Angel Javellana v Jose Lim, et al; GR 4015, 24 August 1908

Facts:
On 26 May 1897, Jose and others executed a document in favor of Angel,
wherein it stated that they had received a sum of PhP 2,600.86 as a “deposit” without
interest from the latter. The document also stipulated that they would return the same
amount jointly and severally on 20 January 1898.
Upon the stipulated due date, however, Jose and others asked for an extension
to pay and bound themselves to pay 15% interest per annum on the amount of their
indebtedness, to which the Angel acceded. Despite the extension, Jose and others
still failed to pay the full amount of their indebtedness. Consequently, this prompted
Angel to file a civil action before the CFI of Iloilo. The CFI of Iloilo subsequently ruled
in favor of Angel to recover the amount due plus the payment of 15% interest per
annum.
Issue: Whether or not the contract executed by Angel and Jose and others was that
of a deposit.
Ruling:
No, the contract executed by Angel and Jose and others was not a deposit.
Instead, it was a contract of simple loan or mutuum.
Ratio:
It must be understood that Jose and others were lawfully authorized to make
use of the amount deposited, which they have done as subsequently shown when they
asked for an extension of the time for the return thereof. They were conscious that
they had used, for their own profit and gain, the money which they apparently received
as a “deposit”. Moreover, they engaged to pay interest to Angel from the stipulated
date until the time when the refund should have been made.
Where money, consisting of coins of legal tender, is deposited with a person
and the latter is authorized by the depositor to use and dispose of the same, the
agreement is not a contract of deposit, but a loan. Moreover, Article 1768 of the old
Civil Code (now Article 1978 of the New Civil Code) provides that when the depository
has per- mission to make use of the thing deposited, the contract loses the character
of a de- posit and becomes a loan or bailment
A subsequent agreement between the parties as to interest on the amount said
to have been deposited, because the same could not be returned at the time fixed
therefore, does not constitute a renewal of an agreement of deposit, but it is the best
evidence that the original contract entered into between them was for a loan under the
guise of a deposit.
 BANK OF THE PHILIPPINE ISLANDS VS. COURT OF APPEALS
232 SCRA302 / G.R. NO. 104612 / MAY 10, 1994
FACTS:
Private respondents Eastern Plywood Corporation and Benigno Lim as officer
of the corporation, had an “AND/OR” joint account with Commercial Bank and Trust
Co (CBTC), the predecessor-in-interest of petitioner Bank of the Philippine Islands.
Lim withdraw funds from such account and used it to open a joint checking account
(an “AND” account) with Mariano Velasco. When Velasco died in 1977, said joint
checking account had P662, 522.87. By virtue of an Indemnity Undertaking executed
by Lim and as President and General Manager of Eastern withdrew one half of this
amount and deposited it to one of the accounts of Eastern with CBTC.
Eastern obtained a loan of P73, 000.00 from CBTC which was not secured.
However, Eastern and CBTC executed a Holdout Agreement providing that the loan
was secured by the “Holdout of the C/A No. 2310-001-42” referring to the joint
checking account of Velasco and Lim.
Meanwhile, a judicial settlement of the estate of Velasco ordered the withdrawal
of the balance of the account of Velasco and Lim.
Asserting that the Holdout Agreement provides for the security of the loan
obtained by Eastern and that it is the duty of CBTC to debit the account of respondents
to set off the amount of P73, 000 covered by the promissory note, BPI filed the instant
petition for recovery. Private respondents Eastern and Lim, however, assert that the
amount deposited in the joint account of Velasco and Lim came from Eastern and
therefore rightfully belong to Eastern and/or Lim. Since the Holdout Agreement covers
the loan of P73, 000, then petitioner can only hold that amount against the joint
checking account and must return the rest.
ISSUE:
Whether BPI can demand the payment of the loan despite the existence of the
Holdout Agreement and whether BPI is still liable to the private respondents on the
account subject of the withdrawal by the heirs of Velasco.
RULING:
Yes, for both issues. Regarding the first, the Holdout Agreement conferred on
CBTC the power, not the duty, to set off the loan from the account subject of the
Agreement. When BPI demanded payment of the loan from Eastern, it exercised its
right to collect payment based on the promissory note, and disregarded its option
under the Holdout Agreement. Therefore, its demand was in the correct order.
Regarding the second issue, BPI was the debtor and Eastern was the creditor
with respect to the joint checking account. Therefore, BPI was obliged to return the
amount of the said account only to the creditor. When it allowed the withdrawal of the
balance of the account by the heirs of Velasco, it made the payment to the wrong
party. The law provides that payment made by the debtor to the wrong party does not
extinguish its obligation to the creditor who is without fault or negligence. Therefore,
BPI was still liable to the true creditor, Eastern.
 Liam Law v. Olympic Sawmill Co., 129 SCRA 439 (1984) Case Digest
Facts:
On or about September 7, 1957, the petitioner loaned P10, 000.00, without
interest, to the respondent. The loan became ultimately due on January 31, 1960 but
was not paid. The petitioner asked for a 3-month extension, or up to April 30, 1960.
On March 17, 1960, the parties executed another loan document for the payment of
P10, 000.00 extended up to April 30, 1960 but the obligation was increased by P6,
000.00 to answer for the attorney’s fees, legal interest, and other cost incident thereto.
The petitioner again failed to pay their obligation by April 30, 1960. On September 23,
1957, the respondent instituted a collection case. The petitioner admitted the P10,
000.00 principal obligation but claimed that the additional P6, 000.00 constituted
usurious interest.
Issue: Whether or not the additional P6, 000.00 constituted usurious interest.
Held:
No. Usury has been legally non-existent. Interest can now be charged as
lender and borrower may agree upon. In the present case, the petitioner had not
proven that the P6, 000.00 additional obligation was illegal.
 GO TIONG and LUZON SURETY CO., INC
FACTS:
Go Tiong owned a rice mill and warehouse, located at Mabini, Urdaneta,
Pangasinan. He obtained a license of a bonded businessman with LuzonSurety Co.,
with conditions he failed to fulfill. The warehouse and palay deposited therein were
insured with the Alliance Surety and Insurance Company. Ramon Gonzales
deposited palay to Go Tiong even before he got the license who later demanded
the value of his deposits. But Go Tiong failed to give him his value until fire burned
down the warehouse, with sacks in excess of that was authorized under his license.
The receipts issued to Gonzales were ordinary receipts and not the warehouse
receipts as defined by Warehouse receipts act. Plaintiff filed their claims with the
Bureau of Commerce and the proceeds of the insurance policy, BOC paid off some
claims. Plaintiff’s counsel withdrew the claims, because according to court nothing
came from plaintiff's efforts to have his claim paid, inconsistent with what Go
Tiong claimed that it was denied Gonzales filed claims both against Gonzales
and Luzon Surety, and renewed his claim with BOC. Gonzales and Go Tiong
entered into a contract of amicable settlement to the effect that upon the settlement
of all accounts, but upon failure to comply, Gonzales prosecuted his court action. Court
ruled in favor of Gonzales. Hence this appeal.
ISSUE:
Is the plaintiff’s claim covered by the Civil Law, and not Bonded Warehouse Act
for the reason that, Go Tiong issued to plaintiff were ordinary receipts, notthe
warehouse receipts contemplated by the Warehouse Receipts Law, and because
the deposits of palay of plaintiff were gratuitous?
RULING:
Consequently, any deposit made with him as a bonded warehouseman
must necessarily be governed by the provisions of Act No. 3893.Though it is
desirable that receipts issued by a bonded warehouseman should conform to the
provisions of the Warehouse Receipts Law, said provisions are not mandatory and
indispensable in the sense that if they fell short of the requirements of the Warehouse
Receipts Act, then the commodities delivered for storage become ordinary deposits
and willnot be governed by the provisions of the Bonded Warehouse Act. As the trial
courtwell observed, as far as Go Tiong was concerned, the fact that the receipts
issued by him were not "quedans" is no valid ground for defense because he
was the principal obligor. Furthermore, as found by the trial court, Go Tiong had
repeatedly promised plaintiff to issue to him "quedans" and had assured him that
he should not worry; and that Go Tiong was in the habit of issuing ordinary
receipts (not "quedans") to his depositors. Considering the fact, as already stated,
that prior to the burning of the warehouse, plaintiff demanded the payment of
the value of his palay from Go Tiong on two occasions but was put off without
any valid reason, it is illogical and unreasonable to hold that the presumption of
negligence in case of this kind is rebutted by the bailee by simply proving that the
property bailed was destroyed by an ordinary fire which broke out on the bailee's own
premises, without regard to the care exercised by the latter to prevent the fire, or to
save the property after the commencement of the fire. Besides, as observed by the
trial court, the defendant violated the terms of his license by accepting for deposit
palay in excess of the limit authorized by his license, which fact must have
increased the risk. Appealed decision affirmed.

CONSOLIDATED TERMINALS, INC vs ARTEX DEVELOPMENT CO., INC.,

FACTS: CTI was the operator of a customs bonded warehouse located at Port
Area, Manila. It received on deposit one hundred ninety-three (193) bales of high
density compressed raw cotton valued at P99, 609.76. It was understood that CTI
would keep the cotton in behalf of Luzon Brokerage Corporation until the consignee
thereof, Paramount Textile Mills, Inc., had opened the corresponding letter of credit in
favor of shipper, Adolph Hanslik Cotton of Corpus Christi, Texas. Allegedly by virtue
of a forged permit to deliver imported goods, purportedly issued by the Bureau of
Customs, Artex was able to obtain delivery of the bales of cotton on November 5 and
6, 1964 after paying CTI P15, 000 as storage and handling charges. At the time the
merchandise was released to Artex, the letter of credit had not yet been opened and
the customs duties and taxes due on the shipment had not been paid. CTI, in its
original complaint, sought to recover possession of the cotton by means of a writ of
replevin. The writ could not be executed. CTI then filed an amended complaint by
transforming its original complaint into an action for the recovery from Artex of P99,
609.76 as compensatory damages, P10, 000 as nominal and exemplary damages and
P20, 000 as attorney's fees.
ISSUE: whether or not CTI have a cause of action against Artex.
HELD: The answer is in the negative. We hold that CTI's appeal has no merit.
Its amended complaint does not clearly show that, as warehouseman, it has a cause
of action for damages against Artex. The real parties interested in the bales of cotton
were Luzon Brokerage Corporation as depositor, Paramount Textile Mills, Inc. as
consignee, Adolph Hanslik Cotton as shipper and the Commissioners of Customs and
Internal Revenue with respect to the duties and taxes. These parties have not sued
CTI for damages or for recovery of the bales of cotton or the corresponding taxes and
duties. The case might have been different if it was alleged in the amended complaint
that the depositor, consignee and shipper had required CTI to pay damages, or that
the Commissioners of Customs and Internal Revenue had held CTI liable for the duties
and taxes. In such a case, CTI might logically and sensibly go after Artex for having
wrongfully obtained custody of the merchandise.