Case Summary (G.R. No. 108052)
Trial Court Ruling
The Regional Trial Court found that:
• PNB’s application of US$2,627.11 constituted improper interception of funds subject to an implied trust for Citibank’s credit and was not subject to compensation, since the five requisites of compensation under Article 1279 were not met.
• The P34,340.38 deduction from the Libya remittance was validly applied by compensation against Lapez’s quasi‐contractual obligation for solutio indebiti, as the remittance was intended for deposit in his PNB account and the compensation requisites were satisfied.
The court ordered PNB to pay Lapez US$2,627.11 (or its peso equivalent) with legal interest and dismissed all other counterclaims.
Appellate Court Decision
The Court of Appeals affirmed:
• As correspondent bank, PNB’s sole duty was to transmit the Jeddah remittance to Citibank for Lapez. No creditor‐debtor relationship existed between PNB and Lapez as to that remittance; hence, compensation could not extinguish PNB’s trust obligation.
• PNB’s liability continued until full performance of its remittance obligation.
• The P34,340.38 compensation against the Libya remittance remained valid, as the funds were destined for Lapez’s PNB account and all five requisites of Article 1279 were present.
Issue on Legal Compensation and Prescription
PNB contended that legal compensation had occurred by virtue of mutual obligations arising from solutio indebiti, thus obviating its duty to return US$2,627.11. It further argued that requiring separate suits would frustrate speedy justice. Lapez asserted that no mutual principal obligations existed and that PNB’s interception violated the implied trust. Both courts also addressed whether PNB’s solutio indebiti claim had prescribed.
Supreme Court’s Analysis on Compensation
Compensation under Article 1279 requires that each party be principal creditor and debtor of the other on liquidated, demandable obligations with no third‐party controversy. The Court held that:
• As to the US$2,627.11 remittance, PNB owed an implied trust duty to transmit the funds to Citibank, while Lapez’s only obligation to PNB was quasi‐contractual (solutio indebiti) arising from mistaken overpayments. These roles are not reciprocal principal obligations. Compensation therefore could not extinguish PNB’s trust duty to remit US$2,627.11.
• The P34,340.38 deduction satisfied all compensation requisites because the Libya re
Case Syllabus (G.R. No. 108052)
Procedural History
- Petition for review of the Decision of the Court of Appeals in CA-G.R. CV No. 27926 (June 16, 1992) affirming the Regional Trial Court, Branch 107, Quezon City.
- RTC: Ordered PNB to pay private respondent the sum of US$2,627.11 (or its peso equivalent) with legal interest from January 13, 1987; dismissed plaintiff’s supplemental complaint and defendant’s counterclaims.
- CA: Affirmed the RTC in toto, rejecting PNB’s argument on legal compensation.
- Petitioner PNB brought the case to the Supreme Court, principally contesting the denial of set-off against the intercepted remittance.
Statement of Facts
- Two foreign-origin remittances were coursed through PNB as local correspondent bank for deposit to private respondent’s accounts:
- US$2,627.11 from National Commercial Bank of Jeddah to be credited to respondent’s Citibank, Greenhills account.
- PHP 34,340.38 from a Libyan source to be credited to respondent’s PNB account No. 830-2410.
- PNB discovered two earlier erroneous “double credits” to account No. 830-2410 in November 1980 (US$5,679.23) and January 1981 (US$5,885.38), totaling PHP 87,380.44.
- PNB demanded refund of the double credits by letter dated October 23, 1986; private respondent replied December 2, 1986; PNB answered December 22, 1986.
- PNB deducted PHP 34,340.38 from the Libyan remittance with private respondent’s knowledge and consent (receipt No. 857576 dated February 18, 1987).
- Private respondent made a formal demand for remittance of US$2,627.11 on December 4, 1986.
Issues Presented
- Whether a local correspondent bank may intercept and apply to its o