b. Obligations of the Depositary and of the Depositor

B. Deposit (Civil Code, arts. 1962-2009)

Civil Code, arts. 1962-2009

TITLE XII

DEPOSIT

CHAPTER 1

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. (1758a)

Article 1963. An agreement to constitute a deposit is binding, but the deposit itself is not perfected until the delivery of the thing. (n)

Article 1964. A deposit may be constituted judicially or extrajudicially. (1759)

Article 1965. A deposit is a gratuitous contract, except when there is an agreement to the contrary, or unless the depositary is engaged in the business of storing goods. (1760a)

Article 1966. Only movable things may be the object of a deposit. (1761)

Article 1967. An extrajudicial deposit is either voluntary or necessary. (1762)

CHAPTER 2

Voluntary Deposit

SECTION 1

General Provisions

Article 1968. A voluntary deposit is that wherein the delivery is made by the will of the depositor. A deposit may also be made by two or more persons each of whom believes himself entitled to the thing deposited with a third person, who shall deliver it in a proper case to the one to whom it belongs. (1763)

Article 1969. A contract of deposit may be entered into orally or in writing. (n)

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 to return the thing by the guardian, or administrator, of the person who made the deposit, or by the latter himself if he should acquire capacity. (1764)

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 the depositary, or to compel the latter to pay him the amount by which he may have enriched or benefited himself with the thing or its price. However, if a third person who acquired the thing acted in bad faith, the depositor may bring an action against him for its recovery. (1765a)

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.

If the deposit is gratuitous, this fact shall be taken into account in determining the degree of care that the depositary must observe. (1766a)

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. (n)

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. (n)

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. (n)

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. (n)

Article 1977. The depositary cannot make use of the thing deposited without the express permission of the depositor.

Otherwise, he shall be liable for damages.

However, when the preservation of the thing deposited requires its use, it must be used but only for that purpose. (1767a)

Article 1978. When the depositary has permission to use the thing deposited, the contract loses the concept of a deposit and becomes a loan or commodatum, except where safekeeping is still the principal purpose of the contract.

The permission shall not be presumed, and its existence must be proved. (1768a)

Article 1979. The depositary is liable for the loss of the thing through a fortuitous event:

(1) If it is so stipulated;

(2) If he uses the thing without the depositor's permission;

(3) If he delays its return;

(4) If he allows others to use it, even though he himself may have been authorized to use the same. (n)

Article 1980. Fixed, savings, and current deposits of money in banks and similar institutions shall be governed by the provisions concerning simple loan. (n)

Article 1981. When the thing deposited is delivered closed and sealed, the depositary must return it in the same condition, and he shall be liable for damages should the seal or lock be broken through his fault.

Fault on the part of the depositary is presumed, unless there is proof to the contrary.

As regards the value of the thing deposited, the statement of the depositor shall be accepted, when the forcible opening is imputable to the depositary, should there be no proof to the contrary. However, the courts may pass upon the credibility of the depositor with respect to the value claimed by him.

When the seal or lock is broken, with or without the depositary's fault, he shall keep the secret of the deposit. (1769a)

Article 1982. When it becomes necessary to open a locked box or receptacle, the depositary is presumed authorized to do so, if the key has been delivered to him; or when the instructions of the depositor as regards the deposit cannot be executed without opening the box or receptacle. (n)

Article 1983. The thing deposited shall be returned with all its products, accessories and accessions.

Should the deposit consist of money, the provisions relative to agents in article 1896 shall be applied to the depositary. (1770)

Article 1984. The depositary cannot demand that the depositor prove his ownership of the thing deposited.

Nevertheless, should he discover that the thing has been stolen and who its true owner is, he must advise the latter of the deposit.

If the owner, in spite of such information, does not claim it within the period of one month, the depositary shall be relieved of all responsibility by returning the thing deposited to the depositor.

If the depositary has reasonable grounds to believe that the thing has not been lawfully acquired by the depositor, the former may return the same. (1771a)

Article 1985. When there are two or more depositors, if they are not solidary, and the thing admits of division, each one cannot demand more than his share.

When there is solidarity or the thing does not admit of division, the provisions of articles 1212 and 1214 shall govern. However, if there is a stipulation that the thing should be returned to one of the depositors, the depositary shall return it only to the person designated. (1772a)

Article 1986. If the depositor should lose his capacity to contract after having made the deposit, the thing cannot be returned except to the persons who may have the administration of his property and rights. (1773)

Article 1987. If at the time the deposit was made a place was designated for the return of the thing, the depositary must take the thing deposited to such place; but the expenses for transportation shall be borne by the depositor.

If no place has been designated for the return, it shall be made where the thing deposited may be, even if it should not be the same place where the deposit was made, provided that there was no malice on the part of the depositary. (1774)

Article 1988. The thing deposited must be returned to the depositor upon demand, even though a specified period or time for such return may have been fixed.

This provision shall not apply 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. In these cases, the depositary must immediately inform the depositor of the attachment or opposition. (1775)

Article 1989. Unless the deposit is for a valuable consideration, the depositary who may have justifiable reasons for not keeping the thing deposited may, even before the time designated, return it to the depositor; and if the latter should refuse to receive it, the depositary may secure its consignation from the court. (1776a)

Article 1990. If the depositary by force majeure or government order loses the thing and receives money or another thing in its place, he shall deliver the sum or other thing to the depositor. (1777a)

Article 1991. 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. (1778)

SECTION 3

Obligations of the Depositor

Article 1992. If the deposit is gratuitous, the depositor is obliged to reimburse the depositary for the expenses he may have incurred for the preservation of the thing deposited. (1779a)

Article 1993. The depositor shall reimburse the depositary for any loss arising from the character of the thing deposited, unless at the time of the constitution of the deposit the former was not aware of, or was not expected to know the dangerous character of the thing, or unless he notified the depositary of the same, or the latter was aware of it without advice from the depositor. (n)

Article 1994. The depositary may retain the thing in pledge until the full payment of what may be due him by reason of the deposit. (1780)

Article 1995. A deposit is extinguished:

(1) Upon the loss or destruction of the thing deposited;

(2) In case of a gratuitous deposit, upon the death of either the depositor or the depositary. (n)

CHAPTER 3

Necessary Deposit

Article 1996. A deposit is necessary:

(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. (1781a)

Article 1997. The deposit referred to in No. 1 of the preceding article shall be governed by the provisions of the law establishing it, and in case of its deficiency, by the rules on voluntary deposit.

The deposit mentioned in No. 2 of the preceding article shall be regulated by the provisions concerning voluntary deposit and by article 2168. (1782)

Article 1998. The deposit of effects made by travellers in hotels or inns shall also be regarded as necessary. The keepers of hotels or inns shall be responsible for them as depositaries, provided that notice was given to them, or to their employees, of the effects brought by the guests and that, on the part of the latter, they take the precautions which said hotel-keepers or their substitutes advised relative to the care and vigilance of their effects. (1783)

Article 1999. The hotel-keeper is liable for the vehicles, animals and articles which have been introduced or placed in the annexes of the hotel. (n)

Article 2000. The responsibility referred to in the two preceding articles shall include the loss of, or injury to the personal property of the guests caused by the servants or employees of the keepers of hotels or inns as well as strangers; but not that which may proceed from any force majeure. The fact that travellers are constrained to rely on the vigilance of the keeper of the hotels or inns shall be considered in determining the degree of care required of him. (1784a)

Article 2001. The act of a thief or robber, who has entered the hotel is not deemed force majeure, unless it is done with the use of arms or through an irresistible force. (n)

Article 2002. The hotel-keeper is not liable for compensation if the loss is due to the acts of the guest, his family, servants or visitors, or if the loss arises from the character of the things brought into the hotel. (n)

Article 2003. The hotel-keeper cannot free himself from responsibility by posting notices to the effect that he is not liable for the articles brought by the guest. Any stipulation between the hotel-keeper and the guest whereby the responsibility of the former as set forth in articles 1998 to 2001 is suppressed or diminished shall be void. (n)

Article 2004. The hotel-keeper has a right to retain the things brought into the hotel by the guest, as a security for credits on account of lodging, and supplies usually furnished to hotel guests. (n)

CHAPTER 4

Sequestration or Judicial Deposit

Article 2005. A judicial deposit or sequestration takes place when an attachment or seizure of property in litigation is ordered. (1785)

Article 2006. Movable as well as immovable property may be the object of sequestration. (1786)

Article 2007. The depositary of property or objects sequestrated cannot be relieved of his responsibility until the controversy which gave rise thereto has come to an end, unless the court so orders. (1787a)

Article 2008. The depositary of property sequestrated is bound to comply, with respect to the same, with all the obligations of a good father of a family. (1788)

Article 2009. As to matters not provided for in this Code, judicial sequestration shall be governed by the Rules of Court. (1789a)

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 (Art. 1962).

NOTE: Safekeeping must be the principal purpose of the contract. Otherwise, it is not a deposit.

Obligations of the Depositary

• Safekeep the thing deposited
• Return the thing on the date stipulated or when the depositor claims it
• Not to transfer deposit
• Not to change the way of deposit
• To collect on the choses in action deposited
• Not to commingle things if so stipulated
• Not to make use of the things so deposited
• Liability for loss through fortuitous event in certain cases
• Obligation when the thing is closed and sealed
• To return products, accessories and accessions
• To pay interest on sums converted to personal use
• Cannot require that the depositor prove his ownership over the thing
• Obligation when third person appears to be the owner
• Obligation when there are two or more depositors
• To return to the person to whom return must be made
• Liability in case of loss by force majeure or government order
• Liability in case of alienation of depositary’s heir

Two primary obligations (Art. 1972)

• Safekeeping of the object
• Degree of Care – same diligence as he would exercise over his property (ordinary diligence)
• NOTE: The depositary cannot excuse himself from liability, in the event of loss, by claiming that he exercised the same amount of care toward the thing deposited as he would towards his own if such care is less than that required by the circumstances.
• Return of the thing

Obligation not to Transfer deposit (Art. 1973)

• General rule: The depositary is not allowed to deposit the thing with a third person.
• Reason: A deposit is founded on trust and confidence and it can be supposed that the depositor, in choosing the depositary, has taken into consideration the latter’s qualification
• Exception: The depositary is authorized by express stipulation

Liabilities: Depositary is liable for loss of the thing deposited when:

• He transfers the deposit with a third person without being authorized to do so although there is no negligence on his part and the third person;
• He deposits the thing with a third person who is manifestly careless or unfit although authorized, even in the absence of negligence; or
• The thing is lost through the negligence of his employees whether the latter are manifestly careless or not.

Exemption from liability: The thing is lost without the negligence of the third person with whom he was allowed to deposit the thing if such third person is not “manifestly careless or unfit” (e.g., minor).

Obligation not to change the way of deposit

General rule: Depositary may not change the way of the deposit. (Art. 1974)

Exception: If there are circumstances indicating that the depositor would consent to the change. This is a situation wherein the depositary would reasonably presume that the depositor would agree to the change if he knows of the facts of the situation (Art. 1974)

Requisites:

• The depositary must notify the depositor of such change; and
• Must wait for the reply of the depositor to such change.

NOTE: These requisites may not be dispensed with unless delay would cause danger.

Obligation to Collect Interest on the choses in action deposited (Art. 1975)

• If the thing deposited should earn interest, the depositary is under the obligation to:
• Collect the interest as it becomes due.
• Take such steps as may be necessary to preserve its value and the right corresponding to it.
• The depositary is bound to collect the capital, as well as the interest, when due.

NOTE: The obligation to collect in the choses in action does not apply to contracts for the rent of safety deposit boxes.

Wrongful Acts of Bank’s Employees

Petitioner bank was remiss in its duty and obligation to treat private respondent’s account with the highest degree of care, considering the fiduciary nature of their relationship. The bank is under obligation to treat the accounts with meticulous care X X X it must bear the blame for failing to discover the mistake of its employee X X X. (Metropolitan Bank v. CA, G.R. No. 112576, October 26, 1994)

Obligation not to Commingle things if so stipulated (Art. 1976)

General rule: The depositary is permitted to commingle grain or other articles of the same kind and quality

Obligation not to make Use of the things deposited (Art. 1977)

General rule: Deposit is for safekeeping of the subject matter and not for its use

Exceptions:

• Expressly authorized by the depositor
• Such use is necessary for its preservation but limited for the purpose only

Effect of unauthorized use: Liability for damages

Effects of authorized use: (Art. 1978)

If the thing deposited is nonconsumable

• General rule: 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
• Exception: Safekeeping is still the principal purpose of the contract

If the thing deposited is money or other consumable thing:

• General rule: Converts the contract into a simple loan or mutuum
• Exception: Safekeeping is still the principal purpose of the contract, but it becomes an irregular deposit. Bank deposits are in the nature of irregular deposits, but they are really loans governed by the law on loans.

An instrument acknowledging receipt of a sum of money as a deposit returnable two months after notice with interest is evidence of a contract of loan and not of deposit. (Gavieres v. Pardo de Tavera, G.R. No. 6, [November 14, 1901], 1 PHIL 71-73)

Liability for Loss through fortuitous event (Art. 1979)

General rule: Depositary is not liable for loss of the thing deposited through a fortuitous event without his fault (Art. 1174)

Exceptions:

• If it is so Stipulated
• If he Uses the thing without the depositor’s permission
• If he Delays in its return
• If he Allows others to use it, even though he himself may have been authorized to use the same

NOTE: Liability for loss without fortuitous event: Depositary presumed at fault since he is in possession (Art. 1265)

Relation between bank and depositor (Art. 1980) Fixed, savings, and current deposits of money in banks and similar institutions shall be governed by the provisions concerning simple loan.

• Contract of loan – deposits in banks are really loans because the bank can use the same for its ordinary transactions
• Relation of creditor and debtor – the relation between a depositor and a bank is that of a creditor and a debtor.

[A] bank has a right of set off of the deposit in its hands for the payment of any indebtedness to it on the part of the depositor. (Gullas v. Philippine National Bank, G.R. No. 43191, [November 13, 1935], 62 PHIL 519-523)

B. Deposit (Civil Code, arts. 1962-2009)

Obligation when the thing deposited is Closed and Sealed (Art. 1981)

The depositary has the obligation to:

• Return the thing deposited when delivered closed and sealed in the same condition.
• Pay for damages should the seal or lock be broken through his fault, which is presumed unless proven otherwise.
• Keep the secret of the deposit when the seal or lock is broken, with or without his fault.

When depositary justified in opening closed and sealed subject matter (Art. 1982):

• The depositary is presumed authorized to do so if the key has been delivered to him.
• When the instructions of the depositor as regards the deposit cannot be executed without opening the box or receptacle (Necessity).

Where Third person appears to be the owner (Art. 1984)

When the depositary discovers that the thing deposited was stolen and knows its true owner, the depositary may be relieved from liability when:

• He advised the true owner of the thing of the deposit
• If the owner, in spite of such information, does not claim it within one month after the true owner is informed, and the depositary returns the thing deposited to the depositor.

Obligation of the depositary when there are two or more depositors (Art. 1985)

• Divisible thing and joint depositors – each one of the depositors can demand only his share proportionate thereto
• Indivisible thing or solidary depositors – rules on active solidarity
• General rule: Each one of the solidary depositors may do whatever may be useful to the others (Art. 1212)
• Exception: Anything which may be prejudicial to the other depositors
• General rule: The depositary may return the thing to any one of the solidary depositors
• Exception: When a demand, judicial or extrajudicial, for its return has been made by one of them in which case delivery should be made to him
• Return to one of the depositors stipulated
• If by stipulation, the thing should be returned to one of the depositors, the depositary is bound to return it only to the person designated, although he has not made any demand for its return

Obligation to Return to the person to whom return must be made (Art. 1986)

• The depositary is obliged to return the thing deposited, when required, to:
• The depositor;
• To his heirs or successors; or
• To the person who may have been designated in the contract.
• If the depositor was incapacitated at the time of making the deposit, the property must be returned to:
• His guardian or administrator
• To the depositor himself should he acquire capacity
• 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.

Obligation to return at the Place of return

General rule: At the place agreed upon by the parties, transportation expenses shall be borne by the depositor (Art. 1987)

Exception: 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 that there was no malice on the part of the depositary (Art. 1987)

NOTE: Under Art. 1251, payment is made at the debtor’s domicile in cases other than those involving a designated place or delivery of a determinate thing; the place of return of a deposited thing is governed by Art. 1987.

Obligation to return upon the Time of return (Art. 1988)

General rule: The thing deposited must be returned to the depositor upon demand, even though a specified period of time for such return may have been fixed

Exceptions:

• When the thing is judicially attached while in the depositary’s possession
• When notified of the opposition of a third person to the return or the removal of the thing deposited

Right of the depositary to return the Thing deposited (Art. 1989)

NOTE: In this case, it is the depositary returning the deposit with or without the demand of the depositor

General rule: The depositary may return the thing deposited, notwithstanding that a period has been fixed for the deposit, if:

• The deposit is gratuitous
• The reason is justifiable

Remedy if depositor refuses to receive the thing: The depositary may deposit the thing at the disposal of the judicial authority.

Exception: When the deposit is for a valuable consideration, the depositary has no right to return the thing before the expiration of the time designated even if he should suffer inconvenience as a consequence.

Depositary’s liability in case of Loss by force majeure or government order (Art. 1990)

Depositary is not liable in cases of loss by force majeure or by government order. However, he has the duty to deliver to the depositor money or another thing he receives in place of the thing.

Liability in case of alienation by the depositary’s Heir (Art. 1991)

When alienation is done in good faith:

• Return the price received for the thing deposited; or
• If the price has not been paid, assign the right of action against the buyer

When alienation is done in BAD FAITH:

• Liable for damages

Depositary may retain the thing in his possession until the full payment of what may be due him by reason of the deposit (Art. 1994)

Depositary may retain the thing in his possession until the full payment of what may be due him by reason of the deposit (Art. 1994)

The thing retained serves as security for the payment of what may be due to the depositary by reason of the deposit (see Arts. 1992, 1993 and 1994).

Obligations of the Depositor (PLD)

• Obligation to Pay expenses of preservation (Art. 1992)

Applies only when the deposit is gratuitous

• Obligation to pay Losses incurred due to character of thing deposited (Art. 1993)
• General rule: The depositary must be reimbursed for loss suffered by him because of the character of the thing deposited.
• Exceptions:
• At the time of the constitution of the deposit, the depositor was not aware of the dangerous character of the thing.
• Depositor was not expected to know the dangerous character of the thing
• Depositor notified the depositary of such dangerous character
• Depositary was aware of the danger without advice from the depositor.
• Effect of Death of depositor or depositary (Art. 1995)
• Deposit gratuitous – death of either of the depositor or depositary extinguishes the deposit (personal in nature). By the word “extinguished,” the law really means that the depositary is not obliged to continue with the contract of deposit.
• Deposit for compensation – not extinguished by the death of either party

When deposit is Necessary: (PLCT)

• It is made in compliance with a Legal obligation
• It takes place on the occasion of any Calamity, such as fire, storm, flood, pillage, shipwreck, or other similar events
• There must be a causal relation between the calamity and the constitution of the deposit.
• Made by Passengers with common carriers
• As to baggage the passengers or their agents carry
• Made by Travelers in hotels or inns (Art. 1998)
• Before keepers of hotels or inns may be held responsible as depositaries with regard to the effects of their guests, the following must concur:

Extent of liability:

• Liability in hotel rooms which come under the term “baggage” or articles such as clothing as are ordinarily used by travelers
• Include those lost or damages in hotel annexes such as vehicles in the hotel’s garage.

When the traveler avails of the valet service of hotels. The contract of deposit is perfected from the traveler’s delivery of the keys to the vehicle to the hotel, who has the obligation to safely keep and return it to the owner. Loss of the vehicle on the hotel’s premises or annexes may give rise to a claim of damages (Durban Apartments v. Pioneer Insurance, G.R. No. 179419, 2011).

When hotelkeeper liable: (Arts. 2000 – 2002)

NOTE: In the following cases, the hotel-keeper is liable regardless of the amount of care exercised:

• The loss or injury to personal property is caused by his servants or employees as well as by strangers (Art. 2000)
• The loss is caused by the act of a thief or robber done without the use of arms or irresistible force (Id., Art. 2001)

Reason: Hotelkeeper is apparently negligent.

Hotel-keeper’s right to retain

The hotel-keeper has a right to retain the things in pledge brought into the hotel by the guest, as a security for credits on account of:

• Lodging
• Supplies usually furnished to hotel guests

Reason: It is given to hotel-keepers to compensate them for the liabilities imposed upon them by law. The right of retention recognized in this Article is in the nature of a pledge created by operation of law.

• In compliance with a legal obligation (governed by the law establishing it, and in case of deficiency, the rules on voluntary deposit e.g. Arts. 538, 586 and 2104).
• Made on the occasion of any calamity (governed by the rules on voluntary deposit and Art. 2168).

Sequestration or judicial deposit

When judicial deposit takes place: When an attachment or seizure of property in litigation is ordered by a court. (Art. 2005)

Nature: Auxiliary to a case pending in court.

Purpose: To maintain the status quo during the pendency of the litigation or to insure the right of the parties to the property in case of a favorable judgment

Depositary of sequestered property: person appointed by the court. (Art. 2007)

Obligations:

• To take care of the property with the diligence of a good father of the family. (Art. 2008)
• He may not be relieved of his responsibility until the litigation is ended or the court so orders. (Art. 2007)

Applicable law: Judicial deposit is governed by the Civil Code; as to matters not provided for in the Code, the Rules of Court apply. (Art. 2009)