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CA, FAMILY SAVINGS BANK &/ CAMS TRADING ENTERPRISES 1989 / Grino-Aquino FACTS Since 1980, Victoria Yau Chu had been purchasing cement on credit from CAMS Trading. To guaranty payment for her cement withdrawals, she executed in favor of CAMS Trading deeds of assignment of her time deposits [320k] in the Family Savings Bank. The deeds of assignment, which were prepared by her own lawyer, uniformly provided 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. On July 24,1980, CAMS Trading notified the Bank that Chu had an unpaid account with it [314k~], so it asked that it be allowed to encash the said time deposit certificates. It submitted to the Bank a letter from Chu admitting that her outstanding account with CAMS Trading was 404.5k. The bank agreed to encash the certificates after verbally advising Chu of CAMS Tradings request. It delivered to Cams Trading 283.7k~ only, as one time deposit certificate lacked the proper signatures. Upon being informed of the encashment, Chu demanded from the bank and CAMS Trading that her time deposit be restored, but since neither complied, Chu filed a complaint to recover the sum of 283.7k~ from them. RTC Chus complaint dismissed for lack of merit CA Affirmed RTC decision AFFIRMED BY SC The deeds of assignment were contracts of pledge, but, as the collateral was also money or an exchange 1 of "peso for peso," the provision in NCC 2112 for the sale of the thing pledged at public auction to convert it into money to satisfy the pledgor's obligation, did not have to be followed. 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. ISSUE & HOLDING [These are issues raised by Chu in this petition for review with the SC ] 1. WON the encashment of the deposit certificates is a pacto commissorio. NO 2. WON the obligations secured by her time deposits had already been paid. NO PROOF OF PAYMENT RATIO ISSUE #1 A pacto commissorio is a provision for the automatic appropriation of the pledged or mortgaged property by the creditor in payment of the loan upon its maturity. The prohibition against a pacto commissorio 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. The encashment of the deposit certificates was not a pacto commissorio which is prohibited under NCC 2 2088. 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 was not illegal for the creditor to encash the time deposit certificates to pay the debtors' overdue obligation, with the latter's consent. ISSUE #2 Whether the debt had already been paid (as alleged by Chu) is a factual question. CA found that this was not proven, for the evidence which Chu sought to present on appeal, were receipts for payments made prior to July 18, 1980. Since Chu signed on July 18, 1980 a letter admitting her indebtedness to be 404.5k, and there is no proof of payment made by her thereafter to reduce or extinguish her debt, the application of her time deposits, which she had assigned to the creditor to secure the payment of her debt, was proper. Chus petition for review DENIED.

NCC 2112. The creditor to whom the credit has not been satisfied in due time, may proceed before a Notary Public to the sale of the thing pledged. This sale shall be made at a public auction, and with notification to the debtor and the owner of the thing pledged in a proper case, stating the amount for which the public sale is to be held. If at the first auction the thing is not sold, a second one with the same formalities shall be held; and if at the second auction there is no sale either, the creditor may appropriate the thing pledged. In this case he shall be obliged to give an acquittance for his entire claim. (1872a)

NCC 2088. The creditor cannot appropriate the things given by way of pledge or mortgage, or dispose of them. Any stipulation to the contrary is null and void. (1859a)