STUDENT NAME: Lucero, Melrick V.

CREDIT TRANSACTIONS
STUDENT NO: 2018-0037 SAT. 4:00PM – 7:00PM

MIDTERMS ECQ EXERCISES

1. Celeriña got a loan from RCBC BANK for PHP 5,000,000.00 to develop her resort. She
executed a real estate mortgage over several real properties in favor of RCBC BANK as
security for the loan. The loan was release in several installments. In total, the amount
released was only PHP 4,000,000.00. Celeriña demanded the release of the balance of the
loan, but RCBC Bank refused. RCBC BANK found upon inspection of the property that
Celeriña had not completed the construction works in the resort. RCBC BANK
demanded that Celeriña expedite the construction or it will execute foreclosure
proceedings. A notice of foreclosure sale was later sent to Celeriña. Aggrieved, Celeriña
filed and action to nullify the foreclosure proceedings. Can RCBC Bank foreclose the
mortgage? Explain.

The RCBC Bank cannot foreclose the mortgage. Here, Celerina got a loan from RCBC Bank for
P5,000,000 for the development of her resort. However, she only received P4,000,000 from the
bank when the bank filed for foreclosure of mortgage. The bank, therefore, cannot demand
foreclsure of the mortgage since the bank still has an obligation of 1 million pesos to Celerina.

The civil code under the provisions of loan, requires the perfection of the contract of loan, which
is the delivery of the 5,000,000 loan from creditor RCBC Bank to the debtor, herein, Celerina
and her subsequent default in paying for her loan as agreed, before RCBC bank can demand
foreclosure of mortgage.

2. True or False. Explain your answers.

2.1. A criminal prosecution to collect obligations arising out of violations of the Trust
Receipts Law (P.D. 115) and Bouncing Check Law (Batas Pambansa Bilang 22) is not
violative of the constitutional provision that “No person shall be imprisoned for debt or
non-payment of a poll tax (Art. III, Section 20, 1987 Constitution)

True. PD 115 and BP Blg 22 do not punish the indebtedness of a person or the non-payment of
debt. In BP Blg. 22, it punishes a person who issues any check knowing at the time of issue that
he does not have sufficient funds in or credit with the drawee bank for the payment of said check
and upon presentment said check is subsequently dishonored by the bank for insufficiency of
funds or credit. Whereas, PD 115, punishes the failure of a person to turn over the proceeds of
the sale of goods covered by a trust receipt or to return said goods if not sold.

2.2. In Mutuum secured by a mortgage, the loss of the collateral extinguishes the loan.

False. The law does not extinguish a contract of loan by virtue of loss of a collateral mortgage
because it is not the principal object of the loan but merely a security for the loan to ensure that
the debtor shall pay its obligation to its creditor.
 2.3. Failure of an employee to liquidate a cash advance obtained for travel commits
the crime of estafa.

False. The relation is purely that of a creditor and debtor. There is no fraud by merely failing to
liquidate the advance money received. The crime of estafa involves defraudation, false pretense
and deceit. An action showing its nature should be present. Failure of an employee to liquidate a
cash advance is an ommission of what is ought to do, therefore fraud is not present.

3. DISTINGUISH FROM EACH OTHER

3.1. MONETARY AND COMPENSATORY INTEREST

Monetary interest refers to the interest which is paid for the use of the money at a certain rate
stipulate by the parties. On the other hand, compensatory interest refers to the interest paid by
virtue of damages for delay or failure to pay principal on which interest is demanded.

3.2. MUTUUM AND COMMODATUM

Commodatum is a contract of loan where a person who is the bailor delivers to another who is
the bailee, either something not consumable so that latter may use the thing for a certain time and
return it. Whereas, simple loan or mutuum is constituted when a person, who is the debtor,
receives a loan of money or any other fungible thing from another, who is the creditor, acquiring
the ownership thereof and is bound to pay the creditor an equal amount of the same kind and
quality. Therefore, in mutuum, there is a transfer of ownerrship unlike in commodatum where
the ownership retains to the bailor.
Furthermore, the purpose of commadatum is the use of thing which can be movable and
immovables; in matuum, the consumption of a movable thing. The thing or object in the contract
of commodatum is generally non-consumable but when the purpose is for exhibition, the object
can be consumable. Whereas in mutuum, the object are money and fungible things which can be
consumable or non-consumable.

3.3. COMMODATUM AND DEPOSIT

A contract of deposit is constituted from the moment a person receives a thing belonging to
another with the obligation of safely keeping it and returning the same. The principal purpose in
the contract of deposit therefore, is for safekeeping unlike in commodatum where the purpose of
the contract of loan is for the use of thing.

Since the law grants the person the rights to use the thing or object delivered in commodatum, it
is noteworthy to say that there is a transfer of ownership unlilke in deposit where the depositor
retains the ownership of the thing delivered,

3.4. COMMODATUM AND BARTER

Barter is always onerous unlike commodatum which is essentially gratuituous. Meaning their is
an exchange of things which are non-fungible, from both parties resulting to a mutual sale and
transfer of ownership on both sides. Whereas in commodatum, the ownership of the object
delivered is retained.

3.5. LEASE AND DEPOSIT

Lease is different from deposit because the cause in a contract of lease is the enjoyment of the
thing; in the contract of deposit, it is the safekeeping of the thing. While lease is consensual or
perfected by mere consent and is onerous, deposit is real or perfected by the delivery of the thing
and may be gratuitous or onerous.

4. May a non-comsumable be the object of Mutuum? May a cosummable be the object of

Commodatum? Explain?

Yes, a non-consumable may be an object of mutuum and consummable be an object of

Commodatum.

While the object in mutuum as provided by law are either money or fungible things, it is
important to note that the fungibility of a thing depends on the intention of the parties. Therefore,
if the parties treats a non-consumable thing as fungible then the contract of loan would fall under
mutuum. For example, a book, which by its nature is a non-consumable thing, when treated as a
fungible thing, one of the parties to the mutuum can replace the book with the same kind,
quantity and quality.

In Commodatum, when the purpose of the consumable thing is for exhibition and not for
consumption then it can be an object in the contract.

5. CARLO issued a personal check for PHP 100,000 in favor of Lourdes in payment of
medicines. The Check bounced. On June 1, 2007, Lourdes sued CARLO. On June 1,
2008, the court rendered judgement against CARLO ordering him to pay PHP 100,000
with interest at legal rate from June 1, 2007 (filing of complaint). On June 1, 2009, the
judgement became final. The Sheriff executed and computed the interest rate at 12%
from June 1, 2007 and with interest at 12% on the unpaid interest from June 1, 2007. Is
the Sheriff correct? Why?

The sheriff is incorrect for two reasons.

First, he committed an error in computing the interest rate of 12%. The correct legal interest rate
fixed by law as compensary interest for the bouncing check is 6% and not 12%. Here, the order
of the court was for Carlo to pay 100,000 pesos with interest at legal rate. Therefore, 6% is the
correct interest rate considering also the absence of written stipulation by the parties.

Second, he computed the 12% interest of the unpaid interest from June 1, 2007. Jurisprudence
provides that the counting of interest accruing from unpaid interest should start from the time it
is judicially demanded. Therefore, the counting of the interest of unpaid interest should start
from June 1, 2009 when the judgement became final.

6. Lourdes borrowed PHP 100,000 from Teresita payable on June 1, 1999. This was secured
by a real estate mortgage. Since the peso depreciated to PHP 60 to USD 1, Lourdes
tendered a payment. I US dollars equivalent to PHP 100,000 on June 1, 1999. Teresita
refused to accept. Lourdes returned and tendered her personal check of PHP 100,000.
Teresita gain refused. Lourdes later on tendered a Manager’s check and insisted that the
check is as good as cash. Teresita refused. Teresita foreclosed the mortgage and became
the highest bidder for PHP 120,000 (which was the loan interest plus expenses) Lourdes
tendered a personal check for 120,000. Teresita refused. Lourdes finally tendered a
Cashier’s check for PHP 120,000 which was likewise refused. Is Teresita correct in all
her refusals? Why?

Teresita is correct in her refusals. The payment of debts in money shall be made in the currency
stipulated or as agreed. However in the absence of stipulations or when the parties did not come
into an agreement of the currency, the payment of money should be in legal tender in the
Philippines which are the notes and coins issued by the Banko Sentral ong Pilipinas.

With regards to payment of debtor to creditor by virtue the delivery of mercantile documents
such as checks, the creditor may refuse to accept checks in payment of the obligation. Hence, the
refusal of Teresita of the payment of Lourdes in a form of foreign currency and checks which are
not considered as legal tender, is correct.

6.1. What if Teresita accepted a cashier’s check, but forgot to deposit it on due date.
Her bank refused to accept the check because it became stale for 3 years. Meantime,
Lourdes became insolvent and the other creditors were able to garnish the deposit
supposedly covered by the cashier’s check had it been deposited. She now wants Lourdes
to pay her in cash in the current exchange rate of PHP 50 per dollar from PHP 40 per
dollar 3 years ago. Lourdes refused to pay him again, claiming that Teresita is estopped
from raising the issue of legal tender, having accepted the check 3 years ago, and that it
was Teresita’s negligence in not depositing the check that caused the check to become
stale. Can Teresita nor raise the issue that the cashier’s check is not legal tender and
validly enforce payment against Lourdes?

Teresitta cannot raise the issue that the cashier’s check is not a valid legal tender. The general
rule is that the delivery of commercial paper or mercantile documents suh as checks does not
produce the effect of payment . However, an exception to this rule is when the creditor impairs
the commercial paper or mercantile document thru his fault after accepting it from the debtor. In
this situation, the commercial or mercantile document was consider a valid legal tender. Thus,
the creditor cannot anymore ask for another payment from the debtor.

In the given facts, Teresita accepted the check as payment of Lourdes’ obligation. After failing to
encash the check for 3 years, she cannot anymore ask for Lourdes to pay the obligation. The
insolvency of Lourdes, does not give Teresita the right to demand for payment after negligently
staling the check in her possession failing to encash it in the bank.
 7. LACSON obtained a loan from PSBank for PHP 1,000,000.00 and executed a promissory
note with a stipulated interest of 10% per month for a 60-month term loan and with an
acceleration clause in case of default.

7.1. Upon default, PSBank sued LACSON for the entire loan plus interest and
expenses. LACSON, in his answer, raised the defenses that the interest is usurious and
unconscionable and therefore void as against the laws and morals. Decide.

The executed promissory note with a stipulated interest of 10% per month for a 60-month term
loan and with an acceleration clause in case of default is excessive and unconscionable thus,
void. Since the stipulation on the interest rate is void, it is as if there was no express contract
thereon. However it does not entitle Lacson to stop payment of interest as the court will not
remove the interest but merely reduce the interest to make it equitable.

It should be emphasized that only the rate of interest was declared void. The stipulation requiring
Lacson to pay ontereset on his loan remains valid and binding. Therefore, in accordance with
BSP Circular No. 799 Series of 2013 effective July 1, 2013, he is liable to pay the legal interest
from the time he defaulted until his loan is fully paid an interest rate of 6% per annum.

7.2. What if LACSON fully paid his loan but later on realized that the interest he paid
was unconscionable, can he recover any overpayment of interest. Why or Why not?

Yes he can recover the overpayment of interest. The interest paid by Lacson should be applied to
the payment to the stipulated or legal and unpaid interest, as the case may be, and later, to the
capital or principal. The lender should then refund the excess amount of interest that it has
illegally imposed upon Laccson. The amount to be refunded refers to that paid by Lacson when
he had no obligation to do so.

8. TRUE OR FALSE. EXPLAIN YOUR ANSWER.

8.1. An escalation clause is valid and enforceable?

True. It is well settled in the Jurisprudence that escalation clauses are not basically wrong or
legally objectionable so long as they are not solely potestative but based on reasonable and valid
grounds. Escalation clauses are valid stipulations in commercial contracts to maintain fiscal
stability and to retain the value of money in long term contracts.

Parties to an agreement pertaining to a loan or forbearance of money, good, or credit may

stipulate that the rate of interest agreed upon may be increased in the event that the applicable
maximum rate of interest is increased by the monetary board. Provided, that such stipulation
agreement that the rate of interest agreed upon shall be reduced in the event that the applicable
maximum rate of interest is reduced by law or by the monetary board and that the adjustment in
the rate of interest agreed upon shall take effect on or after the effectivity of the increase or
decrease in the maximum rate of interest.

8.2. Only a movable can be an object of deposit?

False. Immovable can be an object of deposit in sequestratioin or judicial deposit which takes
place when an attachment or seizure of propert in litigation is ordered. Whether final or
preliminary attachment, the property that is attached is in custodio legis. A property that is in
custodio legis can no longer be returned to the depositor who is the judgement debtor in the case.

8.3. The right of retention of a depositary in the law of deposit is the same as the right
of retention of the bailee in the law on commodatum.

False. In Commodatum, the bailee cannot retain the thing loaned on the ground that the bailor
owes him something, even though it may be by reason of expenses. In Deposit, the depository
may retain the thing in pledge until the full payment of what may be due him by reason of the
deposit.

9. CARLO opened a savings deposit account with RCBC Savings Bank (Bank) for PHP
1,000,000. The bank became insolvent and consequently, it was ordered closed by the
Monetary Board. After notice, CARLO filed a claim to recover his deposit alleging
among others that his deposit should not be made part of the assets of the Bank because
CARLO is the owner of the deposit. The Bank refused to honor the claim alleging that it
is nor part of the assets.
9.1. Who is correct and why?

The bank is correct. Bank deposits are in the nature of irregular deposits. They are really loans
because they earn interest. All kinds of bank deposits, whether fixed, savings, or current are to be
treated as loans and are to be covered by the law on loans. Current and savings deposits are loans
to a bank because it can use the same.

Carlo here in opening savings deposit account with RCBC was in reality a creditor of the Bank
and not a depositor. The Bank was in turn a debtor of petitioner. Therefore, following the law on
loans, the deposits of Carlo formed part of the assets of RCBC.

9.2. Suppose that the PHP 100,000 was placed by CARLO in a safety deposit box of
the Bank which transaction was covered by a contract of rent of safety deposit box, will
your answer be the same? Why?

No. The prevailing rule in the jurisprudence is that the relation between a bank renting out safe
deposit boxes and its customer with respect to the contents of the box is that of a bailor and
bailee, the bailment for hire and mutual benefit. Therefore, the ownership of the contents of the
safety deposit box was not transferred to the bank. Hence, the money did not form part of the
bank’s asset.

10. As a guest in a hotel, JOHN brought with him some valuables. What shall JOHN do in
order to ensure that in case of loss of her valuables, he can hold the hotel liable? Is a
waiver in favor of the hotel against any liability in case of loss of valuables valid? If the
valuables were stolen by strangers, is the hotel owner liable?

The liability by the hotel in safekeeping the valuables of John commences as soon as their is
evident intention on the part of John to avail himself of the accommodation of the hotel. It does
not matter whether compensation has already been paid or not, whether he has already partaken
food and drink or not.

The Civil Code provides the hotel keepers cannot escape or limit liability by stipulation or the
posting of notices. Any stipulation between the hotel keeper and the guest whereby the
responsibility of the former is supressed or diminished shall be void. The hotel keepers are still
liable regardless of the posting of notices exempting themselves from any liability or even if the
loss of the valuables are caused by sttrangers.