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G.R. No. L-53955 January 13, 1989 Manila Banking Corp. vs Teodoro 169 SCRA 95 THE MANILA BANKING CORPORATION, plaintiff-appellee, vs. ANA TACIO TEO!ORO, JR. an" GRACE ANNA TEO!ORO, defendantsappellants. This is an appeal fro the de!ision" of the Co#rt of $irst %nstan!e of Manila, Bran!h &'%% in Civil Case (o. )*1)* for !olle!tion of s# of one+ ,ased on pro issor+ notes e-e!#ted ,+ the defendants-appellants in favor of plaintiffappellee ,ank. The dispositive portion of the appealed de!ision .Re!ord on Appeal, p. //0 reads as follo1s2 345R5$6R5 7#dg ent is here,+ rendered .a0 senten!ing defendants, Anasta!io Teodoro, 8r. and 9ra!e Anna Teodoro 7ointl+ and severall+, to pa+ plaintiff the s# of :15,;/).11 pl#s 1<= interest per ann# fro Septe ,er /;, 1969 #ntil f#ll+ paid, in pa+ ent of :ro issor+ (otes (o. 11>*), pl#s the s# of :1,;;;.;; as attorne+?s fees@ and .,0 senten!ing defendant Anasta!io Teodoro, 8r. to pa+ plaintiff the s# of :*,9/>.)>, pl#s interest at 1<= per ann# fro Septe ,er /;, 1969 #ntil f#ll+ paid, in pa+ ent of :ro issor+ (otes (os. 11515 and 11699, pl#s the s# of :5;;.;; an attorne+?s fees. 3ith Costs against defendants. The fa!ts of the !ase as fo#nd ,+ the trial !o#rt are as follo1s2 6n April <5, 1966, defendants, together 1ith Anasta!io Teodoro, Sr., 7ointl+ and severall+, e-e!#ted in favor of plaintiff a :ro issor+ (ote .(o. 11>*)0 for the s# of :1;,><;.;; pa+a,le in 1<; da+s, or on A#g#st <5, 1966, at 1<= interest per ann# . Aefendants failed to pa+ the said a o#nt inspire of repeated de ands and the o,ligation as of Septe ,er /;, 1969 stood at : 15,1/).11 in!l#ding a!!r#ed interest and servi!e !harge. 6n Ma+ /, 1966 and 8#ne <;, 1966, defendants Anasta!io Teodoro, Sr. .$ather0 and Anasta!io Teodoro, 8r. .Son0 e-e!#ted in favor of plaintiff t1o :ro issor+ (otes .(os. 11515 and 116990

for :*,;;;.;; and :1,;;;.;; respe!tivel+, pa+a,le in 1<; da+s at 1<= interest per ann# . $ather and Son ade a partial pa+ ent on the Ma+ /, 1966 pro issor+ (ote ,#t none on the 8#ne <;, 1966 :ro issor+ (ote, leaving still an #npaid ,alan!e of :*,9/>.)> as of Septe ,er /;, 1969 in!l#ding a!!r#ed interest and servi!e !harge. The three :ro issor+ (otes stip#lated that an+ interest d#e if not paid at the end of ever+ onth shall ,e added to the total a o#nt then d#e, the 1hole a o#nt to ,ear interest at the rate of 1<= per ann# #ntil f#ll+ paid@ and in !ase of !olle!tion thro#gh an attorne+-at-la1, the akers shall, 7ointl+ and severall+, pa+ 1;= of the a o#nt over-d#e as attorne+?s fees, 1hi!h in no !ase shall ,e leas than :<;;.;;. %t appears that on 8an#ar+ <>, 196>, the Son e-e!#ted in favor of plaintiff a Aeed of Assign ent of Re!eiva,les fro the 5 ergen!+ 5 plo+ ent Ad inistration in the s# of :>>,6/5.;;. The Aeed of Assign ent provided that it 1as for and in !onsideration of !ertain !redits, loans, overdrafts and other !redit a!!o odations e-tended to defendants as se!#rit+ for the pa+ ent of said s# and the interest thereon, and that defendants do here,+ re ise, release and B#it!lai all its rights, title, and interest in and to the a!!o#nts re!eiva,les. $#rther. .10 The title and right of possession to said a!!o#nts re!eiva,le is to re ain in the assignee, and it shall have the right to !olle!t the sa e fro the de,tor, and 1hatsoever the Assignor does in !onne!tion 1ith the !olle!tion of said a!!o#nts, it agrees to do as agent and representative of the Assignee and in tr#st for said Assignee @ --- --- --.60 The Assignor g#arantees the e-isten!e and legalit+ of said a!!o#nts re!eiva,le, and the d#e and p#n!t#al pa+ ent thereof #nto the assignee, ... on de and, ... and f#rther, that Assignor 1arrants the solven!+ and !redit 1orthiness of ea!h and ever+ a!!o#nt.

.)0 The Assignor does here,+ g#arantee the pa+ ent 1hen d#e on all s# s pa+a,le #nder the !ontra!ts giving rise to the a!!o#nts re!eiva,le ... in!l#ding reasona,le attorne+?s fees in enfor!ing an+ rights against the de,tors of the assigned a!!o#nts re!eiva,le and 1ill pa+ #pon de and, the entire #npaid ,alan!e of said !ontra!t in the event of non-pa+ ent ,+ the said de,tors of an+ onthl+ s# at its d#e date or of an+ other defa#lt ,+ said de,tors@ --- --- --.90 ... This Assign ent shall also stand as a !ontin#ing g#arantee for an+ and all 1hatsoever there is or in the f#t#re there 1ill ,e 7#stl+ o1ing fro the Assignor to the Assignee ... %n their stip#lations of $a!t, it is ad itted ,+ the parties that plaintiff e-tended loans to defendants on the ,asis and ,+ reason of !ertain !ontra!ts entered into ,+ the def#n!t 5 ergen!+ 5 plo+ ent Ad inistration .55A0 1ith defendants for the fa,ri!ation of fishing ,oats, and that the :hilippine $isheries Co ission s#!!eeded the 55A after its a,olition@ that nonpa+ ent of the notes 1as d#e to the fail#re of the Co ission to pa+ defendants after the latter had !o plied 1ith their !ontra!t#al o,ligations@ and that the :resident of plaintiff Bank took steps to !olle!t fro the Co ission, ,#t no !olle!tion 1as effe!ted. $or fail#re of defendants to pa+ the s# s d#e on the :ro issor+ (ote, this a!tion 1as instit#ted on (ove ,er 1/, 1969, originall+ against the $ather, Son, and the latter?s 1ife. Be!a#se the $ather died, ho1ever, d#ring the penden!+ of the s#it, the !ase as against hi 1as dis iss #nder the provisions of Se!tion <1, R#le / of the R#les of Co#rt. The a!tion, then is against defendants Son and his 1ife for the !olle!tion of the s# of : 15,;/).11 on :ro issor+ (ote (o. 1>>*)@ and against defendant Son for the re!over+ of : *,/9>.).> on :ro issor+ (otes (os. 11515 and 11699, pl#s interest on ,oth a o#nts at 1<= per ann# fro Septe ,er /;, 1969 #ntil f#ll+ paid, and 1;= of the a o#nts d#e as attorne+?s fees.

(either of the parties presented an+ testi onial eviden!e and s#, itted the !ase for de!ision ,ased on their Stip#lations of $a!t and on then, do!# entar+ eviden!e. The iss#es, as defined ,+ the parties are2 .10 1hether or not plaintiff !lai is alread+ !onsidered paid ,+ the Aeed of Assign. 7#dg ent of Re!eiva,les ,+ the Son@ and .<0 1hether or not it is plaintiff 1ho sho#ld dire!tl+ s#e the :hilippine $isheries Co ission for !olle!tion.? .Re!ord on Appeal, p. <9- /<0. 6n April 1), 19)<, the trial !o#rt rendered its 7#dg ent adverse to defendants. 6n 8#ne *, 19)<, defendants filed a otion for re!onsideration .Re!ord on Appeal, p. //0 1hi!h 1as denied ,+ the trial !o#rt in its order of 8#ne 1>, 19)< .Re!ord on Appeal, p. /)0. 6n 8#ne </, 19)<, defendants filed 1ith the lo1er !o#rt their noti!e of appeal together 1ith the appeal ,ond .Re!ord on Appeal, p. /*0. The re!ord of appeal 1as for1arded to the Co#rt of Appeals on A#g#st <<, 19)< .Re!ord on Appeal, p. ><0. %n their appeal .Brief for the Appellants, Rollo, p. 1<0, appellants raised a single assign ent of error, that is C T4AT T45 A5C%S%6( %( DE5ST%6( AM6E(TS T6 A 8EA%C%AF R5MAG%(9 6$ T45 C6(TRACT B5T355( T45 :ART%5S, %( '%6FAT%6( 6$ FA3@ 45(C5, TA(TAM6E(T T6 FACG 6R 5&C5SS 6$ 8ER%SA%CT%6(. As the appeal involves a p#re B#estion of la1, the Co#rt of Appeals, in its resol#tion pro #lgated on Mar!h 6, 19*;, !ertified the !ase to this Co#rt .Rollo, p. <>0. The re!ord on Appeal 1as for1arded to this Co#rt on Mar!h /1, 19*; .Rollo, p. 10. %n the resol#tion of Ma+ /;, 19*;, the $irst Aivision of this Co#rt ordered that the !ase ,e do!keted and de!lared s#, itted for de!ision .Rollo, p. //0. 6n Mar!h ), 19**, !onsidering the length of ti e that the !ase has ,een pending 1ith the Co#rt and to deter ine 1hether s#pervening events a+ have rendered the !ase oot and a!ade i!, the Co#rt resolved .10 to reB#ire the parties to M6'5 %( T45 :R5M%S5S 1ithin thirt+ da+s fro noti!e, and in !ase the+ fail to ake the proper anifestation 1ithin the reB#ired period, .<0 to !onsider the !ase ter inated and !losed 1ith the entr+ of 7#dg ent a!!ordingl+ ade thereon .Rollo, p. >;0.

6n April <), 19**, appellee oved for a resol#tion of the appeal revie1 interposed ,+ defendants-appellants .Rollo, p. >10. The a7or iss#es raised in this !ase are as follo1s2 .10 1hether or not the assign ent of re!eiva,les has the effe!t of pa+ ent of all the loans !ontra!ted ,+ appellants fro appellee ,ank@ and .<0 1hether or not appellee ,ank #st first e-ha#st all legal re edies against the :hilippine $isheries Co ission ,efore it !an pro!eed against appellants for !olle!tions of loan #nder the pro issor+ notes 1hi!h are plaintiffs ,ases in the a!tion for !olle!tion in Civil Case (o. )*1)*. Assign ent of !redit is an agree ent ,+ virt#e of 1hi!h the o1ner of a !redit, kno1n as the assignor, ,+ a legal !a#se, s#!h as sale, dation in pa+ ent, e-!hange or donation, and 1itho#t the need of the !onsent of the de,tor, transfers his !redit and its a!!essor+ rights to another, kno1n as the assignee, 1ho a!B#ires the po1er to enfor!e it to the sa e e-tent as the assignor !o#ld have enfor!ed it against the de,tor. ... %t a+ ,e in the for of a sale, ,#t at ti es it a+ !onstit#te a dation in pa+ ent, s#!h as 1hen a de,tor, in order to o,tain a release fro his de,t, assigns to his !reditor a !redit he has against a third person, or it a+ !onstit#te a donation as 1hen it is ,+ grat#ito#s title@ or it a+ even ,e erel+ ,+ 1a+ of g#arant+, as 1hen the !reditor gives as a !ollateral, to se!#re his o1n de,t in favor of the assignee, 1itho#t trans itting o1nership. The !hara!ter that it a+ ass# e deter ines its reB#isites and effe!ts. its reg#lation, and the !apa!it+ of the parties to e-e!#te it@ and in ever+ !ase, the o,ligations ,et1een assignor and assignee 1ill depend #pon the 7#di!ial relation 1hi!h is the ,asis of the assign ent2 .Tolentino, Co entaries and 8#rispr#den!e on the Civil Code of the :hilippines, 'ol. 5, pp. 165-1660. There is no B#estion as to the validit+ of the assign ent of re!eiva,les e-e!#ted ,+ appellants in favor of appellee ,ank. The iss#e is 1ith regard to its legal effe!ts. % %t is evident that the assign ent of re!eiva,les e-e!#ted ,+ appellants on 8an#ar+ <>, 196> did not transfer the o1nership of the re!eiva,les to appellee ,ank and release appellants fro their loans 1ith the ,ank in!#rred #nder pro issor+ notes (os. 11>*),11515 and 11699.

The Aeed of Assign ent provided that it 1as for and in !onsideration of !ertain !redits, loans, overdrafts, and their !redit a!!o odations in the s# of :1;,;;;.;; e-tended to appellants ,+ appellee ,ank, and as se!#rit+ for the pa+ ent of said s# and the interest thereon@ that appellants as assignors, re ise, release, and B#it!lai to assignee ,ank all their rights, title and interest in and to the a!!o#nts re!eiva,le assigned .lst paragraph0. %t 1as f#rther stip#lated that the assign ent 1ill also stand as a !ontin#ing g#arant+ for f#t#re loans of appellants to appellee ,ank and !orrespondingl+ the assign ent shall also e-tend to all the a!!o#nts re!eiva,le@ appellants shall also o,tain in the f#t#re, #ntil the !onsideration on the loans se!#red ,+ appellants fro appellee ,ank shall have ,een f#ll+ paid ,+ the .(o. 90. The position of appellants, ho1ever, is that the deed of assign ent is a B#it!lai in !onsideration of their inde,tedness to appellee ,ank, not ere g#arant+, in vie1 of the follo1ing provisions of the deed of assign ent2 ... the Assignor do here,+ remise, release and quit-claim #nto said assignee all its rights, title and interest in the a!!o#nts re!eiva,le des!ri,ed here#nder. .5 phasis s#pplied ,+ appellants, first par., Aeed of Assign ent0. ... that the title and right of possession to said a!!o#nt re!eiva,le is to re ain in said assignee and it shall have the right to collect directly from the debtor, and 1hatever the Assignor does in !onne!tion 1ith the !olle!tion of said a!!o#nts, it agrees to do so as agent and representative of the Assignee and it trust for said Assignee ....Ibid. par. < of Aeed of Assign ent0.? .Re!ord on Appeal, p. <)0 The !hara!ter of the transa!tions ,et1een the parties is not, ho1ever, deter ined ,+ the lang#age #sed in the do!# ent ,#t ,+ their intention. Th#s, the Co#rt, B#oting fro the A eri!an 8#rispr#den!e .6* <d, Se!#red Transa!tion, Se!tion 5;0 said2 The !hara!ters of the transa!tion ,et1een the parties is to ,e deter ined ,+ their intention, regardless of 1hat lang#age 1as #sed or 1hat the for of the transfer 1as. %f it 1as intended to se!#re the pa+ ent of one+, it #st ,e !onstr#ed as a pledge. 4o1ever, even tho#gh a transfer, if regarded ,+ itself, appellate to have ,een a,sol#te, its o,7e!t and !hara!ter ight still ,e B#alified and e-plained ,+ a !onte poraneo#s 1riting de!laring it to have ,een a deposit of the propert+ as !ollateral se!#rit+. %t has ,een %d

that a transfer of propert+ ,+ the de,tor to a !reditor, even if s#ffi!ient on its far to ake an a,sol#te !onve+an!e, sho#ld ,e treated as a pledge if the de,t !ontin#es in e-isten!e and is not dis!harged ,+ the transfer, and that a!!ordingl+, the #se of the ter s ordinaril+ e-porting !onve+an!e, of a,sol#te o1nership 1ill not ,e given that effe!t in s#!h a transa!tion if the+ are also !o onl+ #sed in pledges and ortgages and therefore do not #nB#alifiedl+ indi!ate a transfer of a,sol#te o1nership, in the a,sen!e of !lear and a ,ig#o#s lang#age or other !ir!# stan!es e-!l#ding an intent to pledge. .FopeH v. Co#rt of Appeals, 11> SCRA 6)1 I19*<J0. Aefinitel+, the assign ent of the re!eiva,les did not res#lt fro a sale transa!tion. %t !annot ,e said to have ,een !onstit#ted ,+ virt#e of a dation in pa+ ent for appellants? loans 1ith the ,ank eviden!ed ,+ pro issor+ note (os. 11>*), 11515 and 11699 1hi!h are the s#,7e!t of the s#it for !olle!tion in Civil Case (o. )*1)*. At the ti e the deed of assign ent 1as e-e!#ted, said loans 1ere non-e-istent +et. The deed of assign ent 1as e-e!#ted on 8an#ar+ <>, 196> .5-h. K9K0, 1hile pro issor+ note (o. 11>*) is dated April <5, 1966 .5-h. ?A0, pro issor+ note 11515, dated Ma+ /, 1966 .5-h. ?B?0, pro issor+ note 11699, on 8#ne <;, 1966 .5-h. KCK0. At ost, it 1as a dation in pa+ ent for :1;,;;;.;;, the a o#nt of !redit fro appellee ,ank indi!ated in the deed of assign ent. At the ti e the assign ent 1as e-e!#ted, there 1as no o,ligation to ,e e-ting#ished e-!ept the a o#nt of :1;,;;;.;;. Moreover, in order that an o,ligation a+ ,e e-ting#ished ,+ another 1hi!h s#,stit#tes the sa e, it is i perative that it ,e so de!lared in #neB#ivo!al ter s, or that the old and the ne1 o,ligations ,e on ever+ point in!o pati,le 1ith ea!h other .Arti!le 1<9<, (e1 Civil Code0. 6,vio#sl+, the deed of assign ent 1as intended as !ollateral se!#rit+ for the ,ank loans of appellants, as a !ontin#ing g#arant+ for 1hatever s# s 1o#ld ,e o1ing ,+ defendants to plaintiff, as stated in stip#lation (o. 9 of the deed. %n !ase of do#,t as to 1hether a transa!tion is a pledge or a dation in pa+ ent, the pres# ption is in favor of pledge, the latter ,eing the lesser trans ission of rights and interests .FopeH v. Co#rt of Appeals, supra0. %n one !ase, the assign ents of rights, title and interest of the defendant in the !ontra!ts of lease of t1o ,#ildings as 1ell as her rights, title and interest in the land on 1hi!h the ,#ildings 1ere !onstr#!ted to se!#re an overdraft fro a ,ank a o#nting to :11;,;;;.;; 1hi!h 1as in!reased to :15;,;;;.;;, then to :165,;;;.;; 1as !onsidered ,+ the Co#rt to ,e do!# ents of ortgage !ontra!ts

inas #!h as the+ 1ere e-e!#ted to g#arantee the prin!ipal o,ligations of the defendant !onsisting of the overdrafts or the inde,tedness res#lting therefro . The Co#rt r#led that an assign ent to g#arantee an o,ligation is in effe!t a ortgage and not an a,sol#te !onve+an!e of title 1hi!h !onfers o1nership on the assignee .:eople?s Bank L Tr#st Co. v. 6do , 6> :hil. 1<6 I19/)J0. %% As to 1hether or not appellee ,ank #st have to e-ha#st all legal re edies against the :hilippine $isheries Co ission ,efore it !an pro!eed against appellants for !olle!tion of loans #nder their pro issor+ notes, #st also ,e ans1ered in the negative. The o,ligation of appellants #nder the pro issor+ notes not having ,een released ,+ the assign ent of re!eiva,les, appellants re ain as the prin!ipal de,tors of appellee ,ank rather than ere g#arantors. The deed of assign ent erel+ g#arantees said o,ligations. That the g#arantor !annot ,e !o pelled to pa+ the !reditor #nless the latter has e-ha#sted all the propert+ of the de,tor, and has resorted to all the legal re edies against the de,tor, #nder Arti!le <;5* of the (e1 Civil Code does not therefore appl+ to the . %t is of !o#rse of the essen!e of a !ontra!t of pledge or ortgage that 1hen the prin!ipal o,ligation ,e!o es d#e, the things in 1hi!h the pledge or ortgage !onsists a+ ,e alienated for the pa+ ent to the !reditor .Arti!le <;*), (e1 Civil Code0. %n the instant !ase, appellants are ,oth the prin!ipal de,tors and the pledgors or ortgagors. Resort to one is, therefore, resort to the other. Appellee ,ank did tr+ to !olle!t on the pledged re!eiva,les. As the 5 ergen!+ 5 plo+ ent Agen!+ .55A0 1hi!h iss#ed the re!eiva,les had ,een a,olished, the !olle!tion had to ,e !o#rsed thro#gh the 6ffi!e of the :resident 1hi!h disapproved the sa e .Re!ord on Appeal, p. 160. The re!eiva,le ,e!a e virt#all+ 1orthless leaving appellants? loans fro appellee ,ank #nse!#red. %t is ,#t proper that after their repeated de ands ade on appellants for the settle ent of their o,ligations, appellee ,ank sho#ld pro!eed against appellants. %t 1o#ld ,e an e-er!ise in f#tilit+ to pro!eed against a def#n!t offi!e for the !olle!tion of the re!eiva,les pledged. 345R5$6R5, the appeal is Ais issed for la!k of of the trial !o#rt is affir ed in toto. erit and the appealed de!ision