Chattel Mortgage

Article 2140
• By a chattel mortgage, personal property is recorded ih the Chattel
Mortgage Register as a security for the performance of an obligation.
If the movable, instead of being recorded, is delivered to the creditor
or a third person, the contract is a pledge and not a chattel mortgage.
Article 2141
• The provisions of this Code on pledge, insofar as they are not in
conflict with the Chattel Mortgage Law shall be applicable to the
chattel mortgages.
What is a contract of Chattel Mortgage?
• A contract where a personal property is recorded in the Chattel
Mortgage Register as a security for the performance of an obligation.
Examples
• Shares of stock in a corporation
• Interest in the business
• Machinery vessel
• Motor vehicles
• Validity between the parties- personal property must be recorded in
the Chattel Mortgage Register.
• Validity as to third person- personal property must be recorded in the
Chattel mortgage register abd must be accompanied by an affidavit of
good faith.
Venue of Registration

• If he resides in the Philippines- in the office of the register of deeds of

the province in which the mortgagor resides at the time of the
making of the chattel mortgage.
• If he does not reside in the Philippines- in the province where the
property is located.
• If the property is situated in the province different from that in which
the mortgagor resides- in both provinces.
• Chattel mortgage mist be register in two chattel mortgage register
when the mortgagor resides in one province, but the property is
located in another province. The registration must be in both,
otherwise the chattel mortgage is void.
 Chattel Mortgage vs. Real mortgage
• Chattel mortgage- constituted on movables.

- cannot guarantee future obligations.

• Real mortgage- constituted on immovable.

-it may guarantee future obligations.

 Chattel Mortgage vs.Pledge
• Chattel mortgage-delivery is not an essential element.
-case of foreclosure, the excess of the amount due
goes to the debtor.
- in the case of foreclosure, the creditor is entitled
to recover the deficiency from the debtor, except if the chattel
mortgage is a security for the purchase of personal property in
installment.
• Pledge- delivery is essential element
- in the case of foreclosure, the debtor is not entitled to the
excess unless it is otherwise agreed upon.
- in the case of foreclosure, the creditor is not entitled to
recover deficiency notwithstanding any stipulation to the contrary.
Affidavit of Good Faith
• It is an oath in the contract 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 purposes and that the same is a just and valid obligation and
one not entered into for the purpose of fraud.
• Effect of absense of an affidavit of good faith –still valid as between
the parties.
• Foreclosure of chattel mortgage- if the mortgagor defaults in the
payment of the secured debt or otherwise fails to comply with the
conditions of the mortgage, the creditor has no right ro appropriate
to himself the personal property because he is permitted only to
recover his credit from the proceeds of the sale of the property at the
public auction.