X.
PLEDGE AND MORTGAGE
A. Concepts Common to Pledge and Mortgage
1. Essential Requisites of the Contracts of Pledge and Mortgage - Art. 2085,
2086 and 2087
2. Creditor is prohibited to Appropriate Property Pledged or Mortgaged –
Art. 2088
3. The Concept of Pactum Commissiorium - Art. 2088
4. Indivisibility of a Pledge or Mortgage – Arts. 2089 and 2090
5. Pledge and Mortgage as Security for Obligations – Art. 2091
6. Promise to Create a Pledge or Mortgage as a Personal Action – Art. 2092
B. The Personal Property Security Act- Republic Act No. 11057 (“PPSA”)
1. Focus on R.A. 11057’s Title – Strengthening the Legal Framework of
secured transactions involving persona property
2. Sec. 2 - Declaration of Policy: Promotion of Economic Activity / Access to
Credit
3. Effectivity of the PPSA - Secs. 62, 67, 68, R.A. 11057
4. Effect of the PPSA on Civil Code/ special laws on: a) Pledge / Chattel
Mortgage : Arts. 2085-2092 & 2127, 2140-2141, CC b) Arts. 2241,
2243 & 2247, CC
5. Scope of the PPSA – Chap. 1, Sec. 4,
a. In relation to Arts. 416 & 417, Civil Code
b. Other personal property in PPSA: Secs. 3(b)(3), 3(c)(3), 3(j), Sec.
7, Sec. 8(b), Sec. 12, Sec. 14 (a), Sec.18 (e & f), Sec. 23 (b) and
(c), Secs. 24&25
6. Nature of a Security Interest under the PPSA:
a. Continuity – Chap. 2, Sec. 9
b. Collateral: description – Chap. 2, Sec, 7
c. Proceeds – Chap. 2, Sec. F
d. Right to Proceeds ad commingled funds & Money- Chap. 2, Sec. 8
e. Property mortgaged subject to fulfillment of obligation- Art. 2126, CC
7. The Security Interest and Parties Involved:
a. Definition of Security Interest – Chap.1, Sec. 3 (j)
b. The Grantor – Chap. 1, Sec. 3 (c)
c. The Secured Creditor - Chap. 1, Sec. 3 (i)
8. How is a Security Interest created? - Chap. 2, Sec. 5
9. Form of Security Agreement? – Chap. 2, Sec. 6 ,PPSA, Art.
1307/1157,CC, Chap.1, Sec. 3 (k),
10. Collateral described – Chap. 2, Sec. 7, PPSA
11. Perfection of Security Interest – Chap. 3, Sec. 11, PPSA
12. Means of Perfection & Change in Means of Perfection-
Chap.3,Secs.12/15, PPSA
a. In relation to Art. 2140, 2125, CC
13. Perfection by:
a. Control – Chap. 3, Sec. 13, PPSA, Chap.1, Sec, 3b(1-3)
b. Possession – R.A. 11057, Sec. 12, Arts. 523, 2093, CC
c. Registration – Chap. 3, Sec. 12, PPSA
14. Assignment of Security Interest – Chap. 3, Sec. 16, PPSA
15. Disposition of Collateral and Perfection of Interest- Chap. 2 Sec. 9,
Chap. 3, Sec. 14, Chap. 4, Sec. 21, PPSA
16. Priority of Security Interest and the Importance of Registration in the
Electronic Registry of the Land Registration Authority (LRA) – Chap. 4, Sec.
17, Chap. 5, Secs. 26, 27, 28, 29, 30 -43, PPSA
17. Priority of Security Interest:
a. By Perfection of Control- Chap. 4, Sec.18, PPSA
b. Instruments and Negotiable documents – Chap. 4, Sec. 19, PPSA
c. By Operation of Law- Chap. 4, Secs. 20 – 22 in relation to Arts.
2241, 2243, 2247-47, Civil Code
d. Purchase Money Security Interest – Chap. 4, Secs. 23, 24 and 25,
PPSA
18. Enforcement of Security:
a. Repossession Without the need of a judicial process:
1)Expedited Repossession of Collateral – Chap. 6,Sec. 47, (a) and
(b)
2)Recovery in special cases – Chap. 6, Sec. 48
b. Repossession Through a judicial process – Chap. 6, Sec. 47 (c), Sec.
63
c. Recovery without judicial process – Chap 6, Sec. 48
d. Disposition of Collateral – Chap. 6, Secs. 49-52
e. Retention of Collateral by Secured Creditor – Chap. 6, Sec. 54
f. Rights related to Enforcement:
1)Right of Redemption- Chap. 6, Sec. 45
2)Right of Higher Ranking Secured Creditor – Chap. 6, Sec. 46
19. Transitional Provisions:
a. Interpretation- Chap. 7, Sec. 55-59
20. Cases:
a. Nature of a Security Agreement – Mla. Banking vs. Teodoro , G.R.
No. 53955, January 13, 1989, 169 SCRA 95, Yao Chu vs. Court of
Appeals, G.R. No. L-78519, September 26, 1989, 177 SCRA 793*
b. Registration and Priority of Rights- Gatioan vs. Gaffud, G.R. No. L-
21953, March 28, 1969, 27 SCRA 706*
c. Recovery as an enforcement procedure- Citibank N.A. vs. Investors
Finance Corporation vs. Sabeniano, G.R. No. 156132, Oct. 12,
2006, 504 SCRA 378*
d. Redemption – Medida et.al vs. Court of Appeals, et.al, G.R. No.
98334, May 8, 1992, 208 SCRA 887, Paray vs. Espeleta vs.
Rodriguez, G.R. No.132287, 479 SCRA 571*
Note: Cases taken from Prof. Stephanie Somera’s Notes and Cases on the
Personal Security Act.
