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041. Yau Chu v.

Court of Appeals
G.R. No. L-78519/26 September 1989/First Division/Petition for Revie on !ertior"ri
#i$tori" %"& !'& ("ssiste) b* 'er '&sb"n)+ ,i$'"e  petitioners
!o&rtt of 0p
"s++ F"mi
* S"vi
nss "n3
"n3++ "n)/
or !0,S
!0,S 4r")in
 nte
s+ n$.
n$. 
De$ision b* . Grino-0&ino+ Diest b* Pip

Short Versio
Version:n: Victoria bought cement from CAMS and secured her payments with
deeds of assignment over her time deposits in Family Savings Bank. She assigned about
!"#$ worth but her obligations to CAMS came up to about %#%$. CAMS re&uested the
bank to encash the time deposit certi'cates( which the bank did only after calling up
and obtaining Victoria)s consent. Victoria then sued the bank and CAMS for alleged
 p"$t&m $ommissori&m.  *he Court ruled against her( as the prohibition on  p"$t&m
$ommissori&m was enacted in order to protect debtors from creditors who automatically
appropriate pledged or mortgaged property which might have a higher value than the
debt. +here 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 certi'cates to pay the debtors) overdue obligation( with the latter)s consent.

Facts: Since ,-#( Victoria /au Chu had been purchasing cement on credit from CAMS.
 *o guaranty payment for her cement withdrawals( she e0ecuted in favor of CAMS deeds
of assignment of her time deposits in Family Savings Bank. *he total amount came up to
!"#$. 10cept for serial numbers and the dates of the time deposit certi'cates( the
deeds of assignment prepared by Victoria)s lawyer uniformly read2

... 4'"t t'e "ssinment serves "s " $o"ter" or &"r"ntee for t'e p"*ment of m* 
n it'
it' t'e s"i)
s"i) !0,S
!0,S 4R0D
NGG N4
S+ N!.
N!. on "$$o
&ntt of m* 
$ement it')r"" from s"i) $omp"n*+ per sep"r"te $ontr"$t ee$&te) beteen &s.

3n 4uly ,-#( CAMS noti'ed the bank that Victoria had an unpaid account with it in
the sum of about !,%$ and re&uested the encashment of the time deposit certi'cates
assigned to it by Victoria. As proof( it submitted to the bank a letter from Victoria
ng her outstan
g account
account with CAMS
CAMS reach
ing %#%.5
$. *he bank
bank verball
advised Victoria of CAMS) re&uest and after she verbally agreed( the bank encashed the
certi'cates and delivered about "!$ because one time deposit lacked the proper

Victoria then turned around and demanded that the bank and CAMS restore her time
deposit. +hen both refused( she 'led a complaint to recover the sum from them before
the 6*C of Makati. *he 6*C dismissed the complaint for lack of merit. Court of Appeals
a7rmed. Before the Supreme Court she argued that the encashment of her time deposit
certi'cates was p"$t&m
was p"$t&m $ommissori&m.

Issue: 8id the encashm

ent of Victo
s time deposit
deposit certi'
es amount
amount to
 p"$t&m $ommissori&m: 9:.

Ruling: etition 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 certi'cates into cash was to present
them to the bank for encashment after due notice to the debtor.
The encashent of the !eposit certi"cates #as not a  pactum
commissorium as prohi$ite! un!er Article %0&& of the Civil Co!e. A  pactum
commissorium is a provision for the automatic appropriation of the ple!ge! or
ortgage! propert' $' the cre!itor in pa'ent of the loan upon its aturit'.
 *his prohibition is intended to protect the obligor( pledgor( or mortgagor against being
overreached by his creditor who holds a pledge or mortgage over property whose value
is much more than the debt. (here) as in this case) the securit' for the !e$t is
also one' !eposite! in a $an*) the aount of #hich is even less than the
!e$t) it is not illegal for the cre!itor to encash the tie !eposit certi"cates to
pa' the !e$tors+ over!ue o$ligation) #ith the latter+s consent.

Voting: N"rv"s"+ !r&; and ,e)i")e"+ .+ concur.

G"n$"*$o+ .+ no part.