NEED HELP!! Original OR/CR, Open Deed of SALE and Money Lending

Hello po mga attorneys and law student!

My friend have a small money lending business. Now "she" (babae po sya) wanted to try doing Car Money Lending. There are people who gambles and sometimes in the wee hour they need cash badly and is looking for people who has cash and they will use their car as a collateral.

According to my friend, here is the process:

1. The gambler is in need of money and will be using his/her car as a collateral in exchange for a few cash.

2. My friend will have a contract ready for the person to sign provided the following:
- Original OR/CR
- he/she must be the owner of the car
- Driver license

3. My friend will photocopy the owner driver license into 3 bond paper and have the owner sign it 3 times.

4. The owner will also sign a 4th piece of paper which is the contract state in there that he/she borrowed money from my friend with the amount $$$$$ with an interest of -% a day. Also in the same contract is also state that if the owner fails to pay or claim the car in 30 days the car will be considered SOLD to my friend.

5. After signing 4 pieces of paper, then my friend will give the money to the owner of the car and the car will be kept in my friends house until due date or till the owner comes back and claim it within the agreement period.



As a money lender what are the things she needs to consider before accepting the car as a collateral if:

A. The gambler is doing Buy and Sell and the OR/CR is not in his/her name but has an open deed of SALE?

B. Is a photocopy of OR/CR acceptable?


...Wala po ako kotse so Im not sure if this is a stupid Question:

C. Iba po ba ang OR/CR and deed of SALE?

D. Is the original OR/CR acceptable without a deed of SALE? Kasi meron na yun contract na sign nung owner (please refer to #4 above) can that be sufficient na kahit wala na DEED of SALE?


Please advise po. Thanks

hi welcome again

I think what your friend is doing is not proper because it does not conform with the requirements of law

If you are referring to a chattel mortgage contract, your friend has to comply with the following requirements of the Civil Code and the Chattel Mortgage Law

ESSENTIAL REQUISITES TO CONSTITUTE A
VALID CHATTEL MORTGAGE OVER PERSONAL
PROPERTY
(NOTE: ALL MUST CONCUR)
1. It must be constituted to secure the fulfillment
of principal obligation. (Art. 2085, NCC)
2. The mortgagor must be the absolute owner
of the thing mortgaged. (Art. 2085, NCC)
3. The persons constituting the mortgage have
the free disposal of the property and in the
absence thereof, they be legally authorized
for the purpose. (Art. 2085, NCC)
4. Must be recorded in the Chattel Mortgage
Register in order to bind third persons.

The first three requirements pertain to the
requirements of any valid mortgage under the Civil
Code.

REQUIREMENTS UNDER THE CHATTEL
MORTGAGE LAW FOR THE VALIDITY OF A
CHATTEL MORTGAGE
1. Substantial compliance with form in Sec. 5 of
the Chattel Mortgage Law.
2. The deed of mortgage must be signed by at
least 2 witnesses.
3. Deed must contain an affidavit of good
faith.
4. Deed must be accompanied by a certificate
of oath [notarial acknowledgment].

Additionally, the mortgage must also be registered at
the LTO in order to bind third persons
Whether the contract be categorized as a pledge or chattel mortgage, the provision that if the owner fails to pay or claim the car in 30 days the car will be considered SOLD to your friend is considered null and void because it is a
PACTUM COMMISSORIUM

PACTUM COMMISSORIUM is a stipulation where thing or mortgaged shall automatically become the property of the creditor in the event of nonpayment of the debt within the
term fixed

Requisites of pactum commissorium:
a. there should be a pledge or mortgage
b. there should be a stipulation for an automatic appropriation by the creditor of the property in the event
of nonpayment

when a mortgagor does not pay, the car cannot automatically belong to your friend because there are procedures she has to follow like foreclosure, auction etc

I see... Pero marami na ganun business right now. People in need of money have no choice but to sign 3 pieces of blank paper with thumbmark and surrender a valid ID (only driver's license and passport are acceptable). Ganun talaga yun negosyo nyan. My friend is new to this business and for those "veteran" na sa negosyo na to customer have to put thumbmark and signature on 3 blank sheets of paper.

Some veteran lender even accept car that is not registered on the owner's name. WE don't know how they deal with the car after due date but according to some sources, they have connection with LTO.

For those who just provide photo copy of OR/CR, upon due date they have their connection in LTO pull out the records so they can put the car FOR SALE.

My friend was thinking on doing this business for a while but she want to play it safe. Is the below requirements sufficient na ba?

- Valid ID (Passport or Driver's License) will be taken from the owner and will only return if they claim the car.
- Original OR/CR
- signature over printed name with thumb print on 3 pieces of blank paper on the lower right hand portion.


If people is badly in need of money and they only have their car for collateral, ano pa ba magagawa mo? Kung di mo tangapin meron iba kukuha. I mean nag heram isang tao sayo ng pera. The law requires proof. Now they can't pay you back and they want to claim the car back pa? Lugi naman yun nag nag pa heram sa kanya ng money if the Law does not allow that.

I always hear from radio station sa taxi re debate on "utang". always the problem is walang proof or agreement on that. Always yun advise ng abogado is to have it written in black and white. Now, meron CAR as a collateral in black and white paper, hindi pa ba sapat yun?


On your last statement above:

when a mortgagor does not pay, the car cannot automatically belong to your friend because there are procedures she has to follow like foreclosure, auction etc

Ano foreclosure? ano auction? I mean di na nga sya maka bayad ng utang nya, babalik pa ng friend ko sa kanya yun kotse? Seriously!!! Eh, pano na after sevreal months or several years later, di na talaga binalikan syempre the interest is a per day basis, di pa rin pwede sa friend ko yun car? ang labo naman....

So, what are the things you need to consider to make the car rightfully yours if the person cannot come back and claim the car? [u]

One last thing about this... This is not some sort of like bank mortgage or car loan with the car company. This is a person to person agreement.


Stranger #1 : Pare, in need ako pera ngayon. Pwede paheram?

Stranger #2 : How much ba?

Stranger #1 : Mga 500,000 pesos lang

Stranger #2: Ang laki naman. Di kita kilala eh.

Stranger #1: In need ko lang pera talaga.. pwede ko ba isanla kotse ko sayo?

Stranger #2: Pero pare, malaki talaga yun halaga ng heram mo eh. Mag kasulatan na lang tayo ng agreement para make sure ko na ibabalik mo yun pera sa akin. Pero meron tong interest ha at daily eto. Pag di mo naibalik yun pera in 30 days, bigyan kita ng palugit pa ng 8 days. Pag wala talaga yun pera by then ibebenta ko na ha. Kasi kelangan ko rin yun pera para sa debut ng anak ko in 4 months time. Ok lang ba?

Stranger #1: hmm... sige, kelangan talaga eh. Kung yun lang ang way na para makaheram lang ako sayo.

Stranger #2: Sige, paki lagay signature mo dito sa tatlong papel and maglagay ka ng thumbmark. Then, kelangan iwan mo sa akin driver's license mo, OR/CR and syempre yun kotse mo.

Stranger #1: (Follow all instructions and surrender his car, license, OR/CR to stranger#2) Salamat pare, babalikan ko yun kotse.

Stranger #2: Eto na yun 500k. Babalik ka ha...

Stranger #1: Syempre!!!


After 40 days, stranger #2 didn't get any calls nor text from stranger #1 and in 2 months time he needs the money badly for his daughter debut.


Even inside the casino. Meron din nagsasanla ng cellphones at 2% a day interest for a maximum of 15 days. Afterwhich, the cellphones are being SOLD off to other people or it's already owned by the lender na. Marami din mga abogado nagsasanla ng cellphones. Wala naman mga abogado binalikan yun lendor just because of the "Civil Code" you cited above. So kelangan pa ba ng forclosure and auction para maging rightfully yours yun cellphones? I think the same lang yun CAR except siguro risky lang pag hindi original yun OR/CR.


So, di pa rin nya pwede ibenta yun car? Kahit naka black and white na yun agreement?

there is no question that there is a valid credit transaction, however, the problem lies with the security ( collateral)

kung gusto po ng friend mo na mag play safe, dapat naaayon sa batas ang documents nya.

tama po c joker, may mga proseso na dapat sundin. hindi automatic na pag aari na ng friend mo ung car pag di nakabayad ung umutang. the legal term for this is Pactum Commissorium. This is unlawful.

kailangan muna ng foreclusure tapos may bidding. Pag walang bidder e pwede na mapunta sa friend mo. Do u notice pawnshops conduct auction sale of jewelries na naremata? Ganun ung proseso, they are even required to publish it sa newspaper. Same is true with banks, they also have foreclosure sales.

pag matalino ung naka utang, pwede pa nya mabawi ung sasakyan nya pag hindi nasundan ang tamang proseso

I think I got it na.

So my friend will have to advertise the car for auction, tama po ba? Even if the lending of money is a person-to-person agreement?

Banks and Pawnshop are business kasi. So, they have to abide by the law coz it's a "business".

In my friend's case, parang agreement between 2 person.

Eto po scenario:

Scenario #1: Bunny borrowed 1,000 pesos from his neighbor Donald Duck. Donald refuse because it's a lot of money. Bunny then took his TV and pawned it to Donald promising Donald that he will return it in 5 days.

Scenario #2: Don is loosing money and he only has his cellphone to exchange of money. He talked to his friend and borrowed P1,000 and promise his friend that he will return the money in 5 days time and will pay interest for his cellphone.


Question:

A. Even as simple as an OLD TV and a CHEAP Cellphone, do you still have to go through "foreclosure and auction" after 10 days because the person who owes you money can't claim it back anymore?

B. How do you go about the "foreclosure" thingy? Saan po i-bid yun OLD TV and a cheap cellphone?

C. What do you mean "foreclosure"?

D. If the items went into bidding and there is a buyer? then what happened to the money? Does it goes to Bunny and Don? or does the money goes to the lender? How about the interest and the agreement in black and white? Will all the interest be paid from the day Donald borrowed money up to the date the car is sold on an auction?




**********************************************************************


Back to the Car topic.

Remember the person who borrowed money will have to sign 3 blank sheets of paper together with his thumbprint. Those paper will then become a DEED OF SALE after the maturity date. DEED of SALE na po yun, hindi pa rin ba pwede sa kaibigan ko na yun kotse?

banks and pawnshops are governed by special laws but the principles are basically thesame.

Even if its a person to person agreement, the law shall still be followed. This may be absurd to others because it is not usually practiced.

my answers to questions ABCD are the provisions of the civil code on pledge

Art. 2112. The creditor to whom the credit has not been satisfied in due time, may proceed before a Notary Public to the sale of the thing pledged. This sale shall be made at a public auction, and with notification to the debtor and the owner of the thing pledged in a proper case, stating the amount for which the public sale is to be held. If at the first auction the thing is not sold, a second one with the same formalities shall be held; and if at the second auction there is no sale either, the creditor may appropriate the thing pledged. In this case he shall be obliged to give an acquittance for his entire claim. (1872a)

Art. 2113. At the public auction, the pledgor or owner may bid. He shall, moreover, have a better right if he should offer the same terms as the highest bidder.

The pledgee may also bid, but his offer shall not be valid if he is the only bidder. (n)

Art. 2114. All bids at the public auction shall offer to pay the purchase price at once. If any other bid is accepted, the pledgee is deemed to have been received the purchase price, as far as the pledgor or owner is concerned. (n)

Art. 2115. The sale of the thing pledged shall extinguish the principal obligation, whether or not the proceeds of the sale are equal to the amount of the principal obligation, interest and expenses in a proper case. If the price of the sale is more than said amount, the debtor shall not be entitled to the excess, unless it is otherwise agreed. If the price of the sale is less, neither shall the creditor be entitled to recover the deficiency, notwithstanding any stipulation to the contrary. (n)

the proceeds of the sale shall go to the lender, subject to the rules above cited if there is an excess or deficiency. yes the interest shall be computed from the day the money is borrowed

the mortgage of a car shall be governed by the chattel mortgage law. The procedure for foreclosure is governed by Section 14, Act No. 1508 of the Chattel Mortgage Law

SEC. 14 The mortgagee, his executor, administrator, or assign, may, after thirty days from the time of condition broken, cause the mortgaged property, or any part thereof, to be sold at public auction by a public officer at a public place in the municipality where the mortgagor resides, or where the property is situated, provided at least ten days notice of the time, place, and purpose of such sale has been posted at two or more public places in such municipality, and the mortgagee, his executor, administrator, or assign, shall notify the mortgagor or person holding under him and the persons holding subsequent mortgages of the time and place of sale, either by notice in writing directed to him or left at his abode, if within the municipality, or sent by mail if he does not reside in such municipality, at least ten days previous to the sale.

YOur friend's practice is very risky and unjust. The debtor can question later on the alleged deed of sale because he was merely made to sign a blank paper and it was not his intention to sell the car. It is just proper if they execute a chattel mortgage contract and foreclose it later on so that everything shall be in accordance with the law.

here is an example of a chattel mortgage contract

CHATTEL MORTGAGE

KNOW ALL MEN BY THESE PRESENTS:

I, (Name of Mortgagor) of legal age, single/married to____________________ with postal address at _____________________________hereinafter known as the MORTGAGOR, and _________________________________ of legal age, single/married to ______________________ with postal address at _______________________________ hereinafter known as the MORTGAGEE, witnesseth:

That the MORTGAGOR is indebted unto the MORTGAGEE in the sum of (Amount in Words) (000,000.00), Philippine Currency, receipt of which is acknowledged by the MORTGAGOR upon the signing of this instrument, payable within a period of _____ years, with interest thereon at the rate of (___) % per annum;

That for, and consideration of , this indebtedness, and to assure the performance of said obligation to pay, the MORTGAGOR hereby conveys by way of CHATTEL MORTGAGE unto the MORTGAGEE, his heirs and assigns, the following personality now in the possession of said MORTGAGOR

MAKE :
MOTOR NO. :
SERIES :
SERIAL/CHASSIS NO. :
TYPE OF BODY :
PLATE NO. :
YEAR MODEL :
FILE NO. :

That the condition of this obligation is that should the MORTGAGOR perform the obligation to pay the hereinabove cited indebtedness of (Amount in Words) (000,000.00) together with accrued interest thereon, this chattel mortgage shall at once become null and void and of no effect whatsoever, otherwise, it shall remain in full force and effect.


IN WITNESS WHEREOF, the parties have hereunto set their hands, this ____day of ______ 2008______ at ____ Philippines.

_______________________________ _______________________________

MORTGAGOR MORTGAGEE

IN THE PRESENCE OF:

_______________________________ _______________________________



ACKNOWLEDGEMENT


Republic of the Philippines)
________________________ ) S.S

BEFORE ME, personally appeared:

Name CTC Number Date/Place Issued

(Name of Mortgagor) 10000000 Jan 01, 08 / Quezon City
(Name of Mortgagee) 10000000 Jan 11, 08 / Las Pinas City

Known to me and to me known to be the same persons who executed the foregoing instrument and acknowledged to me that the same is their free and voluntary act and deed.

WITNESS MY HAND AND SEAL, on the date and place first above written.



Notary Public

Doc. No.______;
Page No. ______;
Book No.______;
Series of 2008.


Note: Chattel mortgages requires an Affidavit of Good Faith attached to it -sample below:



AFFIDAVIT OF GOOD FAITH

We, the undersigned MORTGAGOR AND MORTGAGEE hereby jointly and severally swear that we executed the foregoing Chattel Mortgage in order to secure the indebtedness therein and for no other purpose or purposes contrary to law.


____________________________ _____________________________
MORTGAGOR MORTGAGEE

Pwede po ba paki add if the customer provided you only a photo copy of an OR/CR that after due date the lender may have to require the customer to bring the original copy or that the lender with his/her authorization may proceed to LTO and have the original copy printed or pulled out. Pwede po ba ganun?

What I meant is if my friend used the above template for those who only brings a copy of an OR/CR. Kasi sa casino, if people are loosing money it's usually at the wee hour. They need instant cash. But sometimes these people only have the photo copy of an OR/CR. But they are the owner. Pwede po ba ganun?

Do we have law re loan using a photocopy of an OR/CR?

Please advise. Thanks.

I think my friend will just go with the trend. Have the customer signed on a 3 pieces blank paper with his thumbmark. Surrender his/her car, with original OR/CR and driver's license.

What can they do? Once after the due date the signed paper will then become an Open Deed of SALE. They can't demand anything anymore. It's their signature and thumbmark on it. If they say that they signed a blank piece of paper, they have to prove it. But by law they have already signed an Open Deed of Sale..

That's Life!!

honeysweet, good luck to your friend and thanks for dropping by. im looking forward meeting your friend at the casino when I ran out of chips