- Petitioner
- Mavest (U.S.A.) Inc.
- Respondent
- Sampaguita Garment Corporation
- Citation
- G.R. No. 127454
- Court
- Supreme Court
- Division
- Third Division
- Ponente
- Garcia, J.
- Decided
- September 21, 2005
Summary
This Supreme Court case involved a garment manufacturing contract dispute where MAVEST companies failed to pay US$29,200.00 for delivered garments to JC Penney. Petitioners claimed their debt was extinguished through legal compensation, alleging damages from previous Sears Roebuck transactions due to respondent's supposed specification failures and delays. The Court ruled that legal compensation could not apply as petitioners failed to prove respondent's liability to them, while their own US$29,200.00 debt was established and acknowledged. The decision clarifies requirements for legal compensation under Civil Code Articles 1277-1278, emphasizing that parties must be mutually creditors and debtors with liquidated, demandable obligations. The Court held MAVEST Manila Liaison Office solidarily liable as the extension office of the principal. This case demonstrates important principles regarding burden of proof in affirmative defenses and the strict requirements for legal compensation to extinguish contractual obligations.