Personal Property Security Act

RA No. 11057

2E - Reviewer

A. Introduction and General Concepts

Q: Who are the parties in a Security Agreement?

ANS: The parties in a Security Agreement are the Grantor and the Secured
creditor. The Grantor may be the debtor or he may be a third party.

Q: Who may be considered as a Grantor?

ANS: Under Sec 3(c) of the PPSA, the Grantor may be any of the following:

a. The person who grants a security interest in collateral to secure its

own obligation or that of another person;
b. A buyer or other transferee of a collateral that acquires its right
subject to a security interest;
c. A transferor in an outright transfer of an accounts receivable; or
d. A lessee of goods

Q: Who is a Secured Creditor?

ANS: Under Sec 3(i) of the PPSA, a Secured Creditor is “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 operation lease for
not less than one (1) year”

B. Scope

Q: What is the scope of the Personal Property Security Act (PPSA)?

ANS: It applies to all transactions of any form that secure an obligation with
movable collateral, except interests in aircrafts subject to R.A. 9497 or the Civil
Aviation Authority Act of 2008 and interests in ships subject to PD 1521 or the
Ship Mortgage Decree of 1978. (RA No. 11057, otherwise known as “Personal
Property Security Act”, Sec. 4)

PPSA repealed the laws on conventional pledges and chattel mortgage and
replaced with a framework for secured transactions.

Q: What are the objects of the PPSA?

 ANS: 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. Rights arising from contracts, 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 Negotiable instruments
5. Negotiable documents of title Consumer goods
6. Intellectual property
7. Livestock
8. Fixtures, accessions, and commingled goods, or
9. Future property or after-acquired assets
Note: A security interest can only be created on the asset over which the grantor
has a legal right IRR of R.A. 11057, Sec. 2.03)

C. Security Interest

Q: What is a security interest?

ANS: A property right in collateral that:

(1) secures payment or other performance of an obligation, re- gardless of

whether the parties have denominated it as a se- curity interest, and regardless
of the type of asset, the status of the grantor or secured creditor, or the nature of
the se- cured obligation;
(2) buyer of accounts receivable and
(3) lessor under an operating lease for not less than one (1) year.

Q: What are the stages in the life of security interest?

ANS: The security interest of a secured creditor passess through the following
stages in its life: (1) creation, (2) perfection, and (3) enforcement.

Q: How is a security interest created?

ANS: A security interest shall be created by a security agreement or the lease of

an operating lease for not less than 1 year. A security agreement is likewise
created by the sale of an account receivable, unless otherwise stipulated by all
the parties in the document sale (Sec. 3.01 IRR)

Q: What is a security agreement?

ANS: A security agreement must be contained in a written contract signed by the
parties. It may consist of one or more writings that, taken to- gether, establish the
intent of the parties to create a security interest. (Sec. 6)

Q: When is the description of the collateral considered efficient?

Ans: 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 in- ventory", or
"all personal property within a generic category" of the grantor shall be sufficient.
(Sec. 7)

Q: What happens when a collateral is disposed of?

Ans: 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. (Sec. 9)

Q: What are the asset-specific rules regarding security interests over future
property?

Ans:

(a) A security agreement may provide for the creation of a security interest in
future property or after-acquired assets, but the security interest in that property
is created only when the grantor acquires rights in it or the power to encumber it.

(b) A security agreement may provide that a security interest in a tangible asset
that is transformed into a product extends to the product. A security interest that
extends to a product is limited to the value of the encumbered asset immediately
before it became part of the product.

(c) A security agreement may provide that a security interest in a tangible asset
extends to its replacement. A security interest that extends to a replacement is
limited to the value of the encumbered asset immediately before it was replaced
(Sec. 3.05, IRR).

Q: What are the asset-specific rules regarding security interests over right
to proceeds and commingled funds?

ANS: (a) A security interest in personal property shall extend to its identifi- able
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 identi- fiable 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 com-
mingled funds or money between the time when the proceeds were commingled
and the time the security interest in the proceeds is claimed. (Sec. 8)

Q: What are the asset-specific rules regarding security interests over

tangible assets commingled in a mass?

ANS: (a) A security interest in a tangible asset that is commin- gled in a mass
extends to the mass.

(b) 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. (Sec. 3.07, IRR)

Q: What are the asset-specific rules regarding security interests in certain

accounts receivable?

ANS: (a) A security interest in an account receivable shall be effective

notwithstanding any agreement between the grantor and the account debtor or
any secured credi- tor limiting in any way the grantor’s right to create a security
interest; Provided that: Nothing in this section affects the right of a buyer to
create a security interest over the account receivable. Provided, further: that any
release of information is subject to agreements on confidentiality.

(b) Nothing in this section shall affect any obligation or liability of the grantor for
breach of the agreement is 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:

(i) A contract for the supply or lease of goods or services other than
financial services;
(ii) A construction contract or contract for the sale or lease of real
property; and
(iii) A contract for the sale, lease or license of intellectual property
Q: When is a security interest extinguished?

ANS: Security interest is extinguished when all secured obligations have been
discharged and there are no outstanding commitments to extend credit secured
by the security interest (Sec. 3.12, IRR).

Q: When shall a security interest be perfected?

Ans:

(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.

Q: What are the means for perfecting security interests?

ANS: 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 registra- tion or

possession. A security interest in investment property and de- posit account may
be perfected by registration or control. (Sec. 12)

Q: What are the rules in perfection by control?

ANS:

(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 pur- pose 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 en- tered into such an agreement
shall not be required to confirm the exis- tence of the agreement to another
person unless requested to do so by the grantor. (Sec. 13)

Q: What are the means of perfection of a security interest in tangible

assets?

ANS: S security interest in tangible assets may be perfected by either:

(a) Registration of a notice with the Registry: provided, that a security that is
not registered remains valid between the parties; or

(b) Possession, whether actual or constructive, of the tangible asset either by

the secured creditor or a depositary acting for the secured creditor. Provided, that
the debtor or the grantor cannot possess the collateral on behalf of the secured
creditor for purposes of perfecting and maintaining the security interest over such
collateral.

If a security interest in a tangible asset is effective against third parties, a security

interest in a mass to which the security interest extends is effective against third
parties without any further act (Sec 4.02, IRR).

Q: What are the means of perfection of a security interest in intangible

assets?

ANS: A security interest in intangible assets may be perfected by either:

(a) Registration of a notice with the Registry. Provided, that a security that is
not registered remains valid between the parties; or

(b) Conclusion of a control agreement. 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 (Sec 4.03, IRR).

Q: What are the means of perfection of a security interest in Intermediated

Securities or Deposit Accounts?

ANS: A security interest in intermediated securities or deposit accounts may be

perfected by:

(a) Registration of a notice as with the Registry: Provided, that a security that
is not registered remains valid between the parties;
(b) Creation of a security interest in favor of the deposit-taking institution or the
intermediary

(c) Conclusion of a control agreement.

For purposes of determining the time of perfection of the security interest, the
security agreement or control agreement shall be executed under oath, and shall
include the date and time of its execution.

Nothing in these Rules shall require a deposit-taking institution or an intermediary

under sub-section (b) 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 (Sec 4.04,
IRR).

Q: What are the means of perfection of a security interest in Electronic

Securities?

ANS: A security interest in electronic non-intermediated securities may be

perfected by:

(a) Registration of a notice with the Registry: Provided, that a security that is
not registered remains valid between the parties;

(b) The execution of a control agreement between the grantor and secured
creditor; or

(c) Control, through notation of a 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 (Sec 4.05, IRR).

Q: What are the means of perfection of a security interest in Intermediated

Electronic Securities?

ANS: A security interest in investment property that is electronic (i.e., a scripless

or uncertificated) security held by an intermediary may be perfected by:

(a) Registration of a notice as de ned under these Rules with the Registry:
Provided, that a security that is not registered remains valid between the parties;

(b) The execution of a control agreement between the intermediary, the

grantor and secured creditor.

For purposes of determining the time of perfection of the security interest, the
control agreement shall be executed under oath, and shall include the date and
time, specifying the hour and minute of its execution (Sec 4.06, IRR).
Q: What are the required form and contents in a control agreement?

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

1. Be executed in writing by the issuer or the intermediary, the grantor

and the secured creditor;

2. 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;

(b) With respect to rights to deposit account, a control agreement shall:

1. Be executed in writing among the deposit-taking institution, the
grantor and the secured creditor;

2. 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;

(c) With respect to commodity contracts, a control agreement shall:

1. Be executed in writing among the grantor, secured creditor, and

intermediary;

2. 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 (Sec. 4.07, IRR).

Q: What is the effect when a change in the means of perfection occur?

ANS: 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 (Sec. 4.08, IRR).

Q: What are the rules regarding the perfection of proceeds?

ANS:

(i) Before default, upon disposition of the 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.
(ii) Before default, 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 (Sec 4.09 (b), IRR).

Q: What is the priority order regarding livestock?

Ans:

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. (Sec. 24)

Q: What are the rules regarding fixtures, accessions, and commingled

goods?

ANS:

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. (Sec.
4.10, IRR)

Case: Makati Leasing & Finance Corp v. Wearever Textile Mills, Inc.

In order to obtain financial accommodations from petitioner Makati Leasing and

Finance Corporation, the private respondent Wearever Textile Mills, Inc.,
discounted and assigned several receivables with the former under a Receivable
Purchase Agreement. To secure the collection of the receivables assigned,
private respondent executed a Chattel Mortgage over certain raw materials
inventory as well as machinery described as an Artos Aero Dryer Stentering
Range.

Upon default, petitioner filed a petition for extrajudicial foreclosure of the

properties mortgage to it. Acting on petitioner’s application for replevin, the lower
court issued a writ of seizure. Then after, the sheriff enforcing the seizure order
repaired to the premises of private respondent and removed the main drive motor
of the subject machinery.

The Court of Appeals, in certiorari and prohibition proceedings ordered the return
of the seized drive motor, after ruling that the machinery in suit cannot be the
subject of replevin, much less of a chattel mortgage, because it is a real property
pursuant to Article 415 of the New Civil Code, the same being attached to the
ground by means of bolts and the only way to remove it from respondent’s plant
would be to drill out or destroy the concrete floor, the reason why all that the
sheriff could do to enforce the writ was to take the main drive motor of said
machinery.

Q: Whether the seized driver motor CANNOT be a subject of chattel

mortgage.

ANS: No. The seized drive motor CAN be a subject of chattel mortgage.

Examining the records of the instance case, the Supreme Court found no logical
justification to exclude and rule out, as the appellate court did, the present case
from the application of the pronouncement in the TUMALAD v. VICENCIO CASE
(41 SCRA 143) where a similar, if not identical issue was raised. If a house of
strong materials, like what was involved in the Tumalad case may be considered
as personal property for purposes of executing a chattel mortgage thereon as
long as the parties to the contract so agree and no innocent third party will be
prejudiced thereby, there is absolutely no reason why a machinery, which is
movable in its nature and becomes immobilized only by destination or purpose,
may not be likewise treated as such. This is really because one who has so
agreed is estopped from denying the existence of the chattel mortgage.

In rejecting petitioner’s assertion on the applicability of the Tumalad doctrine, the

Court of Appeals lays stress on the fact that the house involved therein was built
on a land that did not belong to the owner of such house. But the law makes no
distinction with respect to the ownership of the land on which the house is built
and we should not lay down distinctions not contemplated by law.

Private respondent contends that estoppel cannot apply against it because it had
never represented nor agreed that the machinery in suit be considered as
personal property but was merely required and dictated on by herein petitioner to
sign a printed form of chattel mortgage which was in a blank form at the time of
signing. This contention lacks persuasiveness. As aptly pointed out by petitioner
and not denied by the respondent, the status of the subject machinery as
movable or immovable was never placed in issue before the lower court and the
Court of Appeals except in a supplemental memorandum in support of the
petition filed in the appellate court.

Case: Manila Banking Corp v Anastacio Teodoro, Jr. and Grace Teodoro
Sps Teodoro along with Teodoro Jr executed a Promissory Note (PN) in favor of
Manila Banking Corporation (MBC), payable within 120 days with 12% interest
per annum, however they failed to pay such PN and left a balance of 15k. They
subsequently executed two other PNs payable within 120 days with 12% interest
per annum. They were able to make partial payment, but still left 8.9k balance. It
appears that Teodoro Jr executed a Deed of Assignment of receivables in favor
of MBC from Emergency Employment Administration that amounts to 44k. The
deed provided it was for consideration of certain credits, loans, overdrafts and
other credit accommodations extended to the spouses and Teodoro Sr as
security for the payment of said sum and interest thereon; and that they release
and quitclaim all its rights, title, and interest in the receivables. It was also
admitted by the parties that MBC extended loans to the spouses and Teodoro Jr
because of certain contracts entered into by the latter with EEA for fabrication of
fishing boats and that the Philippine Fisheries Commission succeeded EEA after
its abolition. That non-payment of the PNs was fun to failure of the commission to
pay spouses. That the bank took steps to collect from the Commission but no
collection was effected.

Q: Whether the assignment of receivables has the effect of payment of all

the loans contracted by the spouses.

ANS: No, the assignment of receivables does not equate to the payment of
all the loans. The assignment of receivables did not transfer the ownership of
the receivables to MBC and release the spouses from their loans. Consideration
was for certain credits, loans, overdrafts and credit accommodations worth 10k
extended by MBC to spouses and as security for the payment of said sum and
interest thereon.

Case: Yau Chu v. CA

Victoria Yau Chu, had been purchasing cement on credit from CAMS Trading
Enterprises, Inc. (hereafter "CAMS Trading" for brevity). To guaranty payment
for her cement withdrawals, she executed in favor of Cams Trading deeds of
assignment of her time deposits in the total sum of P320,000 in the Family
Savings Bank (hereafter the Bank). Cams Trading notified the bank that Mrs.
Chu had an unpaid account with it in the sum of P314,639.75. It asked that it be
allowed to encash the time deposit certificates which had been assigned to it by
Mrs. Chu. It submitted to the Bank a letter dated July 18, 1980 of Mrs. Chu
admitting that her outstanding account with Cams Trading was P404,500. After
verbally advising Mrs. Chu of the assignee's request to encash her time deposit
certificates and obtaining her verbal conformity thereto, the Bank agreed to
encash the certificates. It delivered to Cams Trading the sum of P283,737.75
only, as one time deposit certificate (No. 0048120954) lacked the proper
signatures. Upon being informed of the encashment, Mrs. Chu demanded from
the Bank and Cams Trading that her time deposit be restored. When neither
complied, she filed a complaint to recover the sum of P283,737.75 from them.
The RTC and CA dismissed the complaint for lack of merit.

Q: Whether the Court of Appeals erred in not annulling the encashment of

the time deposit certificates as pactum commisorium?

ANS: No. The Court of Appeals found that the deeds of assignment were
contracts of pledge, but, as the collateral was also money or an exchange of
"peso for peso," the provision in Article 2112 of the Civil Code for the sale of the
thing pledged at public auction to convert it into money to satisfy the pledgor's
obligation, did not have to be followed. All that had to be done to convert the
pledgor's time deposit certificates into cash was to present them to the bank for
encashment after due notice to the debtor.

The encashment of the deposit certificates was not a pacto commissorio

which is prohibited under Art. 2088 of the Civil Code. A pacto commissorio
is a provision for the automatic appropriation of the pledged or mortgaged
property by the creditor in payment of the loan upon its maturity. The prohibition
against a pacto commissorio is intended to protect the obligor, pledgor, or
mortgagor against being overreached by his creditor who holds a pledge or
mortgage over property whose value is much more than the debt. Where, as in
this case, the security for the debt is also money deposited in a bank, the amount
of which is even less than the debt, it was not illegal for the creditor to encash the
time deposit certificates to pay the debtors' overdue obligation, with the latter's
consent. (Yau Chu v. CA, GR No. L-78519, September 26, 1989)

Case: PCI Leasing & Finance, Inc. v. Trojan Metal Industries Inc.

Trojan Metal Industries, Inc. (TMI) came to PCI Leasing and Finance, Inc.
(PCILF) to seek a loan. Instead of extending a loan, PCILF offered to buy various
equipment TMI owned. Hard-pressed for money, TMI agreed. PCILF and TMI
immediately executed deeds of sale evidencing TMI’s sale to PCILF of the
various equipment in consideration of ₱ 2,865,070.00.

PCILF and TMI then entered into a lease agreement, whereby TMI from PCILF
the various equipment it previously owned. Pursuant to the lease agreement, TMI
issued post-dated checks representing 24 monthly installments.

The lease agreement required TMI to give PCILF a guaranty deposit of

₱1,030,350.00, which would serve as security for the timely performance of
TMI’s obligations under the lease agreement, to be automatically forfeited should
TMI return the leased equipment before the expiration of the lease agreement.
Further, spouses Walfrido and Elizabeth Dizon, as TMI’s President and Vice-
President, respectively executed in favor of PCILF a Continuing Guaranty of
Lease Obligations, agreeing to immediately pay whatever obligations would be
due PCILF in case TMI failed to meet its obligations under the lease agreement.

To obtain additional loan from another financing company, TMI used the leased
equipment as temporary collateral. PCILF considered the second mortgage a
violation of the lease agreement. At this time, TMI’s partial payments had
reached ₱1,717,091.00.11. On 8 December 1998, PCILF sent TMI a demand
letter for the payment of the latter’s outstanding obligation. PCILF’s demand
remained unheeded. On 7 May 1999, PCILF filed in the RTC a complaint against
TMI for recovery of sum of money and personal property with prayer for the
issuance of a writ of replevin. The RTC issued the writ of replevin PCILF prayed
for, directing the sheriff to take custody of the leased equipment. Not long after,
PCILF sold the leased equipment to a third party and collected the proceeds
amounting to ₱1,025,000.00.The RTC ruled in favor of PCILF that it is entitled to
the possession of TMI’s equipment. The CA ruled that the sale with lease
agreement was in fact a loan secured by chattel mortgage.

Q: Whether the lease agreement entered into was a financial lease or a loan
secured by chattel mortgage?

ANS: The Court held in Cebu Contractors Consortium Co. v. Court of Appeals
that the transaction between CCCC and MLFC was not one of financial leasing
as defined by law, but simply a loan secured by a chattel mortgage over CCCC’s
equipment. The Court went on to explain that where the client already owned the
equipment but needed additional working capital and the finance company
purchased such equipment with the intention of leasing it back to him, the lease
agreement was simulated to disguise the true transaction that was a loan with
security. In that instance, continued the Court, the intention of the parties was not
to enable the client to acquire and use the equipment, but to extend to him a
loan.

In the present case, since the transaction between PCILF and TMI involved
equipment already owned by TMI, it cannot be considered as one of financial
leasing, as defined by law, but simply a loan secured by the various equipment
owned by TMI.

Hence, had the true transaction between the parties been expressed in a proper
instrument, it would have been a simple loan secured by a chattel mortgage,
instead of a simulated financial leasing. Thus, upon TMI’s default, PCILF was
entitled to seize the mortgaged equipment, not as owner but as creditor-
mortgagee for the purpose of foreclosing the chattel mortgage. PCILF’s sale to a
third party of the mortgaged equipment and collection of the proceeds of the sale
can be deemed in the exercise of its right to foreclose the chattel mortgage as
creditor-mortgagee.
 The Court of Appeals correctly ruled that the transaction between the parties was
simply a loan secured by a chattel mortgage. (PCI Leasing & Finance, Inc. v.
Trojan Metal Industries Inc., GR. No. 176381, Dec. 15, 2010)

D. The Registry

Q: What is the Registry?

ANS: Under Sec 3(h) of the PPSA, the Registry is defined as the centralized and
nationalize electronic registry established in the Land Registration Authority
(LRA) where notice of a security interest and a lien in personal property may be
registered.

Q: What is the purpose of the Registry?

ANS: Under Sec 26(b) of the PPSA, it states that the Registry shall provide
electronic means for registration and searching of notices. Moreover, under Sec
27 of the same law, it states that the Registry provides for the public any
information contained in a registered notice.

Q: What are the duties of the registry?

ANS: Under Sec 35 of the PPSA, the duties of the registry are as follow:
a. For each registered notice, the registry shall:
i. Assign a unique registration number;
ii. Create a record that bears the number assigned to the initial notice and
the date and time of the registration; and
iii. 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 of refusing to register a notice, the Registry does not determine the
sufficiency, correctness, authenticity, or validity or any information contained in
the notice.

Q: What is a notice?
 ANS: Sec 3(e) of the PPSA states that a notice is 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.

Q: When is a notice of security interest effective?

ANS: 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. The copy of the
electronic record of the notice provided to the person who submitted it indicating
the date and time of effectivity shall be conclusive. (IRR of R.A. 11057, Sec.
5.07).

Q: What are the instances when a notice is considered ineffective?

ANS: The following are the instances when a notice is ineffective:

1. When it is seriously misleading. Seriously misleading notices include notices
which do not provide the identification number of the grantor (IRR of RA11057,
Sec 5.07);
2. 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 the grantor (IRR of
RA11057, Sec 5.07).

Q: When is a notice considered sufficient?

ANS: An initial notice of security interest shall not be rejected if:

1. It identifies the grantor by an identification number , as further prescribed in the
regulations;
2. It identifies the secured creditor or an agent of the secured creditor by name;
3. It provides an address for the grantor and secured creditor or its agent;
4. It describes the collateral;
5. It states the duration of effectivity of the security interest; and
6. The prescribed fee has been tendered, or an arrangement has been made for
payment of fees by other means.
● NOTE:
○ If the grantor is a natural person, that grantor shall be identified through
the name appearing in any of the grantor’s government issued
identification, as may be prescribed by the LRA.
○ If the grantor is a juridical person, that grantor shall be identified through
its name in the most recently registered articles of incorporation, or in an
agreement constituting the legal person.

Q: What are the effects of registration of notice?

ANS: The registration of a notice shall neither expand nor diminish the security
interest beyond the terms of the security agreement, except as otherwise
provided by the PPSA or the IRR of the PPSA (IRR of RA 11057, Sec 5.07)

Q: What is the remedy of a person who sustains loss or damage, or is

deprived of his priority right as a consequence of an erroneous or false
description in the notice?

ANS: Any person who, without negligence on his part, sustains loss or damage,
or is deprived of his priority right in consequence of an erroneous or false
description in the notice made by the filing party may bring an action in any court
of competent jurisdiction for the recovery of damages from the responsible party.
The same court may also order the correction of the error or false description in
the notice (IRR of RA11057, Sec 5.10)

Q: How can the effectiveness of a notice be terminated?

ANS: The following are the ways to terminate a notice:
1. The effectiveness of a notice may be terminated by registering a
termination notice that identifies the initial notice by its registration number
and each secured creditor who authorizes the registration of the
termination notice. The notice is terminated from the date and time when
the information in the notice is no longer accessible to searchers of the
public registry record. A termination notices terminates effectiveness of
the notice as to each authorizing secured creditor (IRR of RA11057, Sec
5.11)
2. The court may, on application by the grantor, issue an order that the
notice be terminated 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 of the court may appeal the order (IRR of
RA11057, Sec 5.12)

Q: When can a grantor demand amendment or termination of notice?

ANS: A grantor may give a written demand to the secured creditor for the
amendment or termination of the effectiveness of the notice in the following
cases:
1. All the obligations under the security agreement to which the registration
relates have been performed and there is no commitment to make future
advances;
2. The secured creditor has agreed to release part of the collateral described
in the notice;
3. The collateral described in the notice includes an item or kind of property
that is not a collateral under a security agreement between the secured
creditor and the grantor;
4. No security agreement exists between the parties; or
5. The security interest is extinguished in accordance with the IRR or PPSA
(IRR of RA11057, Sec 5.13)
 Q: What is the nature of the electronic records of the Registry?

ANS: The electronic records of the Registry shall be the official records. All
notices registered and the information contained in such notices shall be
considered, as part of the public record and may be searched and examined by
any person (IRR of RA11057, Sec 5.18)

E. Enforcement of Security Interest - Margate

Q: What are the ways security interest may be enforced?

Ans: Under the PPSA, a security interest is enforced by recovery, disposition, or

retention. In certain cases, the secured creditor must first seek repossession of
the collateral.

Q: How is a security interest enforced?

Ans: The secured creditor may enforce its security interest whether through a
judicial process or through an extra-judicial process, including the sale of the
secured assets through either a public or private disposition. Any judicial
enforcement of security interests, including the disposition of collateral shall be
governed by rules promulgated by the Supreme Court. (Sec. 7.01, IRR)

Q: When is Expedited Repossession of the Collateral (Without Judicial

Process) allowed?

Ans: 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 peace. Breach of 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.

If the collateral is a fixture, the secured creditor, if it has priority over all owners
and mortgages, 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. (Sec. 7.02, IRR)

Q: When is Expedited Repossession of the Collateral (With Judicial

Process) allowed?

ANS: If upon default, the secured creditor cannot take possession of collateral
without breach of peace, the secured creditor may proceed as follows:

(a) 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;

(b) The secured creditor shall provide a debtor, grantor, and if the collateral is a
fixture, any real estate mortgage, a copy of the application, including all
supporting documents and evidence for the order granting the secured creditor
possession of the collateral; and

(c) 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. (Sec. 7.03, IRR)

Q: What is the right of redemption?

ANS:

(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.

Q: What are the rights of higher-ranking secured creditor to take over

Enforcement?

ANS:

(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 enti- tled to take
over the enforcement process.
(b) The right referred to in subsection (a) of this section may be in- voked 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 the PPSA and these Rules. (Sec. 7.04, IRR)

Q: How is recovery made in special cases?

ANS: Upon default, the secured creditor may without judicial process:

(a) Instruct the account debtor of an accounts receivable 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 where the security interest 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 a control

agreement, instruct the deposit-taking institution to pay the balance of the deposit
account to the secured creditor’s account by providing:

(i) A copy of the security agreement that creates or provides for a

security interest; and

(ii) 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. (Sec. 7.05, IRR)

Q: What do you mean by “Right to dispose of collateral”

ANS:

(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. (sec. 49)

Q: How is commercial reasonableness established?

ANS:

(a) In disposing of collateral, the secured creditor shall act in a com- mercially
reasonable manner.

(b) A disposition is commercially reasonable if the secured creditor disposes of

the collateral in conformity with commercial practices among dealers in that type
of property.

(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. (Sec. 50)

Q: To whom and how should a notification of disposition be made?

ANS:

(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 secured creditor shall notify the persons entitled to notification via
registered mail, private courier, electronically, or through any means where
receipt of the notice can be established by a disinterested third party.

(e) 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. (Sec. 7.08, IRR)

Q: What are the guidelines on private or public disposition?

ANS: The following are the guidelines:

a) The secured creditor may dispose of the collateral through a sale open to
participation by the general public.

b) In case of extra-judicial disposition, the secured creditor may, subject to the

guidelines below, select the method, manner, time, place and other aspects of
the sale or other disposition, lease or license, including whether to sell or
otherwise dispose of, lease or license encumbered assets individually, in groups
or altogether: Provided, that the disposition is undertaken in good faith and
satisfies the commercial reasonableness requirement. Judicial dispositions shall
be governed by rules promulgated by the Supreme Court.

c) The secured creditor shall, no later than ten (10) days before the extra-
judicial disposition of the collateral, cause the posting with the Registry of a
notice that sufficiently describes the collateral to be sold and specifies the
method, manner, time, place and other details of the sale. The Registry shall
ensure that all such notices posted are publicly accessible and searchable. In
adherence with the commercial reasonableness requirement, the secured
creditor may also cause the advertisement of the disposition through any other
means or medium as the secured creditor may deem as suitable, to maximize
awareness of the sale among dealers in the type of property to which the
collateral belongs.

d) All collateral shall be disposed through auction and the following indicators
may be taken into account in determining whether the sale satisfies the good
faith and commercial reasonableness requirement:

i that the person or entity who presides over the auction is an

experienced dealer in the type of property sold;
ii. that the participating bidders do not engage in collusive practices
that prevent free and open competition;
iii. that the records of the proceedings, including the identities and
respective submissions of the bidders, are documented in writing and
subsequently maintained; and
iv. that the highest bidder is duly awarded the collateral.
 The winning bidder must fully pay the bid price at the conclusion of the
auction. Otherwise, the collateral may be awarded to the next highest
bidder.

e) Any government agency that regularly undertakes public auctions in the

course of its regular activities may be engaged by any secured creditor to preside
over public auctions over securitized movable collateral, through rules and
regulations that must be submitted to the Department of Finance for prior
approval. Private entities such as auction houses, industry groups of secured
creditors, or organizations of recognized dealers of specific movables may
likewise adopt rules and regulations for the conduct of public auctions, subject to
the approval of the Department of Finance. Any public auction of movable
collateral conducted by any government agency or private entity under rules duly
approved by the Department of Finance shall be conclusively presumed to be
commercially reasonable.

f) 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.

g) If a method of disposition of collateral has been approved in any legal

proceeding, whether judicial or administrative, it is conclusively commercially
reasonable (Sec. 7.09, IRR).

Q: What are the rules regarding the proceeds of disposition?

ANS:

(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

lien 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.
(c) 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.

(d) 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. (Sec. 7.11, IRR)

Q: What are the rights of buyers and other third parties?

ANS:
The following are the rights of the buyers and other third parties:

(a) If a secured creditor sells the collateral under Rule VII of the IRR of PPSA,
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 Rule VII of the
IRR of PPSA, 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 Rule VII of the IRR of PPSA, 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
Rule VII of the IRR of PPSA that materially prejudiced the rights of the grantor
or another person (Sec. 7.12, IRR)

Q: What are the rules regarding the retention of collateral by a secured

creditor?

ANS:

(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.

Q: What are the remedies for a secured party's failure to comply with the
rules?

ANS: The following are the remedies:

(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 (Sec.
7.14, IRR).

Case: Citibank vs Sabeniano

Respondent, Modesta Sabeniano, is a client of Citibank and FNCB Finance.

Respondent has substantial deposits and money market placements with the
petitioners as well as money market placements with the Ayala Investment and
Development Corporation, the proceeds of which were supposedly deposited
automatically and directly to respondent's accounts with petitioner Citibank.
Petitioners refused to return her deposits and the proceeds of her money market
placements despite her repeated demands. Petitioners replied that respondent
obtained loans, executed through Promissory Notes and secured by a pledge on
her dollar accounts, and a deed of assignment against her MMPS with FNCB
Finance. When respondent failed to pay her loans despite repeated demands by
petitioner Citibank, the latter exercised its right to off-set or compensate
respondent's outstanding loans with her deposits and money market placements,
pursuant to the Declaration of Pledge and the Deeds of Assignment executed by
respondent in its favor. Petitioner Citibank supposedly informed respondent of
the foregoing compensation through letters.

10 years later, the RTC declared the offsetting done as illegal and ordered the
return of the amount with legal interest, while Sabeniano was ordered to pay her
loans to Citibank. Both parties appealed to the CA which affirmed the RTC’s
decision, but further ruled entirely in favor of Sabeniano – holding that Citibank
failed to establish her indebtedness and that all the executed deeds should be
returned to her account. Thus it was raised to the SC.

Q: Is there a valid off setting/compensation of loan as to the deposits?

ANS:
General Requirement of Compensation:
Art. 1278. Compensation shall take place when two persons, in their own right,
are creditors and debtors of each other.
Art. 1279. In order that compensation may be proper, it is necessary;
(1) That each one of the obligors be bound principally, and that he be at
the same time a principal creditor of the other;
(2) That both debts consist in a sum of money, or if the things due are
consumable, they be of the same kind, and also of the same quality if the
latter has been stated;
(3) That the two debts be due;
(4) That they be liquidated and demandable;
(5) That over neither of them there be any retention or controversy,
commenced by third persons and communicated in due time to the debtor.

1. Yes. As already found by this Court, petitioner Citibank was the creditor of
respondent for her outstanding loans. At the same time, respondent was the
creditor of petitioner Citibank, as far as her deposit account was concerned, since
bank deposits, whether fixed, savings, or current, should be considered as simple
loan or mutuum by the depositor to the banking institution. Both debts consist in
sums of money. By June 1979, all of respondent's PNs in the second set had
matured and became demandable, while respondent's savings account was
demandable anytime. Neither was there any retention or controversy over the
PNs and the deposit account commenced by a third person and communicated in
due time to the debtor concerned. Compensation takes place by operation of law.

Q: Is there a valid off setting/compensation of loan as to money market

placements?
ANS:

2. Yes, but technically speaking Citibank did not effect a legal compensation or
off-set under Article 1278 of the Civil Code, but rather, it partly extinguished
respondent's obligations through the application of the security given by the
respondent for her loans.

Respondent's money market placements were with petitioner FNCB Finance, and
after several roll-overs, they were ultimately covered by PNs No. 20138 and
20139, which, by 3 September 1979, the date the check for the proceeds of the
said PNs were issued, amounted to P1,022,916.66, inclusive of the principal
amounts and interests. As to these money market placements, respondent
was the creditor and petitioner FNCB Finance the debtor (thereby implying
that money market placement is a simple loan or mutuum); while, as to the
outstanding loans, petitioner Citibank was the creditor and respondent the
debtor. Consequently, legal compensation, under Article 1278 of the Civil Code,
would not apply since the first requirement for a valid compensation, that each
one of the obligors be bound principally, and that he be at the same time a
principal creditor of the other, was not met.

What petitioner Citibank actually did was to exercise its rights to the proceeds of
respondent's money market placements with petitioner FNCB Finance by virtue
of the Deeds of Assignment executed by respondent in its favor. Petitioner
Citibank was only acting upon the authority granted to it under the foregoing
Deeds when it finally used the proceeds of PNs No. 20138 and 20139, paid by
petitioner FNCB Finance, to partly pay for respondent's outstanding loans. Strictly
speaking, it did not effect a legal compensation or off-set under Article 1278 of
the Civil Code, but rather, it partly extinguished respondent's obligations through
the application of the security given by the respondent for her loans. Although the
pertinent documents were entitled Deeds of Assignment, they were, in reality,
more of a pledge by respondent to petitioner Citibank of her credit due from
petitioner FNCB Finance by virtue of her money market placements with the
latter. According to Article 2118 of the Civil Code –
ART. 2118. If a credit has been pledged becomes due before it is
redeemed, the pledgee may collect and receive the amount due. He
shall apply the same to the payment of his claim, and deliver the
surplus, should there be any, to the pledgor.

Case: Paray vs Rodriguez

Respondents were the owners of shares of stock in a corporation. They secured

by way of pledge of some of their shares of stock to petitioners ”Parays”.
Respondents failed to pay their loans, thus the Paray’s attempted to foreclose the
pledges. Respondents sought the declaration of nullity of the pledge agreements,
but it was dismissed by the RTC and gave due course to the foreclosure and sale
at public auction. Before the date of auction, respondents consigned to the RTC.
Notwithstanding the consignations, the public auction took place, with petitioner
Espeleta successfully bidding all the pledged shares. The CA reversed the
 decision of the RTC, ruling that the consignation extinguished the loan and that
the attempts at payment by respondent were characterized as made in the
exercise of redemption. Petitioners now argue before the SC that the amounts
consigned could not extinguish the principal loan obligations of respondents
since they were not sufficient to cover the interests due on the debt. They
likewise argue that the essential procedural requisites for the auction sale had
been satisfied.

Q: Was there a valid redemption?

ANS: No. The right of redemption involves payments made by debtors after the
foreclosure of their properties, and not those made or attempted to be made, as
in this case, before the foreclosure sale. The subject sale of pledged shares was
an extrajudicial sale, specifically a notarial sale, as distinguished from a judicial
sale as typified by an execution sale. Under the Civil Code, the foreclosure of a
pledge occurs extrajudicially, without intervention by the courts. All the creditor
needs to do, if the credit has not been satisfied in due time, is to proceed before
a Notary Public to the sale of the thing pledged.

F. Transitional Provisions

Q: When is the date of effectivity of the transitional period?

ANS: The transitional period began on February 9, 2019, which is the date of
effectivity of the PPSA pursuant to Section 67 thereof (IRR of R.A. No. 11057,
Sec 8.06). All security interests created during the Transitional Period are
governed by the PPSA (IRR of R.A. No. 11057, Sec 8.06).
Note: 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

G. Miscellaneous Provisions (Secs. 61, 63, and 66)

Q: What is the composition of the Congressional Oversight Committee?

ANS: 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 Representatives Committee on Banks
and Financial Intermediaries, and representatives of other relevant congressional
committees.

Q: What is the function of the Congressional Oversight Committee?

ANS: A Congressional Oversight Committee shall be created that will conduct a
periodic review every 5 years commencing from the effectivity of this Act. (Sec.
60)

Q: Rules on Enforcement Procedure

ANS: 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.

Q: What are the laws repealed by the PPSA?

ANS: Under Section 66 of the PPSA, 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. Arts. 2085-2123, 2127, 2140-2141, 2241, 2243 and 2246-2247 of
Republic Act No. 386, otherwise known as the “Civil Code of the
Philippines”;

NOTE:
Art. 2085 – 2092 (Provisions Common the Pledge and Mortgage)
Art. 2093 – 2123 (Pledge)
Art. 2127 - The mortgage extends to the natural accessions, to the
improvements, growing fruits, and the rents or income not yet
received when the obligation becomes due, and to the amount of
the indemnity granted or owing to the proprietor from the insurers of
the property mortgaged, or in virtue of expropriation for public use,
with the declarations, amplifications and limitations established by
law, whether the estate remains in the possession of the
mortgagor, or it passes into the hands of a third person.
Art. 2140 – 2141 – Chattel Mortgage
Art. 2241, 2243 – Classification of Credits
Art. 2246-2247 – Order of Preference of Credits

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”.