COMPARATIVE TABLE OF PERSONAL PROPERTY SECURITY ACT AS AGAINST CHATTEL

MORTGAGE, PLEDGE AND PREFERENCE OF CREDITS : | JUMALON, Jewelyn A. 4B

PERSONAL PROPERTY SECURITY ACT v. CHATTEL MORTGAGE

CHATTEL MORTGAGE (NCC;
DISTINCTIONS: PPSA (R.A. 11057)
ACT 1508)
Registration requirement: Registration is required by Not required. It is sufficient
law. that there is a security
agreement which will create
Art. 2140 of the NCC: the security interest.
By a chattel mortgage,
personal property is recorded Sec. 6:
in the Chattel Mortgage A security agreement must
Register as a security for the be contained in a written
performance of an contract signed by the
obligation. parties.
It may consist of one or more
writings that, taken together,
establish the intent of the
parties to create a security
interest.
When perfected: By registration. Sec. 11(a):
A security interest shall be
Art. 2140 of the NCC: perfected when it has been
If the movable, instead of created and the secured
being recorded is deliver to creditor has taken one of the
the creditor or a third actions in accordance with
person, the contract is a Sec. 12.
pledge, not a chattel
mortgage. Sec. 12:
A security interest may be
perfected by:
 Registration of a
notice with the
Registry;
 Possession of the
collateral by the
secured creditor;
 Control of investment
property and deposit
account.
Ownership of the collateral: Art. 2085 of the NCC, as Sec.5(b):
suppletory applied, provides A security agreement may
that: provide for the creation of a
 The security interest in a future
pledgor/mortgagor property, but the security
 COMPARATIVE TABLE OF PERSONAL PROPERTY SECURITY ACT AS AGAINST CHATTEL
MORTGAGE, PLEDGE AND PREFERENCE OF CREDITS : | JUMALON, Jewelyn A. 4B

must be the absolute interest in that property is

owner of the thing created only when the
pledged of mortgaged grantor acquires rights in it or
 The persons the power to encumber it.
constituting the
pledge or mortgage Hence, security debtor can
have the free disposal use future property as
of their property, and collateral provided the
in the absence condition set forth in Sec.
thereof, that they be 5(b) has been complied with.
legally authorized for
the purpose

Hence, the
mortgagor/pledgor cannot
use future property as
collateral.

Formalities: Requisites of a chattel Sec. 12:

mortgage: A security interest may be
Art. 2085 of the NCC: (as perfected by:
applied suppletory)  Registration of a
 The chattel mortgage notice with the
must be constituted Registry;
to secure the  Possession of the
fulfillment of a collateral by the
principal obligation secured creditor;
 The  Control of investment
pledgor/mortgagor property and deposit
must be the absolute account.
owner of the thing
pledged of mortgaged
 The persons
constituting the
pledge or mortgage
have the free disposal
of their property, and
in the absence
thereof, that they be
legally authorized for
the purpose

Chattel Mortgage must

 COMPARATIVE TABLE OF PERSONAL PROPERTY SECURITY ACT AS AGAINST CHATTEL
MORTGAGE, PLEDGE AND PREFERENCE OF CREDITS : | JUMALON, Jewelyn A. 4B

likewise be in accordance
with Arts. 2085-2123, 2140-
2141 of the NCC.

Enforcement of the security: Sec. 14 of Act 1508: Either through:

The mortgagee, his executor,
his administrator, or assign,
may after 30 days from the
time of condition broken,
cause the mortgaged
property, or any part thereof,
to be sold at a public auction
by a public officer at a public
place in the municipality
where the mortgagor resides,
or where the property is
situated.
 Recovery (Sec. 48);
 Disposition (Sec. 49);
 Retention (Sec. 54).
In certain cases, secured
creditor must first seek
REPOSSESSION (Sec.47) of
the collateral, which may be
undertaken with judicial
process or without judicial
process.

PNB v. Manila Investment

Construction, Inc. (G.R. No.:
L-27132, April 29, 1971):
The sale may be a private
one, if permitted by the
agreement of the parties.
There is nothing immoral or
against public order in such
agreement entered into
freely and voluntarily, in line
with the provisions of
substantive law giving the
contracting parties full
freedom to contract provided
their agreement is not
contrary to law, morals, good
customs, public order or
public policy.
Right of lender to recover Allowed. Allowed.
deficiency:
Bicol Savings and Loans Sec. 52:
Association v. Guinhawa The secured creditor,
(G.R. No.: L-62415, August whether a mortgagee or
20, 1990) pledgee, shall account to the
 In extra-judicial grantor for any surplus, and
 COMPARATIVE TABLE OF PERSONAL PROPERTY SECURITY ACT AS AGAINST CHATTEL
MORTGAGE, PLEDGE AND PREFERENCE OF CREDITS : | JUMALON, Jewelyn A. 4B

foreclosure of CM, unless otherwise agreed, the

the deficiency maybe debtor is liable for any
recovered by deficiency.
instituting a separate
civil action for that
purpose.
 In judicial foreclosure
of CM, the creditor
may ask for the
execution of the
judgment against any
other property of the
mortgagor for the
payment of the
balance.

Right of the borrower to Allowed. Allowed.

recover surplus:
Sec. 14 of Act. 1508: Sec. 52(b):
The proceeds of such sale The secured creditor,
shall be applied to the whether a mortgagee or
payment, first, of the cost pledgee, shall account to the
and expenses of keeping and grantor for any surplus, and
sale, and then to the unless otherwise agreed, the
payment of the demand or debtor is liable for any
obligation secured by such deficiency.
mortgage, and the residue
shall be paid to persons
holding subsequent
mortgages in their order, and
the balance, after paying the
mortgages, shall be paid to
the mortgagor or person
holding under him on
demand.
Lender’s right of action in Caltex v. IAC, 176 SCRA 741 Sec. 49:
case of default by the (1989): (a) After default, a
borrower: The mortgagee has a choice secured creditor may
of one of the two remedies, sell or otherwise
BUT HE CANNOT HAVE dispose of the
BOTH: collateral, publicly or
 Foreclose the privately, in its
mortgage; present condition or
 COMPARATIVE TABLE OF PERSONAL PROPERTY SECURITY ACT AS AGAINST CHATTEL
MORTGAGE, PLEDGE AND PREFERENCE OF CREDITS : | JUMALON, Jewelyn A. 4B

 File an ordinary action following any

to collect the debt. commercially
reasonable
preparation or
processing.
(b) The secured creditor
may buy the collateral
at any public
disposition, or at
private disposition
but only if the
collateral is of a kid
that is customarily
sold on a recognized
market or the subject
of widely distributed
standard price
quotations.

Right of Redemption: None. Allowed.

(Sibal v. Valdez, 50 Phil. 512;
Sps. Paray v. Rodriguez, G.R.
No.: 132287, January 24,
2006.)
Sec. 45:
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.
 COMPARATIVE TABLE OF PERSONAL PROPERTY SECURITY ACT AS AGAINST CHATTEL
MORTGAGE, PLEDGE AND PREFERENCE OF CREDITS : | JUMALON, Jewelyn A. 4B

PERSONAL PROPERTY SECURITY ACT v. PLEDGE

DISTINCTIONS: PLEDGE (NCC) PPSA (R.A. 11057)
When perfected: Delivery. Delivery is not necessary.

Art. 2093 of the NCC: Sec. 11(a):

In addition to the requisites A security interest shall be
prescribed in Art. 2085, it is perfected when it has been
necessary, in order to created and the secured
constitute the contract of creditor has taken one of the
pledge, that the thing actions in accordance with
pledged be placed in the Sec. 12.
possession of the creditor, or
of a third person by common Sec. 12:
agreement. A security interest may be
perfected by:
 Registration of a
notice with the
Registry;
 Possession of the
collateral by the
secured creditor;
 Control of investment
property and deposit
account.
Formalities: Requisites of Pledge: The following must be
Art. 2085 of the NCC: present:
 The pledge must be
constituted to secure 1.) Written security
the fulfillment of a agreement signed by
principal obligation the parties. (Sec. 6)
 The 2.) Description of the
pledgor/mortgagor collateral. (Sec. 7)
must be the absolute 3.) Perfection of security
owner of the thing interest. (Secs. 11 &
pledged of mortgaged 12)
 The persons
constituting the
pledge or mortgage
have the free disposal
of their property, and
in the absence
thereof, that they be
 COMPARATIVE TABLE OF PERSONAL PROPERTY SECURITY ACT AS AGAINST CHATTEL
MORTGAGE, PLEDGE AND PREFERENCE OF CREDITS : | JUMALON, Jewelyn A. 4B
Right of borrower to recover
surplus:
Right of lender to recover
deficiency:
Enforcement of security:
legally authorized for
the purpose
Not allowed. Allowed.
Art. 2115 of the NCC: Sec. 52(b):
If the price of the sale is less The secured creditor,
(than the amount of the whether a mortgagee or
principal obligation), neither pledgee, shall account to the
shall the creditor be entitled grantor for any surplus, and
to recover the deficiency, unless otherwise agreed, the
notwithstanding any debtor is liable for any
stipulation to the contrary. deficiency.
Not allowed, generally. Not allowed, generally.
Art. 2115 of the NCC: Sec. 52(b):
If the price of the sale is The secured creditor,
more than said amount (of whether a mortgagee or
the principal obligation), thepledgee, shall account to the
debtor shall not be entitled grantor for any surplus, and
to the excess, UNLESS it is unless otherwise agreed, the
otherwise agreed. debtor is liable for any
deficiency.
Notarial Sale. Either through:
o Two auctions may be  Recovery (Sec. 48);
had, and if the thing  Disposition (Sec. 49);
pledged had not been  Retention (Sec. 54).
sold after the two
auctions, the pledgee In certain cases, secured
may appropriate the creditor must first seek
thing pledged with REPOSSESSION (Sec.47) of
the effect of the collateral, which may be
extinguishment of undertaken with judicial
debt. process or without judicial
process.
Art. 2112 of the NCC:
The creditor to whom the
credit has not been satisfied
in due time, may proceed
before a Notary Public to the
sale of the thing pledged.
This sale shall be made at a
public auction, and with the
 COMPARATIVE TABLE OF PERSONAL PROPERTY SECURITY ACT AS AGAINST CHATTEL
MORTGAGE, PLEDGE AND PREFERENCE OF CREDITS : | JUMALON, Jewelyn A. 4B
Binding effect to 3rd parties:
notification to the debtor and
the owner of the thing
pledged in a proper case,
stating the amount for which
the public sale is to be held.
If at the first auction the
thing is not sold, a second
one with the same
formalities shall be held; and
if at the second auction there
is no sale either, the creditor
may appropriate the thing
pledged. In this case, he shall
give an acquittance for his
entire claim.
Description of the thing Need not be in public
pledged and date of pledge instrument.
must appear in a public
instrument. It is enough that there is a
written security agreement
Art. 2096 of the NCC: and is signed by the parties.
A pledge shall not take effect (Sec.6)
against third persons if a
description of the thing
pledged and the date of
pledge do not appear in a
public instrument.