II.

ANSWER (A)
(1) The contract created when a depositor opens a deposit account with a bank is a simple
loan or mutuum. Article 1980 of the NCC provides fixed, savings, and current deposits of
money in banks and similar institutions shall be governed by the provisions of concerning
simple loan or mutuum. When a savings account is opened, a creditor-debtor relationship
ensues with the depositor as the creditor and the bank as the debtor.

(2) No, the bank had no right to take over Saachi’s bank deposit. The Hold over agreement
states that the right may be exercised by the bank only after the depositor incurs any
liability to the bank. In this case, the depositor is only suspected of estafa by another bank
in the Prosecutor’s office. Absent a court order, the bank cannot withhold the deposit of
the depositor.

ANSWER (B)
No, the bank is not correct. While the Bank is correct about the applicability of
compensation, it was not correct as to the amount compensated.
A bank deposit is a contract of loan, where the depositor is the creditor and the bank the
debtor. Since Sarah is also the debtor of the bank with respect to the loan, both are
mutually principal debtors and creditors of each other. Both obligation are due,
demandable and liquidated but only up to the extent of P300, 000.00 (covering the unpaid
third, fourth and fifth monthly instalments). The entire one million was not yet due
because the loan has no acceleration clause in case of default. And since there is no
retention or controversy commenced by third person and communicated in due time to
the debtor, then all the requisites of legal compensation are present but only up to the
amount of P300, 000.00. The bank, therefore, may deduct P300, 000.00 from Sarah’s bank
deposit by way of compensation.
III
ANSWER (A)
(1) Tito must bear the P15,000.00 expenses for the van. Generally, extraordinary expenses
for the preservation of the thing loaned are paid by the bailor, he being the owner of the
thing loaned. In this case however, Tito should bear the expenses because he incurred the
expenses without first informing Pedro about it. Neither was the repair shown to be
urgent. Under Article 1949 of the Civil Code, bailor generally bears the extraordinary
expenses for the preservation of the thing and should refund the said expenses if made by
the bailee; Provided, The bailee brings the same to the attention of the bailor before
incurring them, except only if the repair is urgent that reply cannot be awaited.

(2) Tito must also pay for the ordinary expenses for the use and preservation of the thing
loaned. He must pay for the gasoline, oil, greasing and spraying. He cannot ask for
reimbursement because he has the obligation to return the identical thing to the bailor.
Under Article 1941 of the Civil Code, the bailee is obliged to pay for the ordinary expenses
for the use and preservation of the thing loaned.
(3) No, Pedro does not have the right to retrieve the van before the lapse of one year. The
parties are mutually bound by the terms of the contract. Under the Civil Code, there are
only 3 instances when the bailor could validly ask for the return of the thing loaned even
before the expiration of the period. These are when: (1) a precarium contract was entered
 (Article 1947); (2) if the bailor urgently needs the thing (Article 1946); and (3) if the bailee
commits acts of ingratitude (Article 1948). Not one of the situations is present in this case.
The fact that Tito had leased the thing loaned to Annabelle would not justify the demand
for the return of the thing loaned before expiration of the period. Under Article 1942 of the
Civil Code, leasing of the thing loaned to a third person not member of the household of
the bailee, will only entitle bailor to hold bailee liable for the loss of the thing loaned.
(4) Generally, extraordinary expenses arising on the occasion of the actual use of the thing
loaned by the bailee, even if incurred without fault of the bailee, shall be shouldered
equally by the bailor and the bailee. (Art. 1949 of the Civil Code). However, if Pedro had an
urgent need for the vehicle, Tito would be in delay for failure to immediately return the
same, then Tito would be held liable for the extraordinary expenses.
IV.
ANSWER (A)
No, Sebastian’s argument has no merit. Under Art. 2073 of the Civil Code, when there are
two or more guarantors for the same debtor for the same debt, the one among them who
has paid may demand each of the others the share which is proportionately owing from
him. In the problem, SSC as guarantor who bound to be solidarity liable with Sebastian, its
cause of action is based on the surety bond that it posted to accommodate Sebastian
pending assessment by the BIR. Sebastian’s argument that SSC cannot recover from him
because SSC has not paid anything from BIR is wrong. Here, BIR’s foreclosure of the bond
served as payment by SSC so as to allow him to recover indemnity from Sebastian based
on the indemnity agreement.
ANSWER (B)
The difference between a guaranty and suretyship is that obligations in guaranties are
secondary or has subsidiary liability. While in suretyship, obligations are primary and may
be primarily liable. Also, the undertaking in guarantee is to pay if the principal debtor
cannot pay. While in suretyship, the undertaking is to pay if the principal debtor does not
pay. Moreover, in guaranty, a guarantor is entitled to the benefit of excussion, while in
suretyship, the surety is not entitled to such benefit. Furthermore, according to Article
2047, the guarantor insures the solvency of the principal debtor while the surety insures
the debt. More so, when the contract is a suretyship, the provisions of the Civil Code on
solidary obligations shall apply.

ANSWER (C)
V.
ANSWER (A)
(1) When the obligation is breached and it consists in the payment of a 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 (Article 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 12013], applying BSP —MB Circular No. 799).

(2) 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 certainty. Accordingly, where the demand is established with reasonable
certainty, the interest shall begin to run from the time the claim is made judicially or
extrajudicially, 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]).

ANSWER (B)
No, the case is not one of a natural obligation because even if the contract of loan is
verbal, the delay of Julia made her liable for interest upon demand by Sara. This is not a
case of a natural obligation but a civil obligation to pay interest by way of damages by
reason of delay. (Article 1956; Article 1169; Article 2209 Civil Code)
ANSWER (C)
No. Under Art 1956, no interest shall be due unless it has been expressly stipulated in
writing. In this case, the agreement was not reduced to writing. Therefore, no interest is
due.

VI.
ANSWER (A)

(1) This refers to stipulations allowing an increase in the interest rate agreed upon by the contracting
parties.

Yes, it is valid provided of the following are the requirements;

(1) there can be increase in interest if it was increased by law or by the monetary board.

2. It must include a provision of the reduction of interest if in the event the interest is reduced by
law or by the monetary board.

It is a valid stipulation in commercial contract to maintain fiscal stability and to retain the value of
money in long term contracts.

However, a unilateral determination (INVALID) and imposition of increase in interest rates is

violative of the principle of the “Mutuality of contracts”.

(2)

ANSWER (B)

It is to protect its citizens from a lack of awareness of the true cost of credit to the user by assuring
a full disclosure of such cost with a view of preventing the uninformed use of credit to the
detriment of the national economy.

VII.
ANSWER (A)
ANSWER (B)
(1) Bumibili has a better title to the computer than Mayaman. A bearer negotiable document of title
can pass ownership thereof by means of mere delivery to one who acquires the document for
value and in good faith.
(2) Mayaman would have had a better right than Bumibili had the document of title been so worded as
to make the article deliverable to the order of Mayaman. Without an indorsemnt of Mayaman,
Bodeguero’s receipt could not have been negotiated to Bumibili, sufficient for the latter to acquire
title there over as against Mayaman, who was unlawfully deprived of it.

(2)

VIII.

IX.
ANSWER (A)
No, the agreement allowing automatic appropriation is void.

Under Article 2088 of the Civil Code,  the creditor cannot appropriate the things given by
way of pledge or mortgage, or dispose of them, and any stipulation to the contrary is null
and void. This automatic appropriation is commonly called pactum commissorium, and
based on jurisprudence, it has the following elements:
1. There must be a creditor-debtor relationship between the parties.
2. The property of the debtor was used as security of the loan, either as a mortgage or
a pledge
3. The agreement provides for automatic appropriation of the property upon failure to
pay the obligation.

In this case, all of the elements of pactum commissorium are present:

1. Jane and Donna have a creditor-debtor relationship.
2. Donna’s jewelry were given to Jane as a pledge.
3. Their agreement provides for automatic appropriation of the jewelry upon failure to
pay.

The agreement being a pactum commissorium, it is void under Article 2088 of the Civil
Code.

ANSWER (B)
Yes, she can redeem the jewelry.

Article 559 of the Civil Code provides that “The possession of movable property acquired
in good faith is equivalent to a title. Nevertheless, one who has lost any movable or has
been unlawfully deprived thereof, may recover it from the person in possession of the
same. If the possessor of a movable lost or which the owner has been unlawfully deprived,
 has acquired it in good faith at a public sale, the owner cannot obtain its return without
reimbursing the price paid therefor.”

In this case, since the automatic appropriation of the jewelry is void for being pactum
commissorium, Donna was unlawfully deprived of her movable property. Therefore, she is
entitled to recover possession of the same. However, because Juana paid value for the
jewelry, Donna must reimburse her before she could possession.

ANSWER (C)
An example of legal pledge, also known as right of retention, is the one provided under
Article 612 of the Civil Code which states, “upon the termination of the usufruct, the thing
in usufruct shall be delivered to the owner, without prejudice to the right of retention
pertaining to the usufructuary or his heirs for taxes and extraordinary expenses which
should be reimbursed.”

X
ANSWER (A)
(1) 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.
(2) Yes, Jose is liable to Cruz. Since Jose lent the car to Jolie without Cruz's consent, Jose
must bear the consequent loss of the car.
ANSWER (B)
Credit refers to belief or trust by a person in another’s ability to comply with an obligation. It is
a person’s ability to borrow money by virtue of confidence or trust reposed by a lender that the
borrower will pay what he may promise. It is derived from the latin word “crederie” which
means “Trust”.

ANSWER (C)
A thing is consumable when it cannot be used in a manner appropriate to its nature without
being consumed. (Art. 418) (e.g. food, firewood, gasoline)

On the other hand, a non ‐consumable thing is a movable thing which can be used in a manner
appropriate to its nature without it being consumed. (Art. 418) (e.g. car, television, radio)