First United Constructors Corp. v Bayanihan; G.R. No. 164895; Bersamin, J.

FACTS:

Petitioner FUCC and Blue Star Construction Corp ordered six units of dump trucks from respondent. FUCC ordered additional two units. Upon presentment of the checks for payment, the respondent learned that FUCC had ordered the payment stopped. The respondent immediately demanded the full settlement of their obligation from the petitioners, but to no avail. Instead, the petitioners informed the respondent that they were withholding payment of the checks due to the breakdown of one of the dump trucks they had earlier purchased from respondent, specifically the second dump truck delivered on May 27, 1992. Petitioner averred that they refused to pay because respondent also refused to repair the dump truck despite informing the latter of the defects.

ISSUE:

Whether the costs of the repairs and spare parts for the alleged defective dump truck could be offset for the petitioners’ obligations to the respondent.

RULING:

Yes. Legal compensation was permissible. Legal compensation takes place when the requirements set forth in Article 1278 and Article 1279 of the Civil Code are present. As to whether petitioners could avail themselves of compensation, both the RTC and CA ruled that they could not because the claims of petitioners against respondent were not liquidated and demandable.

Considering that preponderant evidence showing that petitioners had spent for the repairs and spare parts of the alleged defective dump truck within the warranty period of three months supported the finding of the two lower courts, the Court accepts their finding. Verily, factual findings of the trial court, when affirmed by the CA, are conclusive on the Court when supported by the evidence on record.

A debt is liquidated when its existence and amount are determined. Accordingly, an unliquidated claim set up as a counterclaim by a defendant can be set off against the plaintiff’s claim from the moment it is liquidated by judgment. Article 1290 of the Civil Code provides that when all the requisites mentioned in Article 1279 of the Civil Code are present, compensation takes effect by operation of law, and extinguishes both debts to the concurrent amount. With petitioners’ expenses for the repair of the dump truck being already established and determined with certainty by the lower courts, it follows that legal compensation could take place because all the requirements were

present.