PLEDGE

( Old Law )
WHAT IS PLEDGE?
• A contract where debtor delivers to creditor
or 3rd 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 w/ all its fruits
and accessions.
What are
the Kinds
of Pledge?
1. Conventional ‐ by
agreement of parties.
2. Legal ‐ by operation of
law.
 Essential Requisites
for a Contract of Pledge
1. Constituted  to secure the fulfillment of a
principal obligation;
2. Pledgor is the absolute owner of the thing
pledged;
3. Persons constituting the pledge have the
free disposal of their property, and in the
absence thereof, that they be legally
authorized for the purpose. (Art. 2085, NCC)
OBJECT OF THE CONTRACT:
• movable or personal property,
or document evidencing
incorporeal right.
A contract of pledge not
appearing in a public
instrument does not
affect its validity.
It is valid between
the parties.
Who are the Parties to the

?
1. Pledgor – the debtor; the
one who delivers the thing
pledged to the creditor.

2. Pledgee – the creditor; the

one who receives the thing
pledged.
WHAT ARE
THE
RIGHTS
OF A
PLEDGEE?
1. Retain the thing until debt is paid.
(Art. 2018, NCC)
2. To be reimbursed for the expenses made
for the preservation of the thing pledged.
(Art. 2099, NCC)
3. Creditor may bring any action pertaining to
the pledgor in order to recover it from or
defend it against a 3 rd person.
WHAT ARE THE OBLIGATIONS OF A
PLEDGEE?
1.Take care of the thing pledged with the
diligence of a good father of a family.
(Art. 2099, NCC)

Note: Pledgee is liable for the loss or

deterioration of the thing by reason of
fraud, negligence, delay, or violation of the
terms of the contract.
2. GR: Pledgee cannot deposit the thing pledged
to a 3rd person.
XPN: Unless there is stipulation to the contract
(Art. 2100, NCC)

Note: Pledgee is liable for the loss or

deterioration of the thing pledged caused by the
acts or negligence of the agents or employees of
the pledgee.
3. Apply the fruits, income,
dividends, or interests
produced or earned by the
property, to interests or
expenses first, then to the
principal. (Art. 2102, NCC)
4. GR: Cannot use the thing pledged
without authority.
XPNs:
a. If the pledgor had given him authority
or permission to use it; 
b. If the use of the thing is necessary for
its preservation but only for that
purpose.
5. Return the thing pledged
to the pledgor when the
principal obligation is
fulfilled or satisfied it.
What are the rights of the pledgor?
1. Right to dispose the thing pledged, provided
there is consent of the pledgee (Art. 2097,
NCC)

2. Right to ask that the thing pledged be

deposited (Art. 2104 and Art. 2106, NCC)

3. Right to substitute thing pledged (Art. 2107,

NCC)
HOW IS A CONTRACT OF PLEDGE
PERFECTED?
• A contract of pledge is perfected
when the thing pledged is
placed in the actual possession
of or delivered to the pledgee or
a third person designated by the
parties by common consent.
(Art. 2093, NCC)