Compiled rulings of the assigned cases for midterms Commodatum and Mutuum:

Tolentino vs Gonzales
A contract of loan signifies the giving of a sum of money, goods or credits to another, with a promise to repay, but not a promise to return the same thing. It has been defined as an advancement of money, goods, or credits upon a contract or stipulation to repay, not to return, the thing loaned at some future day in accordance with the terms of the contract. The moment the contract is completed, the money, goods or chattels given cease to be the property of the former owner and become the property of the obligor to be used according to his own will, unless the contract itself expressly provides for a special or specific use of the same. At all events, the money, goods or chattels, the moment the contract is executed, cease to be the property of the former owner and become the sole property of the obligor.

Quintos vs Beck
The contract entered into between the parties is one of commadatum, because under it the plaintiff gratuitously granted the use of the furniture to the defendant, reserving for herself the ownership thereof; by this contract the defendant bound himself to return the furniture to the plaintiff, upon the latters demand. The latter, as bailee, was not entitled to place the furniture on deposit; nor was the plaintiff under a duty to accept the offer to return the furniture, because the defendant wanted to retain the three gas heaters and the four electric lamps.

Republic vs Grijaldo
The terms of the promissory notes and the chattel mortgage that the appellant executed in favor of the Bank of Taiwan, Ltd. do not support the claim of appellant. The obligation of the appellant under the five promissory notes was not to deliver a determinate thing namely, the crops to be harvested from his land, or the value of the crops that would be harvested from his land. Rather, his obligation was to pay a generic thing the amount of money representing the total sum of the five loans, with interest. The transaction between the appellant and the Bank of Taiwan, Ltd. was a series of five contracts of simple loan of sums of money. "By a contract of (simple) loan, one of the parties delivers to another ... money or other consumable thing upon the condition that the same amount of the same kind and quality shall be paid." (Article 1933, Civil Code)

Frias vs San Diego-Sison

The payment of regular interest constitutes the price or cost of the use of money and thus, until the principal sum due is returned to the creditor, regular interest continues to accrue since the debtor continues to use such principal amount. It has been held that for a debtor to continue in possession of the principal of the loan and to continue to use the same after maturity of the loan without payment of the monetary interest, would constitute unjust enrichment on the part of the debtor at the expense of the creditor.

Angel Warehousing vs Chelda

In simple loan with stipulation of usurious interest, the prestation of the debtor to pay the principal debt, which is the cause of the contract (Article 1350, Civil Code), is not illegal. The illegality lies only as to the prestation to pay the stipulated interest; hence, being separable, the latter only should be deemed void, since it is the only one that is illegal. - And in case of such demand, and the debtor incurs in delay, the debt earns interest from the date of the demand - in obligations to pay money, where the debtor incurs in delay, he has to pay interest by way of damages (Art. 2209, Civil Code)

Cu Unjieng vs Mabalacat
Where this court held that interest cannot be allowed in the absence of stipulation, or in default thereof, except when the debt is judicially claimed; and when the debt is judicially claimed, the interest upon the interest can only be computed at the rate of 6 per cent per annum.

Usury Law:
Investors Finance Corporation vs Autoworld Sales Corporation
The law will not permit a usurious loan to hide itself behind a legal form. Parol evidence is admissible to show that a written document though legal in form was in fact a device to cover usury. If from a construction of the whole transaction it becomes apparent that there exists a corrupt intention to violate the Usury Law, the courts should and will permit no scheme, however ingenious, to becloud the crime of usury. The Usury Law recognizes the legitimate purchase of negotiable mercantile paper by innocent purchasers. But even the law has anticipated the potential abuse of such transactions to conceal usurious loans. Thus, the law itself made a qualification. It would recognize legitimate purchase of negotiable mercantile paper, whether usurious or otherwise, only if the purchaser had no intention of evading the provisions of the Usury Law and that the purchase was not a part of the original usurious transaction. Otherwise, the law would not hesitate to annul such contracts. Thus, Art. 1957 of the Civil Code provides Contracts and stipulations, under any cloak or device whatever, intended to circumvent the laws on usury shall be void. The borrower may recover in accordance with the laws on usury.

Solangon vs Salazar
The Usury Law had been repealed by Central Bank Circular No. 905 there is no more maximum rate of interest and the rate will just depend on the mutual agreement of the parties. Nothing in the said circular grants lenders carte blanche authority to raise interest rates to levels which will either enslave their borrowers or lead to a hemorrhaging of their assets. Based on equity and fairness, the court may order the interest to be reduced if it is outrageous and inordinate.

Eastern Shipping Lines vs CA and Tomimbang vs Tomimbang

It is easily discernible in these cases that there has been a consistent holding that the Central Bank Circular imposing the 12% interest per annum applies only to loans or forbearance 16 of money, goods or credits, as well as to judgments involving such loan or forbearance of money, goods

or credits, and that the 6% interest under the Civil Code governs when the transaction involves the payment of indemnities in the concept of damage arising from the breach or a delay in the performance of obligations in general. A loan or forbearance of money, the interest due should be that which may have been stipulated in writing. 21 Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. 22 In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 23 of the Civil Code. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court 24 at the rate of 6% per annum. 25 No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. 26 Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made.

United Planters Sugar Milling Company vs CA

Deposit:
CA Agro-Industrial Development Corp vs CA
The prevailing rule appears to be that where a safe-deposit company leases a safe-deposit box or safe and the lessee takes possession of the box or safe and places therein his securities or other valuables, the relation of bailee and bail or is created between the parties to the transaction as to such securities or other valuables The contract in the case at bar is a special kind of deposit. It cannot be characterized as an ordinary contract of lease under Article 1643 because the full and absolute possession and control of the safety deposit box was not given to the joint renters The depositary would be liable if, in performing its obligation, it is found guilty of fraud, negligence, delay or contravention of the tenor of the agreement. 26 In the absence of any stipulation prescribing the degree of diligence required, that of a good father of a family is to be observed. 27 Hence, any stipulation exempting the depositary from any liability arising from the loss of the thing deposited on account of fraud, negligence or delay would be void for being contrary to law and public policy.

Baron vs David
Under article 1978 of the Civil Code, when the depository has permission to make use of the thing deposited, the contract loses the character of mere deposit and becomes a loan or acommodatum; and of course by appropriating the thing, the bailee becomes responsible for its value.

Serrano vs Central Bank of the Philippines

Bank deposits are in the nature of irregular deposits. They are really loans because they earn interest. All kinds of bank deposits, whether fixed, savings, or current are to be treated as loans and are to be covered by the law on loans.

De Los Santos vs Tan Khey and YHT Realty vs CA

While the law speaks of deposit of effects by travellers in hotels or inns, personal receipt by the innkeeper for safe keeping of effects is not necessaily meant thereby. The reason therefor is the fact that it is the nature of business of an innkeeper to provide not only lodging for travellers but also to security to their persons and effects. The secuity mentioned is not confined to the effects actually delivered to the innkeeper but also to all effects placed within the premises of the hotel. This is because innkeepers by the neture of their business, have supervision and controlof their inns and the premises threof. The owner of a hotel may exonerate himself from liability by showing that the guest has taken exclusive control of his own goods, but this must be exclusive custody and control of a guest, and must not be held under the supervision and care of the innkeeper,ey are kept in a room assigned to a guest or the other proper depository in the house.

Durban Apartments vs Pioneer Insurance and Surety Corp

Art. 1962. A deposit is constituted from the moment a person receives a thing belonging to another, with the obligation of safely keeping it and returning the same. If the safekeeping of the thing delivered is not the principal purpose of the contract, there is no deposit but some other contract. Art. 1998. The deposit of effects made by travelers in hotels or inns shall also be regarded as necessary. The keepers of hotels or inns shall be responsible for them as depositaries, provided that notice was given to them, or to their employees, of the effects brought by the guests and that, on the part of the latter, they take the precautions which said hotel-keepers or their substitutes advised relative to the care and vigilance of their effects.

Guingona Jr. vs The City Fiscal of Manila

Hence, the relationship between the private respondent and the Nation Savings and Loan Association is that of creditor and debtor; consequently, the ownership of the amount deposited was transmitted to the Bank upon the perfection of the contract and it can make use of the amount deposited for its banking operations, such as to pay interests on deposits and to pay withdrawals. While the Bank has the obligation to return the amount deposited, it has, however, no obligation to return or deliver the same money that was deposited

Guaranty and Surety:

Severino vs Severino

A guarantor or surety is bound by the same consideration that makes the contract effective between the principal parties thereto. The compromise and dismissal of lawsuit is recognized in law as a valuable consideration; and the dismissal of the action which c instituted against d was an adequate consideration to support the promise on the part of d to pay the sums stipulated in the contract subject of the action It is neither necessary that the guarantor or surety should receive any part of the benefit, if such there be accruing to his principal. The true consideration of this contract was the detriment suffered by c in the former action in dismissing the proceeding and it is immaterial that no benefit may have accrued either to the principal or his guarantor

Picson vs Picson
Under Article 2209 of the Civil Code "(i)f the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the indemnity for damages, there being no stipulation to the contrary, shall be the payment of the interest agreed upon, and in the absence of stipulation, the legal interest, which is six per cent per annum." Article 2212 of the Civil Code providing that "(I)nterest due shall earn legal interest from the time it is judicially demanded, although the obligation may be silent upon this point A guaranty must be express, (Article 2055, Civil Code) and it would be violative of the law to consider a party to be bound as a surety when the very word used in the agreement is "guarantor."

Rizal Commercial Banking Corp vs Arro

The agreement was executed obviously to induce petitioner to grant any application for a loan Daicor may desire to obtain from petitioner bank. The guaranty is a continuing one which shall remain in full force and effect until the bank is notified of its termination. This is a continuing guaranty and shall remain in full force and effect until written notice shall have been received. Article 2053. A guaranty may also be given as security for future debts, the amount of which is not yet known; there can be no claim against the guarantor until the debt is liquidated. A conditional obligation may also be secured.

PNB vs Luzon Surety Co.

If a surety upon demand fails to pay, he can be held liable for interest, even if in thus paying, the liability becomes more than that in the principal obligation. The increased liability is not because of the contract but because of the default and the necessity of judicial collection. It should be noted, however, that the interest runs from the time the complaint is filed, not from the time the debt becomes due and demandable.

Prudencio vs CA
Liability of accommodation party. An accommodation party is one who has signed the instrument as maker, drawer, acceptor, or indorser, without receiving value therefor, and for the purpose of lending his name to some other person. Such a person is liable on the instrument to a holder for value, notwithstanding such holder at the time of taking the instrument knew him to be only an accommodation party. Unlike in a contract of suretyship, the liability of the accommodation party remains not only primary but also unconditional to a holder for value such that even if the accommodated party receives an extension of the period for payment without the consent of the accommodation party, the latter is still liable for the whole obligation and such extension does not release him because as far as a holder for value is concerned, he is a solidary codebtor.

Dino vs CA
A continuing guaranty is one which is not limited to a single transaction, but which contemplates a future course of dealing, covering a series of transactions, generally for an indefinite time or until revoked. It is prospective in its operation and is generally intended to provide security with respect to future transactions within certain limits, and contemplates a succession of liabilities, for which, as they accrue, the guarantor becomes liable. 9 Otherwise stated, a continuing guaranty is one which covers all transactions, including those arising in the future, which are within the description or contemplation of the contract, of guaranty, until the expiration or termination thereof. 10 A guaranty shall be construed as continuing when by the terms thereof it is evident that the object is to give a standing credit to the principal debtor to be used from time to time either indefinitely or until a certain period, especially if the right to recall the guaranty is expressly reserved. Hence, where the contract of guaranty states that the same is to secure advances to be made "from time to time" the guaranty will be construed to be a continuing one.

Fortune Motors vs CA
The surety undertakings executed by Chua and Rodrigueza were continuing guaranties or suretyships covering all future obligations of Fortune Motors (Phils.) Corporation with Filinvest Credit Corporation. This is evident from the written contract itself which contained the words absolutely, unconditionally and solidarily guarantee(d) to Respondent Filinvest and its affiliated and subsidiary companies the full, faithful and prompt performance, payment and discharge of any and all obligations and agreements of Petitioner Fortune under or with respect to any and all such contracts and any and all other agreements (whether by way of guaranty or otherwise) of the latter with Filinvest and its affiliated and subsidiary companies now in force or hereafter made.

Bank of Commerce vs Spouses Andres and Eliza Flores

A continuing guaranty is a recognized exception to the rule that an action to foreclose a mortgage must be limited to the amount mentioned in the mortgage contract. Under Article 2053 of the Civil Code, a guaranty may be given to secure even future debts, the amount of which may not be known at the time the guaranty is executed. This is the basis for contracts denominated as a continuing guaranty or suretyship. A continuing guaranty is not limited to a single transaction, but contemplates a future course of dealing, covering a series of transactions, generally for an indefinite time or until revoked. It is prospective in its operation and is generally intended to provide security with respect to future transactions within certain limits, and contemplates a succession of liabilities, for which, as they accrue, the guarantor becomes liable. In other words, a continuing guaranty is one that

covers all transactions, including those arising in the future, which are within the description or contemplation of the contract of guaranty, until the expiration or termination thereof. A guaranty shall be construed as continuing when, by the terms thereof, it is evident that the object is to give a standing credit to the principal debtor to be used from time to time either indefinitely or until a certain period, especially if the right to recall the guaranty is expressly reserved.

Arroyo vs Jungsay
The surety has the right, under certain circumstances, to demand the discussion of the property of the principal debtor. Where suit is brought against the surety alone, he may interpose the plea, and compel the creditor to discuss the principal debtor. The effect of this is to stay proceedings against the surety until judgment has been obtained against the principal debtor, and execution against his property has proved insufficient. When the suit is brought against the surety and the principal debtor the plea of discussion does not require or authorize any suspension of the proceedings; but the judgment will be so modified as to require the creditor to proceed by execution against the property of the principal, and to exhaust it before resorting to the property of the surety.

Bitanga vs Pyramid Construction

Under a contract of guarantee, the guarantor binds himself to the creditor to fulfill the obligation of the principal debtor in case the latter should fail to do so. The guarantor who pays for a debtor, in turn, must be indemnified by the latter. However, the guarantor cannot be compelled to pay the creditor unless the latter has exhausted all the property of the debtor and resorted to all the legal remedies against the debtor. This is what is otherwise known as the benefit of excussion.

The manila Banking Corp vs Teodoro

Assignment of credit is an agreement by virtue of which the owner of a credit, known as the assignor, by a legal cause, such as sale, dation in payment, exchange or donation, and without the need of the consent of the debtor, transfers his credit and its accessory rights to another, known as the assignee, who acquires the power to enforce it to the same extent as the assignor could have enforced it against the debtor. ... It may be in the form of a sale, but at times it may constitute a dation in payment, such as when a debtor, in order to obtain a release from his debt, assigns to his creditor a credit he has against a third person, or it may constitute a donation as when it is by gratuitous title; or it may even be merely by way of guaranty, as when the creditor gives as a collateral, to secure his own debt in favor of the assignee, without transmitting ownership. The character that it may assume determines its requisites and effects. its regulation, and the capacity of the parties to execute it; and in every case, the obligations between assignor and assignee will depend upon the judicial relation which is the basis of the assignment.

Palmares vs CA
It is a cardinal rule in the interpretation of contracts that if the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulation shall control. [13] In the case at bar, petitioner expressly bound herself to be jointly and severally or solidarily liable with the principal maker of the note. The terms of the contract are clear, explicit and unequivocal that petitioners liability is that of a surety. A creditors right to proceed against the surety exists independently of his right to proceed against the principal. [39] Under Article 1216 of the Civil Code, the creditor may proceed against any one of the solidary debtors or some or all of them simultaneously. The rule, therefore, is that if the obligation is joint and several, the creditor has the right to proceed even against the surety alone. [40] Since, generally, it is not necessary for a creditor to proceed against a principal in order to hold the surety liable, where, by the terms of the contract, the obligation of the surety is the same as that of the principal, then as soon as the principal is in default, the surety is likewise in default, and may be sued immediately and before any proceedings are had against the principal

PNB vs Manila Surety

Even if the assignment with power of attorney from the principal debtor were considered as mere additional security, still by allowing the assigned funds to be exhausted without notifying the surety, PNB deprived the former of any possibility of recoursing against that security. Article 2080 of the Civil Code provides that guarantors even though they are solidary, are released from their obligation whenever some act of the creditor they cannot be subrogated to the rights, mortgages and preferences of the latter.