Rule 6 - Kinds of Pleadings

1. Financial Building Corp. v. FPA,

G.R. No. 133119, 17 August 2000, 338 SCRA 346

FACTS:

Calibre was one of Bayer’s distributors/dealers in Pangasinan and Tarlac. The distributorship agreement was
supposed to be effective from June 1989 to June 1991. However, Bayer stopped delivering stocks to Calibre on
July 1989 after the latter failed to settle its unpaid accounts. Bayer and Calibre tried to reach a settlement
agreement but Mario Sebastian expressed discontent in Bayer’s refusal to credit his claims in full and underscored
the alleged inaction of Bayer in reconciling Calibre's accounts. Calibre filed a suit for damages before the Pasig
RTC. Damages prayed for include actual damages for losses and profits, damage to goodwill and business
reputation, and exemplary damages. Bayer filed an answer with Counterclaim, denying its alleged wanton
appointment of other distributors and that Calibre filed the damage suit to avoid paying its overdue accounts.
Bayer also moved that the Sebastians be impleaded as co-defendants, considering that they bound themselves as
solidary debtors under the distributorship/dealership agreement. Calibre opposed Bayerphil’s motion to implead
the Sebastians and move to strike out the counterclaim, reasoning that spouses are not parties in its suit against
Bayer and thus are not proper parties to the counterclaim.

The TC rendered judgment favoring Calibre. It held that Calibre was justified in withholding payment because
there was deliberate inaction/employment of dilatory tactics on the part of Bayerphil to reconcile accounts making
it liable for damages for ‘abuse of rights’ and ‘unfair competition’ under Articles 19, 20, and 28 of the Civil Code.
The CA reversed the TC’s factual findings.

ISSUES: Whether the granting of relief to Bayerphil’s counterclaim is permissive?

HELD:

Bayerphil’s counterclaim is permissive, but the trial court should have given it the opportunity to pay the docket
fees since it did not avoid paying said fees.

"A compulsory counterclaim is any claim for money or other relief, which a defending party may have against an
opposing party, which at the time of suit arises out of, or is necessarily connected with, the same transaction or
occurrence that is the subject matter of plaintiff’s complaint. It is compulsory in the sense that it is within the
jurisdiction of the court, does not require for its adjudication the presence of third parties over whom the court
cannot acquire jurisdiction, and will be barred x x x if not set up in the answer to the complaint in the same case.
Any other claim is permissive.The Court has already laid down the following tests to determine whether a
counterclaim is compulsory or not, to wit:

(1) Are the issues of fact or law raised by the claim and the counterclaim largely the same?

(2) Would res judicata bar a subsequent suit on defendant's claims, absent the compulsory counterclaim rule?

(3) Will substantially the same evidence support or refute plaintiff's claim as well as the defendant's
counterclaim? and

(4) Is there any logical relation between the claim and the counterclaim, such that the conduct of separate trials
of the respective claims of the parties would entail a substantial duplication of effort and time by the parties and
the court? The fourth test is the ‘compelling test of compulsoriness’.

The elements of a compulsory counterclaim are thus given:

A counterclaim is compulsory and is considered barred if not set up where the following circumstances are present:
1) that it arises out of the, or is necessarily connected with the transaction or occurrence that is the subject
matter of the opposing party’s claim, 2) that it does not require for its adjudication the presence of third parties
of whom the court cannot acquire jurisdiction, and 3) that the court has jurisdiction to entertain the claim. (Javier
vs. IAC, 171 SCRA 605)
2. Calibre Traders v. Bayer Philippines
G.R. No. 161432, 13 October 2010, 633 SCRA 34

FACTS: Calibre was one of Bayer’s distributors/dealers in Pangasinan and Tarlac. The distributorship agreement
was supposed to be effective from June 1989 to June 1991. However, Bayer stopped delivering stocks to Calibre on
July 1989 after the latter failed to settle its unpaid accounts. Bayer and Calibre tried to reach a settlement
agreement but Mario Sebastian expressed discontent in Bayer’s refusal to credit his claims in full and underscored
the alleged inaction of Bayer in reconciling Calibre's accounts. Calibre filed a suit for damages before the Pasig
RTC. Damages prayed for include actual damages for losses and profits, damage to goodwill and business
reputation, and exemplary damages. Bayer filed an answer with Counterclaim, denying its alleged wanton
appointment of other distributors and that Calibre filed the damage suit to avoid paying its overdue accounts.
Bayer also moved that the Sebastians be impleaded as co-defendants, considering that they bound themselves as
solidary debtors under the distributorship/dealership agreement. Calibre opposed Bayerphil’s motion to implead
the Sebastians and move to strike out the counterclaim, reasoning that spouses are not parties in its suit against
Bayer and thus are not proper parties to the counterclaim.

The TC rendered judgment favoring Calibre. It held that Calibre was justified in withholding payment because
there was deliberate inaction/employment of dilatory tactics on the part of Bayerphil to reconcile accounts making
it liable for damages for ‘abuse of rights’ and ‘unfair competition’ under Articles 19, 20, and 28 of the Civil Code.
The CA reversed the TC’s factual findings.

ISSUES: Whether the granting of relief to Bayerphil’s counterclaim is permissive?

HELD: Bayerphil’s counterclaim is permissive, but the trial court should have given it the opportunity to pay the
docket fees since it did not avoid paying said fees.

"A compulsory counterclaim is any claim for money or other relief, which a defending party may have against an
opposing party, which at the time of suit arises out of, or is necessarily connected with, the same transaction or
occurrence that is the subject matter of plaintiff’s complaint. It is compulsory in the sense that it is within the
jurisdiction of the court, does not require for its adjudication the presence of third parties over whom the court
cannot acquire jurisdiction, and will be barred x x x if not set up in the answer to the complaint in the same case.
Any other claim is permissive.The Court has already laid down the following tests to determine whether a
counterclaim is compulsory or not, to wit:

(1) Are the issues of fact or law raised by the claim and the counterclaim largely the same?

(2) Would res judicata bar a subsequent suit on defendant's claims, absent the compulsory counterclaim rule?

(3) Will substantially the same evidence support or refute plaintiff's claim as well as the defendant's
counterclaim? and

(4) Is there any logical relation between the claim and the counterclaim, such that the conduct of separate trials
of the respective claims of the parties would entail a substantial duplication of effort and time by the parties and
the court? The fourth test is the ‘compelling test of compulsoriness’.

The elements of a compulsory counterclaim are thus given:

A counterclaim is compulsory and is considered barred if not set up where the following circumstances are present:
1) that it arises out of the, or is necessarily connected with the transaction or occurrence that is the subject
matter of the opposing party’s claim, 2) that it does not require for its adjudication the presence of third parties
of whom the court cannot acquire jurisdiction, and 3) that the court has jurisdiction to entertain the claim. (Javier
vs. IAC, 171 SCRA 605)
3. Alba, Jr. v. Malapajo
G.R. No. 198752, 13 January 2016, 780 SCRA 534

FACTS:

 On October 19, 2009, P filed with the RTC, a Complaint against R for recovery of ownership and/or
declaration of nullity or cancellation of title and damages alleging that he was the previous registered owner of a
parcel of land situated in Bolo, Roxas City, covered by TCT; that his title was canceled by virtue of a deed of sale he
allegedly executed in favor of respondents for P500,000.00; that new TCT was issued in the name of R; that the
deed of sale was a forged document which R were the co-authors of.
 R filed their Answer with Counterclaim contending that they were innocent purchasers for value and that
the deed was a unilateral document which was presented to them already prepared and notarized.
 P filed a Reply to Answer stating that the court had no jurisdiction over the nature of R's permissive
counterclaim; and, that assuming without admitting that the two real estate mortgages are valid, the rate of (5%)
per month is unconscionable and must be reduced.
 P filed a Motion to Set the Case for Preliminary Hearing as if a Motion to Dismiss had been Filed alleging
that R counterclaims are permissive, thus, there must be payment of docket fees and filing of a certification against
forum shopping; and, that the supposed loan extended by R’s mother to P, must also be dismissed as R is not the real
parties-in-interest. R filed their Opposition
 RTC issued an Order denying petitioner's motion finding that respondents’ counterclaims are compulsory.
Petitioner’s motion for reconsideration was denied.
 P filed a petition for certiorari with the CA. However, CA dismissed the petition for certiorari. P again filed
a motion for reconsideration which the CA denied,
 P filed with the Petition his Affidavit of Service and incorporated the registry receipts, P still failed to
comply with the requirement on proper proof of service. Post office receipt is not the required proof of service by
registered mail. Section 10, Rule 13 of the 1997 Rules of Civil Procedure specifically stated that service by registered
mail is complete upon actual receipt by the addressee, or after five (5) days from the date he received the first
notice of the postmaster, whichever is earlier. Verily, registry receipts cannot be considered sufficient proof of
service; they are merely evidence of the mail matter with the post office of the sender, not the delivery of said mail
matter by the post office to the addressee. Moreover, Section 13, Rule 13 of the 1997 Rules of Civil Procedure
specifically stated that the proof of personal service in the form of an affidavit of the party serving shall contain a
full statement of the date, place and manner of service, which was not true in the instant petition.

ISSUE: W/N R counterclaim is permissive in nature.

HELD: No. The court ruled that it is compulsory. When R counterclaimed that, in case the deed of sale is declared
null and void, they are paid the loan P obtained from them plus the agreed monthly interest which was covered by a
real estate mortgage on the subject property executed by P in favor of R. There is a logical relationship between
the claim and the counterclaim, as the counterclaim is connected with the transaction or occurrence constituting the
subject matter of the opposing party's claim. Notably, the same evidence to sustain respondents' counterclaim would
disprove petitioner's case. In the event that R could convincingly establish that P actually executed the promissory
note and the real estate mortgage over the subject property in their favor then petitioner's complaint might fail. P
claim is so related logically to respondents' counterclaim, such that conducting separate trials for the claim and the
counterclaim would result in the substantial duplication of the time and effort of the court and the parties.

Since respondents' counterclaim 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. There is,
therefore, no need for R to pay docket fees and to file a certification against forum shopping for the court to acquire
jurisdiction over the said counterclaim.

To determine whether a counterclaim is compulsory or permissive, we have devised the following tests: (a) Are
the issues of fact and law raised by the claim and by the counterclaim largely the same? (b) Would res
judicata bar a subsequent suit on defendants’ claims, absent the compulsory counterclaim rule? (c) Will
substantially the same evidence support or refute plaintiffs’ claim as well as the defendants’ counterclaim? and
(d) Is there any logical relation between the claim and the counterclaim? A positive answer to all four
questions would indicate that the counterclaim is compulsory.
4. Reillo v. San Jose
G.R. No. 166393, 18 June 2009, 589 SCRA 458

FACTS: Quiterio San Jose and Antonina Espiritu Santo are husband and wife. Both died intestate in 1970 and 1976
respectively. They have five children, to wit: Virginia, Virgilio, Galicano, Victoria, and Catalina.

In 1998, Virginia with the help of her husband(Zosimo Fernando, Sr.) and her children (Cristina Reillo et al) executed
a Deed of Extrajudicial Settlement of Estate where they made it appear that Virginia was the only heir of the
spouses Quiterio and Antonina. They adjudicated among themselves the estate and then later sold it to Ma. Teresa
Piñon.

Later, the other siblings found out about what Virginia did and so in October 1999, they filed a complaint in RTC-
Rizal for the annulment of the deed of extrajudicial settlement as well as the subsequent deed of sale.

In their answer, Reillo et al (children of the now deceased Virginia) admitted that their grandparents (Quiterio and
Antonina) indeed had five children and that their mom isn’t the only heir. However, they alleged that what their mom
adjudicated to herself is her inheritance; that other than the parcel of land their mom adjudicated to herself, their
grandparents have 12 other parcels of land which are under the possession of Galicano et al; that as such, they are
filing a “compulsory” counterclaim for the partition of the other 12 parcels of land.

Galicano et al then filed a motion for the court to render judgment on the pleadings. The trial court granted the
motion. The RTC ruled that the admission of Reillo et al that there are 4 other heirs is proof that the extrajudicial
settlement is void because the other heirs were excluded. The RTC also ruled that Reillo et al’s counterclaim is not
compulsory but rather it is a permissive counterclaim. As such, Reillo et al should have paid docket fees therefor but
they failed to do so hence their counterclaim is dismissed. The RTC then ordered the heirs to partition the estate
according to the laws of intestate succession. On appeal, the Court of Appeals (CA) affirmed the decision of the
RTC.

Reillo et al appealed the decision of the CA on the ground that the judgment on the pleading is void; that it is the
RTC’s fault why they failed to pay the docket fees for its failure to direct them; and that the order for partition is
void because it does not come with an order of publication pursuant to Rule 74 of the Rules of Court.

ISSUE: Whether or not the order for partition issued by the trial court is void because there was no corresponding
order for publication pursuant to the provisions of Rule 74 of the Rules of Court.

HELD: No. The applicable rule is Rule 69 of the Rules of Court. Since the extrajudicial settlement is void, the
property is reverted back to its previous state which is: that it is part of the estate of Quiterio and Antonina. As
such, the estate is deemed undivided among the heirs. And every action to end an indivision among heirs is deemed
an action for partition. Therefore Rule 69 applies and under this rule, there is no need to publish the partition in a
newspaper of general circulation.

Anent the issue of the judgment on the pleadings, the same is valid because Reillo et al failed to raise an issue when
they already admitted that there are other heirs which were excluded in the deed of extrajudicial settlement. Their
allegation that the parcel of land adjudicated by their mother is her inheritance is not tenable because the same was
not indicated in the deed of extrajudicial settlement. In fact, what was stated was that she was the sole heir.

Anent the issue of the counterclaim, Reillo et al’s counterclaim is permissive in nature and not a compulsory one
because their claim is not “necessarily connected with the transaction or occurrence constituting the subject matter
of the opposing party’s claim”. Their counterclaim consists of a claim that there are 12 other parcels of land owned
by Quiterio and Antonina. Such allegation is already entirely different from the action brought by Galicano et al.,
hence it is permissive and it can even be brought in a separate proceeding. As a permissive pleading, it requires the
payment of docket fees and the RTC cannot be faulted for not directing Reillo et al to do so. The payment is
incumbent upon Reillo et al and the obligation cannot be shifted to the RTC.
5. Banco de Oro v. Court of Appeals
G.R. No. 160354, 25 August 2005, 468 SCRA 166

FACTS:
Having failed to comply with the Credit Line Agreement (CLA) obligation, Banco de Oro Universal Bank
filed before the Regional Trial Court of Quezon City (RTC) an application for an extrajudicial foreclosure of the
mortgaged properties against Gabriel and Ma. Geraldine Locsin. Subsequently, the Locsins filed a complaint against
BDO, the RTC Clerk of Court and Ex-Oficio Sheriff of Quezon City, and Sheriff VI Marino V. Cahero, for Specific
Performance, Tort and Damages with Prayer for the Issuance of a Temporary Restraining Order (TRO) and a Writ
of Preliminary Injunction. The RTC denied the issuance of a TRO.

A Supplemental Complaint was filed by the Locsins. They repleaded in toto the allegations in their Complaint
and additionally alleged that BDO proceeded with the public auction of the properties covered by the mortgage in
the CLA “contrary to law.”BDO admitted that the public auction took place but it denied that it was contrary to law.

More than eight months after the Locsins filed their Supplemental Complaint, BDO filed a complaint against
them before the Mandaluyong RTC for Collection of Sum of Money. To such, the Locsins filed a Motion to Dismiss on
the ground that it should have been raised as compulsory counterclaim in their complaint and by failing to raise it as
such, it is now “barred by the rules.” The RTC denied the same.

The Locsins appealed to the Court of Appeals which reversed the decision of the Mandaluyong RTC finding that
BDO‘s complaint was a compulsory counterclaim which should have been raised in its Answer to the Locsins‘ complaint,
and having failed to do so, it is now barred.

ISSUE:

Whether or not BDO‘s complaint is barred for failure to raise it as a compulsory counterclaim in its Answer to the
Locsins‘ complaint

HELD:

The Court held that until after the Locsins allegedly refused and failed to settle the alleged deficiency amount of
their outstanding obligation, despite BDO‘s letter of demand sent to the Locsins, BDO‘s cause of action had not
arisen. BDO could not, therefore, have set its claim assuming arguendo that it is a compulsory counterclaim.

The counterclaim must be existing at the time of the filing of the answer, though not at the commencement of
action-a premature counterclaim cannot be set in the answer. The party who fails to interpose a counterclaim although
arising out of or is necessarily connected with the transaction or occurrence of the plaintiff‘s suit but which did not
exist or mature at the time said party files his answer is not thereby barred from interposing such claim in a future
litigation.

The setting up of such “after-acquired counterclaim,” is merely permissive, not compulsory. At all events, even if the
claim of BDO is a compulsory counterclaim which should have been set up in its Answer to the Locsins‘ Supplemental
Complaint, technicality should give way to justice and equity to enable BDO to pursue its “after-acquired” claim
against the Locsins.
6. Asian Construction v. Court of Appeals
G.R. No. 160242, 17 May 2005, 458 SCRA 750

FACTS:

On March 13, 2001, Monark Equipment Corporation (MEC) filed a Complaint[1] for a sum of money with damages
against the Asian Construction and Development Corporation (ACDC) with the Regional Trial Court (RTC) of Quezon
City. Herein respondent alleged that ACDC leased Caterpillar generator sets and Amida mobile floodlighting systems
from MEC during the period of March 13 to July 15, 1998 but failed, despite demands, to pay the rentals therefor
in the total amount of P4,313,935.00; from July 14 to August 25, 1998, various equipments from MEC were, likewise,
leased by ACDC for the latters power plant in Mauban, Quezon, and that there was still a balance of P456,666.67;
and ACDC also purchased and took custody of various equipment parts from MEC for the agreed price of P237,336.20
which, despite demands, ACDC failed to pay.

Petitioner filed a motion to file and admit answer with third-party complaint against Becthel Overseas Corporation
(Becthel). ACDC admitted its indebtedness to MEC in the amount of P5,071,335.86 but alleged that defendant has
incurred an obligation with plaintiff, in the amount of P5,071,335.86. But third-party defendant fails and refuses to
pay its overdue obligation in connection with the leased equipment used by defendant to comply with its contracted
services; The equipment covered by the lease were all used in the construction project of Becthel in Mauban, Quezon,
and Expo in Pampanga and defendant was not yet paid of its services that resulted to the non-payment of rentals on
the leased equipment.

And by way of third-party complaint against Becthel as third-party defendant, ACDC alleged that Third-party
plaintiff repleads the foregoing allegations in the preceding paragraphs as may be material and pertinent hereto;
Third-party BECTHEL OVERSEAS CORPORATION (herein called Becthel) is a corporation duly organized and
existing under the laws of the United States of America but may be served with summons at Barangay Cagsiay I,
Mauban, Quezon 4330, Philippines; Third-party plaintiff rendered and complied with its contracted works with third-
party defendant using plaintiffs (Monark) rented equipment. But, third-party defendant BECTHEL did not pay for
the services of third-party plaintiff ASIAKONSTRUKT that resulted to the non-payment of plaintiff Monarks claim;
Despite repeated demands, third-party defendant failed and refused to pay its overdue obligation to third-party
plaintiff ASIAKONSTRUKT, and third-party defendant needs to be impleaded in this case for contribution,
indemnity, subrogation or other reliefs to off-set or to pay the amount of money claim of plaintiff Monark on the
leased equipment used in the Mauban, Quezon project in the total amount of P456,666.67;

ACCORDINGLY, this Court finds defendant Asian Construction and Development Corporation liable to pay plaintiff
Monark Equipment Corporation and is hereby ordered to pay plaintiff the amount of FIVE MILLION SEVENTY-ONE
THOUSAND AND THREE HUNDRED THIRTY-FIVE & 86/100 PESOS (P5,071,335.86) plus 12% interest from the
filing of the complaint until fully paid.

ACDC appealed the resolution to the Court of Appeals (CA).

On July 18, 2001, the CA rendered judgment dismissing the appeal and affirming the assailed decision. The appellate
court ruled that since MEC had prayed for judgment on the pleadings, it thereby waived its claim for damages other
than the amount of P5,071,335.86; hence, there was no longer a genuine issue to be resolved by the court which
necessitated trial. The appellate court sustained the disallowance of the third-party complaint of ACDC against
Becthel on the ground that the transaction between the said parties did not arise out of the same transaction on
which MECs claim was based.

ISSUE:

WHETHER OR NOT A THIRD-PARTY COMPLAINT IS PROPER?

HELD:
Section 11, Rule 6 of the Rules of Court provides:

Sec. 11. Third (fourth, etc.)-party complaint. A third (fourth, etc.) party complaint is a claim that a defending party
may, with leave of court, file against a person not a party to the action, called the third (fourth, etc.) party defendant,
for contribution, indemnity, subrogation or any other relief, in respect of his opponents claim. The purpose of Section
11, Rule 6 of the Rules of Court is to permit a defendant to assert an independent claim against a third-party which
he, otherwise, would assert in another action, thus preventing multiplicity of suits. All the rights of the parties
concerned would then be adjudicated in one proceeding. This is a rule of procedure and does not create a substantial
right. Neither does it abridge, enlarge, or nullify the substantial rights of any litigant. This right to file a third-party
complaint against a third-party rests in the discretion of the trial court. The third-party complaint is actually
independent of, separate and distinct from the plaintiffs complaint, such that were it not for the rule, it would have
to be filed separately from the original complaint.

A prerequisite to the exercise of such right is that some substantive basis for a third-party claim be found to exist,
whether the basis be one of indemnity, subrogation, contribution or other substantive right. The bringing of a third-
party defendant is proper if he would be liable to the plaintiff or to the defendant or both for all or part of the
plaintiffs claim against the original defendant, although the third-party defendants liability arises out of another
transaction. The defendant may implead another as third-party defendant (a) on an allegation of liability of the latter
to the defendant for contribution, indemnity, subrogation or any other relief; (b) on the ground of direct liability of
the third-party defendant to the plaintiff; or (c) the liability of the third-party defendant to both the plaintiff and
the defendant. There must be a causal connection between the claim of the plaintiff in his complaint and a claim for
contribution, indemnity or other relief of the defendant against the third-party defendant.

The third-party complaint does not have to show with certainty that there will be recovery against the third-party
defendant, and it is sufficient that pleadings show possibility of recovery. In determining the sufficiency of the
third-party complaint, the allegations in the original complaint and the third-party complaint must be examined. A
third-party complaint must allege facts which prima facie show that the defendant is entitled to contribution,
indemnity, subrogation or other relief from the third-party defendant.