Chattel Mortgage Law Act No. 1508, as amended

Group 3

Chavez, JosdanDel Puerto, MorrisTadeo, JustineTolentino, Ivo

Chattel MortgageIt is a conditional sale or 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 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 becomes void and the mortgagee is hereby divested of his title. Laws that Govern Chattel Mortgages Act No. 1508 primarily governs chattel mortgages. The provisions of the New Civil Code on pledge are also applicable so long as they do not contradict the provisions of Act 1508. Characteristics of Chattel Mortgage Accessory Contract its purpose is to secure the performance of a principal obligation. Formal Contract registration in the Chattel Mortgage Register is indispensible for its validity. Unilateral Contract it produces only obligations on the part of the creditor to free the thing from the encumbrance on fulfillment of the obligation.Essential Requisites of a Chattel Mortgage that it be constituted to secure the fulfillment of a principal obligation; that the mortgagor be the absolute owner of the thing mortgaged; that the persons constituting the mortgage have the free disposal of their property or, in the absence thereof, that they be legally authorized for the purpose; that the object be personal or movable property

Future/After-Acquired PropertyFuture or after-acquired property may be the subject of a chattel mortgage when The properties mortgaged are perishable (fruits), or subject to wear and tear (vehicles tire) or were intended to be sold or used (rolling stock) but with the understanding that they would be replaced with similar properties to be hereafter acquired by the mortgagor. In case of other properties, if the inclusion of such future or after-acquired properties is expressly stipulated and a supplement to the mortgage specifically listing and describing such property is executed and registered in the chattel mortgage register. Where Chattel Mortgage is Registered Where the mortgagor resides in the Philippines, in his place of residence; Where the mortgagor resides abroad, in the place where the property is situated; Where the mortgagor resides in a place different from where the property is situated, in the place where the mortgagor resides as well as the place where the property is situated; however, if the amount of the thing mortgaged is more than P 500,000, registration in the province where the property is situated is considered as sufficient registration. Formal Requisites in Preparation and Execution of a Chattel Mortgage Signed by the person executing the same in the presence of two witnesses; Accompanied by an affidavit of good faith and a certificate of oath; Mortgaged property must be described in such a manner as to enable anybody reading the document, after reasonable inquiry and investigation, to be able to identify the same. Extrajudicial Foreclosure Procedure The mortgagee, 30 days after the condition of a chattel mortgage is broken, may cause the mortgaged property or any part thereof to be sold at public auction by a public officer at a public place in the municipality where the mortgagor resides or where the property is situated. The application for the foreclosure should be filed with the Executive Judge through the Clerk of Court. After such is received, the Clerk shall (i) raffle the application among the sheriffs and (ii) cause the posting of the notice of the sale. Notice of the time, place and purpose of such sale must be posted, at least 10 days before the date of sale at 2 or more public places in the municipality where the mortgagor resides or where the property is situated.

The mortgagee shall notify the mortgagor and the persons holding subsequent mortgages of the time and place of sale, at least 10 days before the sale, either by notice in writing directed to him or left at his abode, if within the municipality, or sent by mail if he does not reside within the municipality. The officer making the sale shall, within 30 days thereafter, make in writing a return of his doings and file the same in the office of the registry of deeds where the mortgage is recorded, and such registry shall record the same. The return shall particularly describe the articles sold and state the amount received for each article.How Proceeds are Distributed First, the proceeds shall be applied to the payment of the costs of keeping and sale. Second, to the payment of the principal obligation secured by the mortgage. Third, to the payment of the obligations secured by subsequent mortgages in their order and the balance paid to the mortgage.Offenses under Article 391 of the Revised Penal Code Knowingly removing any personal property mortgaged under the Chattel Mortgage Law to any province or city other than the one in which it was located at the time of the execution of the mortgage without the mortgagees consent. Selling or pledging personal property or any part thereof already mortgaged under the Chattel Mortgage Law without the consent of the mortgagee written on the back of the mortgage ad noted on the record thereof in the office of the register of deeds of the place where the property is located. Other Essential Rules as Regards Chattel Mortgages Personal property already mortgaged can be mortgaged again. The right of the redemption is the only right that passes to the second mortgagee by virtue of the second mortgage. Any person may bid in the foreclosure sale but the mortgagors bid would be preferred in case such bid is the same with the terms of the highest bidder. A mortgagee is entitled to sue for deficiency following foreclosure except when the personal property is sold in installments where the mortgagors failure to pay covers 2 or more installments. However, the action must be brought within 10 years after the foreclosure.

Recto LawIt is the law, now reflected in Articles 1484 and 1485 of theCivil 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 ff remedies; Exact fulfillment of the obligation, should the vendee fail to pay (specific performance) Cancel the sale, should the vendees failure to pay cover two or more installments. Here, the vendor gets back the object of the sale and retains the installments. However, this is not available in the absence of stipulation in the contract. Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendees failure to pay cover two 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 contrary shall be considered void.