The PERSONAL PROPERTY SECURITY ACT otherwise known as REPUBLIC ACT

11057 which took effect on September 7, 2018, seeks to establish a unified and modern
legal framework for securing obligations using personal property.

Before, security transactions over personal properties were governed by the laws on
pledge and chattel mortgage. However these laws are expressly repealed by virtue of
Section 66 of PERSONAL PROPERTY SECURITY ACT.

In the discussion of Atty. Javier, I learned that PPSA now provides for a single type of
security transaction and that there is no more distinction between pledge and mortgage.
PPSA covers all transactions, of any forms that secure obligation with personal
property.

PPSA involves a single type of transaction, THE SECURITY INTEREST. Security has
been defined as a property right in collateral that secures the payment or other
performance of an obligation regardless of the name given to the contract by the parties
or the type of the asset, status of the grantor, or regardless of the status of the secured
creditor. This is also regardless of the nature of the secured obligation and it also
includes the security interests; includes the right of buyer of account receivable or a
lessor under an operating lease for not less than one year.

And this security interest will continue in the collateral even if such collateral or personal
property is sold, leased, licensed exchange or otherwise disposed of. So, even if the
grantor sells the property, the security interest will follow that property after its transfer
to any subsequent transferee. Unless there is a stipulation to the contrary or a
subsequent transferee is a buyer in good faith. However he is not a buyer in good faith if
the security interest is registered before the transferee before it because registration is a
notice to the whole world.

Also, Security interest will still be valid even if there is a contractual limitation on the
grantors right to create a security interest.

How is the security interest created. ?

Security interest is created through a security agreement. The security agreement must
be in writing. It must be in a written contract and signed by the parties, however the law
allows the security agreement to be contained in a one or more writings. Provided that
when you take the writings together you can establish or show the intention of the
parties to create a security interest. Security agreementt must also have a description
of the collateral.
 These description can be sufficient if it can reasonably identify the subject or the
collateral itself.cna be specific or general as long as you can reasonably identify that it is
the subject property referred to.

Security agreement can also cover future property but subject to qualification under the
law that the security interest will only be created and only start to exist when the grantor
acquires the rights over that future property or when he gains the power to encumber it.
And before that, there is nothing to use a security.

Security agreement, may provide that the security interest intangible assets, extends to
its product in case of transformation or to its replacement in case, it is replaced.
However in case of transformation into product or replacement, the security interest will
only be limited to the value of the asset before its transformation or replacement.

Perfection of the security interest

When security interest is perfected, It becomes effective against third parties but in case
the security agreement is not registered, it will not bind third parties, but it will be binding
and valid between parties.

How is security agreement and security interest perfected.

It is created through:

1. There must be creation. The security interest must be created first in a security
agreement. And now it will be perfected if you add either registration of a notice with the
registry of property in the LRA or possession of property by the secured creditor.

Those 2 will apply in case of tangible property or asset.

If it is intangible, Security is perfected either through registration of the notice with the
registry in the LRA or through the completion of the control agreement.

According to Atty Javier, Control agreement is a written agreement which must be under
oath in order to determine the time of its perfection with the date and time. It is written
agreement among the grantor, secured creditor and either the intermediary or the
deposit taking institute. Where the intermediary or deposit taking institute agrees to
follow the instructions of the secured creditor without the consent of the grantor.

Security interest is extinguished when all the secured obligations are discharged and no
outstanding commitments to extend credit secured by security interest. In which case
the grantor may demand termination of the notice. The secured creditor has 15 days
upon receipt of the demand within which he will register the amendment or termination
of the notice as may be applicable.
In case the secured creditor fails to register the amendment notice or termination of
notice and the Remedy of the grantor is to go to court and the court may issue an order
either amending or terminating the notice as the case may be.

Perfection by virtue of control.

1. creation of the security interest in favour of the deposit taking instruction or

intermediary.

2. created through the conclusion of the control agreement when the parties entered
into control agreement

3. by notation of the security interes in the books for the purpose of recording the name
of the holder of the security.

Nothing in the PPSA to be used by the grantor to compel the deposit taking institute or
intermediary to enter in a control agreement. Except in the request of the grantor.

Collateral produces money, accounts receivable or negotiable instrument, deposit

accounts, upon possession of these collateral the security interest will now extend to the
money, accts receivable or negotiable instrument, it will extend without the need of
further agreement.in other words, the security interest is continuously perfected.

If the proceed is different from those, security interest can only be perfected by applying
the means applicable to its type. Meaning there has to be new registration, new
possession, or new control. It has to be perfected again if the proceed is different and
collateral itself is disposed of.

Those assets, which are not money, accts receivable, negotiable instrument, or deposit
account and those where not perfected anew with the means applicable to each type,
Within 15 days form the receipt of the grantor pf the proceeds, then they will not
effective against third persons.

In case security interest is over a fixture which is now part of another movable or
immovable or has been commingled, the security interest in such fixture continues to
exist provided that the personal property is traceable.

Any subsequent change of the means of the perfection does not affect the previous
perfection. The requirement there is that it must be perfected at the start and there is no
intervening time between the time of perfection and the subsequent change in the mode
and intervening time when the perfection does not exist.