DISTINCTION PLEGDE MORTGAGE ANTICHRESIS

S Chattel Real
DEFINITION It is a contract by By a chattel mortgage, A real estate mortgage is a By the contract of
virtue of which the personal property is recorded contract whereby the debtor antichresis the
debtor delivers to the in the Chattel secures to the creditor creditor acquires the
creditor or to a third Mortgage Register as a the fulfillment of a principal right to receive the
person a movable security for the performance obligation, specially subjecting fruits of an
or a document of an obligation. If the to such security immovable immovable of his
involving movable, instead of being property debtor, with the
incorporeal rights for recorded, is delivered to the or real rights over immovable obligation to app
the purpose of creditor or a third person, property in case the principal apply them to the
securing the the contract is a pledge and obligation is not complied with payment of the
fulfillment of a not a chattel mortgage. (Art. at the interest, if
principal obligation 2140) time stipulated. owing, and
with the thereafter to the
understanding that principal of his
when the obligation credit. (Art. 2132.)
is fulfilled, the thing
delivered
shall be returned
with all its fruits and
accessions.
Governing Law CIVIL CODE A. CIVIL CODE A. CIVIL CODE Articles CIVIL CODE
Articles 2085-2123 Articles 2085-2092 2083-2092 Articles
2140-2141 2124-2131 2085-2092
B.THE CHATTEL B. SUPREME COURT A.M. 2132-2139
MORTGAGE LAW NO. 99-10-05-0 AS
(Act No. 1508, as amended) AMENDED BY
 C.REVISED RESOLUTION OF JUNE 30,
ADMINISTRATIVE CODE 2001 AND AUGUST 7, 2002
D. REVISED PENAL JUDICIAL FORECLOSURE
CODE OF REAL ESTATE
MORTGAGE (Rule 68, ROC)

Subject Matter All movables Personal or Movable A. Immovables Fruits of

within property. B. Alienable rights imposed Immovables or Real
commerce, (Art.2140; Sec. 2, Act No. upon immovables (Art. 2124) Property (Art. 2132)
provided, susceptible 1508)
of possession.
(Art. 2094)

Incorporeal rights
evidenced by
negotiable
instruments, bills of
lading, shares of
stock, bonds,
warehouse receipts
and similar
documents.
(Art. 2095. )
Need for Does not need Registration in the Chattel Registration in the Registry of Does not need
Registration registration Mortgage Register Deeds registration
 Purpose To secure fulfillment To secure fulfillment of To secure fulfillment of To secure the
of a principal principal obligation principal obligation performance of a
obligation. principal obligation

Parties Pledgor & Pledgee Mortgagor & Mortgagee Creditor & Debtor

Classification 1. Voluntary or 1. Voluntary – Agreed to

conventional between the parties or
(created by constituted by the will of the
agreement of the owner of the
parties); property
2. Legal (by 2. Legal – Required by law to
operation of law). be executed in favor of certain
persons
3. Equitable – Lacks the
proper formalities of mortgage
but shows the intention of the
parties to make the property as
a security for a debt
Fruits/income If the pledge earns or Creditor does not have any Creditor does not have any Creditor acquires
produces fruits, right to receive fruits right to receive fruits right to receive fruits
income, dividends or of the property
interest, the creditor
shall compensate
what he receives to
what is owing him;
 but if none are owing
him, or insofar as the
amount may exceed
that which is due, he
shall apply it to the
principal. Unless
there is a stipulation
to the contrary, the
pledge shall extend
to the interest and
earnings of the right
pledged. (Art. 2102)
Nature and 1. Real, because it is 1. Accessory, because it 1. Accessory 1. Accessory
Characteristics perfected by delivery secures performance of a 2. Unilateral 2. Formal Contract
of the thing pledged. principal 3. Creates Real Rights It must be in
2. Acessory, because obligation 4. Subsidiary specified form to be
it has no independent 2. Formal, because it 5. Indivisible valid (in writing).
existence. requires registration in the 6. Consensual 3. A third person,
3. Unilateral, Chattel Mortgage 7.Inseparable, it follows the who is not a party to
because it creates an Register for its validity (but property, whoever is in the principal
obligation solely on only against third persons) possession. contract, may offer
the part of the 3. Unilateral, because it his immovable
creditor to return the produces only obligations on under the contract of
thing pledged upon the part of antichresis to secure
fulfillment of the the creditor to free the thing the debt of another.
principal obligation. from the encumbrance on (2085)
4. Subsidiary, fulfillment of the 4. Indivisible
because the Obligation. (2089): Indivisibility
 obligation of the is not affected by the
creditor does not fact that the debtors
arise until fulfillment are not
of the solidarily liable.
principal obligation. (2090)
5. Ownership is 6. May secure all
retained by the kinds of obligation
debtor (pure--conditional)
6. Indivisible, (2091)
because principal
obligation must be
fully paid before the
object pledged can
be released.
Perfected by Delivery Consent Constructive Delivery Consent;
*Delivery not
required for the
validity of the
contract itself. BUT,
it is required in
order that the
creditor may receive
the fruits.
 Formality Must be in writing Must be in writing. Must be in writing. Must be in writing,
(indicating otherwise, void.
1.description of *Must be registered in *Written or oral but the oral (Art. 2134)
thing pledged and chattel mortgage register mortgage is not binding
2.date of pledge) against third persons. *The amount of the
*Must include an Affidavit of principal and of the
*No registration Good Faith *Registered public document interest shall be
needed (for convenience. Art. 1358, 1st specified in writing;
par.) otherwise, the
contract shall be
void
(Art. 2134).
Deficiency in Deficiency cannot be Deficiency can be recovered Deficiency can be recovered Deficiency can be
foreclosure sale recovered (Art. except in case of personal recovered
2115) except in property sold on installment
pledges created by basis (Art. 1484) and lease
operation of law (Art of personal property with an
2121-2122) option to buy.
Excess in Excess is retained by Excess is to be returned to Excess is to be returned to the Excess is to be
foreclosure sale pledgee unless there the mortgagor mortgagor returned to the
is a stipulation to the mortgagor
contrary

Obligations it All kinds of Cannot secure future May secure future obligations All kinds of
may secure obligations obligations obligations
Use of the thing Use is not allowed Use is impossible. The Use is impossible. The Use is allowed.
unless authorized by property is not in the property is not in the Fruits will be
the owner or possession of the mortgagee possession of the mortgagee applied to the
necessary for it charges and interest
preservation but only on the principal
for that purpose. debt. (Art. 2132)
(Art. 2104)
Right to sell Pledgor can sell Mortgagor can sell property Mortgagor can sell property
thing pledged with mortgaged even without mortgaged even without
consent of pledgee consent of mortgagee consent of mortgagee
Delivery Delivery of the thing Delivery of the personal Actual delivery is not Delivery may or
pledge is necessary. property to the mortgage is necessary. may not be
not necessary. necessary.

Ownership Pledgor must be the Mortgagor must be the owner of the thing mortgaged, Debtor must be the
owner of the thing otherwise the mortgage is void. owner
pledged, otherwise
the pledge is void.
Transfer of Ownership is not Ownership is not transferred Ownership is not transferred Ownership is not
ownership transferred transferred
Validity Not valid against Not valid against third person Not valid against third The contract is valid
third persons unless unless registered in the persons if not registered in only between the
a description of the Chattel Mortgage Register. Registry of Deeds. parties.
thing pledged and
the date of the
pledge appear in a
public instrument.
Constitution of The thing can be The mortgagor can execute The mortgagor can execute Can only be
the contract on pledged only once. another mortgage on the same another mortgage on the same constituted once.
the same property. property.
subject
Rights & Pledgor’s Rights: Mortgagor’s Right: Mortgagor’s Right: Creditor
Obligations of 1) To alienate 1) To receive excess of 1) To alienate the thing Rights:
Parties the thing proceeds after having been mortgaged property but the 1. Compel debtor to
pledged applied to: mortgage shall remain enter again upon
provided the A. Costs and expenses of sale attached to the property. enjoyment of
pledgee B.Obligation secured by property except
consent to the mortgage *A stipulation forbidding the when there is
sale. C.Claims of persons holding owner from alienating the stipulation to the
2) To demand subsequent mortgages immovable mortgage shall be contrary. (Art. 2136)
the return in void being contrary to public
case of 2) To redeem property policy inasmuch as the Obligations
reasonable transmission of property 1. To pay the taxes
grounds to should not be unduly impede. and charges upon the
fear Mortgagee’s Right: estate unless there is
destruction or 1) To recover deficiency *in case of legal mortgage, a contrary
impairment of (except if chattel the right to compel each other stipulation.
the thing mortgage secured to observe the form required 2. To pay expenses
without the purchase of personal by law necessary for
pledgee’s property payable in 2) To redeem property; reservation and
fault, subject installments) For Judicial foreclosure, repairs. (Art. 2135)
to the duty of Equity of Redemption--
replacement. exercise before, but not after Debtor:
3) To bid and be confirmation of the sale (Obligation)
preferred at For Extrajudicial Foreclosure, 1.To pay what he
 the public Right of Redemption-- within owes the creditor in
auction. 1 year from date of order to reacquire
4) To ask that registration of sale the enjoyment of the
the thing immovable.
pledged be Mortgagee’s Right:
deposited in 1) To claim from third a
one of the person in possession of the
following mortgaged property the
cases: payment of the part of the
a) if the creditor credit secured by which said
uses the thing third person possesses.
without
authority. *It is necessary that prior
b) He misuses demand for payment must
the thing. have been made on the debtor
c) The thing is and the latter failed to pay.
endangered of
being lost or
impaired
because of
negligence or
willful act of
the pledgee.

Pledgor’s
Obligations:
1) To advise the
pledgee of the
 flaws of the
thing.
2) Not to
demand the
return of the
thing until
after full
payment of
the debt,
including
interest due
thereon and
expenses
incurred for
this
preservation.

Pledgee’s Rights:
1) Option to
demand
replacement
or immediate
payment of
the debt in
case of
deception as
to substance
or quality.
2) To be
reimbursed of
the expenses
made for the
preservation
of the thing
pledged.
3) To retain the
thing in his
possession or
in that third
person to
whom it has
been
delivered until
the debt is
paid.
4) To sell at
public auction
in case of
reasonable
grounds to
fear
destruction or
impairment of
the thing
without his
fault.
5) To bring
actions
pertaining to
the owner or
to defend it
against third
persons.
6) To choose
which of
several things
pledged shall
be sold.
7) To collect and
receive
amount due
on credit
pledged.
8) To bid at
public
auction,
unless he is
the only
bidder.
9) To
appropriate
the thing (not
automatic)
 Pledgee’s
Obligations:
1) To take care of
thing pledged
with the
diligence of a
good father of a
family
2) To be
responsible for
the acts of his
agents or
employees with
respect to the
thing pledged.
Remedies Sale of the thing Foreclosure of Chattel/Real Mortgage by public auction under 1) Action for
pledged at a public Act 1508 but the parties may stipulate that it may be by specific
auction. In case of private sale. performance
legal pledge, it can 2) Petition for
be made from the the sale of the
date of demand mortgages
otherwise; the debtor under Rule 68
may require the of the Rules
return of the thing. of
Court.
3) Judicial
Foreclosure
Requisites 1. Possession of In Chattel Mortgage, In Real Mortgage, 1) It can cover
the thing pledged 1) It can cover only 1) It can cover only only the fruits
must be personal or movable immovable property of an
transferred to the property in general; and alienable real immovable
creditor or a third however, the parties rights imposed upon property
person by may treat as personal immovable. 2) Delivery of
agreement property that which by 2) It must appear in a the
1) Subject its nature would be public instrument. immovable is
matter: real property. Registration in the registry of necessary for
movable and 2) Registration of the property is necessary to bind the creditor to
incorporeal rights mortgage with the third persons but not for the receive the
evidenced by Chattel Mortgage validity of the contract. fruits and not
documents of the Register where the that the
title and the mortgagor resides; if contract shall
instruments property is located in a be biding.
proving the right different province, 3) Amount of
pledged shall be registration in both the principal
delivered to the provinces is required. and interest
creditor and if 3) Description of the must be
negotiable must property as would specified in
be endorsed. enable the parties or writing.
The description of other persons to Express agreement
the thing pledged identify the same after that debtor will give
and the date of must reasonable possession of the
appear in a public investigation and property to creditor
instrument to bind inquiry. and that the latter
third persons but not 4) Accompanied by an will apply the fruits
for the validity of the affidavit of good faith to the interest if any
 contract. to bind thirds persons ten to the principal
but not for the validity of his credit.
of the contract.
5) It can cover only
obligations existing at
the time the mortgage
s constituted.

Extinguishmen 1) For the same 1) Foreclosure of the thing mortgaged. The debtor shall
t causes as all Judicial – ordinary action for foreclosure under Rule 68 of the have the right to the
other Rules of Court extinguishment of
obligations. the pledge or
2) Return of the Extra-judicial – when mortgagee is given a special power of mortgage as the
thing pledged attorney to sell the mortgaged property by public auction portion of the debt
by the under Act No. 3135 for which each thing
pledgee to the is especially
pledgor. answerable is
3) Statement in satisfied.
writing by the
pledge that he
renounces or
abandons the
pledge.
4) Payment of
the debt.
5) Sale of the
thing pledged
at public
 auction.
Appropriation under
Art. 2112.