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8/9/2019 Commercial Law Review - Zara Notes Chattel Mortgage
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Commercial Law Review
Special Laws
Maria Zarah Villanueva - Castro
CHATTEL MORTGAGE:
A. Define chattel mortgage
It is an accessory contract by virtue of whichpersonal property is recorded in the ChattelMortgage Register as a security for theperformance of an obligation
Su!ect Matter:
!It covers personal or movable propertiescontemplated under "rticle #$% and #$& ofthe 'ew Civil Code including shares ofstoc(s and interest in business
!)rowing crops may be sub*ect to chattelmortgage as e+press provision of law
General Rule: ,uildings are not sub*ect ofchattel mortgage
E"ce#tion: he chattel mortgage over abuilding is considered valid as between theparties on the basis of estoppels but notagainst third persons
$. Di%tingui%h chattel mortgage from #le&ge
'le&ge Chattel Mortgage
'ot perfected untilthere is delivery
.elivery is notnecessary
Registration is notnecessary
Registration isnecessary to bindthird persons
'o recovery fordeficiency
General Rule: hereis recovery fordeficiencyE"ce#tion: In caseof sale under Recto
LawGeneral Rule:.ebtor is not entitledto the e+cessE"ce#tion%: there isstipulation/ and incase of legal pledge
.ebtor is entitled tothe e+cess
0ledge can secureafter-incurredobligations
Cannot secure after-incurred obligations
C. (h) i% regi%tration nece%%ar)*
Registration creates a lien that follows theproperty and serves as notice to thirdpersons
!)ood faith is not a defense
+: If there is actual (nowledge but noregistration1 is the third party bound to the
mortgage2
A: ,ES. he registration re3uirement iscomplied with by reason of actual(nowledge
D. (here &o )ou regi%ter chattel mortgage*
he mortgage must be registered in theChattel Mortgage Register of the Register of.eeds of the province in which themortgagor resides at the time of ma(ing thesane or if1 he resides within the 0hilippines1
in the province in which the property issituated If the property is situated in differentprovince from that in which the mortgagorresides1 that mortgage must be recorded inthe Chattel Mortgage Register of theRegister of .eeds of both the province in
which the mortgagor resides and that inwhich the property is situated
E. -% there a foreclo%ure %ale in chattelmortgage*
,ES.
Can the mortgagee recover &eficienc)*
,ES.4+cept in case of sale sub*ect to RectoLaw
Reui%ite%:
$ Sale of personal property
5 he personal property sub*ect of sale iscovered by chattel mortgage
6 he payment is via instalment/. After0incurre& Oligation%
!Chattel mortgage can cover only obligationse+isting at the time the mortgage isconstituted!It cannot cover after-incurred obligationsbecause of the e+ecution of affidavit of goodfaith
!.rag net clause is not allowed in chattelmortgage- .rag net clause is a clause in pledge1 realmortgage1 or antichresis that allows the
properties sub*ect of pledge1 real mortgageor antichresis to secure future obligations
A1 ACT TO REG2LATE THE SALE O/'RO'ERT, 21DER S'EC-AL 'O(ERS-1SERTED -1 OR A11E3ED TO REAL ESTATEMORTGAGE 4ACT 56578:
$
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8/9/2019 Commercial Law Review - Zara Notes Chattel Mortgage
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Commercial Law Review
Special Laws
Maria Zarah Villanueva - Castro
A. Reuirement% for the e"tra!u&icialforeclo%ure to e effecte&
$ here must be a special power insertedin or attached to any real estatemortgage allowing the sale of property
5 Said sale cannot be made legally outsideof the province in which the property soldis situated/ and in case the place withinsaid province in which the sale is to bemade is sub*ect to stipulation1 such saleshall be made in said place or in themunicipal building of the municipality in
which the property or part thereof is
situated
6 'otice shall be given by posting noticesof the sale for not less than twenty daysin at least three public places of themunicipality or city where the property issituated1 and if such property is worthmore than four hundred pesos1 suchnotice shall also be published once a
wee( for at least three consecutivewee(s in a newspaper of generalcirculation in the municipality or city
# he sale shall be made at public auction1between the hours or nine in the morningand four in the afternoon/ and shall beunder the direction of the sheriff of theprovince1 the *ustice or au+iliary *ustice ofthe peace of the municipality in whichsuch sale has to be made1 or a notarypublic of said municipality1 who shall beentitled to collect a fee of five pesos eachday of actual wor( performed1 in additionto his e+penses
$. -n ca%e of foreclo%ure %ale9 what are the!uri%&ictional reuirement%*Sec 5 of "ct 6$67 provides that8 9Said sale
cannot be made legally outside of the
province in which the property sold is
situated/ and in case the place within said
province in which the sale is to be made is
sub*ect to stipulation1 such sale shall be
made in said place or in the municipal
building of the municipality in which the
property or part thereof is situated
C. -n ca%e of foreclo%ure %ale9 what i% the#erio& of re&em#tion*
/or 1atural #er%on%:$ year from the date
of the registration of the certificate of sale
with the Register of .eeds
/or uri&ical #er%on%: the right to redeem
the property is until1 but not after1 the
registration of the certificate of foreclosuresale which in no case shall be more than
three :6; months after foreclosure1 whichever
is earlier1 as provided in Section #& of
Republic "ct 'o
D. -% the #urcha%er entitle& to #o%%e%% the
#ro#ert) &uring the #erio& of
re&em#tion*
,ES. Sec #& of the ),L provides that the
purchaser at the auction sale concernedwhether in a *udicial or e+tra-*udicial
foreclosure shall have the right to enter upon
and ta(e possession of such property
immediately after the date of the confirmation
of the auction sale and administer the same
in accordance with law
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Commercial Law Review
Special Laws
Maria Zarah Villanueva - Castro
6 Sale1 transfer1 mortgage or otherdisposition of all or substantially all of the
fi+tures and e3uipment
$. (hat are the tran%action% not covere&*
$ Sale by virtue of *udicial order
5 Sale or mortgage is made in the ordinarycourse of trade and business
6 >hen accompanied with a written waiverby the seller?mortgagor@s creditors
# Sale by assignee in insolvency or thosebeyond the reach of creditors
7 Sale of properties e+empt fromattachment or e+ecution
C. (hat are the oligation% of the%ellerIt doesn@t matter if the claim has not beenreduced to *udgment
E. 'ur#o%e of the $ul= Sale% Law:
o prevent the merchants from evading intheir obligations
It see(s to prevent the defrauding ofcreditors by the secret sale or disposal inbul( of all or substantially all of a merchant@sstoc( of goods
-1SOL?E1C, LA(:A. (hat i% the o!ect of %u%#en%ion of
#a)ment*
he ob*ect of suspension of payment is tosee( postponement of the payment of debtsin order to provide the debtor a given periodto convert some of his properties to cash
$. (hat i% the financial con&ition of thea##licant when he file& the #etition for%u%#en%ion of #a)ment*
he debtor has sufficient property to cover allhis debts but there is impossibility to meetthem when they respectively fall due
C. (here &o )ou file a #etition for%u%#en%ion of #a)ment*
he petition is filed in the court of theprovince or of the city where the debtorresided for si+ months ne+t preceding thefiling of his petition
D. (hat are the effect% of the filing of a#etition for %u%#en%ion of #a)ment*$ 'o disposition in any manner of his
property may be made by the petitioner
e+cept insofar as concerns the ordinary
operations of commerce or of industry in
which he is engaged/
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5 'o payments may be made by the
petitioner e+cept in the ordinary course of
his business or industry/ and6 =pon re3uest to the court1 all pending
e+ecutions against the debtor shall be
suspended e+cept e+ecution against
property especially mortgaged
E. (hat i% &oule ma!orit) rule for #ro#o%e&%che&ule of liailit)*Sec B :e; of the Insolvency Law providesthat to form a ma*ority1 it is necessary that5?6 of the creditors voting unite upon thesame proposition and that the claims
represented by said ma*ority vote amount toat least 6?7 of the total liabilities of the debtormentioned in the petition
/. Di%tingui%h in%olvenc) from %u%#en%ion
Su%#en%ion of'a)ment
-n%olvenc)
he debtor hassufficient propertybut he foresees theimpossibility ofmeeting his debts asthey fall due
he debtor does nothave sufficientproperty to pay hisdebts
he purpose is tosuspend or delaypayment of debts
he purpose is todischarge the debtorfrom the payment ofcertain debts
he amount ofindebtedness is notaffected
Some of the creditorsmay receive lessthan their credits
he number ofcreditors isimmaterial
In case of involuntaryinsolvency1 three ormore creditors arere3uired
G. Di%tingui%h involuntar) in%olvenc) fromvoluntar) in%olvenc)
-nvoluntar)-n%olvenc)
?oluntar)-n%olvenc)
6 or more creditorsare re3uired
ne creditor issufficient