Banco De Oro Unibank Inc. v. Ypil et. al GR No. 212024 12 October 2020 Hernando, J.

Banco De Oro Unibank Inc. v. Ypil et. al

GR No. 212024

12 October 2020

Hernando, J.;

Second Division

 

Nature of the Action: This is a Petition for Review on Certiorari challenging the Decision and the Resolution of the Court of Appeals (CA) affirming the Orders of the Regional Trial Court (RTC) which directed the petitioner, BDO Unibank, Inc. (Bank), to guarantee the availability of the garnished amount of P300,000.00 from the account of respondent Cebu Sureway Trading Corporation (CSTC), represented by its Executive Vice--President, respondent Leopoldo Kho (Kho).

Facts:

Leopoldo Kho, representing Cebu Sureway Trading Corporation (CSTC), offered a proposal to Edgardo Ypil. Then it was able to solicit an amount of P300,000.00. But he opted to refund the same. Despite of repeated demands, oral and written, CTSC and/or Kho did not answer.

Consequently, Ypil filed a complaint for specific performance with attachment before RTC. It granted the prayer of attachment. Then the sheriff served the notice of garnishment from CSTC and/or Kho's accounts but the bank informed the sheriff that they have no garnishable funds.

However, RTC found out that the Bank already debited from CSTC's savings and current accounts some amounts to offset its outstanding obligation under a loan agreement with the Bank. it asserted that that since the Bank and CSTC were creditors and debtors of each other, legal compensation already took effect.

Nevertheless, the RTC ordered the Bank to make available the garnished deposits of CTSC and Kho. The bank moved for reconsideration but was denied then it filed a petition for certiorari but the same denied also.

Hence, this petition.

Issue:

Whether legal compensation took place ipso jure as between the Bank and CSTC defaulted in its obligation to the Bank.

Ruling:

The petition is unmeritorious.

It is settled that "[c]ompensation is a mode of extinguishing to the concurrent amount the debts of persons who in their own right are creditors and debtors of each other.66 The object of compensation is the prevention of unnecessary suits and payments thru the mutual extinction by operation of law of concurring debts." The said mode of payment is encapsulated in Article 1279 of the Civil Code, viz.:

ARTICLE 1279. 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.

In relation to this, Article 1290 of the Civil Code states that "[w]hen 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."

In any case, guided by the conditions stated in Article 1279 of the Civil Code and to supplement the findings of the CA, We reiterate that there is no dispute that the Bank and CSTC are both creditors and debtors of each other. Moreover, the debts consist in or involve a sum of money, particularly CSTC's loan and its deposit with the Bank. Notably, the Bank argues that CSTC's debts became due given that it defaulted in its loan obligations even without need of demand pursuant to the Promissory Note. Neither CSTC nor Kho categorically refuted that CSTC indeed defaulted.

However, similar to the CA's ruling, the flaw in the Bank's argument is its failure to specify the date when CSTC actually defaulted in its obligation or particularly pinpoint which installment it failed to pay. The Bank merely revealed that CSTC owed it the amount of P3,823,000.00 without presenting a detailed computation or proof thereof except for the Promissory Note. Although CSTC and Kho did not question the computation made by the Bank, the fact remains that the actual date of default was not disclosed and verified with corroborating preponderant proof. The Bank only stated that CSTC has not been paying its monthly obligations prior to February 4, 2004 which is not particular enough, even if the Promissory Note indicates that CSTC's obligation will immediately become due after default and without need of notice.

Thus, CSTC's indebtedness cannot be considered as due and liquidated. It should be emphasized that "[a] claim is liquidated when the amount and time of payment is fixed. If acknowledged by the debtor, although not in writing, the claim must be treated as liquidated." In this case, the time of default and the amount due were not specific and particular. Without this information, a simple arithmetic computation cannot possibly be done without risking errors especially with regard to the application of interest and penalties. Similarly, despite CSTC's failure to contest the Bank's computation, its debt still cannot be considered as liquidated. Further confirmation is necessary in order to treat CSTC's debt as due, demandable and liquidated, which the Bank unfortunately did not bother to elaborate on.