I N T R O D U C T I O N

M E A N I N G A N D S C O P E O F C R E D I T T R A N S A C T I O N S
Credit transactions include all transactions involving the u r c h a s e or l o a n
o! g o o d s " s e r v i c e s " o r # o n e $ in the resent %ith a r o # i s e t o a $ o r
d e l i v e r in the !uture&
T W O T Y P E S O F C R E D I T T R A N S A C T I O N S /
C O N T R A C T S O F S E C U R I T Y
'& S e c u r e d t r a n s a c t i o n s o r c o n t r a c t s o ! r e a l
s e c u r i t $
( supported by a c o l l a t e r a l or anencumbrance of property
)& U n s e c u r e d t r a n s a c t i o n s o r c o n t r a c t s o !
e r s o n a l s e c u r i t $
( fulfillment by the debtor is supported only by a p r o m i s e t o p a y or the p e r s o n a l
c o m m i t m e n t of another
E * A M P + E S O F C R E D I T T R A N S A C T I O N S
' & ,a i l #e n t c o n t r a c t s
)&Contracts o! guarant$ andsuret$shi
- & M o r t g a g e
. & A n t i c h r e s i s
/&Concurrence and re!erence o! credits
M E A N I N G O F S E C U R I T 0
S e c u r i t $ 1 d e ! 2 & So#ething given" deosited" or serving as a
# e a n s t o e n s u r e t h e ! u l ! i l l # e n t o r e n ! o r c e # e n t o ! a n
o 3 l i g a t i o n or o! r o t e c t i n g s o # e i n t e r e s t i n r o e r t $ &
4 I N D S O F S E C U R I T 0
'& P e r s o n a l S e c u r i t $ 5 %hen a n i n d i v i d u a l
3eco#es a suret$ or a guarantor
)& P r o e r t $ o r R e a l S e c u r i t $
( %hen a # o r t g a g e " l e d g e " a n t i c h r e s i s " c h a r g e " o r l i e n
Or other device used to have roert$ held" out o! %hich the erson to 3e #ade secure can 3e
co#ensated !or loss&
, A I + M E N T
, a i l # e n t 1 d e ! 2 & The d e l i v e r $ o ! r o e r t $ o! one erson to
another in trust !or a seci!ic urose" %ith a contract" that the trust shall 3e !aith!ull$ e6ecuted and the
roert$ returned or dul$ accounted !or %hen the secial urose is acco#lished or 7et until
the 3ailor reclai#s it&To 3e legall$ en!orcea3le" a 3ail#ent #ust contain all the elements of a
valid contract !"ic" are consent, object, and cause or consideration& 8o%ever" a 3ail#ent
#a$ also 3e created 3$ oeration o! la%&
P A R T I E S I N , A I + M E N T
'& , a i l o r
(the giver9 the one %ho delivers the ossession o! the thing 3ailed
)& , a i l e e
( the reciient9 the one %ho receives the ossession or custod$ o! the thing delivered
# I N D S O F $ A I % & E N T
' & F o r t h e s o l e 3 e n e ! i t o ! t h e 3 a i l o r
E6a#les: gratuitous deosit and #andatu# 13ail#ent o! goods %here the 3ailee gratuitousl$
underta7es to do so#e act %ith resect to the roert$2
E6& M$ tito !ro# the States #a7es adala a 3ali73a$an 3o6 !illed %ith sa# through another
relative %ho;s !l$ing to the Philiines on vacation& It onl$ 3ene!its #$ tito 1the 3ailor2& Or"
8elen deosits Polsci;s 3a3$ chair %ith the #$sterious little gu$ %ho doesn;t s#ile in the 3adge
ositor$ counter outside the li3& In this case" onl$ 8elen 3ene!its 13ased on a true stor$2&
) & F o r t h e s o l e 3 e n e ! i t o ! t h e 3 a i l e e
E6a#les: co##odatu# and gratuitous si#le loan or #utuu#
E6& *ilca 3orro%s #$ %hite 3louse 3ecause she !orgot to 3ring clothes to change !ro# her Pasa$
Cit$ <ail out!it& Onl$ *ilca is 3ene!ited" not #e& Or" *ilca 3orro%s P'= !ro# #e %ithout interest&
- & F o r t h e 3 e n e ! i t o ! 3 o t h a r t i e s
E6a#les: deosit !or a co#ensation" involuntar$ deosit" ledge" 3ail#ents !or hire
>
E6& Ans7$ a%ns her huge dia#ond earrings at ?illarica Pa%nsho& The a%nsho givesher P'="=== and a
a%n tic7et& ,oth arties 3ene!it ( Ans7$ gets !ast cash" %hile thea%nsho gets to 7ee the
huge dia#ond earrings to #a7e sure that Ans7$ a$s" and in caseshe doesn;t the$ can sell the
earrings&' and ) are
g r a t u i t o u s 3 a i l # e n t s &
There is no consideration 3ecause the$ are considered #oreas a !avor 3$ one art$ to the other&
,ail#ents under nu#3er - are
# u t u a l 5 3 e n e ! i t 3 a i l # e n t s "
and the$ usuall$ result !ro# 3usiness transactions&
, A I + M E N T F O R 8 I R E
, a i l # e n t ! o r h i r e
arises %hen
g o o d s a r e l e ! t % i t h t h e 3 a i l e e
!or so#e use or service 3$ hi#
a l % a $ s ! o r s o # e c o # e n s a t i o n & 4 I N D S O F , A I + M E N T F O R
8 I R E
'&
8 i r e o ! t h i n g s (
goods are delivered !or the te#orar$ use o! the hirer
)& 8 i r e o ! s e r v i c e (
goods are delivered !or so#e %or7 or la3or uon it 3$ the 3ailee
-& 8 i r e ! o r c a r r i a g e o ! g o o d s (
goods are delivered either to a co##on carrier or to a rivateerson !or the urose o! 3eing
carried !ro# lace to lace
.& 8 i r e o ! c u s t o d $ (
goods are delivered !or storage
I & + O A N G E N E R A + P R O ? I S I O N S
Art& '@--& ,$ the contract o! loan" one o! the arties delivers to another" either so#ething not
consu#a3le so that the latter #a$ use the sa#e !or a certain ti#e and return it" in %hich case the
contract is called a commodatum9 or #one$ or other consu#a3le thing" uon condition that the
sa#e a#ount o! the sa#e 7ind and Aualit$ shall 3e aid" in %hich case the contract is si#l$
called a loan or mutuum.
Commodatum is essentially gratuitous& Si#le loan #a$ 3e gratuitous or %ith a stiulation to
a$ interest& In commodatum the 3ailor retains the o%nershi o! the thing loaned" %hile in
si#le loan" o%nershi asses to the 3orro%er&
Art. 1934& An acceted ro#ise to deliver so#ething 3$ %a$ o! co##odatu# or si#le loan is
3inding uon the arties" 3ut the commodatum or simple loan itsel! shall not 3e er!ected until
the deliver$ o! the o3Bect o! the contract&
C 8 A R A C T E R I S T I C S O F T 8 E C O N T R A C T O F + O A N
'& A r e a l c o n t r a c t (
the deliver$ o! the thing loaned is necessar$ !or the er!ection o! thecontract
)& A u n i l a t e r a l c o n t r a c t (
once the su3Bect #atter has 3een delivered" it creates o3ligations onthe art o! onl$ one o! the
arties 1the 3orro%er2
C A U S E O R C O N S I D E R AT I O N I N A C O N T R A C T O F + O A N
'& As to the 3orro%er: the acAuisition o! the thing
)& As to the lender: the right to de#and its return or o! its eAuivalent
4 I N D S O F + O A N
'& C o # # o d a t u #
( %here the lender delivers to the 3orro%er a n o n 5 c o n s u # a 3 l e t h i n g
so that the latter #a$ use it !or a certain ti#e and r e t u r n t h e i d e n t i c a l t h i n g
)& S i # l e l o a n o r # u t u u # (
%here the lender delivers to the 3orro%er # o n e $ o r t h e c o n s u # a 3 l e t h i n g
uon the condition that the latter shall a $ t h e s a # e a # o u n t o ! t h e s a # e
7 i n d a n d A u a l i t $ &
+ O A N S D I S T I N G U I S 8 E D F R O M C R E D I T
C r e d i t #eans the a 3 i l i t $ o ! a n i n d i v i d u a l t o 3 o r r o %
#one$ or things 3$ virtue o! the con!idence or trust reosed 3$ a lender that he %ill a$ %hat he #a$
ro#ise %ithin a seci!ied eriod&
L o a n #eans the d e l i v e r $ 3 $ o n e a r t $ a n d t h e r e c e i t 3 $ t h e
o t h e r a r t $ o ! a g i v e n s u # o ! # o n e $ o r o t h e r c o n s u # a 3 l e
t h i n g uon an agree#ent to rea$ the sa#e a#ount o! the sa#e 7ind and Aualit$" %ith or
%ithout interest&
The concession o! a credit necessaril$ involves the granting o! loans u to the li#it o! the
a#ount !i6ed in the credit& As oosed to de3t" credit is a de3t considered !ro# the creditor;s
standoint& It is that %hich is due to an$ erson&
D I S T I N C T I O N S , E T C E E N C O M M O D AT U M A N D S I M P + E
+ O A N C O M M O D A T U M S
I M P + E + O A N S U , < E C T
MAT T E R
N o t c o n s u # a 3 l e M o n e $ o r o t h e r
c o n s u # a 3 l e thing
O C N E R S 8 I P
R e t a i n e d 3 $ t h e l e n d e r T r a n s ! e r r e d t o t h e
3 o r r o % e r
G R AT U I T O U S D
G r a t u i t o u s D e ! a u l t r u l e
i s t h a t i t i s gratuitous ,UT the arties #a$stiulate
interest" in %hich case"it 3eco#es onerous
P A 0 M E N T , 0 , O R R O C E R
,orro%er #ust return the sa#ething loaned,orro%er need onl$ a$ thesa#e a#t o! the sa#e 7ind
andAualit$
4 I N D O F P R O P E R T 0
R e a l o r e r s o n a l P e r s o
n a l o n l $
P U R P O S E
T e # o r a r $ u s e o r o s s e s s i o n
C o n s u # t i o n
C 8 E N + E N D E R M A 0 D E M A N D
+ender #a$ de#and return o! the thing 3e!ore the e6iration o! the ter# in case o! urgent need
+ender #a$ not de#and return o! the thing 3e!ore the lase o! the ter# agreed uon
+ O S S O F T 8 E T 8 I N G
Su!!ered 3$ the lender 1since he is the o%ner2
Su!!ered 3$ the 3orro%er even i! through !ortuitous event
>
In commodatum" i! $ou do not return the thing %hen it is due" $ou %ill 3e lia3le !or esta!a
3ecause o%nershi o! the roert$ is not trans!erred to the 3orro%er&
>
In loan" the 3orro%er %ho does not a$ is not cri#inall$ lia3le !or esta!a& 8is lia3ilit$ is only a
civil liability for the breach of the obligation to pay& This is 3ecause in loan, onership of the
thing is transferred to the borroer" so there is no unla%!ul ta7ing o! roert$ 3elonging to
another&
A C C ! " # ! $ " % & ' ( ) ! # & ' A * ! A + , # , % ! L & A -
,orro%er goes to +ender and as7s i! he could 3orro% P'=4 at EF interest er annu#& +ender
sa$s o7a$" I %ill lend $ou the #one$& This is an acceted ro#ise to #a7e a !uture loan& It is a
consensual contract and is 3inding uon the arties& ,ut is there a contract o! loan at this ointD
No" 3ecause loan is a real contract and is er!ected onl$ uon deliver$ o! the thing&
+ & % ' & + L & A -
There are no !or#al reAuisites !or the validit$ o! a contract o! loan e6cet i! there is a stiulation
!or the a$#ent o! interest& A stiulation !or the a$#ent o! interest #ust 3e in %riting&
C H A P T E R 1 C O M M O D A T U M
Art& '@-/& The 3ailee in commodatum acAuires the use o! the thing loaned 3ut not its !ruits9 i!
an$ co#ensation is to 3e aid 3$ hi# %ho acAuires the use" the contract ceases to 3e a
commodatum&
* ( - $ ) & + C & ' ' & $ A # , '
' & Or d i n a r $ c o ##o d a t u #
)&Precariu# ( one %here3$ the 3ailor #a$ de#and the thing loaned at %ill
- A # , % ! & + C & ' ' & $ A # , '
>
Commodatum in simple terms is hiram ( A agrees to lend his guard dog to his !riend , !or a
%ee7 !or !ree& , is entitled to use the dog !or this eriod& At the end o! the %ee7" , #ust return
the dog to A& I! the dog gives 3irth %hile it is in the custod$ o! ," the uies 1!ruits2 3elong to
A&
'& The 3ailee acAuires the use o! the thing 3 u t n o t i t s ! r u i t s
" unless there is a stiulation to the contrar$&
)& It is essentiall$ g r a t u i t o u s &
-& The urose o! the contract is the t e # o r a r $ u s e o ! t h e t h i n g l o a n e d !or
a certain ti#e& 1So i! the 3ailee is not entitled to use the thing" it is not co##odatu# 3ut it #a$
3e adeosit&2
.& The su3Bect #atter is generall$ n o n 5 c o n s u # a 3 l e r e a l o r e r s o n a l
r o e r t $ " though consu#a3le goods #a$ also 3e the su3Bect o! co##odatu# i! the urose
is not theconsu#tion o! the o3Bect 1e6& Disla$ o! a 3ottle o! %ine2&
/& The l e n d e r n e e d n o t 3 e t h e o % n e r o! the thing loaned& It is enough that
he has ossessor$ interest in the thing or right to use it %hich he #a$ assert against the 3ailee
and third ersons though not against the right!ul o%ner& 1E6& A lessee #a$ su3let the thing
leased2&
E& It is u r e l $ e r s o n a l i n c h a r a c t e r &
The conseAuences o! this are the !ollo%ing:
A& The d e a t h o! either art$ e 6 t i n g u i s h e s the contract unless there is a contrar$
stiulation !or the co##odatu# to su3sist until the urose is acco#lished
,& The 3orro%er c a n n o t l e n d o r l e a s e t h e t h i n g t o a t h i r d e r s o n &
8o%ever" # e # 3 e r s o ! t h e 3 o r r o % e r ; s h o u s e h o l d
#a$ #a7e use o! the thing loaned e 6 c e t :
I & i ! t her e i s a s t i ul at i on t o t he cont r ar $9
I i & i ! t he nat ur e o! t he t hi ng ! or 3i ds i t &
G& The arties #a$ stiulate that the 3 o r r o % e r # a $ u s e t h e ! r u i t s
o! the thing" 3ut this #ust onl$ 3e i n c i d e n t a l to the use o! the thing itsel! 13ecause i! it is the
#ain cause" the contract #a$ 3e one o! usu!ruct2&
O , + I G AT I O N S O F T 8 E , O R R O C E R
'& + i a 3 i l i t $ ! o r o r d i n a r $ e 6 e n s e s
( The 3orro%er should de!ra$ the e6enses !or the use and reservation o! the thing loaned&
)& + i a 3 i l i t $ ! o r l o s s o ! t h e t h i n g
( The general rule is the 3 o r r o % e r i s n o t l i a 3 l e ! o r l o s s o r d a # a g e
d u e t o a ! o r t u i t o u s e v e n t & The o%ner 3ears the loss& ,ut in the !ollo%ing
cases"the 3orro%er is lia3le !or loss through a !ortuitous event:
A& i! he devotes the thing to a urose di!!erent !ro# that !or %hich it %as loaned 1,ad
! a i t h 2 this is a 3reach o! the tenor o! the o3ligation
,& i! he 7ees it longer than the eriod stiulated or a!ter the acco#lish#ent o! the use !or
%hich the co##odatu# has 3een constituted 1d e l a $ 2
C& i! the thing loaned has 3een d e l i v e r e d % i t h a r a i s a l o ! i t s v a l u e unless
there is a stiulation e6e#ting the 3ailee !ro# resonsi3ilit$ in case o! a !ortuitous event this is
eAuivalent to an assu#tion o! ris79
D& i! he lends or leases the thing to a t h i r d e r s o n %ho is not a #e#3er o! his household
also a 3reach o! the tenor o! the o3ligation9
E& i!" 3eing a3le to save either the thing 3orro%ed or his o%n thing" he chose to save his o%n
1i n g r a t i t u d e 2 &
-& + i a 3 i l i t $ ! o r d e t e r i o r a t i o n o ! t h e t h i n g
5 The 3orro%er is not lia3le !or the ordinar$ deterioration or %ear and tear o! the thing that
co#es as a natural conseAuence o! its use& This is 3orne 3$ the lender& Reason: ,ecause the
lender retains o%nershi so he should 3ear the loss !ro# ordinar$ deterioration& Also" 3ecause
the urose o! co##odatu# is !or the 3orro%er to use the thing& Deterioration is a natural result
o! such use&
.& O 3 l i g a t i o n t o r e t u r n t h e t h i n g l o a n e d
( The 3orro%er #ust return the thing as soon as the eriod stiulated e6ires or the urose has
3een acco#lished& 8e cannot 7ee the thing as securit$ !or an$thing that the lender #a$ o%e
hi#" e6cet !or a clai# !or da#ages su!!ered 3ecause o! the !la%s o! the thing loaned&
So !or e6a#le" *ilca earlier %on a 3et %ith Ca$o" as a result o! %hich" Ca$o o%es her a
tuna sand%ich& Ca$o loaned Alvin Ang;s Fris3ee to *ilca !or '= da$s& At the end o! the '= da$s"
*ilca cannot re!use to return Alvin Ang;s !ris3ee to Ca$o and hold it hostage until Ca$o delivers
the sand%ich& Ch$D ,ecause *ilca;s o3ligation as a 3orro%er is to return the thing a!ter the
eriod e6ires" and she cannot 7ee it as a securit$ !or an$thing that Ca$o #a$ o%eher& Or"
*ilca 3orro%s 4i# Chong;s car !or '= da$s& Chile the car is in *ilca;s ossession" a tire
e6lodes& *ilca has to 3u$ a ne% tire !or P-"===& At the end o! the '= da$s" *ilca re!uses to
return the car unless 4i# Chong a$s her the P-"===& Can *ilca re!use to returnD No& In this case" 4i# Chong
o%es *ilca P-"=== as an e6traordinar$ e6ense !or the reservation o! the thing& ,ut even i! 4i#
Chong o%es *ilca #one$ in connection %ith the thing that he loaned" *ilca still cannot retain
the car as securit$&
!.ception/ I! the thing loaned has hidden de!ects and the 3orro%er su!!ers da#ages as a result o! the
hidden de!ect" the 3orro%er can clai# da#ages against the lender& Pending a$#ent o! the
da#ages 3$ lender to 3orro%er" 3orro%er can 7ee the thing as a securit$&1see discussion 3elo%2
/& + i a 3 i l i t $ o ! t % o o r # o r e 3 a i l e e s (
Chen there are t%o or #ore 3orro%ers to %ho# a thing is loaned in one contract" there lia3ilit$
is s o l i d a r $ &
& 0 L ( 1 A # ( & - ) & + # 2 ! L ! - $ ! %
'& O 3 l i g a t i o n t o r e s e c t t h e d u r a t i o n o !
t h e l o a n ( The lender cannot de#and the return o! the thing until a!ter the e6iration o!
the eriod or a!ter the acco#lish#ent o! the use !or %hich the co##odatu# %as constituted&
8o%ever" he #a$ de#and its return or te#orar$ use i! he should have u r g e n t n e e d o! the thing&
)& P r e c a r i u #
( Precariu# is a 7ind o! co##odatu# %here the l e n d e r # a $ d e # a n d t h e t h i n g a t
% i l l &
Precariu# e6ists in the !ollo%ing cases:
a& I! there is no stiulation as to the duration o! the contract or to the use to %hich
thething loaned should 3e devoted
3&I! the use o! the thing is #erel$ tolerated 3$ the lender ,UT" the lender #a$ not
de#and the thing cariciousl$" ar3itraril$" or %hi#sicall$" since this %ould give rise to an action
on the art o! 3orro%er !or a3use o! right under Articles '@" )="and )'&
-& R i g h t t o d e # a n d r e t u r n o ! t h i n g ! o r
a c t s o ! i n g r a t i t u d e ( I! the 3orro%er co##its an$ o! the acts
enu#erated in Art& GE/ o! the Civil Code" the lender #a$ de#and the i##ediate return o! the
thing !ro# the 3orro%er& 1This alies to ordinar$ co##odatu#" since in recariu# the lender
can de#and at %ill" su3Bect to the rovisions against a3use o! right2
. & O 3 l i g a t i o n t o r e ! u n d e 6 t r a o r d i n a r $
e 6 e n s e s
A& E 6 t r a o r d i n a r $ e 6 e n s e s ! o r t h e
r e s e r v a t i o n o ! t h e t h i n g
(T h e l e n d e r s h o u l d r e ! u n d the 3orro%er the e6traordinar$ e6enses !or the
reservation o! the thing" rovided that the 3 o r r o % e r i n ! o r # s t h e l e n d e r
3 e ! o r e incurring the e6ense"unless the need is so urgent that the lender cannot 3e noti!ied
%ithout danger&
,& E 6 t r a o r d i n a r $ e 6 e n s e s a r i s i n g ! r o #
a c t u a l u s e o ! t h e t h i n g ( E6traordinar$ e6enses arising on the
occasion o! the actual use o! the thing shall 3e 3 o r n e 3 $ t h e l e n d e r a n d
3 o r r o % e r o n a / = 5 / = 3 a s i s " unless there is a contrar$ stiulation&
/ & A l l o t h e r e 6 e n s e s a r e ! o r t h e
a c c o u n t o ! t h e 3 o r r o % e r &
E& + i a 3 i l i t $ ! o r d a # a g e s ! o r 7 n o % n h i d d e n
! l a % s 5
ReAuisites: 1F58ADD2
A& There is a ! l a % o r d e ! e c t in the thing loaned9
,& The !la% or de!ect is h i d d e n
C& The lender is a % a r e o! the !la%
D& The lender d o e s n o t a d v i s e the 3orro%er o! the !la%
E& The 3orro%er su!!ers d a # a g e s 3$ reason o! the !la% or de!ect & The lender is enaliHed !or his
!ailure to disclose a hidden !la% %hich causes da#age 3ecausehe is in a osition to revent the
da#age !ro# haening&
32&# #("4
E6a#le:
,orro%er 3orro%s a '@G= Mitsu3ishi +ancer !ro# +ender& Un!ortunatel$"+ender !orgets to tell
3orro%er that the car has a tendenc$ to overheat a!ter '= #inutes& So ,orro%er drives" and a!ter
'= #inutes" the car stalls and overheats& ,orro%er oens the hood and sees lots o! stea#& 8e
oens the radiator ca to ut %ater inside& Radiator %ater scalds his !ace" and he su!!ers !ro# 3urns&
Can he clai# da#ages !ro# +ender and can he 7ee the car as securit$D
>
No" 3ecause in this case" ,u$er should have 7no%n& 8e %as" at least" in a osition to 7no% that
the car Bust #ight 3e rone to overheating since it %as old alread$& And %hen he oened the
hood and sa% lots o! stea#" he should have 7no%n that i! he oened the radiator" ver$ hot %ater
%ould sra$ out& 8e should have ta7en recautions %hen he oened the hood or he should have gone to a
gas station or #echanic to have it !i6ed& ,ut since he %as negligent" he has onl$ hi#sel! to
3la#e !or the da#age caused& The de!ect %as not reall$ hidden since ,orro%er %as in a osition
to 7no% o! it even i! +ender did not in!or# hi#& 8ad he 3een #ore care!ul" he %ould not have 3een
scalded&
A , A N D O N M E N T O F T 8 I N G , 0 T 8 E + E N D E R
Can the lender tell ,orro%er: I don;t %ant to a$ !or the e6traordinar$ e6enses and da#ages
that I o%e $ou& <ust 7ee the thing" and let;s !orget a3out #$ o3ligation&No& The lender cannot
e6e#t hi#sel! !ro# the a$#ent o! the e6enses or da#ages 3$ a3andoning the thing to the
3orro%er& This is 3ecause the e6enses and da#ages #a$ e6ceed the value o! the thing loaned"
and it %ould" there!ore" 3e un!air to allo% the lender to Bust a3andon the thing instead o! a$ing
!or the e6enses and da#ages&
-&

' & C h e n t h e l o s s i s c a u s e d 3 $ t h e e # l o $ e e s o ! t h e
h o t e l o r 3 $ s t r a n g e r s " r o v i d e d t h e g u e s t ! o l l o % e d t h e
t % o r e A u i s i t e s u n d e r A r t & ' @ @ I 1 n o t i c e
a n d r e c a u t i o n 2 & ) & C h e n t h e l o s s i s c a u s e d 3 $ t h e a c t
o ! a t h i e ! o r a r o 3 3 e r d o n e % i t h o u t t h e u s e o ! a r # s
a n d i r r e s i s t i 3 l e ! o r c e &
Chen is the hotel NOT lia3leD'&
C h e n t h e l o s s o r i n B u r $ i s c a u s e d 3 $
! o r c e # a B e u r e
" l i 7 e ! l o o d " ! i r e " t h e ! t o r r o 3 3 e r $ 3 $ a s t r a n g e r % i t h t h e
u s e o ! a r # s o r i r r e s i s t i 3 l e ! o r c e " U N + E S S t h e h o t e l 5
7 e e e r i s g u i l t $ o ! ! a u l t o r n e g l i g e n c e i n ! a i l i n g t o
r o v i d e a g a i n s t t h e l o s s o r i n B u r $ ! r o # t h i s c a u s e & S o a s
a g e n e r a l r u l e " i ! a r # e d # e n e n t e r t h e h o t e l a n d s t e a l
$ o u r t h i n g s " t h e h o t e l i s e 6 c u s e d ! r o # l i a 3 i l i t $ 3 e c a u s e
i t i s c o n s i d e r e d a ! o r t u i t o u s e v e n t & 8 o % e v e r " i ! t h e
h o t e l ! a i l e d t o t a 7 e r e a s o n a 3 l e r e c a u t i o n s 1 e 6 :
s e c l u d e d i s l a n d % i t h o n l $ o n e s e c u r i t $ g u a r d s t a t i o n e d
n e a r t h e s h o r e a n d l o t s o ! ! o r e i g n e r s c h e c 7 e d i n 2 " i t
% i l l s t i l l 3 e l i a 3 l e ! o r i t s n e g l i g e n c e & ) & C h e n t h e l o s s
i s d u e t o t h e a c t s o ! t h e g u e s t 1 % h o i s t h e o % n e r
o ! t h e t h i n g 2 " h i s ! a # i l $ " s e r v a n t s " o r v i s i t o r s 9
a n d - & C h e n t h e l o s s a r i s e s ! r o # t h e c h a r a c t e r o !
t h e t h i n g s 3 r o u g h t i n t o t h e h o t e l
>
E 6 a # l e o ! t h i n g % h e r e t h e l o s s a r i s e s ! r o # t h e
c h a r a c t e r o ! t h e t h i n g : I ! $ o u 3 r i n g a D a l # a t i a n " o r a
s n a 7 e " o r C $ r u s ; e t h a # s t e r i n t o t h e h o t e l " 3 $ t h e v e r $
n a t u r e o ! t h e s e e t s " t h e $ c o u l d e a s i l $ g e t l o s t i n t h e
r e # i s e s & A r t & ) = = - & T h e h o t e l 5 7 e e e r c a n n o t ! r e e
h i # s e l ! ! r o # r e s o n s i 3 i l i t $ 3 $ o s t i n g n o t i c e s t o t h e
e ! ! e c t t h a t h e i s n o t l i a 3 l e ! o r t h e a r t i c l e s 3 r o u g h t 3 $
t h e g u e s t & A n $ s t i u l a t i o n 3 e t % e e n t h e h o t e l 5 7 e e e r a n d
t h e g u e s t % h e r e 3 $ t h e r e s o n s i 3 i l i t $ o ! t h e ! o r # e r a s
s e t ! o r t h i n A r t i c l e s ' @ @ I t o ) = = ' i s s u r e s s e d
o r d i # i n i s h e d s h a l l 3 e v o i d & E v e n i ! t h e h o t e l 5 7 e e e r
o s t s s i g n s o r u t s t h e s e l i t t l e ! i n e 5 r i n t s t i u l a t i o n s
t h a t i t i s n o t l i a 3 l e ! o r a n $ l o s s " i t c a n n o t e s c a e i t s
l i a 3 i l i t i e s a s a d e o s i t a r $ u n d e r A r t i c l e s ' @ @ I t o
) = = ' & R e a s o n : 0o u c a n n o t % a i v e t h e l i a 3 i l i t $ o ! o n e
% h o i s g u i l t $ o ! g r o s s n e g l i g e n c e & G r o s s n e g l i g e n c e i s
e A u i v a l e n t t o ! r a u d o r 3 a d ! a i t h & A n d a s % e a l l 7 n o % " a
% a i v e r o ! ! u t u r e ! r a u d i s v o i d & I t i s c o n t r a r $ t o l a % "
# o r a l s " a n d u 3 l i c o l i c $ & 8 o % e v e r " t h i s o n l $ a l i e s
t o a c o n t r a c t o ! d e o s i t & I n t h e c a s e o ! c a r a r 7 s "
t h e ! i n e r i n t o n t h e t i c 7 e t s a l % a $ s c o n t a i n s a % a i v e r
o ! l i a 3 i l i t $ 3 $ t h e o % n e r o ! t h e c a r a r 7 ! o r a n $ l o s s
% i t h i n i t s r e # i s e s & T h i s % a i v e r i s v a l i d 3 e c a u s e " a s
d i s c u s s e d a l r e a d $ " t h e c o n t r a c t % i t h t h e c a r a r 7 i s n o t
a d e o s i t 3 u t o n l $ a s h o r t 5 t e r # l e a s e & A r t & ) = = . & T h e
h o t e l 5 7 e e e r h a s a r i g h t t o r e t a i n t h e t h i n g s 3 r o u g h t
i n t o t h e h o t e l 3 $ t h e g u e s t " a s a s e c u r i t $ ! o r c r e d i t s o n
a c c o u n t o ! l o d g i n g " a n d s u l i e s u s u a l l $ ! u r n i s h e d t o
h o t e l g u e s t s &
C a $ o
I I D
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T h i s i s a n o t h e r l e d g e c r e a t e d 3 $ o e r a t i o n o ! l a % & I !
$ o u d o n o t a $ $ o u r h o t e l 3 i l l s " t h e h o t e l c a n 7 e e $ o u r
s t u ! ! a s a s e c u r i t $ & M o r e o v e r " $ o u % i l l 3 e l i a 3 l e
! o r e s t a ! a &
C8APTER . SEJUESTRATION OR <UDICIA+ DEPOSIT
A r t & ) = = / & A B u d i c i a l d e o s i t o r s e A u e s t r a t i o n t a 7 e s
l a c e % h e n a n a t t a c h # e n t o r s e i H u r e o ! r o e r t $ i n
l i t i g a t i o n i s o r d e r e d & A r t & ) = = E & M o v a 3 l e a s % e l l a s
i # # o v a 3 l e r o e r t $ # a $ 3 e o 3 B e c t o !
s e A u e s t r a t i o n & A r t & ) = = G & T h e d e o s i t a r $ o ! r o e r t $ o r
o 3 B e c t s s e A u e s t r a t e d c a n n o t 3 e r e l i e v e d o ! h i s
r e s o n s i 3 i l i t $ u n t i l t h e c o n t r o v e r s $ % h i c h g a v e r i s e
t h e r e t o h a s c o # e t o a n e n d " u n l e s s t h e c o u r t s o
o r d e r s & A r t & ) = = I & T h e d e o s i t a r $ o ! r o e r t $
s e A u e s t r a t e d i s 3 o u n d t o c o # l $ " % i t h r e s e c t t o t h e
s a # e " % i t h a l l t h e o 3 l i g a t i o n s o ! a g o o d ! a t h e r o ! a
! a # i l $ &
Chat is Budicial deositD
< u d i c i a l d e o s i t i s a d e o s i t
ursuant to a court order
( % h e n a n a t t a c h # e n t o r s e i H u r e o ! r o e r t $ i n
l i t i g a t i o n i s o r d e r e d 3 $ a c o u r t &
E6a#les:
' & a t t a c h # e n t o ! r o e r t i e s 3 $ s h e r i ! ! u o n t h e
! i l i n g o ! a c o # l a i n t ) & g a r n i s h # e n t o !
# o n e $ - & r e c e i v e r # a $ 3 e a o i n t e d 3 $ t h e c o u r t t o
a d # i n i s t e r a n d r e s e r v e t h e r o e r t $ i n
l i t i g a t i o n . & e r s o n a l r o e r t $ # a $ 3 e s e i H e d 3 $ t h e
s h e r i ! ! i n s u i t s o ! r e l e v i n
Chat is the urose o! Budicial deositD
U n l i 7 e e 6 t r a 5 B u d i c i a l d e o s i t " % h e r e t h e u r o s e i s
s a ! e 7 e e i n g " t h e u r o s e o ! B u d i c i a l d e o s i t i s t o
#aintain the status Auo
d u r i n g t h e e n d e n c $ o ! t h e l i t i g a t i o n t o
insure the right o! the arties to the roert$
i n c a s e o ! a ! a v o r a 3 l e B u d g # e n t & T h i s # e a n s t h a t i n
c a s e o ! ! a v o r a 3 l e B u d g # e n t " t h e a r t $ % i l l 3 e a s s u r e d
t h a t t h e r e % i l l 3 e r o e r t $ t o s a t i s ! $ t h e e 6 e c u t i o n o !
t h e B u d g # e n t &
Chat #a$ 3e the o3Bect o! Budicial deositD
U n l i 7 e e 6 t r a 5 B u d i c i a l d e o s i t " % h e r e t h e o 3 B e c t # u s t 3 e
a # o v a 3 l e " a B u d i c i a l d e o s i t c a n c o v e r
3oth #ova3le and i##ova3le roert$
&
8o% do $ou deosit an i##ova3leD
0o u a n n o t a t e t h e a t t a c h # e n t o n t h e t i t l e % i t h t h e
R e g i s t e r o ! D e e d s &
Chat are the o3ligations o! the deositar$ o! seAuestrated roert$D
C a $ o
I I D
) = = ) P
A G E
' ) '

T h e e r s o n a o i n t e d 3 $ t h e c o u r t a s d e o s i t a r $ h a s
t h e o 3 l i g a t i o n t o t a 7 e c a r e o ! t h e t h i n g % i t h t h e
d i l i g e n c e o ! a g o o d ! a t h e r o ! a ! a # i l $ & 8 e # a $ n o t 3 e
r e l i e v e d o ! h i s r e s o n s i 3 i l i t $ u n t i l t h e l i t i g a t i o n i s
e n d e d o r u n t i l t h e c o u r t s o o r d e r s &
DISTINCTIONS ,ETCEEN <UDICIA+ AND E*TRA5<UDICIA+ DEPOSIT< U D I C I A +
D E P O S I T E * T R A 5 < U D I C I A + D E P O S I T CAUSE OR ORIGIN
, $ % i l l o ! t h e c o u r t , $ % i l l
o ! t h e a r t i e s 9 h e n c e t h e r e i s a c o n t r a c t
PURPOSE
T o s e c u r e t h e r i g h t o ! a a r t $ t o r e c o v e r i n c a s e o !
! a v o r a 3 l e B u d g # e n t S a ! e 7 e e i n g
SU,<ECT MATTER
M o v a 3 l e o r i # # o v a 3 l e r o e r t $ O n l $ # o v a 3 l e r o e r t $
REMUNERATION
T h e d e o s i t a r $ i s a l % a $ s c o # e n s a t e d 9 t h e r e ! o r e i t i s
o n e r o u s A s a r u l e " i t i s g r a t u i t o u s " t h o u g h t h e a r t i e s
# a $ s t i u l a t e o t h e r % i s e
IN C8OSE ,E8A+F IT IS8E+D
I n 3 e h a l ! o ! t h e e r s o n % h o " 3 $ t h e B u d g # e n t " h a s a
r i g h t I n 3 e h a l ! o ! t h e d e o s i t o r o r t h e t h i r d
e r s o n d e s i g n a t e d A r t & ) = = @ & A s t o # a t t e r s n o t r o v i d e d
! o r i n t h i s C o d e " B u d i c i a l s e A u e s t r a t i o n s h a l l 3 e
g o v e r n e d 3 $ t h e R u l e s o ! C o u r t &
T h a t ; s a l l ! o l 7 s & S o r r $ " I d i d n ; t i n c l u d e
C a r e h o u s e R e c e i t s + a % a n $ # o r e 3 e c a u s e
i t ; s r o 3 a 3 l $ g o i n g t o 3 e B u s t / F o ! t h e
e 6 a # " a c c o r d i n g t o < P S P & G o o d l u c 7 K M a $ t h e
o % e r o ! g r e $ s 7 u l l 3 e % i t h u s a l l
L
C a $ o
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