💡 Trivia Auto-transfer of collateral property not allowed -- SC

The Supreme Court (SC) has reminded that while lenders can acquire the properties used as collaterals in case of non-payment of loans, ownership over the properties cannot be transferred automatically to them. To do so, the transfer would constitute pactum commissorium, a prohibited agreement under Article 2088 of the Civil Code. The prohibition states that a lender cannot automatically gain ownership of the collateral if the borrower fails to make payments.

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