rule 6 cases.pdf

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RULE 6- Kinds of Pleadings

[G.R. NO. 136051 : June 8, 2006]

ALFREDO P. ROSETE, OSCAR P. MAPALO and CHITO P. ROSETE,Petitioners, v.JULIANO LIM and LILIA LIM, Respondents.

D E C I S I O N

CHICO-NAZARIO, J.:

Before Us is a Petition for Review on Certiorariwhich seeks to set aside theDecision1of the Court of Appeals in CA-G.R. SP No. 45400 dated 24 August1998 which upheld the Orders of Branch 77 of the Regional Trial Court (RTC)of Quezon City in Civil Case No. Q-95-25803 dated 22 July 19972 and 27August 1997,3 allowing the taking of deposition upon oral examination ofpetitioners Oscar P. Mapalo and Chito P. Rosete, and its Resolution4dated 19October 1998 denying petitioners' Motion for Reconsideration.

Relevant to the petition are the following antecedents:On 5 December 1995, respondents Juliano Lim and Lilia Lim filed beforeBranch 77 of the RTC of Quezon City a Complaint for Annulment, SpecificPerformance with Damages against AFP Retirement and Separation BenefitsSystem (AFP-RSBS), Espreme Realty and Development Corporation(Espreme Realty), Alfredo P. Rosete, Maj. Oscar Mapalo, Chito P. Rosete,Bank of the Philippine Islands (BPI), and Register of Deeds of the Province ofMindoro Occidental, docketed as Civil Case No. Q-95-25803.5 It asked,among other things, that the Deed of Sale executed by AFP-RSBS coveringcertain parcels of lands in favor of Espreme Realty and the titles thereof underthe name of the latter be annulled; and that the AFP-RSBS and EspremeRealty be ordered to execute the necessary documents to restore ownershipand title of said lands to respondents, and that the Register of Deeds beordered to cancel the titles of said land under the name of Espreme Realtyand to transfer the same in the names of respondents.

On 18 January 1996, petitioners filed a Motion to Dismiss on the grounds thatthe court has no jurisdiction over the subject matter of the action or suit andthat venue has been improperly laid.6A Supplemental Motion to Dismiss wasfiled by petitioner Alfredo P. Rosete on 23 January 1996. 7 Respondentsopposed the Motion to Dismiss filed by petitioners8 to which petitioners filed

their Reply.9 Respondents filed a Comment on the Reply.10 AFP-RSBS,11Espreme Realty,12and, BPI13filed their respective Motions to Dismiss whichrespondents opposed.

In an Order dated 12 March 1996, the Motions to Dismiss filed by all thedefendants were denied.14 The Motions for Reconsideration filed bypetitioners15and BPI,16which respondents opposed,17were also denied in anOrder dated 24 May 1996.18

On 6 June 1996, BPI filed its Answer with Compulsory Counterclaim andCross-claim19 to which respondents filed their Reply and Answer toCounterclaim.20 Respondents also filed a Motion21 to Serve SupplementalAllegation against BPI and petitioner Chito Rosete which the trial courtgranted in an order dated 28 July 1996.22

On 7 June 1996, petitioners manifested that on 5 June 1996, they filed aPetition23 for Certiorariand Prohibition in the Court of Appeals, docketed asCA-G.R. SP No. 40837, challenging the trial court's Orders dated 12 March1996 and 24 May 1996 that denied their Motions to Dismiss andReconsideration, respectively.24They likewise informed the trial court that on6 June 1996, they filed an Ex-Parte Motion25to Admit Answers Ex Abudanti

Cautela.26

!rbl" #$r% l l l$brrOn 7 August 1996, petitioner Chito Rosete filed a motion asking that the ordergranting the Motion to Serve Supplemental Allegation against BPI and him bereconsidered and set aside, and that respondents be ordered to reduce theirsupplemental allegations in the form and manner required by the Rules ofCourt.27Same was denied in an order dated 12 August 1996.28This denialwas appealed to the Court of Appeals on 26 August 1996, which wasdocketed as CA-G.R. SP No. 41821.29

Petitioner Chito Rosete filed his Supplemental Answer (Ex Abudanti Cautela)on 9 September 1996.30

On 28 May 1997, respondents filed a Notice to Take Deposition Upon OralExamination giving notice that on June 18 and 20, 1997 at 9:00 a.m., they willcause the deposition of petitioners Oscar Mapalo and Chito Rosete.31

On 13 June 1997, petitioners filed an Urgent Ex-Parte Motion and Objectionto Take Deposition Upon Oral Examination.32They argued that the depositionmay not be taken without leave of court as no answer has yet been servedand the issues have not yet been joined since their Answer was filed exabudanti cautela, pending resolution of the Petition for Certiorarichallenging


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the orders dated 12 March 1996 and 24 May 1996 that denied their Motions toDismiss and for Reconsideration, respectively. This is in addition to the factthat they challenged via a Petition for Certioraribefore the Court of Appealsthe lower court's Orders dated 23 July 1996 and 12 August 1996 which,respectively, granted respondents' Motion to Serve Supplemental AllegationAgainst Defendants BPI and Chito Rosete, and for the latter to plead thereto,and denied Chito Rosete's Motion for Reconsideration of the order dated 23July 1996. Moreover, they contend that since there are two criminal cases

pending before the City Prosecutors of Mandaluyong City and Pasig Cityinvolving the same set of facts as in the present case wherein respondentJuliano Lim is the private complainant and petitioners are the respondents, topermit the taking of the deposition would be violative of their right against self-incrimination because by means of the oral deposition, respondents wouldseek to establish the allegations of fact in the complaint which are also theallegations of fact in the complaint-affidavits in the said criminal cases.

Respondents filed their Comment on the Objection to Deposition Taking33towhich petitioners filed their Reply.34

In an Order dated 22 July 1997, the lower court denied petitioners' motion andobjection to take deposition upon oral examination, and scheduled the taking

thereof.35

On 7 August 1997, petitioners filed a Motion for Reconsideration.36

They filed a Supplemental Motion for Reconsideration on 11 August 1997.37

On 13 August 1997, petitioners filed an Urgent Ex-parte Motion to Cancel orSuspend the Taking of the Deposition Upon Oral Examination.38

In an Order dated 27 August 1997, the lower court denied petitioners' Motionfor Reconsideration and Supplemental Motion for Reconsideration, andscheduled the taking of the Deposition Upon Oral Examination.39

On 22 September1997, respondents filed an Omnibus Motion: (1) To StrikeOut Answer of Defendants Mapalo and Chito Rosete; (2) to DeclareDefendants Mapalo and Chito Rosete In Default; and (3) For Reception ofPlaintiffs' Evidence Ex-parte,40which petitioners opposed.41

On 29 September 1997, petitioners filed with the Court of Appeals a Petitionfor Certiorariand Prohibition (CA-G.R. SP No. 45400) assailing the Orders ofthe lower court dated 22 July 1997 and 27 August 1997.42

In an Order dated 29 October 1997, the lower court: (1) ordered the strikingout from the record of the Answer ex abudanti cautela filed by petitionersMapalo and Chito Rosete for their continued unjustified refusal to be sworn

pursuant to Rule 29 of the 1997 Rules of Civil Procedure; (2) declareddefendants Mapalo and Chito Rosete in default; and I allowed plaintiffs topresent their evidence ex-parte as regards the latter.43On 25 November 1997,petitioners filed an Urgent Ex-parte Omnibus Motion (1) For Reconsideration;(2) To Lift Order of Default; and (3) To Hold In Abeyance Presentation ofPlaintiffs' Evidence Ex-parte.44 The day after, petitioners filed an AmendedOmnibus Motion.45

On 28 November 1997, respondents filed a Motion to Set Case for Ex-partePresentation of Evidence46which the lower court set for 11 December 1997.47

In an Order dated 11 December 1997, the lower court denied petitioners'urgent ex-parte omnibus motion.48On even date, the ex-parte presentation ofevidence against petitioners Mapalo and Chito Rosete was terminated.49

On 10 February 1998, petitioners filed a Petition50 for Certiorari andProhibition before the Court of Appeals (CA-G.R. SP No. 46774) questioningthe lower court's Orders dated 29 October 1997 and 11 December 1997.51

On 24 August 1998, the Court of Appeals dismissed the Petition for Certiorariand Prohibition, and upheld the Orders of the lower court dated 22 July 1997

and 27 August 1997 (CA-G.R. SP No. 45400).52

The Motion forReconsideration53 which was opposed54 by respondents was denied on 19October 1998.55

Petitioners assail the ruling of the Court of Appeals via a Petition for Reviewon Certiorari. They anchor their petition on the following grounds:

I.

THE TRIAL COURT ERRED AND ACTED IN GRAVE ABUSE OFDISCRETION AMOUNTING TO LACK OF OR IN EXCESS OFJURISDICTION IN DECLARING IN ITS ORDER DATED AUGUST 27, 1997THAT THE CONSTITUTIONAL RIGHT AGAINST SELF INCRIMINATION OFOSCAR MAPALO AND CHITO ROSETE WOULD NOT BE VIOLATED BYTHE TAKING OF THEIR DEPOSITION IN THE CIVIL CASE FILED IN THELOWER COURT ALTHOUGH THEY ARE ALSO RESPONDENTS ORDEFENDANTS IN THE AFOREMENTIONED CRIMINAL CASES FILED BYHEREIN PRIVATE RESPONDENT JULIANO LIM INVOLVING THE SAMEOR IDENTICAL SET OF FACTS; AND

II.


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THE TRIAL COURT ERRED AND ACTED IN GRAVE ABUSE OFDISCRETION AMOUNTING TO LACK OF OR IN EXCESS OFJURISDICTION IN DECLARING IN ITS ORDER DATED JULY 22, 1997 THAT(A) THE NOTICE TO TAKE DEPOSITION UPON ORAL EXAMINATIONNEED NOT BE WITH LEAVE OF COURT BECAUSE AN ANSWER EXABUDANTE CAUTELA HAS BEEN FILED; AND (B) JOINDER OF ISSUES ISNOT REQUIRED IN ORDER THAT THE SECTION 1, RULE 2356 OF THERULES OF CIVIL PROCEDURE MAY BE AVAILED OF.

Petitioners argue that the Court of Appeals gravely erred when it found thatthe trial court did not abuse its discretion when it refused to recognizepetitioners Oscar Mapalo and Chito Rosete's constitutional right against self-incrimination when, through its Orders dated 22 July 1997 and 27 August1997, it allowed and scheduled the taking of their depositions by way of oralexamination. They explain they refuse to give their depositions due to thependency of two criminal cases against them, namely, Batasan PambansaBlg. 22 and Estafa, because their answers would expose them to criminalaction or liability since they would be furnishing evidence against themselvesin said criminal cases. They allege there can be no doubt that the questions tobe asked during the taking of the deposition would revolve around theallegations in the complaint in the civil case which are identical to the

allegations in the complaint-affidavits in the two criminal cases, thus, there isa tendency to incriminate both Oscar Mapalo and Chito Rosete. Moreover,they explain that while an ordinary witness may be compelled to take thewitness stand and claim the privilege against self-incrimination as eachquestion requiring an incriminating answer is shot at him, an accused mayaltogether refuse to answer any and all questions because the right againstself-incrimination includes the right to refuse to testify.

In short, petitioners Mapalo and Chito Rosete refuse to have their depositionstaken in the civil case because they allegedly would be incriminatingthemselves in the criminal cases because the testimony that would be elicitedfrom them may be used in the criminal cases. As defendants in the civil case,it is their claim that to allow their depositions to be taken would violate theirconstitutional right against self-incrimination because said right includes theright to refuse to take the witness stand.

In order to resolve this issue, we must determine the extent of a person's rightagainst self-incrimination. A person's right against self-incrimination isenshrined in Section 17, Article III of the 1987 Constitution which reads: "Noperson shall be compelled to be a witness against himself."

The right against self-incrimination is accorded to every person who givesevidence, whether voluntary or under compulsion of subpoena, in any civil,criminal or administrative proceeding. The right is not to be compelled to be awitness against himself. It secures to a witness, whether he be a party or not,the right to refuse to answer any particular incriminatory question, i.e., one theanswer to which has a tendency to incriminate him for some crime. However,the right can be claimed only when the specific question, incriminatory incharacter, is actually put to the witness. It cannot be claimed at any other

time. It does not give a witness the right to disregard a subpoena, decline toappear before the court at the time appointed, or to refuse to testify altogether.The witness receiving a subpoena must obey it, appear as required, take thestand, be sworn and answer questions. It is only when a particular question isaddressed to which may incriminate himself for some offense that he mayrefuse to answer on the strength of the constitutional guaranty.57

As to an accused in a criminal case, it is settled that he can refuse outright totake the stand as a witness. In People v. Ayson,58this Court clarified the rightsof an accused in the matter of giving testimony or refusing to do so. We said:

An accused "occupies a different tier of protection from an ordinary witness."Under the Rules of Court, in all criminal prosecutions the defendant is entitled

among others'1) to be exempt from being a witness against himself, and

2) to testify as witness in his own behalf; but if he offers himself as a witnesshe may be cross-examined as any other witness; however, his neglect orrefusal to be a witness shall not in any manner prejudice or be used againsthim.

The right of the defendant in a criminal case "to be exempt from being awitness against himself" signifies that he cannot be compelled to testify orproduce evidence in the criminal case in which he is the accused, or one ofthe accused. He cannot be compelled to do so even by subpoena or otherprocess or order of the Court. He cannot be required to be a witness either forthe prosecution, or for a co-accused, or even for himself. In other words -unlike an ordinary witness (or a party in a civil action) who may be compelledto testify by subpoena, having only the right to refuse to answer a particularincriminatory question at the time it is put to him - the defendant in a criminalaction can refuse to testify altogether. He can refuse to take the witnessstand, be sworn, answer any question. X x x (Underscoring supplied.)


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It is clear, therefore, that only an accused in a criminal case can refuse to takethe witness stand. The right to refuse to take the stand does not generallyapply to parties in administrative cases or proceedings. The parties theretocan only refuse to answer if incriminating questions are propounded. ThisCourt applied the exception - a party who is not an accused in a criminal caseis allowed not to take the witness stand - in administrative cases/proceedingsthat partook of the nature of a criminal proceeding or analogous to a criminalproceeding.59It is likewise the opinion of the Court that said exception applies

to parties in civil actions which are criminal in nature. As long as the suit iscriminal in nature, the party thereto can altogether decline to take the witnessstand. It is not the character of the suit involved but the nature of theproceedings that controls.60

In the Ayson case, it is evident that the Court treats a party in a civil case asan ordinary witness, who can invoke the right against self-incrimination onlywhen the incriminating question is propounded. Thus, for a party in a civilcase to possess the right to refuse to take the witness stand, the civil casemust also partake of the nature of a criminal proceeding.

In the present controversy, the case is civil it being a suit for Annulment,Specific Performance with Damages. In order for petitioners to exercise the

right to refuse to take the witness stand and to give their depositions, the casemust partake of the nature of a criminal proceeding. The case on handcertainly cannot be categorized as such. The fact that there are two criminalcases pending which are allegedly based on the same set of facts as that ofthe civil case will not give them the right to refuse to take the witness standand to give their depositions. They are not facing criminal charges in the civilcase. Like an ordinary witness, they can invoke the right against self-incrimination only when the incriminating question is actually asked of them.Only if and when incriminating questions are thrown their way can they refuseto answer on the ground of their right against self-incrimination.

On the second assigned error, petitioners contend that the taking of their oraldepositions should not be allowed without leave of court as no answer has yetbeen served and the issues have not yet been joined because their answerswere filed ex abudanti cautela pending final resolution of the petition forcertiorarichallenging the trial court's Orders dated 12 March 1996 and 24 May1996 that denied their motions to dismiss and for reconsideration,respectively.

Section 1 of Rule 2461of the Revised Rules of Court reads:

Section 1. Depositions pending action, when may be taken. - By leave of courtafter jurisdiction has been obtained over any defendant or over property whichis the subject of the action, or without such leave after an answer has beenserved, the testimony of any person, whether a party or not, may be taken, atthe instance of any party, by deposition upon oral examination or writteninterrogatories. The attendance of witnesses may be compelled by the use ofa subpoena as provided in Rule 23. Depositions shall be taken only inaccordance with these rules. The deposition of a person confined in prison

may be taken only by leave of court on such terms as the court prescribes.

From the quoted section, it is evident that once an answer has been served,the testimony of a person, whether a party or not, may be taken by depositionupon oral examination or written interrogatories. In the case before us,petitioners contend they have not yet served an answer to respondentsbecause the answers that they have filed with the trial court were made exabudanti cautela. In other words, they do not consider the answers they filedin court and served on respondents as answers contemplated by the Rules ofCourt on the ground that same were filed ex abudanti cautela.

We find petitioners' contention to be untenable. Ex abudanti cautela means"out of abundant caution" or "to be on the safe side."62An answer ex abudanti

cautela does not make their answer less of an answer. A cursory look at theanswers filed by petitioners shows that they contain their respective defenses.An answer is a pleading in which a defending party sets forth his defenses63and the failure to file one within the time allowed herefore may cause adefending party to be declared in default.64 Thus, petitioners, knowing fullywell the effect of the non-filing of an answer, filed their answers despite thependency of their appeal with the Court of Appeals on the denial of theirmotion to dismiss.

Petitioners' argument that the issues of the case have not yet been joinedmust necessarily fail in light of our ruling that petitioners have filed theiranswers although the same were made ex abudanti cautela. Issues are joinedwhen all the parties have pleaded their respective theories and the terms ofthe dispute are plain before the court.65In the present case, the issues have,indeed, been joined when petitioners, as well as the other defendants, filedtheir answers. The respective claims and defenses of the parties have beendefined and the issues to be decided by the trial court have been laid down.

We cannot also sustain petitioners' contention that the lower court erred whenit said that the joinder of issues is not required in order that Section 1, Rule 23of the 1997 Rules of Civil Procedure may be availed of. Under said section, adeposition pending action may be availed of: (1) with leave of court when an


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answer has not yet been filed but after jurisdiction has been obtained over anydefendant or property subject of the action, or (2) without leave of court afteran answer to the complaint has been served. In the instant case, the taking ofthe deposition may be availed of even without leave of court becausepetitioners have already served their answers to the complaint.

WHEREFORE, all the foregoing considered, the instant petition is dismissedfor lack of merit.

SO ORDERED.

[G.R. No. 133119. August 17, 2000]

FINANCIAL BUILDING CORPORATION, petitioner, vs. FORBES PARKASSOCIATION, INC., respondent.

D E C I S I O N

DE LEON, JR., J.:

Before us is petition for review on certiorari of the Decision[1] datedMarch 20, 1998 of the Court of Appeals[2] in CA-GR CV No. 48194 entitledForbes Park Association, Inc. vs. Financial Building Corporation, findingFinancial Building Corporation (hereafter, Financial Building) liable fordamages in favor of Forbes Park Association, Inc. (hereafter, Forbes Park),for violating the latters deed of restrictions on the construction of buildingswithin the Forbes Park Village, Makati.

The pertinent facts are as follows:

The then Union of Soviet Socialist Republic (hereafter, USSR) was theowner of a 4,223 square meter residential lot located at No. 10, Narra Place,Forbes Park Village in Makati City. On December 2, 1985, the USSRengaged the services of Financial Building for the construction of a multi-leveloffice and staff apartment building at the said lot, which would be used by theTrade Representative of the USSR.[3] Due to the USSRs representation thatit would be building a residence for its Trade Representative, Forbes Parkauthorized its construction and work began shortly thereafter.

On June 30, 1986, Forbes Park reminded the USSR of existingregulations[4] authorizing only the construction of a single-family residentialbuilding in each lot within the village. It also elicited a reassurance from theUSSR that such restriction has been complied with.[5] Promptly, the USSRgave its assurance that it has been complying with all regulations of ForbesPark.[6] Despite this, Financial Building submitted to the Makati CityGovernment a second building plan for the construction of a multi-levelapartment building, which was different from the first plan for the construction

of a residential building submitted to Forbes Park.

Forbes Park discovered the second plan and subsequent ocularinspection of the USSRs subject lot confirmed the violation of the deed ofrestrictions. Thus, it enjoined further construction work. On March 27, 1987,Forbes Park suspended all permits of entry for the personnel and materials ofFinancial Building in the said construction site. The parties attempted to meetto settle their differences but it did not push through.

Instead, on April 9, 1987, Financial Building filed in the Regional TrialCourt of Makati, Metro Manila, a Complaint[7] for Injunction and Damageswith a prayer for Preliminary Injunction against Forbes Park docketed as CivilCase No. 16540. The latter, in turn, filed a Motion to Dismiss on the groundthat Financial Building had no cause of action because it was not the realparty-in-interest.

On April 28, 1987, the trial court issued a writ of preliminary injunctionagainst Forbes Park but the Court of Appeals nullified it and dismissed thecomplaint in Civil Case No. 16540 altogether. We affirmed the said dismissalin our Resolution,[8] promulgated on April 6, 1988, in G.R. No. 79319 entitledFinancial Building Corporation, et al. vs. Forbes Park Association, et al.

After Financial Buildings case, G.R. No. 79319, was terminated withfinality, Forbes Park sought to vindicate its rights by filing on October 27, 1989with the Regional Trial Court of Makati a Complaint[9] for Damages, againstFinancial Building, docketed as Civil Case No. 89-5522, arising from theviolation of its rules and regulations. The damages claimed are in the

following amounts: (a) P3,000,000.00 as actual damages; (b) P1,000,000.00as moral damages; (c) P1,000,000.00 as exemplary damages; and (d)P1,000,000.00 as attorneys fees.[10] On September 26, 1994, the trial courtrendered its Decision[11] in Civil Case No. 89-5522 in favor of Forbes Parkand against Financial Building, the dispositive portion of which reads, to wit:

WHEREFORE, in view of the foregoing, the Court hereby renders judgmentin favor of the plaintiff and against the defendant:


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(1) Ordering the defendant to remove/demolish theillegal structures within three (3) months from thetime this judgment becomes final and executory, andin case of failure of the defendant to do so, theplaintiff is authorized to demolish/remove thestructures at the expense of the defendant;

(2) Ordering the defendant to pay damages, to wit:

(a) P3,000,000.00 as actual damages byway of demolition expenses;

(b) P1,000,000.00 as exemplary damages;

(c) P500,000.00 as attorneys fees;

(d) the costs of suit.

SO ORDERED.

Financial Building appealed the said Decision of the trial court in CivilCase No. 89-5522 by way of a petition for review on certiorari[12] entitledFinancial Building Corporation vs. Forbes Park Association, Inc. to the Courtof Appeals and docketed therein as CA-GR CV No. 48194. However, theCourt of Appeals affirmed it in its Decision[13] dated March 20, 1998, thedispositive portion of which reads:

WHEREFORE, the Decision dated September 26, 1994 of the Regional TrialCourt of Makati is AFFIRMED with the modification that the award ofexemplary damages, as well as attorneys fees, is reduced to fifty thousandpesos (P50,000.00) each.

Hence, this petition, wherein Financial Building assigns the followingerrors:

I. THE COURT OF APPEALS GRAVELY ERRED INNOT DISMISSING THE COMPLAINT FILED BYRESPONDENT FPA DESPITE THE FACT THAT ITSALLEGED CLAIMS AND CAUSES OF ACTIONTHEREIN ARE BARRED BY PRIOR JUDGMENTAND/ OR ARE DEEMED WAI VED FO R ITSFAILURE TO INTERPOSE THE SAME AS

COMPULSORY COUNTERCLAIMS IN CIVIL CASENO. 16540;

II. THE COURT OF APPEALS GRAVELY ERRED INNOT DISMISSING THE COMPLAINT FILED BYRESPONDENT FPA AGAINST PETITIONER FBCSINCE RESPONDENT FPA HAS NO CAUSE OFACTION AGAINST PETITIONER FBC;

III. THE COURT OF APPEALS GRAVELY ERRED INA W A R D I N G D A M A G E S I N FAV O R O FRESPONDENT FPA DESPITE THE FACT THAT ONTHE BASIS OF THE EVIDENCE ON RECORD,RESPONDENT FPA IS NOT ENTITLED THERETOAND PETITIONER FBC IS NOT LIABLETHEREFOR;

IV. THE COURT OF APPEALS ERRED IN ORDERINGT H E D E M O L I T I O N O F T H E I L L E G A LSTRUCTURES LOCATED AT NO. 10 NARRAPLACE, FORBES PARK, MAKATI CITY,CONSIDERING THAT THE SAME ARE LOCATEDON DIPLOMATIC PREMISES[14]

We grant the petition.

First. The instant case is barred due to Forbes Parks failure to set it upas a compulsory counterclaim in Civil Case No. 16540, the prior injunction suitinitiated by Financial Building against Forbes Park.

A compulsory counterclaim is one which arises out of or is necessarilyconnected with the transaction or occurrence that is the subject matter of theopposing partys claim.[15] If it is within the jurisdiction of the court and it doesnot require for its adjudication the presence of third parties over whom thecourt cannot acquire jurisdiction, such compulsory counterclaim is barred if itis not set up in the action filed by the opposing party.[16]

Thus, a compulsory counterclaim cannot be the subject of a separateaction but it should instead be asserted in the same suit involving the sametransaction or occurrence, which gave rise to it.[17] To determine whether acounterclaim is compulsory or not, we have devised the following tests: (1)Are the issues of fact or law raised by the claim and the counterclaim largelythe same? (2) Would res judicatabar a subsequent suit on defendants claimabsent the compulsory counterclaim rule? (3) Will substantially the same


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evidence support or refute plaintiffs claim as well as the defendantscounterclaim? and (4) Is there any logical relation between the claim and thecounterclaim? Affirmative answers to the above queries indicate the existenceof a compulsory counterclaim.[18]

Undoubtedly, the prior Civil Case No. 16540 and the instant case arosefrom the same occurrence the construction work done by Financial Buildingon the USSRs lot in Forbes Park Village. The issues of fact and law in both

cases are identical. The factual issue is whether the structures erected byFinancial Building violate Forbes Parks rules and regulations, whereas thelegal issue is whether Financial Building, as an independent contractorworking for the USSR, could be enjoined from continuing with the constructionand be held liable for damages if it is found to have violated Forbes Parksrules.

As a result of the controversy, Financial Building seized the initiative byfiling the prior injunction case, which was anchored on the contention thatForbes Parks prohibition on the construction work in the subject premiseswas improper. The instant case on the other hand was initiated by ForbesPark to compel Financial Building to remove the same structures it haserected in the same premises involved in the prior case and to claim damagesfor undertaking the said construction. Thus, the logical relation between thetwo cases is patent and it is obvious that substantially the same evidence isinvolved in the said cases.

Moreover, the two cases involve the same parties. The aggregateamount of the claims in the instant case is within the jurisdiction of theregional trial court, had it been set up as a counterclaim in Civil Case No.16540. Therefore, Forbes Parks claims in the instant case should have beenfiled as a counterclaim in Civil Case No. 16540.

Second. Since Forbes Park filed a motion to dismiss in Civil Case No.16540, its existing compulsory counterclaim at that time is now barred.

A compulsory counterclaim is auxiliary to the proceeding in the original

suit and derives its jurisdictional support therefrom.[19] A counterclaimpresupposes the existence of a claim against the party filing thecounterclaim. Hence, where there is no claim against the counterclaimant,the counterclaim is improper and it must dismissed, more so where thecomplaint is dismissed at the instance of the counterclaimant.[20] In otherwords, if the dismissal of the main action results in the dismissal of thecounterclaim already filed, it stands to reason that the filing of a motion todismiss the complaint is an implied waiver of the compulsory counterclaim

because the grant of the motion ultimately results in the dismissal of thecounterclaim.

Thus, the filing of a motion to dismiss and the setting up of acompulsory counterclaim are incompatible remedies. In the event that adefending party has a ground for dismissal and a compulsory counterclaim atthe same time, he must choose only one remedy. If he decides to file amotion to dismiss, he will lose his compulsory counterclaim. But if he opts to

set up his compulsory counterclaim, he may still plead his ground fordismissal as an affirmative defense in his answer.[21] The latter option isobviously more favorable to the defendant although such fact was lost onForbes Park.

The ground for dismissal invoked by Forbes Park in Civil Case No.16540 was lack of cause of action. There was no need to plead such groundin a motion to dismiss or in the answer since the same was not deemedwaived if it was not pleaded.[22] Nonetheless, Forbes Park still filed a motionto dismiss and thus exercised bad judgment in its choice of remedies. Thus, ithas no one to blame but itself for the consequent loss of its counterclaim as aresult of such choice.

Inasmuch as the action for damages filed by Forbes Park should be asit is hereby dismissed for being barred by the prior judgment in G.R. No.79319 (supra) and/or deemed waived by Forbes Park to interpose the sameunder the rule on compulsory counterclaims, there is no need to discuss theother issues raised by the herein petitioner.

WHEREFORE, the instant petition is hereby GRANTED and theDecision dated March 20, 1998 of the Court of Appeals in CA-G.R. CV No.48194 is hereby REVERSED and SET ASIDE.

Costs against respondent Forbes Park Association, Inc. .

SO ORDERED.

[G.R. NO. 166393 : June 18, 2009]

CRISTINA F. REILLO, LEONOR F. PUSO, ADELIA F. ROCAMORA,SOFRONIO S.J. FERNANDO, EFREN S.J. FERNANDO, ZOSIMO S.J.

FERNANDO, JR., and MA. TERESA F. PION,Petitioners, v.GALICANOE.S. SAN JOSE, represented by his Attorneys-in-Fact, ANNALISA S.J.

RUIZ and RODELIO S. SAN JOSE, VICTORIA S.J. REDONGO, CATALINA


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S.J. DEL ROSARIO and MARIBETH S.J. CORTEZ, collectively known asthe HEIRS OF QUITERIO SAN JOSE and ANTONINA ESPIRITU SANTO,

Respondents.

D E C I S I O N

PERALTA, J.:

Assailed in this Petition for Review on Certiorariis the Decision1dated August31, 2004 of the Court of Appeals (CA) in CA-G.R. CV No. 69261 whichaffirmed the Order dated May 9, 2000 of the Regional Trial Court (RTC) ofMorong, Rizal, Branch 78, granting the motion for judgment on the pleadingsand the motion to dismiss counter petition for partition filed by respondents inCivil Case No. 99-1148-M. Also questioned is the CA Resolution2 datedDecember 14, 2004 denying petitioners' motion for reconsideration.

Spouses Quiterio San Jose (Quiterio) and Antonina Espiritu Santo (Antonina)were the original registered owners of a parcel of land located in E. RodriguezSr. Avenue, Teresa, Rizal covered by Transfer Certificate of Title (TCT) No.458396 of the Register of Deeds of Rizal. The said parcel of land is nowregistered in the name of Ma. Teresa F. Pion (Teresa) under TCT No.M-94400.

Quiterio and Antonina had five children, namely, Virginia, Virgilio, Galicano,Victoria and Catalina. Antonina died on July 1, 1970, while Quiterio died onOctober 19, 1976. Virginia and Virgilio are also now deceased. Virginia wassurvived by her husband Zosimo Fernando, Sr. (Zosimo Sr.) and their sevenchildren, while Virgilio was survived by his wife Julita Gonzales and children,among whom is Maribeth S.J. Cortez (Maribeth).

On October 26, 1999, Galicano, represented by his children and attorneys-in-fact, Annalisa S.J. Ruiz and Rodegelio San Jose, Victoria, Catalina, and

Maribeth (respondents) filed with the RTC a Complaint3for annulment of title,annulment of deed of extra-judicial settlement, partition and damages againstZosimo Sr. and his children Cristina F. Reillo, Leonor F. Puso, Adelia F.Rocamora, Sofronio S.J. Fernando, Efren S.J. Fernando, Zosimo S.J.Fernando, Jr. and Ma. Teresa (petitioners) and the Register of Deeds ofMorong, Rizal. The complaint alleged among other things:

6. Under date of January 23, 1998, defendants FERNANDO et al, without theknowledge and consent of all the other surviving heirs of the deceasedspouses QUITERIO SAN JOSE and ANTONINA ESPIRITU SANTO, includingherein plaintiffs, executed a Deed of Extrajudicial Settlement of Estate AmongHeirs with Waiver of Rights making it appear therein that they are the"legitimate descendants and sole heirs of QUITERIO SAN JOSE andANTONINA ESPIRITU SANTO"; and adjudicating among themselves, thesubject parcel of land.

6.1 In the same document, defendants ZOSIMO SR., CRISTINA, LEONOR,ADELIA, SOFRONIO, EFREN and ZOSIMO JR., waived all their rights,participation and interests over the subject parcel of land in favor of their co-defendant MA. TERESA F. PION (a.k.a MA. TERESA S.J. FERNANDO).

x x x

7. On the strength of the said falsified Deed of Extrajudicial Settlement ofEstate, defendant MA. TERESA PION (a.k.a MA. TERESA S.J.FERNANDO) succeeded in causing the cancellation of TCT No. 458396 in thename of SPS. QUITERIO SAN JOSE and ANTONINA ESPIRITU SANTO and

the issuance of a new Transfer Certificate of Title in her name only, to theextreme prejudice of all the other heirs of the deceased SPS. QUITERIO SANJOSE and ANTONINA ESPIRITU SANTO, specifically, the herein plaintiffswho were deprived of their lawful participation over the subject parcel of land.

7.1 Thus, on July 6, 1999, Transfer Certificate of Title No. M-94400 wasissued in the name of defendant MA. TERESA S.J. FERNANDO.

x x x

8. As a result, the herein plaintiffs and the other surviving heirs of thedeceased spouses QUITERIO SAN JOSE and ANTONINA ESPIRITU

SANTO, who are legally entitled to inherit from the latter's respective estates,in accordance with the laws of intestate succession, have been duly deprivedof their respective rights, interests and participation over the subject parcel ofland.

8.1 Thus, there is sufficient ground to annul the subject Deed of ExtrajudicialSettlement of Estate Among Heirs with Waiver of Rights dated January 23,


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1998, and all other documents issued on the strength thereof, particularlyTransfer Certificate of Title No. M-94400.4

It was also alleged that respondents filed a complaint before the LupongTagapamayapa of their Barangay which issued the required certification to fileaction for failure of the parties to settle the matter amicably.

Petitioners filed their Answer with Counter-Petition and with CompulsoryCounterclaim5 denying that the Deed of Extrajudicial Settlement of EstateAmong Heirs with Waiver of Rights which was the basis of the issuance ofTCT No. M-94400, was falsified and that the settlement was made andimplemented in accordance with law. They admitted that the deceasedspouses Quiterio and Antonina had five children; that the subject property wasnot the only property of spouses Quiterio and Antonina and submitted in theircounter-petition for partition the list of the other 12 parcels of land of thedeceased spouses Quiterio and Antonina that petitioners alleged are inrespondents' possession and control.

On January 18, 2000, respondents filed a Motion for Judgment on thePleadings6alleging that: (1) the denials made by petitioners in their answer

were in the form of negative pregnant; (2) petitioners failed to state the basisthat the questioned document was not falsified; (3) they failed to specificallydeny the allegations in the complaint that petitioners committedmisrepresentations by stating that they are the sole heirs and legitimatedescendants of Quiterio and Antonina; and (4) by making reference to theirallegations in their counter-petition for partition to support their denials,petitioners impliedly admitted that they are not the sole heirs of Quiterio andAntonina.

Respondents filed a Reply to Answer with Compulsory Counterclaim7with amotion to dismiss the counter-petition for partition on the ground thatpetitioners failed to pay the required docket fees for their counter-petition forpartition. Petitioners filed their Rejoinder8 without tackling the issue of non-

payment of docket fees.

On February 4, 2000, petitioners filed their Comment9to respondents' motionfor judgment on the pleading and prayed that the instant action be decided onthe basis of the pleadings with the exception of respondents' unverified Reply.Petitioners also filed an Opposition to the motion to dismiss the counter-petition for partition.

On May 9, 2000, the RTC rendered its Order,10 the dispositive portion ofwhich reads:

1. The Extrajudicial Settlement of Estate Among Heirs with Waiver of Rights,dated January 23, 1998 and Transfer Certificate of Title No. M-94400 in thename of Ma. Teresa S.J. Fernando are declared null and void;

2. The Register of Deeds of Rizal, Morong Branch, is directed to cancel TCTNo. 94400; andcralawlibrary

3. The Heirs of Quiterio San Jose and Antonina Espiritu Santo is (sic) directedto partition the subject parcel of land covered by TCT No. M-458396 inaccordance with the law of intestate succession.11

SO ORDERED.

The RTC found that, based on the allegations contained in the pleadings filedby the parties, petitioners misrepresented themselves when they alleged inthe Deed of Extrajudicial Settlement of Estate Among Heirs with Waiver of

Rights that they are the sole heirs of the deceased spouses Quiterio andAntonina; that petitioners prayed for a counter-petition for partition involvingseveral parcels of land left by the deceased spouses Quiterio and Antoninawhich bolstered respondents' claim that petitioners falsified the ExtrajudicialSettlement which became the basis for the issuance of TCT No. M-94400 inMa. Teresa's name; thus, a ground to annul the Deed of ExtrajudicialSettlement and the title.&'(r)bl*+,-r.(l l(/l-br(r

The RTC did not consider as filed petitioners' Counter-Petition for Partitionsince they did not pay the corresponding docket fees.

Petitioners filed their Motion for Reconsideration, which the RTC denied in anOrder12dated August 29, 2000.

Dissatisfied, petitioners filed an appeal with the CA. After the parties filed theirrespective briefs, the case was submitted for decision.

On August 31, 2004, the CA rendered its assailed Decision affirming the May9, 2000 Order of the RTC.


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The CA found that, while the subject matter of respondents' complaint was thenullity of the Deed of Extrajudicial Settlement of Estate among Heirs withWaiver of Rights that resulted in the issuance of TCT No. M-94400 in Ma.Teresa's name, petitioners included in their Answer a Counter-Petition forPartition involving 12 other parcels of land of spouses Quiterio and Antoninawhich was in the nature of a permissive counterclaim; that petitioners, beingthe plaintiffs in the counter-petition for partition, must pay the docket feesotherwise the court will not acquire jurisdiction over the case. The CA ruled

that petitioners cannot pass the blame to the RTC for their omission to pay thedocket fees.

The CA affirmed the RTC's judgment on the pleadings since petitionersadmitted that the deceased spouses Quiterio and Antonina had five childrenwhich included herein plaintiffs; thus, petitioners misrepresented themselveswhen they stated in the Deed of Extrajudicial Settlement that they are thelegitimate descendants and sole heirs of the deceased spouses Quiterio andAntonina; that the deed is null and void on such ground since respondentswere deprived of their rightful share in the subject property and petitionerscannot transfer the property in favor of Ma. Teresa without respondents'consent; that TCT No. M-94400 must be cancelled for lack of basis. The CAaffirmed the RTC's Order of partition of the subject property in accordance

with the rules on intestate succession in the absence of a will.

Petitioners filed the instant Petition for Review on Certiorari raising thefollowing assignment of errors, to wit:

THE COURT OF APPEALS ERRED IN NOT GIVING DUE COURSE TO THEAPPEAL OF THE DEFENDANTS (HEREIN PETITIONERS) AND INEVENTUALLY UPHOLDING THE DECISION OF THE COURT OF ORIGIN,CONSIDERING THAT SUCH RULING WILL RESULT TO MULTIPLICITY OFSUITS BETWEEN THE SAME PARTIES AND IN VIOLATION OF THECONSTITUTIONAL GUARANTY OF DUE PROCESS OF LAW & PROPERTYAND PROPERTY RIGHTS.

THE COURT OF APPEALS ERRED IN NOT VACATING THE ORDER OFTHE TRIAL COURT IN PARTITIONING THE ESTATE WITHOUTPUBLICATION AS REQUIRED BY RULE 74 AND 76 OF THE 1997 RULESOF CIVIL PROCEDURE.13

Petitioners contend that in their Comment to respondents' motion for judgmenton the pleadings, they stated that they will not oppose the same provided that

their Answer with Counter-Petition for Partition and Rejoinder will be takeninto consideration in deciding the case; however, the RTC decided the caseon the basis alone of respondents' complaint; that the Answer stated that thedeed was not a falsified document and was made and implemented inaccordance with law, thus, it was sufficient enough to tender an issue and wasvery far from admitting the material allegations of respondents' complaint.

Petitioners also fault the RTC for disregarding their claim for partition of theother parcels of land owned by the deceased spouses Quiterio and Antoninafor their failure to pay the court docket fees when the RTC could have simplydirected petitioners to pay the same; and that this error if not corrected willresult to multiplicity of suits.

Petitioners argue that the RTC erred in ordering the partition of the subjectproperty as it violates the basic law on intestate succession that the heirsshould be named and qualified through a formal petition for intestatesuccession whereby blood relationship should be established first by theclaiming heirs before they shall be entitled to receive from the estate of thedeceased; that the order of partition was rendered without jurisdiction for lackof publication as required under Rules 74 and 76 of the Rules of Civil

Procedure for testate or intestate succession.

We find no merit in the petition.

The CA committed no reversible error in affirming the judgment on thepleadings rendered by the RTC.

Section 1, Rule 34 of the Rules of Court, states:

SECTION 1. Judgment on the pleadings. - Where an answer fails to tender anissue, or otherwise admits the material allegations of the adverse party'spleading, the court may, on motion of that party, direct judgment on such

pleading. x x x.

Where a motion for judgment on the pleadings is filed, the essential questionis whether there are issues generated by the pleadings. In a proper case forjudgment on the pleadings, there is no ostensible issue at all because of thefailure of the defending party's answer to raise an issue.14The answer wouldfail to tender an issue, of course, if it does not deny the material allegations inthe complaint or admits said material allegations of the adverse party's


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pleadings by confessing the truthfulness thereof and/or omitting to deal withthem at all.15

In this case, respondents' principal action was for the annulment of the Deedof Extrajudicial Settlement of Estate Among Heirs with Waiver of Rightsexecuted by petitioners and annulment of title on the ground that petitionersstated in the said Deed that they are the legitimate descendants and soleheirs of the spouses Quiterio and Antonina. Although petitioners denied intheir Answer that the Deed was falsified, they, however, admitted respondents'allegation that spouses Quiterio and Antonina had 5 children, thus, supportingrespondents' claim that petitioners are not the sole heirs of the deceasedspouses. Petitioners' denial/admission in his Answer to the complaint shouldbe considered in its entirety and not truncated parts. Considering thatpetitioners already admitted that respondents Galicano, Victoria, Catalina andMaribeth are the children and grandchild, respectively, of the spouses Quiterioand Antonina, who were the original registered owners of the subject property,and thus excluding respondents from the deed of settlement of the subjectproperty, there is no more genuine issue between the parties generated bythe pleadings, thus, the RTC committed no reversible error in rendering thejudgment on the pleadings.

A deed of extrajudicial partition executed without including some of the heirs,who had no knowledge of and consent to the same, is fraudulent and vicious.16The deed of settlement made by petitioners was invalid because it excludedrespondents who were entitled to equal shares in the subject property. Underthe rule, no extrajudicial settlement shall be binding upon any person who hasnot participated therein or had no notice thereof.17Thus, the RTC correctlyannulled the Deed of Extrajudicial Settlement of Estate Among Heirs withWaiver of Rights dated January 23, 1998 and TCT No. M-94400 in the nameof Ma. Teresa S.J. Fernando issued pursuant to such deed.

Petitioners' claim that had there been a trial, they could have presentedtestamentary and documentary evidence that the subject land is the

inheritance of their deceased mother from her deceased parents, deservesscant consideration. A perusal of petitioners' Answer, as well as theirRejoinder, never raised such a defense. In fact, nowhere in the Deed ofExtrajudicial Settlement Among Heirs with Waiver of Rights executed bypetitioners was there a statement that the subject property was inherited bypetitioners' mother Virginia from her deceased parents Quiterio and Antonina.Notably, petitioners never opposed respondents' motion for judgment on thepleadings.

We also find no merit in petitioners' contention that the Counter-Petition forPartition in their Answer was in the nature of a compulsory counterclaim whichdoes not require the payment of docket fees.

A counterclaim is any claim which a defending party may have against anopposing party.18It may either be permissive or compulsory. It is permissive ifit does not arise out of or is not necessarily connected with the subject matterof the opposing party's claim.19A permissive counterclaim is essentially anindependent claim that may be filed separately in another case.

A counterclaim is compulsory when its object arises out of or is necessarilyconnected with the transaction or occurrence constituting the subject matter ofthe opposing party's claim and does not require for its adjudication thepresence of third parties of whom the court cannot acquire jurisdiction. 20Unlike permissive counterclaims, compulsory counterclaims should be set upin the same action; otherwise, they would be barred forever.

Respondents' action was for the annulment of the Deed of ExtrajudicialSettlement, title and partition of the property subject of the Deed. On the otherhand, in the Counter-Petition filed by petitioners in their Answer to

respondents' complaint, they were asking for the partition and accounting ofthe other 12 parcels of land of the deceased spouses Quiterio and Antonina,which are entirely different from the subject matter of the respondents' action.Petitioners' claim does not arise out of or is necessarily connected with theaction for the Annulment of the Deed of Extrajudicial Settlement of theproperty covered by TCT No. 458396. Thus, payment of docket fees isnecessary before the RTC could acquire jurisdiction over petitioners' petitionfor partition.&'(r)bl*+,-r.(l l(/l-br(r

Petitioners, however, argue that the RTC could have simply issued a directiveordering them to pay the docket fees, for its non-payment should not result inthe automatic dismissal of the case.

We find apropos the disquisition of the CA on this matter, thus:

The rule regarding the payment of docket fees upon the filing of the initiatorypleading is not without exception. It has been held that if the filing of theinitiatory pleading is not accompanied by payment of docket fees, the courtmay allow payment of the fee within reasonable time but in no case beyondthe applicable prescriptive or reglementary period.


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It is apparent from the arguments of the defendants-appellants that they areblaming the trial court for their omission to pay the docket fees. It is, however,our opinion that the defendants-appellants cannot pass on to the trial court theperformance of a positive duty imposed upon them by the law. It should benoted that their omission to file the docket fees was raised as one of thegrounds to dismiss the counter petition for partition. The defendants-appellants opposed the said motion without, however, offering an answer tothe said ground raised by the plaintiffs-appellees. In fact, during the period the

motion was being heard by the trial court, the defendants'appellants neverpaid the docket fees for their petition so that it could have at least brought tothe attention of the trial court their payment of the docket fees althoughbelatedly done. They did not even ask the trial court for time within which topay the docket fees for their petition. When the trial court ruled to dismiss thepetition of the defendants-appellants, the latter did not, in their motion forreconsideration, ask the trial court to reconsider the dismissal of their petitionby paying the required docket fees, neither did they ask for time within whichto pay their docket fees. In other words, the trial court could have issued anorder allowing the defendants-appellants a period to pay the docket fees fortheir petition if the defendants-appellants made such manifestation. What isapparent from the factual circumstances of the case is that the defendants-appellants have been neglectful in complying with this positive duty imposed

upon them by law as plaintiffs of the counter petition for partition. Because oftheir omission to comply with their duty, no grave error was committed by thetrial court in dismissing the defendants-appellants' counter petition forpartition.21

Petitioners argue that with the dismissal of their Counter-Petition for Partition,the partition of the other parcels of land owned by the deceased spousesQuiterio and Antonina will result to multiplicity of suits.

We are not persuaded.

Significantly, in petitioners' Answer with Counter-Petition for Partition, they

enumerated 12 other parcels of land owned by the deceased spousesQuiterio and Antonina. They alleged that some of these properties hadalready been disposed of by respondents and some are still generatingincome under the control and administration of respondents, and theseproperties should be collated back by respondents to be partitioned by all theheirs of the deceased spouses. It bears stressing that the action filed byrespondents in the RTC was an ordinary civil action for annulment of title,annulment of the deed of extrajudicial settlement and partition of a parcel ofland now covered by TCT No. M-94400; hence, the authority of the court is

limited to the property described in the pleading. The RTC cannot order thecollation and partition of the other properties which were not included in thepartition that was the subject matter of the respondents' action for annulment.Thus, a separate proceeding is indeed proper for the partition of the estate ofthe deceased spouses Quiterio and Antonina.

Finally, petitioners contend that the RTC erred when it ordered the heirs ofQuiterio and Antonina to partition the subject parcel of land covered by TCTNo. 458396 in accordance with the laws of intestate succession; that the RTCviolated the requirement of publication under Sections 1 and 2 of Rule 74 andSection 3 of Rule 76 of the Rules of Court.

We do not agree.

We find the ruling of the CA on the matter of the RTC's order of partition ofland subject of the annulled deed of extrajudicial settlement worth quoting,thus:

Considering that the subject document and the corresponding title werecanceled, the logical consequence is that the property in dispute, which wasthe subject of the extrajudicial settlement, reverted back to the estate of itsoriginal owners, the deceased spouses Quiterio and Antonina San Jose.Since, it was admitted that all the parties to the instant suit are legal heirs ofthe deceased spouses, they owned the subject property in common. It is abasic rule that any act which is intended to put an end to indivision among co-heirs or co-owners is deemed to be a partition. Therefore, there was noreversible error committed by the trial court in ordering the partition of thesubject property. We find nothing wrong with such ruling considering that thetrial court ordered the partition of the subject property in accordance with therules on intestate succession. The trial court found the property to beoriginally owned by the deceased spouses Quiterio and Antonina San Joseand, in the absence of a will left by the deceased spouses, it must bepartitioned in accordance with the rules on intestate succession.22

As the RTC nullified the Deed of Extrajudicial Settlement of Estate AmongHeirs with Waiver of Rights executed by petitioners and the title issued inaccordance therewith, the order of partition of the land subject of thesettlement in accordance with the laws on intestate succession is proper asrespondents' action filed in the RTC and respondents' prayer in theircomplaint asked for the partition of the subject property in accordance with


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intestate succession. The applicable law is Section 1, Rule 69 of the Rules ofCourt, which deals with action for partition, to wit:

SECTION 1. Complaint in action for partition of real estate. - A person havingthe right to compel the partition of real estate may do so as provided in thisRule, setting forth in his complaint the nature and extent of his title and anadequate description of the real estate of which partition is demanded andjoining as defendants all other persons interested in the property.

And, under this law, there is no requirement for publication.

WHEREFORE, the instant petition is DENIED. The Decision dated August 31,2004 and the Resolution dated December 14, 2004, of the Court of Appeals inCA-G.R. CV No. 69261, are AFFIRMED.

SO ORDERED.

BANCO DE ORO UNIVERSAL BANK,Petitioner,

- versus -

THE HON. COURT OF APPEALS and SPS. GABRIEL G.LOCSIN and MA. GERALDINE R. LOCSIN,

Respondents.G.R. No. 160354

Present:

PANGANIBAN, Chairman,SANDOVAL- GUTIERREZ,CORONA,CARPIO MORALES, andGARCIA, JJ.

Promulgated:

August 25, 2005xx - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -xx

D E C I S I O N

CARPIO MORALES, J.:

Subject of the present Petition for Review is the Court of AppealsJune 5, 2003 Decision[1] annulling and setting aside the Orders[2] of theRegional Trial Court (RTC) of Mandaluyong denying respondents spousesGabriel and Ma. Geraldine Locsins Motion to Dismiss the complaint ofpetitioner, Banco de Oro Universal Bank.

The following antecedent facts are not disputed:

On September 28, 1995, respondents Locsins entered into a TermLoan Agreement (TLA) with petitioner under which they obtained a loan of

P700,000.00 which was secured by a Real Estate Mortgage of their propertycovered by TCT No. N-138739 (1stTLA).

On February 29, 1996, the Locsins obtained a 2nd TLA frompetitioner in the amount of P800,000.00, to secure which they executed aReal Estate Mortgage over their property covered by TCT No. 67286. This2nd TLA was eventually settled on July 2, 1996, on account of which themortgage was cancelled and the title was released on July 8, 1996.

On November 6, 1996, the parties entered into a Credit LineAgreement (CLA) under which the Locsins obtained a credit line of P2.5Million, to secure which their business partners, the spouses Juanito andAnita Evidente, executed a Real Estate Mortgage of their (the Evidentes)properties covered by TCT Nos. N-166336 and N-166637. Monthly

amortization of the obligation appears to have been religiously paid untilOctober of 1997.

The Locsins having failed to comply with their obligation under theCLA, petitioner filed before the Quezon City Regional Trial Court (RTC)Executive Judge an application dated May 4, 1998 for the extra-judicialforeclosure of the mortgage which encumbered the Evidente properties underthe CLA, as well as the mortgage of the Locsin property covering TCT


14/40

N-67286 which secured the 2nd TLA. The application was granted and publicauction of these properties was scheduled, and was actually carried out onJuly 23, 1998.

The public auction was later nullified, however, on petitionersmove, the Locsin property covered by TCT No. 67286 which secured the 2ndTLA having been erroneously included. An amended application forextrajudicial foreclosure was thus filed by petitioner, this time covering the

same Evidente properties and TCT No. 138739, the property of the Locsinswhich secured the 1stTLA. Public auction of these properties was scheduledon August 26, 1998.

Two days before the scheduled public auction or on August 24,1998, the Locsins filed before the Quezon City Regional Trial Court (RTC) acomplaint against petitioner, the RTC Clerk of Court and Ex-Oficio Sheriff ofQuezon City, and Sheriff VI Marino V. Cahero, for Specific Performance, Tortand Damages with Prayer for the Issuance of a Temporary Restraining Order(TRO) and a Writ of Preliminary Injunction, docketed as Civil Case No.Q-98-35337.[3] The pertinent allegations of the Locsins complaint are asfollows:

x x x15. Defendant bank, through its

Assistant Vice-President-Combank II, Agnes C.Tuason, told plaintiffs that the loan valuation ofthe two aforementioned properties [of thespouses Evidente securing the CLA] is PHP2.5Million, and this was in fact the amount receivedby plaintiff from defendant bank . . .

16. The spouses Evidente, throughplaintiffs, paid for the monthly installments dueon the [CLA] until October, 1997, as evidencedby OR No. 167588 dated October 31, 1997

issued by defendant bank. . . .

17. The spouses Evidente wereunable to make subsequent payments and thereal estate mortgage over the Evidenteproperties was recommended for foreclosure.

x x x

19. . . . [P]laintiffs advised defendantbank that they will be settling their 1st TLA infull and shall be taking the property covered byTCT No. N-138739 out of the mortgage.

20. However, to the shock ofplaintiffs, defendant bank through its Account

Officer, Nelia Umbal, refused to release the saidproperty because the Evidente properties, themortgage of which secures . . . the CLA datedNovember 6, 1996, will be insufficient to coverthe balance of the said CLA.

21. Plaintiffs were surprised to learnthat defendant bank capriciously, recklesslyand oppressively gave a loan valuation ofonly PHP900,000.00 for each of [the] twoEvidente properties, or a total of PHP1.8Millio n. This valuat ion is unfair andunreasonable considering that the fair

market value of these properties is aroundPHP5 Million. Furthermore, no reason wasgiven by defendant bank for the sudden andunjust change in the valuation, which wasoriginally pegged by defendant at PHP2.5Million.

22. In effect, the mortgagedproperty covered by TCT No. N-138739,which secures the 1stTLA dated September28, 1995, and which has a loan valuation ofPHP700,000.00, was also made a collateralfor the CLA. Worse, the whole amount of theloan under the 1stTLA was declared due and

demandable, although plaintiffs faithfullyand regularly paid for the monthlyamortization there[of].

23. Thus, to complete, rathersuspiciously, the security for the CLA which isfor PHP2.5 Million, defendant bank furtherinformed plaintiffs that it would cost them


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PHP1.4 Million to take the property coveredby TCT No. N-138739 [which secured the firstTLA] out of the mortgage, because thedeficiency in the CLA secured by the Evidenteproperties must also be paid. This amount ispreposterous considering that at the time, theremaining balance of the 1st TLA was onlyaround PHP450,000,00. Moreover, plaintiffs

were suffering from financial difficulties becauseof the sharp decline of the pesos purchasingpower.

x x x

26. Defendant bank filed with theExecutive Judge of Quezon City, through publicdefendants herein, an Application for Extra-Judicial foreclosure of Real Estate Mortgageunder Act No, 3135, as amended, dated May 4,1998. The application sought the sale in apublic auction of the Evidente properties and

plaintiffs property covered by TCT No. 67286[which secured the second TLA and which TLAhad been settled]. . . .

x x x

31. Yet, defendant bank and publicdefendants allowed the public auction toproceed as scheduled [on July 23, 1998].

x x x

35. In the meantime, without makingany effort to cancel the effects of the public

auction held on July 23, 1998, defendant bankfiled with public defendants an AmendedApplication for Extra-Judicial Foreclosure ofReal Estate Mortgage under Act No. 3135, asamended. The amended application sought thesale in a public auction of the same Evidenteproperties and plaintiffs property covered by

TCT No. N-138739 [which secured the firstTLA].

36. Acting upon the said application,public defendants issued another notice ofSheriff Sale dated July 28, 1998 whichscheduled the public auction of theaforementioned real properties on August

26, 1998. . .

37. Plaintiffs property covered byTCT No. N-138739 is erroneously included inthe amended application and in the Notice of theSheriffs Sale. The said mortgaged propertysecures the 1stTLA dated September 28, 1995,for which plaintiffs have faithfully and regularlypaid for the monthly amortization due. On theother hand, defendant bank is foreclosing thesaid property and the two Evidente propertiesfor alleged failure to pay the monthlyinstallments due on the CLA dated November 8,

1996.x x x

38. Furthermore, defendant bankacted in bad faith and in willful breach of itscontractual obl igat ions to plaint i f fs inunderstating the loan valuation of the twoEvidente properties, and in effect declaringthe property covered by TCT No. N-133739[which secured the first TLA] as additionalcollateral for the said CLA. (Emphasis andunderscoring supplied).

The plaintiffs Locsins thus prayed that:

A. Upon filing of this complaint, atemporary restraining order (TRO) beimmediately issued ex-parte, enjoiningdefendants, their agents and/or representatives


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from enforcing the Notice of Sheriffs Sale datedJuly 28, 1998, and from proceeding with thescheduled public auction of the propertiesincluded therein, particularly plaintiffs realproperty covered by TCT No. N-138739, onAugust 26, 1998, or on any date thereafter, untilfurther orders from the Honorable Court.

B. After appropriate proceedings, awrit of preliminary injunction be issued, underthe same tenor as above, and upon payment ofsuch bond as may be fixed by the HonorableCourt.

C. After trial on the merits,judgment be rendered:

1. On the FirstCause of Action, orderingdefendant bank to faithfullycomply with its obligations

under the 1

st

TLA and theCLA, revert the loanvaluation of the twoE v i d e n t e p r o p e r t i e scovered by TCTs Nos.N-166336 and 166337 toPHP2.5 Million, and allowp l a i n t i f f s to t ak e i t sproperty covered by TCTNo. N-138739 out of themortgage by paying thebalance thereon, minusinterests and penaltiesaccruing from February

1998;

2. On the Firstand Second Causes ofAction, ordering defendantbank to pay plaintiffsPHP500,000.00 in actualdamages;

3. On the ThirdCause of Action, orderingdefendant bank to payplaintiffs PHP1 Million inactual damages;

4. On the

Fourth Cause of Action,ordering defendant bank top a y p l a i n t i f f sPHP500,000.00 in moraldamages;

5. On the FifthCause of Action, orderingdefendant bank to payplaintiffs PHP300,000.00 inexemplary damages;

6. On the Sixth

Cause of Action, orderingdefendant bank to [pay]plaintiffs PHP200,[000].00for attorneys fees andlitigation expenses;

7. Making theinjunction issued againstdefendants permanent;and

8. Orderingdefendants to pay costs ofsuit.

Other reliefs which are justand equitable are likewise prayed for.[4](Emphasis and underscoring in the original;italics supplied).


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Branch 233 of the Quezon City RTC denied the Locsins prayer forthe issuance of a TRO, by Order of August 25, 1998.

In its September 8, 1998 ANSWER[5] with CompulsoryCounterclaim filed on September 11, 1998, petitioner denied that its Asst.Vice President Agnes Tuason had told the Locsins that the loan valuation ofthe Evidente properties was P2.5 million for it in fact told them that the P2.5million loan was approved inspite of the deficiency of the Evidente properties

because of their [Locsins] good paying record with [it]. And it denied(specifically) too the Locsins complaints-allegations in paragraphs 19-25,alleging as follows:

8.2 All the promissory notes signed by[the Locsins] uniformly provide:

U p o n t h eoccurrence as to Maker orany Co-Maker of thisPromissory Note of any ofthe following events ofdefault, the outstandingprincipal, accrued interestand any o the r sumpayable hereunder oru n d e r a n y r e l a t e dagreement shall becomeimmediately due andp a y a b l e w i t h o u tpresentment, demand,protest or notice of anykind (other than notice ofthe event and fact ofdefault) all of which arehereby expressly waivedby the Maker and all of the

Co-Makers, if any:

x x x

3) Failure bythe Maker or any Co-Maker to perform or theviolation of any provision

of this Promissory Note orany related agreement;

x x x

6) The Makeror any Co-Maker fails topay any money due under

any other agreement,standby letter of credit ordocument evidencing,securing, guaranteeing orotherwise relat ing toindebtedness of the Makeror any Co-Maker to anyother creditor, or thereoccurs, any event ofdefault or any event which,but for the passage of timeor the giving of notice, orboth, would constituteu n d e r a n y s u c hagreement, stand by letterof credit or document (andwhich has not beenremedied wi th in anyapplicable grace period):

x x x

8.3 The letter of approval of the P2.5million loan of [the Locsins] has a cross-default provision, which reads:

3.6 A defaulton any availment underthis credit line facility shallautomatically mean adefault on [the Locsins]existing term loan underPromissory Note No.29-01-9080-95 [covering


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the first TLA] and viceversa (Emphasis andunderscoring supplied),[6]

on which letter the Locsins affixed their conformity; that in light of the Locsinsdefault in the settlement of their monthly obligations under the CLA, it sent

them a January 7, 1998 demand letter advising them of the Past Due Statusof their promissory note covering the P2.5 million account to therebyautomatically mean that [said promissory note] and the other loan accountunder [the promissory note covering the 1stTLA] with an outstanding balanceof P460,652.95 are considered Due and Demandable already; that after afollow up letter and a final letter of demand, the Locsins requested, by letter ofFebruary 26, 1998, that the promissory note under the 1st TLA and that underthe CLA be treated separately and that one of their titles be released uponpayment of P1.8 million; that by letter of March 5, 1998, it advised theLocsins that their request in their February 26, 1998 letter regarding therelease of one of the [two Evidente titles] was approved, subject to thepartial payment on Principal plus all interests and charges amounting toP1,934,465.79 as of March 20, 1998; that to its March 5, 1998 letter, theLocsins, by letter of March ___, (sic) 1998, replied as follows:

We would like to request for a thirty dayextension on the deadline given us today for thepayment of P1,900,000.00, or (sic) the releaseof one title under PN No. 11-01-0586-96[covering the CLA] as the person very muchinterested in purchasing it has asked us for thesame. At the same time we are also going totake out the property under PN No.29-01-9080-95 [covering the first TLA], so thatonly one property under the fire (sic) accountmentioned shall be left mortgaged to your bank.

Thank you for your kind consideration.[7](Underscoring supplied);

that despite the grant of the Locsins request for extension of 30 days or up toApril 20, 1998 to pay P1.9 million as a condition for the release of the title,the Locsins failed to come up therewith; and that the inclusion of the Locsinsmortgaged title covering the 1st TLA in the amended application for extra-

judicial foreclosure was not erroneous because of the cross-defaultprovisions and acceleration clauses in the loan documents which [theLocsins] signed.

As Compulsory Counterclaim petitioner alleged that on account of thefiling of the baseless and malicious suit, it was constrained to engage theservices of its counsel at an agreed fee of P200,000.00. It thus prayed for thedismissal of the Locsins complaint and the grant of its counterclaim.

En passant, it does not appear that the Locsins filed a Reply[8] topetitioners Answer with Compulsory Counterclaim.

On March 26, 1999, the Locsins filed an Omnibus Motion[9] (To Amendthe Designation of the Plaintiffs; and to Admit Supplemental Complaint), whichappears to have been granted by the Quezon City RTC. In theirSupplemental Complaint,[10] they repleaded in toto the allegations in theirAugust 24, 1998 Complaint and additionally alleged that petitioner proceededwith the public auction of the properties covered by the mortgage in the 1 stTLA and the mortgage in the CLA on September 23, 1998, contrary to law.

The Locsins thus prayed in their Supplemental Complaint as follows:

1. Ordering the cancellation of the publicauction of TCT Nos. N-138739, N-166336and N-166337 on September 23, 1998;

2. Declaring said auction of no legal forceand effect; and

3. Granting the following reliefs prayed for byplaintiffs in their [original] Complaint, to wit:

x x x[11] (Emphasis and underscoringsupplied).

By Answer[12] (To Supplemental Complaint) dated June 1, 1999,petitioner admitted that the public auction (which was originally scheduled onAugust 26, 1998) did take place on September 23, 1998. It denied, however,that it was contrary to law.

More than eight months after the Locsins filed their SupplementalComplaint reflecting their prayer for the nullification of the September 23,1998 public auction sale or on November 29, 1999, petitioner filed a complaint


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against the Locsins before the RTC of Mandaluyong where it was docketed asCivil Case No. MC-99-935,[13] for Collection of Sum of Money, alleging asfollows:

x x x

5. Defendants failed to satisfy theirobligations under the . . . Promissory

Notes [covering the first TLA & the CLA]and Plaintiff deemed them in default;

x x x

11. The [amended] extrajudicial sale wasconducted on 23 September 1998 andPlaintiff was again declared the highestbidder . . .

12. The total outstanding obligation ofDefendants at the t ime of theforeclo sure was PESOS: FIVEM I L L I O N T W E N T Y T H R E ETHOUSAND FOUR HUNDREDNINETY SIX & 64/100 (P5,023.496.64).However, the appraised value of theproperties was only P3,879,406.80 andplaintiff thus submitted a bid of PESOS:THREE MILLION EIGHT HUNDREDSEVENTY NINE THOUSAND FOURH U N D R E D S I X & 8 0 / 1 0 0(P3,879.406.80);

13. After all expenses for the foreclosure andregistration of the Certificate of Salehave been deducted f rom the

aforementioned bid, there still remainsan outstanding balance in the amount ofPESO S: ONE MILL ION ONEHUNDRED FORTY FOUR THOUSANDEIGHTY NINE & 84/100 (1,144,089.84),EXCLUSIVE OF INTEREST AT THERATE OF TWENTY FIVE AND A HALFPERCENT (25.5%) per annum, which

Plaintiff is entitled to recover fromDefendants;

14. On 09 February 1999, counsel for plaintiffsent a letter to defendants dated 05February 1999, demanding from thelatter the payment of said deficiency butDefendants refused and failed and

continue to refuse and fail to pay saidobligation . . .

15. Due to Defendants unreasonable refusaland failure to comply with Plaintiffs justdemands, Plaintiff was compelled toinstitute the present action and toengage the services of counsel to whomit bound itself to pay the sum ofP130,000.00, plus appearance fee ofP2,000.00 and other legal costs andexpenses.[14] (Emphasis in theoriginal; underscoring supplied).

Petitioner accordingly prayed in its complaint that the Locsins be ordered topay it jointly and severally

1. the outstanding obligation in the sum ofPESO S: ONE MILL ION ONEHUNDRED FORTY FOUR THOUSANDEIGHTY NINE & 84/100 (1,144,089.84),plus interest thereon at the rate oftwenty five and a half percent (25.5%)per annum from 23 September 1998,the date of the foreclosure sale, until theobligation has been fully paid;

2. attorneys fees in the sum of P130,000.00,plus appearance fee of P2,000.00; and

3. costs of suit and expenses of litigation.


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Other just and equitable reliefs underthe premises are likewise prayed for.[15](Emphasis in the original).

To petitioners complaint (for sum of money), the Locsins filed aMotion to Dismiss[16] on the ground that it should have been raised ascompulsory counterclaim in their (the Locsins) complaint (for specific

performance, damages and nullification of the public auction), and by failing toraise it as such, it is now barred by the rules. To the Motion, petitioner filedits Opposition which merited the Locsins filing of a Reply to Opposition.[17]

Branch 213 of the Mandaluyong RTC denied the Locsins Motion toDismiss petitioners Complaint, by Order of September 18, 2000,[18] in thiswise:

The motion to dismiss is premised onthe ground that plaintiffs claim in the instantcase should have been raised in the previouscase, [C]ivil [C]ase No. Q98-35337, whereinplaintiff herein was the defendant, said claimbeing a compulsory counterclaim and for failureto raise the same, it is now barred by the rules.

It is noted, however, that the instantcase is one for collection of alleged deficiencyamount as the proceeds of the foreclosure saleof defendants properties are not sufficient tocover the entire indebtedness. In effect, suchclaim did not arise as a consequence of [C]ivilCase No. 098-353337 but was already existing(sic) even before the institution of that earliercase.

Without necessarily delving into the

veracity of plaintiffs claim but merelyconsidering its origin and nature as alleged inthe complaint, said claim is merely permissiveand not compulsory. Thus, such a claim canstand as an independent act ion. [19](Underscoring supplied).

The Locsins Motion for Reconsideration having been denied bythe Mandaluyong RTC by Order of March 21, 2001,[20] they appealed to theCourt of Appeals which, by the present assailed decision of June 5, 2003,[21]reversed the Orders of the Mandaluyong RTC, it finding that petitionerscomplaint was a compulsory counterclaim which should have been raised inits Answer to the Locsins complaint, and having failed to do so, it is nowbarred; that litis pendentia and res judicata apply to the case; and thatpetitioner violated the rule on forum shopping, hence, the dismissal of its

complaint is warranted. Explained the appellate court:

[The Locsins] complaint in Civil CaseNo. Q-98-35337, pending before Branch 223 ofthe Regional; Trial Court of Quezon City asksspecific performance by private respondentBanco de Oro of its obligations under the verysame loan agreements covered by Real EstateMortgages mentioned in private respondentsComplaint in Civil Case No. MC-99-935 beforethe Mandaluyong City Trial Court. In bothcases, the real properties involved are thosecovered by TCT Nos. N-138739, [N-166336]and N-166337. The basis of the partiesrespective complaints arose from the very sametransactions, the Term Loan Agreement, datedSeptember 28, 1995 and the Credit LineAgreement, dated November 6, 1996. Clearly,there is a logical connection between bothclaims which arose from the same transactionand are necessarily connected and it does notrequire the presence of third parties for itsadjudication. A counterclaim is logically relatedto the opposing partys claim where separatetrials of each of their respective claims wouldinvolve substantial duplication of effort and timeby the parties and the courts.

Moreover, Sec. 2, Rule 9 of the Rulesof Court provides:

S e c . 2 .Compulsory counterclaim,or cross-claim, not set upbarred. - A compulsory


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counterclaim. or a crossclaim, not set up shall bebarred.

Private respondent should haveraised its complaint as compulsory counterclaimin the Regional Trial Court of Quezon City.Failing to do so, it is now barred. The reason for

the rule relating to counterclaims is to avoidmultiplicity of suits and to enable the Courts todispose of the whole matter in controversy inone action, and adjustment of defendantsdemand by counterclaim rather than byindependent suit. (Reyes vs. Court of Appeals,38 SCRA 138).

[The Locsins] second argument isthat private respondents complaint in Civil CaseNo. MC-99-935 constitutes litis pendentia, andtherefore should have been dismissed by thetrial court. For litis pendentia to be a ground fordismissal of an action, three elements mustconcur: (a) identity of parties, or at least suchparties who represent the same interest in bothactions; (b) identity of rights asserted and reliefprayed for being founded on the same facts;and (c) the identity, with respect to the twopreceding particulars in the two cases, is suchthat any judgment that may be rendered in thepending case, regardless of which party issuccessful, would amount to res judicata in theother.

Applying this test, the principle of litispendentia and res judicata will certainly apply to

the instant case, all three requisites arepresent. The parties are the same and what isinvolved in both Civil Case No. Q-98-35337pending before the Quezon City Trial Court andCivil Case No. MC-99-935 before theMandaluyong City Trial Court are the samesubject matter and set of circumstances, whichwould entail presentation of the same evidence.

Judgment in favor of one of the parties in CivilCase No. Q-9835337 would bar the institution ofthe case filed before the Mandaluyong City TrialCourt.

Finally, [the Locsins] assert that CivilCase MC-99-935 should be dismissed sinceprivate respondent is guilty of willful and

deliberate forum shopping. Jurisprudence hasdefined forum-shopping as the filing of multiplesuits involving the same parties for the samecause of action, either simultaneously orsuccessively, for the purpose of obtaining afavorable judgment. Forum shopping existswhere the elements of litis pendentia arepresent, and where the a final judgment in onecase will amount to res judicata in the other.(Heirs of Victorina Motus Penaverde v. Heirs ofMariano Penaverde, 344 SCRA 69). Thus,there is forum shopping when there exist: a)identity of parties, or at least such parties asrepresent the same interest in both actions, b)identity of rights asserted and relief prayed for,the relief being founded on the same facts, andc) the identity of the two preceding particulars issuch that any judgment rendered in the otheraction, will amount to res judicata in the actionunder consideration. (Prubankers Associationvs. Prudential Bank and Trust Company, 302SCRA 83). As discussed earlier, the elementsof litis pendentia being present and that resjudicatawill eventually result, a decision by theQuezon City Trial Court would bar the institutionof the Civil Case in the Mandaluyong City TrialCourt for the collection of deficiency claim in the

foreclosure sale of the petitioners properties.Private respondent violated the rule on forumshopping and therefore, the summary dismissalof their action is warranted.[22] (Italics in theoriginal; underscoring supplied).

Hence, the present Petition for Review on Certiorari,[23] petitionerraising the following assignment of errors:


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I. THE COURT OF APPEALS ERRED IN

HOLDING THAT PETITIONER BANKSCOMPLAINT FOR COLLECTION OFSUM OF MONEY BASED ONDEFICIENCY CLAIM UNDER CIVILC A S E N o . M C - 9 9 - 9 3 5 I S ACOMPULSORY COUNTERCLAIM AND

SHOULD HAVE BEEN SET UP BYPETITIONER BANK IN PRIVATERESPONDENTS COMPLAINT FORSPECIFIC PERFORMANCE, TORTAND DAMAGES, AND ANNULMENTOF FORECLOSURE IN CIVIL CASENO. Q-98-35337.

II. THE COURT OF APPEALS ERRED INHOLDING THAT THERE IS LITISPENDENTIA AND THUS, CIVIL CASEN o . M C - 9 9 - 9 3 5 S H O U L D B EDISMISSED.

III. THE COURT OF APPEALS ERRED INHOLDING THAT THE PETITIONERBANK IS GUILTY OF FORUMSHOPPING.[24]

Petitioner argues that the Locsins complaint is one based on tort,whereas its complaint before the Mandaluyong RTC is based on contract andlaw, hence, the two causes of action are separate and distinct; that under thetest for the determination of whether the counterclaim is compulsory orpermissive, its suit before the RTC of Mandaluyong for collection of deficiencyjudgment is not a compulsory, but permissive counterclaim and may,therefore, proceed independently of the Locsins complaint.

Petitioner adds that its claim arises from the loan agreement,whereas the Locsins claim arises from the annulment of the foreclosure sale;that litis pendentia and res judicata do not apply as grounds for dismissal of itscomplaint as a perusal of both complaints reveals different causes of action,and the rights asserted and the reliefs prayed for are different, and the rule onlis pendensis applicable only when the judgment to be rendered in the actionfirst instituted will be such that regardless of which party is successful, it will

amount to res judicata as to the second action, it citing Hongkong &Shanghai Bank v. Aldecon & Co.[25]

Citing Enriquez, et al. v. Ramos, et al.,[26] petitioner further arguesthat an action for collection of a mortgage loan does not bar another forrescission of the mortgage if such is based on the non-compliance by themortgagor of the mortgage contract.

Petitioner further cites Roa v. PH Credit Corporation,[27] whereinthis Court ruled that the pendency of a replevin suit does not bar a proceedingfor deficiency claim as there is no identity of subject matter, cause of actionand reliefs prayed for.

Finally, petitioner cites Bangko Silangan Development Bank v.Court of Appeals,[28] wherein this Court held that:

The test to determine identity of thecauses of action is to ascertain whether thesame evidence necessary to sustain the secondcause of action is sufficient to authorize arecovery in the first, even if the form or nature ofthe two (2) actions are different from eachother. If the same facts or evidence wouldsustain both, the two (2) actions are consideredthe same within the rule that the judgment in theformer is a bar to the subsequent action;otherwise, it is not. This method has beenconsidered the most accurate test as towhether a former judgment is a bar insubsequent proceedings between the sameparties. It has even been designated asinfallible.

While it is true that the two (2) cases

are founded in practically the same set of facts,as correctly observed by the Court of Appeals, itcannot be said that exactly the same evidenceare needed to prove the causes of action in bothcases. Thus, in Civil Case No, 91-56185 of theRTC of Manila, the evidence needed to provethat petitioner sustained damage to itsreputation and goodwill is not the same


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evidence needed in Civil Case No. 221 of theRTC of Batangas to prove the allegation that asubstantial amount of respondent Bausas bankdeposit in petitioners bank was illegallywithdrawn without her consent or authority, TheRTC of Batangas and the Court of Appeals,therefore, did not abuse their discretion indenying petitioners motion to dismiss which

was based on the ground of litis pendentia.[29](Emphasis and underscoring supplied).

By their Comment,[30] the Locsins maintain thatpetitioners claim in Civil Case No. MC-99-935 is logically related totheir claim in Civil Case No. Q-98-35337, as they involve the sameparties, rely on the same facts, subject matter and series of

transactions and, therefore, would entail presentation of the sameevidence; that petitioner having failed to set up its claim as acompulsory counterclaim[31] in Civil Case No. Q-98-35337, it is nowbarred from setting it up in Civil Case No. MC-99-935; and that litispendentia and res judicata proscribe the filing of a separatecomplaint by petitioner which is guilty of willful and deliberate forumshopping.

The petition is impressed with merit.

It bears noting that when petitioner filed its Answer withCounterclaim to the Locsins complaint on September 11, 1998, theReal Estate Mortgages covering the 1st TLA and the CLA had notbeen extrajudicially foreclosed, the extra-judicial foreclosure havingtaken place subsequent th

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