FIRST PART: INSIGHTS ON PERSONAL PROPERTY SECURITY ACT

In the stretch of decades, Pledge and Chattel Mortgage laws were in effect for securing
personal property connected to a principal obligation. Each of which had its own rules
governing the perfection and validity of their respective contracts, notwithstanding, the very
commonality residing in them, taking into account the object of which the contract have to
consider, which is personal or movable properties.
Now, with it’s intent to shun away from confusion of the rules and to simplify more in all of
personal property security, congress made more convenient and practical the application and
employment of such security by enacting Personal Property Security Act. The purported Act
seeks to unify legal framework of securing obligations using personal property by establishing
rules on perfection , creation, determination of priority and enforcement of security interest.
This time, there is no distinction as to whether security on personal property is one of Pledge
or Chattel Mortgage. Rather, it is now nominally known as security interest which applies rules
for all personal property security transactions, except for aircrafts and ships as they have their
own special laws in effect upon them. Security interest is understood as security rights in
collateral for the performance of an obligation regardless of the contract made or regardless of
the grantor or kinds of personal properties. It extends to identifiable and traceable proceeds
like funds or money, continues even when the property is sold or disposed unless there is
contrary stipulation or in case of purchaser in good faith.
Security interest has to be made in writing and must be described in a general or specific
manner. Such can cover future properties but will only take effect once grantor acquires the
absolute right over the property subject to security.
It is, however, worth noting whether a property to be secured is such as tangible or
intangible one, so as to determine the point of perfection of the security contract. When the
perfection is attained by way of registration, security interest binds third party.
For tangible personal property, perfection effectuates when parties come into an
agreement for purposes of securing a property and registers it in the proper Registry Office or
after agreement, the creditor, possesses the thing secured. For this kind of interest parties may
stipulate such interest may extend to the transformed product or replacement provided that
interest is only limited to the value before transformation or replacement set in.
In contrary, intangible personal property security interest reaches its perfection through
registration of the notice of security interest in the proper Registry office or completion of the
control agreement. Agreement of this kind must be in writing and must be under oath in order
to reckon time of perfection.
Perfection by completion of the control agreement happens when there is a creation of
security interest in favor of intermediary or depositing institution, created via conclusion of
control agreement, subsequently noted on the books of record.
Ultimately, extinguishment of the security interest is eventuated when principal obligations
are discharged and that no outstanding interests exist or when there is full performance of the
involved obligations or when there is no security agreement at all. Consequently, grantor may
demand termination of such interest. If creditor does not or refuses to terminate, the grantor
may go to court to pray for termination.