Manner of Recording Chattel Mortgage

The manner of recording CM is prescribed in P.D 1529 (SECTION 115) Every Registrar of deeds shall keep a 1. PRIMARY ENTRY BOOK 2. REGISTRATION BOOK HE should also certify on each mortgage filed on record (INCLUDING THE

DUPLICATE) the DATE, HOUR, AND MINUTE when the same was received by
him

He also has an additional duty to record on such books any CHATTEL MORTGAGE, ASSIGNMENT, or DISCHARGE thereof, and any instrument relating to a recorded mortgage

These instruments have to be presented to him in duplicate

Manner of Recording Chattel Mortgage

The Registrar of Deeds shall also certify the officers return of sale upon any

mortgage, making reference upon the record of such officers return to the volume and page of the record of the mortgage, and a reference of such return on the record of the mortgage itself, and give a certified copy thereof, when requested, upon payment of the legal fees for such copy and certify upon each mortgage officers return of sale or discharge of mortgage, and upon any other instrument relating to such recorded mortgage, both on the original and in the duplicate, the date, hour, and minute when the same is received for record and record such certificate with the return itself, and keep an alphabetical index of mortgagors and mortgagees, which record and index shall be open to the public inspection. Duly certified copies of such records and of filed instruments shall be received as evidence in any court (Section 115 of P.D. 1529).

Difference in Manner of Registration between Real Estate Mortgages and Chattel Mortgages
1. REAL ESTATE a deed covering registered land is registered from the time the same is recorded in the entry book which can be done upon payment of the filing fees. (Section 56 of the Land Registration Act) 2. Chattel Mortgage the document must be recorded in the chattel mortgage register

Difference in Manner of Registration between Real Estate Mortgages and Chattel Mortgages
REAL ESTATE MORTGAGE

CHATTEL MORTGAGE
ENTRY IN THE DAY BOOK PLUS CHATTEL MORTGAGE REGISTER

ENTRY IN THE DAY BOOK IS SUFFICIENT

Effect of Failure to Register Chattel Mortgage

A chattel mortgage is void as to third persons unless the mortgage is duly registered in the Registry of Deeds (Pacific Commercial Co. vs. National Bank, 49 Phil. 236).

1.If the mortgage is constituted in a public instrument which is not registered, the creditor has the right of preference established by the Civil Code. This means that an unregistered instrument has a preferential right to the proceeds of the sale of the property of the debtor as against the right of judgment creditors who obtained against the same debtors judgments in their favor bearing dates later that in the date of the unregistered deed of mortgage (McMicking vs. Kimura, 12 Phil. 98; Malozo vs. Luneta Motor Company, et al., No. 13509-R, May 23, 1956, O.G. 52, Sept. 30, 1956).

Effect of Failure to Register Chattel Mortgage

Where there exists a chattel mortgage contract in due form, but for some reason or another it was not, as it should be, registered in the office of the register of deeds concerned, the effect would be that it still remains a valid chattel mortgage as against the mortgagor, his executors or administrators (Sec. 4, Chattel Mortgage Law), but void as against the third persons, such as intervening purchasers or creditors claiming liens by attachment, judgment or execution (McCullough & Co. vs. Zoboli, 28 Phil. 301).

Effects of Omission of Affidavit of Good Faith

The Chattel Mortgage Law (Section 5), in describing what shall be deemed sufficient to constitute a good chattel mortgage, includes the requirement of an affidavit of good faith appended to the mortgage and recorded therewith. The absence of the affidavit vitiates a mortgage as against credits and subsequent encumbrances (Philippine Refining Co. vs. Jarque, 61 Phil. 229; Tarrosa vs. F.M. Yap Tico, et al., 46 Phil. 753; Giberson vs. Jureidini Bros, 44 Phil. 21).

Effects of Omission of Affidavit of Good Faith

A chattel mortgage may, however, be valid as between the parties without such an affidavit of good faith. Where a chattel mortgage, though signed by the parties, 1.was not ratified before a notary public, 2.nor registered in the Office of the Registrar of Deeds, 3.nor where the chattels covered by said mortgage totally delivered by the mortgagor, it is not valid as such mortgage (Phil. Motors, Inc. vs. Lorenzo, et al., CA-G. No. 8358-R, prom., Feb- ruary 26, 1953).

Effect of the Omission of Affidavit of Good Faith where property has been delivered and Retained by Mortgagee

The purpose in requiring the affidavit is to guard against the making of fraudulent or fictitious mortgages, which would enable the mortgagor to retain possession of the property and set his credit at defiance. Therefore, the omission of the affidavit does not invalidate the mortgage as against a subsequent purchaser or mortgagee, or an attaching creditor, provided the mortgagee has taken and retained possession of the property. Such possession is notice of the mortgagees interest (Gooding vs. Raily, 50 N.H. 400; See also Art. 2140, Civil Code of the Philippines).

Effect upon third persons with notice

A mortgage of chattel without the affidavit required by the statute is valid against a subsequent purchaser thereof with notice that the mortgage was made in good faith and for a full consideration (Roberto vs. Crawford, 58 N.H. 499).

R and O of the Chattel Mortgagor The mortgagor has the right to retain the possession and enjoyment
of the property mortgaged. After the breach of the contract, but before the sale of the chattel, a mortgagor may redeem the property (Sec. 13, Act No. 1508). The mortgagor may again mortgage the chattel to another person with the written consent of the mortgagee endorsed on the back of the mortgage and on the margin of the record thereof in the Registry of Property. The existence of the prior mortgage need be stated in the second mortgage.

The mortgagor is liable for removing the property mortgaged without the consent of the creditor or for selling the same, or for mortgaging the same without the consent of the mortgagee (See Arts. 319 and 367, Act No. 3815; U.S. vs. Kilayco, 32 Phil. 619; Secs. 9-12, Act No. 1508). The provisions of Sections 9, 10, 11 and 12 of the Chattel Mortgage Law have been repealed by Article 367 of the Revised Penal Code, and the acts covered by those provisions are now penalized in Article 319, which reads as follows:

R and O of Chattel Mortgagor Art. 319. Removal, sale or pledge of mortgaged

property. The penalty of arresto mayor or a fine amounting to twice the value of the property shall be imposed upon: 1. Any person who shall knowingly remove personal property mortgaged under the Chattel Mortgage Law to any province or city other than the one in which it was located at the time of the execution of the mortgage, without the written consent of the mortgagee or his executors, administrators or assigns. 2. Any mortgagor who shall sell or pledge personal property al- ready pledged, or any part thereof, under the terms of the Chattel Mortgage Law, without the consent of the mortgagee written on the back of the mortgage and noted on the record thereof in the Office of the Registrar of Deeds of the province where such property is located.

R and O of Chattel Mortgagor Paragraph 1 of Article 319 above cited penalizes

any person who removes mortgaged property without the written consent of the mortgagee, while paragraph 2 only refers to the mortgagor who sells or pledges the mortgaged property without the consent of the mortgagee duly noted in the records of the Chattel Mortgage Registry. If the property mortgaged is wrongfully sold or disposed of by the mortgage debtor, he is not relieved of criminal liability under the provisions of the Chattel Mortgage Law by the fact that the mortgage indebtedness is thereafter paid in full (U.S. vs. Iguides, 36 Phil. 860).

R and O of Chattel Mortgagor

In one case, the Deed of Chattel Mortgage stipulated that the mortgagor shall not sell, mortgage or in any other way, encumber or dispose of the property herein mortgaged without the previous

writ- ten consent of the mortgagee. In spite of this stipulation, the mortgagor sold the mortgaged
vehicle to a third person. The issue raised was whether or not the sale was valid. It was held that the rule is settled that the chattel mortgagor continues to be the owner of the property, and therefore, has the power to alienate the same; how- ever, he is obliged under pain of penal liability, to secure the written consent of the mortgagee. Thus, the instruments of mortgage are binding, while they subsist, not only upon the parties executing them but also upon those who later, by purchase or otherwise, acquire the mortgaged properties. The absence of the written consent of the mortgagee to the sale of the mortgaged property in favor of a third person, therefore, affects not the validity of the sale but only the penal liability of the mortgagor under the Revised Penal Code and the binding effect of such sale on the mortgagee under the Deed of Chattel Mortgage (Servicewide Specialists, Inc. vs. Intermediate Appellate Court, 1989, 174 SCRA 80, 86-87).