My Notes Credit Transactions
Short Description
credit transactions partial notes...
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Credit Transactions – include all transactions involving PURCHASE/LOAN of goods, services or money in the present with a PROMISE to pay/deliver in the future. 2 Types 1. SECURED transactions (contracts of REAL security) – supported by a COLLATERAL/ ENCUMBRANCE of property; 2. UNSECURED transactions (contracts of PERSONAL security) – supported only by a PROMISE to pay or the personal commitment of another such as guarantor/surety. Security – something given, deposited, or serving as a means to ensure the fulfillment/enforcement of an obligation or of protecting some interest in property. Personal Security Property/Real Security When an individual When a mortgage, pledge, becomes a surety or a antichresis, charge or lien guarantor or other device used to have property held, out of w/c the person to be made secure can be compensated for loss. Secured Creditor – one who holds a security from his debtor for payment of the latter’s debts Bailment – the DELIVERY of property of one person to another in TRUST for a specific purpose, w/ a CONTRACT (express/implied), that the trust shall be faithfully executed & the property returned or duly accounted for when the special purpose is accomplished or kept until the bailor reclaims it. A contractual relation; therefore must contain all the elements of a valid contract. But may also be created by operation of law. Parties in Bailment 1. BAILOR – giver; one who delivers the possession or custody of the thing bailed; 2. BAILEE – recipient; one who receives the possession or custody of the thing thus delivered. Kinds of Contractual Bailment 1. Those for the sole benefit of the BAILOR 2. Those for the sole benefit of the BAILEE 3. For the benefit of BOTH parties Kinds of Bailment for Hire 1. Hire of THINGS – goods are delivered for temporary use of the hirer; 2. Hire of SERVICE – goods are delivered for some work/labor upon it by the bailee 3. Hire for CARRIAGE of goods – goods are delivered either to a common carrier or to a private person for the purpose f being carried from place to place; 4. Hire of CUSTODY – goods are delivered for storage
LOAN 1933. By the contract of loan, COMMODATUM One of the parties delivers to another, either something NOT consumable so that the latter may use the same for a certain time & RETURN it Essentially GRATUITOUS The bailor RETAINS the ownership of the thing loaned
LOAN/MUTUUM Money or other CONSUMABLE thing, upon the condition that the SAME AMOUNT of the same KIND & QUALITY shall be paid May be gratuitous or w/ a stipulation to pay interest Ownership PASSES to the borrower.
Characteristics of the Contract of Loan 1. A REAL contract – the delivery of the thing loaned is necessary for the perfection of the contract; 2. A UNILATERAL contract – once the subj matter has been delivered, it creates obligations on the part of only of the parties – the borrower. Cause/Consideration: 1. As to the borrower → the acquisition of the thing; 2. As to the lender → the R to demand its return or its equivalent Kinds of Loan 1. Commodatum – the bailor delivers to the bailee a non-‐consumable thing so that the latter may use it for a certain time & return the identical thing; 2. Simple loan/ Mutuum – 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 & quality Credit Loan An individual’s ability to The delivery by 1 party borrow money or things (the lender) and the by virtue of the receipt by the other party confidence/trust reposed (borrower) who became by a lender that he will the owner, of a given sum pay what he may promise of money or other w/in a specified period consumable thing upon agreement (express/impled), to repay the same amt of the same kind & quality w/ or w/o interest.
COMMODATUM Ordinarily involves something NOT CONSUMABLE Ownership of the thing loaned is RETAINED by the lender Essentially gratuitous
MUTUUM The subj matter is MONEY/ other CONSUMABLE thing Ownership is TRANSFERRED to the borrower May be gratuitous or may be onerous The borrower must Borrower need only pay RETURN the SAME THING the SAME AMT of the loaned same KIND & QUALITY May involve real/personal Refers only to PERSONAL property property Loan for USE or Loan for CONSUMPTION TEMPORARY POSSESSION Bailor may DEMAND the Lender may NOT demand return of the thing loaned its return before the lapse before the expiration of of the term agreed upon the term in case of URGENT NEED The LOSS of the subj The borrower suffers the matter is suffered by the loss even if caused bailor since he is the exclusively by a fortuitous owner. Res perit domino. event & he is not, ∴ discharged from his duty to pay Purely personal in Not character Kinds of Commodatum 1. Ordinary 2. Precarium – one whereby the bailor may demend the thing loaned at will (1947) 1934. An ACCEPTED PROMISE to deliver something by way of commodatum or simple loan is BINDING upon the parties, but the commodatum/simple loan itself shall not be PERFECTED until the DELIVERY of the object of the contract. Commodatum & Mutuum are REAL contracts w/c require delivery of the subj matter thereof for their perfection. It does not mean that a PROMISE TO LEND would be w/o efficacy/judicial value. An accepted promise to make a future loan is a CONSENSUAL CONTRACT & therefore, binding upon the parties but it is only after delivery, will the real contract of loan arise.
Sec. 1 -‐ NATURE OF COMMODATUM 1935. The BAILEE in COMMODATUM acquires the USE of the thing loaned but NOT its FRUITS. If any COMPENSATION is to be paid by him who acquires its use, the contract CEASES to be a commodatum. Commodatum is essentially GRATUITOUS. If there is compensation →it is a LEASE contract. If the consideration is the rendering of some SERVICE → an INNOMINATE contract will result. Commodatum is similar to a DONATION in that it confers a benefit to the recipient. The presumption is that the bailor has loaned the thing for having no need therefor. (1946[2]: In case of temporary use by the bailor, the contract of commodatum is SUSPENDED while the thing is in the possession of the bailor.) The R to USE is LIMITED to the thing loaned but NOT to its FRUITS ∑unless there is a stipulation to the contrary. As owner of the thing loaned, the bailor is naturally entitled to its fruits. The PURPOSE of the contract of commodatum must be the TEMPORARY USE of the thing loaned. If the be bailee is NOT entitled to the use of the thing →it may be a contract of DEPOSIT(not commodatum). It is an essential feature of the contract of commodatum that the use of the property of another shall be for a certain time. 1936. CONSUMABLE goods MAY be the subject of commodatum if the purpose of the contract is not the consumption of the object, as when it is merelyfor EXHIBITION. 1937. MOVABLE/IMMOVABLE property MAY be the object of commodatum. • Commodatum involving real property: when a person allowed another to build a warehouse on the former’s land so that the latter may use the property for a certain period w/o any payment of rentals. If no time for use of the land is specified →commodatum →precarium. • If rental is paid →lease 1938. The BAILOR in commodatum NEED NOT be the OWNER of the thing loaned. Because by loan, ownership does not pass to the borrower. Hence, mere lessee or usurfuctuary may lend but the borrower or bailee himself may NOT lend/lease the thing loaned to him to a 3rd person. It is sufficient that the bailor has such POSSESSORY INTEREST in the subj matter or R to its use w/c he may assert against the bailee & the 3rd persons although not against the rightful owner.
1939. Commodatum is PURELY PERSONAL in character. Consequently: 1. The DEATH of either bailor/bailee EXTINGUISHES the contract; 2. The BAILEE can NEITHER LEND/LEASE the object of the contract to a 3rd person. ∑ However, the MEMBERS of the bailee’s HOUSEHOLD may make use of the thing loaned. ∑∑ unless a. there is a STIPULATION to the contrary; or b. the NATURE of the thing FORBIDS such use. GR: All rights acquired in virtue of an obligation are transmissible. ∑: Except in commodatum, w/c is a purely personal contract. ∑∑:unless by stipulation, the commodatum is transmitted to the heirs of either/both parties. If there are 2/more borrowers, the death of one does not extinguish the contract in absence of stipulation to the contrary. R of Bailee to lend/lease the thing loaned to 3rd persos GR: The bailee can neither lend nor lease the object of the contract to a 3rd person, in the absence of some agreement to that effect. ∑: However, the use of the thing loaned (ex. TV set) may extend to the members of the bailee’s household (who are not therefore, 3rd persons). ∑∑: Except when (1) there is a stipulation to the contrary & (2) the nature of the thing (ex. dress) forbids its use. 1940. A stipulation that the bailee may make use of the FRUITS of the thing loaned is valid. GR: The bailee is entitled only to the use of the thing loaned & not to its fruits, since the fruits pertain to the owner. • When the thing loaned is an animal, its young subsequently born is not included in the contract. ∑: However, parties may stipulate (not presumed) that the bailee may also make use of the fruits of the thing. The enjoyment of the fruits must only be incidental to the use of the thing itself. If it is the main cause, →the contract may be one of usufruct.
Sec 2. – OBLIGATIONS of the BAILEE 1941. [Liability for ORDINARY EXPENSES] The BAILEE is obliged to PAY for the ORDINARY EXPENSES for the USE & PRESERVATION of the thing loaned. It is logical that the borrower should defray the expenses for the use & preservation of the thing loaned for after all, he acquires the use of the same, & he is supposed to return the identical thing. As a rule, the borrower must take good care of the thing w/ the DILIGENCE of a GOOD FATHER of a FAMILY. • If B borrows the car of L, B must pay for the gas, motor oil, washing, greasing, & spraying, etc. He cannot demand reimbursement for the expenses. As to extraordinary expenses, 1949 governs. 1942. [Liability for LOSS of the thing loaned]The BAILEE is LIABLE for the LOSS of the thing even if it should be through a FORTUITOUS EVENT: a. If he devotes the thing to any PURPOSE DIFFERENT from that for w/c it has been loaned; - He acted in BF b. If he KEEPS IT a. LONGER than the period stipulated b. AFTER the accomplishment of the use for w/c the commodatum has been constituted; - He incurred DELAY c. If the thing loaned has been delivered w/ APPRAISAL of its value, ∑ unless there is a stipulation exempting the bailee from responsibility in case of a fortuitous event; - The law presumes that the parties INTENDED that the borrower shall be liable for the loss of the thing even if it is due to a fortuitous event for otherwise they would not have appraised the thing. d. If he LENDS/LEASES the thing to a 3rd person, who is not a member of his household; - Because commodatum is purely personal e. If being able to save either the thing borrowed or his own thing, he CHOSE TO SAVE the latter. - He shows his ingratitutde after the thing is gratuitously loaned to him. GR: The bailee is NOT liable for the loss/damage due to a fortuitous event. The reason is because the bailor retains ownership of the thing loaned. ∑: 1942.
1943. The bailee does NOT answer for the DETERIORATION of the thing loaned due only to the use thereof & without his fault The parties to the contract know that the thing borrowed cannot be used without deterioration due to ordinary wear & tear. Hence, in absence of agreement to the contrary, the depreciation caused by reasonable & natural use of the thing is borne by the bailor. ∑: But bailee is LIABLE if a. He is guilty of FAULT/NEGLIGENCE; b. He devotes the thing to any PURPOSE DIFFERENT from that for w/c it has been loaned. 1944. The bailee cannot retain the thing loaned on the ground that the bailor owes him something, even though it may be by reason of expenses. However, the bailee has a R of RETENTION for DAMAGES suffered because of flaws of the thing loaned 1951. Except for damages suffered because of the flaws of the thing loaned, the borrower has no R to retain the thing loaned as security for claims he has against the lender, even though they may be by reason of extraordinary expenses. Reasons: 1. Ownership remains in the bailor – the borrower acquires only the use of the thing. It would be extremely harsh if the bailor, after benefiting the baileee, & the use having been accomplished, should be deprived of its enjoyment on the excuse of the expenses more or less certain or just; 2. Only temporary use is given to the bailee – he would be violating the bailor’s trust in him to return the thing as soon as the period stipulated expires or the purpose has been accomplished. Therefore, the law imposes upon him the obligation to return the same. BUT the mere failure of the bailee to return the subj matter of commodatum to the bailor does NOT constitute ADVERSE POSSESSION on the part of the bailee who holds the same in trust. It does NOT ripen into ownership by way of ordinary acquisitive prescription because of the absence of just title. Right of retention for Damages The exception in 1951 is of evident justice. BUT, the bailee’s R extends no further that to the retention of the thing loaned until he is reimbursed for the damages suffered by him. He CANNOT lawfully SELL the thing to satisfy the damages.
1945. When there are 2/MORE BAILEES to whom a thing is loaned in the SAME CONTRACT, they are SOLIDARILY LIABLE. Reason: To safeguard the Rs of the lender. The law presumes that the bailor takes into account the personal integrity & responsibility of all the bailees & that therefore, he would not have constituted the commodatum if there were only one bailee. This is an exception by express provision of law to the GR that the concurrence of 2/more parties in the same obligation gives rise to a joint obligation. Sec 3. – OBLIGATIONS of the BAILOR 1946.[Obligation to RESPECT DURATION of LOAN] The bailor CANNOT demand the return of the thing loaned until after the a. expiration of the period stipulated; or b. accomplishment of the use for w/c the commodatum has been constituted. ∑ However, if in the meantime, he should have URGENT NEED of the thing, he may demand its return or temporary use. In case of TEMPORARY use by the bailor, the contract of commodatum is SUSPENDED while the thing is in the possession of the bailor. The primary obligation of the bailor is to ALLOW the bailee the USE of the thing for the duration of the period stipulated or until the accomplishment of the purpose for w/c the commodatum was constituted. He is bound by the terms of the contract of commodatum w/c is for a certain time. ∑However, should he have URGENT NEED of the thing, or if the borrower commits an act of ingratitutde, he may demand its return or temporary use. (Basis: Commodatum is essentially gratuitous.) The RETURN may be: a. Temporary – contract, rights & duties of parties are temporarily suspended. b. Permanent
1947. The bailor may DEMAND the thing AT WILL & the contractual relation is called PRECARIUM, in the ff cases: a. If NEITHER the DURATION of the contract nor the USE to w/c the thing loaned should be devoted, has been STIPULATED; b. If the USE of the thing is MERELY TOLERATED by the owner. Precarium – a kind of commodatum where the bailor may demand the thing at will. It is a contract by w/c the owner of a thing, at the request of another person, gives the latter the thing for use as long as the owner shall please. In precarium, it is presumed that the use of the thing has been granted SUBJECT to REVOCATION by the bailor at any time, whether or nt the use for w/c the thing has been loaned has been accomplished. The use of the word “owner” is inaccurate. Because 1938 states that the bailor need not be the owner of the thing loaned. 1948. The bailor may DEMAND the IMMEDIATE RETURN of the thing if the bailee commits any acts of INGRATITUTDE specified in 765. 1. If the bailee should commit some OFFENSE against the a. Person b. Honor c. Property of the bailor d. Of his wife e. Children under his parental authority 2. If the bailee IMPUTES to the bailor any a. CRIMINAL OFFENSE or b. act involving MORAL TURPITUDE, even though he should prove it, ∑unless the crime/act has been committed against the bailee himself, his wife or children under his authority; 3. If the bailee unduly REFUSES the bailor SUPPORT when the bailee is legally/morally bound to give support to the bailor. Reason: Because commodatum is essentially gratuitous. 1948 presupposes an ordinary contract of commodatum. In the case of precarium, the bailor can always demand the thing loaned at will.
1949. [Obligation to REFUND EXTRAORDINARY EXPENSES] 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 notification cannot be awaited without danger. If the extraordinary expenses ARISE on the occasion of the ACTUAL USE of the thing by the bailee, even though he acted without fault → they shall be BORNE EQUALLY by BOTH the bailor & the bailee, ∑ unless there is a stipulation to the contrary. Extraordinary Expenses for the PRESERVATION of the thing loaned: Reason: it is the bailor who profits by said expenses. If they are incurred by the bailee, the bailor must refund them provided, the bailee brings the same to the knowledge of the bailor BEFORE incurring them. GR: Notice is required because it is possible that the bailor may not want to incur the extraordinary expenses at all. ∑: Except where they are so urgent that the reply to the notification cannot be awaited without danger. Extraordinary expenses ARISING from ACTUAL USE of the thing loaned Caused by fortuitous event arising on the occasion of the actual use of the thing loaned → borne 50/50 ∑: Unless there is a contrary stipulation. 1950. If, for the purpose of making use of the thing, the BAILEE INCURS EXPENSES OTHER than those referred to in 1941 & 1949,→ he is NOT entitled to reimbursement. All expenses other than those in 1941 & 1949 “for the purpose of making use of the thing” (ex. borrower buys extra tire to be used as reserve on a trip) that is, not necessary for the use & preservation of the thing, must be shouldered by the borrower. This is only proper since he makes use of the thing. Expenses for ostentation are to be borne by the bailee because they are NOT NECESSARY for the preservation of the thing. Ordinary expenses incurred for the preservation of the thing are also for the acct of the bailee (1949).
1951. [Liability to pay Damages for KNOWN HIDDEN FLAWS]The bailor, who, KNOWING the FLAWS of the thing loaned, DOES NOT ADVISE the bailee of the same, shall be LIABLE to the latter for the DAMAGES w/c he may suffer by reason thereof. REQUISITES: 1. There is FLAW/DEFECT in the thing loaned; 2. w/c is HIDDEN; 3. The bailor is AWARE thereof; 4. He DOES NOT ADVISE the bailee of the same; & 5. The bailee suffers DAMAGES by reason of said flaw/defect. The bailor is liable for his BF and the bailee is given the R of retention until he is paid damages. The same responsibility of a bailor in commodatum is imposed on a pledgor. ∑Exceptions: 1. if the defect is PATENT or 2. could have been known to the bailee after inspection, or 3. the bailor is NOT aware of the defect (because commodatum is gratuitous). 1952. The bailor CANNOT EXEMPT himself from the payment of EXPENSES/DAMAGES by ABANDONING the thing to the bailee. Reason: The expenses and/or damages may exceed the value of the thing loaned, and it would, therefore, be unfair to allow the bailor to just abandon the thing instead of paying for said expenses and/or damages. Ch 2. SIMPLE LOAN or MUTUUM 1953. A person who receives a loan of a. MONEY or b. any other FUNGIBLE thing ACQUIRES the OWNERSHIP thereof, & is bound to PAY the creditor an EQUAL amount of the SAME KIND & QUALITY. Simple Loan/Mutuum – a contract whereby one of the parties DELIVERS to another money or other consumable thing w/ the understanding that the same amount of the same kind & quality shall be paid. - Involves the return of the EQUIVALENT only & not the identical thing. ∑However, a loan of money may be payable in kind (1958) The obligation of the borrower is to PAY (not return) because the CONSUMPTION of the thing loaned is the distinguishing character of mutuum. It may include the accessory duty to pay INTEREST (1956). The promise of the borrower to pay is the consideration for the obligation of the lender to furnish the loan. ∴ A loan is thus a BILATERAL contract. In a simple loan/mutuum (unlike in commodatum), the borrower acquires ownership of the money, goods or personal property borrowed. And being the owner, the borrower can dispose of the thing borrowed & his act will not be considered
misappropriation thereof. NO ESTAFA is committed by a person who refuses to pay/recognize his debt. SIMPLE LOAN Delivery of money or some other consumable thing to another w/ a promise to repay an equivalent amt of the same kind & quality but not a promise to return the same thing loaned w/c becomes the property of the obligor. The relation of the parties is that of obligor-‐obligee. The creditor receives “payment” for his loan.
RENT One of the parties delivers to another some non-‐ consumable thing in order that the latter may use it during a certain period & return it to the former. The owner/lessor of the property does not lose his ownership. He simply loses his control over the property rented during the period of the contract. The relation of the parties is that of landlord-‐tenant. The owner of the property rented receives “compensation” or “price” either in money, provisions, chattels or labor from the occupant thereof in return for its use.
Trust Receipts – different from loan. - Written/printed document signed by the entrustee in favor of the entruster containing terms & conditions substantially complying w/ the provisions of the Trust Receipts Law. - A document in w/c is expressed a SECURITY TRANSACTION, whereunder the lender, having NO PRIOR TITLE in the goods on w/c the lien is to be given, and NOT HAVING POSSESSION w/c remains in the borrower, lends his money to the borrower on security of the goods, w/c the borrower is privileged to sell clear of the lien on agreement to pay all/part of the proceeds of the sale to the lender. - Does not seek to enforce the payment of the loan, but punishes the dishonesty & abuse of confidence in the handling of money/goods. - Should not be the basis for criminal prosecution in the event of violation of its provisions. Fungible things – those w/c are usually dealt w/ by number, weight, or measure such as rice, oil, sugar, etc. so that any given unit/portion is treated as the equivalent of any other unit/portion. Whether a thing is CONSUMABLE or not depends upon its NATURE. Whether a thing is FUNGIBLE or not depends upon the INTENTION of the parties.
1954. A contract whereby one person TRANSFERS OWNERSHIP of NON-‐FUNGIBLE things to another w/ the obligation on the part of the latter to give things of the SAME KIND, QUANTITY & QUALITY shall be considered a BARTER. MUTUUM COMMODATUM BARTER Subject matter Subject matter is is money or any NON-‐fungible other fungible (non-‐ thing. consumable) things. Bailee is bound The to return the EQUIVALENT IDENTICAL thing thing is given in borrowed when return for what the time has has been expired or the received. purpose has been served. May be Always ONEROUS gratuitous. GRATUITOUS. (mutual sale) 1955. [Form of PAYMENT] The obligation of a person who borrows MONEY shall be governed by 1249-‐1250. Payment must be made in the CURRENCY stipulated (if possible). Otherwise, it is payable in the currency w/c is the legal tender in the PH. In case of extraordinary inflation/deflation, the BASIS of the payment shall be the value of the currency at the time of the creation of the obligation. If what was loaned is a FUNGIBLE thing other than money, the debtor owes ANOTHER THING of the same kind, quantity & quality, even if it should change in value. In case it is impossible to deliver the same kind, its VALUE at the time of PERFECTION of the loan shall be paid. 1956. No INTEREST shall be due unless it has been EXPRESSLY stipulated in WRITING. Requisites for recovery of Interest 1. The payment of interest must be expressly stipulated; 2. The agreement must be in writing; 3. Interest must be lawful (however, 1957 & 1961) In absence of stipulated interest, there can be LEGAL INTEREST pursuant to 2209 as indemnity for damages (compensatory interest) for breach of contractual obligations. ΩGarcia v Thio. Existence of Stipulation to pay interest If a particular rate of interest has been expressly stipulated by the parties, →that interest (not the legal interest), shall be applied; If the exact rate of interest is not mentioned, the legal rate of 12% shall be payable.
No increase in interest shall be due unless such increase has also been expressly stipulated. Sales invoice or slips issued by a store to its customers stating interests & atty’s fees in the usual printed forms as terms & conditions, w/o the signature of the obligor, do not constitute the express stipulation requied by 1956. Therefore, the obligor is not liable for the interest except only the legal interest under 2209. It is only in contracts of loan, w/ or w/o security, that interest may be stipulated & demanded. The RECEIPT by the creditor of interest payment up to a certain date on a loan that has already matured does NOT ipso facto result in the renewal or extension of maturity period of the loan up to said date. W/N a loan may be renewed does not solely depend on the debtor but more so on the discretion of the creditor. Vendor & vendee are legally free to stipulate for the payment of interest of either the cash price or the installment price. ∑Exceptions to 1956 1. INDEMNITY for DAMAGES – The debtor in delay is liable to pay LEGAL INTEREST as indemnity for damages even in absence of stipulation for the payment of interest. 2. INTEREST ACCRUING from UNPAID INTEREST – Interest due shall earn interest from the time it is judicially demanded although the obligation may be silent upon this point. This contemplates the presence of stipulated or conventional interest w/c has accrued when demand was judicially made. Liability for SURCHARGES & PENALTIES Surcharges & penalties agreed to be paid by the debtor in case of default partake of the nature of LIQUIDATED DAMAGES (2227). Whether intended as an indemnity or penalty, shall be equitably reduced by the courts if they are iniquitous or unconscionable. Separate & distinct from interest. A penalty stipulation is not necessarily preclusive of interest, if there is an agreement to that effect. 1957. Contracts & stipulations, under any cloak or device whatever, intended to circumvent the laws against USURY shall be VOID. The borrower may recover in accordance w/ the laws on usury. The form of contract is not conclusive. Parol evidence is admissible to show that a written document though legal in form was in fact a cloak or device to cover usury. The contract is VOID ONLY as to the INTEREST involved. – A usurious contract should not be considered void in its entirety but only as to the interest involved. It is only the stipulation on usurious interest w/c should be treated as void so that the loan becomes without stipulation to pay interest.
w/ respect to the R of the debtor, the amount paid as interest under the usurious agreement is recoverable by him, since the payment is deemed to have been made under restraint, rather than voluntary. INTEREST RATES ARE NO LONGER SUBJECT TO ANY CEILING. THE RATE WILL DEPEND ON THE AGREEMENT OF THE PARTIES. 1958. In the determination of the INTEREST, if it is payable IN KIND → its VALUE shall be appraised at the CURRENT PRICE of the products/goods at the time of PAYMENT. 1959. [When Unpaid Interest Earns Interest] Without prejudice to the 2212, INTEREST DUE & UNPAID shall NOT earn interest. ∑ However, the contracting parties may by stipulation CAPITALIZE the interest due & unpaid, w/c as added principal, shall earn NEW INTEREST. GR: Accrued interest (due & unpaid) shall NOT earn interest. ∑: Exceptions: 1. When JUDICIALLY DEMANDED (2212); 2. When there is an EXPRESS STIPULATION made by the parties to wit: that the interest due & unpaid shall be added to the principal obligation & the resulting amt shall earn interest – Compounding Interest. The parties may stipulate (in writing) on the imposition of BOTH interest & penalty in case of default on the part of the borrower. 1960. If the borrower pays interest when there has been NO STIPULATION therefor, the provisions concerning SOLUTIO INDEBITI or natural obligations, shall be applied as the case may be. If unstipulated interest is paid by MISTAKE →the debtor may RECOVER based on solution indebiti (undue payment). BUT where the unstipulated interest or interest stipulated, there being a stipulation but is NOT in WRITING, is PAID VOLUNTARILY because the debtor feels morally obliged to do so, →no recovery as in the case of natural obligations (1423). 1961. Usurious contracts shall be governed by the Usury Law & other special laws, so far as they are not inconsistent w/ this Code. Usury is now legally inexistent. The interest legally chargeable depends upon the agreement bet the lender & the borrower. Central Bank Cir 905 removed the Usury Law ceiling on interest rates for secured & unsecured loans, regardless of maturity. However, accdg to the SC, the Cir did not repeal nor in any way amend the Usury Law but simply SUSPENDED the latter’s effectivity. ΩMedel v CA. While the ceiling on interest rates was lifted by the Cir, nothing in said Cir grants lenders a blanket authority to raise interest rates to levels w/c will
enslave/hemorrhage the assets of the borrowers. When the agreed rate is found to be iniquitous & unconscionable, the courts may reduce the same as reason & equity demand.
DEPOSIT 1962. A DEPOSIT is constituted from the moment a person RECEIVES a thing belonging to another, with the OBLIGATION of 1. Safely keeping it & 2. Returning the same. If the safekeeping of the thing delivered is NOT the PRINCIPAL purpose of the contract → there is NO DEPOSIT but some other contract. CHARACTERISTICS of the Contract of Deposit 1. It is a REAL CONTRACT – perfected by delivery of the subject matter 2. When deposit is a. GRATUITOUS → it is a UNILATERAL CONTRACT because only the depositary has an obligation. b. For COMPENSATION → becomes BILATERAL because it gives rise to obligations on the part of both the depositary & depositor SAFEKEEPING – principal purpose of the contract If safekeeping is only an accessory obligation → some other contract (lease, commodatum, or agency) • Where the balance of a commission account remains in the possession of the agent at the principal’s disposal, the same acquires at once the character of a deposit w/c the former must return or restore to the latter at any time it is demanded. o If agent appropriates/diverts it to his own use →ESTAFA. o It could only become his as a loan if so expressly agreed by its owner who would then be obligated not to demand it until the expiration of the legal/stipulated period. The depositary cannot make use of the thing deposited ∑except only in the 2 instances in 1977. DEPOSIT MUTUUM The principal purpose is The principal purpose is the SAFEKEEPING or mere CONSUMPTION of the custody subject matter The depositor can Lender must WAIT until the DEMAND the RETURN of EXPIRATION of the period the subj matter AT WILL granted to the debtor Both movable & Only MONEY & any other immovable property may fungible thing be the object DEPOSIT COMMODATUM The principal purpose is The principal purpose is the SAFEKEEPING TRANSFER of the USE May be gratuitous Essentially & always GRATUITOUS In extrajudicial deposit, Both movable & immovable only movable (corporeal) property may be the object things may be the object
1963. An AGREEMENT to constitute a deposit is BINDING, but the deposit itself is not perfected until the delivery of the thing. A contract of FUTURE deposit is CONSENSUAL. 1964. A deposit may be constituted JUDICIALLY or EXTRAJUDICIALLY. In a deposit, it is essential that the DEPOSITARY is NOT the OWNER of the property deposited. Kinds of Deposit 1. Judicial – one w/c takes place when an ATTACHMENT or SEIZURE of property in litigation is ordered; 2. Extrajudicial a. Voluntary – one where in the DELIVERY is made by the WILL of the depositor or by 2/more persons each of whom believes himself entitled to the thing deposited; b. Necessary – one made IN COMPLIANCE w/ a legal obligation, or on the occasion of a CALAMITY, or by TRAVELLERS in hotels & inns; or by travellers w/ COMMON CARRIERS. 1965. A deposit is a GRATUITOUS contract. ∑ 1. Except when there is an agreement to the contrary; Provided it is not contrary to law, morals, etc or 2. Unless the depositary is engaged in the business of storing goods. - For compensation Another is where property is SAVED from destruction WITHOUT KNOWLEDGE of the owner → the owner is bound to pay the former JC 1966. Only MOVABE thins may be the object of (an EXTRAJUDICIAL) deposit. 1966 proceeds from the object of a deposit w/c is SAFEKEEPING of a thing. The possibility that the thing may disappear or may be lost or stolen is not present in real property. o Delivery of keys to a house is NOT a deposit of the same & entrusting its care & custody is juridically an AGENCY. ∑however, JUDICIAL DEPOSIT may cover movable as well as immovable property, its purpose being to PROTECT the Rs of parties to a suit. Only CORPOREAL things are contemplated. 1966 does not embrace incorporeal/intangible property such as Rs & actions, for it follows the person of the owner wherever he goes, & is not, by reason of its incorporeality, susceptible of custody in the sense that deposit is juridically understood. Thru it is that the DEEDS/docs in w/c those Rs are contained can be the obj of deposit, but in such a case, they are only the materialized & representative expression of the Rs.
1967. An EXTRAJUDICIAL deposit is either a. VOLUNTARY b. NECESSARY. GR: Deposit is generally voluntary. ∑: It becomes necessary in the 3 cases mentioned in 1996 & 1988: 1. When made in COMPLIANCE w/ a legal obligation; 2. On the occasion of any CALAMITY 3. By TRAVELLERS in hotels & inns 4. (also) By travellers or PASSENGERS w/ common carriers. Ch2. VOLUNTARY DEPOSIT 1968. A VOLUNTARY DEPOSIT is that wherein the delivery is made by the WILL of the depositor. A deposit may also be made by 2/more PERSONS each of whom BELIEVES himself ENTITLED to the thing deposited w/ a 3rd person, who shall deliver it in a proper case to the one to whom it belongs. Voluntary deposit – one wherein the delivery is made by the will of the depositor; or sometimes the depositary may be a 3rd person. Voluntary deposit Necessary deposit The depositor has Lack of free choice in the complete freedom in depositor choosing the depositary Depositor need NOT be owner of the thing. Thus, a carrier, commission agent, lesse, etc may deposit goods temporarily in his possession considering that the contract does not involve the transfer of ownership. As a matter of fact, the depositary cannot dispute the title of the depositor to the thing deposited. The depositary is in estoppel. Where there are several depositors 2/more persons each claiming to be entitled to a thing may deposit the same w/ a 3rd person. In such case, the 3rd person assumes the obligation to deliver to the one to whom it belongs. The action to compel the depositors to settle their conflicting claims among themselves would be in the nature of an INTERPLEADER. Here, one of the depositors is not the owner. 1969. A contract of deposit may be entered into ORALLY or in WRITING. Contracts shall be obligatory in whatever form they may have been entered into provided all the essential requisites for their validity are present. Thus, except for the delivery of the thing, there are no formalities required for the existence of the contract.
1970. [Where DEPOSITARY is CAPACITATED & DESPOSITOR is INCAP] If a person having CAPACITY TO CONTRACT accepts a deposit made by one who is INCAP, → the former 1. shall be subject to all the OBLIGATIONS of a DEPOSITARY, & 2. may be compelled to RETURN the thing by the a. GUARDIAN, or ADMINISTRATOR of the person who made the deposit; or b. DEPOSITOR himself if he should acquire capacity. Under the law, persons who are capable cannot allege the incapacity of those w/ whom they contract. 1971. [Where DEPOSITARY is INCAP & DEPOSITOR is CAPACITATED] If the deposit has been made by a CAPACITATED person w/ another who is NOT, → the DEPOSITOR shall only have an ACTION a. TO RECOVER the thing deposited while it is still in the possession of the depositary, b. TO COMPEL the latter to PAY him a) the amount by w/c he may be ENRICHED/BENEFITED himself w/ the thing or b) its PRICE. ∑ However, if a 3rd person who acquired the thing acted in BF → the depositor may bring an ACTION against him for RECOVERY. GR: The INCAP DEPOSITARY (like a minor or insane person) does not incur the obligation of the depositary. ∑: However, he is LIABLE 1. to RETURN the thing deposited while still inhis possession; & 2. to PAY the depositor a. the amount by w/c he may have benefited himself w/ the thing; or b. its price ∑∑ subject to the R of any 3rd person who acquired the thing in GF.
Sec. 2. OBLIGATIONS of the DEPOSITARY 1972. [Obligaton to KEEP the thing deposited & RETURN it] The depositary is obliged 1. to KEEP the thing SAFELY; & 2. to RETURN it, when required, to the a. depositor b. his heirs & successors, or c. person who may have been designated in the contract. His responsibility, w/ regard to the safekeeping & the loss of the thing shall be governed by the provisions of Title I of this Book. If the deposit is GRATUITOUS → this fact shall be taken into account in DETERMINING the DEGREE of CARE that the depositary must observe. Degree of Care Ordinarily, the depositary must exercise over the thing deposited the same diligence as he would exercise over his property for 2 reasons: 1. Because it an essential requisite of judicial relation w/c involves the depositor’s CONFIDENCE in his GF & trustworthiness; & 2. Because of the presumption that the depositor, in choosing the depositary, took into account the DILIGENCE w/c the depositary is ACCUSTOMED w/ respect to his own property. The depositary cannot excuse himself from liability in the event of loss by claiming that he exercised the same amt of care toward the thing deposited as he would toward his own if such care is less than that required by the circumstances. Rules Applicable – The liability of the depositary for the care & delivery of the thing is governed by the RULES on OBLIGATIONS: 1. He is LIABLE if the loss occurs thru his FAULT or NEGLIGENCE, even if the things was insured (2207) 2. The LOSS of the thing while in his POSSESSION, ordinarily raises a PRESUMPTION of FAULT on his part (1256); 3. The required DEGREE of care is GREATER if the deposit is FOR COMPENSATION than when it is gratuitous. But even when it is gratuitous, due care must still be exercised. Return The thing deposited must be returned to the depositor whenever he claims it, even though a specified term or time for such may have been stipulated in the contract.
1973. [Obligation NOT to TRANSFER Deposit] Unless there is a stipulation to the contrary, the depositary cannot deposit the thing w/ a 3rd person. If deposit w/ a 3rd person is allowed, the depositary is liable for the loss if he deposited the thing w/ a person who is manifestly careless/unfit. The depositary is responsible for the negligence of his EEs. Reason: A deposit is founded on TRUST & CONFIDENCE & it can be supposed that the depositor, in choosing the depositary, has taken into consideration the latter’s qualification. Liability for the Loss 1973: The depositor is liable for the loss of the thing deposited if: 1. He TRANSFERS the deposit w/ a 3rd person WITHOUT AUTHORITY although there is no negligence on his part & the 3rd person; 2. He DEPOSITS the thing w/ a 3rd person who is MANIFESTLY CARELESS/UNFIT although authorized, even in the absence of negligence, or 3. The thing is LOST thru the NEGLIGENCE of his EEs whether the latter are manifestly careless or not. ∑: Exemption from Liability The depositor is NOT responsible in case the thing is lost WITHOUT NEGLIGENCE of the 3rd person w/ whom he was allowed to deposit the thing if such 3rd person is NOT manifestly careless/unfit. 1974. [Obligation NOT to CHANGE WAY of Deposit] The DEPOSITARY may change the way of the deposit if under the circumstances he may reasonable PRESUME that the depositor would CONSENT to the change if he KNEW of the facts of the situation. ∑ However, BEFORE the depositary may make such change, he shall 1. NOTIFY the depositor thereof & 2. WAIT for his decision ∑∑ unless delay would cause danger. The notification & waiting for the depositor’s decision may not be dispensed w/ unless the delay would cause danger. It follows the GR that the depositary must take good care of the thing w/ the diligence of a good father of a family. 1975. [Obligation to COLLECT INTEREST on Choses in Action Deposited] The depositary holding certificates, bonds, securities or instruments w/c EARN INTEREST shall be bound: 1. To COLLECT the latter when it becomes due; 2. To take such steps as may be necessary in order that the securities may PRESERVE their VALUE & the Rs corresponding to them accdg to law. ∑ The above provision shall not apply to contracts for the RENT of SAFETY DEPOSIT BOXES. The depositary is bound to collect not only the INTEREST but also the CAPITAL itself when due.
Contract for rent of Safety Deposit Boxes - Not an ordinary contract of lease of things but a SPECIAL KIND of DEPOSIT. Hence, it is not to be strictly governed by the provisions on deposit. ΩCA Agro-‐ Industrual Dev Corp v CA. The RELATION bet a bank renting out safety-‐deposit boxes & its customer w/ respect to the contents of the box is that of BAILOR & BAILEE. The fact that the safe-‐deposit company does not know, & that it is not expected that it shall know, the character/description of the property w/c is deposited in such safe-‐deposit box does not change that relation. Since the company is, by the nature of the contract, given absolute control of access to the property & the depositor cannot gain access thereto w/o the consent & active participation of the company. 1976. [Obligation NOT to COMMINGLE Things Deposited if so stipulated] Unless there is a stipulation to the contrary, the depositary MAY COMMINGLE GRAIN or other articles of the SAME KIND & QUALITY, in w/c case the various depositors shall own or have PROPORTIONATE INTEREST in the mass. GR: The depositary is permitted to commingle grain or other articles of the same kind & quality. In such case, the various depositors of the mingled goods shall own the entire mass in common & each depositor shall be entitled to such portion of the entire mass as the amt deposited by him bears to the whole. ∑: Unless there is a contrary stipulation. If the articles deposited w/c belong to different depositors are NOT of the same kind & quality, it is the DUTY of the depositary to keep them SEPARATE or at least identifiable as he must return to each depositor the IDENTICAL article delivered. 1977. [Obligation NOT to MAKE USE of the Thing Deposited ∑unless Authorized] The depositary CANNOT MAKE USE of the thing deposited without the EXPRESS PERMISSION of the depositor. Otherwise, he shall be liable for DAMAGES. ∑ However, when the PRESERVATION of the thing deposited requires its USE, it must be used BUT only for that purpose. GR: Deposit is for SAFEKEEPING & not for its use (1978). The UNAUTHORIZED USE by the depositary would make him liable for DAMAGES. ∑: But the depositary may make use of the thing even w/o the express permission of the depositor where such use is NECESSARY for its preservation but in such case, the use is LIMITED for that purpose only.
1978. When the depositary has PERMISSION to USE the thing deposited,→ the contract loses the concept of a deposit & becomes a LOAN/COMMODATUM ∑ except where SAFEKEEPING is still the principal purpose of the contract. The permission shall NOT be presumed & its existence must be proved. Effect if Permission to Use is Given 1. If the thing deposited is NON-‐CONSUMABLE & the depositary has PERMISSION to use the thing, →COMMODATUM, despite the fact that the parties may have denominated it as a deposit, ∑unless safekeeping is still the principal purpose of the contract; 2. If the thing deposited is MONEY or other CONSUMABLE thing →the permission to use it will result in its consumption & converts the contract into a SIMPLE LOAN/MUTUUM. ∑unless safekeeping is still the principal purpose of the contract it is still a DEPOSIT but an IRREGULAR one; hence it is called an IRREGULAR DEPOSIT. Bank deposits are in the nature of irregular loans but they are really loans governed by the law on loans. IRREGULAR DEPOSIT MUTUUM The consumable thing The lender is bound by deposited may be the provisions of the demanded at will by the contract & cannot seek irregular depositor for restitution until the time whose benefit the deposit for payment has arisen. has been constituted The only benefit is that The essential cause for the w/c accrues to the transaction is the depositor. necessity of the borrower. A loan w/ a stipulation to pay interest is for the benefit of both parties. The depositor in an Common creditors enjoy irregular deposit has no preference in the preference over the distribution of the creditors w/ respect to debtor’s property. the thing deposited Permission to use is NOT PRESUMED except when such use is necessary for the preservation of the thing deposited & the BURDEN is on the depositary to prove that permission has been given. Failure by depositor to claim or delay in demanding the return of the thing deposited does NOT imply permission to use the thing deposited as would convert the deposit into a loan.
1979. The depositary is LIABLE for the LOSS of the thing through a FORTUITOUS EVENT: 1. If it is so STIPULATED; 2. If he USES the thing WITHOUT the depositor’s PERMISSION; 3. If he DELAYS its RETURN; 4. If he ALLOWS OTHERS to USE it, even though he himself may have been authorized to use the same. GR: The depositary is NOT liable for LOSS through a FORTUITOUS EVENT without his fault. ∑: 1979 1980. [RELATION bet BANK & DEPOSITOR] FIXED, SAVINGS & CURRENT DEPOSITS of money in BANKS & similar institutions shall be governed by the provisions concerning SIMPLE LOAN. 1. CONTRACT of LOAN –deposits of money in banks are really LOANS to the bank because the bank can use the same for its ordinary transactions & for the banking business in w/c it is engaged. Bank deposits are in the nature of IRREGULAR DEPOSITS. They are really loans because they EARN INTEREST. Hence, they are governed by the provisions on mutuum/simple loan & the rules on the imposition of legal interest. While the bank has the obligation to RETURN the amt deposited, it has however, no obligation to return or deliver the SAME money that was deposited. 2. RELATION of CREDITOR & DEBTOR – The depositor(creditor) lends the bank(debtor) money & the bank agrees to pay the depositor on demand. The deposit AGREEMENT determines the Rs & obligations of the parties. a. A bank’s FAILURE to HONOR a deposit is failure to pay its obligation as DEBTOR (not a breach of trust). It will not constitute estafa thru misappropriation. -‐ Ω Serrano v Central Bank b. The payment by a bank of the amt of depositor’s check is NOT a loan to the latter by the former but a payment by the bank as debtor to the depositor as creditor c. GR: A bank can compensate/set off the deposit in its hands for the payment of indebtedness to it on the part of the depositor. d. Drawee bank is bound by its internal banking rules & regulations & is liable to the depositor for fraud, negligence or delay. e. Bank is engaged in business impressed w/ public interest; requires to observe the highest degree of care. f. Suspension of a bank w/c had fallen into a “distressed financial situation” by order of the Central Bank cannot excuse it from its obligations to depositors who had nothing
g.
whatever to do w/ the Central Bank actuations or the events leading to the bank’s distressed state. -‐ΩOverseas Bank of Mla v CA. But the bank may not be liable to pay interest on the deposit during the period of suspension.
1981. [Where the thing deposited DELIVERED CLOSED & SEALED]When the thing deposited is delivered CLOSED & SEALED, the depositary must RETURN it in the SAME CONDITION, & he shall be liable for DAMAGES should the SEAL/LOCK be BROKEN thru HIS FAULT. FAULT on the part of the depositary is PRESUMED, ∑ unless there is proof to the contrary. As regards the VALUE of the thing deposited, the STATEMENT of the depositor shall be ACCEPTED when the FORCIBLE OPENING is imputable to the depositary, should there be no proof to the contrary. ∑ However, the courts may pass upon the CREDIBILITY of the depositor w/ respect to the value claimed by him. When the SEAL/LOCK is BROKEN, with or without the depositary’s fault → he shall keep the SECRET of the deposit. 1982. When it becomes NECESSARY to OPEN a locked box/receptacle, → the depositary is PRESUMED AUTHORIZED to do so, if a. the KEY has been delivered to him; or b. when the INSTRUCTIONS of the depositor as regards the deposit cannot be executed without opening the box/receptacle. Obligations of the Depositary under 1981 1. RETURN the thing deposited when delivered closed & sealed, in the SAME CONDITION; 2. Pay for DAMAGES should the SEAL/LOCK be BROKEN thru his FAULT (w/c is PRESUMED unless proved otherswise); 3. KEEP the SECRET of the deposit when the seal/lock is broken, with or without his fault. Reason: Depositor constituted the deposit in reliance upon the depositary’s fidelity. As to the VALUE of the thing deposited, the statement of the depositor is prima facie evidence only. The courts may pass upon the credibility of the depositor. 1983.[Obligation to RETURN the PRODUCTS, ACCESSORIES & ACCESSIONS] The thing deposited shall be RETURNED with all its 1. PRODUCTS 2. ACCESSORIES 3. ACCESSIONS. Should the deposit consist of MONEY, the provisions relative to AGENTS in 1896 shall be applied to the depositary. The depositor is the OWNER/or at least represents the owner of the thing deposited. The depositary must, therefore, RETURN not only the thing itself but
also all its products, accessions & accessories w/c are consequence of ownership. Obligation to PAY INTEREST on sums CONVERTED to PERSONAL USE
1896. The agent owes interest on the sums he has applied to his own use from the day on w/c he did so, & on those w/c he still owes after the extinguishment of the agency.
If what has been deposited is MONEY→ the depositary has NO RIGHT to make use thereof & ∴ he is not liable to pay interest. BUT if the depositary be in DELAY or has USED the money w/o permission→ he shall be liable to pay INTEREST as indemnity. The depositary owes interest on the sums he has APPLIED TO HIS OWN USE from the day on w/c he did so, & on those w/c he STILL OWES after the extinguishment of the deposit. 1984. [Depositor Need Not Prove Ownership] 1. The depositary CANNOT DEMAND that the depositor PROVE OWNERSHIP of the thing deposited. 2. Nevertheless, should he DISCOVER that the thing has been STOLEN & who its TRUE OWNER is, → he must ADVISE the latter of the deposit. 3. If the OWNER, in spite of such information, DOES NOT CLAIM it within the period of 1 month → the depositary shall be RELIEVED of all responsibility by RETURNING the thing deposited to the DEPOSITOR. 4. If the depositary has REASONABLE GROUNDS to BELIEVE that the thing has NOT been LAWFULLY ACQUIRED by the depositor → the former may RETURN the same. To constitute a deposit, it is not essential that the depositor be the owner of the thing deposited. To require may open door to BF/fraud to retain the thing. Where 3rd person appears to be owner Paragraphs 2,3 & 4 state the STEPS the depositary should take TO BE RELIEVED OF RESPONSIBILITY w/ respect to the thing deposited. Paragraphs 2 & 4 are similar ∑except that for the application of Par 2, 2 CONDITIONS must exist: 1. The thing deposited must have been STOLEN; & 2. The depositary KNOWS who its TRUE OWNER is. Effect of Failure of Owner to Claim Within 1 Month The 1-‐month period is intended merely for the protection of the depositary. If the thing deposited is returned to the depositor after 1 month, the true owner of the thing may still recover it through other legal processes.
1985. When there are 2/more DEPOSITORS, if they are NOT SOLIDARY, & the thing admits of DIVISION → each one CANNOT demand more than his share. When there is SOLIDARITY or the thing does NOT admit of DIVISION → the provisions of 1212 & 1214 shall govern. ∑ However, if there is a stipulation that the thing should be returned to 1 of the depositors, → the depositary shall return it only to the person designated. Right of 2/more Depositors a. If the thing deposited is DIVISIBLE & depositors NOT SOLIDARY →each one can demand only his share proportionate thereto; b. If the thing deposited is NOT DIVISIBLE or the obligation is SOLIDARY → each one of the solidary depositors may do whatever may be useful to the others but not anything w/c may be prejudicial to the latter (1212)& the depositary may return the thing to any one of the solidary depositors ∑unless a DEMAND (extra/judicial) for its return has been made by one of them in w/c case delivery should be made to him(1214). c. If return to one of the depositors STIPULATED → return should be made only to the person designated although he has not made any demand for its return. 1986. [PERSON to whom Return must be made] If the DEPOSITOR should LOSE his CAPACITY to contract after having made the deposit, → the thing CANNOT be RETURNED ∑ except to the persons who may have the administration of his property & Rs. GR: The depositary is obliged to return the thing deposited when required, to: a. The depositor b. His heirs & successors or c. To the person who may have been designated in the contract. ∑: If the depositor was INCAP at the time of making the deposit → the property must be returned to: a. His guardian/administrator b. The person who made the deposit c. The depositor himself should he acquire capacity. ∑: Even if the depositor had capacity at the time of making the deposit, BUT he subsequently LOSES his CAPACITY during the deposit →the thing must be returned to his LEGAL REP.
1987. [PLACE of Return] If at the time the deposit was made, a PLACE was DESIGNATED for the return of the thing → the depositary must TAKE then thing deposited to such place, BUT he EXPENSES for TRANSPO shall be borne by the DEPOSITOR (because the deposit is constituted for the benefit of the depositor). If NO PLACE was designated for the return → it shall be made WHERE the THING deposited MAY BE, even if it should not be the same place where the deposit was made, PROVIDED that there was NO MALICE on the part of the depositary. The thing must be returned: 1. At the place AGREED UPON by the parties; 2. In the absence of stip, at the place WHERE the THING MIGHT BE, even if it should not be the same place where the orig deposit was made, provided the transfer was accomplished W/O MALICE on the part of the depositary. 1987 is similar to the GR regarding the place of payment. 1988. [TIME of Return] The thing deposited must be RETURNED to the depositor UPON DEMAND, even though a specified period or time for such return may have been fixed. ∑ This provision shall NOT APPLY a. when the thing is JUDICIALLY ATTACHED while in the depositary’s possession, or b. should he have been NOTIFIED of the OPPOSITION of a 3rd person to the return/removal of the thing deposited. In these cases, the depositary must immediately INFORM the DEPOSITOR of the attachment or opposition. GR: The depositor can DEMAND the return of the thing deposited AT WILL whether a period has been stipulated or not. (In a deposit, whenever a period is agreed to, the same is for the benefit of the depositor, but it may be validly waived by him. But the period is generally binding upon the depositary.) ∑: If the deposit is for COMPENSATION, → the depositary is entitled to the compensation corresponding to the entire period. In this case, the period is also for the benefit of the depositary. The rule in commodatum is different (cannot demand return ∑unless emergency) When Depositary is NOT obliged to return the thing deposited 1. when the thing is JUDICIALLY ATTACHED while in the depositary’s possession – if the depositor returns the thing, he would be disobeying the judicial order of attachment; 2. should he have been NOTIFIED of the OPPOSITION of a 3rd person to the return/removal of the thing deposited – to permit depositary to refuse to return the thing simply because of the opposition of another is a power prone to abuse. If
at all, the depositary should only be authorized in case of conflicting claims to CONSIGN the thing in COURT thru an action of INTERPLEADER. 1989. [RIGHT of Depositary to Return the Thing deposited] Unless the deposit is for VALUABLE CONSIDERATION, the depositary who may have justifiable reasons for not keeping the thing deposited may, even before the time designated, RETURN it to the depositor; & if the latter should REFUSE to receive it, → the depositary may secure its CONSIGNATION from the court. Right of depositary to return the thing deposited when: a. Deposit is gratuitous → The depositary may likewise return the thing deposited notwithstanding that a period has been fixed for the deposit if: 1. The deposit is GRATUITOUS & 2. Justifiable reasons exit for its return. If depositor refuses to receive the thing →depositary may consign it in court b. Deposit is for a valuable consideration → the depositary has NO R to return the thing deposited before the expiration of the time designated even if he should suffer inconvenience as a consequence. He is bound by the period & restitution before its expiration constitutes a BREACH of his obligation. 1990. If the depositary by a. FORCE MAJEURE or b. GOVT ORDER LOSES the thing & RECEIVES a. money or b. another thing in its place, → he shall DELIVER the sum/other thing to the depositor. The depositary has the obligation to return the thing deposited but he is not liable for loss of the thing by force majeure or by govt order. ∑However, if in place of the thing he RECEIVES money/another thing →he has the duty to deliver to the depositor what he has received, otherwise unjust enrichment. 1991. The DEPOSITARY’s HEIR who in GF may have SOLD the thing w/c he did NOT KNOW was deposited shall only be bound to a. RETURN the PRICE he may have received or b. ASSIGN his R of action against the buyer in case the price has not been paid by him. 1991 presupposes that the depositary DIES & object of deposit is left w/ his heir who in GF, sells it. The obligation of the heir is LIMITED to the return of the PRICE received or to assign the R to collect the same if it has not been paid & not the real value of the thing. If the heir acts in BF →he is liable for DAMAGES. The sale/appropriation constitutes ESTAFA.
Sec 3. OBLIGATIONS of the DEPOSITOR 1992. [Obligation to PAY EXPENSES of PRESERVATION] If the deposit is GRATUITOUS → the depositor is obliged to REIMBURSE the depositary for EXPENSES he may have incurred for the PRESERVATION of the thing deposited. Obligation to pay expenses of Preservation a. If deposit is GRATUITOUS → depositor must reimburse the depositary because he would have incurred them just the same had the thing remained with him. Rule is different in commodatum → bailee has to pay for ordinary expenses As the law makes no distinction, the R to reimbursement covers ALL necessary expenses for preservation, whether ordinary/extraordinary. ∑useful & luxurious expenses. b. If deposit is for COMPENSATION →the expenses of preservation are borne by the depositary because they are deemed included in the compensation ∑unless there is a contrary stipulation. 1993. [Obligation to PAY LOSSES Incurred due to CHARACTER of the thing deposited] The depositor shall REIMBURSE the depositary for ANY LOSS arising from the CHARACTER of the thing deposited, ∑ unless a. at the time of the constitution of the deposit he was NOT AWARE of the dangerous character of the thing, or b. was NOT EXPECTED to know of the same; c. he NOTIFIED the depositary of the same; d. the latter was AWARE of it w/o advice from the depositor. 1994. [Depositary’s R of RETENTION]The depositary may RETAIN the thing in PLEDGE until the FULL PAYMENT of what may be due him by reason of the deposit. 1994 gives an example of a PLEDGE created by law. The thing retained serves as SECURITY for payment of what may be due to the depositary by reason of the deposit. The R granted in this article is similar to that granted to the agent (1914) The rule is different in commodatum where there is no R of retention ∑unless w/ damages suffered by bailee due to hidden flaws in the thing 1995. A deposit is EXTINGUISHED: 1. Upon the LOSS/DESTRUCTION of the thing deposited; 2. In case of a GRATUITOUS deposit, upon the DEATH of either the depositor/depositary. Depositary is not obliged to continue w/ the contract of deposit. The cases mentioned are NOT EXCLUSIVE. Other causes are novation, merger, return of the thing,
expiration of the term, fulfillment of the resolutory condition, etc (1231). If the deposit is for COMPENSATION → it is NOT EXTINGUISHED by the DEATH of either party because unlike in a gratuitous deposit, an onerous deposit is NOT PERSONAL in nature. Hence, the Rs & obligations arising therefrom are TRANSMISSIBLE to their respective heirs. But the heirs of either party have a R to terminate the deposit even before the expiration of the term.
Ch 3. NECESSARY DEPOSIT 1996. A deposit is NECESSARY: 1. When it is made IN COMPLIANCE w/ a LEGAL OBLIGATION; 2. When it takes place on the occasion of any CALAMITY such as fire, storm, flood, pillage, shipwreck or other similar events. 1997. The deposit referred to in #1 shall be governed by the provisions of law establishing it; & in case of its deficiency, by the rules on voluntary deposit. The deposit in #2 shall be regulated by the provisions concerning voluntary deposit & by 2168. A deposit may be: 1. VOLUNTARY 2. NECESSARY 3. By TRAVELLERS in hotels/inns; 4. By PASSENGERS w/ common carriers. Necessary deposit in compliance w/ a legal obligation • Judicial deposit of a thing the possession of w/c is being DISPUTED in a LITIGATION by 2/more persons; • Deposit w/ a BANK or public institution of PUBLIC BONDS/instruments of credit payable to order/bearer given in USUFRUCT when the usufructuary does not give proper security for their conservation; • Deposit of a thing PLEDGED when the creditor usus the same w/o the authority of the owner or misuses it in any other way; • Those required in suits as provided in the ROC; • Those constituted to GUARANTEE contracts w/ the GOVT. Necessary Deposit made on the occasion of any calamity The possession of movable property passes from one person to another by ACCIDENT or FORTUITOUSLY thru force of circumstances & w/c the law imposes on the RECIPIENT the OBLIGs of a BAILEE. Here, the more immediate object is to SAVE the property rather than its safekeeping. A.k.a Involuntary Bailment/Involuntary Deposit. Owner is bound to pay JUST COMPENSATION. (a quasi-‐contract) There must be a CASUAL RELATION bet the CALAMITY & the constitution of the DEPOSIT (DEPOSITO MISERABLE).
1998. [DEPOSIT by TRAVELLERS in HOTELS & INNS] The deposit made by TRAVELLERS in HOTELS & INNS shall also be regarded as NECESSARY. The KEEPERS of hotels/inns shall be RESPONSIBLE for them as DEPOSITARIES, provided, that 1. NOTICE was given to them, or to their EEs, of the effects brought by the guests & 2. on the part of the latter, they take PRECAUTIONS w/c said hotel-‐keepers or their substitutes advised relative to the care & vigilance of their effects. 1999. The HOTEL-‐KEEPER is liable for the VEHICLES, ANIMALS, & ARTICLES w/c have been introduced/placed in the annexes of the hotel. Before the KEEPERS of hotels/inns may be held responsible as depositaries, w/ regard to the effects of their guests, the ff ELEMENTS must concur: 1. They have been PREVIOUSLY INFORMED about the effects brought by the guests & 2. The GUESTS have taken the PRECAUTIONS prescribed regarding their safekeeping. Extent of Liability of Keepers of Hotels & Inns Not limited to the effects lost/damaged in the hotel rooms w/c come under the term “baggage” or articles such as clothing as are ordinarily used by travellers, BUT INCLUDE those lost/damaged in HOTEL ANNEXES such as vehicles in the hotel’s garage. The responsibility imposed EXTENDS to those who OFFER LODGING for COMPENSAITON, whatever may be their character. Travellers/Guests – refers to TRANSIENTS & not to boarders. (non-‐transients are governed by the rules on lease) Hotel-‐keeper/Inn-‐keeper – synonymous Hotel – a building of many rooms chiefly for overnight accommodation of transients & several floors served by elevators, usually w/ a large open street-‐level lobby containing easy chairs, w/ a variety of compartments for eating, drinking, dancing, exhibitions, & group mtgs, w/ shops having both inside & street-‐side entrances & offering for sale items of particular interest to a traveller, or providing personal services & w/ telephone booths, writing tables, & wash rooms freely available. Inn – a public house for the lodging of travellers; a place of public entertainment that does not provide lodging Motel – an establishment w/c provides lodging & parking & w/c the rooms are accessible from an outdoor parking area.
2000. [When HOTEL-‐KEEPER is LIABLE] The responsibility referred to in the 2 preceding articles shall INCLUDE the LOSS of or INJURY to the PERSONAL PROPERTY of the guests caused by 1. the SERVANTS or EEs of the keepers of hotels/inns; 2. by STRANGERS, ∑ but NOT that w/c may proceed from any FORCE MAJEURE. The fact that travellers are constrained to RELY on the VIGILANCE of the keeper of the hotel/inn shall be considered in determining the DEGREE of CARE required of him. 2001. The act of a THIEF/ROBBER, who has entered the hotel is NOT deemed FORCE MAJEURE, ∑ unless it is done a. w/ the use of ARMS or b. through an IRRESISTIBLE FORCE. 2002. The HOTEL-‐KEEPER is NOT liable for compensation if the LOSS a. is due to the ACTS of the GUESTS, his family, servants, or visitors; or b. arises from the CHARACTER of the things brought into the hotel. When hotel keeper is LIABLE: The hotel-‐keeper is liable regardless of the amount of care exercised if: a. The loss/injury is caused by his SERVANTS/EES as well as by STRANGERS, provided that NOTICE has been given & proper PRECAUTIONS taken; b. The loss is caused by the act of a THIEF/ROBBER done WITHOUT the use of arms/irresistible force, for in this case, the hotel-‐keeper is apparently negligent. When hotel-‐keeper is NOT LIABLE a. The loss/injury is caused by FORCE MAJEURE like flood, fire, THEFT/ROBBERY by a STRANGER(not by hotel servant/ee) w/ the use of ARMS/IRRESISTIBLE FORCE ∑unless he is guilty of FAULT/NEGLIGENCE in failing to provide against the loss/injury from his cause; b. The loss is due to the ACTS of the GUESTS, his family, servants or visitors; c. The loss arises from the CHARACTER of the things brought into the hotel. 2003. [EXEMPTION/DIMINUTION of LIABILITY] The hotel-‐keeper cannot free himself from responsibility by POSTING NOTICES to the effect that he is not liable for the articles brought by the guest. Any STIPULATION bet the hotel-‐keeper & the guest whereby the responsibility of the former as set forth in 1998-‐2001 is SUPPRESSED/DIMINISHED shall be VOID. This rule is similar to the rule on common carriers w/c does not allow a common carrier to dispense w/ or limit his responsibility by stipulation or by posting notices. Contrary to law, morals, etc.
Hotel-‐keepers/inn-‐keepers, in offering their accommodations to the public, practically volunteer as depositaries & as such, shld be subj to an EXTRAORDINARY DEGREE of responsibility for the protection & safety of travellers who have no alternative but to rely on the GF of those w/ whom they take lodging. Furthermore, inn-‐keepers, by the very nature of their business, have SUPERVISION & CONTROL of their inns & the premises thereof. In fact, authorities are to the effect that it is not necessary in order to hold an inn-‐keeper liable that effects of the guests be actually delivered to him or his EEs. It is enough that they are within the inn. 2004. [Hotel-‐keeper’s R to RETAIN] The hotel-‐keeper has a R to RETAIN the things brought into the hotel by the guest, as SECURITY for CREDITS on account of LODGING & SUPPLIES usually furnished to hotel guests. This is in the nature of a PLEDGE created by operation of law. The bailee in commodatum may likewise retain the thing loaned for damages by reason of defects thereof. Incidentally, the act of obtaining food or accommodation in a hotel/inn without paying therefor constitutes ESTAFA.
Ch 4. SEQUESTRATION or JUDICIAL DEPOSIT 2005. A JUDICIAL DEPOSIT/SEQUESTRATION takes place when an ATTACHMENT/SEIZURE of property in litigation is ordered. 2006. MOVABLE as well as IMMOVABLE property may be the object of sequestration. 2007. The depositary of property/objects sequestrated CANNOT be RELIEVED of his responsibility until the controversy w/c gave rise thereto has come to an end, ∑ unless the court so orders. 2008. The depositary of property sequestrated is bound to COMPLY w/ respect to the same, w/ all the obligations of a GOOD FATHER of a FAMILY. NATURE & PURPOSE of Judicial Deposit AUXILIARY to a case pending in court. The purpose is to maintain the status quo during the pendency of the litigation or to insure the R of the parties to the property in case of a favorable judgment. Obligation of depositary of sequestrated property Depositary of sequestrated property is the person APPOINTED by the court. He has the OBLIG to take care of the property w/ the DILIGENCE of a GOOD FATHER of a FAMILY & he may not be relieved of his responsibility until the litigation is ended or the court so orders. JUDICIAL Deposits EXTRAJUDICIAL Deposits Will of the court Will of the parties Purpose is SECURITY of SAFEKEEPING of thing the R of party in case of favorable judgment Object may be Movables only movable/immovable Always onerous Generally gratuitous; but may also for compensation Whose behalf it is held: a Depositor or 3rd person person by judgment who designated has a R 2009. As to matters not provided for in this Code, judicial sequestration shall be governed by the ROC Rule 57 – preliminary attachment Rule 59 – Receivership Rule 60 – Replevin Rule 127 – Attachment in criminal cases
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