In the Philippines, a chattel mortgage serves as a security interest over personal property (most commonly vehicles). Once the underlying debt is fully paid, the mortgage must be cancelled to clear the title or the Certificate of Registration (CR). However, a significant legal hurdle arises when the lender—whether an individual who has moved without notice or a financing company that has ceased operations—cannot be located to sign the Release of Mortgage.

Under the Chattel Mortgage Law (Act No. 1508) and the Property Registration Decree (P.D. 1529), the process of cancellation typically requires a voluntary act by the mortgagee. When that party is unreachable, the mortgagor must transition from an administrative process to a judicial one.

1. The Preliminary Step: Due Diligence

Before seeking judicial intervention, the debtor must prove that the lender is truly "unavailable." This involves gathering evidence of "Good Faith Effort":

Demand Letters: Sending a formal demand for the Release of Mortgage via registered mail to the last known address.
SEC/DTI Verification: For corporate lenders, obtaining a certification from the Securities and Exchange Commission (SEC) or Department of Trade and Industry (DTI) regarding the entity’s status (e.g., "Dissolved" or "Revoked").
Barangay Certification: A certification from the last known residence of an individual lender stating they are no longer residing there.

2. The Judicial Solution: Petition for Cancellation

Since the Register of Deeds (RD) or the Land Transportation Office (LTO) cannot unilaterally delete an annotation without a signed release or a court order, the owner must file a Petition for Cancellation of Mortgage Annotation in the Regional Trial Court (RTC) where the property is registered or where the parties reside.

Legal Basis

The petition is usually grounded in the fact that the obligation has been extinguished (through full payment) or has prescribed. Under the Civil Code, actions to foreclose a mortgage must be brought within ten (10) years from the time the right of action accrues. If more than a decade has passed without the lender demanding payment, the mortgage may be cancelled on the grounds of prescription.

The Role of Consignation

If the lender is missing but the debt is not yet fully paid, the debtor must perform Consignation. This is a two-step process:

Tender of Payment: Attempting to pay the lender.
Deposit with the Court: If the lender cannot be found to accept payment, the debtor deposits the remaining balance with the Clerk of Court. Once the court approves the consignation, the obligation is legally extinguished, allowing for the cancellation of the mortgage.

3. Procedural Requirements in Court

To succeed in the petition, the following documents are typically required:

Evidence of Payment: Receipts, bank transfers, or a "Paid" ledger from the defunct company.
Affidavit of Non-Location: A sworn statement detailing the efforts made to find the lender.
Certified True Copy of the Title/CR: Showing the existing encumbrance.
Notice of Hearing: The court will require the publication of the petition in a newspaper of general circulation to notify any interested parties (the missing lender or their heirs/successors).

4. The Court Order and Registration

Once the court is satisfied that the debt is paid (or prescribed) and the lender is unreachable, it will issue a Decision and a subsequent Entry of Judgment.

Obtain a Certified Copy: Secure the court order and the certificate of finality.
Payment of Fees: Pay the corresponding cancellation fees at the Register of Deeds.
Annotation of Discharge: The RD will then enter the "Discharge of Mortgage" in their books, effectively clearing the title or the record for the LTO.

Summary Table: Administrative vs. Judicial Cancellation

Feature	Administrative (Standard)	Judicial (Lender Missing)
Primary Document	Notarized Release of Mortgage	Court Order / Decision
Requirement	Signature of the Lender	Proof of Payment or Prescription
Timeframe	1–5 days	6–18 months (average)
Cost	Minimal (RD fees)	Legal fees, Publication, Filing fees

Key Considerations for Vehicles

For motor vehicles, the process involves an extra step. Once the RTC issues the order and the RD cancels the chattel mortgage, the owner must take the Certificate of Cancellation to the Land Transportation Office (LTO). The LTO will then issue a new Certificate of Registration (CR) without the "Encumbered" notation, allowing the owner to sell or transfer the vehicle freely.