COMMODATUM/MUTUUM

Principal Obligations of the Bailee in a Commodatum/Mutuum

1. Take good care of the thing with the diligence of a good father of the
family (Civil Code, Art.1163, 1169,1170 and 1173);
2. Use thing loaned only for the purpose for which it was loaned and for
no other purpose (Civil Code, Art. 1935, in relation to Arts. 1939(2),
1946);
3. Payment for the ordinary expenses for the use and preservation of the
thing loaned (Civil Code, Art. 1941);
4. Payment for extraordinary expenses arising from the actual use of the
thing , which shall be borne by both the bailor and the bailee, even
though the baiee acted without fault, unless there is a stipulation to
the contrary (Civil Code, Art. 1949(2);
Return and not to retain the thing loaned except for damages
mentioned in Article 1951. (Civil Code, Arts. 1993,1944,1946).

Obligations of a bailor in a Commodatum/Mutuum

1. Respect the duration of the loan because the bailor is bound by the
terms of the contract of commodatum which is for a certain time or
accomplishment of a purpose (Civil Code, Art. 1946)
2. Refund to the bailee extraordinary expenses incurred for the
preservation of the thing, provided the bailee brings the same to the
knowledge of the bailor before incurring them, except when the reply
to the notification cannot be awaited without danger. (Civil Code, Art.
1949, (1). However, if the extra ordinary expenses arise on the
occasion of the actual use by the bailee, even though he acted without
fault, they shll be borne equally by both the balior and the bailee,
unless there is stipulation to the contrary (Civil Code, Art. 1949 (2); and
3. Be liable for damages which the bailee may suffer for failure of the
bailor to advise the former of flaws (hidden defects) of the thing loaned
which are known to him. (Civil Code, Art. 1951).

DEPOSIT

Obligations of Depositary

1. To keep the thing deposited and return it, when required, to the
depositor, or to his heirs or successors, or to the person who may have
been designated in the contract (Civil Code, Art. 1972);
2. Not to transfer the deposit with a third person;
3. Not to change the way of deposit if under the circumstances he cannot
reasonably presume that the depositor would consent to the change if
he knew of the facts of the situation. However, before the depositary
may make such change, he shall notify the depositor thereof and wait
for his decision, unless delay would cause danger (Civil Code, Art.
1974);
4. To collect interest on certificates, bonds, securities, or instruments
deposited, and to take such steps as may be necessary in order that
the securities may preserve their value and the rights corresponding to
them (Civil Code, Art. 1975);
5. Not to commingle the things of the same kind and quality deposited if
so stipulated (Civil Code, Art. 1976);
6. To advise the true owner, should he discover that the thing has been
stolen and who the true owner is (Civil Code, Art. 1984);
7. Not to make use of the thing deposited unless expressly authorized,
otherwise, he shall be liable for damages. However, when the
preservation of the thing requires its use, it must be used but only for
that purpose (Civil Code, Art. 1977);
8. To be liable for loss through fortuitous event in the following cases:
a. if it so stipulated;
b. if he uses the thing without the depositor’s permission;
c. if he delays his return; or
d. if he allows others to use it, even though he himself may have been
authorized to use the same (Civil Code, Art. 1979)
9. To pay for damages should the seal or lock be broken through his fault
which is presumed unless proved otherwise (Civil Code, Art. 1981(2));
10. To return the thing deposited in the same condition when was
delivered closed and sealed (Civil Code, Art. 1981 (1));
11. To keep the secret of the deposit when the seal or lock be
broken, with or without his fault;
12. To return the thing deposited all its products, accessories, and
accessions (Civil Code, Art. 1983). Should the deposit consist of money
and the depositary should be in delay or has used the money without
permission, he shall be liable for interest as indemnity (Civil Code, Art.
1896);
13. To return the thing deposited to the person designated in the
contract (Civil Code, Art. 1985,(2));
14. To return the thing to the legal representative of the depositor,
should the latter lose his capacity to contract (Civil Code, Art. 1986);
 15. To return the thing at the place designated in the contract, or in
the absence thereof, it shall be made where the thing deposited may
be (Civil Code, Art. 1987);
16. To return the thing to the depositor upon demand, even though a
specified period of time for such return may have been fixed except:
a. when the thing is judicially attached while in the depositary’s
possession; or
b. when the depositary was notified of the opposition of a third person
to the return or removal of the thing deposited. Note: In these
cases, the depositary must immediately inform the depositor of the
attachment or opposition (Civil Code, Art. 1988); and
17. To deliver the sum or the thing to the depositor should the
depositary by force majeure or government order loses the thing and
receives money or another thing in its place (Civil Code, Art. 1990).

Obligations of the Depositor

1. Reimburse the depositary for the expenses he may have incurred for
the preservation of the thing deposited should the deposit be
gratuitous Civil Code, Art. 1992); and
2. Reimburse the depositary for any loss arising from the character of the
thing deposited, unless at the time of the constitution of the deposit;
a. the depositor was not aware of such character;
b. he was not expected to know the dangerous character of the thing;
c. he notifies the depositary of the same; or
d. the depositary was aware of it without advise from the depositor
(Civil Code, Art. 1993).

GUARANTY

Duty of the guarantor before he may exercise the benefit of

excussion

1. He must set it up against the creditor upon the latter’s demand for
payment from him, and
2. Point out to the creditor available property of the debtor within the
Philippine territory, sufficient to cover the amount of the debt (Civil
Code, Art. 2061).

The right of the guarantor who pays the creditor against the the principal
debtor
1. Right to be indemnified by the principal debtor. Such indemnity
includes:
a. The total amount of the debt;
b. The legal interest from the time the payment was made known to
the debtor, even though it did not earn interest for the creditor;
c. The expenses incurred by the guarantor after having notified the
debtor that payment had been demanded of him
d. Damages, if are due ( Civil Code, Art. 2066)
2. Right to subrogation; and
Note: If the guarantor has compromised with the creditor, he cannot
demand of the debtor more than what he has really paid (Civil Code,
Art. 2066)
3. Right to sue either the person requesting him to guarantee the debt of
the third person or the latter (Civil Code, Art. 2072).

MORTGAGE/ANTICHRESIS/PLEDGE

Right of the creditor where debtor fails to comply with his

obligation

1. creditor is merely entitled to move for the sale of the thing pledged or
mortgaged with the formalities required by law in order to collect
2. creditor cannot appropriate himself the thing nor can he dispose the
same as owner

PLEDGE

Creditor

a. shall take care of the thing pledged with a diligence of a good father of
a family
b. has the right to the reimbursement of the expenses made for its
preservation is liable for its loss or deterioration by reason of fraud,
negligence, delay or violation of the terms of the contract, and not due
to fortuitous event
c. may bring the actions which pertain to the owner of the thing in order
to recover it from, or defend it against a third person
d. cannot use the thing without the authority of the owner, and if he
should do so, or misuse the thing, the owner may ask that it be
judicially or extrajudicially deposited
e. may use the thing if it is necessary for the preservation of the thing
 f. may either claim another thing in pledge or demand immediate
payment of the principal obligation if he is deceived on the substance
or the quality of the thing

Pledgee

a. cannot deposit the thing pledged with a third person, unless there is a
stipulation authorizing him to do so
b. is responsible for the acts of his agents or employees with respect to
the thing pledged
c. has no right to use the thing or to appropriate the fruits without the
authority of the owner
d. may cause public sale of the thing pledged, if without fault on his part,
there is a danger of destruction, impairment or diminution in value of
the thing. The proceeds of the auction shall be a security for the
principal obligation.

Pledgor

a. has the responsibility for flaws of the thing pledged

b. cannot ask for the return of the thing against the will of the creditor,
unless and until he has paid the debt and its interest, with the
expenses in a proper case
c. is allowed to substitute the thing which is in danger of destruction or
impairment without any fault on the part of the pledge, with another
thing of the same kind and quality
d. may require that the thing be deposited with a third person if through
the negligence or willful act of the pledge the thing is in danger of
being lost or impaired

Mortgage

Right of a mortgagee to recover deficiency

1. Mortgagee is entitled to recover deficiency

2. If the deficiency is embodied in a judgment, it is referred to as
deficiency judgment
3. Action for recovery of deficiency may be filed even during redemption
period
4. Action to recover prescribes after 10 years from the time the right of
action accrues

Chattel Mortgage
Right of Redemption

1. when the condition of a chattel mortgage os broken, the following may

redeem;
a. mortgagor
b. person holding a subsequent mortgage
c. subsequent attaching creditor
2. an attaching creditor who so redeems shall be subrogated to the rights
o the mortgagee and entitled to foreclosure the mortgage in the same
manner that the mortgagee could foreclose it
3. the redemption is made by paying or delivering of the mortgagee the
amount due on such mortgage and the costs and expenses incurred by
such breach of condition before the sale

Right of mortgagee to recover deficiency

1. where mortgage foreclosed: creditor may maintain action for

deficiency although Chattel Mortgage Law is only given as a security
and not as payment of debt.
2. where mortgage constituted as security for purchase of personal
property payable in installments: no deficiency judgment can be asked
and any contrary agreement shall be void
3. where mortgaged property subsequently attached and sold:
mortgagee is entitled to deficiency judgment in an action for specific
performance.

Obligations of an antichretic creditor

1. To pay taxes and charges on the estate, unless there is a stipulation to

the contrary (Civil Code, Art. 2135);
Note: Creditor may avoid said obligation by compelling debtor to
reacquire enjoyment of the property, unless there is a stipulation to
the contrary (Civil Code, Art. 2136)
2. To apply all the fruits, after receiving them, to the payment of interest,
if owing, and thereafter to the principal (Civil Code, Art. 2132);
3. To appraise the actual market value of the fruits at the time of the
application thereof (Civil Code, Art. 2133);
4. To bear the expenses necessary for its preservation and repair (Civil
Code, Art. 2135).

Remedies of the creditor in case of nonpayment of debt

1. To bring an action for specific performance;

2. To petition for the sale of real property as in a foreclosure of
mortgages under Rule 68 of the Rules of Court (Civil Code. Art. 2137).