CASE DIGEST (Credit Transactions):
Would it be valid and effective to have a clause in a chattel mortgage that
ACME SHOE, RUBBER & PLASTIC CORPORATION and CHUA
PAC vs.HON. COURT OF APPEALS, BANK OF THE PHILIPPINES
and REGIONAL SHERIFF OF CALOOCAN CITY
G.R. No. 103576 August 22, 1996
FACTS:
Petitioner Chua Pac, the president and general manager of co-petitioner
Acme executed a chattel mortgage in favor of private respondent Producers
Bank as a security for a loan of P3,000,000. A provision in the chattel
mortgage agreement was to this effect:
"In case the MORTGAGOR executes subsequent promissory note or notes
either as a renewal of the former note, as an extension thereof, or as a new
loan, or is given any other kind of accommodations such as overdrafts,
letters of credit, acceptances and bills of exchange, releases of import
shipments on Trust Receipts, etc., this mortgage shall also stand as security
for the payment of the said promissory note or notes and/or
accommodations without the necessity of executing a new contract and this
mortgage shall have the same force and effect as if the said promissory note
or notes and/or accommodations were existing on the date thereof. This
mortgage shall also stand as security for said obligations and any and all
other obligations of the MORTGAGOR to the MORTGAGEE of whatever
kind and nature, whether such obligations have been contracted before,
during or after the constitution of this mortgage."
In due time, the loan of P3,000,000.00 was paid. Subsequently it obtained
additional loan totalling P2,700,000.00 which was also duly paid.
Another loan was again extended (P1,000,000.00) covered by four
promissory notes for P250,000.00 each, but went unsettled prompting the
bank to apply for an extrajudicial foreclosure with the Sheriff.
ISSUE:
purports to likewise extend its coverage to obligations yet to be contracted or
incurred?
HELD:
No. While a pledge, real estate mortgage, or antichresis may exceptionally
secure after-incurred obligations so long as these future debts are accurately
described, a chattel mortgage, however, can only cover obligations existing
at the time the mortgage is constituted. Although a promise expressed in a
chattel mortgage to include debts that are yet to be contracted can be a
binding commitment that can be compelled upon, the security itself,
however, does not come into existence or arise until after a chattel mortgage
agreement covering the newly contracted debt is executed either by
concluding a fresh chattel mortgage or by amending the old contract
conformably with the form prescribed by the Chattel Mortgage Law. Refusal
on the part of the borrower to execute the agreement so as to cover the after-
incurred obligation can constitute an act of default on the part of the
borrower of the financing agreement whereon the promise is written but, of
course, the remedy of foreclosure can only cover the debts extant at the time
of constitution and during the life of the chattel mortgage sought to be
foreclosed.
Pajuyo v. CA
GR No. 146364 June 3, 2004
Facts: Pajuyo entrusted a house to Guevara for the latter's use provided he
should return the same upon demand and with the condition that Guevara
should be responsible of the maintenance of the property. Upon demand
Guevara refused to return the property to Pajuyo. The petitioner then filed
an ejectment case against Guevara with the MTC who ruled in favor of the
petitioner. On appeal with the CA, the appellate court reversed the judgment
of the lower court on the ground that both parties are illegal settlers on the
property thus have no legal right so that the Court should leave the present
situation with respect to possession of the property as it is, and ruling
further that the contractual relationship of Pajuyo and Guevara was that of a
commodatum.
Issue: Is the contractual relationship of Pajuyo and Guevara that of a
commodatum?
Held: No. The Court of Appeals’ theory that the Kasunduan is one of
commodatum is devoid of merit. In a contract of commodatum, one of the
parties delivers to another something not consumable so that the latter may
use the same for a certain time and return it. An essential feature of
commodatum is that it is gratuitous. Another feature of commodatum is that
the use of the thing belonging to another is for a certain period. Thus, the
bailor cannot demand the return of the thing loaned until after expiration of
the period stipulated, or after accomplishment of the use for which the
commodatum is constituted. If the bailor should have urgent need of the
thing, he may demand its return for temporary use. If the use of the thing is
merely tolerated by the bailor, he can demand the return of the thing at will,
in which case the contractual relation is called a precarium. Under the Civil
Code, precarium is a kind of commodatum.
The Kasunduan reveals that the accommodation accorded by Pajuyo to
Guevarra was not essentially gratuitous. While the Kasunduan did not
require Guevarra to pay rent, it obligated him to maintain the property in
good condition. The imposition of this obligation makes the Kasunduan a
contract different from a commodatum. The effects of the Kasunduan are
also different from that of a commodatum. Case law on ejectment has
treated relationship based on tolerance as one that is akin to a landlord-
tenant relationship where the withdrawal of permission would result in the
termination of the lease. The tenant’s withholding of the property would
then be unlawful.
REPUBLIC OF THE PHILIPPINES, plaintiff-appellee, vs. JOSE V.
BAGTAS, G.R. No. L-17474
DOCTRINE:
A bailee in a contract of commodatum is liable for loss of the thing, even if it
should be through a fortuitous event: (1) If he keeps it longer than the period
stipulated (2) If the thing loaned has been delivered with appraisal of its
value, unless there is a stipulation exempting the bailee fromresponsibility
in case of a fortuitous event.
FACTS:
Jose V. Bagtas borrowed from the Republic of the Philippines through the
Bureau of Animal Industry three bulls for breeding purposes subject to a
government charge of breeding fee of 10%of the book value of the bulls.
On 7 May 1949 of the contract, the borrower asked for a renewal for another
period of one year. However, the Secretary of Agriculture and Natural
Resources approved a renewal thereof of only one bull for another year and
requested the return of the other two.
Bagtas failed to pay the book value of the three bulls or to return them.
Court of First Instance of Manila the Republic of the Philippines commenced
an action against him praying that he be ordered to return the three bulls
loaned to him or to pay their book value in the total sum of P3,241.45 and
the unpaid breeding fee inthe sum of P499.62.
The son of the appellant by the late defendant, returned the two bulls as
evidenced by a memorandum receipt signed by the latter.
The appellant contends that the other bull was accidentally killed during a
raid by the Huksin, where the animal was kept, and that as such death was
due to force majeure she is relieved from the duty of the returning the bull or
paying its value to the appellee.
ISSUE:
Whether the estate of estate of Jose V. Bagtas liable for the bull that was
unreturned and loss due to fortuitous events.

HELD:
Yes. The loan by the appellee to the late defendant Jose V.Bagtas of the
three bulls for breeding purposes for a period of one year from 8 May 1948
to 7 May1949, later on renewed for another year as regards one bull, was
subject to the payment by the borrower of breeding fee of 10% of the book
value of the bulls. The appellant contends that the contract was
commodatum and that, for that reason, as the appellee retained ownership
or title to the bull it should suffer its loss due to force majeure. A contract of
commodatum is essentially gratuitous. If the breeding fee be considered a
compensation, then the contract would be a lease of the bull. Under article
1671 of the Civil Code the lessee would be subject to the responsibilities of a
possessor in bad faith, because she had continued possession of the bull
after the expiry of the contract. And even if the contract be commodatum,
still the appellant is liable, because article1942 of the Civil Code provides
that a bailee in a contract of commodatum is liable for loss of the thing, even
if it should be through a fortuitous event: (2) If he keeps it longer than the
period stipulated (3) If the thing loaned has been delivered with appraisal of
its value, unless there is a stipulation exempting the bailee from
responsibility in case of a fortuitous event. The original period of the loan
was from 8 May 1948 to 7 May 1949. The loan of one bull was renewed for
another period of one year to end on 8 May 1950. But the appellant kept and
used the bull until November 1953 when during a Huk raid it was killed by
stray bullets. Furthermore, when lent and delivered to the deceased husband
of the appellant the bulls had each an appraised book value, to wit: the
Sindhi, at P1,176.46; the Bhagnari, at P1,320.56 and the Sahiniwal;
atP744.46. It was not stipulated that in case of loss of the bull due to
fortuitous event the late husband of the appellant would be exempt from
liability