G.R. No. L-78519 September 26, 1989 GRINO-AQUINO, J.: VICTORIA AU C!U, assisted by her husband "IC!A#L C!

U, vs. CA, $A"IL SAVINGS %AN& and/or CA"S TRA'ING #NT#R(RIS#S,

This is a petition for review on certiorari to annul and set aside the Court of Appeals' decision dated October 28, 1 8! in CA"#.$. C% &o. '(2! which affir)ed the decision of the trial court in favor of the private respondents in an action to recover the petitioners' ti)e deposits in the respondent *a)ily +avin,s -an..

+ince 1 8', the petitioner, %ictoria /au Chu, had been purchasin, ce)ent on credit fro) CA0+ Tradin, 1nterprises, 2nc. 3hereafter 4CA0+ Tradin,4 for brevity5. To ,uaranty pay)ent for her ce)ent withdrawals, she e6ecuted in favor of Ca)s Tradin, deeds of assi,n)ent of her ti)e deposits in the total su) of 7(2',''' in the *a)ily +avin,s -an. 3hereafter the -an.5. 16cept for the serial nu)bers and the dates of the ti)e deposit certificates, the deeds of assi,n)ent, which were prepared by her own lawyer, unifor)ly provided 8 ... That the assi,n)ent serves as a collateral or ,uarantee for the pay)ent of )y obli,ation with the said CA0+ T$A92&# 1&T1$7$2+1+, 2&C. on account of )y ce)ent withdrawal fro) said co)pany, per separate contract e6ecuted between us.

On :uly 2;,1 8', Ca)s Tradin, notified the -an. that 0rs. Chu had an unpaid account with it in the su) of 7(1;,!( .<=. 2t as.ed that it be allowed to encash the ti)e deposit certificates which had been assi,ned to it by 0rs. Chu. 2t sub)itted to the -an. a letter dated :uly 18, 1 8' of 0rs. Chu ad)ittin, that her outstandin, account with Ca)s Tradin, was 7;';,=''. After verbally advisin, 0rs. Chu of the assi,nee's re>uest to encash her ti)e deposit certificates and obtainin, her verbal confor)ity thereto, the -an. a,reed to encash the certificates.2t delivered to Ca)s Tradin, the su) of 728(,<(<.<= only, as one ti)e deposit certificate 3&o. '';812' =;5 lac.ed the proper si,natures. ?pon bein, infor)ed of the encash)ent, 0rs. Chu de)anded fro) the -an. and Ca)s Tradin, that her ti)e deposit be restored. @hen neither co)plied, she filed a co)plaint to recover the su) of 728(,<(<.<= fro) the). The case was doc.eted in the $e,ional Trial Court of 0a.ati, 0etro 0anila 3then C*2 of $iAal, 7asi, -ranch B2B5, as Civil Case &o. (88!1.

2n a decision dated 9ece)ber 12, 1 8(, the tr)*+ ,o-rt .)/m)//e. t0e ,omp+*)1t 2or +*,3 o2 mer)t. C0- *ppe*+e. to the Court of Appeals 3CA"#.$. C% &o. '(2! 5 which *22)rme. t0e .)/m)//*+ of her co)plaint. 2n this petition for review, she alle,es that the Court of Appeals erredC 1. 2n not annullin, the encash)ent of her ti)e deposit certificates as a pactum commissoriumD and 2. 2n not findin, that the obli,ations secured by her ti)e deposits had already been paid.

4e 2)1. 1o mer)t )1 t0e pet)t)o1 2or re5)e6.

The Court of Appeals found that the .ee./ o2 *//)71me1t 6ere ,o1tr*,t/ o2 p+e.7e, but, as the ,o++*ter*+ 6*/ *+/o mo1e8 or an e6chan,e of 4peso for peso,4 the provision in Article 2112 of the Civil Code for the sale of the thin, pled,ed at public auction to convert it into )oney to satisfy the pled,or's obli,ation, did not have to be followed. All that had to be done to convert the pled,or's ti)e deposit certificates into cash was to present the) to the ban. for encash)ent after due notice to the debtor.

The e1,*/0me1t o2 t0e .epo/)t ,ert)2),*te/ 6*/ 1ot * pacto commissorio which is prohibited under Art. 2'88 of the Civil Code. A pacto commissorio is a provision for the automatic appropriation of the pled,ed or )ort,a,ed property by the creditor in pay)ent of the loan upon its )aturity. The prohibition a,ainst a pacto commissorio is intended to protect the obli,or, pled,or, or )ort,a,or a,ainst bein, overreached by his creditor who holds a pled,e or )ort,a,e over property whose value is )uch )ore than the debt. @here, as in this case, t0e /e,-r)t8 2or t0e .ebt )/ *+/o mo1e8 .epo/)te. )1 * b*13, the *mo-1t o2 60),0 )/ e5e1 +e// t0*1 t0e .ebt, it was not ille,al for the creditor to encash the ti)e deposit certificates to pay the debtors' overdue obli,ation, with the latter's consent.

@hether the debt had already been paid as now alle,ed by the debtor, is a factual >uestion which the Court of Appeals found not to have been proven for the evidence which the debtor sou,ht to present on appeal, were receipts for pay)ents )ade prior to July 18, 1980. +ince the petitioner si,ned on :uly 18, 1 8' a letter ad)ittin, her indebtedness to be in the su) of 7;';,='', and there is no proof of pay)ent )ade by her thereafter to reduce or e6tin,uish her debt, the application of her ti)e deposits, which she had assi,ned to the creditor to secure the pay)ent of her debt, was proper. The Court of Appeals did not co))it a reversible error in holdin, that it was so.

@E1$1*O$1, the pet)t)o1 2or re5)e6 )/ .e1)e.. Costs a,ainst the appellant. +O O$91$19. Narvasa, Cruz and Medialdea, JJ., concur. Gancayco, J., took no part.