c. Enforcement of Security Interest

Right to notification to dispose collateral from the secured creditor

Not later than ten (10) days before disposition of the collateral, the secured creditor shall notify the grantor; any other secured creditor or lien holder who, five (5) days before notification is sent to the grantor, held a security interest or lien in the collateral perfected by registration; and any other person from whom the secured creditor received notification of a claim of an interest in the collateral before notifying the grantor of the proposed disposition. However, the grantor may waive the right to be notified. Provided, the requirement to send a notification 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. (R.A. 11057, Section 51)

Right of Redemption

A grantor is entitled to redeem the collateral by paying or otherwise performing the secured obligation in full, including the reasonable cost of enforcement.

The right of redemption may be exercised unless any one of the following has occurred:

• The person entitled to redeem has, after the default, waived in writing the right to redeem;
• The collateral has been sold or otherwise disposed of, acquired or collected by the secured creditor, or an agreement by the secured creditor for that purpose has been concluded; or
• The secured creditor has retained the collateral.

NOTE: Any person who is entitled to receive notification of disposition in accordance with this Chapter 6 is entitled to exercise the right of redemption.

RIGHTS OF THE SECURED CREDITOR

These are the following:

• Right to require payment for a fee for a request of disclosure of information from the grantor;
• Right to take over enforcement;
• Right to expedite Repossession of the Collateral;
• Right to recover in special cases;
• Right to Dispose of Collateral; and
• Right to retain collateral.

ENFORCEMENT OF SECURITY INTEREST SECURED CREDITOR'S RIGHTS

Right of Redemption

GR: Any person entitled to receive a notification of disposition is entitled to redeem the collateral by paying or otherwise performing the secured obligation in full (including the reasonable cost of enforcement. (PPSA, Section 45)

Right of Higher-Ranking Secured Creditor to Take Over Enforcement

A secured creditor whose security-interest has priority over that of the enforcing secured creditor or lien holder (even if another secured creditor or a lien holder has commenced enforcement) shall be entitled to take over the enforcement process. (R.A. 11057, Section 46)

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

Expedited Repossession of the Collateral

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. (R.A. 11057, Section 47)

If the collateral is a fixture, the secured creditor, who 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. (Ibid)

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

• The secured creditor shall be entitled to an expedited hearing upon application for an order granting the secured creditor possession of the collateral.

NOTE: 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.

• 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

• 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 intimidation, or being accompanied by a law enforcement officer when taking possession or confronting the grantor. (Ibid)

Recovery in Special Cases

Upon default, the secured creditor may without judicial process:

• 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;
• In a negotiable document that is perfected by possession, proceed as to the negotiable document or goods covered by the negotiable document;
• 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
• In 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. (R.A. 11057, Section 48)

Notification of Disposition

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

• The grantor;

NOTE: The grantor may waive the right to be notified.

• 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
• 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. (R.A. 11057, Section 51)

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. (Ibid)

The requirement to send a notification 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. (Ibid)

Application of Proceeds

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

• 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;
• The satisfaction of the obligation secured by the security interest of the enforcing secured creditor; and
• The satisfaction of obligations secured by any subordinate security interest or lien in the collateral if a written demand and proof of the interest are received before distribution of the proceeds is completed. (R.A. 11057, Section 52)

The secured creditor shall account to the grantor for any surplus, and, unless otherwise agreed, the debtor is liable for any deficiency. (Ibid)

Retention of Collateral by Secured Creditor (Sec. 54)

• 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:
• The debtor and the grantor;
• 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
• 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. The secured creditor may retain the collateral in the case of:
• 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
• 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.

Enforcement of Prior Interest

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.