Credit Transaction Midterm Atty. Jose Carlo C.

Montemayor
Title XI: Loan General Provisions Art. 1933- By the contract of loan, 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, in which case the contract is called commodatum, or money or other consumable thing, upon the condition that the same amount of the same kind and quality shall be paid, in which case the contract is simply called a loan or mutuum. Commodatum is essentially gratuitous. Simple loan may be gratuitous or with a stipulation to pay interest. In commodatum the bailor retains the ownership of the thing loaned while in simple loan, ownership passes to the borrower. Mutuum -Fungible -Gratuitous/ onerous/ with interest -Ownership= Borrower -Personal Property only -Loan for Consumption -borrower bears risk of loss -paid at the end of the period -not personal in character Commodatum Non-fungible Generally gratuitous Ownership= Lender/ Bailor Real or Personal Property Loan for use ot temporary possession Lender bears risk Return can be demanded anytime Personal

Bailment- delivery of property by one person to another in trust for a specific purpose, with a contract, (express or implied), that the first shall be faithfully executed and the property returned or duly accounted for when the special purpose is accomplished or kep until the bailor reclaims it. Cause in Bailment - borrower- acquisition of the thing - lender- right to require the return of the same thing equivalent Credit as applied to loans- ability to borrow money or thing by virtue of confidence and trust reposed by a lender that the borrower will pay what he may promise. Rent- owner does not lose ownership; he merely loses control thereof in a limited period of time *if deposit- criminally liable if not returned Discounting Paper- interest is deducted in advance - always on a double name paper

Deposit- safekeeping- return upon demand -depositor/ depository- no compensation unless stipulated Irregular Deposit- depository can also use - has preference - essential use is the special benefit for depositor Sale- consensual contract -bilateral reciprocal Escalation Clause- pricing is flexible- by increasing or decreasing. Provided, 1. Increase rate does not exceed law or monetary board 2. Increased rate is made effective not earlier than effectivity law 3. remaining maturities, more than 730 days as of effectivity of law. Art. 1934- shall not be perfected until delivery of object. Commodatum/ Loan- real contract Sale- Consensual contract Chapter 1: Commodatum Section 1: Nature of Commodatum Art. 1935- Bailee in commodatum acquires the use of thing loaned but not its fruits; if there is compensation, it ceases to be a commodatum. Commodatum- a real, principal, essentially gratuitous and personal contract where one of the parties binds himself (bailor/lender) delivers to another (bailee/ borrower) a nonconsumable object, so that the latter nay use the same for a certain period and later return it. Characteristics of a Commodatum (RPGP) 1. real- perfected by delivery 2. Principal- can stand alone in itself 3. Gratuitous- if not, it is a lease 4. Personal in nature- because of the trust Art. 1936- may be consumable goods if merely for exhibition Art. 1937- movable or immovable may be subject of commodatum - if there is rent, it is a lease *contracts must be interpreted by the constitutive elements as defined and denominated by law, and not by the name given by the parties. Mina vs Pascual 25 Phil 540 Art. 1938- Bailor in comm need not be the owner of the thing loaned. What is required is that bailor has the right to use the property he is lending and he be allowed to alienate. Art 1939- Comm is purely personal in character 1. death if either party extinguishes contract

2. baillee can neither lend nor lease to a 3rd party. Only members of household may use- unless stipulated or nature of thing forbids. *exception to the rule that all rights acquired by virtue of an obligation are transmissible. Art. 1940- stipulation that bailee may use fruits is valid. General Rule: if entitled to fruits, it is usufruct Section 2: Obligations of a Bailee Art. 1941- Bailee is obliged to pay for the ordinary expenses for use and preservation of the thing loaned. -exercise diligence of a good father *Art. 1942- Bailee is liable for loss of a thing even in case of fortuitous event: DKA3S 1. if he devotes the thing to any purpose different from that for which it has been loaned 2. if he keeps it longer that what is stipulated or after accomplishment of the use. 3. if thing loaned is delivered with appraisal of its value, unles there is stipulation exempting bailee from responsibility in case of fortuitous event. 4. if he lends or leases thing to a 3rd person not a member of the household 5. if he saves his own thing rather than thing borrowed. Art. 1943- bailee is not responsible for deterioration due only to use and without his fault. Art. 1944- Bailee cannot retain thing loaned on the ground that bailor owes him something, even though it may be by reason of expenses. Bailee has right of retention under art 1951. Reason: bailment applies trust that property be restored. Art. 1945- 2 or more bailees- solidarily liable. Section 3: Obligations of the Bailor Art. 1946- Bailor cannot demand return till after expiration of period stipulated or accomplishment for which commodatum has been constituted. If urgent need, he may demand return or temporary use. In case of temporary use, commodatum is suspended. Art. 1947- the bailor may demand the thing at will, contractual relation is precarium in the following cases: 1. neither duration nor use of thing loaned is stipulated. 2. If use of thing is merely tolerated by the owner Art. 1948- bailor may demand immediate return in case of ingratitude by bailee. Grounds for ingratitude: 1. offense against person, honor, property of donor, his wife, children under his parental authority. 2. Imputes donor any criminal offense unless committed against done

3. Unduly refuses support when done is legally or morally bound. Art. 1949- Bailor shall refund extraordinary expenses for preservation of thing, provided that bailee brings the same to the knowledge of bailor before incurring them, except when it is urgent and notification cannot be awaited without realizing danger. In case of actual use of bailee, extraordinary expenses shall be borne by both of them, unless there is stipulation. Art. 1950- for purpose of making use of thing, bailee is not entitled to be reimbursed. Art. 1951- if bailor knows of a flaw of thing loaned and does not advise bailee, he is liable for damage that bailee suffers. Art. 1952- abandonment of thing loaned does not exempt bailor for payment of expenses and damages.

Chapter 2: Simple Loan or Mutuum Art. 1953: a person who receives a loan of money or any other fungible things acquires the ownership thereof, and is bound to pay the creditor an equal amount of the same kind and quality. Bonnevie vs. CA contract of loan is consensual- borrower of money who has not yet been given the money is not borrower; only would-be-borrower. - late execution of promissory note does not mean that the mortgage has no consideration.

* bank accounts shall be governed by simple loans. Art. 1954: transfer non- fungible things to another- with obligation of latter to give things of same kind, quality and quantity is barter. * non-fungible here is really non-consumable Art. 1955: obligation of a person who borrowed money is governed by 1249 and 1250 if what was loaned is fungible, debtor owes another thing of the same kind, quality and quantity even if it changes in value. If not possible, value at the time of perfection of loan shall be paid.

(1249) legal tender or stipulated currency - promissory notes or bills- effect of payment only when they have been cashed. (1250) extraordinary inflation or deflation- value of currency at the time of establishment of obligation shall be bases of payment. Art. 1956: no interest shall be due unless it has been expressly stipulated in writing. Kinds of interest: compensation for use of money and damages arises from contract or for delay or for failure to pay principal interest due shall earn interest from time it is judicially demanded Legal interest is 12% per annum Municipal corporations are liable for interest What moratorium laws suspend is the running of prescription.

Note: next provisions cover usury law. See codal.

Title XII: Deposit Chapter 1: Deposit in General and its Different Kinds 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 safe keeping of the thing delivered is not principal purpose of the contract, there is no deposit but some other contract. Perfection- when thing is delivered and binding by mere consent. 1. 2. principal purpose is safekeeping. Depository may use it: with express permission of depositor. Preservation of thing requires its use but must only be used for such purpose.

Kinds of Deposit 1. Judicial (sequestration)- attachment or seizure of property in litigation is ordered. 2. Extrajudicial a. voluntary- by will of depositor b. necessary- in compliance of legal obligation - calamity - travelers in hotel or inns - travelers in common carriers. Characteristics of Contract of Deposit: DSUMGU 1. Perfected by delivery 2. Principal purpose is for safekeeping 3. Depository cannot use deposit except -with permission -preservation requires its use 4. Only movable things. 5. Gratuitous- except there is agreement or depository is engaged in the business of storing goods. 6. unilateral or bilateral according to whether gratuitous or compensated. Vs. Barter Vs. Commodatum ownership is not transferred real contract vs consensual gratuitous vs onerous may be gratuitous vs always gratuitous safekeeping vs principal purpose is use safekeeping vs representation by grant of principals affairs custody of thing vs custody is incidental gratuitous vs generally onerous.

Vs. Agency

In agency- it must be returned when demanded at will.

incur criminal liability if appropriated for his own use can become loan if expressly agreed by the owner.

* deposit of advance payment in case of sale is not deposit. It is advance payment and ownership is transferred. Art. 1965: agreement to constitute deposit is binding but it is not perfected until delivery. -to constitute deposit, offer should be accepted. Without agreement, there is no contract. This doctrine is applicable to voluntary deposits.