Atty. WBC - Personal Property Security Act

RA 11057: PERSONAL PROPERTY SECURITY ACT (PPSA)
- The law was signed on August 17, 2018.
> State Policy: To promote economic activity by increasing access to credit, particularly
for MSME’s, by establishing a unified and modern legal framework for securing
obligations with personal property.
[ Remember our lesson in Banking Laws 1 when we discussed that debts may either be secured
or unsecured. The primary difference between the two is the presence or absence of collateral.
A debt is secured when the borrower puts up some asset as surety or collateral for the
obligation. It is unsecured if it has no collateral backing.]
> Scope and Coverage:
Under this law, PERSONAL PROPERTIES OR MOVABLE PROPERTIES as

collaterals now include, among other things:
- Deposit accounts
- Accounts receivables
- Negotiable instruments
- Security certificate or electronic securities
- Inventory
- Equipment
- Consumer goods
- Livestock and other agricultural products,
- Vehicles
- Intellectual property rights
- Future property
Essentially, the law covers all transactions of any form that secure an obligation with
movable collaterals, EXCEPT interests in aircraft (subject to RA 9497 or the Civil Aviation
Authority Act of 2008) and interests in ships or vessels (subject to RA 1521 or the Ship
Mortgage Decree of 1978).
Please take note that the PPSA repealed, amended, and modified the provisions of the
Chattel Mortgage Law, and the provisions of the Civil Code on Pledge and Chattel
Mortgage, as well as some of the provisions on Concurrence and Preference of Credits!
The following laws which are inconsistent with the provisions of this Act are hereby repealed,
amended, or modified:
(a) Secs. 1 to 16 of Act No. 1508 or the Chattel Mortgage Law;

(b) Arts. 2085-2123, 2127, 2140-2041, 2241, 2243, and 2246-2247 of the New Civil Code;
(c) Sec. 13 of RA 8556 or the Financing Company Act of 1998;
(d) Secs. 10, 114-116 of PD No. 1529 or the Property Registration Decree; and
(e) Sec. 5 (e) of RA No. 4136 or the Land Transportation and Traffic Code.
> What is a SECURITY INTEREST?
A property right in collateral that secures payment or other performance of the

obligation, regardless of whether the parties have denominated it as a security interest, and
regardless of the type of the asset, the status of the grantor or secured creditor, or the nature of
the secured obligation.
> Stages in the Life of Security Interest:
1. Creation – Security interest is created by a security agreement.
2. Perfection – Security interest created becomes effective against 3rd parties the moment it
is perfected which can be by 3 means:
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
*Please note that security interest in any tangible asset may be perfected by registration
or possession while in investment property and deposit account may be perfected by
registration or control.
How security interest may be perfected by control?

> Creation of security interest in favor of the deposit-taking institution
> Conclusion of a control agreement
> Notation of the security interest in the books maintained by or on behalf of the issuer
3. Enforcement – The secured creditor may sell or otherwise dispose of the collateral either
by public or private sale. The debtor is also required to satisfy any deficiency. Previously,
the Law on Pledge provides that the foreclosure of a pledge extinguishes the debt and the
secured creditor is no longer entitled to recover any deficiency.
> Priority of Security Interest:
Sec. 17 of the PPSA provides the general rule that “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 security interests and
liens.” However, with respect to bank deposits, specific rules are provided for under Paragraphs
(a) to (d) of Sec. 18.
Under the PPSA, the Land Registration Authority (LRA) is the government agency
tasked to establish a new registry that will enable registration and the searching of
notices on security interests.

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RA 11057: PERSONAL PROPERTY SECURITY ACT (PPSA)

- The law was signed on August 17, 2018.

> Scope and Coverage:

Under this law, PERSONAL PROPERTIES OR MOVABLE PROPERTIES as

(a) Secs. 1 to 16 of Act No. 1508 or the Chattel Mortgage Law;

> What is a SECURITY INTEREST?

A property right in collateral that secures payment or other performance of the

> Stages in the Life of Security Interest:

1. Creation – Security interest is created by a security agreement.

How security interest may be perfected by control?

> Priority of Security Interest:

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