G.R. No. 18500 - Sarmiento vs. Javellana

On August 28, 1911, the defendant loaned the plaintiffs the sum of P1,500 at an interest rate of 25% per annum for a term of one year.
To secure the loan, the plaintiffs pledged a collection of jewels consisting of:

The parties appraised the pledged jewelry at P4,000, and the loan is evidenced by two documents (Exhibits A and 1), which state a total amount of P1,875—this includes the interest on the borrowed sum.

Upon the loan’s maturity on August 31, 1912, plaintiff Eusebio M. Villasenor was unable to settle the debt, leading him to secure an extension from the defendant.

The extension was granted with the understanding that the loan would continue at the 25% per annum interest rate.
The condition attached was that the security (i.e., the pledged jewels) must remain sufficient to cover the capital and accrued interest.

In August 1919, Villasenor, accompanied by Carlos M. Dreyfus, went to the defendant’s house to redeem the jewels by offering to pay P11,000.

The defendant refused, stating that the period for redeeming the jewels had expired.
Subsequent offers by the plaintiffs to redeem the jewels, upon paying the outstanding debt, were similarly rebuffed.

The defendant argued that after the loan’s maturity, he had requested that Villasenor settle the debt and redeem the jewelry, as he required funds for a land purchase.
He further alleged that plaintiff Filomena Sarmiento had, one month later, offered to sell him the jewels for P3,000.

According to his account, he directed her to consult his brother, Catalino Javellana, regarding the offer.
Subsequently, on the following day, Filomena Sarmiento returned and received P1,125—the balance remaining after deducting the plaintiffs’ loan—from the defendant.

The positive testimony of Filomena Sarmiento denying any such sale.
Insufficient corroboration from Jose Sison, whose evidence was deemed inadequate to support the purchase allegation.

Notably, the defendant retained possession of the original documents evidencing the loan and mortgage (Exhibits A and 1), which cast doubt on his version of events.

Both parties introduced evidence regarding the value of the jewels in the event of non-return, with the trial court establishing the mutually acceptable valuation of P12,000.
The central dispute, therefore, was whether the defendant was obligated to return the jewels or their appraised value (P12,000) upon the plaintiffs’ payment of the debt with accrued interest.

The defendant contended that the plaintiffs’ action for recovering the pledged jewels should be declared prescribed.
He argued that since the contract was executed on August 28, 1911, and the loan term was for one year, the right to enforce the pledge should have accrued from the contract’s execution, thereby falling outside of the legally permitted prescription period.
The plaintiffs countered that the right of redemption accrues only upon the expiration of the loan term—August 31, 1912.
The court evaluated that the contract of pledge, since it was in writing, naturally carries an obligation for the return of the pledged items upon fulfillment of the debt, thus affecting how prescription is computed.

Whether the defendant is obligated to return the pledged jewels—or their appraised value of P12,000—upon the plaintiffs’ payment of P1,500 plus the accrued interest at 25% per annum.

Whether the defendant’s claim of having acquired the jewels through a sale from Filomena Sarmiento is sufficiently corroborated by the evidence, given the conflicting testimonies.

How to compute the prescription period for the plaintiffs’ action to recover the pledged jewelry:

Whether the right to redeem the pledge accrued on the date of the execution of the contract (August 28, 1911) or upon the maturity of the loan (August 31, 1912).

Whether the existence of a written contract of pledge intrinsically grants an enforceable right of redemption and influences the prescription period accordingly.

The implications of the retention by the defendant of the original documents evidencing the loan and pledge on the validity of his claim regarding the sale.