Short answer. No. Article 2112 requires the sale of a pledged thing to be made before a Notary Public, at public auction, and with notification to the debtor and the owner, stating the amount for which the sale is to be held. A quiet disposal skips the formalities the article prescribes.
What the law says
This sale shall be made at a public auction, and with notification to the debtor and the owner of the thing pledged in a proper case, stating the amount for which the public sale is to be held.
Civil Code, Article 2112 — Extrajudicial Sale of the Pledge. Read the full provision →
What the article actually requires
The creditor whose credit has not been satisfied in due time may proceed to sell the thing pledged, but not on his own terms. He goes before a Notary Public; the sale is by public auction; and there must be notification to the debtor and the owner, which is a distinction that matters where the item belongs to somebody other than the borrower. The notice is not a courtesy note either — the article requires it to state the amount for which the public sale is to be held, so the owner knows what figure would redeem the item and what the auction is being run to recover.
Two auctions before anything is kept
The article builds in a second chance. If the thing is not sold at the first auction, a second one must be held with the same formalities. Only if that also fails may the creditor appropriate the thing pledged — and even then he takes it on a fixed condition: he shall be obliged to give an acquittance for his entire claim. In other words, keeping the item wipes out the whole debt, not merely the part its value covers. That is the price the law charges for the shortcut, and it explains why a lender would rather sell than keep.
The owner is not a spectator at the auction
Article 2113 gives the pledgor or owner the right to bid, and more than that, a better right if he offers the same terms as the highest bidder. The creditor may bid too, but his offer is not valid if he is the only bidder — which is the rule that stops a lender from staging an auction nobody else attends and buying the item himself for the amount owed. Article 2116 completes the sequence: after the public auction the pledgee must promptly advise the pledgor or owner of the result.
What to do if your item is already gone
Ask, in writing, for the pawn ticket details, the date the loan matured, the notice that was sent and to what address, the notary before whom the sale was held, and the result of the auction. Those are the points the article turns on, and a lender who cannot produce them has a problem. Pawnshops are also regulated separately from the Civil Code, so a complaint may lie with the regulator as well as in court, and the documents you need are much the same for either route.
Cases citing this provision
These Supreme Court decisions cite the provision above. We list them so you can read them yourself; the summaries of what each decided are not ours to give.
- Armand O. Raquel-Santos, et al. vs. Court of Appeals, et al, G.R. No. 174986, July 7, 2009 — read the decision on LawPhil →
- Lim Tay vs. Court of Appeals, et al, G.R. No. 126891, August 5, 1998 — read the decision on LawPhil →
- United Planters Sugar Milling Co., Inc. (UPSUMCO) vs. The Honorable Court of Appeals, et al, G.R. No. 126890, April 2, 2009 — read the decision on LawPhil →
- Insular Life Assurance Company, Ltd., et. al. vs. Robert Young, et. al, G.R. No. 140964, January 16, 2002 — read the decision on LawPhil →
Related provisions
- Civil Code, Article 2112 — Extrajudicial Sale of the Pledge
- Civil Code, Article 2113 — Bidding at the Auction
- Civil Code, Article 2116 — Notice of the Result