Commercial Laws 1: Loan — Commodatum (Arts. 1935-1952)

TITLE XI
LOAN

CHAPTER 1

Commodatum

SECTION 1

Nature of Commodatum

Article 1935. 

The bailee in commodatum 

acquires the use of the thing loaned but not its fruits; 

if any compensation is to be paid by him who acquires the use, 

the contract ceases to be a commodatum.

Article 1940. 

A stipulation that the bailee may make use of the fruits of the thing loaned is valid. 

1. The Main Purpose in Use.

• The term commodatum is derived from the Latin term commodum which means usefulness. 
• The bailee in commodatum acquires the use of the thing loaned. 
•  Use does not include consumption of the thing because the thing loaned is supposed to be returned. 
• In commodatum the borrower does not acquire ownership over the thing borrowed and has the duty to return the same thing to the lender.

2. Fruits

• As a right included in ownership, the owner of the thing is entitled to the fruits thereof. 
• Thus, where an animal is the thing loaned, its young subsequently born is not included in the contract. 
• This is part of what is known as accession discreta that includes:
• natural fruits
• industrial fruits
• civil fruits
• Generally, the borrower in commodatum is not entitled to the fruits of the thing borrowed/loaned. 
• The bailee is entitled only to the use of the thing loaned and not to its fruits. 
• However, Article 1940 of the New Civil Code provides that the use of the fruits of the thing loaned may be given to the borrower or bailee by stipulation. 
• However, the parties may stipulate that the bailee may also make use of the fruits of the thing. Such stipulation cannot be presumed.  
• The enjoyment of the fruits must only be incidental to the use of the thing itself for if it is the main cause, the contract may be one of usufruct. 

2.01 Distinguished from Usufruct.

• Generally, the contract is usufruct if the purpose includes the enjoyment of the fruits of the thing. 
• Usufruct gives a person, known as the usufructuary, the right to enjoy the property of another, with the obligation of preserving its form and substance, unless the title constituting it or the law otherwise provides.
• Usufruct is a real right that is also temporary in nature. 
• The owner retains naked title but transfers his jus possidendi, utendi, and fruendi to another person known as the usufructuary. 

FTTR

Point of Distinction and Similarities	Commodatum	Usufruct
As to the right to enjoy the fruits	Without stipulation, the bailee cannot enjoy the fruits.	Jus fruendi is included in the right of the usufructuary.
Transferability	The right of the bailee is personal and cannot be transferred.	The usufructuary may convey his right to usufruct by way of mortgage or may alienate or transfer his right as such.
Use by Third Persons	Generally, third persons cannot be allowed to use.	The usufructuary can allow third persons to use the thing.
Right of Retention	Generally, there is no right of retention (except for damages, Art. 1951, NCC).	There is a right to retention.

2.02 Distinguished from Lease

• In lease of things. a person is allowed temporary use of the thing for compensation for a definite or indefinite period.

CN-FTTR

Point of Distinction and Similarities	Real Contract	Lease
As to consideration	It is essentially gratuitous.	It is onerous; rentals are paid for the use of the thing.
As to nature	Personal contract - thus, death of one party contract extinguishes the contract.	It is not a personal - death does not extinguish the contract.
As to the extent of the right	Without stipulation, the bailee can use the thing but cannot enjoy the fruits.	The right of the lessee generally extends to a particular use only (depending on the nature of the property) but is not entitled to the fruits.
Transferability	The right of the bailee is personal and cannot be transferred.	The lessee cannot likewise assign his or her right to the lease, except with the consent of the lessor.
Use by Third Persons	Generally, third persons cannot be allowed to use.	The lessee can allow third persons to use the thing through sub-lease if not expressly prohibited.
Repairs and Expenses	The bailee has the obligation to pay for ordinary repairs for the use and preservation of the thing.	Generally, the lessee has no obligation to pay for repairs.

3. Essentially gratuitous. 

• Commodatum is essentially gratuitous. 
• Hence, the contract ceases to be a commodatum if any compensation is to be paid by the borrower who acquires the use. 
• In such a case, there arises a lease contract.
• If the consideration is the rendering of some service, an innominate contract will result.
• Mina v. Pascual, G.R. No. L-8321, October 14, 1913:
• If any compensation is to be paid by him who acquires the use, the contract ceases to be a commodatum.
• Republic Bank v. Bagtas, G.R. No. L-10614, October 25, 1962:
• If a bank loaned to the alleged borrower three bulls subject to the payment of compensation by the borrower of a breeding fee of 10% of the book value of the bulls, the agreement is not commodatum. If the breeding fee is considered compensation, then the contract would be a lease of the bulls and not commodatum.

4. Temporary.

• The use of the thing loaned is temporary: Hence, usually commodatum is an agreement with a term or period. 
• It may be stipulated that the temporary use may end at the time of death of the bailee. 
• In this case, the agreement is also considered one with a period because the contract ends on a day certain, which must necessarily come although it may not be known when.
• Even if no period is agreed upon, the temporary use of the thing may also be a consequence of the specified purpose for lending the property to the bailee. 
• For example, a piece of farming tool may be lent to the bailee for the purpose of harvesting the crops of the bailee. 
• Mina v. Pascual, G.R. No. L-8321, October 14, 1913:
• An essential feature of commodatum is that the use of the thing belonging to another shall be for a period.
• Republic of the Philippines v. Hon. Court of Appeals, et al., G.R. No. L-46145, November 26, 1986:
• During the interim of 67 years from November 26, 1902 to December 17, 1959 (when the U.S. Navy possessed the area) the possessory rights of Domingo Baloy or heirs were merely suspended and not lost by prescription. 
• The occupancy of the U.S. Navy was not in the concept of owner. It partakes of the character of a commodatum. It cannot therefore militate against the title of Domingo Baloy and his successors-in-interest. One's ownership of a thing may be lost by prescription by reason of another's possession if such possession be under claim of ownership, not where the possession is only intended to be transient, as in the case of the U.S. Navy's occupation of the land concerned, in which case the owner is not divested of his title, although it cannot be exercised in the meantime. 

Comments from De Leon:
1.Contract similar to donation. 

• Commodatum is similar to a donation in that it confers a benefit to the recipient.
• The presumption is that the bailor has loaned the thing for having no need therefor. (see Art. 1946, second sentence.)

2. Extent of bailee’s right of use. 

• The right to use is limited to the thing loaned but not to its fruits unless there is a stipulation to the contrary. 
• As owner of the thing loaned, the bailor is naturally entitled to its fruits. 

3. Purpose of the contract.

• The purpose of the contract of commodatum must be the temporary use of the thing loaned. 
• If the bailee is not entitled to the use of the thing, the contract may be a deposit not a commodatum. 
•  It is an essential feature of the contract of commodatum that the use of the property of another shall be “for a certain time.”

Article 1936.

Consumable goods may be the subject of commodatum 

if the purpose of the contract is not the consumption of the object, 

as when it is merely for exhibition. 

Article 1937. 

Movable or immovable property may be the object of commodatum.

1. Object of the Contract.

• The object of the contract of commodatum is a non-consumable thing that is either movable or immovable. 
• Consumable things are those that cannot be used in a manner appropriate to their nature without their being consumed.
• The concepts of movable and immovable properties are provided for in Articles 415, 416, and 417 of the New Civil Code.

1.01 Consumable.

• General Rule: The object of the contract of commodatum is not consumable because the purpose is temporary use rather than consumption. 
• The bailee is required to preserve the form and substance of the thing loaned because he has to return the same thing. 
• Exception: Article 1936 provides that consumable goods may be the subject of commodatum if the purpose of the contract is not the consumption of the object, as when it is merely f or exhibition. 
• In other words, the use of the consumable goods is no longer according to their nature as consumable; the use thereof for exhibition will allow mere temporary use of the thing.
• The intention of the parties turned the consumable thing to non-consumable.
• Examples:
1. A person may borrow a sack of corn for the purpose of exhibiting the new breed of corn in an agricultural fair. 
• Usually, according to its nature, the corn is meant to be consumed but the intention of the parties in this example is for the temporary use of the corn. 
2. The thing that is intended merely for exhibition under Article 1936 may even include money. 
• Thus, a bailee may borrow a number of Peso bills with special markings issued by the Bangko Sentral ng Pilipinas (BSP) to commemorate a certain event with agreement to return exactly the same peso bills. 
• The bailee in commodatum may be allowed to use the money for exhibition for a limited period. 
• Producers Bank of the Philippines v Court of Appeals, G.R. No. 115324, February 19, 2003:
• The rule is that the intention of the parties thereto shall be accorded primordial consideration in determining the actual character of a contract. In case of doubt, the contemporaneous and subsequent acts of the parties shall be considered in such determination.
• The agreement to deposit respondent's money in a savings account specifically for the purpose of making it appear that said firm had sufficient capitalization for incorporation, with the promise that the amount shall be returned within 30 days is commodatum.
• Neither does the Court agree with petitioner's contention that it is not solidarily liable for the return of private respondent's money because it was not privy to the transaction between Doronilla and private respondent. The nature of said transaction, that is, whether it is a mutuum or a commodatum, has no bearing on the question of petitioner's liability for the return of private respondent's money because the factual circumstances of the case clearly show that petitioner Bank, through its employee Mr. Atienza, was partly responsible for the loss of private respondent's money and is liable for its restitution.

1.02 Movable and Immovable.

• The thing that may be borrowed in commodatum is not limited to movables. 
• Immovables are usually non-consumable; hence, they can be subject to temporary use. 
• On the other hand, movables can be consumable or non consumable. 
• Generally, movables can be the object of commodatum only if they are not consumable. 
• Examples:
1. A car, if delivered for temporary use without compensation. 
2. A house, if delivered for temporary use without compensation. 
• Colito T. Pajuyo v. Court of Appeals, G.R. No. 146364, June 3, 2004:
• Pajuyo and private respondent Eddie Guevarra ("Guevarra") executed a Kasunduan or agreement. Pajuyo, as owner of the house, allowed Guevarra to live in the house for free provided Guevarra would maintain the cleanliness and orderliness of the house. Guevarra promised that he would voluntarily vacate the premises on Pajuyo's demand.
• The Kasunduan is not one of commodatum. In a contract of commodatum, one of the parties delivers to another something not consumable so that the latter may use the same for a certain time and return it. An essential feature of commodatum is that it is gratuitous. Another feature of commodatum is that the use of the thing belonging to another is for a certain period.
• The Kasunduan reveals that the accommodation accorded by Pajuyo to Guevarra was not essentially gratuitous. While the Kasunduan did not require Guevarra to pay rent, it obligated him to maintain the property in good condition. The imposition of this obligation makes the Kasunduan a contract different from a commodatum.
• Even assuming that the relationship between Pajuyo and Guevarra is one of commodatum, Guevarra as bailee would still have the duty to turn over possession of the property to Pajuyo, the bailor. The obligation to deliver or to return the thing received attaches to contracts for safekeeping, or contracts of commission, administration and commodatum. These contracts certainly involve the obligation to deliver or return the thing received.

Comments from De Leon:
Subject matter of the contract.

• In commodatum, the subject matter is generally non-consumable things, whether real or personal. 
• This but conforms to reality, for the bailee cannot use and return something which is consumed when used. 
• Exception:
• However, if the purpose of the contract is not the consumption of the object as when it is merely for exhibition, consumable goods may be the subject of the commodatum.
• Example: L lends to B an oversized bottle of wine to be used as a sample or for advertisement.
• If the intention of the parties is to have the consumable goods loaned returned at the end of the period agreed upon, the loan is a commodatum and not a mutuum. 
• An example of commodatum involving real property is when a person allowed another to build a warehouse on the former’s land so that the latter may use the property for a certain period without any payment of rentals. If no time for use of the land is specified, the contract would be that specie of commodatum called “precarium” expressly recognized in Article 1947. 
• If rental is paid, the contract would be one of lease.

Article 1938.

The bailor in commodatum need not be the owner of the thing loaned.

1. Ownership of Bailor Not Required.

• It is not necessary that the bailor is the owner. 
• This is consistent with the purpose of commodatum to merely give temporary use of the thing. 
• The real right that is transferred is merely possession and not ownership.
• Hence, all that is necessary for the bailor is to have:
1. the right to possess and use the thing; and 
2. the right to transfer such right to use and possess. 

2. Persons who can be Bailors.

• Obviously an owner can be a bailor in commodatum. 
• However, as already stated, the bailor need not be the owner. 
• A usufructuary or a lessee in a contract of lease can be a bailor in commodatum with respect to the object of usufruct or lease. 
• The usufructuary or a lessee can allow another to temporarily use the thing. However, this right is subject to the restrictions imposed under the contract between the owner, on one hand, and the lessee or usufructuary, on the other hand. 
• A bailee in commodatum cannot himself be a bailor of the same thing. 
• This is against the nature of commodatum as being personal. 

3. The Right to Dispose.

• While it is not required that the bailor has the right to dispose of the thing itself in an absolute manner, the bailor must have the right to convey the use of the thing. 
• Hence, the bailor cannot constitute a commodatum:
• if the use of the thing is personal to him only or 
• if his right is subject to a contractual prohibition to convey any right. 
• Example:
• It is a common contractual provision in a contract of lease that the right of the lessee cannot be transferred or assigned and he cannot allow any other person to use the property without the consent of the lessor. 
• The lessee cannot be a bailor in commodatum unless the lessor gives his consent.

Comments from De Leon:

1. Bailor need not be owner.

• In commodatum, the bailor need not be the owner of the thing loaned since by the loan, ownership does not pass to the borrower. 
• ✅ mere lessee of the thing 
• ✅ usufructuary
• one entitled to the use and the fruits of property belonging to another
• ❌borrower or bailee himself may not lend nor lease the thing loaned to him to a third person.
• It is sufficient if the bailor has such possessory interest in the subject matter or right to its use which he may assert against the bailee and the third persons although not against the rightful owner. 
• Thus, a lessee may sublet the thing leased, when there is no express prohibition in the contract of lease.
• If the lessee, by a contract of sublease, may transfer to another the enjoyment of the thing leased for a consideration, there is no reason why he should be unable to cede gratuitously its use by way of commodatum.

Article 1939. 

Commodatum is purely personal in character. Consequently:

(1) The death of either the bailor or the bailee extinguishes the contract; 

(2) The bailee can neither lend nor lease the object of the contract to a third person. 

However, the members of the bailee’s household may make use of the thing loaned, 

unless there is a stipulation to the contrary, 

or unless the nature of the thing forbids such use.

1. Personal in Nature

• Commodatum is purely personal in character. 
• The delivery of the thing to the bailee by the bailor is in consideration of the person of the bailee.
• Implicit from the gratuitous nature of the contract is the underlying assumption that the bailor would not have conveyed the temporary use of the thing for free if he did not intend it to benefit the bailee only. 
• It is also assumed that the bailor intended that the temporary benefit will accrue only in favor of the bailee who has use for the same in the meantime. 
• It cannot be assumed that the bailor intends other persons to benefit or that he allows the bailee to profit by allowing others to use it.

2. Manifestations

• The personal nature of the contract is manifested in the following: 

1. The death of either the bailor or the bailee extinguishes the contract; and 
2. The bailee can neither lend nor lease the object of the contract to a third person. 

• The members of the bailee's household may make use of the thing loaned; they are not covered by the term "third person." 
• However, the members of the bailee's household cannot make use of the thing loaned in two cases: 

1. If there is a stipulation in the agreement that the members of the bailee's household cannot use the thing; and
2. If the nature of the thing forbids such use by the members of bailee's household.

Comments from De Leon:

Commodatum, purely personal in character. 

• Unlike mutuum, commodatum is a purely personal contract, the lender having in view the character, credit, and conduct of the borrower. 
• Hence, the death of either party terminates the contract unless by stipulation, the commodatum is transmitted to the heirs of either or both parties. 
• Such stipulation is valid for paragraph 1 presupposes the absence of any contrary stipulation. 
• If there are two or more borrowers, the death of one does not extinguish the contract in the absence of stipulation to the contrary. 
• Article 1939 constitutes an exception to the general rule that all rights acquired in virtue of an obligation are transmissible. 

SECTION 2

Obligations of the Bailee

Article 1941. 

The bailee is obliged to pay 

for the ordinary expenses 

for the use and preservation of the thing loaned. 

Article 1942. 

The bailee is liable for the loss of the thing, 

even if it should be through a fortuitous event:

(1) If he devotes the thing to any purpose

different from that for which it has been loaned; 

 

(2) If he keeps it longer than the period stipulated, 

or after the accomplishment of the use 

for which the commodatum has been constituted;

(3) If the thing loaned has been delivered 

with appraisal of its value, 

unless there is a stipulation exempting the bailee 

from responsibility in case of a fortuitous event;

 

(4) If he lends or leases the thing to a third person, 

 who is not a member of his household; 

(5) If, being able to save either the thing borrowed or his own thing, 

he chose to save the latter. 

Article 1943. 

The bailee does not answer

for the deterioration of the thing loaned 

due only to the use thereof and without his fault.

Article 1944. 

The bailee cannot retain the thing loaned 

on the ground that the bailor owes him something, 

even though it may be by reason of expenses. 

However, the bailee has a right of retention

for damages mentioned in article 1951.

Article 1945. 

When there are two or more bailees 

to whom a thing is loaned 

in the same contract, 

they are liable solidarily.

1. Obligations of the Bailee.

• The obligations of the bailee are as follows: EPRLR

1. To exercise due diligence while in possession of the thing loaned;
2. To pay ordinary expenses for the use and preservation of the thing loaned;
3. To be responsible for the loss of the thing in the cases specified in Article 1942;
4. To be liable for any loss or injury due to the bailee's fault or negligence; and 
5. To return the thing upon expiration of the term of the contract. 

• The liability of two or more bailees is joint and several for any of the above-referred obligations. 
• Hence, the rules on solidary obligations under the New Civil Code apply. 
• For instance, if loss occurs after the bailees failed to return the thing loaned, any one of the bailees may be made liable to the bailer; it is not necessary to sue both bailees. 

2. Expenses for Preservation.

• If a person is obliged to return a determinate thing, he must exercise the diligence of a good father of a family in taking care of the thing. 
• The bailee is liable for breach of this duty; hence, the bailee is liable for any loss due to his negligence.  
• It is logical that the borrower should defray the expenses for the use and preservation of the thing loaned for after all, he acquires the use of the same, and he is supposed to return the identical thing. 
• As part of the duty to exercise due diligence, the bailee is obliged to pay for the ordinary expenses for the use and preservation of the thing loaned.
• Example:
• If the thing loaned is a gasoline generator set, the bailee must shoulder the gasoline cost because the same cost is for the use of the thing loaned.
• Similarly, the bailee is liable for the expenses for the regular routine cleaning of the generator set because the same is an expense for the preservation of the thing loaned.
• If B borrows the car of L, the former must pay for the gasoline, motor oil, washing, greasing and spraying, etc. 
• B cannot demand reimbursement for the expenses.
• However, the bailee does not answer for the deterioration of the thing loaned due only to the use thereof and without his fault.
• Justice J.B.L. Reyes opined that the provision should be taken to refer only to the "normal" use of the thing loaned.
• It should be noted that the bailee is even liable for extraordinary expenses arising from the use of the thing.
• As to extraordinary expenses, Article 1949 governs.

3. Liability of Bailee for Loss.

• The bailee is liable for the loss of the thing, even if it should be through a fortuitous event in the following cases:

1. If he devotes the thing to any purpose different from that for which it has been loaned; 
2. If he keeps it longer than the period stipulated, or after the accomplishment of the use for which the commodatum has been constituted;
3. If the thing loaned has been delivered with appraisal of its value, unless there is a stipulation exempting the bailee f rom responsibility in case of a fortuitous event; 
4. If he lends or leases the thing to a third person, who is not a member of his household; and
5. If, being able to save either the thing borrowed or his own thing, he chose to save the latter. 

• Fortuitous event is an event which could not be foreseen or which, though foreseen, is inevitable. 
• The bailee must exercise proper diligence with regard to the care and preservation of the thing loaned for he must return the thing after its use. 

• General rule: The bailee is not liable for loss or damage due to a fortuitous event. 
• The reason is that the bailor retains the ownership of the thing loaned. 
• However, in an obligation to deliver or to give, the debtor shall be liable for any loss due to fortuitous event which occurred before delivery in certain cases, including cases when: 
1. the obligor or debtor delays;
2. there is a stipulation or agreement that the obligor will not be excused even if the cause is fortuitous event;
3. if there is assumption of risk as required by the nature of obligation; or 
4. where the obligor is also at fault.
• Exception: Article 1942 specifies the instances when the bailee is liable even for a loss due to a fortuitous event. 
• It would seem that the purpose of the law is to punish the bailee for his improper acts although they may not be the proximate cause of the loss. 

• The reason under:
• No. 1 — the bailee acts in bad faith; 
• No. 2 — he incurs in delay; 
• No. 3 — the law presumes that the parties intended that the borrower shall be liable for the loss of the thing even if it is due to a fortuitous event for otherwise they would not have appraised the thing;
• No. 4 — commodatum is purely personal; and 
• No. 5 — the bailee shows his ingratitude after the thing is gratuitously loaned to him.

• Republic Bank v. Bagtas, G.R. No. L-10614, October 25, 1962:
• The borrower was made liable for the loss of the thing loaned (bulls).
• The original period of the loan was from May 8, 1948 to May 7, 1949. The loan of bulls was renewed for another period of one year to end on May 8, 1950 but the borrower kept and used the bulls until November 1963. It was after May 8, 1950 when the bulls were killed by stray bullets during a Huk raid. In addition, when the lender lent and delivered the bulls to the borrower, the bulls had each an appraised book value, and it was not stipulated that in case of loss of the bulls due to fortuitous event, the borrower would be exempt from liability.
• Implicit from the fact that the thing loaned was delivered with an appraisal value is the intention to make the bailee liable in case of loss. The bailor would not have secured an appraisal of the thing loaned if the intent was otherwise. 

• Breach of Loyalty
• The bailee has, to a certain extent, a duty of loyalty to the bailor because he is being allowed to use the property of the latter for free. 
• Hence, Article 1942 makes the bailee liable for the loss of the thing, even if it should be through a fortuitous event if: 
1. If he devotes the thing to any purpose different from that for which it has been loaned;
2. If he lends or leases the thing to a third person, who is not a member of his household; and 
3. If, being able to save either the thing borrowed or his own thing, he chose to save the latter. 
• All these cases involve breach of loyalty on the part of the bailee for which the bailee is penalized. 

4. Right of Retention

• General rule: The bailee cannot retain the thing loaned on the ground that the bailor owes him something, even though it may be by reason of expenses.
• Exception: The bailee has a right of retention for damages mentioned in Article 1951. 
• Under Article 1951, the bailor shall be liable for the damages suffered by the bailee by reason of flaws of the thing loaned, which were known to the bailor but not disclosed to the bailee. 
• The bailor cannot exempt himself from liability by abandoning the thing.
• The exception in Article 1951 is of evident justice. 
• Note, however, that the bailee’s right extends no further than to the retention of the thing loaned until he is reimbursed for the damages suffered by him. 
• He cannot lawfully sell the thing to satisfy said damages.
• In case of pledge, the creditor has the right to retain the thing pledged until he shall have been fully paid.

Comments from De Leon:

1. Liability for deterioration of thing loaned. 

• The parties to the contract know that the thing borrowed cannot be used without deterioration due to ordinary wear and tear. 
• Hence, in the absence of agreement to the contrary, the depreciation caused by the reasonable and natural use of the thing is borne by the bailor.
• The bailee is liable if he:
• is guilty of fault or negligence or 
• devotes the thing to any purpose different from that for which it has been loaned.

2. Obligation to return thing loaned.

• Except for a claim for damages suffered because of the flaws of the thing loaned, the borrower has no right to retain the thing loaned as security for claims he has against the lender, even though they may be by reason of extraordinary expenses.

1. Ownership remains in bailor. 
• The borrower acquires only the use of the thing the ownership of which remains in the lender. 
• It would be extremely harsh if the bailor, after benefiting the bailee, and the use having been accomplished, should be deprived of its enjoyment on the excuse of the expenses more or less certain or just. 
2. Only temporary use given to bailee. 
• Furthermore, the bailee would be violating the bailor’s trust in him to return the thing as soon as the period stipulated expires or the purpose has been accomplished. 
• Therefore, the law imposes upon him the obligation to return the same.

3. Effect of retention or adverse claim by bailee. 

• The mere failure of the bailee to return the subject matter of commodatum to the bailor does not constitute adverse possession on the part of the bailee who holds the same in trust.
• In a case, the bailee declared the lots in question in its name for taxation purposes. 
• It was held that the action of the  bailee by such adverse claim could not ripen into title by way of ordinary acquisitive prescription because of the absence of just title.
• Note: 
• Ordinary acquisitive prescription of real property requires possession of ten years in good faith and with just title.
• Extraordinary acquisitive prescription requires possession for thirty years, without need of title or of good faith. 
• For purposes of prescription, there is just title when the adverse claimant came into possession of the property through one of the modes recognized by law for the acquisition of ownership or other real rights, but the grantor was not the owner or could not transmit any right. 

4. Liability when there are two or more bailees. 

• The reason for imposing solidary liability where there are two or more borrowers is to safeguard effectively the rights of the lender. 
• The law presumes that the bailor takes into account the personal integrity and responsibility of all the bailees and that, therefore, he would not have constituted the commodatum if there were only one bailee.
• This is an exception by express provision of law to the general rule that the concurrence of two or more parties in the same obligation gives rise only to a joint obligation.

PROBLEMS:

1. (2005 Bar) Before he left for Riyadh to work as a mechanic, Pedro left his Adventure van with Tito, with the understanding that the latter could use it for one year for his personal or family use while Pedro works in Riyadh. He did not tell Tito that the brakes of the van were faulty. Tito had the van tuned up and the brakes repaired. He spent a total amount of P15,000.00. After using the vehicle for two weeks, Tito discovered that it consumed too much fuel. To make up for the expenses, he leased it to Annabelle. Two months later, Pedro returned to the Philippines and asked Tito to return the van. Unfortunately, while being driven by Tito, the van was accidentally damaged by a cargo truck without his fault. 

a) Who shall bear the P15,000.00 spent for the repair of the van? Explain. 

Pedro shall be liable for the expenses for the repair of the faulty brakes while Tito shall be liable for the expenses for the tune-up of the van. The facts in the given problem show that Pedro and Tito entered into a contract of commodatum. Pedro is liable for the expenses for the faulty brakes because in a contract of commodatum, the bailor-lender shall be liable for the extraordinary expenses incurred for the thing (in this case the van) borrowed. Pedro did not even disclose the need for such repairs. Article 1949 of the New Civil Code (NCC) provides that the bailor shall refund the extraordinary expenses during the contract for the preservation of the thing loaned provided the bailee brings the same to the knowledge of the bailor before incurring them. The bailee as a rule needs to wait for the reply of the bailor and the only exception is when the repairs are so urgent that the reply to the notification cannot be awaited without danger. In this case, Pedro, the bailor-lender was already aware of the faulty brakes and unless the brakes were repaired, the van could not have been used without danger to the user-borrower, Tito. As to the expenses for the tune up of the van, however, Tito shall shoulder the amount that was spent for said tune-up. Tune-up is an ordinary expense for the use and preservation of the van that was borrowed and therefore, under Article 1941 of the NCC, the bailee bears that expense.

b) Who shall bear the costs for the van's fuel, oil and other materials while it was with Tito? Explain. 

Tito shall shoulder the cost of the fuel and other materials. Article 1941 of the New Civil Code provides that the borrower shall be liable for ordinary expenses. The cost of the fuel and the like are ordinary expenses for the use of the van.

c) Does Pedro have the right to retrieve the van even before the lapse of one year? Explain.

No, Pedro cannot demand the return of the van before the expiration of the one-year period agreed upon. Article 1946 of the New Civil Code provides that the bailor cannot demand the return of the thing loaned till after the expiration of the period stipulated. The exception is if the bailor, or Pedro in the present case, has urgent need for the van, in which case, Pedro may demand its return or temporary use.

d) Who shall bear the expenses for the accidental damage caused by the cargo truck, granting that the truck driver and truck owner are insolvent? Explain.

The cost of repairing the van shall be divided between Tito and Pedro. The second paragraph of Article 1949 of the New Civil Code provides that if extraordinary expenses arise on the occasion of the actual use of the thing by the bailee, even though the bailee acted without fault, they shall be borne equally by both the bailor and the bailee unless there is a stipulation to the contrary. However, if the driver of the cargo truck was at fault, the amount of damages or the expenses that they incurred can be recovered from the driver's employer based on quasi-delict. 

2. Cruz lent Jose his car until Jose finished his Bar exams. Soon after Cruz delivered the car, Jose brought it to Mitsubishi Cubao f or maintenance check-up and incurred costs of P5,000.00. Seeing the car's peeling and faded paint, Jose also had the car repainted for P10,000.00. After the Bar exams, Cruz asked for the return of his car. Jose said he would return it as soon as Cruz has reimbursed him for the car maintenance and repainting costs of P18,000.00. Is Jose's refusal justified?

No, Jose's refusal is not justified. Article 1941 of the New Civil Code provides that the bailee in commodatum is obliged to pay for the ordinary expenses for the use and preservation of the thing loaned in expenses for routine check-up is clearly ordinary expenses for the use of the thing. Similarly, the repainting can be considered ordinary expenses for the preservation of the thing. Hence, Jose, as bailee is not entitled to reimbursement for the expenses. He should return the car to Cruz.

SECTION 3

Obligations of the Bailor

Article 1946. 

The bailor cannot demand the return of the thing loaned 

till after the expiration of the period stipulated, 

or after the accomplishment of the use 

for which the commodatum has been constituted. 

However, if in the meantime, 

he should have urgent need of the thing, 

he may demand its return or temporary use.

In case of temporary use by the bailor, 

the contract of commodatum is suspended 

while the thing is in the possession of the bailor.

Article 1947. 

The bailor may demand the thing at will, 

and the contractual relation is called a precarium,

in the following cases:

(1) If neither the duration of the contract 

nor the use to which the thing loaned should be devoted, 

has been stipulated; or

(2) If the use of the thing 

is merely tolerated by the owner.

Article 1948. 

The bailor may demand the immediate return of the thing 

if the bailee commits any act of ingratitude specified in article 765.

1. Return of the Thing.

•  The obligation to deliver or to return the thing received attaches to contracts for:
• safekeeping
• contracts of commission
• administration 
• commodatum.
• These contracts certainly involve the obligation to deliver or return the thing received.
• Failure to return the thing may expose the bailor to criminal liability for estafa under Article 315(1)(b) of the Revised Penal Code.
• U.S. v. Camara, G.R. No. 9459, October 19, 1914, 28 Phil 238-241:
• Severino Camara cannot be guilty of the crime of estafa, but is a debtor for the price of the sale.
• A contract of sale does not gives rise to the obligation to deliver or to return the thing received, as occurs with contracts for safe-keeping, or of commission, or administration, and others such as commodatum, which certainly involve the obligation to deliver or return the thing received. 
• A person who buys rice on credit becomes the owner of it and indebted for its price, but is not guilty of the crime of estafa by reason of not paying for it. Hence, the sum which the defendant is alleged to have embezzled is not P425.10, as stated in the complaint, but P416.
• De Los Santos v. Jarra, G.R. No. 4150, February 10, 1910:
• Although it is true that in a contract of commodatum the bailor retains the ownership of the thing loaned, and at the expiration of the period, or after the use for which it was loaned has been accomplished, it is the imperative duty of the bailee to return the thing itself to its owner, or to pay him damages if through the fault of the bailee the thing should have been lost or injured, it is clear that where public securities are involved, the trial court, in deferring to the claim of the bailor that the amount loaned be returned him by the bailee in bonds of the same class as those which constituted the contract, thereby properly applies law 9 of title 11 of partida 5.
• General rule: The bailor cannot demand the return of the thing loaned till:
• after the expiration of the period stipulated, or 
• after the accomplishment of the use for which the commodatum has been constituted.
• Exception: The bailor may ask for the return of the thing in the following cases:
1. In case of bailor's urgent need;
2. When the contractual relation is a precarium; 
3. The bailee commits any of the acts of ingratitude under Article 765.

• The return may be only temporary or it may be permanent because the law uses “its return” (meaning permanent) or “temporary use.” 
• In case of temporary use of the thing by the bailor, the rights and duties of the parties are likewise temporarily suspended. 

2. Precarium. 

• Precarium is a kind of commodatum where the bailor may demand the thing at will.
• It has been defined as a “contract by which the owner of a thing, at the request of another person, gives the latter the thing for use as long as the owner shall please.”
• There is precarium in the following cases:
1. If neither the duration of the contract nor the use to which the thing loaned should be devoted, has been stipulated; or 
2. If the use of the thing is merely tolerated by the owner. 
• It was opined that the second case of precarium should be taken as a case where "the use of the thing was understood to have been granted subject to the revocation at any time by the bailor."
• Justice J.B.L. Reyes: 
• Commodatum being a gratuitous loan of the use of a thing, it necessarily implies toleration of such use. Unless the term 'tolerated' is limited, all commodatum will be 'precarium' under this rule. Moreover, the use of the term 'owner' for 'bailor' is improper, because Article 1938 specifies that the bailor may not be the owner.

• In the ordinary commodatum, the possession of the bailee is more secure for he has the right to retain the thing loaned until the expiration of the period agreed upon, or the accomplishment of the use for which the commodatum has been constituted. 
• Note: The use of the word “owner” in Article 1947 is inaccurate. 
• Article 1938 is very clear that the bailor need not be the owner of the thing loaned.

3. Urgent Need.

• The bailor may temporarily ask for the return of the thing in case of urgent need. 
• Example:
• The thing loaned is a machine that is used by an asthma patient. 
• If the separate machine of the bailor broke down and he urgently needs a machine for his asthma, the bailor can ask for the temporary return of the thing. 
• The length of time that the bailor may retain the thing is dictated by the urgency of the need.
• In case of temporary use by the bailor because of urgent need, the contract of commodatum is suspended while the thing is in the possession of the bailor.
• This means that if there is a fixed period for the commodatum, the period is interrupted because the contract is suspended and continues to run again once the thing is returned to the bailee. 
• Example:
• if the thing loaned was delivered to the bailee with the right to use it for a period of 90 days starting from January 1, 2014 but the bailor retrieved the thing on February 1 b e cause of urgent need and returned it on February 10, the running of the period of 90 days was suspended on February 1 and resumed after the thing was returned. 
• In other words, the period from February 1 to February 10 will not be counted in computing the 90 day period.
• It should be recalled that in the case of an obligation with a period that is suspended by fortuitous event, suspension means the obligor is excused from performing the obligation while he or she cannot perform the obligation due to said fortuitous event. The law does not stop the running of the term. 
• The performance of what the law has written off cannot be demanded and required.
• It is believed that this rule is applicable to commodatum when the interruption of the use is due to fortuitous event. 
• The fortuitous event will not extend the period of the commodatum even if the bailee was deprived of the right to use. 
• However, it is submitted that the rule is not applicable in the case of temporary taking by the bailor from the bailee of the thing loaned due to the bailor's urgent need. 
• This latter case involves the exercise of the right to use by the bailor and there is a temporary retaking of the thing loaned from the bailee. 
• The bailee will not be in possession of the thing loaned in the meantime. Hence, suspension under Article 1946 means that the temporary taking of the thing loaned by the bailor stops the running of the term or period.

4. Acts of Ingratitude.

• As noted earlier, commodatum is essentially gratuitous; hence, it is akin to donation because the use of the thing is conveyed to another gratuitously. 
• Consequently, Article 1948 imposes the same grounds for revocation of commodatum that apply to donation as provided in Article 765.
• The provision did not appear in the Old Civil Code and the New Civil Code therefore creates a new ground for the extinguishment of commodatum.
•  Thus, applying Article 765, the bailor may demand the immediate return of the thing in the following cases: CO-IC-UR

1. If the bailee should commit some offenses against the person, the honor or the property of the bailor, or of his wife or children under his parental authority; 
2. If the bailee imputes to the bailor any criminal offense, or any act involving moral turpitude, even though he should prove it, unless the crime or the act has been committed against the bailee himself, his wife or children under his authority; and 
3. If the bailee unduly refuses the bailor support when the bailee is legally or morally bound to give support to the bailor. 

• The bailee who commits any of the acts of ingratitude makes himself unworthy of the trust reposed upon him by the bailor. 
• Hence, the right given to the bailor to demand the immediate return of the thing. 
• Under Article 1948, the contractual relation between the par ties is that of the ordinary commodatum. 
• In the case of precarium, the bailor can always demand the thing loaned at will.

PROBLEM:

The defendant was a tenant of the plaintiff and as such occupied the latter's house on M.H. del Pilar Street, No. 1175. On January 14, 1936, upon the novation of the contract of lease between the plaintiff and the defendant, the former gratuitously granted to the latter the use of certain furniture, subject to the condition that the defendant would return them to the plaintiff upon the latter's demand. The plaintiff sold the house to Maria Lopez and Rosario Lopez and on September 14, 1936, the three notified the defendant of the conveyance, giving him 60 days to vacate the premises under one of the clauses of the contract of lease. Thereafter the plaintiff required the defendant to return all the furniture transferred to him in the house where they were found. On November 5, 1936, the defendant, through another person, wrote to the plaintiff reiterating that she may ask for the furniture in the ground floor of the house. On the 7th of the same month, the defendant wrote another letter to the plaintiff informing her that he could not give up the three gas heaters and the four electric lamps because he would use them until the 15th of the same month when the lease is due to expire. The plaintiff refused to get the furniture in view of the fact that the defendant had declined to make delivery of all of them. On November 15th, before vacating the house, the defendant deposited with the Sheriff all the furniture belonging to the plaintiff. 

a. What was the contract that was entered into between the plaintiff and the defendant with respect to the furniture?

The contract entered into between the parties was one of commodatum. The plaintiff gratuitously granted the use of the furniture to the defendant, reserving for herself the ownership thereof.

 

b. Did the defendant validly deposit the furniture to the Sheriff? 

No. Under the contract of commodatum, the defendant bound himself to return the furniture to the plaintiff, upon the latter's demand. The obligation voluntarily assumed by the defendant to return the furniture upon the plaintiffs demand, means that he should return all of them to the plaintiff at the latter's residence or house. The defendant did not comply with this obligation when he merely placed them at the disposal of the plaintiff, retaining for his benefit the three gas heaters and the four electric lamps.

c. Is the plaintiff liable for the expenses incurred because of the deposit of the furniture with the Sheriff?

No. As the defendant had voluntarily undertaken to return all the furniture to the plaintiff, upon the latter's demand, the plaintiff cannot be legally compelled to bear the expenses occasioned by the deposit of the furniture at the defendant's behest. The defendant, as bailee, was not entitled to place the furniture on deposit; nor was the plaintiff under a duty to accept the offer to return the furniture, because the defendant wanted to retain the three gas heaters and the four electric lamps. The defendant was the one who breached the contract of commodatum, and without any reason he refused to return and deliver all the furniture upon the plaintifl's demand. In these circumstances, it is just and equitable that he pay the legal expenses and other judicial costs which the plaintiff would not have otherwise defrayed.

Article 1949.

The bailor shall refund the extraordinary expenses during the contract 

for the preservation of the thing loaned, 

provided the bailee brings the same to the knowledge of the bailor 

before incurring them, 

except when they are so urgent 

that the reply to the notification cannot be awaited without danger.

If the extraordinary expenses arise 

on the occasion of the actual use of the thing by the bailee, 

even though he acted without fault, 

they shall be borne equally by both the bailor and the bailee, 

unless there is a stipulation to the contrary.

Article 1950.
If, for the purpose of making use of the thing, 
the bailee incurs expenses other than those referred to 

in articles 1941 and 1949, 

he is not entitled to reimbursement.

1. Expenses.

• The expenses that may be incurred in relation to the thing that is the object of commodatum include and the person/s who is/are liable for such expenses is/are as follows: 

1. Ordinary expenses for the use and preservation of the thing;
• Bailee-Borrower 
2. Extraordinary expenses for the preservation of the thing;
• Bailor-Lender 
• Bailee may pay with prior notice to the Bailor and subject to the reimbursement by the latte.
3. Extraordinary expenses arising on the occasion of the actual use of the thing. 
• Equally by the bailor and bailee. 

• All expenses other than those referred to in Articles 1941 and 1949 “for the purpose of making use of the thing” (e.g., borrower buys extra tire to be used as a reserve on a trip) that is, not necessary for the use and preservation of the thing, must be shouldered by the borrower. 
• This is only proper since he makes use of the thing. 
• Expenses for ostentation are to be borne by the bailee because they are not necessary for the preservation of thing.

2. Ordinary Expenses.

• Expenses can either be ordinary or extraordinary depending on the circumstances. 
• Ordinary expenses can either be for the use or for the preservation of the thing. 
• The expense can be a routine or regular expense even if the same is indispensable for the preservation of the thing. 
• Examples:
• Expenses for the sustenance of the cow that the bailee borrowed are ordinary expenses even if said expenses are indispensable for the continued existence of the cow. 
• Expenses for diesel for a borrowed generator set are ordinary expenses for the use of the thing. 
• Electricity expense is an ordinary expense for the use of an electric fan that is the object of commodatum. 
• Diesel is necessary to make the generator set work in the same manner that electricity is necessary to make the electric fan work. 
• They are ordinary expenses even if the same expenses are not necessary to preserve the thing.
• The return of the thing will not excuse the bailee from the payment of the ordinary expenses as well as extraordinary expenses contemplated under the second paragraph of Article 1949.

3. Extraordinary Expenses.

• Expenses that are not routine or regular expenses, including those that cannot be foreseen at the constitution of the commodatum, are for the account of the bailor if they are for the preservation of the thing. 
• However, even if the expenses are extraordinary expenses, the bailee-borrower is required to shoulder the same if they arise from the use of the thing.
• Example:
• If the building borrowed by the bailee is in danger of collapsing, the expenses to be incurred to save the building must ultimately be borne by the bailor. 
• This is in the nature of extraordinary expenses for the preservation of the thing. 
• The bailee may proceed with the repairs and advance the expenses provided that he gives notice to the bailor before incurring them. 
• The bailor shall refund what the bailee spent. 
• Notice to the bailor is excused when the expenses are so urgent that the reply to the notification cannot be awaited without danger. 
• The second paragraph of Article 1949 states that if the extraordinary expenses arise on the occasion of the actual use of the thing by the bailee, even though he acted without fault, they shall be borne equally by both the bailor and the bailee, unless there is a stipulation to the contrary. 
• Example:
• If the bailee borrowed a generator set and the use thereof resulted in overheating and the generator set broke down requiring major repairs, both the bailee and the bailor are liable. 
• The Code Commission explained that the second paragraph of Article 1949 does not appear in the old Civil Code and was added to the New Civil Code provision for the following reason:  
• The foregoing addition to the law seems to be an equitable solution. The bailee pays one-half because of the benefit derived from the use of the thing loaned to him, and the bailor pays the other half because he is the owner and the thing will be returned to him.

Article 1951.

The bailor who, knowing the flaws of the thing loaned, 

does not advise the bailee of the same, 

shall be liable to the latter for the damages 

which he may suffer by reason thereof.

1. Hidden Defect.

• The flaw referred to in Article 1951 is a hidden defect. 
• The bailor is made liable for his bad faith. 
• The bailee is given the right of retention until he is paid damages.
• The defect cannot be apparent because an apparent defect is equivalent to notice to the bailee. 
• If the defect is apparent, the bailor cannot be accused of bad faith because he or she can justifiably assume that the bailee is aware of the defect.
• Example:
•  If L lends to B his car without informing the latter that its brake is not working properly, L will be liable in case B is injured by reason thereof. The liability imposed by law is a just sanction for the bad faith committed by L. 
• Of course, if the defect is patent or could have been known to B after inspection or L was not aware of the defect, L is not liable.
• In the first case, it is presumed that B will adopt the necessary precautions or is willing to take the risk incident to the use of the car. In the second case, L is not liable for the reason that commodatum is gratuitous.
• Where the defect is not known to the bailor, he is not liable because commodatum is gratuitous. 
•  The rule is different in:
• sale (see Art. 1547.) 
• lease (see Art. 1653.)
• For in these contracts, valuable consideration is received by the vendor and the lessor. 

2. Requisites.

• Based on the foregoing and the provisions of Article 1951, it appears that the liability for damages arises if the following requisites are present: HANND

1. There is a hidden defect in the thing borrowed; 
2. The bailor is aware of the hidden defect; 
3. The bailee is not aware of the hidden defect;
4. The bailor did not notify the bailee of the hidden defect; and 
5. The bailee suffered damages by reason of the hidden defect.

Article 1952. 

The bailor cannot exempt himself 

from the payment of expenses or damages 

by abandoning the thing to the bailee.

1. Abandonment.

•  The reason for the above rule is that the expenses and/or damages may exceed the value of the thing loaned, and it would, therefore, be unfair to allow the bailor to just abandon the thing instead of paying for said expenses and/or damages.

• The bailee may return the thing to the bailor. 
• However, the return of the thing does not excuse the payment of the expenses and damages due from the bailee. 
• It was opined that abandonment for the purpose of excusing the bailee from paying the expenses and damages is prohibited because the "value of the thing borrowed might be less than the value of the expenses or damages."

2. Extinguishment of Commodatum.

• The provisions of the New Civil Code on commodatum include the following non-exclusive grounds for extinguishment of the contract: EAR-RRD

1. Expiration of the term agreed upon
2. Accomplishment of the stipulated purpose or use of the thing
3. Return of the thing with the consent of the bailor
4. Return of the thing in case the agreement is precarium
5. Return of the thing for acts of ingratitude
6. Death of a party.

3. Prescription.

• The rule is that the bailee cannot acquire ownership of the property through prescription. 
• Possession of the bailee is not possession in the concept of a holder. 
• Hence, prescription cannot run against the owner of the property unless the bailee repudiates the commodatum and the positive act of repudiation is known to the bailor or the owner.