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General Provisions
(Articles 1933 1934)
Bailment, defined
It 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 the special purpose is accomplished or kept until the bailor reclaims it.
In MUTUUM:
1. Lender - the one who delivers
2. Borrower - the one who receives
Classes
Art. 1933. By the contract of loan, one of the parties delivers to another, either something not
consumable so that the latter may use the same for a certain time and return it, in which case the
contract is called a commodatum; or money or other consumable thing, upon the condition that the
same amount of the same kind and quality shall be paid, in which case the contract is simply called a
loan or mutuum.
Commodatum is essentially gratuitous.
Simple loan may be gratuitous or with a stipulation to pay interest.
In commodatum the bailor retains the ownership of the thing loaned, while in simple loan, ownership
passes to the borrower.
Personal in character
Characteristics
1. REAL Loan is perfected by delivery of the thing loaned.
Art. 1934. An accepted promise to deliver something by way of commodatum or simple loan is
binding upon parties, but the commodatum or simple loan itself shall not be perfected until the
delivery of the object of the contract.
2. UNILATERAL Loan produces obligations only for the borrower. Obligations of the lender are either
incidental to ownership or consequences of the borrowers rights and duties.
Distinctions
Commodatum
Mutuum
Character
Essentially gratuitous
Naturally gratuitous
Object
Purpose
Effect
Risk
Duration
Personal in character
CHAPTER I
COMMODATUM
Section I Nature of Commodatum
(Articles 1935 1940)
Contract of Commodatum, Concept
The right to use is limited to the thing loaned but not to its fruits unless there is a stipulation to the
contrary.
Purpose: The right to use is limited to the thing loaned for a certain time or period. If bailee not entitled
to the use of the thing, the contract may be a DEPOSIT not a Commodatum.
Bailor need not be the owner: Since ownership is not transferred in a Commodatum, the bailor need
not be the owner of the thing loaned. It is sufficient that the bailor has such possessory interest in the
subject matter or right to its use which he may assert against the bailee and the third persons
although not against the rightful owner.
Commodatum is purely personal: Death of either bailor or bailee extinguishes or terminates the
contract unless, by stipulation the Commodatum is transmitted to the heirs of either or both parties. If
there are two or more borrowers/bailee, the death of one does not extinguish the contract in the
absence of stipulation to the contrary. (Source: De Leon)
Cases:
Commodatum is essentially gratuitous
REPUBLIC vs. BAGTAS
FACTS:
Jose V. Bagtas borrowed from the Republic of the Philippines through the Bureau of Animal Industry three
bulls for a period of one year for breeding purposes subject to a government charge of breeding fee of
10% of the book value of the bulls. Upon the expiration of the contract, the borrower asked for a renewal
for another period of one year. However, the Secretary of Agriculture and Natural Resources approved a
renewal thereof of only one bull for another year and requested the return of the other two. Bagtas wrote
to the Director of Animal Industry that he would pay the value of the three bulls and later reiterated his
desire to buy them at a value with a deduction of yearly depreciation to be approved by the Auditor
General. The Director of Animal Industry advised him that the book value of the three bulls could not be
reduced and that they either be returned or their book value paid not later which Bagtas failed to pay or
to return. An action against him was commenced, praying that he be ordered to return the three bulls
loaned to him or to pay their book value with interests, and costs; and that other just and equitable relief
be granted. Bagtas answered that because of the bad peace and order situation in Cagayan Valley,
particularly in the barrio of Baggao, and of the pending appeal he had taken to the Secretary of
Agriculture and Natural Resources and the President of the Philippines from the refusal by the Director of
Animal Industry to deduct from the book value of the bulls corresponding yearly depreciation of 8% from
the date of acquisition, to which depreciation the Auditor General did not object, he could not return the
animals nor pay their value and prayed for the dismissal of the complaint.
The appellant contends that the Sahiniwal bull was accidentally killed during a raid by the Huks in
November 1953 upon the surrounding barrios of Hacienda Felicidad Intal, Baggao, Cagayan, where the
animal was kept, and that as such death was due to force majeure she is relieved from the duty of the
returning the bull or paying its value to the appellee.
ISSUE:
Whether or not Bagtas is relieved from the duty of returning or paying for the value of the bull.
SC RULING:
Bagtas is not relieved of his obligation. The loan by the appellee to the late defendant Bagtas of the three
bulls for breeding purposes for a period of one year, later on renewed for another year as regards one
bull, was subject to the payment by the borrower of breeding fee of 10% of the book value of the bulls.
The appellant contends that the contract was commodatum and that, for that reason, as the appellee
retained ownership or title to the bull it should suffer its loss due to force majeure. A contract of
commodatum is essentially gratuitous. If the breeding fee be considered a compensation, then the
contract would be a lease of the bull. Under the Civil Code, the lessee would be subject to the
responsibilities of a possessor in bad faith, because she had continued possession of the bull after the
expiry of the contract. And even if the contract be commodatum still the appellant is liable, because the
Civil Code provides that a bailee in a contract of commodatum is liable for loss of the thing, even if it
should be through a fortuitous event:
xxx 2) If he keeps it longer than the period stipulated;
3) If 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.
REPUBLIC vs. CA
FACTS:
Applicant Baloys claim is anchored on their possessory information title coupled with their
continuous, adverse and public possession over the land in question. An examination of said title shows
that the description and the area of the land stated therein substantially coincides with the land applied
for and that said title had been regularly issued having been acquired by applicants predecessor,
Domingo Baloy, under the provisions of the Spanish Mortgage Law. Applicants presented their tax
declaration on said lands on April 8, 1965.
The Director of Lands opposed the registration alleging that this land had become public land thru
the operation of Act 627 of the Philippine Commission. On November 26, 1902 pursuant to the executive
order of the President of the U.S., the area was declared within the U.S. Naval Reservation.
ISSUE:
Whether or not the possessory rights of Baloy are lost?
SC RULING:
No. The finding of the respondent court that during the interim of 57 years from November 26,
1902 to December 17, 1959 (when the U.S. Navy possessed the area) the possessory rights of Baloy or
the heirs were merely suspended and not lost by prescription, is supported by a communication or letter
No. 1108-63, dated June 24, 1963, which contains an official statement of the position of the Republic of
the Philippines with regard to the status of the land in question.
Clearly, the occupancy of the U.S. Navy was not in the concept of owner. It partakes of the character
of a commodatum. It cannot therefore militate against the title of Domingo Baloy and his successor-ininterest. Ones ownership of a thing may be lost by prescription by reason of anothers possession if such
possession be under claim of ownership, not where the possession is only intended to be transient, as in
the case of the U.S. Navys occupation of the land concerned, in which case the owner is not divested of
his title, although it cannot be exercised in the meantime.
Kinds
1. ORDINARY - has a definite period stipulated. One of the parties delivers to another something not
consumable so that the latter may use the same for a certain time and return it. In the ordinary
commodatum, the possession of the bailee is more secure for he has the right to retain the thing
loaned until the expiration of the period agreed upon, or the accomplishment of the use for which
the commodatum has been constituted.
2. PRECARIUM - no definite time or use stipulated, or merely tolerated. One whereby the bailor may
demand the thing loaned at will (art.1947) if neither the duration of the contract nor the use to
which the thing loaned should be devoted has been stipulated, or if the use of the thing is merely
tolerated by the owner.
Cases:
If neither the duration of the contract nor the use of the thing loaned is stipulated
QUINTOS vs. BECK
FACTS:
Beck was a tenant of Quintos and occupied the latter's house. Upon the novation of the contract of lease
between the plaintiff and the defendant, the former gratuitously granted to the latter the use of the
furniture, subject to the condition that the defendant would return them to the plaintiff upon the latter's
demand. The plaintiff sold the property to Maria Lopez and Rosario Lopez and on notified the defendant of
the conveyance, and asked him to vacate the premises. Also, Quintos required the defendant to return all
the furniture transferred to him for them in the house where they were found.
Beck wrote a letter to the plaintiff informing her that he could not give up the three gas heaters and the
four electric lamps because he would use them until the 15th of the same month when the lease in due to
expire. before vacating the house, the defendant deposited with the Sheriff all the furniture belonging to
the plaintiff and they are now on deposit in the warehouse situated at No. 1521, Rizal Avenue, in the
custody of the said sheriff.
ISSUE:
1. Whether the defendant complied with his obligation to return the furniture upon the plaintiff's
demand;
2. whether the latter is bound to bear the deposit fees thereof,
3. whether she is entitled to the costs of litigation.
SC RULING:
The contract entered into between the parties is one of commadatum, because under it the plaintiff
gratuitously granted the use of the furniture to the defendant, reserving for herself the ownership thereof;
by this contract the defendant bound himself to return the furniture to the plaintiff, upon the latters
demand
Issue 1:
YES, The obligation voluntarily assumed by the defendant to return the furniture upon the plaintiff's
demand, means that he should return all of them to the plaintiff at the latter's residence or house.
As the defendant had voluntarily undertaken to return all the furniture to the plaintiff, upon the latter's
demand, the Court could not legally compel her to bear the expenses occasioned by the deposit of the
furniture at the defendant's behest. The latter, as bailee, was not entitled to place the furniture on
deposit; nor was the plaintiff under a duty to accept the offer to return the furniture, because the
defendant wanted to retain the three gas heaters and the four electric lamps.
Issue 2:
NO, the Court could not legally compel her to bear the expenses
furniture at the defendant's behest. The latter, as bailee, was not
deposit; nor was the plaintiff under a duty to accept the offer to
defendant wanted to retain the three gas heaters and the four electric
Issue 3:
Yes, the plaintiff is entitled to the payment thereof by the defendant in case of his inability to return some
of the furniture because under paragraph 6 of the stipulation of facts, the defendant has neither agreed
to nor admitted the correctness of the said value.
The costs in both instances should be borne by the defendant because the plaintiff is the prevailing
party. The defendant was the one who breached the contract of commodatum, and without any reason he
refused to return and deliver all the furniture upon the plaintiff's demand. The expenses which may be
occasioned by the delivery to and deposit of the furniture with the Sheriff shall be for the account of the
defendant. the defendant shall pay the costs in both instances
Pactum de Commodando
500,000 to 300,00. In the meantime Saura, Inc. had written RFC requesting that the loan of P500,000.00
be granted. The request was denied by RFC, which added in its letter-reply that it was "constrained to
consider as cancelled the loan of P300,000.00 ... in view of a notification ... from the China Engineers Ltd.,
expressing their desire to consider the loan insofar as they are concerned."
On July 24, 1954 Saura, Inc. took exception to the cancellation of the loan and informed RFC that
China Engineers, Ltd. "will at any time reinstate their signature as co-signer of the note if RFC releases to
us the P500,000.00 originally approved by you." Because of the conflict with regards to the negotiations
within the DBP, Saura, Inc. did not pursue the matter further. Instead, it requested RFC to cancel the
mortgage, and so, on June 17, 1955 RFC executed the corresponding deed of cancellation and delivered it
to Ramon F. Saura himself as president of Saura, Inc.
Almost 9 years after the mortgage in favor of RFC was cancelled at the request of Saura, Inc., the
latter commenced the present suit for damages, alleging failure of RFC (as predecessor of the defendant
DBP) to comply with its obligation to release the proceeds of the loan applied for and approved, thereby
preventing the plaintiff from completing or paying contractual commitments it had entered into, in
connection with its jute mill project.
The trial court rendered judgment for the plaintiff, ruling that there was a perfected contract
between the parties and that the defendant was guilty of breach thereof.
ISSUE:
Whether or not the approval of the loan create an obligation on the part of DBP which it has to
fulfill in favor of Saura Inc.
SC Ruling:
We hold that there was indeed a perfected consensual contract, as recognized in Article 1934 of
the Civil Code, which provides:
ART. 1954. An accepted promise to deliver something, by way of commodatum or simple
loan is binding upon the parties, but the commodatum or simple loan itself shall not be
perferted until the delivery of the object of the contract.
There was undoubtedly offer and acceptance in this case: the application of Saura, Inc. for a loan
of P500,000.00 was approved by resolution of the defendant, and the corresponding mortgage was
executed and registered. But this fact alone falls short of resolving the basic claim that the defendant
failed to fulfill its obligation and the plaintiff is therefore entitled to recover damages.
It should be noted that RFC entertained the loan application of Saura, Inc. on the assumption that
the factory to be constructed would utilize locally grown raw materials, principally kenaf. There is no
serious dispute about this. It was in line with such assumption that when RFC, by Resolution No. 9083
approved on December 17, 1954, restored the loan to the original amount of P500,000.00. it imposed two
conditions, to wit: "(1) that the raw materials needed by the borrower-corporation to carry out its
operation are available in the immediate vicinity; and (2) that there is prospect of increased production
thereof to provide adequately for the requirements of the factory." The imposition of those conditions was
by no means a deviation from the terms of the agreement, but rather a step in its implementation. There
was nothing in said conditions that contradicted the terms laid down in RFC Resolution No. 145, passed on
January 7, 1954, namely "that the proceeds of the loan shall be utilized exclusively for the following
purposes: for construction of factory building P250,000.00; for payment of the balance of purchase
price of machinery and equipment P240,900.00; for working capital P9,100.00." Evidently Saura, Inc.
realized that it could not meet the conditions required by RFC, and so wrote its letter of January 21, 1955,
stating that local jute "will not be able in sufficient quantity this year or probably next year," and asking
that out of the loan agreed upon the sum of P67,586.09 be released "for raw materials and labor." This
was a deviation from the terms laid down in Resolution No. 145 and embodied in the mortgage contract,
implying as it did a diversion of part of the proceeds of the loan to purposes other than those agreed
upon.
The subsequent conduct of Saura, Inc. confirms this desistance. It did not protest against any
alleged breach of contract by RFC, or even point out that the latter's stand was legally unjustified. Its
request for cancellation of the mortgage carried no reservation of whatever rights it believed it might
have against RFC for the latter's non-compliance. As it is there was mutual desistance to the performance
of the obligation.
Requisites
1. CAPACITY - no special capacity. Any person entitled to possession may be the lender so long as his
rights to the thing are not strictly personal. (Lender need not be the owner; a lessee may
constitute a contract of Commodatum; a thief may even be a bailor.)
2. OBJECT - must be non-fungible. If consumable, valid so long as the use agreed upon will not to
consume it (for exhibition purposes). It may be real or personal
3. CONSIDERATION - gratuitous. If not, it ceases to be a Commodatum. (maybe a lease)
4. FORM - no special form is required. Commodatum starts from the moment the thing is delivered.
Section II Obligations of the Bailee
(Articles 1941 1945)
Rights and Obligations of the Bailee
Right of a BAILEE:
1. A personal right to use the thing, but not to use its fruits unless stipulated by the parties. He can
neither lend nor lease the thing to a stranger who is not a member of his household because the
contract is personal.
Obligations of a BAILEE:
1. To preserve the thing.
2. To incur expenses required by the use and preservation of the thing, without reimbursement.
3. To return the thing at the expiration of the contract.
The bailee cannot retain the thing on account of the bailors obligation or bailors debt.
4. He does not answer for damages not due to his fault, but only due to use
registration court and dismissing the VICAR's application as to Lots 2 and 3, the lots claimed by the two
sets of oppositors in the land registration case (and two sets of plaintiffs in the two cases now at bar), the
first lot being presently occupied by the convent and the second by the women's dormitory and the
sister's convent.
ISSUE:
Whether or not Vicar can validly claim the lands in question.
SC RULING:
No, Vicar cannot validly acquire the lands especially on the ground of acquisitive prescription.
Private respondents were able to prove that their predecessors' house was borrowed by petitioner Vicar
after the church and the convent were destroyed. They never asked for the return of the house, but when
they allowed its free use, they became bailors in commodatum and the petitioner the bailee. The
bailees' failure to return the subject matter of commodatum to the bailor did not mean
adverse possession on the part of the borrower. The bailee held in trust the property subject matter
of commodatum. The adverse claim of petitioner came only in 1951 when it declared the lots for taxation
purposes. The action of petitioner Vicar by such adverse claim could not ripen into title by way of ordinary
acquisitive prescription because of the absence of just title. Ordinary acquisitive prescription requires
possession for ten years, but always with just title. Extraordinary acquisitive prescription requires 30
years.
DE LOS SANTOS vs. JARRA
The carabaos delivered to be used not being returned by the defendant upon demand, there is no
doubt that she is under obligation to indemnify the owner thereof by paying him their value.
Article 1101 of said code reads:
Those who in fulfilling their obligations are guilty of fraud, negligence, or delay, and those who in
any manner whatsoever act in contravention of the stipulations of the same, shall be subjected to
indemnify for the losses and damages caused thereby.
The obligation of the bailee or of his successors to return either the thing loaned or its value, is
sustained by the supreme tribunal of Sapin. In its decision of March 21, 1895, it sets out with precision the
legal doctrine touching commodatum as follows:
Although it is true that in a contract of commodatum the bailor retains the ownership of the thing
loaned, and at the expiration of the period, or after the use for which it was loaned has been
accomplished, it is the imperative duty of the bailee to return the thing itself to its owner, or to pay him
damages if through the fault of the bailee the thing should have been lost or injured, it is clear that where
public securities are involved, the trial court, in deferring to the claim of the bailor that the amount loaned
be returned him by the bailee in bonds of the same class as those which constituted the contract, thereby
properly applies law 9 of title 11 of partida 5.
EXTRAORDINARY EXPENSES ARISING FROM THE ACTUAL USE OF THE THING LOANED:
Such expenses (caused by fortuitous event) arising on the occasion of the actual use of the thing
loaned shall be borne by the bailor and bailee alike on a 50-50 (pro rata)
LIABILTY TO PAY DAMAGES FOR KNOWN HIDDEN DEFECTS:
Requisites:
1. There is flaw or defect in the thing loaned
2. That the flaw or defect is hidden
3. The bailor is aware of such flaw
4. He does not notify or advise the bailee of the same and;
5. The bailee suffers damage by reason of such flaw or defect.
IF FLAW IS UNKNOWN TO THE BAILOR:
Bailor is not liable because commodatum is gratuitous. The rule is different in sale (Art, 1547), and
lease (Art. 1653) (Source: De Leon)
Termination
Causes of Extinguishment
1. Expiration of the time or use stipulated
2. Claim of the lender
GENERAL RULE: Allow the bailee the use of the thing loaned for the duration of the period stipulated or
until the accomplishment of the purpose for which the commodatum was instituted.
EXCEPTION: In case of urgent need in which case bailee may demand its return or temporary use.
Reason: The right of the bailor is based on the fact that commodatum is essentially gratuitous.
3. Destruction of the thing
4. Death of the borrower
5. Ingratitude of the bailee
The bailor may demand the return when the bailee commits an act of ingratitude:
If the bailee should commit an offense against the person, the honor or the property of the
bailor, or 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
If the bailee unduly refuses the bailor support when the bailee is legally and morally bound to
give support to the bailor
Chapter II
SIMPLE LOAN or MUTUUM
(Articles 1953 1961)
Concept
It is a contract whereby one party delivers to another money or fungible thing, on the condition of
returning the same kind, amount and quality. If the object loaned is not fungible but the borrower is to
return another of the same kind and quality, it is barter.
Cases:
Mutuum vs. Commodatum
CHEE KIONG YAM vs. MALIK
FACTS:
This is a petition for certiorari, prohibition, and mandamus with preliminary injunction. Petitioners
alleged that respondent Municipal Judge Nabdar J. Malik of Jolo, Sulu, acted without jurisdiction, in excess
of jurisdiction and with grave abuse of discretion when:
(a) he held in the preliminary investigation of the charges of estafa filed by respondents Rosalinda Amin,
Tan Chu Kao and Augusto Sajor against petitioners that there was a prima facie case against the latter;
(b) he issued warrants of arrest against petitioners after making the above determination; and
(c) he undertook to conduct trial on the merits of the charges which were docketed in his court as
Criminal Cases No. M-111, M-183 and M-208.
In the three criminal cases the respondents charges the petitioner with estaffa through
misappropriation, however in the face of the documents it state that the amount received was in the
nature of a simple loan.
ISSUE:
Whether or not the petitioners in this case can be charged of estaffa when the obligation is said to
be that of simple loan.
SC Ruling:
We agree with the petitioners that the facts alleged in the three criminal complaints do not
constitute estafa through misappropriation.
In order that a person can be convicted of estaffa, it must be proven that he has the obligation to
deliver or return the same money, goods or personal property that he received. Petitioners had no such
obligation to return the same money, i.e., the bills or coins, which they received from private respondents.
This is so because as clearly stated in criminal complaints, the related civil complaints and the supporting
sworn statements, the sums of money that petitioners received were loans.
The nature of simple loan is defined in Articles 1933 and 1953 of the Civil Code.
Art. 1933. By the contract of loan, one of the parties delivers to another, either
something not consumable so that the latter may use the same for a certain time and
return it, in which case the contract is called a commodatum; or money or other
consumable thing upon the condition that the same amount of the same kind and quality
shall be paid, in which case the contract is simply called a loan or mutuum.
Commodatum is essentially gratuitous.
Simple loan may be gratuitous or with a stipulation to pay interest.
In commodatum the bailor retains the ownership of the thing loaned, while in simple loam
ownership passes to the borrower.
Art. 1953. A person who receives a loan of money or any other fungible thing acquires
the ownership thereof, and is bound to pay to the creditor an equal amount of the same
kind and quality.
It can be readily noted from the above-quoted provisions that in simple loan (mutuum), as
contrasted to commodatum, the borrower acquires ownership of the money, goods or personal property
borrowed. Being the owner, the borrower can dispose of the thing borrowed (Article 248, Civil Code) and
his act will not be considered misappropriation thereof.
In U.S. vs. Ibaez, 19 Phil. 559, 560 (1911), this Court held that it is not estafa for a person to refuse to
nay his debt or to deny its existence.
We are of the opinion and so decide that when the relation is purely that of debtor and
creditor, the debtor can not be held liable for the crime of estafa, under said article, by
merely refusing to pay or by denying the indebtedness.
It appears that respondent judge failed to appreciate the distinction between the two types of
loan, mutuum and commodatum, when he performed the questioned acts, He mistook the transaction
between petitioners and respondents Rosalinda Amin, Tan Chu Kao and Augusto Sajor to be
commodatum wherein the borrower does not acquire ownership over the thing borrowed and has the
duty to return the same thing to the lender.
Thus the criminal complaints against petitioners are hereby declared null and void; respondent
judge is hereby ordered to dismiss said criminal cases and to recall the warrants of arrest he had issued in
connection therewith.
been properly defined as an advance payment of money, goods or credits upon a contract or stipulation
to repay, not to return, the thing loaned at some future day in accordance with the terms of the contract.
Under the contract of "loan," as used in said statute, the moment the contract is completed the money,
goods or chattels given cease to be the property of the former owner and becomes the property of the
obligor to be used according to his own will, unless the contract itself expressly provides for a special or
specific use of the same. At all events, the money, goods or chattels, the moment the contract is
executed, cease to be the property of the former owner and becomes the absolute property of the obligor.
A contract of "loan" differs materially from a contract of "rent." In a contract of "rent" the owner of
the property does not lose his ownership. He simply loses his control over the property rented during the
period of the contract. In a contract of "loan" the thing loaned becomes the property of the obligor. In a
contract of "rent" the thing still remains the property of the lessor. He simply loses control of the same in
a limited way during the period of the contract of "rent" or lease. In a contract of "rent" the relation
between the contractors is that of landlord and tenant. In a contract of "loan" of money, goods, chattels
or credits, the relation between the parties is that of obligor and obligee. "Rent" may be defined as the
compensation either in money, provisions, chattels, or labor, received by the owner of the soil from the
occupant thereof. It is defined as the return or compensation for the possession of some corporeal
inheritance, and is a profit issuing out of lands or tenements, in return for their use. It is that, which is to
paid for the use of land, whether in money, labor or other thing agreed upon. A contract of "rent" is a
contract by which one of the parties delivers to the other some nonconsumable thing, in order that the
latter may use it during a certain period and return it to the former; whereas a contract of "loan", as that
word is used in the statute, signifies the delivery of money or other consumable things upon condition of
returning an equivalent amount of the same kind or quantity, in which cases it is called merely a "loan."
In the case of a contract of "rent," under the civil law, it is called a "commodatum."
In the present case the property in question was sold. It was an absolute sale with the right only
to repurchase. During the period of redemption the purchaser was the absolute owner of the property.
During the period of redemption the vendor was not the owner of the property. During the period of
redemption the vendor was a tenant of the purchaser. During the period of redemption the relation which
existed between the vendor and the vendee was that of landlord and tenant. That relation can only be
terminated by a repurchase of the property by the vendor in accordance with the terms of the said
contract. The contract was one of rent. The contract was not a loan, as that word is used in Act No. 2655.
Consumable
Muttum involves money or any other fungible things. If not fungible, the contract is barter.
3. Consideration
Gratuitous or onerous.
4. Form
No special form is needed; but there must be delivery, as the contract is real.
An accepted promise to deliver something by way of simple loan may be subject to the Statute
of Frauds if not to be performed within one year. This contract is consensual as distinguished
from loan proper which is real.
Case:
Accepted promise to deliver something by way of simple loan
SAURA IMPORT and EXPORT CO., INC., vs. DEVELOPMENT BANK OF THE PHILIPPINES
FACTS:
Saura, Inc. applied to the Rehabilitation Finance Corporation (RFC), before its conversion into DBP,
for an industrial loan of P500,000.00, to be used as follows: P250,000.00 for the construction of a factory
building for the manufacture of jute sacks; P240,900.00 to pay the balance of the purchase price of the
jute mill machinery and equipment; and P9,100.00 as additional working capital.
After agreeing on the terms of the industrial loan, Mr. & Mrs. Ramon E. Saura, Inocencia Arellano,
Aniceto Caolboy and Gregoria Estabillo and China Engineers, Ltd. shall sign the promissory notes jointly
with the borrower-corporation. On January 7, 1954 RFC passed Resolution No. 145 approving the loan
application for P500,000.00, to be secured by a first mortgage on the factory building to be constructed,
the land site thereof, and the machinery and equipment to be installed. Saura, Inc. was officially notified
of the resolution on January 9, 1954. The day before, however, evidently having otherwise been informed
of its approval, Saura, Inc. wrote a letter to RFC, requesting a modification of the terms laid down by it,
namely: that in lieu of having China Engineers, Ltd. which was willing to assume liability only to the extent
of its stock subscription with Saura, Inc. sign as co-maker on the corresponding promissory notes.
It appears, however, that despite the formal execution of the loan agreement the reexamination
contemplated in Resolution No. 736 proceeded. In a meeting of the RFC Board of Governors on June 10,
1954, at which Ramon Saura, President of Saura, Inc., was present, it was decided to reduce the loan from
P500,000.00 to P300,000.00. But after the reexamination, there ensued several more circumstances that
occurred that resulted to the prolonged the discharged of the loan. Afterwhich, the loan was again
restored to the original amount of P500,000. Yet at one point, the negotiations between the two parties
came to a standstill, and so Saura Inc. did not anymore pursue the matter. Instead, it requested RFC to
cancel the mortgage, and so, on June 17, 1955 RFC executed the corresponding deed of cancellation and
delivered it to Ramon F. Saura himself as president of Saura, Inc.
On January 9, 1964, almost 9 years after the mortgage in favor of RFC was cancelled at the
request of Saura, Inc., the latter commenced the present suit for damages, alleging failure of RFC, as
predecessor of the defendant DBP, to comply with its obligation to release the proceeds of the loan
applied for and approved, thereby preventing the plaintiff from completing or paying contractual
commitments it had entered into, in connection with its jute mill project.
ISSUE: Whether or not the defendant bank is guilty of breach of contract of loan.
SC RULING:
No. DBP is not guilty of breach of contract of loan. The Supreme Court held in this case that
although there was a perfected consensual contract between the parties, such that there was offer and
acceptance: the application of Saura, Inc. for a loan of P500,000.00 was approved by resolution of the
defendant, and the corresponding mortgage was executed and registered. But this fact alone falls short of
resolving the basic claim that the defendant failed to fulfill its obligation and the plaintiff is therefore
entitled to recover damages.
It should be noted that RFC entertained the loan application of Saura, Inc. on the assumption that
the factory to be constructed would utilize locally grown raw materials, principally kenaf. It was in line
with such assumption that when RFC approved and restored the loan to the original amount of
P500,000.00. There was nothing in said conditions that contradicted the terms laid down in RFC
Resolution No. 145, passed on January 7, 1954, namely "that the proceeds of the loan shall be utilized
exclusively for the following purposes: for construction of factory building P250,000.00; for payment of
the balance of purchase price of machinery and equipment P240,900.00; for working capital
P9,100.00." Evidently Saura, Inc. realized that it could not meet the conditions required by RFC, and so
wrote its letter of January 21, 1955, stating that local jute "will not be able in sufficient quantity this year
or probably next year," and asking that out of the loan agreed upon the sum of P67,586.09 be released
"for raw materials and labor." Saura, Inc. obviously was in no position to comply with RFC's conditions. So
instead of doing so and insisting that the loan be released as agreed upon, Saura, Inc. asked that the
mortgage be cancelled, which was done on June 15, 1955. The action thus taken by both parties was in
the nature of mutual desistance, what Manresa terms "mutuo disenso," which is a mode of extinguishing
obligations.
Clearly, the subsequent conduct of Saura Inc. requesting for cancellation of the mortgage carried
no reservation of whatever rights it believed it might have against RFC for the latter's non-compliance
confirms their desistance. All these circumstances demonstrate beyond doubt that the said agreement
had been extinguished by mutual desistance and that on the initiative of the plaintiff-appellee itself.
To return the thing or amount borrowed at the period stipulated or fixed according to general rules.
b.
If the thing borrowed is not money, to return the same amount in equal kind and quality,
even if the price has changed or else its value at the time the contract was perfected.
To Pay Interest
When the stipulation to pay is verbal, the volountary payment is valid as a performance of a
natural obligation. (But GR: Verbal void; EXCP: voluntary payment)
Interest paid even if not stipulated, is not recoverable, it being proof of a tacit contract or a natural
obligation.
a. Except where it is proved that the interest was paid by error (solution indebiti)
b. Interest payable in kind, it is appraised at the current price at the time of payment (Art.
1958)
c. Interest due shall not earn interest (no compounding) in the absence of agreement and
without prejudice to Art 2212 (interest after judicial demand) (Art. 1595)
d. The following are not considered interest:
Increase in the price when the sale is on installment
Attorneys fees for cost of collection
Penalty for breach
Bank deposits, whether fixed savings or current are governed by the provisions concerning simple
loan.
Cases:
Payment in Currency Stipulated
RONO vs. GOMEZ
FACTS:
Cristobal Roo received as a loan four thousand pesos in Japanese fiat money from Jose L.
Gomez. He informed the later that he would use the money to purchase a jitney; and he agreed to pay
that debt one year after date in the currency then prevailing. After the liberation, Roo was sued for
payment. His main defense was his liability should not exceed the equivalent of 4,000 pesos "mickey
mouse" money and could not be 4,000 pesos Philippine currency, because the contract would be void
as contrary to law, public order and good morals.
ISSUE:
Whether or not the contract is contrary to the Usury law, because on the basis of calculations by
Government experts Roo only received the equivalent of one hundred Philippine pesos and now he is
required to disgorge four thousand pesos or interest greatly in excess of the lawful rates.
SC RULING:
No, he is not paying interest. The contract says that the money received "will not earn any
interest." Furthermore, he received four thousand pesos; and he is required to pay four thousand pesos
exactly. The increased intrinsic value and purchasing power of the current money is consequence of an
event (change of currency) which at the time of the contract neither party knew would certainly happen
within the period of one year. They both elected to subject their rights and obligations to that
contingency. If within one year another kind of currency became legal tender, Gomez would probably get
more for his money. If the same Japanese currency continued, he would get less, the value of Japanese
money being then on the downgrade.
a perfectly equitable and valid transaction. Appellants were bound by said contract and appellees were
not obliged to receive payment before it was due. Hence, the latter had reason not to accept the tender
of payment made to them by the former. Judgment affirmed.
Attorneys fees
ANDREAS vs. GREEN
FACTS:
The defendant and appellant questions the clause in the promissory note sued on reading "and a further
sum equal to 10 per cent of the total amount due as and for expenses of collection for attorney's fees
whether actually incurred or not," as in contravention of the Usury Law.
SC RULING: Stipulations in negotiable instruments for the payment of collection and attorney's fees are
not forbidden by lay in this jurisdiction. The lender may without violating the Usury Law provide in a note
for an attorney's fee to cover the cost of collection. This has been definitely held in a long line of cases
both here and elsewhere. The purpose of a stipulation in a note for reasonable attorney's fees
is not to give the lender a larger compensation for the loan than the law allows, but is to
safeguard the lender against future loss or damage by being compelled to retain counsel to
institute judicial proceedings to collect his debt.
The only difference between the provision of the promissory note here complained of and the provision
of the promissory notes in any of the above-cited cases is that the note before us contains these
additional words: "whether actually incurred or not." But this clause is merely descriptive in nature is
in reality merely surplusage. The idea of the parties was to provide for a penalty to cover expenses of
collection. That such expenses were actually incurred in this case is now before the appellate court for
decision. Whether the creditor could enforce the penalty where expenses of collection and attorney's
fees were not actually incurred, is questionable, but does not affect the result in this case.
Judgment affirmed.
however, be stressed that such observation was on the theoretical assumption that the rate
of 2% is being imposed as interest, not as damage dues which was the intendment of the
trial court.
Damage dues in this case do not include and are not included in the computation of interest as
the two are of different categories and are distinct claims which may be demanded separately, in the
same manner that commissions, fines and penalties are excluded in the computation of interest where
the loan or forbearance is not secured in whole or in part by real estate or an interest therein.
While interest forms part of the consideration of the contract itself, damage dues (penalties, and so
forth) are usually made payable only in case of default or non-performance of the contract. 11 Also,
although interest is subject to the provisions of the Usury Law, there is no policy or provision in such law
preventing the enforcement of damage dues although the effect may be to increase the sum payable
beyond the prescribed ceiling rates.
The lower court's decision explicitly ordered petitioner to pay private respondent the amount of
P198,602.41 as principal obligation including interest and damage dues, which is a clear and
unequivocal indication of the lower court's intent to award both interest and damage dues.
Bank Deposits
Cases:
Nature of Bank Deposits
GOPOCO GROCERY vs. PACIFIC COAST BISCUIT
FACTS:
The Mercantile Bank of China was declared in liquidation. Creditors and all those who had any claim
against it were required to present the same before the Bank Commissioner within 90 days. Gopoco
presented its claim.
ISSUE:
What is the real nature of current account a savings deposit?
SC RULING:
The current account and savings deposit have lost their character as deposits and are converted into
simple commercial loans because in cases of such deposits, the bank has made use thereof in the
ordinary course of its transactions as an institution engaged in the banking business, not because it so
wishes but precisely because of the authority deemed to have been granted to it by the depositors to
enable him to collect the interest which they had been and they are now collecting, and by virtue further
of the authority granted to it by Section 125 of the Corporation Law and the Banking Law. The deposits
created a juridical relation of creditor and debtor. The back acquired ownership of the money deposited.
the Superintendent to be true, shall forthwith forbid the institution to do business in the
Philippines and shall take charge of its assets and proceeds according to law.
xxx xxx xxx
If the Monetary Board shall determine that the banking institution cannot resume
business with safety to its creditors, it shall, by the Office of the Solicitor General, file a petition
in the Court of First Instance reciting the proceedings which have been taken and praying the
assistance and supervision of the court in the liquidation of the affairs of the same. The
Superintendent shall thereafter, upon order of the Monetary Board and under the supervision of
the court and with all convenient speed, convert the assets of the banking institution to money.
Section 30 of the same law also provides that:
In case of liquidation of a banking institution, after payment of the costs of the
proceedings, including reasonable expenses and fees of the Central Bank to be allowed by the
court, the Central Bank shall pay the debts of such institution, under the order of the court, in
accordance with their legal priority.
The trial court or, to be exact, the liquidation court noted that there is no provision in the charter
of the Central Bank in the General Banking Law (Republic Acts Nos. 265 and 337, respectively) which
suspends or abates civil actions against an insolvent bank pending in courts other than the liquidation
court. It reasoned out that, because such actions are not suspended, judgments against insolvent banks
could be considered as preferred credits under article 2244(14)(b) of the Civil Code. It further noted that,
in contrast with the Central Act, section 18 of the Insolvency Law provides that upon the issuance by the
court of an order declaring a person insolvent "all civil proceedings against the said insolvent shall be
stayed."
On the other hand, the Central Bank argues that after the Monetary Board has declared that a
bank is insolvent and has ordered it to cease operations, the Board becomes the trustee of its assets "for
the equal benefit of all the creditors, including the depositors". The Central Bank cites the ruling that
"the assets of an insolvent banking institution are held in trust for the equal benefit of all creditors, and
after its insolvency, one cannot obtain an advantage or a preference over another by an attachment,
execution or otherwise" it is also the stand of the Central Bank is that all depositors and creditors of the
insolvent bank should file their actions with the liquidation court.
It cites the ruling that "a creditor of an insolvent state bank in the hands of a liquidator who
recovered a judgment against it is not entitled to a preference for (by) the mere fact that he is a
judgment creditor." It should be noted that fixed, savings, and current deposits of money in banks and
similar institutions are not true deposits. They are considered simple loans and, as such, are not
preferred credits
The aforequoted section 29 of the Central Bank's charter explicitly provides that when a bank is
found to be insolvent, the Monetary Board shall forbid it to do business and shall take charge of its
assets. Evidently, one purpose in prohibiting the insolvent bank from doing business is to prevent some
depositors from having an undue or fraudulent preference over other creditors and depositors.
That purpose would be nullified if, as in this case, after the bank is declared insolvent, suits by
some depositors could be maintained and judgments would be rendered for the payment of their
deposits and then such judgments would be considered preferred credits under article 2244 (14) (b) of
the Civil Code.
ARTICLE 2244. With reference to other property, real and personal, of the debtor, the following
claims or credits shall be preferred in the order named:
xxx xxx xxx
(14) Credits which, without special privilege, appear in (a) a public instrument; or (b) in a
final judgment, if they have been the subject of litigation. These credits shall have preference
among themselves in the order of priority of the dates of the instruments and of the judgments,
respectively.
xxx xxx xxx
We are of the opinion that such judgments cannot be considered preferred and that article
2244(14)(b) does not apply to judgments for the payment of the deposits in an insolvent savings bank
which were obtained after the declaration of insolvency. The Rohr case supplies some illumination on the
disposition of the instant case. The Supreme Court of Montana said:
The general principle of equity that the assets of an insolvent are to be
distributed ratably among general creditors applies with full force to the distribution of the
assets of a bank. A general depositor of a bank is merely a general creditor, and, as
such,
is
not entitled to any preference or priority over other general creditors. xxx
The circumstance that the Fidelity Savings Bank, having stopped operations since February 19,
1969, was forbidden to do business, and that ban would include the payment of time deposits, implies
that suits for the payment of such deposits were prohibited.
The trial court's order which contains the Bank Liquidation Rules and Regulations, indicated that,
in Step IV, the court directed the Central Bank, as liquidator, to submit a Project of Distribution which
should include "a list of the preferred credits to be paid in full in the order of priorities established in
Articles 2241, 2242, 2243, 2246 and 2247" of the Civil Code. It is important to note that Article 2244 was
not mentioned. Therefore, there is no cogent reason why the Elizes and Padilla spouses should not
adhere to the procedure outlined in the said rules and regulations.
FACTS:
The instant petition seeks to prohibit public respondents from proceeding with the preliminary
investigation of I.S. No. 81-31938, in which petitioners were charged by private respondent Clement
David, with estafa and violation of Central Bank Circular No. 364 and related regulations regarding
foreign exchange transactions principally, on the ground of lack of jurisdiction in that the allegations of
the charged, as well as the testimony of private respondent's principal witness and the evidence through
said witness, showed that petitioners' obligation is civil in nature.
From March 20, 1979 to March, 1981, David invested with the Nation Savings and Loan
Association, (hereinafter called NSLA) the sum of P1,145,546.20 on nine deposits, P13,531.94 on savings
account deposits (jointly with his sister, Denise Kuhne), US$10,000.00 on time deposit, US$15,000.00
under a receipt and guarantee of payment and US$50,000.00 under a receipt dated June 8, 1980 (au
jointly with Denise Kuhne), that David was induced into making the aforestated investments by Robert
Marshall an Australian national who was allegedly a close associate of petitioner Guingona Jr., then NSLA
President, petitioner Martin, then NSLA Executive Vice-President of NSLA and petitioner Santos, then
NSLA General Manager; that on March 21, 1981 N LA was placed under receivership by the Central Bank,
so that David filed claims therewith for his investments and those of his sister; that on July 22, 1981
David received a report from the Central Bank that only P305,821.92 of those investments were entered
in the records of NSLA; that, therefore, the respondents in I.S. No. 81-31938 misappropriated the balance
of the investments, at the same time violating Central Bank Circular No. 364 and related Central Bank
regulations on foreign exchange transactions; that after demands, petitioner Guingona Jr. paid only
P200,000.00, thereby reducing the amounts misappropriated to P959,078.14 and US$75,000.00."
At the inception of the preliminary investigation before respondent Lota, petitioners moved to
dismiss the charges against them for lack of jurisdiction because David's claims allegedly comprised a
purely civil obligation which was itself novated. Fiscal Lota denied the motion to dismiss (Petition, p. 8).
But, after the presentation of David's principal witness, petitioners filed the instant petition
because: (a) the production of the Promisory Notes, Banker's Acceptance, Certificates of Time Deposits
and Savings Account allegedly showed that the transactions between David and NSLA were simple loans,
i.e., civil obligations on the part of NSLA which were novated when Guingona, Jr. and Martin assumed
them; and (b) David's principal witness allegedly testified that the duplicate originals of the aforesaid
instruments of indebtedness were all on file with NSLA, contrary to David's claim that some of his
investments were not record
ISSUE:
Whether or not the petitioner in this case is properly charge of estaffa through misappropriation
of funds deposited in NSLA making them subject to the jurisdiction of the respondents investigation.
SC Ruling:
There is merit in the contention of the petitioners that their liability is civil in nature and
therefore, public respondents have no jurisdiction over the charge of estaffa.
It must be pointed out that when private respondent David invested his money on nine. and
savings deposits with the aforesaid bank, the contract that was perfected was a contract of
simple loan or mutuum and not a contract of deposit. Thus, Article 1980 of the New Civil Code
provides that:
Article 1980. Fixed, savings, and current deposits of-money in banks and similar
institutions shall be governed by the provisions concerning simple loan.
In the case of Central Bank of the Philippines vs. Morfe (63 SCRA 114,119 [1975], We said:
It should be noted that fixed, savings, and current deposits of money in banks and
similar institutions are hat true deposits. are considered simple loans and, as such, are
not preferred credits (Art. 1980 Civil Code; In re Liquidation of Mercantile Batik of China
Tan Tiong Tick vs. American Apothecaries Co., 66 Phil 414; Pacific Coast Biscuit Co. vs.
Chinese Grocers Association 65 Phil. 375; Fletcher American National Bank vs. Ang
Chong UM 66 PWL 385; Pacific Commercial Co. vs. American Apothecaries Co., 65 PhiL
429; Gopoco Grocery vs. Pacific Coast Biscuit CO.,65 Phil. 443)."
This Court also declared in the recent case of Serrano vs. Central Bank of the Philippines (96 SCRA 102
[1980]) that:
Bank deposits are in the nature of irregular deposits. They are really 'loans because they
earn interest. All kinds of bank deposits, whether fixed, savings, or current are to be
treated as loans and are to be covered by the law on loans (Art. 1980 Civil Code Gullas
vs. Phil. National Bank, 62 Phil. 519). Current and saving deposits, are loans to a bank
because it can use the same. The petitioner here in making time deposits that earn
interests will respondent Overseas Bank of Manila was in reality a creditor of the
respondent Bank and not a depositor. The respondent Bank was in turn a debtor of
petitioner. Failure of the respondent Bank to honor the time deposit is failure to pay its
obligation as a debtor and not a breach of trust arising from a depositary's failure to
return the subject matter of the deposit (Emphasis supplied).
Hence, the relationship between the private respondent and the Nation Savings and Loan
Association is that of creditor and debtor; consequently, the ownership of the amount deposited was
transmitted to the Bank upon the perfection of the contract and it can make use of the amount
deposited for its banking operations, such as to pay interests on deposits and to pay withdrawals. While
the Bank has the obligation to return the amount deposited, it has, however, no obligation to return or
deliver the same money that was deposited. And, the failure of the Bank to return the amount deposited
will not constitute estafa through misappropriation punishable under Article 315, par. l(b) of the Revised
Penal Code, but it will only give rise to civil liability over which the public respondents have nojurisdiction.
Cable Address:
"COMTRUST"
COMMERCIAL BANK AND TRUST COMPANY
of the Philippines
Quezon City Branch
December 8, 1975
one business day from receipt, is a transaction which is not authorized by CB Circular No. 20, it must be
considered as one which falls under the general class of prohibited transactions. Hence, pursuant to
Article 5 of the Civil Code, it is void, having been executed against the provisions of a
mandatory/prohibitory law. More importantly, it affords neither of the parties a cause of action against the
other. The only remedy is one on behalf of the State to prosecute the parties for violating the law. We
thus rule that Zshornack cannot recover.
was obvious that either of them could ask the Bank for access to the safety deposit box and, with the use
of such key and the Bank's own guard key, could open the said box, without the other renter being
present.
Since, however, the petitioner cannot be blamed for the filing of the complaint and no bad faith on its part
had been established, the trial court erred in condemning the petitioner to pay the respondent Bank
attorney's fees. To this extent, the Decision of public respondent Court of Appeals must be modified.
Kinds
Judicial (Sequestration) takes place when an attachment or seizure of property in litigation is ordered.
Extra-judicial (Art.1967)
a. Voluntary kind where the 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 one 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.
The main difference between a voluntary deposit and a necessary deposit is that in the former, the
depositor has a complete freedom in choosing the depositary, whereas in the latter, there is lack of free
choice in the depositor.
Judicial
Extra-judicial
1. Creation
Will of the court
Will of the parties or contract
2. Purpose
Security or to insure the right of a party to Custody and safekeeping
property or to recover in case of favorable
judgment
3. Subject Matter
Movables or immovables,
Movables only
but generally immovables
4. Cause
May be compen-sated or not, but generally
gratuitous
5. When must the thing be returned
Upon order of the court or when litigation is Upon demand of depositor
ended
6. In whose behalf it is held
Always onerous
Simple Loan
The essential cause for the transaction is the
necessity of the buyer
Cases:
Deposit with interest
Compania Agricola vs. Nepomoceno
FACTS:
It appears from the record that on March 17, 1927, the registered partnerships, Mariano Velasco &
Co., Mariano Velasco, Sons, & Co., and Mariano Velasco & Co., Inc., were, on petition of the creditors,
declared insolvent by the Court of First Instance of Manila.
On the 16th day of April, 1927, the Compania Agricola de Ultramar filed a claim against one of the
insolvents Mariano Velasco & Co., claiming the sum of P10,000, with the agreed interest thereon at the
rate of 6 per cent per annum from April 5, 1918, until its full payment was a deposit with said Mariano
Velasco & Co. and asked the court to declare it a preferred claim.
The assignee of the insolvency answered the claim by interposing a general denial. The claim was
thereupon referred by the court to a Commissioner to receive the evidence, and on September 23, 1929,
the court rendered a decision declaring that the alleged deposit was a preferred claim for the sum
mentioned, with interest at 6 per cent per annum from April 5, 1918, until paid.
ISSUE:
Whether or not the contract entered into by Compania Agricola with Mariano Velasco & Co. is that
of loan or a deposit.
SC Ruling:
In our opinion the court below erred in finding that the claim of the appellee should be considered
a deposit and a preferred claim. In the case of Gavieres vs. De Tavera (1 Phil., 17), very similar to the
present case, this court held that the transaction therein involved was a loan and not a deposit, the court
held;
Although in the document in question a deposit is spoken of, nevertheless from an
examination of the entire document it clearly appears that the contract was a loan and that such
was the intention of the parties. It is unnecessary to recur to the cannons of interpretation to
arrive at this conclusion. The obligation of the depository to pay interest at the rate of 6 per cent
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 depository 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. (Art. 1768, Civil Code.)
Article 1767 of the Civil Code provides that
"The depository cannot make use of the thing deposited without the express
permission of the depositor."
"Otherwise he shall be liable for losses and damages."
Article 1768 also provides that
"When the depository has permission to make use of the thing deposited, the
contract loses the character of a deposit and becomes a loan or bailment."
"The permission not be presumed, and its existence must be proven."
The two cases quoted are sufficient to show that the ten thousand pesos delivered by the
appellee to Mariano Velasco & Co. cannot de regarded as a technical deposit. But the appellee argues
that it is at least an "irregular deposit."
Manresa, in his Commentaries on the Civil Code (vol. 11, p. 664), states that there are three
points of difference between a loan and an irregular deposit. The first difference which he points out
consists in the fact that in an irregular deposit the only benefit is that which accrues to the depositor,
while in a loan the essential cause for the transaction is the necessity of the borrower. The contract in
question does not fulfill this requirement of an irregular deposit.
In the present case the transaction in question was clearly not for the sole benefit of the
Compania Agricola de Ultramar; it was evidently for the benefit of both parties. Neither could the alleged
depositor demand payment until the expiration of the term of three months.
For the reasons stated, the appealed judgment is reversed, and we hold that the transaction in
Chapter 2
Voluntary Deposit
Section 1 General Provisions
(Articles 1968 1971)
Voluntary Deposit
It is wherein the delivery is made by the will of the depositor or by two or more persons each of
whom believes himself to be entitled to the thing deposited
Voluntary deposit vs. necessary deposit: In voluntary deposit the depositor has complete freedom in
choosing the depositary, whereas in necessary deposit there is a lack of choice in the depositor.
Kinds
a. Where the deposit is by the will of the depositor (complete freedom)
b. Where the deposit is by two claimants, and the thing is to be delivered to the one found to be entitled
to it. (conflicting adversarial claims)
Requisites
A. Capacity of the parties: no special capacity is required- the depositor need not be the owner of the
thing and may even be incapacitated.
1. Where the depositor is capable and the depository is incapable
i.
The depositor may recover the thing while in the depositarys possession.
ii.
If the depositary alienates the thing, he must return the price or amount of enrichment.
2. Where the depositor is incapable, and the depositary is capable. T
i.
The depositary may be compelled to return the thing by the guardians or by the depositor
himself if he should acquire capacity. (Capacity is required in the depositor for claiming the
return but not for making a deposit.)
B. Object must be corporeal and movable. (in extrajudicial deposit)- the purpose of the contract is to
insure restoration of the thing that may disappear.
i.
In judicial deposit (receivership)- real or personal property may be included.
C. Formalities: except for delivery, no formalities are required to perfect the agreement.
Section 2 Obligations of Depositary
Even if the depositor had the 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.
2. What is to be returned
i.
If money
-Obligation to pay interest on sums converted for personal use.
ii.
If specific thing
-Obligation to return products, accessories and accessions.
iii.
If generic thing
Unless there is a stipulation to the contrary, the depositary may commingle grain or other
articles of the same kind and quality, in which case the various depositors shall own or
have a proportionate interest in the mass.
3. Form or manner of return
If thing deposited is divisible and there are joint depositors:
Each depositor can demand only his proportionate share thereto.
If thing is not divisible and the obligation is solidary:
Rules on active solidarity shall apply, i.e. each one of the solidary depositors may do whatever maybe
useful to the others but not anything which may be prejudicial to the latter, and the depositary may
return the thing to anyone of the solidary depositors unless a demand, judicial or extrajudicial, for its
return has been made by one of them in which case, delivery should be made to him.
4. Place of return
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.
5. Time of return
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 attach while in the depositarys possession
b. When notified of the opposition of a third person to the return or the removal of the thing
deposited
6. Set-off
GR: The bank can set-off the deposits in its hands for the payment of any indebtedness to it on the
part of the depositor.
However, if the depositor is a mere indorser of a check which was later dishonoured, the right of action
does not accrue until a notice of dishonour is given to him.
7. Banks failure to return amount
Claims for recovery of time deposits plus interest from an insolvent bank shall be filed before the
liquidation proceedings in the proper court. Failure of bank to honor the time deposit is not a breach of
trust arising from a depositarys failure to return the subject matter but a mere failure to pay its
obligation as a debtor.
8. When bank officials may be guilty of estafa
GR: Failure of bank to return the amount deposited will not constitute estafa through misappropriation.
Exception: (Guingona va City Fiscal of Manila)
9. Earnest money
-If a sale did not materialize, the earnest money is considered to be deposited
Cases:
Commingling of Funds; Obligation for money taken by force majeure
Roman Catholic Bishop of Jaro vs. de la Pena
FACTS:
Appeal from the judgment of the Court of First Instance of Iloilo.
The plaintiff, the Roman Catholic Bishop of Jaro, is the trustee of a charitable donation made for
the construction of a leper hospital. Father Agustin de la Pea was the duly authorized representative of
the plaintiff to receive the legacy. Gregorio de la Pea is the administrator of the estate of Father De la
Pea.
In the year 1898 the books of Father De la Pea, as trustee, showed that he had on hand as such
trustee the sum of P6,641.00, collected by him for the charitable purposes aforesaid. In the same year he
deposited in his personal account P19, 000 in the Hongkong and Shanghai Bank at Iloilo. Shortly
thereafter and during the war of the revolution, Father De la Pea was arrested by the military authorities
as a political prisoner, and while detained, there was an order on said bank in favor of the United States
Army officer for the sum deposited in said bank. The money was taken from the bank by the military
authorities by virtue of such order, was confiscated and turned over to the Government. The trust funds
were a part of the funds deposited and which were removed and confiscated by the military authorities of
the United States.
ISSUE: Whether or not Father de la Pea is responsible for the loss of the money.
SC RULING:
NO. Father de la Pea is not responsible for the loss of the money as it was taken by force
majeure. Although the Civil Code states that "a person obliged to give something is also bound to
preserve it with the diligence pertaining to a good father of a family" (art. 1094), it also provides,
following the principle of the Roman law, major casus est, cui humana infirmitas resistere non potest,
that "no one shall be liable for events which could not be foreseen, or which having been foreseen were
inevitable, with the exception of the cases expressly mentioned in the law or those in which the obligation
so declares." (Art. 1105.)
By placing the money in the bank and mixing it with his personal funds De la Pea did not thereby
assume an obligation different from that under which he would have lain if such deposit had not been
made, nor did he thereby make himself liable to repay the money at all hazards. The fact that he placed
the trust fund in the bank in his personal account does not add to his responsibility. Such deposit did not
make him a debtor who must respond at all hazards.
There was no law prohibiting him from depositing it as he did and there was no law which
changed his responsibility by reason of the deposit. While it may be true that one who is under obligation
to do or give a thing is in duty bound, when he sees events approaching the results of which will be
dangerous to his trust, to take all reasonable means and measures to escape or, if unavoidable, to temper
the effects of those events, we do not feel constrained to hold that, in choosing between two means
equally legal, he is culpably negligent in selecting one whereas he would not have been if he had selected
the other.
The court, therefore, finds and declares that the money which is the subject matter of this action
was deposited by Father De la Pea in the Hongkong and Shanghai Banking Corporation of Iloilo; that said
money was forcibly taken from the bank by the armed forces of the United States during the war of the
insurrection; and that said Father De la Pea was not responsible for its loss.
(5) That over neither of them there be any retention or controversy, commenced by third persons
and communicated in due time to the debtor."
ISSUE #2:
Whether or not the right to set off has been properly exercised by the Bank.
SC RULING:
No, the bank did not properly exercise the right accorded to it.
It is undisputed -- nay, even admitted -- that purportedly as an act of accommodation to a valued
client, petitioner allowed the withdrawal of the face value of the deposited check prior to its clearing. That
act certainly disregarded the clearance requirement of the banking system. Such a practice is unusual,
because a check is not legal tender or money; 21 and its value can properly be transferred to a depositors
account only after the check has been cleared by the drawee bank. 22
Under ordinary banking practice, after receiving a check deposit, a bank either immediately credit
the amount to a depositors account; or infuse value to that account only after the drawee bank shall
have paid such amount.23 Before the check shall have been cleared for deposit, the collecting bank can
only "assume" at its own risk -- as herein petitioner did -- that the check would be cleared and paid out.
Further, the reservation made by the bank that it assumes no responsibility beyond carefulness in
selecting correspondents, and until such time as actual payments shall have come to its possession, the
Bank reserves the right to charge back to the Depositors account any amounts previously credited
whether or not the deposited item is returned, this reservation is not enough to insulate the bank from
any liability. It is indeed arguable that "in signing the deposit slip, the depositor does so only to identify
himself and not to agree to the conditions set forth at the back of the deposit slip."
Moreover, by the express terms of the stipulation, petitioner took upon itself certain obligations as
respondents agent, consonant with the well-settled rule that the relationship between the payee or
holder of a commercial paper and the collecting bank is that of principal and agent. As a general rule, a
bank is liable for the wrongful or tortuous acts and declarations of its officers or agents within the course
and scope of their employment. The manager of the banks Cabanatuan branch, Consorcia Santiago,
categorically admitted that she and the employees under her control had breached bank policies. They
admittedly breached those policies when, without clearance from the drawee bank in Baguio, they
allowed respondent to withdraw on October 1, 1990, the amount of the check deposited. Santiago
testified that respondent "was not officially informed about the debiting of the P101,000 from his existing
balance of P170,000 on October 2, 1990 x x x.Being the branch manager, Santiago clearly acted within
the scope of her authority in authorizing the withdrawal and the subsequent debiting without notice.
Aggravating matters, petitioner failed to show that it had immediately and duly informed respondent of
the debiting of his account.
provided in the option granted in the bareboat contract (Exhibit "C"). This amount was accepted by the
Administration as deposit ...." Since the purchase did not eventually materialize for reasons attributable to
REPUBLIC, it is but just that the deposit be returned. It is futile to allege that PAN-ORIENTAL did not plead
for the return of that amount since its prayer included other reliefs as may be just under the premises.
Courts may issue such orders of restitution as justice and equity may warrant.
Extinguishment:
General Causes:
Upon the loss or destruction of the thing deposited.
If gratuitous, upon the death of either the depositor or the depositary.
Other Causes:
By claim of the deposit by the depositor at ant time.
By renunciation of the depositary unless deposit is for consideration.
The depositary who may have just reason for not keeping the deposit may,
even before the term expires, return to the depositor and if the later refuse, he
may obtain its consignation from the court. [Art. 1989]
The reasons must be real and serious: examples; excessive period,
need to go abroad, serious danger of loss.
Reasons known at the time the deposit was accepted and not properly
invoked at that time are unavailing.
Death of either property, if the deposit is gratuitous;
But deposit is not extinguished by compensation [Art.1200]
Chapter 3
Necessary Deposit
(Articles 1996 2004)
Necessary Deposit
A deposit is necessary: (1) When it is made in compliance with a legal obligation; (2) When it takes
place on the occasion of any calamity, such as fire, storm, flood, pillage, shipwreck, or other similar events.
(Article 1996)
Kinds
1. Those made in compliance with legal obligations
It shall be governed by the provisions of the law establishing it, and in case of its deficiency, by the
rules on voluntary deposit.
Example: A borrowed P100,000. 00 from B, and as security thereof, pledged his diamond ring. If B uses
the ring without the authority of A, A may ask that the ring be judicially or extrajudicially deposited.
(Article 2104, Civil Code the creditor cannot use the thing pledged, without the authority of the
owner, and if he should do so, or should misuse the thing in any other way, the owner may ask that it
be judicially or extrajudicially deposited." When the preservation of the thing pledged requires its use,
it must be used by the creditor but only for that purpose.
2. When it takes place on the occasion of any calamity, such as fire, storm, flood, pillage, shipwreck, or
other similar events.
It shall be regulated by the provisions concerning voluntary deposit and by Article 2168 when
during fire, flood, storm, or other calamity, property is saved from destruction by another person
without the knowledge of the owner; the latter is bound to pay the former just compensation.
3.
4.
Example: In a fire, Jose save Pedros car. Jose is in possession of the car; Jose is supposed to be its
depositary. Deposits made on the occasion of a calamity have been fittingly termed depositos
miserable.
That made by travelers in hotels or inns.
The keepers of hotels or inns shall be responsible for them as depositaries, provided that notice
was given to them, or to their employees, of the effects brought by the guests and that, on the
part of the latter, they take the precautions which said hotel-keepers or their substitutes advised
relative to the care and vigilance of their effects.
Travellers refer to transient and was certainly not meant to include ordinary or regular boarders
in any apartment, house, inn or hotel. Guest is synonymous to travellers. Non-transient are
governed by the rules on lease.
Nature of Precautions to be given to guests may be given directly or orally to the guests, or may
be typed or printed on posters.
The liability or responsibility by the hotel or inn keeper commences as soon there is an evident
intention on the part of the travelers to avail himself of the accommodations of the hotel or inn. It
does not matter whether compensation has already been paid or not, or whether the guest has
already partaken of food and drink or not.
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. Any stipulation between the hotel-keeper and the
guest whereby the responsibility of the former as set forth in articles 1998 to 2001 is suppressed
or diminished shall be void.
The hotel-keeper is not liable for compensation if the loss is due to the acts of the guest, his family,
servants or visitors, or if the loss arises from the character of the things brought into the hotel.
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 lodging, and supplies usually furnished to hotel guests.
That made with common carriers.
Chapter 4
Sequestration or Judicial Deposit
(Articles 2005- 2009)
Judicial Deposit
A judicial deposit or sequestration takes place when an attachment or seizure of property in litigation is
ordered. (Art. 2005)
Movable as well as immovable property may be the object of sequestration. (Art. 2006)
The depositary of property or objects sequestrated cannot be relieved of his responsibility until the
controversy which gave rise thereto has come to an end, unless the court so orders. (Art. 2007)
The depositary of property sequestrated is bound to comply, with respect to the same, with all the
obligations of a good father of a family. (Art. 2008)
As to matters not provided for in this Code, judicial sequestration shall be governed by the Rules of
Court. (Art. 2009)
Special Rule
1. Examples of an attachment or seizure of property by judicial order:
a. Under Rule 57, Revised Rules of Court: a proper party may, at the commencement of the action or
at any time thereafter, have the properties of the adverse party attached as security for the
satisfaction of any judgment that may be recovered.
b. Under Rule 60, a sheriff may be ordered to seize personal property in suits for the delivery of
personal property.
c. In PCGG sequestration cases pending before the Sandiganbayan.
Distinguished from extra-judicial deposit
JUDICIAL DEPOSIT
a.
b.
c.
d.
e.
As
As
As
As
As
to
to
to
to
to
source
purpose
object
cause
possession
By Court order
To secure the owners right
May be real or personal property
Remuneratory
For the benefit of the owner/
winning party to the case
EXTRA-JUDICIAL DEPOSIT
(VOLOUNTARY)
By the will of the parties
For safe-keeping
Personal property only
Generally gratuitous
Generally for the benefit of
depositor.
the
The law does not define what a warehouse is. As used, however, in the Act, warehouse means the
building or place where the goods are deposited and stored for profit.
A warehouseman is a person lawfully engaged in the business of storing goods for profit.
Receipts not issued by a warehouseman are not warehouse receipts although in the form of
warehouse receipts.
But a duly authorized officer or agent of a warehouseman may validly issue a warehouse
receipt.
Form
The Act does not require or specify any particular form for warehouse receipts, provided that it
contains the essential terms, as enumerated in section 2 of the Warehouse Receipts Act, which must be
embodied in every warehouse receipts:
1. Location of the Warehouse
This requirement is for the benefit of the holders of the warehouse receipt to enable them to
determine where the goods are deposited especially when the warehouseman has more than
one warehouse located in different places.
2. Date of the Receipt
The date of issue appearing in the warehouse receipt indicates prima facie the date when the
contract of deposit is perfected and when storage charges shall begin to run against the
depositor.
3. Consecutive number of Receipt
To identify each receipt with the goods for which it was issued.
4. Person to whom good are deliverable
This determines the person or persons who shall prima facie be entitled lawfully to the
possession of the goods deposited. This requirement, however, does not determine the
negotiability of the receipt because notwithstanding the failure to use the words of
negotiability, the receipt may still be considered negotiable.
5. Rate of Storage Charges
This states the consideration for the contract from the view of the warehouseman. In the
absence thereof, the law presumes that the depositor shall pay the customary or reasonable
compensation for the services of the warehouseman.
6. Description of the Goods or Packages
For the identification so that the identical property delivered to the warehouseman may be
delivered back by him upon the return of the warehouse receipt. However, the mere fact that
the goods deposited are incorrectly described does not make ineffective the receipt when the
identity of the goods is fully established by the evidence.
7. Signature of the Warehouseman
The warehousemans signature furnishes the best evidence of the fact that the warehouseman
has received the goods described in the receipt and has bound himself to assume all
obligations in connection therewith.
8. Warehousemans ownership of or interest in the goods
It seems wise that where they issue negotiable instrument in this way, the document should
carry notice of the fact on its face.
9. Statement of the advances made and liabilities incurred
To preserve the lien of the warehouseman over the goods stored or the proceeds thereof in his
hands.
Effect of Omission:
1. The validity of receipt not affected.
The omission of any of the requirements will not affect the validity of the warehouse receipt.
2. Warehouseman liable for damages.
It will only render the warehouseman liable for damages to those injured by his omission.
3. Negotiability of receipt not affected.
Section 2 doen not deal with the negotiuability of the warehouse receipt. Thus, omission of any
terms in section 2 that are required will not affect the negotiability of the warehouse receipt.
4. Contract converted to ordinary deposit.
The issuance of the warehouse receipt in the form provided by the law is merely permissive
and directory and not mandatory in the sense that if the requirements are not observed, then
the goods delivered for storage become ordianry deposits.
Terms that cannot be included in a warehouse receipt:
SECTION 3. Form of receipts. What terms may be inserted. A warehouseman may insert in a
receipt issued by him any other terms and conditions provided that such terms and conditions shall
not:
(a) Be contrary to the provisions of this Act.
(b) In any wise impair his obligation to exercise that degree of care in the safe-keeping of the goods
entrusted to him which is reasonably careful man would exercise in regard to similar goods of his own.
*In addition to those limiations, the stipulations in the receipt must not be contrary to law, morals, good
customs, public order, or public policy.
1.
2.
Kinds
Non-negotiable receipt
A receipt in which it is stated that the goods received will be delivered to the depositor or to any other
specified person, is a non-negotiable receipt. (Section 4)
Negotiable receipt
A 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 is a negotiable receipt. (Section 5)
NOTE:
The word negotiable is not used in the sense in which it is applied to bills of exchange or
promissory notes but only as indicating that in the passage of warehouse receipts through the
channels of commerce, the law regards the property which they describe as following them and gives
their regular transfer by indorsement the effect of manual delivery of the thing specified in them.
[Vannett vs. Reilly Hertz Automobile Co., 173 N.W.466]
a.
b.
An offer to surrender the receipt, if negotiable, with such indorsements as would be necessary for
the negotiation of the receipt; and
The offer to surrender the receipt is required for the protection of the warehouseman since
the receipt represents the goods described therein. Furthermore, the warehouseman will be
criminally liable if he delivers the goods without obtaining possession of such receipt. The
warehousemans right to require production of the receipt as a condition precedent to delivery is
subject to waiver, as where he refuses to deliver on other grounds than its production.
A readiness and willingness to sign, when the goods are delivered, an acknowledgment that they
have been delivered, if such signature is requested by the warehouseman.
b. To whom delivery must be made (Section 9)
The person lawfully entitled to the possession of the goods, or his agent;
c.
d.
A person who is either himself entitled to delivery by the terms of a non-negotiable receipt issued
for the goods, or who has written authority from the person so entitled either indorsed upon the
receipt or written upon another paper; or
Oral authority is sufficient
A person in possession of a negotiable receipt by the terms of which the goods are deliverable to
him or order, or to bearer, or which has been indorsed to him or in blank by the person to whom
delivery was promised by the terms of the receipt or by his mediate or immediate indorser.
The warehouseman is liable for misdelivery to a mere possessor of a negotiable receipt by
the terms of which the goods covered by it are deliverable to the order of another, not being an
indorsee thereon.
Misdelivery (Section 10)
What it constitutes?
Where a warehouseman delivers the goods to one who is not in fact lawfully entitled to the
possession of them.
Liability for misdelivery:
For conversion to all having a right of property or possession in the goods if he delivered the
goods otherwise than as authorized by subdivisions (b) and (c) of the preceding section (refer to
Section 9)
Warehouseman shall also be liable though he delivered the goods as authorized by said
subdivisions but prior to such delivery he had either: (a) Been requested, by or on behalf of the
person lawfully entitled to a right of property or possession in the goods, not to make such deliver; or
(b)
Had information that the delivery about to be made was to one not lawfully entitled to the
possession of the goods.
Where goods are covered by a negotiable receipt
When the warehouseman must deliver; Attachment or levy upon the goods (Section 25)
If goods are delivered to a warehouseman by the owner or by a person whose act in conveying
the title to them to a purchaser in good faith for value would bind the owner, and a negotiable receipt
is issued for them, they can not thereafter, while in the possession of the warehouseman, be attached
by garnishment or otherwise, or be levied upon under an execution unless the receipt be first
surrendered to the warehouseman or its negotiation enjoined. The warehouseman shall in no case be
compelled to deliver up the actual possession of the goods until the receipt is surrendered to him or
impounded
by
the
court.
Cancellation of receipt (Section 11)
Except as provided in section thirty-six, where a warehouseman delivers goods for which he
had issued a negotiable receipt, the negotiation of which would transfer the right to the possession of
the goods, and fails to take up and cancel the receipt, he shall be liable to any one who purchases for
value in good faith such receipt, for failure to deliver the goods to him, whether such purchaser
acquired title to the receipt before or after the delivery of the goods by the warehouseman.
The negotiable receipt must be one the negotiation of which would transfer the right to the
possession of the goods. So, the warehouseman who delivers the goods to the real owner without
taking up and cancelling the receipt is not liable to the purchaser for value in good faith of such receipt
from a thief for failure to deliver the goods to him as the thief has not title to the goods.
e.
f.
The alteration of a receipt shall not excuse the warehouseman who issued it from any liability if
such alteration was: (a) Immaterial, (b) Authorized, or (c) Made without fraudulent intent.
g.
h.
i.
of a bond with sufficient sureties to be approved by the court to protect the warehouseman from any
liability or expense, which he or any person injured by such delivery may incur by reason of the
original receipt remaining outstanding. The court may also in its discretion order the payment of the
warehouseman's reasonable costs and counsel fees.
The delivery of the goods under an order of the court as provided in this section, shall not
relieve the warehouseman from liability to a person to whom the negotiable receipt has been or shall
be negotiated for value without notice of the proceedings or of the delivery of the goods.
Where the warehouseman claims ownership over the goods (Section 16)
No title or right to the possession of the goods, on the part of the warehouseman, unless such
title or right is derived directly or indirectly from a transfer made by the depositor at the time of or
subsequent to the deposit for storage, or from the warehouseman's lien, shall excuse the
warehouseman from liability for refusing to deliver the goods according to the terms of the receipt.
Where there are adverse claimants (Section 17 18)
SECTION 17.
Interpleader of adverse claimants. If more than one person claims the title or
possession of the goods, the warehouseman may, either as a defense to an action brought against him
for non-delivery of the goods or as an original suit, whichever is appropriate, require all known
claimants to interplead.
This is for the protection of the warehouseman. In such case, he will be relieved from liability in
delivering the goods to the person to whom the court finds to have a better right.
SECTION 18. Warehouseman has reasonable time to determine validity of claims. If someone other
than the depositor or person claiming under him has a claim to the title or possession of goods, and
the warehouseman has information of such claim, the warehouseman shall be excused from liability for
refusing to deliver the goods, either to the depositor or person claiming under him or to the adverse
claimant until the warehouseman has had a reasonable time to ascertain the validity of the adverse
claim or to bring legal proceedings to compel claimants to interplead.
Take note: the warehouseman is not excused from liability in case he made a mistake.
Liability for non-existence or misdescription of goods (Section 20)
A warehouseman shall be liable to the holder of a receipt for damages caused by the nonexistence of the goods or by the failure of the goods to correspond with the description thereof in the
receipt at the time of its issue. If, however, the goods are described in a receipt merely by a
statement of marks or labels upon them or upon packages containing them or by a statement that the
goods are said to be goods of a certain kind or that the packages containing the goods are said to
contain goods of a certain kind or by words of like purport, such statements, if true, shall not make
liable the warehouseman issuing the receipt, although the goods are not of the kind which the marks
or labels upon them indicate or of the kind they were said to be by the depositor.
SECTION 52. Issue of duplicate receipt not so marked. A warehouse, or any officer, agent, or servant of
a warehouseman who issues or aids in issuing a duplicate or additional negotiable receipt for goods
knowing that a former negotiable receipt for the same goods or any part of them is outstanding and
uncanceled, without plainly placing upon the face thereof the word "duplicate" except in the case of a lost
or destroyed receipt after proceedings are provided for in section fourteen, shall be guilty of a crime, and,
upon conviction, shall be punished for each offense by imprisonment not exceeding five years, or by a fine
not exceeding ten thousand pesos, or by both.
SECTION 53. Issue for warehouseman's goods or receipts which do not state that fact. Where they are
deposited with or held by a warehouseman goods of which he is owner, either solely or jointly or in
common with others, such warehouseman, or any of his officers, agents, or servants who, knowing this
ownership, issues or aids in issuing a negotiable receipt for such goods which does not state such
ownership, shall be guilty of a crime, and, upon conviction, shall be punished for each offense by
imprisonment not exceeding one year, or by a fine not exceeding two thousand pesos, or by both.
SECTION 54. Delivery of goods without obtaining negotiable receipt. A warehouseman, or any officer,
agent, or servant of a warehouseman, who delivers goods out of the possession of such warehouseman,
knowing that a negotiable receipt the negotiation of which would transfer the right to the possession of
such goods is outstanding and uncanceled, without obtaining the possession of such receipt at or before
the time of such delivery, shall, except in the cases provided for in sections fourteen and thirty-six, be
found guilty of a crime, and, upon conviction, shall be punished for each offense by imprisonment not
exceeding one year, or by a fine not exceeding two thousand pesos, or by both.
SECTION 55. Negotiation of receipt for mortgaged goods. Any person who deposits goods to which he
has no title, or upon which there is a lien or mortgage, and who takes for such goods a negotiable receipt
which he afterwards negotiates for value with intent to deceive and without disclosing his want of title or
the existence of the lien or mortgage, shall be guilty of a crime, and, upon conviction, shall be punished for
each offense by imprisonment not exceeding one year, or by a fine not exceeding two thousand pesos, or
by both.
o
o
In Section 50- the warehouseman is made liable if it issues a receipt knowing that the goods for
which such receipt is issued have not been actually received by such warehouseman.
Warehouse receipts are issued for the goods or merchandise stored with the warehouseman. It is
essential that the goods for which the receipt is issued shall be in the warehousemans possession.