PHILIPPINES Law and Practice Contributed by: Kerwin Tan, Eugene Kaw and Veronica Balbin, Tan Hassani and Counsels
to the secured debt. The concept of security trustee is recognised. 3.2.13 Effect of Security Assignments on Residence of Secured Parties The secured party under a security assignment will not automatically be deemed to be resident, domiciled or carrying on business in the Philippines by reason of such security assignment alone. One of the excep - tions to the doctrine of “doing business” is the iso - lated transaction rule. However, if the secured party receives income by rea - son of the security assignment, such income may be subject to income tax. Income derived from sources within the Philippines is taxable as income of a non- resident foreign corporation (subject to any applicable tax treaty). 3.2.14 Perfection of Domestic Law Mortgages A security interest over an aircraft may be perfected by the registration of such interest with the CAAP and annotated in the aircraft’s certificate of registration. However, for its engine, which may be covered by the PPSA, it may be perfected by registration at the PPSR or upon possession by the secured creditor. 3.2.15 Differences Between Security Over Aircraft and Spare Engines The mortgage registration for an aircraft is with the CAAP, while that for a spare engine may be with the PPSR. 3.2.16 Form and Perfection of Security Over Bank Accounts Security interest through a security agreement over deposit accounts can be taken in accordance with the PPSA. A security agreement must be contained in a written contract signed by the parties, and must iden - tify the collateral and the secured obligation. It may consist of one or more writings that, taken together, establish the intent of the parties to create a security interest. On the other hand, a control agreement is an agree - ment in writing between the grantor and the secured creditor, which perfects the security interests over intangible assets. Such security must still be regis -
tered in the registry in order to be implemented under the PPSA. 3.3 Liens 3.3.1 Third-Party Liens A third party can register a lien over an aircraft or engine to answer for the owner-lessor’s obligations. The lien can be registered with the CAAP for aircrafts or with the PPSR for engines, to serve as notice to third parties. The lien can cover the value of the work done on the aircraft and other assets. The Philippine Civil Code covers credits for the making, repair, safe - keeping or preservation of personal property. A fleet lien may be imposed by the CAAP Director- General, who has the power to impose liens on air - craft, machinery and any other assets of persons, cor - porations and partnerships who are in default, have failed to perform their obligations or have failed to pay fines and other penalties. On the other hand, third parties other than the CAAP Director-General may impose liens on an entire fleet if there is an agreement. However, third parties may not be able to detain the aircraft, as it will be sold and the proceeds of the sale shall be applied to the satisfaction of the obligation. Depending on the nature of the security, the third party may foreclose on or attach or levy the aircraft. 3.3.2 Timeframe to Discharge a Lien or Mortgage There is no specific timeframe provided for the dis - charge of a lien or mortgage over an aircraft. Nor - mally, the CAAP will take about two to three weeks to remove an annotation, counted from the date all requirements are met. 3.3.3 Register of Mortgages and Charges Mortgages and charges related to aircraft are regis - tered with the CAAP, which maintains a registry for security over aircrafts. Aircraft engines may be reg - istered in the PPSR. Such registration will serve as a notice to third parties of the existence of such mort - gage or charge. 3.3.4 Statutory Rights of Detention or Non- Consensual Preferential Liens Statutory rights of detention or non-consensual prefer - ential liens can arise over an aircraft and/or on a “fleet-
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