REAL Mortgage

Antichresis
Chattel mortgage
 KEY TERMS
Real Mortgage
• is a contract whereby debtor secures to the creditor the fulfillment of a
principal obligation, especially subjecting to such security, immovable
property or real rights over immovable property in case the principal
obligation is not complied with at the same time stipulated.

Mortgagor
• is the borrower who takes loan from the lender and pledges his property
as a security for repayment.

Mortgagee
• is the lender who gives the loan to the mortgagor and receives the
security interest in the property from the latter.
 Real Rights
• creates lien on the property mortgaged whereby the mortgagee has a
right to have the mortgaged property sold to satisfy his claim.

Foreclosure
• remedy available to the mortgagee by which he subjects 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 thereof to the payment of his
claim.
 Antichresis
• a contract whereby creditor acquires the right to receive the fruits
of an immovable of his debtor, with the obligation to apply them o the
payment of the interest, if owing, and thereafter to the principal of his
credit.

Chattel Mortgage
• personal property is recorded in the Chattel Mortgage Register as a
security for the performance of an obligation.

Affidavit of good faith

• is an oath in a contract of chattel mortgage wherein the parties
“severally 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 a just and valid obligation, and one not
entered into for the purpose of fraud.”
 Real Mortgage
- otherwise known as “real estate mortgage” or “real mortgage”.
– is a contract whereby debtor secures to the creditor the
fulfillment of a principal obligation, especially subjecting to such
security, immovable property or real rights over immovable
property in case the principal obligation is not complied with at
the same time stipulated.

Parties to a Real Mortgage

•Mortgagor
•Mortgagee
 kinds of real mortgage
1. Voluntary- agreed to by the parties or constituted by
the will of the owner of the property on which it is created.

2. Legal- one required by law.

3. Equitable- one which, although lacking the formalities

of a mortgage, shows the intention of the parties to make
the property a security for a debt.
Characteristics of Real Mortgage
▣ Accessory
▣ Indivisible
▣ Inseparable
▣ Real Right
▣ Real Property
Essential requisites of a mortgage
1. To secure the fulfillment of a principal obligation
2. The mortgagor should be the absolute owner of thing
mortgaged
3. The mortgagor should have free disposal of the thing
4. When the principal obligation becomes due, the thing
mortgaged may be alienated to secure payment
5. For a mortgage to be validly constituted and to prejudice third
persons, the mortgage should be recorded with the Registry of
Property.
 Art. 2124
Only the following property may be the object of a
contract of mortgage:
(1) Immovables;
(2) Alienable real rights in accordance with
the laws, imposed upon immovables.

Nevertheless, movables may be the object of

a chattel mortgage.

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 Art. 2125
In addition to the requisites stated in Article 2085, it is
indispensable, in order that a mortgage may be validly
constituted, that the document in which it appears be
recorded in the Registry of Property.
If the instrument is not recorded, the mortgage is
nevertheless binding between the parties.

▣ The persons in whose favor the law establishes a

mortgage have no other right than to demand the
execution and the recording of the document in
which the mortgage is formalized.
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 Art. 2126
The mortgage directly and immediately subjects the
property upon which it is imposed, whoever the
possessor may be, to the fulfillment of the obligation
for whose security it was constituted.

D obtained a loan from C amounting to P100,000. To

secure the debt, D constituted a mortgage on his lot
which C registered with the Register of Deeds. Before
the due date of the loan, D sold the lot to X who knew
nothing of the mortgage. If D defaults in the payment
of his loan, C can foreclose the mortgage.
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 Art. 2127
The mortgage extends to the natural accessions, to the
improvements, growing fruits, and the rents or income not
yet received when the obligation becomes due, and to the
amount of the indemnity granted or owing to the proprietor
from the insurers of the property mortgaged, or in virtue of
expropriation for public use, with the declarations,
amplifications and limitations established by law, whether
the estate remains in the possession of the mortgagor, or it
passes into the hands of a third person.
 Article 2128
The mortgage credit may be alienated or assigned to a third
person, in whole or in part, with the formalities.

Example
D borrowed P200,000 from C. The debt, which is evidenced by a
promissory note, is secured by a mortgage on a certain lot
belonging to D and is due after 6 months. Before the due date, C
assigned the credit to T. In this case, the assignment of the credit
carried with it the assignment of the mortgage in the lot. Here,
the assignment is binding between C and T. To bind third persons,
however, the assignment should be recorded in the Registry of
Property.
 Art. 2129
The creditor may claim from a third person in possession of
the mortgaged property, the payment of the part of the
credit secured by the property which said third person
possesses, in the terms and with the formalities which the
law establishes.

▣ Mortgage credit a real right

▣ Third person’s liability limited to value of property
 example
D mortgage his land worth P500,000.00 in favor of C to secure D’s debt
of P600,000.00. D then sold the land to X.

In this case, the obligation of D to pay the debt is not affected by the
transfer. On the due date of the obligation, C may demand payment
from D and if D fails to pay, C may foreclose the mortgage. C has the
right to claim from X the payment of 500,000.00 which is part of the
credit secured by the property sold to X.

X is not responsible for any deficiency of P100,000.00 in the absence of

a contrary stipulation. The remedy of X is to proceed against D.
 Article 2130
A stipulation forbidding the owner from alienating
the immovable mortgaged shall be void.

▣ Stipulation prohibiting alienation

▣ Stipulation prohibiting second mortgage

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 Article 2131
The form, extent and consequences of a mortgage,
both as to its constitution, modification and
extinguishment, and as to other matters not
included in this Chapter, shall be governed by the
provisions of the Mortgage Law and of the Land
Registration Law.

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 Foreclosure & Redemption of Mortgage

Kinds of Foreclosure
Judicial Foreclosure
Extra judicial foreclosure

Kinds of Redemption
Equity of redemption
Right of Redemption
 ANTICHRESIS
Art. 2132
By the contract of antichresis the
creditor acquires the right to receive the
fruits of an immovable of his debtor, with
the obligation to apply them to the
payment of the interest, if owing, and
thereafter to the principal of his credit.
 antichresis
Accessory Contract- it secures the performance of a
principal obligation.

Formal Contract ”in writing”- It must be in a specified

form to be valid.

Requires delivery - the delivery by the debtor of the

real property given as security in order that the creditor
may receive the fruits.
 ANTICHRESIS VS PLEDGE
• Real Property

• Consensual Contract • Real Contract-

perfected by the
• Perfected by mere delivery of the thing
consent pledged.
 ANTICHRESIS VS REAL MORTGAGE

• Property is delivered • Debtor usually

to the creditor retains possession
• The creditor to of the property
receive the fruits of • The creditor does
the property not have any right
to receive the fruits
 ANTICHRESIS VS REAL MORTGAGE

• The creditor, unless

there is a stipulation
to the contrary, is • The creditor has no
obliged to pay the such obligation
taxes and charges
upon the estate
 Art. 2133
The actual market value of the fruits at the
time of the application thereof to the interest
and principal shall be the measure of such
application
▣ Contract does not cover the immovable but only
its fruits.
▣ Fruits must be appraised at their actual market
value at the time of the application.
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 Art. 2134
The amount of the principal and of the
interest shall be specified in writing;
otherwise, the contract of antichresis shall
be void.

▣ Even if the antichresis is void, the

principal obligation, however, may
still be valid.
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 Art. 2135
The creditor, unless there is a stipulation to the contrary, is
obliged to pay the taxes and charges upon the estate. He is
also bound to bear the expenses necessary for its
preservation and repair. The sum spent for the purposes
stated in this article shall be deducted from the fruits.

▣ Payment all taxes and charges upon the

estate.
▣ Application of the fruits of the estate.
 Art. 2136
The debtor cannot reacquire the enjoyment of the
immovable without first having totally paid what he
owes the creditor.

1. Upon full payment of his obligation to the creditor.

2. When he is compelled by the creditor to enter into the
enjoyment of the property, unless there is stipulation to
the contrary’
This right is available to the creditor if he desires to
exempt himself from the obligation to pay the taxes ad
charges upon the property and the expenses for its
preservation and repair.
 Art.
The creditor does not 2137
acquire the ownership of the real estate
for non-payment of the debt within the period agreed upon.
The creditor does not acquire ownership of the immovable for non-
payment of the debt within the period agreed upon. Any stipulation to
the contrary is void.

In case of non-payment, the creditor shall have the following

remedies:

1. To petition the court for the payment of the debt.

2. To sell the immovable.
The provision of the Rules of Court on foreclosure of mortgages shall
apply. In case of any deficiency in the foreclosure sale, the creditor can
recover the deficiency.
 ART. 2138
The contracting parties may stipulate that the interest upon
the debt be compensated with the fruits of the property
which is the object of the antichresis, provided that if the value
of the fruits should exceed the amount of interest allowed by the
laws against usury, the excess shall be applied to the principal.
(1885a)

ART. 2139
The last paragraph of Article 2085, and Articles 2089 to 2091
are applicable to this contract. (1886a)
 CHATTEL MORTGAGE
Is a contract whereby personal
property is recorded in the Chattel
Mortgage Register as a security for
the performance of an obligation.
(Art. 2140)
 Characteristics of a
chattel mortgage

ACCESSORY CONTRACT

FORMAL CONTRACT

UNILATERAL CONTRACT
 CHATTEL MORTGAGE VS
• Delivery of the
personal property is
necessary
• Registration in the
Chattel Mortgage
Register is required by
law
• The procedure for the
sale of the thing given
as security is found in
Section 14 of Act No.
1508
PLEDGE
• Such delivery is not
necessary
• Registration in the
Registry of Property is
not necessary
• Such procedure is
found in Article 2112
in the Civil Code
CHATTEL MORTGAGE VS PLEDGE

• If the property is sold,

• If the property is
the debtor is not
foreclosed, the excess
entitled to the excess,
over the amount due
unless it is otherwise
goes to the debtor
agreed
• If the property is
• If property is sold, and
foreclosed & there is
there’s a deficiency,
deficiency, the
the creditor is not
creditor is entitled to
entitled to recover the
recover deficiency
deficiency
from the debtor
 Similarities between
Chattel Mortgage & Pledge
• Both are executed to secure performance of a
principal obligation
• Both are constituted only on personal
property
• Both are indivisible
• Both constitute a lien on the property to
himself in payment of the debt
• In both cases, the creditor cannot appropriate
the property to himself in payment of the debt
 Similarities between
Chattel Mortgage & Pledge

• In both cases, when debtor defaults, the property

must be sold for the payment of the creditor
• Both are extinguished by the fulfillment of the
principal obligation or the destruction of the property
pledged or mortgaged.
 Laws Governing Chattel Mortgage

1. Chattel Mortgage Law

2. Civil Code
3. Revised Administrative Code
4. Revised Penal Code
5. Ship Mortgage Degree (Pres. Decree No. 1521)
 Offenses involving Chattel Mortgage

1. Acts Punishable

a. Knowingly moving 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 written consent
of the mortgagee.
 Offenses involving Chattel Mortgage

1. Acts Punishable

b. Selling or pledging personal property, or any part

thereof, under the terms of the Chattel Mortgage Law
without the consent of the mortgagee written on the back
of the mortgage and duly recorded in the Chattel Mortgage
Register.
 Offenses involving Chattel Mortgage

2. Common Essential Elements

b. Selling or pledging personal property, or any part

thereof, under the terms of the Chattel Mortgage Law
without the consent of the mortgagee written on the back
of the mortgage and duly recorded in the Chattel Mortgage
Register.
 Applicability of Provisions on Pledge

It is clear from Article 2141 that the provisions of

the Civil Code on pledge shall apply to a chattel
mortgage insofar as they are not in conflict with
any provision of the Chattel Mortgage Law;
otherwise, the provisions of the latter will apply.
 Subject Matter of Chattel Mortgage

Always be PERSONAL or MOVABLE property

Creation of a Chattel Mortgage

The law as it now stands provides for only one way for
executing a valid chattel mortgage, i.e., the registration of
the personal property in the Chattel Mortgage Register as
security for the performance of an obligation.
 Affidavit of good faith
An oath in a contract of chattel
mortgage wherein the parties “severally
swear that the mortgage is made for the
purpose of securing the obligations
specified in the conditions thereof and
for no other purposes and that the same
is just and valid obligation and one not
entered into for the purpose of fraud.
 Foreclosure of Chattel Mortgage

After payment of the debt or the performance of

the condition specified in the chattel mortgage, the
mortgagee must discharge the mortgage in the
manner provided by law otherwise he may be held
liable for damages by any person entitled to
redeem the mortgage.
 Right of Mortgagee to Recover
Deficiency

1. The creditor may maintain an action for the

deficiency although the Chattel Mortgage Law
is silent on this point.
2. If the chattel mortgage is constituted as
security for the purchase of personal property
payable in installments, no deficiency judgment
can be asked and any agreement to the
contrary shall be void.
 Application of Proceeds of Sale

• Costs and expenses of keeping and sale;

• Payment of the obligation secured by the mortgage;
• Claims of persons holding subsequent mortgages in
their order;
• The balance, if any, shall be paid to the mortgagor,
or person holding under him.
 Right of Redemption

• When the condition of a chattel mortgage is broken,

the following may redeem:
a. The mortgagor
b. A person holding a subsequent mortgage;
c. A subsequent attaching creditor
 Right of Redemption

• An attaching creditor who so redeems shall be

subrogated to the rights of the mortgagee and
entitled to foreclose the mortgage in the same
manner that the mortgagee could foreclose it.
• The redemption is made by paying or delivering to
the mortgagee the amount due on such mortgage &
the costs & expenses incurred by such breach of
condition before the sale thereof.
Thank you!