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Notes on Pledge Mortgage Chattel Mortgage and Antichresis
Accountancy (BSA)
Mariano Marcos State University
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Notes on the Law on Pledge, Real Mortgage & Chattel
Mortgage
Common Provisions on Pledge and Mortgage
- 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 authorized for the purpose (Art. 2085); 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. (Art. 2087)
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 kind of obligation whether pure or conditional, including natural, voidable and unenforceable obligations may be secured by a contract of pledge and mortgage. (Art. 2091, 2052).
- Meaning of PACTUM COMMISSORIUM It is a stipulation authorizing the creditor to appropriate the things given by way of pledge and mortgage or to dispose of them. It is declared null and void by law. (Art 2088). Reason : The amount of the loan is ordinarily much less than the value of the security.
Note: The appropriation must be automatic without need of further act on the part of the debtor. Hence, the prohibition does not apply to: a. Subsequent voluntary act of the debtor of making cession of the property or; b. A promise to assign or sell said property in payment of the debt.
- Rules on the indivisibility of Pledge and Mortgage: a. 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 debtor’s heirs who has paid of the debt cannot ask for the proportionate extinguishments of the pledge or mortgage as long as the debt is not completely satisfied; c. Neither can the creditor’s heirs who received his share of the debt return the pledge or cancel the mortgage, to the prejudice 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. In this case, the debtor shall have a right to the extinguishments of the pledge or mortgage as the portion of the debt for each thing is especially answerable is satisfied.
Examples: a. A borrowed from B P 10,000 and to guarantee payment, A pledge his diamond ring worth P 4,000 and a pair of earnings worth P 6,000. if A pays P 4,000, he cannot ask for the return of the ring because both the ring and the earnings are given to secure payment of the entire obligation of P 10,000. The same is true if A dies leaving W and X as heirs and W pays P4,000 to B.
If the creditors are B and C, and A pays B P4, 000, B cannot return the ring to the prejudice of C who has not received his share.
However, if it is agreed that the ring was given to secure the payment of P4,000 and the earnings, the balance of P6,000 and A (or his heir W) pays P 4,000, A (or W) can demand the return of the ring. b. A and V are jointly liable to C in the sum of P9,000 secured by A’s ring worth P 5,000 and B’s watch worth P4,000. If A pays P5,000 he cannot demand the return of the ring even if their liability is only joint or proportionate because pledge is indivisible.
- Legal effect of a promise to constitute a pledge or mortgage:
It gives rise only to a personal right binding upon the parties but it creates no real right in the property. (See Art. 2092).
PLEDGE
Meaning of Pledge It 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.
Characteristics/Nature as a contract: a. Real b. Accessory c. Unilateral d. Subsidiary contracts because the obligation incurred does not arise until the fulfillment of the principal obligation that is secured. e. In addition to the common requisites of pledge and mortgage (Art 2085), 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. (Art 2093).
Cause or Consideration in PLEDGE Insofar as the pledgor is concerned, it is the principal obligation. But if he is the debtor (Art 2085), the cause is the compensation stipulated for the pledge or the mere liberality of the pledgor.
What are the Kinds of pledge: a. Voluntary or conventional – one which is created by agreement of the parties; or b. Legal – one which is created by operation of law (Art 2121)
Additional requirements in order that pledge shall take effect against third parties: a. The description of the thing pledge; and b. The date of pledge (Art 2076)
May thing pledge be alienated? Yes, provided the pledgee consents to the sale. Ownership passes to the vendee but subject to the rights of the pledgee. (Art 2097)
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 (Art 2099). b. To be reimbursed for the expenses incurred in its preservation (Art 2099). c. To compensate (set – off) the fruits, income, dividends or interests earned or produced by the thing pledged and received with those which are due to him (Art 2102). 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 (Art 2103). 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 (Art 2108). f. To claim a substitute or demand immediate payment, if he is deceived on the substance or quality of the thing pledged (Art 2109) g. To sell the thing pledged at public auction if the obligation secured is not paid (Art 2112). h. To bid at the public sale (Art 2114). i. To collect the amount that become due on a credit pledged before such credit is redeemed. j. To choose which one of the several thing pledged shall be sold (Art 2119).
Obligations of the pledgee: a. To take care of the thing pledge with the diligence of a good father of the family (Art 2099). b. To answer for its loss or deterioration in the proper case; c. Not to deposit the thing pledge with a third person unless authorized (Art )
b. To demand the deposit of the thing pledged should the creditor use it without authority, or misuse it in any other was (Art 2104); c. To substitute the thing pledged if it is endangered without fault of the pledgee without prejudice to the pledgee’s right to have the thing sold at public sale (Art 2108). d. To bid and have preference at the foreclosure sale if he should offer the same terms as the bidder (Art 2113) His offer is not valid however if he is the only bidder. All bids shall offer to pay the purchase price in cash. If 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. (Art. 2114). The sale of the thing pledged extinguishes the principal obligation, whether or not the proceeds are equal to the amount of the principal obligation, interest and expenses in proper case; and
e. To demand the return of the thing pledged upon the extinction of the principal obligation. (Art 2085 (1))
Note: A statement in writing by the pledgee that he renounces or abandons the pledge is sufficient to exinguish 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.
Obligations of the pledgor: a. To notify the pledgee of any flaw or defect of the thing pledged known to him; otherwise he answers for damages suffered by the pledgee (Art 2101); b. To reimburse the pledgee for expenses made for its preservation (Art 2099); and c. To fulfill his principal obligation (Art 2085)
Principles in Pledge:
- As a general rule, the pledge extends to the interest and earnings of
the thing pledged, unless there is a stipulation to the contrary. (Art.
- Unless the pledge is expropriate, the debtor continues to be the owner thereof. Nevertheless, 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. (Art. 2104)
- 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 ask the Court that it be JUDICIALLY OR EXTRA-JUDICIALLY DESPOSITED. However, when the preservation of the thing pledged requires its use, it must be used by the creditor but only for that purpose. (Art. 2104)
- 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. (Art. 2106)
- 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 (Art. 2109).
- As a general rule, the pledge extends to the interest and earnings of
the thing pledged, unless there is a stipulation to the contrary. (Art.
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 kinf as the former and not of inferior quality and without prejudice to the RIGHT OF THE PLEDGEE 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. (Arts. 2107; 2108). Between 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.
- Causes for the extinguishments of the pledge:
a. Return of the thing pledged by the pledgee to the pledgor or owner, any stipulation to the contrary being void (Art 2110); b. Renunciation or abandonment executed in writing by the pledgee even without return of the thing (Art 111) c. Destruction or loss of the thing pledged; d. Extinction of the principal obligation (by payment or sale of the thing pledged); and e. Other causes of extinguishments or ordinary obligations (Art 1231)
SALIENT FEATURES OF PRESIDENTIAL DECREE NO. 114 otherwise known as REGULATING THE ESTABLISHMENT AND OPERATION OF PAWNSHOPS
Background: - Pawnshops provide an additional source of credit especially for small borrowers left unserved by the banking and other financial institutions in the country; - There is no specific law in the Philippines that governs pawnshop establishments, particularly providing definite and uniform standards for their operation.
Declaration of Policy:
- It is hereby declared the policy of the State 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 prejudicial to public interest; and to lay down the minimum requirements and standards under which they may be established and do business. ( Sec. 2)
Definition of Terms: - “Pawnshop” 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 pawnbroker or pawn brokerage. - “Pawner” shall refer to the borrower from a pawnshop. - “Pawnee” shall refer to the pawnshop or pawnbroker. - “Pawn” is the personal property delivered by the pawner to the pawnee as security for a loan. - “Pawn ticket” is the pawnbrokers’ receipt for a pawn. It is neither a security nor a printed evidence of indebtedness. - “Property” 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, knives and similar weapons whose reception in pawn is expressly prohibited by other laws or regulations shall not be included.
A pawnshop may be established as a single proprietorship, partnership or corporation. (SEC. 4)
Any person or entity desiring to engage in the pawnshop business shall (a) register with the Bureau of Commerce ( Department of Trade and Industries) in the case of single proprietorship or the Securities and Exchange Commission in the case of a corporation or any other association ( partnership) and (b) secure a license from the appropriate city or municipality having territorial jurisdiction over the place of establishment and operation (business permit).
SEC. 6. Requirement of registration with the Central Bank. – Any individual, corporation, or association duly registered and licensed to engage in the pawnshop business shall file an information sheet, under oath, with the Central Bank before commencement of actual operations: Provided, however, That pawnshops duly licensed and operating before the approval of this Decree shall, within six months from the date of effectivity of the same, register with the Central Bank. For this purpose, the Central Bank shall furnish pawnshops, upon request, with necessary copies of the prescribed information sheet.
Requirement of registration with the Central Bank – Any individual, corporation, or association duly registered and licensed to engage in the pawnshop business shall file an information sheet, under oath, with the Central Bank before commencement of actual operations. (Sec. 6)
The minimum paid-in capital of any pawnshop which may be established after the effectivity of this Decree shall be one hundred thousand pesos (P100,000):
Characteristics as a Contract: a. Real b. Accessory c. Unilateral; and d. Subsidiary contract
Distinguish Mortgage from Pledge a. Pledge is constituted on movables (Art 2094), while mortgage on immovables (Art 2124); b. In pledge, the property is delivered to the pledgee, or by common consent to third person (Art 2093), 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 (Art 2096), while mortgage is not valid against third persons if not registered even if embodied in a public instrument. (Art 2125).
Note: Both are extinguished by the fulfillment of the principal obligation and by the destruction of the property pledged or mortgaged.
Cause or consideration in mortgage: Its 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.
Kinds of Mortgage: a. Voluntary – one which is agreed to between the parties or constituted by the will of the owner of the property on which it is created (Art 138, Spanish Mortgage Law) b. Legal – one required by law to be executed on favor of certain persons (Art 2125, par 2; see also Arts 2082, 2083) c. Equitable – one which, although it lacks the proper formalities of a mortgage, show the intention of the parties to make the property as a security for a debt.
Property which may be object of Mortgage: a. immovables; and b. Inalienable real rights in accordance with laws, imposed upon immovables (Art 2124)
WHAT CONSTITUTE IMMOVABLE?
Immovables - The following are immovable property: - Land, buildings, roads and construction of all kinds adhered to the soil. - Trees, plants and growing fruits, while they are attached to the land or form an integral part of an immovable. - Everything attached to an immovable in fixed manner, in such a way that it cannot be separated there from without breaking the material or deterioration of the object. - Statues, reliefs, painting or other objects 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. - Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or works 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 works. - Animal 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. - Fertilizer actually used on a piece of land. - Mines, quarries, slag dumps, while the manner thereof forms part of the bed, and waters either running or stagnant. - Docks and structures which, though floating, are intended by their nature and object to remain at a fixed place on a river, lake or coast. - Contracts for public works, and servitudes and other real rights over immovable property. (Art. 415, Civil Code)
Effects of a Mortgage: a. It creates a real right, i., it 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 (Art 2126); b. The mortgage (creditor) may, therefore demand payment from any possessor of the mortgaged property (Art 2129); c. He may alienate or assign the mortgage credit (his right as mortgagee) to a third person (Art 2128); d. The mortgage does not extinguish the title of the mortgagor (debtor) who does not, therefore, lose his right to dispose. Indeed, the law considers void any stipulation forbidding the owner from alienating the property mortgaged. (Art 2130)
Scope of Mortgage: It extends to and includes the following: a. Natural accessions; b. Improvements (even if subsequently made); c. Growing 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; f. Amounts received or owing in virtue of the expropriation of the properly for public sale (Art 2127)
Note: 1. The above are deemed included in the mortgage unless expressly excluded; 2. But the mortgage does not extend to improvements made by a third person subsequent to the mortgage and after the property has passed to him.
Define Foreclosure: Foreclosure is a remedy available to the mortgagee by which he subject 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.
Kinds of Foreclosure: a. Judicial Foreclosure – A mortgage may be foreclosed judicially by bringing an action for that purpose in the Regional Trial Court of the province or city the real property is located or any part thereof lies; and
b. Extra – judicial foreclosure – A mortgage may be foreclosed extra-judicially 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 extra-judicial sale of the mortgaged property (Sec 1, Art No. 3155 as amended by Act no 4148).
- Define Redemption
Redemption may be defined as a transaction by which the mortgagor reacquires or buys back the property, which may have been passed under the mortgage or divests the property of the lien, which the mortgage may have created.
- Kinds of Redemption:
a. Equity of Redemption – 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. In judicial foreclosure, the mortgagor may exercise his equity of redemption before and not after the sale is confirmed by the court; and
b. Right of Redemption – 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. In all cases of extra – judicial sale, the mortgagor may redeem the property at any time within the term
a. After the confirmation of the sale, the mortgagor does not have a right to redeem the property anymore. This is the general rule in judicial foreclosures – 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 junior encumbrances will be satisfied.
d. If there is still an excess, the excess will go back to the mortgagor. In mortgage, the mortgagee DOES NOT get the excess (unlike in pledge).
If there is a deficiency, the mortgagee can ask for a DEFICIENCY JUDGMENT which can be imposed on other property of the mortgagor. The rule on extrajudicial foreclosure is different. The mortgagee must go to court and file another action for the collection of the deficiency.
The proceeds from the judicial 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.
If there is any excess from the proceeds of the sale, such will be returned to the debtor/mortgagor.
Right of Redemption in Judicial Foreclosure
The right to redeem the mortgaged property is exercised by the judgment debtor or mortgagor at anytime before the confirmation of the sale. Generally, the court is given a period of ninety (90) days to confirm the sale. The generally rule is the mortgagor cannot exercise his right of redemption after the sale is confirmed.
WHY ONE WOULD SHY AWAY FROM A JUDICIAL FORECLOSURE?
Judicial foreclosure is costly, since the parties would need to hire lawyers. But then again, the present rules provide that court fees are needed to be paid in extrajudicial proceedings also.
The parties have very little control over the sale because there is court intervention.
More susceptible to stalling/dilatory tactics by the mortgagor, since he can file all sorts of motions in court to prevent the sale.
It is more efficient to have extrajudicial proceedings since for judicial proceedings, there is a minimum lapse of time of 6 years.
Extra –Judicial Foreclosure – A mortgage may be foreclosed extra-judicially 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 extra-judicial sale of the mortgaged property (Sec 1, Art No. 3155 as amended by Act no 4118).
(UNDER ACT 3135/4118 AND SC ADMINISTRATIVE CIRCULAR)
WHERE SHOULD AN EXTRAJUDICIAL FORECLOSURE SALE BE DONE?
Sale cannot be made legally outside the city or province wherein the property sold is situated. In case the place has been stipulated, it shall be made in the municipal building of the said place.
NOTICE OF THE SALE
- POSTING of the notices of the sale FOR NOT LESS THAN 20 DAYS in at least 3 public places of the municipality or city where the property is situated.
- IF THE PROPERTY IS WORTH MORE THAN P400, such notice shall also be
published once a week at least 3 consecutive weeks in a newspaper of general circulation in the municipality or city.
(You don't need to count 6 days between publications.) NOTE: there is jurisprudence, which held that there is sufficient notice when there is publication
- PUBLIC AUCTION/SALE
Time shall be between 9AM and 4PM. It shall be made in the direction of the sheriff of the province, the justice or auxiliary justice of the peace of the municipality, or of the notary public of the municipality, who shall be compensated with P5 for each day of actual work or performance in addition to his expenses.
Anyone may bid at the sale, unless there are stipulations in the agreement.
POSSESSION
> Upon foreclosure, if the mortgagor is in possession of the property, he will retain possession during the redemption period—1 year from the date of sale
> If the winning bidder wants possession during the redemption period, he may execute a bond in the amount equivalent to the use of the property for 12 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 Act. Upon approval, a writ of possession will be issued in his favor.
> If the winning bidder is able to secure possession, the mortgagor may petition that the sale is set aside and the writ of possession be cancelled on the ground that he wasn't in default or that the sale wasn't made in accordance with Act 3135. This must be filed within 30 days from issuance of the writ of possession.
RIGHT OF REDEMPTION
The debtor, his successors-in-interest, or any judicial creditor or judgment 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 1 YEAR FROM AND AFTER THE DATE OF THE SALE and such will be governed by the Rules of Court. –registration of the sale.
When the property is redeemed after the purchaser has been given
possession, the redeemer is entitled to deduct from the price of redemption any rentals that said purchaser may have collected in case the property or any part thereof was rented. If the property was used as his own dwelling, it being town property, or used it gainfully, it being rural property, the redeemer may deduct from the price the interest of 1% per month provided in the Rules of Court
Owners of property that has been sold in a foreclosure sale prior to the effectivity of this Act shall retain their redemption rights until their expiration.
NOTES:
- For judicial or extra-judicial foreclosure, the redemption period is within one year from sale or registration.
- The purpose is to give concession to the banks. Banks cannot get properties mortgaged by those in financial distress.
- The redemption price would be the mortgaged obligation plus the interest as stipulated in the original obligation. Compare this with judicial foreclosure wherein the redemption price is the original price. In this case, you have to pay more when redeeming from a bank.
- There is immediate possession
- A motion to enjoin would not be entertained unless secured by a bond.
- Court will fix the amount of the bond. Normally, this would be the liability of the bank plus costs. This remedied the loopholes in Act 3135—protect the bank during foreclosures. This makes it hard to secure injunctions and it shortens the redemption period.
However, the purchaser at the auction sale concerned whether in a judicial or extra-judicial foreclosure shall have the right to enter upon and take possession of such property immediately after the date of the confirmation of the auction sale and administer the same in accordance with law. Any petition in court to enjoin 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 fixed by the court conditioned that he will pay all the damages which the bank may suffer by the enjoining or the restraint of the foreclosure proceeding.
- "SEC. 6. In all cases in which an extrajudicial sale is made under the special power hereinbefore referred to, the debtor, his successors-in-interest or any judicial creditor or judgment 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 sixty-four to four hundred and sixty-six, inclusive, of the Code of Civil Procedure, in so far as these are not inconsistent with the provisions of this Act." ( Act 4118).
A. No. 99-10-05-0 August 7, 2001
(AS FURTHER AMENDED, AUGUST 7, 2001) PROCEDURE IN EXTRA-JUDICIAL FORECLOSURE OF MORTGAGE
In line with the responsibility of an Executive Judge under Administrative Order No. 6, dated June 30, 1975, for the management of courts within his administrative area, included in which is the task of supervising directly the work of the Clerk of Court, who is also the Ex-Office Sheriff, 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 extrajudicial foreclosure of mortgages: 1. All applications for extra-judicial foreclosure of mortgage whether under the direction of the sheriff or a notary public, pursuant to Act 3135, as amended by Act 4118, and Act 1508, as amended, shall be filed with the Executive Judge, through the Clerk of court who is also the Ex- Officio Sheriff. 2. Upon receipt of an application for extra-judicial foreclosure of mortgage, it shall be the duty of the Clerk ofCourt to: a) receive and docket said application and to stamp thereon the corresponding file number, date and time of filing;
b) collect the filing fees therefore pursuant to rule 141, Section 7(c), as amended by A. No. 00-2-01-SC, and issue the corresponding official receipt; c) examine, 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 Sec. 4 of Act 3135, as amended; d) sign and issue the certificate of sale, subject to the approval of the Executive Judge, or in his absence, the Vice-Executive Judge. No certificate of sale shall be issued in favor of the highest bidder until all fees provided for in the aforementioned sections and in Rule 141, Section 9(1), as amended by A. No. 00-2-01-SC, shall have been paid; Provided, that in no case shall the amountpayable under Rule 141, Section 9(1), as amended, exceed P100,000; e) after the certificate of sale has been issued to the highest bidder, keep 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 Deeds concerned, after which, the records shall be archived. Notwithstanding the foregoing provision, juridical persons whose property is sold pursuant to an extra-judicial 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 (3) months after foreclosure, whichever is earlier, as provided in Section 47 of Republic Act No. 8791 (as amended, Res. Of August 7, 2001).
Where the application concerns the extrajudicial 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 Clerk of Court 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 docketed with the Clerks of Court of the places where the other properties are located and of allowing the extrajudicial foreclosures to proceed thereat. 3. The notices of auction sale in extrajudicial foreclosure for publication by the sheriff or by a notary publicshall be published in a newspaper of general circulation pursuant to Section 1, Presidential Decree No. 1079, dated January 2, 1977, and non-compliance therewith shall constitute a violation of Section 6 thereof. 4. The Executive Judge shall, with the assistance of the Clerk of Court, raffle applications for extrajudicial foreclosure of mortgage under the direction of the sheriff among all sheriffs, including those assigned to the Office of the Clerk of Court and Sheriffs IV assigned in the branches. 5. The name/s of the bidder/s shall be reported by the sheriff or the notary public who conducted the sale to the Clerk of Court before the issuance of the certificate of sale.
This Resolution amends or modifies accordingly Administrative Order No. 3 issued by then Chief Justice Enrique M. Fernando on 19 October 1984 and Administrative Circular No. 3-98 issued by the Chief Justice Andres R. Narvasa on 5 February 1998.
The Court Administrator may issue the necessary guidelines for the effective enforcement of this Resolution.
The Clerk of Court shall cause the publication of this Resolution in a nuewspaper of general circulation not later than August 14, 2001 and furnish copies thereof to the Integrated Bar of the Philippines.
This Resolution shall take effect on the 1st day of September of the year 2001.
Promulgated this 7th day of August 2001 in the City of Manila.
Davide, Jr., C., Bellosillo, Melo, Puno, Vitug, Kapunan, Mendoza, Panganiban, Quisumbing, Pardo, Buena, Gonzaga-Reyes, Ynares-Santiago, and De Leon, Jr., JJ., concur. Sandoval-Gutierrez J., on leave.
CHATTEL MORTGAGE ( Act No. 1508, as amended).
Define Chattel Mortgage: Chattel Mortgage is a contract by virtue of which personal property is recorded in the Chattel Mortgage Register as a security for the performance of an obligation (Art 2140).
Characteristics as a Contract: 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. (Art 2125)
Laws principally governing chattel mortgages: a. Chattel Mortgage Law (Act No. 1508) b. Civil Code c. Revised Administrative Code; and d. Revised Penal Code
Similarities between pledge and chattel mortgage: a. both are executed 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. In both cases, the creditor cannot appropriate the property to himself in payment of the debt; f. In both cases, when the debtor defaults, the property must be sold for the payment of the creditor; and
The redemption is made by paying or delivering to the mortgage the amount due on such mortgage and the costs and expenses incurred by such breach of condition before the sale thereof. (Section 13).
Kinds of Foreclosure of Chattel Mortgage: a. Judicial Foreclosure – the mortgagee institutes an action in court; b. Extra-judicial Foreclosure – The sale is made by the mortgagee himself when authorized by the Chattel mortgage contract or by special law.
How proceeds of the foreclosure be applied? To the payment of the following in their order: a. Costs and expenses of keeping and sale; b. Payment of the obligation secured by the mortgage; c. Claims of persons holding subsequent mortgages in their order; and d. The balance, if any. Shall be paid to the mortgagor, or in person holding under him.
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 provisions of this Act, and a mortgage executed in pursuance thereof shall be termed chattel mortgage.
Sec. 3. Chattel mortgage defined. — A chattel mortgage is a conditional sale of personal property as security for the payment of a debt, or the 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 become void, and the mortgagee is thereby divested of his title.
Sec. 4. Validity. — A chattel mortgage shall not be valid against any person except the mortgagor, his executors or administrators, unless the possession of the property is delivered to and retained by the mortgagee or unless the mortgage is recorded in the office of the register of deeds of the province in which the mortgagor resides at the time of making the same, or, if he resides without the Philippine Islands, in the province in which the property is situated: Provided, however, That if the property is situated in a different province from that in which the mortgagor resides, the mortgage shall be recorded in the office of the register of deeds of both the province in which the mortgagor resides and that in which the property is situated, and for the purposes of this Act the city of Manila shall be deemed to be a province.
Sec. 5. Form. — A chattel mortgage shall be deemed to be sufficient when made substantially in accordance with the following form, and shall be signed by the person or persons executing the same, in the presence of twowitnesses, who shall sign the mortgage as witnesses to the execution thereof, and each mortgagor and mortgagee, or, in the absence of the mortgagee, his agent or attorney, shall make and subscribe an affidavit in substance as hereinafter set forth, which affidavit, signed by the parties to the mortgage as above stated, and the certificate of the oath signed by the authority administering the same, shall be appended to such mortgage and recorded therewith.
FORM OF CHATTEL MORTGAGE AND AFFIDAVIT.
"This mortgage made this ____ day of __19 by _______________, a resident of the municipality of ______________, Province of ____________, Philippine Islands mortgagor, to ____________, a resident of the municipality of ___________, Province of ______________, Philippine Islands, mortgagee, witnesseth:
"That the said mortgagor hereby conveys and mortgages to the said mortgagee all of the following-described personal property situated in the municipality of ______________, Province of ____________ and now in the possession of said mortgagor, to wit:
(Here insert specific description of the property mortgaged.)
"This mortgage is given as security for the payment to the said ______, mortgagee, of promissory notes for the sum of ____________ pesos, with (or without, as the case may be) interest thereon at the rate of ___________ per centum per annum, according to the terms of __________, certain promissory notes, dated _________, and in the words and figures following (here insert copy of the note or notes secured).
"(If the mortgage is given for the performance of some other obligation aside from the payment of promissory notes, describe correctly but concisely the obligation to be performed.)
"The conditions of this obligation are such that if the mortgagor, his heirs, executors, or administrators shall well and truly perform the full obligation (or obligations) above stated according to the terms thereof, then this obligation shall be null and void.
"Executed at the municipality of _________, in the Province of ___, this _____ day of 19
(Signature of mortgagor.)
"In the presence of
"_________________ "_________________
Notes on Pledge Mortgage Chattel Mortgage and Antichresis
Course: Accountancy (BSA)
University: Mariano Marcos State University
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