1.

Explain exhaustively the terms "PACTUM COMMISSORIUM" and

"PACTUM DE NON ALIENANDO". To which subject matter do these
terms apply?
Pactum Commisorium refers to a rule or situation wherein the creditor in an
obligation eventually acquires the ownership of the thing that is given to him as
security by the debtor, thus, it does away with the process of putting it on a public
sale or having it foreclosed that is required by law. In other words, a stipulation
whereby the thing pledged or mortgaged or under antichresis shall automatically
become the property of the creditor in the event of nonpayment of the debt within
the term fixed is a pactum commissorium. This applies to the thing that is
subjected to a pledge or mortgage, wherein their ownership is transferred, without
any sale or public sale, to the creditor upon the failure of the debtor to satisfy the
obligation.
Pactum de non Alienando pertains to a clause in a mortgage giving the mortgagee
the right to foreclose by execution directed solely against the mortgagor, and
giving him the right to seize and sell the mortgaged property, regardless of any
subsequent alienation. It is the agreement of prohibiting the alienation of the
mortgaged immovable property by the owner. Like pactum commissorium it
applies also to a thing mortgaged.
2. State and explain the requisites of Pactum Commissorium? Is this a valid
undertaking? What is the reason of the law for said position?
Requisites for pactum commisorium to exist:
a. There should be a pledge, mortgage, or antichresis of property by way of
security for the payment of the principal obligation; and
b. There should be a stipulation for an automatic appropriation by the creditor of
the property in the event of non-payment of the obligation within the
stipulated period.
Pactum commisorium is not a valid undertaking. Under Articles 2088 and 2137,
pactum commisorium is forbidden and declared null and void. The rationale for its
prohibition is because the practice of pactum commisorium is contrary to good
morals and public policy and because it is often that the value or amount of the
loan undertaken is much less than what the real value the thing pledged or
mortgaged holds.
3. Define and distinguish the following:
a. Contract of Pledge

A contract where debtor delivers to creditor or third person a movable or

document evidencing incorporeal right for the purpose of securing 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.
b. Contract of Real Mortgage
It is a contract whereby the debtor secures to the creditor the fulfillment of the
principal obligation, specially subjecting to such security immovable property or
real rights over immovable property in case the principal obligation is not fulfilled
at the time stipulated.
c. Contract of Chattel Mortgage
A contract by virtue of which personal property is recorded in the Chattel
Mortgage Register as a security for the performance of an obligation.
4. State and explain the characteristics and elements of contract of Pledge.
Real Contract the contract of pledge is a real contract because it is perfected by
mere delivery of the thing that is pledged by the debtor as security to the
fulfillment of his obligation to the creditor.
Accessory Contract the contract has no independent existence of its own. In
other words, the existence of the contract arises only from the need to secure the
fulfillment of the principal obligation.
Unilateral Contract the contract creates an obligation solely on the part of the
creditor to return the thing subject thereof upon the fulfillment of the principal
obligation.
Subsidiary Contract because the obligation incurred does not arise until the
fulfillment of the principal, which is secured.
5. What is your understanding of Legal Pledges? Give at least 5 illustrations.
These are pledges that are constituted by operation of law, which means by the
nature of the principal obligation or as provided in the law an obligation incurred
by a contract a pledge must arise. To illustrate:
a. In cases of necessary expenses, for example in a commodatum, these expenses
shall be refunded to the possessor of the thing in commodatum, but only those
who practiced good faith may retain the thing until he has been reimbursed
therefor.

b. Those who executed work or labor upon a personal or movable property, for
example a car, has the right to retain the car by way of pledge until he is
reimbursed or paid.
c. In an agency, an agent may retain in pledge the things which are object of the
agency until the principal effects the reimbursement and pays the indemnity.
d. A laborers wages shall be considered lien on the goods he participated in
manufacturing or the his work done.
e. In a contract of deposit, the depositary has the right of retention of the thing
deposited to him until the depositor pays full payment of what is due to him
by reason of his business of deposit.
6. State and explain the kinds of mortgages.
Voluntary mortgage the kind that is created through the simple agreement
between the parties or it is constituted through the will of the owner of the
property on which a mortgage is to be created.
Legal mortgage like legal pledges, it is one that is required and provided
directly by the law that a mortgage is to be executed to certain persons.
Equitable mortgage Although is lacks formalities or any requisites that is
required by law or stipulated by parties, an equitable mortgage implies or reveals
the intention of the parties to place and burden a real property as security for a
debt provided that it contains nothing that is unfair and impossible for both parties
or any situation that is contrary to law.
7. Distinguish exhaustively Real Mortgage from Chattel Mortgage.
A Real mortgage is a contract whereby the debtor secures to the creditor the
fulfillment of the principal obligation, specially subjecting to such security
immovable property or real rights over immovable property in case the principal
obligation is not fulfilled at the time stipulated. While a Chattel mortgage is a
contract by which personal property is recorded in the Chattel Mortgage Register
as a security for the performance of an obligation.
In terms of subject matter, Real mortgage involves real or immovable properties
while in Chattel mortgage, personal or movable properties must always be its
subject matter.
In the requirement of registration, in Real mortgage registration is merely for the
purpose of binding third persons, while in Chattel mortgage it is essential for the
validity of the contract.
8. Explain concisely but substantially the characteristics of Real Mortgage.

A Real mortgage is a real contract because it is perfected by mere delivery of the

thing to be mortgaged. It is an accessory contract because it arises from a
principal obligation which may be a debt. It is also a subsidiary contract because
the obligation that the mortgagee can incur arises only upon the fulfillment of the
principal obligation. And furthermore, it is a unilateral contract because it creates
only an obligation on the part of the creditor who must free the property from
encumbrance once the obligation is fulfilled.
9. What is meant by the term Dragnet Clause?
The term refers to a mortgage provision, which is specifically provided and
worded as to include all debts from past and future origins in a contract of real
mortgage. Thus, it is for the purpose of securing future advancements.
10. What is meant by the term Foreclosure? What are the kinds of Foreclosure?
Explain.
It is a remedy that available to the mortgagee in which he subjects the mortgaged
property to the satisfaction of the obligation. This is to secure the mortgage where
the mortgagor defaults in the payment of the obligation.
Kinds of Foreclosure:
Judicial foreclosure that which is governed by the Rules of Court, specifically
Rule 68. It is an action quasi in rem. A mortgage may be foreclosed judicially by
bringing an action for that purpose, in the proper court that has jurisdiction over
the area wherein the real property involved or a portion thereof is situated.
Extrajudicial foreclosure that which is executed upon the will of the mortgagee,
however, an extrajudicial foreclosure may only be effected if in the mortgage
contract covering a real estate, a clause is incorporated therein giving the
mortgagee the power, upon default of the debtor, to foreclose the mortgage by an
extrajudicial sale of the mortgage property.
11. Distinguish the following:
a. Legal Redemption
This is the right of the mortgagor that is stipulated in the contract, in cases of
foreclosure, to legally redeem his mortgaged property. It is the right to be
subrogated upon the same terms and conditions stipulated in the contract, in the
place of the one who acquires the thing by purchase or by dation in payment or by
other transaction whereby ownership is transmitted by onerous title.
b. Equity Redemption

While the right of the mortgagor in case of judicial foreclosure to redeem the
mortgaged property after his default in the performance of the conditions of the
mortgage but before the confirmation of the sale of the mortgaged property is
called and Equity redemption.
c. Right of Redemption.
While the right of redemption is the right of the mortgagor in case of extrajudicial
foreclosure to redeem the mortgaged property within a certain period from and
after it was sold for the satisfaction of the mortgage debt.