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Assignment in Civil Law Review 2 Feb. 16, 2021

1) The document discusses the requisites for compensation under Philippine civil law, including that the obligations must be mutually owed between principal obligors/creditors, consist of sums of money or the same kinds of things, be due and demandable, and not be subject to any retention or controversy by third parties. 2) Examples are provided to illustrate each requisite, such as two parties owing each other the same amount of money. 3) The key differences between compensation and payment are explained, such as compensation occurring by operation of law rather than requiring action.

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Lielet Matutino
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106 views19 pages

Assignment in Civil Law Review 2 Feb. 16, 2021

1) The document discusses the requisites for compensation under Philippine civil law, including that the obligations must be mutually owed between principal obligors/creditors, consist of sums of money or the same kinds of things, be due and demandable, and not be subject to any retention or controversy by third parties. 2) Examples are provided to illustrate each requisite, such as two parties owing each other the same amount of money. 3) The key differences between compensation and payment are explained, such as compensation occurring by operation of law rather than requiring action.

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Lielet Matutino
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© © All Rights Reserved
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LIELET B.

MATUTINO FEBRUARY 16, 2021


CIVIL LAW REVIEW 2
ASSIGNMENT
DEAN GENEVIEVE MARIE DOLORES B. PAULINO

a. The reason behind why congress included this in the New Civil Code
is that if one of the debts consists in civil liability arising from penal
offense, compensation would be improper and inadvisable because the
satisfaction of such obligation is imperative.

Furthermore, the offender or the person with civil liability arising


from crime cannot set up the compensation but the offended party who is
entitled to indemnity can set up his claim in compensation of his debt.

b. As an illustrative example, Princess owes Quennie P200,000.00.


Quennie stole the bracelet of Princess worth P200,000.00. Quennie
cannot set up compensation because of her civil liability arising from
penal offense. However, Princess the offended party can claim the right
of compensation.

II

a. The rationale behind the law which states the compensation shall not
be proper when one of the debts arises from the obligations of a bailee in
commodatum is that to prevent breach of trust and confidence.

b. As an illustrative example, Princess owes Quennie P200,000.00.


Quennie stole the bracelet of Princess worth P200,000.00. Quennie
cannot set up compensation because of her civil liability arising from
penal offense. However, Princess the offended party can claim the right
of compensation.
III

1. That each one of the obligors be bound principally, and that he be at the
same time a principal creditor of the other;

An example for this requisite is Leah, the debtor owes her creditor, Myra
P500,000.00 but Myra owes Riz who is Leah’s guarantor P 500,000.00. Leah
cannot claim compensation here because Riz is not a principal creditor she is the
debtor’s guarantor. Hence for this requisite to apply it must be that Leah who is an
obligor that must be bound principally must at the same time a principal creditor of
Myra.

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;

An illustrative example for this requisite is Kim owes Xian a laptop which
is a determinate thing. Xian also owes Kim a laptop. There can be compensation
here because the things due are of the same kind because both are determinate
things and of the same quality.

3. That the two debts be due;

Mrs. X owes Mr. Y P 50,000 payable on February 16, 2021. Mr. Y owes
Mrs. X the same amount of P50,000 payable on March 16, 2021. Here, there can
be no compensation because one debt is not yet due.

4. That they be liquidated and demandable;

A private common carrier transported gasoline for the government for P1M
The Auditor General wanted to deduct from said amount the damages the carrier
caused to the cargo but said damages were still undetermined and unliquidated.
Here there can be no compensation. Unliquidated damages cannot be said to be
debts owing the government.

5. That over neither of them there be any retention or controversy, commenced


by third persons and communicated in due time to the debtor.

An illustrative example for this requisite is Jeza owes Jelly P2M, Jelly also
owes Jeza P2M, but Jeza’s credit of P2M has been garnished by Tony who claims
to be an unpaid creditor of Jeza. Jelly has been duly notified of the controversy.
There can be no compensation here.

IV

Article 1286 provides that compensation takes place by operation of law, this
means that compensation of debts must not have been prohibited by law like debts
consisting in civil liability arising from penal offense. Hence, in order that
compensation may be proper, the requisites enumerated under Article 1279 must
apply. These requisites are the following:

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.

V
The compensation is a mode of extinguishment of obligation wherein there is
simultaneous balancing or weighing of two obligations of two persons who are
reciprocally debtors and creditors of each other. It extinguishes to the extent in
which the amount of one is covered by that of the other.
VII

The difference between compensation from payment is that payment must


be complete and indivisible as a rule, in compensation, partial extinguishment is
always permitted. Another difference is that while payment involves action or
delivery, compensation takes place by operation of law.

VIII

a. The effect of confusion as to Joint obligations is that confusion does not


extinguish a joint obligation except as regards the share corresponding to the
creditor or debtor in whom the two characters concur. In joint obligation,
the debts are distinct and separate from each other.

b. Piolo and Sam jointly owe Jake the amount of P2M. If Jake assigns the
entire credit to Piolo, Piolo’s share is extinguished, but Sam’s share
remains. In other words, Sam would still owe Piolo the sum of P1M. This is
because in joint obligation, the debtor is only responsible for his
proportionate share of the credit.

IX

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

FACTS:

Lara’s Gifts and Decors, Inc. is engaged in the business of


manufacturing, selling, and exporting handicraft products. On the other
hand, Midtown Industrial Sales, Inc. is engaged in the business of selling
industrial and construction materials, and Petitioner is one of
respondent’s customers. Respondents alleged that from January to
December 2007, petitioner purchased from respondent various industrial
and construction materials. The purchases were on a 60 day credit term,
with the condition that 24% interest per annum would be charged on all
accounts overdue. Petitioner issued several postdated checks in favor of
the respondent however, when respondent deposited the checks bounced.
Petitioner replaced the bounced checks however, the replacement checks
were drawn against insufficient funds and subsequently for account
closed. Respondent sent a demand letter which was for petitioner to settle
its accounts. Still petitioner failed to pay, prompting the respondent to
file against petitioner a complaint for sum of money with prayer for
attachment.

ISSUE:

Whether or not the petitioner is entitled to the remedies under Articles


1191 and 1283 of the Civil Code?

HELD:

No. Article 1192 states that in case both parties have committed a
breach of the obligation, the liability of the first infractor shall be
equitably tempered by the courts if it cannot be determined which of the
parties first violated the contract and the same shall be deemed
extinguished and each shall bear his own damages.

Article 1283 states that if one of the parties to 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,

Other than its bare allegation that the materials delivered were
substandard and of poor quality, Petitioner failed to prove or substantiate
its claims. As found by the trial court, none of petitioners witnesses was
able to present proof that the materials delivered were substandard or
poor quality. Thus, petitioner cannot demand either a tempering of its
liability or an offset of damages.

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