Beruflich Dokumente
Kultur Dokumente
Primarily Act No. 1508, and the provisions of the Civil Code on pledge insofar as
they do not conflict with Act No. 1508.
The purpose of the chattel mortgage law is to promote business and trade and to
give impetus to the economic development of the country. (Torres v. Limjap, 56 Phil.
141; 1931)
(1) Involves personal property (Note however the case of Tumalad v. Vicencio, 41
SCRA 143; 1971);
(2) Constituted to secure the fulfillment of the principal obligation;
(3) Mortgagor is absolute owner of the thing mortgaged;
(4) Persons constituting the mortgage have the free disposal of the property, or in the
absence thereof, are legally authorized for the purpose.
Note that recording of the chattel mortgage with the Register of Deeds, while necessary
to bind 3rd persons, is not an essential requisite.
(1) Substantial compliance with the form prescribed in Sec. 5 of Act No. 1508;
(2) The chattel mortgage must be signed in the presence of at least 2 witnesses;
Yes, provided that the after-acquired property is either (1) in renewal of, or in
substitution for, goods on hand when the mortgage was executed, or (2) purchased with
the proceeds of the sale of such goods. (Torres v. Limjap, 56 Phil. 141; 1931)
No. Sec. 7 of Act 1508 expressly provides that a chattel mortgage covers only
the property described therein and not like or substituted property thereafter acquired by
the mortgagor and placed in the same depository as the property originally mortgaged,
anything in the mortgage to the contrary notwithstanding.
Note however that this provision does not apply to drug stores, bazaars and all
other stores in the nature of a revolving and floating business, i.e. one that deals with the
sale of either perishable goods, "rolling" goods, or goods subject to wear and tear.
(Torres v. Limjap, 56 Phil. 141; 1931)
No. A chattel mortgage can only cover obligations existing at the time the
mortgage is constituted. (Acme Shoe, et al. V. CA, G.R. 103576, Aug. 22, 1996)
REGISTRATION
Act No. 1508 does not prescribe any period within which a chattel mortgage must
be registered.
JUNIOR MORTGAGEES
Yes. In such a case, junior mortgagees have the right of redemption within the
period of redemption allowed by law, for as long as the mortgagor has not yet exercised
his right of redemption.
DEFAULT AND FORECLOSURE
Does the default of the mortgagor have the effect of vesting ownership of the
mortgaged property on the mortgagee? In other words, could he appropriate the
property to himself?
No. He is only permitted to recover his credit from the proceeds of the sale of the
property at public auction through a public officer in the manner prescribed in Sec. 14 of
Act No. 1508. Pactum commissorium is prohibited.
(1) 30 days after the condition of the chattel mortgage is broken, the mortgagee
(or his executor, administrator or assign) may cause the mortgaged property
(or any part thereof) to be sold at public auction.
(2) At least 10 days before the sale, the mortgagor and all junior mortgagors
must be informed in writing of the time, place and purpose of the sale. The
notice of sale must likewise be posted in at least 2 public places in the
municipality where the mortgagor resides or where the property is situated.
At the public auction, the mortgagor or owner may bid. He shall, moreover, have
a better right if he should offer the same terms as the highest bidder. (This implies the
right to match.) The mortgagee may also bid, but his offer shall not be valid if he is the
only bidder. (Art. 2113, Civil Code)
DEFICIENCY
As a general rule, yes, a chattel mortgagee can sue for a deficiency judgment following
foreclosure.
However, if the property was sold in installments, the mortgagee can no longer take any
action against the purchaser to recover any unpaid balance of the price. Any agreement
to the contrary is void. (Art. 1484, Civil Code)
The Recto law, which is now reflected in Articles 1484-1485 of the Civil Code, which
provides that in a contract of sale of personal property, the price of which is payable in
installments, the vendor may exercise any of the following remedies:
(a) Exact fulfillment of the obligation, should the vendee fail to pay (specific
performance);
(b) Cancel the sale, should the vendee's failure to pay cover two or more
installments (Note that this is not the same as rescission because here, the
vendor gets back the object of the sale and retains the installments paid.
However, this is not available in the absence of stipulation in the contract.);
(c) Foreclose the chattel mortgage on the thing sold, if one has been
constituted, should the vendee's failure to pay cover 2 or more installments.
In this case, he shall have no further action against the purchaser to recover
any unpaid balance of the price. Any agreement to the contract is void.
These remedies are alternative; not cumulative. (Pacific Commercial Co. v. Dela Rama,
72 Phil. 380)
SPECIFIC PERFORMANCE
REDEMPTION
Since the Chattel Mortgage Law does not contain provisions similar to Sec. 6 & 7
of Act No. 3135 governing extra-judicial foreclosure of real estate mortgage, the
provisions of Rule 39 of the Rules of Court on redemption in case of execution sales will
apply. (IFC Service Leasing v. Nera, 19 SCRA 181)
Formal Pledgor not required to Mortgagor must execute Affidavit of good faith not
requirements execute an affidavit of an affidavit of good faith, required.
good faith. in addition to the other
formal requirements.
Exception: sale of
personal property in
installments
GOVERNING LAW
Act 3135, as amended by Act No. 4118 and Sec. 47, R.A. 8791 (General
Banking Law of 2000) governs sales made under a special power inserted in or attached
to any real estate mortgage made as security for the payment of money or the fulfillment
of any other obligation.
(Also, there is a SC circular that outlines the procedure for foreclosure of Real
Estate Mortgages. Unfortunately, hindi ko alam yung number. Please find it
nalang.)
FORECLOSURE SALE
PROCEDURE:
(4) Once the sale has been confirmed, the Clerk of Court issues a
certificate of sale to the winning bidder. (Confirm this!)
(5) After the date of the confirmation of the auction sale, the
winning bidder has the right to enter upon and take
possession of such property and administer the same in
accordance with law. (Sec. 47, R.A. 8791)
(6) Upon failure of the debtor to redeem the property within the
period allowed him by the law, absolute ownership over the
purchased property vests in the winning bidder.
POSSESSION
The purchaser at the auction sale has the right to enter upon and take
possession of the property immediately after the date of the confirmation of the auction
sale and administer the same in accordance with law. (Sec. 47, R.A. 8791, amending
Sec. 7 of Act 3135)
REDEMPTION
Natural persons: Within 1 year from and after the date of the sale
(Sec. 6, Act 3135)
Juridical persons: Until but not after the registration of the certificate
of foreclosure sale with the applicable Register of
Deeds, which in no case shall be more than 3
months after foreclosure, whichever is earlier.
(Sec. 47, R.A. 8791)