CREDIT TRANSACTIONS

INSTRUCTIONS: This examination consists of TWENTY FIVE (XXV)

numbers. Read each question very carefully before answering. Answer
SEQUENTIALLY, CLEARLY and CONCISELY starting each number on a
separate page. A mere “YES” or “NO” answer without any corresponding
discussion will not be given any credit. GOOD LUCK!

I.

Answer TRUE if the statement is true, or FALSE if the statement is false.

Explain your answer: An oral promise of guaranty is valid and binding.

II.

Siga-an granted a loan to Villanueva in the amount of Php540,000.00.

Such agreement was not reduced to writing. Siga-an demanded interest
which was paid by Villanueva in cash and checks. The total amount
Villanueva paid accumulated to Php1,200,000.00. Upon advice of her
lawyer, Villanueva demanded for the return of the excess amount of
Php660,000.00 which was ignored by Siga-an.
a. Is the payment of interest valid? Explain.
b. Is solution indebiti applicable? Explain.

III.

What is the difference between "guaranty" and "suretyship"?

IV.

Rosario obtained a loan of Php100,000.00 from Jennifer, and pledged her

diamond ring. The contract signed by the parties stipulated that if Rosario is
unable to redeem the ring on due date, she will execute a document in
favor of Jennifer providing that the ring shall automatically be considered
full payment of the loan.
a. Is the contract valid? Explain.
b. Will your answer to [a] be the same if the contract stipulates that upon
failure of Rosario to redeem the ring on due date, Jennifer may
immediately sell the ring and appropriate the entire proceeds thereof for
herself as full payment of the loan? Explain.
 V.

A, upon request, loaned his passenger Jeepney to B to enable B to bring

his sick wife from Tagudin, Ilocos Sur to the Philippine General Hospital in
Manila for treatment. On the way back to Tagudin, after leaving his wife at
the hospital, people stopped the passenger Jeepney. B stopped for them
and allowed them to ride on board, accepting payment from them just as in
the case of ordinary passenger Jeepneys plying their route. As B was
crossing Balaoan, La Union, there was a landslide, the Jeep that was
loaned to him was wrecked.
a. What do you call the contract that was entered into by A and B with
respect to the passenger Jeepney that was loaned by A to B to transport
the latter's sick wife to Manila? Explain.
b. Is B obliged to pay A for the use of the passenger jeepney? Explain.
c. Is B liable to A for the loss of the Jeepney? Explain.

VI.

Before he left for Riyadh to work as a mechanic, Pedro left his Adventure
van with Tito, with the understanding that the latter could use it for one year
for his personal or family use while Pedro works in Riyadh. He did not tell
Tito that the brakes of the van were faulty. Tito had the van tuned up and
the brakes repaired. He spent a total amount of Php15,000.00. After using
the vehicle for two weeks, Tito discovered that it consumed too much fuel.
To make up for the expenses, he leased it to Annabelle. Two months later,
Pedro returned to the Philippines and asked Tito to return the van.
Unfortunately, while being driven by Tito, the van was accidentally
damaged by a cargo truck without his fault.
a. Who shall bear the Php15,000.00 spent for the repair of the van?
Explain.
b. Who shall bear the costs for the van's fuel, oil and other materials while
it was with Tito? Explain.
c. Does Pedro have the right to retrieve the van even before the lapse of
one year? Explain.
d. Who shall bear the expenses for the accidental damage caused by the
cargo truck, granting that the truck driver and truck owner are insolvent?
Explain.
 VII.

Distinguish usufruct from commodatum and state whether these may be

constituted over consumable goods.

VIII.

Distinguish briefly but clearly between Mutuum and commodatum.

IX.

Samuel borrowed Php300,000.00 housing loan from the bank at 18% per
annum interest. However, the promissory note contained a proviso that the
bank "reserves the right to increase interest within the limits allowed by
law,". By virtue of such proviso, over the objections of Samuel, the bank
increased the interest rate periodically until it reached 48% per annum.
Finally, Samuel filed an action questioning the right of the bank to increase
the interest rate up to 48%. The bank raised the defense that the Central
Bank of the Philippines had already suspended the Usury Law. Will the
action prosper or not? Explain.

X.

Carlos sues Dino for a) collection on a promissory note for a loan, with no
agreement on interest, on which Dino defaulted, and b) damages caused
by Dino on his (Carlos’) priceless Michaelangelo painting on which Dino
accidentally spilled acid while transporting it. The court finds Dino liable on
the promissory note and awards damages to Carlos for the damaged
painting, with interest for both awards. What rates of interest may the court
impose with respect to both awards? Explain.

XI.

The parties in a contract of loan of money agreed that the yearly interest
rate is 12% and it can be increased if there is a law that would authorize
the increase of interest rates.
a. Suppose OB, the lender, would increase by 5% the rate of interest to be
paid by TY, the borrower, without a law authorizing such increase, would
OB’s action be just and valid? Explain.
b. Has TY a remedy against the imposition of the rate increase? Explain.
 XII.

In order to secure a bank loan, XYZ Corporation surrendered its deposit

certificate, with a maturity date of 01 April 2020 to the bank. The
corporation defaulted on the due repayment of the loan, prompting the
bank to encash the deposit certificate. XYZ Corporation questioned the
above action taken by the bank as being a case of pactum commissorium.
The bank disagrees. What is your opinion? Explain.

XIII.

X and Y staged a daring bank robbery in Manila at 10:30 AM in the morning

of a regular business day, and escaped with their loot of two (2) bags, each
bag containing Php500,000,00. During their flight to elude the police, X and
Y entered the nearby locked house of A, then working in his Quezon City
office. From A's house, X and Y stole a box containing cash totaling
Php50,000.00 which box A had been keeping in deposit for his friend B. In
their hurry, X and Y left in A's bedroom one (1) of the bags which they had
taken from the bank. With X and Y now at large and nowhere to be found,
the bag containing Php500,000.00 is now claimed by B, by the Mayor of
Manila, and by the bank. B claims that as the depository. A, by force
majeure had obtained the bag of money in place of the box of money
deposited by B. The Mayor of Manila, on the other hand, claims that the
bag of money should be deposited with the Office of the Mayor as required
of the finder by the provisions of the Civil Code. The bank resists the claims
of B and the Mayor of Manila. To whom should a deliver the bag of money?
Decide with reasons.

XIV.

AB sold to CD a motor vehicle for and in consideration of Php1,200,000.00

to be paid in twelve monthly equal instalments of Php100,000.00, each
instalment being due and payable on the 15th day of each month starting
January 2020. To secure the promissory note, CD (a) executed a chattel
mortgage on the subject motor vehicle, and (b) furnished a surety bond
issued by Philam life. CD failed to pay more than two (2) instalments. AB
went after the surety but he was only able to obtain three-fourths (3/4) of
the total amount still due and owing from CD. AB seeks your advice on how
he might, if at all, recover the deficiency. How would you counsel AB?
Explain.
 XV.

Olivia owns a vast mango plantation which she can no longer properly
manage due to a lingering illness. Since she is indebted to Peter in the
amount of Php5,000,000.00 she asks Peter to manage the plantation and
apply the harvest to the payment of her obligation to him, principal and
interest, until her indebtedness shall have been fully paid. Peter agrees.
a. What kind of contract is entered into between Olivia and Peter? Explain.
b. What specific obligations are imposed by law on Peter as a
consequence of their contract? Explain.
c. Does the law require any specific form for the validity of their contract?
Explain.
d. May Olivia re-acquire the plantation before her entire indebtedness shall
have been fully paid? Explain.

XVI.

In 2019, Steve borrowed Php4,000,000.00 from Danny, collateralized by a

pledge of shares of stock of Concepcion Corporation worth
Php8,000,000.00. In 2020, because of the pandemic crisis, the value of the
shares pledged fell to only Php1,000,000.00. Can Danny demand that
Steve surrender the other shares worth Php7,000,000.00? Explain.

XVII.

ABC loaned to MNO Php4,000,000.00 for which the latter pledged 4,000
shares of stock in XYZ Inc. It was agreed that if the pledgor failed to pay
the loan with 10% yearly interest within four years, the pledgee is
authorized to foreclose on the shares of stock. As required, MNO delivered
possession of the shares to ABC with the understanding that the shares
would be returned to MNO upon the time. A month after 4 years, may the
shares of stock pledged be deemed owned by ABC or not? Reason.

XVIII.

In the province, a farmer couple borrowed money from the local merchant.
To guarantee payment, they left the Torrens Title of their land with the
merchant, for him to hold until they pay the loan. Is there a - a) contract of
pledge, b) contract of mortgage, c) contract of antichresis, or d) none of the
above? Explain.

XIX.

A debtor pledged to his surety pieces of jewelry to indemnify the latter in

case the surety would be obliged to pay the creditor. The surety paid
Php20,000.00 to the creditor. To recover the amount, the surety sold at
public auction the jewelry but realized only Php5,000.00. May the surety
recover the deficiency from the debtor? Explain.

XX.

A entrusted a diamond ring to S to sell. S pledged it instead in a

pawnshop.
a. Can A recover the ring from the pawnshop? Explain.
b. Can the pawnshop insist on payment first of the loan from A? Explain.

XXI.

DL borrowed Php200,000.00 from T & Co. with which he imported 400

heads of breeding cows from New Zealand. Upon their arrival in the
Philippines, the cattle were sent to the ranch of T & Co. for pasture under
the agreement that for as long as DL has not paid the Php200,000.00, he
cannot bet his cattle from the ranch; that the cattle is to be taken care of by
T & Co.’s personnel there, and that one-half of all the offspring shall go to T
& Co. for these services. Without anybody’s fault, all the cattle died of
disease and the Php200,000.00 remained unpaid. T & Co. therefore sued
DL for the Php200,000.00 plus interest. Will the action prosper? Explain.

XXII.

Nante, a registered owner of a parcel of land in Quezon City, sold the

property to Monica under a deed of sale which reads as follows: "That for
and in consideration of the sum of Php500,000.00, value to be paid and
delivered to me, and receipt of which shall be acknowledged by me to the
full satisfaction of Monica, referred to as Vendee, I hereby sell, transfer,
cede, convey, and assign, as by these presents, I do have sold,
transferred, ceded, conveyed and assigned a parcel of land covered by
TCT No. 2468 in favor of the Vendee." After delivery of the initial payment
of Php100,000.00, Monica immediately took possession of the property.
Five (5) months after, Monica failed to pay the remaining balance of the
purchase price. Nante filed an action for the recovery of possession of the
property. Nante alleged that the agreement was one to sell, which was not
consummated as the full contract price was not paid. Is the contention of
Nante tenable? Explain.

XXIII.

Due to the continuous heavy rainfall, the major streets in San Fernando, La
Union became flooded. This compelled Cris to check-in at Square One
Hotel. As soon as Cris got off from his Toyota Altis, the Hotel’s parking
attendant got the key of his car and gave him a valet parking customer’s
claim stub. The attendant parked his car at the basement of the hotel. Early
in the morning, Cris was informed by the hotel manager that his car was
carnapped.
a. What contract, if any, was perfected between Cris and the Hotel when
Cris surrendered the key of his car to the Hotel’s parking attendant?
Explain.
b. What is the liability, if any, of the Hotel for the loss of Cris’ car? Explain.

XXIV.

Donna pledged a set of diamond ring and earrings to Jane for

Php200,000.00. She was made to sign an agreement that if she cannot
pay her debt within six months, Jane could immediately appropriate the
jewelry for herself. After six months, Donna failed to pay. Jane then
displayed the earrings and ring set in her jewelry shop located in a mall. A
buyer, Juana, bought the jewelry set for Php300,000.00.
a. Was the agreement which Donna signed with Jane valid? Explain.
b. Can Donna redeem the jewelery set from Juana by paying the amount
she owed Jane to Juana? Explain.

XXV.

Give an example of a pledge created by operation of law.