Law on Mortgaging and Registering Chattel

Coverage and core concept

Section 2 provides that all personal property is subject to mortgage under the rules of Act No. 1508.
Section 2 defines a mortgage executed under the Act as a chattel mortgage.
Section 3 defines a chattel mortgage as a conditional sale of personal property used as security for:
- the payment of a debt, or
- the performance of some other obligation specified in the mortgage.
Section 3 provides that the sale is void upon the seller paying the purchaser a sum of money or doing some other act named in the mortgage.
Section 3 states that when the condition is performed according to its terms:
- the mortgage and sale become immediately void, and
- the mortgagee is divested of title.

Validity against third persons

Section 4 provides that a chattel mortgage shall not be valid against any person except the mortgagor, his executors, or administrators unless either:
- the possession of the property is delivered to and retained by the mortgagee, or
- the mortgage is recorded in the office of the register of deeds of the province where the mortgagor resides at the time of making the mortgage.
Section 4 provides a rule when the mortgagor resides without the Philippine Islands: the mortgage must be recorded in the province where the property is situated.
Section 4 requires dual recording when:
- the property is situated in a different province from the mortgagor’s residence,
- the mortgage must be recorded in the register of deeds of both provinces.
Section 4 deems the city of Manila to be a province for purposes of recording.

Required form, affidavits, and capacity

Section 5 provides that a chattel mortgage is deemed sufficient when it is made substantially in a specified statutory form and:
- is signed by the person(s) executing it, and
- is executed in the presence of two witnesses, who sign as witnesses.
Section 5 requires that each mortgagor and mortgagee (or, if the mortgagee is absent, the mortgagee’s agent or attorney) must make and subscribe an affidavit in substance as the statutory form states.
Section 5 provides that the affidavit must be:
- appended to the mortgage, and
- signed by the parties, with a certificate of oath appended and signed by the authority administering the oath.
Section 6 allows corporate affidavits to be made by a director, trustee, cashier, treasurer, or manager, or by a person authorized to make or receive the mortgage.
Section 6 allows partnership affidavits to be made by one member of the partnership.

Description of mortgaged property and special rules

Section 7 requires that the description of mortgaged property be sufficient for identity after reasonable inquiry and investigation.
Section 7 requires enhanced identification when the property is “large cattle” as defined by section one of Act Numbered Eleven hundred and forty-seven and its amendments:
- the description must include brands, class, swx, age, knots of radiated hair known as reniclinos or cowlicks, and other ownership marks as in the ownership certificate; and
- it must also include the number and place of issue of such ownership certificates.
Section 7 permits mortgages of growing crops to include an agreement requiring the mortgagor to:
- properly tend, care for, and protect the crop while growing, and
- harvest without delay;
  and in case of default, it permits the mortgagee to:
- enter the premises,
- take measures for protection,
- retain possession,
- sell the crop,
- pay expenses of caring for, harvesting, and selling the crop,
- pay the indebtedness or obligation secured, and
- pay any surplus to the mortgagor or those entitled.
Section 7 provides a coverage rule: a chattel mortgage covers only the property described and does not cover like or substituted property thereafter acquired by the mortgagor and placed in the same depository as the originally mortgaged property, even if the mortgage says otherwise.

Registration records, officer duties, and fees

Section 15 requires each register of deeds to keep a book of records of chattel mortgages.
Section 15 requires the register of deeds to certify on each mortgage left for record the record date, hour, and minute when received.
Section 15 requires recording of:
- each chattel mortgage,
- any transfer or discharge,
- and the officer’s return of sale,
  using cross-references between the mortgage record and the officer’s return record.
Section 15 requires the register of deeds to maintain an alphabetical index of mortgagors and mortgagees, and to make the record and index open to public inspection.
Section 15 provides that duly certified copies are receivable as evidence in court as provided in Act Numbered One hundred and ninety.
Section 15 sets the register of deeds fees:
- three pesos for filing and recording each chattel mortgage, including necessary certificates and affidavits;
- forty centavos for recording each release of a chattel mortgage, including necessary index and references;
- twenty centavos for each folio of one hundred words for recording each sheriff’s return of sale, including necessary index and references.
Section 15 provides that these fees accrue to the treasuries of the respective provinces or of the city of Manila.
Section 15 authorizes the register of deeds to give a certified copy when requested upon payment of lawful fees for such copy.

Transfer restrictions, subsequent mortgages, and penalties

Section 9 prohibits removal: no personal property under a chattel mortgage may be removed from the province where it is located at execution without the written consent of:
- the mortgagor and mortgagee, or
- their executors, administrators, or assigns.
Section 10 prohibits sale or pledge by the mortgagor: a mortgagor may not sell or pledge mortgaged personal property (or any part of it) without the mortgagee’s written consent on:
- the back of the mortgage, and
- the margin of the record in the office where the mortgage is recorded.
Section 11 prohibits second/subsequent mortgages: a mortgagor may not execute a second or subsequent mortgage while the property is subject to a prior mortgage unless the subsequent mortgage sets forth the existence of the previous mortgage.
Section 12 imposes penalties for violations of Sections 9, 10, and 11:
- the mortgagor is fined a sum double the value of the property wrongfully removed, sold, pledged, or mortgaged;
- one half of the fine goes to the use of the party injured and the other half goes to the Treasury of the Philippine Islands; or
- the mortgagor may be imprisoned for a period not exceeding six months; or
- the mortgagor may be punished by both such fine and imprisonment at the court’s discretion.

Redemption rights and foreclosure procedure

Section 13 grants redemption upon broken condition: when the condition of a chattel mortgage is broken, a mortgagor or a person holding a subsequent mortgage may redeem by paying or delivering:
- the amount due on the mortgage, and
- the reasonable costs and expenses incurred by the breach,
  before the sale thereof.
Section 13 grants redemption to an attaching creditor: an attaching creditor who redeems is entitled to foreclose.
Section 13 provides subrogation: an attaching creditor who redeems is subrogated to the rights of the mortgagee and may foreclose as the mortgagee could foreclose under the Act.
Section 14 allows foreclosure after breach: the mortgagee (or his executor, administrator, or assign) may, after thirty days from the time of condition broken, cause the mortgaged property (or any part) to be sold at public auction.
Section 14 requires the sale to be held:
- at a public place in the municipality where the mortgagor resides, or where the property is situated.
Section 14 requires notice and posting:
- at least ten days’ notice of the time, place, and purpose must be posted at two or more public places in the municipality.
Section 14 requires notice to interested parties:
- the mortgagee must notify the mortgagor and persons holding under him and subsequent mortgages of the time and place of sale:
  - by written notice directed to the person or left at the person’s abode (if within the municipality), or
  - sent by mail (if the person does not reside in the municipality),
- at least ten days previous to the sale.
Section 14 imposes post-sale filing duties:
- the public officer must, within thirty days thereafter, make a written return of actions and file it in the register of deeds office where the mortgage is recorded;
- the register of deeds must record the return.
Section 14 requires the return to:
- particularly describe the articles sold, and
- state the amount received for each article,
  and the return operates as a discharge of the lien created by the mortgage.
Section 14 sets the proceeds distribution order:
- first, to payment of costs and expenses of keeping and sale;
- then, to the payment of the demand or obligation secured by the mortgage;
- then, to persons holding subsequent mortgages in their order;
- then, the balance after paying the mortgages is paid to the mortgagor or person holding under him on demand.
Section 14 requires special cattle transfer documentation:
- if the sale includes any “large cattle,” a certificate of transfer required by section sixteen of Act Numbered Eleven hundred and forty-seven must be issued by the treasurer of the municipality where the sale was held to the purchaser.

Officer expenses, sheriff returns, and costs

Section 14 provides that the officer’s fees for selling the property are the same as for sale on execution under Act Numbered One hundred and ninety and its amendments.
Section 14 provides that the register of deeds fees for registering the officer’s return are taxed as part of the costs of sale, which the officer shall pay to the register of deeds.

Redemption enforcement for mortgage discharge delay

Section 8 creates a duty and remedy: if the mortgagee (or his assignee, administrator, executor, or either of them) fails to discharge the mortgage in the manner provided by law within ten days after being requested by any person entitled to redeem, the entitled person may recover.
Section 8 provides the recoverable amount for neglect:
- twenty pesos for the neglect, plus
- all damages occasioned thereby.
Section 8 provides that the action may be brought in any court having jurisdiction over the subject matter.

Mortgagor’s title protection through coverage limits

Section 7 limits coverage to described items, preventing automatic extension of the mortgage to after-acquired like property placed in the same depository.

Related rules expressly referenced

Section 4 incorporates recording rules tied to the register of deeds in the province of the mortgagor’s residence or the province where the property is situated, with Manila treated as a province.
Section 7 ties “large cattle” identification rules to Act Numbered Eleven hundred and forty-seven and its amendments.
Section 7 and Section 14 incorporate operational rules for growing crops and cattle through references to specialized requirements for those categories, including cattle transfer documentation under section sixteen of Act Numbered Eleven hundred and forty-seven.
Section 14 incorporates officer-fee rules by reference to Act Numbered One hundred and ninety and its amendments.
Section 15 incorporates evidentiary treatment by reference to Act Numbered One hundred and ninety.

Statutory effectivity rule

Section 16 sets a fixed effectivity date of August 1, 1906 for Act No. 1508.