REPUBLIC OF THE PHILIPPINES

Bicol College, School of Law

Daraga, Albay

The Concept of Pactum Commissorium

Ben Laurence O Balderama

LLB II

ABSTRACT

Title:

The Concept of Pactum Commissorium

Authors:

Ben Laurence O Balderama

Type of Document:

Unpublished Undergraduate Research Paper

The Pactum Commissorium contains fluidity clause and flow-mortgage clause. From
Emperor Justinian enacted the writ of prohibiting Pactum Commissorium in A.D. 326, many
countries of civil law system carry on this writ and regard the rule of prohibiting pactum
commissorium as a golden rule. Review a variety of reasons of prohibiting pactum
commissorium, it is mainly in order to protect the debtors from the distress and urgency, prevent
creditors damaging the interest of debtors and maintain the fair dealing.
This study deals with the concept of Pactum Commissorium which is a prohibited act
arising from a pact or agreement involving a security contract such as mortgage, pledge and
antichresis.
Pactum Commissorium can be found in Article 2088 of the civil code which provides that
a creditor cannot appropriate the things given by way of pledge or mortgage, or dispose of them.
Any stipulation to the contrary is null and void. 1Simply put, it is a stipulation in a contract of
mortgage of pledge which provides that the mortgagee will automatically own the property
mortgaged in case the mortgagor fails to pay the loan. This stipulation is VOID. 2 Though to
some people this might seem convenient in mortgages but the law disallows this because it wants
to give the mortgagor the right to redeem his property and not be automatically deprived of it.
In details, bringing a closer look to what Pactum Commissorium is and why is it being
prohibited by the law to manifest in any security contracts lies within its very nature. It is
because it is against public morals. This study will help us clarify what is blurred about Pactum
Commissorium and will help us identify its elements in order for us to easily pin point the
situations on which Pactum Commissorium is already existing. It is very much crucial for us to
swiftly identify these cases or security contracts which involves an issue of Pactum
Commissorium because this act is prohibited by the law and that if not properly remedied by the
just shield of justice and law, will cause for the distress and damage for the interest of the
debtors.
1 New Civil Code, Article 2088
2 New Civil Code, Article 2137
2

INTRODUCTION

A pactum commissorium is a stipulation in a contract of mortgage of pledge which

provides that the mortgagee will automatically own the property mortgaged in case the
mortgagor fails to pay the credit. 3If you buy a house the mortgage contract cannot contain a
clause that will enable the bank to sell the house without a court order (in the case that you
default on the payments), in other words the process whereby attachment takes place must be
followed.4 There are specific procedures in place to protect the property owner from summary
execution or automatic process in regards to both general and special mortgages.
In order for Pactum Commissorium to exist, firstly there should be a pledge, mortgage, or
antichresis of property by way of security for the payment of the principal obligation; and second
is there should be a stipulation for an automatic appropriation by the creditor of the property on
the event of non-payment of the obligation within the stipulated period. It is immaterial that the
questioned stipulation was voluntarily and freely entered into, pactum commissorium being void
for being prohibited by law. Stipulation presupposes existence of security contract. Pactum
commissorium referred to in Arts. 2088 and 2137, therefore, presupposes the existence of
mortgage or pledge or antichresis.
In Luisa Briones Velasquez vs. CA, et al., G.R. No. 144882, February 4, 2005, 5 the
Supreme Court once again said that if there is an equitable mortgage, the creditor cannot
consolidate his ownership in case the debtor does not pay. The proper remedy is to foreclose it.
The reason is founded on Article 2088, NCC which provides that the creditor cannot appropriate
the things given by way of pledge or mortgage, or dispose of them. Any stipulation to the
contrary is null and void.
Applying the principle of pactum commissorium specifically to equitable mortgages, in
Montevergin vs. CA, 112 SCRA 641 (1982)6 it has been said that the consolidation of ownership
in the person of the mortgagee in equity, merely upon failure of the mortgagor in equity to pay
the obligation, would amount to a pactum commissorium. It was further articulated that an action
3 New Civil Code, Article 2088
4 New Civil Code, Article 2137
5 Velasquez vs. CA, et al., G.R. No. 144882, February 4, 2005
6 Montevergin vs. CA, 112 SCRA 641 (1982)
3

for consolidation of ownership is an inappropriate remedy on the part of the mortgagee in equity.
The only proper remedy is to cause the foreclosure of the mortgagee in equity. And if the
mortgagee in equity desires to obtain title to the mortgaged property, the mortgagee in equity
may buy it at the foreclosure sale.
A
stipulation
whereby
the
thing
pledged
or
mortgaged
or under antichresis (Art. 2137) shall automatically become the property of the creditor in the
event of non-payment of the debt within the term fixed is known as
pactum commissorium or pacto commisorio which is forbidden by law and declared null and
void.7 (Art. 2088) by such a stipulation, the creditor would be able to
acquire ownership of the property given as security without need of public sale or foreclosure
required by law. This forfeiture clause has traditionally been outlawed because it is contrary to
good morals and public policy. The reason for the prohibition is that the amount of the loan is
ordinarily much less than the real value of the thing pledged or mortgaged.8
Every stipulation to the contrary shall be void. But the creditor may petition the court for
the payment of the debt or the sale of the real property. In this case, the Rules of Court on the
foreclosure of mortgages shall apply. (1884a) Thus it has been held that there was no pactum
commissorium where pursuant to the contract of sale, the sums already paid by the vendee were
forfeited for his failure to pay the stipulated installments in due time considering that the person
to whom the property was forfeited (vendor) was the real and equitable owner of the same
because title would not pass until payment of the last installment. There is also no pactum
commissorium where the alienation of the subject property was by way of security and not by
way of satisfying or extinguishing the debt of the debtor.9

7 New Civil Code, Article 2137

8 New Civil Code, Article 2088
9 New Civil Code, Article 2137 (1884a)
4

DEFINITION OF TERMS

The following terms are identified and defined conceptually and/or operationally to aid the
readers in understanding some words and expressions used in this research:

a. Pactum Commissorium- It is a pact or agreement in a contract of pledge,

mortgage, or antichresis by virtue of which if the debtor cannot fulfill his
obligation, the creditor can appropriate or dispose of the thing given by way of
pledge, mortgage, or antichresis. It is a forfeiture clause in a deed of mortgage10
b. Pledge- defined as an accessory, real and unilateral contract by virtue of which
the debtor or a third person delivers to the creditor or to a third person movable
property as security for the performance of the principal obligation, upon the
fulfillment if which the thing pledged with all its accession and accessories, shall
be returned to the debtor or to third person. 11
c. Equitable Mortgage- is one which lacks the proper formalities, form of words, or
other requisites prescribed by law for a mortgage, but however shows the
intention of the contracting parties to make the property subject of the contract as
security for a debt and contains nothing impossible or contrary to law.12
10 (Hechanova v. Adil, 144 SCRA 450; Montevergen v. Court of Appeals, 112 SCRA 641;
Report of the Code
Commission, 156).

11 Tambunting Pawshop, INC. vs. Commissioner of Internal Revenue G.R. #179085

January 21, 2010
5

d. Antichresis- is a contract of which 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. 13
e. Chattel Mortgage- A chattel mortgage is a loan that is secured by chattel rather
than by real property. In a traditional mortgage, the loan is secured by the property
itself. 14

DISCUSSION

Pactum Commissorium
Pactum Commissorium is a pact or agreement in a contract of pledge, mortgage, or
antichresis by virtue of which if the debtor cannot fulfill his obligation, the creditor can
appropriate or dispose of the thing given by way of pledge, mortgage, or antichresis. It is
prohibited by law. It is a stipulation in a contract of mortgage of pledge which provides that the
mortgagee will automatically own the property mortgaged in case the mortgagor fails to pay the
credit. If you buy a house the mortgage contract cannot contain a clause that will enable the bank
to sell the house without a court order (in the case that you default on the payments), in other
words the process whereby attachment takes place must be followed. There are specific
procedures in place to protect the property owner from summary execution or automatic process
in regards to both general and special mortgages. It is a forfeiture clause in a deed of mortgage 15
Effects of the sale of the thing pledged

12 (41 C.J. 303; Cachola vs CA, 208 SCRA 496; Lumayag vs Heirs of Jacinto Nemeno, 526
SCRA 315; Alvaro vs
Ternida, 479 SCRA 288)

13 New Civil Code, Article 2132

14 The Manila trading and supply company vs Tomas Santos and Genaro D Saez.
15 (Hechanova v. Adil, 144 SCRA 450; Montevergen v. Court of Appeals, 112 SCRA 641;
Report of the Code
Commission, 156).

The sale of the thing pledged shall extinguish the principal obligation, whether or not the
proceeds of the sale are equal to the amount of the principal obligation, interest and expenses in a
proper case. If the price of sale is more than said amount, the debtor shall not be entitled to
excess, unless it is otherwise agreed. If the price of the sale is less, neither shall the creditor be
entitled to recover the deficiency, notwithstanding any stipulation to the contract.16
Art. 2088. The creditor cannot appropriate the things given by way
of pledge or mortgage, or dispose of them. Any stipulation to the contrary is null and void.
Prohibition Against Pactum Commissorium
(1) Stipulation null and void.
A
stipulation
whereby
the
thing
pledged
or
mortgaged
or under antichresis (Art. 2137) shall automatically become the property of the creditor in the
event of non-payment of the debt within the term fixed is known as
pactum commissorium or pacto commisorio which is forbidden by law and declared null and
void. 17(Art. 2088) by such a stipulation, the creditor would be able to
acquire ownership of the property given as security without need of public sale or foreclosure
required by law. This forfeiture clause has traditionally been outlawed because it is contrary to
good morals and public policy. The reason for the prohibition is that the amount of the loan is
ordinarily much less than the real value of the thing pledged or mortgaged.18
(2) Requisites:
There are two requisites or elements for pactum commissorium to exist, namely:
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 on the event of non-payment of the obligation within the stipulated period. It is
immaterial that the questioned stipulation was voluntarily and freely entered into, pactum
commissorium being void for being prohibited by law.19
16 New Civil Code, Article 2115
17 New Civil Code, Article 2137
18 New Civil Code, Article 2088
19 Pablo P Garcia vs Yolanda Valdez Villa G.R. # 158891 June 27, 2012
7

(3) Stipulation presupposes existence of security contract. Pactum commissorium referred to

in Arts. 2088 and 2137, therefore, presupposes the existence of mortgage or pledge or
antichresis.

Art. 2088. The creditor cannot appropriate the things given by way
of pledge or mortgage, or dispose of them. Any stipulation to the contrary is null and void.
Art. 2137. The creditor does not acquire the ownership of the real estate for non-payment
of the debt within the period agreed upon.

Every stipulation to the contrary shall be void. 20But the creditor may petition the court
for the payment of the debt or the sale of the real property. In this case, the Rules of Court on the
foreclosure of mortgages shall apply. (1884a) Thus it has been held that there was no pactum
commissorium where pursuant to the contract of sale, the sums already paid by the vendee were
forfeited for his failure to pay the stipulated installments in due time considering that the person
to whom the property was forfeited (vendor) was the real and equitable owner of the same
because title would not pass until payment of the last installment. There is also no pactum
commissorium where the alienation of the subject property was by way of security and not by
way of satisfying or extinguishing the debt of the debtor.21
(4) Effect on security contract:
The vice of nullity which vitiates such a stipulation does not affect substantially the
principal contract of pledge, mortgage, or antichresis with regard to its validity and efficacy for
the reason that the contract, having been perfected, can subsist although the contracting parties
have not agreed as to manner the creditor can recover his credit inasmuch as the law has
expressly established the procedure in order that he may recover the same, in case the debtor
does not comply with his obligation. In short, the security contract remains valid; only the
prohibited stipulation is void.

Illustrative Cases:
(1) If the sum loaned is not paid, property of the debtor would be considered as absolutely
sold to the creditor for said sum.
20 New Civil Code, Article 2137
21 New Civil Code, Article 2088/Article 2137
8

Facts:
D borrowed money from C under the agreement that if, at the expiration of the period stipulated,
the sum loaned should not be paid, it would be understood that the house and lot owned by D, be
considered as absolutely sold to C for the said sum. No payment was made by D within the time
fixed. In view of the refusal of D to deliver the property, C brought action to recover the property
and rents from D.22
Issue:
Is the contract in question in the nature of pactum commissorium?
Held:
No. We have in this case a contract of loan and a promise of sale of property, the price of
which should be the amount loaned, if within a fixed period of time such amount should not be
paid by the debtor-vendor (D) of the property to the creditor-vendee (C) of the same. The fact
that the parties have agreed at the same time, in such a manner that the fulfillment of the promise
of sale would depend upon the non-payment or return of the amount loaned, has not produced
any change in the nature and legal conditions of either contract or any essential defect which
would tend to nullify them. Pactum commissorium indicates the existence of the contract of
mortgage, or of pledge, or of antichresis, none of which has coincided in the loan in question.
The property does not appear mortgaged. Said property could not be pledged, not being personal
property, and notwithstanding the said double contract the debtor (D) continued in possession
thereof and the said property had never been occupied by the creditor (C). Neither was there any
contract of antichresis by reason of said contract of loan in as much as C has never been in
possession thereof, nor has he enjoyed the said property nor for one moment ever received its
rents. Buyer executed a deed of assignment in favor of seller of property sold, pursuant to a
judgment rendered in an action for specific performance filed by the seller.
(2)
Facts:
B and S agreed on the sale of trucks by the latter (S) to the former (B).When B defaulted
in the payment of the second and third installments, S filed an action in court for specific
performance. The trial court rendered judgment for S and ordered B to pay the balance of his
obligation and in case of failure to do so, to execute a deed of assignment pursuant to the
judgment.
Issue:
22 Pablo P Garcia vs Yolanda Valdez Villa G.R. # 158891 June 27, 2012
9

Is the deed of assignment in the nature of pactum commissorium?

Held:
No. There was no contract of pledge or mortgage entered into by the parties; nor a case of
automatic appropriation of the property by S because it took the intervention of the trial court to
exact fulfillment of the obligation, by which its very nature is ....anathema to the concept of
pacto commissorio. And even granting that the original agreement between the parties had the
badges of pactum commissorium, the deed of assignment does not suffer the same fate as it was
executed pursuant to a valid judgment as can be gleaned from its very terms and conditions.

Prohibition refers to stipulation authorizing automatic appropriation.

What is prohibited by Art. 2088 in connection with pacto commissorio is the automatic
appropriation by the creditor of the thing pledged or mortgaged upon failure of the debtor to pay
his debt within the period agreed upon by virtue of authority or right previously given the
creditor, thus:
(1) A stipulation providing that the mortgaged property shall be considered in full payment
without further action in court in case of non-payment is null and void being in the form of
pacto commissorio.23
(2) A stipulation in a purported pacto de retro sale that the owner that the ownership over the
property sold would automatically pass to the vendee in case of no redemption was effected
within the period stipulated, is contrary to the nature of a true pacto de retro sale, under which
the vendee acquires ownership of the thing sold immediately upon the execution of the sale,
subject only to the vendors right of redemption. The said stipulation is a pactum commissorium
which enables the mortgagee to acquire ownership of the mortgaged property without need of
foreclosure. It is void. Its insertion in the contract is an avowal of the intention of the mortgage,
rather than to sell, the property.24
Permissible stipulations
(1) Subsequent modification of original contract. The stipulations that are prohibited by Arts.
2088 and2137 (antichresis) are those executed or made simultaneously with the original
contract, not those subsequently entered into. The principle does not prohibit
modification of the contract by subsequent agreement such as the parties may see fit to
adopt.
23 New Civil Code, Article 2137
24 New Civil Code, Article 2088
10

(2) Subsequent voluntary cession of property. The prohibition does not include s subsequent
voluntary act of the debtor making cession of the property mortgaged in payment of the
debt which amounts in its legal effect to a novation of the original contract and to a
voluntary sale of the said property for the amount of the debt.
(3) Promise to assign or sell. Neither is the prohibition applicable to a promise to assign or
sell said property in payment of the obligation if, upon its maturity, it is not paid because
the title thereto remains with the debtor. The promise is merely a personal obligation of
the mortgagor and does not in any way bind the property.
(a)The mortgagor can validly sell the property to a third person and if there should
be any action accruing to the mortgagee, it would be a personal action for damages
against the mortgagor.
(b)If the vendee contributed to the breach of the contract by the mortgagor, the
former, together with the latter, may also be held liable for damages; or if the vendee was
guilty of fraud which would be aground for rescission of the sale in his favor, the
mortgagor and not the mortgagee would be the party entitled to bring the action of
annulment.
In the dissenting opinion of Justice Street in the Dulay vs. Aquiatin and Maximo, 47 Phil.
951; 1925), Justice Street said: It is not to be denied that a mortgagor of property may transfer
the mortgaged property to the creditor in satisfaction of the mortgage debt after the mortgage has
fallen due. But such transfer implies the independent exercise of the power vested in the
mortgagor, as owner....by virtue of this stipulation (to the effect that in case the specified date
should arrive and the debtor should be unable to pay the amount due, it should be paid with the
property security), the debtor was bound to transfer the property to the creditor in satisfaction of
the mortgaged debt, the mortgagor being unable at the time to pay the same. Said stipulation
should be declared invalid, as contrary to the spirit, if not the letter of Art. Of 1859 (now Art.
2088), as well as directly contrary to the general principles of jurisprudence applicable to the
relation of mortgagor and mortgagee. If a stipulation of this kind is valid, every mortgage in
which such stipulation is inserted will become self-executing and the debtor, upon making
default in the payment of the debt, will be bound to transfer the property in satisfaction of the
mortgage, with the result that the right of redemption is lost from the mere fact that the debtor is
unable to pay at the date stipulated.25
(4) Authority to take possession of property upon foreclosure.
A stipulation authorizing the mortgagee, for the purpose therein specified, to take possession
of the mortgaged premises upon foreclosure of a mortgage is not repugnant to either Art. 2088 or
Art. 2137.26 On the contrary, such a stipulation is in consonance with or analogous to the

25 (Dulay vs. Aquiatin and Maximo, 47 Phil. 951; 1925)

11

provisions of Arts. 2132, et seq.27 Regarding antichresis and the provisions of the Rules of Court
(Rule 59) regarding the appointment of a receiver as a convenient and feasible means of
preserving and administering the property in litigation.28
Illustrative cases:
(1)
Mortgagor appoints mortgagee in deed of assignment as attorney-in-fact with authority to
dispose of mortgage properties in case of default of mortgagor and to apply the proceeds in the
payment of loan.
Facts:
C, a grantee of a Fishpond Lease Agreement from the Govt, obtained from DBP three
separate loans, each of which was covered by a promissory note. Simultaneous with the
execution of the notes was the execution of Assignment of Leasehold Rights by C, as borrower
of the mortgaged properties by way of security in the payment of the loans. Condition No. 12
provides for the appointment of DBP as attorney-in-fact with authority, among other things, to
sell or otherwise dispose of the said real rights in case of default of C and to apply the proceeds
to the payment of the loan.
Issue:
(a) Whether the condition in question constitute pactum commissorium.
(b) Whether the act of DBP in appropriating to itself Cs leasehold rights without foreclosure
proceedings was contrary to Art. 2088 and, therefore, invalid.
Held:
(a) Elements of pactum commissorium are not present. Condition No, 12 did not provide that the
ownership over the lease hold rights would automatically pass to DBP upon Cubas failure to pay
the loan on time. This provision is standard condition in mortgage contracts and is inconformity
with Art. 2087 of the CC, which authorizes the mortgagee to foreclose the mortgage and alienate
the mortgage property for the payment of the principal obligation.

26 New Civil Code, Article 2137

27 New Civil Code, Article 2132
28 Revised Rules of Court, Rule 59
12

(b) DBP exceeded the authority vested by condition. However, DBP exceeded the authority
vested by condition No. 12 for the Deed of Assignment. As admitted by it during the pre-trial, it
had, without foreclosure proceedings, whether judicial or extrajudicial....appropriated the
leasehold rights of Cuba over the fishpond in question. Its contention that it limited itself to mere
administration by posing caretakers is further belied by the deed of conditional sale it executed
favor of Cuba. The deed stated: Whereas, the Vendor (DBP) by virtue of a deed of assignment
executed in its favor by the herein vendees (Sps. Cuba) the former acquired all the rights and
interest of the latter over the above-described property; The title to the real estate property and
all its improvements thereon shall remain in the name of the vend or until after the purchase
price, advances and interest shall have been fully paid. It is obvious from the above-quoted
paragraphs that DBP had appropriated and taken ownership of Cubas leasehold rights merely on
the strength of the deed of assignment. DBP cannot take refuge in Condition No. 12 of the deed
of assignment to justify its act of appropriating the leasehold rights. As stated earlier condition
No. 12 did not provide that Cubas default would operate to vest in DBP ownership of the rights.
Besides, an assignment to guarantee an obligation as in the present case, is virtually a mortgage
and not an absolute conveyance of title which confers ownership on the assignee.
(2)
The lender is given the option to buy at a certain price the property given as collateral in
the event the borrower fails to pay.
Facts:
C (respondent) entered into a loan agreement with B (petitioner) and her late husband,
with the following terms and conditions:
a. The spouses would borrow P100K from C, for a period of two years counted from Mar.
1, 1987;
b. Interest rate is 18% per annum;
c. To guaranty payment: put up as collateral 70sqm portion of a parcel of land, inclusive
of the apartment therein;
d. In the event the borrowers fail to pay, C has the option to buy or purchase the
mortgaged property for a total consideration of P200K inclusive of the principal and interest.
When the loan was about to mature on Mar. 1, 1989, C proposed to buy at the pre-set
price of P200K the collateral given to guarantee the payment of the loan, but B refused to sell.
On Mar. 1, 1989, B tendered payment of the loan to C which the latter refused to accept, insisting
Bs signing a prepared deed of absolute sale. C consigned the amount of P47.5K with the trial
court with which C filed a complaint for the specific performance. In arriving at the amount
deposited, C considered the principal loan of P100K and 18% interest per annum thereon, which
13

amounted to P52.5K, leaving a balance of P47.5K from the amount of P200K. On the other hand
B filed a petition for consignation and deposited the amount of P153K with the trial court.
Issue:
Whether the stipulation in the loan contract was valid and enforceable.
Held:
a. The stipulation embraced in concept of pactum commissorium. B did not fail to pay the loan.
When C refused to accept payment, B consigned the amount with the trial court. A scrutiny of
the stipulation of the parties reveals a subtle intention of the creditor to acquire the property
given as security for the loan. This is embraced in the concept of pactum commisssorium, which
is proscribed by law. The elements of pactum commissorium are as follows:
(a1) There should be a property mortgaged by way of security for the payment of the
principal obligation; and
(a2) There should be a stipulation for automatic appropriation by the creditor of the thing
mortgaged in case of non- payment of the principal obligation within the stipulated period. Intent
to appropriate property given as collateral appears to be evident a significant task in contract
interpretation is the ascertainment of the intention of the parties and looking into the words used
by the parties to project that intention.= In this case, the intent to appropriate the property given
as collateral in favor of the creditor appears to be evident, for the debtor is obliged to dispose of
the collateral at the pre-agreed consideration amounting to practically the same amount as the
loan. In effect, the creditor acquires the collateral in the event of non-payment of the loan. This is
within the concept of pactum commissorium. Such stipulation is void.29
(a3) Duty of court to protect necessitous borrowers. All persons in need of money are
liable to enter into contractual relationships whatever the condition if only to alleviate their
financial burden albeit temporarily hence, courts are duty bound to exercise caution in the
interpretation and resolution of contracts lest the lenders devour the borrowers like vultures do
with their prey.30
Note:
Here, the agreement between the parties was not a sale with right to repurchase (pacto de
retro sale), but a loan with interest of 18% per annum for a period of 2 years and if B fails to pay,
C was given the option to purchase the property given as collateral for P200K. There was no
29 Pablo P Garcia vs Yolanda Valdez Villa G.R. # 158891 June 27, 2012
30 NATALIA P. BUSTAMANTE, petitioner vs. SPOUSES RODITO F. ROSEL and NORMA
A. ROSEL, respondents.
14

stipulation for automatic appropriation by C of the property in case of non-payment of the loan
within the stipulated period.
Risk of loss of property pledged or mortgaged
As the pledgee or mortgagee does not become the owner of the property and the
ownership thereof remains with the debtor, therefore, under the maxim, res perit domino suo, the
debtor-owner bears the loss of the property. The principal obligation is not extinguished by the
loss of the pledged or mortgaged property.31

CONCLUSION

31 WARNER, BARNES & CO., LTD., Plaintiffs-Appellees, v. RAMON FLORES, DefendantAppellant. Hilado & Hilado
for Plaintiff-Appellee. Enrique F. Mario & Mariano D. Lachica,
for Defendant-Appellant. G.R. No. L-12377.
March 29, 1961

15

Getting straight deeply into its core, what is being prohibited in Pactum Commissorium is
the stipulation for automatic appropriation of the property mortgaged in case the mortgagor fails
to pay the credit. In order for us to determine whether or not there is an issue of Pactum
Commissorium, it is vital to keep in mind its two (2) important elements: First, there should be a
pledge, mortgage, or antichresis of property by way of security for the payment of the principal
obligation; and second is there should be a stipulation for an automatic appropriation by the
creditor of the property on the event of non-payment of the obligation within the stipulated
period. In other words, without the existence of a security contract such as mortgage, pledge or
antichresis, there could be no Pactum Commissorium. It is immaterial that the questioned
stipulation was voluntarily and freely entered into, pactum commissorium being void for being
prohibited by law. Stipulation presupposes existence of security contract. Pactum commissorium
referred to in Arts. 2088 and 2137, therefore, presupposes the existence of mortgage or pledge or
antichresis.

16