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Yau Chu v.

Court of Appeals favor of CAMS deeds of assignment

of her time deposits in Family Savings
G.R. No. L-78519/26 September 1989 Bank. The total amount came up to
Petition for Review on Certiorari P320K.Except for serial numbers and
Victoria Yau Chu (assisted by her the dates of the time deposit certificates,
husband, Michael) – petitioners the deeds of assignment prepared by
Victoria’s lawyer uniformly read:
Court of Appeals, Family Savings Bank,
and/or CAMS Trading Enterprises, Inc. ... That the assignment serves as a collateral
– respondents or guarantee for the payment of my
obligation with the said CAMS TRADING
Victoria bought cement from CAMS ENTERPRISES, INC. on account of my
and secured her payments with deeds cement withdrawal from said company, per
of assignment over her time deposits in separate contract executed between us.
Family Savings Bank. She assigned
about P320K worth but her obligations
to CAMS came up to about P404K. In July 1980, CAMS notified the bank
CAMS requested the bank to encash the that Victoria had an unpaid account
time deposit certificates, which the with it in the sum of about P314K and
bank did only after calling up and requested the encashment of the time
obtaining Victoria’s consent. Victoria deposit certificates assigned to it by
then sued the bank and CAMS for Victoria. As proof, it submitted to the
alleged pactum commissorium. The bank a letter from Victoria admitting
Court ruled against her, as the her outstanding account with CAMS
prohibition on pactum commissorium reaching P404.5K. The bank verbally
was enacted in order to protect debtors advised Victoria of CAMS’ request and
from creditors who automatically after she verbally agreed, the bank
appropriate pledged or mortgaged encashed the certificates and delivered
property, which might have a higher about P283Kbecause one time deposit
value than the debt. Where the security lacked the proper signatures.
for the debt is also money deposited in
a bank, the amount of which is even Victoria then turned around and
less than the debt, it is not illegal for the demanded that the bank and CAMS
creditor to encash the time deposit restore her time deposit. When both
certificates to pay the debtors’ overdue refused, she filed a complaint to recover
obligation, with the latter’s consent. the sum from them before the RTC of
Makati. The RTC dismissed the
Facts: complaint for lack of merit. Court of
Since 1980, Victoria Yau Chu had been Appeals affirmed. Before the Supreme
purchasing cement on credit from Court she argued that the encashment
CAMS. To guaranty payment for her of her time deposit certificates was
cement withdrawals, she executed in pactum commissorium.
Did the encashment of Victoria’s
time deposit certificates amount to
pactumcommissorium? NO.
Ruling: Petition denied.
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.