G.R. No.

138822

January 23, 2001

EVANGELINE ALDAY, petitioner,

vs.
FGU INSURANCE CORPORATION, respondent.
Facts:
Respondent FGU Insurance Corporation filed a complaint with the RTC alleging that petitioner Alday, insurant agent of the
respondent, owed it P114,650.76, representing unliquidated cash advances, unremitted costs of premiums and other
charges.
Petitioner filed her answer and by way of counterclaim, asserted her right for the payment of P104,893.45, representing
direct commissions, profit commissions and contingent bonuses earned and for accumulated premium reserves amounting
to P500,000.00 and prayed for attorney's fees, litigation expenses, moral damages and exemplary damages for the
allegedly unfounded action filed by respondent.
Respondent filed a "Motion to Strike Out Answer With Compulsory Counterclaim And To Declare Defendant In Default"
because petitioner's answer was allegedly filed out of time. The trial court denied the motion and similarly rejected
respondent's motion for reconsideration.
Respondent FGU filed a motion to dismiss petitioner's counterclaim, contending that the trial court never acquired
jurisdiction over the same because of the non-payment of docket fees by petitioner. In response, petitioner asked the trial
court to declare her counterclaim as exempt from payment of docket fees since it is compulsory and that respondent be
declared in default for having failed to answer such counterclaim.
The trial court granted respondent's motion to dismiss petitioner's counterclaim and consequently. The court found
petitioner's counterclaim to be merely permissive in nature and held that petitioner's failure to pay docket fees prevented the
court from acquiring jurisdiction over the same. He trial court similar denied petitioner's motion for reconsideration.
On appeal, the CA sustained the trial court, finding that petitioner's own admissions, as contained in her answer, show that
her counterclaim is merely permissive. The appellate court denied petitioner's motion for reconsideration, giving rise to the
present petition.
Issue:
WON the counterclaim of petitioner is compulsory or permissive in nature
WON there is a need for the petitioner to pay the docket fees in counterclaims.
Held:

A compulsory counterclaim is one which, being cognizable by the regular courts of justice, arises out of or is connected with
the transaction or occurrence constituting the subject matter of the opposing party's claim and does not require for its
adjudication the presence of third parties of whom the court cannot acquire jurisdiction.
In Valencia v. Court of Appeals,20 this Court capsulized the criteria or tests that may be used in determining whether a
counterclaim is compulsory or permissive, summarized as follows:
1. Are the issues of fact and law raised by the claim and counterclaim largely the same?
2. Would res judicata bar a subsequent suit on defendant's claim absent the compulsory counterclaim rule?
3. Will substantially the same evidence support or refute plaintiff's claim as well s defendant's counterclaim?
4. Is there any logical relation between the claim and the counterclaim?
Another test, applied in the more recent case of Quintanilla v. Court of Appeals, is the "compelling test of compulsoriness"
which requires "a logical relationship between the claim and counterclaim, that is, where conducting separate trials of the
respective claims of the parties would entail a substantial duplication of effort and time by the parties and the court."
Tested against the abovementioned standards, petitioner's counterclaim for commissions, bonuses, and accumulated
premium reserves is merely permissive. The recovery of respondent's claims is not contingent or dependent upon
establishing petitioner's counterclaim, such that conducting separate trials will not result in the substantial duplication of the
time and effort of the court and the parties. However, petitioner's claims for damages, allegedly suffered as a result of the
filing by respondent of its complaint, are compulsory.
On the second issue, in order for the trial court to acquire jurisdiction over her permissive counterclaim, petitioner is bound
to pay the prescribed docket fees.
In the permissive counterclaim of petitioner, there is obviously no need to file an answer until petitioner has paid the
prescribed docket fees for only then shall the court acquire jurisdiction over such claim. Meanwhile, the compulsory
counterclaim of petitioner for damages based on the filing by respondent of an allegedly unfounded and malicious suit need
not be answered since it is inseparable from the claims of respondent. If respondent were to answer the compulsory
counterclaim of petitioner, it would merely result in the former pleading the same facts raised in its complaint.
WHEREFORE, the assailed Decision of the Court of Appeals promulgated on 23 December 1998 and its 19 May 1999
Resolution are hereby MODIFIED. The compulsory counterclaim of petitioner for damages filed in Civil Case No. 89-3816
is ordered REINSTATED. Meanwhile, the Regional Trial Court of Makati (Branch 134) is ordered to require petitioner to
pay the prescribed docket fees for her permissive counterclaim (direct commissions, profit commissions, contingent
bonuses and accumulated premium reserves), after ascertaining that the applicable prescriptive period has not yet set in. 33

G.R. No. 143581

January 7, 2008

KOREA TECHNOLOGIES CO., LTD., petitioner,

vs.
HON. ALBERTO A. LERMA, in his capacity as Presiding Judge of Branch 256 of Regional Trial Court of Muntinlupa
City, and PACIFIC GENERAL STEEL MANUFACTURING CORPORATION, respondents.
Petitioner Korea Technologies Co., Ltd. (KOGIES) is a Korean corporation which is engaged in the supply and installation of
Liquefied Petroleum Gas (LPG) Cylinder manufacturing plants, while private respondent Pacific General Steel
Manufacturing Corp. (PGSMC) is a domestic corporation.
PGSMC and KOGIES executed a Contract whereby KOGIES would set up an LPG Cylinder Manufacturing Plant in
Carmona, Cavite. The contract was executed in the Philippines. Later on, the parties executed, in Korea, an Amendment for
Contract amending the terms of payment. The contract and its amendment stipulated that KOGIES will ship the machinery
and facilities necessary for manufacturing LPG cylinders for which PGSMC would pay. KOGIES would install and initiate the
operation of the plant for which PGSMC bound itself to upon the plants production of the 11-kg. LPG cylinder samples.
The machineries, equipment, and facilities for the manufacture of LPG cylinders were shipped, delivered, and installed in
the Carmona plant. PGSMC paid KOGIES USD 1,224,000.
However, gleaned from the Certificate executed by the parties on January 22, 1998, after the installation of the plant, the
initial operation could not be conducted as PGSMC encountered financial difficulties affecting the supply of materials, thus
forcing the parties to agree that KOGIES would be deemed to have completely complied with the terms and conditions of
the contract.
For the installation and initial operation of the plant, PGSMC issued two postdated checks. When KOGIES deposited the
checks, these were dishonored for the reason "PAYMENT STOPPED." KOGIES sent a demand letter to PGSMC
threatening criminal action for violation of Batas Pambansa Blg. 22 in case of nonpayment. On the same date, the wife of
PGSMCs President faxed a letter to KOGIES President complaining that not only did KOGIES deliver a different brand of
hydraulic press from that agreed upon but it had not delivered several equipment parts already paid for.
PGSMC informed KOGIES that PGSMC was canceling their contract on the ground that KOGIES had altered the quantity
and lowered the quality of the machineries and equipment it delivered to PGSMC, and that PGSMC would dismantle and
transfer the machineries, equipment, and facilities installed in the Carmona plant. KOGIES wrote PGSMC informing the
latter that PGSMC could not unilaterally rescind their contract nor dismantle and transfer the machineries and equipment on
mere imagined violations by KOGIES.
KOGIES filed a Complaint for Specific Performance against PGSMC (RTC). The RTC granted a temporary restraining order
(TRO). In its complaint, KOGIES alleged that PGSMC had initially admitted that the checks that were stopped were not
funded but later on claimed that it stopped payment of the checks for the reason that "their value was not received" as the
former allegedly breached their contract by "altering the quantity and lowering the quality of the machinery and equipment"

installed in the plant and failed to make the plant operationa. KOGIES also asked that PGSMC be restrained from
dismantling and transferring the machinery and equipment installed in the plant which the latter threatened to do.
PGSMC filed an opposition to the TRO arguing that KOGIES was not entitled to the.
PGSMC filed its Answer with Compulsory Counterclaim asserting that it had the full right to dismantle and transfer the
machineries and equipment because it had paid for them in full as stipulated in the contract;, the RTC issued an Order
denying the application for a writ of preliminary injunction, reasoning that PGSMC had paid KOGIES the value of the
machineries and equipment as shown in the contract such that KOGIES no longer had proprietary rights over them.
KOGIES prayer for an injunctive writ was denied.
KOGIES filed its Reply to Answer and Answer to Counterclaim. KOGIES denied it had altered the quantity and lowered the
quality of the machinery, equipment, and facilities it delivered to the plant. It claimed that it had performed all the
undertakings under the contract and had already produced certified samples of LPG cylinders. It averred that whatever was
unfinished was PGSMCs fault since it failed to procure raw materials due to lack of funds.
After KOGIES filed a Supplemental Memorandum with Motion to Dismiss answering PGSMCs memorandum and seeking
dismissal of PGSMCs counterclaims.
PGSMC filed a Motion for Inspection of Things to determine whether there was indeed alteration of the quantity and
lowering of quality of the machineries and equipment, and whether these were properly installed. KOGIES opposed the
motion positing that the queries and issues raised in the motion for inspection fell under the coverage of the arbitration
clause in their contract.
The trial court issued an Order granting PGSMCs motion for inspection; and denying KOGIES motion to dismiss PGSMCs
compulsory counterclaims as these counterclaims fell within the requisites of compulsory counterclaims.
KOGIES filed an Urgent Motion for Reconsideration on the order of granting inspection of the plant and denying dismissal of
PGSMCs compulsory counterclaims.
Ten days after, KOGIES filed before the Court of Appeals (CA) a petition for certiorari seeking annulment of the RTC Orders
and praying for the issuance of writs of prohibition, mandamus, and preliminary injunction to enjoin the RTC and PGSMC
from inspecting, dismantling, and transferring the machineries and equipment in the Carmona plant, and to direct the RTC
to enforce the specific agreement on arbitration to resolve the dispute.
KOGIES filed a Supplement to the Petition in CA also reiterating its prayer for the issuance of the writs of prohibition,
mandamus and preliminary injunction which was not acted upon by the CA. KOGIES asserted that the Branch Sheriff did
not have the technical expertise to ascertain whether or not the machineries and equipment conformed to the specifications
in the contract and were properly installed.
The Court of Appeals affirmed the trial court.

the CA affirming the RTC Orders and dismissing the petition for certiorari filed by KOGIES. The CA found that the RTC did
not gravely abuse its discretion..
On the issue of nonpayment of docket fees and non-attachment of a certificate of non-forum shopping by PGSMC, the CA
held that the counterclaims of PGSMC were compulsory ones and payment of docket fees was not required since the
Answer with counterclaim was not an initiatory pleading.
Furthermore, the CA held that the petition for certiorari had been filed prematurely since KOGIES did not wait for the RTCs
resolution, CA held that the RTC must be given the opportunity to correct any alleged error it has committed, and that since
the assailed orders were interlocutory, these cannot be the subject of a petition for certiorari.
Hence, we have this Petition for Review on Certiorari under Rule 45.
WON payment for docket fees in compulsory counterclaim is necessary
Held:
YES.
The rules on the payment of docket fees for counterclaims
and cross claims were amended effective August 16, 2004
As aptly ruled by the CA, the counterclaims of PGSMC were incorporated in its Answer with Compulsory Counterclaim in
accordance with Section 8 of Rule 11, 1997 Revised Rules of Civil Procedure, the rule that was effective at the time the
Answer with Counterclaim was filed. Sec. 8 on existing counterclaim or cross-claim states, "A compulsory counterclaim or a
cross-claim that a defending party has at the time he files his answer shall be contained therein."
Ahe time PGSMC filed its Answer incorporating its counterclaims against KOGIES, it was not liable to pay filing fees for said
counterclaims being compulsory in nature. We stress, however, that under Sec. 7, Rule 141, as amended by A.M. No. 04-204-SC, docket fees are now required to be paid in compulsory counterclaim or cross-claims.

G.R. No. 169576

October 17, 2008

LEONIDES MERCADO, represented by his heirs: Racquel D. Mercado, Jimmy D. Mercado, Henry D. Mercado,
Louricar D. Mercado and Virgilio D. Mercado, petitioners,
vs.
COURT OF APPEALS and SAN MIGUEL CORPORATION, respondents.

Facts:
Mercado had been distributing respondent San Miguel Corporations (SMCs) beer products in Quiapo. SMC extended to
him a credit line allowing him to withdraw goods on credit. To secure his purchases, Mercado assigned three China Banking
Corporation (CBC) certificates of deposit to SMC and executed a continuing hold-out agreement stating that any demand
made by [SMC] on [CBC], claiming default on Mercados part shall be conclusive on [CBC] and shall serve as absolute
authority for [CBC] to encash the [CBC certificates of deposit].Mercado also submitted three surety bonds from Eastern
Assurance and Surety Corporation (EASCO).
SMC notified CBC that Mercado failed to pay for the items he withdrew on credit. It asked CBC to release the proceeds of
the assigned certificates of deposit. CBC approved SMBs request and informed Mercado.
Mercado filed an action to annul the continuing hold-out agreement and deed of assignment in the Regional Trial Court
(RTC). He claimed that the continuing hold-out agreement allowed forfeiture without the benefit of foreclosure was void
pursuant to Article 2088 of the Civil Code.
SMC filed its answer with counterclaim against Mercado contending that Mercado delivered only two CBC certificates of
deposit amounting to P4.5 million and asserted that the execution of the continuing hold-out agreement and deed of
assignment was a recognized business practice. SMC also filed a third-party complaint against EASCO. It sought to collect
the proceeds of the surety bonds submitted by Mercado.
Mercado filed an urgent manifestation and motion seeking the dismissal of the complaint for he was no longer interested in
annulling the continuing hold-out agreement and deed of assignment. The RTC, however, denied the motion.
During trial, Mercado acknowledged the accuracy of SMCs computation of his outstanding liability. Thus, the RTC
dismissed the complaint and ordered Mercado and EASCO to jointly and severally pay SMC.
Aggrieved, Mercado and EASCO appealed to the Court of Appeals (CA) insisting that Mercado did not default in the
payment of his obligations to SMC.
CA affirmed the RTC decision in toto. Mercado and EASCO both moved for reconsideration but their respective motions
were denied.
Mercado passed away and was substituted by his heirs. Petitioners then subsequently filed this petition asserting that the
CA erred in affirming the RTC decision in toto. The said decision was void. SMCs counterclaim was permissive in nature.
Inasmuch as SMC did not pay docket fees, the RTC never acquired jurisdiction over the counterclaim.

Issue:
WON the payment of docket fees was necessary for the RTC to acquire jurisdiction over the subject matter.

Held:
NO. A counterclaim (or a claim which a defending party may have against any party) may be compulsory or permissive. A
counterclaim that (1) arises out of (or is necessarily connected with) the transaction or occurrence that is the subject matter
of the opposing partys claim; (2) falls within the jurisdiction of the court and (3) does not require for its adjudication the
presence of third parties over whom the court cannot acquire jurisdiction, is compulsory. 18 Otherwise, a counterclaim is
merely permissive.
Based on the foregoing, had these issues been tried separately, the efforts of the RTC and the parties would have had to be
duplicated. Clearly, SMCs counterclaim, being logically related to Mercados claim, was compulsory in nature.
Consequently, the payment of docket fees was not necessary for the RTC to acquire jurisdiction over the subject matter.