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JAMACA-UNO|1
CHATTEL MORTGAGE
It is a conditional sale of personal property as security for payment of a debt or performance of some other
obligation specified therein, the condition being that the sale shall be viod upon the seller paying to the
purchaser a sum of money or doing some other act named. If the condition is performed according to its terms
the mortgage and sale immediately become void and the mortgagee is hereby divested of his title.1
* The mortgagor is not relieved from criminal liability even if the mortgage indebtedness is thereafter
paid in full or the mortgagor-seller informed the purchaser that the thing sold had been mortgaged.
* The sale is valid although no written consent was obtained from the mortgagee but the mortgagpr lays
himself open to criminal prosecution.
* For purposes of the Chattel Mortgage Law, both growing crops and large cattles are personal property
and therefore, capable of being mortgaged although they would be considered as immovable property
under certain conditions9.
7
Where parties had treated the “after-acquired properties” as real property by expressly agreeing that the shall automatically become
subject to the lien of the real estate mortgage, this characterization impresses upon the properties the character determined by the
properties who must be held in estoppel. (People’s Bank and Trust Co. vs Dahican Lumber, 20 SCRA 84)
8
Registration is only essential in order to affect third parties. Non-compliance thereof does not affect the validity of the mortgage, as
between the parties.
9
(2)Trees, plants and growing fruits, while they are attached to the land or form an integral part of an immovable; (6) Animal houses,
pigeon-houses, beehives, fishponds or breeding places of similar nature, in case their owner has placed them or preserves them with
intention to have them permanently attached to the land, and forming a permanent part of it; the animals in these places are included.
(Article 415, Civil Code)
NOTES OF JEDYL E. JAMACA-UNO|3
A chattel mortgage shall be deemed to cover only the property described therein and not like or substituted
property thereafter acquired by the mortgagor and placed them in the same depositary as the property
originally mortgaged, anything in the mortgage to the contrary notwithstanding. However, this does not apply
to stores open to the public for retail business where the goods are constantly sold and substituted with new
stock.
This special affidavit is required only for the purpose of transforming an already valid mortgage into “preferred
mortgage.” The absence of it vitiates a mortgage only as against third persons without notice like creditors and
subsequent encumbrances.
RIGHT OF REDEMPTION
1. When the condition of the chattel mortgage is broken, the following may redeem:
a. Mortgagor: redemption from buyer is only the purchase price
b. Person holding a subsequent mortgage
c. A subsequent attaching creditor
2. An attaching creditor whom so redeems shall be subrogated to the rights of the mortgage and entitled to
foreclose the mortgage.
3. The redemption is made by paying or delivering to the mortgagee the amount due on such mortgage
and the costs and expenses incurred by such breach of condition before the sale thereof.12
Where mortgagor has breached the chattel mortgage contract, the mortgagee acquires the right to
possess the chattel starting from the date of said breach. (Northern vs. Herrera, 49 SCRA 392)
Public Sale – If the mortgagor defaults in the payment of the secured debt or otherwise fails to
comply with the conditions of the mortgage, the creditor has no right to appropriate to himself the
personal property because he is only permitted to recover his credit from the proceeds of the sale of
the property at the public auction.
NOTES OF JEDYL E. JAMACA-UNO|5
Private Sale – There is nothing illegal, immoral or against public order in an agreement for the
private sale of personal properties covered by the chattel mortgage.13 The mortgagor is in estoppels
to question it except on the ground of fraud or duress.
13
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. (Article 1306, Civil Code)
14
The30-day period to foreclose a chattel mortgage is the minim period after violation of the mortgage condition for the mortgage
creditor to cause the sale at the public auction of the mortgage chattel with at least 10 days notice to the mortgagor and posting of
public notice.. After the sale of the chattel at the public auction, the right of redemption is no longer available to the mortgagor. (Cabral
vs. Evangelista, 28 SCRA 1000)
15
However, if the proceeds from the foreclosure of the chattel mortgage should exceed the amount due to the mortgagee, excess shall
be for mortgagor’s account. (Francisco vs. Blanco, 307 SCRA 241)
16
See Note 5. The remedies granted by Article 1484 are alternative, not cumulative, and exclusive, that is, the exercise of one would
bar the exercise of the others. (Borbon II vs. Servicewide Specialists, Inc., 258 SCRA 634) HOWEVER, the prohibition under the Recto
Law, does not apply to foreclosure of a chattel mortgage constituted to secure a loan and not originating from sale. (Bicol Savings and
Loan vs. Guinhawa, 188 SCRA 642)
NOTES OF JEDYL E. JAMACA-UNO|6
3. Claims of persons holding subsequent mortgages in their order, and
4. The balance, if any, shall be paid to the mortgagor, or person holding under him.