ARTICLE 1962

DEPOSITS

 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:

1. Real Contract - contract is perfected by the delivery of the subject matter.

2. Unilateral (gratutitous deposit) - only the depositary has an obligation.
3. Bilateral (onerous deposit) - gives rise to obligations on the part of both the depositary and depositor.
(deposit is for compensation)

Principal Purpose of the Contract:

- Safekeeping of the thing delivered (so if safekeeping is only an accessory or second obligation of the
recipient of the thing, deposit is not constituted, but some other contract like lease, commodatum or
agency)

- The principal end of the contract is representation of one by another

Deposit Mutuum

1. Purpose

Principal purpose is Principal purpose is

safekeeping or consumption
custody

2. When to Return

Depositor can The lender must wait

demand the return of until the expiration
the subject matter at of the period granted
will to the debtor

3. Subject Matter

Subject matter may Subject matter is only

be movable or money or other
immovable property fungible thing

4. Relationship

Relationship is that Relationship is that

of lender (creditor) of depositor and
and borrower depositary.
(debtor).

5. Compensation

There can be NO compensation of

compensation of things deposited with
credits. each other (except
Deposit Commodatum
by mutual
agreement).

1. Purpose is 1. Purpose is the

Safekeeping transfer of the use

2. May be gratuitous
2. Essentially and
always gratuitous

3. 3. Both movable and

Movable/corporeal immovable may be
things only in case of the object
extrajudicial deposit
ARTICLE 1963

 An agreement to constitute a deposit is binding

 A deposit is perfected only upon delivery of the object of the contract

ARTICLE 1964

 A deposit may be created by virtue of a court order or by law and not by the will of the parties

 It is essential that the depositary is not the owner of the property deposited

 Kinds of Deposit:

1. Judicial (Sequestration) – takes place when an attachment or seizure of property in litigation is ordered.

2. Extra-judicial
a. Voluntary – one wherein 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. (Arts 1968 – 1995)
b. Necessary – one made in compliance with a legal obligation, or on the occasion of any calamity, or by
travellers in hotels and inns (Arts 1996 - 2004), or by travellers with common carriers (Art 1734 – 1735).

NOTE: The chief difference between a voluntary deposit and a necessary deposit is that in the former, the
depositor has a complete freedom in choosing the depositary, whereas in the latter, there is lack of free choice in
the depositor.

Judicial Extra-judicial
1. Creation

Will of the court Will of the parties

or contract

2. Purpose

Security or to insure Custody and

the right of a party safekeeping
to property or to
recover in case of
favorable judgment

3. Subject Matter

Movables or Movables only

immovables,
 but generally
immovables

4. Cause

Always onerous May be

compensated or
not, but generally
gratuitous

5. When must the thing be returned

Upon order of the Upon demand of

court or when depositor
litigation is ended

6. In whose behalf it is held

Person who has a Depositor or third

right person designated

ARTICLE 1965

GENERAL RULE: Contract of deposit is gratuitous (Art 1965)

EXCEPTIONS:
1. when there is contrary stipulation
2. depositary is engaged in business of storing goods
3. property saved from destruction without knowledge of the owner

ARTICLE 1966

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

 Judicial deposit (Arts. 2005-2006.), however, may cover movable as well as immovable
property its purpose being to protect the rights of parties to a suit.

 Article 1966 does not embrace incorporeal property, such as rights and actions, for it
follows the person of the owner, wherever he goes.

ARTICLE 1967

Deposit is generally voluntary

It becomes necessary in the 3 cases mentioned in Art 1996 & 1998:

 When made in compliance with a legal obligation
 On the occasion of any calamity
 By travellers in hotels and inns

ARTICLE 1968

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

Ordinarily, there are only two persons involved. Sometimes, however, the depositary may be a third person

Voluntary deposit Necessary deposit

The depositor has complete freedom in There is lack of free choice in the depositor
choosing the depositary

Generally, the depositor must be the owner of the thing deposited. But it may belong to a
person other than the depositor.
 A contract for the rent of safety deposit boxes 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. The relation between a bank and its customer is that of a bailor
and bailee. (CA Agro vs CA, 219 SCRA 426)

Obligations of the Depositary (Art 1972 –1991):

1. To keep the thing safely (Art 1972)
 Exercise over the thing deposited the same diligence as he would exercise over his
property
2. To return the thing (Art 1972)
 Person to whom the thing must be returned:
a. Depositor, to his heirs and successors, or the person who may have been designated in
the contract
b. If the depositary is capacitated - he is subject to all the obligations of a depositary
whether or not the depositor is capacitated. If the depositor is incapacitated, the
depositary must return the property to the legal representative of the incapacitated or
to the depositor himself if he should acquire capacity (Art 1970).
c. If the depositor is capacitated and the depositary is incapacitated - the latter does not
incur the obligation of a depositary but he is liable:
i..to return the thing deposited while still in his possession;
ii.to pay the depositor the amount 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 (Art
1971)

 Time of return:
a. Upon demand even though a specified period or time for such return may have been
fixed except when the thing is judicially attached while in the depositary’s possession
or should he have been notified of the opposition of a third person to the return or the
removal of the thing deposited. (Art 1998)
b. If deposit gratuitous, the depositary may return the thing deposited
notwithstanding that a period has been fixed for the deposit if justifiable reasons
exists for its return.
a. If the deposit is for a valuable consideration, the depositary has no right to
return the thing deposited before the expiration of the time designated even if he
should suffer inconvenience as a consequence.(Art 1989)

 What to return: product, accessories, and accessions of the thing deposited (Art 1983)
3. Not to deposit the thing with a third person unless authorized by express stipulation (Art
1973)
 The depositor is liable for the loss of the thing deposited under Article 1973 if:
a. he transfers the deposit with a third person without authority
although there is no negligence on his part and the third person;
b. he deposits the thing with a third person who is manifestly
careless or unfit although authorized even in the absence of negligence; or
c. the thing is lost through the negligence of his employees
whether the latter are manifestly careless or not.
4. If the thing deposited should earn interest (Art 1975):
a. to collect interest and the capital itself as it fall due
b. to take steps to preserve its value and rights corresponding to it
5. Not to commingle things deposited if so stipulated (Art 1976)
6. Not to make use of the thing deposited unless authorized (Art 1977)
GENERAL RULE: Deposit is for safekeeping of the subject matter and not for use. The
unauthorized use by the depositary would make him liable for damages.
EXCEPTIONS:
1. When the preservation of the thing deposited requires its use
2. When authorized by the depositor
 NOTE: The permission to use is NOT presumed except when such use is necessary for the
preservation of the thing deposited.

Effect if permission to use is given (Art 1978):

1. If thing deposited is non-consumable, the contract loses the character of a
deposit and acquires that of a commodatum despite the fact that the parties may have
denominated it as a deposit, unless safekeeping is still the principal purpose.
2. If thing deposited consists of money/consumable things, the contract is converted into
a simple loan or mutuum unless safekeeping is still the principal purpose in which case
it is called an irregular deposit. Example: bank deposits are irregular deposits in
nature but governed by law on loans.
7. When the thing deposited is delivered sealed and closed :
a. to return the thing deposited in the same condition
b. to pay for damages should the seal or lock be broken through his fault, which is
presumed unless proved otherwise
c. to keep the secret of the deposit when the seal or lock is broken with or without his
fault (Art 1981)
NOTE: The depositary is authorized to open the thing deposited which is closed and
sealed when (Art 1982):
i. there is presumed authority (i.e. when the key has been delivered to him or the
instructions of the depositor cannot be done without opening it)
ii. necessity
8. To change the way of the deposit if under the circumstances, the depositary may
reasonably presume that the depositor would consent to the change if he knew of the
facts of the situation, provided, that the former notifies the depositor thereof and wait
for his decision, unless delay would cause danger
9. To pay interest on sums converted to personal use if the deposit consists of money (Art
1983)
10. To be liable for loss through fortuitous event (SUDA): (Art 1979):
a. if 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 himself may have been authorized to use
the same

NOTES:

 Fixed, savings, and current deposits of money in banks and similar institutions shall be
governed by the provisions concerning simple loan. (Art 1980)
 The general rule is that a bank can compensate or set off the deposit in its hands for the
payment of any indebtedness to it on the part of the depositor. In true deposit,
compensation is not allowed.

Irregular deposit Mutuum

1. The consumable 1. Lender is bound

thing deposited may by the provisions of
be demanded at will the contract and
by the depositor cannot demand
restitution until the
time for payment, as
provided in the
contract, has arisen

2. The only benefit is 2. Essential cause for

that which accrues the transaction is
to the depositor the necessity of the
borrower
 3. The irregular 3. Common creditors
depositor has a enjoy no preference
preference over in the distribution of
other creditors with the debtor’s
respect to the thing property
deposited

Rule when there are two or more depositors (Art 1985):

1. If thing deposited is divisible and depositors are not solidary: Each depositor can demand
only his proportionate share thereto.
2. If obligation is solidary or if thing is not divisible: Rules on active solidarity shall apply,
i.e. each one of the solidary depositors may do whatever may be useful to the others but
not anything which may be prejudicial to the latter, (Art. 1212) and the depositary may
return the thing to anyone of the solidary depositors unless a demand, judicial or
extrajudicial, for its return has been made by one of them in which case, delivery should
be made to him (Art. 1214).
3. Return to one of depositors stipulated. The depositary is bound to return it only to the
person designated although he has not made any demand for its return.

NOTES:

 The depositary may retain the thing in pledge until full payment of what may be due him
by reason of the deposit (Art 1994)
 The depositor’s heir who in good faith may have sold the thing which he did not know was
deposited, 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 him (Art 1991)

Obligations of the Depositor (Art 1992 – 1995):

1. To pay expenses for preservation
a. If the deposit is gratuitous, the depositor is obliged to reimburse the depositary for
expenses incurred for the preservation of the thing deposited (Art 1992)
b. If the deposit is for valuable consideration, expenses for preservation are borne by
the depositary unless there is a contrary stipulation
2. To pay loses incurred by the depositary due to the character of the thing deposited

GENERAL RULE: The depositor shall reimburse the depositary for any loss arising from the
character of the thing deposited.
EXCEPTIONS:
1. at the time of the deposit, the depositor was not aware of the dangerous character of
the thing
2. when depositor was not expected to know the dangerous character of the thing
3. when the depositor notified the depository of the same
4. the depositary was aware of it without advice from the depositor

Extinguishment of Voluntary Deposit (Art 1995)

1. Loss or destruction of the thing deposited
2. In case of gratuitous deposit, upon the death of either the depositor or the depositary
3. Other causes, such as return of the thing, novation, merger, expiration of the term
fulfilment of the resolutory condition, etc (Art 1231)

Necessary Deposits
1. Made in compliance with a legal obligation
2. Made on the occasion of any calamity such as fire, storm, flood, pillage, shipwreck or
other similar events (deposito miserable)
3. Made by travellers in hotels and inns or by travellers with common carrier
Deposit by Travellers in hotels and inns:
 The keepers of hotels or inns shall be responsible as depositaries for the deposit of effects
made by travellers provided:
a. Notice was given to them or to their employees of the effects brought by the guest;
and
b. The guests take the precautions which said hotel-keepers or their substitutes advised
relative to the care and vigilance of their effects.
NOTES:

 Liability extends to vehicles, animals and articles which have been introduced or placed in
the annexes of the hotel.
 Liability shall EXCLUDE losses which proceed from force majeure. The act of a thief or
robber is not deemed force majeure unless done with the use of arms or irresistible force.
 The hotel-keeper cannot free himself from the responsibility by posting notices to the
effect that he is not liable for the articles brought by the guest. Any stipulation to such
effect shall be void.
 Notice is necessary only for suing civil liability but not in criminal liability.