CHATTEL MORTGAGE

CHATTEL MORTGAGE – personal property is registered with ROD to secure performance of an obligation

SUBJECT MATTER: movables

DEED OF MORTGAGE: requires only description to enable parties & other persons to identify the subject matter

REGISTRATION OF CHATTEL MORTGAGE
1. Execution of document

2. Payment of fees

3. ROD enters in DAY BOOK in strict order of their presentation chattel mortgages & other instruments relating thereto (primary process)

4. ROD thereafter enters in a more detailed form the essential contents of the instrument in the Chattel Mortgage Register (complementary process)

EFFECT OF REGISTRATION:
1. Creates a lien – attaches to the property whoever holds it; binding on subsequent purchasers

2. Constructive notice

SALE OF CHATTEL WITHOUT CONSENT OF MORTGAGEE – void; criminal act

EFFECT OF FAILURE TO REGISTER:
• Valid between parties but void against 3rd persons

• If instead of registration, it is delivered – it shall be a pledge & not chattel mortgage (if no chattel mortgage deed executed)

• Actual knowledge is same effect as registration

AFFIDAVIT OF GOOD FAITH:

Statement That –
1. Mortgage is made to secure obligation specified
2. Valid & just obligation
3. Not entered into for purpose of fraud

EFFECT OF ABSENCE OF AFFIDAVIT OF GOOD FAITH:
• Vitiates mortgage as against creditors & subsequent encumbrances

• Valid as between parties

• No need to be in public document

ASSIGNMENT OF MORTGAGE: No need to be registered, permissive only & not mandatory

CANCELLATION OF CHATTEL MORTGAGE: Mortgagee to execute a discharge of the mortgage in manner provided by law

FORECLOSURE OF MORTGAGE
• There must first be non-payment & at least 30 days have elapsed since then

• Alternatives:
1. Judicial
2. Extra-judicial – only if there is stipulation/authority

PROCEDURE IN FORECLOSURE
1. Notice posted for 10 days in at least 2 public places in municipality where property is to be sold designating the time, place and purpose of sale

2. Mortgagor is notified in writing at least 10 days before sale

3. Public auction
4. 30 days after sale, officer makes a return & file with ROD where mortgage has been recorded

5. Officer’s return operates as a discharge of the lien created by the mortgage

6. Proceeds to be applied:
a. Cost of sale
b. Amount of obligation
c. Subsequent mortgages
d. Balance – mortgagor

RECOVERY OF DEFICIENCY: Allowed