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182MEMORY AID IN CIVIL LAWCREDIT TRANSACTIONS All transactions involving the purchase or loan of goods, services, or money in the present with a promise to pay or deliver in the futureContracts of security Types: Secured transactions or contracts of real security - supported by a collateral or an e...

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San Beda College of Law 182

MEMORY AID IN CIVIL LAW

CREDIT TRANSACTIONS CREDIT TRANSACTIONS  All transactions involving the purchase or loan of goods, services, or money in the present with a promise to pay or deliver in the future Contracts of security Types: 1. Secured transactions or contracts of real security - supported by a collateral or an encumbrance of property 2. Unsecured transactions or contracts of personal security - supported only by a promise or personal commitment of another such as a guarantor or surety Security  Something given, deposited, or serving as a means to ensure fulfilment or enforcement of an obligation or of protecting some interest in property  Types of Security a. personal – when an individual becomes surety or guarantor b. real or property – when a mortgage, pledge, antichresis, charge or lien or other device used to have property held, out of which the person to be made secure can be compensated for loss Bailment  The delivery of property of one person to another in trust for a specific purpose, with a contract, express or implied, that the trust shall be faithfully executed and the property returned or duly accounted for when the special purpose is accomplished or kept until the bailor claims it.  Parties: 1. bailor - the giver; one who delivers property 2. bailee- the recipient; one who receives the custody or possession of the thing thus delivered CIVIL LAW COMMITTEE

LOAN (Articles 1933 – 1961) 

A contract wherein one of the parties delivers to another, either something not consumable so that the latter may use the same for a certain time and return it or money or other consumable thing, upon the condition that the same amount of the same kind and quality shall be paid. (Art 1933)

Characteristics: 1. Real Contract – delivery of the thing loaned is necessary for the perfection of the contract NOTE: An accepted promise to make a future loan is a consensual contract, and therefore binding upon the parties but it is only after delivery, will the real contract of loan arise. (Art 1934) 2. Unilateral Contract - once the subject matter has been delivered, it creates obligations on the part of only one of the parties (i.e. borrower).  Kinds: 1. Commodatum – when the bailor (lender) delivers to the bailee (borrower) a non-consumable thing so that the latter may use it for a certain time and return the identical thing.  Kinds of commodatum: a. Ordinary Commodatum – use by the borrower of the thing is for a certain period of time b. Precarium - one whereby the bailor may demand the thing loaned at will and it exists in the following cases: i. neither the duration nor purpose of the contract is stipulated ii. the use of the thing is merely tolerated by the owner

 CHAIRPERSON: Romuald Padilla  ASST.CHAIRPERSON: Vida Bocar, Joyce Vidad  EDP: Alnaiza Hassiman, Dorothy Gayon  SUBJECT HEADS: Christopher Rey Marasigan (Persons and Family Relations), Alejandro Casabar(Property), Ma. Rhodora Ferrer(Wills and Succession), Ian Dominic Pua(Obligations and Contracts), Sha Elijah Dumama(Sales and Lease), John Stephen Quiambao(PAT), Christopher Cabigao(Credit Transactions), Ligaya Alipao(Torts and Damages), Anthony Purganan(LTD), Ma. Ricasion Tugadi (Conflicts of Law)

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MEMORY AID IN CIVIL LAW 2. Simple loan or mutuum – where the lender delivers to the borrower money or other consumable thing upon the condition that the latter shall pay the same amount of the same kind and quality. Commodatum Mutuum Key: COPS-LOTR 1. Object Consumable 2. Cause Gratuitous May or may not be gratuitous 3. Purpose Use or temporary Consumption possession 4. Subject Matter Real or personal Only personal property property 5. Ownership of the thing Retained by the Passes to the debtor bailor 6. Thing to be returned Exact thing loaned Equal amount of the same kind and quality 7. Who bears risk of loss Bailor Debtor 8. When to return after the In case of urgent Only need, even before expiration of the the expiration of the term term Non-consumable

Loan

Credit

Delivery by one party and the receipt of other party of a given sum of money or other consumable thing upon an agreement, express or implied, to repay the same.

Ability of a person to borrow money or things by virtue of the trust or confidence reposed by the lender that he will pay what he promised.

Loan

Credit

1. Interest taken at the expiration of the credit 2. Always on a double name paper (two signatures appear with both parties held liable for payment)

Interest is taken in advance Always on a single name paper (i.e. promissory note with no indorse-ment other than the maker)

COMMODATUM (Articles 1935 – 1952)  Nature: 1. PURPOSE: Bailee in commodatum acquires the temporary use of the thing but not its fruits (unless stipulated as an incidental part of the contract).(Art 1935)  Use must be temporary, otherwise the contract may be a deposit. 2. CAUSE: Essentially gratuitous; it ceases to be a commodatum if any compensation is to be paid by the borrower who acquires the use, in such case there arises a lease contract.  Similar to a donation in that it confers a benefit to the recipient. The presumption is that the bailor has loaned the thing for having no need therefor. 3. SUBJECT MATTER: Generally nonconsumable whether real or personal but if the consumable goods are not for consumption as when they are merely for exhibition, consumable goods may be the subject of the commodatum. (Art 1936) 4. Bailor need not be the owner of the thing owned (Art. 1938) since by the loan, ownership does not pass to the borrower.  A mere lessee or usufructuary may lend but the borrower or bailee himself may not lend nor lease the thing loaned to him to a third person (Art 1932[2]) 5. Purely Personal (Art 1939):  Death of either party terminates the contract unless by stipulation, the commodatum is transmitted to the heirs of either or both parties.  Bailee can neither lend nor lease the object of the contract to a third person.

CIVIL LAW COMMITTEE  CHAIRPERSON: Romuald Padilla  ASST.CHAIRPERSON: Vida Bocar, Joyce Vidad  EDP: Alnaiza Hassiman, Dorothy Gayon  SUBJECT HEADS: Christopher Rey Marasigan (Persons and Family Relations), Alejandro Casabar(Property), Ma. Rhodora Ferrer(Wills and Succession), Ian Dominic Pua(Obligations and Contracts), Sha Elijah Dumama(Sales and Lease), John Stephen Quiambao(PAT), Christopher Cabigao(Credit Transactions), Ligaya Alipao(Torts and Damages), Anthony Purganan(LTD), Ma. Ricasion Tugadi (Conflicts of Law)

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MEMORY AID IN CIVIL LAW NOTE:Use of the thing loaned may extend to members of the bailee’s household except: a. contrary stipulation; b. nature of the thing forbids such use Obligations of the Bailee: (Arts 1941 – 1945) 1. To pay for the ordinary expenses for the use and preservation of the thing loaned. (Art 1941) 2. To be liable for the loss of the thing even if it should be through a fortuitous event in the following cases: (KLAS D) a. when he keeps it longer than the period stipulated, or after the accomplishment of its use b. when he lends or leases it to third persons who are not members of his household c. when the thing loaned has been delivered with appraisal of its value d. when, being able to save either of the thing borrowed or his own things, he chose to save the latter; or e. when the bailee devoted the thing for any purpose different from that for which it has been loaned (Art 1942) 3. To be liable for the deterioration of thing loaned (a) if expressly stipulated; (b) if guilty of fault or negligence; or (c) if he devotes the thing to any purpose different from that for which it has been loaned 4. To pay for extraordinary expenses arising from the actual use of the thing by the bailee, which shall be borne equally by both the bailor and the bailee, even though the bailee acted without fault, unless there is a stipulation to the contrary (Art 1949 par 2) 5. To return the thing loaned  The bailee has no right to retain the thing loaned as security for claims he has against the bailor even for extraordinary expenses except for a claim for damages suffered because of the flaws of the thing loaned.

NOTES:

 However, the bailee’s right extends no further than retention of the thing loaned until he is reimbursed for the damages suffered by him.  He cannot lawfully sell the thing to satisfy such damages without court’s approval.  In case there are two or more bailees, their obligation shall be solidary. Obligations of the bailor (Art 1946 – Art 1952): 1. To respect the duration of the loan  GENERAL RULE: Allow the bailee the use of the thing loaned for the duration of the period stipulated or until the accomplishment of the purpose for which the commodatum was instituted.  EXCEPTIONS: a. In case of urgent need in which case bailee may demand its return or temporary use; b. The bailor may demand immediate return of the thing if the bailee commits any act of ingratitude specified in Art. 765. 2. To refund to the bailee extraordinary expenses for the preservation of the thing loaned, provided the bailee brings the same to the knowledge of the bailor before incurring them, except when they are so urgent that the reply to the notification cannot be awaited without danger. 3. To be liable to the bailee for damages for known hidden flaws.  Requisites: a. There is flaw or defect in the thing loaned; b. The flaw or defect is hidden; c. The bailor is aware thereof; d. He does not advise the bailee of the same; and e. The bailee suffers damages by reason of said flaw or defect

CIVIL LAW COMMITTEE  CHAIRPERSON: Romuald Padilla  ASST.CHAIRPERSON: Vida Bocar, Joyce Vidad  EDP: Alnaiza Hassiman, Dorothy Gayon  SUBJECT HEADS: Christopher Rey Marasigan (Persons and Family Relations), Alejandro Casabar(Property), Ma. Rhodora Ferrer(Wills and Succession), Ian Dominic Pua(Obligations and Contracts), Sha Elijah Dumama(Sales and Lease), John Stephen Quiambao(PAT), Christopher Cabigao(Credit Transactions), Ligaya Alipao(Torts and Damages), Anthony Purganan(LTD), Ma. Ricasion Tugadi (Conflicts of Law)

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MEMORY AID IN CIVIL LAW

NOTES:  If the above requisites concur, the bailee has the right of retention for damages.

 The

bailor cannot exempt himself from the payment of expenses or damages by abandoning the thing to the bailee.

3. Relationship between the parties is that of obligorobligee

Relationship is that of a landlord and tenant

4. Creditor receives payment for his loan

Owner of the property rented receives compensation or price either in money, provisions, chattels, or labor

SIMPLE LOAN OR MUTUUM (Art 1953 – 1961)  A contract whereby one party delivers to another, money or other consumable thing with the understanding that the same amount of the same kind and quality shall be paid. (Art. 1953) NOTES:  The mere issuance of the checks does not result in the perfection of the contract of loan. The Civil Code provides that the delivery of bills of exchange and mercantile documents, such as checks, shall produce the effect of payment only when they have been encashed (Gerales vs. CA 218 SCRA 638). It is only after the checks have produced the effect of payment that the contract of loan may be deemed perfected.  The obligation is “to pay” and not to return because the consumption of the thing loaned is the distinguishing character of the contract of mutuum from that of commodatum.  No estafa is committed by a person who refuses to pay his debt or denies its existence. Simple Loan/Mutuum

Rent

1. Delivery of money or some consumable thing with a promise to pay an equivalent of the same kind and quality

Delivery of some nonconsumable thing in order that the other may use it during a certain period and return it to the former.

2. There is a transfer of ownership of the thing delivered

There is no transfer of ownership of the thing delivered

from the occupant thereof in return for its use (Tolentino vs Gonzales, 50 Phil 558 1927)

Loan 1.

Real contract

2. Generally unilateral because only borrower has obligations

Sale Consensual contract Bilateral reciprocal

and

NOTE: If the property is “sold”, but the real intent is only to give the object as security for a debt – as when the “price” is comparatively small – there really is a contract of loan with an “equitable mortgage.” Commodatum/ Mutuum

Barter

1. Subject matter is money or fungible things

Subject matter is non-fungible, (non consumable) things

2. In commodatum, the bailee is bound to return the identical thing borrowed when the time has expired or purpose served

The thing with equivalent value is given in return for what has been received

3. Mutuum may be gratuitous and commodatum is always gratuitous

Onerous, actually a mutual sale

CIVIL LAW COMMITTEE  CHAIRPERSON: Romuald Padilla  ASST.CHAIRPERSON: Vida Bocar, Joyce Vidad  EDP: Alnaiza Hassiman, Dorothy Gayon  SUBJECT HEADS: Christopher Rey Marasigan (Persons and Family Relations), Alejandro Casabar(Property), Ma. Rhodora Ferrer(Wills and Succession), Ian Dominic Pua(Obligations and Contracts), Sha Elijah Dumama(Sales and Lease), John Stephen Quiambao(PAT), Christopher Cabigao(Credit Transactions), Ligaya Alipao(Torts and Damages), Anthony Purganan(LTD), Ma. Ricasion Tugadi (Conflicts of Law)

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 Form of Payment (Art 1955): 1. If the thing loaned is money payment must be made in the currency stipulated, if it is possible; otherwise it is payable in the currency which is legal tender in the Philippines and in case of extraordinary inflation or deflation, the basisi of payment shall be the value of the currency at the time of the creation of the obligation 2. If what was loaned is a fungible thing other than money - the borrower is under obligation to pay the lender another thing of the same kind, quality and quantity. In case it is impossible to do so, the borrower shall pay its value at the time of the perfection of the loan. Interest  The compensation allowed by law or fixed by the parties for the loan or forbearance of money, goods or credits  Requisites for Demandability: (ELI) 1. must be expressly stipulated Exceptions: a. indemnity for damages b. interest accruing from unpaid interest 2. must be lawful 3. must be in writing Compound Interest  GENERAL RULE: Unpaid interest shall not earn interest.  EXCEPTIONS: 1. when judicially demanded 2. when there is an express stipulation (must be in writing in view of Art. 1956) Guidelines for the application of proper interest rates 1. If there is stipulation: that rate shall be applied 2. The following are the rules of thumb for the application/imposition of interest rates: a) When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is

breached, the contravenor can be held liable for damages. b) With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as follows: i. When the obligation breached consists of payment of a sum of money (loan or forbearance of money), the interest shall be that which is stipulated or agreed upon by the parties. In absence of an agreement, the rate shall be the legal rate (i.e. 12% per annum) computed from default. NOTE: The interest due shall itself earn legal interest from the time it is judicially demanded ii. In other cases, the rate of interest shall be six percent (6%) per annum. NOTE: No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. When the demand cannot be established, the interest shall begin to run only from the date of the judgment of the court is made. iii. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph i or ii above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit. (Eastern Shipping Lines vs. CA, July 12, 1994) NOTES:  Central Bank Circular No. 416 fixing the rate of interest at 12% per

CIVIL LAW COMMITTEE  CHAIRPERSON: Romuald Padilla  ASST.CHAIRPERSON: Vida Bocar, Joyce Vidad  EDP: Alnaiza Hassiman, Dorothy Gayon  SUBJECT HEADS: Christopher Rey Marasigan (Persons and Family Relations), Alejandro Casabar(Property), Ma. Rhodora Ferrer(Wills and Succession), Ian Dominic Pua(Obligations and Contracts), Sha Elijah Dumama(Sales and Lease), John Stephen Quiambao(PAT), Christopher Cabigao(Credit Transactions), Ligaya Alipao(Torts and Damages), Anthony Purganan(LTD), Ma. Ricasion Tugadi (Conflicts of Law)

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MEMORY AID IN CIVIL LAW annum deals with loans, forbearance of any money, goods or credits and judgments involving such loans, or forbearance in the absence of express agreement to such rate  Interest as indemnity for damages is payable only in case of default or non-performance of the contract. As they are distinct claims, they may be demanded separately. (Sentinel Insurance Co., Inc. vs CA, 182 SCRA 517)

1. Real Contract - contract is perfected by the delivery of the subject matter. 2. Unilateral (gratutitous deposit) only the depositary has an obligation. 3. Bilateral (onerous deposit) gives rise to obligations on the part of both the depositary and depositor.

 Central Bank Circular No. 905 (Dec.

1. Purpose Principal purpose is Principal purpose is consumption safekeeping or custody 2. When to Return The lender must wait Depositor can demand the return of until the expiration the subject matter at of the period granted to the debtor will 3. Subject Matter Subject matter is Subject matter may only money or other be movable or fungible thing immovable property 4. Relationship Relationship is that Relationship is that of depositor and of lender (creditor) depositary. and borrower (debtor).

10, 1982) removed the Usury Law ceiling on interest rates for secured and unsecured loans, regardless of maturity. Validity of unconscionable interest rate in a loan Supreme Court in Sps. Solangon vs. Jose Salazar, G.R. No. 125944, June 29, 2001, said that since the usury law had been repealed by CB Cir. No. 905 there is no more maximum rate of interest and the rate will just depend on the mutual agreement of the parties (citing Lim Law vs. Olympic Sawmill Co., 129 SCRA 439). But the Supreme Court said that nothing in said circular grants lenders carta blanche authority to raise interest rates to level which will either enslave their borrowers or lead to a hemorrhaging of their assets (citing Almeda vs. CA, 256 SCRS 292 ). In Medel vs. CA, 299 SCRA 481, it was ruled that while stipulated interest of 5.5% per month on a loan is usurious pursuant to CB Circular No. 905, the same must be equitably reduced for being iniquitous, unconscionable and exorbitant. It is contrary to morals, (contra bonos mores). It was reduced to 12% per annum in consonant with justice and fair play. DEPOSIT (Articles 1962 – 2009) 

A contract constituted from the moment a person receives a thing belonging to another, with the obligation of safely keeping it and of returning the same.

Characteristics:

Deposit

Mutuum

5. Compensation NO compensation of There can be things deposited with compensation of each other (except credits. by mutual agreement).

Deposit

Commodatum

1. Purpose is Safekeeping

1. ...