- Means a persons ability to borrow LOAN money by virtue of the confidence - bailor or lender delivers to another or trust in him by the lender that he bailee or borrower will pay what he may promise COMMODATUM: something not - The trust or belief reposed by a consumable person in another, of the latters May be used for a certain time ability to comply with an obligation and then returned CREDIT TRANSACTIONS gratuitous - Agreements based on the trust and bailor retains ownership belief of someone on the ability of contract of use another person to comply with his real or personal property obligations obligation to return same thing - Includes all transactions involving bailor/lender=bears risk of loss, loans of money, goods or services need not to be the owner extended to another either demandable per agreement gratuitously or onerously death of either ends the C Gratuitous a contract where there MUTUUM: money or other consumables. is no consideration or burden The same amount, kind and imposed like commodatum quality should be paid (essentially for free) gratuitous or onerous Onerous a contract where there is Ownership goes to the borrower a burden imposed like interest. contract of consumption Interest=burden personal property only bailor/lender=must be the owner BAILMENT bailee/borrower=bears risk of loss - delivery of property of one person death does not extinguish to another in trust for a specific demandable per agreement purpose with a contract, express or DEPOSIT: for safe keeping implied that the trust shall be real contract faithfully executed and the property movables (but in juridical deposit: returned or duly accounted for movables and immovable, when the special purpose is consumables & non-consumable) accomplished or kept until the bailor gratuitous or onerous reclaims it depositor retains ownership - no fiduciary relationship is created depositor must return the same by a bailment= not accurate to refer thing to the transaction as in trust gratuitous: death of depositor or because no trustee-beneficiary depositary=extinguish D relationship is created onerous: death of either= does bailor- the one who gives or delivers not distinguish D the property bailed depositor=bears risk of loss, need not be the owner demandable at will 1. the payment of interest and penalties in loans is allowed only if PRECARIUM the parties expressly agreed to it The bailor may demand the thing at will: and is REDUCED IN WRITING - if neither the duration of the 2. the BSP may prescribe interest rates contract nor the use to which the 3. legal interest 6% per annum thing loaned should be devoted has 4. interest rates may be invalidated or been stipulated OR equitably reduced when - if the use of the thing is merely unconscionable, iniquitous and tolerated by the owner exorbitant ** imposition of an unconscionable rate PERFECTION- delivery of the object of the of interest on money debt=immoral and contract REAL CONTRACT unjust RES PERIT DOMINO- the thing perishes with the owner CASH ADVANCES when not liquidated= LOAN DEBT: an amount actually ascertained Fail to liquidate cash advances is NOT estafa - a claim which has been formally passed upon by the courts or quasi- CREDIT CARD: any card, plate, coupon book judicial bodies to which it can be in or other credit device existing for the law be submitted and has been purpose of obtaining money, goods, declared to be a debt property, labor or services or anything of CLAIM: a debt in embryo value on credit - evidence of a debt and must pass Credit card transaction contract: thru the process prescribed by law 1. SALES CONTRACT- card holder and before it develops into what is the merchant or business properly called a debt establishment debtor in DEFAULT is only when: 2. LOAN AGREEMENT- card issuer and - the obligation be demandable and card holder already liquidated 3. PROMISE TO PAY- card issuer and - the debtor delays performance merchant or business establishment - the creditor requires the ** purchase using a carda loan performance judicially or extra agreement with the card company. After judicially the latter approves purchase requests= DEMAND is NOT NECESSARY: binding loan contracts - when there is an express stipulation to that effect SAFETY DEPOSIT BOX: contract for the rent - where the law so provides of a safety deposit box is not an ordinary - when the period is the controlling contract of lease but a special kind of motive or the principal inducement deposit for the creation of the obligation ** not strictly governed by the provision on - where demand would be useless deposit INTEREST RATES FREE VALET PARKING depositary - Customer entrusts the car to the - Liability applies whether caused by: restaurant with the expectation of o Servants or employees of the cars safe return. Stipulation of hotel not liable for damages (contract of o Stranger (unless done with adhesion) = void in new of the the use of arms or through nature of the transaction irresistible force= force majeure) PARKING OF A CAR IN A GARAGE: act of - NOT liable is loss is: parking a vehicle in a garage, upon payment o Due to act of the guest, his of a fixed amount == LEASE family, servants or visitors o Due to the character of the BANK DEPOSITS things brought into the - All kinds of deposits whether fixed hotel/inn or current are to be treated as loans and are to be covered by the law on USE OF THE THING IN DEPOSIT/IRREGULAR loans DEPOSIT - A person who receives a loan of - The depository cannot make use of money or any fungible thing the thing deposited except with the acquires ownership thereof and is permission of the depositor or when bound to pay to the creditor an the preservation of the thing equal amount of the same kind and requires its use but only for such quality purpose - Fixed, savings and current deposits - If the depositor permits the use of of money in banks and similar the thing if becomes commodatum institutions shall be governed by the except where safekeeping is still the provisions concerning loan principal purpose of the contract. - Deposit=irregular deposit TIME DEPOSIT: one the payment of which cannot legally be required within such a DEPOSIT= INCAPACITATED specified number of days - Deposit is recognized - The depositary shall be subject to all DEMAND DEPOSITS: all those liabilities of the obligations of the depositary and the BSP and other banks which are maybe compelled to return the thing denominated in the PH currency and are deposited (by guardian or the subject to payment in legal tender upon person who made the deposit after demand by the presentation of the acquiring capacity) depositors checks - Ordinary contracts=contract is voidable HOTEL OWNERS & INNKEEPERS - Depositor can recover the thing - Liable as depositaries of effects deposited while it is still in the made by travelers provided: possession of the depositary. o Notice was given to them Otherwise, the depositor can only o Travelers took precautions as recover/collect the amount by which advised the incapacitated had been enriched - A contract where the guarantor or benefited binds himself to the creditor to fulfill - If the thing is in the hands of a the obligation of the principal person who acted in bad faith, the debtor in case the latter shall fail to depositor can recover the thing from do so him with damages CONTRACT OF SURETYSHIP - If the person binds himself solidarily REAL OR PERSONAL SECURITY Contracts of security- either personal or real WARRANTY Contracts of PERSONAL security- - Undertaking that the title, quality or (guaranty or a suretyship), the quantity of the subject matter of a faithful performance of the contract is what it has been obligation by the principal debtor is represented to be and relates to secured by the personal some agreement made ordinarily by commitment of another the party who makes the warranty Contract of REAL security- (pledge) a mortgage or an antichresis that FORM fulfillment is secured by an - Not a formal contract and is valid in encumbrance of property whatever form it may be. It is enforceable only if it complies with GUARANTOR the statute of frauds Subsidiary liable - A guarantee agreement is a promise Pays if debtor CANNOT to answer for the debt or default or Insurer of debtors solvency another, the law clearly requires Entitled to benefit of excussion that it or some note or A person who pays without the memorandum thereof be in writing, knowledge or against the will of the it would be unenforceable unless debtor has the right of beneficial ratifies, although it does not have to reimbursement appear in a public document Guarantor will only pay when the - Guaranty is not presumed but must principal is in default be express and cannot extend to SURETY more than what is stipulated therein Primarily & solidarity liable GUARANTY LIMITATIONS - Guarantor may bind himself for less Pays if debtor DOES NOT but not for more than the principal Insurer of debt debtor, both as regards the amount Not entitled to benefit of excussion and the onerous nature of the Liability of surety is direct, primary conditions. Should he have bound and absolute or equivalent to a himself for more, his obligations regular party shall be reduced to the limits of that SURETY of the debtor OBLIGOR/PRINCIPAL OBLIGEE/CREDITOR DEBTOR THE GUARANTOR QUALIFICATIONS CONTRACT OF GUARANTY - Must have legal capacity o A married woman may - There can be no claim against G or S guarantee an obligation until debt is liquidated without the husbands consent but shall not thereby CONTINUINING BOND: no fixed expiration bound the conjugal date partnership except in cases - May be cancelled only by the oblige, provided by law by the insurance Commisioner and - Integrity, capacity to bind himself, by the court sufficient property to answer for the - By law and by the specific contract obligation which he guarantees to involved in this case, the effectivity be present at the time of perfection of the bond required for the of the contract obtention of a license to engage in - The supervening incapacity of the G the business of receiving rice for will not operate to exonerate him storage is determined not aline by from eventual liability he has the payment of premiums but contracted. The supervening principally by the Administrator of dishonesty of the G (i.e. the National Food Authority (NFA) disappearance of his integrity after he has become bound) does not ACCESSROY & COLLATERAL terminate the contract but merely - A guarantee or surety contract is an entitles the creditor to demand a accessory contract because it is replacement of the G dependent for its existence upon the principal obligation guaranteed by it OBJECT: the promise made by the third CONTRACTS OF GUARANTEE- guarantors person to fulfill the obligation of the debtor obligation is merely collateral and it arises in case of debtors default or miscarriage only upon the default of the person primarily liable CAUSE OR CONSIDERATION - Guaranty is gratuitous SUBSIDIARY/COLLATERAL LIABILITY OF - The cause of the contract is the GUARANTOR same cause which supports the - The liability of the guarantor is only obligation as the principal debtor subsidiary and all the properties of - Not necessary to prove any the principal debtor must be first consideration exhausted before the guarantor may o Peculiar nature of G or S be held answerable for the debt. - Creditor may hold the guarantor GUARANTY MAY BE A SECURITY FOR liable only after judgement has been FUTURE DEBTS CONTINUINING obtained against the principal GUARANTY (DRAGNET CLAUSE in mortgage) debtor and the latter is unable to - Secure advances from time to pay time, any sum, any - The guarantors obligation is merely indebtedness, obligations that collateral and it arises only upon now in force or hereafter made default of the person primarily liable. It an irrevocable letter of credit, the bank undertakes a R when RENUNCIATION has been primary obligation expressly made by G U when it would be USELESS because GUANATORS PAYMENT ONLY WHEN execution on the property of the principal PRINCIPAL IS IN DEFAULT debtor would not after all result in the Creditor should make a demand and satisfaction of the obligation Principal should default its obligation. Only S when G has bound himself SOLIDARILY then should the guarantor pay. with the principal debtor When the petitioner guarantor pay against I INSOLVENCY of the debtor the will of the debtor, the debtor may set A when the debtor has ABSCONDED or up against it defenses available against the cannot be sued within the Philippines, creditor at the time of the payment. unless he has left a manager or representative NOTICE TO GUARANTOR For G to be liable: the creditor must When G, even before having paid, may 1. File a case against the debtor alone proceed against the debtor 2. The creditor must ask the court to S G is SUED for payment notify G I INSOLVENCY of the principal debtor P when the debtor bound to relieve the G The creditor may hold the G liable within a specified PERIOD and the period only after judgement has been has expired obtained against the principal E debt becomes demandable by reason of debtor and the latter is unable to the EXPIRATION of the period of payment pay T after lapse of TEN YEARS when the G may appear to set any applicable Principal obligation has no fixed period for defenses but the benefit of its maturity, unless it be of such nature that excussion is still available despite his it cannot be extinguished except for a or her appearance. period longer than 10 years A there are reasonable grounds to fear EXCUSSION OR EXHAUSTION That principal debtor intends to ABSCOND Before the G can be compelled to pay the I imminent INSOLVENCY of the debtor creditor, all the properties of the principal debtor must have been exhausted and all Action in Art. 2071 is NOT for remedies against him had been resorted to reimbursement but for: by the creditor 1. Demand for release from guaranty 1. G must set up excussion against 2. Demand for sufficient security to creditor in case of demand protect G from the creditor 2. G must point out to the creditor available property/ies of the debtor BENEFIT OF DIVISION 3. G does not fall under any of the 1 debtor + many Gs = divide among all circumstances in Art. 2059 the creditor cannot claim from the Gs except the shares which they are When G is not entitled to excussion respectively bound to pay, unless solidarily has been expressly stipulated. b. G, due to fortuitous event was The benefit of division against co- prevented from advising D of guarantors ceases in the same cases and for payment the same reasons as the benefit of c. C becomes insolvent excussion against the principal debtor. INDEMNITY OF THE GUARANTOR Liability of co-guarantors=JOINT T TOTAL amount paid I legal INTEREST BENEFIT OF CONTRIBUTION E EXPENSES incurred Co-guarantor or co-surety being joint D DAMAGES if any debtors, need not pay the entire obligation. If one of the co-guarantors (one or more) COMMON REQUISITES will pay, he or she may demand 1. Constituted as security/collateral reimbursement from the other co- 2. Absolute owner guarantors the latters proportional share of Pledge or mortgage on future it property is void 1. The payment has been made by 3rd persons may pledge/mortgage virtue of a judicial demand their property (accommodation 2. The principal debtor is insolvent party) 3. Free disposal Effect of insolvency of any G if any of the Property is free from liens or Gs should be insolvent, his share shall be encumbrances borne by the other co-guarantors, including Pledge/mortgage of a property of a payer, in the same proportion. corporation under receivership is not valid BENEFIT OF SUBROGATION The G who pays is subrogated by virtue REAL ESTATE thereof to all the rights which the creditor - Immovable/real had against the debtor. - May secure past, present, future If the G has compromised with the creditor, obligation he cannot demand of the debtor more than - Registration needed only to affect what he has really paid 3rd parties A compromise to be binding must - As a rule, with right of redemption benefit both the debtor and creditor - Deficiency claim possible; mortgagor entitled to excess REPEAT PAYMENT BY PRINCIPAL DEBTOR If D is not aware of the payment by the G CHATTEL also made payment to the C who accepted - Moveable/personal the same despite the previous payment, the - Can only secure present obligation G can go only after the C. - Registration needed to affect 3rd EXCEPTION (when the D must reimburse parties affidavit of good parties the G) required If guaranty is: - No right of redemption a. Gratuitous - Deficiency claim possible; mortgagor entitled to excess DRAGNET CLAUSE/BLANKET MORTGAGE CLAUSE/ANACONDO DOCTRINE/MOTHER PLEDGE HUBBARD CLAUSE - Moveable/personalmust be one which is specifically phrased to delivered subsume all debts of past, present or future - May secure past, present, future origins obligation - Description of property in a public SUBSEQUENT IMPROVEMENTS/AFTER- instrument to affect 3rd parties ACQUIRED PROPERTIES - No right of redemption Improvements subsequently introduced on - No deficiency claim; pledger not the encumbered property are considered to entitled to excess unless otherwise form part of the mortgage only if so owned agreed by the mortgagor
PACTUM COMMISSORIUM When the principal property is mortgaged,
Stipulation empowering the creditor to the mortgage shall include all natural or civil appropriate the thing given as a guaranty fruits and improvements found thereon for the fulfillment of the obligation in the when the secured obligation becomes due even the obligor fails to live up to his as provided in Art. 2127 of the Civil Code. undertakings, without further formality, Consequently, in case of nonpayment of the such as foreclosure proceedings and public secured debt, foreclosure proceedings shall sale. cover not only the hypothecated property The elements of pactum commisorium but all its accessions and accessories as well (which is void) which enables the mortgagee to acquire ownership of the STIPULATIONS OF THE PARTIES; mortgaged property without the need of LIMITATIONS any foreclosure proceedings are: 1. Pacto de non aliendo a. There should be a property 2. Pactum commissorium Mortgaged by way of security for the 3. Stipulation in mortgage to take payment of the principal obligation actual or constructive possession of b. There should be a stipulation for mortgaged property upon automatic appropriation by the foreclosure is valid creditor of the thing mortgaged in 4. Mortgage and iniquitous or case of non-payment of the principal unconscionable interests obligation within the stipulated 5. Mortgagor is allowed to take period subsequent mortgage 6. Notice of writ of possession (WOP) APPROPRIATION OF THE THING PLEDGED and extra judicial foreclosure (EJF) If the thing pledged is not sold in the first and second public auctions, the creditor PACTO DE NON ALIENDO: a stipulation may appropriate the thing pledged. In this forbidding the owner from alienating the case, he shall be obliged to give an immovable mortgaged is void acquaintance for his entire claim The sale by the mortgagor of a mortgaged 3. Bid price in excess of mortgage debt property to a third person is valid may be a ground to set aside notwithstanding the lack of written consent foreclosure sale by the mortgagee and the 3rd person has 4. tipo or upset price the right to redeem the foreclosed property 5. mortgaged property sold at an auction sale lower than the actual MORTGAGEE IN GOOD FAITH EXCEPTION market value TO ABSOLUTE OWNERSHIP IN MORTGAGE 6. change of bid after foreclosure - The mortgagor who is not the 7. act 3135 has no requirement for the rightful owner of the property, has determination of the mortgaged already succeeded in obtaining a properties appraised value as basis Torrens Title over the property in his for the bid price name and that, after obtaining the said title, he succeeds in mortgaging tipo or upset price the property to another who relies the price which is set by the parties as on what appears on the said title the amount at which the property will be - The doctrine of mortgagee in good sold at public auction. faith assumes that the title to the stipulation is null and void because it subject property had already been contravenes Rule 68 of rules of court which transferred or registered in the provides the property mortgaged shall be name of the imposter who sold to the highest bidder thereafter transacts with a if such stipulation, the sale of the mortgagee who acted in good faith property shall take place in accordance with - Does NOT apply to a situation where the requirements of the law and the the title is still in the name of the property sold to the highest bidder rightful owner and mortgagor is different person pretending to be FORECLOSURE & REDEMPTION OF REAL the owner ESTATE MORTGAGE - Mortgagee is not in good faith EXTRA JUDICIAL where the mortgaged title contains - venue: RTC where property an adverse claim mortgaged is located - Banks should not rely solely on the - with right of redemption: one year certificate of title from registration of certificate of sale BID PRICE IN EXTRA JUDICIAL FORECLOSURE - if mortgagor is a judicial person, 1. Surplus money arising from until, but not after, the registration foreclosure auction sale belongs to of the certificate of foreclosure sale the mortgagor with the application register of 2. Inadequacy of price in foreclosure deeds which in no case shall be auction sale is not sufficient to set more than three months after the aside foreclosure sale foreclosure, whichever is earlier UNLESS price is grossly shocking to the conscience or revolting to the JUDICIAL mind - RTC where the property or one of In any of the following cases, any money, the properties mortgaged is located fruits, or benefit to be received by the - NO right of redemption; only equity vendee as rent or otherwise shall be of redemption considered as interest which shall be - UNLESS mortgagee is a bank or subject to the usury laws financial institution, in which case This provision shall also apply to a contract the redemption shall be one year purporting to be an absolute sale from registration of the certificate of sale and confirmation of sale For the presumption of an equitable mortgaged to arise under article 1602, 2 EQUITABLE MORTGAGE one which requisites must concur: although lacking in some formality, or form a. That the parties entered into a or words or other requisites demanded by a contract denominated as a contract statute, nevertheless reveals the intention of sale of the parties to change real property as b. That their intention was to secure an security for a debt , there being no existing debt by way of a mortgage impossibility nor anything contrary to law in Any circumstances laid out in art. 1602, not this intent the concurrence nor an overwhelming number of the enumerated circumstances., CONTRACT OF SALE IS PREMUSED TO BE AN is sufficient to support the conclusion that a EQUITABLE MORTGAGE contract of sale is in fact an equitable Art. 1602, Civil Code: the contract shall be mortgage. In several cases we have no presumed to be an equitable mortgage in hesitated to declare a purported contract of any of the following cases: sale to be an equitable mortgage based 1. When the price of a sale with right solely on one of the enumerated to repurchase in unusually circumstances under art. 1602. This inadequate approached follows the rule that when 2. When the vendor remains in doubt exists on the nature of parties possession as lessee or otherwise transaction, the law favors the least 3. When upon or after the expiration transmission of property rights. of the right to repurchase another instrument extending the period of ANTICHRESIS a contract whereby the redemption or granting a new creditor acquires the right to receive the period is executed fruits of an immovable of his debtor with 4. When the purchaser retains for the obligation to apply them to the himself a part of the purchase price payment of the interest and thereafter to 5. When the vendor binds himself to the principal of his credit pay the taxes on the thing sold ** it must be in writing: the amount of the 6. In any other case where it may be principal and the interest OR ELSE VOID fairly inferred that the real intention of the parties is that transaction shall secure the payment of a debt or the performance of any other obligation