Credit Transactions

CREDIT TRANSACTIONS A. Credit Transaction include all transactions involving the purchase or loan of goods, services or money in the present with a promise to pay or deliver in the the future. 1. By the use of credit more exchanges are possible, persons are able to enjoy a thing today but pay for it later and through the banking system actual money transfer is illuminated by cancellation of debts and credits. 2 2. Credit transactions are really contract of security. (a). secured transaction or contracts of real security. Those supported by collateral or an encumbrance of property; Ex; pledge, mortgage, antichresis. (b). unsecured transaction or contracts of personal security. Those the fulfilment of which by the principal debtor is secured or supported only by a promise to pay or the personal commitment of another such as a guarantor or surety. 3 BAILMENT Defined. ▣ Bailment is the delivery of property by one person to another in trust for a specific purposes with a contract express or implied that the trust shall be faithfully executed and the property returned or duly accounted for when the purpose is duly accomplished or kept it until the owner reclaims. In general bailment maybe said to be a contractual relation, by agreement or by operation of law. 4 PARTIES TO A BAILMENT ▣ Creation of Bailment. ▣ (1.) by agreement (2). By operation of law ▣ a. Bailor - the giver- the party who delivered the possession or custody of the thing bailed. ▣ b. Bailee - the recipient- the party who receives the possession of the thing thus delivered. (Obligation of parties). 5 SUBJECT UNDER BAILMENT The following subjects fall under Bailments: ▣ 1. COMMODATUM – It is a gratuitous loan of a thing, to be used for a certain time and for a certain purpose, and with the obligation to return the same thing after the time expires or the purpose accomplished. (Art.1935, NCC) ▣ 2. MUTUM – A contract by virtue of which one of the contracting parties delivers to the other money or any other consumable thing subject to the condition that the same amount of the same kind and quality be paid or returned. (Art. 1938, NCC.) 7 ▣ 3. DEPOSIT – When a person receives a thing belonging to another with the obligation to safely keeping and returning it at the instance of the owner or depositor. ▣ 4. PLEDGE – The deposit of the personal property by a debtor with a creditor as security for payment of the debt. A bailment of a chattel (generally personal property) as security for the debt without effecting a transfer of title. (Hemphill’s Law Dictionary.) (The provisions of the NCC on pledge was repealed, amended, modified by the Personal Property Security Act (RA 11057) ▣ 5. LEASE – A written agreement under which possession and use of property is granted, for a specified time, for a specified payment. The landlord (lessor) and the tenant (lessee) relationship. (Hemphill’s Law Dictionary.) 8 SCOPE OF CREDIT TRANSACTIONS The study of Credit Transactions is wider in scope than Bailments and aside from the abovementioned subjects under Bailments, the following additional subjects make up the whole Credit Transactions: 1. WAREHOUSE RECEIPT – A receipt showing storage of goods or property in a warehouse; it is sometimes used as an Instruments and is evidence of Title to the property in storage. (Hemphill’s Law Dictionary.) 10 2. GUARANTY – An undertaking to be legally responsible for the payment of a debt of another or for the performance of another’s act6 that is required as a legal obligation. A guarantor (one who furnishes a guaranty) is secondarily liable, and in some instances may be released form liability if there is a failure to make a demand on the principal debtor, or to pursue available remedies against the debtor. (Hemphill’s Law Dictionary) 3. SURETYSHIP – In a contract of Suretyship, one part agrees to be answerable for the debt of another or for the performance of another’s act that is required as a legal obligation. A guarantor (one who furnishes a guaranty) is secondarily liable, and in some instances may be released from liability if there is a failure to make a demand on the principal debtor, or to pursue available remedies against the debtor. (Hemphill’s Law Dictionary) 11 4. MORTGAGE – The transfer of property passing conditionally as security for a debt. (Ibid.) Mortgage may be: a) REAL ESTATE MORTGAGE – It is an accessory obligation whereby real property is offered as security for a debt or loan. b) CHATTEL MORTGAGE – It is an accessory obligation whereby real property is offered as security for a debt or loan. (laws on chattel mortgage repealed modified, amended by PPSA (RA 11057) 12 5. ANTICHRESIS – A contract by virtue of which the creditor acquires the right to receive the fruits of an immovable of his debtor, with the obligation to apply them to the payment of the interest, if owing, and thereafter to the principal of his credit. (Art.2132, Civil Code.) 13 LOAN LOAN define ▣ By the contract of loan, one of the parties delivers to another, either something not consumable so that the latter may use the same for a certain time and return it, in which case the contract is called a commodatum; or money or other consumable thing, upon the condition that the same amount of the same kind and quality shall be paid, in which case the contract is simply called a loan or mutuum. (Art. 1933) 15 ▣ Commodatum is essentially gratuitous. ▣ Simple loan may be gratuitous or with a stipulation to pay interest ▣ In commodatum, the bailor retains the ownership of the thing loaned, while in simple loan, ownership passes to the borrower. 16 PRINCIPAL KINDS OF LOAN The principal kinds of loan are: ▣ 1. COMMODATUM – it is gratuitous lending by the lender of a non-consumable thing or object to the borrower to be used for a certain period of time or for a specific purpose. The borrower has the obligation to return the same thing after the period expires or after the purpose is accomplished in the same condition as when he received it from the lender. 17 2. MUTUUM OR SIMPLE LOAN – where the lender lends or delivers to the borrower money or some other consumable thing for a specified time mutually agreed upon. The debtor must return the same amount of money or thing of the same kind and quality on the agreed date. The loan of money may bear interest according to their agreement. A thing is consumable when it is consumed in a manner appropriate to its purpose or nature; Ex rice, sugar, gasoline, fruit etc. • Obligation of the borrower is to pay: • The contract of mutum involves the return of the equivalent only and not the identical thing because the borrower acquires ownership thereof. 18 COMMODATUM AND MUTUUM, distinguished It is the essential that proper distinction be made between these two kinds of Loan as the parties to each contract have entirely different rights and liabilities. Distinguished from barter. By the contract of barter one of the parties bind himself to give one thing in exchange of another thing by the other. 19 1. As to Nature of the Contract ▣ a. COMMODATUM – is gratuitous in nature. The lender is lending the object to the borrower without any compensation. The only liability of the borrower is to return the very same thing loaned in the same condition at the same time agreed upon. ▣ b. MUTUUM – As a rule, the loan is onerous. In loan of money, interest is usually charged. Mutuum or simple loan may also be gratuitous. 20 2. As to Object a. In Commodatum – Object is a non-consumable or non-fungible thing. May refer also to immovable or personal property. b. In Mutuum – Object is money or any consumable or fungible thing. Refers only to personal property. 3. As to Ownership a. In Commodatum – Ownership of the thing loaned to borrower is retained by the lender. b. In Mutuum – Ownership of the thing loaned is immediately transferred to the borrower. 21 4. As to Consideration a. In Commadatum – Commadatum is essentially gratuitous. b. In Mutuum – Mutuum may be gratuitous or onerous. 5. As to Purpose a. In Commadatum – Object is to be used for certain time or for a certain purpose. b. In Mutuum – Generally the object is for consumption. Money is to be spent and the other personal property (gasoline, oil, etc.) to be consumed. 22 6. As to Return of Object a. In Commodatum – The same object or thing loaned must be returned by the borrower in the same condition as when it was loaned to him b. In Mutuum – The debtor must pay or return an equal amount of the same kind and quality. 23 ▣ ART. 1934. An accepted promise to deliver something by way of commodatum or simple loan is binding upon the parties, but the commadatum or simple loan itself shall not be perfected until the delivery of the object of the contract. (Note: binding effect of accepted promise). ▣ Contract of commodatum or mutuum perfected by the actual delivery of prestation. By the acceptance of the promise to lend his car to A the borrower, B can demand the delivery to him of the car because it is a perfected contract. 24 CHAPTER 1 COMMODATUM Section 1 – NATURE OF COMMODATUM ▣ ART. 1935. The bailee in commodatum acquires the use of the thing loaned but not its fruits; if any compensation is to be paid by him who acquires the use, the contract ceases to be a commodatum. ▣ (Commodatum essentially gratuitous) BAILEE LIMITED TO USE OF OBJECT ▣ As already previously stated, Commodatum is the gratuitous loan of a non-consumable thing, and the bailee is limited to the use of the thing only but not to its fruits. However, Art. 1940 says that a stipulation that the bailee may make use of the fruits of the thing loaned is valid. ▣ If the bailee is allowed the use of the thing loaned, the contract ceases to be a Commodatum and becomes a contract of lease. 26 ▣ ART. 1936. Consumable goods may be the subject of commodatum if the purpose of the contract ceases to be a Commodatum and becomes a contract of lease, which will be discussed in detail under Title VIII – Lease. ▣ ART.1937. Movable or immovable property may be the object of commodatum. ▣ Subject matter: In commodatum the subject matter is generally non-consumable things whether real or personal. ▣ Q. May consumable be the object of commodatum? 27 WHEN CONSUMABLE GOODS MAY BE SUBJECT OF COMMODATUM ▣ As a general rule, the object of a contract of commodatum may be non-consumable things, either real or personal property. However, consumable goods or things, either real or personal property. However, consumable goods or things may also be considered valid objects of commodatum if such goods are not to be consumed but instead to be used only for exhibition or advertisement purposes. ▣ Ex. – A borrows from B 5 bottles of Chanel perfume, not to consumed but to be used for display in her shop. This now is a contract of commodatum. 28 KINDS OF GOODS 1. Consumable - a personal property which cannot be used in the manner appropriate to its nature without its being consumed, e.g. gasoline, sugar, etc. 2. Non-consumable –, a personal property which can be used in a manner appropriate to its nature without being consumed, e.g. book. Also refers to immovable property. 3. Fungible – if the intention is to allow a substitution or replacement of the thing loaned with something of the same kind and quality, e.g. rice, corn, other grains. 4. Non-fungible -, if the intention is to compel a return of the identical thing given. 29 NOTES: 1. whether a thing is consumable or not depends on the nature of the thing. 2. Whether it is fungible or not depends on the intention of the parties. ▣ Example – Sugar is ordinarily consumable and fungible, but if the intention is merely to display it for exhibition without being consumed, then it is considered non-fungible. 30 ▣ ART.1938. The bailor in commodatum need not to be the owner of the thing loaned. OWNERSHIP NOT TRANSFERRED ▣ The bailor need not to be the owner of the thing loaned because ownership is not transferred to the bailee. But it is important that the bailor has the right to the use of the thing and is authorized or allowed to alienate such right gratuitously, i.e. a lessee may lend the thing leased to the bailee. However, a bailee is not allowed to lend the thing loaned to him to another third party. ▣ * Another example is a ususufructuary. 31 ▣ ART.1939. Commodatum is purely personal in character. Consequently: 1. The death of either the bailor or the bailee extinguishes the contract; 2. The bailee can neither lend nor lease the object of the contract to a third person. However, the members of the bailee’s household may make use of the thing loaned, unless there is a stipulation to the contrary, or unless the nature of the thing forbids such use. 3. (note: purely personal in character). 32 ART. 1940. A stipulation that the bailee may make use of the fruits of the thing loaned is valid. ▣ As stipulated in Art.1935, the bailee acquires the use of the thing loaned but he is not entitled to its fruits because the fruits actually belong to the owner of the thing. The above Article states that any agreement giving the bailee the right use the fruits is valid. ▣ Ex. A lends his karaoke to B. B cannot lend it to his friends, but B’s family can use the same. ▣ (Note: Contrary stipulation as to fruits). 33 Section 2 – OBLIGATIONS OF THE BAILEE ▣ ART.1941. The bailee is obliged to pay for the ordinary expenses for the use and preservation of the thing loaned. BAILEE LIABLE FOR ORDINARY EXPENSES The bailee has the following obligations under this Article: 1. During his use of the thing loaned, he must take care of it with the proper diligence of a good father of a family; and 2. He must pay for all the expenses for the use and preservation of thing loaned. ▣ Example – A lends his car to B. B must pay for the cost of oil, gasoline, etc. and the expenses necessary for the preservation of A’s car. 34 Art. 1942. The bailee is liable for the loss of the thing, even if it should be through a fortuitous event: 1. If he devotes the thing to any purpose different from that for which it has been loaned; 2. If he keeps it longer than the period stipulated, or after the accomplishment of the use for which the commodatum has been constituted; 3. If the thing loaned has been delivered with appraisal of its value, unless there is a stipulation exemption the bailee from responsibility in case of a fortuitous event; 4. Note: Liability for loss of the thing loan). 35 4. If he lends or leases the thing to a third person, who is not a member of his household; 5. If, being able to save either the thing borrowed or his own thing, he chose to save the latter. (Notes: As a general rule the bailee is not liable for loss or damaged due to fortuitous events: However, under the provisions mentioned enumerated the reason for such liability). 36 Art. 1943. The bailee does not answer for the deterioration of the thing loaned due only to the use thereof and without his fault. (No liability for deterioration for use without his fault) Q. When bailee maybe liable for deterioration? BAILEE NOT LIABLE FOR ORDINARY WEAR AND TEAR As a rule, the bailee will not be liable for the deterioration of the thing due to the daily ordinary wear and tear. However, as stated in the preceeding article, the bailee becomes liable: 1) if he uses the thing for different purposes, or 2) due to his fault and negligence. 37 Art. 1944. The bailee cannot retain the thing loaned on the ground that the bailor owes him something, even though it may be by reason of expenses. However, the bailee has a right of retention for damages mentioned in Article 1951. BAILEE’S RIGHT OF RETENTION As a rule, the bailee cannot retain the thing loaned to him because the bailor owes him something. But he has the right of retention of the thing until the bailor pays for damages mentioned in Article 1951. Rules: 1. Ownership remains to the bailor 2. Only temporary use is given to the bailee Exception Art. 1951 giving bailee right of retention is of 38 evident justice Art. 1945. When there are two or more bailees to whom a thing is loaned in the same contract, they are liable solidarily. This Article is self-explanatory. Contrary to the rule in Article 1207 that the concurrence of two or more creditors or two or more debtors will only mean joint liability, unless there is express stipulation to the contrary. In the case, the two or more bailees will be automatically considered solidarily liable. 39 SECTION 3 – OBLIGATIONS OF THE BAILOR ▣ Art. 1946. The bailor cannot demand the return of the thing loaned till after the expiration of the period stipulated, or after the accomplishment of the use for which the commodatum has been constituted. However, if in the meantime, he should have urgent need of the thing, he may demand its return or temporary use. ▣ In case of temporary use by the bailor, the contract of commodatum is suspended while the thing is in the possession of the bailor. 40 TEMPORARY USE OF THE THING BY BAILOR As a rule, the bailor cannot ask for the return of the thing loaned 1. until the accomplishment of the purpose for which the thing was loaned; or 2. until the period of use as stipulated in the contract expires. ▣ Exceptions – The bailor may ask for the immediate return of the thing loadeda) If he has an urgent need of the thing; or b) If he wants to use the thing temporarily. 41 ▣ After the urgent need or use of the thing, the bailor has the obligation to return it to the bailee. In the meantime, the terms of the contract of commodatum will be suspended while the thing remains in the possession of the bailor. The contract will resume after the return of the thing loaned to the bailee. 42 Art. 1947. The bailor may demand the thing at will, and the contractual relation is called a precarium, in the following cases: 1. If neither the duration of the contract nor the use to which the thing loaned should be devoted, has been stipulated; or 2. If the use of the thing is merely tolerated by the owner. 43 ▣ KINDS OF COMMODATUM 1) Precarium – where the owner of the thing lends it gratuitously for use of the bailee for as long as the bailor or owner pleases. He can demand the return of the thing at will. 2) Ordinary – A gratuitous loan of a thing to the bailee, subject to its return at a specific date or after the accomplishment of the purpose. In Precarium, the bailor may demand the return of the thing loaned at will under the following cases; ▣ 1) If there is no specific date or period within which to return it; or ▣ 2) If the is no particular purpose for which it will be used; or ▣ 3) If the bailor is merely tolerating the use of the thing by the bailee. 44 Art. 1948. The bailor may demand the immediate return of the thing if the bailee commits any act of ingratitude specified in Article 765. Whether there is a specified period or a specific purpose for the use of the thing, the bailor can demand the immediate return of the thing if the bailee commits any of the following acts of ingratitude as specified in Article 765: 1. If the bailee should commit some offense against the person, the honor or the property of the bailor, of his wife or children under his parental authority; 45 ▣ 2. If the bailee imputes to the bailor any criminal offense, or any act involving moral turpitude, even though he should prove it, unless the crime or the act has been committed against the bailee himself, his wife or children under his authority; ▣ 3. If the bailee unduly refuses the bailor support when the bailee is legally or morally bound to give support to the bailor. 46 Art. 1949. The bailor shall refund the extraordinary expenses during the contract for the preservation of the thing loaned, provided the bailee brings the same to the knowledge of the bailor before incurring them, except when they are so urgent that the reply to the notification cannot be awaited without danger. Art. 1950. If, for the purpose of making use of the thing, the bailee incurs expenses other than those referred to in Articles 1941 and 1949, he is not entitled to reimbursement. 47 NO REIMBURSEMENT FOR OTHER EXPENSES If, in the use of the thing loaned, the bailee incurs expenses other than: 1. Those ordinary expenses for the use and preservation of the thing (Art.1491), or 2. Extraordinary expenses for the preservation of the thing (Art.1949). He is not entitled to reimbursement. 48 Example – A lends his jeepney to B to be used in B’s election campaign. B buys a loud speaker system and attaches it to the jeep for use in his campaign tour. Question – After the election campaign, can B ask for a reimbursement of the cost of the loud speaker system? No, He cannot seek reimbursement because such expense is not necessary for the preservation of the vehicle, but it was bought more for his own purpose and benefit. 49 Art. 1951. The bailor who, knowing the flaws of the thing loaned, does not advise the bailee of the same, shall be liable to the latter for the damages which he may suffer by reason thereof. Art. 1952. The bailor cannot exempt himself from the payment of expenses or damages by abandoning the thing to the bailee. This is self-explanatory. The bailor cannot exempt himself from the payment of expenses or damages by abandoning the thing loaned to the bailee. 50 Art. 1951. The bailor who, knowing the flaws of the thing loaned, does not advise the bailee of the same, shall be liable to the latter for the damages which he may suffer by reason thereof. Art. 1952. The bailor cannot exempt himself from the payment of expenses or damages by abandoning the thing to the bailee. This is self-explanatory. The bailor cannot exempt himself from the payment of expenses or damages by abandoning the thing loaned to the bailee. 51 Art. 1955. The obligation of a person who borrowed money shall be governed by the provision of Art. 1249 and 1250 of this Code. If what was loaned is a fungible thing other than money, the debtor owes another thing of the same kind, quality and quantity even if it should change in value. In case it is impossible to deliver the same kind, its value at the time of the perfection of the loan shall be paid. Article 1956. No interest shall be due unless it has been expressly stipulated in writing. Article 1957. Contracts and stipulations, under any cloak or device whatever, intended to circumvent the laws against usury shall be void. The borrower may recover in accordance with the laws on usury. 52 Article 1958. In the determination of the interest, if it is payable in kind, its value shall be appraised at the current price of the products or goods at the time and place of payment. Article 1959. Without prejudice to the provisions of article 2212, interest due and unpaid shall not earn interest. However, the contracting parties may by stipulation capitalize the interest due and unpaid, which as added principal, shall earn new interest. 53 Article 1960. If the borrower pays interest when there has been no stipulation therefor, the provisions of this Code concerning solutio indebiti, or natural obligations, shall be applied, as the case may be. Article 1961. Usurious contracts shall be governed by the Usury Law and other special laws, so far as they are not inconsistent with this Code. 54 DEPOSIT IN GENERAL AND ITS DIFFERENT KINDS Article 1962. A deposit is constituted from the moment a person receives a thing belonging to another, with the obligation of safely keeping it and of returning the same. If the safekeeping of the thing delivered is not the principal purpose of the contract, there is no deposit but some other contract. DEPOSIT, defined: It is a contract which is constituted from the moment a person receives a thing belonging to another with the obligation of safely keeping it and returning the same. 56 ELEMENTS OF DEPOSIT 1.) There must be actual delivery of the thing for safekeeping. Deposit is considered a real contract which is perfected only upon the actual delivery of the thing. 2.) The primary purpose of Deposit is safekeeping of the thing. 3.) It may be gratuitous or onerous. 57 PRINCIPAL PARTIES ▣ 1.) The Depositary (Depositante) – the person who deposits the thing for safekeeping. ▣ 2.) The Depositary (Depositorio) – the person who receives the thing for safekeeping. 58 KINDS OF DEPOSIT 1.) Judicial Deposit (Sequestration) – when deposit is constituted by order of the court for the attachment or seizure of property in litigation. 2.) Extrajudicial Deposit a) Voluntarily Deposit – when deposit is constituted by the voluntary will of the depositor. b) Necessary Deposit – which is constituted: - o in compliance with a legal obligation – Art.1996 o on the occasion of a natural calamity - Art.1996 o by passengers of common carriers – Art. 1754 o by guests in hotels or inns – Art.1998 59 DISTINCTION BETWEEN JUDICIAL & EXTRAJUDICIAL DEPOSIT: JUDICIAL EXTRAJUDICIAL 60 1. How constituted By order of the court By voluntary will of parties 2. Object of Deposit Movables or Immovables Movables only. 3. Purpose To secure or protect the owner’s right Only for safekeeping 4. Nature Onerous, the depositary must be paid May be gratuitous or onerous. 5. As to return of Object Delivered upon order of the court. Upon demand by the depositor. DISTINCTION BETWEEN DEPOSIT AND COMMODATUM: DEPOSIT COMMADATUM 61 How constituted Judicially or extrajudicially Extrajudicially only. Object of Deposit Movables or Immovables As a rule, nonconsumables Purpose Safekeeping of thing Use of the thing. Nature May be gratuitous or onerous. Always gratuitous. DISTINCTION BETWEEN DEPOSIT AND MUTUUM: DEPOSIT COMMADATUM 62 How constituted Judicially or extrajudicially Extrajudicially, Object of Deposit Movables or Immovables Money and fungible things Purpose Safekeeping of thing Consumption of the thing Nature Upon demand of the depositor. Upon arrival of maturity date. Article 1963. An agreement to constitute a deposit is binding, but the deposit itself is not perfected until the delivery of the thing. Article 1964. A deposit may be constituted judicially or extrajudicially. Article 1965. A deposit is a gratuitous contract, except when there is an agreement to the contrary, or unless the depositary is engaged in the business of storing goods. Article 1966. Only movable things may be the object of a deposit. 63 Article 1963. An agreement to constitute a deposit is binding, but the deposit itself is not perfected until the delivery of the thing. Article 1964. A deposit may be constituted judicially or extrajudicially. Article 1965. A deposit is a gratuitous contract, except when there is an agreement to the contrary, or unless the depositary is engaged in the business of storing goods. Article 1966. Only movable things may be the object of a deposit. Article 1967. An extrajudicial deposit is either voluntary or necessary. 64 VOLUNTARY DEPOSIT Section 1 – GENERAL PROVISIONS Article 1968. A voluntary deposit is that wherein the delivery is made by the will of the depositor. A deposit may also be made by two or more persons each of whom believes himself entitled to the thing deposited with a third person, who shall deliver it in a proper case to the one to whom it belongs. Article 1969. A contract of deposit may be entered into orally or in writing. Article 1970. If a person having capacity to contract accepts a deposit made by one who is incapacitated, the former shall be subject to all the obligations of a depositary, and may be compelled to return the thing by the guardian, or administrator, of the person who made the deposit, or by the latter himself if he should acquire capacity. 66 Article 1971. If the deposit has been made by a capacitated person with another who is not, the depositor shall only have an action to recover the thing deposited while it is still in the possession of the depositary, or to compel the latter to pay him the amount by which he may have enriched or benefited himself with the thing or its price. However, if a third person who acquired the thing acted in bad faith, the depositor may bring an action against him for its recovery. 67 Section 2 - OBLIGATIONS OF THE DEPOSITARY Article 1972. The depositary is obliged to keep the thing safely and to return it, when required, to the depositor, or to his heirs and successors, or to the person who may have been designated in the contract. His responsibility, with regard to the safekeeping and the loss of the thing, shall be governed by the provisions of Title I of this Book. If the deposit is gratuitous, this fact shall be taken into account in determining the degree of care that the depositary must observe. Article 1973. Unless there is a stipulation to the contrary, the depositary cannot deposit the thing with a third person. If deposit with a third person is allowed, the depositary is liable for the loss if he deposited the thing with a person who is manifestly careless or unfit. The depositary is responsible for the negligence of his employees. 68 Article 1974. The depositary may change the way of the deposit if under the circumstances he may reasonably presume that the depositor would consent to the change if he knew of the facts of the situation. However, before the depositary may make such change, he shall notify the depositor thereof and wait for his decision, unless delay would cause danger. Article 1975. The depositary holding certificates, bonds, securities or instruments which earn interest shall be bound to collect the latter when it becomes due, and to take such steps as may be necessary in order that the securities may preserve their value and the rights corresponding to them according to law. The above provision shall not apply to contracts for the rent of safety deposit boxes. 69 Article 1976. Unless there is a stipulation to the contrary, the depositary may commingle grain or other articles of the same kind and quality, in which case the various depositors shall own or have a proportionate interest in the mass. Article 1977. The depositary cannot make use of the thing deposited without the express permission of the depositor. Otherwise, he shall be liable for damages. However, when the preservation of the thing deposited requires its use, it must be used but only for that purpose. 70 Article 1978. When the depositary has permission to use the thing deposited, the contract loses the concept of a deposit and becomes a loan or commodatum, except where safekeeping is still the principal purpose of the contract. The permission shall not be presumed, and its existence must be proved. Article 1979. The depositary is liable for the loss of the thing through a fortuitous event: (1) If it is so stipulated; (2) If he uses the thing without the depositor's permission; (3) If he delays its return; (4) If he allows others to use it, even though he himself may have been authorized to use the same. 71 Article 1980. Fixed, savings, and current deposits of money in banks and similar institutions shall be governed by the provisions concerning simple loan. Article 1981. When the thing deposited is delivered, closed, and sealed the depositary must return it in the same condition and he shall be liable for damages should the seal or lock be broken through his fault. Fault on the part of the depositary is presumed unless there is proof to the contrary As regards the value of the thing deposited the statement of the depositor shall be accepted when the forcible opening is imputable to the depositary, should there be no proof to the contrary. However, the courts may pass upon the credibility of the depositor with respect to the value claimed by him. When the seal or lock is broken with or without the depositary’s fault, he shall keep the secret of the deposit. 72 Art. 1982. When it becomes necessary to open a locked box or receptacle, the depositary is presumed authorized to do so, if the key has been delivered to him or when the instruction of the depositor as regards the deposit cannot be executed without opening the box or receptacle. Art. 1983. The thing deposited shall be returned with all its products, accessories, and accessions Should the deposit consist of money, the provisions relative to agents in Article 1896 shall be applied to the depositary. 73 Article 1984. The depositary cannot demand that the depositor prove his ownership of the thing deposited. Nevertheless, should he discover that the thing has been stolen and who its true owner is, he must advise the latter of the deposit. If the owner, in spite of such information, does not claim it within the period of one month, the depositary shall be relieved of all responsibility by returning the thing deposited to the depositor. If the depositary has reasonable grounds to believe that the thing has not been lawfully acquired by the depositor, the former may return the same. (1771a) 74 Article 1985. When there are two or more depositors, if they are not solidary, and the thing admits of division, each one cannot demand more than his share. When there is solidarity or the thing does not admit of division, the provisions of articles 1212 and 1214 shall govern. However, if there is a stipulation that the thing should be returned to one of the depositors, the depositary shall return it only to the person designated. (1772a) 75 Article 1986. If the depositor should lose his capacity to contract after having made the deposit, the thing cannot be returned except to the persons who may have the administration of his property and rights. (1773) Article 1987. If at the time the deposit was made a place was designated for the return of the thing, the depositary must take the thing deposited to such place; but the expenses for transportation shall be borne by the depositor. If no place has been designated for the return, it shall be made where the thing deposited may be, even if it should not be the same place where the deposit was made, provided that there was no malice on the part of the depositary. (1774) 76 Article 1988. The thing deposited must be returned to the depositor upon demand, even though a specified period or time for such return may have been fixed. This provision shall not apply when the thing is judicially attached while in the depositary’s possession, or should he have been notified of the opposition of a third person to the return or the removal of the thing deposited. In these cases, the depositary must immediately inform the depositor of the attachment or opposition. (1775) 77 Article 1989. Unless the deposit is for a valuable consideration, the depositary who may have justifiable reasons for not keeping the thing deposited may, even before the time designated, return it to the depositor; and if the latter should refuse to receive it, the depositary may secure its consignation from the court. (1776a) Article 1990. If the depositary by force majeure or government order loses the thing and receives money or another thing in its place, he shall deliver the sum or other thing to the depositor. (1777a) Liability for loss by force majeure or government order. Article 1991. The depositor’s heir who in good faith may have sold the thing which he did not know was deposited, shall only be bound to return the price he may have received or to assign his right of action against the buyer in case the price has not been paid him. (1778) 78 SECTION 3 - Obligations of the Depositor Article 1992. If the deposit is gratuitous, the depositor is obliged to reimburse the depositary for the expenses he may have incurred for the preservation of the thing deposited. (1779a) Article 1993. The depositor shall reimburse the depositary for any loss arising from the character of the thing deposited, unless at the time of the constitution of the deposit the former was not aware of, or was not expected to know the dangerous character of the thing, or unless he notified the depositary of the same, or the latter was aware of it without advice from the depositor. (n) Article 1994. The depositary may retain the thing in pledge until the full payment of what may be due him by reason of the deposit. (1780) 79 Article 1995. A deposit is extinguished: (1) Upon the loss or destruction of the thing deposited: (2) In case of gratuitous deposit, upon the death of either the depositor or the depositary. (3) In case of gratuitous deposit upon the death of either the depositor or the depositary. Note: The causes for extinguishment of deposit mentioned in said Art. 1995 are not exclusive; There are other cases such as return of the thing, novation, merger, fulfilment of the resolutory conditions etc. (Art 1231). 80 Necessary Deposit Article 1996. A deposit is necessary: (1) When it is made in compliance with a legal obligation. (2) When it takes place on the occasion of any calamity such as fire, stormpilage, shipwreck, or other similar events. Note: A deposit maybe voluntary Article 1997. The deposit referred to in No. 1 of the preceding article shall be governed by the provisions of the law establishing it, and in case of its deficiency, by the rules on voluntary deposit. The deposit mentioned in No. 2 of the preceding article shall be regulated by the provisions concerning voluntary deposit and by article 2168. (1782) 82 Article 1998. The deposit of effects made by travellers in hotels or inns shall also be regarded as necessary. The keepers of hotels or inns shall be responsible for them as depositaries, provided that notice was given to them, or to their employees, of the effects brought by the guests and that, on the part of the latter, they take the precautions which said hotel-keepers or their substitutes advised relative to the care and vigilance of their effects. (1783) Article 1999. The hotelkeeper is liable for the vehicles, animals and articles which have been introduced or placed in the annexes of the hotel. (n) Article 2000. The responsibility referred to in the two preceding articles shall include the loss of, or injury to the personal property of the guests caused by the servants or employees of the keepers of hotels or inns as well as strangers; but not that which may proceed from any force majeure. The fact that travellers are constrained to rely on the vigilance of the keeper of the hotels or inns shall be considered in determining the degree of care required of him. (1784a) 83 Article 2001. The act of a thief or robber, who has entered the hotel is not deemed force majeure, unless it is done with the use of arms or through an irresistible force. (n) Article 2002. The hotelkeeper is not liable for compensation if the loss is due to the acts of the guest, his family, servants, or visitors, or if the loss arises from the character of the things brought into the hotel. (n) Article 2003. The hotelkeeper cannot free himself from responsibility by posting notices to the effect that he is not liable for the articles brought by the guest. Any stipulation between the hotel-keeper and the guest whereby the responsibility of the former as set forth in articles 1998 to 2001 is suppressed or diminished shall be void. (n) Article 2004. The hotel-keeper has a right to retain the things brought into the hotel by the guest, as a security for credits on account of lodging, and supplies usually furnished to hotel guests. (n) 84 SEQUESTRATION OF JUDICIAL DEPOSIT Article 2001. The act of a thief or robber, who has entered the hotel is not deemed force majeure, unless it is done with the use of arms or through an irresistible force. (n) Article 2002. The hotelkeeper is not liable for compensation if the loss is due to the acts of the guest, his family, servants, or visitors, or if the loss arises from the character of the things brought into the hotel. (n) Article 2003. The hotelkeeper cannot free himself from responsibility by posting notices to the effect that he is not liable for the articles brought by the guest. Any stipulation between the hotel-keeper and the guest whereby the responsibility of the former as set forth in articles 1998 to 2001 is suppressed or diminished shall be void. (n) Article 2004. The hotel-keeper has a right to retain the things brought into the hotel by the guest, as a security for credits on account of lodging, and supplies usually furnished to hotel guests. (n) 86 Art. 2005. A judicial deposit or sequestration takes place when an attachment or seizure of property in litigation is ordered. Art. 2006 Movable as well as well as immovable property may be the object of sequestration. Art. 2007 The depositary of property or objects sequestrated cannot be relieved of his responsibility until the controversy which gave rise thereto has come to an end, unless the court so orders. Art. 2008 The depositary of property sequestrated is bound to comply with respect to the same with all the obligation of a good father of a family. 87 Q. When is judicial deposit takes place? Q. What is the nature and purpose of judicial deposit? Q. What is the obligation of depositary of sequestrated property? Q. Distinction between Judicial and extrajudicial deposit. Art. 2009 As to matters not provided for in this Code judicial sequestration shall be govern by the Rules of Court. Note: Applicable law: The law on judicial deposit is essentially remedial or procedural in nature, thus the Rules of Court applies. a. Rule 57 Preliminary attachment b. Rule 59 Receivership c. Rule 60 Replevin After real estate mortgage 88 END 89 The Personal Property Security Act and its Implementing Rules and Regulations The Personal Property Security Act (“PPSA”) was enacted on August 17, 2018, to strengthen the secured transactions legal framework in the Philippines, and provide for the creation, perfection, determination of priority, establishment of a centralized notice registry, and enforcement of security interests in personal property (tangible and intangible), except aircraft and ships. The PPSA’s full implementation is conditioned upon the issuance of the relevant implementing rules and regulations and the establishment of a new registry (wherein security interests created under the PPSA may be registered). In this connection, the implementing rules and regulations of the PPSA (“PPSA Rules”) were published last November 18, 2019 and have become effective on December 3, 2019. However, the registry has not yet been established. Nevertheless, the PPSA Rules directed the Land Registration Authority to establish the registry within six months from the publication of the PPSA Rules. 91 The PPSA expressly repealed, amended or modified, among others, the provisions of the Chattel Mortgage Law (Act No. 1508) (specifically, Sections 1-16), the provisions of the Civil Code of the Philippines (Republic Act No. 386) (“Civil Code”) on mortgage and pledge (specifically, Articles 2085-2123, 2127, 2140-2141, 2241, 2243 and 2246- 2247), and the registration of chattel mortgages under the Property Registration Decree (Presidential Decree No. 1529) (specifically, Sections 114-116). Before the PPSA, the creation of a valid security interest over personal property under Philippine law is governed by the Civil Code and the Chattel Mortgage Law. Under the PPSA Rules, however, all security interests created from February 9, 2019 to the PPSA’s full implementation when the registry is established and operational (the “Transitional Period”) will be governed by the PPSA except that registration will be in accordance with the Chattel Mortgage Law until the registry is established. 92 Once the registry is established, the creation of a valid security interest over personal property under Philippine law will be entirely governed by the PPSA and the PPSA Rules, except interests in aircraft which are subject to the Civil Aviation Authority Act of 2008 (Republic Act No. 9497) and interests in ships which will continue to be governed by the Ship Mortgage Decree of 1978 (Presidential Decree No. 1521). 93 Creation of Security Interest Under the PPSA Rules, parties are free to enter into any form of security arrangements over moveable property as long as the security arrangement is not inconsistent with the PPSA or the PPSA Rules. Further, subject to existing law, parties may also apply the PPSA Rules to other functional equivalents of security interest, including fiduciary transfers of title; financial lease; assignment or transfer receivables; and sale with retention of title. A security interest may be created by (i) a security agreement, (ii) an operating lease for not less than one year, or (iii) the sale of an account receivable (unless otherwise stipulated by the parties in the document of sale). 94 Except as otherwise provided in the PPSA, the PPSA Rules, or upon agreement of the parties, a security interest will continue in the collateral notwithstanding the sale, lease, license, exchange, or other disposition of the collateral. A security interest is extinguished when all secured obligations have been discharged and there are no outstanding commitments to extend the credit secured by the security interest. 95 Security Agreement The security agreement must be contained in a written contract signed by the parties and must identify the collateral and the secured obligation. The description of the collateral is considered sufficient (whether it is specific or general) if it reasonably identifies the collateral. For example, a description such as “all personal property” of the grantor is sufficient. The security agreement must provide for the language to be used in agreements and notices. The security agreement may provide for the creation of a security interest in a future property or afteracquired asset, but it is created only when the grantor acquires rights in it or the power to encumber it. Thesecurity agreement may also provide that a security interest in a tangible asset that is transformed into aproduct extends to the product (but limited to the value of the encumbered asset before it became part of the product). It may likewise provide that a security interest in a tangible asset extends to its replacement (but limited to the value of the encumbered asset before it was replaced). 96 Perfection of Security Interest After a security interest has been created, it may be perfected by: (i) registration of a notice with the registry; (ii) possession of the collateral by the secured creditor, and; (iii) control of investment property and deposit account. On perfection, a security interest becomes effective against third parties. A security interest in any tangible asset may be perfected by registration (i.e., by filing a notice with the registry) or possession (whether actual or constructive). While a security interest in investment property or deposit account may be perfected by registration or control 97 i.e., through (i) the creation of a security interest in favor of the deposit-taking institution or intermediary, (ii) the conclusion of a control agreement (which must be executed under oath and must include the date and time of execution), or (iii) for investment property that is an electronic security but not held with an intermediary, the notation of the security interest in the books of the issuer). 98 Registry during the Transitional Period Under the PPSA Rules, the Land Registration Authority (“LRA”), within six months from the publication of the PPSA Rules, will establish and administer the centralized, nationwide registry. The registry must provide electronic means for registration and search of notices. The LRA will issue the necessary guidelines on the use and management of the registry. During the Transitional Period, the registration of the security agreement with the LRA will be in accordance with the Chattel Mortgage Law. The LRA will also determine a system of provisional registration of such agreements during such Transitional Period. This said, given that the PPSA repealed the provisions of the Chattel Mortgage Law, the legal effect of registration under such law as provided in the PPSA Rules is unclear. 99 Priority of Security Interest The PPSA provides for priority rules (i.e., rules to determine which secured creditor will have priority over the same collateral). Generally, the priority of security interests and liens in the same collateral will 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 interest and liens or (except as expressly stipulated in the PPSA Rules) to the mode of perfection. For details, please see Chapter 4 of the PPSA and Rule VI of the PPSA Rules. If the grantor has become insolvent, the security interest perfected before the commencement of insolvency proceedings in respect of the grantor will remain perfected and retain the priority it had before the commencement of the proceedings, subject to applicable insolvency law. 100 Taking Possession of the Collateral If the collateral is not with the secured creditor, upon default, the secured creditor may take possession of the collateral without a judicial process if the security agreement so stipulates, but possession must be without breach of the peace. In this connection, “breach of the peace” includes 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. 101 If the secured creditor cannot take possession of the collateral without breach of the peace, the secured creditor may proceed as follows: 1. The secured creditor will be entitled to an expedited hearing upon application with the court for an order granting the secured creditor possession of the collateral. 2. The secured creditor must provide the debtor, grantor, and, if the collateral is a fixture, any real estate mortgagee, a copy of the application with supporting documents and evidence. 3. The secured creditor is entitled to an order granting possession of the collateral upon the court finding that a default has occurred under the security agreement and that the secured creditor has a right to take possession of the collateral. 102 Under the following special cases, upon default, the secured creditor may take possession of the collateral without judicial process by: 1. instructing 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; 2. in a negotiable document where the security interest is perfected by possession, proceeding as to the negotiable document or goods covered by the negotiable document; 3. in a deposit account maintained by the secured creditor, applying the balance of the deposit account to the obligation secured by the deposit account; and 103 4. in other cases of a security interest in a deposit account perfected by a control agreement, instructing the deposit-taking institution to pay the balance of the deposit account to the secured creditor’s account by providing (i) a copy of the security agreement 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. 104 Disposition of Collateral After default, a secured creditor may (upon prior notice to the grantor, other secured creditors, and any other person from whom the secured creditor received notification of a claim of interest in thecollateral) sell or otherwise dispose of the collateral, publicly or privately, in its present condition or following any commercially reasonable preparation or processing. A disposition is commercially reasonable if the secured creditor disposes of the collateral in conformity with commercial practices among dealers in that type of property. The specific guidelines on private or public disposition are set out in Section 7.09 of the PPSA Rules. 105 Retention of Collateral After default, a secured creditor may also propose to the debtor and grantor to take all or part of the collateral in total or partial satisfaction of the secured obligation by sending a proposal to the grantor, other secured creditors, and any other person from who the secured creditor received notification of a claim. 106 The secured creditor may retain the collateral in case of: (i) a proposal for the acquisition of the collateral in full satisfaction of the secured obligation, without objection from any of the addressees of the proposal; or (ii) a proposal for the acquisition of the collateral in partial satisfaction of the secured obligation, but only if the secured creditor received the written affirmative consent of the addressees of the proposal. 107 REPUBLIC ACT No. 11057 An Act Strengthening the Secured Transactions Legal Framework in the Philippines, Which Shall Provide for the Creation, Perfection, Determination of Priority, Establishment of a Centralized Notice Registry, and Enforcement of Security Interests in Personal Property, and for Other Purposes 108 Be it enacted by the Senate and House of Representatives of the Philippine Congress Assembled: Section 1. Title. -This Act shall be known as the "Personal Property Security Act". Section 2. Declaration of Policy. -It is the policy of the State to promote economic activity by increasing access to least cost credit, particularly for micro, small, and medium enterprises (MSMEs), by establishing a unified and modern legal framework for securing obligations with personal property. 109 CHAPTER 1 DEFINITIONS AND SCOPE Be it enacted by the Senate and House of Representatives of the Philippine Congress Assembled: Section 1. Title. -This Act shall be known as the "Personal Property Security Act". Section 2. Declaration of Policy. -It is the policy of the State to promote economic activity by increasing access to least cost credit, particularly for micro, small, and medium enterprises (MSMEs), by establishing a unified and modern legal framework for securing obligations with personal property. 111 Section 3. Definition of Terms. -As used in this Act, the following terms shall mean: (a) Commodity contract – a commodity futures contract, an option on a commodity futures contract, a commodity option, or another contract if the contract or option is: (1) Traded on or subject to the rules of a board of trade that has been designated as a contract market for such a contract; or (2) Traded on a foreign commodity board of trade, exchange, or market, and is carried on the books of a commodity intermediary for a commodity customer; 112 (b) Control agreement – (1) With respect to securities, means an agreement in writing among the issuer or the intermediary, the grantor and the secured creditor, according to which the issuer or the intermediary agrees to follow instructions from the secured creditor with respect to the security, without further consent from the grantor; (2) With respect to rights to deposit account, means an agreement in writing among the deposit-taking institution, the grantor and the secured creditor, according to which the deposit-taking institution agrees to follow instructions from the secured creditor with respect to the payment of funds credited to the deposit account without further consent from the grantor; 113 (3) With respect to commodity contracts, means an agreement in writing among the grantor, secured creditor, and intermediary, according to which the commodity intermediary will apply any value distributed on account of the commodity contract as directed by the secured creditor without further consent by the commodity customer or grantor; 114 (c) Grantor – (1) The person who grants a security interest in collateral to secure its own obligation or that of another person; (2) A buyer or other transferee of a collateral that acquires its right subject to a security interest; (3) A transferor in an outright transfer of an accounts receivable; or (4) A lessee of goods; 115 (d) Non-inter mediated securities – securities other than securities credited to a securities account and rights in securities resulting from the credit of securities to a securities account; (e) Notice – 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; (f) Proceeds – any property received upon sale, lease or other disposition of collateral, or whatever is collected on or distributed with respect to collateral, claims arising out of the loss or damage to the collateral, as well as a right to insurance payment or other compensation for loss or damage of the collateral; (g) Purchase money security interest – a security interest in 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 extent that the credit is used for that purpose; 116 (h) Registry – the centralized and nationwide electronic registry established in the Land Registration Authority (LRA) where notice of a security interest and a lien in personal property may be registered; (i) Secured creditor – 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 operating lease for not less than one (1) year; (j) Security interest – a property right in collateral that secures payment or other performance of an obligation, regardless of whether the parties have denominated it as a security interest, and regardless of the type of asset, the status of the grantor or secured creditor, or the nature of the secured obligation; including the right of a buyer of accounts receivable and a lessor under an operating lease for not less than one (1) year; and (k) Writing – for the purpose of this Act includes electronic records. 117 Section 4. Scope of the Act.— This Act shall apply to all transactions of any form that secure an obligation with movable collateral, except interests in aircrafts subject to Republic Act No. 9497, or the "Civil Aviation Authority Act of 2008", and interests in ships subject to Presidential Decree No. 1521, or the "Ship Mortgage Decree of 1978". 118 CHAPTER 2 CREATION OF SECURITY INTEREST Section 5. Creation of a Security Interest.— (a) A security interest shall be created by a security agreement, (b) A security agreement may provide for the creation of a security interest in a future property, but the security interest in that property is created only when the grantor acquires rights in it or the power to encumber it. Section 6. Security Agreement.— A security agreement must be contained in a written contract signed by the parties. It may consist of one or more writings that, taken together, establish the intent of the parties to create a security interest. 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. 120 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. 121 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 122 (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. 123 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). 124 (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. 125 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. 127 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. 128 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. 129 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. 130 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. 131 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. 133 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. 134 (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. 135 (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. 136 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 Plight 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. 137 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. 138 (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. 139 (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. 140 Section 24. Livestock. -A perfected security interest in livestock securing an obligation incurred to enable the grantor to obtain food or medicine for the livestock shall have priority over any other security interest in the livestock, except for a perfected purchase money security interest in the livestock, if the secured creditor providing credit for food or medicine gives written notification to the holder of the conflicting perfected security interest in the same livestock before the grantor receives possession of the food or medicine. Section 25. Fixtures, Accessions, and Commingled Goods. -A perfected security interest in a movable property which has become a fixture, or has undergone accession or commingling shall continue provided the movable property involved can still be reasonably traced. In determining ownership over fixtures, accessions, and commingled goods, the provisions of Book II of Republic Act No. 386 or the "Civil Code of the Philippines" shall apply. 141 CHAPTER 5 REGISTRATION – REGISTRY Section 26. Establishment of Electronic Registry.— (a) The Registry shall be established in and administered by the LRA. (b) The Registry shall provide electronic means for registration and searching of notices. 143 Section 27. Public Record.— (a) Information contained in a registered notice shall be considered as a public record. (b) Any person may search notices registered in the Registry. (c) The electronic records of the Registry shall be the official records. 144 Section 28. Sufficiency of Notice.— (a) An initial notice of security interest shall not be rejected: (1) If it identifies the grantor by an identification number, as further prescribed in the regulations; (2) If it identifies the secured creditor or an agent of the secured creditor by name; (3) If it provides an address for the grantor and secured creditor or its agent; (4) If it describes the collateral: and (5) If the prescribed fee has been tendered, or an arrangement has been made for payment of fees by other means. 145 (b) If the Registry rejects to register a notice, it shall promptly communicate the fact of and reason for its rejection to the person who submitted the notice. (c) Each grantor must authorize the registration of an initial notice by signing a security agreement or otherwise in writing. (d) A notice may be registered before a security agreement is concluded. Once a security agreement is concluded, the date of registration of the notice shall be reckoned from the date the notice was registered. (e) A notice of lien may be registered by a lien holder without the consent of the person against whom the lien is sought to be enforced. (f) Description of the collateral in a notice shall be entered in English. 146 Section 29. One Notice Sufficient for Security Interests Under Multiple Security Agreements. -The registration of a single notice may relate to security interests created by the grantor under one (1) or more than one security agreement. 147 Section 30. Effectiveness of Notice.— (a) A notice shall be effective at the time it is discoverable on the records of the Registry. (b) A notice shall be effective for the duration of the term indicated in the notice unless a continuation notice is registered before the term lapses. (c) A notice substantially complying with the requirements of this Chapter shall be effective unless it is seriously misleading. (d) A notice that may not be retrieved in a search of the Registry against the correct identifier of the grantor shall be ineffective with respect to that grantor. 148 Section 31. Seriously Misleccding Notice. -A notice that does not provide the identification number of the grantor shall be seriously misleading. Section 32. Amendment of Notice.— (a) A notice may be amended by the registration of an amendment notice that: (1) Identifies the initial notice by its registration number; and (2) Provides the new information. 149 (b) An amendment notice that adds collateral that is not proceeds must be authorized by the grantor in writing. (c) An amendment notice that adds a grantor must be authorized by the added grantor in writing. (d) An amendment notice shall be effective only as to each secured creditor who authorizes it. (e) An amendment notice that adds collateral or a grantor shall be effective as to the added collateral or grantor from the date of its registration. 150 Section 33. Continuation of Notice.— (a) The period of effectiveness of a notice may be continued by registering an amendment notice that identifies the initial notice by its registration number. (b) Continuation of notice may be registered only within six (6) months before the expiration of the effective period of the notice. Section 34. Termination of Effectiveness of a Notice.— (a) The effectiveness of a notice may be terminated by registering a termination notice that: (1) Identifies the initial notice by its registration number; and (2) Identifies each secured creditor who authorizes the registration of the termination notice. (b) A termination notice terminates effectiveness of the notice as to each authorizing secured creditor. 151 Section 35. Registry Duties.— (a) For each registered notice, the Registry shall: (1) Assign a unique registration number; (2) Create a record that bears the number assigned to the initial notice and the date and time of registration; and (3) 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. 152 (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 or refusing to register a notice, the Registry does not determine the sufficiency, correctness, authenticity, or validity of any information contained in the notice. 153 Section 36. Search of Registry Records and Certified Report.— (a) The Registry shall communicate the following information to any person who requests it: (1) Whether there are in the Registry any unlapsed notices that indicate the grantor's identification number or vehicle serial number that exactly matches the relevant criterion provided by the searcher; (2) The registration number, and the date and time of registration of each notice; and (3) All of the information contained in each 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 shall be admissible into evidence in judicial proceedings without extrinsic evidence of its authenticity. 154 Section 37. Disclosure of Information.— (a) The secured creditor must provide to the grantor at its request: (1) The current amount of the unpaid secured obligation; and (2) A list of assets currently subject to a security interest. (b) The secured creditor may require payment of a fee for each request made by the grantor in subsection (a) in this section, but the grantor is entitled to a reply without charge once every six (6) months. (c) A security interest in a deposit account shall not: (1) Affect the rights and obligations of the deposit-taking institution without its consent; or (2) Require the deposit-taking institution to provide any information about the deposit account to third parties. 155 Section 38. Fees Set by Regulation.— (a) The fees for registering a notice and for requesting a certified search report shall be set by regulation issued by the DOF for the recovery of reasonable costs of establishing and operating the Registry. (b) The fee structure or any change thereof under subsection (a) shall further consider that the same shall not be burdensome to either lender or grantor. (c) There shall be no fee for electronic searches of the Registry records or for the registration of termination notices. (d) The Registry may charge fees for services not mentioned above. 156 Section 39. When the Grantor May Demand Amendment or Termination of Notice. -A grantor may give a written demand to the secured creditor to amend or terminate the effectiveness of the notice if: (a) All the obligations under the security agreement to which the registration relates have been performed and there is no commitment to make future advances; (b) The secured creditor has agreed to release part of the collateral described in the notice; (c) The collateral described in the notice includes an item or kind of property that is not a collateral under a security agreement between the secured creditor and the grantor; (d) No security agreement exists between the parties; or (e) The security interest is extinguished in accordance with this Act. 157 Section 40. Matters That May be Required by Demand. -Upon receipt of the demand submitted under Section 39, the secured creditor must register, within fifteen (15) working days, an amendment or termination notice: (a) Terminating the registration in a case within subsections (a), (d) or (e) of Section 39; (b) Amending the registration to release some property that is no longer collateral in a case within subsection (c) of Section 39 or that was never collateral under a security agreement between the secured creditor and the grantor in a case within subsection (c) of Section 39. 158 Section 43. No Fee for Compliance of Demand. -A secured creditor shall not charge any fee for compliance with a demand received under Section 39. Section 44. When Registration and Search Constitutes Interference with Privacy of Individual. -A person who submitted a notice for registration or carried out a search of the Registry with a frivolous, malicious or criminal purpose or intent shall be subject to civil and criminal penalties according to the relevant laws. 159 CHAPTER 6 ENFORCEMENT OF SECURITY INTEREST SECURED CREDITOR’S RIGHTS Section 45. Right of Redemption.— (a) Any person who is entitled to receive a notification of disposition in accordance with this Chapter is entitled to redeem the collateral by paying or otherwise performing the secured obligation in full, including the reasonable cost of enforcement. (b) The right of redemption may be exercised, unless: (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 (3) The secured creditor has retained the collateral. 161 Section 46. Right of Higher-Ranking Secured. Creditor to Take Over Enforcement.— (a) Even if another secured creditor or a lien holder has commenced enforcement, a secured creditor whose security-interest has priority over that of the enforcing secured creditor or lien holder shall be entitled to take over the enforcement process. (b) The right referred to in subsection (a) of this section may be invoked 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 this Act. 162 Section 47. Expedited Repossession of the Collateral.— (a) 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 the peace. (b) If the collateral is a fixture, the secured creditor, if it has priority over all owners and mortgagees, 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. 163 (c) If, upon default, the secured creditor cannot take possession of collateral without breach of the peace, the secured creditor may proceed as follows: (1) The secured creditor shall be entitled to an expedited hearing upon application for an order granting the secured creditor possession of the collateral. Such application shall include a statement by the secured creditor, under oath, verifying the existence of the security agreement attached to the application and identifying at least one event of default by the debtor under the security agreement; (2) The secured creditor shall provide the debtor, grantor, and, if the collateral is a fixture, any real estate mortgagee, a copy of the application, including all supporting documents and evidence for the order granting the secured creditor possession of the collateral; and 164 (3) The secured creditor is entitled to an order granting possession of the collateral upon the court finding that a default has occurred under the security agreement and that the secured creditor has a right to take possession of the collateral. The court may direct the grantor to take such action as the court deems necessary and appropriate so that the secured creditor may take possession of the collateral: Provided, That breach of the 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. 165 Section 48. Recovery in Special Cases.— Upon default, the secured creditor may without judicial process: (a) Instruct the account debtor 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; (b) In a negotiable document that is perfected by possession, proceed as to the negotiable document or goods covered by the negotiable document; (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 (d) I n other cases of security interest in a deposit account perfected by control, instruct the deposit-taking institution to pay the balance of the deposit account to the secured creditor’s account. 166 Section 49. Right to Dispose of Collateral.— (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. 167 Section 49. Right to Dispose of Collateral.— (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. 168 Section 50. Commercial Reasonableness Required.— (a) In disposing of collateral, the secured creditor shall act in a commercially reasonable manner. (b) A disposition is commercially reasonable if the secerned creditor disposes of the collateral in conformity with commercial practices among dealers in that type of property. (c) A disposition is not commercially unreasonable merely because a better price could have been obtained by disposition at a different time or by a different method from the time and method selected by the secured creditor. (d) If a method of disposition of collateral has been approved in any legal proceeding, it is conclusively commercially reasonable. 169 Section 51. Notification of Disposition.— (a) Not later than ten (10) days before disposition of the collateral, the secured creditor shall notify: (1) The grantor; (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. 170 (b) The grantor may waive the right to be notified. (c) A notification of disposition is sufficient if it identifies the 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. (d) 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. 171 Section 52. Application of Proceeds.— (a) The proceeds of disposition shall be applied in the following order: (1) The reasonable expenses of taking, holding, preparing for disposition, and disposing of the collateral, including reasonable attorneys’ fees and legal expenses incurred by the secured creditor; (2) The satisfaction of the obligation secured by the security interest of the enforcing secured creditor; and (3) The satisfaction of obligations secured by any subordinate security interest or hen in the collateral if a written demand and proof of the interest are received before distribution of the proceeds is completed. (b) The secured creditor shall account to the grantor for any surplus, and, unless otherwise agreed, the debtor is liable for any deficiency. 172 Section 53. Rights of Buyers and Other Third Parties.— (a) If a secured creditor sells the collateral under this Chapter, 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 this Chapter, the lessee or licensee shall be entitled to the benefit of the lease or license during its term. (c) If a secured creditor sells, leases or licenses the collateral not in compliance with this Chapter, the buyer, lessee or licensee of the collateral shall acquire the rights or benefits described in subsections (a) and (b) of this section: Provided, That it had no knowledge of a violation of this Chapter that materially prejudiced the rights of the grantor or another person. 173 Section 54. Retention of Collateral by Secured Creditor.— (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: (1) The debtor and the grantor; (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. 174 (b) The secured creditor may retain the collateral in the case of: (1) A proposal for the acquisition of the collateral in full satisfaction of the secured obligation, unless the secured creditor receives an objection in writing from any person entitled to receive such a proposal within twenty (20) days after the proposal is sent to that person; or (2) A proposal for the acquisition of the collateral in partial satisfaction of the secured obligation, only if the secured creditor receives the affirmative consent of each addressee of the proposal in writing within twenty (20) days after the proposal is sent to that person. 175 CHAPTER 7 TRANSITIONAL PROVISIONS Section 55. Interpretation of Transitional Provisions.— For this Chapter, unless the context otherwise requires: (a) Existing secured creditor – means a secured creditor with a prior security interest; (b) Prior law – means any law that existed or in force before the effectivity of this Act; (c) Prior interest – means a security interest created or provided for by an agreement or other transaction that was made or entered into before the effectivity of this Act and that had not been terminated before the effectivity of this Act, but excludes a security interest that is renewed or extended by a security agreement or other transaction made or entered into on or after the effectivity of this Act; and (d) Transitional period - means the period from the date of effectivity of this Act until the date when the Registry has been established and operational. 177 Section 56. Creation of Prior Interest.— (a) Creation of prior interest shall be determined by prior laws. (b) A prior interest remains effective between the parties notwithstanding its creation did not comply with the creation requirements of this Act. 178 Section 57. Perfection of Prior Interest.— (a) A prior interest that was perfected under prior law continues to be perfected under this Act until the earlier of: (1) The time the prior interest would cease to be perfected under prior law; and (2) The expiration of the transitional period. (b) If the perfection requirements of this Act are satisfied before the perfection of a prior interest ceases in accordance with subsection (a) of this section, the prior interest continues to be perfected under this Act from the time when it was perfected under the prior law. 179 (c) If the perfection requirements of this Act are not satisfied before the perfection of a prior interest ceases in accordance with subsection (a) of this section, the prior interest is perfected only from the time it is perfected under this Act. (d) A written agreement between a grantor and a secured creditor creating a prior interest is sufficient to constitute authorization by the grantor of the registration of a notice covering assets described in that agreement under this Act. (e) If a prior interest referred to in subsection (b) of this section was perfected by the registration of a notice under prior law, the time of registration under the prior law shall be the time to be used for purposes of applying the priority rules of this Act. 180 Section 58. Priority of Prior Interest.— (a) The priority of a prior interest as against the rights of a competing claimant is determined by the prior law if: (1) The security interest and the rights of all competing claimant arose before the effectivity of this Act; and (2) The priority status of these rights has not changed since the effectivity of this Act. (b) For purposes of subsection (a)(2) of this section, the priority status of a prior interest has changed only if: (1) It was perfected when this Act took effect, but ceased to be perfected; or (2) It was not perfected under prior law when this Act took effect, and was only perfected under this Act. 181 Section 59. Enforcement of Prior Interest.— (a) If any step or action has been taken to enforce a prior interest before the effectivity of this Act, enforcement may continue under prior law or may proceed under this Act. (b) Subject to subsection (a) of this section, prior law shall apply to a matter that is the subject of proceedings before a court before the effectivity of this Act. 182 CHAPTER 8 CONGRESSIONAL OVERSIGHT AND MISCELLANEOUS PROVISIONS Section 60. Congressional Oversight and Periodic Review.— A Congressional Oversight Committee shall be created that will conduct a periodic review every five (5) years commencing from the effectivity of this Act. The Congressional Oversight Committee shall be composed of the Chairperson of the Senate Committee on Banks, Financial Institutions and Currencies, the Chairperson of the House of Representatives Committee on Banks and Financial Intermediaries, and representatives of other relevant congressional committees. Section 61. Interpretation.— If there is conflict between a provision of this Act and a provision of any other law, this Act shall govern unless the other law specifically cites or amends the conflicting provisions of this law. Section 62. Implementing Rules and Regulations.— Within six (6) months from the passage of this Act, the DOF in coordination with the Department of Justice, through the LRA, shall promulgate the necessary rules and regulations for’ the effective implementation of this Act. 184 Section 63. Rules on Enforcement Procedure.— Subject to Section 47, the expedited hearing/proceedings shall be conducted in a summary manner consistent with the declared policies of this Act and in accordance with the rules of procedure that the Supreme Court may promulgate. Section 64. Sourcing of Funds.— The funds needed for the implementation of this Act shall be taken from the Special Account arising from revenues collected by the LRA under Section 111 of Presidential Decree No. 1529, without need for any further government approval. Section 65. Separability Clause.— Should any provision herein be declared unconstitutional, the same shall not affect the validity of the other provisions of this Act. 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: 185 (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". 186 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 187