A.Y.

2021-2022

JOSHUA P. SALCE BSABM

CASE DIGEST 6

TRADERS ROYAL BANK, Petitioner, vs.

NORBERTO CASTAÑARES and MILAGROS CASTAÑARES, Respondents.

G.R. No. 172020 December 6, 2010

FACTS

Spouses Castanares are exporters of shell crafts and handicrafts. To sustain their
business, they obtained loans and credit accommodations from Traders Royal Bank,
mortgaging their real estates (REMs). As evidenced by a promissory note, petitioner
released only the amount of P35,000.00 although the mortgage deeds indicated the
principal amounts asP 86,000.00 andP 60,000.00. Respondents were further granted
additional funds on various dates under promissory notes they executed in favor of the
petitioner.
Petitioner transferred the amount of P1,150.00 from respondents current account to their
savings account. The loans began to mature and the letters of credit against which the
packing advances were granted started to expire. Petitioner, without notifying the
respondents, applied to the payment of respondents outstanding obligations the sum of
P30,930.49 which was remitted to the respondents thru telegraphic transfer from
AMROBANK, Amsterdam.
For failure of the respondents to pay their outstanding loans with petitioner, the latter
proceeded with the extrajudicial foreclosure of the real estate mortgages. Thereafter, a
Certificate of Sale covering all the mortgaged properties was issued by in favor of
petitioner as the lone bidder.
Petitioner instituted a Civil Case for deficiency judgment, claiming that after applying the
proceeds of foreclosure sale to the total unpaid obligations of respondents
(P200,397.78), respondents were still indebted to petitioner for the sum ofP83,397.68.
Respondents filed a Civil Case for the recovery of the sum debited from their savings
account passbook and the equivalent amount of telegraphic transfer, and in addition, the
damage suffered by the respondents from letters of credit left un-negotiated.
The RTC consolidated the cases and ruled in favor of the petitioner but was overturned
by the CA.

ISSUE

Whether or not the payment of $4,220.00 by the Bank by way of compensation is valid.
 A.Y. 2022-2023

HELD

Yes. Even if all of the legal requirements for legal compensation are not met, agreements
for the compensation of debts or any responsibilities between mutual creditors and
debtors are permitted under Art. 1282 of the Civil Code. Compensation, whether
voluntary or traditional, is not restricted to commitments that have not yet been met. The
only prerequisites for traditional compensation are that (1) each party may fully dispose
of the credit he is seeking to compensate and (2) they agree to the mutual credit
extinguishment. As a result, the trial court made no error in determining that petitioner
properly utilized the $4,220.00 telegraphic transfer remitted by respondents’ overseas
client through the petitioner as compensation.