ART.

NOTES
LOAN; general provisions
1933 Contract of Loan: Commodatum and Mutuum; Discount v. Loan
1934 Accepted promise to deliver - already binding but perfected only upon delivery of the object of contract
COMMODATUM
1935 BAILEE - acquires use of thing loaned but NOT its fruits (E: stipulated/incidental); Any compensation ceases to be a commodatum
1936 Consummabes may be subject of commodatum but only for mere exhibition
1937 Object: Movable/Immovable
1938 BAILOR - need NOT be owner of the thing loaned, so long as he has possessory interest in the subject matter or right to its use which he
may assert against bailee & 3rd but not against rightful owner
1939 Commodatum, PURELY PERSONAL; Death of bailor/bailee extinguishes; Bailee can’t lend except household members
1940 Stipulation for bailee to make use of fruits of thing loaned is valid; BUT right to the enjoyment of fruits must only be incidental, otherwise
usufruct
Obligations of bailee
1941 Pay ordinary expenses for use/preservation of thing loaned
1942 Liable for loss, even if fortuitous if: Different purpose / Keeps longer / Appraisal of its value delivered with the thing / Lends or leased to 3rd
not household member / Chose to save thing other than latter (GR: bailee noto liable for loss/damage due to fortuitous events; E: 1942)
1943 Not liable for ordinary wear & tear (unless stipulation to contrary); but will be liable of guilty of fraud/negligence or devotes any purpose
different from that intended
1944 Cannot retain thing even if bailor owes him; but has right of retention for damages in Art. 1951 (hidden flaws/defects)
1945 2 or more bailees, solidarily liable
Obligations of Bailor
1946 Cannot demand return before period ends/purpose accomplished
● When bailor is in urgent need: demand return or temporary use
● Temporary use of bailor: commodatum is suspended while in bailor’s possession
Where thing loaned is returned:

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 1. Period agreed lapsed
2. Accomplished purpose
3. Precarium
4. Urgent need (suspended only)
5. Acts of ingratitude
1947 Precarium - kind of commodatum where the bailor may demand thing at will. If...
1. No duration/use​ stipulated; or
2. Use of thing is merely ​tolerated
1948 Acts of ingratitude - bailor may demand return of thing if bailee is ingratitude (Art. 765)
1949 Refunds extraordinary expenses for: (unless contrary stipulated)
● Preservation - bailee must inform bailor before incurring expenses (no need to inform when urgent but inform afterwards); OR
● Use - bailee & bailor borne equally of extraordinary expenses if it arises on actual use of bailee
1950 No reimbursement if bailee incurs expenses other than Art. 1941 and Art. 1949
1951 Liability for damages on hidden defects or flaws
1952 Can’t exempt self from damages by abandoning thing to bailee
SIMPLE LOAN OR MUTUUM
1953 SIMPLE LOAN - person receiving loan/fungible thing:
● Acquires ownership thereof; and
● Bound to pay creditor ​equal amount or same kind & quality
Rent v. Simple Loan
1954 BARTER (contrary to Art. 1638, which includes fungible)
● One person transfers ownership of ​non-fungible​ to another
● Obligation of other party to give ​things of same kind, quantity, & quality
1955 Form of payment:
Loan of money
● Art. 1249; Arrt. 1250
Loan of fungible other than money
● Debtor owed another thing of same kind, quantity, & quality, even if value changes
If impossible to deliver same kind:
● Value at time of perfection of loan shall be paid

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1956 GR: No interest due
● E: contrary is expressly stipulated in writing and is lawful;
Only in contracts of loan (mutuum) that interest may be stipulated or demanded
● Liability for interest in absence of stipulation: Indemnity for Damages; Interest Accruing from Unpaid Interest
1957 Contracts & stipulations intended to circumvent laws against usury = VOID (only as to the interest involved, not the principal); borrower
may recover in accordance with the laws against usury
1958 Determination of interest if payable in kind:
● Value appraised at: current price of products & goods at time and place of payment
1959 GR: interest due & unpaid shall NOT earn interest (w/o prejudice to Art. 2212)
● E: (1) interest is judicially demanded (Art. 2212); (2) contracting parties may, by stipulation:
○ Capitalize interest due & underpaid, which shall be added to the principal, shall earn new interest (compound)
1960 Borrower pays interest w/o stipulation, apply:
● Natural obligations
● Solutio indebiti - return of what has been paid by mistake
1. No right to collect excess sum
2. Amount paid by mistake by the defendants
USURY
1961 CB Circular No. 905​ - Jan 1, 1983, lifted ceiling rates in usury law
● 12%/annum - loans or forbearances of any money, goods or credits & judgments (CB Cir. No. 416, Jul 29, 1974)
● 6%/annum - action for recovery of damages (Art. 2209)
Usury Law (Act No. 2566​) - loans and forbearances only; suspended by the Central Bank
● Elements (LUUT)
● Interest/Forbearance
● Kinds of Interest
● Application of Interest
● Usurious loans void only with respect to interest
● Escalation clauses in Loans
● Paying Interest in Kind
●
DEPOSIT; in general and its different kinds

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1962 Deposit - person receives a thing belonging to another, with the obligation of safely keeping it and of returning the same; safekeeping is
the principal purpose
1963 Agreement to constitute deposit is binding; perfected only upon delivery of the thing
1964 Deposit may be constituted judicially or extrajudicially (will of parties / court order / law)
1965 GR: Deposit is gratuitous
E:
1. Contrary stipulation
2. Depositary engaged in business of storing goods
3. Involuntary Deposit - property saved from destruction without knowledge of owner; depositary entitled to just compensation
1966 Only movable things may be subject of deposit
● Extrajudicial deposit - only movables
● Judicial deposit - movables & immovables
● Does not embrace incorporeal rights & actions (shares of stocks, right of way, etc.)
1967 Extrajudicial Deposit - Voluntary v. Necessary
VOLUNTARY DEPOSIT
1968 Voluntary deposit & deposit made by 2 or more persons (latter, need interpleader)
1969 Contract of deposit: Oral or Written
1970 Capacitated person receives deposit from incapacitated
● Former shall be subject to all obligations of depositary
● May be compelled to return the thing by guardian/administrator of person who made deposit, or by latter when acquire capacity
1971 Incapacitated person receives deposit from capacitated
● Depositor shall only have action to recover thing while still in possession of depositary; OR
● Compel latter to pay him the amount by which he may have enriched or benefitted himself with the thing or its price
● 3rd who acquired the thing acted in BF - depositor may bring action against 3rd for its recovery
Obligations of Depositary
1972 Return object
● When the depositor claims it, though the parties may have a stipulated term
When object lost:
● Depositary cannot excuse from liability if such care is less than that required by the circumstances or through is fault or negligence
● If for compensation, required degree of care is greater

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1973 Liability for loss:
1. Deposit to 3rd unauthorized
2. Deposit to 3rd authorized but 3rd is manifestly careless/unfit
3. Depositary’s employees’ negligence (manifest/not)
1974 May change way of deposit only when:
● He may reasonably presume that depositor would consent to change if he knew of the facts of the situation
● Before making change, ​notify depositor & wait for his decision, unless delay would cause danger
1975 -obsolete na raw-
1976 May commingle grain or articles of the same kind & quality
● In which case, the various depositors shall own or have a proportionate interest in the mass
● Unless stipulation to contrary
1977 GR: Can’t use without express permission of depositor
● E: preservation of thing requires use
1978 GR: Deposit with use or purpose -> No; becomes commodatum/mutuum
● E: if safekeeping is still the main purpose
○ Not presumed
Irregular Deposit v. Mutuum
1979 When depositary liable even in fortuitous events & w/o his fault:
1. Stipulated
2. Uses thing w/o depositor’s permission
3. Delays its return
4. Allows others to use it, even though he himself may have been authorized to use the same
1980 Bank deposits -> governed by laws on simple loan; irregular deposits, that’s why we get interests; creditor-debtor relationship
1981 Closed & sealed deposit; Fault of debtor - value of thing deposited (rebuttable); With or without fault - keep secret of deposit
1982 Depositary’s opening justified:
● Presumed authority (key given)
● Necessity (instructions of principal as regards deposit cannot be executed without opening)
1983 Return all products, accessories, and accessions of thing deposited;
If money - Art. 1896
1984 ● Proof of ownership not necessary

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 ● If stolen & knows owner
○ Notify owner
○ Owner must claim within 1m -> if not, depositary is relieved of all responsibility
● If thing unlawful
○ Return to depositary
1985 ● 2 or more not solidary depositors and thing admits division
○ Demand only his share
● Solidary/not admit division
○ Arts. 1212, 1214
● Stipulation to return to one of depositors
○ Return only to the person designated
1986 Depositor’s capacity lost during deposit - return to persons who may have administration
1987 Place to return thing
● Designated - depositor bears depositary’s expenses for transportation
● No place designated - where thing deposited may be; no malice on part of depositary
1988 GR: Return upon demand even if fixed period
● E: if judicially attached; 3rd opposition (immediately inform depositor)
1989 When depositary may return:
● Gratuitous
● Justifiable reasons
If depositor refuses - consign with court
1990 Depositary lost thing thru force majeure or government then receives money or other
● Deliver such received to depositor
1991 Depositary’s heir sold thing in GF
● Return price; OR
● Assign right of action against buyer not yet paying
Depositary’s heir sold thing in BF
● Can be sued for damages and estafa
Obligations of Depositor
1992 Reimburse depositary for preservation expenses
1993 Reimburse depositary for any loss arising from character of thing deposited, UNLESS

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 ● At time of constitution of deposit, depositor not aware of
● Depositor was not expected to know the dangerous character of the thing
● Notified depositary of the same; OR
● Depositary aware of it without advice from depositor
1994 Depositary may retain thing in pledge until full payment - of what is due to the depositary by reason of the deposit
1995 Deposit extinguished
1. Loss/destruction of thing
2. If gratuitous - death of either depositor or depositary
3. Return of thing
Also included: novation, merger, fulfillment of resolutory condition, etc.
NECESSARY DEPOSIT
1996 Necessary deposit:
1. Legal obligation
2. Deposited during calamity
3. Hotels/Inns
4. Common carriers
1997 Legal obligation - governed by law establishing it or by rules of voluntary deposit
Deposited during calamity - Art. 2168 (Quasi-contract)
1998 Deposit by travelers in hotel/inn
1999 Hotel/inn liable for annexes
Requisites to be liable
2000 What kind of responsibility by hotel/inn
2001 Thief/robber
2002 When hotel keeper is not liable for compensation:
● Loss due to acts of guest, his family, servants or visitors
● Loss due to character of things brought into the hotel
2003 Posting notices cannot free hotel-keeper from responsibility; any stipulation suppressing responsibility under 1998-2001 is void
2004 Hotel/inn has right to retain things brought into hotel by guest as security for credits on account of lodging & supplies usually furnished to
hotel guests

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SEQUESTRATION OR JUDICIAL DEPOSIT
2005 Judicial deposit takes place:
● Attachment/seizure of property in litigation is ordered
2006 Object of sequestration: movable or immovable
2007 Depositary in this kind of deposit cannot be relieved of responsibility until controversy is resolved and court orders
2008 Depositary - Diligence of Good Father of a Family
2009 Matters not provided in this code, judicial sequestration shall be governed by Rules of Court
● Rule 57 - Preliminary Attachment
● Rule 59 - Receivership
● Rule 60 - Replevin
● Rule 127 - Attachment in Criminal Proceedings
NATURE AND EXTENT OF GUARANTY
2047 Surety is an insurer of the debt whereas a guarantor is insurer of the insolvency of the debtor
2048 Guaranty is gratuitous unless stipulation to contrary
2049 Married woman as guarantor ordinarily binds her separate property ​BUT may also bind ACP/CPG in when husband consents or benefitted
marriage
2050 Guaranty without knowledge or against will of principal debtor: Art. 1236, Art. 1237 (and Art. 2067)
2051 Guaranty: conventional / legal or judicial / gratuitous / or by onerous title; Double or Sub-Guaranty
2052 Guaranty cannot exist without valid obligation BUT may be constituted to guarantee voidable / unenforceable / natural obligation (contrast
with Art. 2081)
2053 Continuing Guaranty/Suretyship; Future Debts; Debts Subsequently Incurred; Existing Unliquidated Debts; Conditional Obligations (there
can be no claim against the guarantor until the debt is liquidated)
2054 Guarantor may bind himself for less but not for more than principal debtor - consider the amount and the onerous nature
2055 Guaranty not presumed, need to be express and cannot extend to what is stipulated; Simple/Indefinite - principal obligation, accessories,
judicial costs (if definite, only limited to principal debt); Judicial costs only when guarantor is judicially required to pay

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