COMPENSATION

Q: A treasury warrant, payable to X and indorsed by A, was cashed at the

Philippine National Bank. The warrant was subsequently dishonored by the
Philippine Treasury. The Bank then applied the deposit of A to the payment of the
amount paid for the warrant. Is the action of the bank in accordance with law?
Reasons.
A: Yes, the action of the bank is in accordance with law. In the case of Gullas v.
Philippine National Bank (G.R. No. L-43191, November 13, 1935), the Court held
that a bank has a right of set-off of the deposit in its hands for the payment of any
indebtedness to it on the part of the depositor. When a person deposits his
money at a bank whether such deposit is savings, savings or current, a
relationship of creditor and debtor is established between the depositor and
bank. In this case, all the requisites for compensation are present. Thus, the
action of the Bank is in accordance with law.
CONDITIONAL OBLIGATIONS
Q: A sold a parcel of land to B for P20,000. In the deed of sale, there is a
stipulation that the purchase price shall be paid on a certain date and that in case
of failure to pay on such a date, A can rescind the contract. Suppose that B fails
to pay on the date stipulated in the contract, is Art. 1191 of the Civil Code
applicable?
A: Art. 1191 is not applicable. According to the case of De la Rama Steamship
Co. v. Tan (99 Phil. 1034), where the contract itself contains a resolutory
condition by virtue of which the obligation may be cancelled or extinguished in
case of breach, judicial permission to rescind the contract is no longer necessary.
The use of the word implied in the article supports this conclusion. The right to
rescind is implied only if not expressly granted; no right can be said to be
implied if it is expressly recognized. Thus, Art. 1191 cannot be held to be
applicable.
DIFFICULTY BEYOND CONTEMPLATION OF THE PARTIES
Q: Naga Telephone Company (NTC) entered with a cooperative, a contract for
the use by NTC in its operation of its telephone service, the electric post of the
cooperative. As consideration, NTC agreed to install, free of charge, 10
telephone connections for the use by the cooperative. After 10 years of
enforcement, the cooperative filed a complaint for reformation of the contract on
the ground that the same was too in favor of NTC, and that the telephone cables
have become much heavier, worsened by the fact that their linemen bore holes
through the post at which point the post was broken during typhoons. Will the
action prosper?
A: Yes, the action will prosper. In the case of Naga Telephone Co. v. CA (G.R.
No. 107112, February 24, 1994), the Court held that Art. 1267 speaks of service
which has become so difficult. Taking into consideration the rationale behind this
provision, the term Service should be understood as referring to the
performance of the obligation. Under the theory of rebus sic stantibus, the

parties stipulate in the light of certain prevailing conditions, and once these
conditions cease to exist, the contract also ceases to exist.