Credit Transactions Memory Aid PDF

lOMoARcPSD|22845566 Credit transaction-reviewer Accountancy (Manuel S. Enverga University Foundation) Scan to open on Studocu Studocu is not sponsored or endorsed by any college or university Downloaded by Kikaru Plays (barba.mari2020@gmail....

lOMoARcPSD|22845566 Credit transaction-reviewer Accountancy (Manuel S. Enverga University Foundation) Scan to open on Studocu Studocu is not sponsored or endorsed by any college or university Downloaded by Kikaru Plays ([email protected])  lOMoARcPSD|22845566 San Beda College of Law 182 MEMORY AID IN CIVIL LAW CREDIT TRANSACTIONS CREDIT TRANSACTIONS LOAN (Articles 1933 – 1961)  All transactions involving the purchase or loan of goods, services,  A contract wherein one of the or money in the present with a parties delivers to another, either promise to pay or deliver in the something not consumable so that future the latter may use the same for a certain time and return it or money Contracts of security or other consumable thing, upon the Types: condition that the same amount of 1. Secured transactions or contracts of the same kind and quality shall be real security - supported by a paid. (Art 1933) collateral or an encumbrance of property Characteristics: 2. Unsecured transactions or contracts 1. Real Contract – delivery of the thing of personal security - supported only loaned is necessary for the by a promise or personal perfection of the contract commitment of another such as a NOTE: An accepted promise to make guarantor or surety a future loan is a consensual contract, and therefore binding upon Security the parties but it is only after  Something given, deposited, or delivery, will the real contract of serving as a means to ensure loan arise. (Art 1934) fulfilment or enforcement of an obligation or of protecting some 2. Unilateral Contract - once the interest in property subject matter has been delivered,  Types of Security it creates obligations on the part of a. personal – when an individual only one of the parties (i.e. becomes surety or guarantor borrower). b. real or property – when a mortgage, pledge, antichresis,  Kinds: charge or lien or other device 1. Commodatum – when the bailor used to have property held, out (lender) delivers to the bailee of which the person to be made (borrower) a non-consumable thing secure can be compensated for so that the latter may use it for a loss certain time and return the identical thing. Bailment  Kinds of commodatum:  The delivery of property of one a. Ordinary Commodatum – use by person to another in trust for a the borrower of the thing is for a specific purpose, with a contract, certain period of time express or implied, that the trust b. Precarium - one whereby the shall be faithfully executed and the bailor may demand the thing property returned or duly accounted loaned at will and it exists in the for when the special purpose is following cases: accomplished or kept until the bailor i. neither the duration nor claims it. purpose of the contract is stipulated  Parties: ii. the use of the thing is 1. bailor - the giver; one who delivers merely tolerated by the property owner 2. bailee- the recipient; one who receives the custody or possession of the thing thus delivered 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) Downloaded by Kikaru Plays ([email protected])  lOMoARcPSD|22845566 San Beda College of Law 183 MEMORY AID IN CIVIL LAW 2. Simple loan or mutuum – where the COMMODATUM (Articles 1935 – 1952) lender delivers to the borrower  Nature: money or other consumable thing upon the condition that the latter 1. PURPOSE: Bailee in commodatum shall pay the same amount of the acquires the temporary use of the same kind and quality. thing but not its fruits (unless stipulated as an incidental part of Commodatum Mutuum the contract).(Art 1935) Key: COPS-LOTR  Use must be temporary, 1. Object otherwise the contract may be a Non-consumable Consumable deposit. 2. Cause Gratuitous May or may not be 2. CAUSE: Essentially gratuitous; it gratuitous ceases to be a commodatum if any 3. Purpose compensation is to be paid by the Use or temporary Consumption borrower who acquires the use, in possession such case there arises a lease 4. Subject Matter contract. Real or personal Only personal property property  Similar to a donation in that it 5. Ownership of the thing confers a benefit to the Retained by the Passes to the debtor recipient. The presumption is bailor that the bailor has loaned the 6. Thing to be returned thing for having no need Exact thing loaned Equal amount of the therefor. same kind and quality 3. SUBJECT MATTER: Generally non- 7. Who bears risk of loss consumable whether real or personal Bailor Debtor but if the consumable goods are not 8. When to return for consumption as when they are In case of urgent Only after the merely for exhibition, consumable need, even before expiration of the goods may be the subject of the the expiration of the term commodatum. (Art 1936) term 4. Bailor need not be the owner of the thing owned (Art. 1938) since by the Loan Credit loan, ownership does not pass to the Delivery by one party Ability of a person to and the receipt of borrow money or borrower. other party of a things by virtue of  A mere lessee or usufructuary given sum of money the trust or may lend but the borrower or or other consumable confidence reposed bailee himself may not lend nor thing upon an by the lender that he lease the thing loaned to him to agreement, express will pay what he a third person (Art 1932) or implied, to repay promised. the same. 5. Purely Personal (Art 1939):  Death of either party terminates the contract unless by Loan Credit stipulation, the commodatum is 1. Interest taken at Interest is taken in transmitted to the heirs of either the expiration of the advance credit or both parties. 2. Always on a Always on a single  Bailee can neither lend nor lease double name paper name paper (i.e. the object of the contract to a (two signatures promissory note with third person. appear with both no indorse-ment parties held liable other than the for payment) maker) 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) Downloaded by Kikaru Plays ([email protected])  lOMoARcPSD|22845566 San Beda College of Law 184 MEMORY AID IN CIVIL LAW NOTE:Use of the thing loaned NOTES: may extend to members of the  However, the bailee’s right bailee’s household except: extends no further than a. contrary stipulation; retention of the thing loaned b. nature of the thing until he is reimbursed for the forbids such use damages suffered by him. Obligations of the Bailee: (Arts 1941 –  He cannot lawfully sell the thing to satisfy such damages 1945) without court’s approval. 1. To pay for the ordinary expenses for the use and preservation of the thing  In case there are two or loaned. (Art 1941) more bailees, their 2. To be liable for the loss of the thing obligation shall be solidary. even if it should be through a fortuitous event in the following Obligations of the bailor (Art 1946 – Art cases: (KLAS D) 1952): a. when he keeps it longer than the 1. To respect the duration of the loan period stipulated, or after the GENERAL RULE: Allow the bailee accomplishment of its use the use of the thing loaned for the b. when he lends or leases it to duration of the period stipulated or third persons who are not until the accomplishment of the members of his household purpose for which the commodatum c. when the thing loaned has been was instituted. delivered with appraisal of its EXCEPTIONS: value a. In case of urgent need in d. when, being able to save either which case bailee may demand of the thing borrowed or his own its return or temporary use; things, he chose to save the b. The bailor may demand latter; or immediate return of the thing if e. when the bailee devoted the the bailee commits any act of thing for any purpose different ingratitude specified in Art. 765. from that for which it has been loaned (Art 1942) 2. To refund to the bailee 3. To be liable for the deterioration of extraordinary expenses for the thing loaned (a) if expressly preservation of the thing loaned, stipulated; (b) if guilty of fault or provided the bailee brings the same negligence; or (c) if he devotes the to the knowledge of the bailor thing to any purpose different from before incurring them, except when that for which it has been loaned they are so urgent that the reply to 4. To pay for extraordinary expenses the notification cannot be awaited arising from the actual use of the without danger. thing by the bailee, which shall be borne equally by both the bailor and 3. To be liable to the bailee for the bailee, even though the bailee damages for known hidden flaws. acted without fault, unless there is a  Requisites: stipulation to the contrary (Art 1949 a. There is flaw or defect in the par 2) thing loaned; 5. To return the thing loaned b. The flaw or defect is hidden;  The bailee has no right to retain c. The bailor is aware thereof; the thing loaned as security for d. He does not advise the bailee of claims he has against the bailor the same; and even for extraordinary expenses e. The bailee suffers damages by except for a claim for damages reason of said flaw or defect suffered because of the flaws of the thing loaned. 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) Downloaded by Kikaru Plays ([email protected])  lOMoARcPSD|22845566 San Beda College of Law 185 MEMORY AID IN CIVIL LAW NOTES: 3. Relationship Relationship is that  If the above requisites concur, between the parties of a landlord and the bailee has the right of is that of obligor- tenant retention for damages. obligee  The bailor cannot exempt himself from the payment of 4. Creditor receives Owner of the expenses or damages by payment for his loan property rented receives abandoning the thing to the compensation or bailee. price either in money, provisions, SIMPLE LOAN OR MUTUUM (Art 1953 – chattels, or labor 1961)  A contract whereby one party from the occupant delivers to another, money or other thereof in return for consumable thing with the its use (Tolentino vs understanding that the same amount Gonzales, 50 Phil 558 1927) of the same kind and quality shall be paid. (Art. 1953) Loan Sale NOTES: 1. Real contract Consensual contract  The mere issuance of the checks does not result in the perfection of 2. Generally Bilateral and the contract of loan. The Civil Code unilateral because reciprocal provides that the delivery of bills of only borrower has exchange and mercantile obligations documents, such as checks, shall produce the effect of payment only NOTE: If the property is “sold”, but the when they have been encashed real intent is only to give the object as (Gerales vs. CA 218 SCRA 638). It is security for a debt – as when the “price” only after the checks have produced is comparatively small – there really is a the effect of payment that the contract of loan with an “equitable contract of loan may be deemed mortgage.” perfected. Commodatum/  The obligation is “to pay” and not to Barter Mutuum return because the consumption of the thing loaned is the distinguishing 1. Subject matter is Subject matter is character of the contract of mutuum money or fungible non-fungible, (non from that of commodatum. things consumable) things  No estafa is committed by a person who refuses to pay his debt or denies 2. In commodatum, The thing with its existence. the bailee is bound equivalent value is to return the given in return for identical thing what has been Simple Loan/Mutuum Rent borrowed when the received time has expired or 1. Delivery of money Delivery of some non- purpose served or some consumable consumable thing in thing with a promise order that the other 3. Mutuum may be Onerous, actually a to pay an equivalent may use it during a gratuitous and mutual sale of the same kind and certain period and commodatum is quality return it to the always gratuitous former. 2. There is a transfer There is no transfer of ownership of the of ownership of the thing delivered thing delivered 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) Downloaded by Kikaru Plays ([email protected])  lOMoARcPSD|22845566 San Beda College of Law 186 MEMORY AID IN CIVIL LAW breached, the contravenor can  Form of Payment (Art 1955): be held liable for damages. 1. If the thing loaned is money - b) With regard particularly to an payment must be made in the award of interest in the concept currency stipulated, if it is possible; of actual and compensatory otherwise it is payable in the damages, the rate of interest, as currency which is legal tender in the well as the accrual thereof, is Philippines and in case of imposed, as follows: extraordinary inflation or deflation, i. When the obligation the basisi of payment shall be the breached consists of value of the currency at the time of payment of a sum of money the creation of the obligation (loan or forbearance of 2. If what was loaned is a fungible money), the interest shall be thing other than money - the that which is stipulated or borrower is under obligation to pay agreed upon by the parties. the lender another thing of the same In absence of an agreement, kind, quality and quantity. In case it the rate shall be the legal is impossible to do so, the borrower rate (i.e. 12% per annum) shall pay its value at the time of the computed from default. perfection of the loan. NOTE: The interest due shall itself earn legal interest Interest from the time it is judicially  The compensation allowed by law or demanded fixed by the parties for the loan or ii. In other cases, the rate of forbearance of money, goods or interest shall be six percent credits (6%) per annum.  Requisites for Demandability: (ELI) NOTE: No interest, however, 1. must be expressly stipulated shall be adjudged on Exceptions: unliquidated claims or a. indemnity for damages damages except when or b. interest accruing from until the demand can be unpaid interest established with reasonable 2. must be lawful certainty. When the demand 3. must be in writing cannot be established, the interest shall begin to run Compound Interest only from the date of the GENERAL RULE: Unpaid interest shall judgment of the court is not earn interest. made. EXCEPTIONS: iii. When the judgment of the 1. when judicially demanded court awarding a sum of 2. when there is an express money becomes final and stipulation (must be in writing in executory, the rate of legal view of Art. 1956) interest, whether the case falls under paragraph i or ii Guidelines for the application of above, shall be 12% per proper interest rates annum from such finality 1. If there is stipulation: that rate shall until its satisfaction, this be applied interim period being deemed 2. The following are the rules of thumb to be by then an equivalent for the application/imposition of to a forbearance of credit. interest rates: (Eastern Shipping Lines vs. a) When an obligation, regardless CA, July 12, 1994) of its source, i.e., law, contracts, quasi-contracts, NOTES: delicts or quasi-delicts is  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) Downloaded by Kikaru Plays ([email protected])  lOMoARcPSD|22845566 San Beda College of Law 187 MEMORY AID IN CIVIL LAW annum deals with loans, forbearance 1. Real Contract - contract is of any money, goods or credits and perfected by the delivery of the judgments involving such loans, or subject matter. forbearance in the absence of 2. Unilateral (gratutitous deposit) - express agreement to such rate only the depositary has an  Interest as indemnity for damages is obligation. payable only in case of default or 3. Bilateral (onerous deposit) - non-performance of the contract. As gives rise to obligations on the they are distinct claims, they may be part of both the depositary and demanded separately. (Sentinel depositor. Insurance Co., Inc. vs CA, 182 SCRA 517) Deposit Mutuum 1. Purpose  Central Bank Circular No. 905 (Dec. Principal purpose is Principal purpose is 10, 1982) removed the Usury Law safekeeping or consumption ceiling on interest rates for secured custody and unsecured loans, regardless of 2. When to Return maturity. Depositor can The lender must wait demand the return of until the expiration Validity of unconscionable interest rate the subject matter at of the period granted in a loan will to the debtor Supreme Court in Sps. Solangon 3. Subject Matter vs. Jose Salazar, G.R. No. 125944, June Subject matter may Subject matter is be movable or only money or other 29, 2001, said that since the usury law immovable property fungible thing had been repealed by CB Cir. No. 905 4. Relationship there is no more maximum rate of Relationship is that Relationship is that interest and the rate will just depend on of lender (creditor) of depositor and the mutual agreement of the parties and borrower depositary. (citing Lim Law vs. Olympic Sawmill Co., (debtor). 129 SCRA 439). But the Supreme Court said that nothing in said circular grants 5. Compensation lenders carta blanche authority to raise There can be NO compensation of interest rates to level which will either compensation of things deposited with enslave their borrowers or lead to a credits. each other (except by mutual hemorrhaging of their assets (citing agreement). Almeda vs. CA, 256 SCRS 292). In Medel vs. CA, 299 SCRA 481, it was ruled that Deposit Commodatum while stipulated interest of 5.5% per month on a loan is usurious pursuant to 1. Purpose is 1. Purpose is the CB Circular No. 905, the same must be Safekeeping transfer of the use equitably reduced for being iniquitous, unconscionable and exorbitant. It is 2. May be gratuitous 2. Essentially and contrary to morals, (contra bonos always gratuitous mores). It was reduced to 12% per annum in consonant with justice and fair 3. Movable/corporeal 3. Both movable and play. things only in case of immovable may be extrajudicial deposit the object DEPOSIT (Articles 1962 – 2009)  Kinds of Deposit:  A contract constituted from the 1. Judicial (Sequestration) –takes place moment a person receives a thing when an attachment or seizure of belonging to another, with the property in litigation is ordered. obligation of safely keeping it and of returning the same. 2. Extra-judicial a. Voluntary – one wherein the Characteristics: delivery is made by the will of the depositor or by two or more 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) Downloaded by Kikaru Plays ([email protected])  lOMoARcPSD|22845566 San Beda College of Law 188 MEMORY AID IN CIVIL LAW persons each of whom believes 3. property saved from destruction himself entitled to the thing without knowledge of the owner deposited. (Arts 1968 – 1995) b. Necessary – one made in NOTES: compliance with a legal  Article 1966 does not embrace obligation, or on the occasion of incorporeal property, such as rights any calamity, or by travellers in and actions, for it follows the person hotels and inns (Arts 1996 - of the owner, wherever he goes. 2004), or by travellers with common carriers (Art 1734 –  A contract for the rent of safety deposit boxes is not an ordinary 1735). contract of lease of things but a NOTE: The chief difference special kind of deposit; hence, it is between a voluntary deposit and a not to be strictly governed by the necessary deposit is that in the provisions on deposit. The relation former, the depositor has a between a bank and its customer is complete freedom in choosing the that of a bailor and bailee. (CA Agro depositary, whereas in the latter, vs CA, 219 SCRA 426) there is lack of free choice in the depositor. Obligations of the Depositary (Art 1972 –1991): Judicial Extra-judicial 1. To keep the thing safely (Art 1972) 1. Creation  Exercise over the thing Will of the court Will of the parties or contract deposited the same diligence as he would exercise over his 2. Purpose property Security or to insure Custody and the right of a party safekeeping 2. To return the thing (Art 1972) to property or to  Person to whom the thing must recover in case of be returned: favorable judgment a. Depositor, to his heirs and 3. Subject Matter successors, or the person who Movables or Movables only may have been designated in the immovables, contract but generally b. If the depositary is capacitated - immovables he is subject to all the 4. Cause obligations of a depositary Always onerous May be compen- whether or not the depositor is sated or not, but capacitated. If the depositor is generally gratuitous incapacitated, the depositary must return the property to the 5. When must the thing be returned legal representative of the Upon order of the Upon demand of incapacitated or to the depositor court or when depositor himself if he should acquire litigation is ended capacity (Art 1970). 6. In whose behalf it is held c. If the depositor is capacitated Person who has a Depositor or third and the depositary is right person designated incapacitated - the latter does not incur the obligation of a depositary but he is liable: GENERAL RULE: Contract of deposit is i..to return the thing gratuitous (Art 1965) deposited while still in his EXCEPTIONS: possession; 1. when there is contrary ii.to pay the depositor the stipulation amount which he may have 2. depositary is engaged in business benefited himself with the of storing goods thing or its price subject to 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) Downloaded by Kikaru Plays ([email protected])  lOMoARcPSD|22845566 San Beda College of Law 189 MEMORY AID IN CIVIL LAW the right of any third person 4. If the thing deposited should earn who acquired the thing in interest (Art 1975): good faith (Art 1971) a. to collect interest and the capital itself as it fall due  Time of return: b. to take steps to preserve its a. Upon demand even though a value and rights corresponding to specified period or time for such it return may have been fixed 5. Not to commingle things deposited if except when the thing is so stipulated (Art 1976) judicially attached while in the 6. Not to make use of the thing depositary’s possession or should deposited unless authorized (Art he have been notified of the 1977) opposition of a third person to GENERAL RULE: Deposit is for the return or the removal of the safekeeping of the subject matter thing deposited. (Art 1998) and not for use. The unauthorized b. If deposit gratuitous, the use by the depositary would make depositary may return the thing him liable for damages. deposited notwithstanding that a EXCEPTIONS: period has been fixed for the 1. When the preservation of the deposit if justifiable reasons thing deposited requires its use exists for its return. 2. When authorized by the c. If the deposit is for a depositor valuable consideration, the depositary has no right to return NOTE: The permission to use is NOT the thing deposited before the presumed except when such use is expiration of the time necessary for the preservation of the designated even if he should thing deposited. suffer inconvenience as a consequence.(Art 1989) Effect if permission to use is given (Art 1978):  What to return: product, 1. If thing deposited is accessories, and accessions of non-consumable, the contract the thing deposited (Art 1983) loses the character of a deposit 3. Not to deposit the thing with a third and acquires that of a person unless authorized by express commodatum despite the fact stipulation (Art 1973) that the parties may have denominated it as a deposit,  The depositor is liable for the unless safekeeping is still the loss of the thing deposited under principal purpose. Article 1973 if: 2. If thing deposited consists of a. he money/consumable things, the transfers the deposit with a third contract is converted into a person without authority simple loan or mutuum unless although there is no negligence safekeeping is still the principal on his part and the third person; purpose in which case it is called b. he an irregular deposit. Example: deposits the thing with a third bank deposits are irregular person who is manifestly careless deposits in nature but governed or unfit although authorized by law on loans. even in the absence of 7. When the thing deposited is negligence; or delivered sealed and closed : c. the thing a. to return the thing deposited in is lost through the negligence of the same condition his employees whether the latter b. to pay for damages should the are manifestly careless or not. seal or lock be broken through 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) Downloaded by Kikaru Plays ([email protected])  lOMoARcPSD|22845566 San Beda College of Law 190 MEMORY AID IN CIVIL LAW his fault, which is presumed 1. The consumable 1. Lender is bound unless proved otherwise thing deposited may by the provisions of c. to keep the secret of the deposit be demanded at will the contract and when the seal or lock is broken by the depositor cannot demand restitution until the with or without his fault (Art time for payment, as 1981) provided in the NOTE: The depositary is contract, has arisen authorized to open the thing deposited which is closed and 2. The only benefit is 2. Essential cause for sealed when (Art 1982): that which accrues the transaction is the i. there is presumed authority to the depositor necessity of the (i.e. when the key has been borrower delivered to him or the instructions of the depositor 3. The irregular 3. Common creditors depositor has a enjoy no preference cannot be done without preference over in the distribution of opening it) other creditors with the debtor’s ii. necessity respect to the thing property 8. To change the way of the deposit if deposited under the circumstances, the depositary may reasonably presume that the depositor would consent to Rule when there are two or more the change if he knew of the facts of depositors (Art 1985): the situation, provided, that the 1. If thing deposited is divisible and former notifies the depositor thereof depositors are not solidary: Each and wait for his decision, unless depositor can demand only his delay would cause danger proportionate share thereto. 9. To pay interest on sums converted to 2. If obligation is solidary or if thing is personal use if the deposit consists not divisible: Rules on active of money (Art 1983) solidarity shall apply, i.e. each one 10. To be liable for loss through of the solidary depositors may do fortuitous event (SUDA): (Art 1979): whatever may be useful to the a. if stipulated others but not anything which may b. if he uses the thing without the be prejudicial to the latter, (Art. depositor's permission 1212) and the depositary may return c. if he delays its return the thing to anyone of the solidary d. if he allows others to use it, depositors unless a demand, judicial even though he himself may or extrajudicial, for its return has have been authorized to use the been made by one of them in which same case, delivery should be made to him (Art. 1214). NOTES: 3. Return to one of depositors  Fixed, savings, and current deposits stipulated. The depositary is bound of money in banks and similar to return it only to the person institutions shall be governed by the designated although he has not made provisions concerning simple loan. any demand for its return. (Art 1980)  The general rule is that a bank can NOTES: compensate or set off the deposit in  The depositary may retain the thing its hands for the payment of any in pledge until full payment of what indebtedness to it on the part of the may be due him by reason of the depositor. In true deposit, deposit (Art 1994). compensation is not allowed.  The depositor’s heir who in good faith may have sold the thing which Irregular deposit Mutuum he did not know was deposited, shall only be bound to return the price he 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) Downloaded by Kikaru Plays ([email protected])  lOMoARcPSD|22845566 San Beda College of Law 191 MEMORY AID IN CIVIL LAW may have received or to assign his pillage, shipwreck or other similar right of action against the buyer in events (deposito miserable) case the price has not been paid him 3. Made by travellers in hotels and inns (Art 1991). or by travellers with common carrier Obligations of the Depositor (Art 1992 – 1995): 1. To pay expenses for preservation a. If the deposit is gratuitous, the Deposit by Travellers in hotels and depositor is obliged to inns: reimburse the depositary for  The keepers of hotels or inns shall be expenses incurred for the responsible as depositaries for the preservation of the thing deposit of effects made by travellers deposited (Art 1992) provided: b. If the deposit is for valuable a. Notice was given to them or to consideration, expenses for their employees of the effects preservation are borne by the brought by the guest; and depositary unless there is a b. The guests take the precautions contrary stipulation which said hotel-keepers or their 2. To pay loses incurred by the substitutes advised relative to depositary due to the character of the care and vigilance of their the thing deposited effects. NOTES: GENERAL RULE: The depositor shall  Liability extends to vehicles, animals reimburse the depositary for any loss and articles which have been arising from the character of the thing introduced or placed in the annexes deposited. of the hotel. EXCEPTIONS:  Liability shall EXCLUDE losses which 1. at the time of the deposit, the proceed from force majeure. The depositor was not aware of the act of a thief or robber is not dangerous character of the thing deemed force majeure unless done 2. when depositor was not expected with the use of arms or irresistible to know the dangerous character force. of the thing 3. when the depositor notified the  The hotel-keeper cannot free depository of the same himself from the responsibility by 4. the depositary was aware of it posting notices to the effect that he without advice from the depositor is not liable for the articles brought by the guest. Any stipulation to such Extinguishment of Voluntary Deposit effect shall be void. (Art 1995)  Notice is necessary only for suing 1. Loss or destruction of the thing civil liability but not in criminal deposited liability. 2. In case of gratuitous deposit, upon the death of either the depositor or GUARANTY (Articles 2047 – 2084) the depositary 3. Other causes, such as return of the  A contract whereby a person thing, novation, merger, expiration (guarantor) binds himself to the of the term fulfilment of the creditor to fulfil the obligation of resolutory condition, etc (Art 1231) the principal debtor in case the latter fail to do so. Necessary Deposits 1. Made in compliance with a legal  Classification of Guaranty: obligation 1. In the Broad sense: 2. Made on the occasion of any a. Personal - the guaranty is the calamity such as fire, storm, flood, credit given by the person who 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) Downloaded by Kikaru Plays ([email protected])  lOMoARcPSD|22845566 San Beda College of Law 192 MEMORY AID IN CIVIL LAW guarantees the fulfilment of the rather than the first should perform principal obligation. (Agro Conglomerates, Inc. vs. CA, b. Real - the guaranty is the 348 SCRA 450) property, movable or NOTES: immovable.  The reference in Article 2047 to solidary obligations does not mean that suretyship is withdrawn from the applicable provisions governing guaranty. A surety is almost the 2. As to its Origin same as a solidary debtor, except a. Conventional - agreed upon by that he himself is a principal debtor. the parties. b. Legal - one imposed by virtue of  In suretyship, there is but one contract, and the surety is bound by a provision of a law. the same agreement which binds the c. Judicial - one which is required principal. A surety is usually bound by a court to guarantee the with the principal by the same eventual right of one of the instrument, executed at the same parties in a case. time and upon the same 3. As to Consideration consideration (Palmares vs CA, 288 a. Gratuitous - the guarantor does SCRA 422) not receive any price or remuneration for acting as such.  It is not for the obligee to see to it b. Onerous - the guarantor receives that the principal debtor pays the valuable consideration. debt or fulfill the contract, but for 4. As to the Person guaranteed the surety to see to it that the a. Single - one constituted solely to principal debtor pays or performs guarantee or secure (Paramount Insurance Corp vs CA, performance by the debtor of 310 SCRA 377) the principal obligation. b. Double or sub-guaranty - one Nature of Surety’s undertaking: constituted to secure the 1. Liability is contractual and fulfilment by the guarantor of a accessory but direct prior guaranty. NOTE: He directly, primarily and 5. As to Scope and Extent equally binds himself with the a. Definite - the guaranty is limited principal as original promisor, to the principal obligation only, although he possesses no direct or or to a specific portion thereof. personal interest over the latter’s b. Indefinite or simple - one which obligation, nor does he receive any not only includes the principal benefits therefrom. (PNB vs CA, 198 obligation but also all its SCRA 767) accessories including judicial 2. Liability limited by the terms of the costs contract. NOTE: It cannot be extended by SURETYSHIP implication beyond the terms of the contract (PNB vs CA, 198 SCRA 767)  A contract whereby a person (surety) 3. Liability arises only if principal binds himself solidarily with the debtor is held liable. principal debtor NOTES:  A relation which exists where one  The creditor may sue separately person (principal) has undertaken an or together the principal debtor obligation and another person and the surety. Where there are (surety) is also under a direct and several sureties, the obligee may primary obligation or other duty to proceed against any one of the obligee, who is entitled to but them. one performance, and as between  In the absence of collusion, the the two who are bound, the second surety is bound by a judgment 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) Downloaded by Kikaru Plays ([email protected])  lOMoARcPSD|22845566 San Beda College of Law 193 MEMORY AID IN CIVIL LAW against the principal even  Guaranty may be constituted to though he was not a party to the guarantee the performance of a proceedings. The nature of its voidable or unenforceable undertaking makes it privy to all contract. It may also guarantee proceedings against its principal a natural obligation. (Art 2052) (Finman General Assurance Corp. vs. Salik, 188 SCRA 740)  The guarantor cannot bind himself for more than the principal debtor and even if he 4. Surety is not entitled to the benefit does, his liability shall be of exhaustion reduced to the limits of that of NOTE: He assumes a solidary liability the debtor. for the fulfilment of the principal 2. Subsidiary and Conditional - takes obligation (Towers Assurance Corp effect only in case the principal vs. Ororama Supermart, 80 SCRA debtor fails in his obligation. 262) as an original promissory and debtor from the beginning. NOTES: 5. Undertaking is to creditor and not to debtor.  The guarantor cannot bind NOTE: The surety makes no himself for more than the covenant or agreement with the principal debtor and even if he principal that it will fulfil the does, his liability shall be obligation guaranteed for the benefit reduced to the limits of that of of the principal. Such a promise is the debtor. But a guarantor may not implied by law either; and this is bind himself for less than that of true even where under the contract the principal (Art 2054) the creditor is given the right to sue  A guaranty may be given as the principal, or the latter and the security for future debts, the surety at the same time. (Arranz vs. amount of which is not yet Manila Fidelity & Surety Co., Inc., known; there can be no claim 101 Phil. 272) against the guarantor until the 6. Surety is not entitled to notice of debt is liquidated. A conditional principal’s default obligation may also be secured. NOTE: The creditor owes no duty of (Art 2053) active diligence to take care of the 3. Unilateral - may be entered even interest of the surety and the surety w/o the intervention of the principal is bound to take notice of the debtor, in which case Art. 1236 and principal’s default and to perform 1237 shall apply and it gives rise only the obligation. He cannot complain to a duty on the part of the that the creditor has not notified guarantor in relation to the creditor him in the absence of a special and not vice versa. agreement to that effect. (Palmares 4. Nominate vs CA, 288 SCRA 422) 5. Consensual 7. Prior demand by the creditor upon 6. It is a contract between the principal is not required guarantor/surety and creditor. NOTE: As soon as the principal is in default, the surety likewise is in NOTES: default.  Acceptance of guaranty by 8. Surety is not exonerated by neglect creditor and notice thereof to of creditor to sue principal guarantor: Characteristics of Guaranty and  In declaring that guaranty Suretyship: must be express, the law 1. Accessory - It is indispensable refers solely and exclusively condition for its existence that there to the obligation of the must be a principal obligation. guarantor because it is he NOTES: alone who binds himself by 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) Downloaded by Kikaru Plays ([email protected])  lOMoARcPSD|22845566 San Beda College of Law 194 MEMORY AID IN CIVIL LAW his acceptance. With respect motive of pecuniary gain and hence, to the creditor, no such should be protected against unjust requirement is needed pecuniary impoverishment by because he binds himself to imposing on the principal, duties nothing. akin to those of a fiduciary.  However, when there is merely an offer of a NOTES: guaranty, or merely a  The rule will apply only after it conditional guaranty, in the has been definitely ascertained sense that it requires action that the contract is one of by the creditor before the suretyship or guaranty. It cannot obligation becomes fixed, it be used as an aid in determining does not become binding whether a party’s undertaking is until it is accepted and until that of a surety or guarantor. notice of such acceptance by (Palmares vs CA, 288 SCRA 292) the creditor is given to, or  It does not apply in case of acquired by, the guarantor, compensated sureties. or until he has notice or 10. It is a contract which requires that knowledge that the creditor the guarantor must be a person has performed the condition distinct form the debtor because a and intends to act upon the person cannot be the personal guaranty. guarantor of himself.  But in any case, the creditor NOTE: However, in a real guaranty, is not precluded from like pledge and mortgage, a person waiving the requirement of may guarantee his own obligation notice. with his personal or real properties.  The consideration of the guaranty is the same as the Guaranty Suretyship consideration of the principal obligation. 1. Liability depends 1. Surety assumes upon an independent liability as regular  The creditor may proceed agreement to pay the party to the against the guarantor although obligation if primary undertaking he has no right of action against debtor fails to do so the principal debtor. 7. Not presumed. It must be expressed 2. Collateral under- 2. Surety is an and reduced in writing. taking original promisor NOTE: A power of attorney to loan money does not authorize the agent 3. Guarantor is 3. Surety is secondarily liable primarily liable to make the principal liable as a surety for the payment of the debt 4. Guarantor binds 4. Surety undertakes of a third person. (BPI vs. Coster, 47 himself to pay if to pay if the principal Phil. 594) the principal DOES NOT PAY 8. Falls under the Statute of Frauds CANNOT PAY since it is a “special promise to answer for the debt, default or 5. Insurer of 5. Insurer of the miscarriage of another”. solvency of debtor debt 9. Strictly interpreted against the creditor and in favor of the 6. Guarantor can 6. Surety cannot guarantor/surety and is not to be avail of the benefit avail of the benefit of of excussion and excussion and division extended beyond its terms or division in case specified limits. (Magdalena Estates, creditor proceeds Inc. vs Rodriguez, 18 SCRA 967) The against him rule of strictissimi juris commonly pertains to an accommodation surety Indorsement Guaranty because the latter acts without 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) Downloaded by Kikaru Plays ([email protected])  lOMoARcPSD|22845566 San Beda College of Law 195 MEMORY AID IN CIVIL LAW 1. Primarily of 1. Contract of  It is never necessary that the transfer security guarantor or surety should receive 2. Unless the note is any part or benefit, if such there be, 2. Failure in either or promptly presented both of these accruing to the principal. (Willex for payment at particulars does not Plastic Industries Corp. vs. CA, 256 maturity and due generally work as an SCRA 478) notice of dishonor absolute discharge of given to the indorser a guarantor’s within a reasonable liability, but his is time he will be discharged only to discharged abso- the extent of the loss Double or sub-guaranty (Art 2051 2nd lutely from all which he may have par) liability thereon, suffered in whether he has consequence thereof  One constituted to guarantee the suffered any actual obligation of a guarantor damage or not Continuing guaranty (Art 2053) 3. Indorser does not 3. Guarantor  One which is not limited to a single warrant the solvency. warrants the solvency transaction but which contemplates He is answerable on a of the promisor a future course of dealings, covering strict compliance a series of transactions generally for with the law by the holder, whether the an indefinite time or until revoked. promisor is solvent or not NOTES:  Prospective in operation (Diño vs CA, 4. Indorser can be 4. Guarantor cannot be 216 SCRA 9) sued as promisor sued as promisor  Construed as continuing when by the Guaranty Warranty terms thereof it is evident that the A contract by which a An undertaking that object is to give a standing credit to person is bound to the title, quality, or the principal debtor to be used from another for the quantity of the time to time either indefinitely or fulfilment of a subject matter of the until a certain period, especially if promise or contract is what it the right to recall the guaranty is engagement of a has been represented expressly reserved (Diño vs CA, 216 third party to be, and relates to SCRA 9) some agreement made ordinarily by  “Future debts” may also refer to the party who makes debts existing at the time of the the warranty constitution of the guaranty but the amount thereof is unknown and not NOTES: to debts not yet incurred and  A guaranty is gratuitous, unless there existing at that time. is a stipulation to the contrary. The  Exception to the concept of cause of the contract is the same continuing guaranty is chattel cause which supports the obligation mortgage. A chattel mortgage can as to the principal debtor. only cover obligations existing at the  The peculiar nature of a guaranty or time the mortgage is constituted and surety agreement is that is is not those contracted subsequent to regarded as valid despite the the execution thereof (The Belgian absence of any direct consideration Catholic Missionaries, Inc. vs. received by the guarantor or surety Magallanes Press, Inc., 49 Phil 647). either from the principal debtor or An exception to this is in case of from the creditor; a consideration stocks in department stores, drug moving to the principal alone will stores, etc. (Torres vs. Limjap, 56 suffice. Phil 141). CIVIL LAW COMMITTEE ?