REPUBLIC ACT No.

11057 (3) A transferor in an outright transfer of an accounts receivable;

or
An Act Strengthening the Secured Transactions Legal
Framework in the Philippines, Which Shall Provide for the (4) A lessee of goods;
C r e a t i o n , P e r f e c t i o n , D e t e r m i n a t i o n o f P r i o r i t y,
Establishment of a Centralized Notice Registry, and (d) Non-inter mediated securities – securities other than
Enforcement of Security Interests in Personal Property, and securities credited to a securities account and rights in
for Other Purposes securities resulting from the credit of securities to a securities
account;
Be it enacted by the Senate and House of Representatives of
the Philippine Congress Assembled: (e) Notice – a statement of information that is registered in the
Registry relating to a security interest or lien. The term includes
Section 1. Title. -This Act shall be known as the "Personal an initial notice., amendment notice, and termination notice;
Property Security Act".
(f) Proceeds – any property received upon sale, lease or other
Section 2. Declaration of Policy. -It is the policy of the State to disposition of collateral, or whatever is collected on or
promote economic activity by increasing access to least cost distributed with respect to collateral, claims arising out of the
credit, particularly for micro, small, and medium enterprises loss or damage to the collateral, as well as a right to insurance
(MSMEs), by establishing a unified and modern legal framework payment or other compensation for loss or damage of the
for securing obligations with personal property. collateral;

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 (g) Purchase money security interest – a security interest in

DEFINITIONS AND SCOPE 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
Section 3. Definition of Terms. -As used in this Act, the following extent that the credit is used for that purpose;
terms shall mean:
(h) Registry – the centralized and nationwide electronic registry
(a) Commodity contract – a commodity futures contract, an established in the Land Registration Authority (LRA) where
option on a commodity futures contract, a commodity option, or notice of a security interest and a lien in personal property may
another contract if the contract or option is: be registered;

(1) Traded on or subject to the rules of a board of trade that has (i) Secured creditor – a person that has a security interest. For
been designated as a contract market for such a contract; or the purposes of registration and priority only, it includes a buyer
of account receivable and a lessor of goods under an operating
(2) Traded on a foreign commodity board of trade, exchange, or lease for not less than one (1) year;
market, and is carried on the books of a commodity intermediary
for a commodity customer; (j) Security interest – a property right in collateral that secures
payment or other performance of an obligation, regardless of
(b) Control agreement – whether the parties have denominated it as a security interest,
and regardless of the type of asset, the status of the grantor or
(1) With respect to securities, means an agreement in writing secured creditor, or the nature of the secured obligation;
among the issuer or the intermediary, the grantor and the including the right of a buyer of accounts receivable and a
secured creditor, according to which the issuer or the lessor under an operating lease for not less than one (1) year;
intermediary agrees to follow instructions from the secured and
creditor with respect to the security, without further consent from
the grantor; (k) Writing – for the purpose of this Act includes electronic
records.
(2) With respect to rights to deposit account, means an
agreement in writing among the deposit-taking institution, the Section 4. Scope of the Act.— This Act shall apply to all
grantor and the secured creditor, according to which the transactions of any form that secure an obligation with movable
deposit-taking institution agrees to follow instructions from the collateral, except interests in aircrafts subject to Republic Act
secured creditor with respect to the payment of funds credited to No. 9497, or the "Civil Aviation Authority Act of 2008", and
the deposit account without further consent from the grantor; interests in ships subject to Presidential Decree No. 1521, or the
"Ship Mortgage Decree of 1978".
(3) With respect to commodity contracts, means an agreement
in writing among the grantor, secured creditor, and intermediary, CHAPTER 2

according to which the commodity intermediary will apply any CREATION OF SECURITY INTEREST
value distributed on account of the commodity contract as
directed by the secured creditor without further consent by the Section 5. Creation of a Security Interest.—
commodity customer or grantor;
(a) A security interest shall be created by a security agreement,
(c) Grantor –
(b) A security agreement may provide for the creation of a
(1) The person who grants a security interest in collateral to security interest in a future property, but the security interest in
secure its own obligation or that of another person; that property is created only when the grantor acquires rights in
it or the power to encumber it.
(2) A buyer or other transferee of a collateral that acquires its
right subject to a security interest;

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Section 6. Security Agreement.— A security agreement must be (1) A contract for the supply or lease of goods or services other
contained in a written contract signed by the parties. It may than financial services;
consist of one or more writings that, taken together, establish
the intent of the parties to create a security interest. (2) A construction contract or a contract for the sale or lease of
real property; and
The security agreement shall likewise provide for the language
to be used in agreements and notices. The grantor shall be (3) A contract for the sale, lease or license of intellectual
given the option to have the agreement and notices in Filipino. property.
The Department of Finance (DOF) shall prepare model
agreements in plain English and Filipino. CHAPTER 3

PERFECTION OF SECURITY INTEREST
Section 7. Description of Collateral.— A description of collateral
shall be considered sufficient, whether it is specific or general, if Section 11. Perfection of Security Interest.—
it reasonably identifies the collateral. A description such as "all
personal property", "all equipment", "all inventory", or "all (a) A security interest shall be perfected when it has been
personal property within a generic category" of the grantor shall created and the secured creditor has taken one of the actions in
be sufficient. accordance with Section 12.

Section 8. Right to Proceeds and Commingled Funds and (b) On perfection, a security interest becomes effective against
Money.— third parties.

(a) A security interest in personal property shall extend to its Section 12. Means of Perfection.— A security interest may be
identifiable or traceable proceeds. perfected by:

(b) Where proceeds in the form of funds credited to a deposit (a) Registration of a notice with the Registry;
account or money are commingled with other funds or money:
(b) Possession of the collateral by the secured creditor; and
(1) The security interest shall extend to the commingled money
or funds, notwithstanding that the proceeds have ceased to be (c) Control of investment property and deposit account.
identifiable to the extent they remain traceable:
A security interest in any tangible asset may be perfected by
(2) The security interest in the commingled funds or money shall registration or possession. A security interest in investment
be limited to the amount of the proceeds immediately before property and deposit account may be perfected by registration
they were commingled: and or control.

(3) If at any time after the commingling, the balance credited to Section 13. Perfection by Control.—
the deposit account or the amount of the commingled money is
less than the amount of the proceeds immediately before they (a) A security interest in a deposit account or investment
were commingled, the security interest against the commingled property may be perfected by control through:
funds or money shall be limited to the lowest amount of the
commingled funds or money between the time when the (1) The creation of the security interest in favor of the deposit-
proceeds were commingled and the time the security interest in taking institution or the intermediary;
the proceeds is claimed.
(2) The conclusion of a control agreement; or
Section 9. Continuity of Security Interest.— A security interest
shall continue in collateral notwithstanding sale, lease, license, (3) For an investment property that is an electronic security not
exchange, or other disposition of the collateral, except as held with an intermediary, the notation of the security interest in
otherwise provided in Section 21 of this Act, or agreed upon by the books maintained by or on behalf of the issuer for the
the parties. purpose of recording the name of the holder of the securities.(b)
Nothing in this Act shall require a deposit-taking institution or an
Section 10. Contractual Limitation on the Creation of a Security intermediary to enter into a control agreement, even if the
Interest.— grantor so requests. A deposit-taking institution or an
intermediary that has entered into such an agreement shall not
(a) A security interest in an account receivable shall be effective be required to confirm the existence of the agreement to
notwithstanding any agreement between the grantor and the another person unless requested to do so by the grantor.
account debtor or any secured creditor limiting in any way the
grantor’s right to create a security interest. Section 14. Perfection in Proceeds.—

(b) Nothing in this section shall affect any obligation or liability of (a) Upon disposition of collateral, a security interest shall extend
the grantor for breach of the agreement in subsection (a). to proceeds of the collateral without further act and be
continuously perfected, if the proceeds are in the form of money,
(c) Any stipulation limiting the grantor’s right to create a security accounts receivable, negotiable instruments or deposit
interest shall be void. accounts.

(d) This section shall apply only to accounts receivable arising (b) Upon disposition of the collateral, if the proceeds are in a
from: 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

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 the relevant type of collateral within fifteen (15) days after the document shall have priority over a security interest in the
grantor receives such proceeds; otherwise, the security interest instrument or negotiable document that is perfected by
in such proceeds shall not be effective against third parties. registration of a notice in the Registry.

Section 15. Change in Means of Perfection.— A security Section 20. Priority and Plight of Retention by Operation of
interest shall remain perfected despite a change in the means Law. -A person who provides services or materials with respect
for achieving perfection: Provided, That there was no time when to the goods, in the ordinary course of business, and retains
the security interest was not perfected. possession of the goods shall have priority over a perfected
security interest in the goods until payment thereof.
Section 16. Assignment of Security Interest.— If a secured
creditor assigns a perfected security interest, an amendment Section 21. Transferee Exceptions. -Any party who obtains, in
notice may be registered to reflect the assignment. the ordinary course of business, any movable property
containing a security interest shall take the same free of such
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 security interest provided he was in good faith. No such good
PRIORITY OF SECURITY INTEREST faith shall exist if the security interest in the movable property
was registered prior to his obtaining the property.
Section 17. Priority Rules.— The priority of security interests
and liens in the same collateral shall be determined according to Section 22. Effect of the Grantor’s Insolvency on the Priority of
time of registration of a notice or perfection by other means, a Security Interest. -Subject to the applicable insolvency law, a
without regard to the order of creation of the security interests security interest perfected prior to the commencement of
and liens. insolvency proceedings in respect of the grantor shall remain
perfected and retain the priority it had before the
Section 18. Priority for Perfection by Control.— commencement of the insolvency proceedings.

(a) A security interest in a deposit account with respect to which Section 23. Purchase Money Security Interest.—
the secured creditor is the deposit-taking institution or the
intermediary shall have priority over a competing security (a) A purchase money security interest in equipment and its
interest perfected by any method. proceeds shall have priority over a conflicting security interest, if
a notice relating to the purchase money security interest is
(b) A security interest in a deposit account or investment registered within three (3) business days after the grantor
property that is perfected by a control agreement shall have receives possession of the equipment.
I priority over a competing security interest except a security
C interest of the deposit-taking institution or the intermediary. (b) A purchase money security interest in consumer goods that
is perfected by registration of notice not later than three (3)
(c) The order of priority among competing security interests in a business days after the grantor obtains possession of the
deposit account or investment property that were perfected by consumer goods shall have priority over a conflicting security
the conclusion of control agreements shall be determined on the interest.
basis of the time of conclusion of the control agreements.
(c) A purchase money security interest in inventory, intellectual
(d) Any rights to set-off that the deposit-taking institution may property or livestock shall have priority over a conflicting
have against a grantor’s right to payment of funds credited to a perfected security interest in the same inventory, intellectual
deposit account shall have priority over a security interest in the property or livestock if:
deposit account.
P (1) The purchase money security interest is perfected when the
R (e) A security interest in a security certificate perfected by the grantor receives possession of the inventory or livestock, or
secured creditor’s possession of the certificate shall have acquires rights to intellectual property; and
priority over a competing security interest perfected by
registration of a notice in the Registry. (2) Before the grantor receives possession of the inventory or
livestock, or acquires rights in intellectual property, the purchase
(f) A security interest in electronic securities not held with an money secured creditor gives written notification to the holder of
intermediary perfected by a notation of the security interests in the conflicting perfected security interest in the same types of
the books maintained for that purpose by or on behalf of the inventory, livestock, or intellectual property. The notification sent
issuer shall have priority over a security interest in the same to the holder of the conflicting security interest may cover
N securities perfected by any other method. multiple transactions between the purchase money secured
C creditor and the grantor without the need to identify each
R (g) A security interest in electronic securities not held with an transaction.
intermediary perfected by the conclusion of a control agreement
shall have priority over a security interest in the same securities (d) The purchase money security interest in equipment or
perfected by registration of a notice in the Registry. consumer goods perfected timely in accordance with
subsections (a) and (b), shall have priority over the rights of a
(h) The order of priority among competing security interests in buyer, lessee, or lien holder which arise between delivery of the
electronic securities not held with an intermediary perfected by equipment or consumer goods to the grantor and the time the
the conclusion of control agreements is determined on the basis notice is registered.
of the time of conclusion of the control agreements.
Section 24. Livestock. -A perfected security interest in livestock
Section 19. Priority for Instruments and Negotiable Documents. securing an obligation incurred to enable the grantor to obtain
-A security interest in an instrument or negotiable document that food or medicine for the livestock shall have priority over any
is perfected by possession of the instrument or the negotiable other security interest in the livestock, except for a perfected

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purchase money security interest in the livestock, if the secured (e) A notice of lien may be registered by a lien holder without the
creditor providing credit for food or medicine gives written consent of the person against whom the lien is sought to be
notification to the holder of the conflicting perfected security enforced.
interest in the same livestock before the grantor receives
possession of the food or medicine. (f) Description of the collateral in a notice shall be entered in
English.
Section 25. Fixtures, Accessions, and Commingled Goods. -A
perfected security interest in a movable property which has Section 29. One Notice Sufficient for Security Interests Under
become a fixture, or has undergone accession or commingling Multiple Security Agreements. -The registration of a single
shall continue provided the movable property involved can still notice may relate to security interests created by the grantor
be reasonably traced. In determining ownership over fixtures, under one (1) or more than one security agreement.
accessions, and commingled goods, the provisions of Book II of
Republic Act No. 386 or the "Civil Code of the Philippines" shall Section 30. Effectiveness of Notice.—
apply.
(a) A notice shall be effective at the time it is discoverable on the
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 records of the Registry.
REGISTRATION – REGISTRY
(b) A notice shall be effective for the duration of the term
Section 26. Establishment of Electronic Registry.— indicated in the notice unless a continuation notice is registered
before the term lapses.
(a) The Registry shall be established in and administered by the
LRA. (c) A notice substantially complying with the requirements of this
Chapter shall be effective unless it is seriously misleading.
(b) The Registry shall provide electronic means for registration
and searching of notices. (d) A notice that may not be retrieved in a search of the Registry
against the correct identifier of the grantor shall be ineffective
Section 27. Public Record.— with respect to that grantor.

(a) Information contained in a registered notice shall be Section 31. Seriously Misleccding Notice. -A notice that does
considered as a public record. not provide the identification number of the grantor shall be
seriously misleading.
(b) Any person may search notices registered in the Registry.
Section 32. Amendment of Notice.—
(c) The electronic records of the Registry shall be the official
records. (a) A notice may be amended by the registration of an
amendment notice that:
Section 28. Sufficiency of Notice.—
(1) Identifies the initial notice by its registration number; and
(a) An initial notice of security interest shall not be rejected:
(2) Provides the new information.
(1) If it identifies the grantor by an identification number, as
further prescribed in the regulations; (b) An amendment notice that adds collateral that is not
proceeds must be authorized by the grantor in writing.
(2) If it identifies the secured creditor or an agent of the secured
creditor by name; (c) An amendment notice that adds a grantor must be
authorized by the added grantor in writing.
(3) If it provides an address for the grantor and secured creditor
or its agent; (d) An amendment notice shall be effective only as to each
secured creditor who authorizes it.
(4) If it describes the collateral: and
(e) An amendment notice that adds collateral or a grantor shall
(5) If the prescribed fee has been tendered, or an arrangement be effective as to the added collateral or grantor from the date of
has been made for payment of fees by other means. its registration.

(b) If the Registry rejects to register a notice, it shall promptly Section 33. Continuation of Notice.—
communicate the fact of and reason for its rejection to the
person who submitted the notice. (a) The period of effectiveness of a notice may be continued by
registering an amendment notice that identifies the initial notice
(c) Each grantor must authorize the registration of an initial by its registration number.
notice by signing a security agreement or otherwise in writing.
(b) Continuation of notice may be registered only within six (6)
(d) A notice may be registered before a security agreement is months before the expiration of the effective period of the notice.
concluded. Once a security agreement is concluded, the date of
registration of the notice shall be reckoned from the date the Section 34. Termination of Effectiveness of a Notice.—
notice was registered.
(a) The effectiveness of a notice may be terminated by
registering a termination notice that:

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(1) Identifies the initial notice by its registration number; and (b) The secured creditor may require payment of a fee for each
request made by the grantor in subsection (a) in this section, but
(2) Identifies each secured creditor who authorizes the the grantor is entitled to a reply without charge once every six
registration of the termination notice. (6) months.

(b) A termination notice terminates effectiveness of the notice as (c) A security interest in a deposit account shall not:
to each authorizing secured creditor.
(1) Affect the rights and obligations of the deposit-taking
Section 35. Registry Duties.— institution without its consent; or

(a) For each registered notice, the Registry shall: (2) Require the deposit-taking institution to provide any
information about the deposit account to third parties.
(1) Assign a unique registration number;
Section 38. Fees Set by Regulation.—
(2) Create a record that bears the number assigned to the initial
notice and the date and time of registration; and (a) The fees for registering a notice and for requesting a certified
search report shall be set by regulation issued by the DOF for
(3) Maintain the record for public inspection. the recovery of reasonable costs of establishing and operating
the Registry.
(b) The Registry shall index notices by the identification number
of the grantor and, for notices containing a serial number of a (b) The fee structure or any change thereof under subsection (a)
motor vehicle, by serial number. shall further consider that the same shall not be burdensome to
either lender or grantor.
(c) The Registry shall provide a copy of the electronic record of
the notice, including the registration number and the date and (c) There shall be no fee for electronic searches of the Registry
time of registration to the person who submitted it. records or for the registration of termination notices.

(d) The Registry shall maintain the capability to retrieve a record (d) The Registry may charge fees for services not mentioned
by the identification number of the grantor, and by serial number above.
of a motor vehicle.
Section 39. When the Grantor May Demand Amendment or
(e) The Registry shall maintain records of lapsed notices for a Termination of Notice. -A grantor may give a written demand to
period of ten (10) years after the lapse. the secured creditor to amend or terminate the effectiveness of
the notice if:
(f) The duties of the Registry shall be merely administrative in
nature. By registering a notice or refusing to register a notice, (a) All the obligations under the security agreement to which the
the Registry does not determine the sufficiency, correctness, registration relates have been performed and there is no
authenticity, or validity of any information contained in the commitment to make future advances;
notice.
(b) The secured creditor has agreed to release part of the
Section 36. Search of Registry Records and Certified Report.— collateral described in the notice;

(a) The Registry shall communicate the following information to (c) The collateral described in the notice includes an item or kind
any person who requests it: of property that is not a collateral under a security agreement
between the secured creditor and the grantor;
(1) Whether there are in the Registry any unlapsed notices that
indicate the grantor's identification number or vehicle serial (d) No security agreement exists between the parties; or
number that exactly matches the relevant criterion provided by
the searcher; (e) The security interest is extinguished in accordance with this
Act.
(2) The registration number, and the date and time of
registration of each notice; and Section 40. Matters That May be Required by Demand. -Upon
receipt of the demand submitted under Section 39, the secured
(3) All of the information contained in each notice. creditor must register, within fifteen (15) working days, an
amendment or termination notice:
(b) If requested, the Registry shall issue a certified report of the
results of a search that is an official record of the Registry and (a) Terminating the registration in a case within subsections (a),
shall be admissible into evidence in judicial proceedings without (d) or (e) of Section 39;
extrinsic evidence of its authenticity.
(b) Amending the registration to release some property that is
Section 37. Disclosure of Information.— no longer collateral in a case within subsection (c) of Section 39
or that was never collateral under a security agreement between
(a) The secured creditor must provide to the grantor at its the secured creditor and the grantor in a case within subsection
request: (c) of Section 39.

(1) The current amount of the unpaid secured obligation; and Section 41. Procedure for Noncompliance with Demand. -If the
secured creditor fails to comply with the demand within fifteen
(2) A list of assets currently subject to a security interest. (15) working days after its receipt, the person giving the demand

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under Section 39 may ask the proper court to issue an order (c) The right of the higher-ranking secured creditor to take over
terminating or amending the notice as appropriate. the enforcement process shall include the right to enforce the
rights by any method available to a secured creditor under this
Section 42. Compulsory Amendment or Termination by Court Act.
Order.—
Section 47. Expedited Repossession of the Collateral.—
(a) The court may, on application by the grantor, issue an order
that the notice be terminated or amended in accordance with (a) The secured creditor may take possession of the collateral
the demand, which order shall be conclusive and binding-on the without judicial process if the security agreement so stipulates:
LRA: Provided, That the secured creditor wrho disagrees with Provided, That possession can be taken without a breach of the
the order of the court may appeal the order. peace.

(b) The court may make any other order it deems proper for the (b) If the collateral is a fixture, the secured creditor, if it has
purpose of giving effect to an order under subsection (a) of this priority over all owners and mortgagees, may remove the fixture
section. from the real property to which it is affixed without judicial
process. The secured creditor shall exercise due care in
(c) The LRA shall amend or terminate a notice in accordance removing the fixture.
with a court order made under subsection (a) of this section as
soon as reasonably practicable after receiving the order. (c) If, upon default, the secured creditor cannot take possession
of collateral without breach of the peace, the secured creditor
Section 43. No Fee for Compliance of Demand. -A secured may proceed as follows:
creditor shall not charge any fee for compliance with a demand
received under Section 39. (1) The secured creditor shall be entitled to an expedited
hearing upon application for an order granting the secured
Section 44. When Registration and Search Constitutes creditor possession of the collateral. Such application shall
Interference with Privacy of Individual. -A person who submitted include a statement by the secured creditor, under oath,
a notice for registration or carried out a search of the Registry verifying the existence of the security agreement attached to the
with a frivolous, malicious or criminal purpose or intent shall be application and identifying at least one event of default by the
subject to civil and criminal penalties according to the relevant debtor under the security agreement;
laws.
(2) The secured creditor shall provide the debtor, grantor, and, if
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 the collateral is a fixture, any real estate mortgagee, a copy of
ENFORCEMENT OF SECURITY INTEREST SECURED the application, including all supporting documents and
CREDITOR’S RIGHTS evidence for the order granting the secured creditor possession
of the collateral; and
Section 45. Right of Redemption.—
(3) The secured creditor is entitled to an order granting
(a) Any person who is entitled to receive a notification of possession of the collateral upon the court finding that a default
disposition in accordance with this Chapter is entitled to redeem has occurred under the security agreement and that the secured
the collateral by paying or otherwise performing the secured creditor has a right to take possession of the collateral. The
obligation in full, including the reasonable cost of enforcement. court may direct the grantor to take such action as the court
deems necessary and appropriate so that the secured creditor
(b) The right of redemption may be exercised, unless: may take possession of the collateral: Provided, That breach of
the peace shall include entering the private residence of the
(1) The person entitled to redeem has not, after the default, grantor without permission, resorting to physical violence or
waived in writing the right to redeem; intimidation, or being accompanied by a law enforcement officer
when taking possession or confronting the grantor.
(2) The collateral is sold or otherwise disposed of, acquired or
collected by the secured creditor or until the conclusion of an Section 48. Recovery in Special Cases.— Upon default, the
agreement by the secured creditor for that purpose; and secured creditor may without judicial process:

(3) The secured creditor has retained the collateral. (a) Instruct the account debtor to make payment to the secured
creditor, and apply such payment to the satisfaction of the
Section 46. Right of Higher-Ranking Secured. Creditor to Take obligation secured by the security interest after deducting the
Over Enforcement.— secured creditor’s reasonable collection expenses. On request
of the account debtor, the secured creditor shall provide
(a) Even if another secured creditor or a lien holder has evidence of its security interest to the account debtor when it
commenced enforcement, a secured creditor whose security- delivers the instruction to the account debtor;
interest has priority over that of the enforcing secured creditor or
lien holder shall be entitled to take over the enforcement (b) In a negotiable document that is perfected by possession,
process. proceed as to the negotiable document or goods covered by the
negotiable document;
(b) The right referred to in subsection (a) of this section may be
invoked at any time before the collateral is sold or otherwise (c) In a deposit account maintained by the secured creditor,
disposed of, or retained by the secured creditor or until the apply the balance of the deposit account to the obligation
conclusion of an agreement by the secured creditor for that secured by the deposit account; and
purpose.

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(d) I n other cases of security interest in a deposit account (a) The proceeds of disposition shall be applied in the following
perfected by control, instruct the deposit-taking institution to pay order:
the balance of the deposit account to the secured creditor’s
account. (1) The reasonable expenses of taking, holding, preparing for
disposition, and disposing of the collateral, including reasonable
Section 49. Right to Dispose of Collateral.— attorneys’ fees and legal expenses incurred by the secured
creditor;
(a) After default, a secured creditor may sell or otherwise
dispose of the collateral, publicly or privately, in its present (2) The satisfaction of the obligation secured by the security
condition or following any commercially reasonable preparation interest of the enforcing secured creditor; and
or processing.
(3) The satisfaction of obligations secured by any subordinate
(b) The secured creditor may buy the collateral at any public security interest or hen in the collateral if a written demand and
disposition, or at a private disposition but only if the collateral is proof of the interest are received before distribution of the
of a kind that is customarily sold on a recognized market or the proceeds is completed.
subject of widely distributed standard price quotations.
(b) The secured creditor shall account to the grantor for any
Section 50. Commercial Reasonableness Required.— surplus, and, unless otherwise agreed, the debtor is liable for
any deficiency.
(a) In disposing of collateral, the secured creditor shall act in a
commercially reasonable manner. Section 53. Rights of Buyers and Other Third Parties.—

(b) A disposition is commercially reasonable if the secerned (a) If a secured creditor sells the collateral under this Chapter,
creditor disposes of the collateral in conformity with commercial the buyer shall acquire the grantor’s right in the asset free of the
practices among dealers in that type of property. rights of any secured creditor or lien holder.

(c) A disposition is not commercially unreasonable merely (b) If a secured creditor leases or licenses the collateral under
because a better price could have been obtained by disposition this Chapter, the lessee or licensee shall be entitled to the
at a different time or by a different method from the time and benefit of the lease or license during its term.
method selected by the secured creditor.
(c) If a secured creditor sells, leases or licenses the collateral
(d) If a method of disposition of collateral has been approved in not in compliance with this Chapter, the buyer, lessee or
any legal proceeding, it is conclusively commercially licensee of the collateral shall acquire the rights or benefits
reasonable. described in subsections (a) and (b) of this section: Provided,
That it had no knowledge of a violation of this Chapter that
Section 51. Notification of Disposition.— materially prejudiced the rights of the grantor or another person.

(a) Not later than ten (10) days before disposition of the Section 54. Retention of Collateral by Secured Creditor.—
collateral, the secured creditor shall notify:
(a) After default, the secured creditor may propose to the debtor
(1) The grantor; and grantor to take all or part of the collateral in total or partial
satisfaction of the secured obligation, and shall send a proposal
(2) Any other secured creditor or lien holder who, five (5) days to:
before the date notification is sent to the grantor, held a security
interest or lien in the collateral that was perfected by (1) The debtor and the grantor;
registration; and
(2) Any other secured creditor or lien holder who, five (5) days
(3) Any other person from whom the secured creditor received before the proposal is sent to the debtor and the grantor,
notification of a claim of an interest in the collateral if the perfected its security interest or lien by registration; and
notification was received before the secured creditor gave
notification of the proposed disposition to the grantor. (3) Any other person with an interest in the collateral who has
given a written notification to the secured creditor before the
(b) The grantor may waive the right to be notified. proposal is sent to the debtor and the grantor.

(c) A notification of disposition is sufficient if it identifies the (b) The secured creditor may retain the collateral in the case of:
grantor and the secured creditor; describes the collateral; states
the method of intended disposition; and states the time and
place of a public disposition or the time after which other
disposition is to be made. (1) A proposal for the acquisition of the collateral in full
satisfaction of the secured obligation, unless the secured
(d) The requirement to send a notification under this section creditor receives an objection in writing from any person entitled
shall not apply if the collateral is perishable or threatens to to receive such a proposal within twenty (20) days after the
decline speedily in value or is of a type customarily sold on a proposal is sent to that person; or
recognized market.
(2) A proposal for the acquisition of the collateral in partial
Section 52. Application of Proceeds.— satisfaction of the secured obligation, only if the secured creditor
receives the affirmative consent of each addressee of the

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proposal in writing within twenty (20) days after the proposal is (a) The priority of a prior interest as against the rights of a
sent to that person. competing claimant is determined by the prior law if:

CHAPTER 7
 (1) The security interest and the rights of all competing claimant
TRANSITIONAL PROVISIONS arose before the effectivity of this Act; and

Section 55. Interpretation of Transitional Provisions.— For this (2) The priority status of these rights has not changed since the
Chapter, unless the context otherwise requires: effectivity of this Act.

(a) Existing secured creditor – means a secured creditor with a (b) For purposes of subsection (a)(2) of this section, the priority
prior security interest; status of a prior interest has changed only if:

(b) Prior law – means any law that existed or in force before the (1) It was perfected when this Act took effect, but ceased to be
effectivity of this Act; perfected; or

(c) Prior interest – means a security interest created or provided (2) It was not perfected under prior law when this Act took effect,
for by an agreement or other transaction that was made or and was only perfected under this Act.
entered into before the effectivity of this Act and that had not
been terminated before the effectivity of this Act, but excludes a Section 59. Enforcement of Prior Interest.—
security interest that is renewed or extended by a security
agreement or other transaction made or entered into on or after (a) If any step or action has been taken to enforce a prior
the effectivity of this Act; and interest before the effectivity of this Act, enforcement may
continue under prior law or may proceed under this Act.
(d) Transitional period - means the period from the date of
effectivity of this Act until the date when the Registry has been (b) Subject to subsection (a) of this section, prior law shall apply
established and operational. to a matter that is the subject of proceedings before a court
before the effectivity of this Act.
Section 56. Creation of Prior Interest.—
CHAPTER 8

(a) Creation of prior interest shall be determined by prior laws. CONGRESSIONAL OVERSIGHT AND MISCELLANEOUS
PROVISIONS
(b) A prior interest remains effective between the parties
notwithstanding its creation did not comply with the creation Section 60. Congressional Oversight and Periodic Review.— A
requirements of this Act. Congressional Oversight Committee shall be created that will
conduct a periodic review every five (5) years commencing from
Section 57. Perfection of Prior Interest.— the effectivity of this Act. The Congressional Oversight
Committee shall be composed of the Chairperson of the Senate
(a) A prior interest that was perfected under prior law continues Committee on Banks, Financial Institutions and Currencies, the
to be perfected under this Act until the earlier of: Chairperson of the House of Representatives Committee on
Banks and Financial Intermediaries, and representatives of
(1) The time the prior interest would cease to be perfected under other relevant congressional committees.
prior law; and
Section 61. Interpretation.— If there is conflict between a
(2) The expiration of the transitional period. provision of this Act and a provision of any other law, this Act
shall govern unless the other law specifically cites or amends
(b) If the perfection requirements of this Act are satisfied before the conflicting provisions of this law.
the perfection of a prior interest ceases in accordance with
subsection (a) of this section, the prior interest continues to be Section 62. Implementing Rules and Regulations.— Within six
perfected under this Act from the time when it was perfected (6) months from the passage of this Act, the DOF in
under the prior law. coordination with the Department of Justice, through the LRA,
shall promulgate the necessary rules and regulations for’ the
(c) If the perfection requirements of this Act are not satisfied effective implementation of this Act.
before the perfection of a prior interest ceases in accordance
with subsection (a) of this section, the prior interest is perfected Section 63. Rules on Enforcement Procedure.— Subject to
only from the time it is perfected under this Act. Section 47, the expedited hearing/proceedings shall be
conducted in a summary manner consistent with the declared
(d) A written agreement between a grantor and a secured policies of this Act and in accordance with the rules of procedure
creditor creating a prior interest is sufficient to constitute that the Supreme Court may promulgate.
authorization by the grantor of the registration of a notice
covering assets described in that agreement under this Act. Section 64. Sourcing of Funds.— The funds needed for the
implementation of this Act shall be taken from the Special
(e) If a prior interest referred to in subsection (b) of this section Account arising from revenues collected by the LRA under
was perfected by the registration of a notice under prior law, the Section 111 of Presidential Decree No. 1529, without need for
time of registration under the prior law shall be the time to be any further government approval.
used for purposes of applying the priority rules of this Act.
Section 65. Separability Clause.— Should any provision herein
Section 58. Priority of Prior Interest.— be declared unconstitutional, the same shall not affect the
validity of the other provisions of this Act.

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Section 66. Repealing Clause.— 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:

(a) Sections 1 to 16 of Act No. 1508, otherwise known as "The

Chattel Mortgage Law";

(b) Articles 2085-2123, 2127, 2140-2141, 2241, 2243, and

2246-2247 of Republic Act No. 386, otherwise known as the
"Civil Code of the Philippines";

(c) Section 13 of Republic Act No. 5980, as amended by

Republic Act No. 8556, otherwise known as the "Financing
Company Act of 1998";

(d) Sections 114-116 of Presidential Decree No. 1529, otherwise

known as the "Property Registration Decree";

(e) Section 10 of Presidential Decree No. 1529, insofar as the

provision thereof is inconsistent with this Act; and

(f) Section 5(e) of Republic Act No. 4136, otherwise known as

the "Land Transportation and Traffic Code".

Section 67. Effectivity.— This Act shall take effect fifteen (15)
days after publication in at least two (2) newspapers of general
circulation.

Section 68. Implementation.— 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

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