Creditor can’t appropriate house and lot pledged or mortgaged to him

Persida Acosta

Persida Acosta

Dear PAO,
My mother entered into a contract called “sangla tira” with Mando involving our untitled house and lot in Taguig City (Metro Manila). The contract states that my mother borrowed P300,000.00 from Mando and the latter would take possession of the subject house and lot for two years or until 2014. It also stipulates that if my mother is unable to pay the P300,000.00 after two years, Mando will become the owner of the property. We failed to pay the P300,000.00 in 2014 because my mother suffered from a heart ailment, which eventually caused her death.

We offered to pay Mando the P300,000.00 plus interest but he refused to accept I,t claiming that he already owns the property. He cited the failure of my mother to pay her loan in 2014, saying this clause is expressly provided in the contract. Can we still recover the property from Mando?

Dear Nestor,
You can still recover the property from Mando but subject to the payment of the amount borrowed by your mother. The stipulation provided in the contract that Mando will be the owner of the house and lot in case your mother fails to pay the borrowed amount is void. This stipulation is called pactum commissorium.

Article 1306 of the Civil Code of the Philippines states that “the contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order or public policy.” Correlative to this provision of law is Article 2088 of the same code that provides that “[t]he 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.”

The following are the elements of pactum commissorium:

(1) There should be a property mortgaged by way of security for the payment of the principal obligation; and

(2) 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 (Garcia vs Villar, G.R. No. 158891, June 27, 2012).

In your case, since Mando refused to receive the amount of P300,000.00 and interest, your remedy is consignation of the amount before the judicial authority pursuant to Article 1258 of the New Civil Code of the Philippines. After which, you can notify Mando of the consignation and ask the court for the cancelation of the obligation or contract (Article 1260, Id.)

Again, we find it necessary to mention that this opinion is solely based on the facts you have narrated and our appreciation of the same. The opinion may vary when the facts are changed or elaborated.

We hope that we were able to enlighten you on the matter.

Editor’s note: Dear PAO is a daily column of the Public Attorney’s Office. Questions for Chief Acosta may be sent to


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