Short answer. Yes, for now. Article 1284 says that when one or both debts are rescissible or voidable, they may be compensated against each other before they are judicially rescinded or avoided. So the set-off can operate while the flawed debt is still standing and has not yet been undone by a court.
What the law says
When one or both debts are rescissible or voidable, they may be compensated against each other before they are judicially rescinded or avoided.
Civil Code, Article 1284 — Rescissible or Voidable Debts. Read the full provision →
A flawed but still-valid debt can be set off
Compensation, or set-off, cancels two debts that two persons owe each other, up to the amount they overlap. Your worry is that one of the debts is voidable — defective, and open to being annulled. Article 1284 addresses exactly this: when one or both debts are rescissible or voidable, they may be compensated against each other before they are judicially rescinded or avoided. The key idea is that a voidable or rescissible obligation is not automatically void; it is valid and produces effects until a court sets it aside. Because it still legally exists, it can be met by compensation in the meantime, just like any ordinary debt.
The turning point is judicial rescission or annulment
Everything hinges on the phrase before they are judicially rescinded or avoided. Up to that moment, the debt counts and can be offset. If and when a court later rescinds or annuls the flawed debt, the basis for that side of the set-off is undone, and the parties must be restored to their proper positions — the compensation cannot rest on an obligation that has been struck down. So the rule does not freeze the situation permanently in favor of the set-off; it simply recognizes that, while the defect has not yet been judicially acted upon, the obligation is real enough to be extinguished by compensation.
What this means for you
In practical terms, you and your creditor can treat the two debts as cancelling each other out now, even though one of them is voidable, because that debt has not been annulled by a court. But the arrangement carries a built-in risk: if the party entitled to attack the voidable debt succeeds in having it annulled, the compensation resting on it can unravel. If you are the one with grounds to avoid the debt, acting to have it judicially set aside changes the picture; if you do nothing, the debt stands and the set-off holds. Knowing who holds the right to challenge the flawed debt is therefore central to deciding your next move.
Cases citing this provision
These Supreme Court decisions cite the provision above. We list them so you can read them yourself; the summaries of what each decided are not ours to give.
- International Hotel Corporation vs. Francisco B. Joaquin, Jr., et al, G.R. No. 158361, April 10, 2013 — read the decision on LawPhil →