Commercial Laws 1: Deposit — Chapter 1: Deposit in General and its Different Kinds
- The contract of deposit is one of the real contracts in Civil Law that is of Roman law origin.
- It is called depositum in Justinian's classification of real contracts.
- The other real contracts are:
- mutuum
- commodatum
- pignus
- In Roman Law, depositum was gratuituous and the "depositee received neither ownership nor possession but simply detention."
- In the United States, deposit, together with commodatum, is part of what is known as bailment which can be gratuitous or for hire.
- In the Philippines, deposit is governed by Articles 1962 to 2009 of Title XII, Book IV of the New Civil Code.
- However, Act No. 2137 otherwise known as the Warehouse Receipts Law applies when warehouse receipts are issued by a warehouseman.
- In addition, Act No. 3893 as amended by Republic Act No. 247, otherwise known as the General Bonded Warehouse Act applies on matters relating to bonded warehouses.
Art. 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.
1. Definition.
- There is deposit when one person delivers and the other person receives a thing belonging to another, with the obligation on the part of the latter of safely keeping it and of returning the same.
- The New Civil Code sometimes uses the Roman law term depositum for the contract of deposit.
- If the safekeeping of the thing delivered is not the principal purpose of the contract, there is no deposit but some other contract like commodatum.
- Calibo, Jr. v. Court of Appeals:
- In a contract of deposit, a person receives an object belonging to another with the obligation of safely keeping it and of returning the same.
- Thus, there is no deposit if a person received a tractor not to safely keep it but as a form of security for the payment of obligations.
- There is no deposit where the principal purpose for receiving the object is not safekeeping.
- The right to possess does not always include the right to use.
- For while the bailee in the contract of deposit holds the property in trust, he is not granted by law the right to make use of the property in deposit.
1.01. Intent of the Parties.
- The title of the document is not controlling.
- Hence, although a deposit is spoken of in the document in question, nevertheless the contract may be declared to be a contract of loan from an examination of the entire document, if it clearly appears that the contract was a loan and that such was the intention of the parties.
- Gavieres v. T.H. Pardo De Tavera:
- The obligation of the supposed depositary to pay interest at the rate of six percent to the depositor suffices to cause the obligation to be considered as a loan and makes it likewise evident that it was the intention of the parties that the depositary should have the right to make use of the amount deposited, since it was stipulated that the amount could be collected after notice of two months in advance.
- Such being the case, the contract lost the character of a deposit and acquired that of a loan.
- ❌Loan.
- 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 thus entered into between the depositor and the depositary is not a contract of deposit but a loan.
- Compania Agricola De Ultramar v. Nepomuceno:
- The debtors were lawfully authorized to make use of the amount deposited, which they have done, as subsequently shown when asking for an extension of the time for the return thereof, inasmuch as, acknowledging that they have subjected the lender, their creditor, to losses and damages for not complying with what had been stipulated, and being conscious that they had used, for their own profit and gain, the money that they received apparently as a deposit, they engaged to pay interest to the creditor from the date named until the time when the refund should be made.
- Such conduct on the part of the debtors is unquestionable evidence that the transaction entered into between the interested parties was not a deposit, but a real contract of loan.
- ❌Security.
- In a contract of deposit, a person receives an object belonging to another with the obligation of safely keeping it and of returning the same.
- Calibo, Jr. v. Court of Appeals:
- The petitioner himself states that he received the tractor not to safely keep it but as a form of security for the payment of another person's obligations.
- Hence, the Court concluded that there was no deposit where the principal purpose for receiving the object is not safekeeping.
- Deposit in Sale.
- There is no deposit just because the term "deposit" is used by the parties.
- Thus, in practice, a "deposit" is made for the purchase of a thing.
- However, in most cases, the "deposit" is actually either an advance payment or an earnest money contemplated under Article 1482 of the New Civil Code.
- Article 1482. Whenever earnest money is given in a contract of sale, it shall be considered as part of the price and as proof of the perfection of the contract.
- ❌Deposit in Lease.
- In the same manner, the security deposit that is usually contractually required and even statutorily allowed in a contract of lease cannot be considered deposit under Article 1962.
- A lessee or a sub-lessee is often required to deposit a certain amount which shall serve as a security for whatever damage that may be caused to the leased property or for any unpaid utility.
- It is believed that the same deposit is not one that is contemplated under Article 1962 because the principal purpose is not safekeeping of the amount deposited.
- ❌Deposit of Students.
- People of the Philippines u. Montemayor:
- The students deposited amounts in a College as a security for materials that may be broken.
- The Supreme Court ruled that the amounts paid by the students to the College, in order to answer for the value of materials broken, "were no more 'deposits' in law than bank 'deposits' are so. There was no showing that the college undertook to keep safe the moneys in question and return it later to each student in the very same coins or bills in which it had been originally received. The College merely bound itself to reimburse or repay to each student the amount "deposited" by him or her, after deducting or setting off the value of broken equipment.
- The relation thus established between college and student was one of debtor and creditor, not one of depositor and depository; the transaction was a loan, not a deposit. As a loan, the College acquired the ownership of the money paid by the students, subject only to the obligation of reimbursing equivalent amounts, unless a deduction should happen to be due.
- Since the College was a government institution or public entity, the money became the public funds from the time the College received them.
- ✅Deposit of Personal Effects.
- It is usual for establishments to accept personal effects or clothing like the delivery of the customer's coat while entering the premises.
- While delivery of the coat may be for the convenience of the customer, the moment the establishment receives the coat, the establishment is already in control of the coat for safekeeping.
- The delivery of personal effects may also be for security purposes, as in the case where the customer is required to turn over the customer's gun.
- However, it is believed that this is also a case of deposit.
- The same is true in the case of stores or supermarkets that accept bags or other personal properties of the customer before the customer enters the store/supermarket.
1.02. Proof.
- He who alleges that a contract of deposit exists must prove the existence thereof.
- Under Article 1311 of the Civil Code, contracts are binding upon the parties (and their assigns and heirs) who execute them.
- When there is no privity of contract, there is likewise no obligation or liability to speak about and thus no cause of action arises.
- Privity is a relation between two parties that is recognized by law.
- Specifically, in an action against the depository, the burden is on the plaintiff to prove the bailment or deposit and the performance of conditions precedent to the right of action.
- A depositary is obliged to return the thing to the depositor, or to his heirs or successors, or to the person who may have been designated in the contract.
- Chan v. Maceda, Jr.:
- The Supreme Court noted that the records are bereft of any proof of the existence of a contract of deposit, oral or written, between petitioners and respondent.
- The respondent miserably failed to prove the existence of the deposit. The only pieces of evidence respondent presented to prove the contract of deposit were the delivery receipts. However, the receipts were unsigned and not duly received or authenticated by any competent witness. Hence, the delivery receipts were ruled to have no probative value at all.
- United States v. lgpuara:
- A certain Mr. Jose Igpuara acknowledged in a written document that the amount at the disposal of Eugenio Veraguth (depositor) was the sum of P2,498.00 which was the balance from Juana Mantilla's sugar.
- Mr. lgpuara remained in possession of the amount in no other sense than to take care of the amount and for no other purpose. Possession by Mr. lgpuara was considered a deposit with the obligation to safekeep and turn over the same to the principal.
1.03. Parties.
The parties in a contract of deposit are:
3.02. Distinguished from Lease.
- the depositor and
- the depositary.
- Depositor
- the person who delivers the goods to the depositary
- Depositary
- the person who receives the goods with the obligation to safely keep the goods and to return the same to the depositor.
- The depositor cannot be the depositary at the same time.
- Article 1962 states that the thing must belong to another.
- However, it is possible for the depositary to keep his own goods.
- Example:
- Under Section 2(h) of Act No. 21327, otherwise known as the Warehouse Receipts Law (WRL), if the receipt is issued for goods of which the warehouseman is owner, either solely or jointly or in common with others, the fact of such ownership must be stipulated.
- With this provision of the WRL, it is believed that for goods co-owned by the depositary, a contract of deposit may be entered into between the depositary and the co-owners. The co-owner-depositary will then hold the goods not in his capacity as co-owner but as depositary.
- The depositor need not be the owner of the thing deposited.
- Thus, in certain cases, a borrower, lessee or usufructuary may be compelled by the circumstances to deposit the thing to a depositary.
- It is enough that the depositor can transfer material custody of the thing.
- There can be two or more depositors of the same thing, either under the same interest or separate claim or interest.
- Article 1968 of the New Civil Code provides that "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."
1.04. Arrastre Operator.
- The duty of care required of a depositary is imposed on an arrastre operator.
- An arrastre operator handles cargo deposited on the wharf or between the establishment of the consignee or shipper and the ship's tackle.
- The arrastre operator is the custodian of the goods discharged from a vessel; hence, the arrastre operator's duty is to take good care of the goods and turn the goods over to the party entitled to their possession.
2.
Characteristics.
- The characteristics of the contract of deposit include the following:
- It is a real contract, that is, it is perfected by delivery;
- It is a principal contract;
- It can be unilateral if it is gratuitous or bilateral if it is onerous;
- Its purpose is safekeeping;
- It involves temporary custody of the depositary as there is an obligation to return; and
- It involves temporary custody of corporeal personal property.
3. Distinctions.
- While the contracts of commodatum, usufruct and lease all involve delivery of property to another without transfer of ownership, the contract of deposit can be distinguished from these other contracts as shown below.
- Commodatum and the contract of deposit may be distinguished as follows:
Lease is different from deposit because the cause in a contract of lease is the enjoyment of the thing, whereas in a contract of deposit, it is the safekeeping of the thing.
PROBLEM:
On February 9, 1993 respondent Master Tours and Travel
Corporation (Master Tours) entered into a five-year lease agreement
f
rom February 15, 1993 to February 15, 1998 with petitioner RCJ
Bus Lines, Incorporated (RCJ) covering four Daewoo air-conditioned
buses, described as "presently junked and not operational" for the
lease amount of 1"600,000.00, with 1'400,000.00 payable upon the
signing of the agreement and 1"200,000.00 "payable upon completion
of rehabilitation of the four buses by the lessee." The agreement was
signed by Marciano T. Tan as Master Tours' Executive Vice-President
and Rolando Abadilla as RCJ's President and Chairman.
More than four years into the lease or on June 16, 1997, Master
Tours wrote RCJ a letter, demanding the return of the four buses
"brought to your garage at E. Rodriguez Avenue for safekeeping" so
Master Tours could settle its obligation with creditors who wanted to
foreclose on the buses. RCJ did not, however, heed the demand.
On January 16, 1998, Master Tours wrote RCJ a letter,
demanding the return of the buses to it and the payment of the lease
f
ee of1'600,000.00 that had remained unpaid since 1993. On February
2, 1998, RCJ wrote back through counsel that it had no obligation
to pay the lease fee and that it would return the buses only after
Master Tours shall have paid RCJ the storage fees due on them. This
prompted Master Tours to file a collection suit against RCJ before the
Regional Trial Court (RTC) of Manila. For its defense, RCJ alleged that it had no use for the buses, they being non-operational, and that
the lease agreement had been modified into a contract of deposit of
the buses for which Master Tours agreed to pay RCJ storage fees of
P4,000.00 a month. To prove the new agreement, RCJ cited Master
Tours' letter of June 16, 1997 which acknowledged that the buses
were brought to RC.J's garage for "safekeeping." The pertinent portion
of the letter reads:
"This is to follow up our previous discussion with you with regards
to the Five (5) units of Daewoo Airconditioned Motorcoaches, which
we brought to your garage at E. Rodriguez Avenue for safekeeping.
Since we have outstanding loan, with BancAsia Finance & Investment
Corporation and BancAsia Capital Corporation that we are unable
to service payment, they have made final demand to us and are in
the process of foreclosing these units. We urgently request from you a
meeting to thresh out matters concerning the pulling out of these units
by the financing firms."
Was the contract of lease novated and converted to a deposit?
No. Article 1292 of the Civil Code provides that in novation, "it is
imperative that it be so declared in unequivocal terms, or that the
old and the new obligations be on every point incompatible with each
other." The obligations are incompatible if they cannot stand together.
In such a case, the subsequent obligation supersedes or novates the
first. The turning point in this case, therefore, is whether or not the
parties subsequently entered into an agreement for the storage of the
buses that superseded their prior lease agreement involving the same
buses.
First. RCJ failed to present any clear proof that it agreed with
Master Tours to abandon the lease of the buses and in its place
constitute RCJ as depositary of the same, providing storage service
to Master Tours for a fee. The only evidence RCJ relied on is Master
Tours' letter of June 16, 1997 in which it demanded the return of
the four buses which were placed in RCJ's garage for "safekeeping."
However, the letter does not on its face constitute an agreement. It
contains no contractual stipulations respecting some warehousing
arrangement between the parties concerning the buses. At best, the
letter acknowledges that five Master Tours' buses were "brought to
your RCJ's garage ... for safekeeping." But the idea of RCJ safekeeping
the buses for Master Tours is consistent with their lease agreement.
The lessee of a movable property has an obligation to "return the thing
leased, upon the termination of the lease, just as he received it." This
means that RCJ must, as an incident of the lease, keep the buses safe
f
rom injury or harm while these were in its possession.
It is evident from the tenor of Master Tours' letter that RCJ's
"safekeeping" was to begin from the time the buses were delivered
at its garage. There is no allegation or evidence that Master Tours pulled out the buses at some point, signifying the pre-termination or
the lease agreement, then brought them back to RCJ's garage, this
time for safekeeping. This circumstance rules out any notion that an
agreement for RCJ to hold the buses for safekeeping had overtaken
the lease agreement.
Second, it did not make sense for Master Tours to pre-terminate
its lease of the junked buses to RCJ, which would earn Master Tours
P600,000.00, in exchange for having to pay RCJ storage fees for
keeping those buses just the same. Ae pointed out above, the lease
already implied an obligation on RCJ's part to safekeep the buses
while they were being rented. (RCG Bus Lines, Inc. v. Masur Tours
and Travel Corp., G.R. No. 177232, October 11, 2012)
3.03. Distinguished from Usufruct.
- The owner of a thing may give the usufruct over the same thing to another person known as the usufructuary.
- In this case, the owner retains naked ownership over the thing.
- Usufruct can be distinguished from deposit as follows:
4.
Free Valet Parking.
- When a restaurant offers free valet parking to its customers, the restaurant company is constituted as depositary of the vehicle/s.
- The customer entrusts his or her car to the restaurant with the expectation of the car's safe return at the end of the meal.
- The stipulation in the "Parking Stub" holding the restaurant not liable for any damage — being a contract of adhesion — is void in view of the nature of the transaction.
- There is necessary deposit of vehicles under Article 1999 but the same is limited to vehicles brought to hotels.
- It does not include parking lots and parking buildings that are either separate from or attached to or are part of shopping malls.
- Spouses Mamaril v. Boy Scouts of the Philippines:
- The petitioners in were jeepney operators since 1971. They would park their six passenger jeepneys every night at the Boy Scout of the Philippines' (BSP) compound located at 181 Concepcion Street, Malate, Manila for a fee of P300.00 per month for each unit. The contract between the parties was deemed to be a lease contract.
- The Court ruled:
- Moreover, the Court concurs with the finding of the CA that the contract between the parties herein was one of lease as defined under Article 1643 of the Civil Code.
- It has been held that the act of parking a vehicle in a garage, upon payment of a fixed amount, is a lease. Even in a majority of American cases, it has been ruled that where a customer simply pays a fee, parks his car in any available space in the lot, locks the car and takes the key with him, the possession and control of the car, necessary elements in bailment, do not pass to the parking lot operator, hence, the contractual relationship between the parties is one of lease.
- The Office of the Solicitor General v. Ayala Land Incorporated:
- The prohibition against their collection of parking fees from the public, for the use of said facilities, is already tantamount to a taking or confiscation of their properties. The State is not only requiring that respondents devote a portion of the latter's properties for use as parking spaces, but is also mandating that they give the public access to said parking spaces for free. Such is already an excessive intrusion into the property rights of respondents. Not only are they being deprived of their right to use a portion of their properties as they wish, they are further prohibited from profiting from its use or even just recovering therefrom the expenses for the maintenance and operation of the required parking facilities.
- The Court concluded that the total prohibition against the collection by respondents of parking fees from persons who use the mall parking facilities has no basis under the law and the State also cannot impose the same prohibition by generally invoking police power, since said prohibition amounts to a taking of respondents' property without payment of just compensation.
- It is believed that the contract for the use parking lots is in the nature of a lease if the driver of the vehicle retains control thereof and merely uses a space in the parking lot.
- However, the parking lot/building operator or the mall will be treated as a depositary if possession of the vehicle is entrusted to the employees or agents of said parking lot/building operator or mall as in the case of valet parking.
- There is bailment if the customer leaves the keys and the vehicle to the operator or mall employees.
- The situation is similar to a restaurant that offers free valet parking to its customers where the restaurant company is constituted as depositary.
- Clifford L. Wall v. Airport Parking Company of Chicago:
- Defendant, Airport Parking Company of Chicago, was the operator of a self-parking lot at O'Hare Airport. The lot is wholly enclosed, well lighted, paved and marked into parking spaces. Motorists enter through automatic gates and there receive a ticket bearing the date and time of arrival. They park in any available parking space, lock their automobiles, and retain the keys. When ready to depart they walk into the lot, pick up their vehicle and leave via an exit where the ticket is handed to an attendant to compute and collect the parking charges.
- The basic issue in the case is whether the contract with the parking lot operator is one of lease.
- The Court explained that use of self-service parking lots, such as the one here involved, does not create a bailor-bailee relationship and the lot operator is not subject to the liability imposed by the rules relating to bailments.
5. Safety Deposit Box.
- CA Agro-Industrial Development Corp. v. Court of Appeals:
- The Supreme Court explicitly rejected the contention that a contract for the use of a safety deposit box is a contract of lease governed by Title VII, Book IV of the Civil Code. However, the Court did not fully subscribe to the view that it is a contract of deposit to be strictly governed by the New Civil Code provision on deposit under its Title XII, Book IV.
- The Supreme Court considered a contract for a safety deposit box as a special kind of deposit citing the prevailing rule in American jurisprudence that the relation between a bank renting out safe deposit boxes and its customer with respect to the contents of the box is that of a bailor and bailee.
- The bailment for hire and mutual benefit has thus been adopted in this jurisdiction. It was noted by the Supreme Court that there are laws which authorize banking institutions to rent out safety deposit boxes.
- Sia v. Court of Appeals:
- The prevailing rule in American Jurisprudence — that the relation between a bank renting out safe deposit boxes and its customer with respect to the contents of the box is that of a bailor and bailee, the bailment being for hire and mutual benefit — has been adopted in this jurisdiction.
- Both the law and authority cited are clear enough and require no further elucidation. Unfortunately, however, the public respondent failed to consider that in the instant case, as correctly held by the trial court, SBTC was guilty of negligence. The facts constituting negligence are enumerated in the petition and have been summarized in this ponencia. SBTC's negligence aggravated the injury or damage to the petitioner which resulted f rom the lose or destruction of the stamp collection. SBTC was aware of the floods of 1985 and 1986; it also knew that the floodwaters inundated the room where Safe Deposit Box No. 64 was located.
- In view hereof, it should have lost no time in notifying the petitioner in order that the box could have been opened to retrieve the stamps, thus saving the same from further deterioration and lose. In this respect, it failed to exercise the reasonable care and prudence expected of a good father of a family, thereby becoming a party to the aggravation of the injury or loss.
- The previous law, Section 72 of the General Banking Act, and the present law, Section 53 of the General Banking Law of 2000 (GBL for short) provide that a bank may perform the following services:
- Receive in custody funds, documents and valuable objects;
- Act as financial agent and buy and sell, by order of and for the account of their customers, shares, evidences of indebtedness and all types of securities;
- Make collections and payments for the account of others and perform such other services for their customers as are not incompatible with banking business;
- Upon prior approval of the Monetary Board, act as managing agent, adviser, consultant or administrator of investment management/advisory/consultancy accounts; and
- Rent out safety deposit boxes.
- The GBL expressly provides that the bank shall perform the above-enumerated services "as depositary or as an agent. Accordingly, it shall keep the funds, securities and other effects which it receives duly separate from the bank's own assets and liabilities.''
- CA Agro-Industrial Development Corp. v. Court of Appeals:
- The primary function is still found within the parameters of a contract of deposit, i.e., the receiving in custody of funds, documents and other valuable objects for safekeeping. The renting out of the safety deposit boxes is not independent from, but related to or in conjunction with, this principal function.
- The depositary's responsibility for the safekeeping of the objects deposited in the case at bar is governed by Title I, Book IV of the Civil Code. Accordingly, the depositary would be liable if, in performing its obligation, it is found guilty of fraud, negligence, delay or contravention of the tenor of the agreement. (Art. 1170, ibid.) In the absence of any stipulation prescribing the degree of diligence required, that of a good father of a family is to be observed. (Art. 1173, ibid.) Hence, any stipulation exempting the depositary f rom any liability arising from the loss of the thing deposited on account of fraud, negligence or delay would be void for being contrary to law and public policy.
- With respect to property deposited in a safe-deposit box by a customer of a safe-deposit company, the parties, since the relation is a contractual one, may by special contract define their respective duties or provide for increasing or limiting the liability of the deposit company, provided such contract is not in violation of law or public policy. It must clearly appear that there actually was such a special contract, however, in order to vary the ordinary obligations implied by law from the relationship of the parties; liability of the deposit company will not be enlarged or restricted by words of doubtful meaning. The company, in renting safe-deposit boxes, cannot exempt itself from liability for loss of the contents by its own fraud or negligence or that, of its agents or servants, and if a provision of the contract may be construed as an attempt to do so, it will be held ineffective for the purpose. Although it has been held that the lessor of a safe-deposit box cannot limit its liability for loss of the contents thereof through its own negligence, the view has been taken that such a lessor may limit its liability to some extent by agreement or stipulation.
PROBLEM:
The parties entered into a "Lease Agreement" whereby the bank
"leased" Safe Deposit Box No. 54. The following provisions of the Lease Agreement of the safety deposit box limit the bank's liability,
viz.:
9. The liability of the bank by reason of the lease, is limited
to the exercise of the diligence to prevent the opening of the Safe by
any person other than the Renter, his authorized agent or legal
representative.
13.
The bank is not a depository of the contents of the Safe and
it has neither the possession nor the control of the same. The Bank has
no interest whatsoever in said contents, except as herein provided, and
it assumes absolutely no liability in connection therewith.
Are the provisions of pars. 9 and 13 valid?
No, the conditions in pars. 9 and 13 of the Lease Agreement are
invalid. Such conditions limit the scope of the exercise of due diligence
by the bank involved to merely seeing to it that only the renter, his
authorized agent or his legal representative should open or have
access to the safety deposit box. In short, in all other situations, it
would seem that the bank-renter is not bound to exercise diligence of
any kind at all. Hence, the conditions must be stricken down for being
contrary to law and public policy as they are meant to exempt the
renter bank from any liability for damage, loss or destruction of the
contents of the safety deposit box which may arise from its own or its
agents' fraud, negligence or delay. (Sia v. Court of Appeals, G.R. No.
102970, May 13, 1993)
The plaintiff rented on March 22, 1985 the Safety Deposit Box No. 54
of the defendant bank at its Binondo Branch located at the Fookien
Times Building, Soler St., Binondo, Manila wherein he placed his
collection of stamps. The said safety deposit box leased by the plaintiff
was at the bottom or at the lowest level of the safety deposit boxes
of the defendant bank at its aforesaid Binondo Branch. During the
floods that took place in 1985 and 1986, floodwater entered into the
defendant bank's premises, seeped into the safety deposit box leased
by the plaintiff and caused, according to the plaintiff, damage to his
stamps collection. The defendant bank rejected the plaintifl's claim
for compensation for his damaged stamps collection, so, the plaintiff
instituted an action for damages against the defendant bank. Is the
bank liable to the plaintiff?
Yes, because the bank was guilty of negligence. The bank's negligence
aggravated the injury or damage to the stamp collection. The bank was
aware of the floods of 1985 and 1986; it also knew that the floodwaters
inundated the room where Safe Deposit Box No. 54 was located. In
view thereof, it should have lost no time in notifying the plaintiff in
order that the box could have been opened to retrieve the stamps,
thus saving the same from further deterioration and loss. In this
respect, the bank failed to exercise the reasonable care and prudence
expected of a good father of a family, thereby becoming a party to
the aggravation of the injury or loss. Accordingly, the aforementioned fourth characteristic of a fortuitous event is absent. Article 1170 of the
Civil Code, which states that those who in the performance of their
obligation are guilty of fraud, negligence, or delay, and those who in
any manner contravene the tenor thereof, are liable for damages, thus
comes to the succor of the petitioner. The destruction or loss of the
stamp collection, which was. in the language of the trial court, the
"product of 27 years of patience and diligence caused the petitioner
pecuniary loss; hence. he must be compensated therefor. (Sia v. Court
of Appeals, G.R. No. 102970, May 13, 1993)
6.
Escrow Agreements
- Escrow agreements may partake the nature of deposit.
- Province of Bataan v. Villafuerte, Jr:
- An escrow fills a definite niche in the body of the law; it has a distinct legal character. The usual definition is that an escrow is a written instrument which by its terms imports a legal obligation and which is deposited by the grantor, promisor, or obligor, or his agent with a stranger or third party, to be kept by the depositary until the performance of a condition or the happening of a certain event, and then to be delivered over to the grantee, promisee, or obligee.
- While originally. the doctrine of escrow applied only to deeds by way of grant, or as otherwise stated, instruments for the conveyance of land, under modern theories of law, the term escrow is not limited in its application to deeds but is applied to the deposit of any written instrument with a third person.
- Particular instruments which have been held to be the subject of an escrow include:
- bonds or covenants
- deeds
- mortgages
- oil and gas leases
- contracts for the sale of land or for the purchase of personal property
- corporate stocks and stock subscriptions
- promissory notes or other commercial paper
- insurance applications and policies
- contracts for the settlement of will-contest cases
- indentures of apprenticeship
- receipts assigning concessions and discontinuances and releases of causes of action.
- Moreover, it is no longer open to question that money may be delivered in escrow.
- Escrow Deposit.
- It is submitted, however, that bank deposits that are considered "escrow deposit" are not governed by the rules on the contract of deposit.
- The law on mutuum still applies to the deposit itself.
- However, the bank must perform the service of releasing of the escrow fund subject to certain conditions.
- Example:
- If the parties in a contract of sale agreed to deposit the price in escrow, the release by the bank of the funds to the seller may be subject to the condition that the seller must submit the title and the tax declaration in the name of the buyer. Hence, the purpose of the deposit is not for safekeeping.
- Judicial Escrow.
- The escrow may be created pursuant to a court order.
- In our jurisdiction, an escrow order issued by a court of law may find ample basis and support in the court's intrinsic power to issue orders and other ancillary writs and processes incidental or reasonably necessary to the exercise of its main jurisdiction.
- Evidently, judicial power connotes certain incidental and inherent attributes reasonably necessary for an effective administration of justice.
- In a manner of speaking, courts have not only the power to maintain their life, but they have also the power to make that existence effective for the purpose for which the judiciary was created.
- They can, by appropriate means, do all things necessary to preserve and maintain every quality needful to make the judiciary an effective institution of Government.
- Courts have therefore inherent power to preserve their integrity, maintain their dignity and to insure effectiveness in the administration of justice.
De Leon:
Characteristics of the contract.
- It is a real contract like commodatum and mutuum because it is perfected by the delivery of the subject matter.
- When the deposit is gratuitous, it is a unilateral contract because only the depositary (depositorio) has an obligation. But when the deposit is for compensation, the juridical relation created becomes bilateral contract because it gives rise to obligations on the part of both the depositary and depositor (depositante).
Safekeeping, principal purpose
of the contract.
- Effect where safekeeping only an accessory obligation.
- The principal purpose of the contract of deposit is the safekeeping of the thing delivered so that if safekeeping is only an accessory or secondary obligation of the recipient of the thing, deposit is not constituted but some other contract like lease, commodatum, or agency.
- Example:
- The delivery of money to a person so that he may make payment or invest the money for the account of the giver, or of documents or records to a lawyer hired to represent a party to a suit, cannot be regarded as constituting a deposit, but only as an agency.
- Here, the principal end of the contract is representation of one by another and not the custody and preservation of the thing delivered.
- Balance of commission account in agent’s possession at principal’s disposal appropriated by agent.
- Where the balance of a commission account remains in the possession of the agent at the principal’s disposal, the same acquires at once the character of a deposit which the former must return or restore to the latter at any time it is demanded.
- The agent undoubtedly commits the crime of estafa if he appropriates or diverts it to his own use.
- It could only become his as a loan, if so expressly agreed by its owner who would then be obligated not to demand it until the expiration of the legal or stipulated period
Deposit distinguished from mutuum.
- The distinctions are as follows:
- Deposit
- the principal purpose is safekeeping or mere custody;
- the depositor can demand the return of the subject matter at will;
- both movable and immovable property may be the object.
- Mutuum
- the principal purpose is the consumption of the subject matter;
- the lender must wait until the expiration of the period granted to the debtor before he can demand the return of the subject matter;
- only money and any other fungible thing may be the object.
Deposit distinguished from commodatum.
- The following are the distinctions:
- Deposit
- the principal purpose is safekeeping or mere custody;
- may be gratuitous;
- in (extrajudicial) deposit, only movable (corporeal) things may be the object
- Mutuum
- the principal purpose is the transfer of the use;
- essentially and always gratuitous;
- both movable and immovable property may be the object
Art. 1963.
An agreement to constitute a deposit is
binding,
but the deposit itself is not perfected
until the
delivery of the thing.
1. Perfection.
- The contract of deposit is a real contract because it is not perfected until the delivery of the thing.
- This feature of deposit is rooted in Roman Law.
- It is consistent with the purpose of deposit that is for safekeeping of goods.
- Necessarily, safekeeping can only start if the depositor has material custody of the thing deposited.
- Transfer of possession therefore perfects the contract and at the same time transfers juridical possession of the property to the depositary but as a mere holder.
- Since possession by the depositary is juridical possession, the depositary may be liable for Estafa if he appropriates the goods.
- The first part of Article 1963 contemplates a preparatory contract to deposit a thing in the future.
- This contract is classified as a consensual contract and is perfected by the mere meeting of minds of the parties.
Art. 1964.
A deposit may be constituted
judicially
or extrajudicially.
Art. 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.
Art. 1966.
Only movable things may be the object
of a deposit.
Art. 1967.
An extrajudicial deposit is either
voluntary or necessary.
1. Kinds of Deposit.
- Deposit may be:
- regular or irregular
- extrajudicial or judicial
- Regular and Irregular.
- Regular deposit
- It is the general rule, that is, the depositary cannot use the thing deposited.
- Irregular deposit
- The depositary has permission to use the thing deposited.
- Extrajudicial Deposit
- It is a deposit that is perfected without court intervention or approval.
- It can either be voluntary or necessary:
- Voluntary — deposit that is the result of voluntary agreement.
- Necessary — deposit that is made in:
- compliance with a legal obligation
- or on the occasion of any calamity,
- or by travellers in hotels and inns
- or by travellers with common carriers.
- Judicial Deposit
- It is a deposit that results when the Court orders the attachment or seizure of property.
- However, judicial deposit may also be legal deposit as in the case where judicial deposit is mandated by law.
- Example:
- Judicial deposit provided for under Article 538 of the New Civil Code.
- Article 583. The usufructuary, before entering upon the enjoyment of the property, is obliged:
- To make, after notice to the owner or his legitimate representative, an inventory of all the property, which shall contain an appraisal of the movables and a description of the condition of the immovables;
- To give security, binding himself to fulfill the obligations imposed upon him in accordance with this Chapter.
- Only movable things may be the object of a deposit.
- Article 1966 of the New Civil Code contemplates extrajudicial deposit.
- The rule applies to both voluntary deposit and necessary deposit.
- The rule is different in judicial deposit because Articles 2005 and 2006 expressly recognize deposit of real properties.
- Necessarily, however, the movable things contemplated under Article 1966 are corporeal things because the purpose of the contract of deposit is safekeeping.
- Rights are incapable of material custody.
- Thus, shareholdings in a corporation cannot be the object of extrajudicial deposit although the certificate of stock that represents the same can be deposited.
- The shares themselves are intangible properties while the certificates that represent them are corporeal things.
2.01. Deposit of Money.
- Foreign currency can be the object of deposit.
- Bank of the Philippine Islands v. The Intermediate Appellate Court and Zshornack:
- The document which embodies the contract states that the US$3,000.00 was received by the bank for safekeeping. The subsequent acts of the parties also show that the intent of the parties was really for the bank to safely keep the dollars and to return it to respondent Zshornack at a later time.
- The Supreme Court therefore concluded that the above arrangement is that contract defined under Article 1962, New Civil Code.
- The Roman Catholic Bishop of Jaro v. De La Peña:
- The Supreme Court seems to indicate that the legal tender can be the object of deposit. The cases involved the amount of P6,641.00 which belonged to the Roman Catholic Bishop of Jaro. However, it is believed that the real agreement appears to be a trust agreement and not a contract of deposit. Nevertheless, the deposit of legal tender is still legally feasible so long as the principal purpose is safekeeping.
3. Generally Gratuitous.
- General Rule: A deposit is a gratuitous contract.
- Exceptions:
- when there is an agreement to the contrary; or
- the depositary is engaged in the business of storing goods.
- Thus, a warehouseman who is engaged in the business of storing goods may charge compensation for goods that are deposited in his warehouse.
- Section 2 of the Warehouse Receipts Law expressly provides that the warehouse receipts shall state the rate of storage charges.
- Where property saved from destruction without knowledge of the owner.
- In involuntary deposit, where property is saved from destruction during a calamity by another person without the knowledge of the owner, the latter is bound to pay the former just compensation. (see Arts. 1996[2], 1997, par. 2.)
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