ACT NO.

3952 (As Amended) - THE BULK SALES LAW

Section 1. This Act shall be known as "The Bulk Sales Law."

Purpose and general scheme of the Bulk Sales Law. 1 — (a) Purpose. — Bulk Sales Act is designed to prevent the
defrauding of creditors by the secret sale in bulk of substantially all of a merchant's stock of goods. (b) General scheme
— The general scheme of these statutes is to declare such bulk sales fraudulent and void as to creditors of the vendor,
or presumptively so, unless specified formalities are observed, such as the demanding and the giving of a list of
creditors, the giving of actual or constructive notice to such creditors, by record or otherwise, and the making of an
inventory. (27 C.J. Sec. 881.)

Constitutionality of the Law. — The Bulk Sales Law is constitutional. (Liwanag v. Menghraj, 40 Off. Gaz. 1441.) Bulk sales
statutes have been sustained as a constitutional exercise of the police power, and as such not in violation of the
constitution prohibiting the enactment of laws which shall deprive any person of life, liberty, or property without due
process of law, or which shall deny to such person the equal protection of the laws. Nor do they infringe constitutional
provisions guaranteeing the right of acquiring, possessing, and protecting property. (27 C.J. Sec. 882.)

Construction of the Law. — These statutes should be read as a whole for purposes of construction. As they are of a penal
character, and in derogation of common law, and of the right to alienate property without restriction, they are to be
strictly construed, and are not to be extended by construction to situations not clearly intended thereby. However,
these statutes should be construed and applied with a view to cure the evil at which they are aimed, which is the
defrauding of creditors by secret bulk sales. (27 C.J. Sec. 884.)

Effect of the Bulk Sales Law as to other fraudulent conveyances. — The effect of bulk sales laws is to create a new type
or kind of fraudulent conveyance (Kelley-Buckley Co. v. Cohen, 195 Mass 585, 81 N.E. 297; Riley Pennsylvania Oil Co. v.
Symmonds, 195 Mo. A. 111, 190 S.W. 1038; Joplin Supply Co. v. Smith, 182 Mo. A. 212, 167 S.W. 649); hence, the
provisions of Arts. 1381–1389 of the new Civil Code will not have the effect of modifying the Bulk Sales Law, and will be
applicable only as suppletory law insofar as they are not in conflict with said law.

Sec. 2. Any sale, transfer, mortgage or assignment of a stock of goods, wares, merchandise, provisions, or materials
otherwise than in the ordinary course of trade and the regular prosecution of the business of the vendor, mortgagor,
transferor, or assignor, or any sale, transfer, mortgage, or assignment of all, or substantially all, of the business or
trade theretofore conducted by the vendor, mortgagor, transferor, or assignor, or of all, or substantially all, of the
fixtures and equipment used in and about the business of the vendor, mortgagor, transferor; or assignor, shall be
deemed to be a sale and transfer in bulk, in contemplation of this Act: Provided, however, That if such vendor,
mortgagor, transferor, or assignor, produces and delivers a written waiver of the provisions of this Act from his
creditors as shown by verified statements, then, and in that case, the provisions of this section shall not apply.

What shall be deemed to be a sale and transfer in bulk. 2 — A sale and transfer in bulk is any sale, transfer, mortgage or
assignment (1) of a stock of goods, wares, merchandise, provisions, or materials otherwise than in the ordinary course of
trade and the regular prosecution of the business of the vendor, mortgagor, transferor, or assignor, or (2) of all, or
substantially all, of the business or trade theretofore conducted by the vendor, mortgagor, transferor, or assignor, or (3)
of all, or substantially all, of the fixtures and equipment used in and about the business of the vendor, mortgagor,
transferor, or assignor. (Sec. 2, Bulk Sales Law.)

Same; Exceptions to the rule. 3 — It will not be deemed a sale and transfer in bulk in contemplation of this Act, (1) if
such vendor, mortgagor, transferor, or assignor produces and delivers a written waiver of the provisions of this Act from
his creditors as shown by verified statements (Sec. 2, Bulk Sales Law), or (2) if such vendor, mortgagor, transferor, or
assignor is an executor, administrator, receiver assignee in insolvency, or public officer, acting under judicial process.
(Sec. 8, Bulk Sales Law.)

Term "sellers," explained. — The statutes generally do apply to retail merchants, traders, or dealers, and generally only
to persons of that class. (27 C.J. Sec. 888.)

Term "creditors," explained. — The term "creditors" as descriptive of the persons in whose favor the statute declares a
bulk sale fraudulent and void is usually not restricted to any particular class of creditors, but includes all persons who
were creditors of the seller at the time of the sale, although their claims had not been reduced to judgment, or were not
due, and although they were not creditors for merchandise, but were merely general creditors of the seller in other
transactions. But only those who were creditors at the time of the sale complained of are entitled to the benefits of the
statute; creditors whose claims came into existence subsequent to the sale are not protected thereby. (27 C.J. Sec. 888.)

Waiver and estoppel of creditors. — Creditors may waive the right to the benefit of the bulk sales statutes, or estop
themselves to claim that the sale was invalid because the requirements of the bulk sales statutes were not complied
with. The benefit of the statutes is for those who take the steps prescribed thereby in order to protect their claims.
There is no estoppel unless the conduct was relied on by the other party to his prejudice, in accordance with the rule as
to estoppel generally. (27 C.J. Sec. 887.)

Term "stock, " explained. — The common use of the term "stock" when applied to the goods in a mercantile house
refers to those which are kept for sale. (Albrecht v. Cudihee, 37 Wash. 206, 208, 79 P. 628.)

Term "merchandise," explained. — We think that "merchandise," as used in this act, must be construed to mean such
things as are usually bought and sold in trade by merchants. (People's Sav. Bank v. Van Allsburg, 165 Mich. 524, 526, 131
N.W. 101.) "Merchandise" means something that is sold every day, and is constantly going out of the store and being
replaced by other goods. (Boise Credit Men's Ass'n. v. Ellis, 26 Ida. 438, 449, 144 P. 6, L.R.A. 1915 E, 917.) Thus,
"merchandise" may include a stock of meat and other merchandise such as is usually sold in a market (Virginia-Carolina
Chemical Co. v. Bouchelle, 12 Ga. A. 611, 78 S.E. 51), or liquors kept in a saloon for sale (Marshon v. Toohey, 38 Nev.
248, 148 P. 357); but land and buildings are not "goods, wares, and merchandise" within the statute. (McMillen v.
Nelson, [N. D.] 181 N.W 618; National Trust Co. v. Nadon, 8 Sask. L. 41, 24 Dom. L.R. 742, 30 West L.R. 588, 7 West Wkly.
1067; Barthels v. Sloance, 7 Sask, L. 376.)

Term "fixtures," explained. — When used in statutes of this character, it refers to such articles of merchandise usually
possessed and annexed to the premises occupied by them to enable them better to store, handle, and display their
wares and which are commonly known as trade fixtures, although removable without material injury to the premises at
or before the end of tenancy. (Brown v. Quigley, 165 Mich. 337, 130 N.W. 690, 34 L.R.A.N.S. 218 [foll. People's Sav. Bank
v. Van Allsburg, 165 Mich. 524, 131 N.W. 101.].) But a store building containing a stock of merchandise and being used
for transactions of mercantile business is not a fixture. The statute has reference to trade fixtures connected with the
business and not to the building in which the business is carried on. (Robbins v. Fuller, [Ark.] 229 S.W. 8; McMillen v.
Nelson, [N. D.] 181 N.W. 618.)

"Exempt properties," not within the law. — Bulk sales statutes are intended to operate only on property to which
creditors may look for satisfaction of their claims and consequently have no application to property which is exempt. (27
C.J. Sec. 889.) See "Property exempt from execution," Sec. 12, Rule 39, Rules of Court. See also Sec. 35, Act No. 3428, as
amended; Arts. 223 et seq., and 1708, new Civil Code; and Sec. 17, Rep. Act No. 1161 (refer to annotations placed above
Sec. 48, Insolvency Law, in Volume 2.)

Sec. 3. It shall be the duty of every person who shall sell, mortgage, transfer, or assign any stock of goods, wares,
merchandise, provisions or materials in bulk, for cash or on credit, before receiving from the vendee, mortgagee, or
his, or its agent or representative any part of the purchase price thereof, or any promissory note, memorandum, or
other evidence therefor, to deliver to such vendee, mortgagee, or agent, or if the vendee, mortgagee, or agent be a
corporation, then to the president, vice-president, treasurer, secretary or manager of said corporation, or, if such
vendee or mortgagee be a partnership firm, then to a member thereof, a written statement sworn to substantially as
hereinafter provided, of the names and addresses of all creditors to whom said vendor or mortgagor may be
indebted, together with the amount of indebtedness due or owing, or to become due or owing by said vendor or
mortgagor to each of said creditors, which statement shall be verified by an oath to the following effect:

PHILIPPINE ISLANDS ) S.S.

PROVINCE OR CITY OF )

Before me, the undersigned authority, personally appeared _________ (vendor, mortgagor, agent or
representative, as the case may be), bearing Res. Cert. No. _____________ issued at _________ on the
__________ day of ___________, who, by me being first duly sworn, upon his oath, deposes and states that the
foregoing statement contains the names of all the creditors of ______________ (vendor, mortgagor) together
with their addresses, and that the amount set opposite each of said respective names, is the amount now due
and owing, and which shall become due and owing by _____________ (vendor or mortgagor) to such creditors,
and that there are no creditors holding claims due or which shall become due, for, or on account of goods,
wares, merchandise, provisions or materials purchased upon credit or on account of money borrowed, to carry
on the business of which said goods, wares, merchandise, provisions of materials are a part, other than as set
forth in said statement.

_______________________
(Signature of vendor, etc.)

Subscribed and sworn to before me this ___________ day of __________, 19____, at ____________

Sufficiency of statement. — Substantial compliance with the statute is essential to validity of the sale or transfer. (In re
Calvi, 185 Fed. 642; Peck v. Hibben, 185 Ind. 623, 114 N.E. 216; Interstate Shirt, etc. Co. v. Windham, 165 Mich. 648, 131
N.W. 102.) A verbal statement that the seller had no creditors is not sufficient compliance with a statute requiring the
statement to be in writing and under oath. (Peck v. Hibben, supra.) If the seller has no creditors, an unequivocal
statement of this fact is necessary in the statement. (Interstate Shirt, etc. Co. v. Windham, supra; Fitzhugh v. Munnell, 92
Or. 47, 179 P. 679.) An affidavit stating that a stock sold is "entirely free from debt and that there is no encumbrance
thereon, except a certain chattel mortgage given to" a specified person is insufficient as against existing creditors of the
seller. (Interstate Shirt, etc. Co. v. Windham, supra.) The statute contemplates not only creditors whose claims are due
but those whose claims are not due and the statement must state the facts as to both class of creditors if both exist and
if there are none such, the latter fact must be stated. The statement is ineffectual if it fails to give the addresses of the
creditors. If the statement is defective on its face, the buyer accepts it at his peril. (Fitzhugh v. Munnell, supra.)

Effect of false statement. — If the statement is fair upon its face and the buyer has no knowledge of its incorrectness,
and nothing to put him on inquiry about it, he will be protected in his purchase. (International Silver Co. v. Hull, 140 Ga.
10, 78 S.E. 609, 45 L.R.A.N.S. 492; Fitzhugh v. Munnell, 92 Or. 47, 179, P. 679; Coach v. Gage, 70 Or. 182, 138 P. 847.) If
the seller misrepresents the amount of his indebtedness, the creditor has no remedy against the goods sold, but he can
prosecute the seller criminally. (Seltzer v. Peddi, 24 Pa. Dist. 456, 41 Pa. Co. 677.) The statute declares the sale void only
on the failure of the purchaser to do what is required of him. It does not declare the sale void if the list of creditors
furnished by a vendor under oath is not in fact "full, accurate and complete." It does not in any way make the purchaser
responsible for any incorrectness in the list. We think it would be unreasonable to so construe it. (Glantz v. Gardiner, 40
R.I. 397, 100 A. 913, 916, L.R.A. 1917 L. 226.)

Sec. 4. Whenever any person shall sell, mortgage, transfer, or assign any stock of goods, wares, merchandise,
provisions or materials, in bulk, for cash or on credit, and shall receive any part of the purchase price, or any
promissory note, or other evidence of indebtedness for said purchase price or advance upon mortgage, without
having first delivered to the vendee or mortgagee or to his or its agent or representative, the sworn statement
provided for in section three hereof, and without applying the purchase or mortgage money of the said property to
the pro rata payment of the bona fide claim or claims of the creditors of the vendor or mortgagor, as shown upon
such sworn statement, he shall be deemed to have violated this Act, and any such sale, transfer or mortgage shall be
fraudulent and void.

What are prohibited are secret conveyances. — What are prohibited are secret conveyances, those made
unaccompanied by a sworn list of creditors and without previous payment of their credits, and those made gratuitously
or for a nominal consideration. Thus, the Bulk Sales Law does not include within its prohibition sales or mortgages made
by a debtor to one of his creditors in preference to another. (Go v. Phil. Nat. Bank, 40 Off. Gaz. 2065; see also Sec. 7, Bulk
Sales Law.)

Same; Effect of lack of sworn list of creditors. 4 — A sale made of all the effects in the vendor's store without the buyer
being furnished a sworn list of creditors as required by Sec. 3, is null and void irrespective of the good or bad faith of the
buyer, and judgment creditors may treat such sale as never having been made and proceed to have execution levied on
the properties thus sold. (Chin Asing v. Uy Gongco & Co., [CA] 40 Off. Gaz. 11th Supp. 142.)

Rights and liabilities; As between purchaser and creditors. 5 — A purchaser in violation of the Bulk Sales Act acquires no
rights in the property purchased as against the creditors of the seller. His status is that of trustee, or receiver for the
benefit of all the creditors of the seller. As such he is responsible for the disposition of the property. The fact that he has
mingled the goods with his own so as to destroy their identity, or that he has resold the property, does not divest him of
his liability to creditors, but on the contrary operates to impose a personal liability. Application by the seller of the
proceeds of a bulk sale to the payment of some of his creditors does not affect the buyer's liability to other creditors
who received none of the proceeds. Where a purchaser does not comply with the law, the mere fact that on his request
the creditor sought to collect from the seller does not raise an estoppel against him to sue them on his primary liability
to them. (27 C.J. Sec. 892.)

Same; As between purchaser and seller. — The bulk sales statutes do not in any way affect the validity of the transfer as
between the immediate parties thereto. A sale not in compliance with the bulk sales statute is valid as against all
persons other than creditors. Notwithstanding a noncompliance with the statutes, title to goods transferred passes to
the transferee as between the parties to the transfer, where it remains until divested by proceedings instituted by a
creditor for that purpose. If the seller has been guilty of fraud to the injury of the buyer, or if there has been an entire
failure of the consideration, the seller cannot hide behind the statute and thus avoid liability to the purchaser. So the
statute does not preclude the seller from recovering the purchase price of a sale made in violation of its terms; but,
where a sale is void for noncompliance with the bulk sales statutes, it cannot as between the parties be made to operate
to give the vendee a lien for the money he has paid. The vendee, having acted in violation of the law, does not come into
equity with clean hands, and is not in a position to ask for any remedy in a court of equity. It is not a ground to rescind
an entire contract by which property is exchanged for merchandise, without complying with the statutes, that there is a
partial failure of consideration by reason of the fact that creditors assert rights to a part of the merchandise, but
damages to the extent to which the buyer was injured will be awarded. (27 C.J. Sec. 893.)

Same; Between creditors and subsequent purchasers. 6 —The statute does not confer on the creditors of the vendor
who fail to comply with its requirements the right to pursue the property in whosoever hands it may fall. To authorize
the giving of relief to creditors it must be shown that the holder of the property transferred is the fraudulent vendee
himself or some person who took the property from him with knowledge that the transfer was fraudulent. The statutes
do not render an innocent purchaser for value from the original purchaser liable to creditors of the original seller nor
affect his title to the property. But if the circumstances are such as to bind the subsequent purchaser with constructive
notice that the sale to his vendor was fraudulent, the property will be liable in his hands to creditors of the original
vendor. (27 C.J., Sec. 894.)

Remedies available to creditors. — Under the general prevailing rule that mere non-compliance with the statute does
not render the purchaser personally liable to creditors, an ordinary action against the purchaser by creditors to obtain a
money judgment will not lie, unless the purchaser has sold or otherwise disposed of, or dealt with, the property, so as to
become personally liable to creditors for the value of it. The proper remedy is one against the goods to subject them to
the payment of the debt, such as execution, attachment, garnishment, or by a proceeding in equity. (27 C.J. Sec. 895.)

Same; Replevin. — A creditor of the seller cannot maintain replevin against the purchaser to recover property sold in
contravention of the Bulk Sales Act. But the purchaser may maintain replevin to recover property seized on attachment
or execution against the seller, and in such action the validity of the sale may be determined. (27 C.J. Sec. 900.)

Sec. 5. It shall be the duty of every vendor, transferor, mortgagor, or assignor, at least ten days before the sale,
transfer or execution of a mortgage upon any stock of goods, wares, merchandise, provisions or materials, in bulk, to
make a full detailed inventory thereof and to preserve the same showing the quantity and, so far as is possible with
the exercise of reasonable diligence, the cost price to the vendor, transferor, mortgagor or assignor of each article to
be included in the sale, transfer, mortgage, or assignment, and notify every creditor whose name and address is set
forth in the verified statement of the vendor, transferor, mortgagor, or assignor, at least ten days before transferring
possession thereof, personally or by registered mail, of the price, terms and conditions of the sale, transfer, mortgage,
or assignment.

Sufficiency of notice. — No notice other than the one prescribed by the statute will be sufficient (In re Thompson, 242
Fed. 602; Maultrie Grocery Co. v. Holmes-Hartsfield Co., 22 Ga. A. 512, 96 S.E. 346) and a substantial compliance with
the requirements as to notice is essential (Stuart v. Elk Horn Bank, etc. Co., 123 Ark. 265, 185 S.W. 263, Ann. Cas. 1918A
268.) Thus, if the list furnished is not verified as required by statute, and omits to name certain creditors who are not
notified, the sale is void as to such creditors, whether their omission was fraudulent or otherwise. (Williams v. J.W.
Crowdus Drug Co. [Tex. Civ. A.] 167 S.W. 187.)

Same; Time of notice. — Where the statute requires the vendor, transferor, mortgagor or assignor to notify personally
or by registered mail every creditor "at least ten days before transferring possession" of any stock of goods, wares,
merchandise, provisions or materials, in bulk, it is sufficiently complied with by sending notice by registered mail at least
ten days before transferring possession thereof. It is not necessary that the notice shall have been received ten days
before such transfer of possession. (See Wyone Shoe Co. v. Daniels, 136 Ga. 192, 71 S.E. 1.)

Sec. 6. Any vendor, transferor, mortgagor or assignor of any stock of goods, wares, merchandise, provisions or
materials, in bulk, or any person acting for, or on behalf of any such vendor, transferor, mortgagor, or assignor, who
shall knowingly or willfully make, or deliver or cause to be made or delivered, a statement, as provided for in section
three hereof, which shall not include the names of all such creditors, with the correct amount due and to become due
to each of them, or shall contain any false or untrue statement, shall be deemed to have violated the provisions of
this Act.

Sec. 7. It shall be unlawful for any person, firm or corporation, as owner of any stock of goods, wares, merchandise,
provisions or materials, in bulk, to transfer title to the same without consideration or for a nominal consideration
only.

Sec. 8. Nothing in this Act contained shall apply to executors, administrators, receivers, assignees in insolvency, or
public officers, acting under judicial process.

Sec. 9. The sworn statement containing the names and addresses of all creditors of the vendor or mortgagor provided
for in section three of this Act, shall be registered in the Bureau of Commerce. For the registration of each such sworn
statement a fee of five pesos shall be charged to the vendor or mortgagor of the stock of goods, wares, merchandise,
provisions or materials, in bulk. (As amended by Rep. Act No. 111.)

Sec. 10. The provisions of this Act shall be administered by the Director of the Bureau of Commerce, 5 who is hereby
empowered, with the approval of the Department Head, to prescribe and adopt from time to time such rules and
regulations as may be deemed necessary for the proper and efficient enforcement of the provisions of this Act.
Sec. 11. Any person violating any provision of this Act shall, upon conviction thereof, be punished by imprisonment
for not less than six months, nor more than five years, or fined in a sum not exceeding five thousand pesos, or by both
such imprisonment and fine, in the discretion of the court.

Rules as to subsidiary imprisonment. — No subsidiary imprisonment should be imposed on an accused found guilty of
violating the Bulk Sales Law, if he fails to pay his obligation to a creditor who may have been prejudiced by reason of the
fraudulent and void mortgage executed by the accused, there being no proof that the goods mortgaged have
disappeared. (People v. Mapoy, Off. Gaz. for August, 1943, 755.)

Sec. 12. This Act shall take effect on its approval.

Approved: December 12, 1932.

ACT NO. 1508 - AN ACT PROVIDING FOR THE MORTGAGING OF PERSONAL PROPERTY AND FOR THE REGISTRATION OF
THE MORTGAGES SO EXECUTED

Section 1. The short title of this Act shall be "The Chattel Mortgage Law."

Sec. 2. All personal property shall be subject to mortgage, agreeably to the provisions of this Act, and a mortgage
executed in pursuance thereof shall be termed chattel mortgage.

Sec. 3. Chattel mortgage defined. — A chattel mortgage is a conditional sale of personal property as security for the
payment of a debt, or the performance of some other obligation specified therein, the condition being that the sale
shall be void upon the seller paying to the purchaser a sum of money or doing some other act named. If the condition
is performed according to its terms the mortgage and sale immediately become void, and the mortgagee is thereby
divested of his title.

Sec. 4. Validity. — A chattel mortgage shall not be valid against any person except the mortgagor, his executors or
administrators, unless the possession of the property is delivered to and retained by the mortgagee or unless the
mortgage is recorded in the office of the register of deeds of the province in which the mortgagor resides at the time
of making the same, or, if he resides without the Philippine Islands, in the province in which the property is situated:
Provided, however, That if the property is situated in a different province from that in which the mortgagor resides,
the mortgage shall be recorded in the office of the register of deeds of both the province in which the mortgagor
resides and that in which the property is situated, and for the purposes of this Act the city of Manila shall be deemed
to be a province.

Sec. 5. Form. — A chattel mortgage shall be deemed to be sufficient when made substantially in accordance with the
following form, and shall be signed by the person or persons executing the same, in the presence of two witnesses,
who shall sign the mortgage as witnesses to the execution thereof, and each mortgagor and mortgagee, or, in the
absence of the mortgagee, his agent or attorney, shall make and subscribe an affidavit in substance as hereinafter set
forth, which affidavit, signed by the parties to the mortgage as above stated, and the certificate of the oath signed by
the authority administering the same, shall be appended to such mortgage and recorded therewith.

FORM OF CHATTEL MORTGAGE AND AFFIDAVIT.

"This mortgage made this ____ day of ______19____ by _______________, a resident of the municipality of
______________, Province of ____________, Philippine Islands mortgagor, to ____________, a resident of the
municipality of ___________, Province of ______________, Philippine Islands, mortgagee, witnesseth:

"That the said mortgagor hereby conveys and mortgages to the said mortgagee all of the following-described personal
property situated in the municipality of ______________, Province of ____________ and now in the possession of said
mortgagor, to wit:

(Here insert specific description of the property mortgaged.)

"This mortgage is given as security for the payment to the said ______, mortgagee, of promissory notes for the sum of
____________ pesos, with (or without, as the case may be) interest thereon at the rate of ___________ per centum per
annum, according to the terms of __________, certain promissory notes, dated _________, and in the words and figures
following (here insert copy of the note or notes secured).

"(If the mortgage is given for the performance of some other obligation aside from the payment of promissory notes,
describe correctly but concisely the obligation to be performed.)

"The conditions of this obligation are such that if the mortgagor, his heirs, executors, or administrators shall well and
truly perform the full obligation (or obligations) above stated according to the terms thereof, then this obligation shall
be null and void.

"Executed at the municipality of _________, in the Province of ________, this _____ day of 19_____

____________________
(Signature of mortgagor.)

"In the presence of

"_________________
"_________________
(Two witnesses sign here.)
 FORM OF OATH.
"We severally swear that the foregoing mortgage is made for the purpose of securing the obligation specified in the
conditions thereof, and for no other purpose, and that the same is a just and valid obligation, and one not entered into
for the purpose of fraud."

FORM OF CERTIFICATE OF OATH.

"At ___________, in the Province of _________, personally appeared ____________, the parties who signed the
foregoing affidavit and made oath to the truth thereof before me.

"_____________________________"
(Notary public, justice of the peace, 1 or other officer, as the case may be.)

Sec. 6. Corporations. — When a corporation is a party to such mortgage the affidavit required may be made and
subscribed by a director, trustee, cashier, treasurer, or manager thereof, or by a person authorized on the part of such
corporation to make or to receive such mortgage. When a partnership is a party to the mortgage the affidavit may be
made and subscribed by one member thereof.

Sec. 7. Descriptions of property. — The description of the mortgaged property shall be such as to enable the parties to
the mortgage, or any other person, after reasonable inquiry and investigation, to identify the same.

If the property mortgaged be large cattle," as defined by section one of Act Numbered Eleven and forty-seven, 2 and
the amendments thereof, the description of said property in the mortgage shall contain the brands, class, sex, age,
knots of radiated hair commonly known as remolinos, or cowlicks, and other marks of ownership as described and set
forth in the certificate of ownership of said animal or animals, together with the number and place of issue of such
certificates of ownership.

If growing crops be mortgaged the mortgage may contain an agreement stipulating that the mortgagor binds himself
properly to tend, care for and protect the crop while growing, and faithfully and without delay to harvest the same,
and that in default of the performance of such duties the mortgage may enter upon the premises, take all the
necessary measures for the protection of said crop, and retain possession thereof and sell the same, and from the
proceeds of such sale pay all expenses incurred in caring for, harvesting, and selling the crop and the amount of the
indebtedness or obligation secured by the mortgage, and the surplus thereof, if any shall be paid to the mortgagor or
those entitled to the same.

A chattel mortgage shall be deemed to cover only the property described therein and not like or substituted property
thereafter acquired by the mortgagor and placed in the same depository as the property originally mortgaged,
anything in the mortgage to the contrary notwithstanding.

Sec. 8. Failure of mortgagee to discharge the mortgage. — If the mortgagee, assign, administrator, executor, or either
of them, after performance of the condition before or after the breach thereof, or after tender of the performance of
the condition, at or after the time fixed for the performance, does not within ten days after being requested thereto
by any person entitled to redeem, discharge the mortgage in the manner provided by law, the person entitled to
redeem may recover of the person whose duty it is to discharge the same twenty pesos for his neglect and all
damages occasioned thereby in an action in any court having jurisdiction of the subject-matter thereof.

Sec. 9-12. (inclusive) 3

Sec. 13. When the condition of a chattel mortgage is broken, a mortgagor or person holding a subsequent mortgage,
or a subsequent attaching creditor may redeem the same by paying or delivering to the mortgagee the amount due
on such mortgage and the reasonable costs and expenses incurred by such breach of condition before the sale
thereof. An attaching creditor who so redeems shall be subrogated to the rights of the mortgagee and entitled to
foreclose the mortgage in the same manner that the mortgagee could foreclose it by the terms of this Act.

Sec. 14. Sale of property at public auction; Officer's return; Fees; Disposition of proceeds. — 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.
The officer making the sale shall, within thirty days thereafter, make in writing a return of his doings and file the same
in the office of the register of deeds where the mortgage is recorded, and the register of deeds shall record the same.
The fees of the officer for selling the property shall be the same as in the case of sale on execution as provided in Act
Numbered One hundred and ninety, 4 and the amendments thereto, and the fees of the register of deeds for
registering the officer's return shall be taxed as a part of the costs of sale, which the officer shall pay to the register of
deeds. The return shall particularly describe the articles sold, and state the amount received for each article, and shall
operate as a discharge of the lien thereon created by the mortgage. The proceeds of such sale shall be applied to the
payment, first, of the costs and expenses of keeping and sale, and then to the payment of the demand or obligation
secured by such mortgage, and the residue shall be paid to persons holding subsequent mortgages in their order, and
the balance, after paying the mortgages, shall be paid to the mortgagor or person holding under him on demand.

If the sale includes any "large cattle," a certificate of transfer as required by section sixteen of Act Numbered Eleven
hundred and forty-seven 5 shall be issued by the treasurer of the municipality where the sale was held to the
purchaser thereof.

Sec. 15. 6, 6a

Sec. 16. This Act shall take effect on August first, nineteen hundred and six.

Enacted, July 2, 1906.

Footnotes

1. Now Municipal judge.

2. Now section 511 of the Administrative Code.
3. Repealed by Act 3815, Article 367 approved December 8, 1930.
4. Now Rule 141, section 7 of the Rules of Court.
5. Now Section 523 of the Administrative Code.
6. Superseded by section 198 of the Administrative Code. The following is the present text of section 198 as amended
by RA 2711, approved June 18, 1960.

"SECTION 198. Registration of chattel mortgages and fees collectible in connection therewith. — Every register of deeds
shall keep a primary entry book and a registration book for the chattel mortgages; shall certify on each mortgage filed
for record, as well as on its duplicate, the date, hour, and minute when the same was by him received; and shall record
in such books any chattel mortgage, assignment, or discharge thereof, and any other instruments relating to a recorded
mortgage, and all such instruments shall be presented to him in duplicate, the original to be filed and the duplicate to be
returned to the person concerned.

"The recording of a mortgage shall be effected by making an entry, which shall be given a correlative number, setting
forth the names of the mortgagee, and the mortgagor, the sum or obligation guaranteed, date of the instrument, name
of the notary before whom it was sworn to or acknowledged, and a note that the property mortgaged, as well as the
terms and conditions of the mortgage, is mentioned in detail in the instrument filed, giving the proper file number
thereof. The recording of other instruments relating to a recorded mortgage shall be effected by way of annotations on
the space provided therefor in the registration book, after the same shall have been entered in the primary entry book.

"The register of deeds shall also certify the officer's return of sale upon any mortgage, making reference upon the
record of such officer's 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 lawful fees for
such copy; and certify upon each mortgage officer's return of sale or discharge of mortgage; and upon any other
instrument relating to such a recorded mortgage, both on the original and on 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 public inspection.

"Duly certified copies of such records and of filed instruments shall be receivable as evidence in any court.

"The register of deeds shall collect the following fees for services rendered by him under this section:

"(a) For entry or presentation of any document in the primary entry book, one peso. Supporting papers presented
together with the principal document need not be charged any entry or presentation fee unless the party in interest
desires that they be likewise entered.

"(b) For filing and recording each chattel mortgage, including the necessary certificates and affidavits, the fees
established in the following schedule shall be collected:
 "1. When the amount of the mortgage does not exceed six thousand pesos, three pesos and fifty centavos for the first
five hundred pesos or fractional part thereof, and one peso and fifty centavos for each additional five hundred pesos or
fractional part thereof.

"2. When the amount of the mortgage is more than six thousand pesos but does not exceed thirty thousand pesos,
twenty-four pesos for the initial amount not exceeding eight thousand pesos, and four pesos for each additional two
thousand pesos or fractional part thereof.

"3. When the amount of the mortgage is more than thirty thousand pesos but does not exceed one hundred thousand
pesos, seventy-five pesos for the initial amount not exceeding thirty-five thousand pesos, and seven pesos for each
additional five thousand pesos or fractional part thereof.

"4. When the amount of the mortgage is more than one hundred thousand pesos but does not exceed five hundred
thousand pesos, one hundred and seventy-six pesos for the initial amount not exceeding one hundred ten thousand
pesos, and ten pesos for each additional ten thousand pesos or fractional part thereof.

"5. When the amount of the mortgage is more than five hundred thousand pesos, five hundred eighty-one pesos for the
initial amount not exceeding five hundred twenty thousand pesos, and fifteen pesos for each additional twenty
thousand pesos or fractional part thereof: Provided, however, That registration of the mortgage in the province where
the property is situated shall be sufficient registration: And provided, further, That if the mortgage is to be registered in
more than one city or province, the register of deeds of the city or province where the instrument is first presented for
registration shall collect the full amount of the fees due in accordance with the schedule prescribed above, and the
register of deeds of the other city or province where the same instrument is also to be registered shall collect only a sum
equivalent to twenty per centum of the amount of fees due and paid in the first city or province, but in no case shall the
fees payable in any registry be less than the minimum fixed in said schedule.

"(c) For recording each instrument of sale, conveyance, or transfer of the property which is subject of a recorded
mortgage, or of the assignment of mortgage credit, the fees established in the preceding schedule shall be collected on
the basis of ten per centum of the amount of the mortgage or unpaid balance thereof: Provided, That the latter is stated
in the instrument.

"(d) For recording each notice of attachment, including the necessary index and annotations, four pesos.

"(e) For recording each release of mortgage, including the necessary index and references, the fees established in the
schedule under paragraph (b) above shall be collected on the basis of five per centum of the amount of the mortgage.

"(f) For recording each release of attachment, including the proper annotations, two pesos.

"(g) For recording each sheriff's return of sale, including the index and references, three pesos.

"(h) For recording a power of attorney, appointment of judicial guardian, administrator, or trustee, or any other
instrument in which a person is given power to act in behalf of another in connection with a mortgage, three pesos.

"(i) For recording each instrument or order relating to a recorded mortgage, including the necessary index and
references, for which no specific fee is provided above, two pesos.

"(j) For certified copies of records, such fees as are allowed by law for copies kept by the register of deeds.

"(k) For issuing a certificate relative to, or showing the existence or non-existence of, an entry in the registration book,
or a document on file, for each such certificate containing not more than two hundred words, three pesos; if it exceeds
that number, an additional fee of fifty centavos shall be collected for every one hundred words or fractional part
thereof, in excess of the first two hundred words."
 CHATTEL MORTGAGE
(ARTICLES 2140-2141, CHATTEL MORTGAGE LAW)
Art. 2140. By a chattel mortgage, personal property is recorded in the Chattel Mortgage Register as a security for
the performance of an obligation. If the movable, instead of being recorded, is delivered to the creditor or a third
person, the contract is a pledge and not a chattel mortgage. (n)

CHATTEL MORTGAGE
> Contract by virtue of which personal property is recorded in the Chattel Mortgage Register as security for the
performance of an obligation

CHARACTERISTICS
1. Accessory contract
2. Formal contract

WHAT MAKES IT DIFFERENT FROM A PLEDGE?

1. Delivery of the personal property to the mortgagee is not necessary
2. The registration in the Register is required by law
3. Procedure for the sale of the thing is different
4. If the property is foreclosed and there is excess, the amount goes to the debtor
5. If there is deficiency, the creditor may recover the deficiency

WHEN DO YOU DO A Chattel Mortgage OR PLEDGE?

> When property needs to be retained by the debtor, then opt for a chattel mortgage

Art. 2141. The provisions of this Code on pledge, insofar as they are not in conflict with the Chattel Mortgage Law
shall be applicable to chattel mortgages. (n)

LAWS GOVERNING CHATTEL MORTGAGE

1. Chattel mortgage law, Act 1508
2. Civil Code provisions
3. Revised Administrative Code
4. Revised Penal Code

OFFENSES INVOLVING CHATTEL MORTGAGE

1. Knowingly removing personal property mortgaged 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
2. Selling or pledging personal property already mortgaged or any part thereof, under the terms of the Chattel
Mortgage Law without the consent of the mortgage written on the back of the mortgage and duly recorded in the
CM Register

REGISTRATION
> Registration shall be done in the Register of Deeds where the mortgagor resides
> And when the property is situated somewhere else, it needs to be registered also in the Register of Deeds of the
area where the property is situated
> Chattel mortgage would not be valid and binding as against third persons absent any registration
> If what is mortgaged is a car, registration with the LTO is also needed. Absent this, again, it would not be binding
and invalid as against third persons

FORM OF CONTRACT AS STATED IN THE LAW.

> Theoretically, the mortgagor may sign the contract alone but practically, the mortgagee must sign also given
that they both need to sign the affidavit of good faith

AFFIDAVIT OF GOOD FAITH

> Part of the chattel mortgage contract wherein it is stated that the chattel mortgage has been constituted to
secure a principal obligation and not meant for fraud or any ill purpose
> It is possible to defraud using mortgage. You can take away property through mortgage from an unsecured
creditor.

FORMAL REQUIREMENT OF DESCRIPTION OF PROPERTY

> Attach a description or schedule of the properties mortgaged
> There is also the requirement of payment of registration fees and documentary stamp taxes
FORECLOSURE (SIMILAR BUT NOT IDENTICAL WITH REM) SECTION 14, CHATTEL MORTGAGE LAW
1. There is a 30-day cooling off period before the public auction, from the time the condition is broken
2. Notice—at least 10 days notice of the time, day, place, and purpose of such sale has been posted at 2 or more public
places in such municipality. Personal notice or mail shall also be given to the mortgagor or person holding
under him and the persons holding subsequent mortgages of the time and place of sale.
3. Sheriff should possess the property as he needs to deliver the same to the winning bidder. If the mortgagor refuses
to do so, the mortgagee can seek the help of the court. There could also be a stipulation in the contract as
well. But if the debtor is not willing and able, the loss is with the creditor.
4. There is a 30-day equity of redemption period (payment of obligation)
5. After foreclosure, there could be recovery of deficiency, but there is Recto Law (1484) pertaining to sale of
personal property in installments and there is a Chattel Mortgage to secure payment of price.

AN ACTION FOR SPECIFIC PERFORMANCE IS TANTAMOUNT TO THE ABANDONMENT OF RIGHTS OF MORTGAGEE

APPLICATION OF PROCEEDS OF FORECLOSURE
1. Costs
2. Obligation itself. Pay first the interest and then the principal. If there is penalty, then pay it first.
3. Junior encumbrances
4. Owner
The Recto Law covers installment sales of personal property; Maceda Law governs installment sales of real property.

The Recto Law (Installment Sales Law – NCC Art.1484-1486)

The Recto Law comprises Articles 1484 to 1486 of the Civil Code. It was added to the Civil Code to prevent abuses in the
foreclosure of chattel mortgages, such as when mortgagee-creditors foreclosed mortgaged property, bought them at a
low price (on purpose,) then prosecuted the mortgagor-debtors to recover the deficiencies.

The Recto Law also covers leases with the option to purchase.
To what does the Recto Law apply?
This law covers contracts of sale of personal property by installments (Act No. 4122). It is also applied to contracts
purporting to be leases of personal property with option to buy, when the lessor has deprived the lessee of the
possession or enjoyment of the thing. (PCI Leasing and Finance Inc. v. Giraffe-X Creative Imaging, Inc., G.R. No. 142618,
July 12, 2007)

What are the alternative remedies in case of sale of personal property in installments? In the event a buyer of
personal property defaults by failing to pay two or more of the agreed installments, the seller can do any of the
following:
1. Specific Performance: Exact fulfillment should the buyer fail to pay
General Rule: If availed of, the unpaid seller cannot anymore choose other remedies;
Exception: if after choosing, it has become impossible, rescission may be pursued

2. Rescission: Cancel the sale if buyer fails to pay 2 or more installments Deemed chosen when:
a. Notice of rescission is sent
b. Takes possession of subject matter of sale
c. Files action for rescission

3. Foreclosure: Foreclose on chattel mortgage if buyer fails to pay 2 or more installments

General Rule: Actual foreclosure is necessary to bar recovery of balance - Extent of barring effect: purchase price
Exception: Mortgagor refuses to deliver property to effect foreclosure; expenses incurred in attorneys fees, etc.
This happens when a person takes a loan to buy something and he mortgages the thing he bought to
ensure the creditor that he will pay the loan. Remember: If you choose one remedy, you can’t choose the others. These
remedies, believe it or not, are also available to the buyer. You also can’t use all or any of them at the same time. The
Recto Law also won’t apply to a straight sale (i.e. a sale where there is a downpayment and the balance is payable in the
future in a single payment only.) The seller can also assign his credit to another person, making that person the new
creditor.

If the buyer refuses to surrender the items to the seller, he becomes a perverse buyer-mortgagor. When that happens,
the seller can recover expenses and attorney’s fees.

The Maceda Law

Do you want to know your rights as a real estate investor, or simply as a real estate buyer who is making installment
payments? The first logical step would be to know what law applies and what that particular law contains, which in this
case would be the full text of Republic Act No. 6552. More popularly known as the Maceda Law, the RA 6552 follows.

The Maceda Law, RA 6552, is the real estate equivalent of the Recto Law. Like the Recto Law, it also covers financing of
sales of real property (which is why mortgages also come in.) It doesn’t apply,however, to the following sales:
Industrial lots
Commercial buildings and lots
Lands under the CARP Law

MACEDA LAW (RA6552) Maceda Law in the Philippines applies to the purchaser of real property by installment
payments when the purchase becomes cancelled by a delinquency in payment. It provides the buyer with a right to a
refund as a requisite for cancellation of contract due to delinquency when the buyer has paid at least two years. The
refund is 50% of total payments; additional 5% per year after 5th year.

To qualify for the Maceda Law, the buyer must have already paid at least 2 years of installment payments.

The buyer has the right to continue the unpaid installments due without additional interest provided that the buyer
must pay within the grace period. The grace period provided is one month for every one year of installments paid.
The buyer has the right to opt for a refund of the installment payments being made (This includes the down payments,
deposits or options on the contract). The buyer is entitled to 50% refund from his total payments made. An additional of
5% refund per year for every 5 years.
If the buyer has paid less than two years installment:
The buyer has the right to continue his payments within a grace period of 60 days.
 FULL TEXT OF MACEDA LAW:

REPUBLIC ACT NO. 6552 – REALTY INSTALLMENT BUYER PROTECTION ACTAN ACT TO PROVIDE PROTECTION TO
BUYERS OF REAL ESTATE ON INSTALLMENT PAYMENTS

Section 1. This Act shall be known as the “Realty Installment Buyer Act.”

Section 2. It is hereby declared a public policy to protect buyers of real estate on installment payments against onerous
and oppressive conditions.

Section 3. In all transactions or contracts involving the sale or financing of real estate on installment payments, including
residential condominium apartments but excluding industrial lots, commercial buildings and sales to tenants under
Republic Act Numbered Thirty-eight hundred forty-four, as amended by Republic Act Numbered Sixty-three hundred
eighty-nine, where the buyer has paid at least two years of installments, the buyer is entitled to the following rights in
case he defaults in the payment of succeeding installments:

(a) To pay, without additional interest, the unpaid installments due within the total grace period earned by him which is
hereby fixed at the rate of one month grace period for every one year of installment payments made: Provided, That this
right shall be exercised by the buyer only once in every five years of the life of the contract and its extensions, if any.

(b) If the contract is cancelled, the seller shall refund to the buyer the cash surrender value of the payments on the
property equivalent to fifty per cent of the total payments made, and, after five years of installments, an additional five
per cent every year but not to exceed ninety per cent of the total payments made: Provided, That the actual cancellation
of the contract shall take place after thirty days from receipt by the buyer of the notice of cancellation or the demand
for rescission of the contract by a notarial act and upon full payment of the cash surrender value to the buyer.

Down payments, deposits or options on the contract shall be included in the computation of the total number of
installment payments made.

Section 4. In case where less than two years of installments were paid, the seller shall give the buyer a grace period of
not less than sixty days from the date the installment became due.

If the buyer fails to pay the installments due at the expiration of the grace period, the seller may cancel the contract
after thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a
notarial act.

Section 5. Under Section 3 and 4, the buyer shall have the right to sell his rights or assign the same to another person or
to reinstate the contract by updating the account during the grace period and before actual cancellation of the contract.
The deed of sale or assignment shall be done by notarial act.

Section 6. The buyer shall have the right to pay in advance any installment or the full unpaid balance of the purchase
price any time without interest and to have such full payment of the purchase price annotated in the certificate of title
covering the property.

Section 7. Any stipulation in any contract hereafter entered into contrary to the provisions of Sections 3, 4, 5 and 6, shall
be null and void.

Section 8. If any provision of this Act is held invalid or unconstitutional, no other provision shall be affected thereby.

Section 9. This Act shall take effect upon its approval.