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KIND Real Contract Real Contract Real Contract

Purely personal (1939) Transmissible contract

Essentially gratuitious May or may be for a consideration May or may not be gratuitous
(payment of interest)

FORM No form required Stipulation as to interest must be in writing No form required

OBJECT Movable or immovable as long as Non- Fungible (consumable thing) GR: Movable
Consumable (non fungible) XPN: Immovable is allowed if it is a
JUDICIAL deposit (sequestration,
Could also be fungible so long as the use is attachment
merely for exhibition (1936)

RIGHT TO USE Use of the thing Since there is transfer of ownership, the GR: Not allowed to use the thing deposited
GR: Allowed to use by bailee and household debtor can use the thing loaned and its XPN: if (1) there is stipulation and (2) the
members fruits use is merely incidental (3) safekeeping is
XPN: unless there is stipulation against HH still the principal purpose of the deposit
members or when the nature of the thing — it will become irregular deposit
forbids use (CDM is a purely personal contract) OR
(4) if the use is for the preservation of the
Use of fruits thing
GR: No right to use the fruits (1935)
XPN: Stipulation (1940)

OWNERSHIP The bailor need not be the owner of the thing Must be the owner of the thing loaned. No transfer of ownership. The depositor
loaned remains to be the owner of the thing
There is a transfer of ownership, from deposited
there is no transfer of ownership in creditor to debtor.

RIGHT OF Only for hidden defects - the bailee may retain YES. It is a legal pledge.
RETENTION the thing borrowed


1. To answer for the ordinary expenses for Payment of the principal and the interest if 1. To safekeep the thing deposited
the use and preservation of the thing validly stipulated in the contract 2. If the depositor is incapacitated:
borrowed Return it to the administrator of his
2. Liable for the loss of the thing property or to his guardians
3. Liable for loss of the thing through a 3. Liability for the loss:
fortuitous event if: (DL-ALI) • deposited with 3rd persons (if allowed)
• using the thing for a Different purpose who are manifestly careless and unfit
• Using it Longer than the period stipulated • Notify and wait for the decision of the
or after the accomplishment of the use depositor in case there is a necessity to
• Thing is delivered with Appraisal of value change the way of deposit (1974)
• Lends or leases the thing to 3rd persons 4. Liability for loss even if through a
other than HH members fortuitous event if: (S-U-D-A) 1979
• When he has a choice whether to save the • Stipulated
thing loaned or his own thing and he chose • Use without permission
the latter (ingratitude) • Delay in return
• Allowing others to use
5. Collect the amount due to certificates,
bonds, securities which earn interest.
(1975) and to take steps necessary to
preserve the value and the the rights due
the securities deposited to him.
6. Commingling goods:
GR: May commingle
XPN: unless there is stipulation
7. Return the thing deposited:
• to the place stipulated (expenses by
• to the place where the deposit is found
— even if it be not the place where
deposit was made as long as there is no
malice on the part of the depositary

EXPENSES preservation) - bailee of the thing) - depositor if gratuitous;
depositary if onerous
(preservation and not due to actual use | with EXTRAORDINARY EXPENSES
notice from bailee) - bailor (due to the character of the thing deposited)
- depositor
EXTRAORDINARY EXPENSES (due to actual XPN: if he notified the DTY of the defect
use) if the DTY was aware of it
w/ fault of bailee - bailee if he DTR was not aware of it or is not
w/o fault of bailee - bailee and bailor (unless expected to know the dangerous character
there is a stipulation)
ie. nabanggang kotse

WHEN VALUE For determination of value of the goods if

DETERMINED the same kind cannot be delivered - at the
time it is paid

For the interest if payable in kind — value

appraised at the time and place it is paid

EXTINGUISHMENT 1. Death of the bailor or bailee Return of the thing deposited

2. Return of the thing loaned (after the period it
was stipulated or after the accomplishment Demand by the Depositor
of the use which the commodatum was GR: depositor may demand the thing
constituted) deposited any time. (even though there is a
period stipulated)
GR: bailor may not demand the thing loaned XPN:
until the expiration of the period which the CDM (1) When the thing is judicially attached
was constituted (2) when there is opposition from a third
XPN: person as to the return or removal of the
Bailor may demand the return immediately thing — DTY must immediately inform DTR
if: of the opposition or the attachment
1. Urgent use/temporary use (commodatum is
suspended) Return by the depositary
2. In a contract of precarium (no period When he learns that the depositor is not the
stipulation, no purpose) real owner:
3. Mere tolerance of the bailor (no contract at a. (if he learns it is stolen and who the real
all) owner is) Advise the owner who shall
4. If the bailee committed acts of ingratitude redeem it within ONE MONTH
b. return the thing to the depositor if the
real owner fails to redeem
c. he may return the thing if he has
reasonable grounds to believe that the
thing was not lawfully acquired

If the deposit is gratuitous

Depository may return it if he has justifiable

Upon loss of the thing deposited

Upon death of either DTY or DTR if


The ostensible discord is not difficult to explain. The factual circumstances may have called for different applications, guided by the rule that the courts are vested
with discretion, depending on the equities of each case, on the award of interest. Nonetheless, it may not be unwise, by way of clarification and reconciliation, to
suggest the following rules of thumb for future guidance.

I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is breached, the contravenor can be held liable for
damages. The provisions under Title XVIII on "Damages" of the Civil Code govern in determining the measure of recoverable damages.

II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is
imposed, as follows:

1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may
have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the
rate of interest shall be 12% per annum to be computed from default (NOW 6%), i.e., from judicial or extrajudicial demand under and subject to the provisions of
Article 1169 of the Civil Code.
2. 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 at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until the
demand can be established with reasonable certainty. 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 (at which time the quantification of damages may be deemed to
have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or
paragraph 2, above, shall be 12% per annum (NOW 6%) from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a
forbearance of credit.


1. File a case with the RTC for damages - no interest yet since the amount is 1. there is a loan remained unpaid with stipulated interest of 24% PA
not yet liquidated 2. File a case for sum of money with RTC - interest will begin to run from the
2. RTC awards actual, moral, exemplary damages (100,000) time there is judicial demand (monetary interest of 24% PA)
3. from the decision of the RTC the interest will begin to run (6% per annum When RTC rules in favour of plaintiff - interest will begin to run on top of the
as compensatory interest) monetary interest (compensatory interest of 6% PA)
4. from the time the court awarding a sum of money becomes final and Upon the finality of the decision - add compensatory interest as forbearance
executory — it becomes a forbearance of money 12% PA — ( now 6% PA) of money - 12% (now 6%)


(PARKING A VEHICLE considered as a lease, not a deposit) 

Moreover, the Court concurs with the finding of the CA that the contract between the parties herein was one of lease as defined under Article 1643 of the Civil Code.
It has been held that the act of parking a vehicle in a garage, upon payment of a fixed amount, is a lease. Even in a majority of American cases, it has been ruled
that where a customer simply pays a fee, parks his car in any available space in the lot, locks the car and takes the key with him, the possession and control of the
car, necessary elements in bailment, do not pass to the parking lot operator, hence, the contractual relationship between the parties is one of lease.?r?l1

Anent Sps. Mamaril's claim that the exculpatory clause: "Management shall not be responsible for loss of vehicle or any of its accessories or article left therein"31
contained in the BSP issued parking ticket was void for being a contract of adhesion and against public policy, suffice it to state that contracts of adhesion are not
void per se. It is binding as any other ordinary contract and a party who enters into it is free to reject the stipulations in its entirety. If the terms thereof are accepted
without objection, as in this case, where plaintiffs-appellants have been leasing BSP's parking space for more or less 20 years,32 then the contract serves as the law
between them.33 Besides, the parking fee of P300.00 per month or P10.00 a day for each unit is too minimal an amount to even create an inference that BSP
undertook to be an insurer of the safety of plaintiffs-appellants' vehicles.

NATURE Consensual Real - thing pledged must be Consensual

Accessory contract delivered to the C. Accessory Contract Accessory Contract
Accessory Contract A specie of mortgage
GR: gratuitous
XPN: stipulation to the contrary

KINDS 1. Conventional 1. Conventional 1. Real estate Mortgage

2. Legal/Judicial (583 on 2. Legal Pledge [those with 2. Chattel Mortgage
USUFRUCT) right of retention, i.e. deposit
3. Gratuitous 1994; movables of the lessee
4. Onerous existing on the immovables
of the lessor for the payment Indivisible Indivisible
of rents for one year 2244(9)]


FORM May be oral or in writing Must be in public inst to bind 3rd Registration Registration must be in writing to be valid
REQUIRED persons: description and date required to be required for
binding to 3rd validity

AS TO Pledgee/Creditor or third part by Mortgagor/Debtor Mortgagor/Debtor Creditor or debtor

POSSESSION agreement
**Creditor may give
possession to debtor if he
doesn’t want to pay the taxes
and charges upon the estate
& expenses necessary for
XPN if there is stipulation that
C must possess the property

OBJECT Movables (within the commerce 1. Immovable Movables Fruits of the Immovables
of man & susceptible of 2. Inalienable real
possession) right over an
ie vessel - delivery of keys is immovable

Incorporeal rights - N.I., bills of

lading, SS, WR. (the instrument
must be delivered to the creditor)

*To deliver NI - must be

endorsed and delivered;
indorsement will function only to
effect security not to transfer title

REQUISITES GUARANTOR: PLEDGOR must be the owner of MORTGAGOR must be the owner of
1. integrity the thing pledged; the thing mortgaged;
2. capacity to bind himself He must have free disposal of
3. sufficient properties the thing pledged He must have free disposal of the thing
4. not convicted of crime mortgaged
involving dishonesty
5. not insolvent
(for 4 & 5, the Creditor can
demand replacement, unless the
Guarantor is a specified person;

There can even be a contract of

Guaranty even if without the
knowledge and consent of debtor
(2050 in relation to 1236/1237)

PARTIES TO Guarantor and the Creditor Pledgor - Pledgee Mortgagor - Mortgagee Creditor - Debtor
CONTRACT There may be sub guarantors.
(2051 2nd par)

Liability of Co-Guarantors
GR: joint
XPN: solidary if there is a
but ceases in case of insolvency
of one of the co-G (Mam Sena:
confusing provision. in OBLICON,
the insolvency of one of the joint
debtors shall not be answerable
by the others. There is no mutual
guaranty between them)

CONSENT There must be consent of the No consent needed from the mortgagee No consent needed from the
pledgee (C), subject to the to sell the property debtor to sell the property

This is a restriction to the power

to dispose

Use of the thing pledged

C cannot use the thing without
consent of the owner; in case of
abuse or misuse, the owner may
demand that it be judicially/
extrajuducially deposited (2104)

RIGHT OF The pledgee has the right to

RETENTION retain possession until debt is
fully paid (2098/2105)

1. negligence or wilful act of the
pledgee there is danger that
the thing pledged will be lost
or impaired - deposit to 3rd
2. Fear of destruction or
impairment without fault of C
- demand the return and offer
another w the same kind and
quality (2107)

He has the right to retain - in

case of hidden defects

RIGHT OF 1. Total amount of the debt Pledgee must be reimbursed for

REIMBURSEM 2. Legal expenses- from the time the expenses for preservation
ENT the payment was made known
to the debtor
3. Expenses incurred by the G -
after having notified the D that
payment was made
4. Damages if due

SCOPE/ Pledgee must compensate the The Mortgage after acquired

RIGHT OVER fruits to those owing him - apply extends to: properties
THE FRUITS the fruits to the interest then 1. natural GR: No
principal accessions There must be
2. improvements another CM for the
XPN: stipulation excluding the 3. growing fruits after acquired
fruits of the pledge 4. Rents or properties. In the
income not yet CM doc, there
received must be a
5. Price of description of the
expropriation property
6. Indemnity from

XPN: stipulation
excluding the
improvements etc

after acquired
GR: No
XPN: stipulation
(for the benefit of
the MGEE, to
mantain the value
of the security)

LEGAL Given to the guarantor who pays Given to the pledgee — he is

SUBROGATIO — he is surrogated to all the rights surrogated to all the rights of the
N of the Creditor as against the pledgor in order to recover it
Debtor (2067) from or to defend it from a 3rd
person (2103)

THIRD PARTY 3rd party pledgor - has the rights There could be a
of a guarantor: 3rd party
2066-2070; 2077-2081 mortgagor

WHAT MAY BE • Valid obligation SAME AS GUARANTY (2086) Dragnet clause Only the present
SECURED/ • voidable Same property can obligation
EXTENT OF • unenforceable secure future For future
SECURITY • natural obligation obligations obligation, another
• conditional obligation - reliance on the CM must again be
• Future debts - but there can be security test registered
no claim against the G unless
liquidated Affidavit of Good
Faith - that the
Simple/Indefinite (2055 2nd par) obligation secured
Guaranty by the CM is valid
1. Principal obligation and without fraud
2. Accessories (you cannot extend
3. Judicial cost from the time this kind of
there is judicial demand stipulation to future
Definite Guaranty (2055 1st par) - it will create a
- only to the amount so stipulated preference to
the lien

REQUIREMEN 1. Run after the debtor first: 1. Debt is due and remains The mortgage directly and immediately
T BEFORE exhaust ALL the properties of unsatisfied subjects the property upon which it is
GOING AFTER the debtor in the PH and resort 2. Pledgee can go after the imposed, whoever the possessor may
THE to ALL the legal remedies pledge be, to the fulfilment of the obligation for
SECURITY against the debtor whose security it was constituted (2126)
2. Insolvency of the debtor - in
the form of an unsatisfied — no need to run after the debtor first.
writ of execution
3. Proceed with the Guaranty Options of the Creditor (Mortgage
lien upon the estate of the debtor) -
Benefit of Excussion (2060) Rule 86, Sec 7
1. Demand to the guarantor 1. File a complaint of sum of money
2. The guarantor must first against the debtor and waive the
invoke his right of excussion mortgage
3. Point out to the Creditor the 2. Foreclose the mortgage and recover
properties of the Debtor within the deficiency by filing a claim
the PHILIPPINES against the estate
3. Rely on his security alone -
No benefit of excussion if: Foreclose the mortgage and waive
SIAP all other action as against the Debtor
1. Stipulated
2. Insolvency of debtor
3. Absconded (G) unless he left
manager or reps
4. Presumption that the exercise
of the ROE will not result to
the satisfaction of the

FORECLOSU Extrajudicial only Judicial and Judicial and Judicial (2137)

RE SALE extrajudicial Extrajudicial
Conventional pledge
1. Notary public
2. Notice to the pledgor of the
date of the public auction and
the amount
3. Auction
4. Notify pledgor of the result

First auction - no sale - proceed

to 2nd auction
Second auction - no sale -
appropriate the property

Legal pledge
1. Make a demand for the
amount due
2. Foreclose within ONE
MONTH, otherwise, the D
may require return

WHO MAY BID Pledgor - better right than

anyone else, as long as he offers
the same terms as the highest
Pledgee - can bid as long as
there are other bidders

DEFICIENCY No deficiency judgment Deficiency Deficiency Deficiency judgment

judgment judgment
notwithstanding any stipulation to XPN: the CM is on
the contrary instalment

EXCESS Conventional Pledge Excess will go to Excess will go to

No recovery of excess the mortgagor the mortgagor
Excess will go the pledgee (Rule 68)
XPN: stipulation to the contrary XPN: stipulation to
the contrary
Legal Pledge
There is recovery of excess

EXTINGUISHM 1. when principal obligation is If the C is deceived on the

ENT OF THE extinguished substance and quality of the
CONTRACT XPN: Novation - if there is thing pledged
no material alteration 1. He may demand
which is more onerous to replacement
the G 2. He may demand immediate
2. Property paid to the C even if payment
C is evicted (2077)
3. Release made by the C in Return of the thing pledged -
favour of one of the co-G cancels the pledge
without the consent of the
others (2078) Statement in writing by the
4. Extension of time granted to pledgee that he renounces the
the D w/o consent of the G pledge - pledgee becoming a
(2079) depositary
5. If by the acts of the C, they
cannot be surrogated to the
rights, mortgages and
preferences of the C.