I.

Discuss Deposit under the Civil Law -> It is a Real Contract (only perfected by the delivery of the subject matter). Gratuitous when the contract is unilateral (only the depositary has an obligation) and for Compensation when the contract is bilateral (obligation on both the depositary and depositor) -> Safekeeping is the principal purpose of Deposit. If it be only an accessory obligation then it is not considered a Deposit. Some other contracts exist like Lease, Commodatum or Agency. -> A deposit may either be Judicially or Extrajudicially. Judicially takes place when the attachment or Seizure of property is by virtue of a court order while Extrajudically happens when the delivery is constituted based on the will of the depositor or by two or more persons each believing to be entitled to the thing deposited. -> The subject matter of a Deposit is available only for Movable Things or Personal Property. Because the possibility that a thing may disappear, be stolen or may be lost is not present in a Real Property. -> The Form of a contract of deposit may either be Orally or in Writing. It is based on the principle that Contracts shall be obligatory in whatever form they may have been entered into provided all the essential requisites for their validity are present. (Art. 1356) -> Extrajudicial Deposit is either Voluntary or Necessary. Voluntary Deposit happens when the delivery is made by the will of the depositor. Necessary Deposit is effected when it is made: 1. In compliance with an legal obligation 2. On the occasion of any calamity, such as fire, storm, pillage, shipwreck or other similar events. *But the main distinction between the two is that in Voluntary Deposit the depositor has complete freedom in choosing the depositary, whereas in Necessary Deposit there is a lack of free choice on the part of the depositor. (11 Manresa 674) -> The Degree of Care: on the part of the Depositary is that he is expected to exercise over the thing deposited the same diligence as he would exercise over his property for two reasons:

1. An essential requisite of the judicial relations which involves the depositor s confidence in the Depositarys good faith and trustworthiness. 2. The presumption of the depositor, in choosing the depositary, took into account the diligence which the depositary is accustomed with respect to his own property.

II. Discuss Special Law on Deposits (Warehouse Receipts Law) -> The Warehouse Receipts Law known as Act. 2137 came into effect on

February 5, 1912. It covers all warehouses whether public or private, bonded or not. It has been held applicable to the following: 1. Warehousemen licensed under Act. 3893 or the (Bonded Warehouse Act) 2. Those engaged in the business of receiving commodities for storage -> Purposes of the Warehouse Receipts Law: a. To regulate the status, rights, and liabilities of the parties in a warehousing contract b. To protect those who, in good faith and for value, acquire negotiable warehouse receipts by negotiation c. To render the title to and right to possession of, property stored in warehouses more easily convertible; d. To facilitate the use of warehouse receipts as documents of title and e. In order to accomplish these, to place a much greater responsibility on the warehouseman. -> Who is a warehouseman? It is a person lawfully engaged in the storing of goods for profit. -> What is a warehouse? It means the building or place where goods are deposited and stored for profit. -> Who may issue warehouse receipts? GR: Only a warehouseman may issue such receipts XPN: But, the following may: 1. A duly authorized officer 2. An agent of a warehouseman

-> Nature of a warehouse receipt. a. It is a written acknowledgment by a warehouseman that he has received and holds certain goods therein described in store for the person to whom it is issued. b. It is a simple written contract between the owner of the goods and the warehouseman to pay the compensation for that service. c. It is a bilateral contract. The goods are in the hands of a warehouseman and a symbolic representation of the property itself. d. It is not a negotiable instrument.

-> Essential terms needed in the Form of warehouse receipts must embody the following though they may be in written or printed from. a. Location of the warehouse b. Date of Issue of the Receipt c. Consecutive Number of the Receipt d. Statement whether goods received will be delivered to bearer or to a specified person or his order. e. Rate of Storage charges f. Description of the Goods g. Signature of Warehouseman h. If receipt is issued for goods of which the warehouseman is owner, either solely or jointly or in common with others, the fact of such ownership i. Statement of the amount of advances made and liabilities incurred for which the warehouseman claims as lien. * A warehouseman shall be liable to any person injured thereby for all damages caused by the omission from a negotiable receipt of any of the terms herein required. Reasons: A. For the benefit of the holders of the warehouse receipts to enable them to determine where the goods are deposited especially when the warehouseman has more than one warehouse in different places B. It indicates a prima facie the date when the contract of deposit is perfected and when the storage charges shall begin to run against the depositor.

C. Determines the persons who shall prima facie be entitled lawfully to the possession of the goods deposited. D. States the consideration for the contract from the view of the warehouseman. The law presumes that the depositor shall pay the customary or reasonable compensation for the services of the warehouseman. E. For identification so that the identical property delivered to the warehouseman may be delivered back by him upon the return of the warehouse receipt. A warehouseman cannot be supposed to know the contents of each package or box of merchandise which was delivered to him, and so packed as to cover and conceal the real nature of the goods delivered. G. It is the best evidence of the fact that the warehouseman received the goods described in the receipt and has bound himself to assume all obligations in connection therewith. H. Purpose is to prevent abuses which in the past had arisen from warehousemen issuing receipts on the goods. I. Purpose is to preserve the lien of the warehouseman over the goods stored or the proceeds thereof in his hands.

A. Obligations of the parties; For the warehouseman he is obligated to DELIVER THE GOODS upon a demand made either by the holder of the receipt or by the depositor. Moreover, he is principally obligated to: a. Take care of the goods entrusted to his safekeeping b. To deliver them to the holder of the receipt or the depositors provided the following conditions are met (See below)

For the holder of the receipt or the depositor they are obligated to: a. Make an offer to satisfy the warehousemans lien b. Offer to surrender the receipt, if negotiable with such indorsements as would be necessary for negotiation of the receipt c. A readiness and willingness to sign when the goods are delivered d. An acknowledgment that they have been delivered, and if the warehouseman

requested their signature.

III. Discuss and Distinguish Guaranty from Suretyship. Provide their characteristics, nature and extent, legal effects and how extinguished. -> Guaranty is a contract between the guarantor and the creditor. In its broad sense, it includes pledge and mortgage. Purpose of which may be accomplished not only through securing the fulfillment of an obligation contracted by the principal debtor but also by furnishing to the creditor for his security, property with authority to collect the debt from the proceeds of the same in case of default. Suretyship is defined as a contractual relation resulting from an agreement whereby one person, the surety,engages to be answerable to a third person for the debt, default, or miscarriage of another known as the principal.

Characteristics GUARANTY

Nature and Legal Effects Extent Accessory >If the guaranty Guarantor Contract is definite: only Liability is secondarily Subsidiary limited in liable and whole or in part All legal Conditional to the principal remedies debt. against Unilateral debtor are > If guaranty is to be Guarantor indefinite: exhausted must be a Liability first person extends not distinct only to the (Debtor and from the principal Guarantor) debtor obligation but Guarantor also to all its who pays accessories. the debtor must be indemnifie d by the former: a. Total amount of debt b. Legal Interest

Extinguishment Same time as that of the debtor and for the same causes as all other obligations. When the principal obligation is extinguished so then is guaranty Payment or Performance Loss of the thing due Condonatio n of Remission of Debt Confusion or Merger of the Rights of the creditor Compensat ion Novation Annulment

c. Expenses incurred after having been notified that the payment had been demanded of him. (Co-guarantors) May demand of each of the others the share which is proportiona lly owing him If insolvent, the share of the insolvent be borne by the others including the payer in the same proportion SURETYSHIP Assumes liability as a regular party Charged as an original promisor Liability is contractual and accessory but direct Liability is limited to the terms of the contract Liability arises only if principal debtor is

Recission Fulfillment of a resolutory condition Prescriptio n Release of the guarantor by the creditor

Held to know every default of his principal Will not be

Suretyship is extinguished if there is material alteration of the principal obligation. For example an extension granted to the debtor by the credit or without the consent of the surety extinguishes the surety.

discharged either by the mere indulgence of the creditor or by want of notice of the default of the principal

held liable Surety is not entitled to exhaustion

IV. Discuss and Distinguish Pledge and Mortgage. Provide their characteristics, nature and extent, legal effects and how extinguished. -> Pledge is a contract by which the debtor delivers to the creditor or a third person a MOVABLE document evidencing incorporeal rights. Purpose of which is to secure the fulfillment of a principal obligation with the understanding that when the obligation is fulfilled, the thing delivered shall be returned with all its fruits and accessories. Mortgage is a contract whereby the debtor secures to the creditor the fulfillment of a principal obligation subjecting to such security an IMMOVABLE property which obligation shall be satisfied with the proceeds of the sale of said property or rights in case the said obligation is not complied with at the time stipulated. Characteristics PLEDGE Real Contract Accessory Contract Unilateral Contract Subsidiary Contract Nature and Extent Constituted on Movables Property is to be delivered Not valid against third persons Constit uted on Immovables Legal Effects Extinguishment Return of the thing pledged Renunciati on or Abandonm ent Sale of the thing pledged

MORTGAGE Real Contract Accesssory Creates a real right a. If the

Contract Subsidiary Contract Unilateral Contract

and extends to its accessions, improvements, growing fruits, rents or income as well as proceeds of insurance Deliver y is not necessary Future property cannot be subjected to mortgage

mortgagor sells the encumbered property, the property remains subject to the fulfillment of the principal obligation secured by it b. The mortgagee has a right to rely in good faith on what appears on the certificate of title of the mortgagor of the property given as security and in the absence of anything to excite suspicion, he is under no obligation to look beyond the certificate c. Until the action for expropriation has been completed, ownership over the property remains with the registered owner d. Banking

institution must exercise due diligence before entering contract of mortgage e. If a person is the first mortgagee over a property which was sold in an auction by the second mortgagee, the only right left to him is to collect his mortgage credit from the purchaser thereof during the sale conducted f. In a suit to nullify a certificate of title, the mortgagee is an indispensable party. Creates merely an encumbran ce