LAW ON CREDIT TRANSACTIONS – DEPOSIT

(Articles 1962-2009)

• Chapter 1 – Deposit in General and Its Different Kinds (Arts. 1962-1967)

• Chapter 2 – Voluntary Deposit (Arts. 1968-1995)
Section 1. – General Provisions (Arts. 1968-1971)
Section 2. – Obligations of the Depositary (Arts. 1972-1991)
Section 3. – Obligations of the Depositor (Arts. 1992-1995)
• Chapter 3 – Necessary Deposit (Arts. 1996-2004)
• Chapter 4 – Sequestration or Judicial Deposit (Arts. 2005-2009)

DEPOSIT (Art. 1962)

- A deposit is a contract constituted from the moment a person receives a thing belonging to another, with the obligation
of safely keeping it and of returning the same

Characteristics of the contract of DEPOSIT

1. It is a real contract because it is perfected by the delivery of the subject matter.
2. When the deposit is gratuitous, it is a unilateral contract because only the depositary (depositorio) has an obligation.
But when the deposit is for compensation, the juridical relation created becomes bilateral because it gives rise to
obligations on the part of both the depositary and depositor (depositante).
3. Contract of deposit generally gratuitous.

Distinctions between Deposit and Mutuum

Deposit Mutuum
Principal Purpose Safekeeping or mere custody. Consumption of the subject matter.
Return Depositor can demand return at will. Lender must wait for the expiration of the
stipulated period.
Object Movable (extrajudicial) and immovable (judicial) Money or fungible thing.

Distinctions between Deposit and Commodatum

Deposit Commodatum
Principal Purpose Safekeeping or mere custody. Transfer of use.
Return May be gratuitous Always gratuitous.
Object Only movable (corporeal) things may be the object Both movable and immovable property.
of extrajudicial deposit.

Kinds of DEPOSIT
❖ Judicial - takes place when an attachment or seizure of property in litigation is ordered.
❖ Extrajudicial - may be:
✓ Voluntary - the delivery is made by the will of the depositor or by two or more persons each of whom believes
himself entitled to the thing deposited
✓ Necessary - one made in compliance with a legal obligation, or on the occasion of any calamity, or by travelers in
hotels and inns or by travelers with common carriers.

Extrajudicial vs. Judicial Deposits

Extrajudicial
How constituted By will of the contracting parties.
Object Must be movable or personal
property.
Purpose Safekeeping of the thing deposited.
Gratuitous or Onerous? As a general rule, gratuitous
How the thing is returned/delivered The depository is obliged to return the
thing deposited upon demand made
by the depositor.
Judicial
By virtue of a court order.
May be either movable or immovable
property.
To secure or protect the owner’s right.
Always onerous
The thing shall be delivered only upon
order of the court.

Kinds of Extrajudicial Deposit

Voluntary Deposit Necessary Deposit
The depositor has complete freedom in choosing the depositary. There is lack of free choice in the depositor.

VOLUNTARY DEPOSIT
- A voluntary deposit is one wherein the delivery is made by the will of the depositor.

Form of contract of deposit

A contract of deposit may be entered into orally or in writing. (Art. 1969)
- Except for the delivery of the thing, there are no formalities required for the existence of the contract.
Effect if one of the parties is incapacitated
❖ If the depositary is capacitated, he is subject to all the obligations of a depositary whether or not the depositor is
capacitated. The depositary may be compelled to return the property to the legal representative of the incapacitated or
to the depositor himself if he should acquire capacity. (see Art. 1970) Under the law, "persons who are capable cannot
allege the incapacity of those with whom they contract."

❖ The incapacitated depositary does not incur the obligation of a depositary. However, he is liable:
(a) to return the thing deposited while still in his possession and
(b) to pay the depositor the amount by which he may have benefited himself with the thing or its price subject to
the right of any third person who acquired the thing in good faith.
Obligations of the Depositary
1. To keep the thing deposited and return it. (Art. 1972)
2. Not to transfer deposit with a third person. (Art. 1973)
3. Not to change way of deposit (Art. 1974)
4. To collect interest on choses in action (certificates, bonds, securities, or instruments) deposited (Art. 1975)
5. Not to commingle things deposited if so stipulated. (Art. 1976)
6. Not to make use of the thing deposited unless expressly authorized (Art. 1977)
7. To be liable for loss even through a fortuitous event (Art. 1979) in the ff cases:
a) if so stipulated
b) if he uses the thing without the depositor's permission
c) if he delays its return
d) if he allows others to use it, even though he may have been authorized to use the same
8. To return the thing deposited when delivered closed and sealed, in the same condition (Art. 1981, par. 1)
9. To pay for damages should the seal or lock be broken through his fault (Art. 1981, par. 2)
10. To keep the secret of the deposit when the seal or lock is broken, with or without his fault. (Art. 1981, par. 3)
11. To return products, accessories, and accessions (Art. 1983)
12. To pay interest on sums converted to personal use (Art. 1983)
13. To advise the true owner, should he discover who the true owner is (Art. 1984)
14. To return the thing deposited at the place designated, or in the absence thereof, where the thing deposited may be (Art.
1987)
15. To return the thing deposited upon demand (Art. 1988)
16. To be deliver the sum or other thing to the depositor if the thing is lost by force majeure or government order and
receives money or another thing in its place. (Art. 1990)

Obligations of the Depositor

1. If the deposit is gratuitous, to pay expenses of preservation (Art. 1992)
2. To reimburse the depositary for any loss arising from the character of the thing deposited, unless at the time of the
constitution of the deposit:
a) the depositor was not aware of such character,
b) he was not expected to know the dangerous character of the thing,
c) he notified the depositary of the same, or
d) the depositary was aware of it without advice from the depositor.

Causes of Extinguishment of Deposit

• Upon the loss or destruction of the thing deposited;
• In case of a gratuitous deposit, upon the death of either the depositor or the depositary.
• Other causes: return of the thing, novation, merger, expiration of the term, fulfillment of the resolutory condition, etc.

Persons to Whom Return of Thing Deposited

Must be Made
- The depositary is obliged to return the thing deposited, when required, to the depositor, to his heirs and successors, or
to the person who may have been designated in the contract (Art. 1972).
- If the depositor was incapacitated at the time of making the deposit, the property must be returned to his guardian or
administrator or the person who made the deposit or to the depositor himself should he acquire capacity (Art. 1970).
Even if the depositor had capacity at the time of making the deposit but he subsequently loses his capacity during the
deposit, the thing must be returned to his legal representative (Art. 1988).

Place of Return of Thing Deposited

✓ At the place agreed upon by the parties, and in the absence of 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.
Note: Depositor shoulders the expenses for transportation

Time of Return of Thing Deposited

General Rule: Upon demand or at will, whether or not a period has been stipulated.

Exceptions:
a) thing is judicially attached while in the depositary's possession
b) depositary was notified of the opposition of a third person to the return or the removal of the thing deposited (Art. 1986)
NECESSARY DEPOSIT
- A voluntary deposit is made by the free will of the depositor. In a necessary deposit, this freedom of choice is absent.

Kinds of Necessary Deposit

1) When it is made in compliance with a legal obligation;
2) When it takes place on the occasion of any calamity, such as fire, storm, flood, pillage, shipwreck, or other similar
events. (Art. 1996)
3) Made by travelers in hotels or inns. (Art. 1998)
4) Made by passengers with common carriers. (Art. 1754.)
Extent of Liability of Keepers of Hotels and Inns
- The liability is not limited to effects lost or damaged in the hotel rooms which come under the term "baggage" or articles
such as clothing as are ordinarily used by travelers but include those lost or damaged in hotel annexes such as vehicles
in the hotel's garage.
- The responsibility imposed extends to all those who offer lodging for a compensation, whatever may be their character.

Liability of Hotel / Inn-keepers

Hotel-keeper liable
- The loss or injury is caused by his servants or employees as well as by strangers (Art. 2000.) provided that notice has
been given and proper precautions taken.
- The loss is caused by the act of a thief or robber done without the use of arms and irresistible force. (Art. 2001.)

Hotel-keeper is not liable

- The loss or injury is caused by force majeure, like flood, fire (Art. 2000), theft or robbery by a stranger (not by
hotelkeeper's servant or employee) with the use of arms or irresistible force (Art. 2001.), etc., unless he is guilty of fault
or negligence in failing to provide against the loss or injury from his cause.
- The loss is due to the acts of the guests, his family, servants, or visitors (Art. 2002)
- The loss arises from the character of the things brought into the hotel.

SEQUESTRATION OR JUDICIAL DEPOSIT

- Judicial deposit or sequestration takes place when an attachment or seizure of property in litigation is ordered
by a court. (Art. 2005.)

Judicial and Extrajudicial Deposits Distinguished

Judicial Deposits
Cause or Origin By the will of the court.
Purpose As security and to secure the right of a
party to recover in case of a favorable
judgment.
Subject Matter Either movable or immovable property
but generally immovable property.
Remuneration Always remunerated (onerous)
In whose behalf it is held In behalf of the person who, by the In behalf of the depositor or third
judgment, has a right.
Extrajudicial Deposits
By the will of the parties.
Custody and safekeeping of the thing.
Only movable property.
May be compensated or not, but
generally gratuitous.
person designated.