Art. 2112.

The creditor to whom the credit has not been satisfied in due time, may proceed
before a Notary Public to the sale of the thing pledged. This sale shall be made at a public
auction, and with notification to the debtor and the owner of the thing pledged in a proper
case, stating the amount for which the public sale is to be held. If at the first auction the thing
is not sold, a second one with the same formalities shall be held; and if at the second auction
there is no sale either, the creditor may appropriate the thing pledged. In this case he shall be
obliged to give an acquittance for his entire claim. (1872a)

Right of Creditor to Sell if Credit is Not Satisfied

Under Article 2087, the law says that it is of the essence of the contract of pledge that
when the principal obligation becomes due, the things in which the pledge consists may be
alienated for the payment to the creditor.

Formalities Required

a. The debt is already due

b. There must be intervention of a notary public

c. There must be a public auction (if at first, it is not sold, a second auction must be
held with the same formalities).

d. Notice to the debtor or owner stating the amount due, that is the amount for which
the public sale is to be held

Examples:

Thing pledged is not sold at first auction -> Pledgee not allowed to appropriate the thing for
himself

Thing pledged is not sold at second auction -> Pledgee can appropriate the thing for himself ->
shall be oblige to give an acquittance for his entire claim. (A document that shows that a debtor
has been released from a debt obligation.)

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.

The pledgee may also bid, but his offer shall not be valid if he is the only bidder. (n)

Prteference given to Pledgor if the debt is not paid and a public sale takes place, both the
pledgor and the pledgee may bid. The pledgor shall be shall be preferred if he offers the same
terms as the highest bidder, for after all, the thing belongs to him. To avoid fraud, the pledge is
not allowed to acquire the thing pledged if he is the only bidder.

Art. 2114. All bids at the public auction shall offer to pay the purchase price at once. If any
other bid is accepted, the pledgee is deemed to have been received the purchase price, as far
as the pledgor or owner is concerned. (n)

Bids must be for cash All bids, including that of the pledgor, must be for cash. If the pledge
accepts a bid other than for cash, the pledgor or the owner has the right to consider that the
pledge has received the purchase price in cash.