LOANS

Bailment defined - a consignment of goods for sale

- also, the delivery of property by 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
reclaims it

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LOANS

Parties:
Bailor
Bailee

2007 Bar Exam (Civil Law):

The parties to a bailment are the:
a) bailor
b) bailee
c) comodatario
d) all of the above
e) letters a and b
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LOANS

Classes:

Commodatum - loan for use

Mutuum – simple loan or loan of consumption

Other classification of contractual bailment:

- those for the benefit of the bailor

- those for the sole benefit of the bailee
- those for the benefit of both parties

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LOANS

Characteristics:

Real – perfected by delivery

Unilateral – obligation pertains only to the borrower

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LOANS

As to: Commodatum Mutuum

A. Character Essentially gratuitous Naturally gratuitous

B. Object Non-fungible object (but Object is money or

may be consumable) fungible thing

C. Purpose Transfer its use Transfer ownership

D. Effect Restoration of the very Restoration of an equal

things loaned quantity and quality

E. Risk On the lender (as owner) On the borrower (as

debtor of a generic thing)

F. Duration May be claimed before May not be claimed until

the end of the term if the term expires or 5is
urgently needed (1946) forfeited
COMMODATUM

Concept

Cases:
Republic vs. Bagtas - commodatum is essentially
gratuitous

Mina vs. Pascual – commodatum is for a certain

period
- It is an essential feature of commodatum
(ordinary) that the use of the thing belonging to
another shall be for a certain period.
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COMMODATUM

Cases (contd.):

Catholic Vicar vs. CA – effect of adverse

possession for 11 years

- The bailee’s failure to return the subject

matter of commodatum to the bailor did not mean
adverse possession on the part of the borrower. The
bailee held in trust the property subject of the
commodatum.

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COMMODATUM

Cases (contd.):

Republic vs. CA and Baloy – effect of suspension of

possessory rights
- The US’ possession of the area partook of the
nature of commodatum, hence, it merely suspended but
not cause the loss of the possessory rights of Baloy by
prescription. One’s possession may be lost by prescription
by reason of another’s possession if such possession be
under claim of ownership, not where the possession is
only intended to be transient, as in the case of the US
Navy’s occupation of the land concerned in which case the
owner is not divested of his title, although it cannot be
exercised in the meantime.
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COMMODATUM

Kinds of commodatum:

Ordinary

Precarium
- no time stipulated (Quintos case)

- use is merely tolerated (Catholic Vicar

case)

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COMMODATUM

Pactum de commodando - accepted promise to deliver

something by way of commodatum

Saura Import and Export Co., Inc. vs. DBP

- We hold that there was indeed a perfected
consensual contract, as recognized in Article
1934 of the Civil Code, which provides:

ART. 1954. An accepted promise to deliver something,

by way of commodatum or simple loan is binding upon the
parties, but the commodatum or simple loan itself shall not be
perfected until the delivery of the object of the contract.

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COMMODATUM

Requisites:
a) capacity - no special capacity required
b) object – non fungible
- Mina vs. Pascual
- Quintos vs. Beck
c) consideration – contract must be gratuitous
- Republic vs. Bagtas
d) form - no special form required

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COMMODATUM – Rights and obligations of the parties
Rights and obligations of the bailee:
a) Right – personal right to use the thing
b) Duties/liabilities
1) preserve the thing
2) expenses for use and preservation of the thing
3) return the thing
i) Effect of failure to return:
Quintos vs. Beck
Catholic Vical Apostolic vs. CA
4) damages
De los Santos vs. Jarra
5) loss
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COMMODATUM – Rights and Obligations of the Parties
Rights and obligations of the bailee (contd.):
b)Duties
5) loss
- if due to fortuitous event
i) General rule
ii) Exceptions:
- different use
- delay
- appraisal
- lending to
stranger
- failure to save
6) Nature of liability if there are two or
more borrowers 13
COMMODATUM – Rights and Obligations of the Parties

Obligations of the bailor:

A. Primary obligation of the bailor

B. Effects as to the lender/bailor:

a) To pay extraordinary expenses of preservation
- when
- rule if incurred on the occasion of actual use
b) To answer for damages to the borrower
- when
- abandonment

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COMMODATUM - Termination

Causes of extinguishment:
a) Expiration of time or use stipulated
b) Claim of the lender
- ground
- exception
c) Destruction of the thing
d) Death of borrower
e) Ingratitude
1) Instances
- commission of offense
- imputation of criminal offense
- refusal to support
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MUTUUM
Concept - contract whereby one party delivers to another money
or a fungible thing, on the condition of returning the same
kind, amount and quality.

Distinguished from:
a) Commodatum
Chee Kiong Yam vs. Malik - In simple loan (mutuum),
as contrasted to commodatum, the borrower acquires
ownership of the money, goods or personal property
borrowed. Being the owner, the borrower can dispose of the
thing borrowed (Article 248, Civil Code) and his act will not
be considered misappropriation thereof.
b) Barter
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 MUTUUM – Distinctions

c) Lease
Tolentino vs. Gonzalez Sy Chiam - A contract for the lease of property is
not a “loan”. A contract of loan is differed from a contract of lease or “rent”.
- a loan signifies the delivery of money, goods or credit to another with a
promise to repay an equivalent amount of the same kind and quality, but a
promise to return the same thing loaned; while a rent signifies the delivery to
another of some non-consumable thing in order that the latter may use it during
a certain period and return it to the former
- in loan, the relation between the parties is that of obligor and obligee,
while in rent the relation is that of landlord and tenant
- in loan, the creditor receives “payment” for his loan, while in rent, the
owner of the property receives “compensation” or “price” either in money,
provisions, chattels, or labor from the occupant in return for its use

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MUTUUM – Distinctions

d) Estafa
Liwanag v. CA:
Estafa is a crime committed by a person who defrauds
another causing him to suffer damages, by means of
unfaithfulness or abuse of confidence, or of false pretenses of
fraudulent acts.
The transaction between Rosales and Liwanag could not
be a loan for in a contract of loan once the money is received by
the debtor, ownership over the same is transferred. Being the
owner, the borrower can dispose of it for whatever purpose he
may deem proper.

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MUTUUM

Kinds:
a) gratuitous
b) with interest

Requisites:
a) capacity of the parties
b) object
c) consideration
d) form
i) form accepted promise to deliver something by
way of simple loan

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MUTUUM
Obligations of the borrower:
a) To return the thing or amount borrowed
1) Rule if the thing borrowed is money
Roño vs. Gomez
Roño’s undertaking:
I affirm the legal tender, currency or any medium of
exchange, or money in this sum of P4,000 will be paid by me
to Jose L. Gomez one year after this date, October 5, 1944.
Issue:
Can Roño insist on paying in mickey mouse money?
Held:
No.

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MUTUUM – Rule if the thing borrowed is money

Roño vs. Gomez (contd.)

One basic principle of the law on contracts of the Civil Code is
that "the contracting parties may establish any pacts, clauses
and conditions they may deem advisable, provided they are not
contrary to law, morals or public order." (Article 1255.)
Another principle is that "obligations arising from contracts
shall have the force of law between the contracting parties and
must be performed in accordance with their stipulations"

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MUTUUM – Rule if the thing borrowed is money

Is a stipulation not to pay while the war was going on valid?

Nepomuceno vs. Narciso:

One of the stipulations is that while the war goes on, the
mortgagor, his administrators or assigns, cannot redeem the
property mortgaged.

Issue:
Is the stipulation contrary to public policy?

Held:
No.

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MUTUUM – Rule if the thing borrowed is money

Ruling:
We find nothing immoral or violative of public
order in that stipulation.
It was a perfectly equitable and valid
transaction, in conformity with the provision of the Civil Code
hereinabove quoted.
Appellants were bound by said contract and
appellees were not obligated to receive the payment before it
was due. Hence the latter had reason not to accept the tender of
payment made to them by the former.

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MUTUUM – Obligations of the borrower

Rule if the thing borrowed is not money:

- to return the same amount even if the price or

value has changed

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MUTUUM – Obligations of the borrower

b) To pay interest
1) When
2) Rule if interest is fixed for a certain period
Jardenil vs. Solas:
Issue:
Is Solas bound to pay the stipulated interest only
up to the date of maturity as fixed in the promissory note, or up
to the date payment is effected?
Held:
Only up to the date of maturity.

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MUTUUM

Jardinel vs. Solas (contd.):

Ruling of the court:
- Defendant-appellee has, therefore, clearly agreed to
pay interest only up to the date of maturity, or until March 31,
1934. As the contract is silent as to whether after that date, in
the event of non-payment, the debtor would continue to pay
interest, we cannot in law, indulge in any presumption as to
such interest; otherwise, we would be imposing upon the
debtor an obligation that the parties have not chosen to agree
upon. Article 1755 (now 1956) of the Civil Code provides that
"interest shall be due only when it has been expressly
stipulated."
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MUTUUM – Obligation to pay interest

Rule if stipulation to pay interest is verbal

- generally
- exception (voluntary payment)

Rule if interest is paid even if not stipulated

- generally
- exception

Rule if interest is payable in kind

Rule on compounding of interest

- generally
- exception
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MUTUUM – Obligation to pay interest

What are not considered interest:

- Increase in the price
Manila Trading vs. Tamaraw Plantation - The interest of the price of
the thing sold on credit over its cash sale price is not interest within the
purview of the Usury Law, if the sale is made in good faith and not as
mere pretext to cover a usurious loan.

- Attorney’s fees and costs of collection

Andreas vs. Green - The lender may without violating the Usury Law
provide in a note for an attorney’s fee to cover the cost of collection. The
purpose of a stipulation in a note for reasonable attorney’s fees is not to
give the lender a large compensation for the loan than the law allows, but
is to safeguard the lender against future loss or damage by being
compelled to retain counsel to institute judicial proceedings to collect his
debt.
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MUTUUM – Obligation to pay interest

What are not considered interest (contd.):

- Penalty for breach

Sentinel Insurance Co., Inc. vs. CA
- The damage dues in this case (2% interest every 45
days) do not include and are not included in the computation
of interest as the two are of different categories and are
distinct claims which may be demanded separately, in the
same manner that commissions, fines and penalties are
excluded in the computation of interest where the loan or
forbearance is not secured in whole or in part by real estate or
an interest therein.
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MUTUUM
Nature of bank deposits
Gopoco Grocery vs. Pacific Coast Biscuit Co. (1938):
- The so-called current account and savings deposit x x x are
converted into simple commercial loans x x x. The deposits created
a juridical relation of creditor and debtor. The bank acquired
ownership of the money deposited.
Central Bank of the Phil. vs. Morfe (1975):
- It should be noted that fixed, savings, and current deposits of
money in banks and similar institutions are not true deposits. They
are considered simple loans and, as such, are not preferred credits
Serrano vs. Central Bank of the Phil. (1980):
- Bank deposits are in the nature of irregular deposits. They are
really loans because they earn interest. All kinds of bank deposits, whether
fixed, savings, or current are to be treated as loans and are to be covered by
the law on loans.
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MUTUUM – Bank deposits

Liability for failure to return savings deposit

Guingona vs. City Fiscal of Manila:
- While the Bank has the obligation to return the
amount deposited, it has, however, no obligation to return or
deliver the same money that was deposited. And, the failure of
the Bank to return the amount deposited will not constitute
estafa through misappropriation punishable under Article 315,
par. l(b) of the Revised Penal Code, but it will only give rise
to civil liability over which the public respondents have no-
jurisdiction.

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