UNIVERSITY OF SANTO TOMAS

Faculty of Civil Law

España, Manila, Philippines

Republic Act No. 11057

Personal Property Security Act

WRITTEN REPORT

SUBMITTED TO:
Atty. Irvin Joseph M. Fabella

SUBMITTED BY:
CHU, Hercea
RONGCALES, Anell
UGALI, Christian

2D
A.Y. 2022-2023
(Reporter: Rongcales, Anell S.)
Q: What is the Personal Property
Security Act (PPSA)?
A: Republic Act. No. 11057 or the Personal
Property Security Act (PPSA Law), signed
on 17 August 2018, provides for new means
and requirements for creating, perfecting,
and registering security over personal
property in the Philippines.
Q: What are the sources of the PPSA?
A: The PPSA is patterned after the United
Nations Commission on International Trade
Law (UNCITRAL) the Model Law on
Secured Transactions (2016.) The Model
Law is based on:
(1) The United Nations Convention
on the Assignment of Receivables in
International Trade;
(2) The UNCITRAL Secured
Transactions Guide on Secured
Transactions;
(3) The Supplement on Security
Interests in Intellectual Property; and
(4) The UNCITRAL Guide on the
Implementation of a ide on Security
Rights Registry.
The PPSA also incorporates concepts
derived from the Uniform Commercial Code
of the United States.
Q: What are the Frameworks of the
PPSA?
A: Like the Model Law, the PPSA follows a
unitary, functional, and comprehensive
framework in creating security interests over
personal property.
(1) Unitary approach. -The Model
Law follows a unitary approach
using one concept for all types of
security interest.
(2) Functional approach. The Model
Law follows a functional approach
under which the Model Law applies
to all types of transactions that fulfill
security purposes, such as a
secured loan, a retention-of-title
sale, or a financial lease.
(3) Comprehensive approach. The
Model Law follows a comprehensive
approach under which the Model
Law applies to all types of movable
assets, all forms of secured
obligations, and all categories of
grantors and secured creditors (see
UNCITRAL Legislative Guide on
Secured Transactions, Introduction,
par. 61 [2010].)
Q: What is the Policy behind the law?
A: The PPSA seeks to promote economic
activity by increasing access to least cost
credit, particularly for micro, small, and
medium enterprises (MSMEs.) (PPSA, Sec.
2, Rules, Sec 1.04.)
Q: What are the Key benefits of the
PPSA?
A: The PPSA is said to provide these key
benefits:
(1) Use of almost all type of movables as
collateral. The PPSA allows the grantor to
provide almost any type of movable
property as collateral.
(2) No requirement of possession by
secured creditor of collateral. Similar to a
chattel mortgage, and unlike a pledge, the
PPSA allows a security interest over the
collateral even if the secured creditor does
not take physical possession. Hence, the
business can continue to use the assets in
its operations. (see Practice Guide, ch. I.B,
par. 14.)
(3) Security interest over future assets. -
The PPSA makes it possible for a business
to give security over a movable property not
yet owned by the business (such as future
inventory), with the security interest
automatically attaching to that property as
soon as the business acquires rights in it.
(PPSA, Sec. 5[b]; see Practice Guide, ch.
I.B, par. 15.)
CHAPTER 1 - Definition and Scope
Q: What is a Commodity Contract?
A: (a) Commodity contract – a commodity
futures contract, an option on a commodity
futures contract, a commodity option, or
another contract if the contract or option is:
(1) Traded on or subject to the rules
of a board of trade that has been
designated as a contract market for
such a contract; or
Q: Who is a Grantor under PPSA?
(2) Traded on a foreign commodity
A: Grantor –
board of trade, exchange, or market,
and is carried on the books of a
commodity intermediary for a
commodity customer;
Q: What is a Control Agreement?
A: Control agreement –
(1) With respect to securities, means
an agreement in writing among the
issuer or the intermediary, the
grantor and the secured creditor,
according to which the issuer or the
intermediary agrees to follow
instructions from the secured
creditor with respect to the security,
without further consent from the
grantor;
(2) With respect to rights to deposit
account, means an agreement in
writing among the deposit-taking
institution, the grantor and the
secured creditor, according to which
the deposit-taking institution agrees
to follow instructions from the
secured creditor with respect to the
payment of funds credited to the
deposit account without further
consent from the grantor;
(3) With respect to commodity
contracts, means an agreement in
writing among the grantor, secured
creditor, and intermediary, according
to which the commodity intermediary
will apply any value distributed on
account of the commodity contract
as directed by the secured creditor
without further consent by the
commodity customer or grantor.
(1) The person who grants a security
interest in collateral to secure its
own obligation or that of another
person;
(2) A buyer or other transferee of a
collateral that acquires its right
subject to a security interest;
 (3) A transferor in an outright
transfer of an accounts receivable;
or
(4) A lessee of goods.
Q: What is the definition of Proceeds
under PPSA?
A: Proceeds - any property received upon
sale, lease or other disposition of collateral,
or whatever is collected on or distributed
with respect to collateral, claims arising out
of the loss or damage to the collateral, as
well as a right to insurance payment or
other compensation for loss or damage of
the collateral;
Q: Who is a secured creditor under the
PPSA
A: Secured creditor – a person that has a
security interest. For the purposes of
registration and priority only, it includes a
buyer of account receivable and a lessor of
goods under an operating lease for not less
than one (1) year;
Q: What is a security interest?
A: Security interest – a property right in
collateral that secures payment or other
performance of an obligation, regardless of
whether the parties have denominated it as
a security interest, and regardless of the
type of asset, the status of the grantor or
secured creditor, or the nature of the
secured obligation; including the right of a
buyer of accounts receivable and a lessor
under an operating lease for not less than
one (1) year.
Q: What is the Scope of the Act?
A: This Act shall apply to all transactions of
any form that secure an obligation with
movable collateral, except interests in
aircrafts subject to Republic Act No. 9497,
or the "Civil Aviation Authority Act of 2008",
and interests in ships subject to Presidential
Decree No. 1521, or the "Ship Mortgage
Decree of 1978".
CHAPTER 2 - Creation of Security
Interest
Q: How is security interest created?
A: Creation of a Security Interest. —
(a) A security interest shall be
created by a security agreement,
(b) A security agreement may
provide for the creation of a security
interest in a future property, but the
security interest in that property is
created only when the grantor
acquires rights in it or the power to
encumber it.
Q: When is the description of collateral
considered sufficient?
A: A description of collateral shall be
considered sufficient, whether it is specific
or general, if it reasonably identifies the
collateral. A description such as "all
personal property", "all equipment", "all
inventory", or "all personal property within a
generic category" of the grantor shall be
sufficient.
Q: What will happen if the proceeds in
the form of funds credited to a deposit
account or money are commingled with
other funds or money?
A: Where proceeds in the form of funds
credited to a deposit account or money are
commingled with other funds or money:
(1) The security interest shall extend
to the commingled money or funds,
notwithstanding that the proceeds
have ceased to be identifiable to the
extent they remain traceable:
(2) The security interest in the
commingled funds or money shall be
limited to the amount of the
proceeds immediately before they
were commingled: and
(3) If at any time after the
commingling, the balance credited to
the deposit account or the amount of
the commingled money is less than
the amount of the proceeds
immediately before they were
commingled, the security interest
against the commingled funds or
money shall be limited to the lowest
amount of the commingled funds or
money between the time when the
proceeds were commingled and the
time the security interest in the
proceeds is claimed.
Q: What is meant by the phrase
“Continuity of Security Interest”?
A: A security interest shall continue in
collateral notwithstanding sale, lease,
license, exchange, or other disposition of
the collateral, except as otherwise provided
in Section 21 of PPSA, or agreed upon by
the parties.
Q: What are the Contractual Limitations
on the Creation of a Security Interest?
A:
(a) A security interest in an account
receivable shall be effective
notwithstanding any agreement
between the grantor and the account
debtor or any secured creditor
limiting in any way the grantor’s right
to create a security interest.
(b) Nothing in this section shall affect
any obligation or liability of the
grantor for breach of the agreement
in subsection (a).
(c) Any stipulation limiting the
grantor’s right to create a security
interest shall be void.
(d) This section shall apply only to
accounts receivable arising from:
(1) A contract for the supply
or lease of goods or services
other than financial services;
(2) A construction contract or
a contract for the sale or
lease of real property; and
(3) A contract for the sale,
lease or license of intellectual
property.
CHAPTER 3 - Perfection of Security
Interest
(Reporter: Hercea Gabrielle Chu)
Q: What are the means of perfecting a
security interest?
A: Under Section 12 of the PPSA, a security
interest in any tangible asset may be
perfected by registration or possession. On
the other hand, a security interest in
investment property and deposit account
may be perfected by registration or control.
Q: What is the legal effect of perfecting a
security interest?
A: The perfection of a security interest shall
be binding upon third parties. If there is no
perfection, the security interest is only
effective upon the parties to the agreement.
Q: What is the primary means of
perfection?
A: The primary means of perfection is
registration because it is available for all
types of personal Property and because it
allows the grantor to remain in possession
of, and continue to use, the collateral.
Q: What are the means of perfection by
control in a deposit account or
investment property?
A: As a general rule, registration of notice to
the Registry is the primary means of
perfecting security interests over intangible
assets.
However, Sec. 13 of the PPSA adds 3 more
ways of perfecting a security interest by
control in a deposit account or investment
property:
(1) The creation of the security interest in
favor of the deposit-taking institution or the
intermediary;
(2) The conclusion of a control agreement;
or
(3) For an investment property that is an
electronic security not held with an
intermediary, the notation of the security
interest in the books maintained by or on
behalf of the issuer for the purpose of
recording the name of the holder of the
securities.
Q: What is a control agreement?
A: A control agreement is an agreement
entered into by the grantor, the creditor; with
respect to securities, the issuer or the
intermediary; with respect to a deposit
account, the deposit-taking institution; and
with respect to commodity contracts, the
commodity intermediary. For purposes of
determining the time of perfection of the
security interest, the control agreement shall
be executed under oath, and shall indicate
the date and time of its execution.
Q: What is the right to proceeds?
A: Under Sec. 8 of the PPSA, the creditor’s
security interest extends to identifiable or
traceable proceeds.
Q: What are the rules when the security
interest in proceeds becomes perfected
and binding on third parties?
A: Under Sec. 14, if the proceeds is in the
form of money, the perfection of the
security interest in the collateral extends
automatically to the proceeds if these
requisites are met:
(a) there is a perfected security interest in
the collateral; (b) the collateral is disposed
of; (c) the proceeds take the form of money,
receivables, negotiable instruments or
deposit accounts.
On the other hand, proceeds not in the
form of money, the security interest in the
proceeds will remain perfected only if the
security interest in such proceeds is
perfected by the means applicable to that
type of collateral within 15 days after the
grantor receives such proceeds.
Q: Can a security interest remain
perfected despite a change in the means
for achieving perfection?
A: Yes, it will remain perfected provided that
there was no time when the security interest
was not perfected.
CHAPTER 4 - Priority of Security Interest
(Reporter: Hercea Gabrielle Chu)
Q: What is priority|?
A: The term “priority” refers to the right of a
person in an encumbered asset in
preference to the right of a competing
claimant.
Q: Can there be multiple security interest
over the same asset?
A: Yes, the PPSA allows the creation of
more than one security Interest over the
same asset in order to utilize the full value
of the asset. Hence, there may be instances
where there is a competition between more
than one security interest created by the
same grantor in the same asset.
Q: How is the priority of security
interests and liens in the same collateral
determined?
A: In determining the priority, we first identify
the means of perfection.
● Perfection by registration alone
● Perfection not involving registration
● Perfection involving different means
of perfection.
a. For perfection by registration alone, one
may determine the order of priority by
looking at the order of registration,
regardless of the order of creation.
b. For perfection without registration, the
priority is determined by the order of
perfection.
c. For perfection involving different means
of perfection, the priority is determined by
the order of perfection of security interests.
Q: Summarize the rules on the priority of
security interests.
1. Order of priority for security interests on
tangibles
a) to the security interest of a person who
provides services or materials with respect
to goods, in the ordinary course of business,
and retains possession of the goods
b) to registered purchase money security
interest in equipment, consumer goods,
inventory, intellectual property and livestock
c) to security interest perfected by
registration or possession, which priority
shall be determined according to the time of
— possession.
2. Order of priority for security interests on
deposit accounts
a) to a deposit-taking institution with right
of set-off
b) to the perfected security interest of
deposit-taking institution
c) to security interest perfected through a
control agreement, which priority is
determined based on the time of conclusion
of the control agreements
d) to security interested perfected by
registration, which priority shall be
determined according to the time of
registration (see PPSA, Secs. 12, 17.)
3. Order of priority for security interests on
Investment property in the form of
certificated securities
a) to the security interest perfected by
possession of the certificate
determined based on the time of conclusion
of the control agreement
c) to the security interest perfected by
registration of a notice with the Registry,
which priority shall be determined according
to the time of registration
6. Order of priority for security interests on
Investment property consisting of negotiable
instruments

b) to a security interest perfected by a) to security interest perfected by

registration of a notice with the Registry, possession
which priority shall be determined according
to the time of registration b) to security interest perfected by
registration of a notice with the Registry,
4. Order of priority for security interests on which priority shall be determined according
Investment property held with an to the time of registration
intermediary
Q: What are the classification of goods
a) to the security interest of the under the PPSA?
intermediary
A: There are 5 main classification of goods
b) to the security interest perfected by a under the PPSA.
control agreement, which priority will be
determined based on the time of conclusion 1. Consumer Goods - goods that are used
of the control agreements or acquired for use primarily for personal,
family or household purposes.
c) Priority given to the security interest
perfected by the Registry, which priority the a. A purchase money
time of registration of a notice with the security interest in consumer
Registry, which priority shall be determined goods shall have priority over
according to the time of registration a conflicting security interest
provided that:
5. Order of priority for security interests on
Investment property consisting of electronic
i. the grantor
securities not held with an intermediary
obtains possession of
a) to the security interest perfected by a the consumer goods;
notation of the security interest in the books and
maintained for that purpose by or on behalf
of the issuer ii. the purchase
money security
b) to the security interest perfected by a interest is perfected
control agreement, which priority shall be by registration of
 notice not later than a. purchase money security
three (3) business interest in intellectual
days after the grantor property shall have priority
obtains possession of over a conflicting perfected
the consumer goods. security interest in the same
intellectual Property if:
2. Inventory - refers to tangible assets
held by the grantor for sale or lease in the
ordinary course of the grantor’s business, i. The purchase
including raw materials and work in process. money security
interest is perfected
a. A purchase money when the grantor
security interest in inventory acquires rights to
shall have priority over a intellectual property,
conflicting perfected security and
interest in the same inventory
if: ii. Before the
grantor acquires
i. The purchase rights in nee property,
money security the purchase money
interest is perfected secured creditor gives
when the grantor written Notification to
receives possession the holder of the
of the inventory; conflicting perfected
security interest in the
same intellectual
ii. Before the property. The
grantor receives notification sent to the
possession of the holder of the
inventory, the conflicting security
purchase money interest may cover
secured creditor gives multiple transactions
written notification to between the
the holder of the purchase money
conflicting perfected secured creditor and
security interest in the the grantor without
same types of the need to identify
inventory. each transaction.
3. Intellectual property/property rights - It 4. Livestock
shall include copyright, trademarks, service
marks, patents, industrial designs and trade a. purchase money
secrets. security interest in livestock
in shall have priority over a
conflicting perfected security
 interest in the same livestock by registration of
if: notice not later than 3
business days after
i. the grantor receives
The purchase money possession of the
security interest is equipment
perfected when the
grantor received Q: What are the special rules on priority
possession of the for livestock?
livestock; and
A: Under Sec. 24 of the PPSA, the order of
ii. priority is as follows:
Before the grantor
receives possession 1) perfected purchase money security
of the livestock, the interest in the livestock;
purchase money
secured creditor gives 2) Perfected security interest in the
written notification to livestock securing an obligation to enable
the holder of the the grantor to obtain food or medicine over
conflicting perfected the livestock (subject to the notice
security interest in the requirement);
same livestock.
3) perfected security interest over the
(Rules, Sec. 6.05[c].)
livestock to secure other obligations.
5. Equipment - a tangible asset other than
Q: Can the notice of purchase money be
inventory or consumer goods, or livestock,
sent by the secured creditor cover
that is primarily used or intended to be used
multiple transactions?
by the grantor j operation of its business.
A: Yes. Under Section 23[c][2], the
a. a purchase money
notification sent to the holder of the
security Interest in equipment
conflicting security interest may cover
and its proceeds shall have
multiple transactions between the purchase
priority over a conflicting
money secured creditor and the grantor
perfected security interest in
without the need to identify each
the same equipment and
transaction.
Proceeds if:
Q: What is the Priority Rule?
i. the grantor
obtains possession of A: Under Sec. 20 of the PPSA, a person
the equipment; and who provides services or materials with
respect to the goods, in the ordinary course
of business, and retains possession of the
ii. the purchase goods shall have priority over a perfected
money security security interest in the goods until payment
interest is perfected thereof.
Q: What are the requisites for the Priority
Rule to apply?
A: Section 20 Priority rule applies only when
these requisites are met:
(a) a person (the “Supplier”) provides
goods or services with respect to the goods;
(b) the Supplier provides these goods or
services in the ordinary course of business;
(c) the Supplier is unpaid;
(d) the Supplier retains Possession of the
goods.
CHAPTER 5 - Creation of Security
Interest.
[Reporter: Ugali]
Q: The rule under the Right to
Notification to dispose of collateral from
the secured creditor.
A:
GR: Not later than ten (10) days before
disposition of the collateral, the secured
creditor shall notify the grantor of the said
action. ​
Exceptions:​
A. The grantor may waive such right. ​
B. The requirement to send a
notification shall not apply if the
collateral is perishable or threatens
to decline speedily in value or is of
type customarily sold on a
recognized market. (Sec. 51, Ibid.)
Q: What are the required details to file an
Initial Notice?
A: The required fields to be filled out are the
Grantor information, Secured Creditor
information, Collateral type and description,
and transaction information such as loan
amount, and Term end date.
Q: What happens if information about
the Grantor, Secured Creditor, or the
collateral changes after the original
registration?
A: You may file an amendment notice to an
Initial Notice previously submitted. The
following changes may be made:
1. Add or remove one or more
Grantors
2. Edit details of Grantors
3. Add/remove one or more
Borrower
4. Edit details of Borrower
5. Add/remove one or more
collateral
6. Edit collateral details
7. Replace one or more Secured
Creditors 8. Edit any creditor details
9. Edit loan amount.
Q: Who can Demand Amendment or
Termination of Notice?
A: The Grantor but only if:
1. All the obligations under the
security agreement to which the registration
relates have been performed and there is
no commitment to make future advances; ​
2. The secured creditor has agreed
to release part of the collateral described in
the notice;​
​
 3. The collateral described in the
notice includes an item or kind of
property that is not a collateral under
a security agreement between the
secured creditor and the grantor; ​
4. No security agreement exists
between the parties; or ​
5. The security interest is
extinguished in accordance with this
Act.
CHAPTER 6
ENFORCEMENT OF SECURITY
INTEREST SECURED CREDITOR’S
RIGHTS
[Reporter: Ugali, Christian D.]
Q: Who can search the registry?
A: Anyone who registers and has an
account in the registry can conduct a search
in the Personal Property Security Registry.
Q: Can the Secured Creditor dispose the
security interest?
A: Yes, After default, a secured creditor may
sell or otherwise dispose of the collateral,
publicly or privately, in its present condition
or following any commercially reasonable
preparation or processing.
Q: What does commercial
reasonableness mean?
A: A disposition is commercially reasonable
if the secured creditor disposes of the
collateral in conformity with commercial
practices among dealers in that type of
property.
CHAPTER 7 - Transitional Provisions
[Reporter: Rongcales, Anell S.]
Q: Who is an Existing Secured Creditor?
A: Existing secured creditor – means a
secured creditor with a prior security
interest.
Q: What is a prior interest?
A: Prior interest – means a security interest
created or provided for by an agreement or
other transaction that was made or entered
into before the effectivity of this Act and that
had not been terminated before the
effectivity of this Act, but excludes a security
interest that is renewed or extended by a
security agreement or other transaction
made or entered into on or after the
effectivity of this Act.
Q: How is prior interest created?
A: Creation of Prior Interest.—
(a) Creation of prior interest shall be
determined by prior laws.
(b) A prior interest remains effective
between the parties notwithstanding
its creation did not comply with the
creation requirements of this Act.
Q: How is prior interest perfected?
A: Perfection of Prior Interest. —
(a) A prior interest that was
perfected under prior law continues
to be perfected under this Act until
the earlier of:
(1) The time the prior interest
would cease to be perfected
under prior law; and
(2) The expiration of the
transitional period.
(b) If the perfection requirements of
this Act are satisfied before the
perfection of a prior interest ceases
in accordance with subsection (a) of
this section, the prior interest
continues to be perfected under this
Act from the time when it was
perfected under the prior law.
(c) If the perfection requirements of
this Act are not satisfied before the
perfection of a prior interest ceases
in accordance with subsection (a) of
this section, the prior interest is
perfected only from the time it is
perfected under this Act.
(d) A written agreement between a
grantor and a secured creditor
creating a prior interest is sufficient
to constitute authorization by the
grantor of the registration of a notice
covering assets described in that
agreement under this Act.
(e) If a prior interest referred to in
subsection (b) of this section was
perfected by the registration of a
notice under prior law, the time of
registration under the prior law shall
be the time to be used for purposes
of applying the priority rules of this
Act.
Q: How is prior interest enforced?
A: Enforcement of Prior Interest. —
(a) If any step or action has been
taken to enforce a prior interest
before the effectivity of this Act,
enforcement may continue under
prior law or may proceed under this
Act.
(b) Subject to subsection (a) of this
section, prior law shall apply to a
matter that is the subject of
proceedings before a court before
the effectivity of this Act.
CHAPTER 8 - Congressional Oversight
and Miscellaneous Provisions
Q: How is the law interpreted?
A: Interpretation.— If there is conflict
between a provision of this Act and a
provision of any other law, this Act shall
govern unless the other law specifically
cites or amends the conflicting provisions of
this law.
Q: What are the laws repealed by the
passage of the Act?
A: Repealing Clause.— The following laws,
and all laws, decrees, orders, and
issuances or portions thereof, which are
inconsistent with the provisions of this Act,
are hereby repealed, amended, or modified
accordingly:
(a) Sections 1 to 16 of Act No. 1508,
otherwise known as "The Chattel
Mortgage Law";
(b) Articles 2085-2123, 2127,
2140-2141, 2241, 2243, and
2246-2247 of Republic Act No. 386,
otherwise known as the "Civil Code
of the Philippines";

(c) Section 13 of Republic Act No.

5980, as amended by Republic Act
No. 8556, otherwise known as the
"Financing Company Act of 1998";

(d) Sections 114-116 of Presidential

Decree No. 1529, otherwise known
as the "Property Registration
Decree";

(e) Section 10 of Presidential Decree

No. 1529, insofar as the provision
thereof is inconsistent with this Act;
and

(f) Section 5(e) of Republic Act No.

4136, otherwise known as the "Land
Transportation and Traffic Code".