CASE 2014-0009: UNION BANK OF THE  PHILIPPINES, Petitioner – versus – DEVELOPMENT BANK OF THE PHILIPPINES, Respondent (G.R. NO. 191555, 20 JANUARY 2014, PERLAS-BERNABE, JJ.) (BRIEF TITLE: UNION BANK VS. DBP)

 

DISPOSITIVE:

 

“WHEREFORE, the petition is DENIED. The Decision dated November 3, 2009 and Resolution dated February 26, 2010 of the Court of Appeals in CA-G.R. SP No. 93833 are hereby AFFIRMED.”

 

SO ORDERED.

 

SUBJECT/DOCTRINES:

 

WHAT IS LEGAL COMPENSATION?

 

LEGAL COMPENSATION IS DEFINED AS A MODE OF EXTINGUISHING OBLIGATIONS WHEREBY TWO PERSONS IN THEIR CAPACITY AS PRINCIPALS ARE MUTUAL DEBTORS AND CREDITORS OF EACH OTHER WITH RESPECT TO EQUALLY LIQUIDATED AND DEMANDABLE OBLIGATIONS TO WHICH NO RETENTION OR CONTROVERSY HAS BEEN TIMELY COMMENCED AND COMMUNICATED BY THIRD PARTIES.
 WHAT ARE THE REQUISITES OF LEGAL COMPENSATION?

 

 (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. (EMPHASES AND UNDERSCORING SUPPLIED)  

 

HOW DOES LEGAL COMPENSATION OPERATES?

 

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.

 

CAN UNION BANK CLAIM LEGAL COMPENSATION: THAT IS –  IT HAS NO MORE OBLIGATION TO RETURN FUNDS TO DBP SINCE DBP IS ALSO OBLIGATED TO PAY UNION BANK CERTAIN LEASE PAYMENTS?

 

NO.

 

DBP’S ASSUMED OBLIGATIONS TO UNION BANK FOR REMITTANCE OF THE LEASE PAYMENTS ARE AS DECIDED IN A PREVIOUS CASE CONTINGENT ON THE PRIOR PAYMENT THEREOF BY FOODMASTERS’ TO DBP. SUCH COURT DECISION HAS ALREADY BECOME FINAL.

 

TO READ THE DECISION, JUST CLICK/DOWNLOAD THE FILE BELOW.

 

SCD-2014-0009-JAN 2014-UNION BANK