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Perfection of Title-Based Security

A transfer of ownership takes effect solely by the manifestation of intent of the relevant parties.[1] To assert it against a third party, however, perfection is necessary. To perfect a transfer of ownership of a movable, the Civil Code requires delivery of the movable.[2]

In this context, “delivery” does not always mean that the location of the movable must change. The Civil Code permits constructive transfers.[3] Therefore, a transfer of ownership can be perfected without a change in the appearance.

Arguably, this provision benefits creditors. Nevertheless, the law must address immediate acquisition by a third party. Therefore, the Civil Code states that if a third party peacefully and openly commences the possession of the collateral, by a transactional act, the third party will acquire ownership immediately if the proceedings are commenced in good faith and the third party is faultless.[4]

  • [1] Article 176 of Civil Code (Mimpo) provides, “The creation and transfer of real rights shall takeeffect solely by the manifestations of intention of the relevant parties.”
  • [2] Article 178 of Civil Code (Mimpo) provides, “The transfers of real rights concerning movablesmay not be asserted against a third party, unless the movables are delivered.”
  • [3] Article 183 of Civil Code (Mimpo) provides, “If an agent manifests an intention that the thingpossessed by it shall thenceforward be possessed on behalf of its principal, the principal shallthereby acquire possessory rights.” In this context, “agent” means transferor-debtor, and “principal” means transferee-creditor.
  • [4] Article 192 of Civil Code (Mimpo)
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