Question & AnswerQ&A (Act No. 1508)
The short title of Act No. 1508 is 'The Chattel Mortgage Law.'
All personal property shall be subject to mortgage according to the provisions of this Act.
A chattel mortgage is a conditional sale of personal property as security for the payment of a debt or the performance of some other specified obligation, with the condition that the sale shall be void upon fulfillment of the obligation.
A chattel mortgage is valid against third parties only if possession of the property is delivered to and retained by the mortgagee or the mortgage is recorded in the register of deeds office of the province where the mortgagor resides or where the property is situated.
The chattel mortgage must be signed by the mortgagor in the presence of two witnesses who also sign it, and both mortgagor and mortgagee (or their authorized agents) must subscribe an affidavit stating the purpose and validity of the mortgage. The mortgage and affidavit must be recorded together.
The affidavit may be made and subscribed by a director, trustee, cashier, treasurer, manager, or authorized person of a corporation; and by one member if a partnership is party to the mortgage.
The description must be sufficiently specific to identify the property after reasonable inquiry. For large cattle, brands, class, sex, age, and other marks of ownership must be described. For growing crops, the mortgagor may agree to care for the crops and authorize the mortgagee to take action if duties are not performed.
The person entitled to redeem may recover twenty pesos for neglect and all damages caused by the failure of the mortgagee to discharge the mortgage within ten days after request.
No, personal property under a chattel mortgage shall not be removed from the province where it is located at the time of the mortgage execution without written consent of both mortgagor and mortgagee or their legal representatives.
No, the mortgagor cannot sell or pledge the mortgaged property without written consent of the mortgagee endorsed on the mortgage and record thereof.
Violators are subject to a fine double the value of the property wrongfully removed, sold, pledged, or mortgaged, with half of the fine going to the injured party and half to the Treasury, or imprisonment up to six months, or both as decided by the court.
By paying or delivering to the mortgagee the amount due and reasonable costs before sale, and an attaching creditor redeeming the property is subrogated to the rights of the mortgagee to foreclose.
The mortgagee may sell the property at public auction after 30 days from breach, upon giving at least 10 days' notice posted publicly and notified to interested parties. The sale must be conducted by a public officer in the municipality where the mortgagor resides or where the property is situated.
Proceeds first pay costs and expenses of sale and keeping the property, then the mortgage debt, next subsequent mortgages in order, and any remainder is paid to the mortgagor or their assigns.
The register of deeds must keep a book of chattel mortgage records, certify and record mortgages, transfers, discharges, officer's return of sale, maintain indexes, and issue certified copies upon payment of fees. Records are open to public inspection.
Three pesos for filing and recording each chattel mortgage; forty centavos for recording each release; twenty centavos per one hundred words for recording sheriff’s return of sale; fees go to the provincial or Manila city treasury.
The Act took effect on August 1, 1906.