REGULATORY FRAMEWORK FOR BUSINESS TRANSACTIONS

Law on Pledge, Mortgage and Antichresis

Direction: Read and study the following concepts.

1. Essential requisites of the contracts of pledge, real estate mortgage and chattel mortgage

a. That they be constituted to secure the fulfillment of a principal obligation or contract of

loan.
i. Kinds of principal obligations that may be secured by a pledge or mortgage
1. Pure obligation
2. Obligation with a suspensive period or resolutory period
3. Conditional obligations whether suspensive or resolutory
4. Natural obligations
5. Rescissible obligations
6. Voidable obligations
7. Unenforceable obligations
ii. Principal obligations that may not be secured by a pledge or mortgage
1. Void obligations

b. That the pledgor or mortgagor be the absolute owner of the thing pledged or mortgaged
even if the pledgor or mortgagor is not the principal debtor.
i. Period the pledgor or mortgagor required to be the owner of the thing pledged or
mortgaged for the validity of contract of pledge or mortgage
1. At the time the contract of pledge or mortgage is constituted or perfected

c. That the persons constituting the pledge or mortgage have the free disposal of their
property, and in the absence thereof, that they be legally authorized for the purpose.

d. That when the principal obligation becomes due, the things in which the pledge or
mortgage consists may be alienated for the payment of the creditor.
i. Pactum Commissorium is a stipulation whereby the thing pledged or mortgaged shall
automatically become the property of the creditor in the event of non-payment of the
secured debt within the term fixed. This stipulation is null and void for being contrary to
law and public policy. However, the contract of loan and contract of pledge or mortgage
remain to be valid.
ii. Dacion en Pago is a special mode of payment whereby the debtor voluntarily delivers
and transfers the ownership of a noncash asset, either collateral or not, in full
satisfaction of a debt in money at the time of its maturity date.

2. The following are the instances where the thing pledged or mortgaged may be sold or alienated
in public auction for the payment of the secured contract of loan or principal obligations
a. If the pledgor or mortgagor fails to fulfill certain conditions and such violation would make the
debt due and demandable.
b. If the debtor has lost the right to make use of the period or where there is an acceleration clause
in the payment of installment.
c. Upon default to pay the obligation at maturity.

3. Indivisibility of contract of pledge or mortgage or antichresis - The contract of pledge or mortgage

is indivisible whether the secured contract of loan is joint or solidary. Thus, the secured contract of loan
must be fully paid before any of the thing pledged or mortgaged may be released as security. The
indivisibility of a pledge or mortgage is not affected by the fact that the debtors are not solidarily liable.
A pledge or mortgage is indivisible, even though the debt may be divided among the successors in
interest of the debtor or of the creditor. Therefore, the debtor's heir who has paid a part of the debt
cannot ask for the proportionate extinguishment of the pledge or mortgage as long as the debt is not
completely satisfied. Neither can the creditor's heir who received his share of the debt return the
pledge or cancel the mortgage, to the prejudice of the other heirs who have not been paid. From these
provisions is excepted the case in which, there being several things given in mortgage or pledge, each
one of them guarantees only a determinate portion of the credit. The debtor, in this case, shall have a
right to the extinguishment of the pledge or mortgage as the portion of the debt for which each thing is
specially answerable is satisfied.

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 4. Contract of pledge is a contract by virtue of which the debtor delivers to the creditor or to a third
person a movable, or instrument evidencing incorporeal rights for the purpose of securing the fulfillment
of a principal obligation with the understanding that when the obligation is fulfilled, the thing delivered
shall be returned with all its fruits and accessions.

5. Contracting parties in contract of pledge

a. Pledgor refers to the party who delivered and pledged his movable or personal property to
secure the payment of the principal contract of loan. The pledgor may be the principal debtor or
third person.
b. Pledgee refers to the party who received the pledged movable or personal property which
serves as the security for the payment of his loan receivable.

6. Characteristics of a contract of pledge

a. Real – It is perfected by delivery of the subject matter.
b. Accessory – It has no independent existence of its own.
c. Unilaterial – It creates an obligation on the part of the creditor to return the thing upon the
fulfillment of the principal obligation.
d. Subsidiary – The obligation incurred does not arise until the fulfillment of the principal
obligation which is secured.
e. Indivisible – It creates a lien on the whole or all of the properties pledged, which lien continues
until the obligation is secures has been fully paid.
f. Nominate – It has a name given to it by law.

7. Essential requisites of conventional pledge or contract of pledge

a. That it be constituted to secure the fulfillment of a principal obligation or contract of loan.
b. That the pledgor be the absolute owner of the thing pledged.
c. That person constituting the pledge has the free disposal of his property, and in the absence
thereof, that he be legally authorized for the purpose.
d. That the thing pledged be placed in the possession of the creditor, or a third person by common
agreement.

8. Subject matter of a contract of pledge

a. All movable or personal property susceptible of possession.
b. Incorporeal rights or intangible assets which are evidenced by negotiable instruments, bill of
lading, shares of stocks, bonds, warehouse receipts and similar documents.

9. Form of contract of pledge for validity or to bind contracting parties vs. form of contract of
pledge to bind third persons - Contract of pledge may be in any form for its validity to bind
contracting parties because it is a real contract perfected by the delivery of the thing pledged but it must
be notarized with the description of the thing pledged and its date stated in the notarized contract in
order to bind third persons.

10. Nature of a contract to constitute a pledge vs. nature of contract of pledge - Contract to constitute
a pledge is a consensual contract perfected by mere consent while contract of pledge is a real contract
perfected by the delivery of the thing pledged.

11. Rights of the debtor-pledgor

a. To alienate, but it must be with the consent of the pledgee, the thing pledged but the thing
pledged will still be subject to the contract of pledge.
b. To continue to be the owner of the thing pledged unless it is expropriated or sold in public
auction after default by the principal debtor.
c. To ask for the return of the thing pledged after he has paid the debt and its interest, with
expenses in a proper case.
d. To ask that the thing pledged be judicially or extra-judicially deposited if it is used without
authority or for purposes other than for its preservation.
e. To require that the thing be deposited with a third person if it is in danger of being lost or
impaired through the negligence or willful act of the pledgee.
f. To demand the return of the thing pledged, upon offering another thing in pledge, provided the
latter is of the same kind and quality, if there are reasonable grounds to fear the destruction or
impairment of the thing pledged without the fault of the pledgee. This right is without prejudice to
the right of the pledgee to have the thing sold at a public sale. However, the pledgee is bound to
advise the pledgor, without delay, of any danger to the thing pledged.
g. In case of a pledge of animals, their offspring shall pertain to the pledgor or owner of animals
pledged, but shall be subject to the pledge, if there is no stipulation to the contrary.

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 12. Obligations of the debtor-pledgor
a. To pay the debt and its interest, with expenses, in a property case, when they are due if the
pledgor is also the debtor.
b. To pay damages that the pledgee may suffer by reason of the flaws of the thing pledged, if he
was aware of such flaws but did not advise the pledgee of the same.
c. To pay for the expenses which are necessary for the preservation of the thing pledged.

13. Rights of the creditor-pledgee

a. To retain in his possession the thing pledged until the debt is paid.
b. To demand reimbursement of the expenses made for the preservation of the thing pledged.
c. To bring actions which pertain to the owner of the thing pledged in order to recover it from, or
defend it against third person.
d. To use the thing pledged only if (1) he is authorized to do so, or (2) when its use is necessary of
the preservation of the thing.
e. To cause the sale of the thing pledged at a public sale, if there is a danger of destruction,
impairment or diminution of value of the thing pledged without his fault.
f. To collect and receive the amount due if the thing pledged is a credit which becomes due before
it is redeemed, and to apply the same to the payment of his claim.
g. To sell the thing pledged upon default of the debtor.
h. To select or choose the thing to be sold in public auction in case there are two or more things
pledged.
i. To appropriate the thing pledged in case the thing pledged is not sold in at least two public
auctions.

14. Obligations of creditor-pledgee

a. To take care of the thing pledged with the diligence of a good father of a family.
b. To be liable for the loss or deterioration of the thing pledged unless it is due to a fortuitous
event.
c. Not to deposit the thing pledged with a third person unless ordered by the court.
d. To be responsible for the acts of his agents or employees with respect to the thing pledged.
e. Not to use the thing pledged except (1) when he is authorized by the owner or (2) when the use
of the thing is necessary for its preservation.
f. To deliver to the debtor the surplus after paying his claim from what he has collected on a credit
that was pledged and which has become due before it is redeemed.
g. If the pledge earns or produces fruits, income, dividends, or interests, the creditor shall
compensate what he receives with those which are owing him; but if none are owing him, or
insofar as the amount may exceed that which is due, he shall apply it to the principal. Unless
there is a stipulation to the contrary, the pledge shall extend to the interest and earnings of the
right pledged.

15. Instances when a third person-pledgor who pledges his own movable property to secure the
debt of another person shall be released from liability and may ask for the return of his pledged
personal property from the pledgee
a. If the creditor voluntarily accepts immovable or other property in payment of the debt even if the
creditor thereafter loses the same by eviction.
b. If an extension of time is granted to the debtor by the creditor without pledgor’s consent.
c. If through some act of the creditor, the pledgor cannot be subrogated to the rights, mortgages
and preferences of the creditor.
d. If the thing pledged is deteriorated on the fault of the pledgee.

16. Public Sale of Pledged Personal or Movable Property refers to the remedy available to the pledgee
by which he subjects the property pledged to sale for the satisfaction of the obligation secured when the
principal obligation is not paid when due or when there is any violation of any condition, stipulation or
warranty by the pledgor.

17. Formalities required for the sale of the thing pledged in case of failure of the debtor to pay the
principal obligation
a. It must be by public auction.
b. It must be through a notary public.
c. There must be a notice to the debtor and the owner of the thing pledged, stating the amount for
which the public sale is to be held.

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 18. Modes of extinguishment of a contract of pledge

a. Indirect Mode of Extinguishment

i. When the principal obligation or contract of loan secured by the contract of pledge is
extinguished.

b. Direct Modes of Extinguishment of contract of pledge that do not extinguish the secured
contract of loan

i. Return by the pledgee of the thing pledged to the pledgor or owner.

ii. Renunciation or abandonment in writing by the pledgee of the contract of pledge.

c. Direct Modes of Extinguishment of contract of pledge that also extinguish the secured
contract of loan

i. Sale of the thing pledged regardless of the net proceeds of the sale.

1. Rule in case of deficiency

a. The pledgee can never recover the deficiency despite stipulation for
recovery. Any stipulation for recovery of deficiency is null and void.

2. Rule in case of excess

a. The pledgee is generally entitled to the excess in the absence of

stipulation to the contrary.

ii. Appropriation of the thing pledged by the pledgee if the thing pledged is not sold in at
least two public auctions.

19. Null and void stipulations in a contract of pledge

I. A stipulation which provides that the pledge is not extinguished by the return of the thing pledged.

II. A stipulation allowing the automatic appropriation by the pledgee of the thing pledged in case of
default of the debtor.

III. A stipulation for the recovery of deficiency in case the proceeds from the sale of the thing pledged is
less than the amount of the obligation.

20. Legal Pledge is a type of pledge which refers to the right of a person to retain a thing until he receives
payment of his claim.

21. Examples of legal pledge

a. A possessor in good faith may retain the movable upon which he has incurred necessary and
useful expenses until he has been reimbursed therefore.
b. He who has executed work upon movable has a right to retain it by way of pledge until he is
paid.
c. The depositary may retain the thing deposited until the full payment of what may have been due
from him by reason of the deposit.

22. Distinctions between Contract of or Conventional pledge and Legal pledge

a. The deficiency in foreclosure sale in contract of pledge can never be recovered by the pledgee
but the deficiency in public sale in legal pledge can be recovered by the creditor.

b. The excess in foreclosure sale in contract of pledge will generally go to the pledgee in the
absence of stipulation to the contrary but the excess in the public sale in legal pledge will go to
the debtor.

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 23. Real Estate Mortgage is a contract whereby the debtor or third person secures to the creditor the
fulfillment of a principal obligation, specially subjecting to such security immovable property or real
rights over immovable property in case the principal obligation is not complied with at the time
stipulated.

24. Contracting parties in contract of real estate mortgage

a. Mortgagor refers to the party who mortgaged his immovable or real property to secure the
payment of the principal contract of loan. The mortgagor may be the principal debtor or third
person.

b. Mortgagee refers to the party whose loan receivable is secured by the mortgaged immovable or
real property.

25. Essential requisites of a contract of real estate mortgage

a. That it be constituted to secure the fulfillment of a principal obligation or contract of loan.

b. That the mortgagor be the absolute owner of the thing mortgaged.
c. That the person constituting the mortgage must have the free disposal of his property, and in
the absence thereof, that he be legally authorized for the purpose.

26. Important characteristics of real estate mortgage

a. Accessory – It cannot exist without a principal obligation such as contract of loan.

b. Indivisible – It creates a lien on the whole or all of the properties mortgaged, which lien
continues until the obligation is secures has been fully paid.
c. Inseparable – It subjects the property upon which it is imposed, whoever the possessor may
be, to the fulfillment of the obligation for whose security it was constituted.
d. Real right – It creates a lien on the property mortgaged.
e. Consensual contract – It is perfected by mere consent.
f. Nominate – It has a name given to it by law.

27. Types of real estate mortgage

a. Conventional real estate mortgage is one which is created by the agreement of the parties.

b. Legal mortgage is one executed pursuant, to an express requirement of a provision of law.

c. Equitable mortgage is one which although lacks certain formality, form or words or other
requisites provided by statute, but the facts show the intention of the parties to charge the real
property as a security for a debt and contains nothing contrary to law. The remedy of the injured
party is to file an action for reformation of instrument.

28. Subject matter of contract of real estate mortgage

a. Immovable property or real property

b. Rights on immovable property

29. Form of a contract of real estate mortgage for validity vs. Form of a contract of real estate
mortgage to bind third persons - Contract of real estate mortgage may be in any form for its validity
to bind contracting parties because it is a consensual contract perfected by mere consent but it must be
notarized and registered with Registry of Deeds in order to affect or to bind third persons.

30. Foreclosure of real estate mortgage refers to the remedy available to the mortgagee by which he
subjects the property mortgaged to sale for the satisfaction of the obligation secured when the principal
obligation is not paid when due or when there is any violation of any condition, stipulation or warranty
by the mortgagor.

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 31. Types of Foreclosure of Real Estate Mortgage

a. Judicial Foreclosure is a type of foreclosure made through the filling of a petition in court
under Rule 68 of Rules of Court and availed of when the deed of real estate mortgage does not
contain a special power of attorney (SPA) authorizing the mortgagee-creditor to foreclosure it
extrajudicially.

i. Equity of Redemption – The judgment debtor/mortgagor has a period of not less than
90 days nor more than 120 days from the entry of judgment to pay his liability to prevent
the public sale of his mortgaged property. This period of equity of redemption in judicial
foreclosure is extended by the Supreme Court even after the public auction of
mortgaged property as long as it is exercised before the order of the court confirming the
public sale of the mortgaged property.

ii. Right of Redemption – The judgment debtor/mortgagor is not generally allowed to

repurchase the property sold in public auction in judicial foreclosure unless a special law
allows. As an exception to the general rule, a mortgagor in judicial foreclosure made by
mortgagee-bank may still exercise the right of redemption in accordance to the
redemption period provided by General Banking Law.

b. Extrajudicial Foreclosure is a type of foreclosure made in compliance with Act No. 3135 (Real
Estate Mortgage Law) and available when there is a stipulation in the mortgage contract that the
mortgage may be foreclosed extrajudicially or when such foreclosure sale is made under a
special power of attorney inserted in the contract of mortgage.

i. Equity of Redemption – The mortgagor may pay his obligation to prevent the public
sale of his property in the grace period given by the mortgagee.

ii. Right of Redemption – The mortgagor may repurchase the property sold in public
auction within a period of:

1. Generally within 12 months or 1 year from public sale

2. Exceptionally within 3 months or 90 days from public sale if these two requisites
are present: (1) the mortgagee is a bank and (2) the mortgagor is a juridical or
artificial person.

32. Rules in deficiency or excess in foreclosure of real estate mortgage

a. Rule in case deficiency

i. The mortgagee can recover the deficiency in the absence of stipulation to the contrary.

b. Rule in case of excess

i. The mortgagor is entitled to the excess in the absence of stipulation to the contrary.

33. Null and void stipulations in a contract of mortgage

I. A stipulation which provides for tipo or upset price in the foreclosure sale of mortgaged property. A
tipo or upset price is a maximum limit as to the selling price in the public sale of mortgaged
property. It is void because the mortgaged property must be sold to the highest bidder and there
must be no maximum limitation on the price.
.
II. A stipulation allowing the automatic appropriation by the mortgagee of the thing mortgaged in case
of default of the debtor.

III. A stipulation prohibiting the mortgagor from disposing or selling his property.

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 34. Chattel mortgage is a conditional sale of personal property as security for the payment of a debt, or
the performance of some other obligation specified therein, the condition being that the sale shall be
void upon the seller paying to the purchaser a sum of money or doing some other act named. If the
condition is performed according to its terms the mortgage and sale immediately become void, and the
mortgagee is thereby divested of his title.

35. Contracting parties in contract of chattel mortgage

a. Mortgagor refers to the party who mortgaged his movable or personal property to secure the
payment of the principal contract of loan. The mortgagor may be the principal debtor or third
person.
b. Mortgagee refers to the party whose loan receivable is secured by the mortgaged movable or
personal property.

36. Essential requisites of contract of chattel mortgage

a. That it be constituted to secure the fulfillment of a principal obligation or contract of loan.

b. That the mortgagor be the absolute owner of the thing mortgaged.
c. That the person constituting the mortgage must have the free disposal of his property, and in
the absence thereof, that he be legally authorized for the purpose.
d. That the document in which the mortgage appears be recorded in the Chattel Mortgage
Register.

37. Important characteristics Contract of chattel mortgage

a. Accessory – It cannot exist without a principal obligation such as contract of loan.

b. Indivisible – It creates a lien on the whole or all of the properties mortgaged, which lien
continues until the obligation is secures has been fully paid.
c. Inseparable – It subjects the property upon which it is imposed, whoever the possessor may
be, to the fulfillment of the obligation for whose security it was constituted.
d. Formal contract – It is perfected by the registration to chattel mortgage register.
e. Nominate – It has a name given to it by law.

38. Subject matter of chattel mortgage

a. Movable property or Personal property

b. Incorporeal rights or intangible assets which are evidenced by negotiable instruments, bill of
lading, shares of stocks, bonds, warehouse receipts and similar documents.

39. Form of a contract of chattel mortgage for validity vs. Form of a contract of chattel mortgage to
bind third persons - Contract of chattel mortgage must be registered before chattel mortgage registry
in order to bind contracting parties because it is a formal or solemn contract but it must be
accompanied by affidavit of good faith in order to affect or to bind third persons.

40. Affidavit of Good faith is an affidavit attached to a deed of chattel mortgage which states that the
parties swear that the mortgage is made for the purpose of securing the obligations specified in the
conditions thereof, and for no other purposes, and that the same is a just and valid obligation and not
one entered into for purposes of fraud.

41. Rules for the place of registration of Chattel Mortgage

a. As a general rule, it must be recorded in the Chattel Mortgage Register of the province where
the mortgagor resides.
b. If must be recorded in the both Chattel Mortgage Registers of the provinces where the
mortgagor resides and where the property is located if the property is not located in the province
of domicile of the mortgagor.
c. If the mortgagor is domiciled outside the Philippines, the mortgage must be registered in the
Chattel Mortgage Register where the property is located.
d. With respect to motor vehicles, it must be registered Chattel Mortgage Register of the province
where the mortgagor resides and in Land Transportation Office where the motor vehicle is
registered.
e. With respect to shares of stock, Chattel Mortgage Register in the province where the
corporation has its principal office and in the domicile of the mortgagor.
f. With respect to vessel, Philippine Coast Guard of port of entry of vessel and Chattel Mortgage
Register of the province where the mortgagor resides.

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 42. Foreclosure of chattel mortgage refers to the remedy available to the mortgagee by which he
subjects the property mortgaged to sale for the satisfaction of the obligation secured when the principal
obligation is not paid when due or when there is any violation of any condition, stipulation or warranty
by the mortgagor. The mortgagor is given by Chattel Mortgage Law of grace period of 30 days from the
date of debtor's default to pay the secured obligation in order to prevent the sale of mortgaged property.

43. Rules in deficiency or excess in foreclosure of chattel mortgage

a. Rule in case of deficiency

i. The mortgagee can recover the deficiency in the absence of stipulation to the contrary.

b. Rule in case of excess

i. The mortgagor is entitled to the excess in the absence of stipulation to the contrary.

44. Antichresis is a contract whereby the creditor acquires the right to receive the fruits of an immovable
of his debtor, with the obligation to apply them to the payment of the interest, if owing, and thereafter to
the principal of his credit. It is a formal contract perfected by the execution of the written instrument
containing the antichretic agreement together with the amount of the principal and interest of the loan

45. Contracting parties in contract of antichresis

a. Antichretic debtor refers to the party who delivered his land to the creditor to secure the
payment of principal contract of loan through the harvesting of its fruits and subsequent
application to the interest and principal of the contract of loan.
b. Antichretic creditor refers to the party who received a land from the debtor which serves as
security for the the payment of principal contract of loan through the harvesting of its fruits and
subsequent application to the interest and principal of the contract of loan.

46. Important characteristics Contract of Antichresis

a. Accessory – It cannot exist without a principal obligation such as contract of loan.
b. Indivisible – It creates a lien on the whole or all of the properties mortgaged, which lien
continues until the obligation is secures has been fully paid.
c. Inseparable – It subjects the property upon which it is imposed, whoever the possessor may
be, to the fulfillment of the obligation for whose security it was constituted.
d. Formal contract – It is perfected by the written agreement on the contract of antichresis
including the principal and interest of the loan.
e. Nominate – It has a name given to it by law.

47. Principles of Contract of Antichresis

a. The basis for application of the fruits to the interests and principal is the actual market value of
the fruits at the time of application.
b. In the absence of stipulation to the contrary, the antichretic creditor shall generally be liable to
pay the real property taxes and expenses necessary for the repair and preservation of the real
property used as collateral in contract of antichresis by applying the fruits harvested.
c. Upon non-payment or default of the antichretic debtor of the principal obligation, the antichretic
creditor cannot automatically appropriate the real property used as security because it is pactum
commissorium which is contrary to law and public policy.
d. The antichretic creditor may file an action to collect a sum of money a.k.a. action for exact
fulfillment or specific performance but such action is tantamount to waiver of the security of
antichresis. Afterwards, the antichretic creditor may ask from the judge the issuance of writ of
attachment which might result to the public sale of the land which is the subject matter of
contract of antichresis.

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 Comparison of Pledge, Real Mortgage, Chattel Mortgage and Antichresis

Basis of Conventional Pledge Real Estate Mortgage Chattel Mortgage Antichresis

Difference
Type of Contract Real – By delivery of Consensual – By mere Formal or Solemn – By Formal or Solemn – By
as to perfection object consent registration of the execution of written
contract of chattel agreement of antichresis
mortgage in the Chattel with statement of the
Mortgage Registry amount of principal and
interest of the contract
of loan.
Principal Present obligation Generally present Generally present Generally present
Obligation Being only obligation unless future obligation unless future obligation unless future
Secured obligations are also obligations are also obligations are also
secured by agreement secured by agreement secured by agreement
of parties of parties of parties
To bind third Must be in a public Must be registered in Must be accompanied Must be registered in
persons instrument showing a the Registry of by affidavit of good the Registry of Property
description of the thing Property faith
pledged and the date
of the pledge
Object of Movable or personal Immovable or real Movable or personal Immovable or real
contract property property property property
Prohibition Applicable Applicable Applicable Applicable
against pactum
commissorium
Indivisibility of Indivisible Indivisible Indivisible Indivisible
the contract
Remedy of Foreclose security and Foreclose security and Foreclose security and Gather the fruits of the
Creditor in case sell the collateral in sell the collateral in sell the collateral in land and apply the fair
of Debtor’s public action with the public action with the public action with the market value of the fruits
default proceeds to be proceeds to be applied proceeds to be applied at the time of application
applied to the unpaid to the unpaid obligation to the unpaid obligation first to the interest of the
obligation loan and the remainder
to the principal of the
loan.
As to deficiency Deficiency can never Deficiency can be Deficiency can be Deficiency can be
be recovered even if recovered unless there recovered unless there recovered through
there is a stipulation. is stipulation to the is stipulation to the continuous gathering of
Any stipulation for contrary. contrary. (Except in fruits.
recovery of deficiency case of personal
is null and void. property sold in
(Exception – Legal installment under
Pledge) Recto Law)
As to excess of Excess belongs to the Excess belongs to the Excess belongs to the Excess fruits belongs to
proceeds pledgee-creditor mortgagor unless there mortgagor unless there the owner of the land or
unless there is is stipulation to the is stipulation to the antichretic debtor.
stipulation to the contrary. contrary.
contrary. (Exception –
Legal Pledge)
As to The pledgee may The mortgagee cannot The mortgagee cannot The antichretic creditor
appropriation of appropriate the thing appropriate the thing appropriate the thing cannot appropriate the
property pledged if the same is mortgaged. mortgaged. land used as collateral
not sold in two public but may sell the fruits to
auctions. be applied to interest
and principal of loan.
As to selling of The pledgor may only The mortgagor can sell The mortgagor can sell The antichretic debtor
property after the sell the property with the property. Any the property. Any can sell the land.
pledge or the consent of the stipulation prohibiting stipulation prohibiting
mortgage by the pledgee. the mortgagor to sell the mortgagor to sell
owner. the property is void. the property is void.
Conduct of sale Public sale only GR: Public sale GR: Public sale Not applicable
of foreclosed Exception: Private sale Exception: Private sale
property by if stipulated by if stipulated by
creditor contracting parties contracting parties
Redemption None but pledgor can Extrajudicial Equity of redemption Not applicable
prevent the public sale foreclosure – Equity of only within 30 days
by paying the secured redemption and right of from default to pay the
obligation redemption secured obligation to
Judicial foreclosure – prevent the foreclosure
Generally equity of sale
redemption only unless
provided by special law
such as Banking Law.

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Name of Contract of Contract of Loan or Contract of Deposit Contract of Lease
Contract Commodatum Mutuum
Definition It is a contract wherein It is a contract wherein It is a contract wherein It is a contract wherein
one of the parties one of the parties a person receives a one party binds himself
delivers to another, delivers to another thing belonging to to give another the
either something not money or other another, with the enjoyment or use of a
consumable so that the consumable thing, upon obligation of safely thing for a price certain,
latter may use the the condition that the keeping it and of and for a period which
same for a certain time same amount of the returning the same may be definite or
and return it. same kind and quality and the the indefinite.
shall be paid. safekeeping of the
thing delivered is the
principal purpose of
the contract.

Subject matter 1. Non-consumable 1. Money 1. Consumable thing 1. Real property

thing 2. Consumable thing 2. Non-consumable 2. Personal property
2. Consumable thing thing
but only for purpose of
exhibit
Characteristics 1. Real 1. Real 1. Real 1. Consensual
2. Essentially 2. Onerous if there is 2. Onerous if there 2. Onerous
gratuitous interest or gratuitous if depositary fee or
there is no interest. gratuitous if for free.

Regulatory Framework for Business Transactions Page 10 of 10