Art. 2100.

The pledgee cannot deposit the thing pledged with a third person,
unless there is a stipulation authorizing him to do so.

The pledgee is responsible for the acts of his agents or employees with respect
to the thing pledged.

GR: Pledgee cannot deposit the thing pledged

EXC: parties stipulated on an authorization to pledge

RMMBR:

>Third persons who are NOT parties to the principal obligation may secure the
latter by pledging or mortgaging their own property. (Art.2085)

>Pledgee is liable for the loss or deterioration of the thing pledged caused by
the acts or negligence of the agents or employees of the pledgee.

Example No.1:

“PR” pawned her engagement ring valued at P100k at “PE Pawnshop.” While
“PR” was out using the money she got from the pawnshop, the latter—having
planned to close for a week for the holidays—deposited “PR’s” engagement
ring to “DRY.” Is the deposit valid? (Ask class)

No. Art. 2100 prohibits the deposit of pledged things to third persons absent a
stipulation authorizing him to do so.

Example No.2:

Using the same entities in the previous example, assume that the ring was not
deposited to “DRY” but was kept inside the glass boxes of “PE Pawnshop” nor
did the pawnshop close for the holidays. Miss Matcha Ooson, one of the
employees of the said pawnshop, was informed of the pawned engagement
ring and upon seeing it in the glass box, she took out and put it on her finger
which fit her like a glove and planned to wear it until “PR” returns to pay his debt
and claim the ring. While Miss Ooson was washing her hands, the ring slipped off
of her finger, and it fell in the sink and down the drain, making it impossible to be
retrieved. Who should be held liable for the loss of the ring? (Ask class)

The pledgee pawnshop is to be held liable for the loss of the ring because under
Art. 2100, The pledgee is responsible for the acts of his agents or employees with
respect to the thing pledged.
Art. 2101. The pledgor has the same responsibility as a bailor in commodatum in
the case under Article 1951.

Art. 1951. The bailor (pledgor; debtor; the one who delivers the thing pledged to
the creditor) who, knowing the flaws of the thing loaned, does not advise the
bailee (pledgee; creditor; one who receives the thing pledged) of the same,
shall be liable to the latter for the damages which he may suffer by reason
thereof.

Example:
Hairy Rocker pledged his Macbook Air to Sass Abelgas. He (HR) knew that his
laptop tends to overheat if it gets charged beyond 3hours, but he did not warn
Sass about it, fearing that she might not accept the laptop if she found out
about it. After the said transaction, Sass wanted to check out the laptop so she
charged it for 5 hours and while waiting went out to watch Justice League.
While she was out, the laptop overheated after being charged for more than 3
hours and exploded causing Sass’s house to be burned down to ashes. Who
should be held liable for the destruction of Sass’s humble abode? (ask class)

Hairy Rocker should be held liable because under Art. 2101, in relation to Art.
1951, The bailor (pledgor; debtor; the one who delivers the thing pledged to the
creditor) who, knowing the flaws of the thing loaned, does not advise the bailee
(pledgee; creditor; one who receives the thing pledged) of the same, shall be
liable to the latter for the damages which he may suffer by reason thereof.
Art. 2102. If the pledge earns or produces fruits, income, dividends, or interests,
the creditor shall compensate what he receives with those which are owing him;
but if none are owing him, or insofar as the amount may exceed that which is
due, he shall apply it to the principal. Unless there is a stipulation to the contrary,
the pledge shall extend to the interest and earnings of the right pledged.

In case of a pledge of animals, their offspring shall pertain to the pledgor or

owner of animals pledged, but shall be subject to the pledge, if there is no
stipulation to the contrary. (1868a)

Extent of Pledge:

1. Fruits, income, dividends, or interests

>Creditor SHALL COMPENSATE what he receives which are due to him

>If the fruits, et al or the amount exceeds that which is due him, the same
shall be APPLIED to the Principal Obligation (to pay)

2. Interest and earnings of the right pledged

3. Offsprings of animals pledged

>Pratus sequitor ventrem – offspring follows the mother

This legal maxim means that the offspring follows the dam (mother). The
legal presumption, in the absence of proof to the contrary, is that the calf,
as well as its mother belongs to the owner of the latter, by the right of
accretion (US v. Caballero, G.R. No. 8608, September 26, 1913).

Thus, when the ownership over the offspring of the animal when the male
and female belongs to different owners, the owner of the female was
considered also the owner of the young, unless there is a contrary custom
or speculation.
Art. 2115. The sale of the thing pledged shall extinguish the principal obligation,
whether or not the proceeds or the sale are equal to the amount of the principal
obligation, interest and expenses in a proper case. If the price of the sale is
more than said amount, the debtor shall not be entitled to the excess, unless it is
otherwise agreed. If the price of the sale is less, neither shall the creditor be
entitled to recover the deficiency, notwithstanding any stipulation to the
contrary.

RULES:
(a) Sale of thing pledged => extinguishment of principal obligation

(b) If Price is MORE => GR: excess goes to the creditor

EXC: unless there is an agreement on the contrary

(c) If Price is LESS => creditor is NOT entitled to the deficiency.

NOTA BENE:

>A contrary stipulation on Rule (c) is VOID for being contrary to law.

>EXTINGUISHMENT OF PLEDGE

1. For the same causes as all other obligations (Art. 1231)

2. Return of the thing pledged by the pledgee to the pledgor (Art. 2110)

3. Statement in writing by the pledgee that he renounces or abandons the

pledge (Art. 2111)

4. Payment of the debt (Art. 2105)

5. Sale of the thing pledged at public auction (Art. 2115)

Example:

FACTS:
Mommy Dionesia pledged to her surety her jewelries to indemnify the latter in
case it (the surety) would be obliged to pay the creditors. The surety paid P5,600
to the creditors. To recover the amount , he sold Mommy Dionesia’s jewelries at
a public auction, but unfortunately received only P1,000.
ISSUE:

May the surety recover the deficiency from Mommy Dionesia?

Held:

No, the surety may not recover the deficiency from Mommy Dionesia anymore.
Under Art. 2115 of the NCC, xxx.

The surety had other options such as specific performance on the principal
obligation. But since he opted for foreclosure, he is bound by the rules enshrined
in Art. 2115. (Manila Surety & Fidelity Co., Inc. v. Velayo)
Art. 2116. After the public auction, the pledgee shall promptly advise the
pledgor or owner of the result thereof.

(Remember “Obligations of the Pledgee”)

1. To take care of the thing with the diligence of a good father of a family.
(Art. 2099)
2. To not use the thing unless authorized or by the owner or its preservation
requires its use. (Art. 2104)
3. To not deposit the thing with a 3rd person unless so stipulated. (Art. 2100)
4. To be responsible for acts of agents and employees regarding the thing.
(Art. 2100)
5. To advise pledgor of danger of the thing. (Art. 2107)
6. To advise pledgor of the result of the public auction (Art. 2116)
Art. 2117. Any third person who has any right in or to the thing pledged may
satisfy the principal obligation as soon as the latter becomes due and
demandable.

Rights of a Third Person to Pay the Debt

(Remember Art. 2085, last par.)

Example:

Anne Heussaff promised to give Edcarl her diamond engagement ring if Edcarl
should pass the Bar. Anne Heussaff needed money, so she pledged the ring
with Christian Grey to secure a loan. When the debt becomes due and
demandable, Edcarl, if he passed the Bar, may pay the debt (and more*wink*
hehe) to Christian Grey and thus get the diamond ring. Christian Grey cannot
refuse payment by Edcarl because he has a right in the thing pledged.