Credit Transactions (Reviewer) Credit Transactions - all transactions involving the purchase or loan of goods, services, or money in the present with a promise to pay or deliver in the future. Characteristics and classification of Contract of Loan: 1. Real Contract – delivery of the thing loaned is necessary for the perfection of the contract. NOTE: An accepted promise to make a future loan is a consensual contract, and therefore binding upon the parties but it is only after delivery, will the real contract of loan arise. (Art 1934) 2. Unilateral Contract- once the subject matter has been delivered, it creates obligations on the part of only one of the parties (i.e. borrower).
Rule on the loss of the thing loan: To be liable for the loss of the thing even if it should be through a fortuitous event in the following cases: (KLAS D) (Art 1942) a. when he keeps it longer than the period stipulated, or after the accomplishment of its use b. when he lends or leases it to third persons who are not members of his household c. when the thing loaned has been delivered with appraisal of its value d. when, being able to save either of the thing borrowed or his own things, he chose to save the latter; or e. when the bailee devoted the thing for any purpose different from that for which it has been loaned. When can there be a right of retention: The bailee’s right extends no further than retention of the thing loaned until he is reimbursed for the damages suffered by him. He cannot lawfully sell the thing to satisfy such damages without court’s approval.
Concept of Commodatum and Mutuum Commodatum – when the bailor (lender) delivers to the bailee (borrower) a non-consumable thing so that the latter may use it for a certain time and return the identical thing. 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.
Effect of the duration of the loan upon the parties: The primary obligation of the bailor is to 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 constituted. The reason is that the bailor is bound by the terms of the contract of commodatum which is “for a certain time.” Concept of Precarium: one whereby the bailor may
Scope of Bailee’s right of use: Bailee in commodatum acquires the temporary use of the thing but not its fruits (unless stipulated as an incidental part of the contract).(Art 1935)
Use must be temporary; otherwise the contract may be a deposit. Subject of Commodatum: Generally nonconsumable 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. (Art 1936) Consequence of commodatum for purely personal: Purely Personal (Art 1939): 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 to a third person. Can the thing be borrowed? Can it be lend by
demand the thing loaned at will. How is extraordinary expense spent in loan? Is there in other words any extraordinary expense that can be incurred in the contract of loan; how is it spent; why it is spent; what is the effect of the extraordinary expense upod the parties? Such expenses (caused by fortuitous event) arising on the occasion of the actual use of the thing loaned (e.g., expenses for repairing a borrowed jeep damaged in a collision) shall be borne by the bailor and bailee alike on a 50-50 basis. Extraordinary expenses for the preservation of the thing loaned. The effect is that The bailor shall refund the extraordinary expenses during the contract for the preservation of the thing loaned, provided the bailee brings the same to the knowledge of the bailor before incurring them, except when they are so urgent that the reply to the notify cation cannot be awaited without danger.
borrower to another? No, Bailee can neither lend nor lease the object of the contract to a third person.
Redhibitory defect: the nullification of a sale because of a defect in the article sold of such nature as to make it totally or virtually unusable or as to have prevented the purchase if known to the buyer. The seller is responsible for warranty against the hidden defects which the thing sold may have, if they render it unfit for the use for which it is intended, or if they diminish its fitness for such use to such an extent that, had the vendee been aware thereof, he would not have acquired it or would have given a lower price for it.
2. Extra-judicial - takes place through a contract between parties. The purpose of such is the custody and safekeeping of the thing. Differentiate voluntary from necessary deposit: Voluntary deposit is one wherein the delivery is made by the will of the depositor or by two or more persons each of whom believes himself entitled to the thing deposited whereas, necessary deposit one made in compliance with a legal obligation, or on the occasion of any calamity, or by travellers in hotels and inns or by travellers with common carriers.
Non-criminal liability for failure to pay: In simple loan or 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 and his act will not be considered misappropriation thereof. No
Obligations of the Depositary: 1. to keep the thing safely. 2. to return it, when required, to the depositor, or to his heirs and successors, or to the person who may have been designated in the contract.
estafa is committed by a person who refuses to pay his debt or denies its existence.
G.R. No, the depositary cannot make use of the thing deposited without the express permission of the depositor.
Forms of Payment: (Art 1955): 1. If the thing loaned is money - payment must be made in the currency stipulated, if it is possible; otherwise it is payable in the currency which is legal tender in the Philippines and in case of extraordinary inflation or deflation, the basisi of payment shall be the value of the currency at the time of the creation of the obligation.
EXCEPTIONS: 1. When the preservation of the thing deposited requires its use 2. When authorized by the depositor
2. If what was loaned is a fungible thing other than money - the borrower is under obligation to pay the lender another thing of the same kind, quality and quantity. In case it is impossible to do so, the borrower shall pay its value at the time of the perfection of the loan.
contract into a simple loan or mutuum. But if safekeeping is still the principal purpose of the contract, and the use of the thing is merely secondary, it is still a deposit but an irregular one; hence, it is called an irregular deposit.
Can the borrower use the thing borrowed?
Irregular deposit as distinguished from Mutuum: If the thing deposited is money or other consumable thing, the permission to use it will result in its consumption and converts the
In an irregular deposit the consumable thing deposited may be demanded at will by the irregular depositor for whose benefit the deposit has been constituted, while in mutuum, the lender is bound by the provisions of the contract and cannot seek restitution until the time for payment, as provided in the contract, has arisen; ,
When can there be no recovery of interest: (Art. 1960)where the unstipulated interest, or interest stipulated, there being a stipulation but it is not in writing, is paid voluntarily because the debtor feels morally obliged to do so, there can be no recovery as in the case of natural obligations. Concept of Solution indebiti (unjust enrichment): Art. 2154. If something is received when there is no right to demand it, and it was unduly delivered through mistake, the obligation to return it arises. ART. 1960. If the borrower pays interest when there has been no stipulation. When is there perfection in a contract of deposit: it is perfected by the delivery of the subject matter.
The rule on thing deposited that was delivered closed and seal: a. to return the thing deposited in the same condition b. to pay for damages should the seal or lock be broken through his fault, which is presumed unless proved otherwise c. to keep the secret of the deposit when the seal or lock is broken with or without his fault (Art 1981) To whom must the thing deposited be return?
Kinds of deposit: 1. Judicial (Sequestration) –takes place when an
Return to one of depositors stipulated. The
attachment or seizure of property in litigation is ordered.
depositary is bound to return it only to the person designated although he has not made any demand for its return.
Obligations of the Depositor (Art 1992 – 1995): 1. To pay expenses for preservation a. If the deposit is gratuitous, the depositor is obliged to reimburse the depositary for expenses incurred for the preservation of the thing deposited (Art 1992) b. If the deposit is for valuable consideration, expenses for preservation are borne by the depositary unless there is a contrary stipulation. 2. 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:
by indorsement the effect of manual delivery of the things specified in them. Obligations of the warehouseman: (1) to take care of the goods entrusted to his safekeeping (Sec. 21.); and (2) to deliver them to the holder of the receipt or the depositor provided the conditions under Section 8 are fulfilled. Remedies of creditor of negotiable receipt: A creditor whose debtor is the owner of a negotiable receipt shall be entitled to such aid from courts of appropriate jurisdiction, by injunction and otherwise, in attaching such receipt or in satisfying the claim by means thereof as is allowed at law or in equity in these Islands in regard to property which cannot readily be attached or levied upon by ordinary legal process.
1. at the time of the deposit, the depositor was not
aware of the dangerous character of the thing 2. when depositor was not expected to know the dangerous character of the thing 3. when the depositor notified the depository of the same 4. the depositary was aware of it without advice from the depositor
Against what property the lien may be enforced: (a) Against all goods, whenever deposited, belonging to the person who is liable as debtor for the claims in regard to which the lien is asserted; and
When does judicial deposit takes place? Takes place when an attachment or seizure of property in litigation is ordered by a court.
(b) Against all goods belonging to others which have been deposited at any time by the person who is liable as debtor for the claims in regard to which the lien is asserted if such person had been so entrusted with the possession of the goods that a pledge of the same by him at the time of the
WAREHOUS RECEIPTS: Who are the parties? Warehouse receipts may be issued by any warehouseman.
deposit to one who took the goods in good faith for value would have been valid.
What is its purpose or the purpose of Warehouse Receipt? (1) To regulate the status, rights, and liabilities of the parties in a warehousing contract; (2) To protect those who, in good faith and for value, acquire negotiable warehouse receipts by negotiation; (3) To render the title to, and right of possession of, property stored in warehouses more easily convertible; (4) To facilitate the use of warehouse receipts as documents of title; and (5) In order to accomplish these, to place a much greater responsibility on the warehouseman. What is the meaning of the “ negotiability” in the Warehouse Receipts Law? The word “negotiable” is not used in the sense in which it is applied to bills of exchange or promissory notes but only as indicating that in the passage of warehouse receipts through the channels of commerce, the
Enforcement of Warehouseman’s lien: 1. By refusing to deliver the goods until the lien is satisfied 2. By causing the extrajudicial sale of the property and applying the proceeds to the value of the lien 3. By filing a civil action for collection of the unpaid charges or by way of counterclaim in an action to recover the property from him How is negotiation of receipt done? NEGOTIATION OF NEGOTIABLE RECEIPT BY DELIVERY 1. Where by the terms of the receipt, the warehouseman undertakes to deliver the goods to the bearer 2. Where by the terms of the receipt, the warehouseman undertakes to deliver the goods to the order of a specified person, and such person or a subsequent indorsee of the receipt has indorsed it in blank or to bearer a. Where by the terms of the receipt, the goods are deliverable to bearer or where a negotiable receipt has been indorsed in blank or bearer, any holder
law regards the property which they describe as following them and gives to their regular transfer
may indorse the same to himself or to any other specified person, and in such case the receipt shall thereafter be negotiated only by
the indorsement by such indorsee Extent of Guarantor’s liability: (Art 2055) NEGOTIATION OF NEGOTIABLE RECEIPT BY INDORSEMENT 1. If indorsed in blank or to bearer, the documen t becomes negotiable by delivery 2. If indorsed to a specified person, it may be again negotiated by the indorsement of such person in blank, to bearer or to another specified person. Delivery alone isn’t sufficient.
Warranties on sale of receipt: 1. That the receipt is genuine 2. That he has a legal right to negotiate or transfer it 3. That he has knowledge of no fact which would impair the validity of the worth of the receipt 4. That he has a right to transfer the title to the goods and that the goods are merchantable or fit for a particular purpose, whenever such warranties would have been implied, if the contract of the parties had been to transfer without a receipt of the goods represented thereby Concept of guaranty and suretyship GUARANTY (Articles 2047 – 2084) A contract whereby a person (guarantor) binds himself to the creditor to fulfil the obligation of the principal debtor in case the latter fail to do so. SURETYSHIP A contract whereby a person (surety) binds himself solidarily with the principal debtor Who are the parties: Guarantor, Creditor and the principal Debtor Guaranty of future debts It is one which is not limited to a single transaction but which contemplates a future course of dealings, covering a series of transactions generally for an indefinite time or until revoked. It covers all transactions, including those arising in the future, which are within the description or contemplation of the contract of guaranty, until the expiration or termination thereof. Future debts, even if the amount is not yet known, may be guaranteed but there can be no claim against the guarantor until the amount of the debt is ascertained or fixed and demandable. The reason is that a contract of guaranty is subsidiary. Continuing guaranty (Art 2053) One which is not limited to a single transaction
1. Where the guaranty definite: It is limited in whole or in part to the principal debt, to the exclusion of accessories. 2. Where guaranty indefinite or simple: It shall comprise not only the principal obligation, but also all its accessories, including the judicial costs, 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: (Arts 2056-2057) 1. possesses integrity 2. capacity to bind himself 3. has sufficient property to answer for the obligation which he guarantees NOTES:
The qualifications need only be present at the time of the perfection of the contract. The subsequent loss of the integrity or property or supervening incapacity of the guarantor would not operate to exonerate the guarantor or the eventual liability he has contracted, and the contract of guaranty continues. However, the creditor may demand another guarantor with the proper qualifications. But he may waive it if he chooses and hold the guarantor to his bargain. Benefit of Excussion (Art 2058) 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: (PAIRS) 1. If it may be presumed that an execution on the property of the principal debtor would not result in the satisfaction of the obligation Not necessary that the debtor be judicially declared insolvent or bankrupt 2. When he has absconded, or cannot be sued within the Philippines unless he has left a manager or representative 3. In case of insolvency of the debtor Must be actual 4. If the guarantor has expressly renounced it 5. If he has bound himself solidarily with the debtor Extinguishment of guaranty: (RA2CE2) 1. 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
but which contemplates a future course of dealings, covering a series of transactions generally for an indefinite time or until revoked.
has been granted (Art 2078); 2. 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 (Art 2077); 3. 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 (Art 2080); 4. For the same causes as all other obligations (Art 1231); 5. When the principal obligation is extinguished; 6. Extension granted to the debtor by the creditor without the consent of the guarantor (Art 2079)
