MIDSAPAK, ANNA MARIA R.

JD-4 Assignment

CIVIL LAW REVIEW 2 February 16, 2021

I.

a.)

The reason is that, compensation cannot be possible because the satisfaction of the
obligation in civil liability arising from penal offense is imperative. However, the
law allows for the compensation be set up by the victim.

b.)

For example, A owes B P 20,000. On the other hand B was found criminally and
civilly liable in the amount of 20,000 in a case for Estafa filed by A but the case
was still pending before the Supreme Court. Here, compensation is not possible.

II.

a.)

The rationale of the said prohibition of compensation when one of the debts arises
from a commodatum is based on justice. A commodatum is given on the basis
of confidence in the the borrower. It is therefore, a matter of morality, that the
depositary or the borrower should in fact perform his obligation; otherwise, the
trust or confidence of the depositor or lender would be violated.
 b.)

For example, A owes B P 20,000. On the other hand B was found criminally and
civilly liable in the amount of 20,000 in a case for Estafa filed by A but the case
was still pending before the Supreme Court. Here, compensation is not possible.

III.

The following are the explanations to the five requisites in compensation:

1.) The first requisite occurs when the parties are mutual creditors and
debtors of each other. For example, B banks extended loans to Mario, a
depositors of B banks. Then the two parties are mutually Creditors and
debtors of each other.

2.) The second requisite, for legal compensation is that both debts consists
in a sum of money or if things due are consumable, they be of the same
kind or quality. There will be no legal compensation when one debts
involves the payment of money and the other the delivery of a particular
thing. For instance if A is indebted to B, in the amount of P 3,000 and B
has also the obligations to deliver A her piano, compensation is not
possible.

3.) In the third requisite, the debts cannot be demanded if it is not yet due.
However , the parties can agree that compensation can be made even as
to debts which are not due. For example the debt of A to B was due and
demandable today but the debt of B to A has the maturity date on August
21,2021 , then legal compensation is not possible because the debts of B
to A is not yet due and demandable.

4.) The fourth requisite, the debt must be determined and certain. For
instance, A obligations to B in the amount of P 2,000 incurs accrued
interest that runs until full payment of such debts whereas B indebted to
A in the amount of P 2,000 bears no interest , then legal compensation
will not take place as one of the debts are not liquidated.
 5.) Fifth requisite, the debts has no person claiming the same. For Example,
If A is indebted to B in the amount of P 3,000 due on February 28, 2020
and B, is also indebted to A, in the amount of P 3,000 due on March 3,
2020. So, on March 3, 2020 both debts are due and demandable but on
March 2, 2020 the creditor of B, Y, obtains a favorable judgment on suit
filed against him and garnishes the receivables of B from A , then legal
compensation cannot take place as there is third person, Y, claiming it.

IV.

Compensation by operation of law takes place when the two parties are
principal creditors and debtors to each other such that 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

V.

Compensation extinguishes obligation when the parties are mutually

creditors and debtors of each other and the debts are the same , it is due and
demandable and no third person claiming the same. Hence, if X is indebted to Y, in
the amount of P 70,000 and Y is also indebted to be X, in the amount of P 70,000,
and both indebtedness are due without third person claiming the same , the
obligation is extinguished as there is legal compensation, it is inconvenient or
impractical to actual pay the amount of P 70,000 which X is indebted to Y, in
turn Y, has also the obligation to X of the same amount.
 VII.

The difference between compensation and payment are the following:

a.) Compensation take effect by operation of law while, payment is by act

of the parties;
b.) In compensation, the capacity to give or acquired is not essential whereas
in payment it is essential; and
c.) In compensation , as a rule it is partial, while in payment as rule it is
complete and indivisible.

VIII.

a.)

There is only partial extinguishment of the obligation because in joint

obligation the liability of the debtors is only up to their shares in the whole
indebtedness and the creditor can only collect from a joint debtor his share in total
indebtedness.

b.)
For example , X, Y and Z jointly owed A the amount of P 15,000 and
there is a merger of the characters of Z and A , the obligation is extinguished in so
far as the P 5,000 share of Z in the indebtedness is concerned but not as to the
rest. A can still collect P 5,000.00 each from X and Y.
 IX.

Lara’s Gifts & Decors, Inc. Vs. Midtown Industrial Sales, Inc.,
G.R. No. 225433. August 28, 2019

Facts:

Petitioner Lara's Gifts & Decors, Inc. is engaged in the business of

manufacturing, selling, and exporting handicraft products. Respondent Midtown
Industrial Sales, Inc. is engaged in the business of selling industrial and
construction materials, and petitioner is one of respondent's customers. Petitioner
purchased from respondent various industrial and construction materials. The
purchases were on a sixty (60)-day credit term, with the condition that 24%
interest per annum would be charged on all accounts overdue, as stated in the sales
invoices. Petitioner paid for its purchases by issuing several Chinabank postdated
checks in favor of respondent. However, when respondent deposited the
Chinabank checks on their maturity dates, the checks bounced. After repeated
demands from respondent, petitioner replaced the bounced checks with new
postdated Export and Industry Bank checks. However, when respondent deposited
the replacement checks on their maturity dates, the checks were likewise
dishonored for being "Drawn Against Insufficient Funds," and subsequently, for
"Account Closed." Respondent sent a demand letter  which was received by
petitioner, informing petitioner of the bounced checks and demanding that
petitioner settle its accounts. Still petitioner failed to pay, prompting respondent to
file on a Complaint for Sum of Money with Prayer for Attachment against
petitioner.

The trial court held that petitioner failed to prove that the deliveries made by
respondent did not comply with the required specifications. Other than the self-
serving denials of its witnesses, no other evidence was offered by petitioner to
prove that the materials delivered were substandard. On the other hand, the amount
of P1,263,104.22 claimed by respondent against petitioner was supported by the
sales invoices and postdated checks. The trial court also held that the stipulated
24% interest per annum on overdue accounts is not unconscionable.

The Court of Appeals sustained the finding of the trial court.

.

Issue:

WHETHER OR NOT ARTICLES 1192 AND 1283 OF THE CIVIL CODE ARE
APPLICABLE IN THE PRESENT CASE

Held :

No.

Articles 1192 and 1283 of the Civil Code read:

Art 1192 In case both parties have committed a breach of the obligation, the
liability of the first infractor shall be equitably tempered by the courts fit
cannot be determined which of the parties first violated the contract the same
shall be deemed extinguished, and each shall bear his own damages.

Art 1283 If one of the parties to a suit over an obligation has a claim for
damages against the other, the former may set it off by proving his right to
said damages and the amount thereof.

As previously discussed, petitioner failed to substantiate its claims that the

materials delivered were substandard or of poor quality. Thus, petitioner cannot
demand either a tempering of its liability or an offset of damages.