ENRIQUE ICASIANO, PLAINTIFF AND APPELLEE, VS. FELISA ICASIANO, DEFENDANT AND APPELLANT.

Appeal
from an order of the Court of First Instance of Manila granting
plaintiff’s motion to dismiss defendant’s first counterclaim and
dismissing the latter.

The facts are simple enough. In his
complaint, dated July 31, 1959, plaintiff Enrique Icasiano sought to
recover P20,000 plus interest and attorney’s fees, from the defendant,
Felisa Icasiano. Within the reglementary period, or on November 9,
1959, the latter filed an answer admitting some allegations of the
complaint, denying other allegations thereof and setting up special
defenses, as well as two (2) counterclaims—one for the sum of PI50
allegedly borrowed by plaintiff from the defendant, and another for
moral and exemplary damages, attorney’s fees and expenses of
litigation, allegedly suffered and incurred by the defendant in
consequence of this suit, in such sum as the court may find just and
reasonable.

On November 17, 1959, plaintiff moved (2) to dismiss the first counterclaim; (b) to strike out paragraph (2) of defendant’s answer; and (c)
to set the case for hearing on the merits. Despite defendant’s
objection thereto, on December 7, 1959, the lower court granted the
first prayer, denied the second prayer and set the case for hearing on
a stated date. Notice of the order to this effect was served on the
defendant on December 17, 1959, who, three (3) days latter, filed her
notice of appeal and appeal bond. Plaintiff countered with a motion to
strike out defendant’s appeal “in so far as said notice refers to the
setting for hearing of the above entitled case on January 7, 1960, at
8:30 a.m., for the simple reason that said order, in so far as it sets
a date for the hearing of the above entitled case is interlocutory and,
therefore, not appealable, and for the further reason that the intended
appeal from said setting order is plainly frivolous and interposed only
for the purpose of delay”. This motion was denied in an order dated
December 19, 1959, which allowed defendant’s appeal “from the order of
December 7, 1959, in so far as it orders the dismissal of defendant’s
first counterclaim, and setting the hearing of this case on January 7,
1960, at 8:30 a.m.” Upon denial by the lower court of plaintiff’s
motion for reconsideration of its last order, defendant filed her
record on appeal, which, after its amendment, was approved “there being
no opposition thereto”.

Sometime after the transmittal of the
amended record on appeal to this Court or on February 4, 1960,
plaintiff filed a motion to dismiss the appeal upon the ground that
defendant’s appeal “from the order of the trial court dated December 7,
1959, dismissing her first counterclaim is manifestly and palpably
frivolous” and that her appeal from said order insofar as it sets the
case for hearing is “ostensibly dilatory, aside from the fact that such
setting order is interlocutory and, therefore, not immediately
appealable”. This motion was denied by a resolution of this Court dated
February 17, 1960. We, likewise, denied plaintiff’s motion for
reconsideration of said resolution.

The main issue in this
appeal is whether or not the lower court had erred in holding itself
without jurisdiction to entertain defendant’s first counterclaim.
Before passing upon the merits of such question, it should be noted,
however, that the order granting plaintiff’s motion to dismiss said
counterclaim is interlocutory in nature, and, hence, not appealable,
until after judgment shall have been rendered on plaintiff’s complaint
(Guanco, et al. vs. Monteblanco, et all 111 Phil., 886; Villasin vs. Seven-Up Bottling Co., of the Philippines, 107 Phil., 801; 58 Off. Gaz. (10) 1964; Caldera, et al. vs. Balcueba, et al., 84 Phil. 304).

However, plaintiff did not object to defendant’s appeal from said order except insofar only as it set the case for hearing.
In other words, it acquiesced to said appeal as regards the dismissal
of the aforementioned counterclaim. In fact, plaintiff interposed no
objection to defendant’s amended record on appeal. Hence, even if the
lower court should have disapproved it, for the reason that said order
of dismissal is interlocutory in character, its order approving the
amended record on appeal entailed, at most, an error of judgment that
does not affect our jurisdiction to entertain the appeal (Gatmaitan vs. Medina, 109 Phil., 108; 60 Off. Gaz. (17) 2343; Salazar vs.
Salazar, L-5823, April 29, 1953). It may not be amiss to add that the
allegation in the motion, filed by plaintiff with this Court, to
dismiss the appeal, to the effect that the same is frivolous insofar as
it seeks a review of the order dismissing defendant’s first
counterclaim, has no merit, not only because a party can not be barred
upon such ground from appealing by writ of error, but, also, because we
find that the lower court had erred in issuing the order complained of.

Indeed, regardless of whether1 the court of First Instance
may entertain counterclaims for less than F5,000, it must be noted that
Article 1278, 1279, 1286 and 1290 of our Civil Code read

“Art. 1278. Compensation shall take place when two persons, in their own right, are creditors and debtors of each other.”

“Art. 1279. In order that compensation may be proper, it is necessary:

(1) That each one of the obligors be bound principally, and that he be at the same time a principal creditor of the other;

(2)
That both debts consist in a sum of money, or if the things due are
consumable, they be of the same kind, and also of the same quality if
the latter has been stated;

(3) That the two debts be due;

(4) That they be liquidated and demandable;

(5)
That over neither Of them there be any retention or controversy,
commenced by third persons and communicated in due time to the debtor.”

“Art. 1286. Compensation takes place by operation of law, even though
the debts may be payable at different places, but there shall be an
indemnity for expenses of exchange or transportation to the place of
payment.”

“Art. 1290. When all the requisites mentioned in
Article 1279 are present, compensation takes effect by operation of
law, and extinguishes both debts to the concurrent amount, even though
the creditors and debtors are not aware of the compensation.”

Pursuant
to these provisions, defendant would have been entitled to deduct from
plaintiff’s claim of P20,000—At the latter were established—the sum of
P150 involved in her first counterclaim, if the allegations thereof
were true, even if no such counterclaim had been set up in her answer,
for “when all the requisites mentioned in Article 1279 are present,
compensation takes effect by operation of law, and extinguishes both
debts to the concurrent amount, even though the creditors and debtors
are not aware of”—and, hence, did not plead—”the compensation”.
Moreover, it is clear from the record before us that said counterclaim
was set up, not so much to obtain a money judgment against plaintiff,
as by way of set-off, to reduce the sum collectible by the latter, if
successful, to the extent of the concurrent amount (Moore’s Federal
Practice, Vol. 1, pp. 695-696) (See, also, Wisdom vs. Guess Dry cleaning Co., 5 Fed. Supl., 762-767).

Wherefore,
the order appealed from is hereby reversed, insofar as it dismisses
defendant’s first counterclaim, and the case is, accordingly, remanded
to the lower court for further proceedings, not inconsistent with this
decision, with costs against plaintiff-appellee, Enrique Icasiano. It
is so ordered.

Bengzon, C. J., Padilla, Bautista Angelo, Labrador, Reyes, J. B. L., Paredes, and De Leon, JJ., concur.