ARTICLE 2085.

The following The Doctrine of Mortgagee

requisites are essential to the in Good Faith is based on
contracts of pledge and the rule that all persons
mortgage: dealing with property covered
(1) That they be constituted to by Torrens Certificate of Title
secure the fulfillment of a are not required to go beyond
principal obligation; what appears on the face of
(2) That the pledgor or the title. Mortgagee has the
mortgagor be the absolute right to rely on the face of the
owner of the thing pledged or title.
mortgaged; An innocent purchaser for
(3) That the persons value therefore, who relies on
constituting the pledge or the title is protected. However
mortgage have the free the mortgagee bank cannot
disposal of their property, and claim to be a mortgagee in
in the absence thereof, that good faith because he cannot
they be legally authorized for be excused from exercising
the purpose. the due diligence required
from Banking Institutions.
Third persons who are not So what is prohibited is the
parties to the principal automatic appropriation. If
obligation may secure the an act is still required for the
latter by pledging or parties to consummate the
mortgaging their own transfer of the property from
property. the debtor to the creditor, then
PLUS OBJECT, CONSENT, that is not a pactum
CONDIDERATION AND commissorium. Because
DELIVERY FOR PLEDGE that additional act would
ONLY mean that the appropriation is
not automatic.
Art. 2093. In Addition to the Art. 2096. A pledge shall not
requisites prescribed in 2085, take effect against third
it is necessary, in order to persons if a description of the
constitute the contract of thing pledged and the date of
pledge, that the thing pledged the pledge do not appear in a
be placed in the possession public instrument.
of the creditor, or of a third
person by common Requisites for a pledge to
agreement. bind third persons:
1. There must be a The pledgee is responsible for
description of the thing the acts of his agents or
pledged; employees with respect to the
2. The date of the pledge thing pledged.
must appear on a public Art. 2101. The pledger has
instrument. the same responsibility as a
bailor in commodatum in the
In pledge, there is no case under 1951.
transfer of ownership. It is Recall 1951—
merely a lien over the thing; it Art. 1951. The bailor who,
is merely an encumbrance. It knowing the flaws of the thing
does not dispossess the loaned, does not advise the
pledger of the ownership over bailee of the same, shall be
the thing as he still remains to liable to the latter for the
be the owner. damages which he may suffer
by reason thereof.
RIGHTS AVAILABLE TO The pledgee has the right to
THE PLEDGEE/CREDITOR retain the thing until the
Art. 2098. The contract of pledgor reimburses him for
pledge gives a right to the the damages that he has
creditor to retain the thing in suffered.
his possession or in that of a Art. 2103. Unless the thing
third person to whom it has pledged is expropriated, the
been delivered, until the debt debtor continues to be the
is paid. owner thereof.
Art. 2099. The creditor shall Nevertheless, the creditor
take care of the thing pledged may bring the actions which
with the diligence of a good pertain to the owner of the
father of a family; he has the thing pledged in order to
right to the reimbursement of recover it from, or defend it
the expenses made for its against a third person.
preservation, and is liable for General rule: The pledgee
its loss or deterioration, in cannot use the thing without
conformity with the provisions consent or permission of the
of this code. pledgor (similar rule with
Art. 2100. The pledgee deposit). The same rule
cannot deposit the thing applies with the fruits,
pledged with a third person, accessions, and accessories
unless there is a stipulation of the thing pledged.
authorizing him to do so. Exception: If the use of the
thing is allowed for a certain
way, then the pledgee shall (4) That the pledgee does not
use the thing only in that way. choose to exercise his right to
When do you avail of the cause the thing pledged to be
right to have the thing sold at a public auction
deposited? (2108).
(1) If the pledgee uses the
thing pledged; The right of the pledgee to
(2) You have the authority of have the thing sold at the
the owner; public auction as provided in
(3) If allowed to use it, but 2108 is superior than the right
uses it in a manner different of the pledgor provided in
from what they agreed upon. 2107 to demand the return of
the thing in substitute of
Instances that the owner another thing. Therefore, the
may ask that the thing pledgor can only exercise his
pledged be deposited right under 2107 if the
judicially or extrajudicially: pledgee does not exercise his
(1) When creditor uses thing right to sell the thing at the
pledged without authority of public auction as provided in
the owner; (2104) 2108.
(2) When creditor misuses the
thing in any other way; (2104) Formalities under 2112:
(3) When thing pledged is in 1. debt is due and unpaid
danger of being lost or 2. Sale is made in a public
impaired because of the auction
negligence or willful act of the 3. There must notice to the
pledgee (2106) owner and the pledgor stating
the amount due
Requisites for 2107 to 4. The sale must be made in
apply: the intervrntion of a notary
(1) The pledgor has public.
reasonable grounds to fear
the destruction or impairment 2112, it only requires notice to
of the thing pledged; the pledger and owner. Notice
(2) No fault on the part of the to the pledgor and owner is
pledgee; sufficient.
(3) Pledgor is offering in place
of the thing another thing in ART. 2124. Only the following
pledge which is of the same property may be the object of
kind and not of inferior quality; a contract of mortgage:
and (1) Immovables;
(2) Alienable real rights in valid mortgage is constituted
accordance with the where the alleged deed of
laws,imposed upon mortgage is a mere private
immovables. document and, therefore, is
Nevertheless, movables may not registered. The creditor
be the object of a chattel may recover the loan,
mortgage. although the mortgage
document evidencing the loan
Equitable. — one which, was nonregistrable being a
although it lacks the proper purely private document. He
formalities or other requisites has the right tocompel the
of a mortgage required by debtor to execute a contract
law, nevertheless reveals the of mortgage in a public
intention of the parties to instrument.
burden real property as a 2. Where mortgage not
security for a debt, and registered. — However, an
contains nothing impossible additional provision is made
or contrary to law. that if the instrument of
An equitable mortgage is not mortgage is not recorded, the
different from a real estate mortgage is nevertheless
mortgage, and the lien binding between the parties.”
created thereby ought not to In other
be defeated by requiring words, registration only
compliance with the operates as a notice of the
formalities necessary to the mortgage to others but neither
validity of a voluntary real adds to its validity nor
estate mortgage. converts an invalid mortgage
into a valid one between the
However, a stipulation parties.
subjecting to the mortgage 3. Where mortgage
lien, properties registered under Act No.
(improvements) which the 3344. — The registration of a
mortgagor may subsequently mortgage over real property
acquire, install, or use in under Act No. 3344 is without
connection with real property prejudice to the better rightof
already mortgaged belonging third parties. Thus, an
to the mortgagor is valid. unregistered pacto de retro
sale over ahouse is superior
to a recorded mortgage over
1. Where mortgage in a the same house of
private document. — No a later date.
 to secure which the mortgage
Doctrine of mortgagee in was given
good faith.
(1) Reliance in good faith on Redemption of property
certificate of title of sold. — The debtor (natural
mortgagor. — A mortgagee person) has the right to
has a right to rely in good faith redeem the property sold
on the certificate of title of the within the term of one year
mortgagor of the property from and after the date of the
given as security and in the sale.The reckoning date in
absence of any sign that cases of registered land is
might arouse suspicion, has from the registration of the
no obligation to undertake certifi cate of sale since it is
further investigation. only from the date
Exception as where the that the sale takes effect as a
purchaser or mortgagee has conveyance
knowledge of a defect or lack In the case of juridical
of title in the vendor, or the persons (corporations and
mortgagee does not directly partnerships), they have the
deal with the registered owner right to redeem
of real property. or that he the property until, but not after
was aware of suffi cient facts the registration of the certifi
to induce a reasonably cate of foreclosure sale which
prudent man to inquire into in no case shall be more than
the status of a property in three (3) months after
litigation. foreclosure, which ever is
The stipulation mentioned earlier, as provided in
above to secure future and
other indebtedness is known ART. 2132. By the contract of
as the “blanket’’ mortgage antichresis the creditor
clause, also known in acquires the right to receive
American jurisprudence as a the fruits of an immovable of
“dragnet’’ clause. It is one his debtor, with the obligation
which is specifically phrased to apply them to the payment
to subsume all debts of past of the interest, if owing, and
or future origin. thereafter to the principal of
Foreclosure is the remedy his credit.
available to the mortgagee by
which he subjects the
mortgaged property to the
satisfaction of the obligation
Antichresis and pledge the contrary, is obliged to pay
compared. the taxes and charges upon
The distinctions are as the estate (Art. 2135.), while
follows: in mortgage, the creditor has
(1) Antichresis refers to real no such obligation; and
property, while pledge, to (4) In antichresis, it is
personal property; and expressly stipulated that the
(2) Antichresis is perfected by creditor given possession of
mere consent, while pledge is the property shall apply the
perfected by the delivery of fruits thereof to the payment
the thing pledged; and of interest, if owing, and
(3) Antichresis is a thereafter to the principal of
consensual contract, while the credit, while in a
pledge is a real contract. mortgage, there is no such
Both are similar in that the obligation on the part of the
debtor loses control of the mortgagee. Both are similar in
subject that the subject matter is real
matter of the contract. property. Like pledge and
mortgage, antichresis gives a
Antichresis and real real and not merely a
mortgage compared. personal right if it is registered
The following are the in the Registry of Property.
distinctions:
(1) In antichresis, the property ART. 2140. By a chattel
is delivered to the creditor, mortgage, personal
while in mortgage, the debtor property is recorded in the
usually retains possession of Chattel Mortgage Register
the property; as a security for the
(2) In antichresis, the creditor performance of an
acquires only the right to obligation. If the movable,
receive the fruits of the instead of being recorded,
property; hence, it does not is delivered to the creditor
produce a real right, while in or a third person, the
mortgage, the creditor does contract is a pledge and not
not have any right to receive a chattel mortgage.
the fruits, but mortgage
creates a real right over the Chattel mortgage and
property which is enforceable pledge distinguished.
against the whole world; The following are the
(3) In antichresis, the creditor, distinctions:
unless there is a stipulation to
(1) In chattel mortgage, the Similarities between chattel
delivery is not necessary, mortgage and pledge.
while in pledge, such delivery They are:
is necessary; (1) Both are executed to
(2) In chattel mortgage, the secure performance of a
registration of the same in the principal obligation;
Chattel Mortgage Register is (2) Both are constituted only
required by law, while in on personal property;
pledge, registration in the (3) Both are indivisible;
Registry of Property is not (4) Both constitute a lien on
necessary; the property;
(3) The procedure for the sale (5) In both cases, the creditor
of the thing given as security cannot appropriate the
is different. In chattel property to himself in payment
mortgage, the procedure is of the debt;
found in Section 14 of Act No. (6) In both cases, when the
1508, as amended, while in debtor defaults, the property
pledge, it is found in Article must be sold for the payment
2112 of the Civil Code; of the creditor; and
(4) In chattel mortgage, if the (7) Both are extinguished by
property is foreclosed, the the fulfillment of the principal
excess over the amount due obligation or by the
goes to the debtor while in destruction of the property
pledge, if the property is sold, pledged or mortgaged.
the debtor is not entitled to
the excess unless it is
otherwise agreed (Art. 2125.)
or except in the case of a
legal pledge (Art. 2121.); and
(5) In chattel mortgage, if the
property is foreclosed and
there is a deficiency, the
creditor is entitled to recover
the deficiency from the
debtor.In pledge, if the
property is sold, and there is a
deficiency, the
creditor is not entitled to
recover the deficiency.