Case Digest (G.R. No. 156978)
Facts:
Manila Surety & Fidelity Company, Inc. v. Rodolfo R. Velayo, G.R. No. L-21069, October 26, 1967, Supreme Court En Banc, Reyes, J., writing for the Court.In 1953, Manila Surety & Fidelity Company, Inc. (the surety) executed a bond for P2,800 at the request of Rodolfo Velayo to procure the dissolution of a writ of attachment issued in favor of Jovita Granados in a suit against Velayo in the Court of First Instance of Manila. Velayo agreed to pay an annual premium of P112 and to indemnify the surety for any loss, costs and attorney’s fees it might incur under the bond.
As collateral “by way of pledge,” Velayo delivered four pieces of jewelry to the surety, granting it power to sell the items if the surety paid or became liable under the bond and to apply the proceeds to any amounts paid, costs and legal expenses. The pledge instrument also allowed the surety to demand additional security should the collateral diminish in value.
Judgment was rendered for Granados against Velayo; execution was returned unsatisfied and the surety paid P2,800. The surety sold the pledged jewelry, netting only P235, and then sued Velayo to recover the balance. Velayo invoked Article 2115 of the 1950 Civil Code, contending that sale of the pledged chattels extinguished his principal obligation and that no deficiency could be recovered by the creditor.
The Municipal Court denied Velayo’s defense and rendered judgment for the surety. On appeal the Court of First Instance of Manila likewise overruled Velayo and awarded the surety P2,565 (the deficiency), interest at 12-1/...(Subscriber-Only)
Issues:
- Does the sale of pledged chattels bar the creditor from recovering any deficiency from the debtor under Article 2115 of the 1950 Civil Code?
- Does the characterization of the collateral as merely an "added protection" (rather than a principal mortgage-like agreement) prevent the applica...(Subscriber-Only)
Ruling:
- (Subscriber-Only)
Ratio:
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Doctrine:
- (Subscriber-Only)