Possession and Care of Object of Pledge
The creditor cannot use the thing pledged,
Art. 2110. If the thing pledged is returned by the pledgee to
the pledgor or owner, the pledge is extinguished. Any
stipulation to the contrary shall be void.
If subsequent to the perfection of the pledge, the thing is in
the possession of the pledgor or owner, there is a prima facie
presumption that the same has been returned by the
pledgee. This same presumption exists if the thing pledged is
in the possession of a third person who has received it from
the pledgor or owner after the constitution of the pledge.
Art. 2098. The contract of pledge gives a right to the creditor
to retain the thing in his possession or in that of a third
person to whom it has been delivered, until the debt is paid.
Art. 2109. If the creditor is deceived on the substance or
quality of the thing pledged, he may either claim another
thing in its stead, or demand immediate payment of the
principal obligation. (n)
Art. 2100. The pledgee cannot deposit the thing pledged with
a third person, unless there is a stipulation authorizing him
to do so.
The pledgee is responsible for the acts of his agents or
employees with respect to the thing pledged. (n)
Art. 2104.
without the authority of the owner, and if he should do so,
or should misuse the thing in any other way, the owner may
ask that it be judicially or extrajudicially deposited. When the
preservation of the thing pledged requires its use, it must be
used by the creditor but only for that purpose.
Art. 2105. The debtor cannot ask for the return of the thing
pledged against the will of the creditor, unless and until he
has paid the debt and its interest, with expenses in a proper
case
Art. 2107. If there are reasonable grounds to fear the
destruction or impairment of the thing pledged, without the
fault of the pledgee, the pledgor may demand the return of
the thing, upon offering another thing in pledge, provided
the latter is of the same kind as the former and not of inferior
quality, and without prejudice to the right of the pledgee
under the provisions of the following article.
The pledgee is bound to advise the pledgor, without delay,
of any danger to the thing pledged. (n)
Art. 2108. If, without the fault of the pledgee, there is danger
of destruction, impairment, or diminution in value of the
thing pledged, he may cause the same to be sold at a public
sale. The proceeds of the auction shall be a security for the
principal obligation in the same manner as the thing
originally pledged. (n)
Art. 2109. If the creditor is deceived on the substance or
quality of the thing pledged, he may either claim another
thing in its stead, or demand immediate payment of the
principal obligation. (n)
Art. 2110. If the thing pledged is returned by the pledgee to
the pledgor or owner, the pledge is extinguished. Any
stipulation to the contrary shall be void.
If subsequent to the perfection of the pledge, the thing is in
the possession of the pledgor or owner, there is a prima facie
presumption that the same has been returned by the
pledgee. This same presumption exists if the thing pledged is
in the possession of a third person who has received it from
the pledgor or owner after the constitution of the pledge.
CHAPTER 2
MOVABLE PROPERTY
Art. 416. The following things are deemed to be personal
property:
(1) Those movables susceptible of appropriation which are
not included in the preceding article;
(2) Real property which by any special provision of law is
considered as personal property;
(3) Forces of nature which are brought under control by
science; and
(4) In general, all things which can be transported from place
to place without impairment of the real property to which
they are fixed. (335a)
Art. 417. The following are also considered as personal
property:
(1) Obligations and actions which have for their object
movables or demandable sums; and
(2) Shares of stock of agricultural, commercial and industrial
entities, although they may have real estate. (336a)
Art. 418. Movable property is either consumable or
nonconsumable. To the first class belong those movables
which cannot be used in a manner appropriate to their
nature without their being consumed; to the second class
belong all the others. (337)
Art. 2125. In addition to the requisites stated in Article 2085,
it is indispensable, in order that a mortgage may be validly
constituted, that the document in which it appears be
recorded in the Registry of Property. If the instrument is not
recorded, the mortgage is nevertheless binding between the
parties.
The persons in whose favor the law establishes a mortgage
have no other right than to demand the execution and the
recording of the document in which the mortgage is
formalized.

Art. 2126. The mortgage directly and immediately subjects

the property upon which it is imposed, whoever the
possessor may be, to the fulfillment of the obligation for
whose security it was constituted. (1876)

PPSA
Art. 2140. By a chattel mortgage, personal property is
recorded in the Chattel Mortgage Register as a security for
the performance of an obligation. If the movable, instead of
being recorded, is delivered to the creditor or a third person,
the contract is a pledge and not a chattel mortgage.
Personal Property Security Agreement
A. Introduction and General Concepts Civil Code Art. 2140
Republic Act No. 11057,
Sec. 2. – declaration of policy; promote econ activity;
access to least cost credit
Sec. 66, - repeal sec 1-15 of CM law; NCC prov; others
Sec. 60-62, Congressional oversight; Interpretation;
IRR
Sec. 67, - effectivity
Sec. 68, - implementation conditioned on
establishment of registry
Sec. 65. – separability clause
B. Scope of the PPSA
Sec. 4. – scope; obligation; security using movable
collateral; exceptions;
C. Security Interest
Sec. 3. (j) - defn: security interest
Sec. 3 (c)- defn: grantor – 4 instances
Sec. 3 (i) - defn: secured creditor
Sec. 9 – continuity of security interest – except:
sec21(transfree in GF) or agreement
Sec. 8 – right to proceeds; commigled funds
1. Security interest extends to
traceable/identifiable proceeds
2. Money commingled
a. Extend to funds
b. Limited to amount
c. If balance is less – limited to lowest
amount of commingled funds…
Sec. 3 (f) - defn: proceeds – from collateral
Civil Code, Art. 2126
1. Creation
R.A. No. 11057, Sec. 5 – Creation of a security interest: a. by
security agreement, b. in future properties
a. Object
Sec. 4 – scope: movable collateral
Sec. 5 – includes future prop
Civil Code,
Art. 416, Art. 417 – immovable prop
CASES:
Makati Leasing & Finance Corporation v. Wearever
Textile Mills, Inc. & Court of Appeals, G.R. No. L-58469,
May 16, 1983, 122 SCRA 296.
Manila Banking Corporation v. Teodoro, Jr. and
Teodoro, G.R. No. 53955, January 13, 1989, 169 SCRA
95.
Yau Chu v. Court of Appeals et al., G.R. No. L-78519,
September 26, 1989, 177
SCRA 793.
b. Form
Sec. 6 – written contract signed by parties; maybe 1 or
more writings; language -any
Sec. 3 (k) – denf – “writing” includes electronic records
Sec. 7 – Description of collateral – reasonably
identifies
c. Asset-Specific Rules - Accounts Receivable
Sec. 10 – Contractual Limitation on creation of a
security interest; right of a grantor to create security interest
d. Disclosure of Information by Secured Creditor
Sec. 37 – Disclosure of information; creditor to supply
information; creditor may require payment of fee for
information
2. Perfection
Sec. 11 – perfection of a security interest: refers to
sec12; perfection -> effective against 3rd persons
Sec. 25 – Fixtures, accessions, commingled goods –
security continues if it can be reasonably traced
Sec. 12 – means of perfection – registration,
possession of collateral or control of property
Sec. 15 - Change in means of perfection – remains
perfected
Civil Code, Art. 2125. - recording
R.A. No. 11057, Sec. 13 – Perfection by control:
a. deposit account/investment property – 3
instances
Sec. 3. (b) – control agreement
a. Disposition of Perfected Security Interest
Sec. 9 – continuity of SI
Sec. 21 – GF transferee exception
Sec. 14 – Perfection in Proceeds of a collateral;
Different means -> a. in money; b. not in money
Sec. 3 (f) – defn: proceeds
b. Assignment of Security Interest
Sec. 16. – Assignment of Security Interest: an
amendment notice may be registered
D. The Registry
Sec. 26 – Est. Electronic Registry- by LRA
Sec. 64 – Funds: from funds collected by LRA
Sec. 38 – Fees
Sec. 27 – Public Record: info in registered notice
Sec. 35 – Duties of Registry; admin in nature
Sec. 28-31 – Notice; *read more
Sec. 44 – civil and criminal penalties-malicious
registration/search
Sec. 36.
Sec. 32-34
Sec. 39- 43

E. Priority of Security Interest

Sec. 17-22
Sec. 3 (g), Sec. 23
PCI Leasing & Finance, Inc. v. Trojan Metal Industries Inc., et
al., G.R. No. 176381, December 15, 2010, 638 SCRA 615.
Sec. 24
F. Enforcement of Security Interest Sec. 47, Sec. 63
Sec. 46, Sec. 48
Citibank, N.A. & Investors Finance Corporation v. Sabeniano,
G.R. No. 156132, October 12, 2006, 504 SCRA 378.
Sec. 49-51
Sec. 45
Paray & Espeleta v. Rodriguez, et al., G.R. No. 132287,
January 24, 2006, 479 SCRA 571.
Sec. 52-54
G. Transitional Provisions Sec. 55-59