COMMODATUM MUTUUM

Art. 418. Movable property is either consumable

both not subject to statute or nonconsumable. To the first class belong those
of frauds movables which cannot be used in a manner
Ownership retained by Ownership transferred appropriate to their nature without their being
bailor because you do not return consumed; to the second class belong all the
the same thing others.

Gratuituos Can be gratuitous or Consumable- can't be used without being

onerous consumed
Return the same thing Return the same -look at the nature of the object
kind/quality
Fungible-depends upon the intention if parties
Movable or Immovable Only movable (personal -not on the nature of the object
propertty)

Even if there's a period can If there's a period,debtor Art. 1953. A person who receives a loan of money
demand return when there is cannot pay ahead. or any other fungible thing acquires the
an urgent need ownership thereof, and is bound to pay to the
creditor an equal amount of the same kind and
-not necessary that the bailor
quality.
is the owner ( lessee or
usufructuary can lend the
thing) Art. 1933. By the contract of loan, one of the
parties delivers to another, either something not
Art. 1938. The bailor in consumable so that the latter may use the same
commodatum need not be for a certain time and return it, in which case the
the owner of the thing contract is called a commodatum; or money or
loaned other consumable thing, upon the condition that
the same amount of the same kind and quality
Loan for use or temporary Loan for consumption
possession shall be paid, in which case the contract is simply
called a loan or mutuum.
Art. 1947. The bailor may
demand the thing at will, and Commodatum is essentially gratuitous.
the contractual relation is
called a precarium, in the
Simple loan may be gratuitous or with a
following cases:
stipulation to pay interest.
(1) If neither the duration of
the contract nor the use to In commodatum the bailor retains the ownership
which the thing loaned of the thing loaned, while in simple loan,
should be devoted, has been ownership passes to the borrower.
stipulated; or
(2) If the use of the thing is Ex. A borrowed wine bottles from B for display
merely tolerated by the but visitor drank it, or if B said you may drink it.
owner. =mutuum

Real contract Ex. A buys coke and deposited money for the
bottle, then returns it.
Art. 1316. Real contracts, = barter
such as deposit, pledge and
Commodatum, are not Art. 1954. A contract whereby one person
perfected until the delivery of transfers the ownership of non-fungible things to
the object of the obligation
another with the obligation on the part of the
Bailor-bailee Creditor-debtor latter to give things of the same kind, quantity,
and quality shall be considered a barter
COMMODATUM Art. 1937. Movable or immovable property may
Art. 1940. A stipulation that the bailee may make be the object of commodatum.
use of the fruits of the thing loaned is valid.
Usufructuary can lease the land to another.
Ex. You may use my land and enjoy fruits coz i will Art. 572. The usufructuary may personally enjoy
go abroad. Commodatum if the main purpose is the thing in usufruct, lease it to another, or
to use land. If main purpose is fruits--usufruct. alienate his right of usufruct, even by a gratuitous
title; but all the contracts he may enter into as
A Car cannot be subject of mutuum such usufructuary shall terminate upon the
But a gasoline can be a subject of mutuum. expiration of the usufruct, saving leases of rural
lands, which shall be considered as subsisting
Consensual during the agricultural year.
Art. 1934. An accepted promise to deliver
something by way of commodatum or simple
loan is binding upon parties, but the Bailee died and the thing is used by his
commodatum or simple loan itself shall not be household.= extinguished because he died.
perfected until the delivery of the object of the
contract. Art. 1939. Commodatum is purely personal in
character. Consequently:

Art. 1479. A promise to buy and sell a (1) The death of either the bailor or the bailee
determinate thing for a price certain is extinguishes the contract;
reciprocally demandable. (2) The bailee can neither lend nor lease the
object of the contract to a third person. However,
An accepted unilateral promise to buy or to sell a the members of the bailee's household may
determinate thing for a price certain is binding make use of the thing loaned, unless there is a
upon the promissor if the promise is supported stipulation to the contrary, or unless the nature
by a consideration distinct from the price. of the thing forbids such use.

Art. 1941. The bailee is obliged to pay for the

BPI v. CA, Feb 2002 ordinary expenses for the use and preservation of
A applied for loan which was approved by BOD, the thing loaned.
Mortgaged her land but Bank did not deliver Art. 1943. The bailee does not answer for the
money. = no perfected contract of loan. Bank is deterioration of the thing loaned due only to the
liable for damages for breach of promise of loan. use thereof and without his fault

Art. 1949. The bailor shall refund the

Loan contact perfected in 1996, 12% per year but extraordinary expenses during the contract for
money was given only in 2000 the preservation of the thing loaned, provided
= no interest to pay before year 2000. Only from the bailee brings the same to the knowledge of
the time you receive the money. the bailor before incurring them, except when
they are so urgent that the reply to the
1934- commodatum or mutuum- perfected upon notification cannot be awaited without danger.
delivery
If the extraordinary expenses arise on the
Art. 1935. The bailee in commodatum acquires occasion of the actual use of the thing by the
the used of the thing loaned but not its fruits; if bailee, even though he acted without fault, they
any compensation is to be paid by him who shall be borne equally by both the bailor and the
acquires the use, the contract ceases to be a bailee, unless there is a stipulation to the
commodatum. contrary.

Commodatum ad ostentationem - for exhibit only Ex. Car in the garrage lost thru fortuitous even-
bailor is liable
Ex. House actually used - borne equally by bailor Art. 1946. The bailor cannot demand the return
and bailee unless there's stipulation. of the thing loaned till after the expiration of the
Note: period stipulated, or after the accomplishment of
(1944) In commodatum, bailee can't retain the use for which the commodatum has been
property even if not paid extraordinary expenses. constituted. However, if in the meantime, he
Xp: (1951) damages because of hidden defects should have urgent need of the thing, he may
and the bailor new but did not advise bailee. demand its return or temporary use.
In case of temporary use by the bailor, the
Bailor not liable for hidden defects unless he contract of commodatum is suspended while the
knew. thing is in the possession of the bailor.

GR: Art. 1944. The bailee cannot retain the thing

loaned on the ground that the bailor owes him In Precarium- demand is necessary
something, even though it may be by reason of
expenses. However, the bailee has a right of Note: bailor may demand return immediately:
retention for damages mentioned in Article 1951. 1) if he needs it
2) Precarium
XP: Art. 1951. The bailor who, knowing the flaws 3) Acts of ingratitude
of the thing loaned, does not advise the bailee of
the same, shall be liable to the latter for the Bailor has to reimburse for extraordinary
damages which he may suffer by reason thereof. expenses.
Art. 1952. The bailor cannot exempt himself from
Note: nobody is liable for fortuitous event the payment of expenses or damages by
Except: abandoning the thing to the bailee.
1) mutuum - because money is generic
2) Art. 1942. The bailee is liable for the loss of the Bailor and bailee cannot compensate
thing, even if it should be through a fortuitous Art. 1287. Compensation shall not be proper
event: when:
1) one of the debts arises from a depositum
(1) If he devotes the thing to any purpose or from the obligations of a depositary or
different from that for which it has been 2) of a bailee in commodatum.
loaned; 3) Neither can compensation be set up against a
(2) If he keeps it longer than the period creditor who has a claim for support due by
stipulated, or after the accomplishment of gratuitous title.
the use for which the commodatum has
been constituted;
SIMPLE LOAN or MUTUUM
(3) If the thing loaned has been delivered -consummable
with appraisal of its value, unless there is a -if non-consummable and you transfer
stipulation exemption the bailee from ownership=it is barter
responsibility in case of a fortuitous event;
-value at the time of perfection of loan not at the
(4) If he lends or leases the thing to a third time of loss
person, who is not a member of his -no interest unless expressly stipulated or if the
household; law provides for it [ art.229- delay 6%, art.1589-
when you do not pay and thing produces fruits,
(5) If, being able to save either the thing or 1788 when you do not give what you promised
borrowed or his own thing, he chose to to the partnership)
save the latter.
Art. 1589. The vendee shall owe interest for the
Art. 1945. When there are 2 or more bailees to period between the delivery of the thing and the
whom a thing is loaned in the same contract, payment of the price, in the following three
they are liable solidarily. cases:
(1) Should it have been so stipulated; 12% 6%
(2) Should the thing sold and delivered produce
fruits or income; Back rentals -from Damages (2213-only
(3) Should he be in default, from the time of demand judicial/extra from judgment-
j reasonable certainty) -if
judicial or extrajudicial demand for the payment
becomes judgment final
of the price.
12%

Art. 1788. A partner who has undertaken to Loan forbearance of Return of downpayment
contribute a sum of money and fails to do so money in sales
becomes a debtor for the interest and damages Illegal recruitment (PP Non-payment of
from the time he should have complied with his v. Billaber) purchase price
obligation.
The same rule applies to any amount he may Estafa Payment of goods
have taken from the partnership coffers, and his Final judgment Solution indebiti
liability shall begin from the time he converted
the amount to his own use. Reimbursement of
insurance
SIGAAN V. VILLANUEVA (2009) Specific performance
-A borrowed money from B, P100,000, 25% with damages
interest, not in writing
HELD: loan valid even not in writing Contact to sell but seller
sold to another (tan v.
(1960) if paid voluntarily, cannot recover Renolirao)
anymore (natural obligation)
If he he did not know-mistake of payment - can
recover but if not recovered (solutio indebiti) --
can demand interest of 6%.

Art. 1226. In obligations with a penal clause, the 3% per annum interest- excessive, void under
penalty shall substitute the indemnity for 1403
damages and the payment of interests in case of
noncompliance, if there is no stipulation to the Art. 1229. The judge shall equitably reduce the
contrary. Nevertheless, damages shall be paid if penalty when the principal obligation has been
the obligor refuses to pay the penalty or is guilty partly or irregularly complied with by the debtor.
of fraud in the fulfillment of the obligation. Even if there has been no performance, the
penalty may also be reduced by the courts if it is
Art. 2209. If the obligation consists in the iniquitous or unconscionable
payment of a sum of money, and the debtor
incurs in delay, the indemnity for damages, there Art. 2227. Liquidated damages, whether intended
being no stipulation to the contrary, shall be the as an indemnity or a penalty, shall be equitably
payment of the interest agreed upon, and in the reduced if they are iniquitous or unconscionable.
absence of stipulation, the legal interest, which is
six per cent per annum. Art. 1409. The following contracts are inexistent
and void from the beginning:
Art. 2212. Interest due shall earn legal interest (1) Those whose cause, object or purpose is
from the time it is judicially demanded, although contrary to law, morals, good customs, public
the obligation may be silent upon this point. order or public policy;xxx

1409 (1)- even if declared void, creditor can still

recover 12% per annum. (Only reduce)

[Civil circular 415]

Legal interest of 12% for loans and forbearance Art. 1963. An agreement to constitute a deposit is
of money -if no stipulated interest/penalty binding, but the deposit itself is not perfected
interest and delay- commence to run if there's until the delivery of the thing. 
demand
Borrowed money, deposited title of his property=
Art. 2213. Interest cannot be recovered upon loan with deposit
unliquidated claims or damages, except when the
demand can be established with reasonably Two kinds of deposit:
certainty. 1) voluntary
2) Necessary
Contract to make wedding gown and there is
delay - 6% Art. 1962. A deposit is constituted from the
moment a person receives a thing belonging to
If no monetary interest- use penalty interest at another, with the obligation of safely keeping it
the time of delay and of returning the same. If the safekeeping of
No monetary, no penalty - can recover legal the thing delivered is not the principal purpose of
interest the contract, there is no deposit but some other
contract.
Art. 2212. Interest due shall earn legal interest
from the time it is judicially demanded, although Ex. “I will deposit my car to you, you may use it”-
the obligation may be silent upon this point. if safekeeping is principal purpose, it is still
deposit.
[State investment v. Ca , june 19, 1991]
-loan with Monetary interest 24%, no penalty Art. 1978. When the depositary has permission to
interest, delay for 1 year use the thing deposited, the contract loses the
How much interest can be recovered? concept of a deposit and becomes a loan or
Held: The appropriate measure damages in case commodatum, except where safekeeping is still
of delay is payment of penalty interest, in case the principal purpose of the contract. The
there is no penalty interest use the monetary permission shall not be presumed, and its
interest rate, in the absence of monetary interest existence must be proved.
use legal interest. In this case penalty interest is
also 24%. Apply legal interest if no stipulated Rule: look at the principal purpose of the contract
interest. If safekeeping- Deposit
If use – Commodatum
Art. 2209. If the obligation consists in the
payment of a sum of money, and the debtor Ex. You entered into a dorm, you entered into a
incurs in delay, the indemnity for damages, there contract of deposit for 6 months, 2-month
being no stipulation to the contrary, shall be the deposit which will be part of rental, if you will not
payment of the interest agreed upon, and in the continue will be forfeited.  not a deposit under
absence of stipulation, the legal interest, which is the Civil Code. “2-months deposit” considered as
6% per annum. advance rental; forfeiture of deposit serves as a
penalty clause. If the deposit will be returned to
you, it’s a Loan.
DEPOSIT
Irregular deposits:
-Real contracts (have to be delivered) 1) Art. 1992. If the deposit is gratuitous-
-There can be a contract of future depositor is obliged to reimburse the depositary
deposit/promise to deposit (just like for the expenses he may have incurred for the
commodatum and mutuum) preservation of the thing.
- standard of safekeeping: good father of the
family 2) Deposits in bank- Loan
Art. 1980. Fixed, savings, and current deposits of
money in banks and similar institutions shall be
governed by the provisions concerning simple Art. 1994. The depositary may retain the
loan. thing in pledge until the full payment of what
may be due him by reason of the deposit.
If you have a savings deposit in a bank and you
owe the same bank, there can be compensation. Art. 2121. Pledges created by operation of
If debts are of the same kind and principally law, such as those referred to in 1994, it will
debtor and creditor of each other. be sold but he excess will have to be
Art. 1286. Compensation takes place by returned.
operation of law, even though the debts may be
payable at different places, but there shall be an In commodatum, who pays for the preservation
indemnity for expenses of exchange or of the thing? –Bailee, since it’s gratuitous
transportation to the place of payment
In commodatum, is there a right to retention of
Ex. A deposited “time deposit” in a bank. Bank unpaid extra ordinary expenses?
declared closed by the central bank. Can the -NO , except for damages by reason of the defect
depositor recover from the bank what he has of thing where the bailor did not inform the
deposited? No, this is not a deposit; there is no bailee.
obligation to return the same thing. The purpose
is to use. To recover, file a suit as collection or Deposit is a gratuitous contract generally.
thru PDIC. If you base it in deposit, cannot. This is
a loan since ownership has already transferred. In Gratuitous v. Compensated deposit
a true deposit you have to return the same thing. -In compensated deposit, the depositary usually
In fact, you have an obligation not to use in a pays for the expenses.
deposit. -In compensated, Death of the depositary does
not extinguish the deposit. Transmissible.
Deposit v. Loan -Even, if there is a period the depositor can
-in deposit, you must return the same thing demand the return anytime.

Ex. A and B grew palay in their rice field. They Art. 1995. A deposit its extinguished:
went to C who owns a rice mill. 50 sacks of rice. C (1) Upon the loss or destruction of the thing
would mill and C would sell in manila where they deposited;
can get higher price and from the sale per sack, C (2) In case of a gratuitous deposit, upon the
will be receiving P50 per sack. Before C could mill death of either the depositor or the
the rice, burned thru fortuitous event. Who will depositary
bear the lost?  A and B. Res perit domino.
Voluntary deposit-made by the will of depositor
Deposit of Car v. Pledge of Car Art. 1968. A voluntary deposit is that wherein the
-Deposit is a principal contract, while pledge is a delivery is made by the will of the depositor.
security. In pledge, if you do not pay the loan you -A deposit may also be made by 2 or more
can sell the car. persons each of whom believes himself entitled
- Depositary spent for the preservation of the car to the thing deposited with a third person, who
and the owner did not pay. Can the depositary shall deliver it in a proper case to the one to
sell the car if it is a gratuitous deposit?  Yes, it whom it belongs.
now becomes a pledge (2121) if owner will not
pay ordinary expenses for presevation and it may *deposit may be done orally. But it should be
be sold. delivered. If not delivered- not deposit.

Art. 1992. If the deposit is gratuitous, the

depositor is obliged to reimburse the Art. 1970. Depositary (capacitated); Depositor
depositary for the expenses he may have (incapacitated). Can depositor demand the
incurred for the preservation. return of the thing? --Depositary may be
compelled to return the thing by the guardian, or
administrator, of the person who made the
deposit, or by the latter himself if he should constituted, or his successor in interest, or any
acquire capacity. person authorized to receive it

Art. 1971. Depositor (capacitated); Depositary

(incapacitated): SEA v. CA
-the depositor can have an action to recover the
thing d while it is still in the possession of the Art. 1977. The depositary cannot make use of the
depositary, or thing deposited without the express permission
-to compel the incapacitated depositary to pay of the depositor.
him the amount by which he may have enriched Otherwise, he shall be liable for damages.
or benefited himself with the thing or its price. However, when the preservation of the thing
However, if a third person who acquired the deposited requires its use, it must be used but
thing acted in bad faith, the depositor may bring only for that purpose. (1767a)
an action against him for its recovery. Art. 1978. When the depositary has permission to
  use the thing deposited, the contract loses the
concept of a deposit and becomes a loan or
   commodatum, except where safekeeping is still
Art. 1972. The depositary is obliged to keep the the principal purpose of the contract.
thing safely and to return it, when required, to The permission shall not be presumed, and its
the depositor, or to his heirs and successors, or to existence must be proved. (1768a)
the person who may have been designated in the Art. 1979. The depositary is liable for the loss of
contract. His responsibility, with regard to the the thing through a fortuitous event:
safekeeping and the loss of the thing, shall be (1) If it is so stipulated;
governed by the provisions of Title I of this Book. (2) If he uses the thing without the depositor's
If the deposit is gratuitous, this fact shall be taken permission;
into account in determining the degree of care (3) If he delays its return;
that the depositary must observe. (4) If he allows others to use it, even though he
himself may have been authorized to use the
Art. 1973. Unless there is a stipulation to the same. 
contrary, the depositary cannot deposit the thing Art. 1942. The bailee is liable for the loss of the
with a third person. If deposit with a third person thing, even if it should be through a fortuitous
is allowed, the depositary is liable for the loss if event:
he deposited the thing with a person who is (1) If he devotes the thing to any purpose
manifestly careless or unfit. The depositary is different from that for which it has been loaned;
responsible for the negligence of his employees (2) If he keeps it longer than the period
stipulated, or after the accomplishment of the
Art. 1977. The depositary cannot make use of the use for which the commodatum has been
thing deposited without the express permission constituted;
of the depositor. (3) If the thing loaned has been delivered with
Otherwise, he shall be liable for damages. appraisal of its value, unless there is a stipulation
However, when the preservation of the thing exemption the bailee from responsibility in case
deposited requires its use, it must be used but of a fortuitous event;
only for that purpose.  (4) If he lends or leases the thing to a third
person, who is not a member of his household;
Art. 1975. The depositary holding certificates, (5) If, being able to save either the thing
bonds, securities or instruments which earn borrowed or his own thing, he chose to save the
interest shall be bound to collect the latter when latter.
it becomes due, and to take such steps as may be
necessary in order that the securities may
preserve their value and the rights corresponding 1981~1975
to them according to law. Art. 1981. When the thing deposited is delivered
closed and sealed, the depositary must return it
Art. 1240. Payment shall be made to the person in the same condition, and he shall be liable for
in whose favor the obligation has been
damages should the seal or lock be broken possession, or should he have been notified of
through his fault. the opposition of a third person to the return or
Fault on the part of the depositary is presumed, the removal of the thing deposited. In these
unless there is proof to the contrary. cases, the depositary must immediately inform
As regards the value of the thing deposited, the the depositor of the attachment or opposition. 
statement of the depositor shall be accepted,
when the forcible opening is imputable to the
depositary, should there be no proof to the
contrary. However, the courts may pass upon the
credibility of the depositor with respect to the
value claimed by him.
When the seal or lock is broken, with or without
the depositary's fault, he shall keep the secret of
the deposit. 
Art. 1975. The depositary holding certificates,
bonds, securities or instruments which earn
interest shall be bound to collect the latter when
it becomes due, and to take such steps as may be
necessary in order that the securities may
preserve their value and the rights corresponding
to them according to law.
The above provision shall not apply to contracts
for the rent of safety deposit boxes.

Art. 1983. The thing deposited shall be returned

with all its products, accessories and accessions.
Should the deposit consist of money, the
provisions relative to agents in article 1896 shall
be applied to the depositary.

1984~1988

Art. 1984. The depositary cannot demand that

the depositor prove his ownership of the thing
deposited.
Nevertheless, should he discover that the thing
has been stolen and who its true owner is, he
must advise the latter of the deposit.
If the owner, in spite of such information, does
not claim it within the period of one month, the
depositary shall be relieved of all responsibility by
returning the thing deposited to the depositor.
If the depositary has reasonable grounds to
believe that the thing has not been lawfully
acquired by the depositor, the former may return
the same. (1771a)

Art. 1988. The thing deposited must be returned

to the depositor upon demand, even though a
specified period or time for such return may have
been fixed.
This provision shall not apply when the thing is
judicially attached while in the depositary's