TITLE XII

DEPOSIT Under the Civil Code, a deposit is a gratuitous contract, unless there is an
agreement to the contract, or unless the depository is engaged in the
CHAPTER 1 business of storing goods.
Deposit in General and its Different Kinds

Article 1962. A deposit is constituted from the moment a person receives a thing belonging to
another, with the obligation of safely keeping it and of returning the same. If the safekeeping of the
thing delivered is not the principal purpose of the contract, there is no deposit but some other
contract.
Essential requisites of the contract
Definition of contract of deposit 1. Consent of the contracting parties;
 Article 1962 provides for the definition of deposit. 2. Object certain which is the subject matter of the contract; and
 Deposit is derived from the word “depositum” of Roman law 3. Cause of the obligation which is established.

Governing Law Note: Delivery of the thing is also an essential requisite of the contract. Without
 Primarily regulated by Title XII, Book IV of the New Civil Code (Arts. 1962 to 2009), subject delivery, the depository cannot comply with its obligation of safely keeping the thing
to its transitional provisions (Arts. 2252 to 2269) and returning it.

Characteristic of the contract Delivery need not consist of the actual delivery of the thing.
example: there is delivery when the depositary already had the
Real Contract It is a real contract like commodatum and mutuum, because it is possession
perfected by the delivery of the subject matter of the contract. of the thing in another capacity.

Unilateral Contract
Nominate Contract
Principal Contract
Informal Contract
Gratuitous Contract
It is generally a unilateral contract, as it gives rise to the principal obligation
on the part of the depositary, to safely keep the thing and to return it.
It is unilateral despite the reimbursement obligations of the depositor under
Arts. 1992-1993, as the liabilities of the depositor under those provisions
may not arise, except when extrinsic or independent events occur.
It only becomes a bilateral contract and onerous, when the depositor
has agreed to pay remuneration to the depositary, as the depositor
assumes a primary obligation.
It has been given a specific name by the Civil Code.
Its existence is not dependent on another contract.
No particular form is required for the contract.
It is generally a gratuitous contract, wherein the depositor does not pay
compensation to the depositary.
If the renumeration is paid by the depositor, the contract becomes a
contract of work or service.
1. Consent of the contracting parties
 Manifested by the meeting of the offer and acceptance upon the thing and the
cause which are to constitute the contract.
 Consent may be manifested, expressly or tacitly.
 Consent must be given by parties with capacity to give consent.
example: minors, insane, or demented persons cannot give
consent to a contract of deposit
2. Consent of the contracting parties
 Only movable things capable of being delivered mav be the object of a deposit.
 General contract law also requires the object of the contract must also be within
the commerce of men, determinate, and not impossible.
 There may be a contract for the custody and safekeeping of movable
property, but that contract would not be deemed a contract of deposit under
Article 1962.
 Movable and immovable property may be the object of sequestration of
Judicial Deposit.
3. Cause of the contract
 Essentially gratuitous, in which the cause is the mere liberality of the
depository.
 It is onerous when:
1. The depository paid fees; or
2. When the depository is engaged in the business of storing goods.

Deposit as a credit transaction

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2C Credit Transactions | 2nd Semester of A.Y. 2021-2022
  A deposit is a contract of confidence, because the depositor places full faith and confidence Note: Compensation is not applicable to deposit. Under Article 1287, compensation
in the depository’s probity and zeal. is not proper when one debt arises from a deposit or from the obligations of a
 Before the deposit is constituted, the depositor considers the personal qualities of the depository or of a bailee in commodatum.
depository.

Parties to the contract Deposit vs. Mutuum

1. Depositor; and
 There may be more than 1 depositor, such as when the deposit Deposit Mutuum
is being made by 2 or more persons, each of whom believes As to the purpose
himself to be entitled to the thing deposited.  Principal purpose is safekeeping or mere  The purpose is the consumption of the subject
custody. matter.
2. Depository As to the when the demand can be made
 Need not to be the owner of the thing deposited, because a  Depositor can demand the return of the subject  The lender must wait until the expiration of the
contract of deposit does not transfer ownership of the thing matter at will. period granted to the debtor.
deposited.
 The depository cannot demand that the depositor prove his
ownership of the thing deposited. As to the object
 Both movable and immovable property may be  Only money or other consumable thing may be
object. object.
Safekeeping, principal purpose of the contract
 The principal purpose of the contract of deposit is the safekeeping of the thing delivered.
 If safekeeping is only an accessory or secondary obligation of the recipient of the thing, Deposit vs. Commodatum
deposit is not constituted but some other contract like lease, commodatum, or agency.
Example: A money has been delivered to a person so he may invest the Deposit Commodatum
money for the account of the giver, cannot be constituted as a deposit but only As to the purpose
as an agency.  Principal purpose is safekeeping or mere  The purpose is the transfer of use
 Where the balance of a commission account remains in the possession of the agent at the custody.
principal’s disposal, the same acquires at once the character of a deposit which the former As to the nature of the deposit
must return or restore to the latter, at any time it is demanded.  Deposit may be gratuitous.  Essentially and always gratuitous.
 An agent commits the crime of estafa if he appropriates/diverts it to his own use.
 It could become a loan, if so expressly agreed by the owner who would be then obligated not
to demand it until the expiration of the legal or stipulated period. As to the object
 Where the document which embodies the contract states that U.S. dollars in cash were  In extrajudicial deposit, only movable  Both movable and immovable property may be
received by the bank for safekeeping, and the subsequent acts of the parties also show that (corporeal) things may be the object. the object.
the intent was really for the bank to safely keep the dollars and return it to the plaintiff
who demanded the return of the money about five (5) months later, the above
arrangement is the contract of deposit defined under Article 1962.
Article 1963. An agreement to constitute a deposit is binding, but the deposit itself is not perfected
until the delivery of the thing.
Extinguishment of deposit
 A deposit is extinguished upon: Binding effect of agreement to deposit
 A deposit is a real contract and is, therefore, perfected only upon delivery of the object of the
1. General modes for the extinguishment of obligations; contract.
 Where there has been no delivery, there is merely an agreement to deposit which,
2. Loss or destruction of the thing deposited; however, is binding and enforceable upon the parties.
 Hence, a contract of future deposit is consensual.
2. In case of a gratuitous deposit, upon the death of either the depositor
or the depositary; or
Article 1964. A deposit may be constituted judicially or extrajudicially.
3. By the return of the thing by the depositary.
Creation of deposit

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2C Credit Transactions | 2nd Semester of A.Y. 2021-2022
  May be created by the virtue of a court order, or by law and cannot by the will of the parties.
 In deposit, it is essential that the depository is not the owner of the property deposited.
Corporeal things contemplated
Kinds of deposit  A deposit can only have as its object, the movable corporeal things.
1. Judicial  Art. 1966 does not embrace incorporeal or intangible property, such as rights and
 One which takes place when an attachment or seizure of property in litigation is ordered. actions.

2. Extrajudicial, which may be:

Article 1967. An extrajudicial deposit is either voluntary or necessary.
2.1 Voluntary
 One wherein the delivery is made by the will of the depositor or by 2 or more Kinds of extrajudicial deposit
persons, each of whom believes himself entitled to the thing deposited.  Deposit is generally voluntary.

2.2 Necessary  It becomes necessary in 3 cases mentioned in Arts. 1996, and 1998, respectively:
 One made in compliance with a legal obligation, or on the occasion of any
calamity, or by travellers in hotels and inns, or by travellers with common 1. When made in compliance with a legal obligation, on the occasion of
carriers. any calamity, or by travellers in hotels and inns.

2. The deposit of goods made by travellers or passengers with common

Article 1965. A deposit is a gratuitous contract, except when there is an agreement to the contrary, carriers may also be regarded as necessary.
or unless the depositary is engaged in the business of storing goods.

Contract of deposit is generally gratuitous

Exceptions:

1. Where there is contrary stipulation.

 Provided that it is not contrary to law, morals, good customs, public order,
or public policy

2. Where depository is engaged in business of storing goods

 Just like in the case of a warehouseman, for compensation and not out of
pure generosity.

3. Where there property saved from destruction without the knowledge of the
owner.
 In involuntary deposit, where property is saved from destruction during a
calamity by another person without the knowledge of the owner, the latter
is bound to pay the former a just compensation.

Article 1966. Only movable things may be the object of a deposit

Subject matter of deposit

 Only movable or personal property may be the object of extrajudicial deposit, whether
voluntary or necessary.

 Judicial deposits, however, may cover movable and immovable property, as its
purpose is to bring protection to the rights of the parties in a suit.

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2C Credit Transactions | 2nd Semester of A.Y. 2021-2022
 capacitated.
1. To the legal representative of
the incapacity; or

2. To the depositor himself, if he

should acquire capacity.
CHAPTER 2
Voluntary Deposit  Under the law, persons who are capable cannot allege the incapacity of those with
whom they contract.
SECTION 1  The depositor cannot be compelled by the incapacitated depositor to return the thing
General Provisions to such depositor.
 If the depository learns that the depositor is incapacitated, it is best for the depositor
Article 1968. A voluntary deposit is that wherein the delivery is made by the will of the depositor. A to contract the depositor’s guardian or administrator, in relation to the return of the
deposit may also be made by two or more persons each of whom believes himself entitled to the thing.
thing deposited with a third person, who shall deliver it in a proper case to the one to whom it
belongs. Status of the contract
 When one party to the contract of deposit is incapacitated to give consent to the
Voluntary deposit defined contract, the contract is voidable.
 A voluntary deposit is one wherein the delivery is made by the will of the depositor.
 When both parties are incapable of giving consent to a contract, the contract is
Voluntary vs. Necessary Deposits unenforceable.
 In Voluntary deposit, the depositor has a complete freedom in choosing the depository.
 In Necessary deposit, there is a lack of free choice in the depositor. Article 1971. If the deposit has been made by a capacitated person with another who is not, the
depositor shall only have an action to recover the thing deposited while it is still in the possession of
Where there are several depositors the depositary, or to compel the latter to pay him the amount by which he may have enriched or
 Two or more persons, each claiming to be entitled to a thing may deposit the same with a benefited himself with the thing or its price. However, if a third person who acquired the thing acted in
third person. bad faith, the depositor may bring an action against him for its recovery.
 In such case, the third person assumes the obligation to deliver to the one to whom it
belongs. Where depository incapacitated and depositor capacitated
 The action to compel the depositors to settle their conflicting claims among themselves would
be in the nature of an interpleader.  The incapacitated depositary (like minor/insane person) does not incur the obligation of a
depositary.
Article 1969. A contract of deposit may be entered into orally or in writing.
 However, he/she is liable:
Form of contract of deposit 1. To return the thing deposited while still in his possession;
 No required form for a deposit.
 It may be entered into orally or in writing. 2. If the thing deposited is no longer in his possession, to pay the depositor
 Deposit being a real contract, delivery of the thing is essential in order to perfect the contract. the amount by which he may have benefitted himself with the thing or its
price, subject to the right of any third person, who acquired the thing in
good faith.
Article 1970. If a person having capacity to contract accepts a deposit made by one who is
incapacitated, the former shall be subject to all the obligations of a depositary, and may be compelled Example: A deposited a watch with B (a minor), who sold it to
to return the thing by the guardian, or administrator, of the person who made the deposit, or by the C.
latter himself if he should acquire capacity.
1. If C acted in bad faith, A may recover the watch from him.
When depository capacitated and depositor incapacitated
2. If C acted in good faith, A’s only recourse is against B to
compel him return the price received for the watch or the
When the depository is capacitated: When the depositor is incapacitated:
amount by which he may have benefitted himself.
 He is subject to all obligations of a  The depository must return the
depository, whether the depositor is property:

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2C Credit Transactions | 2nd Semester of A.Y. 2021-2022

SECTION 2
Obligations of the Depositary
Article 1972. The depositary is obliged to keep the thing safely and to return it, when required, to the
depositor, or to his heirs and successors, or to the person who may have been designated in the
contract. His responsibility, with regard to the safekeeping and the loss of the thing, shall be
governed by the provisions of Title I of this Book.
 The diligence required of the depositary is that agreed upon by the parties, who may limit or
expand the degree of diligence required.
 Ordinarily, the depository must exercise the same diligence as he would exercise over his
property.
 The liability of the depository for the care and delivery of the thing is governed by the rules on
obligations:
1. When there is a loss or deterioration of the thing which occurred through his
fault/negligence.
2. The loss of the thing while in his possession ordinarily raises a presumption of
fault on his part.
3. If the contract, does not state the diligence required, that which expected of a
good father of a family is required.
3. The required degree of care is greater if the deposit is for compensation than
when it is gratuitous.
 When the deposit is gratuitous, the depository does not have to obtain insurance for the thing
deposited, unless there is a stipulation to the contrary.
Obligation to return

WHAT must be  The depository must return the thing received, with all its products,
If the deposit is gratuitous, this fact shall be taken into account in determining the degree of care that returned accessories and accessions.
the depositary must observe.

The depository has (3) principal obligations Exceptions to the rule that the same thing received must be
returned are:
1. The obligation to keep the thing;
a. if the depositary was not prohibited from comingling grains
1.1 To obligation to keep the thing safely. and other articles of the same kind and quality, then the
depositary must return an article of the same kind and quality
1.2 The obligation to not deposit the thing with a third person. (Art. 1976.);

1.3 The obligation not to change the way of the deposit. b. if the depository by force majeure loses the thing and
receives money/another thing in its place, he must deliver the
1.4 The obligation to collect interest on certificates when they become money or thing received to the depositor.
due and preserve the value of securities.

1.5 The obligation not to commingle grain and other articles of the c. if the depositary’s heir sells the thing sold in good faith (not
same kind and quality if there is a stipulation to the contrary. knowing the thing was merely deposited), he is only bound to
return the price he may' have received.
2. The obligation not to use the thing; and

3. The obligation to return the thing. Note: If the thing deteriorates while in the custody of the
depositary, the depositary will return the thing to the
3.1 The obligation to return the thing with all its products, accessions, depositor in the deteriorated state.
and accessories.

3.2 The obligation to return the thing closed and sealed if delivered in In the absence of fault on the part of the depositary, the
such condition, except in certain instances. depositary cannot be held liable for the deterioration
suffered by the thing.
Obligation to keep the thing deposited

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2C Credit Transactions | 2nd Semester of A.Y. 2021-2022
 TO WHOM returned  As a rule, the depository must return the thing:
1. to the depositor;
2. to his heirs and successors; or
3. to the person who may have been designated in the
contract.
Breach of obligation to return
Who has priority in receiving the thing deposited, the
heir
or the assignee of the depositor?
a. If the assignee did not intervene in the contract, but he
was just appointed to receive the deposit, then the thing
must be delivered to the heir.
b. If the deposit was made for the benefit of the assignee,
the assignee acquired the right to require delivery of the
thing deposited.
 If the depositor was incapacitated at the time of making the deposit,
the property must be returned to his guardian or administrator or to the
depositor himself should he acquire capacity. (Art. 1970.)
 If the depositor loses capacity to contract after having made the
deposit, the depositary must return the thing to the persons who may
have administration of the depositor’s property and rights.
 When there are two (2) or more depositors, if they are not solidary,
and the thing admits of division, each cannot demand more than his
share.
 When there is solidarity or the thing does not admit of division, Articles
1212 and 1214 will apply. (Art. 1985.)
 Under Article 1214, the depositary may deliver the thing to any of the
solidary depositors; but if any demand, judicial or extrajudicial, has
been made by any of them, delivery should be made to him.
Custody must be personal
WHEN must be  The depositary is only a custodian who acts in the exclusive interest of
returned the depositor and must therefore be willing at all times to make the
delivery to the depositor.
 The depositary must, as a rule, return the thing deposited upon
demand.
Obligation not to transfer deposit
WHERE must be  As a rule, the depositary must return the thing at the place designated
returned for its return.
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 Absent stipulation, at the place where the thing deposited might be
even, if it should not be the same place where the original deposit was
made provided the transfer was accomplished without malice on the
part of the depositary.
 If the depository fails to return the thing, the depository can:
1. Be held liable for damages for failure to return the thing;
2. Be held criminally liable for estafa, should he appropriate the thing.
 In case of failure to return the thing because of mistake or force majeure:
1. Mistake:
 The mistake relates, not to the depositary, but to his heir, “who in good faith
may have sold the thing which he did not know was deposited.” (Art. 1991.)
Here, the heir will not be held liable for damages but “shall only be
bound to return the price he may have received or to assign his right
of action against the buyer in case the price has not been paid to him.”
2. Force Majeure:
 As a rule, if the depositary loses the thing by force majeure (and without
fault or negligence on his part) and he does not receive money or another
thing in its place, the depositary is not bound to return the thing.
 But if the depositary receives money or another thing in place of the thing
deposited, then the depositary must deliver the sum or money of the
other thing to the depositor.
Article 1973. Unless there is a stipulation to the contrary, the depositary cannot deposit the thing
with a third person. If deposit with a third person is allowed, the depositary is liable for the loss if he
deposited the thing with a person who is manifestly careless or unfit. The depositary is responsible
for the negligence of his employees.
 The depository’s custody of the thing must be personal.
 Contract of deposit is a contract of confidence, as before the deposit is constituted, the
depositor considered the personal qualities of the depositary.
 Unless authorized by express stipulation, the depositary may not deposit the thing with a third
person.
  Liability for loss. The depositor is liable for the loss of the thing deposited if:
Contract for rent of safety deposit boxes
1. He transfers the deposit with a third person without authority
although there is no negligence on his part and the third person;
2. He deposits the thing with a third person who is manifestly
careless or unfit although authorized, even in the absence of
negligence; or
3. The thing is lost through the negligence of his employees
whether the latter are manifestly careless or not.
 Exemption from liability. The depositor is not responsible if the thing is lost without
negligence of the third person with whom he was allowed to deposit the thing if such person is
not “manifestly careless or unfit”
 A contract for the rent of safety deposit boxes (2 nd paragraph) is not an ordinary contract of
lease of things, but a special kind of deposit.
 Hence, it is not to be strictly governed by the provisions on deposit.
 In operating a safety deposit box, the box and the contents thereof are in the manual
possession of the lessor.
 However, neither the lessor nor the renter can be given access to the contents of the box
without the consent and cooperation of the other.
Article 1976. Unless there is a stipulation to the contrary, the depositary may commingle grain or
other articles of the same kind and quality, in which case the various depositors shall own or have a
proportionate interest in the mass.
PAGE 17 OF PART V DEPOSIT FILE

 If the depositary urgently needs to deposit the thing with a third person to preserve the thing
and there is no more time to obtain the depositor’s consent, the depositary should be able to
transfer the deposit.

Article 1974. The depositary may change the way of the deposit if under the circumstances he may
reasonably presume that the depositor would consent to the change if he knew of the facts of the
situation. However, before the depositary may make such change, he shall notify the depositor
thereof and wait for his decision, unless delay would cause danger. 

Obligation not to change way of deposit

 The depositary may change the way or manner of the deposit if there are circumstances
indicating that the depositor would consent to the change.

 However, the depositary should first notify the depositor and wait for the latter’s
decision. This requirement may not be dispensed with unless delay would cause danger.

 It follows the general rule that the depositary must take good care of the thing with the
diligence of a good father of a family.

Article 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.

Obligation to collect interest on choses in action deposited

 If the thing deposited should earn interest, the depositary is under the obligation:

1. to collect the interest as it becomes due; and

2. to take such steps as may be necessary to preserve its value and
the rights corresponding to it.
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2C Credit Transactions | 2nd Semester of A.Y. 2021-2022