RA 11057 - Personal Property Security Act
RA 11057 - Personal Property Security Act
RA 11057 - Personal Property Security Act
The security agreement shall likewise provide for the language to be used in
agreements and notices. The grantor shall be given the option to have the agreement
and notices in Filipino. The Department of Finance (DOF) shall prepare model
agreements in plain English and Filipino.
SECTION 7. Description of Collateral . — A description of collateral shall be
considered sufficient, whether it is specific or general, if it reasonably identifies the
collateral. A description such as "all personal property," "all equipment," "all inventory,"
or "all personal property within a generic category" of the grantor shall be sufficient.
SECTION 8. Right to Proceeds and Commingled Funds and Money . —
(a) A security interest in personal property shall extend to its identifiable or
traceable proceeds.
(b) Where proceeds in the form of funds credited to a deposit account or
money are commingled with other funds or money:
(1) The security interest shall extend to the commingled money or funds,
notwithstanding that the proceeds have ceased to be identifiable to the
extent they remain traceable;
(2) The security interest in the commingled funds or money shall be limited to
the amount of the proceeds immediately before they were commingled; and
(3) If at any time after the commingling, the balance credited to the deposit
account or the amount of the commingled money is less than the amount of
the proceeds immediately before they were commingled, the security
interest against the commingled funds or money shall be limited to the
lowest amount of the commingled funds or money between the time when
the proceeds were commingled and the time the security interest in the
proceeds is claimed.
SECTION 9. Continuity of Security Interest . — A security interest shall
continue in collateral notwithstanding sale, lease, license, exchange, or other disposition
of the collateral, except as otherwise provided in Section 21 of this Act, or agreed upon
by the parties.
SECTION 10. Contractual Limitation on the Creation of a Security Interest .
—
(a) A security interest in an account receivable shall be effective
notwithstanding any agreement between the grantor and the account debtor or any
secured creditor limiting in any way the grantor's right to create a security interest.
(b) Nothing in this section shall affect any obligation or liability of the grantor
for breach of the agreement in subsection (a).
(c) Any stipulation limiting the grantor's right to create a security interest shall
be void.
(d) This section shall apply only to accounts receivable arising from:
(1) A contract for the supply or lease of goods or services other than financial
services;
(2) A construction contract or a contract for the sale or lease of real property;
and
(3) A contract for the sale, lease or license of intellectual property.
CHAPTER 3
Perfection of Security Interest
SECTION 11. Perfection of Security Interest . —
(a) A security interest shall be perfected when it has been created and the
secured creditor has taken one of the actions in accordance with Section 12.
(b) On perfection, a security interest becomes effective against third parties.
SECTION 12. Means of Perfection . — A security interest may be perfected
by:
(a) Registration of a notice with the Registry;
(b) Possession of the collateral by the secured creditor; and
(c) Control of investment property and deposit account.
A security interest in any tangible asset may be perfected by registration or
possession. A security interest in investment property and deposit account may be
perfected by registration or control.
SECTION 13. Perfection by Control . —
(a) A security interest in a deposit account or investment property may be
perfected by control through:
(1) The creation of the security interest in favor of the deposit-taking
institution or the intermediary;
(2) The conclusion of a control agreement; or
(3) For an investment property that is an electronic security not held with an
intermediary, the notation of the security interest in the books maintained
by or on behalf of the issuer for the purpose of recording the name of the
holder of the securities.
(b) Nothing in this Act shall require a deposit-taking institution or an
intermediary to enter into a control agreement, even if the grantor so requests. A
deposit-taking institution or an intermediary that has entered into such an agreement
shall not be required to confirm the existence of the agreement to another person unless
requested to do so by the grantor.
SECTION 14. Perfection in Proceeds . —
(a) Upon disposition of collateral, a security interest shall extend to proceeds
of the collateral without further act and be continuously perfected, if the proceeds are in
the form of money, accounts receivable, negotiable instruments or deposit accounts.
(b) Upon disposition of the collateral, if the proceeds are in a form different
from money, accounts receivable, negotiable instruments or deposit accounts, the
security interest in such proceeds must be perfected by one of the means applicable to
the relevant type of collateral within fifteen (15) days after the grantor receives such
proceeds; otherwise, the security interest in such proceeds shall not be effective
against third parties.
SECTION 15. Change in Means of Perfection . — A security interest shall
remain perfected despite a change in the means for achieving perfection: Provided ,
That there was no time when the security interest was not perfected.
SECTION 16. Assignment of Security Interest . — If a secured creditor
assigns a perfected security interest, an amendment notice may be registered to reflect
the assignment.
CHAPTER 4
Priority of Security Interest
SECTION 17. Priority Rules . — The priority of security interests and liens in
the same collateral shall be determined according to time of registration of a notice or
perfection by other means, without regard to the order of creation of the security
interests and liens.
SECTION 18. Priority for Perfection by Control . —
(a) A security interest in a deposit account with respect to which the secured
creditor is the deposit-taking institution or the intermediary shall have priority over a
competing security interest perfected by any method.
(b) A security interest in a deposit account or investment property that is
perfected by a control agreement shall have priority over a competing security interest
except a security interest of the deposit-taking institution or the intermediary.
(c) The order of priority among competing security interests in a deposit
account or investment property that were perfected by the conclusion of control
agreements shall be determined on the basis of the time of conclusion of the control
agreements.
(d) Any rights to set-off that the deposit-taking institution may have against a
grantor's right to payment of funds credited to a deposit account shall have priority over
a security interest in the deposit account.
(e) A security interest in a security certificate perfected by the secured
creditor's possession of the certificate shall have priority over a competing security
interest perfected by registration of a notice in the Registry.
(f) A security interest in electronic securities not held with an intermediary
perfected by a notation of the security interests in the books maintained for that purpose
by or on behalf of the issuer shall have priority over a security interest in the same
securities perfected by any other method.
(g) A security interest in electronic securities not held with an intermediary
perfected by the conclusion of a control agreement shall have priority over a security
interest in the same securities perfected by registration of a notice in the Registry.
(h) The order of priority among competing security interests in electronic
securities not held with an intermediary perfected by the conclusion of control
agreements is determined on the basis of the time of conclusion of the control
agreements.
SECTION 19. Priority for Instruments and Negotiable Documents . — A
security interest in an instrument or negotiable document that is perfected by
possession of the instrument or the negotiable document shall have priority over a
security interest in the instrument or negotiable document that is perfected by
registration of a notice in the Registry.
SECTION 20. Priority and Right of Retention by Operation of Law . — A
person who provides services or materials with respect to the goods, in the ordinary
course of business, and retains possession of the goods shall have priority over a
perfected security interest in the goods until payment thereof.
SECTION 21. Transferee Exceptions. — Any party who obtains, in the
ordinary course of business, any movable property containing a security interest shall
take the same free of such security interest provided he was in good faith. No such
good faith shall exist if the security interest in the movable property was registered prior
to his obtaining the property.
SECTION 22. Effect of the Grantor's Insolvency on the Priority of a
Security Interest . — Subject to the applicable insolvency law, a security interest
perfected prior to the commencement of insolvency proceedings in respect of the
grantor shall remain perfected and retain the priority it had before the commencement of
the insolvency proceedings.
SECTION 23. Purchase Money Security Interest . —
(a) A purchase money security interest in equipment and its proceeds shall
have priority over a conflicting security interest, if a notice relating to the purchase
money security interest is registered within three (3) business days after the grantor
receives possession of the equipment.
(b) A purchase money security interest in consumer goods that is perfected
by registration of notice not later than three (3) business days after the grantor obtains
possession of the consumer goods shall have priority over a conflicting security
interest.
(c) A purchase money security interest in inventory, intellectual property or
livestock shall have priority over a conflicting perfected security interest in the same
inventory, intellectual property or livestock if:
(1) The purchase money security interest is perfected when the grantor
receives possession of the inventory or livestock, or acquires rights to
intellectual property; and
(2) Before the grantor receives possession of the inventory or livestock, or
acquires rights in intellectual property, the purchase money secured
creditor gives written notification to the holder of the conflicting perfected
security interest in the same types of inventory, livestock, or intellectual
property. The notification sent to the holder of the conflicting security
interest may cover multiple transactions between the purchase money
secured creditor and the grantor without the need to identify each
transaction.
(d) The purchase money security interest in equipment or consumer goods
perfected timely in accordance with subsections (a) and (b), shall have
priority over the rights of a buyer, lessee, or lien holder which arise
between delivery of the equipment or consumer goods to the grantor and
the time the notice is registered. DETACa
Published in the Official Gazette, Vol. 114, No. 36, p. 6325 on September 3, 2018.