Professional Documents
Culture Documents
RESOLUTION
QUISUMBING, J.:
Petitioner seeks the review and reversal of the decision of the Court of Appeals, dated
August 22, 2000 in CA-G.R. SP No. 58379,1 which affirmed the orders of the Regional
Trial Court (RTC), Branch 37, Calamba, Laguna, dated February 8, 2000 and March 29,
2000 in Civil Case No. 2881-2000-C entitled "Carlo A. Tan v. Kaakbay Finance
Corporation, Dennis S. Lazaro and Roldan M. Noynay"2 for declaration of nullity of the
Promissory Note purportedly attached to the Real Estate Mortgage, the usurious and
unlawful or exorbitant and unconscionable rates of interest and fees therein, and the
Deed of Sale Under Pacto de Retro. Likewise, assailed is the appellate court’s resolution3
dated December 20, 2000, denying petitioner’s motion for reconsideration.
In the latter part of 1995, petitioner Carlo4 A. Tan applied for and was granted a loan of
four million pesos (P4,000,000.00) by private respondent Kaakbay Finance Corporation
(Kaakbay), as represented by its president, private respondent Dennis S. Lazaro. As
collateral, a real estate mortgage5 on petitioner Tan’s parcel of land with the
improvements therein all covered by Transfer Certificate Title No. T-2071256 located
along Rizal St., Calamba, Laguna was executed. Petitioner alleged that the stipulated
interest was 12% per annum until fully paid, which amount however, was not stated in
the mortgage when he signed it on November 16, 1995. The amount loaned was released
to him in two installments of P2,500,000.00 and P1,500,000.00 on November 23, 1995
and December 23, 1995, respectively.
As of November 22, 1996, petitioner failed to pay his obligation. He claimed that
Kaakbay never furnished him a copy of the real estate mortgage; that, according to
Kaakbay, his obligation had now reached P5,570,000.00 because the actual interest was
0.3925% for a period of less than one year instead of the agreed-upon interest of 12% per
annum; and that he was made to issue two postdated checks to guarantee his obligation,
namely: UCPB Check No. CBA 052985 in the amount of P5,570,000.00 postdated to
November 5, 1996; and UCPB Check No. CBA 095215 in the amount of P6,175,000.00
postdated to January 31, 1997.7
Petitioner further alleged that he negotiated with Kaakbay for a further extension of time
to pay his obligation, which the latter agreed to. It was agreed that petitioner and
Kaakbay would sign, execute, and acknowledge a Deed of Sale Under Pacto de Retro
upon the expiration of a two-year period starting January 8, 1998 to January 8, 2000.
Petitioner was then given a blank Deed of Sale Under Pacto de Retro on January 8, 1998
which he signed.8 His suspicions that Kaakbay was charging him usurious rates of
interest were confirmed when he obtained a Statement of Account stating that his
obligation had now reached P13,333,750.00.9
On October 21, 1999, petitioner learned of the existence of an accomplished Deed of Sale
Under Pacto de Retro, which appeared that the same was signed by him and his wife
Maria Rosario Delmo Tan, on one hand, and private respondent Lazaro on the other, and
was allegedly notarized by private respondent Atty. Roldan M. Noynay on February 5,
1998,10 when in truth and in fact, he, his wife, and their witness Charito Morales did not
sign it on said date, nor did they execute it before Atty. Noynay or any other notary
public on said date.
On the same date, petitioner filed a Notice of Lis Pendens with the Registry of Deeds of
Calamba, Laguna, which was annotated on TCT No. 207125.12
On January 17, 2000, respondents, through their counsel, Atty. Roldan M. Noynay, filed
their ‘Consolidated Answer With Compulsory Counterclaim And Opposition To
Temporary Restraining Order (TRO) and Preliminary Injunction.’13
During the hearing of petitioner’s application for the issuance of a TRO, the parties
agreed in open court that petitioner would withdraw his application for a TRO, while
respondents in turn would hold in abeyance the registration of the Deed of Sale Under
Pacto de Retro until the case was terminated. The trial court issued an order to that
effect, dated January 17, 2000.14
Later, the law firm of Ortega, Del Castillo, Bacorro, Odulio, Calma, and Carbonell
entered its appearance as counsel for respondents.15 Said counsel requested for an
extension of time to file an Answer, and also moved for the withdrawal of the
‘Consolidated Answer’16 filed by Atty. Noynay insofar as respondents Kaakbay and
Lazaro are concerned.17 Respondents also filed a ‘Supplemental Opposition To The
Prayer For Preliminary Injunction Or To Temporary Injunction.’18
On February 3, 2000, respondents, through the new counsel, filed their Answer with
Counterclaim,19 praying that petitioner pay them four million pesos (P4,000,000.00)
representing the principal amount of the loan, nine million three hundred thirty three
thousand seven hundred fifty pesos (P9,333,750.00) representing the ‘compounded
monthly interest and annual penalty interest’, two hundred fifty thousand pesos
(P250,000.00) as litigation expenses, and five hundred thousand pesos (P500,000.00)
as attorney’s fees.
On February 21, 2000, petitioner filed an Urgent Motion to Expunge Motions and
Pleadings Filed by Defendants Kaakbay Finance Corporation and Dennis S. Lazaro,
Particularly Their Answer with Counterclaim and Motion for Admission of Counterclaim
both Dated February 3, 2000 and/or Comment/Opposition (To Said Defendants’
Manifestation and Supplemental Opposition to their Prayer for Preliminary Injunction
and to Temporary Injunction Dated January 24, 2000 and February 3, 2000
Respectively.)21 In this motion, petitioner pointed out that the respondents were being
represented by their counsel, the law firm of Ortega, Del Castillo, Bacorro, Odulio,
Calma, and Carbonell without stating if said law firm is in collaboration with or in
substitution of their previous counsel, respondent Atty. Roldan M. Noynay. Petitioner
argued that the procedure laid down in the rules concerning the change or substitution
of counsel of a party litigant had not been properly complied with by the respondents,
and thus the motions filed by the said law firm should be expunged. In addition,
petitioner argued that respondents’ Answer with Counterclaim should not be admitted,
as it partook of the nature of a permissive counterclaim, which required the payment of
the prescribed filing fees; and since the fees were not paid, the lower court did not
acquire jurisdiction over said Answer.
In its order of February 8, 2000, the trial court granted respondents’ motion for
admission of counterclaim without payment of fees.22
Petitioner then filed a "Supplemental Motion by Way of Motion for Reconsideration" but
this was denied.
Petitioner seasonably appealed to the Court of Appeals where he maintained that the
trial court committed grave abuse of discretion in admitting the answer with
counterclaim, which contains a permissive counterclaim the correct filing fees of which
have not been paid by respondents Kaakbay and Lazaro to the trial court. Thus,
petitioner insisted that the trial court had not acquired jurisdiction over the said answer
with counterclaim. Alternatively, petitioner urged that said answer be expunged from the
record of the case a quo.
On August 22, 2000, the appellate court promulgated its decision, decreeing as follows:
WHEREFORE, the instant petition is DENIED for lack of merit, and accordingly,
DISMISSED.23
Petitioner then moved for reconsideration, but the appellate court denied it in the
resolution dated December 20, 2000.
Hence, this instant petition, where petitioner now contends that the Court of Appeals
committed the following errors, in:
(a) ITS HOLDING THAT "XXX THE LOWER COURT DID NOT COMMIT
GRAVE ABUSE OF DISCRETION IN DECLARING THE COUNTERCLAIM OF
PRIVATE RESPONDENTS KAAKBAY FINANCE CORPORATION AND DENNIS
S. LAZARO AS COMPULSORY, REQUIRING NO PAYMENT OF LEGAL FEES
XXX" WHEN EVEN THE YULIENCO VS. COURT OF APPEALS CASE (G.R. NO.
131692, JUNE 10, 1999, 308 SCRA 206) IT CITED IN ITS DECISION
FAVORABLY SUPPORTS THE ASSERTION OF PETITIONER THAT THE
COUNTERCLAIM IN RESPONDENTS’ ANSWER IN THE CASE A QUO IS A
PERMISSIVE COUNTERCLAIM.
(b) ITS FAILURE TO RULE IN THE ASSAILED DECISION THAT HON. JUDGE
JUANITA T. GUERRERO HAS ACTED WITHOUT OR IN EXCESS OF
JURISDICTION, OR WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO
LACK OR EXCESS OF JURISDICTION IN ISSUING THE ORDERS OF
FEBRUARY 8, 2000 AND MARCH 29, 2000 CONSIDERING THAT THE
COLLECTION OF THE TOTAL AMOUNT OF P14,083,750.00 REPRESENTING
UNPAID LOAN AND ACCRUED INTEREST THEREIN BY WAY OF
COUNTERCLAIM IS COMPULSORY AND THAT THE ANSWER MAY BE
ADMITTED WITHOUT NECESSITY OF PAYING THE DOCKET FEES.
The basic issue for resolution in this case is whether the counterclaim of respondents is
compulsory or permissive in nature.
Petitioner assails the Court of Appeals for affirming the trial court’s order that the
counterclaim of respondents is compulsory in nature, thus requiring no payment of legal
fees. Petitioner contends that his complaint against the respondents is predicated on the
unauthorized application of usurious, unconscionable and exorbitant rates of interest
and other fees by respondents Kaakbay and Lazaro to petitioner’s loan without the
latter’s knowledge, as well as the approval and the falsification of the promissory note
supposed to be attached to the Real Estate Mortgage and the Deed of Sale Under Pacto
de Retro.
According to petitioner, he did not attempt to prevent the foreclosure of the mortgage
because what he questions is the validity of the promissory note and the void rates of
interest. He insists that these were falsified. He likewise assails the genuineness of the
deed of sale in dispute. Since the evidence to be presented by the respondents to support
the genuineness and due execution of the questioned promissory note and the Deed of
Sale Under Pacto de Retro as a ground for the specific performance thereof, is not the
same as the evidence to be presented by the petitioner as plaintiff in the case below to
support his claim of fraud employed by respondents, petitioner asserts the counterclaim
cannot be deemed compulsory. He adds that since the respondents demand the payment
of the loan and the interests pursuant to the contract of loan, completely inconsistent
with his claim that subject documents were a nullity, what respondents had filed is not a
compulsory counterclaim.
For their part, respondents contend that their counterclaims are for payment of the
unpaid loan of the petitioner in the amount of P4,000,000.00, the compounded interest
with annual penalty equivalent to P9,333,750.00, litigation expenses of P250,000 and
attorney’s fees of P500,000. The respondents say these are all compulsory and not
permissive counterclaims. Petitioner admitted in his complaint his indebtedness to
respondent Kaakbay Finance Corporation in the amount of P4,000,000.00 and his
liability for interest at the rate of 12% per annum only. These admissions arise out of, or
are necessarily connected with, or have a logical relation to the transaction or occurrence
forming the subject matter of the petitioner’s claim. Consequently, respondents conclude
that the trial court did not err in ruling that payment of the docket fees is no longer
necessary as their counterclaims are compulsory in nature.
Tested against the abovementioned standards, we agree with the appellate court’s view
that respondents’ counterclaims are compulsory in nature. Petitioner’s complaint was for
declaration of nullity, invalidity or annulment of the promissory notes purportedly
attached to the Real Estate Mortgage dated November 16, 1995 and the usurious and
void interest rates appearing therein and the Deed of Sale Under Pacto De Retro.
Respondents’ counterclaim was for the payment of the principal amount of the loan,
compounded monthly interest and annual penalty interest arising out of the non-
payment of the principal loan, litigation expenses and attorney’s fees. There is no dispute
as to the principal obligation of P4,000,000, but there is a dispute as to the rate and
amount of interest. Petitioner insists that the amount of interest is only 12% yearly until
fully paid, while respondents insist on 3.5% monthly. Also, respondents allege that
petitioner owes them P9,333,750.00 representing the compounded monthly interest and
annual penalty, which is disputed by petitioner. Petitioner further seeks the nullification
of the Deed of Sale Under Pacto de Retro for being falsified, while respondents aver the
deed is valid. It thus appears that the evidence required to prove petitioner’s claims is
similar or identical to that needed to establish respondents’ demands for the payment of
unpaid loan from petitioner such as amount of interest rates. In other words, petitioner’s
claim is so related logically to respondents’ counterclaim, such that conducting separate
trials for the claim and the counterclaim would result in the substantial duplication of
the time and effort of the court and the parties. Clearly, this is the situation contemplated
under the "compelling test of compulsoriness." The counterclaims of respondents herein
are obviously compulsory, not permissive. As aptly held by the Court of Appeals, the
issues of fact and law raised by both the claim and counterclaim are largely the same,
with a logical relation, considering that the two claims arose out of the same
circumstances requiring substantially the same evidence. Any decision the trial court will
make in favor of petitioner will necessarily impinge on the claim of respondents, and vice
versa. In this light, considering that the counterclaims of respondents are compulsory in
nature, payment of docket fees is not required. The CA did not err in holding that the
trial court had acquired jurisdiction on the matter.28
WHEREFORE, the petition is hereby DENIED for lack of merit, and the assailed
decision of the Court of Appeals dated August 22, 2000 and its resolution dated
December 20, 2000, in CA-G.R. SP No. 58379, are AFFIRMED. No pronouncement as to
costs.
SO ORDERED.
TEEHANKEE, J.:p
This original action for prohibition with preliminary injunction was filed on June 3, 1971
by the then municipal mayor of Pozorrubio, Pangasinan, against the then provincial
governor and members of the provincial board of Pangasinan and other co-respondents.
The petition questioned the legality and validity of Resolution No. 176 dated May 20,
1971 and of Resolution No. 185 dated May 27, 1971 of respondent provincial board
resolving to preventively suspend petitioner mayor from her office at the instance of
complainant (herein respondent Anita T. Estrada, president of the Pozorrubio Market
Vendors Association, Inc.) who had filed administrative charges against petitioner mayor
for alleged oppression and/or misconduct in office.
The said administrative complaint dated December 29, 1970 was intimately related to a
complaint filed on December 1, 1970 in the Court of First Instance of Pangasinan by the
same market vendors association questioning the validity of the municipal ordinances
sought to be enforced by petitioner mayor against them in the matter of their vacating
their leased market stalls to give way to the construction of a new market building. Said
civil complaint was dismissed by the court per its decision dated April 5, 1971, and
plaintiff appealed the same to the Court of Appeals.
The petitioner further sought the issuance of a restraining order or preliminary
injunction against said resolutions of the provincial board and her impending
suspension thereunder, and the Court issued the corresponding temporary restraining
order per its resolution of June 4, 1971.
Respondents duly filed their respective answers besides a joint motion to lift restraining
order. After discussion of the motion by the parties in their various pleadings, the Court
issued its Resolution of July 2, 1971, as follows: .
... THE COURT resolved: (a) to issue an amended temporary restraining
order so as to restrain the respondents herein from continuing with the
hearing of Administrative Case No. 11, entitled "Anita T. Estrada,
complainant, vs. Fe F. Bautista, etc., respondent," of the Provincial Board
of Pangasinan; (b) to require the respondents to show cause, not later
than July 12, 1971, why the writ of preliminary injunction prayed for
should not be issued; and (c) to set the hearing of the case on the merits
and on the matter of the issuance of a preliminary injunction on
Wednesday, July 14, 1971, at 9:30 a.m.
After the hearing thus held on July 14, 1971, respondents officials filed a manifestation
dated July 19, 1971 informing the Court: .
That on July 17, 1971, the Provincial Board of Pangasinan passed a
resolution suspending indefinitely the continuation of the investigation of
Administrative Case No. 11 entitled Anita Estrada, complainant, versus
Mayor Fe Bautista, respondent, and declaring Resolutions Nos. 176 and
185, both current series, of the Board as functus oficio and without any
further force and effect,
and submitting a certified copy of the resolution referred to, as unanimously approved by
the provincial board. The resolution was approved upon the written recommendation of
then vice-governor Millora who called the board's attention to the corresponding
provisions of the Decentralization Act "that no [administrative] investigation shall
commence or continue within ninety (90) days immediately prior to an election."
(Section 5, Republic Act No. 5185).
Petitioner's counsel filed a counter-manifestation dated August 7, 1971 expressing
concern that the provincial board's "indefinite suspension" of the administrative case
might be lifted after the November 1971 elections, notwithstanding that the said board
had in effect cancelled its questioned resolutions that sought to effect the preventive
suspension of petitioner.
With the expiration of the term of office of petitioner mayor * as well as of respondents
provincial officials as of the end of the year 1971 without any further action having been
taken by the latter and without petitioner's preventive suspension during her said term
having been effected, the issues in the case at bar have become moot and academic.
ACCORDINGLY, the Court resolved to dismiss the case at bar, without pronouncement
as to costs.
Concepcion, C.J., Reyes, J.B.L., Makalintal, Zaldivar, Castro, Fernando, Barredo,
Villamor and Makasiar, JJ., concur.
Footnotes
* As per Comelec certification of Feb. 8, 1972, petitioner was a candidate
for the same office of mayor of Pozorrubio at the Nov. 8, 1971 elections
and lost to the now incumbent Mayor Artemio R. Saldivar.
CONCEPCION, C.J.:
This is an original action to set aside several orders of the Court of First Instance of
Manila, in Civil Case No. 43073 thereof, as well as an alias writ of execution and a notice
of sale issued in connection therewith. Upon the filing of the petition and the submission
and approval of a bond in the sum of P1,000.00, on motion of petitioners herein, we
issued a writ of preliminary injunction enjoining respondent Judge and the Sheriff of
Manila from carrying out the aforementioned writ of execution.
Petitioners herein are the spouses Jose S. Agawin and Felicisima Ballecer. On May
4, 1960, they instituted, said Civil Case No. 43073 against respondent Jose Bernardo, to
recover damages allegedly caused by him in consequence of the destruction and
demolition of a portion of a wall of the petitioners, along the common boundary line of
their lot and that of Bernardo, at Felix Huertas Street, Manila, as well as to recover
possession of a portion of petitioners' aforementioned lot, with an area of 0.80 square
meters, which was allegedly encroached upon by the wall subsequently erected by
Bernardo in place of the one he had destroyed.
In due course, Bernardo filed his answer denying petitioners' averments, and
alleging, in turn, that the demolition and destruction made by him had taken place
within the boundary of his own property. By way of counterclaim, Bernardo set up two
(2) causes of action, namely: (1) that petitioners were the parties who had encroached
upon and occupied a portion of Bernardo's property, with an area of about 3.70 square
meters, without his consent and against his will, and (2) that petitioners' complaint is
premature, uncalled for, capricious and without any justifiable cause, for which reason
Bernardo prayed that they be sentenced to vacate his aforementioned portion of land
allegedly encroached upon by them and to turn it over to him, and to pay damages
aggregating P48,000.00.
On the last day of the reglementary period to answer the counterclaim, or on June
6, 1960, petitioners filed ex parte urgent motion for extension of time therefor, but on
June 11 the motion was denied and ordered stricken off the record. Then, on June 13, the
court declared petitioners in default as to the counterclaim and ordered Bernardo to
present his evidence thereon before the Deputy Clerk of Court on June 15, at 9: 00 a.m.,
which Bernardo did. On June 20, the court rendered a decision the dispositive part of
which reads:
WHEREFORE, the Court hereby renders judgment on the counterclaim in
favor of the defendant-counterclaimant and against the plaintiffs, as follows:
1. Ordering the plaintiffs and/or their agents and representatives including all
persons claiming under them to deliver and restore the possession thereof to the
defendant, that portion of said defendant's property consisting of 3.7 square
meters which is being encroached upon and occupied by or in possession of the
plaintiffs;
2. Ordering plaintiffs to pay, jointly and severally, the defendant the following
sums, to wit:
(a) P3,625.00 as compensatory damages which the defendant failed to
realize in the form of rentals from that portion of his property subject
matter of the counterclaim, corresponding to the period from May, 1948
to May, 1960, with interest thereon at the legal rate from the date of filing
of the answer with counterclaim until fully paid; plus the sum of P25.00
for each month thereafter until the premises in question are actually
delivered to the possession and occupation of the defendant;
(b) P541.00 as actual damages incurred by the defendant;
(c) P10,000.00 as moral damages;
(d) P2,000.00 as exemplary damages; and
(e) P1,000.00 as attorney's fees.
With costs against the plaintiffs.
On June 28, petitioners moved for a reconsideration of the orders of June 11 and
13, but the motion was denied on July 1. Thereupon, petitioners filed a petition for relief
from judgment, with a prayer for a writ of preliminary injunction, to restrain the Clerk of
Court from issuing a writ of execution. After denying this petition, the Court, on
petitioner's motion for reconsideration, granted it on January 18, 1961, only to deny it
once more, on February 4, on motion for reconsideration filed by Bernardo. Forthwith,
or on February 8, petitioners filed their notice of appeal. Soon thereafter, petitioners
sought an extension of time to file their appeal bond and their record on appeal, but the
motion was denied, on February 18, for lack of merit. On March 18, the Court ordered
the issuance of a writ of execution, but, on April 11, the execution of the decision of June
20, 1960, was ordered stayed pending trial on the merits on petitioners' complaint.
On motion of Bernardo, dated December 19, 1962, said order was, on January 29,
1963, set aside and the issuance of a writ of execution "only as to paragraph No. 1 and
paragraph No. 2-a of the dispositive part" of the aforementioned decision, was ordered.
A reconsideration of this order having been denied, the Clerk of Court issued an alias
writ of execution and, in pursuance thereof, the Sheriff of Manila caused to be published
a notice of sale at public auction of a property of petitioners herein. Hence, the present
case against Bernardo, the Judge of the lower court and the Sheriff of Manila.
The main question for determination in this case is whether the lower court has
gravely abused its discretion in declaring the petitioners in default and in rendering
judgment against them on Bernardo's counterclaim after an ex parte hearing. It is
obvious that the answer must be in the affirmative.1awphîl.nèt
To begin with, a motion for extension of time to file an answer to the counterclaim
had been filed within the reglementary period and plausible reasons were given in
support thereof: counsel for petitioners had been unable to contact them owing to a
typhoon that had just hit Manila, and the flood and inclement weather that had followed.
The main reason for the lower court's adverse action thereon would seem to be
petitioners' failure to set it for hearing as provided in the Rules of Court. But, there are
motions that may be heard and granted ex parte, and petitioners' aforementioned
motion belongs to such class. Thus in Moya v. Barton (76 Phil. 831, 833) it was held:
With respect to the other ground, Section 2 of Rule 27 provides that "every
motion other than one which may be heard ex-parte . . . . shall be filed with the
Court, and served upon the parties affected thereby." Taking into consideration
that the extension of time applied for may be shorter than the time required to
have a motion set for hearing and acted on by the court, and that the court has, as
above stated, discretion to grant the petition, the motion for extension filed in the
present case may be considered as one which may be heard ex-parte. . . . .."
What is more, Bernardo's counterclaim was predicated upon allegations of fact
which are inconsistent with, and, hence, controverted by, the allegations in petitioners'
complaint. In this connection, it should be noted that Bernardo had, according to the
complaint, encroached upon petitioners' property, whereas Bernardo maintained the
exact opposite in his counterclaim — not only that petitioners' allegation was not true,
but, also, that they were the ones encroaching upon the property of Bernardo. Certainly,
this contention, of Bernardo can not be decided without passing upon the truth of the
allegations in the complaint, which petitioners are entitled to prove, whether they had
answered Bernardo's counterclaim or not. In other words, the issues raised in the
counterclaim were inseparable from those posed in the complaint, and so it was not
absolutely necessary for the petitioners to file an answer to the counterclaim (Arejola vs.
Cayetano, L-6673, Sept. 8, 1954; Rosario vs. Martinez, L-4473, Sept. 30, 1952). In the
language of Mr. Justice Reyes (J.B.L.), speaking for the Court in Navarro v. Bello (54
O.G. 6588):
There was no need for petitioners to answer respondents' counterclaim,
considering that plaintiffs, in their complaint, claimed not only ownership of, but
also the right to possess, the parcels in question, alleging that sometime in May,
1954, defendants, through force and intimidation, wrested possession thereof
from their tenants, and that it was upon a writ of possession issued by the Court
of First Instance of Pangasinan that they were placed back in possession by the
provincial sheriff. These averments were denied by defendants in their answer,
wherein they asserted ownership in themselves and illegal deprivation of their
possession by plaintiffs, and as counterclaim, prayed for damages allegedly
suffered because of plaintiffs' alleged usurpation of the premises.
It thus appears that the issues of the counterclaim are the very issues raised
in the complaint and in the answer, and said counterclaim is based on the very
defenses pleaded in the answer. To answer such counterclaim would require
plaintiffs to replead the same facts already alleged in their complaint.1awphîl.nèt
But in any event, whether or not plaintiffs have answered defendants'
counterclaim, they have the right to prove the averments of their complaint,
including their claim that it was by court order that they secured possession of
the parcels in question from defendants. And if plaintiffs are able to prove such
allegations, then the court must dismiss defendants' counterclaim for damages,
since the illegal usurpation of defendants' possession allegedly committed by
plaintiffs, which is the basis of the counterclaim, would not have been proved. In
short, the issues of the counterclaim are so inseparable from those of the
complaint and the answer that such counterclaim partakes of the nature of a
special defense which, even if not specifically challenged by plaintiffs in a reply, is
deemed controverted (Rule 11, Sec. 1, Rules of Court; Rosario v. J. Martinez, L-
4473, September 30, 1952; Lama v. Apacible, 79 Phil. 68). There was, therefore,
no occasion for plaintiffs' default on defendants' counterclaim, and the order of
the court below declaring them in default, as well as the judgment by default, is
improper and void.
The lower court committed, therefore, a grave abuse of discretion, amounting to
excess of jurisdiction, in declaring the petitioners in default as regards the counterclaim,
and in rendering a decision in default against them on said counterclaim, and, as a
consequence, said decision is null and void, and so are the aforementioned writ of
execution, alias writ of execution, and notice of sale issued by the Sheriff in pursuance
thereof.
WHEREFORE, the orders complained of, as well as said writ of execution and alias
writ of execution, and the notice of sale adverted to above, including the decision of June
20, 1960, are hereby annulled and set aside, and the writ of preliminary injunction
heretofore issued by this Court is, accordingly, made permanent, with costs against
herein respondent Jose Bernardo. It is so ordered.
Reyes, J.B.L., Dizon, Regala, Makalintal, Bengzon, J.P., Zaldivar, Sanchez and Castro,
G.R. No. L-16371 March 28, 1961
Petition for certiorari against the decision of the Court of Appeals in its CA-G.R. No.
24617-R.
The Zambales Colleges, Inc. filed with the Court of First Instance of Zambales a suit for
damages against Ciriaco Villanueva. In his answer dated 2 February 1956, defendant set
up a counterclaim with three causes of action, to wit:
12. That on February 24, 1951, plaintiff, acting thru its President, Ricardo
Aguirre, maliciously filed criminal cases Nos. 1635 and 1636 in the Justice of the
Peace Court of San Narciso, Zambales, charging him of estafa for allegedly
certifying that a certain Jose Dumiao was qualified to teach and receive salary;
17. That on August 3, 1955, plaintiff corporation filed an action for estafa with the
Justice of the Peace Court of San Narciso, Zambales, against the defendant based
on the same facts as alleged in the complaint;
22. That on or about August 6, 1955, after the said estafa case mentioned in the
second cause of action was filed, plaintiff with malice aforethought, took undue
actions in the is issuance and service of the warrant of arrest by causing its
representatives to hand-carry the said warrant notwithstanding official
regulations and orders against such practice, and in so doing managed to serve
said warrant or caused to have it served shortly before noon on a Saturday when
bonding companies were closing their offices for the weekend, plaintiff'(s)
purpose being to detain the defendant until the following Monday;
23. That because of this act of the plaintiff, defendant was arrested scandalously
in the presence of his many visitors and unceremoniously taken to police
headquarters and treated like an ordinary criminal, thus causing him damages in
the amount of P10,000.00.
On 16 February 1956, plaintiff filed a motion to dismiss the counterclaim alleging bar by
prior judgment and lack of cause of action. Alleging that the motion to dismiss was filed
out of time, defendant moved to declare the plaintiff in default as to the counterclaim.
The trial court denied this motion for default by its order of 23 March 1956; but, on 31
August 1956, the court also denied plaintiff's motion to dismiss the counterclaim. It
appears that plaintiff's counsel was duly notified of the last denial on 1 September 1956.
Because the plaintiff continued to ignore the counterclaim, on 20 March 1957, the trial
court, upon defendant's motion, finally declared the plaintiff in default as to the
counterclaim.
Evidence having been adduced, the trial court rendered its decision dated 24 June 1958,
the dispositive portion of which reads:
2. Ordering the plaintiff to pay to the defendant the sum of P2,500.00 as moral
damages and P1,000.00 as attorney's fees on the first cause of action of the
latter's counterclaim; the amount of P5,000.00 as moral damages and P1,000.00
as attorney's fees on the second cause of action; and the sum of P5,000.00 as
moral damages and P1,000.00 as exemplary damages on the third cause of
action.
Plaintiff's appeal from this judgment to the Court of Appeals was given due course after
the re-amended record on appeal was approved on 20 March 1959 and is now pending
decision in that Court. However, before the perfection of the appeal and upon motion of
the defendant, the trial court ordered on 15 August 1958, the execution f its decision as to
defendant's counterclaim.
Alleging that the trial court issued the writ of execution without or in excess of its
jurisdiction, the plaintiff filed with the Court of Appeals an original action for certiorari
and prohibition designed to set aside and annul said order. On the theory, however, that
the petitioner was not entitled to appeal on the counterclaim, the appellate tribunal
denied the petition. Hence, this review.
Petitioner argues in this instance that respondent trial court committed a grave abuse of
discretion and/or acted in excess of its jurisdiction in sustaining the counterclaim
notwithstanding an utter lack of evidence in support of its allegations; that its order
declaring the petitioner (plaintiff therein) in default and judgment by default on the
counterclaim are null and void; and, finally, that said court erred in ruling that a party in
default has no right to appeal.
There is clearly no merit the first contention. While an error of judgment might have
been committed by the trial judge in his evaluation of the evidence in the damage suit
(but this is just an assumption), we, nonetheless, do not find such excess of discretion to
be whimsical, arbitrary or capricious amounting to a virtual refusal to perform his
bounden duty as a magistrate of justice. As to the first and second causes of action, the
court, we note, took into consideration the Criminal charges filed against the defendant,
the findings of the criminal courts dismissing the same for want of substance, and
testimonial evidence tending to show the lack of merit of the criminal imputations
instituted by the plaintiff (herein petitioner), like, for instance, the absence of deceit on
the part of accused Villanueva and damage on the part of the complainant college.
Coming specifically to the third cause of action, the trial court found, among other
things, that the warrant for Villanueva's arrest was unduly hand-carried to Manila
without the necessary indorsement of the justice of the Peace court; that his arrest was so
timed that defendant could not possibly procure immediately a bond for his could no
provisional release, and that the warrant was served on him at his office at the
Department of Education to unnecessarily embarrass, humiliate, and ridicule him before
his visitors and co-employees. To accept petitioner's plea for a review of these findings
and conclusions of the court would, in effect, amount to allowing the substitution of
petitions for certiorari in lieu of appeals, which we are not in a position to do (see Chua
Ke vs. Abeto, 63 Phil. 539, and cases cited therein).
Invoking the case of Navarro and Binoya vs. Bello, et al., G.R. No. L-11674, January 31,
1958, 54 Off. Gaz 6588, petitioner next argues that the declaration of default is null and
void, because the issues raised in the counter-claim, particularly those contained in the
second and third causes of action, are so inextricably linked with those raised by the
complaint, that an answer would merely require a repleading of the complaint.
The pertinent allegations of the complaint filed by the petitioner in the Court of First
Instance of Zambales read:
2. ... (The defendant was, in the years from 1947 to 1950, the Director of the
Zambales Academy, Inc. (now the Zambales Colleges, Inc.) in all its school
departments, and a member of the Board of Trustees of the same corporation
from 1948 to 1950;
3. ... (The defendant, acting fraudulently and in abuse of the trust reposed in him
as Director and member of the Board of Trustees, without the knowledge,
consent and authority of the Board of Trustees of the Zambales Academy, Inc.,
and without the requisite permit and authority of the Bureau of Private Schools,
clandestinely organized and operated fake branches or classes of the Zambales
Academy Junior Normal Court in the municipalities of Castillejos Iba and
Palauig, all within the province of Zambales, in the years from 1947 to 1950;
4. ... (Under) the defendant's direction tuition and other school fees were
collected from students enrolled in this fake branches or classes, which money
collections were not delivered to the Zambales Academy, Inc. but were
appropriated to defendant's use and purchases known to and allowed only by
himself.
Even the petitioner, however, does not pretend that defendant's initial cause of action in
his counterclaim (malicious filing of criminal charges) is related to the allegations stated
in the complaint. This is but to be expected, considering that the complaint never made
the slightest reference to the matters averred in said portion of the counterclaim (see
First Cause of Action, Supra). That being the case, the plaintiff was still obligated under
the Rules of Court to controvert or otherwise meet the new issues by filing the
corresponding answer (see Sec. 7, Rule 10, Rules of Court). The same thing may be sa
third cause of action of the counterclaim, which only raised the propriety of the manner
how the warrant for Villanueva's arrest was procured by the plaintiff and served upon
said defendant. No further discourse is needed to show the already apparent disparity
between the issues posed by the first and third causes of action of the counter-claim, on
one handy and the complaint, on the other.
Petitioner is, however, correct as to the second cause of action. The counterclaim itself
recited that this particular cause of action is merely base on facts alleged in the
complaint, and it thus had the effect only of restating the issues already raised by the
plaintiff. Obviously, as far as this cause of action is concerned, there was no occasion to
rule the plaintiff in default.1 Hence, the award of damages on the counterclaims second
cause of action has become final, since the case was appealed on the merits. But this fact
not excuse the petitioner from meeting the different issues of the first and third causes of
action, and as to them, it was properly declared in default.
Petitioner maintains that it has not lost its standing in court and is technically not in
default because it filed a motion to dismiss the counterclaim. The records show,
however, that said motion was denied by the trial court on 31 August 1956, and movant
Zambales College, Inc. was duly notified of this denial on 1 September 1956. Needless to
say, a motion to dismiss cannot be a substitute for an answer, especially when it is
denied.
Not having moved for the reconsideration or for the lifting of the order of default,
petitioner itself has foreclosed its right to appeal from the portions of the judgment
which considered it in default (see Lim vs. Go Fay, 80 Phil. 166; Samudio vs.
Municipality of Gaiza, 53 Off. Gaz., 3744; Manila Motor Co., Inc. vs. San Juan, G.R. No
L-9163, May 29, 1959).
WHEREFORE, the judgment of the Court of Appeals appealed from is modified in the
sense that the order of execution, dated 15 August 1959, issued by the trial court in its
Civil Case No. 1760, shall be confined only to those portions of its judgment relating to
the first and third causes of action of defendant Villanueva's counterclaim to the
exclusion of the P6,000.00 — awarded on the second cause of action. The writ of
preliminary injunction issued by this Court on 8 March 1960 to stay execution of
judgment in said Civil case is hereby lifted, and the trial court ordered to proceed in
accordance with this opinion. No special pronouncement as to costs. So ordered.
G.R. No. L-56605 January 28, 1983
ANDRES C. SARMIENTO, petitioner,
vs.
THE HON. CELESTINO C. JUAN, PRESIDING JUDGE, BRANCH X, COURT OF FIRST
INSTANCE OF MANILA and BELFAST SURETY & INSURANCE CO., INC.,
respondents.
Andres C. Sarmiento in his own behalf.
Federico T. Castillo, Jr., for respondents.
VASQUEZ, J.:
In this petition for review on certiorari, petitioner Andres C. Sarmiento seeks to set aside
a decision rendered by the respondent Court of Appeals in CA G.R. No. SP-10649 which
denied due course to a petition for certiorari filed therein by the herein petitioner to
annul two orders issued by the Court of First Instance of Manila in Civil Case No. 126113.
The instant petition was given due course in the Resolution of September 14, 1981 and
the parties ordered to submit their respective memoranda. The petitioner flied a
memorandum in his behalf but the private respondent merely adopted its comment on
the petition as its memorandum.
Civil Case No. 126113 was an action filed by private respondent Belfast Surety &
Insurance Co., Inc. against herein petitioner and his father Benjamin R. Sarmiento, Sr.
for indemnification under an Indemnity Agreement executed by them in connection with
a bail bond. The case was assigned to Branch X of the Court of First Instance of Manila
presided over by respondent Judge Celestino C. Juan who had since retired.
After the petitioner filed an answer with compulsory counterclaim, private respondent
filed a motion to dismiss the case against defendant Benjamin R. Sarmiento, Sr., and to
schedule the case for pre-trial. This motion was granted by Judge Juan and the pre-trial
was set on February 5, 1980, at 8:30 a.m.
At the said pre-trial, nobody appeared except Atty. Federico T. Castillo, Jr., counsel for
the private respondent. However, the petitioner sent to the Court on the same date an
urgent motion for postponement stating therein that when he was preparing to go to the
Court, he felt severe stomach pain followed by loose bowel movements, and he
accordingly prayed that the pre-trial be postponed to another date.
The urgent motion for postponement filed by the petitioner was denied in the order of
Judge Juan dated February 5, 1980. On motion of Atty. Castillo, the petitioner was
"declared non-suited" (should have been "as in default") and the private respondent
allowed to present its evidence ex-parte on February 26, 1980, at 8:30 a.m.
On February 25, 1980, the petitioner filed a motion for reconsideration of the order of
February 5, 1980. In his order of February 26, 1980, Judge Juan denied the said motion
for reconsideration "for lack of merit," and reiterated the permission for the private
respondent to present its evidence ex-parte.
It does not appear whether the ex-parte presentation of evidence by the private
respondent had already been accomplished, nor that a derision thereon had been
rendered. That such proceedings had not taken place could, however, be gathered from
the fact that on March 19, 1980, the petitioner filed a petition for certiorari with the
Supreme Court docketed as G.R. No. 53399 to annul the aforementioned orders of Judge
Juan dated February 5, 1980 and February 26, 1980. The said petition was remanded to
the Court of Appeals pursuant to the Resolution of the First Division of this Court dated
March 28, 1980. It was docketed in the Court of Appeals as CA-G.R. No. SP-14649. In a
decision promulgated on August 29, 1980 by the Special First Division of the Court of
Appeals, the petition was denied due course and ordered dismissed for lack of meet. Said
decision is the subject of the present appeal by certiorari.
The petitioner assails the refusal of the respondent Court of Appeals to disturb the
questioned orders of Judge Juan which petitioner claims to have been issued in excess of
jurisdiction and with grave abuse of discretion. He contends that (a) the pre-trial was
premature inasmuch as, there having been no answer filed by the private respondent to
the petitioner's counterclaim alleged in his answer, the "last pleading" has not yet been
filed so as to authorize a pre-trial to be conducted in accordance with Section 1, Rule 20,
of the Rules of Court; (b) there being no valid pre-trial, the trial court had no authority to
declare him as "non-suited", or more correctly, as in default, for his failure to appear at
the said pre-trial; (b) assuming that there was a valid pre-trial, the trial court could not
legally declare the petitioner as in default due to his failure to be present threat inasmuch
as the private respondent itself made no valid appearance at said pre-trial because only
its counsel appeared without any special authority to represent his client at the said pre-
trial; and (c) it was a grave abuse of discretion on the part of the trial court to deny the
petitioner's urgent motion for postponement despite the merit of the ground alleged
therein, and the same thing is true with the denial of his motion to set aside or lift the
order declaring him in default.
We see no merit in the petitioner's contention that the pre-trial was prematurely
scheduled on the supposed ground that the last pleading had not been filed. In the
petition for certiorari docketed as G.R. No. 53399, the petitioner has alleged that he filed
his answer to the complaint containing a compulsory counterclaim on December 21,
1979 which was served on the counsel for the private respondent on the same date.
(Rollo, p. 19.) The pre-trial was scheduled to be held on February 5, 1980 or a month and
a half after the petitioner had flied his answer to the complaint in Civil Case No. 126113
and private respondent served with a copy of the same. While it may be true that the
private respondent had not filed any answer to the counterclaim contained in the
petitioner's answer, such circumstance does not prevent the trial court from conducting
the pre-trial. As was observed by the respondent Court of Appeals in its questioned
decision: "If no answer (to the counterclaim) is timely filed the pre-trial order may issue.
Otherwise, an unscrupulous party litigant can hold court processes by the simple
expedient of failing to answer."
The requirement that the pre-trial shall be scheduled "after the last pleading has been
filed" ( Section 1, Rule 20, Rules of Court) is intended to fully apprise the court and the
parties of all the issues in the case before the pre-trial is conducted. It must be
remembered that the issues may only be ascertained from the allegations contained in
the pleadings filed by the parties. The last permissible pleading that a party may file
would be the reply to the answer to the last pleading of claim that had been filed in the
case, which may either be the complaint, a cross-claim, a counterclaim or a third party
complaint, etc. (Secs. 2 and 11, Rule 6, Rules of Court.) Any pleading asserting a claim
must be answered, and the failure to do so by the party against whom the claim is
asserted renders him liable to be declared in default in respect of such claim. (See. 10,
Ibid) There are, however, recognized exceptions to the rule, making the failure to answer
a pleading of claim as a ground for a default declaration, such as the failure to answer a
complaint in intervention (Sec. 2(c) Rule 12, Rules of Court), or a compulsory
counterclaim so intimately related to the complaint such that to answer to same would
merely require a repetition of the allegations contained in the complaint (Zamboanga
Colleges, Inc. vs. Court of Appeals, 1 SCRA 870; Ballecer vs. Bernardo, 18 SCRA 291;
Agaton vs. Perez, 18 SCRA 1165.)
In the case presently considered, the nature of the counterclaim in the petitioner's
answer has not been made clear, except to categorize it as a compulsory counterclaim.
Such being the case, it is likely to be one where the answering thereof is not necessary,
and the failure to do so would not be a ground to be declared in default. In any event, the
private respondent's failure to answer the petitioner's counterclaim after the period to
file the answer had lapsed is no obstacle to holding a pre-trial.1äwphï1.ñët The
requirement that the last pleading must have been filed before a pre-trial may be
scheduled should more appropriately be construed to mean not only if the last pleading
had been actually filed, but also if the period for filing the same had expired.
We, however, find merit in the petitioner's two other contentions. The denial by Judge
Juan of the petitioner's motion to postpone the pre-trial scheduled on February 5, 1980
may have appeared valid at the outset, considering that it was filed at the last minute and
was not accompanied by a medical certificate although the ground alleged was illness on
the part of the petitioner. Nonetheless, a different appraisal of the petitioner's plea
should have been made after the petitioner filed a motion for reconsideration which was
made under oath. Due regard should have been given to the repeated pronouncements
by this Court against default judgments and proceedings that lay more emphasis on
procedural niceties to the sacrifice of substantial justice. After all, the ex-parte
presentation of evidence had not yet been conducted nor had a decision been rendered in
the case. It appeared to be a simple matter of giving the petitioner a chance to have his
day in court in order to defend himself against the claim filed by the private respondent.
As it turned out, the procedure adopted by the trial court proved unprofitable and
disadvantageous to all parties concerned, including the courts. The case would have been
disposed of in a much easier and more expeditious manner if the trial court had heeded
the petitioner's simple plea for a chance to be heard. Thereby, all the proceedings taken
subsequent to the disputed orders of the trial court could have been avoided, and the
Court of Appeals and the Supreme Court spared from the trouble of resolving the
petitions filed before them.
The petitioner also has valid reason to complain about the apparent overanxiousness of
the trial court to finish the case in summary fashion. The petitioner had manifested to
the Court that his inability to appear before the pre-trial was due to a sudden ailment
that befell him while he was preparing to go to Court. While it is true that the motion for
postponement was not accompanied by a medical certificate, it must be considered that
not every ailment is attended to by a physician, or if so, a medical certificate under oath
as required by the Rules could be secured within the limited time available. There has
been no refutation of the cause of the non-appearance of the petitioner as claimed by the
latter. Said cause had been reiterated under oath in the petitioner's motion for
reconsideration to which the trial court turned a deaf ear. Any suspicion that the
petitioner was merely suing for delay is readily dispelled by the fact that the pre-trial was
being set for the first time, and that the petitioner took immediate steps against the
refusal of the trial court to set aside the default declaration and to pursue remedies
steadfastly against the same in the higher tribunals.
The declaration default on the part of the petitioner may not be considered as entirely
proper under the circumstances surrounding the same. It is undenied that nobody
appeared at the pre-trial except the counsel for the private respondent. Under settled
doctrines, not even the private respondent may be considered as having appeared at the
said pre-trial, it not having made appearance thereat through a duly authorized
representative. In such a situation, the trial court would have acted more properly if it
dismissed the case, or declared the private respondent as plaintiff therein as non-suited
instead of declaring the petitioner as in default (erroneously stated by it as "non-suited.")
This is because while the court may declare the plaintiff non- suited for non-appearance
at the pre-trial or dismiss the case for his non- appearance at the trial without motion on
the part of the defendant (Sec. 3, Rule 17), the latter may not be declared in default
without such motion on the part of the plaintiff. (Sec. 1. Rule 18; Trajano vs. Cruz, 80
SCRA 712.) A plaintiff who makes no valid appearance at pre-trial may not ask that the
defendant be punished for the same shortcoming it was equally guilty of.
WHEREFORE, the judgment of the Court of Appeals rendered in CA-G.R. No. 10649
promulgated on August 29, 1980, and the Resolution issued in said case dated March 29,
1981 which denied a motion for the reconsideration of the said judgment are hereby
REVERSED and SET ASIDE. The orders of the Court of First Instance of Manila in Civil
Case No. 126113 dated February 5, 1980 and February 26, 1980 are ordered ANNULLED
and SET ASIDE. Let the said case be rescheduled for pre-trial and for subsequent
proceedings thereafter. Costs against the private respondent.
SO ORDERED.
BARREDO, J.:.
Appeal from the favorable decision of the Court of First Instance of Sorsogon on the
counterclaim of respondents (herein appellees) in its Civil Case No. 1657-84 — the
complaint (petition) of therein petitioner (herein appellant) having beet previously
dismissed, without prejudice, for his failure to submit an amended complaint as required
of him in the court a quo's earlier order.
The record shows that on 26 May 1951, appellee Segundo, Goyala together with his now
deceased wife Antonina Almoguera, who was also named respondent or defendant in the
complaint or petition in the court below, sold to appellant by a "Deed of Pacto de Retro
Sale" a certain parcel of agricultural land having an area of approximately two and one-
half hectares for P750.00, the repurchase to be made, according to the deed, within one
year. It also appears from said deed that on July 4, 1951, the vendee paid another
P100.00 as addition to the purchase price. About ten (10) years after the execution of the
said document, or on April 12, 1961, to be precise, the vendee filed with the Court of First
Instance of Sorsogon the present case against the vendors by way of a petition for
consolidation of ownership of the land described and involved in the "Deed of Pacto de
Retro Sale." In his petition, the vendee, herein appellant, alleged, inter alia, that the date
for repurchase, May 26, 1952, having expired and the vendors not having been able to
repurchase the same under the terms and conditions of the agreement, the ownership
over the land involved had become consolidated in him; and that for the purpose of
recording in the Registry of Property the said consolidation of ownership, it was
necessary that a judicial order be issued to that effect and accordingly prayed for such an
order.
On May 26, 1961, appellee Segundo Goyala filed an opposition or answer to the petition.
He therein alleged that his wife Antonina Almoguera had died in the year 1959 and
denied the allegation in the petition regarding the pacto de retro sale, "the fact of the
matter being," according to him, "that on May 26, 1951, the respondents obtained a cash
load of P750.00 from the petitioner payable in one year without interest; that only on
July 26, 1951, Dolores Goyala, daughter of the respondents, obtained from the petitioner
the sum of P50.00 to be added and credited to the account of the respondents; and then
on August 25, 1951, the said Dolores Goyala received from the petitioner another amount
of P10.00 to be added to and credited to the account of the respondents, (so that) the
total loan of the respondents from the petitioner aggregates P810.00 Philippine
Currency" and that to guarantee the payment of the said loan, the respondents executed
a mortgage in favor of the petitioner on a parcel of coconut land described in Annex A of
the petition, hence, altho the deed was executed or drawn in the form of a pacto de retro
sale, the true and real intention of the parties thereto was that the same was a mere
mortgage to secure the payment of the original loan of P750.00 together with the
additional amount received thereafter, making a total loan of P810.00, payable within,
one year without interest. He further alleged that in the evening of May 26, 1952, he and
his wife went to the house of the petitioner and tendered to him the sum of P810.00 to
pay the debt, but said petitioner refused to receive the same and to cancel the document
of mortgage, Annex A. The said appellee also reiterated by way of counterclaim the
foregoing allegations of his answer and prayed thus:.
Subsequently, on January 26, 1963, appellee Goyala filed a motion to dismiss the
complaint or petition on the ground that notwithstanding the lapse of 43 days after
appellant's receipt of a copy of the above-quoted order of the trial court, said appellant
had failed and neglected to submit the amended complaint required of him. The motion
was opposed by appellant; and the trial court, resolving the incident, issued the following
order on February 15, 1963:.
Thereafter, on July 10, 1963, appellee filed a motion to declare appellant in default in
respect of said appellee's counterclaim, contained in his answer (opposition) to the
dismissed complaint petition) of appellant. This motion was granted by the trial court in
its order of July 11, 1963, to wit:.
Upon petition of the counsel for the defendant Segundo Goyala to declare
the plaintiff in default on the ground of failure on the part of the plaintiff
to answer the counterclaim filed by said defendant Segundo Goyala within
the reglementary period, despite the fact that the plaintiff's counsel was
duly served with a copy thereof, and the plaintiff's complaint was already
dismissed by this Court in its order of February 15, 1963 on the ground of
neglect to submit the amended complaint as required in the Court order
of December 4, 1962, the plaintiff is hereby declared in default on the
counterclaim filed by said defendant Segundo Goyala.
Let the defendant Segundo Goyala submit his evidence before the Clerk of
Court, who is hereby commissioned to receive the same.
As directed in the order above-quoted, the Clerk of Court received the evidence of
appellee in respect of his counterclaim and, thereafter, on November 15, 1963 the trial
court rendered favorable judgment on appellee's counterclaim. The pertinent portions of
the decision referred to read thus:.
The above-quoted decision was subsequently amended in an order of December 19, 1963,
as follows:.
It appearing that in the dispositive part of the decision there was no
directive to restore the possession to the defendants upon execution, the
dispositive portion of the said decision is hereby amended to include
therein an additional directive ordering the plaintiff to deliver and restore
the possession of the land in question to the defendants.
Dissatisfied with the decision referred to, appellant appealed to the Court of Appeals
which upon its finding that the said appeal involves purely questions of law, certified the
same to this Court for resolution.
In his brief, appellant assigns the following errors allegedly committed by the trial court:.
The thrust of appellant's argument in respect of the first assignment of error is to the
effect that there is no occasion for the trial court to declare him in default in respect of
appellee's counterclaim in this case, for the reasons that: (a) the said counterclaim "falls
within the category of compulsory counterclaim" which does not call for an independent
answer as the complaint already denies its material allegations; and (b) the dismissal of
the complaint in this case without prejudice carried with it the dismissal of the said
counterclaim.
The first assignment of error of appellant is well taken. It is now settled that a plaintiff
who fails or chooses not to answer a compulsory counterclaim may not be declared in
default, principally because the issues raised in the counterclaim are deemed
automatically joined by the allegations of the complaint.1 In the instant case, there can be
no doubt that appellant's counterclaim was a compulsory one in as much as it arises out
of or is necessarily connected with transaction or occurrence that is the subject matter of
the complaint; the complaint alleged that the right of appellee to repurchase the property
in question had already expired and asked for an order of consolidation; on the other
hand, appellant's counterclaim was for reformation of the deed claiming that it was only
a mortgage. Thus the counterclaim was clearly inconsistent with and directly
controverted; the whole theory and basic allegations of the complaint. In consequence,
appellant's complaint stood as the answer to appellee's counterclaim; hence, the
incorrectness of the trial court's order declaring the appellant in default in regard to said
counterclaim is evident.
Regarding the dismissal of petitioner's complaint, We hold also, that the trial court
committed reversible error in ordering the same. It is true that under Section 3 of Rule
17, a complaint may be dismissed for failure to prosecute if the plaintiff fails to comply
with an order of the court, but it is obvious that the said provision cannot apply when the
order supposedly ignored is a void one, as in this case. Here, the trial court ordered
petitioner to amend the complaint only because it was informed that one of the
defendants had died, the court directing that the plaintiff should name the heirs of the
deceased as defendants in lieu of said deceased. Such an order runs counter to the ruling
of this Court in Caseñas vs. Resales, et al. 2 which is squarely applicable to the Situation
herein obtaining. In that case, We held:.
When certain of the parties to Civil Case No. 261 died and due notice
thereof was given to the trial court, it devolved on the said court to order,
not the amendment of the complaint, but the appearance of the legal
representatives of the deceased in accordance with the procedure and
manner outlined in Rule 3, Section 17 of the Rules of Court, which
provide:.
In the case of Barrameda vs. Barbara, 90 Phil. 718, this Court held that
an order to amend the complaint, before the proper substitution of parties
as directed by the aforequoted rule has been effected, is void and imposes
upon the plaintiff no duty to comply therewith to the end that an order
dismissing the said complaint, for such non-compliance, would similarly
be void. In a subsequent case, Ferriera, et al. vs. Gonzales, et al., G.R. No.
L-11567, July 17, 1958, this Court affirmed a similar conclusion on the
determination that the continuance of a proceedings during the pendency
of which a party thereto dies, without such party having been validly
substituted in accordance with the rules, amounts to a "lack of
jurisdiction".
The facts of this case fit four square into the Barrameda case above-cited,
save for the minor variance that in the former two of the litigants died
while only one predeceased the case in Barrameda. Here, as in
Barrameda, during the pendency of (the) civil case, notice was given to the
trial court of the deaths of one of the plaintiffs and one of the defendants
in it. Instead of ordering the substitution of the deceased's legal
representatives in accordance with Rule 3, Sec. 17 of the Rules of Court,
the trial court directed the surviving plaintiff to amend the complaint and
when the latter failed to comply therewith, the said court dismissed the
complaint for such non-compliance. We must hold, therefore, as We did
in Barrameda that inasmuch as there was no obligation on the part of the
plaintiff-appellant herein to amend his complaint in Civil Case No. 261,
any such imposition being void, his failure to comply with such an order
did not justify the dismissal of his complaint. Grounded as it was upon a
void order, the dismissal was itself void." (To the same effect, see World
Wide Insurance & Surety Co. v. Jose, etc., et al., 96 Phil. 45, 50).
Besides, in line with the principle underlying Sec. 2 of Rule 17, it is not proper to dismiss
a complaint when a compulsory counterclaim has been pleaded by defendant. The
reason is obvious. Under the cited provision, the right of the plaintiff to move for the
dismissal of an action after the defendant has filed his answer is qualified by the clause
providing that: "If a counterclaim has been pleaded by a defendant prior to the service
upon him of the plaintiff's motion to dismiss, the action shall not be dismissed against
the defendant's objection unless the counterclaim can remain pending for independent
adjudication by the court." With this limitation, the power of the court to dismiss the
complaint upon motion of plaintiff, which is usually without prejudice, is not purely
discretionary.3 The purpose is to avoid multiplicity of suits over the same matter which
would necessarily entail unnecessary expense and, what is worse, possibility of conflict
and inconsistency in the resolution of the same questions. The same considerations
would obtain, if the defendant were the one to ask for dismissal. The best interests of
justice require that conflicting claims regarding the same matter should be decided in
one single proceeding. Dismissing the complaint without prejudice, as the trial court has
done in this case, albeit upon motion of the defendant, will not prevent the undesirable
multiplication of suits and reventilation of the same issues in the subsequent action that
may be filed by virtue of the reservation made in the disputed order of dismissal.
Having arrived at the foregoing conclusions, it becomes unnecessary to discuss the other
two assigned errors.
WHEREFORE, the decision appealed from is set aside and this case is remanded to the
court below for further proceedings in consonance with the above opinion, with costs
against appellee.