Bank of the Philippine Islands v.
Reyes
255 SCRA 571 (1996)
COMPENSATION
“Art 1290 - Compensation takes effect by operation of law, and extinguishes both
debts to the concurrent amount, even though the creditors and debtors are not
aware of the compensation.”
FACTS:
Edvin Reyes maintained two joint “and/or” accounts in BPI Cubao branch: one with
his wife and another with his grandmother. He normally deposits US Treasury warrants
payable to the order of his grandmother (as a monthly pension) in the latter joint “and/or”
account.
Emetria Fernandez, the grandmother died on December 28, 1989 without the
knowledge of the US Treasury. A US Treasury Warrant dated January 1, 1990 was still
sent to her in the amount of $377 (P10,556). Reyes deposited the check in the joint
account with the grandmother. The US Veterans Administration Office in Manila
conditionally cleared the check and sent the same to the US for further clearing.
On March 1990 (2 months after) Reyes closed the joint account with his
grandmother and transferred the funds to the joint account with his wife.
On January 1991 (almost a year later), the last US Treasury Warrant was
dishonored as it was discovered that it was issued 3 days after the (pensioned)
grandmother died.
The US treasury requested BPI for a refund. A month later, Reyes received an
urgent telegram requesting him to contact the bank, and when he did, he was informed
that the treasury check was the subject of a claim by Citibank, correspondent of BPI. He
assured them the he would drop by the bank. He verbally authorized them to debit from
his joint account the amount in the warrant.
Reyes then went to the bank with his lawyer and “surprisingly, demanded from BPI
restitution of the debited amount.” He claimed that because of the debit, he failed to
withdraw his money when he needed them.
He filed suit for damages. RTC dismissed for lack of cause of action, but CA
reversed and ordered BPI to credit the amount to Reyes’ account.
ISSUES:
W/N legal compensation was proper in this case, which was alleged by the bank in
the appeal.
HELD:
Yes. The elements of legal compensation are all present in the case at bar.
The obligors bound principally are at the same time creditors of each other. BPI stands as
a debtor of Reyes, a depositor. At the same time, said bank is the creditor of Reyes with
respect to the dishonored U.S. Treasury Warrant which the latter illegally transferred to
his joint account. The debts involved consist of a sum of money. They are due, liquidated,
and demandable. They are not claimed by a third person.
Article 1290 of the Civil Code provides that “when all the requisites mentioned in
Article 1279 are present, compensation takes effect by operation of law, and extinguishes
both debts to the concurrent amount, even though the creditors and debtors are not
aware of the compensation.” Legal compensation operates even against the will of the
interested parties and even without the consent of them.
Article 1279 states that in order that compensation may be proper, it is
necessary:
(1) That each one of the obligors be bound principally, and that he be at
the same time a principal creditor of the other;
(2) That both debts consist in a sum of money, or if the things due are
consumable, they be of the same kind, and also of the same quality if the
latter has been stated;
(3) That the two debts be due;
(4) That they be liquidated and demandable;
(5) That over neither of them there be any retention or controversy,
commenced by third persons and communicated in due time to the debtor.