CREDIT TRANSASTIONS Types of security All transactions int ving the purchase «t 1. personal ~ wher, an individual becomes: goods, services, 2¢ inoney with a provaise to pay ‘surety oF guarantor fr dealer in the ful ate P. teal or property ~ when an encumbrance Is made oh property. Contracts of Sect rity: Types 4. Secured” tra sautionsiconteacts of al Bailment: The delivery of property of ono person securily - trarsacllons supported by a to anathat In ‘rust for @ specific purwose, wih a colateral or'ais encumbrance of property contract, »xpross oF implied, that the trus! shall be ‘The encunittanco Is otfe ted as follows: faithfully executeit and the property rolumed oF a. In pledge, by” placing the movable duly accounted far when the special puipase property 9 the posnession of the crestor; accomplished of kept until the bali clainis b. in chattel norigage, by ths execution of the corresponding deed substantially ih Parties: the form presciibed by law and the 4, ballot = ore who delivers the possession or feglstratic: with the Cnalte! Mortgage custody ofthe thing batted Rogistry, 2, ballee ~ one who receives the custody or 8, Inreal et: te mortgage, by the execution possension of the thing thus delivered. of. pubijy Instrument cncumbering the real-propety covered theroby and the Aoltmant for Hira ayes when goods ot let ‘annotation’ of thy mortgeige on the Ile AH with the Reglaty of Deeds, and Aer by him 4d. in antichests, kya written instrument at ‘granting to ths creditor the right to receive SAN REDA tie frults ofA Immovable property with: the cbligetion to apply such frults to the payment of th®. interest ond arhicipal obligation ‘Aone Shoe, Rubber & Plastic Comp, v. Jourt of Appeals, G.R. No. 103576, At gust 22, 1996). 2. Uneeoured trét sactions/contracts of personal secutty = wuneadtors aopored cry By Bea foots promise, or coinmn'tment of another such as a Arse me ond guaranter of euety Security: Something given, deposited, or serving aga moans” te. ensure ehforcemant of an thing feawedd i is necensay Gr the Sa ction oft conte ‘executive commitTes: HERDERT CALM ABUGAN vera chaser haw academies upetations, MANDLO ADEL SANTOS cha tel operators, GRACE SARAN TIA ee alr for operations, UAH CALE NUESTRO ven cul for acai, ANE AMGEUE CTANG Wo chor teeta KRIGTNE ANNACELAEE HIS ion char for rane, ER MERIAACOSTA ae hn fo ep, AE JELLO CONCEPCION wa hn fra cent, * FRANCESCA LOURDES Sut) A subiect cha, SHEAR MARE ARELIA rctat sublet chal, ACF AVI GNYIRO wep, FPANCESCA LOURDES SEGA ‘persons and fairl 8, CUSCELYN CARAYUGA property, MA. PFUSACPAZCN PANO nc MARY 1 ANE GALANG wild sucesso, [MARIA DANIAFLOR BERAW Od COLLEEN INFANTE obigtlons and cont, MARY IVY ANNE C/LANG sas and lens, EVA CHRISTINE NAPAIUAN Jarier, agency and Wott KATHERINE ANI SILO credit Wrantacton,SHLENA MARIE ACELA tris tne damages, JAN PEAML PORTIS. i {Wes acd deeds a2 MAL ELLE TEYES conc: of ans Memes : ‘Aldrn Akio, Loyd Elna Azetol,Janara Avene Jonathan iets Paul uae Karrame, hair ener Batts, fone Bora, Lea ise eth Fran tones, Fin Casting, Vela Congc, kine Paula Cx, Beaeito Clava Die Therese Dou, Herbert Oa Mya ive Dorings, Ana Coda dri fees, Menana OiAito,CinrstaEnno-“aenanc, Cava Esjuana, China Fane, Leoponve Neola Warnbul Sou Xstne Ceres Gorslet Dalry Jy flee, Roe Tosnn eho Lamu, Flacertina Ure Joram Wits Hadbet Mallet, Chie Cn, andor, kite! Concapn Ona, Joann Marie Angus, Patra Salar, Chnltna Santas, no res Santor, Chast Says, Mary Mt Sut, Jewel Celdd Taub, Te-ence Taleo, lp Tate, Gili lia wev, Jean Gives Wino, Joshus Vion, Rau Ca.on Deograc Bt ad228 [2009 CENTRALIZED BAR OPERATIONS, GAUSE OR CONSIDERATION Reason: delivery is necescary in view of the purpose of the contract which is to transfer either the use or the ownership of te thing loaned. Note: An acvepted promise fo make a future foan is a consensual coniraci, and therefore binding upc the parties but it is only after iclivery of the subject matter, will the real contract of loan arise (Art 1824}, Unilateral Contract — once tha subject matter has been delivered, it creates Obligations: on the part of only one of the partias (ie. borrower). 1. as to borrower ~ tha acquisition of the thing 2. a8 to lender» the right to demand its raturn or its equivalent KINDS: 1. Commodatum ~ when the bailor delivers to the bailee a non-consumable thing so ‘hat ‘he latter may use it for a certain time and retuin the identical thing. Kinds of Commodatum: a. Ordinary Commodatum -- use oy the ballee of the thing is for a certain pesiod oftime b, Precanum ~ one whereby the balfor ray demand the thing loaned at will if ary of the following exist: i uration and purpose of the conuact 's not stipulated li, use of the thing is merely tolerated by the owner Simple foan (mutuum) ~ lender delivers to the borrower money or other consumable thing upon the condition that the latter shall retum the same amount of the same kind and quality. Commodatum and Mutuum Distinguished NAS ouSieal wimable 1 Correlate with’ Article San Beds College of Law In case of ergent nzed] Upon expiration of the Jand’ commission of any! term only acts of ingratitude, even before the expiration. of [the term person {0 money or land the receipt of o’ner| sorrow party of a given sum of| things by virtue of the money ~ “or her! trust of confidence ‘consumable thing upon] reposed by the lendar fan agreement, oxsress| that he wil gay what ‘oF iniplied, to rapay the} he promised within a same amount of the| specified period, same kind and quel, with or without interast. the concession of “credit” necessarily involves the granting of “loens" up to the limit of the amount. fixed in the ‘credit? (Pooplo v. Concepcion. GR No, L-18535, August 15, 1922)fan Beda Callege of Hae + Ifthe ballee Is ‘lot entitled to the use of the thing, the contract is deposit + A slipulation that the ballee may make use of the frulte of the thing loaned ia valid (Artcts 1940), CAUSE: Essenlially -graiitous! but (1) if any compensation is to be pri by the bo--ower there arises a lezse contract; (2) If the consideration fs fendering some service, an innominate convract vallresult, 8 ‘+ The presumption in that the ballor has loaned the thing for having no need therefor. SUBJECT MATTE! General rule: Non-consumeble goods, whethe! movatile or immovable proparty (Arts. 1935-1937) Exception: Consumabie: goods riay be the subject matter of conimodatim ifthe perpose of the contract 1s not the consumption of the. object (Art. 1936) Baltor Need not be the Owner of the Thing Loaned (Art, 1998) + It is’ sufficient that the balior has aa) possessory Interest; of b) the right to use Which ne may assert against the ballee or 3rd porsons but not the rightful owner, + Ammere lessee or uoufructuary may fend Du the borrower or bailee himself may rot end nor tease the thing loaned to him to a third person (it, 1992/2). COMMODATUM 18 PURELY PERSONAL: + Intransiniasible ight (this is daenivd an ‘exception fo Art. 1178) + Death of either party terminates the contract unless by stipuiation, the commodatum is transmitted to the halts of eltker or botir parties, Right of Ballog to Joni the thing toaned to third persons, Goneral rule: Aballes‘can neither tend_nor lease the object of the ‘contract to a third person, Iq. the. absence, ot some understanding or agreement to that effect, Exception: Use of the thing loaned may extend to mambers of the ‘baijon’s household, unless {oxcoption to tho excopti=n}: 2, there Ie a contrary stipulation; or natura of te hg fords eucn use (pan2, Art, 1939), CONTRACT SIMILAR TO DONATION Both’ confer benefit. to the. ceciplent. The ‘presumption Is that the ballor has foaned the thing a) MEMORY AID IN.CiViL LAW 229 for having no need therefore {sscond sentence, Adl, 1946) OBLIGATIGNE OF THI BAILEE: Preet ipal Obligations; {ake care of th iicg with dilgence of @ good fathor of a family (is, 1763, 1969, 1770 and 173) 2. raturn the thng upen expiration of tems. or ‘uson necomplishmrt of purpose (Art. 1993) thar obligationa: {0 . JERO} + Poy for the gicina’y expanses for the use end presurvation «x1 tha thing luaned (At 7941) fo 20 liable for sp even If it shoul be thro.gh a foriita,s avent in the following cians (Gn excaptieipto the general rule that tho bull ls not aif for loss or damage due tu a fortuitous event becouse ownership remain.with the bal: (KLAS-O) 2. when h keep. If longer than the period supulated, or a'tar the accomplishment of iis use (datay); b. When he fends or leases it te third persons wro are not members of his hhoueshold (commodatum is purely personaly, ©. whcn the thing loaned has been delivered with appraisal of iis value uniess there is a stipulation exempting the bailee from responsibly in case of fortuitous event {intention of the panies), 4. when, being ablo to gave either of the thing borrowed of his own things, he chose to sive the latter (shows ingratituday: or 2 when the see devoted ihe thing for a pore oa yates BGA a i te230 ]2009 CENT ALIZED BAN OPERATIONS sutfered t2' tne balleo because of hidien faws krona to the batlor © The right of retention ceases when the bailee is ra mbursed «Tha ballee cannot iawfully sell the thing to calisy the damages 8, To pay for the oypenuew other than those under Arts. 194 and 1949 fe.g. ordinary expenses for be pranervetios and expenses for ostentatior) Note: In case there -are multiple baslors, thelr obligation shall by solidary. Ta's is an exception by express provislan of law to the ganeral rule that the coneurrarae at two or more paities in the some ctligation gives tise aly to @ joint allgation (Arts. 12.97, 1208) Reason: to safeg Lard effectivaly the rights of the bailor OBLIGATIONS OF THE BAILOR: 4. To respect thi duration of the loar because the bellor is bound by the terms of the cantract of corermedatur which is fora certain ‘time : Exceptions: a, in case of urgent need of the thiag, he may dematid Its retum or temporary use, Reason: commodatum. Is“ essantially ‘gratulious; Effect: contract of commodatum is suspended while tho thing Is in the possession of the ballor 6. |F tho Béillee ‘commits any act of ingratitude specited in Ar. 705, Reason: smilarty of commodcawm wih donation 2, Refund to the inatlee extraorcinary expenses incurted for, the preservation of the thing, provided thé ballee isrings the same to the kaowedge of ice balor before incurring them, except when the raply fo the notifeation cannot be awaited without danger. 3. To be lable tc- the bailee for damages for known hidden flaws, Requisites: (HANS) 1. Existonce cf fiaw or defect 2. The flaw e- defect le hidden; 3. The ballor ia ware thereo? 4. ballee le 99° aware tha-eot aad 5. Tha ballag quflore damagns by reason of seid finw or dotecr. Note: Ifthe above retuisites concur, the bailee nas tha right of retertion for damages. + The ballor canvot exempt himself from the payment of uxpenses or damages by 70 San Meda College of Hay abandoning the thing to the balles, Reason the expenses of, damages may exceed the value of Hive thihg loaned (4rt, 1952) + If In making use of the thing, the valloe incurees expenans other than ordinary and edraordinary expenses, he Is not ented to relmbursemart (Ans, 1207, 1208). a contract whereby one of the partlos delivers to another money or other consumable thing with the understanaling that the sama amount of tho sams kine aiid quulty shall be pald (Art, 4992) + Itinvoives the rotum of the equivalent amount con'y and not the Identical thing because the borrower acquites ownership of the motley or other consumable thing loaned (Art, 1976) «© Aloan of money may be payable In kind (Art 1968), Note: x ; + Mere, Issuance of checks to the deblor doos ft perfect the con'ract of foan. itis only afer the checks fave’ been encashed by the debtor that: re -contract may.be deemed perfecied, +The destruction of the thing loaned does not extinguish one's obligation to pay because his obligation Is not fo retum the thing foaried but torpay a generic thing, + No estafa in committed by a person who refuses to, pay his: debtor denise lis existence. a Raason: thy’ borrowet effectively acquires ownership, 4 Mutuuna and Ront OlstinguishedSan Bed College Lato Loan and fia Distinguistiod Real contract 1 Cantona sonra Generally unitate: aly Biletoral set reciprocal because only borrow or; faeces ; Note: if the property 1s *soid’, but the real invent is only to give the object au securty for. a dett ~ an when the *price’ Is cmparetively small - there really is @ contract ¢f loan, wlth an “equitable “Mertgege' (Art 1802). BARTER — a contsict’ whereby one person ‘wansfers. ownership cf noefungibte things. to another with the ob!iga.ion on the part of the later te-gve things ef the sums Kea, quelly and quantity (Art, 1984). DEFINITION OF FUNGIBLE: 1, fungidle ~ thos@ hich belong to cummon genus which Inchites several specs of the “game kine! (6.9. grein, wine ol) 2. non-fungible = those’ that are specifically determined and cannot be substituted by others (e.g. specie Jand, bulldlag, particular house) FUNGIBLE AND NON. ‘Commodatum / Mutuumn and Barter Distir quishod Re Pe [Subject matter is money] Subject matter Is non- emer mates money] sue! ater ton fan. iad in commodaturn, tha] The thing wih | jballee Is bound to retur| equivalent value is the identical thr given tr return tor what SS fae ery wt Multum may ‘bal Onerous, actually a jgratultous avd) mutual sale icommodatum Is always (et a OF PAYMENT: It thing leaned Is. 10rey = payment must be made In the cunéney stipulated, othorwice mat whic: {8 jegel tenaer in the Phiopines and in case of ixtordinaty inflation or deflation, payment hall be fr the valua of the currency’ at thd'titie 9: the creation of tie obligation. 2. Ifthing loaned is otier than money = paym:nt fof another thing of the sams kind, qualty and ‘quantily, In ease it Ls Impossible to do 86, the MEMORY AID IN.CIVL Uw] 231 borrower shal puy ls value et the time if tho perfection of theloah, REQUISITES FOR. DEMANDABILITY OF INTEREST: (LEW) ‘ust be arpresily stipulated Exceptions: a indemniy for dameges ._ interest neoruing from unpaid interoat 2 must be fovciul 3. tho agreement must 84 in wring ; COMPOUND INTEREST General ruts: Unpaid lAterest sha not sain interest, : Exceptions: 1. when judicially dethanded 2. when theie isan wxpress stipulation (must be in writing) GUIDELINES FOR’ THE APPLICATION OF PROPER INTEREST RATES The rules for the imposition ef interest cates: 4, Stipulated rate shatl apply, 2 When an obligation, regerdless of ks source, Is breached, tha contravenor can be held liable for camages, 3, With regard to an award of interest in tho concept of damages, the rate of intevost, as well a8 the accrual thereof, is Imposed, ac folows: 8, Whei the obligation breached consists of payment ef A tum of money, in the absbnce of an agreement, the tals shall be tho loca’ rate computed from default Note: Tha Interest ove. shall teal oun Ee it Is judicioly 3868, nteroot abst & recites annum. 9 OB Hi___232.|2009 CENTRALIZED BAR CPERATIONS Lines ¥. CA. GR No, 97452. July 12, 1994). Note: Central Bank Circular: No. 418 fixing the rate of interest al 12% per annum. deals. with loans, forbearance of any money, goods or ‘redits and judgments involving’ such loans, of forbearance in the absence of express agreeincnt to such rate CENTRAL BANK CIRCULAR NO. 905 (DEC. 10, 1982) SUSPENDED THE USURY LAW, + If the obligation arises irom other sources Such as contract of sale, damages a.ising from injury to persons and loss of property, and actions arising from unpaid Insurance claims, what is applicable is the rate of 6% annually es provided in, Am. 2208 (Terminal Facities and Services Corp. v. PPA, GR No. 135699. February 27, 2002), + Interest as indemnity for damages Is payabie only in ease of default or non-performance of the contract. As they are alstinct claims, they Imay be demanded separately (Sentinel Insurencey. CA, GR, No, L-52482 February 28, 1980), VALIDITY OF UNGONSCIONABLE INTEREST RATE IN A LOAN + The Supreme Court said that nothing in said clcular suspending the Usury Law grants lenders authority to raise interest cates to levels which wii either enslave thelr borrowers or lead to a hemorrhaging of their ‘assets (Almeda v. CA, GR No. 113412, Apri 17, 1996), + In Medel v. Court of Appeals, (GR No. 131622. Noveniber 27, 1998) It was ruled that while stipulated interest of 6.5% per month in 2 loan is not usurious pursuant 19 CBC No. 805, the same must be equitadly reduced for being iniquitous, unconscionable and exorbitant. it is contrary to morals. !t was reduced to 122% per annum in consonant with justice and fairpiay. + When the agreed rate is iniquitous and unconscionable, the courts may reduce the same as reason and equity demand. (Imporial ¥. Jaucian, G.R. No. 149004 April 14, 2004), The interest may also be reouced if tha principal “obligation nas been paitially performed, RECOVERY GF UNSTIPULATED INTEREST PAID 4. Pal by mistake «the debtor may resover as jn the case of solutio indebiti or undue payment 232 San Meds College of Laty 2. Voluntarily paid ~ no recovery as in'the case of raturel obligations ‘A conlract constituted from the moment a person receives a thing belonging fo another, with the | Cbiigation of safely kaeping it and of ratumning the same, i PRINCIPAL PURPOSE: SAFEKEEPING. If the safekeeping is no! the princiole purpose &t may be cither: 2} commodatum, b) lease or c) egency + The depositor nzed not be the owner of the thiig deposited because the purpose of the contract is safeceeping and not transfer of ‘ownership. The dapositary cannot dispute the tile of the dusositor (Ar. 1984(1)). The depositary is In estoppel (Art. 1436), The depositary carnot make use of the thing doposiied, EXCEPT in two instances: 1. wien there is 21 express permission of the depositor * or j 2 wihen it is necessary for the preservaton of the thing coposited (Art. 1977). i + Acontract of deposit may be a.ade orally or in witing (Art. 1968) CHARAGTER'STICS: 1. Real Contract ~ perfected by the delivery of the subject matter. Where there has been no delivery, there is merely an agreement to ‘leposit which. however is Singing and + ‘enforceable upon the parties, i 2, Unilateral = when gratuitous because only the depositary as an obligation : 3. Bilateral ~ if win, compensation because t one