I.

RRC - Foreclosure of Real Estate Mortgages (Judicial, Extrajudicial, Notarial Foreclosures)

1. What is a real estate mortgage contract?

1.1. A real estate mortgage (“REM”) contract is a security contract where the debtor subjects
immovable property or real rights over said immovable as a security for the fulfillment of a
principal obligation or condition.
2. Upon what properties can a real estate mortgage be created?
2.1. A real estate mortgage contract may be created over immovable property defined under article
415 of the New Civil Code (“NCC”), and alienable real rights imposed upon immovables. (article
2124, NCC).
3. Must the REM contract be written?
3.1. No, it need not be written. A valid REM contract may be made orally between the parties and
will bind them. However, in order to bind third persons to the REM contract, the contract must
be recorded in the Registry of Property. (article 2125, NCC).
4. Is this verbal REM contract unenforceable?
4.1. No, it is not unenforceable. A REM contract does not fall under the statute of frauds hence the
fact that it is not written does not make it unenforceable. (article 1403, NCC).
5. How can I compel the other party to a verbal REM contract to have this contract be in written
form and be registered with the Registry of Property?
5.1. You can invoke article 1357 and 1358 of the NCC which essentially state that if there is already
a valid contract, such as a REM contract which creates real rights over immovable property, and
the law requires the contract to be in a proper form, then a party may compel the other to
observe said form. This article 1357 is only for the convenience of the parties, and its purpose is
to compel a party to execute a public document so that the other may register the REM
contract.
6. Can I alienate or assign this REM contract to another person?
6.1. Yes. The mortgage credit may be alienated, or assigned to a third person, in whole in in part, by
the mortgagee who is the owner of said right. (article 2129, NCC).
7. What if happens if the mortgaged real estate is sold or disposed of?
7.1. The real estate is still subject to the mortgage. Article 2126 of the NCC states that the mortgage
directly and immediately subjects the property upon which it is imposed, regardless of the
possessor of the property, to the fulfillment of the obligation for whose security it was
constituted.
8. Can the mortgagee prohibit the mortgagor from selling or alienating the mortgaged real estate
property?
8.1. No, the mortgagee cannot prohibit the mortgagor from selling or alienating the immovable
mortgaged. Any stipulation to this effect is void. (article 2130, NCC).
9. What happens to the principal obligation if the REM contract is void?
9.1. The principal obligation continues to subsist. Since the REM is just an accessory contract to the
principal obligation to which it secures, the invalidity or of the former does not affect the latter.
10. What happens to the REM contract if the principal obligation to which it secures is void?
10.1. The REM contract will be extinguished. Being an accessory contract, the REM will be
extinguished if the principal obligation to which it secures is declared void.
11. Does the mortgagor lose title to the property mortgaged?
 11.1. No, he does not. A mortgage does not involve a transfer, cession or conveyance of the
mortgaged property but only constitutes a lien on said property. A mortgage does not
extinguish the title of the mortgagor, and the latter continues to be the owner of the property.
Even the default of the mortgagor does not operate to vest in the mortgagee the ownership of
the encumbered property.
12. An immovable is already an encumbered property pursuant to a REM contract. Can the mortgagor
still subsequently mortgage the same property to other creditors or mortgagees?
12.1. Yes, the mortgagor can still subsequently mortgage the immovable. Since the mortgagor
retains the ownership of the encumbered property, he can even mortgage it again to another
mortgagee (also known as subsequent mortgagees or junior encumbrancers).
13. A parcel of land was the subject of a REM. Subsequently, crops grew on this land. Are the crops
included in the REM?
13.1. Yes, the crops are included in the REM. The mortgage extends to the growing fruits on
the mortgaged property, such as the crops. (article 2127, NCC).
14. What happens if the mortgaged immovable is expropriated by the government?
14.1. The just compensation or indemnity paid by the government to the mortgagor will serve
as the security for the principal obligation. (article 2127, NCC).
15. What is a real estate mortgage foreclosure?
15.1. In a real estate mortgage, when the principal obligation is not paid when due, the
mortgagee has the right to foreclose the mortgage and to have the property seized and sold
with a view to applying the proceeds to the payment of the principal obligation. (Commodity
Financing Co., Inc. v. Jose B. Jimenez, G.R. No. L-31384, 29 June 1979).
16. What are the types of real estate foreclosures?
16.1. Judicial foreclosure and extra-judicial foreclosure.
17. What is judicial foreclosure?
17.1. Judicial foreclosures are governed by Rule 68 of the Rules of Court (“ROC”). Judicial
foreclosure is the default rule when it comes to foreclosures. One may only do extra-judicial
foreclosures if the mortgage contract or deed has a provision which gives the mortgagee the
special power to sell the mortgaged property under Act No. 3135.
18. Can you mortgage private land to a foreigner or alien?
18.1. Yes, you can. Section VII, article XII of the 1987 Constitution merely prohibits foreigners
or aliens from owning private lands in the Philippines, except in cases of hereditary succession.
Foreigners or aliens are merely disqualified from owning lands but are not prohibited in
becoming mortgagees where private lands are the encumbered properties. Act No. 133, as
amended, governs the situation where private land is mortgaged and the mortgagees are
foreigners or aliens.
19. What does Act No. 133, as amended, state in relation to foreclosure of real estate mortgage by
foreigners?
19.1. Act No. 133, as amended, allows foreigners to be mortgagees of private lands. However,
foreigners are prohibited from taking possession of the mortgaged land during the existence of
the mortgage, except after default and for the sole purpose of foreclosure and in no case to
exceed a period of five (5) years from actual possession. Foreigners are also prohibited from
taking part in the bid or sale of the land during foreclosure. After default however, the
foreigner-mortgagee or his successor-in-interest may now take possession of the land in
 accordance with the judicial procedures for foreclosure and in no case exceeding five (5) years
from actual possession.
20. Can there be extra-judicial foreclosure of private land where the mortgagee is a foreigner or alien?
20.1. No, the foreclosure must be done judicially. Section 1 of Act No. 133, as amended,
states that foreclosures in these types of situations must be done in accordance with judicial
procedures.
21. How is a judicial foreclosure initiated?
21.1. The mortgagee must file a complaint for foreclosure in the court having jurisdiction over
the area wherein the property is situated. (Section 1, rule 68 in relation to section 1, Rule 4 of
the Rules of Court).
22. What must this complaint for foreclosure contain?
22.1. The complaint must set forth: (section 1, Rule 68, ROC)
22.1.1. Date and due execution of the mortgage;
22.1.2. Assignments, if any;
22.1.3. Names and residences of the mortgagor and mortgagee;
22.1.4. A description of the mortgaged property;
22.1.5. Statement of the date of the note or other documentary evidence of the obligation
secured by the mortgage, the amount claimed to be unpaid thereon; and
22.1.6. The names and residences of all persons having or claiming an interest in the property
subordinate in right to that of the holder of the mortgage, all of whom shall be made
defendants in the action.
23. What happens in the trial for a complaint for foreclosure under rule 68 of the ROC?
23.1. The trial is where the court determines the amount due the plaintiff or mortgagee,
including interest, charges and costs, and shall render judgment for the sum found to be due
and order that said amount be paid to the plaintiff/mortgagee within a period of not less than
90 days nor more than 120 days from entry of judgment. (section 1, rule 68, ROC).
24. What is the “equity of redemption” period?
24.1. The equity of redemption period is the period where the court orders the
defendant/debtor to pay the amount due the plaintiff/mortgagee within a period not less than
90 days nor more than 120 days from the entry of judgment. (section 2, rule 68, ROC).
25. What happens if the defendant/debtor pays the amount due the mortgagee within the equity of
redemption period?
25.1. The foreclosure does not happen, as the defendant/debtor has already paid the amount
due the plaintiff/mortgagee. (section 2, rule 68, ROC).
26. What happens if the defendant/debtor fails to pay the plaintiff/mortgagee within the equity of
redemption period?
26.1. The court, upon motion, will then order the property to be sold, and proceed with the
foreclosure sale in accordance with rule 39 of the ROC. (section 3, rule 68, ROC).
27. Can the mortgagor still redeem the property after judicial foreclosure?
27.1. As a rule, there is no right of redemption in judicial foreclosures. The defendant/debtor
in a complaint for foreclosure is given the opportunity to prevent the foreclosure of his
property by paying the amount due the plaintiff/mortgagee within the equity of redemption
period. The period of redemption even extends beyond the equity of redemption period if
there is yet no judicial confirmation of sale.
28. What happens if the defendant/debtor does not redeem the property before the judicial
confirmation of sale?
28.1. Upon judicial confirmation of sale and upon motion, all rights in the foreclosed property
are vested in the purchaser. This means that upon confirmation, the defendant/debtor can no
longer redeem the foreclosed property.
29. Is the confirmation of sale appealable?
29.1. Yes, the order of confirmation is appealable, and if the defendant/debtor fails to appeal
the same within the period for appeal then such order becomes final.
30. What happens when the order of confirmation of sale becomes final?
30.1. The purchaser at the auction sale or last redemptioner, if any, shall then be entitled to
the possession of the property and he may secure a writ of possession, upon motion, from the
court which ordered the foreclosure, unless a third party is actually holding the same adversely
to the judgment obligor. (sec 3, rule 68, ROC). This motion for the issuance of a writ of
possession may be made ex parte or without the presence of the other party. (Sps. Carlos v.
Court of Appeals, G.R. No. 164036, 19 October 2007).
31. How are the proceeds of the judicial foreclosure sale applied?
31.1. The proceeds of the sale shall first be applied to the costs of the sale, and then to the
person foreclosing the mortgage. Any balance or residue left after paying off the mortgage debt
due shall be paid to the junior encumbrancers in the order of their priority which is to be
ascertained by the court, or if there be no such encumbrancers or there be a balance or residue
after payment to them, then such balance or residue shall be given to the mortgagor or the
latter’s authorized agent, or to the person entitled to it. (section 4, rule 68, ROC).
32. How does a judicial foreclosure sale proceed in cases where not all the secured debt is due?
32.1. If the secured debt to which the mortgage or encumbrance was held is not all due as
provided in the judgment of the court, as soon as a sufficient portion of the property has been
sold to pay the total amount and the costs due, the sale will terminate. Afterwards, and as
often as more of the secured debt becomes due for the principal or interest and other valid
charges, the court may, upon motion, order more of the mortgaged real estate to be sold.
(section 5, rule 68, ROC)
33. What can be done in situations where the secured debt is not all due, and the mortgaged
properties cannot be sold in portions since it would prejudice the parties?
33.1. In cases where not all of the secured debt is due and if the property cannot be sold in
portions without prejudicing the parties, the entirety of the mortgaged properties will be sold
in the first instance and the entire debt and costs shall be paid, if the proceeds of the sale be
sufficient for it, there being a rebate of interest where such rebate is proper. (section 5, rule 68,
ROC).
34. What happens when after applying the proceeds of the sale, there is still a balance due the
plaintiff?
34.1. Upon motion, the court shall render judgment against the defendant for any such
deficiency or balance. Execution then may issue immediately if the balance is all due at the time
of the rendition of the judgment. However, if the debt is not all due, the plaintiff shall be
entitled to execution at such time as the remaining balance shall become due under the terms
of the original contract and such due date shall be stated in the judgment. (section 6, rule 68,
ROC).
35. Does the mortgagee need to file an action to recover the deficiency from the defendant?
35.1. No, the mortgagee need not file an independent action to recover the deficiency. The
plaintiff merely needs to file a motion with the court for a deficiency judgment to be rendered
against the defendant.
36. What if there is a surplus after applying the proceeds of the foreclosure sale?
36.1. The surplus or balance remaining will be given to the mortgagor, his duly authorized
agent, or to the person entitled to such surplus or balance. (section 4, rule 68, ROC).
37. What is an extra-judicial foreclosure?
37.1. Extra-judicial foreclosure is governed by Act No. 3135, as amended. The law is applicable
only to real estate mortgages and regulates the sale of encumbered real estate if there is a
stipulation inserted or attached to the REM contract which gives the mortgagee a special power
to sell the mortgaged property in case of failure to pay the principal obligation or the violation
of any condition.
38. Where can the extra-judicial foreclosure be made?
38.1. The sale must be made in a place within the province wherein the property is situated.
In case the place within the province where the property is situated is subject to stipulation,
such sale shall be made in said place or in the municipal building of the municipality in which
the property or part thereof is situated. (section 1, Act No. 3135).
39. How is an extra-judicial foreclosure initiated?
39.1. File an application for extra-judicial foreclosure of mortgage with the Executive Judge,
through the Clerk of Court, who is also the Ex-Officio Sheriff. (Office of the Court Administrator
Circular No. 7-2002);
39.2. Posting notices of the sale for not less than 20 days in at least three (3) public places of
the municipality or city where the property is situated. If the mortgaged property is worth more
than PhP 400.00, then such notice shall also be published once a week for at least three (3)
consecutive weeks in a newspaper of general circulation in the municipality or city. (section 3,
Act No. 3135);
39.3. The sale shall be made at public auction, between the hours or nine (9) in the morning
and four (4) in the afternoon, and shall be under the direction of the sheriff of the province, the
justice or auxiliary justice of the peace of the municipality in which such sale has to be made, or
a notary public of said municipality. (section 4, Act No. 3135).
40. Who may redeem the property sold under an extra-judicial foreclosure? (section 27, Rule 39, ROC)
40.1. The judgment obligor or his successor-in-interest;
40.2. The “redemptioner”, who is the creditor having a lien by virtue of an attachment,
judgment, or mortgage on the property sold or part thereof, subsequent to the lien under
which the property was sold.
41. Can the purchaser in an extra-judicial foreclosure be entitled to possession even during the one (1)
year redemption period?
41.1. Yes. The purchaser may petition the court having jurisdiction over the place where the
mortgaged property is situated to give the former possession thereof during the redemption
period. The purchaser must then post a bond in an amount equivalent to the use of the
property for a period of 12 months, to indemnify the debtor in case it be shown that the sale
was made without violating the mortgage or without complying with the requirements of the
Act. (section 7, Act No. 3135).
42. Can the debtor challenge this petition for possession by the purchaser at the foreclosure sale?
42.1. Yes. The debtor may, but not later than thirty days after the purchaser was given
possession, petition that the sale be set aside and the writ of possession cancelled, specifying
the damages suffered by him, on the grounds that the mortgage was not violated or that the
sale was not made in accordance with the provisions of Act No. 3135. (section 8, Act No. 3135).
43. What happens if the mortgaged real property was redeemed after the purchaser was given
possession thereof?
43.1. The redeemer shall be entitled to deduct from the price of redemption any rentals that
said purchaser may have collected in case the property or any part thereof was rented. If the
purchaser occupied the property as his own dwelling, it being town property, or used it
gainfully, it being rural property, the redeemer may deduct from the price the interest of one
per centum per month provided for under the ROC. (section 9, Act No. 3135).
44. What are the periods of redemption in extra-judicial foreclosure?
44.1. The judgment obligor, exercising his first or subsequent registration, may redeem the
property from the purchaser at any time within one (1) year from the date of registration of the
certificate of sale. After the redemption by the judgment obligor, there is no further
redemption; (sections 28 and 29, rule 39, ROC).
44.2. The redemptioner exercising his first redemption has one (1) year from the date of
registration of the certificate of sale to redeem the property. (section 28, rule 39, ROC).
44.3. The redemptioner exercising a subsequent redemption has a period of 60 days after the
last redemption within which to redeem the property. The subsequent redemption may even
be done beyond the one (1) year period to redeem, provided it is within 60 days from the last
redemption (section 28, rule 39, ROC).
45. What are the redemption amounts?1
45.1. For the first redemption by the judgment obligor or redemptioner, they shall pay:
(section 28, rule 39, ROC)
45.1.1. The purchase price;
45.1.2. One (1) percent interest per month on the purchase price;
45.1.3. Assessments and taxes paid by the purchaser after the purchase;
45.1.4. One (1) percent interest on the assessments and taxes paid by the purchaser after the
purchase;
45.1.5. If the purchaser is also a creditor having a prior lien to that of the redemptioner, other
than the judgment under which the purchase was made, then pay the amount of such
other lien, with interest.
45.2. For the subsequent redemption by the judgment obligor or redemptioner, they shall
pay: (section 28, rule 39, ROC)
45.2.1. The amount paid on the last redemption;
45.2.2. Two (2) percent interest on the amount paid on the last redemption;
45.2.3. Assessments and taxes paid by the last redemptioner after the redemption, with
interest at six (6) percent this being the legal interest.
45.2.4. The amount of any liens held by the last redemptioner prior to the latter’s own, with
interest. Please note that 45.2.4 does not apply to redemption made by the judgment

1
Primer – Reviewer on Remedial Law Volume 1, Civil Procedure, Manuel R. Riguera, fourth edition, 2017, page
545.
 obligor since his redemption does not obliterate the subsequent liens as to the judgment
obligor.
46. What proofs are required from a redemptioner? (section 30, rule 39, ROC)
46.1. The redemptioner must produce to the officer or the person from whom he seeks to
redeem, and serve his notice to the officer, a copy of the judgment or final order under which
he claims the right to redeem, as certified by the clerk of court wherein the judgment or final
order is entered; or
46.2. If he redeems upon a mortgage or other lien, a memorandum of the record thereof,
certified by the registrar of deeds; or
46.3. An original or certified copy of any assignment necessary to establish his claim; and
46.4. An affidavit executed by him or his agent, showing the amount then actually due on the
lien.
47. What effect does Republic Act No. 8791 or the General Banking Law of 2000 (“GBL”) have on the
judicial foreclosure of REM?
47.1. As a rule, in judicial foreclosures of REM, there is no period of redemption, as the
defendant or debtor in the complaint may only prevent the foreclosure of the property by
paying the amount due the mortgagee during the equity of redemption period. However,
section 47 of the GBL provides an exception to this rule where the mortgagee is a banking
institution by now allowing the debtor or mortgagor to redeem the property within one (1)
year from the sale of the property.
48. What are the periods of redemption for judicial and extra-judicial foreclosure of real estate
mortgages if the mortgagee is a banking institution?
48.1. In cases of either judicial or extra-judicial foreclosure of any real estate mortgage which
serves as a security for any loan or credit accommodation, the mortgagor or debtor whose real
property has been sold for the full or partial payment of his obligation shall have the right
within one (1) year after the sale of the real estate, to redeem the property. (section 47, GBL).
49. Under section 47 of the GBL, what amounts should the mortgagor or debtor pay in order to
redeem the foreclosed property?
49.1. The amount due under the mortgage deed;
49.2. Interest as stated in the mortgage; and
49.3. All the costs and expenses incurred by the bank or institution from the sale and custody
of said property less the income derived therefrom.
50. What is the difference between the right of the purchaser at the foreclosure under Act No. 3135
and section 47 of the GBL with respect to the right to take possession of the real estate?
50.1. In section 7 of Act No. 3135, the purchaser in the foreclosure sale must furnish a bond in
order to entitle him to take possession of the mortgaged property during the redemption
period. On the other hand, section 47 of the GBL mandates that the purchaser at the auction
sale of the mortgaged property whether in a judicial or extra-judicial foreclosure, has the right
to immediately enter and take possession of the same after the date of confirmation of the
auction sale. Section 47 of the GBL therefore does not require the posting of a bond before the
purchaser can enter and take possession of the mortgaged property.
51. Can the mortgagor or debtor enjoin or restrain the foreclosure proceedings instituted under
section 47 of the GBL?
 51.1. Yes, but the mortgagor or debtor must post a bond in an amount fixed by the court. The
bond will answer for any and all damages which the bank may suffer by the enjoining or the
restraint of the foreclosure proceeding. (section 47, GBL).
52. What is the special rule in the second paragraph of section 47 of the GBL when it comes to
juridical entities as mortgagors?
52.1. This paragraph applies in cases of extra-judicial foreclosures where the mortgagor is a
juridical entity and the mortgagee is a banking institution. In case the property of the
mortgagor-juridical entity is extra-judicially foreclosed by the bank, the mortgagor may redeem
the property but not after, the registration of the certificate of foreclosure sale with the
applicable Register of Deeds which in no case shall be more than three (3) months after
foreclosure, whichever is earlier.
53. Under the second paragraph of section 47 of the GBL, what can the mortgagee bank do to prevent
the mortgagor from exercising its right to redeem the property?
53.1. The mortgagee bank should immediately register the certificate of foreclosure sale with
the applicable Register Deeds.

II. RRC - Foreclosure of securities under the Chattel Mortgage Law/Personal Property Security Act

1. What is the governing law with respect to foreclosures of securities?

1.1. The governing law is now Republic Act No. 11057, otherwise known as the Personal Property
Security Act (PPSA), and its implementing rules and regulations (PPSA IRR), as this law repealed
the provisions on pledge and mortgage under the New Civil Code, and also the entirety of Act
No. 1508 otherwise known as the Chattel Mortgage Law. However, section 68 of the law states
that notwithstanding its effectivity, the implementation of the PPSA is conditioned with the
establishment and operationalization of the Registry.
2. What are securities and how are they defined under the PPSA, and the PPSA IRR?
2.1. Rule 1, section 1.05 (ii) of the PPSA IRR defines securities as shares, participation or interests in
a corporation or in a commercial enterprise or profit-making venture and evidenced by a
certificate, contract, instrument, whether written or electronic in character. Securities include
but are not limited to:
2.1.1. Shares of stocks, bonds, debentures, notes as evidence of indebtedness, asset-backed
securities;
2.1.2. Investment contracts, certificates of interest or participation in a profit-sharing
agreement, certificates of deposit for a future subscription;
2.1.3. Fractional undivided interests in oil, gas or other mineral rights;
2.1.4. Derivatives like options and warrants;
2.1.5. Certificates of assignments, certificates of participation, trust certificates, voting trust
certificates or similar instruments;
2.1.6. Proprietary or nonproprietary membership certificates in corporations; and
2.1.7. Other instruments as may in the future be determined by the Securities and Exchange
Commission (SEC).
2.2. The types of securities covered under the PPSA and its IRR are intermediated and non-
intermediated securities (section 1.05 [p] and [t]), electronic securities and intermediated
electronic securities (section 4.05 and 4.06 of the IRR, respectively).
 2.2.1. What are intermediated, non-intermediated, and electronic securities?
2.2.1.1. Intermediated securities are defined under section 1.05 [p] of the IRR as
securities which are credited to a securities account, and also rights in the securities
resulting from the credit of securities to a securities account.
2.2.1.2. Section 1.05 [t] defines non-intermediated securities are those securities other
than intermediated securities.
2.2.1.3. The PPSA and its IRR do not define an electronic security. A security is an
intangible property since it signifies a share, participation or interest in a corporation
or commercial enterprise. An electronic security is therefore merely a security
expressed in an electronic form.
3. My securities were made collaterals under laws previous to PPSA. Does the former law still govern
this mortgage agreement?
3.1. It depends. Section 56 of the PPSA provides that the creation of a prior interest shall be
governed by the prior laws, and that this prior interest remains effective between the parties
despite that its creation did not comply with the creation requirements of the PPSA. Section 57
of the PPSA on the other hand states that a security interest that was perfected under a prior
law continues to be perfected under the PPSA until the earlier of either the time the prior
interest ceased to be perfected under the prior law and the expiration of the transitional
period.
4. What do “prior interest” and “transitional period” mean?
4.1. Section 55 (c) of the PPSA defines a prior interest as a security interest created or provided for
by an agreement or other transaction that was made or entered into before the PPSA was
effective and had not been terminated before the effectivity of the PPSA. A security interest
however excludes a security interest which is renewed or extended by a security agreement or
other transaction made or entered into on or after the effectivity of the PPSA.
4.2. Sec 55 (d) of the law defines the “transitional period” as the period from the date of effectivity
of the PPSA until the date when the Registry has been established and operational.
5. Can a prior law determine the priority of a prior interest as against the rights of a competing
claimant?
5.1. Yes. The priority of a prior interest as against the rights of a competing claimant is determined
by prior law if: (section 58, PPSA)
5.1.1. The security interest and the rights of all competing claimants arose before the effectivity
of the PPSA; and
5.1.2. The priority status of these rights has not changed since the effectivity of the PPSA.
6. When is the priority status of a prior right considered as “deemed changed”?
6.1. The priority status of a prior right has changed only if: (section 58 [b], PPSA)
6.1.1. It was perfected when the PPSA took effect, and ceased to be perfected, or
6.1.2. It was not perfected under prior law when the PPSA took effect, but was perfected only
when the PPSA took effect.
7. How is a prior interest enforced?
7.1. If before the effectivity of the PPSA, any step or action has already been taken to enforce said
prior interest, and such prior interest remains effective despite its non-compliance with the
PPSA with respect to its creation, enforcement may continue under the prior law, or may
proceed under the PPSA. (section 59, PPSA IRR).
8. Does the prior law still apply to an enforcement matter which is the subject of proceedings before a
court before the PPSA took effect?
8.1. Yes, but subject to section 59 (a) of the PPSA.
9. When did the PPSA become effective?
9.1. Section 67 of the PPSA states that the law becomes effective 15 days after publication in at
least two (2) newspapers of general circulation. The PPSA therefore became effective on
February 9, 2019.
10. The security interests to a collateral were created and perfected only on or during the Transitional
Period. Which law governs?
10.1. All security interests created during the Transitional Period are governed by the PPSA.
(section 8.07, PPSA IRR).
10.2. The perfection of all existing security interests created during the Transitional Period
shall be governed by the PPSA, provided that during this period, registration of the security
agreement with the LRA shall be in accordance with section 4 of Act No. 1508, otherwise
known as the “Chattel Mortgage Law”. The LRA shall also determine a system of provisional
registration of such agreements during such Transitional Period. (section 8.08, PPSA IRR).
11. What is section 4 of the Chattel Mortgage Law in relation to the registration of the security
agreement under the PPSA IRR?
11.1. Section 8.08 of the PPSA IRR therefore states that the manner of registering the security
agreement shall follow the procedure for recording under section 4 of the Chattel Mortgage
Law, since the Registry created under the PPSA is yet to be established and operationalized.
11.2. Section 4 of the Chattel Mortgage Law provides that a chattel mortgage shall not be
valid against any person except the mortgagor, his executors and 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 the mortgagor resides outside of the
Philippine, in the province in which the property is situated, provided 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.
12. The grantor and a secured creditor entered into a written agreement for the creation of a prior
interest. What can the secured creditor do with this written agreement?
12.1. This written agreement is sufficient to constitute an authorization by the grantor of the
registration of a notice covering assets described in said agreement under the PPSA. (section 57
[d], PPSA).
13. What happens when the perfection requirements under the PPSA are satisfied even before the
perfection of a prior interest ceases under the prior law?
13.1. The prior interest continues to be perfected under the PPSA from the time when it was
perfected under the prior law. (section 57 [b], PPSA).
14. What happens when the perfection requirements under the PPSA are not satisfied before the
perfection of a prior interest ceases under the prior law?
14.1. The prior interest then would only be perfected from the time it is perfected under the
PPSA. (section 57 [c], PPSA).
15. What If the prior interest referred under section 57 (b) of the PPSA was perfected via the
registration in the Registry of a notice under prior law?
15.1. The time of registration under the prior law shall then be the time to be used for
purposes of applying the priority rules. (section 57 [e]).
16. What are the rules concerning the priority and enforcement of security interests during the
Transitional Period?
16.1. The priority of competing security interests and the enforcement of all existing security
interests during the Transitional Period shall be determined and be governed by the PPSA.
(sections 8.09 and 8.10 of the PPSA IRR).
17. What is the nature of the expedited hearings or proceedings on the enforcement procedure under
the PPSA?
17.1. The expedited hearings or proceedings shall be done in a summary manner consistent
with the policies of the PPSA, subject to section 47 of the PPSA and rule VII of the PPSA IRR.
(Section 63, PPSA).
18. Who are the parties to a securities mortgage contract under the new law and its IRR?
18.1. Under a control agreement, the parties are the issuer or intermediary, the grantor, and
the secured creditor. (section 3[b], PPSA).
19. What is a control agreement with respect to securities?
19.1. A control agreement with respect to securities, is an agreement in writing among the
issuer or the intermediary, the grantor, and the secured creditor. Under this Agreement, the
issuer or the intermediary agrees to follow the instructions given by the secured creditor with
respect to the security, without further consent from the grantor. (section 3[b] [1], PPSA).
19.2. With respect to intermediated securities, a control agreement shall: (section 4.07 PPSA
IRR)
19.2.1. Be executed in writing by the issuer or the intermediary, the grantor, and the secured
creditor;
19.2.2. Stipulate that the issuer or the intermediary agrees to follow the instructions from the
secured creditor with respect to the security, without further consent from the grantor.
20. How are securities mortgaged under the law?
20.1. A security interest over the securities must first be created. Section 3(j) of the PPSA
defines a security interest as a property right in collateral that secures payment or other
performance of an obligation, regardless of whether the parties have named it as a security
interest, regardless of the type of asset, the status of the grantor or secured creditor, or the
nature of the secured obligation.
21. What happens if the mortgaged securities are sold or disposed even if there was still no default on
the part of the debtor?
21.1. The security interest over the collaterals still continues notwithstanding its sale,
exchange, or other disposition, except agreed upon by the parties or in case where the
“Transferee Exception” applies. (section 9, PPSA).
22. What is a Transferee Exception?
22.1. A transferee is any party who obtains, in the ordinary course of business, any movable
property containing a security interest. The transferee exception means that a transferee who
obtains this movable property containing the security interest in the normal course of business
takes the same free from such security interest but on the condition that the transferee acted
 in good faith. Good faith is present if the security interest in the movable was not registered
prior to the transferee obtaining the property. Conversely therefore, the transferee will not be
in good faith if the security interest in the movable property was registered prior to his
obtaining the property. (section 21, PPSA).
23. Does the law prescribe a form for the Security Agreement?
23.1. Section 3.03 of the PPSA IRR provides for the formal requirements of the Security
Agreement:
23.1.1. It must be contained in a written contract signed by the parties;
23.1.2. It must identify the collateral and also the secured obligation.
23.1.3. The Agreement may also consist of one or more writings that, taken together, establish
the intent of the parties to create a security interest.
23.1.4. The Agreement must provide for the language to be used in agreements and notices;
23.1.5. The Grantor is given the option to have the agreement and notices in Filipino.
24. When does the Security Agreement sufficiently identify the collateral?
24.1. A description of the collateral in the security agreement and/or in the registration
notices is sufficient if it reasonably identifies the collateral. A specific description of the
collateral is not required in constituting the security interest. Even descriptions of the collateral
such as “all personal property, “all equipment”, “all inventory”, or “all personal property within
a generic category” of the grantor are sufficient. (section 3.04, PPSA IRR).
25. Can I also mortgage securities that I will obtain in the future?
25.1. Yes. Section 5 (b) of the PPSA states that a security agreement may provide for the
creation of a security interest in a future property, but the security interest in that property is
created only when the grantor acquires rights in it or the power to encumber it.
26. When does the security interest over collateral end?
26.1. The security interest ends or is extinguished when all the secured obligations have been
discharged and that there are no outstanding commitments to extend credit secured by the
security interest. (section 3.12, PPSA IRR).
27. Can these mortgaged securities be released?
27.1. Yes. The mortgaged securities can be released when the security interest over these
collaterals have been extinguished. (section 3.12, PPSA IRR).
28. What does it mean when the PPSA provides for perfection of security interests?
28.1. On perfection, a security interest becomes effective and binding against third persons.
(section 4.01, PPSA IRR).
29. How are security interests over securities perfected?
29.1. A security is an intangible asset. A security interest over intangible assets such as
securities may be perfected by either: (section 4.03, PPSA IRR)
29.1.1. Registration of a notice with the Registry, provided that a security that is not registered
still remains valid as between the parties; or
29.1.2. Conclusion of a control agreement. For purposes of determining the time of perfection
of the security interest, this control agreement shall be executed under oath, and shall
indicate the date and time of its execution.
30. Does the law or the rules provide for the manner of perfection for intermediated, electronic non-
intermediated, and intermediated electronic securities?
 30.1. Yes. Section 4.04 of the PPSA provides that security interests in intermediated securities
may be perfected by either:
30.1.1. Registration of a notice with the Registry, provided that a security that is not registered
remains valid between the parties;
30.1.2. Creation of a security interest in favor of the intermediary; or
30.1.3. Conclusion of a control agreement.

For purposes of determining the time of perfection of the security interest, the security
agreement or control agreement shall be executed under oath, and shall include the
date and time of its execution.
30.2. Section 4.05 of the PPSA IRR provides that the perfection of a security interest over
electronic non-intermediated securities may be by:
30.2.1. Registration of a notice with the Registry, provided that a security that is not registered
remains valid between the parties;
30.2.2. The execution of a control agreement between the grantor and secured creditor; or
30.2.3. Control, through notation of a security interest in the books maintained by or on behalf
of the issuer for the purpose of recording the name of the holder of the securities.
30.3. Section 4.06 of the PPSA IRR provides that security interests in intermediated electronic
securities may be by:
30.3.1. Registration of a notice with the Registry, provided that a security that is not registered
remains valid between the parties;
30.3.2. Execution of a control agreement between the intermediary, the grantor, and the
secured creditor.

For purposes of determining the time of perfection of the security interest, the control
agreement shall be executed under oath, and shall include the date and time, specifying
the hour and minute of its execution.
31. Who administers this Registry?
31.1. The Land Registration Authority (LRA) is the body responsible for establishing and
administering the nationwide Registry. (section 26, PPSA).
32. What if there was a change in the means to perfect the security interest over the securities?
32.1. Despite a change in the means of achieving perfection, a security interest remains
perfected, provided that there was no time when the security interest was not perfected.
(section 15, PPSA).
33. What happens to the security interest if before default of the debtor, the securities which serve as
collateral are disposed?
33.1. Section 4.09 (b) (i) of the PPSA IRR provides that if before default and the collateral is
disposed, the security interest extends to the proceeds of the collateral without further act and
be continuously perfected, provided that the said proceeds are in the form of money, accounts
receivable, negotiable instruments or deposit accounts.
33.2. If the proceeds are in a form different from money, accounts receivable, negotiable
instruments or deposit accounts, the security interest in such proceeds must be perfected by
one of the means applicable to the relevant type of collateral within 15 days after the grantor
receives said proceeds, otherwise, the security interest in said proceeds will not be effective
against third parties. (section 4.09 [b] [ii]), PPSA IRR).
34. What is the general rule when it comes to priority of security interest in securities?
 34.1. The general rule is that the priority of security interests and liens on the same collateral
shall be determined according to the time of registration of a notice or perfection by other
means without regard to the order of creation of security interests and liens, or to the mode of
perfection, except as provided in section 6.02 of the PPSA IRR. (section 6.01, PPSA IRR).
35. What are the priority rules for intangible assets, such as securities?
35.1. Section 6.02 of the PPSA IRR lays down the priority rules for securities. These rules in
section 6.02 are however subject to the general rule laid down in section 6.01:
35.1.1. A security interest in investment property that is perfected by a control agreement shall
have priority over a over a competing security interest except a security interest of the
intermediary. (section 6.02 [b]).
35.1.2. The order of priority among competing interests in investment property that were
perfected by the conclusion of control agreements shall be determined based on the time
of conclusion of the control agreements. (section 6.02[c]).
35.1.3. A security interest in electronic non-intermediated securities perfected by a notation of
the security interests in the books maintained for that purpose by or on behalf of the
issuer shall have priority over a security interest in the same securities perfected by any
other method. (section 6.02 [e]).
35.1.4. A security interest in electronic securities not held with an intermediary perfected by
the conclusion of a control agreement shall have priority over a security interest in the
same securities perfected by registration of a notice in the Registry. (section 6.02 [f]).
35.1.5. A security interest in electronic securities held with an intermediary and perfected
through a control agreement shall have priority over a security interest in the same
securities perfected by any other method. (section 6.02 [g]).
35.1.6. The order of priority among competing security interests in electronic securities not held
with an intermediary perfected by the conclusion of control agreements is determined on
the basis of the time of conclusion of the control agreements. (section 6.02 [h]).
36. When will these mortgaged securities be foreclosed?
36.1. After default, a secured creditor may sell or otherwise dispose of the collateral either
publicly or privately, in its present condition or following any commercially reasonable
preparation or processing. The secured creditor may also purchase the collateral at any public
disposition, or even in a private disposition but only if the collateral is of a kind that is
customarily sold on a recognized market or is the subject of widely distributed standard price
quotations (section 49, PPSA).
37. What does default under the PPSA mean?
37.1. Default is the failure of a debtor to pay or otherwise perform a secured obligation, and
any other event that constitutes default under the terms of an agreement between the grantor
and the secured creditor. (section 1.05 [e], PPSA IRR).
38. In what manner must the secured creditor act in disposing the collateral?
38.1. Section 50 of the PPSA provides that the secured creditor must act in a commercially
reasonable manner in disposing the collateral. A disposition is commercially reasonable if the
secured creditor disposes of the collateral in conformity with commercial practices among
dealers in that type of property.
39. Is it then a commercially unreasonable disposition if a better price could have been obtained by
another disposition at a different time or different method from the time and method selected by
the secured creditor?
 39.1. No, a disposition is not commercially unreasonable merely because a better price could
have been obtained by disposition at a different time or by a different method from the time
and method selected by the secured creditor. (section 50 [c], PPSA).
40. What are the legal effects if a method of disposition of a collateral is approved in any legal
proceeding?
40.1. This method of disposition of the collateral is deemed to be a commercially reasonable
method. (section 50 [d], PPSA).
41. What must the secured creditor do before disposing the collateral?
41.1. Not later than 10 days before disposition of the collateral, the secured creditor shall
notify: (section 51, PPSA)
41.1.1. The grantor;
41.1.2. Any other secured creditor or lien holder who, five (5) days before the date the
notification is sent to the grantor, held security interest or lien in the collateral that was
perfected by registration; and
41.1.3. Any other person from whom the secured creditor received notification of a claim of an
interest in the collateral if the notification was received before the secured creditor gave
notification of the proposed disposition to the grantor.
42. How do we determine if a notification of disposition of the collateral is enough?
42.1. A notification of disposition of the collateral is sufficient if it: (section 51 [c], PPSA)
42.1.1. Identifies the grantor and the secured creditor;
42.1.2. Describes the collateral;
42.1.3. States that method of the intended disposition; and
42.1.4. States the time and place of the public disposition or the time after which other
disposition is to be made.
43. Is the requirement to send a notification mandatory at all times?
43.1. No, it is not. The requirement to send a notification before disposition shall not apply if
the collateral is perishable, or that it threatens to decline speedily in value, or is of a type which
is customarily sold on a recognized market. (section 51 [d], PPSA).
44. How does a secured creditor enforce his/her security interest in a collateral?
44.1. A secured creditor may enforce his/her security interest either with or without judicial
process. Section 7.01 of the PPSA IRR states that a secured creditor may enforce his/her
security interest whether through a judicial or extra-judicial process, including the sale of the
secured assets through either a public or private disposition.
45. What governs the judicial enforcement of security interests?
45.1. Judicial enforcement of security interests, including the disposition of collateral, shall be
governed by the rules promulgated by the Supreme Court of the Philippines. (section 7.01,
PPSA IRR).
46. Can the secured creditor repossess the collateral without judicial process?
46.1. Yes. Section 7.02 of the PPSA IRR states that a secured creditor may take possession of
the collateral without judicial process provided that the security agreement allows it, and
provided that this possession be taken without breach of the peace.
47. What does breach of the peace under the IRR mean?
47.1. Section 7.02 of the PPSA IRR states that a breach of the peace includes entering the
private residence of the grantor without his/her permission; resorting to physical violence or
 intimidation; or being accompanied by a law enforcement officer when taking possession or
confronting the grantor.
48. Can the secured creditor also take possession using judicial processes?
48.1. Yes. Section 7.03 of the PPSA IRR provides that if upon default, and the secured creditor
cannot take possession of the collateral without a breach of the peace, the secured creditor
may proceed as follows:
48.1.1. The secured creditor shall be entitled to an expedited hearing upon application for an
order granting the secured creditor possession of the collateral. This application shall
include a statement by the secured creditor, under oath, verifying the existence of the
security agreement attached to the application and identifying at least one event of
default by the debtor under the security agreement;
48.1.2. The secured creditor shall provide the debtor and the grantor a copy of the application,
including all supporting documents and evidence of the order granting the secured
creditor possession of the collateral; and
48.1.3. The secured creditor is entitled to an order granting possession of the collateral upon
the court finding that a default has occurred under the security agreement and that the
secured creditor has a right to take possession of the collateral. The court may direct the
grantor to take such action as the court deems necessary and appropriate so that the
secured creditor may take possession of the collateral.
49. I am a secured creditor having priority over collaterals (securities). These same securities were also
mortgaged by my debtor to another creditor. Upon default by my debtor with his/her obligation in
the latter obligation, the subsequent creditor enforced his/her security interest in said securities.
What are my rights as a higher-ranking secured creditor?
49.1. Even if another secured creditor or lien holder has commenced enforcement, a higher-
ranking secured creditor, or a secured creditor whose security interest has priority over that of
the enforcing secured creditor or lien holder shall be entitled to take over the enforcement
process. (section 46 [a], PPSA).
50. When can I, as a higher-ranking secured creditor, invoke my right to take over enforcement?
50.1. This right to take over enforcement may be invoked at any time before the collateral is
sold, disposed of, or retained by the secured creditor or until the conclusion of an agreement
by the secured creditor for that purpose. (section 46 [b], PPSA). The right of a higher-ranking
secured creditor to take over the enforcement process shall include the right to enforce the
rights by any method available to a secured creditor under the PPSA.
51. What are the guidelines on private or public dispositions?
51.1. Section 7.09 of the PPSA IRR discusses these guidelines:
51.1.1. The secured creditor may dispose of the collateral through a sale open to participation
by the general public;
51.1.2. In cases of extra-judicial dispositions, the secured creditor may, subject to the
guidelines, select the method, manner, time, place and other aspects of the sale or other
disposition, lease or license, including whether to sell or otherwise dispose of, lease or
license encumbered assets individually, in groups or altogether, provided that the
disposition is undertaken in good faith and satisfies the commercial reasonableness
requirement of the PPSA. Judicial dispositions shall be governed by rules promulgated by
the Supreme Court.
 51.1.3. No later than 10 days before the extra-judicial disposition of the collateral, the secured
creditor shall cause the posting with the Registry, of a notice that sufficiently describes the
collateral to be sold and specifies the method, manner, time, place and other details of the
sale. The Registry shall ensure that all such notices posted are publicly accessible and
searchable. In adherence with the commercial reasonableness requirement, the secured
creditor may also cause the advertisement of the disposition through any other means or
medium as the secured creditor may deem as suitable in order to maximize the awareness
of the sale among dealers in the type of property to which the collateral belongs.
51.1.4. All collaterals shall be disposed through auction, and the following indicators may be
taken into account in determining whether the sale satisfies the good faith and
commercial reasonableness requirement:
51.1.4.1. That the person or entity presiding over the auction is an experienced dealer in
the type of property sold;
51.1.4.2. That the participating bidders do not engage in collusive practices that prevent
free and open competition;
51.1.4.3. That the records of the proceedings, including the identities and respective
submissions of the bidders, are documented in writing and subsequently maintained;
and
51.1.4.4. That the highest bidder is duly awarded the collateral. The winning bidder must
likewise fully pay the bid price at the conclusion of the auction. Otherwise, the
collateral may be awarded to the next highest bidder.
51.1.5. Any government agency that regularly undertakes public auctions in the course of its
regular activities may be engaged by any secured creditor to preside over public auctions
over securitized movable collateral under this section, through the rules and regulations
which must be submitted to the Department of Finance (DOF) for prior approval. For
private entities, such as auction houses, industry groups of secured creditors, or
organizations of recognized dealers of specific movables may likewise adopt rules and
regulations for the conduct of public auctions, subject to the approval of the DOF. Any
public auction of movable collateral conducted by any government agency or private
entity under rules duly approved by the DOF shall be conclusively presumed to be
commercially reasonable.
51.1.6. The secured creditor may buy the collateral at any public disposition, or a at a private
disposition but only if the collateral is of a kind that is customarily sold on a recognized
market or is the subject of widely distributed standard price quotations.
51.1.7. If a method of disposition of collateral has been approved in any legal proceeding,
whether judicial or administrative, it is conclusively commercially reasonable.
52. Can we redeem these foreclosed securities?
52.1. Yes, the foreclosed securities may be redeemed. Section 45 of the PPSA provides that
any person who is entitled to receive a notification of disposition is entitled to redeem the
collateral by paying or otherwise performing the secured obligation in full, including the
reasonable cost of enforcement.
53. Can the right of redemption be exercised all the time?
53.1. No. Section 45 (b) of the PPSA states that the right of redemption cannot be exercised if:
53.1.1. The person entitled to redeem has waived such right in writing;
 53.1.2. The collateral is sold or disposed of, acquired or collected by the secured creditor or
until the conclusion of an agreement by the secured creditor for that purpose; and
53.1.3. When the secured creditor has retained the collateral.
54. When can the secured creditor retain the collateral?
54.1. Section 54 of the PPSA provides for the process on when the secured creditor may
retain the securities held as collateral:
54.1.1. After default, the secured creditor may propose to the debtor and grantor to take all or
part of the collateral in total or partial satisfaction of the secured obligation, and shall send
a proposal to:
54.1.1.1. The debtor and grantor;
54.1.1.2. Any other secured creditor or lien holder who, five (5) days before the proposal
is sent to the debtor and the grantor, perfected its security interest or lien by
registration; and
54.1.1.3. Any other person with an interest in the collateral who has given a written
notification to the secured creditor before the proposal is sent to the debtor and the
grantor.
54.1.2. The secured creditor may retain the collateral in the case of either:
54.1.2.1. A proposal for the acquisition of the collateral in full satisfaction of the secured
obligation, unless the secured creditor receives an objection in writing from any
person entitled to receive such a proposal within 20 days after the proposal is sent to
that person; or
54.1.2.2. A proposal for the acquisition of the collateral in partial satisfaction of the of the
secured obligation, only if the secured creditor receives the affirmative consent of
each addressee of the proposal in writing within 20 days after the proposal is sent to
that person.
55. When is a proposal for retention of collateral by the secured creditor deemed sufficient?
55.1. It is deemed sufficient if the proposal includes: (section 7.13 [c], PPSA IRR)
55.1.1. A statement of the amount required at the time of the proposal is given to satisfy the
secured obligation, including the interest and the reasonable cost of enforcement, and the
amount of the secured obligation that is proposed to be satisfied;
55.1.2. A statement that the secured creditor proposes to acquire the encumbered asset
described in the proposal in total or partial satisfaction of the secured obligation;
55.1.3. A statement of the date after which the secured creditor will acquire the encumbered
asset.
56. What happens if the secured party fails to comply with the PPSA IRR?
56.1. The aggrieved party may resort to certain remedies such as judicial proceedings and
damages, as provided under section 7.14 of the PPSA IRR.
57. What does the judicial order regarding non-compliance with the PPSA IRR entail?
57.1. If it is established that a secured party is not proceeding in accordance with the PPSA
IRR, a court may order or restrain the collection, enforcement, or disposition of the collateral
on appropriate terms and conditions. (section 7.14 [a], PPSA IRR).
58. What are included in the damages awarded to an aggrieved party due to non-compliance with the
PPSA IRR?
 58.1. A party or any interested person who fails to comply with the provisions of the IRR shall
be liable in the amount of any loss resulting from such failure. Loss caused by a failure to
comply may include loss resulting from the debtor’s inability to obtain, or increased costs of,
alternative financing. (section 7.14 [b], PPSA IRR).
59. Who are entitled to recover damages?
59.1. A person, who at the time of the failure to comply with the PPSA IRR, was a debtor,
grantor, or held a security in or other lien on the collateral, may recover damages stated under
section 7.14 (b) of the PPSA IRR. (section 7.14 [c], PPSA IRR).
60. How are the proceeds of the foreclosed collateral/s applied?
60.1. The proceeds of the disposition shall be applied in the following order: (section 52,
PPSA)
60.1.1. The reasonable expenses of taking, holding, preparing for disposition, and disposing the
collateral, including reasonable attorney’s fees and legal expenses incurred by the secured
creditor;
60.1.2. The satisfaction of the obligation secured by the security interest of the enforcing
secured creditor; and
60.1.3. The satisfaction of obligations secured by any subordinate security interest or lien in the
collateral if a written demand and proof of the interest are received before distribution of
the proceeds is completed.
61. What costs are included in the holding expenses of a collateral?
61.1. The reasonable expenses of holding the collateral includes all expenses incurred by the
secured creditor in the preservation and care of the collateral in his/her possession with the
diligence of a good father of the family. (section 7.11 [c], PPSA IRR).
62. Who is liable for the loss and deterioration on the collateral?
62.1. The secured creditor shall be liable to the grantor for the value of the loss and
deterioration of the collateral due to the former’s failure to preserve and care for said
collateral. (section 7.11 [d], PPSA IRR).
63. Who is entitled to the surplus, if any, after the disposition or foreclosure of the collateral?
63.1. The grantor is entitled to any surplus. The secured creditor must account to the grantor
any said surplus. (section 52 [b], PPSA).
64. Is the grantor liable to the secured creditor in case of any deficiency after the disposition?
64.1. It depends. The general rule is that the grantor is liable to the secured creditor in case of
deficiency after the disposition of the collateral. The exception to this is if the parties agree that
the grantor will not be liable to the secured creditor for any such deficiency. (section 52 [b],
PPSA).
65. In case the secured creditor sells the collateral to a buyer, what rights does the buyer have with
respect to the thing purchased?
65.1. The buyer in this case shall acquire the grantor’s right in the asset free of the rights of
any secured creditor or lien holder. (section 53 [a], PPSA). However, if the secured creditor sells
the collateral in a manner not in compliance with the PPSA, the buyer shall still acquire the
grantor’s right in the asset free of the rights of any secured creditor or lien holder, provided
that the buyer had no knowledge of any violation of the rules that materially prejudices the
rights of the grantor or another person. (section 53 [c], PPSA).

PPSA Law
SECS

Sec 3(b) (1)

Sec 3 (c)

Sec 3 (d)

Sec 3 (e)

Sec 3 h, I, j

Sec 4 – scope

Sec 5

Sec 6

Sec 7

Sec 9

Sec 10

Sec 11

Sec 12

Sec 13

Sec 14(d)

Sec 15

Sec 16

Sec 17

sec 18 (e to h)

sec 19

sec 21

sec 22

sec 26

sec 28
sec 29

sec 30

sec 32

sec 33

sec 34

sec 37

sec 39

sec 40

sec 41

sec 42

sec 43

enforcement proper

sec 45

sec 46

sec 47

sec 48

sec 49

sec 50

sec 51

sec 52

sec 53

sec 54

sec 55

sec 56

sec 57

sec 58

sec 59
sec 63

sec 68 – conditions for implementation

PPSA IRR

SECS

1.05 (D) (i) intermediated secus

1.05 (E)

1.05 (K)

1.05 (L)

1.05 (M)

1.05 (O)

1.05 (P)

1.05 (S)

1.05 (T)

1.05 (U)

1.05 (W)

1.05 (X)

1.05 (Y)

1.05 (Z)

1.05 (EE)

1.05 (FF)

1.05 (GG)

1.05 (HH)

1.05 (II)

1.05 (JJ)

2.01

2.02

2.03(A)
3.01

3.02

3.03

3.04

3.05

3.12

4.01

4.03 (INTANGIBLE)

4.04

4.05 (perfection of secu interest in electronic secus)

4.07

4.08

4.09

5.05

5.06

5.07

5.08

5.09

5.10

5.11

5.12

5.13

5.14

5.15

6.01
6.02

RULE 7 – enforcement (foreclosure proper)

7.01

7.02

7.03

7.04

7.06

7.07

7.08

7.09

7.10

7.11

7.12

7.13

7.14

8.01

8.02

8.03

8.04

8.05

8.06

8.07

8.08

8.09

8.10

8.10

9.02
10.03