Credit Transactions_Midterm Examination_via email

Part 1 (80%) - 5:30 to 7:30 PM

Part 2 (20%) – 7:30 to 8:30 PM
Part 1 – True or False. (80%) Write TRUE if the given statement is correct
Or False if incorrect. Write your answers in the spaces provided before the
statements. Submit your answers not later than 7:30 PM to the email account
of the Beadle – [email protected]

Please use this format for your file name for Part 1 submission -
#1credittrans_midterm_part1_[your family names_first name]
Example - #1credittrans_midterm_part1_cervantes_ramon

# Answers/Statements
1 _______________ It is settled in decisions of the Supreme Court that
12% per annum is the legal rate of interest imposed on occasions that
the rates stipulated by parties are nullified. This is by now the present
rule.

2 _______________ The Court has the power to nullify excessive

interest rates and impose new rates for the parties, such reduction,
however, must always be guided by reason and equity.

3 _______________ The right of the debtor to apply payment is merely

directory in nature and must be promptly exercised, lest, such right
passes to the creditor.

4 _______________ Where property is mistakenly delivered to a person

who receives and takes possession of the property, such person is
deemed to have received it trust. A trust relationship is created by
law. In case of misappropriation or conversion of the property, there
will be civil liability but not criminal liability.
5 _______________ When both parties enter into an agreement
knowing that the return of the goods subject of the trust receipt is not
possible even without any fault on the part of the trustee, it is not a
trust receipt transaction penalized under Section 13 of P.D. 115. This
transaction becomes a mere loan, where the borrower is obligated to
pay the bank the amount spent for the purchase of the goods.

6 _______________ Commodatum and mutuum are two kinds of loan

under the New Civl Code and both are real contracts.

7 _______________ The provisions of the Code of Commerce on loan,

deposit and guaranty had been repealed by the New Civil Code.

8 _______________ A deposited P500,000 with Bank ABC as time

deposit. The legal relation between A and Bank ABC is that of a
creditor and a debtor, where Bank ABC is the debtor with obligation to
repay A with or without interest.

9 _______________ In mutuum, the borrower becomes the owner of

the thing borrowed.

1 _______________ A delivered money to B to be returned in two

0 months, subject to interest. The contract is one of a simple loan.

1 TF - Today, A agrees to lend B P100,000 next month. Today, upon the

1 meeting of minds of the parties on this agreement, a contract of loan
is perfected.

1 _______________ Loan is a reciprocal obligation, as it arises from the

2 same cause where one party is the creditor, and the other the debtor.
The obligation of one party in a reciprocal obligation is dependent
upon the obligation of the other, and the performance should always
be simultaneous.
1 _______________ Upon application by A, Bank ABC approved in his
3 favor a loan of P1 million. To secure the loan, prior to its release, A
executed a real mortgage over a parcel of land that he owns in favor
of Bank ABC. The bank released only a part of the approved loan and
refused to release the balance without legal justification. In case of
non-payment of the amount released, the bank can properly foreclose
the mortgage.

1 _______________ The foreclosure of a mortgage constituted to

4 secure a loan can only be made in case of non-payment of the loan
and not for any other violation of the contractual stipulations.

1 _______________ The foreclosure of a mortgage constituted to

5 secure a loan can only be made in case of non-payment of the loan
and not for any other violation of the contractual stipulations.

1 _______________ The restoration of possession and the payment of

6 reasonable rentals are in accordance with the law, which expressly
provides that one who recovers, according to law, possession unjustly
lost shall be deemed for all purposes which may redound to his benefit
to have enjoyed it without interruption. Thus, a mortgagee who has
wrongly foreclosed and taken possession of the foreclosed property
after it is ordered returned to the mortgagor shall be liable to pay
reasonable rent for the period that the property was in the possession
of said mortgagee.

1 _______________ In the case of DBP v. Guarina Agricultural And

7 Realty Development Corporation, the Supreme Court held that a
property mortgaged to the bank cannot be foreclosed in case the
borrower has violated an agreement that a loan granted by the bank
shall be used only for the purposes approved by the bank.
1 _______________ Rice may be a proper object in a contract of
8 commodatum.

19
_______________ An owner of a parcel of land allowed it to be used by his
brother who built a warehouse thereon and occupied the lot for 30 years
without payment of rental. When the owner demanded for the return of the
property, the brother refused to return the property and among the issues
raised is the absence of stipulation on the return of the property. The contract
was deemed by the SC as commodatum and the property had to be returned
to the owner.

20
_______________ A cannot be a bailor in a contract of commodatum where
the object involved is not owned by him.

21
_______________ The loans of commodatum and mutuum are purely personal
in character and of any of the parties extinguishes the obligation.

22
_______________ Death of either the bailor or the bailee in commodatum
extinguishes the contract. Thus, as a rule, where A and B are bailees in a
contract of commodatum, in case A dies the contract of commodatum is
extinguished

23
_______________ Every person obliged to give something is also obliged to
take care of it with the proper diligence of a good father of a family. This rule
applies in every contract of commodatum.

24
_______________ In the absence of a stipulation to the contrary , the bailee
even though he acted without fault will the liable for extraordinary expenses
arising on the occasion of the actual use of the thing by the bailee.

25

_______________ In consideration of the fact that commodatum is essentially

gratuitous, he bailee is always liable for the loss of the thing, even if it should
be through a fortuitous event.

26
_______________ The rule that “no person shall be responsible for those
events which could not be foreseen, or which though foreseen, were inevitable”
also applies to commodatum.

27
_______________ The bailee does not answer for the deterioration of the
thing loaned
due only to the use thereof and without his fault.

28
_______________ A lent B his laptop, to be returned after a month. When A
asked for the return of the laptop, B refused to return it to A. According to B,
he will not return it to A unless A first pay B a loan granted by B to A which has
remained unpaid for over a year. The retention of the thing with B is allowed by
law in this case.
29
_______________ In a contract of commodatum, the ownership of the thing
delivered by the bailor to the bailee is not transferred to the bailee.
Consequently, the bailee cannot have a right to retain the thing against the
bailor in any case because under the law, possession pertains to the owner of a
thing..

30
_______________ X and Y borrowed W’s newly purchased stereo set for a
party activity. W initially hesitated to lend the set but later on reconsidered and
allowed X and Y to use the set, telling them that is worth P50 thousand. Due to
X’s wrongful handling of the set it got destroyed beyond repair. W demanded
for the payment of the value of the set. Since X did not have any money, W can
demand that Y pay him the total value of the object.

31
_______________ The rule on that where there are two or more debtors, who
concur in one and the same obligation the obligation shall be joint does not
apply in commodatum.

32
_______________ In commodatum, where the bailor has an urgent need for
the thing he has lent to the bailee for a period of one month, the law allows the
bailor to ask for the return of the thing even before the expiration of the period
agreed upon, but the bailor is always obliged to allow the bailee to use the thing
after the bailor’s urgent need is accomplished.

33
_______________ The bailor may revoke the contract of commodatum in case
the bailee commits any act against the bailor that the bailor deems an act of
ingratitude.

34
_______________ The rule provides that if the extraordinary expenses arise on
the occasion of the actual use of the thing by the bailee, even though he acted
without fault, they shall be borne equally by both the bailor and the bailee. It is
possible, however, for the bailee to be made wholly liable for such
extraordinary expenses.

35
_______________ In every case where the bailee suffers damages because of
defects in the thing lent by the bailor, the bailor liable.

36
_______________ A deposited in his savings account with Bank ABC USD 1,000.
The bank noted each serial number of the dollar bills deposit slip. A can later
demand that the bank should return to him exactly the same dollar bills he
deposited in accordance with the provisions of the law on contracts of deposit..

37
_______________ A, a candidate for the Bar exams, gave B an expensive pen
which B shall own, with the obligation to give A in return a particular pen that B
used in passing his own Bar examination. In case B is unable to give to B the
aforesaid pen, the allows B to perform his obligation by giving to A another pen
of the same kind and quality.

38
_______________ In the case of Cibank – NA v. Sabeniano, the Supreme Court
found the devaluation of the Philippine currency that occurred in the course of
the Asian crisis of 1997 as a case of extraordinary inflation that allows the value
of the currency at the time of the establishment of the obligation to be the
basis of payment of the obligations involved in the case.

39
_______________ According to the Supreme Court, the existence of
extraordinary inflation must be officially proclaimed by competent authorities,
and the only competent authorities so far recognized by this Court to make
such an official proclamation are the Bangko Sentral ng Pilipinas and the
Bankers Association of the Philippines.

40
_______________ The Supreme Court had noted that the Philippines experienced
economic crisis in the 1980s, and the Court did not find that extraordinary
inflation took place during the said period so as to warrant the application of
Article 1250 of the Civil Code.

41
_______________ In the case of Citibank-NA v. Sabeniano, the Supreme Court
ruled that the Citiban should refund to Sabeniano the US Dollar deposits taken
from her Citibank-Geneva accounts or its equivalent in Philippine currency using
the exchange rate at the time of payment, plus the stipulated interests.

42
_______________ Under the law, In case an extraordinary inflation or deflation of
the currency stipulated should supervene, the value of the currency at the time
of the establishment of the obligation shall be the basis of payment, unless
there is an agreement to the contrary.

43
_______________ In case it is established that there has been no extraordinary
inflation or deflation, an obligation to pay USD 1,000,000 in peso currency when
the value of USD 1 was equivalent to Php 25 at the time of the establishment of
the obligation will be paid with Equivalent P 25,000,000 (i.e. USD 1,000,000 x
P25 per USD 1), and not be based on the values of the currencies at the time of
payment which is USD 1 to Php 50.

44
_______________ The Supreme Court had not considered the decline in the
purchasing power of the pesos from 1983 to 1985, the time of economic crisis
on the occasion of the assassination of Ninoy Aquino, to be so great as to result
in extraordinary inflation.

45
_______________ A borrowed from B one sack of rice, costing P1,000 at the time
the loan was perfected. Under the contract, B is obliged to pay A after one
month a sack of rice of the same kind and quality. At the time of payment, the
cost of a sack of rice has increased to P2,500. A can be obliged to deliver to B a
sack of rice that is now costing P2,500.

46
_______________ A borrowed from B one sack of rice, costing P1,000 at the time
the loan was perfected. Under the contract, B is obliged to pay A after one
month a sack of rice of the same kind and quality. At the time of payment, the
cost of a sack of rice has increased to P2,500. If it has become impossible to
deliver a sack of rice of the same kind and quality, A should pay B Php 1,000.

47
_______________ According to the law, no interest shall be due unless it has
been expressly stipulated in writing. But there may be an obligation to pay
interest as penalty or damage even when the there is no stipulation for liability
for such obligation.

48
_______________ For compensatory interest to be demandable, there must be a
judicial demand.

49
_______________ A borrowed P1,000 from B. A stipulation was made for the
payment of interest but no interest rate was indicated. There is no liability for
the payment of interest here for failure to stipulate in writing the rate of
interest payable.

50
_______________ When under a contract, interest is due but is unpaid, the
amount of unpaid interest be subject to interest from the time a judicial or
extrajudicial demand is made.

51
_______________ If the contract is silent on the payment of interest on the
amount of unpaid interest, such interest cannot be made payable.

52
_______________ The consolidation of the unpaid interest with the capital is not
allowed by the law because it will have the effect of subjecting the unpaid
interest to interest.

53
_______________ The present rule provides that the rate of interest for the loan
or forbearance of any money, goods or credits and the rate allowed in
judgments, in the absence of an express contract as to such rate of interest,
shall be six percent (6%) per annum.

54
_______________ 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.

55
_______________ The rate of legal interest up to June 30, 2013 shall be those
provided under BSP-MB Circular No. 905. S. 1982 (i.e., 6% or 12% as the case
may be). Circular No. 799, Series of 2013, shall be effective only from July 1,
2013, it cannot apply retroactively. The latter circular will also not apply to
cases already pending in court at the time of the effectivity of said circular.

56
_______________ The Supreme Court has upheld the authority of the Central –
Monetary Board to issue CB Circular No. 905 which removed all interest ceilings
and thus had the effect of suspending Act. No. 2655 (Usury Law of 1916) as
regards usurious interest rates.

57
_______________ According to the Supreme Court, CB Circular No. 905 repealed
the Usury Law. By virtue of the circular, the Usury Law has been rendered
ineffective. Usury has been legally non-existent in our jurisdiction. interest can
now be charged as lender and borrower may agree.

58
_______________ According to the Supreme Court, CB Circular No. 905 repealed
the Usury Law. By virtue of the circular, the Usury Law has been rendered
ineffective. Usury has been legally non-existent in our jurisdiction. Interest can
now be charged as lender and borrower may agree.

59
_______________ The lifting of the ceilings for interest rates does not authorize
charging excessive, unconscionable, and iniquitous interest, except when the
stipulation on the rates of interest payable under the contract is knowingly and
voluntarily made by the parties to the contract in writing.
60
_______________ A lent B P10,000 which B will use to plant rice. The amount is
agreed to be payable 5 months from the date the loan is granted. A and B
further agreed that B shall pay interest at the rate of 2% per month in kind i.e.
rice. At the time the loan was granted the price of rice was P1,000 per sack.
When the time for payment came the price of rice had increased to P2,000 per
sack. B should deliver ½ sack of rice, based on the value of rice at the time of
payment which is P2,000 per sack of rice.

62
_______________ The borrower orally agreed to pay interest (not reduced into
writing). If the debtor paid the interest because he considered the payment of
the interest as a moral obligation on his part, the payment is valid but subject to
the right of the borrower to recover such payment.

63
_______________ Deposit is a real contract, perfected by delivery. Thus where A
and B agreed that A will deposit his car with B in a month’s time, no contract of
deposit exists until such delivery is made. The agreement in the meantime has
no legal effects yet.
64
_______________ As a general rule, in a contract of deposit the depositor is not
entitled to compensation for his safekeeping of the thing deposited.

65
_______________ When a thing is the subject of conflicting claims by two or
more parties, the law provides that the conflicting claimants must litigate their
conflicting claims in court and it is not proper for a person to accept the thing by
way of voluntary deposit.

66
_______________ As a general rule, depositaries may commingle grain or other
articles of the same kind and quality. This will allow depositaries a more
economic use of the space in their warehouses.

67
_______________ A, B and C deposited with D 10, 40 and 50 sacks of palay of the
same kind and quality, respectively. D commingled the grains. The warehouse
caught fire and 50 sacks were destroyed. A, B and C will share equally in the
remaining sacks of palay.

68
_______________ If the thing deposited is in a locked box and the key has been
delivered to depositary, the law presumes that the depositary is authorized to
open the locked box anytime the depositary wishes to.

69
_______________ Under a contract of deposit the depositary is not under any
obligation to pay interest on the thing deposited to the depositor. But there
may be instances when the depositary may be under obligation to pay such
interest.

70
_______________ When a depositary has reasonable grounds to believe that the
thing has not been lawfully acquired by the depositor or when he discover that
the thing has been stolen, the depositary may either return the thing to the
depositor or to the owner in case he knows who the true owner is.

71
_______________ A and B, solidary depositors, deposited a car with Y, with the
agreement that the car shall be returned by Y to B. A, being a solidary depositor
can properly demand the return of the car to him.

72
_______________ If at the time the deposit was made a place was designated for
the return of the thing, the depositary must take the thing deposited to such
place; but the expenses for transportation shall be borne by the depositor.

73
_______________ In all instances, a depositary is obliged to return the thing
deposited by the depositor at the latter’s demand even if a period for the
deposit has been agreed upon because such period is for the benefit of the
depositor who may set such period aside.

74
_______________ Any depositary who may have justifiable reasons for not
keeping the thing deposited may, even before the time designated, return it to
the depositor; and if the latter should refuse to receive it, the depositary may
secure its consignation from the court.

75
_______________ The depositary's heir who in good faith may have sold the
thing which he did not know was deposited, shall only be bound to return the
price he may have received or to assign his right of action against the buyer in
case the price has not been paid him.

76
_______________ To hold hotelkeepers liable for the effects of their guests, it is
not necessary that such effects be actually delivered to the innkeepers or their
employees. It is enough that such effects are within the hotel or inn.

78
_______________ In case the depositor happens to be indebted to the depositary
under certain transaction separate from the deposit, the depositary can retain
the thing until such debt is paid first by the depositor

79
_______________ A deposited a thing with B who is in the business of storing
goods, with B paying the fee for the storage. B died after the deposit was
made. The heirs of B will have the obligation of continuing to safekeep the
thing deposited by A.

79
_______________ One legal way for hotel establishments to protect themselves
from liability for the loss of items brought in by guests, is to have the guests
execute written waivers holding the establishments or its employees free from
blame for such loss.

80
_______________ When the loss of things brought into the hotel establishment
by hotel guests is caused by a visitor allowed by the hotel guest to stay in his
room, the hotel establishment is freed from liability for such loss, as in the case
of YHT Realty Corporation v. Court of Appeals and Maurice McLoughlin.

END OF PART 1