COURSE OUTLINE 6.

Obligations of the bailee

a) Obligation to take good care of thing with the

Credit Transactions: Theory and Practice
I. Introduction
A. Meaning and scope of credit transactions
B. Meaning and kinds of security
diligence of a good father of the family (Art. 1163)
b) Obligation to use thing loan loaned only for the
purpose for which it was loaned and for no other
purpose (Arts. 1935, 1939, 1940)

II. Loan c) Obligation to return and to not retain the thing

A. General Principles loaned except under certain circumstances (Arts.
1944, 1946)
1. Definition (Art. 1933)
d) Obligation to pay ordinary expenses for the use
and preservation of the thing and portion of extra-
2. Types (Art. 1933)
ordinary expenses arising from the actual use of the
thing (Arts. 1941, 1943, 1945, 1949, 1950)
a) Commodatum
e) Obligation to be solidary liable when there are
b) Mutuum
two or more bailees to whom a thing is loaned in the
same contract (Arts. 1207, 1945)
3. Distinguished from other contracts/terms
7. Possible obligations of the bailor
a) Lease (Art. 1643)
a) Obligation to refund extraordinary expenses for
b) Donation (Art. 725) the preservation of the thing loaned (Arts. 1949)
c) Barter (Art. 1954) b) Obligation to refund portion of extraordinary
expenses arising from the actual use of the thing
d) Credit (Art. 1949)

B. Commodatum c) Obligation to pay damages for known hidden flaws

(Arts. 1951, 1952)
1. Concept; types of commodatum (Arts. 1933, 1935)
8. Risk of loss and deterioration
2. Characteristics/classification of the contract (Arts.
1316, 1933, 1934) a) General rule (Art. 1942)

3. Essential requisites of the contract (Arts. 1318) b) Exception (Art. 1943)

a) Consent (Arts. 37-39, 46, 1327) 9. Term and extinguishment of the contract

b) Object (Arts. 418, 1347-1349, 1936, 1937) a) General rule (Arts. 1231, 1946, 1947, 1948)

c) Cause (Arts. 1350, 1933) b) Exception (Art. 1287)

d) Delivery (Arts. 1316, 1933) 10. Practical considerations

4. Parties to the contract (Art. 1938, 1939) C. Mutuum

5. Form of contract (Arts. 1356, 1357, 1358) 1. Concept (Arts. 1933, 1953)
2. Characteristics/classification of the contract (Arts. III. Deposit
1316, 1933, 1934) A. Introduction

3. Essential requisites of the contract (Arts. 1318) 1. Concept (Art. 1962)

a) Consent (Arts. 37-39, 46, 1327) 2. Types (Arts. 1964, 1967)

b) Object (Arts. 418, 1347-1349, 1933, 1953) B. Voluntary deposit

c) Cause (Arts. 1350, 1933) 1. Concept (Art. 1968)

d) Delivery (Arts. 1316, 1933) 2. Characteristics/classification of the contract (Arts.

1316, 1963, 1965)
4. Parties to the contract
3. Essential requisites of the contract
5. Form of contract
a) Consent (Arts. 37-39, 46, 1327, 1963, 1970, 1971)
a) General rule (Arts. 1356, 1357, 1358)
b) Exceptions (Arts. 1878[7], 1956) depositor incapacitated (Art. 1970, 1986)
6. Obligations of the borrower (Art. 1955)
depositary incapacitated (Art. 1971)
a) Obligation to pay to the creditor an equal amount
of the same kind and quality (Arts. 1249, 1250, 1953, b) Object (Arts. 416-417, 1347-1349, 1966)
1955; Arts. 1197, 1198, 1251)
c) Cause (Arts. 1350, 1965)
b) Obligation to pay interest (if stipulated) (Arts.
1169, 1226, 1253, 1423, 1933, 1956-1961, 2154, d) Delivery (Arts. 1316, 1968)
2209, 2212, 2213; BSP Circular No. 799, series of
2013) 4. Parties to the contract

7. Risk of loss and deterioration 5. Form of the contract (Art. 1969)

a) General rule 6. Obligations of the depositary

b) Exception a) Obligation to keep the thing (Arts. 1962, 1972,

1973)
8. Term and extinguishment of the contract (Art.
1231) Obligation to keep the thing safely (Arts. 1173,
1972)
9. Distinguished from other contracts
Obligation not to transfer deposit (Art. 1973)
a) Lease (Art. 1643)
Obligation not to change way of the deposit (Art.
b) Barter (Art. 1954) 1974)

c) Bank deposit (Art. 1980) Obligation to collect interest on choses in action

(Art. 1975)
d) Commodatum
Obligation to not commingle if so stipulated (Art.
10. Practical considerations 1976)
b) Obligation to not use the thing unless authorized b) depositum miserabile
(Arts. 1977, 1978)
governing law
c) Obligation to return thing (Arts. 1972, 1984,
1985, 1987, 1988, 1990, 1991, 1994) examples

Obligation to return the thing with products, c) deposit of passengers with common carriers (Art.
accessories and accessions (Art. 1983) 1754)

Obligation to return thing closed and sealed (Art. d) deposit of travellers with hotels and inns (Arts.
1981, 1982) 1998-2004)

what (Arts. 1962, 1972, 1976, 1983, 1990, 1991), who are liable
to whom (Arts. 1212, 1214, 1972, 1984, 1985, 1986),
when (Arts. 1988, 1994), where (Art. 1987) what items are covered

7. Obligations of the depositor where the items are deposited

a) Obligation to reimburse the depositary for rules on liability (rules and exceptions; conditions)
expenses incurred (Art. 1992)
hotels right of retention
b) Obligation to reimburse the depositary for any
loss arising from the character of the thing (Art. D. Sequestration or judicial deposit
1933)
1. Concept (Arts. 2005, 2009)
c) Obligation to pay fees if stipulated (Art. 1965)
governing law
8. Risk of loss and deterioration
nature and purpose
a) General rule (Arts. 1972, 1170, 1990)
examples
b) Exception (Arts. 1979)
2. Object of the contract (Art. 2006)
9. Extinguishment
3. Obligations of depositary
a) General rule (Arts. 1287, 1988, 1989, 1995)
Obligation to take care of the thing with the
b) Exception (Art. 1287) diligence of a good father of the family (Art. 2008)

C. Necessary deposit 4. Term and extinguishment (Art. 2007)

1. Concept (Arts. 1996, 1997) E. Deposit distinguished from other contracts

2. Types a) Distinguished from mutuum (Art. 1980)

a) made in compliance with legal obligation b) Distinguished from commodatum (Art. 1978)

governing law F. Judicial deposit distinguished from extra-judicial

deposit
examples
IV. Guaranty
A. Concept (Art. 2047)
Classification of guaranty (Art. 2051, 2055)
B. Characteristics of the contract (Arts. 2048, 2052,
2053, 2054)
C. Essential requisites of the contract
1. Consent (Arts. 37-39, 46, 1327)
2. Object (Arts. 2052, 2053)
3. Cause (Arts. 1350, 2051)
D. Parties to the contract (Arts. 2049, 2056, 2057)
1. Persons involved
a) Creditor and guarantor
b) Debtor and guarantor, with stipulations in favor
of the creditor
2. Qualifications of the guarantor (Arts. 2049, 2056,
2057)
E. Form of the contract (Arts. 1403[2][b]), 1358,
2055)
a) in writing
b) not presumed
c) strictly construed (gratuitous)
F. Obligation of the guarantor: fulfill the principal
obligation (Art. 2047)
1. Types of obligations that may be secured by the
guarantee
a) valid, voidable, unenforceable obligations (Art.
2052)
b) present and future debts (Art. 2053)
c) absolute and conditional obligations (Art. 2053)
2. Extent of obligations of the guarantor (Art. 2054)
a) not more than the debtor
b) consequence if guarantor assumed more
3. Items covered by the guarantee (Art. 2055)
a) principal obligations
b) accessory obligations such as judicial costs
4. Payment made without the knowledge or against
the consent of the debtor (Arts. 1236, 1237, 2050)
a) amount benefited
b) no subrogation
5. Time and place of payment (Arts. 1251, 2058)
G. Effects of guaranty between the guarantor and the
creditor
1. Benefit of excussion (Arts. 2058-2062)
a) concept (Arts. 2058, 2063)
applies to guarantor of guarantor (Art. 2064)
b) rationale
c) requisites
exhausted all property of the debtor
resorted to all legal remedies against debtor
d) when benefit of excussion not available
waiver, solidarily liability, insolvency,
absconded/cannot be sued, execution will not result
in satisfaction (Art. 2058)
failure to set it up and point out Philippine
properties (Art. 2059); effect of negligence of
creditor
judicial bondsman (Art. 2084)
e) typical procedure
 suit by creditor against debtor (and in certain
cases, against guarantor); notice to guarantor (Art.
2062)
judgment against creditor
exhaustion of properties of debtor
demand against guarantor
set up benefit of excussion and point out Philippine
properties (Art. 2060)
-payment
2. Benefit of division among several guarantors
a) concept (Art. 2065)
b) rationale
c) when benefit of division available and not
available (Art. 2065)
3. Effect of compromise (Art. 2063)
a) between the creditor and the principal debtor
b) between the guarantor and the creditor
H. Effects of guaranty between the guarantor and the
debtor
1. Effect of payment (with and without the
consent/knowledge of the debtor): in general
a) Right to be indemnified (Arts. 2050, 2066, 2072)
b) Right to subrogation (Arts. 1237, 1303, 2050,
2067)
2. Effect of payment without notifying the debtor
(Art. 2068)
3. Effect of early payment (Art. 2069)
4. Effect of repeat payment by debtor (Art. 2070)
5. Right to proceed against debtor before payment
(Art. 2071)
6. Effect of request made by a person for guarantee
of debt of third person (Art. 2072)
I. Effects of guaranty among the co-guarantors
1. Effect of payment by a co-guarantor (Arts. 2073,
2074)
2. Effect of insolvency of a co-guarantor (Art. 2073)
3. Effect of insolvency of the guarantor on the sub-
guarantor (Art. 2075)
J. Extinguishment of the guaranty; defenses available
to the guarantor (Arts. 1397, 2076-2081)
1. Causes for extinguishment
(a) General causes for extinguishment of obligations
Payment or performance (Art. 1231[1])
Dacion en pago (Art. 2077)
Loss of the thing due (Art. 1262)
Service becomes impossible (Art. 1266)
Consignation (Art. 1261)
Condonation (Arts. 1273, 2078)
Merger or confusion (Arts. 1275-1276)
Compensation (Arts. 1279, 1280)
Novation (Art. 1296)
(b) Special causes for extinguishment of guaranty
Extension (Art. 2079)
Failure of subrogation (Art. 2080)
Release (Art. 2078)
(2) Defenses available to the guarantor
(a) Defenses derived from the principal obligation
(Art. 1397)
(b) Defenses derived from the contract of guarantee (b) general rule and exception (Arts. 2087, 2112)

(c) Defenses derived from the conduct of the creditor (c) requisites
(Arts. 2061, 2079, 2080)
(d) permissible stipulations
K. Legal and judicial bonds (Art. 2082-2084)
3. Indivisibility of pledge and mortgage (Arts. 2089,
L. Distinguished from other contracts/terms 2090)

1. Warranty (a) general rule and exceptions

2. Suretyship (Arts. 1216-1222) 4. Promise to constitute a pledge or mortgage (Art.

2092)
a) Definition
B. Pledge
b) Law applicable
1. Concept (Arts. 2085, 2087, 2123); Types (Art.
c) Nature of suretys undertaking 2121)

M. Practical considerations 2. Characteristics of the contract (Arts. 1316, 2092,

2093, 2096)
V. Pledge and mortgage
A. Introduction 3. Essential requisites of the contract (Arts. 1318)

1. Essential requisites (Arts. 2085, 2086, 2087) a) Consent (Arts. 37-39, 46)

a) constituted to secure fulfillment of principal b) Object (Arts. 416-418, 2094, 2095)

obligation
movable property susceptible of appropriation
rationale
incorporeal rights
types of obligations secured (Arts. 2052, 2086,
2091) pledge of future property?

debtor and third parties as pledgors/mortgagors c) Cause (Art. 1350)

b) pledgor or mortgagor is absolute owner of thing d) Delivery (Arts. 1316, 2093)

pledged or mortgaged
nature of delivery
rationale
to whom delivered
consequences if pledgor/mortgagor not the owner
4. Parties to the contract (Arts. 2085, 2103; Family
c) persons constituting the pledge or mortgage have Code, art. 111)
the free disposal of their property
5. Form of the contract (Art. 2096)
rationale
6. Principal obligations of the pledgor
2. Prohibition against appropriation

(a) rationale
a) Obligation to allow the alienation of the thing in
the event the principal obligation becomes due (Art.
2087)
b) Obligation to pay damages for known hidden
flaws (Arts. 2101, 1951)
c) Obligation to reimburse pledgee for expenses of
preservation (Art. 2099)
7. Principal obligations of the pledgee
a) Obligation to take care of the thing pledged (Art.
2099)
b) Obligation to not deposit the thing pledged with a
third party (Art. 2100)
c) Obligation with respect to matured credits, and to
fruits, income dividends, or interests (Arts. 2118,
2102)
d) Obligation to not use the thing pledged (Art. 2104)
e) Obligation to return the thing pledged (Art. 2105)
8. Special rules
a) Ownership of the thing pledged
rules with respect to ownership of the thing
pledged (Arts. 2103, 2097, 2120)
sale of the thing while pledged (Art. 2097)
retention of the thing pledged (Arts. 2098, 2105)
risk of loss and deterioration
b) Thing pledged in danger of destruction
negligence or wilful act of pledgee (Art. 2106)
without fault of the pledgee (Arts. 2107, 2108)
c) Deception on substance and quality of thing
pledged (Art. 2109)
d) Specific rules for third party pledgors
right to satisfy principal obligation by third party
pledgor (Art. 2117)
third party pledgors rights as guarantors (Art.
2120)
e) Procedure for foreclosure (Arts. 2112-2117,
2119)
right to recover excess and deficiency
f) Pawnshops (Art. 2123)
9. Extinguishment (Arts. 2110, 2111, 2115)
a) Extinguishment of the principal obligation
b) Extinguishment of the pledge
return of the thing pledged; presumption
10. Legal pledges (Arts. 546, 1731, 1994, 2121,
2123)
11. Practical considerations
C. Real Estate Mortgage
1. Concept (Arts. 1602, 2083, 2085, 2087)
2. Characteristics of the contract (Arts. 2086, 2092,
2052, 2125)
3. Essential requisites of the contract (Arts. 1318)
a) Consent (Arts. 37-39, 46, 1327)
b) Object (Arts. 415, 493, 499, 2124, 2127)
c) Cause (Art. 1350)
4. Parties to the contract (Art. 2085; Family Code, art.
111)
5. Form of the contract (Arts. 1879, 2125)
6. Types (Arts. 1602, 2125)
7. Obligations of the mortgagor
a) implied right to take care of the thing
b) obligation to allow foreclosure (Art. 2087) 2. Characteristics of the contract

8. Obligations of the mortgagee 3. Essential requisites of the contract (Arts. 1318)

obligation to release the mortgaged property from a) Consent (Arts. 37-39, 46, 1327)
encumbrance
b) Object of the contract (Arts. 416, 417, 2124;
9. Special rules relating to real estate mortgages Chattel Mortgage Law, sec. 2)

a) Ownership of property after creation of mortgage description of the property (Chattel Mortgage
(Art. 2130) Law, sec. 7)

b) Registration requirement; effects (Arts. 1312, after acquired properties (Chattel Mortgage Law,
2125; 2126, 2129) sec. 7)

c) Stipulations c) Cause (Art. 1350)

pactum commisorium (Art. 2088) 4. Parties to the contract

option to buy 5. Form of the contract (Chattel Mortgage Law, secs.

4, 5, 6, 7, 15)
acceleration clause
affidavit of good faith
stipulation fixing upset price
6. Rights and obligations of the mortgagor
d) Indivisibility of the mortgage (Arts. 2089, 2090)
8. Rights and obligations of the mortgagee
e) Alienation of mortgage credit (Art. 2128)
a) Right to possession
f) Registration of the mortgage (P.D. 1529, secs. 54,
60, 61, 62, 113) b) Right to foreclose (Chattel Mortgage Law, secs. 8,
13, 14)
g) Foreclosure (Rules of Court, Rule 68; Act No.
3135) procedure

h) Redemption and equity of redemption equity of redemption (Chattel Mortgage law, secs.
13, 14)
10. Risk of loss and deterioration (Art. 2103)
right to surplus or deficiency (Chattel Mortgage
11. Extinguishment Law, sec. 14)

12. Distinguished from an equitable mortgage (Arts. 9. Special rules involving chattel mortgage
1602, 1603, 1604, 1605)
a) registration of chattel mortgage (Art. 2140;
13. Practical considerations Chattel Mortgage Law, sec. 4; P.D. No. 1529, secs.
114, 115)
D. Chattel mortgage
effect of registration
1. Concept (Art. 2140, 2141; Chattel Mortgage Law,
sec. 3) b) offenses involving chattel mortgage (Revised
Penal Code, art. 319)
10. Risk of loss and deterioration
11. Extinguishment (Chattel Mortgage Law, sec. 8,
13)
12. Practical considerations
E. Pledge, real estate mortgage and chattel mortgage
distinguished
VI. Antichresis
A. Concept (Art. 2132)
B. Characteristics of the contract (Arts. 2139, 2091)
C. Essential requisites of the contract (Arts. 1318)
a) Consent (Arts. 37-39, 46, 1327)
b) Object (Art. 2132)
c) Cause (Art. 1350)
D. Parties to the contract (Arts. 2085, 2132)
E. Form of the contract (Art. 2134)
F. Obligations of the creditor
1. Obligation to apply fruits to interest and principal
(Arts. 2132, 2133, 2138)
2. Obligation to pay taxes and charges upon the
estate (Art. 2135)
G. Rules involving antichresis
1. Ownership (Art. 2136)
2.Creditors acquisition of ownership upon default
(Art. 2137)
3. Indivisibility (Arts. 2139, 2089-2090)
H. Risk of loss and deterioration
I. Extinguishment
J. Distinguished from other contracts
1. Pledge
2. Mortgage
K. Practical considerations
VII. Concurrence and Preference of Credits
A. Meaning of concurrence and preference of credits
B. Nature and effect of preference
C. When rules apply
D. General rules
1. liability of debtor (Art. 2236)
2. exempt properties (Arts. 2238, 2239)
(a) family home (Family Code, arts. 153, 155);
(b) properties exempt from execution under the
Rules of Court (Rules of Court, rule 39, sec. 13);
(c) right to receive support (Family Code, art. 205)
(c) assets belonging to conjugal partnership or
absolute community (Art. 2238)
(d) undivided share on interest in the co-owned
property (Art. 2239)
3. insolvency (Art. 2237)
(a) meaning
(b) governing law
(c) applicability to properties held in trust (Art.
2340)
(d) concurrence and preference of credits in an
insolvency situation (FRIA, secs. 53(a), 53(d), 92(i),
133, 136))
E. General categories of credit
1. special preferred credits listed in Articles 2241
and 2242;
2. ordinary preferred credits listed in Article 2244;
3. common credits under Article 2245.
F. Classification of credits
1. Preferred credits with respect to specific movable
property (Arts. 2241, 2243, 2246, 2247, 2250)
2. Preferred credits with respect to specific
immovable property (Arts. 2242, 2243, 2248, 2249,
2250)
3. Order of preference with respect to other
properties of the debtor (Art. 2244)
4. Other credits enjoying no preference (Arts. 2245,
2251)
VIII. Special Laws
A.Financial Rehabilitation and Insolvency Act (FRIA)
1. Governing law (Art. 2237); Purpose of the law
(sec. 2)
2. Concepts
(a) Insolvent (sec. 4(p))
(b) Debtors covered (and not covered) (secs. 4(kk),
5)
(c) Claims (sec. 4[c])
(d) Suspension of payment (sec. 94)
(e) Rehabilitation (sec. 4(gg))
(f) Liquidation (sec. 4(u))
3. General remedies when insolvent
(a) Types of remedies
Judicial remedies under FRIA (suspension of
payment, rehabilitation)
Extra-judicial
(b) Benefits
Judicial (see secs. 47, 16(k), 17(b), 71, 69(a), 86)
Extra-judicial
4. Suspension of payment
(a) Concept (sec. 94)
(b) To whom available (sec. 94)
(c) Procedure
Filing of petition (secs. 94, 96)
Action on petition (secs. 95, 96)
Creditors meeting (secs. 97, 98, 99)
Approval of agreement and objections (sec. 100-
102)
Court order (sec. 101)
5. Rehabilitation
(a) Concept (sec. 4(gg))
(b) Types
Court supervised rehabilitation (secs. 12, 13)
Pre-negotiated rehabilitation (sec. 76)
Out of court or informal restructuring agreements
or rehabilitation plans (sec. 83)
(c) Who may file petition (secs. 12, 13, 76, 83)
(d) Procedure for court-supervised rehabilitation
Filing of petition for rehabilitation
(voluntary/involuntary)(secs. 12, 13, 14)
Court action on the petition (Art. 15)
Issuance of commencement order/stay or
suspension order, including appointment of
receiver (secs. 16, 17, 18, 21, 31)
Publication of commencement order (sec. 16(f))
Filing of creditors claim (sec. 16(i))
Initial hearing (secs. 22, 23)
 Creditors comment on petition and rehabilitation
plan (sec. 22)
Submission of report by rehabilitation receiver
(sec. 24)
Grant of due course to, or dismissal of, the petition;
convert into liquidation proceedings (secs. 25, 26,
27, 92)
Preparation of rehabilitation plan by receiver;
consultation with debtors and creditors; formation
of creditors committee (secs. 42, 43, 63, 64)
Creditors meeting to approve rehabilitation
plan (sec. 64)
Submission of Rehabilitation Plan to the court
(secs. 62, 65)
Filing of objections to rehabilitation plan (sec. 66)
Hearing on objections (sec. 67)
Confirmation of rehabilitation plan (sec. 68, 69, 72,
92)
Submission of final report; accounting and
discharge of receiver (sec. 73)
Termination proceedings (secs. 74-75, 92)
(e) Procedure for pre-negotiated rehabilitation
Filing of petition (sec. 76)
Issuance of order by the court (sec. 77)
Publication of order and creditor notification (sec.
77)
Filing of objections (sec. 79)
Hearing on objections (sec. 80)
Approval of rehabilitation plan (secs. 81-82)
(f) Procedure for out of court or informal
restructuring agreements or rehabilitation plans
Parties negotiation workout agreement/standstill
agreement (secs. 84, 85)
Execution of work-out agreement/standstill
agreement (secs. 84-89)
(g) Governance provisions
Management committee (secs. 36, 37, 47)
Use, disposition or sale of assets (secs. 48-53)
Post-commencement order loans, obligations and
interest (sec. 54-55)
Treatment of employee claims (sec. 56)
Treatment of contracts (secs. 57-59)
6. Liquidation
(a) Concept (secs. 4(u), 4(v), 4(w))
(b) Types (secs. 92, 103, 105)
Voluntary
Involuntary
(c) Who may file (secs. 90, 103, 105)
(d) Procedure for voluntary liquidation
Filing of verified petition (secs. 90, 103)
Issuance of liquidation order (sec. 104, 112)
(e) Procedure for involuntary liquidation
Filing of petition (secs. 91, 105)
Publication of petition (sec. 91)
Issuance of a show cause-order (secs. 91, 106)
Hearing
Issuance of liquidation order (secs. 91, 112, 113,
114)
 Appointment of liquidator and preparation of
liquidation plan (sec. 129)
Implementation of liquidation plan and sale of
assets (sec. 131)
payment terms: sight and term/usance
purpose: commercial and stand by
6. Principles applicable

Order removing debtor from list of registered strict compliance

entities
independence
Termination order (sec. 134, 135)
D. Usury Law
(f) Other matters relating to liquidation
1. Interest
Right of set-off (sec. 124)
(a) concept
Avoidance proceedings (secs. 127-128)
(b) kinds
Concurrence and preference of credits (secs. 130,
133) 2. Usury

Liquidation of securities market participant (sec. (a) concept

136)
(b) form of transaction (Civil Code, art, 1957)
7. Treatment of secured creditors (secs. 4(jj),
4(kk),4(ll), 51, 53, 60, 61, 62(j), 96, 101, 106, 114) 3. The Usury Law (Civil Code, arts. 1175, 1961)

B. Truth in Lending Act (R.A. No. 3765) (a) purpose, theory and nature

1. Purpose (sec. 2) (b) construction of the law

2. Coverage (sec. 3) (c) transactions to which the Usury Law apply and
do not apply
3. Disclosure required (sec. 4)
(d) the Usury law and CB Circular No. 905
4. Penalties for violation (sec. 6)
4. Power of BSP Monetary Board to prescribe rates of
C. Letters of credit (Code of Commerce, arts. 567, interest (Usury Law, secs. 1, 1-, 4-A, 4-B, 9-A)
568)
5. Interest under the Usury Law and BSP Circular
1. Letters of credit No. 799, s. 2013 (secs. 1, 2, 3, 5)

2. Governing Law (a) Rates of interest under the Usury Law (Usury
Law, secs. 2, 3, 4)
3. Concept
legal rate
4. Parties
maximum rate for loans secured by real estate
5. Types mortgage

revocability: revocable and irrevocable maximum rate for other loans

 maximum rates for pawnshops
(b) Calculation of interest
commissions, premiums, fines and penalties (Usury
Law, secs. 2, 3)
attorneys fees
compound interest (Usury Law, sec. 6)
interest paid in advance (Usury Law, sec. 6)
interest payable in kind (Art. 1958; Usury Law, sec.
8)
6. Prohibited acts (Usury Law, secs. 2, 3, 4, 10)
(a) taking or receiving usurious interest under
section 2 of the Usury Law
(b) agreeing to charge usurious interest under
section 3 of the Usury Law
(c) agreeing to charge or receiving usurious interest
under section 4 of the Usury Law; dividing pawn;
payment of insurance premium under section 4 of
the Usury Law
7. Remedies (Civil Code, art. 1413)
(a) recovery of usurious interest (Civil Code, arts.
1413, 1957; Usury Law, sec. 6)
(b) recovery of commissions, premiums, penalties
and surcharges (Usury Law, sec. 6)
8. Penalties and prescription of action (Usury Law,
sec. 10)
9. Usurious interest vs. excessive interest vs. interest
arising from a unilateral increase (escalation/de-
escalation clause)
(a) Validity of contract (Art. 1957; Usury Law, sec. 7)
(b) Validity of stipulation
(c) Ability of lender to recover principal
(d) Obligation of borrower to pay interest
(e) Ability of borrower to recover interest already
paid
(f) Ability of borrower to recover compensatory
interest in case of delay in payment
E. Warehouse Receipts Law
1. Governing Law (sec. 57)
interpretation and definitions (secs. 56, 58)
2. Concepts
(a) Warehouse
(b) Warehouseman (sec. 58[a])
meaning of goods (sec. 58[a])
(c) Warehouse receipts
meaning of warehouse receipts
who may issue receipts (sec. 1)
form of receipts; essential terms effect of omission
of essential terms (sec. 2)
other terms (sec. 3)
3. Types of warehouse receipts (secs. 4, 5, 6, 7)
(a) Negotiable
definition (sec. 5)
who may negotiate (sec. 40)
manner of negotiation: delivery (sec. 37)
and indorsement (sec. 38)
rights of person to whom a receipt was duly
negotiated (sec. 41)
rights of persons to whom negotiable instrument
was transferred but not negotiated (secs. 39, 42)
rights of person to whom negotiable receipt was
transferred without indorsement (sec. 43)
(b) Non-negotiable
 definition (sec. 4)
who may transfer
manner of transfer: delivery (sec. 39)
rights of persons to whom a receipt was
transferred (sec. 42)
4. Various rules relating to warehouse receipts
(a) warranties on sale of receipts (sec. 44)
(b) liability of person negotiating or transferring
receipt (sec. 45)
(c) representation of mortgagee and pledgee (sec.
46)
(d) effect when there is fraud, mistake or duress
(sec. 47)
(e) negotiation of goods pledged or mortgaged (sec.
48)
(f) stoppage in transitu (sec. 49)
5. Obligations of warehouseman
(a) Obligation to take care of the goods (sec. 21)
(b) Obligation to deliver
when (sec. 8)
to whom (sec. 9, 10, 14, 17, 25, 33);
grounds for refusal to deliver (secs. 10, 16, 17, 18,
25, 26, 36)
adverse title as a ground for refusal of delivery
(sec. 16, 19)
(c) Obligation to stamp duplicate on copies of
negotiable receipt (secs. 6, 15, 52)
(d) Obligation to place non-negotiable or not
negotiable on a non-negotiable receipt (sec. 7);
(e) Obligation to cancel negotiable receipts upon
delivery or part delivery (secs. 11, 12, 14, 36, 54)
(f) Obligation to honor altered receipts in
appropriate cases (sec. 13)
(g) Obligation to not issue receipt if goods are not
existent (secs. 20, 50)
(h) Obligation to properly describe the goods
covered by the receipt (sec. 20)
(i) Obligation to keep the goods separate and to not
comingle the goods (secs. 22-24; Civil Code, art.
1976)
meaning of fungible goods (sec. 58[a])
6. Warehousemans right of lien
(a) right of lien (secs. 27, 30)
(b) goods subject to the lien (secs. 28, 30)
(c) effect of lien (sec. 31)
(d) when lien lost (sec. 29)
(e) remedies available to the warehouseman
(sec. 31, 32, 33, 34, 35, 36)
7. Criminal offenses (secs. 50-55)
(a) issuance of receipts for goods not received (sec.
50)
(b) issuance of receipts containing false statements
(sec. 51)
(c) issuance of duplicate receipts not so marked (sec.
52)
(d) issuance of receipts that do not say that
warehouseman is the owner (sec. 53)
(e) delivery of goods without obtaining negotiable
receipt (sec. 54)
(f) negotiation of receipt for mortgaged foods (sec.
55)
F. Trust Receipts Law
1. Concept and purpose of the law (secs. 1, 2, 4, 5)
2. Characteristics/classification of the contract (e) Obligation to keep said goods or proceeds thereof
whether in money or whatever form, separate and
3. Essential requisites of the contract capable of identification as property of the entruster
(sec. 9)
(a) Consent
(f) Obligation to return the goods, documents or
(b) Object (secs. 3[a], 3[d], 3[e], 3[h], 4) instruments in the event of non-sale or upon demand
of the entruster (sec. 9)
(c) Cause
(g) Obligation to observe all other terms and
(d) Delivery (sec. 4) conditions of the trust receipt not contrary to the
provisions of the Trust Receipts Law (sec. 9)
4. Parties to the contract
7. Rights of the entrustor (sec. 7)
(a) Entrustor (sec. 3[c])
(a) Right to proceeds of the sale
(b) Entrustee (sec. 3[b)
(b) Right to return in case of non-sale
5. Form of contract (secs. 3[j], 5)
(c) Right to cancel the trust and take possession
6. Obligations of the entrustee upon default of entrustee

(a) Obligation hold the designated goods, documents (d) Right to avail of other remedies
or instruments in trust for the entruster (secs. 4, 9)
8. Risk of loss and deterioration (sec. 10)
(b) Obligation to sell or otherwise dispose of the
goods, documents or instruments strictly in 9. Term and extinguishment of the contract
accordance with the trust receipts (secs. 4, 9)

entrustor not responsible on sale by entrustee

(sec. 8)

purchaser for value and in good faith acquires

property free from lien (sec. 11)

enstrusters security interest valid against

creditors of entrustee (sec. 12)

(c) Obligation to receive the proceeds in trust for the

entruster and turn over the same to the entruster to
the extent of the amount owing to the entruster or as
appears on the trust receipt (secs. 4, 9)

rules on currency (sec. 5)

breach of obligation (sec. 13)

(d) Obligation to insure the goods for their total

value against loss from fire, theft, pilferage or other
casualties (sec. 9)