What is Chattel Mortgage?

• It is a contract by virtue
of which personal
property is recorded in
the Chattel Mortgage
Register as a security
for the performance of
an obligation.
Characteristics of Chattel Mortgage:
1. It is a formal contract because
it must be embodied in a public
instrument and recorded in the
Chattel Mortgage Register;

2. It is an accessory contract
because its existence depends
upon an existing valid principal
obligation;
3. It is a unilateral contract because the
obligation is only on the part of the
creditor to free the chattel from
encumbrance upon the payment of the
principal obligation;
4. It does not convey dominion but is
only a security (In re: Du Tec Chuan,
No. 11156, March 28, 1916);
5. It creates a real right or a lien which
is being recorded and follows the
chattel wherever it goes (Northern
Motors, Inc. v. Coquia, No. L‐40018,
Dec. 15, 1975).
REQUISITES:
1. GR: It covers only movable
property.
XPN: When the parties treat as
personalty that which is according
to its nature realty.
2. Registration with the Chattel
Mortgage Register.
3. Description of the property.
4. Accompanied by an affidavit of
good faith to bind 3rd persons.
What may be the subject matter of
chattel mortgage?
1. Shares of stock in a corporation;
2. Interest in business;
3. Machinery and house of mixed materials treated by
parties as personal property and no innocent third person
will be prejudiced thereby. (Makati Leasing and Finance
Corp. v. Weaver Textile Mills, Inc., No. L‐58469, May, 16,
1983);  
4. Vessels, the mortgage of which have been recorded with
the Philippine Coast Guard in order to be
effective as to third persons;
5. Motor vehicles, the mortgage of
which had been registered both
with the Land Transportation
Commission and the Chattel
Mortgage Registry in order to
affect third persons;
6. House which is intended to be
demolished; or
7. Growing crops and large cattle
(pars. 2 and 3, Sec. 7, Act No.
1508).
WHAT IS AFFIDAVIT OF GOOD FAITH?
It is an oath in a 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.”
What is the legal significance of
registration?
It is tantamount to the
symbolic delivery of the
mortgage to the
mortgagee, which is
equivalent to actual
delivery.
How is chattel mortgage
foreclosed?
• Public sale  
• Private sale  

GR: If there is an express stipulation

in the contract.
XPN: Fraud or duress