ETRIII
CIVIL LAW REVIEW Lecture Series
OUTLINE/ LECTURE ON
CREDIT TRANSACTIONS
By: Atty. Eduardo T.
Reyes, III
(Prepared for Law 4-C,
Univ. of San Agustin Law School,
SY 2016-2017)
I.
Contract
of Loan.
1.1.Defined.
By
the contract of loan, one of the parties called the bailor or lender delivers
to another called the borrower or bailee, either something not consumable so
that the latter may use the same for a certain time and return it, in which
case it is called a commodatum ; or money or other consumable thing, upon the
condition that the same amount of the same kind and quality shall be paid, in
which case the contract is simply a loan or mutuum.
1.2.Characteristics.
a) Real
Contract. Commodatum or simple loan is PERFECTED upon delivery of
the object of the contract.
b) Unilateral.
There
is NO contract of loan before delivery by the lender. However, in Development Bank of the Phils v. Guarina
Agricultural and Realty Development Corp.,[1]
it was held that “x x x a loan requires
the delivery of money or any other consumable object by one party to another
who acquires ownership thereof, on the condition that the same amount or
quality shall be paid. Loan is a
reciprocal obligation, as it arises from the same cause where one party in
a reciprocal obligation is dependent upon the obligation of the other, and the
performance should ideally be simultaneous.”
1.3.
Kinds of Loan
a) Commodatum
b) Mutuum
c) Accepted
promise to loan (Art. 1934). This is a CONSENSUAL
contract which is preparatory to a contract of
loan.
d) Discounting.
Mode
of lending money where interest is withheld in advance.
e) Revolving
Credit.- A credit line is “that amount of money or merchandise
which a banker, merchant, or supplier agrees to supply to a person on credit
and generally agreed to in advance. It is the fixed limit of credit granted by
a bank, retailer, or credit card issuer to a customer, to the full extent of
which the latter may avail himself of his dealings with the former but which he
must not exceed and is usually intended to cover a series of transactions in
which case, when the customer’s line of credit is nearly exhausted, he is
expected to reduce his indebtedness by payments before making any further
drawings”[2].
f) Credit
Card. – “The issuance of a credit card allows the holder thereof
to obtain, on credit, goods, and services from certain establishments. As proof
that this credit is extended by the establishment, a credit card draft is
issued. Thereafter, the company issuing the credit card will pay for the
purchases of the credit card holders by redeeming the drafts. The obligation to
collect from the card holders and to bear the loss- in case they do not pay-
rests on the issuer of the credit card”[3].
Three contracts. (1) Contract of sale
between the card holder and the merchant or business establishment that
accepted the credit card; (2) The loan agreement between the credit card holder
and the credit card issuer; and (3) The promise to pay between the credit card
issuer and the merchant or business establishment”[4].
No Duty to Approve. “From the
loan agreement perspective, the contractual relationship begins to exist only
upon the meeting of the offer and acceptance of the parties involved. In
more concrete terms, when cardholders use their credit cards to pay for their
purchases, they merely offer to enter into loan agreements with the
credit card company. Only after the latter approves the purchase requests that
the parties enter into binding loan contracts, in keeping with Article 1319 of
the Civil Code x x x”[5].
SUMMARY OF RULES AND DISTINCTIONS BETWEEN COMMODATUM, SIMPLE LOAN AND DEPOSIT[6]
COMMODATUM
|
SIMPLE LOAN
|
VOLUNTARY DEPOSIT
|
The purpose is the
use of the thing.
NOTE: Use of the
fruits is not included unless expressly provided for.[7]
|
The purpose is for
the borrower to consume what was borrowed.
|
The purpose is
safe-keeping.
|
Real contract
perfected upon delivery.
|
Real Contract
|
Real Contract
|
Movable and
Immovable Things
|
Involves Movables
|
(1) Extrajudicial
Deposit- Movables only[8]
(2) Judicial
Deposit- Movable and Immovable
|
Essentially
Gratuitous
NOTE: If onerous or
compensation is paid, then contract may be Lease.[9]
|
May be Gratuitous
or Onerous (Example: If interest is
payable)
|
May be Gratuitous
or Onerous
|
The object is
generally non-consumable
EXCEPTION: If the
purpose is not for consumption but for exhibition.
|
The object is money
or other fungible things.
|
Consumable or
non-consumable although for safekeeping only
|
Bailor/ Lender retains
ownership of the thing delivered
|
Bailor/ Lender
becomes the owner of the thing delivered
|
Depositor retains
ownership of the thing delivered
|
There is an
obligation to return the same thing.
|
The bailee/
borrower becomes the owner; hence, there is no obligation to return the same
thing.
|
The Depositary must
return the same thing.
|
Death of the lender
or the borrower extinguishes Commodatum because it is purely PERSONAL in
character.[10]
|
Death of the lender
does not extinguish the loan.
|
If gratuitous deposit-
Death of the depositor or the depositary extinguishes the deposit.[11]
If for
compensation- Death of the depositor and or the depositary DOES NOT
extinguish the deposit.
|
Generally, the
bailor bears the loss of the thing due to fortuitous event.
|
The bailee-borrower
bears the loss of the thing delivered. Res
perit domino.
|
Generally, the
depositor bears the loss of the thing due to fortuitous event.
|
The bailor/ lender
need not be the owner of the thing loaned.
|
The lender- bailor
must be the owner or at least capable of transferring ownership.
|
The depositor need
not be the owner of the thing deposited. However, the depositary CANNOT be
the owner of the thing deposited.
|
Generally, the
lender must wait for the expiration of the period agreed upon or the accomplishment
of the use for which the commodatum has been constituted.[12]
|
The lender- bailor
must wait for the expiration of the period agreed upon.
|
The depositor can
demand the return of the thing at anytime.
|
II.
Commodatum.
The
main purpose is USE of the thing loaned. But the right to the FRUITS is
retained by the OWNER. Thus the distinction from USUFRUCT whereby the
usufructuary gets to enjoy the right to use and to the fruits.
-It is also ESSENTIALLY
GRATUITOUS and TEMPORARY because the agreement is subject to a term or period.
Pursuant to Article 1935, “If any compensation is to be paid by him
who acquires the use, the contract ceases to be a commodatum”.
-
General rule: Object is “non-consumable
goods”.
-
Exception: When consumable goods is USED
merely for exhibition. In Producers Bank
of the Philippines v. Hon. Court of Appeals[15],
the agreement to deposit respondent’s money in a savings account
specifically for the purpose of making it appear that said firm had sufficient
capitalization for incorporation, with the promise that the amount shall be
returned within 30 days is commodatum.
-
PERSONAL IN NATURE. Commodatum is purely
personal in character. Consequences: a. death of either bailor or bailee
extinguishes the contract; b. bailee cannot lease the object of the contract to
a third person. However, the members of the bailee’s household may make use of
the thing loaned, unless there is a stipulation to the contrary, or unless the
nature of the thing forbids such use.[16]
2.1.
Obligations of the Bailee.
(1) To exercise due diligence while in possession
of the thing loaned.
(2) To pay
ordinary expenses for the use and preservation of the thing loaned.
(3) To be responsible for the loss of the thing
in the cases specified in Article 1942
(4) To be liable for any loss or injury caused
because of the bailee’s fault or negligence; and,
(5) To return the thing upon the expiration of
the term of the contract.
Expenses
for Preservation. “If a
person is obliged to return a determinate thing, he must exercise the diligence
of a good father of a family in taking care of the thing. The bailee is liable
for breach of this duty, hence, the bailee is liable for any loss due to his
negligence.
a.
As part of
the duty to exercise due diligence, the bailee is obliged to pay for the
ordinary expenses for the use and preservation of the thing loaned. If the
thing loaned is a gasoline generator set, the bailee must shoulder the gasoline
cost because the same cost is for the use of the thing loaned. Similarly, the
bailee is liable for the expenses for the regular routine cleaning of the
generator set because the same is an expense for the preservation of the thing
loaned.
b.
However,
the bailee does not answer for the deterioration of the thing loaned due only
to the use thereof and without his fault. Justice J.B.L. Reyes opined that the
provision should be taken to refer only to the “normal” use of the thing
loaned. It should be noted that the bailee is even liable for extraordinary
expenses arising from the use of the thing.[17]”
LOSS. The bailee is liable for the loss
of the thing, even if it should be through a fortuitous event in the following
cases:
(1) He devotes the thing to any purpose different
from that for which it has been loaned;
(2) If he keeps it longer than the period
stipulated, or after the accomplishment of the use for which the commodatum has
been constituted;
(3) If the thing loaned has been delivered with
appraisal of its value, unless there is a stipulation exempting the bailee from
responsibility in case of a fortuitous event
(4) If he lends or leases the thing to a third
person, who is not a member of his household;
(5) If, being able to save either the thing
borrowed or his own thing, he chose to save the latter.
RIGHT OF
RETENTION:
GENERAL RULE: 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.
EXCEPTION: However,
the bailee has a right of retention for damages mentioned in Article 1951, i.e., the bailor is liable to the bailee if
the bailee was damaged because of a flaw or defect in the thing of which the
bailor was aware. The bailor cannot exempt himself from liability by abandoning
the thing.
SOLIDARY
LIABILITY. – “When there are two or more bailees to whom a
thing is loaned in the same contract, they are liable solidarily[18]”.
2.2.
Obligations of the Bailor
General
Rule: Bailor
cannot demand the return of thing until after the expiration of the period
stipulated or accomplishment of the use for which commodatum was
constituted.
Exceptions:
a) PRECARIUM- In precarium, the bailor may
demand the thing at will. 1)If neither the duration of the contract nor the use
to which the thing loaned should be devoted has been stipulated; or, 2) If the
use of the thing is merely tolerated by the owner.
“It was opined that the second case of
precarium should be taken as a case where the “use of the thing was understood
to have been granted subject to the revocation at anytime by the bailor.
Justice J.B.L. Reyes observed that: “Commodatum being a gratuitous loan of the
use of a thing, it necessarily implies toleration of such use. Unless the term
‘tolerated’ is limited, all commodatum will be ‘precarium’ under this rule.
Moreover, the use of the term ‘owner’ for ‘bailor’ is improper, because Article
1938 specifies that the bailor may not be the owner.[19]”
b) URGENT NEED- Bailor may temporarily ask for the return of the thing in case of
urgent need.
c) ACTS OF INGRATITUDE- Commodatum being
essentially gratuitous it partakes of the nature of a donation. Hence, Article
1948 provides for the same grounds for revocation of donation as grounds for
revocation of commodatum.
3. Simple Loan or Mutuum . A person
who receives a loan of money or any other fungible thing acquires the ownership
thereof, and is bound to pay to the creditor an equal amount of the same kind
and quality.[20]
3.1.
Money or
Fungibles. The contract of mutuum
requires the receipt of money or other fungible things. Fungibility refers
to the capability of the object to be substituted by another of the same kind,
quantity or quality.
3.2.
Transfer
of Ownership. In mutuum, ownership
is transferred to the borrower. Hence, in simple loan, the failure of the
borrower to return the object does not give rise to estafa.
3.3.
Interest . requisites.
a) Payment of interest is agreed upon;
b) Stipulation to Pay Interest must be in
writing;
c) Rate
must not be against the law (not usurious or unconscionable)
“In
summary, the rules (on interest) may be presented in tabular form as follows:
TYPE OF OBLIGATION
|
INTEREST DUE
|
ADDITIONAL INTEREST
|
1. When the
obligation is breached, and in the payment of a sum of money, i.e., a loan or forbearance of money.
|
- The interest due
should be that which may have been stipulated in writing.
|
a. Interest due
shall itself earn legal interest from the time it is judicially demanded. In
the absence of stipulation, the rate of interest shall be 6% per annum to be computed from default;
b. If court awards
a sum of money and the award becomes final and executor, the rate of legal
interest, shall be 6% per annum from such finality until its satisfaction.
|
2. When an
obligation not constituting a loan or forbearance of money is breached.
|
- an interest on
the amount of damages awarded may be imposed at the discretion of the court
at the rate of 6% per annum.
|
Court awards a sum
of money which becomes final and executor, the rate of legal interest shall
be 6% per annum from such finality
until its satisfaction, this interim period being deemed to be by then an
equivalent to a forbearance of credit.
|
3. Unliquidated claims
or damages
|
- no interest until
final judgment
-the legal interest
of 6% shall be on the amount finally adjudged by the Court.
|
IV.DEPOSIT
4.1.Definition.
There
is deposit when one person delivers and the other person receives a thing
belonging to another, with the obligation of safely keeping it and of returning
the same.[21]
4.2.
Characteristics.
a)
It is a real contract, that is, it is
perfected by delivery;
b)
It is a principal contract;
c)
It can be unilateral if it is gratuitous or
bilateral if it is onerous. But GENERALLY GRATUITOUS. Per Article 1965, New Civil Code, A contract of deposit is gratuitous
save in cases of: 1) when there is an agreement to the contrary; or 2) the
depositary is engaged in the business of storing goods.
d)
Its purpose is safekeeping
e)
It involves temporary custody of the
depositary as there is an obligation to return; and,
f)
It involves temporary custody of corporeal
personal property.[22]
Distinguished
from Lease. Read RCG Bus Lines, Inc. v. Master Tours and Travel Corp.[23]
“To begin with, the cause in a contract of lease is the enjoyment of
the thing; in a contract of deposit, it is the safekeeping of the thing.6
They thus create essentially distinct obligations that would result in a
novation only if the parties entered into one after the other concerning the
same subject matter. The turning point in this case, therefore, is whether or
not the parties subsequently entered into an agreement for the storage of the
buses that superseded their prior lease agreement involving the same buses.
Although the buses were described in the lease agreement as “junked and not
operational,” it is clear from the prescribed manner of payment of the rental
fee (P400,000.00 down and P200,000.00 upon completion of their rehabilitation)
that RCJ would rehabilitate such buses and use them for its transport business.
Now, RCJ’s theory is that the parties subsequently changed their minds and
terminated the lease but, rather than have Master Tours get back its junked
buses, RCJ agreed to store them in its garage as a service to Master Tours
subject to payment of storage fees. Two things militate against RCJ’s theory.
First, RCJ failed to present any clear proof that it agreed with Master Tours
to abandon the lease of the buses and in its place constitute RCJ as depositary
of the same, providing storage service to Master Tours for a fee. The only
evidence RCJ relied on is Master Tours’ letter of June 16, 1997 in which it
demanded the return of the four buses which were placed in RCJ’s garage for
“safekeeping.” The pertinent portion of the letter reads: This is to follow up
our previous discussion with you with regards to the Five (5) units of Daewoo
Airconditioned Motorcoaches, which we brought to your garage at E. Rodriguez
Avenue for safekeeping. Since we have outstanding loan with BancAsia Finance
& Investment Corporation and BancAsia Capital Corporation that we are
unable to service payment, they have made final demand to us and are in the
process of foreclosing these units. We urgently request from you a meeting
to thresh out matters concerning the pulling of these units by the financing
firms.7 For one thing, the letter does not on its face constitute an agreement.
It contains no contractual stipulations respecting some warehousing arrangement
between the parties concerning the buses. At best, the letter acknowledges that
five Master Tours’ buses were “brought to your [RCJ’s] garage…for safekeeping.”
But the idea of RCJ safekeeping the buses for Master Tours is consistent with
their lease agreement. The lessee of a movable property has an obligation to
“return the thing leased, upon the termination of the lease, just as he
received it.”8 This means that RCJ must, as an incident of the lease, keep the
buses safe from injury or harm while these were in its possession. For another,
it is evident from the tenor of Master Tours’ letter that RCJ’s “safekeeping”
was to begin from the time the buses were delivered at its garage. There is no
allegation or evidence that Master Tours pulled out the buses at some point,
signifying the pre-termination of the lease agreement, then brought them back
to RCJ’s garage, this time for safekeeping. This circumstance rules out any
notion that an agreement for RCJ to hold the buses for safekeeping had
overtaken the lease agreement. Second, it did not make sense for Master Tours
to pre-terminate its lease of the junked buses to RCJ, which would earn Master
Tours P600,000.00, in exchange for having to pay RCJ storage fees for keeping
those buses just the same. As pointed out above, the lease already implied an
obligation on RCJ’s part to safekeep the buses while they were being rented.
Two. RCJ claims that it cannot be held liable to Master Tours for rental fee on
the buses considering that these never became operational. The pertinent
portions of the lease agreement provide: 7 The letter mentions five buses but
the contract refers only to four buses; Section 1. Lease of AIRCON BUSES – The LESSOR
hereby agrees and shall deliver unto the LESSEE the AIRCON BUSES by way of a
long term lease of said buses. Section 2. Term of Lease – The lease of the
AIRCON BUSES shall be for a period of FIVE (5) years to commence on 15 February
1993 and to end automatically on 15 February 1998. x x x Section 3. Lease Fee –
For and in consideration of the lease of the AIRCON BUSES subject hereof, the
lease fee for five years for the Four (4) units shall be in the amount of
PESOS: SIX HUNDRED THOUSAND (P600,000.00). The LESSEE agrees to advance the
amount of PESOS: FOUR HUNDRED THOUSAND (P400,000.00) payable upon the signing
of the Agreement. The remaining balance of PESOS: TWO HUNDRED THOUSAND
(P200,000.00) will be payable upon completion of rehabilitation of the 4 buses
by the lessee.9 The Court finds no basis in the above for holding that RCJ’s
obligation to pay the rents of P600,000.00 on the buses depended on the buses
being rehabilitated. Apart from delivering the buses to RCJ, the agreement did
not require any further act from Master Tours as a condition to the exercise of
its right to collect the lease fee. Of course, the lease agreement provided for
two payments: P400,000.00 upon the signing of the agreement and P200,000.00
upon completion of rehabilitation of the buses. But this provision is more
about the mode of payment rather than about the extinguishment of the
obligation to pay the amounts due. The phrase “upon completion of
rehabilitation” implies an obligation to complete the rehabilitation which, in
this case, wholly depended on work to be done “by the lessee.” That the buses
may have turned out to be unsuitable for use despite repair cannot prejudice
Master Tours. X x x”
4.3.
Free Valet Parking. Read Triple- V Food Services, Inc. v. Filipino
Merchants Insurance Co.[24]
“When a restaurant offers free
valet parking to its customers, the restaurant company is constituted as
DEPOSITARY. The customer entrusts his or her car to the restaurant with the
expectation of the car’s safe return at the end of the meal. The stipulation in
the “Parking stub” holding the restaurant not liable for any damage- being a
contract of adhesion- is void in view of the nature of the transaction.”[25]
4.4.
Safety Deposit Box.
Question:
Is it governed by
Contract of Lease (Title VII, Book IV of the Civil Code) or Deposit under
(Title XII, Book IV)?
It
is not a contract of lease. It is governed by Section 53 of the General Banking
Law being one of the functions of a bank which is to : (5)Rent out safety deposit boxes”. “The depositary’s responsibility is still
found within the parameters of a contract of deposit”, I.E., the receiving in custody of the funds, securities and other effects which it
receives duly separate from the bank’s own assets and liabilities.”
4.5.
Escrow Agreements v. Escrow Deposit
-
X x x An
escrow fills a definite niche in the body of the law; it has a distinct legal
character. The usual definition is that an escrow is a written instrument which
by its terms imports a legal obligation and which is deposited by the grantor,
promisor, or obligor, or his agent with a stranger or third party, to be kept
by the depositary until the performance of a condition or the happening of a
certain event, and then to be delivered over to the grantee, promise, or
obligee.
While originally, the doctrine of escrow
applied to deeds by way of grant, or as otherwise stated, instruments for the
conveyance of land, under modern theories of law, the term escrow is not
limited in its application to deeds, but is applied to the deposit of any
written instrument with a third person. Particular instruments which have been
held to be the subject of an escrow include bonds or covenants, deeds,
mortgages, oil and gas leases, contracts for the sale of land or for the
purchase of personal property, corporate stocks and stock subscriptions,
promissory notes or other commercial paper, insurance applications, indentures
of apprenticeship, receipts assigning concessions and discontinuances and
releases of causes of action. Moreover, it is no longer open to question
that money may be delivered in escrow.
-
Escrow Deposit. According to Prof. Timoteo B. Aquino: “It is
submitted, however, that bank deposits that are considered “escrow deposit” are
not governed by the rules on the contract of deposit. The law on mutuum still
applies to the deposit itself. However, the bank must perform the service of
releasing of the escrow fund subject to certain conditions. For instance, if
the parties in a contract of sale agreed to deposit the price in escrow, the
release by the bank of the funds to the seller may be subject to the condition
that the seller must submit the title and the tax declaration in the name of
the buyer. Hence the purpose of the deposit is not for safekeeping”[26].
4.6.
USE OF THE THING. Gen. Rule- Depositary cannot use the thing
because the purpose of the contract is only for SAFEKEEPING.
Exceptions:
(1) The
preservation of the thing requires its use (Article 1977, New Civil Code)
(2) Irregular
deposit (Article 1978, New Civil Code).
4.6.1.
Irregular Deposit v. Loan.
In Rogers v. Smith Bell & Co.,[27] it was
held that:
“Manresa,
in his Commentaries on the Civil Code (vol. 11, p. 664), states that there are
three points of difference between a loan and
an irregular deposit. The first difference which he points out consists
in the fact that in an irregular deposit the only benefit is that which accrues
to the depositor, while in a loan the essential cause for the transaction is
the necessity of the borrower. The contract in question does not fulfill this
requirement of an irregular deposit. It is very apparent that it was not for
the benefit of Rogers. It, like any other loan of money, was for the benefit of
both parties. The benefit which Smith, Bell & Co., received was the use of
the money; the benefit which Rogers received was the interest on his money. In
the letter in which Smith, Bell & Co., on the 30th of June,
1888, notified the plaintiff of the reduction of the interest, they said: “We
call your attention to this matter in order that you may if you think best
employ you money in some other place”.
Nor
does the contract in question fulfill the third requisite indicated by Manresa,
which is, that in an irregular deposit, the depositor can demand the return of
the article at anytime, while the lender is bound by the provisions of the
contract and cannot seek restitution until the time for payment, as provided in
the contract, has arisen. It is apparent from the terms of this documents that
the plaintiff could not demand his money at anytime. He was bound to give
notice of his desire for its return and then to wait for six months before he
could insist upon payment”.
4.7.
Depositor’s Right to Sell. With respect to the depositor, his right to
sell would depend on whether or not he is the owner or is authorized to sell
the thing deposited. The depositor who is not the owner must also secure the
necessary authority to sell from the owner[28].
4.8.
Right 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.
4.9.
Necessary Deposits.
4.9.1. Hotels and
Inns. Read
Durban
Apartments Corp. v. Pioneer Insurance and surety Corp.[29]
“Article 1962, in relation to Article 1998, of
the Civil Code defines a contract of deposit and a necessary deposit made by
persons in hotels or inns:
Art. 1962. A deposit is constituted from the
moment a person receives a thing belonging to another, with the obligation of
safely keeping it and 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.
Art. 1998. The deposit of effects made by travelers in hotels or
inns shall also be regarded as necessary. The keepers of hotels or inns shall
be responsible for them as depositaries, provided that notice was given to
them, or to their employees, of the effects brought by the guests and that, on
the part of the latter, they take the precautions which said hotel-keepers or
their substitutes advised relative to the care and vigilance of their effects.
Plainly, from the facts found by the lower courts, the insured See
deposited his vehicle for safekeeping with petitioner, through the latters
employee, Justimbaste. In turn, Justimbaste issued a claim stub to See. Thus, the
contract of deposit was perfected from Sees delivery, when he handed over to
Justimbaste the keys to his vehicle, which Justimbaste received with the
obligation of safely keeping and returning it. Ultimately, petitioner is liable
for the loss of Sees vehicle.
Vehicles.
“The hotel-keeper is
liable for the vehicles, animals and articles which have been introduced or
placed in the annexes of the hotel.[30]
Liability for Acts of Servants and
Employees- Art. 2000
Thief
and Robber. The act of
a thief or robber who has entered the hotel is not deemed force majeure.
Exception: The act of a thief or
robber is a defense if it is done with the USE OF ARMS or through IRRESTIBLE
FORCE. Hence the depositary is not liable under this exception.
NOT
LIABLE FOR ACTS OF GUESTS. If loss is
caused
(1)
due to
acts of guest, his family, servants or visitors, or
(2)
if the
loss arises from the character of the things brought into the hotel[31]
Prohibited
Acts. The hotelkeeper
cannot free himself form responsibility by posting notices to the effect that
he is not liable for the articles brought by the guest.
“Any
stipulation between the hotelkeeper and the guest whereby the responsibility of
the former is suppressed or diminished.[32]”
Burden of
Evidence. “One who,
while a guest at an inn or hotel, has lost his goods, is not bound, in an
action against the innkeeper, to prove negligence on the part of the defendant
or his servants. Proof of the loss suffices to make out a prima facie case, and
casts upon the defendant the burden of showing facts which will exonerate him
of liability. The innkeeper is said to be liable as an insurer of the goods
which have been intrusted to him.
This
rule is of almost universal application, but some jurisdictions apply the rule
of measuring liability by the negligence of the innkeeper or his servants, a
very high degree of care being demanded, and a presumption of negligence
arising from the fact of loss. Such a rule is, in effect, an application of the
res ipsa loquitur doctrine, and to
avoid liability the innkeeper must show that the loss was due to some other
cause than his own or his servant’s or agent’s fault.
Even
under the prevailing rule that he is an insurer, the innkeeper is not bound to
establish, in order to escape liability, that the loss of the plaintiff’s
property was caused by inevitable accident or an irresistible force. The rule
has been thus stated in a leading case: “The general doctrine deducible from
the authorities, ancient and modern, is that keepers of public inns are bound
well and safety to keep the property of their guests accompanying them at the
inn; and in case of such property is lost of injured, the innkeeper can only
absolve himself from liability by showing that the loss or injury occurred
without any fault on his part, or by the fault of the guest, his companions or
servants or by superior force; and the burden of proof to exonerate the
innkeeper is upon him, for in the first instance the law will attribute the
loss injury to his fault.”
The
rule of strict liability does not apply to the loss or to the damage of the
goods of permanent boarders and other parties who have a special
contract as to board.”[33]
V.GUARANTY. By guaranty, a
person, called the guarantor, binds himself to the creditor to fulfill the
obligation of the principal debtor in case the latter should fail to do so.[34]
5.1. Guaranty & Suretyship v. Mortgage,
Pledge & Antichresis
v The contracts of guaranty and suretyship are
both PERSONAL SECURITY TRANSACTION that secures a principal obligation – it is
the personal obligation of the natural or juridical entity. They should be
distinguished from REAL SECURITY AGREEMENT like mortgage, pledge and
antichresis where property is given by way of collateral.[35]
v Excussion. The liability of the guarantor is
SUBSIDIARY. The guarantor cannot be compelled to pay the creditor unless:
a.
The
creditor has EXHAUSTED all the property of the debtor; and
b. The creditor has resorted to all the legal
remedies against the debtor.
VI.SURETYSHIP
SURETY
|
GUARANTY
|
The
surety insures the debt- the surety’s undertaking is that the debt shall be
paid.
|
The
guarantor insures the debtor’s solvency- the guarantor’s undertaking is that
the debtor shall pay.
|
The
surety is solidarily and primarily liable
|
The
guarantor is subsidiarily liable.
|
The
surety is not entitled to the benefit of excussion.
|
The
guarantor is entitled to the benefit of excussion.
|
VII.PLEDGE AND MORTGAGE
7.1.
Requirements COMMON to Pledge and Mortgage
a) They must
be constituted to secure the fulfillment of a principal obligation
b) The
mortgagor or pledger must be the absolute owner of the thing pledged or
mortgaged
c) The
pledger or mortgagor must have free disposal of the property.
7.2. Who may pledge or mortgage. The
debtor himself or a Third Person (who are not parties to the principal
obligation) may mortgage or pledge to secure the obligation of the debtor.
7.3. PACTUM
COMMISSORIUM. The debtor may waive the security and just
file an action for specific performance for the payment of the obligation.
However, if he wants to reply on the security, he must foreclose or have the
property sold for the payment of the debt. The creditor cannot appropriate the
things given by way of pledge or mortgage, or dispose of them.[36]
7.3.1. Requisites.
a)
There
should be a property mortgaged or pledged by way of security for the payment of
the principal obligation; and
b)
There
should be a stipulation for automatic appropriation by the creditor of the
thing given as secutiry in case of non-payment of the principal obligation
within the stipulated period.
7.3.2. A promise to transfer a property in
favor of the creditor in case of non payment is not pactum commissorium because
there is no automatic transfer. “The mortgagor is free to sell or not to sell
the property.”[37]
- There is also no pactum commissorium if the
principal obligation is extinguished by dacion en pago, novation or cession.[38]
- An AUTHORITY TO SELL and the appointment of
the mortgagee as attorney-in-fact to sell and dispose of real rights does not,
by itself, constitute pactum commissorium. Such authority is consistent with
Article 2087.[39]
VIII.REAL ESTATE MORTGAGE v. IX.CHATTEL
MORTGAGE
REAL ESTATE MORTGAGE
|
CHATTEL MORTGAGE
|
Object: Immovable Property
|
Object: Movable
Property
|
Blanket
Mortgage or Dragnet Clause- specifically phrased to SUBSUME ALL DEBTS OF PAST
OR FUTURE ORIGIN; After-incurred obligations
|
After-incurred
obligations.
Section
5 of Chattel Mortgage Law requires an “Affidavit of Good Faith” which states
that “ We severally swear that the
foregoing mortgage is made for the purpose of securing the obligation
specified in the conditions thereof, and for no other purpose, and
that the same is a just and valid obligation, and not entered into for the
purpose of fraud”.
- “While a pledge, real estate mortgage, or
antichresis may exceptionally secure after-incurred obligations so long as these
future debts are accurately described, a chattel mortgage, however, can only
cover obligations existing at the time the mortgage is constituted.[40]
|
Concept
of Mortgagee in Good Faith and In Bad Faith- Exception: Banks and other Financial Institutions cannot merely rely
on face of title[41]
|
|
After-Acquired
Properties
|
Chattel
mortgage shall be deemed to cover only the property described in the written
mortgage contract.[42]
|
Deficiency
Judgment
|
Deficiency
Judgment. Unless: covered by Recto Law.
|
Right of redemption; equity of redemption
Note: Rural Banks: 2
years redemption period
|
No right
of redemption over personal property. Only equity of redemption (before sale of property in judicial
foreclosure).[43]
|
Act 3135- Rules on Foreclosure
|
Act 1508
|
Foreclosure;
writ of possession. “the
proceeding in a petition and/ or motion for issuance of writ of possession,
after the lapse of the statutory period for redemption, is summary in nature.
The trial court is mandated to issue a writ of possession upon a finding of the
lapse of the one-year statutory period for redemption without the redemptioner
having redeemed the property.[44]
HOWEVER, The right
of the mortgagor to annul the foreclosure proceedings and recover possession
pursuant to sections 7 & 8 of Act 3135 as amended, is limited only to the
“redemption period”[45].
“The
provisions of Act No. 3135 applies until the period of redemption; once
redemption lapses and consolidation of the purchaser’s title ensues, Act No.
3135 finds no application In a number of cases,14 the Court declared that
Section 8 of Act No. 3135 is the available remedy to set aside a writ of
possession, without considering whether the writ involved in each of these
cases was issued during or after the lapse of the redemption period. Upon
reevaluation, we find it necessary to make a distinction and clarify when the
remedy under Section 8 of Act No. 3135 may be availed of. In extrajudicial
foreclosures, a writ of possession may be issued either (1) within the
redemption period or (2) after the lapse of the redemption period.15 The first
instance is based on a privilege provided under Section 7 of Act No. 3135; the
second is based on the purchaser’s right of ownership. The basis of the
purchaser’s right to possess the property affects the nature of the right. Act
No. 3135 governs only the manner of the sale and redemption of the mortgaged
real property in an extrajudicial foreclosure; proceedings beyond these, i.e.,
upon the lapse of the redemption period 13 Supra note 6, at 861. 14 Some of these
include Samson v. Rivera, G.R. No. 154355, May 20, 2004, 428 SCRA 759, 770; Cua
Lai Chu v. Laqui, G.R. 169190, February 11, 2010, 612 SCRA 227, 235; Fortaleza
v. Lapitan, G.R. No. 178288, August 15, 2012, 678 SCRA469, 484-485; Tolosa v.
United Coconut Planters Bank, G.R. No. 183058, April 3, 2013, 695 SCRA 138,
147. 15 Section 6 of Act No. 3135 allows a one-year redemption period. This
provision has been partly modified by Section 47 of Republic Act No. 8791 or
the General Banking Law of 2000. For juridical mortgagors whose property is
mortgaged in favour of banks, they are “allowed to exercise the right of
redemption only “until, but not after, the registration of the certificate of
foreclosure sale” and in no case more than three (3) months after foreclosure,
whichever comes first,” Goldenway Merchandizing Corporation v. Equitable PCI
Bank, G.R. No. 195540, March 13, 2013, 693 SCRA 439, 453. Decision 7 G.R. No.
206599 and the consolidation of the purchaser’s title, are no longer within its
scope. This is apparent from Section 1 of Act No. 3135, which states: Section
1. When a sale is made under a special power inserted in or attached to any
real-estate mortgage hereafter made as security for the payment of money or the
fulfillment of any other obligation, the provisions of the following [sections]
shall govern as to the manner in which the sale and redemption shall be
effected, whether or not provision for the same is made in the power. [Emphasis
ours] In fact, the nine (9) sections of Act No. 3135 pertain to proceedings
governing extrajudicial foreclosures, from the conduct of the foreclosure sale
up to the exercise of the right of redemption. Our reading of Act No. 3135,
therefore, should be consistent with the law’s limited coverage. During the
redemption period, the purchaser’s title is merely inchoate.16 The “mere
purchase and [issuance of a] certificate of sale alone do not confer any right
to the possession or beneficial use of the premises [in favor of the
purchaser].”17 Nonetheless, the purchaser may acquire possession of the
property during the redemption period by exercising the privilege granted to
him under Section 7 of Act No. 3135: Sec. 7. In any sale made under the
provisions of this Act, the purchaser may petition the Court of First Instance
of the province or place where the property or any part thereof is situated, to
give him possession thereof during the redemption period, furnishing bond in an
amount equivalent to the use of the property for a period of twelve months, to
indemnify the debtor in case it be shown that the sale was made without
violating the mortgage or without complying with the requirements of this Act.
Such petition shall be made under oath and filed in form of an ex parte motion
in the registration or cadastral proceedings if the property is registered, or
in special proceedings in the case of property registered under the Mortgage
Law or under section one hundred and ninety-four of the Administrative Code, or
of any other real property encumbered with a mortgage duly registered in the
office of any register of deeds in accordance with any existing law, and in
each case the clerk of the court shall, upon the filing of such petition,
collect the fees specified in paragraph eleven of section one hundred and
fourteen of Act Numbered Four hundred and ninety-six, as amended by Act
Numbered Twenty-eight hundred and sixty-six, and the court shall, upon approval
of the bond, order that a writ of possession issue, addressed to the sheriff of
the province in which the property is situated, who shall execute said order
immediately. [Emphases ours] The debtor, on the other hand, is provided
opportunity to contest the transfer of possession during the redemption period
under Section 8 of Act No. 3135, as he remains to be the owner of the
foreclosed property. The provision states: 16 Ermitaño v. Paglas, G.R. No.
174436, January 23, 2013, 689 SCRA 158, 168. 17 Id. at 170. Decision 8 G.R. No.
206599 Sec. 8. The debtor may, in the proceedings in which possession was
requested, but not later than thirty days after the purchaser was given
possession, petition that the sale be set aside and the writ of possession
cancelled, specifying the damages suffered by him, because the mortgage was not
violated or the sale was not made in accordance with the provisions hereof, and
the court shall take cognizance of this petition in accordance with the summary
procedure provided for in section one hundred and twelve of Act Numbered Four
hundred and ninety-six; and if it finds the complaint of the debtor justified,
it shall dispose in his favor of all or part of the bond furnished by the
person who obtained possession. Either of the parties may appeal from the order
of the judge in accordance with section fourteen of Act Numbered Four hundred
and ninety-six; but the order of possession shall continue in effect during the
pendency of the appeal. [Emphases ours] The writ of possession that the debtor
may petition to set aside under Section 8 of Act No. 3135 undoubtedly refers to
one issued pursuant to Section 7 of the same law “during the redemption
period.” The reference to the Section 7 proceeding underscores the position
that the remedy provided in Section 8 is available only against a writ of
possession during the redemption period. Further showing Section 7 and 8’s
close relation is the bond required to be filed by the purchaser in Section 7
that the debtor may proceed against in Section 8. Section 7 states that the
petition for the issuance of a writ of possession should be accompanied by a
bond which, under Section 8, shall “indemnify the debtor in case it be shown
that the sale was made without violating the mortgage or without complying with
the requirements of [Act No. 3135].” The requirement and purpose of the bond in
Act No. 3135 support the position that Section 8 thereof is a remedy available
only during the redemption period. A bond is no longer required to be filed in
support of a petition for writ of possession filed after the redemption period
has expired without the mortgagor exercising his right of redemption. At this
point, the purchaser’s right over the property is consolidated and his right to
obtain possession of the property stems from his right of ownership. In
Philippine National Bank v. Sanao Marketing Corporation, 18 the Court ruled that
- A writ of possession may also be issued after consolidation of ownership of
the property in the name of the purchaser. It is settled that the buyer in a
foreclosure sale becomes the absolute owner of the property purchased if it is
not redeemed during the period of one year after the registration of sale. As
such, he is entitled to the possession of the property and can demand it any
time following the consolidation of ownership in his name and the issuance of a
new transfer certificate of title. In such a case, the bond required in Section
7 of Act No. 3135 is no longer necessary. Possession of 18 G.R. No. 153951,
August 29, 2005, 465 SCRA 287. Decision 9 G.R. No. 206599 the land then becomes
an absolute right of the purchaser as confirmed owner. Upon proper application
and proof of title, the issuance of the writ of possession becomes a
ministerial duty of the court.19 [Emphases ours] If a bond is no longer
required to support a writ of possession issued after the consolidation of the
purchaser’s ownership, then no relief can be extended to the debtor under
Section 8 of Act No. 3135. As pointed out, the remedy provided under Section 8
of Act No. 3135 to the debtor becomes available only after the purchaser
acquires actual possession of the property. This is required because until then
the debtor, as the owner of the property, does not lose his right to possess.
However, upon the lapse of the redemption period without the debtor exercising
his right of redemption and the purchaser consolidates his title, it becomes
unnecessary to require the purchaser to assume actual possession thereof before
the debtor may contest it. Possession of the land becomes an absolute right of
the purchaser, as this is merely an incident of his ownership. In fact, the
issuance of the writ of possession at this point becomes ministerial for the
court.20 The debtor contesting the purchaser’s possession may no longer avail
of the remedy under Section 8 of Act No. 3135, but should pursue a separate
action e.g., action for recovery of ownership, for annulment of mortgage and/or
annulment of foreclosure. FSAMI’s consolidation of ownership therefore makes
the remedy under Section 8 of Act No. 3135 unavailable for 680 Home. 680 Home
cannot assail the writ of possession by filing a petition in LRC No. M-5444. A
further consideration in this case is the rule against forum shopping, which
would be violated if 680 Home’s resort to a Section 8 remedy is allowed. We
note that 680 Home has already commenced an action for the annulment of the
foreclosure before the RTC of Makati City (docketed as Civil Case No. 09-254)
after FSAMI consolidated its ownership but before it acquired a writ of
possession. To authorize 680 Home to resort to Section 8 of Act No. 3135 to
have the sale and the writ set aside would be to allow two pending actions
grounded on the same cause, i.e., the supposed invalidity of the foreclosure
proceedings, contrary to the rules against forum shopping. Given the
inapplicability of Section 8 of Act No. 3135, it becomes irrelevant to consider
the effect of Aldanco’s continued possession of the property on 680 Home’s
opposition to the writ of possession. That Aldanco’s possession prevented FSAMI
from acquiring actual possession of the property neither benefited nor harmed
680 Home’s case which is not dependent on FSAMI’s actual possession.”
PRESENT
LAW ON REMEDY AFTER LAPSE OF REDEMPTION PERIOD. Section
111 of Act 496 is no longer good law. Act 496 was enacted way back on January
1, 1903. It is already deemed superseded by The Property Registration Decree
(PD 1529) which became effective on June 11, 1978.
Instead,
the applicable law is Section 75 of PD 1529 which states:
“SEC. 75. Application for new certificate upon expiration of redemption period. –
Upon the expiration of the time, if
any, allowed by law for redemption after registered land has been sold on
execution taken or sold for the enforcement of a lien of any description,
except a mortgage lien, the purchaser at such sale or anyone claiming under him
may petition the court for the entry of a new certificate of title to him.
Before
the entry of a new certificate of title, the registered owner may pursue all
legal and equitable remedies to impeach or annul such proceedings.”
X.ANTICHRESIS
REQUISITES. In Spouses
Charito M. Reyes and Roberto Reyes etc. v. Heirs of Benjamin Malance etc.[46]
it was held that:
“Notably, the purpose indicated for the
Malance heirs’ formal offer of the records and receipts of hospitalization,
medicines, and burial expenses of Benjamin was merely “to show proof of
expenses incurred by x x x Benjamin x xx relative to his sickness and x x x
where he spent the loan he obtained from the Magtalas sisters. The Court,
however, concurs with the RTC’s finding, as affirmed by the CA, that the
Kasulatan is a contract of antichresis. Article 2132 of the Civil Code
provides:
Art.
2132. By the contract of antichresis the creditor acquires the right to receive
the fruits of an immovable of his debtor, with the obligation to apply them to
the payment of the interest, if owing and thereafter to the principal of his
credit.
Thus, antichresis involves an express
agreement between the parties whereby: (a) the creditor will have possession of
the debtor’s real property given as security; (b) such creditor will apply the
fruits of the said property to the interest owed by the debtor, if any, then to
the principal amount; ( c ) the creditor retains enjoyment of such property
until the debtor has totally paid what he owes; and (d) should the obligation
be duly paid, then the contract is automatically extinguished
proceeding from the accessory character of the agreement.
Until when is Antichretic Creditor entitled
to possession?
X
x x
The document specifically authorizes [the
Magtalas sisters] to receive the fruits of the subject landholding with the
obligation to apply them as payment to his [P]600,000.00 principal loan for a
period of six (6) years. The instrument provides no accessory stipulation as to
interest due or owing the creditors x x x . No mention of interest was ever
made by the creditors when they testified in court. This could only be
interpreted that the [Magtalas sisters] have no intention whatsoever to charge
Benjamin of interest for his loan. We note also that the Kasulatan is silent as
to the transfer of possession of the subject property. However, [the Magtalas
sisters] admitted taking possession of Benjamin’s landholding after his death
on September 29, 2006 and that they have been cultivating it since then. They
rationalize that their action is in accord with their agreement with Benjamin
when the latter was still alive. They assure the return of the subject property
upon full payment of Benjamin’s loan [the Malance Heirs], the
successors-in-interest of Benjamin. While the Kasulatan did not provide for the
transfer of possession of the subject land, the contemporaneous and subsequent
acts of the parties show that such possession was intended to be transferred.
Atty. Navarro testified that while the Kasulatan only shows that the harvest
and the fruits shall answer for Benjamin’s indebtedness, the parties agreed
among themselves that the lenders would be the one to take possession of the
subject land in order for them to get the harvest. Indeed, such arrangement
would be most reasonable under the premises since at that time, Banjamin’s
medical condition necessitated hospitalization, hence, his physical inability
to cultivate and harvest the fruits thereon. As antichretic creditors, the
Magtalas sisters are entitled to retain enjoyment of the subject land until the
debt has been fully paid.
X x x
The debt not having been totally paid,
petitioners are entitled to retain enjoyment of the subject land. Consequently,
the Malance heirs’ complaint for recovery possession, declaration of nullity of
the Kasulatan, and damages against petitioners must be dismissed.”
[1] G.R. No. 160758, January 15, 2014
[2] Sps. Pio Dato v. Bank of Philippine Islands, G.R. No. 181873,
November 27, 2013
[3] Accenture, inc. v. CIR, G.R. No. 190102, July 11, 2012
[4] Pantaleon v. American Express International, Inc., G.R. No. 174269,
August 25, 2010
[5] Ibid.
[6] PP. 700-701, REVIEWER ON CIVIL LAW By Timoteo B. Aquino, First
Edition, 2014
[7] Arts. 1935 and 1940, NCC
[8] Art. 1966, NCC
[9] Article 1935, Second Clause, NCC
[10] Art. 1939[1], NCC
[11] Art. 1995, NCC
[12] Art. 1946, NCC
[13] Ibid.
[14] Art. 1935, NCC
[15] G.R. No. 115324, February 9, 2003
[16] Article 1939, NCC
[17] See pp. 23 to 24, Essentials of Credit Transactions and Banking
Laws by Timoteo B. Aquino, 2015 citing J.B.L. Reyes, Observations on the New
Civil Code on Points Not Covered by Amendments Already Proposed, March 31,
1951, reproduced in Ipse Loquitur, Ruben
F. Balane, Ed., p. 258, hereinafter referred to in this work as “J.B.L. Reyes,
Observations”.
[18] Article 1945, NCC
[19] p. 28, Essentials of Credit Transactions and Banking Laws by
Timoteo B. Aquino, Ibid.
[20] Article 1953, NCC
[21]Article 1962, NCC
[22] ESSENTIALS OF CREDIT TRANSACTIONS AND BANKING LAWS, Timoteo B.
Aquino, 2015
[23] G.R. No. 177232, October 11, 2012
[24] G.R. No. 160544, February 21, 2005
[25] See p. 712, Reviewer on Civil Law, Timoteo B. Aquino, First
Edition, 2014
[26] See page 128, Essentials of Credit Transactions and Banking Laws,
2015
[27] 10 Phil., 319 cited in Compania Agricola De Ultramar v. Nepomuceno,
G.R. No. L-32778, November 14, 193-
[28] p. 151, Aquino, Ibid.
[29] G.R. no. 179419, January 12, 2011
[30] Art. 1999, NCC
[31] Art. 2002, NCC
[32] YHT Realty Corp. v. Court of Appeals, G.R. No. 126780, February 17,
2005
[33] See pp. 18-19 Evidence, Volume VII, Part II, 1997 Edition by
Vicente Francisco
[34] Article 2047, NCC
[35] see pp. 718-719, Aquino Civil Law Review, 2014
[36] Art. 2088, NCC
[37] See Agoncillo v. Javier, G.R. L-1261 August 7, 1918
[38] Ong v. Roban Lending Corporation, G.R. no. 172592, July 9, 2008
[39] Development Bank of the Philippines v. Court of Appeals, G.R. No.
118242, January 5, 1998
[40] Acme Shoe, Rubber & Plastic Corporation v. Court of Appeals,
G.R. No. 103576, August 22, 1996
[41] See Fabio Cahayag and Conrado Rivera v. Commercial Credit
Corporation, G.R. no. 168078 & 168357, January 13, 2016
[42] Section 7 [4] Act 1508; Tsai v. Court of Appeals, 366 SCRA 324
(2001)
[43] RCBC v. Royal Cargo Corp., G.R. No. 179756, October 2, 2009
[44] Sps. Antonio S. Pahang et al v. Hon. Augustine A. Vestil, et al.,
G.R. No. 14895, July 12, 2004
[45] 680 Home Appliances Inc. v. The Honorable Court of Appeals, G.R.
No. 206599, September 29, 2014
[46] G.R. No. 219071, August 24, 2016
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