Professional Documents
Culture Documents
479,JANUARY24,2006
571
Parayvs.Rodriguez
G.R.No.132287.January24,2006.*
SPOUSES BONIFACIO and FAUSTINA PARAY, and VIDAL
ESPELETA, petitioners, vs. DRA. ABDULIA C. RODRIGUEZ,
MIGUELAR.JARIOLassistedbyherhusbandANTOLINJARIOL,SR.,
LEONORA NOLASCO assisted by her husband FELICIANO
NOLASCO, DOLORES SOBERANO assisted by her husband JOSE
SOBERANO,JR.,JULIAR.GENEROSO,TERESITAR.NATIVIDAD
and GENOVEVA R. SORONIO assisted by her husband ALFONSO
SORONIO,respondents.
CivilLaw;Pledge;Foreclosure;UndertheCivilCode,theforeclosureofa
pledgeoccursextrajudiciallywithoutinterventionbythecourts.Preliminarily,it
mustbeclarifiedthatthesubjectsaleofpledgedshareswasanextrajudicialsale,
specificallyanotarialsale,asdistinguishedfromajudicialsaleastypifiedbyan
execution sale. Under the Civil Code, the foreclosure of a pledge occurs
extrajudicially,withoutinterventionbythecourts.Allthecreditorneedsto
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*THIRDDIVISION.
572
572
SUPREMECOURTREPORTSANNOTATED
Parayvs.Rodriguez
do,ifthecredithasnotbeensatisfiedinduetime,istoproceedbeforeaNotary
Publictothesaleofthethingpledged.
Same;Same;Same;Redemption;Therightofredemptionasaffirmedunder
Rule 39 of the Rules of Court applies only to execution sales, more precisely
executionsalesofrealproperty.TherightofredemptionasaffirmedunderRule39
oftheRulesofCourtappliesonlytoexecutionsales,morepreciselyexecutionsales
ofrealproperty.
Same;Same;Same;Same;Thereisnolawinourstatutebookswhichveststhe
right of redemption over personal property.The right of redemption over
mortgaged real property sold extrajudicially is established by Act No. 3135, as
amended.Thesaidlawdoesnotextendthesamebenefittopersonalproperty.Infact,
thereisnolawinourstatutebookswhichveststherightofredemptionoverpersonal
property.ActNo.1508,ortheChattelMortgageLaw,ostensiblycouldhaveserved
asthevehicleforanylegislativeintenttobestowarightofredemptionoverpersonal
property, since that law governs the extrajudicial sale of mortgaged personal
property,butthestatuteisdefinitelysilentonthepoint.AndSection39ofthe1997
RulesofCivilProcedure,extensivelyrelieduponbytheCourtofAppeals,starkly
uttersthattherightofredemptionappliestorealproperties,notpersonalproperties,
soldonexecution.
Same;Same;Same;NoprovisionintheRulesofCourtorinanylawrequires
thatpledgedpropertiessoldatauctionbesoldseparately.TheCourtofAppeals
alsofoundfaultwiththeapparentsaleinbulkofthepledgedshares,notwithstanding
thefactthattheseshareswereownedbyseveralpeople,onthepremisethepledgors
wouldbedeniedtheopportunitytoknowexactlyhowmuchtheywouldneedto
shouldertoexercisetherighttoredemption.Thisconcernisobviouslyrendereda
nonissuebythefactthattherecanbenorighttoredemptioninthefirstplace.Rule
39oftheRulesofCourtdoesprovideforinstanceswhenpropertiesforeclosedatthe
sametimemustbesoldseparately,suchasinthecaseoflotsalesforrealproperty
underSection19.However,theseinstancesagainpertaintoexecutionsalesandnot
extrajudicialsales.NoprovisionintheRulesofCourtorinanylawrequiresthat
pledgedpropertiessoldatauctionbesoldseparately.
VOL.479,JANUARY24,2006
573
573
Parayvs.Rodriguez
PETITIONforreviewoncertiorariofadecisionoftheCourtofAppeals.
ThefactsarestatedintheopinionoftheCourt.
DioresLawOfficeforpetitioners.
FloridoandAssociatesforrespondentsHeirsofDra.A.Rodriguez.
GregorioB.EscasinasforrespondentD.Soberano.
MarioOrtizforrespondentsSps.Jariol.
TINGA,J.:
TheassaileddecisionoftheCourtofAppealstookoffonthepremisethat
pledged shares of stock auctioned off in a notarial sale could still be
redeemedbytheirowners.Thisnotioniswrong,andwethusreverse.
Thefacts,asculledfromtherecord,follow.
Respondentsweretheowners,intheirrespectivepersonalcapacities,of
sharesofstockinacorporationknownastheQuirinoLeonorRodriguez
RealtyInc.1Sometimeduringtheyears1979to1980,respondentssecured
bywayofpledgeofsomeoftheirsharesofstocktopetitionersBonifacio
andFaustinaParay(Parays)thepaymentofcertainloanobligations.The
sharespledgedarelistedbelow:
MiguelRodriguezJariol....
1,000sharescoveredbyStockCertificatesNo.011,060,061&062;
AbduliaC.Rodriguez........
300sharescoveredbyStockCertificatesNo.023&093;
LeonoraR.Nolasco............
407sharescoveredbyStockCertificatesNo.091&092;
GenovevaSoronio..............
699sharescoveredbyStockCertificatesNo.025,059&099;
_______________
1NowknownasQuinorFinancingCorporation.SeeRollo,p.5.
574
574
SUPREMECOURTREPORTSANNOTATED
Parayvs.Rodriguez
DoloresR.Soberano..........
699sharescoveredbyStockCertificatesNo.021,053,022&097;
JuliaGeneroso...................
1,100sharescoveredbyStockCertificatesNo.085,051,086&084;
TeresitaNatividad............
440sharescoveredbyStockCertificatesNos.054&0552
......
14Oct.1991
LeonoraR.Nolasco...................
277,381.82
......
14Oct.1991
GenovevaR.Soronio................
425,353.50
......
14Oct.1991
...................................................
38,385.44
......
14Oct.1991
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2Rollo,p.18.
3PennedbythenJudge(nowCourtofAppealsAssociateJustice)R.Dacudao.
4Rollo,p.36.
VOL.479,JANUARY24,2006
575
575
JuliaR.Generoso.....................
638,385.00
Parayvs.Rodriguez
......
25Oct.1991
TeresitaR.Natividad...............
264,375.00
......
11Nov.1991
DoloresR.Soberano.................
12,031.61
......
25Oct.1991
520,216.39
......
11Nov.1991
MiguelaJariol..........................
490,000.00
......
18Oct.1991
88,000.00
......
18Oct.19915
consign payments. However, in a Resolution dated 4 May 2000, the appellate court
recognizedthattheJariolspouseshadindeedmadetheconsignedpaymentsnowreferenced.
SeeCARollo,pp.279280.
6 ThroughaDecisiondated18November1992,pennedbythenJudge(nowCourtof
AppealsJustice)G.Jacinto.
576
576
SUPREMECOURTREPORTSANNOTATED
Parayvs.Rodriguez
auctionsale.7TheCourtofAppealsEighthDivisionhoweverreversedthe
RTC on appeal, ruling that the consignations extinguished the loan
obligations and the subject pledge contracts; and the auction sale of 4
November1991asnullandvoid.8Mostcrucially,theappellatecourtchose
toupholdthesufficiencyoftheconsignationsowingtoanimputedpolicy
ofthelawthatfavoredredemptionandmandatedaliberalconstructionto
redemption laws. The attempts at payment by respondents were
characterizedasmadeintheexerciseoftherightofredemption.
The Court of Appeals likewise found fault with the auction sale,
holdingthattherewasaneedtoindividuallysellthevarioussharesof
stockastheyhadbelongedtodifferentpledgors.Thus,itwasobserved
thattheminutesoftheauctionsaleshouldhavespecifiedindetailthebids
submitted for each of the shares of the pledgors for the purpose of
knowingthepricetobepaidbythedifferentpledgorsuponredemptionof
theauctionedsalesofstock.
PetitionersnowarguebeforethisCourtthattheywereauthorizedto
refuseastheydidthetenderofpaymentsincetheywereundertakingthe
auctionsalepursuanttothefinalandexecutorydecisioninCivilCases
Nos. R20120 and 20131, which did not authorize the payment of the
principal obligation by respondents. They point out that the amounts
consigned could not extinguish the principal loan obligations of
respondentssincetheywerenotsufficienttocovertheinterestsdueonthe
debt.Theylikewisearguethattheessentialproceduralrequisitesforthe
auctionsalehadbeensatisfied.
Weruleinfavorofpetitioners.
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7CARollo,pp.144147.
8 ThroughaDecisiondated29December1997,pennedbyAssociateJusticeJ.Rasul,
andconcurredinbyAssociateJusticesE.LabitoriaandM.Buzon.
VOL.479,JANUARY24,2006
577
577
Parayvs.Rodriguez
Thefundamentalpremisefromwhichtheappellatecourtproceededwas
thattheconsignationsmadebyrespondentsshouldbeconstruedinlightof
therulesofredemption,asifrespondentswereexercisingsuchright.In
that perspective, the Court of Appeals made three crucial conclusions
favorabletorespondents:thattheiractofconsigningthepaymentswith
the RTC should be deemed done in the exercise of their right of
redemption;thatthebuyeratpublicauctiondoesnotipsofactobecomethe
ownerofthepledgedsharespendingthelapseoftheoneyearredemptive
period; andthat thecollectivesale ofthe sharesof stockbelongingto
severalindividualownerswithoutspecificationoftheapportionmentinthe
applicationsofpaymentdeprivestheindividualownersoftheopportunity
toknowofthepricetheywouldhavetopayforthepurposeofexercising
therightofredemption.
Theappellatecourtsdwellingontherightofredemptionisutterlyoff
tangent.Therightofredemptioninvolvespaymentsmadebydebtorsafter
theforeclosureoftheirproperties,andnotthosemadeorattemptedtobe
made,asinthiscase,beforetheforeclosuresale.Theproperfocusofthe
CourtofAppealsshouldhavebeenwhethertheconsignationsmadeby
respondentssufficientlyacquittedthemoftheirprincipalobligations.A
pledgecontractisanaccessorycontract,andisnecessarilydischargedif
theprincipalobligationisextinguished.
Nonetheless,theCourtisnowconfrontedwiththisrathernewfangled
theory, as propounded by the Court of Appeals, involving the right of
redemptionoverpledgedproperties.Wehavenohesitationinpronouncing
suchtheoryasdiscreditable.
Preliminarily,itmustbeclarifiedthatthesubjectsaleofpledgedshares
wasanextrajudicialsale,specificallyanotarialsale,asdistinguishedfrom
ajudicialsaleastypifiedbyanexecutionsale.UndertheCivilCode,the
foreclosureofapledgeoccursextrajudicially,withoutinterventionbythe
courts.Allthecreditorneedstodo,ifthecredithasnotbeen
578
578
SUPREMECOURTREPORTSANNOTATED
Parayvs.Rodriguez
satisfiedinduetime,istoproceedbeforeaNotaryPublictothesaleofthe
thingpledged.9
Thephrasegivingduecoursetotheforeclosureandsaleatpublicauction
ofthevariouspledgessubjectofthesetwocasesmaygiverisetothe
impressionthatsuchsaleisjudicialincharacter.Whilethedecisiondid
authorizethesalebypublicauction,suchdeclarationcouldnotdetract
from the fact that the sale so authorized is actually extrajudicial in
character. Note that the final judgment in said cases expressly did not
directthesalebypublicauctionofthepledgedshares,butinsteadupheld
therightoftheParaystoconductsuchsaleattheirownvolition.
Indeed,asaffirmedbytheCivilCode,11thedecisiontoproceedwiththe
salebypublicauctionremainsinthesolediscretionoftheParays,who
couldverywellchoosenottoholdthesalewithoutviolatingthefinal
judgmentsintheafore
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9SeeCivilCode,Art.2112.
10Rollo,p.36.
11Art.2112.
VOL.479,JANUARY24,2006
579
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Parayvs.Rodriguez
mentionedcivilcases.Ifthesaleweretrulyincompliancewithafinal
judgmentororder,theParayswouldhavenochoicebuttostagethesale
forthentheorderdirectingthesalearisesfromjudicialcompulsion.But
nothinginthedispositiveportiondirectedthesaleatpublicauctionasa
mandatoryrecourse,andproperlysosincethesaleofpledgedpropertyin
publicauctionis,byvirtueoftheCivilCode,extrajudicialincharacter.
Therightof redemptionas affirmedunder Rule 39ofthe Rulesof
Courtappliesonlytoexecutionsales,morepreciselyexecutionsalesof
realproperty.
The Court of Appeals expressly asserted the notion that pledged
property, necessarily personal in character, may be redeemed by the
creditorafterbeingsoldatpublicauction.Yet,asafundamentalmatter,
does the right of redemption exist over personal property? No law or
jurisprudence establishes or affirms such right. Indeed, no such right
exists.
Therighttoredeempropertysoldassecurityforthesatisfactionofan
unpaidobligationdoesnotexistpreternaturally.Neitherisitpredicatedon
proprietaryright,which,afterthesaleofpropertyonexecution,leavesthe
judgmentdebtorandvestsinthepurchaser.Instead,itisabarestatutory
privilegetobeexercisedonlybythepersonsnamedinthestatute.12
The right of redemption over mortgaged real property sold
extrajudiciallyisestablishedbyActNo.3135,asamended.Thesaidlaw
doesnotextendthesamebenefittopersonalproperty.Infact,thereisno
lawinourstatutebookswhichveststherightofredemptionoverpersonal
property.ActNo.1508,ortheChattelMortgageLaw,ostensiblycould
haveservedasthevehicleforanylegislativeintenttobestowa
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12 See Magnov.Viola,61Phil.80,84(19341935);citing McQueenyvs.Toomey,36
Mont.,282;122Am.St.Rep.,358;92Pac.,56112Ann.Cas.,316;BankingCorporationof
Montanav.Hein,52Mont.,238;156Pac.,1085.SeealsoCastrov.IntermediateAppellate
Court,G.R.No.73859,29September1988,165SCRA654,661.
580
580
SUPREMECOURTREPORTSANNOTATED
Parayvs.Rodriguez
right of redemption over personal property, since that law governs the
extrajudicial sale of mortgaged personal property, but the statute is
definitelysilentonthepoint.AndSection39ofthe1997RulesofCivil
Procedure,extensivelyrelieduponbytheCourtofAppeals,starklyutters
that the right of redemption applies to real properties, not personal
properties,soldonexecution.
Tellingly, this Court, as early as 1927, rejected the proposition that
personalpropertymaybecoveredbytherightofredemption.InSibalv.
Valdez,13theCourtruledthatsugarcanecropsarepersonalproperty,and
thus,notsubjecttotherightofredemption. 14Nocountervailingstatutehas
beenenactedsincethenthatwouldaccordtherightofredemptionover
personalproperty,hencetheCourtcanaffirmthisdecadesoldrulingas
effectivetodate.
Sincethepledgedsharesinthiscasearenotsubjecttoredemption,the
CourtofAppealshadnobusinessinvokingandapplyingtheinexistent
rightofredemption.Wecannotthusagreethattheconsignedpayments
shouldbetreatedwithliberality,orsomehowconstruedashavingbeen
madeintheexerciseoftherightofredemption.Wealsomustrejectthe
appellatecourtsdeclarationthatthebuyerofatthepublicauctionisnot
ipsofactorenderedtheowneroftheauctionedshares,sincethedebtor
enjoystheoneyearredemptiveperiodtoredeemtheproperty.Obviously,
sincethereisnorighttoredeempersonalproperty,therightsofownership
vesteduntothepurchaserattheforeclosuresalearenotentangledinany
suspensiveconditionthatisimplicitinaredemptiveperiod.
TheCourtofAppealsalsofoundfaultwiththeapparentsaleinbulkof
thepledgedshares,notwithstandingthefactthattheseshareswereowned
by several people, on the premise the pledgors would be denied the
opportunitytoknow
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1350Phil.512(1927).
14Sibalv.Valdez,Id.,atp.524.
VOL.479,JANUARY24,2006
581
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Parayvs.Rodriguez
exactlyhowmuchtheywouldneedtoshouldertoexercisetherightto
redemption.Thisconcernisobviouslyrenderedanonissuebythefactthat
therecanbenorighttoredemptioninthefirstplace.Rule39oftheRules
ofCourtdoesprovideforinstanceswhenpropertiesforeclosedatthesame
time must be sold separately, such as in the case of lot sales for real
property under Section 19. However, these instances again pertain to
executionsalesandnotextrajudicialsales.NoprovisionintheRulesof
Courtorinanylawrequiresthatpledgedpropertiessoldatauctionbesold
separately.
Ontheotherhand,undertheCivilCode,itisthepledgee,andnotthe
pledgor,whoisgiventherighttochoosewhichoftheitemsshouldbesold
iftwoormorethingsarepledged.15Nosimilaroptionisgiventopledgors
under the Civil Code. Moreover, there is nothing in the Civil Code
provisions governing the extrajudicial sale of pledged properties that
prohibitsthepledgeeofseveraldifferentpledgecontractsfromauctioning
allofthepledgedpropertiesonasingleoccasion,orfromthebuyeratthe
auctionsaleinpurchasingallthepledgedpropertieswithasinglepurchase
price. The relative insignificance of ascertaining the definite
apportionmentsofthesalepricetotheindividualsharesliesinthefactthat
onceapledgeditemissoldatauction,neitherthepledgeenorthepledgor
can recover whatever deficiency or excess there may be between the
purchasepriceandtheamountoftheprincipalobligation.16
A different ruling though would obtain if at the auction, a bidder
expressed the desire to bid on a determinate number or portion of the
pledgedshares.Insuchacase,theremaylietheneedtoascertainwith
particularitywhichofthesharesarecoveredbythebidprice,sincenotall
ofthesharesmaybesoldattheauctionandcorrespondinglynotallofthe
pledgecontractsextinguished.Thesamesituationalsowouldlieif
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15SeeCivilCode,Art.2119.
16SeeCivilCode,Art.2115.
582
582
SUPREMECOURTREPORTSANNOTATED
Parayvs.Rodriguez
583
583
Parayvs.Rodriguez
ontheseloans,whichwerepeggedattherateof5%permonthor60%per
annum.BeforethisCourt,respondents,saveforDoloresSoberano,donot
contestthisinterestrateasallegedbypetitioners.Soberano,ontheother
hand,challengesthisinterestrateasusurious.17
Theparticularpledgecontractsdidnotformpartoftherecordselevated
tothisCourt.However,the5%monthlyinterestratewasnotedinthe
statementoffactsinthe14October1988RTCDecisionwhichhadsince
becomefinal.Moreover,thesaiddecisionpronouncedthatevenassuming
that the interest rates of the various loans were 5% per month, it is
doubtfulwhethertheinterestssochargedwereexorbitantlyorexcessively
usurious.Thisisbecauseforsometimenow,usuryhasbecomelegally
inexistent.18Thefinalityofthis1988Decisionisasettledfact,andthus
thetimetochallengethevalidityofthe5%monthlyinterestratehadlong
passed.Withthatinmind,thereisnoreasonfortheCourttodisagreewith
petitioners that in order that the consignation could have the effect of
extinguishingthepledgecontracts,suchamountsshouldcovernotjustthe
principalloans,butalsothe5%monthlyintereststhereon.
ItbearsnotingthattheCourtofAppealsalsoruledthatrespondentshad
satisfiedtherequirementsunderSection18,Rule39,whichprovidesthat
thejudgmentobligormaypreventthesalebypayingtheamountrequired
bytheexecutionandthecoststhathavebeenincurredtherein. 19However,
theprovisionappliesonlytoexecutionsales,andnotextrajudicialsales,as
evidencedbytheuseofthephrasessaleofpropertyonexecutionand
judgment obligor. The reference is inapropos, and even if it were
applicable,thefailureofthepaymenttocovertheinterestsduerendersit
insufficienttostaythesale.
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17Rollo,p.67.
18Id.,atp.36.
19SeeRulesofCourt,Rule39,Sec.18.
584
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SUPREMECOURTREPORTSANNOTATED
Parayvs.Rodriguez
TheeffectofthefinalityofthejudgmentsinCivilCasesNos.R20120
andR20131shouldalsonotbediscounted.Petitionersrighttoproceed
withtheauctionsalewasaffirmednotonlybylaw,butalsobyafinal
court judgment. Any subsequent court ruling that would enjoin the
petitionersfromexercisingsuchrightwouldhavetheeffectofsuperseding
afinalandexecutoryjudgment.
Finally,wecannothelpbutobservethatrespondentsmayhavesaved
themselvesmuchtroubleiftheysimplyparticipatedintheauctionsale,as
they are permitted to bid themselves on their pledged properties. 20
Moreover,theywouldhavehadabetterrighthadtheymatchedtheterms
of thehighestbidder.21 Under thecircumstances,with thehigh interest
paymentsthataccruedafterseveralyears,respondentswereevenplacedin
afavorablepositionbythepledgeagreements,sincethecreditorwouldbe
unabletorecoveranydeficiencyfromthedebtorsshouldthesalepricebe
insufficienttocovertheprincipalamountswithinterests.Certainly,had
respondentsparticipatedintheauction,therewouldhavebeenachancefor
them to recover the shares at a price lower than the amount that was
actuallyduefromthemtotheParays.Thatrespondentsfailedtoavailof
thisbeneficialresortwhollyaccordedthembylawistheirloss.Now,all
respondentscanrecoveristheamountstheyhadconsigned.
WHEREFORE,thepetitionisGRANTED.Theassaileddecisionofthe
CourtofAppealsisSETASIDEandthedecisionoftheCebuCityRTC,
Branch 16, dated 18 November 1992 is REINSTATED. Costs against
respondents.
SOORDERED.
Quisumbing (Chairperson), Carpio and CarpioMorales, JJ.,
concur.
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20SeeCivilCode,Art.2113.
21Ibid.
VOL.479,JANUARY24,2006
585
585
Republicvs.Naguiat
Petition granted, assailed decision set aside. That of the Cebu City
RegionalTrialCourt,Br.16reinstated.
Note.Thelegalperspectivewithinwhichtherighttoredeemcanstill
beavailedofornotmustbeviewedinthelightofthe dictum thatthe
policy of the law is to aid rather than defeat the right of redemption.
(Cometavs.CourtofAppeals,351SCRA294[2001])
o0o
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