Manila Banking Corp. v. Teodor

AUTHORSHIP INFORMATION
Digest Author Grace Ann Tamboon

Topic Pledge Assignment of Credit
CASE INFORMATION
Petitioner(s) Manila Banking Corp
Respondent(s) Anastacio Teodoro, Jr. And Grace Anna
Teodoro
Reference G.R. No. L-53955 January 13, 1989
Ponente JUSTICE BIDIN
DOCTRINE(S)
The presumption in favor of pledge is a legal principle that favors interpreting
transactions as pledges rather than dations in payment when there is uncertainty. It
means that a transaction is presumed to be a pledge, which involves the transfer of
possession of property to the creditor as security for the debt, but not the transfer of
ownership.
CASE SUMMARY
On April 25, 1966, defendants, together with
Anastacio Teodoro, Sr., jointly and severally,
executed in favor of plaintiff a Promissory Note for
the sum of P10,420.00 payable in 120 days, or on
August 25, 1966, at 12% interest per annum.
Defendants failed to pay the said amount inspite
of demands and the obligation as of September
30, 1969 stood at P 15,137.11. On May 3, 1966
and June 20, 1966, defendants Teodoro, Sr. and
Teodoro, Jr. executed in favor of plaintiff two
Promissory for P8,000.00 and P1,000.00
respectively, payable in 120 days at 12% interest
per annum. Father and Son made a partial
payment on the May 3, 1966 promissory Note but
none on the June 20, 1966 Promissory Note,
Pertinent Facts leaving still an unpaid balance of P8,934.74 as of
September 30, 1969. The three Promissory
Notes stipulated that any interest due if not paid
at the end of every month shall be added to the
total amount then due, the whole amount to bear
interest at the rate of 12% per annum until fully
paid.
It appears that on January 24, 1964, the Son

executed in favor of plaintiff a Deed of
Assignment of Receivables from the Emergency
Employment Administration in the sum of
P44,635.00 which provided that it was for and in
consideration of certain credits, loans, overdrafts
and other credit accommodations extended to
defendants as security for the payment of said
sum and the interest thereon, and that
defendants do hereby release all its rights and
interest in and to the accounts receivables. In
their stipulations of Fact, it is admitted by the
parties that plaintiff extended loans to defendants
by reason of certain contracts entered into by the
defunct EEA with defendants for the fabrication of
fishing boats, and that the Philippine Fisheries
Commission succeeded the EEA after its
abolition; that non- payment of the notes was due
to the failure of the Commission to pay
defendants after the latter had complied with their
contractual obligations. For failure to pay the
obligations due from the promissory notes, an
action for sum of money was filed against the
defendants by the plaintiff with the CFI of Manila.
PROCEDURAL HISTORY
The trial court rendered its judgment adverse to
RTC defendants.
As the appeal involves a pure question of law, the

CA Court of Appeals, in its resolution promulgated on
March 6, 1980, certified the case to Supreme
Court
• WON the assignment of receivables has

the effect of payment of all the loans
contracted by appellants from appellee
Relevant Issue(s) bank.
• WON appellee bank must first exhaust all
legal remedies against the PFC before it
can proceed against appellants for
collections of loan under the promissory
notes which are plaintiffs’ bases in the
action for collection in the civil case.
The trial court rendered its judgment adverse to

defendants. Subsequently, defendants filed a
motion for reconsideration which was denied by
the trial court. Thereafter, defendants filed with
the lower court
their notice of appeal. In their appeal, appellants
Analysis raised that the decision in question amounts to a
judicial remaking of the contract between the
parties, in violation of law, tantamount to lack or
excess of jurisdiction. As the appeal involves a
pure question of law, the Court of Appeals, in its
resolution, certified the case to the Supreme
Court.
- No. It is evident that the assignment of
receivables executed by appellants, did not
transfer the ownership of the receivables to
appellee bank and release appellants from their
loans with the bank incurred under promissory
Ruling(s) & Rationale notes. The Deed of Assignment provided that it
was for and in consideration of certain credits,
loans, overdrafts, and their credit
accommodations extended to appellants by
appellee bank, and as security for the payment of
said sum and the interest thereon; that appellants
as assignors, release, to assignee bank all their
rights and interest in and to the accounts
receivable assigned. Obviously, the deed of
assignment was intended as collateral security
for the bank loans of appellants, as a continuing
guaranty for whatever sums would be owing by
defendants to plaintiff. In case of doubt as to
whether a transaction is a pledge or a dation in
payment, the presumption is in favor of pledge,
the latter being the lesser transmission of rights
and interests.
- No. The obligation of appellants under the

promissory notes not having been released by
the assignment of receivables, appellants remain
as the principal debtors of appellee bank rather
than mere guarantors. The deed of assignment
merely guarantees said obligations. That the
guarantor cannot be compelled to pay the creditor
unless the latter has exhausted all the property of
the debtor, and has resorted to all the legal
remedies against the debtor, under Article 2058
of the New Civil Code does not therefore apply to
them. It is of course of the essence of a contract
of pledge or mortgage that when the principal
obligation becomes due, the things in which the
pledge or mortgage consists may be alienated for
the payment to the creditor. In the instant case,
appellants are both the principal debtors and the
pledgors or mortgagors. Resort to one is,
therefore, resort to the other.

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AUTHORSHIP INFORMATION

Digest Author Grace Ann Tamboon

It appears that on January 24, 1964, the Son

As the appeal involves a pure question of law, the

• WON the assignment of receivables has

The trial court rendered its judgment adverse to

- No. The obligation of appellants under the

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