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GOJO V GOYALA 35 SCRA 557 Barredo, J.: Oct.

30, 1970
NATURE Appeal from a decision of the CFI of Sorsogon FACTS -Appellee Segundo Goyala, with his now deceased wife Antonina sold to Gojo a 2.5 hectare parcel of agricultural land for P750 by a Deed of Pacto de Retro Sale, the repurchase to be made within one year, as stated in the deed. The deed also indicates that the vendee paid a nother P100 in addition to the purchase price. 10 years after the execution of said document, Gojo filed a case with the CFI against Goyala by way of a petition for consolidation of ownership of said land. Gojo alleged that the period for repurchasing had expired and ownership had become consolidated in him and that for purposes of recording the consolidation in the Registry of Property, it was necessary that a judicial order be issued to that effect. -Goyala filed an answer to the petition, alleging that they had obtained a cash loan of P810 from Gojo payable w/in one year w/o interest and that to guarantee payment, Goyala executed a mortgage in favor of the petitioner on the parcel of land in question. Hence, although the deed was executed in the form of a pacto de retro sale, the true intention of the parties was for it to be a mere mortgage to secure payment. Goyala further claimed that he and his wife attempted to pay the debt but petitioner refused to receive the sum and cancel the mortgage. By way of counterclaim, Goyala prayed that petitioner receive the P810 and that the document of mortgage be declared so, and not a pacto de retro sale. He further prayed for P1800 per annum until the final termination of the case for the fruits of said property and in the case that the instrument be deemed a true pacto de retro sale, that petitioner be ordered to execute a deed of resale in favor of respondents in accordance with A1606CC. -Counsel for Goyala filed a manifestation informing the TC that the named defendant, Antonina, had died, prompting the TC to issue an order requiring counsel for the plaintiff to submit an amended Complaint substituting Antonina with one of her successors in interest as party defendants. Goyala filed a motion to dismiss the petition on the ground that notwithstanding the lapse of 43 days after appellants receipt of a copy of the said TC order, said appellant failed and neglected to submit the amended complaint required of him. Appellant opposed the motion but the TC dismissed the complaint. -Appellee filed a motion to declare appellant in default in respect of said appellees counterclaim, which was gr anted by the TC, which further required Goyala to submit his evidence before the Clerk of Court. TC rendered favorable judgment on appellees counterclaim, declaring the Deed of Pacto de Retro Sale an equitable mortgage and ordering Gojo to receive the P810 and to restore possession to the defendants and allowing them to redeem the same. -Appellant appealed to the CA, which upon finding that the said appeal involves purely questions of law, certified the same to the SC. ISSUES Parties: Re contractual money claims / Dismissal by claimant / Compulsory counterclaim/ Answer: Defenses WON TC erred in declaring plaintiff in default with respect to defendants counterclaim HELD YES. The appellant contends that there is no occasion for the TC to declare him in de fault in respect of appellees counterclaim as said counterclaim falls within the category of compulsory counterclaim which does not call for an independent answer as the complaint already denies its material allegations. It is now settled that a plaintiff who fails or chooses not to answer a compulsory counterclaim may not be declared in default, principally because the issues raised in the counterclaim are deemed automatically joined by the allegations of the complaint. -While it is true that under Sec. 3 of Rule 17, a complaint may be dismissed for failure to prosecute if the plaintiff fails to comply with an order of the court, said provision cannot apply when the order ignored is a void one, as in this case. (As in Sec 20 of Rule 3, the death of the defendant in a contractual money claim does dismiss such action for recovery, but will be allowed to continue until final judgment is entered. Favorable judgment obtained by the plaintiff shall be enforced in the manner provided in these Rules for prosecuting claims against the estate of a deceased person. In Barrameda vs Barbara, the SC held that an order to amend the complaint, before the proper substitution of parties as directed by Sec. 17, Rule 3 (Sec. 16, new law), is void and imposes upon the plaintiff no duty to comply therewith to the end that an order dismissing the said complaint, for such noncompliance, would similarly be void. It was further held in Ferriera vs Gonzales that the continuance of a proceeding during the pendency of which a party thereto dies, without such party having been validly substituted in accordance with the rules, amounts to lack of jurisdiction. WHEREFORE, the decision appealed from is set aside