THIRD DIVISION

G.R. No. 170354 June 30, 2006

EDGARDO PINGA, Petitioner
vs.
THE HEIRS OF GERMAN TINGA, Respondents.
PONENTE: TINGA, J.

Facts:
On 28 May 1998, respondent Heirs of German Santiago filed a complaint for
injunction with RTC Zamboanga del Sur against defendants (petitioner and
Vicente Saavedra). It alleged that they had been unlawfully entering the
respondents coco lands, cutting wood and bamboos, and harvesting fruits of
coconut trees. They prayed that defendants be enjoined from committing the
acts complained of.

In their Answer with Counterclaim, defendants disputed respondents

ownership over the properties, asserting that petitioners father, Edmundo
Pinga, from whom defendants derived their interest, had been in possession
thereof since the 1930s. Defendants alleged that respondents had already
been ordered ejected therefrom in 1968 after a complaint for forcible entry
was filed by Edmundo Pinga heirs. In turn, defendants prayed for damages.

On 27 July 2005 hearing, respondents counsel failed to appear who sought a

motion for postponement. Petitioners (defendants) counsel opposed the
move for postponement and moved to dismiss the case. On that date, RTC
dismissed the complaint and allowed defendants to present their
evidence ex-parte. Respondents moved to reconsider the 27 July 2005 order,
not for case reinstatement but for case dismissal and disallowance for
defendant-petitioner to present evidence ex-parte citing City of Manila v.
Ruymann and Domingo v. Santos where it ruled that a counterclaim could
not remain pending for independent adjudication.

On 9 August 2005, the RTC granted respondents MR and dismissed the

counterclaim on the only ground that there was no opposition to
respondents MR. Petitioner filed an urgent MR (which was later denied) to
which respondents filed an Opposition to Defendants Urgent MR arguing
that compulsory counterclaims cannot be adjudicated independently of
plaintiffs cause of action, and the dismissal of the complaint carries with it
the dismissal of the compulsory counterclaims. Hence, the present Petition
for Review under Rule 45 on a pure question of law.

Issue:
Whether or not the dismissal of the complaint necessarily carries with it the
dismissal of the compulsory counterclaim.

Ruling:

NO. Petition is GRANTED. RTC Decision is SET ASIDE and

Petitioners counterclaim is REINSTATED.

We hold that under Section 3, Rule 17 of the 1997 Rules of Civil Procedure,
the dismissal of the complaint due to the fault of plaintiff does not
necessarily carry with it the dismissal of the counterclaim, compulsory or
otherwise. In fact, the dismissal of the complaint is without prejudice to the
right of defendants to prosecute the counterclaim.

On a prefatory note, the RTC, in dismissing the counterclaim, did not

expressly adopt respondents argument that the dismissal of their complaint
extended as well to the counterclaim. Instead, the RTC justified the
dismissal of the counterclaim on the ground that there is no opposition to
[plaintiffs] Motion for Reconsideration [seeking the dismissal of the
counterclaim].[20] This explanation is hollow, considering that there is no
mandatory rule requiring that an opposition be filed to a motion for
reconsideration without need for a court order to that effect; and, as posited
by petitioner, the failure to file an opposition to the Plaintiffs Motion for
Reconsideration is definitely not one among the established grounds for
dismissal [of the counterclaim].[21] Still, the dismissal of the counterclaim by
the RTC betrays at very least a tacit recognition of respondents argument
that the counterclaim did not survive the dismissal of the complaint. At most,
the dismissal of the counterclaim over the objection of the defendant (herein
petitioner) on grounds other than the merits of the counterclaim, despite the
provisions under Rule 17 of the 1997 Rules of Civil Procedure, constitutes a
debatable question of law, presently meriting justiciability through the
instant action. Indeed, in reviewing the assailed orders of the RTC, it is
inevitable that the Court consider whether the dismissal of the complaint,
upon motion of the defendant, on the ground of the failure to prosecute on
plaintiffs part precipitates or carries with it the dismissal of the pending
counterclaims.

Our core discussion begins with Section 3, Rule 17 of the 1997 Rules
of Civil Procedure, which states:

SEC. 3. Dismissal due to fault of plaintiff.If, for no justifiable

cause, the plaintiff fails to appear on the date of the presentation of his
evidence in chief on the complaint, or to prosecute his action for an
unreasonable length of time, or to comply with these Rules or any order of
the court, the complaint may be dismissed upon motion of defendant or
upon the court's own motion, without prejudice to the right of the
defendant to prosecute his counterclaim in the same or in a separate action.
This dismissal shall have the effect of an adjudication upon the merits,
unless otherwise declared by the court.

The express qualification in the provision that the dismissal of the complaint
due to the plaintiffs fault, as in the case for failure to prosecute, is without
prejudice to the right of the defendant to prosecute his counterclaim in the
same or separate action. This stands in marked contrast to the provisions
under Rule 17 of the 1964 Rules of Court which were superseded by the
1997 amendments. In the 1964 Rules, dismissals due to failure to prosecute
were governed by Section 3, Rule 17, to wit:

SEC. 3. Failure to prosecute. If plaintiff fails to appear at the time of the

trial, or to prosecute his action for an unreasonable length of time, or to
comply with these rules or any order of the court, the action may be
dismissed upon motion of the defendant or upon the courts own motion.
This dismissal shall have the effect of an adjudication upon the merits,
unless otherwise provided by court.

Evidently, the old rule was silent on the effect of such dismissal due to
failure to prosecute on the pending counterclaims. As a result, there arose
what one authority on remedial law characterized as the nagging question of
whether or not the dismissal of the complaint carries with it the dismissal of
the counterclaim.[22] Jurisprudence construing the previous Rules was hardly
silent on the matter.

In their arguments before the RTC on the dismissal of the of the

counterclaim, respondents cited in support City of Manila v. Ruymann,
[23]
Domingo v. Santos,[24] Belleza v. Huntington,[25] and Froilan v. Pan
Oriental Shipping Co.,[26] all of which were decided more than five decades
ago. Notably though, none of the complaints in these four cases were
dismissed either due to the fault of the plaintiff or upon the instance of the
defendant.[27]

The distinction is relevant, for under the previous and current incarnations of
the Rules of Civil Procedure, it is Section 3, Rule 17 that governs the
dismissals due to the failure of the plaintiff to prosecute the complaint, as
had happened in the case at bar. Otherwise, it is Section 2, Rule 17, which
then, and still is now, covered dismissals ordered by the trial court upon the
instance of the plaintiff.[28] Yet, as will be seen in the foregoing discussion, a
discussion of Section 2 cannot be avoided as the postulate behind that
provision was eventually extended as well in cases that should have properly
been governed by Section 3.

Even though the cases cited by respondents involved different factual

antecedents, there exists more appropriate precedents which they could have
cited in support of their claim that the counterclaim should have been
dismissed even if the dismissal of the complaint was upon the defendants
motion and was predicated on the plaintiffs fault. BA Finance Corp. v.
Co[29] particularly stands out in that regard, although that ruling is itself
grounded on other precedents as well. Elucidation of these cases is in order.

On the general effect of the dismissal of a complaint, regardless of cause, on

the pending counterclaims, previous jurisprudence laid emphasis on whether
the counterclaim was compulsory or permissive in character. The necessity
of such distinction was provided in the 1964 Rules itself, particularly
Section 2, Rule 17, which stated that in instances wherein the plaintiff seeks
the dismissal of the complaint, 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.[30] The vaunted commentaries of Chief Justice Moran, remarking on
Section 2, Rule 17, noted that [t]here are instances in which a counterclaim
cannot remain pending for independent adjudication, as, where it arises out
of, or is necessarily connected with, the transaction or occurrence which is
the subject matter of the opposing partys claim.[31]
This view expressed in Morans Commentaries was adopted by the Court in
cases where the application of Section 2, Rule 17 of the 1964 Rules of Court
was called for, such as in Lim Tanhu v. Ramolete,[32] and Dalman v. City
Court of Dipolog City.[33] The latter case warrants brief elaboration. Therein,
the plaintiff in a civil case for damages moved for the withdrawal of her own
case on the ground that the dispute had not been referred to the barangay
council as required by law. Over the objection of the defendant, who feared
that her own counterclaim would be prejudiced by the dismissal, plaintiffs
motion was granted, the complaint and the counterclaim accordingly
dismissed by the trial court. The Court refused to reinstate the counterclaim,
opining without elaboration, [i]f the civil case is dismissed, so also is the
counterclaim filed therein.[34] The broad nature of that statement gave rise to
the notion that the mandatory dismissal of the counterclaim upon dismissal
of the complaint applied regardless of the cause of the complaints
dismissal.[35]

Notably, the qualification concerning compulsory counterclaims was

provided in Section 2, Rule 17 of the 1964 Rules, the provision governing
dismissals by order of the court, and not Section 3, Rule 17. As stated earlier,
Section 3, which covered dismissals for failure to prosecute upon motion of
the defendant or upon motu proprio action of the trial court, was silent on
the effect on the counterclaim of dismissals of such nature.

Spouses Sta. Maria, Jr. v. Court of Appeals,[36] decided in 1972, ostensibly

supplied the gap on the effect on the counterclaim of complaints dismissed
under Section 3. The defendants therein successfully moved before the trial
court for the dismissal of the complaint without prejudice and their
declaration in default on the counterclaim after plaintiffs therein failed to
attend the pre-trial. After favorable judgment was rendered on the
counterclaim, plaintiffs interposed an appeal, citing among other grounds,
that the counterclaim could no longer have been heard after the dismissal of
the complaint. While the Court noted that the adjudication of the
counterclaim in question does not depend upon the adjudication of the
claims made in the complaint since they were virtually abandoned by the
non-appearance of the plaintiffs themselves, it was also added that [t]he
doctrine invoked is not available to plaintiffs like the petitioners, who
prevent or delay the hearing of their own claims and allegations.[37] The
Court, through Justice JBL Reyes, noted:
 The doctrine that the complaint may not be dismissed if the
counterclaim cannot be independently adjudicated is not available to,
and was not intended for the benefit of, a plaintiff who prevents or
delays the prosecution of his own complaint. Otherwise, the trial of
counterclaims would be made to depend upon the maneuvers of the
plaintiff, and the rule would offer a premium to vexing or delaying tactics
to the prejudice of the counterclaimants. It is in the same spirit that we
have ruled that a complaint may not be withdrawn over the opposition of
the defendant where the counterclaim is one that arises from, or is
necessarily connected with, the plaintiffs action and cannot remain
pending for independent adjudication.[38]

There is no doubt that under the 1964 Rules, the dismissal of a

complaint due to the failure of the plaintiff to appear during pre-trial, as what
had happened in Sta. Maria, fell within the coverage of Section 3, Rule 17.
On the other hand, Section 2 was clearly limited in scope to those dismissals
sustained at the instance of the plaintiff.[39] Nonetheless, by the early 1990s,
jurisprudence was settling on a rule that compulsory counterclaims were
necessarily terminated upon the dismissal of the complaint not only if such
dismissal was upon motion of the plaintiff, but at the instance of the
defendant as well. Two decisions from that period stand out in this
regard, Metals Engineering Resources Corp. v. Court of
Appeals[40] and International Container Terminal Services v. Court of
Appeals.[41]

In Metals, the complaint was expunged from the record after the
defendant had filed a motion for reconsideration of a trial court order
allowing the filing of an amended complaint that corrected a jurisdictional
error in the original complaint pertaining to the specification of the amount
of damages sought. When the defendant was nonetheless allowed to present
evidence on the counterclaim, the plaintiff assailed such allowance on the
ground that the counterclaim was compulsory and could no longer remain
pending for independent adjudication. The Court, in finding for the plaintiff,
noted that the counterclaim was indeed compulsory in nature, and as such,
was auxiliary to the proceeding in the original suit and derived its
jurisdictional support therefrom.[42] It was further explained that the doctrine
was in consonance with the primary objective of a counterclaim, which was
to avoid and prevent circuitry of action by allowing the entire controversy
between the parties to be litigated and finally determined in one action, and
to discourage multiplicity of suits.[43] Also, the Court noted that since the
complaint was dismissed for lack of jurisdiction, it was as if no claim was
filed against the defendant, and there was thus no more leg for the complaint
to stand on.[44]

In International Container, the defendant filed a motion to dismiss

which was granted by the trial court. The defendants counterclaim was
dismissed as well. The Court summarized the key question as what is the
effect of the dismissal of a complaint ordered at the instance of the defendant
upon a compulsory counterclaim duly raised in its answer.[45] Then it ruled
that the counterclaim did not survive such dismissal. After classifying the
counterclaim therein as compulsory, the Court noted that [i]t 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.[46]

Then in 1993, a divided Court ruled in BA Finance that the dismissal

of the complaint for nonappearance of plaintiff at the pre-trial, upon motion
of the defendants, carried with it the dismissal of their compulsory
counterclaim.[47] The Court reiterated the rule that a compulsory
counterclaim cannot remain pending for independent adjudication by the
court as it is auxiliary to the proceeding in the original suit and merely
derives its jurisdictional support therefrom.[48] Express reliance was made
on Metals, International Container, and even Dalman in support of the
majoritys thesis. BA Finance likewise advised that the proper remedy for
defendants desirous that their counterclaims not be dismissed along with the
main complaint was for them to move to declare the plaintiffs to be
non-suited on their complaint and as in default on their compulsory
counterclaim, instead of moving for the dismissal of the complaint.[49]

Justice Regalado, joined by Chief Justice Narvasa, registered a strong

objection to the theory of the majority. They agreed that the trial court could
no longer hear the counterclaim, but only on the ground that defendants
motion to be allowed to present evidence on the counterclaim was filed after
the order dismissing the complaint had already become final. They disagreed
however that the compulsory counterclaim was necessarily dismissed along
with the main complaint, pointing out that a situation wherein the dismissal
of the complaint was occasioned by plaintiffs failure to appear during
pre-trial was governed under Section 3, Rule 17, and not Section 2 of the
same rule. Justice Regalado, who ironically penned the decision
in Metals cited by the majority, explained:
Turning back to Rule 17, it is readily apparent that Sections 2
and 3 thereof envisage different factual and adjective situations. The
dismissal of the complaint under Section 2 is at the instance of
plaintiff, for whatever reason he is minded to move for such dismissal,
and, as a matter of procedure, is without prejudice unless otherwise
stated in the order of the court or, for that matter, in plaintiff's
motion to dismiss his own complaint. By reason thereof, to curb any
dubious or frivolous strategy of plaintiff for his benefit or to obviate
possible prejudice to defendant, the former may not dismiss his complaint
over the defendant's objection if the latter has a compulsory counterclaim
since said counterclaim would necessarily be divested of juridical basis
and defendant would be deprived of possible recovery thereon in that same
judicial proceeding.

Section 3, on the other hand, contemplates a dismissal not

procured by plaintiff, albeit justified by causes imputable to him and
which, in the present case, was petitioner's failure to appear at the
pre-trial. This situation is also covered by Section 3, as extended by
judicial interpretation, and is ordered upon motion of defendant
or motu proprio by the court. Here, the issue of whether defendant has
a pending counterclaim, permissive or compulsory, is not of
determinative significance. The dismissal of plaintiff's complaint is
evidently a confirmation of the failure of evidence to prove his cause
of action outlined therein, hence the dismissal is considered, as a
matter of evidence, an adjudication on the merits. This does not,
however, mean that there is likewise such absence of evidence to prove
defendant's counterclaim although the same arises out of the subject
matter of the complaint which was merely terminated for lack of
proof. To hold otherwise would not only work injustice to defendant
but would be reading a further provision into Section 3 and wresting a
meaning therefrom although neither exists even by mere
implication. Thus understood, the complaint can accordingly be dismissed,
but relief can nevertheless be granted as a matter of course to defendant on
his counterclaim as alleged and proved, with or without any reservation
therefor on his part, unless from his conduct, express or implied, he has
virtually consented to the concomitant dismissal of his counterclaim.[50]

Justice Regalado also adverted to Sta. Maria and noted that the objections
raised and rejected by the Court therein were the same as those now relied
upon by the plaintiff. He pointed out that Dalman and International
Container, both relied upon by the majority, involved the application of
Section 2, Rule 17 and not Section 3, which he insisted as the applicable
provision in the case at bar.[51]

The partial dissent of Justice Regalado in BA Finance proved opportune, as

he happened then to be a member of the Rules of Court Revision Committee
tasked with the revision of the 1964 Rules of Court. Just a few months
after BA Finance was decided, Justice Regalado proposed before the
Committee an amendment to Section 3, Rule 17 that would explicitly
provide that the dismissal of the complaint due to the fault of the plaintiff
shall be without prejudice to the right of the defendant to prosecute his
counterclaim in the same or in a separate action. The amendment, which was
approved by the Committee, is reflected in the minutes of the meeting of the
Committee held on 12 October 1993:

[Justice Regalado] then proposed that after the words upon the
courts own motion in the 6th line of the draft in Sec. 3 of Rule 17, the
following provision be inserted: without prejudice to the right of the
defendant to prosecute his counterclaim in the same or in a separate
action. The Committee agreed with the proposed amendment of
Justice Regalado.

Justice Herrera observed that under Secs. 1 to 3 of Rule 17, it is not the
action that is dismissed but the complaint. He asked whether there is any
distinction between complaint and action. Justice Regalado opined that the
action of the plaintiff is initiated by his complaint.

Justice Feria then suggested that the dismissal be limited to the

complaint[.] Thus, in the 1st line of Sec. 1, the words An action will be
changed to a complaint; in the 2nd line of Sec. 2, the words an action
will be changed to a complaint and in Sec. 3, the word action on the
5thline of the draft will be changed to complaint. The Committee
agreed with Justice Ferias suggested amendments.

CA Pao believed that there is a need to clarify the counterclaim that

the defendant will prosecute, whether it is permissive or compulsory
or all kinds of counterclaims.

Justice Regalado opined that there is no need of making a clarification

because it is already understood that it covers both counterclaims.[52]

It is apparent from these minutes that the survival of the counterclaim

despite the dismissal of the complaint under Section 3 stood irrespective of
whether the counterclaim was permissive or compulsory. Moreover, when
the Court itself approved the revisions now contained in the 1997 Rules of
Civil Procedure, not only did Justice Regalados amendment to Section 3,
Rule 17 remain intact, but the final version likewise eliminated the
qualification formerly offered under Section 2 on counterclaims that can
remain pending for independent adjudication by the court.[53] At present,
even Section 2, concerning dismissals on motion of the plaintiff, now
recognizes the right of the defendant to prosecute the counterclaim either in
the same or separate action notwithstanding the dismissal of the complaint,
and without regard as to the permissive or compulsory nature of the
counterclaim.

In his commentaries on the 1997 Rules of Civil Procedure, Justice Regalado

expounds on the effects of the amendments to Section 2 and 3 of Rule 17:

2. Under this revised section [2], where the plaintiff moves for the
dismissal of his complaint to which a counterclaim has been interposed,
the dismissal shall be limited to the complaint. Such dismissal shall be
without prejudice to the right of the defendant to either prosecute his
counterclaim in a separate action or to have the same resolved in the same
action. Should he opt for the first alternative, the court should render the
corresponding order granting and reserving his right to prosecute his claim
in a separate complaint. Should he choose to have his counterclaim
disposed of in the same action wherein the complaint had been dismissed,
he must manifest such preference to the trial court within 15 days from
notice to him of plaintiffs motion to dismiss. These alternative remedies
of the defendant are available to him regardless of whether his
counterclaim is compulsory or permissive. A similar alternative
procedure, with the same underlying reason therefor, is adopted in Sec. 6,
Rule 16 and Sec. 3 of this Rule, wherein the complaint is dismissed on the
motion of the defendant or, in the latter instance, also by the court motu
proprio.
xxxx

2. The second substantial amendment to [Section 3] is with respect to the

disposition of the defendants counterclaim in the event the plaintiffs
complaint is dismissed. As already observed, he is here granted the choice
to prosecute that counterclaim in either the same or a separate action. x x x
x

3. With the aforestated amendments in Secs. 2 and 3 laying down

specific rules on the disposition of counterclaims involved in the
dismissal actions, the controversial doctrine in BA Finance
 Corporation vs. Co, et al., (G.R. No. 105751, June 30, 1993) has been
abandoned, together with the apparent confusion on the proper
application of said Secs. 2 and 3. Said sections were distinguished and
discussed in the authors separate opinion in that case, even before they
were clarified by the present amendments x x x.[54]

Similarly, Justice Feria notes that the present rule reaffirms the right of the
defendant to move for the dismissal of the complaint and to prosecute his
counterclaim, as stated in the separate opinion [of Justice Regalado in BA
Finance.][55] Retired Court of Appeals Justice Herrera pronounces that the
amendment to Section 3, Rule 17 settles that nagging question whether the
dismissal of the complaint carries with it the dismissal of the counterclaim,
and opines that by reason of the amendments, the rulings
in Metals Engineering, International Container, and BA Finance may be
deemed abandoned.[56] On the effect of amendment to Section 3, Rule 17, the
commentators are in general agreement,[57] although there is less unanimity
of views insofar as Section 2, Rule 17 is concerned.[58]

To be certain, when the Court promulgated the 1997 Rules of Civil

Procedure, including the amended Rule 17, those previous jural doctrines
that were inconsistent with the new rules incorporated in the 1997 Rules of
Civil Procedure were implicitly abandoned insofar as incidents arising after
the effectivity of the new procedural rules on 1 July 1997. BA Finance, or
even the doctrine that a counterclaim may be necessarily dismissed along
with the complaint, clearly conflicts with the 1997 Rules of Civil Procedure.
The abandonment of BA Finance as doctrine extends as far back as 1997,
when the Court adopted the new Rules of Civil Procedure. If, since then,
such abandonment has not been affirmed in jurisprudence, it is only because
no proper case has arisen that would warrant express confirmation of the
new rule. That opportunity is here and now, and we thus rule that the
dismissal of a complaint due to fault of the plaintiff is without prejudice to
the right of the defendant to prosecute any pending counterclaims of
whatever nature in the same or separate action. We confirm that BA
Finance and all previous rulings of the Court that are inconsistent with this
present holding are now abandoned.

Accordingly, the RTC clearly erred when it ordered the dismissal of the
counterclaim, since Section 3, Rule 17 mandates that the dismissal of the
complaint is without prejudice to the right of the defendant to prosecute the
counterclaim in the same or separate action. If the RTC were to dismiss the
counterclaim, it should be on the merits of such counterclaim. Reversal of
the RTC is in order, and a remand is necessary for trial on the merits of the
counterclaim.

It would be perfectly satisfactory for the Court to leave this matter at that.
Still, an explanation of the reason behind the new rule is called for,
considering that the rationale behind the previous rule was frequently
elaborated upon.

Under Act No. 190, or the Code of Procedure in Civil Actions

promulgated in 1901, it was recognized in Section 127(1) that the plaintiff
had the right to seek the dismissal of the complaint at any time before trial,
provided a counterclaim has not been made, or affirmative relief sought by
the cross-complaint or answer of the defendant.[59] Note that no qualification
was made then as to the nature of the counterclaim, whether it be
compulsory or permissive. The protection of the defendants right to
prosecute the counterclaim was indeed unqualified. In City of Manila,
decided in 1918, the Court explained:

By paragraph 1 [of Section 127], it will be seen that, where the

defendant has interposed a counterclaim, or is seeking affirmative relief by
a cross-complaint, that then, and in that case, the plaintiff cannot dismiss
the action so as to affect the right of the defendant in his counterclaim or
prayer for affirmative relief. The reason for that exception is clear. When
the answer sets up an independent action against the plaintiff, it then
becomes an action by the defendant against the plaintiff, and, of course,
the plaintiff has no right to ask for a dismissal of
the defendants action.[60]

Nonetheless, a new rule was introduced when Act No. 190 was replaced by
the 1940 Rules of Court. Section 2, Rule 30 of the 1940 Rules specified that
if a counterclaim is pleaded by a defendant prior to the service 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. This qualification remained intact
when the 1964 Rules of Court was introduced.[61] The rule referred only to
compulsory counterclaims, or counterclaims which arise out of or are
necessarily connected with the transaction or occurrence that is the subject
matter of the plaintiffs claim, since the rights of the parties arising out of the
same transaction should be settled at the same time.[62] As was evident
in Metals, International Container and BA Finance, the rule was eventually
extended to instances wherein it was the defendant with the pending
counterclaim, and not the plaintiff, that moved for the dismissal of the
complaint.

We should not ignore the theoretical bases of the rule distinguishing

compulsory counterclaims from permissive counterclaims insofar as the
dismissal of the action is concerned. There is a particular school of thought
that informs the broad proposition in Dalman that if the civil case is
dismissed, so also is the counterclaim filed therein,[63] or the more nuanced
discussions offered in Metals, International Container, and BA Finance. The
most potent statement of the theory may be found in Metals,[64] which
proceeds from the following fundamental premisesa compulsory
counterclaim must be set up in the same proceeding or would otherwise be
abated or barred in a separate or subsequent litigation on the ground of auter
action pendant, litis pendentia or res judicata; a compulsory counterclaim is
auxiliary to the main suit and derives its jurisdictional support therefrom as it
arises out of or is necessarily connected with the transaction or occurrence
that is the subject matter of the complaint;[65] and that if the court dismisses
the complaint on the ground of lack of jurisdiction, the compulsory
counterclaim must also be dismissed as it is merely ancilliary to the main
action and no jurisdiction remained for any grant of relief under the
counterclaim.

The first point is derived from Section 4, Rule 9, of the 1964 Rules of Court,
while the two latter points are sourced from American jurisprudence. There
is no disputing the theoretical viability of these three points. In fact, the
requirement that the compulsory counterclaim must be set up in the same
proceeding remains extant under the 1997 Rules of Civil Procedure.[66] At the
same time, other considerations rooted in actual practice provide a
counterbalance to the above-cited rationales.

Whatever the nature of the counterclaim, it bears the same integral

characteristics as a complaint; namely a cause (or causes) of action
constituting an act or omission by which a party violates the right of another.
The main difference lies in that the cause of action in the counterclaim is
maintained by the defendant against the plaintiff, while the converse holds
true with the complaint. Yet, as with a complaint, a counterclaim without a
cause of action cannot survive.
It would then seemingly follow that if the dismissal of the complaint
somehow eliminates the cause(s) of the counterclaim, then the counterclaim
cannot survive. Yet that hardly is the case, especially as a general rule. More
often than not, the allegations that form the counterclaim are rooted in
an act or omission of the plaintiff other than the plaintiffs very act of
filing the complaint. Moreover, such acts or omissions imputed to the
plaintiff are often claimed to have occurred prior to the filing of the
complaint itself. The only apparent exception to this circumstance is if it
is alleged in the counterclaim that the very act of the plaintiff in filing
the complaint precisely causes the violation of the defendants rights. Yet
even in such an instance, it remains debatable whether the dismissal or
withdrawal of the complaint is sufficient to obviate the pending cause of
action maintained by the defendant against the plaintiff.[67]

These considerations persist whether the counterclaim in question is

permissive or compulsory. A compulsory counterclaim arises out of or is
connected with the transaction or occurrence constituting the subject matter
of the opposing partys claim, does not require for its adjudication the
presence of third parties, and stands within the jurisdiction of the court both
as to the amount involved and the nature of the claim.[68] The fact that the
culpable acts on which the counterclaim is based are founded within the
same transaction or occurrence as the complaint, is insufficient causation to
negate the counterclaim together with the complaint. The dismissal or
withdrawal of the complaint does not traverse the boundaries of time to undo
the act or omission of the plaintiff against the defendant, or vice versa.
While such dismissal or withdrawal precludes the pursuit of litigation

by the plaintiff, either through his/her own initiative or fault, it would be

iniquitous to similarly encumber the defendant who maintained no such
initiative or fault. If the defendant similarly moves for the dismissal of the
counterclaim or neglects to timely pursue such action, let the dismissal of the
counterclaim be premised on those grounds imputable to the defendant, and
not on the actuations of the plaintiff.

The other considerations supplied in Metals are anchored on the premise that
the jurisdictional foundation of the counterclaim is the complaint itself. The
theory is correct, but there are other facets to this subject that should be taken
into account as well. On the established premise that a counterclaim involves
separate causes of action than the complaint even if derived from the same
transaction or series of transactions, the counterclaim could have very well
been lodged as a complaint had the defendant filed the action ahead of the
complainant.[69] The terms ancillary or auxiliary may mislead in signifying
that a complaint innately possesses more credence than a counterclaim, yet
there are many instances wherein the complaint is trivial but the
counterclaim is meritorious. In truth, the notion that a counterclaim is, or
better still, appears to be merely ancillary or auxiliary is chiefly the offshoot
of an accident of chronology, more than anything else.

The formalistic distinction between a complaint and a counterclaim does not

detract from the fact that both of them embody causes of action that have in
their end the vindication of rights. While the distinction is necessary as a
means to facilitate order and clarity in the rules of procedure, it should be
remembered that the primordial purpose of procedural rules is to provide the
means for the vindication of rights. A party with a valid cause of action
against another party cannot be denied the right to relief simply because the
opposing side had the good fortune of filing the case first. Yet this in effect
was what had happened under the previous procedural rule and
correspondent doctrine, which under their final permutation, prescribed the
automatic dismissal of the compulsory counterclaim upon the dismissal of
the complaint, whether upon the initiative of the plaintiff or of the defendant.

Thus, the present rule embodied in Sections 2 and 3 of Rule 17 ordains a

more equitable disposition of the counterclaims by ensuring that any
judgment thereon is based on the merit of the counterclaim itself and not on
the survival of the main complaint. Certainly, if the counterclaim is palpably
without merit or suffers jurisdictional flaws which stand independent of the
complaint, the trial court is not precluded from dismissing it under the
amended rules, provided that the judgment or order dismissing the
counterclaim is premised on those defects. At the same time, if the
counterclaim is justified, the amended rules now unequivocally protect such
counterclaim from peremptory dismissal by reason of the dismissal of the
complaint.

- Digested [15 November 2016, 21:36]

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