CIVIL PROCEDURE CASES – Pleadings (Rule 6)
G.R. No. 138822 January 23, 2001
EVANGELINE ALDAY, petitioner, vs.FGU INSURANCE
CORPORATION, respondent.
On 5 May 1989, respondent FGU Insurance Corporation filed a complaint
with the Regional Trial Court of Makati1alleging that petitioner Evangeline
K. Alday owed it P114,650.76, representing unliquidated cash advances,
unremitted costs of premiums and other charges incurred by petitioner in
the course of her work as an insurance agent for
respondent.2 Respondent also prayed for exemplary damages, attorney's
fees, and costs of suit.3Petitioner filed her answer and by way of
counterclaim, asserted her right for the payment of P104,893.45,
representing direct commissions, profit commissions and contingent
bonuses earned from 1 July 1986 to 7 December 1986, and for
accumulated premium reserves amounting to P500,000.00. In addition,
petitioner prayed for attorney's fees, litigation expenses, moral damages
and exemplary damages for the allegedly unfounded action filed by
respondent.4 On 23 August 1989, respondent filed a "Motion to Strike Out
Answer With Compulsory Counterclaim And To Declare Defendant In
Default" because petitioner's answer was allegedly filed out of
time.5However, the trial court denied the motion on 25 August 1989 and
similarly rejected respondent's motion for reconsideration on 12 March
1990.6 A few weeks later, on 11 April 1990, respondent filed a motion to
dismiss petitioner's counterclaim, contending that the trial court never
acquired jurisdiction over the same because of the non-payment of
docket fees by petitoner.7 In response, petitioner asked the trial court to
declare her counterclaim as exempt from payment of docket fees since it
is compulsory and that respondent be declared in default for having failed
to answer such counterclaim.8
In its 18 September 1990 Order, the trial court9 granted respondent's
motion to dismiss petitioner's counterclaim and consequently, denied
petitioner's motion. The court found petitioner's counterclaim to be merely
permissive in nature and held that petitioner's failure to pay docket fees
prevented the court from acquiring jurisdiction over the same.10 The trial
court similar denied petitioner's motion for reconsideration on 28
February 1991. 1âwphi1.nêt
On 23 December 1998, the Court of Appeals11 sustained the trial court,
finding that petitioner's own admissions, as contained in her answer,
show that her counterclaim is merely permissive. The relevant portion of
the appellate court's decision12 is quoted herewith -
Contrary to the protestations of appellant, mere reading of the
allegations in the answer a quo will readily show that her
counterclaim can in no way be compulsory. Take note of the
following numbered paragraphs in her answer:
"(14) That, indeed, FGU's cause of action which is not
supported by any document other than the self-serving
'Statement of Account' dated March 28, 1988 x x x
(15) That it should be noted that the cause of action of
FGU is not the enforcement of the Special Agent's
Contract but the alleged 'cash accountabilities which are
not based on written agreement x x x.
x x x x
(19) x x x A careful analysis of FGU's three-page
complaint will show that its cause of action is not for
specific performance or enforcement of the Special
Agent's Contract rather, it is for the payment of the
alleged cash accountabilities incurred by defendant
during the period form [sic] 1975 to 1986 which claim is
executory and has not been ratified. It is the established
rule that unenforceable contracts, like this purported
money claim of FGU, cannot be sued upon or enforced
unless ratified, thus it is as if they have no effect. x x x."
To support the heading "Compulsory Counterclaim" in her answer
and give the impression that the counterclaim is compulsory
appellant alleged that "FGU has unjustifiably failed to remit to
defendant despite repeated demands in gross violation of their
Special Agent's Contract x x x." The reference to said contract
was included purposely to mislead. While on one hand appellant
alleged that appellee's cause of action had nothing to do with the
Special Agent's Contract, on the other hand, she claim that FGU
violated said contract which gives rise of [sic] her cause of action.
Clearly, appellant's cash accountabilities cannot be the offshoot
of appellee's alleged violation of the aforesaid contract.
On 19 May 1999, the appellate court denied petitioner's motion for
reconsideration,13 giving rise to the present petition.
1

Before going into the substantive issues, the Court shall first dispose of
some procedural matters raised by the parties. Petitioner claims that
respondent is estopped from questioning her non-payment of docket fees
because it did not raise this particular issue when it filed its motion - the
"Motion to Strike out Answer With Compulsory Counterclaim And To
Declare Defendant In Default" - with the trial court; rather, it was only nine
months after receiving petitioner's answer that respondent assailed the
trial court's lack of jurisdiction over petitioner's counterclaims based on
the latter's failure to pay docket fees.14 Petitioner's position is
unmeritorious. Estoppel by laches arises from the negligence or omission
to assert a right within a reasonable time, warranting a presumption that
the party entitled to assert it either has abandoned or declined to assert
it.15 In the case at bar, respondent cannot be considered as estopped
from assailing the trial court's jurisdiction over petitioner's counterclaim
since this issue was raised by respondent with the trial court itself - the
body where the action is pending - even before the presentation of any
evidence by the parties and definitely, way before any judgment could be
rendered by the trial court.
Meanwhile, respondent questions the jurisdiction of the Court of Appeals
over the appeal filed by petitioner from the 18 September 1990 and 28
February 1991 orders of the trial court. It is significant to note that this
objection to the appellate court's jurisdiction is raised for the first time
before this Court; respondent never having raised this issue before the
appellate court. Although the lack of jurisdiction of a court may be raised
at any stage of the action, a party may be estopped from raising such
questions if he has actively taken part in the very proceedings which he
questions, belatedly objecting to the court's jurisdiction in the event that
the judgment or order subsequently rendered is adverse to him.16 In this
case, respondent actively took part in the proceedings before the Court of
Appeals by filing its appellee's brief with the same.17 Its participation,
when taken together with its failure to object to the appellate court's
jurisdiction during the entire duration of the proceedings before such
court, demonstrates a willingness to abide by the resolution of the case
by such tribunal and accordingly, respondent is now most decidedly
estopped from objecting to the Court of Appeals' assumption of
jurisdiction over petitioner's appeal.18
The basic issue for resolution in this case is whether or not the
counterclaim of petitioner is compulsory or permissive in nature. A
compulsory counterclaim is one which, being cognizable by the regular
courts of justice, arises out of or is connected with the transaction or
occurrence constituting the subject matter of the opposing party's claim
CIVIL PROCEDURE CASES – Pleadings (Rule 6)
and does not require for its adjudication the presence of third parties of
whom the court cannot acquire jurisdiction.19
In Valencia v. Court of Appeals,20 this Court capsulized the criteria or
tests that may be used in determining whether a counterclaim is
compulsory or permissive, summarized as follows:
1. Are the issues of fact and law raised by the claim and
counterclaim largely the same?
2. Would res judicata bar a subsequent suit on defendant's claim
absent the compulsory counterclaim rule?
3. Will substantially the same evidence support or refute plaintiff's
claim as well s defendant's counterclaim?
4. Is there any logical relation between the claim and the
counterclaim?
Another test, applied in the more recent case of Quintanilla v. Court of
Appeals,21 is the "compelling test of compulsoriness" which requires "a
logical relationship between the claim and counterclaim, that is, where
conducting separate trials of the respective claims of the parties would
entail a substantial duplication of effort and time by the parties and the
court."
As contained in her answer, petitioner's counterclaims are as
follows:
(20) That defendant incorporates and repleads by reference all
the foregoing allegations as may be material to her Counterclaim
against FGU.
(21) That FGU is liable to pay the following just, valid and
legitimate claims of defendant:
(a) the sum of at least P104,893.45 plus maximum
interest thereon representing, among others, direct
commissions, profit commissions and contingent bonuses
legally due to defendant; and
2

(b) the minimum amount of P500,000.00 plus the
maximum allowable interest representing defendant's
accumulated premium reserve for 1985 and previous
years,
which FGU has unjustifiably failed to remit to defendant despite
repeated demands in gross violation of their Special Agent's
Contract and in contravention of the principle of law that "every
person must, in the exercise of his rights and in the performance
of his duties, act with justice, give everyone his due, and observe
honesty and good faith."
(22) That as a result of the filing of this patently baseless,
malicious and unjustified Complaint, and FGU's unlawful, illegal
and vindictive termination of their Special Agent's Contract,
defendant was unnecessarily dragged into this litigation and to
defense [sic] her side and assert her rights and claims against
FGU, she was compelled to hire the services of counsel with
whom she agreed to pay the amount of P30,000.00 as and for
attorney's fees and stands to incur litigation expenses in the
amount estimated to at least P20,000.00 and for which FGU
should be assessed and made liable to pay defendant.
(23) That considering further the malicious and unwarranted
action of defendant in filing this grossly unfounded action,
defendant has suffered and continues to suffer from serious
anxiety, mental anguish, fright and humiliation. In addition to this,
defendant's name, good reputation and business standing in the
insurance business as well as in the community have been
besmirched and for which FGU should be adjudged and made
liable to pay moral damages to defendant in the amount of
P300,000.00 as minimum.
(24) That in order to discourage the filing of groundless and
malicious suits like FGU's Complaint, and by way of serving [as]
an example for the public good, FGU should be penalized and
assessed exemplary damages in the sum of P100,000.00 or such
amount as the Honorable Court may deem warranted under the
circumstances.22
Tested against the abovementioned standards, petitioner's counterclaim
for commissions, bonuses, and accumulated premium reserves is merely
permissive. The evidence required to prove petitioner's claims differs
CIVIL PROCEDURE CASES – Pleadings (Rule 6)
from that needed to establish respondent's demands for the recovery of
cash accountabilities from petitioner, such as cash advances and costs of
premiums. The recovery of respondent's claims is not contingent or
dependent upon establishing petitioner's counterclaim, such that
conducting separate trials will not result in the substantial duplication of
the time and effort of the court and the parties. One would search the
records in vain for a logical connection between the parties' claims. This
conclusion is further reinforced by petitioner's own admissions since she
declared in her answer that respondent's cause of action, unlike her own,
was not based upon the Special Agent's Contract.23 However, petitioner's
claims for damages, allegedly suffered as a result of the filing by
respondent of its complaint, are compulsory.24
There is no need for need for petitioner to pay docket fees for her
compulsory counterclaim.25 On the other hand, in order for the trial court
to acquire jurisdiction over her permissive counterclaim, petitioner is
bound to pay the prescribed docket fees.26 The rule on the payment of
filing fees has been laid down by the Court in the case of Sun Insurance
Office, Ltd. V. Hon. Maximiano Asuncion27-
1. It is not simply the filing of the complaint or appropriate
initiatory pleading, but the payment of the prescribed docket fee,
that vests a trial court with jurisdiction over the subject-matter or
nature of the action. Where the filing of the initiatory pleading is
not accompanied by payment of the docket fee, the court may
allow payment of the fee within a reasonable time but in no case
beyond the applicable prescriptive or reglementary period.
2. The same rule applies to permissive counterclaims, third-party
claims and similar pleadings, which shall not be considered filed
until and unless the filing fee prescribed therefor is paid. The
court may allow payment of said fee within a reasonable time but
also in no case beyond its applicable prescriptive or reglementary
period.
3. Where the trial court acquires jurisdiction over a claim by the
filing of the appropriate pleading and payment of the prescribed
filing fee but, subsequently, the judgment awards a claim not
specified in the pleading, or if specified the same has been left for
determination by the court, the additional filing fee therefor shall
constitute a lien on the judgment. It shall be the responsibility of
the Clerk of Court or his duly authorized deputy to enforce said
lien and assess and collect the additional fee.
3
 CIVIL PROCEDURE CASES – Pleadings (Rule 6)
The above mentioned ruling in Sun Insurance has been reiterated in the
recent case of Susan v. Court of Appeals.28 In Suson, the Court explained
that although the payment of the prescribed docket fees is a jurisdictional
requirement, its non-payment does not result in the automatic dismissal
of the case provided the docket fees are paid within the applicable
prescriptive or reglementary period. Coming now to the case at bar, it has
not been alleged by respondent and there is nothing in the records to
show that petitioner has attempted to evade the payment of the proper
docket fees for her permissive counterclaim. As a matter of fact, after
respondent filed its motion to dismiss petitioner's counterclaim based on
her failure to pay docket fees, petitioner immediately filed a motion with
the trial court, asking it to declare her counterclaim as compulsory in
nature and therefore exempt from docket fees and, in addition, to declare
that respondent was in default for its failure to answer her
counterclaim.29 However, the trial court dismissed petitioner's
counterclaim. Pursuant to this Court's ruling in Sun Insurance, the trial
court should have instead given petitioner a reasonable time, but in no
case beyond the applicable prescriptive or reglementary period, to pay
the filing fees for her permissive counterclaim.

Petitioner asserts that the trial court should have declared respondent in
default for having failed to answer her counterclaim.30 Insofar as the
permissive counterclaim of petitioner is concerned, there is obviously no
need to file an answer until petitioner has paid the prescribed docket fees
for only then shall the court acquire jurisdiction over such
claim.31 Meanwhile, the compulsory counterclaim of petitioner for
damages based on the filing by respondent of an allegedly unfounded
and malicious suit need not be answered since it is inseparable from the
claims of respondent. If respondent were to answer the compulsory
counterclaim of petitioner, it would merely result in the former pleading
the same facts raised in its complaint.32

WHEREFORE, the assailed Decision of the Court of Appeals

promulgated on 23 December 1998 and its 19 May 1999 Resolution are
hereby MODIFIED. The compulsory counterclaim of petitioner for
damages filed in Civil Case No. 89-3816 is ordered REINSTATED.
Meanwhile, the Regional Trial Court of Makati (Branch 134) is ordered to
require petitioner to pay the prescribed docket fees for her permissive
counterclaim (direct commissions, profit commissions, contingent
bonuses and accumulated premium reserves), after ascertaining that the
applicable prescriptive period has not yet set in.33

SO ORDERED. 1âw phi 1.nêt

4

G.R. No. 146019 June 8, 2004
ARMANDO M. LASCANO, petitioner, vs.UNIVERSAL STEEL
SMELTING CO., INC., REYNALDO U. LIM and HON. REGIONAL
TRIAL COURT OF QUEZON CITY, respondents.
For review are (1) the resolution1 dated August 7, 2000 of the Court of
Appeals in CA-G.R. SP No. 59972, which dismissed petitioner’s special
civil action for certiorari because of late filing; and (2) the resolution2 of
November 15, 2000, denying petitioner’s motion for reconsideration. In
the interest of the speedy administration of justice, we shall also inquire
into the merits of said special civil action.
The antecedent facts are as follows:
Sometime in 1990, petitioner Armando Lascano had a
construction project at No. 18 Dalsol Street, GSIS Village, Project
8, Quezon City. This project required a number of steel bars of
various grades, which petitioner ordered from private respondent
Universal Steel Smelting Co., Inc. (USSCI). On August 30, 1990,
the steel bars valued at P104,268 were received by petitioner’s
representative, Rolando Nanquil. When the amount due thereon
was not paid, USSCI demanded payment. Instead of complying,
petitioner denied that he ordered the steel bars from USSCI.
Upon advice of its lawyer, USSCI filed a criminal complaint
for estafa against petitioner with the Quezon City Prosecutor’s Office. The
complaint was dismissed on September 5, 1991. USSCI’s motion for
reconsideration was denied on November 14, 1991 and its petition for
review filed with the Department of Justice was also
dismissed per resolution dated June 19, 1992.
In the meantime, the Manila Bulletin in its August 23, 1991 issue,
published a news item entitled "School Owner in QC Sued." On August
27, 1991, another news item, "School Owner Faces Rap," was published,
this time by Tempo. In both news items, the school owner referred to was
petitioner Armando Lascano.
Hence, on August 25, 1992, petitioner filed with public respondent
Regional Trial Court of Quezon City, Branch 93, a complaint for damages
against private respondents USSCI and its Vice-President Reynaldo Lim,
for alleged malicious prosecution and allegedly causing the publication in
two (2) newspapers of general circulation, that he was being sued
for estafa.
CIVIL PROCEDURE CASES – Pleadings (Rule 6)
The case was docketed as Civil Case No. Q-92-13212 and on December
27, 1994, the trial court dismissed the complaint, thus:
WHEREFORE, premises considered, the Court hereby dismisses
the complaint for failure of plaintiff to establish his causes of
action by preponderant evidence.
On the counterclaim, the Court orders plaintiff to pay the
defendants the following:
1. P104,268.00 with interest thereon at 14% per annum
from
August 30, 1990 until fully paid;
2. P100,000.00 for moral damages;
3. P50,000.00 for exemplary damages;
4. P35,000.00 as and for reasonable attorney’s fees; and
5. Costs of suit.
SO ORDERED.3
Petitioner received said Decision on January 16, 1995. Petitioner’s
counsel then filed a Notice of Appeal on January 20, 1995, which was
approved by the trial court in an Order dated January 25, 1995. However,
the Court of Appeals dismissed the appeal in its Resolution dated August
13, 1998, in this wise:
Pursuant to Section 1 (c), Rule 50 in relation to Section 4 of Rule
41 of the 1997 Rules of Civil Procedure, as amended, the instant
appeal is hereby DISMISSED for failure of the appellant to pay
the docket and other lawful fees.
SO ORDERED.4
On September 5, 1998, said Resolution became final and executory and
the Court of Appeals issued an entry of judgment thereon. Private
respondents then promptly filed on January 10, 2000 a motion for
5

execution of the December 27, 1994 judgment, which the court a
quo granted on February 9, 2000. On March 15, 2000, petitioner filed a
motion for reconsideration of the trial court’s Order granting the motion for
execution, but the same was denied on April 28, 2000.
Thus, on July 31, 2000, petitioner filed a special civil action
for certiorari with the Court of Appeals. However, the Court of Appeals, in
its Resolution of August 7, 2000, dismissed said petition on the ground of
late filing. Petitioner then filed a motion for reconsideration, which was
denied in the appellate court’s Resolution dated November 15, 2000.
Hence, the instant petition ascribing to the appellate court the following
errors:
I period, but which shall not be less than five (5) days in any event,
THE COURT OF APPEALS GRAVELY ERRED IN STRICTLY
APPLYING THE RULES IN THE FILING OF PETITION FOR
CERTIORARI CONTRARY TO THE LIBERAL CONSTRUCTION
RULE AS ECHOED IN SEVERAL SUPREME COURT
DECISIONS.
II
THE COURT OF APPEALS GRAVELY ERRED IN
DISREGARDING THE RULE ON INTEREST OF JUSTICE AND
EQUITY IN FAVOR OF TECHNICALITY WHERE THE RTC
DECISION SUBJECT OF EXECUTION WAS UNJUST AND
VOID HAVING BEEN RENDERED ON PURE SPECULATION
AND CONJECTURE WITHOUT CITATION OF SPECIFIC
EVIDENCE.5
On the procedural aspect, we find merit in the petition.
In finding that the special civil action for certiorari was filed out of time,
the Court of Appeals applied Supreme Court Circular No. 39-98,6 which
took effect on September 1, 1998. Said circular amended Section 4, Rule
65 of the 1997 Rules of Civil Procedure as follows:
Sec. 4. Where and when petition to be filed. – The petition may
be filed not later than sixty (60) days from notice of the judgment,
order or resolution sought to be assailed in the Supreme Court or,
CIVIL PROCEDURE CASES – Pleadings (Rule 6)
if it relates to the acts or omissions of a lower court or of a
corporation, board, officer or person, in the Regional Trial Court
exercising jurisdiction over the territorial area as defined by the
Supreme Court. It may also be filed in the Court of Appeals
whether or not the same is in aid of its appellate jurisdiction, or in
the Sandiganbayan if it is in aid of its jurisdiction. If it involves the
acts or omissions of a quasi-judicial agency, and unless
otherwise provided by law or these Rules, the petition shall be
filed in and cognizable only by the Court of Appeals.
If the petitioner had filed a motion for new trial or reconsideration
in due time after notice of said judgment, order or resolution, the
period herein fixed shall be interrupted. If the motion is denied,
the aggrieved party may file the petition within the remaining
reckoned from notice of such denial. No extension of time to file
petition shall be granted except for the most compelling reason
and in no case to exceed fifteen (15) days. (Underscoring ours).
Records show that petitioner received on March 3, 2000 a copy of
respondent trial court’s February 9, 2000 Order granting the motion for
execution of the December 27, 1994 judgment. He filed the motion for
reconsideration on March 15, 2000 or twelve (12) days after notice of the
assailed Order. Thus, consistent with SC Circular No. 39-98, the original
60-day period was interrupted when petitioner filed a motion for
reconsideration. Since the motion was denied, petitioner had the
remaining period of forty-eight (48) days within which to file the special
civil action for certiorari with the Court of Appeals.
Evidence on record shows petitioner received on June 1, 2000 a copy of
the trial court’s April 28, 2000 Order denying his motion for
reconsideration. Therefore, conformably with SC Circular No. 39-98, the
filing of the special civil action for certiorari with the Court of Appeals on
July 31, 2000, or on the 60th day, was twelve (12) days beyond the
reglementary period.
We must point out, however, that Supreme Court Circular No. 56-
2000,7 which took effect on September 1, 2000 further amended Section
4 of Rule 65 as follows:
Sec 4. When and where petition filed. - The petition shall be filed
not later than sixty (60) days from notice of the judgment, order or
resolution. In case a motion for reconsideration or new trial is
6

timely filed, whether such motion is required or not, the sixty (60)
day period shall be counted from notice of the denial of the said
motion. (Underscoring ours).
Under the second amendment, the 60-day period within which to file the
special civil action for certiorari starts to run from receipt of notice of the
denial of the motion for reconsideration. However, it bears stressing, at
the time of petitioner’s filing of the special civil action for certiorari with the
Court of Appeals on July 31, 2000, SC Circular No. 56-2000 was not yet
in effect. Therefore, the sole issue for our consideration in this case is
whether or not said circular may be applied retroactively.
The present question does not pose a novel issue. In an analogous
case, San Luis v. Court of Appeals,8 the Court of Appeals likewise
reckoned the counting of the 60-day period from petitioner’s receipt of a
copy of the assailed Order, considered the interruption of the running of
the period by the filing of the motion for reconsideration, and held that the
remaining period resumed to run on the date petitioner received the
Order denying his motion for reconsideration.
In said case of San Luis, petitioner’s special civil action for certiorari was
filed with the Court of Appeals on January 7, 2000, long before SC
Circular No. 56-2000 took effect. Nonetheless, we applied the circular
retroactively and held that the appellate court erred in dismissing the
special civil action for certiorari on the ground of late filing. We said
therein:
Settled is the rule that remedial statutes or statutes relating to
remedies or modes of procedure, which do not create new rights
or take away vested rights but only operate in furtherance of the
remedy or confirmation of rights already existing, do not come
within the purview of the general rule against the retroactive
operation of statutes. Procedural laws are construed to be
applicable to actions pending and undetermined at the time of
their passage, and are deemed retroactive in that sense and to
that extent. As a general rule, the retroactive application of
procedural laws cannot be considered violative of any personal
rights because no vested right may attach to nor arise therefrom.9
We see no reason why we should treat the instant case differently. Thus,
pursuant to SC Circular No. 56-2000, petitioner’s 60-day period to file the
special civil action for certiorari should be counted from his receipt on
June 1, 2000 of the Order of April 28, 2000, denying his motion for
CIVIL PROCEDURE CASES – Pleadings (Rule 6)
reconsideration. Hence, the special civil action for certiorari having been
filed on July 31, 2000, or the last day before the reglementary period
expired, the Court of Appeals should not have dismissed the same on the
ground of late filing.
Considering the circumstances in this case, we could direct the Court of
Appeals to decide on the merits the issues raised in petitioner’s special
civil action for certiorari. However, that would only result in further delay
before the resolution of this case. In our view, it is preferable to settle the
entire controversy now in a single proceeding, leaving no root or branch
to bear the seeds of future litigation. Following the San Luis decision, if
based on the records including the pleadings and the evidence, the
dispute could be resolved by us, we will do so to serve the ends of
justice, instead of remanding the case to the lower court for further
proceedings.10
In the petition for certiorari, petitioner assigns the following errors to the
trial court:
I
THE RESPONDENT COURT GRAVELY ABUSED ITS
DISCRETION IN GRANTING THE ISSUANCE OF WRIT OF
EXECUTION.
II
THE RESPONDENT COURT GRAVELY ABUSED ITS
DISCRETION IN UPHOLDING THAT IT IS THE MINISTERIAL
DUTY THE (sic) COURT TO ISSUE THE WRIT OF EXECUTION.
III
THE RESPONDENT COURT GRAVELY ABUSED ITS
DISCRETION IN UPHOLDING THAT THE EXECUTION OF
WHATEVER JUDGMENT THAT MAY HAVE BEEN RENDERED
WILL PUT THE (SIC) REST THE CONTROVERSY BETWEEN
PARTY LITIGANTS.
IV
7

THE RESPONDENT COURT GRAVELY ABUSED ITS
DISCRETION IN DISREGARDING THE RULE THAT A WRIT OF
EXECUTION MAY BE DISALLOWED ON EQUITABLE
GROUNDS.11
Petitioner contends that the December 27, 1994 judgment is devoid of
factual and legal bases. He protests the order to pay private
respondents P104,268 representing the value of the steel bars delivered
to him. According to petitioner, he transacted business with LNG
Marketing, not with private respondents. He claims that LNG Marketing
was a dealer of private respondents, but that both could not compete for
one client.12
In our view, that petitioner transacted with LNG Marketing for the
purchase of steel bars might well be true, but it did not preclude the fact
that private respondents had delivered steel bars to petitioner. The fact of
delivery to petitioner of the subject steel bars is evidenced by delivery
receipts signed by one Rolando Nanquil acting as petitioner’s agent.
While petitioner denied knowing said Rolando Nanquil, the delivery
receipts of LNG Marketing were signed by the same Rolando Nanquil, as
duly authorized agent of petitioner. Delivery of subject steel bars to
petitioner having been established by preponderance of evidence, we
could not conclude that the trial court erred when it ordered petitioner to
pay private respondents the value of said steel bars.
Petitioner questions the trial court’s order to pay private
respondents P100,000 and P50,000 as moral and exemplary damages,
respectively. He maintains that he filed the complaint in good faith, which
is inconsistent with the order to pay moral damages; and that there was
no proof he acted in a wanton, fraudulent, reckless, oppressive and
malevolent manner, as to justify exemplary damages.
Petitioner misses the point that the court a quo ordered the payment of
moral damages not because he filed the complaint in bad faith, but
because of his unjustified refusal to pay a just debt. Article 2220 of the
Civil Code provides:
ART. 2220. Willful injury to property may be a legal ground for
awarding moral damages if the court should find that, under the
circumstances, such damages are justly due. The same rule
applies to breaches of contract where the defendant acted
fraudulently or in bad faith. (Underscoring ours).
CIVIL PROCEDURE CASES – Pleadings (Rule 6)
When payment on the delivered steel bars was demanded, petitioner,
instead of complying with his obligation, denied having transacted with
private respondents. Such cold refusal to pay a just debt amounts to a
breach of contract in bad faith, as contemplated by the aforecited
provision. Hence, the order to pay moral damages is in accordance with
law, but only with regard to respondent individual (Reynaldo Lim) and not
to respondent corporation (USSCI). A corporation cannot suffer nor be
entitled to moral damages.13
As to exemplary damages, although the same cannot be recovered as a
matter of right, they need not be proved. But before considering whether
exemplary damages should be awarded, it must first be shown that an
award of moral, temperate or compensatory damages obtains.14 In the
instant case, as the order to pay moral damages to private individual
respondent is proper, it follows that the adjudication of exemplary
damages on that basis is also in order.
As to the amount of damages, the court a quo ordered payment
of P100,000 for moral damages and P50,000 for exemplary damages.
However, considering the amount of the unpaid debt at issue in this case,
we are of the considered view that P10,000 as moral damages
and P5,000 in exemplary damages would suffice under the
circumstances.
Finally, petitioner argues private respondents’ counterclaims are merely
permissive, which require payment of docket fees. Indeed, before the trial
court may acquire jurisdiction over permissive counterclaims, docket fees
thereon must first be paid.15 However, we find that the counterclaims
herein are not permissive, but compulsory.16On this point, Section 7, Rule
6 of the Revised Rules of Civil Procedure is pertinent:
SEC. 7. Compulsory counterclaim. – A compulsory counterclaim
is one which, being cognizable by the regular courts of justice,
arises out of or is connected with the transaction or occurrence
constituting the subject matter of the opposing party’s claim and
does not require for its adjudication the presence of third parties
of whom the court cannot acquire jurisdiction. Such a
counterclaim must be within the jurisdiction of the court both as to
the amount and the nature thereof, except that in an original
action before the Regional Trial Court, the counterclaim may be
considered compulsory regardless of the amount.
8
 CIVIL PROCEDURE CASES – Pleadings (Rule 6)
The alleged malicious filing of estafa against petitioner is necessarily
connected with the non-payment of the value of steel bars delivered to
petitioner. The resolution of the latter issue does not require the presence
of third parties of whom the court a quo cannot acquire jurisdiction.
Therefore, the counterclaims raised by private respondents are clearly
compulsory in nature. Thus, non-payment of docket fees does not affect
the jurisdiction of the trial court to rule thereon.

In sum, we find no error nor grave abuse of discretion on the part of

public respondent in rendering the assailed judgment dismissing the
complaint. But the award to private respondents of damages as part of
their counterclaims against the petitioner, particularly with regard to
damages as herein elucidated, ought to be modified accordingly.

WHEREFORE, the resolutions of the appellate court dated August 7,

2000 and November 15, 2000 in CA-G.R. SP No. 59972 are SET ASIDE.
The assailed decision of the Regional Trial Court of Quezon City, Branch
93, in Civil Case No. Q-92-13212, dated December 27, 1994,
is AFFIRMED, except as to the amounts of moral and exemplary
damages, which are MODIFIED and reduced to only P10,000.00
and P5,000.00, respectively. No pronouncement as to costs.

SO ORDERED.

9

G.R. No. 155173 November 23, 2004
LAFARGE CEMENT PHILIPPINES, INC., (formerly Lafarge
Philippines, Inc.), LUZON CONTINENTAL LAND CORPORATION,
CONTINENTAL OPERATING CORPORATION and PHILIP
ROSEBERG, petitioners, vs. CONTINENTAL CEMENT
CORPORATION, GREGORY T. LIM and ANTHONY A.
MARIANO, respondents.
May defendants in civil cases implead in their counterclaims persons who
were not parties to the original complaints? This is the main question to
be answered in this controversy.
The Case
Before us is a Petition for Review1 under Rule 45 of the Rules of Court,
seeking to nullify the May 22, 20022 and the September 3, 2002
Orders3 of the Regional Trial Court (RTC) of Quezon City (Branch 80) in
Civil Case No. Q-00-41103. The decretal portion of the first assailed
Order reads:
"WHEREFORE, in the light of the foregoing as earlier stated, the
plaintiff's motion to dismiss claims is granted. Accordingly, the
defendants' claims against Mr. Lim and Mr. Mariano captioned as
their counterclaims are dismissed."4
The second challenged Order denied petitioners' Motion for
Reconsideration.
The Facts
Briefly, the origins of the present controversy can be traced to the Letter
of Intent (LOI) executed by both parties on August 11, 1998, whereby
Petitioner Lafarge Cement Philippines, Inc. (Lafarge) -- on behalf of its
affiliates and other qualified entities, including Petitioner Luzon
Continental Land Corporation (LCLC) -- agreed to purchase the cement
business of Respondent Continental Cement Corporation (CCC). On
October 21, 1998, both parties entered into a Sale and Purchase
Agreement (SPA). At the time of the foregoing transactions, petitioners
were well aware that CCC had a case pending with the Supreme Court.
The case was docketed as GR No. 119712, entitled Asset Privatization
Trust (APT) v. Court of Appeals and Continental Cement Corporation.
CIVIL PROCEDURE CASES – Pleadings (Rule 6)
In anticipation of the liability that the High Tribunal might adjudge against
CCC, the parties, under Clause 2 (c) of the SPA, allegedly agreed to
retain from the purchase price a portion of the contract price in the
amount of P117,020,846.84 -- the equivalent of US$2,799,140. This
amount was to be deposited in an interest-bearing account in the First
National City Bank of New York (Citibank) for payment to APT, the
petitioner in GR No. 119712.
However, petitioners allegedly refused to apply the sum to the payment
to APT, despite the subsequent finality of the Decision in GR No. 119712
in favor of the latter and the repeated instructions of Respondent CCC.
Fearful that nonpayment to APT would result in the foreclosure, not just
of its properties covered by the SPA with Lafarge but of several other
properties as well, CCC filed before the Regional Trial Court of Quezon
City on June 20, 2000, a "Complaint with Application for Preliminary
Attachment" against petitioners. Docketed as Civil Case No. Q-00-41103,
the Complaint prayed, among others, that petitioners be directed to pay
the "APT Retained Amount" referred to in Clause 2 (c) of the SPA.
Petitioners moved to dismiss the Complaint on the ground that it violated
the prohibition on forum-shopping. Respondent CCC had allegedly made
the same claim it was raising in Civil Case No. Q-00-41103 in another
action, which involved the same parties and which was filed earlier before
the International Chamber of Commerce. After the trial court denied the
Motion to Dismiss in its November 14, 2000 Order, petitioners elevated
the matter before the Court of Appeals in CA-GR SP No. 68688.
In the meantime, to avoid being in default and without prejudice to the
outcome of their appeal, petitioners filed their Answer and Compulsory
Counterclaims ad Cautelam before the trial court in Civil Case No. Q-00-
41103. In their Answer, they denied the allegations in the Complaint.
They prayed -- by way of compulsory counterclaims against Respondent
CCC, its majority stockholder and president Gregory T. Lim, and its
corporate secretary Anthony A. Mariano -- for the sums of (a) P2,700,000
each as actual damages, (b) P100,000,000 each as exemplary damages,
(c) P100,000,000 each as moral damages, and (d) P5,000,000 each as
attorney's fees plus costs of suit.
Petitioners alleged that CCC, through Lim and Mariano, had filed the
"baseless" Complaint in Civil Case No. Q-00-41103 and procured the
Writ of Attachment in bad faith. Relying on this Court's pronouncement in
Sapugay v. CA,5petitioners prayed that both Lim and Mariano be held
"jointly and solidarily" liable with Respondent CCC.
10

On behalf of Lim and Mariano who had yet to file any responsive
pleading, CCC moved to dismiss petitioners' compulsory counterclaims
on grounds that essentially constituted the very issues for resolution in
the instant Petition.
Ruling of the Trial Court
On May 22, 2002, the Regional Trial Court of Quezon City (Branch 80)
dismissed petitioners' counterclaims for several reasons, among which
were the following: a) the counterclaims against Respondents Lim and
Mariano were not compulsory; b) the ruling in Sapugay was not
applicable; and c) petitioners' Answer with Counterclaims violated
procedural rules on the proper joinder of causes of action.6
Acting on the Motion for Reconsideration filed by petitioners, the trial
court -- in an Amended Order dated September 3, 20027 -- admitted
some errors in its May 22, 2002 Order, particularly in its pronouncement
that their counterclaim had been pleaded against Lim and Mariano only.
However, the RTC clarified that it was dismissing the counterclaim insofar
as it impleaded Respondents Lim and Mariano, even if it included CCC.
Hence this Petition.8
Issues
In their Memorandum, petitioners raise the following issues for our
consideration:
"[a] Whether or not the RTC gravely erred in refusing to rule that
Respondent CCC has no personality to move to dismiss
petitioners' compulsory counterclaims on Respondents Lim and
Mariano's behalf.
"[b] Whether or not the RTC gravely erred in ruling that (i)
petitioners' counterclaims against Respondents Lim and Mariano
are not compulsory; (ii) Sapugay v. Court of Appeals is
inapplicable here; and (iii) petitioners violated the rule on joinder
of causes of action."9
For clarity and coherence, the Court will resolve the foregoing in reverse
order.
CIVIL PROCEDURE CASES – Pleadings (Rule 6)
The Court's Ruling
The Petition is meritorious.
First Issue:
Counterclaims and Joinder of Causes of Action.
Petitioners' Counterclaims Compulsory
Counterclaims are defined in Section 6 of Rule 6 of the Rules of Civil
Procedure as "any claim which a defending party may have against an
opposing party." They are generally allowed in order to avoid a
multiplicity of suits and to facilitate the disposition of the whole
controversy in a single action, such that the defendant's demand may be
adjudged by a counterclaim rather than by an independent suit. The only
limitations to this principle are (1) that the court should have jurisdiction
over the subject matter of the counterclaim, and (2) that it could acquire
jurisdiction over third parties whose presence is essential for its
adjudication.10
A counterclaim may either be permissive or compulsory. It is permissive
"if it does not arise out of or is not necessarily connected with the subject
matter of the opposing party's claim."11 A permissive counterclaim is
essentially an independent claim that may be filed separately in another
case.
A counterclaim is compulsory when its object "arises out of or is
necessarily connected with the transaction or occurrence constituting the
subject matter of the opposing party's claim and does not require for its
adjudication the presence of third parties of whom the court cannot
acquire jurisdiction."12
Unlike permissive counterclaims, compulsory counterclaims should be
set up in the same action; otherwise, they would be barred forever.
NAMARCO v. Federation of United Namarco Distributors13 laid down the
following criteria to determine whether a counterclaim is compulsory or
permissive: 1) Are issues of fact and law raised by the claim and by the
counterclaim largely the same? 2) Would res judicata bar a subsequent
suit on defendant's claim, absent the compulsory counterclaim rule? 3)
Will substantially the same evidence support or refute plaintiff's claim as
well as defendant's counterclaim? 4) Is there any logical relation between
11

the claim and the counterclaim? A positive answer to all four questions
would indicate that the counterclaim is compulsory.
Adopted in Quintanilla v. CA14 and reiterated in Alday v. FGU Insurance
Corporation,15 the "compelling test of compulsoriness" characterizes a
counterclaim as compulsory if there should exist a "logical relationship"
between the main claim and the counterclaim. There exists such a
relationship when conducting separate trials of the respective claims of
the parties would entail substantial duplication of time and effort by the
parties and the court; when the multiple claims involve the same factual
and legal issues; or when the claims are offshoots of the same basic
controversy between the parties.
We shall now examine the nature of petitioners' counterclaims against
respondents with the use of the foregoing parameters.
Petitioners base their counterclaim on the following allegations:
"Gregory T. Lim and Anthony A. Mariano were the persons
responsible for making the bad faith decisions for, and causing
plaintiff to file this baseless suit and to procure an unwarranted
writ of attachment, notwithstanding their knowledge that plaintiff
has no right to bring it or to secure the writ. In taking such bad
faith actions, Gregory T. Lim was motivated by his personal
interests as one of the owners of plaintiff while Anthony A.
Mariano was motivated by his sense of personal loyalty to
Gregory T. Lim, for which reason he disregarded the fact that
plaintiff is without any valid cause.
"Consequently, both Gregory T. Lim and Anthony A. Mariano are
the plaintiff's co-joint tortfeasors in the commission of the acts
complained of in this answer and in the compulsory counterclaims
pleaded below. As such they should be held jointly and solidarily
liable as plaintiff's co-defendants to those compulsory
counterclaims pursuant to the Supreme Court's decision in
Sapugay v. Mobil.
xxx xxx xxx
"The plaintiff's, Gregory T. Lim and Anthony A. Mariano's bad
faith filing of this baseless case has compelled the defendants to
engage the services of counsel for a fee and to incur costs of
CIVIL PROCEDURE CASES – Pleadings (Rule 6)
litigation, in amounts to be proved at trial, but in no case less than
P5 million for each of them and for which plaintiff Gregory T. Lim
and Anthony A. Mariano should be held jointly and solidarily
liable.
"The plaintiff's, Gregory T. Lim's and Anthony A. Mariano's
actions have damaged the reputations of the defendants and they
should be held jointly and solidarily liable to them for moral
damages of P100 million each.
"In order to serve as an example for the public good and to deter
similar baseless, bad faith litigation, the plaintiff, Gregory T. Lim
and Anthony A. Mariano should be held jointly and solidarily liable
to the defendants for exemplary damages of P100 million
each." 16
The above allegations show that petitioners' counterclaims for damages
were the result of respondents' (Lim and Mariano) act of filing the
Complaint and securing the Writ of Attachment in bad faith. Tiu Po v.
Bautista17 involved the issue of whether the counterclaim that sought
moral, actual and exemplary damages and attorney's fees against
respondents on account of their "malicious and unfounded" complaint
was compulsory. In that case, we held as follows:
"Petitioners' counterclaim for damages fulfills the necessary
requisites of a compulsory counterclaim. They are damages
claimed to have been suffered by petitioners as a consequence of
the action filed against them. They have to be pleaded in the
same action; otherwise, petitioners would be precluded by the
judgment from invoking the same in an independent action. The
pronouncement in Papa vs. Banaag (17 SCRA 1081) (1966) is in
point:
"Compensatory, moral and exemplary damages, allegedly
suffered by the creditor in consequence of the debtor's action, are
also compulsory counterclaim barred by the dismissal of the
debtor's action. They cannot be claimed in a subsequent action
by the creditor against the debtor."
"Aside from the fact that petitioners' counterclaim for damages
cannot be the subject of an independent action, it is the same
evidence that sustains petitioners' counterclaim that will refute
private respondent's own claim for damages. This is an additional
12

factor that characterizes petitioners' counterclaim as
compulsory."18
Moreover, using the "compelling test of compulsoriness," we find that,
clearly, the recovery of petitioners' counterclaims is contingent upon the
case filed by respondents; thus, conducting separate trials thereon will
result in a substantial duplication of the time and effort of the court and
the parties.
Since the counterclaim for damages is compulsory, it must be set up in
the same action; otherwise, it would be barred forever. If it is filed
concurrently with the main action but in a different proceeding, it would
be abated on the ground of litis pendentia; if filed subsequently, it would
meet the same fate on the ground of res judicata.19
Sapugay v. Court of Appeals Applicable to the Case at Bar
Sapugay v. Court of Appeals finds application in the present case. In
Sapugay, Respondent Mobil Philippines filed before the trial court of
Pasig an action for replevin against Spouses Marino and Lina Joel
Sapugay. The Complaint arose from the supposed failure of the couple to
keep their end of their Dealership Agreement. In their Answer with
Counterclaim, petitioners alleged that after incurring expenses in
anticipation of the Dealership Agreement, they requested the plaintiff to
allow them to get gas, but that it had refused. It claimed that they still had
to post a surety bond which, initially fixed at P200,000, was later raised to
P700,000.
The spouses exerted all efforts to secure a bond, but the bonding
companies required a copy of the Dealership Agreement, which
respondent continued to withhold from them. Later, petitioners
discovered that respondent and its manager, Ricardo P. Cardenas, had
intended all along to award the dealership to Island Air Product
Corporation.
In their Answer, petitioners impleaded in the counterclaim Mobil
Philippines and its manager -- Ricardo P. Cardenas -- as defendants.
They prayed that judgment be rendered, holding both jointly and
severally liable for pre-operation expenses, rental, storage, guarding
fees, and unrealized profit including damages. After both Mobil and
Cardenas failed to respond to their Answer to the Counterclaim,
petitioners filed a "Motion to Declare Plaintiff and its Manager Ricardo P.
Cardenas in Default on Defendant's Counterclaim."
CIVIL PROCEDURE CASES – Pleadings (Rule 6)
Among the issues raised in Sapugay was whether Cardenas, who was
not a party to the original action, might nevertheless be impleaded in the
counterclaim. We disposed of this issue as follows:
"A counterclaim is defined as any claim for money or other relief
which a defending party may have against an opposing party.
However, the general rule that a defendant cannot by a
counterclaim bring into the action any claim against persons other
than the plaintiff admits of an exception under Section 14, Rule 6
which provides that 'when the presence of parties other than
those to the original action is required for the granting of complete
relief in the determination of a counterclaim or cross-claim, the
court shall order them to be brought in as defendants, if
jurisdiction over them can be obtained.' The inclusion, therefore,
of Cardenas in petitioners' counterclaim is sanctioned by the
rules."20
The prerogative of bringing in new parties to the action at any stage
before judgment is intended to accord complete relief to all of them in a
single action and to avert a duplicity and even a multiplicity of suits
thereby.
In insisting on the inapplicability of Sapugay, respondents argue that new
parties cannot be included in a counterclaim, except when no complete
relief can be had. They add that "[i]n the present case, Messrs. Lim and
Mariano are not necessary for petitioners to obtain complete relief from
Respondent CCC as plaintiff in the lower court. This is because
Respondent CCC as a corporation with a separate [legal personality] has
the juridical capacity to indemnify petitioners even without Messrs. Lim
and Mariano."21
We disagree. The inclusion of a corporate officer or stockholder --
Cardenas in Sapugay or Lim and Mariano in the instant case -- is not
premised on the assumption that the plaintiff corporation does not have
the financial ability to answer for damages, such that it has to share its
liability with individual defendants. Rather, such inclusion is based on the
allegations of fraud and bad faith on the part of the corporate officer or
stockholder. These allegations may warrant the piercing of the veil of
corporate fiction, so that the said individual may not seek refuge therein,
but may be held individually and personally liable for his or her actions.
In Tramat Mercantile v. Court of Appeals,22 the Court held that generally,
it should only be the corporation that could properly be held liable.
13

However, circumstances may warrant the inclusion of the personal
liability of a corporate director, trustee, or officer, if the said individual is
found guilty of bad faith or gross negligence in directing corporate affairs.
Remo Jr. v. IAC23 has stressed that while a corporation is an entity
separate and distinct from its stockholders, the corporate fiction may be
disregarded if "used to defeat public convenience, justify a wrong, protect
fraud, or defend crime." In these instances, "the law will regard the
corporation as an association of persons, or in case of two corporations,
will merge them into one." Thus, there is no debate on whether, in
alleging bad faith on the part of Lim and Mariano the counterclaims had
in effect made them "indispensable parties" thereto; based on the alleged
facts, both are clearly parties in interest to the counterclaim.24
Respondents further assert that "Messrs. Lim and Mariano cannot be
held personally liable [because their assailed acts] are within the powers
granted to them by the proper board resolutions; therefore, it is not a
personal decision but rather that of the corporation as represented by its
board of directors."25 The foregoing assertion, however, is a matter of
defense that should be threshed out during the trial; whether or not
"fraud" is extant under the circumstances is an issue that must be
established by convincing evidence.26
Suability and liability are two distinct matters. While the Court does rule
that the counterclaims against Respondent CCC's president and
manager may be properly filed, the determination of whether both can in
fact be held jointly and severally liable with respondent corporation is
entirely another issue that should be ruled upon by the trial court.
However, while a compulsory counterclaim may implead persons not
parties to the original complaint, the general rule -- a defendant in a
compulsory counterclaim need not file any responsive pleading, as it is
deemed to have adopted the allegations in the complaint as its answer --
does not apply. The filing of a responsive pleading is deemed a voluntary
submission to the jurisdiction of the court; a new party impleaded by the
plaintiff in a compulsory counterclaim cannot be considered to have
automatically and unknowingly submitted to the jurisdiction of the court. A
contrary ruling would result in mischievous consequences whereby a
party may be indiscriminately impleaded as a defendant in a compulsory
counterclaim; and judgment rendered against it without its knowledge,
much less participation in the proceedings, in blatant disregard of
rudimentary due process requirements.
CIVIL PROCEDURE CASES – Pleadings (Rule 6)
The correct procedure in instances such as this is for the trial court, per
Section 12 of Rule 6 of the Rules of Court, to "order [such impleaded
parties] to be brought in as defendants, if jurisdiction over them can be
obtained," by directing that summons be served on them. In this manner,
they can be properly appraised of and answer the charges against them.
Only upon service of summons can the trial court obtain jurisdiction over
them.
In Sapugay, Cardenas was furnished a copy of the Answer with
Counterclaim, but he did not file any responsive pleading to the
counterclaim leveled against him. Nevertheless, the Court gave due
consideration to certain factual circumstances, particularly the trial court's
treatment of the Complaint as the Answer of Cardenas to the compulsory
counterclaim and of his seeming acquiescence thereto, as evidenced by
his failure to make any objection despite his active participation in the
proceedings. It was held thus:
"It is noteworthy that Cardenas did not file a motion to dismiss the
counterclaim against him on the ground of lack of jurisdiction.
While it is a settled rule that the issue of jurisdiction may be
raised even for the first time on appeal, this does not obtain in the
instant case. Although it was only Mobil which filed an opposition
to the motion to declare in default, the fact that the trial court
denied said motion, both as to Mobil and Cardenas on the ground
that Mobil's complaint should be considered as the answer to
petitioners' compulsory counterclaim, leads us to the inescapable
conclusion that the trial court treated the opposition as having
been filed in behalf of both Mobil and Cardenas and that the latter
had adopted as his answer the allegations raised in the complaint
of Mobil. Obviously, it was this ratiocination which led the trial
court to deny the motion to declare Mobil and Cardenas in
default. Furthermore, Cardenas was not unaware of said
incidents and the proceedings therein as he testified and was
present during trial, not to speak of the fact that as manager of
Mobil he would necessarily be interested in the case and could
readily have access to the records and the pleadings filed therein.
"By adopting as his answer the allegations in the complaint which
seeks affirmative relief, Cardenas is deemed to have recognized
the jurisdiction of the trial court over his person and submitted
thereto. He may not now be heard to repudiate or question that
jurisdiction."27
14

Such factual circumstances are unavailing in the instant case.
The records do not show that Respondents Lim and Mariano are
either aware of the counterclaims filed against them, or that they
have actively participated in the proceedings involving them.
Further, in dismissing the counterclaims against the individual
respondents, the court a quo -- unlike in Sapugay -- cannot be
said to have treated Respondent CCC's Motion to Dismiss as
having been filed on their behalf.
Rules on Permissive Joinder of Causes
of Action or Parties Not Applicable
Respondent CCC contends that petitioners' counterclaims violated the
rule on joinder of causes of action. It argues that while the original
Complaint was a suit for specific performance based on a contract, the
counterclaim for damages was based on the tortuous acts of
respondents.28 In its Motion to Dismiss, CCC cites Section 5 of Rule 2
and Section 6 of Rule 3 of the Rules of Civil Procedure, which we quote:
"Section 5. Joinder of causes of action. – A party may in one
pleading assert, in the alternative or otherwise, as many causes
of action as he may have against an opposing party, subject to
the following conditions:
(a) The party joining the causes of action shall comply with the
rules on joinder of parties; x x x"
Section 6. Permissive joinder of parties. – All persons in whom or
against whom any right to relief in respect to or arising out of the
same transaction or series of transactions is alleged to exist
whether jointly, severally, or in the alternative, may, except as
otherwise provided in these Rules, join as plaintiffs or be joined
as defendants in one complaint, where any question of law or fact
common to all such plaintiffs or to all such defendants may arise
in the action; but the court may make such orders as may be just
to prevent any plaintiff or defendant from being embarrassed or
put to expense in connection with any proceedings in which he
may have no interest."
The foregoing procedural rules are founded on practicality and
convenience. They are meant to discourage duplicity and multiplicity of
suits. This objective is negated by insisting -- as the court a quo has done
-- that the compulsory counterclaim for damages be dismissed, only to
CIVIL PROCEDURE CASES – Pleadings (Rule 6)
have it possibly re-filed in a separate proceeding. More important, as we
have stated earlier, Respondents Lim and Mariano are real parties in
interest to the compulsory counterclaim; it is imperative that they be
joined therein. Section 7 of Rule 3 provides:
"Compulsory joinder of indispensable parties. – Parties in interest without
whom no final determination can be had of an action shall be joined
either as plaintiffs or defendants."
Moreover, in joining Lim and Mariano in the compulsory counterclaim,
petitioners are being consistent with the solidary nature of the liability
alleged therein.
Second Issue:
CCC's Personality to Move to Dismiss the Compulsory
Counterclaims
Characterizing their counterclaim for damages against Respondents
CCC, Lim and Mariano as "joint and solidary," petitioners prayed:
"WHEREFORE, it is respectfully prayed that after trial judgment
be rendered:
"1. Dismissing the complaint in its entirety;
"2. Ordering the plaintiff, Gregory T. Lim and Anthony A. Mariano
jointly and solidarily to pay defendant actual damages in the sum
of at least P2,700,000.00;
"3. Ordering the plaintiff, Gregory T. Lim and Anthony A, Mariano
jointly and solidarily to pay the defendants LPI, LCLC, COC and
Roseberg:
"a. Exemplary damages of P100 million each;
"b. Moral damages of P100 million each; and
"c. Attorney's fees and costs of suit of at least P5 million each.
Other reliefs just and equitable are likewise prayed for."29
15

Obligations may be classified as either joint or solidary. "Joint" or "jointly"
or "conjoint" means mancum or mancomunada or pro rata obligation; on
the other hand, "solidary obligations" may be used interchangeably with
"joint and several" or "several." Thus, petitioners' usage of the term "joint
and solidary" is confusing and ambiguous.
The ambiguity in petitioners' counterclaims notwithstanding, respondents'
liability, if proven, is solidary. This characterization finds basis in Article
1207 of the Civil Code, which provides that obligations are generally
considered joint, except when otherwise expressly stated or when the law
or the nature of the obligation requires solidarity. However, obligations
arising from tort are, by their nature, always solidary. We have
assiduously maintained this legal principle as early as 1912 in Worcester
v. Ocampo,30 in which we held:
"x x x The difficulty in the contention of the appellants is that they
fail to recognize that the basis of the present action is tort. They
fail to recognize the universal doctrine that each joint tort feasor is
not only individually liable for the tort in which he participates, but
is also jointly liable with his tort feasors. x x x
"It may be stated as a general rule that joint tort feasors are all
the persons who command, instigate, promote, encourage,
advise, countenance, cooperate in, aid or abet the commission of
a tort, or who approve of it after it is done, if done for their benefit.
They are each liable as principals, to the same extent and in the
same manner as if they had performed the wrongful act
themselves. x x x
"Joint tort feasors are jointly and severally liable for the tort which
they commit. The persons injured may sue all of them or any
number less than all. Each is liable for the whole damages
caused by all, and all together are jointly liable for the whole
damage. It is no defense for one sued alone, that the others who
participated in the wrongful act are not joined with him as
defendants; nor is it any excuse for him that his participation in
the tort was insignificant as compared to that of the others. x x x
"Joint tort feasors are not liable pro rata. The damages can not be
apportioned among them, except among themselves. They
cannot insist upon an apportionment, for the purpose of each
paying an aliquot part. They are jointly and severally liable for the
whole amount. x x x
CIVIL PROCEDURE CASES – Pleadings (Rule 6)
"A payment in full for the damage done, by one of the joint tort
feasors, of course satisfies any claim which might exist against
the others. There can be but satisfaction. The release of one of
the joint tort feasors by agreement generally operates to
discharge all. x x x
"Of course the court during trial may find that some of the alleged
tort feasors are liable and that others are not liable. The courts
may release some for lack of evidence while condemning others
of the alleged tort feasors. And this is true even though they are
charged jointly and severally."
In a "joint" obligation, each obligor answers only for a part of the whole
liability; in a "solidary" or "joint and several" obligation, the relationship
between the active and the passive subjects is so close that each of them
must comply with or demand the fulfillment of the whole obligation.31 The
fact that the liability sought against the CCC is for specific performance
and tort, while that sought against the individual respondents is based
solely on tort does not negate the solidary nature of their liability for
tortuous acts alleged in the counterclaims. Article 1211 of the Civil Code
is explicit on this point:
"Solidarity may exist although the creditors and the debtors may
not be bound in the same manner and by the same periods and
conditions."
The solidary character of respondents' alleged liability is precisely why
credence cannot be given to petitioners' assertion. According to such
assertion, Respondent CCC cannot move to dismiss the counterclaims
on grounds that pertain solely to its individual co-debtors.32 In cases filed
by the creditor, a solidary debtor may invoke defenses arising from the
nature of the obligation, from circumstances personal to it, or even from
those personal to its co-debtors. Article 1222 of the Civil Code provides:
"A solidary debtor may, in actions filed by the creditor, avail itself
of all defenses which are derived from the nature of the obligation
and of those which are personal to him, or pertain to his own
share. With respect to those which personally belong to the
others, he may avail himself thereof only as regards that part of
the debt for which the latter are responsible." (Emphasis
supplied).
16

The act of Respondent CCC as a solidary debtor -- that of filing a motion
to dismiss the counterclaim on grounds that pertain only to its individual
co-debtors -- is therefore allowed.
However, a perusal of its Motion to Dismiss the counterclaims shows that
Respondent CCC filed it on behalf of Co-respondents Lim and Mariano; it
did not pray that the counterclaim against it be dismissed. Be that as it
may, Respondent CCC cannot be declared in default. Jurisprudence
teaches that if the issues raised in the compulsory counterclaim are so
intertwined with the allegations in the complaint, such issues are deemed
automatically joined.33 Counterclaims that are only for damages and
attorney's fees and that arise from the filing of the complaint shall be
considered as special defenses and need not be answered.34
CIVIL PROCEDURE CASES – Pleadings (Rule 6)
4. Summons must be served on Respondents Lim and Mariano
before the trial court can obtain jurisdiction over them.
WHEREFORE, the Petition is GRANTED and the assailed Orders
REVERSED. The court of origin is hereby ORDERED to take cognizance
of the counterclaims pleaded in petitioners' Answer with Compulsory
Counterclaims and to cause the service of summons on Respondents
Gregory T. Lim and Anthony A. Mariano. No costs.
SO ORDERED.

CCC's Motion to Dismiss the Counterclaim on Behalf of Respondents Lim

and Mariano Not Allowed

While Respondent CCC can move to dismiss the counterclaims against it

by raising grounds that pertain to individual defendants Lim and Mariano,
it cannot file the same Motion on their behalf for the simple reason that it
lacks the requisite authority to do so. A corporation has a legal
personality entirely separate and distinct from that of its officers and
cannot act for and on their behalf, without being so authorized. Thus,
unless expressly adopted by Lim and Mariano, the Motion to Dismiss the
compulsory counterclaim filed by Respondent CCC has no force and
effect as to them.

In summary, we make the following pronouncements:

1. The counterclaims against Respondents CCC, Gregory T. Lim

and Anthony A. Mariano are compulsory.

2. The counterclaims may properly implead Respondents

Gregory T. Lim and Anthony A. Mariano, even if both were not
parties in the original Complaint.

3. Respondent CCC or any of the three solidary debtors (CCC,

Lim or Mariano) may include, in a Motion to Dismiss, defenses
available to their co-defendants; nevertheless, the same Motion
cannot be deemed to have been filed on behalf of the said co-
defendants.

17