Chattel Mortgage 2.docx

CHATTEL MORTGAGE A. Requisites 1. Constituted to secure a principal obligation. 2. Mortgagor is absolute owner of the thing. 3. The persons constituting the mortgage have free disposal of property/legally authorized 4. Essence is when principal obligation becomes due, the things in which the mortgage consists may be alienated for the payment to the creditor. 5. Perfected by recording -Personal property is recorded in the Chattel Mortgage Register as security for the performance of an obligation. Notes: provisions of pledge applicable as long as it’s not in conflict with the Chattel Mortgage Law.If a CM contract is not recorded, it is not binding on third persons. Only valid between mortgagor and mortgagee mortgagee may compel mortgagor by specific performance to register the mortgage.Act of recording grants chattel mortgagee the symbolic possession of the collateral. B. Form Act 15081. Chattel mortgage not valid unless recorded in the officeof deeds (Sec. 4)2. Where recorded:a. province where mortgagor resides at the time of the making of the CMb. OR if he resides outside Phils. whereproperty is situated.c. If the property is situated in a different provincefrom which the mortgagor resides recorded both wherethe property is and where mortgagor resides.d. City of Manila considered a province3. Form (Sec. 5) Deemed sufficient when substantially inaccordance with the ff. forma. and signed by partiesb. in the presence of 2 witnessesc. each mortgagee and mortgagor, or in theabsence of mortgagee, his agent/attorney shall make andsubscribe an affidavit d. and the certificate of oath signed by authorityadministering the same.e. property must be specifically described.f. copy of notes/notes secured attached.g. describe concisely other obligations aside frompayment of PNNotes:-

(Sec. 6) if corporation: affidavit by director,cashier, trustee, cashier,treasurer/manager/person authorizedif partnership: one member thereof C. Obligations Secured - CM Law requires an affidavit of good faith stating that theCM is:1. made solely for the purpose of securing obligationspecified in CM AND2. principal obligation is a just and valid obligation, not entered into for purposes of fraud.Logically, a CM can only cover obligations existing at thetime the mortgage is constituted. It can’t cover future debts even if particularly described.- Increase/extension of CM becomes new CM in itself andwill take effect only from the date the same are made andnot from the date of the original CM.Contract to mortgage that includes future debts is abinding commitment, the contract of CM itself is not perfected until after an agreement covering the newlycontracted debt is executed according to CM law.

Refusal on the part of the debtor toexecute the agreement as to cover after-incurred obligation may constitute anevent of default of the contract to mortgage

BUT the remedy of foreclosure will cover only debts existing at the time of constitution of the contract of CM. D. Object of Chattel Mortgage 1. movables 2. personal property (Act. 1508, Sec. 2) 3. obligations and actions which have for their object movables or demandable sums. 4. shares of stock of agricultural, commercial, and industrial entities, although they may have real estate. I. Reasonable Description Rule Act. No. 1508, Sec. 7 -description of mortgaged property shall be as such as to enable the parties to the mortgage or any other person, after reasonable inquiry and investigation to identify the same. II. After Acquired Properties Act. No. 1508, Sec. 7

-A CM shall be deemed to cover only property described therein and not like or substituted property thereafter acquired by the mortgagor and placed in the same depositary as the property originally mortgaged, anything in the mortgage to the contrary notwithstanding.

Par. Does not apply to retail stores.

GR: Chattel covers only the property describedtherein and does not cover property thereafteracquired.

E:A stipulation in a CM authorizing mortgagor tosell the property covered by the CM, and toreplace, renew or substitute them with otherproperty thereafter acquired is VALID andBINDING and extends the scope and effet of theCM to after acquired properties. E. Ownership of Collateral - Mortgagor can alienate mortgaged property as hecontinues to be the owner of the sameMortgagor’s right to alienate is restricted by requirements imposed by law.- MORTGAGOR MUST PROCURE THE WRITTEN CONSENT OF MORTGAGEE (PENAL LIABILITY IF HE DOESN’T)