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    087 BPI v. CA Compensation

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    Carl Angelo
    The Supreme Court ruled in favor of BPI, holding that all elements of legal compensation were present in the case. Reyes deposited his grandmother's pension in their joint bank account. After his grandmother died, he transferred the funds to another joint account without informing the US Treasury. When the Treasury discovered the grandmother's death, it requested reimbursement from BPI. Reyes verbally authorized BPI to debit the reimbursement amount from his other joint account. However, he later sued BPI for restitution. The RTC dismissed the case, but the CA reversed this decision. The Supreme Court found that legal compensation applied, as BPI was both a debtor and creditor to Reyes, the debts involved money, were due

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    087 BPI v. CA Compensation

    Uploaded by

    Carl Angelo
    89 views2 pages
    The Supreme Court ruled in favor of BPI, holding that all elements of legal compensation were present in the case. Reyes deposited his grandmother's pension in their joint bank account. After his grandmother died, he transferred the funds to another joint account without informing the US Treasury. When the Treasury discovered the grandmother's death, it requested reimbursement from BPI. Reyes verbally authorized BPI to debit the reimbursement amount from his other joint account. However, he later sued BPI for restitution. The RTC dismissed the case, but the CA reversed this decision. The Supreme Court found that legal compensation applied, as BPI was both a debtor and creditor to Reyes, the debts involved money, were due

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    087-BPI-v.-CA-Compensation

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    The Supreme Court ruled in favor of BPI, holding that all elements of legal compensation were present in the case. Reyes deposited his grandmother's pension in their joint bank account. After his grandmother died, he transferred the funds to another joint account without informing the US Treasury. When the Treasury discovered the grandmother's death, it requested reimbursement from BPI. Reyes verbally authorized BPI to debit the reimbursement amount from his other joint account. However, he later sued BPI for restitution. The RTC dismissed the case, but the CA reversed this decision. The Supreme Court found that legal compensation applied, as BPI was both a debtor and creditor to Reyes, the debts involved money, were due

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    89 views2 pages

    087 BPI v. CA Compensation

    Uploaded by

    Carl Angelo
    The Supreme Court ruled in favor of BPI, holding that all elements of legal compensation were present in the case. Reyes deposited his grandmother's pension in their joint bank account. After his grandmother died, he transferred the funds to another joint account without informing the US Treasury. When the Treasury discovered the grandmother's death, it requested reimbursement from BPI. Reyes verbally authorized BPI to debit the reimbursement amount from his other joint account. However, he later sued BPI for restitution. The RTC dismissed the case, but the CA reversed this decision. The Supreme Court found that legal compensation applied, as BPI was both a debtor and creditor to Reyes, the debts involved money, were due

    Copyright:

    © All Rights Reserved
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    of 2

    UP Law BGC Eve 2024 BPI v.

    CA
    Obligations and Contracts Art. 1279, 1290, NCC 1996 Puno
    SUMMARY DOCTRINE
    Respondent Edvin Reyes deposited his late Art. 1279 Requisites of Legal Compensation:
    grandmother’s pension in their joint account. He then 1) That each one of the obligors be bound
    closed this account and transferred the funds to his other principally, and that he be at the same time a
    joint account with his wife. Upon the US Dept. of principal creditor of the other;
    Treasury’s discovery of his grandmother’s death, the 2) That both debts consist in a sum of money, or if
    petitioner bank was ordered to reimburse the funds. the things due are consumable, they be of the
    Reyes verbally authorized BPI to debit the amount from same kind, and also of the same quality if the
    his other joint account, but later filed a complaint against latter has been stated;
    BPI for restitution. RTC dismissed the case for lack of 3) That the two debts be due;
    cause of action, but the CA reversed this decision. The SC 4) That they be liquidated and demandable;
    ruled in favor of BPI, holding that all elements of legal 5) That over neither of them there be any retention
    compensation is present in the case. 6) That each one of or controversy, commenced by third persons and
    the obligors be bound principally, and that he be at the communicated in due time to the debtor.
    same time a principal creditor of the other;
    7) 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;
    8) That the two debts be due;
    9) That they be liquidated and demandable;
    10) That over neither of them there be any retention
    or controversy, commenced by third persons and
    communicated in due time to the debtor.

    FACTS

     Respondent Edvin Reyes open 2 bank accounts at BPI: a joint “AND/OR” account with his wife and a joint
    “AND/OR” account with his grandmother. In the letter account, he regularly deposited the US Treasury Warrants
    payable to his grandmother as her monthly pension.
     Reyes’s grandmother died without the knowledge of the US Treasury Department. She was still sent a warrant which
    respondent Reyes in his joint account with his grandmother. 2 months later, Reyes closed his account with his
    grandmother and transferred the funds to his joint account with his wife.
     The US Treasury Warrant was dishonored as it was discovered that respondent’s grandmother died 3 days prior to its
    issuance. The US Dept. of Treasury requested petitioner bank to refund.
     BPI called the attention of Reyes who assured that he would drop by and look into the matter. Reyes also verbally
    authorized BPI to debit from his other joint account (that his of his wife’s) the amount stated in the dishonored U.S.
    Treasury Warrant.
     Surprisingly, private respondent demanded from petitioner bank restitution of the debited amount. He claimed that
    because of the debit, he failed to withdraw his money when he needed them and filed a suit for Damages in the RTC.
     RTC dismissed the complaint for lack of cause of action. This was reversed by the CA.
     Petitioner bank contends that the CA gravely erred in not holding that BPI has legal right to apply the deposit of
    respondent Reyes to his outstanding obligation to petitioner bank brought about by the return of the US Treasury
    Warrant he earlier deposited under the principle of “legal compensation”. (see case for other issues)

    RATIO

    W/N the CA erred when it failed to rule that legal compensation is proper?
    Yes. Compensation shall take place when two persons, in their own right, are creditors and debtors of each other. Art.
    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. Since this compensation takes place ipso jure, its effects arise on the very day on which all its
    requisites concur. When used as a defense, it retroacts to the date when its requisites are fulfilled.

    Art. 1279 states that in order that compensation may be proper, it is necessary:
    6) That each one of the obligors be bound principally, and that he be at the same time a principal creditor of the
    other;
    7) 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;
    8) That the two debts be due;
    9) That they be liquidated and demandable;
    10) That over neither of them there be any retention or controversy, commenced by third persons and communicated
    in due time to the debtor.

    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. Petitioner bank stands as a debtor of the private respondent, a depositor. At the same time, said
    bank is the creditor of the private respondent 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.

    FALLO

    IN VIEW HEREOF, the Decision of respondent Court of Appeals in CA-G.R. CV No. 41543 dated August 16, 1994 is
    ANNULLED and SET ASIDE and the Decision of the trial court in Civil Case No. Q-91-8451 dated January 20, 1993 is
    REINSTATED. Costs against private respondent. SO ORDERED.

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