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What is a pawnshop? (Sec. 3) What is the citizenship requirement? (Sec. 8) 2)Pawnshop appraises the item.
A pawnshop is a person or entity engaged in In a single proprietorship, only Filipino citizen 3)Parties agree to the loan amount.
the business of lending money on personal
In partnership, 70% of capital must be owned 4)Pawnshop gives pawn ticket and money.
property delivered as security for loans.
by Filipinos 5)Pay debt with interest and redeem pawn.
A pawnshop may be established as a single
proprietorship, a partnership or a corporation. In a corporation, 70% of voting capital stock is
owned by Filipinos or if non-stock corporation,
70% of members are Filipinos How much can be loaned? (Sec. 9)
How do you register a pawnshop? (Sec. 5-6) The amount of loan is agreed by the parties.
1)If a single proprietorship, get certificate of Amount not less than 30% of appraised value
registration from Department of Trade & of security unless pawner manifests in writing
Industry. desire to borrow lesser amount.
2)If a partnership or corporation, submit articles
of partnership or articles of incorporation to the
Securities and Exchange Commission. What are the charges? (Sec. 10)
3)Get a business license from the city or Interest rates - no ceiling but not iniquitous,
municipality where pawnshop is located. unconscionable, or contrary to morals 3
How much capital is required? (Sec. 7) What is a pawn ticket? (Sec. 12)
A pawn ticket is the receipt for a pawn. What are other duties of pawnshops?
How is a pawn sold or disposed? (Sec. 15)
It states amount of loan, date of pawning, rate Safeguard pawnshop assets 5
of interest, name and residence of pawner. The disposition must be by public auction in
Exert ordinary diligence 6
his place of business or other public place
Be Insured against fire 7
How do you redeem a pawn? (Sec. 13) After notice to pawner and publication of sale
On March 8, 1952, the United Car Exchange It also appears from the record that defendant
sold to the Fortune Enterprises, Inc., the 0. N. Borlough took possession of the vehicle
following described car from the time he purchased it, On July 10,
1952, Fortune Enterprises, Inc. brought action
Make: Chevrolet (1947); Plate No. 34- against Salvador Aguinaldo to recover the
1465 balance of the purchase price. Borlough filed
Type : Sedan; Motor No. a third-party complaint, claiming the vehicle.
EAA-20834 (Exhibit D). Thereupon, Fortune Enterprises, Inc.
amended its complaint, including Borlough as
a defendant and alleging that he was in
The same car was sold by the Fortune
connivance with Salvador Aguinaldo and was
Enterprises, Inc. to one Salvador Aguinaldo,
unlawfully hiding and concealing the vehicle in
and for not having paid it in full, the latter
order to evade seizure by judicial process.
executed on the same date a promissory note
Borlough answered alleging that he was in
in the amount of P2,400 payable in 20
legal possession thereof, having purchased it
installments including interest thereon at 12
Republic of the Philippines in good faith and for the full price of P4,000,
per cent per annum, the last of which
SUPREME COURT and that he had a certificate of registration of
installments fell due on January 9, 1953
Manila the vehicle issued by the Motor Vehicles
(Exhibit "A").
Office, and he prayed for the dismissal of the
complaint, the return of the vehicle and for in view of the express provisions of the These notice shall be filed by the Chief of the
damages against the plaintiff. Revised Motor Vehicles Law, which expressly Motor Vehicles Office in the motor records,
and specifically regulate the registration, sale and in the absence of more specific
The vehicle was seized by the sheriff of or transfer and mortgage of motor vehicles. information, shall be deemed evidence of the
Manila on August 4, 1952 and was later sold The following provisions of said law may help true status of ownership of the motor vehicle.
at public auction. The Court of First Instance decide the legal question now under (Revised Motor Vehicles Law.)
rendered judgment in favor of Borlough, and consideration:
against plaintiff, ordering the latter to pay It is to be noted that under section 4 (b) of the
Borlough the sum of P4,000, with interest at 6 SEC. 5 (c) Reports of motor vehicle sales. Revised Motor Vehicles Law the Chief of the
per cent per annum, from the date of the On the first day of each month, every dealer in Motor Vehicles Office is required to enter or
seizure of the car on August 4, 1952, and in motor vehicles shall furnish the Chief of the record, among other things, transfers of motor
addition thereto, attorney's fees in the sum of Motor Vehicles Office a true report showing vehicles "with a view of making and keeping
P1,000. the name and address of each purchase of a the same and each all of them as accessible
motor vehicle during the previous month and as possible to and for persons and officers
Upon appeal to the Court of Appeals, this the manufacturer's serial number and motor properly interested in the same," and to "issue
court rendered judgment ordering that Emil B. number; a brief description of the vehicle, and such reasonable regulations governing the
Fajardo pay Borlough P4,000 plus attorney's such other information as the Chief of the search and examination of the documents and
fees and that plaintiff pay to Borlough any Motor Vehicles Office may require. records . . . as will be consistent with their
amount received by it in excess of its credits availability to the public and their safe and
and judicial expenses. The reason for the SEC. 5 (e) Report of mortgages. Whenever secure prevention."
modification of the judgment is that the any owner hypothecates or mortgage any
mortgage was superior, being prior in point of motor vehicle as surety for a debt or other Two recording laws are here being invoked,
time, to whatever rights may have been obligation, the creditor or person in whose one by each contending party the Chattel
acquired by Borlough by reason of his favor the mortgage is made shall, within seven Mortgage Law (Act No. 1508), by the
possession and by the registration of his title days, notify the Chief of the Motor Vehicles mortgagor and the Revised Motor Vehicles
in the Motor Vehicle Office. Office in writing to the effect, stating the Law (Act No. 3992), by a purchaser in
registration number of the motor vehicle, date possession. What effect did the passenger of
The question involved in the appeal in this of mortgage, names and addresses of both the Revised Motor Vehicles Law have on the
case is one of law and may be stated thus: As parties, and such other information as the previous enactment?
between a prior mortgage executed over a Chief of the Motor Vehicles Office may
motor vehicle, registered under the Chattel require. This notice shall be signed jointly by The Revised Motor Vehicles Law is a special
Mortgage Law only, without annotation thereof the parties to the mortgage. legislation enacted to "amend and compile the
in the Motor Vehicles Office, and a laws relative to motor vehicles," whereas the
subsequent registration of the vehicle in the On termination, cancellation or foreclosure of Chattel Mortgage Law is a general law
Motor Vehicles Office accompanied by actual the mortgage, a similar written notice signed covering mortgages of all kinds of personal
possession of the motor vehicle, which should by both parties, shall be forwarded to the property. The former is the latest attempt to
prevail. While the question can be resolved by Chief of the Motor Vehicles Office by the assemble and compile the motor vehicle laws
the general principles found in the Civil Code owner. of the Philippines, all the earlier laws on the
and expressly stated in Article 559, there is no subject having been found to be very deficient
need resorting thereto (the general principles) in form as well as in substance (Villar and De
Vega, Revised Motor Vehicles Law, p. 1); it Mortgage Law. A mortgage in order to affect existing lien, which continues valid until the
had been designed primarily to control the third persons should not only be registered in record shows that it has been satisfied and a
registration and operation of motor vehicles the Chattel Mortgage Registry, but the same new certificate issued on legal authority, even
(section 2, Act No. 3992). should also be recorded in the motor Vehicles through another certificate which does not
Office as required by section 5 (e) of the disclose the lien is procured as the result of
Counsel for petitioner contends that the Revised Motor Vehicles Law. And the failure false statements made in the application
passage of the Revised Motor Vehicles Law of the respondent mortgage to report the therefore, and the vehicle is purchased by a
had the effect of repealing the Chattel mortgage executed in its favor had the effect bona fide purchaser.
Mortgage Law, as regards registration of of making said mortgage ineffective against
motor vehicles and of the recording of Borlough, who had his purchase registered in The holder of a lien who is derelict in his duty
transaction affecting the same. We do not the said Motor Vehicles Office. to comply and require compliance with the
believe that it could have been the intention of statutory provisions acts at his own peril, and
the legislature to bring about such a repeal. In On failure to comply with the statute, the must suffer the consequence of his own
the first place, the provisions of the Revised transferee's title is rendered invalid as against negligence; and accordingly, he is not entitled
Motor Vehicles Law on registration are not a subsequent purchaser from the transferor, to the lien as against a subsequent innocent
inconsistent with does of the Chattel Mortgage who is enabled by such failure of compliance purchaser filed as provided by other chattel
Law. In the second place, implied repeals are to retain the indicia of ownership, such as a mortgage statutes. The rule is otherwise,
not favored; implied repeals are permitted only subsequent purchaser in good faith, or a however, as against claimants not occupying
in cases of clear and positive inconsistency. purchaser from a conditional buyer in the position of innocent purchaser, such as a
The first paragraph of section 5 indicates that possession; and the lien of a chattel mortgage judgment creditor, or one acquiring title with
the provisions of the Revised Motor Vehicles given by the buyer to secure a purchase actual notice of an unregistered lien, and the
Law regarding registration and recording of money loan never becomes effective in such statutes do not protect a purchaser holding
mortgage are not incompatible with a case as against an innocent purchaser. (60 under registered title if a link in the title is
mortgage under the Chattel Mortgage Law. Corpus Juris Secundum, p. 171.) forgery. Moreover, such statute will not impair
The section merely requires report to the vested rights of a mortgage under a chattel
Motor Vehicles Office of a mortgage; it does One holding a lien on a motor vehicle, in so mortgage duly recorded. (60 C.J.S., pp. 181-
not state that the registration of the mortgage far as he can reasonably do so, must protect 182.)
under the Chattel Mortgage Law is to be himself and others thereafter dealing in good
dispensed with. We have, therefore, an faith by complying and requiring compliance The above authorities leave no room for doubt
additional requirements in the Revised Motor with the provisions of the laws concerning that purchaser O. N. Borlough's right to the
Vehicles Law, aside from the registration of a certificates of title to motor vehicles, such as vehicle as against the previous and prior
chattel mortgage, which is to report a statutes providing for the notation of liens or mortgage Fortune Enterprises, Inc., which
mortgage to the Motor Vehicles Office, if the claims against the motor vehicle certificate of failed to record its lien in accordance with the
subject of the mortgage is a motor vehicle; the title or manufacturer's certificate, or for the Revised Motor Vehicles Law, should be
report merely supplements or complements issuance to the mortgagee of a new certificate upheld.
the registration. of ownership. Where the lien holder has
satisfied himself that the existence of the lien For the foregoing consideration, the judgment
The recording provisions of the Revised Motor is recited in the certificate of title, he has done of the Court of Appeals is hereby reversed
Vehicles Law, therefore, are merely all that the law contemplates that he should and that of the Court of First Instance
complementary to those of the Chattel do, and there is notice to the public of the affirmed, with costs against respondent.
denied, and the case was appealed to this defendant Hospital de San Juan de Dios, Inc.
Court. obtained, in Civil Case No. 1930 of the
Municipal Court of Pasay City, a judgment
The facts are that on May 8, 1953, in order to was duly Josewfina Vda. de Eleazar. A writ of
secure an indebtedness of P15,000.00, execution was duly issued and, on January
Josefina Vda. de Aleazar executed in favor of 28, 1957, the same was served on the
the plaintiff-appellant Buenaventura Saldana a judgment debtor by the sheriff of Pasay City;
chattel mortgage covering properties whereupon the following properties of
described as follows: Josefina Eleazar were levied upon:
Republic of the Philippines A building of strong materials, used for 8 Tables with 4 (upholstered) chairs each.
SUPREME COURT restaurant business, located in front of the
Manila San Juan de Dios Hospital at Dewey 1 Table with 4 (wooden) chairs.
Boulevard, Pasay City, and the following
EN BANC personal properties therein contained: 1 Table (large) with 5 chairs.
G.R. No. L-13194 January 29, 1960 1 Radio, Zenith, cabinet type. 1 Radio-phono (Zenith, 8 tubes).
defendants-appellees Hospital de San Juan stones belonging to me and all other goods precise thing mortgaged may be ascertained with certainty."
Here there is nothing in the description "873 head of sheep" from
de Dios, Inc. and the Philippine Guaranty Co., and chattels" (Russel vs. Winne, 97 Am. Dec. which anyone, the mortgagee or third persons, could ascertain
Inc., executed an indemnity bond to answer 755); "all of the property of the said W.W. with any certainty what chattels were covered by the mortgage.
for any damages that plaintiff might suffer. Allen used or situated upon the leased
Accordingly, on February 13, 1957, the said premises" (Dorman vs. Crooks State Bank, 64 In many instances the courts have held the
properties were sold to the defendant hospital A.L.R. 614); "all goods in the store where they description good where, though otherwise
as the highest bidder, for P1,500.00. are doing business in E. City, N.C." (Davis vs. faulty, the mortgage explicity states that the
Turner, 120 Fed. 605); "all and singular the property is in the possession of the mortgagor,
Appellants claims that the phrase in the goods, wares, stock, iron tools manufactured and especially where it is the only property of
chattel mortgage contract "and all other articles and property of every description, that kind owned by him.
furnitures, fixtures and equipment found in the being situated in or about the shop or building
said premises", validly and sufficiently now occupied by me in Howley Stree" The specifications in the chattel mortgage
covered within its terms the personal (Winslow vs. Merchants Ins. Co., 38 Am. Dec. contract in the instant case, we believe, in
properties disposed of in the auction sale, as 368,) were held sufficient description, on the substantial compliance with the "reasonable
to warrant an action for damages by the theory that parol evidence could supplement it description rule" fixed by the chattel Mortgage
plaintiff mortgagee. to render identification rule is expressed in Act. We may notice in the agreement,
Walker vs. Johnson (Mont.) 1254 A.L.R. 937: moreover, that the phrase in question is found
There is merit in appellant's contention. after an enumeration of other specific articles.
Section 7 of Act No. 1508, commonly and The courts and textbook writers have It can thus be reasonably inferred therefrom
better known as the Chattel Mortgage Law, developed several rules for determination of that the "furnitures, fixture and equipment"
does not demand a minute and specific the sufficiency of the description in a chattel referred to are properties of like nature,
description of every chattel mortgaged in the mortgage. The rules are general in nature and similarly situated or similarly used in the
deal of mortgage but only requires that the are different where the controversy is between restaurant of the mortgagor located in front of
the parties to the mortgage from the situation the San Juan de Dos Hospital at Dewey
Boulevard, Pasay City, which articles can be should be treshed out in the insolvency Plastic Corporation, executed a chattel
definitely pointed out or ascertain by simple proceedings, mortgage in favor of Producers Bank of
inquiry at or about the premises. Note that the the Philippines, as a security for a
limitation found in the last paragraph of which appears inconsistent with the definitive
section 7 of the Chattel Mortgage Law1on "like
corporate loan in the amount of P3M.
character of the rulings invoked.
or subsituated properties" make reference to The chattel mortgage contained a
those "thereafter acquired by the mortgagor We find that the ground for the appealed order clause that provided for the mortgage to
and placed in the same depository as the (lack of cause of action) does not appear so stand as security for all other obligations
property originally mortgaged", not to those indubitable as to warrant a dismissal of the contracted before, during and after the
already existing and originally included at the action without inquiry into the merits and constitution of the mortgage.
date of the constitution of the chattel without the description in the deed of
mortgage. A contrary view would unduly mortgage (Nico vs. Blanco, 81 Phil., 213;
impose a more rigid condition than what the
The P3M was paid. Subsequently, the
Zobel vs. Abreau, 52 Off. Gaz., 3592).
law prescribes, which is that the description corporation obtained additional financial
be only such as to enable identification after a Wherefore, the orders appealed from are set accommodations totalling P2.7M. This
reasonable inquiry and investigation. aside and the case remanded to the lower was also paid on the due date. Again,
court for further proceedings. Costs against the bank extended another loan to the
The case of Giberson vs. A.N. Jureidini Bros., appellee. corporation in the amount of P1M,
44 Phil., 216, 219, cited by the appellees and covered by four promissory notes.
the lower court, cannot be likened to the case
However, the corporation was unable to
at bar, for there, what were sought to be
mortgaged included two stores wit all its pay this at maturity. Thereupon, the
merchandise, effects, wares, and other bazar G.R. No. 103576, Aug. 22, bank applied for an extra-judicial
goods which were being constantly disposed foreclosure of mortgage.
of and replaced with new supplies in 1996
connection with the business, thereby making For its part, the corporation filed an
any particular or definite identification either action for injunction with prayer for
impractical or impossible under the o Contracts of Security: Chattel
Mortgage damages. The lower court ultimately
circumstances. Here, the properties deemed
overed were more or less fixed, or at least o The rule on after-incurred dismissed the case and ordered the
permanently situated or used in the premises obligations extra-judicial foreclosure of mortgage.
of the mortgagor's restaurant. o Is a corporation entitled to moral Hence, this appeal.
damages?
The rule in the Jureidini case is further ISSUEs:
weakened by the court's observation that (44
Phil., p. 220) o W/N extra-judicial foreclosure of
FACTS: the chattel mortgage is proper
Moreover, if there should exist any doubts on
the questions we have just discussed, they Chua Pac, president and general
manager of Acme Shoe, Rubber and
o If not proper, W/N the corporation then the property encumbered can be constitute as an act of default on the
is entitled to damages as a result of the alienated for the payment of the part of the borrower of the financing
extra-judicial foreclosure obligation, but that should the obligation agreement wherein the promise is
be duly paid, then the contract is written, but, of course, the remedy of
HELD: automatically extinguished proceeding foreclosure can only cover the debts
from the accessory character of the extant at the time of constitution and
Contracts of Security agreement. As the law so puts it, once during the life of the chattel mortgage
the obligation is complied with, then the sought to be foreclosed.
Contracts of security are either personal contract of security becomes, ipso facto,
or real. In contracts of personal security, null and void. In the case at bar, the chattel mortgage
such as a guaranty or suretyship, the was terminated when payment for the
faithful performance of the obligation by After-incurred Obligations P3M loan was made so there was no
the principal debtor is secured by the chattel mortgage to even foreclose at
personal commitment of another (the While a pledge, real estate mortgage, or the time the bank instituted the extra-
guarantor or surety). In contracts of real antichresis may exceptionaly secure judicial foreclosure.
security, such as a pledge, a mortgage after-incurred obligations so long as
or an antichresis, that fulfillment is these future debts are accurately Damages
secured by an encumbrance of property described, a chattel mortgage, however,
-- in pledge, the placing of movable can only cover obligations existing at the In its complaint, the corporation asked
property in the possession of the time the mortgage is constituted. for moral damages sustained "as a
creditor; in chattel mortgage by the Although a promise expressed in a result of the unlawful action taken by the
execution of the corresponding and chattel mortgage to include debts that respondent bank against it." The court
substantially in teh form prescribed by are yet to be contracted can be a said --
law; in real estate mortgage, by the binding commitment that can be
execution of a public instrument compelled upon, the security itself, "Moral damages are granted in
encumbering the real property covered however, does not come into existence recompense for physical suffering,
thereby; and in antichresis, by a written or arise until after a chattel mortgage mental anguish, fright, serious anxiety,
instrument granting to the creditor the agreement covered the newly besmirched reputation, wounded
right to receive the fruits of an contracted debt is executed either by feelings, moral shock, social humiliation,
immovable property with the obligation concluding a fresh chattel mortgage or and similar injury. A corporation, being
to apply such fruits to the payment of by amending the old contract an artificial person and having existence
interest, if owing, and thereafter to the conformably with the Chattel Mortgage only in legal contemplation, has no
principal of his credit -- upon the Law. Refusal on the part of borrower to feelings, no emotions, no senses;
essential condition that if the obligation execute the agreement so as to cover therefore it cannot experience physical
becomes due and the debtor defaults, the after-incurred obligation can suffering and mental anguish. Mental
suffering can be experienced only by Unmistakably, the redemption cited in Section However, even prior to receiving, through counsel, a
13 partakes of an equity of redemption, which is mailed notice of the auction sale on the date of the
one having a nervous system and it the right of the mortgagor to redeem the mortgaged auction sale itself on June 16, 1992, respondent was
flows from real ills and sorrows and property after his default in the performance of the already put on notice of the impending foreclosure
griefs of life -- all of which cannot be conditions of the mortgage but before the sale of the sale of the mortgaged chattels. Despite its window of
property to clear it from the encumbrance of the opportunity to exercise its equity of redemption,
suffered by respondent bank as an mortgage. It is not the same as right of however, respondent chose to be technically shrewd
artificial person. redemption which is the right of the mortgagor to about its chances, preferring instead to seek
redeem the mortgaged property after registration of annulment of the auction sale, which was the result of
the foreclosure sale, and even after confirmation of the foreclosure of the mortgage, permission to
"Although Chua Pac was included in the the sale. conduct which it had early on opposed before the
case, he was only so named as a party insolvency court. Its negligence or omission to
exercise its equity of redemption within a reasonable
in representation of the corporation."
While respondent had attached some of Terrymanilas time, or even on the day of the auction sale, warrants
RCBC V. ROYAL CARGO CORPORATION, assets to secure the satisfaction of a P296,662.16 a presumption that it had either abandoned it or
(2009) judgment rendered in another case, what it effectively opted not to assert it. Equitable considerations thus
Right of Redemption attached was Terrymanilas equity of sway against it. To now allow respondent have its way
redemption. That respondents claim is much lower in annulling the auction sale and at the same time let
than the P1.5 million actual bid of petitioner at the it proceed with its claims before the insolvency court
Issue: WON petitioner, as mortgagee, had the duty to auction sale does not defeat respondents equity of would neither rhyme with reason nor with justice.
notify the respondent of the public auction sale. redemption. Top Rate International Services, Inc. v.
IAC enlightens: