LOAN

Art. 1933: By the contract of loan, one of the parties delivers to another, either something not consumable so that the latter may use the same for a certain time and return it, in which case the contract is called a commodatum; or money or other consumable thing, upon the condition that the same amount of the same kind and quality shall be paid, in which case the contract is simply called a loan or mutuum.

Commodatum is essentially gratuitous.

Simple loan may be gratuitous or with a stipulation to pay interest.

In commodatum the bailor retains the ownership of the thing loaned, while in simple loan, ownership passes to the borrower.

Art. 1934. An accepted promise to deliver something by way of commodatum or simple loan is binding upon parties, but the commodatum or simple loan itself shall not be perfected until the delivery of the object of the contract. (

COMMODATUMI. Obligations of the Bailee

1. Payment for ordinary expenses for the use and preservation of the thing loaned. (Art. 1941)

2. Liable for fortuitous event if:a. If he devotes the thing to any

purpose different from that for which it has been loaned;

b. If he keeps it longer than the period stipulated, or after the accomplishment of the use for which the commodatum is established;

c. If the thing loaned has been delivered with its appraisal of its value, unless there is a stipulation exempting the bailee from responsibility in case of a fortuitous event.

d. If he lends or leases the thing to a third person, who is not a member of his household;

e. If, being able to save either the thing borrowed or his own thing, he chose to have the latter.

3. Obligation to return the thing (Bailee cannot retain the thing loaned on the ground that the bailor owes him something)

But has a right of retention for damages

4. Solidary liability when there are two or more bailees

5. Deterioration due to ordinary wear and tear (ordinary use): Bailee is not liable

II. Obligations of the Bailor1. Bailor cannot demand the return of the

thing loaned till:a. After the expiration of the

period stipulated;

b. After the accomplishment of its use for which the commodatum has been constituted.

Exception: a. If bailor have the urgent need of the

thing, he may demand its return or temporary use.

The contract of commodatum is suspended while the thing is in the possession of the bailor.

b. Bailor may demand immediate return if the bailee commits any act of ingratitude specified in Art. 765.

2. Obligation to refund extraordinary expenses during the contract for the preservation of the thing loaned.

Requisites:i. Bailee brings the same

to the knowledge of the bailor before incurring the same, except when they are so urgent that the reply to the notification cannot be awaited without danger.

*Extraordinary expenses arise on the occasion of the actual use if the thing by the bailee, even though he acted without fault, they shall be borne equally by the bailee and bailor, unless there is stipulation to the contrary

*Expenses other than ordinary expenses, extraordinary expenses during the contract for preservation and extraordinary expenses on the occasion of the actual use of the thing IS NOT ENTITLED FOR REIMBURSEMENT

3. Bailor shall be liable for damages if:A. has knowledge of the flaws of the thing

loaned and does not advise the bailee of the said flaws (Art. 1951)

B. if he abandons the thing to the bailee (Art. 1952)

Art. 1947. The bailor may demand the thing at will, and the contractual relation is called a precarium, in the following cases:

(1) If neither the duration of the contract nor the use to which the thing loaned should be devoted, has been stipulated; or

(2) If the use of the thing is merely tolerated by the owner.

DEPOSIT

I. Voluntary Deposit

A voluntary deposit is that wherein the delivery is made by the will of the depositor. (Art. 1968)

A deposit may also be made by two or more persons each of whom believes himself entitled to

the thing deposited with a third person, who shall deliver it in a proper case to the one to whom it belongs.

Form of Contract: orally or in writing (Art. 1969)

Rule if depositor is incapacitated:1. The depositary shall be subject to all

the obligations of a depositary, and may be compelled to return the thing by the guardian, or administrator, or the person who made the deposit, or by the latter himself if he should acquire capacity. (Art. 1970)

Rule if depositary is incapacitated:1. The depositor shall only have an action

to recover the thing deposited while it is still in the possession of the depositary; or

2. Compel the latter to pay him the amount by which he may have enriched or benefited himself with the thing or its price.

If a third person who acquired the thing acted in bad faith, the depositor may bring an action against him for its recovery.

II. Obligations of the Depositary1. To keep the thing safely (Art. 1972)

Every person who is obliged to give something is also obliged to take care of it with the proper diligence of a good father of a family, unless the law or stipulation of the parties requires another standard of care. (Art. 1163)

Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those who in any manner contravene the tenor thereof, are liable for damage. (Art. 1170)

The depositary is liable for the loss of the thing through a fortuitous event: (Art. 1979)

a. If it is so stipulated;b. If he uses the thing without the

depositor’s consent;c. If he delays its return;d. If he allows others to use it,

even though he himself may have been authorized to use the same.

2. To return the thing, when required by the depositor, or his heirs and successors, or to the person who may have been designated in the contract. (Art. 1972)

The thing deposited must be returned to the depositor upon demand, even though a specified period or time for

such return may have been fixed. (Art. 1988)

Exception: Return upon demand shall not apply when:

a. The thing is judicially attached in the depositary’s possession;

b. The depositary have been notified of the opposition of a third person to the return or the removal of the thing deposited.

In these cases, the depositary must immediately inform the depositor of the attachment or opposition.

The thing deposited shall be returned with all its products, accessories and accessions. (Art. 1983)

If the deposit consists of money, the provision on Art. 1896 shall be applied to the depositary.

Art. 1896: The agent owes interest on the sums he has applied to his own use from the day on which he did so, and on those which he still owes after the extinguishment of the agency.

The thing deposited must be returned to the place designated for the return of the thing.

The expenses for transportation shall be borne by the depositor.

If no place has been designated for the return, it shall be made where the thing deposited may be, even if it should not be the same place where the deposit was made, provided that there was no malice on the part of the depositary.

Rule if the thing deposited is closed or sealed:

If the thing deposited is delivered closed and sealed: The depositary must return it in the same condition. (Art. 1981)

If the seal or lock be broken without the depositary’s fault, he shall keep the secret of the deposit.

If the seal or lock be broken through his fault, he shall be liable for damages.

Fault is presumed unless there is proof to the contrary.

When it becomes necessary to open a locked box or receptacle, the depositary is presumed authorized to do so if:

i. The key has been delivered to him; or

ii. When the instructions of the depositor as regards the deposit cannot be executed without opening the box or receptacle. (Art. 1982)

3. The depositary cannot make use of the thing deposited without the express permission of the depositor.

Liability in case of use: damages

Exception: If for the preservation of the thin deposited requires its use, it must be used but only for that purpose. (Art. 1977)

When the depositor has permission to use the thing deposited: the contract becomes a loan or commodatum and loses the concept of deposit.

Exception: Where the safekeeping is still the principal purpose of the contract.

*Permission shall not be presumed and must be proved. (Art. 1978)

4. The depositary cannot deposit the thing to a third person. (Art. 1973)

Exception: When there is a stipulation to the contrary.

Liability for loss is on the depositary if he deposited the thing to a third person who is manifestly careless or unfit.

The depositary is also responsible for the negligence of his employees.

5. Obligation not to change the way of the deposit

Exception: When under the circumstances the depositary may reasonably presume that the depositor would consent to the change if he knew the facts of the situation.

Before the depositary may make such change, he shall notify the depositor thereof and wait for his decision, unless delay would cause danger.

6. The depositary cannot demand that the depositor prove his ownership of the thing deposited.

Nevertheless, should he discover that the thing has been stolen and while its true owner is, he must advise the latter of the deposit.

If the depositary has reasonable grounds to believe that the thing has not been lawfully acquired by the depositor, the former may return the same.

7. If the thing deposited (holding certificates, bonds, securities or instruments) earns interest: (Art. 1975)

a. The depositary is bound to collect the interest when it becomes due;

b. Take necessary steps in order that the securities may preserve their value and the rights corresponding to them according to law.

Exception: Shall not apply to contracts of rent and safety deposit boxes.

8. Obligation not to commingle thingsException:

III. Obligation of the Depositor1. Obligation to reimburse the depositary for

expenses for the preservation of the thing deposited if the deposit is GRATUIOUS. (Art. 1992)

2. Obligation to reimburse for LOSS arising from the character of the thing deposited. (Art. 1993)

Exception: Unless at the time of the constitution of the deposit the depositor was not aware of, or was not expected to know the dangerous character of the thing, or unless he notified the depositary of the same, or the latter was aware of it without advice of the depositor.

3. Obligation to pay the depositary in full (Art. 1994)

Remedy of the depositary in case of non-payment: he may retain the thing in pledge.

IV. Extinguishment of Deposit (Art. 1995)1. Upon the loss or destruction of the thing

deposited;2. Death of either the depositor or depositary,

in cases of gratuitous deposit.

V. Necessary DepositWhen is a deposit necessary? (Art. 1996)

1. When it is made in compliance with a legal obligation;

(1) Shall be governed by the provisions of the law establishing it, and in case of deficiency, by the rules of voluntary deposit (Art. 1997)

2. When it takes place on the occasion of any calamity such as fire, storm, flood, pillage, shipwreck, or other similar events.

(1) Shall be governed by the provisions concerning

voluntary deposit and Art. 2168. (Art. 1997)

Art. 2168: When during a fire, flood, storm, or other calamity, property is saved from destruction by another person without the knowledge of the owner, the latter is bound to pay the former just compensation.

3. The deposit of effects made by travellers in hotels or inns shall also be regarded as necessary. (Art. 1998)

The keepers of hotels or inns shall be regarded as depositaries, provided that notice was given to them, or to their employees, of the effects brought by the guests and that, on the part of the latter, they take the precautions which said hotel-keepers or their substitutes advised relative to the care and vigilance of their effects.

Liability of hotel-keepers or their substitutes:

1. The hotel-keeper is liable for the vehicles, animals and articles which have been introduced or placed in the annexes of the hotel. (Art. 1991)

2. Liable for loss of, injury to personal property of the guests caused by the servants or employees of the keepers of hotel or inns as well as by strangers. (Art. 2000)

Exception: a. force majure

The act of a thief or robber, who entered the hotel is not force majure, unless it is done with the use of arms or through and irresistible force. (Art. 2001)

b. it the loss is due to the acts of the guest, his family, servants or visitors, (Art. 2002)

c. if the loss arises from the character of the things brought into the hotel (Art. 2002)

3. Liable for loss even though he posts notices to the effect that he is not liable for the articles brought by the guest.

Any stipulation between the hotel-keeper and the guest whereby the responsibility of the former as set forth in Art.

1998 – 2001 is suppressed or diminished shall be void.

Right of the hotel-keeper / inn-keeper to remain the things brought into the hotel by the guest as security for credits on account of lodging, and supplies usually furnished to hotel guests.