[G.R. No. L-22485. March 13, 1968.] complete delivery of Charge Order No.
complete delivery of Charge Order No. 37071 or that she be relieved from paying P855.00 and
CONSUELO V. CALO, doing business under the trade name CVC Lumber Industries, assisted
by MARCOS M. CALO, plaintiffs-appellants, vs. AJAX INTERNATIONAL INCORPORATED,
defendant-appellee.
SYLLABUS
1. ACTIONS; DISMISSAL; CLAIM NOT A COMPULSORY COUNTERCLAIM IN ANOTHER
CASE; EFFECT. Where plaintiff's claim in civil case No. 860 of the Court of First Instance of
Agusan consisting of P12,000.00 attorney's fees is not a compulsory counterclaim in Civil Case
No. VI-93062 of the municipal court of Manila, its dismissal by the lower court upon the
supposed ground that it was compulsory counterclaim in the latter case, is reversed and the
case remanded to the lower court for further proceedings.
2. ID.; COMPULSORY COUNTERCLAIM; WHEN BARRED BEFORE MUNICIPAL COURT.
The rule that a compulsory counterclaim not set up is barred, when applied to the municipal
court, presupposes that the amount involved is within the said court's jurisdiction. Otherwise
it would be absurd if the counterclaim filed is beyond its jurisdiction for it would be prohibited
to take cognizance thereof.
DECISION
BENGZON, J.P., J p:
Sometime on May 7, 1959, plaintiff-appellant Calo ordered from defendant-appellee Ajax
International, Inc., 1,200 ft. of John Shaw wire rope at P2.85 per foot. The transaction was
evidenced by Charge Order No. 37071, for P3,420.00.
According to plaintiff Calo, when the wire rope was delivered to Butuan City, the same was
found short of 300 ft. Plaintiff then wrote two letters to defendant asking for either completion
of delivery or account adjustment of the alleged undelivered 300 ft. of wire rope.
On November 20, 1961, a complaint docketed as Civil Case No. IV- 93062 was filed in the
Municipal Court of Manila by one Adolfo Benavides who claimed to have acquired the
outstanding credit account of Calo from defendant Ajax International, Inc. Charge Order No.
37071 was among those included in the assigned account. Subsequently, a judgment by
default was entered, and a writ of execution issued, against plaintiff Calo. The latter resorted
to this Court on a petition for certiorari, prohibition and mandamus. 1 We set aside the
judgment of default and writ of execution issued against plaintiff Calo and remanded the case
for further proceedings.
On January 23, 1962, plaintiff Calo, assisted by her husband, Marcos Calo, filed in the Court of
First Instance of Agusan a complaint against defendant asking (1) that the latter either effect
(2) that the latter indemnify her for P12,000 as attorney's fees, damages and expenses of
litigation. 2 The case was docketed as Civil Case No. 860.
Instead of filing an answer, defendant moved for the dismissal of Civil Case 860 on the ground,
inter alia, that the subject thereof was involved and intimately related to that in Civil Case No.
IV-93062 of the Municipal Court of Manila. The Court a quo sustained the motion and
dismissed the case.
Plaintiff-appellant moved for reconsideration and new trial. When this failed, she instituted
the present appeal.
The dismissal of Civil Case No. 860 by the court a quo because of the pendency of Civil Case
No. IV-93062 in the municipal court of Manila is predicated on the supposition that plaintiff's
claim is a compulsory counter-claim that should be filed in the latter case. There is no question
that it arises out of the same transaction which is the basis of the complaint in Civil Case No.
IV-93062 and does not require the presence of third parties over whom the municipal court of
Manila could not acquire jurisdiction.
However, plaintiff's claim is not a compulsory counterclaim in Civil Case No. IV-93062 for the
simple reason that the amount thereof exceeds the jurisdiction of the municipal court. The
rule that a compulsory counterclaim not set up is barred, when applied to the municipal court,
presupposes that the amount involved is within the said court's jurisdiction. Otherwise, as this
Court had already noted in Yu Lay vs. Galmes, 3 we would come to the absurd situation where
a claim must be filed with the municipal court which it is prohibited from taking cognizance of,
being beyond its jurisdiction.
Besides, the reason underlying the rule, which is to settle all related controversies in one sitting
only, does not obtain. For, even if the counterclaim in excess of the amount cognizable by the
inferior court is set up, the defendant cannot obtain positive relief. The Rules allow this only
for the defendant to prevent plaintiff from recovering from him. 4 This means that should the
court find both plaintiff's complaint and defendant's counterclaim (for an amount exceeding
said court's jurisdiction) meritorious, it will simply dismiss the complaint on the ground that
defendant has a bigger credit. Since defendant still has to institute a separate action for the
remaining balance of his counterclaim, the previous litigation did not really settle all related
controversies.
Plaintiff Calo's claim of P12,000.00 not being a compulsory counterclaim in Civil Case No. VI-
93062, it need not be filed there. The pendency then of said civil case could not be pleaded in
abatement of Civil Case No. 860. Consequently, the lower court erred in dismissing plaintiff's
complaint. WHEREFORE, the order of dismissal appealed from is hereby reversed and the case
remanded for further proceedings. Costs against appellee Ajax International, Inc. So Ordered.
1
G.R. No. L-11647 January 31, 1958
FLORENTINO NAVARRO and BEATRIZ VINOYA, petitioners,
vs.
HON. ELOY BELLO, Judge of the Court of First Instance of Pangasinan, JUAN CABUANG,
FLORENTINA BAUTISTA, FLORENCIO GALICIA and CONSOLACION BAUTISTA, respondents.
Villanueva, Resultan and Associates for petitioners.
Conrado M. Soriano for respondents.
REYES, J.B.L., J.:
This is a petition for certiorari and mandamus with preliminary injunction seeking the
annulment of a decision of the Court of First Instance of Pangasinan dated July 30, 1956,
dismissing the complaint in Civil Case No.13099, adjudging the respondents-defendants
owners of two parcels of land described in the complaint, and awarding damages to the latter
for the unlawful usurpation of the disputed lots by the petitioners.
It appears that petitioners-plaintiffs filed a complaint on September 30, 1954, with the Court
of First Instance of Pangasinan (Civil Case No. 13099) praying for the annulment of transfer
certificates of title Nos. 15967 and 15968 and the corresponding deeds of sale executed by
respondents Florencio Galicia and Consolacion Bautista in favor of respondents Juan Cabuang
and Florentino Bautista over lots Nos. 20774 and 32540, of the San Carlos Cadastre, claiming
ownership of said parcels of land, and alleging actual possession. Respondents filed their
answer to the amended complaint on November 24, 1954, also claiming ownership over the
questioned lots with a counterclaim for the damages allegedly arising out of the unlawful
usurpation of the possession of the above described parcels of land by the petitioners through
force and intimidation.
No answer to the counterclaim having been filed within the time prescribedby the Rules, upon
petition of the respondents, the petitioners (plaintiffs below) were declared in default in an
order of the lower court dated February 2, 1955, and the same order commissioned the deputy
clerk of court to receive the evidence of the defendants. No notice of this order was furnished
the petitioners of their counsel. The reception of evidence was made on February 8, 1955, and
in accordance with the evidence submitted bythe respondents, the court rendered decision
adjudicating the defendant'scounterclaim for damages, declaring the respondents owners of
the disputed parcels of land, and dismissing the complaint. Copy of the decision wasreceived
by the petitioners on August 7, 1956.
On September 3, 1956, petitioners filed their first motion for reconsideration to set aside the
decision and order of default; it was denied, and notice of such denial received by the
petitioners on October 1, 1956. A second motion for reconsideration filed on October 3, 1956,
havingbeen also denied by the lower court, notice of appeal was filed by petitioners on
October 6, 1956, the same day when the notice of denial of the second motion for
reconsideration was received by them, and with the notice of appeal they asked for a fifteen-
day extension within which to file therecord on appeal and appeal bond, which was granted.
But upon objection interposed by the respondents, the court in its order of October 26, 1956,
denied the approval of the record on appeal on the ground that the decision sought to be
reviewed has become final and that the plaintiffs having been declared in default, they have
no right to appeal unless and until the order of default is revoked and set aside.
There was no need for petitioners to answer respondents' counterclaim, considering that
plaintiffs, in their complaint, claimed not only ownership of, but also the right to possess, the
parcels in question, alleging that sometime in May, 1954, defendants through force and
intimidation, wrestedpossession thereof from their tenants, and that it was upon a writ of
possession issued by the Court of First Instance of Pangasinan that they were placed back in
possession by the provincial sheriff. These averments were denied by defendants in their
answer, wherein they asserted ownership in themselves and illegal deprivation of their
possession by plaintiffs, and as counterclaim, prayed for damages allegedly suffered because
of plaintiffs'alleged usurpation of the premises.
It thus appears that the issues of the counterclaim are the very issues raised in the complaint
and in the answer, and said counterclaim is based on the very defenses pleaded in the answer.
To answer such counterclaim would require plaintiffs to replead the same facts already alleged
in their complaint.
But in any event, whether or not plaintiffs have answered defendants' counterclaim, they have
the right to prove the averments of their complaint, including their claim that it was by court
order that they secured possession of the parcels in question from defendants. And if plaintiffs
are able to prove such allegations, then the court must dismiss defendants' counterclaim for
damages, since the illegal usurpation of defendants' possession allegedly committed by
plaintiffs, which is the basis of the counterclaim,would not have been proved. In short, the
issues of the counterclaim partakes of the nature of a special defense which, even if not
specifically challengedby plaintiffs in a reply, is deemed controverted (Rule 11, sec. 1, Rules
ofCourt; Rosario vs. J. Martinez, 92 Phil., 1064; Luna vs. Apacible, 79 Phil.,8). There was,
therefore, no occasion for plaintiffs' default on defendants'couterclaim, and the order of the
court below declaring them in default, as well as the judgment by default, is improper and void.
It is plain from the records that the complaint and the aswer have not as yetbeen set for trial
in the court below. Only after the issues of the complaint and answer are tried, and the parties
heard, may the court resolve the defendants' counterclaim for damages. If the court finds for
plaintiffs, defendants' defenses, and counterclaim, must necessarily fail. On the otherhand, if
the court finds for the defendants, then plaintiff's complaint must be dismissed, defendants
would be declared owners of the lands inquestion, and they would be awarded damages under
2
their counterclaim. But until and unless the whole case is heard on the merits, the court a quo
can not decide on defendants' counterclaim, without depriving plaintiffs their day in court.

Even if plaintiffs had really defaulted on the counterclaim, still the court was bound to limit its
decision to the specific reliefs ask for. Sec. 9, Rule 35, of the Rules of Court provides:

A judgment entered by default shall not exceed the amount or be different in kind from that
prayed for in the demand for judgment . . .

Since the counterclaim was set to recover damages caused by the petitioners alleged entering
the land in question through force and intimidation, thecourt could, at most, award the
damages sought; hence, in adjudging also the defendants, Juan Cabuang and Florentina
Bautista, to be the owners of the two parcels of land described in the complaint, when what
was tried was thecounterclaim, the court below exceeded its jurisdiction (See Lim Toco vs.Fo
Fay, 80 Phil., 166).

Since the ownership of the disputed land was put in issued by the allegations of the complaint
and the special defenses in the answer, the correct procedure, assuming that the declaration
of default was properly entered, should have been for the trial court to set the complaint and
answer for the hearing. The lower court, even in the case of a true default on the couterclaim,
could not deny the petitioners-palintiffs the right to be heard and produce evidence in support
of their complaint, as that pleading was valid and had not been stricken from the records. Their
having defaulted on the counterclaim, if they did so at all, did not operate to deprive the
plaintiffs from any standing or remedy in court in connection with their complaint.

Petitioner's timely motions for reconsideration and new trial were denied bythe lower court,
first, because it said the petitioners had lost their standing in court in view of the order of
default, and second because such motions were not accompanied by affidavits of merits. The
first argument is, in view of what we have already stated, invalid and untenable. As for the
second, we have already ruled that affidavits of merits are not necessarywhen the granting of
the motion is not discretionary with the court but is demandable as of right, as where the
movant has been deprived of his day in court, through no fault or negligence of his own (Valerio
vs. Tan, et al., 97 Phil. 558). This rule applies in the instant case, since petitioners have been
deprived of their day in court through an illegal order of default.

Wherefore, the writ of certiorari is granted, and the decision of July 30, 1956 of the Court of
First Instance of Pangasinan in its case No. 13099 is hereby set aside, and said court is directed
to proceed with the trial ofthe entire case on the merits. Costs against respondents Cabuang
andBautista. So ordered.

3
[G.R. No. L-26768. October 30, 1970.]
FAUSTINO GOJO, petitioner-appellant, vs. SEGUNDO GOYALA and ANTONINA ALMOGUERA,
respondents-appellees.
Fernando P. Gerona, Sr. for petitioner-appellant.
Agustin Frivaldo for respondents-appellees.
SYLLABUS
1. REMEDIAL LAW; PLEADINGS AND PRACTICE; COUNTERCLAIM; COMPULSORY
COUNTERCLAIM DOES NOT CALL FOR AN INDEPENDENT ANSWER. 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.
2. ID.; ID.; ID.; COMPULSORY COUNTERCLAIM. In the instant case, there can be no
doubt that appellant's counterclaim was a compulsory one inasmuch as it arises out of or is
necessarily connected with transaction or occurrence that is the subject matter of the
complaint; the complaint alleged that the right of appellee to repurchase the property in
question had already expired and asked for an order of consolidation; on the other hand,
appellant's counterclaim was for reformation of the deed claiming that it was only a mortgage.
Thus the counterclaim was clearly inconsistent with and directly controverted the whole
theory and basic allegations of the complaint.
3. ID.; ID.; COMPLAINT; DISMISSAL; FAILURE TO PROSECUTE; FAILURE TO COMPLY
WITH A VOID ORDER OF A COURT WILL NOT JUSTIFY THE DISMISSAL OF THE COMPLAINT. It
is true that under Section 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, but it is obvious that the said provision
cannot apply when the order supposedly ignored is a void one, as in this case. Here, the trial
court ordered petitioner to amend the complaint only because it was informed that one of the
defendants had died, the court directing that the plaintiff should name the heirs of the
deceased as defendants in lieu of said deceased. Such an order runs counter to the ruling in
Case-as vs. Rosales, et al. (L-18707, February 28, 1967) that an order of the trial court directing
the surviving plaintiff to amend the complaint was a void order inasmuch as there was no
obligation on said plaintiff to amend his complaint.
4. ID.; ID.; PARTY; DEATH OF A PARTY. When certain of the parties to a civil case died
and due notice thereof was given to the trial court, it devolved on the said court to order, not
the amendment of the complaint, but the appearance of the legal representatives of the
deceased in accordance with the procedure and manner outlined in Rule 3, Section 17 of the
Rules of Court.
5. ID.; ID.; DISMISSAL OF COMPLAINT NOT PROPER WHEN THERE IS COMPULSORY
COUNTERCLAIM. In line with the principle underlying Sec. 2 of Rule 17, it is not proper to
dismiss a complaint when a compulsory counterclaim has been pleaded by defendant. The
reason is obvious. Under the cited provision, the right of the plaintiff to move for the dismissal
of an action after the defendant has filed his answer is qualified by the clause providing that:
"If a counterclaim has been pleaded by a defendant prior to the service upon him of the
plaintiff's motion to dismiss, the action shall not be dismissed against the defendant's
objection unless the counterclaim can remain pending for independent adjudication by the
court." With this limitation, the power of the court to dismiss the complaint upon motion of
plaintiff, which is usually without prejudice, is not purely discretionary.
6. ID.; ID.; ID.; PURPOSE. The purpose of Section 2, Rule 17, Revised Rules of Court
is to avoid multiplicity of suits over the same matter which would necessarily entail
unnecessary expense and, what is worse, possibility of conflict and inconsistency in the
resolution of the same question. The same considerations would obtain, if the defendant were
the one to ask for dismissal. The best interests of justice require that conflicting claims
regarding the same matter should be decided on one single proceeding.
DECISION
BARREDO, J p:
Appeal from the favorable decision of the Court of First Instance of Sorsogon on the
counterclaim of respondents (herein appellees) in its Civil Case No. 1657-84 the complaint
(petition) of therein petitioner (herein appellant) having been previously dismissed, without
prejudice, for his failure to submit an amended complaint as required of him in the court a
quo's earlier order.
The record shows that on 26 May 1951, appellee Segundo Goyala together with his now
deceased wife Antonina Almoguera, who was also named respondent or defendant in the
complaint or petition in the court below, sold to appellant by a "Deed of Pacto de Retro Sale"
a certain parcel of agricultural land having an area of approximately two and one-half hectares
for P750.00, the repurchase to be made, according to the deed, within one year. It also appears
from said deed that on July 4, 1951, the vendee paid another P100.00 as addition to the
purchase price. About ten (10) years after the execution of the said document, or on April 12,
1961, to be precise, the vendee filed with the Court of First Instance of Sorsogon the present
case against the vendors by way of a petition for consolidation of ownership of the land
described and involved in the "Deed of Pacto de Retro Sale." In his petition, the vendee, herein
appellant, alleged, inter alia, that the date for repurchase, May 26, 1952, having expired and
the vendors not having been able to repurchase the same under the terms and conditions of
the agreement, the ownership over the land involved had become consolidated in him; and
that for the purpose of recording in the Registry of Property the said consolidation of
4
ownership, it was necessary that a judicial order be issued to that effect and accordingly prayed
for such an order. pred
On May 26, 1961, appellee Segundo Goyala filed an opposition or answer to the petition. He
therein alleged that his wife Antonina Almoguera had died in the year 1959 and denied the
allegation in the petition regarding the pacto de retro sale, "the fact of the matter being,"
according to him, "that on May 26, 1951, the respondents obtained a cash loan of P750.00
from the petitioner payable in one year without interest; that only on July 26, 1951, Dolores
Goyala, daughter of the respondents, obtained from the petitioner the sum of P50.00 to be
added and credited to the account of the respondents; and then on August 25, 1951, the said
Dolores Goyala received from the petitioner another amount of P10.00 to be added to and
credited to the account of the respondents, (so that) the total loan of the respondents from
the petitioner aggregates P810.00 Philippine Currency" and that to guarantee the payment of
the said loan, the respondents executed a mortgage in favor of the petitioner on a parcel of
coconut land described in Annex A of the petition, hence, altho the deed was executed or
drawn in the form of a pacto de retro sale, the true and real intention of the parties thereto
was that the same was a mere mortgage to secure the payment of the original loan of P750.00
together with the additional amount received thereafter, making a total loan of P810.00,
payable within one year without interest. He further alleged that in the evening of May 26,
1952, he and his wife went to the house of the petitioner and tendered to him the sum of
P810.00 to pay the debt, but said petitioner refused to receive the same and to cancel the
document of mortgage, Annex A. The said appellee also reiterated by way of counterclaim the
foregoing allegations of his answer and prayed thus:
"WHEREFORE, the respondent Segundo Goyala respectfully prays this Honorable Court to
dismiss the petition and render judgment in favor of the respondents as follows:
"(a) Ordering the petitioner to receive the sum of P810.00 tendered or deposited by the
respondents in full settlement of their debts to him;
"(b) Declaring the document marked Annex A of the petition to be mortgage and not a
pacto de retro sale, and ordering the same cancelled and with no more force and effect;
"(c) Ordering the petitioner to pay the respondents the sum of P1,800.00 per annum
beginning May 26, 1951 until the final termination of this case as the reasonable monetary
value of the products for the said property, and from this amount, there should be deducted
however, the corresponding legal interest annually on said loans; and
"(d) In case, however, of the remote possibility that this Court should find the said
instrument (Annex A) to be a true pacto de retro sale, and not a mere mortgage, it is hereby
prayed that the petitioner be ordered to execute a deed of resale or repurchase of said
property in favor of the respondents in accordance with Art. 1606 third paragraph of the Civil
Code."
On December 1, 1962, counsel for respondent Goyala filed a manifestation informing the trial
court that the named defendant (respondent) Antonina Almoguera was already dead, she
having died at Labo, Camarines Norte on March 27, 1959, and that her surviving nearest kin
are her children, namely: Leonor, Pedro, Juliana, Dolores, Valentina, Soledad, Penya, Mamerta,
Salvador, Genesa, Felipe and Elegio all surnamed Goyala with residences at Bulan,
Sorsogon. Hearing was had on that manifestation, after which the trial court, under date of
December 4, 1962, issued the following order:
"As prayed for in the manifestation of Atty. Agustin Frivaldo, counsel for the defendant, dated
December 1, 1962, on the ground stated therein, the counsel for the plaintiff is hereby
required to submit an amended Complaint substituting therein for one of the defendants,
Antonina Almoguera, now deceased her successors in interest as party defendants, within the
reglementary period."
Subsequently, on January 26, 1963, appellee Goyala filed a motion to dismiss the complaint or
petition on the ground that notwithstanding the lapse of 43 days after appellant's receipt of a
copy of the above-quoted order of the trial court, said appellant had failed and neglected to
submit the amended complaint required of him. The motion was opposed by appellant; and
the trial court, resolving the incident, issued the following order on February 15, 1963:
"The matter under consideration is the motion to dismiss filed by the defendants on the
ground that the plaintiff has failed and neglected to submit the amended complaint as
required in the order of this Court dated December 4, 1962, which the plaintiff had received
on December 13, 1962. From December 13, 1962 when the motion to dismiss was filed, 43
days have elapsed. On February 6, 1963 when the plaintiff has again failed to file together with
said opposition the required amended complaint, and altho plaintiff has requested for a
reasonable extension of time within which to file the said pleading, it is regrettable to state
that up to the present has neglected to do so.
"WHEREFORE, the complaint is hereby dismissed without prejudice."
Thereafter, on July 10, 1963, appellee filed a motion to declare appellant in default in respect
of said appellee's counterclaim, contained in his answer (opposition) to the dismissed
complaint (petition) of appellant. This motion was granted by the trial court in its order of July
11, 1963, to wit:
"Upon petition of the counsel for the defendant Segundo Goyala to declare the plaintiff in
default on the ground of failure on the part of the plaintiff to answer the counterclaim filed by
said defendant Segundo Goyala within the reglementary period, despite the fact that the
plaintiff's counsel was duly served with a copy thereof, and the plaintiff's complaint was
already dismissed by this Court in its order of February 15, 1963 on the ground of neglect to
submit the amended complaint as required in the Court order of December 4, 1962, the
5
plaintiff is hereby declared in default on the counterclaim filed by said defendant Segundo
Goyala.
"Let the defendant Segundo Goyala submit his evidence before the Clerk of Court, who is
hereby commissioned to receive the same." prLL
As directed in the order above-quoted, the Clerk of Court received the evidence of appellee in
respect of his counterclaim and, thereafter, on November 15, 1963 the trial court rendered
favorable judgment on appellee's counterclaim. The pertinent portions of the decision
referred to read thus:
"It appears that on May 26, 1951, respondents obtained a loan of P750.00 from the petitioner.
To secure the loan, respondents executed a document, which was made a Deed of Pacto de
Retro Sale (Exh. 'A'), on suggestion of petitioner to exempt himself from liabilities under the
Usury Law. Dolores Goyala, one of the daughters of respondents, obtained an additional loan
of P50.00 on July 26, 1951, (Exh. 'A-1') and another P10.00 on August 19, 1951, (Exh. 'A-3')
from the petitioner which amounts were duly authorized and acknowledged by respondent
Segundo Goyala. In the late afternoon of May 26, 1952, the last day to redeem the property,
Segundo Goyala, tendered the amount of P810.00 to herein petitioner in complete payment
of the loan and to release the property securing the said loan, but was refused because it was
already night time, and was advised instead to return the following day. When Segundo Goyala
returned the following day to redeem the property he was told by petitioner that the period
to redeem has already expired. Segundo Goyala testified further that he tried no less than
three times to redeem the property but each time petitioner refused the redemption money.
"It appears further that the petitioner is in possession of the land since May 26, 1951, after the
execution of Exhibit 'A' up to the present time and had appropriated to himself the products
during the period. It is shown further that the land is a productive coconut land and has a fair
market value of P5,000.00 with an annual yield of P1,800.00."
"The respondents are not however entitled to be reimbursed of the value of the products
obtained by the petitioner who acted in the belief that the agreement was a Pacto de Retro
Sale which turned out to be otherwise as the Court now so declares.
"WHEREFORE, in view of the foregoing the Court hereby declares the Deed of Pacto de Retro
Sale (Exh. 'A') an equitable mortgage and respondents Segundo Goyala and the heirs of
Antonina Almoguera are allowed to redeem the property; orders Faustino Gojo to withdraw
the amount of P810.00 deposited with the Clerk of Court in full settlement of the loan, and
hereby cancels and declares without force and effect the aforementioned Deed of Pacto de
Retro Sale executed by the spouses Segundo Goyala and Antonina Almoguera in favor of
Faustino Gojo. Without costs."
The above quoted decision was subsequently amended in an order of December 19, 1963, as
follows:
"It appearing that in the dispositive part of the decision there was no directive to restore the
possession to the defendants upon execution, the dispositive portion of the said decision is
hereby amended to include therein an additional directive ordering the plaintiff to deliver and
restore the possession of the land in question to the defendants."
Dissatisfied with the decision referred to, appellant appealed to the Court of Appeals which,
upon its finding that the said appeal involves purely questions of law, certified the same to this
Court for resolution. cdasia
In his brief, appellant assigns the following errors allegedly committed by the trial court:
"1. THE LOWER COURT ERRED IN DECLARING PLAINTIFF IN DEFAULT WITH RESPECT TO
DEFENDANT'S COUNTERCLAIM;
"2. THE LOWER COURT ERRED IN DEPUTIZING OR COMMISSIONING THE CLERK OF
COURT TO RECEIVE THE EVIDENCE OF THE DEFENDANT SEGUNDO GOYALA;
"3. THE LOWER COURT ERRED IN RENDERING JUDGMENT IN FAVOR OF THE
RESPONDENT SEGUNDO GOYALA AND THE HEIRS OF ANTONINA ALMOGUERA ALLOWING
THEM TO REDEEM THE LAND IN QUESTION FROM THE PETITIONER FAUSTINO GOJO FOR THE
SUM OF P810.00."
The thrust of appellant's argument in respect of the first assignment of error is to the effect
that there is no occasion for the trial court to declare him in default in respect of appellee's
counterclaim in this case, for the reasons that: (a) the 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; and (b) the dismissal of the complaint in this
case without prejudice carried with it the dismissal of the said counterclaim.
The first assignment of error of appellant is well taken. 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. 1 In the instant case, there can be no doubt that appellant's
counterclaim was a compulsory one inasmuch as it arises out of or is necessarily connected
with transaction or occurrence that is the subject matter of the complaint; the complaint
alleged that the right of appellee to repurchase the property in question had already expired
and asked for an order of consolidation; on the other hand, appellant's counterclaim was for
reformation of the deed claiming that it was only a mortgage. Thus the counterclaim was
clearly inconsistent with and directly controverted the whole theory and basic allegations of
the complaint. In consequence, appellant's complaint stood as the answer to appellee's
6
counterclaim; hence, the incorrectness of the trial court's order declaring the appellant in
default in regard to said counterclaim is evident.
Regarding the dismissal of petitioner's complaint, We hold also, that the trial court committed
reversible error in ordering the same. It is true that under Section 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, but it is obvious that the said provision cannot apply when the order supposedly ignored
is a void one, as in this case. Here, the trial court ordered petitioner to amend the complaint
only because it was informed that one of the defendants had died, the court directing that the
plaintiff should name the heirs of the deceased as defendants in lieu of said deceased. Such an
order runs counter to the ruling of this Court in Caseas vs. Rosales, et al. 2 which is squarely
applicable to the situation herein obtaining. In that case, We held:
"When certain of the parties to Civil Case No. 261 died and due notice thereof was given to the
trial court, it devolved on the said court to order, not the amendment of the complaint, but
the appearance of the legal representatives of the deceased in accordance with the procedure
and manner outlined in Rule 3, Section 17 of the Rules of Court, which provide:
'SECTION 17. Death of party.After a party dies and the claim is not thereby
extinguished, the court shall order, upon proper notice, the legal representative of the
deceased to appear and to be substituted for the deceased, within a period of thirty (30) days,
or within such time as may be granted. If the legal representative fails to appear within said
time, the court may order the opposing party to procure the appointment of a legal
representative of the deceased within a time to be specified by the court, and the
representative shall immediately appear for and on behalf of the interest of the deceased. The
court charges involved in procuring such appointment, if defrayed by the opposing party, may
be recovered as costs. The heirs of the deceased may be allowed to be substituted for the
deceased, without requiring the appointment of an executor or administrator and the court
may appoint guardian ad litem for the minor heirs.'
"In the case of Barrameda vs. Barbara, 90 Phil. 718, this Court held that an order to amend the
complaint, before the proper substitution of parties as directed by the aforequoted rule has
been effected, is void and imposes upon the plaintiff no duty to comply therewith to the end
that an order dismissing the said complaint, for such non-compliance, would similarly be void.
In a subsequent case, Ferriera, et al. vs. Gonzales, et al., G.R. No. L-11567, July 17, 1958, this
Court affirmed a similar conclusion on the determination that the continuance of a
proceedings during the pendency of which a party thereto dies, without such party having
been validly substituted in accordance with the rules, amounts to a 'lack of jurisdiction."
"The facts of this case fit four square into the Barrameda case above-cited, save for the minor
variance that in the former two of the litigants died while only one predeceased the case in
Barrameda. Here, as in Barrameda, during the pendency of (the) civil case, notice was given to
the trial court of the deaths of one of the plaintiffs and one of the defendants in it. Instead of
ordering the substitution of the deceased's legal representatives in accordance with Rule 3,
Sec. 17 of the Rules of Court, the trial court directed the surviving plaintiff to amend the
complaint and when the latter failed to comply therewith, the said court dismissed the
complaint for such non-compliance. We must hold, therefore, as We did in Barrameda that
inasmuch as there was no obligation on the part of the plaintiff-appellant herein to amend his
complaint in Civil Case No. 261, any such imposition being void, his failure to comply with such
an order did not justify the dismissal of his complaint. Grounded as it was upon a void order,
the dismissal was itself void." (To the same effect, see World Wide Insurance & Surety Co. v.
Jose, etc., et al., 96 Phil. 45, 50). cdlex
Besides, in line with the principle underlying Sec. 2 of Rule 17, it is not proper to dismiss a
complaint when a compulsory counterclaim has been pleaded by defendant. The reason is
obvious. Under the cited provision, the right of the plaintiff to move for the dismissal of an
action after the defendant has filed his answer is qualified by the clause providing that: "If a
counterclaim has been pleaded by a defendant prior to the service upon him of the plaintiff's
motion to dismiss, the action shall not be dismissed against the defendant's objection unless
the counterclaim can remain pending for independent adjudication by the court." With this
limitation, the power of the court to dismiss the complaint upon motion of plaintiff, which is
usually without prejudice, is not purely discretionary. 3 The purpose is to avoid multiplicity of
suits over the same matter which would necessarily entail unnecessary expense and, what is
worse, possibility of conflict and inconsistency in the resolution of the same questions. The
same considerations would obtain, if the defendant were the one to ask for dismissal. The best
interests of justice require that conflicting claims regarding the same matter should be decided
in one single proceeding. Dismissing the complaint without prejudice, as the trial court has
done in this case, albeit upon motion of the defendant, will not prevent the undesirable
multiplication of suits and reventilation of the same issues in the subsequent action that may
be filed by virtue of the reservation made in the disputed order of dismissal.
Having arrived at the foregoing conclusions, it becomes unnecessary to discuss the other two
assigned errors. LexLib
WHEREFORE, the decision appealed from is set aside and this case is remanded to the court
below for further proceedings in consonance with the above opinion, with costs against
appellee.
7
[G.R. No. L-21766. September 30, 1966.]
FELICISIMA BALLECER and JOSE S. AGAWIN, petitioners, vs. JOSE BERNARDO, The Hon. JESUS
P. MORFE, Presiding Judge, Branch XIII of the Court of First Instance of Manila, and the Sheriff
of Manila, respondents.
SYLLABUS
1. PLEADING AND PRACTICE; MOTIONS THAT MAY BE HEARD AND GRANTED EX PARTE.
There are motions that may be heard and granted ex-parte, and a motion for extension of
time to file an answer to a counterclaim belongs to such class (Moya vs. Barton, 76 Phil., 831,
833).
2. ID.; COUNTERCLAIMS; WHEN IT IS NOT NECESSARY TO FILE AN ANSWER TO A
COUNTERCLAIM. Where the issues raised in the counterclaim are inseparable from those
posed in the complaint, it is not absolutely necessary for the plaintiff to file an answer thereto
(Arejola vs. Cayetano, G. R. No. L-6673, September 8, 1954; Gomez vs. Martinez, G. R. No. L-
4473, September 30, 1952; Navarro vs. Bello 54 Off. Gaz., 6588).
DECISION
CONCEPCION, C.J p:
This is an original action to set aside several orders of the Court of First Instance of Manila, in
Civil Case No. 43073 thereof, as well as an alias writ of execution and a notice of sale issued in
connection therewith. Upon the filing of the petition and the submission and approval of a
bond in the sum of P1,000.00, on motion of petitioners herein, we issued a writ of preliminary
injunction enjoining respondent Judge and the Sheriff of Manila from carrying out the
aforementioned writ of execution.
Petitioners herein are the spouses Jose S. Agawin and Felicisima Ballecer. On May 4, 1960, they
instituted said Civil Case No. 43073 against respondent Jose Bernardo, to recover damages
allegedly caused by him in consequence of the destruction and demolition of a portion of a
wall of the petitioners, along the common boundary line of their lot and that of Bernardo, at
Felix Huertas Street, Manila, as well as to recover possession of a portion of petitioners'
aforementioned lot, with an area of 0.80 square meters, which was allegedly encroached upon
by the wall subsequently erected by Bernardo in place of the one he had destroyed.
In due course, Bernardo filed his answer denying petitioners' averments, and alleging, in turn,
that the demolition and destruction made by him had taken place within the boundary of his
own property. By way of counterclaim, Bernardo set up two (2) causes of action, namely: (1)
that petitioners were the parties who had encroached upon and occupied a portion of
Bernardo's property, with an area of about 3.70 square meters, without his consent and
against his will, and (2) that petitioners' complaint is premature, uncalled for, capricious and
without any justifiable cause, for which reason Bernardo prayed that they be sentenced to
vacate his aforementioned portion of land allegedly encroached upon them and to turn it over
to him, and to pay damages aggregating P48,000.00.
On the last day of the reglementary period to answer counterclaim, or on June 6, 1960,
petitioners filed an ex parte urgent motion for extension of time therefor, but on June 11, the
motion was denied and ordered stricken off the record. Then, on June 13, the court declared
petitioners in default as to the counterclaim and ordered Bernardo to present his evidence
thereon before the Deputy Clerk of Court on June 15, at 9:00 a.m., which Bernardo did. On
June 20, the court rendered a decision the dispositive part of which reads:
WHEREFORE, the Court hereby renders judgment on the counterclaim in favor of the
defendant-counterclaimant and against the plaintiffs, as follows:
"1. Ordering the plaintiffs and/or their agents and representatives including all persons
claiming under them to deliver and restore the possession thereof to the defendant, that
portion of said defendants property consisting of 3.7 square meters which is being encroached
upon and occupied by or in possession of the plaintiffs;
"2. Ordering plaintiffs to pay, jointly and severally, the defendant the following sums, to
wit:
"(a) P3,625.00 as compensatory damages which the defendant failed to realize in the
form of rentals from that portion of his property subject matter of the counterclaim,
corresponding to the period from May, 1948 to May, 1960, with interest thereon at the legal
rate from the ,date of filing of the answer with counterclaim until fully paid; plus the sum of
P25.00 for each month thereafter until the premises in question are actually delivered to the
possession and occupation of the defendant;
"(b) P541.00 as actual damages incurred by the defendant;
"(c) P10,000.00 as moral damages;
"(d) P2,000.00 as exemplary damages; and
"(e) P1,000.00 as attorney's fees.
"With costs against the plaintiffs."
On June 28, petitioners moved for a reconsideration of the orders of June 11 and 13, but the
motion was denied on July 1. Thereupon, petitioners filed a petition for relief from judgment,
with a prayer for a writ of preliminary injunction, to restrain the Clerk of Court from issuing a
writ of execution. After denying this petition, the Court, on petitioner's motion for
reconsideration, granted it on January 18, 1961, only to deny it once more, on February 4, on
motion for reconsideration filed by Bernardo. Forthwith, or on February 8, petitioners filed
8
their notice of appeal. Soon thereafter, petitioners sought an extension of time to file their
appeal bond and their record on appeal, but the motion was denied, on February 18, for lack
of merit. On March 18, the Court ordered the issuance of a writ of execution, but, on April 11,
the execution of the decision of June 20, 1960, was ordered stayed pending trial on the merits
on petitioners' complaint.
On motion of Bernardo, dated December 19, 1962, said order was, on January 29, 1963, set
aside and the issuance of a writ of execution "only as to paragraph No. 1 and paragraph No. 2-
a of the dispositive part" of the aforementioned decision, was ordered. A reconsideration of
this order having been denied, the Clerk of Court issued an alias writ of execution and, in
pursuance thereof, the Sheriff of Manila caused to be published a notice of sale at public
auction of a property of petitioners herein. Hence, the present case against Bernardo, the
Judge of the lower court and the Sheriff of Manila.
The main question for determination in this case is whether the lower court has gravely abused
its discretion in declaring the petitioners in default and in rendering judgment against them on
Bernardo's counterclaim after an ex parte hearing. It is obvious that the answer must be in the
affirmative.
To begin with, a motion for extension of time to file an answer to the counterclaim had been
filed within the reglementary period and plausible reasons were given in support thereof;
counsel for petitioners had been unable to contact them owing to a typhoon that had just hit
Manila, and the flood and inclement weather that had followed.
The main reason for the lower court's adverse action thereon would seem to be petitioners'
failure to set it for hearing as provided in the Rules of Court. But, there are motions that may
be heard and granted ex parte, and petitioners' aforementioned motion belongs to such class.
Thus in Moya vs. Barton (76 Phil. 831, 833) it was held:
"With respect to the other ground, Section 2, of Rule 27 provides that 'every motion other than
one which may be heard ex parte . . . shall be filed with the Court, and served upon the parties
affected thereby.' Taking into consideration that the extension of time applied for may be
shorter than the time required to have a motion set for hearing and acted on by the court, and
that the court has, as above stated, discretion to grant the petition, the motion for extension
filed in the present case may be considered as one which may be heard ex-parte . . ."
What is more, Bernardo's counterclaim was predicated upon allegations of fact which are
inconsistent with and, hence, controverted by, the allegations in petitioners complaint. In this
connection, it should be noted that Bernardo had, according to the complaint, encroached
upon petitioners' property, whereas, Bernardo maintained the exact opposite in his
counterclaim not only that petitioners' allegation was not true, but, also, that they were the
ones encroaching upon the property of Bernardo. Certainly, this contention, of Bernardo can
not be decided without passing upon the truth of the allegations in the complaint, which
petitioners are entitled to prove, whether they had answered Bernardo's counterclaim or not.
In other words, the issues raised in the counterclaim were inseparable from those posed in the
complaint, and so it was not absolutely necessary for the petitioners to file an answer to the
counterclaim (Arejola vs. Cayetano, L-6673, Sept. 8, 1954; Gomez vs. Martinez, L-4473, Sept.
30, 1952). In the language of Mr. Justice Reyes (J.B.L.), speaking for the Court in Navarro vs.
Bello (54 Off. Gaz., 6588):
"There was no need for petitioners to answer respondents' counterclaim, considering that
plaintiffs, in their complaint, claimed not only ownership of, but also the right to possess, the
parcels in question, alleging that sometime in May, 1954, defendants, through force and
intimidation, wrested possession thereof from their tenants, and that it was upon a writ of
possession issued by the Court of First Instance of Pangasinan that they were placed back in
possession by the provincial sheriff. These averments were denied by defendants in their
answer, wherein they asserted ownership in themselves and illegal deprivation of their
possession by plaintiffs, and as counterclaim, prayed for damages allegedly suffered because
of plaintiffs' alleged usurpation of the premises.
"It thus appears that the issues of the counterclaim are the very issues raised in the complaint
and in the answer, and said counterclaim is based on the very defenses pleaded in the answer.
To answer such counterclaim would require plaintiffs to replead the same facts already alleged
in their complaint.
"But in any event, whether or not plaintiffs have answered defendants' counterclaim, they
have the right to prove the averments of their complaint, including their claim that it was by
court order that they secured possession of the parcels in question from defendants. And if
plaintiffs are able to prove such allegations, then the court must dismiss defendants'
counterclaim for damages, since the illegal usurpation of defendants' possession allegedly
committed by plaintiffs, which is the basis of the counterclaim, would not have been proved.
In short, the issues of the counterclaim are so inseparable from those of the complaint and the
answer that such counterclaim partakes of the nature of a special defense which, even if not
specifically challenged by plaintiffs in a reply, is deemed controverted (Rule 11, Sec. 1, Rules of
Court; Rosario vs. J. Martinez, L-4473, September 30, 1952; Lama vs. Apacible, 79 Phil. 68).
There was, therefore, no occasion for plaintiffs' default on defendants' counterclaim, and the
order of the court below declaring them in default, as well as the judgment by default, is
improper and void."
The lower court committed, therefore, a grave abuse of discretion, amounting to excess of
jurisdiction, in declaring the petitioners in default as regards the counterclaim, and in
rendering a decision in default against them on said counterclaim, and, as a consequence, said
decision is null and void, and so are the aforementioned writ of execution, alias writ of
execution, and notice of sale issued by the Sheriff in pursuance thereof.
9
WHEREFORE, the orders complained of, as well as said writ of execution and alias writ of
execution, and the notice of sale adverted to above, including the decision of June 20, 1960,
are hereby annulled and set aside, and the writ of preliminary injunction heretofore issued by
this Court is, accordingly, made permanent, with costs against herein respondent Jose
Bernardo. It is so ordered.

Reyes, J.B.L., Dizon, Regala, Makalintal, Bengzon, J.P., Zaldivar, Sanchez and Castro, JJ., concur.

Barrera, J., is on leave.

10