OBLIGATIONS OF THE DEPOSITARY (ART o The depositor is liable for the loss of the thing

1972-1991) deposited under Article 1973 if:

a. He transfers the deposit with a third person
1. To keep the thing safely (Art 1972) without authority although there is no negligence
o Exercise over the thing deposited the same on his part and the third person;
diligence as he would exercise over his property b. he deposits the thing with a third person who is
2. To return the thing (Art 1972) manifestly careless or unfit although authorized
o Person to whom the thing must be returned: even in the absence of negligence, or
a. Depositor, to his heirs and successors, or the person c. the thing is lost through the negligence of his
who may have been designated in the contract employees whether the latter are manifestly
b. If the depositary is capacitated he is subject to all careless or not.
the obligations of a depositary whether or not the
depositor is capacitated. If the depositor is 4. If the thing deposited should earned interest (Art 1975):
incapacitated, the depositary must return the property a. to collect interest and the capital itself as it far
to the legal representative of the incapacitated or to due
the depositor himself if he should acquire capacity b. to take steps to preserve its value and rights
(Art 1970) corresponding to it
c. If the depositor is capacitated and the depositary 5. Not to commingle things deposited if so stipulated (Art
incapacitated the latter does not incur the obligation 1976)
of a depositary but he is liable:
i. to return the thing deposited while still in 6. Not to make use of the thing deposited unless
his possession; authorized (Art.1977)
ii. to pay the depositor the amount which he o GENERAL RULE: Deposit is for safekeeping of
may have benefited himself with the thing or its the subject matter and not for use. The
price subject to the right of any third person who unauthorized use by the depositary would make
acquired the thing in good faith (Art 1971) him liable for damages
o EXCEPTIONS:
Time of return; 1. When the preservation of the thing deposited
a. Upon demand even though a specified period requires its use
or time for such return may have been fixed 2. When authorized by the depositor
except when the thing is judicially attached while o NOTE: The permission to use is NOT presumed
in the depositary's possession or should he have except when such use is necessary for the
been notified of the opposition of a third person preservation of the thing deposited.
to the return or the removal of the thing deposited.
(Art 1998) Effect if permission to use is given (Art 1978):
b. i deposit gratuitous, the depositary may return 1. If thing deposited is non-consumable, the
the thing deposited notwithstanding that a period contract loses the character of a deposit and
has been fixed for the deposit if justifiable acquires that of a commodatum despite the fact
reasons exists for its return. that the parties may have denominated it as a
c. the deposit is for a valuable consideration; the deposit, unless safekeeping is still the principal
depositary has no right to return the thing purpose.
deposited before the expiration of the time 2. If thing deposited consists of money/
designated even if he should suffer inconvenience consumable things, the contract is converted into
as a consequence. (Art 1989) a simple loan or mutuum unless safekeeping is
 What to return: product, accessories and still the principal purpose in which case it is
accessions of the thing deposited (Art 1983) called an irregular deposit. Example: bank
3. Not to deposit the thing with a third person unless deposits are irregular deposits in nature but
authorized by express stipulation (Art 1973) governed by law on loans.
7. When the thing deposited is delivered sealed and restitution until the
closed: time for payment, as
a. to return the thing deposited in the same provided in the
condition contract, has arisen
b. to pay for damages should the seal or lock be 2. The only benefit is 2. Essential cause for
broken through his fault, which is presumed that which accrues the transaction is the
unless proved otherwise to the depositor necessity of the
c. to keep the secret of the deposit when the seal borrower
o lock is broken with or without his fault (Art. 3. The irregular 3. Common creditors
1981) depositor has a enjoy no preference
o NOTE: The depositary is authorized to open the preference over in the distribution of
thing deposited which is closed and sealed when other creditors with the debtor's
(Art 1982): respect to the thing property
i. there is presumed authority (i.e. when the key deposited
has been delivered to him or the instructions of
the depositor cannot be done without opening it)
ii. necessity Rule when there are two or more depositors (Art
8. To change the way of the deposit if under the 1985):
circumstances, the depositary may reasonably presume 1. If thing deposited is divisible and depositors
that the depositor would consent to the change if he knew are not solidary: Each depositor can demand only
of the facts of the situation, provided, that the former his proportionate share thereto.
notifies the depositor thereof and wait for his decision, 2. If obligation is solidary or if thing is not
unless delay would cause danger divisible: Rules on active solidarity shall apply,
i.e. each one of the solidary depositors may do
9. To pay interest on sums converted to personal use if the whatever may be useful to the others but not
deposit consists of money (Art 1983) anything which may be prejudicial to the latter,
(Art. 1212) and the depositary may return the
10. To be liable for loss through fortuitous event (SUDA): thing to anyone of the solidary depositors unless
(Art 1979): a demand, judicial or extrajudicial, for its return
a. if stipulated has been made by one of them in which case,
b. if he uses the thing without the depositor's delivery should be made to him (Art. 1214).
permission 3. Return to one of depositors stipulated. The
c. if he delays its return depositary is bound to return it only to the person
d. if he allows others to use it, even though he designated although he has not made any demand
himself may have been authorized to use the same for its return.
o NOTES: o NOTES:
 Fixed, savings, and current deposits of  The depositary may retain the thing in
money in banks and similar institutions shall pledge until full payment of what may be
be governed by the provisions concerning due him by reason of the deposit (Art
simple loan. (Art 1980) 1994).
 The general rule is that a bank can  The depositor's heir who in good faith
compensate or set off the deposit in its hands may have sold the thing which he did not
for the payment of any indebtedness to it on know was deposited, shall only be bound
the part of the depositor. In true deposit, to return the price he may have received
compensation is not allowed. or to action his right of action against the
buyer in case the price has not been paid
1. The consumable 1. Lender is bound
him (Art 1991)
ting deposited may by the provisions of
be demanded at will the contract and
by the depositor cannot demand
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
o GENERAL RULE:
The depositor shall reimburse the depositary for
any loss arising from the character of the thing
deposited.
o 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 force.
3. when the depositor notified the depository of
the same
4. the depositary was aware of it without advice
from the depositor