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The trial court: in favor of Fermin that the debt was reduced to

4. MINDANAO PORTLAND CEMENT VS. CA P120000. The CA reversed the same in favor of Mariano that debt
(G.R. No. L-62169, February 28, 1983) was P160000 (original)

DOCTRINE: For compensation to take place, the two parties must be

debtors and creditors of each other.
WON the two obligations are extinguished reciprocally by operation of law?
Respondent Atty. Casiano P. Laquihon, in behalf of third-party NO.
defendant Pacweld Steel Corporation (Pacweld) as the latter's
attorney, filed a pleading addressed to the defendant & Third-Party HELD
Plaintiff Mindanao Portland Cement Corporation (MPCC), for the
collection of attorneys fees from a previous case against MPCC. The Supreme Court ruled in favor of the MPCC.

MPCC filed an opposition to Atty. Laquihon's motion, stating, as The appealed order granting Atty. Laquihons motion was a
grounds therefor, that said amount is set-off by a like sum of void alteration of judgment
P10,000.00 which it MPCC has collectible in its favor from Pacweld
also by way of attorney's fees which MPCC recovered from the same Pursuant to the provisions of Art. 1278, 1279 and 1290 of the Civil
Court of First Instance of Manila in another civil case, entitled Code and all the requisites in Art. 1279 even creditors and debtors
Pacweld Steel Corporation, et al. writ of execution to this effect are unaware for automatic compensation are present.
having been issued by said court
MPCC and Pacweld were creditors and debtors of each other, their
The court denied the petition by MPCC. An appeal was filed where debts to each other consisting in 2 separate cases, ordering the
MPCC claims that the court erred in not holding that the two payment to each other of the sum of P10,000 by way of attorneys
obligations are extinguished reciprocally by operation of law. fees. The 2 obligations offset each other.

Fermin denied that the storage of zippers in Marianos warehouse

was intended to guarantee the payment of his loan. These were
merely deposits because he had nowhere to place the zippers.

When Fermin tried to get the rest of the zippers, Mariano refused to
release it due to the non-payment of the loan.

Mariano sued Fermin for the principal amount of 160000