Q: Why credit transactions?
A: Because these transactions all involved credit meaning there is a belief in the capacity of one of the parties to perform his obligation in the future.
Note: Credit transactions ang tawag but they are not all contracts. There can be legal relationship even without an agreement – examples – legal pledge, judicial deposit. But the others are contracts – there are contractual deposit and pledge by agreement.
Transactions:
A. Kinds of Loans 1. Mutuum 2. Commadatum B. Kind of Deposits
1. Judicial 2. Extrajudicial C. Guaranty
D. Suretyship
E. Real Guaranty – favorite in the bar exams 1. Pledge
2. Chattel Mortgage (CM) 3. Real Estate Mortgage (REM) 4. Antichresis
Focus on the following provisions:
1933, 1962, 2047, 2132, 2140 Obligations of the bailee – 1942 Obligations of depositary - 1979 Right to demand for interest – 1956 Requisites of pledge and mortgage - 2085 Pactum Commissorium – 2088
Indivisibilty Principle
Right to recover the deficiency / excess – 2115 Mutuum vs. Commodatum
1. C – a thing is delivered to the bailee for the use of the property and therefore ownership is not transferred.
M – a consumable thing is delivered and therefore ownership thereof is transferred to the bailee or borrower.
2. M – only consumables are the object C – may be immovables (house, rice field) Usufruct vs. Commodatum
1. U – is a right to enjoy the property which means that the usufructuary will not only have the right to
possess but he would have the right to the fruits of the thing.
C – no right to the fruits but only right to use the thing but it may be expressly stipulated that he can also use the fruits.
Consensual vs. Real Contracts
1. C – are perfected by mere consent thus upon meeting of the minds as to the object and the cause there is already a perfected contract
RC – are perfected upon delivery of the thing which is the object of the contract.
Examples of Real Contracts
1316 – Commodatum, deposit and pledge Mutuum (memorize these 4 examples)
Note: Perfection is subject to the formalities of the law. Even if the contract has already been perfected, the contract may be unenforceable because it is not in the form prescribed by law for the enforceability of the contract. Example – contract of sale (subject to the provisions of the statute of frauds)
Note: There are different rules in mutuum and commodatum. There are also different rules in judicial and extrajudicial deposit. But all these are principal contracts. All the other credit transactions are accessory contracts – guaranty, suretyship, pledge, CM, REM, antichresis – they depend on other contracts for their existence or their validity.
(memorize)
Note: An accepted promise to loan is consensual.
Saura vs. DBP – when the loan application of Saura was accepted or approved by the bank, there was already a perfected contract but it is not mutuum. SC said, it is perfected consensual contract of loan because the loan itself will only be perfected upon the delivery of the amount to the borrower. Until the amount is delivered, there is no perfected mutuum rather there was only a perfected consensual contract of loan. Thus, with that perfected contract, the borrower can already demand for the delivery of money. That is his right but until then the mutuum itself will not yet be perfected. Ganun din sa commodatum, ganun din sa deposit.
Commodatum
It is essentially gratuitous contract. If there is compensation, it is not commodatum. In the case of Republic vs. Bagtas, SC said it is lease not commodatum because there was an obligation to pay breeding fee.
Loan
Loan is normally gratuitous (utang mo sa friend mo) unless there is an express stipulation in writing. Take note under Article 1956, a creditor in a contract of mutuum cannot demand for interest unless it was expressly stipulated in writing. Take note that we are talking here a kind of interest known as compensatory interest for the use of the money. So if you borrowed money in January payable at the end of the year, during that period, the creditor may be entitled to an interest known as compensatory interest but after the obligation became due and there was demand for the payment nonetheless the borrower failed to pay, this time there will be a liability to pay interest by way of damages not compensatory interest. And this kind of interest (damages) need not be in writing. This interest by way of damages is the effect of delay because of the failure to pay despite demand when the obligation was already due, he will be liable for damages. In monetary obligations, the liability for damages is in the form of interest.
In monetary obligations, if there was a stipulation that there is liability to pay interest but the interest rate was not fixed, it will be the legal rate that can be invoked (12%) – loan or forbearance of money.
If there is a stipulation like 6% per month or 72%
per annum, the SC ruled in Solamon vs. CA, that although the usury law has already been suspended and therefore apparently the parties can stipulate any interest rate is not true. The interest rate agreed upon may be unconscionable and therefore the SC will strike down the stipulation and the interest will be the legal rate. The SC had struck down interest above 60% per annum. Below 50% per annum, the SC allowed this interest.
There is still no decision if what is the status if the interest is between 50% to 60% per annum
Commodatum
In commodatum, the object is movable or immovable. Usually, it is non-consumable because the very thing borrowed should also be the very thing that should be returned. If it is consumable it will be consumed in accordance with its nature. But the law provides for exception, if the purpose of the commodatum is not for consumption – examples – for display or exhibit – then there can be a valid commodatum over a consumable item. But it is non – fungible because it cannot be replaced with a similar kind. The very thing borrowed should be the same thing that should be returned.
BE: R upon request loaned his passenger jeepney to F to enable to bring his wife from Tarlac to PGH for treatment. On the way back to Tarlac after leaving his wife in PGH, people stopped the passenger jeepney and R allowed
them to ride accepting payments from them just as in the case of ordinary passenger jeepney. As he was crossing Bamban, Tarlac, there was an on rush of lahar from Mt.
Pinatubo. The jeep was wrecked. What do you call the contract that was entered into by R and F? Is F obliged to pay R for the use? Is F liable to R for the loss of the jeep?
SA: This is commadatum. In commadatum, it is essentially gratuitous (no payment). Take note the jeep was lost due to a fortuitous event. If you follow the general rule under 1174, he should not be held liable. But by express provision of the law in commodatum, the borrower is liable. Under 1942, when the borrower devotes the thing to other purpose not agreed upon (the purpose is to bring the wife to the hospital), the borrower is liable even if the loss is due to fortuitous event.
Note: Bailor need not be the owner himself because there is no obligation to transfer ownership.
BE: M borrowed B’s truck. During a fire that broke out in M’s garage, M had time to save only 1 vehicle and M saved his car instead of B’s truck. Is he liable for the loss of B’s struck?
SA: Yes. This is an exception to the res perit domino rule. It would also fall under 1942 that he chose to save his thing when he had the opportunity to save one of two things, the other being a borrowed item.
Yung iba – if you kept it longer, it is consistent with delay under 1165 - in an obligation to deliver a determinate thing and the thing was lost due to a fortuitous event, that debtor will still be liable for the loss if he was in delay.
Republic vs. Bagtas
Held: Even if this is commadatum under Article 1942, it will be the bailee or the borrower who will bear the loss.
Deposit
The same rule in deposit – in deposit, ownership does not pass to the depositary. Thus, under the res perit domino rule, it will be the depositor who will bear the loss if the thing was lost due to a fortuitous event. In robbery, the depositor will bear the loss unless there is negligence on the part of the depositary or if it is stipulated that the depositary will be liable. (If you are the depositary, demand for a higher rental so you have money to pay for insurance)
If he uses it without compensation, he will be liable because in deposit the purpose of the delivery is for safekeeping, the depositary is not supposed to
use the thing. So if he uses the thing, he will be liable for the loss of the thing.
Loan
There is a special kind of commodatum known as precarium. Precarium – in this kind of commodatum the bailor has the right to demand for the return of the thing at will at any time.
Q: When would there be a precarium?
A: There would be a precarium if there was no stipulation as to duration nor the use of the thing unless there is a custom. So no agreement as to period or no agreement as to particular use then the bailor would have the right to demand the thing at any time or the use of the thing is merely tolerated.
From this rule, you should be able to conclude that even if commadatum is essentially gratuitous, if there was a period agreed upon as a rule the bailor should respect the period. He cannot demand for the return of the thing just because there is no payment. But there are exceptions:
1. Even if there was a period, he can demand for the return if there is an urgent need on the part of the bailor. But in that scenario, the commadatum is not extinguished, it is only suspended. After the bailor have used the thing, he should return the thing to the bailee so the latter could finish the period.
2. When the bailee committed an act of ingratitude. The grounds will be similar to donation.
Deposit
Q: Are checking accounts, savings account, dollar accounts irregular deposits?
A: No. They are not deposits under the law because they are governed by the rules on mutuum (loan). The bank is the debtor. SC called these deposits “in the nature of irregular deposits”
but not irregular deposits because the banks use the money that is why it is in the nature of irregular deposits.
Irregular Deposits – these are deposits where the depositary has the right to use the thing because normally in an ordinary deposit, the depositary has no right to use because the purpose is safekeeping. But if he has the right to use, that deposit may be called an irregular deposit, the limitation of the law is that the use must not be the principal purpose (the principal purpose should be the safekeeping).
Examples: Car was delivered to you as depositary.
Kung pwede mo gamitin araw araw sa paghatid
sundo sa mga anak mo, hindi ito deposit, mukhang commodatum ito kung walang bayad for the use.
But if the delivery is for safekeeping but the depositor allowed you to use the car for an occasion – that is an irregular deposit because the depositary has the right to use the thing with the permission of the depositor.
Another scenario where the depositary would have the right to use and therefore the deposit is an irregular deposit - when the preservation of the thing deposited delivered to depositary requires the use of the thing like using the car to preserve it.
BE: The parties in a contract of loan of money agreed that the yearly interest rate is 12% and it can be increased if there is a law that would authorize the increase of interest rates.
Suppose the lender would increase the rate by 5% to be paid by the borrower without a law authorizing such increase. Would the lender’s action be just and valid? What is the remedy of the borrower?
SA: Not valid because by the agreement of the parties, the increase in the rate will only be made if there is a law that would authorize the increase.
SC Case: There can be no valid increase without a law authorizing it but in this case the Bangko Sentral issued a resolution increasing the maximum rate. The SC said the banks cannot increase the interest rates because a Monetary Board Resolution is not the same as a law. It may have the effect of a law but that is not a law and therefore that could not be a basis.
Credit Transaction notes is incomplete. Refer to your codal.
CREDIT TRANSACTIONS Quiz
1. Deposit is a real contract – TRUE
2. A contract of deposit is not covered by the statute of frauds – FALSE
3. If deposit has been made by capacitated person, if perfected with another who is not a depositor shall only have an action to recover the thing deposited while it is still in the possession of the depositary - FALSE
4. Depositary is obliged to keep the thing safely and to return it to the depositor – FALSE 5. If deposit with a third person is allowed, the depositary shall not be liable for the loss –
FALSE
6. The depositary cannot make use of the thing deposited without the express permission of the depositor – FALSE
7. When depositary has permission to use the thing deposited the contract loses the concept of deposit and becomes a loan - FALSE
8. Depositary cannot demand that the depositor prove his ownership of the thing deposited – TRUE
9. The thing deposited must be returned to the depositor even though there is a specified period or time for such – FALSE
10. The deposit of effects made by travelers of inns is a necessary deposit – TRUE 11. Contracts of loan and deposit are essentially gratuitous – FALSE
12. The bailor in commodatum acquires the use of the thing loaned without compensation but not the fruits, if there is a stipulation to the contrary, the contract ceases to be commodatum
13. Bailee shall not be liable for loss of thing if it should be through fortuitous event. –FALSE 14. A contract of deposit is a consensual contract, thus xxx to deliver arise. – FALSE
15. An escalation clause is void if there is no de-escalation clause – FALSE (true only if loans in banks)
16. While a surety undertakes to pay if the principal does not pay, the guarantor only binds himself to pay if the principal cannot pay. The one is the insurer of the debt, the other is the insurer of the solvency of the debtor. – TRUE
17. Guaranty is essentially gratuitous. – FALSE
18. A guaranty may be constituted to guaranty the performance of a voidable contract. - TRUE
19. A guaranty may also be given as security for future debts, the amount of which is not yet known. – TRUE
20. The guarantor cannot be compelled to pay the credit unless the latter has exhausted all the properties of the debtor and has resorted to all the legal remedies against the debtor.
- FALSE