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

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
2

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

LOANS
Characteristics: Real perfected by delivery Unilateral obligation pertains only to the borrower

LOANS Distinctions and Differences:

As to:
A. Character B. Object C. Purpose D. Effect E. Risk F. Duration

Commodatum
Essentially gratuitous

Mutuum
Naturally gratuitous or

Non-fungible object (but Object is money may be consumable) fungible thing Transfer its use Transfer ownership

Restoration of the very Restoration of an equal things loaned quantity and quality On the lender (as owner) On the borrower (as debtor of a generic thing)

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.
6

COMMODATUM
Cases (contd.):

Catholic Vicar vs. CA effect of adverse possession for 11 years

- The bailees 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.

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. Ones possession may be lost by prescription by reason of anothers 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 Navys occupation of the land concerned in which case the owner is not divested of his title, although it cannot be exercised in the meantime.

COMMODATUM
Kinds of commodatum:

Ordinary
Precarium - no time stipulated (Quintos case) use is merely tolerated (Catholic Vicar case)

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.
10

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

11

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

12

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 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 14 abandonment B.

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
15

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
16

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 17 the occupant in return for its use

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.
18

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
19

MUTUUM
Obligations of the borrower: a) To return the thing or amount borrowed 1) Rule if the thing borrowed is money Roo vs. Gomez Roos 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 Roo insist on paying in mickey mouse money? Held: No.

20

MUTUUM Rule if the thing borrowed is money

Roo 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"
21

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.
22

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.
23

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

24

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.
25

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."

26

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
27

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. -

Attorneys fees and costs of collection Andreas vs. Green - The lender may without violating the Usury
Law provide in a note for an attorneys fee to cover the cost of collection. The purpose of a stipulation in a note for reasonable attorneys 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 to28 collect his debt.

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.

29

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 30 loans and are to be covered by the law on loans.

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.
31