ATENEO CENTRAL BAR OPERATIONS 2007 Civil Law SUMMER REVIEWER

Transcription

1 Civil Law SUMMER REVIEWER CREDIT TRANSACTIONS include all transactions involving the purchase or loan of goods, services or money in the present with a promise to pay or deliver in the future (contract of security) 2 TYPES OF CREDIT TRANSACTIONS: 1. secured transactions those supported by a collateral or an encumbrance of property 2. unsecured transactions those supported only by a promise to pay or the personal commitment of another such as a guarantor or surety SECURITY is something given, deposited or serving as a means to ensure the fulfillment or enforcement of an obligation or of protecting some interest in the property 2 TYPES OF SECURITY: 1. personal when an individual becomes a surety or a guarantor 2. real or property when an emcumbrance is made on property BAILMENT is the delivery of property of one person to another in trust for a specific purpose, with a contract, express or implied, that the trust shall be faithfully executed and the property returned or duly accounted for when a special purpose is accomplished or kept until the bailor reclaims it. PARTIES IN BAILMENT 1. bailor the giver, the party who delivers possession/custody of the thing bailed 2. bailee the recipient, the party who receives the possession/custody of the thing delivered KINDS OF CONTRACTUAL BAILMENT W/ REFERENCE TO COMPENSATION 1. for the sole benefit of the bailor (gratuitous) e.g. gratuitous deposit, mandatum (do some act w/ respect to a thing) 2. for the sole benefit of the bailee (gratuitous) e.g. commodatum, gratuitous simple loan or mutuum 3. for the benefit of both parties e.g. deposit for compensation, involuntary deposit, pledge and bailments for hire: a. hire of things temporary use b. hire of service for work or labor c. hire of carriage of goods for carriage d. hire of custody for storage LOAN CHARACTERISTICS 1. real contract delivery is essential for perfection of the loan (BUT a promise to lend, being consensual, is binding upon the parties) 2. unilateral contract - only the borrower has the obligation KINDS 1. commodatum where the bailor delivers to the bailee a non-consumable thing so that the latter may use it for a certain time and return the identical thing kinds of commodatum: a. ordinary commodatum use by the bailee of the thing is for a certain period of time b. precarium one whereby the bailor may demand the thing loaned at will; exists in cases where: i. neither the duration of the contract nor the use to which the thing loaned should be devoted has been stipulated ii. if the use of the thing is merely tolerated by the owner 2. mutuum or simple loan - where the lender delivers to the borrower money or other consumable thing upon the condition that the latter will pay the same amount of the same kind and quality (when it is consumed in a manner appropriate to its purpose) LOAN 1. delivery by one party and the receipt by the other party of a given sum of money or other consumable thing upon an agreement, express or implied 2. to repay the same amount of the same kind and quality, w/ or w/o interest CREDIT The ability of an individual to borrow money or things by virtue of the confidence or trust reposed by a lender that he will pay what he may promise w/in a specified period Adviser: Dean Cynthia Roxas-Del Castillo; Heads: Joy Marie Ponsaran, Eleanor Mateo; Understudies: Joy Stephanie Tajan, John Paul Lim; Subject Head: Sarah Lopez; Pledgee: Aiza Constantino

2 LOAN Interest is usually taken at the expiration of a credit Always on single-name paper COMMODATUM Object Ordinarily nonconsumable Ownership Ownership is of the thing retained by the lender Cause Essentially gratuitous Thing to be returned Subject Matter Purpose When to return Who bears risk of loss Borrower must return the same thing loaned May involve real or personal property Loan for use or temporary possession Bailor may demand the return of the thing loaned before the expiration of the term in case of urgent need Loss of the subject matter is suffered by the bailor since he is the owner DISCOUNTING PAPER Interest is deducted in advance Double name paper More expensive for the borrower because interest is calculated on the amount loaned and not the amount actually received MUTUUM (SIMPLE LOAN) Money or other consumable thing Ownership is transferred to the borrower Gratuitous or onerous (w/ stipulation to pay interest) Borrower need only pay the same amount of the same kind and quality Only personal property Loan consumption for Lender may not demand its return before the lapse of the term agreed upon Borrower suffers the loss (even if caused exclusively by a fortuitous event and he is not therefore discharged from his duty to pay) Nature Purely personal Not purely personal COMMODATUM (Articles ) 1. cause: essentially gratuitous (otherwise, if there Is compensation, it might be lease) 2. purpose: temporary use of the thing loaned but not its fruits, unless stipulated or is incidental (otherwise, if the bailee is not entitled to the use of the thing, it might be deposit) 3. subject matter: generally non-consumable goods but if the consumable goods are not for consumption, such may be the subject of the commodatum, as when merely for exhibition (Art. 1936) 4. bailor need not be the owner of the thing loaned (Art 1938) it is sufficient that he has a possessory interest a mere lessee or usufructuary may lend but the borrower or bailee himself may not lend not lease the thing loaned to him to a third person (Art. 1932[2]) 5. purely personal a. death of either party terminates the contract UNLESS there is stipulation to the contrary b. generally, bailee can neither lend nor lease the object to a 3 rd person in the absence of some agreement to that effect c. use of the thing loaned may extend to the bailee s household (who are not considered 3 rd persons) except: 1. when there is a contrary stipulation 2. nature of the thing forbids such use 6. enjoyment of fruits a stipulation to make use of fruits is valid, but it is never presumed. The enjoyment of the fruits must only be incidental to the use of the thing itself, for if it is the main cause, the contract may be one of usufruct. OBLIGATIONS OF THE BAILEE (Arts ) (COOLRD2) 1. To pay for the ordinary expenses for the use and preservation of the thing loaned (Art. 1941) 2. To pay for all other expenses other than those referred to in Art and 1949 (refund of extraordinary expenses either in full or in half) (Art. 1950) REASON: Bailee makes use of the thing. Expenses for ostentation are to borne by the Page 191 of 297

3 bailee because they are not necessary for the preservation of the thing 3. To take good care of the thing with the diligence of a good father of a family (Art. 1163) 4. To be liable for loss even if due to a fortuitous event: GR: the bailee is not liable for loss or damage due to a fortuitous event (Art. 1174) Reason: the bailor retains the ownership of the thing loaned Exceptions: (Art punishes the bailee for his improper acts although they may not be the proximate cause of the loss) a. Bad faith if the bailee devotes the thing to any purpose different from that for which it has been loaned b. Delay - he keeps it longer than the period stipulated or after the accomplishment of the use for which the commodatum has been constituted c. Has been delivered with appraisal -the thing loaned has been delivered with appraisal of its value, UNLESS there is a stipulation exempting the bailee from responsibility in case of a fortuitous event d. Lends the subject matter to a 3 rd person - he lends or leases the thing to a third person who is not a member of his household e. Ingratitude - being able to save the thing borrowed or his own thing, he chose to save the latter 5. The bailee has NO RIGHT to retain the thing loaned as security for claims he has against the bailor, even though they may be by reason of extraordinary expenses (Art. 1944) Reasons: a. Ownership remains in bailor the bailee acquires only the use of thing, the ownership of which remains w/ the bailor b. Only temporary use given to bailee the bailee would be violating the bailor s trust in him to return the thing as soon as the period stipulated expires or the purpose has been accomplished Exception: Claim for damages suffered because the bailor doesn t advise bailee of the flaws known to him (Art. 1951) 6. A bailee doesn t answer for the deterioration of the thing loaned due only to the use thereof and without his fault 7. Liability when there are 2 or more bailees: The presumption is that they are solidarily liable (Art. 1945) Reason for the presumption: to safeguard effectively the right of the bailor. The law presumes that the bailor takes into account the personal integrity and responsibility of all the bailees and that, therefore, he would not have constituted the commodatum if there were only one bailee OBLIGATIONS OF THE BAILOR (AD-READ-HA) 1. Primary obligation of the bailor: GR: To allow the bailee the use of the thing loaned for the duration of the period stipulated or until the accomplishment of the purpose for w/c the commodatum was constituted Exceptions: the bailor may demand the return or its temporary use upon: a. bailor has an urgent need for the thing (Art. 1946) the contract is suspended Reason: the right of the bailor is based on the fact that commodatum is essentially gratuitous b. bailee commits an act of ingratitude (Art. 1948) if the bailee should commit an offense against the person, the honor or the property of the bailor, or of the wife or children under his parental authority if the bailee imputes to the bailor any criminal offense, or any act involving moral turpitude, even though he should prove it, unless the crime or the act has been committed against the bailee himself, his wife, or children under his authority; and if the bailee unduly refuses the bailor support when the bailee is legally or morally bound to give support to the bailor Reason: the person who commits any of the acts of ingratitude makes himself unworthy of the trust reposed upon him by the bailor. 2. May demand the thing at will when the contract is precarium PRECARIUM a kind of commodatum where the bailor may demand the thing at will. It has been defined as a contract by which the owner of a thing, at the request of another person, gives the latter the thing for use as long as the owner shall please 3. To refund the extraordinary expenses (Art. 1949) Page 192 of 297

4 GR on reimbursement: Notice should be given by the bailee to the bailor regarding such extraordinary expenses Reason for the rule: notice is required because it is possible that the bailor may not want to incur the extraordinary expense at all. Exception: where the extraordinary expenses are so urgent that the reply to the notification cannot be awaited w/o danger. 4. if the extraordinary expenses arise from the actual use of the thing and even though bailee acted w/o fault, the expenses will be borne equally by both the bailor and the bailee (50-50) (Art. 1949, 2 nd par.) Reasons: a. the bailee pays ½ because of the benefit derived from the use of the thing loaned to him; b. the bailor pays the other ½ because he is the owner and the thing will be returned to him Exception: Stipulation to the contrary that provide for a different apportionment of such expenses or that they shall be borne by the bailee or bailor alone 5. all other expenses which are not necessary for the use and preservation of the thing must be shouldered by the borrower (bailee) 6. the depreciation caused by the reasonable and natural use of the thing is borne by the bailor (Art. 1943) Reason: The parties to the contract know that the thing borrowed cannot be used without deterioration due to ordinary wear and tear. Exceptions: a. when there is a stipulation to the contrary; b. when the bailee is guilty of fault or negligence; c. if he devotes the thing to any purpose different from that for which has been loaned 7. To pay damages for known hidden flaws (Art. 1951) Requisites: (the following must concur) a. there is a flaw or defect in the thing loaned b. the flaw or defect is hidden c. the bailor is aware thereof d. he does not advise the bailee of the same e. the bailee suffers damages by reason of the flaw or defect Exception: when the defect is not known to the bailor, he is not liable because commodatum is gratuitous. 8. The bailor has no right of abandonment for expenses and damages (Art. 1952) Reason: The expense and/or damages may exceed the value of the thing loaned SIMPLE LOAN OR MUTUUM SIMPLE LOAN OR MUTUUM contract whereby one of the parties delivers to another money or other fungible thing w/ the understanding that the same amount of the same kind and quality shall be paid. (Art. 1933) SIMPLE LOAN Signifies the delivery of money or some other consumable thing to another w/ a promise to repay an equivalent amount of the same kind and quality There is a transfer of ownership of the thing delivered The relation between parties is that of obligor and oblige The creditor receives payment for his loan Basis of comparison Subject matter RENT/LEASE One party delivers to another some nonconsumable thing in order that the latter may use it during a certain period and return it to the former The owner of the lessee or the lessor of the property does not lose his ownership. He simply loses control over the property rented during the period of the contract The relation is between landlord and tenant The owner of the property receives compensation or price either in money, provisions, chattels, or labor from the occupant thereof in return for its use MUTUUM COMMODATUM BARTER Money or any other fungible things/ Personal or real property (generally nonconsumable) Nonfungible or nonconsumabl Page 193 of 297

5 Obligation of bailee Nature of contract personal property Pay or deliver the same kind or quality loaned to the bailee May be gratuitous Return the identical thing borrowed when the time has expired or the purpose has been served Always gratuitous e things The equivalent thing is given in return for what has been received Onerous NATURE OF MUTUUM a. bilateral - borrower promise to pay is the consideration for the lender s obligation to furnish the loan b. no criminal liability upon failure to pay SUBJECT MATTER a. fungible or consumable-depending on the intent of the parties, that the return of the thing is equivalent only and not the identical thing b. money c. if the transfer of ownership is on a nonfungible thing, with the obligation of the other to give things of the same kind, quantity and quality, it is a barter INTEREST GR: Interest must be expressly stipulated in writing, and it must be lawful (Art. 1956) Exceptions: 1. Indemnity for damages the debtor in delay is liable to pay legal interest (6%/12%) as indemnity for damages even in the absence of a stipulation for the payment of interest. Interest as indemnity for damages is payable only in case of default or non-performance of contract. Basis for computation for indemnity: a. Central Bank Circular % p.a. in cases of: Loans Forbearance TIFF (Uncompressed) of decompressor money, goods or credits Judgments involving such loans or forbearance, in the absence of the express agreement as to such rate of interest During the interim period from the date judgment until actual payment b. Art of the Civil Code 6% p.a. in cases of: Other sources (e.g. sale) Damages arising from injury to persons Loss of property which does not involve a loan 2. Interest accruing from unpaid interest - interest due shall earn interest from the time it is judicially demanded although the obligation may be silent upon this point. DETERMINATION OF INTEREST PAYABLE IN KIND: Its value shall be appraised at the current price of the products or goods at the time and place of payment. (Art. 1958) Purpose: to make usury harder to perpetrate COMPOUNDING INTEREST (Art. 1959) GR: accrued interest (interest due and unpaid) shall not earn interest Exceptions: When judicially demanded When there is an express stipulation made by the parties to wit: that the interest due and unpaid shall be added to the principal obligation and the resulting total amount shall earn interest Compounding interest may be availed of only when there is a written stipulation in the contract for the payment of interest. BARTER BARTER - A contract whereby one person transfers the ownership of non-fungible things to another with the obligation on the part of the latter to give things of the same kind, quantity and quality. DEPOSIT DEPOSIT - A deposit is constituted from the moment a person receives a thing belong 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. NOTE: it is essential that the depository is not the owner of the thing deposited Page 194 of 297

6 CHARACTERISTICS 1. real - because it is perfected only by the delivery of the subject matter BUT an agreement to constitute a deposit is binding and enforceable, since it is merely consensual 2. unilateral - if gratuitous 3. bilateral - if with compensation Basis of comparison Principal Purpose Deman dability Object Nature of contract Deposit Mutuum Commodatum Safekeeping or mere custody Demand return of the thing at will Both movable and immovable may be the object But in extrajudicial deposit, only a movable (corporeal) thing may be the object May be gratuitous Consumption Lender must wait until expiration of period granted to debtor Only money and any other fungible thing may be the object May be gratuitous CREATION OF DEPOSIT (Art. 1964) 1. By virtue of a court order; or 2. By law Transfer of the use May demand return at will (PRECARIUM) or only after the expiration of the period or accomplishme nt of the use of the thing subject to exceptions Both movable and immovable may be the object Essentially and always gratuitous 3. Not by the will of the parties 4. It is essential that the depositary is not the owner of the property deposited (Art. 1962) KINDS OF DEPOSIT 1. judicial - when an attachment or seizure of property in litigation is ordered 2. extrajudicial (Art. 1967) a. voluntary- delivery is made by the will of the depositor or by two or more persons each of whom believes himself entitled to the thing deposited; b. necessary- made in compliance with a legal obligation, or on the occasion of any calamity, or by travelers in hotels and inns or by travelers with common carriers Judicial Extrajudicial Creation Will of the court Will of the contracting parties Purpose Security or to Custody and ensure the right safekeeping of a party to the property or to recover in case of favorable judgment Subject Generally Movables only Matter immovables Cause Always onerous May be compensated but generally gratuitious Return of Upon order of the Upon demand of thing court/ end of depositor litigation In whose Person who has Depositor or /3rd behalf it is a right person designated held DEPOSIT IS GENERALLY GRATUITOUS: (Art. 1965) GR: A deposit is generally gratuitous. Exceptions: a. when there is a contrary stipulation b. where depositary is engaged in the business of storing goods c. where property is saved without knowledge of the owner SUBJECT MATTER OF DEPOSIT (Art. 1966) GR: only movable or personal property may be the object of deposit, whether voluntary or necessary. Exception: In judicial deposit, it may cover both movable and immovable property. DEPOSITOR NEED NOT BE THE OWNER OF THE THING: GR: The depositor must be the owner of the thing deposited. Page 195 of 297

7 Exceptions: It may belong to another person than the depositor. a. when two or more persons 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. b. Interpleader the action to compel the depositors to settle their conflicting claims. Here one of the depositors is not the owner. FORM OF CONTRACT OF DEPOSIT: GR: A contract of deposit may be entered into orally or in writing. (Art. 1969) Exception: Delivery of the thing deposited. (It is a real contract, hence, delivery is required for perfection.) Depositary - capacitated Depositor - incapacitated Depositary is subject to ALL the obligations of a depositary Depositary must return the property either to: a) the legal representative of the incapacitated, OR b) the depositor himself if he should acquire capacity Depositary - incapacitated Depositor - capacitated Basis of Comparison Irregular deposit Demandability Demandable at will of the irregular depositor for whose benefit the deposit has been constituted Depositary does not incur the obligations of a depositary Depositary, however is liable to: a) return the thing deposited while still in his possession; AND b) pay the depositor the amount by which he may have benefited himself with the thing or its price subject to the right of any 3 rd person who acquires the thing in good faith Benefit Benefit accrues to the depositor Preference of Depositor has credit preference over other creditors Mutuum Lender is bound by the provisions of the contract and cannot seek restitution until the time of payment as provided in the contract has arisen Necessity of the borrower Enjoy no preference in the distribution with respect to the thing deposited of the debtor s property. OBLIGATIONS OF THE DEPOSITARY (SRT-CCC- ULC-RITT-RPT-TL-HR) 1. Two primary obligations (Art. 1972) a. safekeeping of the object; b. Return of the thing when required even though a specified term or time for such may have been stipulated in the contract. Degree of Care same diligence as he would exercise over his property. Reasons: i. Essential requisite of judicial relation which involves the depositor s confidence in his good faith and trustworthiness; ii. The presumption that the depositor took into account the diligence which the depositary is accustomed with respect to his own property. The depositary cannot excuse himself from liability in the event of loss by claiming that he exercised the same amount of care toward the thing deposited as he would towards his own if such care is less than that required by the circumstances. 2. Obligation not to transfer deposit (Art. 1973) GR: the depositary is not allowed to deposit the thing with a third person. Reason: 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. Exception: The depositary is authorized by express stipulation. Liabilities: Depositary is liable for loss of the thing deposited when: 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. Exemption from liability: The thing is lost without the negligence of the third person with whom he was allowed to deposit the Page 196 of 297

8 thing if such third person is not manifestly careless or unfit. 3. Obligation not to change the way of deposit (Art. 1974) GR: Depositary may not change the way of the deposit Exception: If there are circumstances indicating that the depositor would consent to the change. This is a situation wherein the depositary would reasonably presume that the depositor would agree to the change if he knows of the facts of the situation. Requisites: a. The depositary must notify the depositor of such change and b. Must wait for the reply of the depositor to such change. Exception: If the delay of the reply would cause danger. 4. Obligation to collect on the choses in action deposited (Art. 1975) If the thing deposited should earn interest, the depositary is under the obligation to: a. Collect the interest as it becomes due; b. Take such steps as may be necessary to preserve its value and the right corresponding to it. The depositary is bound to collect the capital, as well as the interest, when due. Contract of rent of safety deposit boxes (Art. 1975) A contract for the rent of safety deposit boxes 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. The prevailing rule in the US is that the relation between a bank renting out safety deposit boxes and its customer with respect to the contents of the box is that of bailor and bailee. 5. Obligation not to commingle things if so stipulated (Art. 1976) GR: The depositary are needed to see this is picture. permitted to commingle grain or other articles of the same kind and quality. Effects: a. The various depositors of the mingled goods shall own the entire mass in common. b. Each depositor shall be entitled to such portion of the entire as the amount deposited by him bears the whole. Exception: When there is a stipulation to the contrary. 6. Obligation not to make use of the things deposited (Art. 1977) GR: Deposit is for safekeeping of the subject matter and not for its use. Exceptions: a. Expressly authorized by the depositor; b. Such use is necessary for its preservation but limited for the purpose only. Effect of unauthorized use: Liability for damages Effects of authorized use: (Art. 1978) a. If the thing deposited is non-consumable: GR: The contract loses the character of a deposit and acquires that of a commodatum despite the fact that the parties may have denominated it as a deposit. Exception: Safekeeping is still the principal purpose of the contract. b. If the thing deposited is money or other consumable thing: GR: Converts the contract into a simple loan or mutuum. Exception: Safekeeping is still the principal purpose of the contract, but it becomes an irregular deposit. Bank deposits are in the nature of irregular deposits but they are really loans governed by the law on loans. 7. Liability for loss through fortuitous event (Art. 1979) GR: The depositary is not liable for loss through fortuitous event without his fault. Exceptions: a. If it is so stipulated; b. If he uses the thing without the depositor s permission c. If he delays in its return; d. If he allows others to use it, even though he himself may have been authorized to use the same. Note: Liability for loss without fortuitous event: Depositary presumed at fault (Art. 1265) - in possession 8. Relation between bank and depositor (Art. 1980) Fixed, savings, and current deposits of money in banks and similar institutions shall be governed by the provisions concerning simple loan. Page 197 of 297

9 a. Contract of loan deposits in banks are really loans because the bank can use the same for its ordinary transactions b. Relation of creditor and debtor the relation between a depositor and a bank is that of a creditor and a debtor. 9. Obligation when the thing deposited is closed and sealed (Art. 1981) The depositary has the obligation to: a. return the thing deposited when delivered closed and sealed in the same condition; b. pay for damages should the seal or lock be broken through his fault, which is presumed unless proven otherwise; c. Keep the secret of the deposit when the seal or lock is broken, with or without his fault. 10. When depositary justified in opening closed and sealed subject matter (Art. 1982) a. The depositary is presumed authorized to do so if the key has been delivered to him; b. When the instructions of the depositor as regards the deposit cannot be executed without opening the box or receptacle. (Necessity) 11. Obligation to return products, accessories and accessions (Art. 1983) 12. Obligation to pay interest on sums converted for personal use (Art. 1983) 13. The depositary who receives the thing in deposit cannot require that the depositor prove his ownership over the thing (Art. 1984) 14. Where third person appears to be the owner (Art. 1984) The depositary may be relieved from liability when: a. He advised the true owner of the thing of the deposit. b. If the owner, is spite of such information, does not claim it within the period of one month (30 days) 15. Obligation of the depositary when there are two or more depositors. (Art. 1985) a. Divisible thing and joint depositors each one of the depositors can demand only his share proportionate thereto. b. Indivisible thing and solidary depositors rules on active solidarity GR: Each one of the depositors may do whatever may be useful to the others. (Art. 1212) Exception: Anything which may be prejudicial to the other depositors. GR: The depositary may return the thing to any one of the solidary depositors Exception: When a demand, judicial or extrajudicial, for its return has been made by one of them in which case delivery should be made to him. c. Return to one of the depositors stipulated if by stipulation, the thing should be returned to one of the depositors, the depositary is bound to return it only to the person designated although he has not made any demand for its return. 16. Obligation to return to the person to whom return must be made. (Art. 1986) a. The depositary is obliged to return the thing deposited, when required, to: The depositor; To his heirs or successors; or To the person who may have been designated in the contract. b. If the depositor was incapacitated at the time of making the deposit, the property must be returned to: His guardian or administrator; To the person who made the deposit; To the depositor himself should he acquire capacity. c. Even if the depositor had capacity at the time of making the deposit but he subsequently loses his capacity during the deposit, the thing must be returned to his legal representative. 17. Obligation to return at the place of return (Art. 1987) same as the general rule of law regarding the place of payment. (Art. 1251) GR: At the place agreed upon by the parties, transportation expenses shall be borne by the depositor. Exception: In the absence of stipulation, at the place where the thing deposited might be even if it should not be the same place where the original deposit was made. 18. Obligation to return upon the time of return. (Art. 1988) Page 198 of 297

10 GR: The thing deposited must be returned to the depositor upon demand, even though a specified period or time for such return may have been fixed. Exceptions: a. When the thing is judicially attached while in the depositary s possession b. When notified of the opposition of a third person to the return or the removal of the thing deposited. 19. Right of the depositary to return the thing deposited. (Art. 1989) NOTE: in this case, it is the depositary who is returning the deposit WITH OR WITHOUT THE DEMAND of the depositor GR: The depositary may return the thing deposited notwithstanding that a period has been fixed for the deposit if: a. The deposit is gratuitous; b. The reason is justifiable. Remedy if depositor refuses to receive the thing: The depositary may deposit the thing at the disposal of the judicial authority. Exception: When the deposit is for a valuable consideration, the depositary has no right to return the thing before the expiration of the time designated even if he should suffer inconvenience as a consequence. 20. Depositary s liability in case of loss by force majeure or government order. (Art. 1990) Depositary is not liable in cases of loss by force majeur or by government order. However, he has the duty to deliver to the depositor money or another thing he receives in place of the thing. 21. Liability in case of alienation of the depositary s heir. (Art. 1991) When alienation is done in GOOD FAITH: a. Return the value of the thing deposited b. Assign the right to collect from the buyer. The heir does not need to pay the actual price of the thing deposited. When alienation is done in BAD FAITH: a. Liable for damages; b. Pay the actual price of the thing deposited. 22. Depositary may retain the thing in pledge until the full payment of what may be due him by reason of the deposit. (Art. 1994) The thing retained serves as security for the payment of what may be due to the depositary by reason of the deposit. (see Art. 1965, 1992, 1993). Note: The debt must be prior to the deposit. Irregular Deposit May be demanded at will by the irregular depositor for whose benefit the deposit has been constituted Only benefit is that which accrues to the depositor Depositor has preference over other creditors Mutuum Lender is bound by the provision of the contract and cannot seek restitution until the time for payment, as provided in the contract has arisen If with interest, benefit if both parties No preference OBLIGATIONS OF THE DEPOSITOR (PLD) 1. Obligation to pay expenses of preservation. (Art. 1992) 2. Obligation to pay losses incurred due to character of thing deposited. (Art. 1993) GR: The depositary must be reimbursed for loss suffered by him because of the character of the thing deposited. Exceptions: a. Depositor was not aware of the danger; b. Depositor was not expected to know the dangerous character of the thing; c. Depositor notified the depositary of such dangerous character; d. Depositary was aware of the danger without advice from the depositor. 3. Effect of death of depositor or depositary. (Art. 1995) a. Deposit gratuitous death of either of the depositor or depositary extinguishes the deposit (personal in nature). By the word extinguished, the law really means that the depositary is not obliged to continue with the contract of deposit. b. Deposit for compensation not extinguished by the death of either party. Other Matters Concerning a Depositor 1. Depositary has a right to retain the thing in pledge until full payment of what may be due him by reason of the deposit 2. A deposit is extinguished: a. upon the loss or deterioration of the thing deposited; Page 199 of 297

11 b. upon the death of the depositary, ONLY in gratuitous deposits; c. other provisions in the Civil Code (novation, merger, etc.) NECESSARY DEPOSIT A deposit is necessary when: 1. It is made in compliance with a legal obligation; 2. It takes place on the occasion of any calamity, such as fire, storm, flood, pillage, shipwreck, or other similar events. *There must be a causal relation between the calamity and the constitution of the deposit. 3. Made by passengers with common carriers. as to those baggage the passengers or their agents carry 4. Made by travelers in hotels or inns. (Art. 1998) Before keepers of hotels or inns may be held responsible as depositaries with regard to the effects of their guests, the following must concur: Elements: a. They have been previously informed about the effects brought by the guests; and b. The latter have taken the precautions prescribed regarding their safekeeping. Extent of liability: a. Liability in hotel rooms which come under the term baggage or articles such as clothing as are ordinarily used by travelers b. Include those lost or damages in hotel annexes such as vehicles in the hotel s garage. When hotel-keeper liable: (Art ) NOTE: In the following cases, the hotelkeeper is liable REGARDLESS of the amount of care exercised: a. The loss or injury to personal property is caused by his servants or employees as well as by strangers (Art. 2000). b. The loss is caused by the act of a thief or robber done without the use of arms and irresistible force. (Art. 2001) Reason: Hotel-keeper is apparently negligent. When hotel-keeper not liable: a. The loss or injury is cause by force majeure, like flood, fire, theft or robbery by a stranger (not the hotel-keeper s servant or employee) with the use of firearms or irresistible force. Exception: Unless the hotel-keeper is guilty of fault or negligence in failing to provide against the loss or injury from his cause. b. The loss is due to the acts pf the guests, his family, servants, visitors. c. The loss arises from the character of the things brought into the hotel. Exemption or diminution of liability: 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. (Art. 2003) Effect: Any stipulation between the hotel-keeper and the guest whereby the responsibility of the former (as set forth in Art ) is suppressed or diminished shall be VOID. Hotel-keeper s right to retain 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: a. lodging; b. supplies usually furnished to hotel guests. Reason: It is given to hotel-keepers to compensate them for the liabilities imposed upon them by law. The right of retention recognized in this article is in the nature of a pledge created by operation of law. In compliance with a legal obligation (governed by the law establishing it, and in case of deficiency, the rules on voluntary deposit e.g. Arts. 538, 586 and 2104) Made on the occasion of any calamity (governed by the rules on voluntary deposit and Art. 2168) SEQUESTRATION OR JUDICIAL DEPOSIT When judicial deposit takes place: Judicial deposit takes place when an attachment or seizure of property in litigation is ordered by a court. (Art. 2005) Nature: Auxiliary to a case pending in court. Page 200 of 297

12 Purpose: To maintain the status quo during the pendency of the litigation or to insure the right of the parties to the property in case of a favorable judgment. Depositary of sequestered property: person appointed by the court. (Art. 2007) Obligations: a. To take care of the property with the diligence of a good father of the family. (Art. 2008) b. He may not be relieved of his responsibility until the litigation is ended or the court so orders. (Art. 2007) Applicable law: The law on judicial deposit is remedial or procedural in nature. Hence, the Rules of Court are applicable. (Art. 2009) Basis of Comparison Cause or origin Purpose Subject Matter Remuneration In whose behalf it is held Judicial Deposit By will of the courts Security; Secure the right of a party to recover in case of favorable judgment. Either movable or immovable property but generally, immovable Always remunerated (onerous) In behalf of the person who, by the judgment, has a right WAREHOUSE RECEIPTS LAW Extra-judicial Deposit By will of the parties. Hence, there is a contract Custody; Safekeeping of the thing Only movable property Generally gratuitous, but may be compensated In behalf of the depositor or third person designated Scope: all warehouses, whether public or private, bonded or not Application: applies to warehouse receipts issued by a warehouseman as defined in Sec. 58(a), while the Civil Code, to other cases where receipts are not issued by a warehouseman. The Issue of Warehouse Receipts WHO MAY ISSUE? 1. a warehouseman - a person lawfully engaged in the business of storing goods for profit 2. a duly authorized officer or agent of a warehouseman NOTE: receipts not issued by a warehouseman although in the form of warehouse receipts are not warehouse receipts FORM AND CONTENTS: need not be in particular form, but certain essential terms must be present: 1. Location of warehouse -because the warehouseman may have other warehouses 2. Date of issue and receipt - indicates prima facie the date when the contract of deposit is perfected and when the storage charges shall begin 3. Consecutive number of receipt - to identify each receipt with the goods for which it was issued 4. Person to whom goods are deliverable - determines the person or persons who shall prima facie be entitled lawfully to the possession of the goods deposited 5. Rate of storage charges - consideration for the contract from the view of the warehouseman 6. Description of goods or packages - for identification 7. Signature of warehouseman - best evidence of the fact that the warehouseman has received the goods and has bound himself to assume all obligations in connection therewith 8. Warehouseman s ownership of or interest in the goods - purpose is to prevent abuses in the past when warehouseman issued receipt on their goods 9. Statement of advances made and liabilities incurred (if present) - purpose is to preserve the lien of the warehouseman over the goods stores or the proceeds thereof in his hands NOTE: Effect of omission of any of the essential terms: a. validity and negotiability of receipt is NOT affected b. warehouseman will be liable for damages c. the contract will be converted to an ordinary deposit Page 201 of 297

13 WHAT TERMS MAY BE INSERTED? ANY other terms or condition EXCEPT: a. those contrary to this Act (e.g. exemption from liability for misdelivery in Sec. 10, not giving statutory notice in case of sale of goods in Sec. 33 and 34) b. an exemption from liability and negligence c. those contrary to law, morals, good customs, public order or public policy DEFINITIONS a. negotiable receipt - receipt in which it is stated that the goods received will be delivered to the bearer or to the order of any person named in such receipt b. non-negotiable receipt - receipt in which it is stated that the goods received will be delivered to the depositor or to any other specified person NOTE: 1. a provision in a negotiable receipt that it is nonnegotiable is VOID 2. a negotiable warehouse receipt is not a negotiable instrument in the same sense as in the NIL. Duplicate receipts (applies ONLY) to negotiable warehouse receipts. Whenever more than one negotiable receipt is issued for the same goods, the word DUPLICATE shall be placed on the face of the receipt except the one 1 st issued. Effect: the warehouseman shall be liable for damages for failing to do this to anyone who purchased the subsequent receipt (1) for value, and (2) supposing it to be an original; even though the purchase be after delivery of the goods by the warehouseman to the holder of the original receipt. Failure to make non-negotiable (applies only to non-negotiable warehouse receipts) a. A non-negotiable receipt must contain the word: non-negotiable b. Effect of failure to do so will give a holder who purchased it for value supposing it to be negotiable, the option treat it as negotiable CONSTRUCTION OF WAREHOUSE RECEIPTS: Liberal construction of the law in favor of bona fide holders. This has no application to actions against any party other than a warehouseman. OBLIGATION AND RIGHTS OF A WAREHOUSEMAN UPON THEIR RECEIPTS PRINCIPAL OBLIGATIONS WAREHOUSEMAN: 1. To take care of the goods, and be liable for failure to exercise care BUT he is not liable for loss or injury which could not have been avoided UNLESS there is a stipulation to the contrary 2. To deliver the goods to the holder of the receipt or the depositor upon DEMAND accompanied with: a. an offer to satisfy the warehouseman s lienbecause a warehouseman may refuse delivery until his lien is satisfied b. an offer to surrender the receipt- for the protection of the warehouseman and to avoid criminal liability; this is subject to waiver c. an offer to sign when the goods are delivered, an acknowledgment that they have been delivered BUT a warehouseman may still refuse delivery on the grounds of some lawful excuse like: 1. Sec. 10 a. He has been requested by the person lawfully entitled to the goods not to make delivery b. He has information that the delivery about to be made was not to one lawfully entitled to the goods 2. Sec. 16: He has acquired title to the goods which was delivered from: a. Transfer made by the depositor at the time of the deposit for storage or subsequent thereto b. The warehouseman s lien 3. Sec. 18: If there are several claimants to the goods 4. Sec. 21: If goods were lost and he had no fault 5. Sec. 36: He has already lawfully sold the goods PERSONS TO WHOM THE GOODS MUST BE DELIVERED 1. Persons lawfully entitled to the possession of the goods or its agent 2. Persons entitled to deliver under: a. a non-negotiable receipt; or b. with written authority 3. person in possession of a negotiable receipt (which was lawfully negotiated) Page 202 of 297

14 NOTE: a warehouseman does NOT have a cause of action against a person to whom he misdelivered the thing UNLESS the depositor sues him. ACTS FOR WHICH A WAREHOUSEMAN IS LIABLE: 1. Failure to stamp duplicate on copies of a negotiable receipt (Sec. 6 and 15) When more than one negotiable receipts are issued for the same goods, the word duplicate must be plainly placed by the warehouseman upon the face of every such receipt except the 1 st. In such case, the warehouseman warrants: a. that the duplicate is an accurate copy of the original receipt b. such original receipt is uncancelled at the date of the issue of the duplicate NOTE: The duplicate imposes no other liability upon the warehouseman. 2. Failure to place non-negotiable on a nonnegotiable receipt (Sec. 7) 3. Misdelivery of the goods (Sec. 10) To one not lawfully entitled to possession: Liable for conversion (unauthorized assumption and exercise of the right of ownership over goods belonging to another through alteration or the exclusion of the owner s right) To a person entitled to delivery under a nonnegotiable receipt or written authorization OR person in possession of a negotiable receipt Still liable for conversion if: a. prior to delivery, he had been requested NOT to make such delivery b. he had received notice of the adverse claim or title of a 3 rd person 4. Failure to effect cancellation of a negotiable receipt upon delivery of the goods (Sec. 11) This is applicable ONLY to negotiable receipts but NOT to a situation where there was a valid sale in accordance with Sec. 36 a. When the goods are delivered already: Failure to cancel will make him liable to any one who purchased for value in good faith such receipt b. When only some of the goods were delivered: Failure to cancel or to state plainly in the receipt that some goods were delivered will make him liable to any one who purchased for value in good faith such receipt 5. Issuing receipt for non-existing goods or misdescribed goods (Sec. 20): GR: a warehouseman is under obligation to deliver the identical property stored with him and if he fails to do so, he is liable. Exception: if the description consists merely of marks or labels upon the goods or upon the packages containing them, etc., the warehouseman is NOT liable even if the goods are not of the kind as indicated in the marks or labels 6. In case of lost or destroyed receipts (Sec. 14) Remember that a warehouseman must deliver to the one who has the receipt but if such was lost, a competent court may order the delivery of the goods only: a. upon proof of the loss or destruction of the receipt; AND b. upon giving of a bond with sufficient securities NOTE: the warehouseman is still liable to a holder of the receipt for value without notice since the warehouseman can secure himself in the bond given. 7. Failure to take care of the goods (Sec. 12) 8. Failure to give notice in case of sales of goods to satisfy his lien (Sec. 33) or because the goods are perishable and hazardous (Sec. 34) EFFECTS OF ALTERED RECEIPTS: 1. Alteration immaterial: whether fraudulent or not, authorized or not, the warehouseman is liable on the altered receipt according to its original tenor; 2. Alteration material: but it was authorized, the warehouseman is liable according to the terms of the receipts as altered; 3. Material alteration innocently made: though unauthorized, the warehouseman is liable on the altered receipt according to its original term; 4. Material alteration fraudulently made: warehouseman is liable according to the original tenor to a: a. purchaser of the receipt for value without notice; and b. to the alterer and subsequent purchasers with notice ( BUT his Page 203 of 297

15 liability is limited only to delivery as he is excused from any other liability) * Even a fraudulent alteration cannot divest the title of the owner of stored goods and the warehouseman is liable to return them to the owner. BUT a bona fide holder acquires no right to the goods under a negotiable receipt which has been stolen or lost or which the indorsement has been forged. WITH REGARD TO OWNERSHIP 1. Ownership is not a defense for refusal to deliver The warehouseman cannot refuse to deliver the goods on the ground that he has acquired title or right to the possession of it unless such is derived: a. directly or indirectly from a transfer made by the depositor at the time of the deposit for storage or subsequent thereto; b. from the warehouseman s lien 2. Adverse title of a 3 rd person is not a defense for refusal to deliver by a warehouseman to his bailor on demand EXCEPT: a. To persons to whom the goods must be livered (Sec. 9) b. To the person who wins in the interpleader case (Sec. 17) c. To the person he finds to be entitled to the possession after investigation (Sec. 18) d. To the buyer in case there was a valid sale of the goods (Sec. 36) DUTY OF WAREHOUSEMAN WHEN THERE ARE SEVERAL CLAIMANTS The warehouseman may either: 1. Investigate and determine within a reasonable time the validity of the claims, and deliver to the person whom he finds is entitled to the possession of the goods Effect: He is NOT excused from liability in case he makes a mistake 2. He may bring a complaint in interpleader Effect: a. he will be relieved from liability in delivering the goods to the person whom the court finds to have better right; b. he is liable for refusal to deliver to the rightful claimant when it is required to have an interpleader; 3. He may not do (a) and (b) Effect: He will be liable after a lapse of a reasonable time, of conversion as of the date of the original demand for the goods. NOTE: This does NOT apply to cases where the warehouseman himself makes a claim to the goods. COMMINGLING OF DEPOSITED GOODS GR: A warehouseman may not mingle goods belonging to different depositors. Exception: In case of fungible goods of the same kind and grade provided: a. he is authorized by agreement b. he is authorized by custom Effects: a. each depositor shall own the entire mass in common and entitled to his portion b. warehouseman is severally liable to each depositor for the care and redelivery of their portion as if the goods had been kept separate ATTACHMENT OR LEVY OF NEGOTIABLE RECEIPTS A warehouseman has the obligation to hold the goods for the owner or for the person to whom the negotiable receipt has been duly negotiated. Therefore, the goods cannot be attached or levied upon under an execution UNLESS: a. the document be first surrendered; or b. the negotiation is enjoined, or c. the document is impounded by the court The warehouseman cannot be compelled to deliver the goods until: a. the receipt is surrendered to him; b. it is impounded by the court NOTE: This provision does NOT apply if the person depositing is NOT the owner of the goods or one who has not the right to convey title to the goods binding upon the owner. REMEDY OF CREDITOR WHOSE DEBTOR OWNS A NEGOTIABLE RECEIPT Attachment of the negotiable receipt (NOT the goods) NOTE: the goods themselves cannot readily be attached or levied upon by ordinary legal process EXTENT OF WAREHOUSEMAN S LIEN 1. lawful charges for a. storage, and b. preservation of the goods 2. lawful claims for a. money advanced b. labor c. interest d. weighing e. insurance Page 204 of 297