CREDIT TRANSACTIONS  LOAN
A contract wherein one of the parties delivers to
 Credit Transactions - Transactions or loan of
goods, services, or money in the present with a
promise to pay or deliver in the future.
 Bailment - The delivery of property of one person to
another in trust for a specific purpose, with a
contract, express or implied, that the trust shall be
faithfully executed and the property returned or duly
accounted for when the special purpose is
accomplished or kept until the bailor claims it.
Parties:
1. Bailor-the giver; one who delivers property
2. Bailee- the recipient; one who receives the custody
or possession of the thing thus delivered.
CREDIT TRANSACTIONS
o Loan: Mutuum and Commodatum
o Deposit
o Guaranty/Suretyship
o Pledge
o Chattel Mortgage
o Real Mortgage
o Antichresis
FINALS: CREDIT TRANSACTIONS
Introduction (Arts. 1931-1241)
A. LOAN
Gemeral Provisions (1933-1934)
Commodatum (1935-1952)
Mutuum (1953-1961)
B. DEPOSIT
Deposit in General and Its Different Kinds
(1962-1967)
Voluntary Deposit (1968-1995)
Necessary Deposit (1996-2003) Judicial Deposit
(2005-2009)
C. GUARANTY (2047-2084)
D. PLEDGE (2085-2123)
E. REAL MORTGAGE (2124-2131)
F. ANTICHRESIS (2132-2139)
G. CHATTEL MORTGAGE (2140-2141)
another, either something not consumable so that the
latter may use the same for a certain time and return
it or money or other consumable thing, upon the
condition that the same amount of the same kind and
quality shall be paid.
Characteristics:
o Real Contract-delivery of the thing loaned is
necessary for the perfection of the contract
o Unilateral Contract -once the subject matter
has been delivered, it creates obligations on the
part of only one of the parties (i.e, borrower).
Kinds
o Commodatum and Mututum
COMMODATUM - when the bailor (lender) delivers to
the bailee (borrower) a nonconsumable thing so that the
latter may use it for a certain time and return the
identical thing.
Nature:
 Bailee in commodatum acquires the use of the thing
but not its fruits (unless stipulated as an incidental
part of the contract).
 Essentially gratuitous; it ceases to be a
commodatum if any compensation is to be paid by
the borrower who acquires the use.
 Similar to a donation in that it confers a benefit to
the recipient.
 Use of the thing loaned must be temporary,
otherwise the contract may be a deposit
 Subject matter is generally non consumable
whether real or personal but if the consumable
goods are not for consumption as when they are
merely for exhibition, consumable goods may be
the subject of the commodatum.
 Bailor need not be the owner of the thing loaned.
 Death of either party terminates the contract unless
by stipulation, the commodatum is transmitted to
the heirs of either or both parties.
 Bailee can neither lend nor lease the object of the
contract.
 Use of the thing loaned may extend to members of
the bailee's household
  except: contrary stipulation; nature of the thing
forbids such use.
OBLIGATIONS OF THE BAILEE IN
COMMODATUM:
 To pay for the ordinary expenses for the use and
preservation of the thing loaned.
 The bailee is liable for the loss of the thing even if it
should be through a fortuitous event in any of the
following cases:
o when the bailee devoted the thing for any
purpose different from that for which it has been
loaned;
o when he keeps it longer than the period
stipulated, or after the accomplishment of its
use;
o when the thing loaned has been delivered with
appraisal of its value; when he lends or leases it
to third persons who are not members of his
household; or when, being able to save either of
the thing borrowed or his own things, he chose
to save the latter
Note:
 In case of extraordinary expenses arising from the
actual use of the thing by the bailee, they shall be
borne equally by both the bailor and the bailee, even
though the bailee acted without fault, unless there is
a stipulation to the contrary
 The borrower has no right to retain the thing loaned
as security against the lender except for a claim for
damages suffered because of the flaws of the thing
loaned.
 In case there are two or more bailees their obligation
shall be solidary
GENERAL RULE: Allow the bailee the use of the
thing loaned for the duration of the period stipulated or
until the accomplishment of the purpose for which the
commodatum was instituted
EXCEPTIONS: In case of urgent need in which case
bailee may demand its return or temporary use. To
refund to the bailee extraordinary expenses for the
preservation of the thing loaned.
To be liable for damages for known hidden flaws.
REQUISITES
 There is flaw or defect in the thing loaned
 The flaw or defect is hidden
 The ballor is aware thereof
 He does not advise the bailee of the same
 The bailee suffers damages by reason of said flaw or
defect
 If the above requisites concur, the bailee has the
right of retention for damages
MUTUUM - Simple loan or mutuum-where the lender
delivers to the borrower money or other consumable
thing upon the condition that the latter shall pay the
same amount of the same kind and quality.
NOTE:
 The obligation is "to pay" and not to return
because the consumption of the thing loaned is the
distinguishing character of the contract of mutuum
from that of commodatum.
 No estafa is committed by a person who refuses to
pay his debt or denies its existence.
 Central Bank Circular No. 416 fixing the rate of
interest at 12% per annum deals with loans,
forbearance of any money, goods or credits and
judgments involving such loans, or forbearance in
the absence of express agreement to such rate.
 Interest as indemnity for damages is payable only in
case of default or non-performance of the contract.
 As they are distinct claims, they may be demanded
separately.
 COMMODATUM MUTUUM DEPOSIT
1. Object Non- Consumable Consumable
 The chief difference between a voluntary deposit
2. Cause Gratuitous May or may not be and a necessary deposit is that in the former, the
gratuitous
depositor has a complete freedom in choosing the
3. Purpose Use or temporary Consumption depositary, whereas in the latter, there is lack of free
possession choice in the depositor.
4. Subject Matter Real or Personal Only Personal  If the depositary is capacitated, he is subject to all
the obligations of a depositary whether or not the
5. Ownership of Retained by the bailor Passes to the debtor depositor is capacitated. If the depositor is
the thing
incapacitated, the depositary must return the
6. Thing to be Exact thing loaned Equal amount of the property to the legal representative of the
return same kind and quality
incapacitated or to the depositor himself if he should
bailee
acquire capacity.
7. Who bears Risk Bailor Bailee  The incapacitated depositary does not incur the
of loss
obligation of a depositary but he is liable:
8. When to return Incase of urgent need, Only after expiration of a. to return the thing deposited while still in his
even b4 the expiration the term
of term
OBLIGATIONS OF THE DEPOSITARY
DEPOSIT - A contract constituted from the moment a
person receives a belonging to another, with the  To keep the thing safely
obligation of safely keeping it and of returning the  To return of the thing when required
same.  Exercise over the thing deposited the same diligence
as he would exercise over his property Not to
Characteristics: deposit the thing with a third person unless
 Real Contract-contract is perfected by the delivery authorized by express stipulation If the thing
of the subject matter. Unilateral (gratuitous deposit) deposited should earn interest:
- Only the depositary has an obligation. A. to collect interest as it fall due
 Bilateral (onerous deposit) - gives rise to B. to take steps to preserve its value and rights
obligations on the part of both the depositary and corresponding to it
depositor.  Not to commingle things deposited if so stipulated
 Not to make use of the thing deposited unless
Kinds of Deposit: authorized
 When the thing deposited is delivered sealed and
1. Judicial (Sequestration) -takes place when an closed:
attachment or seizure of property in litigation is A. to return the thing deposited when delivered
ordered. closed and sealed, in the same condition
2. Extra-judicial B. to pay for damages should the seal or lock be
 Voluntary - one when the delivery is made by broken through his fault, which is presumed
the will of the depositor or by two or more unless proved otherwise
persons each of whom believes himself entitled C. to keep the secret of the deposit when the seal or
to the thing deposits. lock is broken with or without his fault.
 The depositary is authorized to open the thing
 Necessary- one made in compliance with a legal
deposited which is closed and sealed when:
obligation, or on the occasion of any calamity,
a. There is presumed authority (ex. when the key
or by travelers in hotels and inns or travelers
has been delivered to him or the instructions of
with common carriers.
the depositor cannot be done without opening it.
b. necessity
 To return product, accessories, and accessions of the
thing deposited
 To pay interest on sums converted to personal use if
the deposit consists of money.
GENERAL RULE: Deposit is for safekeeping of the
subject matter and not for use. The unauthorized use by
the depositary would make him liable for damages.
EXCEPTIONS:
a. When the preservation of the thing deposited
requires its use
b. When authorized by the depositor
EFFECT IF PERMISSION TO USE IS GIVEN:
A. If thing deposited is non-consumable, the contract
loses the character of a deposit and acquires that of
a commodatum despite the fact that the parties may
have denominated it as a deposit, unless
safekeeping is still the principal purpose.
B. If thing deposited consists of money/consumable
things, the contract is converted into a simple loan
or mutuum unless safekeeping is still the principal
purpose in in which case it is called an Irregular
deposit.
Example: bank deposits are irregular deposits in
nature but governed by law on loans.
The permission to use a NOT presumed except
when such use k necessary for the preservation of
the thing deposited.
OBLIGATIONS OF THE DEPOSITOR:
 To pay expenses for preservation
 If the deposit is gratuitous, the depositor is obliged
to reimburse the depositary for expenses incurred for
the preservation of the thing deposited
 If the deposit is for valuable consideration, expenses
for preservation are borne by the depositary
 To pay loses incurred by the depositary due to the
character of the thing deposited
GENERAL RULE: The depositor shall reimburse the
depositary for any loss arising from the character of the
thing deposited.
EXCEPTIONS:
 at the time of the deposit, the depositor was not
aware of the dangerous character of the thing
 when depositor was not expected to know the
dangerous character of the thing
 when the depositor notified the depository of the
same
 the depositary was aware of it without advice from
the depositor
EXTINGUISHMENT OF VOLUNTARY DEPOSIT
 Loss or destruction of the thing deposited
 In case of gratuitous deposit, upon the death of
either the depositor or the depositary
 Other causes, such as return of the thing, novation,
expiration of the term fulfillment of the resolutory
condition, etc.
NECESSARY DEPOSITS
 made in compliance with a legal obligation
 it takes place on the occasion of any calamity such
as fire, storm, flood, pillage, shipwreck or other
similar events
DEPOSIT BY TRAVELERS IN HOTELS AND
INNS:
 The keepers of hotels or inns shall be responsible as
depositaries for the deposit of effects made by
travelers provided: them
 Notice was given to by the guest; and or to their
employees of the effects brought The guests take the
precautions which said hotel-keepers or their
substitutes advised relative to the care and vigilance
of their effects.
 Liability shall EXCLUDE losses which proceed
from force majeure. The act of a thief or robber is
not deemed force majeure unless done with the use
of arms or irresistible force.
 The hotel-keeper cannot free himself from the
responsibility by posting notices to the effect that he
is not liable for the articles brought by the guest.
Any stipulation to such effect shall be void
GUARANTY/SURETYSHIP
GUARANTY - A contract whereby a person (guarantor)
binds himself to the creditor to fulfill the obligation of
the principal debtor in case the latter fail to do so.
SURETYSHIP- A contract whereby a person binds
himself solidarily with the principal debtor.
The reference in Art. 2047 to solidary
obligations does not mean that surety ship is withdrawn
from the applicable provisions governing guaranty. A
surety is almost the same as a solidary debtor, except
that he himself is a principal debtor.
CHARACTERISTICS OF GUARANTY AND
SURETYSHIP:
o Accessory-It is indispensable condition for its
existence that there must be a principal obligation.
The guarantor cannot bind himself for more than
the principal debtor and even if he does, his liability
shall be reduced to the limits of that of the debtor
o Subsidiary and Conditional takes effect only in
case the principal debtor fails in his obligation.
o Unilateral-may be entered even w/o the intervention
of the principal debtor and it gives rise only to a duty
on the part of the guarantor in relation to the creditor
and not vice versa.
CHARACTERISTICS OF GUARANTY AND
SURETYSHIP:
 Nominate
 Consensual
 It is a contract between the guarantor/surety and
creditor.
 Not presumed. It must be expressed and reduced
in writing.
 Strictly interpreted against the creditor and in
favor of the guarantor/surety and is not to be
extended beyond its terms or specified limits.
NATURE OF SURETY'S UNDERTAKING
A. Liability is contractual and accessory but direct
He directly, primarily and equally binds
himself with the principal as original promisor,
although he possesses no direct or personal
interest over the latter's obligation.
B. Limited by the terms of the contract.
C. Arises only if principal debtor is held liable.
The creditor may sue separately or together the
principal debtor and the surety.
D. Surety is not entitled to the benefit of exhaustion
He assumes a solidary liability for the
fulfillment of the principal obligation.
E. Undertaking is to creditor and not to debtor.
EXTENT OF GUARANTOR'S LIABILITY:
 Where the guaranty definite: it is limited in whole
or in part to the principal debt, to the exclusion of
accessories
 Where guaranty indefinite or simple: It shall
compromise not only the principal obligation, but
also all its accessories, including the judicial cost,
provided with respect to the latter, that the guarantor
shall only be liable for those costs incurred after he
has been judicially required to pay.
QUALIFICATIONS OF A GUARANTOR:
(KEYWORD: CIP)
 Possesses Integrity
 Capacity to bind himself
 has sufficient property ta answer for the
obligation which he guarantees
BENEFIT OF EXCUSSION
 The right by which the guarantor cannot be
compelled to pay the creditor unless the latter has
exhausted: all the properties of the principal debtor,
and has resorted to all of the legal remedies against
such debtor
WHEN GUARANTOR IS NOT ENTITLED TO
THE BENEFIT OF EXCUSSION:
 If the guarantor has expressly renounced it
 If he has bound himself solidarily with the debtor
 In case of insolvency of the debtor
 When he has absconded, or cannot be sued within
the Philippines unless he has left a manager or
representative
 If it may be presumed that an execution on the
property of the principal debtor would not result in
the satisfaction of the obligation
 If the guarantor does not set up the benefit against
the creditor upon demand for payment from him,
and point out to the creditor available property to the
debtor within Philippine territory, sufficient to cover
the amount of the debt
 If he is a judicial bondsman or sub-surety
 Where the pledge or mortgage has been given by
him as special security
 If he fails to interpose it as a defense before
judgment is rendered against him
the payment is in any case valid as to the creditor
who has accepted it (Art. 1238).
 Waiver of the right.
EFFECT OF PAYMENT BY GUARANTOR
WITHOUT NOTICE TO DEBTOR:
 The debtor may interpose against the guarantor
those defenses which he could have set up against
the creditor at the time the payment was made.

GUARANTOR'S RIGHT OF INDEMNITY OR EFFECT OF REPEAT PAYMENT BY DEBTOR:

REIMBURSEMENT
GENERAL RULE: Before guarantor pays the creditor,
GENERAL RULE: Guaranty is a contract of he must first notify the debtor(Art. 2068) if he fails to
indemnity. The guarantor is entitled to be reimbursed by give such notice and the debtor repeats payment, the
the principal debtor. guarantor can only collect from the creditor and
guarantor has no cause of faction against the debtor for
The indemnity consists of: the return of the amount paid by guarantor even if the
creditor should become insolvent.
 Total amount of the debt
 Legal interest thereon from the time the payment EXCEPTION: The guarantor can still claim
was made known (notice of so that if the debtor does reimbursement from the debtor in spite of lack of notice
not pay immediately, he incurs in delay ) to the if the following conditions are present: the creditor
debtor ,even though it did not earn interest for the becomes insolvent; guarantor was prevented by
creditor. Guarantor’s right to legal interest is granted fortuitous event to advise the debtor of the payment; and
by law by virtue of the payment he has made. the guaranty is gratuitous.
 Expenses incurred by the guarantor after having
GUARANTTY SURETYSHIP
notified the debtor that payment has been demanded
of him by the creditor; only those expenses that the Liability depends upon an Surety assumes liability as a
guarantor has to satisfy in accordance with law as s a independent agreement to regular party to the
consequence of as a the guaranty (Art. 2055) not pay he obligation if primary undertaking
those which depend upon his will or own acts or his debtor fails to do so
fault for these are his exclusive personal
Collateral Undertaking An original promisor
responsibility and it is not just that they be
shouldered by the debtor. Guarantor is secondarily Primarily Liable
 Damages if they are due in accordance with law. liable
General rules on damages apply.
Guarantor binds himself to Undertakes to pay if the
pay if the Principal principal DOES NOT PAY
EXCEPTIONS:
CANNOT PAY

 Where the guaranty is constituted without the Insurer of the insolvency of Insurer of the debt
knowledge or against the will of the principal debtor, debtor
the guarantor can recover only insofar as the
payment had been beneficial to the debtor (Art. Guarantor can avail of the Cannot avail of the benefit
benefit of excussion and of excussion and division
2050).
division in case creditor
 Payment by a third person who does not intend to be
proceeds against him
reimbursed by the debtor is deemed to be a donation,
which, however, requires the debtor's consent. But
EXTINGUISHMENT OF GUARANTY
  When the principal obligation is extinguished;
 For the same causes as all other obligations;
 If the creditor voluntarily accepts immovable or
other properties in payment of the debt, even if he
should afterwards lose the same through eviction or
conveyance of property;
 Release in favor of one of the guarantors, without
the consent of the others, benefits all to the extent
of the share of the guarantor to whom it has been
granted;
 Extension granted to the debtor by the creditor
without the consent of the guarantor; and
 Whenever by some act of the creditor, the
guarantors even though they are solidarily liable
cannot be subrogated to the rights, mortgages and
preferences of the former.
PLEDGE/MORTGAGE/ANTICHRESIS
Common Elements of Pledge, Mortgage, and
Antichresis
A. Essential Requisites
 Secures the fulfillment of a principal obligation;
 Pledgor, mortgagor, antichretic debtor must be
the absolute owner of the thing pledged or
mortgaged; and
 Pledgor, mortgagor, antichretic debtor must have
free disposal of their property, or be legally
authorized for such purpose.
PACTUM COMMISSORIUM
Stipulation whereby the thing pledged or
mortgaged, or under antichresis shall automatically
become the property of the creditor in the event of non-
payment of the debt within the term fixed.
GENERAL RULE: Pactum Commissorium is
forbidden by law and is declared null and void.
EXCEPTION: The pledgee may appropriate the thing
pledged if after the first and second auctions, the thing is
not sold.
GENERAL RULE: A pledge, mortgage, or antichresis
is indivisible.
EXCEPTIONS:
 Where each one of several things guarantees a
determinate portion of the credit
 Where only a portion of the loan was released
 Where there was failure of consideration.
PLEDGE
 A contract wherein the debtor delivers to the creditor
or to a third person a movable or document
evidencing incorporeal rights for the purpose of
securing fulfillment of a principal obligation with
the understanding that when the obligation is
fulfilled, the thing delivered shall be returned with
all its fruits and accessions.
 Special Requisites (in addition to the common
essential requisites):
 Possession of the thing pledged must be
transferred to the creditor or a third person
by agreement;
 It can only cover movable property and
incorporeal rights evidenced by documents
of title; and
 The description of the thing pledged and the
date must appear in a public instrument to
bind third person, but not for the validity of
the contract.
RIGTHS AND OBLIGATION OF PLEDGOR
RIGTHS:
 To demand return in case of reasonable grounds
to fear destruction or impairment of the thing
without the pledgee's fault, subject to the duty of
replacement
 To bid and be preferred at the public auction
OBLIGATIONS:
 To advise the pledgee of the flaws of the thing
 Not to demand the return of the thing until after
full payment of the debt
RIGTHS AND OBLIGATION OF PLEDGEE
RIGTHS:
1. To bring actions pertaining to an owner
2. To sell at public auction in case of reasonable
grounds to fear destruction or impairment of the
thing without his fault
3. Option to demand replacement or immediate
payment of the debt in case of deception as to
substance or quality
4. To sell at public auction in case of non-payment
of debt at maturity
5. To bid at the public auction
6. To appropriatethe thing in case of failure of the
2nd public auction
7. To retain excess value received in the public sale
8. To possess the thing
9. To object to the alienation of the thing
10. To retain the thing until after full payment of the
debt
11. To apply said fruits, interests or earnings to the
interest, if any, then to the principal of the credit
OBLIGATIONS
1. Not to use thing unless authorized or by the
owner or its preservation requires its use
2. Take care of the thing with the diligence of a
good Father of a family
3. Not to deposit the thing with a 3 person unless
so stipulated
4. Responsibility for acts of agents and employees
as regards the thing
5. To advise pledgor of danger to the thing
6. To advise pledgor of the result of the public
auction
REAL ESTATE MORTGAGE
 A contract whereby the debtor secures to the
creditor the fulfillment of a principal obligation,
specially subjecting to such security immovable
property or real rights over immovable property in
case the principal obligation is not complied with at
the time stipulated.
 As an accessory contract, its consideration is that of
the principal contract from which it receives life
 Special Requisites (in addition to the common
essential requisites)
 It can cover only immovable property and
alienable real rights imposed upon immovables;
 It must appear in a public instrument; and
 Registration in the registry of property is
necessary to bind third persons, but not for the
validity of the contract.
 mortgagor retains possession. If the possession
is transferred to the mortgagee, it must not
expressly be for purpose of applying the fruits
to the interest then to the principal of the credit,
for then it would be an antichresis.
Foreclosure: The remedy available to the mortgagee by
which he subjects the mortgaged property to the
satisfaction of the obligation to secure that for which the
mortgage was given.
Kinds:
 Judicial-ordinary action for foreclosure under
Rule 68 of the Rules of Court
 Extrajudicial - when mortgagee is given a special
power of attorney to sell the mortgaged property
by public auction, under Act No. 3135
 Should there remain a balance due to the
mortgagee after applying the proceeds of the sale,
the mortgagee is entitled to recover the deficiency,
Redemption
It is the transaction by which the mortgagor reacquires
or buys back the property which may have passed
PLEDGE REAL MORTGAGE
Refers to real property Refers to personal
property
Not valid against third Not valid against third
persons unless a persons unless registered
description of the thing
pledged and date of
pledge appear in a public
instrument
CHATTEL MORTGAGE
 A contract by virtue of which personal property is
recorded in the Chattel Mortgage Register as a
security for the performance obligation. of an
 Special Requisites
  It can cover only personal or movable property
in general; however, the parties may treat as
personal property that which by its nature
would be real property;
 Registration of the mortgage with the Chattel
Mortgage Register where the mortgagor
resides; if property is located in a different
province, registration in both provinces
required;
 Description of the property as would enable the
parties or other persons to identify the same
after reasonable investigation and inquiry; and
 Accompanied by an affidavit of good faith to
bind third persons, but not for the validity of
the contract.
apply the fruits to interest, if any, then to the
principal of his credit.
OBLIGATIONS OF ANTICHRETIC CREDITOR:
 To pay taxes and charges on the estate, including
necessary expenses
 Creditor may avoid said obligation by:
 compelling debtor to reacquire enjoyment of the
property or by stipulation to the contrary.
 To apply all the fruits, after receiving them, to
the payment of interest, if owing, and thereafter
to the principal
 To render an account of the fruits to the Debtor

AFFIDAVIT OF GOOD FAITH

 Oath in a contract of chattel mortgage wherein

the parties "severally swear that the mortgage is
made for the purpose of securing the obligation
specified in the conditions thereof and for other
purposes and that the same is a just and valid
obligation and one not entered into for the
purpose of fraud.
 Foreclosure sale in chattel mortgage is by public
auction under Act No. 1508, but the parties may
stipulate that it be by private sale.
 The creditor may maintain an action for the
deficiency, except if the chattel mortgage is
constituted as security for the purchase of
personal property payable in installments.

ANTICHRESIS

 A contract whereby the creditor acquires the right

to receive the fruits of an immovable of the debtor,
with the obligation to a to apply app them to the
payment of the interest, if owing, and thereafter
the principal of his credit.
 Special Requisites (in addition to the common
essential requisites):
 It can cover only the fruits of an immovable
property;
 Delivery of the immovable is necessary for the
creditor to receive the fruits;
 Amount of principal and interest must be specified
in writing; and
 Express agreement that debtor will give possession
of the property to creditor and that the latter will