### Facts:
Casimiro R. Nadela, previously employed by ECCO-ASIA as Assistant Vice-President for the Southern Philippines Division, retained certain company properties post his contractual employment termination on July 31, 1985. Initially, to offset company debts owing to financial difficulties, he arranged for company assets to be stored in a warehouse and later facilitated offset agreements with creditors, including transferring assets to creditor Percival G. Llaban of JAPER Marketing.
The procedural journey to the Supreme Court began with ECCO-ASIA demanding the return of unreturned properties or payment for their value. ECCO-ASIA filed a recovery action (Civil Case No. 12117) against Nadela and Llaban. While the trial court held Nadela liable, the case against Llaban was dismissed for lack of evidence. Nadela appealed to the Court of Appeals, which modified the award related to interest rates and attorney’s fees. Unsatisfied, Nadela sought review from the Supreme Court.
### Issues:
1. Was the appellate court’s decision to uphold the trial court’s finding that Nadela unlawfully retained ECCO-ASIA’s properties supported by evidence?
2. Is legal compensation applicable between Nadela’s claims for unpaid wages and benefits and ECCO-ASIA’s claim for the return of its properties?
### Court’s Decision:
The Supreme Court partly granted the petition, reiterating the factual findings of the lower courts based on substantial evidence demonstrating Nadela’s possession of the company’s unreturned properties. The Court ruled that legal compensation was applicable as both parties owed each other money, offsetting Nadela’s financial claims against the value of the retained properties.
### Doctrine:
This case emphasized the principle of legal compensation outlined in Article 1279 of the Civil Code of the Philippines, demonstrating how mutual debts between parties can be extinguished to the extent of their concurrent amounts.
### Class Notes:
– **Legal Compensation**: Requires mutual debts between parties, both of which are due, liquidated, and demandable.
– **Factual Findings**: The factual findings of lower courts, when affirmed by appellate courts and supported by substantial evidence, are binding and generally not disturbed on appeal.
### Historical Background:
In the mid-1980s, amidst the Philippines’ economically challenging period, companies often faced scenarios requiring innovative debt settlement approaches. This case provides insight into practices like offsetting debts with assets, a measure precipitated by widespread financial strain among businesses.
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