8/10/2019 Legarde & Mundin CredTrans Notes 1 http://slidepdf.com/reader/full/legarde-mundin-credtrans-notes-1 1/21 SECURITY TRANSACTIONS FAQs OF ATTY. DE LEON-MANZANO (For midterms) Second part of the exam may involve answering whether a statement is “Correct or Incorrect,” not true or false. You might be ased to state why the answer is not correct. !sually, this part is right minus wrong. I compiled the answers from the blue boos of those who got really high grades and I included my own answers. I. LOAN COMMODATUM "arties# $ailor % one who delivers the possession or custody of the thing bailed $ailee % one who receives the custody or possession of the thing thus delivered. &'()# (he bailee in commodatum ac*uires the use of the thing loaned but &'( I(S +!I(S- if any compensation is to be paid by him who ac*uires the use, the contract ceases to be commodatum /rt. 01234- it becomes a lease contract. Wo is !i"#!e $or e%&e'ses i' ommod"tm* In a commodatum, the bailee has the obligation to pay the '5I&/Y expenses for the use and preservation of the thing loaned /rt. 01604 since he en7oys the use of the same. "ayment for )8(/'5I&/Y expenses arising from the actual use of the thing shall be borne by both the bailor and the bailee, even though the bailee acted without fault. )8C)"(I'&# Stipulation to the contrary Is te #"i!ee !i"#!e $or te deterior"tio' o$ te ti'+ !o"'ed* 9)&)/: !:)#&o. (he bailee does not answer for the deterioration of the thing loaned due to ordinary wear and tear and without his fault /rt. 01624. (he depreciation caused by the reasonable and natural use of the thing is borne by the bailor. )8C)"(I'&# /greement to the contrary We' m", " #"i!or #e m"de !i"#!e to &", d"m"+es $or 'o' idde' $!"s i' te ti'+* +;/&54 0. (hing has a +:/< or defect, =. +law is ;I55)&, 2. $ailor is /</) of such flaw, 6. $ailee is &'( aware thereof- bailor did not advise the latter of such flaw, and 3. $ailee suffers 5/>/9) by reason of said flaw or defect >I?/):/ +/&CI&) 5/@I5 :/9/5), =A/, =B0= "age 0
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Second part of the exam may involve answering whether a statement is “Correct or Incorrect,”
not true or false. You might be ased to state why the answer is not correct. !sually, this part is
right minus wrong. I compiled the answers from the blue boos of those who got really high
grades and I included my own answers.
I. LOAN
COMMODATUM
"arties#
$ailor % one who delivers the possession or custody of the thing bailed
$ailee % one who receives the custody or possession of the thing thus delivered.
&'()# (he bailee in commodatum ac*uires the use of the thing loaned but &'( I(S+!I(S- if any compensation is to be paid by him who ac*uires the use, the contract ceases to
be commodatum /rt. 01234- it becomes a lease contract.
Wo is !i"#!e $or e%&e'ses i' ommod"tm*
In a commodatum, the bailee has the obligation to pay the '5I&/Y expenses for the
use and preservation of the thing loaned /rt. 01604 since he en7oys the use of the same.
"ayment for )8(/'5I&/Y expenses arising from the actual use of the thing shall be
borne by both the bailor and the bailee, even though the bailee acted without fault.
)8C)"(I'&# Stipulation to the contrary
Is te #"i!ee !i"#!e $or te deterior"tio' o$ te ti'+ !o"'ed*
9)&)/: !:)# &o. (he bailee does not answer for the deterioration of the thing loaned
due to ordinary wear and tear and without his fault /rt. 01624. (he depreciation caused by the
reasonable and natural use of the thing is borne by the bailor.
)8C)"(I'&# /greement to the contrary
We' m", " #"i!or #e m"de !i"#!e to &", d"m"+es $or 'o' idde' $!"s i' te
ti'+* +;/&54
0. (hing has a +:/< or defect,
=. +law is ;I55)&,
2. $ailor is /</) of such flaw,
6. $ailee is &'( aware thereof- bailor did not advise the latter of such flaw, and
3. $ailee suffers 5/>/9) by reason of said flaw or defect
/rt. D3, CC. (he acts of ingratitude are as follows CI!r4#
0. If the bailee should C'>>I( some offenses against the person, honor or property of the
bailor, or of his wife or children under his "/,
=. If the bailee I>"!()S to the bailor any criminal offense or any act involving moral
turpitude, or
2. If the bailee !&5!:Y )+!S)S to the bailor support when the bailee is legally or morally
bound to give support to the bailor
MUTUUM
+ungible things % those which cannot be used without being consumed- hence,
consumable
Disti'+is mtm $rom ommod"tm.
C'>>'5/(!> >!(!!>'b7ect# &'&AC'&S!>/$:) >oney or other C'&S!>/$:) thing'wnership of the thing# )(/I&)5 by the
lenderEbailor
(/&S+))5 to the borrower
Cause# 9enerally 9/(!I('!S >ay be 9/(!I('!S or '&)'!S that is,
with stipulation to pay with interest4 (hing to be returned# )8/C( (;I&9 loaned )F!/: />'!&( of the same ind and *ualitySub7ectAmatter# /ny property real or
personal4
")S'&/: property
"urpose# !se or ()>"'/Y "'SS)SSI'& :oan for C'&S!>"(I'&
<hen to return# In case of urgent need andcommission of any acts of ingratitude, bailor
may demand the return of the thing loaned
$)+') the expiration of the term
:ender may &'( demand its return before thelapse of the term agreed upon
<ho bears ris of loss# $ailor owner4 5ebtorEbaileeEborrower suffers the loss even if
caused by fortuitous event and he is not
discharged from his duty to pay"urely personal in character &ot so
I$ "t "s !o"'ed is " $'+i#!e ti'+ oter t"' mo'e,1 "t does te de#tor oe*
If the thing loaned is not money, albeit consumable, the debtor owes another thing of
the same ind, *uantity and *uality, even if it should change in value. In case it is impossible to
deliver the same ind, its value at the time of the perfection of the loan shall be paid /rt.
0. ;otelAeepers and innAeepers, in offering their accommodations to the public,
practically volunteer as depositaries- as such, they should be sub7ect to an
extraordinary degree of responsibility. (ravelers have no choice but to rely on their good
faith and care.
=. InnAeepers, by the nature of their business, have supervision and control of their inns
and the premises thereof.
I4. WARE2OUSE
M", " "reosem"' re$se to de!i/er te +oods o' te +ro'd t"t e o's tem*
&o. Sec. 0D of the <arehouse eceipts :aw provides that
9)&)/: !:)# &o title or right to the possession of the goods, on the part of the
warehouseman shall excuse the warehouseman from liability from refusing to deliver the goods
according to the terms of the receipt.
)8C)"(I'&S# !nless such title or right is derived directly or indirectly from0. / transfer made by the depositor at the time or subse*uent to the deposit for storage,
or
=. +rom the warehousemanJs liens
W"t "re te "ts $or i " "reosem"' m", #e e!d !i"#!e* &IC) ">S4
0. +ailure to S(/>" “duplicate” on copies of a negotiable receipt Sec. D4
=. +ailure to ":/C) “nonAnegotiable” or “not negotiable” on a nonAnegotiable receipt Sec.
4
2. >IS5):I@)Y of goods Sec. 0B46. +ailure to )++)C( cancellation of the negotiable receipt upon delivery of the goods Sec.
004
3. ISS!I&9 receipt for nonAexisting goods or misdescribed goods Sec. =B4
D. +ailure to tae good C/) of the goods Sec. =04
. +ailure to give &'(IC) in case of sale of goods to satisfy his lien Sec. 224 or beucase
the goods are perishable or haardous Sec. 264
Disss te !i"#i!it, o$ te "reosem"' i' "se o$ !ost or destro,ed reei&ts.
(he court before ordering the delivery of the goods when the receipt is lost or destroyed
shall Sec. 064#
0. +irst pass upon the *uestion of whether the receipt has been lost or destroyed by
re*uiring
a. Satisfactory "''+ of such loss, and
b. 9iving of a $'&5 with sufficient sureties to protect the warehouseman from any
liability or expense, which he or any person in7ured by such delivery may incur
by reason of the original receipt remaining outstanding.
0. (he (I(:) over the goods covered by the receipt as against
a. (ransferor person negotiating the receipt4, and
b. 'wnerEdepositor person to whose order, by the terms of the receipt, the
goods were to be delivered4
=. If receipt is nonAnegotiable,
a. (he right to &'(I+Y the warehouseman of such transfer if the goods to him
b. ight to ac*uire the direct '$:I9/(I'& of the warehouseman to hold possession
of the goods for him, as if the warehouseman directly contracted with him
;'<)@), such rights of the transferee may be defeated if "a&4
0. "I' to notifying the warehouseman of the transfer, either by the transferee or the
transferor, the goods are /((/C;)5 or levied upon by the creditors of the transferor, or
=. (he warehouseman had been &'(I+I)5Mby the transferor or a subse*uent purchaser of
the goodsMof a subse*uent sale of the goods by the transferor.
Disss te "rr"'ties o$ " &erso' 'e+oti"ti'+ or tr"'s$erri'+ " reei&t.
/ person negotiating or transferring a receipt, including one who for value, assigns a claim
secured by a receipt, warrants that Sec. 66 A 9:I(4
0.4 (he receipt is 9)&!I&).
=.4 ;e has a :)9/: I9;( to negotiate or transfer it
2.4 ;e has no nowledge of any fact which would I>"/I the validity or worth of the receipt
6.4 ;e has a right to (/&S+) the title to the goods, and that the goods are merchantableor fit for a particular purpose, if such warranties can be implied, if the intention of the
parties was to transfer title over the goods without need of the receipt.
Disss te !i"#i!ities o$ " &erso' 'e+oti"ti'+ or tr"'s$erri'+ " reei&t.
It is the duty of every indorsee to now that all previous indorsements are genuine-
otherwise, he will not ac*uire a valid title to the instrument. (he last indorser warrants that all
previous indorsements are genuine. (he liability is limited only to a violation of the 6 warranties
set forth in Sec. 66. (hus, a person negotiating a receipt could be held liable, as when, for
example, the receipt was#
0. / forgery,
=. ;e had stolen it, or
2. ;e had nowledge that the receipt was invalid or that the goods had been damaged.
'ne who assigns for value a claim secured by a receipt of the title is also liable for the
violation of any of the four warranties enumerated, !&:)SS a contrary intention appears.
Does i'dorseme't o$ " reei&t m"e te i'dorser !i"#!e $or "', $"i!re o' te &"rt o$
te "reosem"' or &re/ios i'dorses to $!$i!! teir res&eti/e o#!i+"tio's* W, is
"' i'dorser o$ " reei&t 'ot " +"r"'tor*
(he <arehouse eceipts :aw expressly provides that a person who indorses a
negotiable receipt shall not be treated as a guarantor of the receipt. (he indorsement of a
warehouse receipt amounts merely to a C'&@)Y/&C) $Y (;) I&5'S), not a contract of
guarantee. It shall &'( mae the indorser liable for any failure on the part of the
warehouseman or previous indorsers on the receipt to fulfill their respective obligations Sec.
634.
Such indorser shall only be liable for the receipt if he breaches any of his warranties.
<ithout such breach, the holder of the receipt may not go against the indorser if the receipt is
subse*uently dishonored for other causes not covered by the warranties of the indorser. !nlie
a guarantor who is liable for the receipt if the person primarily liable does not perform his
obligation, an indorser is only liable if he breaches his warranties and provided he has beennotified by the holder of the dishonor of the receipt within a reasonable time.
4. 7UARANTY
Disti'+is +"r"'t, $rom sret,si&.
9!//&(Y S!)(YS;I":iability depends on an independent
agreement to pay the obligation if primary
debtor fails to do so
Surety assumes liability as regular party to the
undertaing
Collateral undertaing Surety is an original promisor9uarantor is secondarily liable Surety is primarily liable9uarantor binds himself to pay if the principal
C/&&'( pay
Surety undertaes to pay if the principal 5')S
&'( payInsurer of solvency of debtor Insurer of the debt9uarantor can avail the benefit of excussion
and division in case creditor proceeds against
him
Surety cannot avail of the benefit of excussion
and division
&ot bound to tae notice of the nonA
performance of his principal
;eld to now every default of his principal
'ften discharged by the mere indulgence of
the creditor or want of notice of default
&ot discharged by the mere indulgence of the
creditor or by want of notice of default
W, is " sret, o'sidered "' i'srer o$ te de#t*
/ surety is considered an insurer of the debt because he is "I>/I:Y /&5 5I)C(:Y
:I/$:) (' (;) C)5I('. ;e undertaes to pay the debt without any *ualification. ;e does
not insure the solvency of the principal debtor- rather, he insures that the debt shall be paid if
and when the creditor demands it from him. ;e is, in other words, a regular party to the
undertaing. (he creditor need not go against the principal debtor before going against the
surety. ;e is not even discharged by the indulgence of the creditor.
Disss te '"tre o$ te sret,6s 'dert"i'+. Does te sret, m"e o/e'"'t it
te &ri'i&"! de#tor* &o. Is e e'tit!ed to 'otie o$ &ri'i&"!6s de#tor6s de$"!t* &o.
2o so!d " sret,si& o'tr"t #e o'stred*
/ suretyJs undertaing is a primary and solidary undertaing. ;e is an original party to
the agreement, and hence, a principal obligor. (he surety undertaes that the obligation shall
be fulfilled, and that the creditor may go against him immediately for the fulfillment of such
obligation. (he suretyJs covenant is with the creditor and not with the principal debtor,
although an indemnity agreement could be entered into between the surety and the principal
debtor to fix their respective rights and obligations with each other. In the absence of any
stipulation, a surety is generally not entitled to a notice of the principal debtorJs default. /ssurety, it is his duty to see to it that the obligation is fulfilled by the principal debtor, or by
himself. ?nowledge of the principal debtorJs default is charged upon the surety, who must
immediately tae steps to ensure the fulfillment of the obligation.
/ contract of suretyship, if it is 9/(!I('!S, shall be constructed strictissimi juris
against the creditor and in favor of the surety where ambiguities are present. It should not be
construed as to expand the suretyJs liability for more than what is manifestly expressed. (he
rule of strictissimi juris commonly refers to an accommodation surety. (he rationale is that an
accommodation surety acts gratuitously and should be protected against un7ust pecuniary
impoverishment.
If the contract of surety is '&)'!S or one for compensation, such rule does not apply.Compensated surety agreements are construed against the surety company, as they are the
ones who drafted the agreement. (he rule of strictissimi juris does not apply to such onerous
surety contracts, especially if it would unduly and un7ustly give benefit to the surety company
to the detriment of the principal debtor or the creditor. Such companies are already protected
by subAsureties and subAguaranties.
Is te +"r"'tor6s !i"#i!it, !imited o'!, to te &ri'i&"! o#!i+"tio'*
&o. /rt =B33.
0. +or definite guaranty, the obligation is limited in whole or in part to the principal debt, to
the exclusion of the accessories.
=. +or simple or indefinite guaranty % if the terms of the contract of guaranty are general
and indefinite and do not specify in clear and express manner that the liability of the
guarantor is limited to the principal obligation, in whole or part,
It extends not only to the said the principal obligation but also all its accessories,
a. (hey are being comprehended within the principal because the guaranty has
secured it wilt all its conse*uences
b. "'@I5)5, with respect to 7udicial costs, the guarantor shall only be liable for
those costs incurred after he has been 7udicially re*uired to pay
W"t is te $orm o$ +"r"'t,* W"t &er$orm"'e does te +"r"'t, sere*
/ guaranty is not presumed- it must be express and cannot extend to more than what is
stipulated therein /rt. =B334. It falls under the Statute of +rauds- hence, it must be reduced in
writing and subscribed by the party charged, otherwise, it is unenforceable.
/ guaranty cannot exist without a valid obligation. &evertheless, it may be constituted
to guarantee the performance of /rt. =B3= A @!&4
0. @'I5/$:) contracts /rt. 021B# vitiated consent or incapacitated contracting party- may
be ratified- binding until annulled4 inasmuch as such is binding, unless it is annulled by
a proper action in court=. !&)&+'C)/$:) contracts /rt. 06B2# acts of agent without "Js authority, Statute of
+rauds, etc- ratifiable4 because such contract is not void
2. &/(!/: '$:I9/(I'&S /rt. 06=2# not based on positive law but on e*uity and natural
law- do not grant a right of action to enforce their performance, but after voluntary
fulfillment by the obligor, they authorie the retention of what has been delivered or
rendered by reason thereof4
a. ationale# So that the creditor may proceed against the guarantor although he
has no right of action against the principal debtor for the reason that the latterJs
obligation is not enforceable
b. If the debtor himself offers a guaranty for his natural obligation, he impliedlyrecognies his liability, thereby transforming the obligation from natural into a
civil one civil obligations give a right of action to compel their performance
K/rt. 06=2L4.
We' m", te +"r"'tor &roeed "+"i'st te &ri'i&"! de#tor e/e' #e$ore "/i'+
&"id te de#t*
(his is allowed when such right is expressly stipulated in the agreement between the
guarantor and the debtor. /rt. =B0 of the Civil Code also provides for seven instances when
the guarantor may proceed against the debtor even before payment. (he purpose is to enable
the guarantor to tae measures to protect his interest in view of the probability that he would
be called upon to pay the debt. SI:I5$/4
0. If he is S!)5 for payment
=. I&S':@)&CY of the principal debtor
2. <hen he has $'!&5 himself to relieve him from the guaranty within a specified period,
(he benefit of excussion is the right in which the guarantor cannot be compelled to pay
the creditor, !&:)SS
0. Creditor has exhausted all the properties of the principal debtor, and
=. esorted to all of the legal remedies against such debtor.
;ow exercised#
0. 5emand for payment upon the guarantor only /+() 7udgment upon the debt
=. "oint out the available property not in litigation or encumbered4 of the debtor <I(;I&
the "hilippines
(he benefit cannot begin to tae place before 7udgment has been obtained against the
debtor ($alon - &A)+ (he creditor shall suffer the loss if he failed to exhaust and resort to alllegal remedies, but the loss is only to the extent of the value of said property of the insolvency
of the debtor.
W"t "re te e%e&tio's to te #e'e$it o$ e%ssio'* +" /I&S, SH
I. /(. =B31. In the following cases, the guarantor is &'( entitled to the benefit of
excussion /I&S4#
0. If the guarantor expressly )&'!C&)5 it waiver4
a. (he benefit of excussion is a personal right- hence, its waiver is validb. Such waiver should be made in express terms
=. If he has bound himself S':I5/I:Y with the debtor
a. ;e becomes a surety with primary liability as a solidary coAdebtor
b. In effect, he renounces in the contract itself the benefit of excussion
2. I&S':@)&CY of debtor
a. (he liability of the guarantor arises as the debtor cannot fulfill his obligation
b. Insolvency must be actual, proven by unsatisfied writ of execution
6. <hen he has /$S'C&5)5 or cannot be sued within the "hilippines, !&:)SS he has left
a manager or representative
a. If the debtor absconded or left the country, he cannot fulfill his obligation
b. Creditor cannot be expected to go after a debtor who is in hiding
3. If it may be presumed that an execution on the property of the principal debtor would
&'( be sufficient to satisfy the obligation
a. &ot necessary that he debtor be 7udicially declared insolvent or banrupt
b. If the creditor wants to hold the guarantor liable, he must resort to all legal
remedies against the debtor and exhaust his properties