PHILIPPINE BANK OF COMMUNICATIONS v. ELENA LIM et al.

[ G.R. No. 158138; April 12, 2005 ]

FACTS:
Elena Lim, Ramon Calderon and Tri-Oro International Trading & Manufacturing
Corporation obtained a loan from petitioner and executed a continuing surety
agreement in favor of the bank for all loans, credits, etc., that they were extended or
maybe extended to in the future.
A Promissory Note was executed by respondents requesting the bank for a
renewal of the loan amounting to 3 million. There was an express stipulation that the
venue for any legal action that may arise out of said promissory note shall be in Makati,
to the exclusion of all other courts.
Upon maturity, the respondents failed to pay the obligation which prompted the
Bank to foreclose the real estate mortgage valued at P1,081,600 leaving a deficiency of
P4,014,279.23.
A complaint for collection of a deficiency was filed in the RTC of Manila.
Respondents moved to dismiss the complaint on the ground of improper venue,
invoking the stipulation contained in the promissory note with respect to the
restrictive/exclusive venue.
ISSUE:
Whether the action against the sureties is covered by the restriction on venue
stipulated in the Promissory Note.
RULING:
No.
Since the cases pertaining to both causes of action are restricted to Makati City
as the proper venue, petitioner cannot rely on Section 5 of Rule 2 of the Rules of Court.
A stipulation as to venue does not preclude the filing of the action in other places,
unless qualifying or restrictive words are used in the agreement.
In the instant case, the stipulation on the exclusivity of the venue as stated in the
PN is not at issue. What petitioner claims is that there was no restriction on the venue,
because none was stipulated in the SA on which petitioner had allegedly based its
suit. Accordingly, the action on the SA may be filed in Manila, petitioners place of
residence.

SPOUSES HERMES and ARCELI OCHOA v. CHINA BANKING CORPORATION

G.R. No. 192877; March 23, 2011
FACTS:
The mortgaged real property of Petitioners Spouses Hermes and Arceli Ochoa
was located in Paraaque City over which the China Banking Corporation was granted
a special power to foreclose extra-judicially.
Petitioners insist that the stipulated exclusive venue of Makati City is binding only
on petitioners' complaint for Annulment of Foreclosure, Sale, and Damages filed before
the Regional Trial Court of Paraaque City, but not on respondent bank's Petition for
Extrajudicial Foreclosure of Mortgage, which was filed with the same court.
ISSUE:
Whether or not the exclusive venue of Makati City, as stipulated by the parties
applies to the Petition for Extrajudicial Foreclosure.
RULING:
No.
With respect to the venue of extrajudicial foreclosure sales, Act No. 3135, as
amended, applies, it being a special law dealing particularly with extrajudicial
foreclosure sales of real estate mortgages, and not the general provisions of the Rules
of Court on Venue of Actions.
Consequently, the stipulated exclusive venue of Makati City is relevant only
to actions arising from or related to the mortgage, such as petitioners' complaint
for Annulment of Foreclosure, Sale, and Damages.

FRANCISCO TANTUICO, JR. v. REPUBLIC OF THE PHILIPPINES ET AL.

G.R. No. 89114; December 2,1991
FACTS:
A civil case for reconveyance, reversion, accounting, restitution and damages
was instituted by the Republic of the Philippines, represented by the PCGG, and
assisted by the Office of the Solicitor General with the Sandiganbayan against Benjamin
Romualdez, Ferdinand E. Marcos and Imelda R. Marcos.
Francisco S. Tantuico, Jr. was included as defendant in the civil case on the
theory that he allowed himself to be used as instrument in accumulating ill-gotten
wealth by the Marcoses.
Petitioner argues that the allegations pertaining to him state only conclusions of
fact and law, inferences of facts from facts not pleaded and mere presumptions, not
ultimate facts as required by the Rules of Court.
ISSUE:
Whether or not Petitioner is correct that the allegations are not ultimate facts as
required by the Rules of Court.
RULING:
Yes.
Where the complaint states ultimate facts that constitute the three (3) essential
elements of a cause of action, namely: (1) the legal right of the plaintiff, (2) the
correlative obligation of the defendant, and (3) the act or omission of the defendant in
violation of said legal right, the complaint states a cause of action, otherwise, the
complaint must succumb to a motion to dismiss on that ground of failure to state a
cause of action.
The complaint does not contain any allegation as to how petitioner became, or
why he is perceived to be, a dummy, nominee or agent. Besides, there is no averment
in the complaint how petitioner allowed himself to be used as instrument in the
accumulation of ill-gotten wealth, what the concessions, orders and/or policies
prejudicial to plaintiff are, why they are prejudicial, and what petitioner had to do with the
granting, issuance, and or formulation of such concessions, orders, and/or policies.
The allegations in the complaint pertaining to petitioner are, therefore, deficient in
that they merely articulate conclusions of law and presumptions unsupported by factual
premises.

FAR EAST MARBLE (PHILS.) INC., ET AL. v. COURT OF APPEALS and BANK OF
THE PHILIPPINE ISLANDS
G.R. No. 94093; August 10, 1993
FACTS:
On its complaint, BPI alleged that on various dates and for valuable
consideration, it extended to Far East several loans, evidenced by promissory notes,
and credit facilities in the form of trust receipts and that despite repeated requests and
demands for payment thereof, Far East had failed and refused to pay. Thus, BPI filed a
complaint for foreclosure of chattel mortgage with replevin against Far East Marble
(Phils.), Inc., Ramon Tabuena and LuisTabuena, Jr.
In its answer Far East admitted the genuineness and due execution of the
promissory notes but denied that repeated demands for payment were made by BPI on
it. Far East then raised the affirmative defense of prescription and lack of cause of
action, arguing that since the promissory notes matured in 1976 while BPI filed its action
to foreclose the chattel mortgage only in 1987 (or more than 10 years from the time its
cause of action accrued), and there being no demand for payment which would interrupt
the period of prescription for instituting said action, BPI's claims have prescribed.
ISSUE:
Whether or not BPIs allegations in the complaint contained ultimate facts so as
to sufficiently establish its cause of action.
RULING:
Yes.
A cause of action consists of three elements, namely: (1) the legal right of the
plaintiff; (2) the correlative obligation of the defendant; and (3) the act or omission of the
defendant in violation of said legal right. These elements are manifest in BPI's
complaint, particularly when it was therein alleged that: (1) for valuable consideration,
BPI granted several loans, evidenced by promissory notes, and extended credit facilities
in the form of trust receipts to Far East (photocopies of said notes and receipts were
duly attached to the Complaint); (2) said promissory notes and trust receipts had
matured; and (3) despite repeated requests and demands for payment thereof, Far East
had failed and refused to pay.
Clearly then, the general allegation of BPI that "despite repeated requests and
demands for payment, Far East has failed to pay" is sufficient to establish BPI's cause
of action.

SPOUSES MARCELO AND ANITA ARENAS v. COURT OF APPEALS ET AL.

G.R. No. 126640; November 23, 2000
FACTS:
A verbal contract of lease was entered into between Rosalina Rojas and Marcelo
Arenas over a stall in a building owned by Rojas. Arenas used the leased premises as
an optical clinic.
Rojas wanted to demolish and reconstruct the building and terminate her lease
contract with Arenas. So, she sent a notice of termination and a demand to vacate the
premises but petitioners refused to vacate.
She instituted in the MTC Civil Case 658 for Unlawful Detainer and Damages
with the following prayers: first, that the petitioner be ordered to vacate the premises in
question; second, that respondent be allowed to cause the demolition, reconstruction
and renovation of the premises; and third, that petitioner be ordered to indemnify
respondent damages in the form of litigation expenses and attorneys fees.
The MTC ruled in favor of Rojas. Arenas appealed to the RTC but was denied.
Civil Case 16890 was instituted by Arenas before they could receive a copy of
the decision in Civil Case No. 658. They filed with the RTC an action for Damages,
Certiorari with a Writ of Preliminary Injunction and/or Restraining Order against Rojas.
The RTC issued a temporary restraining order enjoining the MTC from hearing
Civil Case No. 658.
Respondents moved to dismiss the case, invoking the rule against multiplicity of
suits, but the trial court denied it for lack of merit.
Respondents filed with the trial court their answer to the complaint with
counterclaim, reiterating their motion to dismiss with an alternative motion to suspend
the proceedings for the reason that the pending appeal raises a prejudicial question but
the trial court issued a resolution stating that it had jurisdiction to hear, try and decide
Civil Case No. 16890.
ISSUE:
Whether or not the causes of action complained of in the RTC were in the nature
of compulsory counterclaims that must be pleaded in Civil Case No. 658 of the MTC.
RULING:
No.

The following are the tests by which the compulsory nature of a counterclaim can
be determined:
(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 defendants claim absent the
compulsory counterclaim rule?
(3) Will substantially the same evidence support or refute plaintiffs claim as well as
defendants counterclaim?
(4) Is there any logical relation between the claim and counterclaim?
We do not agree with the Court of Appeals that the claims in Civil Case No.
16890 may be pleaded as compulsory counterclaims in Civil Case No. 658.
First. In Civil Case No. 16890, the damages prayed for arose not from contract
but from quasi-delict. They constitute separate and distinct causes of action.
Second. In de Leon v. Court of Appeals, we held that [W]here the issues of the
case extend beyond those commonly involved in unlawful detainer suits, the case is
converted from a mere detainer suit to one incapable of pecuniary estimation thereby
placing it under the exclusive jurisdiction of the regional trial courts. Verily, since the
municipal trial court could not have taken cognizance of the claims in Civil Case No.
16890, then such claims could not be considered as compulsory counterclaims in Civil
Case No. 658.
Third. The acts complained of were committed after the complaint and the
answer were filed.

CARLO TAN v. KAAKBAY FINANCE CORPORATION, DENNIS LAZARO AND

ROLDAN NOYNAY
G.R. No. 146595; June 20, 2003
FACTS:
Kaakbay Finance Corporation as represented by its president Dennis Lazaro
extended a loan of four million pesos (Php 4,000 ,000.00) to Carlo Tan with a real estate
mortgage as a security. According to Tan, it was stated that the interest for the loan is
12% per annum as opposed by respondents, claiming that it was 3.5% monthly.
Tan failed to pay his obligation but an extension of time was granted to him. It
was agreed that Tan and Kaakbay would sign, execute, and acknowledge a Deed of
Sale Under Pacto de Retro so Tan was made to sign a document. Tan learned of the
existence of the Deed of Sale under Pacto de Retro in favor of Lazaro which appeared
that he and his wife executed before a notary public, Atty. Roldan Noynay but in truth,
no such document was executed by him.
Tan filed a complaint in the RTC of Calamba, Laguna praying that his obligation
to Kaakbay Finance Corporation in the amount of P4,000,000.00 be subject to interest
of only 12% per annum; that the promissory notes attached to his Real Estate Mortgage
be declared null and void; that the Deed of Sale Under Pacto de Retro be declared
unenforceable; and that respondents pay moral and exemplary damages in the amount
of P200,000.00 and P50,000.00, respectively, as well as attorneys fees.
Respondents filed their Consolidated Answer With Compulsory Counterclaim
And Opposition To Temporary Restraining Order (TRO) and Preliminary Injunction.
During the hearing of petitioners 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.
Later, the law firm of Ortega, Del Castillo, Bacorro, Odulio, Calma, and Carbonell
entered its appearance as counsel for respondents. Through the new counsel,
respondents filed their Answer with Counterclaim, 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 attorneys fees.

In addition, respondents filed a Motion for Admission of Counterclaim Without

Payment of Fees, on the ground that their counterclaim is compulsory in nature, hence
it may be admitted without payment of fees.
The trial court granted respondents motion for admission of counterclaim without
payment of fees. Tan opposed the motion and claims that the answer with counterclaim
is permissive in nature. Thus, the correct filing fees must be paid by respondents.
ISSUE:
Whether or not the counterclaim of respondents is compulsory in nature, thus
can be admitted without payment of docket fees.
RULING:
Yes.
Petitioners complaint was for declaration of nullity, invalidity or annulment of the
promissory notes purportedly attached to the Real Estate Mortgage 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 nonpayment of the principal loan, litigation expenses and attorneys 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 petitioners 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.
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.

MANUEL BUNGCAYAO, SR., REPRESENTED IN THIS CASE BY HIS ATTORNEY-INFACT ROMEL BUNGCAYAO V. FORT ILOCANDIA PROPERTY HOLDINGS, AND
DEVELOPMENT CORPORATION
G.R. No. 170483; April 19, 2010
FACTS:
Petitioner and other D'Sierto members applied for a foreshore lease with the
Community Environment and Natural Resources Office (CENRO) and were granted a
provisional permit. Fort Ilocandia Property Holdings and Development Corporation
(respondent) filed a foreshore application over a 14-hectare area abutting the Fort
Ilocandia Property, including the 5-hectare portion applied for by D'Sierto members.
The DENR Regional Executive Director denied the foreshore lease applications
of the D'Sierto members, including petitioner, on the ground that the subject area
applied for fell either within the titled property or within the foreshore areas applied for
by respondent. The D'Sierto members appealed the denial of their applications but
DENR Secretary denied the appeal on the ground that the area applied for encroached
on the titled property of respondent based on the final verification plan.
Respondent invited the D'Sierto members to a luncheon meeting where Atty. Liza
Marcos was asked to mediate over the conflict among the parties. Atty. Marcos offered
P300,000 as financial settlement per claimant in consideration of the improvements
introduced, on the condition that they would vacate the area identified as respondent's
property. A D'Sierto member made a counter-offer of P400,000, to which the other
D'Sierto members agreed.
Petitioner alleged that his son, Manuel Bungcayao, Jr., who attended the
meeting, manifested that he still had to consult his parents about the offer but upon the
undue pressure exerted by Atty. Marcos, he accepted the payment and signed the Deed
of Assignment, Release, Waiver and Quitclaim in favor of respondent.
Petitioner then filed an action for declaration of nullity of contract before the RTC
against respondent. Petitioner alleged that his son had no authority to represent him
and that the deed was void and not binding upon him.
Respondent countered that the area upon which petitioner and the other D'Sierto
members constructed their improvements was part of its titled property. Respondent
alleged that petitioner's sons, Manuel, Jr. and Romel, attended the luncheon meeting on
their own volition and they were able to talk to their parents through a cellular phone
before they accepted respondent's offer.

As a counterclaim, respondent prayed that petitioner be required to return the

amount of P400,000 from respondent, to vacate the portion of the respondent's property
he was occupying, and to pay damages because his continued refusal to vacate the
property caused tremendous delay in the planned implementation of Fort Ilocandia's
expansion projects.
ISSUE:
Whether or not respondents counterclaim is compulsory.
RULING:
No.
Respondent filed three counterclaims.
The first was for recovery of the P400,000 given to Manuel, Jr.; the second was
for recovery of possession of the subject property; and the third was for damages.
The first counterclaim was rendered moot with the issuance of the 6 November
2003 Order confirming the agreement of the parties to cancel the Deed of Assignment,
Release, Waiver and Quitclaim and to return the P400,000 to respondent. Respondent
waived and renounced the third counterclaim for damages. The only counterclaim that
remained was for the recovery of possession of the subject property. While this
counterclaim was an offshoot of the same basic controversy between the parties, it is
very clear that it will not be barred if not set up in the answer to the complaint in the
same case. Respondent's second counterclaim, contrary to the findings of the trial court
and the Court of Appeals, is only a permissive counterclaim. It is not a compulsory
counterclaim. It is capable of proceeding independently of the main case.
The rule in permissive counterclaim is that for the trial court to acquire
jurisdiction, the counterclaimant is bound to pay the prescribed docket fees. Any
decision rendered without jurisdiction is a total nullity and may be struck down at any
time, even on appeal before this Court.
In this case, respondent did not dispute the non-payment of docket fees.
Respondent only insisted that its claims were all compulsory counterclaims. As such,
the judgment by the trial court in relation to the second counterclaim is considered null
and void without prejudice to a separate action which respondent may file against
petitioner.

CALIBRE TRADERS INC., MARIO SISON SEBASTIAN, and MINDA BLANCO

SEBASTIAN v. BAYER PHILIPPINES INC.
G.R. No. 161431; October 13, 2010
FACTS:
Calibre TraCalibre Traders, Inc. (Calibre) was one of Bayerphils distributors/dealers of
its agricultural chemicals. The parties had a disagreement as the entitlement and
computations of the discounts of Calibre. Calibre, although aware of the deadline to pay its
debts with Bayerphil, nevertheless withheld payment to compel Bayerphil to reconcile its
accounts.
Calibre filed a suit for damages. It accused Bayerphil of maliciously breaching the
distributorship agreement by manipulating Calibres accounts, withholding discounts and
rebates due it, charging unwarranted penalties, refusing to supply goods, and favoring the new
distributors/dealers to drive it out of business.
In its Answer with Counterclaim, Bayerphil denied its alleged wanton appointment of
other distributors, reasoning that it could not be faulted for a difference in treatment between a
paying dealer and a non-paying one. It 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 also moved that Mario Sebastian and his wife Minda (Sebastians) be
impleaded as co-defendants, considering that the Sebastians bound themselves as solidary
debtors under the distributorship/dealership agreement.
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. It stressed that the issues between the
damages suit it filed and Bayerphils counterclaim for collection of money are totally unrelated.
On the other hand, 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.
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, adopting all the allegations and defenses of Calibre. They 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.

ISSUE:
Whether or not Bayerphils claim against the petitioners partakes of a compulsory
counterclaim to justify the non-payment of docket fees.
RULING:
No.
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 occurrence that 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.
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 or contingent 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 non-payment 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.

G.R. No. L-22578 January 31, 1973

NATIONAL MARKETING CORPORATION (NAMARCO) v. FEDERATION OF UNITED
NAMARCO DISTRIBUTORS, INC.
FACTS:
NAMARCO imported merchandise which was the subject of a contract of sale to
FEDERATION. To insure the payment, NAMARCO accepted three domestic letters of
credit, to wit: PNB Domestic L/C No. 600570; PNB Domestic L/C No. 600606, and PNB
Domestic L/C No. 600586.
FEDERATION and some of its members filed a complaint against the
NAMARCO, which became Civil Case No. 42684 of this Court for specific performance
and damages, alleging that after the NAMARCO had delivered a great portion of the
goods listed in the Contract of Sale, it refused to deliver the other goods mentioned in
the said contract.
In its answer, NAMARCO alleged that the Contract of Sale was not validly
entered into by the NAMARCO and, therefore, it is not bound by the provisions thereof,
without setting up any counterclaim for the value of the goods which it had already
delivered but which had not yet been paid for by the FEDERATION.
NAMARCO demanded from FEDERATION the payment of the total amount of
P611,053.35, but the latter failed and refused to pay the said amount, or any portion
thereof, to the NAMARCO.
Court of First Instance of Manila promulgated its decision in Civil Case No.
42684, ordering the NAMARCO to specifically perform its obligation in the Contract of
Sale, by delivering to the FEDERATION the undelivered goods.
NAMARCO appealed from the decision but the Supreme Court rendered a
decision on NAMARCO's appeal in Civil Case No. 42684, holding that the Contract of
Sale was valid.
NAMARCO instituted the present action (Civil Case No. 46124) alleging, among
others, that the FEDERATION'S act or omission in refusing to satisfy the former's valid,
just and demandable claim has compelled it to file the instant action; and praying that
the FEDERATION be ordered to pay the NAMARCO.
FEDERATION moved to dismiss the complaint on the ground that the cause of
action alleged is barred by res judicata.
In support thereof, the FEDERATION and some of its members instituted Civil
Case No. 42684 against NAMARCO for specific performance to enforce compliance

with the contract of sale; that said contract, basis of Civil Case No. 42684, is also the
basis of NAMARCO's present complaint in Civil Case No. 46124; that when NAMARCO
filed its answer to the complaint in Civil Case No. 42684, it did not set up any
counterclaim therein; that the Court of First Instance of Manila promulgated the decision
in said Civil Case No. 42684, ordering, among others, the NAMARCO to specifically
perform its obligation under the contract of sale by delivering to the FEDERATION the
goods subject-matter of the contract as are involved in the complaint; that NAMARCO's
claim in the present case, Civil Case No. 46124, against the FEDERATION alone, being
a compulsory counterclaim against the latter, in that it arose out of or is necessarily
connected with the transaction or occurrence that is the subject-matter of the action of
the FEDERATION in Civil Case No. 42684 against the NAMARCO and therefore it must
have been set up in said Civil Case No. 42684 in the manner prescribed by section 4,
Rule 10 of the Rules of Court, and within the the date of filing in Civil Case No. 42684,
of the answer of NAMARCO and the date of the decision in that case; and that the
failure of NAMARCO to set up, in said Civil Case No. 42684, such a counterclaim,
precludes NAMARCO from raising it as an independent action, pursuant to Section 6 of
Rule 10 of the Rules of Court.
ISSUE:
Whether or not this action of NAMARCO for the collection of the payment of the
merchandise delivered to, but not yet paid by, the FEDERATION, is already barred as a
consequence of the failure of NAMARCO to set it up as a counterclaim in the previous
case, (Civil Case No. 42684).
RULING:
No.
The complaint of the FEDERATION against the NAMARCO in Civil Case No.
42684 was predicated on the refusal of the latter to perform its obligation under the
Contract of Sale. The refusal of the NAMARCO to perform its obligation under the
Contract of Sale is the act or the event, the circumstance or default, which constitutes
the transaction or the occurrence.
The FEDERATION contends that NAMARCO's claim arose out of that
transaction or occurrence, or was necessarily connected with that transaction or
occurrence, because the cause of action of the FEDERATION in Civil Case No. 42684
and the cause of action of the NAMARCO in this case are based on the same Contract
of Sale.
But it will be noted that one of the requisites for the application of the rule on
compulsory counterclaim is that the counterclaim should at least be connected with or

must arise out of the transaction or occurrence which gave rise to the opposing party's
claim.
The right of the NAMARCO to the cost of the goods existed upon delivery of the
said goods to the FEDERATION which, under the Contract of Sale, had to pay for them.
Therefore, the claim of the NAMARCO for the cost of the goods delivered arose out of
the failure of the FEDERATION to pay for the said goods, and not out of the refusal of
the NAMARCO to deliver the other goods to the FEDERATION. The action of the
FEDERATION in Civil Case No. 42684, based on the refusal of the NAMARCO to
deliver the other goods, had nothing to do with the latter's claim for the cost of the goods
delivered and, hence, such claim was not necessarily connected therewith.
The claim of the NAMARCO in this case could have been a permissive
counterclaim, but is not a compulsory counterclaim, in Civil Case No. 42684.
While the Contract of Sale created reciprocal obligations between the
FEDERATION and the NAMARCO, the refusal of the latter to deliver the other goods
was not due to the failure of the FEDERATION to pay for the goods delivered, but rather
to the fact that it believed, as alleged in its answer in Civil Case No. 42684, that the
Contract of Sale was not validly entered into by it. Such being the case, the failure of the
FEDERATION to pay for the goods delivered could not have been properly raised by
the NAMARCO as a defense or pleaded as a compulsory counterclaim in Civil Case No.
42684. However, had the NAMARCO alleged its present claim in Civil Case No. 42684,
the Court would have permitted it. A permissive counterclaim is one which does not
arise out of, or is not necessarily connected with, the transaction or occurrence that is
the subject-matter of the opposing party's claim.
Since the cause of action of the FEDERATION in Civil Case No. 42684 is such
that the claim of the NAMARCO in this case could not properly be pleaded as a
compulsory counter-claim in that case, the NAMARCO is not precluded from bringing
this present action. Section 6, Rule 10, Rules of Court, is not applicable.

FLORENTINO NAVARRO and BEA TRIZ VINOYA v. HON. ELOY BELLO, Judge of
the Court of First Instance of Pangasinan, JUAN CABUANG, FLORENTINA
BAUTISTA, FLORENTIO GALICIA and CONSOLACION BAUTISTA
G.R. No. L-11647; January 31, 1958
FACTS:
A complaint was filed by petitioners in the CFI of Pangasinan for the annulment
of the transfer certificates of title and the deeds of sale over the two parcel of land which
was executed by Florencio Galicia and Consolacion Bautista in favor of Juan Cabuang
and Florentino Bautista.
Petitioners claim ownership over said parcels of land and further alleged actual
possession ever it. In turn, respondents filed their answer to the amended complaint
and also claim ownership over the questioned lots with a counterclaim for the damages
allegedly arising out of the unlawful usurpation of the possession of the parcels of land
by the petitioners through force and intimidation.
The petitioners were declared in default for failure to answer the counterclaim
filed by respondents. The court ruled that the petitioners have no right to appeal unless
and until the order of default is revoked and set aside.
ISSUE:
Whether or not there is a need to answer to the counterclaim by the respondents.
RULING:
No.
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.

ALEJANDRO AGASEN and FORTUNA CALONGE-AGASEN v. COURT OF

APPEALS and PETRA BILOG, assisted by her husband, FELIPE BILOG
G.R. No. 115508; February 15, 2000
FACTS:
A complaint for Recovery of Possession and Ownership was filed by Petra Bilog
against petitioners involving an 8,474 square meter parcel of land registered in her
name under TCT No. T-16109 and alleging among others that petitioners took
possession and assumed ownership of the said property, appropriating the fruits
therefrom and that despite demands to vacate the land, petitioners refused to do so and
even filed a case for Annulment of TCT and/or Reconveyance with Damages.
In their Answer, petitioners asserted that the subject land used to form part of Lot
No. 2192, which is a 42,372 square meter parcel of land owned in common by the five
(5) Bilog siblings, Petra Bilog being one of them. Petitioners claimed that they became
the owners of the portion of the subject land which belonged to private respondent as
her share therein, by virtue of: (1) the sale in their favor of 1,785 square meters thereof
by Leonora Calonge, sister of Fortunata Calonge-Agasen, and (2) the sale in their favor
by private respondent of the remaining 6,717.50 square meters by virtue of a notarized
Partition with Sale.
By way of counterclaim, petitioners charged private respondent with having
fraudulently caused title to the subject land to be issued in her name.
ISSUE:
Whether or not the two (2) documents relied upon by petitioners as basis for their
claim of ownership are valid.
RULING:
No.
It is not denied that the two subject documents are notarized documents and, as
such, are considered public documents which enjoy the presumption of validity as to
authenticity and due execution.

The subject documents were also attached by petitioners to their Answer where
they were alleged as part of the counterclaim.
As such, private respondent should have specifically denied under oath their
genuineness and due execution. After all, a counterclaim is considered a complaint,
only this time, it is the original defendant who becomes the plaintiff. It stands on the
same footing and is to be tested by the same rules as if it were an independent
action. Having failed to specifically deny under oath the genuineness and due execution
of the said documents, private respondent is deemed to have admitted the same.

FIRESTONE TIRE AND RUBBER COMPANY OF THE PHILIPPINES v. FERNANDO

TEMPONGKO and ANTONIO LUNA
G.R. No. L-24399; March 28, 1969
FACTS:
Fernando Tempongko (defendant), in the course of the presentation of his
evidence in the collection suit instituted in the City Court of Manila obtained a leave to
file a third-party complaint against Antonio Luna (third-party defendant). After proper
proceedings, the City Court rendered judgment on the original complaint in favor of
Firestone (plaintiff), and on the third-party complaint in favor of defendant, as third-party
plaintiff.
Only the Antonio Luna (third-party defendant) appealed in due course from the
judgment rendered against him in the third-party complaint.
When the records were elevated to the Court of First Instance of Manila,
Firestone (plaintiff) filed a Motion to Remand Case to the lower court, for execution of its
judgment against defendant, alleging in substance that by virtue of defendant's failure to
appeal, its judgment against defendant had become final and executory and was in no
way affected by the appeal filed by third party defendant from the judgment in favor of
defendant in the third-party complaint.
ISSUE:
What is the function of a third-party complaint?
RULING:
Rule 6, section 12 defines a third-party complaint as follows:

SEC. 12. Third-party complaint. A third-party complaint is a claim that a

defending party may, with leave of court, file against a person not a party to the action,
called the third-party defendant, for contribution, indemnity, subrogation or any other
relief, in respect of his opponent's claim.
The third-party complaint, is therefore, a procedural device whereby a "third
party" who is neither a party nor privy to the act or deed complained of by the plaintiff,
may be brought into the case with leave of court, by the defendant, who acts as thirdparty plaintiff to enforce against such third-party defendant a right for contribution,
indemnity, subrogation or any other relief, in respect of the plaintiff's claim. The thirdparty complaint is actually independent of and separate and distinct from the plaintiff's
complaint. When leave to file the third-party complaint is properly granted, the Court
renders in effect two judgments in the same case, one on the plaintiff's complaint and
the other on the third-party complaint.
When he finds favorably on both complaints, as in this case, he renders
judgment on the principal complaint in favor of plaintiff against defendant and renders
another judgment on the third-party complaint in favor of defendant as third-party
plaintiff, ordering the third-party defendant to reimburse the defendant whatever amount
said defendant is ordered to pay plaintiff in the case. Failure of any of said parties in
such a case to appeal the judgment as against him makes such judgment final and
executory. By the same token, an appeal by one party from such judgment does not
inure to the benefit of the other party who has not appealed nor can it be deemed to be
an appeal of such other party from the judgment against him.

ASIAN CONSTRUCTION AND DEVELOPMENT CORPORATION (ACDC) v. COURT

OF APPEALS and MONARK EQUIPMENT CORPORATION (MEC)
G.R. No. 160242; March 17, 2005
FACTS:
MEC leased various equipment to ACDC. Due to the failure of ACDC to pay
rentals despite repeated demands, MEC filed a complaint for a sum of money with
damages against ACDC with RTC of Quezon City.
ACDC filed a motion to file and admit answer with third-party complaint against
Becthel Overseas Corporation (Becthel). In its answer, ACDC admitted its
indebtedness to MEC but alleged that the various equipment covered by the lease were
all used in the construction project of Becthel in Mauban, Quezon, and Expo in

Pampanga and defendant was not yet paid of its services that resulted to the nonpayment of rentals on the leased equipment.
MEC opposed the motion of ACDC to file a third-party complaint against Becthel
on the ground that the defendant had already admitted its principal obligation to MEC
and the transaction between it and ACDC, on the one hand, and between ACDC and
Becthel, on the other, were independent transactions.
ISSUE:
Whether or not the third-party complaint filed by ACDC against Becthel is proper.
RULING:
No.
In this case, the claims of the respondent against the petitioner arose out of the
contracts of lease and sale; such transactions are different and separate from those
between Becthel and the petitioner as third-party plaintiff for the construction of the
latters project in Mauban, Quezon, where the equipment leased from the respondent
was used by the petitioner. The controversy between the respondent and the petitioner,
on one hand, and that between the petitioner and Becthel, on the other, are thus entirely
distinct from each other. There is no showing in the proposed third-party complaint that
the respondent knew or approved the use of the leased equipment by the petitioner for
the said project in Quezon. Becthel cannot invoke any defense the petitioner had or
may have against the claims of the respondent in its complaint, because the petitioner
admitted its liabilities to the respondent. The barefaced fact that the petitioner used the
equipment it leased from the respondent in connection with its project with Becthel does
not provide a substantive basis for the filing of a third-party complaint against the latter.
There is no causal connection between the claim of the respondent for the rental and
the balance of the purchase price of the equipment and parts sold and leased to the
petitioner, and the failure of Becthel to pay the balance of its account to the petitioner
after the completion of the project in Quezon.

ARTURO BALBASTRO, JOSE PEREZ, EDGARDO DE LA CRUZ, LEONARDO

VILLANUEVA and CONSORCIA HALILI v. COURT OF APPEALS, HON. WALFRIDO
DE LOS ANGELES, in his capacity as Judge of the Court of First Instance of Rizal,
Quezon City, Branch IV, and FRANCISCO FERNANDEZ
G. R. No. L- 33255; November 29, 1972
FACTS:
A complaint for interpleader and consignation was filed by Chiu Keng Iong, Lim
Bun Kong and Rajindar Singh, who are lessees of three doors of the 10-door apartment,
against Francisco Fernandez and Angela Butte, each of whom was claiming ownership
over the 10-door apartment and of the right to collect the rents therefrom. The plaintiffs
alleged that they have no means of knowing definitely to whom they should pay rentals
whether to Butte or Fernandez.
In answer to plaintiffs' complaint defendant Fernandez alleged among others that
pending determination of the conflicting claims involved in the case he was granted
an ad interim authority to collect and deposit with the court the rentals due on the
subject property. On the other hand, defendant Butte claims that being the owner of the
10-door apartment in question, she has every right to collect the rents of the property.
Private respondent Fernandez filed a Third-Party Complaint against the thirdparty defendants (petitioners herein) who are the lessees of the remaining doors of the
10-door apartment because of their refusal to recognize his authority to collect the rents
on the doors leased by them. The third-party defendants filed a "Motion To Strike Out
And/Or To Dismiss The Third-Party Complaint" filed by Fernandez on the ground that
the filing of said Third-Party Complaint against them is in violation of the express
provisions of Section 12, Rule 6 of the Revised Rules of Court and not in accord with
established jurisprudence on the matter and on the further ground that said Third-Party
Complaint does not state any cause of action.
ISSUE:
Whether or not section 12 of Rule 6 of the Rules authorizes a defendant to bring
into the case any person not a party to the action, who is not secondarily liable to said
defendant for contribution, indemnity, subrogation or any other relief in respect to the
claim of the plaintiff against the defendant.
RULING:
No.

Section 12 of Rule 6 of the Revised Rules of Court authorizes a defendant to

bring into a lawsuit any person "not a party to the action ... for contribution, indemnity,
subrogation or any other relief in respect of his opponent's claim."
From its explicit language it does not compel the defendant to bring the thirdparties into the litigation, rather it simply permits the inclusion of anyone who meets the
standard set forth in the rule. The secondary or derivative liability of the third-party is
central whether the basis is indemnity, subrogation, contribution, express or implied
warranty or some other theory.
The rule requires that the third-party defendant is "not a party to the action". In
addition to the aforecited requirement, the claim against the third-party defendant must
be based upon plaintiff's claim against the original defendant (third-party claimant).
Further, for a third-party complaint to be available the third-party defendant must
be liable secondarily to the original defendant in the event that the latter is held liable to
the plaintiff.
Absent therefore in the case at bar the nexus between petitioners as third-party
defendants and Francisco Fernandez, the third-party plaintiff, showing the existence of
a secondary or derivative liability of the former in favor of the latter "in respect of his
opponent's claim" the third-party action would not be proper.