Property Security Act", Sec. 4)
Property Security Act", Sec. 4)
Property Security Act", Sec. 4)
RA No. 11057
2E - Reviewer
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.
ANS: Under Sec 3(c) of the PPSA, the Grantor may be any of the following:
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
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PPSA repealed the laws on conventional pledges and chattel mortgage and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.
C. 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.
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 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)
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)
(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).
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.
ANS:
(1) The creation of the security interest in favor of the deposit- taking institution or
the intermediary;
(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)
(a) Registration of a notice with the Registry: provided, that a security that is
not registered remains valid between the parties; or
(a) Registration of a notice with the Registry. Provided, that a security that is
not registered remains valid between the parties; or
(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
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.
(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
(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;
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:
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).
(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).
Ans:
ANS:
Case: Makati Leasing & Finance Corp v. Wearever Textile Mills, Inc.
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.
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.
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.
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.
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.
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.
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.
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
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.
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.
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.
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)
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)
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)
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)
ANS: If upon default, the secured creditor cannot take possession of collateral
without breach of peace, the secured creditor may proceed as follows:
(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
ANS:
(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
ANS:
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)
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.
(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
(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)
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)
ANS:
(a) In disposing of collateral, the secured creditor shall act in a com- mercially
reasonable manner.
ANS:
(a) Not later than ten (10) days before disposition of the collateral, the secured
creditor shall notify:
(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.
(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)
a) The secured creditor may dispose of the collateral through a sale open to
participation by the general public.
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:
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.
ANS:
(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)
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;
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:
(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:
Q: What are the remedies for a secured party's failure to comply with the
rules?
(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).
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.
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.
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.
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
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
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:
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