PLEDGE; PRESUMPION IN FAVOR OF PLEDGE.

In case of doubt as to
whether a transacTon is a pledge or a daTon in payment, the
presumpTon is in favor of pledge, the laer being the lesser
transmission of rights and interests
PLEDGE; PACUM COMMISORIUM; PROHIBIED. he parTes gave
the deed of assignment the form of an absolute conveyance of Ttle
over the receivables assigned, essenTally for the convenience of the
assignee. Without such formally unlimited conveyance of Ttle, the
assignee would have to treat the deed of assignment as no more than
a deed of pledge or of chael mortgage. In other words, in such
hypotheTcal case, should the assignee seek to realize upon the security
given to him through the deed of assignment (which would then have
to comply with the documentaTon and registraTon requirements of a
pledge or chael mortgage), the assignee would have to foreclose upon
the securiTes or credits assigned and place them on public sale and
there acquire the same. It should be recalled that under the principle
which forbids a pactum commisorium ArTcle 2088, Civil Code), a
mortgagee or pledgee is prohibited from simply taking and
appropriaTng the personal property turned over to him as security for
the payment of a principal obligaTon. A deed of assignment by way of
security avoids the necessity of a public sale imposed by the rule on
pactum commisorium, by in eect placing the sale of the collateral up
front. 1. April 1966, Spouses Teodoro together with Teodoro Sr
executed a PN in favour of Manila Banking Corp (MBC); o Payable
within 120 days (unl Aug), with 12% interest per annum; o They
failed to pay and le balance of 15k as of September 1969; 2. May and
June 1966, executed two PNs; o 8k and 1k respecvely payable within
120 days and 12% per annum; o They made paral payment but sll
le 8.9k balance as of September 1969; 3. It appears than in 1964,
Teodoro Jr executed a Deed of Assignment of Receivables in favour of
MBC from Emergency Employment Administraon; o Amounted to 44k;
o The deed provided it was for consideraon of certain credits, loans,
overdras and other credit accommodaons extended to the spouses
and Teodoro Sr as security for the payment of said sum and interest
thereon; and that they release and quitclaim all its rights, tle and
interest in the receivables; 4. In the spulaons of fact, it was admied
by the pares: o That MBC extended loans to the spouses and Teodoro
Jr because of certain contracts entered into by laer with EEA for
fabricaon of Fshing boats and that the Philippine isheries
Commission succeeded EEA aer its abolion; o That non-payment of
the PNs was due to failure of the Commission to pay spouses; o That
the Bank took steps to collect from the Commission but no collecon
was eected; 5. or failure of the spouses and Teodor Sr to pay, MBC
instuted against them; o Teodoro Sr subsequently died so suit only
against the spouses; 6. TC favoured MBC; MR denied; o Spouses

appealed to CA but since issue pure queson of law, CA forwarded to

SC;