2004 BAR QUESTIONS (CREDIT)

Q: Distinguish briefly but clearly between Mutuum and Commodatum.

A: In MUTUUM, the object borrowed must be a consumable thing the ownership of which is transferred to the
borrower who incurs the obligation to return the same consumable to the lender in an equal amount, and of the same
kind and quality. In COMMODATUM, the object borrowed is usually a non-consumable thing the ownership of
which is not transferred to the borrower who incurs the obligation to return the very thing to the lender.
Commodatum is essentially gratuitous; in mutuum, it may be gratuitous or not.

Q: 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. 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 OBs action be just and valid? Why? Has TY a remedy against the imposition of the rate increase?
Explain.

A: OB's action is not just and valid. The debtor cannot be required to pay the increase in interest there being no law
authorizing it, as stipulated in the contract. Increasing the rate in the absence of such law violates the principle of
mutuality of contracts.

ALTERNATIVE ANSWER

Even if there was a law authorizing the increase in interest rate, the stipulation is still void because there is no
corresponding stipulation to decrease the interest due when the law reduces the rate of interest.

Q: ABC loaned to MNO P40,000 for which the latter pledged 400 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.

A: The shares of stock cannot be deemed owned by ABC upon default of MNO. They have to be foreclosed. Under
Article 2088 of the Civil Code, the creditor cannot appropriate the things given by way of pledge. And even if the
parties have stipulated that ABC becomes the owner of the shares in case MNO defaults on the loan, such stipulation
is void for being a pactum commissorium.



Multiple Choice

1. Which of the following is illustrative of commodatum?
a. A delivered his dvd player to B for the latters temporary use in exchange of P50.
b. A borrowed Bs magazine to show to her sister the months cover.
c. A gave his slice of pizza to B upon the latters promise to buy him 2 slices the next day.
d. a and b
e. a and c
2. 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. Suppose OB, the lender,
would increase by 5% the rate of interest to be paid by TY, which of the following is true?
a. Contract is invalid because there is no stipulation that interest would be decreased if there is a law
that would decrease interest rates.
b. Contract is invalid because interest rate is usurious.
c. Contract is invalid because it violates mutuality of contracts.
d. a and b
e. a and c
f. b and c

3. ABC loaned to MNO P40,000 for which the latter pledged 400 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. The pledgor failed
to pay. Which of the following is true?

a. The pledgee may appropriate the shares of stock in payment of the money loaned.
b. The pledgee may not appropriate the shares of stock in payment of the money loaned.
c. If the proceeds from the sale of stocks are less than the debt, the creditor may demand for the
deficiency.
d. If the proceeds from the sale of stocks are more than the debt, the creditor must return the excess to the
debtor.
e. a and c
f. c and d

Answers:
1. B
2. E
3. B