Deposit v. Mutuum

Below are three distinctions between a contract of deposit and a contract of mutuum. It must be noted that mutuum is a kind of loan while deposit is a special kind of lease of service.

[1] PURPOSE. In deposit, the principal purpose is safekeeping or mere custody, while in mutuum, the consumption of the subject matter.

In deposit, the depositor delivers to the depositary a thing and the latter has to keep it safe and return upon the former's demand. The thing cannot be consumed or used, whether it be personal or real property. Even if the thing bailed is perishable, there can be no reason for the bailee to consume or use it.

In mutuum, the creditor delivers to the debtor a thing which is money or any other consumable thing. The debtor has no obligation to give the same thing as long as a thing of the equal value or nature is returned. The credit knows that the debtor will use the thing (especially money) and this is actually the motive of the debtor in entering into the contract of loan.

If the thing delivered is perishable and does perish (rot or go beyond its shelf life), the depositary has to give it back to the depositor in such a state and cannot be blamed for it (unless there is a stipulation to prevent the same from happening). In mutuum, if the debtor fails, forgets, neglects or intends not to consume or use the thing loaned and it goes bad, he cannot return the same rotten thing; he must give the creditor a thing of equal value or nature as of the time of delivery.

Let us take, for example, a deposit in the baggage counter of a mall. Even if the thing deposited goes beyond its shelf life, the mall cannot be blamed for the mall-goer's failure to demand return before such unfortunate thing happens. Likewise, as a general rule, if a person (debtor) borrows 10,000 pesos from another (creditor), payable in 25 years, and even if the value of each installment shrinks due to inflation, the debtor cannot be made to pay more than what he has received from the creditor (at the time of delivery).

[2] RETURN. In deposit, the depositor can demand the return of the subject matter at will, while in mutuum, the lender must wait until the expiration of the period granted to the debtor (if such period is given. There are instances when no such period is given or, instead, a condition).

The rule is that the depositor can demand the return of the thing at will and this period is always for the benefit of the depositor. In the general law on obligations, a period is presumed to be for the benefit of both parties but this is the case in deposit.

The purpose of a deposit contract is for the depositary to serve the depositor by keeping the latter's thing and returning the same whenever demanded. Hence, even if there is a period in a deposit contract, this does not mean that the depositary can simply throw away the thing deposited after the expiry thereof. It is humbly submitted that his duties as a depositary subsist until the thing is returned. His remedy for the delay would be to charge more fees (if he is engaged in the business of deposit or if there is a stipulation for compensation) against the depositor.
In a contract of mutuum (simple loan), it is not uncommon that payment has a period. In fact, in most such contracts, payment is on installment (done partially from time to time, e.g., monthly). This, however, does not mean that all mutuum contracts are with a period. An example of this would be a loan evidenced by a promissory note that is payable on demand.

It is important to observe that mutuum in case of banks is payable on demand unless there is a stipulation to the contrary.

[3] NATURE OF THING. In deposit, both movable and immovable property may be the object, while in mutuum, only money and any other fungible thing.

Note that in mutuum, the purpose is consumption. Therefore, if the purpose is not consumption but mere exhibition, regardless of the nature of the thing, there may be a contract of commodatum.

CASE #1: The Supreme Court has ruled in a line of cases that a bank deposit is in the nature of a simple loan or mutuum. More succinctly, in Citibank, N.A. (Formerly First National City Bank) v. Sabeniano, the Court said that a money market placement is a simple loan or mutuum. (G.R. No. 133179. March 27, 2008)

CASE #2: There is no doubt that BPI-FB owns the deposited monies in the accounts of Franco, but not as a legal consequence of its unauthorized transfer of FMIC’s deposits to Tevesteco’s account. BPI-FB conveniently forgets that the deposit of money in banks is governed by the Civil Code provisions on simple loan or mutuum. As there is a debtor-creditor relationship between a bank and its depositor, BPI-FB ultimately acquired ownership of Franco’s deposits, but such ownership is coupled with a corresponding obligation to pay him an equal amount on demand. Although BPI-FB owns the deposits in Franco’s accounts, it cannot prevent him from demanding payment of BPI-FB’s obligation by drawing checks against his current account, or asking for the release of the funds in his savings account. Thus, when Franco issued checks drawn against his current account, he had every right as creditor to expect that those checks would be honored by BPI-FB as debtor. (G.R. No. 123498. November 23, 2007)

CASE #3: Bank deposits, which are in the nature of a simple loan or mutuum, must be paid upon demand by the depositor. (G.R. No. 104612. May 10 1994)

The discussion above is based on De Leon and De Leon, Jr.'s (2010) book on credit transactions. SOURCE: De Leon and De Leon, Jr. (2010). Comments and Cases on CREDIT TRANSACTIONS. 11th edition. ISBN 978-971-23-5535-6. Rex Books Store.