[G.R. No. 90530. October 7, 1992.

]
INTERNATIONAL CONTAINER TERMINAL SERVICES, INC., vs. THE HON. COURT
OF APPEALS, HON. EDILBERTO G. SANDOVAL, C.F. SHARP, INC. and FIRST
INTEGRATED BONDING & INSURANCE CO., INC.,
Facts: Sharp, Inc., filed a complaint for prohibition with prayer for preliminary injunction
against the Secretary of Transportation and Communications, the Philippine Ports Authority
(PPA), E. Razon, Inc., and the International Container Terminal Services Inc., the herein
petitioner. The complaint was docketed as Civil Case No. 88-43616 in the Regional Trial
Court of Manila, Branch 9.
Trial court issued a writ of preliminary injunction upon the posting by Sharp of a bond of
P10,000,000.00. On that same day, the petitioner filed an answer with a compulsory
counterclaim against Sharp for its "unfounded and frivolous action."
The writ of preliminary injunction was nullified by this Court in G.R. No. 82218. We held
that Sharp was not a proper party to the case, and that it was premature for not having
exhausted the administrative remedies open to it from "the PPA, the Bidding Committee, and
the Office of the President."
The PPA, taking its cue from this decision, filed a motion to dismiss, which was adopted by
petitioner CCTSI. RTC Judge Edilberto G. Sandoval then dismissed the complaint as well as
the counterclaim.
CCTSI filed a motion for reconsideration of the order insofar as it dismissed its counterclaim.
Meanwhile, it gave notice to the First Integrated Bonding and Insurance Co., Inc. that it was
claiming damages against Sharp for the revoked injunction.chanrobles virtual lawlibrary
The motion for reconsideration was denied. The trial court declared in part:
. . . indeed a compulsory counterclaim by the nature of its nomenclature arises out of or is so
intertwined with the transaction or occurrence that is the subject matter of the complaint so
that by the dismissal of the latter, the same has to be discarded, specially since the complaint
was dismissed without any trial.
The dismissal of the counterclaim was appealed to the respondent court, which was upheld by
the lower court.
CCTSI has filed the present petition for review alleging that the order of the trial court
dismissing the counterclaim was issued with grave abuse of discretion.
The Court gave due course to this petition and required the parties to submit simultaneous
memoranda. After studying their respective arguments and the pertinent law and
jurisprudence, we have come to the conclusion that the petition cannot prosper.
The counterclaim for damages alleged that the delay in the award of the MICT contract
caused by Sharps complaint and writ of preliminary injunction jeopardized the petitioners
timetable to attain the projected volumes in its winning bid and, as well, caused it to incur
litigation expenses, including attorneys fees.

A counterclaim is compulsory where: (1) it arises out of, or is necessarily connected with, the
transaction or occurrence that is the subject matter of the opposing partys claim; (2) it does
not require for its adjudication the presence of third parties of whom the court cannot acquire
jurisdiction; and (3) the court has jurisdiction to entertain the claim. 1
Tested by these requirements, the petitioners counterclaim was clearly compulsory. It is
obvious from the very nature of the counterclaim that it could not remain pending for
independent adjudication, that is, without adjudication by the court of the complaint itself on
which the counterclaim was based.
Rule 17, Sec. 2 of the Rules of Court provides: If a counterclaim has been pleaded by a
defendant prior to the service upon him of the plaintiffs motion to dismiss, the action shall
not be dismissed against the defendants objection unless the counterclaim can remain
pending for independent adjudication by the court.
The Court notes that, to begin with, the petitioner itself joined the PPA in moving for the
dismissal of the complaint; or put passively, it did not object to the dismissal of the private
respondents complaint. Secondly, the compulsory counterclaim was so interwined with the
complaint that it could not remain pending for independent adjudication by the court after the
dismissal of the complaint which had provoked the counterclaim in the first place. As a
consequence, the dismissal of the complaint (on the petitioners own motion) operated to also
dismiss the counterclaim questioning that complaint.
The petitioner is correct in contending that the claim for damages caused by the wrongful
issuance of a preliminary injunction can be made in the form of a counterclaim.
However, there is no glossing away the fact that it was the petitioner itself that caused the
dismissal of its counterclaim when it not only did not object to, but actually moved for, the
dismissal of the complaint.
The rules governing the application for damages against the surety bond posted in support of
the application for a writ of preliminary attachment are also applicable by analogy to
preliminary injunction. (Sec. 20 of Rule 57 of the Rules of Court.) A long line of cases has
held that these rules are mandatory and failure to observe them deprives the aggrieved party
of the right to proceed against the surety bond.
Due notice to the adverse party and its surety setting forth the facts supporting the applicants
right to damages and the amount thereof under the bond is indispensable.
The herein petitioner contends that it complied with the requirements when it served the
bonding company with notice of its claim for damages on August 31, 1988. It is correct. No
particular form for such notice is required.
Had the counterclaim not been dismissed with the dismissal of the complaint, the petitioner
could have introduced evidence to show that it was prejudiced by the filing of the complaint
and the obtention of the writ of preliminary injunction by Sharp. But the petitioner itself
aborted that effort when it joined PPA in moving for the dismissal of Sharps complaint,
knowing that it was the basis of its own compulsory counterclaim.
WHEREFORE, the petition is DENIED, with costs against the petitioner. It is so ordered.

G.R. No. 95631 October 28, 1991

METALS ENGINEERING RESOURCES CORPORATION, petitioner,
vs.
COURT OF APPEALS and PLARIDEL JOSE, respondents.
REGALADO, J.:p
The appeal herein arose from Civil Case No. 55560 filed by petitioner corporation against
private respondent Plaridel Jose, for the annulment of an agreement to buy and sell executed
between the parties, before the Regional Trial Court of Pasig, Branch 160, the complaint 2
alleging, inter alia, that:
2. plaintiff and defendant executed a document which was denominated as an "Agreement to
Buy and Sell" in which plaintiff offered to sell to the defendant and the latter in turn agreed to
buy several parcels of land with an aggregate area of 6,135 sq. m. . . .
4. The "Agreement to Buy and Sell", on its face, did not contemplate nor did it result to a
binding and enforceable contract to sell.
5. Despite the fact that the subject "agreement" had not yet been perfected and completed,
defendant prematurely caused the preparation of a subdivision plan of the lands into several
sub-lots and offered the same for sale to the public through an advertisement published in the
issue of the "Manila Bulletin" on November 25, 1987 . . .
8. The refusal of defendant to acnowledge the imperfection and non-completion of the
"Agreement" and to accept the refund P50.000.00 as well as his acts of offering the land for
sale to third person and his annotation of adverse claims in the title covering the lands are
unjustifiable and great damage and prejudice to plaintiff.
Private respondent filed his Answer with Counterclaim on the prejudice of his investment and
financial projection, tarnished reputation, etc.
Before the case could be heard on pre-trial, private respondent filed a Motion to Expunge the
Complaint on the ground that the same did not specify the amount of damages sought either
in the body or in the prayer of the complaint,
In an Order dated December 15, 1988, the trial court required petitioner to amend its
complaint by specifying the amount of damages prayed for, otherwise the original complaint
shall be dismissed. In compliance therewith, petitioner filed its Amended Complaint
specifying the amount of damages it seeks to recover from private respondent.
However, private respondent moved for the reconsideration of the trial court's aforesaid order
with respect to the portion allowing petitioner to file an amended complaint, stating that the
court did not acquire jurisdiction when the wrong docket fee was paid, hence the amendment
of the complaint did not vest jurisdiction upon the court; and that for all legal intents and
purposes, no original complaint was filed which could be the subject of an amendment.
Acting thereon, on April 12, 1989, the trial court issued an Order 5 granting the motion for
reconsideration and ordering that the complaint be expunged from the record on the ground
that it did not acquire jurisdiction over the case.

Private respondent then filed a Motion to Set Case for Presentation of Evidence in support of
his counterclaim. In its Opposition, petitioner averred that since private respondent's
counterclaim is compulsory in nature because it is necessarily connected with and arose out
of the same transaction subject of the complaint, with the dismissal of petitioner's complaint
the compulsory counterclaim can no longer remain pending for independent adjudication
Thereafter, the court a quo issued an Order, 6 dated June 20, 1989, granting private
respondent's motion to present evidence and holding that "a) compulsory counterclaim is a
complaint in itself; that it is a complaint against the plaintiff; that it is independent in
character. It has to be set up in the answer otherwise it will be waived or barred and it cannot
be invoked in another case, for it would be splitting a cause of action which is not allowed
under the rules." It added that herein private respondent "correctly insisted that the
compulsory counterclaim should be prosecuted now, otherwise he cannot invoke his claim in
a separate proceeding because he will be "barred by the dismissal" of the instant case."
Petitioner filed a Motion for Reconsideration of said order alleging that a compulsory
counterclaim is essentially ancillary to the main controversy and that, assuming that private
respondent's counterclaim can remain pending for independent trial, the same would
nevertheless be dismissed for non-payment of any docket fees on the total amount of the
counterclaim. The motion for reconsideration was denied.
From said order, petitioner filed a special civil action for and certiorari prohibition with
prayer for preliminary injunction and/or temporary restraining order with respondent Court of
Appeals. Respondent court, in its questioned decision, dismissed the special civil action for
certiorari, stating that since the order is merely interlocutory in nature and that at most it is
merely an error of judgment, it cannot be corrected by certiorari.
Its motion for reconsideration having been denied, petitioner filed the instant petition.
Petitioner avers that respondent Court of Appeals gravely erred (1) in finding that no
jurisdictional defect was committed by the trial court in issuing the order date June 20, 1989
allowing respondent Jose to present evidence in support of his compulsory counterclaim
despite the dismissal of the complaint; and (2) in holding that the order of June 20, 1989
cannot be the basis of a petition for certiorari and prohibition. 10
We find for petitioner.
Private respondent's asseveration that a compulsory counterclaim is not deemed dismissed
just because the main complaint is dismissed by the court, and that the same has to be
pursued otherwise it will forever be barred on the ground of res judicata, is at most specious
and should be struck down for lack of merit.
There is no dispute that private respondent's counterclaim is compulsory in nature since (1) it
arises out of, or is necessarily connected with the transaction or occurrence that is the subject
matter of the opposing party's claim; 2) it does not require for its adjudication the presence of
third parties over whom the court cannot acquire jurisdiction; and 3) the court has jurisdiction
to entertain the claim. A compulsory counterclaim cannot be made the subject of a separate
action but should be asserted in the same suit involving the same transaction or occurrence
giving rise to it. Where the counterclaim is made the subject of a separate suit, it may be
abated upon a plea of auter action pendant or litis pendentia, and/or dismissed on the ground
of res judicata.

However, such is not the situation obtaining in the present action. In the petition before us,
private respondent, in his responsive pleading which is aptly titled "Answer with
Counterclaim," has properly raised a counterclaim against herein petitioner's claim that the
agreement to buy and sell is imperfect and incomplete.
A compulsory counterclaim is auxiliary to the proceeding in the original suit and derives its
jurisdictional support therefrom, inasmuch as it arises out of or is necessarily connected with
the transaction or occurrence that is the subject matter of the complaint. It follows that if the
court does not have jurisdiction to entertain the main action of the case and dismisses the
same, then the compulsory counterclaim, being ancillary to the principal controversy, must
likewise be dismissed since no jurisdiction remained for any grant of relief under the
counterclaim.
At any rate, considering that petitioner has re-filed its complaint involving the same cause of
action which is now pending before another branch of the court, there is nothing to prevent
private respondent from raising the same counterclaim for adjudication in the subsequent
action.
It is the submission of herein petitioner that assuming arguendo that the counterclaim can
proceed independently of the main action, the court did not acquire jurisdiction thereover for
failure of private respondent to pay the corresponding docket fees, but such rules only apply
to permissive counterclaims.
Finally, we do not ascribe to respondent court's declaration that the order of dismissal issued
by the trial court is merely interlocutory and, at most, an error of judgment which is not
correctible by certiorari and prohibition. It is precisely to correct the lower court when in the
course of proceedings it acts without jurisdiction or in excess thereof or if the trial judge
otherwise acted with grave abuse of discretion that the extraordinary writ of certiorari or
prohibition is afforded to parties as a relief. Such a relief is available even in respect to
interlocutory orders.
WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE, and
judgment is hereby rendered DISMISSING the compulsory counterclaim of private
respondent in Civil Case No. 55560, without prejudice to the setting up of the same in Civil
Case No. 58126, both of the Regional Trial Court of Pasig, Metro Manila.
SO ORDERED

[G.R. No. 133119. August 17, 2000]

FINANCIAL BUILDING CORPORATION, petitioner, vs. FORBES PARK ASSOCIATION, INC.,
respondent.
DE LEON, JR., J.:
The then Union of Soviet Socialist Republic (hereafter, USSR) was the owner of a 4,223 square meter
residential lot located at No. 10, Narra Place, Forbes Park Village in Makati City. On December 2,
1985, the USSR engaged the services of Financial Building for the construction of a multi-level office
and staff apartment building at the said lot, which would be used by the Trade Representative of the
USSR.1[3] Due to the USSRs representation that it would be building a residence for its Trade
Representative, Forbes Park authorized its construction and work began shortly thereafter.
On June 30, 1986, Forbes Park reminded the USSR of existing regulations 2[4] authorizing only the
construction of a single-family residential building in each lot within the village. Despite this, Financial
Building submitted to the Makati City Government a second building plan for the construction of a
multi-level apartment building, which was different from the first plan for the construction of a
residential building submitted to Forbes Park.
Forbes Park suspended all permits of entry for the personnel and materials of Financial Building in the
said construction site. The parties attempted to meet to settle their differences but it did not push
through.
Instead, on April 9, 1987, Financial Building filed in the Regional Trial Court of Makati, Metro Manila, a
Complaint3[7] for Injunction and Damages with a prayer for Preliminary Injunction against Forbes Park
docketed as Civil Case No. 16540, which was ultimately nullified and dismissed by the Court.
After Financial Buildings case, G.R. No. 79319, was terminated with finality, Forbes Park sought to
vindicate its rights by filing on October 27, 1989 with the Regional Trial Court of Makati a Complaint 4[9]
for Damages, against Financial Building, docketed as Civil Case No. 89-5522, arising from the
violation of its rules and regulations.
Financial Building appealed the said Decision of the trial court in Civil Case No. 89-5522 by way of a
petition for review on certiorari5[12] however, the Court of Appeals affirmed it in its Decision
Hence, this petition.
Granted.
First. The instant case is barred due to Forbes Parks failure to set it up as a compulsory counterclaim
in Civil Case No. 16540, the prior injunction suit initiated by Financial Building against Forbes Park.
A compulsory counterclaim is one which arises out of or is necessarily connected with the transaction
or occurrence that is the subject matter of the opposing partys claim. If it is within the jurisdiction of
the court and it does not require for its adjudication the presence of third parties over whom the court
cannot acquire jurisdiction, such compulsory counterclaim is barred if it is not set up in the action filed
by the opposing party.
Thus, a compulsory counterclaim cannot be the subject of a separate action but it should instead be
asserted in the same suit involving the same transaction or occurrence, which gave rise to it.

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Undoubtedly, the prior Civil Case No. 16540 and the instant case arose from the same occurrence the
construction work done by Financial Building on the USSRs lot in Forbes Park Village. The issues of
fact and law in both cases are identical. The factual issue is whether the structures erected by
Financial Building violate Forbes Parks rules and regulations, whereas the legal issue is whether
Financial Building, as an independent contractor working for the USSR, could be enjoined from
continuing with the construction and be held liable for damages if it is found to have violated Forbes
Parks rules.
Moreover, the two cases involve the same parties. The aggregate amount of the claims in the instant
case is within the jurisdiction of the regional trial court, had it been set up as a counterclaim in Civil
Case No. 16540. Therefore, Forbes Parks claims in the instant case should have been filed as a
counterclaim in Civil Case No. 16540.
Second. Since Forbes Park filed a motion to dismiss in Civil Case No. 16540, its existing compulsory
counterclaim at that time is now barred.
A compulsory counterclaim is auxiliary to the proceeding in the original suit and derives its
jurisdictional support therefrom. If the dismissal of the main action results in the dismissal of the
counterclaim already filed, it stands to reason that the filing of a motion to dismiss the complaint is an
implied waiver of the compulsory counterclaim because the grant of the motion ultimately results in
the dismissal of the counterclaim.
Thus, the filing of a motion to dismiss and the setting up of a compulsory counterclaim are
incompatible remedies. In the event that a defending party has a ground for dismissal and a
compulsory counterclaim at the same time, he must choose only one remedy.
The ground for dismissal invoked by Forbes Park in Civil Case No. 16540 was lack of cause of action.
There was no need to plead such ground in a motion to dismiss or in the answer since the same was
not deemed waived if it was not pleaded.6[22] Nonetheless, Forbes Park still filed a motion to dismiss
and thus exercised bad judgment in its choice of remedies. Thus, it has no one to blame but itself for
the consequent loss of its counterclaim as a result of such choice.
Inasmuch as the action for damages filed by Forbes Park should be as it is hereby dismissed for
being barred by the prior judgment in G.R. No. 79319 (supra) and/or deemed waived by Forbes Park
to interpose the same under the rule on compulsory counterclaims, there is no need to discuss the
other issues raised by the herein petitioner.
WHEREFORE, the instant petition is hereby GRANTED and the Decision dated March 20, 1998 of
the Court of Appeals in CA-G.R. CV No. 48194 is hereby REVERSED and SET ASIDE.
Costs against respondent Forbes Park Association, Inc. .
SO ORDERED.