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Review on the Law on Pledge, Real Mortgage & Chattel Mortgage

Common Provisions on Pledge and Mortgage
1. Essential Requisites common to both Pledge and Mortgage: a. They are constituted to secure fulfillment of the principal obligation. b. The pledgor or mortgagor is the absolute owner of the thing pledge or mortgage. c. The person constituting the pledge or mortgage have free disposal of the their property and in the absence thereof that may be legally authori!ed for the purpose "#rt. $%&'() and d. The when the principal obligation becomes due the things in which the pledge or mortgage consists may be alienated for the payment of the creditor. "#rt. $%&*( Note: a. Third persons who are not parties to the principal obligation may secure the latter by pledging or mortgaging their own property (Art. 2085). b. Any ind o! obligation whether pure or conditional" including natural" #oidable and unen!orceable obligations may be secured by a contract o! pledge and mortgage. (Art. 20$%" 2052). $. Meaning of P#+T,M +-MM.//-R.,M .t is a stipulation authori!ing the creditor to appropriate the things given by way of pledge and mortgage or to dispose of them. .t is declared null and void by law. "#rt $%&&(. Reason : The amount of the loan is ordinarily much less than the value of the security. Note: The appropriation must be automatic without need o! !urther act on the part o! the debtor. &ence" the prohibition does not apply to: a. 'ubse(uent #oluntary act o! the debtor o! ma ing cession o! the property or) b. A promise to assign or sell said property in payment o! the debt. 0. Rules on the indivisibility of Pledge and Mortgage: a. # pledge or mortgage is indivisible even though the debt may be divided among the successors in interest of the debtor or of the creditor) b. Therefore the debtor1s heirs who has paid of the debt cannot as2 for the proportionate e3tinguishments of the pledge or mortgage as long as the debt is not completely satisfied) c. 4either can the creditor1s heirs who received his share of the debt return the pledge or cancel the mortgage to the pre5udice of the other heirs who have not been paid) d. The above rules however do not apply where there being in several things given in mortgage or pledge each of them guarantees only a determinate portion of the credit. .n this case the debtor shall have a right to the e3tinguishments of the pledge or mortgage as the portion of the debt for each thing is especially answerable is satisfied. *+amples: a. # borrowed from 6 P 1% %%% and to guarantee payment # pledge his diamond ring worth P 7 %%% and a pair of earnings worth P 8 %%%. if # pays P 7 %%% he cannot as2 for the return of the ring because both the ring and the earnings are given to secure payment of the entire obligation of P 1% %%%. The same is true if # dies leaving 9 and : as heirs and 9 pays P7 %%% to 6. .f the creditors are 6 and + and # pays 6 P7 %%% 6 cannot return the ring to the pre5udice of + who has not received his share. ;owever if it is agreed that the ring was given to secure the payment of P7 %%% and the earnings the balance of P8 %%% and # "or his heir 9( pays P 7 %%% # "or 9( can demand the return of the ring. b. # and < are 5ointly liable to + in the sum of P= %%% secured by #1s ring worth P ' %%% and 61s watch worth P7 %%%. .f # pays P' %%% he cannot demand the return of the ring even if their liability is only 5oint or proportionate because pledge is indivisible. 7. >egal effect of a promise to constitute a pledge or mortgage: .t gives rise only to a personal right binding upon the parties but it creates no real right in the property. "/ee #rt. $%=$(.

PLEDGE
1. Meaning of Pledge .t is a contract by virtue of which the debtor delivers to the creditor or to the third person a movable or instrument evidencing incorporeal rights for the purpose of securing the fulfillment of a principal obligations is fulfilled the thing delivered shall be returned with all the fruits and accessions. $. +haracteristics?4ature as a contract: a. Real b. #ccessory c. ,nilateral d. /ubsidiary contracts because the obligation incurred does not arise until the fulfillment of the principal obligation that is secured. e. .n addition to the common requisites of pledge and mortgage "#rt $%&'( it is necessary in order to constitute the contract of pledge that the thing pledged be placed in the possession of the creditor or of a third person by common agreement. "#rt $%=0(. 0. +ause or +onsideration in P>E@AE .nsofar as the pledgor is concerned it is the principal obligation. 6ut if he is the debtor "#rt $%&'( the cause is the compensation stipulated for the pledge or the mere liberality of the pledgor. 7. 9hat are the Binds of pledge: a. ,oluntary or con#entional - one which is created by agreement of the parties) or b. .egal - one which is created by operation of law "#rt $1$1( '. #dditional requirements in order that pledge shall ta2e effect against third parties: a. The description o! the thing pledge) and b. The date o! pledge (Art 20/0) 8. May thing pledge be alienatedC Des provided the pledgee consents to the sale. -wnership passes to the vendee but sub5ect to the rights of the pledgee. "#rt $%=*( *. Enumerate the rights of the Pledgee) a. To retain the thing in his possession or in that of a third person to whom it has delivered until the debt is paid "#rt $%==(. b. To be reimbursed for the e3penses incurred in its preservation "#rt $%==(. c. To compensate "set E off( the fruits income dividends or interests earned or produced by the thing pledged and received with those which are due to him "#rt $1%$(. d. To bring the actins which pertain to the owner of the thing pledged in order to recover if from or defend it against a third person "#rt $1%0(. e. To sell the thing pledged at the public auction if without his fault there is danger of destruction impairment or diminution in the value of the thing "#rt $1%&(. f. To claim a substitute or demand immediate payment if he is deceived on the substance or quality of the thing pledged "#rt $1%=( g. To sell the thing pledged at public auction if the obligation secured is not paid "#rt $11$(. h. To bid at the public sale "#rt $117(. i. To collect the amount that become due on a credit pledged before such credit is redeemed. 5. To choose which one of the several thing pledged shall be sold "#rt $11=( .

&. -bligations of the pledgee: a. To ta2e care of the thing pledge with the diligence of a good father of the family "#rt $%==(. b. To answer for its loss or deterioration in the proper case) c. 4ot to deposit the thing pledge with a third person unless authori!ed "#rt ( d. To be responsible for the acts of his agents or employees with respect to the thing pledged "#rt $1%%() e. 4ot to use the thing pledged unless authori!ed or its preservation so requires "#rt $1%7() f. To advise the pledgor without delay of any danger to the thing pledged "#rt $1%*(. g. To promptly advise the pledgor or owner in case of sale at public auction of the result thereof "#rt $118() and h. To return the thing pledged when the principal obligation is paid.

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=. +onditions required in an e3tra E 5udicial foreclosure sale of the thing pledged: a. The debt is due and unpaid b. The sale must be at a public auction c. There must be notice to the pledgor and owner stating the amount due) and d. The sale must be made with the intervention of a notary public. Note: The pledgee may appropriate the thing pledged i! a!ter the !irst and second auctions" the thing is not sold. 1! the creditor appropriated the thing" it shall be considered as !ull payment !or his entire claim. &e is thus obliged to gi#e an ac(uittance !or the same (Art. 2%%5). The sale must be made at the public auction with noti!ication to the debtor and the owner o! the thing pledged in a proper case" stating the amount !or which the public sale is to be held. 1%. Rules on the proceeds after sale of the thing pledged: a. Price of sale more than the amount due E The debtor is not entitled to the e3cess unless otherwise agreed) and b. Price of sale less tan the amount due E The creditor is not entitled to recover any deficiency notwithstanding any stipulation to the contrary. "#rt. $11'( Reason: To compel the creditor to hold an honest public sale. Note: %. The creditor" howe#er" may sue on the principal obligation instead o! electing to sell the thing pledged. 2. 1n pledge by operation o! law" a!ter payment o! the debt and e+pense" the remainder o! the price shall be deli#ered to the obligor (Arts 2%2%" 2%22) 2. 3nder the 4hattel 5ortgage .aw" the mortgagor can also reco#er the e+cess (Act. No. %500" 'ec %6). 11. .nstances of >egal Pledges or Pledges by -peration of >aw: a. Possessor in good faith E for necessary and useful e3penses incurred over the thing "#rt '78() b. ,sufructuary E for ta3es and e3traordinary e3penses "#rt 81$( ) c. 6ailee E For damages suffered by reason of the flaws in the thing loaned. "#rts 1=77 1='1() d. #gent E for e3penses advance and damages caused by the agency "#rt 1=17() e. @epositary E for the payment of what may be due him by reason of the deposit "#rt 1==7() and f. ;otel Beeper E for credits for lodging and supplies furnished "#rt $%%7() and g. .ndependent contractor E he who has e3ecuted wor2 upon a movable has a right to retain it by way of pledge until he is paid. "#rt 1*01 see also #rt 1*%1(. .n case of pledge by operation of law the proceeds shall be applied to the debt and e3penses the remainder of the price of the sale shall be delivered to the obligor. "#rt. $1$1(. The thing under pledge by operation of law may be sold only after demand of the amount for which the thing is retained. The public auction shall ta2e place within one month after such demand. .f without 5ust grounds the creditor does not cause the public sale to be held within such period the debtor may require the return of thing. "#rt. $1$$( 1$. Rights of the Pledgor: a. T- continue to be the owner of the thing pledged until its sale unless it is e3propriated"#rt $1%0( ) b. To demand the deposit of the thing pledged should the creditor use it without authority or misuse it in any other was "#rt $1%7() c. To substitute the thing pledged if it is endangered without fault of the pledgee without pre5udice to the pledgee1s right to have the thing sold at public sale "#rt $1%&(. d. To bid and have preference at the foreclosure sale if he should offer the same terms as the bidder "#rt $110( ;is offer is not valid however if he is the only bidder. #ll bids shall offer to pay the purchase price in cash. .f a bid other than for cash is accepted the pledgee is deemed to have received the purchase price in cash as far as the pledgor or owner is concerned. "#rt. $117(. The sale of the thing pledged e3tinguishes the principal obligation whether or not the proceeds are equal to the amount of the principal obligation interest and e3penses in proper case) and

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e. To demand the return of the thing pledged upon the e3tinction of the principal obligation. "#rt $%&' "1(( 4ote: # statement in writing by the pledgee that he renounces or abandons the pledge is sufficient to e3inguish the pledge. For this purpose neither the acceptance by the pledgor or owner nor the return of the thing pledged is necessary. The pledgee becomes a depositary or bailee. 10. -bligations of the pledgor: a. To notify the pledgee of any flaw or defect of the thing pledged 2nown to him) otherwise he answers for damages suffered by the pledgee "#rt $1%1() b. To reimburse the pledgee for e3penses made for its preservation "#rt $%==() and c. To fulfill his principal obligation "#rt $%&'( 17. Principles in Pledge: 1. #s a general rule the pledge e3tends to the interest and earnings of the thing pledged unless there is a stipulation to the contrary. "#rt. $1%$( $. ,nless the pledge is e3propriate the debtor continues to be the owner thereof. 4evertheless the creditor may bring actions which pertains to the owner of the thing pledged in order to recover it from or defend it against third person. "#rt. $1%7( 0. The creditor cannot use the thing pledged without the consent of the owner and if he should do so or should misuse t he thing in any other way the owner may as2 the +ourt that it be G,@.+.#>>D -R E:TR#HG,@.+.#>>D @E/P-/.TE@. ;owever when the preservation of the thing pledged requires its use it must be used by the creditor but only for that purpose. "#rt. $1%7( 7. The remedy of the pledgor should the thing pledgedd be in danger of being lost or impaired through the negligence or willful act of the pledgee is to require the thing to be deposited with a third person. "#rt. $1%8( '. The creditor who is deceived on the substance or quality of the thing pledged may either "1( claim another thing instead) or demand immediate payment of the principal obligation "#rt. $1%=(. 1'. Remedies should there be reasonable grounds to fear the destruction or impairment of the thing pledged without fault of the pledgee: The pledgee is bound to advise the pledgor without delay or danger to the thing pledged. The pledgor on the other hand may demand the return of the thing upon offering another in pledge provided the latter is of the same 2inf as the former and not of inferior quality and without pre5udice to the R.A;T -F T;E P>E@AEE to cause the sale of the thing pledged at public sale. The proceeds of the auction sale shall be security for the principal obligation in the same manner as the thing originally pledged. "#rts. $1%*) $1%&(. 6etween the right of the pledgor to demand the return of the thing pledged and the right of the pledgee to cause it to be sold at public auction the latter prevails.

18. +auses for the e3tinguishments of the pledge: a. Return of the thing pledged by the pledgee to the pledgor or owner any stipulation to the contrary being void "#rt $11%() b. Renunciation or abandonment e3ecuted in writing by the pledgee even without return of the thing "#rt 111( c. @estruction or loss of the thing pledged) d. E3tinction of the principal obligation "by payment or sale of the thing pledged() and e. -ther causes of e3tinguishments or ordinary obligations "#rt 1$01( SALIENT FEATURES F PRESIDENTIAL DECREE N ! ""# otherwi$e %nown a$ REGULATING T&E ESTA'LIS&MENT AND PERATI N F PA(NS& PS 6ac2ground: I Pawnshops provide an additional source of credit especially for small borrowers left unserved by the ban2ing and other financial institutions in the country)

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I There is no specific law in the Philippines that governs pawnshop establishments particularly providing definite and uniform standards for their operation.

@eclaration of Policy: E .t is hereby declared the policy of the /tate to regulate the establishment of pawnshops and to place their operation on a sound and stable basis to derive the optimum advantages from them as an additional source of credit) to prevent and mitigate as far as practicable practices pre5udicial to public interest) and to lay down the minimum requirements and standards under which they may be established and do business. " /ec. $( @efinition of Terms: I JPawnshopK shall refer to a person or entity engaged in the business of lending money on personal property delivered as security for loans and shall be synonymous and may be used interchangeably with pawnbro2er or pawn bro2erage. I JPawnerK shall refer to the borrower from a pawnshop. I JPawneeK shall refer to the pawnshop or pawnbro2er. I JPawnK is the personal property delivered by the pawner to the pawnee as security for a loan. I JPawn tic2etK is the pawnbro2ers1 receipt for a pawn. .t is neither a security nor a printed evidence of indebtedness. I JPropertyK shall include only such personal property as may actually be delivered to the control and possession of the pawnshop: Provided however That certain specified chattels such as guns 2nives and similar weapons whose reception in pawn is e3pressly prohibited by other laws or regulations shall not be included. # pawnshop may be established as a single proprietorship partnership or corporation. "/E+. 7( #ny person or entity desiring to engage in the pawnshop business shall "a( register with the 6ureau of +ommerce " @epartment of Trade and .ndustries( in the case of single proprietorship or the /ecurities and E3change +ommission in the case of a corporation or any other association " partnership( and "b( secure a license from the appropriate city or municipality having territorial 5urisdiction over the place of establishment and operation "business permit(. /E+. 8. Requirement of registration with the +entral 6an2. ) An* individ+al, ,or-oration, or a$$o,iation d+l* regi$tered and li,en$ed to engage in the -awn$ho- .+$ine$$ $hall /ile an in/or0ation $heet, +nder oath, with the Central 'an% .e/ore ,o00en,e0ent o/ a,t+al o-erations: Provided however That pawnshops duly licensed and operating before the approval of this @ecree shall within si3 months from the date of effectivity of the same register with the +entral 6an2. For this purpose the +entral 6an2 shall furnish pawnshops upon request with necessary copies of the prescribed information sheet. Requirement of registration with the +entral 6an2 E #ny individual corporation or association duly registered and licensed to engage in the pawnshop business shall file an information sheet under oath with the +entral 6an2 before commencement of actual operations. "/ec. 8( The 0ini0+0 -aid1in ,a-ital of any pawnshop which may be established after the effectivity of this @ecree shall be one hundred thousand pesos "P1%% %%%.%%(: +iti!enship requirement. ,pon the effectivity of this @ecree only Filipino citi!ens may establish and own a pawnshop organi!ed in the form of a single proprietorship: Provided however That in the ,a$e o/ a -artner$hi-, at lea$t $event* -er ,ent 23456 o/ it$ ,a-ital $hall .e owned .* Fili-ino ,iti7en$: Provided further That in the ,a$e o/ a ,or-oration, at lea$t $event* -er ,ent 23456 o/ the voting ,a-ital $to,% $hall .e owned .* ,iti7en$ o/ the Phili--ine$, or i/ there .e no ,a-ital $to,%, at lea$t $event* -er ,ent 23456 o/ the 0e0.er$ entitled to vote, $hall .e ,iti7en$ o/ the Phili--ine$. /E+. =. #mount of loan. Pawnshops may grant such amount of loans as may be agreed upon between the parties: Provided That the amount of loan shall in no case be less than thirty per cent "0%L( of the appraised value of the security offered for the loan unless the pawner manifests in writing the desire to borrow a lesser amount. /E+. 1%. Rates of interest. E 4o pawnshop shall directly or indirectly stipulate charge demand ta2e or receive any higher rate or greater sum or value for any loan or forbearance than the rate allowed by the ,sury >aw for such transactions. .t shall be unlawful for a pawnshop to divide the pawn offered by

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a pawner in order to collect greater interest and?or to require the pawner to pay an additional charge as insurance premium for the safe2eeping and conservation of the article pawned. .n addition to interest charges pawnshops may impose a Ma3imum service charge of five pesos "P'.%%( but in no case to e3ceed one per cent "1L( of the principal loan. /E+. 10. Redemption. E The pawner who fails to pay his obligation on the date it /all$ d+e 0a*, within ninet* da*$ /ro0 the date o/ 0at+rit* o/ the o.ligation, redee0 the -awn by payment of the principal of the debt with interest: Provided however That for the purpose of computing interest due after maturity of the obligation the .a$i$ $hall .e the $+0 o/ the -rin,i-al o.ligation and intere$t earned at the ti0e the o.ligation 0at+red. /E+. 17. @isposition of pawn on default of pawner. E .n the event the pawner fails to redeem the pawn within ninety days from the date of the maturity of the obligation in accordance with the preceding section the -awn.ro%er 0a* $ell or otherwi$e di$-o$e o/ an* arti,le ta%en or re,eived .* hi0 in -awn8 Provided however That the -awner $hall .e d+l* noti/ied o/ $+,h $ale on or .e/ore the ter0ination o/ the ninet*1da* -eriod, the noti,e -arti,+larl* $tating the date, ho+r, and -la,e o/ $ale! /E+. 1'. Public auction of pawned articles. 4o pawnbro2er shall sell or otherwise dispose of any article or thing ta2en or received in pawn or pledge e3cept at "1( public auction in his place of business as such pawnbro2er or in any other public place within the territorial limits of the municipality or city where the pawnshop has its place of business "$( under the control and direction of an auctioneer with license duly issued by the corresponding authorities "0( nor shall any such article or thing to be sold or disposed of unless said pawnbro2er has published a notice once in at least two daily newspapers printed in the city or municipality during the wee2 preceding the date of such sale. .n remote areas where newspapers are neither published nor circulated noti,e .* new$-a-er -+.li,ation $hall .e $+.$tit+ted .* -o$ting noti,e$ in ,on$-i,+o+$ -+.li, -la,e$ within the territorial li0it$ o/ the ,it* or 0+ni,i-alit* where the -awn$ho- ha$ it$ -la,e o/ .+$ine$$ . /aid notice whether published or posted shall be in Engli$h and either in Pilipino or in the local dialect and shall contain the name of the pawnshop its owner address of the establishment hour and the date of the auctions sale. "/E+.1'( Pawnshop business is under the regulatory power of the +entral ban2 of the Philippines. "/ec. 1*(

REAL M RTGAGE
1. @efine mortgage: Mortgage otherwise 2nown as 7eal *state mortgage or 7eal 5ortgage is a contract whereby the debtor secures to the creditor the fulfillment of the principal obligation especially sub5ecting to such security immovable property or real rights over immovable property in case the principal obligation is not complied with at the time stipulated: $. +haracteristics as a +ontract: a. Real b. #ccessory c. ,nilateral) and d. /ubsidiary contract 0. @istinguish Mortgage from Pledge a. Pledge is constituted on movables "#rt $%=7( while mortgage on immovables "#rt $1$7() b. .n pledge the property is delivered to the pledgee or by common consent to third person "#rt $%=0( while in mortgage delivery is not necessary) and c. Pledge is not valid against third persons unless a description of the thing pledged and the date of the pledge appear on a public instrument "#rt $%=8( while mortgage is not valid against third persons if not registered even if embodied in a public instrument. "#rt $1$'(. Note: 8oth are e+tinguished by the !ul!illment o! the principal obligation and by the destruction o! the property pledged or mortgaged. 7. +ause or consideration in mortgage:

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.ts consideration is that the principal contract from which it receives its life although the obligation secured is incurred by a third person that is the principal debtor is other than the mortgagor. '. Binds of Mortgage: a. <oluntary E one which is agreed to between the parties or constituted by the will of the owner of the property on which it is created "#rt 10& /panish Mortgage >aw( b. >egal E one required by law to be e3ecuted on favor of certain persons "#rt $1$' par $) see also #rts $%&$ $%&0( c. Equitable E one which although it lac2s the proper formalities of a mortgage show the intention of the parties to ma2e the property as a security for a debt. 8. Property which may be ob5ect of Mortgage: a. immovables) and b. .nalienable real rights in accordance with laws imposed upon immovables "#rt $1$7( 9;#T +-4/T.T,TE .MM-<#6>EC .mmovables I The following are immovable property: I >and buildings roads and construction of all 2inds adhered to the soil. I Trees plants and growing fruits while they are attached to the land or form an integral part of an immovable. I Everything attached to an immovable in fi3ed manner in such a way that it cannot be separated there from without brea2ing the material or deterioration of the ob5ect. I /tatues reliefs painting or other ob5ects for use or ornamentation placed in buildings or on lands by the owner of the immovable in such a manner that it reveals the intention to attach them permanently to the tenements. I Machinery receptacles instruments or implements intended by the owner of the tenement for an industry or wor2s which may be carried on in a building or on a piece of land and which tend directly to meet the needs of the said industry or wor2s. I #nimal houses pigeon houses beehives fishponds or breeding places of similar nature in case their owner has placed them or preserves them with the intention to have them permanently attached to the land and forming a permanent part of it) the animals in these places are included. I Fertili!er actually used on a piece of land. I Mines quarries slag dumps while the manner thereof forms part of the bed and waters either running or stagnant. I @oc2s and structures which though floating are intended by their nature and ob5ect to remain at a fi3ed place on a river la2e or coast. I +ontracts for public wor2s and servitudes and other real rights over immovable property. "#rt. 71' +ivil +ode( *. Effects of a Mortgage: a. .t creates a real right i.e. it directly and immediately sub5ects the property upon which it is imposed whoever the possessor may be to the fulfillment of the obligation for whose security it was constituted "#rt $1$8() b. The mortgage "creditor( may therefore demand payment from any possessor of the mortgaged property "#rt $1$=() c. ;e may alienate or assign the mortgage credit "his right as mortgagee( to a third person "#rt $1$&() d. The mortgage does not e3tinguish the title of the mortgagor "debtor( who does not therefore lose his right to dispose. .ndeed the law considers void any stipulation forbidding the owner from alienating the property mortgaged. "#rt $10%( &. /cope of Mortgage: .t e3tends to and includes the following: a. 4atural accessions) b. .mprovements "even if subsequently made() c. Arowing fruits) d. Rents or income "belonging to the mortgagor( not yet received when the obligation becomes due) e. Proceeds of insurance received or owing from insurance of the property)

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f. Note: %. The abo#e are deemed included in the mortgage unless e+pressly e+cluded) 2. 8ut the mortgage does not e+tend to impro#ements made by a third person subse(uent to the mortgage and a!ter the property has passed to him. =. @efine Foreclosure: Foreclosure is a remedy available to the mortgagee by which he sub5ect the mortgaged property to the satisfaction of the obligation to secure which the mortgage was given through the sale of the property at public auction and the application of the proceeds to the payment of his claims. 1%. Binds of Foreclosure: a. Gudicial Foreclosure E # mortgage may be foreclosed 5udicially by bringing an action for that purpose in the Regional Trial +ourt of the province or city the real property is located or any part thereof lies) and b. E3tra E 5udicial foreclosure E # mortgage may be foreclosed e3traH5udicially where there is inserted in the contract a clause giving the mortgagee the prior upon default of the debtor to foreclose the mortgage by an e3traH5udicial sale of the mortgaged property "/ec 1 #rt 4o. 01'' as amended by #ct no 717&(. 11. @efine Redemption Redemption may be defined as a transaction by which the mortgagor reacquires or buys bac2 the property which may have been passed under the mortgage or divests the property of the lien which the mortgage may have created. 1$. Binds of Redemption: a. Equity of Redemption E the right of the mortgagor to redeem the mortgaged property after his default in the performance of the conditions of the mortgage but before the sale of the mortgaged property. .n 5udicial foreclosure the mortgagor may e3ercise his equity of redemption before and not after the sale is confirmed by the court) and b. Right of Redemption E the right of the mortgagor to redeem the mortgaged property with a certain period after is was sold for the satisfaction of the mortgaged debt. .n all cases of e3tra E 5udicial sale the mortgagor may redeem the property at any time within the term of one year from and after the date of the registration of the sale. .n 5udicial foreclosure the general rule is that the mortgagor cannot e3ercise his right of redemption after the sale is confirmed by an order of the +ourt. #mounts received or owing in virtue of the e3propriation of the properly for public sale "#rt $1$*(

R+le$ on Fore,lo$+re

<#>.@.TD #4@ EFFE+T -F F-RE+>-/,RE The right to foreclose the mortgage and to have the property sei!ed and sold with a view to applying the proceeds to the payment of the principal obligation M # mortgage contract may contain an acceleration clauseNon occasion of the mortgagor1s default the whole sum remaining unpaid automatically becomes due and payable M Essence of mortgage contractNproperty has been identified and separated from a mass of the property of the mortgagor to secure the payment of a principal obligation M-nce the proceeds have been applied to the payment of the principal obligation the debtor cannot anymore be as2ed to pay unless there is deficiency. AR-,4@/ F-R F-RE+>-/,RE #. Failure to pay the principal obligation on maturity date. B. <iolation of any condition stipulation or warranty of the mortgage contract by the debtor/debtor

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+. Binds of Foreclosure: @. Gudicial Foreclosure E # mortgage may be foreclosed 5udicially by bringing an action for that purpose in the Regional Trial +ourt of the province or city the real property is located or any part thereof lies as outlined under /ections 7 and *% of the Revised Rules of +ourt. .f there is deficiency in the public sale the mortgagee can petition the court for a deficiency 5udgment and collect the unpaid balance from the debtor. # third person who owns the land mortgaged but merely secured the principal obligation shall not be liable for the deficiency of the debtor. The latter shall be personally liable thereof. R+le 9: R+le$ o/ Co+rt 1. The mortgagee should file a petition for 5udicial foreclosure in the court which has 5urisdiction over the area where the property is situated $. The court will conduct a trial. .f after trial the court finds merit in the petition it will render 5udgment ordering the mortgagor?debtor to pay the obligation within a period not less than =% nor more than 1$% days from the finality of 5udgment. 0. 9ithin this =% to 1$% day period the mortgagor has the chance to pay the obligation to prevent his property from being sold. This is called the EO,.TD -F RE@EMPT.-4 PER.-@. 7. .f mortgagor fails to pay within the =%H1$% days given to him by the court the property shall be sold to the highest bidder at public auction to satisfy the 5udgment. '. There will be a 5udicial confirmation of the sale. #fter the confirmation of the sale the purchaser shall be entitled to the possession of the property and all the rights of the mortgagor with respect to the property are severed or terminated. The equity of redemption period actually e3tends until the sale is confirmed. Even after the lapse of the =% to 1$% day period the mortgagor can still redeem the property so long as there has been no confirmation of the sale yet. Therefore the equity of redemption can be considered as the right of the mortgagor to redeem the property 6EF-RE the confirmation of the sale. a. #fter the confirmation of the sale the mortgagor does not have a right to redeem the property anymore. This is the general rule in 5udicial foreclosures E there is no right of redemption after the sale is confirmed. The proceeds of the sale of the property will be disposed as follows: a. First the costs of the sale will be deducted from the price at which the property was sold b. The amount of the principal obligation and interest will be deducted. c. The 5unior encumbrances will be satisfied. d. .f there is still an e3cess the e3cess will go bac2 to the mortgagor. .n mortgage the mortgagee @-E/ 4-T get the e3cess "unli2e in pledge(. .f there is a deficiency the mortgagee can as2 for a @EF.+.E4+D G,@AME4T which can be imposed on other property of the mortgagor. The rule on e3tra5udicial foreclosure is different. The mortgagee must go to court and file another action for the collection of the deficiency. The proceeds from the 5udicial sale of foreclosed property shall be applied as follows: a. To the total amount of the debt. b. To the costs of the sale. c. To the claims of subsequent mortgagees. .f there is any e3cess from the proceeds of the sale such will be returned to the debtor?mortgagor. Right of Redemption in Gudicial Foreclosure The right to redeem the mortgaged property is e3ercised by the 5udgment debtor or mortgagor at anytime before the confirmation of the sale. Aenerally the court is given a period of ninety "=%( days to confirm the sale. The generally rule is the mortgagor cannot e3ercise his right of redemption after the sale is confirmed.

10
9;D -4E 9-,>@ /;D #9#D FR-M # G,@.+.#> F-RE+>-/,REC 1. Gudicial foreclosure is costly since the parties would need to hire lawyers. 6ut then again the present rules provide that court fees are needed to be paid in e3tra5udicial proceedings also. $. The parties have very little control over the sale because there is court intervention. 0. More susceptible to stalling?dilatory tactics by the mortgagor since he can file all sorts of motions in court to prevent the sale. 7. .t is more efficient to have e3tra5udicial proceedings since for 5udicial proceedings there is a minimum lapse of time of 8 years.

E;tra )<+di,ial Fore,lo$+re E # mortgage may be foreclosed e3traH5udicially where there is inserted in the contract a clause giving the mortgagee the prior upon default of the debtor to foreclose the mortgage by an e3traH5udicial sale of the mortgaged property "/ec 1 #rt 4o. 01'' as amended by #ct no 711&(. 2UNDER ACT ="=>?#"": AND SC ADMINISTRATI@E CIRCULAR6

(&ERE S& ULD AN EATRA<UDICIAL F RECL SURE SALE 'E D NEB /ale cannot be made legally outside the city or province wherein the property sold is situated. .n case the place has been stipulated it shall be made in the municipal building of the said place. 4-T.+E -F T;E /#>E 1. P-/T.4A of the notices of the sale F-R 4-T >E// T;#4 $% @#D/ in at least 0 public places of the municipality or city where the property is situated. $. .F T;E PR-PERTD ./ 9-RT; M-RE T;#4 P7%% such notice shall also be published once a wee2 at least 0 consecutive wee2s in a newspaper of general circulation in the municipality or city. "Dou donPt need to count 8 days between publications.( 4-TE: there is 5urisprudence which held that there is sufficient notice when there is publication I P,6>.+ #,+T.-4?/#>E 1. Time shall be between =#M and 7PM. .t shall be made in the direction of the sheriff of the province the 5ustice or au3iliary 5ustice of the peace of the municipality or of the notary public of the municipality who shall be compensated with P' for each day of actual wor2 or performance in addition to his e3penses. $. #nyone may bid at the sale unless there are stipulations in the agreement. P-//E//.-4 M ,pon foreclosure if the mortgagor is in possession of the property he will retain possession during the redemption periodN1 year from the date of sale M .f the winning bidder wants possession during the redemption period he may e3ecute a bond in the amount equivalent to the use of the property for 1$ months to indemnify the debtor in case it be shown that the sale was made without violating the mortgage or without complying with the requirements of the #ct. ,pon approval a writ of possession will be issued in his favor. M .f the winning bidder is able to secure possession the mortgagor may petition that the sale

11
is set aside and the writ of possession be cancelled on the ground that he wasnPt in default or that the sale wasnPt made in accordance with #ct 010'. This must be filed within 0% days from issuance of the writ of possession.

R.A;T -F RE@EMPT.-4 The debtor his successorsHinHinterest or any 5udicial creditor or 5udgment creditor of said debtor or any person having a lien on the property subsequent to the mortgage or deed of trust under which the property is sold may redeem the same at any time 9.T;.4 T;E TERM -F 1 DE#R FR-M #4@ #FTER T;E @#TE -F T;E /#>E and such will be governed by the Rules of +ourt. Eregistration of the sale. (hen the -ro-ert* i$ redee0ed a/ter the -+r,ha$er ha$ .een given -o$$e$$ion, the redee0er i$ entitled to ded+,t /ro0 the -ri,e o/ rede0-tion an* rental$ that $aid -+r,ha$er 0a* have ,olle,ted in ,a$e the -ro-ert* or an* -art thereo/ wa$ rented! I/ the -ro-ert* wa$ +$ed a$ hi$ own dwelling, it .eing town -ro-ert*, or +$ed it gain/+ll*, it .eing r+ral -ro-ert*, the redee0er 0a* ded+,t /ro0 the -ri,e the intere$t o/ "5 -er 0onth -rovided in the R+le$ o/ Co+rt

R,>E/ -F +-,RT R,>E 0= /E+T.-4/ $= T- 01 #4@ 0' /ec. $=. Effect of redemption by 5udgment obligor and a certificate to be delivered and recorded thereupon) to whom payments on redemption made. .f the 5udgment obligor redeems he must ma2e the same payments as are required to effect a redemption by a redemptioner whereupon no further redemption shall be allowed and he is restored to his estate. The person to whom the redemption payment is made must e3ecute and deliver to him a certificate of redemption ac2nowledge before a notary public or other officer authori!ed to ta2e ac2nowledgments of conveyances of real property. /uch certificate must be filed and recorded in the registry of deeds of the place in which the property is situated and the registrar of deeds must note the record thereof on the margin of the record of the certificate of sale. The payments mentioned in this and the last preceding sections may be made to the purchaser r redemptioner or for him to the officer who made the sale. /ec. 0%. Proof required of redemptioner. # redemptioner must produce to the officer or person from whom he see2s to redeem and serve with his notice to the officer a copy of the 5udgment or final order under which he claims the right to redeem certified by the cler2 of the court wherein the 5udgment or final order is entered) or if he redeems upon a mortgage or other lien a memorandum of the record thereof certified by the registrar of deeds) or an original or certified copy of any assignment necessary to establish his claim) and an affidavit e3ecuted by him or his agent showing the amount then actually due on the lien. /ec. 01. Manner of using premises pending redemption) waste restrained. ,ntil the e3piration of the time allowed for redemption the court may as in other proper cases restrain the commission of waste on the property by in5unction on the application of the purchaser or the 5udgment obligee with or without notice) but it is not waste for a person in possession of the property at the time of the sale or entitled to possession afterwards during the period allowed for redemption to continue to use it in the same manner in which it was previously used) or to use it in the ordinary course of husbandry) or to ma2e the necessary repairs to buildings thereon while he occupies the property. /ec. 0'. Right to contribution or reimbursement. 9hen property liable to an e3ecution against several persons is sold thereon and more than a due proportion of the 5udgment is satisfied out of the proceeds of the sale of the property of one of

12
them or one of them pays without a sale more than his proportion he may compel a contribution from the others) and when a 5udgment is upon an obligation of one of them as security for another and the surety pays the amount or any part thereof either by sale of his property or before sale he may compel repayment from the principal. AE4ER#> 6#4B.4A >#9 -F $%%% /E+T.-4 7* /ec. 7*. Foreclosure of Real Estate Mortgage. H .n the event of foreclosure whether 5udicially or e3traH5udicially of any mortgage on real estate which is security for any loan or other credit accommodation granted the mortgagor or debtor whose real property has been sold for the full or partial payment of his obligation shall have the right within one year after the sale of the real estate to redeem the property by paying the amount due under the mortgage deed with interest thereon at rate specified in the mortgage and all the costs and e3penses incurred by the ban2 or institution from the sale and custody of said property less the income derived therefrom. 4otwithstanding #ct 010' 5uridical persons whose property is being sold pursuant to an e3tra5udicial foreclosure shall have the right to redeem the property in accordance with this provision until but not after the registration of the certificate of foreclosure sale with the applicable Register of @eeds which in no case shall be more than three "0( months after foreclosure whichever is earlier. -wners of property that has been sold in a foreclosure sale prior to the effectivity of this #ct shall retain their redemption rights until their e3piration. 4-TE/: 1. For 5udicial or e3traH5udicial foreclosure the redemption period is within one year from sale or registration. $. The purpose is to give concession to the ban2s. 6an2s cannot get properties mortgaged by those in financial distress. 0. The redemption price would be the mortgaged obligation plus the interest as stipulated in the original obligation. +ompare this with 5udicial foreclosure wherein the redemption price is the original price. .n this case you have to pay more when redeeming from a ban2. 7. There is immediate possession '. # motion to en5oin would not be entertained unless secured by a bond. 8. +ourt will fi3 the amount of the bond. 4ormally this would be the liability of the ban2 plus costs. This remedied the loopholes in #ct 010'Nprotect the ban2 during foreclosures. This ma2es it hard to secure in5unctions and it shortens the redemption period. ;owever the purchaser at the auction sale concerned whether in a 5udicial or e3traH5udicial foreclosure shall have the right to enter upon and ta2e possession of such property immediately after the date of the confirmation of the auction sale and administer the same in accordance with law. #ny petition in court to en5oin or restrain the conduct of foreclosure proceedings instituted pursuant to this provision shall be given due course only upon the filing by the petitioner of a bond in an amount fi3ed by the court conditioned that he will pay all the damages which the ban2 may suffer by the en5oining or the restraint of the foreclosure proceeding. I Q/E+. 8. .n all cases in which an e3tra5udicial sale is made under the special power hereinbefore referred to the debtor his successorsHinHinterest or any 5udicial creditor or 5udgment creditor of said debtor or any person having a lien on the property subsequent to the mortgage or deed of trust under which the property is sold may redeem the same at any time within the term of one year from and after the date of the sale) and such redemption shall be governed by the provisions of sections four hundred and si3tyHfour to four hundred and si3tyH si3 inclusive of the +ode of +ivil Procedure in so far as these are not inconsistent with the provisions of this #ct.Q " #ct 711&(.

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14

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A!M! No! CC1"414>14

A+g+$t 3, D44"

2AS FURT&ER AMENDED, AUGUST 3, D44"6 PR CEDURE IN EATRA1<UDICIAL F RECL SURE F M RTGAGE .n line with the responsibility of an E3ecutive Gudge under #dministrative -rder 4o. 8 dated Gune 0% 1=*' for the management of courts within his administrative area included in which is the tas2 of supervising directly the wor2 of the +ler2 of +ourt who is also the *+9:!!ice /heriff and his staff and the issuance of commissions to notaries public and enforcement of their duties under the law the following procedures are hereby prescribed in e3tra5udicial foreclosure of mortgages: 1. #ll applications for e3traH5udicial foreclosure of mortgage whether under the direction of the sheriff or a notary public pursuant to #ct 010' as amended by #ct 711& and #ct 1'%& as amended shall be filed with the E3ecutive Gudge through the +ler2 of court who is also the E3H -fficio /heriff. $. ,pon receipt of an application for e3traH5udicial foreclosure of mortgage it shall be the duty of the +ler2 of+ourt to: a( receive and doc2et said application and to stamp thereon the corresponding file number date and time of filing) b( collect the filing fees therefore pursuant to rule 171 /ection *"c( as amended by #.M. 4o. %%H$H%1H/+ and issue the corresponding official receipt) c( e3amine in case of real estate mortgage foreclosure whether the applicant has complied with all the requirements before the public auction is conducted under the direction of the sheriff or a notary public pursuant to /ec. 7 of #ct 010' as amended)

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d( sign and issue the certificate of sale sub5ect to the approval of the E3ecutive Gudge or in his absence the <iceHE3ecutive Gudge. 4o certificate of sale shall be issued in favor of the highest bidder until all fees provided for in the aforementioned sections and in Rule 171 /ection ="1( as amended by #.M. 4o. %%H$H%1H/+ shall have been paid) ;ro#ided" that in no case shall the amountpayable under Rule 171 /ection ="1( as amended e3ceed P1%% %%%.%%) e( after the certificate of sale has been issued to the highest bidder 2eep the complete records while awaiting any redemption within a period of one "1( year from date of registration of the certificate of sale with the Register of @eeds concerned after which the records shall be archived. 4otwithstanding the foregoing provision 5uridical persons whose property is sold pursuant to an e3traH5udicial foreclosure shall have the right to redeem the property until but not after the registration of the certificate of foreclosure sale which in no case shall be more than three "0( months after foreclosure whichever is earlier as provided in /ection 7* of Republic #ct 4o. &*=1 "as amended Res. -f #ugust * $%%1(. 9here the application concerns the e3tra5udicial foreclosure of mortgages of real estates and?or chattels in different locations covering one indebtedness only one filing fee corresponding to such indebtedness shall be collected. The collecting +ler2 of +ourt shall apart from the official receipt of the fees issue a certificate of payment indicating the amount of indebtedness the filing fees collected the mortgages sought to be foreclosed the real estates and?or chattels mortgaged and their respective locations which certificate shall serve the purpose of having the application doc2eted with the +ler2s of +ourt of the places where the other properties are located and of allowing the e3tra5udicial foreclosures to proceed thereat. 0. The notices of auction sale in e3tra5udicial foreclosure for publication by the sheriff or by a notary publicshall be published in a newspaper of general circulation pursuant to /ection 1 Presidential @ecree 4o. 1%*= dated Ganuary $ 1=** and nonHcompliance therewith shall constitute a violation of /ection 8 thereof. 7. The E3ecutive Gudge shall with the assistance of the +ler2 of +ourt raffle applications for e3tra5udicial foreclosure of mortgage under the direction of the sheriff among all sheriffs including those assigned to the -ffice of the +ler2 of +ourt and /heriffs .< assigned in the branches. '. The name?s of the bidder?s shall be reported by the sheriff or the notary public who conducted the sale to the +ler2 of +ourt before the issuance of the certificate of sale. This Resolution amends or modifies accordingly #dministrative -rder 4o. 0 issued by then +hief Gustice Enrique M. Fernando on 1= -ctober 1=&7 and #dministrative +ircular 4o. 0H=& issued by the +hief Gustice #ndres R. 4arvasa on ' February 1==&. The +ourt #dministrator may issue the necessary guidelines for the effective enforcement of this Resolution. The +ler2 of +ourt shall cause the publication of this Resolution in a nuewspaper of general circulation not later than #ugust 17 $%%1 and furnish copies thereof to the .ntegrated 6ar of the Philippines. This Resolution shall ta2e effect on the 1st day of /eptember of the year $%%1. Promulgated this *th day of #ugust $%%1 in the +ity of Manila. <a#ide" =r." 4.=." 8ellosillo" 5elo" ;uno" ,itug" >apunan" 5endo?a" ;anganiban" @uisumbing" ;ardo" 8uena" Aon?aga97eyes" Bnares9'antiago" and <e .eon" =r." ==." concur. 'ando#al9Autierre? =." on leave.

C&ATTEL M RTGAGE 2 A,t No! ">4:, a$ a0ended6!

1. @efine +hattel Mortgage: +hattel Mortgage is a contract by virtue of which personal property is recorded in the +hattel Mortgage Register as a security for the performance of an obligation "#rt $17%(. $. +haracteristics as a +ontract: a. accessory b. unilateral c. formal contract d. if the chattel mortgage "or real mortgage( is not recorded the mortgagee acquires the right to demand registration of the contract. "#rt $1$'( 0. >aws principally governing chattel mortgages: a. +hattel Mortgage >aw "#ct 4o. 1'%&( b. +ivil +ode c. Revised #dministrative +ode) and

17
d. Revised Penal +ode 7. /imilarities between pledge and chattel mortgage: a. both are e3ecuted to secure performance of a principal obligation) b. both are constituted only on personal property) c. both are indivisible d. both are constitute a lien on the property e. .n both cases the creditor cannot appropriate the property to himself in payment of the debt) f. .n both cases when the debtor defaults the property must be sold for the payment of the creditor) and g. 6oth are e3tinguishments by the fulfillment of the principal obligation and by the destruction of the property pledged or mortgaged. '. @istinguish chattel mortgage from pledge: a. .n chattel mortgage the delivery of the personal property to the mortgagee is not necessary while in pledge such delivery is necessary) b. .n chattel mortgage the registration of the same in the +hattel Mortgage Register is necessary for its validity while in pledge registration in the Registry of Property is not necessary. c. The procedure for the sale of the thing given as a security is different. .n chattel mortgage the procedure is found in /ection 17 of #ct 4o. 1'%& as amended while in pledge it is found in #rticle $11$ of the +ivil +ode. d. .n chattel mortgage the e3cess over the amount due after foreclosure goes to the debtor "#rt 4o. 1'%& /ection 17( while in pledge if the property is sold the debtor is not entitled to the e3cess unless it is otherwise agreed "#rt $11'( or e3cept in the case of a legal pledge "#rt $1$1( and) e. .n chattel mortgage the creditor is entitled to recover any deficiency e3cept if the chattel mortgage is a security for the purchase of personal property in installments while in pledge the creditor is not entitled any stipulation to the contrary notwithstanding "#rt $11'(. 8. -b5ect of +hattel Mortgage +ontract: -nly movable or personal properties such as: a. /hares of stoc2 "the mortgage to be registered both in +hattel Mortgage Registries of the province where the mortgagor resides and the province where the corporation has its principal business() b. .nterest in business) c. Arowing crops) d. >arge cattles) e. <ehicles "the mortgage to be registered also with the >and Transportation -ffice() and f. <essels "the mortgage to be registered with the -ffice of the Philippine +oast Auard of the Port of @ocumentation of such vessels. "Pres. @ecree 4o. 1'$1 /ec. 0 =a((. g. ;ouse built on rented land but as between the parties only under the doctrine of estoppel) and h. ;ouse to be demolished and portable nipa huts for what are really mortgaged in this case are the materials thereof and they are therefore personal property. Note: Arowing crops and large cattle are considered personal property under the 4hattel 5ortgage .aw (Art %508 'ec /). They cannot howe#er" be the obCect o! a contract o! pledge because they are considered immo#able under the 4i#il 4ode" which principally go#erns pledge. *. E3tent or scope of +hattel Mortgage: .t covers only property described in the contract and e3cludes li2e or substituted property thereafter acquired by the mortgagor notwithstanding any thing in the contract to the contrary "#rt 4o. 1'%& /ec *(. E3ception: .n this case of stoc2 or merchandise contained in drugstores grocery stores etc. which are constantly sold and substituted with new stoc2. &. 9hat is an #ffidavit of Aood FaithC The #ffidavit of Aood Faith is an oath in a contra t of chattel mortgage wherein the parties Jseverally 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 5ust and valid obligation and one not entered into for the purpose of fraud. "/ection '(

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Note: The absence o! the a!!ida#it #itiates a mortgage only as against third persons without notice" li e creditors and subse(uent encumbrances. =. 9ho may e3ercise right of redemption when condition of the chattel mortgage is bro2en: a. The mortgagor) b. # person holding a subsequent mortgage) c. # subsequent attaching creditor The redemption is made by paying or delivering to the mortgage the amount due on such mortgage and the costs and e3penses incurred by such breach of condition before the sale thereof. "/ection 10(. 1%. Binds of Foreclosure of +hattel Mortgage: a. Gudicial Foreclosure E the mortgagee institutes an action in court) b. E3traH5udicial Foreclosure E The sale is made by the mortgagee himself when authori!ed by the +hattel mortgage contract or by special law. 11. ;ow proceeds of the foreclosure be appliedC To the payment of the following in their order: a. +osts and e3penses of 2eeping and sale) b. Payment of the obligation secured by the mortgage) c. +laims of persons holding subsequent mortgages in their order) and d. The balance if any. /hall be paid to the mortgagor or in person holding under him.

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ACT NO. 1508 ACT NO. 1508 - AN ACT PROVIDING FOR THE MORTGAGING OF PERSONAL PROPERTY AND FOR THE REGISTRATION OF THE MORTGAGES SO EXECUTED

Section 1. The short title of this Act shall be "The Chattel Mortgage Law." Sec. 2. All personal property shall be subject to mortgage agreeably to the pro!isions of this Act an" a mortgage e#ecute" in pursuance thereof shall be terme" chattel mortgage. Sec. $. Chattel mortgage "efine". % A chattel mortgage is a con"itional sale of personal property as security for the payment of a "ebt or the performance of some other obligation specifie" therein the con"ition being that the sale shall be !oi" upon the seller paying to the purchaser a sum of money or "oing some other act name". &f the con"ition is performe" accor"ing to its terms the mortgage an" sale imme"iately become !oi" an" the mortgagee is thereby "i!este" of his title. Sec. '. (ali"ity. % A chattel mortgage shall not be !ali" against any person e#cept the mortgagor his e#ecutors or a"ministrators unless the possession of the property is "eli!ere" to an" retaine" by the mortgagee or unless the mortgage is recor"e" in the office of the register of "ee"s of the pro!ince in which the mortgagor resi"es at the time of ma)ing the same or if he resi"es without the *hilippine &slan"s in the pro!ince in which the property is situate"+ *ro!i"e" howe!er That if the property is situate" in a "ifferent pro!ince from that in which the mortgagor resi"es the mortgage shall be recor"e" in the office of the register of "ee"s of both the pro!ince in which the mortgagor resi"es an" that in which the property is situate" an" for the purposes of this Act the city of Manila shall be "eeme" to be a pro!ince. Sec. ,. -orm. % A chattel mortgage shall be "eeme" to be sufficient when ma"e substantially in accor"ance with the following form an" shall be signe" by the person or persons e#ecuting the same in the presence of twowitnesses who shall sign the mortgage as witnesses to the e#ecution thereof an" each mortgagor an" mortgagee or in the absence of the mortgagee his agent or attorney shall ma)e an" subscribe an affi"a!it in substance as hereinafter set forth which affi"a!it signe" by the parties to the mortgage as abo!e state" an" the certificate of the oath signe" by the authority a"ministering the same shall be appen"e" to such mortgage an" recor"e" therewith. -./M .- C0ATT1L M./T2A21 A34 A--&4A(&T. "This mortgage ma"e this 5555 "ay of 555555165555 by 555555555555555 a resi"ent of the municipality of 55555555555555 *ro!ince of 555555555555 *hilippine &slan"s mortgagor to 555555555555 a resi"ent of the municipality of 55555555555 *ro!ince of 55555555555555 *hilippine &slan"s mortgagee witnesseth+ "That the sai" mortgagor hereby con!eys an" mortgages to the sai" mortgagee all of the following7"escribe" personal property situate" in the municipality of 55555555555555 *ro!ince of 555555555555 an" now in the possession of sai" mortgagor to wit+ 80ere insert specific "escription of the property mortgage".9 "This mortgage is gi!en as security for the payment to the sai" 555555 mortgagee of promissory notes for the sum of 555555555555 pesos with 8or without as the case may be9 interest thereon at the rate of 55555555555 per centum per annum accor"ing to the terms of 5555555555 certain promissory notes "ate" 555555555 an" in the wor"s an" figures following 8here insert copy of the note or notes secure"9. "8&f the mortgage is gi!en for the performance of some other obligation asi"e from the payment of promissory notes "escribe correctly but concisely the obligation to be performe".9 "The con"itions of this obligation are such that if the mortgagor his heirs e#ecutors or a"ministrators shall well an" truly perform the full obligation 8or obligations9 abo!e state" accor"ing to the terms thereof then this obligation shall be null an" !oi". "1#ecute" at the municipality of 555555555 in the *ro!ince of 55555555 this 55555 "ay of 1655555

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55555555555555555555 8Signature of mortgagor.9 "&n the presence of "55555555555555555 "55555555555555555 8Two witnesses sign here.9 -./M .- .AT0. ":e se!erally swear that the foregoing mortgage is ma"e for the purpose of securing the obligationspecifie" in the con"itions thereof an" for no other purpose an" that the same is a just an" !ali" obligation an" one not entere" into for the purpose of frau"." -./M .- C1/T&-&CAT1 .- .AT0. "At 55555555555 in the *ro!ince of 555555555 personally appeare" 555555555555 the parties who signe" the foregoing affi"a!it an" ma"e oath to the truth thereof before me. "55555555555555555555555555555" 83otary public justice of the peace 1 or other officer as the case may be.9 Sec. ;. Corporations. % :hen a corporation is a party to such mortgage the affi"a!it re<uire" may be ma"e an" subscribe" by a "irector trustee cashier treasurer or manager thereof or by a person authori=e" on the part of such corporation to ma)e or to recei!e such mortgage. :hen a partnership is a party to the mortgage the affi"a!it may be ma"e an" subscribe" by one member thereof. Sec. >. 4escriptions of property. % The "escription of the mortgage" property shall be such as to enable the parties to the mortgage or any other person after reasonable in<uiry an" in!estigation to i"entify the same. &f the property mortgage" be large cattle " as "efine" by section one of Act 3umbere" 1le!en an" forty7se!en 2 an" the amen"ments thereof the "escription of sai" property in the mortgage shall contain the bran"s class se# age )nots of ra"iate" hair commonly )nown as remolinos or cowlic)s an" other mar)s of ownership as "escribe" an" set forth in the certificate of ownership of sai" animal or animals together with the number an" place of issue of such certificates of ownership. &f growing crops be mortgage" the mortgage may contain an agreement stipulating that the mortgagor bin"s himself properly to ten" care for an" protect the crop while growing an" faithfully an" without "elay to har!est the same an" that in "efault of the performance of such "uties the mortgage may enter upon the premises ta)e all the necessary measures for the protection of sai" crop an" retain possession thereof an" sell the same an" from the procee"s of such sale pay all e#penses incurre" in caring for har!esting an" selling the crop an" the amount of the in"ebte"ness or obligation secure" by the mortgage an" the surplus thereof if any shall be pai" to the mortgagor or those entitle" to the same. A chattel mortgage shall be "eeme" to co!er only the property "escribe" therein an" not li)e or substitute" property thereafter ac<uire" by the mortgagor an" place" in the same "epository as the property originally mortgage" anything in the mortgage to the contrary notwithstan"ing. Sec. ?. -ailure of mortgagee to "ischarge the mortgage. % &f the mortgagee assign a"ministrator e#ecutor or either of them after performance of the con"ition before or after the breach thereof or after ten"er of the performance of the con"ition at or after the time fi#e" for the performance "oes not within ten "ays after being re<ueste" thereto by any person entitle" to re"eem "ischarge the mortgage in the manner pro!i"e" by law the person entitle" to re"eem may reco!er of the person whose "uty it is to "ischarge the same twenty pesos for his neglect an" all "amages occasione" thereby in an action in any court ha!ing juris"iction of the subject7 matter thereof. Sec. 6712. 8inclusi!e9 $ Sec. 1$. :hen the con"ition of a chattel mortgage is bro)en a mortgagor or person hol"ing a subse<uent mortgage or a subse<uent attaching cre"itor may re"eem the same by paying or "eli!ering to the mortgagee the amount "ue on such mortgage an" the reasonable costs an" e#penses incurre" by such breach of con"ition before the sale thereof. An attaching cre"itor who so re"eems shall be subrogate" to the rights of the mortgagee an" entitle" to foreclose the

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mortgage in the same manner that the mortgagee coul" foreclose it by the terms of this Act. Sec. 1'. Sale of property at public auction@ .fficerAs return@ -ees@ 4isposition of procee"s. % The mortgagee his e#ecutor a"ministrator or assign may after thirty "ays from the time of con"ition bro)en cause the mortgage" property or any part thereof to be sol" at public auction by a public officer at a public place in the municipality where the mortgagor resi"es or where the property is situate" pro!i"e" at least ten "aysA notice of the time place an" purpose of such sale has been poste" at two or more public places in such municipality an" the mortgagee his e#ecutor a"ministrator or assign shall notify the mortgagor or person hol"ing un"er him an" the persons hol"ing subse<uent mortgages of the time an" place of sale either by notice in writing "irecte" to him or left at his abo"e if within the municipality or sent by mail if he "oes not resi"e in such municipality at least ten "ays pre!ious to the sale. The officer ma)ing the sale shall within thirty "ays thereafter ma)e in writing a return of his "oings an" file the same in the office of the register of "ee"s where the mortgage is recor"e" an" the register of "ee"s shall recor" the same. The fees of the officer for selling the property shall be the same as in the case of sale on e#ecution as pro!i"e" in Act 3umbere" .ne hun"re" an" ninety ' an" the amen"ments thereto an" the fees of the register of "ee"s for registering the officerAs return shall be ta#e" as a part of the costs of sale which the officer shall pay to the register of "ee"s. The return shall particularly "escribe the articles sol" an" state the amount recei!e" for each article an" shall operate as a "ischarge of the lien thereon create" by the mortgage. The procee"s of such sale shall be applie" to the payment first of the costs an" e#penses of )eeping an" sale an" then to the payment of the "eman" or obligation secure" by such mortgage an" the resi"ue shall be pai" to persons hol"ing subse<uent mortgages in their or"er an" the balance after paying the mortgages shall be pai" to the mortgagor or person hol"ing un"er him on "eman". &f the sale inclu"es any "large cattle " a certificate of transfer as re<uire" by section si#teen of Act 3umbere" 1le!en hun"re" an" forty7se!en , shall be issue" by the treasurer of the municipality where the sale was hel" to the purchaser thereof. Sec. 1,. ; ;a Sec. 1;. This Act shall ta)e effect on August first nineteen hun"re" an" si#. Enacted, July 2, 1906.