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CHATTEL MORTGAGE

What is a chattel mortgage?
In a chattel mortgage, personal property is recorded in the Chattel Mortgage Registry as security for the performance of an obligation.
(Art. 2140, Civil Code. Note that the definition in Sec. 3, Act 1508 describing chattel mortgage as a "conditional sale" is not accurate.)

What law governs chattel mortgages?
Primarily Act No. 1508, and the provisions of the Civil Code on pledge insofar as they do not conflict with Act No. 1508.

What is the purpose of the chattel mortgage law?
The purpose of the chattel mortgage law is to promote business and trade and to give impetus to the economic development of the
country. (Torres v. Limjap, 56 Phil. 141; 1931)

What are the essential requisites of a chattel mortgage?
1. Involves personal property (Note however the case of Tumalad v. Vicencio, 41 SCRA 143; 1971);
2. Constituted to secure the fulfillment of the principal obligation;
3. Mortgagor is absolute owner of the thing mortgaged;
4. Persons constituting the mortgage have the free disposal of the property, or in the absence thereof, are legally authorized for the
purpose.

Note that recording of the chattel mortgage with the Register of Deeds, while necessary to bind 3rd persons, is not an essential
requisite.

What formal requirements must be observed in the preparation and execution of a chattel mortgage?
1. Substantial compliance with the form prescribed in Sec. 5 of Act No. 1508;
2. The chattel mortgage must be signed in the presence of at least 2 witnesses;
3. Affidavit of good faith;

The affidavit of good faith states that:
"We (the parties) severally swear that the foregoing mortgage is made for the purpose of securing the obligation specified in the
conditions thereof, and for no other purpose, and that the same is a just and valid obligation, and one not entered into for the purpose
of fraud." (Sec. 5)

4. Certificate of oath / Notarial acknowledgment;

5. Sufficiency of description


PROPERTY COVERED BY CHATTEL MORTGAGE

What kind of property can be the subject of a chattel mortgage?
As a general rule, only personal property can be the subject of a chattel mortgage. However, the following kinds of property, although
not personalty, have been deemed validly covered by a chattel mortgage:

Growing crops (Sec. 6, Act 1508) ;
House built on another person's land (Tumalad v. Vicencio, 41 SCRA 143; 1971)
Machinery permanently affixed to a building, under the doctrine of estoppel (Makati Leasing v. Wearever Textile, 122 SCRA 296;
1983)

Can future or after-acquired property be the subject of chattel mortgage?
Yes, provided that the after-acquired property is either (1) in renewal of, or in substitution for, goods on hand when the mortgage was
executed, or (2) purchased with the proceeds of the sale of such goods. (Torres v. Limjap, 56 Phil. 141; 1931)


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Can like or substituted property be deemed covered by a chattel mortgage?
No. Sec. 7 of Act 1508 expressly provides that a chattel mortgage covers only the property described therein and not like or substituted
property thereafter acquired by the mortgagor and placed in the same depository as the property originally mortgaged, anything in the
mortgage to the contrary notwithstanding.

Note however that this provision does not apply to drug stores, bazaars and all other stores in the nature of a revolving and floating
business, i.e. one that deals with the sale of either perishable goods, "rolling" goods, or goods subject to wear and tear. (Torres v.
Limjap, 56 Phil. 141; 1931)

Can a chattel mortgage cover after-incurred obligations or debts subsequently contracted?
No. A chattel mortgage can only cover obligations existing at the time the mortgage is constituted. (Acme Shoe, et al. V. CA, G.R.
103576, Aug. 22, 1996)

REGISTRATION

In what place should a chattel mortgage be registered?
If residing in Philippines: place of residence of mortgagor
If residing abroad: province where the property is located
If residence and location of property are different: In both place of residence of mortgagor and location of property

Exception: If the amount of the mortgage is > P 500,000.00, the parties to the mortgage contract may agree to have the mortgagee
registered only in the place where the property is located, and that shall be sufficient. (Sec. 198, Revised Administrative Code)

In addition to the foregoing, in what other registry or register should a chattel mortgage be registered or recorded?

Motor vehicles: Land Transportation Office where vehicle is Registered

Shares of stock: Register of Deeds where the corporation has its principal office. Note: There is no need for notation in the books of the
corporation. (Chua Guan v. Samahang Magsasaka, 62 Phil. 472; 1935)
Vessels: Philippine Coastguard
Bureau of Customs in Manila (if in Manila) or in the Office of the Collector of Customs in the port of entry (if outside Manila)
Motor vehicle which is Land Transportation Franchising and Regulatory public utility and loan Board (LTFRB) is not repayable within 1
year:

When should a chattel mortgage be registered?
Act No. 1508 does not prescribe any period within which a chattel mortgage must be registered.


JUNIOR MORTGAGEES
Can personal property already mortgaged be mortgaged again? In such a case, what is the right of the subsequent or junior
mortgagees?

Yes. In such a case, junior mortgagees have the right of redemption within the period of redemption allowed by law, for as long as the
mortgagor has not yet exercised his right of redemption.

DEFAULT AND FORECLOSURE
Does the default of the mortgagor have the effect of vesting ownership of the mortgaged property on the mortgagee? In other words,
could he appropriate the property to himself?

No. He is only permitted to recover his credit from the proceeds of the sale of the property at public auction through a public officer in
the manner prescribed in Sec. 14 of Act No. 1508. Pactum commissorium is prohibited.


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What is the procedure for foreclosure of chattel mortgages?
1. 30 days after the condition of the chattel mortgage is broken, the mortgagee (or his executor, administrator or assign) may cause the
mortgaged property (or any part thereof) to be sold at public auction.

2. At least 10 days before the sale, the mortgagor and all junior mortgagors must be informed in writing of the time, place and purpose
of the sale. The notice of sale must likewise be posted in at least 2 public places in the municipality where the mortgagor resides or
where the property is situated.

Who may bid in the foreclosure sale?
At the public auction, the mortgagor or owner may bid. He shall, moreover, have a better right if he should offer the same terms as the
highest bidder. (This implies the right to match.) The mortgagee may also bid, but his offer shall not be valid if he is the only bidder.
(Art. 2113, Civil Code)

DEFICIENCY

Can a chattel mortgagee sue for a deficiency following foreclosure?
As a general rule, yes, a chattel mortgagee can sue for a deficiency judgment following foreclosure.

However, if the property was sold in installments, the mortgagee can no longer take any action against the purchaser to recover any
unpaid balance of the price. Any agreement to the contrary is void. (Art. 1484, Civil Code)

What is the Recto law?
The Recto law, which is now reflected in Articles 1484-1485 of the Civil Code, which provides that in a contract of sale of personal
property, the price of which is payable in installments, the vendor may exercise any of the following remedies:

a. Exact fulfillment of the obligation, should the vendee fail to pay (specific performance);

b. Cancel the sale, should the vendee's failure to pay cover two or more installments (Note that this is not the same as rescission
because here, the vendor gets back the object of the sale and retains the installments paid. However, this is not available in the
absence of stipulation in the contract.);

c. Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's failure to pay cover 2 or more
installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any
agreement to the contract is void.

(The principal object of this amendment was to remedy the abuses committed in connection with the foreclosure of chattel mortgages.
This amendment prevents mortgagees from seizing the mortgaged property, buying it at foreclosure sale for a low price, and then
bringing the suit against the mortgagor for a deficiency judgment. The almost invariable result of this procedure was that the mortgagor
found himself minus the property and still owing practically the full amount of his original indebtedness.)

These remedies are alternative; not cumulative. (Pacific Commercial Co. v. Dela Rama, 72 Phil. 380)

SPECIFIC PERFORMANCE

In sales on installments, where the action instituted is for specific performance and the mortgaged property is subsequently attached
and sold, the sale thereof does not amount to a foreclosure of the mortgage. Hence, seller is entitled to a deficiency judgment.
(Southern Motors v. Moscoso, 2 SCRA 168; 1961)






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REDEMPTION

What are the rules on redemption of property subject to chattel mortgage?
Since the Chattel Mortgage Law does not contain provisions similar to Sec. 6 & 7 of Act No. 3135 governing extra-judicial foreclosure
of real estate mortgage, the provisions of Rule 39 of the Rules of Court on redemption in case of execution sales will apply. (IFC
Service Leasing v. Nera, 19 SCRA 181)


(Please include short digests/ ratios of the following cases:


Levy Hermanos, Inc. v. Pacific Commercial, 71 Phil. 587
Cruz v. Filipinas Investment, 23 SCRA 791
Ridad v. Filipinas Investment, 205 Phil. 197
Filipinas Investment v. Vitug, 28 SCRA 658)



EXTRAJUDICIAL FORECLOSURE OF REAL ESTATE MORTGAGE

GOVERNING LAW
Act 3135, as amended by Act No. 4118 and Sec. 47, R.A. 8791 (General Banking Law of 2000) governs sales made under a special
power inserted in or attached to any real estate mortgage made as security for the payment of money or the fulfillment of any other
obligation.

(Also, there is a SC circular that outlines the procedure for foreclosure of Real Estate Mortgages. Unfortunately, hindi ko alam yung
number. Please find it nalang.)

FORECLOSURE SALE
TYPE OF SALE: Public auction
VENUE OF SALE: Province where the property is situated

If venue is subject to stipulation, such sale shall be made in said place (i.e., the place so stipulated) or in the municipal building of the
municipality in which the property or part thereof is situated.

NOTICE: Notices of the sale are to be posted in at least 3 public places of the municipality or city where the property is situated for not
less than 20 days. Such notice shall likewise be published once a week for at least 3 consecutive weeks in a newspaper of general
circulation in the municipality or city.

TIME OF SALE: Between 9 AM and 4 PM

WHO MAY BID: The creditor;
The trustee;
Other persons authorized to act for the creditor;
Other bidders not privy to the mortgage or trust deed

PROCEDURE:
1. The mortgagee files an application for foreclosure with the Executive Judge through the Clerk of Court, who will receive and docket
the application and collect the appropriate filing fees. (SC Circular)
2. Notice of the sale is posted in at least 3 public places of the municipality or city where the property is situated for not less than 20
days and published once a week for at least 3 consecutive weeks in a newspaper of general circulation in the municipality or city. (Sec.
3, Act 3135)


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3. The auction sale is conducted under the direction of the sheriff, the Executive Judge, or a notary public of the municipality. (Sec. 4,
Act 3135)

At the sale, the creditor, trustee, or other persons authorized to act for the creditor may participate in the bidding and purchase under
the same conditions as any other bidder unless the contrary has been expressly provided in the mortgage or trust deed under which
the sale is made. (Sec. 5, Act 3135)

There must be at least 2 participating bidders for the auction sale to be valid. (SC Circular)

4. Once the sale has been confirmed, the Clerk of Court issues a certificate of sale to the winning bidder. (Confirm this!)

5. After the date of the confirmation of the auction sale, the winning bidder has the right to enter upon and take possession of such
property and administer the same in accordance with law. (Sec. 47, R.A. 8791)

Within 30 days after the purchaser is given possession of the property, the debtor may petition that the sale be set aside on the ground
that the mortgage was not violated or the sale was not made in accordance with the provisions of Act 3135. (Sec. 8, Act 3135)

6. Upon failure of the debtor to redeem the property within the period allowed him by the law, absolute ownership over the purchased
property vests in the winning bidder.

POSSESSION
The purchaser at the auction sale has the right to enter upon and take possession of the property immediately after the date of the
confirmation of the auction sale and administer the same in accordance with law. (Sec. 47, R.A. 8791, amending Sec. 7 of Act 3135)

REDEMPTION

WHO MAY REDEEM:
(1) The debtor;
(2) The debtor's successors-in-interest;
(3) Any judicial creditor or judgment creditor of the debtor;
(4) Any person having a lien on the property subsequent to the mortgage or deed of trust under which the property is sold

PERIOD FOR REDEMPTION:
Natural persons: Within 1 year from and after the date of the sale (Sec. 6, Act 3135)
Juridical persons: Until but not after the registration of the certificate of foreclosure sale with the applicable Register of Deeds, which in
no case shall be more than 3 months after foreclosure, whichever is earlier. (Sec. 47, R.A. 8791)

EFFECT OF INADEQUACY OF PRICE
When there is a right to redeem, inadequacy of price is of no moment for the reason that the judgment debtor always has the chance to
redeem and reacquire the property. In fact, the property may be sold for less than its fair market value precisely because the lesser the
price the easier for the owner to effect a redemption. (Valmonte v. CA, 303 SCRA 278, citing DBP v. Moll, 43 SCRA 82)



EFFECT OF REQUEST FOR EXTENSION OF TIME ON RIGHT TO QUESTION VALIDITY OF FORECLOSURE SALE
The act of seeking an extension of the redemption period estops the mortgagors from questioning the foreclosure sale thereafter.
(Valmonte v. CA, 303 SCRA 278)






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Reappearance of the missing spouse

But the problem is if any person (friend, relative, barangay official, etc) discovers that the missing spouse is really alive, then that
person can file an affidavit of reappearance with the Local Civil Registrar. If the petitioner had already gotten married, then that
subsequent marriage is automatically terminated. This is provided for by Article 42 of the FC.

Posted below are the specific provisions of the Family Code on this matter:

Art. 40. The absolute nullity of a previous marriage may be invoked for purposes of remarriage on the basis solely of a final judgment
declaring such previous marriage void. (n)

Art. 41. A marriage contracted by any person during subsistence of a previous marriage shall be null and void, unless before the
celebration of the subsequent marriage, the prior spouse had been absent for four consecutive years and the spouse present has a
well-founded belief that the absent spouse was already dead. In case of disappearance where there is danger of death under the
circumstances set forth in the provisions of Article 391 of the Civil Code, an absence of only two years shall be sufficient.
For the purpose of contracting the subsequent marriage under the preceding paragraph the spouse present must institute a
summary proceeding as provided in this Code for the declaration of presumptive death of the absentee, without prejudice to the effect
of reappearance of the absent spouse. (83a)

Art. 42. The subsequent marriage referred to in the preceding Article shall be automatically terminated by the recording of the
affidavit of reappearance of the absent spouse, unless there is a judgment annulling the previous marriage or declaring it void ab initio.
A sworn statement of the fact and circumstances of reappearance shall be recorded in the civil registry of the residence of the
parties to the subsequent marriage at the instance of any interested person, with due notice to the spouses of the subsequent marriage
and without prejudice to the fact of reappearance being judicially determined in case such fact is disputed. (n)

Art. 43. The termination of the subsequent marriage referred to in the preceding Article shall produce the following effects:
(1) The children of the subsequent marriage conceived prior to its termination shall be considered legitimate;
(2) The absolute community of property or the conjugal partnership, as the case may be, shall be dissolved and liquidated, but if
either spouse contracted said marriage in bad faith, his or her share of the net profits of the community property or conjugal partnership
property shall be forfeited in favor of the common children or, if there are none, the children of the guilty spouse by a previous marriage
or in default of children, the innocent spouse;
(3) Donations by reason of marriage shall remain valid, except that if the donee contracted the marriage in bad faith, such donations
made to said donee are revoked by operation of law;
(4) The innocent spouse may revoke the designation of the other spouse who acted in bad faith as beneficiary in any insurance
policy, even if such designation be stipulated as irrevocable; and
(5) The spouse who contracted the subsequent marriage in bad faith shall be disqualified to inherit from the innocent spouse by
testate and intestate succession.(n)

Art. 44. If both spouses of the subsequent marriage acted in bad faith, said marriage shall be void ab initio and all donations by
reason of marriage and testamentary dispositions made by one in favor of the other are revoked by operation of law.




EJECTMENT 1. The remedy of terceria or a separate action under Section 16, Rule 39 is no longer available to Sina Imani because he
is not deemed a stranger to the case filed against petitioner. Imani vs. Metropolitan Bank Trust Company, p. 357. 2. Under Batas
Pambansa Blg. 129, as amended by Republic Act (RA) No. 7691, the Municipal Trial Court (MTC) shall have exclusive original
jurisdiction over cases of forcible entry and unlawful detainer. Mendoza vs. Germino, p. 537. ELECTORAL CONTESTS The set up
embodied in the Constitution and statutes characterizes the resolution of electoral contests as essentially an exercise of judicial power.





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AFFIDAVIT OF DESISTANCE
REPUBLIC OF THE PHILIPPINES)
CITY OF MANILA ) S.S.

I, Juan del la Cruz, of legal age, single, and a resident of # 123 Main St., Malate, Manila, after having duly sworn to in accordance
with law hereby depose and state:
1. I am the complaining witness for Serious Physical Injuries against Jesus Santos in the case entitled "People of the Philippines
versus Jesus Santos", Criminal Case No. 12345, Metropolitan Trial Court, Branch No. 11, City of Manila.
2. After my sober and soul searching assessment and analysis of the incident, I have realized that because I was not wearing my
eyeglasses and it was dark, I can not point out, without a doubt the accused or any other person/s who inflicted harm against me.
3. Since I could not state with certainty and without doubt the liability of Jesus Santos, in fairness to him, I am permanently
withdrawing my complaint against him. I clear him of whatever responsibility or liability to me.
4. I hereby inform the City Prosecutor of Manila that I am withdrawing my complaint for Serious Physical Injuries in Criminal Case
No. 12345 entitled "People of the Philippines versus Jesus Santos", Metropolitan Trial Court, Branch No. 11, City of Manila.
5. I likewise request the Metropolitan Trial Court, Branch No. 11, City of Manila to dismiss with prejudice the said criminal case.

IN WITNESS WHEREOF, I hereby set my hand this __ day of September 20__ at the City of Manila.

Juan de la Cruz
Complaining Witness

SUBSCRIBED AND SWORN to before me this 22nd day of January 20__ at the City of Manila, Philippines.
Romeo Abad
Public Prosecutor

An affidavit of desistance is executed by a complainant when he no longer wishes to pursue a case against an accused or a defendant
in a court case

Note: Same; Same; Desistance; Courts look with disfavor on affidavits of desistance and/or retraction.Courts look with disfavor on
affidavits of desistance and/or retraction. In People v. Bation, 367 SCRA 211 (2001), We explained why: x x x [An affidavit of
desistance] can easily be secured from poor and ignorant witnesses, usually for monetary considerations and because it is quite
incredible that after going through the process of having the accused apprehended by the police, positively identifying him as the rapist,
and enduring humiliation and examination of her private parts, the victim would suddenly declare that the wrongful act of the accused
does not merit prosecution. [People vs. Orje, 657 SCRA 427(2011)]
The issue of an Affidavit of Desistance filed by the private complainant in a criminal case which touches on the lack of jurisdiction of the
trial court to have proceeded may be considered on appeal.[1]

An affidavit of desistance is merely an additional ground to buttress the accused's defenses, not the sole consideration that can result
in acquittal. There must be other circumstances which, when coupled with the retraction or desistance, create doubts as to the truth of
the testimony given by the witnesses at the trial and accepted by the judge.[2] In People vs. Echegaray,[3] despite the admission made
by the victim herself in open court that she had signed an Affidavit of Desistance, she, nevertheless, "strongly pointed out that she is
not withdrawing the charge against the accused because the latter might do the same sexual assaults to other women." All that the
accused-appellant offered as defenses mainly consisted of denial and alibi which cannot outweigh the positive identification and
convincing testimonies given by the prosecution. Hence, the affidavit of desistance, which the victim herself intended to disregard as
earlier discussed, must have no bearing on the criminal prosecution against the accused-appellant, particularly on the trial court's
jurisdiction over the case.

Affidavits of retraction executed by witnesses who had previously testified in court will not be countenanced for the purpose of securing
a new trial. It would be a dangerous rule for courts to reject testimonies solemnly taken before courts of justice simply because the
witnesses who had given them later on change their mind for one reason or another, for such a rule would make solemn trials a
mockery and place the investigation of truth at the mercy of unscrupulous witnesses. Affidavits of retraction can be easily secured from
poor and ignorant witnesses usually for a monetary consideration. Recanted testimony is exceedingly unreliable. There is always the
probability that it may later be repudiated. So courts are wary or reluctant to allow a new trial based on retracted testimony.[