EXTINGUISHMENT OF PLEDGE May be rebutted by evidence to the

contrary(e.g., the return was merely for

1. Payment of the debt substitution of the thing pledged)
Only the accessory obligation is
Art. 2109. If the creditor is deceived on the presumed remitted, not the principal
substance or quality of the thing pledged, he obligation
may either claim another thing in its stead, or
demand immediate payment of the principal 3. Written statement by the pledgee that he
obligation. (n) renounces or abandons the pledge
RIGHT OF PLEDGEE TO DEMAND
Art. 2111. A statement in writing by the pledgee
SUBSTITUTE OR IMMEDIATE PAYMENT
that he renounces or abandons the pledge is
1) To claim another thing in pledge, and
sufficient to extinguish the pledge. For this
2) To demand immediate payment of the
purpose, neither the acceptance by the pledgor
principal obligation
or owner, nor the return of the thing pledged is
(Only alternative remediesto choose only
necessary, the pledgee becoming a depositary.
one but not both)
(n)
2. Thing pledged is returned by the pledgee
The renunciation must be in writing to
to the pledger or owner
extinguish the pledge
Art. 2110. If the thing pledged is returned by the The renunciation is not conditioned
pledgee to the pledgor or owner, the pledge is upon the acceptance of the pledger nor
extinguished. Any stipulation to the contrary upon the return of the thing pledge
shall be void. Principal debt is not affected by the
waiver of pledge but the waiver of
If subsequent to the perfection of the pledge, the principal obligation carries with it that
thing is in the possession of the pledgor or of the pledge
owner, there is a prima facie presumption that
the same has been returned by the pledgee. This 4. Sale of the thing pledged at a public
same presumption exists if the thing pledged is auction
in the possession of a third person who has
received it from the pledgor or owner after the Art. 2108. If, without the fault of the pledgee,
constitution of the pledge. (n) there is danger of destruction, impairment, or
diminution in value of the thing pledged, he may
The pledge is still extinguished even if cause the same to be sold at a public sale. The
there is a stipulation that it would proceeds of the auction shall be a security for
continue although the pledgee is no the principal obligation in the same manner as
longer in possession the thing originally pledged. (n)
Presumption where thing pledged in possession RIGHT OF PLEDGEE TO CAUSE THE SALE
of pledgor or owner subsequent to the OF THE THING PLEDGED
perfection: the thing has been returned and, This right is superior to that of the
therefore, the pledge has been extinguished pledgor to substitute the thing pledged
 The right given to the pledgor The pledgee may also bid, but his offer shall not
is without prejudice to the right of the be valid if he is the only bidder. (n)
pledgee
RIGHT OF PLEDGOR AND PLEDGEE TO
Art. 2112. The creditor to whom the credit has BID AT PUBLIC SALE
not been satisfied in due time, may proceed
before a Notary Public to the sale of the thing The pledgor shall be preferred if he
pledged. This sale shall be made at a public offers the same terms as the highest
auction and with notification to the debtor and bidder, for after all, the thing belongs to
the owner of the thing pledged in a proper case, him
stating the amount for which the public sale is to To avoid fraud, the pledgee is not al
be held. If at the first auction the thing is not lowed to acquire the thing pledged if
sold, a second one with the same formalities he is the only bidder
shall be held; and if at the second auction there
Art. 2114. All bids at the public auction shall
is no sale either, the creditor may appropriate
offer to pay the purchase price at once. If any
the thing pledged. In this case he shall be
obliged to give an acquittance for his entire other bid is accepted, the pledgee is deemed to
claim. (1872a) have been received the purchase price, as far as
the pledgor or owner is concerned. (n)
THE FORMALITIES REQUIRED FOR SUCH
SALE In pledge, bid must be for cash: if the pledgee
accepts a bid other than for cash, the pledgor has
1) The debt is due and unpaid the right to consider that the pledgee has
2) The sale must be at a public auction received the purchase price in cash
3) There must be notice to the pledgor and
owner, stating the amount due 5. Other causes of extinguishment of pledge
4) The sale must be made with the are prescription, loss of the thing, merger,
intervention of a notary public compensation, novation, etc.

If at first auction the thing is not sold, a

second one with the same formalities
shall be held
If at second auction the thing is not sold,
the pledgee may appropriate the thing
pledge as full payment for his entire
claim (In case the value of the thing is
more than the principal obligation, the
debtor/pledgor is not entitled to the
excess)

Art. 2113. At the public auction, the pledgor or

owner may bid. He shall, moreover, have a
better right if he should offer the same terms as
the highest bidder.