PLEDGE MORTGAGE

CHATTEL REAL ESTATE

MORTGAGE MORTGAGE
DEFINITION It is a contract by virtue of By a chattel A real estate
which the debtor delivers mortgage, personal mortgage is a
to the creditor or to a third property is recorded contract
person a movable in the Chattel whereby the
or a document involving Mortgage Register as debtor secures
incorporeal rights a security for the to the creditor
for the purpose of performance of an the fulfillment
securing the fulfillment obligation. If the of a principal
of a principal obligation movable, instead of obligation,
with being recorded, is specially
the understanding delivered to the subjecting to
that when the creditor or a third such security
obligation is person, the contract is a immovable
fulfilled, the pledge and not a property
thing delivered chattel mortgage. or real rights
shall be returned (Art. 2140) over
with all its fruits immovable
and accessions. property in
case the
principal
obligation is
not complied
with at the
time stipulated

PURPOSE To secure To secure fulfillment To secure

fulfillment of a of principal obligation fulfillment of
principal principal
obligation. obligation

PARTIES Pledgor & Mortgagor & Mortgagee Mortgagor & Mortgagee

Pledgee

SUBJECT MATTER All personal or movable 1. Immovables

movables, property. 2. Alienable
which rights imposed
are upon
within immovables
commerce,
may
be
pledged,
provided
they
are
susceptible
of
possession.
(Art.
2094)
 Incorporeal
rights (Art.
2095.)

KINDS 1. Voluntary or 1. Voluntary

conventional
(created by Agreed to
agreement of the between the
parties); parties or
2. Legal (by constituted by
operation of law). the will of the
owner of the
property
2. Legal

Required by
law to 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.

NATURE Real 1. Mortgage is a

, because it It is an real
is perfected by accessory ,
delivery of the contract accessory
thing pledged. because it ,
2. secures performance and
Acessory of a principal subsidiary
, obligation contract
because it has no 2.
independent It is a
existence. formal
3. contract
Unilateral because it
, requires registration
because it creates an in the Chattel
obligation Mortgage
solely on the part 3.
of the creditor to It is a
return the unilateral
thing pledged contract
upon fulfillment because it
 of the principal produces only
obligation. obligations on the
4. part of
Subsidiary the creditor to free
, the thing from the
because the encumbrance on
obligation of the fulfillment of the
creditor does not obligation.
arise until
fulfillment of the
principal
obligation.
Register for its
validity (but only
against third
persons)

PERFECTION Real There CONSENSUAL REAL

must be delivery CONTRACT
of the thing. BUT NO
DELIVERY

FORMALITY Must be in Must be in writing, a Must be in

writing specific form is writing, a
No registration required. specific form is
needed Formal required.
Registered in chattel Formal
mortgage register Written or oral But
the oral mortgage
is not binding
against third
persons.
Registered public
document

LIABILITY Serves as an accessory contract

*with regard to suretyship it is contractual and accessory but direct. In other words he
is directly,
primarily and equally bound with the principal as original promisor although he
possesses no direct or personal interest over
the latters obligations nor does he receive any benefit therfrom. (Garcia, Jr. Vs. CA)

DELIVERY Delivery of the thing In Chattel Mortgage In Real

pledge is necessary.
, Mortgage
delivery of the personal Delivery may or
, property to the may not be
mortgage is not not necessary
necessary.

OWNERSHIP Pledgor must be the Mortgagor must be the Mortgagor must be the
owner of the thing owner of the owner of the
pledge, otherwise thing mortgaged, thing mortgaged,
the pledge is void. otherwise the mortgage otherwise the mortgage
 is void is void

VALIDITY Not valid against In Chattel Mortgage In Real

third persons unless , Mortgage
a description of the not valid against third , not
thing pledged and person unless valid against
the date of the registered in the third persons if
pledge appear in a Chattel Mortgage not registered
public instrument. Register.

PROHIBITION Against Pactum

Commissorium

REMEDIES Sale of the thing Foreclosure of Chattel

pledged at a public Mortgage by
auction. In case of public auction under Act
legal pledge, it can 1508 but the
be made from the parties may stipulate that
date of demand it may be by
otherwise; the private sale
debtor may require
the return of the
thing.

SPECIAL 1. Possession of In Chattel Mortgage In Real

the thing pledged , Mortgage,
REQUISITES must be 1) 1)
transferred to the It can cover It can
creditor or a third only personal cover
person by or movable only
agreement property in immo
2) general; vable
Subject however, the proper
matter: parties may ty and
movable and treat as aliena
incorporeal rights personal ble
evidenced by property that real
documents of the which by its rights
title and the nature would impos
instruments be real ed
proving the right property. upon
pledged shall be 2) immo
delivered to the Registration vable.
creditor and if of the 2)
negotiable must mortgage It
be endorsed. with the must
The description of Chattel appea
the thing pledged Mortgage r in a
and the date of must Register public
appear in a public where the instru
instrument to bind mortgagor ment.
third persons but not
resides; if Registration in
property is the registry of
for the validity of located in a
the contract. property is
different
necessary to
province,
registration in
bind third
 both persons but not
provinces is for the validity
required. of the contract
3)
Description of
the property
as would enable the
parties or
other persons
to identify the
same after
reasonable
investigation
and inquiry.
4)
Accompanied
by an
affidavit of
good faith to
bind thirds
persons but
not for the
validity of the
contract.
5)
It can cover
only
obligations
existing at
the time the
mortgage s
constituted

EXTINGUISHMENT 1) 1)
For the Foreclosure of the thing
same mortgaged.
causes as
Judicial ordinary action for foreclosure
all other
obligations.
under Rule 68 of the Rules of Court
2) Extra-judicial when mortgagee is given
Return of a special power of attorney to sell the
the thing mortgaged property by public auction
pledged by under Act No. 3135
the
pledgee to
the
pledgor.
3)
Statement
in 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.