Q1. Are non‐fungible things irreplaceable? Explain.

Non-fungible things are irreplaceable. They must be returned to the lender after the purpose of
the loan had been accomplished. Nonfungible things may be replaced by agreement of the
parties. In such case, the contract is barter and not loan.

Q2. What could be the subject of commodatum? Explain.

Consumable goods may be the object of commodatum according to Article 1936 of the New
Civil Code, if the purpose is not to consume them, such as when they are borrowed only for ad
ostentationem or exhibition purposes. The same and similar things must be returned to the lender
or bailor after the event.

Q3. Can estafa be committed by a person who refuses to pay his debt or denies its
existence? Explain.

No estafa be committed by a person who refuses to pay his debt or denies its existence. It is
because the debtor acquires ownership of the item supplied in mutuum. It is not misappropriation
if he consumes or disposes of the thing since it is an act of ownership. As a result, there is no
basis for pursuing a criminal charge.

Q4. What if the bailee is entitled to payment or reimbursement of expenses incurred or

damages suffered and the bailor offers the thing loaned as payment for said expenses or
damages, would such offer be valid or not, in view of the prohibition under Art. 1952 which
states that the bailor cannot exempt himself from the payment of expenses or damages by
abandoning the thing to the bailee? Explain.

The offer is no longer valid. It might be deemed dation in payment. In this case, the bailor's
abandonment was made in favor of the bailee in exchange for payment of the latter's expenses,
which is a breach of what the law clearly prohibits under Article 1952.

Q5. Before he left for Riyadh to work as a mechanic, Pedro left his 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 P15,000.00. 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. Who shall bear the
P15,000.00 spent for the repair of the van? Explain.

The contract between Pedro and Tito is one of commodatum. Pedro, the bailor, is responsible for
the costs of repairing the faulty brakes, which are extraordinary costs incurred as a result of the
bailor's failure to disclose the defect or fault; Tito, on the other hand, is responsible for "that part
of the P15,000.00 spent for the tuneup," which is an ordinary cost associated with the use and
preservation of the van.

Q6. Sabugo granted a loan to Samilin. The loan agreement was not reduced in writing.
Thereafter, Sabugo demanded additional interest which was paid by Samilin in cash and
checks. Upon advice of her lawyer, Samilin demanded for the return of the amount of
interest paid. Is the payment of interest valid?

No, only if and only if the following conditions are met may monetary interest be paid: 1. There
was a specific provision for the payment of interest; and 2. there was a specific provision for the
payment of interest. The interest payment arrangement was decreased in writing. The payment of
monetary interest requires the fulfillment of both prerequisites. As a result, collecting interest
without a documented agreement is against the law.

Q7. What is the nature of advance payment in a contract of sale?

In accordance with Article 1962, a so called deposit of an advance payment in the case of a sale
is not the deposit. It is an advance payment that, once provided, assigns title to the seller subject
to the buyer's payment being completed in accordance with the terms of the agreement.

Q8. When the deposit consists of money, what must be returned upon the extinguishment
of contract?

Article 1896 will apply that which states that the money placed must be returned together with
interest for its usage. The imposition of interest is in the form of a penalty for the use of money if
there is no agreement to pay the interest from the beginning; otherwise, the contract is mutuum.

Q9. Maneja assigned and conveyed to Serrano her time deposit. Notwithstanding series of
demands for encashment of the aforementioned time deposits, OBM refused to honor the
time deposits. Is OBM liable to Serrano despite the fact the Central Bank declared that
OBM could no longer operate due to its chronic reserve deficiencies?
Yes. Bank deposits are irregular deposits by their nature. They are basically loans since they
produce interest. All bank deposits, whether fixed, savings, or current, will be treated as loans
and subject to loan regulations. Both current and savings deposits can be used by a bank, hence
they are considered loans to the bank. When Serrano placed interest-bearing time deposits with
OBM, he was a creditor of the responder bank rather than a depositor. Serrano owed money to
the bank, and Serrano owed money to the bank. The failure of OBM to fulfill the time deposits is
a breach of faith deriving from a depositary's failure to return the deposit's subject matter, not a
violation of trust.

Q10. Are hotel or inn keepers still liable regardless of the posting of notices exempting
themselves from any liability?

Yes. Even if notices exempting them from obligation are posted, they are still accountable. Any
agreement between the hotelkeeper and the guest that limits or reduces the former's
responsibilities (Arts. 1998–2001) is void.