Cases Full for Mortgage and Pledge

8/13/2019 Cases Full for Mortgage and Pledge

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G.R. No. L-78519 September 26, 1989

VICTORIA YAU CU, !""#"te$ b% &er &'"b!($ )ICA*L CU, petitioners,vs.ON. COURT O+ A*ALS, +A)ILY SAVINGS AN !($/or CA)S TRA0ING *NT*RRIS*S, INC.,respondents.

Francisco A. Lara, Jr. for petitioner.

D. T. Ramos and Associates for respondent Family Savings Bank.

Romulo T. Santos for respondent A!S Trading.

GRINO-AUINO, J.:

This is a petition for review on certiorari to annul and set aside the Court of Appeals' decision dated

October 28, 1986 in CA!.". C# $o. %&269 which affired the decision of the trial court in favor of theprivate respondents in an action to recover the petitioners' tie deposits in the respondent (ail)*avin+s an-.

*ince 198%, the petitioner, #ictoria au Chu, had been purchasin+ ceent on credit fro CA/* Tradin+0nterprises, nc. hereafter 3CA/* Tradin+3 for brevit)4. To +uarant) pa)ent for her ceentwithdrawals, she e5ecuted in favor of Cas Tradin+ deeds of assi+nent of her tie deposits in the totalsu of &2%,%%% in the (ail) *avin+s an- hereafter the an-4. 05cept for the serial nubers and thedates of the tie deposit certificates, the deeds of assi+nent, which were prepared b) her own law)er,uniforl) provided 7

... That the assi+nent serves as a collateral or +uarantee for the pa)ent of )obli+ation with the said CA/* T"A$! 0$T0""*0*, $C. on account of ) ceent

withdrawal fro said copan), per separate contract e5ecuted between us.

On ul) 2:,198%, Cas Tradin+ notified the an- that /rs. Chu had an unpaid account with it in the suof &1:,6&9.;


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1. n not annullin+ the encashent of her tie deposit certificates as apactumcommissorium and

2. n not findin+ that the obli+ations secured b) her tie deposits had alread) been paid.

?e find no erit in the petition for review.

The Court of Appeals found that the deeds of assi+nent were contracts of pled+e, but, as the collateralwas also one) or an e5chan+e of 3peso for peso,3 the provision in Article 2112 of the Civil Code for thesale of the thin+ pled+ed at public auction to convert it into one) to satisf) the pled+or's obli+ation, didnot have to be followed. All that had to be done to convert the pled+or's tie deposit certificates into cashwas to present the to the ban- for encashent after due notice to the debtor.

The encashent of the deposit certificates was not apacto commissorio which is prohibited under Art.2%88 of the Civil Code. Apacto commissoriois a provision for the automaticappropriation of the pled+edor ort+a+ed propert) b) the creditor in pa)ent of the loan upon its aturit). The prohibition a+ainst a

pacto commissoriois intended to protect the obli+or, pled+or, or ort+a+or a+ainst bein+ overreached b)his creditor who holds a pled+e or ort+a+e over propert) whose value is uch ore than the debt.?here, as in this case, the securit) for the debt is also one) deposited in a ban-, the aount of which is

even less than the debt, it was not ille+al for the creditor to encash the tie deposit certificates to pa) thedebtors' overdue obli+ation, with the latter's consent.

?hether the debt had alread) been paid as now alle+ed b) the debtor, is a factual =uestion which theCourt of Appeals found not to have been proven for the evidence which the debtor sou+ht to present onappeal, were receipts for pa)ents adeprior to July "#, "$#%. *ince the petitioner si+ned on ul) 18,198% a letter adittin+ her indebtedness to be in the su of :%:,


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Th$s Pet$t$on (o Re#$e& on Cet$oa$ )*+sees to e#ese the -o$nt dec$s$on)+ o(the Co%t o( Appea"s $n CA/0.R. C1 Nos. 23456 and 23578 dated 2* Jan%a' *665and the Reso"%t$on dated 27 J%"' *665 den'$n9 the ot$on (o econs$deat$on.The Co%t o( Appea"s a(($ed the dec$s$on)2+ o( the Re9$ona" T$a" Co%t o( I$9aC$t', ;anch 25, dec"a$n9 the (oec"os%e o( the ot9a9ed popet$es #o$d (o(a$"%e to cop"' &$th the stat%to' e


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popet$es. S%!se


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the t$a" co%t and the a!sence o( an' a&ad o( tepeate, no$na" o eBep"a'daa9es. D;Ps appea", on the othe hand, assa$"ed the dec$s$on as &e"" as theode d$s$ss$n9 $ts pet$t$on (o a &$t o( possess$on.

The Co%t o( Appea"s, &h$ch conso"$dated the appea"s, a(($ed the dec$s$on o( thet$a" co%t.)6+ D;P ($"ed a Mot$on (o Recons$deat$on &h$ch the Co%t o( Appea"s

den$ed.)*7+

Hence, th$s pet$t$on.

The R%"$n9 o( the Co%t o( Appea"s

The Co%t o( Appea"s s%sta$ned the t$a" co%ts %"$n9 that the (oec"os%e &as#o$d. The Co%t o( Appea"s a(($ed the t$a" co%ts ($nd$n9 that D;P (a$"ed tocop"' &$th the post$n9 and p%!"$cat$on ec$c%stances>:

=a? The tans$tta" "ette dated Octo!e 7, *63* &h$ch e"ates to the po9ess o(the est%ct%$n9 o( the ot9a9e acco%nt o( Eea"d Resot Hote" Copoat$onand that the sae has !een appo#ed !' the SEC =EBh. >D>?

=!? The tans(e o( shaes o( stocs to appe""ant D;P, the #a"%e o( &h$ch ae!oen as (o""o&s:

*. Stoc cet$($cate No. 27 (o *,35,*83 shaes &oth P*,35,*83.77 =EBhs. >D>and >D/*>?

. Stoc cet$($cate No. 2 (o 62,34 shaes &oth P642,34.77 =EBhs. >F> and>F/*>?

2. Stoc cet$($cate No. 72*, (o 56*,74 shaes &oth P56*,74.77 =EBhs. >M> and>M/4>?.

=c? The acceptance o( the (oe9o$n9 !' the D;P &$tho%t a$s$n9 the (act o( de"a'as e!od$ed $n cond$t$on no. @ o( EBh. >;>.

=d? No e-ect$on &as ade !' the de(endant/appe""ant D;P at the t$e the shaeso( stocs &ee !e$n9 he"d !' the "atte.

=e? The !e"ated e-ect$on o( the shaes o( stocs &as $nteposed on"' at the t$ethe $nstant s%$t &as ($"ed &h$ch &as "on9 a(te the eBp$at$on o( the 67/da' pe$odeBtended !' D;P to Eea"d.chano!"es #$t%a" "a& "$!a'
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=(? No e-ect$on &as a"so ade &hen p"a$nt$(( copoat$on d$d not a#a$" o( theadd$t$ona" "oan &h$ch &as a""e9ed"' pat o( the paca9e accoodat$on.)**+

The Co%t o( Appea"s a"so a(($ed the t$a" co%ts a&ad o( oa" daa9es !%tden$ed ERHCs c"a$ (o tepeate and eBep"a' daa9es. The Co%t o( Appea"s(o%nd that D;Ps $nt%s$on, ass$sted !' she$((s and se#ea" aed en, $nto Hote"

I!a"on and the she$((s $n#ento' o( the hote"s (%n$t%e and ($Bt%es ca%sed (eaand anB$et' to the hote" o&ne, sta(( and 9%ests. These acts, accod$n9 to theCo%t o( Appea"s, de!ased the hote"s 9ood&$"" and %nde$ned $ts #$a!$"$t'&aant$n9 the a&ad o( oa" daa9es.

F$nd$n9 the (oec"os%e #o$d, the Co%t o( Appea"s a"so den$ed D;Ps pet$t$on (o ade($c$enc' c"a$ and a &$t o( possess$on.

The Iss%es

D;P pesents the (o""o&$n9 $ss%es (o eso"%t$on:

*. hethe D;P cop"$ed &$th the post$n9 and p%!"$cat$on e


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(a$"ed to post the e


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the ** Septe!e *635 a%ct$on sa"e. D;P $ns$sts that the "a& does not e


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The Co%t %"ed $n O%ano that Sect$on 8 o( R%"e 26 does not app"' to eBta-%d$c$a"(oec"os%e sa"es, th%s:

Pet$t$one s%!$ts that the "an9%a9e o( the a!o#ec$ted po#$s$on )2+ $p"$es thatthe &$tten eAn Act to Re9%"ate the Sa"e o(Popet' %nde Spec$a" Po&es Inseted $n o AnneBed to Rea" Estate Mot9a9es>app"$es $n cases o( eBta-%d$c$a" (oec"os%e sa"e. A d$((eent set o( "a& app"$es toeach c"ass o( sa"e ent$oned. The c$ted po#$s$on $n the R%"es o( Co%t hence doesnot app"' to an eBta-%d$c$a" (oec"os%e sa"e. =Ephas$s s%pp"$ed?

D;P a"so a$nta$ns that ERHCs act o( eUpon eBta/-%d$c$a" pet$t$on (o sa"e %nde Act 2*24*473 ($"ed a9a$nst =nae and addess o( Mot9a9os? to sat$s(' the ot9a9e $nde!tedness&h$ch as o( ao%nts to P eBc"%d$n9 pena"t$es, cha9es,attone's (ees and eBpenses o( (oec"os%e, the %ndes$9ned o h$s d%"'
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a%tho$Ged dep%t' &$"" se"" at p%!"$c a%ct$on on =date o( sa"e? at *7:77A.M. o soon theea(te at the a$n entance o( the =p"ace o( sa"e? tothe h$9hest !$dde, (o cash o ana9es chec and $n Ph$"$pp$ne C%enc', the(o""o&$n9 popet' &$th a"" $ts $po#eents, to &$t:

>=Desc$pt$on o( Popet'>?

>A"" sea"ed !$ds %st !e s%!$tted to the %ndes$9ned on the a!o#e stated t$eand date.>

>In the e#ent the p%!"$c a%ct$on sho%"d not tae p"ace on the sa$d date, $t sha"" !ehe"d on , &$tho%t (%the not$ce.>

=date?

>SHERIFF> =Ephas$s s%pp"$ed?chano!"es #$t%a" "a& "$!a'

The "ast paa9aph o( the pesc$!ed not$ce o( sa"e a""o&s the ho"d$n9 o( a

esched%"ed a%ct$on sa"e &$tho%t epost$n9 o ep%!"$cat$on o( the not$ce.Ho&e#e, the esched%"ed a%ct$on sa"e &$"" on"' !e #a"$d $( the esched%"ed date o(a%ct$on $s c"ea"' spec$($ed $n the p$o not$ce o( sa"e. The a!sence o( th$s$n(oat$on $n the p$o not$ce o( sa"e &$"" ende the esched%"ed a%ct$on sa"e #o$d(o "ac o( epost$n9 o ep%!"$cat$on. I( the not$ce o( a%ct$on sa"e conta$ns th$spat$c%"a $n(oat$on, &hethe o not the pat$es a9eed to s%ch esched%"eddate, thee $s no oe need (o the epost$n9 o ep%!"$cat$on o( the not$ce o( theesched%"ed a%ct$on sa"e.

The O(($ce o( the Co%t Ad$n$stato $ss%ed C$c%"a No. @/77 p%s%ant to the*8 Dece!e *666 Reso"%t$on o( th$s Co%t $n A.M. No. 66/*7/74/7, as aended !'the Reso"%t$ons o( 27 Jan%a' 77* and @ A%9%st 77*. The Co%t $ss%ed these

Reso"%t$ons (o t&o easons.

F$st, the Co%t sees to $n$$Ge the eBpenses &h$ch the ot9a9ee $nc%s $np%!"$sh$n9 the not$ce o( eBta-%d$c$a" sa"e. $th the added $n(oat$on $n thenot$ce o( sa"e, the ot9a9ee need not ca%se the epost$n9 and ep%!"$cat$on o(the not$ce o( the esched%"ed a%ct$on sa"e. Thee $s no #$o"at$on o( the not$cee


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In the $nstant case, thee $s no $n(oat$on $n the not$ce o( a%ct$on sa"e o( an'date o( a esched%"ed a%ct$on sa"e. E#en $( s%ch $n(oat$on &ee stated $n thenot$ce o( sa"e, the epost$n9 and ep%!"$cat$on o( the not$ce o( sa"e &o%"d st$"" !enecessa' !eca%se C$c%"a No. @/77 too e((ect on"' on Ap$" 77. Thee&ee no s%ch 9%$de"$nes $n e((ect d%$n9 the


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o%tstand$n9 p$nc$pa" !a"ance o( P2,477,777.77 and tota" aeaa9es on $nteestand othe cha9es o( P2,854,777.77, the con#es$on p$ce to !e e


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o( 87K o( the tota" o%tstand$n9 o!"$9at$on as o( Ma' *4, *637 &$"" $nc"%depe(eed shaes.chano!"es #$t%a" "a& "$!a'

B B B Ephas$s s%pp"$ed?

A cae(%" e#$e& o( the (acts and the e#$dence pesented !' the pat$es d$sc"oses

that ERHC (a$"ed to cop"' &$th the tes and cond$t$ons set (oth $n D;PReso"%t$on No. 645.

F$st, ERHC (a$"ed to cop"' &$th the $potant cond$t$on o( con#et$n9 $nto e


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. Ass$9nent o( 5@K o( o%tstand$n9 #ot$n9 shaes.chano!"es #$t%a" "a& "$!a'

e ae ead' to !$n9 %p the ass$9ned shaes $n (a#o o( D;P to 5@K o( thecopoat$ons o%tstand$n9 #ot$n9 shaes o( 8,6*@,477 as o( Dece!e 2*, *63 otota" o( 2,68,@4 shaes.

The copoat$on &$"" a$nta$n $ts pe#$o%s ass$9nent o( 6**,377 shaes.

Moeo#e, the copoat$on $s a9eea!"e that Stoc Cet$($cate No. 727 (o*,35,*83 shaes &h$ch had !een tans(eed to D;P !e cons$deed as ana"tenat$#e cop"$ance to the a$s$n9 o( D;Ps ass$9ned shaes to the (%"" 5@K o2,68,@4 shaes. o% (oa" con(o$t' to th$s aan9eent $s "$e&$see


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Second, ERHC d$d not a#a$" o( the P5@6,777.77 add$t$ona" "oan, desp$te th$s !e$n9 aate$a" cond$t$on o( the est%ct%$n9 a9eeent. ERHC co%"d not s$p"' e(%seto a#a$" o( the add$t$ona" "oan !eca%se the poceeds o( th$s "oan &ee to pa' the!a"ance o( ERHCs acc%ed $nteest and othe cha9es d%e D;P as o( *4 Ma' *637.C"ea"', ERHCs e(%sa" to a#a$" o( the add$t$ona" "oan, $ntended to %p/date ERHCs"oan acco%nt, pe#ented the pe(ect$on o( the est%ct%$n9 a9eeent.

Last"', ERHC (a$"ed to cop"' &$th the C>chano!"es #$t%a" "a& "$!a'

8. On Septe!e @, *63*, &e ece$#ed !' pesona" de"$#e' a "ette (o

Mana9e Ma$o C. Leao, cop' &heeo( $s attached as AnneB >D>. In o%con#esat$on had on th$s occas$on, I e$teated o% e


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@. A"" doc%ents (o th$s "oan appo#a" sha"" !e eBec%ted and pe(ected &$th$n 67da's (o the date o( th$s not$ce othe&$se, th$s accoodat$on sha"" !ea%toat$ca""' cance""ed.)24+ chano!"es #$t%a" "a& "$!a'

The t$a" and appe""ate co%ts 9a#e"' $sappehended the (acts and adean$(est"' $staen $n(eences $n ($nd$n9 that the pat$es had pe(ected the

est%ct%$n9 a9eeent. Conse


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c"a$ant (o act%a" $n-%' s%((eed and not to $pose a pena"t' on the &on9doe.)2@+ =Ephas$s s%pp"$ed?chano!"es #$t%a" "a& "$!a'

In the !od' o( $ts dec$s$on, the t$a" co%t 9a#e no !as$s to -%st$(' the a&ad o(oa" daa9es. The t$a" co%t s$p"' a&aded oa" daa9es $n the d$spos$t$#epot$on o( $ts dec$s$on.)23+

Moeo#e, as a 9enea" %"e, oa" daa9es ae not a&aded to a copoat$on,th%s:

The a&ad o( oa" daa9es cannot !e 9anted $n (a#o o( a copoat$on !eca%se,!e$n9 an at$($c$a" peson and ha#$n9 eB$stence on"' $n "e9a" contep"at$on, $t hasno (ee"$n9s, no eot$ons, no senses. It cannot, thee(oe, eBpe$ence ph's$ca"s%((e$n9 and enta" an9%$sh, &h$ch can !e eBpe$enced on"' !e one ha#$n9 ane#o%s s'ste. The stateent $n Peop"e #. Maneo and Ma!%"ao L%!e Co. #.PN; that a copoat$on a' eco#e oa" daa9es $( $t >has a 9ood ep%tat$onthat $s de!ased, es%"t$n9 $n soc$a" h%$"$at$on> $s an o!$te d$ct%. On th$s scoea"one the a&ad (o daa9es %st !e set as$de, s$nce R;S $s a copoat$on.)26+

HEREFORE, the Jo$nt Dec$s$on o( the Co%t o( Appea"s $n CA/0.R. C1 Nos. 23456and 23578 $s AFFIRMED &$th MODIFICATION. The eBta-%d$c$a" (oec"os%e o( thechatte" ot9a9e $s #a"$d &heeas the eBta-%d$c$a" (oec"os%e o( the ea" estateot9a9e $s #o$d. The a&ad o( oa" daa9es $s de"eted (o "ac o( !as$s. Nocosts.

SO ORDERED.

Da#$de, J., C.J., =Cha$an?, 1$t%9, naes/Sant$a9o, and AGc%na, JJ., conc%.

[G. R. No. 126800. November 29, 1999]

NATALIA P. BUSTAMANTE,petitioner vs. SPOUSES ROITO !. ROSEL "#$ NORMA A. ROSEL,

Respondents.

R E S O L U T I O N

PARO,J.%

T&e '"(e be)ore *&e +or* -( " e*-*-o# )or rev-e/ o# 'er*-or"r-1*o "## *&e $e'-(-o# o) *&e +or* o) Ae"(,2

rever(-# "#$ (e**-# "(-$e *&e $e'-(-o# o) *&e Re-o#" Tr-" +or*,, $"*e$ November 10, 1992, 3$e

Teo$oro P. Re-#o. 4e5o# +-*, Br"#'& 87, -# "# "'*-o# )or (e'-)-' er)orm"#'e /-*& 'o#(-#"*-o#.

O# M"r'& 8, 198, "* 4e5o# +-*, Norm" Ro(e e#*ere$ -#*o " o"# "reeme#* /-*& e*-*-o#er N"*"-"

B(*"m"#*e "#$ &er "*e &(b"#$ I(m"e +. B(*"m"#*e, #$er *&e )oo/-# *erm( "#$ 'o#$-*-o#(%

1. T&"* *&e borro/er( "re *&e re-(*ere$ o/#er( o) " "r'e o) "#$, ev-$e#'e$ b TRANS!ER

+ERTI!I+ATE O! TITLE No. 8066, 'o#*"-#-# "# "re" o) !OUR UNRE T:ENT; TREE


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EIGTEEN = PER+ENT er "##m, "#$ *o "r"#* *&e "me#* *&ereo), *&e "re **-# "( "

'o"*er" SE?ENT; er "##m

'omme#'-# o# M"r'& 2, 1989, *o "#$ #*- A(* 10, 1990, /&e# $e)e#$"#*( $eo(-*e$ *&e "mo#* /-*&*&e O))-'e o) *&e +-* Tre"(rer #$er O))-'-" Re'e-* No. 011678


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TEOORO P. REGINO

3$e11

O# November 16, 1992, re(o#$e#*( "e"e$ )rom *&e $e'-(-o# *o *&e +or* o) Ae"(.12O# 3 8, 1996,

*&e +or* o) Ae"( re#$ere$ $e'-(-o# rever(-# *&e r-# o) *&e Re-o#" Tr-" +or*. T&e $-(o(-*-ve

or*-o# o) *&e +or* o) Ae"( $e'-(-o# re"$(%

IN ?IE: O! TE !OREGOING, *&e D$me#* "e"


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:e #o*e *&e e"er#e(( o) re(o#$e#*( *o "'-re *&e roer* -ve# "( 'o"*er" *o "r"#*ee *&e o"#. T&e

("e o) *&e 'o"*er" -( "# ob-"*-o# /-*& " ((e#(-ve 'o#$-*-o#.20I* -( $ee#$e#* o# *&e &"e#-# o) "#

eve#*, /-*&o* /&-'& *&e ob-"*-o# *o (e $oe( #o* "r-(e. S-#'e *&e eve#* $-$ #o* o''r, re(o#$e#*( $o #o*

&"ve *&e r-&* *o $em"#$ ))-me#* o) e*-*-o#er( ob-"*-o#, e(e'-" /&ere *&e ("me /o$ #o* o# be

$-("$v"#*"eo( *o e*-*-o#er b* /o$ "(o #D(* e#r-'& re(o#$e#*( 'o#(-$er-# *&e -#"$e"*e

'o#(-$er"*-o#


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SO ORERE.

&avide, Jr., C.J., Puno, 'apunan, and (nares)Santia%o, JJ., concur.


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1

2G.R. No. 132287 January 24, 2006

SPOUSES BONIFACIO an FAUS!INA PARA", an #I$A% ESPE%E!A,Petitioners,vs.$RA. AB$U%IA C. RO$RIGUE&, 'IGUE%A R. JARIO% a(()(*+ y -+r-u(an AN!O%IN JARIO%, SR., %EONORA NO%ASCO a(()(*+ y -+r-u(an FE%ICIANO NO%ASCO, $O%ORES SOBERANO a(()(*+ y -+r-u(an JOSE SOBERANO, JR., JU%IA R. GENEROSO, !ERESI!A R.NA!I#I$A$ an GENO#E#A R. SORONIO a(()(*+ y -+r -u(anA%FONSO SORONIO, Respondents.

D E C I S I O N

!INGA, J.:

The assailed decision of the Court of Appeals too off on the pre!ise that pled"edshares of stoc auctioned off in a notarial sale could still #e redee!ed #$ theiro%ners. This notion is %ron", and %e thus reverse.

The facts, as culled fro! the record, follo%.

&espondents %ere the o%ners, in their respective personal capacities, of shares ofstoc in a corporation no%n as the 'uirino()eonor(&odri"ue* &ealt$ Inc.1So!eti!e durin" the $ears 1++ to 1+-, respondents secured #$ %a$ of pled"eof so!e of their shares of stoc to petitioners /onifacio and 0austina Para$

Para$s3 the pa$!ent of certain loan o#li"ations. The shares pled"ed are listed#elo%4

5i"uel &odri"ue* 6ariol 7.1, shares covered #$ Stoc Certifi(

cates No. 11, 8, 81 9 82:

A#dulia C. &odri"ue* 7. ; shares covered #$ Stoc Certificates

No. 2; 9 +;:

)eonora &. Nolasco 7.. , >+ 9 ++:

Dolores &. So#erano7. 8++ shares covered #$ Stoc Certificates
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No. 21, >;, 22 9 +:

6ulia =eneroso 7.. 1,1 shares covered #$ Stoc Certificates

No. ->, >1, -8 9 -2

?hen the Para$s atte!pted to foreclose the pled"es on account of respondents@failure to pa$ their loans, respondents filed co!plaints %ith the &e"ional TrialCourt &TC3 of Ce#u Cit$. The actions, %hich %ere consolidated and tried #efore&TC /ranch 1


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Not%ithstandin" the consi"nations, the pu#lic auction too place as scheduled,%ith petitioner idal Espeleta successfull$ #iddin" the a!ount of P8,2,.for all of the pled"ed shares. None of respondents participated or appeared at theauction of < Nove!#er 1++1.

&espondents instead filed on 1; Nove!#er 1++1 a co!plaint seein" thedeclaration of nullit$ of the concluded pu#lic auction. The co!plaint, doceted asCivil Case No. CE/(1+28, %as assi"ned to /ranch 18 of the Ce#u Cit$ &TC.&espondents ar"ued that their tender of pa$!ent and su#seuent consi"nationsserved to etin"uish their loan o#li"ations and dischar"ed the pled"e contracts.Petitioners countered that the auction sale %as conducted pursuant to the finaland eecutor$ Bud"!ent in Civil Cases Nos. &(212 and 21;1, and that thetender of pa$!ent and consi"nations %ere !ade lon" after their o#li"ations hadfallen due.

The Ce#u Cit$ &TC dis!issed the co!plaint, epressin" a"ree!ent %ith the

position of the Para$s.8

It held, a!on" others that respondents had failed totender or consi"n pa$!ents %ithin a reasona#le period after default and that theproper re!ed$ of respondents %as to have participated in the auction sale.TheCourt of Appeals Ei"hth Division ho%ever reversed the &TC on appeal, rulin" thatthe consi"nations etin"uished the loan o#li"ations and the su#Bect pled"econtracts: and the auction sale of < Nove!#er 1++1 as null and void.-5ostcruciall$, the appellate court chose to uphold the sufficienc$ of the consi"nationso%in" to an i!puted polic$ of the la% that favored rede!ption and !andated ali#eral construction to rede!ption la%s. The atte!pts at pa$!ent #$ respondents%ere characteri*ed as !ade in the eercise of the ri"ht of rede!ption.

The Court of Appeals lie%ise found fault %ith the auction sale, holdin" that there%as a need to individuall$ sell the various shares of stoc as the$ had #elon"ed todifferent pled"ors. Thus, it %as o#served that the !inutes of the auction saleshould have specified in detail the #ids su#!itted for each of the shares of thepled"ors for the purpose of no%in" the price to #e paid #$ the different pled"orsupon rede!ption of the auctioned sales of stoc.

Petitioners no% ar"ue #efore this Court that the$ %ere authori*ed to refuse asthe$ did the tender of pa$!ent since the$ %ere undertain" the auction salepursuant to the final and eecutor$ decision in Civil Cases Nos. &(212 and21;1, %hich did not authori*e the pa$!ent of the principal o#li"ation #$

respondents. The$ point out that the a!ounts consi"ned could not etin"uish theprincipal loan o#li"ations of respondents since the$ %ere not sufficient to coverthe interests due on the de#t. The$ lie%ise ar"ue that the essential proceduralreuisites for the auction sale had #een satisfied.

?e rule in favor of petitioners.

The funda!ental pre!ise fro! %hich the appellate court proceeded %as that theconsi"nations !ade #$ respondents should #e construed in li"ht of the rules of
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rede!ption, as if respondents %ere eercisin" such ri"ht. In that perspective, theCourt of Appeals !ade three crucial conclusions favora#le to respondents4 thattheir act of consi"nin" the pa$!ents %ith the &TC should #e dee!ed done in theeercise of their ri"ht of rede!ption: that the #u$er at pu#lic auction does notipso facto#eco!e the o%ner of the pled"ed shares pendin" the lapse of the one(

$ear rede!ptive period: and that the collective sale of the shares of stoc#elon"in" to several individual o%ners %ithout specification of the apportion!entin the applications of pa$!ent deprives the individual o%ners of the opportunit$to no% of the price the$ %ould have to pa$ for the purpose of eercisin" the ri"htof rede!ption.

The appellate court@s d%ellin" on the ri"ht of rede!ption is utterl$ off(tan"ent.The ri"ht of rede!ption involves pa$!ents !ade #$ de#tors after the foreclosureof their properties, and not those !ade or atte!pted to #e !ade, as in this case,#efore the foreclosure sale. The proper focus of the Court of Appeals should have#een %hether the consi"nations !ade #$ respondents sufficientl$ acuitted the!

of their principal o#li"ations. A pled"e contract is an accessor$ contract, and isnecessaril$ dischar"ed if the principal o#li"ation is etin"uished.

Nonetheless, the Court is no% confronted %ith this rather ne% fan"led theor$, aspropounded #$ the Court of Appeals, involvin" the ri"ht of rede!ption overpled"ed properties. ?e have no hesitation in pronouncin" such theor$ asdiscredita#le.

Preli!inaril$, it !ust #e clarified that the su#Bect sale of pled"ed shares %as anetraBudicial sale, specificall$ a notarial sale, as distin"uished fro! a Budicial saleas t$pified #$ an eecution sale. Fnder the Civil Code, the foreclosure of a pled"e

occurs etraBudiciall$, %ithout intervention #$ the courts. All the creditor needs todo, if the credit has not #een satisfied in due ti!e, is to proceed #efore a Notar$Pu#lic to the sale of the thin" pled"ed.+

In this case, petitioners atte!pted as earl$ as 1+- to proceed etraBudiciall$ %iththe sale of the pled"ed shares #$ pu#lic auction. o%ever, etraBudicial sale %assta$ed %ith the filin" of Civil Cases No. &(212 and 21;1, %hich sou"ht to annulthe pled"e contracts. The final and eecutor$ Bud"!ent in those cases affir!edthe pled"e contracts and disposed the! in the follo%in" fashion4

?E&E0O&E, pre!ises considered, Bud"!ent is here#$ rendered dis!issin" the

co!plaints at #ar, and G

13 Declarin" the various pled"es covered in Civil Cases Nos. &(212 and&(21;1 valid and effective: and

23 =ivin" due course to the foreclosure and sale at pu#lic auction of thevarious pled"es su#Bect of these t%o cases.

Costs a"ainst the plaintiffs.
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SO O&DE&ED.1

The phrase "ivin" due course to the foreclosure and sale at pu#lic auction of thevarious pled"es su#Bect of these t%o cases !a$ "ive rise to the i!pression thatsuch sale is Budicial in character. ?hile the decision did authori*e the sale #$

pu#lic auction, such declaration could not detract fro! the fact that the sale soauthori*ed is actuall$ etraBudicial in character. Note that the final Bud"!ent insaid cases epressl$ did not direct the sale #$ pu#lic auction of the pled"edshares, #ut instead upheld the ri"ht of the Para$s to conduct such sale at theiro%n volition.

Indeed, as affir!ed #$ the Civil Code,11the decision to proceed %ith the sale #$pu#lic auction re!ains in the sole discretion of the Para$s, %ho could ver$ %ellchoose not to hold the sale %ithout violatin" the final Bud"!ents in theafore!entioned civil cases. If the sale %ere trul$ in co!pliance %ith a finalBud"!ent or order, the Para$s %ould have no choice #ut to sta"e the sale for then

the order directin" the sale arises fro! Budicial co!pulsion. /ut nothin" in thedispositive portion directed the sale at pu#lic auction as a !andator$ recourse,and properl$ so since the sale of pled"ed propert$ in pu#lic auction is, #$ virtue ofthe Civil Code, etraBudicial in character.

The ri"ht of rede!ption as affir!ed under &ule ;+ of the &ules of Court appliesonl$ to eecution sales, !ore precisel$ eecution sales of real propert$.

The Court of Appeals epressl$ asserted the notion that pled"ed propert$,necessaril$ personal in character, !a$ #e redee!ed #$ the creditor after #ein"sold at pu#lic auction. Het, as a funda!ental !atter, does the ri"ht of rede!ption

eist over personal propert$ No la% or Burisprudence esta#lishes or affir!s suchri"ht. Indeed, no such ri"ht eists.

The ri"ht to redee! propert$ sold as securit$ for the satisfaction of an unpaido#li"ation does not eist preternaturall$. Neither is it predicated on proprietar$ri"ht, %hich, after the sale of propert$ on eecution, leaves the Bud"!ent de#torand vests in the purchaser. Instead, it is a #are statutor$ privile"e to #e eercisedonl$ #$ the persons na!ed in the statute.12

The ri"ht of rede!ption over !ort"a"ed real propert$ sold etraBudiciall$ isesta#lished #$ Act No. ;1;>, as a!ended. The said la% does not etend the sa!e

#enefit to personal propert$. In fact, there is no la% in our statute #oos %hichvests the ri"ht of rede!ption over personal propert$. Act No. 1>-, or the Chattel5ort"a"e )a%, ostensi#l$ could have served as the vehicle for an$ le"islativeintent to #esto% a ri"ht of rede!ption over personal propert$, since that la%"overns the etraBudicial sale of !ort"a"ed personal propert$, #ut the statute isdefinitel$ silent on the point. And Section ;+ of the 1++ &ules of Civil Procedure,etensivel$ relied upon #$ the Court of Appeals, starl$ utters that the ri"ht ofrede!ption applies to real properties, not personal properties, sold on eecution.


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Tellin"l$, this Court, as earl$ as 1+2, reBected the proposition that personalpropert$ !a$ #e covered #$ the ri"ht of rede!ption. In Sibal 1. v. Valdez,1;theCourt ruled that su"ar cane crops are personal propert$, and thus, not su#Bect tothe ri"ht of rede!ption.1


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covered #$ the #id price, since not all of the shares !a$ #e sold at the auctionand correspondin"l$ not all of the pled"e contracts etin"uished. The sa!esituation also %ould lie if one or so!e of the o%ners of the pled"ed sharesparticipated in the auction, #iddin" onl$ on their respective pled"ed shares.o%ever, in this case, none of the pled"ors participated in the auction, and the

sole #idder cast his #id for all of the shares. There o#viousl$ is no lon"er an$practical reason to apportion the #id price to the respective shares, since no!atter ho% sli"ht or si"nificant the value of the purchase price for the individualshare is, the sale is co!pleted, %ith the pled"or and the pled"ee not entitled torecover the ecess or the deficienc$, as the case !a$ #e. To invalidate thesu#Bect auction solel$ on this point serves no cause other than to cele#ratefor!alit$ for for!alit$@s sae.

Clearl$, the theor$ adopted #$ the Court of Appeals is in sha!#les, and cannot #eresurrected. The uestion thou"h $et re!ains %hether the consi"nations !ade #$respondents etin"uished their respective pled"e contracts in favor of the Para$s

so as to enBoin the latter fro! auctionin" the pled"ed shares.

There is no dou#t that if the principal o#li"ation is satisfied, the pled"es should #eter!inated as %ell. Article 2+- of the Civil Code provides that the ri"ht of thecreditor to retain possession of the pled"ed ite! eists onl$ until the de#t is paid.Article 21> of the Civil Code further clarifies that the de#tor cannot as for thereturn of the thin" pled"ed a"ainst the %ill of the creditor, unless and until he haspaid the de#t and its interest. At the sa!e ti!e, the ri"ht of the pled"ee toforeclose the pled"e is also esta#lished under the Civil Code. ?hen the credit hasnot #een satisfied in due ti!e, the creditor !a$ proceed %ith the sale #$ pu#licauction under the procedure provided under Article 2112 of the Code.

&espondents ar"ue that their various consi"nations !ade prior to the auction saledischar"ed the! fro! the loan and the pled"e a"ree!ents. The$ are !istaen.

Petitioners point out that %hile the a!ounts consi"ned #$ respondents couldans%er for their respective principal loan o#li"ations, the$ %ere not sufficient tocover the interests due on these loans, %hich %ere pe""ed at the rate of >J per!onth or 8J per annu!. /efore this Court, respondents, save for DoloresSo#erano, do not contest this interest rate as alle"ed #$ petitioners. So#erano, onthe other hand, challen"es this interest rate as usurious.1

The particular pled"e contracts did not for! part of the records elevated to thisCourt. o%ever, the >J !onthl$ interest rate %as noted in the state!ent of factsin the 1< Octo#er 1+-- &TC Decision %hich had since #eco!e final. 5oreover, thesaid decision pronounced that even assu!in" that the interest rates of thevarious loans %ere >J per !onth, it is dou#tful %hether the interests so char"ed%ere eor#itantl$ or ecessivel$ usurious. This is #ecause for so!eti!e no%,usur$ has #eco!e Kle"all$ ineistent.@1-The finalit$ of this 1+-- Decision is asettled fact, and thus the ti!e to challen"e the validit$ of the >J !onthl$ interestrate had lon" passed. ?ith that in !ind, there is no reason for the Court to
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disa"ree %ith petitioners that in order that the consi"nation could have the effectof etin"uishin" the pled"e contracts, such a!ounts should cover not Bust theprincipal loans, #ut also the >J !onthl$ interests thereon.

It #ears notin" that the Court of Appeals also ruled that respondents had satisfied

the reuire!ents under Section 1-, &ule ;+, %hich provides that the Bud"!ento#li"or !a$ prevent the sale #$ pa$in" the a!ount reuired #$ the eecution andthe costs that have #een incurred therein.1+o%ever, the provision applies onl$ toeecution sales, and not etra(Budicial sales, as evidenced #$ the use of thephrases sale of propert$ on eecution and Bud"!ent o#li"or. The reference isinapropos, and even if it %ere applica#le, the failure of the pa$!ent to cover theinterests due renders it insufficient to sta$ the sale.

The effect of the finalit$ of the Bud"!ents in Civil Cases Nos. &(212 and &(21;1 should also not #e discounted. Petitioners@ ri"ht to proceed %ith theauction sale %as affir!ed not onl$ #$ la%, #ut also #$ a final court Bud"!ent. An$

su#seuent court rulin" that %ould enBoin the petitioners fro! eercisin" suchri"ht %ould have the effect of supersedin" a final and eecutor$ Bud"!ent.

0inall$, %e cannot help #ut o#serve that respondents !a$ have saved the!selves!uch trou#le if the$ si!pl$ participated in the auction sale, as the$ are per!ittedto #id the!selves on their pled"ed properties.25oreover, the$ %ould have had a#etter ri"ht had the$

!atched the ter!s of the hi"hest #idder.21Fnder the circu!stances, %ith the hi"hinterest pa$!ents that accrued after several $ears, respondents %ere evenplaced in a favora#le position #$ the pled"e a"ree!ents, since the creditor %ould

#e una#le to recover an$ deficienc$ fro! the de#tors should the sale price #einsufficient to cover the principal a!ounts %ith interests. Certainl$, hadrespondents participated in the auction, there %ould have #een a chance for the!to recover the shares at a price lo%er than the a!ount that %as actuall$ due fro!the! to the Para$s. That respondents failed to avail of this #eneficial resort %holl$accorded the! #$ la% is their loss. No%, all respondents can recover is thea!ounts the$ had consi"ned.

?E&E0O&E, the petition is =&ANTED. The assailed decision of the Court ofAppeals is SET ASIDE and the decision of the Ce#u Cit$ &TC, /ranch 18, dated 1-Nove!#er 1++2 is &EINSTATED. Costs a"ainst respondents.

SO O&DE&ED.

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