ADDITIONAL PROVISIONS (COMMERCIAL LAW 1) of the occurrence of the violation, in any court of

Concept of Credit competent jurisdiction. In any action under this

Constitution subsection in which any person is entitled to a recovery,
Article III, Section 20 the creditor shall be liable for reasonable attorney's fees
No person shall be imprisoned for debt or non-payment and court costs as determined by the court.
of a poll tax.
(b) Except as specified in subsection (a) of this section,
Truth in Lending Act nothing contained in this Act or any regulation
Section 3(2) contained in this Act or any regulation thereunder shall
(2) "Credit" means any loan, mortgage, deed of trust, affect the validity or enforceability of any contract or
advance, or discount; any conditional sales contract; any transactions.
contract to sell, or sale or contract of sale of property or
services, either for present or future delivery, under (c) Any person who willfully violates any provision of this
which part or all of the price is payable subsequent to Act or any regulation issued thereunder shall be fined by
the making of such sale or contract; any rental-purchase not less than P1,00 or more than P5,000 or
contract; any contract or arrangement for the hire, imprisonment for not less than 6 months, nor more than
bailment, or leasing of property; any option, demand, one year or both.
lien, pledge, or other claim against, or for the delivery of,
property or money; any purchase, or other acquisition (d) No punishment or penalty provided by this Act shall
of, or any credit upon the security of, any obligation of apply to the Philippine Government or any agency or any
claim arising out of any of the foregoing; and any political subdivision thereof.
transaction or series of transactions having a similar
purpose or effect. (e) A final judgment hereafter rendered in any criminal
proceeding under this Act to the effect that a defendant
Mutuum has willfully violated this Act shall be prima facie
Truth in Lending Act evidence against such defendant in an action or
Section 4. Any creditor shall furnish to each person to proceeding brought by any other party against such
whom credit is extended, prior to the consummation of defendant under this Act as to all matters respecting
the transaction, a clear statement in writing setting which said judgment would be an estoppel as between
forth, to the extent applicable and in accordance with the parties thereto.
rules and regulations prescribed by the Board, the
following information: Deposit
Warehouse Receipts Law
(1) the cash price or delivered price of the property or Act No. 2137, February 05, 1912 ]
service to be acquired; AN ACT CONCERNING WAREHOUSE RECEIPTS.
By authority of the United States, be it enacted by the
(2) the amounts, if any, to be credited as down payment Philippine Legislature, that:
and/or trade-in;
CHAPTER I.
(3) the difference between the amounts set forth under
clauses (1) and (2); THE ISSUE OF WAREHOUSE RECEIPTS.

(4) the charges, individually itemized, which are paid or SECTION 1. Persons who may issue receipts.—
to be paid by such person in connection with the Warehouse receipts may be issued by any
transaction but which are not incident to the extension warehouseman.
of credit;
SEC 2. Form of receipts; Essential terms.—Warehouse
(5) the total amount to be financed; receipts need not be in any particular form, but every
such receipt must embody within its written or printed
(6) the finance charge expressed in terms of pesos and terms—
centavos; and (a) The location of the warehouse where the goods are
stored,
(7) the percentage that the finance bears to the total (b) The date of issue of the receipt,
amount to be financed expressed as a simple annual (c) The consecutive number of the receipt,
rate on the outstanding unpaid balance of the (d) A statement whether the goods received will be
obligation. delivered to the bearer, to a specified person, or to a
specified person or his order,
Section 6. (a) Any creditor who in connection with any (e) The rate of storage charges,
credit transaction fails to disclose to any person any (f) A description of the goods or of the packages
information in violation of this Act or any regulation containing them,
issued thereunder shall be liable to such person in the (g) The signature of the warehouseman, which may be
amount of P100 or in an amount equal to twice the made by his authorized agent,
finance charged required by such creditor in connection (h) If the receipt is issued for goods of which the
with such transaction, whichever is the greater, except warehouseman is owner, either solely or jointly or in
that such liability shall not exceed P2,000 on any credit common with others, the fact of such ownership, and
transaction. Action to recover such penalty may be (i) A statement of the amount of advances made and of
brought by such person within one year from the date liabilities incurred for which the warehouseman claims a
lien. If the precise amount of such advances made or of goods or by the depositor, if such demand is
such liabilities incurred is, at the time of the issue of the accompanied with—
receipt, unknown to the warehouseman or to his agent (a) An offer to satisfy the warehouseman's lien,
who issues it, a statement of the fact that advances have (b) An offer to surrender the receipt if negotiable, with
been made or liabilities incurred and the purpose such indorsements as would be necessary for the
thereof is sufficient. negotiation of the receipt, and
A warehouseman shall be liable to any person injured (c) A readiness and willingness to sign, when the goods
thereby, for all damage caused by the omission from a are delivered, an acknowledgment that they have been
negotiable receipt of any of the terms herein required. delivered, if such signature is requested by the
warehouseman.
SEC. 3. Form of receipts; What terms may be inserted In case the warehouseman refuses or fails to deliver the
.—A warehouseman may insert in a receipt, issued by goods in compliance with a demand by the holder or
him, any other terms and conditions: Provided, That depositor so accompanied, the burden shall be upon the
such terms and conditions shall not— warehouseman to establish the existence of a lawful
(a) Be contrary to the provisions of this Act. excuse for such refusal.
(b) In any wise impair his obligation to exercise that
degree of care in the safe-keeping of the goods SEC. 9. Justification of warehouseman in delivering.—A
intrusted to him which a reasonably careful man would warehouseman is justified in delivering the goods,
exercise in regard to similar goods of his own. subject to the provisions of the three following sections,
SEC. 4. Definition of non-negotiable receipt.—A receipt to one who is—
in which it is stated that the goods received will be (a) The person lawfully entitled to the possession of the
delivered to the depositor, or to any other specified goods, or his agent,
person, is a nonnegotiable receipt. (b) A person who is either himself entitled to delivery by
the terms of a nonnegotiable receipt issued for the
SEC. 5. Definition of negotiable receipt.—A receipt in goods,, or who has written authority from the person so
which it is stated that the goods received will be entitled either indorsed upon the receipt or written
delivered to the bearer, or to the order of any person upon another paper, or
named in such receipt is a negotiable receipt. (c) A person in possession of a negotiable receipt by the
terms of which the goods are deliverable to him or order
No provision shall be inserted in a negotiable receipt or to bearer, or which has been indorsed to him or in
that it is nonnegotiable. Such provision, if inserted, shall blank by the person to whom delivery was promised by
be void. the terms of the receipt or by his immediate indorsee.
SEC. 10. Warehouseman's liability for misdelivery.—
SEC. 6. Duplicate receipts must be so marked.—When Where a warehouseman delivers the goods to one who
more than Duplicate receipts, one negotiable receipt is is not in fact lawfully entitled to the possession of them,
issued for the same goods, the word "duplicate" shall be the warehouseman shall be liable as for conversion to all
plainly placed upon the face of every such receipt, having a right of property or possession in the goods if
except the one first issued. A warehouseman shall be he delivered the goods otherwise than as authorized (b)
liable for all damage caused by his failure so to do to any and (c) of the preceding section and though he
one who purchased the subsequent receipt for value delivered the goods as authorized by said subdivisions
supposing it to be an original, even though the purchase he shall be so liable, if prior to such delivery be had
be after the delivery of the goods by the warehouseman either—
to the holder of the original receipt. (a) Been requested, by or on behalf of the person
lawfully entitled to a right of property or possession in
SEC. 7. Failure to mark "Not negotiable."—A the goods, not to make such delivery, or
nonnegotiable receipt shall have plainly placed upon its (b) Had information that the delivery about to be made
face by the warehouseman issuing it "nonnegotiable," was to one not lawfully entitled to the possession of the
or "not negotiable." In case of the warehouse-man's goods.
failure so to do, a holder of the receipt who purchased SEC. 11. Negotiable receipts must be canceled when
it for value supposing it to be negotiable, may, at his goods delivered.—Except as provided in section thirty-
option, treat such receipt as imposing upon the six, where a warehouseman delivers goods for which he
warehouseman the same liabilities he would have had issued a negotiable receipt, the negotiation of
incurred had the receipt been negotiable. which would transfer the right to the possession of the
goods, and fails to take up and cancel the receipt, he
This section shall not apply, however, to letters, shall be liable to any one who purchases for value in
memoranda, or written acknowledgments of an good faith such receipt, for failure to deliver the goods
informal character. to him, whether such purchaser acquired title to the
receipt before or after the delivery of the goods by the
CHAPTER II warehouseman.

OBLIGATIONS AND EIGHTS OF WAREHOUSE MEN SEC. 12. Negotiable receipts must be canceled or marked
UPON THEIR RECEIPTS. when part of goods delivered.—Except as provided in
section thirty-six, where a warehouseman delivers part
SEC. 8. Obligation of warehouseman to deliver.—A of the goods for which he had issued a negotiable
warehouse-man, in the absence of some lawful excuse receipt and fails either to take up and cancel such
provided by this Act, is bound to deliver the goods upon receipt, or to place plainly upon it a statement of what
a demand made either by the holder of a receipt for the goods or packages have been delivered he shall be
liable, to any one who purchases for value in good faith
such receipt, for failure to deliver all the goods specified SEC. 17. Interpleader of adverse claimants.—If more
in the receipt, whether such purchaser acquired title to than one person claims the title or possession of the
the receipt before or after the delivery of any portion of goods, the warehouseman may, either as a defense to
the goods by the warehouseman. an action brought against him for nondelivery of the
goods, or as an original suit, whichever is appropriate,
SEC. 13. Altered receipts.—The alteration of a receipt require all known claimants to interplead.
shall not excuse the warehouseman who issued it from
any liability if such alteration was— SEC. 18. Warehouseman has reasonable time to
(a) Immaterial, determine validity of claims.—If some one other than
(b) Authorized, or the depositor or person claiming under him has a claim
(c) Made without fraudulent intent. to the title or possession of the goods, and the
If the alteration was authorized, the warehouseman warehouseman has information of such claim, the
shall be liable according to the terms of the receipt as warehouseman shall be excused from liability for
altered. If the alteration was unauthorized, but made refusing to deliver the goods, either to the depositor or
without fraudulent intent, the warehouseman shall be person claiming under him or to the adverse claimant,
liable according to the terms of the receipt, as they were until the warehouseman has had a reasonable time to
before alteration. ascertain the validity of the adverse claim or to bring
legal proceedings to compel all claimants to interplead.
Material and fraudulent alteration of a receipt shall not
excuse the warehouseman who issued it from liability to SEC. 19. Adverse title is no defense except as above
deliver, according to the terms of the receipt as provided.— Except as provided in the two preceding
originally issued, the goods for which it was issued, but sections and in sections nine and thirty-six, no right or
shall excuse him from any other liability to the person title of a iliird person shall be a defense to an action
who made the alteration and to any person who took brought by the depositor or person claiming under him
with notice of the alteration. Any purchaser of the against the warehouseman for failure to deliver the
receipt for value without notice of the alteration shall goods according to the terms of the receipt.
acquire the same rights against the warehouseman
which such purchaser would have acquired if the receipt SEC. 20. Liability for non-existence or misdescription of
had not been altered at the time of the purchase. goods.— A warehouseman shall be liable to the holder
or a receipt tor damages caused by the nonexistence of
SEC. 14. Lost or destroyed receipts.—Where a the goods or by the failure of the goods to correspond
negotiable receipt has been lost or destroyed, a court of with the description thereof in the receipt at the time of
competent jurisdiction, may order the delivery of the its issue. If, however, the goods are described in a
goods upon satisfactory proof of such loss or receipt merely by a statement of marks or labels upon
destruction and upon the giving of a bond with them, or upon packages containing them, or by a
sufficient sureties to be approved by the court to statement that the goods are said to be goods of a
protect the warehouseman from any liability or certain kind, or that the packages containing the goods
expense, which he or any person injured by such are said to contain goods of a certain kind, or by words
delivery may incur by reason of the original receipt of like purport, such statements, if true, shall not make
remaining outstanding. The court may also in its liable the warehouseman issuing the receipt, although
discretion order the payment of the warehouseman's the goods are not of the kind which the marks or labels
reasonable costs and counsel fees. upon them indicate, or of the kind they were said to be
by the depositor.
The delivery of the goods under an order of the court as
provided in this section, shall not relieve the SEC. 21. Liability for care of goods.—A warehouseman
warehouseman from liability to a person to whom the shall be liable for any loss or injury to the goods caused
negotiable receipt has been or shall be negotiated for by Iris failure to exercise such care in regard to them as
value without notice of the proceedings or of the a reasonably careful owner of similar goods would
delivery of the goods. exercise, but he shall not be liable, in the absence of an
agreement to tire contrary, for any loss or injury to the
SEC. 15. Effect of duplicate receipts.—A receipt upon the goods which could not have been avoided by the
face Duplicate receipts. of which the word "duplicate" is exercise of such care.
plainly placed is a representation and warranty by the
warehouseman that such receipt is an accurate copy of SEC. 22. Goods must be kept separate.—Except as
an original receipt properly issued and uncanceled at the provided in the following section, a warehouseman shall
date of the issue of the duplicate, but shall impose upon keep the goods so far separate from goods of other
him no other liability. depositors, and from other goods of the same depositor
for which a separate receipt has been issued, as to
SEC. 16. Warehouseman can not set up title in himself.— permit at all times the identification and redelivery of
No title or right to the possession of the goods, on the the goods deposited.
part of the warehouseman, unless such title or right is
derived directly or indirectly from a transfer made by the SEC. 23. Fungible goods may be commingled, if
depositor at the time of or subsequent to the deposit warehouseman authorized.—If authorized by
for storage, or from the warehouseman's lien, shall agreement or by custom, a warehouseman may mingle
excuse the warehouseman from liability for refusing to fungible goods with other goods of the same kind and
deliver the goods according to the terms of the receipt. grade. In such case the various depositors of the
mingled goods shall own the entire mass in common (a) By surrendering possession thereof, or
and each depositor shall be entitled to such portion (b) By refusing to deliver the goods when a demand is
thereof as the amount deposited by him bears to the made with which he is bound to comply under the
whole. provisions of this Act.
SEC. 30. Negotiable receipt must state charges for which
SEC. 24. Liability of warehouseman to depositors of lien is claimed.—If a negotiable receipt is issued for
commingled goods.—The warehouseman shall be goods, the warehouseman shall have no lien thereon,
severally liable to each depositor for the care and except for charges for storage of those goods
redelivery of his share of such mass to the same extent subsequent to the date of the receipt, unless the receipt
and under the same circumstances as if the goods had expressly enumerates other charges for which a lien is
been kept separate. claimed. In such case there shall be a lien for the charges
enumerated so far as they are within the terms of
SEC. 25. Attachment or levy upon goods for which a section twenty-seven, although the amount of the
negotiable receipt has been issued.—If goods are charges so enumerated is not stated in the receipt.
delivered to a warehouseman by the owner or by a
person whose act in conveying the title to them to a SEC. 31. Warehouseman need not deliver until lien is
purchaser in good faith for value would bind the owner, satisfied.— A warehouseman having a lien valid against
and a negotiable receipt is issued for them, they can not the person demanding the goods may refuse to deliver
thereafter, while in the possession of the the goods to him until the lien is satisfied.
warehouseman, be attached by garnishment or
otherwise, or be levied upon under an execution, unless SEC. 32. Warehouseman's lien does not preclude other
the receipt be first surrendered to the warehouseman, remedies.—Whether a warehouseman has or has not a
or its negotiation enjoined. The warehouseman shall in lien upon the goods, he is entitled to all remedies
no case be compelled to deliver up the actual possession allowed by law to a creditor against his debtor, for the
of the goods until the receipt is surrendered to him or collection from the depositor of all charges and
impounded by the court. advances which the depositor has expressly or impliedly
contracted with the warehouseman to pay.
SEC. 26. Creditors' remedies to reach negotiable
receipts.—A creditors remedies creditor whose debtor SEC. 33. Satisfaction of lien by sale.—A warehouseman's
is the owner of a negotiable receipt shall be entitled to lien for a claim which has become due may be satisfied
such aid from courts of appropriate jurisdiction, by as follows:
injunction and .otherwise, in attaching such receipt or in
satisfying the claim by means thereof as is allowed at The warehouseman shall give written notice to the
law or in equity in these islands, in regard to property person on whose account the goods are held, and to any
which can not readily lie attached or levied upon by other person known by the warehouseman to claim an
ordinary legal process. interest in the goods. Such notice shall be given by
delivery in person or by registered letter addressed to
SEC. 27. What claims are included in the the last known place of business or abode of the person
warehouseman's lien.— claims included in Subject to to be notified. The notice shall contain—
the provisions of section thirty, a warehouseman shall (a) An itemized statement of the warehouseman's
have a lien on goods deposited or on the proceeds claim, showing the sum due at the time of the notice and
thereof in his hands, for all lawful charges for storage the date or dates when it became due,
and preservation of the goods; also for all lawful claims (b) A brief description of the goods against which the
for money advanced, interest, insurance, lien exists,
transportation, labor, weighing, coopering, and other (c) A demand that the amount oi the claim as stated in
charges and expenses in relation to such goods; also for the notice, and of such further claim as shall accrue, shall
all reasonable charges and expenses for notice, and be paid on or before a day mentioned, not less than ten
advertisements of sale, and for sale of the goods where days from the delivery of the notice if it is personally
default has been made in satisfying the delivered, or from the time when the notice should
warehouseman's lien. reach its destination, according to the due course of
post, if the notice is sent by mail, and
SEC. 28. Against what property the lien may be (d) A statement that unless the claim is paid within the
enforced.— Enforcement Subject to the provisions of time specified the goods will be advertised for sale and
section thirty, a warehouseman's lien may be sold by auction at a specified time and place.
enforced— In accordance with the terms of a notice so given, a sale
(a) Against all goods, whenever deposited, belonging to of the goods by auction may be had to satisfy any valid
the person who is liable as debtor for the claims in claim of the warehouseman for which he has a lien on
regard to which the lien is asserted, and the goods. The sale shall be had in the place where the
(b) Against all goods belonging to others which have lien was acquired, or, if such place is manifestly
been deposited at any time by the person who is liable unsuitable for the purpose, at the nearest suitable place.
as debtor for the claims in regard to which the lien is After the time for the payment of the claim specified in
asserted if such person had been so intrusted with the the notice to the depositor has elapsed, an
possession of the goods that a pledge of the same by advertisement of the sale, describing the goods to be
him at the time of the deposit to one who took the in sold, and stating the name of the owner or person on
good faith for value would have been valid. whose account the goods are held, and the time and
SEC. 29. How the lien may be lost.—A warehouseman place of the sale, shall be published once a week for two
loses his lien upon goods— consecutive weeks in a newspaper published in the
place where such sale is to be held. The sale shall not be
held less than fifteen days from the time of the first CHAPTER III.
publication. If there is no newspaper published in such
place, the advertisement shall be posted at least ten NEGOTIATION AND TRANSFER OF RECEIPTS.
days before such sale in not less than six conspicuous
places therein. SEC. 37. Negotiation of negotiablr receipts by
delivery.—A negotiable receipt may be negotiated by
From the proceeds of such sale the warehouseman shall delivery—
satisfy his lien, including the reasonable charges of (a) Where, by the terms of the receipt, the
notice, advertisement, and sale. The balance, if any, of warehouseman —by delivery, undertakes to deliver the
such proceeds shall be held by the warehouseman, and goods to the bearer, or
delivered on demand to the person to whom he would (b) Where, by the terms of the receipt, the
have been bound to deliver or justified in delivering the warehouseman undertakes to deliver the goods to the
goods. order of a specified person, and such person or a
subsequent indorsee of the receipt has indorsed it in
At any time before the goods are so sold any person blank or to bearer.
claiming a right of property or possession therein may
pay the warehouseman the amount necessary to satisfy
his lien and to pay the reasonable expenses and Where, by the terms of a negotiable receipt, the goods
liabilities incurred in serving notices and advertising and are deliverable to bearer or where a negotiable receipt
preparing for the sale up to the time of such payment. has been indorsed in blank or to bearer, any holder may
The warehouseman shall deliver the goods to the indorse the same to himself or to any other specified
person making such payment if he is a person entitled, person, and in such case the receipt shall thereafter be
under the provisions of this Act, to the possession of the negotiated only by the indorsement of such indorsee.
goods on payment of charges thereon. Otherwise the
warehouseman shall retain possession of the goods SEC. 38. Negotiation of negotiable receipts by
according to the terms of the original contract of indorsement.—A negotiable receipt may be negotiated
deposit. by the indorsement of the person to whose order the
goods are, by the terms of the receipt, deliverable. Such
SEC. 34. Perishable and hazardous goods.—If goods are indorsement may be in blank, to bearer or to a specified
of a perishable nature, or by keeping will deteriorate person. If indorsed to a specified person, it may be again
greatly in value, or by their odor, leakage, negotiated by the indorsement of such person in blank,
inflammability, or explosive nature, will be liable to to bearer or to another specified person. Subsequent
injure other property, the warehouseman may give such negotiation may be made in like manner.
notice to the owner, or to the person in whose name the
goods are stored, as is reasonable and possible under SEC. 39. Transfer of receipts.—A receipt which is not in
the circumstances, to satisfy the lien upon such goods, such form that it can be negotiated by delivery may be
and to remove them from the warehouse, and in the transferred by the holder by delivery to a purchaser or
event of the failure of such person to satisfy the lien and donee.
to remove the goods within the time so specified, the
warehouseman may sell the goods at public or private A nonnegotiable receipt can not be negotiated, and the
sale without advertising. If the warehouseman after a indorsement of such a receipt gives the transferee no
reasonable effort is unable to sell such goods, he may additional right.
dispose of them in any lawful manner, and shall incur no
liability by reason thereof. SEC. 40. Who may negotiate a receipt.—A negotiable
receipt may be negotiated—
The proceeds of any sale made under the terms of this (a) By the owner thereof, or
section shall be disposed of in the same way as the (b) By any person to whom the possession or custody of
proceeds of sales made under the terms of the the receipt has been intrusted by the owner, if, by the
preceding section. terms of the receipt, the warehouseman undertakes to
deliver the goods to the order of the person to whom
SEC. 35. Other methods of enforcing liens.—The the possession or custody of the receipt has been
remedy for enforcing a lien herein provided does not intrusted, or if at the time of such intrusting the receipt
preclude any other remedies allowed by law for the is in such form that it may be negotiated by delivery.
enforcement of a lien against personal property nor bar SEC. 41. Rights of person to whom a receipt has been
the right to recover so much of the warehouseman's negotiated.—A person to whom a negotiable receipt
claim as shall not be paid by the proceeds of the sale of has been duly negotiated acquires thereby—
the property. (a) Such title to the goods as the person negotiating the
receipt to him had or had ability to convey to a
SEC. 36. Effect of sale.—After goods have been lawfully purchaser in good faith for value, and also such title to
sold to Effect of sale. satisfy a warehouseman's lien, or the goods as the depositor or person to whose order the
have been lawfully sold or disposed of because of their goods were to be delivered by the terms of 'the receipt
perishable or hazardous nature, the warehouseman had or had ability to convey to a purchaser in good faith
shall not thereafter be liable for failure to deliver the for value, and
goods to the depositor, or owner of the goods, or to a (b) The direct obligation of the warehouseman to hold
holder of the receipt given for the goods when they possession of the goods for him according to the terms
were deposited, even if such receipt be negotiable.
of the receipt as fully as if the warehouseman had of the person making the negotiation, or by the fact that
contracted directly with him. the owner of the receipt was induced by fraud, mistake,
SEC. 42. Rights of person to whom a receipt has been or duress to intrust the possession or custody of the
transferred.—A person to whom a receipt has been receipt to such person, if the person to whom the
transferred but not negotiated, acquires thereby, as receipt was negotiated, or a person to whom the receipt
against the transferer, the title of the goods, subject to was subsequently negotiated, paid value therefor,
the terms of any agreement with the transferer. without notice of the breach of duty, or fraud, mistake,
or duress.
If the receipt is nonnegotiable such person also acquires
the right to notify the warehouseman of the transfer to SEC. 48. Subsequent negotiation.—Where a person
him of such receipt, and thereby to acquire the direct having sold, mortgaged, or pledged goods which are m
obligation of the warehouseman to hold possession of a warehouse and for which a negotiable receipt has
the goods for him according to the terms of the receipt. been issued, or having sold, mortgaged, or pledged the
negotiable receipt representing such goods, continues
Prior to the notification of the warehouseman by the in possession of the negotiable receipt, the subsequent
transferer or transferee of a nonnegotiable receipt, the negotiation thereof by that person under any sale, or
title of the transferee to the goods and the right to other disposition thereof to any person receiving the
acquire the obligation of the warehouseman may be same in good faith, for value and without notice of the
defeated by the levy of an attachment or execution previous sale, mortgage, or pledge. shall have the same
upon the goods by a creditor of the transferer, or by a effect as if the first purchaser of the goods or receipt
notification to the warehouseman by the transferer or a had expressly authorized the subsequent negotiation.
subsequent purchaser from the transferer of a
subsequent sale of the goods by the transferer. SEC. 49. Negotiation defeats vendor's lien.—Where a
negotiable receipt has been issued for goods, no sellers
SEC. 43. Transfer of neqotiable receipt ivilhout lien or right of stoppage in transitu shall defeat the
indorsement.— Where a negotiable receipt is rights of any purchaser for value in good faith to whom
transferred tor value by delivery, and the indorsement such receipt has been negotiated, whether such
of the transferer is essential for negotiation, the negotiation be prior or subsequent to the notification to
transferee acquires a right against the transferer to the warehouseman who issued such receipt of the
compel him to indorse the receipt, unless a contrary seller's claim to a lien or right of stoppage in transitu.
intention appears. The negotiation shall take effect as of Nor shall the warehouseman be obliged to deliver or
the time when the indorsement is actually made. justified in delivering the goods to an unpaid seller
unless the receipt is first surrendered for cancellation.
SEC. 44. Warranties on sale of receipt.—A person who
for value negotiates or transfers a receipt by CHAPTER IV.
indorsement or delivery, including one who assigns for
value a claim secured by a receipt, unless a contrary CRIMINAL OFFENSES.
intention appears, warrants—
(a) That the receipt is genuine, SEC. 50. Issue of receipt for goods not received.—A
(b) That he has a legal right to negotiate or transfer it, warehouseman, or any officer, agent, or servant of a
(cj That he has knowledge of no fact which would impair warehouseman, who issues or aids in issuing a receipt
the validity or worth of the receipt, and knowing that the goods for which such receipt is issued
(d) That he has a right to transfer the title to the goods have not been actually received by such warehouseman,
and that the goods are merchantable or fit for a or are not under his actual control at the time of issuing
particular purpose whenever such warranties would such receipt, shall be guilty of a crime, and upon
have been implied, if the contract of the parties had conviction shall be punished for each offense by
been to transfer without a receipt the goods imprisonment not exceeding five years, or by a fine not
represented thereby. exceeding ten thousand pesos, or by both.
SEC. 45. Indorser not a guarantor.—The indorsement of
a receipt shall not make the indorser liable for any failure SEC. 51. Issue of receipt containing false statement.—A
on the part of the warehouseman or previous indorsers warehouseman, or any officer, agent, or servant of a
of the receipt to fulfill their respective obligations. warehouseman, who fraudulently issues or aids in
fraudulently issuing a receipt for goods knowing that it
SEC. 46. No warranty implied from accepting payment contains any false statement, shall be guilty of a crime,
of a debt.—A mortgagee, pledged, or holder for security and upon conviction shall be punished for each offense
of a receipt who in good faith demands or receives by imprisonment not exceeding one year, or by a fine
payment of the debt for which such receipt is security, not exceeding two thousand pesos, or by both.
whether from a party to a draft drawn for such debt or
from any other person, shall not by so doing be deemed SEC. 52. Issue of duplicate receipts not so marked.—A
to represent or to warrant the genuineness of such warehouseman, or any officer, agent, or servant of a
receipt or the quantity or quality of the goods therein warehouseman, who issues or aids in issuing a duplicate
described. or additional negotiable receipt for goods knowing that
a former negotiable receipt for the same goods or any
SEC. 47. When negotiation not impaired by fraud, part of them is outstanding and uncanceled, without
mistake, or Fraud, mistake, or duress.—The validity of plainly placing upon the face thereof the word
the negotiation of a receipt is not impaired by the fact "Duplicate" except in the case of a lost or destroyed
that such negotiation was a breach of duty on the part receipt after proceedings as provided for in section
fourteen, shall be guilty of a crime, and upon conviction "Holder" of a receipt means a person who has both
shall be punished for each offense by imprisonment not actual possession of such receipt and a right of property
exceeding five years, or by a fine not exceeding ten therein.
thousand pesos, or by both. "Order" means an order by indorsement on the receipt.
"Owner" does not include mortgagee or pledgee.
SEC. 53. Issue for warehouseman's goods of receipts "Person" includes a corporation or partnership or two
which do not state that fact.—Where there are or more persons having a joint or common interest.
deposited with or held by a warehouseman goods of To "purchase" includes to take as mortgagee or as
which he is owner, either solely or jointly or in common pledgee.
with others, such warehouseman, or any of his officers, "Purchaser" includes mortgagee and pledgee.
agents, or servants who, knowing this ownership, issues "Receipt" means a warehouse receipt.
or aids in issuing a negotiable receipt for such goods "Value" is any consideration sufficient to support a
which does not state such ownership, shall be guilty of simple contract. An antecedent or pre-existing
a crime, and upon conviction shall be punished for each obligation, whether for money or not, constitutes value
offense by imprisonment not exceeding one year, or by where a receipt is taken either in satisfaction thereof or
a fine not exceeding two thousand pesos, or by both. as security therefor.
"Warehouseman" means a person lawfully engaged in
SEC. 54. Delivery of goods without obtaining negotiable the business of storing goods for profit.
receipt.—a warehouseman, or any officer, agent, or
servant of a warehouseman who delivers goods out of (b) A thing is done "in good faith" within the meaning of
the possession of such warehouseman, knowing that a this Act. when it is in fact done honestly, whether it be
negotiable receipt the negotiation of which would done negligently or not.
transfer the right to the possession of such goods is SEC. 59. Application of Act.—The provisions of this Act
outstanding and uncanceled, without obtaining the do not apply to receipts made and delivered prior to the
possession of such receipt at or before the time of such taking effect hereof.
delivery, shall, except in the cases provided for in
sections fourteen and thirty-six, be found guilty of a SEC. 60. Repeals.—All Acts and laws and parts thereof
crime, and upon conviction shall be punished for each inconsistent with this Act are hereby repealed.
offense by imprisonment not exceeding one year, or by
a fine not exceeding two thousand pesos, or by both. SEC. 61. Time when Act takes effect.—This Act shall take
effect ninety days after its publication in the Official
SEC. 55. Negotiation of receipt for mortgaged goods.— Gazette of the Philippine Islands shall have been
Any person who deposits goods to which he has not completed.
title, or upon which there is a lien or mortgage, and who
takes for such goods a negotiable receipt which he Enacted, February 5, 1912.
afterwards negotiates for value with intent to deceive
and without disclosing his want of title or the existence General Bonded Warehouse Act
of the lien or mortgage shall be guilty of a crime, and
upon conviction shall be punished for each offense by Section 1. This Act shall be known by the short title of
imprisonment not exceeding one year, or by a fine not "BONDED WAREHOUSE ACT."
exceeding two thousand pesos, or by both. Sec. 2. As used in this Act, the term "warehouse" shall
be deemed to mean every building, structure, or other
CHAPTER V. protected inclosure in which rice is kept for storage. The
term "rice" shall be deemed to mean either palay in
INTERPRETATION. bundles, or in grains, or clean rice, or both. "Person"
including corporation or partnership or two or more
SEC. 56. Cases not provided for in Act.—Any case not persons having joint or common interest;
provided for in this Act shall be governed by the "warehouseman" means a person engaged in the
provisions of existing legislation, or in default thereof, business receiving rice for storage; and "receipt" means
by the rules of the law merchant. any receipt issued by a warehouseman for rice delivered
to him. For the purpose of this Act, the business of
SEC. 57. Name of Act.—This Act may be cited as the receiving rice for storage shall include (1) any contract or
Warehouse Receipts Act. transaction wherein the warehouseman is obligated to
return the very same rice delivered to him or pay its
SEC. 58. Definitions.— (a) In this Act, unless the context value;(2) any contract or transaction wherein the rice
or subject matter otherwise requires— delivered is to be milled for and on account of the owner
"Action" includes counter claim, set-off, and suit in thereof; (3) any contract or transaction wherein the rice
equity as provided by law in these Islands. delivered is commingled with the rice delivered by or
"Delivery" means voluntary transfer of possession from belonging to other persons and the warehouseman is
one person to another. obligated to return the rice of the same kind or pay its
"Fungible goods" means goods of which any unit is, value.
from its nature or by mercantile custom, treated as the
equivalent of any other unit. Sec. 3. No person shall engage in the business of
"Goods" means chattels or merchandise in storage, or receiving rice for storage without first securing a license
which has been or is about to be stored. therefore from the Director of the Bureau of Commerce
and Industry. Said license shall be annual and shall
expire on the thirty-first day of December.
 NOW, THEREFORE, I, FERDINAND E. MARCOS, President
Sec. 4. Any person applying for a license to engage in the of the Philippines, by virtue of the powers vested in me
business of receiving rice for storage shall set forth in by the Constitution, as Commander-in-Chief of all the
the application the place or places where the business Armed Forces of the Philippines, and pursuant to
and warehouse are to be established or located and the Proclamation No. 1081, dated September 21, 1972, and
maximum quantity of rice to be received. The General Order No. 1, dated September 22, 1972, as
application shall be accompanied by a cash bond or a amended, and in order to effect the desired changes
bond secured by real estate or signed by a duly and reforms in the social, economic, and political
authorized bonding company, the amount of which shall structure of our society, do hereby order and decree and
be fixed by the Director of the Bureau of Commerce and make as part of the law of the land the following:
Industry at not less than thirty-three and one third
percent of the market value of the maximum quantity or Section 1. Short Title. This Decree shall be known as the
rice to be received. Said bond shall be so conditioned as Trust Receipts Law.
to respond for the market value of the rice actually
delivered and received at any time the warehouseman is Section 2. Declaration of Policy. It is hereby declared to
unable to return the rice or to pay its value. The bond be the policy of the state (a) to encourage and promote
shall be approved by the Director of the Bureau of the use of trust receipts as an additional and convenient
Commerce and Industry before issuing a license under aid to commerce and trade; (b) to provide for the
this Act, to satisfy himself concerning the sufficiency of regulation of trust receipts transactions in order to
such bond, and to determine whether the warehouse assure the protection of the rights and enforcement of
for which such license is applied for is suitable for the obligations of the parties involved therein; and (c) to
proper storage of rice. declare the misuse and/or misappropriation of goods or
proceeds realized from the sale of goods, documents or
Letters of Credit instruments released under trust receipts as a criminal
Code of Commerce offense punishable under Article Three hundred and
Article 567. Letters of credit are those issued by one fifteen of the Revised Penal Code.
merchant to another, or for purpose of attending to a
commercial transaction. Section 3. Definition of terms. As used in this Decree,
unless the context otherwise requires, the term
Article 568. The essential conditions of letters of credit
shall be: (a) "Document" shall mean written or printed evidence
1. To be issued in favor of a determined person of title to goods.
and not to order.
2. To be limited to a fixed and specified amount, (b) "Entrustee" shall refer to the person having or taking
or to one or more indeterminate amounts, but possession of goods, documents or instruments under a
all included in a maximum sum the limit of trust receipt transaction, and any successor in interest
which must be exactly stated. of such person for the purpose or purposes specified in
Letters of credit which do not have one of these the trust receipt agreement.
conditions shall be considered simply as letters of
recommendation. (c) "Entruster" shall refer to the person holding title
over the goods, documents, or instruments subject of a
Trust Receipts trust receipt transaction, and any successor in interest
Trust Receipts Law of such person.
PRESIDENTIAL DECREE No. 115 January 29, 1973
(d) "Goods" shall include chattels and personal property
PROVIDING FOR THE REGULATION OF TRUST RECEIPTS other than: money, things in action, or things so affixed
TRANSACTIONS to land as to become a part thereof.

WHEREAS, the utilization of trust receipts, as a (e) "Instrument" means any negotiable instrument as
convenient business device to assist importers and defined in the Negotiable Instrument Law; any
merchants solve their financing problems, had gained certificate of stock, or bond or debenture for the
popular acceptance in international and domestic payment of money issued by a public or private
business practices, particularly in commercial banking corporation, or any certificate of deposit, participation
transactions; certificate or receipt, any credit or investment
instrument of a sort marketed in the ordinary course of
WHEREAS, there is no specific law in the Philippines that business or finance, whereby the entrustee, after the
governs trust receipt transactions, especially the rights issuance of the trust receipt, appears by virtue of
and obligations of the parties involved therein and the possession and the face of the instrument to be the
enforcement of the said rights in case of default or owner. "Instrument" shall not include a document as
violation of the terms of the trust receipt agreement; defined in this Decree.

WHEREAS, the recommendations contained in the (f) "Purchase" means taking by sale, conditional sale,
report on the financial system which have been lease, mortgage, or pledge, legal or equitable.
accepted, with certain modifications by the monetary
authorities included, among others, the enactment of a (g) "Purchaser" means any person taking by purchase.
law regulating the trust receipt transactions;
(h) "Security Interest" means a property interest in d) to effect their presentation, collection or renewal
goods, documents or instruments to secure
performance of some obligations of the entrustee or of The sale of goods, documents or instruments by a
some third persons to the entruster and includes title, person in the business of selling goods, documents or
whether or not expressed to be absolute, whenever instruments for profit who, at the outset of the
such title is in substance taken or retained for security transaction, has, as against the buyer, general property
only. rights in such goods, documents or instruments, or who
sells the same to the buyer on credit, retaining title or
(i) "Person" means, as the case may be, an individual, other interest as security for the payment of the
trustee, receiver, or other fiduciary, partnership, purchase price, does not constitute a trust receipt
corporation, business trust or other association, and transaction and is outside the purview and coverage of
two more persons having a joint or common interest. this Decree.

(j) "Trust Receipt" shall refer to the written or printed Section 5. Form of trust receipts; contents. A trust
document signed by the entrustee in favor of the receipt need not be in any particular form, but every
entruster containing terms and conditions substantially such receipt must substantially contain (a) a description
complying with the provisions of this Decree. No further of the goods, documents or instruments subject of the
formality of execution or authentication shall be trust receipt; (2) the total invoice value of the goods and
necessary to the validity of a trust receipt. the amount of the draft to be paid by the entrustee; (3)
an undertaking or a commitment of the entrustee (a) to
(k) "Value" means any consideration sufficient to hold in trust for the entruster the goods, documents or
support a simple contract. instruments therein described; (b) to dispose of them in
the manner provided for in the trust receipt; and (c) to
Section 4. What constitutes a trust receipt transaction. turn over the proceeds of the sale of the goods,
A trust receipt transaction, within the meaning of this documents or instruments to the entruster to the
Decree, is any transaction by and between a person extent of the amount owing to the entruster or as
referred to in this Decree as the entruster, and another appears in the trust receipt or to return the goods,
person referred to in this Decree as entrustee, whereby documents or instruments in the event of their non-sale
the entruster, who owns or holds absolute title or within the period specified therein.
security interests over certain specified goods,
documents or instruments, releases the same to the The trust receipt may contain other terms and
possession of the entrustee upon the latter's execution conditions agreed upon by the parties in addition to
and delivery to the entruster of a signed document those hereinabove enumerated provided that such
called a "trust receipt" wherein the entrustee binds terms and conditions shall not be contrary to the
himself to hold the designated goods, documents or provisions of this Decree, any existing laws, public policy
instruments in trust for the entruster and to sell or or morals, public order or good customs.
otherwise dispose of the goods, documents or
instruments with the obligation to turn over to the Section 6. Currency in which a trust receipt may be
entruster the proceeds thereof to the extent of the denominated. A trust receipt may be denominated in
amount owing to the entruster or as appears in the trust the Philippine currency or any foreign currency
receipt or the goods, documents or instruments acceptable and eligible as part of international reserves
themselves if they are unsold or not otherwise disposed of the Philippines, the provisions of existing law,
of, in accordance with the terms and conditions executive orders, rules and regulations to the contrary
specified in the trust receipt, or for other purposes notwithstanding: Provided, however, That in the case of
substantially equivalent to any of the following: trust receipts denominated in foreign currency,
payment shall be made in its equivalent in Philippine
1. In the case of goods or documents, (a) to sell the currency computed at the prevailing exchange rate on
goods or procure their sale; or (b) to manufacture or the date the proceeds of sale of the goods, documents
process the goods with the purpose of ultimate sale: or instruments held in trust by the entrustee are turned
Provided, That, in the case of goods delivered under over to the entruster or on such other date as may be
trust receipt for the purpose of manufacturing or stipulated in the trust receipt or other agreements
processing before its ultimate sale, the entruster shall executed between the entruster and the entrustee.
retain its title over the goods whether in its original or
processed form until the entrustee has complied fully Section 7. Rights of the entruster. The entruster shall be
with his obligation under the trust receipt; or (c) to load, entitled to the proceeds from the sale of the goods,
unload, ship or tranship or otherwise deal with them in documents or instruments released under a trust
a manner preliminary or necessary to their sale; or receipt to the entrustee to the extent of the amount
owing to the entruster or as appears in the trust receipt,
2. In the case of instruments, or to the return of the goods, documents or instruments
in case of non-sale, and to the enforcement of all other
a) to sell or procure their sale or exchange; or rights conferred on him in the trust receipt provided
such are not contrary to the provisions of this Decree.
b) to deliver them to a principal; or
The entruster may cancel the trust and take possession
c) to effect the consummation of some transactions of the goods, documents or instruments subject of the
involving delivery to a depository or register; or trust or of the proceeds realized therefrom at any time
upon default or failure of the entrustee to comply with
any of the terms and conditions of the trust receipt or written terms of a trust receipt shall be valid as against
any other agreement between the entruster and the all creditors of the entrustee for the duration of the trust
entrustee, and the entruster in possession of the goods, receipt agreement.
documents or instruments may, on or after default, give
notice to the entrustee of the intention to sell, and may, Section 13. Penalty clause. The failure of an entrustee to
not less than five days after serving or sending of such turn over the proceeds of the sale of the goods,
notice, sell the goods, documents or instruments at documents or instruments covered by a trust receipt to
public or private sale, and the entruster may, at a public the extent of the amount owing to the entruster or as
sale, become a purchaser. The proceeds of any such appears in the trust receipt or to return said goods,
sale, whether public or private, shall be applied (a) to documents or instruments if they were not sold or
the payment of the expenses thereof; (b) to the disposed of in accordance with the terms of the trust
payment of the expenses of re-taking, keeping and receipt shall constitute the crime of estafa, punishable
storing the goods, documents or instruments; (c) to the under the provisions of Article Three hundred and
satisfaction of the entrustee's indebtedness to the fifteen, paragraph one (b) of Act Numbered Three
entruster. The entrustee shall receive any surplus but thousand eight hundred and fifteen, as amended,
shall be liable to the entruster for any deficiency. Notice otherwise known as the Revised Penal Code. If the
of sale shall be deemed sufficiently given if in writing, violation or offense is committed by a corporation,
and either personally served on the entrustee or sent by partnership, association or other juridical entities, the
post-paid ordinary mail to the entrustee's last known penalty provided for in this Decree shall be imposed
business address. upon the directors, officers, employees or other officials
or persons therein responsible for the offense, without
Section 8. Entruster not responsible on sale by prejudice to the civil liabilities arising from the criminal
entrustee. The entruster holding a security interest shall offense.
not, merely by virtue of such interest or having given the
entrustee liberty of sale or other disposition of the Section 14. Cases not covered by this Decree. Cases not
goods, documents or instruments under the terms of provided for in this Decree shall be governed by the
the trust receipt transaction be responsible as principal applicable provisions of existing laws.
or as vendor under any sale or contract to sell made by
the entrustee. Section 15. Separability clause. If any provision or section
of this Decree or the application thereof to any person
Section 9. Obligations of the entrustee. The entrustee or circumstance is held invalid, the other provisions or
shall (1) hold the goods, documents or instruments in sections hereof and the application of such provisions or
trust for the entruster and shall dispose of them strictly sections to other persons or circumstances shall not be
in accordance with the terms and conditions of the trust affected thereby.
receipt; (2) receive the proceeds in trust for the
entruster and turn over the same to the entruster to the Section 16. Repealing clause. All Acts inconsistent with
extent of the amount owing to the entruster or as this Decree are hereby repealed.
appears on the trust receipt; (3) insure the goods for
their total value against loss from fire, theft, pilferage or Section 17. This Decree shall take effect immediately.
other casualties; (4) keep said goods or proceeds
thereof whether in money or whatever form, separate Done in the City of Manila, this 29th day of January, in
and capable of identification as property of the the year of Our Lord, nineteen hundred and seventy-
entruster; (5) return the goods, documents or three.
instruments in the event of non-sale or upon demand of
the entruster; and (6) observe all other terms and Revised Penal Code
conditions of the trust receipt not contrary to the Article 315. Swindling (estafa). – Any person who shall
provisions of this Decree. defraud another by any of the means mentioned
hereinbelow shall be punished by:
Section 10. Liability of entrustee for loss. The risk of loss 1st. The penalty of prision correccional in its maximum
shall be borne by the entrustee. Loss of goods, period to prision mayor in its minimum period, if the
documents or instruments which are the subject of a amount of the fraud is over 12,000 pesos but does not
trust receipt, pending their disposition, irrespective of exceed 22,000 pesos, and if such amount exceeds the
whether or not it was due to the fault or negligence of latter sum, the penalty provided in this paragraph shall
the entrustee, shall not extinguish his obligation to the be imposed in its maximum period, adding one year for
entruster for the value thereof. each additional 10,000 pesos; but the total penalty
which may be imposed shall not exceed twenty years. In
Section 11. Rights of purchaser for value and in good such cases, and in connection with the accessory
faith. Any purchaser of goods from an entrustee with penalties which may be imposed under the provisions of
right to sell, or of documents or instruments through this Code, the penalty shall be termed prision mayor or
their customary form of transfer, who buys the goods, reclusion temporal, as the case may be.
documents, or instruments for value and in good faith 2nd. The penalty of prision correccional in its minimum
from the entrustee, acquires said goods, documents or and medium periods, if the amount of the fraud is over
instruments free from the entruster's security interest. 6,000 pesos but does not exceed 12,000 pesos;
3rd. The penalty of arresto mayor in its maximum period
Section 12. Validity of entruster's security interest as to prision correccional in its minimum period if such
against creditors. The entruster's security interest in amount is over 200 pesos but does not exceed 6,000
goods, documents, or instruments pursuant to the pesos; and
4th. By arresto mayor in its maximum period, if such paying therefor, with intent to defraud the
amount does not exceed 200 pesos, provided that in the proprietor or manager thereof, or by
four cases mentioned, the fraud be committed by any of obtaining credit at hotel, inn, restaurant,
the following means: boarding house, lodging house, or
1. With unfaithfulness or abuse of confidence, apartment house by the use of any false
namely: pretense, or by abandoning or
a. By altering the substance, quantity, or surreptitiously removing any part of his
quality, or anything of value which the baggage from a hotel, inn, restaurant,
offender shall deliver by virtue of an boarding house, lodging house or
obligation to do so, even though such apartment house after obtaining credit,
obligation be based on an immoral or illegal food, refreshment or accommodation
consideration. therein without paying for his food,
b. By misappropriating or converting, to the refreshment or accommodation.
prejudice of another, money, goods, or any 3. Through any of the following fraudulent
other personal property received by the means:
offender in trust or on commission, or for a. By inducing another, by means of deceit, to
administration, or under any other sign any document.
obligation involving the duty to make b. By resorting to some fraudulent practice to
delivery of or to return the same, even insure success in a gambling game.
though such obligation be totally or c. By removing, concealing or destroying, in
partially guaranteed by a bond; or by whole or in part, any court record, office
denying having received such money, files, document or any other papers.
goods, or other property.
c. By taking undue advantage of the Real Estate Mortgage
signature of the offended party in blank, Act 3135
and by writing any document above such ACT NO. 3135 - AN ACT TO REGULATE THE SALE OF
signature in blank, to the prejudice of the PROPERTY UNDER SPECIAL POWERS INSERTED IN OR
offended party or of any third person. ANNEXED TO REAL-ESTATE MORTGAGES
2. By means of any of the following false
pretenses or fraudulent acts prior to or
simultaneously with the commission of the Section 1. When a sale is made under a special power
fraud: inserted in or attached to any real-estate mortgage
a. By using fictitious name, or falsely hereafter made as security for the payment of money or
pretending to possess power, influence, the fulfillment of any other obligation, the provisions of
qualifications, property, credit, agency, the following election shall govern as to the manner in
business or imaginary transactions, or by which the sale and redemption shall be effected,
means of other similar deceits. whether or not provision for the same is made in the
b. By altering the quality, fineness or weight power.
of anything pertaining to his art or Sec. 2. Said sale cannot be made legally outside of the
business. province in which the property sold is situated; and in
c. By pretending to have bribed any case the place within said province in which the sale is to
government employee, without prejudice be made is subject to stipulation, such sale shall be made
to the action for calumny (the making of in said place or in the municipal building of the
false and defamatory statements about municipality in which the property or part thereof is
someone in order to damage their situated.
reputation; slander) which the offended
party may deem proper to bring against Sec. 3. Notice shall be given by posting notices of the
the offender. In this case, the offender sale for not less than twenty days in at least three public
shall be punished by the maximum period places of the municipality or city where the property is
of the penalty. situated, and if such property is worth more than four
d. By post-dating a check, or issuing a check in hundred pesos, such notice shall also be published once
payment of an obligation when the a week for at least three consecutive weeks in a
offender therein were not sufficient to newspaper of general circulation in the municipality or
cover the amount of the check. The failure city.
of the drawer of the check to deposit the
amount necessary to cover his check within Sec. 4. The sale shall be made at public auction, between
three days from receipt of notice from the the hours or nine in the morning and four in the
bank and/or the payee or holder that said afternoon; and shall be under the direction of the sheriff
check has been dishonored for lack of of the province, the justice or auxiliary justice of the
insufficiency of funds shall be prima facie peace of the municipality in which such sale has to be
evidence of deceit constituting false made, or a notary public of said municipality, who shall
pretense or fraudulent act. (As amended be entitled to collect a fee of five pesos each day of
by RA 4885) actual work performed, in addition to his expenses.
e. By obtaining any food, refreshment or
accommodation at a hotel, inn, restaurant, Sec. 5. At any sale, the creditor, trustee, or other persons
boarding house, lodging house, or authorized to act for the creditor, may participate in the
apartment house and the like without bidding and purchase under the same conditions as any
other bidder, unless the contrary has been expressly shall be entitled to deduct from the price of redemption
provided in the mortgage or trust deed under which the any rentals that said purchaser may have collected in
sale is made. case the property or any part thereof was rented; if the
purchaser occupied the property as his own dwelling, it
Sec. 6. In all cases in which an extrajudicial sale is made being town property, or used it gainfully, it being rural
under the special power hereinbefore referred to, the property, the redeemer may deduct from the price the
debtor, his successors in interest or any judicial creditor interest of one per centum per month provided for in
or judgment creditor of said debtor, or any person section four hundred and sixty-five of the Code of Civil
having a lien on the property subsequent to the Procedure.
mortgage or deed of trust under which the property is
sold, may redeem the same at any time within the term Sec. 10. This Act shall take effect on its approval.
of one year from and after the date of the sale; and such
redemption shall be governed by the provisions of Approved: March 6, 1924
sections four hundred and sixty-four to four hundred
and sixty-six, inclusive, of the Code of Civil Procedure, in A.M. No. 99-10-05-0
so far as these are not inconsistent with the provisions A.M. No. 99-10-05-0 December 14, 1999
of this Act. (Amended by A.M. 99-10-05-0, August 7, 2001)

Sec. 7. In any sale made under the provisions of this Act, PROCEDURE IN EXTRA-JUDICIAL FORECLOSURE OF
the purchaser may petition the Court of First Instance of MORTGAGE
the province or place where the property or any part
thereof is situated, to give him possession thereof In line with the responsibility of an Executive Judge
during the redemption period, furnishing bond in an under Administrative Order No. 6, dated June 30, 1975,
amount equivalent to the use of the property for a for the management of courts within his administrative
period of twelve months, to indemnify the debtor in area, included in which is the task of supervising directly
case it be shown that the sale was made without the work of the Clerk of Court, who is also the Ex Officio
violating the mortgage or without complying with the Sheriff, and his staff, and the issuance of commissions
requirements of this Act. Such petition shall be made to notaries public and enforcement of their duties under
under oath and filed in form of an ex parte motion in the the law, the following procedures are hereby prescribed
registration or cadastral proceedings if the property is in extrajudicial foreclosure of mortgages:
registered, or in special proceedings in the case of
property registered under the Mortgage Law or under 1. All applications for extra-judicial foreclosure of
section one hundred and ninety-four of the mortgage whether under the direction of the sheriff or
Administrative Code, or of any other real property a notary public, pursuant to Act 3135, as amended by Act
encumbered with a mortgage duly registered in the 4118, and Act 1508, as amended, shall be filed with the
office of any register of deeds in accordance with any Executive Judge, through the Clerk of Court who is also
existing law, and in each case the clerk of the court shall, the Ex-Officio Sheriff.
upon the filing of such petition, collect the fees specified
in paragraph eleven of section one hundred and 2. Upon receipt of an application for extra-judicial
fourteen of Act Numbered Four hundred and ninety-six, foreclosure of mortgage, it shall be the duty of the Clerk
as amended by Act Numbered Twenty-eight hundred of Court to:
and sixty-six, and the court shall, upon approval of the
bond, order that a writ of possession issue, addressed a) receive and docket said application and to stamp
to the sheriff of the province in which the property is thereon the corresponding file number, date and time
situated, who shall execute said order immediately. of filing;

Sec. 8. The debtor may, in the proceedings in which b) collect the filing fees therefor and issue the
possession was requested, but not later than thirty days corresponding official receipt;
after the purchaser was given possession, petition that
the sale be set aside and the writ of possession c) examine, in case of real estate mortgage foreclosure,
cancelled, specifying the damages suffered by him, whether the applicant has complied with all the
because the mortgage was not violated or the sale was requirements before the public auction is conducted
not made in accordance with the provisions hereof, and under the direction of the sheriff or a notary public,
the court shall take cognizance of this petition in pursuant to Sec. 4 of Act 3135, as amended;
accordance with the summary procedure provided for in
section one hundred and twelve of Act Numbered Four d) sign and issue the certificate of sale, subject to the
hundred and ninety-six; and if it finds the complaint of approval of the Executive Judge, or in his absence, the
the debtor justified, it shall dispose in his favor of all or Vice-Executive Judge; and
part of the bond furnished by the person who obtained
possession. Either of the parties may appeal from the e) after the certificate of sale has been issued to the
order of the judge in accordance with section fourteen highest bidder, keep the complete records, while
of Act Numbered Four hundred and ninety-six; but the awaiting any redemption within a period of one (1) year
order of possession shall continue in effect during the from date of registration of the certificate of sale with
pendency of the appeal. the Register of Deeds concerned, after which the
records shall be archived.
Sec. 9. When the property is redeemed after the
purchaser has been given possession, the redeemer
Where the application concerns the extrajudicial within one year after the sale of the real estate, to
foreclosure of mortgages of real estates and/or chattels redeem the property by paying the amount due under
in different locations covering one indebtedness, only the mortgage deed, with interest thereon at rate
one filing fee corresponding to such indebtedness shall specified in the mortgage, and all the costs and
be collected. The collecting Clerk of Court shall, apart expenses incurred by the bank or institution from the
from the official receipt of the fees, issue a certificate of sale and custody of said property less the income
payment indicating the amount of indebtedness, the derived therefrom. However, the purchaser at the
filing fees collected, the mortgages sought to be auction sale concerned whether in a judicial or extra-
foreclosed, the real estates and/or chattels mortgaged judicial foreclosure shall have the right to enter upon
and their respective locations, which certificate shall and take possession of such property immediately after
serve the purpose of having the application docketed the date of the confirmation of the auction sale and
with the Clerks of Court of the places where other administer the same in accordance with law. Any
properties are located and of allowing the extrajudicial petition in court to enjoin or restrain the conduct of
foreclosures to proceed thereat. foreclosure proceedings instituted pursuant to this
provision shall be given due course only upon the filing
3. The notices of auction sale in extrajudicial foreclosure by the petitioner of a bond in an amount fixed by the
for publication by the sheriff or by a notary public shall court conditioned that he will pay all the damages which
be published in a newspaper of general circulation the bank may suffer by the enjoining or the restraint of
pursuant to Section 1, Presidential Decree No. 1709, the foreclosure proceeding. Notwithstanding Act 3135,
dated January 26, 1977, and non-compliance therewith juridical persons whose property is being sold pursuant
shall constitute a violation of Section 6 thereof. to an extrajudicial foreclosure, shall have the right to
redeem the property in accordance with this provision
4. The Executive Judge shall, with the assistance of the until, but not after, the registration of the certificate of
Clerk of Court, raffle application for extrajudicial foreclosure sale with the applicable Register of Deeds
foreclosure of mortgage under the direction of the which in no case shall be more than three (3) months
sheriff among all sheriffs, including those assigned to after foreclosure, whichever is earlier. Owners of
the Office of the Clerk of Court and Sheriffs IV assigned property that has been sold in a foreclosure sale prior to
in the branches. the effectivity of this Act shall retain their redemption
rights until their expiration. (78a)
5. No auction sale shall be held unless there are at least
two (2) participating bidders, otherwise the sale shall be Rules of Court
postponed to another date. If on the new date set for Foreclosure of Real Estate Mortgage
the sale there shall not be at least two bidders, the sale
shall then proceed. The names of the bidders shall be Section 1. Complaint in action for foreclosure. — In an
reported by the sheriff or the notary public who action for the foreclosure of a mortgage or other
conducted the sale to the Clerk of Court before the encumbrance upon real estate, the complaint shall set
issuance of the certificate of sale. forth the date and due execution of the mortgage; its
assignments, if any; the names and residences of the
This Resolution amends or modifies accordingly mortgagor and the mortgagee; a description of the
Administrative Order No. 3 issued by then Chief Justice mortgaged property; a statement of the date of the
Enrique M. Fernando on 19 October 1984 and note or other documentary evidence of the obligation
Administrative Circular No. 3-98 issued by the Chief secured by the mortgage, the amount claimed to be
Justice Andres R. Narvasa on 5 February 1998. unpaid thereon; and the names and residences of all
persons having or claiming an interest in the property
The Court Administrator may issue the necessary subordinate in right to that of the holder of the
guidelines for the effective enforcement of this mortgage, all of whom shall be made defendants in the
Resolution. action. (1a)

The Clerk of Court shall cause the publication of this Section 2. Judgment on foreclosure for payment or sale.
Resolution in a newspaper of general circulation not — If upon the trial in such action the court shall find the
later than 27 December 1999 and furnish copies thereof facts set forth in the complaint to be true, it shall
to the Integrated Bar of the Philippines. ascertain the amount due to the plaintiff upon the
mortgage debt or obligation, including interest and
This Resolution shall take effect on the fifteenth day of other charges as approved by the court, and costs, and
January year 2000. shall render judgment for the sum so found due and
order that the same be paid to the court or to the
Enacted this 14th day of December 1999 in the City of judgment obligee within a period of not less than ninety
Manila. (90) days nor more than one hundred twenty (120) days
from the entry of judgment, and that in default of such
General Banking Law payment the property shall be sold at public auction to
Article III, Section 47 satisfy the judgment. (2a)
Foreclosure of Real Estate Mortgage. - In the event of
foreclosure, whether judicially or extra-judicially, of any Section 3. Sale of mortgaged property; effect. — When
mortgage on real estate which is security for any loan or the defendant, after being directed to do so as provided
other credit accommodation granted, the mortgagor or in the next preceding section, fails to pay the amount of
debtor whose real property has been sold for the full or the judgment within the period specified therein, the
partial payment of his obligation shall have the right court, upon motion, shall order the property to be sold
in the manner and under the provisions of Rule 39 and be cancelled, and a new one issued in the name of the
other regulations governing sales of real estate under purchaser.
execution. Such sale shall not affect the rights of
persons holding prior encumbrances upon the property Where a right of redemption exists, the certificate of
or a part thereof, and when confirmed by an order of the title in the name of the mortgagor shall not be cancelled,
court, also upon motion, it shall operate to divest the but the certificate of sale and the order confirming the
rights in the property of all the parties to the action and sale shall be registered and a brief memorandum
to vest their rights in the purchaser, subject to such thereof made by the registrar of deeds upon the
rights of redemption as may be allowed by law. certificate of title. In the event the property is
redeemed, the deed of redemption shall be registered
Upon the finality of the order of confirmation or upon with the registry of deeds, and a brief memorandum
the expiration of the period of redemption when thereof shall be made by the registrar of deeds on said
allowed by law, the purchaser at the auction sale or last certificate of title.
redemptioner, if any, shall be entitled to the possession
of the property unless a third party is actually holding If the property is not redeemed, the final deed of sale
the same adversely to the judgment obligor. The said executed by the sheriff in favor of the purchaser at the
purchaser or last redemptioner may secure a writ of foreclosure sale shall be registered with the registry of
possession, upon motion, from the court which ordered deeds; whereupon the certificate of title in the name of
the foreclosure. (3a) the mortgagor shall be cancelled and a new one issued
in the name of the purchaser. (n)
Section 4. Disposition of proceeds of sale. — The
amount realized from the foreclosure sale of the Section 8. Applicability of other provisions. — The
mortgaged property shall, after deducting the costs of provisions of sections 31, 32 and 34 of Rule 39 shall be
the sale, be paid to the person foreclosing the applicable to the judicial foreclosure of real estate
mortgage, and when there shall be any balance or mortgages under this Rule insofar as the former are not
residue, after paying off the mortgage debt due, the inconsistent with or may serve to supplement the
same shall be paid to junior encumbrancers in the order provisions of the latter. (8a)
of their priority, to be ascertained by the court, or if
there be no such encumbrancers or there be a balance Personal Property Security
or residue after payment to them, then to the RA 11057
mortgagor or his duly authorized agent, or to the person REPUBLIC ACT No. 11057
entitled to it. (4a)
An Act Strengthening the Secured Transactions Legal
Section 5. How sale to proceed in case the debt is not all Framework in the Philippines, Which Shall Provide for
due. — If the debt for which the mortgage or the Creation, Perfection, Determination of Priority,
encumbrance was held is not all due as provided in the Establishment of a Centralized Notice Registry, and
judgment as soon as a sufficient portion of the property Enforcement of Security Interests in Personal Property,
has been sold to pay the total amount and the costs due, and for Other Purposes
the sale shall terminate; and afterwards as often as
more becomes due for principal or interest and other Be it enacted by the Senate and House of
valid charges, the court may, on motion, order more to Representatives of the Philippine Congress Assembled:
be sold. But if the property cannot be sold in portions
without prejudice to the parties, the whole shall be Section 1. Title. -This Act shall be known as the "Personal
ordered to be sold in the first instance, and the entire Property Security Act".
debt and costs shall be paid, if the proceeds of the sale
be sufficient therefor, there being a rebate of interest Section 2. Declaration of Policy. -It is the policy of the
where such rebate is proper. (5a) State to promote economic activity by increasing access
to least cost credit, particularly for micro, small, and
Section 6. Deficiency judgment. — If upon the sale of medium enterprises (MSMEs), by establishing a unified
any real property as provided in the next preceding and modern legal framework for securing obligations
section there be a balance due to the plaintiff after with personal property.
applying the proceeds of the sale, the court, upon
motion, shall render judgment against the defendant for CHAPTER 1
any such balance for which, by the record of the case, he DEFINITIONS AND SCOPE
may be personally liable to the plaintiff, upon which
execution may issue immediately if the balance is all due Section 3. Definition of Terms. -As used in this Act, the
at the time of the rendition of the judgment; otherwise; following terms shall mean:
the plaintiff shall be entitled to execution at such time
as the balance remaining becomes due under the terms (a) Commodity contract – a commodity futures
of the original contract, which time shall be stated in the contract, an option on a commodity futures contract, a
judgment. (6a) commodity option, or another contract if the contract
or option is:
Section 7. Registration. — A certified copy of the final
order of the court confirming the sale shall be registered (1) Traded on or subject to the rules of a board of trade
in the registry of deeds. If no right of redemption exists, that has been designated as a contract market for such
the certificate of title in the name of the mortgagor shall a contract; or
(2) Traded on a foreign commodity board of trade, (LRA) where notice of a security interest and a lien in
exchange, or market, and is carried on the books of a personal property may be registered;
commodity intermediary for a commodity customer;
(i) Secured creditor – a person that has a security
(b) Control agreement – interest. For the purposes of registration and priority
only, it includes a buyer of account receivable and a
(1) With respect to securities, means an agreement in lessor of goods under an operating lease for not less
writing among the issuer or the intermediary, the than one (1) year;
grantor and the secured creditor, according to which
the issuer or the intermediary agrees to follow (j) Security interest – a property right in collateral that
instructions from the secured creditor with respect to secures payment or other performance of an obligation,
the security, without further consent from the grantor; regardless of whether the parties have denominated it
as a security interest, and regardless of the type of asset,
(2) With respect to rights to deposit account, means an the status of the grantor or secured creditor, or the
agreement in writing among the deposit-taking nature of the secured obligation; including the right of a
institution, the grantor and the secured creditor, buyer of accounts receivable and a lessor under an
according to which the deposit-taking institution agrees operating lease for not less than one (1) year; and
to follow instructions from the secured creditor with
respect to the payment of funds credited to the deposit (k) Writing – for the purpose of this Act includes
account without further consent from the grantor; electronic records.

(3) With respect to commodity contracts, means an Section 4. Scope of the Act.— This Act shall apply to all
agreement in writing among the grantor, secured transactions of any form that secure an obligation with
creditor, and intermediary, according to which the movable collateral, except interests in aircrafts subject
commodity intermediary will apply any value distributed to Republic Act No. 9497, or the "Civil Aviation Authority
on account of the commodity contract as directed by Act of 2008", and interests in ships subject to
the secured creditor without further consent by the Presidential Decree No. 1521, or the "Ship Mortgage
commodity customer or grantor; Decree of 1978".

(c) Grantor – CHAPTER 2

CREATION OF SECURITY INTEREST
(1) The person who grants a security interest in collateral
to secure its own obligation or that of another person; Section 5. Creation of a Security Interest.—

(2) A buyer or other transferee of a collateral that (a) A security interest shall be created by a security
acquires its right subject to a security interest; agreement,

(3) A transferor in an outright transfer of an accounts (b) A security agreement may provide for the creation
receivable; or of a security interest in a future property, but the
security interest in that property is created only when
(4) A lessee of goods; the grantor acquires rights in it or the power to
encumber it.
(d) Non-inter mediated securities – securities other than
securities credited to a securities account and rights in Section 6. Security Agreement.— A security agreement
securities resulting from the credit of securities to a must be contained in a written contract signed by the
securities account; parties. It may consist of one or more writings that,
taken together, establish the intent of the parties to
(e) Notice – a statement of information that is create a security interest.
registered in the Registry relating to a security interest
or lien. The term includes an initial notice., amendment The security agreement shall likewise provide for the
notice, and termination notice; language to be used in agreements and notices. The
grantor shall be given the option to have the agreement
(f) Proceeds – any property received upon sale, lease or and notices in Filipino. The Department of Finance (DOF)
other disposition of collateral, or whatever is collected shall prepare model agreements in plain English and
on or distributed with respect to collateral, claims Filipino.
arising out of the loss or damage to the collateral, as
well as a right to insurance payment or other Section 7. Description of Collateral.— A description of
compensation for loss or damage of the collateral; collateral shall be considered sufficient, whether it is
specific or general, if it reasonably identifies the
(g) Purchase money security interest – a security collateral. A description such as "all personal property",
interest in goods taken by the seller to secure the price "all equipment", "all inventory", or "all personal
or by a person who gives value to enable the grantor to property within a generic category" of the grantor shall
acquire the goods to the extent that the credit is used be sufficient.
for that purpose;
Section 8. Right to Proceeds and Commingled Funds and
(h) Registry – the centralized and nationwide electronic Money.—
registry established in the Land Registration Authority
(a) A security interest in personal property shall extend (a) A security interest shall be perfected when it has
to its identifiable or traceable proceeds. been created and the secured creditor has taken one of
the actions in accordance with Section 12.
(b) Where proceeds in the form of funds credited to a
deposit account or money are commingled with other (b) On perfection, a security interest becomes effective
funds or money: against third parties.

(1) The security interest shall extend to the commingled Section 12. Means of Perfection.— A security interest
money or funds, notwithstanding that the proceeds may be perfected by:
have ceased to be identifiable to the extent they remain
traceable: (a) Registration of a notice with the Registry;

(2) The security interest in the commingled funds or (b) Possession of the collateral by the secured creditor;
money shall be limited to the amount of the proceeds and
immediately before they were commingled: and
(c) Control of investment property and deposit account.
(3) If at any time after the commingling, the balance
credited to the deposit account or the amount of the A security interest in any tangible asset may be
commingled money is less than the amount of the perfected by registration or possession. A security
proceeds immediately before they were commingled, interest in investment property and deposit account
the security interest against the commingled funds or may be perfected by registration or control.
money shall be limited to the lowest amount of the
commingled funds or money between the time when Section 13. Perfection by Control.—
the proceeds were commingled and the time the
security interest in the proceeds is claimed. (a) A security interest in a deposit account or investment
property may be perfected by control through:
Section 9. Continuity of Security Interest.— A security
interest shall continue in collateral notwithstanding (1) The creation of the security interest in favor of the
sale, lease, license, exchange, or other disposition of the deposit-taking institution or the intermediary;
collateral, except as otherwise provided in Section 21 of
this Act, or agreed upon by the parties. (2) The conclusion of a control agreement; or

Section 10. Contractual Limitation on the Creation of a (3) For an investment property that is an electronic
Security Interest.— security not held with an intermediary, the notation of
the security interest in the books maintained by or on
(a) A security interest in an account receivable shall be behalf of the issuer for the purpose of recording the
effective notwithstanding any agreement between the name of the holder of the securities.(b) Nothing in this
grantor and the account debtor or any secured creditor Act shall require a deposit-taking institution or an
limiting in any way the grantor’s right to create a intermediary to enter into a control agreement, even if
security interest. the grantor so requests. A deposit-taking institution or
an intermediary that has entered into such an
(b) Nothing in this section shall affect any obligation or agreement shall not be required to confirm the
liability of the grantor for breach of the agreement in existence of the agreement to another person unless
subsection (a). requested to do so by the grantor.

(c) Any stipulation limiting the grantor’s right to create Section 14. Perfection in Proceeds.—
a security interest shall be void.
(a) Upon disposition of collateral, a security interest
(d) This section shall apply only to accounts receivable shall extend to proceeds of the collateral without
arising from: further act and be continuously perfected, if the
proceeds are in the form of money, accounts receivable,
(1) A contract for the supply or lease of goods or services negotiable instruments or deposit accounts.
other than financial services;
(b) Upon disposition of the collateral, if the proceeds are
(2) A construction contract or a contract for the sale or in a form different from money, accounts receivable,
lease of real property; and negotiable instruments or deposit accounts, the
security interest in such proceeds must be perfected by
(3) A contract for the sale, lease or license of intellectual one of the means applicable to the relevant type of
property. collateral within fifteen (15) days after the grantor
receives such proceeds; otherwise, the security interest
CHAPTER 3 in such proceeds shall not be effective against third
PERFECTION OF SECURITY INTEREST parties.

Section 11. Perfection of Security Interest.— 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 Section 19. Priority for Instruments and Negotiable
perfected. Documents. -A security interest in an instrument or
negotiable document that is perfected by possession of
Section 16. Assignment of Security Interest.— If a the instrument or the negotiable document shall have
secured creditor assigns a perfected security interest, an priority over a security interest in the instrument or
amendment notice may be registered to reflect the negotiable document that is perfected by registration of
assignment. a notice in the Registry.

CHAPTER 4 Section 20. Priority and Plight of Retention by Operation

PRIORITY OF SECURITY INTEREST of Law. -A person who provides services or materials
with respect to the goods, in the ordinary course of
Section 17. Priority Rules.— The priority of security business, and retains possession of the goods shall have
interests and liens in the same collateral shall be priority over a perfected security interest in the goods
determined according to time of registration of a notice until payment thereof.
or perfection by other means, without regard to the
order of creation of the security interests and liens. Section 21. Transferee Exceptions. -Any party who
obtains, in the ordinary course of business, any movable
Section 18. Priority for Perfection by Control.— property containing a security interest shall take the
same free of such security interest provided he was in
(a) A security interest in a deposit account with respect good faith. No such good faith shall exist if the security
to which the secured creditor is the deposit-taking interest in the movable property was registered prior to
institution or the intermediary shall have priority over a his obtaining the property.
competing security interest perfected by any method.
Section 22. Effect of the Grantor’s Insolvency on the
(b) A security interest in a deposit account or Priority of a Security Interest. -Subject to the applicable
investment property that is perfected by a control insolvency law, a security interest perfected prior to the
agreement shall have priority over a competing security commencement of insolvency proceedings in respect of
interest except a security interest of the deposit-taking the grantor shall remain perfected and retain the
institution or the intermediary. priority it had before the commencement of the
insolvency proceedings.
(c) The order of priority among competing security
interests in a deposit account or investment property Section 23. Purchase Money Security Interest.—
that were perfected by the conclusion of control
agreements shall be determined on the basis of the time (a) A purchase money security interest in equipment
of conclusion of the control agreements. and its proceeds shall have priority over a conflicting
security interest, if a notice relating to the purchase
(d) Any rights to set-off that the deposit-taking money security interest is registered within three (3)
institution may have against a grantor’s right to business days after the grantor receives possession of
payment of funds credited to a deposit account shall the equipment.
have priority over a security interest in the deposit
account. (b) A purchase money security interest in consumer
goods that is perfected by registration of notice not
(e) A security interest in a security certificate perfected later than three (3) business days after the grantor
by the secured creditor’s possession of the certificate obtains possession of the consumer goods shall have
shall have priority over a competing security interest priority over a conflicting security interest.
perfected by registration of a notice in the Registry.
(c) A purchase money security interest in inventory,
(f) A security interest in electronic securities not held intellectual property or livestock shall have priority over
with an intermediary perfected by a notation of the a conflicting perfected security interest in the same
security interests in the books maintained for that inventory, intellectual property or livestock if:
purpose by or on behalf of the issuer shall have priority
over a security interest in the same securities perfected (1) The purchase money security interest is perfected
by any other method. when the grantor receives possession of the inventory
or livestock, or acquires rights to intellectual property;
(g) A security interest in electronic securities not held and
with an intermediary perfected by the conclusion of a
control agreement shall have priority over a security (2) Before the grantor receives possession of the
interest in the same securities perfected by registration inventory or livestock, or acquires rights in intellectual
of a notice in the Registry. property, the purchase money secured creditor gives
written notification to the holder of the conflicting
(h) The order of priority among competing security perfected security interest in the same types of
interests in electronic securities not held with an inventory, livestock, or intellectual property. The
intermediary perfected by the conclusion of control notification sent to the holder of the conflicting security
agreements is determined on the basis of the time of interest may cover multiple transactions between the
conclusion of the control agreements. purchase money secured creditor and the grantor
without the need to identify each transaction.
(d) The purchase money security interest in equipment (5) If the prescribed fee has been tendered, or an
or consumer goods perfected timely in accordance with arrangement has been made for payment of fees by
subsections (a) and (b), shall have priority over the other means.
rights of a buyer, lessee, or lien holder which arise
between delivery of the equipment or consumer goods (b) If the Registry rejects to register a notice, it shall
to the grantor and the time the notice is registered. promptly communicate the fact of and reason for its
rejection to the person who submitted the notice.
Section 24. Livestock. -A perfected security interest in
livestock securing an obligation incurred to enable the (c) Each grantor must authorize the registration of an
grantor to obtain food or medicine for the livestock shall initial notice by signing a security agreement or
have priority over any other security interest in the otherwise in writing.
livestock, except for a perfected purchase money
security interest in the livestock, if the secured creditor (d) A notice may be registered before a security
providing credit for food or medicine gives written agreement is concluded. Once a security agreement is
notification to the holder of the conflicting perfected concluded, the date of registration of the notice shall be
security interest in the same livestock before the reckoned from the date the notice was registered.
grantor receives possession of the food or medicine.
(e) A notice of lien may be registered by a lien holder
Section 25. Fixtures, Accessions, and Commingled without the consent of the person against whom the
Goods. -A perfected security interest in a movable lien is sought to be enforced.
property which has become a fixture, or has undergone
accession or commingling shall continue provided the (f) Description of the collateral in a notice shall be
movable property involved can still be reasonably entered in English.
traced. In determining ownership over fixtures,
accessions, and commingled goods, the provisions of Section 29. One Notice Sufficient for Security Interests
Book II of Republic Act No. 386 or the "Civil Code of the Under Multiple Security Agreements. -The registration
Philippines" shall apply. of a single notice may relate to security interests created
by the grantor under one (1) or more than one security
CHAPTER 5 agreement.
REGISTRATION – REGISTRY
Section 30. Effectiveness of Notice.—
Section 26. Establishment of Electronic Registry.—
(a) A notice shall be effective at the time it is
(a) The Registry shall be established in and administered discoverable on the records of the Registry.
by the LRA.
(b) A notice shall be effective for the duration of the
(b) The Registry shall provide electronic means for term indicated in the notice unless a continuation notice
registration and searching of notices. is registered before the term lapses.

Section 27. Public Record.— (c) A notice substantially complying with the
requirements of this Chapter shall be effective unless it
(a) Information contained in a registered notice shall be is seriously misleading.
considered as a public record.
(d) A notice that may not be retrieved in a search of the
(b) Any person may search notices registered in the Registry against the correct identifier of the grantor
Registry. shall be ineffective with respect to that grantor.

(c) The electronic records of the Registry shall be the Section 31. Seriously Misleccding Notice. -A notice that
official records. does not provide the identification number of the
grantor shall be seriously misleading.
Section 28. Sufficiency of Notice.—
Section 32. Amendment of Notice.—
(a) An initial notice of security interest shall not be
rejected: (a) A notice may be amended by the registration of an
amendment notice that:
(1) If it identifies the grantor by an identification
number, as further prescribed in the regulations; (1) Identifies the initial notice by its registration number;
and
(2) If it identifies the secured creditor or an agent of the
secured creditor by name; (2) Provides the new information.

(3) If it provides an address for the grantor and secured (b) An amendment notice that adds collateral that is not
creditor or its agent; proceeds must be authorized by the grantor in writing.

(4) If it describes the collateral: and (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. (a) The Registry shall communicate the following
information to any person who requests it:
(e) An amendment notice that adds collateral or a
grantor shall be effective as to the added collateral or (1) Whether there are in the Registry any unlapsed
grantor from the date of its registration. notices that indicate the grantor's identification number
or vehicle serial number that exactly matches the
Section 33. Continuation of Notice.— relevant criterion provided by the searcher;

(a) The period of effectiveness of a notice may be (2) The registration number, and the date and time of
continued by registering an amendment notice that registration of each notice; and
identifies the initial notice by its registration number.
(3) All of the information contained in each notice.
(b) Continuation of notice may be registered only within
six (6) months before the expiration of the effective (b) If requested, the Registry shall issue a certified
period of the notice. report of the results of a search that is an official record
of the Registry and shall be admissible into evidence in
Section 34. Termination of Effectiveness of a Notice.— judicial proceedings without extrinsic evidence of its
authenticity.
(a) The effectiveness of a notice may be terminated by
registering a termination notice that: Section 37. Disclosure of Information.—

(1) Identifies the initial notice by its registration number; (a) The secured creditor must provide to the grantor at
and its request:

(2) Identifies each secured creditor who authorizes the (1) The current amount of the unpaid secured obligation;
registration of the termination notice. and

(b) A termination notice terminates effectiveness of the (2) A list of assets currently subject to a security interest.
notice as to each authorizing secured creditor.
(b) The secured creditor may require payment of a fee
Section 35. Registry Duties.— for each request made by the grantor in subsection (a)
in this section, but the grantor is entitled to a reply
(a) For each registered notice, the Registry shall: without charge once every six (6) months.

(1) Assign a unique registration number; (c) A security interest in a deposit account shall not:

(2) Create a record that bears the number assigned to (1) Affect the rights and obligations of the deposit-
the initial notice and the date and time of registration; taking institution without its consent; or
and
(2) Require the deposit-taking institution to provide any
(3) Maintain the record for public inspection. information about the deposit account to third parties.

(b) The Registry shall index notices by the identification Section 38. Fees Set by Regulation.—
number of the grantor and, for notices containing a
serial number of a motor vehicle, by serial number. (a) The fees for registering a notice and for requesting a
certified search report shall be set by regulation issued
(c) The Registry shall provide a copy of the electronic by the DOF for the recovery of reasonable costs of
record of the notice, including the registration number establishing and operating the Registry.
and the date and time of registration to the person who
submitted it. (b) The fee structure or any change thereof under
subsection (a) shall further consider that the same shall
(d) The Registry shall maintain the capability to retrieve not be burdensome to either lender or grantor.
a record by the identification number of the grantor,
and by serial number of a motor vehicle. (c) There shall be no fee for electronic searches of the
Registry records or for the registration of termination
(e) The Registry shall maintain records of lapsed notices notices.
for a period of ten (10) years after the lapse.
(d) The Registry may charge fees for services not
(f) The duties of the Registry shall be merely mentioned above.
administrative in nature. By registering a notice or
refusing to register a notice, the Registry does not Section 39. When the Grantor May Demand Amendment
determine the sufficiency, correctness, authenticity, or or Termination of Notice. -A grantor may give a written
validity of any information contained in the notice. demand to the secured creditor to amend or terminate
the effectiveness of the notice if:
Section 36. Search of Registry Records and Certified
Report.—
(a) All the obligations under the security agreement to criminal purpose or intent shall be subject to civil and
which the registration relates have been performed and criminal penalties according to the relevant laws.
there is no commitment to make future advances;
CHAPTER 6
(b) The secured creditor has agreed to release part of ENFORCEMENT OF SECURITY INTEREST SECURED
the collateral described in the notice; CREDITOR’S RIGHTS

(c) The collateral described in the notice includes an Section 45. Right of Redemption.—
item or kind of property that is not a collateral under a
security agreement between the secured creditor and (a) Any person who is entitled to receive a notification
the grantor; of disposition in accordance with this Chapter is entitled
to redeem the collateral by paying or otherwise
(d) No security agreement exists between the parties; performing the secured obligation in full, including the
or reasonable cost of enforcement.

(e) The security interest is extinguished in accordance (b) The right of redemption may be exercised, unless:
with this Act.
(1) The person entitled to redeem has not, after the
Section 40. Matters That May be Required by Demand. - default, waived in writing the right to redeem;
Upon receipt of the demand submitted under Section
39, the secured creditor must register, within fifteen (15) (2) The collateral is sold or otherwise disposed of,
working days, an amendment or termination notice: acquired or collected by the secured creditor or until the
conclusion of an agreement by the secured creditor for
(a) Terminating the registration in a case within that purpose; and
subsections (a), (d) or (e) of Section 39;
(3) The secured creditor has retained the collateral.
(b) Amending the registration to release some property
that is no longer collateral in a case within subsection (c) Section 46. Right of Higher-Ranking Secured. Creditor to
of Section 39 or that was never collateral under a Take Over Enforcement.—
security agreement between the secured creditor and
the grantor in a case within subsection (c) of Section 39. (a) Even if another secured creditor or a lien holder has
commenced enforcement, a secured creditor whose
Section 41. Procedure for Noncompliance with Demand. security-interest has priority over that of the enforcing
-If the secured creditor fails to comply with the demand secured creditor or lien holder shall be entitled to take
within fifteen (15) working days after its receipt, the over the enforcement process.
person giving the demand under Section 39 may ask the
proper court to issue an order terminating or amending (b) The right referred to in subsection (a) of this section
the notice as appropriate. may be invoked at any time before the collateral is sold
or otherwise disposed of, or retained by the secured
Section 42. Compulsory Amendment or Termination by creditor or until the conclusion of an agreement by the
Court Order.— secured creditor for that purpose.

(a) The court may, on application by the grantor, issue (c) The right of the higher-ranking secured creditor to
an order that the notice be terminated or amended in take over the enforcement process shall include the
accordance with the demand, which order shall be right to enforce the rights by any method available to a
conclusive and binding-on the LRA: Provided, That the secured creditor under this Act.
secured creditor wrho disagrees with the order of the
court may appeal the order. Section 47. Expedited Repossession of the Collateral.—

(b) The court may make any other order it deems proper (a) The secured creditor may take possession of the
for the purpose of giving effect to an order under collateral without judicial process if the security
subsection (a) of this section. agreement so stipulates: Provided, That possession can
be taken without a breach of the peace.
(c) The LRA shall amend or terminate a notice in
accordance with a court order made under subsection (b) If the collateral is a fixture, the secured creditor, if it
(a) of this section as soon as reasonably practicable after has priority over all owners and mortgagees, may
receiving the order. remove the fixture from the real property to which it is
affixed without judicial process. The secured creditor
Section 43. No Fee for Compliance of Demand. -A shall exercise due care in removing the fixture.
secured creditor shall not charge any fee for compliance
with a demand received under Section 39. (c) If, upon default, the secured creditor cannot take
possession of collateral without breach of the peace,
Section 44. When Registration and Search Constitutes the secured creditor may proceed as follows:
Interference with Privacy of Individual. -A person who
submitted a notice for registration or carried out a (1) The secured creditor shall be entitled to an expedited
search of the Registry with a frivolous, malicious or hearing upon application for an order granting the
secured creditor possession of the collateral. Such
application shall include a statement by the secured (a) In disposing of collateral, the secured creditor shall
creditor, under oath, verifying the existence of the act in a commercially reasonable manner.
security agreement attached to the application and
identifying at least one event of default by the debtor (b) A disposition is commercially reasonable if the
under the security agreement; secerned creditor disposes of the collateral in
conformity with commercial practices among dealers in
(2) The secured creditor shall provide the debtor, that type of property.
grantor, and, if the collateral is a fixture, any real estate
mortgagee, a copy of the application, including all (c) A disposition is not commercially unreasonable
supporting documents and evidence for the order merely because a better price could have been obtained
granting the secured creditor possession of the by disposition at a different time or by a different
collateral; and method from the time and method selected by the
secured creditor.
(3) The secured creditor is entitled to an order granting
possession of the collateral upon the court finding that (d) If a method of disposition of collateral has been
a default has occurred under the security agreement approved in any legal proceeding, it is conclusively
and that the secured creditor has a right to take commercially reasonable.
possession of the collateral. The court may direct the
grantor to take such action as the court deems Section 51. Notification of Disposition.—
necessary and appropriate so that the secured creditor
may take possession of the collateral: Provided, That (a) Not later than ten (10) days before disposition of the
breach of the peace shall include entering the private collateral, the secured creditor shall notify:
residence of the grantor without permission, resorting
to physical violence or intimidation, or being (1) The grantor;
accompanied by a law enforcement officer when taking
possession or confronting the grantor. (2) Any other secured creditor or lien holder who, five
(5) days before the date notification is sent to the
Section 48. Recovery in Special Cases.— Upon default, grantor, held a security interest or lien in the collateral
the secured creditor may without judicial process: that was perfected by registration; and

(a) Instruct the account debtor to make payment to the (3) Any other person from whom the secured creditor
secured creditor, and apply such payment to the received notification of a claim of an interest in the
satisfaction of the obligation secured by the security collateral if the notification was received before the
interest after deducting the secured creditor’s secured creditor gave notification of the proposed
reasonable collection expenses. On request of the disposition to the grantor.
account debtor, the secured creditor shall provide
evidence of its security interest to the account debtor (b) The grantor may waive the right to be notified.
when it delivers the instruction to the account debtor;
(c) A notification of disposition is sufficient if it identifies
(b) In a negotiable document that is perfected by the grantor and the secured creditor; describes the
possession, proceed as to the negotiable document or collateral; states the method of intended disposition;
goods covered by the negotiable document; and states the time and place of a public disposition or
the time after which other disposition is to be made.
(c) In a deposit account maintained by the secured
creditor, apply the balance of the deposit account to the (d) The requirement to send a notification under this
obligation secured by the deposit account; and section shall not apply if the collateral is perishable or
threatens to decline speedily in value or is of a type
(d) I n other cases of security interest in a deposit customarily sold on a recognized market.
account perfected by control, instruct the deposit-
taking institution to pay the balance of the deposit Section 52. Application of Proceeds.—
account to the secured creditor’s account.
(a) The proceeds of disposition shall be applied in the
Section 49. Right to Dispose of Collateral.— following order:

(a) After default, a secured creditor may sell or (1) The reasonable expenses of taking, holding,
otherwise dispose of the collateral, publicly or privately, preparing for disposition, and disposing of the
in its present condition or following any commercially collateral, including reasonable attorneys’ fees and legal
reasonable preparation or processing. expenses incurred by the secured creditor;

(b) The secured creditor may buy the collateral at any (2) The satisfaction of the obligation secured by the
public disposition, or at a private disposition but only if security interest of the enforcing secured creditor; and
the collateral is of a kind that is customarily sold on a
recognized market or the subject of widely distributed (3) The satisfaction of obligations secured by any
standard price quotations. subordinate security interest or hen in the collateral if a
written demand and proof of the interest are received
Section 50. Commercial Reasonableness Required.— before distribution of the proceeds is completed.
(b) The secured creditor shall account to the grantor for (a) Existing secured creditor – means a secured creditor
any surplus, and, unless otherwise agreed, the debtor is with a prior security interest;
liable for any deficiency.
(b) Prior law – means any law that existed or in force
Section 53. Rights of Buyers and Other Third Parties.— before the effectivity of this Act;

(a) If a secured creditor sells the collateral under this (c) Prior interest – means a security interest created or
Chapter, the buyer shall acquire the grantor’s right in provided for by an agreement or other transaction that
the asset free of the rights of any secured creditor or lien was made or entered into before the effectivity of this
holder. Act and that had not been terminated before the
effectivity of this Act, but excludes a security interest
(b) If a secured creditor leases or licenses the collateral that is renewed or extended by a security agreement or
under this Chapter, the lessee or licensee shall be other transaction made or entered into on or after the
entitled to the benefit of the lease or license during its effectivity of this Act; and
term.
(d) Transitional period - means the period from the date
(c) If a secured creditor sells, leases or licenses the of effectivity of this Act until the date when the Registry
collateral not in compliance with this Chapter, the buyer, has been established and operational.
lessee or licensee of the collateral shall acquire the
rights or benefits described in subsections (a) and (b) of Section 56. Creation of Prior Interest.—
this section: Provided, That it had no knowledge of a
violation of this Chapter that materially prejudiced the (a) Creation of prior interest shall be determined by
rights of the grantor or another person. prior laws.

Section 54. Retention of Collateral by Secured (b) A prior interest remains effective between the
Creditor.— parties notwithstanding its creation did not comply with
the creation requirements of this Act.
(a) After default, the secured creditor may propose to
the debtor and grantor to take all or part of the Section 57. Perfection of Prior Interest.—
collateral in total or partial satisfaction of the secured
obligation, and shall send a proposal to: (a) A prior interest that was perfected under prior law
continues to be perfected under this Act until the earlier
(1) The debtor and the grantor; of:

(2) Any other secured creditor or lien holder who, five (1) The time the prior interest would cease to be
(5) days before the proposal is sent to the debtor and perfected under prior law; and
the grantor, perfected its security interest or lien by
registration; and (2) The expiration of the transitional period.

(3) Any other person with an interest in the collateral (b) If the perfection requirements of this Act are
who has given a written notification to the secured satisfied before the perfection of a prior interest ceases
creditor before the proposal is sent to the debtor and in accordance with subsection (a) of this section, the
the grantor. prior interest continues to be perfected under this Act
from the time when it was perfected under the prior
(b) The secured creditor may retain the collateral in the law.
case of:
(c) If the perfection requirements of this Act are not
(1) A proposal for the acquisition of the collateral in full satisfied before the perfection of a prior interest ceases
satisfaction of the secured obligation, unless the in accordance with subsection (a) of this section, the
secured creditor receives an objection in writing from prior interest is perfected only from the time it is
any person entitled to receive such a proposal within perfected under this Act.
twenty (20) days after the proposal is sent to that
person; or (d) A written agreement between a grantor and a
secured creditor creating a prior interest is sufficient to
(2) A proposal for the acquisition of the collateral in constitute authorization by the grantor of the
partial satisfaction of the secured obligation, only if the registration of a notice covering assets described in that
secured creditor receives the affirmative consent of agreement under this Act.
each addressee of the proposal in writing within twenty
(20) days after the proposal is sent to that person. (e) If a prior interest referred to in subsection (b) of this
section was perfected by the registration of a notice
CHAPTER 7 under prior law, the time of registration under the prior
TRANSITIONAL PROVISIONS law shall be the time to be used for purposes of applying
the priority rules of this Act.
Section 55. Interpretation of Transitional Provisions.—
For this Chapter, unless the context otherwise requires: Section 58. Priority of Prior Interest.—
(a) The priority of a prior interest as against the rights of LRA under Section 111 of Presidential Decree No. 1529,
a competing claimant is determined by the prior law if: without need for any further government approval.

(1) The security interest and the rights of all competing Section 65. Separability Clause.— Should any provision
claimant arose before the effectivity of this Act; and herein be declared unconstitutional, the same shall not
affect the validity of the other provisions of this Act.
(2) The priority status of these rights has not changed
since the effectivity of this Act. Section 66. Repealing Clause.— The following laws, and
all laws, decrees, orders, and issuances or portions
(b) For purposes of subsection (a)(2) of this section, the thereof, which are inconsistent with the provisions of
priority status of a prior interest has changed only if: this Act, are hereby repealed, amended, or modified
accordingly:
(1) It was perfected when this Act took effect, but
ceased to be perfected; or (a) Sections 1 to 16 of Act No. 1508, otherwise known as
"The Chattel Mortgage Law";
(2) It was not perfected under prior law when this Act
took effect, and was only perfected under this Act. (b) Articles 2085-2123, 2127, 2140-2141, 2241, 2243, and
2246-2247 of Republic Act No. 386, otherwise known as
Section 59. Enforcement of Prior Interest.— the "Civil Code of the Philippines";

(a) If any step or action has been taken to enforce a prior (c) Section 13 of Republic Act No. 5980, as amended by
interest before the effectivity of this Act, enforcement Republic Act No. 8556, otherwise known as the
may continue under prior law or may proceed under this "Financing Company Act of 1998";
Act.
(d) Sections 114-116 of Presidential Decree No. 1529,
(b) Subject to subsection (a) of this section, prior law otherwise known as the "Property Registration
shall apply to a matter that is the subject of proceedings Decree";
before a court before the effectivity of this Act.
(e) Section 10 of Presidential Decree No. 1529, insofar as
CHAPTER 8 the provision thereof is inconsistent with this Act; and
CONGRESSIONAL OVERSIGHT AND MISCELLANEOUS
PROVISIONS (f) Section 5(e) of Republic Act No. 4136, otherwise
known as the "Land Transportation and Traffic Code".
Section 60. Congressional Oversight and Periodic
Review.— A Congressional Oversight Committee shall Section 67. Effectivity.— This Act shall take effect
be created that will conduct a periodic review every five fifteen (15) days after publication in at least two (2)
(5) years commencing from the effectivity of this Act. newspapers of general circulation.
The Congressional Oversight Committee shall be
composed of the Chairperson of the Senate Committee Section 68. Implementation.— Notwithstanding the
on Banks, Financial Institutions and Currencies, the entry into force of this Act under Section 67, the
Chairperson of the House of Representatives implementation of the Act shall be conditioned upon
Committee on Banks and Financial Intermediaries, and the Registry being established and operational under
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.

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