2ND PART: INSIGHTS ON THE ORDER OF PREFERENCE ON PERSONAL PROPERTY SECURITY ACT

Personal Property Security Act sets order of Preference or Priority in the application of
Security Interest. This, for all intents and purposes, amends Articles 2241, 2242, 2243, 2246
and 2247.
Priority of Security Interest refers to and is understood as the order of preference of secured
creditor’s rights on the security of the debtor for payment of the latter’s obligation. It is by
which that the former is paid first before others.
As a general rule in the Implementing Rules and Regulations of PPSA, Priority of Security
Interest is reckoned at the time of registration of notice without regard to order of creation or
mode of perfection, only time of registration of notice control or possession of the interest.
To delve into the order of preference it is material to note whether interest is a Deposit
account, livestock, investment or Electronic Security or Purchase Money Security Interest.
In Deposit account, Livestock and investment, first in the priority of Security interest is any
right of Banks or Depositary Institutions may have to set off against grantors right of payment
of funds credited to deposit account by virtue of its creditor - debtor relationship. Second in the
order is security interest in deposit account which is perfected by control agreement. However,
if there are several security interest conflicting with one another, priority is determined as to
which control agreement concluded first.
In accordance with the order of preference on Electronic Security, it has to be considered if
one is one Held by Intermediary or Not Held. For Not Held, First is that which was perfected by
notation in the books of the entity. Second is that which was perfected by control agreement.
For several control agreement, it is determined by the first Control Agreement which
concluded first. If Held by an Intermediary, it is under first priority if it is perfected by a Control
agreement.
On matters of Purchase Money Security Interest one which is an interest in goods taken by
seller to secure the payment of the buyer, the rule is when it refers to Equipment or Consumer
Goods, order of priority is first, is that which notice is registered in 3 business days from the
time grantor acquires the goods.
In accordance with the 3 business day rule, secured creditor is of priority over other rights of
Lessee or other lien holders between delivery of goods and registration of the notice.
Purchase Money Security Interest for intellectual Property, Inventory or Livestock, it is of
priority if it is perfected when grantor received possession of the object of the interest. Secured
creditor must give written notice on the inventory before grantor acquires rights over it. For
livestock only order of preference, if creditor fails to give notice to the grantor then priority is
given to the one who secured the obligation of that livestock.
 As regards Negotiable Instrument Documents of Title, if perfected by possession by creditor
priority on the security interest happens at the time of registration of such title. For persons
who provide services or material in ordinary course of business on goods and retain possession
of goods , they enjoy priority of interest of the goods until paid by the debtor and in effect, can
retain object until paid.

In the context of Grantor’s Insolvency, when perfection of the interest happens before the
insolvency, priority of interest shall remain. But when perfection is during the insolvency,
interest shall constitute a lein over the collateral.