Chattel Mortgage Law

10. Formal Requisites of CM:
1. The law primarily governs chattel mortgage.
Provisions on pledge of NCC in so far as not a. substantial compliance with form in Sec.
in conflict with CML also govern chattel 5 of CML
mortgages.
b. signed by at least 2 witnesses
2. Chattel Mortgage may be rescinded for
being in fraud of creditors. c. must contain an affidavit of good faith

3. Growing fruits are covered by chattel d. certificate of oath (notarial
mortgage but they may not be pledged. acknowledgment)

4. Machinery placed on plant or building owned 11. Affidavit of Good Faith
by another can be the object of chattel
mortgage. - where the parties severally swear that the
mortgage is made for the purpose of securing
5. General Rule: Chattel Mortgage cannot the obligation specified and for no other purpose
cover debts subsequently contracted. and that the same is a just and valid obligation
and not one entered into for fraud
6. Rules:
- property given in CM must be described to
Chattel Mortgage cannot cover debts enable the parties or any other person after
subsequently contracted reasonable inquiry and investigation to identify it

a. registered in place where mortgagor 12. Future property may not be covered by
resides and where property (chattel) is CM but when such property is a:
located. If mortgagor resides abroad,
register in place where property is a. renewal of, or in substitution for goods on
located. hand when the mortgage was executed,
or
b. Motor Vehicles: register also in Land
Transportation Office b. purchased with proceeds (not of your
own money) of said goods, said property
c. Shares of Stock: place of domicile of may be covered by CM
corporation and shareholder. No need
for notation in books of corporation 13. Criminal Acts - removal of chattel to
another city or province without written
d. Vessels: Phil. Coastguard consent of mortgagee, selling property
already pledged, or mortgaged without
7. To be valid against 3rd persons: written consent of mortgagee

a. affidavit of good faith 14. A chattel mortgage may be foreclosed
judicially or extra-judicially, in the latter case,
b. contract must be registered before a notary or sheriff, or creditor or
mortgagee when stipulated, even without
8. General Rule: In Chattel Mortgage, there is need of notice (when mortgagee forecloses)
recovery of deficiency judgment.
15. Pactum Commissorium applies to Chattel
Exception: when Recto Law applies Mortgage.

9. Requisites of CML:

a. constituted to secure the fulfillment of
principal obligation

b. mortgagor is absolute owner of the thing
mortgaged

c. persons constituting the mortgage have
the free disposal of the property and in
the absence thereof, they be legally
authorized for the purpose

d. recorded to bind 3rd persons