CREDIT TRANSACTIONS

3rd Term, AY 2013-2014

OUTLINE

1. Concept of credit

See:

People v. Concepcion, 44 Phil. 126 (1922)

Republic v. First National City Bank of New York, 3 SCRA 851 (1961)

2. Loan
De Leon, Comments and Cases on Credit Transactions, pages 6-54 (2013 edition)

2.1.

General provisions Articles 1933 to 1934, Civil Code

See:

Republic v. Grijaldo, 15 SCRA 681 (1965)

Saura Import & Export v. DBP, 44 SCRA 445 (1972)
Garcia v. Thio, 518 SCRA 433 (2007)
Central Bank v. CA, 139 SCRA 46 (1985)
Bonnevie v. CA, 125 SCRA 122 (1983)
BPI Investment v. CA, 377 SCRA 117 (2002)

2.2.

Commodatum

a) Nature of commodatum Articles 1935 to 1940, Civil Code

b) Obligations of the bailee Articles 1941 to 1945, Civil Code
c) Obligations of the bailor Articles 1946 to 1952, Civil Code
See:

Payujo v. CA, 430 SCRA 492 (2004)

Quintos & Ansaldo v. Beck, 69 Phil. 108 (1939)
Catholic Vicar Apostolic of Mt. Province v. CA, 165 SCRA 515 (1988)

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Republic v. Bagtas, 6 SCRA 262 (1962)
2.3.

Simple loan or mutuum Art. 1953 to 1961 Civil Code; see also Articles 1980,
2209, 2212, 2213 Civil Code; Central Bank Circular 416 (29 July 1974); CB
Circular 905 (10 December 1982); BSP Circular No. 799 (1 July 2013)

See:

Saura Import & Export v. DBP, 44 SCRA 445 (1972)

Producers Bank v. CA, 377 SCRA 651 (2003)
Tan v. Valdehueza, 66 SCRA 61 (1975)
Ching v. Nicdao, 522 SCRA 316 (2007)
Banco Filipino v. Navarro (July 1987)
Philippine National Bank v. CA, 196 SCRA 536 (1991)
Insular Bank of Asia & America v. Salazar, 159 SCRA 133 (1988)
GSIS v. CA, 145 SCRA 311 (1986)
Siga-an v. Villanueva, 576 SCRA 696 (2009)
Ligutan v. CA, 376 SCRA 560 (2002)
Eastern Shipping Lines v. CA, 234 SCRA 78 (1994)
Radiowealth Finance v. Del Rosario, 335 SCRA 288 (2000)
State Investment House v. CA, 198 SCRA 390 (1991)
People v. Puig & Porras, 563 SCRA 564 (2008)
Presidential Ad Hoc Fact Finding Committee on Behest Loans v. Disierto,
317 SCRA 272 (1989)

2.4.

Usury Law, Act 2655, as amended1

CB Circular 905 (10 December 1982)
BSP Circular No. 799 (1 July 2013)
De Leon, Credit Transactions, pages 55-108 (2013 Ed.)
Art. 1413, Civil Code

While the Central Bank (BSP) has removed the ceiling on interest rates, the basic principles and
concepts of the Usury Law will nonetheless be taken up.

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a) Usury defined
b) Elements
c) Purpose, theory, history of Usury Law
d) Applicability; when not applicable Sec. 1, 2, 3, 4, 4-a, 4-b, Act 2655
e) Authority of Central Bank to prescribe maximum rate Sec. 1-a, Act 2655
f)

Void only as to interest stipulation; borrowers right to recover excess interest

Sec. 7, Act 2655

g) Escalation Sec. 7-a, Act 2655

h) Compound interest
i)

Advance interest (see Sec. 5, Act 2655)

j)

Pari delicto rule not applicable

k) Loan of money payable in kind Sec. 8, Act 2655

l)

Denial of usury under oath Sec. 9, Act 2655

See:

Security Bank v RTC Makati, 263 SCRA 483 (1996)

PNB v. Encina, 544 SCRA 608 (2008)
Carpo v. Chua, 471 SCRA 471 (2005)
Liam Law v. Olympic Sawmill, 129 SCRA 441 (1984)

2.5.

Truth in Lending Act, R.A. 3765

a) Policy behind the law

b) Coverage
c) Required information
See:
2.6.

UCPB v. Beluso, 530 SCRA 567 (2007)

Letters of credit
Sec. 567 to 572, Code of Commerce

3. Deposit
De Leon, Credit Transactions, pages 109-166 (2013 Ed.)

3.1.

Voluntary deposit
a) In general; kinds Articles 1962 to 1971; Art. 1287, Civil Code
b) Obligations of depositary Articles 1972 to 1991, Civil Code
c) Obligations of depositor Articles 1992 to 1995, Civil Code
See:

CA Agro-Industrial Dev. Corp. v CA, 219 SCRA 426 (1993)

Sia v. Court of Appeals 222 SCRA 24 (1993)
BPI v. Intermediate Appellate Court, 164 SCRA 630 (1988)
BPI Family Bank v. Franco, 538 SCRA 184 (2007)
YHT Realty v. CA, 451 SCRA 638 (2005)
Equitable PCI Bank v. Ng Sheung Ngor, 541 SCRA 223 (2007)
Guingona, Jr. v. City Fiscal of Manila, 128 SCRA 577 (1984)

3.2.

Necessary deposit Articles 1996 to 2004, Civil Code

3.3.

Sequestration or judicial deposit Articles 2005 to 2009

3.4.

Warehouse Receipts Law, Act 2137, as amended

a) Applicability of law
b) Definitions - Sec. 58
c) Definition, form, contents of receipt - Sec. 2; 3
d) Non-negotiable, negotiable receipts - Sec. 4; 5
e) Obligations and rights of warehouseman - Sec. 8 to 36
f)

Negotiation and transfer of receipts - Sec. 37 to 48

g) Criminal offenses - Sec. 50-56

See:
3.5.

PNB v. Se, Jr., 256 SCRA 380 (1988)

Trust Receipts Law, PD 114

See:

Colinares v. CA, 339 SCRA 609 (2000)

4. Security transactions

4.1.

Guaranty Articles 2047 to 2084, Civil Code

a) Nature and extent of guaranty Articles 2047 to 2057

See De Leon, pages 226 to 278

b) Effects of guaranty
See De Leon, pages 279 to 309

(i)

As between guarantor and creditor Articles 2058 to 2065

- the benefit of excussion

(ii)

As between debtor and guarantor Articles 2066 to 2072

(iii)

As between co-guarantors Articles 2073 to 2075

c) Extinguishment of guaranty Articles 2076 to 2081

See De Leon, pages 310 to 328

See:

Ong v. Phil. Commercial International Bank, 448 SCRA 705 (2005)

See:

E. Zobel v. Court of Appeals, 290 SCRA 1 (1998)

International Finance v. Imperial Textiles, 475 SCRA 23 (2006)
Velasquez v. Solidbank, 550 SCRA119 (2008)
Dino v CA, 216 SCRA 9 (1992)
Philippine Blooming Mills v. CA, 413 SCRA 445 (2003)
Willex Plastic Industries v. CA, 256 SCRA 478 (1996)
Atok Finance v. CA, 222 SCRA 232 (1993)

d) Legal and judicial bonds Articles 2082 to 2084, Civil Code

4.2.

Suretyship Art. 2047, 1207 to 1222, Civil Code; Art. 2082 to 2084, Civil Code
See:

Palmares v CA, 288 SCRA 422 (1998)

Garcia, Jr. v. CA, 191 SCRA 493 (1990)
RCBC v. Arro, 115 SCRA 777 (1982)

4.3.

Pledge and mortgage Articles 2085 to 2131, Civil Code

a) Provisions common to pledge and mortgage Articles 2085 to 2092

See De Leon, Credit Transactions, pages 329 to 358
See:

Spouses Ramos v. Obispo, 692 SCRA 240 (2013)

Manila Banking v Teodoro, 169 SCRA 95 (1989)
PNB v. Banalao, 584 SCRA 95 (2009)
Development Bank of the Philippines v. CA, 284 SCRA 14 (1998)
Cavite Development v. Lim, 324 SCRA 346 (2000)
Bustamante v. Rosel, 319 SCRA 413 (1999)
Ong v. Roban Lending, 557 SCRA 516 (2008)
Uy Tong v. CA 161 SCRA 383 (1988)
Guanzon v Argel. 33 SCRA 374 (1970)
Montevirgen v. CA, 112 SCRA 641 (1982)
Gonzales v. GSIS, 107 SCRA 492 (1981)
Central Bank v. CA, 139 SCRA 46 (1985)

b) Provisions applicable to pledge only Articles 2093 to 2123

See De Leon, Credit Transactions, pages 359 to 382
See:

China Banking v. CA, 270 SCRA 503 (1997)

Estate of Litton v. Mendoza, 163 SCRA 246 (1988)

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Paray et al. v. Rodriguez et al., 479 SCRA 571 (2006)
c) Mortgage (real mortgage) - Articles 2124 to 2131, Civil Code; Rule 68, Rules
of Court; Act No. 3135, as amended; RA 4882
See De Leon, pages 383 to 413

See:

Medida v. Court of Appeals, 208 SCRA 887 (1992)

Suico v. PNB, 531 SCRA 515 (August 2007)
Huerta Alba Resort v. Court of Appeals, 339 SCRA 534 (2000)
Lanuza v. de Leon, 20 SCRA 369 (1967)

4.4.

Antichresis Articles 2132 to 2139, Civil Code

De Leon, Credit Transactions, pages 496 to 504

4.5.

Chattel Mortgage Articles 2140 and 2141, Civil Code

De Leon, pages 515 to 534
See:

Peoples Bank & Trust v. Dahican Lumber, 20 SCRA 84 (1967)

Makati Leasing & Finance v. Wearever Textile Mills, 122 SCRA
296 (1983)
Dy, Jr. v. Court of Appeals, 198 SCRA 826 (1991)
Pameca Wood Treatment, et al., v. CA, 310 SCRA 281 (1999)
Acme Shoe Rubber & Plastic v. CA, 260 SCRA 714 (1996)
Servicewide Specialist v. CA, 320 SCRA 478 (1999)

5. Concurrence and preference of credits Articles 2236 to 2251, Civil Code; Insolvency
Law (Act 1856 as amended); De Leon, pages 535 to 577

See:

De Barretto v. Villanueva, 1 SCRA 288 (1961)

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J.L. Bernardo v. CA, 324 SCRA 24 (2000)
DBP v CA, 363 SCRA 307 (2000)
State Investment v. CA, 277 SCRA 209 (1997)
RCBC v. IAC, 320 SCRA 279 (1999)
DBP v. NLRC, 222 SCRA 264 (1993)
Banco Filipino v. NLRC, 188 SCRA 700 (1990)