UNION BANK v.
JUNIAT Bank and that such writs were served by the
G.R No. 171569, August 1, 2011
Facts:
Petitioner: Union Bank of the Philippines
(Union Bank) is a universal banking
corporation organized and existing under
Philippine laws.
Respondent/s:
Winwood Apparel, Inc. (Winwood) and
Wingyan Apparel, Inc. (Wingyan) are
domestic corporations engaged in the
business of apparel manufacturing.
Both respondent corporations are owned
and operated by respondent Alain Juniat
(Juniat), a French national based in
Hongkong.
Nonwoven Fabric Philippines, Inc.
(Nonwoven) is a Philippine corporation
engaged in the manufacture and sale of
various types of nonwoven fabrics.
Union Bank filed with RTC of Makati a
Complaint with prayer for the issuance of
ex-parte writs of preliminary attachment
and replevin against Juniat, Winwood,
Wingyan, and the person in possession of
the mortgaged motorized sewing machines
and equipment.
Union Bank alleged that:
Juniat, acting in behalf of Winwood and
Wingyan, executed a promissory note (on
April 11, 1992) and a Chattel Mortgage (on
March 27, 1992) over several motorized
sewing machines and other allied equipment
to secure their obligation arising from export
bills transactions to Union Bank in the
amount of P1,131,134.35;
Juniat executed a Continuing Surety
Agreement as additional security for the
obligation in favor of Union Bank;
The loan remains unpaid; and
The mortgaged motorized sewing machines
are insufficient to answer for the obligation.
RTC of Makati issued writs of preliminary
attachment and replevin in favor of Union
Sheriff to Nonwoven as it was in possession
of the motorized sewing machines and
equipment.
Nonwoven filed an Answer contending that
unnotarized Chattel Mortgage executed in
favor of Union Bank has no binding effect on
Nonwoven and that it has a better title over
the motorized sewing machines and
equipment because these were assigned to
it by Juniat pursuant to their Agreement.
Union Bank filed a Motion to Sell Chattels
Seized by Replevin, praying that the
motorized sewing machines and equipment
be sold to avoid depreciation and
deterioration.
However, before the RTC could act on the
motion, Union Bank sold the attached
properties for the amount of P1,350,000.00.
Nonwoven moved to cite the officers of
Union Bank in contempt for selling the
attached properties, but the RTC denied the
same on the ground that Union Bank acted
in good faith.
RULING OF RTC MAKATI:
ruled in favor of Union Bank
ruled that both the Chattel Mortgage in favor
of Union Bank and the Agreement in favor of
Nonwoven have no obligatory effect on third
persons because these documents were not
notarized.
Since the Chattel Mortgage in favor of Union
Bank was executed earlier, Union Bank has
a better right over the motorized sewing
machines and equipment under the doctrine
of "first in time, stronger in right" (prius
tempore, potior jure).
declared Union Bank entitled to the proceeds
of the sale of the subject machineries.
declared respondents to be jointly and
severally liable to Union Bank, for the
deficiency between the proceeds of the sale
of the machineries and original claim of
Union Bank
Ruling of CA:
reversed the ruling of RTC.
ruled that the contract of pledge entered into
between Juniat and Nonwoven is valid and
binding, and that the motorized sewing
machines and equipment were ceded to
Nonwoven by Juniat by virtue of a dacion en
pago. Thus, CA declared Nonwoven entitled
to the proceeds of the sale of attached
properties.
Issue/s:
Whether Union Bank had a better right over
the machineries seized or levied upon in the
proceedings before the trial court and/or the
proceeds of the sale thereof.
Whether Nonwoven has a valid claim over
the subject sewing machines.
Held:
PETITION IS GRANTED.
Union bank's Arguments:
It insists that it has a better title to the
proceeds of the sale.
It also insists that although the Chattel
Mortgage executed in its favor was not
notarized, it is nevertheless valid, and thus,
has preference over a subsequent
unnotarized Agreement.
It claims that no other evidence was
presented by Nonwoven to show that the
motorized sewing machines and equipment
were indeed transferred to them by
Juniat/Winwood/Wingyan.
Nonwoven's Arguments:
It claims ownership over the proceeds of the
sale pursuant to Art. 1544 of the Civil Code
on double sale.
It contends that since its prior possession
over the motorized sewing machines and
equipment was in good faith, it has a better
title over the proceeds of the sale.
It also contends that Union Bank has no right
over the proceeds of the sale because the
Chattel Mortgage executed in its favor was
unnotarized, unregistered, and without an
affidavit of good faith.
The unnotarized Chattel Mortgage executed
by Juniat, for and in behalf of Wingyan and
Winwood, in favor of Union Bank does not
bind Nonwoven. Thus, the fact that the
Chattel Mortgage executed in favor of Union
Bank was not notarized does not affect
Union Bank’s cause of action.
A perusal of the Agreement dated May 9,
1992 clearly shows that the sewing
machines, snap machines and boilers were
pledged to Nonwoven by Juniat to guarantee
his obligation. However, under Article 2096
of the Civil Code, "[a] pledge shall not take
effect against third persons if a description of
the thing pledged and the date of the pledge
do not appear in a public instrument." Hence,
just like the chattel mortgage executed in
favor of petitioner, the pledge executed by
Juniat in favor of Nonwoven cannot bind
petitioner.
No evidence was presented by Nonwoven to
show that the attached properties were
subsequently sold to it by way of a dacion en
pago. Also, there is nothing in the
Agreement dated May 9, 1992 to indicate
that the motorized sewing machines, snap
machines and boilers were ceded to
Nonwoven as payment for the Wingyan’s
and Winwood’s obligation. It bears stressing
that there can be no transfer of ownership if
the delivery of the property to the creditor is
by way of security.
In case of doubt as to whether a transaction
is one of pledge or dacion en pago, the
presumption is that it is a pledge as this
involves a lesser transmission of rights and
interests.
Nonwoven is not entitled to the proceeds of
the sale of the attached properties because it
failed to show that it has a better title over
the same.
 PARAY v. RODRIGUEZ, ET AL., G.R. No.
132287 (JANUARY 24, 2006)
FACTS:
Respondents were the owners of shares
of stock in Quirino-Leonor-Rodriguez Realty
Inc. In 1979 to 1980, respondents secured by way
of pledge of some of their shares of stock to
petitioners Bonifacio and Faustina Paray
(“Parays”) the payment of certain loan obligations.
When the Parays attempted to foreclose the
pledges on account of respondents’ failure to pay
their loans, respondents filed complaints with RTC
of Cebu City. The actions sought the declaration
of nullity of the pledge agreements, among others.
However the RTC dismissed the complaint and
gave due course to the foreclosure and sale at
public auction of the various pledges. This
decision attained finality after it was affirmed by
the Court of Appeals and the Supreme Court.
Respondents then received Notices of Sale
which indicated that the pledged shares were to
be sold at public auction. However, before the
scheduled date of auction, all of respondents
caused the consignation with the RTC Clerk of
Court of various amounts. It was claimed that
respondents had attempted to tender payments to
the Parays, but had been rejected.
Notwithstanding the consignations, the
public auction took place as scheduled, with
petitioner Vidal Espeleta successfully bidding for
all of the pledged shares. None of respondents
participated or appeared at the auction.
Respondents instead filed a complaint with
the RTC seeking the declaration of nullity of the
concluded public auction.
Respondents’ argument:
Respondents argued that their tender of
payment and subsequent consignations served to
extinguish their loan obligations and discharged
the pledge contracts.
Petitioners’ argument:
Petitioners countered that the auction
sale was conducted pursuant to a final and
executory judgment and that the tender of
payment and consignations were made long after
their obligations had fallen due.
They pointed out that the amounts
consigned could not extinguish the principal loan
obligations of respondents since they were not
sufficient to cover the interests due on the debt.
They likewise argued that the essential procedural
requisites for the auction sale had been satisfied.
Ruling of RTC:
The RTC dismissed the complaint,
expressing agreement with the position of the
Parays. It held that respondents had failed to
tender or consign payments within a reasonable
period after default and that the proper remedy of
respondents was to have participated in the
auction sale.
Ruling of CA:
The Court of Appeals however reversed
the RTC on appeal, ruling that the consignations
extinguished the loan obligations and the subject
pledge contracts; and the auction sale as null and
void. It (CA) chose to uphold the sufficiency of the
consignations owing to an imputed policy of the
law that favored redemption and mandated a
liberal construction to redemption laws. The
attempts at payment by respondents were
characterized as made in the exercise of the right
of redemption.
CA likewise found fault with the auction
sale, holding that there was a need to individually
sell the various shares of stock as they had
belonged to different pledgors.
ISSUES:
1. WON right of redemption exists over personal
properties (such as the subject pledged
shares).
2. WON the consignations made by
respondents prior to the auction sale are
sufficient to extinguish the loan obligations
and the subject pledged contracts.
3. WON the act of respondents in consigning the
payments should be deemed done in the
exercise of their right of redemption owing to
an imputed policy of the law that favored
redemption and mandated a liberal
construction to redemption laws.
4. WON a buyer at a public auction ipso
facto becomes the owner of the pledged
shares pending the lapse of the one-year
redemptive period
5. WON there is a need to individually sell the
various shares of stock as they had belonged
to different pledgors.
HELD:
1. No.
No law or jurisprudence establishes or
affirms such right. Indeed, no such right exists.
 The right of redemption over mortgaged
real property sold extrajudicially is established by
Act No. 3135, as amended. The said law does not
extend the same benefit to personal property. In
fact, there is no law in our statute books which
vests the right of redemption over personal
property. Act No. 1508, or the Chattel Mortgage
Law, ostensibly could have served as the vehicle
for any legislative intent to bestow a right of
redemption over personal property, since that law
governs the extrajudicial sale of mortgaged
personal property, but the statute is definitely
silent on the point.
The right of redemption as affirmed under
Rule 39 of the Rules of Court applies only to
execution sales, more precisely execution sales of
real property.
It must be clarified that the subject sale of
pledged shares was an extrajudicial sale,
specifically a notarial sale, as distinguished from a
judicial sale as typified by an execution sale.
Under the Civil Code, the foreclosure of a pledge
occurs extrajudicially, without intervention by the
courts. All the creditor needs to do, if the credit has
not been satisfied in due time, is to proceed before
a Notary Public to the sale of the thing pledged.
In this case, petitioners attempted to
proceed extrajudicially with the sale of the pledged
shares by public auction. However, extrajudicial
sale was stayed with the filing of Civil Cases which
sought to annul the pledge contracts. The final
and executory judgment in those cases affirmed
the pledge contracts and disposed them. Said
judgment did not direct the sale by public auction
of the pledged shares, but instead upheld the right
of the Parays to conduct such sale at their own
volition.
2. No.
There is no doubt that if the principal
obligation is satisfied, the pledges should be
terminated as well. Article 2098 of the Civil Code
provides that the right of the creditor to retain
possession of the pledged item exists only until
the debt is paid. Article 2105 of the Civil Code
further clarifies that the debtor cannot ask for the
return of the thing pledged against the will of the
creditor, unless and until he has paid the debt and
its interest. At the same time, the right of the
pledgee to foreclose the pledge is also
established under the Civil Code. When the credit
has not been satisfied in due time, the creditor
may proceed with the sale by public auction under
the procedure provided under Article 2112 of the
Code.
In order that the consignation could have
the effect of extinguishing the pledge contracts,
such amounts should cover not just the principal
loans, but also the monthly interests thereon.
In the case at bar, while the amounts
consigned by respondents could answer for their
respective principal loan obligations, they were
not sufficient to cover the interests due on these
loans, which were pegged at the rate of 5% per
month or 60% per annum.
3. No.
The pledged shares in this case are not
subject to redemption. Thus, the consigned
payments should not be treated with liberality, or
somehow construed as having been made in the
exercise of the right of redemption.
4. Yes.
Obviously, since there is no right to
redeem personal property, the rights of ownership
vested unto the purchaser at the foreclosure sale
are not entangled in any suspensive condition that
is implicit in a redemptive period.
5. No.
This concern is obviously rendered a
non-issue by the fact that there can be no right to
redemption in the first place. Rule 39 of the Rules
of Court does provide for instances when
properties foreclosed at the same time must be
sold separately, such as in the case of lot sales for
real property under Section 19. However, these
instances again pertain to execution sales and not
extrajudicial sales. No provision in the Rules of
Court or in any law requires that pledged
properties sold at auction be sold separately.
On the other hand, under the Civil Code,
it is the pledgee, and not the pledgor, who is given
the right to choose which of the items should be
sold if two or more things are pledged. No similar
option is given to pledgors under the Civil Code.
Moreover, there is nothing in the Civil Code
provisions governing the extrajudicial sale of
pledged properties that prohibits the pledgee of
several different pledge contracts from auctioning
all of the pledged properties on a single occasion,
or from the buyer at the auction sale in purchasing
all the pledged properties with a single purchase
price. The relative insignificance of ascertaining
the definite apportionments of the sale price to the
individual shares lies in the fact that once a
pledged item is sold at auction, neither the
pledgee nor the pledgor can recover whatever
deficiency or excess there may be between the
purchase price and the amount of the principal
obligation.
RULING: Decision of the Court of Appeals
is SET ASIDE and the decision of the RTC Cebu
City is REINSTATED.
G.R. NO. 153802 HELD:

HOMEOWNERS SAVINGS & LOAN BANK vs.
MIGUELA C. DAILO
FACTS:
Respondent Miguela C. Dailo and Marcelino
Dailo, Jr. were married on August 8, 1967.
During their marriage, the spouses purchased a
house and lot in San Pablo City, registered in the
name of Marcelino Dailo to the exclusion of his
wife.
In 1993, through a grant of Special Power of
Attorney to Lilibeth Osmundo, Marcelino
obtained a loan from petitioner Homeowners
Savings and Loan Bank, secured by the property
in San Pablo. Gesmundo also executed a Real
Estate Mortgage constituted on the subject
property in favor of petitioner without the
knowledge and consent of respondent. The loan
matured and remained outstanding which led to
the foreclosure of the mortgage.
The court held that the property relations of
respondent and her late husband shall be
governed, foremost, by Chapter 4 on Conjugal
Partnership of Gains of the Family Code and,
suppletorily, by the rules on partnership under
the Civil Code. In case of conflict, the former
prevails because the Civil Code provisions on
partnership apply only when the Family Code is
silent on the matter.
Marcelino and Miguela Dailo were married before
the effectivity of the Family Code. In the absence
of a marriage settlement, their properties were
governed by the system of Conjugal Partnership
of gains, which was made also made applicable
after the effectivity of the Code.
Article 124 of the Family Code, in the absence of
(court) authority or written consent of the other
spouse, any disposition or encumbrance of the
conjugal property shall be void. The Court ruled
that the mortgage entered into by Marcelino
without his wife’s consent and, thus, was void.

In 1993, Marcelino died.

As to the issue of liability of the property for the
obligation obtained by Marcelino, the court held
Respondent found out later about the mortgage that for failure to present clear proof that the said
and claimed that she had no knowledge of it. She obligation redounded to the benefit of the family
further claims that the property was conjugal in which under Article 121 of the Family Code, the
nature and so she consequently filed for the subject property could not be held liable.
Nullity of Real Estate Mortgage and Certificate of
Sale, Affidavit of Consolidation of Ownership,
Deed of Sale, Reconveyance with Prayer for
Preliminary Injunction and Damages against
petitioner. In the latter’s Answer with
Counterclaim, petitioner prayed for the dismissal
of the complaint on the ground that the property
in question was the exclusive property of the late
Marcelino Dailo, Jr. The Court of appeals favored
Miguela. Hence this petition.

ISSUE:

1.) Whether or not the mortgage entered into by

respondent’s husband without her knowledge
was valid.

2.) Whether or not the property may be held

liable for the obligation obtained by the late
Marcelino Dailo.

041. Yau Chu v. Court of Appeals
G.R. No. L-78519/26 September 1989/First
Division/Petition for Review on Certiorari
Victoria Yau Chu (assisted by her husband,
Michael) – petitioners
Court of Appeals, Family Savings Bank, and/or
CAMS Trading Enterprises, Inc. – respondents
Decision by J. Grino-Aquino, Digest by Pip
recover the sum from them before the RTC of
Makati. The RTC dismissed the complaint for lack
of merit. Court of Appeals affirmed. Before the
Supreme Court she argued that the encashment
of her time deposit certificates was pactum
commissorium.
Issue: Did the encashment of Victoria’s time
deposit certificates amount to pactum
commissorium? NO.

Short Version: Victoria bought cement from Ruling: Petition denied.

CAMS and secured her payments with deeds of
assignment over her time deposits in Family
Savings Bank. She assigned about P320K worth
but her obligations to CAMS came up to about
P404K. CAMS requested the bank to encash the
time deposit certificates, which the bank did only
after calling up and obtaining Victoria’s consent.
Victoria then sued the bank and CAMS for alleged
pactum commissorium. The Court ruled against
her, as the prohibition on pactum commissorium
was enacted in order to protect debtors from
creditors who automatically appropriate pledged
or mortgaged property which might have a higher
value than the debt. Where the security for the
debt is also money deposited in a bank, the
amount of which is even less than the debt, it is
not illegal for the creditor to encash the time
deposit certificates to pay the debtors’ overdue
obligation, with the latter’s consent.
Facts: Since 1980, Victoria Yau Chu had been
purchasing cement on credit from CAMS. To
guaranty payment for her cement withdrawals,
she executed in favor of CAMS deeds of
assignment of her time deposits in Family Savings
Bank. The total amount came up to P320K.
Except for serial numbers and the dates of the
time deposit certificates, the deeds of assignment
prepared by Victoria’s lawyer uniformly read:
Ratio: Since the collateral in this case was also
money, there was no need to sell the thing
pledged at public auction in order to satisfy the
pledgor’s obligation. All that had to be done to
convert the pledgor's time deposit certificates into
cash was to present them to the bank for
encashment after due notice to the debtor.
The encashment of the deposit certificates
was not a pactum commissorium as
prohibited under Article 2088 of the Civil Code.
A pactum commissorium is a provision for
the automatic appropriation of the pledged or
mortgaged property by the creditor in payment
of the loan upon its maturity. This prohibition is
intended to protect the obligor, pledgor, or
mortgagor against being overreached by his
creditor who holds a pledge or mortgage over
property whose value is much more than the debt.
Where, as in this case, the security for the debt
is also money deposited in a bank, the amount
of which is even less than the debt, it is not
illegal for the creditor to encash the time
deposit certificates to pay the debtors’
overdue obligation, with the latter’s consent.

... That the assignment serves as a collateral

or guarantee for the payment of my obligation
with the said CAMS TRADING
ENTERPRISES, INC. on account of my
cement withdrawal from said company, per
separate contract executed between us.

In July 1980, CAMS notified the bank that

Victoria had an unpaid account with it in the sum
of about P314K and requested the encashment of
the time deposit certificates assigned to it by
Victoria. As proof, it submitted to the bank a letter
from Victoria admitting her outstanding account
with CAMS reaching P404.5K. The bank verbally
advised Victoria of CAMS’ request and after she
verbally agreed, the bank encashed the
certificates and delivered about P283K because
one time deposit lacked the proper signatures.

Victoria then turned around and demanded

that the bank and CAMS restore her time deposit.
When both refused, she filed a complaint to
ROBERTO C. SICAM and AGENCIA de R.C.
SICAM, INC. vs. SPOUSES JORGE
G.R. No. 159617, August 8, 2007
FACTS: On different dates, Lulu Jorge pawned
several pieces of jewelry with Agencia de R. C.
Sicam located in Parañaque to secure a loan.
On October 19, 1987, two armed men entered
the pawnshop and took away whatever cash and
jewelry were found inside the pawnshop vault.
On the same date, Sicam sent Lulu a letter
informing her of the loss of her jewelry due to the
robbery incident in the pawnshop. Respondent
Lulu then wroteback expressing disbelief, then
requested Sicam to prepare the pawned jewelry
for withdrawal on November 6, but Sicam failed
to return the jewelry.
Lulu, joined by her husband Cesar, filed a
complaint against Sicam with the RTC of Makati
seeking indemnification for the loss of pawned
jewelry and payment of AD, MD and ED as well
as AF.
The RTC rendered its Decision dismissing
respondents’ complaint as well as petitioners’
counterclaim. Respondents appealed the RTC
Decision to the CA which reversed the RTC,
ordering the appellees to pay appellants the
actual value of the lost jewelry and AF.
Petitioners MR denied, hence the instant petition
for review on Certiorari.
ISSUE: are the petitioners liable for the loss of
the pawned articles in their possession?
(Petitioners insist that they are not liable since
robbery is a fortuitous event and they are not
negligent at all.)
HELD: The Decision of the CA is AFFIRMED.
YES
Article 1174 of the Civil Code provides:
Art. 1174. Except in cases expressly specified by
the law, or when it is otherwise declared by
stipulation, or when the nature of the obligation
requires the assumption of risk, no person shall
be responsible for those events which could not
be foreseen or which, though foreseen, were
inevitable.
Fortuitous events by definition are extraordinary
events not foreseeable or avoidable. It is
therefore, not enough that the event should not
have been foreseen or anticipated, as is
commonly believed but it must be one impossible
to foresee or to avoid. The mere difficulty to
foresee the happening is not impossibility to
foresee the same.
To constitute a fortuitous event, the following
elements must concur:
(a) the cause of the unforeseen and unexpected
occurrence or of the failure of the debtor to
comply with obligations must be independent of
human will;
(b) it must be impossible to foresee the event
that constitutes the caso fortuito or, if it can be
foreseen, it must be impossible to avoid;
(c) the occurrence must be such as to render it
impossible for the debtor to fulfill obligations in a
normal manner; and,
(d) the obligor must be free from any participation
in the aggravation of the injury or loss.
The burden of proving that the loss was due to a
fortuitous event rests on him who invokes it. And,
in order for a fortuitous event to exempt one from
liability, it is necessary that one has committed
no negligence or misconduct that may have
occasioned the loss.
Sicam had testified that there was a security
guard in their pawnshop at the time of the
robbery. He likewise testified that when he
started the pawnshop business in 1983, he
thought of opening a vault with the nearby bank
for the purpose of safekeeping the valuables but
was discouraged by the Central Bank since
pawned articles should only be stored in a vault
inside the pawnshop. The very measures which
petitioners had allegedly adopted show that to
them the possibility of robbery was not only
foreseeable, but actually foreseen and
anticipated. Sicam’s testimony, in effect,
contradicts petitioners’ defense of fortuitous
event.

Moreover, petitioners failed to show that they
were free from any negligence by which the loss
of the pawned jewelry may have been
occasioned.
Robbery per se, just like carnapping, is not a
fortuitous event. It does not foreclose the
possibility of negligence on the part of herein
petitioners.
Petitioners merely presented the police report of
the Parañaque Police Station on the robbery
committed based on the report of petitioners’
employees which is not sufficient to establish
robbery. Such report also does not prove that
petitioners were not at fault. On the contrary, by
the very evidence of petitioners, the CA did not
err in finding that petitioners are guilty of
concurrent or contributory negligence as
provided in Article 1170 of the Civil Code, to wit:
Art. 1170. Those who in the performance of their
obligations are guilty of fraud, negligence, or
delay, and those who in any manner contravene
the tenor thereof, are liable for damages.
**
Article 2123 of the Civil Code provides that with
regard to pawnshops and other establishments
which are engaged in making loans secured by
pledges, the special laws and regulations
concerning them shall be observed, and
subsidiarily, the provisions on pledge, mortgage
and antichresis.
The provision on pledge, particularly Article 2099
of the Civil Code, provides that the creditor shall
take care of the thing pledged with the diligence
of a good father of a family. This means that
petitioners must take care of the pawns the way
a prudent person would as to his own property.
In this connection, Article 1173 of the Civil Code
further provides:
Art. 1173. The fault or negligence of the obligor
consists in the omission of that diligence which is
required by the nature of the obligation and
corresponds with the circumstances of the
persons, of time and of the place. When
negligence shows bad faith, the provisions of
Articles 1171 and 2201, paragraph 2 shall apply.
If the law or contract does not state the diligence
which is to be observed in the performance, that
which is expected of a good father of a family
shall be required.
We expounded in Cruz v. Gangan that
negligence is the omission to do something
which a reasonable man, guided by those
considerations which ordinarily regulate the
conduct of human affairs, would do; or the doing
of something which a prudent and reasonable
man would not do. It is want of care required by
the circumstances.
A review of the records clearly shows that
petitioners failed to exercise reasonable care and
caution that an ordinarily prudent person would
have used in the same situation. Petitioners were
guilty of negligence in the operation of their
pawnshop business. Sicam’s testimony revealed
that there were no security measures adopted by
petitioners in the operation of the pawnshop.
Evidently, no sufficient precaution and vigilance
were adopted by petitioners to protect the
pawnshop from unlawful intrusion. There was no
clear showing that there was any security guard
at all. Or if there was one, that he had sufficient
training in securing a pawnshop. Further, there is
no showing that the alleged security guard
exercised all that was necessary to prevent any
untoward incident or to ensure that no suspicious
individuals were allowed to enter the premises. In
fact, it is even doubtful that there was a security
guard, since it is quite impossible that he would
not have noticed that the robbers were armed
with caliber .45 pistols each, which were
allegedly poked at the employees. Significantly,
the alleged security guard was not presented at
all to corroborate petitioner Sicam’s claim; not
one of petitioners’ employees who were present
during the robbery incident testified in court.
Furthermore, petitioner Sicam’s admission that
the vault was open at the time of robbery is
clearly a proof of petitioners’ failure to observe
the care, precaution and vigilance that the
circumstances justly demanded.
The robbery in this case happened in petitioners’
pawnshop and they were negligent in not
exercising the precautions justly demanded of a
pawnshop.
NOTES:
We, however, do not agree with the CA when it
found petitioners negligent for not taking steps to
insure themselves against loss of the pawned
jewelries.
Under Section 17 of Central Bank Circular No.
374, Rules and Regulations for Pawnshops,
which took effect on July 13, 1973, and which
was issued pursuant to Presidential Decree No.
114, Pawnshop Regulation Act, it is provided that
pawns pledged must be insured, to wit:
Sec. 17. Insurance of Office Building and Pawns-
The place of business of a pawnshop and the
pawns pledged to it must be insured against fire
and against burglary as well as for the latter(sic),
by an insurance company accredited by the
Insurance Commissioner.
However, this Section was subsequently
amended by CB Circular No. 764 which took
effect on October 1, 1980, to wit:
Sec. 17 Insurance of Office Building and Pawns
– The office building/premises and pawns of a
pawnshop must be insured against fire.
(emphasis supplied).
where the requirement that insurance against
burglary was deleted. Obviously, the Central
Bank considered it not feasible to require
insurance of pawned articles against burglary.
The robbery in the pawnshop happened in 1987,
and considering the above-quoted amendment,
there is no statutory duty imposed on petitioners
to insure the pawned jewelry in which case it was
error for the CA to consider it as a factor in
concluding that petitioners were negligent.
Nevertheless, the preponderance of evidence
shows that petitioners failed to exercise the
diligence required of them under the Civil Code.
LIM TAY vs. COURT OF APPEALS, GO FAY
AND CO. INC., SY GUIOK, and THE ESTATE
OF ALFONSO LIM
Dadivas
FACTS:
 January 8, 1980- Sy Guiok secured a
loan from the petitioner in the amount of
P40, 000 payable within six (6) months
and executed a Contract of Pledge
whereby he pledged his three hundred
(300) shares of stock in the Go Fay &
Company Inc.
 Guiok obliged himself to pay interest on
said loan at the rate of 10% per annum
from the date of said contract of
pledge. On the same date, Alfonso Sy
Lim secured a loan from the Lim Tay in
the amount of P40,000 payable in six (6)
months and executed a Contract of
Pledge covering his three hundred
(300) shares of stock in Respondent
Corporation. Under said contract, Sy
Lim obliged himself to pay interest on his
loan at the rate of 10% per annum from
the date of the execution of said contract.
In the event of the foreclosure of
this pledge and the sale of the pledged
certificate, any surplus remaining in the
hands of the PLEDGEE after the
payment of the said sum and interest,
and the expenses, if any, connected with
the foreclosure sale, shall be paid by the
PLEDGEE to the PLEDGOR
Upon payment of the said
amount and interest in full, the PLEDGEE
will, on demand of the PLEDGOR,
redeliver to him the said shares of stock
by surrendering the certificate delivered
to him by the PLEDGOR or by
retransferring each share to the
PLEDGOR, in the event that the
PLEDGEE, under the option hereby
granted, shall have caused such shares
to be transferred to him upon the books
of the issuing company.
 Guiok and Sy Lim endorsed their
respective shares of stock in blank and
delivered to the petitioner
  Guiok and Sy Lim failed to pay their
respective loans and the accrued
interests thereon to the petitioner.
Petitioner filed a Petition for Mandamus
against the Corporation directing the
corporate secretary of Go Fay & Co., Inc.
to register the stock transfers and issue
new certificates in favor of Lim Tay and
be ordered to pay all dividends due and
unclaimed on the said certificates to Lim
Tay.
 SEC: dismissed the complaint.
 CA: affirmed SEC’s decision
Issue: W/N Lim Tay is the owner of the shares
previously subjected to pledge, for him to
cause the registration of said shares in his
own name?
Held: NO
 Lim Tay's ownership over the shares was
not yet perfected when the Complaint
was filed. The contract of pledge certainly
does not make him the owner of the
shares pledged.
 This contractual stipulation, which was
part of the Complaint, shows that plaintiff
was merely authorized to foreclose the
pledge upon maturity of the loans, not to
own them. Such foreclosure is not
automatic, for it must be done in a public
or private sale. Nowhere did the
Complaint mention that petitioner had in
fact foreclosed the pledge and purchased
the shares after such foreclosure. His
status as a mere pledgee does not, under
civil law, entitle him to ownership of the
subject shares.
Pledgee is not the owner of the shares
 There is no showing that petitioner made
any attempt to foreclose or sell the shares
through public or private auction, as
stipulated in the contracts of pledge and
as required by Article 2112 of the Civil
Code. Therefore, ownership of the
shares could not have passed to
him. The pledgor remains the owner
during the pendency of the pledge and
prior to foreclosure and sale, as explicitly
provided by Article 2103 of the same
Code
No ownership by prescription
 In the present case, petitioners
possession of the stock certificates came
about because they were delivered to him
pursuant to the contracts of pledge. His
possession as a pledgee cannot ripen
into ownership by
prescription. Petitioner expressly
repudiated the pledge, only when he filed
his Complaint and claimed that he was
not a mere pledgee, but that he was
already the owner of the shares. Based
on the foregoing, petitioner has not
acquired the certificates of stock through
extraordinary prescription.
No novation in favor of Petitioner
 In the present case, novation cannot be
presumed by (a) respondents
indorsement and delivery of the
certificates of stock covering the 600
shares, (b) petitioners receipt of
dividends from 1980 to 1983, and (c) the
fact that respondents have not instituted
any action to recover the shares since
1980.
 Respondents’ indorsement and delivery
of the certificates of stock were pursuant
to paragraph 2 of the contract which did
not effect the transfer of ownership to
petitioner. It was merely in compliance
with Article 2093 of the Civil Code which
requires that the thing pledged be placed
in the possession of the creditor or a third
person of common agreement; and if the
thing pledged are shares of stock, then
the instrument proving the right pledged
must be delivered to the creditor.
Jurisdiction of SEC:
The registration of shares in a stockholders name,
the issuance of stock certificates, and the right to
receive dividends which pertain to the said shares
are all rights that flow from ownership- falls within
the jurisdiction of the SEC. However, if ownership
of the shares is not clearly established and is still
unresolved at the time the action for mandamus is
filed, then jurisdiction lies with the regular courts.