The gratuitous lending of an object for the use of the

Definition borrower (bailee), who has the obligation to return

the same to the lender (bailor) without damage.

Art. 1935: Contract ceases to be commodatum if

Bailor Liberality bailee pays compensation to bailor -> becomes a
Consideration lease

Bailee Permissive Use

GR: Non-consumable thing

EX: Consumable thing, if purpose is not

consumption (ex. exhibition; Art. 1936)
Concepts
Art. 1937: Movables or immovables may be the
As a Contract subject of a commodatum
Object
SGS: SC is wrong here; ownership had to pass for
Producers Bank v. CA: Agreement in this case was a
the purpose stated (because incorporators must own
contract of commodatum, even if money was the
the capital to be used). And if ownership over the
object since it was only used to show that there was
object passes, then it is mutuum. There is the same
enough capitalization for incorporation (i.e.,
obligation to repay in this case, however, whether
exhibition)
mutuum or commodatum

Both parties must consent

Consent Not a consensual contract, however, but a real
contract, perfected by delivery

Art. 1938: Bailor in commodatum need not be the

owner of the thing loaned

But, as against the bailee, he is considered the

owner
Bailor
Retains ownership over the thing, even after delivery

Primary obligation in a contract of commodatum is

the delivery of the object to be loaned

GR (Art. 1935): Permissive use is only as to the

Stipulated Penalty, also earning legal interest (6%)
from the time it is judicially demand
Conventional Rate, also earning legal interest (6%)
No Penal Clause but only Conventional Rate
from the time it is judicially demanded
6% per annum computed from judicial or
extrajudicial demand
Interest runs from when demand was made judicially
Liquidated Damages
or extrajudicially
Interest runs from the date of promulgation of
Damages Not Liquidated
judgment
NOTE: Base for the computation of legal interest
shall be on the amount finally adjudged
6% per annum from finality of judgment until
Whether Sum of Money or Not
satisfaction
Also, a document may contain two or more legally-
binding contracts
Clauses in long-term credit transactions that
authorise the increase in conventional interest rates
A means to maintain fiscal stability and retaining the
value of money
SGS on Concepcion v. CA: An important clause
since most credit transactions subsist over long
periods of time
EX: Clause is voided if it allows for unconsented
increase in interest rates, which transgresses the
mutuality principle of contracts.
There must be a de-escalation clause that
authorises a corresponding reduction in the interest
rates
1. Must have a de-escalation clause
2. Escalation must be pegged to the "prevailing
market rates"
3. The proposed modification must be the result of
an agreement between the parties
EX: Contracting parties, may, by stipulation,
capitalise the interest due and unpaid, which as
added principal, shall earn new interest (i.e., interest
on interest/compound interest)
1. There is an express stipulation in writing to pay
interest.
By stipulation, compounding/capitalising of interest
is agreed upon (compound interest)
2. Any or both of the following instances are present:
This demand is reckoned from the date of filing and When the conventional interest due and unpaid is
the rate shall be the legal rate (6%) judicially demanded, whether or not there was an
agreement/stipulation to this eect
SGS: In Art. 1959, it is still the principal that earns
the interest; the interest unpaid shall just be added to
the principal, making the base amount larger
NOTE: The legal rate of interest is 6% as per
Monetary Board Circular No. 799
Has Penal Clause Places an obligation upon the debtor to assume a
greater liability in case of breach
Has Stipulated Rate
Sum of Money
No Stipulation
Eastern Shipping + Nacar Rules on Interest
Art. 2209: Legal interest is imposed when the debtor
delays in an obligation which consists of a payment
of a sum of money, in absence of any stipulation.
Award of 6% per annum on damages, at the
Not a Sum of Money Art. 2212: Interest due shall earn legal interest from
discretion of the court
time that judicial demand is made, even if the
obligation is silent as to this point
Legal Interest, Applied to the Whole Award
The increase in price by this clause in a sale on
credit transaction is NOT considered as a disguise
for a usurious loan
Such increase is not the 'interest' within the meaning
of the Usury Law
Such clause serves only to cover expenses in a sale
on credit and to encourage cash sales
This principal amount may be recovered through a
judicial action, in which case it would be considered
as to have been judicially demanded -> entitles it to
earn legal interest from the date of demand
It is paid as compensation in a simple loan
It is that interest agreed upon by the parties,
distinguished from that prescribed by law
The conventional interest paid in a simple loan
Monetary Interest
Viewed as the cost of money
SGS on Frias v. San Diego-Sison: Conventional
interest is the payment for the use of money
Loan of money, goods, or credits (simple loan)
Forbearance, or the act of refraining, tolerating, or
Applies To
abstaining from enforcing a right or obligation of
money, goods, or credits even if the principal
obligation is not a simple loan
Agreed upon by parties Conventional
Amount or rate supplied by law in absence of
Legal
stipulation
Concept
GR: Generally valid.
Escalation Clauses
Rule
Sereno Rules from Concurring Op.
in Spouses Juico v. China Banking
GR: Conventional interest applies on the principal
amount only (i.e., conventional interest)
On Application of Interest (Art. 1959)
GR: Interest on interest is generally NOT
demandable
How Applied (Art. 1959 and 2212)
EX: Interest on interest becomes demandable in the
presence of the . requisites:
Compensatory interest is the indemnity for
damages arising from delay on the part of the
debtor of an obligation consisting in the payment of
a sum of money
Does not need to be expressly stipulated in writing
Concept
but usually comes in the form of a penal clause
Parties may freely stipulate the amount or rate of the
compensatory interest BUT it is subject to reduction
if the court finds it to be iniquitous or
unconscionable (Ligutan v. CA)
An accessory obligation
Compensatory, Penalty or Indemnity Interest
Penal Clauses
Strengthens the coercive nature of an obligation
Provides liquidated damages to answer for the
breach
Siga-an v. Villanueva: Interest may be imposed as
indemnity for damages even in the absence of Rules
stipulation in 2 cases...
Refers not only to conventional interest but also
includes fees, service charges, discounts, and
such other charges incident to the extension of
credit, as the Monetary Board of the Central Bank of
the Philippines may by regulation prescribe
Basically, it is the lending of money at an interest rate
higher than the ceiling prescribed by law
Was prohibited by the provisions of the Civil Code
and the Usury Law (Act 2655)
However, it is currently suspended (not repealed), by
virtue of the Central Bank Circ. No. 905, which lifted
the ceilings on interest rates
The provisions of the Usury Law applies only to
contracts that involve a loan OR a forbearance of Application
money, goods, or credit
On Time Price Dierential
If debtor pays under the usurious transaction, his
Remedy of Debtor
remedy is to recover the amount he paid as interest
The nullity of the usurious interest does NOT bar the
creditor from enforcing his right to collect the Remedy of Creditor
principal amount of the obligation
Contract of loan wherein the creditor delivers money
or consumable property to the debtor, upon the
condition that the same amount of the same kind
and quality shall be paid back
Necessary since the use of the property involved in a
mutuum generally results in its extinguishment
Art. 1953: Debtor acquires ownership of the money
The obligation of the debtor is then to pay an equal
or the consumable property delivered
amount of the same kind and quality, eectively
replacing or substituting the property loaned
Involves consumable and fungible property, which
makes it commercially interchangeable with other
property of the same kind.
Concept This is the most common of all credit commercial
credit transactions, which comes in the form of a
fixed, savings, or current deposit account with a
bank (Art. 1980)
SGS: This is the most common credit transaction
since it involves money
People v. Puig and Porras: The relationship between
banks and depositors are that of debtor and creditor.
The bank acquires ownership of the money
deposited by its clients.
Gratuitous
Onerous
Kinds
Permissive Use
Money
Conventional Interest
Goods and Other Consumables
SGS and Art. 1954: If the purpose of the contract is
the transfer of ownership of a non-fungible property
and payment is made by giving something of the
same kind, quantity and quality, it is a contract of
barter
Value of payment of the principal is generally
determined at the time of the establishment of the This is the primary obligation of the debtor
obligation (i.e., the delivery of the principal)
Written promise by the maker to the payee or to
the bearer, or a written promise to pay a specified
amount to a certain person on demand or on a
specified date
SGS: Payable to a specific person
Written promise by the issuer to pay money to the
holders; or,
Written promise issued by a government or
corporation to holders, to pay the principal amount
of the loan at maturity and a specified sum of money
usually at intervals (Interest-bearing or discounted
government or corporate securities)
SGS: Payable to any holder. Hence, bonds are
easier to trade due to this nature. With notes, the
holder has to prove that he/she derives his/her
rights from the person named in the note
Instrument acknowledging a debt secured only by
the issuer's earning power and NOT by a lien, legal
right or interest that a creditor has, on any specific Debenture
asset or an unsecured bond.
Interest on Interest
SGS: Basically an "unsecured bond"
Fixed Amount
Money
Interest Rate
Value is appraised at the time of the payment
In Kind
SGS: It's good to state the appraised value
Interest
1. There is an express stipulation for the payment of
interest
2. Such stipulation is in writing
Creditor obliged to return the amount paid by
Borrower paid by mistake
mistake
Eects of Lack of Requisites
Creditor is authorised to retain Borrower voluntarily paid
SGS: What the law requires is that the express
stipulation in writing state that THERE SHALL BE
interest, and not the amount/rate of interest per se
Concept Finance Charges
Concept
Usury
Usurious Acts
Remedies
object loaned and does NOT include its fruits
Parties As to fruits
EX (Art. 1940): Unless the parties stipulate
otherwise; such stipulation is considered valid
The main consideration of the bailee is the GR: Commodatum is personal in character; bailee
permissive use of the object loaned cannot lend nor lease the thing loaned to a third
Bailee
person
As to third persons using the object loaned (Art.
1939)
EX to the EX: Unless there is a stipulation to the
EX: Members of the bailee's household may make
contrary OR the nature of the property forbids its use
use of the property loaned
by anyone other than the bailee
Art. 1945: Two or more bailees to whom a thing is
loaned in the same contract are liable solidarily.
Definition and Concept
Art. 1941: Bailee is liable for ordinary expenses
arising from use and preservation
Ordinary Expenses
Art. 1943: However, this does NOT include
deterioration arising from ordinary wear and tear.
GR: Since Bailor retains the ownership, he is liable
Concept
for extraordinary expenses
Arising From Preservation EX to the EX: General rule applies if the need for
EX: Bailee becomes liable if he incurs them without these extraordinary expenses are so urgent that
Extraordinary Expenses (Art. 1949) first informing the bailor and securing his approval waiting for bailor's approval would endanger the
property loaned
GR: BOTH bailor and bailee are liable
Creditor Arising From Use
Consideration EX: Unless stipulated otherwise
Debtor If bailee incurs expenses from use, other than those
ordinary and extraordinary expenses for use and
Other Expenses (Art. 1950)
preservation, he is liable for them without right to
Consumables Liability for Expenses and Damages
reimbursement
Art. 1952: Bailor cannot exempt himself from
Object Commodatum obligation of reimbursing the bailee for expenses and
indemnifying the latter for damages by abandoning
Abandonment by Bailor the property to the bailee
The bailee has the right to compel the bailor for
expenses that he duly owes
GR (Art. 1950): Bailee has no right of retention over
the property if bailor refuses to pay; he only has a
Mutuum (Simple Loan) right to demand payment
EX (Art. 1951 and 1944): If the bailor, who has Object is to guarantee payment
Right of Retention by Bailee
Note knowledge of the flaws of the property loaned, does
Has an accessory character to the principal
not advise the bailee of the same and the latter
obligation of the bailor to pay damages
suers damages by reason thereof, then the bailee
shall have a right of retention over the property until Not considered a coercive measure but a means of
bailor indemnifies him for damages. obtaining compensation
After the expiration of the period stipulated
Jurisprudence: A sum credited on the books of a GR (Art. 1946): Bailee's obligation to return only
"Transaction by which a creditor mitigates non-
Obligation to Pay company to a person who appears to be entitled to arises... After accomplishment of the use for which the
payment of a debt by equating a sum of money
it. It presupposes a creditor-debtor relationship, commodatum was constituted
owed with property or another person's undertaking
Bond Evidences Definition Security and may be said to imply ability, by reason of
to pay." Neither duration nor the use to which the thing
property or estates, to make a promised Art. 1947: Commodatum is a precarium, wherein
CONCEPT OF CREDIT Credit Definition payment." bailor may demand return at will. Commodatum is a should be devoted to was stipulated
SGS: Mitigates the risk of loss
precarium in the cases:
Justice Malcolm in People v. Concepcion: "The Use of the thing is merely tolerated by the owner
SGS: "Any transaction that comes about from the
ability to borrow money by virtue of the confidence
evaluation of an individual's ability to borrow Definition Credit Transaction Demand the return of the property, extinguishing
or trust reposed by a lender that he will pay what
(credit)." the commodatum
he may promise."
Art. 1946: Bailor has urgent need of the property, in
which case he may... Demand the temporary use of the property,
temporarily suspending the commodatum while the
bailor possesses the thing
Bailee commits some oense against the person,
the honor, or property of the bailor, or the bailors
EX: Bailor may demand return of the property in the wife, or the children under parental authority of the
Obligation to Return bailor
. cases:
Payable in... Concept Bailee imputes to the bailor any criminal oense,
Art. 765: Bailee commits the acts of ingratitude or any act involving moral turpitude, even though it
against bailor be proved, unless the crime or act has been
committed against the bailee, or the bailees wife, or
children under parental authority of the bailee
Bailee unduly refuses the bailor support when the
Interest former is legally or morally bound to give support
to the latter
SGS: These exceptions recognise that the liberality
Requisites of the bailor is the cause of the contract as to him/
her.
Quintos v. Beck: In returning the object, the rules in
Refers to the loan itself
the Civil Code on where payment should be made
Contract OF Loan
should be followed (see Art. 1251), in order to be
A real contract; requires delivery for perfection
considered to have complied with the obligation.
Requires delivery for perfection
An agreement/binding promise between parties to
A real contract GR: Bailor is liable since he retains ownership Delivery is made by the will of the depositor
enter into a loan contract Has to have 3 essential elements to be valid:
consent, object and cause Also made by two or more persons, each of whom
A consensual contract; perfected by mere consent Bailee devotes use of property loaned to a dierent
Definition (Art. 1968)
purpose than that agreed upon (breach of the believes himself to be entitled to the thing deposited
between parties Concept A contract for permissive use
conditions of the commodatum) with a third person, who shall deliver it in a proper
SGS: This does not yet involve delivery Kinds Loan always arises from a contract case to the one to whom it belongs
Bailee keeps property even after accomplishment of
SGS on AmEx v. Pantaleon: SC is wrong in ruling Contract TO Loan One of the 'contracts of neighborliness' from the the purpose for which the property is used (delay) A valid and binding contract
that there is a contract of loan since it is only upon Roman times Contract TO Deposit
Bailee keeps property beyond the stipulated period Perfected by mere agreement/consent between the
the bank's payment od the money to the merchant
Creditor's primary obligation is to deliver the object of the commodatum (delay) How Constituted (Art. 1963) parties
that there is a constructive delivery; it is only at this Liability for Loss During Fortuitous Events
point that the contract of loan is perfected! of the loan. EX: Bailee is liable when...
EX to the EX: Unless there is a stipulation that A real contract, which requires delivery for its
Contract OF Deposit
Delivery is the essential moment of the perfection of Property was delivered with appraised value exempts the bailee from loss due to FE even if value perfection
The delivery of the proceeds of the loan in this case
SGS: May sometimes be called as a credit line. LOAN Obligation to Deliver the contract. of the property was appraised
is called a draw down Oral
General Concepts
Garcia v. Thio: Delivery is the by which the res or the Bailee lends the property to a third person who is Form (Art. 1969)
GR: Non-consumable thing Written
substance thereof is placed in the actual or control NOT a member of the household (breach)
Commodatum
EX: Consumable thing, if purpose is not of another Triple-V Food Services v. Filipino Merchants
consumption (ex. exhibition) Bailee is able to save property loaned or his own
Object property, the bailee chooses the latter (amounting to GR: It is a gratuitous contract Insurance Company: A deposit is a gratuitous
Art. 1935: Contract ceases to be commodatum if
an act of ingratitude) contract
Money Bailor Liberality bailee pays compensation to bailor -> becomes a
Consumable Mutuum Commodatum Consideration (Art. 1965)
lease There is an agreement to the contrary; or,
Other consumables
Bailee Permissive Use EX: Unless... The depositary is engaged in the business of storing
Debtor has to return the very same property Consideration
Commodatum goods
delivered Gratuitous
Creditor
Loss or destruction of the thing deposited
Pay the same amount lent to him; and, Mutuum Onerous
Debtor has to... Money Obligation to Return or Pay How Extinguished (Art. 1995) In case of a gratuitous deposit, upon the death of
Pay interest, if any Debtor Permissive Use
Mutuum either party
Debtor has to pay with the same amount, kind and
Other Consumables The specific manner with which the thing delivered in
quality of the consumables delivered
Definition a deposit is safely kept (Editor's Note: This is my
own definition)
Art. 1962: An obligation constituted from the SGS: Use of the word "constituted" in Art. 1962
GR: Depositary may not change the way of the
moment of delivery of the property belonging to implies that deposit does not just arise from contract
deposit
another for the purpose of safekeeping and eventual
return (as armed in BPI v. IAC and Zshornack)
Depositary can make a presumption of consent on
Change of the Way of the Deposit (Art. 1974) the part of the depositor, based on the
Judicially
Concept and Definition circumstances
EX: Unless the following requisites are met:
Art. 1964: Manner of Constitution Voluntary (Art. 1967)
Extrajudicially Before such change, the depositary notifies the EX to the EX: Obligation to notify does not apply if
Necessary (Art. 1967) depositor and waits for his decision the delay/wait would cause danger to the object
BPI v. IAC and Zshornack: A contract of deposit Collect interest when they become due
GR: The depositary holding certificates, bonds,
Concept involving currency is possible with banks
securities, or instruments which earn interest Take necessary measures to preserve their value and
Depositor Initiate the deposit by delivery of the property must: corresponding rights
Administration (Art. 1975)
Parties and Obligation Safekeeping of the property EX: This obligation does not apply if the said
Depositary certificates, etc., are kept pursuant to a contract for
Return of the property the rent of safety deposit boxes
GR (Art. 1966): Only movable things may be the GR: Depositary may commingle grain or other
object of a deposit fungible articles; various depositors shall have a
Object Commingling (Art. 1976) proportionate ownership in the mass
EX (Art. 2006): In cases of judicial deposit,
immovable property may also be a valid object EX: Unless there is a stipulation to the contrary
Also known as sequestration GR: Depositary cannot make use of the object
Concept (Art. 2005) A deposit constituted by judicial order, as a NOTE: If safekeeping is not the principal purpose,
It is an extrajudicial deposit constituted over a consequence of litigation Depositor expressly gives his permission for use then the arrangement is not a deposit and may be a
movable by a consequence of law or quasi-contract, Use (Art. 1977)
Rules loan
so that no unjust enrichment will result from a Movables EX: Unless...
Way of the Deposit
juridical relation Concepts Object (Art. 2006) Preservation of the object requires its use; use shall
Only kind of deposit that may have an immovable as
Judicial Immovables be limited only for the purpose of preservation
It is made in compliance with a legal obligation its object
Art. 1996: Deposit is necessary when... If delivered closed and sealed, depositary should
When it takes place on the occasion of any calamity Case is finally resolved; or
return it in the same condition
Extinguishment (Art. 2007)
Governed by law establishing it Court orders property's release from sequestration
If seal or lock be broken through depositary's fault,
Obligation
Rules Compliance with Legal Obligation Depositary is bound to comply, wrt the property, then he/she is liable for damages
Provisions on Voluntary Deposit are applicable Obligation (Art. 2008)
suppletorily with all the obligations of a good father of a family
Depositary is also obligated to keep the secret of the
It is a formal contract (i.e., the law provides a deposit
Governed by provisions on Voluntary Deposit and Closed and Sealed Object (Art. 1981)
Art. 2168 specific form as a requisite for its validity)
GR: Presumed to be depositary's fault
Occasion of Any Calamity As to Fault
If a person saves property on occasion of any Definition It is issued by a warehouseman, a person lawfully
EX: Unless proof to the contrary is shown
calamity without the knowledge of the owner, the Rules engaged in the business of storing goods for profit
latter is bound to pay the former just compensation If forcible opening is imputable to depositary, then Courts may however pass upon the credibility of the
It is an evidence of goods in a warehouse
As to Value the statement of the depositor as to the value shall depositor wrt the value claimed by him/her
Hotel keepers and employees must be given notice be accepted
as to the eects brought by the guests GR: May contain any terms and conditions
Art. 1998: Deposit of eects of hotel guests are GR: Depositary cannot open the locked box/
Hotel guests must follow the hotel-keepers Are contrary to the provisions of the Warehouse
considered necessary Form receptacle
precautions wrt to the care and vigilance over their Receipts Law
EX: Those that...
Coverage
eects There is express authority from the depositor
Impair the obligation to exercise due care
Opening a Locked Box or Receptacle (Art. 1982)
Art. 1999: Hotel-keeper is also liable for vehicles, Key to the lock was delivered to the depositary
Must indicate on the face of receipt that it is "non- Otherwise, it can be treated as a negotiable WR EX: Unless...
animals and articles placed in the annexes of the General Concepts
negotiable" or "not negotiable" There is presumed authority from either fact that...
hotel The instructions of the depositor cannot be executed
Necessary DEPOSIT Non-negotiable without opening the box/receptacle
Depositor
Hotel-keeper is liable for loss and/or injury to the The goods will be delivered to either...
guest's property Any other specified person on the WR CA Agro Industrial Dev't Corp. v. CA: It is still a
deposit even if the depositary did not have full
GR: Acts of thieves/robbers is not deemed force May be purchased for value control; such fact aects only the way of the
Instances
majeure Kinds of Receipt deposit
Hotel-keeper is not liable for force majeure Negotiable Bearer
Hotels or Inns
EX: Unless it was done with arms or through The goods will be delivered to either... GR: Liable when depositary deposits object with a
On Liability (Arts. 2000-2002)
irresistible force Order of any person named third person

Loss is due to act of the guests, his family, servants, Refers to any other receipt issued for the same Obligation to Safekeep Art. 1973: Assuming deposit with third persons are
Deposit with Third Person (Art. 1973)
or visitors goods allowed, depositary is liable when he/she deposits
Duplicate Receipts EX: Unless there is a stipulation which allows it
Hotel-keeper is also not liable if... the object with a person who is manifestly careless
Loss arises from the character of the eects brought All DRs must indicate on its face that it is a duplicate Failure to do so gives rise to criminal liability or unfit
into hotel
Similar to a depositary's obligation to return Liability of Depositary for Employees (Art. 1973):
Hotel-keeper cannot free himself from liability by Depositary is liable for the negligence of his/her
posting notices to the eect that they shall not be Subsists even if WR is altered or destroyed
employees
liable for the eects of the guests (as armed in YHT Obligation to Deliver
Realty Corp. v. CA) Made by holder or depositor
On Waiver (Art. 2003) GR: Depositary cannot make use of the object; he is
Arises upon valid demand
With an oer to satisfy the warehouseman's lien liable if he does
Any stipulation that exempts the hotel-keeper from Warehouse Receipt (WR)
his responsibilities in Arts. 1998-2001, or diminishes NOTE: If safekeeping is not the principal purpose,
Generally, no commingling, but also subject to
them, is considered void. Use (Art. 1977) Depositor expressly gives his permission for use then the arrangement is not a deposit and may be a
Obligations and Rights of a Warehouseman Liable to keep goods safe in the same way as a exceptions
Liability for Goods loan
depositary EX: Unless...
Governed by law on common carriers
Keep safe from levy and attachment
Check-in Luggage Preservation of the object requires its use; use shall
Common carriers must observe extraordinary be limited only for the purpose of preservation
Passengers' Baggage in a Contract of Common Similar to a depositary's right of retention, in that it is
diligence
Carriage (Art. 1754) a means to obtain payment
If delivered closed and sealed, depositary should
Governed by provisions on responsibility of hotel- Warehouseman's Lien return it in the same condition
Carry-on Luggage It is non-exclusive in nature; it entitles him to all
keepers (see above)
remedies under the law as that a creditor may have
against the debtor If seal or lock be broken through depositary's fault,
Obligation
then he/she is liable for damages
Depositary; Instances When Liable
Involves a negotiable WR
Depositary is also obligated to keep the secret of the
Negotiation Editor's Note: Sorry, the provisions in the book don't Voluntary deposit
The WR is negotiated either by delivery or by Closed and Sealed Object (Art. 1981)
define "negotiate." Personally, I understand it as
indorsement GR: Presumed to be depositary's fault
purchasing the WR for value.
Negotiation and Transfer As to Fault
May involve a negotiable or non-negotiable WR EX: Unless proof to the contrary is shown
Liability for Loss and Damage
Transfer If forcible opening is imputable to depositary, then Courts may however pass upon the credibility of the
Involves the conveyance of the WR, whether
negotiable or not, to another As to Value the statement of the depositor as to the value shall depositor wrt the value claimed by him/her
be accepted
Distinguished from the Civil Code contract of
Criminal Liability deposit, in the the WR Law provides for criminal GR: Depositary is generally not liable for a loss
liabilities for certain acts and omissions through FE

The industry of storing goods and commodities It was stipulated

require a license
General Bonded Warehouses
Definition of Terms
Fortuitous Event (Art. 1979) He uses the object without permission
Every building/structure/other protected enclosure in EX: Depositary becomes liable in the . instances:
Warehouse Return was delayed
which commodities are kept for storage
He allows others to use it, even if he himself was
Any person engaged in the business of receiving
Warehouseman authorised to use it
commodities for storage
Even if loss is due to FE (without his fault) or due to
Any receipt issued by a warehouseman for
Warehouse Receipt government order, the depositary is liable to deliver
commodities delivered to him Even if not liable (Art. 1990)
the money or replacement to the depositor, if any is
given

GR: Depositor becomes liable for damages to

depositary if he/she delivers a thing, whose
character causes any loss to the depositary

The depositor was not aware of the object's

dangerous character, at the time the deposit was
Depositor; Instance When Liable (Art. 1993) constituted; or,

EX: Unless... The depositor has informed the depositary of such

dangerous character; or,

The depositary was, in any case, aware of the

dangerous character of the object

Gratuitous: Depositor bears the expenses for

preservation; he is liable to reimburse the depositary
for them
Liability for Expenses (Art. 1992)
Onerous: Depositary bears the expenses for
preservation

Depositor; or

No Issues on Capacity to Contract (Art. 1972) Heirs and successors-in-interest; or

Person Designated in Contract

Guardian or administrator of depositor

Already incapacitated at the time of constitution (Art.
1970)
Depositor, if he acquires capacity
Depositor Incapacitated
Persons who may have administration of depositor's
Incapacitated after constitution (Art. 1986)
property and rights

Depositor only has a cause of action for recovery

Incapacitated Depositary in Possession while it is still in the incapacitated depositary's
Has Issues on Capacity to Contract possession

Depositor can only compel the incapacitated

Depositary Incapacitated (Art. 1971) Third Person Who Acquired in Good Faith in depositary to pay him/her the amount by which the
Possession depositary may have enriched or benefitted himself
with the thing or its price
To Whom
Third Person Who Acquired in Bad Faith in Depositor has a cause of action for the recovery of
Possession the object

Joint Depositors and Divisible Object (Art. 1985) Each depositor cannot demand more than his share

Has Stipulated Person Return to designated person

Two or more solidary depositors OR Returning an Return to co-depositor who makes a demand
Indivisible Object (Art. 1985) No Stipulated Person Return to any of the co-depositors, if no demand at
all

SGS: While the actual article says "depositor's heir,"

it should be "depositary's heir." Otherwise, the
meaning is absurd. This was an oversight in
Depositary's Heir Sold Object in Good Faith Without legislation
Knowledge That It Was Deposited (Art. 1991)
Price Paid Deliver the price to depositor

Assign to depositor the right of action to recover

Price Not Yet Paid
Obligation to Return price from buyer

Thing itself, with all products, accessories, and

accessions

Sums he applied for his own use, accruing from the

What to Return (Art. 1983)
date of use
Art 1896 applied: The depositary is liable to pay
If object is money, Art. 1896 shall apply to depositary
interest on... Sums that he still owes the depositor after the
extinguishment of the deposit

GR: Place designated, with expenses for

transportation borne by the depositor

EX: If there is no designation and provided there is

Where to Return (Art. 1987) no malice on the part of the depositary, it shall be
returned to the place where the onject deposited is,
EVEN if it was not the same place where the deposit
was made

One of the depositary's primary obligations

GR: Depositary should return the object upon

demand, even if a period was specified

Thing deposited was judicially attached while it was

in depositary's possession

Depositary was notified of a third party opposition to

EX: Depositary cannot return upon demand of
When to Return (Art. 1988) the return/removal of the thing deposited
depositor if...
NOTE: These exceptions are wrt to returning the SGS: In this cases, depositary should protect itself
object upon demand; the obligation to return the by consigning the property with the court.
object will always subsist.

Art. 1989: If deposit is gratuitous, depositary, upon If depositor refuses to accept the return, depositary
justifiable reasons for not continuing the deposit, may consign it with the court
may return the object to the depositor, even if the
period fixed had not yet elapsed

Depositary has a right to retain the thing in pledge

Right of Retention (Art. 1994) until the full payment of all amounts duly owed to
him/her