March 13, 1911
Arenas et al delivered their jewelry to Perello for the latter to sell on commission. Instead of selling, Perello pledged the jewelry to the pawnshop of Raymundo, and appropriated the money. Perello was then sentenced with estafa. The pawnshop owner/pledgee, Raymundo, still possessed the jewelry of Arenas and refused to return the deliver the jewelry to the sheriff as requested by the owner Arenas. Hence, Arenas filed a suit against the pawnshop owner.
Raymundo prayed that the complaint be dismissed and argued that the jewelry were pledged to him by Perello as a security for a the loan (P1,524); and that one of the sons of the jewelry owner, Gabriel La O, mediated in the pawning transaction.
RTC: Pawnshop owner Raymundo must restore the jewelry to the owner, with reservation of the pawnshop owner’s right to file a case against the proper party (i.e. Perello).
Raymundo filed a bill of exception. Arenas filed an action for replevin.
CA: Affirmed RTC.
Issue and Ruling:
Should Raymundo return the jewelry to the rightful owner although he loaned money to the embezzler? Yes.
- It did not acquire the jewelry in public auction, although it acquire it in good faith;
- The real owner of the jewelry did not enter into contract with the pledgee pawnshop. In a pledge, the pledgor must be the real owner; Under Article 2185 of NCC, the pledgor must be the absolute owner of the thing pledged.
- It is unreasonable to oblige the real jewelry owner to (a) lose his property or (b) pay for it twice (first, by purchasing it; second, by redeeming it);
- The pawnshop released all the loan money to the “estafador” or embezzler and nothing on the party of the owner;
- Pawnshops are constantly receiving security for loans. Hence, they are expected by law to exercise more diligence.