UNIVERSITY OF SANTO TOMAS

FACULTY OF CIVIL LAW

A.Y 2022 - 2023

PERSONAL PROPERTY SECURITY ACT

R.A. 11057

2F
CREDIT TRANSACTIONS

MEMBERS:
CORTEZ, CLARISSE SYDNEY
JALLORINA, ALDYNNE GENISE
PAGDONSOLAN, MARK MOSES
PICHAY, JAMES GABRIEL
URSAL, VINICE NICOLE

PROFESSOR:
ATTY. IRVIN JOSEPH FABELLA
I. Preliminaries
REPUBLIC ACT No. 11057 | An Act Strengthening the Secured Transactions Legal
Framework in the Philippines, Which Shall Provide for the Creation, Perfection,
Determination of Priority, Establishment of a Centralized Notice Registry, and
Enforcement of Security Interests in Personal Property, and for Other Purposes
Section 1. TITLE. -This Act shall be known as the "PERSONAL PROPERTY
SECURITY ACT".

The Personal Property Security Act ("PPSA") is a consolidation of House Bill No. 6907
and Senate Bill. No. 1459.

PRE-PPSA SECURITY DEVICES OVER PERSONAL PROPERTY

Before the approval of the PPSA, the pledge and the chattel mortgage are the security
devices commonly used to create a security interest in personal property. These
security devices were governed by the Civil Code (see Civil Code, Arts. 2035-2123;
2140-2141.); in addition, chattel mortgages were governed by the Chattel Mortgage
Law. (Act No. 1508.3

EFFECT ON THE LAWS GOVERNING PLEDGE AND CHATTEL MORTGAGE

1. PPSA repealed the provisions of the Civil Code on Pledge (Art. 2085 – 2123),
Chattel Mortgage (Art. 2140- 2141) and Sec. 1-16 of the Chattel Mortgage law
(Act. No. 1508). (Sec. 9.01 of PPSA IRR.)

2. No more Pledge and Chattel Mortgage, under the PSSA, contracts creating a
security interest over a movable property are referred to simple as “security
agreement”. (Rabuya, Pre-Bar Reviewer in Civil Law, 2021 Ed, 553)

SOURCE OF THE PPSA

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 Security Rights Registry.

The PPSA also incorporates concepts derived from the Uniform Commercial Code of
the United States.
FRAMEWORK OF THE PPSA

Like the UNCITRAL Model Law, the PPSA follows a unitary, functional, and
comprehensive framework in creating security interests over personal property.

1) UNITARY APPROACH: The PPSA provides a "unified" framework for securing

obligations with personal property (Sec. 2) and introduced a unitary security
device that replaced the pledge and the chattel mortgage. In lieu of the wide
array of prior terminology (such as pledge, pledgor, pledgee, chattel mortgage,
mortgagor, mortgage, and so on), the PPSA substituted one device and a set of
basic terms: "security agreement," "security interest," "grantor," "secured
creditor”.
2) FUNCTIONAL APPROACH: The PPSA applies "to all transactions of any form
that secure an obligation with movable collateral (PPSA, Sec. 4.)
3) COMPREHENSIVE APPROACH: The PPSA applies to all types of movable
collateral (except aircrafts and ships), all types of obligations, and all types of
grantors and secured creditors (see PPSA, Secs. 3[c]; 3[i]; 4.)

Section 2. DECLARATION OF POLICY. -It is the policy of the State to promote

economic activity by increasing access to least cost credit, particularly for micro, small,
and medium enterprises (MSMEs), by establishing a unified and modern legal
framework for securing obligations with personal property.

POLICY BEHIND THE LAW: 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).
KEY BENEFITS OF THE PPSA: 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: The PPSA allows a security interest over the collateral even if the
secured creditor does not take physical possession.
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.
INTERPRETATION: If there is a conflict between a provision of this Act and a provision
of any other law, this Act shall govern unless the other law specially cites and amends
the conflicting provisions of this Law.

KINDS OF AGREEMENT:

1. COMMODITY CONTRACT
2. CONTROL AGREEMENT
3. SECURITY INTEREST
Section 3. DEFINITION OF TERMS. -As used in this Act, the following terms shall
mean:

(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
(2) Traded on a foreign commodity board of trade, exchange, or market, and
is carried on the books of a commodity intermediary for a commodity
customer;

1. COMMODITY CONTRACT: A commodity futures contract means "a contract

providing for the making or taking delivery at a prescribed time in the future of a
specific quantity and quality of a commodity or the cash value thereof, which is
customarily offset prior to the delivery date, and includes standardized contracts
having the indicia of commodities futures, commodity options and commodity
leverage, or margin contracts”.
Suspension of registration and trading of commodities futures contract:
Under the Securities Regulation Code (SRC), and without prejudice to Bangko
Sentral ng Pilipinas rules and circulars, the public trading of commodities futures
contracts is suspended until further ordered otherwise by the Securities and
Exchange Commission (SEC).
(b) 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;

2. CONTROL AGREEMENT: refers to an agreement in writing between the grantor,

the secured creditor and the issuer or intermediary (in the case of securities) or
the deposit-taking institution (in the case of rights to payment of funds credited to
a bank account), according to which the issuer, intermedia the deposit-taking
 institution agrees to follow the instructions of the secured creditor without the
further consent of the grantor. It also refers to an agreement in writing between
the grantor, the secured creditor, and the 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. (PPSA, Sec. 3[b][3].)
Under the Rules, a control agreement is an agreement in writing between the
grantor and the secured creditor which perfects the security interests over
intangible assets. (Rules, Sec. 1.05[d].)

Parties to, form and contents of a control agreement.

(1) With respect to intermediated securities, a control agreement shall:

a. Be executed in writing by the issuer or the intermediary, the grantor
and the secured creditor.
b. Stipulate that 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, a control agreement shall:
a. Be executed in writing among the deposit-taking institution, the
grantor and the secured creditor;
b. Stipulate that 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, a control agreement shall:
a. Be executed in writing among the grantor, secured creditor, and
intermediary;
b. Stipulate that 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.

Purpose of a control agreement.

A control agreement achieves two (2) purposes:

a. It renders a security interest effective against third parties.

b. It establishes the priority of the secured creditor that has entered into the control
agreement. (see PPSA, Sec. 18; Guide to Enactment, ch. I, par. 43.)

In addition, a control agreement can help ensure the cooperation of the deposit-taking
institution or the issuer of securities if the secured creditor needs to enforce its security
right.

(j) 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; and

3. SECURITY INTEREST: A security interest is a property right in movable

collateral that secures payment or other performance of an obligation. While the
definition states "regardless of the type of asset," the PPSA applies only to
movable collateral.
PARTIES UNDER THE PPSA
1. GRANTOR
2. SECURED CREDITOR

(c) 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;

1. GRANTOR may be: (a) the debtor that secures its own obligation; or (b) a person
that secures the obligation of the debtor.
A buyer or other transferee of a collateral that acquires its right subject to a
security interest is also considered a grantor to ensure that the PPSA remains
applicable even if the grantor has disposed of the collateral. (Guide to
Enactment, ch. I, par. 47.)

A transferor in an outright transfer of an accounts receivable is also treated as a

grantor. As discussed under Section 4, the PPSA also applies to the outright
transfer of receivables.

The PPSA also treats the lessee of goods as a grantor.

(i) 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;
2. SECURED CREDITOR is a person that has a security interest over the collateral.
The term "secured creditor" includes a buyer of account receivable and a lessor
of goods under an operating lease for not less than one (1) year for purposes of
registration and priority only.
MEANING OF TERMS

SECURITIES refer to shares, participation or interests in a corporation or in a

commercial enterprise or profit-making venture and evidenced by a certificate, contract,
instruments, whether written or electronic in character. It includes but is not limited to:

(a) Shares of stocks, bonds, debentures, notes as evidence of indebtedness,

asset-backed securities;
(b) Investment contracts, certificates of interest or participation in a profit-sharing
agreement, certificates of deposit for a future subscription;
(c) Fractional undivided interests in oil, gas or other mineral rights;
(d) Derivatives like options and warrants;
(e) Certificates of assignments, certificates of participation, trust certificates, voting
trust certificates or similar instruments;
(f) Proprietary or nonproprietary membership certificates in corporations; and
(g) Other instruments as may in the future be determined by the Securities and
Exchange Commission. (Rules, Sec. 1.05[i); see R.A. No. 8799, Sec. 3.1.)

An ISSUER is the originator, maker, obligor, or creator of the security.

An INTERMEDIARY is defined as:

- a person (including a central securities depository) who in the course of a

business or other regular activity or maintains securities accounts for others or
both for others and for its own account and is acting in that capacity.
- a clearing corporation or a person, including a bank or broker, that in the ordinary
course of its business maintains securities accounts for others and is acting in
that capacity.
- Under the Rules, it is a person, including, but not limited to, a bank, trust entity,
depositary, broker, or central r securities depositary, that in the ordinary course of
business bs or regular activity maintains an account for such securities 10 or
assets, for another person, and is acting in that capacity.

​DEPOSIT ACCOUNT means a demand, time, savings, passbook, or similar account

maintained with a bank; it does not include investment property or account evidenced
by an instrument.

DEPOSIT TAKING INSTITUTION refers to a bank as defined under Republic Act No.
8791, otherwise known as the "General Banking Law," a non-stock savings and loan
association as defined under Republic Act No. 4367, or the "Revised Non-stock Savings
and Loan Association Act of 1997," or a cooperative as defined under Republic Act NO.
3520 otherwise known as the "Philippine Cooperative Code."

(c) NON-INTER MEDIATED SECURITIES – securities other than securities credited to

a securities account and rights in securities resulting from the credit of securities to a
securities account;
Types of securities.

(1) Types of security based on certification. – In terms of certification, a security may

be certificated or non-certificated.
(a) A certificated security is a security that is represented by a certificate.
(b) A non-certificated security is a security that is not represented by a
certificate.
(2) Types of security based on intermediation. - In terms of intermediation, a security
may be non-intermediated or intermediated.
(a) Intermediated securities are securities credited to a securities account and
rights in securities resulting from the credit of securities to a securities
account. They are securities held through an intermediary.
(b) Non-intermediated securities are securities other than securities credited
to a securities account and rights in securities resulting from the credit of
securities to a securities account. In other words, they are securities other
than intermediated securities.

(e) NOTICE – a statement of information that is registered in the Registry relating to

a security interest or lien. The term includes an initial notice., amendment notice,
and termination notice;

The Notice is a statement of information relating to: (1) a security interest; and (2) a lien.

(f) 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;

PROCEEDS cover proceeds of the sale or other disposition, or lease of an encumbered

asset; proceeds of proceeds; and natural fruits (e.g., the calves of encumbered cows) or
civil fruits

(g) PURCHASE MONEY SECURITY INTEREST – a security interest in goods

taken by the seller to secure the price or by a person who gives value to enable
the grantor to acquire the goods to the extent that the credit is used for that
purpose;

In both instances, a security interest must be taken or created. Under Section 5(a), a
security interest is created through a security agreement.

(h) REGISTRY – the centralized and nationwide electronic registry established in

the Land Registration Authority (LRA) where notice of a security interest and a
lien in personal property may be registered;

The Registry is the electronic registry where notices of the security interests and liens
over personal property may be registered. (See Rules, Sec. 1.05[f].)
Liens: The PPSA also covers liens. This pertains to encumbrances that are not security
interests created and perfected under the PPSA. The Rules broadly define a lien as a
qualified right or a proprietary interest, which may be exercised over the property of
another.

The PPSA contains these rules on liens:

(a) A notice of lien may be registered by a lien holder without the consent of the
person against whom the lien is sought to be enforced.
(b) The PPSA defines "notice" as a statement of information registered in the
Registry relating to a security interest or lien.
(c) The Registry is the electronic registry where notice of a security interest or lien in
personal property may be registered.
(d) The priority of security interests and liens in the same collateral shall be
determined according to time of registration of a notice or perfection by other
means, without regard to the order of creation of the security interests and liens.
(e) The purchase money security interest in equipment or consumer goods perfected
timely shall have priority over the rights of a buyer, lessee, or lien holder which
arise between delivery of the equipment or consumer goods to the grantor and
the time the notice is registered.
(f) A lien holder is entitled to redeem.
(g) A lien holder who, five (5) days before the date notification is sent to the grantor,
held a lien in the collateral that was perfected by registration, is entitled to notice
of disposition
(h) A lienholder may commence enforcement but a higher-ranking creditor may take
over.
(i) If the collateral is disposed of, excess proceeds must be applied to the
satisfaction of obligations secured by any lien in the collateral.
(j) If a secured creditor sells the collateral, the buyer shall acquire the grantor's right
in the asset free of the rights of any secured creditor or lien holder.
(k) A lienholder is entitled to object to any proposed retention by the secured creditor
of the collateral.

(c) WRITING – for the purpose of this Act includes electronic records.

Electronic writing. The definition of the term "writing" is intended to ensure that where
that term is referred to in the PPSA, this reference will include electronic records.

Section 4. SCOPE OF THE ACT.— 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".
GR: The PPSA shall apply to all transactions of any form that secure an obligation with
movable collateral. (Sec. 4, RA 11057)
A security interest may be created over all forms of tangible or intangible asset or
personal property as defined by the Civil Code, including, but not limited to:

1. Right arising from a contract, including but not limited to:

a. Securities
b. Commodity contracts
c. Lease of goods including financial leases and operating leases for a
period of not less than one (1) year
2. Equipment;
3. Inventory;
4. Deposit accounts;
5. Negotiable instruments;
6. Negotiable documents of title;
7. Consumer goods;
8. Intellectual property;
9. Livestock;
10. Fixture, accessions, and commingled goods; or
11. Future property or after-acquired assets.

XPN:

1. Interests in aircrafts subject to RA No. 9497, or the "Civil Aviation Authority Act of
2008"; and
2. Interests in ships subject to Presidential Decree (PD) No. 1521, or the "Ship
Mortgage Decree of 1978".

SECURITY INTERESTS IN AIRCRAFTS: The manner Sec. 4 is written implies that the
PPSA does not apply to the creation of security interest in aircrafts. The creation of a
security interest in an aircraft is allowed under the PPSA, but perfection and priority
shall be made based on the registration of the conveyance with the Civil Aviation
Authority.

SECURITY INTERESTS IN SHIPS: The Ship Mortgage Decree applies to the creation
and perfection of a mortgage over ships. It provides rules, among others, on the
registration of the mortgage over the ship and on preferences regarding liens and other
priorities over the ship.

II. Creation and Perfection of Security Interest

Section 5. 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.
Creation vs. Effectiveness
When the security interest is created, the security interest is effective between the
parties. On the other hand, when the security interest is perfected, the security is
effective against third parties.

Creation of Security Interest

A security interest shall be created by a security agreement.

Parties to the Security Agreement

1. Grantor
● Person who grants a security interest to secure its own obligation or
another’s
● A buyer or other transferee that acquires its right subject to a security
interest
● A transferor in an outright transfer of an accounts receivable
● A lessee of goods
2. Secured Creditor - A person that has security interest including a buyer of
account receivable and a lessor of goods under an operating lease for not less
than 1 year.

Debtor - The debtor is the person that owes payment or other performance of a secured
obligation, whether or not that person is the grantor of the security right securing
payment or other performance of that obligation, including a secondary obligor such as
a guarantor of a secured obligation.

Essential Requisites of Security Agreement

1. Consent of the contracting parties

2. Cause of the Contract
3. Object certain which is the subject matter of the contract

a. Tangible movable assets

b. Intangible movable assets

All forms of tangible and intangible assets

(a) Rights arising from contracts, including but not limited to:

1. Securities;
2. Commodity contracts;
3. Lease of goods including financial leases and operating leases for a
period of not less than one (1) year.

(b) Equipment
(c) Inventory
(d) Deposit accounts
(e) Negotiable instruments
(f) Negotiable documents of title
 (g) Consumer goods
(h) Intellectual property
(i) Livestock
(j) Fixtures, accessions, and commingled goods, or
(k) Future property or after-acquired assets

Present and Future Assets

The grantor may create a security interests over:

1. An asset that the grantor already owns;

2. An asset that the grantor acquires with the proceeds of the secured loan;
3. Its inventory, including inventory that the grantor does not yet own but may
acquire;
4. Its receivables, including receivables that the grantor might not yet own but may
acquire;
5. Its rights under one or more contracts; OR
6. All its movable property, both present and future.

Rule on the Effectiveness of Security Interest

The parties can defer the effectiveness of the security interest to a later time. However,
the parties cannot agree to a time of effectiveness earlier than the time they actually
reach their agreement.

Future Property Defined

It refers to any movable property which does not exist or which the grantor does not
have rights in or the power to encumber at the time the security agreement is
concluded.

Rule on Security Agreement for Future Property

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.

Example: The grantor may execute a security agreement with the secured creditor to
create a security interest over goods that it will manufacture using the equipment or
another piece of equipment that it will purchase.

In both cases, the security interest is not created during the execution of the security
agreement but when the goods are manufactured and when the grantor acquires rights
in the new piece of equipment.

Section 6. Security Agreement.— A security agreement must be contained in a

written contract signed by the parties. It may consist of one or more writings that, taken
together, establish the intent of the parties to create a security interest.
The security agreement shall likewise provide for the language to be used in
agreements and notices. The grantor shall be given the option to have the agreement
and notices in Filipino. The Department of Finance (DOF) shall prepare model
agreements in plain English and Filipino.

Minimum Contents

1. Reflect the intent of the parties to create a security interest, except for contracts
that the PPSA considers security agreements notwithstanding absence of intent
between the parties to constitute a security;
2. Identify the parties (the secured creditor and the grantor);
3. Describe the secured obligation; and
4. Describe the encumbered assets.

Notarization
The PPSA does not mention that the security agreement must be notarized.

Format
A security agreement must be contained in a written contract signed by the parties.

Separate Agreement
It may consist of one or more writings that, taken together, establish the intent of the
parties to create a security interest.

Function
This provides objective evidence of the existence of the security agreement and its key
terms.

Section 7. Description of Collateral.— 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.

Description of Collateral to be Sufficient

A description of collateral shall be considered sufficient, whether it is specific or general,
if it reasonably identifies the collateral.

Delivery of the Collateral

The delivery of the collateral is not an essential requisite of the contract. The PPSA
provides for the creation of both possessory and non-possessory security interests in
movable assets.

Non-possessory security interests is possible through the registration of a notice with

the registry.

Section 8. Right to Proceeds and Commingled Funds and Money.—

(a) A security interest in personal property shall extend to its identifiable or traceable
proceeds.

(b) 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.

Rule on Security Interest and Right to Proceeds

A security interest in personal property shall extend to its identifiable or traceable
proceeds.

Rule on Security Interest in a Tangible Asset that is Commingled

A security interest in a tangible asset that is commingled in a mass extends to the mass.
A security interest that extends to a mass is limited to the same proportion of the mass
as the quantity of the encumbered asset bore to the quantity of the entire mass
immediately after the commingling.

Note: The creation of a security interest over commingled funds occurs by operation of
law. The parties need not expressly so provide in the security agreement.

Rules Where Proceeds in the Form of Funds Credited to a Deposit Account or

Money are Commingled with ther 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

Example: If proceeds amounting to P10M are deposited to a bank account with

a credit balance of P50M, the security interest in the proceeds extends to P10M
only.
 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.

Reason: If the total amount of commingled money falls below the amount of the
proceeds, funds deposited or money added cannot be deemed to be proceeds of
the original assets.

Section 9. Continuity of Security Interest.— 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 this Act, or agreed upon by the
parties.

GR: Security interest shall continue in collateral notwithstanding sale, lease, license,
exchange, or other disposition of the collateral.

The exceptions are:

1. When the parties agree otherwise;

2. If a party obtains in good faith the movable property in the ordinary course of
business.

Determination of Good faith

If the security interest is registered before the transferee acquired it, he is deemed to be
a buyer in bad faith because registration is notice to the whole world.

Application: This applies only to a non-enforcement situations.

Section 10. Contractual Limitation on the Creation of a Security Interest.—

(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.

Rule on Contractual Limitation on the Creation of Security Interest

GR: A contractual limitation on the creation of a security interest is valid.

Exceptions: Any stipulation limiting the grantor’s right to create a security interest shall
be void with respect to account receivables 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.

When not applicable

This does not apply to other types of receivables – receivables arising from a loan and
finance receivables.

Liability
While a security interest is effective notwithstanding an agreement to the contrary, a
person that creates a security interest in a receivable in breach of the agreement is not
excused from liability to its counter-party for damages caused.

CHAPTER 3
PERFECTION OF SECURITY INTEREST

Section 11. Perfection of Security Interest.—

(a) A security interest shall be perfected when it has been created and the secured
creditor has taken one of the actions in accordance with Section 12.

(b) On perfection, a security interest becomes effective against third parties.

Perfection
A security interest shall be perfected when it has been created and the secured creditor
has taken one of the actions in accordance with Section 12.

Note: Upon perfection, a security interest becomes effective against third parties.

Section 12. Means of Perfection.— A security interest may be perfected by:

(a) Registration of a notice with the Registry;

(b) Possession of the collateral by the secured creditor; and

(c) Control of investment property and deposit account.

A security interest in any tangible asset may be perfected by registration or possession.

A security interest in investment property and deposit account may be perfected by
registration or control.

Creation and Perfection

There must be creation of a security interest and perfection of the security interest by
any of the means. Absent a security agreement, even if the means of perfection of
security interest are present, it will not be effective against third parties.

Creation of Security Interest is effective upon the parties to the security agreement,
while a perfected security interest is effective against third parties

Means of Perfection of Security Interest

a. Registration of a notice with the Registry;

It is the process of filing a notice as determined under the Rules with the
Registry. The LRA is mandated to establish and administer a centralized and
nationwide electronic registry where notice of a security interest and a lien in
personal property may be registered and searched for.

b. Possession of the collateral by the secured creditor; and

Perfection through possession is similar to the Civil Law pledge.

The concept of possession under the PPSA refers to actual. Mere possession of
a tangible assets does not create a security interest. For the security interest to
be binding upon the parties, they must execute a written security agreement.

c. Control of investment property and deposit account.

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.

Rules

1. A security interest in any tangible asset may be perfected by registration or

possession.
2. A security interest in investment property and deposit account may be
perfected by registration or control.
Section 13. Perfection by Control.—

(a) A security interest in a deposit account or investment property may be perfected by

control through:

(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.

(b) Nothing in this Act shall require a deposit-taking institution or an intermediary to

enter into a control agreement, even if the grantor so requests. A deposit-taking
institution or an intermediary that has entered into such an agreement shall not be
required to confirm the existence of the agreement to another person unless requested
to do so by the grantor.

Creation of the security interest in favor of the deposit-taking institution or the

intermediary
If the secured creditor is the deposit-taking institution that holds the deposit account, the
mere creation of the security interest in favor of the deposit-taking institution perfects
the security interest.

The conclusion of a control agreement

If the secured creditor is a party other than the deposit taking institution, the security
interest may be perfected through the conclusion of a control agreement.

Uncertificated non-intermediated securities

The security interest over uncertificated non-intermediated securities may be perfected
by a 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.

Section 14. Perfection in Proceeds.—

(a) Upon disposition of collateral, a security interest shall extend to proceeds of the
collateral without further act and be continuously perfected, if the proceeds are in the
form of money, accounts receivable, negotiable instruments or deposit accounts.

(b) Upon disposition of the collateral, if the proceeds are in a form different from money,
accounts receivable, negotiable instruments or deposit accounts, the security interest in
such proceeds must be perfected by one of the means applicable to the relevant type of
collateral within fifteen (15) days after the grantor receives such proceeds; otherwise,
the security interest in such proceeds shall not be effective against third parties.
Proceeds in the form of money, etc —
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;
c. The proceeds take the form of money, accounts receivable, negotiable
instruments or deposit accounts.

Proceeds not in the form of money, etc —

If the proceeds are not in the form of money, etc., 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 fifteen (15) days after the grantor
receives such proceeds; otherwise, the security interest in such proceeds shall not be
effective against third parties

Example
If the GRANTOR sold the tractor given as collateral to secure GRANTOR’s obligation to
the SECURED CREDITOR, and if the proceeds are in the form of money, account
receivables, negotiable instruments, or deposit accounts, SECURED CREDITOR need
not do anything to make its security interest binding against third parties.

However, if the proceeds are another equipment, such as when the tractor is exchanged
for another tractor, SECURED CREDITOR has 15 days during which SECURED
CREDITOR needs to perfect its security interest in the new tractor.

Section 15. Change in Means of Perfection.— A security interest shall remain

perfected despite a change in the means for achieving perfection: Provided, That there
was no time when the security interest was not perfected.

Q: Can there be a change in means of perfection?

YES. A security interest shall remain perfected despite a change in the means for
achieving perfection: Provided, That there was no time when the security interest was
not perfected.

Section 16. Assignment of Security Interest.— If a secured creditor assigns a

perfected security interest, an amendment notice may be registered to reflect the
assignment.

Q: Is assignment of security interest possible?

YES. A security interest is a property right that may be assigned. If a secured creditor
assigns a perfected security interest, an amendment notice may be registered to reflect
the assignment.
III. Priority of Security Interest

Section 17. Priority Rules.— The priority of security interests and liens in the same
collateral shall be determined according to time of registration of a notice or perfection
by other means, without regard to the order of creation of the security interests and
liens.

Priority - The right of a person in an encumbered asset in preference to the right of a

competing claimant

Competing claimant - A creditor of a grantor or other person with rights in an

encumbered asset that may be in competition with the rights of a secured creditor in the
same encumbered asset

There may be instances where there is a competition between more than one security
interest crested by the same grantor in the same asset. The rule is that priority between
competing security interests and liens is determined by the order in which the security
interest was perfected.

Priority rules

1. Perfection by registration alone - Determined by order of registration, regardless

of the order of creation
2. Perfection not involving registration - Determined by order of perfection
3. Perfection involving different means of perfection - Determined according to time
of registration of a notice or perfection by other means, without regard to the
order of creation of the security interests and liens

Rules on the priority of security interests

A. Tangibles - Order of priority:

a. Priority given to the security 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. Priority given to registered purchase money security interest in equipment,
consumer goods, inventory, intellectual property and livestock
c. Priority given to security interest perfected by registration or possession,
which priority shall be determined according to the time of perfection by
registration or possession
B. Deposit account - Order of priority:
a. Priority given to a deposit-taking institution with right to set-off
b. Priority given to the perfected security interest of a deposit-taking
institution
c. Priority given to security interest perfected through a control agreement,
which priority is determined based on the time of conclusion of the control
agreements
 d. Priority given to security interest perfected by registration, which priority
shall be determined according to the time of registration
C. Investment property in the form of certificated securities - Order of priority:
a. Priority given to the security interest perfected by possession of the
certificate
b. Priority given to security interest perfected by registration of a notice with
the Registry, which priority shall be determined according to the time of
registration
D. Investment property consisting of securities held with an intermediary - Order of
priority:
a. Priority given to the security interest of the intermediary
b. Priority given to the security interest perfected by a control agreement,
which priority will be determined based on the time of conclusion of the
control agreements
c. Priority given to the security interest perfected by a registration of a notice
with the Registry, which priority shall be determined according to the time
of registration
E. Investment property consisting of electronic securities not held with an
intermediary - Order of priority:
a. Priority given to the security interest perfected by a notation of the security
interest in the books maintained for that purpose by or on behalf of the
issuer
b. Priority given to the security interest perfected by a control agreement,
which priority shall be determined based on the time of conclusion of the
control agreement
c. Priority given to the security interest perfected by a registration of a notice
with the Registry, which priority shall be determined according to the time
of registration
F. Investment property consisting of negotiable instruments - Order of priority:
a. Priority given to the security interest perfected by possession
b. Priority given to the security interest perfected by a registration of a notice
with the Registry, which priority shall be determined according to the time
of registration

Section 18. Priority for Perfection by Control.—

(a) A security interest in a deposit account with respect to which the secured creditor is
the deposit-taking institution or the intermediary shall have priority over a competing
security interest perfected by any method.

(b) A security interest in a deposit account or investment property that is perfected by a

control agreement shall have priority over a competing security interest except a
security interest of the deposit-taking institution or the intermediary.

(c) The order of priority among competing security interests in a deposit account or
investment property that were perfected by the conclusion of control agreements shall
be determined on the basis of the time of conclusion of the control agreements.
(d) Any rights to set-off that the deposit-taking institution may have against a grantor’s
right to payment of funds credited to a deposit account shall have priority over a security
interest in the deposit account.

(e) A security interest in a security certificate perfected by the secured creditor’s

possession of the certificate shall have priority over a competing security interest
perfected by registration of a notice in the Registry.

(f) A security interest in electronic securities not held with an intermediary perfected by a
notation of the security interests in the books maintained for that purpose by or on
behalf of the issuer shall have priority over a security interest in the same securities
perfected by any other method.

(g) A security interest in electronic securities not held with an intermediary perfected by
the conclusion of a control agreement shall have priority over a security interest in the
same securities perfected by registration of a notice in the Registry.

(h) The order of priority among competing security interests in electronic securities not
held with an intermediary perfected by the conclusion of control agreements is
determined on the basis of the time of conclusion of the control agreements.

Priority rules for deposit account and investment property

1. If the secured creditor is the deposit-taking institution or the intermediary, it shall

have priority over all competing security interests perfected by any method.
2. Security interest over the deposit account or investment property perfected by
control vs Security interest perfected by a method other than control -
PERFECTION OVER CONTROL PREVAILS OTHER MEANS OF PERFECTION
3. Security interest over the deposit account or investment property perfected by
control vs Subsequent security interests over the same deposit account or
investment property that have all been perfected by control - DETERMINED BY
THE ORDER OF CONCLUSION OF THE CONTROL AGREEMENTS
4. Security interest of various secured creditors in the deposit account vs Right to
set-off of the deposit-taking institution that holds the deposit account - RIGHT TO
SET OFF SHALL PREVAIL, PROVIDED THE DEPOSIT-TAKING INSTITUTION
HAS THE RIGHT TO SET-OFF UNDER THE LAW OR UNDER CONTRACT

Priority rules of securities

1. Security interest in a certificated security perfected by possession of the secured

creditor of the certificate vs Security interest in the same security perfected by a
registration of a notice in the Registry - POSSESSION PREVAILS OVER
REGISTRATION
2. Security interest in an uncertificated non-intermediated security (i.e., an
electronic security credited to a securities account) perfected by possession of
the secured creditor of the certificate (i.e., an electronic security credited to a
securities account) vs Security interest in the same security perfected by a
 registration of a notice in the Registry - NOTATION PREVAILS OVER
REGISTRATION
3. Security interest in an uncertificated non-intermediated security (i.e., an
electronic security credited to a securities account) perfected by conclusion of a
control agreement vs Security interest in the same security perfected by a
registration of a notice in the Registry - NOTATION PREVAILS OVER CONTROL
AND REGISTRATION
4. Security interest in an uncertificated non-intermediated security (i.e., an
electronic security credited to a securities account) perfected by conclusion of a
control agreement vs Security interest in the same security perfected by
subsequent conclusions of other control agreements - DETERMINED BASED
ON THE TIME OF CONCLUSION OF THE CONTROL AGREEMENTS

Section 19. Priority for Instruments and Negotiable Documents. - A security interest
in an instrument or negotiable document that is perfected by possession of the
instrument or the negotiable document shall have priority over a security interest in the
instrument or negotiable document that is perfected by registration of a notice in the
Registry.

Priority for instruments and negotiable instruments - POSSESSION PREVAILS OVER

REGISTRATION

Section 20. Priority and Plight of Retention by Operation of Law. - A person who
provides services or materials with respect to the goods, in the ordinary course of
business, and retains possession of the goods shall have priority over a perfected
security interest in the goods until payment thereof.

Highest Priority Rule - A person who provides services or materials with respect to the
goods, in the ordinary course of business, and retains possession of the goods shall
have priority over a perfected security interest in the goods until payment thereof. This
priority rule prevails overl all other perfected security interests over the goods.

Requisites:

1. A person (the supplier) provides goods or services with respect to the goods
2. The supplier provides these goods or services in the ordinary course of business
3. The supplier is unpaid
4. The supplier retains possession of the goods

Coverage:

1. Credits for the making, repairs, safekeeping, or preservation of personal property

2. Credits for the transportation of goods and incidental expenses
3. Warehouseman’s lien
4. Hotel-keeper’s lien
Section 21. Transferee Exceptions. - Any party who obtains, in the ordinary course of
business, any movable property containing a security interest shall take the same free
of such security interest provided he was in good faith. No such good faith shall exist if
the security interest in the movable property was registered prior to his obtaining the
property.

Alienation by the grantor of the collateral - Buyer may take the property subject to the
security interest, provided in good faith. XPN: No such good faith shall exist if the
security interest in the movable property was registered before he obtained the property.

Section 22. Effect of the Grantor’s Insolvency on the Priority of a Security

Interest. - Subject to the applicable insolvency law, a security interest perfected prior to
the commencement of insolvency proceedings in respect of the grantor shall remain
perfected and retain the priority it had before the commencement of the insolvency
proceedings.

Grantor’s insolvency, effect - A perfected security interest generally retains its priority
as against competing claimants notwithstanding the commencement of insolvency
proceedings with respect to the grantor. During insolvency proceedings, the perfected
security interest constitutes a lien over the collateral.

Section 23. Purchase Money Security Interest.—

(a) A purchase money security interest in equipment and its proceeds shall have priority
over a conflicting security interest, if a notice relating to the purchase money security
interest is registered within three (3) business days after the grantor receives
possession of the equipment.

(b) A purchase money security interest in consumer goods that is perfected by

registration of notice not later than three (3) business days after the grantor obtains
possession of the consumer goods shall have priority over a conflicting security interest.

(c) A purchase money security interest in inventory, intellectual property or livestock

shall have priority over a conflicting perfected security interest in the same inventory,
intellectual property or livestock if:

(1) The purchase money security interest is perfected when the grantor receives
possession of the inventory or livestock, or acquires rights to intellectual property;
and

(2) Before the grantor receives possession of the inventory or livestock, or

acquires rights in intellectual property, the purchase money secured creditor
gives written notification to the holder of the conflicting perfected security interest
in the same types of inventory, livestock, or intellectual property. The notification
sent to the holder of the conflicting security interest may cover multiple
transactions between the purchase money secured creditor and the grantor
without the need to identify each transaction.
(d) The purchase money security interest in equipment or consumer goods perfected
timely in accordance with subsections (a) and (b), shall have priority over the rights of a
buyer, lessee, or lien holder which arise between delivery of the equipment or consumer
goods to the grantor and the time the notice is registered.

Consumer goods, Priority - A purchase money security interest in consumer goods shall
have priority over a conflicting security interest provided that:

a. the grantor obtains possession of the consumer goods; and

b. the purchase money security interest is perfected by registration of notice not
later than 3 business days after the grantor obtains possession of the consumer
goods.

Inventory, Priority - A purchase money security interest in inventory shall have priority
over a conflicting perfected security interest in the same inventory if:

a. the purchase money security interest is perfected when the grantor receives
possession of the inventory; and
b. before the grantor receives possession of the inventory, the purchase money
secured creditor gives written notification to the holder of the conflicting perfected
security interest in the same types of inventory.

Intellectual property, Priority - A purchase money security interest in intellectual property

shall have priority over a conflicting perfected security interest in the same intellectual
property if:

a. the purchase money security interest is perfected when the grantor acquires
rights to intellectual property; and
b. before the grantor acquires rights in intellectual property, the purchase money
secured creditor gives written notification to the holder of the conflicting perfected
security interest in the same intellectual property. The notification sent to the
holder of the conflicting security interest may cover multiple transitions between
the purchase money secured creditor and the grantor without the need to identify
each transaction.

Livestock, Priority - A purchase money security interest in livestock in shall have priority
over a conflicting perfected security interest in the same livestock if:

a. the purchase money security interest is perfected when the grantor received
possession of the livestock; and
b. before the grantor receives possession of the livestock, the purchase money
secured creditor gives written notification to the holder of the conflicting perfected
security interest in the same livestock.

Equipment, Priority - A purchase money security interest in equipment and its proceeds
shall have priority over a conflicting perfected security interest in the same equipment
and proceeds if:
 a. the grantor obtains possession of the equipment; and
b. the purchase money security interest is perfected by registration of notice not
later than 3 business days after teh grantor receives possession of the
equipment.

Section 24. Livestock. - A perfected security interest in livestock securing an obligation

incurred to enable the grantor to obtain food or medicine for the livestock shall have
priority over any other security interest in the livestock, except for a perfected purchase
money security interest in the livestock, if the secured creditor providing credit for food
or medicine gives written notification to the holder of the conflicting perfected security
interest in the same livestock before the grantor receives possession of the food or
medicine.

Security interests over livestock will have this order of priority:

1. perfected purchase money security interest in the livestock

2. perfected security interest in the livestock securing an obligation to enable the
grantor to obtain food or medicine over the livestock (subject to the notice
requirement)
3. perfected security interest over the livestock to secure other obligations

Section 25. Fixtures, Accessions, and Commingled Goods. - A perfected security

interest in a movable property which has become a fixture, or has undergone accession
or commingling shall continue provided the movable property involved can still be
reasonably traced. In determining ownership over fixtures, accessions, and commingled
goods, the provisions of Book II of Republic Act No. 386 or the "Civil Code of the
Philippines" shall apply.

A perfected security interest in a movable property which has become a fixture, or has
undergone accession or commingling shall continue provided the movable property
involved can still be reasonable traced.

IV. Registration-Registry

Section 26. Establishment of Electronic Registry.—

(a) The Registry shall be established in and administered by the LRA.

(b) The Registry shall provide electronic means for registration and searching of notices.

Establishment of Electronic Registry

RA No. 11057 and its IRR provide that an electronic registry shall be established and
administered by the LRA. The Registry shall provide the public an electronic means for
registration and searching of registered notices relating to transactions on personal
property.

Registered notices, which shall be part of the Registry and considered as public
records, shall contain personal information such as the names of grantors, borrowers
and creditors for identification purposes.

Section 27. Public Record.—

(a) Information contained in a registered notice shall be considered as a public record.

(b) Any person may search notices registered in the Registry.

(c) The electronic records of the Registry shall be the official records.

The respective contact information of the grantors, borrowers and creditors such as
addresses, email addresses and mobile and phone numbers shall also be collected
during the online registration process for notification purposes, but shall not be
disclosed to the public.

Taking these into consideration, the collection and subsequent disclosure of personal
information through the Registry is necessary in the exercise of the LRA’s regulatory
mandate.

Section 28. Sufficiency of Notice.—

(a) An initial notice of security interest shall not be rejected:

(1) If it identifies the grantor by an identification number, as further prescribed in the

regulations;

(2) If it identifies the secured creditor or an agent of the secured creditor by name;

(3) If it provides an address for the grantor and secured creditor or its agent;

(4) If it describes the collateral: and

(5) If the prescribed fee has been tendered, or an arrangement has been made for
payment of fees by other means.

(b) If the Registry rejects to register a notice, it shall promptly communicate the fact of
and reason for its rejection to the person who submitted the notice.
(c) Each grantor must authorize the registration of an initial notice by signing a security
agreement or otherwise in writing.

(d) A notice may be registered before a security agreement is concluded. Once a

security agreement is concluded, the date of registration of the notice shall be reckoned
from the date the notice was registered.

(e) A notice of lien may be registered by a lien holder without the consent of the person
against whom the lien is sought to be enforced.

(f) Description of the collateral in a notice shall be entered in English.

Procedure

1. The grantor, or any person authorized by the grantor, submits the notice to the
Registry, and pays the prescribed fee. The notice is considered sufficient if it:

a. Identifies the grantor by an identification number

b. Identifies the secured creditor by name

c. Provides an address for the grantor and secured creditor

d. Describes the collateral [Sec. 28].

2. The Registry either accepts or rejects the notice for registration. However, if the
notice meets the minimum requirements and the fee is paid, it shall not be rejected
[Sec. 28(a)]

a. The Registry does not determine the correctness, authenticity, or validity of the
information contained in the notice.

b. Thus, questions regarding the validity of the security agreement are expected
to be decided in a proper litigation after registration [Somera]

3. If the Registry rejects the registration of a notice, it shall promptly communicate the
fact and reason for its rejection to the person who submitted the notice [Sec. 28(b)]

4. If the Registry accepts the registration of a notice, it shall be effective, from the time it
is discoverable on the records of the Registry, until such time that the duration indicated
on the notice lapses [Sec. 30]

a. Any person may search notices registered in the Registry [Sec. 27].

b. The electronic records of the Registry shall be the official records [Sec. 27].
Effects of Registration

1. The security interest becomes binding on third parties [Sec. 11].

2. The registered notice is considered a public record [Sec. 27].

3. Subsequent purchasers of the collateral are charged with notice of the security
interest burdening the title of said collateral.

• Such notice cannot be overcome by proof of good faith [Legarda & Prieto v.
Saleeby, G.R. No. L-8936 (1915)]

4. Establishes the basis of priority of security of interest according to time of registration

[Sec. 17].

Section 29. One Notice Sufficient for Security Interests Under Multiple Security
Agreements. -The registration of a single notice may relate to security interests created
by the grantor under one (1) or more than one security agreement.

Notices are statements that relate to a security interest or lien, and may refer to an initial
notice, an amendment notice or a termination notice. The agency tasked with the
responsibility of establishing and administering the said Registry, including the
responsibility of issuing guidelines on the use and management of the Registry, is the
Land Registration Authority (“LRA”).

NOTE: The registration of a single notice may relate to security interests created by the
grantor under one (1) or more than one security agreement. (Sec. 29, Ibid.)

Section 30. Effectiveness of Notice.—

(a) A notice shall be effective at the time it is discoverable on the records of the
Registry.

(b) A notice shall be effective for the duration of the term indicated in the notice unless a
continuation notice is registered before the term lapses.

(c) A notice substantially complying with the requirements of this Chapter shall be
effective unless it is seriously misleading.

(d) A notice that may not be retrieved in a search of the Registry against the correct
identifier of the grantor shall be ineffective with respect to that grantor.
Effectiveness of Notice

A notice shall be effective at the time it is discoverable on the records of the Registry
and for the duration of the term indicated in the notice unless a continuation notice is
registered before the term lapses. Substantial compliance of the requirements would
still give effectiveness to the notice unless it is seriously misleading. (Sec. 30, Ibid.)

Section 31. Seriously Misleading Notice. -A notice that does not provide the
identification number of the grantor shall be seriously misleading.

Section 32. Amendment of Notice.—

(a) A notice may be amended by the registration of an amendment notice that:

(1) Identifies the initial notice by its registration number; and

(2) Provides the new information.

(b) An amendment notice that adds collateral that is not proceeds must be authorized
by the grantor in writing.

(c) An amendment notice that adds a grantor must be authorized by the added grantor
in writing.

(d) An amendment notice shall be effective only as to each secured creditor who
authorizes it.

(e) An amendment notice that adds collateral or a grantor shall be effective as to the
added collateral or grantor from the date of its registration.

Amending of Notice

A notice may be amended by the registration of an amendment notice that:

1. Identifies the initial notice by its registration number; and

2. Provides the new information. (Sec. 32, Ibid.)

Section 33. Continuation of Notice.—

(a) The period of effectiveness of a notice may be continued by registering an

amendment notice that identifies the initial notice by its registration number.

(b) Continuation of notice may be registered only within six (6) months before the
expiration of the effective period of the notice.
Section 34. Termination of Effectiveness of a Notice.—

(a) The effectiveness of a notice may be terminated by registering a termination notice

that:

(1) Identifies the initial notice by its registration number; and

(2) Identifies each secured creditor who authorizes the registration of the termination
notice.

(b) A termination notice terminates effectiveness of the notice as to each authorizing

secured creditor.

Termination of Effectiveness of a Notice

The effectiveness of a notice may be terminated by registering a termination notice that:

a. Identifies the initial notice by its registration number; and

b. Identifies each secured creditor who authorizes the registration of the termination
notice.

A termination notice terminates effectiveness of the notice as to each authorizing

secured creditor. (Sec. 34, Ibid.)

Section 35. Registry Duties.—

(a) For each registered notice, the Registry shall:

(1) Assign a unique registration number;

(2) Create a record that bears the number assigned to the initial notice and the date and
time of registration; and

(3) Maintain the record for public inspection.

(b) The Registry shall index notices by the identification number of the grantor and, for
notices containing a serial number of a motor vehicle, by serial number.

(c) The Registry shall provide a copy of the electronic record of the notice, including the
registration number and the date and time of registration to the person who submitted it.

(d) The Registry shall maintain the capability to retrieve a record by the identification
number of the grantor, and by serial number of a motor vehicle.

(e) The Registry shall maintain records of lapsed notices for a period of ten (10) years
after the lapse.
(f) The duties of the Registry shall be merely administrative in nature. By registering a
notice or refusing to register a notice, the Registry does not determine the sufficiency,
correctness, authenticity, or validity of any information contained in the notice.

Section 36. Search of Registry Records and Certified Report.—

(a) The Registry shall communicate the following information to any person who
requests it:

(1) Whether there are in the Registry any unlapsed notices that indicate the grantor's
identification number or vehicle serial number that exactly matches the relevant criterion
provided by the searcher;

(2) The registration number, and the date and time of registration of each notice; and

(3) All of the information contained in each notice.

(b) If requested, the Registry shall issue a certified report of the results of a search that
is an official record of the Registry and shall be admissible into evidence in judicial
proceedings without extrinsic evidence of its authenticity.

Section 37. Disclosure of Information.—

(a) The secured creditor must provide to the grantor at its request:

(1) The current amount of the unpaid secured obligation; and

(2) A list of assets currently subject to a security interest.

(b) The secured creditor may require payment of a fee for each request made by the
grantor in subsection (a) in this section, but the grantor is entitled to a reply without
charge once every six (6) months.

(c) A security interest in a deposit account shall not:

(1) Affect the rights and obligations of the deposit-taking institution without its consent;
or

(2) Require the deposit-taking institution to provide any information about the deposit
account to third parties.

Section 38. Fees Set by Regulation.—

(a) The fees for registering a notice and for requesting a certified search report shall be
set by regulation issued by the DOF for the recovery of reasonable costs of establishing
and operating the Registry.

(b) The fee structure or any change thereof under subsection (a) shall further consider
that the same shall not be burdensome to either lender or grantor.
(c) There shall be no fee for electronic searches of the Registry records or for the
registration of termination notices.

(d) The Registry may charge fees for services not mentioned above.

Section 39. When the Grantor May Demand Amendment or Termination of Notice.
-A grantor may give a written demand to the secured creditor to amend or terminate the
effectiveness of the notice if:

(a) All the obligations under the security agreement to which the registration relates
have been performed and there is no commitment to make future advances;

(b) The secured creditor has agreed to release part of the collateral described in the
notice;

(c) 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;

(d) No security agreement exists between the parties; or

(e) The security interest is extinguished in accordance with this Act.

Section 40. Matters That May be Required by Demand. -Upon receipt of the demand
submitted under Section 39, the secured creditor must register, within fifteen (15)
working days, an amendment or termination notice:

(a) Terminating the registration in a case within subsections (a), (d) or (e) of Section 39;

(b) Amending the registration to release some property that is no longer collateral in a
case within subsection (c) of Section 39 or that was never collateral under a security
agreement between the secured creditor and the grantor in a case within subsection (c)
of Section 39.

Section 41. Procedure for Noncompliance with Demand. -If the secured creditor fails
to comply with the demand within fifteen (15) working days after its receipt, the person
giving the demand under Section 39 may ask the proper court to issue an order
terminating or amending the notice as appropriate.

Section 42. Compulsory Amendment or Termination by Court Order.—

(a) The court may, on application by the grantor, issue an order that the notice be
terminated or amended in accordance with the demand, which order shall be conclusive
and binding-on the LRA: Provided, That the secured creditor wrho disagrees with the
order of the court may appeal the order.

(b) The court may make any other order it deems proper for the purpose of giving effect
to an order under subsection (a) of this section.
(c) The LRA shall amend or terminate a notice in accordance with a court order made
under subsection (a) of this section as soon as reasonably practicable after receiving
the order.

Section 43. No Fee for Compliance of Demand. -A secured creditor shall not charge
any fee for compliance with a demand received under Section 39.

Section 44. When Registration and Search Constitutes Interference with Privacy
of Individual. -A person who submitted a notice for registration or carried out a search
of the Registry with a frivolous, malicious or criminal purpose or intent shall be subject
to civil and criminal penalties according to the relevant laws.

Compulsory Amendment or Termination by Court Order

The court may, on application by the grantor, issue an order that the notice be
terminated or amended in accordance with the demand, which order shall be conclusive
and binding on the LRA: Provided, That the secured creditor who disagrees with the
order may appeal the order.

The court may take any order it deems proper for the purpose of giving effect to the
order made under the first paragraph. The LRA shall amend or terminate a notice in
accordance with a court order as soon as reasonably practicable after receiving the
order. (Sec. 42, Ibid.)

Security interest shall be perfected when it has been created and the secured creditor
has taken one of the actions mentioned above. On perfection, a security interest
becomes effective against third parties. (Sec. 11, Ibid.)

Significance of the Registry

The significance of the establishment of the Registry cannot be underestimated

considering that under the PPSA, the registration of a notice with the Registry is one
mode of perfecting a security interest. The other modes of perfecting a security interest
are through possession of the collateral by the secured creditor and control of
investment property and deposit account.

More importantly, the PPSA provides that the priority of security interests and liens in
the same collateral is determined according to the time of registration of a notice or
perfection by other means, without regard to the order of creation of the security
interests and liens.

Individual Users may create and register their Individual User Accounts online through
the PPSR without requiring any further approval from the LRA. On the other hand,
Juridical Entities, through their representative, may create and register their Juridical
User Accounts either by Self-Service Online Mode, which is done through the PPSR, or
by LRA-Assisted Offline Mode, which is facilitated by a designated LRA Officer.

Juridical Entities that require multiple user accounts need to coordinate with the LRA on
the creation of their Juridical Entity Account.

V. Enforcement of Security Interest

● The personal security may be enforced after default through sale or disposition of
the collateral publicly or privately.
● The enforcement of security interest under the PPSA is different from the
enforcement of security interest under the Chattel Mortgage Law and the law on
pledge because of the following:
○ The PPSA provides for a simplified and expedited private and public
disposition of collateral;
○ The PPSA provides for the right to take over the enforcement process by
a higher-ranking secured creditor (Sec. 46);
○ There is a remedy for expedited repossession of collateral in the PPSA
(Sec. 47);
○ Under the PPSA, collection and application is expressly allowed for
deposit accounts and negotiable instruments (Sec. 48);
○ Retention of the collateral is allowed under the PPSA in certain cases
(Sec. 54).
● Section 8.11 of the Implementing and Regulations provided that the expedited
hearing/proceedings shall be conducted in a summary manner.
Overview of Enforcement of Security Interests
1. The debtor incurs in default.
2. The secured creditor effects repossession of the collateral. The repossession
may be done without judicial process if:
a. so stipulated in the security agreement; and
b. the possession can be taken without a breach of the peace.
3. If the collateral is a fixture, the secured creditor, if it has priority over all owners
and mortgagees, may remove the fixture from the real property to which it is
affixed without judicial process. The secured creditor shall exercise due care in
removing the fixture.
4. If, upon default, the secured creditor cannot take possession of the collateral
without breach of the peace, he must apply with the courts for an order granting
him possession of the collateral. The secured creditor must prove that a default
has occurred under the security agreement and that the secured creditor has a
right to take possession of the collateral.
5. The secured creditor must give notice of the intended disposition not later than
ten (10) days before the disposition. The requirement to send a notification
 shall not apply if the collateral is perishable or is threatened to decline speedily in
value or is of a type customarily sold on a recognized market.
6. The proceeds of disposition shall be applied in the following order:
a. The reasonable expenses of taking, holding, preparing for disposition, and
disposing of the collateral, including reasonable attorney’s fee and legal
expenses incurred by the secured creditor;
b. The satisfaction of the obligation secured by the security interest of the
enforcing secured creditor; and
c. The satisfaction of obligations secured by any subordinate security
interest or lien in the collateral if a written demand and proof of the interest
are received before distribution of the proceeds is completed.
7. The secured creditor shall account to the grantor for any surplus, and, unless
otherwise agreed, the debtor is liable for any deficiency.
Section 45. Right of Redemption.—
(a) Any person who is entitled to receive a notification of disposition in accordance with
this Chapter is entitled to redeem the collateral by paying or otherwise performing the
secured obligation in full, including the reasonable cost of enforcement.
(b) The right of redemption may be exercised, unless:
(1) The person entitled to redeem has not, after the default, waived in writing the
right to redeem;
(2) The collateral is sold or otherwise disposed of, acquired or collected by the
secured creditor or until the conclusion of an agreement by the secured creditor
for that purpose; and
(3) The secured creditor has retained the collateral.

Secured Creditor’s Rights

1. Right to require payment for a fee for a request of disclosure of information from
the grantor; (Sec. 37)
2. Right to take over enforcement; (Sec. 46)
3. Right to expedite Repossession of the Collateral; (Sec. 47)
4. Right to recover in special cases; (Sec. 48)
5. Right to Dispose of Collateral; (Sec. 49 - 51) and
6. Right to retain collateral (Sec. 54).
Section 46. Right of Higher-Ranking Secured Creditor to Take Over
Enforcement.—
(a) Even if another secured creditor or a lien holder has commenced enforcement, a
secured creditor whose security-interest has priority over that of the enforcing secured
creditor or lien holder shall be entitled to take over the enforcement process.
(b) The right referred to in subsection (a) of this section may be invoked at any time
before the collateral is sold or otherwise disposed of, or retained by the secured creditor
or until the conclusion of an agreement by the secured creditor for that purpose.
(c) The right of the higher-ranking secured creditor to take over the enforcement
process shall include the right to enforce the rights by any method available to a
secured creditor under this Act.
● A secured creditor whose security interest has priority over that of the enforcing
secured creditor or lien holder (even if another secured creditor or a lien holder
has commenced enforcement) shall be entitled to take over the enforcement
process.
● The right of higher-ranking secured creditor to take over enforcement may be
invoked at any time before the collateral is sold or otherwise disposed of or
retained by the secured creditor or until the conclusion of an agreement by the
secured creditor for that purpose. This right shall include the right to enforce the
rights by any method available to a secured creditorunder PPSA.

Section 47. Expedited Repossession of the Collateral.—

(a) The secured creditor may take possession of the collateral without judicial process if
the security agreement so stipulates: Provided, That possession can be taken without a
breach of the peace.
(b) If the collateral is a fixture, the secured creditor, if it has priority over all owners and
mortgagees, may remove the fixture from the real property to which it is affixed without
judicial process. The secured creditor shall exercise due care in removing the fixture.
(c) If, upon default, the secured creditor cannot take possession of collateral without
breach of the peace, the secured creditor may proceed as follows:
(1) The secured creditor shall be entitled to an expedited hearing upon
application for an order granting the secured creditor possession of the
collateral. Such application shall include a statement by the secured creditor,
under oath, verifying the existence of the security agreement attached to the
application and identifying at least one event of default by the debtor under the
security agreement;
(2) The secured creditor shall provide the debtor, grantor, and, if the collateral is
a fixture, any real estate mortgagee, a copy of the application, including all
supporting documents and evidence for the order granting the secured creditor
possession of the collateral; and
(3) The secured creditor is entitled to an order granting possession of the
collateral upon the court finding that a default has occurred under the security
 agreement and that the secured creditor has a right to take possession of the
collateral. The court may direct the grantor to take such action as the court
deems necessary and appropriate so that the secured creditor may take
possession of the collateral: Provided, That breach of the peace shall include
entering the private residence of the grantor without permission, resorting to
physical violence or intimidation, or being accompanied by a law enforcement
officer when taking possession or confronting the grantor.
Section 48. Recovery in Special Cases.— Upon default, the secured creditor may
without judicial process:
(a) Instruct the account debtor to make payment to the secured creditor, and apply such
payment to the satisfaction of the obligation secured by the security interest after
deducting the secured creditor’s reasonable collection expenses. On request of the
account debtor, the secured creditor shall provide evidence of its security interest to the
account debtor when it delivers the instruction to the account debtor;
(b) In a negotiable document that is perfected by possession, proceed as to the
negotiable document or goods covered by the negotiable document;
(c) In a deposit account maintained by the secured creditor, apply the balance of the
deposit account to the obligation secured by the deposit account; and
(d) In other cases of security interest in a deposit account perfected by control, instruct
the deposit-taking institution to pay the balance of the deposit account to the secured
creditor’s account.
● Note: The IRR enumerated the documents needed in the case mentioned in
paragraph d. These are:
○ a copy of the security agreement that creates or provides for a security
interest; and
○ the secured party’s affidavit stating that a default has occurred, and that
the secured party is entitled to enforce the security interest non-judicially.
Disposition
Section 49. Right to Dispose of Collateral.—
(a) 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.
(b) The secured creditor may buy the collateral at any public disposition, or at a private
disposition but only if the collateral is of a kind that is customarily sold on a recognized
market or the subject of widely distributed standard price quotations.

Section 50. Commercial Reasonableness Required.—

(a) In disposing of collateral, the secured creditor shall act in a commercially reasonable
manner.
(b) A disposition is commercially reasonable if the secerned creditor disposes of the
collateral in conformity with commercial practices among dealers in that type of property.
(c) A disposition is not commercially unreasonable merely because a better price could
have been obtained by disposition at a different time or by a different method from the
time and method selected by the secured creditor.
(d) If a method of disposition of collateral has been approved in any legal proceeding, it
is conclusively commercially reasonable.
● The grantor and any other secured creditor (who holds security interest in the
collateral at least five days before the date of notification) are entitled to receive
notice 10 days before the disposition of the collateral. Any other person from
whom the secured creditor received notification of a claim of an interest in the
collateral prior to the service of a notification of disposition to the grantor is also
entitled to the notice required under section 51(a).
● The secured creditor may also propose to the debtor and grantor to take all or
part of the collateral in total or partial satisfaction of the secured obligation by
sending a proposal to the debtor and the grantor, and such other secured creditor
or lien holder or other person with interest in the collateral as specified in Section
54(a) of this act.

Section 51. Notification of Disposition.—

(a) Not later than ten (10) days before disposition of the collateral, the secured creditor
shall notify:
(1) The grantor;
(2) Any other secured creditor or lien holder who, five (5) days before the date
notification is sent to the grantor, held a security interest or lien in the collateral
that was perfected by registration; and
(3) Any other person from whom the secured creditor received notification of a
claim of an interest in the collateral if the notification was received before the
secured creditor gave notification of the proposed disposition to the grantor.
(b) The grantor may waive the right to be notified.
(c) A notification of disposition is sufficient if it identifies the grantor and the secured
creditor; describes the collateral; states the method of intended disposition; and states
the time and place of a public disposition or the time after which other disposition is to
be made.
(d) The requirement to send a notification under this section shall not apply if the
collateral is perishable or threatens to decline speedily in value or is of a type
customarily sold on a recognized market.

Section 52. Application of Proceeds.—

(a) The proceeds of disposition shall be applied in the following order:
(1) The reasonable expenses of taking, holding, preparing for disposition, and
disposing of the collateral, including reasonable attorneys’ fees and legal
expenses incurred by the secured creditor;
(2) The satisfaction of the obligation secured by the security interest of the
enforcing secured creditor; and
(3) The satisfaction of obligations secured by any subordinate security interest
or hen in the collateral if a written demand and proof of the interest are received
before distribution of the proceeds is completed.
(b) The secured creditor shall account to the grantor for any surplus, and, unless
otherwise agreed, the debtor is liable for any deficiency.
● The reasonable expenses of holding the collateral shall include all expenses
incurred by the secured creditor in the preservation and care of the collateral in
his possession with the diligence of a good father of a family (Section 7.11(c) of
Implementing Rules and Regulations).
● The secured creditor shall be liable to the grantor for the value of the loss and
deterioration that may be suffered due to his failure to preserve and care for the
collateral (Section 7.11(d) of Implementing Rules and Regulations).
● Effect of Section 52(b) on the Recto Law (Article 1484 of the New Civil Code) - It
should not be construed as PPSA removing the third remedy (foreclosure of the
chattel mortgage) and the prohibition on recovery of deficiency in case of
foreclosure. It is believed that the cases covered by the Recto Law is an
exception to Section 52(b) because the evil sought to be prevented by the Recto
Law (mortgagees seizing the mortgaged property, buying it at foreclosure sale for
a low price, then bringing a suit against the mortgagor for a deficiency
judgement) still exists. (Aquino, Essentials of Credit Transactions and Insolvency
Law 2021 edition)
Section 54. Retention of Collateral by Secured Creditor.—
(a) After default, the secured creditor may propose to the debtor and grantor to take all
or part of the collateral in total or partial satisfaction of the secured obligation, and shall
send a proposal to:
(1) The debtor and the grantor;
 (2) Any other secured creditor or lien holder who, five (5) days before the
proposal is sent to the debtor and the grantor, perfected its security interest or
lien by registration; and
(3) Any other person with an interest in the collateral who has given a written
notification to the secured creditor before the proposal is sent to the debtor and
the grantor.
(b) The secured creditor may retain the collateral in the case of:
(1) A proposal for the acquisition of the collateral in full satisfaction of the
secured obligation, unless the secured creditor receives an objection in writing
from any person entitled to receive such a proposal within twenty (20) days after
the proposal is sent to that person; or
(2) A proposal for the acquisition of the collateral in partial satisfaction of the
secured obligation, only if the secured creditor receives the affirmative consent
of each addressee of the proposal in writing within twenty (20) days after the
proposal is sent to that person.
● Section 7.13(c) of Implementing Rules and Regulations provides that a proposal
for the retention of the collateral is sufficient if it includes:
1. A statement of the amount required at the time the proposal is given to
satisfy the secured obligation, including interest and the reasonable cost
of enforcement, and the amount of the secured obligation that is proposed
to be satisfied;
2. A statement that the secured creditor proposes to acquire the encumbered
asset described in the proposal in total or partial satisfaction of the
secured obligation;
3. A statement of the date after which the secured creditor will acquire the
encumbered asset.
● Note: Automatic appropriation of the collateral is not allowed under the PPSA.

Rights of Buyers and other Third Parties

Section 53. Rights of Buyers and Other Third Parties.—
(a) If a secured creditor sells the collateral under this Chapter, the buyer shall acquire
the grantor’s right in the asset free of the rights of any secured creditor or lien holder.
(b) If a secured creditor leases or licenses the collateral under this Chapter, the lessee
or licensee shall be entitled to the benefit of the lease or license during its term.
(c) If a secured creditor sells, leases or licenses the collateral not in compliance with this
Chapter, the buyer, lessee or licensee of the collateral shall acquire the rights or
benefits described in subsections (a) and (b) of this section: Provided, That it had no
knowledge of a violation of this Chapter that materially prejudiced the rights of the
grantor or another person.

Remedies for Secured Party’s Failure to Comply with the Rules

Section 7.14. Remedies for Secured Party’s Failure to Comply with the Rules -
(a) Judicial orders concerning noncompliance - If it is established that a secured
party is not proceeding in accordance with these Rules, a court may order or
restrain collection, enforcement, or disposition of collateral on appropriate terms
and conditions.
(b) Damages for noncompliance - A party or interested person who fails to comply
with the provisions of these Rules shall be liable in the amount of any loss
resulting from such failure. Loss caused by a failure to comply may include loss
resulting from the debtor’s inability to obtain, or increased costs of, alternative
financing.
(c) Person entitled to recover damages - A person that, at the time of the failure, was
a debtor, a grantor, or held a security interest in or other lien on the collateral may
recover damages under subsection (b) for its loss.
Transitional Provisions
Section 55. Interpretation of Transitional Provisions.— For this Chapter, unless the
context otherwise requires:
(a) Existing secured creditor – means a secured creditor with a prior security interest;
(b) Prior law – means any law that existed or in force before the effectivity of this Act;
(c) 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; and
(d) Transitional period - means the period from the date of effectivity of this Act until the
date when the Registry has been established and operational.
● Section 8.06 of the Implementing and Regulations provided that the transitional
period shall begin on February 9, 2019.
Section 56. 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.
 ● Section 8.07 of the Implementing and Regulations provided that security interests
created during the Transitional Period are governed by the PPSA.
Section 57. 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.
● Section 8.08 of the Implementing and Regulations provided that the perfection of
all existing security interests created during the transitional period shall be
governed by the PPSA provided that during the transitional period, registration of
the security agreement with the LRA shall be in accordance with Section 4 of the
Chattel Mortgage Law.
● The LRA shall also determine a system of provisional registration of such
agreements during such transitional period.
a. 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
these Rules.
b. If the perfection requirements of these Rules are satisfied before the
perfection of a prior interest ceases in accordance with Rule 8.03, the prior
interest continues to be perfected under these Rules from the time when it
was perfected under the prior law.
c. If a prior interest referred to in subsection (b) of this section was perfected
by the registration in the registry 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 these Rules.
 d. If the perfection requirements of these Rules are not satisfied before the
perfection of a prior interest ceases in accordance with Rule 8.03, the prior
interest is perfected only from the time it is perfected under these Rules.
Section 58. Priority of Prior Interest.—
(a) The priority of a prior interest as against the rights of a competing claimant is
determined by the prior law if:
(1) The security interest and the rights of all competing claimant arose before
the effectivity of this Act; and
(2) The priority status of these rights has not changed since the effectivity of this
Act.
(b) For purposes of subsection (a)(2) of this section, the priority status of a prior interest
has changed only if:
(1) It was perfected when this Act took effect, but ceased to be perfected; or
(2) It was not perfected under prior law when this Act took effect, and was only
perfected under this Act.
● Section 8.09 of the Implementing and Regulations provided that the priority of
competing security interests shall be determined during the Transitional Period
by applying the PPSA.
Section 59. 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.
● Section 8.10 of the Implementing and Regulations provided that the enforcement
of all existing security interests during the Transitional Period shall be governed
by the PPSA.

Congressional Oversight and Miscellaneous Provisions -

Section 60. Congressional Oversight and Periodic Review.— A Congressional
Oversight Committee shall be created that will conduct a periodic review every five (5)
years commencing from the effectivity of this Act. The Congressional Oversight
Committee shall be composed of the Chairperson of the Senate Committee on Banks,
Financial Institutions and Currencies, the Chairperson of the House of Representatives
Committee on Banks and Financial Intermediaries, and representatives of other relevant
congressional committees.
Section 61. 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.
Section 62. Implementing Rules and Regulations.— Within six (6) months from the
passage of this Act, the DOF in coordination with the Department of Justice, through the
LRA, shall promulgate the necessary rules and regulations for’ the effective
implementation of this Act.
Section 63. Rules on Enforcement Procedure.— Subject to Section 47, the expedited
hearing/proceedings shall be conducted in a summary manner consistent with the
declared policies of this Act and in accordance with the rules of procedure that the
Supreme Court may promulgate.
Section 64. Sourcing of Funds.— The funds needed for the implementation of this Act
shall be taken from the Special Account arising from revenues collected by the LRA
under Section 111 of Presidential Decree No. 1529, without need for any further
government approval.
Section 65. Separability Clause.— Should any provision herein be declared
unconstitutional, the same shall not affect the validity of the other provisions of this Act.
Section 66. 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".
Section 67. Effectivity.— This Act shall take effect fifteen (15) days after publication in
at least two (2) newspapers of general circulation.
Section 68. Implementation.— Notwithstanding the entry into force of this Act under
Section 67, the implementation of the Act shall be conditioned upon the Registry being
established and operational under
 REFERENCES
BOOKS
Aquino, T. (2021). Essentials of Credit Transactions and Insolvency Law. Rex
Bookstore.
De Leon, H. (2021). Comments and Cases on Credit Transactions Fourteenth Edition.
Rex Bookstore.

LAWS
Republic Act No. 11057 or “Personal Property Security Act”

WORLD WIDE WEB SOURCES

A Registry that will increase your access to secured loans. (2021) Retrieved May, 2023,
from A REGISTRY THAT WILL INCREASE YOUR ACCESS TO SECURED
LOANS | CDA
Explanatory notes to the draft implementing rules and regulations of the Personal
Property Security Act. (n.d). Retrieved May, 2023, from
https://www.dof.gov.ph/download/draft-irr-and-explanatory-notes/?wpdmdl=24121
&refresh=6450ab0475f5c1683008260