Ortiz v Kayanan GR No.

L-32974 (1979)

Even after his good faith ceases, the possessor can still retain the
property (Art 546) until he has been fully reimbursed for all the
necessary and useful expenses made by him on the property
The principal characteristic of the right of retention is its
accessory character. It is accessory to a principal
obligation
Considering that the right of the possessor to receive the
fruits terminates when his good faith ceases, it is
necessary, in order that this right to retain may be useful, to
concede to the creditor the right to secure
reimbursement from the fruits of the property by utilizing
its proceeds for the payment of the interest as well as the
principal of the debt while he remains in possession

Manila Banking Corporation v Teodoro GR No. 53955

(1989)

The character of the transactions between the parties is not

determined by the language used in the document but by their
intention

If it was intended to secure the payment of money, it must

be construed as a pledge
It has been held that a transfer of property by the debtor to
a creditor, even if sufficient to make an absolute
conveyance, should be treated as a pledge if the debt
continues in existence and is not discharged by the
transfer
Obviously, the deed of assignment was intended as collateral
security for the bank loans of appellants (Teodoros), as a
continuing guaranty for whatever sums would be owing by
defendants to plaintiff, as stated in stipulation No. 9 of the deed

In case of doubt as to whether a transaction is a pledge or a

dation in payment, the presumption is in favor of pledge,
the latter being the lesser transmission of rights and
interests

Yan Chu v CA GR No. L-78519 (1989)

The encashment of the deposit certificates was not a pacto

commissorio which is prohibited under Art. 2088 of the Civil Code
A pacto commissorio is a provision for the automatic
appropriation of the pledged or mortgaged property by the
creditor in payment of the loan upon its maturity
The prohibition against a pacto commissorio is intended to
protect the obligor, pledgor, or mortgagor against being
overreached by his creditor who holds a pledge or mortgage over
property whose value is much more than the debt
Where, as in this case, the security for the debt is also money
deposited in a bank, the amount of which is even less than the
debt, it was not illegal for the creditor to encash the time
deposit certificates to pay the debtors' overdue obligation, with
the latter's consent

Citibank v Sabeniano GR No. 156132 (2006)

General Requirement of Compensation:
Art. 1278 Compensation shall take place when two persons, in their
own right, are creditors and debtors of each other.
Art. 1279 In order that compensation may be proper, it is necessary;
(1) That each one of the obligors be bound principally, and that
he be at the same time a principal creditor of the other;
(2) That both debts consist in a sum of money, or if the things
due are consumable, they be of the same kind, and also of the
same quality if the latter has been stated;
(3) That the two debts be due;
(4) That they be liquidated and demandable;
(5) That over neither of them there be any retention or
controversy, commenced by third persons and communicated in
due time to the debtor.

Respondent Sabeniano and Citibank were creditor and debtor of

each other;

Citibank was creditor with respect to respondents loan and latter

was creditor with respect to her savings account with Citibank;

As far as her deposit account was concerned, since bank

deposits, whether fixed, savings, or current, should be

considered as simple loan or mutuum by the depositor to the
banking institution;

Both debts consist in sum of money;

Compensation takes place by operation of law, so even in the

absence of express authority from respondent, Citibank had
the right to effect the partial compensation of respondents
outstanding loans with her deposit account