RULE 5-6 (Rules of Court case Digest)

8/9/2019 RULE 5-6 (Rules of Court case Digest)

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RULE 5

Uniform Procedure In Trial Courts

Section 1. Uniform procedure. Theprocedure in the Municipal Trial Courts shall

be the same as in the Regional Trial Courts,except (a) where a particular provisionexpressly or impliedly applies only to either ofsaid courts, or (b) in civil cases governed bythe Rule on Summary Procedure. (n)

Section 2. Meaning of terms. The term"Municipal Trial Courts" as used in these Rulesshall include Metropolitan Trial Courts,Municipal Trial Courts in Cities, Municipal TrialCourts, and Municipal Circuit Trial Courts. (1aProcedure In Regional Trial Courts

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G.R. No. 200804 January 22, 2014

A.L. ANG NETWORK, INC.,Petitioner,vs.EMMA MONDEJAR, accompanied by herhusband, EFREN MONDEJAR,Respondent.

Facts:

On March 23, 2011, petitioner filed acomplaint for sum of money before the MTCC,seeking to collect from respondent the amountof P23,111.71 which represented her unpaidwater bills for the period June 1, 2002 toSeptember 30, 2005.

Petitioner claimed that it was dulyauthorized to supply water to and collectpayment therefor from the homeowners ofRegent Pearl Subdivision, one of whom isrespondent.

From June 1, 2002 until September30, 2005, respondent and her familyconsumed a total of 1,150 cubic meters (cu.m.) of water, which amountedto P28,580.09. However, she only paid theamount of P5,468.38, thus, leaving a balanceof P23,111.71 which was left unpaid despitepetitioners repeated demands.

In defense, respondent contended thatsince April 1998 up to February 2003, shereligiously paid the agreed monthly flat rate

of P75.00 for her water consumption.Notwithstanding their agreement that the samewould be adjusted only upon prior notice to the

homeowners, petitioner unilaterally chargedher unreasonable and excessive adjustmentsfar above the average daily water consumptionfor a household of only 3 persons. She alsoquestioned the propriety and/or basis of theaforesaid claim.

In the interim, petitioner disconnectedrespondents water line for not paying theadjusted water charges since March 2003 upto August 2005.

On June 10, 2011, the MTCCrendered a Decision holding that sincepetitioner was issued a Certificate of PublicConvenience by the National Water ResourcesBoard (NWRB) only on August 7, 2003, then, itcan only charge respondent the agreed flatrate of P75.00 per month prior thereto or thesum of P1,050.00 for the period June 1, 2002to August 7, 2003. Thus, given that respondenthad made total payments equivalentto P1,685.99 for the same period, she shouldbe considered to have fully paid petitioner.

Moreover, the MTCC noted thatpetitioner failed to submit evidence showing(a) the exact date when it actually beganimposing the NWRB approved rates; and (b)that the parties had a formal agreementcontaining the terms and conditions thereof,

without which it cannot establish with certaintyrespondents obligation.

Aggrieved, petitioner filed a petition forcertiorari under Rule 65 of the Rules of Courtbefore the RTC, ascribing grave abuse ofdiscretion on the part of the MTCC in findingthat it failed to establish with certaintyrespondents obligation, and in not orderingthe latter to pay the full amount sought to becollected.

On November 23, 2011, the RTC

issued a Decision dismissing the petition forcertiorari, finding that the said petition was onlyfiled to circumvent the non-appealable natureof small claims cases as provided underSection 23 of the Rule of Procedure on SmallClaims Cases. To this end, the RTC ruled thatit cannot supplant the decision of the MTCCwith another decision directing respondent topay petitioner a bigger sum than that whichhas been awarded.

Petitioner moved forreconsideration but was denied in anOrder dated February 16, 2012, hence, theinstant petition.


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Issue:

Whether or not petitioners recourse underRule 65 of the Rules of Court assailing thepropriety of the MTCC Decision in the subjectsmall claims case is the proper remedy.

Ruling:

Yes. Section 23 of the Rule of Procedure forSmall Claims Cases states that:

SEC. 23. Decision. After the hearing, thecourt shall render its decision on the sameday, based on the facts established by theevidence (Form 13-SCC). The decision shallimmediately be entered by the Clerk of Courtin the court docket for civil cases and a copy

thereof forthwith served on the parties.

The decision shall be final and unappealable.

Consider ing the f inal nature of a smal lc laims case decision under the above-stated rule, the remedy of appeal is notallowed, and the prevail ing party may, thu s,immediately move for i tsexecutio n. Nevertheless, the pro scrip tionon appeals in smal l claims cases, simi lar toother proceedings w here appeal is not anavai lable remedy, does not preclude theaggr ieved party from f i l ing a p et i tion forcert iorari under Rule 65 of the Rules ofCourt .This general rule has been enunciatedin the case of Okada v. Security PacificAssurance Corporation,wherein it was heldthat:

In a long line of cases, the Court hasconsistently ruled that "the extraordinary writ ofcertiorari is always available where there is noappeal or any other plain, speedy andadequate remedy in the ordinary course of

law." In Jaca v. Davao Lumber Co., the Courtruled:

x x x Altho ugh Section 1, Rule 65 of theRules of Court provides that the sp ecialcivi l act ion of cert iorar i may only beinvok ed when " there is no app eal, nor anyplain, speedy and adequate remedy in thecourse of law," this rule is not withoutexcept ion. The avai labi l i ty o f th e ordinarycourse of appeal does not const i tutesuff ic ient ground to prevent a party frommaking use of the extraordinary remedy of

cert iorari w here appeal is not an adequateremedy o r equal ly b enef ic ial , speedy and

suff icient. It is the inadequacy not themere absence of all oth er legal remedi esand the danger of fai lure of just ice withoutthe wri t that usual ly determines theprop r iety of cert iorar i .

This ruling was reiterated in Conti v. Court ofAppeals:

Truly, an essential requisite for the availabilityof the extraordinary remedies under the Rulesis an absence of an appeal nor any "plain,speedy and adequate remedy" in the ordinarycourse of law, one which has been so definedas a "remedy which (would) equally (be)beneficial, speedy and sufficient not merely aremedy which at some time in the future willbring about a revival of the judgment x x xcomplained of in the certiorari proceeding, buta remedy which will promptly relieve thepetitioner from the injurious effects of thatjudgment and the acts of the inferior court ortribunal" concerned. x x x (Emphasis supplied)

In this relation, it may not be amiss to placatethe RTCs apprehension that respondentsrecourse before it (was only fi led to circumventthe non-appealable nature of [small claimscases], because it asks [the court] to supplantthe decision of the lower [c]ourt with anotherdecision directing the private respondent to

pay the petitioner a bigger sum than what hasbeen awarded." Verily, a petit ion forcert iorari, unlik e an appeal, is an orig inalact ion designed to correct only errors ofju risd ic t io n and n o t o f judgmen t. Owing toits nature, it is therefore incumbent uponpetitioner to establish that jurisdictional errorstainted the MTCC Decision. The RTC, in turn,could either grant or dismiss the petition basedon an evaluation of whether or not the MTCCgravely abused its discretion by capriciously,whimsically, or arbitrarily disregardingevidence that is material to the controversy.

In view of the foregoing, the Court thus findsthat petitioner correctly availed of the remedyof certiorari to assail the propriety of the MTCCDecision in the subject small claims case,contrary to the RTCs ruling.

Likewise, the Court finds that petitioner filedthe said petition before the proper forum (i.e.,the RTC). To be sure, the Court, the Cou rtof Ap peals and the Region al Trial Court shave concurrent jur isdict ion to issue a wri tof cert iorar i .Such concurrence ofju risd ic t io n, however , does no t g ive a par tyunbr idled freedom to cho ose the venue of


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his act ion lest he ran afoul o f the doctr ineof hierarchy of courts. Instead, a becomingregard for judicial hierarchy dictates thatpetitions for the issuance of writs of certiorariagainst first level courts should be filed withthe Regional Trial Court, and those against the

latter, with the Court of Appeals, before resortmay be had before the Court. This procedureis also in consonance with Section 4, Rule 65of the Rules of Court.

Hence, consid er ing that smal l claims casesare exclusively with in the jur isdict ion o f theMetropolitan Trial Courts, Municipal TrialCourt s in Cit ies, Muni cipal Trial Cou rts, andMun icipal Circuit Trial Courts, cert ioraripet i t ions assai l ing its disposi t ion s shouldbe f i led before their correspondingRegional Trial Courts. This petitioner

complied with when it instituted its petition forcertiorari before the RTC which, as previouslymentioned, has jurisdiction over the same. Infine, the RTC erred in dismissing the saidpetition on the ground that it was an improperremedy, and, as such, the case must bereinstated and remanded thereto for its properdisposition.


RULE 6

Kinds Of Pleadings

Section 1. Pleadings defined. Pleadings arethe written statements of the respective claimsand defenses of the parties submitted to thecourt for appropriate judgment. (1a)

Section 2. Pleadings allowed. The claims ofa party are asserted in a complaint,counterclaim, cross-claim, third (fourth, etc.)-party complaint, or complaint-in-intervention.

The defenses of a party are alleged in theanswer to the pleading asserting a claimagainst him.

An answer may be responded to by a reply. (n)

Section 3. Complaint. The complaint is thepleading alleging the plaintiff's cause orcauses of action. The names and residencesof the plaintiff and defendant must be stated inthe complaint. (3a)

Section 4.Answer. An answer is a pleadingin which a defending party sets forth hisdefenses. (4a)


PBCom v . Spouses Go, G.R. No. 175514,February 14, 2011

On September 30, 1999, respondent

Jose C. Go (Go)obtained two loans from

PBCom, evidenced by two promissory notes,

embodying his commitment to

payP17,982,222.22 for the first loan, and P80

million for the second loan, within a ten-yearperiod from September 30, 1999 to September

30, 2009. Go executed two (2) pledge

agreements, both dated September 29, 1999,

covering shares of stock in Ever Gotesco

Resources and Holdings, Inc. The first pledge,

valued at P27,827,122.22, was to secure

payment of the first loan, while the second

pledge, valued at P70,155,100.00, was to

secure the second loan.

Two years later, however, the marketvalue of the said shares of stock plunged to

less than P0.04 per share. Thus, PBCom, as

pledgee, notified Go in writing on June 15,

2001, that it was renouncing the pledgeagreements.

Later, PBCom filed before the RTC a

complaint for sum of money with prayer for a

writ of preliminary attachment against Go andhis wife, Elvy T. Go(Spouses Go), docketed as

Civil Case No. 01-101190. PBCom alleged

that Spouses Go defaulted on the two (2)

promissory notes, having paid only three (3)

installments on interest paymentscovering

the months of September, November and

December 1999. Consequently, the entirebalance of the obligations of Go became

immediately due and demandable. PBCom

made repeated demands upon Spouses Go

for the payment of said obligations, but the

couple imposed conditions on the payment,

such as the lifting of garnishment effected by

the Bangko Sentral ng Pilipinas (BSP) on Gos

accounts.

Spouses Go filed their Answer with

Counterclaim denying the material allegationsin the complaint and stating, among other

matters, that:


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8. The

promissory note referred to inthe complaint expressly statethat the loan obligation ispayable within the period of

ten (10) years. Thus, from theexecution date of September30, 1999, its due date falls onSeptember 30, 2009 (and not2001 as erroneously stated inthe complaint). Thus, priorto September 30, 2009, theloan obligations cannot bedeemed due anddemandable.

In conditionalobligations, the acquisition of

rights, as well as theextinguishment or loss ofthose already acquired, shalldepend upon the happeningof the event which constitutesthe condition. (Article 1181,New Civil Code)

9. Contraryto the plaintiffs proferrence,defendant Jose C. Go hadmade substantial payments interms of his monthly

payments. There is, therefore,a need to do someaccounting works (sic) toreconcile the records of bothparties.

10. Whiledemand is a necessaryrequirement to consider thedefendant to be indelay/default, such has notbeen complied with by theplaintiff since the former is not

aware of any demand madeto him by the latter for thesettlement of the wholeobligation.

11. Undeniably, at the time the pledge ofthe shares of stock wereexecuted, their total value ismore than the amount of theloan or at the very least,equal to it. Thus, plaintiff wasfully secured insofar as its

exposure is concerned.

12. And evenassuming without conceding,that the present value of saidshares x x x went down, itcannot be considered assomething permanent since

the prices of stocks in themarket either increases (sic)or decreases (sic) dependingon the market forces. Thus, itis highly speculative for theplaintiff to consider saidshares to have sufferedtremendous decrease in itsvalue. More so, it is unfair forthe plaintiff to renounce orabandon the pledgeagreements.

On September 28, 2001, PBCom filed

a verified motion for summary judgment

anchored on the following grounds:

I. MATERIAL AVERMENTS OF THECOMPLAINT ADMITTED BYDEFENDANT-SPOUSES INTHEIR ANSWER TOOBVIATE THE NECESSITYOF TRIAL

II. NO REALDEFENSES AND NOGENUINE ISSUES AS TOANY MATERIAL FACTWERE TENDERED BY THEDEFENDANT-SPOUSES INTHEIR ANSWER

III. PLANTIFFS CAUSES OF ACTIONSARE SUPPORTED BYVOLUNTARY ADMISSIONS

AND AUTHENTICDOCUMENTS WHICH MAYNOT BE CONTRADICTED.

PBCom contended that the Answer

interposed no specific denials on the material

averments in paragraphs 8 to 11 of the

complaint such as the fact of default, the entire

amount being already due and demandable by

reason of default, and the fact that the bank

had made repeated demands for the paymentof the obligations.


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Spouses Go opposed the motion for

summary judgment arguing that they had

tendered genuine factual issues calling for the

presentation of evidence.

The RTC granted PBComsmotion in itsJudgment dated January 25, 2002 ordering

defendants to pay plaintiff jointly and severally

the following: 1. The total amount

of P117,567,779.75, plus interests and

penalties as stipulated in the two promissory

notes; 2. A sum equivalent to 10% of the

amount involved in this case, by way of

attorneys fees; and 3. The costs of suit.

CA reversedand set asidethe

assailed judgment of the RTC, denied

PBComs motion for summary judgment, and

ordered the remand of the records to the court

of origin for trial on the merits.

ISSUE:

Whether or not Spouses Gos denial in their

Answer constitutes specific denials required by

the Rules on the material averments in

paragraphs 8 to 11 of the complaint.

Held:

Yes. Under the Rules, every pleading must

contain, in a methodical and logical form, a

plain, concise and direct statement of the

ultimate facts on which the party pleading relies

for his claim or defense, as the case may be,

omitting the statement of mere evidentiary

facts.

To specifically deny a material allegation,

a defendant must specify each materialallegation of fact the truth of which he does not

admit, and whenever practicable, shall set forth

the substance of the matters upon which he

relies to support his denial. Where a defendant

desires to deny only a part of an averment, he

shall specify so much of it as is true and

material and shall deny only the remainder.

Where a defendant is without knowledge or

information sufficient to form a belief as to the

truth of a material averment made in the

complaint, he shall so state, and this shall have

the effect of a denial.

Rule 8, Section 10 of the Rules of Civil

Procedure contemplates three (3) modes of

specific denial, namely: 1) by specifying each

material allegation of the fact in the complaint,

the truth of which the defendant does not

admit, and whenever practicable, setting forth

the substance of the matters which he will rely

upon to support his denial; (2) by specifying so

much of an averment in the complaint as is true

and material and denying only the remainder;

(3) by stating that the defendant is without

knowledge or information sufficient to form abelief as to the truth of a material averment in

the complaint, which has the effect of a denial.

The purpose of requiring the defendantto make a specific denial is to make him

disclose the matters alleged in the complaintwhich he succinctly intends to disprove at the

trial, together with the matter which he relied

upon to support the denial. The parties are

compelled to lay their cards on the table.

The Supreme court denied the petition

for review on certiorari under Rule 45 filed by

petitioner Philippine Bank ofCommunications (PBCom)seeking to set

aside the July 28, 2006 Decision, and the

November 27, 2006 Resolution of the Court of

Appeals (CA) in CA G.R. CV No. 77714. (TheCA decision reversed and set aside

the January 25, 2002Decision of the Regional

Trial Court, Branch 42, Manila (RTC), which

granted the motion for summary judgment and

rendered judgment on the basis of the

pleadings and attached documents.)


BPI vs. Spouse Royeco

G.R. No. 176664

Facts:

On August 23, 1993, spouses Reynaldo and

Victoria Royeca (respondents) executed and

delivered to Toyota Shaw, Inc. a Promissory

Note for P577,008.00 payable in 48 equal

monthly installments of P12,021.00, with a

maturity date of August 18, 1997. ThePromissory Note provides for a penalty of 3%


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for every month or fraction of a month that an

installment remains unpaid.

To secure the payment of said Promissory

Note, respondents executed a ChattelMortgage in favor of Toyota over a certain

motor vehicle.

Toyota, with notice to respondents, executed a

Deed of Assignment transferring all its rights,

title, and interest in the Chattel Mortgage to

Far East Bank and Trust Company (FEBTC).

Claiming that the respondents failed to pay

four (4) monthly amortizations FEBTC sent a

formal demand to respondents on March 14,

2000 asking for the payment thereof, plus

penalty. The respondents refused to pay on

the ground that they had already paid their

obligation to FEBTC.

On April 19, 2000, FEBTC filed a Complaint for

Replevin and Damages against therespondents with the Metropolitan Trial Court

(MeTC) of Manila praying for the delivery of

the vehicle, with an alternative prayer for the

payment of P48,084.00 plus interest and/or

late payment charges at the rate of 36% per

annum from May 18, 1997 until fully paid.

In their Answer, respondents alleged that on

May 20, 1997, they delivered to the Auto

Financing Department of FEBTC eight

postdated checks in different amounts totaling

P97,281.78. The respondents further averred

that they did not receive any notice from the

drawee banks or from FEBTC that these

checks were dishonored. They explained that,

considering this and the fact that the checks

were issued three years ago, they believed in

good faith that their obligation had already

been fully paid.

On February 23, 2005, the MeTC dismissed

the case and granted the respondents

counterclaim for damages. On appeal, the

Regional Trial Court (RTC) set aside the

MeTC Decision and ordered the respondents

to pay the amount claimed by the petitioner.

The RTC denied the respondents motion for

reconsideration. The respondents elevated the

case to the Court of Appeals (CA) through a

petition for review. They succeeded in

obtaining a favorable judgment when the CA

set aside the RTCs Decision and reinstated

the MeTCs Decision on July 12, 2006.

Issue:

Who has the burden of proof in this case?

Rulings:

In civil cases, the party having the burden of

proof must establish his case by a

preponderance of evidence, or evidence which

is more convincing to the court as worthy ofbelief than that which is offered in opposition

thereto. Thus, the party, whether plaintiff or

defendant, who asserts the affirmative of

an issue has the onus to prove his

assertion in order to obtain a favorable

judgment. For the plaintiff, the burden to

prove its positive assertions never parts.

For the defendant, an affirmative defense is

one which is not a denial of an essential

ingredient in the plaintiffs cause of action,

but one which, if established, will be agood defensei.e. an "avoidance" of the

claim.

To establish their defense, the respondents

therefore had to present proof, not only that

they delivered the checks to the petitioner, but

also that the checks were encashed. The

respondents failed to do so. Had the checks

been actually encashed, the respondents

could have easily produced the cancelledchecks as evidence to prove the same.


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Instead, they merely averred that they believed

in good faith that the checks were encashed

because they were not notified of the dishonor

of the checks and three years had already

lapsed since they issued the checks.

Because of this failure of the respondents to

present sufficient proof of payment, it was no

longer necessary for the petitioner to prove

nonpayment, particularly proof that the checks

were dishonored. The burden of evidence is

shifted only if the party upon whom it is lodged

was able to adduce preponderant evidence to

prove its claim.

Section 5. Defenses. Defenses may eitherbe negative or affirmative.

(a) A negative defense is the specificdenial of the material fact or factsalleged in the pleading of the claimantessential to his cause or causes ofaction.

(b) An affirmative defense is anallegation of a new matter which, whilehypothetically admitting the material

allegations in the pleading of theclaimant, would nevertheless preventor bar recovery by him. The affirmativedefenses include fraud, statute oflimitations, release, payment, illegality,statute of frauds, estoppel, formerrecovery, discharge in bankruptcy, andany other matter by way of confessionand avoidance. (5a)


Lefarge Cement Philippines vs CCC, Lim,

Mariano

Facts:

Petitioner Lafarge Cement Philippines,

Inc. (Lafarge) -- on behalf of its

affiliates and other qualified entities,

including Petitioner Luzon Continental

Land Corporation (LCLC) -- agreed to

purchase the cement business of

Respondent Continental Cement

Corporation (CCC).

On October 21, 1998, both parties

entered into a Sale and Purchase

Agreement (SPA). At the time of the

foregoing transactions, petitioners

were well aware that CCC had a case

pending with the Supreme Court. Thecase was docketed as GR No.

119712, entitledAsset Privatization

Trust (APT) v. Court of Appeals and

Continental Cement Corporation.

In anticipation of the liability that the

High Tribunal might adjudge against

CCC, the parties, under Clause 2 (c)

of the SPA, allegedly agreed to retain

from the purchase price a portion of

the contract price in the amount

of P117,020,846.84 -- the equivalent

of US$2,799,140. This amount was to

be deposited in an interest-bearing

account in the First National City Bank

of New York (Citibank) for payment to

APT.

However, petitioners allegedly refused

to apply the sum to the payment to

APT, despite the subsequent finality of

the Decision in GR No. 119712 in

favor of the latter and the repeated

instructions of Respondent

CCC. Fearful that nonpayment to APT

would result in the foreclosure, not just

of its properties covered by the SPA

with Lafarge but of several other

properties as well, CCC filed before

the Regional Trial Court of Quezon

City on June 20, 2000, a Complaint

with Application for Preliminary

Attachment against petitioners.

Petitioners moved to dismiss the

Complaint on the ground that it

violated the prohibition on forum-shopping. The trial court denied the

Motion to Dismiss in its November 14,

2000 Order, petitioners elevated the

matter before the Court of Appeals in

CA-GR SP No. 68688.

In the meantime, to avoid being in

default and without prejudice to the

outcome of their appeal, petitioners

filed their Answer and Compulsory

Counterclaims ad Cautelam before the

trial court in Civil Case No. Q-00-41103. In their Answer, they denied


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the allegations in the Complaint. They

prayed -- by way of compulsory

counterclaims against Respondent

CCC, its majority stockholder and

president Gregory T. Lim, and its

corporate secretary Anthony A.Mariano -- for the sums of

(a) P2,700,000 each as actual

damages, (b) P100,000,000 each as

exemplary damages,

(c) P100,000,000 each as moral

damages, and (d) P5,000,000 each as

attorneys fees plus costs of suit.

Petitioners alleged that CCC, through

Lim and Mariano, had filed the

baseless Complaint in Civil Case No.

Q-00-41103 and procured the Writ of

Attachment in bad faith. Relying on

this Courts pronouncement

in Sapugay v. CA,[5]

petitioners prayed

that both Lim and Mariano be held

jointly and solidarily liable with

Respondent CCC.

Issue:

Whether or not the RTC gravely erred in ruling

that

(i) petitioners counterclaims against

Respondents Lim and Mariano are

not compulsory;

(ii) Sapugay v. Court of Appeals is

inapplicable here; and

(iii) petitioners violated the rule on

joinder of causes of action.

Ruling:

(i) Petitioners Counterclaims

Compulsory.(Principles laid down)

Counterclaims are defined in

Section 6 of Rule 6 of the Rules of

Civil Procedure as any claim

which a defending party may have

against an opposing party. They

are generally allowed in order to

avoid a multiplicity of suits and to

facilitate the disposition of the

whole controversy in a single

action, such that the defendants

demand may be adjudged by a

counterclaim rather than by an

independent suit. The only

limitations to this principle are (1)

that the court should have

jurisdiction over the subject

matter of the counterclaim,and

(2) that it could acquirejurisdiction over third parties

whose presence is essential for

its adjudication.

A counterclaim may either be

permissive or compulsory. It is

permissiveif it does not arise out

of or is not necessarily connected

with the subject matter of the

opposing partys claim.[11]

A

permissive counterclaim is

essentially an independent claim

that may be filed separately in

another case.

A counterclaim is compulsory

when its object arises out of or is

necessarily connected with the

transaction or occurrence

constituting the subject matter of

the opposing partys claim and

does not require for its

adjudication the presence of third

parties of whom the court cannotacquire jurisdiction.

Criteria to determine whether a

counterclaim is compulsory or

permissive: 1) Are issues of fact

and law raised by the claim and by

the counterclaim largely the

same? 2) Would res judicata bar a

subsequent suit on defendants

claim, absent the compulsory

counterclaim rule? 3) Will

substantially the same evidencesupport or refute plaintiffs claim

as well as defendants

counterclaim? 4) Is there any

logical relation between the claim

and the counterclaim? A positive

answer to all four questions would

indicate that the counterclaim is

compulsory.

Adopted in Quintanilla v.

CA[14]

and reiterated inAlday v.

FGU Insurance Corporation,

[15]

thecompelling test of
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compulsorinesscharacterizes a

counterclaim as compulsory if

there should exist a logical

relationship between the main

claim and the counterclaim. There

exists such a relationship whenconducting separate trials of the

respective claims of the parties

would entail substantial

duplication of time and effort by

the parties and the court; when

the multiple claims involve the

same factual and legal issues; or

when the claims are offshoots of

the same basic controversy

between the parties.

The allegations show that

petitioners counterclaims for

damages were the result of

respondents (Lim and Mariano)

act of filing the Complaint and

securing the Writ of Attachment in

bad faith.

Aside from the fact that petitionerscounterclaim for damages cannot be thesubject of an independent action, it is thesame evidence that sustains petitionerscounterclaim that will refute privaterespondents own claim for damages. Thisis an additional factor that characterizespetitioners counterclaim as compulsory.Moreover, using the compelling test ofcompulsoriness, we find that, clearly, therecovery of petitioners counterclaims iscontingent upon the case filed byrespondents; thus, conducting separatetrials thereon will result in a substantialduplication of the time and effort of thecourt and the parties.

Since the counterclaim for damages iscompulsory, it must be set up in the sameaction; otherwise, it would be barredforever. If it is filed concurrently with themain action but in a different proceeding, itwould be abated on the ground of l i t ispendent ia; if filed subsequently, it wouldmeet the same fate on the ground of resjud icat a.

(ii) Sagupay vs CA is applicable to

the case at bar.

Among the issues raisedin Sapugay was whether

Cardenas, who was not a party to

the original action, might

nevertheless be impleaded in the

counterclaim. We disposed of this

issue as follows:

A counterclaim is defined as any claim formoney or other relief which a defendingparty may have against an opposingparty. However, the general rule that adefendant cannot by a counterclaim bringinto the action any claim against personsother than the plaintiff admits of anexception under Section 14, Rule 6 whichprovides that when the presence ofparties other than those to the originalaction is required for the granting ofcomplete relief in the determination of a

counterclaim or cross-claim, the courtshall order them to be brought in asdefendants, if jurisdiction over themcan be obtained. The inclusion,therefore, of Cardenas in petitionerscounterclaim is sanctioned by the rules.

The prerogative of bringing in new partiesto the action at any stage before judgmentis intended to accord complete relief to allof them in a single action and to avert aduplicity and even a multiplicity of suitsthereby.

The inclusion of a corporate officer orstockholder -- Cardenas in Sapugay orLim and Mariano in the instant case -- isnot premised on the assumption that theplaintiff corporation does not have thefinancial ability to answer for damages,such that it has to share its liability withindividual defendants. Rather, suchinclusion is based on the allegations offraud and bad faith on the part of thecorporate officer or stockholder. Theseallegations may warrant the piercing of theveil of corporate fiction, so that the saidindividual may not seek refuge therein, butmay be held individually and personallyliable for his or her actions.

While the Court does rule that thecounterclaims against Respondent CCCspresident and manager may be properly filed,the determination of whether both can in factbe held jointly and severally liable withrespondent corporation is entirely anotherissue that should be ruled upon by the trial

court.


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violation of the rule concerning splitting causes

of action or the necessary joinder of causes of

action.

RULING:

The Court ruled in the affirmative.

A counterclaim is defined as any claim formoney or other relief which a defending partymay have against an opposing party.

[6]A

counterclaim is compulsory if (a) it arises outof, or is necessarily connected with, thetransaction or occurrence which is the subjectmatter of the opposing party's claim; (b) it doesnot require for its adjudication the presenceofthird parties of whom the court cannot acquirejurisdiction; and (c) the court has jurisdiction toentertain the claim.

[7]In other words, a

compulsory counterclaim cannot be made thesubject of a separate action but should beasserted in the same suit involving the sametransaction or occurrence giving rise to it.

[8]

The criteria or tests by which thecompulsory or permissive nature of specificcounterclaims can be determined are asfollows:

(1) Are the issues of fact and lawraised by the claim andcounterclaim largely the same?

(2) Wouldres judicata bar asubsequent suit on defendant'sclaim absent the compulsorycounterclaim rule?

(3) Will substantially the sameevidence support or refuteplaintiff's claim as well asdefendant's counterclaim?

(4) Is there any logical relationbetween the claim and thecounterclaim?

[9]

Stripped of its legalese and trivial details,Special Civil Case No. 93-2521 of the RTC ofMakati City is basically an injunction suit, apetition for prohibition. On the other hand,Civil Case No. Q-95-23691 is an ordinaryaction for collection of sums of money. In theformer, YULIENCO essentially seeks toprohibit or enjoin the disposition and/or saleofhis property, the proceeds of which willanswer for his unpaid obligations toACC. Specifically, YULIENCO attempts toprevent (1) the foreclosure of the real estatemortgages which he executed to secure his

monetary obligations, (2) the issuance ofcertificates of sale in cases of mortgages

already foreclosed, and (3) the sale ofhisspecific club membership certificates andshares of stocks in ACC. Promissory notesare also involved in that case but they arespecifically identified as Promissory NotesNos.315, 317 and 318, and are intimately

related to or secured by the real estatemortgages. In Civil Case No. Q-95-23691,ACC simply seeks to collect from YULIENCOhis unpaid monetary obligations covered byspecific but unsecured Promissory NotesNos.56, 57, 59 and 60. Needless to say, theyare not the promissory notes subject of the firstaction. Neither are they substantially,intimately and reasonably relevant to nor evenremotely connected with the promissory notesand the cause of action in the injunctionsuit. Simply put, the promissory notes in bothcases differ from and are not related to each

other.

There is, therefore, a dissimilarity in thesubject matter of both cases arising fromseparate and distinct transactions andnecessarily requiring different evidence tosupport the divergent claims. Moreimportantly, the "one compelling test ofcompulsoriness" i.e., the logical relationshipbetween the claim and counterclaim, does notapply here. To reiterate, there is no logicalrelationship between YULIENCO's petition forinjunctive relief and ACC's collection suit,

hence separate trials of the respective claimsof the parties will not entail a substantialduplication of effort and time as the factualand/or legal issues involved, as alreadyexplained, are dissimilar and distinct.

[10]A

judgment in Special Civil Action No. 93-2521will not therefore bar Civil Case No. Q-95-23691; "this, [additionally] on the theory thatwhat is barred by prior judgment are not onlythe matters squarely raised and litigated, butall such matters as could have been raised butwere not."

[11]Obviously, each averment by

ACC for the collection of a sum of money

covered by Promissory Notes Nos. 56, 57 59and 60 is not a "matter" that could have beenraised as counterclaim in the injunction suit.

In light of the above showing, there wasno violation of the rule against splitting causesof action or necessary joinder of causes ofaction.


Section 6. Counterclaim. A counterclaim isany claim which a defending party may have

against an opposing party. (6a)
http://sc.judiciary.gov.ph/jurisprudence/1999/jun99/131692.htm#_edn6http://sc.judiciary.gov.ph/jurisprudence/1999/jun99/131692.htm#_edn6http://sc.judiciary.gov.ph/jurisprudence/1999/jun99/131692.htm#_edn6http://sc.judiciary.gov.ph/jurisprudence/1999/jun99/131692.htm#_edn7http://sc.judiciary.gov.ph/jurisprudence/1999/jun99/131692.htm#_edn7http://sc.judiciary.gov.ph/jurisprudence/1999/jun99/131692.htm#_edn7http://sc.judiciary.gov.ph/jurisprudence/1999/jun99/131692.htm#_edn8http://sc.judiciary.gov.ph/jurisprudence/1999/jun99/131692.htm#_edn8http://sc.judiciary.gov.ph/jurisprudence/1999/jun99/131692.htm#_edn8http://sc.judiciary.gov.ph/jurisprudence/1999/jun99/131692.htm#_edn9http://sc.judiciary.gov.ph/jurisprudence/1999/jun99/131692.htm#_edn9http://sc.judiciary.gov.ph/jurisprudence/1999/jun99/131692.htm#_edn10http://sc.judiciary.gov.ph/jurisprudence/1999/jun99/131692.htm#_edn10http://sc.judiciary.gov.ph/jurisprudence/1999/jun99/131692.htm#_edn10http://sc.judiciary.gov.ph/jurisprudence/1999/jun99/131692.htm#_edn11http://sc.judiciary.gov.ph/jurisprudence/1999/jun99/131692.htm#_edn11http://sc.judiciary.gov.ph/jurisprudence/1999/jun99/131692.htm#_edn11http://sc.judiciary.gov.ph/jurisprudence/1999/jun99/131692.htm#_edn11http://sc.judiciary.gov.ph/jurisprudence/1999/jun99/131692.htm#_edn10http://sc.judiciary.gov.ph/jurisprudence/1999/jun99/131692.htm#_edn9http://sc.judiciary.gov.ph/jurisprudence/1999/jun99/131692.htm#_edn8http://sc.judiciary.gov.ph/jurisprudence/1999/jun99/131692.htm#_edn7http://sc.judiciary.gov.ph/jurisprudence/1999/jun99/131692.htm#_edn6


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Mercado v. Court of Appeals, G.R. No.169576, October 17, 2008

FACTS:

San Miguel Corporation (SMC) extended toLeonides Mercado, a distributor of SMCs beerproducts since 1967, a P7.5 million credit line.To secure his purchases, Mercado assigned 3China Bank Corporation certificates of depositamounting to P5 million to SMC and executeda continuing hold-out agreement stating:

Any demand made by[SMC] on [CBC],claiming default onmy/our part shall beconclusive on [CBC]

and shall serve asabsolute authority for[CBC] to encash the[CBC certificates ofdeposit] in accordancewith the thirdparagraph of this Hold-Out Agreement,whether or not I/wehave in fact defaultedon any of my/ourobligations with [SMC],it being understood

that the issue ofwhether or not therewas factual defaultmust be threshed outsolely between me/usand [SMC]

He also submitted three surety bonds fromEastern Assurance and Surety Corporation(EASCO) totaling P2.6 million. Consequentlyafter SMC notified CBC that Mercado failed topay it asked CBC to release the proceeds ofthe assigned certificates of deposit which CBC

approved. On March 2, 1992, Mercado filed anaction to annul the continuing hold-outagreement and deed of assignment in theRegional Trial Court (RTC) of Manila claimingthat such agreement allowed forfeiture withoutthe benefit of foreclosure which is void in viewof Article 2088 of the Civil Code. He arguedthat he had already settled his recentpurchases on credit but SMC erroneouslyapplied the said payments to his old accountsnot covered by the continuing hold-outagreement.

On March 18, 1992, SMC filed its answer withcounterclaim against Mercado and contended

that Mercado delivered only two CBCcertificates of deposit amounting to P4.5million and asserted that the execution of thecontinuing hold-out agreement and deed ofassignment was a recognized businesspractice. Furthermore, because Mercado

admitted his outstanding liabilities, SMCsought payment of the lees products hewithdrew (or purchased on credit) worthP7,468,153.75.

On April 23, 1992, SMC filed a third-partycomplaint against EASCO to collect theproceeds of the surety bonds submitted byMercado.

On September 14, 1994, Mercado filed anurgent manifestation and motion seeking thedismissal of the complaint. He claimed that he

was no longer interested in annulling thecontinuing hold-out agreement and deed ofassignment. The RTC, however, denied themotion. Instead, it set the case for pre-trial.Thereafter, trial ensued.

During trial, Mercado acknowledged theaccuracy of SMCs computation of hisoutstanding liability as of August 15,1991. Thus, the RTC dismissed the complaintand ordered Mercado and EASCO (to theextent of P2.6 million or the value of its bonds)to jointly and severally pay SMC the amount

of P7,468,153.75.

Aggrieved, Mercado and EASCO appealed tothe Court of Appeals (CA) insisting thatMercado did not default in the payment of hisobligations to SMC but CA affirmed the RTCdecision in toto. Mercado and EASCO bothmoved for reconsideration but their respectivemotions were denied.

On October 28, 2005, EASCO filed a petitionfor review on certiorari but eventually agreedto settle its liability with SMC. The petition was

terminated on September 19, 2007. WhenMercado passed away, he was substituted byhis heirs, petitioners Racquel D. Mercado,Jimmy D. Mercado, Henry D. Mercado,Louricar D. Mercado and Virgilio D. Mercado.

Petitioners subsequently filed this petitionasserting that the CA erred in affirming theRTC decision in toto. The said decision(insofar as it ordered Mercado to paySMC P7,468,153.75) was void. SMCscounterclaim was permissive in nature.Inasmuch as SMC did not pay docket fees, the

RTC never acquired jurisdiction over thecounterclaim.


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ISSUE:Whether or not SMCs counterclaim ispermissive or compulsory in nature.

HELD:

The SC held that SMCs counterclaim, beinglogically related to Mercados claim, wascompulsory in nature. Consequently, thepayment of docket fees was not necessaryfor the RTC to acquire jurisdiction over thesubject matter.

A counterclaim (ora claim which adefending party may have against anyparty) may be compulsory or permissive. Acounterclaim that (1) arises out of (or isnecessarily connected with) the transactionor occurrence that is the subject matter of

the opposing partys claim; (2) falls withinthe jurisdiction of the court and (3) doesnot require for its adjudication thepresence of third parties over whom thecourt cannot acquire jurisdiction, iscompulsory. Otherwise, a counterclaim ismerely permissive.

When Mercado sought to annul the continuinghold-out agreement and deed of assignment(which he executed as security for his creditpurchases), he in effect sought to be freedfrom them. While he admitted having

outstanding obligations, he neverthelessasserted that those were not covered by theassailed accessory contracts. For its part,aside from invoking the validity of the saidagreements, SMC therefore sought to collectthe payment for the value of goods Mercadopurchased on credit. Thus, Mercadoscomplaint and SMCs counterclaim bothtouched the issues of whether the continuinghold-out agreement and deed of assignmentwere valid and whether Mercado hadoutstanding liabilities to SMC. The sameevidence would essentially support or refute

Mercados claim and SMCs counterclaim.


CALIBRE TRADERS, INC., vs. BAYER

PHILIPPINES, INC.,

Facts:

This is petition for review on certiorari assails the

July 31, 2002 Decision and the December 19,

2003 Resolution of the Court of Appeals (CA) in

CA-G.R. CV No. 45546, that denied petitioners

action for damages against respondent Bayer

Philippines Inc. (Bayerphil) and instead granted the

latters counterclaim forP1,272,103.07,

representing unpaid purchases of Bayerphils

products.

Calibre Traders, Inc. (Calibre) was one of

Bayerphils distributors/dealers of its agricultural

chemicals within the provinces of Pangasinan and

Tarlac. Their last distributorship agreement was

effective from June 1989 to June 1991. However,

Bayerphil stopped delivering stocks to Calibre on

July 31, 1989 after the latter failed to settle its

unpaid accounts in the total amount

of P1,751,064.56.

The parties had a disagreement as to the

entitlement and computations of the discounts

of Calibre. It withheld the payment to Bayerphil

and compelled the former to reconcile its accounts.

In a letter dated August 16, 1989, Calibre

requested Bayerphil for a reconciliation of

accounts. It enumerated the following claims that

amounted to P968,265.82.

Calibre sent follow-up letters dated September 17,

October 13, and November 16, 1989.

On September 29, 1989, Bayerphils credit and

collection officer, Leon Abesamis, conferred with

Calibres General Manager Mario Sebastian(Sebastian). The attempt to settle failed. Again, on

October 27, 1989, Bayerphils Sales Manager of

the Agro Division, Vidal Lingan, met with

Sebastian. The results of their discussion were put

in writing. Bayerphils explained that there are

some claims in the form of rebates should not be

granted to the petitioners, save those which have

valid justifications. Respondents assert that they

are fair to the petitioners in dealing with their claims,

as they granted their requests. Bayerphils offeredto grant Calibres claims so that they may finally


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settle its unpaid accounts totaling to P934,086.92

by a reply dated November 24, 1989. Bayerphils

gave a deadline on or before December 8, 1989.

Respondent conditioned on the premise that failure

to remit the said amount through a bank shall be a

cause for the cancellation of the respondents offer.

In his December 8, 1989 letter, Sebastian

expressed discontent in Bayerphils refusal to credit

his claims in full and underscored the alleged

inaction of Bayerphil in reconciling Calibres

accounts. This was followed by a demand letter

requiring Bayerphil to pay the sum

of P10,000,000.00 for the damages it had allegedly

caused to Calibre. Bayerphil replied, reminding

that Calibre owed it P1,272,103.07 as of December

31, 1989.

Accusing Bayerphil of maliciously breaching the

distributorship agreement by manipulating Calibres

accounts, withholding discounts and rebates due it,

charging unwarranted penalties, refusing to supplygoods, and favoring the new distributors/dealers to

drive it out of business, Calibre, on March 14, 1990,

filed a suit for damages, before the Regional Trial

Court (RTC) of Pasig. Calibre prayed

for P8,000,000.00 actual damages, representing

alleged actual losses and profits; P2,000,000.00

award as alleged damage to its goodwill and

business reputation; P3,500,000.00 as exemplary

damages; and, attorneys fees ofP1,500,000.00.

In its Answer with Counterclaim, Bayerphil denied

its alleged wanton appointment of other distributors

and maintained that Calibre filed the damage suit to

avoid paying its overdue accounts. Considering

that those purchased on credit remained unpaid,

Bayerphil had to refuse to further supply Calibre

with its products.

Bayerphil thus prayed for the collection

of P1,272,103.07, with interest of 14% per annum

accruing daily and compounded monthly from the

date of default (as provided in the dealership

agreement); P1,000,000.00 exemplary damages;

and, P200,000.00 attorneys fees and costs of suit.

Bayerphil also moved that Mario Sebastian and his

wife Minda (Sebastians) be impleaded as co-

defendants.

Calibre opposed Bayerphils motion to

implead the Sebastians and moved to strike out the

counterclaim, reasoning that the spouses are not

parties in its suit against Bayerphil and thus are not

the proper parties to the counterclaim. Bayerphil

contended that both causes of action arose from

the same contract of distributorship, and that the

Sebastians inclusion is necessary for a full

adjudication of Bayerphils counterclaim to avoid

duplication of suits.In its October 24, 1990 Resolution, the trial court

rejected Calibres arguments and granted the

motion to implead the Sebastians as co-defendants

in the counterclaim.

The spouses then filed their answer to Bayerphils

counterclaim and raised the issue that the

counterclaim against them is permissive, and since

Bayerphil failed to pay the required docket fees, the

trial court has no jurisdiction over the counterclaim.

On December 6, 1993, the trial court rendered

judgment favoring Calibre and dismissing the

Counter-Complaint of the defendant against

Spouses Mario and Minda Sebastian.

CA reversed the RTCs decision and favored

Bayerphils counterclaim. Later, the appellate court

denied the MR of the petitioner.


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Issue/s:

1. Whether or not Calibre is entitled to an

award and damages

2. Whether or not the relief granted toBayerphils counterclaim is proper.

Held:

1. No, Calibre is not entitled to an award and

damages.

There is no adequate proof that Bayerphil

was guilty of abusing its rights. [G]ood faith ispresumed and that the burden of proving bad faith

rests upon a party alleging the same. In civil

cases, the law requires that the party who alleges a

fact and substantially asserts the affirmative of the

issue has the burden of proving it. This is where

Calibre failed. Bayerphil never ignored the request

for accounts reconciliation. Bayerphil acted on

Calibres letter and sent its representatives to meet

with Sebastian. Bayerphils second letter, wherein

some claims were additionally granted, was on

Bayerphils part an act of concession in its desire to

be paid since Calibre remained adamant in not

paying its accounts. If ever Calibre found the

second letter to be apparently inconsistent with the

first letter, bad faith cannot be immediately imputed

to Bayerphil since the latter is not precluded from

making prompt corrections in its

computations. This matter involves an honest

difference in the computation of the amount, and/or

a variance in opinion as to the validity of the

claims. under actual or compensatory damages,

indemnification comprises not only the value of the

loss suffered, but likewise the profits the obligee

failed to obtain. To justify a grant of actual or

compensatory damages, the amount of loss must

be proved with a reasonable degree of certainty,

based upon competent proof and the best

evidence obtainable by the injured party. The

projected sum of P10 million sales cannot thus be

the proper base in computing actual

damages. Calibre computed its lost income based

only on its capability to sell around P10 Million, not

on the actual income earned in the past years to

properly compute the average income/profit. At

any rate, since Calibre had no cause of action at all

against Bayerphil, there can be no basis to award it

with damages.

2. Yes, the grant of the respondents

counterclaim is proper.

A compulsory counterclaim is any claim

for money or other relief, which a

defending party may have against an

opposing party, which at the time of suit

arises out of, or is necessarily connected

with, the same transaction or occurrencethat is the subject matter of plaintiffs

complaint. It is compulsory in the sense

that it is within the jurisdiction of the court,

does not require for its adjudication the

presence of third parties over whom the

court cannot acquire jurisdiction, and will

be barred x x x if not set up in the answer

to the complaint in the same case. Any

other claim is permissive. [The] Court

has already laid down the following tests

to determine whether a counterclaim is

compulsory or not, to wit: (1) Are the

issues of fact or law raised by the claim

and the counterclaim largely the same?

(2) Would res judicatabar a subsequent

suit on defendant's claims, absent the

compulsory counterclaim rule? (3) Will


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substantially the same evidence support

or refute plaintiff's claim as well as the

defendant's counterclaim? and (4) Is there

any logical relation between the claim and

the counterclaim, such that the conduct of

separate trials of the respective claims of

the parties would entail a substantial

duplication of effort and time by the parties

and the court? The fourth test is the

compelling test of compulsoriness.

Bayerphils suit may independently proceed in a

separate action. Although the rights and

obligations of the parties are anchored on the same

contract, the causes of action they filed against

each other are distinct and do not involve the same

factual issues. We find no logical relationship

between the two actions in a way that the recovery

or dismissal of plaintiffs suit will establish a

foundation for the others claim. The counterclaim

for collection of money is not intertwined with orcontingent on Calibres own claim for damages,

which was based on the principle of abuse of

rights. Both actions involve the presentation of

different pieces of evidence. Calibres suit had to

present evidence of malicious intent, while

Bayerphils objective was to prove nonpayment of

purchases. The allegations highlighting bad faith

are different from the transactions constituting the

subject matter of the collection suit. Respondents

counterclaim was only permissive. Hence, the CA

erred in ruling that Bayerphils claim against the

petitioners partakes of a compulsory

counterclaim. The rules and jurisprudence do not

require that the parties to the counterclaim be the

original parties only. In fact, the presence of third

parties is allowed, the only provision being their

capacity to be subjected under the courts

jurisdiction. As regards the nature of the claims of

the parties, neither is it required that they be of the

same nature, only that they arise from the same

transaction or occurrence.

All along, Bayerphil has never evaded payment of

the docket fees on the honest belief that its

counterclaim was compulsory. It cannot be

gainsaid that the emerging trend in the rulings of

this Court is to afford every party litigant the

amplest opportunity for the proper and just

determination of his cause, free from the

constraints of technicalities. Rules on the payment

of filing fees have already been relaxed. It is a

settled doctrine that although the payment of the

prescribed docket fees is a jurisdictional

requirement, its non-payment x x x should not

result in the automatic dismissal of the case

provided the docket fees are paid within the

applicable prescriptive period. The prescriptive

period therein mentioned refers to the period withinwhich a specific action must be filed. It means that

in every case, the docket fee must be paid before

the lapse of the prescriptive period. In accordance

with the aforementioned rules on payment of

docket fees, the trial court upon a determination

that Bayerphils counterclaim was permissive,

should have instead ordered Bayerphil to pay the

required docket fees for the permissive

counterclaim, giving it reasonable time but in no

case beyond the reglementary period. Considering

the foregoing discussion, we find no need to

remand the case to the trial court for the resolution

of Bayerphils counterclaim.

WHEREFORE, the July 31, 2002 Decision of the

Court of Appeals in CA-G.R. CV No. 45546

is AFFIRMED. Considering that the counterclaim


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is permissive, respondent Bayer Philippines, Inc.

is ORDEREDto pay the prescribed docket fees

with the Regional Trial Court of Pasig City within

fifteen (15) days from receipt of this Decision.


VIRGINIA S. DIO and H.S. EQUITIES,LTD.,Petitioners,

vs.SUBIC BAY MARINE EXPLORATORIUM,INC., represented by its Chairman and

Chief Executive Officer, TIMOTHYDESMOND,Respondents.

G.R. No. 189532 June 11, 2014

Facts:

Petitioner H.S. Equities, Ltd., (HSE) isa foreign corporation duly organizedand existing under the laws of theBritish Virgin Islands, with registeredaddress at Akara Building, 24 DeCastro Street, Wickhams Cay I, RoadTown, Tortola, British Virgin Islands. Itentered into an isolated transactionsubject of the instant case. It isrepresented in this action by petitionerVirginia S. Dio (Dio).

Respondent Subic Bay MarineExploratorium, Inc. (SBME) is adomestic corporation, duly organizedand existing under the Philippine lawsand is represented in this action by itsChief Executive Officer, respondentTimothy Desmond (Desmond).

In 2002, SBME decided to expand itsbusiness by operating a beach resortinside the property administered bythe Subic Bay Metropolitan Authority(SBMA).

HSE (formerly known as WestdaleAssets Limited) thru its authorizeddirector, Dio, agreed to invest theamount of US$2,500,000.00 withSBME by purchasing 750,000common shares with a par valueofP100 per share from the increase inits authorized capital stock. After HSEinitially paid US$200,000.00 for itssubscription, it refused to further lay

out money for the expansion project ofthe SBME due to the alleged

mismanagement in the handling ofcorporate funds.

Consequently, SBME initiated an intra-corporate dispute before the RTC ofBalanga City, Bataan against

petitioners HSE and Dio.Beforepetitioners could file their answer tothe complaint, respondents impleadedits Corporate Secretary, Atty. WinstonGinez, as additional defendant. In theirAmended Complaint, SBMEessentially alleged that HSE unjustlyrefused to pay the balance of itsunpaid subscription effectivelyjeopardizing the companys expansionproject. It was further alleged bySBME that Dio tried to dissuade localinvestors and financial institutions from

putting in capital to SBME by imputingdefamatory acts against Desmond. Toprotect the interest of the corporationand its stockholders, SBME soughtthat petitioners be enjoined fromcommitting acts inimical to the interestof the company.

To refute the claims of respondents,petitioners maintained in their Answerwith Compulsory Counterclaimthat itwould be highly preposterous for themto dissuade investors and banks from

putting in money to SBME consideringthat HSE and Dio are stakeholders ofthe company with substantialinvestments therein.

In turn, petitioners countered that theirreputation and good name in thebusiness community were tarnishedas a result of the filing of the instantcomplaint, and thus prayed that theybe indemnified.

It was alleged that after the filing of theinstant complaint, Desmond, incollusion with other Board of Directorsof SBME, managed to unjustly denyHSE and Dio their rights under theSubscription Agreement. To curbsimilar socially abhorrent actions,petitioners prayed that SBME and itsBoard of Directors, namely, Desmond,John Corcoran, Gaile Laule andGregorio Magdaraog, be jointly andseverally held liable to pay exemplarydamages in the amount ofUS$2,000,000.00.


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After petitioners filed their Answer withCompulsory Counterclaim, the RTC,issued an Orderdated 15 August 2005motu proprio dismissing the civil caseand was grounded on the defectivecertificate of non-forum shopping

which was signed by Desmond withoutspecific authority from the Board ofDirectors of SBME.

Armed with a board resolutionspecifically authorizing Desmond tosign the certificate of non-forumshopping on behalf of SBME,respondents moved that the civil casebe reinstated and further proceedingsthereon be conducted. A copy of suchauthority was attached by respondentsto their Motion for Reconsideration.

For lack of merit, RTC deniedrespondents motion and affirmed thedismissal in an Orderdated 22September 2005. The court a quoruled that the belated submission of aboard resolution evidencingDesmonds authority to bind thecorporation did not cure the initialdefect in the complaint and declaredthat strict compliance with proceduralrules is enjoined for the orderlyadministration of justice.

Aggrieved by the lower courts refusalto reinstate their complaint,respondents elevated the matterbefore the Court of Appeals assailingthe propriety of the 15 August 2005and 22 September 2005 RTC Ordersvia Petition for Review .

For failure of the respondents to filetheir appellants brief, the appellatecourt proceeded to dismiss andconsider the case closed andterminated in its Resolutiondated 2January 2007.

After respondents failed to seasonablymove for the reconsideration of theaforementioned Resolution, thedismissal became final and executory,as shown in the Entry ofJudgmentdated 3 May 2007.

The procedural incidents before theappellate court having been resolved

with finality, petitioners went back tothe RTC to file a motion to set theircounterclaims for hearingwhich was

opposed by the respondents on theground that the filing of thecompulsory counterclaims was notaccompanied by payment of therequired docket fees precluding thecourt from acquiring jurisdiction over

the case.

Acting on the motions filed by theopposing parties, the RTC, in an Orderdated 3 April 2009 granted the motionof the respondents, thereby directingthe dismissal of petitionerscounterclaims but not on the ground ofnon-payment of docket fees. Indisallowing petitioners counterclaimsto proceed independently ofrespondents complaint, the lowercourt pointed out that in view of the

dismissal of the main case, which hasalready been affirmed with finality bythe appellate court, it has already lostits jurisdiction to act on petitionerscounterclaim, the compulsorycounterclaim being merely ancillary tothe principal controversy.

In an Orderdated 26 August 2009, theRTC refused to reconsider its earlierdisposition. Petitioners filed this instantPetition for Review on Certiorarionpure question of law seeking the

reversal of the 3 April 2009 and 26August 2009 RTC Orders.

Issue:

Whether or not the Trial Court committed anerror of law when it refused to set [petitioners]counterclaims for hearing on the ground thatthe case was deemed "Closed andTerminated" by the Court Of Appeals after thelatter dismissed respondents appeal becauseof their failure to file their appellants brief.

Ruling:

Petitioners here raise the solitary issue of thepropriety of the dismissal of their counterclaimon the basis of the reasoning of the lower courtthat the counterclaim derives its jurisdictionalsupport from the complaint which has alreadybeen dismissed. Petitioners maintain that thecourt a quo erred in arriving at the legalconclusion that the counterclaim can no longerstand for independent adjudication after themain case was already dismissed with finality.

In order to resolve this issue, the Court needonly to look into the pleadings, depositions,


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admissions, and affidavits submitted by therespective parties without going into the truthor falsity of such documents. Consequently,the petitioners remedy for assailing thecorrectness of the dismissal of theircounterclaims, involving as it does a pure

question of law, indeed lies with this Court.

The dismissal of the complaint resulted fromrespondents failure to append to the complainta copy of the board resolution authorizingDesmond to sign the certificate of non-forumshopping on behalf of SBME. The subsequentdismissal of the counterclaim, in turn,erroneously proceeded from the ratio thatsince the main action has already beendismissed with finality by the appellate court,the lower court has lost its jurisdiction to grantany relief under the counterclaim.

In the significant case of Pinga v. Heirs ofGerman Santiago, this Court speakingthrough Justice Dante Tinga, resolved thenagging question as to whether or not thedismissal of the complaint carries with it thedismissal of the counterclaim. Putting to restthe remaining confusion occasioned by MetalsEngineering Resources Corp. v. Court ofAppeals and BA Finance Corporation v.Co, the Court articulated that, in light of theeffectivity of the 1997 Rules of Civil Procedure,the correct and prevailing doctrine is asfollows:

To be certain, when the Courtpromulgated the 1997 Rules of CivilProcedure, including the amendedRule17, those previous jural doctrinesthat were inconsistent with the newrules incorporated in the 1997 Rules ofCivil Procedure were implicitlyabandoned insofar as incidents arisingafter the effectivity of the newprocedural rules on 1 July 1997. BA

Finance, or even the doctrine that acounterclaim may be necessarilydismissed along with the complaint,clearly conflicts with the 1997 Rules ofCivil Procedure. The abandonment ofBA Finance as doctrine extends as farback as 1997, when the Court adoptedthe new Rules of Civil Procedure. If,since then, such abandonment has notbeen affirmed in jurisprudence, it isonly because no proper case hasarisen that would warrant expressconfirmation of the new rule. That

opportunity is here and now, and wethus rule that the dismissal of acomplaint due to fault of the

plaintiff is without prejudice to theright of the defendant to prosecuteany pending counterclaims ofwhatever nature in the same orseparate action.We confirm that BAFinance and all previous rulings of the

Court that are inconsistent with thispresent holding are now abandoned.

x x x x

Thus, the present rule embodied in Sections 2and 3 of Rule 17ordains a more equitabledisposition of the counterclaims by ensuringthat any judgment thereon is based on themerit of the counterclaim itself and not on thesurvival of the main complaint. Certainly, if thecounterclaim is palpably without merit orsuffers jurisdictional flaws which standindependent of the complaint, the trial court isnot precluded from dismissing it under theamended rules, provided that the judgment ororder dismissing the counterclaim is premisedon those defects. At the same time, if thecounterclaim is justified, the amended rulesnow unequivocally protect such counterclaimfrom peremptory dismissal by reason of thedismissal of the complaint. Reviewing thevacated position, in Metals EngineeringResources Corp., severance of causes ofaction was not be permitted in order to preventcircuity of suits and to avert the possibility ofinconsistent rulings based on the same set offacts, viz:

For all intents and purposes, suchproposition runs counter to the natureof a compulsory counterclaim in that itcannot remain pending forindependent adjudication by the court.This is because a compulsorycounterclaim is auxiliary to theproceeding in the original suit andderives its jurisdictional support

therefrom, inasmuch as it arises out ofor is necessarily connected with thetransaction or occurrence that is thesubject matter of the complaint. Itfollows that if the court does not havejurisdiction to entertain the main actionof the case and dismisses the same,then the compulsory counterclaim,being ancillary to the principalcontroversy, must likewise bedismissed since no jurisdictionremained for any grant of relief underthe counterclaim.


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The aforementioned doctrine is in consonancewith the primary objective of a counterclaimwhich is to avoid and prevent circuity of actionby allowing the entire controversy between theparties to be litigated and finally determined inone action, wherever this can be done with

entire justice to all parties before the court.The philosophy of the rule is to discouragemultiplicity of suits.1wphi1It will beobserved that the order of the trial courtallowing herein private respondent to proceedwith the presentation of his evidence insupport of the latter's counterclaim isrepugnant to the very purpose and intent of therule on counterclaims.

In BA Finance Corporation, we likewiserefused to entertain the compulsorycounterclaim after the trial court lost its

jurisdiction in the main case, thus:

The rule is that a compulsorycounterclaim cannot "remain pendingfor independent adjudication by thecourt." This is because a compulsorycounterclaim is auxiliary to theproceeding in the original suit andmerely derives its jurisdictional supporttherefrom.

Thus, it necessarily follows that if the

trial court no longer possessesjurisdiction to entertain the main actionof the case, as when it dismisses thesame, then the compulsorycounterclaim being ancillary to theprincipal controversy, must likewise besimilarly dismissed since nojurisdiction remains for the grant ofany relief under the counterclaim.

As the rule now stands, the nature of thecounterclaim notwithstanding, the dismissal ofthe complaint does not ipso jure result in the

dismissal of the counterclaim, and the lattermay remain for independent adjudication ofthe court, provided that such counterclaim,states a sufficient cause of action and does notlabor under any infirmity that may warrant itsoutright dismissal. Stated differently, thejurisdiction of the court over the counterclaimthat appears to be valid on its face, includingthe grant of any relief thereunder, is not abatedby the dismissal of the main action. The courtsauthority to proceed with the disposition of thecounterclaim independent of the main action ispremised on the fact that the counterclaim, on

its own, raises a novel question which may be

aptly adjudicated by the court based on its ownmerits and evidentiary support.

InPerkin Elmer Singapore Pte Ltd. v. DakilaTrading Corporartion, a case on all fours withthe present one, we expounded our ruling in

Pinga and pointed out that the dismissal of thecounterclaim due to the fault of the plaintiff iswithout prejudice to the right of the defendantto prosecute any pending counterclaims ofwhatever nature in the same or separateaction, thus: Based on the aforequoted rulingof the Court, if the dismissal of the complaintsomehow eliminates the cause of thecounterclaim, then the counterclaim cannotsurvive. Conversely, if the counterclaim itselfstates sufficient cause of action then it shouldstand independently of and survive thedismissal of the complaint. Now, having been

directly confronted with the problem of whetherthe compulsory counterclaim by reason of theunfounded suit may prosper even if the maincomplaint had been dismissed, we rule in theaffirmative.

It bears to emphasize that petitioner'scounterclaim against respondent is fordamages and attorney's fees arising from theunfounded suit. While respondent's Complaintagainst petitioner is already dismissed,petitioner may have very well already incurreddamages and litigation expenses such asattorney's fees since it was forced to engagelegal representation in the Philippines toprotect its rights and to assert lack ofjurisdiction of the courts over its person byvirtue of the improper service of summonsupon it. Hence, the cause of action ofpetitioner's counterclaim is not eliminated bythe mere dismissal of respondent's complaint.

Once more, we allow the counterclaim ofthe petitioners to proceed independently ofthe complaint of the respondents.

WHEREFORE, premises considered, thepetition is GRANTED.


Cabaero v. Hon. Cantos, G.R. No. 102942,

April 18, 1997

Petitioner:Amado F. Cabaero and Carmen C.

Perez, Amado organized the joint business

venture together with Epifanio Ceralde herein

respondent to the case, Aqualand Ventures &Management Corporation.


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Petitioners, conspired and falsely

pretending with intent to defraud Epifanio

Ceralde.

Amado F. Cabaero, Senior Vice-

President of Aqualand Ventures &

Management Corporation.

Carmen C. Perez, encashed the

check and misappropriated, misapplied and

converted the said amount for their own

personal use and benefit.

Respondent: Hon. Alfredo C. Santos in his

capacity as Presiding Judge of the RTC of

Manila, Br. VII, and Epifanio Ceralde, latter

was defrauded with the amount P1,550,000.00

Principles: Actions; Pleadings and Practice;

Waiver; A motion attacking a pleading or a

proceeding shall include all objections not so

included shall be deemed waived.

Counterclaims; Docket Fees; No

docket fee are required to be paid in

connection with the filing of a compulsory

counterclaim.

Counterclaims is defined as any

claim for money or other relief which a

defending party may have against an opposing

party, while Compulsory Counterclaim is one

which at the time of suit arises out of, or is

necessarily connected with, the same

transaction or occurrence that is subject matter

of plaintiff's complaint.

Right:

Obligation:

Violation:

Facts: A special civil action was filed by the

petitioners in the Supreme Court by way of

Certiorari.

The present petition emanated from

Crim. Case No. 90-18826 of the RTC of

Manila. Said case commenced on October 18,

1990, with the filing of an information against

petitioners charging them with estafa for

allegedly defrauding private respondentEpifanio Cerlade of the sum of P1,550,000.00.

In the said case, that in or about and

during the period comprised between

September, 1987 and October 30, 1987, in the

city of Manila, Philippines, the said accused,

conspiring and confederating together and

mutually helping each other, did then and

there wilfully, unlawfully and feloniously

defraud on Epifanio Cerlade by inducing said

Epifiano Cerlade to advance the total amount

of P1,550,000.00 to be paid to M.C. CastroConstruction, Co. representing the purchase

price of 6 parcels of land located in

Pangasinan which the Aqualand Ventures &

Management Corporation, a joint business

venture organized by accused Amado F.

Cabaero and the said Epifanio Ceralde,

purchased from the said company, with the

understanding that the said amount would be

returned to Epifanio Ceralde as soon as the

loan for P1,500,000.00 applied for by the said

Aqualand Ventures & ManagementCorporation with Solid Bank, of which the said

accused Amado F. Cabaero is the Senior

Vice-President, is released, but both accused,

once the said loan has been approved by the

bank, in furtherance of their conspiracy and

falsely pretending that accused Carmen C.

Perez had been authorized by the said

Aqualand Ventures & Management

Corporation to receive the check for

P1,500,000.00 for and in its own behalf,

succeeded in inducing the cashier of said SolidBank to release the same to accused Carmen

C. Perez, thereby enabling her to encash the

aforesaid check, and instead of turning over

the said amount to the said Epifanio Ceralde,

accused failed and refused, and still failed and

refused despite of repeated demands made to

that effect, and with intent to defraud,

misappropriated, misapplied and converted the

said amount to their own personal use and

benefit, to the damage and prejudice of the

said Epifanio Ceralde in the aforesaid amount

of P1,550,000.00, Philippine Currency.


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Thus, on January 7, 1991, petitioners

were arraigned and entered a plea of not

guilty.

On February 5, 1991, Atty. Ambrosio

Blanco entered his appearance as private

prosecutor.

Thereon, on February 11, 1991, the

Presiding Judge of the RTC of Manila, Branch

IV, Hon. Elisa R. Israel inhibited herself out of

delicadeza from further hearing the case

pursuant to Section 1 of Rule 137 of the Rules

of Court after considering that the

complainant is a relative by affinity of a

nephew of her husband.

Thereafter, the case was re-raffled toBranch VII presided over by respondent Judge

Alfredo Cantos.

On April 2, 1991, petitioners filed an

answer with counterclaim alleging that the

money loaned from Solid Bank mentioned in

the information was duly applied to the

purchase of the 6 parcels of land in

Pangasinan, and that the filing of said

information was unjustified and malicious.

Thus, petitioners prayed that theinformation be dismissed or quashed and the

civil action impliedly instituted in the criminal

action; ordering the complaining witness

Ceralde to pay to them P1,500,000.00 as

moral damages, P550,000.00 as exemplary

damages, P100,000.00 as attorney's fees;

and, P20,000.00 as litigation expenses.

Hence, accused pray for such other reliefs,

legal and equitable in the premises.

During the initial hearing on April 15,

1991, the prosecution verbally moved that the

answer with the counterclaim be expunged

from the records and/or dismissed. The

respondent judge, after the exchange of

arguments between the two parties gave the

contending parties time to submit a

Memorandum and Comment or Opposition.

The Memorandum of the private

prosecutor justified his Motion to Expunge the

answer with counterclaim for 2 reasons: (1) the

trial court had no jurisdiction over the answerwith countercalim for non-payment of the

prescribed docket fees and (2) the

compulsory counterclaim against complainant

is barred for failure to file it before

arraignment.

In their Opposition, petitioners argued

that this court in Javier vs IAC laid down, for

procedural soundness, the rule that a

counterclaim should be permitted in a criminal

action where the civil aspect in not served.

Further, inasmuch as petitioners' counterclaim

was compulsory in nature, they were not

required to pay docket fees therefor.

Additionally, the Rules do not specifically

provide for filing of counterclaims in crimanal

cases, whereas Section 3 of Rule 9 and

Section 9 of Rules 6 allow the filing, with leave

of court, of a counterclaim at any time beforejudgment. Thus, petitioners contended that

their filing was within the proper period.

Thereon, respondent Judge Cantos

granted the prosecutions' Motion to Expunge

in an order dated July 1, 1991and denied the

petitioners' motion for reconsideration in an

order dated August 21, 1991.

On the theory that there is no plain,

speedy and adequate remedy in the ordinary

course of law, the petitioners through counsel,

filed this instant petition.

Issue: WON the counterclaim of the accused

can be tried together with the criminal case

filed against petitioners.

Ruling: NO. The Court ruled that the

counterclaim of the cannot be tried together

with the criminal case because, as already

discussed, it will unnecessarily complicate and

confuse the criminal proceedings. Thus, the

trial court should confine itself to the criminal

aspect and the possible civil liability of the

accused arising out of the crime. The

counterclaim (and cross-claim or third party

complaint, if any) should be set aside or

refused cognizance without prejudice to their


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filing in separate proceedings at the proper

time.

As explained in the case of Javier vs

IAC, allowing and hearing counterclaims (and

possibly crossclaims and third-party

complaints) in a criminal action will surely

delay the said action. The primary issue in a

criminal prosecution that is under the control of

state prosecutors is the guilt of the accused

and his civil liability arising from the same act

or omission. Extending the civil action arising

from the same acts or omission to

counterclaims, cross-claims and third-party

complaints , and allowing the accused

and other parties to submit evidence of their

respective claims will complicate the

disposition of the criminal case.

In addition, adjudication of compulsory

counterclaims and/or related claims or

pleadings logically includes the application of

other rules which, by their very nature, apply

only to civil actions. The following matters may

be invoked in connection with the filing of an

answer with a counterclaim: the genuineness

and due execution of an actionable document

which are deemed admitted unless specifically

denied under oath, affirmative defenses likeres judicata, prescription, and statute of frauds

which are deemed waived by failure to

interpose tham as affirmative defenses in an

answer; and the failure of a defendant to file

an answer seasonably may result in his

defaultin the civil aspect but not in the criminal.

As a consequence of these matters, the entry

of plea during arraignment will no longer signal

joinder of issues in a criminal action.

Further, in an impliedly instituted civil

action, an accused is not sufficiently apprisedof the specific basis of the claims against him.

An accused learns of the implied institution of

a civil action from the contents of an

information. An information, however, is filed in

behalf of the People of the Philippines. Hence,

it does not contain the ultimate facts relating

to the civil liability of the accused.

At balance, until there are

definitiverules of procedure to govern the

institution, prosecution and resolution of thecivil aspect (and the consequences and

implications thereof) impliedly instituted in a

criminal case, trial courts should limit their

jurisdiction to the civil liability of the accused

arising from the criminal case.

Wherefore, the questioned orders

dated July 1,1991 and August 21, 1991 are

hereby modified.

The counterclaim of the accused is

hereby set aside without prejudice. The

respondent RTC of Manila is directed to

proceed with the trial of the criminal action and

the civil action arising from the criminal offense

that is impliedly instituted therein, with all

judicios dispatch. No costs.

Notes:


Section 7. Compulsory counterclaim. Acompulsory counterclaim is one which, beingcognizable by the regular courts of justice,arises out of or is connected with thetransaction or occurrence constituting thesubject matter of the opposing party's claimand does not require for its adjudication the

presence of third parties of whom the courtcannot acquire jurisdiction. Such acounterclaim must be within the jurisdiction ofthe court both as to the amount and the naturethereof, except that in an original action beforethe Regional Trial Court, the counter-claimmay be considered compulsory regardless ofthe amount. (n)


Section 8. Cross-claim. A cross-claim is any

claim by one party against a co-party arisingout of the transaction or occurrence that is thesubject matter either of the original actio

Documents

RULE 5-6 (Rules of Court case Digest)