WEEK 2 – CREDIT TRANS

LOANS

ARTS. 1933-1934

Article 1933. By
the contract of loan, one of the parties delivers to another,
either something not consumable so that the latter may use the same for a
certain time and return it, in which case the contract is called a
commodatum; or money or other consumable thing, upon the condition
that the same amount of the same kind and quality shall be paid, in which
case the contract is simply called a loan or mutuum.

Commodatum is essentially gratuitous.

Simple loan may be gratuitous or with a stipulation to pay interest.

In commodatum the bailor retains the ownership of the thing loaned, while
in simple loan, ownership passes to the borrower. (1740a)

Article 1934. Anaccepted promise to deliver something by way of

commodatum or simple loan is binding upon parties, but the commodatum
or simple loan itself shall not be perfected until the delivery of the object of
the contract.

 People vs. Concepcion (44 Phil. 126 [1922])

https://www.scribd.com/document/258215311/GR-L-19190-1922-People-vs-Concepcion

 Re: Anonymous Letter-Complaint on the Alleged Involvement and for Engaging in the
Business of Lending Money at Usurious Rates of Interest of Ms. Dolores T. Lopez, SC
Chief Judicial Staff Officer, and Mr. Fernando M. Montalvo, SC Supervising Judicial
Staff Officer, Checks Disbursement Division, Fiscal Management and Budget Office
(A.M. No. 2010-21-SC, Sept.30, 2014)
http://source.gosupra.com/docs/decision/57735
 Section 1. Nature of Commodatum (Arts. 1935-1940 NCC)

Article 1935. The bailee in commodatum acquires the use of the thing loaned but not its fruits; if
any compensation is to be paid by him who acquires the use, the contract ceases to be a
commodatum. (1941a)

Article 1936. Consumable goods may be the subject of commodatum if the purpose of the contract
is not the consumption of the object, as when it is merely for exhibition. (n)

Article 1937. Movable or immovable property may be the object of commodatum. (n)

Article 1938. The bailor in commodatum need not be the owner of the thing loaned. (n)

Article 1939. Commodatum is purely personal in character. Consequently:

Article 1940. A stipulation that the bailee may make use of the fruits of the thing loaned is valid.
(n)

 Republic vs. Bagtas (6 SCRA 262 [1962])

https://lawphil.net/judjuris/juri1962/oct1962/gr_l-17474_1962.html
Facts:
Jose Bagtas borrowed from the Bureau of Animal Industry three bulls for a period of one year for breeding
purposes subject to a government charge of breeding fee of 10% of the book value of the books. Upon the
expiration of the contract, Bagtas asked for a renewal for another one year, however, the Secretary of
Agriculture and Natural Resources approved only the renewal for one bull and other two bulls be returned.
Bagtas then wrote a letter to the Director of Animal Industry that he would pay the value of the three bulls
with a deduction of yearly depreciation. The Director advised him that the value cannot be depreciated
and asked Bagtas to either return the bulls or pay their book value. Bagtas neither paid nor returned the
bulls. The Republic then commenced an action against Bagtas ordering him to return the bulls or pay their
book value.

Issue:
1. WON the contract was commodatum
2. WON Bagtas should be held liable for its loss due to force majeure.

Ruling:
1. NO, the contract is not commodatum.
2. YES, he is liable for the loss.

Ratio: A contract of commodatum is essentially gratuitous. Supreme Court held that Bagtas was
liable for the loss of the bull even though it was caused by a fortuitous event. If the contract was
one of lease, then the 10% breeding charge is compensation (rent) for the use of the bull and Bagtas,
as lessee, is subject to the responsibilities of a possessor. He is also in bad faith because he
continued to possess the bull even though the term of the contract has already expired. 

If the contract was one of commodatum, he is still liable because: (1) he kept the bull longer than
the period stipulated; and (2) the thing loaned has been delivered with appraisal of its value
(10%). No stipulation that in case of loss of the bull due to fortuitous event the late husband of
the appellant would be exempt from liability. 
 The original period of the loan was from 8 May 1948 to 7 May 1949. The loan of one bull was
renewed for another period of one year to end on 8 May 1950. But the appellant kept and used the
bull until November 1953 when during a Huk raid, it was killed by stray bullets. Furthermore, when
lent and delivered to the deceased husband of the appellant the bulls had each an appraised book
value, to with: the Sindhi, at P1,176.46, the Bhagnari at P1,320.56 and the Sahiniwal at P744.46. It
was not stipulated that in case of loss of the bull due to fortuitous event the late husband of the
appellant would be exempt from liability.

Ruling: ACCORDINGLY, the writ of execution appealed from is set aside, without pronouncement as
to costs.

 Pajuyo vs. CA (430 SCRA 492 [2004])

Facts: Pajuyo entrusted a house to Guevara for the latter's use provided he should
return the same upon demand and with the condition that Guevara should be
responsible of the maintenance of the property. Upon demand Guevara refused to
return the property to Pajuyo. The petitioner then filed an ejectment case against
Guevara with the MTC who ruled in favor of the petitioner. On appeal with the CA,
the appellate court reversed the judgment of the lower court on the ground that
both parties are illegal settlers on the property thus have no legal right so that the
Court should leave the present situation with respect to possession of the property
as it is, and ruling further that the contractual relationship of Pajuyo and Guevara
was that of a commodatum.

Issue: Is the contractual relationship of Pajuyo and Guevara that of a

commodatum?

Held: No. The Court of Appeals’ theory that the Kasunduan is one of commodatum
is devoid of merit. In a contract of commodatum, one of the parties delivers to
another something not consumable so that the latter may use the same for a
certain time and return it. An essential feature of commodatum is that it is
gratuitous. Another feature of commodatum is that the use of the thing belonging
to another is for a certain period. Thus, the bailor cannot demand the return of the
thing loaned until after expiration of the period stipulated, or after accomplishment
of the use for which the commodatum is constituted. If the bailor should have
urgent need of the thing, he may demand its return for temporary use. If the use of
the thing is merely tolerated by the bailor, he can demand the return of the thing at
will, in which case the contractual relation is called a precarium. Under the Civil
Code, precarium is a kind of commodatum. The Kasunduan reveals that the
accommodation accorded by Pajuyo to Guevarra was not essentially gratuitous.
While the Kasunduan did not require Guevarra to pay rent, it obligated him to
maintain the property in good condition. The imposition of this obligation makes the
Kasunduan a contract different from a commodatum. The effects of the Kasunduan
are also different from that of a commodatum. Case law on ejectment has treated
relationship based on tolerance as one that is akin to a landlord-tenant relationship
where the withdrawal of permission would result in the termination of the lease.
The tenant’s withholding of the property would then be unlawful.
 Producers Bank of the Phils. vs. CA (397 SCRA 651 [2003])
 Facts:
Sometime in 1979, private ]]
Vives was asked by his neighbor and friend Angeles Sanchez to help her friend
and townmate, Col. Arturo Doronilla, in incorporating his business, the Sterela
Marketing and Services. Specifically, Sanchez asked private respondent to deposit
in a bank a certain amount of money in the bank account of Sterela for purposes
of its incorporation. She assured private respondent that he could withdraw his
money from said account within a month’s time. Private respondent asked
Sanchez to bring Doronilla to their house so that they could discuss Sanchezs
request.

On May 9, 1979, private respondent, Sanchez, Doronilla and a certain Estrella

Dumagpi, Doronillas private secretary, met and discussed the matter. Thereafter,
relying on the assurances and representations of Sanchez and Doronilla, private
respondent issued a check in the amount of P200,000.00 in favor of Sterela.
Private respondent instructed his wife, Mrs. Inocencia Vives, to accompany
Doronilla and Sanchez in opening a savings account in the name of Sterela in the
Buendia, Makati branch of Producers Bank of the Philippines. However, only
Sanchez, Mrs. Vives and Dumagpi went to the bank to deposit the check. They
had with them an authorization letter from Doronilla authorizing Sanchez and her
companions, in coordination with Mr. Rufo Atienza, to open an account for
Sterela Marketing Services in the amount of P200,000.00. In opening the account,
the authorized signatories were Inocencia Vives and/or Angeles Sanchez. A
passbook for Savings Account No. 10-1567 was thereafter issued to Mrs. Vives.

Subsequently, private respondent learned that Sterela was no longer holding

office in the address previously given to him. Alarmed, he and his wife went to
the Bank to verify if their money was still intact. The bank manager referred them
to Mr. Rufo Atienza, the assistant manager, who informed them that part of the
money in Savings Account No. 10-1567 had been withdrawn by Doronilla, and
that only P90,000.00 remained therein. He likewise told them that Mrs. Vives
could not withdraw said remaining amount because it had to answer for some
postdated checks issued by Doronilla. According to Atienza, after Mrs. Vives and
Sanchez opened Savings Account No. 10-1567, Doronilla opened Current
Account No. 10-0320 for Sterela and authorized the Bank to debit Savings
Account No. 10-1567 for the amounts necessary to cover overdrawings in Current
Account No. 10-0320. In opening said current account, Sterela, through
Doronilla, obtained a loan of P175,000.00 from the Bank. To cover payment
thereof, Doronilla issued three postdated checks, all of which were dishonored.
Atienza also said that Doronilla could assign or withdraw the money in Savings
Account No. 10-1567 because he was the sole proprietor of Sterela.

Private respondent tried to get in touch with Doronilla through Sanchez. On June
29, 1979, he received a letter from Doronilla, assuring him that his money was
intact and would be returned to him. On August 13, 1979, Doronilla issued a
 postdated check for P212,000.00 in favor of private respondent. However, upon
presentment thereof by private respondent to the drawee bank, the check was
dishonored. Doronilla requested private respondent to present the same check on
September 15, 1979 but when the latter presented the check, it was again
dishonored.

Private respondent referred the matter to a lawyer, who made a written demand
upon Doronilla for the return of his clients money. Doronilla issued another check
for P212,000.00 in private respondents favor but the check was again dishonored
for insufficiency of funds.

Private respondent instituted an action for recovery of sum of money in the RTC
Pasig against Doronilla, Sanchez, Dumagpi and petitioner. RTC ruled against
defendants Arturo J. Doronila, Estrella Dumagpi and Producers Bank of the
Philippines.

 Petitioner appealed to the CA. The CA affirmed the decision of the RTC. It
likewise denied with finality petitioners motion for reconsideration.

 Issue:
 Whether or not CA erred in upholding that the transaction between the defendant
Doronilla and respondent Vives was one of simple loan and not accommodation

 Held:
No.

 No error was committed by the Court of Appeals when it ruled that the transaction
between private respondent and Doronilla was a commodatum and not a
mutuum.A circumspect examination of the records reveals that the transaction
between them was a commodatum. Article 1933 of the Civil Code distinguishes
between the two kinds of loans in this wise:
 By the contract of loan, one of the parties delivers to another, either something not
consumable so that the latter may use the same for a certain time and return it, in
which case the contract is called a commodatum; or money or other consumable
thing, upon the condition that the same amount of the same kind and quality shall
be paid, in which case the contract is simply called a loan or mutuum.

 Commodatum is essentially gratuitous.

 Simple loan may be gratuitous or with a stipulation to pay interest.

 In commodatum, the bailor retains the ownership of the thing loaned, while in
simple loan, ownership passes to the borrower.

 The foregoing provision seems to imply that if the subject of the contract is a
consumable thing, such as money, the contract would be a mutuum. However,
 there are some instances where a commodatum may have for its object a
consumable thing. Article 1936 of the Civil Code provides:

 Consumable goods may be the subject of commodatum if the purpose of the
contract is not the consumption of the object, as when it is merely for exhibition.

 Thus, if consumable goods are loaned only for purposes of exhibition, or when
the intention of the parties is to lend consumable goods and to have the very same
goods returned at the end of the period agreed upon, the loan is a commodatum
and not a mutuum.

 The rule is that the intention of the parties thereto shall be accorded primordial
consideration in determining the actual character of a contract. In case of doubt,
the contemporaneous and subsequent acts of the parties shall be considered in
such determination.

 As correctly pointed out by both the Court of Appeals and the trial court, the
evidence shows that private respondent agreed to deposit his money in the savings
account of Sterela specifically for the purpose of making it appear that said firm
had sufficient capitalization for incorporation, with the promise that the amount
shall be returned within thirty (30) days. Private respondent merely
accommodated Doronilla by lending his money without consideration, as a favor
to his good friend Sanchez.It was however clear to the parties to the transaction
that the money would not be removed from Sterelas savings account and would
be returned to private respondent after thirty (30) days.

 Doronillas attempts to return to private respondent the amount of P200,000.00
which the latter deposited in Sterelas account together with an ad\ditional
P12,000.00, allegedly representing interest on the mutuum, did not convert the
transaction from a commodatum into a mutuum because such was not the intent
of the parties and because the additional P12,000.00 corresponds to the fruits of
the lending of the P200,000.00. Article 1935 of the Civil Code expressly states
that [t]he bailee in commodatum acquires the use of the thing loaned but not its
fruits. Hence, it was only proper for Doronilla to remit to private respondent the
interest accruing to the latters money deposited with petitioner.

 Neither does the Court agree with petitioners contention that it is not solidarily
liable for the return of private respondents money because it was not privy to the
transaction between Doronilla and private respondent. The nature of said
transaction, that is, whether it is a mutuum or a commodatum, has no bearing on
the question of petitioners liability for the return of private respondents money
because the factual circumstances of the case clearly show that petitioner, through
its employee Mr. Atienza, was partly responsible for the loss of private
respondents money and is liable for its restitution.
 Section 3. Obligations of the Bailor (Arts. 1946-1952 NCC)

ARTICLE 1946. The bailor cannot demand the return of the thing loaned till after the expiration of
the period stipulated, or after the accomplishment of the use for which the commodatum has been
constituted. However, if in the meantime, he should have urgent need of the thing, he may demand
its return or temporary use.

In case of temporary use by the bailor, the contract of commodatum is suspended while the thing is
in the possession of the bailor. (1749a)

Article 1947. The bailor may demand the thing at will, and the contractual relation is called a
precarium, in the following cases:

Article 1948. The bailor may demand the immediate return of the thing if the bailee commits any
act of ingratitude specified in article 765. (n)

Article 1949. The bailor shall refund the extraordinary expenses during the contract for the
preservation of the thing loaned, provided the bailee brings the same to the knowledge of the bailor
before incurring them, except when they are so urgent that the reply to the notification cannot be
awaited without danger.

If the extraordinary expenses arise on the occasion of the actual use of the thing by the bailee, even
though he acted without fault, they shall be borne equally by both the bailor and the bailee, unless
there is a stipulation to the contrary. (1751a)

Article 1950. If, for the purpose of making use of the thing, the bailee incurs expenses other than
those referred to in articles 1941 and 1949, he is not entitled to reimbursement. (n)

Article 1951. The bailor who, knowing the flaws of the thing loaned, does not advise the bailee of
the same, shall be liable to the latter for the damages which he may suffer by reason thereof. (1752)

Article 1952. The bailor cannot exempt himself from the payment of expenses or damages by
abandoning the thing to the bailee. (n)
 Quintos and Ansaldo vs. Beck (69 Phil. 108 [1939])

MARGARITA QUINTOS and ANGEL A. ANSALDO, plaintiffs-appellants vs. BECK, defendant-

appellee. G.R. No. L-46240, November 3, 1939
Doctrine: In a contract of commodatum, the ownership is retained by the person who loaned it and must
be returned to them as stipulated in their agreement.  (Arts. 1933, 1946-1958)

Facts:
The plaintiff brought this action to compel the defendant to return her certain furniture which she lent him
for his use.
The defendant was a tenant of the plaintiff and as such occupied the latter's house on M. H. del Pilar
street, upon the novation of the contract of lease between the plaintiff and the defendant, the former
gratuitously granted to the latter the use of the furniture, subject to the condition that the defendant would
return them to the plaintiff upon the latter's demand.
The plaintiff sold the property to Maria Lopez and Rosario Lopez and on September 14, 1936, these three
notified the defendant of the conveyance, giving him sixty days to vacate the premises under one of the
clauses of the contract of lease.
Thereafter, the plaintiff required the defendant to return all the furniture transferred to him for them in the
house where they were found.
The defendant, through another person, wrote to the plaintiff reiterating that she may call for the furniture
in the ground floor of the house. Then defendant wrote another letter to the plaintiff informing her that he
could not give up the three gas heaters and the four electric lamps because he would use them until the
15th of the month when the lease in due to expire.
The plaintiff refused to get the furniture in view of the fact that the defendant had declined to make
delivery of all of them. Before vacating the house, the defendant deposited with the Sheriff all the
furniture belonging to the plaintiff and they are now on deposit in the warehouse, in the custody of the
said sheriff.
Issue:
WON the contract between the parties was a contract of commodatum.
Held:
The contract entered into between the parties is one of commadatum, because under it the plaintiff
gratuitously granted the use of the furniture to the defendant, reserving for herself the ownership thereof;
by this contract the defendant bound himself to return the furniture to the plaintiff, upon the latter’s
demand.
As the defendant had voluntarily undertaken to return all the furniture to the plaintiff, upon the latter's
demand, the Court could not legally compel her to bear the expenses occasioned by the deposit of the
furniture at the defendant's behest. The latter, as bailee, was not entitled to place the furniture on deposit;
nor was the plaintiff under a duty to accept the offer to return the furniture, because the defendant wanted
to retain the three gas heaters and the four electric lamps.
As to the value of the furniture, we do not believe that the plaintiff is entitled to the payment thereof by
the defendant in case of his inability to return some of the furniture; the defendant has neither agreed to
nor admitted the correctness of the said value. Should the defendant fail to deliver some of the furniture,
the value thereof should be latter determined by the trial Court through evidence which the parties may
desire to present.
The costs in both instances should be borne by the defendant.
The defendant was the one who breached the contract of commodatum, and without any reason he refused
to return and deliver all the furniture upon the plaintiff's demand.
In these circumstances, it is just and equitable that he pays the legal expenses and other judicial costs
which the plaintiff would not have otherwise defrayed.
Notes:
RTC Decision: She appealed from the judgment of the Court of First Instance of Manila which ordered
that the defendant return to her the three has heaters and the four electric lamps found in the possession of
the Sheriff of said city, that she call for the other furniture from the said sheriff of Manila at her own
expense, and that the fees which the Sheriff may charge for the deposit of the furniture be paid  pro rata
(proportionally) by both parties.
SC Decision: The appealed judgment is modified and the defendant is ordered to return and deliver to the
plaintiff, in the residence to return and deliver to the plaintiff, in the residence or house of the latter, all
the furniture. The expenses which may be occasioned by the delivery to and deposit of the furniture with
the Sheriff shall be for the account of the defendant. The defendant shall pay the costs in both instances.