CHATTLE

MORTGAG
E
 COVERAGE
1. THE CHATTEL MORTGAGE LAW (Act
No. 1508, as amended)

2. CIVIL CODE Articles 2085-2092;

2140-2141

3. Revised Administrative Code; and

4. Revised Penal Code

 DEFINITION OF
CHATTEL MORTGAGE
It is a conditional sale of personal property as
security for the payment of a debt, or the
performance of some other obligation specified
therein, the condition being that the sale shall be
void 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 thereby divested of his title.
 WHAT ARE IT`S CHARACTERISTICS AS A
CONTRACT?
a. Accessory – It cannot exist without a principal
obligation.
b. Indivisible – It creates a lien on the whole or all
of the properties mortgaged, which lien continues
until the obligation is secures has been fully paid.
c. Inseparable – It subjects the property upon
which it is imposed, whoever the possessor may
be, to the fulfillment of the obligation for whose
security it was constituted.
d. Formal contract – It is perfected by the
registration if the chattel mortgage register.
WHAT IS THE SUBJECT MATTER OF A
CHATTEL MORTGAGE?
PERSONAL PROPERTY
OR
MOVABLE PROPERTY
 What is the EXTENT or SCOPE of
Chattel Mortgage?
It covers only property described in the
contract, and excludes like or substituted
property thereafter acquired by the
mortgagor, notwithstanding anything in
the contract to the contrary (Art No. 1508
Sec 7).
Exception: In this case of stock or
merchandise contained in drugstores,
grocery stores, etc. which are constantly
sold and substituted with new stock.
 WHAT ARE IT`S ESSENTIAL
REQUISITES?
a. That it be constituted to secure the fulfillment of a
principal obligation or contract of loan.

b. That the mortgagor be the absolute owner of the

thing mortgaged.

c. That the person constituting the mortgage must have

the free disposal of his property, and in the absence
thereof, that he be legally authorized for the purpose.

d. That the document in which the mortgage appears be

recorded in the Chattel Mortgage Register.
RULES FOR THE REGISTRATION OF THE
CHATTEL MORTGAGE
a. As a general rule, it must be recorded in the
Chattel Mortgage Register of the province
where the mortgagor resides.

b. If must be recorded in the both Chattel

Mortgage Registers of the provinces where the
mortgagor resides and where the property is
located if the property is not located in the
province of domicile of the mortgagor.

c. If the mortgagor is domiciled outside the

Philippines, the mortgage must be registered
in the Chattel Mortgage Register where the
property is located.
 RULES FOR THE REGISTRATION OF THE
CHATTEL MORTGAGE

d. With respect to motor vehicles, it must be

registered Chattel Mortgage Register where the
mortgagor resides and LTO.

e. With respect to shares of stock, Chattel

Mortgage Register in the province where the
corporation has its principal office and in the
domicile of the mortgagor.

f. With respect to vessel, Bureau of Customs at

port of entry.
 RULES FOR THE REGISTRATION OF THE
CHATTEL MORTGAGE

d. With respect to motor vehicles, it must be

registered Chattel Mortgage Register where the
mortgagor resides and LTO.

e. With respect to shares of stock, Chattel

Mortgage Register in the province where the
corporation has its principal office and in the
domicile of the mortgagor.

f. With respect to vessel, Bureau of Customs at

port of entry.
WHAT MAKES A CHATTEL MORTGAGE
VALID?
A chattel mortgage shall be deemed to be
sufficient when made substantially in accordance
with the following form,

a. It shall be signed by the person or persons

executing the mortgage.

b. In the presence of two witnesses, who shall sign

the mortgage as witnesses to the execution.

c. Each mortgagor and mortgagee, or, in the

absence of the mortgagee, his agent or attorney.

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WHAT MAKES A CHATTEL MORTGAGE
VALID?

A chattel mortgage shall be deemed to be

sufficient when made substantially in accordance
with the following form, and

d. The agent shall make and subscribe an affidavit

in substance as hereinafter set forth, which
affidavit, signed by the parties to the mortgage as
above stated, and

e. Certificate of the oath signed by the authority

administering the same, shall be appended to such
mortgage and recorded therewith.

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 What must be state din the description of a
property?

The description of the mortgaged

property shall be such as to
enable the parties to the
mortgage, or any other person,
after reasonable inquiry and
investigation, to identify the
same.

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 What must be state din the
description of a property?
If the property mortgaged be large cattle," the
description of said property in the mortgage shall
contain the :
a. brands
b. class
c. sex
d. age
e. knots of radiated hair commonly known as
remolinos, or cowlicks
f. other marks of ownership
as described and set forth in the certificate of
ownership of said animal or animals, together with
the number and place of issue of such certificates
of ownership.
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 What must be state din the
description of a property?
If growing crops be mortgaged the mortgage may
contain an agreement stipulating that the
mortgagor binds himself properly to tend, care for
and protect the crop while growing, and faithfully
and without delay to harvest the same, and that in
default of the performance of such duties the
mortgage may enter upon the premises, take all
the necessary measures for the protection of said
crop, and retain possession thereof and sell the
same, and from the proceeds of such sale pay all
expenses incurred in caring for, harvesting, and
selling the crop and the amount of the
indebtedness or obligation secured by the
mortgage, and the surplus thereof, if any shall be
paid to the mortgagor or those entitled to the
same.
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 What is an Affidavit of Good
Faith?
◦ The Affidavit of Good Faith is an oath in
a contract of chattel mortgage wherein
the parties “severally swear that the
mortgage is made for the purpose of
securing the obligation specified in the
conditions thereof and for no other
purpose and that the same is just and
valid obligation and one not entered
into for the purpose of fraud.

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 Failure of mortgagee to
discharge the mortgage
◦ If the mortgagee, assign, administrator, executor, or
either of them, after performance of the condition
before or after the breach thereof, or after tender of the
performance of the condition, at or after the time fixed
for the performance, does not within ten days after
being requested thereto by any person entitled to
redeem, discharge the mortgage in the manner
provided by law, the person entitled to redeem may
recover of the person whose duty it is to discharge the
same twenty pesos for his neglect and all damages
occasioned thereby in an action in any court having
jurisdiction of the subject matter thereof

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Who may exercise right of redemption when
condition of the chattel mortgage is broken:

a. The mortgagor;
b. A person holding a subsequent mortgage;
c. A subsequent attaching creditor

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Rules in deficiency or excess in
foreclosure of chattel mortgage

Rule in case of deficiency

◦ The mortgagee can recover the
deficiency in the absence of
stipulation to the contrary.

Rule in case of excess

◦ The mortgagor is entitled to the
excess in the absence of
stipulation to the contrary.
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Foreclosure - refers to the remedy
available to the mortgagee by which he
subjects the property mortgaged to the
satisfaction of the obligation secured when the
principal obligation is not paid when due or
when there is any violation of any condition,
stipulation or warranty by the mortgagor.

As to deficiency, this can be recovered unless

there is stipulation to the contrary. (Except in
case of personal property sold in instalment
under Recto Law)
What is the REMEDY TO BE USED IN A
CHATTEL MORTGAGE?

Foreclosure - refers to the remedy

available to the mortgagee by which he
subjects the property mortgaged to the
satisfaction of the obligation secured
when the principal obligation is not paid
when due or when there is any violation
of any condition, stipulation or warranty
by the mortgagor.

As to deficiency, this can be recovered

unless there is stipulation to the contrary.
(Except in case of personal property sold
in instalment under Recto Law)
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Kinds of Foreclosure of Chattel
Mortgage:

1. Judicial Foreclosure – the mortgagee

institutes an action in court;

2. Extra-judicial Foreclosure – The sale

is made by the mortgagee himself
when authorized by the Chattel
mortgage contract or by special law.

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What is the procedure for Extrajudicial Foreclosure
of real both estate mortgage under Act No. 3135 and
Chattel Mortgage under Act No. 1508?

1. Filing of application before the Executive Judge

through the Clerk of Court;

2. Clerk of Court will examine whether the

requirement of the law have been complied
with. That is, whether the notice of sale has
been posted for not less than 20 days in at
least three (3) public places of the municipality
or city where the property is situated, and
where the same is more than P400.00, that
such notice has been published

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What is the procedure for Extrajudicial Foreclosure
of real both estate mortgage under Act No. 3135 and
Chattel Mortgage under Act No. 1508?

3. The certificate of sale must be approved by the Executive

Judge;

4. In extrajudicial foreclosure of real mortgages in different

locations covering one indebtedness, only one filing fee
corresponding to such debt shall be collected;

5. The Clerk of Court shall issue certificate of payment

indicating the amount of indebtedness, the filing fees
collected, the mortgages sought to be foreclosed, the
description of the real estates and their respective locations;

6. The notice of sale shall be published in a newspaper of

general circulation pursuant to Section 1, PD No. 1079;

7. The application shall be raffled among all sheriffs; and

8. After the redemption period has expired, the Clerk of Court

shall archive the records 24
 How proceeds of the foreclosure
be applied?
To the payment of the following in their order:
a. Costs and expenses of keeping and sale;

b. Payment of the obligation secured by the mortgage;

c. Claims of persons holding subsequent mortgages in their order;

and

d. The balance, if any. Shall be paid to the mortgagor, or in person

holding under him.

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