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ACT NO. 2137 - THE WAREHOUSE RECEIPTS LAW

I — THE ISSUE OF WAREHOUSE RECEIPTS

Section 1. Persons who may issue receipts. — Warehouse receipts may be issued by any
warehouseman.

Sec. 2. Form of receipts; essential terms. — Warehouse receipts need not be in any particular
form but every such receipt must embody within its written or printed terms:

(a) The location of the warehouse where the goods are stored,

(b) The date of the issue of the receipt,

(c) The consecutive number of the receipt,

(d) A statement whether the goods received will be delivered to the bearer, to a specified person
or to a specified person or his order,

(e) The rate of storage charges,

(f) A description of the goods or of the packages containing them,

(g) The signature of the warehouseman which may be made by his authorized agent,

(h) If the receipt is issued for goods of which the warehouseman is owner, either solely or jointly
or in common with others, the fact of such ownership, and

(i) A statement of the amount of advances made and of liabilities incurred for which the
warehouseman claims a lien.  If the precise amount of such advances made or of such liabilities
incurred is, at the time of the issue of, unknown to the warehouseman or to his agent who issues
it, a statement of the fact that advances have been made or liabilities incurred and the purpose
thereof is sufficient.

A warehouseman shall be liable to any person injured thereby for all damages caused by the
omission from a negotiable receipt of any of the terms herein required.

Sec. 3. Form of receipts. — What terms may be inserted. — A warehouseman may insert in a
receipt issued by him any other terms and conditions provided that such terms and conditions
shall not:

(a) Be contrary to the provisions of this Act.

(b) In any wise impair his obligation to exercise that degree of care in the safe-keeping of the
goods entrusted to him which is reasonably careful man would exercise in regard to similar
goods of his own.
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Sec. 4. Definition of non-negotiable receipt. — A receipt in which it is stated that the goods
received will be delivered to the depositor or to any other specified person, is a non-negotiable
receipt. 

Sec. 5. Definition of negotiable receipt. — A receipt in which it is stated that the goods received
will be delivered to the bearer or to the order of any person named in such receipt is a negotiable
receipt.

No provision shall be inserted in a negotiable receipt that it is non-negotiable.  Such provision, if

inserted shall be void.

Sec. 6. Duplicate receipts must be so marked. — When more than one negotiable receipt is
issued for the same goods, the word "duplicate" shall be plainly placed upon the face of every
such receipt, except the first one issued.  A warehouseman shall be liable for all damages caused
by his failure so to do to any one who purchased the subsequent receipt for value supposing it to
be an original, even though the purchase be after the delivery of the goods by the warehouseman
to the holder of the original receipt.

Sec. 7. Failure to mark "non-negotiable." — A non-negotiable receipt shall have plainly placed
upon its face by the warehouseman issuing it "non-negotiable," or "not negotiable."  In case of
the warehouseman's failure so to do, a holder of the receipt who purchased it for value supposing
it to be negotiable, may, at his option, treat such receipt as imposing upon the warehouseman the
same liabilities he would have incurred had the receipt been negotiable.

This section shall not apply, however, to letters, memoranda, or written acknowledgment of an
informal character.

II — OBLIGATIONS AND RIGHTS OF WAREHOUSEMEN UPON  THEIR RECEIPTS

Sec. 8. Obligation of warehousemen to deliver. — A warehouseman, in the absence of some

lawful excuse provided by this Act, is bound to deliver the goods upon a demand made either by
the holder of a receipt for the goods or by the depositor; if such demand is accompanied with:

(a) An offer to satisfy the warehouseman's lien;

(b) An offer to surrender the receipt, if negotiable, with such indorsements as would be
necessary for the negotiation of the receipt; and

(c) A readiness and willingness to sign, when the goods are delivered, an acknowledgment that
they have been delivered, if such signature is requested by the warehouseman.

In case the warehouseman refuses or fails to deliver the goods in compliance with a demand by
the holder or depositor so accompanied, the burden shall be upon the warehouseman to establish
the existence of a lawful excuse for such refusal.
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Sec. 9. Justification of warehouseman in delivering. — A warehouseman is justified in

delivering the goods, subject to the provisions of the three following sections, to one who is:

(a) The person lawfully entitled to the possession of the goods, or his agent;

(b) A person who is either himself entitled to delivery by the terms of a non-negotiable receipt
issued for the goods, or who has written authority from the person so entitled either indorsed
upon the receipt or written upon another paper; or

(c) A person in possession of a negotiable receipt by the terms of which the goods are
deliverable to him or order, or to bearer, or which has been indorsed to him or in blank by the
person to whom delivery was promised by the terms of the receipt or by his mediate or
immediate indorser.

Sec. 10. Warehouseman's liability for misdelivery. — Where a warehouseman delivers the goods
to one who is not in fact lawfully entitled to the possession of them, the warehouseman shall be
liable as for conversion to all having a right of property or possession  in the goods if he
delivered the goods otherwise than as authorized by subdivisions (b) and (c) of the preceding
section, and though he delivered the goods as authorized by said subdivisions, he shall be so
liable, if prior to such delivery he had either:

(a) Been requested, by or on behalf of the person lawfully entitled to a right of property or

possession in the goods, not to make such deliver; or

(b) Had information that the delivery about to be made was to one not lawfully entitled to the
possession of the goods.

Sec. 11. Negotiable receipt must be cancelled when goods delivered. — Except as provided in
section thirty-six, where a warehouseman delivers goods for which he had issued a negotiable
receipt, the negotiation of which would transfer the right to the possession of the goods, and fails
to take up and cancel the receipt, he shall be liable to any one who purchases for value in good
faith such receipt, for failure to deliver the goods to him, whether such purchaser acquired title
to the receipt before or after the delivery of the goods by the warehouseman.

Sec. 12. Negotiable receipts must be cancelled or marked when part of goods delivered. —
Except as provided in section thirty-six, where a warehouseman delivers part of the goods for
which he had issued a negotiable receipt and fails either to take up and cancel such receipt or to
place plainly upon it a statement of what 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 in the receipt, whether such purchaser acquired title to the receipt before or after
the delivery of any portion of the goods by the warehouseman.

Sec. 13. Altered receipts. — The alteration of a receipt shall not excuse the warehouseman who
issued it from any liability if such alteration was:
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(a) Immaterial,

(b) Authorized, or

(c) Made without fraudulent intent.

If the alteration was authorized, the warehouseman shall be liable according to the terms of the
receipt as altered.  If the alteration was unauthorized but made without fraudulent intent, the
warehouseman shall be liable according to the terms of the receipt as they were before alteration.

Material and fraudulent alteration of a receipt shall not excuse the warehouseman who issued it
from liability to deliver according to the terms of the receipt as originally issued, the goods for
which it was issued but shall excuse him from any other liability to the person who made the
alteration and to any person who took with notice of the alteration.  Any purchaser of the receipt
for value without notice of the alteration shall acquire the same rights against the warehouseman
which such purchaser would have acquired if the receipt had not been altered at the time of
purchase.

Sec. 14. Lost or destroyed receipts. — Where a negotiable receipt has been lost or destroyed, a
court of competent jurisdiction may order the delivery of the goods upon satisfactory proof of
such loss or destruction and upon the giving of a bond with sufficient sureties to be approved by
the court to protect the warehouseman from any liability or expense, which he or any person
injured by such delivery may incur by reason of the original receipt remaining outstanding.  The
court may also in its discretion order the payment of the warehouseman's reasonable costs and
counsel fees.

The delivery of the goods under an order of the court as provided in this section, shall not relieve
the warehouseman from liability to a person to whom the negotiable receipt has been or shall be
negotiated for value without notice of the proceedings or of the delivery of the goods. 

Sec. 15. Effect of duplicate receipts. — A receipt upon the face of which the word "duplicate" is
plainly placed is a representation and warranty by the warehouseman that such receipt is an
accurate copy of an original receipt properly issued and uncanceled at the date of the issue of the
duplicate, but shall impose upon him no other liability.

Sec. 16. Warehouseman cannot set up title in himself . — No title or right to the possession of
the goods, on the part of the warehouseman, unless such title or right is derived directly or
indirectly from a transfer made by the depositor at the time of or subsequent to the deposit for
storage, or from the warehouseman's lien, shall excuse the warehouseman from liability for
refusing to deliver the goods according to the terms of the receipt.

Sec. 17. Interpleader of adverse claimants. — If more than one person claims the title or
possession of the goods, the warehouseman may, either as a defense to an action brought against
him for non-delivery of the goods or as an original suit, whichever is appropriate, require all
known claimants to interplead.
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Sec. 18. Warehouseman has reasonable time to determine validity of claims. — If someone other
than the depositor or person claiming under him has a claim to the title or possession of goods,
and the warehouseman has information of such claim, the warehouseman shall be excused from
liability for refusing to deliver the goods, either to the depositor or person claiming under him or
to the adverse claimant until the warehouseman has had a reasonable time to ascertain the
validity of the adverse claim or to bring legal proceedings to compel claimants to interplead.

Sec. 19. Adverse title is no defense except as above provided. — Except as provided in the two
preceding sections and in sections nine and thirty-six, no right or title of a third person shall be a
defense to an action brought by the depositor or person claiming under him against the
warehouseman for failure to deliver the goods according to the terms of the receipt.

Sec. 20. Liability for non-existence or misdescription of goods. — A warehouseman shall be

liable to the holder of a receipt for damages caused by the non-existence of the goods or by the
failure of the goods to correspond with the description thereof in the receipt at the time of its
issue.  If, however, the goods are described  in a receipt merely by a statement of marks or labels
upon them or upon packages containing them or by a statement that the goods are said to be
goods of a certain kind or that the packages containing the goods are said to contain goods of a
certain kind or by words of like purport, such statements, if true, shall not make liable the
warehouseman issuing the receipt, although the goods are not of the kind which the marks or
labels upon them indicate or of the kind they were said to be by the depositor.

Sec. 21. Liability for care of goods. — A warehouseman shall be liable for any loss or injury to
the goods caused by his failure to exercise such care in regard to them as reasonably careful
owner of similar goods would exercise, but he shall not be liable, in the absence of an agreement
to the contrary, for any loss or injury to the goods which could not have been avoided by the
exercise of such care.

Sec. 22. Goods must be kept separate. — Except as provided in the following section, a
warehouseman shall keep the goods so far separate from goods of other depositors and from
other goods of the same depositor for which a separate receipt has been issued, as to permit at all
times the identification and redelivery of the goods deposited.

Sec. 23. Fungible goods may be commingled if warehouseman authorized. — If authorized by

agreement or by custom, a warehouseman may mingle fungible goods with other goods of the
same kind and grade.  In such case, the various depositors of the mingled goods shall own the
entire mass in common and each depositor shall be entitled to such portion thereof as the amount
deposited by him bears to the whole.

Sec. 24. Liability of warehouseman to depositors of commingled goods. — The warehouseman

shall be severally liable to each depositor for the care and redelivery of his share of such mass to
the same extent and under the same circumstances as if the goods had been kept separate.

Sec. 25. Attachment or levy upon goods for which a negotiable receipt has been issued. — If
goods are delivered to a warehouseman by the owner or by a person whose act in conveying the
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title to them to a purchaser in good faith for value would bind the owner, and a negotiable
receipt is issued for them, they can not thereafter, while in the possession of the warehouseman,
be attached by garnishment or otherwise, or be levied upon under an execution unless the receipt
be first surrendered to the warehouseman or its negotiation enjoined.  The warehouseman shall
in no case be compelled to deliver up the actual possession of the goods until the receipt is
surrendered to him or impounded by the court.

Sec. 26. Creditor's remedies to reach negotiable receipts. — A creditor whose debtor is the
owner of a negotiable receipt shall be entitled to such aid from courts of appropriate jurisdiction,
by injunction and otherwise, in attaching such receipt or in satisfying the claim by means thereof
as is allowed at law or in equity in these islands in regard to property which can not readily be
attached or levied upon by ordinary legal process.

Sec. 27. What claims are included in the warehouseman's lien. — Subject to the provisions of
section thirty, a warehouseman shall have a lien on goods deposited or on the proceeds thereof in
his hands, for all lawful charges for storage and preservation of the goods; also for all lawful
claims for money advanced, interest, insurance, transportation, labor, weighing, coopering and
other charges and expenses in relation to such goods, also for all reasonable charges and
expenses for notice, and advertisements of sale, and for sale of the goods where default had been
made in satisfying the warehouseman's lien.

Sec. 28. Against what property the lien may be enforced. — Subject to the provisions of section
thirty, a warehouseman's lien may be enforced:

(a) Against all goods, whenever deposited, belonging to the person who is liable as debtor for
the claims in regard to which the lien is asserted, and

(b) Against all goods belonging to others which have been deposited at any time by the person
who is liable as debtor for the claims in regard to which the lien is asserted if such person had
been so entrusted with the possession of goods that a pledge of the same by him at the time of
the deposit to one who took the goods in good faith for value would have been valid.

Sec. 29. How the lien may be lost. — A warehouseman loses his lien upon goods:

(a) By surrendering possession thereof, or

(b) By refusing to deliver the goods when a demand is made with which he is bound to comply
under the provisions of this Act.

Sec. 30. Negotiable receipt must state charges for which the lien is claimed. — If a negotiable
receipt is issued for goods, the warehouseman shall have no lien thereon except for charges for
storage of goods subsequent to the date of the receipt unless the receipt expressly enumerated
other charges for which a lien is claimed.  In such case, there shall be a lien for the charges
enumerated so far as they are within the terms of section twenty-seven although the amount of
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the charges so enumerated is not stated in the receipt.

Sec. 31. Warehouseman need not deliver until lien is satisfied. — A warehouseman having a lien
valid against the person demanding the goods may refuse to deliver the goods to him until the
lien is satisfied.

Sec. 32. Warehouseman's lien does not preclude other remedies. — Whether a warehouseman
has or has not a lien upon the goods, he is entitled to all remedies allowed by law to a creditor
against a debtor for the collection from the depositor of all charges and advances which the
depositor has expressly or impliedly contracted with the warehouseman to pay.

Sec. 33. Satisfaction of lien by sale. — A warehouseman's lien for a claim which has become
due may be satisfied as follows:

(a) An itemized statement  of the warehouseman's claim, showing the sum due at the time of the
notice and the date or dates when it becomes due,

(b) A brief description of the goods against which the lien exists,

(c) A demand that the amount of the claim as stated in the notice of such further claim as shall
accrue, shall be paid on or before a day mentioned, not less than ten days from the delivery of
the notice if it is personally delivered, or from the time when the notice shall reach its
destination, according to the due course of post, if the notice is sent by mail,

(d) A statement that unless the claim is paid within the time specified, the goods will be
advertised for sale and sold by auction at a specified time and place.

In accordance with the terms of a notice so given, a sale of the goods by auction may be had to
satisfy any valid claim of the warehouseman for which he has a lien on the goods.  The sale shall
be had in the place where the lien was acquired, or, if such place is manifestly unsuitable for the
purpose of the claim specified in the notice to the depositor has elapsed, and advertisement of
the sale, describing the goods to be sold, and stating the name of the owner or person on whose
account the goods are held, and the time and place of the sale, shall be published once a week for
two 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 publication.  If there is no
newspaper published in such place, the advertisement shall be posted at least ten days before
such sale in not less than six conspicuous places therein.

From the proceeds of such sale, the warehouseman shall satisfy his lien including the reasonable
charges of notice, advertisement and sale.  The balance, if any, of such proceeds shall be held by
the warehouseman and delivered on demand to the person to whom he would have been bound
to deliver or justified in delivering goods.

At any time before the goods are so sold, any person claiming a right of property or possession
therein may pay the warehouseman the amount necessary to satisfy his lien and to pay the
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reasonable expenses and liabilities incurred in serving notices and advertising and preparing for
the sale up to the time of such payment.  The warehouseman shall deliver the goods to the
person making payment if he is a person entitled, under the provision of this Act, to the
possession of the goods on payment of charges thereon.  Otherwise, the warehouseman shall
retain the possession of the goods according to the terms of the original contract of deposit.

Sec. 34. Perishable and hazardous goods. — If goods are of a perishable nature, or by keeping
will deteriorate greatly in value, or, by their order, leakage, inflammability, or explosive nature,
will be liable to injure other property , the warehouseman may give such notice to the owner or
to the person in whose names the goods are stored, as is reasonable and possible under the
circumstances, to satisfy the lien upon such goods and to remove them from the warehouse and
in the event of the failure of such person to satisfy the lien and to receive the goods within the
time so specified, the warehouseman may sell the goods at public or private sale without
advertising.  If the warehouseman, after a reasonable effort, is unable to sell such goods, he may
dispose of them in any lawful manner and shall incur no liability by reason thereof.

The proceeds of any sale made under the terms of this section shall be disposed of in the same
way as the proceeds of sales made under the terms of the preceding section.

Sec. 35. Other methods of enforcing lien. — The remedy for enforcing a lien herein provided
does not preclude any other remedies allowed by law for the enforcement of a lien against
personal property nor bar the right to recover so much of the warehouseman's claim as shall not
be paid by the proceeds of the sale of the property.

Sec. 36. Effect of sale. — After goods have been lawfully sold to satisfy a warehouseman's lien,
or have been lawfully sold or disposed of because of their perishable or hazardous nature, the
warehouseman shall not thereafter be liable for failure to deliver the goods to the depositor or
owner of the goods or to a holder of the receipt given for the goods when they were deposited,
even if such receipt be negotiable.

III — NEGOTIATION AND TRANSFER OF RECEIPTS

Sec. 37. Negotiation of negotiable receipt of delivery. — A negotiable receipt may be negotiated

by delivery:

(a) Where, by terms of the receipt, the warehouseman undertakes to deliver the goods to the
bearer, or

(b) Where, by the terms of the receipt, the warehouseman undertakes to deliver the goods to the
order of a specified person, and such person or a subsequent indorsee of the receipt has indorsed
it in blank or to bearer. 

Where, by the terms of a negotiable receipt, the goods are deliverable to bearer or where a
negotiable receipt has been indorsed in blank or to bearer, any holder may indorse the same to
himself or to any other specified person, and, in such case, the receipt shall thereafter be
negotiated only by the indorsement of such indorsee.
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Sec. 38. Negotiation of negotiable receipt by indorsement. — A negotiable receipt may be

negotiated by the indorsement of the person to whose order the goods are, by the terms of the
receipt, deliverable.  Such indorsement may be in blank, to bearer or to a specified person.  If
indorsed to a specified person, it may be again negotiated by the indorsement of such person in
blank, to bearer or to another specified person.  Subsequent negotiation may be made in like
manner.

Sec. 39. Transfer of receipt. — A receipt which is not in such form that it can be negotiated by
delivery may be transferred by the holder by delivery to a purchaser or donee.

A non-negotiable receipt can not be negotiated, and the indorsement of such a receipt gives the
transferee no additional right.

Sec. 40. Who may negotiate a receipt. — A negotiable receipt may be negotiated:

(a) By the owner thereof, or

(b) By any person to whom the possession or custody of the receipt has been entrusted by the
owner, if, by the terms of the receipt, the warehouseman undertakes to deliver the goods to the
order of the person to whom the possession or custody of the receipt has been entrusted, or if, at
the time of such entrusting, the receipt is in such form that it may be negotiated by delivery.

Sec. 41. Rights of person to whom a receipt has been negotiated. — A person to whom a
negotiable receipt has been duly negotiated acquires thereby:

(a) Such title to the goods as the person negotiating the receipt to him had or had ability to
convey to a purchaser in good faith for value, and also such title to the goods as the depositor or
person to whose order the goods were to be delivered by the terms of the receipt had or had
ability to convey to a purchaser in good faith for value, and

(b) The direct obligation of the warehouseman to hold possession of the goods for him according
to the terms of the receipt as fully as if the warehouseman and contracted directly with him.

Sec. 42. Rights of person to whom receipt has been transferred. — A person to whom a receipt
has been transferred but not negotiated acquires thereby, as against the transferor, the title of the
goods subject to the terms of any agreement with the transferor.

If the receipt is non-negotiable, such person also acquires the right to notify the warehouseman
of the transfer to him of such receipt and thereby to acquire the direct obligation of the
warehouseman to hold possession of the goods for him according to the terms of the receipt.

Prior to the notification of the warehouseman by the transferor or transferee of a non-negotiable

receipt, the title of the transferee to the goods and the right to acquire the obligation of the
warehouseman may be defeated by the levy of an attachment or execution upon the goods by a
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creditor of the transferor or by a notification to the warehouseman by the transferor or a

subsequent purchaser from the transferor of a subsequent sale of the goods by the transferor.

Sec. 43. Transfer of negotiable receipt without indorsement. — Where a negotiable receipt is

transferred for value by delivery and the indorsement of the transferor is essential for
negotiation, the transferee acquires a right against the transferor to compel him to indorse the
receipt unless a contrary intention appears.  The negotiation shall take effect as of the time when
the indorsement is actually made.

Sec. 44. Warranties of a sale of receipt. — A person who, for value, negotiates or transfers a
receipt by indorsement or delivery, including one who assigns for value a claim secured by a
receipt, unless a contrary intention appears, warrants:

(a) That the receipt is genuine,

(b) That he has a legal right to negotiate or transfer it,

(c) That he has knowledge of no fact which would impair the validity or worth of the receipt,
and

(d) That he has a right to transfer the title to the goods and that the goods are merchantable or fit
for a particular purpose whenever such warranties would have been implied, if the contract of
the parties had been to transfer without a receipt of the goods represented thereby.

Sec. 45. Indorser not a guarantor. — The indorsement of a receipt shall not make the indorser
liable for any failure on the part of the warehouseman or previous indorsers of the receipt to
fulfill their respective obligations.

Sec. 46. No warranty implied from accepting payment of a debt. — A mortgagee, pledgee, or
holder for security of a receipt who, in good faith, demands or receives payment of the debt for
which such receipt is security, whether from a party to a draft drawn for such debt or from any
other person, shall not, by so doing, be deemed to represent or to warrant the genuineness of
such receipt or the quantity or quality of the goods therein described.

Sec. 47. When negotiation not impaired by fraud, mistake or duress. — The validity of the
negotiation of a receipt is not impaired by the fact that such negotiation was a breach of duty on
the part of the person making the negotiation or by the fact that the owner of the receipt was
induced by fraud, mistake or duress or to entrust the possession or custody of the receipt to such
person, if the person to whom the receipt was negotiated or a person to whom the receipt was
subsequently negotiated paid value therefor, without notice of the breach of duty, or fraud,
mistake or duress.

Sec. 48. Subsequent negotiation. — Where a person having sold, mortgaged, or pledged goods
which are in warehouse and for which a negotiable receipt has been issued, or having sold,
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mortgaged, or pledged the negotiable receipt representing such goods, continues in possession of
the negotiable receipt, the subsequent negotiation thereof by the person under any sale or other
disposition thereof to any person receiving the same in good faith, for value and without notice
of the previous sale, mortgage or pledge, shall have the same effect as if the first purchaser of the
goods or receipt had expressly authorized the subsequent negotiation.

Sec. 49. Negotiation defeats vendor's lien. — Where a negotiable receipt has been issued for
goods, no seller's lien or right of stoppage in transitu shall defeat the rights of any purchaser for
value in good faith to whom such receipt has been negotiated, whether such negotiation be prior
or subsequent to the notification to the warehouseman who issued such receipt of the seller's
claim to a lien or right of stoppage in transitu.  Nor shall the warehouseman be obliged to deliver
or justified in delivering the goods to an unpaid seller unless the receipt is first surrendered for
cancellation. 

IV —  CRIMINAL OFFENSES

Sec. 50. Issue of receipt for goods not received. — A warehouseman, or an officer, agent, or
servant of a warehouseman who issues or aids in issuing a receipt knowing that the goods for
which such receipt is issued have not been actually received by such warehouseman, or are not
under his actual control at the time of issuing such receipt, shall be guilty of a crime, and, upon
conviction, shall be punished for each offense by imprisonment not exceeding five years, or by a
fine not exceeding ten thousand pesos, or both.

Sec. 51. Issue of receipt containing false statement. — A warehouseman, or any officer, agent or
servant of a warehouseman who fraudulently issues or aids in fraudulently issuing a receipt for
goods knowing that it contains any false statement, shall be guilty of a crime, and upon
conviction, shall be punished for each offense by imprisonment not exceeding one year, or by a
fine not exceeding two thousand pesos, or by both.

Sec. 52. Issue of duplicate receipt not so marked. — A warehouse, or any officer, agent, or
servant of a warehouseman who issues or aids in issuing a duplicate or additional negotiable
receipt for goods knowing that a former negotiable receipt for the same goods or any part of
them is outstanding and uncanceled, without plainly placing upon the face thereof the word
"duplicate" except in the case of  a lost or destroyed receipt after proceedings are provided for in
section fourteen, shall be guilty of a crime, and, upon conviction, shall be punished for each
offense by imprisonment not exceeding five years, or by a fine not exceeding ten thousand
pesos, or by both.

Sec. 53. Issue for warehouseman's goods or receipts which do not state that fact. — Where they
are deposited with or held by a warehouseman goods of which he is owner, either solely or
jointly or in common with others, such warehouseman, or any of his officers, agents, or servants
who, knowing this ownership, issues or aids in issuing a negotiable receipt for such goods which
does not state such ownership, shall be guilty of a crime, and, upon conviction, shall be punished
for each offense by imprisonment not exceeding one year, or by a fine not exceeding two
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thousand pesos, or by both.

Sec. 54. Delivery of goods without obtaining negotiable receipt. — A warehouseman, or any

officer, agent, or servant of a warehouseman, who delivers goods out of the possession of such
warehouseman, knowing that a negotiable receipt the negotiation of which would transfer the
right to the possession of such goods is outstanding and uncanceled, without obtaining the
possession of such receipt at or before the time of such delivery, shall, except in the cases
provided for in sections fourteen and thirty-six, be found guilty of a crime, and, upon conviction,
shall be punished for each offense by imprisonment not exceeding one year, or by a fine not
exceeding two thousand pesos, or by both.

Sec. 55. Negotiation of receipt for mortgaged goods. — Any person who deposits goods to
which he has no title, or upon which there is a lien or mortgage, and who takes for such goods a
negotiable receipt which he afterwards negotiates for value with intent to deceive and without
disclosing his want of title or the existence of the lien or mortgage, shall be guilty of a crime,
and, upon conviction, shall be punished for each offense by imprisonment not exceeding one
year, or by a fine not exceeding two thousand pesos, or by both.

V — INTERPRETATION

Sec. 56. Case not provided for in Act. — Any case not provided for in this Act shall be governed
by the provisions of existing legislation, or in default thereof, by the rule of the law merchant.

Sec. 57. Name of Act. — This Act may be cited as the Warehouse Receipts Act.

Sec. 58. Definitions. — (a)  In this Act, unless the content or subject matter otherwise requires:

"Action" includes counterclaim, set-off, and suits in equity as provided by law in these islands.

"Delivery" means voluntary transfer of possession from one person to another.

"Fungible goods" means goods of which any unit is, from its nature by mercantile custom,
treated as the equivalent of any other unit.

"Goods" means chattels or merchandise in storage or which has been or is about to be stored.

"Holder" of a receipt means a person who has both actual possession of such receipt and a right
of property therein.

"Order" means an order by indorsement on the receipt.

"Owner" does not include mortgagee.

"Person" includes a corporation or partnership or two or more persons having a joint or common
interest.
 13

To "purchase" includes to take as mortgagee or as pledgee.

"Receipt" means a warehouse receipt.

"Value" is any consideration sufficient to support a simple contract.  An antecedent or pre-

existing obligation, whether for money or not, constitutes value where a receipt is taken either in
satisfaction thereof or as security therefor.

"Warehouseman"  means a person lawfully engaged in the business of storing goods for profit.

(b) A thing is done "in good faith"  within the meaning of this Act when it is in fact done
honestly, whether it be done negligently or not.

Sec. 59. Application of Act. — The provisions of this Act do not apply to receipts made and
delivered prior to the taking effect hereof.

Sec. 60. Repeals. — All acts and laws and parts thereof inconsistent with this Act are hereby
repealed. 

Sec. 61. Time when Act takes effect. — This Act shall take effect ninety days after its
publication in the Official Gazette of the Philippines shall have been completed.

Enacted: February 5, 1912

ACT NO. 3893

ACT NO. 3893 - AN ACT TO REGULATE THE BUSINESS OF RECEIVING RICE FOR
STORAGE, GIVING THE DIRECTOR OF COMMERCE AND INDUSTRY THE DUTY TO
ENFORCE IF, PROVIDING PENALTIES FOR VIOLATION OF THE PROVISIONS,
EXEMPTING COOPERATIVE MARKETING ASSOCIATIONS OF RICE PRODUCERS
FROM APPLICATION THEREOF, REPEALING ACT NUMBERED THIRTY-FOUR
HUNDRED AND SIXTY-NINE AND FOR OTHER PURPOSES

Section 1. This Act shall be known by the short title of "BONDED WAREHOUSE ACT."
 14

Sec. 2. As used in this Act, the term "warehouse" shall be deemed to mean every building,
structure, or other protected inclosure in which rice is kept for storage. The term "rice" shall be
deemed to mean either palay in bundles, or in grains, or clean rice, or both. "Person" including
corporation or partnership or two or more persons having joint or common interest;
"warehouseman" means a person engaged in the business receiving rice for storage; and
"receipt" means any receipt issued by a warehouseman for rice delivered to him. For the purpose
of this Act, the business of receiving rice for storage shall include (1) any contract or transaction
wherein the warehouseman is obligated to return the very same rice delivered to him or pay its
value;(2) any contract or transaction wherein the rice delivered is to be milled for and on account
of the owner thereof; (3) any contract or transaction wherein the rice delivered is commingled
with the rice delivered by or belonging to other persons and the warehouseman is obligated to
return the rice of the same kind or pay its value.

Sec. 3. No person shall engage in the business of receiving rice for storage without first securing
a license 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.

Sec. 4. Any person applying for a license to engage in the business of receiving rice for storage
shall set forth in the application the place or places where the business and warehouse are to be
established or located and the maximum quantity of rice to be received. The application shall be
accompanied by a cash bond or a bond secured by real estate or signed by a duly authorized
bonding company, the amount of which shall be fixed by the Director of the Bureau of
Commerce and Industry at not less than thirty-three and one third percent of the market value of
the maximum quantity or rice to be received. Said bond shall be so conditioned as to respond for
the market value of the rice actually delivered and received at any time the warehouseman is
unable to return the rice or to pay its value. The bond shall be approved by the Director of the
Bureau of Commerce and Industry before issuing a license under this Act, to satisfy himself
concerning the sufficiency of such bond, and to determine whether the warehouse for which
such license is applied for is suitable for the proper storage of rice.

Sec. 5. Whenever the Director of the Bureau of Commerce and Industry shall determine that a
bond approved by him, is or any cause, has become insufficient, he may require an additional
bond or bonds to be given by the warehouseman concerned, conforming with the requirements
of the preceding section, and unless the same be given within the time fixed by a written demand
therefor the license of such warehouse may be suspended or revoked.

Sec. 6. Every person licensed under this Act to engage in the business of receiving rice for
storage shall insure the rice so received and stored against fire.

Sec. 7. Any person injured by the breach of any obligation to secure which a bond is given,
under the provisions of this Act, shall be entitled to sue on the bond in his own name in any
court of competent jurisdiction to recover the damages he may have sustained by such breach.
Nothing contained herein shall except any property of assets of any warehouseman from being
sued on in case the bond given is not sufficient to respond for the full market value of the rice
 15

received by such warehouseman.

Sec. 8. Every warehouseman licensed under this Act shall receive for storage, so far as his
license and the capacity of his warehouse permit, any rice, of the kind customarily stored therein
by him, which may be tendered to him in a suitable condition for warehousing, in the usual
manner and in the ordinary and usual course of business, without making any discrimination
between persons desiring to avail themselves of warehouse facilities.

Sec. 9. Every warehouseman licensed under this Act shall keep a complete record of the rice
received by him, of the receipts issued therefor of the withdrawals, of the liquidations and of all
receipts returned to and cancelled by him. He shall make reports to the Director of Bureau of
Commerce and Industry concerning his warehouse and the conditions, contents, operations, and
business thereof in such form and at such time as the said Director may require, and shall
conduct said warehouse in all other respects in compliance with this Act and the rules and
regulations made in accordance therewith.

Sec. 10. The Director of Bureau of Commerce and Industry shall from time to time make such
rules and regulations as he may deem necessary for the efficient execution of the provisions of
this Act.

Sec. 11. Any person engaging in the business of receiving rice for storage in violation of Section
three of this Act shall be deemed guilty of misdemeanor, and upon conviction thereof shall be
punished by imprisonment of not less than one month or by a fine of not more than five
thousand pesos, or both, in the discretion of the court.

Sec. 12. Any warehouseman licensed under this Act receiving a quantity of rice greater than that
specified in his application and license, shall, upon conviction, be fined double the market value
of the rice so received in excess of the quantity of rice he is authorized to receive.

Sec. 13. Any person entering into connivance or combination with any warehouseman that is not
licensed under this Act, with the purpose of evading the provisions of section three of this Act,
shall be deemed guilty of misdemeanor, and upon conviction thereof, shall be fined not more
than two hundred pesos or imprisonment for not more than one month, or both, in the discretion
of the court.

Sec. 14. The Director of the Bureau of Commerce and Industry may, after opportunity for
hearing has been afforded to the license concerned, suspend or revoke any license issued to any
warehouseman, conducting a warehouse under this Act, for any violation or failure to comply
with any provision of this Act or of the rules and regulations made by virtue thereof.

Sec. 15. This Act shall not be applicable to cooperative marketing associations of rice producers
organized under Act Numbered Three Thousand Four Hundred and Twenty-five known as the
"Cooperative Marketing Law," provided such associations shall not receive, for storage, rice
from non-members which is greater in quantity than one-half of the total quantity of rice
 16

received from members, at any time.

Sec. 16. If any clause, sentence, or paragraph, or part of this Act shall, for any reason, be
adjusted by any court of competent jurisdiction to be invalid, such judgment shall not affect,
impair, or invalidate the remainder thereof, but shall be confined in his operation to the clause,
sentence, paragraph or part thereof directly involved in the controversy in which such judgment
shall have been rendered.

Sec. 17. This Act shall take effect on January First, nineteen hundred and thirty-two.

ACT NO. 3952

ACT NO. 3952 (As Amended) - THE BULK SALES LAW

Section 1. This Act shall be known as "The Bulk Sales Law."

Purpose and general scheme of the Bulk Sales Law. 1 — (a) Purpose. — Bulk Sales Act is
 17

designed to prevent the defrauding of creditors by the secret sale in bulk of substantially all of a
merchant's stock of goods. (b) General scheme — The general scheme of these statutes is to
declare such bulk sales fraudulent and void as to creditors of the vendor, or presumptively so,
unless specified formalities are observed, such as the demanding and the giving of a list of
creditors, the giving of actual or constructive notice to such creditors, by record or otherwise,
and the making of an inventory. (27 C.J. Sec. 881.)

Constitutionality of the Law. — The Bulk Sales Law is constitutional. (Liwanag v. Menghraj, 40
Off. Gaz. 1441.) Bulk sales statutes have been sustained as a constitutional exercise of the police
power, and as such not in violation of the constitution prohibiting the enactment of laws which
shall deprive any person of life, liberty, or property without due process of law, or which shall
deny to such person the equal protection of the laws. Nor do they infringe constitutional
provisions guaranteeing the right of acquiring, possessing, and protecting property. (27 C.J. Sec.
882.)

Construction of the Law. — These statutes should be read as a whole for purposes of
construction. As they are of a penal character, and in derogation of common law, and of the right
to alienate property without restriction, they are to be strictly construed, and are not to be
extended by construction to situations not clearly intended thereby. However, these statutes
should be construed and applied with a view to cure the evil at which they are aimed, which is
the defrauding of creditors by secret bulk sales. (27 C.J. Sec. 884.)

Effect of the Bulk Sales Law as to other fraudulent conveyances. — The effect of bulk sales
laws is to create a new type or kind of fraudulent conveyance (Kelley-Buckley Co. v. Cohen,
195 Mass 585, 81 N.E. 297; Riley Pennsylvania Oil Co. v. Symmonds, 195 Mo. A. 111, 190
S.W. 1038; Joplin Supply Co. v. Smith, 182 Mo. A. 212, 167 S.W. 649); hence, the provisions
of Arts. 1381–1389 of the new Civil Code will not have the effect of modifying the Bulk Sales
Law, and will be applicable only as suppletory law insofar as they are not in conflict with said
law.

Sec. 2. Any sale, transfer, mortgage or assignment of a stock of goods, wares, merchandise,
provisions, or materials otherwise than in the ordinary course of trade and the regular
prosecution of the business of the vendor, mortgagor, transferor, or assignor, or any sale,
transfer, mortgage, or assignment of all, or substantially all, of the business or trade theretofore
conducted by the vendor, mortgagor, transferor, or assignor, or of all, or substantially all, of the
fixtures and equipment used in and about the business of the vendor, mortgagor, transferor; or
assignor, shall be deemed to be a sale and transfer in bulk, in contemplation of this Act:
Provided, however, That if such vendor, mortgagor, transferor, or assignor, produces and
delivers a written waiver of the provisions of this Act from his creditors as shown by verified
statements, then, and in that case, the provisions of this section shall not apply.

What shall be deemed to be a sale and transfer in bulk. 2 — A sale and transfer in bulk is any
sale, transfer, mortgage or assignment (1) of a stock of goods, wares, merchandise, provisions,
or materials otherwise than in the ordinary course of trade and the regular prosecution of the
business of the vendor, mortgagor, transferor, or assignor, or (2) of all, or substantially all, of the
business or trade theretofore conducted by the vendor, mortgagor, transferor, or assignor, or (3)
 18

of all, or substantially all, of the fixtures and equipment used in and about the business of the
vendor, mortgagor, transferor, or assignor. (Sec. 2, Bulk Sales Law.)

Same; Exceptions to the rule. 3 — It will not be deemed a sale and transfer in bulk in
contemplation of this Act, (1) if such vendor, mortgagor, transferor, or assignor produces and
delivers a written waiver of the provisions of this Act from his creditors as shown by verified
statements (Sec. 2, Bulk Sales Law), or (2) if such vendor, mortgagor, transferor, or assignor is
an executor, administrator, receiver assignee in insolvency, or public officer, acting under
judicial process. (Sec. 8, Bulk Sales Law.)  

Term "sellers," explained. — The statutes generally do apply to retail merchants, traders, or
dealers, and generally only to persons of that class. (27 C.J. Sec. 888.)

Term "creditors," explained. — The term "creditors" as descriptive of the persons in whose favor
the statute declares a bulk sale fraudulent and void is usually not restricted to any particular class
of creditors, but includes all persons who were creditors of the seller at the time of the sale,
although their claims had not been reduced to judgment, or were not due, and although they
were not creditors for merchandise, but were merely general creditors of the seller in other
transactions. But only those who were creditors at the time of the sale complained of are entitled
to the benefits of the statute; creditors whose claims came into existence subsequent to the sale
are not protected thereby. (27 C.J. Sec. 888.)

Waiver and estoppel of creditors. — Creditors may waive the right to the benefit of the bulk
sales statutes, or estop themselves to claim that the sale was invalid because the requirements of
the bulk sales statutes were not complied with. The benefit of the statutes is for those who take
the steps prescribed thereby in order to protect their claims. There is no estoppel unless the
conduct was relied on by the other party to his prejudice, in accordance with the rule as to
estoppel generally. (27 C.J. Sec. 887.)

Term "stock, " explained. — The common use of the term "stock" when applied to the goods in
a mercantile house refers to those which are kept for sale. (Albrecht v. Cudihee, 37 Wash. 206,
208, 79 P. 628.)

Term "merchandise," explained. — We think that "merchandise," as used in this act, must be
construed to mean such things as are usually bought and sold in trade by merchants. (People's
Sav. Bank v. Van Allsburg, 165 Mich. 524, 526, 131 N.W. 101.) "Merchandise" means
something that is sold every day, and is constantly going out of the store and being replaced by
other goods. (Boise Credit Men's Ass'n. v. Ellis, 26 Ida. 438, 449, 144 P. 6, L.R.A. 1915 E, 917.)
Thus, "merchandise" may include a stock of meat and other merchandise such as is usually sold
in a market (Virginia-Carolina Chemical Co. v. Bouchelle, 12 Ga. A. 611, 78 S.E. 51), or liquors
kept in a saloon for sale (Marshon v. Toohey, 38 Nev. 248, 148 P. 357); but land and buildings
are not "goods, wares, and merchandise" within the statute. (McMillen v. Nelson, [N. D.] 181
N.W 618; National Trust Co. v. Nadon, 8 Sask. L. 41, 24 Dom. L.R. 742, 30 West L.R. 588, 7
West Wkly. 1067; Barthels v. Sloance, 7 Sask, L. 376.)
 19

Term "fixtures," explained. — When used in statutes of this character, it refers to such articles of
merchandise usually possessed and annexed to the premises occupied by them to enable them
better to store, handle, and display their wares and which are commonly known as trade fixtures,
although removable without material injury to the premises at or before the end of tenancy.
(Brown v. Quigley, 165 Mich. 337, 130 N.W. 690, 34 L.R.A.N.S. 218 [foll. People's Sav. Bank
v. Van Allsburg, 165 Mich. 524, 131 N.W. 101.].) But a store building containing a stock of
merchandise and being used for transactions of mercantile business is not a fixture. The statute
has reference to trade fixtures connected with the business and not to the building in which the
business is carried on. (Robbins v. Fuller, [Ark.] 229 S.W. 8; McMillen v. Nelson, [N. D.] 181
N.W. 618.)

"Exempt properties," not within the law. — Bulk sales statutes are intended to operate only on
property to which creditors may look for satisfaction of their claims and consequently have no
application to property which is exempt. (27 C.J. Sec. 889.) See "Property exempt from
execution," Sec. 12, Rule 39, Rules of Court. See also Sec. 35, Act No. 3428, as amended; Arts.
223 et seq., and 1708, new Civil Code; and Sec. 17, Rep. Act No. 1161 (refer to annotations
placed above Sec. 48, Insolvency Law, in Volume 2.)  

Sec. 3. It shall be the duty of every person who shall sell, mortgage, transfer, or assign any stock
of goods, wares, merchandise, provisions or materials in bulk, for cash or on credit, before
receiving from the vendee, mortgagee, or his, or its agent or representative any part of the
purchase price thereof, or any promissory note, memorandum, or other evidence therefor, to
deliver to such vendee, mortgagee, or agent, or if the vendee, mortgagee, or agent be a
corporation, then to the president, vice-president, treasurer, secretary or manager of said
corporation, or, if such vendee or mortgagee be a partnership firm, then to a member thereof, a
written statement sworn to substantially as hereinafter provided, of the names and addresses of
all creditors to whom said vendor or mortgagor may be indebted, together with the amount of
indebtedness due or owing, or to become due or owing by said vendor or mortgagor to each of
said creditors, which statement shall be verified by an oath to the following effect:

PHILIPPINE ISLANDS ) S.S.
PROVINCE OR CITY OF )

Before me, the undersigned authority, personally appeared _________ (vendor, mortgagor,
agent or representative, as the case may be), bearing Res. Cert. No. _____________ issued at
_________ on the __________ day of ___________, who, by me being first duly sworn, upon
his oath, deposes and states that the foregoing statement contains the names of all the creditors
of ______________ (vendor, mortgagor) together with their addresses, and that the amount set
opposite each of said respective names, is the amount now due and owing, and which shall
become due and owing by _____________ (vendor or mortgagor) to such creditors, and that
there are no creditors holding claims due or which shall become due, for, or on account of
goods, wares, merchandise, provisions or materials purchased upon credit or on account of
money borrowed, to carry on the business of which said goods, wares, merchandise, provisions
of materials are a part, other than as set forth in said statement.
 20

_______________________
(Signature of vendor, etc.)

Subscribed and sworn to before me this ___________ day of __________, 19____, at

____________

Sufficiency of statement. — Substantial compliance with the statute is essential to validity of the
sale or transfer. (In re Calvi, 185 Fed. 642; Peck v. Hibben, 185 Ind. 623, 114 N.E. 216;
Interstate Shirt, etc. Co. v. Windham, 165 Mich. 648, 131 N.W. 102.) A verbal statement that the
seller had no creditors is not sufficient compliance with a statute requiring the statement to be in
writing and under oath. (Peck v. Hibben, supra.) If the seller has no creditors, an unequivocal
statement of this fact is necessary in the statement. (Interstate Shirt, etc. Co. v. Windham, supra;
Fitzhugh v. Munnell, 92 Or. 47, 179 P. 679.) An affidavit stating that a stock sold is "entirely
free from debt and that there is no encumbrance thereon, except a certain chattel mortgage given
to" a specified person is insufficient as against existing creditors of the seller. (Interstate Shirt,
etc. Co. v. Windham, supra.) The statute contemplates not only creditors whose claims are due
but those whose claims are not due and the statement must state the facts as to both class of
creditors if both exist and if there are none such, the latter fact must be stated. The statement is
ineffectual if it fails to give the addresses of the creditors. If the statement is defective on its
face, the buyer accepts it at his peril. (Fitzhugh v. Munnell, supra.)  

Effect of false statement. — If the statement is fair upon its face and the buyer has no knowledge
of its incorrectness, and nothing to put him on inquiry about it, he will be protected in his
purchase. (International Silver Co. v. Hull, 140 Ga. 10, 78 S.E. 609, 45 L.R.A.N.S. 492;
Fitzhugh v. Munnell, 92 Or. 47, 179, P. 679; Coach v. Gage, 70 Or. 182, 138 P. 847.) If the
seller misrepresents the amount of his indebtedness, the creditor has no remedy against the
goods sold, but he can prosecute the seller criminally. (Seltzer v. Peddi, 24 Pa. Dist. 456, 41 Pa.
Co. 677.) The statute declares the sale void only on the failure of the purchaser to do what is
required of him. It does not declare the sale void if the list of creditors furnished by a vendor
under oath is not in fact "full, accurate and complete." It does not in any way make the purchaser
responsible for any incorrectness in the list. We think it would be unreasonable to so construe it.
(Glantz v. Gardiner, 40 R.I. 397, 100 A. 913, 916, L.R.A. 1917 L. 226.)

Sec. 4. Whenever any person shall sell, mortgage, transfer, or assign any stock of goods, wares,
merchandise, provisions or materials, in bulk, for cash or on credit, and shall receive any part of
the purchase price, or any promissory note, or other evidence of indebtedness for said purchase
price or advance upon mortgage, without having first delivered to the vendee or mortgagee or to
his or its agent or representative, the sworn statement provided for in section three hereof, and
without applying the purchase or mortgage money of the said property to the pro rata payment of
the bona fide claim or claims of the creditors of the vendor or mortgagor, as shown upon such
sworn statement, he shall be deemed to have violated this Act, and any such sale, transfer or
mortgage shall be fraudulent and void.

What are prohibited are secret conveyances. — What are prohibited are secret conveyances,
those made unaccompanied by a sworn list of creditors and without previous payment of their
credits, and those made gratuitously or for a nominal consideration. Thus, the Bulk Sales Law
 21

does not include within its prohibition sales or mortgages made by a debtor to one of his
creditors in preference to another. (Go v. Phil. Nat. Bank, 40 Off. Gaz. 2065; see also Sec. 7,
Bulk Sales Law.)

Same; Effect of lack of sworn list of creditors. 4 — A sale made of all the effects in the vendor's
store without the buyer being furnished a sworn list of creditors as required by Sec. 3, is null and
void irrespective of the good or bad faith of the buyer, and judgment creditors may treat such
sale as never having been made and proceed to have execution levied on the properties thus sold.
(Chin Asing v. Uy Gongco & Co., [CA] 40 Off. Gaz. 11th Supp. 142.)

Rights and liabilities; As between purchaser and creditors. 5 — A purchaser in violation of the
Bulk Sales Act acquires no rights in the property purchased as against the creditors of the seller.
His status is that of trustee, or receiver for the benefit of all the creditors of the seller. As such he
is responsible for the disposition of the property. The fact that he has mingled the goods with his
own so as to destroy their identity, or that he has resold the property, does not divest him of his
liability to creditors, but on the contrary operates to impose a personal liability. Application by
the seller of the proceeds of a bulk sale to the payment of some of his creditors does not affect
the buyer's liability to other creditors who received none of the proceeds. Where a purchaser
does not comply with the law, the mere fact that on his request the creditor sought to collect
from the seller does not raise an estoppel against him to sue them on his primary liability to
them. (27 C.J. Sec. 892.) 

Same; As between purchaser and seller. — The bulk sales statutes do not in any way affect the
validity of the transfer as between the immediate parties thereto. A sale not in compliance with
the bulk sales statute is valid as against all persons other than creditors. Notwithstanding a
noncompliance with the statutes, title to goods transferred passes to the transferee as between the
parties to the transfer, where it remains until divested by proceedings instituted by a creditor for
that purpose. If the seller has been guilty of fraud to the injury of the buyer, or if there has been
an entire failure of the consideration, the seller cannot hide behind the statute and thus avoid
liability to the purchaser. So the statute does not preclude the seller from recovering the purchase
price of a sale made in violation of its terms; but, where a sale is void for noncompliance with
the bulk sales statutes, it cannot as between the parties be made to operate to give the vendee a
lien for the money he has paid. The vendee, having acted in violation of the law, does not come
into equity with clean hands, and is not in a position to ask for any remedy in a court of equity. It
is not a ground to rescind an entire contract by which property is exchanged for merchandise,
without complying with the statutes, that there is a partial failure of consideration by reason of
the fact that creditors assert rights to a part of the merchandise, but damages to the extent to
which the buyer was injured will be awarded. (27 C.J. Sec. 893.)

Same; Between creditors and subsequent purchasers. 6 —The statute does not confer on the
creditors of the vendor who fail to comply with its requirements the right to pursue the property
in whosoever hands it may fall. To authorize the giving of relief to creditors it must be shown
that the holder of the property transferred is the fraudulent vendee himself or some person who
took the property from him with knowledge that the transfer was fraudulent. The statutes do not
render an innocent purchaser for value from the original purchaser liable to creditors of the
 22

original seller nor affect his title to the property. But if the circumstances are such as to bind the
subsequent purchaser with constructive notice that the sale to his vendor was fraudulent, the
property will be liable in his hands to creditors of the original vendor. (27 C.J., Sec. 894.)

Remedies available to creditors. — Under the general prevailing rule that mere non-compliance
with the statute does not render the purchaser personally liable to creditors, an ordinary action
against the purchaser by creditors to obtain a money judgment will not lie, unless the purchaser
has sold or otherwise disposed of, or dealt with, the property, so as to become personally liable
to creditors for the value of it. The proper remedy is one against the goods to subject them to the
payment of the debt, such as execution, attachment, garnishment, or by a proceeding in equity.
(27 C.J. Sec. 895.)

Same; Replevin. — A creditor of the seller cannot maintain replevin against the purchaser to
recover property sold in contravention of the Bulk Sales Act. But the purchaser may maintain
replevin to recover property seized on attachment or execution against the seller, and in such
action the validity of the sale may be determined. (27 C.J. Sec. 900.)

Sec. 5. It shall be the duty of every vendor, transferor, mortgagor, or assignor, at least ten days
before the sale, transfer or execution of a mortgage upon any stock of goods, wares,
merchandise, provisions or materials, in bulk, to make a full detailed inventory thereof and to
preserve the same showing the quantity and, so far as is possible with the exercise of reasonable
diligence, the cost price to the vendor, transferor, mortgagor or assignor of each article to be
included in the sale, transfer, mortgage, or assignment, and notify every creditor whose name
and address is set forth in the verified statement of the vendor, transferor, mortgagor, or
assignor, at least ten days before transferring possession thereof, personally or by registered
mail, of the price, terms and conditions of the sale, transfer, mortgage, or assignment. 7

Sufficiency of notice. — No notice other than the one prescribed by the statute will be sufficient
(In re Thompson, 242 Fed. 602; Maultrie Grocery Co. v. Holmes-Hartsfield Co., 22 Ga. A. 512,
96 S.E. 346) and a substantial compliance with the requirements as to notice is essential (Stuart
v. Elk Horn Bank, etc. Co., 123 Ark. 265, 185 S.W. 263, Ann. Cas. 1918A 268.) Thus, if the list
furnished is not verified as required by statute, and omits to name certain creditors who are not
notified, the sale is void as to such creditors, whether their omission was fraudulent or otherwise.
(Williams v. J.W. Crowdus Drug Co. [Tex. Civ. A.] 167 S.W. 187.)

Same; Time of notice. — Where the statute requires the vendor, transferor, mortgagor or
assignor to notify personally or by registered mail every creditor "at least ten days before
transferring possession" of any stock of goods, wares, merchandise, provisions or materials, in
bulk, it is sufficiently complied with by sending notice by registered mail at least ten days before
transferring possession thereof. It is not necessary that the notice shall have been received ten
days before such transfer of possession. (See Wyone Shoe Co. v. Daniels, 136 Ga. 192, 71 S.E.
1.)

Sec. 6. Any vendor, transferor, mortgagor or assignor of any stock of goods, wares,
merchandise, provisions or materials, in bulk, or any person acting for, or on behalf of any such
 23

vendor, transferor, mortgagor, or assignor, who shall knowingly or willfully make, or deliver or
cause to be made or delivered, a statement, as provided for in section three hereof, which shall
not include the names of all such creditors, with the correct amount due and to become due to
each of them, or shall contain any false or untrue statement, shall be deemed to have violated the
provisions of this Act.

Sec. 7. It shall be unlawful for any person, firm or corporation, as owner of any stock of goods,
wares, merchandise, provisions or materials, in bulk, to transfer title to the same without
consideration or for a nominal consideration only.

Sec. 8. Nothing in this Act contained shall apply to executors, administrators, receivers,
assignees in insolvency, or public officers, acting under judicial process.

Sec. 9. The sworn statement containing the names and addresses of all creditors of the vendor or
mortgagor provided for in section three of this Act, shall be registered in the Bureau of
Commerce. For the registration of each such sworn statement a fee of five pesos shall be charged
to the vendor or mortgagor of the stock of goods, wares, merchandise, provisions or materials, in
bulk. (As amended by Rep. Act No. 111.)

Sec. 10. The provisions of this Act shall be administered by the Director of the Bureau of
Commerce, 5 who is hereby empowered, with the approval of the Department Head, to prescribe
and adopt from time to time such rules and regulations as may be deemed necessary for the
proper and efficient enforcement of the provisions of this Act.

Sec. 11. Any person violating any provision of this Act shall, upon conviction thereof, be
punished by imprisonment for not less than six months, nor more than five years, or fined in a
sum not exceeding five thousand pesos, or by both such imprisonment and fine, in the discretion
of the court.

Rules as to subsidiary imprisonment. — No subsidiary imprisonment should be imposed on an

accused found guilty of violating the Bulk Sales Law, if he fails to pay his obligation to a
creditor who may have been prejudiced by reason of the fraudulent and void mortgage executed
by the accused, there being no proof that the goods mortgaged have disappeared. (People v.
Mapoy, Off. Gaz. for August, 1943, 755.)

Sec. 12. This Act shall take effect on its approval.  

Approved: December 12, 1932.

ACT NO. 3135

ACT NO. 3135  - AN ACT TO REGULATE THE SALE OF PROPERTY UNDER SPECIAL
POWERS INSERTED IN OR ANNEXED TO REAL-ESTATE MORTGAGES
 24

Section 1. When a sale is made under a special power inserted in or attached to any real-estate
mortgage hereafter made as security for the payment of money or the fulfillment of any other
obligation, the provisions of the following election shall govern as to the manner in which the
sale and redemption shall be effected, whether or not provision for the same is made in the
power.

Sec. 2. Said sale cannot be made legally outside of the province in which the property sold is
situated; and in case the place within said province in which the sale is to be made is subject to
stipulation, such sale shall be made in said place or in the municipal building of the municipality
in which the property or part thereof is situated.

Sec. 3. Notice shall be given by posting notices of the sale for not less than twenty days in at
least three public places of the municipality or city where the property is situated, and if such
property is worth more than four hundred pesos, such notice shall also be published once a week
for at least three consecutive weeks in a newspaper of general circulation in the municipality or
city. 

Sec. 4. The sale shall be made at public auction, between the hours or nine in the morning and
four in the afternoon; and shall be under the direction of the sheriff of the province, the justice or
auxiliary justice of the peace of the municipality in which such sale has to be made, or a notary
public of said municipality, who shall be entitled to collect a fee of five pesos each day of actual
work performed, in addition to his expenses.

Sec. 5. At any sale, the creditor, trustee, or other persons authorized to act for the creditor, may
participate in the bidding and purchase under the same conditions as any other bidder, unless the
contrary has been expressly provided in the mortgage or trust deed under which the sale is made.

Sec. 6. In all cases in which an extrajudicial sale is made under the special power hereinbefore
referred to, the debtor, his successors in interest or any judicial creditor or judgment creditor of
said debtor, or any person having a lien on the property subsequent to the mortgage or deed of
trust under which the property is sold, may redeem the same at any time within the term of one
year from and after the date of the sale; and such redemption shall be governed by the provisions
of sections four hundred and sixty-four to four hundred and sixty-six, inclusive, of the Code of
Civil Procedure, in so far as these are not inconsistent with the provisions of this Act. 

Sec. 7. In any sale made under the provisions of this Act, the purchaser may petition the Court of
First Instance of the province or place where the property or any part thereof is situated, to give
him possession thereof during the redemption period, furnishing bond in an amount equivalent
to the use of the property for a period of twelve months, to indemnify the debtor in case it be
shown that the sale was made without violating the mortgage or without complying with the
requirements of this Act. Such petition shall be made under oath and filed in form of an ex parte
motion in the registration or cadastral proceedings if the property is registered, or in special
proceedings in the case of property registered under the Mortgage Law or under section one
hundred and ninety-four of the Administrative Code, or of any other real property encumbered
 25

with a mortgage duly registered in the office of any register of deeds in accordance with any
existing law, and in each case the clerk of the court shall, upon the filing of such petition, collect
the fees specified in paragraph eleven of section one hundred and fourteen of Act Numbered
Four hundred and ninety-six, as amended by Act Numbered Twenty-eight hundred and sixty-six,
and the court shall, upon approval of the bond, order that a writ of possession issue, addressed to
the sheriff of the province in which the property is situated, who shall execute said order
immediately.  

Sec. 8. The debtor may, in the proceedings in which possession was requested, but not later than
thirty days after the purchaser was given possession, petition that the sale be set aside and the
writ of possession cancelled, specifying the damages suffered by him, because the mortgage was
not violated or the sale was not made in accordance with the provisions hereof, and the court
shall take cognizance of this petition in accordance with the summary procedure provided for in
section one hundred and twelve of Act Numbered Four hundred and ninety-six; and if it finds
the complaint of the debtor justified, it shall dispose in his favor of all or part of the bond
furnished by the person who obtained possession. Either of the parties may appeal from the
order of the judge in accordance with section fourteen of Act Numbered Four hundred and
ninety-six; but the order of possession shall continue in effect during the pendency of the appeal.

Sec. 9. When the property is redeemed after the purchaser has been given possession, the
redeemer shall be entitled to deduct from the price of redemption any rentals that said purchaser
may have collected in case the property or any part thereof was rented; if the purchaser occupied
the property as his own dwelling, it being town property, or used it gainfully, it being rural
property, the redeemer may deduct from the price the interest of one per centum per month
provided for in section four hundred and sixty-five of the Code of Civil Procedure.

Sec. 10. This Act shall take effect on its approval.

 26

ACT NO. 1508

ACT NO. 1508 - AN ACT PROVIDING FOR THE MORTGAGING OF PERSONAL

PROPERTY AND FOR THE REGISTRATION OF THE MORTGAGES SO EXECUTED

Section 1. The short title of this Act shall be "The Chattel Mortgage Law."

Sec. 2. All personal property shall be subject to mortgage, agreeably to the provisions of this
Act, and a mortgage executed in pursuance thereof shall be termed chattel mortgage.

Sec. 3. Chattel mortgage defined. — A chattel mortgage is a conditional sale of personal

property as security for the payment of a debt, or the performance of some other obligation
specified therein, the condition being that the sale shall be void upon the seller paying to the
purchaser a sum of money or doing some other act named. If the condition is performed
according to its terms the mortgage and sale immediately become void, and the mortgagee is
thereby divested of his title.

Sec. 4. Validity. — A chattel mortgage shall not be valid against any person except the
mortgagor, his executors or administrators, unless the possession of the property is delivered to
and retained by the mortgagee or unless the mortgage is recorded in the office of the register of
deeds of the province in which the mortgagor resides at the time of making the same, or, if he
resides without the Philippine Islands, in the province in which the property is situated:
Provided, however, That if the property is situated in a different province from that in which the
mortgagor resides, the mortgage shall be recorded in the office of the register of deeds of both
the province in which the mortgagor resides and that in which the property is situated, and for
the purposes of this Act the city of Manila shall be deemed to be a province.

Sec. 5. Form. — A chattel mortgage shall be deemed to be sufficient when made substantially in
accordance with the following form, and shall be signed by the person or persons executing the
same, in the presence of two witnesses, who shall sign the mortgage as witnesses to the
execution thereof, and each mortgagor and mortgagee, or, in the absence of the mortgagee, his
agent or attorney, shall make and subscribe an affidavit in substance as hereinafter set forth,
which affidavit, signed by the parties to the mortgage as above stated, and the certificate of the
oath signed by the authority administering the same, shall be appended to such mortgage and
recorded therewith.

FORM OF CHATTEL MORTGAGE AND AFFIDAVIT.

"This mortgage made this ____ day of ______19____ by _______________, a resident of the
municipality of ______________, Province of ____________, Philippine Islands mortgagor, to
____________, a resident of the municipality of ___________, Province of ______________,
Philippine Islands, mortgagee, witnesseth:
 27

"That the said mortgagor hereby conveys and mortgages to the said mortgagee all of the
following-described personal property situated in the municipality of ______________,
Province of ____________ and now in the possession of said mortgagor, to wit:

(Here insert specific description of the property mortgaged.)

"This mortgage is given as security for the payment to the said ______, mortgagee, of
promissory notes for the sum of ____________ pesos, with (or without, as the case may be)
interest thereon at the rate of ___________ per centum per annum, according to the terms of
__________, certain promissory notes, dated _________, and in the words and figures following
(here insert copy of the note or notes secured).

"(If the mortgage is given for the performance of some other obligation aside from the payment
of promissory notes, describe correctly but concisely the obligation to be performed.)

"The conditions of this obligation are such that if the mortgagor, his heirs, executors, or
administrators shall well and truly perform the full obligation (or obligations) above stated
according to the terms thereof, then this obligation shall be null and void.

"Executed at the municipality of _________, in the Province of ________, this _____ day of
19_____

____________________
(Signature of mortgagor.)

"In the presence of

"_________________
"_________________
(Two witnesses sign here.)

FORM OF OATH.
"We severally swear that the foregoing mortgage is made for the purpose of securing the
obligation specified in the conditions thereof, and for no other purpose, and that the same is a
just and valid obligation, and one not entered into for the purpose of fraud."

FORM OF CERTIFICATE OF OATH.

"At ___________, in the Province of _________, personally appeared ____________, the
parties who signed the foregoing affidavit and made oath to the truth thereof before me.

"_____________________________"
(Notary public, justice of the peace, 1 or other officer, as the case may be.)

Sec. 6. Corporations. — When a corporation is a party to such mortgage the affidavit required
may be made and subscribed by a director, trustee, cashier, treasurer, or manager thereof, or by a
person authorized on the part of such corporation to make or to receive such mortgage. When a
 28

partnership is a party to the mortgage the affidavit may be made and subscribed by one member
thereof.

Sec. 7. Descriptions of property. — The description of the mortgaged property shall be such as
to enable the parties to the mortgage, or any other person, after reasonable inquiry and
investigation, to identify the same.

If the property mortgaged be large cattle," as defined by section one of Act Numbered Eleven
and forty-seven, 2 and the amendments thereof, the description of said property in the mortgage
shall contain the brands, class, sex, age, knots of radiated hair commonly known as remolinos, or
cowlicks, and other marks of ownership as described and set forth in the certificate of ownership
of said animal or animals, together with the number and place of issue of such certificates of
ownership.

If growing crops be mortgaged the mortgage may contain an agreement stipulating that the
mortgagor binds himself properly to tend, care for and protect the crop while growing, and
faithfully and without delay to harvest the same, and that in default of the performance of such
duties the mortgage may enter upon the premises, take all the necessary measures for the
protection of said crop, and retain possession thereof and sell the same, and from the proceeds of
such sale pay all expenses incurred in caring for, harvesting, and selling the crop and the amount
of the indebtedness or obligation secured by the mortgage, and the surplus thereof, if any shall
be paid to the mortgagor or those entitled to the same.

A chattel mortgage shall be deemed to cover only the property described therein and not like or
substituted property thereafter acquired by the mortgagor and placed in the same depository as
the property originally mortgaged, anything in the mortgage to the contrary notwithstanding.

Sec. 8. Failure of mortgagee to discharge the mortgage. — If the mortgagee, assign,

administrator, executor, or either of them, after performance of the condition before or after the
breach thereof, or after tender of the performance of the condition, at or after the time fixed for
the performance, does not within ten days after being requested thereto by any person entitled to
redeem, discharge the mortgage in the manner provided by law, the person entitled to redeem
may recover of the person whose duty it is to discharge the same twenty pesos for his neglect
and all damages occasioned thereby in an action in any court having jurisdiction of the subject-
matter thereof.

Sec. 9-12. (inclusive) 3

Sec. 13. When the condition of a chattel mortgage is broken, a mortgagor or person holding a
subsequent mortgage, or a subsequent attaching creditor may redeem the same by paying or
delivering to the mortgagee the amount due on such mortgage and the reasonable costs and
expenses incurred by such breach of condition before the sale thereof. An attaching creditor who
so redeems shall be subrogated to the rights of the mortgagee and entitled to foreclose the
mortgage in the same manner that the mortgagee could foreclose it by the terms of this Act.
 29

Sec. 14. Sale of property at public auction; Officer's return; Fees; Disposition of proceeds. —
The mortgagee, his executor, administrator, or assign, may, after thirty days from the time of
condition broken, cause the mortgaged property, or any part thereof, to be sold at public auction
by a public officer at a public place in the municipality where the mortgagor resides, or where
the property is situated, provided at least ten days' notice of the time, place, and purpose of such
sale has been posted at two or more public places in such municipality, and the mortgagee, his
executor, administrator, or assign, shall notify the mortgagor or person holding under him and
the persons holding subsequent mortgages of the time and place of sale, either by notice in
writing directed to him or left at his abode, if within the municipality, or sent by mail if he does
not reside in such municipality, at least ten days previous to the sale.

The officer making the sale shall, within thirty days thereafter, make in writing a return of his
doings and file the same in the office of the register of deeds where the mortgage is recorded,
and the register of deeds shall record the same. The fees of the officer for selling the property
shall be the same as in the case of sale on execution as provided in Act Numbered One hundred
and ninety, 4 and the amendments thereto, and the fees of the register of  deeds for registering
the officer's return shall be taxed as a part of the costs of sale, which the officer shall pay to the
register of deeds. The return shall particularly describe the articles sold, and state the amount
received for each article, and shall operate as a discharge of the lien thereon created by the
mortgage. The proceeds of such sale shall be applied to the payment, first, of the costs and
expenses of keeping and sale, and then to the payment of the demand or obligation secured by
such mortgage, and the residue shall be paid to persons holding subsequent mortgages in their
order, and the balance, after paying the mortgages, shall be paid to the mortgagor or person
holding under him on demand.

If the sale includes any "large cattle," a certificate of transfer as required by section sixteen of
Act Numbered Eleven hundred and forty-seven 5 shall be issued by the treasurer of the
municipality where the sale was held to the purchaser thereof.

Sec. 15. 6, 6a

Sec. 16. This Act shall take effect on August first, nineteen hundred and six.

REPUBLIC ACT No. 11057

 30

An Act Strengthening the Secured Transactions Legal Framework in the Philippines,

Which Shall Provide for the Creation, Perfection, Determination of Priority, Establishment
of a Centralized Notice Registry, and Enforcement of Security Interests in Personal
Property, and for Other Purposes

Be it enacted by the Senate and House of Representatives of the Philippine Congress Assembled:

Section 1. Title. -This Act shall be known as the "Personal Property Security Act".

Section 2. Declaration of Policy. -It is the policy of the State to promote economic activity by
increasing access to least cost credit, particularly for micro, small, and medium enterprises
(MSMEs), by establishing a unified and modern legal framework for securing obligations with
personal property.

CHAPTER 1
DEFINITIONS AND SCOPE

Section 3. Definition of Terms. -As used in this Act, the following terms shall mean:

(a) Commodity contract – a commodity futures contract, an option on a commodity

futures contract, a commodity option, or another contract if the contract or option is:

(1) Traded on or subject to the rules of a board of trade that has been designated
as a contract market for such a contract; or

(2) Traded on a foreign commodity board of trade, exchange, or market, and is

carried on the books of a commodity intermediary for a commodity customer;

(b) Control agreement –

(1) With respect to securities, means an agreement in writing among the issuer or
the intermediary, the grantor and the secured creditor, according to which the
issuer or the intermediary agrees to follow instructions from the secured creditor
with respect to the security, without further consent from the grantor;

(2) With respect to rights to deposit account, means an agreement in writing

among the deposit-taking institution, the grantor and the secured creditor,
according to which the deposit-taking institution agrees to follow instructions
from the secured creditor with respect to the payment of funds credited to the
deposit account without further consent from the grantor;

(3) With respect to commodity contracts, means an agreement in writing among

the grantor, secured creditor, and intermediary, according to which the
commodity intermediary will apply any value distributed on account of the
commodity contract as directed by the secured creditor without further consent by
the commodity customer or grantor;
 31

(c) Grantor –

(1) The person who grants a security interest in collateral to secure its own
obligation or that of another person;

(2) A buyer or other transferee of a collateral that acquires its right subject to a
security interest;

(3) A transferor in an outright transfer of an accounts receivable; or

(4) A lessee of goods;

(d) Non-inter mediated securities – securities other than securities credited to a securities

account and rights in securities resulting from the credit of securities to a securities
account;

(e) Notice – a statement of information that is registered in the Registry relating to a

security interest or lien. The term includes an initial notice., amendment notice, and
termination notice;

(f) Proceeds – any property received upon sale, lease or other disposition of collateral, or
whatever is collected on or distributed with respect to collateral, claims arising out of the
loss or damage to the collateral, as well as a right to insurance payment or other
compensation for loss or damage of the collateral;

(g) Purchase money security interest – a security interest in goods taken by the seller to
secure the price or by a person who gives value to enable the grantor to acquire the goods
to the extent that the credit is used for that purpose;

(h) Registry – the centralized and nationwide electronic registry established in the Land
Registration Authority (LRA) where notice of a security interest and a lien in personal
property may be registered;

(i) Secured creditor – a person that has a security interest. For the purposes of registration
and priority only, it includes a buyer of account receivable and a lessor of goods under an
operating lease for not less than one (1) year;

(j) Security interest – a property right in collateral that secures payment or other

performance of an obligation, regardless of whether the parties have denominated it as a
security interest, and regardless of the type of asset, the status of the grantor or secured
creditor, or the nature of the secured obligation; including the right of a buyer of accounts
receivable and a lessor under an operating lease for not less than one (1) year; and

(k) Writing – for the purpose of this Act includes electronic records.

 32

Section 4. Scope of the Act.— This Act shall apply to all transactions of any form that secure an
obligation with movable collateral, except interests in aircrafts subject to Republic Act No. 9497,
or the "Civil Aviation Authority Act of 2008", and interests in ships subject to Presidential
Decree No. 1521, or the "Ship Mortgage Decree of 1978".

CHAPTER 2
CREATION OF SECURITY INTEREST

Section 5. Creation of a Security Interest.—

(a) A security interest shall be created by a security agreement,

(b) A security agreement may provide for the creation of a security interest in a future
property, but the security interest in that property is created only when the grantor
acquires rights in it or the power to encumber it.

Section 6. Security Agreement.— A security agreement must be contained in a written contract

signed by the parties. It may consist of one or more writings that, taken together, establish the
intent of the parties to create a security interest.

The security agreement shall likewise provide for the language to be used in agreements and
notices. The grantor shall be given the option to have the agreement and notices in Filipino. The
Department of Finance (DOF) shall prepare model agreements in plain English and Filipino.

Section 7. Description of Collateral.— A description of collateral shall be considered sufficient,

whether it is specific or general, if it reasonably identifies the collateral. A description such as
"all personal property", "all equipment", "all inventory", or "all personal property within a
generic category" of the grantor shall be sufficient.

Section 8. Right to Proceeds and Commingled Funds and Money.—

(a) A security interest in personal property shall extend to its identifiable or traceable
proceeds.

(b) Where proceeds in the form of funds credited to a deposit account or money are
commingled with other funds or money:

(1) The security interest shall extend to the commingled money or funds,
notwithstanding that the proceeds have ceased to be identifiable to the extent they
remain traceable:

(2) The security interest in the commingled funds or money shall be limited to the
amount of the proceeds immediately before they were commingled: and

(3) If at any time after the commingling, the balance credited to the deposit
account or the amount of the commingled money is less than the amount of the
 33

proceeds immediately before they were commingled, the security interest against
the commingled funds or money shall be limited to the lowest amount of the
commingled funds or money between the time when the proceeds were
commingled and the time the security interest in the proceeds is claimed.

Section 9. Continuity of Security Interest.— A security interest shall continue in collateral

notwithstanding sale, lease, license, exchange, or other disposition of the collateral, except as
otherwise provided in Section 21 of this Act, or agreed upon by the parties.

Section 10. Contractual Limitation on the Creation of a Security Interest.—

(a) A security interest in an account receivable shall be effective notwithstanding any

agreement between the grantor and the account debtor or any secured creditor limiting in
any way the grantor’s right to create a security interest.

(b) Nothing in this section shall affect any obligation or liability of the grantor for breach
of the agreement in subsection (a).

(c) Any stipulation limiting the grantor’s right to create a security interest shall be void.

(d) This section shall apply only to accounts receivable arising from:

(1) A contract for the supply or lease of goods or services other than financial
services;

(2) A construction contract or a contract for the sale or lease of real property; and

(3) A contract for the sale, lease or license of intellectual property.

CHAPTER 3
PERFECTION OF SECURITY INTEREST

Section 11. Perfection of Security Interest.—

(a) A security interest shall be perfected when it has been created and the secured creditor
has taken one of the actions in accordance with Section 12.

(b) On perfection, a security interest becomes effective against third parties.

Section 12. Means of Perfection.— A security interest may be perfected by:

(a) Registration of a notice with the Registry;

(b) Possession of the collateral by the secured creditor; and

(c) Control of investment property and deposit account.

 34

A security interest in any tangible asset may be perfected by registration or possession. A

security interest in investment property and deposit account may be perfected by registration or
control.

Section 13. Perfection by Control.—

(a) A security interest in a deposit account or investment property may be perfected by

control through:

(1) The creation of the security interest in favor of the deposit-taking institution or
the intermediary;

(2) The conclusion of a control agreement; or

(3) For an investment property that is an electronic security not held with an
intermediary, the notation of the security interest in the books maintained by or on
behalf of the issuer for the purpose of recording the name of the holder of the
securities.(b) Nothing in this Act shall require a deposit-taking institution or an
intermediary to enter into a control agreement, even if the grantor so requests. A
deposit-taking institution or an intermediary that has entered into such an
agreement shall not be required to confirm the existence of the agreement to
another person unless requested to do so by the grantor.

Section 14. Perfection in Proceeds.—

(a) Upon disposition of collateral, a security interest shall extend to proceeds of the
collateral without further act and be continuously perfected, if the proceeds are in the
form of money, accounts receivable, negotiable instruments or deposit accounts.

(b) Upon disposition of the collateral, if the proceeds are in a form different from money,
accounts receivable, negotiable instruments or deposit accounts, the security interest in
such proceeds must be perfected by one of the means applicable to the relevant type of
collateral within fifteen (15) days after the grantor receives such proceeds; otherwise, the
security interest in such proceeds shall not be effective against third parties.

Section 15. Change in Means of Perfection.— A security interest shall remain perfected despite
a change in the means for achieving perfection: Provided, That there was no time when the
security interest was not perfected.

Section 16. Assignment of Security Interest.— If a secured creditor assigns a perfected security

interest, an amendment notice may be registered to reflect the assignment.

CHAPTER 4
PRIORITY OF SECURITY INTEREST
 35

Section 17. Priority Rules.— The priority of security interests and liens in the same collateral
shall be determined according to time of registration of a notice or perfection by other means,
without regard to the order of creation of the security interests and liens.

Section 18. Priority for Perfection by Control.—

(a) A security interest in a deposit account with respect to which the secured creditor is
the deposit-taking institution or the intermediary shall have priority over a competing
security interest perfected by any method.

(b) A security interest in a deposit account or investment property that is perfected by a

control agreement shall have priority over a competing security interest except a security
interest of the deposit-taking institution or the intermediary.

(c) The order of priority among competing security interests in a deposit account or
investment property that were perfected by the conclusion of control agreements shall be
determined on the basis of the time of conclusion of the control agreements.

(d) Any rights to set-off that the deposit-taking institution may have against a grantor’s
right to payment of funds credited to a deposit account shall have priority over a security
interest in the deposit account.

(e) A security interest in a security certificate perfected by the secured creditor’s

possession of the certificate shall have priority over a competing security interest
perfected by registration of a notice in the Registry.

(f) A security interest in electronic securities not held with an intermediary perfected by a
notation of the security interests in the books maintained for that purpose by or on behalf
of the issuer shall have priority over a security interest in the same securities perfected by
any other method.

(g) A security interest in electronic securities not held with an intermediary perfected by
the conclusion of a control agreement shall have priority over a security interest in the
same securities perfected by registration of a notice in the Registry.

(h) The order of priority among competing security interests in electronic securities not
held with an intermediary perfected by the conclusion of control agreements is
determined on the basis of the time of conclusion of the control agreements.

Section 19. Priority for Instruments and Negotiable Documents. -A security interest in an

instrument or negotiable document that is perfected by possession of the instrument or the
negotiable document shall have priority over a security interest in the instrument or negotiable
document that is perfected by registration of a notice in the Registry.

Section 20. Priority and Plight of Retention by Operation of Law. -A person who provides
services or materials with respect to the goods, in the ordinary course of business, and retains
 36

possession of the goods shall have priority over a perfected security interest in the goods until
payment thereof.

Section 21. Transferee Exceptions. -Any party who obtains, in the ordinary course of business,
any movable property containing a security interest shall take the same free of such security
interest provided he was in good faith. No such good faith shall exist if the security interest in the
movable property was registered prior to his obtaining the property.

Section 22. Effect of the Grantor’s Insolvency on the Priority of a Security Interest. -Subject to

the applicable insolvency law, a security interest perfected prior to the commencement of
insolvency proceedings in respect of the grantor shall remain perfected and retain the priority it
had before the commencement of the insolvency proceedings.

Section 23. Purchase Money Security Interest.—

(a) A purchase money security interest in equipment and its proceeds shall have priority
over a conflicting security interest, if a notice relating to the purchase money security
interest is registered within three (3) business days after the grantor receives possession
of the equipment.

(b) A purchase money security interest in consumer goods that is perfected by

registration of notice not later than three (3) business days after the grantor obtains
possession of the consumer goods shall have priority over a conflicting security interest.

(c) A purchase money security interest in inventory, intellectual property or livestock

shall have priority over a conflicting perfected security interest in the same inventory,
intellectual property or livestock if:

(1) The purchase money security interest is perfected when the grantor receives
possession of the inventory or livestock, or acquires rights to intellectual property;
and

(2) Before the grantor receives possession of the inventory or livestock, or

acquires rights in intellectual property, the purchase money secured creditor gives
written notification to the holder of the conflicting perfected security interest in
the same types of inventory, livestock, or intellectual property. The notification
sent to the holder of the conflicting security interest may cover multiple
transactions between the purchase money secured creditor and the grantor without
the need to identify each transaction.

(d) The purchase money security interest in equipment or consumer goods perfected
timely in accordance with subsections (a) and (b), shall have priority over the rights of a
buyer, lessee, or lien holder which arise between delivery of the equipment or consumer
goods to the grantor and the time the notice is registered.
 37

Section 24. Livestock. -A perfected security interest in livestock securing an obligation incurred

to enable the grantor to obtain food or medicine for the livestock shall have priority over any
other security interest in the livestock, except for a perfected purchase money security interest in
the livestock, if the secured creditor providing credit for food or medicine gives written
notification to the holder of the conflicting perfected security interest in the same livestock
before the grantor receives possession of the food or medicine.

Section 25. Fixtures, Accessions, and Commingled Goods. -A perfected security interest in a

movable property which has become a fixture, or has undergone accession or commingling shall
continue provided the movable property involved can still be reasonably traced. In determining
ownership over fixtures, accessions, and commingled goods, the provisions of Book II of
Republic Act No. 386 or the "Civil Code of the Philippines" shall apply.

CHAPTER 5
REGISTRATION – REGISTRY

Section 26. Establishment of Electronic Registry.—

(a) The Registry shall be established in and administered by the LRA.

(b) The Registry shall provide electronic means for registration and searching of notices.

Section 27. Public Record.—

(a) Information contained in a registered notice shall be considered as a public record.

(b) Any person may search notices registered in the Registry.

(c) The electronic records of the Registry shall be the official records.

Section 28. Sufficiency of Notice.—

(a) An initial notice of security interest shall not be rejected:

(1) If it identifies the grantor by an identification number, as further prescribed in

the regulations;

(2) If it identifies the secured creditor or an agent of the secured creditor by name;

(3) If it provides an address for the grantor and secured creditor or its agent;

(4) If it describes the collateral: and

(5) If the prescribed fee has been tendered, or an arrangement has been made for
payment of fees by other means.
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(b) If the Registry rejects to register a notice, it shall promptly communicate the fact of
and reason for its rejection to the person who submitted the notice.

(c) Each grantor must authorize the registration of an initial notice by signing a security
agreement or otherwise in writing.

(d) A notice may be registered before a security agreement is concluded. Once a security
agreement is concluded, the date of registration of the notice shall be reckoned from the
date the notice was registered.

(e) A notice of lien may be registered by a lien holder without the consent of the person
against whom the lien is sought to be enforced.

(f) Description of the collateral in a notice shall be entered in English.

Section 29. One Notice Sufficient for Security Interests Under Multiple Security Agreements. -
The registration of a single notice may relate to security interests created by the grantor under
one (1) or more than one security agreement.

Section 30. Effectiveness of Notice.—

(a) A notice shall be effective at the time it is discoverable on the records of the Registry.

(b) A notice shall be effective for the duration of the term indicated in the notice unless a
continuation notice is registered before the term lapses.

(c) A notice substantially complying with the requirements of this Chapter shall be
effective unless it is seriously misleading.

(d) A notice that may not be retrieved in a search of the Registry against the correct
identifier of the grantor shall be ineffective with respect to that grantor.

Section 31. Seriously Misleccding Notice. -A notice that does not provide the identification
number of the grantor shall be seriously misleading.

Section 32. Amendment of Notice.—

(a) A notice may be amended by the registration of an amendment notice that:

(1) Identifies the initial notice by its registration number; and

(2) Provides the new information.

(b) An amendment notice that adds collateral that is not proceeds must be authorized by
the grantor in writing.
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(c) An amendment notice that adds a grantor must be authorized by the added grantor in
writing.

(d) An amendment notice shall be effective only as to each secured creditor who
authorizes it.

(e) An amendment notice that adds collateral or a grantor shall be effective as to the
added collateral or grantor from the date of its registration.

Section 33. Continuation of Notice.—

(a) The period of effectiveness of a notice may be continued by registering an amendment

notice that identifies the initial notice by its registration number.

(b) Continuation of notice may be registered only within six (6) months before the
expiration of the effective period of the notice.

Section 34. Termination of Effectiveness of a Notice.—

(a) The effectiveness of a notice may be terminated by registering a termination notice

that:

(1) Identifies the initial notice by its registration number; and

(2) Identifies each secured creditor who authorizes the registration of the
termination notice.

(b) A termination notice terminates effectiveness of the notice as to each authorizing

secured creditor.

Section 35. Registry Duties.—

(a) For each registered notice, the Registry shall:

(1) Assign a unique registration number;

(2) Create a record that bears the number assigned to the initial notice and the date
and time of registration; and

(3) Maintain the record for public inspection.

(b) The Registry shall index notices by the identification number of the grantor and, for
notices containing a serial number of a motor vehicle, by serial number.

(c) The Registry shall provide a copy of the electronic record of the notice, including the
registration number and the date and time of registration to the person who submitted it.
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(d) The Registry shall maintain the capability to retrieve a record by the identification
number of the grantor, and by serial number of a motor vehicle.

(e) The Registry shall maintain records of lapsed notices for a period of ten (10) years
after the lapse.

(f) The duties of the Registry shall be merely administrative in nature. By registering a
notice or refusing to register a notice, the Registry does not determine the sufficiency,
correctness, authenticity, or validity of any information contained in the notice.

Section 36. Search of Registry Records and Certified Report.—

(a) The Registry shall communicate the following information to any person who
requests it:

(1) Whether there are in the Registry any unlapsed notices that indicate the
grantor's identification number or vehicle serial number that exactly matches the
relevant criterion provided by the searcher;

(2) The registration number, and the date and time of registration of each notice;
and

(3) All of the information contained in each notice.

(b) If requested, the Registry shall issue a certified report of the results of a search that is
an official record of the Registry and shall be admissible into evidence in judicial
proceedings without extrinsic evidence of its authenticity.

Section 37. Disclosure of Information.—

(a) The secured creditor must provide to the grantor at its request:

(1) The current amount of the unpaid secured obligation; and

(2) A list of assets currently subject to a security interest.

(b) The secured creditor may require payment of a fee for each request made by the
grantor in subsection (a) in this section, but the grantor is entitled to a reply without
charge once every six (6) months.

(c) A security interest in a deposit account shall not:

(1) Affect the rights and obligations of the deposit-taking institution without its
consent; or
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(2) Require the deposit-taking institution to provide any information about the
deposit account to third parties.

Section 38. Fees Set by Regulation.—

(a) The fees for registering a notice and for requesting a certified search report shall be
set by regulation issued by the DOF for the recovery of reasonable costs of establishing
and operating the Registry.

(b) The fee structure or any change thereof under subsection (a) shall further consider that
the same shall not be burdensome to either lender or grantor.

(c) There shall be no fee for electronic searches of the Registry records or for the
registration of termination notices.

(d) The Registry may charge fees for services not mentioned above.

Section 39. When the Grantor May Demand Amendment or Termination of Notice. -A grantor
may give a written demand to the secured creditor to amend or terminate the effectiveness of the
notice if:

(a) All the obligations under the security agreement to which the registration relates have
been performed and there is no commitment to make future advances;

(b) The secured creditor has agreed to release part of the collateral described in the
notice;

(c) The collateral described in the notice includes an item or kind of property that is not a
collateral under a security agreement between the secured creditor and the grantor;

(d) No security agreement exists between the parties; or

(e) The security interest is extinguished in accordance with this Act.

Section 40. Matters That May be Required by Demand. -Upon receipt of the demand submitted
under Section 39, the secured creditor must register, within fifteen (15) working days, an
amendment or termination notice:

(a) Terminating the registration in a case within subsections (a), (d) or (e) of Section 39;

(b) Amending the registration to release some property that is no longer collateral in a
case within subsection (c) of Section 39 or that was never collateral under a security
agreement between the secured creditor and the grantor in a case within subsection (c) of
Section 39.
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Section 41. Procedure for Noncompliance with Demand. -If the secured creditor fails to comply
with the demand within fifteen (15) working days after its receipt, the person giving the demand
under Section 39 may ask the proper court to issue an order terminating or amending the notice
as appropriate.

Section 42. Compulsory Amendment or Termination by Court Order.—

(a) The court may, on application by the grantor, issue an order that the notice be
terminated or amended in accordance with the demand, which order shall be conclusive
and binding-on the LRA: Provided, That the secured creditor wrho disagrees with the
order of the court may appeal the order.

(b) The court may make any other order it deems proper for the purpose of giving effect
to an order under subsection (a) of this section.

(c) The LRA shall amend or terminate a notice in accordance with a court order made
under subsection (a) of this section as soon as reasonably practicable after receiving the
order.

Section 43. No Fee for Compliance of Demand. -A secured creditor shall not charge any fee for
compliance with a demand received under Section 39.

Section 44. When Registration and Search Constitutes Interference with Privacy of Individual. -
A person who submitted a notice for registration or carried out a search of the Registry with a
frivolous, malicious or criminal purpose or intent shall be subject to civil and criminal penalties
according to the relevant laws.

CHAPTER 6
ENFORCEMENT OF SECURITY INTEREST SECURED CREDITOR’S RIGHTS

Section 45. Right of Redemption.—

(a) Any person who is entitled to receive a notification of disposition in accordance with
this Chapter is entitled to redeem the collateral by paying or otherwise performing the
secured obligation in full, including the reasonable cost of enforcement.

(b) The right of redemption may be exercised, unless:

(1) The person entitled to redeem has not, after the default, waived in writing the
right to redeem;

(2) The collateral is sold or otherwise disposed of, acquired or collected by the
secured creditor or until the conclusion of an agreement by the secured creditor
for that purpose; and

(3) The secured creditor has retained the collateral.

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Section 46. Right of Higher-Ranking Secured. Creditor to Take Over Enforcement.—

(a) Even if another secured creditor or a lien holder has commenced enforcement, a
secured creditor whose security-interest has priority over that of the enforcing secured
creditor or lien holder shall be entitled to take over the enforcement process.

(b) The right referred to in subsection (a) of this section may be invoked at any time
before the collateral is sold or otherwise disposed of, or retained by the secured creditor
or until the conclusion of an agreement by the secured creditor for that purpose.

(c) The right of the higher-ranking secured creditor to take over the enforcement process
shall include the right to enforce the rights by any method available to a secured creditor
under this Act.

Section 47. Expedited Repossession of the Collateral.—

(a) The secured creditor may take possession of the collateral without judicial process if
the security agreement so stipulates: Provided, That possession can be taken without a
breach of the peace.

(b) If the collateral is a fixture, the secured creditor, if it has priority over all owners and
mortgagees, may remove the fixture from the real property to which it is affixed without
judicial process. The secured creditor shall exercise due care in removing the fixture.

(c) If, upon default, the secured creditor cannot take possession of collateral without
breach of the peace, the secured creditor may proceed as follows:

(1) The secured creditor shall be entitled to an expedited hearing upon application
for an order granting the secured creditor possession of the collateral. Such
application shall include a statement by the secured creditor, under oath, verifying
the existence of the security agreement attached to the application and identifying
at least one event of default by the debtor under the security agreement;

(2) The secured creditor shall provide the debtor, grantor, and, if the collateral is a
fixture, any real estate mortgagee, a copy of the application, including all
supporting documents and evidence for the order granting the secured creditor
possession of the collateral; and

(3) The secured creditor is entitled to an order granting possession of the

collateral upon the court finding that a default has occurred under the security
agreement and that the secured creditor has a right to take possession of the
collateral. The court may direct the grantor to take such action as the court deems
necessary and appropriate so that the secured creditor may take possession of the
collateral: Provided, That breach of the peace shall include entering the private
residence of the grantor without permission, resorting to physical violence or
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intimidation, or being accompanied by a law enforcement officer when taking

possession or confronting the grantor.

Section 48. Recovery in Special Cases.— Upon default, the secured creditor may without
judicial process:

(a) Instruct the account debtor to make payment to the secured creditor, and apply such
payment to the satisfaction of the obligation secured by the security interest after
deducting the secured creditor’s reasonable collection expenses. On request of the
account debtor, the secured creditor shall provide evidence of its security interest to the
account debtor when it delivers the instruction to the account debtor;

(b) In a negotiable document that is perfected by possession, proceed as to the negotiable

document or goods covered by the negotiable document;

(c) In a deposit account maintained by the secured creditor, apply the balance of the
deposit account to the obligation secured by the deposit account; and

(d) I n other cases of security interest in a deposit account perfected by control, instruct
the deposit-taking institution to pay the balance of the deposit account to the secured
creditor’s account.

Section 49. Right to Dispose of Collateral.—

(a) After default, a secured creditor may sell or otherwise dispose of the collateral,
publicly or privately, in its present condition or following any commercially reasonable
preparation or processing.

(b) The secured creditor may buy the collateral at any public disposition, or at a private
disposition but only if the collateral is of a kind that is customarily sold on a recognized
market or the subject of widely distributed standard price quotations.

Section 50. Commercial Reasonableness Required.—

(a) In disposing of collateral, the secured creditor shall act in a commercially reasonable
manner.

(b) A disposition is commercially reasonable if the secerned creditor disposes of the

collateral in conformity with commercial practices among dealers in that type of
property.

(c) A disposition is not commercially unreasonable merely because a better price could
have been obtained by disposition at a different time or by a different method from the
time and method selected by the secured creditor.
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(d) If a method of disposition of collateral has been approved in any legal proceeding, it
is conclusively commercially reasonable.

Section 51. Notification of Disposition.—

(a) Not later than ten (10) days before disposition of the collateral, the secured creditor
shall notify:

(1) The grantor;

(2) Any other secured creditor or lien holder who, five (5) days before the date
notification is sent to the grantor, held a security interest or lien in the collateral
that was perfected by registration; and

(3) Any other person from whom the secured creditor received notification of a
claim of an interest in the collateral if the notification was received before the
secured creditor gave notification of the proposed disposition to the grantor.

(b) The grantor may waive the right to be notified.

(c) A notification of disposition is sufficient if it identifies the grantor and the secured
creditor; describes the collateral; states the method of intended disposition; and states the
time and place of a public disposition or the time after which other disposition is to be
made.

(d) The requirement to send a notification under this section shall not apply if the
collateral is perishable or threatens to decline speedily in value or is of a type customarily
sold on a recognized market.

Section 52. Application of Proceeds.—

(a) The proceeds of disposition shall be applied in the following order:

(1) The reasonable expenses of taking, holding, preparing for disposition, and disposing
of the collateral, including reasonable attorneys’ fees and legal expenses incurred by the
secured creditor;

(2) The satisfaction of the obligation secured by the security interest of the enforcing
secured creditor; and

(3) The satisfaction of obligations secured by any subordinate security interest or hen in
the collateral if a written demand and proof of the interest are received before distribution
of the proceeds is completed.

(b) The secured creditor shall account to the grantor for any surplus, and, unless otherwise
agreed, the debtor is liable for any deficiency.
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Section 53. Rights of Buyers and Other Third Parties.—

(a) If a secured creditor sells the collateral under this Chapter, the buyer shall acquire the
grantor’s right in the asset free of the rights of any secured creditor or lien holder.

(b) If a secured creditor leases or licenses the collateral under this Chapter, the lessee or
licensee shall be entitled to the benefit of the lease or license during its term.

(c) If a secured creditor sells, leases or licenses the collateral not in compliance with this
Chapter, the buyer, lessee or licensee of the collateral shall acquire the rights or benefits
described in subsections (a) and (b) of this section: Provided, That it had no knowledge
of a violation of this Chapter that materially prejudiced the rights of the grantor or
another person.

Section 54. Retention of Collateral by Secured Creditor.—

(a) After default, the secured creditor may propose to the debtor and grantor to take all or
part of the collateral in total or partial satisfaction of the secured obligation, and shall
send a proposal to:

(1) The debtor and the grantor;

(2) Any other secured creditor or lien holder who, five (5) days before the
proposal is sent to the debtor and the grantor, perfected its security interest or lien
by registration; and

(3) Any other person with an interest in the collateral who has given a written
notification to the secured creditor before the proposal is sent to the debtor and the
grantor.

(b) The secured creditor may retain the collateral in the case of:

(1) A proposal for the acquisition of the collateral in full satisfaction of the secured
obligation, unless the secured creditor receives an objection in writing from any person
entitled to receive such a proposal within twenty (20) days after the proposal is sent to
that person; or

(2) A proposal for the acquisition of the collateral in partial satisfaction of the secured
obligation, only if the secured creditor receives the affirmative consent of each addressee
of the proposal in writing within twenty (20) days after the proposal is sent to that person.

CHAPTER 7
TRANSITIONAL PROVISIONS

Section 55. Interpretation of Transitional Provisions.— For this Chapter, unless the context
otherwise requires:
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(a) Existing secured creditor – means a secured creditor with a prior security interest;

(b) Prior law – means any law that existed or in force before the effectivity of this Act;

(c) Prior interest – means a security interest created or provided for by an agreement or

other transaction that was made or entered into before the effectivity of this Act and that
had not been terminated before the effectivity of this Act, but excludes a security interest
that is renewed or extended by a security agreement or other transaction made or entered
into on or after the effectivity of this Act; and

(d) Transitional period - means the period from the date of effectivity of this Act until the
date when the Registry has been established and operational.

Section 56. Creation of Prior Interest.—

(a) Creation of prior interest shall be determined by prior laws.

(b) A prior interest remains effective between the parties notwithstanding its creation did
not comply with the creation requirements of this Act.

Section 57. Perfection of Prior Interest.—

(a) A prior interest that was perfected under prior law continues to be perfected under this
Act until the earlier of:

(1) The time the prior interest would cease to be perfected under prior law; and

(2) The expiration of the transitional period.

(b) If the perfection requirements of this Act are satisfied before the perfection of a prior
interest ceases in accordance with subsection (a) of this section, the prior interest
continues to be perfected under this Act from the time when it was perfected under the
prior law.

(c) If the perfection requirements of this Act are not satisfied before the perfection of a
prior interest ceases in accordance with subsection (a) of this section, the prior interest is
perfected only from the time it is perfected under this Act.

(d) A written agreement between a grantor and a secured creditor creating a prior interest
is sufficient to constitute authorization by the grantor of the registration of a notice
covering assets described in that agreement under this Act.

(e) If a prior interest referred to in subsection (b) of this section was perfected by the
registration of a notice under prior law, the time of registration under the prior law shall
be the time to be used for purposes of applying the priority rules of this Act.
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Section 58. Priority of Prior Interest.—

(a) The priority of a prior interest as against the rights of a competing claimant is
determined by the prior law if:

(1) The security interest and the rights of all competing claimant arose before the
effectivity of this Act; and

(2) The priority status of these rights has not changed since the effectivity of this
Act.

(b) For purposes of subsection (a)(2) of this section, the priority status of a prior interest
has changed only if:

(1) It was perfected when this Act took effect, but ceased to be perfected; or

(2) It was not perfected under prior law when this Act took effect, and was only
perfected under this Act.

Section 59. Enforcement of Prior Interest.—

(a) If any step or action has been taken to enforce a prior interest before the effectivity of
this Act, enforcement may continue under prior law or may proceed under this Act.

(b) Subject to subsection (a) of this section, prior law shall apply to a matter that is the
subject of proceedings before a court before the effectivity of this Act.

CHAPTER 8
CONGRESSIONAL OVERSIGHT AND MISCELLANEOUS PROVISIONS

Section 60. Congressional Oversight and Periodic Review.— A Congressional Oversight

Committee shall be created that will conduct a periodic review every five (5) years commencing
from the effectivity of this Act. The Congressional Oversight Committee shall be composed of
the Chairperson of the Senate Committee on Banks, Financial Institutions and Currencies, the
Chairperson of the House of Representatives Committee on Banks and Financial Intermediaries,
and representatives of other relevant congressional committees.

Section 61. Interpretation.— If there is conflict between a provision of this Act and a provision
of any other law, this Act shall govern unless the other law specifically cites or amends the
conflicting provisions of this law.

Section 62. Implementing Rules and Regulations.— Within six (6) months from the passage of
this Act, the DOF in coordination with the Department of Justice, through the LRA, shall
promulgate the necessary rules and regulations for’ the effective implementation of this Act.
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Section 63. Rules on Enforcement Procedure.— Subject to Section 47, the expedited

hearing/proceedings shall be conducted in a summary manner consistent with the declared
policies of this Act and in accordance with the rules of procedure that the Supreme Court may
promulgate.

Section 64. Sourcing of Funds.— The funds needed for the implementation of this Act shall be
taken from the Special Account arising from revenues collected by the LRA under Section 111
of Presidential Decree No. 1529, without need for any further government approval.

Section 65. Separability Clause.— Should any provision herein be declared unconstitutional, the
same shall not affect the validity of the other provisions of this Act.

Section 66. Repealing Clause.— The following laws, and all laws, decrees, orders, and issuances
or portions thereof, which are inconsistent with the provisions of this Act, are hereby repealed,
amended, or modified accordingly:

(a) Sections 1 to 16 of Act No. 1508, otherwise known as "The Chattel Mortgage Law";

(b) Articles 2085-2123, 2127, 2140-2141, 2241, 2243, and 2246-2247 of Republic Act
No. 386, otherwise known as the "Civil Code of the Philippines";

(c) Section 13 of Republic Act No. 5980, as amended by Republic Act No. 8556,
otherwise known as the "Financing Company Act of 1998";

(d) Sections 114-116 of Presidential Decree No. 1529, otherwise known as the "Property
Registration Decree";

(e) Section 10 of Presidential Decree No. 1529, insofar as the provision thereof is
inconsistent with this Act; and

(f) Section 5(e) of Republic Act No. 4136, otherwise known as the "Land Transportation
and Traffic Code".

Section 67. Effectivity.— This Act shall take effect fifteen (15) days after publication in at least
two (2) newspapers of general circulation.

Section 68. Implementation.— Notwithstanding the entry into force of this Act under Section 67,
the implementation of the Act shall be conditioned upon the Registry being established and
operational under

Approved,