Refil, Karen A.

PART 2- PRIORITY OR PREFERENCE OF SECURITY INTEREST

In the second discussion on PPSA, Atty. Javier talked about the priority or preference of Security
Interest. I learned that the IRR of PPSA defined priority as the right of the person in an encumbered
asset in preference of a right of the competing claimant or in other words, this is the preference of the
secure creditor in payment. He gets to be paid first before others.

Also, Sec 66- amends Art 2241, 2243, 2246, 2247 of the Civil Code insofar as the preference stated in
those arts is inconsistent with the priority rights of the secured creditor which are perfected under PPSA
or its IRR.

Generally, the priority of security interests or liens on the same collateral is determined according to
the time of the registration of the notice in the registry of LRA or perfection by other means without
regard to the order of creation or mode perfection of the contract. The time by which we will determine
the priority of the security interest is the time of registration or perfection by control or possession.

In the discussion, there were specific rules that were tackled. One of them was the rules on Deposit
Account, made by deposit-taking institutes such as banks.

1. Any rights which any deposit taking which is the bank may have to set off or compensate against the
grantors right to payment of funds credited to the deposit account. They shall priority over any security
int of the deposit acct. The right to set off compensation.

Case: Gullas vs National Bank; compensation/Loan

The depositor in the bank has a creditor- debtor relationship. In this case the bank has the right to set
off or compensate a deposit in its hands for payment to any indebtedness to it by the debtor because of
the debtor-creditor relationship bet the depositor and the bank.

2. In case of security interest, in a deposit account in which the secured creditor is a deposit-taking
institute or intermediary institute , takes the first preference.

3. Security interest in the deposit account or investment property which is perfected by a control
agreement.

After all those, everything will follow

Electronic securities not held: The preference or priority of security interest is on the following orders;

1. perfected by notation in the books

2. perfected by control agreement

3. by registration of notice

WHAT IF THERE IS COMPETING INTEREST- DETERMINE BY THE TIME OF THE CONCLUSION OF THE
CONTROL AGREEMENT.
Refil, Karen A.

If held by intermediary, perfected by control agreement, then it will be the priority among others.

Purchase money security interest was also defined as security interest in goods, an interest which
attaches to the goods or secured by a person who gives value to enable the grantor to acquire goods to
the extent the credit for that purpose. In case of the seller, to secure the price.