CREDIT TRANSACTIONS | 2E | THU 6:30-9:30PM | ATTY.

PATRICK SARMIENTO

AGUSTIN, BALANUECO, CARDENAS, VILLAROMAN

DEPOSIT
ARTICLES 1962 - 2009 OF THE NEW CIVIL CODE
Table of Contents
 Chapter One: Deposit in General and its Different Kinds
Articles 1962 – 1967 (s. 3 - 21)

 Chapter Two: Voluntary Deposit

Articles 1968 – 1995 (s. 22 - __)

 Chapter Three: Necessary Deposit

Articles 1996 – 2004 (s. __ - __)

 Chapter Four: Sequestration or Judicial Deposit

Articles 2005 – 2009 (s. __ - __)
Chapter One:
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.”
Governing law.
 The classification of deposits into

civil deposit governed by the old Civil Code and

commercial deposit governed by the Code of Commerce

has been abolished by the new Civil Code (see Art. 2270[2]).

 All deposits, whether civil or commercial,

are now primarily regulated by

Title XII, Book IV of the new Civil Code (Arts. 1962-2009)

subject to its transitional provisions (Arts. 2252-2269).

Characteristics of the
contract.
 Real

 Unilateral / Bilateral
 Nominate

 Principal

 Informal

 Gratuitous / Onerous
Essential requisites of the
contract.
1) Consent of the contracting parties

2) Object certain
which is the subject matter of the contract.

3) Cause of the obligation

which is established (Art. 1318).
 Delivery of the thing
is also an essential requisite of the contract.
Deposit as a credit
transaction.
A deposit is a contract of confidence.

 The depositor places full faith and confidence in the

depositary’s probity and zeal.

 Beforethe deposit is constituted, the depositor takes

into account the personal qualities of the depositary.

 A deposit has been defined as a contract whereby one

person delivers a thing to a person he trusts, so that
the latter can guard the thing until the former
demands its return.
Parties to the contract.
 Depositor

 Depositary
Safekeeping,
principal purpose of the
contract.
 Effect where safekeeping only an accessory
obligation.
 Balance of commission account in agent’s possession
at principal’s disposal appropriated by agent.
 Dollars deposited with bank sold by bank which
credited peso proceeds to depositor’s current
account.
Extinguishment of deposit.
 General modes for the extinguishment of
obligations (see Art. 1231) except compensation;
 Deathof either the depositor or
the depositary (in case of a gratuitous deposit);
 Return of the thing by the depositary (Art. 1989).
Deposit distinguished from
mutuum.
 As to principal purpose;
 Asto depositor or lender’s right to demand the
return;
 As to object.
Deposit
distinguished from
commodatum.
 As to principal purpose;
 With respect to cause;
 As to object.
Article 1963.
“An agreement to constitute a deposit is binding,
but the deposit itself is not perfected until the delivery of the
thing. ”
Article 1964.
“A deposit may be constituted judicially or extrajudicially.”
Creation of deposit.

A deposit may be created

not by the will of the parties but
 by virtue of a court order or
 by law
Kinds of deposit.

Deposit is either:
 Judicial (Arts. 2005-2008)

 Extrajudicial (Art. 1967) which may be:

 Voluntary

 Necessary
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.”
Contract of deposit
generally gratuitous.

Where there is contrary stipulation.

Where depositary engaged in business of
storing goods.
Where property saved from destruction
without knowledge of the owner.
Article 1966.
“Only movable things may be the object of a deposit.”

 Subject matter of deposit.

 Only corporeal things contemplated.
Article 1967.
“An extrajudicial deposit is either voluntary or necessary.”
Chapter Two:
Voluntary Deposit
 Sec. 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.”
Voluntary deposit defined.

A voluntary deposit is one wherein

the delivery is made by the will of the depositor.

Voluntary and
necessary deposits
distinguished.
Voluntary Deposit Necessary Deposit
The depositor has There is lack of free
complete freedom in choice in the
choosing the depositor.
depositary.
Where there are several
depositors.
 Twoor more persons each claiming to be entitled to a
thing may deposit the same with a third person.
 In such case, the third person assumes the obligation to
deliver to the one to whom it belongs.

 The action to compel the depositors to settle their

conflicting claims among themselves would be in the
nature of an interpleader (Sec. 1, Rule 62, ROC).
 One of the depositors is not the owner.
Article 1969.
“A contract of deposit may be entered into orally or in writing.”
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.”
Where depositary capacitated
and 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 to the depositor himself if he
should acquire capacity (see Art. 1986).
 Under the law, “persons who are capable cannot allege the incapacity of those
with whom they contract” (Art. 1397).
 The provision states that the depositary may be compelled to return the thing
by the depositor if the depositor should acquire capacity.
 The depositor cannot be compelled by the incapacitated depositor to
return the thing to such depositor.
 f the depositary learns that the depositor’s guardian or administrator in
relation to the return of the thing.
Status of contract.
 TheCivil Code provisions on deposit do not indicate the status of a
contract where one of the parties to the contract of deposit is
incapacitated to give consent to the contract.
 A contract where one of the parties is incapable of giving consent to a
contract is voidable (Art. 1390[1]).

 Where both parties are incapable of giving consent to a contract, the

contract is unenforceable (Art. 1403[3]).

 Express or implied ratification by the parent or guardian of one of the

contracting parties will give the contract the same effect as if only one of
them were incapacitated.

 If ratification is made by parents or guardians of both contracting

parties, the contract shall be validated from its inception (Art. 1407).
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.”
Where depositary
incapacitated and depositor
capacitated.
 Theincapacitated depositary (like a minor or an insane
person) does not incur the obligation of a depositary.
 He is liable

1) to return the thing deposited while still in his possession and

2) 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.
 Sec. 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.”
Principal obligations
of the depositary (1 of 3).

The depositary has three principal obligations:

1) To keep the thing (Arts. 1962, 1972);

2) To not use the thing (Art. 1977); and

3) To return the thing (1962, 1972).

Principal obligations
of the depositary (2 of 3).
In relation to the obligation to keep the things,
the depositary has the following related obligations:

i. To keep the thing safely (Art. 1972);

ii. To not deposit the thing with a 3rd person (Art. 1973);

iii. To not change the way of the deposit (Art. 1974);

iv. To collect interest on certificates when they become due and preserve
the value of securities (Art. 1975);

v. To not commingle grain and other articles of the same kind and quality if
there is a stipulation to the contrary (Art. 1976);
Principal obligations
of the depositary (3 of 3).
In relation to the obligation to return the thing, the depositary has
the following related obligations:
i. To return the thing with all its products, accessions and accessories (Art. 1983)

ii. To return the thing closed and sealed if delivered in such condition (except in
certain instances) (Arts. 1981-1982).
Obligation to keep
the thing deposited (1 of 4).

 Degree of care
 Rules applicable
 Insurance
Obligation to keep
the thing deposited (2 of 4).
 Degree of care

i. Agreed upon

ii. In the absence of stipulation, the degree of diligence required is

a. lower: deposit = gratuitous

b. higher: deposit = compensation

iii. Ordinarily, the same diligence over depositary’s property

iv. As required by the circumstances

Obligation to keep
the thing deposited (3 of 4).
 Rules applicable. The liability of the depositary for the care and delivery of the
thing is governed by the rules on obligations (Arts. 1163).
a. He is liable if the loss occurs through his fault or negligence (Art. 1170), even if the
thing was insured (Art. 2207).
b. The loss of the thing while in his possession, ordinarily raises a presumption of fault

on his part (see Art. 1265).

c. If the contract does not state the diligence required, that which is expected of a
good father of a family is required (Art. 1173).
d. The required degree of care is greater if the deposit is for compensation than when
it is gratuitous. This is similar to the rule in agency (Art. 1909) and common carriers

(Art. 1733). But even when it is gratuitous, due care must still be exercised.
Obligation to keep
the thing deposited (4 of 4).

 Insurance

The dominant view is that the depositary,

when the deposit is gratuitous, is not obligated
to obtain insurance for the thing deposited,
unless there is a stipulation to the contrary.
Obligation to return (1 of 7).

 What must be returned

 To whom returned
 When
 Where
Obligation to return (2 of 7).

 What must be returned (1 of 2)

The depositary must return the thing received, together with all its products,
accessories and accessions (Arts. 1972, 1983).
 If the thing deteriorates while in the custody of the depositary, the
depositary will return the thing to the depositor in the deteriorated state.
 In the absence of fault on the part of the depositary, the depositary
cannot be held liable for the deterioration suffered by the thing.
Obligation to return (3 of 7).

 What must be returned (2 of 2)

Exceptions to the rule that the same thing received must be returned are:

a. If the depositary was not prohibited from comingling grains and other
articles of the same kind and quality, then the depositary must return
an article of the same kind and quality (Art. 1976).

b. If the depositary by force majeure loses the thing and receives money
or another thing in its place, he must deliver the sum of money or
other thing received to the depositor (Art. 1990).

c. If the depositary’s heir sells the thing sold in good faith (not knowing
the thing was merely deposited), he is only bound to return the price
he may have received (Art. 1991).
Obligation to return (4 of 7).

 To whom returned (1 of 2)

a. As a rule, the depositary must return the thing to the depositor, or to his
heirs and successors, or to the person who may have been designated in
the contract (Art. 1972).

b. If the depositor was incapacitated at the time of making the deposit,

the property must be returned to his guardian or administrator or
the depositor himself should he acquire capacity (Art. 1970).

If the depositor loses capacity to contract after having made the

deposit, the depositary must return the thing to the persons who may
have administration of the depositor’s property and rights (Art. 1986).
Obligation to return (5 of 7).

 To whom returned (2 of 2)

c. When there are two or more depositors:

i. If they are not solidary, and the thing admits of division,

each one cannot demand more than his share.

ii. When there is solidarity or the thing does not admit of division,
the provisions of Article 1212 and 1214 will apply (Art. 1985).

 The depositary may deliver the thing to any one of the solidary
depositors (see Art. 1214).

 But if any demand, judicial or extrajudicial, has been made by any

one of them, delivery should be made to him (see Art. 1214).

d. In the situation contemplated under Article 1984, the depositary must return the
thing deposited to the true owner.
Obligation to return (6 of 7).

 When

The depositary is only a custodian who acts

in the exclusive interest of the depositor and
must be willing at all times to make the delivery
to the depositor.

 The depositary must, as a rule, return the thing

deposited upon demand (Art.1988).
Obligation to return (7 of 7).

 Where

a. As a rule, the depositary must return the thing at the

place designated for its return (Art. 1987).

b. In the absence of stipulation, at the place where the

thing deposited might be even if 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 (Art. 1987).
Breach of obligation to return.
 Ifthe depositary fails to return the thing, then his liability will be
governed by the general provisions on obligations under
Title 1, Book IV of the Civil Code.

 The depositary can be held liable for damages for failure to

return the thing (Art. 1170).

 The depositary can also be held criminally liable for estafa should
he appropriate the thing (see RPC, Art. 315; U.S. v. Morales).

 The Civil Code provides specific rules in case of failure to return

the thing as a result of mistake and force majeure.
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.”

Obligation not to transfer
deposit
(1 of 3).
Unless authorized by express stipulation, the depositary
is not allowed to deposit the thing with a third person because
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.
 Liability for loss.
 Exemption from liability.
Obligation not to transfer
deposit
(2 of 3).
 Liability for loss. Under Article 1973, the depositor is liable
for the loss of the thing deposited 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.
Obligation not to transfer
deposit
(3 of 3).
 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 third person is not
“manifestly careless or unfit.”

b. The depositor should not be responsible if the depositor

has authorized the deposit of the thing with another person
and has designated the third person.
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.”
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.”
Obligation to collect interest
on choses in action deposited.

 Ifthe thing deposited should earn interest,

the depositary is under the obligation:

1. to collect the interest as it becomes due and

2. to take such steps as may be necessary to preserve

its value and the rights corresponding to it.
Contract for rent of
safety deposit boxes.

A contract for the rent of safety deposit boxes

(2nd par.) 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
(CA Agro-Industrial Dev. Corp. vs. Court of Appeals).
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.”
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. ”
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.”
Effect if permission to use is
given.
 In deposit, the permission to use is not presumed
except when such use is necessary for the preservation
of the thing deposited.

 The burden is on the depositary to prove the

permission has been given.
 Things deposited, non-consumable.
 Things deposited, money or other consumable
thing.
Irregular deposit
distinguished from mutuum.

 As to demandability of the object

 As to benefit
 As to preference over other creditor
Permission to use not
presumed.
 Ina deposit, the permission to use is not presumed
except when such use is necessary for
the preservation of the thing deposited (Art. 1977)
and the burden is on the depositary to prove
that permission has been given (Art. 1978, 2nd par).
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.”
Article 1980.
“Fixed, savings, and current deposits of money in banks and similar institutions
shall be governed by the provisions concerning simple loan.”
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.”
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.”
Where thing deposited
delivered closed and sealed (1
of 3).
 Obligations of the depositary.
 Reason for rule.
 When depositary justified to open.
Where thing deposited
delivered closed and sealed (2
of 3) .
Obligations of the depositary. The depositary has the obligation to
(under Art. 1981):
a. return the thing deposited when delivered closed and sealed, in the same
condition (par. 1);

b. pay for damages should the seal or lock be broken through his fault (par.
1) which is presumed unless proved otherwise (par. 2); and

c. keep the secret of the deposit when the seal or lock is broken, with or
without his fault (par. 3).
 Reason for rule.
Where thing deposited
delivered closed and sealed (3
of 3).
 When depositary justified to open.

The depositary is authorized by Article 1982 to open

the thing deposited which is closed and sealed
when there is

(a) presumed authority; or

(b) necessity.
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.”
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.”
Depositor need not prove
his ownership.

The depositary who receives the thing in deposit cannot

require that the depositor prove his ownership over the
thing.

 To acquire proof of ownership may open the

door to fraud and bad faith, for the depositary,
on the pretense of requiring proof of ownership,
may be able to retain the thing.
Where third person
appears to be owner.

In such a case, Article 1984 (pars. 2, 3, 4) states the steps the

depositary should take to be relieved of all responsibility with
respect to the thing deposited.

Pars. 2 and 4 are similar except that for the application

of par. 2, two conditions must exist:
1. the thing deposited must have been stolen; and

2. the depositary knows who its true owner is (see Art. 559, par.
1)
Effect of failure of owner
to claim within one month.

The period of one month provided in paragraph 3

is intended merely for the protection of the
depositary.

 If the thing is returned to the depositor after one

month, the true owner of the thing may still recover it
through other legal processes.
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.”
Right of two or more
depositors.
 Thingdeposited divisible and depositors not
solidary.
 Obligation solidary or thing deposited not
divisible.
 Return to one of depositors stipulated.
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. ”
Person to whom return
must be made.

 pursuant to Article 1972.

 pursuant to Article 1970.
 pursuant to Article 1986.
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.”
Article 1988.
“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.”
Time of return.
 As a rule, the depositor can demand the return of the thing
deposited at will and this is true whether a period has been
stipulated or not.

 Ifthe deposit is for a compensation, the depositary is entitled

to the compensation corresponding to the entire period.

 The rule in commodatum is different, as the bailor cannot

generally demand the return of the thing loaned
till after the expiration of the period stipulated, or
after the accomplishment of the use for which
the commodatum has been constituted (see Art. 1946).
When depositary not obliged
to return thing deposited.
 The right to immediate restitution is subject to the two cases provided in
the second paragraph (see also Art. 1984, par. 2).
 In the 1st case, if the depositor returns the thing, he would be disobeying
the judicial order of attachment.
 In connection with the 2nd case, the following observation has been made:

“To permit the depositary to refuse to return the thing deposited simply
because of the opposition of another, is a power very prone to abuse and
mischief. If at all, the depositary should only be authorized in case of
conflicting claims to consign the thing in court through an action of
interpleader.’’
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.”
Right of depositary to return
thing deposited.
 Deposit gratuitous. The depositary may likewise return the thing
deposited notwithstanding that a period has been fixed for the
deposit if :
a. the deposit is gratuitous and
b. justifiable reasons exist
 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.
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.”
Liability for loss by force
majeure or government order.
 The depositary has the obligation to return the thing deposited (Art. 1972).

i. But he is not liable for loss of the thing

a) by force majeure or

b) by government order.

ii. If in place of the thing he receives money or another thing, he has the
duty to deliver to the depositor what he has received otherwise, he would
enrich himself at the expense of the depositor.
 The thing is presumed lost as a result of the fault of the depositary unless the
contrary is proven.
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. ”
Alienation in good faith
by depositary’s heir.
The 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

i. to the return of the price received or

ii. to assign the right to collect the same if it has not been paid and not the real
value of the thing.

 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 deposited constitutes estafa (Art. 315, par. 1[b],
RPC).
 Sec. 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.”
Deposit gratuitous.
 It rests on equity.
 The depositor would have incurred them 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 as the bailee is
obliged to pay for the ordinary expenses for the use and
preservation of the thing (see Art. 1941).
Deposit for compensation.
If the deposit is for a 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.

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.”
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.”
What may be due him.
 The phrase “what may be due him” will include
i. the expenses incurred under Article 1992,
ii. the indemnification for any loss suffered pursuant to
Article 1993, and
iii. any agreed remuneration in case of onerous deposits.
iv. any transportation expenses pursuant to Article 1987.
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.”
Effect of death of depositor or
depositary.
 Deposit gratuitous. If the deposit is gratuitous, the
death of either the depositor or depositary extinguishes
the deposit (No. 2).

 Deposit for compensation. A deposit for a

compensation is not extinguished by the death of either
party because, unlike a gratuitous deposit, an onerous
deposit is not personal in nature (see Art. 1411).
Chapter Three:
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.”
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.”
Necessary deposit in
compliance with a legal
obligation.
The following are examples of such deposit:

1) The judicial deposit of a thing the possession of which is being disputed in a litigation
by two or more persons (Art. 538);

2) The deposit with a bank or public institution of public bonds or instruments of credit
payable to order or bearer given in usufruct when the usufructuary does not give
proper security for their conservation (Art. 586);

3) The deposit of a thing pledged when the creditor uses the same without the authority
of the owner or misuses it in any other way (Art. 2104);

4) Those required in suits as provided in the Rules of Court; and

5) Those constituted to guarantee contracts with the government.

Necessary deposit made
on the occasion of any
calamity.
 Deposit created by accident or fortuitous event
(Deposito miserable). In this type of necessary
deposit,
the possession of movable property passes from
one person to another by accident or fortuitously
through force of circumstances and which the law
imposes on the recipient the obligations of a bailee.
 Governing rules.
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.”
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. ”
Deposit by travellers
in hotels and inns.
Keepers of hotel and inns are generally liable for the loss of the
effects of their guests.
 Before keepers of hotels or inns may be held responsible as
depositaries with regard to the effects of their guests, the
following elements must concur:
1. They have been previously informed about the effects
brought by the guests; and
2. The latter have taken the precautions prescribed regarding
their safekeeping.
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
travellers but include those lost or damaged in hotel
annexes such as vehicles in the hotel’s garage.
Terms explained.
 The words “travellers” and “guests”, as used by law,

are synonymous.
 It refers to transients and not to boarders.
 Nontransients are governed by the rules on lease.
 Theterms “hotel-keeper” and “inn-keeper” are also
synonymous.
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 by 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 hotel or inn
shall be considered in determining the degree of care required of
him.”
Article 2001.
“The act of a thief or robber, who has entered the hotel
is not deemed force majeure,

unless it is done with he use of arms or through an irresistible force.”

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

1. 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 (Art. 1998)

2. The loss is caused by the act of a thief or robber done

without the use of arms and irresistible force (Art.
2001)
When hotel-keeper not liable.
The hotel keeper is not liable in the following cases:
1. 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 (see
Arts. 1170, 1174);
2. The loss is due to the acts of the guests, his family, servants, or
visitors (Art. 2002);
3. The loss arises from the character of the things brought into the
hotel (Art. 2002).
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.”
Exemption or diminution of
liability.
The rule in this article is similar to the rule on common
carriers which does not allow a common carrier to
dispense with or limit his responsibility by stipulation or
by posting of notices (see Art.1760).
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.”
Hotel-keeper’s right to retain.
 The right of retention recognized in this article is in the
nature of a pledge created by operation of law (see
Arts. 2121-2122).

 The act of obtaining food or accommodation in a hotel

or inn without paying therefor constitutes estafa (Arts.
315, Sec. 2[e], RPC).
Chapter Four:
Sequestration or
Judicial Deposit
Articles 2005 - 2008.
ART. 2005. A judicial deposit or sequestration takes place when an attachment or
seizure of property in litigation is ordered.

ART. 2006. Movable as well as immovable property may be the object of

sequestration.

ART. 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.

ART. 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.
When judicial deposit takes
place.
Judicial deposit or sequestration takes place when an
attachment or seizure of property in litigation is ordered
by a court (Art. 2005).
 Properties may be attached by the sheriff upon the
filing of a complaint (Rule 57, Rules of Court), or a
receiver
(a disinterested party) may be appointed by the court to
administer and preserve the property in litigation (Rule
59),
 Personal property may be seized by the sheriff in suits
of replevin or manual delivery of personal property
Nature and purpose of
judicial deposit.
 The deposit is judicial because it is auxiliary to a case
pending in court.
 A thing is in custodia legis, when it is shown that it has been
and is subjected to the official custody of a judicial or
executive officer in pursuance of his execution of a legal writ.
 In our jurisdiction, an escrow order may be issued by a court
in the exercise of its intrinsic power to issue orders and other
ancillary writs and processes incidental or reasonably
necessary to the exercise of its main jurisdiction.
Obligation of depositary of
sequestrated property.
 The depositary of sequestrated property is the person
appointed by the court (Art. 2007).
 He has the obligation to take care of the property with
the diligence of a good father of a family (Art. 2008)
and he may not be relieved of his responsibility until the
litigation is ended or the court so orders (Art. 2007).
Judicial and extrajudicial
deposits distinguished.
 As to cause or origin
 As to purpose
 As to subject matter
 As to remuneration
 In whose behalf it is held
 As to termination
 Principles applicable
Article 2009.
“As to matters not provided for in this Code,
judicial sequestration shall be governed by the Rules of Court.”
Applicable law.
 The law on judicial deposit is remedial or procedural in nature.

 Hence, the Rules of Court are applicable.

 The relevant provisions of the Rules of Court are

i. Rule 57 (Preliminary Attachment),

ii. Rule 59 (Receivership), and

iii. Rule 60 (Replevin).

iv. Rule 127 (Attachment in criminal cases).

RELATED CASES
CASE No. 1
CASE No. 2
CASE No. 3
CASE No. 4
CASE No. 5
CASE No. 6
CASE No. 7