GENERAL PROVISIONS

Art.  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)
 

VOLUNTARY DEPOSIT

     One  wherein  the  delivery  is  made  by  the  will  of  the depositor

     Generally,  the  depositor  must  be  the  owner  of  the  thing deposited
     But it may belong to another person 
     The depositary cannot dispute the title of the depositor to the thing deposited
 

WHERE THERE ARE SEVERAL DEPOSITORS

     Two  or  more  persons  each  claiming  to  be  entitled  to  the thing deposited, may deposit the same with a third person
 
Art. 1969. A contract of deposit may be entered into orally or in writing. (n)
 
Art. 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)
 

WHERE  DEPOSITARY  CAPACITATED  AND  THE  DEPOSITOR INCAPACITATED

     If  the  depositary  is  capacitated,  he  is  subject  to  all  the obligations of a depositary, whether or not the depositor is capacitated
     In the latter case, the depositary must return the property to  the  legal  representative  of  the  incapacitated  or  the depositor himself if he should acquire capacity
 
WHAT  IF  THE  CAPACITATED  DEPOSITOR  CANNOT  RETURN IT TO THE LEGAL REPRESENTATIVE? 

He can be held liable for estafa.

WHAT  CAN  HE  OPT  TO  DO?   

Consignation  is  not advisable.  It is too costly.
 
Art.  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)
 

WHERE DEPOSITARY INCAPACITATED AND THE DEPOSITOR CAPACITATED

     The incapacitated depositary doesn’t incur the obligation of the depositary
     However, he is liable to return 
o     To  return  the  thing  deposited  while  still  in  his possession
o     To the  pay the depositor the  amount by  which  he may  have  benefited  himself  with  the  thing  or  its price  subject  to  the  right  of  a  third  person  who acquired the thing in good faith
 
WHAT IS THE BENEFIT CONTEMPLATED BY LAW? 

Reasonable and judicious use
 

OBLIGATIONS OF THE DEPOSITARY

 
Art. 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)
 

OBLIGATION TO KEEP THE THING DEPOSITED AND RETURN IT 

1.   Degree  of  care—ordinarily,  the  depositor  must  exercise over  the  thing  deposited  the  same  diligence  as  he  would exercise over his property
a.    Because  it  is  an  essential  requisite  of  the  judicial relation  which  involves  the  depositor’s  confidence in good faith and trustworthiness
b.   Presumption  that  the  depositor  in  choosing  the depositary  took  into  account  the  diligence  which the  depositary  is  accustomed  with  respect  to  his own property 

2.   Rules applicable 
a.    Art. 1163. Every person obliged to give something is  also  obliged  to  take  care  of  it  with  the  proper diligence  of  a  good  father  of  a  family,  unless  the law  or  the  stipulation  of  the  parties  requires another standard of care. (1094a) 
b.   Art.  1170.  Those  who  in  the  performance  of  their obligations  are  guilty  of  fraud,  negligence,  or delay,  and  those  who  in  any  manner  contravene the tenor thereof, are liable for damages. (1101) 
c.    Art.  1265.  Whenever  the  thing  is  lost  in  the possession of the debtor, it shall be presumed that
the loss was due to his fault, unless there is proof to  the  contrary,  and  without  prejudice  to  the
provisions  of  article  1165.  This  presumption  does not  apply  in  case  of  earthquake,  flood,  storm,  or
other natural calamity. (1183a) 
d.   The  required  degree  of  care  is  greater  if  the deposit  is  made  for  compensation  than  when  it  is gratuitous.  

3.   Return before specified term—the thing deposited must be returned  to  the  depositor  whenever  he  claims  it,  even though  a  specified  term  or  time  for  such  may  have  been stipulated in the contract.
 
CAN  THERE  BE  A  STIPULATION  FOR  A  LESSER  DEGREE  OF CARE?  Yes.
 
CAN THERE BE STIPULATION THAT THERE WOULD ONLY BE LIABILITY  WITH  REGARD  GROSS  NEGLIGENCE  AND  NOT ORDINARY NEGLIGENCE?  Yes.  
 
Art. 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)
 

OBLIGATION NOT TO TRANSFER DEPOSIT

1.   Liability for loss
a.    If  he  deposits  it  with  a  third  person  without authority  even  if  there  has  been  no  negligence
from his part and on the third person
b.   If  deposit  with  a  third  person  is  allowed,  he  is liable  still  if  he  deposited  the  thing  with  a  person who is manifestly careless or unfit

2.   Exemption from liability
a.    The depositor is not responsible in case 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 

Art.  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)
 
Art.   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)
 

IF  THE  THING  DEPOSITED  SHOULD  EARN  INTEREST,  THE DEPOSITARY IS UNDER THE OBLIGATION 

1.   To collect the interest as it becomes due 
2.   To  take  steps  as  may  be  necessary  to  preserve  its  value and the rights corresponding to it

SAFETY DEPOSIT BOXES 

     The  contract  for  rent  of  safety  deposit  boxes  is  not  an ordinary  contract  of  lease  of  things  because  the  full  and absolute possession  and  control  of the safety deposit box is not given to the party renting.  
     It is actually a special kind of deposit.  It is a contractual relation  between  the  parties.    The  liability  rules  are governed  by  the  Civil  Code  provisions  on  obligations  and contracts, and not on donations. 
 

IS  A  STIPULATION  WHICH  EXEMPTS  THE   BANK  FROM LIABILITY  FOR  THE  THINGS  CONTAINED  IN  THE  SAFETY DEPOSIT BOX VALID? 

     The  stipulation  is  void.    Even  if  as  a  rule,  the  Bank  may limit   its   liability   to   some   extent   by   agreement   or stipulation,  the  agreement  or  stipulation  must  not  be contrary to law and public policy. 
     The law on deposit provides that the depositary is liable for loss  due  to  fraud,  negligence,  delay,  or  contravention  of the  tenor  of  the  agreement.    Any  contrary  stipulation would be void.  
 
Art. 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) 
 
Art.  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)
 

GENERALLY  THE  DEPOSITARY  CANNOT  MAKE  USE  OF  THE THING DEPOSITED WITHOUT THE EXPRESS PERMISSION OF THE DEPOSITOR.  WHAT ARE THE EXCEPTIONS?

1.   When  the  depositor  has  given  his  express  permission  to the depositary to use the thing deposited
2.   When  the  preservation  of  the  thing  deposited  requires  its use, it must be used but only for that purpose
 

WHAT IS THE REASON FOR THIS RULE?

     The principal purpose of deposit is safekeeping, not use of the thing.  If the purpose is use, it is not deposit anymore. 
     If   the   depositary   uses   the   thing   deposited   without permission of the depositor, he shall be liable for damages.  In  addition,  if  the  thing  is  lost  even  through  fortuitous event, the depositary shall bear the loss. 
 
Art.  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)
 

WHAT HAPPENS IF THE DEPOSITARY IS GIVEN PERMISSION TO USE?  

1.   If the purpose of the contract is still for safekeeping, then it retains its concept as a deposit

2.   If the purpose  has become for the use  or consumption of the thing
a.    Commodatum—if   the   purpose   is   for   a   non-consumable thing
b.   Mutuum—if the purpose is for a  consumable thing or money
 
Art.  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)
 

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

Art. 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)
 

OBLIGATION  TO  RETURN  PRODUCTS,  ACCESSORIES,  AND ACCESSIONS

     The  depositor  is  the  owner  of  or  at  least  represents  the owner of the things deposited
     The  depositary  must  therefore  return  not  only  the  thing itself  but  also  all  its  products,  accessions  and  accessories which are a consequence of ownership
 

OBLIGATION  TO  PAY  INTEREST  ON  SUMS  CONVERTED  TO PERSONAL USE

     If  what  has  been  deposited  is  money,  the  depositary  has no right to make use thereof and therefore, he is not liable to pay interest
     If  the  depositary  be  in  delay  or  has  used  the  money without  permission,  he  shall  be  liable  for  interest  as indemnity
     The depositary  owes interest  on the  sums he  has  applied to his own use from the day on which he did so, and those which he still owes after the extinguishment of the deposit
 
Art. 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)
 

DEPOSITOR NEED NOT PROVE OWNERSHIP

     The  depositary  who  receives  the  thing  in  deposit  cannot require  that  the  depositor  prove  his  ownership  over  the thing
 

WHERE THIRD PERSON APPEARS TO BE THE OWNER

     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.
 

CAN THE DEPOSITARY REQUIRE THE PRESENTATION OF AN ID?   

Yes.    Proof  of  identification  is  different  from  proof  of ownership.
 

CAN  THE  DEPOSITARY  REQUIRE  THE  PRESENTATION  OF THE RECEIPT?

Yes.    It  is  only  a  proof  of  identification  and  not ownership.
 

IN DEPOSIT, WHAT SHOULD BE ASCERTAINED AT THE VERY LEAST?  

Authority to  make deposit  should  be  ascertained.  Take note that before the deposit, proof of ownership may be required.  The  prohibition  applies  subsequent  to  the  deposit.    There  is required due diligence review.
 
Art.  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)
 

RIGHT OF TWO OR MORE DEPOSITORS

1.   Thing deposited divisible and depositors not solidary—if the thing  deposited  is  divisible  and  there  are  two  or  more depositors  who  are  not  solidary,  each  one  can  demand only his proportionate share thereto
2.   Obligation  solidary  or  thing  deposited  not  divisible—if  the obligation is solidary or the thing is not divisible, the rules on active solidarity shall apply, to the effect that 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, and the depositary may return the thing to any one  of  the  solidary  depositors  unless  a  demand  for  its return  has  been  made  by  one  of  them  in  which  case delivery should be made  to him

3.   Return to one of 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.
 
Art.  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)
 

PERSON TO WHOM RETURN MUST BE MADE

1.   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
2.   If the person 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
3.   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. 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)
 

PLACE OF RETURN

     The  thing  must  be  returned  at  the  place  agreed  upon  by the parties, and in the absence of stipulation, at the place where the thing deposited might even if it shouldn’t be the same place where the original deposit was made provided the transfer was  accomplished  without malice  on the part of the depositary
     In the first place, the expenses for transportation shall be borne by the depositor.  This is just because the deposit is constituted  for  the  benefit  of  the  depositor  and  not  the depositary  who  assumes  no  more  than  the  safekeeping and the return of the thing
 
Art.  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)
 

TIME OF RETURN

     As a rule, the depositor can demand the return of the thing deposited  at  will  and  this  is  true  whether  the  period  has been stipulated or not
     If  the  deposit  is  for  compensation,  the  depositary  is entitled to the compensation for the whole period.  In this case, the period is for both the depositor and depositary.
 

WHEN  DEPOSITARY  IS  NOT  OBLIGED  TO  RETURN  THING DEPOSITED

1.   When  the  thing  has  been  judicially  attached  while  in  the depositary’s   possession—he   would   be   disobeying   the judicial order of attachment
2.   When  he  has  been  notified  of  the  opposition  of  a  third person to the return or removal of the thing deposited
 
Art.    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)
 

RIGHT OF DEPOSITARY TO RETURN THING DEPOSITED

1.   Deposit gratuitous—the depositary may likewise return the thing  deposited  notwithstanding  that  a  period  has  been fixed for the thing if
a.    The deposit is gratuitous
b.   Justifiable reasons

2.   Deposit for a valuable consideration—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. 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)
 

LIABILITY FOR LOSS BY FORCE MAJEURE OR GOVERNMENT ORDER

     The  depositary  has  the  obligation  to  return  the  thing deposited
     But he isn’t liable for loss of the thing by force majeure or by government order
     However,  if  in  place  of  the  thing  he  receives  money  or another thing, he has the duty to deliver to the depositor what  he  has  acquired  otherwise,  he  would  enrich  himself at the expense of the depositor
 
Art. 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)
 

ALIENATION IN GOOD FAITH BY DEPOSITARY’S HEIR

     This   above   article   envisions   a   situation   where   the depositary dies and the object of the deposit is left with his heir who, in good faith, sells it
     The  obligation  of  the  heir  is  limited  to  the  return  of  the price received or to assign the right to collect the same if it hasn’t been paid and not the real value of the thing
     The rule is based on considerations of equity
     If the purchaser who acquired the thing acted in bad faith, the  depositor  may  bring  an  action  against  him  for  its recovery
     If the heir acts in bad faith, he is liable for damages.  The sale or appropriation of the thing constitutes estafa.
 

OBLIGATIONS OF THE DEPOSITOR

 
Art.  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)
 

OBLIGATION TO PAY EXPENSES OF PRESERVATION

1.   Deposit  gratuitous—the  above  article  applies  only  if  the deposit  is  gratuitous.    It  rests  on  equity.    The  depositor would have incurred just the same had the thing remained with him.  Without the duty of reimbursement imposed by the article, the depositor would be enriching himself at the expense  of  the  depositary.    The  rule  is  different  in commodatum.
2.   Deposit  for  compensation—if  the  deposit  is  for  valuable consideration,  the  expenses  of  preservation  are  borne  by the  depositary  because  they  are  deemed  included  in  the compensation. There   can   however   be   a   contrary stipulation.  
 
Art. 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)

 
Art.  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)
 

DEPOSITARY’S RIGHT OF RETENTION 

     Talks about legal pledge
     The thing retained serves as security for payment of what may be due to the depositary by reason of the deposit
     Depositary may foreclose through public auction
 
Art. 1995. A deposit its 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)
 

CAUSES OF EXTINGUISHMENT OF DEPOSIT

     The causes mentioned are not exclusive
     There  could  also  be  other  causes  such  as  return  of  the thing,  Novation,  merger,  expiration  of  term,  fulfillment  of resolutory condition
 

EFFECT OF DEATH OF DEPOSITOR OR DEPOSITARY

1.   Deposit  gratuitous—if  the  deposit  is  gratuitous,  the  death of  either  the  depositor  or  depositary  extinguishes  the deposit.  
2.   Deposit  for  compensation—a  deposit  for  a  compensation isn’t  extinguished  by  the  death  of  either  party  because unlike  a  gratuitous  deposit,  an  onerous  deposit  isn’t personal  in  nature.    Hence,  the  rights  and  obligations arising  therefrom  are  transmissible  to  their  respective heirs.    But  the  heirs  of  either  party  have  a  right  to terminate  the  deposit  even  before  the  expiration  of  the
term.