Enforcement of security interest

- when we talk about enforcement of security interest, we are talking about the rights and remedy of the creditor, the grantor of the debtor, as
the case may be, and the rights of the buyer or other third person who may acquire the collateral.

rights and remedies of the secured creditor:

the secured creditor can exercise his rights under the PPSA either extrajudicially or judicially. 

judicial exercise of remedies - we will have to follow the rules promulgated by the SC.

extrajudicially - we will follow the rules provided for under the PPSA and IRR.

1. Extradited repossession of the collateral

2. higher ranking secure creditor to take over the enforcement
3. to retain of the collateral.
4. right to dispose or sell the collateral
5. special rights provided for under the PPSA and IRR
6. right to damages.

1. Extradited repossession of the collateral

- upon default of the grantor the secured may take possession of the collateral, extrajudicially.

how? provided there is compliance to requisites:

- it must be stipulated that he has this right
- it can be done without breach of the peace.

what is breach of the peace?

- it can be entering the grantors residence, violence or intimidation, or in case the secure creditor will have to be accompanied by a law
enforcer to enforce his rights.

if the repossession can be done without breaching the peace than it can be availed of.

if the collateral is a fixture, which has been attached to a movable or real property, the secured creditor has priority over all other owners of the
real property and he may remove the fixtures from the property only if he can so it with due care and he can do it extrajudicially.

but if the secured creditor cannot take repossession without breaching the peace then he cannot take repossession extrajudicially. he has to
apply for a court order and serve this application upon all the interest in the parties upon which the secured creditor will be entitled to an
expedited hearing. a very fast hearing, and if found to be warranted,

if the court finds that default had occurred under the security agreement and that the secured has indeed has the right to take possession of
the property, then the court will now issue an order granting possession to the secured creditor.

so that is the expedited possession of collateral.

2. higher ranking secure creditor to take over the enforcement

 if the secure credit has a secured interest which has priority over another secured creditor or lien holder who is about to or even commenced
enforcement, he can take over enforcement.

why?
 because he has priority. this right of priority may be invoked at any time before the collateral is sold or disposed of in any other manner and
the secured creditor can use any method to enforce which is allowed under the PPSA or IRR.

3. to retain of the collateral. (RETENTION OVER COLLATERAL)

- After the default of the grantor, the secured creditor may retain the collateral either in full satisfaction or partial satisfaction of the secured
obligation.

how?
by sending a proposal. he has to send a proposal to the debtor or the grantor and other secured creditor or lien holder who has perfected a
security interest or lien through registration 5-days before the sending of the proposal to the debtor or the grantor and to any other party who
has an interest to the collateral who gave written notice to the secured creditor before the proposal is sent to the debtor or grantor.

- just take note, the only way that this right can be enforced is through the sending of the proposal. 

how to determine if the proposal is sufficient under the IRR?

- if it has a statement stating the amount required to satisfy the obligation;
- the amount of the obligation proposed to be satisfied (remember, it can be total or partial)
- that the secured creditor proposes to acquire the collateral which is prescribed in total or partial satisfaction of the obligation.
- put the date after which the secured creditor can acquire the encumbered assets.

then after that the secured creditor may retain the property either for full satisfaction or partial.

however, there are qualifications:

 full satisfaction: - full satisfaction cannot be granted if there is a written objection which is sent within 20 days after the proposal has been sent
to any of those parties who are required to be notified.

- note: time of sending. not the time of receipt

Partial - this `will only be granted if the secured creditor is able to acquire the affirmative consent in writing of all addressees of the proposal
within 20 days from the sending of the proposal.

4. right to dispose or sell the collateral

- can dispose or sell the collateral whether through public or private sale. it must be necessary beyond auction.

- the property must be sold at the sale at its:

 present condition or
 following any commercially reasonable preparation to make it more appealing to prospective buyers.

requirement:
- the secured creditor must act in a commercially reasonable manner;

how do we know that the secured creditor has been acting in a commercially reasonable manner?

- if it is in conformity with the common practice among dealers in that type of property; and
- the law says that it will still be reasonable even if a better price could have been obtained at a different time or place than that selected by the
secured creditor.

now the secured creditor is given leeway under the rules:

- the secured creditor may select the method, the manner, time, place, and he can choose to sell, to lease, to encumbered the assets or the
collateral individually or as a group. 

as long as the following rules are complied with:

for sale - it has to be done in auction form whether if it is private or public

it has to satisfy the requirement of being reasonable;

and finally, the disposition or sale has to be done in good faith.

how to determine good faith? 

- the party or the entity who is presiding over the auction is an experienced dealer in that type of property sold
- if the participating bidders in the auction, they do not engage in a collusive practice that will prevent the free and open competition
over the collateral.
 - there must be records of the auction which identify the bidders as well as their submissions which must be documented in writing
and maintained.
- the collateral must be awarded to the highest bidder.

what if the highest bidder cannot pay during the auction?

the collateral which is sold will now b awarded to the next highest bidder.

now in order to exercise this right to sell or dispose the collateral, the requirements are:
- he must give notice to the following people within 10 days before disposition;
1.the grantor, 
2.any other secured creditor or lien holder who was able to register notice 5 days before th 3. notice is sent to the grantor
any secured creditor who was able to send notice of his security interest to the secured creditor before the secured creditor has sent notice of
the disposition to the grantor.

- the secure creditor must cause the posting in the registry of the LRA. of notice that described the collateral, the method, the manner, and the
time. and this information is publicly available.

this notice to the grantor may be waived after default. 

who is the entity that the law allows to conduct the auction?
- government agency which regularly conducts public auction;
- private entity such as auction houses

but in either case, they will submit rules and regulation over the auction to the department of finance. and if the department approves then the
public auction will now be conclusive be presumed to be commercially reasonable.

at the auction the secured creditor may buy the collateral but  only if the collateral is of a kind which is customarily sold on a recognized market
or if it is a subject of a widely distributed standard price quotation.

now if the method of the disposition is approved in a legal proceeding whether it be judicial or administrative, then that is also conclusively
presumed to be commercially reasonable.

Now if the

in case of application of proceeds

- the proceed shall be applied to reasonable expenses for the taking, the holding, the preparing for disposition and the actual disposition.
including all other legal expenses.
-  the proceed shall be applied to the satisfaction of the principal obligation,
- the satisfaction of the claims of the subordinate security interest. provided that there is a written demand and proof of the security interest
is received before the proceeds had been distributed.

rules on excess:
- the grantor is entitled to receive the excess. 

rules on deficiency:

GR: the grantor will still be liable for the deficiency, AND the secured creditor can claim the deficiency from the grantor.

EXP: when there is a stipulation that the secured creditor will not be entitled to the deficiency.

what if the secured creditor incurred damage to the thing or loss?

-the secured creditor since he benefits from the proceeds, he is also liable for any loss or deterioration which is suffered due to failure to
preserved or take care of the collateral.

5. SPEACIAL` RIGHTS OF THE SECURED CREDITOR:

on default, these are the following remedies which the secured creditor could exercise extrajudicially:

1. When it comes to accounts receivables, the secured creditor may instruct the debtor of those accounts receivables to make
payment straight to the secured creditor instead of the grantor. The secured creditor now can apply those to the payment of the
obligation after deducting the reasonable expenses collection;

2. if the collateral is a negotiable instrument which was perfected by possession, then the secured creditor may claim satisfaction
either from the instrument itself or from the goods covered in the negotiable instrument of title;

3. if the collateral is a deposit account which was made in favor of a deposit taking institute, then the secured creditor may instruct
the deposit taking institute to pay the balance of the deposit account to the secured creditors account. 

(collateral is a deposit) HOW? by providing, a copy of the security agreement which created the security interest, and the secured creditor
must give an affidavit saying that default occurred and that he is entitled to enforce the security interest extra judicially.

Last kay damages----

RIGHTS AND REMEDIES OF THE GRANTOR:

1. in case the secured creditor is not complying with the rules of the PPSA, then the court may order or restrain collection, enforcement,
disposition of the collateral in terms and conditions which are appropriate to the circumstances;

2. the right of redemption. 

- any party who is entitled to receive notice of the disposition, 

1. the grantor, 
2. any other secured creditor or lien holder who was able to register notice 5 days before the notice is sent to the grantor
3. any secured creditor who was able to send notice of his security interest to the secured creditor before the secured creditor has
sent notice of the disposition to the grantor.

any of these people is entitled to redeem the collateral which is being sold.

how to redeem?
by paying or fulfilling the obligation in full plus the reasonable cause of enforcement.

this right to redeem is not applicable when:

1. 1.if the grantor expressly makes a waiver in writing after he has been in default;
2. if the collateral has been sold, has been disposed, or acquired or collected by the secured creditor; (the right has been transferred
already!!!)
3. if the secured creditor has retained the collateral following the rule on retention.

RIGHTS OF THE BUYER OR 3RD PERSON

when we say buyer or 3rd person, he is the highest bidder which he was able to acquire the collateral at the public sale.

RULES:

1. 1.If the secured creditor sells or disposes the collateral then the buyer acquires the grantors rights to the assets free from all rights
of the secured creditor or lien holders;

2. if the secured creditor leases, or licenses the collateral, then the licensee or the lessee is entitled to the benefit of  the lease or the
license as the case may be for the period of the term.

3. in case the secured creditor does not comply with rules of deposition, the buyer or the licensee, or the lessee will only be able to get
the rights if he is in good faith.
good faith = no knowledge of any violations of the enforcement that will materially prejudice the rights or any other 3rd person.

TRANSITIONAL RIGHTS

- PPSA begin from Feb. 9,2019. 

- as to creation of the security interest, the prior laws will still remain effective prior to Feb 9.
- as to perfection, perfection will continue until either it ceases under the prior law or until full implementation of the PPSA whichever comes
first;
- as to priority, this is determined by prior law if the security interest and the rights of competing claimants arose before the PPSA and the
priority status has not been changed since the effectivity of the PPSA.

HOW Will we know that the priority status has been changed? `
it change only when the perfection took place when the PPSA took effect but it ceased to become perfect after the PPSA. OR
there is a change. it was not perfected before the PPSA but became perfected after PPSA`.

Enforcement.
- Can be done under the prior law or under the PPSA.
- If there is a court proceeding the follow the court proceeding. luhh

IN CASE OF CONLFICT.
THE PPSA WILL GOVERN