International Corporate Bank, Inc. vs IAC et.al., G.R. No. L-69560 June 30, 1988
Subject: Obligations and Contracts
FACTS
In 1980, respondent (Natividad Fajardo) applied for P50M
loan from petitioner ICBI’s predecessor-in-interest (Atrium Capital Corp.). To
secure loan, Fajardo mortgaged her real properties in Quiapo, and Bulacan. Of
this loan, only the amount of P20M was approved for release by Atrium Capital
(now ICBI). The same amount was applied to pay her other obligations to Atrium
Capital, bank fees, etc, and because of this Fajardo claims she did not receive
anything from the loan. Fajardo also
made a money market investment with Atrium Capital for P1,046,253.77.
Meanwhile, Fajardo failed to pay her mortgaged indebtedness.
Due to this, Atrium Capital refused to pay the proceeds of
the money market placement and applied the amount to the deficiency in the
proceeds of the auction sale of Fajardo’s mortgaged properties. Fajardo filed
complaint against ICBI for annulment of sale of the mortgaged properties +
release to her the balance of her loan + recovery of P1,062,063.83 representing
the proceeds of her money market investment. ICBI said that after foreclosing
the mortgage, there is still due from Fajardo the amount of P6.81M against
which it has the right to compensate Fajardo's money market claim of
P1,062,063.83.
Fajardo contended that the mortgage is not yet due and
demandable, and accordingly the foreclosure was illegal; that she is entitled
to the proceeds of her money market placement as it has long become due and
payable. In the same case, Fajardo filed motion to order ICBI to release in her
favor sum of P1,062,063.83, representing the proceeds of the money market
placement. The Trial Court ruled in favour of Fajardo and ordered ICBI to
deliver to Fajardo the amount of P1,062,063.83, conditioned upon the Fajardo
filing a bond amount to P1,062,063.83 to answer for all damages which ICBI may
suffer in event that Court should finally decide that Fajardo was not entitled
to said amount. The CA ruled in favour of Fajardo; dismissed petition for
certiorari filed by ICBI. The ICBI filed petition for certiorari with SC.
ISSUE
Whether or not there can be legal compensation in the case.
RULING
No.
Article 1279 of the Civil Code requires among others, that
in order that legal compensation shall take place, "the two debts be
due" and "they be liquidated and demandable." Compensation is
not proper where the claim of the person asserting the set-off against the
other is not clear nor liquidated; compensation cannot extend to unliquidated,
disputed claim arising from breach of contract.
There can be no doubt that petitioner is indebted to
private respondent in the amount of P1,062,063.83 representing the proceeds of
her money market investment. This is admitted. But whether private respondent
is indebted to petitioner in the amount of P6.81 million representing the
deficiency balance after the foreclosure of the mortgage executed to secure the
loan extended to her, is vigorously disputed. This circumstance prevents legal
compensation from taking place.
It must be noted that Civil Case No. 83-19717 is still
pending consideration at the RTC Manila, for annulment of Sheriffs sale on
extra-judicial foreclosure of private respondent's property from which the
alleged deficiency arose. Therefore, the validity of the extrajudicial
foreclosure sale and petitioner's claim for deficiency are still in question,
so much so that it is evident, that the requirement of Article 1279 that the
debts must be liquidated and demandable has not yet been met. For this reason,
legal compensation cannot take place under the law.
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