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PART X – CREDIT TRANSACTIONS quantification of damages may be deemed to

have been reasonably ascertained). The


LOAN (1993, 1996, 1998, 2001, 2004, 2005, actual base for the computation of legal
2016 BAR) interest shall, in any case, be on the amount
finally adjudged. (Nacar v. Gallery Frames,
Q: With regard to an award of interest in 703 SCRA 439 [2013])
the concept of actual and compensatory
damages, please state the guidelines Q: A, upon request, loaned his passenger
regarding the manner of computing legal jeepney to B to enable B to bring his sick
interest in the following situations: wife from Paniqui, Tarlac to the Philippine
1. When the obligation is breached and it General Hospital in Manila for treatment.
consists in the payment of a sum of money On the way back to Paniqui, after leaving
like a loan or forbearance of money; his wife at the hospital, people stopped the
2. When the obligation does not constitute passenger jeepney. B stopped for them
a loan or forbearance of money. and allowed them to ride on board,
accepting payment from them just as in
Consider the issuance of BSP-MB Circular the case of ordinary passenger jeepneys
No. 799, which became effective on July 1, plying their route. As B was crossing
2013. (2016 BAR) Bamban, there was an onrush of lahar
A: from Mt. Pinatubo. The jeep that was
1. When the obligation is breached and it loaned to him was wrecked.
consists in the payment of sum of money like 1) What do you call the contract that was
a loan or forbearance of money, in the entered into by A and B with respect to the
absence of stipulation, the rate of interest passenger jeepney that was loaned by A to
shall be the legal rate of 6% per annum, (Art. B to transport the latter’s sick wife to
2209, CC) which was increased to 12% per CB Manila?
Circular No. 905, series of 1982 to be 2) Is B obliged to pay A for the use of the
computed from default. The twelve percent passenger jeepney?
(12%) per annum legal interest shall apply 3) Is B liable to A for the loss of the
only until June 30, 2013. From July 1, 2013, jeepney? (1993 BAR)
the new rate of six percent (6%) per annum A:
shall be the prevailing rate of interest when 1) The contract is called “commodatum”. (Art.
applicable. (Nacar v. Gallery Frames, 703 1933, Civil Code)
SCRA 439 [2013], applying BSP-MB Circular 2) No, B is not obliged to pay A for the use of
No. 799) the passenger jeepney because commodatum
2. The interest on the amount of damages is essentially gratuitous. (Art. 1933, Civil
awarded may be imposed at the discretion of Code)
the court at the rate of 6% per annum. No 3) Yes, because B devoted the thing to a
interest, however, shall be adjudged on purpose different from that for which it has
unliquidated claims or damages, exept when been loaned (Art. 1942, par. 2 Civil Code)
or until the demand can be established with
reasonable certainty. Accordingly, where the Q: Distinguish briefly but clearly between
demand is established with reasonable Mutuum and commodatum. (2004 BAR)
certainty, the interest shall begin to run from A: In mutuum, the object borrowed must be a
the time the claim is made judicially or extra- consumable thing the ownership of which is
judicially, but when such certainty cannot be transferred to the borrower who incurs the
so reasonably established at the time the obligation to return the same consumable to
demand is made, the interest shall begin to the lender in an equal amount, and of the
run only from the date the judgment of the same kind and quality. In commodatum, the
court is made (at which time the object borrowed is usually a non-consumable
thing the ownership of which is not consequently Tito, the bailee, shall shoulder
transferred to the borrower who incurs the them. (Art. 1941, Civil Code)
obligation to return the very thing to the c) No, Pedro cannot demand the return of
lender. the van until after the expiration of the
one-year period stipulated. However, if in
Q: Before he left for Riyadh to work as a the meantime he should have urgent need of
mechanic, Pedro left his Adventure van the van, he may demand its return or
with Tito, with the understanding that the temporary use.
latter could use it for one year for his d) Both Tito and Pedro shall bear equally
personal or family use while Pedro works the costs of the extraordinary expenses,
in Riyadh. He did not tell Tito that the having been incurred on the occasion of
brakes of the van were faulty. Tito had the actual use of the van by Tito, the bailee,
van tuned up and the brakes repaired. He even though he acted without fault.
spent a total amount of P15, 000.00. After
using the vehicle for two weeks, Tito Q: Distinguish usufruct from
discovered that it consumed too much commodatum. (1998 BAR)
fuel. To make up for the expenses, he A: Usufruct is a right given to a person
leased it to Annabelle. Two months later, (usufructuary) to enjoy the property of
Pedro returned to the Philippines and another with the obligation of preserving its
asked Tito to return the van. form and substance. (Art. 562, Civil Code)
Unfortunately, while being driven by Tito, On the other hand, commodatum is a contract
the van was accidentally damaged by a by which one of the parties (bailor) delivers
cargo truck without his fault. to another (bailee) something not
a) Who shall bear the P15, 000.00 spent consumable so that the latter may use it for
for the repair of the van? Explain. a certain time and return it. In usufruct the
b) Who shall bear the costs for the van's usufructuary gets the right to the use and to
fuel, oil and other materials while it was the fruits of the same, while in commodatum,
with Tito? Explain. the bailee only acquires the use of the thing
c) Does Pedro have the right to retrieve loaned but not its fruits. Usufruct may be
the van even before the lapse of one year? constituted on the whole or a part of the
Explain. fruits of the thing. (Art. 564, Civil Code) It
d) Who shall bear the expenses for the may even be constituted over consumables
accidental damage caused by the cargo like money (Alunan v. Veloso, 52 Phil. 545).
truck, granting that the truck driver and On the other hand, in commodatum,
truck owner are insolvent? Explain. (2005 consumable goods may be subject thereof
BAR) only when the purpose of the contract is not
A: the consumption of the object, as when it is
a) The contract between Pedro and Tito is merely for exhibition. (Art. 1936, Civil Code)
one of commadatum. Of the P15, 000.00
spent, Pedro, the bailor, shall bear the Q: In the province, a farmer couple
expenses for the repair of the faulty borrowed money from the local merchant.
brakes, they being extraordinary expenses To guarantee payment, they left the
incurred due to the non-disclosure by the Torrens Title of their land with the
bailor of the defect or fault; Tito, on the merchant, for him to hold until they pay
other hand, shall shoulder that part of the the loan. Is there a –
P15, 000.00 spent for the tune-up, said a) contract of pledge
expense being ordinary for the use and b) contract of mortgage
preservation of the van. c) contract of antichresis, or
b) The costs for the fuel and other materials d) none of the above? Explain. (1996 BAR)
are considered ordinary expenses, and
A: None of the above. There is no pledge A: There is no pactum commissorium here.
because only movable property may be Deposits of money in banks and similar
pledged (Art. 2094). If at all, there was a institutions are governed by the provisions on
pledge of the paper or document constituting simple loans (Art. 1980). The relationship
the Torrens Title, as a movable by itself, but between the depositor and a bank is one of
not of the land which the title represents. creditor and debtor. Basically this is a matter
There is no mortgage because no deed or of compensation as all the elements of
contract was executed in the manner compensation are present in this case (BPI v.
required by law for a mortgage (Arts. 2085 CA, G.R. No. 104612, May 10, 1994).
to 2092; Arts. 2124 to 2131). There is no
contract of antichresis because no right to Q: X, who has a savings deposit with Y
the fruits of the property was given to the Bank in the sum of P1, 000, 000.00 incurs
creditor (Art. 2132). A contract of simple a loan obligation with the said Bank in the
loan was entered into with security sum of P800 000.00 which has become
arrangement agreed upon by the parties due. When X tries to withdraw his deposit,
which is not one of those mentioned above. Y Bank allows only P200, 000.00 to be
withdrawn, less service charges, claiming
Q: The parties in a contract of loan of that compensation has extinguished its
money agreed that the yearly interest rate obligation under the savings account to
is 12% and it can be increased if there is a the concurrent amount of X’s debt. X
law that would authorize the increase of contends that compensation is improper
interest rates. Suppose OB, the lender, when one of the debts, as here, arises from
would increase by 5% the rate of interest a contract of deposit. Assuming that the
to be paid by TY, the borrower, without a promissory note signed by X to evidence
law authorizing such increase, would OB’s the loan does not provide for
action be just and valid? Why? Has TY have compensation between said loan and his
a remedy against the imposition of the savings deposit, who is correct? (1998
rate increase? Explain. (2001, 2004 BAR) BAR)
A: OB's action is not just and valid. The debtor A: Y Bank is correct. Art. 1287, Civil Code,
cannot be required to pay the increase in does not apply. All the requisites of Art. 1279,
interest there being no law authorizing it, as Civil Code are present. In the case of Gullas v.
stipulated in the contract of loan. Increasing PNB (62 Phil. 519), The Supreme Court held:
the rate in the absence of such law violates “The Civil Code contains provisions regarding
the principle of mutuality of contracts compensation (set off) and deposit. These
under Art. 1308. portions of Philippine Law provide that
compensation shall take place when two
DEPOSIT (1997, 1998 BAR) persons are reciprocally creditor and
debtor of each other. In this connection, it
Q: In order to secure a bank loan, XYZ has been hesld that the relation existing
Corporation surrendered its deposit between a depositor and a bank is that of
certificate, with a maturity date of 01 creditor and debtor. xxx As a general rule, a
September 1997 to the bank. The bank has a right of set off of the deposits in its
corporation defaulted on the due hands for the payment of any indebtedness to
repayment of the loan, prompting the it on the part of a depositor.” Hence,
bank to encash the deposit certificate. XYZ compensation took place between the mutual
Corporation questioned the above action obligations of X and Y Bank.
taken by the bank as being a case of
pactum commissorium. The bank
disagrees. What is your opinion? (1997
BAR)