CREDIT TRANSACTIONS

Course Outline
Mr. Mark Xavier D. Oyales

I. REVIEW OF CONTRACT LAW

(1) Elements – Art. 1305, 1318, CC.

(2) Characteristics of Contract – Art. 1306, 1308, 1311, 1315

(3) Perfection – Art. 1315, 1316

II. CONTRACT OF LOAN

(1) General Provisions – Art. 1933 and 1934

- Contract of Loan v. Contract to Loan (BPI Investment Corporation v. Court of

Appeals, G.R. No. 133632, February 15, 2002)

(2) Commodatum and Mutuum distinguished

Commodatum Mutuum

Character Essentially gratuitous Naturally gratuitous

Object Non-fungible thing (but may be Money or fungible thing

consumable)

Purpose Loan for use Loan for consumption

Primary obligation Return of the thing loaned Payment of equal quality and
quantity

Risk of Loss Bailor (as owner) Borrower (as owner and as

debtor of a generic thing)

Duration May be claimed before the end May not be claimed until the
of the term if urgently needed term expires or is forfeited

Transfer of There is no transfer of Ownership of the thing loaned

ownership ownership of the thing loaned is transferred to the borrower

Use of the fruits Bailee has no right to use the Borrower (as owner) may use
fruits unless so stipulated the fruits

(3) Commodatum – Art. 1935 - 1952

- Distinguish from usufruct and lease

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 - Pactum de commodando or an accepted promise to deliver something by way of
commodatum
- Republic v. Court of Appeals, G.R. No. L-46145, November 26, 1986
- Spouses Abella v. Spouses Abella, G.R. No. 195166, July 8, 2015
- Producers Bank of the Philippines v. Court of Appeals, G.R. No. 115324,
February 19, 2003.

(4) Mutuum – Art. 1953 – 1961.

- Art. 2209 – 2213

- Act No. 2655, as amended by Presidential Decree No. 116
- C.B. Circular No 905, Series of 1982|||
- BSP Circular No. 799 dated June 21, 2013
- Eastern Shipping Lines, Inc. v. Court of Appeals, G.R. No. 97412, [July 12, 1994],
304 PHIL 236-254
- Nacar v. Gallery Frames, G.R. No. 189871, [August 13, 2013], 716 PHIL 267-
283)
- (Spouses Almeda v. Court of Appeals, G.R. No. 113412, [April 17, 1996], 326
PHIL 309-326)
- Security Bank Corp. v. Spouses Mercado, G.R. Nos. 192934 & 197010, [June 27,
2018]
- Spouses Silos v. Philippine National Bank, G.R. No. 181045, [July 2, 2014], 738
PHIL 156-206
- De la Paz v. L & J Development Co., G.R. No. 183360, [September 8, 2014]

(5) Truth in Lending Act

- Bank of the Philippine Islands v. Spouses Yu, G.R. No. 184122, [January 20,
2010], 624 PHIL 408-421
- Spouses Silos v. Philippine National Bank, G.R. No. 181045, [July 2, 2014], 738
PHIL 156-206)

III. DEPOSIT

(1) Characteristics

(a) Real contract

(b) Its purpose is safekeeping
(c) Naturally gratuitous
(d) Unilateral if gratuitous and bilateral if onerous
(e) Only movables may be the object of a deposit (cf. in judicial deposit or receivership,
real or personal property may be included).

(2) Kinds

(a) Extrajudicial (Voluntary or Necessary) v. Judicial (Receivership or Sequestration)

(b) Regular (the depositary cannot use the thing deposited) v. Irregular (the depositary
may use the thing deposited)

(3) Voluntary Deposit (Art. 1968 – 1971)

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 Triple-V Food Services, Inc. v. Filipino Merchants Insurance Company, Inc. (G.R. No.
160544, February 21, 2005)

(a) Requisites

i. Capacity of the Parties

 Where the depositor is capable and the depositary incapable

 Where the depositor is incapable and the depositary capable

ii. Object: must be corporeal and movable in extrajudicial deposit

iii. Delivery

(b) Obligations of the depositary

i. To preserve the thing

ii. To return the thing

(c) Obligations of the depositor

(4) Necessary Deposit

Durban Apartments Corporations v. Pioneer Insurance and Surety Corporation, G.R. No.
179419, January 12, 2011.
YHT Realty Corporation et al., v. Court of Appeals, G.R. No. 126780, February 17, 2005.

IV. LETTERS OF CREDIT

(1) Purpose

Applicable Rules: Philippine Code of Commerce, Art. 567-572, See also The Hongkong
& Shanghai Banking Corp. Limited v. National Steel Corp., G.R. No. 183486, February
24, 2016.

(2) Kinds of Letters of Credit

(a) Commercial Credit

(b) Standby Letter of Credit

Transfield Philippines Inc. v. Luzon Hydro Corporation, G.R. No. 146717,

November 22, 2004

(3) Parties

(4) Strict Compliance

Feati Bank and Trust Co. v. Court of Appeals, G.R. No. 94209, April 30, 1991

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 (5) Independence Principle

Transfield Philippines Inc. v. Luzon Hydro Corporation, G.R. NO. 146717, November
22, 2004

V. TRUST RECEIPTS LAW

(1) Applicable law: Presidential Decree No. 115

(2) Parties (Entruster and Entrustee)

(3) Colinares v. Court of Appeals, G.R. No. 90828, September 5, 2000

Metropolitan Bank & Trust Co., v. Gonzales, G.R. No. 180165, April 7, 2009

Allied Banking Corporation v. Ordonez, G.R. No. 82495, December 10, 1990

Development Bank of the Philippines v. Prudential Bank, G.R. No. 143772, November
22, 2005

Ng v. People, G.R. No. 173905, April 23, 2010

VI. SURETY AND GUARANTY

VII. REAL ESTATE MORTGAGE

(1) Characteristics

(a) Constituted to secure fulfillment of a principal obligation

(b) Constituted by the absolute owner

Dadis v. Spouses De Guzman, G.R. No. 206008, June 7, 2017

Land Bank of the Philippines v. Musni, G.R. No. 206343, February 22, 2017
Prudential Bank v. Rapanot, G.R. No. 191636, January 16, 2017

(c) Constituted by one who has free disposal of the property or should be legally authorized
for the purpose

(d) Things mortgaged may be alienated at the instance of the creditor for payment of the
principal obligation (Article 2087).

- Pactum Commissorium: (i) there is a mortgage wherein property is mortgaged by

way of security for the payment of principal obligation, and (b) there should be a
stipulation for an automatic appropriation by the creditor of the thing mortgaged in
the event of non-payment of the principal obligation

Spouses Pen v. Spouses Julian, G.R. No. 160408, January 11, 2016
Home Guaranty Corp. v. La Savoie Development Corp., G.R. No. 168616, January
28, 2015

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 Garcia v. Villar, G.R. No. 158891, June 27, 2012
Yau Chu v. Court of Appeals, 177 SCRA 793 [1989]

(e) Mortgage is indivisible

(i) Partial payment does not

(2) Object: (i) Immovables and (2) Alienable real rights

(3) Consideration: As to the pledgee, the consideration of the principal credit supports the pledge

(4) Form: Section 112 of the Land Registration Decree; Article 2125 of the Civil Code

Coca-Cola Bottlers Phils., Inc. v. Spouses Soriano, G.R. No. 211232, April 11, 2018

(5) Effect:

(a) A real right is created (Article 2126)

(b) Extension to Accessions and Accessories (Article 2127)

Luzon Lumber and Hardware Company, Inc. v. Quiambao, G.R. No. L-5638. March 30,
1954.
Ramos v. Philippine National Bank, G.R. No. 178218, December 14, 2011.
Prudential Bank v. Alviar, G.R. No. 150197, July 28, 2005

(c) Pactum de non alienado (Article 2130)

(6) Foreclosure

(a) Extrajudicial Foreclosure

Act No. 3135

Section 47, Republic Act No. 8791
Supreme Court Circular A.M. No. 99-10-05

(b) Judicial Foreclosure (Rule 68 of the Rules of Court)

(c) Cases:

Caltex Philippines, Inc. v. Intermediate Appellate Court, G.R. No. 74730, August 25,
1989
Spouses Certeza, et al. v. Philippine Savings Bank, G.R. No. 190078, March 5, 2010
Spouses Yap v. Spouses Dy, et al., G.R. No. 157867, December 15, 2009
Olizon v. Court of Appeals, G.R. No. 107075, September 1, 1994
Global Holiday v. Metropolitan Bank, G.R. No. 184081, June 19, 2009
Ouno v. Court of Appeals, G.R. No. 129279, March 4, 2003
Metropolitan Bank v. Spouses Tan, G.R. No. 178449, October 17, 2008
Hi-Yield Realty v. Court of Appeals, G.R. No. 138978
Spouses Castro v. Tan, G.R. No. 168940, November 24, 2009