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Real Estate vs.

Chattel Mortgage
Salient points of distinction
REAL ESTATE MORTGAGE CHATTEL MORTGAGE
As the subject matter
Movable/Personal Property

Immovable/Real Property - parties may


agree to treat real property as personal
Immovable/Real Property property however such agreement is
valid only as between the contracting
parties.Tumalad vs. Vicencio (1971) and
Evangelista vs. Alto Surety (1958)

Where registered
Register of Deeds
As to Registration Requirement

Both instruments must be recorded but even if not recorded, the mortgage would still be valid as between the parties

As to the Remedy of the Mortgagee


Judicial/Extrajudicial Foreclosure Public Sale/Private Sale
Judicial Foreclosure under the Extrajudicial Foreclosure under Public Sale under Sec. 14 Chattel
Rules 68 (ROC) Act 3135 Mortgage Law
1. File a complaint for foreclosure. It
must set forth the ff:
a. date and due execution of
mortgage
b. its assignment, if any 1. Notices of sale must be posted
c. names and residences of the for at least 20 days in at least 3
mortgagor and mortgagee public places of the municipality or 1. After 30 days from the time of default,
d. description of mortgaged property city where the property is situated. the mortgagee may cause the mortgaged
e. statement of the date of the note or If property is worth more than property to be foreclosed at public
other documentary evidence of the P400, such notice shall be auction by a public officer at a public
obligation secured by mortgage published once a week for 3 place where the mortgagor resides or
f. amount claimed to be unpaid consecutive weeks in a newspaper where the property is situated.
g. names and residences of all of general circulation in the
persons having or claiming interest in municipality or city.
the property who are subordinated to
the rights of the holder of the
mortgage (all of whom shall be made
as defendants)
2. For real estate mortgages
2. Court shall render judgment on
covering loans not exceeding
foreclosure. Upon ascertainment of
P100k exclusive of interests due
the amount due to the plaintiff plus
and unpaid granted by rural banks 2. A 10-day notice of the time, place and
interests, other charges and costs,
or thrift banks, publication in a purpose of such sale must have been
the court shall order the obligor to pay
newspaper shall be dispensed posted at 2 or more public places in such
the amount due to the court or to the
with. A notice of foreclosure posted municipality.
obligee within a period of not less
in the most conspicuous areas for
than 90 days but not more than 120
60 days prior to the public auction
days from entry of judgment.
is sufficient

3. At least 10 days before the sale, the


3. The sale shall be made between
3. In case of default of payment, the mortgagee shall notify the mortgagor or
9am to 4pm under the direction of
property shall be sold to the highest persons holding under him and the
the sheriff of the province. The
bidder at the public auction to satisfy persons holding subsequent mortgages
property mortgaged shall be
judgment. of the time and place of sale either in
awarded to the highest bidder.
writing or by mail.

Bathan, MR
De La Salle Lipa – College of Law
Real Estate vs. Chattel Mortgage
Salient points of distinction

4. The proceeds of such sale shall be


4. The proceeds of the sale shall be applied to the ff:
applied to the payment of the ff: 4. Sale must be legally made within a. costs and expenses of keeping the
a. costs of the sale the province where the property is sale
b. amount due to mortgagee situated. In case there is a b. obligation secured by such mortgage
c. claims of junior encumbrancers or stipulation as to the place in the c. residue shall be paid to the persons
persons holding subsequent province where sale is to be made, holding subsequent mortgages in their
mortgages in the order of their priority then such sale shall be made in the order
d. the balance, if any shall be paid to municipal building of the d. the balance, after paying the
the mortgagor or his duly authorized municipality so stipulated. mortgages, shall be paid to the
agent, or to the person entitled to it mortgagor or to persons holding under
him on demand.

5. A Certificate of Sale shall be


issued to the purchaser and it shall be
registered in the Registry of Deeds. If
no right of redemption exists, the
certificate of title in the name of the
mortgagor shall be cancelled, and 5. After the sale, the Clerk of Court
a new one issued in the name of shall collect appropriate fees under
the purchaser. Where a right of Rule 141
redemption exists, the certificate
of title in the name of the 6.Clerk of Court issues the
mortgagor shall not be cancelled, Certificate of Sale
but the certificate of sale and the
order confirming the sale shall be
registered and a brief memorandum
thereof made by the registrar of
deeds upon the certificate of title.
As to Right of Redemption
Judicial Foreclosure of Mortgage Extrajudicial Foreclosure of
Mortgage
No right of redemption is available
except when foreclosure is made by Right of Redemption may be There is NO right of redemption in
banks or banking institutions. In the exercised within 1 year from the Chattel Mortgage. Here, the purchaser at
latter instance, the redemption period registration of the Sheriff's an auction sale becomes the owner of
shall be one (1) year from the date of Certificate with the RD. the property.
registration of the certificate of sale.

There then exists only what is known


as the equity of redemption. This is
Juridical persons may exercise the
simply the right of the defendant
right of redemption until, but not
mortgagor to extinguish the mortgage Only a 30-day equity of redemption
after, the registration of the
and retain ownership of the property period may be exercised by the
certificate of foreclosure with the
by paying the secured debt within the mortgagor wherein he may pay the
RD, which in no case shall be more
90-day period after the judgment obligation prior to the foreclosure sale.
than 3 months after the
becomes final, in accordance with
foreclosure, whichever is earlier.
Rule 68, or even after judgment
becomes final.

Bathan, MR
De La Salle Lipa – College of Law