PAST EXAM COMPILATIONS FOR CREDIT TRANSACTIONS – ATTY. JAZZIE M. SARONA-LOZARE, CPA, LLM, ESQ.

FIRST EXAM COVERAGE

S.Y. 2018-2019
ATENEO DE DAVAO UNIVERSITY COLLEGE OF LAW

SET I: (88 pts.)

PART II:

1.

a. Kylo’s contention should prevail.

It is a well-settled principle in Civil Law that the intention of the parties to a contract is accorded primordial
consideration. No less than the stipulation between them expresses such intent.

In the case at bar, Kylo and Rey stipulated that the 5% monthly interest was only for three (3) months. Hence,
this agreement between them must be followed.

The instant case has similar factual circumstances with the case of Dio vs Japor where the Supreme Court
emphasized the importance of looking at the factual circumstances of each case in determining the interest rate to be
imposed. In such case, the court upheld the three percent (3%) interest rate agreed upon by the parties for two (2)
months but rules that such rate cannot be imposed beyond the period agreed upon as it will already be considered
unconscionable and iniquitous.

Applying both principle of law and jurisprudence, Kylo’s contention that the 5% monthly interest is for three
(3) months only should be upheld. (3 pts.)

b. As to the interest rate to be applied after the 3-month period of the loan, we are to apply the principle laid
down by the Supreme Court in the case of Chua vs. Timan that in the event of unconscionable and iniquitous interest
rates, the court are to reduce them accordingly. Hence:

• From August 1, 2012 up to June 13, 2013, the rate of interest that should be imposed is 12% per annum. This
is in consonance with Central Bank Circular 416 and further bolstered by the ruling of the Supreme Court in
Eastern Shipping vs CA wherein the rule is to apply such rate (12%) for loans and forebearance of money,
hoods or credits. It is worthy to note that the contract between Kylo and Rey arises from a loan transaction.
• From July1, 2013 up to the time of payment, the rate of interest to applied is 6% per annum pursuant to BSP
Circular 799 and supported by ruling in Nacar vs Gallery Frames which reduced the rate of interest for loans
or forebearance of money, goods or credits to 6%. July 1 2013 is the effectivity date of such rule.
• Finally from the time of finality of judgement up to the time of payment, a 6% interest rate per annum is also
to be imposed upon the amount finally adjudged. The is on the presumption that such finality of judgement
happens beyond July 1, 2013.

To sum it all up, although the Usury Law has already been suspended, this does not mean carte blanche
authority to creditors in imposing interest rates which could to the hemorrhaging of the debtor’s assets (Chua vs.
Timan). Thus, we are not to impose the 5% per month (or 6% per annum) interest rate beyond the 3-month period
agreed upon. Not doings so would mean imposing an iniquitous and unconscionable interest rate. (4 pts.)

2. No, Leia cannot be held liable for estafa. What was involved here is a contract of simple loan or mutuum.

Under Article 1933 of the Civil Code, ownership of the thing loaned passes to the bailee in a contract of simple
loan or mutuum. With ownership transferring to the borrower, no fiduciary relationship could arise. Absent this fiduciary
relationship which is an element of estafa, Leia cannot be convicted of such crime.

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COMPILED BY: ANNA SOPHIA TARHATA PIANG | II-MANRESA
 PAST EXAM COMPILATIONS FOR CREDIT TRANSACTIONS – ATTY. JAZZIE M. SARONA-LOZARE, CPA, LLM, ESQ.
FIRST EXAM COVERAGE
S.Y. 2018-2019
ATENEO DE DAVAO UNIVERSITY COLLEGE OF LAW

The facts of this case are similar to the case of Yong Chan Kim vs People where the Supreme Court defined
liquidation as a settling of an indebtedness. This further bolsters the fact that ownershipof the amount passes to the
bailee-borrower.

In conclusion, Lea cannot be convicted of estafa. At best, she can only be civilly liable for failing to liquidate
the Php 30,000 cash advance given to her. (10 pts.)

3.

a. The contract entered into between Han and Luke is a contract of commodatum.

Under Article 1933 of the Civil Code, a contract of commodatum is one whereby a person grants to another
the use of a non-consummable thing with the intention that the exact same thing be returned to the bailor. A contract
of commodatum is essentially gratuitous.

In the case at bar, Han loaned his jeepney to Luke for the latter to use the same with the intention than Luke
will return the jeepner after the purpose of the loan (i.e to bring the wife to the hospital) is accomplished. More
importantly, such contract was entered into without compensation. Hence, essentially gratuitous. It is evident from the
facts of the case that the contract is one of commodatum. (4 pts.)

b. Yes, Luke is liable to Han for the loss of the jeepney.

Under Article 1942 of the Civil Code, the bailee is liable for the loss of the thing loaned even if the same be
caused by a fortuitous event if the bailee used the object of commodatum for a purpose other than the intended or
agreed upon. This rule stems from the bailee’s bad faith.

In the case at bar, Luke used the jeep to accept payments from ordinary passengers which is a use different
from that intended (i.e. to bring his wife to the hospital). Hence, even though the collapsing of the bridge is a fortuitous
event, such defense is unavailable to Luke as to exempt him from liability, Thus, Luke is still liable to Han. (5 pts.)

4. Under the Civil Code, the four (4) instances where the depositary is liable for the loss of the thing deposited is
as follows:

a. when there is a stipulation of the parties;

b. when the depositary uses the thing deposited without the permission of the depositor;
c. when the depositary delays in delivering the thing to the depositor upon demand or when requested to do
so;
d. when the depositary allows other to use the things deposited even if he himself is allowed to use it. (5 pts.)

5.

a. The contract for the rent of a safety deposit bix is a depositum. To be exact, and to use the words of the
Supreme Court in the cases of CA Agro-Industrial vs CA and Sia vs. CA, the said contract is a “special kind of deposit”.

According to the Supreme Court in the cases above-cited, the contract for the rent of a safety deposit box
cannot be deemed as a lease because, unlike a lease, the absolute control and possession of such safety box is not with
the lessee-renter. It is to be noted that the lessee-renter cannot open the bx without the key which is in the possession
of the bank.

On the other hand, it is considered as a “special kind of deposit” because the bank-depositary cannot access
the said safety deposit box without the permission of the lessee-renter and without the key the latter possess.

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COMPILED BY: ANNA SOPHIA TARHATA PIANG | II-MANRESA
 PAST EXAM COMPILATIONS FOR CREDIT TRANSACTIONS – ATTY. JAZZIE M. SARONA-LOZARE, CPA, LLM, ESQ.
FIRST EXAM COVERAGE
S.Y. 2018-2019
ATENEO DE DAVAO UNIVERSITY COLLEGE OF LAW

Hence, by virtue of the peculiar nature of a contract for the rent of a safety deposit box wherein the intervention
of both parties (i.e lessor-renter-depositor and bank-depositary) are needed in order to access the object, it is deemed
a “special kind of deposit”. The relationship between the parties is also said to be that of a bailor and bailee involving a
hire for service with mutual benefits (CA Agro-Industrial vs CA and Sia vs CA). (10pts.)

b. Yes, Finn’s claim will prosper.

As discussed previously, a contract of rent of a safety deposit box is a “special kind of deposit”. The principal
purpose of which is safe-keeping with the relationship of the parties also being one of bailor and bailee, involving hire
of services with mutual benefits (CA Agro-Industrial vs CA and Sia vs CA). With this, it follows that ownership of the
amount deposited by Finn to the bank remains with Finn. It is of no moment that the object of contract is money since
the intention of the parties reveal that the principal purpose is safe-keeping (a contract of deposit) and not
use/consumption (a contract of loan).

By virtue of the fact that ownership of the Php 100,000 remained with Finn and was not transferred with the
bank, Finn’s contention that the same does not constitute as part of the assets of Dameron Bank is meritorious. Thus,
the same should be retuned to Finn. (10 pts.)

6. The following are the distinctions between a contract of commodatum and depositum:

a) As to purpose, a commodatum is intended for the use of the bailee (Article 1933 of the Civil Code) while a
depositum is primarily for safe-keeping (Article 1962 of the Civil Code);

b) As to the parties involved, a commodatum involves a bailor and a bailee while a depositum involves a depositor
and a depositary; and

c) As to its nature, a commodatum is essentially gratuitous while a depositum is generally gratuitous but may
also be entered into for a compensation or consideration. (5 pts.)

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COMPILED BY: ANNA SOPHIA TARHATA PIANG | II-MANRESA
 PAST EXAM COMPILATIONS FOR CREDIT TRANSACTIONS – ATTY. JAZZIE M. SARONA-LOZARE, CPA, LLM, ESQ.
FIRST EXAM COVERAGE
S.Y. 2018-2019
ATENEO DE DAVAO UNIVERSITY COLLEGE OF LAW

SET II: (TOTAL NUMBER OF POINTS UNKNOWN)

PART II:

1.

a. As stated in the case of Eastern Shipping Lines vs Court of Appeals, when an obligation is breached and it
consists in the payment of a sum of money like a loan or forebearance, the debtor-borrower shall pay a compensatory
interest:
a.1. based on what was stipulated between the parties
a.2. absent such stipulation, the debtor shall pay 12% interest upon default in payment (judicial or extra-judicial
demand) until the obligation is fully paid.

If the obligation is not yet fully-paid and the decision became final and executory, the interest will still be at
12% until it is fully satisfied.

However, as stated in Nacar vs Gallery Frames, after July 1, 2013, the interest for the breach of obligation
involving loan or forebearance was reduced to 6% percent. Also, the interest to be paid after the decision became final
and executory will be 6% from July 1, 2013 until the obligation is fully satisfied. (4 pts.)

b. When an obligation does not constitute loan or forebearance, the debtor-borrower may be required to pay
an interest of 6% at the court’s discretion. This will be computed upon the judicial or extrajudicial demand or when the
value of the property has already been properly liquidated until the obligation has been fully satisfied.

If the decision of the court became final and executory without the obligation being fully satisfied, the interest
will become 12% because the obligation has become one which consist payment of a sum of money.

In addition, as stated in Nacar vs Gallery Frames, the legal interest when the decision of the court becomes
final and executory after July 1, 2013 will be 6% rather than 12%. The interest payable will be computed until its full
satisfaction. (5 pts.)

2. The difference between commodatum and depositum are as follows:

• As to cause, commodatum is essentially gratuitous while depositum may be onerous or gratuitous.

• As to object, commodatum ordinarily involves con-consummable things while depositum may involve either
consumable or non-consummable things.
• As to purpose, in commodatum, the main purpose is for the usage of the thing while in depositum, the main
purpose is for safe-keeping and the subsequent return to the depositor.
• As to demandability, in commodatum, the bailor cannot require the return of the property until the period
stipulated between the parties. An exception to this rule is when there is an urgent need, then the property
may be temporarily return to the bailor. On the other hand, the depositor may demand the return of the thing
at any time. (5 pts.)

3. The payment of interest is not proper.

For an interest to be binding, it must be:

a. Expressly stipulated
b. It must be in writing

Absent these requirements, the creditor cannot demand payment of interest from the debtor based on his or
her outstanding obligation.

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COMPILED BY: ANNA SOPHIA TARHATA PIANG | II-MANRESA
 PAST EXAM COMPILATIONS FOR CREDIT TRANSACTIONS – ATTY. JAZZIE M. SARONA-LOZARE, CPA, LLM, ESQ.
FIRST EXAM COVERAGE
S.Y. 2018-2019
ATENEO DE DAVAO UNIVERSITY COLLEGE OF LAW

In the case at bar, the additional Php 200,000 paid by Irene to Patsy as an interest is not proper. First, the
payment of interest is not expressly stipulated in their contract or agreement, second, even if Irene agreed to pay the
amount, the agreement was not put into writing. Thus, the payment falls under the concept of solutio indebiti.

Provided that this is solutio indebiti because the payment made is not proper, Patsy has an obligation to
reimburse Irene the excess payment of Php 200,000. (9 pts.)

4. No, the contention of the Duncan Bank is not meritorious.

The “lease” of a safety deposit box is a depositum or a special kind of deposit. It is not a lease per se because
the lessee does not have the full control and possession over the safety deposit box and it is not an ordinary deposit
because the bank does not have full control over the property because it no access to it without the permission of the
client.

Considering that it is a special kind of deposit and may be regarded as one of the bank’s ordinary transactions,
absent any stipulation, the bank is required to exercise ordinary diligence of a good father of a family in safeguarding
the properties deposited in its safety deposit boxes. This being said, the provisions 9 and 10 are void because it removes
this kind of diligence required from banking institutions.

In addition, even if it was a fortuitous event, the bank will still be held liable due to its contributory negligence.
The bank should have informed Manolo of the flood in order to retrieve the items deposited in the safety deposit box
to avoid further damage, however it failed to do so.

The bank dialed to exercise the diligence expected from it. Thus, it is still liable for the damages suffered by
Manalo. (9 pts.)

5.

a. No, Candida is not correct.

When a depositor deposits money in a bank, the transaction between the parties becomes a contract of loan.
The bank becomes the borrowe/bailee while the depositor is the lender/bailor. This means that the bank may use the
money being deposited in exchange of paying interest to the depositor.

That being said, the money deposited by Candida constitute a part of the assets of the bank. She is no longer
the owner of the exact money she had deposited, rather, she is entitled only to the value or the amount of the money
she had deposited. Ownership has already been transferred to the bank.

In addition, she also cannot claim that there is an irregular deposit since the transaction benefits both her and
the bank and there is no preference over her compared to other depositors. Provided these, she cannot intervene in
the insolvency proceedings and her contentions must fall. (8 pts.)

b. My answer would not be the same, Candida is still the owner of the money being deposited.

If the property had been placed in a safety deposit box, sealed, marked, and identified as the depositary’s
property, there exists a special kind of deposit between the bank and the depositor. The purpose of this is inly for
safekeeping or temporary possession, the bank does not become the owner of the property, but rather, as in this case,
the depositor retains his/her ownership.

In the case a t bar, Candida is correct in claiming that her Php 100,000 does not constitute a part of the assests
of the bank. She is entitled to the return of the exact same thing she had deposited. Thus, she can properly intervene
in the insolvency proceedings and obtain the Php 100,000 she had deposited. (10 pts.)

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COMPILED BY: ANNA SOPHIA TARHATA PIANG | II-MANRESA
 PAST EXAM COMPILATIONS FOR CREDIT TRANSACTIONS – ATTY. JAZZIE M. SARONA-LOZARE, CPA, LLM, ESQ.
FIRST EXAM COVERAGE
S.Y. 2018-2019
ATENEO DE DAVAO UNIVERSITY COLLEGE OF LAW

6. Yes, Violet is liable to Paula.

The New Civil Code provides that when the property deposited was sold by the heirs of the depositary
believing that the latter was the real owner of the property, the heirs are liable to the depositor the proceeds of the sale
or of the purchaser was unable to pay, the depositor has the right to collect the payment.

In the case at bar, Violet, being an heir of Susan, is liable to pay Paula the proceeds of the sale but not the
exact value of the pieces of jewelry. (5 pts.)

6
COMPILED BY: ANNA SOPHIA TARHATA PIANG | II-MANRESA
 PAST EXAM COMPILATIONS FOR CREDIT TRANSACTIONS – ATTY. JAZZIE M. SARONA-LOZARE, CPA, LLM, ESQ.
FIRST EXAM COVERAGE
S.Y. 2018-2019
ATENEO DE DAVAO UNIVERSITY COLLEGE OF LAW

SET III: (TOTAL NUMBER OF POINTS UNKNOWN)

PART II:

1. Oakensheild hotel is liable as depositary for the loss of Thorin’s car. A necessary deposit was created between
the hotel and Thorin because of the instances for a necessary deposit to arise is when a traveler deposits his things as
a guest to hotels, motels, or inns through the latter’s representative pursuant to Articles 1998, 2000 to 2003 of the Civil
Code.

In this case, a contract of deposit was perfected when Thorin’s car was delivered to the hotel’s employee, the
parking attendant, who in turn issued a valet parking claim stub to Thorin. As such, there is notice to the hotel. In view
of this, the hotel as depositary had the obligation to take care of the case with due diligence and to return the same to
Thorin.

The hotel’s failure to return the car to Thorin is a breach of its obligation. Thus, it must be held liable for the
value of the car. The vase of YHT Apartment vs. CA is instructive in this case where YHT was held liable for the liss of
See’s car parked in the hotel’s annex in BPI’s premises. (9 pts.)

2. The distinctions between commodatum and mutuum are as follows:

a. As to cause, commodatum is essentially gratuitous while mutuum may be onerous or gratuitous;

b. As to object, commodatum generally involves non-consumable things while mutuum involves money or
other consumable things;
c. As to ownership, in commodatum, there is no transfer of ownership while in muttum there is a transfer of
ownership;
d. As to obligation, the exact same thing must be returned in commodatum while the amount of the same
thing of the same kind and quality must be paid in mutuum;
e. As to purpose, commodatum is for the use of the thing while mutuum is for purpose; and
f. As to subject matter, commodatum includes both immovable and movable property while mutuum only
includes movable property. (5 pts.)

3.

a. Forebearance of money is a contractual obligation of the creditor to refrain, within period of time, from
requiring the debtor to pay an obligation already due and payable. (4 pts.)

b. If I were the judge, the appropriate interest rate that I will impose is 6% pursuant to Central Bank Circular No.
799 effective July1, 2013. It provides:

(2) when an obligation to pay a sum of money (i.e. contract of loan or forebearance) is breached, the interest
rate to be imposed is that stipulated by the parties. In the absence of such stipulation, the legal interest of 6% shall be
imposed from the time of default i.e. judicial or extra-judicial demand.

Applying the said provision, from the time of default (i.e. judicial or extra-judicial demand) until June 30, 2013,
the rate to be imposed must be 12%. This due to the fact that CB Circ. No, 799 took effect only July 6, 2013. Prior to
such, the imposable rate for loan or forebearance of money was still 12%.

Accordingly, upon its effectivity on July 1, 2013, the rate to imposed from said date up to the satisfaction of
the change in the rate imposable for judgements which became final and executory until its satisfaction from 12% to
6%. (8 pts.)

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COMPILED BY: ANNA SOPHIA TARHATA PIANG | II-MANRESA
 PAST EXAM COMPILATIONS FOR CREDIT TRANSACTIONS – ATTY. JAZZIE M. SARONA-LOZARE, CPA, LLM, ESQ.
FIRST EXAM COVERAGE
S.Y. 2018-2019
ATENEO DE DAVAO UNIVERSITY COLLEGE OF LAW

4. Yes. The contention of Legolas is valid. Indeed, no contract of loan was perfected in this case. The document
denominated as a “Loan and Trust Receipt” is in truth and in fact not a contract of loan despite its nomenclature. The
Php 3,000,000.00 that Legolas Shipping Corporation is claiming is not a loan but an insurance policy to which it is
entitled.

In a contract of loan or mutuum, a party delivers either money or other consumable thing to another, who has
an obligation to pay the same amount of the thing of the same kind and quality.

In this case, even if Saruman Guarantee delivers the money to Legolas Shipping, the latter has no obligation
to pay the same to the former. As the insurer of Legolas, Saruman is subrogated to its shoes as creditor. As such, no
contract of loan exists between the two. Finally, it is the intention of the parties which must govern and not merely
stipulations in the contract. (8 pts.)

5. A contract of lease of a safety deposit box is considered as a contract of special deposit because it is not like
any other kind of deposit where the control of the thing is with the depositary. In a contract of lease of a safety deposit
box, both the depositor and depositary must be present in opening the same, and without one, the safety deposit box
cannot be accessed by the other.

Unlike in a contract of lease, where the lessee can use the thing, the depositary in a lease of a safety deposit
box cannot use the same. It is merely for safekeeping. (4 pts.)

6. The instances where the depositary is liable for the loss of the thing deposited through a fortuitous event are
as follows:

a. if it is stipulated by the parties;

b. if the depositary used the thing without permission of the depositor;
c. if the depositary is in delay in delivering the thing to the depositor;
d. if the depositary allowed third persons to use the thing without authority of the depositor;
e. if even with the consent of the depositor, the depositary allowed third persons who are unfit to use the thing; and
f. if the depositary saved his own thing over the thing deposited. (5 pts.)

7. Yes, Frodo is liable for the damage. As a general rule, the bailee in a commodatum is not liable for the loss or
destruction of the thing in case of a fortuitous event. This, however, admits a few exceptions. One of which, as illustrated
in this case, is when the bailee devotes the thing for another use aside from what was stipulated. In such case, the bailee
will still be liable even if the loss is cause by force majure.

In this case, the commodatum was constituted for the sole purpose of allowing Frodo to bring his sick wife to
the hospital with the obligation to return the jeepney to Bilbo immediately thereafter. Thus, in allowing passengers to
board the jeepney for payment, Frodo devoted the thing for another purpose not agreed upon. In view of this, Frodo
should be liable for the damage suffered by the jeepney. (10 pts.)

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COMPILED BY: ANNA SOPHIA TARHATA PIANG | II-MANRESA