CREDIT TRANSACTIONS

INSTRUCTIONS: This examination consists of TWENTY FIVE (XXV)

numbers. Read each question very carefully before answering. Answer
SEQUENTIALLY, CLEARLY and CONCISELY starting each number on a
separate page. A mere “YES” or “NO” answer without any corresponding
discussion will not be given any credit. GOOD LUCK!

I.

Answer TRUE if the statement is true, or FALSE if the statement is false.

Explain your answer: An oral promise of guaranty is valid and binding.

II.

Siga-an granted a loan to Villanueva in the amount of Php540,000.00.

Such agreement was not reduced to writing. Siga-an demanded interest
which was paid by Villanueva in cash and checks. The total amount
Villanueva paid accumulated to Php1,200,000.00. Upon advice of her
lawyer, Villanueva demanded for the return of the excess amount of
Php660,000.00 which was ignored by Siga-an.
a. Is the payment of interest valid? Explain.
b. Is solution indebiti applicable? Explain.

III.

What is the difference between "guaranty" and "suretyship"?

IV.

Rosario obtained a loan of Php100,000.00 from Jennifer, and pledged her

diamond ring. The contract signed by the parties stipulated that if Rosario is
unable to redeem the ring on due date, she will execute a document in
favor of Jennifer providing that the ring shall automatically be considered
full payment of the loan.
a. Is the contract valid? Explain.
b. Will your answer to [a] be the same if the contract stipulates that upon
failure of Rosario to redeem the ring on due date, Jennifer may
immediately sell the ring and appropriate the entire proceeds thereof for
herself as full payment of the loan? Explain.
 V.

A, upon request, loaned his passenger Jeepney to B to enable B to bring

his sick wife from Tagudin, Ilocos Sur to the Philippine General Hospital in
Manila for treatment. On the way back to Tagudin, after leaving his wife at
the hospital, people stopped the passenger Jeepney. B stopped for them
and allowed them to ride on board, accepting payment from them just as in
the case of ordinary passenger Jeepneys plying their route. As B was
crossing Balaoan, La Union, there was a landslide, the Jeep that was
loaned to him was wrecked.
a. What do you call the contract that was entered into by A and B with
respect to the passenger Jeepney that was loaned by A to B to transport
the latter's sick wife to Manila? Explain.
b. Is B obliged to pay A for the use of the passenger jeepney? Explain.
c. Is B liable to A for the loss of the Jeepney? Explain.

VI.

Before he left for Riyadh to work as a mechanic, Pedro left his Adventure
van with Tito, with the understanding that the latter could use it for one year
for his personal or family use while Pedro works in Riyadh. He did not tell
Tito that the brakes of the van were faulty. Tito had the van tuned up and
the brakes repaired. He spent a total amount of Php15,000.00. After using
the vehicle for two weeks, Tito discovered that it consumed too much fuel.
To make up for the expenses, he leased it to Annabelle. Two months later,
Pedro returned to the Philippines and asked Tito to return the van.
Unfortunately, while being driven by Tito, the van was accidentally
damaged by a cargo truck without his fault.
a. Who shall bear the Php15,000.00 spent for the repair of the van?
Explain.
b. Who shall bear the costs for the van's fuel, oil and other materials while
it was with Tito? Explain.
c. Does Pedro have the right to retrieve the van even before the lapse of
one year? Explain.
d. Who shall bear the expenses for the accidental damage caused by the
cargo truck, granting that the truck driver and truck owner are insolvent?
Explain.
 VII.

Distinguish usufruct from commodatum and state whether these may be

constituted over consumable goods.

VIII.

Distinguish briefly but clearly between Mutuum and commodatum.

IX.

Samuel borrowed Php300,000.00 housing loan from the bank at 18% per
annum interest. However, the promissory note contained a proviso that the
bank "reserves the right to increase interest within the limits allowed by
law,". By virtue of such proviso, over the objections of Samuel, the bank
increased the interest rate periodically until it reached 48% per annum.
Finally, Samuel filed an action questioning the right of the bank to increase
the interest rate up to 48%. The bank raised the defense that the Central
Bank of the Philippines had already suspended the Usury Law. Will the
action prosper or not? Explain.

X.

Carlos sues Dino for a) collection on a promissory note for a loan, with no
agreement on interest, on which Dino defaulted, and b) damages caused
by Dino on his (Carlos’) priceless Michaelangelo painting on which Dino
accidentally spilled acid while transporting it. The court finds Dino liable on
the promissory note and awards damages to Carlos for the damaged
painting, with interest for both awards. What rates of interest may the court
impose with respect to both awards? Explain.

XI.

The parties in a contract of loan of money agreed that the yearly interest
rate is 12% and it can be increased if there is a law that would authorize
the increase of interest rates.
a. Suppose OB, the lender, would increase by 5% the rate of interest to be
paid by TY, the borrower, without a law authorizing such increase, would
OB’s action be just and valid? Explain.
b. Has TY a remedy against the imposition of the rate increase? Explain.
 XII.

In order to secure a bank loan, XYZ Corporation surrendered its deposit

certificate, with a maturity date of 01 April 2020 to the bank. The
corporation defaulted on the due repayment of the loan, prompting the
bank to encash the deposit certificate. XYZ Corporation questioned the
above action taken by the bank as being a case of pactum commissorium.
The bank disagrees. What is your opinion? Explain.

XIII.

X and Y staged a daring bank robbery in Manila at 10:30 AM in the morning

of a regular business day, and escaped with their loot of two (2) bags, each
bag containing Php500,000,00. During their flight to elude the police, X and
Y entered the nearby locked house of A, then working in his Quezon City
office. From A's house, X and Y stole a box containing cash totaling
Php50,000.00 which box A had been keeping in deposit for his friend B. In
their hurry, X and Y left in A's bedroom one (1) of the bags which they had
taken from the bank. With X and Y now at large and nowhere to be found,
the bag containing Php500,000.00 is now claimed by B, by the Mayor of
Manila, and by the bank. B claims that as the depository. A, by force
majeure had obtained the bag of money in place of the box of money
deposited by B. The Mayor of Manila, on the other hand, claims that the
bag of money should be deposited with the Office of the Mayor as required
of the finder by the provisions of the Civil Code. The bank resists the claims
of B and the Mayor of Manila. To whom should a deliver the bag of money?
Decide with reasons.

XIV.

AB sold to CD a motor vehicle for and in consideration of Php1,200,000.00

to be paid in twelve monthly equal instalments of Php100,000.00, each
instalment being due and payable on the 15th day of each month starting
January 2020. To secure the promissory note, CD (a) executed a chattel
mortgage on the subject motor vehicle, and (b) furnished a surety bond
issued by Philam life. CD failed to pay more than two (2) instalments. AB
went after the surety but he was only able to obtain three-fourths (3/4) of
the total amount still due and owing from CD. AB seeks your advice on how
he might, if at all, recover the deficiency. How would you counsel AB?
Explain.
 XV.

Olivia owns a vast mango plantation which she can no longer properly
manage due to a lingering illness. Since she is indebted to Peter in the
amount of Php5,000,000.00 she asks Peter to manage the plantation and
apply the harvest to the payment of her obligation to him, principal and
interest, until her indebtedness shall have been fully paid. Peter agrees.
a. What kind of contract is entered into between Olivia and Peter? Explain.
b. What specific obligations are imposed by law on Peter as a
consequence of their contract? Explain.
c. Does the law require any specific form for the validity of their contract?
Explain.
d. May Olivia re-acquire the plantation before her entire indebtedness shall
have been fully paid? Explain.

XVI.

In 2019, Steve borrowed Php4,000,000.00 from Danny, collateralized by a

pledge of shares of stock of Concepcion Corporation worth
Php8,000,000.00. In 2020, because of the pandemic crisis, the value of the
shares pledged fell to only Php1,000,000.00. Can Danny demand that
Steve surrender the other shares worth Php7,000,000.00? Explain.

XVII.

ABC loaned to MNO Php4,000,000.00 for which the latter pledged 4,000
shares of stock in XYZ Inc. It was agreed that if the pledgor failed to pay
the loan with 10% yearly interest within four years, the pledgee is
authorized to foreclose on the shares of stock. As required, MNO delivered
possession of the shares to ABC with the understanding that the shares
would be returned to MNO upon the time. A month after 4 years, may the
shares of stock pledged be deemed owned by ABC or not? Reason.

XVIII.

In the province, a farmer couple borrowed money from the local merchant.
To guarantee payment, they left the Torrens Title of their land with the
merchant, for him to hold until they pay the loan. Is there a - a) contract of
pledge, b) contract of mortgage, c) contract of antichresis, or d) none of the
above? Explain.

XIX.

A debtor pledged to his surety pieces of jewelry to indemnify the latter in

case the surety would be obliged to pay the creditor. The surety paid
Php20,000.00 to the creditor. To recover the amount, the surety sold at
public auction the jewelry but realized only Php5,000.00. May the surety
recover the deficiency from the debtor? Explain.

XX.

A entrusted a diamond ring to S to sell. S pledged it instead in a

pawnshop.
a. Can A recover the ring from the pawnshop? Explain.
b. Can the pawnshop insist on payment first of the loan from A? Explain.

XXI.

DL borrowed Php200,000.00 from T & Co. with which he imported 400

heads of breeding cows from New Zealand. Upon their arrival in the
Philippines, the cattle were sent to the ranch of T & Co. for pasture under
the agreement that for as long as DL has not paid the Php200,000.00, he
cannot bet his cattle from the ranch; that the cattle is to be taken care of by
T & Co.’s personnel there, and that one-half of all the offspring shall go to T
& Co. for these services. Without anybody’s fault, all the cattle died of
disease and the Php200,000.00 remained unpaid. T & Co. therefore sued
DL for the Php200,000.00 plus interest. Will the action prosper? Explain.

XXII.

Nante, a registered owner of a parcel of land in Quezon City, sold the

property to Monica under a deed of sale which reads as follows: "That for
and in consideration of the sum of Php500,000.00, value to be paid and
delivered to me, and receipt of which shall be acknowledged by me to the
full satisfaction of Monica, referred to as Vendee, I hereby sell, transfer,
cede, convey, and assign, as by these presents, I do have sold,
transferred, ceded, conveyed and assigned a parcel of land covered by
TCT No. 2468 in favor of the Vendee." After delivery of the initial payment
of Php100,000.00, Monica immediately took possession of the property.
Five (5) months after, Monica failed to pay the remaining balance of the
purchase price. Nante filed an action for the recovery of possession of the
property. Nante alleged that the agreement was one to sell, which was not
consummated as the full contract price was not paid. Is the contention of
Nante tenable? Explain.

XXIII.

Due to the continuous heavy rainfall, the major streets in San Fernando, La
Union became flooded. This compelled Cris to check-in at Square One
Hotel. As soon as Cris got off from his Toyota Altis, the Hotel’s parking
attendant got the key of his car and gave him a valet parking customer’s
claim stub. The attendant parked his car at the basement of the hotel. Early
in the morning, Cris was informed by the hotel manager that his car was
carnapped.
a. What contract, if any, was perfected between Cris and the Hotel when
Cris surrendered the key of his car to the Hotel’s parking attendant?
Explain.
b. What is the liability, if any, of the Hotel for the loss of Cris’ car? Explain.

XXIV.

Donna pledged a set of diamond ring and earrings to Jane for

Php200,000.00. She was made to sign an agreement that if she cannot
pay her debt within six months, Jane could immediately appropriate the
jewelry for herself. After six months, Donna failed to pay. Jane then
displayed the earrings and ring set in her jewelry shop located in a mall. A
buyer, Juana, bought the jewelry set for Php300,000.00.
a. Was the agreement which Donna signed with Jane valid? Explain.
b. Can Donna redeem the jewelery set from Juana by paying the amount
she owed Jane to Juana? Explain.

XXV.

Give an example of a pledge created by operation of law.

ORDONIA, Glesly G. LAW3; 10:30-12:00 am; WF

BSA – 2C May 1, 2020

ANSWERS:

I.

FALSE.
Under Article 1403, (2) b, NCC, which provides that a special promise
to answer for the debt, default, or miscarriage of another, should be in
writing to be enforceable.
In this case, while the contract of guaranty is valid, however, is
unenforceable because it is not in writing.
Therefore, it was false because the validity of a contract should be
distinguished from its enforceability.

II.

a) NO.
Article 1956 of the Civil Code states that no interest shall be due
unless it has been expressly stipulated in writing.
In this case, it was said that such an agreement was not reduced in
writing.
Therefore, it is no.

b) YES.
Under Article 1960 provides that if the borrower pays interest when
there has been no stipulation therefore, the provisions of the Civil Code
concerning solutio indebiti or natural obligations, shall be applied.
In this case, Villanueva paid over P660,000.00 representing interest
payment which is not due.
Therefore, it is a yes, and for he can demand its return.

III.

The difference between guaranty and suretyship are as follows: (1) A

guarantor and a surety are unlike in that the surety assumes liability as a
regular party to the undertaking, while the liability of the guarantor depends
upon an independent agreement to pay the obligation if the primary debtor
fails to do so; and (2) The guarantor is secondarily or subsidiarily liable,
while the surety is primarily and directly liable.
It would then follow that “while a surety undertakes to pay if the
principal does not pay, the guarantor only binds himself to pay if the
principal cannot pay.” (Machetti vs. Hospicio de San Jose 7 Fidelity &
Surety Co., 43 Phil. 297)
A surety is considered in law as being the same party as the principal
debtor concerning the obligation assumed by the latter under the same
agreement which binds the latter.

IV.

a) YES. The contract is valid.

The contract does not amount to a pactum commissorium because it
does not provide for the automatic appropriation by the pledge of the thing
pledged in case of default by the pledger.
In this case, Rosario has to execute a document in favor of Jennifer
to transfer the ownership of the pledged ring to the latter.
Therefore, it is valid.

b) NO.
Under Article 2088 of the Civil Code states that the creditor cannot
appropriate the things given by way of pledge or mortgage, or dispose of
them. Any stipulation to the contrary is null and void.
In this case, the answer will be different because Jennifer cannot
immediately sell-by herself the thing pledged.
Therefore, it is no.

V.

a) The contract that was entered into by A and B was called

commodatum.
According to Article 1933 of the Civil Code in which by the contract of
loan, one of the parties delivers to another, either something not
consumable so that the latter may use the same for a certain time and
return it.
In this case, the passenger jeepney is not a consumable thing.
Therefore, the contract is called commodatum.

b) NO. He is not obliged to pay.

 Under Article 1933, paragraph 2, provides that commodatum is
essentially gratuitous.
Therefore, B is not obliged to pay A for the use of passenger jeepney.

c) YES. He is liable for the loss of the thing.

Under article 1942 of the Civil code states that the bailee is liable for
the loss of the thing, even if it should be through a fortuitous event if he
devotes the thing to any purpose different from that for which it has been
loaned.
In this case, B devoted the thing to a purpose different from that.
Hence, B is liable.

VI.

a) Pedro shall bear the P15,000.00 spent.

The contract between Pedro and Tito is one of commodatum.
In this case, Pedro, the bailor, shall bear the expenses for the repair
of the faulty brakes, they being extraordinary expenses incurred due to the
non-disclosure by the bailor of the defect or fault, but instead, Tito
shouldered that part of the P15,000.00 spent for the tune-up, said expense
being ordinary for the use and preservation of the van.
Therefore, Pedro shall bear for the expenses of the van.

b) Tito shall bear the costs for the van's fuel, oil, and other materials.
Under Article 1941 of the Civil Code requires that the bailee is obliged
to pay for the ordinary expense for the use and preservation of the thing
loaned.
In this case, the costs for the fuel and other materials are considered
ordinary expenses.
Hence, Tito, the bailee, shall shoulder them.

c) NO.
In this case, Pedro cannot demand the return of the van until after the
expiration of the one -year period stipulated. However, if in the meantime
he should have urgent need of the van, he may demand its return or
temporary use.
Therefore, Pedro doesn’t have the right to retrieve the van even
before the lapse of one year.
d) Both Tito and Pedro shall bear equally the costs of the extraordinary
expenses.
Under Article 1949 of the Civil Code, paragraph 2, if the extraordinary
expenses arise on the occasion of the actual use of the thing by the bailee,
even though he acted without fault, they shall be borne equally by both the
bailor and the bailee, unless there is a stipulation of the contrary.
In this case, the van was accidentally damaged by a cargo truck
without Tito’s fault.
So, therefore, both of them shall bear equally the costs.

VII.

Usufruct gives a right to enjoy the property of another with the

obligation of preserving its form and substance unless the title constituting
it or the law otherwise provides. While, commodatum is a contract by which
one of the parties delivers to another, either something not consumable so
that the latter may use the same for a certain time and return it.
In usufruct, the usufructuary gets the right to the use and the fruits of
the same, while in commodatum, the bailee is entitled only to the use of the
thing loaned and not to its fruits.
It is also stated in Article 564 of the Civil Code that usufruct may be
constituted on the whole or a part of the fruits of the thing. It may even be
constituted over consumables like money (Alunan v. Veloso, 52 Phil. 545).
On the other hand, consumable goods may be the subject of commodatum
if the purpose of the contract is not the consumption of the object, as when
it is merely for the exhibition. (Art. 1936, Civil Code)

VIII.

The distinction between mutuum and commodatumIn is that in

mutuum, the object borrowed must be in money or other consumable
things, upon the condition that the same amount of the same kind and
quality shall be paid. While in commodatum, one of the parties delivers to
another, either something not consumable so that the latter may use for the
same time and return it.
Commodatum is essentially gratuitous, while mutuum may be
gratuitous or with a stipulation to pay interest.
In commodatum, the bailor retains the ownership of the thing loaned,
while in mutuum, ownership passes to the borrower.
 IX.

The action will prosper.

It was set by the Usury Law that the interest rates are no longer
subject to any ceiling. The rate will depend on the agreement of the parties.
But in this case, the debtor not having given his consent to the
increase in interest, the increase is void.
Therefore, any change of interest must be mutually agreed upon by
the parties.

X.

Concerning the collection of money or promissory note, it is a

forbearance of money, the legal rate of interest for having defaulted on the
payment of 12% will apply.
On the other hand, for the damages to the painting, it is 6% from the
time of the final demand up to the time of finality of the decision and 12% of
the total amount from the finality of judgment until judgment credit is fully
paid.
Hence, the court considers the latter as a forbearance of money.

XI.

a) NO. OB’s action is not just and valid.

Increasing the rate in the absence of such a law violates the principle
of mutuality of contracts.
In this case, there is no law authorizing such increase.
Therefore, it is not just and valid.

b) Ty, the debtor cannot be required to pay the increase in

Interest.
In this case, there is no law authorizing it, as stipulated in the
contract.
Therefore, the debtor doesn't have a remedy against the imposition of
the rate increase.

XII.

There is no pactum commissorium here.

 Under article 1980 of the Civil Code, states that fixed, savings, and
current deposits of money in banks and similar institutions shall be
governed by the provisions concerning simple loan. Accordingly, the
relation between XYZ Corporation and a bank is that of a creditor and
debtor.
In this case, this is a matter of compensation as all the elements of
compensation are present.

XIII.

A must deliver the bag of money to the bank. Since Article 1990 is not
applicable. B would have no right to claim the money. This refers to another
thing received in substitution of the object deposited by B to A and is found
upon something exchanged.
The Mayor of Manila cannot invoke also. Under Article 719 of the
Civil Code which requires the finder to deposit the thing with the Mayor only
when the previous possessor is unknown.
In this case, the previous possessor and known owner, which is the
bank.
Therefore, a must return bag of money to the bank.

XIV.

Yes, AB can recover the deficiency.

The action of AB to go after the surety bond cannot be taken to mean
a waiver of his right to demand payment for the whole debt.
In this case, the amount received from the surety is only payment to
that extent, and an action may be maintained for a deficiency debt.
Therefore, he can recover the deficiency.

XV.

a) A kind of contract entered into between Olivia and Peter was

antichresis.
Under Article 2132 of the Civil Code which provides that by the
contract of antichresis the creditor acquires the right to receive the fruits of
an immovable of his debtor, with the obligation to apply them to the
payment of the interest, if owing, and thereafter to the principal of his credit.

b) It is an obligation of antichretic creditor.

 Under Article 2135 which provides that the creditor, unless there is a
stipulation to the contrary, is obliged to pay the taxes and charges upon the
estate.
He is also bound to bear the expenses necessary for its preservation
and repair. And the sum spent for the purposes stated in the article shall be
deducted from the fruits.
Therefore, Peter must do the obligations above for he is an
antichretic creditor.

c) YES. The law requires a specific form for the validity of the contract.
Under Article 2134 of the Civil Code, which provides that the amount
of the principal and the interest shall be specified in writing; otherwise, the
contract of antichresis shall be void.

d) NO.
Under Article 2136 provides that the debtor cannot reacquire the
enjoyment of the immovable without first having paid what he owes the
creditor. But the latter, to exempt himself from the obligations imposed
upon him by the preceding article, may always upon him by the preceding
article, may always compel the debtor to enter again upon the enjoyment of
the property, except when there us a stipulation to the contrary.
Hence, Olivia cannot demand its return until the debt is paid.

XVI.
NO.
Bilateral contracts cannot change unilaterally. A pledge is only a
subsidiary contract.
In this case, Steve is indebted to Danny for the amount of Php
4,000,000.00 despite the fall in the value of the stocks pledged.
Therefore, Danny cannot demand other shares.

XVII.

Upon default of MNO, the shares of stock cannot be deemed owned

by ABC.
According to Article 2088, the creditor cannot appropriate the things
given by way of pledge or mortgage, or dispose of them.
In such a case, they have to be foreclosed. Also, even if the parties have
stipulated that ABC becomes the owner of the shares in case MNO
defaults on the loan, such stipulation is void for being a pactum
commissorium.

XVIII.

None of the above.

As it was stated under Article 2094 of the New Civil Code, all
movables which are within the commerce may be pledged. Hence, there is
no contract of pledge.
Another, there is no contract of mortgage. What exists only is a right
of action to compel the fulfillment of the promise but there is no pledge or
mortgage yet. (Art.2092)
And lastly, there is no contract of antichresis because no right to the
fruits of the property was given to the creditor. (Art. 2132 NCC)
But instead, a contract of simple loan, which is not one of those
mentioned above, was entered into with the security arrangement agreed
upon by the parties.

XIX.

NO. The surety cannot recover the deficiency from the debtor.
Under Article 2115 of the Civil Code provides that in a foreclosure of
a pledge, if the price of the sale is less than the indebtedness secured by
the pledge, the creditor shall not be entitled to recover the deficiency,
notwithstanding any stipulation to the contrary.
By electing to sell the articles pledged, the creditor waived any other
remedy and must abide by the results of the sale.
Therefore, no deficiency is recoverable.

XX.

a) YES. A can recover the ring from the pawnshop.

According to Article 559 of the Civil Code, the legitimate owner who
had lost the thing or who had been unduly deprived thereof can recover it
even from a possessor in good faith.

b) The pawnshop owner cannot insist on payment of the loan from A.

In this case, the contract of a pledge is void because S is not the
owner of things pledged. And, because of enormous profits, pawnshop
owners might have been robbed, stolen or embezzled.
 Hence, the pawnshop owner cannot insist on the payment of the
amount for which the ring was pledged.

XXI.

The action will prosper.

Under Article 1198, par. 3 of the Civil Code which requires that the
debtor shall lose every right to make use of the period when by his acts he
has impaired said guarantees or securities after their establishment, and
when through a fortuitous event they disappear, unless he immediately
gives new ones equally satisfactory.
In this case, the loss was due to a fortuitous event, it is clear that both
the accessory contract of pledge and the proposition contract of services
are extinguished. However, the principal contract of loan still subsists.
Therefore, the obligation of DL to pay the loan plus interest has
become immediately demandable.

XXII.

The contention of Nante is not tenable.

The deed itself states that for consideration received, he sells,
transfers, and conveys the land to Monica and there was a delivery of the
property to the latter. The contract is one of sale as there was no
reservation of ownership on the part of the seller Nante. The non-payment
of the price in a contract of sale would only entitle the seller to rescind the
contract but it does not thereby prevent the transfer of ownership
particularly so as in this case, where there was already delivered to the
buyer.
XXIII.

a) The contract that was entered into between Cris and the Hotel was
called a necessary deposit.
Under Article 1998 of the Civil Code which states that the deposit
effects made by travelers in hotels or inns shall also be regarded as
necessary. And Under Article 1999 which provides that the hotel-keeper is
liable for the vehicles, animals, and articles which have been introduced or
placed in the annexes of the hotel.
 The contract of deposit was perfected when the guest surrendered
the key of his car to the Hotel’s parking attendant and the hotel is under the
obligation of safely keeping and returning it.
Therefore, the contract is one of the necessary deposits.

b) The Supreme Court held the hotel liable for the loss of Cris’ car.
In this case, the car was carnapped at the Hotel’s parking area which
is the basement became an annex of the hotel.
Hence, Square One Hotel is liable for the loss of the vehicle.

XXIV.

a) NO. The agreement which Donna signed with Jane wasn’t valid.
Upon default of Donna, the agreement to appropriate the jewelry is
considered pactum commissorium, and it is considered void by law
according to Article 2088 of the Civil Code.
Therefore, it wasn’t valid.

b) NO. Donna cannot redeem it from Juana.

Under Article 1311, contracts take effect only between the parties.
In this case, the pledge contract is between her and Jane. While
Juana is not a party to the pledge contract
Therefore, she cannot redeem it from Juana.

XXV.

This article 1994 gives an example of a pledge created by operation

of law is that the depository may retain the thing in pledge until the full
payment of what may be due him because of the deposit. In other words,
the depository's right of retention. Another from article 1914 states that the
agent may retain in pledge the things which are the object of the agency
until the principal effects the reimbursement and pays the indemnity
outlined in the two preceding articles.