Credit Transactions, First Semestre (AY 2014 2015), Saturday (7PM 9PM), Atty. Crisostomo A.

Uribe
Bentez, Montilla, San Andres, Sia, Uyson


Angel Javellana v Jose Lim, et al; GR 4015, 24 August 1908
En banc, Torres, J.

Facts:

(1) On 26 May 1897, Jose and others executed a document in favor of Angel, wherein it
stated that they had received a sum of PhP 2,600.86 as a deposit without interest
from the latter. The document also stipulated that they would return the same amount
jointly and severally on 20 January 1898.

(2) Upon the stipulated due date, however, Jose and others asked for an extension to
pay and bound themselves to pay 15% interest per annum on the amount of their
indebtedness, to which the Angel acceded. Despite the extension, Jose and others
still failed to pay the full amount of their indebtedness. Consequently, this prompted
Angel to file a civil action before the CFI of Iloilo. The CFI of Iloilo subsequently ruled
in favor of Angel to recover the amount due plus the payment of 15% interest per
annum.

Issue:

Whether or not the contract executed by Angel and Jose and others was that of a
deposit.

Ruling:

No, the contract executed by Angel and Jose and others was not a deposit. Instead, it
was a contract of simple loan or mutuum.

Ratio:

(1) It must be understood that Jose and others were lawfully authorized to make use of
the amount deposited, which they have done as subsequently shown when they
asked for an extension of the time for the return thereof. They were conscious that
they had used, for their own profit and gain, the money which they apparently
received as a deposit. Moreover, they engaged to pay interest to Angel from the
stipulated date until the time when the refund should have been made.

(2) Where money, consisting of coins of legal tender, is deposited with a person and the
latter is authorized by the depositor to use and dispose of the same, the agreement
is not a contract of deposit, but a loan. Moreover, Article 1768 of the old Civil Code
(now Article 1978 of the New Civil Code) provides that when the depository has per-
mission to make use of the thing deposited, the contract loses the character of a de-
posit and becomes a loan or bailment.

(3) A subsequent agreement between the parties as to interest on the amount said to
have been deposited, because the same could not be returned at the time fixed
therefore, does not constitute a renewal of an agreement of deposit, but it is the best
evidence that the original contract entered into between them was for a loan under
the guise of a deposit.