SPOUSES PARAY vs RODRIGUEZ Case Digest

G.R. No. 132287, January 24, 2006

Facts:
Respondents were the owners, in their respective personal capacities, of shares of stock in a corporation
known as the Quirino-Leonor-Rodriguez Realty Inc.Respondentssecured by way of pledge of some of their
shares of stock to petitioners Bonifacio and Faustina Paray (Parays) the payment of certain loan
obligations.
When the Parays attempted to foreclose the pledges on account of respondents failure to
pay their loans, respondents filed complaints which sought the declaration of nullity of the pledge
agreements .Respondents consign to RTC which they interpreted as redemption. Notwithstanding the
consignations, the public auction took place as scheduled, with petitioner Vidal Espeleta successfully bidding
the amount of P6,200,000.00 for all of the pledged shares.
Issue:
WON Petitioners were authorized to refuse as they did the tender of payment since they were undertaking
the auction sale pursuant to the final and executory decision in Civil Cases.
Held:
Yes. it must be clarified that the subject sale of pledged shares was an extrajudicial sale, specifically a
notarial sale, as distinguished from a judicial sale as typified by an execution sale. Under the Civil Code, the
foreclosure of a pledge occur s extrajudicially, without intervention by the courts. All the creditor needs to
do, if the credit has not been satisfied in due time, is to proceed before a Notary Public to the sale of the
thing pledged.
In this case, petitioners attempted as early as 1980 to proceed extrajudicially with the sale of the pledged
shares by public auction. However, extrajudicial sale was stayed with the filing of Civil Cases No. R-20120
and 20131, which sought to annul the pledge contracts. The final and executory judgment in those cases
affirmed the pledge contracts and disposed. Since the pledged shares in this case are not subject to
redemption, the Court of Appeals had no business invoking and applying the inexistent right
of redemption. We cannot thus agree that the consigned payments should be treated with liberality,
or somehow construed as having been made in the exercise of the right of redemption. We also must
reject the appellate courts declaration that the buyer of at the public auction is not ipso
facto rendered the owner of the auctioned shares, since the debtor enjoys the one-year redemptive
period to redeem the property. Obviously, since there is no right to redeem personal property, the rights of
ownership vested unto the purchaser at the foreclosure sale are not entangled in any suspensive condition
that is implicit in a redemptive period. WHEREFORE, the petition is GRANTED. The assailed decision of the
Court of Appeals is SET ASIDE and the decision of the Cebu City RTC, Branch 16, dated 18 November 1992
is REINSTATED. Costs against respondents.

State Investment House Inc. vs. CA

State Investment House Inc. vs. CA
GR No. 101163 January 11, 1993
Bellosillo, J.:
Facts:
Nora Moulic issued to Corazon Victoriano, as security for pieces of jewellery to be sold
on commission, two postdated checks in the amount of fifty thousand each. Thereafter,
Victoriano negotiated the checks to State Investment House, Inc. When Moulic failed to sell the

jewellry, she returned it to Victoriano before the maturity of the checks. However, the checks
cannot be retrieved as they have been negotiated. Before the maturity date Moulic withdrew her
funds from the bank contesting that she incurred no obligation on the checks because the
jewellery was never sold and the checks are negotiated without her knowledge and consent.
Upon presentment of for payment, the checks were dishonoured for insufficiency of funds.
Issues:
1. Whether or not State Investment House inc. was a holder of the check in due course
2. Whether or not Moulic can set up against the petitioner the defense that there was failure or
absence of consideration
Held:
Yes, Section 52 of the NIL provides what constitutes a holder in due course. The evidence shows
that: on the faces of the post dated checks were complete and regular; that State Investment
House Inc. bought the checks from Victoriano before the due dates; that it was taken in good
faith and for value; and there was no knowledge with regard that the checks were issued as
security and not for value. A prima facie presumption exists that a holder of a negotiable
instrument is a holder in due course. Moulic failed to prove the contrary.
No, Moulic can only invoke this defense against the petitioner if it was a privy to the purpose for
which they were issued and therefore is not a holder in due course.
No, Section 119 of NIL provides how an instruments be discharged. Moulic can only invoke
paragraphs c and d as possible grounds for the discharge of the instruments. Since Moulic failed
to get back the possession of the checks as provided by paragraph c, intentional cancellation of
instrument is impossible. As provided by paragraph d, the acts which will discharge a simple
contract of payment of money will discharge the instrument. Correlating Article 1231 of the Civil
Code which enumerates the modes of extinguishing obligation, none of those modes outlined
therein is applicable in the instant case. Thus, Moulic may not unilaterally discharge herself from
her liability by mere expediency of withdrawing her funds from the drawee bank. She is thus
liable as she has no legal basis to excuse herself from liability on her check to a holder in due
course. Moreover, the fact that the petitioner failed to give notice of dishonor is of no moment.
The need for such notice is not absolute; there are exceptions provided by Sec 114 of NIL.

Dio vs CA
Dio vs CA
G.R. No. 89775 November 26, 1992
FACTS: In 1977, Uy Tiam Enterprises and Freight Services (hereinafter referred to as UTEFS), thru
its representative Uy Tiam, applied for and obtained credit accommodations (letter of credit and trust
receipt accommodations) from the Metropolitan Bank and Trust Company (Metrobank) in the sum of

P700,000.00. To secure the aforementioned credit accommodations Norberto Uy and Jacinto Uy

Dio executed separate Continuing Suretyships in favor of the latter in which Norberto Uy agreed to
pay METROBANK any indebtedness of UTEFS up to the aggregate sum of P300,000.00 while
Jacinto Uy Dio agreed to be bound up to the aggregate sum of P800,000.00.
Having paid the obligation under the above letter of credit, UTEFS, through Uy Tiam, obtained in
1979 another credit accommodation from METROBANK, which credit accommodation was fully
settled before an irrevocable letter of credit was applied for and obtained without the participation of
Norberto Uy and Jacinto Uy Dio as they did not sign the document. Also, they were not asked to
execute any suretyship to guarantee its payment. Neither did METROBANK nor UTEFS inform them
that the new Letter of Credit has been opened and the Continuing Suretyships separately executed
in 1977 shall guarantee its payment.
For UTEFS failure to pay in full its debt obligations to Metrobank, the latter demanded payment from
UTEFS and its sureties, Norberto Uy and Jacinto Uy Dio. Dio denied liability for the new credit
accommodation claiming that it is a new obligation contracted without his participation. Besides, the
1977 credit accommodation which he guaranteed has been fully paid.
ISSUE: Whether petitioners are liable as sureties for the 1979 obligations of Uy Tiam to
METROBANK by virtue of the Continuing Suretyship Agreements they separately signed in 1977?
HELD: YES. Under the Civil Code, a guaranty may be given to secure even future debts, the amount
of which may not known at the time the guaranty is executed. This is the basis for contracts
denominated as continuing guaranty or suretyship. A continuing guaranty is one which is not
limited to a single transaction, but which contemplates a future course of dealing, covering a
series of transactions, generally for an indefinite time or until revoked. It is prospective in its
operation and is generally intended to provide security with respect to future transactions within
certain limits, and contemplates a succession of liabilities, for which, as they accrue, the guarantor
becomes liable.
The stipulations in the surety agreement unequivocally reveal that the suretyship agreement in the
case at bar are continuing in nature. Petitioners do not deny this; in fact, they candidly admitted it.
Neither have they denied the fact that they had not revoked the suretyship agreements. Accordingly,
as correctly held by the public respondent:
Undoubtedly, the purpose of the execution of the Continuing Suretyships was to induce appellant to
grant any application for credit accommodation (letter of credit/trust receipt) UTEFS may desire to

obtain from appellant bank. By its terms, each suretyship is a continuing one which shall remain in
full force and effect until the bank is notified of its revocation.