Probable questions

1.) Cf loan and muttuum in re deposits in Art 1980 as enunciated in Producer’s bank v ca
 A commodatum may be on things which are not consumable provided their purpose is
for exhibition only. This was what was held in Producer’s bank v ca (case of show
money). However, Art 1980 provides that deposits, fixed savings, etc in bank shall be
governed by the rules on simple loan or muttuum. Thus such may also be governed as a
simple loan

2.) What is a forbearance of money
 “forbearance” is defined, within the context of usury law, AS A CONTRACTUAL OBLIGATION OF LENDER
OR CREDITOR TO REFRAIN, DURING GIVEN PERIOD OF TIME, FROM REQUIRING BORROWER OR DEBTOR
TO REPAY LOAN OR DEBT THEN DUE AND PAYABLE (Battaan Seeedling v Republic

3.) Are back rentals in the concept of a loan, meaning a forbearance of money
 Yes, it holds the quality of loan or forbearance of money and thus shall accrue 12%
interest per annum (Catungal v Hao)
4.) Interests: How to compute. Formula in Eastern Shipping Lines
 Use of Forbearance of money:
o No Stipulation: no interest
 Ie. A loan shall not earn interest, unless there is express stipulation for
payment of interest and that it has been reduced in writing (Siga-an v
Villanueva)
o Stipulation but no amount: 12%
o Stipulated
 Breach of the obligations of the loan or forbearance of money goods or credit
o No Stipulation: Legal Interest (12%) from time of
 Judicial
 Extrajudicial demand
o Stipulated: Interest; upon judicial demand, stipulated plus 12% interest begins
to run.
 Exception: if another stipulation provides that the loan will earn an
interest upon maturity. (First Fil Sin v Padillo)
 Breach for obligations not involving loan or forbearance of money
o 6% rate from judicial demand upon discretion of the court
o Runs from
 Reasonable certainty of
 Judicial
 Extrajudicial
 No certainty: time of decisions(maybe rtc level if decided in there)
o
 Finaility of judgment
 o 12% from finality of judgment

Does this mean that in case 1, that if there is stipulated interest, it shall be compounded with the legal
interest after date of judicial demand, or is it a separate undertaking

5.) Mash up of interest and deposits again in re Integrated realty v PNB

 , THAT WHAT ENABLES A BANK TO PAY STIPULATED INTEREST ON MONEY DEPOSITED WITH IT IS THAT THRU
THE OTHER ASPECTS OF ITS OPERATION IT IS ABLE TO GENERATE FUNDS TO COVER THE PAYMENT OF SUCH
INTEREST
 THAT THE OBLIGATION TO PAY INTEREST ON THE DEPOSIT CEASES THE MOMENT THE OPERATION OF THE
BANK IS COMPLETELY SUSPENDED BY THE DULY CONSTITUTED AUTHORITY, THE CENTRAL BANK .
 Thus it is upon the actual stoppage of operations as ordered by central bank that stops the running oif
interests and not the state of actual liquidation .
6.) Validity of Escalation clauses
 16 It was only pursuant to P.D. No. 1684 which became effective March 17, 1980 wherein to be valid,
escalation clauses should provided: 1.) THAT THERE CAN BE AN INCREASE IN INTEREST IF INCREASED BY
LAW OR BY THE MONETARY BOARD; AND 2.) IN ORDER FOR SUCH STIPULATION TO BE VALID, IT MUST
INCLUDE A PROVISION FOR THE REDUCTION OF THE STIPULATED INTEREST IN THE EVENT THAT THE
MAXIMUM RATE OF INTEREST IS REDUCED BY LAW OR BY THE MONETARY BOARD (Banco Filipino v CA)
 There must also a reference rate from which the the interest shall be based upon. i.e.
3% increase from the fair market value. (Consolidated Bank v CA)
 An additional requirement is that there can be no unilateral increase of interest
without the consent of the other part on the basis of mutuality of contracts (Mendoza
v CA)

7.) Usurious Interests and Principal Obligations (Divisible Obligations)
 Contracts and stipulations of usurious interests shall be void. The principal Obligation
is a separate undertaking from the interests. Thus a usurious interest is void, but the
principal obligation remains to be valid. (First Metro v Este Del sol)
 The nullity of usurious interests does not carry with it the nullity of the principal
obligation, such as a real estate mortgage as in this case. The interest rate is a
separate and divisible obligation from the principal obligation; thus the principal
obligation subsists. ( Carpo v Chua)
8.) Deposits, its meaning and purpose
 Deposit is constituted when a person receives a thing belonging to another with
obligation to safe keep and return it. Safekeeping must be primary purpose, otherwise
no deposit. (Art 1962) The purpose shall be determined by the contract or if
ambiguous, the intention of the parties as shown by their subsequent acts. (BPI v CA)
 The depositor is not liable for fortuitous event that lead to the loss of the thing.
(Roman Catholic v Pena, Main), However, there is also the view that co-mingling of
the thing deposited to personal funds, makes the protection from liability be shed off
from the depositary (Roman v Pena, Dissent)
  In a case where there are two depositors who hold the same key, and the depositary
who holds another key which could not be opened without the presence of both keys,
in renting a safety deposit box, such is not purely a lease, nor is it purely a deposit,
rather it is a special kind of deposit. Moreover laws of the Phil shows that banks acts
more in a function of a depositary, plus the primary function of the depost box was
still for safekeeping. (CA Agro v CA)

9.) Use of the thing without depositor’s permission

 Art 1978 provides that the depositary may not use the thing without the permission of
the depositor or if there is no danger in using it, otherwise he shall be liable for
damages. In case of using it with permission, the contract loses the concept of a
deposit and becomes a loan or a commodatum.
 In a case where the money was used by the so-called depositaries, the contarct ceases
to be a deposit and is called a loan. (Javellana v Lim) Sir asked whether it is a loan or
deposit. The answer is that it was a loan from the start. The intent behind Art 1978 is
in relation to cases where deposits are used as a subterfuge for a contract of loan.
Thus, the result is that such contracts are determined by the intention of the parties.
10.)Burden of Proof
 In actions against the depositary, the burden of proof that there is a deposit is on the
plaintiff(depositor). (Chan v maceda)
11.)Exemptions from liability
 Any stipulation which exempts the depositor from liability is void on the basis of Art
1306, where they can establish stipulations, provided not contrary to law, public
policy, good morals. (CA Agro v CA)
 Art 2003, prevents hotelkeepers from exempting themselves from liability. Such
stipulations are void. What art 2002, exempts is not merely liability from friends,
visitors, family, etc. The intent behind the law is to make hotelkeepers liable when
their negligence had set forth the cause of the loss. Thus their negligence (YHT v CA)
Thus 2001 exempts from liability hotels where theft is made with use of arms or
irresistible force.