Estate of Litton vs Mendoza

Guarantor: C. MendozaDebtor of Tan and Mendoza: BernalsAssignee of Tan: G. LittonCreditor: Tan

Facts:Bernal spouses are engaged in the manufacturing of embroidery,

garments, and cotton materials. Bernals purchased from Tan cotton materials guaranteed by Mendoza. Bernals issued post dated checks to Mendoza. The check matured without being enchashed and Mendoza asked that another one be issued in the same amount.

Mendoza issued two checks in favor of Tan. Tan had the two checks issued by Mendoza discounted in a bank. However, the said checks were later returned to Tan with the words stamped "stop payment" which appears to have been ordered by Mendoza for failure of the Bernals to deposit sufficient funds for the check that the Bernals issued in favor of Mendoza.

Tan instituted an action acgainst Mendoza. While the case was pending Mendoza entered into a compromise agreement with Tan, wherein Tan acknowledged that all his claims against Mendoza had been settled and that both parties waive, release and quit whatever claims they may have against each other. Tan died and the action was continued by the administrators of Litton estate.

Petitioner: Due to the compromise agreement, he is released from liability.Respondent: Compromise agreement is null and void because he was not duly represented by his counsel and that he had no right to alienate said credit. HELD: The deed of assignment fulfills the requisites of a valid pledge or mortgage. Although it is true that Tan may validly alienate the litigatious credit as ruled by the appellate court, citing Article 1634 of the Civil Code, said provision should not be taken to mean as a grant of an absolute right on the part of the assignor Tan to indiscriminately dispose of the thing or the right given as security. The provision should be read in consonance with Article 2097 of the same code.  Although the pledgee or the assignee, Litton, Sr. did not ipso facto become the creditor of private respondent

Mendoza, the pledge being valid, the incorporeal right assigned by Tan in favor of the former can only be alienated by the latter with due notice to and consent of Litton, Sr. or his duly authorized representative. To allow the assignor to dispose of or alienate the security without notice and consent of the assignee will render nugatory the very purpose of a pledge or an assignment of credit.

Yuliongsui vs PNBDebtor-Pledgor: D. YuliongsiuCreditor-Pledgee: PNB

Facts:The plaintiff owned 2 vessels and one which was subject to an

installment payment. He obtained a loan of 50,000 from PNB and pledged 2 of his vessels as well as his equity in one of the vessels to guarantee it. He paid the partial payment and executed two promissory notes as to renew the balance. The two notes were never paid at all by plaintiff on their respective due dates. The plaintiff was convicted by the court of estaffa. He was also declared insolvent by the court. The bank took possession of the pledged vessels and sold to third parties without the knowledge of the plaintiff while the other one which the sale was rescinded for failure to pay the remaining installments. The plaintiff filed an action to recover the three vessels.

RTC: the action of the banks were justified.

Yoliongsui: The contract is a chattel mortgage, and the bank cannot take possession of the chattels until after there has been default.

Ruling:The contract is a contract of pledge. PNB therefore is entitled to actual possession of the vessels as pledgee. While it is true that the plaintiff continued operating the vessels after the pledge contract was entered into, his possession was expressly made “subject to the order of the pledgee”. The pledgor is regarded as trustee of the thing pledged.

CORNELIO CRUZ and CIRIACA SERRANO v. CHUA LEE

Parties:Pawner/ Debtor-Pledgor: C. CruzPawnee/ Creditor: Monte de Piedad and I. TambuntingCreditor-Pledgee: Chua Lee

Facts:Cornelio Cruz pledged valuable jewelry to two different pawnshops,

Monte de Piedad and Ildefonso Tambunting receiving therefore twelve pawn tickets showing that these tickets were renewable, according to the custom of pawnbrokers, upon payment from time to time of the sum of money representing the intent accruing upon the debts.

Cruz presented himself to Chua and pledged to him six pawn tickets of Monte de Piedad and a week after obtained another loan from Chua. Chua renewed the tickets issued by Monte de Piedad by paying the interest necessary to effect renewal, but these tickets expired and they were not renewed. The jewelries were sold at a public auction and were not redeemed.

Contention of the Respondent:- Chua alleged that the tickets had been drawn in the form of sale with stipulation for repurchase, but it was understood between the parties that the transaction was a loan and that the jewelry and tickets held by him constituted a mere security for the money advanced by him to Cruz.

Ruling:Chua is liable for the loss of the value of the pawn tickets.

The ordinary pawn ticket is a document by virtue of which the property in the thing pledged passes from hand to hand by mere delivery of

the ticket, and the contract of pledge is, therefore, absolvable to bearer. It results that one who takes a pawn ticket in pledge acquires domination over the pledge, as it is the holder who must renew the pledge to keep it alive. The law contemplates that the pledgee may have to undergo expenses in order to prevent the pledge from being lost; and is entitled to reimbursement from the pledgor.