COMPARATIVE TABLE OF PERSONAL PROPERTY SECURITY ACT AS AGAINST CHATTEL MORTGAGE, PLEDGE AND PREFERENCE OF

CREDITS : | JUMALON, Jewelyn A. 4B

PERSONAL PROPERTY SECURITY ACT v. CHATTEL MORTGAGE and PLEDGE

CHATTEL MORTGAGE (NCC; ACT
DISTINCTIONS: PPSA (R.A. 11057) PLEDGE (NCC)
1508)
Registration Registration is required by law. Not required. It is sufficient that there N/A
requirement: is a security agreement which will
Art. 2140 of the NCC: create the security interest.
By a chattel mortgage, personal
property is recorded in the Chattel Sec. 6:
Mortgage Register as a security for A security agreement must be
the performance of an obligation. 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.
When By registration. Sec. 11(a): Delivery.
perfected: A security interest shall be perfected
Art. 2140 of the NCC: when it has been created and the Art. 2093 of the NCC:
If the movable, instead of being secured creditor has taken one of the In addition to the requisites
recorded is deliver to the creditor actions in accordance with Sec. 12. prescribed in Art. 2085, it is
or a third person, the contract is a necessary, in order to constitute
pledge, not a chattel mortgage. Sec. 12: the contract of pledge, that the
A security interest may be perfected thing pledged be placed in the
by: possession of the creditor, or of a
Ø Registration of a notice with third person by common
the Registry; agreement.
Ø Possession of the collateral by
the secured creditor;
Ø Control of investment
property and deposit account.
 COMPARATIVE TABLE OF PERSONAL PROPERTY SECURITY ACT AS AGAINST CHATTEL MORTGAGE, PLEDGE AND PREFERENCE OF
CREDITS : | JUMALON, Jewelyn A. 4B

Binding Effect Through registration (not only to Need not be in public instrument. Description of the thing pledged
to 3rd Parties: bind 3rd parties, but also to be and date of pledge must appear
valid.) It is enough that there is a written in a public instrument.
security agreement and is signed by
Note: Registration is essential to the parties. (Sec.6) Art. 2096 of the NCC:
the validity of the chattel A pledge shall not take effect
mortgage, pursuant to Art. 2140 of against third persons if a
the NCC. Hence, an unrecorded description of the thing pledged
mortgage is not valid. and the date of pledge do not
appear in a public instrument.

Ownership of Art. 2085 of the NCC, as Sec.5(b): Art. 2085 of the NCC:
the collateral: suppletory applied, provides that: A security agreement may provide for Ø The pledgor/mortgagor
Ø The pledgor/mortgagor the creation of a security interest in a must be the absolute
must be the absolute future property, but the security owner of the thing
owner of the thing pledged interest in that property is created pledged of mortgaged
of mortgaged only when the grantor acquires rights Ø The persons constituting
Ø The persons constituting in it or the power to encumber it. the pledge or mortgage
the pledge or mortgage have the free disposal of
have the free disposal of Hence, security debtor can use future their property, and in the
their property, and in the property as collateral provided the absence thereof, that
absence thereof, that they condition set forth in Sec. 5(b) has they be legally authorized
be legally authorized for been complied with. for the purpose
the purpose
Hence, the mortgagor/pledgor
Hence, the mortgagor/pledgor cannot use future property as
cannot use future property as collateral.
collateral.
 COMPARATIVE TABLE OF PERSONAL PROPERTY SECURITY ACT AS AGAINST CHATTEL MORTGAGE, PLEDGE AND PREFERENCE OF
CREDITS : | JUMALON, Jewelyn A. 4B

Formalities: Requisites of a chattel mortgage: Sec. 12: Requisites of Pledge: Art. 2085 of
Art. 2085 of the NCC: (as applied A security interest may be perfected the NCC:
suppletory) by:
Ø The chattel mortgage must Ø Registration of a notice with Ø The pledge must be
be constituted to secure the Registry; constituted to secure the
the fulfillment of a Ø Possession of the collateral by fulfillment of a principal
principal obligation the secured creditor; obligation
Ø The pledgor/mortgagor Ø Control of investment
must be the absolute property and deposit account. Ø The pledgor/mortgagor
owner of the thing pledged must be the absolute owner of
of mortgaged the thing pledged of mortgaged
Ø The persons constituting
the pledge or mortgage Ø The persons constituting
have the free disposal of the pledge or mortgage have the
their property, and in the free disposal of their property,
absence thereof, that they and in the absence thereof, that
be legally authorized for they be legally authorized for the
the purpose purpose

Chattel Mortgage must likewise

be in accordance with Arts. 2085-
2123, 2140-2141 of the NCC.

Enforcement of Sec. 14 of Act 1508: Either through: Notarial Sale.

the security: The mortgagee, his executor, his Ø Recovery (Sec. 48); o Two auctions may be
administrator, or assign, may after Ø Disposition (Sec. 49);
30 days from the time of condition Ø Retention (Sec. 54). had, and if the thing pledged had
broken, cause the mortgaged not been sold after the two
property, or any part thereof, to be In certain cases, secured creditor auctions, the pledgee may
sold at a public auction by a public must first seek REPOSSESSION appropriate the thing pledged
officer at a public place in the (Sec.47) of the collateral, which may
 COMPARATIVE TABLE OF PERSONAL PROPERTY SECURITY ACT AS AGAINST CHATTEL MORTGAGE, PLEDGE AND PREFERENCE OF
CREDITS : | JUMALON, Jewelyn A. 4B

municipality where the mortgagor be undertaken with judicial process with the effect of extinguishment
resides, or where the property is or without judicial process. of debt.
situated.
Art. 2112 of the NCC:
PNB v. Manila Investment The creditor to whom the credit
Construction, Inc. (G.R. No.: L- has not been satisfied in due time,
27132, April 29, 1971): may proceed before a Notary
The sale may be a private one, if Public to the sale of the thing
permitted by the agreement of the pledged. This sale shall be made
parties. There is nothing immoral at a public auction, and with the
or against public order in such notification to the debtor and the
agreement entered into freely and owner of the thing pledged in a
voluntarily, in line with the proper case, stating the amount
provisions of substantive law for which the public sale is to be
giving the contracting parties full held. If at the first auction the
freedom to contract provided their thing is not sold, a second one
agreement is not contrary to law, with the same formalities shall be
morals, good customs, public order held; and if at the second auction
or public policy. there is no sale either, the
creditor may appropriate the
thing pledged. In this case, he
shall give an acquittance for his
entire claim.

Right of lender Allowed. Allowed. Not allowed, generally.

to recover
deficiency: Sec. 52: Art. 2115 of the NCC:
If the price of the sale is more
 COMPARATIVE TABLE OF PERSONAL PROPERTY SECURITY ACT AS AGAINST CHATTEL MORTGAGE, PLEDGE AND PREFERENCE OF
CREDITS : | JUMALON, Jewelyn A. 4B

Bicol Savings and Loans The secured creditor, whether a than said amount (of the
Association v. Guinhawa (G.R. No.: mortgagee or pledgee, shall account principal obligation), the debtor
L-62415, August 20, 1990) to the grantor for any surplus, and shall not be entitled to the
Ø In extra-judicial unless otherwise agreed, the debtor excess, UNLESS it is otherwise
foreclosure of CM, the is liable for any deficiency. agreed.
deficiency maybe
recovered by instituting a
separate civil action for
that purpose.
Ø In judicial foreclosure of
CM, the creditor may ask
for the execution of the
judgment against any
other property of the
mortgagor for the
payment of the balance.

Right of the Allowed. Allowed. Not allowed.

borrower to
recover surplus: Sec. 14 of Act. 1508: Sec. 52(b): Art. 2115 of the NCC:
The proceeds of such sale shall be The secured creditor, whether a If the price of the sale is less
applied to the payment, first, of mortgagee or pledgee, shall account (than the amount of the principal
the cost and expenses of keeping to the grantor for any surplus, and obligation), neither shall the
and sale, and then to the payment unless otherwise agreed, the debtor creditor be entitled to recover
of the demand or obligation is liable for any deficiency. the deficiency, notwithstanding
secured by such mortgage, and the any stipulation to the contrary.
residue shall be paid to persons
holding subsequent mortgages in
their order, and the balance, after
paying the mortgages, shall be paid
 COMPARATIVE TABLE OF PERSONAL PROPERTY SECURITY ACT AS AGAINST CHATTEL MORTGAGE, PLEDGE AND PREFERENCE OF
CREDITS : | JUMALON, Jewelyn A. 4B

to the mortgagor or person holding

under him on demand.
Lender’s right of Caltex v. IAC, 176 SCRA 741 (1989): Sec. 49: PNB v. Atendido (94 Phil. 254):
action in case of The mortgagee has a choice of one (a) After default, a secured If the obligation is not paid upon
default by the of the two remedies, creditor may sell or otherwise maturity, the most that the
borrower: BUT HE CANNOT HAVE BOTH: dispose of the collateral, pledgee can do is to sell the
Ø Foreclose the mortgage; publicly or privately, in its property and apply the proceeds
Ø File an ordinary action to present condition or following to the payment of the obligation.
collect the debt. any commercially reasonable
preparation or processing.
(b) The secured creditor may buy
the collateral at any public
disposition, or at private
disposition but only if the
collateral is of a kid that is
customarily sold on a
recognized market or the
subject of widely distributed
standard price quotations.

Right of None. Allowed. None.

Redemption: (Sibal v. Valdez, 50 Phil. 512; Sps. (Sps. Paray v. Rodriquez, G.R. No:
Paray v. Rodriguez, G.R. No.: Sec. 45: 132287, January 24, 2006)
132287, January 24, 2006.) Any person who is entitled to receive
a notification of disposition is entitled
to redeem the collateral by paying or
otherwise performing the secured
obligation in full, including the
reasonable cost of enforcement.
 COMPARATIVE TABLE OF PERSONAL PROPERTY SECURITY ACT AS AGAINST CHATTEL MORTGAGE, PLEDGE AND PREFERENCE OF
CREDITS : | JUMALON, Jewelyn A. 4B

PERSONAL PROPERTY SECURITY ACT v. PREFERENCE OF CREDIT

DISTINCTION PREFERENCE OF CREDIT (NCC) PPSA (R.A. 11057)
For movable properties only
Rule on Priority: Art. 2247 of the NCC: Sec. 17.:
If there are two or more credits with respect The priority of security interests and liens in the
to the same specific movable property, they same collateral shall be determined according to
shall be satisfied pro rata, after the payment time of registration of a notice or perfection by
of duties, taxes and fees due the Stat or any other means, without regard to the order of
subdivision thereof. creation of the security interests and liens.

Art. 2241 of the NCC speaks of the equality of

all the credits listed therein.
o But duties, taxes and fees due on the
specific movable must first be paid.
(Art. 2241(1) )
Order of priority: For Special Preferred Credits: Secs. 18 to 25 emphasize the process in determining
o Arts. 2241, 2246, 2247 of the NCC the priorities in security interests regarding
apply. (for movables) movables.

For Ordinary Preferred Credits:

o Art. 2244 of the NCC applies.
o Worker’s claim for unpaid wages has
been moved from second priority to
first priority in the order of preference.
(Republic v. Peralta)
COMPARATIVE TABLE OF PERSONAL PROPERTY SECURITY ACT AS AGAINST CHATTEL MORTGAGE, PLEDGE AND PREFERENCE OF
CREDITS : | JUMALON, Jewelyn A. 4B