We are using hibernate with weblogic. The JDBC connection pool is setup using weblogic's configuration. Every once in a while, a hibernate query gets chosen as deadlock victim by sybase and does not release the resources(page locks) it had. It does not happen every time it gets chosen as victim.
Does this have something to do with hibernate or it is purely a sybase issue.

I am also closing out the connection in a finally block
finally {
if (session != null)
session.close();
session = null;
}

You need to provide detailed information, to get help from community.

Deadlock is a database concurrency contol limitation, you must access pages in the same order in all transactions to avoid deadlock. Try FlushMode.ALWAYS on READ_COMMITED isolation level it can help to avoid some deadlocks, but it can happen anyway. Deadlocks are almost random with page level locking (you can try to create table with page size = row size as workaround too). Retry transactions if possible or serialize transactions yourself (using table level locking) if you are sure it is a database fault and transactional code guidnes doe's not help (it must be documented, but probably it sounds like "keep transactions as short as possible", so commit as soon as possible too).