REAL ESTATE MORTGAGE . A contract whereby a debtor secures to the creditor the fulfillment of a principal obligation, especially subjecting to such security immovable property or real rights over immovable property in case the principal obligation is not complied with the time stipulated . Subject: . Immovables . Alienable real rights - ie. Ownership. Usufruct. Hereditary right. Right of redemption KINDS OF REAL ESTATE MORTGAGE . Voluntary (agreed upon between the parties) . Legal (required by law to be executed between certain persons) . Equitable (lacks the proper formalities of a mortgage but has the intention of the parties to make the property a security fo a debt) PRINCIPAL RIGHTS OF THE MORTGAGEE . To compel the mortgagor to execute a contract of mortgage in a public instrument so that it may be registered to affect third persons . To claim from the transferee of the mortgaged property the payment of the part of the credit secured by the property which said transferee possesses . To foreclose the mortgage in order to collect credit in case of failure to fulfill the principal obligation . To recover any deficiency in case there be g balance due after applying the proceeds of the foreclose 25-27 / 35 PRINCIPAL OBLIGATIONS OF THE MORTGAGOR . To comply with his obligations at the time stipulated . To pay any deficiency in case there is a balance due after applying the proceeds of the foreclosure sale . To respect the rights of the mortgageeFORECLOSURE . The remedy available to the mortgagee by which s/he subjects the property pledged/mortgaged to the satisfaction of the obligation to secure the principal contract through the sale of the property at a public auction and the application of the proceeds thereof to the payment of his/her claims . May be: . Judicial (action in court) . Extrajudicial PLEDGE PLEDGE . A contract by virtue of which the debtor delivers to creditor or to a third person a movable or instrument evidenceng corporeal 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 . The thing pledged must be placed in the possession of the creditor or a third persons . Constituted on movables PLEDGE May either be: . Voluntary or conventional (created by agreement of the parties) . Legal (created by operation of law) . Possessor in good faith . Usufructuary Agent . Depositary . Hotel keeper Independent contractorOBLIGATIONS OF THE PLEDGEE (CREDITOR) 1. To take care of the thing pledged 2. To answer for its loss or deterioration 3. Not to deposit the thing pledged with a third person unless authorized 4. To be responsible for the acts of his agents or employees with respect to the thing pledged OBLIGATIONS OF THE PLEDGEE (CREDITOR) 5. Not to use the thing pledged unless authorized or its preservation so requires 6. To advise the pledgor, without delay, of any danger to the thing pledged 7. To promptly advise the pledgor or owner in case of sale at public auction of the result thereof 8. To return the thing pledged when the principal obligation is paid 17-19 / 35 RIGHTS OF THE PLEDGOR . To continue to be the owner of the thing pledged, until its sale, unless it is expropriated . To demand the deposit of the thing pledged should the creditor use it without authority or misuse it in any other way . To substitute the thing pledged if it is endangered . To bid and have preference at the foreclosure sale if s/he should offer the same terms as the bidder . To demand the return of the thing pledged upon the extinction of the principal obligation OBLIGATIONS OF THE PLEDGOR . To notify the pledgee of any flaw or defect of th thing pledged known to him . Otherwise, he answers for damages suffered by the pledgee . To reimburse the pledgee for expenses made for its preservation . To fulfill the principal obligationPLEDGE To take effect against third persons, a pledge must: . Appear in a public instrument . With the description of the thing pledged . The date of the pledge (to ensure that the pledge was not simulated to escape from creditors) Note: the thing pledged may be sold if the creditor agrees to the sale. Ownership passes to the vendee but subject to the contract of pledge. RIGHTS OF THE PLEDGEE (CREDITOR) 1. To retain the thing in his/her possession or in that of a third person, until the debt is paid 2. To be reimbursed for expenses incurred in its preservation 3. To compensate the fruits, income, dividends or interest earned or produced by the thing pledged received with those which are due to h 13-15 / 35 4. To bring the actions which pertain to the thing pledged in order to recover it from, or delena if against, a third person RIGHTS OF THE PLEDGEE (CREDITOR) 5. To sell the thing pledged at a public auction if, without fault, there is danger of destruction, impairment or diminution in the value of the thing 6. To claim a substitute or demand immediate payment if he is deceived in the substance or quality of the thing pledged 7. To sell the thing pledged at a public action if the obligation secured is not paid RIGHTS OF THE PLEDGEE (CREDITOR) 8. To bid at a public sale/auction 9. To collect the amount that becomes due on a credit pledged before such credit is redeemed 10. To choose which one of several things pledged shall be sold.22:50 ..1 0.44 KB/S 47 Credit Transac... Q . . . CREDIT TRANSACTIONS . Pledge . Real mortgage . Chattel mortgage NATURE AND REQUISITES OF PLEDGE AND MORTGAGES (REAL AND CHATTEL) 1. They are purely accessory contracts. . They are intended to secure the performance of a principal and pre-existing obligation . By subjecting a particular property as security . Any kind of obligation (pure or condition, natural, voidable and unenforceable) may be secured by a contract of pledge and NATURE AND REQUISITES OF PLEDGE AND MORTGAGES (REAL AND CHATTEL) 2. The pledgor or mortgagor must be the absolute owner of the thing pledged or mortgaged. . Future properties cannot be pledged or mortgaged . Share in a co-ownership may be pledged or mortgaged . Pledgor or mortgagor is not necessarily the debtor in the principal obligation NATURE AND REQUISITE PLEDGE AND MORTGAGES AND CHA 3. The persons constituting the pledge or mortgage must have from disposal of the OPRINCIPAL RIGHTS OF THE MORTGAGOR . To continue in the ownership and possession of the mortgaged property . To alienate the property subject to the fulfillment of his obligation for whose security the mortgage was constituted . To exercise the right of redemption or equity of redemption REDEMPTION . A transaction by which the mortgagor reacquires or buys back the property which may have passed under the mortgage or divests the property of the lien which the mortgage may have created . Kinds: . Equity of redemption - if the foreclosure is judicial; exercised before the sale is confirmed by the court . Right of redemption - if the foreclosure is extrajudicial, exercised within one year after the date of registration of the sale EXTINGUISHMENT OF THE MORTGAGE . Same as ordinary obligations CHATTEL MORTGAGEFORECLOSURE . The debt is due and unpaid . The item pledged is sold at a public auction . There must be notice to the pledgor and owner stating the amount due . If the foreclosure is extrajudicial, it must be before a notary public RULES ON PAYMENT IN CASE OF FORECLOSURE If the price of sale > amount due . Debtor is not entitled to the excess amount unless otherwise agreed upon If the price of sale is