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The Bailee Letter Mortgage is a crucial document in Philippine commercial and financial transactions where property serving as collateral is held by a third party. This document type emerged from the need to secure financing while maintaining efficient business operations, particularly in industries where inventory or equipment must remain in the possession of a warehouse, storage facility, or operational entity. The Bailee Letter Mortgage combines elements of bailment under the Civil Code of the Philippines with security interests under the Personal Property Security Act, creating a legally sound structure for three-party arrangements. It is commonly used in situations where a lender (mortgagee) requires security over property that is or will be in the possession of a third party (bailee), while the borrower (mortgagor) retains ownership but not possession. The document typically includes detailed property descriptions, acknowledgment of the security interest, and specific obligations of the bailee regarding the property's maintenance and release.

1. Date and Address Block: Formal letter heading with date and recipient's complete address

2. Subject Line: Clear identification of the document as a Bailee Letter Mortgage and reference to the underlying property

3. Opening Paragraph: Identification of all parties (Bailee, Mortgagor, and Mortgagee) and their respective roles

4. Property Description: Detailed description of the mortgaged property under bailment, including identification numbers, location, and condition

5. Acknowledgment of Possession: Confirmation of the bailee's current possession of the property and the capacity in which they hold it

6. Security Interest Declaration: Statement of the mortgage interest and the underlying obligation it secures

7. Bailee Undertakings: Specific commitments regarding the care, maintenance, and preservation of the property

8. Release Conditions: Terms under which the property may be released or transferred

9. Signature Block: Space for signatures of all parties, including witnesses if required