What do you need to know about repossession of mortgaged automobiles?
For those who are engaged in the lending business, it cannot be denied that many of them face the difficulties posed by the need to collect from their debtors the amount due, or in going after the security offered for the obligation as in case of mortgages, which would deprive them of their right to use the money in more useful and productive endeavors.
This is particularly true in case of loans secured by chattel mortgages, where the property given as a collateral is a movable property (as opposed to a real estate mortgage where the property involved is an immovable or real property). Most common examples of this are automobiles mortgaged to the creditor to secure auto loans obtained from the latter. Unlike in real estate mortgage where possession of the property is not necessary to effect foreclosure, the creditor in a chattel mortgage is constrained to take possession of the property that was given as security for purposes of selling it in a foreclosure sale.
Repossession of automobiles
In case of auto loans, there would be a lot less complication if the debtor just voluntarily surrenders the possession of the subject automobile to the creditor, as the latter may then proceed with the foreclosure sale after getting hold of it. Some borrowers, however, are simply too stubborn in holding on to their automobiles just to make it more difficult for the lender to recover the amounts due from them.
The writ of replevin
In such cases where the debtor-mortgagor would remain steadfast in not surrendering possession of their automobiles to the creditor-mortgagee, the latter may have no other alternative but to take up legal action against the former. Good thing is that the creditor has an available remedy, and that is to apply to the court for the issuance of a writ of replevin, wherein the court will require the debtor to surrender the automobile to the possession of the applicant creditor.
A creditor who seeks to recover possession of personal property may, aside from filing an action before the court for collection of sum of money, include a prayer for the issuance of a writ of replevin [See: Sec. 1, Rule 60, Rules of Court]. Under the Rules, the application shall be accompanied by an affidavit, which shows:
- That the applicant is entitled to the possession over the property being claimed, particularly describing it;
- That the property is wrongfully possessed by the party being complained of, as well as the reasons for such wrongful possession;
- That the property has not been taken by the government under its control to satisfy a tax assessment or fine, or other indebtedness for which a court judgment had already been previously rendered;
- The actual market value of the property [See: Sec. 2].
The applicant must also post a bond in favor of the current possessor, in double the value of the property (as stated in the affidavit). Upon the filing of such affidavit and approval of the bond, the court shall then issue the corresponding writ of replevin [See: Sec. 3].
Once the court issues a writ of replevin, it shall be served by the sheriff to the possessor for purposes of taking the subject automobile. If said automobile is inside a building or enclosure, the writ of replevin shall function as enough authority for the sheriff to break in without being liable for trespassing. Neither shall the sheriff be liable for the necessary damages caused by such breaking in for purposes of taking the subject automobile [See: Sec. 4].
Criminal action under the Revised Penal Code
Considering that automobiles are used as mode of transportation, they can easily be taken from one place to another. This makes it very convenient for the debtor-mortgagor to simply conceal the automobile by taking it to far away places in order to avoid being repossessed by the creditor. In case the mortgagor conceals the subject automobile to place it beyond the reach of the mortgagee, the latter may file a criminal action under Article 319 of the Revised Penal Code for knowingly removing the mortgaged property to any province or city other than the one in which it was located when the mortgage was constituted. Such act, when done without the consent of the mortgagee, is punishable by arresto mayor, or imprisonment from 1 month and 1 day to 6 months.
The purpose of the law in making the said act criminal is to give the necessary sanction to the provision of the law in the interest of the public at large, so that in all cases where loans are made and secured, the mortgage debtors may be deterred from committing the said act, and the mortgage creditors may be protected against the loss or inconvenience resulting from the wrongful removal and concealment of the mortgaged property [See: G.R. No. 10630].
With such remedies available to an auto loan creditor, it is clear that he has ample opportunity to legally and effectively enforce his claim, taking into consideration the fact that auto loans are usually secured by a chattel mortgage. If ever the creditor finds collecting the amounts due him difficult, it is definitely worth going after the property mortgaged, aside from going after the debtor himself. These remedies by which the creditor’s claim over the property may be enforced are intended to ensure that, in the end, he will not be the one to come up empty handed.
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