G.R. No. L-50638 July 25, 1983
LORETO J. SOLINAP, petitioner, vs. HON. AMELIA K. DEL ROSARIO, as Presiding Judge of Branch IV, Court of First Instance of Iloilo, SPOUSES JUANITO and HARDEVI R. LUTERO, and THE PROVINCIAL SHERIFF OF ILOILO, respondents.

FACTS

Petitioner Loreto Solinap leased Hacienda Tambal from the spouses Tiburcio Lutero and Asuncion Magalona. The contract required Solinap to pay P25,000 of the annual rent directly to the Philippine National Bank (PNB) to amortize the Luteros’ loan. After Tiburcio Lutero’s death, during testate proceedings for his estate, respondent Judge Amelia K. del Rosario authorized the estate administrator to find heirs willing to pay estate obligations with a right of subrogation. Respondents Juanito and Hardivi Lutero, heirs, paid P25,000 to PNB. They then moved for reimbursement from Solinap in the testate court, claiming subrogation to PNB’s rights.
While this motion was pending, Solinap filed a separate collection suit (Civil Case No. 12397) against the Lutero spouses, claiming they owed him P71,000 from loans and dishonored checks. The Luteros, in their answer, denied the claims and counterclaimed for unpaid rentals on Hacienda Tambal, alleging they had purchased a half-interest in it. The testate court later granted the Luteros’ reimbursement motion, ordering Solinap to pay them P25,000 with interest. Solinap’s certiorari petition against this order was dismissed by the Supreme Court.

ISSUE

Whether the respondent judge committed grave abuse of discretion in denying Solinap’s plea for compensation or set-off between his P25,000 obligation to the Luteros (from the testate court order) and the Luteros’ alleged P71,000 debt to him (the subject of the separate civil case).

RULING

The Supreme Court dismissed the petition, finding no grave abuse of discretion. The legal logic is anchored on the requisites for legal compensation under the Civil Code. While Article 1278 allows compensation when two persons are mutually debtors and creditors of each other, Article 1279 explicitly requires that both obligations must be liquidated and demandable. A liquidated debt is one whose existence and amount are determined, or readily determinable, without controversy.
The Court ruled that Solinap’s claim against the Luteros for P71,000 in Civil Case No. 12397 was not liquidated. That claim was actively disputed by the Luteros on both factual and legal grounds and was still pending judicial determination. Furthermore, the Luteros’ counterclaim for unpaid rentals in that same case, if proven, could even extinguish or reduce Solinap’s demand. Citing Mialhe vs. Halili, the Court emphasized that compensation cannot apply where a claim is still the subject of litigation and its validity and amount are uncertain. Therefore, the respondent judge correctly held that the lack of liquidation in Solinap’s claim against the Luteros barred the operation of legal compensation. The order to pay the liquidated P25,000 debt from the testate proceeding was thus proper.