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CREDIT TRANSACTIONS

LAW 305M
1st Semester, AY 2016-20171
1. Concept of credit
Read: People v. Concepcion, GR L-19190, 29 November 1922
Republic of the Philippines v. Philippine National Bank, et al., GR L-16106,
30 December 1962
Pantaleon v American Express, GR 174269, 25 August 2010
R.A. 3765, Truth in Lending Act, Sec. 3 meaning of credit
2. Loan
2.1.

General Articles 1933 to 1934, Civil Code


Object; consideration; delivery of thing loaned; obligation to return or pay
Read: Garcia v Thio, G.R. No. 154878, 16 March 2007
Saura Import & Export v. DBP, GR L-24968, 27 April 1972
BPI Investment v CA, GR 133632, 15 February 2002
Pantaleon v American Express, GR 174269, 25 August 2010

2.2.

Commodatum
a) General Articles 1933 to 1940, inclusive, Civil Code
Consideration; object; parties; ownership; use
b) Obligations of bailee Articles 1941 to 1945, inclusive, Civil Code
c) Obligations of bailor Articles 1946 to 1952, inclusive, Civil Code
Read: Producers Bank v. CA, G.R. No. 115324, 19 February 2003
Catholic Vicar Apostolic v. CA, G.R. No. 80294-95 21 Sept. 1988
Payujo v. CA, GR 146364, 3 June 2004
Republic v. Bagtas, GR L-17474, 25 October 1961
Quintos & Ansaldo v. Beck, GR L-46240, 3 November 1939

2.3.

Simple loan or mutuum


a) General
Art. 1933; 1953 to 56, Civil Code
Art.1249 and 1250; Civil Code
Art. 1980; Civil Code
Read:

1Students

People v. Puig & Porras, 563 SCRA 564 (2008)


BPI Family v Franco, GR 123498, 23 November 2007
Producers Bank v. CA, G.R. No. 115324, 19 February 2003

must study the provisions of law and the cases cited in this outline. Reference - Credit
Transactions by Gomez-Somera (UP College of Law; 2 volumes)

b) Interest
(i) Interest as cost of money; simple interest; capitalized
(compounded) interest - Art.1933, 1956-1961; 1423; 1253; Civil
Code
(ii) Interest as penalty, compensation or indemnity: Art. 2209 to 2213,
Civil Code
Read:

Ching v. Nicdao, G.R. No. 141181, 27 April 2007


Siga-an v Villanueva, G.R. No. 173227, 20 January 2009
Frias v. San Diego, GR 155223, 3 April 2007
State Investment House v. CA, GR 90676. 19 June 1991
Concepcion v CA, GR 122079, 27 June 1997
Radiowealth v. Del Rosario, G.R. No. 138739. 6 July 2000
GSIS v. CA, GR L-52478, 30 Oct 1985
Ligutan v CA, GR 138677, 12 February 2002
Eastern Shipping Lines v. CA, GR 97412, 12 July 1994
Ledda v. BPI, GR 200868, 21 November 2012
Spouses Silos v PNB, GR 181045, 2 July 2014
Spouses Juico v China Banking, GR 187678, 10 April 2013
Philippine National Bank v CA, GR 88880, 20 August 1991
Insular Bank of Asia and America v Salazar, G.R. No. 82082
March 25, 1988

c) Usury
Art. 1175; 1957; 1961; 1413, Civil Code
Act 2655, as amended; Pres. Decree 116 (25 January 1973)
Sec. 1, 1-a; 2; 3; 4-a; 4-b; 5; 7; 9-a; 10
CB Circular 416 (29 July 1974); CB Circular 905 (10 December 1982);
BSP Circular No. 799 (1 July 2013)
Read:

Security Bank v RTC Makati, GR 113926. 23 October 1996


Carpo v Chua, GR 150773 & 153599, 30 September 2005

d) Truth in Lending Act RA 3765


(i)
Sec. 3 definitions
(ii)
Sec. 4 statement and contents
(iii)
Sec. 6 violations and penalties
Read:

UCPB v Samuel & Beluso, GR No. 159912, 17 August 2007

3. Deposit
3.1.

Voluntary deposit
a) In general; kinds Articles 1962 to 1971, Civil Code

b) Obligations of depositary Articles 1972 to 1991, Civil Code


c) Obligations of depositor Articles 1992 to 1995, Civil Code
Read: BPI v. Intermediate Appellate Court, 164 SCRA 630 (1988)
RC Bishop of Jaro v De la Pena, GR L-6913; 26 Phil. 144 (1913)
CA Agro-Industrial Dev. Corp. v CA, GR 90027, 3 March 1993
People v. Puig and Porras, GR 128780, 28 August 2008
YHT Realty v. CA, GR 126780. 17 February 2005
Sia v. CA, GR 102970. 13 May 1993
Baron v David, GR L-26948, 26949, 8 October 1927
People v. Ong, GR 93849, 20 December 1991
Serrano v. Central Bank, GR L-30511, 14 February 1980
Triple V Food Services v Filipino Merchants, GR 160544, 21
February 2005
Spouses Mamaril v BSP, GR 179382, 14 January 2011
3.2.

Necessary deposit Articles 1996 to 2004, Civil Code

3.3.

Sequestration or judicial deposit Articles 2005 to 2009

3.4.

Warehouse Receipts Law, Act 2137, as amended


a)
b)
c)
d)
e)
f)

Applicability; purpose
Definition, form, contents of receipt - Sec. 2; 3
Non-negotiable, negotiable receipts - Sec. 4; 5
Obligations and rights of warehouseman - Sec. 8 to 36
Negotiation and transfer of receipts - Sec. 37 to 48
Criminal offenses - Sec. 50-56

Read: PNB v. Se, Jr., GR 119231, 18 April 1996


4. Special commercial laws
4.1.

Merchants and commercial transactions, Art. 1-63, Code of Commerce

4.2.

Letters of credit, Art. 567-568, Code of Commerce


Read: Feati Bank and Trust v CA, GR 94209, 30 April 1991
MWSS v Daway and Maynilad Water, GR 160732, 21 June 3004

5. Security transactions
5.1.

Concept of security transactions

5.2.

Guaranty and suretyship


Articles 2047 to 2084, Civil Code
Art 1207 to 1222, Civil Code; Art. 2082 to 2084 (Legal and judicial bonds)
a) Nature and extent of guaranty Articles 2047 to 2057
Read:

Velasquez v Solidbank, G.R. No. 157309, 28 March 2008


Philippine Blooming Mills v CA, GR 142381, 15 Oct 2003
Atok Finance v CA, G.R. No. 80078, 18 May 1993
Municipality of Gasan v Marasigan, GR 43486, 30 Sept 1936
Willex Plastic Industries v CA, G.R. No. 103066. 25 April
1996

b) Benefit of excussion Art. 2058; 2059; 2060


Read:

Syquia v Palma, G.R. No. L-41320, 9 November 1934

c) Suretyship
Art. 2047
Joint and solidary obligations, Art. 1207, et seq., Civil Code
Sec. 177 and 178, RA 10607 (amended Insurance Code)
d) Distinction between guaranty and surety
Read:

E. Zobel, Inc. v CA, GR 113931, 6 May 1998


International Finance Corp. v Imperial Textile Mills, GR
160324, 15 Nov 2005

e) Where principles of guaranty also applicable to suretyship


Read:

Ong v Phil, Commercial Intl Bank, G.R. 160466, 17 Jan


2005
Manila Surety v Batu Construction, GR L-9353, 21 May 1957
Escano v Ortigas, GR 151953, 29 June 2007
Philippine Blooming Mills v CA, GR 142381, 15 Oct 2003

f) Effects of guaranty
(i)
As between guarantor and creditor Articles 2058 to 2065
(ii)
As between debtor and guarantor Articles 2066 to 2072
(iii)
As between co-guarantors Articles 2073 to 2075
5.3.

g) Extinguishment of guaranty Articles 2076 to 2081


Pledge, mortgage and antichresis
Articles 2085 to 2141, Civil Code
a) Provisions common to pledge and mortgage

Articles 2085 to 2092; Art. 2052


Read:

Adriano v Pangilinan, GR 137471, 16 January 2002


Dizon v Suntay, GR L-30817, 29 September 1972
Cavite Development v Lim, G.R. No. 131679. 1 Feb 2000
DBP v CA, GR 118367 & 118342, 5 January 1998
Bustamante v Rosel, GR 126800, 29 November 1999
Ong v Roban Lending, GR 172592, 9 July 2008
Uy Tong v CA, G.R. No. 77465 21 May 1988
Guanzon v Argel, G.R. No. L-27706, 16 June 1970
Central Bank v CA and Tolentino, G.R. No. L-45710, 3
October 1985

b) Provisions applicable to pledge only


Articles 2093 to 2123; Art. 416-417
Read:

Paray and Espeleta v Rodriguez, GR 132287, 24 Jan. 2006


Yuliongsiu v PNB, GR L-19227, 17 February 1968

c) Real estate mortgage


Art. 2085; 2087, Civil Code
Art. 2124 to 2131, Civil Code
Rule 68, Rules of Court Foreclosure of Real Estate Mortgage
Act No. 3135, as amended by Act 4118 An Act to regulate the sale of
property under special powers inserted in or annexed to real estate
mortgages
RA 8791, Sec. 47
Circular 7-2002, Guidelines for Enforcement of SC Resolution of
December 14, 1999 in Administrative Matter No. 99-10-05-0 (Re:
Procedure in Extrajudicial Foreclosure of Mortgage) as amended by
Resolutions dated January 30, 2001 and August 7, 2001

Read:

Prudential Bank v. Alviar, GR 150197, 28 July 2005


Philippine Bank of Communications v CA, GR 118552, 5
February 1996
Peoples Bank and Trust v Dahican Lumber, GR L017500,
16 May 1967
Korea International Bank v. Filkor, GR 138292, 10 April 2002
Huerta Alba Resort v CA, GR 128567, 1 September 2000
Spouses Rosales and Sibug v Spouses Suba, GR 137782,
12 August 2003
Grand Farms et al v CA et al, GR 91779, 7 February 1991
Medida v Court of Appeals, GR 98334, 8 May 1992
Suico v PNB, G.R. No. 170215, 28 August 2007
BPI Family Savings v Golden Power Diesel Sales, GR
170169, 12 January 2011

Goldenway Merchandising v Equitable PCI Bank, GR


195540, 13 March 2013`
Heirs of Quisumbing v PNB, GR 178242, 20 Jan 2009
d) Chattel mortgage
(i)
Art. 2085, 2087 Civil Code
(ii)
Art. 2140 to 2141, Civil Code; Art. 416-417, Civil Code
(iii)
Chattel Mortgage Law, Act 1508 as amended
Sec. 2 - What may be subject of chattel mortgage
Sec. 4; 5 Validity; form; affidavit of good faith
Sec. 7 Description
Sec. 8 - Foreclosure
Sec. 13 - Equity of redemption
Sec. 14 Foreclosure
Circular 7-2002, Guidelines for Enforcement of SC Resolution of
December 14, 1999 in Administrative Matter No. 99-10-05-0
Right of redemption
Possession
Surplus or deficiency
Read:

PCI Leasing v Trojan Metal, GR 176381, 15 December 2010


Acme Shoe Rubber v CA, GR 103576, 22 Aug 1996
Makati Leasing v Wearever Textiles, GR L-58469, 16 May
1983
Peoples Bank & Trust v Dahican Lumber, GR L-17500, 16
May 1967
Dy v Court of Appeals, GR 92989, 8 July 1991
Pameca Wood v CA, GR 106435, 14 July 1999
Servicewide Specialist Inc. v CA, Gr 116363, 10 Dec 1999
RCBC v Royal Cargo, GR 179756, 20 October 2009
Servicewide Specialists v CA, GR 110048, 19 November
1999

e) Antichresis
Articles 2132 to 2139, Civil Code
Read:
Diego v Fernando, GR L-15128, 25 August 1960
5.4.

Trust Receipts Law


Read: Colinares and Veloso v CA, GR No. 90828, 5 September 2000

6. Insolvency and Corporate Rehabilitation


a) Art. 2236, 2237, Civil Code
b) Concurrence and preference of credits, Articles 2241 to 2251, Civil Code
Read:

De Barretto v Villanueva, GR L-14938, 29 December 1962


J.L. Bernardo v CA, GR 105827, 31 January 2000
DBP v CA, GR 126200, 16 August 2001

c) RA 10142, Financial Rehabilitation and Insolvency Act (FRIA) see attached


reading outline for FRIA
Read:

Rubber World (Phils) Inc. v NLRC, G.R 126773, 14 April 1999


Leca Realty v Manuela Corp, G.R. 166800 & 168924, 25 Sept 2007
RCBC v IAC, G.R. No. 74851, 09 December 1999
Sobrejuanite v ASB Development, G.R. 165675, 30 Sept. 2005
Metropolitan Bank & Trust v SLGT Holdings, G.R. 175181-82,
175354 & 175387-88, 14 September 2007
Clarion Printing House v NLRC, G.R. No. 148372, 27 June 2005
Ong v PCIB, G.R. 160466, 17 Jan 2005
Metropolitan Bank v ASB Holdings, G.R. 166197, 27 Feb 2007
MWSS v Daway & Maynilad Water, G.R. 160732, 21 June 2004

FRIA - Reading Outline


A.
B.
C.
D.

Articles 2236 and 2237, Civil Code


State policy Sec. 2, RA 10141 (FRIA)
Nature of proceedings Sec. 3, FRIA
Concurrence and preference of credits
1) Sec. 62, FRIA
2) Sec. 133, FRIA
3) Articles 2241 to 2251, Civil Code
E. Definitions RA 10141 (FRIA)
1) Insolvent Sec. 4(p)
2) Debtor; group of debtors Sec. 4(k); 4(n) [Juridical debtor]
(i) Who are not included Sec. 5
3) Individual debtor Sec. 4(o)
4) Control Sec. 4(f)
5) Liabilities Sec. 4(s)
6) Claim Sec. 4(c)
7) Insolvent debtors estate Sec. 4(q)
8) Encumbered property Sec. 4(l)
9) Creditor Sec. 4(h)
10) Stakeholder Sec. 4(nn)
11) Lien Sec. 4
12) Ordinary course of business Sec. 4(y)

F.

G.
H.
I.
J.

K.

13) Rehabilitation Sec. 4(gg)


14) Rehabilitation Receiver Sec. 4 (hh)
15) Rehabilitation Plan - Sec. 4(ii)
16) Liquidation
Court supervised rehabilitation
1) Who can initiate; what petition must contain Sec. 12; Sec. 13; Sc. 14 FRIA
2) Commencement Order Sec. 4(e); Sec. 15; Sec. 16; Sec. 17; Sec. 19
3) Effects of commencement order Sec. 16(q); Sec. 17; Sec. 18; Sec. 19
4) Effectivity and duration of commencement order Sec. 21
5) Initial hearing Sec. 22
6) Claims of creditors Sec. 16(i); Sec. 23
7) Report of Rehabilitation Receiver Sec. 24
8) Due course or dismissal Sec. 26; Sec. 27
9) Rehabilitation Receiver
a) Who; qualifications; creditors nominee Sec. 28; Sec. 29; Sec. 30
b) Powers, duties, responsibilities Sec. 31; Sec. 39
c) Immunity Sec.41
10) Management Committee Sec. 36; Sec. 37
11) Creditors committee Sec. 42; Sec. 43
12) Determination of claims Sec. 44; Sec. 45
13) Management Sec. 47; Sec. 36
14) Assets Sections 49 to 53
15) Employees; contracts Sec. 56; Sec. 57
16) Nullity of certain pre-commencement transactions Sec. 58; Sec. 59
17) Secured creditors Sec. 60
18) Rehabilitation Plan
a) Consultations
b) Creditor approval; court approval notwithstanding rejection by creditor
Sec. 64
c) Confirmation Sec. 68; 69
Pre-negotiated rehabilitation Sec. 76; Sec. 77
Out of court or informal restructuring agreements Sec. 83; Sec. 85; Sec. 86
Liquidation Sec. 90; Sec. 91
Insolvency of individual debtor
1) Suspension of payments Sec. 94; Sec. 96
2) Voluntary liquidation
3) Involuntary liquidation
Nul lity of certain transactions Sec. 127