Chattel Mortgage Law
10. Formal Requisites of CM:
1. The law primarily governs chattel mortgage.
Provisions on pledge of NCC in so far as not
in conflict with CML also govern chattel
mortgages.
2. Chattel Mortgage may be rescinded for
being in fraud of creditors.
3. Growing fruits are covered by chattel
mortgage but they may not be pledged.
4. Machinery placed on plant or building owned
by another can be the object of chattel
mortgage.
5. General Rule: Chattel Mortgage cannot
cover debts subsequently contracted.
6. Rules:
Chattel Mortgage cannot cover debts
subsequently contracted
a. registered in place where mortgagor
resides and where property (chattel) is
located. If mortgagor resides abroad,
register in place where property is
located.
b. Motor Vehicles: register also in Land
Transportation Office
c. Shares of Stock: place of domicile of
corporation and shareholder. No need
for notation in books of corporation
d. Vessels: Phil. Coastguard
7. To be valid against 3rd persons:
a. affidavit of good faith
b. contract must be registered
8. General Rule: In Chattel Mortgage, there is
recovery of deficiency judgment.
Exception: when Recto Law applies
9. Requisites of CML:
a. constituted to secure the fulfillment of
principal obligation
b. mortgagor is absolute owner of the thing
mortgaged
c. persons constituting the mortgage have
the free disposal of the property and in
the absence thereof, they be legally
authorized for the purpose
d. recorded to bind 3rd persons
a. substantial compliance with form in Sec.
5 of CML
b. signed by at least 2 witnesses
c. must contain an affidavit of good faith
d. certificate of oath (notarial
acknowledgment)
11. Affidavit of Good Faith
- where the parties severally swear that the
mortgage is made for the purpose of securing
the obligation specified and for no other purpose
and that the same is a just and valid obligation
and not one entered into for fraud
- property given in CM must be described to
enable the parties or any other person after
reasonable inquiry and investigation to identify it
12. Future property may not be covered by
CM but when such property is a:
a. renewal of, or in substitution for goods on
hand when the mortgage was executed,
or
b. purchased with proceeds (not of your
own money) of said goods, said property
may be covered by CM
13. Criminal Acts - removal of chattel to
another city or province without written
consent of mortgagee, selling property
already pledged, or mortgaged without
written consent of mortgagee
14. A chattel mortgage may be foreclosed
judicially or extra-judicially, in the latter case,
before a notary or sheriff, or creditor or
mortgagee when stipulated, even without
need of notice (when mortgagee forecloses)
15. Pactum Commissorium applies to Chattel
Mortgage.