Yuliongsiu v PNB

Facts:

Yuliongsiu was the owner of the 2 vessels, purchased by installment however,

Yuliongsiu failed to pay for the vessels.

Subsequently, Yuliongsiu obtained a loan of P50k from PNB and pledged his vessels to
guarantee its payment.

Plaintiff made partial payments the remaining balance was renewed by executing 2
promissory notes in the bank’s favor. These notes were never paid.

PNB took possession of the pledged vessels after the first note became due and was not
paid. One of the boats was surrendered by PNB to the Phil. Shipping Commission which
rescinded the sale to plaintiff for failing to pay the remaining installments on the purchase price.
The other 2 boats were sold by PNB to third parties.

Yuliongsiu filed a case to recover the vessels or their value against PNB.

Issue:

Whether thing pledged needs to be in the actual possession of the pledge

Whether constructive deliver y is sufficient to constitute pledge

Ruling:

The parties stipulated that the contract is a pledge contract.

Therefore, the PNB as pledgee was entitled to the actual possession of the vessels. While it is
true that plaintiff continued operating the vessels after the pledge contract was entered into, his
possession was expressly made "subject to the order of the pledgee."

The provision of Art. 2110 of the present Civil Code being new — cannot apply to the pledge
contract here which was entered into on June 30, 1947.

On the other hand, there is an authority supporting the proposition that the pledgee can
temporarily entrust the physical possession of the chattels pledged to the pledgor without
invalidating the pledge. In such a case, the pledgor is regarded as holding the pledged property
merely as trustee for the pledgee.

Betita v. Ganzon, there has to be actual delivery of the chattels pledged.

Banco Español-Filipino v. Peterson, it says that symbolic delivery would suffice.

For purposes of showing the transfer of control to the pledgee, delivery of the keys to the
warehouse sufficed.

In other words, the type of delivery will depend upon the nature and the peculiar
circumstances of each case.

Here, the parties agreed that the vessels would be delivered by the "pledgor to the pledgor who
shall hold said property subject to the order of the pledgee."

Considering the circumstances of this case and the nature of the objects pledged, i.e., vessels
used in maritime business, such delivery is sufficient.

Since the PNB was in full control of the vessels thru Yuliongsiu, the former could take actual
possession at any time during the pledge to make more effective its security.

Therefore, the taking was not unlawful.