Ong v. Intermediate Appellate Court
REITERATIONFacts
1. The Antecedents: Madrigal Shipping Co., Inc. obtained a loan from Consolidated Bank and Trust Corporation (Solidbank) and pledged its barge and tugboat as security. Madrigal Shipping Co., Inc. failed to repay the loan. Subsequently, the pledged barge was sold at a public auction by virtue of a writ of execution from the National Labor Relations Commission, and petitioner Honesto Ong purchased it in good faith. Solidbank filed a complaint for Replevin with Damages against Honesto Ong and others, alleging conspiracy to place the barge beyond the bank's reach. 2. Procedural History: Solidbank filed a replevin suit against Honesto Ong and others before the Court of First Instance (CFI). The CFI initially issued an order for the seizure of the barge, which was later lifted. After various motions and oppositions, the CFI ordered the petitioners to post a counterbond of P400,000.00. Upon failure to post the counterbond, the CFI ordered the delivery of the barge to Solidbank. The petitioners filed a second motion for reconsideration, which was denied. They then elevated the matter to the Intermediate Appellate Court (IAC) via a petition for certiorari. The IAC dismissed the petition for lack of merit and denied the subsequent motion for reconsideration. 3. The Petition: This petition for review on certiorari seeks to reverse the decision of the Intermediate Appellate Court. The petitioners argue that the contract of pledge between Solidbank and Madrigal Shipping Co., Inc. is not binding on them as third persons because it was not registered under the Tariff and Customs Code. They also question the necessity of posting a counterbond. The Supreme Court is asked to determine whether the unregistered pledge is binding on third parties and whether the requirement for a counterbond was legally justified.
Issue(s)
Whether or not the contract of pledge entered into by and between Solidbank and Madrigal Shipping Co., Inc. is binding on the petitioners Ong. Whether or not there is a necessity for the Ongs to post a counterbond in the amount of P400,000.00.
Ruling
The petition is DISMISSED for lack of merit, and the assailed decision dated January 31, 1986 of the Intermediate Appellate Court is AFFIRMED.
Ratio Decidendi
On the binding effect of the pledge agreement on petitioners Ong: The Court held that the pledge agreement is binding on the petitioners Ong. Article 2096 of the Civil Code requires a pledge to be in a public instrument containing the description of the thing pledged and the date of the pledge to take effect against third persons. Furthermore, jurisprudence interprets this to mean that possession of the thing pledged must be delivered to the pledgee. In this case, the Pledge Agreement was a notarized public instrument, and the subject barge was delivered to Solidbank, which had it moored and guarded. Therefore, all requirements for the pledge to be effective against third persons were complied with. Article 2090 of the Civil Code grants the creditor the right to retain the thing pledged until the debt is paid, making Solidbank a lawful possessor of the barge. On the necessity for the Ongs to post a counterbond: The Court affirmed the necessity for the Ongs to post a counterbond. Under the Rules of Court, a defendant in a replevin suit may demand the return of the property by filing a redelivery bond executed to the plaintiff in double the value of the property. This right must be exercised within the statutory periods specified in Sections 5 and 6 of Rule 60. The purpose of the counterbond is to protect the defendant's interest from undue damage and to secure the plaintiff should the action be adjudged meritorious. The Court found that the lower court exercised prudence by requiring the petitioners to post a bond to stand as security for Solidbank, should the suit for replevin prosper, mirroring the bond posted by Solidbank to protect the Ongs' interest.
Main Doctrine
A pledge agreement, to be binding on third persons, must be in a public instrument containing the description of the thing pledged and the date of the pledge, and possession of the thing pledged must be delivered to the pledgee. A defendant in a replevin suit seeking to retain possession of the property must post a counterbond within the statutory periods.