CREDIT TRANSACTIONS - Escarez Reviewer - Part I

CREDIT‌‌TRANSACTIONS‌
‌ ● Concession‌ ‌of‌ ‌a ‌ ‌"credit"‌ ‌necessarily‌ ‌involves‌ ‌the‌‌

‌ granting‌‌ of‌‌ "loans"‌‌ up‌‌ to‌‌
the‌‌ limit‌‌ of‌‌ the‌‌ amount‌‌ fixed‌‌ in‌‌

the‌‌"credit."‌ ‌
THE‌‌CONCEPT‌‌OF‌‌CREDIT‌ ‌ WON‌‌the‌‌granting‌‌of‌‌credit‌‌is‌‌a‌‌"loan"‌‌or‌‌a‌‌"discount"‌‌–‌‌LOAN‌ ‌
A.‌‌Credit,‌‌Debt,‌‌&‌‌Security‌ ‌ ● Counsel‌ ‌argue‌ ‌that‌ ‌the‌ ‌pertinent‌ ‌law‌ ‌prohibits‌ ‌the‌‌
granting‌ ‌of‌ ‌a ‌ ‌"loan,"‌ ‌it‌ ‌does‌ ‌not‌ ‌prohibit‌ ‌what‌ ‌is‌‌
Bill‌‌of‌‌Rights‌‌-‌‌Art.‌‌III,‌‌Section‌‌20‌.‌‌No‌‌person‌‌shall‌‌be‌‌
commonly‌‌known‌‌as‌‌a‌‌"discount."‌ ‌
imprisoned‌‌for‌‌debt‌‌or‌‌non-payment‌‌of‌‌a‌‌poll‌‌tax.‌ ‌ ● To‌ ‌discount‌ ‌is‌ ‌only‌ ‌a ‌ ‌mode‌ ‌of‌ ‌loaning‌ ‌money,‌ ‌with,‌‌
however,‌‌ these‌‌ distinctions:‌‌ (1)‌‌ In‌‌ a ‌‌discount,‌‌ interest‌‌ is‌‌

Ancient‌‌Times‌ ‌ deducted‌‌ in‌‌ advance,‌‌ while‌‌ in‌‌ a ‌‌loan,‌‌ interest‌‌ is‌‌
taken‌‌
● Much‌‌harsher‌‌then.‌ ‌ at‌‌ the‌‌ expiration‌‌ of‌‌ a ‌‌credit;‌‌ (2)‌‌ a ‌‌discount‌‌ is‌‌ always‌‌ on‌‌
● Roman‌‌Law:‌‌Nonpaying‌‌debtor‌‌can‌‌be‌‌seized/killed‌‌since‌‌ double-name‌‌ paper;‌‌ a ‌‌loan‌‌ is‌‌ generally‌‌ on‌‌ single-name‌‌
an‌‌unpaid‌‌debt‌‌=‌‌a‌‌human‌‌life.‌ ‌ paper.‌ ‌
● Judaic‌‌Law:‌‌Nonpaying‌‌debtor’s‌‌children‌‌can‌‌be‌‌taken.‌ ‌ ● Notes‌ ‌signed‌ ‌by‌‌ the‌‌ law‌‌ firm‌‌ were‌‌ not‌‌ discount‌‌ paper‌‌
but‌ ‌were‌ ‌mere‌ ‌pieces‌ ‌of‌ ‌evidence‌ ‌of‌ ‌indebtedness‌, ‌‌
Current‌‌Times‌ ‌ because‌‌ (1)‌‌ interest‌‌ was‌‌ not‌‌ deducted‌‌ from‌‌ the‌‌ face‌‌ of‌‌

● Refer‌‌to‌‌the‌‌constitution.‌‌Times‌‌have‌‌changed.‌ ‌ the‌ ‌notes,‌ ‌but‌ ‌was‌ ‌paid‌ ‌when‌‌ the‌‌ notes‌‌ fell‌‌ due;‌‌ and‌‌
Security‌ ‌ (2)‌‌they‌‌were‌‌single-name‌‌and‌‌not‌‌double-name‌‌paper.‌ ‌
● A‌‌kinder‌‌system‌‌to‌‌ensure‌‌payment;‌‌in‌‌lieu‌‌of‌‌human‌‌life‌‌ WON‌‌the‌‌granting‌‌of‌‌credit‌‌is‌‌an‌‌“indirect‌‌loan”‌‌–‌‌YES‌ ‌
“a‌‌pound‌‌of‌‌flesh”.‌ ‌ ● Counsel‌‌ argues‌‌ that‌‌ a ‌‌loan‌‌ to‌‌ the‌‌ law‌‌ firm‌‌ was‌‌ not‌‌ an‌
● Definition‌:‌‌a‌‌transaction‌‌by‌‌which‌‌a‌‌creditor‌‌mitigates‌‌the‌‌
"indirect‌‌ loan."‌‌ In‌‌ this‌‌ connection,‌‌ it‌‌
should‌‌ be‌‌ recalled‌‌
that‌ ‌the‌ ‌wife‌ ‌of‌ ‌the‌ ‌Concepcion‌ ‌held‌ ‌a ‌ ‌share‌ ‌in‌ ‌the‌‌
risk‌‌of‌‌non-payment‌‌of‌‌debt‌‌by‌‌equating‌‌a‌‌sum‌‌of‌‌money‌
firm’s‌‌partnership.‌ ‌
owed‌‌with‌‌property‌‌or‌‌another‌‌person's‌‌undertaking‌‌to‌‌pay.‌ ‌ ● The‌ ‌purpose‌‌ of‌‌ the‌‌ Legislature‌‌ for‌‌ the‌‌ pertinent‌‌ law‌‌ is‌‌

Importance‌‌of‌‌Credit,‌‌Debt,‌‌&‌‌Security‌ ‌ plainly‌‌ to‌‌
erect‌‌ a ‌‌wall‌‌ of‌‌
safety‌‌ against‌‌ temptation‌‌ for‌‌ a ‌‌
● What‌‌allowed‌‌trade‌‌and‌‌commerce‌‌to‌‌flourish‌‌in‌‌the‌‌ director‌‌of‌‌the‌‌bank‌. ‌ ‌
14th-19th‌‌centuries.‌ ‌ Ruling:‌ ‌As‌ ‌to‌ ‌the‌ ‌defense‌ ‌that‌ ‌the‌ ‌transaction‌ ‌was‌ ‌only‌ ‌a ‌‌
● 20th‌‌Century:‌‌Global‌‌economy‌‌demanded‌‌more‌‌ concession‌ ‌of‌ ‌credit,‌ ‌SC‌ ‌held‌ ‌that‌ ‌concession‌ ‌of‌ ‌credit‌‌
increasingly‌‌complicated‌‌iterations‌‌of‌‌the‌‌same‌‌concepts.‌ ‌ necessarily‌‌ involves‌‌ a ‌‌loan‌. ‌‌As‌‌ to‌‌
the‌‌ defense‌‌ of‌‌
the‌‌ transaction‌‌
being‌ ‌a ‌ ‌discount,‌ ‌SC‌ ‌held‌ ‌that‌ ‌elements‌ ‌of‌ ‌discount‌ ‌weren't‌‌
B.‌‌Credit‌‌&‌‌Credit‌‌Transactions‌‌Defined‌ ‌ satisfied‌. ‌‌As‌‌ to‌‌
the‌‌ defense‌‌ that‌‌ there‌‌ was‌‌ no‌‌ “indirect‌‌ loan,”‌‌ SC‌‌
Credit:‌‌Statutory‌‌Definition‌ ‌ disagreed‌ ‌stating‌ ‌that‌ ‌the‌ ‌purpose‌ ‌of‌ ‌Legislature‌ ‌is‌ ‌to‌ ‌prevent‌‌
these‌ ‌conflict‌ ‌of‌ ‌interest‌ ‌as‌ ‌it‌ ‌was‌ ‌shown‌ ‌that‌ ‌there‌ ‌was‌ ‌a ‌‌
Truth‌‌in‌‌Lending‌‌Act,‌‌Sec.‌‌3(2)‌.‌‌"Credit"‌‌means‌‌any‌‌loan,‌‌ relationship‌‌between‌‌Concepcion‌‌and‌‌a‌‌shareholder‌‌of‌‌such‌‌firm.‌ ‌
mortgage,‌‌deed‌‌of‌‌trust,‌‌advance,‌‌or‌‌discount;‌‌any‌‌conditional‌‌
sales‌‌contract;‌‌any‌‌contract‌‌to‌‌sell,‌‌or‌‌sale‌‌or‌‌contract‌‌of‌‌sale‌‌of‌‌ Act‌‌No.‌‌2747‌‌(In‌‌effect‌ ‌in‌‌1919;‌‌repealed‌‌by‌‌Act‌‌No.‌‌2938)‌ ‌
property‌‌or‌‌services,‌‌either‌‌for‌‌present‌‌or‌‌future‌‌delivery,‌‌under‌‌ ● Sec.‌‌35‌:‌‌The‌‌National‌‌Bank‌‌shall‌‌not,‌d ‌ irectly‌‌or‌‌

which‌‌part‌‌or‌‌all‌‌of‌‌the‌‌price‌‌is‌‌payable‌‌subsequent‌‌to‌‌the‌‌making‌‌ indirectly‌,‌‌grant‌‌loans‌‌to‌‌any‌‌of‌‌the‌‌members‌‌of‌‌the‌‌
of‌‌such‌‌sale‌‌or‌‌contract;‌‌any‌‌rental-purchase‌‌contract;‌‌any‌‌ board‌‌of‌‌directors‌‌of‌‌the‌‌bank‌‌nor‌‌to‌‌agents‌‌of‌‌the‌‌
contract‌‌or‌‌arrangement‌‌for‌‌the‌‌hire,‌‌bailment,‌‌or‌‌leasing‌‌of‌‌ branch‌‌banks.‌ ‌
property;‌‌any‌‌option,‌‌demand,‌‌lien,‌‌pledge,‌‌or‌‌other‌‌claim‌‌ ● Sec.‌‌49‌:‌‌punished‌‌by‌‌a‌‌fine‌‌not‌‌to‌‌exceed‌‌ten‌‌
against,‌‌or‌‌for‌‌the‌‌delivery‌‌of,‌‌property‌‌or‌‌money;‌‌any‌‌purchase,‌‌ thousand‌‌pesos,‌‌or‌‌by‌‌imprisonment‌‌not‌‌to‌‌exceed‌‌
or‌‌other‌‌acquisition‌‌of,‌‌or‌‌any‌‌credit‌‌upon‌‌the‌‌security‌‌of,‌‌any‌‌ five‌‌years,‌‌or‌‌by‌‌both‌‌such‌‌fine‌‌and‌‌imprisonment."‌ ‌
obligation‌‌of‌‌claim‌‌arising‌‌out‌‌of‌‌any‌‌of‌‌the‌‌foregoing;‌‌and‌‌any‌‌
transaction‌‌or‌‌series‌‌of‌‌transactions‌‌having‌‌a‌‌similar‌‌purpose‌‌or‌‌ Credit‌‌(Malcolm’s‌‌Definition)‌ ‌ Loan‌ ‌
effect.‌ ‌ ● ability‌‌to‌‌borrow‌‌money‌‌ ● delivery‌‌by‌‌one‌‌party‌‌
by‌‌virtue‌‌of‌‌the‌‌
and‌‌the‌‌receipt‌‌by‌‌
● This‌‌definition,‌‌however,‌‌is‌‌only‌‌an‌e ‌ numeration‌‌of‌‌the‌‌ confidence‌‌or‌‌trust‌‌ the‌‌other‌‌party‌‌of‌‌a ‌‌
coverage‌‌of‌‌law‌‌‌&‌‌applicable‌‌contracts.‌‌Does‌‌NOT‌‌give‌‌a ‌‌ reposed‌‌by‌‌a‌‌lender‌‌that‌‌ given‌‌sum‌‌of‌‌money,‌‌
conceptual‌‌framework‌‌to‌‌understand‌‌Credit.‌ ‌ he‌‌will‌‌pay‌‌what‌‌he‌‌may‌‌ upon‌‌an‌‌agreement,‌‌
● Truth‌‌in‌‌Lending‌‌Act‌ ‌ promise…‌ ‌ express‌‌or‌‌implied,‌‌to‌‌
● The‌‌BEST‌‌conceptual‌‌ repay‌‌the‌‌sum‌‌
Credit:‌‌Jurisprudential‌‌Definition‌‌(Republic‌‌v.‌‌PNB)‌ ‌ definition‌ ‌ loaned‌ ‌
● a‌‌sum‌‌credited‌‌on‌‌the‌‌books‌‌of‌‌a‌‌company‌‌to‌‌a‌‌person‌‌
who‌‌appears‌‌to‌‌be‌‌entitled‌‌to‌‌it.‌ ‌ ● Concession‌‌of‌‌a‌‌"credit"‌‌necessarily‌‌involves‌‌the‌‌
● Presupposes‌‌a‌‌creditor-debtor‌‌relationship.‌ ‌ granting‌‌of‌‌"loans"‌‌up‌‌to‌‌the‌‌limit‌‌of‌‌the‌‌amount‌‌fixed‌‌

in‌‌the‌‌"credit."‌ ‌
● Implies‌‌ability‌‌to‌‌pay,‌‌by‌‌reason‌‌of‌‌property‌‌or‌‌estates,‌‌a ‌‌
promised‌‌amount‌‌to‌‌be‌‌paid.‌ ‌ ‌
● THAT‌‌WHICH‌‌IS‌‌DUE‌‌to‌‌any‌‌person,‌‌as‌‌distinguished‌‌
Credit:‌‌Definition‌ ‌
from‌‌that‌‌which‌‌he‌‌owes.‌ ‌
● An‌‌evaluation,‌‌made‌‌in‌‌the‌‌present,‌‌by‌‌virtue‌‌of‌‌the‌‌trust‌‌
● Flawed;‌‌uses‌‌the‌‌word‌‌“credit”‌‌itself.‌‌Becomes‌‌circular‌‌in‌‌
and‌‌confidence‌‌reposed‌‌by‌‌a‌‌creditor,‌‌of‌‌a‌‌debtor's‌‌future‌ ‌
reasoning;‌‌refer‌‌to‌‌People‌‌v.‌‌Concepcion‌‌for‌‌the‌‌best‌‌
worth‌‌or‌‌ability.‌ ‌
conceptual‌‌definition.‌ ‌ ○ Extent‌‌by‌‌which‌‌a‌‌creditor‌‌is‌‌willing‌‌to‌‌allow‌‌a ‌‌
Debt:‌‌Definition‌ ‌ debtor‌‌to‌‌incur‌‌debt‌‌based‌‌on‌e ‌ valuation‌‌of‌‌
● A‌‌DEMAND‌‌for‌‌an‌‌amount‌‌ACTUALLY‌‌ASCERTAINED.‌ ‌ debtor’s‌‌ability‌‌to‌‌pay‌ ‌
● Amount‌‌must‌‌be‌‌actually‌‌ascertained,‌‌and‌‌not‌‌a‌‌mere‌‌ ● The‌‌ability‌‌to‌‌INCUR‌‌DEBT‌ ‌
unliquidated‌‌demand‌‌or‌‌liability‌ ‌
● Latin‌:‌C
‌ redere‌ ‌
● Arises‌‌from‌‌a‌‌contractual‌‌obligation‌ ‌
○ To‌‌trust;‌‌to‌‌believe‌ ‌
People‌‌v.‌‌Concepcion‌ ‌ Debt‌ ‌ Credit‌ ‌ Securities‌ ‌
Facts:‌ ‌PNB‌ ‌board‌‌ of‌‌
directors‌‌ member‌‌ Concepcion‌‌ extended‌‌ a ‌‌ -‌‌Demand‌‌/ ‌‌ -‌‌Extent‌‌a‌‌Debtor‌‌may‌‌ -‌‌Creditor’s‌‌ability‌‌to‌‌

loan‌‌ to‌‌ his‌‌ wife’s‌‌
law‌‌ firm‌‌ despite‌‌ a ‌‌law‌‌
prohibiting‌‌ such‌‌ conflict‌‌
of‌‌ Obligation‌‌to‌‌Pay‌ ‌ borrow/extend‌‌benefit,‌‌ ensure‌‌payment‌‌of‌‌the‌‌
interest.‌‌ The‌‌ law‌‌
states:‌‌ PNB‌‌ shall‌‌ not,‌‌
directly‌‌
or‌‌
indirectly,‌‌
grant‌‌ ‌ based‌‌on…‌ ‌ debt‌ ‌
loans‌‌to‌‌any‌‌of‌‌the‌‌members‌‌of‌‌the‌‌board‌‌of‌‌directors.‌‌ ‌ -‌‌Evaluation‌‌of‌‌the‌‌
Issues:‌‌ ‌ creditor‌‌of‌‌the‌‌debtor’s‌‌

WON‌‌ the‌‌ granting‌‌ of‌‌
a ‌‌credit‌‌
of‌‌
Concepcion‌‌ to‌‌
his‌‌
wife’s‌‌
law‌‌
firm‌‌ ability‌‌to‌‌pay‌‌him‌‌back.‌ ‌
is‌‌a‌‌“loan”‌‌-‌‌YES‌ ‌
‌
‌
‌
1‌ ‌
C.‌‌Commercial‌‌Credit‌‌Transactions‌ ‌ ● A‌‌form‌‌of‌‌trust‌‌in‌‌the‌‌state‌‌reposed‌‌by‌‌the‌‌holder;‌‌an‌‌

approximation‌‌of‌‌absolute‌‌credit‌ ‌
CoC,‌‌Art‌‌1.‌‌‌The‌‌following‌‌are‌‌merchants‌‌for‌‌the‌‌purposes‌‌of‌‌this‌‌
● If‌‌other‌‌parties‌‌do‌‌not‌‌accept‌‌the‌‌money‌‌as‌‌payment,‌‌the‌‌
Code:‌ ‌
state‌‌is‌‌to‌‌answer‌‌for‌‌it‌‌
‌
1. Those‌‌who,‌‌having‌‌legal‌‌capacity‌‌to‌‌trade,‌‌customarily‌‌
devote‌‌themselves‌‌thereto.‌ ‌ ‌
2. Commercial‌‌or‌‌industrial‌‌associations‌‌which‌‌are‌‌formed‌‌
in‌‌accordance‌‌with‌‌this‌‌Code.‌ ‌ PART‌‌I.‌‌LOAN‌ ‌
THE‌‌CONCEPT‌‌OF‌‌LOAN‌ ‌
CoC,‌‌Art‌‌2.‌‌‌Commercial‌‌transactions,‌‌be‌‌they‌‌performed‌‌by‌‌
merchants‌‌or‌‌not,‌‌whether‌‌they‌‌are‌‌specified‌‌in‌‌this‌‌Code‌‌or‌‌not,‌‌

A.‌‌General‌‌Concepts‌ ‌
shall‌‌be‌‌governed‌‌by‌‌the‌‌provisions‌‌contained‌‌in‌‌the‌‌same;‌‌in‌‌the‌‌ CC,‌‌Article‌‌1933‌.‌‌By‌‌the‌‌contract‌‌of‌‌loan,‌‌‌one‌‌of‌‌the‌‌parties‌‌
absence‌‌of‌‌such‌‌provisions,‌‌by‌‌the‌‌commercial‌‌customs‌‌ delivers‌‌to‌‌another,‌‌either‌‌something‌‌not‌‌consumable‌‌so‌‌that‌‌the‌‌
generally‌‌observed‌‌in‌‌each‌‌place;‌‌and‌‌in‌‌the‌‌absence‌‌of‌‌both,‌‌by‌‌ latter‌‌may‌‌use‌‌the‌‌same‌‌for‌‌a‌‌certain‌‌time‌‌and‌‌return‌‌it‌,‌‌in‌‌which‌‌
those‌‌of‌‌the‌‌common‌‌law.‌ ‌ case‌‌the‌‌contract‌‌is‌‌called‌‌a‌c‌ ommodatum‌;‌‌or‌m ‌ oney‌‌or‌‌other‌‌
‌ consumable‌‌thing,‌‌upon‌‌the‌‌condition‌‌that‌‌the‌‌same‌‌amount‌‌of‌‌
Commercial‌‌transactions‌‌shall‌‌be‌‌considered‌‌those‌‌enumerated‌‌ the‌‌same‌‌kind‌‌and‌‌quality‌‌shall‌‌be‌‌paid‌,‌‌in‌‌which‌‌case‌‌the‌‌
in‌‌this‌‌Code‌‌and‌‌any‌‌others‌‌of‌‌a‌‌similar‌‌character.‌ ‌ contract‌‌is‌s‌ imply‌‌called‌‌a‌‌loan‌‌or‌‌mutuum‌. ‌ ‌
‌CoC,‌‌Art‌‌3.‌‌‌The‌‌legal‌‌presumption‌‌of‌‌a‌‌customary‌‌engagement‌‌ Commodatum‌‌is‌‌essentially‌‌gratuitous.‌ ‌
in‌‌commerce‌‌exists‌‌from‌‌the‌‌time‌‌the‌‌person‌‌who‌‌desires‌‌to‌‌trade‌‌ Simple‌‌loan‌‌may‌‌be‌‌gratuitous‌‌or‌‌with‌‌a‌‌stipulation‌‌to‌‌pay‌‌

gives‌‌notice‌‌through‌‌circulars,‌‌newspapers,‌‌handbills,‌‌posters‌‌ interest.‌ ‌
exhibited‌‌to‌‌the‌‌public,‌‌or‌‌in‌‌any‌‌other‌‌manner‌‌whatsoever,‌‌of‌‌an‌‌

establishment,‌‌the‌‌purpose‌‌of‌‌which‌‌is‌‌to‌‌conduct‌‌any‌‌ In‌‌commodatum‌‌the‌‌bailor‌‌retains‌‌the‌‌ownership‌‌of‌‌the‌‌thing‌‌

commercial‌‌transaction.‌ ‌ loaned,‌‌while‌‌in‌‌simple‌‌loan,‌‌ownership‌‌passes‌‌to‌‌the‌‌borrower.‌‌

(1740a)‌ ‌
‌
Credit‌‌Transactions‌ ‌
CC,‌‌Article‌‌1305‌.‌‌A‌‌contract‌‌is‌‌a‌‌meeting‌‌of‌‌minds‌‌between‌‌two‌‌

● Generally‌‌governed‌‌by‌‌the‌‌Civil‌‌Code‌ ‌
persons‌‌whereby‌‌one‌‌binds‌‌himself,‌‌with‌‌respect‌‌to‌‌the‌‌other,‌‌to‌‌

● Most‌‌credit‌‌transactions‌‌are‌‌commercial‌‌in‌‌nature,‌‌ give‌‌something‌‌or‌‌to‌‌render‌‌some‌‌service.‌‌(1254a)‌ ‌
habitually‌‌transacted‌‌by‌‌merchants.‌ ‌
○ Thus,‌‌the‌‌Code‌‌of‌‌Commerce‌‌and‌‌certain‌‌ ‌
special‌‌laws‌‌also‌‌govern.‌ ‌ Loan;‌‌As‌‌Defined‌‌by‌‌Article‌‌1933‌ ‌
Illustration‌‌(Depositor‌‌→‌‌Institutional‌‌Creditor‌‌→‌‌Debtor)‌ ‌ ● An‌‌obligation‌‌that‌‌always‌‌arises‌‌from‌‌contract‌ ‌
1. Merchant‌‌deposits‌‌funds‌‌with‌‌an‌‌institutional‌‌creditor.‌ ‌ ○ Meeting‌‌of‌‌the‌‌minds‌ ‌
● Merchant‌‌=‌‌depositor‌ ‌
● Funds‌‌=‌‌bank‌‌deposit‌ ‌ Commodatum‌ ‌ Mutuum‌ ‌
● Institutional‌‌creditor‌‌=‌‌bank‌ ‌ ● A‌‌contract‌‌where‌‌one‌‌ ● A‌‌contract‌‌where‌‌one‌‌
○ Assessed‌‌if‌‌able‌‌to‌‌repay‌‌funds‌‌w/‌‌ party‌‌delivers‌‌to‌‌another‌‌ party‌‌delivers‌‌to‌‌another‌‌
interest‌‌after‌‌a‌‌set‌‌amount‌‌of‌‌time‌ ‌ a‌n
‌ onconsumable‌s‌ o‌‌that‌‌ money‌‌or‌‌some‌‌other‌‌
2. Institutional‌‌creditor‌‌lends‌‌funds‌‌to‌‌another‌‌merchant,‌‌ the‌‌latter‌‌may‌‌use‌‌it‌‌for‌‌a ‌‌ consumable‌t‌hing,‌‌so‌‌that‌‌
subject‌‌to‌‌security‌ ‌ ‌ certain‌‌time,‌‌and‌‌then‌‌ the‌‌latter‌‌may‌‌return‌‌the‌‌
● Institutional‌‌creditor‌‌=‌‌bank‌ ‌ return‌‌it.‌ ‌ same‌‌amount,‌‌of‌‌the‌‌
● Other‌‌merchant‌‌=‌‌debtor‌ ‌ ‌ same‌‌kind‌‌and‌‌quality,‌‌
○ Likewise‌‌assessed‌‌for‌‌ability‌‌to‌‌repay‌‌ after‌‌a‌‌certain‌‌time.‌ ‌
funds‌‌w/‌‌interest‌‌after‌‌some‌‌time‌ ‌ ‌
● Lent‌‌funds‌‌=‌‌bank‌‌loan‌ ‌ ● A‌‌contract‌‌for‌‌permissive‌‌use‌ ‌
● Security‌= ‌ ‌‌Collateral‌ ‌ ○ Similar‌‌to‌‌lease,‌‌or‌l‌ocatio‌‌conductio‌ ‌
○ Property‌‌of‌‌debtor‌ ‌ ■ Lends‌‌a‌‌thing‌‌for‌‌use‌‌in‌‌return‌‌for‌‌money‌‌

○ To‌‌guarantee‌‌performance‌ ‌ (rent)‌ ‌
○ Ex.‌‌mortgage‌‌over‌‌real/personal‌‌property‌‌ B.‌‌Obligation‌‌to‌‌Deliver‌ ‌
of‌‌the‌‌debtor‌ ‌
■ Or‌‌demand‌‌securities‌ ‌ CC,‌‌Art.‌‌1934.‌‌‌...(T)he‌‌‌commodatum‌‌or‌‌simple‌‌loan‌‌itself‌‌‌shall‌‌
■ Or‌‌ask‌‌for‌‌receivables‌‌as‌‌collateral‌ ‌ not‌‌be‌‌perfected‌‌until‌‌the‌‌delivery‌‌‌of‌‌the‌‌object‌‌of‌‌the‌‌contract.‌ ‌
■ Or‌‌ask‌‌for‌‌sureties/guaranties‌ ‌ ● Delivery‌‌is‌‌the‌‌obligation‌‌of‌‌the‌‌CREDITOR.‌ ‌
3. Interest‌‌paid‌‌by‌‌debtor‌‌=‌‌Source‌‌of‌‌revenue‌‌used‌‌by‌‌ ● Delivery‌:‌‌The‌‌formal‌‌act‌‌of‌‌transferring‌‌control/possession‌‌
institutional‌‌creditor‌‌to‌‌pay‌‌the‌‌depositor‌ ‌ of‌‌property‌‌for‌‌permissive‌‌use‌‌of‌‌the‌‌debtor.‌ ‌
Habituality‌‌&‌‌Contracts‌‌of‌‌Adhesion‌ ‌ ● It‌‌is‌‌because‌‌of‌‌delivery‌‌that‌‌a‌‌(simple)‌‌loan‌‌is‌‌considered‌‌

● The‌‌habituality‌‌of‌‌these‌‌contracts‌‌necessitate‌‌the‌‌use‌‌of‌‌ a‌‌real‌‌contract‌ ‌
premade‌‌contracts‌‌(contracts‌‌of‌‌adhesion)‌ ‌ ○ Consent‌‌is‌‌not‌‌sufficient;‌‌the‌‌real‌‌passing‌‌of‌‌

● Contracts‌‌of‌‌adhesion:‌‌one‌‌party‌‌imposes‌‌on‌‌another‌‌a ‌‌ property‌‌from‌‌one‌‌pair‌‌of‌‌hands‌‌to‌‌another‌‌is‌‌
ready-made‌‌contract‌ ‌ likewise‌‌required‌‌in‌‌a‌‌real‌‌contract‌ ‌
○ Other‌‌party‌‌is‌‌free‌‌to‌‌reject‌‌it‌‌entirely,‌‌or‌‌to‌‌
‌
consent‌‌to‌‌it‌‌(adhere‌‌to‌‌it)‌ ‌
○ There‌‌is‌‌NO‌‌room‌‌for‌‌negotiation‌ ‌ [A2]‌‌Garcia‌‌v.‌‌Thio‌ ‌
● Contracts‌‌of‌‌adhesion‌‌are‌‌permissible,‌‌but‌‌if‌‌ambiguous,‌‌ Doctrine‌:‌‌Being‌‌a‌‌real‌‌contract,‌‌a‌‌contract‌‌of‌‌loan‌‌is‌‌perfected‌‌
only‌‌upon‌‌the‌‌delivery‌‌of‌‌the‌‌object‌‌of‌‌the‌‌contract.‌ ‌
ambiguity‌‌is‌‌construed‌‌against‌‌the‌‌party‌‌who‌‌prepared‌‌it.‌ ‌
Facts‌:‌‌Respondent‌‌Thio‌‌received‌‌two‌‌crossed‌‌checks‌‌from‌‌
‌ petitioner‌‌in‌‌the‌‌amounts‌‌of‌‌$100,000‌‌and‌‌P500,000,‌‌both‌‌
D.‌‌The‌‌Relevance‌‌of‌‌Trust‌‌&‌‌Confidence‌ ‌ payable‌‌to‌‌the‌‌order‌‌of‌‌Marilou‌‌Santiago.‌‌Thereafter,‌‌petitioner‌‌
● Credit‌‌transactions,‌‌though‌‌they‌‌became‌‌the‌‌root‌‌of‌‌the‌‌
received‌‌from‌‌respondent‌‌the‌‌amounts‌‌of‌‌$3,000‌‌and‌‌P20,000‌‌
first‌‌financial‌‌meltdown‌‌of‌‌the‌‌21st‌‌century,‌‌also‌‌became‌‌
monthly‌‌as‌‌payment‌‌for‌‌interest.‌‌However,‌‌despite‌‌repeated‌‌
the‌‌solution‌‌to‌‌alleviating‌‌the‌‌ensuing‌‌poverty.‌ ‌ demands,‌‌respondent‌‌failed‌‌to‌‌pay‌‌the‌‌principal‌‌amounts‌‌upon‌‌
maturity.‌‌Petitioner‌‌filed‌‌a‌‌complaint‌‌for‌‌sum‌‌of‌‌money‌‌and‌‌
Money‌ ‌ damages‌‌in‌‌RTC‌‌Makati,‌‌which‌‌ruled‌‌in‌‌its‌‌favor.‌‌The‌‌CA‌‌
2‌ ‌
2.‌‌Consideration‌‌of‌‌a‌‌Loan‌ ‌
reversed.‌ ‌
Issues‌:‌‌W/N‌‌there‌‌was‌‌a‌‌contract‌‌of‌‌loan‌‌between‌‌the‌‌parties,‌‌ CC,‌‌Article‌‌1933‌.‌‌...‌ ‌
making‌‌respondent‌‌liable‌‌to‌‌petitioner‌‌-‌‌YES.‌ ‌
Ruling‌:‌‌A‌‌loan‌‌is‌‌a‌‌real‌‌contract,‌‌and‌‌not‌‌consensual,‌‌and‌‌as‌‌ Commodatum‌‌is‌‌essentially‌‌gratuitous.‌ ‌
such‌‌is‌‌perfected‌‌only‌‌upon‌‌the‌‌delivery‌‌of‌‌the‌‌object‌‌of‌‌the‌‌
Simple‌‌loan‌‌may‌‌be‌‌gratuitous‌‌or‌‌with‌‌a‌‌stipulation‌‌to‌‌pay‌‌

contract,‌‌pursuant‌‌to‌‌Art.‌‌1934,‌‌CC.‌‌Upon‌‌delivery‌‌of‌‌the‌‌object‌‌of‌‌ interest.‌ ‌
the‌‌contract,‌‌the‌‌debtor‌‌acquires‌‌ownership‌‌of‌‌such‌‌money‌‌and‌‌is‌‌
liable‌‌to‌‌pay‌‌the‌‌creditor.‌‌The‌‌checks‌‌were‌‌delivered‌‌to‌‌ ...‌ ‌
respondent.‌‌Even‌‌if‌‌she‌‌did‌‌not‌‌physically‌‌receive‌‌the‌‌proceeds‌‌
of‌‌the‌‌checks,‌‌she‌‌was‌‌in‌‌control‌‌and‌‌possession‌‌of‌‌them,‌‌as‌‌ ● Loan‌‌contracts‌‌are‌‌reciprocal.‌ ‌
proven‌‌by‌‌several‌‌factors‌‌(see‌‌below).‌‌However,‌‌respondent‌‌is‌‌ ● Commodatum‌‌vs‌‌Mutuum‌‌is‌‌based‌‌on‌‌consideration‌ ‌
not‌‌liable‌‌to‌‌petitioner‌‌for‌‌payment‌‌of‌‌interest‌‌since‌‌such‌‌
○ Commodatum‌‌is‌‌purely‌‌out‌‌of‌‌liberality;‌‌it‌‌is‌‌

stipulation‌‌for‌‌payment‌‌was‌‌not‌‌in‌‌writing,‌‌pursuant‌‌to‌‌Art.‌‌1956.‌‌
gratuitous‌ ‌
Despite‌‌this,‌‌respondent‌‌is‌‌liable‌‌for‌‌legal‌‌interest‌‌as‌‌provided‌‌in‌‌
Art.‌‌2209,‌‌CC‌‌which‌‌is‌‌12%‌‌per‌‌annum.‌ ‌ ○ Mutuum‌‌may‌‌be‌‌gratuitous,‌‌but‌‌often‌‌it‌‌comes‌‌
with‌‌a‌‌stipulation‌‌to‌‌pay‌‌interest‌ ‌
● From‌‌the‌‌start,‌‌Thio‌‌had‌‌planned‌‌to‌‌loan‌‌money‌‌ ‌
from‌‌Garcia‌‌at‌‌3%‌‌per‌‌annum,‌‌and‌‌then‌‌lend‌‌it‌‌to‌‌ 3.‌‌Obligation‌‌to‌‌Return‌‌or‌‌Pay‌ ‌
Santiago‌‌at‌‌a‌‌higher‌‌rate‌‌of‌‌5%‌‌per‌‌annum.‌‌Thio‌‌
wanted‌‌to‌‌keep‌‌the‌‌2%‌‌for‌‌herself.‌ ‌ CC,‌‌Article‌‌1933‌.‌‌By‌‌the‌‌contract‌‌of‌‌loan,‌‌one‌‌of‌‌the‌‌parties‌‌
● There‌‌was‌‌consent‌‌and‌‌delivery‌‌to‌‌Thio.‌ ‌ delivers‌‌to‌‌another,‌‌either‌‌something‌‌not‌‌consumable‌‌so‌‌that‌‌the‌‌
Yes,‌‌there‌‌WAS‌‌a‌‌contract‌‌of‌‌loan‌‌between‌‌Thio‌‌&‌‌Garcia‌ ‌ latter‌‌may‌‌use‌‌the‌‌same‌‌for‌‌a‌‌certain‌‌time‌‌and‌‌return‌‌it,‌‌in‌‌which‌‌
1. Why‌‌would‌‌Garcia‌‌lend‌‌money‌‌to‌‌Santiago,‌‌whom‌‌ case‌‌the‌‌contract‌‌is‌‌called‌‌a‌‌commodatum;‌‌or‌‌money‌‌or‌‌other‌‌
she‌‌did‌‌not‌‌know?‌ ‌ consumable‌‌thing,‌‌upon‌‌the‌‌condition‌‌that‌‌the‌‌same‌‌amount‌‌of‌‌
2. When‌‌Santiago‌‌filed‌‌a‌‌petition‌‌for‌‌insolvency,‌‌she‌‌ the‌‌same‌‌kind‌‌and‌‌quality‌‌shall‌‌be‌‌paid,‌‌in‌‌which‌‌case‌‌the‌‌
listed‌‌Thio‌‌as‌‌her‌‌creditor‌‌and‌‌NOT‌‌Garcia.‌ ‌ contract‌‌is‌‌simply‌‌called‌‌a‌‌loan‌‌or‌‌mutuum.‌ ‌
3. Santiago‌‌was‌‌not‌‌even‌‌present‌‌as‌‌a‌‌witness.‌ ‌
...‌ ‌
‌
●How‌‌is‌‌the‌‌delivery‌‌of‌‌an‌‌intangible‌‌identified?‌ CC,‌‌Article‌‌1232‌.‌‌Payment‌‌means‌‌‌not‌‌only‌‌the‌‌delivery‌‌of‌‌money‌‌
○ Ex.‌‌Checks.‌‌In‌‌the‌‌Thio‌‌case,‌‌the‌‌Court‌‌ruled‌‌that‌‌it‌‌ but‌‌also‌‌the‌‌performance‌,‌‌in‌‌any‌‌other‌‌manner,‌‌of‌‌an‌‌obligation.‌ ‌
was‌‌actual‌‌‌possession‌‌and‌‌control‌o ‌ ver‌‌the‌‌checks‌‌
that‌‌constitutes‌‌delivery,‌‌and‌‌not‌‌upon‌‌encashment.‌‌ ‌ CC,‌‌Article‌‌1233‌.‌‌A‌‌debt‌‌shall‌‌not‌‌be‌‌understood‌‌to‌‌have‌‌been‌‌
○ What‌‌factor‌‌would‌‌denote‌‌control?‌‌Permissive‌‌ paid‌‌unless‌‌the‌‌thing‌‌or‌‌service‌‌in‌‌which‌‌the‌‌obligation‌‌consists‌‌

use/consumption‌‌of‌‌the‌‌object‌‌for‌‌the‌‌purpose‌‌one‌‌ has‌‌been‌‌completely‌‌delivered‌‌or‌‌rendered,‌‌as‌‌the‌‌case‌‌may‌‌be.‌ ‌
entered‌‌into‌‌the‌‌loan‌ ‌ ● Commodatum‌:‌‌Debtor’s‌‌obligation‌‌is‌‌to‌‌RETURN‌ ‌
● Checks‌:‌‌NOT‌‌legal‌‌tender.‌ ‌ ● Mutuum‌:‌‌Debtor’s‌‌obligation‌‌is‌‌to‌‌PAY‌‌the‌‌same‌‌amount,‌‌

Importance‌‌of‌‌Delivery‌ ‌ kind‌‌and‌‌quality‌‌of‌‌the‌‌property‌ ‌
● If‌‌delivery‌‌is‌‌defective,‌‌then‌‌it‌‌can‌‌be‌‌argued‌‌that‌‌the‌‌terms‌‌ ○ Again,‌‌Creditor’s‌‌obligation‌‌is‌‌to‌‌DELIVER‌ ‌
&‌‌conditions‌‌of‌‌the‌‌loan‌‌are‌‌not‌‌yet‌‌enforceable‌‌(even‌‌after‌‌ ‌
meeting‌‌of‌‌the‌‌minds)‌ ‌ D.‌‌Contract‌‌to‌‌Loan‌
● Ex.‌‌“the‌‌loan‌‌amount‌‌wasn’t‌‌even‌‌delivered‌‌to‌‌me,‌‌so‌‌why‌‌
charge‌‌me‌‌interest?”‌ ‌ CC,‌‌Article‌‌1934‌.‌‌An‌‌accepted‌‌promise‌‌to‌‌deliver‌‌something‌‌by‌‌
way‌‌of‌‌commodatum‌‌or‌‌simple‌‌loan‌‌is‌‌binding‌‌upon‌‌parties,‌‌but‌‌
C.‌‌Kinds‌‌of‌‌Loan‌ ‌
the‌‌commodatum‌‌or‌‌simple‌‌loan‌‌itself‌‌shall‌‌not‌‌be‌‌perfected‌‌until‌‌

1.‌‌Object‌‌of‌‌a‌‌Loan‌ ‌ the‌‌delivery‌‌of‌‌the‌‌object‌‌of‌‌the‌‌contract.‌‌(n)‌ ‌
● Can‌‌be‌‌consumable‌‌or‌‌nonconsumable‌ ‌
Contract‌‌to‌‌Loan:‌‌Art.‌‌1934‌‌Definition‌ ‌
CC,‌‌Article‌‌1933‌.‌‌By‌‌the‌‌contract‌‌of‌‌loan,‌‌one‌‌of‌‌the‌‌parties‌‌ ● An‌‌accepted‌‌promise‌‌to‌‌deliver‌‌a‌‌consumable‌‌/ ‌‌
delivers‌‌to‌‌another,‌‌either‌‌something‌‌not‌‌consumable‌‌so‌‌that‌‌the‌‌ nonconsumable‌‌property.‌ ‌
latter‌‌may‌‌use‌‌the‌‌same‌‌for‌‌a‌‌certain‌‌time‌‌and‌‌return‌‌it,‌‌in‌‌which‌‌
● Binding‌‌contract‌‌between‌‌debtor‌‌&‌‌creditor‌ ‌
case‌‌the‌‌contract‌‌is‌‌called‌‌a‌‌commodatum;‌‌or‌‌money‌‌or‌‌other‌‌
consumable‌‌thing,‌‌upon‌‌the‌‌condition‌‌that‌‌the‌‌same‌‌amount‌‌of‌‌ ○ Debtor‌:‌‌Promises‌‌to‌‌deliver‌ ‌
the‌‌same‌‌kind‌‌and‌‌quality‌‌shall‌‌be‌‌paid,‌‌in‌‌which‌‌case‌‌the‌‌ ○ Creditor‌:‌‌Accepts‌‌the‌‌promise‌ ‌
contract‌‌is‌‌simply‌‌called‌‌a‌‌loan‌‌or‌‌mutuum.‌ ‌ ● A‌‌consensual‌‌contract;‌‌perfected‌‌by‌‌MERE‌‌CONSENT.‌ ‌
○ As‌‌opposed‌‌to‌‌the‌‌commodatum‌‌or‌‌mutuum‌‌
...‌ ‌
(simple‌‌loan)‌‌itself,‌‌which‌‌is‌‌a‌‌real‌‌contract,‌‌

In‌‌commodatum‌‌the‌‌bailor‌‌retains‌‌the‌‌ownership‌‌of‌‌the‌‌thing‌‌
which‌‌requires‌‌delivery‌‌alongside‌‌consent‌‌
loaned,‌‌while‌‌in‌‌simple‌‌loan,‌‌ownership‌‌passes‌‌to‌‌the‌‌borrower.‌‌
(contract‌‌of‌‌loan).‌ ‌
(1740a)‌ ‌
Contract‌‌to‌‌Loan‌‌v.‌‌Contract‌‌of‌‌Loan‌ ‌
CC,‌‌Article‌‌418‌.‌‌Movable‌‌property‌‌is‌‌either‌‌consumable‌‌or‌‌ Contract‌‌to‌‌Loan‌ ‌ Contract‌‌of‌‌loan‌ ‌

nonconsumable.‌‌To‌‌the‌‌first‌‌class‌‌belong‌‌those‌‌movables‌‌which‌‌ ● A‌‌consensual‌‌ ● A‌‌real‌‌contract,‌‌

cannot‌‌be‌‌used‌‌in‌‌a‌‌manner‌‌appropriate‌‌to‌‌their‌‌nature‌‌without‌‌
contract,‌‌perfected‌‌ perfected‌‌only‌‌upon‌‌

their‌‌being‌‌consumed;‌‌to‌‌the‌‌second‌‌class‌‌belong‌‌all‌‌the‌‌others.‌‌
by‌‌mere‌‌consent‌ ‌ delivery‌ ‌
(337)‌ ‌ Progression‌‌from‌‌Contract‌‌to‌‌Loan‌‌→‌‌Contract‌‌of‌‌Loan‌ ‌
1. Contract‌‌to‌‌Loan‌ ‌
‌ ● Debtor‌‌delivers‌‌property‌‌to‌‌creditor‌ ‌
Nonconsumable‌ ‌ Consumable‌ ‌ ● A‌‌contract‌‌of‌‌loan‌‌is‌‌perfected…‌ ‌
● Commodatum‌ ‌ ● Mutuum‌ ‌ 2. Contract‌‌of‌‌Loan‌ ‌
● Can‌‌be‌‌movable‌‌or‌‌immovable‌‌ ● Ex.‌‌Money‌ ‌ ● The‌‌debtor‌‌that‌‌originally‌‌delivered‌‌the‌‌property‌‌
(personal‌‌or‌‌real)‌ ‌ ● Creditor‌‌loses‌‌ownership;‌‌
● Creditor‌‌retains‌‌ownership‌‌and‌‌ debtor‌‌gains‌‌it,‌‌since‌‌use‌‌of‌‌ to‌‌the‌‌contract‌‌to‌‌loan’s‌‌creditor,‌‌the‌‌obligation‌‌

only‌‌permits‌‌use‌‌by‌‌the‌‌debtor‌ ‌ a‌‌consumable‌‌requires‌‌its‌‌ to‌‌return‌‌the‌‌property‌‌becomes‌‌the‌‌latter’s.‌ ‌
● Same‌‌thing‌‌must‌‌be‌‌returned‌ ‌ extinguishment‌ ‌ ● Thus,‌‌the‌‌former‌‌debtor‌‌becomes‌‌the‌‌creditor,‌‌
● The‌‌same‌‌amount‌‌must‌‌be‌‌
returned‌ ‌ and‌‌vice‌‌versa,‌‌under‌‌this‌‌contract‌‌of‌‌loan.‌ ‌
‌
‌
‌
3‌ ‌
[A3]‌‌Saura‌‌Import‌‌v.‌‌DBP‌ ‌ agreements‌‌with‌‌the‌‌credit‌‌card‌‌companies.‌‌Only‌‌after‌‌the‌‌latter‌‌
Doctrine‌:‌‌Article‌‌1934.‌‌An‌‌accepted‌‌promise‌‌to‌‌deliver‌‌something‌‌ approves‌‌the‌‌purchase‌‌request‌‌that‌‌the‌‌parties‌‌enter‌‌into‌‌a ‌‌
by‌‌way‌‌of‌‌commodatum‌‌or‌‌simple‌‌loan‌‌is‌‌binding‌‌upon‌‌the‌‌ binding‌‌loan‌‌contract.‌ ‌
parties,‌‌but‌‌the‌‌commodatum‌‌or‌‌simple‌‌loan‌‌itself‌‌shall‌‌not‌‌be‌‌ Facts‌:‌‌The‌‌family‌‌of‌‌petitioner‌‌went‌‌on‌‌a‌‌Europe‌‌tour.‌‌The‌‌
perfected‌‌until‌‌the‌‌delivery‌‌of‌‌the‌‌object‌‌of‌‌the‌‌contract.‌ ‌ petitioner‌‌encountered‌‌an‌‌issue‌‌when‌‌he‌‌tried‌‌to‌‌use‌‌his‌‌AMEX‌‌
Facts‌:‌‌Saura,‌‌Inc.‌‌applied‌‌for‌‌a‌‌loan‌‌with‌‌RFC‌‌(DBP)‌‌and‌‌it‌‌was‌‌ credit‌‌card‌‌to‌‌pay‌‌for‌‌the‌‌purchase‌‌of‌‌diamonds‌‌worth‌‌13k‌‌USD.‌‌
approved.‌‌Saura,‌‌Inc.‌‌brought‌‌in‌‌a‌‌co-signer‌‌to‌‌the‌‌loan,‌‌ The‌‌approval‌‌of‌‌the‌‌purchase‌‌was‌‌delayed‌‌some‌‌78‌‌minutes,‌‌and‌‌
executed‌‌the‌‌corresponding‌‌documents,‌‌and‌‌registered‌‌the‌‌ because‌‌of‌‌this‌‌the‌‌tour‌‌bus‌‌the‌‌family‌‌was‌‌on‌‌delayed‌‌in‌‌its‌‌
mortgage.‌‌When‌‌the‌‌co-signer‌‌decided‌‌to‌‌not‌‌avail‌‌of‌‌the‌‌loan,‌‌it‌‌ activity‌‌due‌‌to‌‌it‌‌waiting‌‌for‌‌the‌‌family‌‌to‌‌get‌‌on‌‌the‌‌bus.‌‌Another‌‌
was‌‌considered‌‌cancelled.‌‌Upon‌‌restoration‌‌of‌‌the‌‌loan‌‌ two‌‌instances‌‌of‌‌delayed‌‌approvals‌‌involving‌‌the‌‌same‌‌credit‌‌
agreement,‌‌RFC‌‌(DBP)‌‌imposed‌‌conditions‌‌for‌‌the‌‌loan.‌‌Saura,‌‌ card‌‌occurred‌‌when‌‌petitioner‌‌used‌‌it‌‌to‌‌purchase‌‌some‌‌items‌‌in‌‌
Inc.‌‌could‌‌not‌‌meet‌‌these‌‌requirements‌‌and‌‌subsequently‌‌ the‌‌US.‌‌The‌‌petitioner‌‌claims‌‌that‌‌he‌‌and‌‌his‌‌family‌‌felt‌‌humiliated‌‌
cancelled‌‌the‌‌registration‌‌of‌‌the‌‌corresponding‌‌mortgages.‌‌Nine‌‌ by‌‌these‌‌instances‌‌of‌‌delay‌‌and‌‌seek‌‌damages.‌‌AMEX‌‌counters‌‌
years‌‌later,‌‌Saura,‌‌Inc.‌‌filed‌‌a‌‌case‌‌against‌‌RFC‌‌(DBP)‌‌for‌‌breach‌‌ that‌‌the‌‌delay‌‌was‌‌a‌‌result‌‌of‌‌its‌‌duty‌‌to‌‌protect‌‌the‌‌interests‌‌of‌‌its‌‌
of‌‌contract.‌ ‌ cardholders‌‌and‌‌its‌‌own‌‌interests;‌‌the‌‌routine‌‌procedure‌‌was‌‌in‌‌
Issues‌:‌‌WAS‌‌THERE‌‌A‌‌PERFECTED‌‌CONTRACT‌‌OF‌‌LOAN‌‌ pursuance‌‌to‌‌the‌‌mandate‌‌that‌‌credit‌‌card‌‌companies‌‌are‌‌
BETWEEN‌‌SAURA,‌‌INC.‌‌AND‌‌RFC‌‌(DBP)?‌ ‌ required‌‌to‌‌exercise‌‌extraordinary‌‌diligence‌ ‌with‌‌regard‌‌to‌‌
Ruling‌:‌‌YES.‌‌ ‌ banking‌‌transactions‌‌of‌‌its‌‌clients.‌ ‌
Issues‌:‌‌W/N‌‌AMEX‌‌was‌‌in‌‌mora,‌‌and‌‌liable‌‌for‌‌damages‌‌-‌‌NO‌ ‌
● Saura‌‌could‌‌not‌‌comply‌‌with‌‌DBP’s‌‌condition‌‌that‌‌ Ruling‌:‌ ‌The‌‌relationship‌‌between‌‌the‌‌credit‌‌card‌‌company‌‌and‌‌
they‌‌would‌‌use‌‌raw‌‌materials‌‌locally‌‌available.‌‌ the‌‌cardholder‌‌is‌‌contractual‌‌and‌‌is‌‌governed‌‌by‌‌the‌‌terms‌‌and‌‌
Thus,‌‌they‌‌mutually‌‌desisted,‌‌and‌‌Saura‌‌even‌‌had‌‌ conditions‌‌found‌‌in‌‌the‌‌card‌‌membership‌‌agreement.‌‌A ‌‌
the‌‌mortgage‌‌for‌‌the‌‌loan‌‌cancelled.‌ ‌ creditor-debtor‌‌relationship‌‌arises‌‌between‌‌the‌‌parties‌‌only‌‌
● Saura,‌‌however,‌‌somehow‌‌thought‌‌it‌‌appropriate‌‌to‌‌ AFTER‌‌the‌‌company‌‌has‌‌approved‌‌of‌‌the‌‌request‌‌and‌‌offer‌‌by‌‌
accuse‌‌DBP‌‌of‌‌breach‌‌9‌‌years‌‌after‌‌the‌‌contract‌‌ the‌‌cardholder‌‌to‌‌pay‌‌using‌‌the‌‌credit‌‌card.‌‌See‌‌doctrine.‌ ‌
was‌‌rescinded.‌‌Obviously,‌‌they‌‌lost.‌ ‌
● This‌‌is‌‌why‌‌ACCEPTANCE‌‌of‌‌an‌‌offer‌‌matters;‌‌for‌‌a ‌‌ ● Holder‌‌-‌‌issuer‌‌relationship‌‌is‌‌NOT‌‌the‌‌same‌‌as‌‌the‌‌
counter-offer‌‌does‌‌NOT‌‌signify‌‌consent.‌‌This‌‌is‌‌ creditor‌‌-‌‌debtor‌‌relationship‌‌when‌‌it‌‌comes‌‌to‌‌credit‌‌
especially‌‌important‌‌in‌‌a‌‌contract‌‌to‌‌loan,‌‌which‌‌is‌‌a ‌‌ cards.‌ ‌
consensual‌‌contract.‌ ‌ ● The‌‌latter‌‌only‌‌arises‌‌once‌‌the‌‌purchase‌‌is‌‌
approved‌‌by‌‌the‌‌bank.‌ ‌
‌ ○ So‌‌how‌‌can‌‌AMEX‌‌be‌‌at‌‌fault‌‌when‌‌there‌‌
is‌‌no‌‌demandable‌‌obligation‌‌yet,‌‌since‌‌it‌‌
[A4]‌‌BPI‌‌Investment‌‌Corporation‌‌vs.‌‌CA‌‌&‌‌ALS‌‌Management‌‌ had‌‌not‌‌yet‌‌approved‌‌the‌‌purchase?‌ ‌
&‌‌Development‌‌Corporation‌ ‌ ● Use‌‌of‌‌a‌‌credit‌‌card‌‌to‌‌pay‌‌is‌‌ONLY‌‌an‌‌offer‌‌by‌‌the‌‌

Doctrine‌:‌‌A‌‌loan‌‌contract‌‌is‌‌not‌‌a‌‌consensual‌‌contract‌‌but‌‌a‌‌real‌‌ holder.‌‌
‌
contract.‌‌It‌‌is‌‌perfected‌‌only‌‌upon‌‌the‌‌delivery‌‌of‌‌the‌‌object‌‌of‌‌the‌‌
contract.‌ ‌ ‌
Facts‌:‌‌ALS‌‌and‌‌Litonjua‌‌bought‌‌a‌‌house‌‌and‌‌lot‌‌from‌‌Frank‌‌Roa,‌‌
which‌‌was‌‌mortgaged‌‌to‌‌BPI.‌‌They‌‌wanted‌‌to‌‌assume‌‌Roa’s‌‌debt‌‌ ‌
to‌‌BPI,‌‌but‌‌BPI‌‌refused.‌‌Instead,‌‌BPI‌‌offered‌‌them‌‌a‌‌new‌‌loan‌‌ COMMODATUM‌ ‌
and‌‌the‌‌mortgage‌‌deed‌‌was‌‌signed‌‌on‌‌March‌‌13,‌‌1981.‌‌On‌‌
August‌‌13,‌‌1982,‌‌ALS‌‌updated‌‌Roa’s‌‌arrearages.‌‌BPIIC‌‌then‌‌
applied‌‌the‌‌proceeds‌‌of‌‌ALS’‌‌loan‌‌to‌‌Roa’s‌‌reduced‌‌balance,‌‌ CC,‌‌Article‌‌1933‌.‌‌By‌‌the‌‌contract‌‌of‌‌loan,‌‌one‌‌of‌‌the‌‌parties‌‌
liquidating‌‌his‌‌debt.‌‌On‌‌Sept.‌‌13,‌‌1982,‌‌BPI‌‌released‌‌what‌‌was‌‌ delivers‌‌to‌‌another,‌‌either‌‌something‌‌not‌‌consumable‌‌so‌‌that‌‌the‌‌
left‌‌of‌‌the‌‌loan.‌‌By‌‌June‌‌1984,‌‌BPI‌‌foreclosed‌‌the‌‌property‌‌saying‌‌ latter‌‌may‌‌use‌‌the‌‌same‌‌for‌‌a‌‌certain‌‌time‌‌and‌‌return‌‌it,‌‌in‌‌which‌‌
ALS‌‌and‌‌Litonjua‌‌failed‌‌to‌‌pay‌‌since‌‌May‌‌1,‌‌1981.‌‌Hence,‌‌ALS‌‌ case‌‌the‌‌contract‌‌is‌‌called‌‌a‌‌commodatum;‌‌or‌‌money‌‌or‌‌other‌‌
and‌‌Lotinjua‌‌filed‌‌a‌‌case‌‌alleging‌‌that‌‌they‌‌were‌‌not‌‌in‌‌arrears‌‌in‌‌ consumable‌‌thing,‌‌upon‌‌the‌‌condition‌‌that‌‌the‌‌same‌‌amount‌‌of‌‌
their‌‌payment‌‌and‌‌that‌‌they‌‌should‌‌not‌‌be‌‌made‌‌to‌‌pay‌‌the‌‌ the‌‌same‌‌kind‌‌and‌‌quality‌‌shall‌‌be‌‌paid,‌‌in‌‌which‌‌case‌‌the‌‌
monthly‌‌amortization‌‌before‌‌the‌‌actual‌‌release‌‌of‌‌the‌‌P500,000‌‌ contract‌‌is‌‌simply‌‌called‌‌a‌‌loan‌‌or‌‌mutuum.‌ ‌
loan‌‌in‌‌August‌‌and‌‌September‌‌1982.‌ ‌
Issues‌:‌‌W/N‌‌the‌‌contract‌‌of‌‌loan‌‌was‌‌perfected‌‌only‌‌on‌‌ Commodatum‌‌is‌‌essentially‌‌gratuitous.‌ ‌
September‌‌13,‌‌1982‌‌or‌‌the‌‌second‌‌release‌‌of‌‌the‌‌loan‌‌-‌‌YES‌ ‌ Simple‌‌loan‌‌may‌‌be‌‌gratuitous‌‌or‌‌with‌‌a‌‌stipulation‌‌to‌‌pay‌‌

Ruling‌:‌‌A‌‌loan‌‌contract‌‌is‌‌not‌‌a‌‌consensual‌‌contract‌‌but‌‌a‌‌real‌‌ interest.‌ ‌
contract.‌‌It‌‌is‌‌perfected‌‌only‌‌upon‌‌the‌‌delivery‌‌of‌‌the‌‌object‌‌of‌‌the‌‌
contract.‌‌The‌‌loan‌‌contract‌‌between‌‌BPI‌‌and‌‌ALS‌‌was‌‌perfected‌‌ In‌‌commodatum‌‌the‌‌bailor‌‌retains‌‌the‌‌ownership‌‌of‌‌the‌‌thing‌‌

only‌‌on‌‌September‌‌13,‌‌1982,‌‌the‌‌date‌‌of‌‌the‌‌second‌‌release‌‌of‌‌ loaned,‌‌while‌‌in‌‌simple‌‌loan,‌‌ownership‌‌passes‌‌to‌‌the‌‌borrower.‌‌

the‌‌loan.‌‌Thus,‌‌the‌‌private‌‌respondents’‌‌obligation‌‌to‌‌pay‌‌ (1740a)‌ ‌
commenced‌‌only‌‌on‌‌October‌‌13,‌‌1982,‌‌a‌‌month‌‌after‌‌the‌‌
perfection‌‌of‌‌the‌‌contract.‌‌Moreover,‌‌a‌‌contract‌‌of‌‌loan‌‌involves‌‌a ‌‌
reciprocal‌‌obligation.‌‌It‌‌is‌‌a‌‌basic‌‌principle‌‌in‌‌reciprocal‌‌
CC,‌‌Art.‌‌1935‌.‌‌The‌‌bailee‌‌in‌‌commodatum‌‌acquires‌‌the‌‌used‌‌of‌‌
obligations‌‌that‌‌neither‌‌party‌‌incurs‌‌in‌‌delay,‌‌if‌‌the‌‌other‌‌does‌‌not‌‌ the‌‌thing‌‌loaned‌‌but‌‌not‌‌its‌‌fruits;‌‌if‌‌any‌‌compensation‌‌is‌‌to‌‌be‌‌

comply‌‌or‌‌is‌‌not‌‌ready‌‌to‌‌comply‌‌in‌‌a‌‌proper‌‌manner‌‌with‌‌what‌‌is‌‌ paid‌‌by‌‌him‌‌who‌‌acquires‌‌the‌‌use,‌‌the‌‌contract‌‌ceases‌‌to‌‌be‌‌a ‌‌
incumbent‌‌upon‌‌him.‌ ‌ commodatum.‌‌(1941a)‌ ‌
● BPI‌‌only‌‌released‌‌the‌‌loan‌‌on‌‌Sep.‌‌1982,‌‌and‌‌thus,‌‌
only‌‌then‌‌was‌‌there‌‌an‌‌obligation‌‌for‌‌ALS‌‌to‌‌ CC,‌‌Art.‌‌1939‌.‌‌Commodatum‌‌is‌‌purely‌‌personal‌‌in‌‌character.‌‌

reciprocate.‌‌Release‌‌=‌‌delivery.‌ ‌ Consequently:‌ ‌
● First‌‌date‌‌of‌‌release‌‌on‌‌Aug‌‌cannot‌‌be‌‌considered‌‌ (1)‌‌The‌‌death‌‌of‌‌either‌‌the‌‌bailor‌‌or‌‌the‌‌bailee‌‌extinguishes‌‌the‌‌

the‌‌day‌‌of‌‌perfection,‌‌since‌‌although‌‌it‌‌was‌‌a ‌‌ contract...‌ ‌
substantial‌‌sum,‌‌it‌‌was‌‌not‌‌yet‌‌the‌‌full‌‌500k‌‌

promised.‌‌This‌‌amount‌‌was‌‌only‌‌completed‌‌upon‌‌
the‌‌second‌‌release‌‌in‌‌Sep.‌ ‌ Commodatum‌ ‌
● Latin‌:‌c‌ ommodare‌;‌‌to‌‌lend‌ ‌
‌ ● The‌‌gratuitous‌‌lending‌‌of‌‌goods‌‌to‌‌the‌‌borrower‌‌(bailee),‌‌

and‌‌then‌‌returned‌‌undamaged‌‌to‌‌the‌‌lender‌‌(bailor).‌ ‌
[A5]‌‌Pantaleon‌‌v.‌‌AMEX‌ ‌ ● Obviously,‌‌the‌‌thing‌‌has‌‌to‌‌be‌‌nonconsumable.‌ ‌
Doctrine‌:‌‌From‌‌the‌‌loan‌‌agreement‌‌perspective,‌‌the‌‌contractual‌‌ ● One‌‌of‌‌the‌‌very‌‌first‌‌contracts‌‌a‌‌child‌‌is‌‌taught.‌ ‌
relationship‌‌begins‌‌to‌‌exist‌‌only‌‌upon‌‌the‌‌meeting‌‌of‌‌the‌‌offer‌‌and‌‌
1. Playmate‌‌DELIVERS‌‌a‌‌toy‌‌to‌‌you;‌ ‌
acceptance‌‌of‌‌the‌‌parties‌‌involved,‌‌i.e.‌‌when‌‌cardholders‌‌use‌‌
their‌‌credit‌‌cards‌‌to‌‌pay,‌‌they‌‌merely‌‌offer‌‌to‌‌enter‌‌into‌‌loan‌‌
2. You‌‌USE‌‌it‌‌for‌‌a‌‌certain‌‌time;‌‌and‌ ‌
3. You‌‌RETURN‌‌it‌‌undamaged‌‌later‌‌on.‌ ‌
4‌ ‌
‌
paid‌‌by‌‌him‌‌who‌‌acquires‌‌the‌‌use,‌‌the‌‌contract‌‌ceases‌‌to‌‌be‌‌a ‌‌
B.‌‌Object‌‌of‌‌Commodatum‌ commodatum.‌‌(1941a)‌ ‌
CC,‌‌Art.‌‌1936‌.‌‌Consumable‌‌goods‌‌may‌‌be‌‌the‌‌subject‌‌of‌‌
commodatum‌‌if‌‌the‌‌purpose‌‌of‌‌the‌‌contract‌‌is‌‌not‌‌the‌‌ CC,‌‌Art.‌‌1939‌.‌‌Commodatum‌‌is‌‌purely‌‌personal‌‌in‌‌character.‌‌

consumption‌‌of‌‌the‌‌object,‌‌as‌‌when‌‌it‌‌is‌‌merely‌‌for‌‌exhibition.‌‌(n)‌ ‌ Consequently:‌ ‌
(1)‌‌The‌‌death‌‌of‌‌either‌‌the‌‌bailor‌‌or‌‌the‌‌bailee‌‌extinguishes‌‌the‌‌

CC,‌‌Art.‌‌1937‌.‌‌Movable‌‌or‌‌immovable‌‌property‌‌may‌‌be‌‌the‌‌object‌‌
contract...‌ ‌
of‌‌commodatum.‌‌(n)‌ ‌
● Generally,‌‌the‌‌object‌‌is‌‌nonconsumable‌‌property,‌‌either‌‌
● Purely‌‌gratuitous.‌‌Liberality‌‌is‌‌the‌‌only‌‌consideration‌‌on‌‌
real‌‌or‌‌personal.‌ ‌ the‌‌part‌‌of‌‌the‌‌bailor.‌ ‌
● However,‌‌consumables‌‌can‌‌be‌‌the‌‌object‌‌if‌‌the‌‌purpose‌‌is‌‌
● Thus,‌‌commodatum‌‌is‌‌purely‌‌personal,‌‌and‌‌the‌‌contract‌‌is‌‌
not‌‌consumption.‌ ‌ extinguished‌‌upon‌‌the‌‌death‌‌of‌‌either‌‌bailor‌‌or‌‌bailee.‌ ‌
● Permissive‌‌use‌‌is‌‌the‌‌consideration‌‌on‌‌the‌‌part‌‌of‌‌the‌‌

[A6]‌‌Producers‌‌Bank‌‌v.‌‌CA‌ ‌ bailee.‌ ‌
Doctrine‌:‌‌Consumable‌‌goods‌‌may‌‌be‌‌subject‌‌of‌‌commodatum‌‌if‌‌ ‌
the‌‌purpose‌‌is‌‌not‌‌the‌‌consumption‌‌of‌‌object‌‌when‌‌it‌‌is‌‌merely‌‌for‌‌
exhibition‌‌[Art.‌‌1937].‌‌This‌‌falls‌‌under‌‌this‌‌since‌‌the‌‌purpose‌‌of‌‌ D.‌‌Parties‌‌to‌‌a‌‌Commodatum‌ ‌
the‌‌deposit‌‌was‌‌to‌‌make‌‌it‌‌appear‌‌Sterela‌‌had‌‌capitalization.‌ ‌ ● Bailor‌:‌‌creditor,‌‌or‌‌lender‌ ‌
Facts‌:‌‌VIves,‌‌Sanchez,‌‌and‌‌Dumagpi‌‌went‌‌to‌‌Producers‌‌to‌‌open‌‌ ● Bailee‌:‌‌debtor,‌‌or‌‌borrower‌ ‌
a‌‌bank‌‌account‌‌and‌‌deposit‌‌P200K‌‌for‌‌the‌‌incorporation‌‌of‌‌ ● From‌‌the‌‌common‌‌law‌‌concept‌‌of‌‌bailment.‌ ‌
Sterela,‌‌the‌‌business‌‌of‌‌Doronilla.‌‌Vives‌‌funded‌‌the‌‌account.‌‌ ○ Bailee‌‌holds‌‌the‌‌property‌‌of‌‌the‌‌bailor‌‌for‌‌a ‌‌
Later,‌‌Doronilla‌‌withdrew‌‌money‌‌leaving‌‌only‌‌P90K‌‌to‌‌the‌‌ certain‌‌purpose,‌‌usually‌‌under‌‌an‌‌expressed‌‌or‌‌
surprise‌‌of‌‌Vives.‌‌He‌‌later‌‌issued‌‌a‌‌check‌‌for‌‌P212K‌‌to‌‌Vives‌‌
implied‌‌contract.‌ ‌
which‌‌was‌‌dishonored‌‌twice.‌ ‌
Relevant‌‌Issue‌:‌‌Whether‌‌it‌‌was‌‌commodatum‌‌or‌‌mutuum‌‌- ‌‌ ‌
COMMODATUM‌ ‌ 1.‌‌Ownership‌‌by‌‌Bailor‌ ‌
Ruling‌:‌ ‌The‌‌consumable‌‌was‌‌only‌‌for‌‌exhibition‌‌not‌‌
consumption,‌‌particularly‌‌as‌‌a‌‌show‌‌of‌‌capitalization‌‌for‌‌ CC,‌‌Art.‌‌1933‌.‌‌...‌ ‌
incorporating‌‌Sterela.‌‌Granted‌‌this‌‌has‌‌no‌‌bearing‌‌on‌‌the‌‌ In‌‌commodatum‌‌the‌‌bailor‌‌retains‌‌the‌‌ownership‌‌of‌‌the‌‌thing‌‌

question‌‌of‌‌Producers‌‌Bank‌‌liability.‌ ‌ loaned,‌‌while‌‌in‌‌simple‌‌loan,‌‌ownership‌‌passes‌‌to‌‌the‌‌borrower.‌‌

(1740a)‌ ‌
Other‌‌issue‌:‌‌Whether‌‌bank‌‌is‌‌liable‌‌-‌‌YES‌ ‌
Ruling‌:‌‌Although‌‌the‌‌savings‌‌account‌‌was‌‌in‌‌the‌‌name‌‌of‌‌
Sterela,‌‌the‌‌bank‌‌records‌‌disclose‌‌that‌‌the‌‌only‌‌ones‌‌empowered‌‌ CC,‌‌Art.‌‌1938‌.‌‌The‌‌bailor‌‌in‌‌commodatum‌‌need‌‌not‌‌be‌‌the‌‌owner‌‌

to‌‌withdraw‌‌the‌‌same‌‌were‌‌Inocencia‌‌Vives‌‌and‌‌Angeles‌‌B.‌‌ of‌‌the‌‌thing‌‌loaned.‌‌(n)‌ ‌
Sanchez.‌‌Despite‌‌this‌‌rule,‌‌Assistant‌‌Manager‌‌Atienza‌‌allowed‌‌ ● The‌‌bailor‌‌need‌‌not‌‌be‌‌the‌‌owner‌‌of‌‌the‌‌property‌‌loaned‌‌
Dornilla‌‌to‌‌withdraw‌‌therefrom‌‌multiple‌‌times.‌‌The‌‌scheme‌‌could‌‌
not‌‌have‌‌been‌‌executed‌‌without‌‌Atienza’s‌‌knowledge,‌‌help,‌‌and‌‌ (ex.‌‌usufructuary).‌ ‌
cooperation.‌‌In‌‌addition,‌‌the‌‌fund‌‌transfer‌‌was‌‌done‌‌without‌‌the‌‌ ● However,‌‌as‌‌far‌‌as‌‌the‌‌bailee‌‌is‌‌concerned,‌‌the‌‌bailor‌‌is‌‌

passbook,‌‌despite‌‌presenting‌‌such‌‌being‌‌required.‌ ‌ considered‌‌the‌‌owner.‌ ‌
‌
● The‌‌contract‌‌in‌‌this‌‌case‌‌was‌‌one‌‌of‌‌mutuum.‌ ‌
● They‌‌wanted‌‌it‌‌to‌‌appear‌‌as‌‌a‌‌mutuum,‌‌so‌‌he‌‌could‌‌
2.‌‌Use‌‌by‌‌Bailee‌ ‌
use‌‌the‌‌money‌‌in‌‌any‌‌way‌‌he‌‌wanted.‌‌ CC,‌‌Art.‌‌1935‌.‌‌The‌‌bailee‌‌in‌‌commodatum‌‌acquires‌‌the‌‌used‌‌of‌‌
Commodatum‌‌has‌‌a‌‌specific‌‌use‌‌(show‌‌money).‌ ‌ the‌‌thing‌‌loaned‌‌but‌‌not‌‌its‌‌fruits;‌‌if‌‌any‌‌compensation‌‌is‌‌to‌‌be‌‌

● So‌‌why‌‌did‌‌Doronilla‌‌make‌‌it‌‌look‌‌like‌‌mutuum?‌‌To‌‌
paid‌‌by‌‌him‌‌who‌‌acquires‌‌the‌‌use,‌‌the‌‌contract‌‌ceases‌‌to‌‌be‌‌a ‌‌
justify‌‌consumption‌‌of‌‌the‌‌200k.‌‌Mutuum’s‌‌purpose‌‌ commodatum.‌‌(1941a)‌ ‌
for‌‌consumables‌‌is‌‌consumption.‌ ‌
● In‌‌order‌‌to‌‌avoid‌‌CRIMINAL‌‌LIABILITY‌‌for‌‌Doronilla‌‌
&‌‌Sanchez‌‌for‌‌estafa‌‌(misappropriation).‌ ‌ CC,‌‌Art.‌‌1940‌.‌‌A‌‌stipulation‌‌that‌‌the‌‌bailee‌‌may‌‌make‌‌use‌‌of‌‌the‌‌

Elements‌‌of‌‌Mutuum‌ ‌ fruits‌‌of‌‌the‌‌thing‌‌loaned‌‌is‌‌valid.‌‌(n)‌ ‌
1. Consumable‌‌object‌‌(money)‌
2. Onerous‌‌(interest‌‌of‌‌12K)‌ ‌
‌ CC,‌‌Art.‌‌1939‌.‌‌Commodatum‌‌is‌‌purely‌‌personal‌‌in‌‌character.‌‌
CC,‌‌Art.‌‌1980‌.‌‌Fixed,‌‌savings,‌‌and‌‌current‌‌deposits‌‌of‌‌money‌‌ Consequently:‌ ‌
in‌‌banks‌‌and‌‌similar‌‌institutions‌‌shall‌‌be‌‌governed‌‌by‌‌the‌‌
(1)‌‌The‌‌death‌‌of‌‌either‌‌the‌‌bailor‌‌or‌‌the‌‌bailee‌‌extinguishes‌‌the‌‌
provisions‌‌concerning‌‌simple‌‌loan.‌‌(n)‌ ‌ contract;‌ ‌
(2)‌‌The‌‌bailee‌‌can‌‌neither‌‌lend‌‌nor‌‌lease‌‌the‌‌object‌‌of‌‌the‌‌

‌ contract‌‌to‌‌a‌‌third‌‌person.‌‌However,‌‌the‌‌members‌‌of‌‌the‌‌bailee's‌‌
‌ household‌‌may‌‌make‌‌use‌‌of‌‌the‌‌thing‌‌loaned,‌‌unless‌‌there‌‌is‌‌a ‌‌
stipulation‌‌to‌‌the‌‌contrary,‌‌or‌‌unless‌‌the‌‌nature‌‌of‌‌the‌‌thing‌‌forbids‌‌

C.‌‌Consideration‌‌in‌‌Commodatum‌ ‌ such‌‌use.‌‌(n)‌ ‌
CC,‌‌Article‌‌1933‌.‌‌By‌‌the‌‌contract‌‌of‌‌loan,‌‌one‌‌of‌‌the‌‌parties‌‌ ●General‌‌Rule‌:‌‌Bailee‌‌acquires‌‌permissive‌‌use,‌‌but‌‌is‌‌not‌‌
delivers‌‌to‌‌another,‌‌either‌‌something‌‌not‌‌consumable‌‌so‌‌that‌‌the‌‌ entitled‌‌to‌‌the‌‌fruits‌‌of‌‌the‌‌thing.‌ ‌
latter‌‌may‌‌use‌‌the‌‌same‌‌for‌‌a‌‌certain‌‌time‌‌and‌‌return‌‌it,‌‌in‌‌which‌‌ ● Exception‌:‌‌When‌‌the‌‌parties‌‌stipulate‌‌the‌‌bailee’s‌‌
case‌‌the‌‌contract‌‌is‌‌called‌‌a‌‌commodatum;‌‌or‌‌money‌‌or‌‌other‌‌
consumable‌‌thing,‌‌upon‌‌the‌‌condition‌‌that‌‌the‌‌same‌‌amount‌‌of‌‌ entitlement‌‌to‌‌permissive‌‌use‌‌of‌‌the‌‌fruits.‌ ‌
the‌‌same‌‌kind‌‌and‌‌quality‌‌shall‌‌be‌‌paid,‌‌in‌‌which‌‌case‌‌the‌‌ Commodatum,‌‌being‌‌Purely‌‌Personal‌ ‌
contract‌‌is‌‌simply‌‌called‌‌a‌‌loan‌‌or‌‌mutuum.‌ ‌ ● Generally,‌‌the‌‌bailee‌‌acquires‌‌the‌‌commodatum‌‌only‌‌for‌‌
himself‌‌and‌‌cannot‌‌lend/lease‌‌it‌‌to‌‌third‌‌persons.‌ ‌
Commodatum‌‌is‌‌essentially‌‌gratuitous.‌ ‌
● The‌‌members‌‌of‌‌a‌‌bailee’s‌‌household‌‌may‌‌make‌‌use‌‌of‌‌
Simple‌‌loan‌‌may‌‌be‌‌gratuitous‌‌or‌‌with‌‌a‌‌stipulation‌‌to‌‌pay‌‌
the‌‌loaned‌‌property,‌‌except:‌ ‌
interest.‌ ‌ a) A‌‌contrary‌‌stipulation‌‌exists;‌ ‌
b) Nature‌‌of‌‌the‌‌property‌‌forbids‌‌use‌‌by‌‌anyone‌‌
loaned,‌‌while‌‌in‌‌simple‌‌loan,‌‌ownership‌‌passes‌‌to‌‌the‌‌borrower.‌‌
other‌‌than‌‌the‌‌bailee.‌ ‌
(1740a)‌ ‌ ‌
‌
CC,‌‌Art.‌‌1935‌.‌‌The‌‌bailee‌‌in‌‌commodatum‌‌acquires‌‌the‌‌used‌‌of‌‌ ‌
the‌‌thing‌‌loaned‌‌but‌‌not‌‌its‌‌fruits;‌‌if‌‌any‌‌compensation‌‌is‌‌to‌‌be‌‌

‌
5‌ ‌
3.‌‌Solidary‌‌Liability‌‌of‌‌Bailees‌ ‌ ● If‌‌the‌‌extraordinary‌‌expenses‌‌arise‌‌from‌‌actual‌‌use,‌‌then‌‌
the‌‌bailor‌‌and‌‌bailee‌‌are‌‌equally‌‌liable.‌ ‌
CC,‌‌Art.‌‌1945‌.‌‌When‌‌there‌‌are‌‌two‌‌or‌‌more‌‌bailees‌‌to‌‌whom‌‌a ‌‌
○ The‌‌parties,‌‌of‌‌course,‌‌may‌‌stipulate‌‌otherwise.‌ ‌
thing‌‌is‌‌loaned‌‌in‌‌the‌‌same‌‌contract,‌‌they‌‌are‌‌liable‌‌solidarily.‌ ‌
‌
‌ 3.‌‌Other‌‌Expenses‌ ‌
E.‌‌Liability‌‌for‌‌Expenses‌‌and‌‌Damages‌ ‌
CC,‌‌Art.‌‌1950‌.‌‌If,‌‌for‌‌the‌‌purpose‌‌of‌‌making‌‌use‌‌of‌‌the‌‌thing,‌‌the‌‌

1.‌‌Ordinary‌‌Expenses‌ ‌
bailee‌‌incurs‌‌expenses‌‌other‌‌than‌‌those‌‌referred‌‌to‌‌in‌‌Articles‌‌
CC,‌‌Art.‌‌1933‌.‌‌...‌ ‌ 1941‌‌and‌‌1949,‌‌he‌‌is‌‌not‌‌entitled‌‌to‌‌reimbursement.‌‌(n)‌ ‌
● Bailee’s‌‌burden.‌‌The‌‌bailee‌‌pays‌‌for‌‌all‌‌expenses‌‌other‌‌

loaned...‌ ‌
than‌‌ordinary‌‌use‌‌and‌‌extraordinary‌‌use‌‌(see‌‌above‌‌for‌‌

the‌‌exceptional‌‌reason‌‌why).‌ ‌
CC,‌‌Art.‌‌1935‌.‌‌The‌‌bailee‌‌in‌‌commodatum‌‌acquires‌‌the‌‌used‌‌of‌‌

‌
the‌‌thing‌‌loaned‌‌but‌‌not‌‌its‌‌fruits...‌ ‌
4.‌‌Abandonment‌‌by‌‌Bailor‌
CC,‌‌Art.‌‌1941‌.‌‌The‌‌bailee‌‌is‌‌obliged‌‌to‌‌pay‌‌for‌‌the‌‌ordinary‌‌
CC,‌‌Art.‌‌1952‌.‌‌The‌‌bailor‌‌cannot‌‌exempt‌‌himself‌‌from‌‌the‌‌

expenses‌‌for‌‌the‌‌use‌‌and‌‌preservation‌‌of‌‌the‌‌thing‌‌loaned.‌‌ payment‌‌of‌‌expenses‌‌or‌‌damages‌‌by‌‌abandoning‌‌the‌‌thing‌‌to‌‌the‌‌

(1743a)‌ ‌ bailee.‌‌(n)‌ ‌
● Thus,‌‌it‌‌follows‌‌that‌‌the‌‌bailee‌‌has‌‌a‌‌right‌‌to‌‌compel‌‌the‌‌

CC,‌‌Art.‌‌1943‌.‌‌The‌‌bailee‌‌does‌‌not‌‌answer‌‌for‌‌the‌‌deterioration‌‌ bailor‌‌to‌‌pay‌‌for‌‌pertinent‌‌expenses.‌ ‌
of‌‌the‌‌thing‌‌loaned‌‌due‌‌only‌‌to‌‌the‌‌use‌‌thereof‌‌and‌‌without‌‌his‌‌

‌
fault.‌‌(1746)‌ ‌
5.‌‌Right‌‌of‌‌Retention‌‌by‌‌Bailee‌ ‌
● Since‌‌bailee‌‌acquires‌‌permissive‌‌use‌‌and‌‌the‌‌obligation‌‌to‌‌
return‌‌it,‌‌naturally,‌‌the‌‌costs‌‌for‌‌ordinary‌‌use‌‌and‌‌
CC,‌‌Art.‌‌1944‌.‌‌The‌‌bailee‌‌cannot‌‌retain‌‌the‌‌thing‌‌loaned‌‌on‌‌the‌‌

ground‌‌that‌‌the‌‌bailor‌‌owes‌‌him‌‌something,‌‌even‌‌though‌‌it‌‌may‌‌
preservation‌‌fall‌‌on‌‌him.‌ ‌
be‌‌by‌‌reason‌‌of‌‌expenses.‌‌However,‌‌the‌‌bailee‌‌has‌‌a‌‌right‌‌of‌‌
● However,‌‌the‌‌bailee‌‌is‌‌not‌‌liable‌‌for‌‌deterioration‌‌arising‌‌
retention‌‌for‌‌damages‌‌mentioned‌‌in‌‌Article‌‌1951.‌‌(1747a)‌ ‌
from‌‌ordinary‌‌use,‌‌and‌‌without‌‌his‌‌fault.‌ ‌
○ It‌‌is‌‌expected‌‌that‌‌the‌‌thing‌‌would‌‌suffer‌‌
CC,‌‌Art.‌‌1951‌.‌‌The‌‌bailor‌‌who,‌‌knowing‌‌the‌‌flaws‌‌of‌‌the‌‌thing‌‌

ordinary‌‌wear‌‌and‌‌tear.‌ ‌ loaned,‌‌does‌‌not‌‌advise‌‌the‌‌bailee‌‌of‌‌the‌‌same,‌‌shall‌‌be‌‌liable‌‌to‌‌

‌ the‌‌latter‌‌for‌‌the‌‌damages‌‌which‌‌he‌‌may‌‌suffer‌‌by‌‌reason‌‌thereof.‌‌
(1752)‌ ‌
[A7]‌‌Pajuyo‌‌v.‌‌Court‌‌of‌‌Appeals‌ ‌
Doctrine‌:‌‌In‌‌a‌‌contract‌‌of‌‌Commodatum,‌‌one‌‌party‌‌delivers‌‌a ‌‌ ● Generally,‌‌the‌‌bailee‌‌has‌‌no‌‌right‌‌of‌‌retention.‌ ‌
nonconsumable‌‌thing‌‌to‌‌another,‌‌so‌‌that‌‌the‌‌latter‌‌may‌‌use‌‌it‌‌for‌‌ ● The‌‌exception‌‌is‌‌if‌‌the‌‌bailor‌‌does‌‌not‌‌advise‌‌the‌‌bailee‌‌of‌‌

a‌‌certain‌‌time,‌‌and‌‌then‌‌return‌‌it.‌‌Contracts‌‌of‌‌commodatum‌‌are‌‌ a‌‌defect‌‌in‌‌the‌‌thing,‌‌and‌‌this‌‌defect‌‌causes‌‌damage‌‌to‌‌the‌‌
GRATUITOUS,‌‌and‌‌the‌‌use‌‌of‌‌the‌‌thing‌‌contemplated‌‌is‌‌for‌‌a ‌‌ bailee‌‌from‌‌its‌‌ordinary‌‌use.‌ ‌
TIME‌‌CERTAIN.‌ ‌ ● The‌‌bailee‌‌retains‌‌the‌‌thing‌‌until‌‌the‌‌bailor‌‌pays‌‌for‌‌

Facts‌:‌‌Pajuyo,‌‌a‌‌squatter,‌‌by‌‌virtue‌‌of‌‌a‌‌Kasunduan,‌‌allowed‌‌
Guevarra‌‌to‌‌live‌‌in‌‌his‌‌house‌‌on‌‌public‌‌land,‌‌provided‌‌that‌‌the‌‌ damages.‌ ‌
latter‌‌maintain‌‌its‌‌cleanliness‌‌and‌‌orderliness,‌‌and‌‌vacate‌‌upon‌‌ ‌
demand.‌‌Pajuyo‌‌demanded‌‌he‌‌vacate,‌‌and‌‌he‌‌refused.‌‌The‌‌MTC‌‌ F.‌‌Liability‌‌for‌‌Loss‌ ‌
&‌‌RTC‌‌ruled‌‌in‌‌favor‌‌of‌‌Pajuyo’s‌‌right‌‌of‌‌physical‌‌possession,‌‌but‌‌
the‌‌CA‌‌reversed‌‌it,‌‌in‌‌favor‌‌of‌‌Guevarra,‌‌on‌‌the‌‌ground‌‌that‌‌the‌‌ CC,‌‌Art.‌‌1933‌.‌‌...‌ ‌
latter‌‌was‌‌allegedly‌‌a‌‌beneficiary‌‌under‌‌Proclamation‌‌137.‌‌The‌‌ In‌‌commodatum‌‌the‌‌bailor‌‌retains‌‌the‌‌ownership‌‌of‌‌the‌‌thing‌‌

CA‌‌refused‌‌to‌‌rule‌‌on‌‌the‌‌issue‌‌of‌‌possession‌‌by‌‌reason‌‌of‌‌both‌‌ loaned...‌ ‌
parties‌‌being‌‌in‌‌pari‌‌delicto.‌‌The‌‌CA‌‌also‌‌ruled‌‌that‌‌the‌‌

Kasunduan‌‌was‌‌in‌‌the‌‌nature‌‌of‌‌commodatum.‌ ‌ CC,‌‌Art.‌‌1942‌.‌‌The‌‌bailee‌‌is‌‌liable‌‌for‌‌the‌‌loss‌‌of‌‌the‌‌thing,‌‌even‌‌if‌‌

Issues‌:‌‌W/N‌‌the‌‌Kasunduan‌‌was‌‌a‌‌commodatum‌‌-‌‌NO‌ ‌ it‌‌should‌‌be‌‌through‌‌a‌‌fortuitous‌‌event:‌ ‌
Ruling‌:‌‌See‌‌Doctrine.‌‌The‌‌Kasunduan‌‌was‌‌neither‌‌gratuitous,‌‌ (1) If‌‌he‌‌devotes‌‌the‌‌thing‌‌to‌‌any‌‌purpose‌‌different‌‌from‌‌
nor‌‌was‌‌the‌‌use‌‌for‌‌a‌‌time‌‌certain.‌ ‌ that‌‌for‌‌which‌‌it‌‌has‌‌been‌‌loaned;‌ ‌
● The‌‌obligation‌‌to‌‌“maintain‌‌cleanliness‌‌and‌‌ (2) If‌‌he‌‌keeps‌‌it‌‌longer‌‌than‌‌the‌‌period‌‌stipulated,‌‌or‌‌after‌‌

orderliness”‌‌was‌‌considered‌‌compensation‌‌by‌‌the‌ the‌‌accomplishment‌‌of‌‌the‌‌use‌‌for‌‌which‌‌the‌‌
court.‌ ‌ commodatum‌‌has‌‌been‌‌constituted‌ ‌
● However,‌‌these‌‌are‌‌considered‌‌ordinary‌‌expenses,‌‌
(3) If‌‌the‌‌thing‌‌loaned‌‌has‌‌been‌‌delivered‌‌with‌‌appraisal‌‌of‌‌
which‌‌the‌‌bailee‌‌is‌‌liable‌‌for.‌‌So,‌‌how‌‌is‌‌this‌‌
its‌‌value,‌‌unless‌‌there‌‌is‌‌a‌‌stipulation‌‌exemption‌‌the‌‌

reconciled‌‌with‌‌Art.‌‌1941?‌ ‌
bailee‌‌from‌‌responsibility‌‌in‌‌case‌‌of‌‌a‌‌fortuitous‌‌event;‌ ‌
○ Perhaps‌‌because‌‌the‌‌court‌‌did‌‌not‌‌
consider‌‌it‌‌as‌‌commodatum?‌‌But‌‌then‌‌ (4) If‌‌he‌‌lends‌‌or‌‌leases‌‌the‌‌thing‌‌to‌‌a‌‌third‌‌person,‌‌who‌‌is‌‌

again,‌‌this‌‌is‌‌already‌‌circular‌‌reasoning.‌ ‌ not‌‌a‌‌member‌‌of‌‌his‌‌household;‌ ‌
‌ (5) If,‌‌being‌‌able‌‌to‌‌save‌‌either‌‌the‌‌thing‌‌borrowed‌‌or‌‌his‌‌

own‌‌thing,‌‌he‌‌chose‌‌to‌‌save‌‌the‌‌latter.‌ ‌
‌
2.‌‌Extraordinary‌‌Expenses‌ ‌ ● General‌‌Rule‌:‌‌Bailor‌‌bears‌‌liability‌‌for‌‌loss‌‌due‌‌to‌‌

CC,‌‌Art.‌‌1949‌.‌‌The‌‌bailor‌‌shall‌‌refund‌‌the‌‌extraordinary‌‌expenses‌‌ fortuitous‌‌event,‌‌since‌‌he‌‌retains‌‌ownership‌‌of‌‌the‌‌thing.‌ ‌
during‌‌the‌‌contract‌‌for‌‌the‌‌preservation‌‌of‌‌the‌‌thing‌‌loaned,‌‌
● Exception‌:‌‌Liability‌‌for‌‌loss‌‌due‌‌to‌‌fortuitous‌‌event‌‌shifts‌‌to‌‌

provided‌‌the‌‌bailee‌‌brings‌‌the‌‌same‌‌to‌‌the‌‌knowledge‌‌of‌‌the‌‌ the‌‌bailee‌‌if:‌ ‌
bailor‌‌before‌‌incurring‌‌them,‌‌except‌‌when‌‌they‌‌are‌‌so‌‌urgent‌‌that‌‌ 1. Bailee‌‌devotes‌‌the‌‌thing‌‌to‌‌a‌‌different‌‌purpose.‌‌ ‌
the‌‌reply‌‌to‌‌the‌‌notification‌‌cannot‌‌be‌‌awaited‌‌without‌‌danger.‌ ‌ ● Contractual‌‌breach‌ ‌
● Bailor‌‌retains‌‌ownership,‌‌so‌‌he‌‌must‌‌shoulder‌‌the‌‌costs‌‌for‌‌ 2. Bailee‌‌retains‌‌the‌‌thing‌‌for‌‌longer‌‌than‌‌stipulated.‌ ‌
extraordinary‌‌expenses‌‌to‌‌preserve‌‌the‌‌thing.‌ ‌ ● Mora‌‌ ‌
● However,‌‌if‌‌the‌‌bailee‌‌covers‌‌these‌‌expenses‌‌before‌‌ 3. Bailee‌‌keeps‌‌it‌‌after‌‌it‌‌has‌‌been‌‌used‌‌accordingly.‌ ‌
informing‌‌the‌‌bailor,‌‌he‌‌is‌‌liable.‌ ‌ ● Mora‌‌ ‌
○ If‌‌the‌‌extraordinary‌‌expenses‌‌are‌‌so‌‌urgent‌‌that‌‌ 4. Property‌‌loaned‌‌was‌‌delivered‌‌with‌‌an‌‌appraised‌‌value.‌ ‌
waiting‌‌for‌‌the‌‌bailor’s‌‌reply‌‌puts‌‌the‌‌property‌‌in‌‌
● This‌‌shows‌‌the‌‌parties’‌‌intention‌‌to‌‌shift‌‌liability‌‌to‌‌

danger,‌‌the‌‌bailor‌‌remains‌‌liable.‌ ‌ the‌‌bailee‌‌in‌‌case‌‌of‌‌loss‌‌by‌‌fortuitous‌‌event.‌ ‌
6‌ ‌
● A‌‌contrary‌‌stipulation‌‌obviously‌‌keeps‌‌the‌‌liability‌‌
● Or‌‌children‌‌under‌‌his‌‌parental‌‌
from‌‌shifting‌‌to‌‌the‌‌bailee.‌ ‌ authority.‌ ‌
5. Bailee‌‌lends/leases‌‌to‌‌a‌‌3rd‌‌party‌‌not‌‌from‌‌his‌‌
b. Imputes‌‌to‌‌the‌‌bailor‌‌any‌‌crime‌‌/‌‌act‌‌of‌‌moral‌‌

household.‌ ‌ turpitude,‌‌even‌‌if‌‌proven,‌‌UNLESS‌‌committed‌‌
● Contractual‌‌breach‌ ‌ against‌‌the‌‌bailee,‌‌his‌‌wife,‌‌or‌‌children.‌ ‌
6. If‌‌in‌‌case‌‌of‌‌danger‌‌of‌‌loss,‌‌the‌‌bailee‌‌chooses‌‌to‌‌save‌‌
c. Bailee‌‌refuses‌‌to‌‌give‌‌support‌‌to‌‌the‌‌bailor‌‌when‌‌
his‌‌own‌‌property‌‌over‌‌the‌‌borrowed‌‌thing.‌ ‌ he‌‌is‌‌legally‌‌or‌‌morally‌‌bound‌‌to.‌ ‌
● Act‌‌of‌‌ingratitude‌ ‌
[A9]‌‌Quintos‌‌&‌‌Ansaldo‌‌v‌‌Beck‌ ‌
‌
Doctrine‌:‌‌The‌‌obligation‌‌to‌‌return‌‌the‌‌furniture‌‌upon‌‌demand‌‌
[A8]‌‌Republic‌‌v.‌‌Bagtas‌ ‌ means‌‌that‌‌the‌‌bailee‌‌should‌‌return‌‌all‌‌of‌‌the‌‌furniture‌‌at‌‌the‌‌
Doctrine‌:‌‌A‌‌bailee‌‌is‌‌liable‌‌for‌‌loss‌‌due‌‌to‌‌fortuitous‌‌event‌‌if‌‌he‌‌
bailor’s‌‌residence.‌‌ ‌
commits‌‌any‌‌of‌‌the‌‌acts‌‌in‌‌CC,‌‌Art.‌‌1942.‌ ‌ Facts‌:‌‌Petitioners‌‌loaned‌‌furniture‌‌to‌‌Beck,‌‌stipulating‌‌that‌‌he‌‌
Facts‌:‌‌Bagtas‌‌borrowed‌‌3‌‌cows.‌‌He‌‌returned‌‌the‌‌two‌‌cows‌‌while‌‌ was‌‌to‌‌return‌‌the‌‌furniture‌‌upon‌‌demand.‌‌Petitioners‌‌later‌‌
the‌‌third‌‌one‌‌was‌‌shot‌‌by‌‌the‌‌Huks.‌ ‌Felicidad,‌‌Bagtas’‌‌wife,‌‌ demanded‌‌the‌‌return‌‌of‌‌the‌‌furniture,‌‌but‌‌Beck‌‌refused‌‌to‌‌return‌‌
argued‌‌that‌‌since‌‌the‌‌contract‌‌was‌‌commodatum,‌‌Petitioner,‌‌as‌‌ some‌‌of‌‌the‌‌furniture‌‌and,‌‌as‌‌to‌‌the‌‌furniture‌‌he‌‌was‌‌willing‌‌to‌‌
owner,‌‌should‌‌suffer‌‌the‌‌loss‌‌due‌‌to‌‌it‌‌being‌‌caused‌‌by‌‌force‌ return,‌‌only‌‌put‌‌them‌‌at‌‌Petitioners’‌‌disposal.‌‌So,‌‌Petitioners‌‌
majeure‌ ‌ refused‌‌to‌‌get‌‌the‌‌furniture.‌‌
‌
Issues‌:‌‌W/N‌‌Bagtas‌‌is‌‌liable‌‌for‌‌the‌‌3rd‌‌cow‌‌-‌‌YES‌ ‌ Issues‌:‌‌W/n‌‌Petitioners‌‌had‌‌violated‌‌the‌‌contract‌‌by‌‌refusing‌‌to‌‌
Ruling‌:‌‌Art.‌‌1942,‌‌CC‌‌provides‌‌for‌‌the‌‌cases‌‌where‌‌the‌‌bailee‌‌is‌‌ get‌‌the‌‌furniture‌ ‌
liable‌‌for‌‌the‌‌loss‌‌even‌‌if‌‌it‌‌was‌‌caused‌‌by‌‌fortuitous‌‌events.‌‌The‌‌ Ruling‌:‌‌They‌‌did‌‌not.‌‌Beck’s‌o ‌ bligation‌‌was‌‌to‌r‌ eturn‌t‌ he‌‌
facts‌‌in‌‌the‌‌case‌‌fit‌‌the‌‌situations‌‌provided‌‌by‌‌Art.‌‌1942‌‌hence‌‌ furniture‌‌to‌‌the‌‌residence‌‌of‌‌Petitioners‌.‌‌His‌‌offer‌‌to‌‌have‌‌them‌‌
Bagtas‌‌is‌‌liable.‌ ‌ get‌‌the‌‌furniture‌‌was‌‌not‌‌compliance.‌‌His‌‌offer‌‌to‌‌return‌‌only‌‌
some‌‌of‌‌the‌‌furniture‌‌was‌‌also‌‌a‌‌breach‌‌of‌‌his‌‌obligations.‌‌So,‌‌
Petitioners‌‌were‌‌not‌‌obliged‌‌to‌‌get‌‌the‌‌furniture.‌‌ ‌
‌
‌ 2.‌‌Right‌‌of‌‌Retention‌‌of‌‌Bailee‌ ‌
‌
CC,‌‌Article‌‌1944‌.‌‌The‌‌bailee‌‌cannot‌‌retain‌‌the‌‌thing‌‌loaned‌‌on‌‌

‌ the‌‌ground‌‌that‌‌the‌‌bailor‌‌owes‌‌him‌‌something,‌‌even‌‌though‌‌it‌‌

G.‌‌Obligation‌‌to‌‌Return‌ ‌ may‌‌be‌‌by‌‌reason‌‌of‌‌expenses.‌‌However,‌‌the‌‌bailee‌‌has‌‌a‌‌right‌‌of‌‌

1.‌‌General‌‌Concepts‌ retention‌‌for‌‌damages‌‌mentioned‌‌in‌‌article‌‌1951.‌ ‌
CC,‌‌Art.‌‌1933‌.‌‌By‌‌the‌‌contract‌‌of‌‌loan,‌‌one‌‌of‌‌the‌‌parties‌‌delivers‌‌
CC,‌‌Article‌‌1951‌.‌‌The‌‌bailor‌‌who,‌‌knowing‌‌the‌‌flaws‌‌of‌‌the‌‌thing‌‌
to‌‌another,‌‌either‌‌something‌‌not‌‌consumable‌‌so‌‌that‌‌the‌‌latter‌‌ loaned,‌‌does‌‌not‌‌advise‌‌the‌‌bailee‌‌of‌‌the‌‌same,‌‌shall‌‌be‌‌liable‌‌to‌‌

may‌‌use‌‌the‌‌same‌‌for‌‌a‌‌certain‌‌time‌‌and‌‌return‌‌it,‌‌in‌‌which‌‌case‌‌ the‌‌latter‌‌for‌‌the‌‌damages‌‌which‌‌he‌‌may‌‌suffer‌‌by‌‌reason‌‌thereof.‌ ‌
the‌‌contract‌‌is‌‌called‌‌a‌‌commodatum...‌ ‌
‌
CC,‌‌Art.‌‌1946‌.‌‌The‌‌bailor‌‌cannot‌‌demand‌‌the‌‌return‌‌of‌‌the‌‌thing‌‌ SIMPLE‌‌LOAN‌‌/‌‌MUTUUM‌ ‌
loaned‌‌till‌‌after‌‌the‌‌expiration‌‌of‌‌the‌‌period‌‌stipulated,‌‌or‌‌after‌‌the‌‌
accomplishment‌‌of‌‌the‌‌use‌‌for‌‌which‌‌the‌‌commodatum‌‌has‌‌been‌‌
constituted.‌‌However,‌‌if‌‌in‌‌the‌‌meantime,‌‌he‌‌should‌‌have‌‌urgent‌‌ CC,‌‌Article‌‌1933‌.‌B‌ y‌‌the‌‌contract‌‌of‌‌loan‌,‌‌one‌‌of‌‌the‌‌parties‌‌
need‌‌of‌‌the‌‌thing,‌‌he‌‌may‌‌demand‌‌its‌‌return‌‌or‌‌temporary‌‌use.‌ ‌ delivers‌‌to‌‌another,‌‌either‌‌something‌‌not‌‌consumable‌‌so‌‌that‌‌the‌‌
In‌‌case‌‌of‌‌temporary‌‌use‌‌by‌‌the‌‌bailor,‌‌the‌‌contract‌‌of‌‌
latter‌‌may‌‌use‌‌the‌‌same‌‌for‌‌a‌‌certain‌‌time‌‌and‌‌return‌‌it,‌‌in‌‌which‌‌
commodatum‌‌is‌‌suspended‌‌while‌‌the‌‌thing‌‌is‌‌in‌‌the‌‌possession‌‌of‌‌ case‌‌the‌‌contract‌‌is‌‌called‌‌a‌‌commodatum;‌‌or‌m ‌ oney‌‌or‌‌other‌‌
the‌‌bailor.‌ ‌ consumable‌‌thing‌,‌‌upon‌‌the‌‌condition‌‌that‌‌the‌‌same‌‌amount‌‌of‌‌
the‌‌same‌‌kind‌‌and‌‌quality‌‌shall‌‌be‌‌paid,‌‌in‌‌which‌‌case‌‌the‌‌
CC,‌‌Art.‌‌1947‌.‌‌The‌‌bailor‌‌may‌‌demand‌‌the‌‌thing‌‌at‌‌will,‌‌and‌‌the‌‌ contract‌‌is‌‌simply‌‌called‌‌a‌‌loan‌‌or‌‌mutuum.‌ ‌
contractual‌‌relation‌‌is‌‌called‌‌a‌p
‌ recarium‌,‌‌in‌‌the‌‌following‌‌cases:‌ ‌
(1) If‌‌neither‌‌the‌‌duration‌‌of‌‌the‌‌contract‌‌nor‌‌the‌‌use‌‌to‌‌
Commodatum‌‌is‌‌essentially‌‌gratuitous.‌ ‌
which‌‌the‌‌thing‌‌loaned‌‌should‌‌be‌‌devoted,‌‌has‌‌been‌‌ Simple‌‌loan‌‌‌may‌‌be‌g
‌ ratuitous‌o
‌ r‌‌with‌‌a‌s
‌ tipulation‌‌to‌‌pay‌‌

stipulated;‌‌or‌ ‌ interest.‌ ‌
(2) If‌‌the‌‌use‌‌of‌‌the‌‌thing‌‌is‌‌merely‌‌tolerated‌‌by‌‌the‌‌owner.‌ ‌

loaned,‌‌while‌i‌n‌‌simple‌‌loan,‌‌ownership‌‌passes‌‌to‌‌the‌‌
CC,‌‌Art.‌‌1948‌.‌‌The‌‌bailor‌‌may‌‌demand‌‌the‌‌immediate‌‌return‌‌of‌‌
borrower‌.‌‌(1740a)‌ ‌
the‌‌thing‌‌if‌‌the‌‌bailee‌‌commits‌‌any‌‌act‌‌of‌‌ingratitude‌‌specified‌‌in‌‌

Article‌‌765.‌ ‌
CC,‌‌Article‌‌1980‌.‌F
‌ ixed,‌‌savings,‌‌and‌‌current‌‌deposits‌‌of‌‌
● The‌‌bailee’s‌‌obligation.‌ ‌ money‌‌in‌‌banks‌‌‌and‌‌similar‌‌institutions‌‌shall‌‌be‌g
‌ overned‌‌by‌‌

When‌‌Does‌‌the‌‌Obligation‌‌to‌‌Return‌‌Arise?‌ ‌ the‌‌provisions‌‌concerning‌‌simple‌‌loan‌. ‌ ‌
1. Expiration‌‌of‌‌stipulated‌‌period;‌ ‌ Simple‌‌Loan‌‌/‌‌Mutuum‌ ‌
2. The‌‌use‌‌for‌‌which‌‌the‌‌commodatum‌‌was‌‌constituted‌‌is‌‌ ● Like‌‌commodatum,‌‌real‌‌contracts.‌ ‌
accomplished;‌ ‌ ● The‌‌creditor‌‌DELIVERS‌‌to‌‌the‌‌debtor‌‌/‌‌borrower‌‌money‌‌or‌‌
Exceptions:‌‌When‌‌Can‌‌the‌‌Bailor‌‌Demand‌‌the‌‌Return?‌ ‌ some‌‌other‌‌CONSUMABLE‌‌thing,‌‌on‌‌the‌‌condition‌‌that‌‌the‌‌
1. When‌‌the‌‌bailor‌‌has‌‌urgent‌‌need‌‌of‌‌the‌‌property,‌‌in‌‌which‌‌ SAME‌‌amount‌‌of‌‌the‌‌SAME‌‌kind‌‌and‌‌quality‌‌shall‌‌be‌‌paid.‌ ‌
case‌‌he‌‌may:‌ ‌ ● Mutuums‌‌of‌‌money‌‌are‌‌the‌‌most‌‌common‌‌type‌‌of‌‌credit‌‌
a. Demand‌‌return,‌‌extinguishing‌‌the‌‌commodatum;‌ ‌ transaction.‌ ‌
b. Demand‌‌temporary‌‌use,‌‌suspending‌‌the‌‌ ○ Ex.‌‌deposit‌‌of‌‌money‌‌by‌‌a‌‌depositor‌‌in‌‌a‌‌fixed,‌
commodatum.‌ ‌ savings,‌‌or‌‌current‌‌deposit‌‌account‌‌in‌‌a‌‌bank.‌ ‌
2. If‌‌the‌‌commodatum‌‌is‌‌a‌‌PRECARIUM,‌‌or‌‌a‌‌contractual‌‌ ● Unlike‌‌commodatum,‌‌the‌‌borrower‌‌acquires‌‌OWNERSHIP‌‌
relation‌‌where‌‌the‌‌bailor‌‌can‌‌demand‌‌the‌‌return‌‌at‌‌will;‌ ‌ of‌‌the‌‌money‌‌/‌‌consumable‌‌for‌‌the‌‌PERMISSIVE‌‌USE‌‌of‌‌
a. Neither‌‌DURATION‌‌nor‌‌USE‌‌is‌‌stipulated;‌ ‌ the‌‌property‌‌loaned.‌ ‌
b. When‌‌use‌‌by‌‌bailee‌‌is‌‌merely‌‌tolerated.‌ ‌ ○ Thus,‌‌the‌‌borrower‌‌can‌‌dispose‌‌of‌‌the‌‌thing,‌‌
3. When‌‌the‌‌bailee‌‌commits‌‌any‌‌of‌‌these‌‌acts‌‌of‌‌ingratitude:‌ ‌ without‌‌it‌‌amounting‌‌to‌‌misappropriation.‌ ‌
a. Commits‌‌some‌‌offense‌‌against…‌ ‌ ‌
● honor/person‌‌of‌‌the‌‌bailor;‌ ‌ ‌
● Or‌‌his‌‌wife;‌ ‌ ‌
7‌ ‌
‌
[A11]‌‌BPI‌‌v.‌‌Franco‌ ‌
B.‌‌Object‌‌of‌‌Simple‌‌Loan‌ ‌
Doctrine‌:‌A ‌ rt.‌‌559‌‌does‌‌not‌‌apply‌‌to‌‌money‌‌‌which,‌‌albeit‌‌
CC,‌‌Article‌‌1933‌.‌‌By‌‌the‌‌contract‌‌of‌‌loan,‌‌one‌‌of‌‌the‌‌parties‌‌ characterized‌‌as‌‌‌a‌‌movable,‌‌is‌‌generic‌‌and‌‌fungible‌. ‌ ‌
delivers‌‌to‌‌another,‌‌either‌‌something‌‌not‌‌consumable‌‌so‌‌that‌‌the‌‌ Facts‌:‌‌BPI‌‌froze‌‌Franco’s‌‌account‌‌because‌‌BPI‌‌suspects‌‌that‌‌
latter‌‌may‌‌use‌‌the‌‌same‌‌for‌‌a‌‌certain‌‌time‌‌and‌‌return‌‌it,‌‌in‌‌which‌‌ Franco‌‌was‌‌involved‌‌in‌‌a‌‌multi-million‌‌peso‌‌scam.‌‌BPI-FB‌‌debited‌‌
case‌‌the‌‌contract‌‌is‌‌called‌‌a‌‌commodatum;‌‌or‌‌money‌‌or‌‌other‌‌ 80m‌‌pesos‌‌from‌‌FMIC’s‌‌account‌‌and‌‌transferred‌‌it‌‌to‌‌Tevesteco’s‌‌
consumable‌‌thing,‌‌upon‌‌the‌‌condition‌‌that‌‌the‌‌same‌‌amount‌‌of‌‌ account‌‌by‌‌virtue‌‌of‌‌an‌‌“Authority‌‌to‌‌Debit”‌‌which‌‌was‌‌later‌‌on‌‌
the‌‌same‌‌kind‌‌and‌‌quality‌‌shall‌‌be‌‌paid,‌‌in‌‌which‌‌case‌‌the‌‌ found‌‌out‌‌to‌‌be‌‌forged.‌‌BPI-FB‌‌insists‌‌that‌‌Franco,‌‌as‌‌allegedly‌‌
contract‌‌is‌‌simply‌‌called‌‌a‌‌loan‌‌or‌‌mutuum.‌ ‌ part‌‌of‌‌the‌‌scam,‌‌should‌‌have‌‌his‌‌accounts‌‌frozen.‌‌Franco‌‌filed‌‌
this‌‌case‌‌because‌‌BPI‌‌refuses‌‌to‌‌unfreeze‌‌his‌‌account.‌‌ ‌
Commodatum‌‌is‌‌essentially‌‌gratuitous.‌ ‌ *Franco‌‌was‌‌suspected‌‌to‌‌be‌‌involved‌‌in‌‌the‌‌scam‌‌because‌‌the‌‌2 ‌‌
Simple‌‌loan‌‌‌may‌‌be‌g
‌ ratuitous‌o
million‌‌pesos‌‌used‌‌to‌‌open‌‌his‌‌account‌‌was‌‌from‌‌the‌‌80‌‌million‌‌
pesos‌‌debited‌‌from‌‌FMIC’s‌‌account.‌‌ ‌
interest.‌ ‌
Issues‌:‌‌Who‌‌had‌‌the‌‌better‌‌right‌‌over‌‌the‌‌money‌‌in‌‌Franco’s‌‌
account?‌‌-‌‌Franco.‌ ‌
loaned,‌‌while‌i‌n‌‌simple‌‌loan,‌‌ownership‌‌passes‌‌to‌‌the‌‌ Ruling‌:‌‌As‌‌there‌‌is‌‌‌a‌‌debtor-creditor‌‌relationship‌‌between‌‌a ‌‌
borrower‌.‌‌(1740a)‌ ‌ bank‌‌and‌‌its‌‌depositor,‌‌BPI-FB‌‌ultimately‌‌acquired‌‌
ownership‌‌of‌‌Franco’s‌‌deposits,‌‌but‌‌such‌‌ownership‌‌is‌‌
coupled‌‌with‌‌a‌‌corresponding‌‌obligation‌‌to‌‌pay‌‌him‌‌an‌‌equal‌‌
CC,‌‌Article‌‌1953‌.‌‌A‌‌person‌‌who‌r‌ eceives‌‌a‌‌loan‌‌of‌‌money‌‌or‌‌
amount‌‌on‌‌demand‌. ‌ ‌
any‌‌other‌‌fungible‌‌thing‌‌acquires‌‌the‌‌ownership‌‌‌thereof,‌‌and‌‌
is‌‌‌bound‌‌to‌‌pay‌‌to‌‌the‌‌creditor‌‌an‌‌equal‌‌amount‌‌of‌‌the‌‌same‌‌ ‌
kind‌‌and‌‌quality‌. ‌ ‌ C.‌‌Obligation‌‌to‌‌Pay‌ ‌
CC,‌‌Article‌‌1954‌.‌‌A‌‌contract‌‌whereby‌‌one‌‌person‌‌transfers‌‌the‌‌ CC,‌‌Article‌‌1955‌.‌‌The‌‌obligation‌‌of‌‌a‌‌person‌‌who‌‌borrows‌‌money‌‌
ownership‌‌of‌n ‌ on-fungible‌‌things‌‌‌to‌‌another‌‌with‌‌the‌o ‌ bligation‌‌
shall‌‌be‌‌governed‌‌by‌‌the‌‌provisions‌‌of‌‌articles‌‌1249‌‌and‌‌1250‌‌of‌‌
on‌‌the‌‌part‌‌of‌‌the‌‌latter‌‌to‌‌give‌‌things‌‌of‌‌the‌‌same‌‌kind,‌‌ this‌‌Code.‌ ‌
quantity,‌‌and‌‌quality‌‌‌shall‌‌be‌‌considered‌‌a‌b ‌ arter‌. ‌ ‌ ‌
If‌w
‌ hat‌‌was‌‌loaned‌‌is‌‌a‌‌fungible‌‌thing‌‌other‌‌than‌‌money‌,‌‌the‌‌
Object‌‌of‌‌Simple‌‌Loans:‌‌Fungibles‌‌/‌‌Consumables‌ ‌ debtor‌‌owes‌‌another‌‌thing‌‌of‌‌the‌‌same‌‌kind,‌‌quantity‌‌and‌‌
● Use‌‌generally‌‌results‌‌in‌‌extinction.‌ ‌ quality,‌‌even‌‌if‌‌it‌‌should‌‌change‌‌in‌‌value‌.‌‌In‌‌case‌‌it‌‌is‌‌
● Borrower’s‌‌obligation‌:‌‌replace‌‌or‌‌substitute‌‌the‌‌property‌‌ impossible‌‌to‌‌deliver‌‌‌the‌‌same‌‌kind,‌‌its‌v ‌ alue‌‌at‌‌the‌‌time‌‌of‌‌

loaned.‌ ‌ the‌‌perfection‌‌‌of‌‌the‌‌loan‌‌shall‌‌be‌‌paid.‌ ‌
● Thus,‌‌the‌‌object‌‌of‌‌a‌‌simple‌‌loan‌‌is‌‌fungible‌‌property.‌ ‌ ● *won’t‌‌this‌‌work‌‌against‌‌the‌‌favor‌‌of‌‌the‌‌creditor,‌‌in‌‌

○ Fungible‌‌property‌:‌‌commercially‌‌ that‌‌if‌‌the‌‌thing‌‌increases‌‌in‌‌value,‌‌he‌‌can‌‌just‌‌“lose”‌‌

interchangeable‌‌w/‌‌other‌‌property‌‌of‌‌the‌‌same‌‌ the‌‌thing‌‌so‌‌he‌‌only‌‌has‌‌to‌‌pay‌‌the‌‌value‌‌at‌‌the‌‌time‌‌

kind.‌ ‌ of‌‌perfection?‌ ‌
Primary‌‌Purpose‌ ‌ ‌
● Permissive‌‌use‌‌of‌‌the‌‌money‌‌/‌‌consumable.‌ ‌
● Since‌‌use‌‌results‌‌in‌‌extinction‌‌of‌‌the‌‌thing,‌‌ownership‌‌is‌‌ CC,‌‌Article‌‌1249‌.‌‌The‌p ‌ ayment‌‌of‌‌debts‌‌in‌‌money‌‌shall‌‌be‌‌
considered‌‌to‌‌have‌‌passed‌‌to‌‌the‌‌borrower.‌ ‌ made‌‌in‌‌the‌‌currency‌‌stipulated‌,‌‌and‌‌if‌‌it‌‌is‌‌not‌‌possible‌‌to‌‌

● If‌‌the‌‌primary‌‌purpose‌‌of‌‌the‌‌contract‌‌is‌‌the‌‌transfer‌‌of‌‌
deliver‌‌such‌‌currency,‌‌then‌‌in‌‌the‌c‌ urrency‌‌which‌‌is‌‌legal‌‌
ownership‌‌of‌‌a‌‌NON-FUNGIBLE‌‌property‌‌and‌‌payment‌‌is‌‌ tender‌‌in‌‌the‌‌Philippines‌. ‌ ‌
‌
made‌‌by‌‌giving‌‌something‌‌of‌‌the‌‌same‌‌quality,‌‌kind,‌‌and‌‌
The‌d ‌ elivery‌‌of‌‌promissory‌‌notes‌‌payable‌‌to‌‌order,‌‌or‌‌bills‌‌of‌‌
quantity,‌‌then‌‌it‌‌is‌‌a‌‌BARTER‌‌and‌‌not‌‌mutuum.‌ ‌ exchange‌‌or‌‌other‌‌mercantile‌‌documents‌‌‌shall‌p ‌ roduce‌‌the‌‌
● Commodatum,‌‌on‌‌the‌‌other‌‌hand,‌‌covers‌‌ effect‌‌of‌‌payment‌‌only‌‌when‌‌they‌h ‌ ave‌‌been‌‌cashed‌,‌‌or‌‌when‌‌
nonconsumables.‌ ‌ through‌‌the‌f‌ ault‌‌of‌‌the‌‌creditor‌‌they‌‌have‌‌been‌‌impaired‌. ‌ ‌
Barter‌ ‌ ‌
● Commodatum‌‌=‌‌same‌‌thing‌‌as‌‌barter‌‌but‌‌no‌‌passing‌‌of‌‌ In‌‌the‌‌meantime,‌‌the‌a ‌ ction‌‌derived‌‌from‌‌the‌‌original‌‌
obligation‌‌shall‌‌be‌‌held‌‌in‌‌the‌‌abeyance‌. ‌ ‌
ownership.‌ ‌
● Barter‌‌=‌‌trade;‌‌exchange‌‌of‌‌ownership.‌ ‌
CC,‌‌Article‌‌1250‌.‌‌In‌‌case‌‌an‌‌‌extraordinary‌‌inflation‌‌or‌‌

[A10]‌‌People‌‌v.‌‌Puig‌‌&‌‌Porras‌ ‌ deflation‌‌‌of‌‌the‌‌currency‌‌stipulated‌‌should‌‌supervene,‌‌the‌v ‌ alue‌‌

Doctrine‌:‌‌Banks,‌‌where‌‌monies‌‌are‌‌deposited,‌‌are‌‌ of‌‌the‌‌currency‌‌at‌‌the‌‌time‌‌of‌‌the‌‌establishment‌‌of‌‌the‌‌
considered‌‌the‌‌owners‌‌thereof‌.‌‌The‌‌relationship‌‌between‌‌ obligation‌‌shall‌‌be‌‌the‌‌basis‌‌of‌‌payment‌,‌‌unless‌‌there‌‌is‌‌an‌‌
banks‌‌and‌‌depositors‌‌has‌‌been‌‌held‌‌to‌‌be‌‌that‌‌of‌‌creditor‌‌and‌‌ agreement‌‌to‌‌the‌‌contrary.‌ ‌
debtor.‌ ‌
● Borrower’s‌‌primary‌‌obligation‌‌is‌‌to‌‌pay.‌ ‌
Facts‌:‌‌Cases‌‌for‌‌qualified‌‌theft‌‌were‌‌filed‌‌against‌‌respondents.‌‌
TC‌‌found‌‌no‌‌probable‌‌cause‌‌to‌‌issue‌‌warrants‌‌of‌‌arrest‌‌because‌‌ Object‌‌=‌‌Money‌
the‌‌element‌‌of‌ ‌“taking‌‌without‌‌consent‌‌of‌‌the‌‌owners”‌‌was‌‌ ● General‌‌rules‌‌on‌‌payment‌‌in‌‌money‌‌apply.‌ ‌
missing‌‌since‌‌it‌‌is‌‌the‌‌depositor-clients,‌‌not‌‌the‌‌bank,‌‌who‌‌own‌‌ ● Value‌‌to‌‌be‌‌paid‌‌is‌‌determined‌‌at‌‌the‌‌time‌‌the‌‌obligation‌‌is‌‌

the‌‌money‌‌and‌ ‌the‌‌Informations‌‌did‌‌not‌‌sufficiently‌‌allege‌‌the‌‌ established‌‌(the‌‌time‌‌the‌‌principal‌‌delivers).‌ ‌
qualifying‌‌circumstance‌‌of‌‌grave‌‌abuse‌‌of‌‌confidence.‌ ‌ Object‌‌=‌‌Any‌‌Other‌‌Consumable‌ ‌
Issues‌:‌‌W/N‌‌the‌‌112‌‌Informations‌‌sufficiently‌‌allege‌‌the‌‌element‌‌ ● Borrower‌‌owes‌‌payment‌‌in‌‌kind.‌ ‌
of‌‌taking‌‌without‌‌the‌‌consent‌‌of‌‌the‌‌owner,‌‌and‌‌the‌‌qualifying‌‌
circumstance‌‌of‌‌grave‌‌abuse‌‌of‌‌confidence‌‌-‌‌YES‌ ‌ ○ Another‌‌property‌‌of‌‌the‌‌same‌‌kind,‌‌quantity,‌‌and‌‌
Ruling‌:‌‌SC‌‌ruled‌‌that‌‌the‌‌‌Bank‌‌acquires‌‌ownership‌‌of‌‌the‌‌ quality.‌ ‌
money‌‌deposited‌‌by‌‌its‌‌clients‌‌(see‌‌doctrine)‌‌and‌‌the‌‌ ● Value‌‌of‌‌the‌‌payment‌‌in‌‌kind‌‌is‌‌determined‌‌at‌‌the‌‌time‌‌of‌‌
employees‌‌of‌‌the‌‌Bank,‌‌who‌‌are‌‌entrusted‌‌with‌‌the‌‌ the‌‌perfection‌‌of‌‌the‌‌simple‌‌loan‌‌(the‌‌time‌‌the‌‌object‌‌is‌‌

possession‌‌of‌‌money‌‌of‌‌the‌‌Bank‌‌due‌‌to‌‌the‌‌confidence‌‌ delivered).‌ ‌
reposed‌‌in‌‌them,‌‌occupy‌‌positions‌‌of‌‌confidence‌.‌‌SC‌‌issued‌‌ Evidence:‌‌Written‌‌Promise‌‌to‌‌Pay‌ ‌
the‌‌warrants‌‌of‌‌arrest‌‌and‌‌directed‌‌RTC‌‌to‌‌proceed‌‌with‌‌trial.‌ ‌ ● Called‌‌“evidence‌‌of‌‌indebtedness”.‌ ‌
Banks‌ ‌ ● The‌‌commercial‌‌forms‌‌that‌‌contracts‌‌of‌‌mutuum‌‌/‌‌simple‌‌
● Bank‌‌&‌‌Client‌‌=‌‌Borrower‌‌&‌‌Creditor.‌ ‌ loans‌‌take.‌ ‌
● Ownership‌‌of‌‌money‌‌passes‌‌onto‌‌the‌‌bank.‌ ‌ 1. Note‌ ‌
‌ ● A‌‌written‌‌promise‌‌by‌‌one‌‌party‌‌(maker)‌‌to‌‌pay‌‌
money‌‌to‌‌another‌‌party‌‌(payee)‌‌or‌‌bearer;‌‌or‌ ‌
8‌ ‌
● A‌‌written‌‌promise‌‌to‌‌pay‌‌a‌‌certain‌‌amount‌‌to‌‌a ‌‌ ○ If‌‌voluntarily‌‌paid,‌‌creditor‌‌can‌‌retain.‌ ‌
certain‌‌person‌‌on‌‌demand,‌‌or‌‌on‌‌a‌‌certain‌‌date.‌ ‌ ‌
2. Bond‌ ‌ 1.‌‌CONVENTIONAL‌‌INTEREST‌ ‌
● A‌‌written‌‌promise‌‌by‌‌the‌‌issuer‌‌to‌‌pay‌‌money‌‌to‌‌the‌‌ a.‌‌General‌‌Concepts‌
holders;‌‌or‌ ‌ ● If‌‌paid‌‌as‌‌compensation‌‌in‌‌an‌‌onerous‌‌mutuum,‌‌it‌‌is‌‌called‌‌
● A‌‌written‌‌promise‌‌issued‌‌by‌‌a‌‌government‌‌/ ‌‌ CONVENTIONAL‌‌INTEREST.‌ ‌
corporation‌‌to‌‌pay‌‌the‌‌principal‌‌amount‌‌of‌‌a‌‌loan‌‌at‌‌ ● Agreed‌‌upon‌‌by‌‌the‌‌parties,‌‌and‌‌is‌‌distinct‌‌from‌‌interest‌‌
maturity‌‌and‌‌a‌‌specific‌‌sum‌‌of‌‌money,‌‌usually‌‌at‌‌ prescribed‌‌by‌‌law.‌ ‌
specific‌‌intervals,‌‌to‌‌a‌‌holder.‌ ‌ b.‌‌Monetary‌‌Interest‌‌/‌‌Regular‌‌Interest‌ ‌
3. Debenture‌‌(Latin:‌‌debentur)‌ ‌ ● The‌‌conventional‌‌interest‌‌in‌‌a‌‌simple‌‌loan‌‌of‌‌money.‌ ‌
● An‌‌instrument‌‌acknowledging‌‌a‌‌debt‌‌secured‌‌ONLY‌‌ ● Payment‌‌of‌‌BOTH‌‌principal‌‌&‌‌interest‌‌is‌‌made‌‌in‌‌money,‌‌
by‌‌the‌‌issuer’s‌‌EARNING‌‌POWER.‌ ‌ gradually‌‌extinguishing‌‌the‌‌money‌‌loan.‌ ‌
● NOT‌‌a‌‌lien,‌‌or‌‌legal‌‌right‌‌/‌‌interest‌‌a‌‌creditor‌‌has,‌‌on‌‌
● Amortization‌:‌‌to‌‌“deaden”,‌‌since‌‌it‌‌kills‌‌the‌‌money‌‌loan.‌ ‌
any‌‌specific‌‌asset‌‌/‌‌unsecured‌‌bond.‌ ‌ ● Monetary‌‌interest‌‌is‌‌the‌‌“cost‌‌of‌‌money”.‌ ‌
‌
[A12]‌‌Frias‌‌v.‌‌San‌‌Diego-Sison‌ ‌
D.‌‌Interest‌ ‌
Doctrine‌:‌‌The‌p ‌ ayment‌‌of‌‌regular‌‌interest‌‌constitutes‌‌the‌‌
1.‌‌Conventional‌‌Interest‌ ‌ price‌‌or‌‌cost‌‌of‌‌the‌‌use‌‌of‌‌money‌‌‌and‌‌thus,‌‌until‌‌the‌‌principal‌‌
sum‌‌due‌‌is‌‌returned‌‌to‌‌the‌‌creditor,‌r‌ egular‌‌interest‌‌continues‌‌
CC,‌‌Article‌‌1933‌.‌‌...‌ ‌
to‌‌accrue‌‌since‌‌the‌‌debtor‌‌continues‌‌to‌‌use‌‌‌such‌‌principal‌‌
Simple‌‌loan‌‌‌may‌‌be‌g
‌ ratuitous‌o
amount.‌ ‌
interest...‌ ‌ Facts‌:‌‌Frias‌‌and‌‌Sison‌‌entered‌‌into‌‌a‌‌MOA‌‌where‌‌Sison‌‌gave‌‌
Frias‌‌Php‌‌3M‌‌for‌‌the‌‌latter‌‌to‌‌be‌‌given‌‌6‌‌months‌‌to‌‌decide‌‌w/n‌‌to‌‌
buy‌‌the‌‌former’s‌‌property.‌‌In‌‌case‌‌Sison‌‌decides‌‌to‌‌buy‌‌the‌‌
CC,‌‌Article‌‌1956‌.‌N
‌ o‌‌interest‌‌shall‌‌be‌‌due‌‌‌unless‌‌it‌‌has‌‌been‌‌
property,‌‌she‌‌will‌‌have‌‌another‌‌6‌‌months‌‌to‌‌pay‌‌the‌‌Php‌‌3.4M‌‌
expressly‌‌stipulated‌‌in‌‌writing‌. ‌ ‌ balance‌‌of‌‌the‌‌total‌‌Php‌‌6.4M‌‌price.‌‌But‌‌if‌‌Sison‌‌decides‌‌NOT‌‌to‌‌
buy‌‌the‌‌property‌‌at‌‌the‌‌end‌‌of‌‌the‌‌6‌‌months,‌‌the‌‌Php‌‌3M‌‌will‌‌be‌‌
CC,‌‌Article‌‌1306‌.‌‌The‌‌contracting‌‌parties‌‌may‌‌establish‌‌such‌‌ considered‌‌a‌‌loan‌‌and‌‌Frias‌‌will‌‌be‌‌given‌‌another‌‌6‌‌months‌‌to‌‌
stipulations,‌‌clauses,‌‌terms‌‌and‌‌conditions‌‌as‌‌they‌‌may‌‌deem‌‌ return‌‌the‌‌money‌‌to‌‌Sison‌‌with‌‌compounded‌‌interest‌‌“for‌‌the‌‌last‌‌
convenient,‌‌provided‌‌they‌‌are‌‌not‌‌contrary‌‌to‌‌law,‌‌morals,‌‌good‌‌
6‌‌months‌‌only.”‌‌ ‌
customs,‌‌public‌‌order,‌‌or‌‌public‌‌policy.‌ ‌ Issues‌:‌‌W/N‌‌the‌‌phrase‌‌“for‌‌the‌‌last‌‌6‌‌months‌‌only”‌‌means‌‌the‌‌
interest‌‌over‌‌the‌‌loan‌‌would‌‌be‌‌for‌‌only‌‌6‌‌months‌‌and‌‌no‌‌more‌‌
CC,‌‌Article‌‌1253‌.‌‌If‌‌the‌‌debt‌‌produces‌‌interest,‌‌payment‌‌of‌‌the‌‌
regardless‌‌when‌‌Frias‌‌would‌‌pay‌‌-‌‌NO‌
principal‌‌shall‌‌not‌‌be‌‌deemed‌‌to‌‌have‌‌been‌‌made‌‌until‌‌the‌‌
Ruling‌:‌‌The‌‌phrase‌‌“for‌‌the‌‌last‌‌6‌‌months‌‌only”‌‌merely‌‌referred‌‌to‌‌
interests‌‌have‌‌been‌‌covered.‌ ‌ the‌‌period‌‌from‌‌which‌‌the‌‌interest‌‌would‌‌start‌‌to‌‌accrue,‌‌i.e.‌‌the‌‌
second‌‌6-month‌‌period.‌‌The‌p ‌ arties‌‌intended‌‌no‌‌interest‌‌to‌‌
accrue‌‌on‌‌the‌‌first‌‌6‌‌months‌‌while‌‌Sison‌‌was‌‌making‌‌up‌‌her‌‌
CC,‌‌Article‌‌1958‌.‌‌In‌‌the‌‌determination‌‌of‌‌the‌‌interest,‌‌if‌‌it‌‌is‌‌

payable‌‌in‌‌kind,‌‌its‌‌value‌‌shall‌‌be‌‌appraised‌‌at‌‌the‌‌current‌‌price‌‌of‌‌
mind‌‌about‌‌the‌‌purchase.‌‌They‌‌merely‌‌said‌‌“for‌‌the‌‌last‌‌6 ‌‌
the‌‌products‌‌or‌‌goods‌‌at‌‌the‌‌time‌‌and‌‌place‌‌of‌‌payment.‌ ‌ months”‌‌on‌‌the‌‌logical‌‌assumption‌‌that‌‌Frias‌‌would‌‌be‌‌able‌‌
to‌‌comply‌‌with‌‌her‌‌obligation‌‌to‌‌repay‌‌the‌‌loan‌‌w/in‌‌said‌‌
perio‌d.‌‌But‌‌certainly,‌‌nothing‌‌in‌‌the‌‌contract‌‌stated‌‌that‌‌in‌‌case‌
CC,‌‌Article‌‌1960‌.‌‌If‌‌the‌‌borrower‌‌pays‌‌interest‌‌when‌‌there‌‌has‌‌
Frias‌‌takes‌‌more‌‌than‌‌6‌‌months‌‌to‌‌repay,‌‌the‌‌monetary‌‌interest‌‌
been‌‌no‌‌stipulation‌‌therefor,‌‌the‌‌provisions‌‌of‌‌this‌‌Code‌‌
would‌‌cease‌‌to‌‌run.‌‌Hence,‌‌the‌‌compounded‌‌bank‌‌interest‌‌will‌‌
concerning‌‌solutio‌‌indebiti,‌‌or‌‌natural‌‌obligations,‌‌shall‌‌be‌‌
continue‌‌to‌‌accrue‌‌until‌‌Frias‌‌pays‌‌the‌‌loan‌‌in‌‌full.‌ ‌
applied,‌‌as‌‌the‌‌case‌‌may‌‌be.‌ ‌
[A13]‌‌Siga-an‌‌v.‌‌Villanueva‌ ‌
CC,‌‌Article‌‌2154‌.‌‌If‌‌something‌‌is‌‌received‌‌when‌‌there‌‌is‌‌no‌‌right‌‌
Doctrine‌:‌‌Payment‌‌of‌‌monetary‌‌interest‌‌is‌‌allowed‌‌‌only‌‌if:‌‌(1)‌‌
to‌‌demand‌‌it,‌‌and‌‌it‌‌was‌‌unduly‌‌delivered‌‌through‌‌mistake,‌‌the‌‌ there‌‌was‌‌an‌e ‌ xpress‌‌stipulation‌‌‌for‌‌the‌‌payment‌‌of‌‌interest;‌‌
obligation‌‌to‌‌return‌‌it‌‌arises.‌ ‌ and‌‌(2)‌‌the‌‌agreement‌‌for‌‌the‌‌payment‌‌of‌‌interest‌‌was‌r‌ educed‌‌
in‌‌writing‌.The‌‌concurrence‌‌of‌‌the‌‌two‌‌conditions‌‌is‌‌required‌‌for‌‌
CC,‌‌Article‌‌1423‌.‌‌Obligations‌‌are‌‌civil‌‌or‌‌natural.‌‌Civil‌‌obligations‌‌
the‌‌payment‌‌of‌‌monetary‌‌interest.‌ ‌
give‌‌a‌‌right‌‌of‌‌action‌‌to‌‌compel‌‌their‌‌performance.‌‌Natural‌‌ Facts‌:‌‌Villanueva‌‌loaned‌‌P540k‌‌from‌‌Siga-an‌‌for‌‌her‌‌business.‌‌
obligations,‌‌not‌‌being‌‌based‌‌on‌‌positive‌‌law‌‌but‌‌on‌‌equity‌‌and‌‌ There‌‌was‌n ‌ o‌‌agreement‌‌regarding‌‌the‌‌payment‌‌of‌‌interest‌. ‌‌
natural‌‌law,‌‌do‌‌not‌‌grant‌‌a‌‌right‌‌of‌‌action‌‌to‌‌enforce‌‌their‌‌
She‌‌issued‌‌2‌‌checks‌‌to‌‌fulfill‌‌her‌‌payment‌‌and‌‌“interest”‌‌(1st‌‌- ‌‌
performance,‌‌but‌‌after‌‌voluntary‌‌fulfillment‌‌by‌‌the‌‌obligor,‌‌they‌‌ 500k;‌‌2nd‌‌-‌‌200k)‌‌but‌‌‌Siga-an‌‌pestered‌‌and‌‌thereated‌‌her‌‌to‌‌
authorize‌‌the‌‌retention‌‌of‌‌what‌‌has‌‌been‌‌delivered‌‌or‌‌rendered‌‌by‌‌ pay‌‌for‌‌additional‌‌interest.‌‌She‌‌complied‌‌and‌‌paid‌‌‌a‌‌total‌‌
reason‌‌thereof.‌‌Some‌‌natural‌‌obligations‌‌are‌‌set‌‌forth‌‌in‌‌the‌‌ amount‌‌of‌‌1.2M.‌‌She‌‌later‌‌found‌‌out‌‌that‌‌she‌‌was‌‌not‌‌obligated‌‌to‌‌
following‌‌articles.‌ ‌ pay‌‌for‌‌an‌‌interest‌‌so‌‌she‌s‌ ent‌‌a‌‌letter‌‌to‌‌Siga-an‌‌asking‌‌to‌‌

return‌‌her‌‌the‌‌excess‌‌‌of‌‌her‌‌payment.‌‌He‌‌resisted.‌ ‌
Simple‌‌Loan‌ ‌
Issue‌:‌‌WON‌‌there‌‌was‌‌an‌‌interest‌‌due‌‌to‌‌petitioner‌‌-‌‌NO‌ ‌
● Can‌‌be‌‌gratuitous‌‌or‌‌onerous.‌ ‌ Ruling‌:‌‌Art.‌‌1956,‌‌CC‌‌specifically‌‌mandates‌‌that‌‌no‌‌interest‌‌
● Onerous?‌‌Compensation‌‌=‌‌interest.‌ ‌ shall‌‌be‌‌due‌‌unless‌‌it‌‌has‌‌been‌e ‌ xpressly‌‌stipulated‌‌in‌‌

Interest‌ ‌ writing‌.‌‌Thus,‌‌reading‌‌from‌‌the‌‌provision,‌‌monetary‌‌interest‌‌is‌‌
● Payable‌‌in‌‌money.‌ ‌ allowed‌‌only‌‌if:‌‌(1)‌‌there‌‌was‌‌an‌‌express‌‌stipulation‌‌for‌‌the‌‌

○ Can‌‌be‌‌a‌‌stated‌‌(fixed)‌‌amount‌‌(ex.‌‌Php‌‌1k).‌ ‌ payment‌‌of‌‌interest;‌‌and‌‌(2)‌‌the‌‌agreement‌‌for‌‌the‌‌payment‌‌of‌‌
○ Can‌‌be‌‌an‌‌interest‌‌rate;‌‌a‌‌percentage‌‌of‌‌the‌‌ interest‌‌was‌‌reduced‌‌in‌‌writing.‌‌Concurrence‌‌of‌‌the‌‌2‌‌conditions‌‌
is‌‌required.‌‌Based‌‌on‌‌the‌‌facts,‌‌the‌‌petitioner‌‌and‌‌respondent‌‌did‌‌
principal‌‌for‌‌a‌‌given‌‌period‌‌(ex.‌‌10%‌‌per‌‌ not‌‌agree‌‌on‌‌the‌‌payment‌‌of‌‌interest‌‌for‌‌the‌‌loan.‌‌There‌‌was‌n ‌ o‌‌
annum).‌ ‌ convincing‌‌proof‌‌of‌‌written‌‌agreement‌‌‌regarding‌‌the‌‌payment‌‌
● Payable‌‌in‌‌kind.‌ ‌ of‌‌interest.‌ ‌
○ Ex.‌‌1‌‌cavan‌‌of‌‌rice‌‌for‌‌every‌‌10‌‌cavans.‌ ‌
‌
○ Value‌‌is‌‌appraised‌‌at‌‌the‌‌TIME‌‌OF‌‌PAYMENT.‌ ‌
c.‌‌Interest‌‌Rate‌ ‌
Requisites‌‌to‌‌Allow‌‌Payment‌‌of‌‌Interest‌ ‌
1. An‌‌express‌‌stipulation‌‌for‌‌the‌‌payment‌‌of‌‌interest;‌‌and‌ ‌ Usury‌‌Law‌‌(RA‌‌2655),‌‌Section‌‌1.‌‌‌The‌‌rate‌‌of‌‌interest‌‌for‌‌the‌‌

2. Express‌‌stipulation‌‌is‌‌in‌‌writing.‌ ‌ loan‌‌or‌‌forbearance‌‌of‌‌any‌‌money‌‌goods,‌‌or‌‌credits‌‌and‌‌the‌‌rate‌‌
● If‌‌these‌‌requisites‌‌do‌‌not‌‌concur‌‌and‌‌the‌‌borrower‌‌still‌‌ allowed‌‌in‌‌judgments,‌‌‌in‌‌the‌‌absence‌‌of‌‌express‌‌contract‌‌as‌‌to‌‌
pays‌‌interest,‌‌then…‌ ‌ such‌‌rate‌‌of‌‌interest,‌‌shall‌‌be‌s
‌ ix‌‌per‌‌centum‌‌per‌‌annum‌‌‌or‌‌
such‌‌rate‌‌as‌‌may‌‌be‌‌prescribed‌‌by‌‌the‌‌Monetary‌‌Board‌‌of‌‌the‌‌
○ If‌‌paid‌‌by‌‌mistake,‌‌creditor‌‌must‌‌return‌‌it.‌ ‌
9‌ ‌
Central‌‌Bank‌‌of‌‌the‌‌Philippines‌‌for‌‌that‌‌purpose‌‌in‌‌accordance‌‌
Doctrine‌:‌‌An‌‌escalation‌‌clause‌‌“which‌g ‌ rants‌‌the‌‌creditor‌‌an‌‌
with‌‌the‌‌authority‌‌hereby‌‌granted.‌ ‌ ‌ unbridled‌‌right‌‌to‌‌adjust‌‌the‌‌interest‌‌independently‌‌and‌‌
...‌ ‌ upwardly‌,‌‌completely‌‌depriving‌‌the‌‌debtor‌‌of‌‌the‌‌right‌‌to‌‌assent‌‌
to‌‌an‌‌important‌‌modification‌‌in‌‌the‌‌agreement”‌‌is‌v ‌ oid‌. ‌ ‌
Application‌‌of‌‌the‌‌Concept‌‌of‌‌Interest‌‌by‌‌the‌‌Usury‌‌Law‌ ‌ Facts‌:‌‌Sps‌‌Juico‌‌defaulted‌‌on‌‌their‌‌loan‌‌from‌‌China‌‌Banking‌‌
1. Mutuum‌:‌‌The‌‌loan‌‌of‌‌money,‌‌goods,‌‌or‌‌credits;‌‌and‌ ‌ Corporation.‌‌The‌‌amount‌‌due‌‌on‌‌the‌‌two‌ ‌
2. Forbearance‌:‌‌The‌‌act‌‌of‌‌refraining,‌‌tolerating,‌‌or‌‌ promissory‌‌notes‌‌totaled‌‌P19,201,776.63.‌‌The‌‌‌loan‌‌had‌‌an‌‌
abstaining‌‌from‌‌enforcing‌‌a‌‌right‌‌/‌‌obligation,‌‌of‌‌money,‌‌ escalation‌‌clause‌‌where‌‌the‌‌petitioners‌‌had‌‌to‌‌pay‌‌monthly‌‌
goods,‌‌or‌‌credits,‌‌even‌‌if‌‌the‌‌principal‌‌obligation‌‌is‌‌a ‌‌ interest‌‌at‌‌the‌‌prevailing‌‌rate,‌‌decided‌‌by‌‌the‌‌bank‌.‌‌The‌‌
mutuum.‌ ‌ mortgaged‌‌property‌‌was‌‌sold‌‌at‌‌public‌‌auction‌‌for‌‌the‌‌amount‌‌of‌‌
P10,300,000.‌‌China‌‌Banking‌‌Corporation‌‌sent‌‌Spouses‌‌Juice‌‌a ‌‌
Determination‌‌of‌‌the‌‌Applicable‌‌Interest‌ ‌ demand‌‌letter‌‌for‌‌the‌‌payment‌‌of‌‌P8,901,776.63,‌‌the‌‌amount‌‌of‌‌
1. Conventional‌‌Interest‌ ‌ deficiency‌‌after‌‌applying‌‌the‌‌proceeds‌‌of‌‌the‌‌foreclosure‌‌sale‌‌to‌‌
● If‌‌a‌‌rate‌‌/‌‌amount‌‌is‌‌stipulated,‌‌apply‌‌that.‌ ‌ the‌‌mortgage‌‌debt.‌‌As‌‌its‌‌demand‌‌remained‌‌unheeded,‌‌China‌‌
2. Legal‌‌Interest‌ ‌ Banking‌‌Collection‌‌filed‌‌a‌‌collection‌‌suit‌‌in‌‌the‌‌trial‌‌court.‌ ‌
● If‌‌no‌‌rate‌‌/‌‌amount‌‌is‌‌stipulated,‌‌then‌‌apply‌‌the‌‌ Issues‌:‌‌W/N‌‌the‌‌escalation‌‌clause‌‌in‌‌their‌‌loan‌‌is‌‌valid‌‌-‌‌NO‌ ‌
interest‌‌rate‌‌prescribed‌‌by‌‌statute.‌ ‌ Ruling‌:‌‌The‌‌escalation‌‌clause‌‌is‌‌void‌‌because‌‌it‌g ‌ rants‌‌
● In‌‌loan‌‌contracts‌‌or‌‌forbearance‌‌of‌‌money,‌‌ respondent‌‌the‌‌power‌‌to‌‌impose‌‌an‌‌increased‌‌rate‌‌of‌‌interest‌‌
without‌‌a‌‌written‌‌notice‌‌‌to‌‌petitioners‌‌and‌‌their‌w ‌ ritten‌‌
goods,‌‌or‌‌credit,‌‌the‌‌legal‌‌interest‌‌rate‌‌is‌‌12%‌‌ consent‌. ‌ ‌
per‌‌annum‌‌(Central‌‌Bank‌‌Circular‌‌416,‌‌series‌‌of‌‌
1974).‌ ‌ [A15]‌‌Spouses‌‌Silos‌‌v.‌‌Philippine‌‌National‌‌Bank‌ ‌
‌ Doctrine‌:‌‌Any‌m ‌ odification‌‌in‌‌the‌‌contract,‌‌such‌‌as‌‌the‌‌
d.‌‌Escalation‌‌Clauses‌ ‌ interest‌‌rates,‌‌must‌‌be‌‌made‌‌with‌‌the‌‌consent‌‌of‌‌the‌‌
contracting‌‌parties‌;‌‌otherwise,‌‌it‌‌has‌‌no‌‌binding‌‌effect.‌ ‌
CC,‌‌Article‌‌1308‌.‌‌The‌c ‌ ontract‌‌must‌‌bind‌‌both‌‌‌contracting‌‌
Facts‌:‌‌Sps.‌‌Silos‌‌secured‌‌a‌‌credit‌‌line‌‌with‌‌PNB‌‌by‌‌constituting‌‌a ‌‌
parties;‌‌its‌v
‌ alidity‌‌or‌‌compliance‌‌cannot‌‌be‌‌left‌‌to‌‌the‌‌will‌‌of‌‌
mortgage‌‌on‌‌their‌‌lot.‌‌The‌‌Credit‌‌Agreement,‌‌Promissory‌‌Notes,‌‌
one‌‌‌of‌‌them.‌ ‌ and‌‌Mortgage‌‌provided‌‌that‌P ‌ NB‌‌may‌‌increase‌‌or‌‌decrease‌‌the‌‌
interest‌‌rate‌‌depending‌‌on‌‌whatever‌‌policy‌‌PNB‌‌may‌‌adopt‌‌
Usury‌‌Law‌‌(RA‌‌2655),‌‌Section‌‌7.‌‌A ‌ ll‌‌covenants‌‌and‌‌ in‌‌the‌‌future‌.‌‌Sps.‌‌Silos‌‌contend‌‌that‌‌such‌‌stipulations‌‌and‌
stipulations‌‌‌contained‌‌in‌‌conveyances,‌‌mortgages,‌‌bonds,‌‌bills,‌‌ interest‌‌rates‌‌are‌‌‌null‌‌and‌‌void‌‌for‌‌being‌‌fixed‌‌without‌‌their‌‌
notes,‌‌and‌‌other‌‌contracts‌‌or‌‌evidences‌‌of‌‌debts,‌‌and‌‌all‌‌deposits‌‌ agreement‌. ‌‌ ‌
of‌‌goods‌‌or‌‌other‌‌things,‌w ‌ hereupon‌‌or‌‌whereby‌‌there‌‌shall‌‌be‌‌ Issues‌:‌‌W/N‌‌the‌‌interest‌‌rates‌‌fixed‌‌by‌‌PNB‌‌are‌‌valid‌‌→‌‌NO.‌ ‌
stipulated‌,‌‌charged,‌‌demanded,‌‌reserved,‌‌secured,‌‌taken,‌‌or‌‌ Ruling‌:‌‌In‌‌loan‌‌agreements,‌‌the‌r‌ ate‌‌of‌‌interest‌‌is‌‌a‌‌principal‌‌
received,‌‌directly‌‌or‌‌indirectly,‌a ‌ ‌‌higher‌‌rate‌‌or‌‌greater‌‌sum‌‌or‌‌ condition,‌‌if‌‌not‌‌the‌‌most‌‌important‌‌component.‌‌Thus,‌‌any‌‌
value‌‌for‌‌the‌‌loan‌‌or‌‌renewal‌‌or‌‌forbearance‌‌of‌‌money,‌‌ modification‌‌thereof‌‌must‌‌be‌‌mutually‌‌agreed‌‌upon;‌‌
goods,‌‌or‌‌credits‌‌than‌‌is‌‌hereinbefore‌‌allowed,‌‌shall‌‌be‌‌void‌: ‌‌ otherwise,‌‌it‌‌has‌‌no‌‌binding‌‌effect‌.‌‌In‌‌order‌‌that‌‌obligations‌‌
Provided,‌‌however,‌‌That‌n ‌ o‌‌merely‌‌clerical‌‌error‌‌‌in‌‌the‌‌
arising‌‌from‌‌contracts‌‌may‌‌have‌‌the‌f‌ orce‌‌of‌‌law‌‌‌between‌‌the‌‌
computation‌‌of‌‌interest,‌‌made‌‌without‌‌intent‌‌to‌‌evade‌‌any‌‌of‌‌the‌‌ parties,‌‌there‌‌must‌‌be‌m ‌ utuality‌‌between‌‌the‌‌parties‌.‌‌It‌‌follows‌‌
provisions‌‌of‌‌this‌‌Act,‌‌‌shall‌‌render‌‌a‌‌contract‌‌void‌:‌‌Provided,‌‌ that‌‌the‌‌minds‌‌of‌‌all‌‌the‌‌parties‌‌must‌‌meet‌‌as‌‌to‌‌the‌‌proposed‌‌

further,‌‌That‌‌parties‌‌to‌‌a‌‌loan‌‌agreement,‌‌the‌‌proceeds‌‌of‌‌which‌‌ modification,‌‌especially‌‌when‌‌it‌‌affects‌‌an‌‌important‌‌aspect‌‌of‌‌the‌‌
may‌‌be‌‌availed‌‌of‌‌partially‌‌or‌‌fully‌‌at‌‌some‌‌future‌‌time,‌‌may‌‌ agreement.‌ ‌
stipulate‌‌that‌‌the‌‌rate‌‌of‌‌interest‌‌agreed‌‌upon‌‌at‌‌the‌‌time‌‌the‌‌loan‌‌
agreement‌‌is‌‌entered‌‌into,‌‌which‌‌rate‌‌shall‌‌not‌‌exceed‌‌the‌‌ ‌
maximum‌‌allowed‌‌by‌‌law,‌‌shall‌‌prevail‌‌notwithstanding‌‌ e.‌‌Interest‌‌on‌‌Interest‌ ‌
subsequent‌‌changes‌‌in‌‌the‌‌maximum‌‌rates‌‌that‌‌may‌‌be‌‌made‌‌by‌‌
the‌‌Monetary‌‌Board:‌‌And‌‌Provided,‌‌finally,‌‌That‌‌nothing‌‌herein‌‌ CC,‌‌Article‌‌1959‌.‌‌Without‌‌prejudice‌‌to‌‌the‌‌provisions‌‌of‌‌article‌‌

contained‌‌shall‌‌be‌‌construed‌‌to‌‌prevent‌‌the‌‌purchase‌‌by‌‌an‌‌ 2212,‌i‌nterest‌‌due‌‌and‌‌unpaid‌‌shall‌‌not‌‌earn‌‌interest‌. ‌‌
innocent‌‌purchaser‌‌of‌‌a‌‌negotiable‌‌mercantile‌‌paper,‌‌usurious‌‌or‌‌ However,‌‌the‌c ‌ ontracting‌‌parties‌‌may‌‌by‌‌stipulation‌‌capitalize‌‌
otherwise,‌‌for‌‌valuable‌‌consideration‌‌before‌‌maturity,‌‌when‌‌there‌‌ the‌‌interest‌‌due‌‌and‌‌unpaid‌,‌‌which‌‌as‌a ‌ dded‌‌principal‌,‌‌shall‌‌
has‌‌been‌‌no‌‌intention‌‌on‌‌the‌‌part‌‌of‌‌said‌‌purchaser‌‌to‌‌evade‌‌the‌‌ earn‌‌new‌‌interest‌. ‌ ‌
provisions‌‌of‌‌this‌‌Act‌‌and‌‌said‌‌purchase‌‌was‌‌not‌‌a‌‌part‌‌of‌‌the‌‌ ● General‌‌rule‌‌is‌‌that‌‌interest‌‌due‌‌and‌‌unpaid‌‌does‌‌

original‌‌usurious‌‌transaction.‌‌In‌‌any‌‌case,‌‌however,‌‌the‌‌maker‌‌of‌‌ not‌‌earn‌‌interest,‌‌unless‌‌stipulated.‌ ‌
said‌‌note‌‌shall‌‌have‌‌the‌‌right‌‌to‌‌recover‌‌from‌‌said‌‌original‌‌holder‌‌
the‌‌whole‌‌interest‌‌paid‌‌by‌‌him‌‌thereon‌‌and,‌‌in‌‌case‌‌of‌‌litigation,‌‌ ‌
also‌‌the‌‌costs‌‌and‌‌such‌‌attorney's‌‌fees‌‌as‌‌may‌‌be‌‌allowed‌‌by‌‌the‌‌
court.‌ ‌ CC,‌‌Article‌‌2212‌.‌‌Interest‌‌due‌‌shall‌‌earn‌‌legal‌‌interest‌‌from‌‌

the‌‌time‌‌it‌‌is‌j‌udicially‌‌demanded‌,‌‌although‌‌the‌‌obligation‌‌may‌‌

Escalation‌‌Clauses‌ ‌
be‌‌silent‌‌upon‌‌this‌‌point.‌ ‌
● Found‌‌in‌‌long-term‌‌credit‌‌transactions.‌ ‌
● Authorizes‌‌an‌‌INCREASE‌‌in‌‌the‌‌conventional‌‌rates,‌‌to…‌ ‌ ● Apart‌‌from‌‌stipulation,‌‌interest‌‌due‌‌can‌‌earn‌‌LEGAL‌‌

○ Maintain‌‌fiscal‌‌stability;‌ ‌ interest‌‌only‌‌when‌‌JUDICIALLY‌‌DEMANDED.‌ ‌
○ Retain‌‌value‌‌of‌‌money.‌ ‌ ‌
● General‌‌Rule:‌‌Escalation‌‌clauses‌‌are‌‌VALID;‌‌do‌‌not‌‌
contravene‌‌public‌‌policy.‌ ‌ Usury‌‌Law‌‌(RA‌‌2655),‌‌Section‌‌5.‌‌‌In‌‌computing‌‌the‌‌interest‌‌on‌‌
● However,‌‌lopsidedness‌‌must‌‌be‌‌countered‌‌w/‌‌ any‌‌obligation,‌‌promissory‌‌note‌‌or‌‌other‌‌instrument‌‌or‌‌contract,‌‌
de-escalation‌‌clauses,‌‌to‌‌authorize‌‌reductions‌‌in‌‌interest‌‌ compound‌‌interest‌‌shall‌‌not‌‌be‌‌reckoned,‌‌except‌‌by‌‌
rates.‌ ‌ agreement‌:‌‌Provided,‌‌That‌w ‌ henever‌‌compound‌‌interest‌‌is‌‌
agreed‌‌upon,‌‌the‌‌effective‌‌rate‌‌of‌‌interest‌‌charged‌‌by‌‌the‌‌
● Valid‌‌escalation‌‌clauses‌‌do‌‌NOT‌‌give‌‌the‌‌creditor‌‌the‌‌
creditor‌‌shall‌‌not‌‌exceed‌‌the‌‌equivalent‌‌of‌‌the‌‌maximum‌‌rate‌‌
unbridled‌‌right‌‌to‌‌unilaterally‌‌adjust‌‌interest‌‌rates.‌ ‌ prescribed‌‌by‌‌the‌‌Monetary‌‌Board‌,‌‌or,‌‌in‌‌default‌‌thereof,‌‌
● ALL‌‌increases‌‌in‌‌interest‌‌rates‌‌made‌‌pursuant‌‌to‌‌a‌‌valid‌‌ whenever‌‌the‌d ‌ ebt‌‌is‌‌judicially‌‌claimed‌,‌‌in‌‌which‌‌last‌‌case‌‌it‌‌
escalation‌‌clause‌‌MUST‌‌be‌‌the‌‌result‌‌of‌‌an‌‌agreement‌‌ shall‌d
‌ raw‌‌six‌‌per‌‌centum‌‌per‌‌annum‌‌interest‌‌or‌‌such‌‌rate‌‌as‌‌
between‌‌the‌‌parties.‌ ‌ may‌‌be‌‌prescribed‌‌by‌‌the‌‌Monetary‌‌Board‌.‌N ‌ o‌‌person‌‌or‌‌
● Unconsented‌‌increases‌‌that‌‌transgress‌‌the‌‌principal‌‌of‌‌ corporation‌‌shall‌‌require‌‌interest‌‌to‌‌be‌‌paid‌‌in‌‌advance‌‌for‌‌a ‌‌
mutuality‌‌of‌‌contracts‌‌are‌‌invalid.‌ ‌ period‌‌of‌‌more‌‌than‌‌one‌‌year‌:‌‌Provided,‌‌however,‌‌That‌‌
whenever‌‌interest‌‌is‌‌paid‌‌in‌‌advance,‌‌the‌‌effective‌‌rate‌‌of‌‌
‌
interest‌‌charged‌‌by‌‌the‌‌creditor‌‌shall‌‌not‌‌exceed‌‌the‌‌
[A14]‌‌Sps‌‌Juico‌‌v‌‌China‌‌Banking‌‌Corporation‌ ‌ equivalent‌‌of‌‌the‌‌maximum‌‌rate‌‌‌prescribed‌‌by‌‌the‌‌Monetary‌‌
10‌ ‌
Board.‌ ‌ (2) When‌‌from‌‌the‌n ‌ ature‌‌and‌‌the‌‌circumstances‌‌of‌‌the‌‌
obligation‌‌it‌‌appears‌‌that‌‌the‌‌designation‌‌of‌‌the‌‌time‌‌
● General‌‌Rule‌:‌‌Conventional‌‌interest‌‌is‌‌paid‌‌on‌‌the‌‌
when‌‌the‌‌thing‌‌is‌‌to‌‌be‌‌delivered‌‌or‌‌the‌‌service‌‌is‌‌to‌‌be‌‌

principal‌‌ONLY‌‌(simple‌‌interest).‌ ‌ rendered‌‌was‌‌a‌c ‌ ontrolling‌‌motive‌‌for‌‌the‌‌establishment‌‌
‌ of‌‌the‌‌contract;‌‌or‌ ‌
Interest‌‌on‌‌Interest‌ ‌ (3) When‌d ‌ emand‌‌would‌‌be‌‌useless‌,‌‌as‌‌when‌‌the‌‌‌obligor‌‌

● The‌‌compensation‌‌for‌‌interest‌‌DUE‌‌and‌‌UNPAID.‌ ‌ has‌‌rendered‌‌it‌‌beyond‌‌his‌‌power‌‌to‌‌perform‌. ‌ ‌
● Generally,‌‌NOT‌‌demandable.‌ ‌
In‌r‌ eciprocal‌‌obligations‌,‌‌neither‌‌party‌‌incurs‌‌in‌‌delay‌‌if‌‌the‌‌

When‌‌is‌‌Interest‌‌on‌‌Interest‌‌Demandable?‌ ‌
other‌‌does‌‌not‌‌comply‌‌or‌‌is‌‌not‌‌ready‌‌to‌‌comply‌‌in‌‌a‌‌proper‌‌
1. When‌‌by‌‌stipulation,‌‌compounding‌‌/‌‌capitalizing‌‌of‌‌interest‌‌is‌‌ manner‌‌with‌‌what‌‌is‌‌incumbent‌‌upon‌‌him.‌F ‌ rom‌‌the‌‌moment‌‌
agreed‌‌upon‌‌(compound‌‌interest).‌ ‌ one‌‌of‌‌the‌‌parties‌‌fulfills‌‌his‌‌obligation,‌‌delay‌‌by‌‌the‌‌other‌‌
● Compounding‌:‌‌When‌‌interest‌‌previously‌‌accumulated‌‌is‌‌ begins‌. ‌ ‌
added‌‌to‌‌the‌‌principal,‌‌and‌‌the‌‌sum‌‌of‌‌which‌‌is‌‌used‌‌to‌‌
calculate‌‌a‌‌new‌‌interest.‌ ‌ CC,‌‌Article‌‌2209‌.‌‌If‌‌the‌‌obligation‌‌consists‌‌in‌‌the‌‌payment‌‌of‌‌a ‌‌
○ Ex.‌‌12k‌‌at‌‌6%.‌‌Next‌‌month,‌‌interest‌‌of‌‌11k‌‌is‌‌paid.‌‌ sum‌‌of‌‌money,‌‌and‌‌the‌‌debtor‌‌incurs‌‌in‌‌delay,‌‌the‌i‌ndemnity‌‌for‌‌
Then‌‌that‌‌of‌‌10k.‌‌So‌‌on‌‌and‌‌so‌‌forth.‌‌You‌‌end‌‌up‌‌ damages,‌‌there‌‌being‌‌no‌‌stipulation‌‌to‌‌the‌‌contrary,‌‌shall‌‌be‌‌
paying‌‌more‌‌than‌‌if‌‌you‌‌just‌‌paid‌‌6%‌‌of‌‌the‌‌entire‌‌ the‌‌payment‌‌of‌‌the‌‌interest‌‌agreed‌‌upon‌,‌‌and‌‌in‌‌the‌‌absence‌‌
of‌‌stipulation,‌‌the‌l‌egal‌‌interest,‌‌which‌‌is‌‌six‌‌per‌‌cent‌‌per‌
thing.‌ ‌ annum‌. ‌ ‌
2. When‌‌interest‌‌due‌‌and‌‌unpaid‌‌is‌‌judicially‌‌demanded.‌ ‌
● This‌‌is‌‌regardless‌‌of‌‌w/n‌‌there‌‌exists‌‌a‌‌stipulation‌‌for‌‌
CC,‌‌Article‌‌1226‌.‌‌In‌‌‌obligations‌‌with‌‌a‌‌penal‌‌clause‌,‌‌the‌‌
interest‌‌on‌‌interest.‌ ‌ penalty‌‌shall‌‌‌substitute‌‌the‌‌indemnity‌‌for‌‌damages‌‌and‌‌the‌‌
● Judicial‌‌demand‌‌is‌‌reckoned‌‌from‌‌the‌‌DAY‌‌OF‌‌FILING‌‌of‌‌ payment‌‌of‌‌interests‌‌in‌‌case‌‌of‌‌noncompliance‌,‌‌if‌‌there‌‌is‌‌no‌‌
the‌‌complaint‌‌before‌‌the‌‌court.‌ ‌ stipulation‌‌to‌‌the‌‌contrary.‌‌Nevertheless,‌d ‌ amages‌‌shall‌‌be‌‌paid‌‌
● Legal‌‌interest‌‌rate‌‌is‌‌12%,‌‌since‌‌it‌‌involves‌‌a‌‌loan‌‌or‌‌
if‌‌the‌‌obligor‌‌refuses‌‌to‌‌pay‌‌the‌‌penalty‌‌or‌‌is‌‌guilty‌‌of‌‌fraud‌‌
forbearance‌‌of‌‌money,‌‌goods,‌‌or‌‌credit.‌ ‌ in‌‌the‌‌fulfillment‌‌of‌‌the‌‌obligation‌. ‌ ‌
The‌‌penalty‌‌may‌‌be‌e ‌ nforced‌‌only‌‌when‌‌it‌‌is‌‌demandable‌‌‌in‌‌
‌ accordance‌‌with‌‌the‌‌provisions‌‌of‌‌this‌‌Code.‌ ‌
[A16]‌‌Abella‌‌v‌‌Abella‌ ‌
Doctrine‌:‌‌Art.‌‌2212.‌‌Interest‌‌due‌‌shall‌‌earn‌‌legal‌‌interest‌‌from‌‌the‌‌ CC,‌‌Article‌‌2210‌.‌I‌nterest‌‌may,‌‌in‌‌the‌‌discretion‌‌of‌‌the‌‌court,‌‌
time‌‌it‌‌is‌‌judicially‌‌demanded,‌‌although‌‌the‌‌obligation‌‌may‌‌be‌‌ be‌‌allowed‌‌upon‌‌damages‌‌‌awarded‌‌for‌b ‌ reach‌‌of‌‌contract‌. ‌ ‌
silent‌‌upon‌‌this‌‌point.‌ ‌
Facts‌:‌‌Petitioner‌‌Spouses‌‌Salvador‌‌and‌‌Alma‌‌Abella‌‌allege‌‌that‌‌ CC,‌‌Article‌‌2213‌.‌‌Interest‌‌cannot‌‌be‌‌recovered‌‌upon‌‌

respondent‌‌spouses‌‌Romeo‌‌and‌‌Annie‌‌Abella‌‌entered‌‌into‌‌a‌‌loan‌‌ unliquidated‌‌claims‌‌or‌‌damages‌,‌‌except‌‌when‌‌the‌d ‌ emand‌‌

with‌‌them‌‌for‌‌the‌‌amount‌‌of‌‌P500k,‌‌with‌m ‌ onthly‌‌payments‌‌of‌‌ can‌‌be‌‌established‌‌with‌‌reasonable‌‌certainty‌. ‌ ‌
2.5%.‌‌Respondents‌‌were‌‌able‌‌to‌‌pay‌‌P200k,‌‌but‌‌the‌‌
remaining‌‌balance‌‌of‌‌P300‌‌was‌‌unpaid‌.‌‌Petitioners‌‌then‌‌filed‌‌a ‌‌ CC,‌‌Article‌‌2226‌.‌L‌ iquidated‌‌damages‌‌‌are‌‌those‌‌‌agreed‌‌upon‌‌
complaint‌‌for‌‌a‌‌sum‌‌of‌‌money‌‌and‌‌damages‌‌with‌‌a‌‌prayer‌‌for‌‌ by‌‌the‌‌parties‌‌to‌‌a‌‌contract‌,‌‌to‌‌be‌p
‌ aid‌‌in‌‌case‌‌of‌‌breach‌‌

preliminary‌‌attachment‌‌before‌‌the‌‌RTC‌‌of‌‌Kalibo,‌‌Aklan.‌‌The‌‌RTC‌‌ thereof.‌ ‌
ruled‌‌in‌‌favor‌‌of‌‌the‌‌petitioners,‌‌while‌‌the‌‌CA‌‌upon‌‌appeal‌‌ruled‌‌
that‌‌petitioners‌‌were‌‌no‌‌longer‌‌entitled‌‌to‌‌the‌‌interest‌‌on‌‌the‌‌loan‌‌
CC,‌‌Article‌‌2227‌.‌‌Liquidated‌‌damages‌,‌‌whether‌‌intended‌‌as‌‌an‌‌
as‌‌it‌‌was‌‌not‌‌properly‌‌stipulated‌‌pursuant‌‌to‌‌Art.‌‌1956.‌ ‌
indemnity‌‌or‌‌a‌‌penalty,‌‌shall‌‌be‌e
‌ quitably‌‌reduced‌i‌f‌‌they‌‌are‌‌

Issues‌:‌‌WON‌‌interest‌‌accrued‌‌on‌‌respondents’‌‌loan‌‌and‌‌WON‌‌
iniquitous‌‌or‌‌unconscionable‌. ‌ ‌
petitioners‌‌are‌‌liable‌‌to‌‌reimburse‌‌the‌‌latter’s‌‌supposed‌‌
excess‌‌payments‌‌for‌‌interest‌‌-‌‌YES‌. ‌ ‌ Compensatory‌‌Interest‌ ‌
The‌‌nature‌‌of‌‌the‌‌contractual‌‌relationship‌‌between‌‌the‌‌petitioners‌‌ ● Also‌‌called‌‌penalty‌‌/‌‌indemnity‌‌interest.‌ ‌
and‌‌respondents‌‌was‌‌‌one‌‌of‌‌simple‌‌loan,‌‌what‌‌with‌‌the‌‌clear‌‌ ● The‌‌indemnity‌‌for‌‌damages‌‌arising‌‌from‌‌the‌‌debtor’s‌‌delay‌‌
and‌‌express‌‌stipulation‌‌to‌‌pay‌‌interest‌‌in‌‌the‌‌
acknowledgment‌‌receipt‌.‌‌Further,‌‌although‌‌there‌‌was‌‌no‌‌proper‌‌ in‌‌an‌‌obligation‌‌to‌‌pay‌‌a‌‌sum‌‌of‌‌money.‌ ‌
stipulation‌‌as‌‌to‌‌the‌‌rate,‌‌jurisprudence‌‌has‌‌provided‌‌that‌i‌n‌‌the‌‌ ● Interest‌‌allowed‌‌by‌‌law‌‌in‌‌the‌‌absence‌‌of‌‌a‌‌promise‌‌to‌‌pay‌‌

absence‌‌of‌‌such‌‌stipulation,‌‌the‌‌rate‌‌of‌‌legal‌‌interest‌‌shall‌‌ a‌‌fixed‌‌sum‌‌as‌‌compensation‌‌for‌‌delay.‌ ‌
apply.‌‌In‌‌this‌‌case,‌‌the‌‌rate‌‌at‌‌the‌‌time‌‌the‌‌loan‌‌was‌‌perfected‌‌ Simple‌‌Loan‌‌of‌‌Money‌ ‌
was‌‌12%‌‌per‌‌annum,‌‌rather‌‌than‌‌the‌‌unconscionable‌‌2.5%‌‌‌(or‌‌ ● An‌‌obligation‌‌consisting‌‌in‌‌the‌‌payment‌‌of‌‌a‌‌sum‌‌of‌‌
30%per‌‌annum),‌‌which‌‌was‌‌void‌‌ab‌‌initio‌‌for‌‌being‌‌contrary‌‌to‌‌ money.‌ ‌
morals‌‌and‌‌the‌‌law.‌ ‌
● Thus,‌‌compensatory‌‌interest‌‌is‌‌demandable‌‌when‌‌there‌‌is‌‌
The‌‌‌payments‌‌paid‌‌by‌‌respondents‌‌should‌‌be‌‌applied‌‌first‌‌to‌‌
the‌‌interest,‌‌then‌‌to‌‌the‌‌principal.‌‌In‌‌accordance‌‌with‌‌this,‌‌by‌‌ delay‌‌in‌‌payment.‌ ‌
June‌‌2002,‌‌respondents‌‌had‌‌already‌‌fully‌‌paid‌‌the‌‌principal‌‌ Other‌‌Simple‌‌Loans‌ ‌
and‌‌conventional‌‌interests,‌‌and‌‌had‌‌even‌‌overpaid‌.‌‌Applying‌‌ ● Not‌‌all‌‌simple‌‌loans‌‌are‌‌for‌‌the‌‌payment‌‌of‌‌a‌‌sum‌‌of‌‌

Art.‌‌2159‌‌then,‌‌the‌‌petitioners‌‌must‌‌reimburse‌‌said‌‌overpayment‌‌ money;‌‌sometimes‌‌payment‌‌is‌‌made‌‌in‌‌kind‌‌of‌‌a ‌‌
as‌‌it‌‌was‌‌never‌‌theirs‌‌to‌‌demand.‌ ‌ consumable‌‌thing.‌ ‌
Ruling‌:‌‌Decision‌‌and‌‌Resolution‌‌of‌‌the‌‌CA‌‌set‌‌aside;‌‌petitioner‌‌ ● Simple‌‌loans‌‌of‌‌money‌‌are‌‌also‌‌not‌‌the‌‌only‌‌obligations‌‌
spouses‌‌Salvador‌‌and‌‌Alma‌‌Abella‌‌jointly‌‌and‌‌severally‌‌liable‌‌to‌‌
respondent‌‌spouses‌‌for‌‌the‌‌reimbursement‌‌of‌‌the‌‌amount‌‌they‌‌ that‌‌consist‌‌in‌‌the‌‌payment‌‌of‌‌a‌‌sum‌‌of‌‌money.‌ ‌
overpaid.‌ ‌ [A17]‌‌Ligutan‌‌v.‌‌Court‌‌of‌‌Appeals.docx‌ ‌
‌ Doctrine‌:‌‌The‌‌question‌‌of‌‌whether‌‌a‌‌penalty‌‌is‌‌reasonable‌‌or‌‌
2.‌‌COMPENSATORY‌‌INTEREST‌ ‌ iniquitous‌‌can‌‌be‌‌partly‌‌subjective‌‌and‌‌partly‌‌objective.‌‌Its‌‌
resolution‌‌would‌‌depend‌‌on‌‌such‌‌factors‌‌as,‌‌but‌‌not‌‌limited‌‌to,‌‌
a.‌‌General‌‌Concepts‌ ‌ the‌‌type,‌‌extent‌‌and‌‌purpose‌‌of‌‌the‌‌penalty,‌‌the‌‌nature‌‌of‌‌the‌‌

CC,‌‌Article‌‌1169‌.‌‌Those‌‌obliged‌‌to‌‌deliver‌‌or‌‌to‌‌do‌‌something‌‌
obligation,‌‌the‌‌mode‌‌of‌‌breach‌‌and‌‌its‌‌consequences,‌‌the‌‌
incur‌‌in‌d
‌ elay‌‌from‌‌the‌‌time‌‌the‌‌obligee‌‌judicially‌‌or‌‌ supervening‌‌realities,‌‌the‌‌standing‌‌and‌‌relationship‌‌of‌‌the‌‌parties,‌‌
extrajudicially‌‌demands‌‌from‌‌them‌‌the‌‌fulfillment‌‌‌of‌‌their‌‌ and‌‌the‌‌like,‌‌the‌‌application‌‌of‌‌which,‌‌by‌‌and‌‌large,‌‌is‌‌addressed‌‌
to‌‌the‌‌sound‌‌discretion‌‌of‌‌the‌‌court‌ ‌
obligation.‌ ‌
Facts‌:‌‌Petitioners‌‌obtained‌‌a‌‌loan‌‌from‌‌respondent‌‌bank,‌‌where‌‌
However,‌‌the‌d ‌ emand‌‌by‌‌the‌‌creditor‌‌shall‌‌not‌‌be‌‌necessary‌‌
they‌‌issued‌‌a‌‌promissory‌‌note‌‌to‌‌pay‌‌the‌‌for‌‌the‌‌borrowed‌‌
in‌‌order‌‌that‌‌delay‌‌may‌‌exist‌: ‌ ‌ amount‌‌with‌‌an‌‌interest‌‌of‌‌15.189%‌‌per‌‌annum,‌‌and‌‌penalty‌‌of‌‌
5%‌‌per‌‌month‌‌on‌‌the‌‌outstanding‌‌debt‌‌in‌‌case‌‌of‌‌default.‌‌They‌‌
(1) When‌‌the‌o
‌ bligation‌‌or‌‌the‌‌law‌‌expressly‌‌so‌‌declare‌;‌‌or‌ ‌
also‌‌agreed‌‌to‌‌pay‌‌10%‌‌of‌‌total‌‌amount‌‌due‌‌as‌‌attorney’s‌‌fees.‌‌
11‌ ‌
Petitioners‌‌failed‌‌to‌‌settle‌‌the‌‌debt‌‌that’s‌‌why‌‌the‌‌bank‌‌filed‌‌a ‌‌ 3. When‌ ‌the‌ ‌judgment‌ ‌of‌ ‌the‌ ‌court‌ ‌awarding‌ ‌a ‌ ‌sum‌ ‌of‌‌
complaint‌‌for‌‌recovery‌‌of‌‌due‌‌amount‌‌with‌‌the‌‌RTC.‌‌RTC‌‌held‌‌in‌‌ money‌ ‌becomes‌ ‌final‌ ‌and‌ ‌executory‌, ‌ ‌the‌ ‌rate‌ ‌of‌ ‌legal‌‌
favor‌‌of‌‌the‌‌bank‌‌so‌‌petitioners‌‌brought‌‌the‌‌matter‌‌to‌‌the‌‌CA.‌‌The‌‌ interest,‌ ‌whether‌ ‌the‌ ‌case‌ ‌falls‌ ‌under‌ ‌paragraph‌ ‌1 ‌ ‌or‌‌
CA‌‌reduced‌‌the‌‌interest‌‌of‌‌the‌‌penalty‌‌from‌‌5%‌‌monthly‌‌to‌‌3%,‌‌ paragraph‌ ‌2,‌ ‌above,‌ ‌shall‌ ‌be‌ 12%‌‌ per‌‌ annum‌‌ from‌‌ such‌‌
since‌‌petitioners‌‌partially‌‌fulfilled‌‌the‌‌obligation.‌‌However,‌‌ finality‌‌until‌‌its‌‌satisfaction‌ ‌
petitioners‌‌are‌‌still‌‌claiming‌‌that‌‌the‌‌3%‌‌rate‌‌monthly‌‌is‌‌excessive‌‌ Facts‌: ‌ ‌Eastern‌ ‌Shipping,‌ ‌Metro‌ ‌Port‌ ‌Service,‌ ‌and‌ ‌Allied‌‌
so‌‌they‌‌elevated‌‌the‌‌case‌‌to‌‌the‌‌Supreme‌‌Court‌ ‌ Brokerage‌ ‌Corp.‌ ‌were‌ ‌sued‌ ‌by‌ ‌Mercantile‌‌ Insurance‌‌ Company,‌‌
Issues‌:‌‌W/N‌‌the‌‌penalty‌‌of‌‌3%‌‌per‌‌month‌‌unconscionable.‌ ‌ which‌ ‌claimed‌ ‌that‌ ‌the‌ ‌former‌ ‌were‌ ‌negligent‌ ‌and‌ ‌in‌ ‌handling‌‌
Ruling‌:‌‌NO.‌‌SEE‌‌DOCTRINE.‌‌Given‌‌the‌‌circumstances‌‌in‌‌this‌‌ their‌ ‌consignee’s‌ ‌shipment.‌ ‌And,‌ ‌as‌ ‌a ‌ ‌result,‌ ‌Mercantile‌‌
case,‌‌not‌‌to‌‌mention‌‌the‌‌repeated‌‌acts‌‌of‌‌breach‌‌by‌‌petitioners‌‌of‌‌ Insurance‌ ‌had‌ ‌to‌‌ pay‌‌ the‌‌
consignee‌‌ under‌‌ the‌‌ insurance‌‌ policy.‌‌
their‌‌contractual‌‌obligation,‌‌the‌‌Court‌‌sees‌‌no‌‌cogent‌‌ground‌‌to‌‌ The‌ ‌CFI‌ ‌ruled‌ ‌in‌ ‌favor‌ ‌of‌ ‌Mercantile‌ ‌Insurance,‌ ‌and‌ ‌held‌ ‌that‌‌
modify‌‌the‌‌ruling‌‌of‌‌the‌‌appellate‌‌court.‌‌ ‌ Eastern‌‌ Shipping‌‌ et‌‌ al.‌‌
were‌‌ solidarily‌‌ liable‌‌ to‌‌ pay‌‌ for‌‌ the‌‌ amount‌‌
of‌‌
the‌‌
loss/damage‌‌ WITH‌‌ 12%‌‌ legal‌‌ interest‌‌ per‌‌ annum,‌‌ from‌‌ the‌‌

‌ date‌‌of‌‌filing‌‌of‌‌complaint.‌ ‌
b.‌‌Interest‌‌Rate‌ ‌ Issues‌: ‌ ‌Whether‌ ‌the‌ ‌applicable‌ ‌rate‌‌ of‌‌ legal‌‌ interest‌‌ is‌‌ 12%‌‌
or‌ ‌6%‌ ‌, ‌ ‌and‌ ‌whether‌ ‌the‌ ‌legal‌ ‌rate‌‌ is‌‌ counted‌‌ from‌‌ date‌‌ of‌‌

CC,‌‌Article‌‌2209‌.‌‌If‌‌the‌‌obligation‌‌consists‌‌in‌‌the‌‌payment‌‌of‌‌a ‌‌ filing‌‌of‌‌the‌‌complaint‌ ‌
sum‌‌of‌‌money,‌‌and‌‌the‌‌debtor‌‌incurs‌‌in‌‌delay,‌‌the‌i‌ndemnity‌‌for‌‌ ● See‌‌doctrine‌ ‌
damages,‌‌there‌‌being‌‌no‌‌stipulation‌‌to‌‌the‌‌contrary,‌‌shall‌‌be‌‌ ● Court‌‌imposed‌‌ ‌
the‌‌payment‌‌of‌‌the‌‌interest‌‌agreed‌‌upon‌,‌‌and‌‌in‌‌the‌‌absence‌‌ ○ 6%‌ ‌on‌ ‌amount‌‌ due,‌‌ counted‌‌ from‌‌ the‌‌ decision‌‌ of‌‌
the‌‌

of‌‌stipulation,‌‌the‌l‌egal‌‌interest,‌‌which‌‌is‌‌six‌‌per‌‌cent‌‌per‌ court‌‌a‌‌quo‌ ‌
annum‌. ‌ ‌ ○ And‌ ‌12%‌ ‌in‌ ‌lieu‌ ‌of‌ ‌the‌ ‌6%‌ ‌imposed‌ ‌on‌ ‌amount‌‌ due‌‌
upon‌‌finality‌‌of‌‌the‌‌SC’s‌‌decision‌‌over‌‌this‌‌case‌ ‌
Usury‌‌Law‌‌(RA‌‌2655),‌‌Section‌‌1.‌‌‌The‌‌rate‌‌of‌‌interest‌‌for‌‌the‌‌
Ruling‌:‌P ‌ etition‌‌partly‌‌granted;‌‌modification‌‌is‌‌as‌‌to‌‌legal‌‌interest‌ ‌
loan‌‌or‌‌forbearance‌‌of‌‌any‌‌money‌‌goods,‌‌or‌‌credits‌‌and‌‌the‌‌rate‌‌
allowed‌‌in‌‌judgments,‌‌‌in‌‌the‌‌absence‌‌of‌‌express‌‌contract‌‌as‌‌to‌‌ [A19]‌‌Estores‌‌v.‌‌Supangan‌ ‌
such‌‌rate‌‌of‌‌interest,‌‌shall‌‌be‌s‌ ix‌‌per‌‌centum‌‌per‌‌annum‌‌‌or‌‌ Doctrine‌: ‌ ‌Forbearance‌ ‌of‌ ‌money,‌ ‌goods‌ ‌or‌ ‌credits‌ ‌refer‌ ‌to‌‌
such‌‌rate‌‌as‌‌may‌‌be‌‌prescribed‌‌by‌‌the‌‌Monetary‌‌Board‌‌of‌‌the‌‌ arrangements‌ ‌other‌ ‌than‌ ‌loan‌ ‌agreements,‌ ‌where‌‌ a ‌‌person‌‌
Central‌‌Bank‌‌of‌‌the‌‌Philippines‌‌for‌‌that‌‌purpose‌‌in‌‌accordance‌‌ acquiesces‌ ‌to‌ ‌the‌ ‌temporary‌ ‌use‌ ‌of‌ ‌his‌ ‌money,‌ ‌goods‌ ‌or‌‌
with‌‌the‌‌authority‌‌hereby‌‌granted.‌ ‌ ‌ credits‌‌ ‌pending‌‌ happening‌‌ of‌‌
certain‌‌ events‌‌ or‌‌
fulfillment‌‌ of‌‌

...‌ ‌ certain‌‌conditions‌. ‌ ‌
Penal‌‌Clauses‌ ‌ Facts‌: ‌ ‌Estores‌ ‌sold‌ ‌a ‌ ‌lot,‌ ‌but‌ ‌never‌ ‌delivered‌ ‌the‌ ‌lot‌ ‌to‌ ‌the‌‌
● Compensatory‌‌interest‌‌need‌‌NOT‌‌be‌‌in‌‌writing,‌‌unlike‌‌ Spouses‌ ‌Supangan‌ ‌even‌ ‌if‌ ‌they‌ ‌already‌ ‌paid‌ ‌P3.5M.‌ ‌The‌‌
conditional‌ ‌deed‌ ‌of‌ ‌sale‌ ‌had‌ ‌a ‌ ‌stipulation‌ ‌that‌ ‌in‌ ‌case‌ ‌of‌‌
conventional‌‌interest.‌ ‌
breach,‌ ‌the‌ ‌amount‌ ‌paid‌ ‌should‌ ‌be‌ ‌returned‌ ‌to‌ ‌the‌ ‌buyer.‌‌
● Parties‌‌may‌‌nevertheless‌‌stipulate‌‌compensatory‌‌interest;‌‌ Spouses‌‌Supangan‌‌wanted‌‌to‌‌claim‌‌interest.‌ ‌
this‌‌is‌‌called‌‌a‌‌PENAL‌‌CLAUSE.‌ ‌ Issue‌: ‌‌Whether‌‌ the‌‌
‌6%‌‌
as‌‌ provided‌‌ under‌‌ Article‌‌ 2209‌‌ of‌‌
the‌‌
● Penal‌‌clauses‌‌are‌‌an‌‌accessory‌‌obligation‌‌to‌‌assume‌‌a ‌‌ Civil‌ ‌Code,‌ ‌or‌ ‌12%‌ ‌under‌ ‌Central‌ ‌Bank‌‌ Circular‌‌ No.‌‌ 416,‌‌ is‌‌

greater‌‌liability‌‌upon‌‌breach‌‌of‌‌the‌‌principal‌‌obligation.‌ ‌ due.-‌‌12%‌‌‌is‌‌the‌‌proper‌‌interest‌ ‌
○ Strengthens‌‌the‌‌coercive‌‌nature‌‌of‌‌the‌‌principal‌‌ Held‌: ‌‌Even‌‌ if‌‌
the‌‌
transaction‌‌ involved‌‌ a ‌‌Conditional‌‌ Deed‌‌ of‌‌
Sale,‌‌
obligation.‌ ‌ the‌ ‌stipulation‌ ‌governing‌ ‌the‌ ‌return‌ ‌of‌ ‌the‌ ‌money‌ ‌can‌ ‌be‌‌
considered‌ ‌as‌ ‌a ‌ ‌forbearance‌ ‌of‌ ‌money‌ ‌which‌ ‌required‌‌
○ Provides‌‌liquidated‌‌damages‌‌in‌‌case‌‌of‌‌breach.‌ ‌ payment‌‌of‌‌interest‌‌at‌‌the‌‌rate‌‌of‌‌12%‌ ‌
● Debtors‌‌are‌‌bound‌‌to‌‌pay‌‌this‌‌in‌‌case‌‌of‌‌breach,‌‌without‌‌
necessitating‌‌proof‌‌of‌‌the‌‌existence‌‌/‌‌measure‌‌of‌‌ ‌
damages.‌ ‌ c.‌‌Interest‌‌on‌‌Interest‌ ‌
● Of‌‌course,‌‌these‌‌clauses‌‌cannot‌‌contravene‌‌law,‌‌morals,‌‌ CC,‌‌Article‌‌2212‌.‌‌Interest‌‌due‌‌shall‌‌earn‌‌legal‌‌interest‌‌from‌‌

and‌‌public‌‌policy.‌‌Courts‌‌may‌‌equitably‌‌reduce‌‌them‌‌to‌‌ the‌‌time‌‌it‌‌is‌j‌udicially‌‌demanded‌,‌‌although‌‌the‌‌obligation‌‌may‌‌

that‌‌effect.‌ ‌ be‌‌silent‌‌upon‌‌this‌‌point.‌ ‌
‌
● Apart‌‌from‌‌stipulation,‌‌interest‌‌due‌‌can‌‌earn‌‌LEGAL‌‌

[A18]‌‌Eastern‌‌Shipping‌‌Lines,‌‌Inc.‌‌vs.‌‌Court‌‌of‌‌Appeals‌ ‌ interest‌‌only‌‌when‌‌JUDICIALLY‌‌DEMANDED.‌ ‌
Doctrine‌:‌‌When‌‌it‌‌comes‌‌to‌‌award‌‌of‌‌interest,‌‌in‌‌the‌‌concept‌‌of‌‌ ● Same‌‌as‌‌conventional‌‌interest.‌ ‌
actual‌‌and‌‌compensatory‌‌damages,‌‌the‌‌rate‌‌of‌‌interest,‌‌and‌‌the‌‌ ‌
accrual‌‌thereof,‌‌is‌‌imposed‌‌as‌‌follows:‌ ‌
1. When‌ ‌the‌ ‌obligation‌ ‌is‌ ‌breached‌ ‌and‌ ‌consists‌ ‌in‌ ‌the‌‌ ‌
payment‌ ‌of‌ ‌a ‌ ‌sum‌ ‌of‌ ‌money‌ ‌(i.e.‌‌ loan‌‌ or‌‌
forbearance‌‌ of‌‌
3.‌‌FINANCE‌‌CHARGES‌ ‌
money),‌‌the‌‌interest‌‌due‌ ‌
a. Should‌ ‌be‌ ‌that‌ ‌stipulated‌ ‌in‌ ‌writing‌ ‌+ ‌ ‌shall‌ ‌earn‌‌ Truth‌‌in‌‌Lending‌‌Act,‌‌Section‌‌4.‌‌‌Any‌c ‌ reditor‌s‌ hall‌‌‌furnish‌‌to‌‌

legal‌ ‌interest‌ ‌from‌ ‌the‌ ‌time‌ ‌it‌ ‌is‌ ‌judicially‌‌ each‌‌person‌‌to‌‌whom‌‌credit‌‌is‌‌extended,‌‌prior‌‌to‌‌the‌‌
demanded‌ ‌ consummation‌‌of‌‌the‌‌transaction,‌‌a‌‌clear‌‌statement‌‌in‌‌
b. In‌‌ ‌absence‌‌ of‌‌
stipulation,‌‌ the‌‌ rate‌‌ shall‌‌ be‌‌ 12%‌‌ per‌‌ writing‌‌‌setting‌‌forth,‌‌to‌‌the‌‌extent‌‌applicable‌‌and‌‌in‌‌accordance‌‌
annum‌‌ + ‌‌computed‌‌ from‌‌ default‌‌ (i.e.‌‌ from‌‌ judicial‌‌ or‌‌
with‌‌rules‌‌and‌‌regulations‌‌prescribed‌‌by‌‌the‌‌Board,‌‌the‌f‌ ollowing‌‌
extrajudicial‌‌demand)‌ ‌ information‌: ‌ ‌
2. When‌‌ an‌‌
obligation‌‌ is‌‌
breached,‌‌ and‌‌ it‌‌
‌does‌‌ not‌‌ consist‌‌ in‌‌

a‌‌
loan‌‌
or‌‌
forbearance‌‌ of‌‌ money‌, ‌‌an‌‌ interest‌‌ on‌‌ the‌‌ amount‌‌ (1) the‌c
‌ ash‌‌price‌‌or‌‌delivered‌‌price‌‌of‌‌the‌‌property‌‌or‌‌

of‌‌damages‌‌awarded‌ ‌ service‌‌‌to‌‌be‌‌acquired;‌ ‌
a. May‌ ‌be‌ ‌imposed‌ ‌at‌ ‌the‌ ‌discretion‌‌ of‌‌ the‌‌ court‌‌ at‌‌
(2) the‌a
‌ mounts,‌‌if‌‌any,‌‌to‌‌be‌‌credited‌‌as‌‌down‌‌payment‌‌

the‌‌rate‌‌of‌‌6%‌‌per‌‌annum‌ ‌ and/or‌‌trade-in;‌
→‌ ‌However,‌ ‌no‌ ‌interest‌ ‌adjudged‌ ‌on‌‌
unliquidated‌‌ claims‌‌ or‌‌ damages,‌‌ EXCEPT‌‌ (3) the‌d
‌ ifference‌‌between‌‌the‌‌amounts‌‌set‌‌forth‌‌under‌‌

when‌‌ the‌‌ demand‌‌ can‌‌ be‌‌ established‌‌ with‌‌ clauses‌‌(1)‌‌and‌‌(2)‌; ‌ ‌
reasonable‌‌certainty‌ ‌ (4) the‌c
‌ harges,‌‌individually‌‌itemized‌,‌‌which‌‌are‌‌paid‌‌or‌‌to‌‌be‌‌

b. Shall‌‌ ‌run‌‌
from‌‌ the‌‌ time‌‌ the‌‌ claim‌‌ is‌‌
made‌‌ judicially‌‌ paid‌‌by‌‌such‌‌person‌‌in‌‌connection‌‌with‌‌the‌‌transaction‌‌but‌‌

or‌‌extrajudicially‌ ‌ which‌‌are‌n‌ ot‌‌incident‌‌to‌‌the‌‌extension‌‌of‌‌credit‌; ‌ ‌
→‌ ‌when‌‌ ‌such‌‌ time‌‌ cannot‌‌ be‌‌ established‌‌
with‌ ‌certainty,‌ ‌then‌ ‌the‌‌ interest‌‌ shull‌‌ run‌‌ (5) the‌t‌ otal‌‌amount‌‌to‌‌be‌‌financed‌; ‌ ‌
only‌ ‌from‌ ‌the‌ ‌date‌ ‌the‌ ‌judgment‌ ‌of‌ ‌the‌‌ (6) the‌f‌ inance‌‌charge‌‌expressed‌‌in‌‌terms‌‌of‌‌pesos‌‌and‌‌

court‌‌is‌‌made‌ ‌ centavos‌;‌‌and‌ ‌
12‌ ‌
(7) the‌p
‌ ercentage‌‌that‌‌the‌‌finance‌‌bears‌‌to‌‌the‌‌total‌‌ usury‌‌shall‌‌be‌‌void‌.‌‌The‌‌borrower‌‌may‌‌recover‌‌in‌‌accordance‌‌

amount‌‌to‌‌be‌‌financed‌‌expressed‌‌as‌‌a‌‌simple‌‌annual‌‌ with‌‌the‌‌laws‌‌on‌‌usury.‌ ‌
rate‌‌‌on‌‌the‌‌outstanding‌‌unpaid‌‌balance‌‌of‌‌the‌‌obligation.‌ ‌
CC,‌‌Article‌‌1961‌.‌U
‌ surious‌‌contracts‌‌shall‌‌be‌‌governed‌‌by‌‌
Truth‌‌in‌‌Lending‌‌Act,‌‌Section‌‌6.‌‌‌(a)‌‌Any‌‌creditor‌‌who‌‌in‌‌ the‌‌Usury‌‌Law‌‌and‌‌other‌‌special‌‌laws‌,‌‌so‌‌far‌‌as‌‌they‌‌are‌‌not‌‌

connection‌‌with‌‌any‌‌credit‌‌transaction‌f‌ ails‌‌to‌‌disclose‌‌to‌‌any‌ inconsistent‌‌with‌‌this‌‌Code.‌ ‌
person‌‌any‌‌information‌‌in‌‌violation‌‌of‌‌this‌‌Act‌‌‌or‌‌any‌‌
regulation‌‌issued‌‌thereunder‌‌shall‌‌be‌‌‌liable‌‌to‌‌such‌‌person‌‌in‌‌ Usury‌‌Law,‌‌Section‌‌1.‌‌‌The‌r‌ ate‌‌of‌‌interest‌‌for‌‌the‌‌loan‌‌or‌‌

the‌‌amount‌‌of‌‌P100‌‌or‌‌in‌‌an‌‌amount‌‌equal‌‌to‌‌twice‌‌the‌‌ forbearance‌‌of‌‌any‌‌money‌‌goods,‌‌or‌‌credits‌‌and‌‌the‌‌rate‌‌
finance‌‌charged‌‌required‌‌by‌‌such‌‌creditor‌‌in‌‌connection‌‌with‌‌ allowed‌‌in‌‌judgments,‌‌in‌‌the‌‌absence‌‌of‌‌express‌‌contract‌‌‌as‌‌
such‌‌transaction,‌‌whichever‌‌is‌‌the‌‌greater,‌‌except‌‌that‌‌such‌‌ to‌‌such‌‌rate‌‌of‌‌interest,‌‌shall‌‌be‌s
‌ ix‌‌per‌‌centum‌‌per‌‌annum‌‌‌or‌‌
liability‌‌shall‌‌not‌‌exceed‌‌P2,000‌‌on‌‌any‌‌credit‌‌transaction‌. ‌ such‌‌rate‌‌as‌‌may‌‌be‌‌prescribed‌‌by‌‌the‌‌Monetary‌‌Board‌‌of‌‌the‌‌
Action‌‌to‌‌recover‌‌such‌‌penalty‌‌may‌‌be‌‌brought‌‌by‌‌such‌‌person‌‌ Central‌‌Bank‌‌of‌‌the‌‌Philippines‌‌for‌‌that‌‌purpose‌‌in‌‌accordance‌‌
within‌‌one‌‌year‌‌from‌‌the‌‌date‌‌of‌‌the‌‌occurrence‌‌of‌‌the‌‌ with‌‌the‌‌authority‌‌hereby‌‌granted.‌ ‌
violation,‌‌in‌‌any‌‌court‌‌of‌‌competent‌‌jurisdiction‌.‌‌In‌‌any‌‌action‌‌
under‌‌this‌‌subsection‌‌in‌‌which‌‌any‌‌person‌‌is‌‌entitled‌‌to‌‌a ‌‌ Usury‌‌Law,‌‌Sec.‌‌1-a‌.‌‌The‌M‌ onetary‌‌Board‌‌is‌‌hereby‌‌
recovery,‌‌the‌‌creditor‌‌shall‌‌be‌‌liable‌‌for‌‌reasonable‌‌attorney's‌‌
authorized‌‌to‌‌prescribe‌‌the‌‌maximum‌‌rate‌‌or‌‌rates‌‌of‌‌interest‌‌
fees‌‌and‌‌court‌‌costs‌‌as‌‌determined‌‌by‌‌the‌‌court.‌ ‌ for‌‌the‌‌loan‌‌or‌‌renewal‌‌thereof‌‌or‌‌the‌‌forbearance‌‌of‌‌any‌‌
(b)‌‌Except‌‌as‌‌specified‌‌in‌‌subsection‌‌(a)‌‌of‌‌this‌‌section,‌‌‌nothing‌‌
money,‌‌goods‌‌or‌‌credits‌,‌‌and‌‌to‌c‌ hange‌‌such‌‌rate‌‌‌or‌‌rates‌‌

contained‌‌in‌‌this‌‌Act‌‌‌or‌‌any‌‌regulation‌‌contained‌‌in‌‌this‌‌Act‌‌or‌‌
whenever‌‌warranted‌‌by‌‌prevailing‌‌economic‌‌and‌‌social‌‌
any‌‌regulation‌‌thereunder‌s ‌ hall‌‌affect‌‌the‌‌validity‌‌or‌‌
conditions.‌ ‌
enforceability‌‌of‌‌any‌‌contract‌‌or‌‌transactions‌. ‌ ‌
(c)‌‌Any‌‌person‌‌who‌w
‌ illfully‌‌violates‌‌‌any‌‌provision‌‌of‌‌this‌‌Act‌‌or‌‌
Usury‌‌Law,‌‌Sec.‌‌4-a‌.‌‌The‌M
‌ onetary‌‌Board‌‌may‌‌eliminate,‌‌
any‌‌regulation‌‌issued‌‌thereunder‌‌shall‌‌be‌f‌ ined‌‌by‌‌not‌‌less‌‌than‌‌ exempt‌‌from,‌‌or‌‌suspend‌‌the‌‌effectivity‌‌of,‌‌interest‌‌rate‌‌

P1,00‌‌or‌‌more‌‌than‌‌P5,000‌‌‌or‌‌‌imprisonment‌‌for‌‌not‌‌less‌‌than‌‌ ceilings‌‌on‌‌certain‌‌types‌‌of‌‌loans‌‌or‌‌renewals‌‌thereof‌‌or‌‌

forbearances‌‌‌of‌‌money,‌‌goods,‌‌or‌‌credit,‌‌whenever‌‌warranted‌‌by‌‌

6‌‌months,‌‌nor‌‌more‌‌than‌‌one‌‌year‌‌‌or‌b ‌ oth‌. ‌ ‌
prevailing‌‌economic‌‌and‌‌social‌‌conditions.‌ ‌
(d)‌N
‌ o‌‌punishment‌‌or‌‌penalty‌‌provided‌‌by‌‌this‌‌Act‌‌shall‌‌

apply‌‌to‌‌the‌‌Philippine‌‌Governmen‌t‌‌or‌‌any‌‌agency‌‌or‌‌any‌‌
Usury‌‌Law,‌‌Sec.‌‌4-b‌.‌‌In‌‌the‌‌exercise‌‌of‌‌its‌‌authority‌‌to‌‌fix‌‌the‌‌

political‌‌subdivision‌‌thereof.‌ ‌ maximum‌‌rate‌‌or‌‌rates‌‌of‌‌interest‌‌under‌‌this‌‌Act,‌‌the‌‌‌Monetary‌‌
(e)‌‌A‌f‌ inal‌‌judgment‌‌hereafter‌‌rendered‌‌in‌‌any‌‌criminal‌‌ Board‌‌shall‌‌be‌‌guided‌‌‌by‌‌the‌‌following:‌ ‌
proceeding‌‌under‌‌this‌‌Act‌‌‌to‌‌the‌‌effect‌‌that‌‌a‌‌defendant‌‌has‌‌
1. The‌e ‌ xisting‌‌economic‌‌conditions‌‌in‌‌the‌‌countr‌y‌‌and‌‌the‌‌
willfully‌‌violated‌‌this‌‌Act‌s
‌ hall‌‌be‌‌prima‌‌facie‌‌evidence‌‌against‌‌ general‌‌requirements‌‌of‌‌the‌‌national‌‌economy;‌ ‌
such‌‌defendant‌‌in‌‌an‌‌action‌‌or‌‌proceeding‌‌brought‌‌by‌‌any‌‌ 2. The‌s ‌ upply‌‌of‌‌and‌‌demand‌‌for‌‌credit‌; ‌ ‌
other‌‌party‌‌against‌‌such‌‌defendant‌‌under‌‌this‌‌Act‌‌‌as‌‌to‌‌all‌‌ 3. The‌r‌ ate‌‌of‌‌increase‌‌in‌‌the‌‌price‌‌levels‌;‌‌and‌ ‌
matters‌‌respecting‌‌which‌‌said‌‌judgment‌‌would‌‌be‌‌‌an‌‌estoppel‌ 4. Such‌‌other‌‌‌relevant‌‌criteria‌‌as‌‌the‌‌Monetary‌‌Board‌‌may‌‌
as‌‌between‌‌the‌‌parties‌‌‌thereto.‌ ‌ adopt‌. ‌ ‌
Finance‌‌Charge‌ ‌ Usury‌‌Law,‌‌Sec.‌‌5.‌‌‌In‌c ‌ omputing‌‌the‌‌interest‌‌‌on‌‌any‌‌obligation,‌‌

● Not‌‌only‌‌the‌‌conventional‌‌interest,‌‌but‌‌also‌‌the‌‌fees,‌‌
promissory‌‌note‌‌or‌‌other‌‌instrument‌‌or‌‌contract,‌c ‌ ompound‌‌
service‌‌charges,‌‌discounts,‌‌and‌‌such‌‌other‌‌charges‌‌ interest‌‌shall‌‌not‌‌be‌‌reckoned,‌‌except‌‌by‌‌agreement‌: ‌‌
incidental‌‌to‌‌the‌‌extension‌‌of‌‌credit.‌ ‌ Provided,‌‌That‌‌whenever‌c ‌ ompound‌‌interest‌‌is‌‌agreed‌‌upon‌, ‌‌
● Such‌‌incidental‌‌fees‌‌are‌‌prescribed‌‌by‌‌the‌‌Monetary‌‌ the‌‌effective‌r‌ ate‌‌of‌‌interest‌‌charged‌‌‌by‌‌the‌‌creditor‌s‌ hall‌‌not‌‌
exceed‌‌the‌‌equivalent‌‌of‌‌the‌‌maximum‌‌rate‌‌prescribed‌‌by‌‌the‌‌
Board‌‌of‌‌the‌‌Central‌‌Bank‌‌of‌‌the‌‌Philippines.‌ ‌
Monetary‌‌Board‌,‌‌or,‌‌in‌‌default‌‌thereof,‌‌whenever‌‌the‌‌debt‌‌is‌‌
Truth‌‌in‌‌Lending‌‌Act‌ ‌ judicially‌‌claimed,‌‌in‌‌which‌‌last‌‌case‌‌it‌‌shall‌‌draw‌‌six‌‌per‌‌
● A‌‌special‌‌commercial‌‌law.‌ ‌ centum‌‌per‌‌annum‌‌interest‌‌or‌‌such‌‌rate‌‌as‌‌may‌‌be‌‌
● Unlike‌‌the‌‌Civil‌‌Code,‌‌includes‌‌penal‌‌clauses.‌ ‌ prescribed‌‌by‌‌the‌‌Monetary‌‌Board‌.‌‌No‌‌person‌‌or‌‌corporation‌‌
shall‌‌require‌‌interest‌‌to‌‌be‌‌paid‌‌in‌‌advance‌‌for‌‌a‌‌period‌‌of‌‌more‌‌
[A20]‌‌UCPB‌‌v.‌‌Beluso.docx‌ ‌ than‌‌one‌‌year:‌‌Provided,‌‌however,‌‌That‌w ‌ henever‌‌interest‌‌is‌‌
Doctrine‌:‌P ‌ ursuant‌‌to‌‌the‌‌Truth‌‌in‌‌Lending‌‌Act,‌‌creditors‌‌are‌‌ paid‌‌in‌‌advance,‌‌the‌‌effective‌‌rate‌‌of‌‌interest‌‌charged‌‌by‌‌the‌‌
required‌,‌‌prior‌‌to‌‌the‌‌consummation‌‌of‌‌the‌‌transaction,‌‌to‌‌ creditor‌‌shall‌‌not‌‌exceed‌‌the‌‌equivalent‌‌of‌‌the‌‌maximum‌‌rate‌‌
disclose‌‌to‌‌the‌‌debtor‌‌the‌‌specific‌‌interest‌‌rate‌‌that‌‌shall‌‌be‌‌ prescribed‌‌by‌‌the‌‌Monetary‌‌Board.‌ ‌
applied‌,‌‌among‌‌others.‌ ‌
Facts‌: ‌ ‌UCPB‌ ‌opened‌ ‌a ‌ ‌credit‌ ‌line‌ ‌in‌ ‌favor‌ ‌of‌ ‌Sps.‌ ‌Beluso.‌‌
Usury‌‌Law,‌‌Sec.‌‌9-a‌.‌‌The‌‌‌Monetary‌‌Board‌‌shall‌‌promulgate‌‌

Eventually,‌ ‌Sps.‌ ‌Beluso‌ ‌failed‌ ‌to‌ ‌make‌ ‌the‌ ‌required‌ ‌payments.‌‌
such‌‌rules‌‌and‌‌regulations‌‌as‌‌may‌‌be‌‌necessary‌‌to‌‌
Consequently,‌ ‌UCPB‌ ‌foreclosed‌ ‌on‌ ‌the‌ ‌real‌ ‌estate‌ ‌mortgage‌‌
implement‌‌‌effectively‌‌the‌‌provisions‌‌of‌‌this‌‌Act.‌ ‌
previously‌ ‌executed‌ ‌by‌ ‌the‌ ‌spouses‌ ‌in‌ ‌UCPB’s‌ ‌favor.‌ ‌The‌‌
spouses‌‌ filed‌‌
a ‌‌complaint‌‌ with‌‌ the‌‌ RTC‌‌
to‌‌ annul‌‌ the‌‌
transactions;‌‌
the‌ ‌RTC‌ ‌ruled‌ ‌in‌ ‌their‌ ‌favor,‌ ‌and‌ ‌the‌ ‌CA‌ ‌affirmed.‌ ‌UCPB‌‌ Central‌‌Bank‌‌Circular‌‌905,‌‌Series‌‌of‌‌1982,‌‌Section‌‌1.‌‌‌The‌r‌ ate‌‌
appealed‌‌to‌‌the‌‌SC.‌ ‌ of‌‌interest‌,‌‌including‌‌commissions,‌‌premiums,‌‌fees‌‌and‌o ‌ ther‌‌
Issues‌: ‌ ‌ charges,‌‌on‌‌a‌‌loan‌‌or‌‌forbearance‌‌‌of‌‌any‌‌money,‌‌goods,‌‌or‌‌
(1) W/N‌‌ the‌‌ interest‌‌
rates‌‌ charged‌‌ by‌‌
UCPB‌‌ were‌‌ valid‌‌
— ‌‌ credits,‌r‌ egardless‌‌of‌‌maturity‌‌and‌‌whether‌‌secured‌‌or‌‌
NO‌ ‌ unsecured‌,‌‌that‌‌may‌‌be‌‌charged‌‌or‌‌collected‌‌by‌‌any‌‌person,‌‌
(2) W/N‌‌UCPB‌‌violated‌‌the‌‌Truth‌‌in‌‌Lending‌‌Act‌‌—‌‌YES‌ ‌ whether‌‌natural‌‌or‌‌juridical,‌‌‌shall‌‌not‌‌be‌‌subject‌‌to‌‌any‌‌ceiling‌‌
Held‌: ‌ ‌The‌ ‌SC‌ ‌affirmed‌ ‌the‌ ‌CA’s‌ ‌decision,‌‌ stating‌‌
that‌‌
‌because‌‌ prescribed‌‌under‌‌or‌‌pursuant‌‌to‌‌the‌‌Usury‌‌Law‌,‌‌as‌‌amended.‌ ‌
the‌‌
promissory‌‌ notes‌‌ did‌‌ not‌‌
specify‌‌ the‌‌ interest‌‌ rates‌‌ to‌‌
be‌‌ The‌‌Effect‌‌of‌‌CBC‌‌905‌ ‌
charged,‌‌ the‌‌
same‌‌ were‌‌
in‌‌ violation‌‌ of‌‌ Art.‌‌ 1308,‌‌
CC‌‌ and‌‌ Sec.‌‌
● Lifted‌‌the‌‌ceilings‌‌on‌‌interest‌‌rates.‌ ‌
4‌‌of‌‌the‌‌Truth‌‌in‌‌Lending‌‌Act‌. ‌ ‌
● Thus,‌‌usury,‌‌though‌‌illegal,‌‌is‌‌now‌‌LEGALLY‌‌
‌ NON-EXISTENT.‌ ‌
4.‌‌USURY‌ ‌ ● Thus,‌‌charges,‌‌even‌‌if‌‌usurious,‌‌can‌‌be‌‌legally‌‌stipulated‌‌

a.‌‌General‌‌Concepts‌ between‌‌parties,‌‌pursuant‌‌to‌‌CC,‌‌Art.‌‌1306.‌ ‌
CC,‌‌Article‌‌1175‌.‌‌Usurious‌‌transactions‌‌shall‌‌be‌‌go
‌ verned‌‌by‌‌
CC,‌‌Article‌‌1306‌.‌‌The‌‌contracting‌‌parties‌m
‌ ay‌‌establish‌‌such‌‌

special‌‌laws‌. ‌ ‌ stipulations,‌‌clauses,‌‌terms‌‌and‌‌conditions‌‌‌as‌‌they‌‌may‌‌
deem‌‌convenient,‌‌provided‌‌they‌‌are‌‌not‌‌contrary‌‌to‌‌law,‌‌
morals,‌‌good‌‌customs,‌‌public‌‌order,‌‌or‌‌public‌‌policy.‌ ‌
CC,‌‌Article‌‌1957‌.‌C
‌ ontracts‌‌and‌‌stipulations‌,‌‌under‌‌any‌‌cloak‌‌

or‌‌device‌‌whatever,‌i‌ntended‌‌to‌‌circumvent‌‌the‌‌laws‌‌against‌‌
13‌ ‌
● However,‌‌this‌‌being‌‌a‌‌mere‌‌circular‌‌of‌‌the‌‌Monetary‌‌
Board.‌ ‌
Board,‌‌it‌‌cannot‌‌repeal‌‌the‌‌illegality‌‌of‌‌usury,‌‌which‌‌was‌‌

created‌‌by‌‌the‌‌Legislature‌‌itself.‌ ‌
Usury‌‌Law,‌‌Sec.‌‌3.‌‌‌No‌‌person‌‌or‌‌corporation‌‌shall‌‌‌directly‌‌or‌‌

● Once‌‌ceilings‌‌are‌‌reimposed‌‌by‌‌the‌‌Monetary‌‌Board,‌‌the‌‌
indirectly‌‌demand,‌‌take,‌‌receive‌‌or‌‌agree‌‌to‌‌charge‌‌in‌‌money‌‌
Usury‌‌Law‌‌shall‌‌be‌‌effective‌‌again.‌ ‌ or‌‌other‌‌property,‌‌real‌‌or‌‌personal,‌‌a‌‌higher‌‌rate‌‌or‌‌greater‌‌
‌ sum‌‌or‌‌value‌‌for‌‌the‌‌loan‌‌or‌‌forbearance‌‌of‌‌money,‌‌goods,‌‌or‌‌
‌ credits‌‌‌where‌‌such‌l‌oan‌‌or‌‌forbearance‌‌is‌‌not‌‌secured‌‌as‌‌
provided‌‌in‌‌Section‌‌two‌‌hereof,‌‌than‌‌fourteen‌‌per‌‌centum‌‌per‌‌
[A21]‌‌AFTIL‌‌v‌‌BSP.docx‌ ‌ annum‌‌or‌‌the‌‌maximum‌‌rate‌‌or‌‌rates‌‌prescribed‌‌by‌‌the‌‌
Doctrine‌:‌C ‌ B‌‌Circ.‌‌No.‌‌905‌‌merely‌‌suspended‌‌the‌‌effectivity‌‌ Monetary‌‌Board‌‌‌and‌‌in‌‌force‌‌at‌‌the‌‌time‌‌the‌‌loan‌‌or‌‌forbearance‌‌

of‌‌the‌‌Usury‌‌Law‌…‌‌However,‌‌the‌‌‌lifting‌‌of‌‌the‌‌ceilings‌‌for‌‌ is‌‌granted.‌ ‌
interest‌‌rates‌‌does‌‌not‌‌authorize‌‌stipulations‌‌charging‌‌
excessive,‌‌unconscionable,‌‌and‌‌iniquitous‌‌interest‌. ‌ ‌ Usury‌‌Law,‌‌Sec.‌‌4.‌‌N ‌ o‌‌pawnbroker‌‌or‌‌pawnbroker's‌‌agent‌‌
Facts:‌ ‌The‌ ‌Central‌ ‌Bank‌ ‌was‌ ‌created‌ ‌with‌ ‌the‌ ‌authority‌ ‌to‌‌ shall‌‌directly‌‌or‌‌indirectly‌‌stipulate,‌‌charge,‌‌demand,‌‌take‌‌or‌‌
prescribe‌ ‌maximum‌ ‌interest‌ ‌rates‌ ‌for‌ ‌loans‌ ‌and‌ ‌forbearance‌ ‌of‌‌ receive‌‌any‌‌higher‌‌rate‌‌or‌‌greater‌‌sum‌‌or‌‌value‌‌for‌‌any‌‌loan‌‌
money,‌ ‌goods‌ ‌and‌ ‌credits.‌ ‌CB‌ ‌Circular‌ ‌No.‌ ‌905‌ ‌then‌ ‌became‌‌ or‌‌forbearance‌‌than‌‌two‌‌and‌‌one-half‌‌per‌‌centum‌‌per‌‌month‌‌
effective‌‌ removing‌‌ the‌‌ ceiling‌‌ on‌‌ interest‌‌ rates.‌‌ New‌‌ law‌‌ was‌‌ then‌‌ when‌‌the‌s ‌ um‌‌lent‌‌is‌‌less‌‌than‌‌one‌‌hundred‌‌‌pesos;‌t‌ wo‌‌per‌‌
passed‌ ‌replacing‌ ‌the‌ ‌Central‌ ‌Bank‌ ‌with‌ ‌the‌ ‌Bangko‌‌ Sentral‌‌ ng‌‌
centum‌‌per‌‌month‌‌when‌‌the‌‌sum‌‌lent‌‌is‌‌one‌‌hundred‌‌pesos‌‌
Pilipinas.‌ ‌Petitioner‌ ‌AFTIL‌ ‌filed‌ ‌a ‌ ‌petition‌ ‌for‌ ‌certiorari‌‌ or‌‌more,‌‌but‌‌not‌‌exceeding‌‌five‌‌hundred‌‌‌pesos;‌‌and‌f‌ ourteen‌‌
arguing‌ ‌that‌ ‌the‌ ‌BSP‌ ‌Monetary‌ ‌Board‌ ‌has‌ ‌no‌ ‌authority‌ ‌to‌‌ per‌‌centum‌‌per‌‌annum‌‌when‌‌it‌‌is‌‌more‌‌than‌‌the‌‌amount‌‌last‌‌
enforce‌‌CB‌‌Circ.‌‌No.‌‌905‌. ‌ ‌ mentioned‌;‌‌or‌‌the‌m ‌ aximum‌‌rate‌‌or‌‌rates‌‌prescribed‌‌by‌‌the‌‌
Issues:‌ ‌ Monetary‌‌Board‌‌and‌‌in‌‌force‌‌at‌‌the‌‌time‌‌the‌‌loan‌‌or‌‌
WON‌ ‌the‌ ‌CB-MB‌ ‌acted‌ ‌within‌ ‌its‌ ‌authority‌ ‌when‌ ‌it‌ ‌issued‌ ‌CB‌‌ forbearance‌‌is‌‌granted‌.‌‌A‌‌pawnbroker‌‌or‌‌pawnbroker's‌‌agent‌‌
Circ.‌‌No.‌‌905,‌‌which‌‌removed‌‌all‌‌interest‌‌ceilings‌‌–‌‌YES‌ ‌ shall‌‌be‌‌considered‌‌such,‌‌for‌‌the‌‌benefits‌‌of‌‌this‌‌Act,‌‌only‌‌if‌‌he‌‌be‌‌
● The‌ ‌CB-MB‌ ‌merely‌ ‌suspended‌ ‌the‌ ‌effectivity‌ ‌of‌‌ the‌‌ Usury‌‌ duly‌‌licensed‌‌and‌‌has‌‌an‌‌establishment‌‌open‌‌to‌‌the‌‌public.‌ ‌
Law‌‌when‌‌it‌‌issued‌‌CB‌‌Circular‌‌No.‌‌905.‌ ‌
● In‌‌several‌‌cases,‌‌the‌‌Court‌‌has‌‌held‌‌that‌‌ ‌ Applicability‌‌of‌‌the‌‌Usury‌‌Law‌ ‌
o Circular‌‌ No.‌‌ 905‌‌ did‌‌ not‌‌
repeal‌‌ nor‌‌ in‌‌ anyway‌‌ amend‌‌ ● Only‌‌for‌‌a‌‌loan,‌‌or‌‌a‌‌forbearance‌‌of‌‌money,‌‌goods,‌‌or‌‌
the‌ ‌Usury‌ ‌Law‌ ‌but‌ ‌simply‌ ‌suspended‌ ‌the‌ ‌latter’s‌‌ credit.‌ ‌
effectivity‌ ‌ ● Does‌‌NOT‌‌apply‌‌to‌‌other‌‌contracts,‌‌such‌‌as‌‌conditional‌‌
o A‌‌ CB‌‌ Circular‌‌ cannot‌‌ repeal‌‌ a ‌‌law,‌‌ for‌‌ only‌‌ a ‌‌law‌‌ can‌‌
sales‌‌based‌‌on‌‌installment‌‌plans.‌ ‌
repeal‌‌another‌‌law‌ ‌
o Usury‌ ‌has‌ ‌been‌ ‌legally‌ ‌non-existent‌ ‌in‌ ‌our‌‌ ○ When‌‌the‌‌sale‌‌is‌‌on‌‌credit,‌‌the‌‌increase‌‌in‌‌price‌‌
jurisdiction.‌ ‌Interest‌ ‌can‌ ‌now‌ ‌be‌ ‌charged‌ ‌as‌ ‌lender‌‌ is‌‌NOT‌‌interest;‌‌it‌‌is‌‌the‌‌TIME‌‌PRICE‌‌
and‌‌borrower‌‌may‌‌agree‌‌upon.‌ ‌ DIFFERENTIAL.‌ ‌
● By‌ ‌lifting‌ ‌the‌ ‌interest‌ ‌ceiling,‌ ‌CB‌ ‌Circular‌ ‌No.‌ ‌905‌ ‌merely‌‌ Disguised‌‌Usurious‌‌Loans‌ ‌
upheld‌ ‌the‌ ‌parties’‌ ‌freedom‌ ‌of‌‌ contract‌‌ to‌‌ agree‌‌ freely‌‌ ● Lawful‌‌on‌‌its‌‌face,‌‌but‌‌usurious‌‌when‌‌additional‌‌
on‌‌the‌‌rate‌‌of‌‌interest‌. ‌‌ ‌ compensation‌‌for‌‌the‌‌loan‌‌is‌‌disguised‌‌as‌‌payment‌‌for‌‌
● However,‌‌ the‌‌ lifting‌‌ of‌‌
the‌‌ ceilings‌‌ for‌‌ interest‌‌ rates‌‌ does‌‌ not‌‌ services‌‌of‌‌little‌‌value‌‌/‌‌not‌‌to‌‌be‌‌performed‌‌at‌‌all.‌ ‌
authorize‌ ‌stipulations‌ ‌charging‌ ‌excessive,‌ ‌unconscionable,‌‌
and‌‌iniquitous‌‌interest.‌ ‌ ‌
● Eastern‌ ‌Shipping‌ ‌Lines,‌ ‌Inc.‌ ‌synthesized‌ ‌the‌ ‌rules‌ ‌on‌ ‌the‌‌ c.‌‌Remedies‌ ‌
imposition‌ ‌of‌ ‌interest,‌ ‌if‌‌ proper,‌‌ and‌‌ the‌‌ applicable‌‌ rate,‌‌ as‌‌

follows:‌‌ ‌ CC,‌‌Article‌‌1413‌.‌‌Interest‌‌paid‌i‌n‌‌excess‌‌of‌‌the‌‌interest‌‌

WON‌‌ the‌‌ new‌‌ BSP-MB‌‌ may‌‌ continue‌‌ to‌‌ enforce‌‌ CB‌‌ Circular‌‌ No.‌‌ allowed‌‌by‌‌the‌‌usury‌‌laws‌‌may‌‌be‌‌recovered‌‌‌by‌‌the‌‌debtor,‌‌
with‌‌interest‌‌thereon‌‌from‌‌the‌‌date‌‌of‌‌the‌‌payment‌. ‌ ‌
905‌‌-‌‌YES‌ ‌
● A‌ ‌closer‌ ‌perusal‌ ‌shows‌ ‌that‌ ‌Section‌‌ 109‌‌ of‌‌ R.A.‌‌ No.‌‌ 265‌‌
covered‌ ‌only‌ ‌loans‌‌ extended‌‌ by‌‌ banks,‌‌ whereas‌‌ under‌‌ Usury‌‌Law,‌‌Sec.‌‌6.‌‌‌Any‌‌person‌‌or‌‌corporation‌‌who,‌‌for‌‌any‌‌such‌‌
Section‌‌ 1-a‌‌ of‌‌ the‌‌ Usury‌‌ Law,‌‌ as‌‌ amended,‌‌ the‌‌ BSP-MB‌‌ loan‌‌or‌‌renewal‌‌thereof‌‌or‌‌forbearance,‌‌‌shall‌‌have‌‌paid‌‌or‌‌
may‌‌ prescribe‌‌ the‌‌ maximum‌‌ rate‌‌ or‌‌ rates‌‌ of‌‌ interest‌… ‌‌It‌‌ delivered‌‌a‌‌higher‌‌rate‌‌or‌‌greater‌‌sum‌‌or‌‌value‌‌than‌‌is‌‌
even‌ ‌authorizes‌ ‌the‌ ‌BSP-MB‌ ‌to‌ ‌prescribe‌ ‌different‌‌ hereinbefore‌‌allowed‌‌‌to‌‌be‌‌taken‌‌or‌‌received,‌m ‌ ay‌‌recover‌‌the‌‌
maximum‌‌rate‌‌or‌‌rates‌‌for‌‌different‌‌types‌‌of‌‌borrowings…‌ ‌ whole‌‌interest,‌‌commissions,‌‌premiums‌‌penalties‌‌and‌‌
● The‌ ‌Usury‌‌ Law‌‌ is‌‌
much‌‌ broader‌‌ in‌‌ scope,‌‌ whereas‌‌ the‌‌ surcharges‌‌paid‌o ‌ r‌‌delivered‌w‌ ith‌‌costs‌‌and‌‌attorneys'‌‌fees‌‌in‌‌
laws‌‌ creating‌‌ the‌‌ CB‌‌ and‌‌ the‌‌ BSP‌‌ merely‌‌ supplemented‌‌ such‌‌sum‌‌as‌‌may‌‌be‌‌allowed‌‌by‌‌the‌‌court‌‌‌in‌‌an‌a ‌ ction‌‌

it‌ ‌as‌ ‌it‌ ‌concerns‌ ‌loans‌ ‌by‌ ‌banks‌ ‌and‌ ‌other‌ ‌financial‌‌ against‌‌the‌‌person‌‌or‌‌corporation‌‌who‌‌took‌‌‌or‌‌received‌‌them‌‌
institutions‌. ‌ ‌Had‌ ‌the‌ ‌law‌ ‌establishing‌ ‌the‌ ‌BSP‌ ‌been‌‌ if‌‌such‌‌action‌‌is‌‌brought‌w ‌ ithin‌‌two‌‌years‌‌after‌‌such‌‌payment‌‌
intended‌ ‌to‌ ‌repeal‌ ‌Section‌ ‌1-a‌ ‌of‌ ‌Act‌ ‌No.‌ ‌2655,‌ ‌it‌ ‌would‌‌ or‌‌delivery‌:‌‌Provided,‌‌however,‌‌That‌‌the‌c ‌ reditor‌‌shall‌‌not‌‌be‌‌
have‌‌so‌‌stated‌‌in‌‌unequivocal‌‌terms.‌ ‌ obliged‌‌to‌‌return‌‌the‌‌interest,‌‌commissions‌‌and‌‌premiums‌‌
Ruling:‌ ‌ for‌‌a‌‌period‌‌of‌‌not‌‌more‌‌than‌‌one‌‌year‌‌collected‌‌by‌‌him‌‌in‌‌
Petition‌‌for‌‌certiorari‌‌DISMISSED.‌ ‌ advance‌‌‌when‌‌the‌‌debtor‌‌shall‌‌have‌p ‌ aid‌‌the‌‌obligation‌‌before‌‌
it‌‌is‌‌due‌,‌‌provided‌‌such‌i‌nterest,‌‌and‌‌commissions‌‌and‌‌
‌ premiums‌‌do‌‌not‌‌exceed‌‌the‌‌rates‌‌fixed‌‌in‌‌this‌‌Act‌. ‌ ‌
b.‌‌Usurious‌‌Acts‌ ‌
Usury‌‌Law,‌‌Sec.‌‌7.‌‌A ‌ ll‌‌covenants‌‌and‌‌stipulations‌‌contained‌‌
Usury‌‌Law,‌‌Sec.‌‌2.‌‌N ‌ o‌‌person‌‌or‌‌corporation‌‌shall‌‌directly‌‌or‌‌ in‌‌conveyances,‌‌mortgages,‌‌bonds,‌‌bills,‌‌notes,‌‌and‌o ‌ ther‌‌
indirectly‌‌take‌‌or‌‌receive‌‌‌in‌‌money‌‌or‌‌other‌‌property,‌‌real‌‌or‌‌ contracts‌‌‌or‌e ‌ vidences‌‌of‌‌debts‌,‌‌and‌a ‌ ll‌‌deposits‌‌of‌‌goods‌‌or‌‌
personal,‌‌or‌‌choses‌‌in‌‌action,‌a ‌ ‌‌higher‌‌rate‌‌of‌‌interest‌‌or‌‌
other‌‌things,‌‌whereupon‌‌or‌‌whereby‌‌there‌‌shall‌‌be‌‌
greater‌‌sum‌‌or‌‌value‌,‌‌including‌‌commissions,‌‌premiums,‌‌fines‌‌ stipulated‌,‌‌charged,‌‌demanded,‌‌reserved,‌‌secured,‌‌taken,‌‌or‌‌
and‌‌penalties,‌‌‌for‌‌the‌‌loan‌‌or‌‌renewal‌‌thereof‌‌or‌‌forbearance‌‌ received,‌‌directly‌‌or‌‌indirectly,‌‌‌a‌‌higher‌‌rate‌‌or‌‌greater‌‌sum‌‌or‌‌
of‌‌money,‌‌goods,‌‌or‌‌credits,‌w ‌ here‌‌such‌‌loan‌‌or‌‌renewal‌‌or‌‌ value‌‌for‌‌the‌‌loan‌‌or‌‌renewal‌‌or‌‌forbearance‌‌‌of‌‌money,‌‌goods,‌‌
forbearance‌‌is‌‌secured‌‌in‌‌whole‌‌or‌‌in‌‌part‌‌by‌‌a‌‌mortgage‌‌ or‌‌credits‌t‌ han‌‌is‌‌hereinbefore‌‌allowed,‌‌shall‌‌be‌‌void‌: ‌‌
upon‌‌real‌‌estate‌‌the‌‌title‌‌to‌‌which‌‌is‌‌duly‌‌registered‌,‌‌or‌‌by‌‌any‌‌ Provided,‌‌however,‌‌That‌‌no ‌ ‌‌merely‌‌clerical‌‌error‌‌in‌‌the‌‌
document‌‌conveying‌‌such‌‌real‌‌estate‌‌or‌‌an‌‌interest‌‌therein,‌‌than‌‌ computation‌‌of‌‌interest,‌‌made‌‌without‌‌intent‌‌to‌‌evade‌‌any‌‌of‌‌
twelve‌‌per‌‌centum‌‌per‌‌annum‌‌or‌‌the‌‌maximum‌‌rate‌‌ the‌‌provisions‌‌of‌‌this‌‌Act,‌‌shall‌‌render‌‌a‌‌contract‌‌void‌: ‌‌
prescribed‌‌by‌‌the‌‌Monetary‌‌Board‌‌and‌‌in‌‌force‌‌at‌‌the‌‌time‌‌ Provided,‌‌further,‌‌That‌‌parties‌‌to‌‌a‌‌loan‌‌agreement,‌‌the‌‌proceeds‌‌
the‌‌loan‌‌or‌‌renewal‌‌thereof‌‌or‌‌forbearance‌‌is‌‌granted‌: ‌‌ of‌‌which‌‌may‌‌be‌‌availed‌‌of‌‌partially‌‌or‌‌fully‌‌at‌‌some‌‌future‌‌time,‌‌
Provided,‌‌That‌‌the‌‌rate‌‌of‌‌interest‌‌under‌‌this‌‌section‌‌or‌‌the‌‌
may‌‌stipulate‌‌that‌‌the‌‌rate‌‌of‌‌interest‌‌agreed‌‌upon‌‌at‌‌the‌‌time‌‌
maximum‌‌rate‌‌of‌‌interest‌‌that‌‌may‌‌be‌‌prescribed‌‌by‌‌the‌‌Monetary‌‌ the‌‌loan‌‌agreement‌‌is‌‌entered‌‌into,‌‌which‌‌rate‌‌shall‌‌not‌‌
Board‌‌under‌‌this‌‌section‌‌may‌‌likewise‌‌apply‌‌to‌‌loans‌‌secured‌‌by‌‌ exceed‌‌the‌‌maximum‌‌allowed‌‌by‌‌law,‌‌shall‌‌prevail‌‌
other‌‌types‌‌of‌‌security‌‌as‌‌may‌‌be‌‌specified‌‌by‌‌the‌‌Monetary‌‌ notwithstanding‌‌subsequent‌‌changes‌‌in‌‌the‌‌maximum‌‌rates‌‌
14‌ ‌
● Usurious‌‌interest‌‌can‌‌be‌‌recovered‌‌since‌‌such‌‌was‌‌paid‌‌
that‌‌may‌‌be‌‌made‌‌by‌‌the‌‌Monetary‌‌Board:‌‌And‌‌Provided,‌‌finally,‌‌
under‌‌restraint‌‌and‌‌not‌‌voluntarily.‌ ‌
That‌n ‌ othing‌‌herein‌‌contained‌‌shall‌‌be‌‌construed‌‌to‌‌prevent‌‌
the‌‌purchase‌‌by‌‌an‌‌innocent‌‌purchaser‌‌‌of‌‌a‌n ‌ egotiable‌‌ ● There‌‌is‌‌NO‌‌conflict‌‌between‌‌Sec.‌‌6‌‌of‌‌the‌‌Usury‌‌Law‌‌and‌‌
mercantile‌‌paper,‌‌usurious‌‌or‌‌otherwise,‌‌for‌‌valuable‌‌ the‌‌Civil‌‌Code.‌ ‌
consideration‌‌before‌‌maturity‌,‌‌when‌‌there‌‌has‌‌been‌n ‌ o‌‌
○ Usury‌‌Law,‌‌Sec.‌‌6:‌‌‌Any‌‌person‌‌who‌‌has‌‌paid‌‌a ‌‌
intention‌‌on‌‌the‌‌part‌‌of‌‌said‌‌purchaser‌‌to‌‌evade‌‌the‌‌ higher‌‌rate‌‌than‌‌allowed‌‌by‌‌law‌‌may‌‌recover‌‌the‌‌
provisions‌‌‌of‌‌this‌‌Act‌‌and‌‌said‌‌purchase‌‌was‌n ‌ ot‌‌a‌‌part‌‌of‌‌the‌‌
WHOLE‌‌interest.‌ ‌
original‌‌usurious‌‌transaction‌.‌‌In‌‌any‌‌case,‌‌however,‌‌the‌m ‌ aker‌‌ ○ CC,‌‌Art.‌‌1413:‌‌‌Interest‌‌paid‌‌IN‌‌EXCESS‌‌of‌‌that‌‌
of‌‌said‌‌note‌‌shall‌‌have‌‌the‌‌right‌‌to‌‌recover‌‌from‌‌said‌‌original‌‌
allowed‌‌by‌‌law‌‌may‌‌be‌‌recovered‌‌by‌‌the‌‌debtor,‌‌w/‌‌
holder‌‌‌the‌‌whole‌‌interest‌‌paid‌‌by‌‌him‌‌thereon‌‌and,‌‌in‌‌case‌‌of‌‌
litigation,‌‌also‌‌the‌‌costs‌‌and‌‌such‌‌attorney's‌‌fees‌‌as‌‌may‌‌be‌‌ interest‌‌from‌‌the‌‌date‌‌of‌‌payment.‌ ‌
allowed‌‌by‌‌the‌‌court.‌ ‌ ■ The‌‌whole‌‌USURIOUS‌‌INTEREST‌‌can‌‌be‌
paid.‌ ‌
Usury‌‌Law,‌‌Sec.‌‌8.‌‌A‌ ll‌‌loans‌‌under‌‌which‌‌payment‌‌is‌‌to‌‌be‌‌ ■ Here,‌‌the‌‌law‌‌does‌‌NOT‌‌allow‌‌division,‌‌since‌‌
made‌‌in‌‌agricultural‌‌products‌‌or‌‌seed‌‌or‌‌in‌‌any‌‌other‌‌kind‌‌of‌‌ the‌‌whole‌‌stipulation‌‌as‌‌to‌‌interest‌‌is‌‌void.‌ ‌
commodities‌‌shall‌‌also‌‌be‌‌null‌‌and‌‌void‌‌‌unless‌‌they‌‌provide‌‌ ■ The‌‌cause/object‌‌of‌‌the‌‌obligation‌‌here‌‌is‌‌the‌‌
that‌‌‌such‌‌products‌‌or‌‌seed‌‌or‌‌other‌‌commodities‌‌shall‌‌be‌‌ payment‌‌of‌‌the‌‌usurious‌‌interest,‌‌which‌‌is‌‌
appraised‌‌at‌‌the‌‌time‌‌when‌‌the‌‌obligation‌‌falls‌‌due‌‌at‌‌the‌‌
illegal‌‌and‌‌therefore‌‌void.‌ ‌
current‌‌local‌‌market‌‌price‌:‌‌Provided,‌‌That‌‌unless‌‌otherwise‌‌
stated‌‌in‌‌a‌‌document‌‌written‌‌in‌‌a‌‌language‌‌or‌‌dialect‌‌intelligible‌‌to‌‌ ■ Recovery‌‌of‌‌this‌‌interest‌‌is‌‌already‌‌covered‌‌
the‌‌debtor‌‌and‌‌subscribed‌‌in‌‌the‌‌presence‌‌of‌‌not‌‌less‌‌than‌‌two‌‌ by‌‌the‌‌Usury‌‌Law;‌‌it‌‌only‌‌added‌‌the‌‌part‌‌
witnesses,‌‌‌any‌‌contract‌‌advancing‌‌money‌‌to‌‌be‌‌repaid‌‌later‌‌ where‌‌interest‌‌can‌‌be‌‌recovered‌‌from‌‌that‌‌
in‌‌agricultural‌‌products‌‌or‌‌seed‌‌or‌‌any‌‌other‌‌kind‌‌of‌‌ interest.‌ ‌
commodities‌‌shall‌‌be‌‌understood‌‌to‌‌be‌‌a‌‌loan‌,‌‌and‌‌any‌‌ 2)‌‌Remedy‌‌of‌‌the‌‌Creditor‌ ‌
person‌‌or‌‌corporation‌h ‌ aving‌‌paid‌‌otherwise‌‌shall‌‌be‌‌entitled‌‌ ● Nullity‌‌of‌‌the‌‌stipulation‌‌for‌‌the‌‌usurious‌‌interest‌‌does‌‌NOT‌‌
in‌‌case‌‌action‌‌is‌‌brought‌‌within‌‌two‌‌years‌‌after‌‌such‌‌
payment‌‌or‌‌delivery‌‌to‌‌recover‌‌all‌‌the‌‌products‌‌or‌‌seed‌‌ nullify‌‌the‌‌creditor’s‌‌right‌‌to‌‌recover‌‌the‌‌principal.‌ ‌
delivered‌‌as‌‌interest,‌‌or‌‌the‌‌value‌‌thereof,‌‌together‌‌with‌‌the‌‌ ● Allowing‌‌otherwise‌‌would‌‌unjustly‌‌enrich‌‌the‌‌debtor.‌ ‌
costs‌‌and‌‌attorney's‌‌fees‌‌in‌‌such‌‌sum‌‌as‌‌may‌‌be‌‌allowed‌‌by‌‌ ● What‌‌happens‌‌to‌‌the‌‌principal?‌‌Deemed‌‌to‌‌be‌‌w/o‌‌
the‌‌court‌.‌N‌ othing‌‌contained‌‌in‌‌this‌‌section‌‌shall‌‌be‌‌ interest;‌‌recoverable‌‌through‌‌judicial‌‌action.‌ ‌
construed‌‌to‌‌prevent‌‌the‌‌lender‌‌from‌‌taking‌‌interest‌‌‌for‌‌the‌‌ ○ When‌‌there‌‌is‌‌demand‌‌for‌‌this,‌‌and‌‌the‌‌debtor‌‌
money‌‌lent,‌‌provided‌‌such‌‌interest‌‌be‌n ‌ ot‌‌in‌‌excess‌‌of‌‌the‌‌rates‌‌ delays,‌‌THEN‌‌it‌‌earns‌‌interest‌‌from‌‌the‌‌day‌‌mora‌
herein‌‌fixed‌. ‌ ‌ began‌‌on‌‌the‌‌part‌‌of‌‌the‌‌debtor.‌ ‌
■ This‌‌is‌‌due‌‌to‌‌the‌‌general‌‌rule‌‌of‌‌law‌‌that‌‌

Usury‌‌Law,‌‌Sec.‌‌9.‌‌‌The‌p‌ erson‌‌or‌‌corporation‌‌sued‌‌shall‌‌file‌‌
when‌‌one‌‌incurs‌‌in‌‌delay,‌‌one‌‌must‌‌pay‌‌
its‌‌answer‌‌in‌‌writing‌‌under‌‌oath‌‌to‌‌any‌‌complaint‌‌brought‌‌or‌‌
filed‌a‌ gainst‌‌said‌‌person‌‌or‌‌corporation‌‌before‌‌a‌c
‌ ompetent‌‌ interest‌‌as‌‌damages.‌ ‌
court‌‌to‌‌recover‌‌the‌‌money‌‌or‌‌other‌‌personal‌‌or‌‌real‌‌ ‌
property,‌‌seeds‌‌or‌‌agricultural‌‌products‌,‌‌charged‌‌or‌‌received‌‌
in‌‌violation‌‌of‌‌the‌‌provisions‌‌of‌‌this‌‌Act.‌‌The‌‌lack‌‌of‌‌taking‌‌
[A20]‌‌Carpo‌‌v.‌‌Chua‌‌and‌‌Dy‌‌Ng‌ ‌
an‌‌oath‌‌to‌‌an‌‌answer‌‌to‌‌a‌‌complaint‌‌will‌‌mean‌‌the‌‌admission‌‌ Doctrine‌:‌‌A‌u ‌ surious‌‌loan‌‌transaction‌‌is‌‌not‌‌a‌‌complete‌‌
of‌‌the‌‌facts‌‌contained‌‌in‌‌the‌‌latter‌. ‌ ‌ nullity‌‌‌but‌‌defective‌‌only‌‌with‌‌respect‌‌to‌‌the‌‌agreed‌‌interest.‌ ‌
Facts‌:‌‌Petitioner‌‌borrowed‌‌from‌‌respondents‌‌P175,000,‌‌payable‌‌
● Refers‌‌ONLY‌‌to‌‌complaints‌‌filed‌‌against‌‌an‌‌entity‌‌ within‌‌6‌‌months‌‌with‌‌an‌‌‌interest‌‌rate‌‌of‌‌6%‌‌per‌‌month‌. ‌‌
that‌‌has‌‌committed‌‌usury,‌‌for‌‌the‌‌recovery‌‌of‌‌the‌‌
Petitioners‌‌failed‌‌to‌‌pay‌‌upon‌‌demand.‌‌The‌‌mortgage‌‌was‌‌
usurious‌‌interest‌‌paid.‌ extrajudicially‌‌foreclosed‌‌and‌‌the‌‌property‌‌was‌‌sold‌‌at‌‌a‌‌public‌‌
● If‌‌the‌‌defendant‌‌entity‌‌has‌‌NOT‌‌filed‌‌an‌‌answer‌‌
auction‌‌to‌‌respondents.Petitioners‌‌failed‌‌to‌‌exercise‌‌their‌‌right‌‌of‌‌
under‌‌oath‌‌denying‌‌guilt,‌‌it‌‌is‌‌presumed‌‌to‌‌have‌‌
redemption;‌‌a‌‌certificate‌‌of‌‌sale‌‌and‌‌a‌‌TCT‌‌was‌‌issued‌‌in‌‌the‌‌
committed‌‌usury.‌ ‌ name‌‌of‌‌respondents.‌‌However,‌p ‌ etitioners‌‌continued‌‌to‌‌
● Does‌‌NOT‌‌apply‌‌to‌‌cases‌‌where‌‌the‌‌DEFENDANT‌‌ occupy‌‌the‌‌house‌‌and‌‌lot.‌‌They‌‌filed‌‌a‌‌complaint‌‌for‌‌
is‌‌the‌‌one‌‌who‌‌claims‌‌usury.‌ ‌ annulment‌‌of‌‌real‌‌estate‌‌mortgage‌‌and‌‌the‌‌consequent‌‌
foreclosure‌‌proceedings,‌‌but‌‌was‌‌dismissed‌.‌‌Hence‌‌this‌‌
‌ petition‌‌for‌‌review.‌ ‌
Issues‌:‌‌W/N‌‌the‌‌interest‌‌rate‌‌stipulated‌‌in‌‌the‌‌principal‌‌loan‌‌is‌‌
Usury‌‌Law,‌‌Sec.‌‌10‌.‌‌Without‌‌prejudice‌‌to‌‌the‌‌proper‌‌civil‌‌action‌‌ null‌‌and‌‌void‌‌-‌‌YES.‌ ‌
violation‌‌of‌‌this‌‌Act‌‌and‌‌the‌‌implementing‌‌rules‌‌and‌‌regulations‌‌ Ruling‌:‌‌Petitioners‌‌cite‌‌Medel‌‌v.‌‌CA‌‌in‌‌contending‌‌that‌‌the‌‌rate‌‌of‌‌
promulgated‌‌by‌‌the‌‌Monetary‌‌Board‌s ‌ hall‌‌be‌‌subject‌‌to‌‌
interest‌‌stipulated‌‌in‌‌the‌‌principal‌‌loan‌‌agreement‌‌is‌‌null‌‌and‌‌void.‌‌
criminal‌‌prosecution‌‌and‌‌the‌‌guilty‌‌person‌‌shall,‌‌upon‌‌ Further,‌‌the‌‌nullity‌‌of‌‌the‌‌interest‌‌rate‌‌affects‌‌the‌‌validity‌‌of‌‌the‌‌
conviction,‌‌be‌‌sentenced‌‌to‌‌a‌‌fine‌‌of‌‌not‌‌less‌‌than‌‌fifty‌‌pesos‌‌ mortgage.‌I‌n‌‌Medel,‌‌the‌‌Court‌‌found‌‌that‌‌the‌‌interest‌‌
nor‌‌more‌‌than‌‌five‌‌hundred‌‌pesos,‌‌or‌‌to‌‌imprisonment‌‌for‌‌ stipulated‌‌at‌‌5.5%‌‌per‌‌month‌‌or‌‌66%‌‌per‌‌annum‌‌was‌‌so‌‌
not‌‌less‌‌than‌‌thirty‌‌days‌‌nor‌‌more‌‌than‌‌one‌‌year,‌‌or‌‌both,‌‌in‌‌ iniquitous‌‌or‌‌unconscionable‌‌as‌‌to‌‌render‌‌the‌‌stipulation‌‌
the‌‌discretion‌‌of‌‌the‌‌court‌,‌‌and‌‌to‌‌‌return‌‌the‌‌entire‌‌sum‌‌ void.‌‌In‌‌this‌‌case,‌‌the‌‌interest‌‌rate‌‌was‌‌at‌‌6%‌‌per‌‌month‌‌or‌‌
received‌‌as‌‌interest‌‌from‌‌the‌‌party‌‌aggrieved‌,‌‌and‌‌in‌‌the‌‌case‌‌ 72%‌‌per‌‌annum‌.‌‌It‌‌is‌‌apparent‌‌that‌‌the‌‌stipulated‌‌interest‌‌in‌‌the‌‌
of‌n
‌ on-payment,‌‌to‌‌suffer‌‌subsidiary‌‌imprisonment‌‌at‌‌the‌‌ subject‌‌loan‌‌is‌‌excessive,‌‌iniquitous,‌‌unconscionable‌‌and‌‌
rate‌‌of‌‌one‌‌day‌‌for‌‌every‌‌two‌‌pesos‌:‌‌Provided,‌‌That‌‌in‌‌case‌‌of‌‌ exorbitant.‌‌In‌‌a‌‌long‌‌line‌‌of‌‌cases,‌‌the‌C ‌ ourt‌‌affirmed‌‌the‌‌rule‌‌
corporations‌,‌‌associations,‌‌societies,‌‌or‌‌companies‌‌the‌‌ that‌‌a‌‌usurious‌‌loan‌‌transaction‌‌is‌‌not‌‌a‌‌complete‌‌nullity‌‌but‌‌
manager,‌‌administrator‌‌or‌‌gerent‌‌or‌‌the‌p ‌ erson‌‌who‌‌has‌‌charge‌‌ defective‌‌only‌‌with‌‌respect‌‌to‌‌the‌‌agreed‌‌interest‌.‌‌In‌‌this‌‌
of‌‌the‌‌management‌‌or‌‌administration‌‌of‌‌the‌‌business‌‌shall‌‌ case,‌‌since‌‌the‌‌mortgage‌‌contract‌‌derives‌‌its‌‌vitality‌‌from‌‌the‌‌
be‌‌criminally‌‌responsible‌‌‌for‌‌any‌‌violation‌‌of‌‌this‌‌Act.‌ ‌ validity‌‌of‌‌the‌‌principal‌‌obligation,‌‌the‌‌invalid‌‌stipulated‌‌interest‌‌
rate‌‌is‌‌similarly‌‌insufficient‌‌to‌‌render‌‌void‌‌the‌‌ancillary‌‌mortgage‌‌
Usurious‌‌Loans‌ ‌
contract.‌‌Further,‌‌the‌‌‌Usury‌‌Law‌‌did‌‌not‌‌deprive‌‌the‌‌lender‌‌of‌‌
● The‌‌entire‌‌obligation‌‌does‌‌NOT‌‌become‌‌void.‌ ‌ his‌‌right‌‌to‌‌recover‌‌from‌‌the‌‌borrower‌‌the‌‌money‌‌actually‌‌
● Usurious‌‌loans‌‌are‌‌divisible.‌ ‌ loaned‌‌to‌‌and‌‌enjoyed‌‌by‌‌the‌‌latter‌.‌‌Despite‌‌this,‌‌petitioners’‌‌
○ Principal‌‌obligation‌:‌‌Pay‌‌the‌‌principal‌‌amount.‌ ‌ action‌‌is‌‌already‌‌barred‌‌by‌‌laches.‌ ‌
○ Accessory‌‌obligation‌:‌‌Pay‌‌the‌‌interest.‌ ‌
■ THIS‌‌is‌‌where‌‌the‌‌illegality‌‌of‌‌usury‌‌lies.‌ ‌ ‌
● Thus,‌‌the‌‌illegal‌‌accessory‌‌prestation‌‌to‌‌pay‌‌interest‌‌is‌‌ ‌
separated,‌‌and‌‌the‌‌principal‌‌obligation‌‌to‌‌pay‌‌the‌‌principal‌‌
amount‌‌is‌‌deemed‌‌to‌‌be‌‌valid‌‌and‌‌w/o‌‌interest.‌ ‌ ‌
1)‌‌Remedy‌‌of‌‌the‌‌Debtor‌ ‌ ‌
15‌ ‌
PART‌‌II.‌‌DEPOSIT‌ ‌ Depositor‌ ‌
● Delivers,‌‌formally‌‌transfers,‌‌gives‌‌or‌‌yields‌‌possession‌‌/ ‌‌
THE‌‌CONCEPT‌‌OF‌‌DEPOSIT‌ ‌ control‌‌of‌‌a‌‌moveable‌‌property‌‌to‌‌the‌‌depositary‌‌for‌‌
A.‌‌General‌‌Concepts‌ ‌ safekeeping.‌ ‌
Contract‌‌of‌‌Deposit‌ ‌
CC,‌‌Article‌‌1962‌.‌‌A‌‌deposit‌‌is‌‌constituted‌‌from‌‌the‌‌ ● A‌‌real‌‌contract;‌‌property‌‌passes‌‌from‌‌one‌‌party‌‌to‌‌another,‌‌
moment‌‌a‌‌person‌‌receives‌‌a‌‌thing‌‌belonging‌‌to‌‌ requiring‌‌more‌‌than‌‌mere‌‌consent.‌ ‌
another,‌‌with‌‌the‌‌obligation‌‌of‌‌safely‌‌keeping‌‌it‌‌and‌‌of‌
○ DELIVERY‌‌of‌‌the‌‌thing‌‌is‌‌essential‌‌for‌‌
returning‌‌the‌‌same‌.‌‌If‌‌the‌s‌ afekeeping‌o ‌ f‌‌the‌‌thing‌‌

perfection.‌ ‌
delivered‌‌is‌n‌ ot‌‌the‌‌principal‌‌purpose‌‌‌of‌‌the‌‌contract,‌‌

Requisites?‌ ‌
there‌‌is‌n
‌ o‌‌deposit‌‌‌but‌‌some‌‌other‌‌contract.‌ ‌
● No‌‌formal‌‌requisites.‌ ‌
Deposit‌ ● Can‌‌be‌‌written‌‌or‌‌oral.‌ ‌
● The‌‌gratuitous‌‌deposit‌‌of‌‌goods,‌‌for‌‌the‌‌benefit‌‌of‌‌the‌‌
● Traditionally‌‌gratuitous,‌‌but‌‌can‌‌be‌‌onerous.‌ ‌
depositor.‌ ‌ Principal‌‌Obligation‌ ‌
● The‌‌other‌‌contract‌‌of‌‌“neighborliness”.‌ ‌ ● Depositary’s‌‌principal‌‌obligation‌‌is‌‌the‌‌safekeeping‌‌& ‌‌
○ Ex.‌‌Leaving‌‌your‌‌keys‌‌to‌‌your‌‌neighbor.‌ ‌ eventual‌‌return‌‌of‌‌the‌‌moveable.‌ ‌
When‌‌Constituted?‌ ‌ ● If‌‌the‌‌principal‌‌obligation‌‌is‌‌not‌‌this,‌‌then‌‌the‌‌contract‌‌is‌‌not‌‌

● The‌‌moment‌‌property‌‌of‌‌another‌‌is‌‌DELIVERED‌‌to‌‌the‌‌ one‌‌of‌‌deposit.‌ ‌
depositary.‌ ‌ Contract‌‌to‌‌Deposit‌ ‌
Purpose‌ ‌ ● Agreement‌‌to‌‌constitute‌‌a‌‌deposit.‌ ‌
● Safekeeping‌‌(as‌‌distinguished‌‌from‌‌loan,‌‌which‌‌is‌‌ ● A‌‌valid‌‌CONSENSUAL‌‌contract;‌‌NOT‌‌a‌‌real‌‌contract.‌‌The‌‌
permissive‌‌use).‌ ‌ real‌‌contract‌‌is‌‌the‌‌actual‌‌deposit‌‌contract.‌ ‌
● Eventual‌‌Return.‌ ‌ ‌
‌ B.‌‌Form‌‌of‌‌Deposit‌
B.‌‌Kinds‌‌of‌‌Deposit‌ ‌
CC,‌‌Article‌‌1969‌.‌‌A‌‌contract‌‌of‌‌deposit‌‌may‌‌be‌‌entered‌‌into‌‌

CC,‌‌Article‌‌1964‌.‌‌A‌‌deposit‌‌may‌‌be‌‌constituted‌‌judicially‌‌or‌‌
orally‌o
‌ r‌‌in‌w
‌ riting‌. ‌ ‌
extrajudicially.‌ ‌
● So,‌‌no‌‌formal‌‌requirements.‌ ‌
‌
CC,‌‌Article‌‌1967‌.‌‌An‌‌extrajudicial‌‌deposit‌‌is‌‌either‌‌voluntary‌‌or‌‌

necessary.‌ ‌ C.‌‌Object‌‌of‌‌Deposit‌ ‌
‌ CC,‌‌Article‌‌1966‌.‌‌Only‌‌‌movable‌‌things‌‌‌may‌‌be‌‌the‌‌object‌‌of‌‌a ‌‌
1. Judicial‌‌Deposit‌ ‌ deposit.‌ ‌
● Obligation‌‌to‌‌safekeep‌‌&‌‌return‌‌as‌‌a‌‌consequence‌‌of‌‌law;‌‌ ‌
allowing‌‌the‌‌issuance‌‌of‌‌a‌‌judicial‌‌order‌‌constituting‌‌the‌‌
D.‌‌Consideration‌‌in‌‌Deposit‌
deposit.‌ ‌
2. Extrajudicial‌‌Deposit‌ ‌ CC,‌‌Article‌‌1965‌.‌‌A‌‌deposit‌‌is‌‌a‌g
‌ ratuitous‌c‌ ontract,‌‌except‌‌

● Voluntary‌‌Deposit‌ ‌ when‌‌there‌‌is‌‌an‌a
‌ greement‌‌to‌‌the‌‌contrary‌,‌‌or‌‌unless‌‌the‌‌
○ Obligation‌‌to‌‌safekeep‌‌&‌‌return‌‌arises‌‌as‌‌a ‌‌ depositary‌i‌s‌‌engaged‌‌in‌‌the‌b ‌ usiness‌‌of‌‌storing‌‌‌goods.‌
consequence‌‌of‌‌contract.‌ ‌ General‌‌Rule‌ ‌
● Necessary‌‌Deposit‌ ‌ ● Contracts‌‌of‌‌deposit‌‌are‌‌gratuitous.‌ ‌
○ Obligation‌‌to‌‌safekeep‌‌&‌‌return‌‌arises‌‌as‌‌a ‌‌ Exception‌ ‌
consequence‌‌of‌‌law‌‌/‌‌quasi-contract.‌ ‌ 1. Agreement‌‌to‌‌the‌‌contrary;‌‌or‌ ‌
‌ 2. Depositary’s‌‌business‌‌is‌‌storage.‌ ‌
VOLUNTARY‌‌DEPOSIT‌ ‌ ‌
A.‌‌General‌‌Concepts‌ ‌ E.‌‌Parties‌‌to‌‌a‌‌Deposit‌ ‌
CC,‌‌Article‌‌1962‌.‌‌A‌‌deposit‌‌is‌c
‌ onstituted‌f‌rom‌‌the‌m ‌ oment‌‌a ‌‌
CC,‌‌Article‌‌1963‌.‌‌An‌a ‌ greement‌‌to‌‌constitute‌‌a‌‌deposit‌‌ person‌‌receives‌‌a‌‌thing‌‌belonging‌‌to‌‌another‌,‌‌with‌‌the‌‌
is‌‌binding‌,‌‌but‌‌the‌d
‌ eposit‌‌itself‌‌is‌‌not‌‌perfected‌‌until‌‌
obligation‌o‌ f‌s‌ afely‌‌keeping‌‌‌it‌‌and‌‌of‌r‌ eturning‌t‌he‌‌same.‌‌If‌‌the‌‌

the‌‌delivery‌‌‌of‌‌the‌‌thing.‌ ‌ safekeeping‌‌of‌‌the‌‌thing‌‌delivered‌‌is‌‌not‌‌the‌‌principal‌‌purpose‌‌of‌‌
the‌‌contract,‌‌there‌‌is‌‌no‌‌deposit‌‌but‌‌some‌‌other‌‌contract.‌ ‌
CC,‌‌Article‌‌1968‌.‌‌A‌‌voluntary‌‌deposit‌‌‌is‌‌that‌‌wherein‌‌ Depositor‌ ‌
the‌‌‌delivery‌‌is‌‌made‌‌by‌‌the‌‌will‌‌of‌‌the‌‌depositor‌.‌‌A‌‌
● Delivers,‌‌formally‌‌transfers,‌‌gives‌‌or‌‌yields‌‌possession‌‌/ ‌‌
deposit‌m ‌ ay‌‌also‌‌be‌‌made‌‌by‌‌two‌‌or‌‌more‌‌persons‌‌ control‌‌of‌‌a‌‌moveable‌‌property‌‌to‌‌the‌‌depositary‌‌for‌‌
each‌‌of‌‌whom‌‌believes‌‌himself‌‌entitled‌‌to‌‌the‌‌thing‌‌ safekeeping.‌ ‌
deposited‌w ‌ ith‌‌a‌‌third‌‌person,‌‌who‌‌shall‌d‌ eliver‌‌it‌‌in‌‌a ‌‌
Depositary‌ ‌
proper‌‌case‌‌to‌‌the‌‌one‌‌to‌‌whom‌‌it‌‌belongs‌. ‌ ‌
● The‌‌one‌‌who‌‌receives‌‌the‌‌thing‌‌from‌‌the‌‌depositor.‌ ‌
● Obligated‌‌to‌‌keep‌‌it‌‌safe,‌‌and‌‌return‌‌it‌‌later‌‌on.‌ ‌
CC,‌‌Article‌‌1995‌.‌‌A‌‌deposit‌‌its‌e
‌ xtinguished‌: ‌ ‌
○ To‌‌keep‌‌safe‌‌is‌‌the‌‌principal‌‌purpose‌‌of‌‌the‌‌

(1) Upon‌‌the‌l‌oss‌‌or‌‌destruction‌‌‌of‌‌the‌t‌ hing‌‌
contract‌‌of‌‌deposit.‌ ‌
deposited;‌ ‌
‌
(2) In‌‌case‌‌of‌‌a‌g ‌ ratuitous‌‌deposit‌,‌‌upon‌‌the‌d ‌ eath‌‌

of‌‌either‌‌the‌d‌ epositor‌o ‌ r‌‌the‌d
‌ epositary‌. ‌ ‌ F.‌‌Obligation‌‌to‌‌Safekeep‌ ‌
Voluntary‌‌Deposits‌ ‌ CC,‌‌Article‌‌1962‌.‌‌A‌‌deposit‌‌is‌c ‌ onstituted‌f‌rom‌‌the‌m ‌ oment‌‌a ‌‌

● Extrajudicial‌‌deposit‌‌arising‌‌from‌‌contract.‌ person‌‌receives‌‌a‌‌thing‌‌belonging‌‌to‌‌another‌,‌‌with‌‌the‌‌
obligation‌o ‌ f‌s
‌ afely‌‌keeping‌‌‌it‌‌and‌‌of‌r‌ eturning‌t‌he‌‌same.‌‌If‌‌the‌‌

● Object‌‌of‌‌the‌‌deposit‌‌=‌‌moveable‌‌property.‌ ‌
safekeeping‌‌of‌‌the‌‌thing‌‌‌delivered‌‌is‌n ‌ ot‌‌the‌‌principal‌‌

● Delivery‌‌of‌‌the‌‌object‌‌is‌‌upon‌‌the‌‌will‌‌of‌‌the‌‌depositor.‌ ‌ purpose‌‌‌of‌‌the‌‌contract,‌‌there‌‌is‌‌no ‌ ‌‌deposit‌‌but‌‌some‌‌other‌‌
● There‌‌must‌‌be‌‌a‌‌meeting‌‌of‌‌the‌‌minds‌‌between‌‌depositor‌‌ contract‌. ‌ ‌
&‌‌depositary.‌ ‌
‌ ● Safekeep‌‌-‌‌preservation‌‌of‌‌items‌‌deposited.‌ ‌
‌ ● Goods‌‌must‌‌be‌‌kept‌‌and‌‌returned‌‌in‌‌the‌‌same‌‌state.‌ ‌
16‌ ‌
Deterioration‌ ‌
● Depositary‌‌must‌‌exercise‌‌regular‌‌care‌‌to‌‌make‌‌sure‌‌that‌‌ Rule‌‌on‌‌Stored‌‌Fungibles‌ ‌
the‌‌thing‌‌is‌‌still‌‌serviceable.‌ ‌ ● General‌‌Rule‌:‌‌Commingling‌‌is‌‌allowed.‌ ‌
● While‌‌it‌‌is‌‌the‌‌depositary’s‌‌obligation‌‌to‌‌preserve‌‌the‌‌
○ Depositors‌‌have‌‌proportionate‌‌interest.‌ ‌
goods,‌‌the‌‌EXCEPTION‌‌is‌‌that‌‌in‌‌case‌‌of‌‌some‌‌goods,‌‌ ● Exception‌:‌‌A‌‌stipulation‌‌to‌‌the‌‌contrary.‌ ‌
● Can‌‌be‌‌an‌‌implicit‌‌stipulation,‌‌like‌‌if‌‌QAMO‌‌mangos‌‌

preservation‌‌does‌‌not‌‌necessarily‌‌mean‌‌to‌‌return‌‌it‌‌in‌‌the‌‌
have‌‌stickers‌‌of‌‌the‌‌brand‌‌on‌‌them.‌ ‌
same‌‌state.‌ ‌
○ Thus,‌‌return‌‌the‌‌perishable‌‌goods‌‌in‌‌a‌‌state‌‌of‌‌
‌
reasonable‌‌deterioration‌‌/‌‌wear‌‌&‌‌tear.‌ ‌
● Ex.‌‌Mangoes‌‌kept;‌‌ripened‌‌further‌‌to‌‌the‌‌point‌‌of‌‌spoiling.‌‌ CC,‌‌Article‌‌1977‌.‌‌The‌‌depositary‌c
‌ annot‌‌make‌‌use‌‌of‌‌the‌‌thing‌‌

The‌‌depositary‌‌cannot‌‌be‌‌held‌‌liable,‌‌unless‌‌the‌‌ deposited‌‌without‌‌the‌‌express‌‌permission‌‌‌of‌‌the‌‌depositor.‌ ‌
deterioration‌‌is‌‌due‌‌to‌‌their‌‌negligence.‌ ‌ Otherwise,‌‌he‌‌shall‌‌be‌‌liable‌‌for‌‌damages.‌ ‌
[B1]‌‌BPI‌‌v.‌‌IAC.docx‌ ‌ However,‌‌when‌‌the‌p ‌ reservation‌‌of‌‌the‌‌thing‌‌deposited‌‌
Doctrine‌:‌A ‌ rticle‌‌1962‌.‌A
‌ ‌‌deposit‌‌is‌‌constituted‌‌from‌‌the‌‌moment‌‌ requires‌‌its‌‌use,‌‌it‌‌must‌‌be‌‌used‌‌but‌‌only‌‌for‌‌that‌‌purpose‌. ‌ ‌
a‌‌person‌‌receives‌‌a‌‌thing‌‌belonging‌‌to‌‌another,‌‌with‌‌the‌‌
On‌‌Use‌‌of‌‌the‌‌Thing‌‌by‌‌the‌‌Depositary‌ ‌
obligation‌‌of‌‌safely‌‌keeping‌‌it‌‌and‌‌of‌‌returning‌‌the‌‌same.‌‌If‌‌the‌‌

● General‌‌Rule‌:‌‌Only‌‌allowed‌‌w/‌‌express‌‌permission.‌ ‌
safekeeping‌‌of‌‌the‌‌thing‌‌delivered‌‌is‌‌not‌‌the‌‌principal‌‌purpose‌‌of‌‌ ● Exception‌:‌‌Use‌‌is‌‌needed‌‌for‌‌preservation.‌‌In‌‌such‌‌

the‌‌contract,‌‌there‌‌is‌‌no‌‌deposit‌‌but‌‌some‌‌other‌‌contract‌. ‌ ‌
case,‌‌must‌‌ONLY‌‌be‌‌used‌‌for‌‌that‌‌purpose.‌ ‌
Facts:‌‌T ‌ he‌‌Zshornacks‌‌entrusted‌‌to‌‌COMTRUST‌‌$3000‌‌cash‌‌
● If‌‌used‌‌w/o‌‌permission,‌‌liable‌‌for‌‌damages.‌ ‌
(aka‌‌greenbacks)‌‌for‌s‌ afekeeping‌.‌‌This‌‌money‌‌was‌‌sold‌‌by‌‌
COMTRUST‌‌and‌‌the‌‌proceeds‌‌were‌‌credited‌‌to‌‌the‌‌peso‌‌current‌‌ ‌
account‌‌of‌‌the‌‌Zshornacks.‌‌The‌‌Zshornacks‌‌filed‌‌a‌‌case‌‌against‌‌
COMTRUST‌‌for‌‌the‌‌return‌‌of‌‌the‌‌$3000‌‌cash‌‌and‌‌damages.‌ ‌ CC,‌‌Article‌‌1978‌.‌‌When‌‌the‌‌‌depositary‌‌has‌‌permission‌‌to‌‌use‌‌
Issues:‌‌IS‌‌COMTRUST‌‌LIABLE‌‌FOR‌‌THE‌‌$3000‌‌CASH‌‌THAT‌‌ the‌‌thing‌‌deposited,‌‌the‌‌contract‌‌‌loses‌‌the‌‌concept‌‌of‌‌a‌‌deposit‌‌

WAS‌‌ENTRUSTED‌‌TO‌‌IT‌‌FOR‌‌SAFEKEEPING?‌ ‌ and‌‌becomes‌‌a‌‌loan‌‌or‌‌commodatum‌,‌‌except‌‌where‌‌
Ruling:‌‌NO.‌F ‌ oreign‌‌exchange‌‌must‌‌be‌‌sold‌‌to‌‌the‌‌Central‌‌Bank‌‌ safekeeping‌‌is‌‌still‌‌the‌‌principal‌‌purpose‌‌‌of‌‌the‌‌contract.‌ ‌
within‌‌one‌‌business‌‌day‌‌from‌‌receipt.‌‌So‌‌although‌‌the‌‌contract‌‌ ‌
was‌‌proven‌‌to‌‌be‌‌one‌‌for‌‌safekeeping‌‌(the‌‌bank‌‌should‌‌return‌‌it‌‌
to‌‌the‌‌Zshornacks‌‌upon‌‌demand),‌‌safekeeping‌‌of‌‌greenbacks‌‌in‌‌ Permission‌‌to‌‌Use?‌ ‌
particular‌‌are‌‌not‌‌allowed,‌‌thus‌‌the‌‌contract‌‌is‌‌void.‌ ‌ ● General‌‌Rule‌:‌‌Turns‌‌it‌‌into‌‌loan‌‌/‌‌commodatum.‌ ‌
● Exception‌:‌‌Principal‌‌purpose‌‌is‌‌still‌‌safekeeping.‌ ‌
● Had‌‌the‌‌thing‌‌deposited‌‌not‌‌been‌‌greenbacks,‌‌
○ Ex.‌‌when‌‌the‌‌usage‌‌is‌‌for‌‌the‌‌purpose‌‌of‌‌
Comtrust‌‌would’ve‌‌been‌‌liable.‌ ‌ preservation‌‌AND‌‌is‌‌expressly‌‌allowed.‌ ‌
‌ ‌
‌ The‌p
‌ ermission‌‌shall‌‌not‌‌be‌‌presumed,‌‌and‌‌its‌‌existence‌‌

must‌‌be‌‌proved‌. ‌ ‌
1.‌‌Way‌‌of‌‌the‌‌Deposit‌‌
‌
CC,‌‌Article‌‌1974‌.‌‌The‌d ‌ epositary‌m ‌ ay‌c‌ hange‌‌the‌‌way‌‌‌of‌‌the‌‌
CC,‌‌Article‌‌1981‌.‌‌When‌‌the‌‌thing‌‌deposited‌‌is‌d ‌ elivered‌‌closed‌‌

deposit‌‌if‌‌under‌‌the‌‌circumstances‌‌he‌m ‌ ay‌‌reasonably‌‌presume‌‌ and‌‌sealed‌,‌‌the‌‌depositary‌‌must‌r‌ eturn‌‌it‌‌in‌‌the‌‌same‌‌

that‌‌the‌‌depositor‌‌would‌‌consent‌‌to‌‌the‌‌change‌‌‌if‌‌he‌‌knew‌‌of‌‌ condition‌,‌‌and‌‌he‌‌shall‌‌be‌l‌iable‌‌for‌‌damages‌‌should‌‌the‌‌seal‌‌
the‌‌facts‌‌of‌‌the‌‌situation.‌‌However,‌b‌ efore‌‌the‌‌depositary‌‌may‌‌ or‌‌lock‌‌be‌‌broken‌‌through‌‌his‌‌fault‌. ‌ ‌
make‌‌such‌‌change‌,‌‌he‌‌shall‌n ‌ otify‌‌the‌‌depositor‌‌thereof‌‌and‌‌ Fault‌‌on‌‌the‌‌part‌‌of‌‌the‌‌depositary‌‌is‌‌presumed‌,‌‌unless‌‌there‌‌

wait‌‌‌for‌‌his‌‌decision,‌‌unless‌d
‌ elay‌‌would‌‌cause‌‌danger‌. ‌ ‌ is‌‌proof‌‌to‌‌the‌‌contrary.‌ ‌
When‌‌Can‌‌the‌‌Way‌‌of‌‌Deposit‌‌be‌‌Changed‌‌by‌‌the‌‌ As‌‌regards‌‌the‌v
‌ alue‌‌of‌‌the‌‌thing‌‌‌deposited,‌‌the‌s‌ tatement‌‌of‌‌
Depositary?‌ ‌ the‌‌depositor‌‌shall‌‌be‌‌accepted‌,‌‌when‌‌the‌f‌ orcible‌‌opening‌‌is‌‌
● Reasonable‌‌presumption‌‌that‌‌the‌‌depositor‌‌would‌‌
imputable‌‌to‌‌the‌‌depositary,‌‌should‌‌there‌‌be‌‌no‌‌proof‌‌to‌‌the‌‌
consent.‌ ‌ contrary‌.‌‌However,‌‌the‌c ‌ ourts‌‌may‌‌pass‌‌upon‌‌the‌‌credibility‌‌
Before‌‌Change‌ ‌ of‌‌the‌‌depositor‌‌‌with‌‌respect‌‌to‌‌the‌‌‌value‌‌claimed‌‌by‌‌him‌. ‌ ‌
● Notify‌‌depositor;‌‌wait‌‌for‌‌decision.‌ ‌
● However,‌‌if‌‌delay‌‌would‌‌cause‌‌danger,‌‌the‌‌ When‌‌the‌s
‌ eal‌‌or‌‌lock‌‌is‌‌broken‌,‌w‌ ith‌‌or‌‌without‌‌the‌‌

requirement‌‌to‌‌notify‌‌is‌‌no‌‌longer‌‌needed.‌ ‌ depositary's‌‌fault‌,‌‌he‌‌shall‌k
‌ eep‌‌the‌‌secret‌‌‌of‌‌the‌‌deposit.‌ ‌
‌ When‌‌Thing‌‌Deposited‌‌is‌‌Locked‌‌/‌‌Sealed‌ ‌
● Depositary‌‌must‌‌return‌‌it‌‌in‌‌the‌‌same‌‌condition.‌ ‌
CC,‌‌Article‌‌1975‌.‌‌The‌‌depositary‌‌holding‌c ‌ ertificates,‌‌bonds,‌ ○ Broken‌‌seal‌‌by‌‌fault‌‌of‌‌depositary‌‌= ‌‌
securities‌‌or‌‌instruments‌‌‌which‌‌earn‌i‌nterest‌s‌ hall‌‌be‌‌bound‌‌to‌‌ damages.‌ ‌
When‌‌Thing‌‌is‌‌Opened‌ ‌
collect‌‌the‌‌latter‌‌when‌‌it‌‌becomes‌‌due‌,‌‌and‌‌to‌t‌ ake‌‌such‌‌

steps‌‌as‌‌may‌‌be‌‌necessary‌‌in‌‌order‌‌that‌‌the‌‌securities‌‌may‌‌ ● Depositary’s‌‌fault‌‌is‌‌PRESUMED.‌ ‌
preserve‌‌their‌‌value‌‌‌and‌‌the‌r‌ ights‌c‌ orresponding‌‌to‌‌them‌‌
○ Thus,‌‌must‌‌prove‌‌his‌‌innocence.‌ ‌
according‌‌to‌‌law.‌ ‌ Value‌‌of‌‌the‌‌Thing‌ ‌
● Depositor’s‌‌statement‌‌is‌‌accepted,‌‌if‌‌the‌‌thing‌‌is‌‌
Things‌‌Holding‌‌Interest‌ ‌ opened‌‌through‌‌the‌‌fault‌‌of‌‌the‌‌depositary.‌ ‌
● Ex.‌‌certificates,‌‌bonds,‌‌securities,‌‌instruments.‌ ‌ Secret‌‌of‌‌the‌‌Deposit‌ ‌
Depositary’s‌‌Duties‌ ‌ ● If‌‌the‌‌thing‌‌is‌‌opened,‌‌depositary‌‌must‌‌still‌‌keep‌‌the‌‌

1. Collect‌‌the‌‌interest‌‌when‌‌it‌‌is‌‌due;‌‌and‌ ‌ secret‌‌of‌‌what‌‌thing‌‌was‌‌inside‌‌it,‌‌whether‌‌it‌‌was‌‌his‌‌

2. Preserve‌‌the‌‌value‌‌of‌‌these‌‌securities‌‌and‌‌the‌‌rights‌‌
fault‌‌or‌‌not.‌ ‌
corresponding‌‌to‌‌them.‌ ‌ ● *what‌‌if‌‌it’s‌‌an‌‌illegal‌‌thing?‌ ‌
‌ ‌
The‌‌above‌‌provision‌‌shall‌n
‌ ot‌‌apply‌‌to‌‌contracts‌‌for‌‌the‌‌rent‌‌of‌‌

safety‌‌deposit‌‌boxes‌. ‌ ‌ CC,‌‌Article‌‌1982‌.‌‌When‌‌it‌‌becomes‌n ‌ ecessary‌‌to‌‌open‌‌a ‌‌
locked‌‌box‌‌or‌‌receptacle‌,‌t‌ he‌‌depositary‌‌is‌‌presumed‌‌
CC,‌‌Article‌‌1976‌.‌‌Unless‌‌there‌‌is‌‌a‌‌stipulation‌‌to‌‌the‌‌contrary,‌‌the‌‌
authorized‌‌to‌‌do‌‌so,‌‌if‌‌the‌‌key‌‌has‌‌been‌‌delivered‌‌to‌‌him‌;‌‌or‌‌

depositary‌‌may‌‌commingle‌‌grain‌‌or‌‌other‌‌articles‌‌of‌‌the‌‌ when‌‌the‌‌‌instructions‌‌of‌‌the‌‌depositor‌‌as‌‌regards‌‌the‌‌deposit‌‌
same‌‌kind‌‌and‌‌quality‌,‌‌in‌‌which‌‌case‌‌the‌v ‌ arious‌‌depositors‌‌ cannot‌‌be‌‌executed‌‌without‌‌opening‌‌‌the‌‌box‌‌or‌‌receptacle.‌ ‌
shall‌‌own‌‌or‌‌have‌‌a‌‌proportionate‌‌interest‌‌in‌‌the‌‌mass‌. ‌ ‌
Presumption‌‌of‌‌Depositary’s‌‌Authority‌‌to‌‌Open‌ ‌
17‌ ‌
over‌‌the‌‌safety‌‌deposit‌‌box.‌ ‌
1. Opening‌‌is‌‌necessary;‌‌and‌ ‌ Issues‌:‌‌W/N‌‌the‌‌contract‌‌between‌‌the‌‌bank‌‌and‌‌petitioner‌‌Sps.‌‌
2. Key‌‌was‌‌delivered‌‌to‌‌the‌‌depositary.‌ ‌ Pugao‌‌was‌‌a‌‌contract‌‌of‌‌lease‌‌-‌‌NO‌ ‌
‌OR‌ ‌ Ruling‌:‌‌The‌‌contract‌‌between‌‌the‌‌renters‌‌and‌‌the‌‌Bank‌‌is‌‌not‌‌a ‌‌
1. Depositor’s‌‌instructions‌‌cannot‌‌be‌‌carried‌‌out‌‌
contract‌‌of‌‌lease.‌‌The‌‌depositary‌‌does‌‌not‌‌have‌‌full‌‌and‌‌absolute‌‌
without‌‌opening‌‌the‌‌thing.‌ ‌ control‌‌of‌‌the‌‌safety‌‌deposit‌‌box‌‌because‌‌he‌‌needs‌‌the‌‌key‌‌of‌‌the‌‌
‌ depositor.‌‌Neither‌‌is‌‌it‌‌an‌‌ordinary‌‌contract‌‌as‌‌Art.‌‌1975‌‌states‌‌
that‌‌it‌‌is‌‌not‌‌applicable‌‌for‌‌the‌‌rent‌‌of‌‌safety‌‌deposit‌‌boxes.‌‌It‌‌is‌‌a ‌‌
‌ special‌‌kind‌‌of‌‌deposit‌‌under‌‌Section‌‌72‌‌of‌‌the‌‌General‌‌
The‌‌Way‌‌of‌‌the‌‌Deposit‌ ‌ Banking‌‌Act.‌‌‌As‌‌the‌‌contract‌‌was‌‌for‌‌‘deposit’,‌‌the‌‌depositary‌‌
● CC‌‌recognizes‌‌that‌‌delivery‌‌of‌‌the‌‌thing‌‌for‌‌safekeeping‌‌ would‌‌be‌‌liable‌‌in‌‌performing‌‌its‌‌obligation‌‌if‌‌it‌‌performed‌‌it‌‌with‌‌
may‌‌have‌‌been‌‌done‌‌in‌‌a‌‌specific‌‌manner.‌‌ ‌ fraud‌‌or‌‌negligence;‌‌therefore‌‌any‌‌stipulation‌‌exempting‌‌the‌‌
depositary‌‌from‌‌any‌‌liability‌‌arising‌‌from‌‌loss‌‌of‌‌the‌‌thing‌‌on‌‌
● Thus,‌‌there‌‌are‌‌rules‌‌to‌‌be‌‌followed.‌ ‌
account‌‌of‌‌fraud,‌‌negligence,‌‌or‌‌delay‌‌would‌‌be‌‌void.‌‌The‌‌Court‌‌
‌ however‌‌found‌‌that‌‌the‌‌Bank‌‌was‌‌not‌‌liable‌‌because‌‌it‌‌was‌‌not‌‌
Rules‌‌to‌‌be‌‌Followed‌‌by‌‌the‌‌Depositary‌ ‌ proven‌‌that‌‌the‌‌loss‌‌of‌‌the‌‌title‌‌was‌‌due‌‌to‌‌the‌‌Bank’s‌‌negligence.‌ ‌
1. Depositary‌‌cannot‌‌change‌‌the‌‌way‌‌of‌‌the‌‌deposit,‌‌unless…‌ ‌
General‌‌Banking‌‌Act,‌‌Section‌‌53‌.‌‌Other‌‌Banking‌‌Services.‌‌-‌‌In‌‌
● Presumption‌‌of‌‌consent‌‌exists‌‌based‌‌on‌‌the‌‌ addition‌‌to‌‌the‌‌operations‌‌specifically‌‌authorized‌‌in‌‌this‌‌Act,‌‌a‌‌bank‌‌
circumstances;‌‌and‌ ‌ may‌‌perform‌‌the‌‌following‌‌services:‌ ‌
● Depositary‌‌notifies‌‌the‌‌depositor‌‌&‌‌waits‌‌for‌‌his‌‌decision.‌ ‌ ...‌ ‌
53.5.‌‌Rent‌‌out‌‌safety‌‌deposit‌‌boxes.‌ ‌
○ Does‌‌NOT‌‌apply‌‌if‌‌delay‌‌=‌‌danger.‌ ‌ ‌
2. The‌‌depositary‌‌must‌‌do‌‌the‌‌following…‌ ‌ The‌‌bank‌‌shall‌‌perform‌‌the‌‌services‌‌permitted‌‌under‌‌Subsections‌‌53.1,‌‌
● Collect‌‌interest‌‌of‌‌bonds,‌‌certificates,‌‌securities,‌‌and‌‌ 53.2,53.3‌‌and‌‌53.4‌‌as‌‌depositary‌‌or‌‌as‌‌an‌‌agent.‌‌Accordingly,‌‌it‌‌shall‌‌
keep‌‌the‌‌funds,‌‌securities‌‌and‌‌other‌‌effects‌‌which‌‌it‌‌receives‌‌duly‌‌
instruments‌‌when‌‌due;‌‌and‌ ‌
separate‌‌from‌‌the‌‌bank's‌‌own‌‌assets‌‌and‌‌liabilities:‌‌The‌‌Monetary‌
● Take‌‌measures‌‌to‌‌preserve‌‌their‌‌value‌‌and‌‌the‌‌rights‌‌ Board‌‌may‌‌regulate‌‌the‌‌operations‌‌authorized‌‌by‌‌this‌‌Section‌‌in‌‌order‌‌
attached‌‌to‌‌them.‌ ‌ to‌‌ensure‌‌that‌‌such‌‌operations‌‌do‌‌not‌‌endanger‌‌the‌‌interests‌‌of‌‌the‌
○ Does‌‌NOT‌‌apply‌‌if‌‌kept‌‌in‌‌safety‌‌deposit‌‌boxes.‌ ‌ depositors‌‌and‌‌other‌‌creditors‌‌of‌‌the‌‌bank...‌‌(72a)‌ ‌
3. Depositary‌‌may‌‌commingle‌‌fungibles,‌‌unless‌‌an‌‌express‌‌ ● IMPT:‌‌discussion‌‌of‌‌special‌‌and‌‌peculiar‌‌nature‌‌of‌
stipulation‌‌against‌‌the‌‌same‌‌exists.‌ ‌ safety‌‌deposit‌‌boxes‌ ‌
4. Depositary‌‌cannot‌‌use‌‌the‌‌thing,‌‌unless…‌ ‌
● Irregular‌‌deposit‌:‌‌express‌‌&‌‌proven‌‌permission.‌ ‌ [B3]‌‌Bishop‌‌of‌‌Jaro‌‌v.‌‌de‌‌la‌‌Peña‌ ‌
○ Principal‌‌purpose‌‌is‌‌still‌‌safekeeping.‌ ‌ Doctrine‌:‌‌By‌‌placing‌‌the‌‌money‌‌in‌‌the‌‌bank‌‌and‌‌mixing‌‌it‌‌with‌‌his‌‌
personal‌‌funds‌‌De‌‌la‌‌Peña‌‌did‌‌not‌‌thereby‌‌assume‌‌an‌‌obligation‌‌
● Loan‌‌/‌‌mutuum‌:‌‌when‌‌safekeeping‌‌is‌‌no‌‌longer‌‌the‌‌
different‌‌from‌‌that‌‌under‌‌which‌‌he‌‌would‌‌have‌‌lain‌‌if‌‌such‌‌deposit‌‌
principal‌‌purpose,‌‌it‌‌is‌‌no‌‌longer‌‌a‌‌deposit.‌ ‌ had‌‌not‌‌been‌‌made,‌‌nor‌‌did‌‌he‌‌thereby‌‌make‌‌himself‌‌liable‌‌to‌‌
● Preservation‌:‌‌preservation‌‌of‌‌the‌‌thing‌‌requires‌‌its‌‌use.‌‌If‌‌
repay‌‌the‌‌money‌‌at‌‌all‌‌hazards.‌ ‌
so,‌‌it‌‌may‌‌be‌‌used‌‌ONLY‌‌for‌‌the‌‌purposes‌‌of‌‌ Facts‌:‌‌Plaintiff‌‌is‌‌the‌‌trustee‌‌for‌‌the‌‌construction‌‌of‌‌a‌‌leper‌‌

preservation.‌ ‌ hospital,‌‌and‌‌Agustin‌‌de‌‌la‌‌Peña‌‌was‌‌the‌‌representative‌‌of‌‌
5. Depositary‌‌must‌‌return‌‌sealed‌‌things‌‌as‌‌received,‌‌and‌‌if‌‌ plaintiff‌‌duly‌‌authorized‌‌to‌‌receive‌‌the‌‌legacy.‌‌A‌‌sum‌‌of‌‌P6,641‌‌
broken,‌‌must‌‌keep‌‌the‌‌secret.‌ ‌ was‌‌received‌‌by‌‌Father‌‌Agustin;‌‌he‌‌later‌‌deposited‌‌P19,000‌‌to‌‌
his‌‌personal‌‌account‌‌in‌‌HSBC‌‌in‌‌Ilo-Ilo.‌‌During‌‌the‌‌war,‌‌he‌‌was‌‌
6. Depositaries‌‌may‌‌open‌‌sealed‌‌things‌‌IF…‌ ‌ arrested‌‌by‌‌the‌‌US‌‌military‌‌as‌‌a‌‌political‌‌prisoner,‌‌and‌‌the‌‌
● Express‌‌authority‌‌is‌‌stipulated;‌‌or‌ ‌ funds‌‌in‌‌his‌‌HSBC‌‌account‌‌were‌‌taken‌‌by‌‌the‌‌officials‌‌and‌‌
● Presumed‌‌authority‌‌exists.‌ ‌ given‌‌to‌‌the‌‌Government‌‌due‌‌to‌‌them‌‌being‌‌"insurgent‌‌
○ Key‌‌is‌‌delivered‌‌to‌‌the‌‌depositary;‌‌or‌ ‌ funds"‌.‌‌The‌‌plaintiff‌‌now‌‌comes‌‌after‌‌the‌‌defendant‌‌for‌‌the‌‌
○ Depositor’s‌‌instructions‌‌cannot‌‌be‌‌executed‌‌w/o‌‌ recovery‌‌of‌‌the‌‌trust‌‌funds‌‌from‌‌the‌‌estate‌‌of‌‌Father‌‌Agustin.‌ ‌
opening‌‌the‌‌thing.‌ ‌ Issues‌:‌‌W/N‌‌FATHER‌‌AGUSTIN‌‌WAS‌‌LIABLE‌‌-‌‌NO‌‌ ‌
‌ Ruling‌:‌‌Though‌‌a‌‌person‌‌is‌‌charged‌‌with‌‌the‌‌obligation‌‌of‌‌taking‌‌
care‌‌of‌‌the‌‌thing‌‌in‌‌their‌‌possession‌‌with‌‌the‌‌diligence‌‌of‌‌a‌‌good‌‌
[B2]‌‌CA‌‌Agro-Industrial‌‌Development‌‌Corporation‌‌v.‌‌Court‌‌of‌‌ father‌‌of‌‌a‌‌family,‌‌‌a‌‌fortuitous‌‌event‌‌releases‌‌them‌‌from‌‌the‌‌
Appeals‌‌&‌‌Security‌‌Bank‌‌&‌‌Trust‌‌Company‌ ‌ loss‌‌of‌‌the‌‌thing‌‌subject‌‌of‌‌the‌‌obligation‌.‌‌The‌‌taking‌‌of‌‌the‌‌
Doctrine‌:‌‌Our‌‌provisions‌‌on‌‌safety‌‌deposit‌‌boxes‌‌are‌‌governed‌‌ military‌‌was‌‌a‌‌fortuitous‌‌event‌‌which‌‌released‌‌Father‌‌Agustin‌‌
by‌‌Section‌‌72(a)‌‌of‌‌the‌‌General‌‌Banking‌‌Act,‌‌and‌‌this‌‌primary‌‌ from‌‌the‌‌obligation‌‌to‌‌answer‌‌for‌‌the‌‌loss‌. ‌ ‌
function‌‌is‌‌still‌‌found‌‌within‌‌the‌‌parameters‌‌of‌‌a‌‌contract‌‌of‌‌
‌
deposit.‌‌The‌‌‌renting‌‌out‌‌of‌‌the‌‌safety‌‌deposit‌‌boxes‌‌is‌‌not‌
independent‌‌from‌‌this‌‌principal‌‌function‌. ‌‌ ‌ 2.‌‌Liability‌‌for‌‌Loss‌‌and‌‌Damage‌ ‌
Thus,‌‌the‌d ‌ epositary's‌‌liability‌‌is‌‌governed‌‌by‌‌our‌‌civil‌‌code‌‌
CC,‌‌Article‌‌1972.‌‌‌The‌d ‌ epositary‌i‌s‌o
‌ bliged‌t‌o‌k
‌ eep‌t‌he‌‌thing‌‌
rules‌‌on‌‌obligation‌‌and‌‌contracts‌,‌‌and‌‌thus‌‌the‌‌SBTC‌‌would‌‌
safely‌‌and‌‌to‌r‌ eturn‌i‌t,‌‌when‌‌required,‌‌to‌‌the‌d
‌ epositor‌,‌‌or‌‌to‌‌his‌‌
be‌‌‌liable‌‌if,‌‌in‌‌performing‌‌its‌‌obligation,‌‌it‌‌is‌‌found‌‌guilty‌‌of‌‌
heirs‌‌and‌‌successors‌,‌‌or‌‌to‌‌the‌‌person‌‌who‌‌may‌‌have‌‌been‌‌
fraud,‌‌negligence,‌‌delay‌‌or‌‌contravention‌‌of‌‌the‌‌tenor‌‌‌of‌‌the‌‌
designated‌i‌n‌‌the‌‌contract.‌‌His‌‌responsibility,‌‌with‌‌regard‌‌to‌‌the‌‌
agreement.‌ ‌
safekeeping‌‌and‌‌the‌‌loss‌‌of‌‌the‌‌thing,‌‌shall‌‌be‌‌governed‌‌by‌‌the‌‌
Facts‌:‌‌Petitioner‌‌CA‌‌Agro-Industrial‌‌and‌‌the‌‌Sps‌‌Pugaos‌‌rented‌‌
provisions‌‌of‌‌Title‌‌I‌‌of‌‌this‌‌Book.‌ ‌
a‌‌Safety‌‌Deposit‌‌Box‌‌from‌‌respondent‌‌Security‌‌Bank‌‌to‌d ‌ eposit‌‌
certificates‌‌of‌‌title‌‌over‌‌land‌‌the‌‌Pugaos‌‌were‌‌selling‌‌‌to‌‌CA‌‌ Whom‌‌to‌‌Return?‌ ‌
Agro.‌‌They‌‌then‌‌signed‌‌a‌‌contract‌‌of‌‌lease‌‌‌which‌‌contained‌‌ ● Depositor‌‌himself‌ ‌
conditions‌‌which‌‌stated‌‌that‌‌the‌b ‌ ank‌‌was‌‌not‌‌a‌‌depositary‌‌of‌‌ ● Depositor’s‌‌heirs‌‌and‌‌successors‌ ‌
the‌‌contents‌‌of‌‌the‌‌safe,‌‌and‌‌had‌‌neither‌‌the‌‌control‌‌or‌‌ ● Person‌‌designated‌ ‌
possession‌‌of‌‌the‌‌same‌,‌‌and‌‌that‌‌the‌‌‌bank‌‌has‌‌no‌‌interest‌‌
whatsoever‌‌in‌‌the‌‌contents,‌‌except‌‌as‌‌provided‌‌within‌‌the‌‌ ‌
contract‌‌of‌‌lease‌‌‌and‌‌‌assumes‌‌no‌‌liability‌‌‌in‌‌connection.‌‌ If‌‌the‌‌deposit‌‌is‌g
‌ ratuitous‌,‌‌this‌‌fact‌‌shall‌‌be‌‌taken‌‌into‌‌account‌‌

Petitioner‌‌got‌‌an‌‌offer‌‌from‌‌Ramos‌‌to‌‌buy‌‌the‌‌lands‌‌but‌‌when‌‌ in‌‌determining‌‌the‌d ‌ egree‌‌of‌‌care‌‌that‌‌the‌‌depositary‌‌must‌‌
they‌‌went‌‌to‌‌the‌‌safety‌‌deposit‌‌box,‌‌they‌‌found‌‌that‌‌the‌t‌ itles‌‌ observe‌. ‌ ‌
were‌‌not‌‌there.‌‌Because‌‌of‌‌the‌‌delay‌‌in‌‌reconstitution‌‌of‌‌title,‌‌ Degree‌‌of‌‌Care‌ ‌
Mrs.‌‌Ramos‌‌withdrew‌‌her‌‌earlier‌‌offer‌‌to‌‌purchase‌‌the‌‌lots,‌‌
● Depends‌‌on‌‌w/n‌‌it‌‌was‌‌gratuitous.‌ ‌
and‌‌the‌‌petitioner‌‌filed‌‌a‌‌complaint‌‌for‌‌damages‌‌against‌‌the‌‌
Bank‌.‌‌RTC‌‌and‌‌CA‌‌both‌‌dismissed‌‌petitioner’s‌‌complaint‌‌on‌‌the‌‌ ‌
ground‌‌that‌‌the‌‌Bank,‌‌under‌‌the‌‌contract‌‌of‌‌lease,‌‌was‌‌released‌‌
from‌‌liability,‌‌and‌‌that‌‌the‌‌petitioner‌‌and‌‌co-renter‌‌had‌‌control‌‌ CC,‌‌Article‌‌1973‌.‌‌Unless‌‌there‌‌is‌‌a‌‌stipulation‌‌to‌‌the‌‌contrary,‌‌the‌‌

18‌ ‌
depositary‌‌cannot‌‌deposit‌‌the‌‌thing‌‌with‌‌a‌‌third‌‌person‌.‌‌If‌‌
deposit‌‌with‌‌a‌‌third‌‌person‌‌is‌‌allowed,‌‌the‌‌depositary‌‌is‌l‌iable‌‌for‌‌
depositor’s‌‌advice,‌‌of‌‌the‌‌dangerous‌‌

the‌‌loss‌‌if‌‌he‌‌deposited‌‌the‌‌thing‌‌with‌‌a‌‌person‌‌who‌‌is‌‌ character‌‌of‌‌the‌‌thing.‌ ‌
manifestly‌‌careless‌‌or‌‌unfit‌.‌‌The‌‌depositary‌‌is‌r‌ esponsible‌‌for‌‌ ‌
the‌‌negligence‌‌of‌‌his‌‌employees‌. ‌ ‌
‌
Deposit‌‌to‌‌3rd‌‌Persons‌ ‌ Depositary’s‌‌Liability‌‌for‌‌Damage‌‌/‌‌Loss‌ ‌
● General‌‌Rule‌:‌‌Disallowed.‌ ‌
● Exception‌:‌‌When‌‌stipulated.‌ ‌ 1. Depositary‌‌deposits‌‌the‌‌thing‌‌w/‌‌a‌‌3rd‌‌person.‌ ‌
Liability‌ ‌ ● Liability‌‌does‌‌not‌‌attach‌‌if‌‌there‌‌was‌‌an‌‌express‌‌
● Depositing‌‌depositary‌‌is‌‌liable,‌‌if‌‌he‌‌deposited‌‌it‌‌w/‌‌
stipulation‌‌authorizing‌‌the‌‌same.‌ ‌
a‌‌person‌‌manifestly‌‌careless‌‌/‌‌unfit.‌ ‌ 2. When‌‌deposit‌‌w/‌‌a‌‌3rd‌‌person‌‌allowed,‌‌if‌‌the‌‌latter‌‌is‌‌manifestly‌‌
● Depositary‌‌is‌‌liable‌‌for‌‌the‌‌negligence‌‌of‌‌his‌‌
careless‌‌or‌‌unfit.‌ ‌
employees.‌ ‌ 3. Depositary’s‌‌employees‌‌are‌‌negligent.‌ ‌
‌ 4. Depositary‌‌uses‌‌the‌‌thing.‌ ‌
● Does‌‌not‌‌attach‌‌if‌‌express‌‌stipulation‌‌allows‌‌it.‌ ‌
CC,‌‌Article‌‌1977‌.‌‌The‌‌depositary‌c
‌ annot‌‌make‌‌use‌‌of‌‌the‌‌thing‌‌
● Does‌‌not‌‌attach‌‌if‌‌use‌‌is‌‌needed‌‌for‌‌preservation.‌
deposited‌‌without‌‌the‌‌express‌‌permission‌‌‌of‌‌the‌‌depositor.‌ ‌ 5. Seal‌‌/‌‌lock‌‌broken‌‌through‌‌the‌‌depositary’s‌‌fault.‌ ‌
Otherwise,‌‌he‌‌shall‌‌be‌‌liable‌‌for‌‌damages.‌ ‌ ● Fault‌‌is‌‌presumed,‌‌unless‌‌the‌‌contrary‌‌is‌‌proven.‌ ‌
● If‌‌the‌‌opening‌‌is‌‌the‌‌depositary’s‌‌fault,‌‌the‌‌thing’s‌‌value‌‌
However,‌‌when‌‌the‌p ‌ reservation‌‌of‌‌the‌‌thing‌‌deposited‌‌ shall‌‌be‌‌based‌‌on‌‌the‌‌depositor’s‌‌statement,‌‌unless…‌ ‌
requires‌‌its‌‌use,‌‌it‌‌must‌‌be‌‌used‌‌but‌‌only‌‌for‌‌that‌‌purpose‌. ‌ ‌
○ Contrary‌‌proof‌‌exists;‌‌or‌ ‌
On‌‌Use‌‌of‌‌the‌‌Thing‌‌by‌‌the‌‌Depositary‌ ‌ ○ Courts‌‌determine‌‌otherwise‌‌based‌‌on‌‌the‌‌
● General‌‌Rule‌:‌‌Only‌‌allowed‌‌w/‌‌express‌‌permission.‌ ‌ depositor’s‌‌credibility.‌ ‌
● Exception‌:‌‌Use‌‌is‌‌needed‌‌for‌‌preservation.‌‌In‌‌such‌‌
6. Depositary‌‌is‌‌liable,‌‌even‌‌for‌‌fortuitous‌‌event,‌‌if…‌ ‌
case,‌‌must‌‌ONLY‌‌be‌‌used‌‌for‌‌that‌‌purpose.‌ ‌
● Depositary’s‌‌liability‌‌is‌‌stipulated;‌ ‌
● If‌‌used‌‌w/o‌‌permission,‌‌liable‌‌for‌‌damages.‌ ‌
● Depositary‌‌uses‌‌it‌‌w/o‌‌permission;‌ ‌
‌ ● Depositary‌‌delays‌‌the‌‌return‌‌of‌‌the‌‌thing;‌‌or‌ ‌
● Depositary‌‌lets‌‌3rd‌‌person‌‌use‌‌it,‌‌even‌‌if‌‌he‌‌himself‌‌has‌‌
CC,‌‌Article‌‌1981‌.‌‌When‌‌the‌‌thing‌‌deposited‌‌is‌d ‌ elivered‌‌closed‌‌
permission.‌ ‌
and‌‌sealed‌,‌‌the‌‌depositary‌‌must‌r‌ eturn‌‌it‌‌in‌‌the‌‌same‌‌
7. Depositary‌‌loses‌‌thing‌‌through‌‌force‌‌majeure‌‌/‌‌government‌‌
condition‌,‌‌and‌‌he‌‌shall‌‌be‌l‌iable‌‌for‌‌damages‌‌should‌‌the‌‌seal‌‌
intervention,‌‌but‌‌receives‌‌something‌‌else‌‌in‌‌return,‌‌he‌‌must‌‌
or‌‌lock‌‌be‌‌broken‌‌through‌‌his‌‌fault‌. ‌ ‌
surrender‌‌that‌‌thing‌‌received‌‌to‌‌the‌‌depositor‌. ‌ ‌
Fault‌‌on‌‌the‌‌part‌‌of‌‌the‌‌depositary‌‌is‌‌presumed‌,‌‌unless‌‌there‌‌
‌
is‌‌proof‌‌to‌‌the‌‌contrary.‌ ‌ Depositor’s‌‌Liability‌‌for‌‌Loss‌‌/‌‌Damage‌ ‌
As‌‌regards‌‌the‌v
‌ alue‌‌of‌‌the‌‌thing‌‌‌deposited,‌‌the‌s‌ tatement‌‌of‌‌ 1. When‌‌the‌‌depositor‌‌delivers‌‌a‌‌thing‌‌that‌‌causes‌‌loss‌‌/‌‌damage‌‌
the‌‌depositor‌‌shall‌‌be‌‌accepted‌,‌‌when‌‌the‌f‌ orcible‌‌opening‌‌is‌‌ to‌‌the‌‌depositary,‌‌unless…‌ ‌
imputable‌‌to‌‌the‌‌depositary,‌‌should‌‌there‌‌be‌‌no‌‌proof‌‌to‌‌the‌‌ ● At‌‌the‌‌time‌‌of‌‌delivery,‌‌depositor‌‌was‌‌unaware‌‌/‌‌not‌‌
contrary‌.‌‌However,‌‌the‌c ‌ ourts‌‌may‌‌pass‌‌upon‌‌the‌‌credibility‌‌
expected‌‌to‌‌be‌‌aware‌‌of‌‌the‌‌dangerous‌‌character‌‌of‌‌the‌‌
of‌‌the‌‌depositor‌‌‌with‌‌respect‌‌to‌‌the‌‌‌value‌‌claimed‌‌by‌‌him‌. ‌ ‌
thing.‌ ‌
When‌‌the‌s
‌ eal‌‌or‌‌lock‌‌is‌‌broken‌,‌w‌ ith‌‌or‌‌without‌‌the‌‌
● Depositor‌‌notified‌‌the‌‌depositary‌‌of‌‌the‌‌dangerous‌‌
depositary's‌‌fault‌,‌‌he‌‌shall‌k
‌ eep‌‌the‌‌secret‌‌‌of‌‌the‌‌deposit.‌ ‌
character‌‌of‌‌the‌‌thing.‌ ‌
● Depositary‌‌is‌‌nonetheless‌‌aware‌‌of‌‌the‌‌dangerous‌‌
CC,‌‌Article‌‌1979‌.‌‌The‌‌depositary‌‌is‌‌liable‌‌for‌‌the‌‌loss‌‌of‌‌the‌‌thing‌‌

character‌‌of‌‌the‌‌thing,‌‌even‌‌absent‌‌notification‌‌by‌‌the‌‌
through‌‌a‌f‌ ortuitous‌‌event‌: ‌ ‌
depositor.‌‌ ‌
(1)‌‌If‌‌it‌‌is‌‌so‌s
‌ tipulated‌; ‌ ‌ ‌
(2)‌‌If‌‌he‌u
‌ ses‌‌the‌‌thing‌‌without‌‌the‌‌depositor's‌‌permission‌; ‌ ‌ Liability‌‌for‌‌Expenses‌ ‌
(3)‌‌If‌‌he‌‌delays‌‌its‌‌return;‌ ‌ CC,‌‌Article‌‌1992‌.‌‌If‌‌the‌‌deposit‌‌is‌g
‌ ratuitous‌,‌‌the‌d ‌ epositor‌‌is‌‌

(4)‌‌If‌‌he‌a
‌ llows‌‌others‌‌to‌‌use‌‌it‌,‌‌even‌‌though‌‌he‌h
‌ imself‌m
‌ ay‌‌
obliged‌‌to‌‌reimburse‌‌the‌‌depositary‌‌for‌‌the‌‌expenses‌‌‌he‌‌may‌‌
have‌‌been‌a ‌ uthorized‌t‌o‌‌use‌‌the‌‌same.‌ ‌ have‌‌incurred‌‌for‌‌the‌p ‌ reservation‌o ‌ f‌‌the‌‌thing‌‌deposited.‌ ‌
Gratuitous‌‌Deposit‌ ‌
CC,‌‌Article‌‌1990‌.‌‌If‌‌the‌d
‌ epositary‌b ‌ y‌‌‌force‌‌majeure‌‌‌or‌‌
● Depositor‌‌bears‌‌expenses.‌ ‌
government‌‌order‌‌loses‌‌the‌‌thing‌‌‌and‌r‌ eceives‌‌money‌‌or‌‌ ○ For‌‌purposes‌‌of‌‌equity.‌ ‌
another‌‌thing‌‌‌in‌‌its‌‌place,‌‌he‌‌shall‌‌‌deliver‌‌the‌‌sum‌‌or‌‌other‌‌ Onerous‌‌Deposit‌ ‌
thing‌‌to‌‌the‌‌depositor‌. ‌ ‌
● Depositary‌‌bears‌‌expenses.‌ ‌
CC,‌‌Article‌‌1993‌.‌‌The‌d
‌ epositor‌s‌ hall‌‌‌reimburse‌‌the‌‌ ○ The‌‌depositary‌‌will‌‌earn‌‌anyway.‌ ‌
depositary‌‌for‌‌any‌‌loss‌‌arising‌‌from‌‌the‌‌character‌‌of‌‌the‌‌ ‌
thing‌‌deposited‌,‌‌unless‌‌at‌‌the‌‌time‌‌of‌‌the‌‌constitution‌‌of‌‌the‌‌
deposit‌‌the‌‌‌former‌‌was‌‌not‌‌aware‌‌of,‌‌or‌‌was‌‌not‌‌expected‌‌to‌‌ ‌
know‌‌the‌‌dangerous‌‌character‌‌of‌‌the‌‌thing‌,‌‌or‌‌unless‌‌he‌‌ G.‌‌Obligation‌‌to‌‌Return‌ ‌
notified‌‌the‌‌depositary‌‌‌of‌‌the‌‌same,‌‌or‌‌the‌‌latter‌‌was‌a
‌ ware‌‌of‌‌ 1.‌‌By‌‌Whom‌‌And‌‌to‌‌Whom‌ ‌
it‌‌without‌‌advice‌‌from‌‌the‌‌depositor‌. ‌ ‌
Reimbursement‌ ‌ CC,‌‌Article‌‌1972.‌‌‌The‌d ‌ epositary‌i‌s‌o
‌ bliged‌t‌o‌k
‌ eep‌t‌he‌‌thing‌‌
● General‌‌Rule‌:‌‌Depositor‌‌must‌‌reimburse‌‌depositary‌‌ safely‌‌and‌‌to‌r‌ eturn‌i‌t,‌‌when‌‌required,‌‌to‌‌the‌d
‌ epositor‌,‌‌or‌‌to‌‌his‌‌
for‌‌loss‌‌arising‌‌from‌‌the‌‌character‌‌of‌‌the‌‌thing.‌ ‌ heirs‌‌and‌‌successors‌,‌‌or‌‌to‌‌the‌‌person‌‌who‌‌may‌‌have‌‌been‌‌
● Exception‌:‌‌No‌‌reimbursement‌‌is‌‌due‌‌if…‌ ‌ designated‌i‌n‌‌the‌‌contract.‌‌His‌‌responsibility,‌‌with‌‌regard‌‌to‌‌the‌‌
○ Depositor‌‌unaware‌‌of‌‌the‌‌dangerous‌‌ safekeeping‌‌and‌‌the‌‌loss‌‌of‌‌the‌‌thing,‌‌shall‌‌be‌‌governed‌‌by‌‌the‌‌
character‌‌of‌‌the‌‌thing;‌ ‌ provisions‌‌of‌‌Title‌‌I‌‌of‌‌this‌‌Book.‌ ‌
○ Depositor‌‌informed‌‌the‌‌depositary‌‌of‌‌the‌‌ Whom‌‌to‌‌Return?‌ ‌
dangerous‌‌character‌‌of‌‌the‌‌thing;‌ ‌ ● Depositor‌‌himself;‌ ‌
○ Depositary‌‌was‌‌aware,‌‌even‌‌without‌‌the‌‌ ● Depositor’s‌‌heirs‌‌and‌‌successors;‌‌or‌ ‌
19‌ ‌
● Person‌‌designated.‌ ‌ When‌‌the‌‌Thing‌‌Deposited‌‌is‌‌Stolen‌ ‌
○ May‌‌be‌‌stipulated‌‌in‌‌the‌‌contract.‌ ‌ ● True‌‌owner‌‌known;‌‌advise‌‌him‌‌of‌‌deposit.‌ ‌
○ Does‌‌not‌‌claim‌‌within‌‌a‌‌month;‌‌depositary‌‌
‌ returns‌‌it‌‌and‌‌is‌‌relieved‌‌of‌‌responsibility.‌ ‌
If‌‌the‌‌deposit‌‌is‌g
‌ ratuitous‌,‌‌this‌‌fact‌‌shall‌‌be‌‌taken‌‌into‌‌account‌‌
● Reasonable‌‌grounds‌‌to‌‌believe‌‌it‌‌was‌‌not‌‌lawfully‌‌
in‌‌determining‌‌the‌d ‌ egree‌‌of‌‌care‌‌that‌‌the‌‌depositary‌‌must‌‌ acquired;‌‌return‌‌to‌‌depositor.‌ ‌
observe‌. ‌ ‌
‌
Degree‌‌of‌‌Care‌ ‌
● Depends‌‌on‌‌w/n‌‌it‌‌was‌‌gratuitous.‌ ‌
CC,‌‌Article‌‌1985‌.‌‌When‌‌there‌‌are‌t‌ wo‌‌or‌‌more‌‌depositors‌,‌‌if‌‌
‌ they‌‌are‌n
‌ ot‌‌solidary‌,‌‌and‌‌the‌t‌ hing‌‌admits‌‌of‌‌division‌,‌‌each‌‌

one‌‌‌cannot‌‌demand‌‌more‌‌than‌‌his‌‌share‌. ‌ ‌
CC,‌‌Article‌‌1970‌.‌‌If‌‌a‌p
‌ erson‌‌having‌‌capacity‌‌‌to‌‌contract‌ When‌‌there‌‌is‌s ‌ olidarity‌‌or‌‌the‌‌thing‌‌does‌‌not‌‌admit‌‌of‌‌
accepts‌‌a‌‌deposit‌‌‌made‌‌by‌‌one‌‌who‌‌is‌i‌ncapacitated‌,‌‌the‌‌ division‌,‌‌the‌‌provisions‌‌of‌‌articles‌1‌ 212‌‌and‌‌1214‌‌‌shall‌‌govern.‌‌

former‌‌shall‌‌be‌s
‌ ubject‌‌to‌‌all‌‌the‌‌obligations‌‌of‌‌a‌‌depositary‌, ‌‌ However,‌‌if‌‌there‌‌is‌‌a‌s
‌ tipulation‌‌that‌‌the‌‌thing‌‌should‌‌be‌‌
and‌‌may‌‌be‌c ‌ ompelled‌‌to‌‌return‌‌the‌‌thing‌‌by‌‌the‌‌guardian‌,‌‌or‌‌ returned‌‌to‌‌one‌‌‌of‌‌the‌‌depositors,‌‌the‌‌depositary‌‌shall‌‌‌return‌‌it‌‌

administrator,‌‌of‌‌the‌‌person‌‌who‌‌made‌‌the‌‌deposit,‌‌or‌‌by‌‌the‌‌ only‌‌to‌‌the‌‌person‌‌designated‌. ‌ ‌
latter‌‌himself‌‌if‌‌he‌‌should‌‌acquire‌‌capacity‌. ‌ ‌
Multiple‌‌Depositors‌ ‌
When‌‌Depositor‌‌is‌‌Incapacitated‌ ‌ ● Joint‌‌&‌‌divisible;‌‌cannot‌‌demand‌‌more‌‌than‌‌share.‌ ‌
● Since‌‌the‌‌depositor‌‌has‌‌no‌‌capacity,‌‌this‌‌contract‌‌is‌‌
● Solidary‌‌/‌‌indivisible;‌‌follow‌‌1212‌‌&‌‌1214.‌ ‌
essentially‌‌voidable‌‌(see‌‌CC,‌‌Art.‌‌1390).‌ ‌
‌
CC,‌‌Article‌‌1390‌.‌‌The‌‌following‌‌contracts‌‌are‌‌voidable‌‌
or‌‌annullable,‌‌even‌‌though‌‌there‌‌may‌‌have‌‌been‌‌no‌‌
damage‌‌to‌‌the‌‌contracting‌‌parties:‌ ‌ CC,‌‌Article‌‌1212‌.‌‌Each‌‌one‌‌of‌‌the‌s ‌ olidary‌‌creditors‌‌may‌‌do‌‌

(1) Those‌‌where‌‌one‌‌of‌‌the‌‌parties‌‌is‌‌incapable‌‌ whatever‌‌may‌‌be‌‌useful‌‌to‌‌the‌‌others‌,‌‌but‌‌not‌‌anything‌‌which‌‌
of‌‌giving‌‌consent‌‌to‌‌a‌‌contract;‌ ‌ may‌‌be‌‌prejudicial‌‌to‌‌the‌‌latter.‌ ‌
(2) Those‌‌where‌‌the‌‌consent‌‌is‌‌vitiated‌‌by‌‌
mistake,‌‌violence,‌‌intimidation,‌‌undue‌‌
influence‌‌or‌‌fraud.‌ ‌
CC,‌‌Article‌‌1214‌.‌‌The‌d ‌ ebtor‌‌may‌‌pay‌‌any‌‌one‌‌of‌‌the‌‌solidary‌‌
These‌‌contracts‌‌are‌‌binding,‌‌unless‌‌they‌‌are‌‌annulled‌‌ creditors‌;‌‌but‌‌if‌‌any‌d
‌ emand‌,‌‌judicial‌‌or‌‌extrajudicial,‌‌has‌‌been‌‌

by‌‌a‌‌proper‌‌action‌‌in‌‌court.‌‌They‌‌are‌‌susceptible‌‌of‌‌ made‌‌by‌‌one‌‌of‌‌them,‌‌payment‌‌should‌‌be‌‌made‌‌to‌‌him‌. ‌ ‌
ratification.‌ ‌
● Depositary‌‌shall‌‌perform‌‌his‌‌duties‌‌as‌‌normal.‌ ‌ CC,‌‌Article‌‌1986‌.‌‌If‌‌the‌d
‌ epositor‌‌should‌‌lose‌‌his‌‌capacity‌‌‌to‌‌

● Demand‌‌to‌‌return‌‌can‌‌be‌‌made‌‌by…‌ ‌ contract‌a
‌ fter‌h
‌ aving‌‌made‌‌the‌d ‌ eposit‌,‌‌the‌‌thing‌c
‌ annot‌‌be‌‌

○ Depositor’s‌‌guardian;‌ ‌ returned‌‌except‌‌to‌‌the‌‌persons‌‌who‌‌may‌‌have‌‌the‌‌
○ Depositor’s‌‌administrator;‌ ‌ administration‌‌‌of‌‌his‌‌property‌‌and‌‌rights.‌ ‌
○ Depositor‌‌himself‌‌after‌‌acquiring‌‌capacity.‌ ‌ Subsequent‌‌Incapacitation‌‌of‌‌the‌‌Depositor‌ ‌
■ If‌‌incapacitated‌‌from‌‌the‌‌
● Thing‌‌can‌‌only‌‌be‌‌returned‌‌to‌‌the‌‌persons‌‌
beginning,‌‌you‌‌can‌‌return‌‌the‌‌
administering‌‌his‌‌property‌‌&‌‌rights.‌ ‌
thing‌‌once‌‌capacity‌‌is‌‌regained‌‌
● Thus,‌‌ascertaining‌‌when‌‌the‌‌depositor‌‌became‌‌
by‌‌the‌‌depositor.‌ ‌ incapacitated‌‌is‌‌important,‌‌to‌‌know‌‌if‌‌1970‌‌or‌‌1986‌‌

‌ applies.‌ ‌
● Law‌‌is‌‌silent‌‌on‌‌when‌‌to‌‌return‌‌for‌‌subsequent‌‌
incapacity‌‌once‌‌it‌‌is‌‌regained‌‌(whereas‌‌1970‌‌
CC,‌‌Article‌‌1971‌.‌‌If‌‌the‌d ‌ eposit‌‌has‌‌been‌‌made‌‌by‌‌a ‌‌ provides).‌ ‌
capacitated‌‌person‌‌with‌‌another‌‌who‌‌is‌‌not‌,‌‌the‌‌depositor‌‌
shall‌o ‌ nly‌‌have‌‌an‌‌action‌‌to‌‌recover‌‌the‌‌thing‌‌deposited‌‌while‌‌ ‌
it‌‌is‌‌still‌‌in‌‌the‌‌possession‌‌of‌‌the‌‌depositary‌,‌‌or‌‌to‌‌compel‌‌the‌‌
latter‌‌to‌p ‌ ay‌‌him‌‌the‌‌amount‌‌by‌‌which‌‌he‌‌may‌‌have‌‌enriched‌‌ CC,‌‌Article‌‌1991‌.‌‌The‌d ‌ epositor's‌‌heir‌‌who‌‌in‌‌good‌‌faith‌‌may‌‌
or‌‌benefited‌‌himself‌‌with‌‌the‌‌thing‌‌or‌‌its‌‌price‌.‌‌However,‌‌if‌‌a ‌‌ have‌‌sold‌‌the‌‌thing‌‌‌which‌‌he‌d ‌ id‌‌not‌‌know‌‌was‌‌deposited,‌‌
third‌‌person‌‌‌who‌‌acquired‌‌the‌‌thing‌a ‌ cted‌‌in‌‌bad‌‌faith‌,‌‌the‌‌
shall‌‌only‌‌be‌b
‌ ound‌‌to‌‌return‌‌the‌‌price‌‌he‌‌may‌‌have‌‌received‌‌
depositor‌‌may‌‌bring‌‌an‌a ‌ ction‌‌against‌‌him‌‌for‌‌its‌‌recovery‌. ‌ ‌ or‌‌to‌a
‌ ssign‌‌his‌‌right‌‌of‌‌action‌‌against‌‌the‌‌buyer‌‌in‌‌case‌‌the‌‌

When‌‌Depositary‌‌is‌‌Incapacitated‌ ‌ price‌‌has‌‌not‌‌been‌‌paid‌‌‌him.‌ ‌
● Depositor‌‌only‌‌has‌‌the‌‌following‌‌options:‌ ‌ ● Isn’t‌‌it‌‌supposed‌‌to‌‌be‌‌“depositary’s‌‌heir”?‌ ‌
○ Action‌‌to‌‌recover‌‌the‌‌thing‌‌while‌‌the‌‌ Depositary’s‌‌Heir‌‌who‌‌Sold‌‌in‌‌Good‌‌Faith‌ ‌
depositary‌‌still‌‌possesses‌‌it;‌‌or‌ ‌ 1. Return‌‌price‌‌received;‌‌or‌ ‌
○ Compel‌‌the‌‌depositary‌‌to‌‌pay‌‌the‌‌amount‌‌by‌‌ 2. Assign‌‌right‌‌of‌‌action‌‌against‌‌the‌‌buyer,‌‌in‌‌case‌‌not‌‌

which‌‌he‌‌may‌‌have‌‌enriched‌‌himself‌‌with‌‌the‌‌ yet‌‌paid.‌ ‌
thing.‌ ‌
● If‌‌a‌‌3rd‌‌person‌‌acquired‌‌it‌‌in‌‌bad‌‌faith,‌‌then‌‌the‌‌
‌
depositor‌‌can‌‌bring‌‌an‌‌action‌‌for‌‌recovery‌‌against‌‌
him.‌ ‌ Incapacity‌‌of‌‌the‌‌Depositor‌‌from‌‌the‌‌Beginning,‌‌as‌‌Opposed‌‌to‌‌
Subsequent‌‌Incapacity‌ ‌
‌ ● From‌‌the‌‌beginning,‌‌the‌‌depositor‌‌has‌‌no‌‌capacity‌‌to‌‌

contract.‌‌However,‌‌in‌‌subsequent‌‌incapacity,‌‌the‌‌depositor‌‌
‌ epositary‌‌cannot‌‌demand‌‌that‌‌the‌‌ had‌‌capacity‌‌to‌‌contract‌‌prior‌‌to‌‌becoming‌‌incapacitated.‌ ‌
depositor‌‌prove‌‌his‌‌ownership‌‌‌of‌‌the‌‌thing‌‌deposited.‌ ‌ ● The‌‌main‌‌difference‌‌is‌‌in‌‌the‌‌EFFECT‌‌on‌‌the‌‌contract‌‌of‌‌

Nevertheless,‌‌should‌‌he‌‌discover‌‌that‌‌the‌t‌ hing‌‌has‌‌been‌‌stolen‌‌ deposit.‌ ‌
and‌‌who‌‌its‌‌true‌‌owner‌‌is,‌‌he‌‌must‌‌advise‌‌the‌‌latter‌‌‌of‌‌the‌‌
○ Incapacitated‌‌from‌‌the‌‌very‌‌beginning;‌‌contract‌‌
deposit.‌ ‌ is‌‌void.‌ ‌
If‌‌the‌o
‌ wner,‌‌in‌‌spite‌‌of‌‌such‌‌information,‌‌does‌‌not‌‌claim‌‌it‌‌ ○ Subsequently‌‌incapacitated;‌‌contract‌‌is‌‌NOT‌‌
within‌‌the‌‌period‌‌of‌‌one‌‌month‌,‌‌the‌‌depositary‌‌shall‌‌be‌‌ void‌‌ab‌‌initio.‌ ‌
relieved‌o ‌ f‌‌all‌‌responsibility‌‌by‌r‌ eturning‌‌the‌‌thing‌‌deposited‌‌to‌‌
2.‌‌What‌‌to‌‌Return‌ ‌
the‌‌depositor‌. ‌ ‌
CC,‌‌Article‌‌1983‌.‌‌The‌‌thing‌‌deposited‌‌shall‌‌be‌‌‌returned‌‌with‌‌all‌‌

If‌‌the‌‌depositary‌‌has‌r‌ easonable‌‌grounds‌‌to‌‌believe‌‌that‌‌the‌‌

thing‌‌has‌‌not‌‌been‌‌lawfully‌‌acquired‌‌‌by‌‌the‌‌depositor,‌‌the‌‌
its‌‌products,‌‌accessories‌‌and‌‌accessions‌. ‌
former‌m ‌ ay‌‌return‌‌‌the‌‌same.‌ ‌ Should‌‌the‌‌deposit‌‌consist‌‌of‌m
‌ oney‌,‌‌the‌‌provisions‌‌relative‌‌to‌‌

20‌ ‌
agents‌‌in‌‌article‌‌1896‌‌shall‌‌be‌‌applied‌‌‌to‌‌the‌‌depositary.‌ ‌
CC,‌‌Article‌‌1967‌.‌‌An‌e
‌ xtrajudicial‌d
‌ eposit‌‌is‌‌either‌v
‌ oluntary‌o
‌ r‌‌

CC,‌‌Article‌‌1896‌.‌‌The‌‌agent‌o‌ wes‌‌interest‌‌on‌‌the‌‌sums‌‌he‌‌has‌‌ necessary‌. ‌ ‌
applied‌‌to‌‌his‌‌own‌‌use‌‌from‌‌the‌‌day‌‌on‌‌which‌‌he‌‌did‌‌so‌,‌‌and‌‌
on‌‌those‌‌which‌‌he‌s‌ till‌‌owes‌‌after‌‌the‌‌extinguishment‌‌‌of‌‌the‌‌
CC,‌‌Article‌‌1996‌.‌‌A‌‌deposit‌‌is‌n
‌ ecessary‌: ‌ ‌
agency.‌ ‌
(1)‌‌When‌‌it‌‌is‌‌made‌i‌n‌‌compliance‌‌with‌‌a‌‌legal‌‌obligation‌; ‌ ‌
● Movables‌:‌‌Must‌‌be‌‌returned‌‌w/‌‌products,‌‌accessories,‌‌
accessions.‌ ‌ (2)‌‌When‌‌it‌‌takes‌‌place‌‌on‌‌the‌‌‌occasion‌‌of‌‌any‌‌calamity‌,‌‌such‌‌
as‌‌fire,‌‌storm,‌‌flood,‌‌pillage,‌‌shipwreck,‌‌or‌‌other‌‌similar‌‌events.‌ ‌
● Money‌:‌‌Interest‌‌applied‌‌to‌‌own‌‌use‌‌from‌‌the‌‌day‌‌he‌‌did,‌‌

and‌‌that‌‌he‌‌owes‌‌after‌‌extinguishment‌‌of‌‌the‌‌deposit.‌ ‌
CC,‌‌Article‌‌1966‌.‌‌Only‌m
‌ ovable‌‌things‌m
‌ ay‌‌be‌‌the‌‌object‌‌of‌‌a ‌‌
‌ deposit.‌ ‌
3.‌‌Where‌‌to‌‌Return‌ ‌
Necessary‌‌Deposits‌ ‌
CC,‌‌Article‌‌1987‌.‌‌If‌‌at‌‌the‌‌time‌‌the‌‌deposit‌‌was‌‌made‌a
‌ ‌‌place‌‌
● Arising‌‌from‌‌law‌‌or‌‌quasi-contract,‌‌as‌‌opposed‌‌to‌‌
was‌‌designated‌‌for‌‌the‌‌return‌‌of‌‌the‌‌thing‌,‌‌the‌‌depositary‌‌must‌‌ voluntary‌‌deposits‌‌that‌‌arise‌‌from‌‌contract.‌ ‌
take‌‌the‌‌thing‌‌deposited‌‌to‌‌such‌‌place;‌‌but‌‌the‌e ‌ xpenses‌‌for‌‌

○ Law‌:‌‌legal‌‌obligation.‌ ‌
transportation‌‌shall‌‌be‌‌borne‌‌by‌‌the‌‌depositor‌. ‌ ‌
■ Applicable‌‌are‌‌the‌‌rules‌‌of‌‌voluntary‌‌

If‌n
‌ o‌‌place‌‌has‌‌been‌‌designated‌f‌or‌‌the‌‌return,‌‌it‌‌shall‌‌be‌‌made‌‌
deposit.‌ ‌
where‌‌the‌‌thing‌‌deposited‌‌may‌‌be,‌‌even‌‌if‌‌it‌‌should‌‌not‌‌be‌‌ ○ Quasi-contract‌:‌‌saved‌‌from‌‌calamity.‌ ‌
the‌‌same‌‌place‌‌where‌‌the‌‌deposit‌‌was‌‌made,‌‌‌provided‌‌that‌‌
● Purpose‌‌is‌‌to‌‌prevent‌‌unjust‌‌enrichment.‌ ‌
there‌‌was‌n ‌ o‌‌malice‌‌on‌‌the‌‌part‌‌of‌‌the‌‌depositary‌. ‌ ‌
● Principal‌‌obligation‌‌is‌‌still‌‌safekeeping‌‌/‌‌preservation.‌ ‌
When‌‌a‌‌Place‌‌is‌‌Designated‌ ‌ ‌
● Depositary‌‌must‌‌take‌‌it‌‌there.‌ ‌ B.‌‌Examples‌‌of‌‌Necessary‌‌Deposit‌ ‌
● Transport‌‌borne‌‌by‌‌depositor.‌ ‌ 1.‌‌Compliance‌‌w/‌‌a‌‌Legal‌‌Obligation‌ ‌
When‌‌No‌‌Place‌‌is‌‌Designated‌ ‌
● Return‌‌made‌‌at‌‌the‌‌present‌‌location‌‌of‌‌the‌‌thing.‌ ‌ CC,‌‌Article‌‌1996‌.‌‌A‌‌deposit‌‌is‌n
○ ONLY‌‌if‌‌no‌‌malice‌‌is‌‌present‌‌on‌‌the‌‌depositary’s‌‌
(1)‌‌When‌‌it‌‌is‌‌made‌i‌n‌‌compliance‌‌with‌‌a‌‌legal‌‌obligation‌; ‌ ‌
part‌‌(ex.‌‌To‌‌inconvenience‌‌the‌‌depositor).‌ ‌
(2)‌‌When‌‌it‌‌takes‌‌place‌‌on‌‌the‌‌‌occasion‌‌of‌‌any‌‌calamity‌,‌‌such‌‌
4.‌‌When‌‌to‌‌Return‌ ‌
as‌‌fire,‌‌storm,‌‌flood,‌‌pillage,‌‌shipwreck,‌‌or‌‌other‌‌similar‌‌events.‌ ‌
CC,‌‌Article‌‌1988‌.‌‌The‌‌thing‌‌deposited‌‌must‌‌be‌‌‌returned‌‌to‌‌the‌‌

depositor‌‌upon‌‌demand‌,‌e ‌ ven‌‌though‌‌a‌‌specified‌‌period‌‌or‌‌ CC,‌‌Article‌‌1997‌.‌‌The‌‌deposit‌‌referred‌‌to‌‌in‌‌No.‌‌1‌‌of‌‌the‌‌

time‌‌for‌‌such‌‌return‌‌may‌‌have‌‌been‌‌fixed‌. ‌ ‌ preceding‌‌article‌‌shall‌‌be‌‌‌governed‌‌by‌‌the‌‌provisions‌‌of‌‌the‌‌
law‌‌establishing‌‌it‌,‌‌and‌‌in‌‌case‌‌of‌‌its‌d
‌ eficiency‌,‌‌by‌‌the‌r‌ ules‌‌

This‌‌provision‌s ‌ hall‌‌not‌‌apply‌‌‌when‌‌the‌‌thing‌‌is‌j‌udicially‌‌
on‌‌voluntary‌‌deposit‌. ‌ ‌
attached‌‌while‌‌in‌‌the‌‌depositary's‌‌possession‌,‌‌or‌‌should‌‌he‌‌
have‌‌been‌n ‌ otified‌‌of‌‌the‌‌opposition‌‌of‌‌a‌‌third‌‌person‌‌to‌‌the‌‌ The‌‌deposit‌‌mentioned‌‌in‌‌No.‌‌2‌‌of‌‌the‌‌preceding‌‌article‌‌shall‌‌be‌‌

return‌‌or‌‌the‌‌removal‌‌of‌‌the‌‌thing‌‌deposited‌.‌‌In‌‌these‌‌cases,‌‌ regulated‌‌by‌‌the‌‌provisions‌‌concerning‌‌voluntary‌‌deposit‌‌and‌‌by‌‌
the‌‌depositary‌‌must‌i‌mmediately‌‌inform‌‌the‌‌depositor‌‌of‌‌the‌‌ article‌‌2168.‌ ‌
attachment‌‌or‌‌opposition‌. ‌ ‌
‌
When‌‌to‌‌Return?‌ ‌ 2.‌‌On‌‌the‌‌Occasion‌‌of‌‌a‌‌Calamity‌ ‌
● Upon‌‌demand,‌‌or‌‌until‌‌the‌‌due‌‌date‌‌comes,‌‌
whichever‌‌comes‌‌first.‌ ‌ CC,‌‌Article‌‌1996‌.‌‌A‌‌deposit‌‌is‌n
Exceptions‌ ‌ (1)‌‌When‌‌it‌‌is‌‌made‌i‌n‌‌compliance‌‌with‌‌a‌‌legal‌‌obligation‌; ‌ ‌
● Does‌‌not‌‌apply‌‌if…‌ ‌
○ Judicially‌‌attached‌ ‌ (2)‌‌When‌‌it‌‌takes‌‌place‌‌on‌‌the‌‌‌occasion‌‌of‌‌any‌‌calamity‌,‌‌such‌‌
○ Third‌‌party‌‌opposition‌‌to‌‌return‌‌/‌‌removal.‌ ‌ as‌‌fire,‌‌storm,‌‌flood,‌‌pillage,‌‌shipwreck,‌‌or‌‌other‌‌similar‌‌events.‌ ‌
● In‌‌such‌‌cases,‌‌the‌‌depositary‌‌must‌‌tell‌‌the‌‌

depositor.‌ ‌ CC,‌‌Article‌‌1997‌.‌‌...‌ ‌
‌ The‌‌deposit‌‌mentioned‌‌in‌‌No.‌‌2‌‌of‌‌the‌‌preceding‌‌article‌‌shall‌‌be‌‌

regulated‌‌by‌‌the‌p ‌ rovisions‌‌concerning‌‌voluntary‌‌deposit‌‌and‌‌
CC,‌‌Article‌‌1989‌.‌‌Unless‌‌the‌‌deposit‌‌is‌‌for‌‌a‌v
‌ aluable‌‌ by‌‌article‌‌2168‌. ‌ ‌
consideration‌,‌‌the‌‌depositary‌‌who‌‌may‌‌have‌j‌ustifiable‌‌
reasons‌‌for‌‌not‌‌keeping‌‌the‌‌thing‌‌‌deposited‌‌may,‌‌even‌b ‌ efore‌‌ CC,‌‌Article‌‌2168‌.‌‌When‌‌during‌‌a‌‌fire,‌‌flood,‌‌storm,‌‌or‌‌other‌‌

the‌‌time‌‌designated‌,‌r‌ eturn‌i‌t‌‌to‌‌the‌‌depositor;‌‌and‌‌if‌‌the‌‌latter‌‌
calamity,‌p
‌ roperty‌‌is‌‌saved‌‌‌from‌‌destruction‌‌by‌‌another‌‌person‌‌
should‌r‌ efuse‌‌to‌‌receive‌‌it,‌‌the‌‌depositary‌‌may‌‌secure‌‌its‌‌ without‌‌the‌‌knowledge‌‌of‌‌the‌‌owner‌,‌‌the‌‌latter‌‌is‌b ‌ ound‌‌to‌‌pay‌‌

consignation‌‌‌from‌‌the‌‌court.‌ ‌ the‌‌former‌j‌ust‌‌compensation‌. ‌ ‌
Early‌‌Return‌‌by‌‌the‌‌Depositary‌ ‌ Savior‌‌of‌‌Property‌‌During‌‌Calamity‌ ‌
● Must‌‌have‌‌a‌‌justifiable‌‌reason‌‌for‌‌not‌‌keeping‌‌it.‌ ‌ ● Law‌‌considers‌‌him‌‌a‌‌depositary.‌ ‌
● May‌‌then‌‌return‌‌it‌‌to‌‌the‌‌depositor.‌ ‌ ● Owner‌‌who‌‌is‌‌bound‌‌to‌‌pay‌‌is‌‌considered‌‌the‌‌depositor.‌ ‌
● If‌‌not‌‌accepted,‌‌may‌‌consign‌‌it‌‌to‌‌the‌‌court.‌ ‌
‌
● NOT‌‌allowed‌‌if‌‌the‌‌deposit‌‌is‌‌onerous.‌ ‌
● These‌‌are‌‌EXCEPTIONS‌‌to‌‌the‌‌obligation‌‌to‌‌return‌‌ 3.‌‌Passenger‌‌Baggage‌‌w/‌‌Common‌‌Carriers‌ ‌
on‌‌DEMAND.‌ ‌ CC,‌‌Article‌‌1754‌.‌‌The‌‌provisions‌‌of‌‌articles‌‌1733‌‌to‌‌1753‌‌shall‌‌

‌ apply‌‌to‌‌the‌‌passenger's‌‌baggage‌‌which‌‌is‌‌not‌‌in‌‌his‌‌
personal‌‌custody‌‌or‌‌in‌‌that‌‌of‌‌his‌‌employee‌.‌‌As‌‌to‌o ‌ ther‌‌

‌ baggage‌,‌‌the‌‌rules‌‌in‌‌articles‌‌1998‌‌and‌‌2000‌‌to‌‌2003‌‌concerning‌‌
5.‌‌Right‌‌of‌‌Retention‌ ‌ the‌r‌ esponsibility‌‌of‌‌hotel-keepers‌‌shall‌‌be‌‌applicable‌. ‌ ‌
CC,‌‌Article‌‌1994‌.‌‌The‌‌depositary‌m ‌ ay‌‌retain‌‌the‌‌thing‌‌in‌‌
Baggage‌‌Not‌‌in‌‌the‌‌Custody‌‌of‌‌the‌‌Passenger‌ ‌
pledge‌‌‌until‌‌the‌f‌ ull‌‌payment‌‌of‌‌what‌‌may‌‌be‌‌due‌‌‌him‌‌by‌‌ ● Common‌‌carriers‌‌are‌‌bound‌‌to‌‌exercise‌‌extraordinary‌‌

reason‌‌of‌‌the‌‌deposit.‌ ‌ diligence.‌‌
‌
● Ex.‌‌check-in‌‌baggage‌ ‌
‌ ‌
NECESSARY‌‌DEPOSIT‌ ‌ Other‌‌Baggage‌ ‌
21‌ ‌
● The‌‌rules‌‌for‌‌innkeepers.‌ ‌
delivery‌‌when‌‌he‌‌handed‌‌over‌‌the‌‌keys‌‌to‌‌Justimbaste‌‌which‌‌he‌‌
● Ex.‌‌hand-carry‌‌baggage‌ ‌
received‌‌with‌‌the‌‌obligation‌‌to‌‌safely‌‌keep‌‌and‌‌return‌‌it.‌ ‌
4.‌‌Hotels‌‌or‌‌Inns‌ ‌ Facts‌:‌‌Jeffrey‌‌See‌‌(insured‌‌by‌‌Pioneer‌‌Insurance)‌‌had‌‌his‌‌Suzuki‌‌
Grand‌‌Vitara‌‌parked‌‌by‌‌hotel‌‌parking‌‌attendant‌‌Justimbaste‌‌when‌‌
CC,‌‌Article‌‌1998‌.‌‌The‌d ‌ eposit‌‌of‌‌effects‌‌made‌‌by‌‌travellers‌‌‌in‌‌
he‌‌checked‌‌in‌‌City‌‌Garden‌‌Hotel‌‌(Durban‌‌Apartments).‌‌The‌‌car‌‌
hotels‌‌or‌‌inns‌‌shall‌‌also‌‌be‌‌regarded‌‌as‌n‌ ecessary‌.‌‌The‌k ‌ eepers‌‌
of‌‌hotels‌‌or‌‌inns‌‌shall‌‌be‌r‌ esponsible‌‌for‌‌them‌‌as‌‌depositaries‌, ‌‌ was‌‌later‌‌carnapped.‌ ‌
provided‌‌that‌‌‌notice‌‌was‌‌given‌‌‌to‌‌them,‌‌or‌‌to‌‌their‌e‌ mployees‌, ‌‌ Issue‌:‌‌Whether‌‌Durban‌‌is‌‌liable‌‌-‌‌YES‌ ‌
Ruling‌:‌‌The‌‌contract‌‌of‌‌deposit‌‌was‌‌perfected‌‌from‌‌See’s‌‌
of‌‌the‌e‌ ffects‌‌‌brought‌‌by‌‌the‌‌guests‌‌and‌‌that,‌‌on‌‌the‌‌part‌‌of‌‌the‌‌

delivery‌‌when‌‌he‌‌handed‌‌over‌‌the‌‌keys‌‌to‌‌Justimbaste‌‌which‌‌he‌‌
latter,‌‌they‌t‌ ake‌‌the‌‌precautions‌‌which‌‌said‌‌hotel-keepers‌‌or‌‌
their‌‌substitutes‌‌advised‌‌‌relative‌‌to‌‌the‌c ‌ are‌‌and‌‌vigilance‌‌‌of‌‌ received‌‌with‌‌the‌‌obligation‌‌to‌‌safely‌‌keep‌‌and‌‌return‌‌it.‌ ‌
their‌‌effects.‌ ‌
[B5]‌‌YHT‌‌Realty‌‌Corporation‌‌v.‌‌Court‌‌of‌‌Appeals‌ ‌
Binding‌‌Keepers‌‌as‌‌Depositaries‌ ‌ Doctrine‌:‌‌CC,‌‌Article‌‌2003.‌‌The‌‌hotel-keeper‌‌cannot‌‌free‌‌himself‌‌
● Guests‌‌have‌‌notified‌‌them‌‌/‌‌their‌‌employees.‌ ‌ from‌‌responsibility‌‌by‌‌posting‌‌notices‌‌to‌‌the‌‌effect‌‌that‌‌he‌‌is‌‌not‌‌
● Guests‌‌take‌‌the‌‌precautions‌‌the‌‌keepers‌‌have‌‌ liable‌‌for‌‌the‌‌articles‌‌brought‌‌by‌‌the‌‌guest.‌‌Any‌‌stipulation‌‌
advised.‌ ‌ between‌‌the‌‌hotel-keeper‌‌and‌‌the‌‌guest‌‌whereby‌‌the‌‌
responsibility‌‌of‌‌the‌‌former‌‌as‌‌set‌‌forth‌‌in‌‌articles‌‌1998‌‌to‌‌2001‌‌is‌‌
‌
suppressed‌‌or‌‌diminished‌‌shall‌‌be‌‌void.‌ ‌
Facts:‌ ‌Tan‌ ‌convinced‌ ‌McLoughlin‌ ‌to‌ ‌begin‌ ‌staying‌ ‌in‌ ‌the‌‌
CC,‌‌Article‌‌1999‌.‌‌The‌h
‌ otel-keeper‌i‌s‌l‌iable‌f‌or‌‌the‌v
‌ ehicles,‌‌
Tropicana‌ ‌for‌ ‌his‌‌ visits.‌‌ McLoughlin‌‌ rented‌‌ safety‌‌ deposit‌‌ boxes‌‌
animals‌‌and‌‌articles‌‌which‌‌have‌‌been‌‌introduced‌‌‌or‌‌placed‌‌in‌‌ in‌ ‌the‌ ‌Tropicana,‌ ‌where‌ ‌Lainez‌ ‌& ‌ ‌Payam‌ ‌were‌ ‌employed.‌ ‌The‌‌
the‌‌annexes‌‌of‌‌the‌‌hotel.‌ ‌ safety‌‌ deposit‌‌ boxes‌‌ can‌‌ only‌‌ be‌‌ opened‌‌ with‌‌ two‌‌ keys,‌‌ one‌‌ with‌‌
the‌ ‌guest,‌ ‌and‌ ‌one‌ ‌with‌ ‌the‌ ‌employees.‌ ‌McLoughlin‌ ‌then‌‌
CC,‌‌Article‌‌2000‌.‌‌The‌‌responsibility‌‌referred‌‌to‌‌in‌‌the‌‌two‌‌ discovered‌ ‌that‌ ‌money‌ ‌he‌ ‌had‌ ‌stored‌ ‌in‌ ‌them‌ ‌would‌ ‌gradually‌‌
preceding‌‌articles‌‌shall‌i‌nclude‌‌the‌‌loss‌‌of,‌‌or‌‌injury‌‌to‌‌the‌‌
disappear,‌‌ and‌‌ upon‌‌ investigating,‌‌ discovered‌‌ that‌‌ Tan‌‌ had‌‌ been‌‌
personal‌‌property‌‌of‌‌the‌‌guests‌‌caused‌‌by‌‌the‌‌servants‌‌or‌‌ taking‌‌ his‌‌
money‌‌ with‌‌ the‌‌ assistance‌‌ of‌‌
the‌‌ employees.‌‌ He‌‌ then‌‌
employees‌‌‌of‌‌the‌‌keepers‌‌of‌‌hotels‌‌or‌‌inns‌‌as‌‌well‌‌as‌s ‌ trangers‌; ‌‌ filed‌ ‌an‌ ‌action‌ ‌for‌ ‌damages‌ ‌against‌ ‌YHT‌ ‌Realty‌ ‌and‌ ‌Lainez‌ ‌& ‌‌
but‌n
‌ ot‌‌that‌‌which‌‌may‌‌proceed‌‌from‌‌any‌‌force‌‌majeure‌.‌‌The‌‌ Payam,‌ ‌who‌ ‌contend‌ ‌in‌ ‌their‌ ‌defense‌ ‌that‌ ‌they‌‌ cannot‌‌ be‌‌ held‌‌
fact‌‌that‌‌‌travellers‌‌are‌‌constrained‌‌to‌‌rely‌‌on‌‌the‌‌vigilance‌‌of‌‌ liable,‌‌ since‌‌ McLoughlin,‌‌ in‌‌
renting‌‌ the‌‌ boxes,‌‌ allegedly‌‌ agreed‌‌ to‌‌

the‌‌keeper‌‌of‌‌the‌‌hotels‌‌or‌‌inns‌‌shall‌‌be‌‌considered‌‌‌in‌‌ the‌‌ stipulations‌‌ of‌‌ paragraphs‌‌ 2 ‌‌& ‌‌4 ‌‌of‌‌
the‌‌ conditions‌‌ to‌‌ use‌‌ the‌‌
determining‌‌the‌‌degree‌‌of‌‌care‌‌required‌‌of‌‌him.‌ ‌ same,‌‌ which‌‌ would‌‌ exempt‌‌ the‌‌ hotel‌‌ from‌‌ liability‌‌ for‌‌
loss‌‌ arising‌‌
from‌ ‌ANY‌ ‌cause.‌ ‌The‌ ‌RTC‌ ‌ruled‌ ‌in‌ ‌favor‌ ‌of‌ ‌McLoughlin,‌ ‌and‌‌
Responsibility‌‌of‌‌Keepers‌‌for‌‌Loss‌‌/‌‌Injury‌‌of‌‌Property‌ ‌ declared‌‌the‌‌paragraphs‌‌void‌‌for‌‌being‌‌against‌‌public‌‌policy.‌ ‌
● If‌‌caused‌‌by‌‌employees‌‌/‌‌strangers.‌ ‌ Issue:‌ ‌W/N‌ ‌a ‌ ‌hotel-keeper‌ ‌may‌ ‌stipulate‌ ‌to‌ ‌exempt‌‌ himself‌‌
● NO‌‌responsibility‌‌if‌‌by‌‌force‌‌majeure.‌ ‌ from‌‌ liability‌‌ arising‌‌ from‌‌ the‌‌ loss‌‌ of‌‌ the‌‌ things‌‌ held‌‌ by‌‌ it‌‌
for‌‌
○ Robbery‌‌/‌‌Theft‌‌is‌‌NOT‌‌force‌‌majeure;‌‌ its‌‌guests‌‌for‌‌safekeeping‌‌-‌‌NO.‌ ‌
unless‌‌through‌‌arms‌‌or‌‌irresistible‌‌force‌‌ CC,‌ ‌Art.‌ ‌2003‌ ‌is‌ ‌clear;‌ ‌hotel-keepers‌ ‌may‌ ‌not‌ ‌exempt‌ ‌himself‌‌
(2001).‌ ‌ from‌‌ liability‌‌ for‌‌ loss‌‌ merely‌‌ by‌‌ posting‌‌ notices‌‌ to‌‌
that‌‌ effect.‌‌ The‌‌
Degree‌‌of‌‌Diligence‌ ‌ RTC‌‌ also‌‌ correctly‌‌ ruled‌‌ that‌‌ the‌‌ paragraphs‌‌ were‌‌ void,‌‌ since‌‌ the‌‌
● How‌‌much‌‌are‌‌guests‌‌constrained‌‌to‌‌rely‌‌on‌‌their‌‌ same‌ ‌article‌ ‌of‌ ‌the‌ ‌CC‌ ‌voids‌ ‌any‌ ‌stipulations‌ ‌that‌ ‌exempt‌ ‌the‌‌
vigilance?‌ ‌ hotel-keeper‌ ‌from‌ ‌his‌ ‌responsibilities‌ ‌set‌ ‌forth‌ ‌in‌ ‌CC,‌ ‌Arts.‌‌
‌ 1998-2001.‌ ‌
Ruling:‌W ‌ HEREFORE,‌‌Petition‌‌DENIED.‌ ‌
CC,‌‌Article‌‌2001‌.‌‌The‌a ‌ ct‌‌of‌‌a‌‌thief‌‌or‌‌robber‌,‌‌who‌‌has‌e ‌ ntered‌‌
‌
the‌‌hotel‌‌is‌n‌ ot‌‌deemed‌‌force‌‌majeure‌,‌u ‌ nless‌i‌t‌‌is‌‌done‌‌with‌‌

the‌‌use‌‌of‌a‌ rms‌o ‌ r‌‌through‌‌an‌‌irresistible‌‌force.‌ ‌ JUDICIAL‌‌DEPOSIT‌ ‌
CC,‌‌Article‌‌1964‌.‌‌A‌‌deposit‌‌may‌‌be‌‌constituted‌j‌udicially‌o
‌ r‌‌

CC,‌‌Article‌‌2002‌.‌‌The‌‌hotel-keeper‌‌is‌n ‌ ot‌‌liable‌‌for‌‌
extrajudicially.‌ ‌
compensation‌‌if‌‌the‌‌loss‌‌is‌‌due‌‌to‌‌the‌‌acts‌‌of‌‌the‌‌guest,‌‌his‌‌

family,‌‌servants‌‌or‌‌visitors‌,‌‌or‌‌if‌‌the‌‌loss‌‌arises‌‌from‌‌the‌‌
CC,‌‌Article‌‌2005‌.‌‌A‌‌judicial‌‌deposit‌‌or‌s
‌ equestration‌t‌akes‌‌place‌‌

character‌‌of‌‌the‌‌things‌‌brought‌‌‌into‌‌the‌‌hotel.‌ ‌ when‌‌an‌a‌ ttachment‌‌or‌‌seizure‌‌of‌‌property‌‌in‌‌litigation‌‌is‌‌
Keeper’s‌‌Exemption‌‌from‌‌Liability‌ ‌ ordered‌. ‌ ‌
● If‌‌loss‌‌is‌‌due‌‌to…‌ ‌
○ Acts‌‌of‌‌the‌‌guest,‌‌his‌‌family,‌‌servants,‌‌or‌‌
CC,‌‌Article‌‌2006‌.‌M ‌ ovable‌‌as‌‌well‌‌as‌‌immovable‌‌‌property‌‌may‌‌

visitors;‌‌or‌ ‌ be‌‌the‌‌object‌‌of‌‌sequestration.‌ ‌
○ The‌‌character‌‌of‌‌the‌‌things.‌ ‌
‌ epositary‌o‌ f‌‌property‌‌or‌‌objects‌‌

‌
sequestrated‌c ‌ annot‌‌be‌‌relieved‌‌of‌‌his‌‌responsibility‌‌until‌‌the‌‌

controversy‌‌which‌‌gave‌‌rise‌‌thereto‌‌has‌‌come‌‌to‌‌an‌‌end‌, ‌‌
CC,‌‌Article‌‌2003‌.‌‌The‌‌hotel-keeper‌c ‌ annot‌‌free‌‌himself‌‌from‌‌ unless‌‌the‌c
‌ ourt‌‌so‌‌orders‌. ‌ ‌
responsibility‌‌by‌‌posting‌‌notices‌‌to‌‌the‌‌effect‌‌that‌‌he‌‌is‌‌not‌‌
liable‌‌for‌‌the‌‌articles‌‌‌brought‌‌by‌‌the‌‌guest.‌‌Any‌s ‌ tipulation‌‌ Depositary’s‌‌Duties‌ ‌
between‌‌the‌‌hotel-keeper‌‌and‌‌the‌‌guest‌‌whereby‌‌the‌‌ ● Relieved‌‌by‌‌the‌‌end‌‌of‌‌the‌‌controversy‌‌or‌‌by‌‌court‌‌

responsibility‌o ‌ f‌‌the‌‌former‌‌as‌‌set‌‌forth‌‌in‌‌articles‌‌1998‌‌to‌‌2001‌‌ order,‌‌whichever‌‌comes‌‌first.‌ ‌
is‌‌suppressed‌‌or‌‌diminished‌‌shall‌‌be‌‌void‌. ‌ ‌
‌
CC,‌‌Article‌‌2004‌.‌‌The‌‌hotel-keeper‌‌has‌‌a‌r‌ ight‌‌to‌‌retain‌‌‌the‌‌
things‌‌brought‌‌into‌‌the‌‌hotel‌‌by‌‌the‌‌guest,‌‌as‌‌a‌s
‌ ecurity‌f‌or‌‌
‌ epositary‌o ‌ f‌‌property‌‌sequestrated‌‌is‌‌

credits‌‌on‌‌account‌‌of‌‌lodging‌,‌‌and‌s ‌ upplies‌‌usually‌‌ bound‌‌to‌‌comply‌,‌‌with‌‌respect‌‌to‌‌the‌‌same,‌‌with‌‌all‌‌the‌‌

furnished‌‌‌to‌‌hotel‌‌guests.‌ ‌ obligations‌‌of‌‌a‌‌good‌‌father‌‌of‌‌a‌‌family‌. ‌ ‌
Right‌‌of‌‌Retention‌ ‌ CC,‌‌Article‌‌2009‌.‌‌As‌‌to‌‌matters‌‌not‌‌provided‌‌for‌‌in‌‌this‌‌Code,‌‌

● For‌‌the‌‌depositary‌‌to‌‌obtain‌‌payment.‌ ‌ judicial‌‌sequestration‌‌shall‌‌be‌‌governed‌‌by‌‌the‌‌Rules‌‌of‌‌
‌ Court‌. ‌ ‌
‌ Judicial‌‌Deposit‌‌/‌‌Sequestration‌ ‌
● Constituted‌‌by‌‌judicial‌‌order.‌ ‌
[B4]‌‌Durban‌‌Apartments‌‌v.‌‌Pioneer‌‌Insurance‌ ‌ ● A‌‌consequence‌‌of‌‌litigation.‌ ‌
Doctrine‌:‌‌The‌‌contract‌‌of‌‌deposit‌‌was‌‌perfected‌‌from‌‌See’s‌‌
● Suppletorily‌‌governed‌‌by‌‌the‌‌ROC.‌ ‌
22‌ ‌
● ONLY‌‌deposit‌‌type‌‌that‌‌can‌‌have‌‌for‌‌its‌‌object‌‌realty.‌
Purpose‌‌of‌‌Judicial‌‌Deposit‌‌/‌‌Sequestration‌ ‌ coverage‌‌of‌‌the‌‌WRL,‌‌and‌‌is‌‌considered‌‌an‌‌

● First,‌‌before‌‌there‌‌may‌‌be‌‌a‌‌judicial‌‌deposit,‌‌there‌‌must‌‌ ordinary‌‌deposit.‌ ‌
first‌‌be‌‌a‌‌case.‌ ‌
‌
● For‌‌attachment,‌‌or‌‌seizures‌‌of‌‌property.‌ ‌
Attachment‌‌v.‌‌Seizure‌ ‌ WRL,‌‌Sec.‌‌3.‌‌Form‌‌of‌‌receipts‌.‌‌—‌‌What‌‌terms‌‌may‌‌be‌‌inserted.‌‌
● Seizure‌‌=‌‌courts‌‌may‌‌do‌‌so‌‌by‌‌force‌‌or‌‌right‌‌of‌‌law.‌ ‌ —‌‌A‌‌warehouseman‌m ‌ ay‌‌insert‌‌in‌‌a‌‌receipt‌‌issued‌‌by‌‌him‌‌any‌‌

● Attachment‌‌=‌‌a‌‌provisional‌‌remedy‌‌at‌‌the‌‌request‌‌of‌‌a ‌‌ other‌‌terms‌‌and‌‌conditions‌‌‌provided‌‌that‌‌such‌‌terms‌‌and‌‌
party.‌‌To‌‌preserve‌‌assets‌‌for‌‌the‌‌satisfaction‌‌of‌‌a ‌‌ conditions‌s
‌ hall‌‌not‌: ‌ ‌
judgment,‌‌in‌‌case‌‌the‌‌party‌‌loses.‌ ‌ (a) Be‌c
‌ ontrary‌‌to‌‌the‌‌provisions‌‌of‌‌this‌‌Act‌. ‌ ‌
○ One‌‌way‌‌to‌‌escape‌‌an‌‌order‌‌of‌‌attachment‌‌is‌‌to‌‌
post‌‌a‌‌counterbond.‌ ‌ (b) In‌‌any‌‌wise‌‌‌impair‌‌his‌‌obligation‌‌to‌‌exercise‌‌that‌‌

degree‌‌of‌‌care‌‌in‌‌the‌‌safe-keeping‌‌‌of‌‌the‌‌goods‌‌

Quasi-Judicial‌‌Deposit‌ ‌
entrusted‌‌to‌‌him‌‌which‌‌is‌w‌ hat‌‌a‌‌reasonably‌‌careful‌‌
● An‌‌appellant‌‌may‌‌file‌‌this,‌‌relative‌‌to‌‌an‌‌action‌‌by‌‌a ‌‌ man‌‌would‌‌exercise‌‌in‌‌regard‌‌to‌‌similar‌‌goods‌‌‌of‌‌
quasi-judicial‌‌agency.‌ ‌ his‌‌own.‌ ‌
● In‌‌order‌‌to‌‌file‌‌an‌‌appeal.‌ ‌
Degree‌‌of‌‌Diligence‌‌of‌‌the‌‌Warehouseman‌ ‌
● Ex.‌‌appeals‌‌before‌‌the‌‌NLRC,‌‌where‌‌in‌‌order‌‌to‌‌be‌‌able‌‌to‌‌
● What‌‌a‌‌reasonably‌‌careful‌‌man‌‌would‌‌exercise‌‌for‌‌
file‌‌an‌‌appeal,‌‌an‌‌employer‌‌is‌‌required‌‌to‌‌post‌‌a‌‌bond‌‌as‌‌a ‌‌ similar‌‌goods‌‌of‌‌his‌‌own.‌ ‌
condition‌‌for‌‌the‌‌filing‌‌of‌‌an‌‌appeal.‌ ‌ ● NO‌‌stipulations‌‌can‌‌be‌‌added‌‌that‌‌will‌‌impair‌‌this.‌ ‌
● Meant‌‌to‌‌satisfy‌‌a‌‌judgment‌‌later‌‌on,‌‌in‌‌case‌‌they‌‌lose.‌ ‌
Obligation‌‌of‌‌depositary‌ ‌ ‌
● Who‌‌is‌‌the‌‌depositary?‌‌Sheriff‌‌or‌‌whomever‌‌is‌‌appointed‌‌
WRL,‌‌Sec.‌‌6.‌‌Duplicate‌‌receipts‌‌must‌‌be‌‌so‌‌marked‌.‌‌—‌‌When‌‌
by‌‌court.‌ ‌
more‌‌than‌‌one‌‌negotiable‌‌receipt‌‌is‌‌issued‌‌for‌‌the‌‌same‌‌
● Maintain‌‌goods‌‌with‌‌diligence‌‌of‌‌good‌‌father‌‌of‌‌the‌‌family.‌ ‌ goods‌,‌‌the‌‌word‌‌"d‌ uplicate‌"‌‌shall‌‌be‌p
‌ lainly‌‌placed‌‌upon‌‌the‌‌
‌ face‌‌of‌‌every‌‌such‌‌receipt,‌‌except‌‌the‌‌first‌‌‌one‌‌issued.‌ ‌A ‌‌
Warehouse‌‌Receipts‌ ‌ warehouseman‌‌shall‌‌be‌‌‌liable‌‌for‌‌all‌‌damages‌‌caused‌‌by‌‌his‌‌
● Warehouse‌‌Receipts‌‌Law‌‌(Act‌‌2137)‌ ‌ failure‌‌so‌‌to‌‌do‌‌to‌‌any‌‌one‌‌who‌‌purchased‌‌the‌‌subsequent‌‌
receipt‌‌for‌‌value‌‌supposing‌‌it‌‌to‌‌be‌‌an‌‌original‌,‌‌even‌‌though‌‌
A.‌‌General‌‌Concepts‌ ‌ the‌‌purchase‌‌be‌‌after‌‌the‌‌delivery‌‌of‌‌the‌‌goods‌‌by‌‌the‌‌

warehouseman‌‌to‌‌the‌‌holder‌‌of‌‌the‌‌original‌‌receipt.‌ ‌
Act‌‌2137‌‌(Warehouse‌‌Receipts‌‌Law),‌‌Section‌‌1.‌‌‌Persons‌‌who‌‌
may‌‌issue‌‌receipts.‌‌—‌‌Warehouse‌‌receipts‌‌may‌‌be‌‌issued‌‌by‌‌‌any‌‌

warehouseman.‌ ‌ WRL,‌‌Sec.‌‌15.‌‌Effect‌‌of‌‌duplicate‌‌receipts‌.‌‌—‌‌A‌‌receipt‌‌upon‌‌
the‌‌face‌‌of‌‌which‌‌the‌‌word‌‌"duplicate"‌‌is‌‌plainly‌‌placed‌‌is‌‌a ‌‌
● A‌‌contract‌‌of‌‌deposit,‌‌between‌‌the‌‌warehouseman,‌‌the‌‌ representation‌‌and‌‌warranty‌‌by‌‌the‌‌warehouseman‌‌that‌‌such‌‌
depositor,‌‌and‌‌the‌‌parties‌‌allowed‌‌to‌‌receive‌‌the‌‌thing‌‌as‌‌
receipt‌‌is‌‌an‌‌accurate‌‌copy‌‌of‌‌an‌‌original‌‌receipt‌‌properly‌‌
specified‌‌in‌‌the‌‌warehouse‌‌receipt.‌ ‌ issued‌‌‌and‌u ‌ ncanceled‌a ‌ t‌‌the‌d
‌ ate‌o
‌ f‌‌the‌‌‌issue‌‌of‌‌the‌‌

duplicate‌,‌‌but‌‌shall‌i‌mpose‌‌upon‌‌him‌‌no‌‌other‌‌liability‌. ‌ ‌
B.‌‌Form‌‌of‌‌Warehouse‌‌Receipts‌ ‌
WRL,‌‌Sec.‌‌2.‌‌Form‌‌of‌‌receipts;‌‌essential‌‌terms‌.‌‌—‌‌Warehouse‌‌ WRL,‌‌Sec.‌‌4.‌‌Definition‌‌of‌‌non-negotiable‌‌receipt‌.‌‌—‌‌A‌‌receipt‌‌
receipts‌‌‌need‌‌not‌‌be‌‌in‌‌any‌‌particular‌‌form‌‌‌but‌‌every‌‌such‌‌
in‌‌which‌i‌t‌‌is‌‌stated‌‌that‌‌the‌‌goods‌‌received‌‌will‌‌be‌‌delivered‌‌

receipt‌‌must‌‌embody‌‌within‌‌its‌‌written‌‌or‌‌printed‌‌terms:‌ ‌ to‌‌the‌‌depositor‌‌‌or‌‌to‌‌a
‌ ny‌‌other‌‌specified‌‌person‌,‌‌is‌‌a ‌‌
non-negotiable‌‌receipt‌. ‌ ‌
(a) The‌l‌ocation‌‌of‌‌the‌‌warehouse‌‌‌where‌‌the‌‌goods‌‌are‌‌

stored,‌ ‌
WRL,‌‌Sec.‌‌7.‌‌Failure‌‌to‌‌mark‌‌"non-negotiable."‌‌‌—‌‌A ‌‌
(b) The‌d
‌ ate‌‌of‌‌the‌‌issue‌‌‌of‌‌the‌‌receipt,‌ ‌ non-negotiable‌‌‌receipt‌s ‌ hall‌‌have‌‌plainly‌‌placed‌‌upon‌‌its‌‌face‌‌
by‌‌the‌‌warehouseman‌‌issuing‌‌it‌‌"non-negotiable,"‌‌or‌‌"not‌‌
(c) The‌c
‌ onsecutive‌‌number‌‌‌of‌‌the‌‌receipt,‌ ‌ negotiable."‌‌ ‌In‌‌case‌‌of‌‌the‌‌warehouseman's‌f‌ ailure‌s‌ o‌‌to‌‌do,‌‌a ‌‌
(d) A‌s
‌ tatement‌w ‌ hether‌‌the‌‌‌goods‌‌received‌‌‌will‌‌be‌‌
holder‌‌of‌‌the‌‌receipt‌‌who‌‌purchased‌‌it‌‌for‌‌value‌‌supposing‌‌it‌‌
delivered‌‌to‌‌the‌‌bearer‌,‌‌to‌‌a‌s
‌ pecified‌‌person‌‌‌or‌‌to‌‌a ‌‌ to‌‌be‌‌negotiable‌,‌‌may,‌‌at‌‌his‌‌option,‌‌‌treat‌‌such‌‌receipt‌‌as‌‌

specified‌‌person‌‌or‌‌his‌‌order‌, ‌ ‌ imposing‌‌upon‌‌the‌‌warehouseman‌‌the‌‌same‌‌liabilities‌‌‌he‌‌
would‌‌have‌‌incurred‌h‌ ad‌‌the‌‌receipt‌‌been‌‌negotiable‌. ‌ ‌
(e) The‌r‌ ate‌o
‌ f‌‌storage‌‌charges,‌ ‌
(f) A‌d
‌ escription‌‌of‌‌the‌‌goods‌‌‌or‌‌of‌‌the‌‌packages‌‌
WRL,‌‌Sec.‌‌5.‌‌Definition‌‌of‌‌negotiable‌‌receipt‌.‌‌—‌‌A‌‌receipt‌‌in‌‌
containing‌‌them,‌ ‌ which‌‌it‌‌is‌s
‌ tated‌t‌hat‌‌the‌‌goods‌‌received‌‌will‌‌be‌‌‌delivered‌‌to‌‌the‌‌
bearer‌‌or‌‌to‌‌the‌‌order‌‌of‌‌‌any‌‌person‌‌named‌‌‌in‌‌such‌‌receipt‌‌is‌‌
(g) The‌‌‌signature‌‌of‌‌the‌‌warehouseman‌‌‌which‌‌may‌‌be‌‌

a‌n
‌ egotiable‌‌receipt‌. ‌ ‌
made‌‌by‌‌his‌a
‌ uthorized‌‌agent‌, ‌ ‌
No‌‌provision‌‌shall‌‌be‌‌inserted‌‌in‌‌a‌‌negotiable‌‌receipt‌‌that‌‌it‌‌
(h) If‌‌the‌‌receipt‌‌is‌‌issued‌‌for‌‌goods‌‌of‌‌which‌‌the‌‌

warehouseman‌‌is‌‌owner,‌‌either‌‌solely‌‌or‌‌jointly‌‌or‌‌ is‌‌non-negotiable‌.‌ ‌Such‌‌provision,‌‌if‌‌inserted‌‌shall‌‌be‌v
‌ oid‌. ‌ ‌
in‌‌common‌‌‌with‌‌others,‌‌the‌‌‌fact‌‌of‌‌such‌‌ownership‌, ‌‌ Act‌‌No.‌‌2137‌‌(Warehouse‌‌Receipts‌‌Law)‌ ‌
and‌ ‌ ● Commercial‌‌law‌‌incarnation‌‌of‌‌the‌‌civil‌‌law‌‌concept‌‌of‌‌
(i) A‌s‌ tatement‌o ‌ f‌‌the‌‌‌amount‌‌of‌‌advances‌‌made‌‌‌and‌‌of‌‌
deposit.‌ ‌
liabilities‌‌incurred‌‌for‌‌which‌‌the‌‌warehouseman‌‌ ● The‌‌issuance‌‌of‌‌warehouse‌‌receipts‌‌is‌‌habitual‌‌in‌‌the‌‌
claims‌‌a‌‌lien‌.‌ ‌If‌‌the‌‌‌precise‌‌amount‌‌of‌‌such‌‌
course‌‌of‌‌business‌‌of‌‌a‌‌warehouseman,‌‌and‌‌thus,‌‌the‌‌law‌‌
advances‌‌made‌‌or‌‌of‌‌such‌‌liabilities‌‌‌incurred‌‌is,‌‌at‌‌
acknowledges‌‌the‌‌rights‌‌and‌‌obligations‌‌that‌‌accompany‌‌
the‌‌time‌‌of‌‌the‌‌issue‌‌of,‌u ‌ nknown‌‌to‌‌the‌‌

such‌‌practices.‌ ‌
warehouseman‌‌or‌‌to‌‌his‌‌agent‌‌‌who‌‌issues‌‌it,‌‌a ‌‌
statement‌‌of‌‌the‌‌fact‌‌that‌‌advances‌‌have‌‌been‌‌ Warehouse‌‌Receipts‌ ‌
made‌‌or‌‌liabilities‌‌incurred‌‌and‌‌the‌‌purpose‌‌thereof‌‌ ● The‌‌law‌‌offers‌‌NO‌‌formal‌‌definition.‌ ‌
is‌‌sufficient‌. ‌ ‌ ● A‌‌definition,‌‌however,‌‌can‌‌be‌‌pieced‌‌together‌‌from‌‌
A‌w
‌ arehouseman‌s‌ hall‌‌be‌l‌iable‌t‌o‌‌any‌‌person‌‌‌injured‌‌thereby‌‌
relevant‌‌provisions.‌ ‌
for‌‌all‌‌damages‌‌caused‌‌by‌‌the‌‌omission‌‌from‌‌a‌‌negotiable‌‌ ● There‌‌is‌‌also‌‌no‌‌specific‌‌form,‌‌but‌‌it‌‌is‌‌still‌‌a‌‌formal‌‌

receipt‌o ‌ f‌‌any‌‌of‌‌the‌t‌ erms‌h
‌ erein‌‌required.‌ ‌ contract‌‌because‌‌the‌‌law‌‌enumerates‌‌things‌‌that‌‌must‌‌
appear‌‌in‌‌the‌‌receipt.‌ ‌
● Absent‌‌any‌‌of‌‌these,‌‌the‌‌contract‌‌is‌‌taken‌‌out‌‌of‌‌the‌‌

23‌ ‌
○ Thus,‌‌in‌‌effect,‌‌the‌‌warehouse‌‌receipt‌‌MUST‌‌be‌‌
WRL,‌‌Sec.‌‌22.‌‌Goods‌‌must‌‌be‌‌kept‌‌separate‌.‌‌—‌‌Except‌‌as‌‌
written.‌ ‌
provided‌‌in‌‌the‌‌following‌‌section,‌‌a‌w
‌ arehouseman‌‌shall‌‌keep‌‌
○ There‌‌need‌‌not‌‌be‌‌a‌‌specific‌‌form‌‌or‌‌template,‌‌as‌‌ the‌‌goods‌‌so‌‌far‌‌separate‌‌from‌‌goods‌‌of‌‌other‌‌depositors‌‌
long‌‌as‌‌the‌‌terms‌‌enumerated‌‌in‌‌WRL,‌‌Sec.‌‌2‌‌are‌‌ and‌‌from‌o
‌ ther‌‌goods‌‌of‌‌the‌‌same‌‌depositor‌‌for‌‌which‌‌a ‌‌
present.‌ ‌ separate‌‌receipt‌‌has‌‌been‌‌issued‌,‌‌as‌‌to‌p‌ ermit‌‌at‌‌all‌‌times‌‌the‌‌

○ “You‌‌can‌‌go‌‌anywhere‌‌in‌‌this‌‌house,‌‌except‌‌in‌‌the‌‌ identification‌‌and‌‌redelivery‌‌of‌‌the‌‌goods‌‌deposited‌. ‌ ‌
following‌‌rooms”‌ ‌ Responsibility‌‌to‌‌Keep‌‌Separate‌ ‌
Warehouse‌‌Receipts:‌‌Definition‌ ‌ ● If‌‌belonging‌‌to‌‌different‌‌depositors;‌‌or‌ ‌
● A‌‌contract‌‌issued‌‌by‌‌a‌‌warehouseman;‌ ‌ ● If‌‌from‌‌the‌‌same‌‌depositor‌‌but‌‌different‌‌receipts.‌ ‌
○ A‌‌person‌‌lawfully‌‌engaged‌‌in‌‌the‌‌business‌‌of‌‌ ● W/N‌‌the‌‌goods‌‌have‌‌their‌‌own‌‌receipts.‌ ‌
storing‌‌goods‌‌for‌‌profit.‌ ‌ Purpose‌ ‌
● As‌‌evidence‌‌of‌‌goods,‌‌chattels,‌‌or‌‌merchandise‌‌in‌‌storage,‌‌ ● To‌‌help‌‌for‌‌easy‌‌identification‌‌&‌‌redelivery.‌ ‌
or‌‌has‌‌been‌‌or‌‌will‌‌be‌‌in‌‌storage;‌ ‌ ‌
● In‌‌a‌‌warehouse.‌ ‌
○ A‌‌building,‌‌structure,‌‌or‌‌other‌‌protected‌‌
WRL,‌‌Sec.‌‌23.‌‌Fungible‌‌goods‌‌may‌‌be‌‌commingled‌‌if‌‌
enclosure‌‌where‌‌commodities‌‌are‌‌stored.‌ ‌ warehouseman‌‌authorized‌.‌‌—‌‌If‌a ‌ uthorized‌‌by‌‌agreement‌‌or‌‌
Effect‌‌of‌‌Omission‌‌of‌‌the‌‌Items‌‌in‌‌WRL,‌‌Sec.‌‌2 ‌ ‌ by‌‌custom‌,‌‌a‌‌warehouseman‌m ‌ ay‌‌mingle‌‌fungible‌‌goods‌‌with‌‌
● The‌‌goods‌‌in‌‌the‌‌possession‌‌of‌‌the‌‌warehouseman‌‌are‌‌ other‌‌goods‌‌of‌‌the‌‌same‌‌kind‌‌and‌‌grade‌.‌ ‌In‌‌such‌‌case,‌‌the‌‌
various‌‌depositors‌‌of‌‌the‌‌mingled‌‌goods‌‌shall‌o
‌ wn‌‌the‌‌entire‌‌
merely‌‌under‌‌ordinary‌‌deposits,‌‌and‌‌not‌‌under‌‌the‌‌
mass‌‌in‌‌common‌‌and‌‌each‌‌depositor‌‌shall‌‌be‌‌entitled‌‌to‌‌
Warehouse‌‌Receipts‌‌Law.‌ ‌ such‌‌portion‌‌thereof‌‌‌as‌‌the‌‌amount‌‌deposited‌‌by‌‌him‌‌bears‌‌to‌‌
● What‌‌if‌‌the‌‌form‌‌is‌‌not‌‌complied‌‌with?‌‌The‌‌document‌‌is‌‌ the‌‌whole.‌ ‌
still‌‌valid,‌‌but‌‌the‌‌warehouseman‌‌will‌‌still‌‌be‌‌liable.‌ ‌
○ The‌‌effect‌‌on‌‌the‌‌transaction?‌‌The‌‌contract‌‌of‌‌ Commingling‌‌of‌‌Fungibles‌ ‌
● Only‌‌if‌‌allowed‌‌by‌‌agreement‌‌or‌‌custom.‌ ‌
deposit‌‌is‌‌still‌‌valid.‌ ‌ ● Must‌‌be‌‌of‌‌the‌‌same‌‌kind‌‌and‌‌grade.‌ ‌
Negotiable‌‌&‌‌Non-Negotiable‌‌Receipts‌ ‌ Effects‌‌of‌‌Commingling‌ ‌
● Non-Negotiables‌‌=‌‌Party‌‌to‌‌whom‌‌the‌‌goods‌‌are‌‌delivered‌ ● Entire‌‌mass‌‌co-owned;‌‌depositors‌‌entitled‌‌to‌‌

is‌‌SPECIFIED.‌ ‌ proportionate‌‌portions.‌ ‌
● Negotiables‌‌=‌‌No‌‌specified‌‌party‌‌(ex.‌‌To‌‌bearer).‌ ‌ ‌
● In‌‌the‌‌absence‌‌of‌‌a‌‌specific‌‌marking‌‌/‌‌statement‌‌that‌‌the‌‌
instrument‌‌is‌‌non-negotiable,‌‌it‌‌is‌‌presumed‌‌negotiable.‌ ‌ WRL,‌‌Sec.‌‌24.‌‌Liability‌‌of‌‌warehouseman‌‌to‌‌depositors‌‌of‌‌
C.‌‌Obligations‌‌&‌‌Rights‌‌of‌‌a‌‌Warehouseman‌ ‌ commingled‌‌goods‌.‌‌—‌‌The‌‌warehouseman‌‌shall‌‌be‌s ‌ everally‌‌
1.‌‌Liability‌‌for‌‌Goods‌ ‌ liable‌‌to‌‌each‌‌depositor‌‌‌for‌‌the‌c‌ are‌‌and‌‌redelivery‌‌of‌‌his‌‌

share‌‌‌of‌‌such‌‌mass‌‌to‌‌the‌‌same‌‌extent‌‌and‌‌under‌‌the‌‌same‌‌
WRL,‌‌Sec.‌‌20.‌‌Liability‌‌for‌‌non-existence‌‌or‌‌misdescription‌‌ circumstances‌a ‌ s‌‌if‌‌the‌‌goods‌‌had‌‌been‌‌kept‌‌separate‌. ‌ ‌
of‌‌goods‌.‌‌—‌‌A‌‌warehouseman‌‌shall‌‌be‌l‌iable‌‌to‌‌the‌‌holder‌‌of‌‌a ‌‌
receipt‌‌‌for‌‌‌damages‌‌caused‌‌by‌‌the‌‌non-existence‌‌of‌‌the‌‌ Liability‌‌for‌‌Commingled‌‌Goods‌ ‌
goods‌‌or‌‌by‌‌the‌‌failure‌‌of‌‌the‌‌goods‌‌to‌‌correspond‌‌with‌‌the‌‌ ● Same‌‌as‌‌if‌‌the‌‌goods‌‌had‌‌been‌‌kept‌‌separate.‌ ‌
description‌‌thereof‌‌in‌‌the‌‌receipt‌‌at‌‌the‌‌time‌‌of‌‌its‌‌issue‌.‌ ‌If,‌‌
‌
however,‌‌the‌‌goods‌‌are‌‌described‌ ‌in‌‌a‌‌receipt‌‌merely‌‌by‌‌a ‌‌
statement‌‌of‌‌marks‌‌or‌‌labels‌‌upon‌‌them‌‌or‌‌upon‌‌packages‌‌
containing‌‌them‌‌or‌‌by‌‌a‌‌statement‌‌that‌‌the‌‌goods‌‌are‌‌said‌‌to‌‌ WRL,‌‌Sec.‌‌25.‌‌Attachment‌‌or‌‌levy‌‌upon‌‌goods‌‌for‌‌which‌‌a ‌‌
be‌‌goods‌‌of‌‌a‌‌certain‌‌kind‌‌or‌‌that‌‌the‌‌packages‌‌containing‌‌ negotiable‌‌receipt‌‌has‌‌been‌‌issued‌.‌‌—‌‌If‌‌goods‌‌are‌‌delivered‌‌
the‌‌goods‌‌are‌‌said‌‌to‌‌contain‌‌goods‌‌of‌‌a‌‌certain‌‌kind‌‌or‌‌by‌‌ to‌‌a‌‌warehouseman‌‌by‌‌the‌‌owner‌‌or‌‌by‌‌a‌‌person‌‌whose‌‌act‌‌in‌‌
words‌‌of‌‌like‌‌purport‌,‌‌such‌‌statements,‌‌if‌‌true,‌s ‌ hall‌‌not‌‌make‌‌ conveying‌‌the‌‌title‌‌to‌‌them‌‌to‌‌a‌‌purchaser‌‌in‌‌good‌‌faith‌‌for‌‌value‌‌

liable‌‌the‌‌warehouseman‌‌issuing‌‌the‌‌receipt,‌‌although‌‌the‌‌ would‌‌bind‌‌the‌‌owner,‌‌and‌‌a‌‌negotiable‌‌receipt‌‌is‌‌issued‌‌‌for‌‌
goods‌‌are‌‌not‌‌of‌‌the‌‌kind‌‌which‌‌the‌‌marks‌‌or‌‌labels‌‌upon‌‌ them,‌t‌ hey‌‌can‌‌not‌‌thereafter,‌‌while‌‌in‌‌the‌‌possession‌‌of‌‌the‌‌
them‌‌indicate‌‌‌or‌‌of‌‌the‌‌kind‌‌they‌‌were‌‌said‌‌to‌‌be‌‌by‌‌the‌‌
warehouseman,‌‌be‌‌attached‌‌by‌‌garnishment‌‌or‌‌otherwise‌,‌‌or‌‌
depositor.‌ ‌ be‌‌‌levied‌‌upon‌‌under‌‌an‌‌execution‌‌unless‌‌the‌‌receipt‌‌be‌‌first‌‌
surrendered‌‌to‌‌the‌‌warehouseman‌‌‌or‌‌its‌n ‌ egotiation‌‌
Liability‌‌for‌‌Non-Existence‌‌/‌‌Misdescription‌ ‌ enjoined‌.‌ ‌The‌‌warehouseman‌‌shall‌‌in‌‌no‌‌case‌‌be‌‌compelled‌‌to‌‌
● Liable‌‌if‌‌the‌‌description‌‌of‌‌the‌‌receipt,‌‌at‌‌the‌‌time‌‌of‌‌
deliver‌‌up‌‌the‌‌actual‌‌possession‌‌of‌‌the‌‌goods‌‌until‌‌the‌‌receipt‌‌is‌‌

issuance,‌‌does‌‌not‌‌correspond‌‌to‌‌the‌‌goods.‌ ‌ surrendered‌‌to‌‌him‌‌or‌‌impounded‌‌by‌‌the‌‌court.‌ ‌
● Not‌‌liable‌‌if‌‌the‌‌description‌‌only‌‌pertains‌‌to‌‌the‌
packaging‌‌of‌‌the‌‌thing‌‌and‌‌not‌‌the‌‌contents.‌ ‌ Attachment‌‌or‌‌Levy‌ ‌
○ Iniquitous‌‌to‌‌make‌‌the‌‌warehouseman‌‌ ● CANNOT‌‌be‌‌released‌‌by‌‌the‌‌warehouseman‌‌until…‌ ‌
liable‌‌for‌‌goods‌‌he‌‌hasn’t‌‌even‌‌seen.‌ ‌ ○ A‌‌receipt‌‌is‌‌surrendered‌‌to‌‌him;‌‌or‌ ‌
○ Negotiation‌‌of‌‌the‌‌receipt‌‌is‌‌enjoined.‌ ‌
‌
‌
WRL,‌‌Sec.‌‌21.‌‌Liability‌‌for‌‌care‌‌of‌‌goods‌.‌‌—‌‌A‌‌warehouseman‌‌
shall‌‌be‌‌liable‌‌for‌‌any‌‌‌loss‌‌or‌‌injury‌‌to‌‌the‌‌goods‌‌caused‌‌by‌ WRL,‌‌Sec.‌‌26.‌‌Creditor's‌‌remedies‌‌to‌‌reach‌‌negotiable‌‌
his‌‌failure‌‌to‌‌exercise‌‌such‌‌care‌‌‌in‌‌regard‌‌to‌‌them‌‌as‌‌ receipts‌.‌‌—‌‌A‌c‌ reditor‌‌whose‌‌debtor‌‌is‌‌the‌‌owner‌‌of‌‌a ‌‌
reasonably‌‌careful‌‌owner‌‌of‌‌similar‌‌goods‌‌would‌‌exercise,‌‌but‌‌he‌‌ negotiable‌‌receipt‌‌shall‌‌be‌‌entitled‌‌to‌‌such‌‌aid‌‌from‌‌courts‌‌of‌‌
shall‌n‌ ot‌‌be‌‌liable,‌‌in‌‌the‌‌absence‌‌of‌‌an‌‌agreement‌‌to‌‌the‌‌ appropriate‌‌jurisdiction‌,‌‌by‌i‌njunction‌a ‌ nd‌‌otherwise,‌‌in‌‌

contrary‌,‌‌for‌‌any‌‌loss‌‌or‌‌injury‌‌to‌‌the‌‌goods‌‌which‌c‌ ould‌‌not‌‌
attaching‌‌such‌‌receipt‌‌‌or‌‌in‌s
‌ atisfying‌‌the‌‌claim‌‌by‌‌means‌‌
have‌‌been‌‌avoided‌‌by‌‌the‌‌exercise‌‌of‌‌such‌‌care‌. ‌ ‌ thereof‌‌as‌‌is‌‌allowed‌‌at‌‌law‌‌or‌‌in‌‌equity‌‌in‌‌these‌‌islands‌‌‌in‌‌

regard‌‌to‌p
‌ roperty‌‌which‌‌can‌‌not‌‌readily‌‌be‌‌attached‌‌or‌‌levied‌‌
Liability‌‌for‌‌Care‌ ‌ upon‌‌by‌‌ordinary‌‌legal‌‌process‌. ‌ ‌
● Depends‌‌upon‌‌the‌‌quantum‌‌of‌‌diligence‌‌required‌‌
(as‌‌a‌‌reasonable‌‌person‌‌would‌‌care‌‌for‌‌his‌‌own‌‌ Responsibility‌‌of‌‌the‌‌Warehouseman‌ ‌
things).‌ ‌ ● Similar‌‌to‌‌the‌‌depositary’s‌‌for‌‌safekeeping.‌ ‌
● Liable‌‌if‌‌due‌‌to‌‌the‌‌failure‌‌to‌‌exercise‌‌such‌‌
Obligations‌‌of‌‌the‌‌Warehouseman‌ ‌
diligence.‌ ‌ 1. Safekeep‌‌the‌‌goods;‌‌and‌ ‌
● Not‌‌liable‌‌if‌‌the‌‌required‌‌care‌‌could‌‌not‌‌prevent‌‌it‌‌
2. Deliver‌‌the‌‌thing‌‌to‌‌the‌‌person‌‌holding‌‌the‌‌receipt‌‌/‌‌the‌‌

(unless‌‌there‌‌is‌‌a‌‌contrary‌‌stipulation).‌ ‌ person‌‌specified‌‌in‌‌the‌‌receipt.‌ ‌
‌ ‌
‌
24‌ ‌
2.‌‌Obligation‌‌to‌‌Deliver‌ ‌
WRL,‌‌Sec.‌‌10.‌‌Warehouseman's‌‌liability‌‌for‌‌misdelivery‌.‌‌— ‌‌
WRL,‌‌Sec.‌‌16.‌‌Warehouseman‌‌cannot‌‌set‌‌up‌‌title‌‌in‌‌himself‌. ‌‌ Where‌‌a‌‌warehouseman‌d ‌ elivers‌‌the‌‌goods‌‌to‌‌one‌‌who‌‌is‌‌not‌‌
—‌N‌ o‌‌title‌‌or‌‌right‌‌to‌‌the‌‌possession‌‌of‌‌the‌‌goods,‌‌on‌‌the‌‌ in‌‌fact‌‌lawfully‌‌entitled‌‌to‌‌the‌‌possession‌‌‌of‌‌them,‌‌the‌‌
part‌‌of‌‌the‌‌warehouseman‌,‌‌unless‌‌such‌‌title‌‌or‌‌right‌‌is‌d
‌ erived‌‌ warehouseman‌‌shall‌‌be‌l‌iable‌‌as‌‌for‌‌conversion‌‌to‌‌all‌‌having‌‌a ‌‌
directly‌‌or‌‌indirectly‌‌from‌‌a‌‌transfer‌‌made‌‌by‌‌the‌‌depositor‌‌at‌‌ right‌‌of‌‌property‌‌or‌‌possession‌ ‌in‌‌the‌‌goods‌‌if‌‌he‌‌delivered‌‌
the‌‌time‌‌of‌‌or‌‌subsequent‌‌to‌‌the‌‌deposit‌‌‌for‌‌storage,‌‌or‌‌from‌‌ the‌‌goods‌‌otherwise‌‌than‌‌as‌‌authorized‌‌‌by‌‌subdivisions‌‌(b)‌‌
the‌‌warehouseman's‌‌lien,‌s ‌ hall‌‌excuse‌‌the‌‌warehouseman‌‌ and‌‌(c)‌‌of‌‌the‌‌preceding‌‌section,‌‌and‌‌though‌‌he‌‌delivered‌‌the‌‌
from‌‌liability‌‌for‌‌refusing‌‌to‌‌deliver‌‌the‌‌goods‌‌according‌‌to‌‌ goods‌‌as‌‌authorized‌‌by‌‌said‌‌subdivisions,‌‌he‌‌shall‌‌be‌‌so‌‌‌liable,‌‌if‌‌
the‌‌terms‌‌of‌‌the‌‌receipt‌. ‌ ‌ prior‌‌to‌‌such‌‌delivery‌‌he‌‌had‌‌either‌: ‌ ‌
(a) Been‌‌requested,‌‌by‌‌or‌‌on‌‌behalf‌‌of‌‌the‌‌person‌‌
General‌‌Rule‌ ‌ lawfully‌‌entitled‌‌to‌‌a‌‌right‌‌of‌‌property‌‌or‌‌
● No‌‌title‌‌/‌‌right‌‌to‌‌possession‌‌can‌‌excuse‌‌the‌‌
possession‌‌in‌‌the‌‌goods,‌‌not‌‌to‌‌make‌‌such‌‌
warehouseman‌‌from‌‌liability‌‌for‌‌refusing‌‌to‌‌deliver‌‌ delivery‌;‌‌or‌ ‌
the‌‌goods‌‌according‌‌to‌‌the‌‌receipt’s‌‌terms.‌ ‌ (b) Had‌‌information‌‌that‌‌the‌d ‌ elivery‌‌about‌‌to‌‌be‌‌made‌‌
Exception‌ ‌ was‌‌to‌‌one‌‌not‌‌lawfully‌‌entitled‌‌to‌‌the‌‌possession‌‌
1. Title‌‌/‌‌right‌‌is‌‌derived‌‌from‌‌a‌‌transfer‌‌made‌‌by‌‌the‌‌
of‌‌the‌‌goods.‌ ‌
depositor…‌ ‌ ‌
○ At‌‌the‌‌time‌‌of‌‌the‌‌deposit‌ ‌
○ Subsequent‌‌to‌‌the‌‌deposit‌ ‌ Warehouseman’s‌‌Liability‌‌for‌‌Misdelivery‌ ‌
2. Title‌‌/‌‌right‌‌is‌‌derived‌‌from‌‌a‌‌warehouseman’s‌‌lien.‌ ‌ 1. When‌‌delivery‌‌not‌‌to‌‌the‌‌person‌‌lawfully‌‌entitled,‌‌
liable‌‌for‌‌conversion‌‌to‌‌those‌‌entitled.‌ ‌
‌ 2. Delivery‌‌as‌‌authorized,‌‌but‌‌prior‌‌to‌‌that…‌ ‌
○ Requested‌‌not‌‌to‌‌make‌‌delivery;‌ ‌
WRL,‌‌Sec.‌‌8.‌‌Obligation‌‌of‌‌warehousemen‌‌to‌‌deliver‌.‌‌—‌‌A ‌‌ ○ Knew‌‌that‌‌delivery‌‌was‌‌not‌‌to‌‌the‌‌one‌‌

warehouseman,‌i‌n‌‌the‌‌absence‌‌of‌‌some‌‌lawful‌‌excuse‌‌ lawfully‌‌entitled.‌ ‌
provided‌‌by‌‌this‌‌Act,‌‌is‌b
‌ ound‌‌to‌‌deliver‌‌the‌‌goods‌‌upon‌‌a ‌‌
demand‌‌made‌‌either‌‌by‌‌the‌‌holder‌‌of‌‌a‌‌receipt‌‌for‌‌the‌‌goods‌‌ ‌
or‌‌by‌‌the‌‌depositor‌;‌‌if‌‌such‌‌demand‌‌is‌‌accompanied‌‌with:‌ ‌
WRL,‌‌Sec.‌‌11.‌‌Negotiable‌‌receipt‌‌must‌‌be‌‌cancelled‌‌when‌‌
(a) An‌o ‌ ffer‌‌to‌‌satisfy‌‌the‌‌warehouseman's‌‌lien‌; ‌ ‌ goods‌‌delivered‌.‌‌—‌‌Except‌‌as‌‌provided‌‌in‌‌section‌‌thirty-six,‌‌
(b) An‌‌‌offer‌‌to‌‌surrender‌‌the‌‌receipt,‌‌if‌‌negotiable,‌‌with‌‌ where‌‌a‌‌warehouseman‌‌delivers‌‌goods‌‌for‌‌which‌‌he‌‌had‌‌issued‌‌a ‌‌
such‌‌indorsements‌‌as‌‌would‌‌be‌‌necessary‌‌‌for‌‌the‌‌ negotiable‌‌receipt,‌‌the‌n ‌ egotiation‌‌of‌‌which‌‌would‌‌transfer‌‌the‌‌
negotiation‌‌of‌‌the‌‌receipt;‌‌and‌ ‌ right‌‌to‌‌the‌‌possession‌‌of‌‌the‌‌goods,‌‌and‌‌fails‌‌to‌‌take‌‌up‌‌and‌‌
(c) A‌‌‌readiness‌‌and‌‌willingness‌‌to‌‌sign,‌‌when‌‌the‌‌ cancel‌‌the‌‌receipt,‌‌he‌‌shall‌‌be‌‌liable‌‌to‌‌any‌‌one‌‌who‌‌
goods‌‌are‌‌delivered,‌‌an‌‌acknowledgment‌‌that‌‌they‌‌ purchases‌‌for‌‌value‌‌in‌‌good‌‌faith‌‌such‌‌receipt,‌‌for‌‌failure‌‌to‌‌
have‌‌been‌‌delivered,‌‌if‌‌such‌‌signature‌‌is‌‌requested‌‌ deliver‌‌the‌‌goods‌‌to‌‌him‌,‌‌whether‌‌such‌‌purchaser‌‌acquired‌‌title‌‌
by‌‌the‌‌warehouseman.‌ ‌ to‌‌the‌‌receipt‌‌before‌‌or‌‌after‌‌the‌‌delivery‌‌of‌‌the‌‌goods‌‌by‌‌the‌‌

In‌‌case‌‌the‌‌warehouseman‌r‌ efuses‌‌or‌‌fails‌‌to‌‌deliver‌‌the‌‌
warehouseman.‌ ‌
goods‌‌in‌‌compliance‌‌with‌‌a‌‌demand‌‌by‌‌the‌‌holder‌‌or‌‌
Warehouseman’s‌‌Liability‌‌for‌‌Failure‌‌to‌‌Cancel‌‌Negotiable‌‌
depositor‌‌so‌‌accompanied,‌‌the‌‌burden‌‌shall‌‌be‌‌upon‌‌the‌‌ Receipt‌ ‌
warehouseman‌‌to‌‌establish‌‌the‌‌existence‌‌of‌‌a‌‌lawful‌‌excuse‌‌ ● After‌‌negotiation,‌‌warehouseman‌‌must‌‌cancel‌‌it.‌ ‌
for‌‌such‌‌refusal.‌ ‌ ● If‌‌he‌‌fails‌‌and‌‌someone‌‌buys‌‌the‌‌receipt‌‌in‌‌good‌‌
Requisites‌‌for‌‌Obligation‌‌to‌‌Deliver‌ ‌ faith,‌‌he‌‌is‌‌liable‌‌as‌‌if‌‌he‌‌had‌‌failed‌‌to‌‌deliver‌‌to‌‌the‌‌

1. Demand‌‌by‌‌holder‌‌of‌‌receipt‌‌/‌‌depositor;‌ ‌ rightful‌‌holder‌‌of‌‌the‌‌receipt.‌ ‌
2. Offer‌‌to‌‌satisfy‌‌warehouseman’s‌‌lien;‌ ‌ ‌
3. Offer‌‌to‌‌surrender‌‌receipt;‌ ‌
○ If‌‌negotiable,‌‌w/‌‌necessary‌‌indorsements‌ ‌
4. Readiness‌‌/‌‌willingness‌‌to‌‌sign.‌ ‌ WRL,‌‌Sec.‌‌12.‌‌Negotiable‌‌receipts‌‌must‌‌be‌‌cancelled‌‌or‌‌
Refusal‌‌/‌‌Failure‌‌to‌‌Deliver‌‌Despite‌‌Demand‌ ‌ marked‌‌when‌‌part‌‌of‌‌goods‌‌delivered‌.‌‌—‌‌Except‌‌as‌‌provided‌‌
● Warehouseman‌‌must‌‌establish‌‌a‌‌lawful‌‌excuse.‌ ‌ in‌‌section‌‌thirty-six,‌w‌ here‌‌a‌‌warehouseman‌‌delivers‌‌part‌‌of‌‌
the‌‌goods‌‌for‌‌which‌‌he‌‌had‌‌issued‌‌a‌‌negotiable‌‌receipt‌‌and‌‌
‌ fails‌‌either‌‌to‌‌take‌‌up‌‌and‌‌cancel‌‌such‌‌receipt‌‌or‌‌to‌‌place‌‌
plainly‌‌upon‌‌it‌‌a‌‌statement‌‌of‌‌what‌‌goods‌‌or‌‌packages‌‌have‌‌
WRL,‌‌Sec.‌‌9.‌‌Justification‌‌of‌‌warehouseman‌‌in‌‌delivering‌.‌‌— ‌‌ been‌‌delivered‌,‌‌he‌‌shall‌‌be‌l‌iable‌‌to‌‌any‌‌one‌‌who‌‌purchases‌‌
A‌‌warehouseman‌‌is‌j‌ustified‌‌in‌‌delivering‌‌the‌‌goods‌,‌‌subject‌‌to‌‌ for‌‌value‌‌in‌‌good‌‌faith‌‌such‌‌receipt,‌‌for‌‌failure‌‌to‌‌deliver‌‌all‌‌
the‌‌provisions‌‌of‌‌the‌‌three‌‌following‌‌sections,‌t‌ o‌‌one‌‌who‌‌is‌: ‌ ‌ the‌‌goods‌‌specified‌‌in‌‌the‌‌receipt‌,‌‌whether‌‌such‌‌purchaser‌‌
acquired‌‌title‌‌to‌‌the‌‌receipt‌‌before‌‌or‌‌after‌‌the‌‌delivery‌‌of‌‌any‌‌

(a) The‌p ‌ erson‌‌lawfully‌‌entitled‌‌to‌‌the‌‌possession‌‌of‌‌ portion‌‌of‌‌the‌‌goods‌‌by‌‌the‌‌warehouseman.‌ ‌
the‌‌goods,‌‌or‌‌his‌‌agent‌; ‌ ‌
(b) A‌‌person‌‌who‌‌is‌‌‌either‌‌himself‌‌entitled‌‌to‌‌delivery‌‌by‌‌ Warehouseman’s‌‌Liability‌‌for‌‌Failure‌‌to‌‌Cancel‌‌Negotiable‌‌
the‌‌terms‌‌of‌‌a‌‌non-negotiable‌‌receipt‌‌issued‌‌for‌‌the‌‌ Receipt‌‌for‌‌Goods‌‌Partially‌‌Delivered‌ ‌
goods‌,‌‌or‌‌who‌‌has‌w ‌ ritten‌‌authority‌‌from‌‌the‌‌person‌‌ ● Failure‌‌to‌‌cancel‌‌receipt‌‌after‌‌partial‌‌delivery‌‌or‌‌

so‌‌entitled‌‌either‌‌indorsed‌‌upon‌‌the‌‌receipt‌‌or‌‌ failure‌‌to‌‌plainly‌‌state‌‌what‌‌goods‌‌have‌‌been‌‌
written‌‌upon‌‌another‌‌paper‌;‌‌or‌ ‌ delivered,‌‌liable‌‌in‌‌the‌‌same‌‌way‌‌as‌‌WRL,‌‌Sec.‌‌11.‌ ‌
(c) A‌‌person‌‌‌in‌‌possession‌‌of‌‌a‌‌negotiable‌‌receipt‌‌by‌‌
‌
the‌‌terms‌‌of‌‌which‌‌the‌‌goods‌‌are‌‌deliverable‌‌to‌‌him‌‌
or‌‌order,‌‌or‌‌to‌‌bearer,‌‌or‌‌which‌‌has‌‌been‌‌indorsed‌‌
to‌‌him‌‌or‌‌in‌‌blank‌‌by‌‌the‌‌person‌‌to‌‌whom‌‌delivery‌‌ WRL,‌‌Sec.‌‌13.‌‌Altered‌‌receipts‌.‌‌—‌‌The‌‌alteration‌‌of‌‌a‌‌receipt‌‌

was‌‌promised‌‌‌by‌‌the‌‌terms‌‌of‌‌the‌‌receipt‌‌or‌‌by‌‌his‌‌
shall‌‌not‌‌excuse‌‌the‌‌warehouseman‌‌who‌‌issued‌‌it‌‌from‌‌any‌‌
mediate‌‌or‌‌immediate‌‌indorser.‌ ‌ liability‌‌if‌‌such‌‌‌alteration‌‌was:‌ ‌
To‌‌Whom‌‌Delivered?‌ ‌ (a) Immaterial‌, ‌ ‌

a. Person‌‌lawfully‌‌entitled;‌‌or‌‌agent‌ ‌ (b) Authorized‌,‌‌or‌ ‌
b. Person‌‌entitled‌‌w/‌‌non-negotiable‌‌receipt;‌‌or‌‌person‌‌
w/‌‌written‌‌authority‌‌so‌‌entitled‌ ‌ (c) Made‌‌without‌f‌ raudulent‌‌intent‌. ‌ ‌
c. Person‌‌possessing‌‌negotiable‌‌receipt.‌ ‌
○ Deliverable‌‌to‌‌him‌‌/‌‌order‌ ‌ Warehouseman‌‌Altered‌‌the‌‌Receipt‌ ‌
○ Deliverable‌‌to‌‌bearer,‌‌indorsed‌‌to‌‌him‌‌or‌‌
● Warehouseman‌‌is‌‌liable‌‌for‌‌alteration,‌‌even‌‌if‌‌

in‌‌blank‌ ‌ immaterial,‌‌authorized,‌‌or‌‌w/o‌‌fraud.‌ ‌
‌ ‌
25‌ ‌
If‌‌the‌‌alteration‌‌was‌a
‌ uthorized‌,‌‌the‌‌warehouseman‌‌shall‌‌be‌‌ WRL,‌‌Sec.‌‌18.‌‌Warehouseman‌‌has‌‌reasonable‌‌time‌‌to‌‌
liable‌‌according‌‌to‌‌the‌‌terms‌‌of‌‌the‌‌receipt‌‌as‌‌altered‌.‌ ‌If‌‌the‌‌
determine‌‌validity‌‌of‌‌claims‌.‌‌—‌‌If‌‌someone‌o ‌ ther‌‌than‌‌the‌‌
alteration‌‌was‌u ‌ nauthorized‌‌but‌‌made‌‌without‌‌fraudulent‌‌ depositor‌‌or‌‌person‌‌claiming‌‌under‌‌him‌‌has‌‌a‌‌claim‌‌to‌‌the‌‌
intent‌,‌‌the‌‌warehouseman‌‌shall‌‌be‌l‌iable‌‌according‌‌to‌‌the‌‌ title‌‌or‌‌possession‌‌of‌‌goods‌,‌‌and‌‌the‌‌warehouseman‌‌has‌‌
terms‌‌of‌‌the‌‌receipt‌‌as‌‌they‌‌were‌‌before‌‌‌alteration.‌ ‌ information‌o ‌ f‌‌such‌‌claim,‌‌the‌‌warehouseman‌‌shall‌‌be‌‌‌excused‌‌
from‌‌liability‌‌for‌‌refusing‌‌to‌‌deliver‌‌the‌‌goods,‌‌either‌‌to‌‌the‌‌
Authorized‌‌Alteration‌ ‌ depositor‌‌or‌‌person‌‌claiming‌‌under‌‌him‌‌or‌‌to‌‌the‌‌adverse‌‌
● Warehouseman‌‌liable;‌‌terms‌‌of‌‌altered.‌ ‌ claimant‌‌until‌‌the‌‌warehouseman‌‌has‌‌had‌‌a‌‌reasonable‌‌time‌‌
Unauthorized‌‌Alteration‌ ‌ to‌‌ascertain‌‌the‌‌validity‌‌of‌‌the‌‌adverse‌‌claim‌‌‌or‌‌to‌‌bring‌‌legal‌‌
● Warehouseman‌‌liable;‌‌terms‌‌of‌‌unaltered.‌ ‌ proceedings‌‌to‌‌compel‌‌claimants‌‌to‌‌interplead.‌ ‌
‌ Excusal‌‌from‌‌Liability‌‌for‌‌Refusal‌‌to‌‌Deliver‌ ‌
● When‌‌a‌‌person‌‌other‌‌than‌‌the‌‌depositor‌‌or‌‌his‌‌agent‌‌
Material‌‌and‌‌fraudulent‌‌alteration‌‌of‌‌a‌‌receipt‌‌shall‌‌not‌‌ presents‌‌a‌‌claim‌‌to‌‌the‌‌title‌‌/‌‌possession‌‌of‌‌the‌‌

excuse‌‌the‌‌warehouseman‌‌who‌‌issued‌‌it‌‌from‌‌liability‌‌to‌‌ goods,‌‌the‌‌warehouseman‌‌can‌‌refuse.‌ ‌
deliver‌‌according‌‌to‌‌the‌‌terms‌‌of‌‌the‌‌receipt‌‌as‌‌originally‌‌ ● Warehouseman‌‌must‌‌have‌‌reasonable‌‌time‌‌to…‌ ‌
issued‌,‌‌the‌‌goods‌‌for‌‌which‌‌it‌‌was‌‌issued‌‌but‌‌shall‌e ‌ xcuse‌‌him‌‌
○ Ascertain‌‌validity‌‌of‌‌the‌‌adverse‌‌claim;‌‌or‌ ‌
from‌‌any‌‌other‌‌liability‌‌to‌‌the‌‌person‌‌who‌‌made‌‌the‌‌alteration‌‌ ○ Compel‌‌claimants‌‌to‌‌interplead‌‌legally.‌ ‌
and‌‌to‌a ‌ ny‌‌person‌‌who‌‌took‌‌with‌‌notice‌‌of‌‌the‌‌alteration‌.‌ ‌Any‌‌
purchaser‌‌of‌‌the‌‌receipt‌‌for‌‌value‌w
‌ ithout‌‌notice‌‌of‌‌the‌‌ ‌
alteration‌‌shall‌‌acquire‌‌the‌‌same‌‌rights‌‌against‌‌the‌‌
warehouseman‌‌which‌‌such‌‌purchaser‌‌would‌‌have‌‌acquired‌‌ WRL,‌‌Sec.‌‌19.‌‌Adverse‌‌title‌‌is‌‌no‌‌defense‌‌except‌‌as‌‌above‌‌
if‌‌the‌‌receipt‌‌had‌‌not‌‌been‌‌altered‌‌‌at‌‌the‌‌time‌‌of‌‌purchase.‌ ‌ provided‌.‌‌—‌‌Except‌‌as‌‌provided‌‌in‌‌the‌‌two‌‌preceding‌‌sections‌‌
and‌‌in‌‌sections‌‌nine‌‌and‌‌thirty-six,‌n
‌ o‌‌right‌‌or‌‌title‌‌of‌‌a‌‌third‌‌

Material‌‌&‌‌Fraudulent‌‌Alteration‌ ‌
person‌‌shall‌‌be‌‌a‌‌defense‌‌to‌‌an‌‌action‌‌brought‌‌by‌‌the‌‌
● Warehouseman‌‌still‌‌liable‌‌to‌‌deliver‌‌according‌‌to‌‌the‌‌
depositor‌‌or‌‌person‌‌claiming‌‌under‌‌him‌‌against‌‌the‌‌
unaltered‌‌terms.‌ ‌
warehouseman‌‌for‌‌failure‌‌to‌‌deliver‌‌‌the‌‌goods‌‌according‌‌to‌‌the‌‌
● However,‌‌warehouseman‌‌is‌‌excused‌‌from‌‌any‌‌other‌‌
terms‌‌of‌‌the‌‌receipt.‌ ‌
liability‌‌to‌‌the‌‌person‌‌who‌‌made‌‌the‌‌alteration,‌‌or‌‌

any‌‌other‌‌person‌‌who‌‌took‌‌the‌‌receipt‌‌w/‌‌notice‌‌of‌‌ Adverse‌‌Title‌‌Not‌‌a‌‌Defense‌‌for‌‌Failure‌‌to‌‌Deliver‌ ‌
alteration.‌ ‌ ● Just‌‌because‌‌someone‌‌else‌‌presents‌‌an‌‌adverse‌‌
Purchaser‌‌w/o‌‌Notice‌‌of‌‌Alteration‌ ‌ title‌‌doesn’t‌‌mean‌‌the‌‌warehouseman‌‌is‌‌excused.‌ ‌
● Acquire‌‌rights‌‌granted‌‌by‌‌the‌‌unaltered‌‌terms.‌ ‌ ● He‌‌is‌‌only‌‌excused‌‌if‌‌he‌‌takes‌‌the‌‌time‌‌to‌‌ascertain‌‌

validity,‌‌or‌‌compel‌‌legal‌‌action,‌‌as‌‌in‌‌WRL,‌‌Sec.‌‌18.‌ ‌
‌
‌
WRL,‌‌Sec.‌‌14.‌‌Lost‌‌or‌‌destroyed‌‌receipts‌.‌‌—‌‌Where‌‌a ‌‌
‌
negotiable‌‌receipt‌‌has‌‌been‌‌lost‌‌or‌‌destroyed‌,‌‌a‌c ‌ ourt‌‌of‌‌

competent‌‌jurisdiction‌‌may‌‌order‌‌the‌‌delivery‌‌of‌‌the‌‌goods‌‌ 3.‌‌Warehouseman’s‌‌Lien‌ ‌
upon‌‌satisfactory‌‌proof‌‌of‌‌such‌‌loss‌‌‌or‌‌destruction‌‌and‌‌upon‌‌
WRL,‌‌Sec.‌‌32.‌‌Warehouseman's‌‌lien‌‌does‌‌not‌‌preclude‌‌other‌‌
the‌g‌ iving‌‌of‌‌a‌‌bond‌‌with‌‌sufficient‌‌sureties‌‌to‌‌be‌‌approved‌‌
remedies‌.‌‌—‌‌Whether‌‌a‌‌warehouseman‌‌has‌‌or‌‌has‌‌not‌‌a‌‌lien‌‌
by‌‌the‌‌court‌‌to‌‌protect‌‌the‌‌warehouseman‌‌from‌‌any‌‌liability‌‌
upon‌‌the‌‌goods,‌‌he‌‌is‌‌‌entitled‌‌to‌‌all‌‌remedies‌‌allowed‌‌by‌‌law‌‌

or‌‌expense,‌‌which‌‌‌he‌‌or‌‌any‌‌person‌‌injured‌‌by‌‌such‌‌delivery‌‌
may‌‌incur‌‌by‌‌reason‌‌of‌‌the‌‌original‌‌receipt‌‌remaining‌‌ to‌‌a‌‌creditor‌‌against‌‌a‌‌debtor‌‌for‌‌the‌‌collection‌‌from‌‌the‌‌
depositor‌‌of‌‌all‌‌charges‌‌and‌‌advances‌‌which‌‌the‌‌depositor‌‌
outstanding‌.‌ ‌The‌‌court‌‌may‌‌also‌‌in‌‌its‌‌discretion‌o
‌ rder‌‌the‌‌

has‌‌expressly‌‌or‌‌impliedly‌‌contracted‌‌‌with‌‌the‌‌warehouseman‌‌
payment‌‌of‌‌the‌‌warehouseman's‌‌reasonable‌‌costs‌‌‌and‌‌
to‌‌pay.‌ ‌
counsel‌‌fees.‌ ‌
Lost‌‌/‌‌Destroyed‌‌Receipts‌ ‌ WRL,‌‌Sec.‌‌27.‌‌What‌‌claims‌‌are‌‌included‌‌in‌‌the‌‌
● Person‌‌claiming‌‌must‌‌satisfactorily‌‌prove‌‌loss‌‌/ ‌‌ warehouseman's‌‌lien‌.‌‌—‌‌Subject‌‌to‌‌the‌‌provisions‌‌of‌‌section‌‌
destruction‌‌to‌‌the‌‌court.‌ ‌ thirty,‌‌a‌‌warehouseman‌‌shall‌‌have‌‌a‌‌lien‌‌on‌‌goods‌‌deposited‌‌or‌‌
● Person‌‌claiming‌‌must‌‌also‌‌give‌‌a‌‌bond‌‌to‌‌protect‌‌ on‌‌the‌‌proceeds‌‌thereof‌‌in‌‌his‌‌hands,‌‌for‌‌all‌‌lawful‌‌charges‌‌
the‌‌warehouseman‌‌from‌‌any‌‌liability‌‌or‌‌expense.‌ ‌ for‌‌storage‌‌and‌‌preservation‌‌of‌‌the‌‌goods‌;‌‌also‌‌for‌‌all‌‌lawful‌‌

● Upon‌‌proof,‌‌the‌‌court‌‌may‌‌motu‌‌proprio‌‌order‌‌
claims‌‌for‌‌money‌‌advanced,‌‌interest,‌‌insurance,‌‌transportation,‌‌
payment‌‌of‌‌the‌‌warehouseman’s‌‌reasonable‌‌costs.‌ ‌ labor,‌‌weighing,‌‌coopering‌‌and‌o‌ ther‌‌charges‌‌and‌‌expenses‌‌in‌‌
relation‌‌to‌‌such‌‌goods,‌‌also‌‌for‌‌all‌‌reasonable‌‌charges‌‌and‌‌
‌
expenses‌‌for‌‌notice,‌‌and‌‌advertisements‌‌of‌‌sale‌,‌‌and‌‌for‌s ‌ ale‌‌
The‌‌delivery‌‌of‌‌the‌‌goods‌‌under‌‌an‌‌order‌‌of‌‌the‌‌court‌‌as‌‌provided‌‌
of‌‌the‌‌goods‌‌where‌‌default‌‌had‌‌been‌‌made‌‌in‌‌satisfying‌‌the‌‌
in‌‌this‌‌section,‌‌‌shall‌‌not‌‌relieve‌‌the‌‌warehouseman‌‌from‌‌ warehouseman's‌‌lien‌. ‌ ‌
liability‌‌to‌‌a‌‌person‌‌to‌‌whom‌‌the‌‌negotiable‌‌receipt‌‌has‌‌been‌‌
or‌‌shall‌‌be‌‌negotiated‌‌for‌‌value‌‌without‌‌notice‌‌of‌‌the‌‌
proceedings‌‌‌or‌‌of‌‌the‌‌delivery‌‌of‌‌the‌‌goods.‌ ‌ WRL,‌‌Sec.‌‌28.‌‌Against‌‌what‌‌property‌‌the‌‌lien‌‌may‌‌be‌‌
enforced‌.‌‌—‌‌Subject‌‌to‌‌the‌‌provisions‌‌of‌‌section‌‌thirty,‌‌a ‌‌
● Even‌‌if‌‌the‌‌court‌‌ordered‌‌the‌‌delivery‌‌of‌‌the‌‌goods‌‌
warehouseman's‌‌lien‌‌may‌‌be‌‌enforced‌: ‌ ‌
as‌‌provided‌‌here,‌‌the‌‌warehouseman‌‌is‌‌still‌‌liable‌‌to‌‌
the‌‌person‌‌who‌‌had‌‌the‌‌negotiable‌‌receipt,‌‌w/o‌ (a) Against‌‌all‌‌goods,‌‌whenever‌‌deposited,‌‌belonging‌‌
to‌‌the‌‌person‌‌who‌‌is‌‌liable‌‌as‌‌debtor‌‌‌for‌‌the‌‌claims‌‌

notice‌‌of‌‌the‌‌proceedings.‌ ‌
in‌‌regard‌‌to‌‌which‌‌the‌‌lien‌‌is‌‌asserted,‌‌and‌ ‌
‌ (b) Against‌‌all‌‌goods‌‌belonging‌‌to‌‌others‌‌which‌‌have‌‌
been‌‌deposited‌‌at‌‌any‌‌time‌‌by‌‌the‌‌person‌‌who‌‌is‌‌
WRL,‌‌Sec.‌‌17.‌‌Interpleader‌‌of‌‌adverse‌‌claimants‌.‌‌—‌‌If‌m ‌ ore‌‌ liable‌‌as‌‌debtor‌‌‌for‌‌the‌‌claims‌‌in‌‌regard‌‌to‌‌which‌‌the‌‌
than‌‌one‌‌person‌‌claims‌‌the‌‌title‌‌or‌‌possession‌‌of‌‌the‌‌goods‌, ‌‌ lien‌‌is‌‌asserted‌‌if‌‌such‌‌person‌‌had‌‌been‌‌so‌‌entrusted‌‌
the‌w
‌ arehouseman‌‌may,‌‌either‌‌as‌‌a‌‌defense‌‌to‌‌an‌‌action‌‌ with‌‌the‌‌possession‌‌of‌‌goods‌‌that‌‌a‌‌pledge‌‌of‌‌the‌‌same‌‌
brought‌‌against‌‌him‌‌for‌‌non-delivery‌‌‌of‌‌the‌‌goods‌‌or‌‌as‌‌an‌‌ by‌‌him‌‌at‌‌the‌‌time‌‌of‌‌the‌‌deposit‌‌to‌‌one‌‌who‌‌took‌‌the‌‌

original‌‌suit,‌‌whichever‌‌is‌‌appropriate,‌r‌ equire‌‌all‌‌known‌‌
goods‌‌in‌‌good‌‌faith‌‌for‌‌value‌‌would‌‌have‌‌been‌‌valid.‌ ‌
claimants‌‌to‌‌interplead‌. ‌ ‌
When‌‌Multiple‌‌People‌‌Claim‌‌Title‌ ‌ WRL,‌‌Sec.‌‌29.‌‌How‌‌the‌‌lien‌‌may‌‌be‌‌lost‌.‌‌—‌‌A‌‌warehouseman‌‌

● Warehouseman‌‌may‌‌require‌‌all‌‌known‌‌claimants‌‌to‌‌ loses‌‌his‌‌lien‌‌‌upon‌‌goods:‌ ‌
interplead‌‌in‌‌a‌‌suit‌‌for‌‌non-delivery‌‌against‌‌him.‌ ‌ (a) By‌‌‌surrendering‌‌possession‌‌‌thereof,‌‌or‌
‌ (b) By‌r‌ efusing‌‌to‌‌deliver‌‌the‌‌goods‌‌when‌‌a‌‌demand‌‌is‌‌

made‌‌with‌‌which‌‌he‌‌is‌‌bound‌‌to‌‌comply‌‌‌under‌‌the‌‌

26‌ ‌
provisions‌‌of‌‌this‌‌Act.‌ ‌ person‌‌in‌‌whose‌‌names‌‌the‌‌goods‌‌are‌‌stored,‌‌as‌‌is‌‌
reasonable‌‌and‌‌possible‌‌under‌‌the‌‌circumstances,‌‌to‌‌satisfy‌‌
the‌‌lien‌‌upon‌‌such‌‌goods‌‌and‌‌to‌‌remove‌‌them‌‌from‌‌the‌‌
WRL,‌‌Sec.‌‌30.‌‌Negotiable‌‌receipt‌‌must‌‌state‌‌charges‌‌for‌‌ warehouse‌‌‌and‌‌in‌‌the‌‌‌event‌‌of‌‌the‌‌failure‌‌of‌‌such‌‌person‌‌to‌‌

which‌‌the‌‌lien‌‌is‌‌claimed‌.‌‌—‌‌If‌‌a‌n
‌ egotiable‌‌receipt‌‌is‌‌issued‌‌ satisfy‌‌the‌‌lien‌‌and‌‌to‌‌receive‌‌the‌‌goods‌‌within‌‌the‌‌time‌‌so‌‌

for‌‌goods‌,‌‌the‌‌‌warehouseman‌‌shall‌‌have‌‌no‌‌lien‌‌thereon‌‌ specified,‌‌the‌‌warehouseman‌‌may‌‌sell‌‌the‌‌goods‌‌at‌‌public‌‌or‌‌
except‌‌for‌‌charges‌‌for‌‌storage‌‌of‌‌goods‌‌subsequent‌‌to‌‌the‌‌ private‌‌sale‌‌without‌‌advertising‌.‌ ‌If‌‌the‌‌warehouseman,‌‌after‌‌a ‌‌
date‌‌of‌‌the‌‌receipt‌‌unless‌‌the‌‌receipt‌‌expressly‌‌enumerated‌‌ reasonable‌‌effort,‌‌is‌u‌ nable‌‌to‌‌sell‌‌such‌‌goods,‌‌he‌‌may‌‌

other‌‌charges‌‌for‌‌which‌‌a‌‌lien‌‌is‌‌claimed‌.‌ ‌In‌‌such‌‌case,‌‌there‌‌ dispose‌‌of‌‌them‌‌in‌‌any‌‌lawful‌‌manner‌‌‌and‌‌shall‌‌incur‌‌no‌‌
shall‌‌be‌‌a‌l‌ien‌‌for‌‌the‌‌charges‌‌enumerated‌‌so‌‌far‌‌as‌‌they‌‌are‌‌ liability‌‌by‌‌reason‌‌thereof.‌ ‌
within‌‌the‌‌terms‌‌of‌‌section‌‌twenty-seven‌‌although‌‌the‌‌
amount‌‌of‌‌the‌‌charges‌‌so‌‌enumerated‌‌is‌‌not‌‌stated‌‌‌in‌‌the‌‌ The‌‌proceeds‌‌of‌‌any‌‌sale‌‌made‌‌under‌‌the‌‌terms‌‌of‌‌this‌‌

receipt.‌ ‌ section‌‌shall‌‌be‌‌disposed‌‌of‌‌in‌‌the‌‌same‌‌way‌‌as‌‌the‌‌

proceeds‌‌of‌‌sales‌‌made‌‌under‌‌the‌‌terms‌‌of‌‌the‌‌preceding‌‌
section‌. ‌ ‌
WRL,‌‌Sec.‌‌31.‌‌Warehouseman‌‌need‌‌not‌‌deliver‌‌until‌‌lien‌‌is‌‌
satisfied‌.‌‌—‌‌A‌w ‌ arehouseman‌‌having‌‌a‌‌lien‌‌valid‌‌against‌‌the‌‌
person‌‌demanding‌‌‌the‌‌goods‌m ‌ ay‌‌refuse‌‌to‌‌deliver‌‌the‌‌goods‌‌ WRL,‌‌Sec.‌‌35.‌‌Other‌‌methods‌‌of‌‌enforcing‌‌lien‌.‌‌—‌‌The‌‌
to‌‌him‌‌until‌‌the‌‌lien‌‌is‌s
‌ atisfied‌. ‌ ‌ remedy‌‌for‌‌‌enforcing‌‌a‌‌lien‌‌herein‌‌provided‌‌does‌‌not‌‌
preclude‌‌any‌‌other‌‌remedies‌‌allowed‌‌by‌‌law‌‌for‌‌the‌‌
enforcement‌‌of‌‌a‌‌lien‌‌against‌‌personal‌‌property‌‌nor‌‌bar‌‌the‌‌
WRL,‌‌Sec.‌‌33.‌‌Satisfaction‌‌of‌‌lien‌‌by‌‌sale‌.‌‌—‌‌A ‌‌
right‌‌to‌‌recover‌‌so‌‌much‌‌of‌‌the‌‌warehouseman's‌‌claim‌‌‌as‌‌
warehouseman's‌‌lien‌‌for‌‌a‌‌claim‌‌which‌‌has‌‌become‌‌due‌‌may‌‌be‌‌

shall‌‌not‌‌be‌‌paid‌‌by‌‌the‌‌proceeds‌‌of‌‌the‌‌sale‌‌of‌‌the‌‌property.‌ ‌
satisfied‌‌as‌‌follows:‌ ‌
(a) An‌‌itemized‌‌statement‌ ‌of‌‌the‌‌warehouseman's‌‌ WRL,‌‌Sec.‌‌36.‌‌Effect‌‌of‌‌sale‌.‌‌—‌‌Af‌ ter‌‌goods‌‌have‌‌been‌‌
claim‌,‌‌showing‌‌the‌‌sum‌‌due‌‌at‌‌the‌‌time‌‌of‌‌the‌‌notice‌‌
lawfully‌‌sold‌‌‌to‌‌satisfy‌‌a‌‌warehouseman's‌‌lien,‌‌or‌‌have‌‌been‌‌
and‌‌the‌‌date‌‌or‌‌dates‌‌when‌‌it‌‌becomes‌‌due,‌ ‌ lawfully‌‌sold‌‌or‌‌disposed‌‌of‌‌because‌‌of‌‌their‌‌perishable‌‌or‌‌
(b) A‌b‌ rief‌‌description‌‌of‌‌the‌‌goods‌‌against‌‌which‌‌the‌‌
hazardous‌‌nature,‌‌the‌‌warehouseman‌‌shall‌‌not‌‌thereafter‌‌be‌‌
liable‌‌for‌‌failure‌‌to‌‌deliver‌‌‌the‌‌goods‌‌to‌‌the‌‌depositor‌‌or‌‌owner‌‌
lien‌‌exists‌, ‌ ‌
of‌‌the‌‌goods‌‌or‌‌to‌‌a‌‌holder‌‌of‌‌the‌‌receipt‌‌given‌‌for‌‌the‌‌goods‌‌

(c) A‌d
‌ emand‌‌that‌‌the‌‌amount‌‌of‌‌the‌‌claim‌‌as‌‌stated‌‌in‌‌ when‌‌they‌‌were‌‌deposited,‌‌‌even‌‌if‌‌such‌‌receipt‌‌be‌‌negotiable‌. ‌ ‌
the‌‌notice‌‌of‌‌such‌‌further‌‌claim‌‌as‌‌shall‌‌accrue‌, ‌‌
shall‌‌be‌‌paid‌‌on‌‌or‌‌before‌‌a‌‌day‌‌mentioned,‌‌not‌‌less‌‌ ‌
than‌‌ten‌‌days‌‌from‌‌the‌‌delivery‌‌of‌‌the‌‌notice‌‌if‌‌it‌‌is‌‌

PNB‌‌v.‌‌Se‌‌(1998)‌ ‌
personally‌‌delivered,‌‌or‌‌from‌‌the‌‌time‌‌when‌‌the‌‌notice‌‌
Doctrine‌:‌L ‌ oss‌‌of‌‌lien‌‌does‌‌not‌‌necessarily‌‌mean‌‌
shall‌‌reach‌‌its‌‌destination,‌‌according‌‌to‌‌the‌‌due‌‌course‌‌
extinguishment‌‌of‌‌the‌‌obligation‌‌to‌‌pay‌‌the‌‌warehousing‌‌
of‌‌post,‌‌if‌‌the‌‌notice‌‌is‌‌sent‌‌by‌‌mail,‌ ‌
fees‌‌‌and‌‌charges‌‌which‌‌continues‌‌to‌‌be‌‌a‌‌personal‌‌liability‌‌of‌‌the‌‌

(d) A‌‌‌statement‌‌that‌‌unless‌‌the‌‌claim‌‌is‌‌paid‌‌within‌‌the‌‌ owners.‌ ‌
time‌‌specified,‌‌the‌‌goods‌‌will‌‌be‌‌advertised‌‌‌for‌‌sale‌‌ Facts‌:‌P ‌ NB‌‌sought‌‌delivery‌‌‌of‌‌sugar‌‌stocks.‌‌Noah’s‌‌Ark‌‌

and‌‌sold‌‌by‌‌auction‌‌at‌‌a‌‌specified‌‌time‌‌and‌‌place.‌ ‌ refused,‌‌arguing‌‌‌that‌‌warehouseman’s‌‌lien‌‌must‌‌be‌‌satisfied‌‌
first‌. ‌ ‌
In‌‌accordance‌‌with‌‌the‌‌terms‌‌of‌‌a‌‌notice‌‌so‌‌given,‌‌‌a‌‌sale‌‌of‌‌the‌‌ Issues‌:‌‌W/N‌‌PNB‌‌is‌‌liable‌‌for‌‌warehouseman’s‌‌lien‌‌-‌‌YES‌ ‌
goods‌‌by‌‌auction‌‌may‌‌be‌‌had‌‌to‌‌satisfy‌‌any‌‌valid‌‌claim‌‌of‌‌
Ruling‌:‌‌Warehouseman’s‌‌lien‌m ‌ ust‌‌be‌‌computed‌‌with‌‌the‌‌
the‌‌warehouseman‌‌for‌‌which‌‌he‌‌has‌‌a‌‌lien‌‌on‌‌the‌‌goods‌. ‌ ‌
liability‌‌of‌‌PNB.‌‌It‌‌was‌‌shown‌‌that‌‌Noah’s‌‌Ark‌‌refused‌‌to‌‌
The‌‌sale‌‌shall‌‌be‌‌had‌‌in‌‌‌the‌‌place‌‌where‌‌the‌‌lien‌‌was‌‌acquired‌, ‌‌ deliver‌‌without‌‌a‌‌legal‌‌excuse‌‌hence‌‌lien‌‌must‌‌be‌‌only‌‌to‌‌the‌‌
or,‌‌if‌‌such‌‌place‌‌is‌‌manifestly‌‌unsuitable‌‌for‌‌the‌‌purpose‌‌of‌‌the‌‌
warehouse‌‌fees‌‌and‌‌charges‌‌up‌‌until‌‌the‌‌date‌‌it‌‌refused‌‌
claim‌‌specified‌‌in‌‌the‌‌notice‌‌to‌‌the‌‌depositor‌‌has‌‌elapsed,‌‌and‌‌
delivery.‌ ‌
advertisement‌‌of‌‌the‌‌sale,‌‌describing‌‌the‌‌goods‌‌to‌‌be‌‌sold,‌‌and‌‌
stating‌‌the‌‌name‌‌of‌‌the‌‌owner‌‌or‌‌person‌‌on‌‌whose‌‌account‌‌the‌‌ ‌
goods‌‌are‌‌held,‌‌and‌‌the‌‌time‌‌and‌‌place‌‌of‌‌the‌‌sale,‌‌shall‌‌be‌‌
D.‌‌Negotiation‌‌&‌‌Transfer‌‌of‌‌Warehouse‌‌Receipts‌ ‌
published‌‌once‌‌a‌‌week‌‌for‌‌two‌‌consecutive‌‌weeks‌‌in‌‌a ‌‌
newspaper‌‌published‌‌in‌‌the‌‌place‌‌where‌‌such‌‌sale‌‌is‌‌to‌‌be‌‌ 1.‌‌Negotiation‌ ‌
held‌.‌ ‌The‌‌sale‌‌shall‌‌not‌‌be‌‌held‌‌less‌‌than‌‌fifteen‌‌days‌‌from‌‌the‌‌ ● Done‌‌in‌‌two‌‌ways;‌‌delivery,‌‌or‌‌indorsement.‌ ‌
time‌‌of‌‌the‌‌first‌‌publication.‌ ‌If‌‌there‌‌is‌‌no‌‌newspaper‌‌published‌‌in‌‌ ● A‌‌type‌‌of‌‌transfer,‌‌applying‌‌only‌‌to‌‌negotiable‌‌instruments.‌ ‌
such‌‌place,‌‌the‌‌advertisement‌‌shall‌‌be‌‌posted‌‌at‌‌least‌‌ten‌‌days‌‌ ● Mere‌‌fact‌‌of‌‌giving‌‌the‌‌instrument‌‌can‌‌suffice‌‌as‌‌a‌‌valid‌‌

before‌‌such‌‌sale‌‌in‌‌not‌‌less‌‌than‌‌six‌‌conspicuous‌‌places‌‌therein.‌ ‌ transfer‌‌of‌‌title‌‌(delivery).‌
From‌‌the‌‌proceeds‌‌of‌‌such‌‌sale,‌‌the‌‌warehouseman‌‌shall‌‌ ● Indorsement‌:‌‌“this‌‌instrument‌‌is‌‌payable‌‌to‌‌the‌‌order‌‌of…”‌ ‌
satisfy‌‌his‌‌lien‌‌including‌‌the‌‌reasonable‌‌charges‌‌of‌‌notice,‌‌ ● You‌‌can‌‌keep‌‌negotiating‌‌a‌‌negotiable‌‌warehouse‌‌receipt‌‌
advertisement‌‌and‌‌sale‌.‌ ‌The‌‌balance,‌‌if‌‌any,‌‌of‌‌such‌‌proceeds‌‌ forever,‌‌until‌‌someone‌‌claims‌‌it.‌ ‌
shall‌‌be‌h ‌ eld‌‌by‌‌the‌‌warehouseman‌‌and‌‌delivered‌‌on‌‌demand‌‌ ● Negotiable‌‌receipt‌‌“deliverable‌‌to‌‌bearer”‌‌-‌‌whoever‌‌holds‌‌
to‌‌the‌‌person‌‌to‌‌whom‌‌he‌‌would‌‌have‌‌been‌‌bound‌‌to‌‌deliver‌‌ the‌‌warehouse‌‌receipt‌‌has‌‌title‌‌over‌‌and‌‌rights‌‌to‌‌the‌‌

or‌‌justified‌‌in‌‌delivering‌‌goods.‌ ‌
good.‌‌ ‌
At‌‌any‌‌time‌b‌ efore‌‌the‌‌goods‌‌are‌‌so‌‌sold,‌‌any‌‌person‌‌ ● Can‌‌an‌‌order‌‌instrument‌‌be‌‌converted‌‌to‌‌a‌‌bearer‌
claiming‌‌a‌‌right‌‌of‌‌property‌‌or‌‌possession‌‌therein‌‌may‌‌pay‌‌ instrument?‌‌WRL,‌‌Sec.‌‌38.‌ ‌
the‌‌warehouseman‌‌the‌‌amount‌‌necessary‌‌to‌‌satisfy‌‌his‌‌lien‌‌
Transfer‌‌of‌‌Non-Negotiable‌‌Receipts‌ ‌
and‌‌to‌‌pay‌‌the‌‌reasonable‌‌expenses‌‌and‌‌liabilities‌‌incurred‌‌
in‌‌serving‌‌notices‌‌and‌‌advertising‌‌and‌‌preparing‌‌for‌‌the‌‌sale‌‌ ● Assignment,‌‌or‌‌transfer.‌ ‌
up‌‌to‌‌the‌‌time‌‌of‌‌such‌‌payment‌.‌ ‌The‌‌warehouseman‌‌shall‌‌ ● The‌‌difference‌‌between‌‌nego‌‌&‌‌non-nego‌‌is‌‌how‌‌the‌‌title‌‌
deliver‌‌the‌‌goods‌‌to‌‌the‌‌person‌‌making‌‌payment‌‌if‌‌he‌‌is‌‌a ‌‌ to‌‌a‌‌warehouse‌‌receipt‌‌may‌‌be‌‌obtained.‌ ‌
person‌‌entitled,‌‌‌under‌‌the‌‌provision‌‌of‌‌this‌‌Act,‌‌to‌‌the‌‌

possession‌‌of‌‌the‌‌goods‌‌on‌‌payment‌‌of‌‌charges‌‌thereon.‌ ‌ WRL,‌ ‌Sec.‌‌40.‌‌Who‌‌may‌‌negotiate‌‌a‌‌receipt‌.‌‌—‌‌A‌‌negotiable‌‌
Otherwise,‌‌the‌‌warehouseman‌‌shall‌‌retain‌‌the‌‌possession‌‌of‌‌ receipt‌‌may‌‌be‌‌negotiated:‌ ‌
the‌‌goods‌‌‌according‌‌to‌‌the‌‌terms‌‌of‌‌the‌‌original‌‌contract‌‌of‌‌
(a)‌‌By‌‌the‌o
‌ wner‌t‌hereof,‌‌or‌ ‌
deposit.‌ ‌ (b)‌‌By‌a‌ ny‌‌person‌‌to‌‌whom‌‌the‌‌possession‌‌or‌‌custody‌‌of‌‌the‌‌
receipt‌‌has‌‌been‌‌entrusted‌‌‌by‌‌the‌‌owner,‌‌if,‌‌by‌‌the‌‌terms‌‌of‌‌the‌‌
WRL,‌‌Sec.‌‌34.‌‌Perishable‌‌and‌‌hazardous‌‌goods‌.‌‌—‌‌If‌‌goods‌‌ receipt,‌‌the‌w‌ arehouseman‌‌undertakes‌‌to‌‌deliver‌‌the‌‌goods‌‌
are‌‌of‌‌a‌‌perishable‌‌nature,‌‌or‌‌by‌‌keeping‌‌will‌‌deteriorate‌‌ to‌‌the‌‌order‌‌of‌‌the‌‌person‌‌to‌‌whom‌‌the‌‌possession‌‌or‌‌
custody‌‌of‌‌the‌‌receipt‌‌has‌‌been‌‌entrusted‌,‌‌or‌‌if,‌‌at‌‌the‌‌time‌‌of‌‌
greatly‌‌in‌‌value,‌‌or,‌‌by‌‌their‌‌order,‌‌leakage,‌‌inflammability,‌‌or‌‌
explosive‌‌nature‌,‌‌will‌‌be‌‌liable‌‌to‌‌injure‌‌other‌‌property‌‌,‌‌the‌‌
such‌‌entrusting,‌‌the‌r‌ eceipt‌‌is‌‌in‌‌such‌‌form‌‌that‌‌it‌‌may‌‌be‌‌

warehouseman‌‌may‌‌give‌‌such‌‌notice‌‌to‌‌the‌‌owner‌‌or‌‌to‌‌the‌‌ negotiated‌‌by‌‌delivery‌. ‌ ‌
27‌ ‌
WRL,‌‌Sec.‌‌37.‌‌Negotiation‌‌of‌‌negotiable‌‌receipt‌‌of‌‌delivery‌. ‌‌ a‌‌claim‌‌secured‌‌by‌‌a‌‌receipt‌,‌‌unless‌‌a‌‌contrary‌‌intention‌‌

—‌‌A‌‌negotiable‌‌receipt‌‌may‌‌be‌n
‌ egotiated‌‌by‌‌delivery‌: ‌ ‌ appears,‌w ‌ arrants‌: ‌ ‌
(a) Where,‌‌by‌‌terms‌‌of‌‌the‌‌receipt,‌‌the‌w
‌ arehouseman‌ (a) That‌‌the‌r‌ eceipt‌‌is‌‌genuine‌, ‌ ‌
undertakes‌‌to‌‌deliver‌‌the‌‌goods‌‌to‌‌the‌‌bearer‌,‌‌or‌ ‌
(b) That‌‌he‌‌‌has‌‌a‌‌legal‌‌right‌‌to‌‌negotiate‌‌‌or‌‌transfer‌‌it,‌ ‌
(b) Where,‌‌by‌‌the‌‌terms‌‌of‌‌the‌‌receipt,‌‌the‌‌

(c) That‌‌he‌‌has‌k
‌ nowledge‌‌of‌‌no‌‌fact‌‌which‌‌would‌‌
warehouseman‌‌undertakes‌‌to‌‌deliver‌‌the‌‌goods‌‌to‌‌
the‌‌order‌‌of‌‌a‌‌specified‌‌person,‌‌and‌‌such‌‌person‌‌or‌‌
impair‌‌the‌‌validity‌‌or‌‌worth‌‌‌of‌‌the‌‌receipt,‌‌and‌ ‌
a‌‌subsequent‌‌indorsee‌‌of‌‌the‌‌receipt‌‌has‌‌indorsed‌‌ (d) That‌‌he‌‌has‌‌a‌‌right‌‌to‌‌transfer‌‌the‌‌title‌‌to‌‌the‌‌goods‌‌
it‌‌in‌‌blank‌‌or‌‌to‌‌bearer‌.
‌‌ ‌ and‌‌that‌‌the‌‌goods‌‌are‌‌merchantable‌‌or‌‌fit‌‌for‌‌a ‌‌
particular‌‌purpose‌‌‌whenever‌‌such‌‌warranties‌‌would‌‌
Where,‌‌by‌‌the‌‌terms‌‌of‌‌a‌‌negotiable‌‌receipt,‌‌the‌g
‌ oods‌‌are‌‌

have‌‌been‌‌implied,‌‌if‌‌the‌‌contract‌‌of‌‌the‌‌parties‌‌had‌‌

deliverable‌‌to‌‌bearer‌‌or‌‌where‌‌a‌‌negotiable‌‌receipt‌‌has‌‌been‌‌
indorsed‌‌‌in‌‌blank‌‌or‌‌to‌‌bearer,‌a
‌ ny‌‌holder‌‌may‌‌indorse‌‌the‌‌ been‌‌to‌‌‌transfer‌‌without‌‌a‌‌receipt‌‌of‌‌the‌‌goods‌‌
same‌‌to‌‌himself‌‌or‌‌to‌‌any‌‌other‌‌specified‌‌person,‌‌and,‌‌in‌‌ represented‌‌thereby‌. ‌ ‌
such‌‌case,‌‌the‌‌receipt‌‌shall‌‌thereafter‌‌be‌‌negotiated‌‌only‌‌by‌‌
the‌‌indorsement‌‌of‌‌such‌‌indorsee‌. ‌ ‌ WRL,‌‌Sec.‌‌46.‌‌No‌‌warranty‌‌implied‌‌from‌‌accepting‌‌payment‌‌
of‌‌a‌‌debt‌.‌‌—‌‌A‌‌mortgagee,‌‌pledgee,‌‌or‌‌holder‌‌for‌‌security‌‌of‌‌a ‌‌
WRL,‌‌Sec.‌‌38.‌‌Negotiation‌‌of‌‌negotiable‌‌receipt‌‌by‌‌ receipt‌‌who,‌‌in‌‌good‌‌faith,‌‌‌demands‌‌or‌‌receives‌‌payment‌‌of‌‌the‌‌
debt‌‌for‌‌which‌‌such‌‌receipt‌‌is‌‌security‌,‌‌whether‌‌from‌‌a‌‌party‌‌to‌‌
indorsement‌.‌‌—‌‌A‌‌negotiable‌‌receipt‌m ‌ ay‌‌be‌‌negotiated‌‌by‌‌the‌‌
a‌‌draft‌‌drawn‌‌for‌‌such‌‌debt‌‌or‌‌from‌‌any‌‌other‌‌person,‌s
‌ hall‌‌not,‌‌
indorsement‌‌of‌‌the‌‌person‌‌to‌‌whose‌‌order‌‌the‌‌goods‌‌are,‌‌by‌‌
by‌‌so‌‌doing,‌‌be‌‌deemed‌‌to‌‌represent‌‌or‌‌to‌‌warrant‌‌the‌
the‌‌terms‌‌of‌‌the‌‌receipt,‌‌deliverable‌.‌ ‌Such‌‌indorsement‌m ‌ ay‌‌
be‌‌in‌‌blank,‌‌to‌‌bearer‌‌or‌‌to‌‌a‌‌specified‌‌person‌.‌ ‌If‌‌indorsed‌‌to‌‌
genuineness‌‌of‌‌such‌‌receipt‌‌‌or‌‌the‌‌quantity‌‌or‌‌quality‌‌of‌‌the‌‌
goods‌‌therein‌‌described.‌ ‌
a‌s
‌ pecified‌‌person,‌‌it‌‌may‌‌be‌‌again‌‌negotiated‌‌by‌‌the‌‌
indorsement‌‌of‌‌such‌‌person‌‌in‌‌blank,‌‌to‌‌bearer‌‌or‌‌to‌‌another‌‌
specified‌‌person‌.‌ ‌Subsequent‌‌negotiation‌‌may‌‌be‌‌made‌‌in‌‌like‌‌ WRL,‌‌Sec.‌‌47.‌‌When‌‌negotiation‌‌not‌‌impaired‌‌by‌‌fraud,‌‌
manner.‌ ‌ mistake‌‌or‌‌duress‌.‌‌—‌‌The‌‌‌validity‌‌of‌‌the‌‌negotiation‌‌of‌‌a ‌‌
receipt‌‌is‌‌not‌‌impaired‌‌‌by‌‌the‌‌fact‌‌that‌‌such‌‌negotiation‌‌was‌‌a ‌‌
Conversion‌‌from‌‌Order‌‌to‌‌Bearer‌ ‌ breach‌‌of‌‌duty‌‌on‌‌the‌‌part‌‌of‌‌the‌‌person‌‌making‌‌the‌‌
● Indorsement‌‌in‌‌blank‌‌converts‌‌an‌‌order‌‌instrument‌‌
negotiation‌‌or‌‌by‌‌the‌‌fact‌‌that‌‌the‌‌owner‌‌of‌‌the‌‌receipt‌‌was‌‌
into‌‌a‌‌bearer‌‌instrument.‌ ‌ induced‌‌by‌‌fraud,‌‌mistake‌‌or‌‌duress‌‌‌or‌‌to‌‌entrust‌‌the‌‌
possession‌‌or‌‌custody‌‌of‌‌the‌‌receipt‌‌to‌‌such‌‌person,‌i‌f‌‌the‌‌

‌
person‌‌to‌‌whom‌‌the‌‌receipt‌‌was‌‌negotiated‌‌or‌‌a‌‌person‌‌to‌‌
whom‌‌the‌‌receipt‌‌was‌‌subsequently‌‌negotiated‌‌paid‌‌value‌‌
WRL,‌‌Sec.‌‌45.‌‌Indorser‌‌not‌‌a‌‌guarantor‌.‌‌—‌‌The‌‌in ‌ dorsement‌‌
therefor,‌‌without‌‌notice‌‌of‌‌the‌‌breach‌‌‌of‌‌duty,‌‌or‌‌fraud,‌‌mistake‌‌
of‌‌a‌‌receipt‌‌shall‌‌not‌‌make‌‌the‌‌indorser‌‌liable‌‌for‌‌any‌‌failure‌‌
or‌‌duress.‌ ‌
on‌‌the‌‌part‌‌of‌‌the‌‌warehouseman‌‌or‌‌previous‌‌indorsers‌‌of‌‌
the‌‌receipt‌‌to‌‌fulfill‌‌‌their‌‌respective‌‌obligations.‌ ‌ WRL,‌‌Sec.‌‌48.‌‌Subsequent‌‌negotiation‌.‌‌—‌‌Where‌a ‌ ‌‌person‌‌
What‌‌if‌‌The‌‌Warehouseman‌‌Fails‌‌to‌‌Deliver?‌ ‌ having‌‌sold,‌‌mortgaged,‌‌or‌‌pledged‌‌goods‌‌which‌‌are‌‌in‌‌
● Liabilities‌‌as‌‌against‌‌the‌‌indorsee,‌‌but‌‌not‌‌the‌‌
warehouse‌‌and‌‌for‌‌which‌‌a‌‌negotiable‌‌receipt‌‌has‌‌been‌‌
indorser,‌‌since‌‌he‌‌is‌‌not‌‌a‌‌guarantor.‌ ‌ issued‌,‌‌or‌‌having‌s
‌ old,‌‌mortgaged,‌‌or‌‌pledged‌‌the‌‌negotiable‌‌
● Why‌‌is‌‌indorser‌‌not‌‌a‌‌guarantor?‌‌The‌‌failure‌‌of‌‌the‌‌ receipt‌‌representing‌‌such‌‌goods,‌‌continues‌‌in‌‌possession‌‌of‌‌
warehouseman‌‌is‌‌the‌‌warehouseman’s‌‌alone.‌ ‌ the‌‌negotiable‌‌receipt‌,‌‌the‌s ‌ ubsequent‌‌negotiation‌‌‌thereof‌‌by‌‌
● Simpler‌‌reason:‌‌who‌‌issued‌‌the‌‌receipt‌‌in‌‌the‌‌first‌‌
the‌‌person‌‌under‌‌any‌‌sale‌‌or‌‌other‌‌disposition‌‌thereof‌‌to‌‌any‌‌
place?‌‌Whman.‌‌WHman‌‌warrants‌‌to‌‌depositor‌‌that‌‌ person‌‌receiving‌‌the‌‌same‌‌in‌‌good‌‌faith,‌‌for‌‌value‌‌and‌‌
items‌‌contained‌‌in‌‌receipt‌‌is‌‌in‌‌his‌‌wh.‌‌When‌‌one‌‌
without‌‌notice‌‌of‌‌the‌‌previous‌‌sale‌,‌‌mortgage‌‌or‌‌pledge,‌‌shall‌‌
demands,‌‌by‌‌the‌‌receipt,‌‌one‌‌has‌‌reasonable‌‌ have‌‌the‌‌‌same‌‌effect‌‌as‌‌if‌‌the‌‌first‌‌purchaser‌‌of‌‌the‌‌goods‌‌or‌‌
understanding‌‌that‌‌he‌‌can‌‌receive‌‌goods.‌‌Indorser‌‌ receipt‌‌had‌‌expressly‌‌authorized‌‌the‌‌subsequent‌‌
depends‌‌on‌‌that‌‌warranty.‌‌ ‌ negotiation‌. ‌ ‌
‌ Subsequent‌‌Negotiation‌‌-‌‌A‌‌Type‌‌of‌‌Fraud‌ ‌
● Subsequent‌‌purchaser,‌‌if‌‌nor‌‌in‌‌good‌‌faith,‌‌acquires‌‌
WRL,‌‌Sec.‌‌41.‌‌Rights‌‌of‌‌person‌‌to‌‌whom‌‌a‌‌receipt‌‌has‌‌been‌‌ no‌‌better‌‌right.‌ ‌
negotiated‌.‌‌—‌‌A‌‌person‌‌to‌‌whom‌‌a‌n ‌ egotiable‌‌receipt‌‌has‌‌ ● Meanwhile‌‌as‌‌to‌W ‌ RL‌‌Sec.‌‌47‌,‌‌subsequent‌‌
been‌‌duly‌‌negotiated‌‌acquires‌‌thereby‌: ‌ ‌ purchasers‌‌must‌‌be‌‌protected.‌‌It‌‌can‌‌always‌‌be‌‌
‌ taken‌‌against‌‌them..‌‌Indorser‌‌has‌‌greater‌‌
(a)‌‌Such‌‌‌title‌‌to‌‌the‌‌goods‌‌as‌‌the‌‌person‌‌negotiating‌‌the‌‌ preference‌‌because‌‌it‌‌is‌‌more‌‌equitable‌‌and‌‌
receipt‌‌to‌‌him‌‌had‌‌or‌‌had‌‌ability‌‌to‌‌convey‌‌to‌‌a‌‌purchaser‌‌in‌‌ indorser‌‌believes‌‌indorser‌‌is‌‌in‌‌good‌‌faith.‌‌Indorsee‌‌

can‌‌rely‌‌on‌‌the‌‌guarantee/warranty‌‌presented‌‌to‌‌it‌‌
good‌‌faith‌‌for‌‌value‌,‌‌and‌‌also‌‌such‌t‌ itle‌‌to‌‌the‌‌goods‌‌as‌‌the‌‌
depositor‌‌or‌‌person‌‌to‌‌whose‌‌order‌‌the‌‌goods‌‌were‌‌to‌‌be‌‌ by‌‌the‌‌indorser‌‌as‌‌again‌‌warranted‌‌by‌‌whman.‌‌This‌‌
delivered‌‌by‌‌the‌‌terms‌‌of‌‌the‌‌receipt‌‌had‌‌‌or‌‌had‌‌ability‌‌to‌‌ also‌‌prevent‌‌fraud‌‌on‌‌the‌‌part‌‌of‌‌indorser‌ ‌
convey‌‌to‌‌a‌‌purchaser‌‌in‌‌good‌‌faith‌‌for‌‌value,‌‌and‌ ‌ ‌
‌
(b)‌‌The‌d
‌ irect‌‌obligation‌‌of‌‌the‌‌warehouseman‌‌to‌‌hold‌‌
WRL,‌‌Sec.‌‌49.‌‌Negotiation‌‌defeats‌‌vendor's‌‌lien‌.‌‌—‌‌Where‌‌a ‌‌
possession‌‌of‌‌the‌‌goods‌‌for‌‌him‌‌‌according‌‌to‌‌the‌‌terms‌‌of‌‌the‌‌
negotiable‌‌receipt‌‌has‌‌been‌‌issued‌‌for‌‌goods,‌‌no‌‌seller's‌‌lien‌‌
receipt‌‌as‌‌fully‌a‌ s‌‌if‌‌the‌‌warehouseman‌‌had‌‌contracted‌‌
or‌‌right‌‌of‌‌stoppage‌‌in‌‌transitu‌‌shall‌‌defeat‌‌the‌‌rights‌‌of‌‌any‌‌
directly‌‌‌with‌‌him.‌ ‌ purchaser‌‌for‌‌value‌‌in‌‌good‌‌faith‌‌to‌‌whom‌‌such‌‌receipt‌‌has‌‌
● Once‌‌an‌‌instrument,‌‌whether‌‌to‌‌bearer‌‌or‌‌to‌‌order,‌‌ been‌‌negotiated‌,‌‌whether‌‌such‌‌negotiation‌‌be‌p ‌ rior‌‌or‌‌

is‌‌validly‌‌indorsed‌‌or‌‌negotiated‌‌to‌‌you,‌‌you‌‌obtain‌‌ subsequent‌‌to‌‌the‌‌notification‌‌to‌‌the‌‌warehouseman‌‌who‌‌
these‌‌rights.‌ ‌ issued‌‌such‌‌receipt‌‌‌of‌‌the‌‌seller's‌‌claim‌‌to‌‌a‌‌lien‌‌or‌‌right‌‌of‌‌

● You‌‌gain‌‌all‌‌the‌‌rights‌‌over‌‌the‌‌goods‌‌pursuant‌‌to‌‌
stoppage‌‌in‌‌transitu.‌ N‌ or‌‌shall‌‌the‌‌warehouseman‌‌be‌‌obliged‌‌
the‌‌warehouse‌‌receipt;‌‌the‌‌warehouseman‌‌is‌‌now‌‌ to‌‌deliver‌‌or‌‌justified‌‌in‌‌delivering‌‌the‌‌goods‌‌to‌‌an‌‌unpaid‌‌
obligated‌‌to‌‌you‌‌as‌‌if‌‌you‌‌were‌‌the‌‌original‌‌
seller‌‌unless‌‌the‌‌receipt‌‌is‌‌first‌‌surrendered‌‌for‌‌cancellation‌. ‌ ‌
depositor.‌ ‌ ‌
‌ 2.‌‌Transfer‌ ‌
WRL,‌‌Sec.‌‌39.‌‌Transfer‌‌of‌‌receipt‌.‌‌—‌‌A‌r‌ eceipt‌‌which‌‌is‌‌not‌‌in‌‌

WRL,‌‌Sec.‌‌44.‌‌Warranties‌‌of‌‌a‌‌sale‌‌of‌‌receipt‌.‌‌—‌‌A‌‌person‌‌

who,‌‌‌for‌‌value,‌‌negotiates‌‌or‌‌transfers‌‌a‌‌receipt‌‌by‌‌
such‌‌form‌‌that‌‌it‌‌can‌‌be‌‌negotiated‌‌by‌‌delivery‌‌‌may‌‌be‌‌
indorsement‌‌or‌‌delivery,‌‌including‌‌one‌‌who‌‌assigns‌‌for‌‌value‌‌ transferred‌‌by‌‌the‌‌holder‌‌by‌‌delivery‌‌to‌‌a‌‌purchaser‌‌or‌‌donee.‌ ‌
28‌ ‌
A‌n
‌ on-negotiable‌‌receipt‌‌can‌‌not‌‌be‌‌negotiated‌,‌‌and‌‌the‌‌ by‌‌both.‌ ‌
indorsement‌o ‌ f‌‌such‌‌a‌‌receipt‌‌‌gives‌‌the‌‌transferee‌‌no‌‌

additional‌‌right‌. ‌ ‌ WRL,‌‌Sec.‌‌52.‌‌Issue‌‌of‌‌duplicate‌‌receipt‌‌not‌‌so‌‌marked‌.‌‌—‌‌A ‌‌
warehouse,‌‌or‌‌any‌‌officer,‌‌agent,‌‌or‌‌servant‌‌of‌‌a‌‌warehouseman‌‌
WRL,‌‌Sec.‌‌42.‌‌Rights‌‌of‌‌person‌‌to‌‌whom‌‌receipt‌‌has‌‌been‌‌ who‌‌‌issues‌‌or‌‌aids‌‌in‌‌issuing‌‌a‌‌duplicate‌‌or‌‌additional‌‌
transferred‌.‌‌—‌‌A‌‌person‌‌to‌‌whom‌‌a‌r‌ eceipt‌‌has‌‌been‌‌ negotiable‌‌receipt‌‌for‌‌goods‌‌knowing‌‌that‌‌a‌‌former‌‌
transferred‌‌but‌‌not‌‌negotiated‌‌acquires‌‌thereby,‌‌as‌‌against‌‌ negotiable‌‌receipt‌‌for‌‌the‌‌same‌‌goods‌‌or‌‌any‌‌part‌‌of‌‌them‌‌is‌‌
the‌‌transferor,‌‌the‌‌title‌‌of‌‌the‌‌goods‌‌subject‌‌to‌‌the‌‌terms‌‌of‌‌
outstanding‌‌and‌‌uncanceled,‌‌without‌‌plainly‌‌placing‌‌upon‌‌
any‌‌agreement‌‌with‌‌the‌‌transferor‌. ‌ ‌ the‌‌face‌‌thereof‌‌the‌‌word‌‌"duplicate"‌‌‌except‌‌in‌‌the‌‌case‌‌of‌ ‌a ‌‌
lost‌‌or‌‌destroyed‌‌receipt‌‌after‌‌proceedings‌‌are‌‌provided‌‌for‌‌
If‌‌the‌‌receipt‌‌is‌n
‌ on-negotiable,‌‌such‌‌person‌‌also‌‌acquires‌‌the‌‌
in‌‌section‌‌fourteen‌,‌‌shall‌‌be‌‌guilty‌‌of‌‌a‌c
‌ rime‌,‌‌and,‌‌upon‌‌

right‌‌to‌‌notify‌‌the‌‌warehouseman‌‌of‌‌the‌‌transfer‌‌to‌‌him‌‌‌of‌‌
conviction,‌‌shall‌‌be‌‌punished‌‌for‌‌each‌‌offense‌‌by‌i‌mprisonment‌‌
such‌‌receipt‌‌and‌‌thereby‌‌to‌‌‌acquire‌‌the‌‌direct‌‌obligation‌‌of‌‌the‌‌
not‌‌exceeding‌‌five‌‌years,‌‌or‌‌by‌‌a‌‌fine‌‌not‌‌exceeding‌‌ten‌‌
warehouseman‌‌to‌‌hold‌‌possession‌‌of‌‌the‌‌goods‌‌for‌‌him‌‌ thousand‌‌pesos,‌‌or‌‌by‌‌both‌. ‌ ‌
according‌‌to‌‌the‌‌terms‌‌‌of‌‌the‌‌receipt.‌ ‌
Prior‌‌to‌‌the‌‌notification‌‌of‌‌the‌‌warehouseman‌‌by‌‌the‌‌transferor‌‌or‌‌ WRL,‌‌Sec.‌‌53.‌‌Issue‌‌for‌‌warehouseman's‌‌goods‌‌or‌‌receipts‌‌
transferee‌‌of‌‌a‌‌non-negotiable‌‌receipt,‌‌the‌‌‌title‌‌of‌‌the‌‌transferee‌‌ which‌‌do‌‌not‌‌state‌‌that‌‌fact‌.‌‌—‌‌Where‌‌they‌‌are‌‌‌deposited‌‌with‌‌
to‌‌the‌‌goods‌‌and‌‌the‌‌right‌‌to‌‌acquire‌‌the‌‌obligation‌‌of‌‌the‌‌ or‌‌held‌‌by‌‌a‌‌warehouseman‌‌goods‌‌of‌‌which‌‌he‌‌is‌‌owner,‌‌
warehouseman‌‌‌may‌‌be‌d ‌ efeated‌b ‌ y‌‌the‌l‌evy‌‌of‌‌an‌‌attachment‌‌ either‌‌solely‌‌or‌‌jointly‌‌‌or‌‌in‌‌common‌‌with‌‌others,‌‌such‌‌

or‌‌execution‌‌upon‌‌the‌‌goods‌‌by‌‌a‌‌creditor‌‌of‌‌the‌‌transferor‌‌ warehouseman,‌‌or‌‌any‌‌of‌‌his‌‌officers,‌‌agents,‌‌or‌‌servants‌w ‌ ho,‌‌
or‌‌by‌‌a‌n‌ otification‌‌to‌‌the‌‌warehouseman‌‌by‌‌the‌‌transferor‌‌or‌‌ knowing‌‌this‌‌ownership,‌‌issues‌‌or‌‌aids‌‌in‌‌issuing‌‌a ‌‌
a‌‌subsequent‌‌purchaser‌‌from‌‌the‌‌transferor‌‌of‌‌a‌‌subsequent‌‌ negotiable‌‌receipt‌‌for‌‌such‌‌goods‌‌which‌‌does‌‌not‌‌state‌‌such‌‌
sale‌‌‌of‌‌the‌‌goods‌‌by‌‌the‌‌transferor.‌ ‌ ownership‌,‌‌shall‌‌be‌‌guilty‌‌of‌‌a‌‌crime,‌‌and,‌‌upon‌‌conviction,‌‌shall‌‌
be‌‌punished‌‌for‌‌each‌‌offense‌‌by‌i‌mprisonment‌‌not‌‌exceeding‌‌
WRL,‌‌Sec.‌‌43.‌‌Transfer‌‌of‌‌negotiable‌‌receipt‌‌without‌‌ one‌‌year,‌‌or‌‌by‌‌a‌‌fine‌‌not‌‌exceeding‌‌two‌‌thousand‌‌pesos‌,‌‌or‌‌
indorsement‌.‌‌—‌‌Where‌‌a‌‌negotiable‌‌receipt‌‌is‌‌transferred‌‌for‌‌ by‌‌both.‌ ‌
value‌‌by‌‌delivery‌‌‌and‌‌the‌i‌ndorsement‌‌of‌‌the‌‌transferor‌‌is‌‌
essential‌‌‌for‌‌negotiation,‌‌the‌‌‌transferee‌‌acquires‌‌a‌‌right‌‌ WRL,‌‌Sec.‌‌54.‌‌Delivery‌‌of‌‌goods‌‌without‌‌obtaining‌‌
against‌‌the‌‌transferor‌‌to‌‌compel‌‌him‌‌to‌‌indorse‌‌the‌‌receipt‌‌ negotiable‌‌receipt‌.‌‌—‌‌A‌‌warehouseman,‌‌or‌‌any‌‌officer,‌‌agent,‌‌or‌‌
unless‌‌a‌‌contrary‌‌intention‌‌appears‌.‌ ‌The‌‌negotiation‌‌shall‌‌ servant‌‌of‌‌a‌‌warehouseman,‌‌who‌‌‌delivers‌‌goods‌‌out‌‌of‌‌the‌‌
take‌‌effect‌‌as‌‌of‌‌the‌‌time‌‌when‌‌the‌‌indorsement‌‌is‌‌actually‌‌made.‌ ‌ possession‌‌of‌‌such‌‌warehouseman,‌‌knowing‌‌that‌‌a ‌‌
negotiable‌‌receipt‌‌the‌‌negotiation‌‌of‌‌which‌‌would‌‌transfer‌‌
WRL,‌‌Sec.‌‌44.‌‌Warranties‌‌of‌‌a‌‌sale‌‌of‌‌receipt‌.‌‌—‌‌A‌‌person‌‌
the‌‌right‌‌to‌‌the‌‌possession‌‌of‌‌such‌‌goods‌‌is‌‌outstanding‌‌and‌‌
who,‌‌‌for‌‌value,‌‌negotiates‌‌or‌‌transfers‌‌a‌‌receipt‌‌by‌‌ uncanceled‌,‌‌without‌‌obtaining‌‌the‌‌possession‌‌of‌‌such‌‌
indorsement‌‌or‌‌delivery,‌‌including‌‌one‌‌who‌‌assigns‌‌for‌‌value‌‌ receipt‌‌‌at‌‌or‌‌before‌‌the‌‌time‌‌of‌‌such‌‌delivery,‌‌shall,‌‌except‌‌in‌‌the‌‌
a‌‌claim‌‌secured‌‌by‌‌a‌‌receipt‌,‌‌unless‌‌a‌‌contrary‌‌intention‌‌
cases‌‌provided‌‌for‌‌in‌‌sections‌‌fourteen‌‌and‌‌thirty-six,‌‌be‌‌found‌‌
appears,‌w ‌ arrants‌: ‌ ‌ guilty‌‌of‌‌a‌‌crime,‌‌and,‌‌upon‌‌conviction,‌‌shall‌‌be‌‌punished‌‌for‌‌each‌‌
offense‌‌by‌‌imprisonment‌n ‌ ot‌‌exceeding‌‌one‌‌year,‌‌or‌‌by‌‌a‌‌fine‌‌
(a) That‌‌the‌r‌ eceipt‌‌is‌‌genuine‌, ‌ ‌ not‌‌exceeding‌‌two‌‌thousand‌‌pesos‌,‌‌or‌‌by‌‌both.‌ ‌
(b) That‌‌he‌‌‌has‌‌a‌‌legal‌‌right‌‌to‌‌negotiate‌‌‌or‌‌transfer‌‌it,‌ ‌
WRL,‌‌Sec.‌‌55.‌‌Negotiation‌‌of‌‌receipt‌‌for‌‌mortgaged‌‌goods‌.‌‌— ‌‌
(c) That‌‌he‌‌has‌k
‌ nowledge‌‌of‌‌no‌‌fact‌‌which‌‌would‌‌
Any‌‌person‌‌who‌d ‌ eposits‌‌goods‌‌to‌‌which‌‌he‌‌has‌‌no‌‌title,‌‌or‌‌
impair‌‌the‌‌validity‌‌or‌‌worth‌‌‌of‌‌the‌‌receipt,‌‌and‌ ‌ upon‌‌which‌‌there‌‌is‌‌a‌‌lien‌‌or‌‌mortgage,‌‌and‌‌who‌‌takes‌‌for‌‌
(d) That‌‌he‌‌has‌‌a‌‌right‌‌to‌‌transfer‌‌the‌‌title‌‌to‌‌the‌‌goods‌‌ such‌‌goods‌‌a‌‌negotiable‌‌receipt‌‌which‌‌he‌‌afterwards‌‌
and‌‌that‌‌the‌‌goods‌‌are‌‌merchantable‌‌or‌‌fit‌‌for‌‌a ‌‌ negotiates‌‌for‌‌value‌‌with‌‌intent‌‌to‌‌deceive‌‌‌and‌‌without‌‌
particular‌‌purpose‌‌‌whenever‌‌such‌‌warranties‌‌would‌‌ disclosing‌‌his‌‌want‌‌of‌‌title‌‌or‌‌the‌‌existence‌‌of‌‌the‌‌lien‌‌or‌‌

have‌‌been‌‌implied,‌‌if‌‌the‌‌contract‌‌of‌‌the‌‌parties‌‌had‌‌
mortgage,‌‌shall‌‌be‌g ‌ uilty‌‌of‌‌a‌‌crime‌,‌‌and,‌‌upon‌‌conviction,‌‌shall‌‌
been‌‌to‌‌‌transfer‌‌without‌‌a‌‌receipt‌‌of‌‌the‌‌goods‌‌ be‌‌punished‌‌for‌‌each‌‌offense‌‌by‌i‌mprisonment‌‌not‌‌exceeding‌‌
represented‌‌thereby‌. ‌ ‌ one‌‌year,‌‌or‌‌by‌‌a‌‌fine‌‌not‌‌exceeding‌‌two‌‌thousand‌‌pesos‌,‌‌or‌‌
by‌‌both.‌ ‌
● Anyone‌‌who‌‌transfers‌‌a‌‌warehouse‌‌receipt‌
guarantees‌‌these‌‌four.‌ ‌ ‌
● Are‌‌these‌‌four‌‌warranties‌‌essential‌‌in‌‌all‌‌
F.‌‌General‌‌Bonded‌‌Warehouses‌ ‌
negotiations?‌ ‌ ● General‌‌Bonded‌‌Warehouse‌‌Act‌‌(RA‌‌3893)‌ ‌
○ Apart‌‌from‌‌these‌‌remember‌‌that‌‌it‌‌should‌‌

● More‌‌advantageous‌‌for‌‌the‌‌depositor.‌‌ ‌
be‌‌FOR‌‌VALUE‌ ‌
● Must‌‌this‌‌always‌‌comply‌‌with‌‌the‌‌WRL?‌‌No,‌‌it‌‌is‌‌not‌‌a ‌‌
‌ must.‌‌The‌‌GBWA‌‌already‌‌exists,‌‌and‌‌the‌‌WRL‌‌is‌‌merely‌‌
‌ suppletory.‌ ‌
E.‌‌Criminal‌‌Liability‌ ‌ ● Thus,‌‌a‌‌general‌‌bonded‌‌warehouse‌‌may‌‌operate‌‌even‌‌
when‌‌not‌‌compliant‌‌to‌‌the‌‌WRL.‌ ‌
WRL,‌‌Sec.‌‌50.‌‌Issue‌‌of‌‌receipt‌‌for‌‌goods‌‌not‌‌received‌.‌‌—‌‌A ‌‌ ● General‌‌Rule‌:‌‌Try‌‌to‌‌comply‌‌by‌‌marrying‌‌both‌‌laws‌‌
warehouseman,‌‌or‌‌an‌‌officer,‌‌agent,‌‌or‌‌servant‌‌of‌‌a ‌‌ together,‌‌so‌‌the‌‌rights‌‌and‌‌obligations‌‌under‌‌the‌‌WRL‌‌may‌‌
warehouseman‌‌who‌i‌ssues‌‌or‌‌aids‌‌in‌‌issuing‌‌a‌‌receipt‌‌ also‌‌exist.‌ ‌
knowing‌‌that‌‌the‌‌goods‌‌for‌‌which‌‌such‌‌receipt‌‌is‌‌issued‌‌
● Exception‌:‌‌If‌‌a‌‌GBW‌‌receipt‌‌is‌‌not‌‌compliant‌‌w/‌‌the‌‌WRL,‌‌
have‌‌not‌‌been‌‌actually‌‌received‌‌‌by‌‌such‌‌warehouseman,‌‌or‌‌
are‌‌‌not‌‌under‌‌his‌‌actual‌‌control‌‌‌at‌‌the‌‌time‌‌of‌‌issuing‌‌such‌‌
it‌‌is‌‌an‌‌ordinary‌‌deposit.‌‌Warehouse‌‌deposits‌‌are‌‌merely‌‌a ‌‌
receipt,‌‌shall‌‌be‌g
‌ uilty‌‌of‌‌a‌‌crime,‌‌and,‌‌upon‌‌conviction,‌‌shall‌‌ type‌‌of‌‌deposit.‌‌Thus,‌‌the‌‌CC’s‌‌rules‌‌on‌‌ordinary‌‌deposits‌‌
be‌‌punished‌‌for‌‌each‌‌offense‌‌by‌‌imprisonment‌‌not‌‌ are‌‌applicable.‌ ‌
exceeding‌‌five‌‌years,‌‌or‌‌by‌‌a‌‌fine‌‌not‌‌exceeding‌‌ten‌‌
thousand‌‌pesos,‌‌or‌‌both‌. ‌ ‌ GBWA,‌‌Sec.‌‌2.‌‌‌As‌‌used‌‌in‌‌this‌‌Act,‌‌the‌‌term‌‌"w
‌ arehouse‌"‌‌shall‌‌
be‌‌deemed‌‌to‌‌mean‌‌‌every‌‌building,‌‌structure,‌‌or‌‌other‌‌
protected‌‌inclosure‌‌in‌‌which‌‌rice‌‌is‌‌kept‌‌‌for‌‌storage.‌‌The‌‌term‌‌
WRL,‌‌Sec.‌‌51.‌‌Issue‌‌of‌‌receipt‌‌containing‌‌false‌‌statement‌.‌‌— ‌‌
A‌‌warehouseman,‌‌or‌‌any‌‌officer,‌‌agent‌‌or‌‌servant‌‌of‌‌a ‌‌ "‌rice‌"‌‌shall‌‌be‌‌deemed‌‌to‌‌mean‌‌either‌p‌ alay‌‌in‌‌bundles,‌‌or‌‌in‌‌

grains,‌‌or‌‌clean‌‌rice,‌‌or‌‌both‌.‌‌"P
‌ erson‌"‌‌including‌‌‌corporation‌‌
warehouseman‌‌who‌f‌ raudulently‌‌issues‌‌or‌‌aids‌‌in‌‌fraudulently‌‌
or‌‌partnership‌‌or‌‌two‌‌or‌‌more‌‌persons‌‌having‌‌joint‌‌or‌‌
issuing‌‌a‌‌receipt‌‌for‌‌goods‌‌knowing‌‌that‌‌it‌‌contains‌‌any‌‌false‌‌
statement,‌‌shall‌‌be‌‌guilty‌‌of‌‌a‌‌crime‌,‌‌and‌‌upon‌‌conviction,‌‌shall‌‌
common‌‌interest‌;‌‌"w ‌ arehouseman‌"‌‌means‌‌a‌p ‌ erson‌‌engaged‌‌
in‌‌the‌‌business‌‌receiving‌‌rice‌‌for‌‌storage‌;‌‌and‌‌"r‌ eceipt‌" ‌‌
be‌‌punished‌‌for‌‌each‌‌offense‌‌by‌‌imprisonment‌n ‌ ot‌‌exceeding‌‌
means‌a ‌ ny‌‌receipt‌‌issued‌‌by‌‌a‌‌warehouseman‌‌for‌‌rice‌‌
one‌‌year,‌‌or‌‌by‌‌a‌‌fine‌‌not‌‌exceeding‌‌two‌‌thousand‌‌pesos‌,‌‌or‌‌
delivered‌‌to‌‌him‌.‌‌For‌‌the‌‌purpose‌‌of‌‌this‌‌Act,‌‌the‌‌‌business‌‌of‌‌

29‌ ‌
○ Allows‌‌the‌‌seller‌‌to‌‌make‌‌new‌‌loans‌‌w/‌‌the‌‌proceeds‌‌from‌‌
receiving‌‌rice‌‌for‌‌storage‌‌shall‌‌include‌‌‌(1)‌‌any‌c ‌ ontract‌o ‌ r‌‌

the‌‌sale‌‌of‌‌the‌‌new‌‌security.‌ ‌
transaction‌w ‌ herein‌‌the‌‌‌warehouseman‌‌is‌‌obligated‌‌to‌‌return‌
the‌‌very‌‌same‌‌rice‌‌delivered‌‌to‌‌him‌‌or‌‌pay‌‌‌its‌‌value;(2)‌‌any‌‌ ● A‌p‌ rocess‌‌of‌‌distributing‌‌risk‌‌of‌‌default,‌‌by‌‌aggregating‌‌the‌‌
contract‌‌or‌‌transaction‌‌wherein‌‌the‌‌‌rice‌‌delivered‌‌is‌‌to‌‌be‌‌milled‌‌ debts,‌‌and‌‌issuing‌‌new‌‌securities‌‌‌for‌‌those‌‌debts.‌ ‌
for‌‌and‌‌on‌‌account‌‌of‌‌the‌‌owner‌‌thereof‌;‌‌(3)‌‌any‌‌contract‌‌or‌‌ ● The‌‌securities‌‌issued‌‌are‌‌called‌a ‌ sset-backed‌‌securities‌. ‌ ‌
transaction‌‌wherein‌‌the‌‌‌rice‌‌delivered‌‌is‌‌commingled‌‌with‌‌the‌‌ ○ Why‌‌is‌‌this‌‌called‌‌this?‌B ‌ uyers‌‌want‌‌to‌‌have‌‌collateral‌‌
rice‌‌delivered‌‌by‌‌or‌‌belonging‌‌to‌‌other‌‌persons‌‌and‌‌the‌‌ to‌‌hold‌‌onto‌.‌‌“I’ll‌‌buy‌‌that,‌‌but‌‌do‌‌these‌‌have‌‌security‌‌
warehouseman‌‌is‌‌obligated‌‌to‌‌return‌‌the‌‌rice‌‌of‌‌the‌‌same‌‌ behind‌‌them,‌‌like‌‌a‌‌mortgage?”‌ ‌
kind‌‌or‌‌pay‌‌its‌‌value‌. ‌ ‌
○ Mostly,‌‌mortgage-backed‌‌securities.‌ ‌
● Tranches‌‌based‌‌on‌‌risk‌:‌n ‌ ot‌‌all‌‌debtors‌‌pay‌,‌‌so‌‌you‌‌classify‌‌

GBWA,‌‌Section‌‌1.‌‌‌This‌‌Act‌‌shall‌‌be‌‌known‌‌by‌‌the‌‌short‌‌title‌‌of‌‌

"BONDED‌‌WAREHOUSE‌‌ACT."‌ ‌ them‌‌into‌‌groups;‌‌and‌‌you‌‌‌price‌‌them‌‌accordingly‌‌when‌‌you‌‌
sell‌‌them‌.‌‌Low‌‌risk‌‌=‌‌high‌‌price,‌‌and‌‌vice‌‌versa.‌ ‌
GBWA,‌‌Sec.‌‌3.‌‌‌No‌‌person‌‌shall‌‌engage‌‌in‌‌the‌‌business‌‌of‌‌ ○ Tranch‌‌1:‌‌‌the‌‌regular‌‌payors.‌‌(low‌‌risk)‌ ‌
receiving‌‌rice‌‌for‌‌storage‌‌without‌‌first‌‌securing‌‌a‌‌license‌‌ ○ Tranch‌‌2:‌‌‌delinquents.‌‌(high‌‌risk)‌ ‌
therefore‌‌from‌‌the‌‌Director‌‌of‌‌the‌‌Bureau‌‌of‌‌Commerce‌‌and‌‌ ‌
Industry.‌‌Said‌‌license‌‌shall‌‌be‌a‌ nnual‌‌and‌‌shall‌‌expire‌‌on‌‌the‌‌
How‌‌does‌‌Securitization‌‌Work?‌‌(Atty.‌‌Escarez)‌ ‌
thirty-first‌‌day‌‌of‌‌December‌. ‌ ‌ ● Ex.‌‌1‌‌mil‌‌pesos‌‌loaned‌‌to‌‌1k‌‌people,‌‌at‌‌P1k‌‌each.‌‌10‌‌year‌‌loan,‌‌
interest‌‌is‌‌10%‌‌per‌‌annum.‌‌Risk‌‌is,‌‌it’s‌‌possible‌‌they‌‌won’t‌‌pay‌‌
GBWA,‌‌Sec.‌‌4.‌‌‌Any‌‌person‌‌‌applying‌‌for‌‌a‌‌license‌‌to‌‌engage‌‌in‌‌ you‌‌back.‌‌You‌‌suddenly‌‌need‌‌the‌‌money,‌‌and‌‌you‌‌want‌‌that‌‌risk‌‌
the‌‌business‌‌of‌‌receiving‌‌rice‌‌for‌‌storage‌‌‌shall‌‌set‌‌forth‌‌in‌‌the‌‌
to‌‌disappear,‌‌so‌‌you‌‌sell‌‌your‌‌entire‌‌credit‌‌of‌‌P1mil,‌‌to‌‌someone‌‌
application‌t‌he‌‌place‌‌or‌‌places‌w ‌ here‌‌the‌‌business‌‌and‌‌
warehouse‌‌are‌‌to‌‌be‌‌established‌‌or‌‌located‌‌and‌‌the‌‌ else‌‌who‌‌is‌‌willing‌‌to‌‌take‌‌the‌‌risk‌‌for‌‌Php800k.‌‌Buyer‌‌will‌‌be‌‌
maximum‌‌quantity‌‌of‌‌rice‌‌to‌‌be‌‌received‌.‌‌The‌‌application‌‌shall‌‌ the‌‌one‌‌to‌‌wait‌‌for‌‌the‌‌1mil‌‌to‌‌be‌‌paid‌‌over‌‌a‌‌period‌‌of‌‌10‌‌years‌‌
be‌‌accompanied‌‌by‌‌a‌c ‌ ash‌‌bond‌‌or‌‌a‌‌bond‌‌secured‌‌by‌‌real‌‌ (buyer‌‌gets‌‌the‌‌interest;‌‌all‌‌rights,‌‌interests,‌‌and‌‌obligations‌‌
estate‌‌or‌‌signed‌‌by‌‌a‌‌duly‌‌authorized‌‌bonding‌‌company‌,‌‌the‌‌ passes‌‌to‌‌the‌‌buyer).‌‌ ‌
amount‌‌of‌‌which‌‌shall‌‌be‌f‌ ixed‌‌by‌‌the‌‌Director‌‌of‌‌the‌‌Bureau‌‌of‌‌ ○ Why‌‌would‌‌the‌‌buyer‌‌buy‌‌it?‌‌Buyer‌‌doesn’t‌‌need‌‌money‌‌
Commerce‌‌and‌‌Industry‌‌at‌‌not‌‌less‌‌than‌‌thirty-three‌‌and‌‌one‌‌ NOW;‌‌the‌‌seller‌‌does.‌‌He’s‌‌liquid‌‌already,‌‌and‌‌wants‌‌to‌‌
third‌‌percent‌‌of‌‌the‌‌market‌‌value‌‌of‌‌the‌‌maximum‌‌quantity‌‌of‌‌
rice‌‌to‌‌be‌‌received‌.‌‌Said‌‌bond‌‌shall‌‌be‌‌so‌‌conditioned‌‌as‌‌to‌‌ make‌‌10%‌‌per‌‌annum.‌ ‌
respond‌‌for‌‌the‌‌market‌‌value‌‌of‌‌the‌‌rice‌‌actually‌‌delivered‌‌ ■ Of‌‌course,‌‌the‌‌buyer‌‌needs‌‌to‌‌exercise‌‌due‌‌
and‌‌received‌‌at‌‌any‌‌time‌‌the‌‌warehouseman‌‌is‌‌unable‌‌to‌‌ diligence‌‌to‌‌see‌‌if‌‌the‌‌people‌‌who‌‌are‌‌indebted‌‌to‌‌
return‌‌the‌‌rice‌‌or‌‌to‌‌pay‌‌its‌‌value‌.‌T
‌ he‌‌bond‌‌shall‌‌be‌‌ him‌‌are‌‌likely‌‌to‌‌pay.‌ ‌
approved‌‌by‌‌the‌‌Director‌‌of‌‌the‌‌Bureau‌‌of‌‌Commerce‌‌and‌‌ ○ Why‌‌would‌‌seller‌‌sell‌‌it?‌‌You‌‌want‌‌the‌‌money‌‌now;‌‌
Industry‌‌before‌‌issuing‌‌a‌‌license‌‌‌under‌‌this‌‌Act,‌‌to‌s ‌ atisfy‌‌
liquidity‌‌now,‌‌don’t‌‌want‌‌to‌‌wait‌‌10‌‌years.‌‌You‌‌get‌‌the‌‌
himself‌‌concerning‌‌the‌s ‌ ufficiency‌‌of‌‌such‌‌bond‌,‌‌and‌‌to‌‌ money‌‌NOW,‌‌since‌‌you‌‌need‌‌it.‌ ‌
determine‌‌whether‌‌the‌‌warehouse‌‌for‌‌which‌‌such‌‌license‌‌is‌‌
applied‌‌for‌‌is‌‌suitable‌‌‌for‌‌the‌‌proper‌‌storage‌‌of‌‌rice.‌ ‌ ■ Sellers‌‌usually‌‌won’t‌‌sell‌‌if‌‌they‌‌know‌‌their‌‌debtors‌‌
will‌‌pay‌‌them,‌‌UNLESS‌‌they‌‌suddenly‌‌need‌‌
‌ money.‌ ‌
■ So,‌‌if‌‌its‌‌80%‌‌bad‌‌debt,‌‌and‌‌20%‌‌good‌‌debt,‌‌you’d‌‌
PART‌‌III.‌‌SECURED‌‌TRANSACTIONS‌ ‌ sell‌‌it‌‌siguro‌‌at‌‌the‌‌value‌‌of‌‌20%‌‌of‌‌the‌‌good‌‌debt.‌ ‌
THE‌‌CONCEPT‌‌OF‌‌SECURITY‌ ‌ ■ Who‌‌buys‌‌bad‌‌debts?‌‌Companies‌‌with‌‌good‌‌
A.‌‌General‌‌Concepts‌ ‌ lawyers‌‌who‌‌can‌‌demand.‌ ‌
● Security‌‌transactions‌‌are‌a ‌ ccessory‌‌obligations‌‌‌that‌‌ ○ So,‌‌the‌‌creditor‌‌w/‌‌many‌‌debts,‌‌sells‌‌them‌‌all‌‌to‌‌one‌‌
mitigate‌‌the‌‌risk‌‌of‌‌default‌‌on‌‌the‌‌part‌‌of‌‌the‌‌debtor‌‌in‌‌a ‌‌ buyer,‌‌so‌‌he‌‌doesn’t‌‌need‌‌to‌‌wait‌‌anymore.‌ ‌
principal‌‌obligation.‌ ‌ ● Securitization‌:‌‌selling‌‌your‌‌debt‌‌portfolio‌‌to‌‌other‌‌investors,‌‌
● The‌p‌ rincipal‌‌obligation,‌‌if‌‌insured‌‌by‌‌a‌‌security‌‌ usually‌‌at‌‌a‌‌discount.‌ ‌
transaction,‌‌is‌‌known‌‌as‌‌a‌‌secured‌‌obligation‌. ‌‌ ‌
Conversely,‌‌those‌‌that‌‌are‌‌not‌‌insured‌‌are‌‌known‌‌as‌‌ B.‌‌Events‌‌of‌‌Default‌ ‌
unsecured‌‌obligations.‌ ‌ ● “That‌‌was‌‌an‌‌event‌‌of‌‌default,‌‌pay‌‌me‌‌in‌‌full‌‌now,‌‌or‌‌I‌‌will‌‌

1.‌‌Distinguished‌‌from‌‌Securities‌ ‌ claim‌‌the‌‌assets‌‌that‌‌back‌‌your‌‌debts”.‌ ‌
● Any‌‌event‌‌can‌‌be‌‌anything,‌‌like‌‌the‌‌death‌‌of‌‌a‌‌good‌‌
Securities‌‌Regulation‌‌Code,‌‌3.1‌.‌‌“Securities”‌‌are‌s ‌ hares,‌‌
business‌‌owner.‌‌However,‌‌there‌‌are‌‌standard‌‌events‌‌of‌‌
participation‌‌or‌‌interests‌‌in‌‌a‌‌corporation‌‌or‌‌in‌‌a‌‌commercial‌‌

enterprise‌‌or‌‌profit-making‌‌venture‌‌and‌‌evidenced‌‌by‌‌a ‌‌ default‌‌(boilerplate‌‌provisions).‌ ‌
certificate,‌‌contract,‌‌instrument,‌‌whether‌‌written‌‌or‌‌ ● So‌‌in‌‌an‌‌event‌‌of‌‌default,‌‌the‌‌whole‌‌obligation‌‌becomes‌‌
electronic‌‌in‌‌character‌.‌‌It‌‌includes:‌ ‌ due,‌‌all‌‌at‌‌one‌‌time.‌ ‌
(a) Shares‌‌of‌‌stock‌,‌‌bonds,‌‌debentures,‌‌notes,‌‌evidences‌‌
Essential‌‌Condition‌‌of‌‌a‌‌Security‌‌Transaction‌ ‌
of‌‌indebtedness,‌a ‌ sset-backed‌‌securities‌; ‌ ‌ ● If‌p
‌ rincipal‌‌obligation‌‌is‌‌complied‌‌with,‌‌then‌‌the‌‌
...‌ ‌ security‌‌obligation‌‌is‌‌extinguished‌‌‌along‌‌with‌‌it.‌ ‌
Evidences‌‌of‌‌Indebtedness‌ ‌ What‌‌if‌‌Debtor‌‌Defaults‌‌for‌‌the‌‌Principal‌‌Obligation?‌ ‌
● Bonds,‌‌debentures,‌‌notes…‌ ‌ ● Creditor‌‌has‌‌two‌‌options:‌ ‌
● The‌c ‌ ommon‌‌commercial‌‌forms‌‌of‌‌loan‌‌contracts‌. ‌ ‌ 1. Ordinary‌a ‌ ction‌‌for‌‌specific‌‌performance‌;‌‌OR‌ ‌
● These‌‌are‌‌called‌‌“securities”,‌‌secured‌‌or‌‌not.‌ ‌ 2. As‌‌a‌‌secured‌‌creditor,‌e ‌ lect‌‌to‌‌enforce‌‌the‌‌
2.‌‌Distinguished‌‌from‌‌Securitization‌ ‌ security‌.‌‌This‌‌is‌‌proper‌‌under‌m ‌ ora‌‌solvendi‌‌
● A‌p‌ rocess‌. ‌ ‌ (debtor’s‌‌fault).‌ ‌
● Loans‌‌&‌‌other‌‌debts‌‌w/‌‌an‌‌expected‌‌cash‌‌payment‌‌stream‌‌(ex.‌‌ Requisites‌‌for‌‌a‌‌Finding‌‌of‌‌Default‌ ‌
Interest)‌‌are‌‌sold‌‌on‌‌a‌‌w/o‌‌recourse‌‌basis‌‌by‌‌a‌‌seller,‌‌to‌‌a ‌‌ 1. Principal‌o ‌ bligation‌‌is‌d
‌ emandable‌& ‌ ‌‌liquidated;‌ ‌
special‌‌purpose‌‌entity‌‌(the‌‌issuer).‌‌The‌‌issuer,‌‌in‌‌turn,‌‌issues‌‌ 2. Debtor‌‌delays‌‌‌performance;‌‌and‌ ‌
securities‌‌(ex.‌‌A‌‌bond‌‌or‌‌other‌‌instruments)‌‌that‌‌depend‌‌on‌‌the‌‌ 3. Creditor‌‌judicially‌‌/‌‌extrajudicially‌‌demands‌‌‌debtor’s‌‌
expected‌‌cash‌‌payment‌‌stream‌‌for‌‌their‌‌repayment.‌ ‌ performance.‌‌ ‌
● To‌‌securitize‌‌is‌‌to‌‌convert‌‌assets‌‌into‌‌securities‌‌for‌‌resale‌ Events‌‌of‌‌Default‌ ‌
in‌‌the‌‌financial‌‌market.‌ ‌ ● Customary‌‌for‌‌parties‌‌to‌‌define‌‌other‌‌events‌‌of‌‌default.‌ ‌
○ Allows‌‌the‌‌seller‌‌to‌‌remove‌‌assets‌‌from‌‌its‌‌books,‌‌ ‌
improving‌‌capital‌‌ratio‌‌and‌‌liquidity.‌ ‌
30‌ ‌

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CREDIT‌‌TRANSACTIONS‌

‌ ● Concession‌ ‌of‌ ‌a ‌ ‌"credit"‌ ‌necessarily‌ ‌involves‌ ‌the‌‌

CC,‌‌Article‌‌418‌.‌‌Movable‌‌property‌‌is‌‌either‌‌consumable‌‌or‌‌ Contract‌‌to‌‌Loan‌ ‌ Contract‌‌of‌‌loan‌ ‌

Finance‌‌Charge‌ ‌ Usury‌‌Law,‌‌Sec.‌‌5.‌‌‌In‌c ‌ omputing‌‌the‌‌interest‌‌‌on‌‌any‌‌obligation,‌‌

Voluntary‌‌Deposits‌ ‌ CC,‌‌Article‌‌1962‌.‌‌A‌‌deposit‌‌is‌c ‌ onstituted‌f‌rom‌‌the‌m ‌ oment‌‌a ‌‌

To‌‌Whom‌‌Delivered?‌ ‌ (a) Immaterial‌, ‌ ‌

‌ (b) By‌r‌ efusing‌‌to‌‌deliver‌‌the‌‌goods‌‌when‌‌a‌‌demand‌‌is‌‌

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