BA Finance Corporation v. Rufino Co, Highline Mercantile, Inc.

, Lucita Veloso Yap, Cloverleaf

Supermarket, Inc., San Andres Commercial and Court of Appeals
GR No. 105751. 30 June 1993

Facts
BA Finance Corp brought this action in court to recover a sum of money arising from a credit
accommodation in the form of a discounting line which it granted to Rufino Co, and from certain
suretyship agreements executed in its favor by herein respondents.
After respondents Amended Answer to Complaint w/ Compulsory Counterclaim was admitted, the
case was set for Pre-Trial Conference. This was however repeatedly reset.
Dec 19: 1989: counsel for BA Finance didnt attend the Pre-Trial Conference. So respondents
moved for dismissal of the case w/o prejudice. The motion was granted.
Jan 22 1990: respondents moved to set the reception of their evidence in support of their
counterclaim. BA finance opposed it.
April 2 1990: trial court denied motion of respondents, so they elevated the order of denial to CA,
which reversed the order and directed trial court to set the reception of evidence on their
counterclaim.
June 2 1992: motion for reconsideration denied, so BA Finance instituted this petition

Issue
WON dismissal of the complaint carries with it the dismissal of the counterclaim

Held
Yes. Petition granted.

Ruling
Counterclaim of respondents is not merely permissive but compulsory in nature; it arises out of or is
necessarily connected w/ the transaction/ occurrence that is the subject matter of the opposing
partys claim. It does not require presence of 3rd parties of whom the court cannot acquire
jurisdiction, and the trial court has jurisdiction to entertain the claim
The same evidence needed to sustain the counterclaim of respondents would also refute the cause
of action in petitioners complaint. For if respondents could show they actually made overpayments
on the credit accommodations, then the complaint must fail. The counterclaim is thus compulsory.
The rule is that a compulsory counterclaim (cc) cannot remain pending for independent
adjudication by the court. This is because a cc is auxiliary to the proceeding in the original suit and
merely derives its jurisdictional support therefrom.
So it follows that if trial court doesnt anymore possess jurisdiction to entertain the main action of
the case, then the cc being ancillary to the principal controversy, must likewise be dismissed since
no jurisdiction remains for the grant of any relief under the cc.
Remedy to recover on defendants cc: Sec. 2 Rule 17: defendant may raise objection to the
dismissal of the complaint; in such case, trial court may not dismiss the main action.
In the case at bar, the respondents themselves moved for the dismissal of the complaint. They
could have asked the trial court to declare petitioners to be non-suited on their complaint and in
default for their failure to appear at the pre-trial despite due notice. This will enable defendant who
was unjustly haled to court to prove his cc, which is intertwined with the complaint, because the
trial court retains jurisdiction over the complaint and of the whole case. The non- dismissal of the
complaint, the non-suit notwithstanding, provides the basis for the compulsory counterclaim to
remain active and subsisting.
Also, respondents moved to set the hearing of the reception of evidence to support their cc more
than one month after the case was dismissed (33 days). By then, the order of dismissal had already
become final.