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Facts:: Yuliongsiu V PNB 22 SCRA 585 (1968)

Yulongsiu owned vessels and equity that were pledged as collateral for a loan from PNB. When Yulongsiu defaulted on payments, PNB took physical possession of the vessels and sold them. Yulongsiu sued, arguing it was a chattel mortgage requiring default first. The court ruled it was a valid pledge contract, as the language specified, allowing PNB to take possession upon non-payment. For a pledge to be valid, delivery need only be constructive based on the circumstances. The sale of pledged property extinguishes the principal debt, even if the sale proceeds are less than the amount owed.

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213 views

Facts:: Yuliongsiu V PNB 22 SCRA 585 (1968)

Yulongsiu owned vessels and equity that were pledged as collateral for a loan from PNB. When Yulongsiu defaulted on payments, PNB took physical possession of the vessels and sold them. Yulongsiu sued, arguing it was a chattel mortgage requiring default first. The court ruled it was a valid pledge contract, as the language specified, allowing PNB to take possession upon non-payment. For a pledge to be valid, delivery need only be constructive based on the circumstances. The sale of pledged property extinguishes the principal debt, even if the sale proceeds are less than the amount owed.

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CAJ
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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YULIONGSIU v PNB entrust the physical possession of the chattels pledged

22 SCRA 585 (1968) to the pledgor without invalidating the pledge. In this
case, the pledgor is regarded as holding the pledge
FACTS: merely as a trustee for the pledge.

Yulongsiu owned 2 vessels and equity in FS-203, which


were purchased by him from the Philippine Shipping
Commission, by installment. Plaintiff obtained a loan As to the validity of the pledge contract with regard to
from defendant and to guarantee payment, plaintiff delivery, plaintiff alleges that constructive delivery is
pledged the 2 vessels and the equity on FS-203, as insufficient to make pledge effective. The Court ruled
evidenced by a pledge contract. Plaintiff made a partial that type of delivery will depend on the nature and
payment and the remaining balance was renewed by the peculiar circumstances of each case. Since the
execution of 2 promissory notes in the bank’s favor. defendant bank was, pursuant to the pledge contract, in
These two notes were never paid at all by plaintiff on full control of the vessels through plaintiff, the former
their respective due dates. could take actual possession at any time during the life
of the pledge to make more effective its security

Defendant bank filed a criminal case against plaintiff


charging the latter with estafa through falsification of .
commercial documents, and the trial court convicted the
plaintiff and was sentenced to indemnify the defendant. MANILA SURETY & FIDELITY V. VELAYO,
The corresponding writ of execution issued to implement 21 SCRA 515 (1967)
the order for indemnification was returned unsatisfied as
plaintiff was totally insolvent. F: Manila Surety & Fidelity Co., upon request of Rodolfo
Velayo, executed a bond for P2,800.00 for the
dissolution of a writ of attachment obtained by one Jovita
Granados in a suit against Rodolfo Velayo in the Court
Meanwhile, together with the institution of the criminal of First Instance of Manila. Velayo undertook to pay the
action, defendant took physical possession of the 2 surety company an annual premium of P112.00 and
vessels and transferred the equity on FS-203 to the provided collateral jewelry with the authority to sell in
defendant. Later on, the 2 vessels were sold by case Manila Surety will be obliged to pay. Judgment
defendant to third parties. having been rendered in favor of Jovita Granados and
against Rodolfo Velayo, and execution having been
returned unsatisfied, the surety company was forced to
pay P2,800.00 that it later sought to recoup from Velayo;
Plaintiff commenced an action for recovery on the and upon the latter's failure to do so, the surety caused
pledged items, and alleges, among others, that the the pledged jewelry to be sold, realizing therefrom a net
contract executed was a chattel mortgage so the creditor product of P235.00 only The surety files a claim against
defendant could not take possession of the chattel object Velayo because the security Is insufficient. Velayo
thereof until after there has been default. claims the sale of the jewelry even if insufficient
extinguishes the principal obligation.

Issue: Won Velayo’s contention is correct


ISSUE: Whether the contract entered into between
plaintiff and defendant is a chattel mortgage or a valid Ruling: Yes! The sale of the thing pledged shall
contract of pledge? extinguish the principal obligation, whther or not the
proceeds of the sale are equal to the amount of the
principal obligation, interest and expenses in a proper
case.
HELD: It’s a contract of pledge. The contract itself
provides that it is a contract of pledge and the judicial
admission that it is a pledge contract cannot be offset
without showing of palpable mistake.

The pledgee defendant was therefore entitled to the


actual possession of the vessels. The plaintiff’s
continued operation of the vessels after the pledge
contract was entered into places his possession subject
to the order of the pledge. The pledge can temporarily

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