Notes on Pledge Mortgage Chattel Mortgage and Antichresis

Notes 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 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).

2. 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.

3. 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.

4. 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


1. 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.

2. 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).

3. 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.

4. 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)

5. 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)

6. 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)

7. 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) .



8. 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 )
d. To be responsible for the acts of his agents or employees with
respect to the thing pledged (Art 2100);
e. Not to use the thing pledged unless authorized or its preservation
so requires (Art 2104);
f. To advise the pledgor, without delay, of any danger to the thing
pledged (Art 2107).
g. To promptly advise the pledgor or owner in case of sale at public
auction of the result thereof (Art 2116); and
h. To return the thing pledged when the principal obligation is paid.

9. Conditions required in an extra – judicial 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 if after the first and
second auctions, the thing is not sold. If the creditor appropriated the
thing, it shall be considered as full payment for his entire claim. He is
thus obliged to give an acquittance for the same (Art. 2115).
The sale must be made at the public auction with notification to the
debtor and the owner of the thing pledged in a proper case, stating the
amount for which the public sale is to be held.

10. Rules on the proceeds after sale of the thing pledged:
a. Price of sale more than the amount due – The debtor is not entitled
to the excess, unless otherwise agreed; and
b. Price of sale less tan the amount due – The creditor is not
entitled to recover any deficiency, notwithstanding any stipulation
to the contrary. (Art. 2115) Reason: To compel the creditor to hold
an honest public sale.

Note:
1. The creditor, however, may sue on the principal obligation
instead of electing to sell the thing pledged.
2. In pledge by operation of law, after payment of the debt and
expense, the remainder of the price shall be delivered to the
obligor (Arts 2121, 2122)
3. Under the Chattel Mortgage Law, the mortgagor can also
recover the excess (Act. No. 1506, Sec 14).

11. Instances of Legal Pledges or Pledges by Operation of Law:
a. Possessor in good faith – for necessary and useful expenses
incurred over the thing (Art 546);
b. Usufructuary – for taxes and extraordinary expenses (Art 612) ;
c. Bailee – For damages suffered by reason of the flaws in the thing
loaned. (Arts 1944, 1951);
d. Agent – for expenses advance and damages caused by the agency (Art
1914);
e. Depositary – for the payment of what may be due him by reason of
the deposit (Art 1994); and
f. Hotel Keeper – for credits for lodging and supplies furnished (Art
2004); and
g. Independent contractor – he who has executed work upon a movable
has a right to retain it by way of pledge until he is paid. (Art
1731, see also Art 1701).


In case of pledge by operation of law, the proceeds shall be
applied to the debt and expenses, the remainder of the price of the
sale shall be delivered to the obligor. (Art. 2121).


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 take place within one month after such demand. If,
without just grounds, the creditor does not cause the public sale
to be held within such period, the debtor may require the return of
thing. (Art. 2122)

12. Rights of the Pledgor:
a. TO continue to be the owner of the thing pledged, until its sale,
unless it is expropriated(Art 2103) ;
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.


13. 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)

14. Principles in Pledge:
1. 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.
2102)
2. 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)
3. 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)
4. 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)
5. 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).

15. 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.

16. 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
(P100,000.00):
Citizenship requirement. Upon the effectivity of this Decree, only Filipino
citizens may establish and own a pawnshop organized in the form of a single
proprietorship: Provided, however, That in the case of a partnership, at
least seventy per cent (70%) of its capital shall be owned by Filipino
citizens: Provided, further That in the case of a corporation, at least
seventy per cent (70%) of the voting capital stock shall be owned by
citizens of the Philippines, or if there be no capital stock, at least
seventy per cent (70%) of the members entitled to vote, shall be citizens
of the Philippines.


SEC. 9. Amount 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 (30%) of the appraised
value of the security offered for the loan unless the pawner manifests
in writing the desire to borrow a lesser amount.

SEC. 10. Rates of interest. – No pawnshop shall directly or indirectly
stipulate, charge, demand, take or receive any higher rate or greater sum
or value for any loan or forbearance than the rate allowed by the Usury Law
for such transactions. It shall be unlawful for a pawnshop to divide the
pawn offered by a pawner in order to collect greater interest and/or to
require the pawner to pay an additional charge as insurance premium for the
safekeeping and conservation of the article pawned. In addition to interest
charges, pawnshops may impose a Maximum service charge of five pesos
(P5.00), but in no case to exceed one per cent (1%) of the principal loan.

SEC. 13. Redemption. – The pawner who fails to pay his obligation on the
date it falls due may, within ninety days from the date of maturity of the
obligation, redeem the pawn 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 basis shall be the sum of the
principal obligation and interest earned at the time the obligation
matured.

SEC. 14. Disposition of pawn on default of pawner. – In 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
pawnbroker may sell or otherwise dispose of any article taken or received
by him in pawn: Provided, however, That the pawner shall be duly notified
of such sale on or before the termination of the ninety-day period, the
notice particularly stating the date, hour, and place of sale.

SEC. 15. Public auction of pawned articles. No pawnbroker shall sell or
otherwise dispose of any article or thing taken or received in pawn or
pledge except at (1) public auction in his place of business as such
pawnbroker or in any other public place within the territorial limits of
the municipality or city where the pawnshop has its place of business, (2)
under the control and direction of an auctioneer with license duly issued
by the corresponding authorities, (3) nor shall any such article or thing
to be sold or disposed of unless said pawnbroker has published a notice
once in at least two daily newspapers printed in the city or municipality
during the week preceding the date of such sale.

In remote areas where newspapers are neither published nor circulated,
notice by newspaper publication shall be substituted by posting notices in
conspicuous public places within the territorial limits of the city or
municipality where the pawnshop has its place of business. Said notice,
whether published or posted, shall be in English, 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. (SEC.15)

Pawnshop business is under the regulatory power of the Central bank of the
Philippines. (Sec. 17)




REAL MORTGAGE


1. Define mortgage:
Mortgage otherwise known as Real Estate mortgage or Real Mortgage is
a contract whereby the debtor secures to the creditor the fulfillment of
the 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 time stipulated:

2. Characteristics as a Contract:
a. Real
b. Accessory
c. Unilateral; and
d. Subsidiary contract

3. 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.

4. 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.

5. 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.

6. 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)



7. Effects of a Mortgage:
a. It creates a real right, i.e., 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)

8. 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.

9. 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.

10. 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).

11. 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.

12. 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 of one year from and after the date of the
registration of the sale. In judicial foreclosure, the general rule
is that the mortgagor cannot exercise his right of redemption after
the sale is confirmed by an order of the Court.



Rules on Foreclosure



VALIDITY AND EFFECT OF FORECLOSURE
The right to foreclose the mortgage and to have the
property seized and sold with a view to applying the proceeds
to the payment of the principal obligation


> A mortgage contract may contain an acceleration clause—on 
occasion of the mortgagor's default, the whole sum remaining unpaid
automatically becomes due and payable



> Essence of mortgage contract—property has been identified 
and separated from a mass of the property of the mortgagor to 
secure the payment of a principal obligation
>Once the proceeds have been applied to the payment of the 
principal obligation, the debtor cannot anymore be asked to pay unless
there is deficiency.

GROUNDS FOR FORECLOSURE
A. Failure to pay the principal obligation on maturity date.
B. Violation of any condition, stipulation or warranty of the mortgage
contract by the debtor/debtor
C. Kinds of Foreclosure:
D. 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
as outlined under Sections 4 and 70 of the Revised Rules of Court. If
there is deficiency in the public sale, the mortgagee can petition the
court for a deficiency judgment and collect the unpaid balance from
the debtor.

A 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.



Rule 68 Rules of Court

1. The mortgagee should file a petition for judicial foreclosure in the
court which has jurisdiction over the area where the property is situated 
2. The court will conduct a trial. If, after trial, the court finds
merit in the petition, it will render judgment ordering the
mortgagor/debtor to pay the obligation within a period not less than 90 
nor more than 120 days from the 

finality of judgment. 
3. Within this 90 to 120 day period, the mortgagor has the chance
to pay the obligation to prevent his property from being sold. This 
is called the EQUITY OF REDEMPTION PERIOD. 

 4. If mortgagor fails to pay within the 90-120 days given to him by the
court, the property shall be sold to the highest bidder at public auction
to satisfy the judgment. 
5. There will be a judicial confirmation of the sale. 

After 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 extends until the sale is
confirmed. Even after the lapse of the 90 to 120 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 BEFORE the
confirmation of the sale.
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?

1. 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.


2. The parties have very little control over the sale 
because there is court intervention. 

3. More susceptible to stalling/dilatory tactics by the
mortgagor, since he can file all sorts of motions in court to prevent
the sale.


4. 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 

1. 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.
2. 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

1. 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.

2. 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







RULES OF COURT, RULE 39, SECTIONS 29 TO 31, AND 35

Sec. 29. Effect of redemption by judgment obligor, and a
certificate to be delivered and recorded thereupon; to whom payments
on redemption made.
If the judgment obligor redeems, he must make 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 execute and deliver to him a certificate of 
redemption acknowledge before a notary public or other officer authorized
to take acknowledgments of conveyances of real property.
Such 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. 



Sec. 30. Proof required of redemptioner.

A redemptioner must produce to the officer, or person from whom he seeks to
redeem, and serve with his notice to the officer a copy of the judgment or
final order under which he claims the right to redeem, certified by the
clerk of the court wherein the judgment 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 executed by him or his agent, showing the amount 
then actually due on the lien. 

Sec. 31. Manner of using premises pending redemption; waste
restrained.


Until the expiration of the time allowed for redemption, the court may, 
as in other proper cases, restrain the commission of waste on the
property by injunction, on the application of the purchaser or the judgment
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 make the
necessary repairs to buildings thereon while he occupies the property.

Sec. 35. Right to contribution or reimbursement.
When property liable to an execution against several persons is
sold thereon, and more than a due proportion of the judgment is satisfied
out of the proceeds of the sale of the property of one of them, or one 
of them pays, without a sale, more than his proportion, he may
compel a contribution from the others; and when a judgment 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.



GENERAL BANKING LAW OF 2000, SECTION 47


Sec. 47. Foreclosure of Real Estate Mortgage. - In the event of
foreclosure, whether judicially or extra-judicially, 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 expenses incurred by the bank or institution from the 
sale and custody of said property less the income derived therefrom.

Notwithstanding Act 3135, juridical persons whose property is being
sold pursuant to an extrajudicial 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 Deeds which in no case shall be more than three (3)
months after foreclosure, whichever is earlier. 

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:
1. For judicial or extra-judicial foreclosure, the redemption period 
is within one year from sale or registration.
2. The purpose is to give concession to the banks. Banks
cannot get properties mortgaged by those in financial distress.
3. 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.
4. There is immediate possession
5. A motion to enjoin would not be entertained unless secured by
a bond.
6. 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).



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A.M. 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.M. 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.M. 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 P100,000.00;
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.J., 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).

1. 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).

2. 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)

3. Laws principally governing chattel mortgages:
a. Chattel Mortgage Law (Act No. 1508)
b. Civil Code
c. Revised Administrative Code; and
d. Revised Penal Code

4. 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
g. Both are extinguishments by the fulfillment of the principal
obligation and by the destruction of the property pledged or
mortgaged.

5. Distinguish chattel mortgage from pledge:
a. In chattel mortgage, the delivery of the personal property to the
mortgagee is not necessary, while in pledge, such delivery is
necessary;
b. In chattel mortgage, the registration of the same in the Chattel
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. In chattel mortgage, the procedure is found in Section
14 of Act No. 1508, as amended, while in pledge, it is found in
Article 2112 of the Civil Code.
d. In chattel mortgage, the excess over the amount due after
foreclosure goes to the debtor (Art No. 1508, Section 14), while in
pledge, if the property is sold, the debtor is not entitled to the
excess unless it is otherwise agreed (Art 2115) or except in the
case of a legal pledge (Art 2121) and;
e. In chattel mortgage, the creditor is entitled to recover any
deficiency except 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 (Art 2115).

6. Object of Chattel Mortgage Contract:
Only movable or personal properties such as:
a. Shares of stock (the mortgage to be registered both in Chattel
Mortgage Registries of the province where the mortgagor resides,
and the province where the corporation has its principal business);
b. Interest in business;
c. Growing crops;
d. Large cattles;
e. Vehicles (the mortgage to be registered also with the Land
Transportation Office); and
f. Vessels (the mortgage to be registered with the Office of the
Philippine Coast Guard of the Port of Documentation of such
vessels. (Pres. Decree No. 1521, Sec. 3 9a)).
g. House built on rented land but as between the parties only under
the doctrine of estoppel; and
h. House 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: Growing crops and large cattle are considered personal property under
the Chattel Mortgage Law (Art 1508 Sec 7). They cannot however, be the
object of a contract of pledge because they are considered immovable under
the Civil Code, which principally governs pledge.

7. Extent or scope of Chattel Mortgage:
It covers only property described in the contract, and excludes like
or substituted property thereafter acquired by the mortgagor,
notwithstanding any thing in the contract to the contrary (Art No. 1508 Sec
7). Exception: In this case of stock or merchandise contained in
drugstores, grocery stores, etc. which are constantly sold and substituted
with new stock.

8. What is an Affidavit of Good Faith?
The Affidavit of Good Faith is an oath in a contra t 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 just and valid obligation and
one not entered into for the purpose of fraud. (Section 5)

Note: The absence of the affidavit vitiates a mortgage only as against
third persons without notice, like creditors and subsequent encumbrances.

9. Who may exercise right of redemption when condition of the chattel
mortgage is broken:
a. The mortgagor;
b. A person holding a subsequent mortgage;
c. A subsequent attaching creditor

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).

10. 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.

11. 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.


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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 "
"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.) "
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""In the presence of "
" "
""_________________ "
""_________________ "
"(Two witnesses sign here.) "
"FORM OF OATH. "
""We severally swear that the foregoing mortgage is made for the purpose of "
"securing the obligationspecified 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." "
" "
"FORM OF CERTIFICATE OF OATH. "
""At ___________, in the Province of _________, personally appeared "
"____________, the parties who signed the foregoing affidavit and made oath to"
"the truth thereof before me. "
" "
""_____________________________" "
"(Notary public, justice of the peace, 1 or other officer, as the case may "
"be.) "
" "
"Sec. 6. Corporations. — When a corporation is a party to such mortgage the "
"affidavit required may be made and subscribed by a director, trustee, "
"cashier, treasurer, or manager thereof, or by a person authorized on the part"
"of such corporation to make or to receive such mortgage. When a partnership "
"is a party to the mortgage the affidavit may be made and subscribed by one "
"member thereof. "
" "
"Sec. 7. Descriptions of property. — The description of the mortgaged property"
"shall be such as to enable the parties to the mortgage, or any other person, "
"after reasonable inquiry and investigation, to identify the same. "
" "
"If the property mortgaged be large cattle," as defined by section one of Act "
"Numbered Eleven and forty-seven, 2 and the amendments thereof, the "
"description of said property in the mortgage shall contain the brands, class,"
"sex, age, knots of radiated hair commonly known as remolinos, or cowlicks, "
"and other marks of ownership as described and set forth in the certificate of"
"ownership of said animal or animals, together with the number and place of "
"issue of such certificates of ownership. "
" "
"If growing crops be mortgaged the mortgage may contain an agreement "
"stipulating that the mortgagor binds himself properly to tend, care for and "
"protect the crop while growing, and faithfully and without delay to harvest "
"the same, and that in default of the performance of such duties the mortgage "
"may enter upon the premises, take all the necessary measures for the "
"protection of said crop, and retain possession thereof and sell the same, and"
"from the proceeds of such sale pay all expenses incurred in caring for, "
"harvesting, and selling the crop and the amount of the indebtedness or "
"obligation secured by the mortgage, and the surplus thereof, if any shall be "
"paid to the mortgagor or those entitled to the same. "
" "
"A chattel mortgage shall be deemed to cover only the property described "
"therein and not like or substituted property thereafter acquired by the "
"mortgagor and placed in the same depository as the property originally "
"mortgaged, anything in the mortgage to the contrary notwithstanding. "
" "
"Sec. 8. Failure of mortgagee to discharge the mortgage. — If the mortgagee, "
"assign, administrator, executor, or either of them, after performance of the "
"condition before or after the breach thereof, or after tender of the "
"performance of the condition, at or after the time fixed for the performance,"
"does not within ten days after being requested thereto by any person entitled"
"to redeem, discharge the mortgage in the manner provided by law, the person "
"entitled to redeem may recover of the person whose duty it is to discharge "
"the same twenty pesos for his neglect and all damages occasioned thereby in "
"an action in any court having jurisdiction of the subject-matter thereof. "
" "
"Sec. 9-12. (inclusive) 3 "
" "
"Sec. 13. When the condition of a chattel mortgage is broken, a mortgagor or "
"person holding a subsequent mortgage, or a subsequent attaching creditor may "
"redeem the same by paying or delivering to the mortgagee the amount due on "
"such mortgage and the reasonable costs and expenses incurred by such breach "
"of condition before the sale thereof. 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 by the "
"terms of this Act. "
" "
"Sec. 14. Sale of property at public auction; Officer's return; Fees; "
"Disposition of proceeds. — The mortgagee, his executor, administrator, or "
"assign, may, after thirty days from the time of condition broken, cause the "
"mortgaged property, or any part thereof, to be sold at public auction by a "
"public officer at a public place in the municipality where the mortgagor "
"resides, or where the property is situated, provided at least ten days' "
"notice of the time, place, and purpose of such sale has been posted at two or"
"more public places in such municipality, and the mortgagee, his executor, "
"administrator, or assign, shall notify the mortgagor or person holding under "
"him and the persons holding subsequent mortgages of the time and place of "
"sale, either by notice in writing directed to him or left at his abode, if "
"within the municipality, or sent by mail if he does not reside in such "
"municipality, at least ten days previous to the sale. "
" "
"The officer making the sale shall, within thirty days thereafter, make in "
"writing a return of his doings and file the same in the office of the "
"register of deeds where the mortgage is recorded, and the register of deeds "
"shall record the same. The fees of the officer for selling the property shall"
"be the same as in the case of sale on execution as provided in Act Numbered "
"One hundred and ninety, 4 and the amendments thereto, and the fees of the "
"register of deeds for registering the officer's return shall be taxed as a "
"part of the costs of sale, which the officer shall pay to the register of "
"deeds. The return shall particularly describe the articles sold, and state "
"the amount received for each article, and shall operate as a discharge of the"
"lien thereon created by the mortgage. The proceeds of such sale shall be "
"applied to the payment, first, of the costs and expenses of keeping and sale,"
"and then to the payment of the demand or obligation secured by such mortgage,"
"and the residue shall be paid to persons holding subsequent mortgages in "
"their order, and the balance, after paying the mortgages, shall be paid to "
"the mortgagor or person holding under him on demand. "
" "
"If the sale includes any "large cattle," a certificate of transfer as "
"required by section sixteen of Act Numbered Eleven hundred and forty-seven 5 "
"shall be issued by the treasurer of the municipality where the sale was held "
"to the purchaser thereof. "
" "
"Sec. 15. 6, 6a "
" "
"Sec. 16. This Act shall take effect on August first, nineteen hundred and "
"six. "
" "
"Enacted, July 2, 1906. "