Villanueva v.

Salvador
GR No. 139436
25 January 2006
Facts:
Spouses Salvador secured two loans from Ever Pawnshop, owned and
managed by Villanueva. They pledged their jewelry items for the loans that
they contracted. The first and second loan indicate 10 April 1992 and 22 May
1992, respectively, as the last day to redeem the jewelry.
The redemption periods came and went, but the spouses failed to redeem the
jewelry.
Their son partially paid the first loan on June 1 while the second loans
maturity date was extended to June 30.
o Due to the partial payment of the first loan, the loan was renewed with
regard to the remaining balance.
o As for the second loan, Ever Pawnshop provided that the spouses must
pay 20% of their second loan obligation on or before June 4, else, the
jewelry will be auctioned as scheduled.
Spouses Salvador failed to pay 20% of the second loan on June 4 and so, Ever
Pawnshop issued a notice regarding the public auction sale of the jewelry. The
notice appeared in Manila Bulletin on June 4, the very day of the auction
itself.
On July 1, the spouses tendered the 20% payment for the second loan, but
the pawnshop refused to accept it. The pawnshop informed the spouses that
the pledged jewelry had already been auctioned last June 4.
o However, it was later on found out that pieces of the pledged jewelry
items were still in the shop, indicating that the pawnshop either bought
some of the unredeemed pledgers or did not sell them.
As for the pledged jewelry for the first loan, Mrs. Salvador tried to redeem
them as well but all she got in response were unclear information as to their
whereabouts. Mr. Salvador also tried to tender payment of the amounts due
on both loans and demanded return of the pledged jewelry. However, Ever
Pawnshop refused to accept the tender.
Thus, a complaint was filed against Villanueva and Ever Pawnshop. The
spouses alleged that the public auction sale of the 2 sets of jewelry pledged
was not valid because it was done without notice.
o After summons were served to Villanueva, his counsel informed the
Salvadors that his client is now willing to accept the payment and have
the jewelry items for the first loan redeemed. However, the Salvadors
turned down this belated offer.
(Since the spouses turned down his offer...) Villanueva averred that he
reminded the spouses regarding the maturity dates and redemption period of
the loans. He also said he provided sufficient notice to the spouses as there
was a publication on June 4 in Manila Bulletin regarding the public auction of
the jewelry items.
o Villanueva said that there was a caveat printed on the dorsal side of
the pawnshop tickets issued to the spouses which state that the
pledged items shall be auctioned off if they are not redeemed before
the expiry date of the redemption period.

RTC ruled in favor of Salvadors and awarded them moral damages. Naturally,
Villanueva appealed. CA upheld RTCs decision.

Issue:
W/N there was valid notice of the sale - NO
W/N the award of moral damages was proper - NO
Held:
No valid notice of sale
The Pawnshop Regulation Act accord the pawner a 90-day grace period
from the date of maturity of the loan obligation within which to redeem
the pawn. Also, even before the lapse of the 90-day period, it also mandates
that the pawner be notified of the proposed auction sale through a
publication in at least 2 daily newspapers during the week preceding
the date of the auction sale.
o Petitioner failed in both aspects. Ever Pawnshop only caused
publication of the auction in one newspaper AND on the very day of
the scheduled auction sale itself. Verily, a notice of the auction sale on
the very day of the auction defeats the purpose of the notice which is
to inform the pawner beforehand that a sale is to occur.
Award of Moral Damages is Not Proper (the case discussed concepts first
then the ruling)
Proof of pecuniary loss is unnecessary to justify award of moral damages.
However, it is essential that the claimant satisfactorily proves the existence
of the factual basis of the damages and its causal connection to the
defendants wrongful act or omission.
o This is so because moral damages, although incapable of pecuniary
estimation, are designed to compensate the claimant for actual injury
suffered and not to impose penalty on the wrongdoer
Conditions required in awarding moral damages:
o There must be an injury, whether physical, mental, or psychological,
clearly sustained by the claimant
o There must be a culpable act or omission factually established
o The wrongful act or omission of the defendant must be the proximate
cause of the injury sustained by the claimant
o The award of damages is predicated on any of the case stated in
Article 2219 of the Civil Code
There need not be a showing that the defendant acted in a wanton or
malevolent manner, BUT there must still be proof of fraudulent action or
bad faith for a claim for moral damages to succeed.
Moral damages are generally not recoverable in culpa contractual, except
when bad faith supervenes and is proven
o Bad faith does not simply connote bad judgment or negligence; it
imports dishonest purpose or some moral obliquity and conscious
doing of a wrong, a breach of known duty through some motive or
interest or ill-will that partakes of the nature of the fraud
o The person claiming moral damages must provide convincing evidence
of the existence of bad faith (since good faith is presumed)

In this case, the cause of action arose from negligence of the petitioners.
While gross negligence may sometimes amount to bad faith, the negligence
in this case is just simple negligence. The RTCs categorical finding that the
case came about owing to the petitioners mistake in renewing the loan when
the sale of the article to secure the loan had already been effected
o RTCs factual finding was that the jewelry pawned for the first loan
were already auctioned in May. Due to an oversight, the pawnshop
committed a mistake when it allowed the renewal of the loan in June
despite the sale of jewelry in May.
Since there was no bad faith on the part of the pawnshop, awarding of moral
damages is not proper.