Commodatum and Mutuum Flashcards
With regard to an award of interest in the concept of actual and compensatory damages, please state the
guidelines regarding the manner of computing legal interest in the following situations:
- When the obligation is breached and it consists in the payment of a sum of money like a loan or forbearance of money;
- When the obligation does not constitute a loan or forbearance of money. Consider the issuance of BSP-MB Circular No. 799, which became effective on July 1, 2013. (2016 BAR)
- When the obligation is breached and it consists in the payment of sum of money like a loan or forbearance of money, in the absence of stipulation, the rate of interest shall be the legal rate of 6% per annum, (Art. 2209, CC) which was increased to 12% per NB Circular No. 905, series of 1982 to be computed from default. The twelve percent (12%) per annum legal interest shall apply only until June 30, 2013. From July 1, 2013, the new rate of six percent (6%) per annum shall be the prevailing rate of interest when applicable. (Nacar v. Gallery Frames, 703 SCRA 439 [2013], applying BSP-MB Circular No. 799)
- The interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages, except when or until the demand can be established with reasonable uncertainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extra-judicially, but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged. (Nacar v. Gallery Frames, 703 SCRA 439 [2013])
A, upon request, loaned his passenger jeepney to B to enable B to bring his sick wife from Paniqui, Tarlac to the Philippine General Hospital in Manila for treatment. On the way back to Paniqui, after leaving his wife at the hospital, people stopped the passenger jeepney. B stopped for them and allowed them to ride on board, accepting payment from them just as in the case of ordinary passenger jeepneys plying their route. As B was crossing Bamban, there was an onrush of lahar from Mt. Pinatubo. The jeep that was loaned to him was wrecked.
1) What do you call the contract that was entered into by A and B with respect to the passenger jeepney that was loaned by A to B to transport the latter’s sick wife to Manila?
2) Is B obliged to pay A for the use of the passenger jeepney?
3) Is B liable to A for the loss of the jeepney? (1993 BAR)
1) The contract is called “commodatum”. ( Art. 1933, Civil Code)
2) No, B is not obliged to pay A for the use of the passenger jeepney because commodatum is essentially gratuitous. ( Art. 1933, Civil Code)
3) Yes, because B devoted the thing to a purpose different from that for which it has been loaned ( Art. 1942, par. 2 Civil Code)
Q: Distinguish briefly but clearly between mutuum and commodatum. (2004 BAR)
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.
Before he left for Riyadh to work as a mechanic, Pedro left his Adventure van with Tito, with the understanding that the latter could use it for one year for his personal or family use while Pedro works in Riyadh. He did not tell Tito that the brakes of the van were faulty. Tito had the van tuned up and the brakes
repaired. He spent a total amount of P15, 000.00. After using the vehicle for two weeks, Tito discovered that it consumed too much fuel. To make up for the expenses, he leased it to Annabelle. Two months later, Pedro returned to the Philippines and asked Tito to return the van. Unfortunately, while being driven by Tito, the van was accidentally damaged by a cargo truck without his fault.
a) Who shall bear the P15, 000.00 spent for the repair of the van? Explain.
b) Who shall bear the costs for the van’s fuel, oil and other materials while it was with Tito? Explain.
c) Does Pedro have the right to retrieve the van even before the lapse of one year? Explain.
d) Who shall bear the expenses for the accidental damage caused by the cargo truck, granting that the truck driver and truck owner are insolvent? Explain. (2005 BAR)
a) The contract between Pedro and Tito is one of commodatum. Of the P15, 000.00 spent, Pedro, the bailor, shall bear the expenses for the repair of the faulty brakes, they being extraordinary expenses incurred due to the non-disclosure by the bailor of the defect or fault; Tito, on the other hand, shall shoulder that part of the P15, 000.00 spent for the tune-up, said expense being ordinary for the use and preservation of the van.
b) The costs for the fuel and other materials are considered ordinary expenses, and consequently Tito, the bailee, shall shoulder them. ( Art. 1941, Civil Code)
c) No, Pedro cannot demand the return of the van until after the expiration of the one-year period stipulated. However, if in the meantime he should have urgent need of the van, he may demand its return or temporary
use.
d) Both Tito and Pedro shall bear equally the costs of the extraordinary expenses, having been incurred on the occasion of actual use of the van by Tito, the bailee, even though he acted without fault.
Q: Distinguish usufruct from commodatum. (1998 BAR)
A: Usufruct is a right given to a person (usufructuary) to enjoy the property of another with the obligation of preserving its form and substance. ( Art. 562, Civil Code) On the other hand, commodatum is a contract by which one of the parties (bailor) delivers to another (bailee) something not consumable so that the latter may use it for a certain time and return it. In usufruct the usufructuary gets the right to the use and to the fruits of the same, while in commodatum, the bailee only acquires the use of the thing loaned but not its fruits. Usufruct may be constituted on the whole or a part of the fruits of the thing. ( Art. 564, Civil Code) It may even be constituted over consumables like money ( Alunan v. Veloso, 52 Phil. 545). On the other hand, in commodatum, consumable goods may be subject thereof only when the purpose of the contract is not the consumption of the object, as when it is merely for exhibition. ( Art. 1936, Civil Code)
: In the province, a farmer couple borrowed money from the local merchant. To guarantee payment, they left the Torrens Title of their land with the merchant, for him to hold until they pay the loan. Is there a –
a) contract of pledge
b) contract of mortgage
c) contract of antichresis, or
d) none of the above?
Explain. (1996 BAR)
None of the above. There is no pledge because only movable property may be pledged ( Art. 2094). If at all, there was a pledge of the paper or document constituting the Torrens Title, as a movable by itself, but not of the land which the title represents. There is no mortgage because no deed or contract was executed in the manner required by law for a mortgage ( Arts. 2085 to 2092; Arts. 2124 to 2131). There is no contract of antichresis because no right to the fruits of the property was given to the creditor ( Art. 2132). A contract of simple loan was entered into with security arrangement agreed upon by the parties which is not one of those mentioned above.
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 OB’s action be just and valid? Why? Has TY have a remedy against the imposition of the rate increase? Explain. (2001, 2004 BAR)
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 of loan. Increasing the rate in the absence of such law violates the principle of mutuality of contracts under Art. 1308.
: A borrowed B’s truck. During a fire which broke out in A’s garage, he had time to save only one vehicle and he saved his car instead of the truck. Is he liable for the loss of B’s truck? Why?
Yes, the bailee in commodatum is liable for the loss of the thing loaned even if through a fortuitous event where, being able to save it or his own thing, he chose to save the latter.
Differenitate mutuum from commodatum
In mutuum, the object is money or any consumable (fungible) thing; in commodatum, the object is, as a general rule, a non-consumable (fungible) thing. The former may or may not be gratuitous; the latter is essentially gratuitous. The purpose of the former is consumption; the purpose of the latter is use. In the former, ownership passes to the debtor, in the latter, ownership remains with the bailor. In the former, the debtor must pay or return an equal amount of the same kind or quality; in the latter, the bailee must return the specific thing loaned.
“L” borrows P50,000 from “M” payable 360 days after date, at 12% interest per annum. To secure the loan, “L” mortgages his house nd lot in favor of “M”. To protect himself from certain contingencies, “M” insures the house for the full amount of the loan with Rock Insurance Company. A fire breaks out and burns the house and “M” collects from the insurance company the full value of the insurance.
Upon maturity of the loan, the insurance company demands payment from “L”. the latter refuses to pay on the ground that the loan had been extinguished by the insurance payment which “M” received from the insurance company. He argues that he has not entered into any loan or contract of whatever nature with the insurance company. He further contends that it is bad enough to lose a house but it is worse if one has to pay off a paid obligation to somebody who has not extended any loan to him. Besides, he states, that the insurance payment should inure to his benefit because he owns the house. Pass upon the merits of “L’s” contentions.
Neither the loan of L was extinguished by the insurance payment which M received from the insurance company; nor the insurance payment inures to L’s benefit; what was then insured was the interest of M, the secured creditor, and not the interest of L, so the proceeds shall be applied exclusively to the proper interest of M.
L’s argument that he has not entered into any loan or contract of whatever nature with the insurance company is also untenable. When the secured creditor’s interest in the mortgaged property of the mortgagor, L, was insured and said property would be burned, the insurance company had to pay the insured, M, and payment by the insurer to the insured creates legal subrogation and makes the insurer an assignee on equity to run after the mortgagor, L. Said right of the insurer is not dependent upon nor does it grow out of, any privity of contract, or upon written assignment of claim, and payment to insured makes the insurer an assignee in equity; thus, L’s consent to said subrogation is not necessary. (Art. 2207, N.C.C.; Fireman’s Fund Insurance Co. v. Jamila & Co., April 7, 1976; 70 SCRA 323)
Siga-an granted a loan to Villanueva in the amount of P540,000.00. Such agreement was not reduced to writing. Siga-an demanded interest which was paid by Villanueva in cash and checks. The total amount Villanueva paid accumulated to P1,200,000.00. Upon advice of her lawyer, Villanueva demanded for the return of the excess amount of P660,000.00 which was ignored by Siga-an.
a. Is the payment of interest valid? Explain.
b. Is solutio indebiti applicable? Explain.
a. No. Article 1956 of the NCC provides that “[n]o interest shall be due unless it has been expressly stipulated in writing.”
b. Yes. Article 2154 of the NCC provides that “[i]f something is received when there is nor right to demand it, and it was unduly delivered through mistake, the obligation to return it arises.”
Carlos sues Dino for (a) collection on a promissory note for a loan, with no agreement on interest, on which Dino defaulted, and (b) damages caused by Dino on his priceless Michealangelo painting on which Dino liable on the promissory note and awards damages to Carlos for the damaged painting, with interests for both awards. What rates of interest may the court impose with respect to both awards? Explain.
With respect to the collection of money or promissory note, it being a forbearance of money, 6% legal interest will apply. As to the damages to the painting, it is also 6% from the time of the final demand up to finality of judgment until fully paid.
The parties in a contract of loan of money agreed that the yearly interest rate is 12% and it can be adjusted if there is a law that would authorize the increase in interest rates. (1) 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 OB’s actions be just and valid? Why? (2) Has TY a remedy against the imposition of the rate increase. Explain.
(1) No, OB’s actions would not be just and valid. Interest shall only be due under the following conditions, namely: (1) the stipulation to pay interest is agreed upon, (2) the stipulation to pay interest must be in writing, and (3) the rate must not be against the law or against morals and public policy. As stated in the facts, it was agreed upon by both parties that an increase would only be allowed if there is a law that would allow such increase. No such law exists given that the Civil Code provides that the rate of interest must be previously agreed upon. A party cannot allow the unilateral increase of interest rate. Such stipulation will make the loan invalid.
(2) Article 1960 of the Civil Code provides that remedy in case the borrower pays interest when there has been no stipulation thereof. It refers to the provisions of the said code on solutio indebiti to govern such situation. Article 2154 of the Civil Code states that if a person receives something when there is no right to demand it, and it was unduly delivered through mistake, the obligation to return it arises. Applying this, if TY has paid such unlawful interest rate, s/he can demand OB to return the same.
Felipe borrowed $100 from Gustavo in 1998, when the Phil P - US$ exchange rate was P56 - US$1. On March 1, 2008, Felipe tendered to Gustavo a cashier’s check in the amount of P4,135 in payment of his US$ 100 debt, based on the Phil P - US$ exchange rat at that time. Gustavo accepted the check, but forgot to deposit it until Sept. 12, 2008. His bank refused to accepted the check because it had become stale. Gustavo now wants Felipe to pay him in cash the amount of P5,600. Claiming that the previous payment was not in legal tender, and that there has been extraordinary deflation since 1998, and therefore, Felipe should pay him the value of the debt at the time it was incurred. Felipe refused to pay him again, claiming that Gustavo is estopped from raising the issue of legal tender, having accepted the check in March, and that it was Gustavo’s negligence in not depositing the check immediately that caused the check to become stale.
(A) Can Gustavo now raised the issue that the cashier’s check is not legal tender?
(B). Can Felipe validly refuse to pay Gustavo again?
(C) Can Felipe compel Gustavo to receive US$100 instead?
(A) No. Gustavo previously accepted a check as payment. It was his fault why the check became stale. He is now estopped from raising the issue that a cashier’s check is not legal tender.
(B) Yes, Felipe can refuse to pay Gustavo, who allowed the check to become stale. Although a check is not legal tender (Belisario v. Natividad. 60 Phil 156), there are instances when a check produces the effects of payment, for example: (a) when the creditor is in estoppel or he had previously promised he would accept a check (b) when the check has lost its value because of the fault of the creditor (Art. 1249, 2nd par.), as when he was unreasonably delayed in presenting the check for payment.
(C) Felipe cannot compel Gustavo to receive US$100 because under RA 529, payment of loans should be at Philippine currency at the rate of exchange prevailing at the time of the stipulated date of payment. Felipe could only compel Gustavo to receive US$ 100 if they stipulated that obligation be paid in foreign currency (R.A. 4100).
Cruz lent Jose his car until Jose finished his Bar exams. Soon after Cruz delivered the car, Jose brought it to Mitsubishi Cubao for maintenance check up and incurred costs of P8,000. Seeing the car’s peeling and faded paint, Jose also had the car repainted for P10,000. Answer the two questions below based on these common facts.
After the bar exams, Cruz asked for the return of his car. Jose said he would return it as soon as Cruz has reimbursed him for the car maintenance and repainting costs of P 18,000. Is Jose’s refusal justified? (1%)
(A) No, Jose’s refusal is not justified. In this kind of contract, Jose is obliged to pay for all the expenses incurred for the preservation of the thing loaned.
(B) Yes, Jose’s refusal is justified. He is obliged to pay for all the ordinary and extraordinary expenses, but subject to reimbursement from Cruz.
(C) Yes, Jose’s refusal is justified. The principle of unjust enrichment warrants the reimbursement of Jose’s expenses.
(D) No, Jose’s refusal is not justified. The expenses he incurred are useful for the preservation of the thing loaned. It is Jose’s obligation to shoulder these useful expenses.
