7/21/2019 Digest - Javellana v Lim - GR 4015 (24 August 1908)

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Credit Transactions, First Semestre (AY 2014 2015), Saturday (7PM 9PM), Atty. Crisostomo A. UribeBentez, Montilla, San Andres, Sia, Uyson

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

Facts:

(1) On 26 May 1897, Jose and others executed a document in favor of Angel, wherein it

stated that they had received a sum of PhP 2,600.86 as a deposit without interestfrom the latter. The document also stipulated that they would return the same amountjointly and severally on 20 January 1898.

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

Issue:

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

Ruling:

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

Ratio:

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

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

posit and becomes a loan or bailment.

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