SUBJECT: The Concept of ‘The Extraordinary Expenses’ in Commodatum

I. Introduction

This memorandum provides an exhaustive analysis of the concept of extraordinary expenses within the context of the contract of commodatum under Philippine civil law. Commodatum, as defined under Article 1933 of the Civil Code of the Philippines, is a contract whereby one of the parties delivers to another something not consumable so that the latter may use it for a certain time and return the identical thing. A central obligation of the bailee (comodatario) is the preservation of the thing loaned. This duty inevitably incurs expenses, which the law classifies as either ordinary or extraordinary. This research focuses on the latter, its legal definition, the obligations it imposes on the parties, the rules for reimbursement, and the practical implications of its application.

II. Definition and Legal Basis

Extraordinary expenses are those incurred for the preservation of the thing loaned which are not considered ordinary or day-to-day maintenance. The primary legal basis is found in Article 1948 of the Civil Code: “The bailee is liable for the loss of the thing, even if it should be through a fortuitous event, if he devotes the thing to any purpose different from that for which it has been loaned, or if he keeps it longer than the period stipulated, or if from its nature and condition, it was necessary to take some step to preserve it from loss or deterioration and the bailee failed to do so.” The phrase “necessary to take some step to preserve it” implies the potential incurrence of extraordinary expenses.
More directly, Article 1949 provides: “The bailee is liable for the deterioration or loss of the thing caused by his negligence, whether slight or gross. However, the bailee is not liable if the thing is lost or deteriorates due to a fortuitous event, save as provided in Article 1948, and save when the fortuitous event occurs after he has incurred in delay.” The necessity to act to prevent loss or deterioration, as triggered by an unforeseen event or a latent defect, is the typical source of extraordinary expenses.

III. Distinction: Ordinary vs. Extraordinary Expenses

A clear understanding requires distinguishing extraordinary expenses from ordinary expenses.
Ordinary expenses are those for the routine maintenance, upkeep, and daily use of the thing loaned. They are incidental to the bailee’s right of use. Under Article 1946, “The bailee is obliged to pay for the ordinary expenses for the use and preservation of the thing loaned.” Examples include fuel for a vehicle used within the scope of the loan, minor cleaning, routine lubrication, or electricity for a borrowed appliance.
Extraordinary expenses, in contrast, arise from unforeseen events, emergencies, or latent defects that threaten the integrity of the thing and require intervention beyond normal upkeep. They are not incidental to use but are necessary for preservation in exceptional circumstances. Examples include major repairs after a sudden breakdown not due to the bailee’s fault, costs to mitigate damage from a natural calamity (fortuitous event), or veterinary surgery for a borrowed animal that falls ill.

IV. Obligation to Incur Extraordinary Expenses

The bailee has a fundamental duty to preserve the thing loaned (Article 1942). When an event occurs that necessitates an extraordinary step to prevent loss or deterioration, the bailee is obligated to take action. This duty is implied from the bailee’s general obligation of diligence (Article 1163). Failure to incur necessary extraordinary expenses when the situation demands it could constitute negligence, making the bailee liable for any resulting damage under Article 1949. However, this duty is not absolute and is subject to the rules on reimbursement.

V. Reimbursement for Extraordinary Expenses

The right to reimbursement for extraordinary expenses is governed by Article 1947: “The bailee may charge for the ordinary expenses for the use and preservation of the thing loaned, but not for the extraordinary expenses, unless there is a stipulation to the contrary. However, the bailee has the right to recover extraordinary expenses if they were incurred for the preservation of the thing and the bailor was aware of the need for such expenses without objection, or if the bailor was unable to attend to the preservation himself and the bailee acted to save the thing from imminent loss or deterioration.”
This article establishes a default rule: extraordinary expenses are not reimbursable unless:

There is an express stipulation in the contract of commodatum providing for reimbursement; or

The bailor was aware of the need for such expenses and did not object (implying tacit consent); or

The expenses were incurred out of necessity to save the thing from imminent peril, and the bailor was unable to act (e.g., unreachable, incapacitated).

VI. Procedure and Burden of Proof

The bailee who seeks reimbursement for extraordinary expenses bears the burden of proof. He must establish:
a) The existence and nature of the expense, proving it was extraordinary and not ordinary.
b) The necessity of the expense for the preservation of the thing loaned from imminent loss or substantial deterioration.
c) The factual circumstance that justifies reimbursement under Article 1947 (e.g., the bailor’s knowledge and lack of objection, or the state of necessity).
The bailee should, if circumstances permit, notify the bailor of the need for the expense and seek instructions. If time is of the essence, he may act but must be prepared to justify the urgency. Proper documentation (receipts, expert assessments, photographs) is crucial.

VII. Comparative Analysis: Ordinary vs. Extraordinary Expenses

The following table summarizes the key distinctions and rules governing the two categories of expenses in commodatum.

Aspect	Ordinary Expenses	Extraordinary Expenses
Legal Basis	Article 1946, Civil Code	Articles 1947, 1948, 1949, Civil Code
Nature	Routine, incidental to use and basic upkeep.	Unforeseen, emergency-based, for preservation against specific peril.
Examples	Fuel, minor oil changes, cleaning supplies, battery replacement for wear.	Major engine overhaul after sudden failure, repair of storm damage, emergency surgery for an animal.
Primary Obligor	Bailee (comodatario).	Bailee has a duty to act, but reimbursement rights vary.
Reimbursement Rule	The bailee is obliged to bear them (Article 1946). He cannot charge the bailor.	Not reimbursable by default. Reimbursable only if: 1) stipulated; 2) bailor knew & did not object; 3) necessary & bailor unable to act (Article 1947).
Failure to Incur	May lead to deterioration from neglect, potentially constituting slight negligence.	May constitute negligence (slight or gross) if a necessary preservation step is omitted, leading to liability for loss (Article 1949).
Relation to Fortuitous Event	Generally unrelated.	Often arise as a consequence of, or response to, a fortuitous event* to prevent further loss.

VIII. Jurisprudential Application

The Supreme Court has applied these principles. In Layugan v. Intermediate Appellate Court (G.R. No. 73998, 1988), the Court implicitly dealt with the concept. While the main issue was negligence, the discussion revolved around the bailee’s duty to take care of the borrowed property as a good father of a family (diligence of a good father of a family). The failure to undertake necessary measures, which could include incurring extraordinary expenses, formed the basis for finding liability. The case of Prudential Bank v. Intermediate Appellate Court (G.R. No. 74886, 1992), though primarily about contract of lease, cited principles of commodatum by analogy and highlighted the duty of a possessor to undertake repairs necessary for preservation, distinguishing between ordinary and extraordinary repairs, the latter being recoverable only under specific conditions.

IX. Practical Implications and Recommendations

For practitioners and parties to a commodatum:

Drafting Contracts: Clearly stipulate in the contract of commodatum how extraordinary expenses will be handled. Allocation of responsibility can be modified by stipulation (Article 1947).

For the Bailee: Act with diligence. In an emergency, take necessary steps to preserve the property, document everything, and notify the bailor at the earliest opportunity. Assume ordinary expenses are your burden.

For the Bailor: Disclose any known defects or peculiarities of the thing loaned. Respond promptly if notified by the bailee of a need for extraordinary preservation.

Evidence: Maintain clear records of communications, invoices, and the condition of the property before, during, and after the loan.

X. Conclusion

Under Philippine law, extraordinary expenses in commodatum are costs incurred to preserve the thing loaned from an unforeseen threat of loss or substantial deterioration. They stand in contrast to ordinary expenses of daily use. While the bailee has a duty to incur such expenses if necessary to fulfill his obligation of preservation, the right to reimbursement is not automatic. The default rule under Article 1947 denies reimbursement unless there is a contractual stipulation, tacit consent from the bailor, or the expenses were necessary and urgently incurred when the bailor was unable to act. This legal framework balances the bailee’s duty of care with the principle that the bailor, as owner, should generally bear the cost of major, unforeseen preservation efforts, unless he has agreed otherwise or his inaction justifies the bailee’s intervention. A clear understanding of this concept is essential to properly delineate the rights and obligations of the parties in a contract of commodatum.