NAME: FELIPE, JEMARD M.

COURSE & YEAR: JURIS DOCTOR 2

Bar Q & A related to Credit Transactions

(Question, 1993)
A, upon request, loaned his passenger Jeepney to B to enable B to bring
his sick wife from Paniqui. Tarlac to the Philippine General Hospital in
Manila for treatment. On the way back to Paniqui, 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 Bamban, there was an onrush of Lahar from Mt. Pinatubo, the
Jeep that was loaned to him was wrecked.

1. 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?

2. Is B obliged to pay A for the use of the passenger jeepney?

3. Is B liable to A for the loss of the Jeepney?

Suggested Answer:

1. The contract is called "commodatum". (Art. 1933. Civil Code).

COMMODATUM is a contract by which one of the parties (bailor)
delivers to another (bailee) something not consumable so that the
latter may use it for a certain time and return it.

2. No, B is not obliged to pay A for the use of the passenger Jeepney
because commodatum is essentially gratuitous. (Art. 1933. Civil
Code)

3. Yes, because B devoted the thing to a purpose different from that

for which it has been loaned (Art. 1942, par. 2, Civil Code)
(Question, 2005)
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 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.

1. Who shall bear the P15,000.00 spent for the repair of the van?
Explain.

2. Who shall bear the costs for the van's fuel, oil, and other materials
while it was with Tito? Explain.

3. Does Pedro have the right to retrieve the van even before the lapse
of one year? Explain.

4. 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.

Suggested Answer:

1. Tito must bear the P15,000.00 expenses for the van. Generally,
extraordinary expenses for the preservation of the thing loaned are
paid by the bailor, he being the owner of the thing loaned. In this
case however, Tito should bear the expenses because he incurred
the expenses without first informing Pedro about it. Neither was the
repair shown to be urgent. Under Article 1949 of the Civil Code,
bailor generally bears the extraordinary expenses for the
preservation of the thing and should refund the said expenses if
made by the bailee; Provided, The bailee brings the same to the
attention of the bailor before incurring them, except only if the
repair is urgent that reply cannot be awaited.

2. Tito must also pay for the ordinary expenses for the use and
preservation of the thing loaned. He must pay for the gasoline, oil,
greasing and spraying. He cannot ask for reimbursement because
he has the obligation to return the identical thing to the bailor.
Under Article 1941 of the Civil Code, the bailee is obliged to pay for
 the ordinary expenses for the use and preservation of the thing
loaned.

3. No, Pedro does not have the right to retrieve the van before the
lapse of one year. The parties are mutually bound by the terms of
the contract. Under the Civil Code, there are only 3 instances when
the bailor could validly ask for the return of the thing loaned even
before the expiration of the period. These are when: (1) a precarium
contract was entered (Article 1947); (2) if the bailor urgently needs
the thing (Article 1946); and (3) if the bailee commits acts of
ingratitude (Article 1948). Not one of the situations is present in
this case.

4. Generally, extraordinary expenses arising on the occasion of the

actual use of the thing loaned by the bailee, even if incurred without
fault of the bailee, shall be shouldered equally by the bailor and the
bailee. (Art. 1949 of the Civil Code). However, if Pedro had an urgent
need for the vehicle, Tito would be in delay for failure to
immediately return the same, then Tito would be held liable for the
extraordinary expenses.

(Question, 1998)
Distinguish usufruct from commodatum and state whether these may be
constituted over consumable goods.

Suggested Answer:

There are several points of distinction between usufruct and

commodatum. Usufruct is constituted by law, by contract, by
testamentary succession, or by prescription (Art. 1933. Civil Code).
Usufruct creates a real right to the fruits of another's property, while
commodatum creates only a purely personal right to use another's
property, and requires a stipulation to enable the bailee to "make use"
of the fruits (Arts. 1939& 1940, Civil Code). Usufruct may be onerous
while commodatum is always or essentially gratuitous (Arts. 1933 &
1935, Civil Code). The contract constituting usufruct is consensual,
while commodatum is a real contract (perfected only by delivery of the
subject matter thereof).

However, both involve the enjoyment by a person of the property of

another, differing only as to the extent and scope of such enjoyment
[jus fruendi in one and Jus utendi in the other); both may have as
subject matter either an immovable or a movable; and, both maybe
constituted over consumable goods (Arts. 574 & 1936, Civil Code). A
consumable thing may be the subject-matter of an abnormal usufruct
but in a normal usufruct, the subject-matter may be used only for
 exhibition. A commodatum of a consumable thing may be only for the
purpose of exhibiting, not consuming it.

(Question, 2004)
Distinguish briefly but clearly between Mutuum and Commodatum.

Suggested Answer:

In MUTUUM, the object borrowed must be a consumable thing the

ownership of which is transferred to the borrower who incurs the
obligation to return the same consumable to the lender in an equal
amount, and of the same kind and quality. In COMMODATUM, the
object borrowed is usually a non-consumable thing the ownership of
which is not transferred to the borrower who incurs the obligation to
return the very thing to the lender.

(Question, 2001)
Samuel borrowed a P300,000.00 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? Why?

Suggested Answer:
The action will prosper. While it is true that the interest ceilings set by
the Usury Law are no longer in force, it has been held that PD No. 1684
and CB Circular No. 905 merely allow contracting parties to stipulate
freely on any adjustment in the interest rate on a loan or forbearance of
money but do not authorize a unilateral increase of the interest rate by
one party without the other's consent (PNB v. CA, 238 SCRA 2O
[1994]]). To say otherwise will violate the principle of mutuality of
contracts under Article 1308 of the Civil Code. To be valid, therefore,
any change of interest must be mutually agreed upon by the parties
(Dizon v, Magsaysay, 57 SCRA 25O [1974]). In the present problem, the
debtor not having given his consent to the increase in interest, the
increase is void.

(Question, 2002)
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 is
liable on the promissory note and awards damages to Carlos for the
damaged painting, with interests for both awards. What rates of interest
may the court impose with respect to both awards? Explain.
Suggested Answer:
With respect to the collection of money or promissory note, it being a
forbearance of money, the legal rate of interest for having defaulted on
the payment of 12% will apply. With respect to the damages to the
painting, it is 6% from the time of the final demand up to the time of
finality of judgment until judgment credit is fully paid. The court
considers the latter as a forbearance of money. (Eastern Shipping
Lines, Inc. v. CA, 234 SCRA 78 [1994]; Art 2210 and 2211, Civil Code)

(Question, 2004)
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. Suppose OB, the lender, would increase by
5% the rate of interest to be paid by TY, the borrower, without a law
authorizing such an increase, would OB’s action be just and valid? Why?
Has TY a remedy against the imposition of the rate increase? Explain.

Suggested Answer:
OB's action is not just and valid. The debtor cannot be required to pay
the increase in interest there being no law authorizing it, as stipulated
in the contract. Increasing the rate in the absence of such law violates
the principle of mutuality of contracts.

Alternative Answer:
Even if there was a law authorizing the increase in interest rate, the
stipulation is still void because there is no corresponding stipulation to
decrease the interest due when the law reduces the rate of interest.

(Question, 1997)
In order to secure a bank loan, XYZ Corporation surrendered its deposit
certificate, with a maturity date of 01 September 1997 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?

Suggested Answer:
We submit that there is no pactum commissorium here. Deposits of
money in banks and similar institutions are governed by the provisions
on simple loans (Art. 1980. Civil Code). The relationship between the
depositor and a bank is one of creditor and debtor. Basically this is a
matter of compensation as all the elements of compensation are present
in this case (BPI vs. CA, 232 SCRA 302).

Alternative Answer:
Where the security for the debt is also money deposited in a bank, it is
not illegal for the creditor to encash the time deposit certificates to pay
the debtor's overdue obligation. (Chu us. CA, et al., G.R 78519,
September 26, 1989).
(Question, 1992)
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 P50,000,00. 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 P50,000.00 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 P50.000.00 is now claimed by B, by the Mayor
of Manila, and by the bank. B claims that 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.

Suggested Answer:
B would have no right to claim the money. Article 1990 of the Civil
Code is not applicable. The law refers to another thing received in
substitution of the object deposited and is predicated upon something
exchanged. The Mayor of Manila cannot invoke. 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, a must return
the bag of money to the bank as the previous possessor and known
owner (Arts. 719 and 1990. Civil Code.)

(Question, 1997)
AB sold to CD a motor vehicle for and in consideration of P120,000.00 to
be paid in twelve monthly equal installments of P10,000,00, each
installment being due and payable on the 15th day of each month
starting January 1997. 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)
installments, 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?

Suggested Answer:
Yes, he 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, The amount received from the surety is
 only payment pro tanto, and an action may be maintained for a
deficiency debt.
(Question, 1995)
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 P500.000.00 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.

1. What kind of contract is entered into between Olivia and Peter?

Explain.

2. What specific obligations are imposed by law on Peter as a

consequence of their contract?

3. Does the law require any specific form for the validity of their
contract? Explain

4. May Olivia re-acquire the plantation before her entire indebtedness

shall have been fully paid? Explain.

Suggested Answer:
1. A contract of antichresis was entered into between payment of the
loan. However, the loan was not paid on Olivia and Peter. Under
Article 2132 of the New Civil Code, by a 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, and thereafter to the principal of his credit.

2. Peter must pay taxes and charges upon the land and bear the
necessary expenses for preservation and repair which he may
deduct from the fruits. (Art, 2135, NCC)

3. The amount of the principal and interest must be specified in

writing, otherwise the antichresis will be void. (Art. 2134, NCC)

4. No. Art. 2136 specifically provides that the debtor cannot re-acquire
the enjoyment of the immovable without first having totally paid
what he owes the creditor. However, it is potestative on the part of
the creditor to do so in order to exempt him from his obligation
under Art. 2135, NCC, The debtor cannot re-acquire the enjoyment
unless Peter compels Olivia to enter again the enjoyment of the
property.

(Question, 1994)
In 1982, Steve borrowed P400.000.00 from Danny, collateralized by a
pledge of shares of stock of Concepcion Corporation worth P800,000,00.
In 1983, because of the economic crisis, the value of the shares pledged
 fell to only P100,000.00. Can Danny demand that Steve surrender the
other shares worth P700,000.00?
Suggested Answer:
No. Danny's right as pledgee is to sell the pledged shares at a public
sale and keep the proceeds as collateral for the loan. There is no
showing that the fall in the value of the pledged property was
attributable to the pledger's fault or fraud. On the contrary, the
economic crisis was the culprit. Had the pledgee been deceived as to
the substance or quality of the pledged shares of stock, he would have
had the right to claim another thing in their place or to the immediate
payment of the obligation. This is not the case here.

(Question, 2004)
ABC loaned to MNO P40,000 for which the latter pledged 400 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 payment of the loan. However, the loan was
not paid on time. A month after 4 years, may the shares of stock pledged
be deemed owned by ABC or not?

Suggested Answer:
The shares of stock cannot be deemed owned by ABC upon default of
MNO. They have to be foreclosed. Under Article 2088 of the Civil Code,
the creditor cannot appropriate the things given by way of pledge. And
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.

(Question, 1996)
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.

Suggested Answer:
None of the above. There is no pledge because only movable property
may be pledged (Art. 2094. NCC). If at all, there was a pledge of the
paper or document constituting the Torrens Title, as a movable by
itself, but not of the land which the title represents. There is no
mortgage because no deed or contract was executed in the manner
required by law for a mortgage (Arts. 2085 to 2092, NCC; 2124 to 2131,
NCC). There is no contract of antichresis because no right to the fruits
of the property was given to the creditor (Art. 2132 NCC).

A contract of simple loan was entered into with security arrangement

agreed upon by the parties which is not one of those mentioned above.
(Question, 2012)
Siga-an granted a loan to Villanueva in the amount of P 540, 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 P 1, 200, 000.00. Upon advice of her
lawyer, Villanueva demanded for the return of the excess amount of P
660, 000.00 which was ignored by Siga-an.

1. Is the payment of interest valid? Explain.

2. Is solution indebiti applicable? Explain.

Suggested Answer:
1. No, Art. 1956, Civil Code, provides that “no interest shall be due
unless it has been expressly stipulated in writing.”

2. Yes, Solutio Indebiti is applicable because Villanueva Overpaid by

P600,000.00 representing interest payment which is not due. He
can, therefore, demand its return.

(Question, 2009)
Answer TRUE if the statement is true, or FALSE if the statement is false.
Explain your answer in not more than two (2) sentences.

An oral promise of guaranty is valid and binding.

Suggested Answer:
FALSE. An oral contract of guaranty, being a special promise to answer
for the debt of another, is unenforceable unless in writing (Article 1403
[2] b, NCC ).

(Question, 2010)
What is the difference between "guaranty" and "suretyship"?

Suggested Answer:
Guaranty and Suretyship distinguished
1. The obligation in guaranty is secondary; whereas, in suretyship, it is
primary.
2. In guaranty, the undertaking is to pay if the principal debtor cannot
pay; whereas, in suretyship, the undertaking is to pay if the
principal debtor does not pay.
3. In guaranty, the guarantor is entitled to the benefit of excussion;
whereas, in suretyship, the surety is not entitled.
4. Liability in guaranty depends upon an independent agreement to
pay the obligations of the principal if he fails to do so; whereas, in
suretyship, the surety assumes liability as a regular party.
 5. The Guarantor insures the solvency of the principal debtor; whereas,
the surety ensures the debt.
6. In a guaranty, the guarantor is subsidiarily liable; whereas, in a
suretyship, the surety binds himself solidarity with the principal
debtor (Art 2047, Civil Code).

(Question, 2009)
Rosario obtained a loan of P100,000.00 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.

1. Is the contract valid? Explain.

2. Will your answer to [1] 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? Reasons.

Suggested Answer:
1. The contract is valid because Rosario has to execute a document in
favor of Jennifer to transfer the ownership of the pledged ring to the
latter. The contract does not amount to pactum commissorium
because it does not provide for the automatic appropriation by the
pledgee of the thing pledged in case of default by the pledgor.

2. No, my answer will be different. While the contract of pledge is valid,

the stipulation authorizing the pledgee to immediately sell the thing
pledged is void under Art 2088 of the New Civil Code, which
provides that “the creditor cannot appropriate the things given by
way of pledge or mortgage, or dispose of them xxx.” Jennifer cannot
immediately sell by herself the thing pledged. It must be foreclosed
by selling it at a public auction in accordance with the procedure
under Art 2112 of the New Civil Code.

(Question, 2013)
Amador obtained a loan of P300,000 from Basilio payable on March 25,
2012. As security for the payment of his loan, Amador constituted a
mortgage on his residential house and lot in Basilio's favor. Cacho, a good
friend of Amador, guaranteed and obligated himself to pay Basilio, in case
Amador fails to pay his loan at maturity.

1. If Amador fails to pay Basilio his loan on March 25, 2012, can
Basilio compel Cacho to pay?
a. No, Basilio cannot compel Cacho to pay because as
guarantor, Cacho can invoke the principle of excussion, i.e.,
all the assets of Basilio must first be exhausted.
 b. No, Basilio cannot compel Cacho to pay because Basilio has
not exhausted the available remedies against Amador.
c. Yes, Basilio can compel Cacho to pay because the nature of
Cacho's undertaking indicates that he has bound himself
solidarily with Amador.
d. Yes, Basilio can compel Cacho who bound himself to
unconditionally pay in case Amador fails to pay; thus the
benefit of excussion will not apply.

2. If Amador sells his residential house and lot to Diego, can Basilio
foreclose the real estate mortgage?
a. Yes, Basilio can foreclose the real estate mortgage because
real estate mortgage creates a real right that attaches to the
property.
b. Yes, Basilio can foreclose the real estate mortgage. It is
binding upon Diego as the mortgage is embodied in a public
instrument.
c. No, Basilio cannot foreclose the real estate mortgage. The
sale confers ownership on the buyer, Diego, who must
therefore consent.
d. No, Basilio cannot foreclose the real estate mortgage. To
deprive the new owner of ownership and possession is unjust
and inequitable.

Suggested Answer:
1. (B) No, Basilio cannot compel Cacho to pay because Basilio has not
exhausted the available remedies against Amador. The guarantor
cannot be compelled to pay the creditor unless the latter has
exhausted all the property of the debtor and has resorted to all the
legal remedies against the debtor (Art. 2058, Civil Code) (Note: “A” is
not the correct answer because it states that “all the assets of
Basilio (the creditor) must first be exhausted”)

2. (B) Yes, Basilio can foreclose the real estate mortgage. It is binding
upon Diego as the mortgage is embodied in a public instrument.
Since the mortgage is in a public instrument, there is constructive
notice to Diego, who is the buyer if the mortgaged property.

(Question, 2013)
Cruz lent Jose his car until Jose finished his Bar exams. Soon after Cruz
delivered the car, Jose brought it to Mitsubishi Cubao for maintenance
check up and incurred costs of P8,000. Seeing the car's peeling and faded
paint, Jose also had the car repainted for P10,000. Answer the two
questions below based on these common facts.

1. After the bar exams, Cruz asked for the return of his car. Jose said he
would return it as soon as Cruz has reimbursed him for the car
maintenance and repainting costs of P 18,000. Is Jose's refusal
justified?
 a. No, Jose's refusal is not justified. In this kind of contract, Jose
is obliged to pay for all the expenses incurred for the
preservation of the thing loaned.
b. Yes, Jose's refusal is justified. He is obliged to pay for all the
ordinary and extraordinary expenses, but subject to
reimbursement from Cruz.
c. Yes, Jose's refusal is justified. The principle of unjust
enrichment warrants the reimbursement of Jose's expenses.
d. No, Jose's refusal is not justified. The expenses he incurred are
useful for the preservation of the thing loaned. It is Jose's
obligation to shoulder these useful expenses.

2. During the bar exam month, Jose lent the car to his girlfriend, Jolie,
who parked the car at the Mall of Asia's open parking lot, with the
ignition key inside the car. Car thieves broke into and took the car. Is
Jose liable to Cruz for the loss of the car due to Jolie's negligence?

a. No, Jose is not liable to Cruz as the loss was not due to his fault
or negligence.
b. No, Jose is not liable to Cruz. In the absence of any prohibition,
Jose could lend the car to Jolie. Since the loss was due to force
majeure, neither Jose nor Jolie is liable.
c. Yes, Jose is liable to Cruz. Since Jose lent the car to Jolie
without Cruz's consent, Jose must bear the consequent loss of
the car.
d. Yes, Jose is liable to Cruz. The contract between them is
personal in nature. Jose can neither lend nor lease the car to a
third person.

Suggested Answer:

1. (D) No, Jose's refusal is not justified. The expenses he incurred are
useful for the preservation of the thing loaned. It is Jose's obligation to
shoulder these useful expenses. In commodatum, the bailee is obliged
to pay for the ordinary expenses for the use and preservation of the
thing loaned (Art 1941, Civil Code). The bailee, Jose, has no right of
retention on the ground that the bailor owes him something, even if it
may be by reason of expenses. He can only retain it if he suffers
damages by reason of a flaw or defect in the thing loaned of which the
bailor knows (Art 1951, Civil Code).

2. (C) Yes, Jose is liable to Cruz. Since Jose lent the car to Jolie without
Cruz's consent, Jose must bear the consequent loss of the car. The
bailee is liable for the loss of the thing, even if it should be through a
fortuitous event if he lends or leases the thing to a third person, who
is not a member of his household (Art 1942, Civil Code).
(Question, 2014)
Due to the continuous heavy rainfall, the major streets in Manila 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.

1. 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?

2. What is the liability, if any, of the Hotel for the loss of Cris’ car?

Suggested Answer:
1. A contract of deposit was perfected between Cris and the Hotel
when Cris surrendered the key to his car to the Hotel’s parking
attendant. In Triple-V Food Services v. Filipino Merchants
Insurance Co. (G.R. No. 160544, February 21, 2005), it was ruled
that when a car is entrusted to valet attendant, there is a contract
of deposit. Article 1962 of the Civil Code provides that a deposit is
constituted from the moment a person receives a thing belonging to
another, with the obligation of safely keeping it and of returning the
same (Durban Apartments v. Pioneer Insurance, [G.R. No. 179419,
March 30, 2011]). Furthermore, Article 1998 of the Civil Code
provides that the deposit of effects made by travelers in hotels or
inns shall be regarded as necessary and that the keepers of hotels
and inns are responsible for the effects deposited as depositaries
subject to their being notified of the effects being brought in by the
travelers and the taking by the travelers of such precautions which
the hotel or inn-keepers or their substitutes advised relative to the
care and vigilance of such effects. Article 1999 of the Civil Code also
provides for the liability of the hotel-keeper for the vehicles
introduced or placed in the annexes of the hotel, which in this case
is the basement of the hotel.

2. The Hotel was constituted as depositary in this case. This, it has

the obligation to safely keep the car which is expected by Cris to be
returned to him. With the loss of the car, the Hotel is liable for the
cost of the car as actual damages.

(Question, 2015)
Sara borrowed P50,000.00 from Julia and orally promised to pay it within
six months. When Sarah tried to pay her debt on the 8th month, Julia
demanded the payment of interest of 12% per annum because of Sara’s
delay in payment. Sara paid her debt and the interest claimed by Julia.
After rethinking, Sara demanded back from Julia the amount she had
paid as interest. Julia claims that she has no obligation to return the
 interest paid by Sara because it was a natural obligation which Sara
voluntarily performed and can no longer recover. Do you agree? Explain.

Suggested Answer:
No, I do not agree with Julia. For a creditor to be entitled to
compensatory interest, the debtor must be in delay. As a rule, in order
for delay to exit, demand must have been made. In this case, there was
no demand made upon the expiration of the 6-month period; thus Sara
cannot be considered in delay, and is not liable to pay compensatory
interest. There being no obligation to pay compensatory interest, Julia
must return the interest mistakenly paid since she was not entitled
thereto, and the delivery was made merely through mistake. If
something is received when there is no right to demand it, and it was
unduly delivered through mistake, the obligation to return arises
(Article 2154, Civil Code).

(Question, 2015)
Donna pledged a set of diamond sing and earrings to Jane for
P200,000.00 She was made to sign an agreement that is 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 earnings and ring set in her jewelry shop located in a mall.
A buyer, Juana, bought the jewelry set for P300,000.00

1. Was the agreement which Donna signed with Jane valid? Explain with
legal basis.

2. Can Donna redeem the jewelry set from Juana by paying the amount
she owed Jane to Juana? Explain with legal basis.

3. Give an example of pledge by operation of law.

Suggested Answer:
1. No, the agreement that if Donna cannot pay her debt within 6
months, Jane could immediately appropriate the jewelry for herself
is void as it constitutes pactum commissorium, which is void under
the law. Under Article 2088, pactum commissorium is a provision
in a pledge or mortgage agreement where the property pledged or
mortgaged by the debtor automatically becomes the property of the
creditor in the event the debtor fails to pay the debt or commits a
breach of the loan or agreement.

2. No. Donna cannot redeem the jewelry set from Juana because there
is no privity of contract between Donna and Juana. Moreover,
Juana is a third person who purchased the thing in good faith from
a merchant store. Under Article 1505, even if the seller does not
have the right to sell, the buyer acquires absolute ownership over
the thing if he bought it in a merchant store in good faith, the
 owner neither having been unlawfully deprived thereof, nor was the
thing lost (Sun Brothers v. Velasco [1963]).

3. Art 1994 states: “The depositary may retain the thing in pledge until
the full payment of what may be due him by reason of the deposit.”

(Question, 2016)
With regard to an award of interest in the concept of actual and
compensatory damages, please state the guidelines regarding the manner
of computing legal interest in the following situations:

1. When the obligation is breached and it consists in the payment of a

sum of money like a loan or forbearance of money

2. When the obligation does not constitute a loan or forbearance of

money

Consider the issuance of BSP-MB Circular No. 799, which became

effective on July 1, 2013.

Suggested Answer:
1. When the obligation is breached and it consists in the payment of a
sum of money like a loan or forbearance of money, in the absence of
stipulation, the rate of interest shall be the legal rate of 6% per
annum (Article 2009 of the Civil Code), which was increased to 12%
per NB Circular No. 905, (Series of 1982) to be computed from
default. The twelve percent, 12%, per annum legal interest shall
apply only until June 30, 2013. From July 1, 2013, the new rate of
six percent (6%) per annum shall be the prevailing rate of interest
when applicable (Nacar v. Gallery Frames, 703 SCRA 439 [2013],
applying BSP-MB Circular No. 799).

2. The 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 extra-judicially, 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 (Nacar v. Gallery Fraems,
703 SCRA 439 [2013]).
(Question, 2016)
Jerico, the project owner, entered into a Construction Contract with Ivan
for the latter to construct his house. Jojo executed a Surety undertaking
to guarantee the performance of the work by Ivan. Jerico and Ivan later
entered into a Memorandum of Agreement (MOA) revising the work
schedule of Ivan and the subcontractors. The MOA stated that all the
stipulations of the original contract not in conflict with the said agreement
shall remain valid and legally effective. Jojo filed a suit to declare him
relieved of his undertaking as a result of the MOA because of the change
in the work schedule. Jerico claims there is no novation of the
Construction Contract. Decide the case and explain.

Suggested Answer:

I will decide in favor of Jerico as there is no novation of the

Construction Contract. Novation is never presumed, and may only take
place when the following are present: (1) a previous valid obligation; (2)
the agreement of all the parties to the new contract; (3) the
extinguishment of the old contract; and (4) validity of the new one.
There must be consent of all the parties to the substitution, resulting in
theextinction of the old obligation and the creation of a new valid one.
In this case, the revision of the work schedule of Ivan and the
subcontractors is not shown to be so substantial as to extinguish the
old contract, and there was also no irreconcilable incompatibility
between the old and new obligations. It has also been held in
jurisprudence that a surety may only be relieved of his undertaking if
there is a material change in the principal contract and such would
make the obligation of the surety onerous. The principal contract
subject of the surety agreement still exists, and Jojo is still bound as a
surety.