Possession And Care Of Object Of Pledge.docx

Possession and Care of Object of Pledge

Art. 2110. If the thing pledged is returned by the pledgee to the pledgor or owner, the pledge is extinguished. Any stipulation to the contrary shall be void. If subsequent to the perfection of the pledge, the thing is in the possession of the pledgor or owner, there is a prima facie presumption that the same has been returned by the pledgee. This same presumption exists if the thing pledged is in the possession of a third person who has received it from the pledgor or owner after the constitution of the pledge. Art. 2098. The contract of pledge gives a right to the creditor to retain the thing in his possession or in that of a third person to whom it has been delivered, until the debt is paid. Art. 2109. If the creditor is deceived on the substance or quality of the thing pledged, he may either claim another thing in its stead, or demand immediate payment of the principal obligation. (n) Art. 2100. The pledgee cannot deposit the thing pledged with a third person, unless there is a stipulation authorizing him to do so. The pledgee is responsible for the acts of his agents or employees with respect to the thing pledged. (n)

Art. 2104. The creditor cannot use the thing pledged, without the authority of the owner, and if he should do so, or should misuse the thing in any other way, the owner may ask that it be judicially or extrajudicially deposited. When the preservation of the thing pledged requires its use, it must be used by the creditor but only for that purpose. Art. 2105. The debtor cannot ask for the return of the thing pledged against the will of the creditor, unless and until he has paid the debt and its interest, with expenses in a proper case Art. 2107. If there are reasonable grounds to fear the destruction or impairment of the thing pledged, without the fault of the pledgee, the pledgor may demand the return of the thing, upon offering another thing in pledge, provided the latter is of the same kind as the former and not of inferior quality, and without prejudice to the right of the pledgee under the provisions of the following article. The pledgee is bound to advise the pledgor, without delay, of any danger to the thing pledged. (n) Art. 2108. If, without the fault of the pledgee, there is danger of destruction, impairment, or diminution in value of the thing pledged, he may cause the same to be sold at a public sale. The proceeds of the auction shall be a security for the principal obligation in the same manner as the thing originally pledged. (n)

Art. 2109. If the creditor is deceived on the substance or quality of the thing pledged, he may either claim another thing in its stead, or demand immediate payment of the principal obligation. (n) Art. 2110. If the thing pledged is returned by the pledgee to the pledgor or owner, the pledge is extinguished. Any stipulation to the contrary shall be void. If subsequent to the perfection of the pledge, the thing is in the possession of the pledgor or owner, there is a prima facie presumption that the same has been returned by the pledgee. This same presumption exists if the thing pledged is in the possession of a third person who has received it from the pledgor or owner after the constitution of the pledge.

CHAPTER 2 MOVABLE PROPERTY Art. 416. The following things are deemed to be personal property: (1) Those movables susceptible of appropriation which are not included in the preceding article; (2) Real property which by any special provision of law is considered as personal property;

(3) Forces of nature which are brought under control by science; and (4) In general, all things which can be transported from place to place without impairment of the real property to which they are fixed. (335a) Art. 417. The following are also considered as personal property: (1) Obligations and actions which have for their object movables or demandable sums; and (2) Shares of stock of agricultural, commercial and industrial entities, although they may have real estate. (336a) Art. 418. Movable property is either consumable or nonconsumable. To the first class belong those movables which cannot be used in a manner appropriate to their nature without their being consumed; to the second class belong all the others. (337) Art. 2125. In addition to the requisites stated in Article 2085, it is indispensable, in order that a mortgage may be validly constituted, that the document in which it appears be recorded in the Registry of Property. If the instrument is not recorded, the mortgage is nevertheless binding between the parties. The persons in whose favor the law establishes a mortgage have no other right than to demand the execution and the

recording of the document in which the mortgage is formalized. Art. 2126. The mortgage directly and immediately subjects the property upon which it is imposed, whoever the possessor may be, to the fulfillment of the obligation for whose security it was constituted. (1876)

PPSA Art. 2140. By a chattel mortgage, personal property is recorded in the Chattel Mortgage Register as a security for the performance of an obligation. If the movable, instead of being recorded, is delivered to the creditor or a third person, the contract is a pledge and not a chattel mortgage.

Personal Property Security Agreement A. Introduction and General Concepts Civil Code Art. 2140 Republic Act No. 11057, Sec. 2. – declaration of policy; promote econ activity; access to least cost credit Sec. 66, - repeal sec 1-15 of CM law; NCC prov; others Sec. 60-62, Congressional oversight; Interpretation; IRR Sec. 67, - effectivity Sec. 68, - implementation conditioned on establishment of registry Sec. 65. – separability clause

B. Scope of the PPSA Sec. 4. – scope; obligation; security using movable collateral; exceptions; C. Security Interest Sec. 3. (j) - defn: security interest Sec. 3 (c)- defn: grantor – 4 instances Sec. 3 (i) - defn: secured creditor Sec. 9 – continuity of security interest – except: sec21(transfree in GF) or agreement Sec. 8 – right to proceeds; commigled funds 1. Security interest extends to traceable/identifiable proceeds 2. Money commingled a. Extend to funds

b. Limited to amount c. If balance is less – limited to lowest amount of commingled funds… Sec. 3 (f) - defn: proceeds – from collateral Civil Code, Art. 2126 1. Creation R.A. No. 11057, Sec. 5 – Creation of a security interest: a. by security agreement, b. in future properties a. Object Sec. 4 – scope: movable collateral Sec. 5 – includes future prop Civil Code, Art. 416, Art. 417 – immovable prop CASES: Makati Leasing & Finance Corporation v. Wearever Textile Mills, Inc. & Court of Appeals, G.R. No. L-58469, May 16, 1983, 122 SCRA 296. Manila Banking Corporation v. Teodoro, Jr. and Teodoro, G.R. No. 53955, January 13, 1989, 169 SCRA 95.

Yau Chu v. Court of Appeals et al., G.R. No. L-78519, September 26, 1989, 177 SCRA 793.

b. Form Sec. 6 – written contract signed by parties; maybe 1 or more writings; language -any Sec. 3 (k) – denf – “writing” includes electronic records Sec. 7 – Description of collateral – reasonably identifies

c. Asset-Specific Rules - Accounts Receivable Sec. 10 – Contractual Limitation on creation of a security interest; right of a grantor to create security interest d. Disclosure of Information by Secured Creditor Sec. 37 – Disclosure of information; creditor to supply information; creditor may require payment of fee for information

2. Perfection Sec. 11 – perfection of a security interest: refers to sec12; perfection -> effective against 3rd persons Sec. 25 – Fixtures, accessions, commingled goods – security continues if it can be reasonably traced Sec. 12 – means of perfection – registration, possession of collateral or control of property Sec. 15 - Change in means of perfection – remains perfected Civil Code, Art. 2125. - recording

R.A. No. 11057, Sec. 13 – Perfection by control: a. deposit account/investment property – 3 instances Sec. 3. (b) – control agreement

a. Disposition of Perfected Security Interest Sec. 9 – continuity of SI Sec. 21 – GF transferee exception Sec. 14 – Perfection in Proceeds of a collateral; Different means -> a. in money; b. not in money Sec. 3 (f) – defn: proceeds

b. Assignment of Security Interest Sec. 16. – Assignment of Security Interest: an amendment notice may be registered

D. The Registry Sec. 26 – Est. Electronic Registry- by LRA Sec. 64 – Funds: from funds collected by LRA Sec. 38 – Fees Sec. 27 – Public Record: info in registered notice Sec. 35 – Duties of Registry; admin in nature Sec. 28-31 – Notice; *read more Sec. 44 – civil and criminal penalties-malicious registration/search

Sec. 36. Sec. 32-34 Sec. 39- 43 E. Priority of Security Interest Sec. 17-22 Sec. 3 (g), Sec. 23 PCI Leasing & Finance, Inc. v. Trojan Metal Industries Inc., et al., G.R. No. 176381, December 15, 2010, 638 SCRA 615. Sec. 24 F. Enforcement of Security Interest Sec. 47, Sec. 63 Sec. 46, Sec. 48 Citibank, N.A. & Investors Finance Corporation v. Sabeniano, G.R. No. 156132, October 12, 2006, 504 SCRA 378. Sec. 49-51 Sec. 45 Paray & Espeleta v. Rodriguez, et al., G.R. No. 132287, January 24, 2006, 479 SCRA 571. Sec. 52-54 G. Transitional Provisions Sec. 55-59