What is a counterclaim?

A counterclaim is any claim which a defending party may have against an opposing party (Section 12, Rule 15, Rules of Court as amended by A.M. 19-10-20-SC)


Why are counterclaims allowed?

They are generally allowed in order to avoid a multiplicity of suits and to facilitate the disposition of the whole controversy in a single action, such that the defendant's demand may be adjudged by a counterclaim rather than by an independent suit. (Lafarge Cement Corp. v. Continental Cement Corp., G.R. No. 155173, November 23, 2004)


What are its limitations?

The only limitations to this principle are:
  1. that the court should have jurisdiction over the subject matter of the counterclaim, and
  2. that it could acquire jurisdiction over third parties whose presence is essential for its adjudication (Lafarge Cement Corp. v. Continental Cement Corp.)

Kinds of counterclaims:

1. Compulsory - A compulsory counterclaim is one which, being cognizable by the regular courts of justice, arises out of or is connected with the transaction or occurrence constituting the subject matter of the opposing party's claim and does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction (Lafarge Cement Corp. v. Continental Cement Corp.)

It is compulsory in the sense that it is within the jurisdiction of the court, does not require for its adjudication the presence of third parties over whom the court cannot acquire jurisdiction, and will be barred in the future if not set up in the answer to the complaint in the same case (Bungcayao v. Fort Ilocandia Property Holdings, G.R. No. 170483, April 19, 2010).

2. Permissive - A counterclaim is permissive if it does not arise out of or is not necessarily connected with the subject matter of the opposing party's claim. It is essentially an independent claim that may be filed separately in another case (Lafarge Cement Corp. v. Continental Cement Corp).


What are the criteria to determine whether the counterclaim is compulsory or permissive?

● The criteria to determine whether the counterclaim is compulsory or permissive are as follows:
  1. Are issues of fact and law raised by the claim and by the counterclaim largely the same?
  2. Would res judicata bar a subsequent suit on defendant’s claim, absent the compulsory rule?
  3. Will substantially the same evidence support or refute plaintiff’s claim as well as defendant’s counterclaim?
  4. Is there any logical relations between the claim and the counterclaim?
A positive answer to all four questions would indicate that the counterclaim is compulsory (Bungcayao v. Fort Ilocandia Property Holdings, G.R. No. 170483, April 19, 2010).


● The "compelling test of compulsoriness" characterizes a counterclaim as compulsory if there should exist a "logical relationship" between the main claim and the counterclaim. There exists such a relationship when conducting separate trials of the respective claims of the parties would entail substantial duplication of time and effort by the parties and the court; when the multiple claims involve the same factual and legal issues; or when the claims are offshoots of the same basic controversy between the parties (Lafarge Cement Corp. v. Continental Cement Corp).

● It is clear that the counterclaim set up by respondent arises from the filing of plaintiff's complaint. The counterclaim is so intertwined with the main case that it is incapable of proceeding independently.  The counterclaim will require a re-litigation of the same evidence if the counterclaim is allowed to proceed in a separate action (Cruz-Agana v. Judge Santiago-Lagman, G.R. No. 139018, April 11, 2005).


Why do we need to know the distinctions?

1. Determination of the nature of counterclaim is relevant for purposes of compliance to the requirements of initiatory pleadings. In order for the court to acquire jurisdiction, permissive counterclaims require payment of docket fees, while compulsory counterclaims do not (Villanueva-Ong v. Enrile, G.R. No. 212904, November 22, 2017). 

[Note must be taken of OCA Circular No. 96-2009 entitled "Docket Fees For Compulsory Counterclaims," dated August 13, 2009, where it was clarified that the rule on imposition of filing fees on compulsory counterclaims has been suspended. Such suspension remains in force up to this day (Villanueva-Ong v. Enrile, G.R. No. 212904, November 22, 2017)]

2. A compulsory counterclaim does not require a certificate of non-forum shopping because a compulsory counterclaim is not an initiatory pleading. (Cruz-Agana v. Judge Santiago-Lagman, G.R. No. 139018, April 11, 2005). A permissive counterclaim, on the other hand, require a certificate of non-forum shopping because it is considered an initiatory pleading.

3. Compulsory counterclaims should be set up in the same action; otherwise, they would be barred forever (Lafarge Cement Corp. v. Continental Cement Corp). Permissive counterclaim, even if not set up in the same action, is not barred. You can file a separate action.


Example of compulsory counterclaim:

Counterclaims seeking moral, actual and exemplary damages and attorneys fees against the respondent on account of their malicious and unfounded complaint (Lafarge Cement Corp. v. Continental Cement Corp).


Example of permissive counterclaim:

Bungcayao, Sr. v. Fort llocandia Property Holdings and Development Corp. cited by respondent, is starkly different from the factual circumstances obtaining at the case at bar. In that case, petitioner  Manuel C. Bungcayao, Sr. sought the annulment of a Deed of Assignment, Release, Waiver and Quitclaim, on the ground of the lack of authority of petitioner's son to represent him thereon. For their part, respondent prayed, as counterclaims to the complaint, that petitioner be required to: 1) return the amount of ₱400,000 from respondent, 2) to vacate the portion of the respondent's property he (petitioner) was occupying, and 3) to pay damages because his (petitioner) continued refusal to vacate the property caused tremendous delay in the planned implementation of Fort Ilocandias expansion projects. In that case, We ruled that the recovery of possession of the property is a permissive counterclaim, while being an offshoot of the basic transaction between the parties, will not be barred if not set up in the answer to the complaint in the same case. This is because the title of respondent to the disputed property therein was actually recognized by the administrative authorities. Necessarily, respondent will not be precluded from asserting its right of ownership over the land occupied by petitioner in a separate proceeding. In other words, respondent's right therein can be enforced separately and is distinct from the legal consequences of the Deed of Assignment, Release, Waiver and Quitclaim executed between the parties therein (Villanueva-Ong v. Enrile, G.R. No. 212904, November 22, 2017).


Failure to pay docket fees

●The rule in permissive counterclaim is that for the trial court to acquire jurisdiction, the counterclaimant is bound to pay the prescribed docket fees. Any decision rendered without jurisdiction is a total nullity and may be struck down at any time, even on appeal before this Court. In this case, respondent did not dispute the non-payment of docket fees. Respondent only insisted that its claims were all compulsory counterclaims. As such, the judgment by the trial court in relation to the second counterclaim is considered null and void without prejudice to a separate action which respondent may file against petitioner (Bungcayao v. Fort Ilocandia Property Holdings, G.R. No. 170483, April 19, 2010).

● Failure to pay the required docket fees, per se, should not necessarily lead to the dismissal of the permissive counterclaim. It has long been settled that while the court acquires jurisdiction over any case only upon the payment of the prescribed docket fees, its non-payment at the time of filing of the initiatory pleading does not automatically cause its dismissal provided that: (a) the fees are paid within a reasonable period; and (b) there was no intention on the part of the claimant to defraud the government.

Here, respondents cannot be faulted for non-payment of docket fees in connection with their counterclaim, primarily because as early as November 16, 2006, the RTC had already found such counterclaim to be compulsory in nature. Such finding was then upheld in the July 2, 2007 RTC Decision and affirmed on appeal by the CA in its assailed Decision. As such, the lower courts did not require respondents to pay docket fees and even proceeded to rule on their entitlement thereto. Verily, respondents' reliance on the findings of the courts a quo, albeit erroneous, exhibits their good faith in not paying the docket fees, much more their intention not to defraud the government. Thus, the counterclaim should not be dismissed for non­payment of docket fees. Instead, the docket fees required shall constitute a judgment lien on the monetary awards in respondents'  favor. In Intercontinental Broadcasting Corporation v. Legasto, citing, Section 2, Rule 141 of the Rules of Court, the Court held that in instances where a litigant's non-payment of docket fees was made in good faith and without any intention of defrauding the government, the clerk of court of the court a quo should be ordered to assess the amount of deficient docket fees due from such litigant, which will constitute a judgment lien on the amount awarded to him, and enforce such lien, as in this case (Sy-Vargas v. Estate of Rolando Ogsos, Sr., G.R. No. 221062, October 05, 2016).