G.R. No. 167434 February 19, 2007
Spouses Ramon M. Nisce and A. Natividad Paras-Nisce, Petitioners, vs. Equitable PCI Bank, Inc., Respondent.

FACTS

Respondent Equitable PCI Bank filed a petition for the extrajudicial foreclosure of real estate mortgages executed by petitioners Spouses Nisce to secure their loan obligations, which totaled over ₱34 million, including an amount covered by a suretyship agreement signed by Natividad Nisce for a separate corporate loan. Prior to the foreclosure sale, the spouses filed a complaint for nullity of the suretyship agreement and damages, with a prayer for a preliminary injunction. They argued the suretyship was void for lack of spousal consent and did not benefit the conjugal partnership. They also claimed legal compensation, asserting their loan obligation should be set off against a US dollar deposit allegedly held by Natividad with PCI Capital Asia Limited, a Hong Kong-based subsidiary of the Bank.
The Regional Trial Court (RTC) denied the application for a preliminary injunction, and the foreclosure sale proceeded. The RTC later dismissed the complaint, ruling the suretyship was valid and binding on the conjugal partnership and that legal compensation was inapplicable. The Court of Appeals affirmed the RTC’s decision, prompting the spouses to elevate the case to the Supreme Court.

ISSUE

The core issues were: (1) Whether the suretyship agreement executed by Natividad Nisce was valid and binding on the conjugal partnership; and (2) Whether legal compensation could extinguish the spouses’ loan obligation based on a deposit with a separate corporate subsidiary of the Bank.

RULING

The Supreme Court denied the petition and affirmed the lower courts’ decisions. On the first issue, the Court held the suretyship agreement was valid and enforceable against the conjugal partnership. Applying the Family Code, a spouse may bind the conjugal partnership for a loan obtained for the benefit of the family. The evidence showed the proceeds of the loan guaranteed by Natividad’s suretyship were used to finance a family-owned corporation managed by their son. This constituted benefit to the family, making the obligation conjugal. The absence of the husband’s signature did not invalidate the contract, as the wife had the capacity to bind the partnership for that purpose.
On the second issue, the Court ruled legal compensation under Article 1279 of the Civil Code was not proper. For compensation to take effect by operation of law, the parties must be mutually debtors and creditors of each other in their own right. Here, the alleged US dollar deposit was with PCI Capital Asia Limited, a separate juridical entity distinct from respondent Equitable PCI Bank. The Bank and its subsidiary maintain independent corporate personalities. Consequently, the spouses were not creditors of the Bank based on that deposit, and the requisite mutual creditor-debtor relationship was absent. The claim for legal compensation, therefore, had no legal basis.