PHILIPPINE NATIONAL BANK, petitioner, vs.

THE COURT OF APPEALS and

RAMON LAPEZ, doing business under the name and style SAPPHIRE SHIPPING,
respondents.
Facts:
A local bank, while acting as local correspondent bank, intercepted funds being coursed
through it by its foreign counterpart for transmittal and deposit to the account of an
individual with another local bank, and applied the said funds to certain obligations
owed to it by the said individual.
PNB appropriated the amounts of $2,627.11 and P34,340.38 from remittances of
Ramon Lapez’s principals abroad.
The first remittance was made by the NCB of Jeddah for the benefit of Lapez, to be
credited to his account at Citibank, Greenhills Branch; the second was from Libya, and
was intended to be deposited at Lapez’s account with PNB. Lapez made a written
demand for remittance of the equivalent of $2,627.11 by means of a letter dated
December 4, 1986. This was answered by PNB on December 22, 1986 inviting Lapez to
come for a conference.
There were two instances in the past, one in November 1980 and the other in January
1981 when Lapez’s account was doubly credited with the equivalents of $5,679.23 and
$5,885.38, respectively, which amounted to an aggregate amount of P87,380.44. PNB
claims, however, that plaintiff’s claim has prescribed.
PNB made a demand upon Lapez for refund of the double or duplicated credits
erroneously made on his account, by means of a letter dated October 23, 1986 or 5
years and 11 months from November 1980, and 5 years and 9 months from January
1981.
The deduction of P34,340.38 was made by PNB with the knowledge and consent of
Lapez, who was issued a receipt dated February 18, 1987.
There is no question that the two erroneous double payments made to Lapez’s
accounts in 1980 and 1981 created an extra-contractual obligation on the part of Lapez
in favor of the PNB, under the principle of solutio indebiti, as follows:
"'If something is received when there is no right to demand it, and it was unduly
delivered through mistake, the obligation to return it arises."' (Article 2154)
RTC and CA ruled in favor of Lapez.
Issue:
WoN PNB was legally justified in making the compensation or set-off against the two
remittances coursed through it in favor of private respondent to recover on the double
credits it erroneously made in 1980 and 1981, based on the principle of solutio indebiti.
Held:
No, they were not.
In the case of the $2,627.11, requisites Nos. 2 through 5 in making compensation
take in effect are apparently present, for both debts consist in a sum of money, are both
due, liquidated and demandable, and over neither of them is there a retention or
controversy commenced by third persons and communicated in due time to the debtor.
Thus between PNB (as the local correspondent of the National Commercial Bank
of Jeddah) and Lapez as beneficiary, there is created an implied trust pursuant to Art.
1453 of the Civil Code, quoted as follows:
"'When the property is conveyed to a person in reliance upon his declared
intention to hold it for, or transfer it to another or the grantor, there is an implied trust in
favor of the person whose benefit is contemplated.
In view of the foregoing, the Court is of the opinion that the parties are not both
principally bound with respect to the $2,627.11 from Jeddah neither are they at the
same time principal creditor of the other.
Therefore, as matters stand, the parties' obligations are not subject to
compensation or set off under Art. 1279 of the Civil Code, for the reason that PNB is not
a principal debtor nor is Lapez a principal creditor insofar as the amount of $2,627.11 is
concerned. They are debtor and creditor only with respect to the double payments; but
are trustee-beneficiary as to the fund transfer of $2,627.11.
Only the Lapez is principally bound as a debtor of PNB to the extent of the
double credits. On the other hand, PNB was an implied trustee, who was obliged to
deliver to the Citibank for the benefit of Lapez the sum of $2,627.11.
Mirasol vs.CA
Facts:
The Mirasols are sugarland owners and planters. Philippine National Bank (PNB)
financed the Mirasols' sugar production venture FROM 1973-1975 under a crop loan
financing scheme. The Mirasols signed Credit Agreements, a Chattel Mortgage on
Standing Crops, and a Real Estate Mortgage in favor of PNB. The Chattel Mortgage
empowered PNB to negotiate and sell the latter's sugar and to apply the proceeds to the
payment of their obligations to it.

President Marcos issued PD 579 in November, 1974 authorizing Philippine Exchange

Co., Inc. (PHILEX) to purchase sugar allocated for export andauthorized PNB to finance
PHILEX's purchases. The decree directed that whatever profit PHILEX might realize
was to be remitted to the government. Believing that the proceeds were more than
enough to pay their obligations, petitioners asked PNB for an accounting of the
proceeds which it ignored. Petitioners continued to avail of other loans from PNB and to
make unfunded withdrawals from their accounts with said bank. PNB asked petitioners
to settle their due and demandable accounts. As a result, petitioners, conveyed to PNB
real properties by way of dacion en pago still leaving an unpaid amount. PNB
proceeded to extrajudicially foreclose the mortgaged properties. PNB still had
a deficiency claim.

Petitioners continued to ask PNB to account for the proceeds, insisting that said
proceeds, if properly liquidated, could offset their outstanding obligations. PNB
remained adamant in its stance that under P.D. No. 579, there was nothing
to account since under said law, all earnings from the export sales of sugar pertained to
the National Government.

On August 9, 1979, the Mirasols filed a suit for accounting, specific performance, and
damages against PNB.

Issue:
WON compensation through dacion en pago takes place between the parties,
thus extinguishes the obligation of the obligor.
Held:
Petitioners claim that the dacion en pago and the foreclosure of their mortgaged
properties were void for want of consideration. Petitioners insist that the loans granted
them by PNB from 1975 to 1982 had been fully paid by virtue of legal compensation.
Hence, the foreclosure was invalid and of no effect, since the mortgages were already
fully discharged. It is also averred that they agreed to the dacion only by virtue of a
martial law Arrest, Search, and Seizure Order (ASSO).
But the court find their argument unpersuasive. oth the lower court and the
appellate court found that the Mirasols admitted that they were indebted to PNB in the
sum stated in the latters counterclaim.[26] Petitioners nonetheless insist that the same
can be offset by the unliquidated amounts owed them by PNB for crop years 1973-74
and 1974-75. Petitioners argument has no basis in law. For legal compensation to take
place, the requirements set forth in Articles 1278 and 1279 of the Civil Code must be
present.
In the present case, set-off or compensation cannot take place between the
parties because:
First, neither of the parties are mutually creditors and debtors of each other.
Under P.D. No. 579, neither PNB nor PHILEX could retain any difference claimed by the
Mirasols in the price of sugar sold by the two firms. P.D. No. 579 prescribed where the
profits from the sales are to be paid.
Second, compensation cannot take place where one claim, as in the instant
case, is still the subject of litigation, as the same cannot be deemed liquidated.
With respect to the duress allegedly employed by PNB, which impugned
petitioners consent to the dacion en pago, both the trial court and the Court of Appeals
found that there was no evidence to support said claim. Factual findings of the trial
court, affirmed by the appellate court, are conclusive upon this Court.