COMPENSATION. — Compensation is the extinguishment, total or partial, of two or more debts (and corresponding credits) when one person is at the same time creditor and debtor of another.
A distinction is made between legal compensation and judicial compensation: the former produces ope legis the total or partial extinguishment of reciprocal credits and debts, whenever certain requirements are present; the latter operates through the intervention of the judge, who, imputing in payment what the creditor in turn owes the debtor, does nothing in substance other than recognize the existence of the requirements of compensation, whose basis nevertheless always lies in the law. One also speaks of voluntary compensation when, outside the two aforementioned cases, the parties agree mutually to compensate their obligations.
The requirements necessary for compensation to take place, at least in the case of legal and judicial compensation, are: a) the identity of the parties, who must be holders (also by universal or particular succession) of reciprocal obligations of a properly juridical nature, that is, obligations ex iustitia, and not ex caritate, gratitude, etc.; b) the liquidity of the credits, that is, their validity and certainty as to the an and quantum debeatur; c) the enforceability of the credits, that is, the fact that the credits to be compensated are actionable; d) the homogeneity of the objects upon which compensation is to operate (the laws also generally require that the object of the credit be a quantity of fungible goods).
The CIC implicitly contemplates judicial compensation in can. 1690, with regard to the counterclaim, which is defined as «actio quam reus coram eodem iudice in eodem iudicio instituti contra actorem, ad submovendam vel minuendam eius petitionem...».
A specific case of judicial compensation may be considered the compensation of judicial costs (can. 1911).
According to the general principle that the costs of proceedings follow the outcome (can. 1910), the judge should in fact, in the case of partial victory by each of the parties to the action, award each the benefit of costs pro rata victoriae. This would precisely establish that opposition of liquid, enforceable, and homogeneous credits upon which legal compensation operates ipso iure: a circumstance that fully justifies the judge’s ruling by which the costs of the proceedings are declared compensated in whole or in part.
But compensation of judicial costs is not possible only in the case of partial defeat. If the litigants are related by blood or marriage, if the dispute was of doubtful resolution and consequently the good faith of the losing party cannot be denied, or if, finally, there is a just and serious reason—for example, the poverty of the losing party—the law (can. 1911), for obvious reasons of expediency and equity, grants the judge the discretionary power to compensate the costs totally or partially; that is, to leave each litigating party responsible for the expenses it incurred in the course of the entire proceedings and for the subsequent related expenses.
For compensation of insults, V. INGIURIA e DIFFAMAZIONE.