Art.

  2085.  The  following  requisites  are  specially subjecting such security, property or
essential  to  the contracts of pledge and fruits thereof:
mortgage:
Pledge
mortgage
(1) That they be constituted to secure the
chattel mortgage
fulfillment of a principal obligation;
antichrists
(2)  That  the  pledgor  or  mortgagor  be  the  REQUISITES TO A CONTRACT OF
absolute owner of the thing pledged or PLEDGE
mortgaged;
1. CONSTITUTED TO SECURE
(3)   That   the   persons   constituting   the   FULFILLMENT OF PRINCIPAL
pledge   or mortgage  have  the  free  disposal  OBLIGATION-
of  their  property,  and  in the absence thereof, Pledge and mortgage- accessory contract
that they be legally authorized for the purpose.
*it cannot exist without valid
Third persons who are not parties to the obligation. May guarantee a voidable,
principal obligation may secure the latter by unenforceable, or natural obligation
pledging or mortgaging their own property. 2. PLEDGOR OR MORTGAGOR IS
(1857) THE ABSOLUTE OWNER-
----------------------------------------------------- -constituted only by absolute owner of
Art. 2086. The provisions of Article 2052 are the thing pledge, otherwise void.
applicable to a pledge or mortgage. (n)
--------------------------------------------------- -future property- cannot be pledged or
Art. 2087. It is also of the essence of these mortgage
contracts that when the principal obligation *it is not necessary that the principal
becomes due, the things in which the pledge or debtor is always be the pledgor or
mortgage consists may be alienated for the mortgagor.
payment to the creditor. (1858)
PLEDGE 3. PLEDGOR OR MORTGAGOR HAS
>     Contract by virtue of which the debtor FREE DISPOSAL OF PROPERTY OR
delivers to the creditor or to a third person a HAS LEGAL AUTHORITY-
movable, or document evidencing incorporeal -act of pledging or mortgaging- is an
rights, for the purpose of securing the   act of strict ownership involving as it does
fulfillment   of   a   principal   obligation    an alienation or transmission of the real
with   the understanding that when the obligation rights property
is fulfilled, the thing delivered shall be returned
with all its fruits and accessions *pledgor or mortgagor must have the
capacity or at least authority or consent of
CHARACTERISTICS OF A CONTRACT the owner to pledge or mortgage the
OF PLEDGE property.
1. REAL CONTRACT- Kasi it is perfected by 4. THE THING PLEDGED OR
delivery (pledgor- debtor, pledgee- creditor) MORTGAGED MAY BE ALIENATED-
2. ACCESORY CONTRACT- no independent - is creditor ay Hindi agad agad na
existence on its own maging owner if at the time stipulated the
3. UNILATERAL CONTRACT- solely obligation ay hindi pa nafufulfill.
obligation on the part of creditor a return young *In addition: thing pledged- dapat delivered
thing subject upon fulfillment of the obligation to the creditor or third person by common
4. SUBSIDIARY CONTRACT-obligation does agreement. NO DELIVERY, NO
not arise until fulfillment of the principal PLEDGE.
obligation which is secured
WHAT IS THE CAUSE OR PLEDGE MORTGAGE
CONSIDERATION IN PLEDGE?
movables immovable
>     Pledge is an accessory contract
>     Its cause is the principal obligation property is delivered delivery is not
to the pledgee, or by necessary
KINDS OF PLEDGE common consent to
1.   Voluntary or conventional- created by third person
agreement of parties not valid against third
2.   Legal- created by the operation of law person unless not valid against
Different species of that kind of contracts description of the third persons if not
which intended to secure the fulfillment of thing pledged and the registered.
principal and pre-existing obligation by date of the pledge
 appear on public your failure to pay the loan is a pactum
instrument. commissorium, which is null and void by law.
Can sell the thing
pledge with the Simply put, your friend cannot automatically
consent of the Can sell the property appropriate to himself the mortgaged property
pledgee mortgaged even upon your failure to pay your obligation but he
without the consent has the option to foreclose the mortgage and
of the mortgagee even purchase the same in a foreclosure sale.
Nevertheless, since you are ready, willing and
able to pay your outstanding debt, we find it
unnecessary to foreclose the subject property.
CONSTITUTED TO SECURE THE
FULFILLMENT OF THE PRINCIPAL 1. Sale of subject property- if the debtor
OBLIGATION fails to pay the creditor is entitled to
CONSTITUTED BY THE ABSOLUTE move for the sale of the thing pledged
OWNER with the formalities required by law.
2. Prohibition against appropriation of
1.   Future  property  cannot  be  the  subject  of  the property- si creditory hindi niya
a  pledge  or mortgage pwedeng I appropriate yung sarili niya
2.   A  pledge  or  mortgage  executed  by  one  sa thing held as pledge or under
who  is  not  the owner  of  the  property  mortgage, nor can he dispose of the
pledged  or  mortgaged  is  without legal same as owner
existence and registration cannot validate it REASON OF PROHIBITION: mas
3.   Share  in  a  co-ownership—shall  be  maliit yung amount ng loan kesa the real
limited  to  the  portion which  may  be  value ng thing pledged or mortgaged.
alienated  by  him  in  the  division  upon  the
termination of the co-ownership PROHIBITION AGAINST PACTUM
COMMISSORIUM
The  absolute  owner-  has  legal and beneficial
ownership.  In the earlier example, P is the legal 1. Stipulation authorizing automatic
owner and S is the beneficial owner.  This being appropriation by creditor- yung
the case, neither of them can pledge the authomatic appropriation ng creditor eto
property. yung prohibited the art 2088 kapag di
>     FREE DISPOSAL OF THE PROPERTY— nakapagbayad si debtor.
property must not be subject to any claim of a 2. Stipulation null and void-
third person - Thing pledge and mortgaged shall
>     CAPACITY  TO  DISPOSE—pledgor  or  authomatically become the property
mortgagor  has  the capacity or authority to of the creditor kapag failure to pay
make a disposition of the property si debtor is known as pacto
comisorio forbidden ito ng law and
ART. 2088. The creditor cannot appropriate declared as null and void.
the things given by way pledge or mortgage *stipulation does not affect the
or dispose of them. Any stipulation to the principal contract of pledge and
contrary is null and void. mortgage itself remains valid ONLY
STIPULATION IS VOID.
Example: I borrowed P100,000.00 from my
friend with an interest of ten percent payable in
11 months for P10,000.00 each month. My
friend also asked me to mortgage a lot to secure 3. Subsequent voluntary cession or sale of
the loan. It was also stipulated in our agreement property-
that if I fail to pay in any given month, the -prohibition does not include subsequent
ownership of my lot will automatically transfer voluntary act of the debtor making
to my friend. On the seventh month, I failed to cession of the property mortgage in
pay my loan because my son got sick, and I used payment of the debt.
the money to pay for the hospital bills. I tried to -voluntary sale of he said property as
pay P20,000.00 the following month but my payment for debt.
friend refused to receive the same. Instead, he
told me that the property is already considered
Art. 2089. A pledge or mortgage is indivisible,
sold to him upon my failure to pay on the
even though the debt may be divided among the
seventh month. Can I still recover my property?
successors in interest of the debtor or of the
I am willing to pay the remaining balance of my
creditor.
loan as long as I can get my property back.
 
George
Therefore, the debtor’s heir who has paid a part
Yes. You can still get your property because the
of the debt cannot  ask  for  the  proportionate
stipulation in your contract for the automatic
extinguishment  of the pledge  or  mortgage  as 
appropriation of the property to your friend upon
long  as  the  debt is not completely satisfied.
 
Neither can the creditor’s heir who received his Kahit pure or conditional obligation pwedeng
share of the debt  return  the  pledge  or  cancel  isecured by a contract of pledge or mortgage,
the mortgage, to  the prejudice of the other heirs same as guaranty which secure the conditional
who have not been paid. obligation.
 
From these provisions is expected the case in Art.  2092.  A  promise  to  constitute  a  pledge 
which, there being several things given in or  mortgage gives rise only to a personal action
mortgage or pledge, each one of them guarantees between the contracting parties,  without 
only a determinate portion of the credit. prejudice  to  the  criminal  responsibility
incurred by him who defrauds another, by
The   debtor,   in   this   case,   shall   have  a  offering in pledge or mortgage as
right   to   the extinguishment of the pledge or unencumbered, things which he knew were
mortgage as the portion of the  debt  for  which  subject  to  some  burden,  or by
each  thing  is  specially  answerable  is satisfied. misrepresenting  himself  to be the owner of the
(1860) same. (1862)
-------------------------------------------------------- 
Art. 2090. The indivisibility  of a  pledge  or  A  promise  to  constitute  a  pledge  or 
mortgage is  not affected  by  the  fact  that  the  mortgage  only  gives rise to a personal right
debtors  are  not  solidarily liable. (n) >What  exists  only  is  the  right  of  action to
> Rule applies even if the obligation is joint compel  the fulfillment  of  the  promise  but 
and not solidary there is no pledge  or mortgage yet
> The divisibility of the principal obligation Under Revised Penal Code, estafa, pretending to
doesn't affect the indivisibility of the be the owner of any real property shall convey,
mortgage or pledge sell, encumber or mortgage the same.
1. Single thing-
Art. 2093. In addition to the requisites
-any portion of the property pledged or
prescribed in Article 2085, it is necessary, in
mortgage is answerable for the whole
order to constitute the contract of pledge, that
obligation as soon as it falls due.
the thing pledged be placed in the possession
2. several things of the creditor, or of a third person by
common agreement. (1863)
-several things are pledge or mortgage all of
them are liable for the entire debt, kahit part lang PLEDGE- real contact that requires delivery for
yung unpaid its perfection, give rise to personal action bet
contracting parties
EXEPTION: kapag yung na pledge is guarantees
determinate protion of the credit. 1. VALIDITY OF PLEDGE-
-unless movable given as security by the
2. Debtor’s her/creditor’s heir way of pledge be delivered to and
-debtor heir na nagbayad ng part ng placed in the possession od the creditor
debtor cannot ask for the proportionate or third person designated by common
extinction of the pledge or mortgage. agreement
-creditor’s heir who received his share -creditor acquires no right to the
ng debt hindi niya pwedeng icancel ito property because pledge is merely a lien
hanggat hindi completely satisfied. and possession is indispensable to the
right of a lien

EXPETIONS TO THE RULE OF 2. TRANSFER OF ACTUAL

DIVISIBILITY POSSESSION-
- Delivery of the possession means
1. Where each one of the several things actual possession of the property
guarantees determinate portion of credit pledged hindi sapat ang ere
-Kapag determinate, example yung 15 k symbolic delivery
na utang ko para sa tig 15k na diamond 3. SYMBOLIC OR CONSTRUCTIVE
ring, yung 20k na utang ko para sa DELIVERY
necklace na gold. -sufficient to validate a pledge
depending upon the peculiar nature od
the thing.
2. Ehre only portion of the loan was
released- -  But it was held in an earlier case that
-21.25% lang ang pwedeng iforclosee the symbolic transfer of the goods is
acceptable when the owner of the
--------------------------------------------------------- property could  no  longer  dispose  of 
the  goods, the  pledgee  being the only
Art. 2091.  The contract of pledge  or  mortgage
one authorized to do so  
may secure all  kinds  of  obligations,  be  they 
pure  or  subject  to  a suspensive or resolutory ----------------------------------------------------------
condition. (1861) -
Art.  2094.  All  movables,  which  are  within pledgee must continue in possession during the
commerce,  may be  pledged,  provided they existence of the pledge
are susceptible of the possession. 
---------------------------------------------------------
Accordingly, a contract whose objects is outside
Art.  2098.  The contract of pledge gives a
the commerce of men is inexistent and void
right to the creditor to retain the thing in his
from the beginning (Civil Code, Article 1409).
possession or in that of a third person to
------------------------------------------------------- whom it has been delivered, until the debt is
Art.  2095. Incorporeal rights, evidenced by paid. (1866a) 
negotiable instruments, bills of lading, shares
-This right is limited only to the fulfillment of
of stock, bonds, warehouse  receipts  and 
the principal obligation for which the pledge was
similar  documents  may  also  be pledged.
created
The instrument proving the right pledged
shall be delivered   to   the creditor, and ---------------------------------------------------------
if negotiable, must   be indorsed.
Art. 2099. The creditor shall take care of the
SUBJECT MATTER OF PLEDGE thing pledged with the diligence of a good
father of a family; he has a right to the
1. Confined and limited to personal
reimbursement of the expenses made for its
property and it cannot be extended to
preservation, and is liable for its loss or
real property
deterioration, in conformity with the
2. Incorporeal   rights   evidenced   by  
provisions of this Code. (1867)
documents   whether negotiable or not
may also be pledged > Upon fulfillment of the principal obligation,
the pledgee must return the thing pledged
PUBLIC INSTRUMENT NECESSARY TO
BIND THIRD PERSONS > Having possession of the property, he has the
obligation to take care of the same with the
1.   CONTENTS OF PUBLIC INSTRUMENT
diligence of a good father of the family
a.    The pledge is not binding against third
persons unless in addition to delivery of the > In case of loss or deterioration of the thing
thing pledged, pledged due to a fortuitous event, the pledgee
it is embodied in a public instrument cannot be held responsible but he is liable for
b.   Description of the thing pledged; and the loss or deterioration by reason of fraud,
date of pledge negligence, or violation of the terms of the
contract.
2.   OBJECT OF THE REQUIREMENT—
to forestall fraud, because a debtor may attempt Art. 2102. If the pledge earns or produces fruits,
to conceal his property from his creditors when income, dividends, or interests, the creditor shall
he sees it in danger of execution by simulating a compensate what he receives with those which
pledge thereof with an accomplice  are owing him; but if none are owing him, or
insofar as the amount may exceed that which is
TAKE NOTE: due, he shall apply it to the principal. Unless
there is a stipulation to the contrary, the pledge
WHAT IS A PUBLIC INSTRUMENT? shall extend to the interest and earnings of the
The pledge contract should be the one in right pledged.
the public instrument, acknowledged by the In case of a pledge of animals, their offspring
notary public shall pertain to the pledgor or owner of animals
What if there is litigation ensued and the pledge pledged, but shall be subject to the pledge, if
is not in a public instrument?  Is this binding there is no stipulation to the contrary. (1868a)
upon the court?  No, it is not. There should be
payment of documentary stamp tax.  > The pledgee has no right to use the
thing pledged or to appropriate the fruits thereof
-------------------------------------------------------- without the authority of the owner
Art.  2097.  With the consent of the pledgee,
> The pledgee can apply the fruits, income,
the thing pledged may be alienated by the
dividends, or interests earned or produced by the
pledgor or owner, subject to the pledge.  The
thing pledged to the payment of interest, if
ownership of the thing pledged is transmitted
owing, and thereafter to the principal of his
to the vendee or transferee as soon as pledgee
credit
consents to the alienation, but the latter shall
continue in possession. (n) > Unless there is stipulation to the contrary,
-Remember that the pledgor retains ownership the interest and earnings of the right pledged
over the thing pledged and in case of animals, their offspring’s, are
-As soon as the pledgee gives his consent, the included in the pledge
ownership of the thing pledged is transferred Art. 2103. Unless the thing pledged is
to the vendee subject to the rights of the expropriated, the debtor continues to be the
pledgee, namely—that the thing sold may be owner thereof.
alienated to satisfy the obligation; and that the
Nevertheless, the creditor may bring the actions provided the latter is of the same kind as the
which pertain to the owner of the thing pledged former and not of inferior quality, and without
in order to recover it from, or defend it against a prejudice to the right of the pledgee under the
third person. (1869) provisions of the following article.
-Si creditor ay obliged to take care of it with The pledgee is bound to advise the pledgor,
diligence of a good father of a family, he is also without delay, of any danger to the thing
authorized to bring actions as to pertain to the pledged. (n)
owner in order to recover claims against 3rd
persons. REQUISITES FOR THE APPLICATION OF
ART 2107:
RIGHT OF PLEDGEE, is real right enforceable
against third persons but necessary na yung 1. Pledgor has reasonable grounds and fear
contract of pledge is embodied in a public of destruction or impairment of the thing
instrument na may description na yung thing pledge.
pledged and date of the pledge. 2. No fault on part of pledgee
3. Pledgor is offering in place of the thing
Art. 2104. The creditor cannot use the thing another thing in pledge which is same
pledged, without the authority of the owner, kind and quality as the former
and if he should do so, or should misuse the 4. The pledgee does not choose to exercise
thing in any other way, the owner may ask his right to cause the thing pledged to be
that it be judicially or extrajudicially sold at public auction
deposited. When the preservation of the thing
Art. 2108. If, without the fault of the pledgee,
pledged requires its use, it must be used by the
there is danger of destruction, impairment, or
creditor but only for that purpose. (1870a)
diminution in value of the thing pledged, he
RIGHT OF THE PLEDGOR TO ASK THAT may cause the same to be sold at a public sale.
THING PLEDGED BE DEPOSITED The proceeds of the auction shall be a security
for the principal obligation in the same
1. Creditor uses the thing without any manner as the thing originally pledged. (n)
authority
2. Misuses the thing in ay other way Art. 2109. If the creditor is deceived on the
3. If the thing is in danger of being lost or substance or quality of the thing pledged, he
impaired because of negligence or may either claim another thing in its stead, or
willful act of pledgee. demand immediate payment of the principal
obligation. (n)
Art. 2105. The debtor cannot ask for the return
of the thing pledged against the will of the 2 remedies of pledgee in case of deceived as to
creditor, unless and until he has paid the debt the substance or quality
and its interest, with expenses in a proper case.
1. Claim another thing
(1871)
2. Demand immediate payment
-yung thing pledge is for security only NOTE: CHOOSE ONLY ONE NOT
for fulfillment of the pledgor’s obligation, hindi BOTH
niya ito pwedeng mag ask ng return hanggat
hindi pa siya FULLY PAID including interest
and expenses. Art. 2110. If the thing pledged is returned by
EXPETION: the pledgee to the pledgor or owner, the pledge
is extinguished. Any stipulation to the
The pledgor is allowed to substitute the thing contrary shall be void.
pledge which is in danger of destruction or
impairment with another thing of the same kind If subsequent to the perfection of the pledge, the
and quality. thing is in the possession of the pledgor or
owner, there is a prima facie presumption that
Art. 2106. If through the negligence or willful the same has been returned by the pledgee. This
act of the pledgee, the thing pledged is in same presumption exists if the thing pledged
danger of being lost or impaired, the pledgor is in the possession of a third person who has
may require that it be deposited with a third received it from the pledgor or owner after
person.  the constitution of the pledge. (n)

Kapag na exposed yung thing pledged sa loss or - One essential requisites of pledge is
impairment through negligence or willful act ni that the object must be placed in the
pledgee pwede itong ipa deposit ni pledgor sa possession of the creditor, or of third
3rd person at kapag na misuse ito ni pledgee din person BY COMMON
ng walang authority ni pledgor. AGREEMENT.
- PLEDGE IS EXTINGUISHED
Art. 2107. If there are reasonable grounds to WHEN THING PLEDGE IS
fear the destruction or impairment of the RETURNED
thing pledged, without the fault of the pledgee,
the pledgor may demand the return of the
thing, upon offering another thing in pledge,
 PRESUMPTION WHERE THE THING Art.  2112.  The creditor to whom the credit
PLEDGED IN POSSESSION OF has not been satisfied in due time, may
PLEDGOR/OWNER proceed before a Notary Public to the sale of
the thing pledged. This sale shall be made at a
-give rise to PRIMA FACIE, public auction, and with notification to the
presumption that the thing has been debtor and the owner of the thing pledged in
returned and therefore the thing pledged a proper case, stating the amount for which
is extinguished. the public sale is to be held. If at the first
-presumption is auction the thing is not sold, a second one
REBUTTED(mababalewala) kapag with the same formalities shall be held; and if
yung irereturn mmo is for merely at the second auction there is no sale either,
substitution of the thing pledged, or the creditor may appropriate the thing
kapag yung thing is stolen and given by pledged.  In this case he shall be obliged to
the thief to the pledgor or owner. give an acquittance for his entire claim.
(1872a)
-Kapag nahanap yung thing pledged sa
debtor or owner, ONLY ACCESSORY > The thing pledged may be alienated for the
OBLIGATION or pledge is presumed payment to the creditor when the principal
remitted hinfi yung principal obligation obligation becomes due
it self. THE FORMALITIES REQUIRED FOR
SUCH SALE
Possession of the Thing by the Debtor or a Third
Person 1.   The debt is due and unpaid
There is presumption of remission when the 2.   The sale must be at a public auction
thing pledged was found in the possession of the 3.   There must be notice to the pledgor and
debtor or a third person who owns the thing after owner, stating the amount due
its delivery to the creditor. It is essential in a 4.   The sale must be made with the intervention
pledge that the thing be delivered to the creditor, of a notary public
or to a third person by common agreement.  
RIGHT OF PLEDGEE TO APPROPRIATE
Only the accessory obligation of pledge is
THING PLEDGED
presumed remitted as the principal obligation
remains in effect. The debtor shall hence > Serves as an exception to the prohibition on
continue to be indebted but he does not have to pactum commissaries
return the thing pledged. > The pledgee may appropriate the thing
pledged if after the first and second auctions, the
Such remission is presumed until an evidence thing is not sold
proves: > If the creditor appropriates the thing, it shall
be considered as full payment of his entire claim
 the thing pledged was possessed —he is thus obliged to an acquittance for the
through theft. same.    The debtor is not entitled for the excess
 the thing has been sent for other in case the value of the thing pledged is more
causes, such as repair, inspection than the principal obligation.
or safekeeping.
Art. 2113. At the public auction, the pledgor
 the thing is not owned by the
or owner may bid.  He shall, moreover, have
third person who possesses it.
a better right if he should offer the same
Art.  2111.  A statement in writing by the terms as the highest bidder.
pledgee that he renounces or  
abandons the pledge is sufficient   to The pledgee may also bid, but his offer shall
extinguish   the   pledge.   For   this   purpose, not be valid if he is the only bidder. (n)
neither   the acceptance by the pledgor or owner,
nor the return of the thing   pledged   is   Art.  2114.  All bids at the public auction shall
necessary, the   pledgee   becoming   a offer to pay the purchase price at once. If any
depositary. (n) other bid is accepted, the pledgee is deemed to
have been received the purchase price, as far as
*The renunciation or abandonment must the pledgor or owner is concerned. (n)
be in writing to constitute an extinguishment of
-IN PLEDGE, BID MUST BE FOR CASH
pledge
Right of the pledgor and pledgee to bid at
*The renunciation is not conditioned upon public sale
the acceptance by the pledgor or owner nor upon
the return of the thing pledged 1. preference given to pledgor
-if debt not paid and public sale takes
*Under this article, the thing pledged place, both pledgor and pledgee may
remains in the possession of the pledgee.    bid.
Hence the renunciation must be in writing. -pledgor must offer the same terms as
the highest bidder, for after all the thing
belongs to him.
NOTE:    - To avoid fraud, the pledgee is not Art.  2117. Any third person who has any right
allowed to acquire the thing pledged if he is the in or to the thing pledged may satisfy the
only bidder  principal obligation as soon as the latter
becomes due and demandable. (n)
2. bids must be for cash
-all bids, including pledgor must be in GENERAL RULE “hindi dapat mag
cash accept si creditor ng payment galing sa third
person, but under this article:
Art. 2115. The sale of the thing pledged shall
extinguish the principal obligation, whether > A third person who has a right in or to the
or not the proceeds of the sale are equal to the thing pledged may pay the debt as soon as it
amount of the principal obligation, interest becomes due and demandable and the
and expenses in a proper case.  If the price of creditor cannot refuse to accept the payment
the sale is more than said amount, the debtor Art. 2118. If a credit which has been pledged
shall not be entitled to the excess, unless it is becomes due before it is redeemed, the
otherwise agreed. If the price of the sale is pledgee may collect and receive the amount
less, neither shall the creditor be entitled to due. He shall apply the same to the payment
recover the   deficiency, notwithstanding   of his claim, and deliver the surplus, should
any   stipulation   to   the contrary. (n) there be any, to the pledgor. (n)
1.   If the price of the sale is more than the > Pledgee is given the right to collect and
amount due the creditor, the debtor is not receive the amount due on the credit pledged
entitled to the excess unless the contrary is
provided > But in reference to the previous article, having
2.   If the price of sale is less, neither is the the duty to take good care with the diligence of a
creditor entitled to recover the deficiency. A good father to a family the thing pledged, he has
CONTRARY STIPULATION IS VOID. the duty to collect if danger would endanger the
a.    The reason is to compel the creditor to hold recovery of the credit
an honest public sale Art.  2119.  If two or more things are pledged,
b.   Creditor should realize the loans only as the pledgee may choose which he will cause to
much as he is likely to realize at a public sale. be sold, unless there is a stipulation to the
RIGHT OF DEBTOR TO EXCESS contrary. He may demand the sale of only as
many of the things as are necessary for the
General rule: “debtor is not entitles to payment of the debt. (n)
recover the excess unless there is an  
agreement to the contrary.”
-Limited lang yung ibebenta niya by the
-rather unfair since the obligation is fully stipulation.
satisfied.
> After sufficient property has been sold to
-the rule would amount to pacto comisorio satisfy the obligation plus interests and
which is prohibited. expenses, no more shall be sold.
UNDER CHATTEL MORTGAGE LAW, Art. 2120. If a third party secures an obligation
mortgagor is entitled to recover the excess of the by pledging his own movable property under the
proceeds of the sale in foreclosure proceedings. provisions of Article 2085, he shall have the
RIGHT OF CREDITOR TO RECOVER same rights as a guarantor under Articles 2066
DEFICIENCY to 2070, and Articles 2077 to 2081. He is not
prejudiced by any waiver   of defense by the
-creditor is not entitled to recover deficiency in principal obligor. (n)
all cases.
-yung third person na hindi kasali sa principal
-by electing to sell the thing pledged instead of
obligation ay pwedeng mag secure by pledging
suing on the principal obligation, the creditor
his own property.
waives any other remedy and must abide by the
result of the sale.
- Law grants him same rights as guarantor, and
TAKE NOTE: The creditor may sue on cannot prejudiced by any waiver of defense by
principal obligation instead of electing to sell the principal debtor.
the thing pledged, para marecover yung   
deficiency from debtor. Art.  2121.  Pledges created by operation of law,
such as those referred to in Articles 546, 1731,
and 1994, are governed by the foregoing articles
Art.   2116.  After the public auction, the on the possession, care and sale of the thing as
pledgee shall promptly advise the pledgor or well as on the termination of the pledge.
owner of the result thereof.  (n) However, after payment of the debt and
expenses, the remainder of the price of the sale
-Para ma protectionan ni debtor yung shall be delivered to the obligor. (n)
rights niya where he has reasonable grounds to
 
believe that the sale was not an honest one and Art. 2122. A thing under a pledge by operation
to take steps.
of law may be sold only after demand of the
 
amount for which the thing is retained.  The the laws, imposed upon immovables.
public auction shall take place within one month  
after such demand.  If, without just grounds, the Nevertheless, movables may be the object of a
creditor does not cause the public sale to be held chattel mortgage. (1874a)
within such period, the debtor may require the  
return of the thing. (n)
  Article 546 of the Civil Code states: MORTGAGE
> Contract whereby the debtor secures to the
ART. 546. Necessary expenses shall be creditor the fulfillment of a principal
refunded to every possessor; but only obligation, specially substituting to such
the possessor in good faith may retain security immovable property or real rights over
the thing until he has been reimbursed immovable property which obligation shall be
therefor. satisfied with the proceeds of sale of said
property or rights in case the said obligation is
Useful expenses shall be refunded only not complied with at the time stipulated
to the possessor in good faith with the
same right of retention, the person who > Real, accessory, unilateral and subsidiary
has defeated him in the possession contract. Because it creates obligation only on
having the option of refunding the the part of the creditor who must free the
amount of the expenses or of paying the property from the encumbrance eonce obligation
increase in value which the thing may is fulfilled.
have acquired by reason thereof. KINDS OF MORTGAGE

Art. 1731. He who has executed work upon a 1. Voluntary- agreed between parties or
movable has a right to retain it by way of pledge constituted by the will of the owner of
until he is paid. (1600) the property.
2. Legal- required by law to be executed in
Art. 1914. The agent may retain in pledge the favor of certain persons.
things which are the object of the agency until 3. Equitable- lacks the proper formalities
the principal effects the reimbursement and pays of a mortgaged shows intention of the
the indemnity set forth in the two preceding parties to make the property as a
articles. (1730) security for a debt.
Art. 1707. The laborer's wages shall be a lien on  
the goods manufactured or the work done. POSSESSION OF PROPERTY MORTGAGED
Art. 1994. The depositary may retain the thing > As a general rule, it is retained by the
in pledge until the full payment of what may be mortgagor
due him by reason of the deposit. (1780) > The mortgaged property is only subjected to a
-in conventional pledge, debtor is not lien by the mortgagee but ownership is retained
entitle to excess unless otherwise agreed upon by the mortgagor
  
-legal pledge, no definite period for the
payment of the principal obligation. Pledgee SUBJECT MATTER OF MORTGAGE
must make demand for the payment of the > Immovables and alienable real rights over
amount due to him. immovables
-if no demand, he cant exercise right of -Real rights over real property(REAL
sale in public auction PROPERTY)
-pledgee must proceed with the sale -Mortgage on real right(REAL PROPERTY)
within 1 month after demand otherwise debtor
may require him to return the thing retained. TAKE NOTE: PLEDGE AND CHATTERL
MORTGAGE ARE MOVABLES
 
Art.    2123.    With    regard    to    pawnshops   
and    other establishments, which are engaged Art.  2125.  In addition to the requisites stated in
in making loans secured by pledges, the special Article 2085, it is indispensable, in order that
laws and regulations concerning them shall be a mortgage may be validly constituted, that
observed, and subsidiarily, the provisions of the document in which it appears be recorded in
his Title. (1873a) the Registry of Property. If the instrument is
not   recorded, the   mortgage   is   nevertheless  
REAL MORTGAGE binding
Art. 2124. Only the following property may be between the parties.
the object of a contract of mortgage:  
  The persons in whose favor the law establishes a
(1) Immovables; mortgage have no other right than to demand the
  execution and the recording   of   the  
(2) Alienable real rights in accordance with document   in   which   the   mortgage   is
formalized. (1875a) 4. Greater care and diligence required
  of mortgagee-bank
-when purchaser/mortgagee is a bank or
ESSENTIAL REQUISITES OF A financing institution which is required
MORTGAGE to observe a higher standard of
1.   To secure the fulfillment of a principal diligence, its business being impressed
obligation with public interest.
2.   The mortgagor should be the absolute owner GR: the purchaser or mortgagee of a
of thing mortgaged land is not required to look further
3.   The mortgagor should have free disposal of than what appears on the face of the
the thing Torrens Certificate of Title doed not
4.   When the principal obligation becomes due, apply.
the thing mortgaged may be alienated to secure
payment -Dapat may careful examination muna
5.   For a mortgage to be validly constituted and to verify its genuineness, to determine
to prejudice third persons, the mortgage should real owner thereof as well as a physical
be recorded with the Registry of Property and on the spot investigation of the land
  itself offered as security.
NO VALIDLY CONSTITUTED -TO PROTECT THE TRUE OWNER
MORTGAGE IF THE DEED OF as well as INNOCENT THIRD
MORTGAGE IS A MERE PRIVATE PERSONS
DOCUMENT MORTGAGE   IS   NEVERTHELESS  
  BINDING   BETWEEN   THE PARTIES EVEN
DOCTRINE OF MORTGAGE IN GOOD IF UNREGISTERED
FAITH > Actual knowledge on the part of the buyer
1. Reliance in good faith on certificate of > Actual knowledge=registration
title of mortgagor-  
Si mortgagee may right to rely in good PROCEDURE:  WHAT HAPPENS WHEN
faith on the CERTIFICATE OF YOU ENTER INTO A CONTRACT OF
TITLE of the mortgagor. MORTGAGE? 
-kapag walang title, no obligation for
further investigation 1.   Execute the document of mortgage 
-pero kahit hindi si Mortgagor ang 2.   Go to a notary public, who will notarize the
totoong owner kung si mortgagee is in document. 
good faith naman in nonetheless entitled 3.   Pay the documentary stamp tax within the
to protection. first five days of the succeeding month.  The doc
stamp tax is a percentage of the value of the
2. Title in name of mortgagor, not of property mortgaged. 
rightful owner- 4.   Go to the Office of the Register of Deeds
-already succeeded in obtaining a and pay the registration fees.  Before you pay
Torrens title over the property in his the registration fees, the government will require
name that after obtaining the said title you to update payment of realty taxes on the
he succeeds in mortgaging the property.    After payment of the registration
property to another who relies on fees, the mortgage will be annotated on the title.
what appears on the said title.  
-the innocent purchaser (mortgagee) for
value protected by law is one who Art. 2126. The mortgage directly and
purchase a titled land by virtue a deed immediately subjects the   property   upon  
executed by the registered owner. which   it   is   imposed, whoever   the possessor
(purchaser siya ng registered owner) may be, to the fulfillment of the obligation for
whose security it was constituted. (1876)
3. Duty of mortgagee to look beyond  
certificate of title- EFFECTS OF MORTGAGE
-GR: where there is nothing on the
certificate of title to indicate any cloud 1.   Creates a real right
or vice in the ownership of the property a.    If the mortgagor sells the encumbered
or any encumbrance therein, the property, the property remains subject to the
purchaser is not required to explore fulfillment of the principal obligation secured by
further than what the Torrens Title upon it
its face indicates in quest for any hidden
b.   The mortgagee has a right to rely in good
defect or inchoate right that may
faith on what appears on the certificate of title of
subsequently defeat his right thereto
the mortgagor of the property given as security
-exeptions kapag may knowledge si
and in the absence of anything to excite
mortgagee.
suspicion, he is under no obligation to look
beyond the certificate 
c.    Until   the   action   for   expropriation   has   RIGHT     OF     CREDITOR     AGAINST    
been completed, ownership over the property TRANSFEREE     OF MORTGAGED
remains with the registered owner PROPERTY
d.   Banking institution must exercise due > The fact that the mortgagor has transferred
diligence before entering contract of mortgage the mortgaged property to a third person
doesn’t relieve him from his obligation to pay
e.    If a person is the first mortgagee over a the debt to the mortgage creditor in the absence
property which was sold in an auction by the of Novation
second mortgagee, the only right left to him is to
collect his mortgage credit from the purchaser > The creditor may only demand from any
thereof possessor the payment only of the part of the
during the sale conducted credit secured by said property
f.    In a suit to nullify a certificate of title, the >pwedeng kunin ni creditor yung payment sa
mortgagee is an indispensable party third person tas si third percon mag proceed
against debtor.
2.   Creates merely an encumbrance
 
-kapag hindi si debtor ang nasa title, may right Art.   2130.   A stipulation forbidding the
to dispose. owner from alienating the immovable
-Law considers void any stipulation forbidding mortgaged shall be void. (n)
the owner from alienating the mortgaged STIPULATION FORBIDDING ALIENATION
immovable. OF MORTGAGED PROPERTY
 
Art. 2127. The mortgage extends to the >Such   stipulation would  be contrary to public
natural accessions, to  the improvements, good inasmuch as the transmission of property
growing  fruits,  and  the  rents  or income not should not be unduly impeded
yet received when the obligation becomes due,  
and to the amount of the indemnity granted or
owing to the proprietor from the insurers of the CAN MORTGAGEE PROHIBIT
property mortgaged, or in   virtue ENCUMBERANCES WITHOUT PRIOR
of expropriation for   public use, with the CONSENT?
declarations, amplifications  and limitations  > Yes, regulation is not the same as prohibition
established  by law, whether the  estate  remains > The mortgagee may even add a standard.  This
in the possession  of  the mortgagor, or  it  is for good measure on the part of the mortgagee
passes into the  hands  of  a  third  person. which is allowed by law.  
(1877)  
EXTENT OF MORTGAGE Art.   2131.   The   form, extent   and
> A REM constituted on an immovable property consequences   of   a mortgage, both as to its
is not limited to the property itself but also constitution, modification and extinguishment,
extends to all its accessions, improvements, and as to other matters not included in this
growing fruits, and rents Chapter, shall   be   governed by   the  
> To exclude them, it is necessary that there be provisions   of   the Mortgage Law and of the
an express stipulation to that effect Land Registration Law. (1880a) 

Art.   2128.   The   mortgage   credit   may   be   Foreclosure- remedy available to the mortgagee
alienated   or assigned to a third person, in whole by which he subjects the mortgaged property to
or in part, with the formalities required by law. the satisfaction of the obligation to secure the
(1878) mortgage.

-Mortgage credit- real right ad directly and KINDS OF FORECLOSURE

immediately subject to mortgaged property for 1. Judicial foreclosure- by bringing action
the fulfillment of principal obligation. for that purpose of regional Trial court
-can be alienated by third person, in whole or in of the province or city where real
part by mortgagee who is the owner. property lies.
-if may balance pa the mortgagee is
-sale assignment is valid kahit di registered. entitled to recover the deficiency, if
KASO Registration is necessary only to affect embodied with deficiency judgement.
the third persons. -third person is the mortgagor, hindi
  siya liable sa deficiency in absence of
Art.  2129.  The creditor may claim from a third contrary to stipulation, yung
person in possession of the mortgaged property, deficiency is directed sa debtor.
the payment of the part of the credit secured by
the property which said third person possesses, Payment of:
in the terms and with the formalities which the a. Costs of the sale
law establishes. (1879)  b. Amount due the mortgagee
 c. Claims of persons holding subsequent 1. Antichresis- property is delivered to the
mortgages in the order of their creditor
priority Mortgage- debtor usually retains
d. Balance if any shall be paid to the possession of the property
mortgagor. 2. Antichresis- creditor acquires real right
to receive frits f the property
Mortgage- creditor does not have any
2. Extrajudicial foreclosure- right to receive the fruits.
-foreclosed extrajudicially where there is 3. Antichresis- creditor unless there is
inserted in the contract stipulation to the contrary is obliged to
-a cluse giving the mortgagee the power, pay the taxes ad charges upon the estate
upon default of the debtor to foreclose Mortgage- creditor has no such
mortgage extrajudicially. obligation
NOTE: BOTH ARE SIMILAR IN
THAT TH SUBJECT IS REAL
PROPERTY. LIKE PLEDGE AND
Redemption- mortgagor-owner of mortgaged
MORTGAGE ANTICHRESIS GIVES
property reacquires the property within a certain
A REAL AND NOT MERELY A
period. After default or foreclosure for the
PERSONAL RIGHT IF IT IS
satisfaction of the mortaged debt.
REGISTERED IN THE REGISTRY OF
PROPERTY.

Kind of redemption Art. 2133. The actual market value of

1. EQUITY REDEMPTION the fruits at the time of the application
-pwede niyang iredeem after default thereof to the interest and principal shall
pero dapat NOT AFTER SALE, be the measure of such application. (n)
BEFORE SALE LANG
-contract does not cover immovable but
2. RIGHT OF REDEMPTION only its fruits
-redeem within a certain period after it -fruits of immovable must be appraised
was sold for the satisfaction of mortgage at their actual MV at the time of
debt. application.

Art.  2134.  The amount of the

principal and of the interest shall be
ANTICHRESIS specified in writing; otherwise, the
(ARTICLES 2132-2139) contract of antichrists shall be void.
(n)

Art.   2132.  By the contract   of antichresis the -require ng law na yung contract
creditor acquires the right to receive the fruits of must be in form in order that it may be
an immovable of his debtor, with the   obligation VALID and to not only affect the third
to apply them to the payment of the interest, if person.
owing, and thereafter to the principal of his -Kahit void yung antichresis yung
credit. (1881) principal obligation VALID parin.
-intended to forestall the use of
-is an accessory contract because it secures the
antichresis for purpose of usury
performance of principal obligation.
-formal contract, because must be in specified Art. 2135. The creditor, unless there is a
form to be valid stipulation to the contrary, is obliged to pay the
taxes and charges upon the estate.
-requires delivery by the debtor of the real
property given as security in order that the He is also bound to bear the expenses necessary
creditor may receive the fruits. for its preservation and repair.
ANTICHRESIS AND PLEDGE COMPARED
The sums spent for the purposes stated in this
1. Antichresis – real property, Pledge- article shall be deducted from the fruits. (1882)
personal property
2. Antichresis- consensual contract, OBLIGATION OF ANTICHRETIC
perfected by mere consent, PLEDGE- CREDITOR
real contract, perfected by the delivery -creditor acquires the right to enjoy the fruits of
of the thing pledged. property delivered to him. Obligations:
NOTE: Both similar in that debtor loses 1. payment all taxes and charged upon the
control of the subject matter. state- creditor is obliged unless there is a
stipulation to the contrary, to pay taxes and
ANTICHRESIS AND REAL MORTGAGED charges upon the estate.
COMPARED
NOTE: if creditor does not pay taxes, he is by -Antichretic creditor is under obligation to
law required to pay indemnity for damages to apply the fruits of the property in satisfaction,
the debtor. first whatever interest on the debt is due,
second, to the payment of the principal.
2.Application of fruits of the estate.- to apply
fruits after receiving them to the interest if -Fruits must appraised on the basis of their
owing thereafter to the principal. actual market value at the time of the
application.
NOTE: sum spent by the creditor in the
fulfillment of the obligations shall be charged -if value exceed amount of interest allowed by
against the fruits of the property. by Usury Law, the excess shall be applied to
the principal.

Art.  2136.  The debtor cannot reacquire the NOTE: rate of interest on loan on of money,
enjoyment of the immovable without first goods, or credit is no longer subject to any
having totally paid what he owes the creditor. ceiling prescribed under Usury Law.

But the latter, in order to exempt himself from Art.  2139.  The last paragraph of Article
the obligations imposed upon him by the 2085, and Articles 2089 to 2091 are applicable
preceding article, may always   compel the   to this contract. (1886a)
debtor   to   enter   again   upon   the enjoyment   ANTICHRESIS
of   the   property, except   when   there   is   a
stipulation to the contrary. (1883)
> The creditor acquires the right to receive the
-yung property na nadeliver is security for fruits of an immovable of his debtor, with the
payment of the obligation of te debtor in obligation to apply them o the payment of the
antichresis. interest, if owing, and thereafter to the principal
-debtor cannot demand its return until debt is of his credit
totally paid.
-if si creditor ayaw niya magbayad ng taxes and
incure the expenses necessary for preservation
and repair of the property, he may compel the DEFAULT RULES TO BE FOLLOWED
debtor to reacquire the enjoyment of the (TAKE NOTE SO THAT YOU WILL KNOW
same except when there us a contrary WHEN TO OPT OUT OF THE RULES)
stipulation.

1.   The creditor advances for the taxes, charges,

Art.  2137.  The creditor does not acquire the as well as the   necessary   expenses   for   the  
ownership of the real estate for non-payment of preservation   of   the property
the debt within the period agreed upon. 2.   The law uses the term “advances” as the
-Kapag di bayad yung debt clear na si creditor fruits of the immovable may be applied to the
does not acquire ownership of the immovable expenses and charges.  If the creditor doesn’t
since yung natransfer is not the ownership but want to advance, he may just surrender the
merely right to receive the fruits. immovable to the debtor
3.   The debtor may not reacquire the enjoyment
-yung stipulation sa antrchretic creditor na mag of the thing until full payment of the obligation.
appropriate ng property upon nonpayment of 4.   The creditor doesn’t acquire ownership of
debt within the period agreed uopon is VOID. the immovable for nonpayment of the debt
within the period agreed upon.  Every stipulation
REMEDY OF CREDITOR: to the contrary is void.  The creditor may
1. To bring actin for specific performance petition the court to foreclose the property.
2. To petition for the sale of real property THERE IS POSSIBILITY TO HAVE
as in foreclosure of mortgage under rule ALTERNATIVE ARRANGEMENTS FOR
68 of the Rules of Court FORECLOSURE.
NOTE: HOWEVER PARTIES MAY
AGREE ON EXTRAJUDICIAL CHATTEL MORTGAGE
FORECLOSURE.
(ARTICLES 2140-2141, CHATTEL
MORTGAGE LAW)
Art.  2138.  The contracting parties may stipulate
that the interest upon the debt be compensated Art.  2140.  By a chattel mortgage, personal
with the fruits of the property which is the object property is recorded in the Chattel Mortgage
of the antichrists, provided that if the value of Register as a security for the performance of
the fruits should exceed the amount of interest an obligation. If the movable, instead of being
allowed by the laws against usury, the excess recorded, is delivered to the creditor or a
shall be applied to the principal. (1885a) third person, the contract is a pledge and not
a chattel mortgage. (n)
CHATTEL MORTGAGE if the
chattel
> Contract by virtue of which personal mortgage is
property is recorded in the Chattel Mortgage a security
Register as security for the performance of an for the
obligation purpose of
CHARACTERISTICS the
property in
1. Accessory contract- because it is for instalment.
the purpose of securing the performance
of a principal obligation. SIMILARITIES BETWEEN CHATTEL
2. Formal contract- its validity in MORTGAGE AND PLEDGE
registration in the CHATTEL
MORTGAGE REGISTER is 1. Moth executed to secure performance
INDESPENSABLE.(necessary) of principal
3. Unilateral contract- produces only an 2. Constituted only on PERSONAL
obligation on the part of the creditor to PROPERTY
free from encumbrance(burden) on 3. Indivisible
fulfillment of the obligation. 4. Constitute a lien on the property
5. Creditor cannot appropriate the
property to himself in payment of the
debt
6. When debtor defaults, the property
CHATTEL PLEDGE must be sold for the payment of the
MORTGAGE creditor.
1. Delivery of 1. Delivery is 7. Extinguished by the fulfillment of the
personal necessary obligation or the destruction of the
property is 2. Registration in property pledged or mortgaged.
not the Registry of
necessary Property is not
2. Registratio necessary. Art. 2141. The provisions of this Code on
n is the 3. Found in pledge, insofar as they are not in conflict with
same in the ARTICLE the Chattel Mortgage Law shall be applicable
Chattel 2112 of the to chattel mortgages. (n)
Mortgage Civil Code.
Register is 4. If the property -AS LONG AS WALANG CONFLICT
required by is sold the
LAWS GOVERNING CHATTEL
law. debtor is not
MORTGAGE
3. Procedure entitled to the
for the sale excess unless 1.   Chattel mortgage law, Act 1508
given as otherwise 2.   Civil Code provisions
security is agreed or 3.   Revised Administrative Code
found in except in the 4.   Revised Penal Code
Section 14 case of legal
of Act No. pledge. 5. Ship Mortgage Decree (Pres. Decree No.
1508, as 5. If property is 1521)
amended sold and there
OFFENSES INVOLVING CHATTEL
4. If the is deficiency,
MORTGAGE
property is the creditor is
foreclosed, not entitled to 1. ACTS PUNISHABLE-
the excess recover the a. Knowingly removing personal
over the deficiency property mortgaged to any
amount due notwithstandin province or city other than the one
goes to g any in which it was located at the time
debtor. stipulation to of the execution of the mortgage
5. If property the contrary. without the written consent
is b. Selling or pledging personal
foreclosed property already pledged or any
and there is part thereof, under the terms of the
a Chattel Mortgage Law without the
deficiency, consent of the mortgage written
the creditor on the back of the mortgage and
is entitled duly recorded in the CM Register
to recover 2. COMMON ESSENTIAL
deficiency ELEMENTS
from the -punished under ART. 319 of the
debtor. REVISED PENAL CODE, is that the
EXCEPT, property is removed or repledged,
 should be the same or identical mortgage in the manner provided by law
property that was mortgaged or otherwise he may be held liable for damages by
pledged before such removal or any person entitled to redeem the mortgage.
pledging.
-mortgagor is not relieved of If mortgagor defaults in the payment of the
CRIMINAL LIABILITY even if the secured debt or otherwise fails to comply with
mortgagee indebtedness is paid in full. the conditions of the mortgage, CREDITOR
-mortgagor-seller informed the HAS NO RIGHT to appropriate to himself
purchaser that the thing sold had the personal property because he is permitted
been mortgaged. only to recover his credit from the proceeds
of the sale of the property at public auction
through public officer in the manner
prescribed in Section 14 Act No. 1508
SUBJECT MATTER OF CHATTEL
MOTGAGE RIGHT OF MORTGAGEE TO RECOVER
DEFICIENCY
1. Must always be personal or movable
property. 1. Creditor may maintain an action for
2. For the purpose of Chattel Mortgage the deficiency although the Chattel
Law, both growing crops and large Mortgage Law is silent on this point.
cattle are PERSONAL PROPERTY, 2. If Chattel Mortgage is COSTITUTED
therefore capable of being mortgaged AS SECURITY for the purchase of
under the conditions stated in ART personal property (not for loan)
415, Nos.(2) and(6) of the Civil Code. payable in installment, no deficiency
Because Art 416 (2) clarified as judgement can be asked and any
personal property “Real property agreement to the contrary shall be
which by any special provision of an VOID.
obligation. APPLICATION OF PROCEEDS OF
SALE
CREATION OF A CHATTEL
MORTGAGE 1. Costs and expenses of keeping and sale
2. Payment of the obligation secured by
-Law, provides only one way for executing a the mortgage
valid Chattel mortgage: 3. Claims of persons holding subsequent
-registration of the personal property in the mortgages in their; order
Chattel Mortgage Register as security for the 4. The balance, if any shall be paid to the
performance of an obligation. mortgagor, or person holding under him

-Under Chattel Mortgage Law, if property is RIGHT OF REDEMPTION

situated in a province different from that in 1. When the condition of chattel mortgage
which mortgagor set aside the registration must is BROKEN:
be in both registers, or otherwise Chattel a. The mortgagor
Mortgage is VOID. b. Person holding a subsequent
AFFIDAVIT OF GOOD FAITH REQUIRED mortgage
c. Subsequent attaching creditor
Affidavid of good faith- is an oath in a 2. An attaching creditor who so redeems
contract of chattel mortgage wherein the shall be subrogated to the rights of the
parties “severally swear that the mortgage is mortgagee and entitled to foreclose
made for the purpose of securing the the mortgage in the same manner that
obligations specified in the conditions thereof the mortgagee could foreclose it.
and for no other purposes and that the same 3. The redemption is made by paying or
is just and valid obligation and one not delivering to the mortgagee the
entered into for the purpose of fraud. amount due on such mortgage and the
costs and expenses incurred by
Chattel Mortgage Law, in its Section 5, in Breach of condition before the sake
describing what shall be deemed sufficient to thereof.
constitute a good chattel mortgage, includes
the requirement of an AFFIDAVID OF
GOOD FAITH appended to the mortgage
and recorded therewith.
-the absence of affidavid vitiates a mortgage
only as against third persons without notice like
creditors and subsequent encumbrances.
FORECLOSURE OF CHATTEL
MORTGAGE
-After payment of the debt in chattel
mortgage the mortgagee must discharge the
FORECLOSURE (SIMILAR BUT NOT
IDENTICAL WITH REM) SECTION 14,
CHATTEL MORTGAGE LAW
1.   There a 30-day cooling off period before the
public auction, from the time the condition is
broken
2.   Notice—at least 10 days’ notice of the time,
day, place, and purpose of such sale has been
posted at 2 or more public places in such
municipality.    Personal notice or mail shall also
be given to the mortgagor or person holding
under him and the persons holding subsequent
mortgages of the time and place of sale.
3.   Sheriff should possess the property as he
needs to deliver the same to the winning bidder. 
If the mortgagor refuses to do so, the mortgagee
can seek the help of the court.  There could also
be a stipulation in the contract as well.  But if
the debtor is not willing and able, the loss is with
the creditor.
4.   There is a 30-day equity of redemption
period (payment of obligation)
5.   After foreclosure, there could be recovery of
deficiency, but there is Recto Law (1484)
pertaining to sale of personal property in
installments and there is a Chattel Mortgage to
secure payment of price.
AN ACTION FOR SPECIFIC
PERFORMANCE IS TANTAMOUNT TO THE
ABANDONMENT OF RIGHTS OF
MORTGAGEE

SOURCES:
https://www.chanrobles.com/civilcodeofthephili
ppinesbook4.htm
https://batasnatin.com/law-library/civil-
law/obligations-and-contracts/815-right-of-
pledgee-to-cause-sale-appropriate-the-thing-
pledged.html