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Reviewer in Credit TransactionsArticle Keywords Requisites Exceptions Notes
1933 2 types of loan
Commodatum:1. delivery of non-consumablething2. such will be used byanother3. within a specified period oftime4. after which, the sameshould be returned.
Mutuum/Simple Loan:1. delivery of consumablething2. upon the condition that thesame amount, of the samekind shall be returned.
Credit - belief or trust in another person'sability to comply with an obligation.
Credit Transactions -contracts/agreements based on this trustor belief.
Two types of Loan:CommodatumMutuum
Difference Commodatum Simple Loan
Return of thing Same thing must be returned Same amount will be returned
Nature Essentially gratuitous May be gratuitous or with stipulation to pay
Ownership Ownership is retained in the bailor Ownership is passed to the borrower
Properties Included May include real or personal property Refers only to personal property
Other terms "contract of temporary possession" "contract for consumption"
Person who bears the loss lender bears the risk of loss borrower who bears the risk of loss
When is returnGenerally, return is at the end of the period, but may be
demanded to be returned before itReturn of thing is always after the period
Character Personal in character Not personal in character
Consumable Non-consumable
depends on the nature of the thing1. movable2. cannot be used in a manner for it was intended withoutbeing consumed
1. movable
2. may be used in the manner for which it was intended without beingconsumed
Fungible Non-fungible
depends on the intention of theparties
intention is to allow substitutionintention is not to allow substitution
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1934Perfection of commodatum orsimple loan
The contract of commodatumor simple loan shall only be
perfected upon the delivery ofthe object of the obligation
An accepted promise to deliver an objectby way of commodatum or mutuum isbinding upon the parties.
Contract of loans are real contracts(perfected by delivery)
Delivery is an essential element
COMMODATUM
NATURE OF COMMODATUM (1935-1940)
1935
Bailee shall acquire the use ofthe thing BUT not its fruits
If any compensation is to bepaid by him who acquires theuse, the same shall cease tobe a commodatum
Features of a commodatum: RPGP1. real (perfected by delivery)2. principal (it can stand alone)3. gratuitous (otherwise, the contract oflease)4. personal in nature (trust)
The contract of commodatum onlytransfers the object for use (jus utendi)
1936Consumable goods may bethe subject of a contract of acommodatum
Provided that the purpose ofthe contract is not the
consumption of the object orwhen it merely for exhibition
Subject matter of commodatum isusually non-consumable for the purposeof the contract is for the same thing to bereturned.
1937Movables or immovables maybe the subject of acommodatum
1938The bailor of the thing neednot be the owner of the thingloaned
Because ownership is not transferred
1939Contract of commodatum ispurely personal
Exception to par.2:However, the members of thebailee's household may make
use of the thing loaned
Exception to the aboveexception:
contrary stipulationnature of the thing forbids its
use
1. death of either the bailee or the bailorextinguishes the obligation
2. the bailee cannot lend nor lease thething loaned to a third person.
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1940There may be a stipulationthat the bailee may make useof the fruits of the thing
General Rule: The bailee only has theright to use the thing loaned, not i tsfruits (Art. 1935)
Exception: A stipulation to that effect (Art.1940)
OBLIGATIONS OF THE BAILEE (1941-1945)
1941The obligation to pay forordinary expenses for thepreservation of the thing
The bailee is obliged to pay for ordinaryexpenses for the preservation of the thingloaned.
Reason:because the bailee will thereturn the same thing; he is also obligedto take care of the thing loaned with thediligence of a good father of the family
1942The obligation to bear theloss of the thing even if it isthrough fortuitous event
1. the thing has been used fora different purpose for which
it was intended
2. it was retained by thebailee longer than the periodstipulated or after theaccomplishment of the reasonof commodatum
3. it was delivered withappraisal, except when thereis a stipulation that the baileewill be excused in case of FE
4. if he leases or lends it to
third person not a meber ofhis household
5. if, being able to save eitherthe thing borrowed or his ownthing, he chooses to save hisown
General Rule: The bailee, since therewas no transfer of ownership, does notbear the loss in fortuitous event (or anyother risks)
Exception: Art. 1942
1. bad faith or abuse2. default3. giving of appraisal only means to makethe bailee answer for loss
4. prohibited by law; violation of personalcharacter of contract5. act of ingratitude
1943Non-liability in case ofdeterioration without fault
The bailee shall not be liable for anydeterioration of the thing due to the usethereof without his fault.
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1944
Bailee do not have the right toretain the thing loaned byreason that the bailor oweshim something even if it be byreason of expenses
Bailee has the right ofretention in Art 1951
1945 Presumption of solidarity
When there are 2 or more
bailees in the same contractof commodatum
OBLIGATIONS OF THE BAILOR (1946-1951)
1946
Bailor cannot demand for thereturn of the thing loaned untilafter the expiration of theperiod agreed
If the bailor should have anurgent need to use the thingloaned, he may demand thereturn of the thing loaned
In case of temporary use by the bailor,the contract of commodatum shall besuspended while the thing is in thepossession of the bailor
General Rule: bailor cannot demand thereturn of the thing loaned before theexpiration of the period stipulated
Exception: when urgently needed by thebailor
Effect: the contract of commodatum shallbe suspended
1947Bailor may demand for thething at will: PRECARIUM
2 types of precarium:
1. neither the duration nor theuse of the thing used wasstipulated
2. the use of the thing is
merely tolerated by the owner
Precarium: special form of commodatum.The possession of the borrower isprecarious and dependent on thelender's will
1948
The bailor may demand theimmediate return of the baileeincase of acts of ingratitude(Art. 765)
Effect of ingratitude: immediate return
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1949
The bailor should reimburseany expenses forextraordinary expenses
If the extraordinary expensesarise from the ordinary useof the thing, it shall be borne
equally of the bailor andbailee
Proviso of par. 1:That the expenses forpreservation shall be broughtto the attention of the bailorbefore incurring them
Exception:
when urgent that the reply tothe notification cannot beawaited without delay
General Rule: expenses for extraordinaryuse shall be borne by the bailor becauseit is he who has profited by the saidexpenses
1950
If for the purpose of makinguse of the thing, the baileeincurs expenses not specifiedin the code, he shall not bereimbursed
1951
The bailor, knowing the flawsof the thing loaned, does notadvise the bailee of such,shall be liable for damages
1. bailor knows of the defect2. the defect is hidden3. does not advise the baileeof such4. damage has been incurredby bailee because of suchdamage
Liability for damages
Right of retention: exception to thegeneral rule of bailee not having the rightof retention
1952
The bailor cannot exempthimself from paying theexpenses or damages byabandoning the thing loaned
Reason: the thing borrowed might belesser than the value of thedamages/expenses
SIMPLE LOAN OR MUTUUM
1953Ownership is passed in thecontract of mutuum
A person who receives a loan of moneyor any other fungible things acquires theownership thereof, and is bound to paythe creditor an equal amount in the samekind and quality
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1954 Definition of Barter
A person receiving the ownership of anon-fungible thing and the other havingthe obligation to pay the equivalent withthe same kind and quality
Non-fungible does not mean non-consumable
1955
Obligation of person whoborrows money
Obligation of person whoborrows another thing
1) shall be to pay the exactamount
2) shall be to return the samekind, quantity and quality
If not able to return (2), thenits value on the time of theperfectionof the contractshall be paid
1956No interest is due unlessexpressly stipulated in thecontract
2 types of interest:Compensation for the use of MoneyCompensatory Damages (occurs duringdefault) - interest not to serve for usage
of money, but as penalty or damages forthe breach of contractual obligations.
1957Contracts and stipulationsdesigned to circumvent thelaw on Usury shall be void
Usury:
1. there must beloan/forbearance2. understanding that theamount should be paid3. interest is greater thanwhat the law requires4. corrupt intent
1958In the determination ofinterest, if it is payable in kind
value is determined by the TIME &PLACE of PAYMENT
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1959Interest due and unpaid shallnot earn interest.
the contracting parties maystipulate that the interest due& unpaid, added as principal,shall earn new interest:compound interest
Compounded interest mustbe expressly stipulated
General Rule on interest: Interest dueand unpaid shall not earn interest
Exception:1. contrary stipulation2. judicial demand
Compound interest is not usurious sincethis is not an interest of the originalprincipal amount
1960If the person pays interestwithout there has nostipulation to that effect
rules on solution indebitior on naturalobligations shall apply
1961Usurious contracts shall begoverned by the Usury Law
provided they are notinconsistent with theprovisions of the civil code
1962 Definition of Deposit
1. receives a thing belongingto another
2. safely keeps it3. returns the same
if safekeeping is not principalpurpose
Characteristics:1. real contract - perfected by delivery2. unilateral - when gratutitous; bilateral -when for compensation
1963Agreement for deposit is
binding; but deposit isperfected upon delivery
1964Deposit is consituted judicially
or extrajudicially
Kinds of Deposit:
1. Judicial - takes place when attahcmentor seizure of property in litagation isordered2. Extrajudicial(a) voluntary - by will of parties(b) necessary - in compliance with law;on occasion of calamity; travelers inhotels, inns; common carriers
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1965 Deposit is gratuitous
1. when there is agreement tocontrary
2. depositary is engaged inbusiness of storing goods
Another exception :3. when property is saved fromdestruction without knowledge of owner
1966Only movable things may be
object of deposit
Exception:1. judicial deposit (Art. 2005-2006) as itmay cver movable and immovableproperties
Why movable only?Because the possibility that the thing maydisappear or may be lost or stolen is notpresent in real property. Movables can belost or stolenl that is why they needsafekeeping.
1967 Extrajudicial deposit is eithervoluntary or necessary
Article Keyword Requisites/Elements Exceptions Notes
1968
Voluntary Deposit: delivery
is made by WILL ofdepositor
Deposit may be made by 2or more persons
In a voluntary deposit, there is completefreedom in choosing depositary.
One of the two depositors, is NOT theowner.Interpleader - action to compel depositorsto settle conflicting claims.
1969Form of deposit: orally or inwriting
No formalities required - except DELIVERY
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1970Depositary is capacitated;depositor is incapacitated
Depositary is:a. subject to all obligations of depositaryb. can be compelled to return thing
Who can compel to return:1. guardian of depositor2. administrator of depositor3. depositor himself (when he acquirescapacity)
1971Depositary is incapacitated;depositor is capacitated
Depositary is NOT subject to obligations ofdepositary but must:
a. return the hingb. pay for amount by which he hasbenefited
Depositor may bring an action for recoveryagainst third person who acquired thing inbad faith.
1972Obligations to keep andreturn
1. keep safely2. return when required by:a. depositorb. a's heirs and successors
c. person deisgnated in contract
Degree of care - same diligence as hewould exercise over his property
Rules in liability of depositary:1. if loss occurs thru his fault or negligence- LIABLE (Art.1170)2. if loss of thing while in his possession -
presumption of fault (Art.1265)3. if deposit is for compensation, degree ofcare is greater
1973Depositary cannot depositthing to third person
(1) stipulation to contrary(2) if allowed by depositor(3) 3rd person not manifestly carelessor unfit
Depositor is LIABLE:a. deposits with third person withoutauthority (w or w/o negligence)b. deposits with third person who ismanifestly careless or unfit althoughauthorizedc. thing is lost thru negligence of hisemployees (whether careless or not)
Depositor is NOT LIABLE:
a. deposits with authority to third personwho is not negligent, manifestly careless orunfit
1974 Depositary can change wayof deposit
1. notify depositor2. wait for depositor's decisions
delay would cause dangerGeneral Rule: Depository cannot changeway of deposit.
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1975
Depository to collect interestof choses in action topreserve their value and
rights
CHOSES in action (such as:certificates, bonds, securities, instruments
that earns interest)
rent of safety deposit boxes
CA Agro Industrial Devt. Corp v CA (1993)Rent of safety deposit box:1. is not an ordinary contract of lease2. considered as a deposit because ofBanking Act but is essential a LEASEbecause the depositary has no full controlor use over the thing.
1976
Depositary not tocommingle things;depositors ownproportionate interest
grain or articles must be of same KINDand QUALITY
stipulation to contrary
1977Depositary not to make useof thing
1. express permission2. preservation of thing requires itsuse
1978When depositary haspermission to use, contract
not a deposit
becomes LOAN or COMMODATUM
permission must be proved
safekeeping is still principal purpose(irregular deposit)
Effect if permission to use is given:1. thing deposited is non-consumable -COMMODATUM2. thing deposited is consumable/ money -MUTUUM / LOAN / IRREGULARDEPOSIT
1979When depositary is liable forloss during fortuitous event
1. if stipulated2. uses the thing without depositor'spermission3. delays return4. allows others to use it
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1980fixed, savings and currentdeposits governed byprovisions on simple loan
1981Depositary's obligationwhen thing deliveredisclosed and sealed
1. return thing in same condition2. pay for damages if seal or lock is
broken through his fault3. keep secret the deposit if seal or lock isbroken
fault of depositary is presumed
1982Depositary presumedauthorized to open lockedbox or recptacle
1. key is delivered to him2. instructions of depositor cannot beexecuted without opening of box orreceptacle
1983Depositary must return thingwith all products,accessories and accessions
depositor is or represents the owner ofthing
products, accessories and accessions areconsequences of ownership
1984Depositary cannot demanddepositor to proveownership
he must advise true owner of deposit,if depostary discovers:
1. that thing is stolen2. true owner
depositary can return thing if:he has reasonable grounds to believe itwas unlawfully acquired
if owner does not claim within onemonth, depositor relieve ofreponsibility to return to depositor
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1985 Two or more depositors
if NOT solidary, thing is DIVISIBLE -cannot demand more than his share
if SOLIDARY, thing is INDIVISIBLE - Arts1212, 1214 governs
if with stipulation to return to one ofdepositors - return to person designated
Art. 1212 - each one of solidary depositorsmay do anything useful but not anythingprejudicial to othersArt. 1214 - may return to any one ofdepositor unless demand for its return ismade by one of them
1986Depositor loses capacity tocontract after deposit - thingcannot be returned
to persons who may haveadminstration of his property or rights
1987 Place of return
A. if place was designated - return to suchplaceB. if place not designated - return to placewhere deposited thing is
B. malice on part of depositarytransportation expenses is borne bydepositor
1988 Time of return must be returned upon DEMANDThis provision shall not apply:1. judicially attached2. opposition of a third party
1989Depositary's right to returnthing deposited
has right to return even before t imedesignated:1. deposit is gratuitous2. for justifiable reasons
if depositor refuse to receive,CONSIGNATION
deposit is for valuable consideration
1990
Depositary loss thing byforce majeure or
government order
if he receives another thing in its place, he
has to deliver sum or thing to depositor
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1991Depositary's heir has soldthing in good faith
1. bound to return price he received2. assign right of action against buyer
1992Depositor reimburse forexpenses for preservation
deposit must be gratuitous
expenses - necessary ordinary /extraordinary expenses
deposit for compensation - expenses forpreservation are borne by depositarybecause included in compensation
1993Depositor reimburse for lossarising from character ofthing
1. depositor not aware of or notexpected to know dangeoruscharacter of thing2. depositary is notified of thedangerous character of thing3. depositary was aware of thedangerous character of thing
1994Depositary may retain inpledge until full payment
1995 Extinguishment of deposit Causes:1. loss or destruction of thing2. upon death of depositor or depositary(gratuitous contract)
other modes of extinguishment:1. return
2. novation3. merger4. expiration of term5. fulfillment of resolutory condition
1996 Necessary Deposit1. in compliance with legal obligation2. occasion of calamity
1997what governs necessarydeposit
provisions of law establishing necessary
deposits; in case of deficienct rules ofvoluntary deposit
Voluntary Deposit v Necessary Deposit:1. voluntary - made by free will ofdepositor; necessary - free will is absent2. necessary deposits - Art. 1996, 1997,1998, 1754
a. travellers in hotels and innsb. passengers in common carriers
Examples of Necessary Deposit:1. judicial deposit of a thing who'spossession is disputed in a litigation2. ususfructuary does not give propersecurity for conservation3. deposit of thing pledge when creditoruses it without authority of owner4. required suits by ROC5. constituted guarantee contracts withgovernment
Deposit created by accident or fortuitous
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event - involuntary deposit or bailment;must have CAUSAL relatrion betweencalamity and constitution of deposit
1998
Responsibility of keepers ofhotels and inns
1. notice to keepers of hotels and inns2. depositor or guest took precautionsprescribed for things' safe keeping.
1999Liability of keepers foranimals, vehicles andarticles should be placed in anneexes of the hotel
2000Additional liability for loss orinjury of guests' personal
property
caused by:1. employees
2. strangers force majeure
Hotel Keeper - LIABLE:1. loss or injury to personal property ofguests caused by employees andstrangers (notice and proper precautionstaken)
2. loss is act of thief or robber without useof arms or irresistible force
Hotel Keeper - NOT LIABLE1. loss or injury due to force majeure2. loss due to acts of guests, his family,servants, visitors3. loss arises from character of thingsbrought into the hotel
2001
Act of thief or robber is notforce majeure
done with:1. use of arms; or2. irresistible force
Article/Section
Keywords Requisites/Elements Exceptions Notes
2002 Non-liability of hotelkeeper
in case of loss
If loss is:
1) Due to actsof the guess, hisfamily, servants or visitors
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2) Arises characterof the thingbought into the hotel
2003 Stipulation to non-liability:VOID/ Exemption orDiminution of Liability
Not exonerated from liabilities even ifhotelkeeper:
1) Post notice to effect that he is notliable for article brought by theguest
2) Insert any stipulations betweenhim and the guest thatdiminishes the responsibility inArt. 1998-2001 (VOID)
Reason:Such stipulations are deemed contrary toLAW, MORALS, and PUBLIC ORDER ORPOLICY
2004 The RIGHT of thehotelkeeper to RETAIN
1) Hotelkeeper retains the thingsbrought by guest
2) As security for credits on accountof lodging, and supplies usuallyfurnished to guest
See:Arts. 2121-2122 on PledgesArts: 1944, 1951: The bailee incommodatum may likewise retain thething loaned for damages by reason ofdefects thereof.Art. 315: The act of obtaining food oraccommodation in a hotel or inn withoutpaying therefor constitutes Estafa.
2005 When judicial deposit takesplace
When:1) Attachment or;
2) Seizure of property in litigation isORDERED by the COURT
The thing is in custody of the law onlywhen:
1)The thing is LAWWFULLY seized2) Placed in possession of a Public
Officer
Escrow- a written instrument w/c by itsterms imports a legal obligation and w/c is
deposited by the grantor, promisor, orobligor, or his agent w a stranger or 3
rd
party, to be kept by the deposit until theperformance of a condition or thehappening of a certain event, and then tobe delivered over to the grantee, promise,or obligee
2006 Things SUBJECT tosequestration
1) Movables2) Immovables
2007 Responsibility of theDepositary
The Depositary is relieved of his liabilitywhen:
1) The controversy which gives risethereto ends
2) Court orders2008 Degree of depositary His obligation to care of the property with
the diligence of a good father of a family
Warehouse Receipt Law1 Who May Issue ONLY a WAREHOUSEMAN can issue RECEIPT If duly authorized by the
warehouseman:1) Officer2) Agent
Warehouse-the building or place wheregoods are deposited and stored for profit
2 Form of receipts;Essential term
Every receipt must embody in its written or printed terms:a) Location of the warehouseb) Date of issue of the receiptc) Consecutive number of the receiptd) Person to whom goods are deliverable
e) Rate of storage chargesf) Description of goods or packages
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g) Signature of the warehousemanh) Warehousemans ownership of or interest in goodsi) Statements of advances made and liabilities incurred
3 What terms may beinserted
1) Warehouseman issues a receipt2) Inserts any other terms and conditions
Terms and conditionsvalid unless:1) Contrary to provisions
of this act2) Impair the obligation to
exercise the degree ofcare in thesafekeeping of thegoods entrusted to thewarehouse-man
4 Definition of non-negotiable receipt
A non negotiable receipt is a receipt in w/c it is stated that the goodsreceived will be:1) delivered to the depositor or;2) any specified person
5 Definition ofNegotiable receipt
A negotiable receipt is a receipt in w/c it is stated that the goodsreceived will be:1) delivered to the bearer or;2) to the order of any person named in such a receipt
When a provision isinserted in a negotiablereceipt that is non-negotiable such provisionis VOID
A warehouse receipt is in no sense anegotiable instrument because it does notcomply with Sec 1(b) of Act. No. 2031Negotiable Instrument Law w/c requiresan unconditional promise or order to pay asum certain in money
6 Duplicate Receiptsmust be marked
Paragraph 11) More than one receipt is issued for the same goods2) The word dupl icateshall be plainly placed on the face of the
receiptParagraph 21) Fails to place word duplicate2) Warehouseman is liable for all the damages3) That there be a subsequent purchaser for value who suppose it
to be the original
Par.1The first receipt issued(original)Par. 2WM still liable eventhough the purchase isafter the delivery of thegoods of the WM to theholder of the original
7 Failure to mark notnegotiable
WM:Shall plainly place non-negotiable or not negotiable upon a non-negotiable receipt
Failure to do so:The holder who purchased it for value supposing it to be negotiablemay impose upon the WM the same liabilities he would have if thereceipt was negotiable
Not applicable to:LettersMemoranda
Written acknowledgementof an informal character
Constructions:Liberal construction in favor of the bonafide holder
8 Obligation to deliver WHs obligation:1) To deliver the good upon demand by the holder of receipt or
depositorHolder/Depositors Obligation:1) Offer to satisfy the WM lien2) Offer to surrender receipt, with endorsements3) Readiness and willingness to sign, when goods are delivered,
acknowledge that the goods have been delivered if requestedby the warehouseman
In case of failure to deliverupon demand:WM should carry theburden to establish thatthe delay was because ofthe existence of a lawfulexcuse for refusal
Applicable only to Negotiable receipt
9 Justification in WM is justified if goods were delivered to:
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delivering 1) Person lawfully entitled to posses of the goods, or his agent2) Person entitled to delivery under a non-negotiable receipt with
written authority3) Person in possession of the negotiable receipt
10 Liability forMisdelivery
WM delivers the good to ones who are not lawfully entitled to thepossession of them; those provided in 2 and 3 above.He is liable:1)Similar to a bank paying a forged check2)For Conversion
Though he delivered thegoods as authorized by(b) and (c) of Sec 9 he stillis liable if:a)been requested, by orbehalf of the personlawfully entitled to a rightof property or possession Ithe goods, not to deliverb)he had information thatthe delivery about to bemade was one not lawfullyentitled to the possessionof the goods
11 Cancellation ofnegotiable receiptswhen whole isdelivered
If WM fails to take up or cancel the negotiable receipt issued by him,he shall be liable for failure to deliver the goods to any one whopurchases for value in good faith such receipt regardless whethersuch purchaser acquired title before or after the delivery of goods
Except as provided inSec. 36
12 Cancellation or
marking of negotiablewhen partiallydelivered
Where parts of goods have been delivered by WM, his failure to
take up and cancel such receipt or place plainly upon it a statementof what goods have been delivered,He is liable to purchaser for value in good faith for failure to deliver
Except as provided in
Sec. 36
13 Altered receipts No excused from liability if alterations are:a)immaterialb)authorizedc)made without fraudulent intent
Purchaser for value w/o notice of the alteration shall have rightsagainst WM he would have acquired had the receipt not beenaltered
If authorized:WM is liable according toterms of receipt as alteredIf unauthorized but w/ofraud:WM is liable according toterms as they were before
Material and fraudulentalteration:
WM is NOT excused fromliability according to theoriginal terms of receiptBUT excuses him fromliabilities to person whoaltered and to those whotook notice
14 Lost or DestroyedReceipts
Negotiable receipt is lost or destroyed.
The court may order delivery of the goods upon 1)satisfactory proofof such loss and destruction2)giving bond by the holder w/ sufficient sureties
WM is not excused topersons to whom thereceipt has beennegotiated for value andhave no notice of the
proceedings or delivery
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goods
15 Duplicate receiptseffect
WM warrants:1)the duplicate is an accurate copy of the original receipt2)such original receipt is uncancelled at the date of the issue of theduplicate
Imposes no other liability on the WM
Except for breach ofwarranty by the WM
16 No title or right ofwarehouseman
WM has no title or right to the goods Unless:1)Derives directly orindirectly the title fromtransfer made by thedepositor at the time ofthe deposit2)from WM lienWM is excused fromliability for refusing todeliver the goodsaccording to terms ofreceipt
17 Interpleader ofadverse claims
If more than 1 person claims the title or possession of goods,WM may require claimants to interplead.WM may use this as
1)Defense against his non delivery2)As original suit
18 Reasonable time todetermine validity ofclaims
WM is excused from liabilities in refusing to deliver until he hasreasonable time to ascertain validity of the adverse claim, bringlegal proceeding or after interpleader if:1)someone other than depositor claims title to possession of thegoods and2)WM has information to such claim
19 Adverse title not adefense
Warehouseman cannot set up the defense of the right and title ofthe third person for his failure to deliver the goods
Except provided in 17 and18 and Sec. 36
20 Liability ofWarehouseman fornon existence or
misdescription ofgoods
WM is liable to holder of a receipt for damages in case of nonexistence of goods or by his failure to correspond the description ofthe goods in the receipt
Not applicable whengoods are:1)described by statement
of marks or labels2)packages containingthem3)statement that goodsare goods of a certain kind4)words of like import
21 Liability for care ofgoods
WM shall exercise the care as a reasonable careful owner of thegoods
Not liable in the absenceof agreements when lossand injury could not havebeen avoided despite thedegree of care
22 Goods must be keptSEPARATE
WM shall keep the goods separate as to permit at all times theidentification and redelivery of the goods deposited
23 Fungible goodsmaybe comingled of
If authorized by agreement or custom:WM may mingle fungible goods with others of the same kind and
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WM is authorized grade.
Depositors will be 1)co-owners of the entire mass 2)entitled to eachportion as deposited
24 Liability of WM todepositors ofcommingled goods
WM is SEVERALLY liable to the each depositor for the care andredelivery of his share in the mass to the extent like the good werekept separately
25 Attachment or levyupon goods for whicha negotiable receipthas been issued
Goods after delivery to WM cannot be 1)attached by garnishment or2)levied upon under an execution
WM cannot be compelled to deliver up the actual possession ofgoods
Unless:1)Receipt was firstsurrendered to WM2)negotiation is enjoined
26 Creditors remedies toreach negotiablereceipts
Creditor may seek the help of the court to satisfy his claims againsthis debtor if his debtor is the owner of the goods deposited
27 Claims included inWM lien
Subject to Sec. 33WM has lien on the goods for:1)lawful charges for storage and preservation of goods2)lawful claims for money advanced, interest, insurance,transportation, labor, weighing, cooperating and other charges andexpenses in relation to such goods3)reasonable charges for notice and advertisements of sale and for
sale of the goods where default had been made in satisfying the lien
Sec28
Against what property the lien may be enforced1. All goods deposited by debtor2. Goods stored in fraud of true owner's rights3. Goods of persons stored by the depositor who isliable to the WHM as debtor with authority to make avalid pledge
WRL = Warehouse Receipts LawWHM - WarehousemanWHR = Warehouse Receipt
Sec
29
How a WHM may lose his lien:
1. surrendering possession2. refusing to deliver goods when demand is madewith which he is bound to comply under this act
See notes for the valid reasons for
the refusal of the WHM to deliverthe goods
Valid reasons for refusing delivery of
goods:1. holder of receipt does not comply withSec 8 (satisfy WHM lien, surrenderreceipt, acknowledgement that the goodshave been delivered)2. that the WHM has legal title in himself3. WHM has legally set up the title aslawful defense4. WHM has lien valid against thedepositor5. failure was not due to WHM (fire,earthquake, theft, robbery)
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Sec30
A negotiable receipt MUST state charges for whichthe lien is claimed
Charges must be stated inaccordance to Sec 27. The lienexists only in so far as the othercharges EXPRESSLY stated
Except charges for storageand preservation of goods
If claims are not specified, the WHMshares PRO RATA with other creditorsthe balance of the claims
Sec31
WHM may REFUSE delivery until lien is satisfied Please note that by delivery, the WHMloses his lien
Sec32
WHM lien is not the only remedy nor it bars any otherremedies for satisfaction of the lien
WHM is entitled to all remedies allowedby law to a creditor against a debtor incollecting the lien
Sec33
A WHM lien may be satisfied thru sale of goods of thedepositor
A written notice must be sent tothe depositor containing thefollowing:1. ITEMIZED STATEMENT of theWHM claim2. DESCRIPTION of goodsagainst which the claim exists
3. A DEMAND of the amount ofthe claim which is to be paid on aDATE mentioned4. A STATEMENT that if the claimis NOT PAID, the goods will beadvertised for sale at a publicauction at a specific date and time
Notice of auction is to be published atleast once a week for two weeks
WHM may charge for the notice,advertisement of the sale from theproceeds thereof
Sec34
If there exists a lien on goods which perishable,leakage, noxious, explosive, liable to injure otherproperty, WHM may DISPOSE of said goods inaccord to Sec 33
SAME AS SEC 33 Sale maybe made publicly or privately(NOT NECESSARILY IN AN AUCTION)
Sec35
If the proceeds of the sale is insufficient to satisfy thelien, WHM is STILL entitled for the balance against thedepositor
Sec36
Effect of sale: WHM is NOT LIABLE for non-delivery Except if under Sec 33,the sale was madeWITHOUT PUBLICATION,the sale is VOID!
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Sec37
Negotiable Receipt may be negotiated by DELIVERY 1. If the receipt is a BEARERinstrument2. If the receipt is made to theorder if a SPECIFIED person andthat person indorses it in blank
A NEGOTIABLE BEARER WHR ISNEGOTIATED BY DELIVERY
Sec38
Negotiation of Negotiable Receipt may be made byINDORSEMENT
SEE SEC 37
Sec39
A receipt which cannot be negotiated by delivery maybe transaferred by holder by delivery to a purchaser
A non - negotiable receipt cannot be negotiated
If a non-negotiable receipt is indorsed,the transferee acquires no better right
Rights are discusse in Sec 42
ADVANTAGES OF WHR1. Protects purchaser for value and ingood faith (Sec 41)2. Goods cannot be subject togarnishment except: if WHR issurrendered or impound or if itsnegotiation is impounded (Sec 25)3. In negotiating it, holder acquires directobligation of the WHM to deliver (Sec 41)4. The goods it covers are not subject tosellers lien or stoppage in transitu (Sec49)
Sec40
A negotiable receipt may be negotiated by:1. The owner thereof2. Any person entrusted by the owner of thepossession of the receipt3. Any person holding the negotiable receipt whichmay be negotiated by delivery
Sec41
Rights of a person to whom a receipt has beennegotiated are:1. The TITLE of the person negotiating the receiptover the goods covered by the receipt2. The TITLE of the person to whose order by theterms of the receipt of the goods were to be delivered3. The DIRECT OBLIGATION of the WHM to hold thegoods in possession for him
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Sec42
Rights of a person to whom a receipt has beenTRANSFERRED:1. The title to the goods as against the transferor2. The right to inform the WHM of the transfer thereof3. The right to acquire the obligation of the WHM tohold the goods for him
EFFECTS OF TRANSFER WITHREGARD TO ATTACHMENT OR LEVYIf the WHR is non-negotiable, the right ofthe transferee may be DEFEATED by alevy
If the WHR is negotiable, the goodsCANNOT be attached or levied against
Sec43
If WHR is negotiable and is transferred for value bydelivery, the transferee has the following rights:1. Right to goods as against the transferor2. Right to COMPEL the transferor to INDORSE theWHR.
If the INTENTION of theparies is that the receiptshould only beTRANSFERRED, thetransferee has no right tocompel the transferor toindorse the WHR
Sec44
Any person who, on SALE, INDORSEMENT,NEGOTIATION of WHR warrants the following:1. That the WHR is genuine2. He has legal right to negotiate or transfer it3. He has knowledge of no fact that may impair thevalidity of the WHR
4. That he has the right to transfer the goods and andthat the goods are merchantable or fit for a particularpurpose
Sec45
The INDORSER is not liable for the failure of theWHM in the fulfillment of his obligation
It must be a VALID, NEGOTIABLEWHR
Sec46
A holder for security of a receipt who in good faithaccepts payment of the debt from a person does notthereby warrat the genuineness of the WHR
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Sec47
The validity of a negotiation of a WHR is not impairedby PREVIOUS fraud, duress, mistake, if the person towhom the negotiation was made, paid value therefor,without notice of the breach of the duty or fraud ormistake or duress
Sec48
Subsequent negotiation of WHR which was alreadysold, mortaged, pledged, in good faith and for value,shall have the same effect as the first purchaser
Sec49
Negotiation defeats vendor's lien See Roman vs Asia Banking Corporation
Sec50
Criminal offense:Issuance of a receipt knowing that the goods for sucha receipt was not received by the WHM or are notunder his control
Persons who may commit thecrime:1. Warehouseman2. Any of his officers3. Any of his Agents
4. Servant of a WHM
Sec51
Criminal offense:Fraudulently issues or aids in the fraudulant issue of aWHR which contains ANY false statement
Persons who may commit thecrime:1. Warehouseman2. Any of his officers3. Any of his Agents4. Servant of a WHM
Sec
52
Issuance of another WHR for goods already received
and was issued prior WHR, without indicating therein"DUPLICATE"
Persons who may commit the
crime:1. Warehouseman2. Any of his officers3. Any of his Agents4. Servant of a WHM
Double issuance of WHR for the same
goods
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Sec53
Issuance if WHR, of which the WHM is owner, ownerin part, jointly or severally, without indicating the fact
Persons who may commit thecrime:1. Warehouseman2. Any of his officers3. Any of his Agents4. Servant of a WHM
WHM must indicate such ownership ofgoods that were deposited andsubsequently issued a WHR
Sec
54
Delivery of goods without obtaining the Negotiable
Receipt
Persons who may commit the
crime:1. Warehouseman2. Any of his officers3. Any of his Agents4. Servant of a WHM
Sec55
Deposit of goods of which one has no title over orupon which there is a lien or mortgage
Persons who may commit thecrime: ANY PERSON
Sec56
Case not provided for in Act
Sec57
This act may be cited as the Warehouse Receipts Act The name of this Act is the WarehouseReceipts Act. It shall not bear any othername except Warehouse Receipts Act.
Article Keyword Requisites/Elements Exceptions Notes
2047 By guaranty, a person called theguarantor, binds himself to thecreditor to fulfill the obligation of theprincipal debtor
Capacity to act
Sufficient property to guaranteethe debt
NOTE:A guarantor is the insurer of theSOLVENCY of the debtor while asurety is the insurer of the DEBTitself
Note: A suretyship is therelation which exists whichone person binds himselfunder direct and solidary
obligation with a principaldebtor
Surety vs Guaranty1. Surety assumes liabilityas a REGULAR party to theundertaking while guarantordepends on anINDEPENDENTAGREEMENT
2. Surety is an originalpromisor while theguarantor is in a collateral
undertaking
A guaranty is: accessory, subsidiary andconditional and unilateral.
Nature of surety's undertaking
1. Liability is contractual and accessorybut direct2. Liability is limited by the terms of thecontract3. Liability only arises when principaldebtor is held liable4. Surety is not entitled to exhaustion5. Undertaking is to creditor, not debtor6. Surety is not entitled to notice ofprincipal's default7. Prior demand upon principal is notrequired8. Surety is not exonerated by neglect ofcreditor to sue the principal
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3. The surety is primarilyliable while the guarantor issubsidiarily liable
4. A surety will not bedischarged by mereindulgance of the creditorwhile a guarantor may bedischarged by mere
indulgence2048 A guaranty is gratuitious, unless
there is a stipulation to the contraryThis Article is self explanatory -Paras
The lack of consideration for a guaranty isnot a ground to excuse the guarantor'sliability
2049 A married woman may guarantee anobligation without her husbandsconsent
But shall not bind the conjugalpartnership, except in casesprovided for by law (Benefitredounded to the family)
2050 If a guaranty is entered into withoutknowledge or consent or against thewill of the principal, THEGUARANTOR WILL NOT BESUBROGATED THE RIGHTS OF
THE CREDITOR, even after he pays
But the guarantor may recover theamount with which the principal debtormay have benefitted from
Art. 2051: A guaranty may be conventional, legal or judicial, gratuitous or by
onerous title.
It may also be constituted, not only in favor of the principal debtor, but also in
favor of the other guarantor, with the latters consent, or without his
knowledge, or even over his objection.
Art. 2052: A guaranty cannot exist without a valid obligation.
Nevertheless, a guaranty may be constituted to guarantee the performance of a
voidable or unenforceable contract. It may also guarantee a natural obligation.
If the principal is void, it follows that the guaranty/surety is also void.
A guaranty may secure the performance of a voidable contract (unless it was
annulled), unenforceable contract (this isnt void), or natural obligation (so that the
creditor may proceed against the guarantor, although he has no right of action against
the principal debtor)
Art. 2053: A guaranty may also be given as security for FUTURE DEBTS, the
amount of which is not yet known; there can be no claim against the guarantor
until the debt is liquidated. A conditional obligation may also be secured.
This refers to a Continuing Guaranty or Continuing Suretyship. This isnt limited to
a single transaction, but which contemplates a future course of dealings, covering a
series of transactions generally for an indefinite time or until revoked.
Future debts, even if the amount is not yet known, may be guaranteed but there can
be no claim against the guarantor until the amount of the debt is ascertained or fixed
and demandable.
Continuing Guaranty/Suretyship is prospective, and generally intended to provide
security with respect to future transactions for an indefinite time or until a certain
period.
[ THIS IS A RECOGNIZED EXCEPTION TO THE GENERAL RULE THAT AN
ACTION TO FORECLOSE A MORTGAGE MUST BE LIMITED TO THE AMOUNT
MENTIONED IN THE MORTGAGE CONTRACT]
A guaranty shall be construed as continuing when by the terms thereof it is evident
that the object is to give a standing credit to the principal to be used from time to time,
either indefinitely or until a certain period, especially if the right to recall the guaranty
is expressly reserved.
A conditional obligation may also be secured, since it is valid and binding.
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Art. 2054: A guarantor may bind himself for less, but not more than the
principal debtor, both as regards the amount and onerous nature of the
conditions.
Should he have bound himself for more, his obligations shall be reduced to the
limits of that of the debtor.
The measure of guarantor or suretys obligation is not the measure of the principals
obligation.
Art. 2055: A guaranty is not presumed; it must be express and cannot extend to
more than what is stipulated therein.
If it be simple or indefinite, it shall comprise not only the principal obligation,
but also all its accessories, including judicial costs, provided with respect the
latter, that the guarantor shall only be liable for those costs incurred after he
has been judicially required to pay.
The reason for this rule is consideration of prudence in the interest of the guarantor
who in many cases finds himself under the harsh necessity o f paying anothers debt
without benefit whatsoever for himself.
Guaranty falls under SOF. It is also strictly construed against the creditor.
The rule of st r ic t iss imi jur isis applicable to accommodation surety, for an AS acts
without motive of pecuniary gain; hence, should be protected against unjust pecuniary
impoverishment by imposing on the principal duties akin to those of a fiduciary. This
shall only apply if it has been ascertained that the contract truly is one of suretyship or
guaranty.
- Exception: not applicable in case of compensated sureties (those who are
engaged in the business of being sureties) since they are already
compensated and are in the purpose of assuming classified risk for profit,
and secured from possible loss.
If the guaranty is definite, the obligation of the guarantor under the terms of the
contract is limited in whole or in part to the principal debt the accessories are
excluded.
- However, if the guaranty is indefinite or simple (par. 2 of Art. 2055), if the
terms of the contract of guaranty are general and indefinite and do not
specify in clear and express manner the liability of the guarantor is limited to
the principal obligation, it extends not only from the principal obligation but to
all its accessories.
o The reason for this rule is that the guarantor shouldve fixed the
limits of his responsibility, pero kay gin pabay-an ya, te mirisi.
Notice is necessary: Where there is merely an offer of a guaranty or a conditional
guaranty (in the sense that it requires action by the creditor before the obligation
becomes fixed), it does not become a binding obligation until it is: accepted and until
notice of such acceptance by the creditor is given to, or acquired by the
guarantor; or until guarantor has knowledge or notice that the creditor has
performed the condition and intends to act upon the guaranty.
- Exception: Waiver of notice
Notice is not necessary: If the transaction is not merely an offer of guaranty butamounts to a direct or unconditional promise of guaranty, all that is necessary to
make the promise binding is that the creditor should act upon it. Notice is not
necessary because contract is unilateral.
- Exception: Notice of acceptance is made a condition of the guaranty
Art. 2056: One who is obliged to furnish a guarantor shall present a person who
possesses INTEGRITY, CAPACITY TO BIND HIMSELF, and SUFFICIENT
PROPERTY to answer for the obligation which he guarantees. The guarantor
shall be subject to the jurisdiction of the court of the place where this
obligation is to be complied with.
Art. 2057: If the guarantor should be convicted in first instance of a crime
involving DISHONESTY or should become INSOLVENT, the creditor may
demand another who has all the qualifications required in the preceding article.
The case is EXCEPTED where the creditor has required and stipulated that a
specified person should be the guarantor.
Take note of the exception!
The qualifications (found in 2056) need only be present at the time of the perfection of
the contract.
Selection of the guarantor: If the creditor has required and stipulated that a specificperson should be the guarantor, the substitution of guarantor may not be demanded
(2057). If the guarantor is selected by the principal, the latter answers for the
requirements of the former. If the guarantor is personally designed by the creditor, the
responsibility for the selection thereof shall fall upon him.
EFFECTS OF GUARANTY
Art. 2058: The guarantor cannot be compelled to pay the creditor unless the
latter has exhausted all of the property of the debtor, and has resorted to legal
remedies against the debtor.
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Benefit of Excussion The creditor needs to first exhaust all of the property of the
principal debtor and to resort to all legal remedies against the debtor before he can
proceed against the guarantor. (n/a to surety)
Art. 2059: Excussion shall not take place:
1. If the guarantor has expressly renounced it;
2. If he has bound himself solidarily with the debtor;
3. In case of insolvency of the debtor;
4. When he has absconded, or cannot be sued within the Philippinesa. Exception: He left a manager or representative
5. If it may be presumed that an execution on the property of the principal
would not result in the satisfaction of the obligation.
The article refers to exceptions to the benefit of excussion.
Art. 2060: In order that the guarantor may make use of the benefit of excussion,
he must set it up against the creditor upon the latters demand for payment
from him, and point out to the creditor available property of the debtor within
Philippine territory, sufficient to cover the amount of the debt.
Art. 2061: The guarantor having fulfilled all the conditions required in 2060, thecreditor who is negligent in exhausting the property pointed out shall suffer the
loss to the extent of the said property for the insolvency of the debtor resulting
from such negligence.
General Rule (joinder of guarantor and principal as parties defendant): The guarantor,
not being a joint contractor with his principal, cannot be sued with his principal.
Exception: Where it would serve merely to delay the ultimate accounting of the
guarantor, adherence to the general rule is not required.
Art. 2062: In every action by the creditor, which must be against the principal
alone, [except in the case mentioned in Art. 2059], the former shall ask theCourt to notify the guarantor of the action. The guarantor may appear so that he
may, if he so desire, to set up such defenses as are granted to him by law. The
benefit of excussion shall always be unimpaired, even if judgment should be
rendered against the principal and the guarantor (in case of appearance of the
latter).
The guarantor cannot be sued along with his principal, MUCH LESS ALONE.
However, he must be notified so that he may appear and set up defenses he may
want to offer.
Art. 2063: A compromise between the creditor and the principal benefits the
guarantor, but does not prejudice him. That which is entered into between the
guarantor and the creditor benefits, but does not prejudice, the principal
debtor.
A compromise is a contract whereby the parties, by making reciprocal concessions,
avoid litigation or put an end to one already commenced.
Art. 2064: The guarantor of a guarantor shall enjoy the benefit of excussion,
both with respect to the guarantor and to the principal debtor.
Art. 2065: Should there be several guarantors of only one debtor and for thesame debt, the obligation to answer shall be DIVIDED among all. The creditor
cannot claim from the guarantors except the shares which they are respectively
bound to pay, UNLESS solidarity has been expressly stipulated.
The BENEFIT OF DIVISION against the co-guarantors ceases in the same cases
and for the same reasons as the benefit of excussion against the principal
debtor.
The article refers to the Benefit of Division, wherein several guarantors of only one
debtor and for the same debt may divide the debt amongst themselves in case it is
joint. This doesnt apply to solidary obligations.
The benefit of excussion is also be available, provided that Art. 2060 is followed.
EFFECT OF GUARANTY BETWEEN PRINCIPAL DEBTOR AND GUARANTOR
Art. 2066: The guarantor who pays for a debtor must be indemnified by the
latter. The indemnification comprises:
1. The total amount of the debt;
2. The legal interests thereon from the time the payment was made
known to the debtor, even though it did not earn interest for the
creditor;
3. The expenses incurred by the guarantor after having notified thedebtor that the payment has been demanded of him;
4. Damages, if any.
This article states that a guarantor is entitled to indemnity for the expenses, total
amount of debt, and damages, if there are any.
Exceptions: Arts. 2068, 2069, 2070, 2081; Sec. 68 & 69 of Insolvency Law; Art.
2050; Art. 1238, and WAIVER
Art. 2067: The guarantor who pays is subrogated by virtue thereof to all rights
which the creditor had against the debtor.
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If the guarantor has compromised with the creditor, he cannot demand of the
debtor more than what he has really paid.
Effect of subrogation: Guarantor becomes the new creditor, in case he paid debtors
debt.
The basis of the right is the necessity to enable the guarantor to enforce the
indemnity given in 2066.
Art. 2068: If the guarantor should pay without notifying the debtor, the lattermay enforce against him all the defenses which he could have set up against
the creditor at the time the payment was made.
Guarantor may not pay without debtors consent. Guarantor cannot be allowed,
through his own fault or negligence, to prejudice or impair the rights and interests of a
debtor.
Art. 2069: If the debt was for a period and the guarantor paid it before it became
due, he cannot demand reimbursement of the debtor until the expiration of the
period UNLESS the payment has been ratified by the debtor.
The guarantor who pays the obligation before it becomes due is NOT entitled toreimbursement EXCEPT if payment was ratified by debtor.
What is controlling is the default and demand on guarantor had taken place while the
guarantee was still in force.
Art. 2070: If the guarantor has paid without notifying the debtor, and the latter
not being aware of the payment, repeats the payment, the former has no
remedy whatsoever against the debtor, but only against the creditor.
NEVERTHELESS, in case of a gratuitous guaranty, if the guarantor was
prevented by a FORTUITOUS EVENT from advising the debtor of the payment,
and the creditor becomes INSOLVENT, the debtor shall reimburse the
guarantor for the amount paid.
General Rule: Before the guarantor pays the creditor, he must first notify the debtor
(2068). If he fails to give such notice and the debtor repeats the payment, the
guarantors only recourse is to go after the creditor, and he may not go after the
debtor, even if subsequently the creditor becomes insolvent.
Exception: The guarantor may still claim from the debtor if:
- The creditor becomes insolvent -> The guarantor has not notified the debtor
because he was prevented by fortuitous event, and the guaranty was
gratuitous
This is because in gratuitous guaranty, the guarantor receives nothing and it would be
unfair to deny him the right to recover from principal debtor.
Art. 2071 [Important!]: The guarantor, even before having paid, may proceed
against the principal debtor:
1. When he is sued for the payment;
2. In case of insolvency of the principal debtor;
3. When the debtor has bound himself to relieve him from the guaranty
within a specified period, and this period has expired;4. When the debt has become demandable, by reason of the expiration of
the period of payment;
5. After a lapse of 10 years, when the principal obligation has no fixed
period for its maturity, UNLESS it be of such nature that it cannot be
extinguished except within a period longer than 10 years;
6. If there are reasonable grounds to fear that principal intends to
abscond;
7. If the principal is in imminent danger of becoming insolvent;
In all these cases, the action of the guarantor is to obtain release from the
guaranty, or to demand a security that shall protect him from any proceedings
by the creditor and from the danger of insolvency of the debtor.
The article cites 7 instances when the guarantor may proceed against the debtor
even before payment, and specified the remedy to which the guarantor is entitled. Its
purpose is to enable the guarantor to take measures for the protection of his interest
in view that he is probably going to be called upon to pay the debt.
(In perfect harmony w/ 2066)
Art. 2072: If one, at the request of another, becomes a guarantor for the debt of
a 3rd
person who is not present, the guarantor who satisfies the debt may sue
either the person so requesting or the debtor for reimbursement.
The guarantor who guarantees the debt of an absentee at the request of another has
a right to claim reimbursement, after satisfying the debt, from the DEBTOR or the
PERSON WHO REQUESTED HIM TO BE A GUARANTOR.
EFFECTS OF GUARANTY AS BETWEEN CO-GUARANTORS
Art. 2073: Where there are two or more guarantors of the same debtor and for
the same debt, the one among them who has paid may demand of each of the
others the share which proportionally owes from him.
If any of the guarantors should be insolvent, his share shall be borne by the
others, including the payer, in the same proportion.
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The provisions of this article shall not be applicable, UNLESS the payment has
been made in virtue of a judicial demand OR the principal is insolvent.
Each guarantor is only bound to pay his proportionate share. Without the
requirement, the guarantor who pays the debt under the circumstances giving him the
right to contribution may proceed directly against his co-guarantors for their
respective shares, with the latter having to incur the trouble and expense of claiming
afterwards from the debtor what they have paid. If one of them is insolvent, that
guarantors share shall be borne by the co-guarantors, including the paying one.
Art. 2074: In the case of the preceding article, the co-guarantors may set up
against the one who paid, the same defenses which would have pertained to
the principal against the creditor, and which are not purely personal to the
debtor.
The article refers to the defenses available to the co-guarantors.
Art. 2075: A sub-guarantor, in case of the insolvency of the guarantor for whom
he bound himself, is responsible to the co-guarantors in the same terms as the
guarantor.
In case of guarantors insolvency, a sub-guarantor is liable to the co-guarantors in thesame manner as the guarantor.
EXTINGUISHMENT OF GUARANTY
Art. 2076: The obligation of the guarantor is extinguished at the same time as
that of the debtor, and for the same causes as all other obligations.
Causes:
1. Payment/performance
2. Loss of thing due
3. Condonation or remission4. Confusion or merger of the rights of the creditor and debtor
5. Compensation
6. Novation
7. Annulment
8. Rescission
9. Fulfillment of resolutory condition
10. Prescription
The guaranty itself may be directly extinguished although the principal obligation still
remains, as in the case of the RELEASE of the guarantor made by the creditor.
If there is material alteration of the principal contract, the surety or guarantor isreleased or no longer liable, UNLESS he has consented to such.
Art. 2077: If the creditor voluntarily accepts immovable or other property in
payment of the debt, even if he should afterwards lose the same through
eviction, the guarantor is released.
While payment is usually made in money, it can also be done through otherstuff.
The acceptance of the creditor usually signifies the extinguishment of the obligation.
However, if there is EVICTION, the PRINCIPAL obligation is revived, but it does NOT
revive the guaranty.
Art. 2078: A release made by the creditor in favor of one of the guarantors,without the consent of the others, benefits all to the extent of the share of the
guarantor to whom it has been granted.
The release benefits ALL to the extent of the share of the released guarantor.
Art. 2079: An extension granted to the debtor by the creditor without the
consent of the guarantor extinguishes the guaranty. The mere failure on the
part of the creditor to demand payment after the debt shall become due does
not of itself constitute any extension of time referred herein.
This applies to guaranty, not suretyship.
If the creditor grants an extension of time to the debtor without guarantors consent,
the latter is discharged from his obligationthis is to avoid prejudice to the guarantor.
The rule applies even if the debtor should become insolvent subsequent to the
maturity of the debt.
However, in the matter of suretyship, the creditor is under NO obligation to display
any diligence in the enforcement of his right as a creditor.
Art. 2080: The guarantors, even though they be solidary, are released from their
obligation whenever by some act of the creditor they cannot be subrogated to
the rights, mortgages and preferences of the latter.
The act of one cannot prejudice the others. It also prevents the collusion between
creditors and debtors and 3rd
persons.
Art. 2081: The guarantor may set up against creditors all the defenses which
pertain to the principal debtor and are inherent in the debt; but not those that
are purely personal to the debtor.
The defenses available to a debt as a guarantor are provided in Art. 2068, and those
available to co-guarantors in Art. 2074. 2081 provides for the defenses that may be
interposed by the guarantor as against the creditor this does not apply to personal
rights.
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LEGAL AND JUDICIAL BONDS
Art. 2082: The bondsman who is to be offered in virtue of a provision of law or
of a judicial order shall have the qualifications prescribed in 2056 and special
laws.
A bond is commonly understood to mean an undertaking that is sufficiently secured
not cash or currency.
Qualifications:
A bondsman is a surety offered in virtue of a provision of law or a judicial order. He
must have the qualifications of a guarantor.
Art. 2083: If the person bound to give a bond in the cases of the preceding
article should not be able to do so, a pledge or a mortgage considered
sufficient to cover his obligation shall be admitted in lieu thereof.
Art. 2084: A judicial bondsman cannot demand the exhaustion of the property
of a principal debtor.
A sub-surety of the same case cannot demand the exhaustion of the property
of the debtor or of the surety.
They are not mere guarantors, but sureties whose liability is primary and solidary.
In case of negligence, the contract of suretyship is not that the creditor will see that
debtor must pay the obligation, but that the surety will see that the debtor pays orperforms. Mere negligence on creditors part in collecting from debtor will not relieve
surety from liability.