RA No 11057

Personal
Property
Security Act
Commercial Law: Credit Transactions
CHAPTERS
DEFINITIONS AND SCOPE
01- CREATION OF SECURITY
02 INTEREST
PERFECTION
03-04 PRIORITY
REGISTRATION-
05-06 ENFORCEMENT

07-08 OTHER PROVISIONS

 01-02
DEFINITIONS AND SCOPE
CREATION OF SECURITY
INTEREST
DEFINITIONS
Commodity contract –
a commodity futures contract,
an option on a commodity 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.
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.

Consumer goods – goods that are used or acquired for

use primarily for personal, family, or household purposes.

Control agreement – an agreement in writing between

the grantor and the secured creditor which perfects the
security interests over intangible asset.
 CONTROL AGREEMENT

Intermediated
As to Deposit account Commodity contracts
securities

issuer or the intermediary, the deposit-taking the grantor, secured

PARTIES the grantor and the institution, the grantor, and creditor and intermediary.
secured creditor. the secured creditor. according to

the deposit-taking the commodity

the issuer or the institution agrees to follow intermediary will apply any
intermediary agrees to instructions from the value distributed on
follow instructions from secured creditor with account of the commodity
FORM/CONTENTS the secured creditor with respect to the payment of contract as directed by the
respect to the security, funds credited to the secured creditor without
without further consent deposit account without further consent by the
from the grantor. further consent from the commodity customer or
grantor. grantor.
Deposit-taking institution – a bank under RA 8791 or
the General Banking Law, a nonstock savings and loan
association as defined under RA 8376 or the Revised
Nonstock Savings and Loan Association Act of 1997, or a
cooperative as defined under RA 9520 or the Philippine
Cooperative Code.

Future property – 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.
Grantor –
i.) the person who grants a security interest in collateral to
secure its own obligation or that of another person;
ii.) a buyer or other transferee of a collateral that acquires
its right subject to a security interest;
iii.) a transferor in an outright transfer of an accounts
receivable; or
iv.) a lessee of goods.
Intermediary – a person, including but not limited to, a
bank, trust entity, depositary, broker, or central securities
depositary, that in the ordinary course of business or
regular activity maintains an account for such securities or
assets, for another person, and is acting in that capacity.

Intermediated securities – securities credited to a

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

Non-intermediated securities – securities other than

intermediated securities.
Secured creditor – a person that has a security interest.

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 YEAR.
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.

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.
Notice – a statement of information that is registered in the
Registry relating to a security interest or lien. This includes,
initial notice, amendment notice, and termination notice.

Registry – the centralized and nationwide electronic

registry established in the Land Registration Authority
where notice of a security interest and a lien in personal
property may be registered.
SCOPE
GENERAL RULE: The PPSA shall apply
to all transactions of any form that
secure an obligation with movable
collateral.
EXCEPTIONS:
interests in:
1. Aircrafts
2. Ships
 PARTIES TO A CONTROL AGREEMENT
Issuer Intermediary
• originator person:
• maker including, but not limited to, a;
• obligor bank, trust entity, depositary,
• creator of the security. broker, or central securities
depositary,
DTI that in the ordinary course of
• bank business maintains an account
• non-stock savings for such securities or assets, for
• loan association another person, and is acting in
• cooperative that capacity.

NOTE: FOR PURPOSE OF REGISTRATION AND PRIORITY ONLY: a secured creditor includes a buyer of account
receivable and a lessor of goods under an operating lease for not less than one year.
 PARTIES IN A SECURITY AGREEMENT:
Grantor Secured creditor
- A person that has a security
- The person who grants a security
interest.
interest in collateral to secure its
own obligation or that of another
person;
- A buyer or other transferee of a
collateral that, acquires its right
subject to a security interest;
- A transferor in an outright transfer
of an accounts receivable; or
- A lessee of goods.

NOTE: FOR PURPOSE OF REGISTRATION AND PRIORITY ONLY: a secured creditor includes a buyer of account
receivable and a lessor of goods under an operating lease for not less than one year.
 ASSET-SPECIFIC RULES
FUTURE PROPERTY:
Q: What can a security agreement
a security interest in future
A: for the creation of provide?
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.) that a security interest in a tangible asset that is
transformed into a product extends to the product.
c.) that a security interest in a tangible asset extends to
replacement.
 RIGHTS TO
PROCEEDS AND COMMINGLED
FUNDS:
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:
• 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.
 RIGHTS TO
PROCEEDS AND COMMINGLED
b. Where proceeds in theFUNDS:
form of funds credited to a
deposit account or money are commingled with other
funds:
• The security interest in the commingled funds or
money shall be limited to the amount of the proceeds
immediately before they were commingled; and
 RIGHTS TO
PROCEEDS AND COMMINGLED
b. Where proceeds in theFUNDS:
form of funds credited to a
deposit account or money are commingled with other
funds:
• 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.
TANGIBLE ASSETS COMMINGLED IN A
MASS
a.Extends to the mass
b.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.
ACCOUNTS RECEIVABLES
a. Any stipulation limiting the grantor’s right to
create a security interest shall be void.
b. This section shall apply only to accounts
receivable arising from:
1. A contract for the supply or lease of goods or
services other than the financial services;
2. A construction contract or contract for the sale
or lease of real property; and
3. A contract for the sale, lease or license of
intellectual property.
 03-04
PERFECTION OF SECURITY
INTEREST
PRIORITY OF SECURITY INTEREST
PERFECTION OF SECURITY INTERESTS
a. A security interest shall be perfected when it has been
created and the secured creditor has taken one of the
following actions:
1. Registration of a notice with the Registry;
2. Possession of the collateral by the secured creditor; and
3. Control of investment property and deposit account.

b. On perfection, a security interest becomes effective

against third parties.
MEANS OF PERFECTION

TYPE OF ASSET REGISTRATION POSSESSION CONTROL

TANGIBLE √ √

INVESTMENT
PROPERTY AND √ √
DEPOSIT ACCOUNT
PRIORITY OF SECURITY INTERESTS
General rule: 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.
TANGIBLE ASSETS

a. Secured creditor’s possession of the certificate

shall have priority over a competing security
interest perfected by registration.
b. Possession of the instrument or the negotiable
document shall have priority over a security
interest perfected by registration.
INTANGIBLE ASSETS
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.
INTANGIBLE ASSETS
c. The order of priority among competing
security interests shall be determined on the
basis of the time of conclusion of the control
agreements.
d. Any rights to set-off shall have priority over a
security interest in the deposit account.
e. A security interest in electronic non-
intermediated securities 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.
INTANGIBLE ASSETS
f. 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.
g. A security interest in electronic securities held
with an intermediary and perfected through a
control agreement shall have priority.
INTANGIBLE ASSETS
h. The order of priority among competing
security interests in electronic securities NOT
held with an intermediary is determined on the
basis of the time of conclusion of the control
agreements.
PRIORITY AND RIGHT OF RETENTION BY
OPERATION OF LAW
A person who:
1. Provides services or materials with respect to the
goods, in the ordinary course of business; and
2. Retains possession of the goods
Shall have priority over a perfected security interest
in the goods until payment thereof.
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.
ORDER OF PRIORITY
TYPE OF ASSET SHALL HAVE PRIORITY

If the notice is registered within three (3)

Equipment business days after receipt of
possession.

If the notice is registered not later than

Consumer goods three (3) business days after receipt of
possession.

1. Upon perfection through possession; or

Inventory, IP and
2. Upon notice to holder of conflicting
Livestock
security interest.
 06-08
REGISTRATION
ENFORCEMENT OF SECURITY
INTEREST
OTHER PROVISIONS
REGISTRATION
THE REGISTRY (LAND REGISTRATION AUTHORITY):
• centralized nationwide
• electronic means (includes searching for notices
and no fees)
• administrative/ministerial duty
• notices - open to public inspection: public record,
official records
SPECIFIC RULES:
1. Notice can be registered ahead of the conclusion of
the
security agreement and the date of registration will
still
be the date of notice (not the conclusion of the
Security
Agreement).
2. One notice for several security agreements is
sufficient.
3. A notice that may not be retrieved in a search of the
SPECIFIC RULES:
4. Notice shall not expand or diminish the Security
interest. Errors or misinterpretations in the notice
regarding the description of the security interest shall
not affect rights in the security agreement.
5. Substantial compliance with notice r equirements is
effective provided it is not seriously misleading.
AMENDMENT OR TERMINATION OF
NOTICE:
a. Grounds when the grantor may demand:
i. obligations have been performed and no
commitment to make future advances;
ii. an agreement to release part of the collateral;
iii. collateral includes properties not included in the
Security Agreement;
iv. No security agreement exists between the
parties;
v. The Security Interest is extinguished.
AMENDMENT OR TERMINATION OF
NOTICE:
b. Upon receipt of a demand from the grantor, the
secured creditor must register termination notice
based on the following:
i. All the Security Agreement obligations have
been performed and there is no commitment to
make future advances;
ii. No security agreement exists between the
parties;
AMENDMENT OR TERMINATION OF
NOTICE:
iii. The Security Interest is extinguished.
iv. The Secured creditor must not charge any fee.

c. If the secured creditor fails to comply with

demand within 15 days, the grantor can go to court
and court may issue an order terminating or
amending the notice.
AMENDMENT OR TERMINATION OF
NOTICE:
CORRECTION OF ERRORS OR OMISSIONS
a. The Registry will register a notice to correct and
effective as of the time the information in the notice
becomes accessible to searchers.
b. Restore omitted data and send a copy to the
secured creditor.
c. Entry of false or misleading information - a
criminal act.
 ENFORCEMENT OF SECURITY
1.INTERESTS
Whether through a judicial or extrajudicial process,
including the sale of the secured assets through either
a public or private disposition.
2. 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.
3. 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.
 ENFORCEMENT OF SECURITY
INTERESTS
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.

If a method of disposition of collateral has been

approved in any legal proceeding, it is conclusively
commercially reasonable.
APPLICATION OF PROCEEDS
a. The reasonable expenses;
b. The satisfaction of the obligation secured by the
security interest of the secured creditor; and
c. The satisfaction of obligations secured by any
subordinate security interest or lien.
NOTIFICATION REQUIREMENTS PRIOR
TO DISPOSITION
Not later than ten days before disposition of the
collateral, the secured creditor shall notify:
a. The grantor;
b. Any other secured creditor or lien holder who, five
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
c. Any other person from whom the secured creditor
received notification.
RIGHT OF BUYERS AND OTHER THIRD
If a secured creditor:
PARTIES
a. Sells the collateral, the buyer shall acquire the
grantor’s right in the asset free for the rights of any
secured creditor or lien holder.

b. Leases or licenses the collateral, the lessee or

licensee shall be entitled to the benefit of the lease or
license during its term.
RIGHT OF BUYERS AND OTHER THIRD
If a secured creditor:
PARTIES
c. sells, leases or licenses the collateral not in
compliance herein, the buyer, the lessee, or licensee
of the collateral shall acquire the rights or benefits,
provided he was in good faith.
EXPEDITED REPOSSESSION OF THE
COLLATERAL
Can the secured creditor retain the collateral?

After default the secured creditor may propose to

the debtor or grantor, any other secured creditor, or
any other person with an interest in the collateral to
take all or part of the collateral in total or partial
satisfaction of the secured obligation.
EXPEDITED REPOSSESSION OF THE
COLLATERAL
EXPN:

Full satisfaction:
secured creditor receives an objection in writing
within 20 days after the proposal is sent

Partial satisfaction:
only if the secured creditor receives affirmative
consent of each within 20 days after proposal is sent
EXPEDITED REPOSSESSION OF THE
COLLATERAL
a. Extrajudicial – 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 which shall include:
1. Entering the private residence of the grantor
without permission;
2. Resorting to physical violence or intimidation, or
3. Being accompanied by a law enforcement officer
when taking possession or confronting the grantor.
EXPEDITED REPOSSESSION OF THE
COLLATERAL
a. Judicial – the secured creditor shall
1. be entitled to an expedited hearing;
2. provide the debtor, grantor, a copy of the
application; and;
3. be entitled to an order granting possession of the
collateral.
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.
RIGHT OF REDEMPTION

General Rule: Any person who is

entitled to receive a notification of
disposition is entitled to redeem the
collateral by paying or otherwise
performing the secured obligation in
full, including the reasonable cost of
enforcement.
Exceptions:
a. The person entitled to redeem has, after the
default, waived in writing the right to redeem;
b. The collateral is sold or otherwise disposed of,
acquired or collected by the secured creditor, or
when an agreement with those effects on the
collateral is concluded by the secured creditor; or
c. The secured creditor has retained the
collateral.
 PRIOR INTEREST AND THE
TRANSITIONAL PERIOD
A prior interest that was perfected under prior law
continues to be deemed perfected under the PPSA
and these rules until the earlier of:
• The time the prior interest would cease to be
perfected under prior law; and
• The beginning of full implementation of the
PPSA.
 PRIOR INTEREST AND THE
TRANSITIONAL PERIOD
The transitional period shall begin on February 9,
2019, which is the date of effectivity of the PPSA.

Transitional period – the period from the date of

effectivity of the PPSA until the date when the
Registry has been established and operational.
Thank you!
ELECCION
URBAN
NOLASCO
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