CIVIL PROCEDURE, Dean

Mawis, 2-B LPU 2014

RULE 6: KINDS OF A PLEADING

Section 1. Pleadings defined. Pleadings are the written statements of the respective claims and defenses of the
parties submitted to the court for appropriate judgment. (1a)
Section 2. Pleadings allowed. The claims of a party are asserted in a complaint, counterclaim, cross-claim, third
(fourth, etc.)-party complaint, or complaint-in-intervention.
The defenses of a party are alleged in the answer to the pleading asserting a claim against him.
An answer may be responded to by a reply. (n)
Section 3. Complaint. The complaint is the pleading alleging the plaintiff's cause or causes of action. The
names and residences of the plaintiff and defendant must be stated in the complaint. (3a)
Section 4. Answer. An answer is a pleading in which a defending party sets forth his defenses. (4a)
Section 5. Defenses. Defenses may either be negative or affirmative.
(a) A negative defense is the specific denial of the material fact or facts alleged in the pleading of the
claimant essential to his cause or causes of action.
(b) An affirmative defense is an allegation of a new matter which, while hypothetically admitting the
material allegations in the pleading of the claimant, would nevertheless prevent or bar recovery by him.
The affirmative defenses include fraud, statute of limitations, release, payment, illegality, statute of frauds,
estoppel, former recovery, discharge in bankruptcy, and any other matter by way of confession and
avoidance. (5a)
Section 6. Counterclaim. A counterclaim is any claim which a defending party may have against an opposing
party. (6a)
Section 7. Compulsory counterclaim. 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. Such a counterclaim must be within the jurisdiction of the court both as to the amount
and the nature thereof, except that in an original action before the Regional Trial Court, the counter-claim may be
considered compulsory regardless of the amount. (n)
Section 8. Cross-claim. A cross-claim is any claim by one party against a co-party arising out of the transaction
or occurrence that is the subject matter either of the original action or of a counterclaim therein. Such cross-claim
may include a claim that the party against whom it is asserted is or may be liable to the cross-claimant for all or
part of a claim asserted in the action against the cross-claimant. (7)
Section 9. Counter-counterclaims and counter-crossclaims. A counter-claim may be asserted against an original
counter-claimant.
A cross-claim may also be filed against an original cross-claimant. (n)
Section 10. Reply. A reply is a pleading, the office or function of which is to deny, or allege facts in denial or
avoidance of new matters alleged by way of defense in the answer and thereby join or make issue as to such new
matters. If a party does not file such reply, all the new matters alleged in the answer are deemed controverted.
If the plaintiff wishes to interpose any claims arising out of the new matters so alleged, such claims shall be set
forth in an amended or supplemental complaint. (11)
Section 11. Third, (fourth, etc.)party complaint. A third (fourth, etc.) party complaint is a claim that a
defending party may, with leave of court, file against a person not a party to the action, called the third (fourth,
etc.) party defendant for contribution, indemnity, subrogation or any other relief, in respect of his opponent's
claim. (12a)
Section 12. Bringing new parties. When the presence of parties other than those to the original action is
required for the granting of complete relief in the determination of a counterclaim or cross-claim, the court shall
order them to be brought in as defendants, if jurisdiction over them can be obtained. (14)
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Section 13. Answer to third (fourth, etc.)party complaint. A third (fourth, etc.) party defendant may allege
in his answer his defenses, counterclaims or cross-claims, including such defenses that the third (fourth, etc.)
party plaintiff may have against the original plaintiff's claim. In proper cases, he may also assert a counterclaim
against the original plaintiff in respect of the latter's claim against the third-party plaintiff. (n)

CALO VS AJAX INTL INC.

Plaintiff Calo ordered 1200 ft of a Josh Shaw wire rope from Ajax International Inc. Upon delivery, subject
matter was short of 300ft. Calo sued defendant Ajax International Inc to either complete the delivery or
account adjustment of the alleged undelivered 300 ft. of wire rope.
Complaint was filed in the Municipal Court of Manila (Civil Case No. IV- 93062) by one Adolfo Benavides
who claimed to have acquired the outstanding credit account of Calo from defendant Ajax International,
Inc.
Judgment by default was entered, and a writ of execution issued, against plaintiff Calo.
Calo appealed via petition for certiorari, prohibition and mandamus before the SC.
Court set aside judgment of default and writ of execution issued against Calo and remanded the case for
further proceedings.
Later, plaintiff Calo assisted by husband Marcos Calo, filed before the CFI of Agusan a complaint (Civil Case
No. 860.) to compel Ajax Intl Inc to either effect complete delivery of Charge Order No. 37071 or that she
be relieved from paying P855.00 and that the latter indemnify her for P12,000 as attorneys fees, damages
and expenses of litigation.
Instead of filing an answer, Ajax Intl Inc. moved for the dismissal of Civil Case 860 that the subject was
involved and intimately related to that case filed the Municipal Court of Manila.
Court sustained the motion and dismissed the case.
Calo moved for reconsideration and new trial which was likewise denied by Court. Hence, the present
appeal.

ISSUE:
WON the RTC erred in dismissing the plaintiffs complaint
RULING:
YES. The dismissal of Civil Case No. 860 because of the pendency of Civil Case No. IV-93062 in the municipal court
of Manila is predicated on the supposition that plaintiffs claim is a compulsory counter-claim that should be filed in
the latter case. There is no question that it arises out of the same transaction which is the basis of the complaint in
Civil Case No. IV-93062 and does not require the presence of third parties over whom the municipal court of Manila
could not acquire jurisdiction.
However, plaintiffs claim is not a compulsory counterclaim in Civil Case No. IV-93062 for the simple reason that the
amount thereof exceeds the jurisdiction of the municipal court. The rule that a compulsory counterclaim not set up
is barred, when applied to the municipal court, presupposes that the amount involved is within the said courts
jurisdiction. Otherwise, we would come to the absurd situation where a claim must be filed with the municipal court
which it is prohibited from taking cognizance of, being beyond its jurisdiction.
Besides, the reason underlying the rule, which is to settle all related controversies in one sitting only, does not
obtain. For, even if the counterclaim in excess of the amount cognizable by the inferior court is set up, the
defendant cannot obtain positive relief. The Rules allow this only for the defendant to prevent plaintiff from
recovering from him. This means that should the court find both plaintiffs complaint and defendants counterclaim
(for an amount exceeding said courts jurisdiction) meritorious, it will simply dismiss the complaint on the ground
that defendant has a bigger credit. Since defendant still has to institute a separate action for the remaining
balance of his counterclaim, the previous litigation did not really settle all related controversies.
Plaintiff Calo's claim of P12,000.00 not being a compulsory counterclaim in Civil Case No. VI-93062, it need not be
filed there. The pendency then of said civil case could not be pleaded in abatement of Civil Case No. 860.

INTERNATIONAL CONTAINER TERMINAL SERVICES, INC. vs. CA

Sharp, Inc. filed a complaint for prohibition with prayer for preliminary injunction against the Philippine
Ports Authority (PPA), E. Razon, DOTC Secretary and International Container Terminal Services Inc., (ICTSI)
before the Regional Trial Court of Manila.

Trial court issued a writ of preliminary injunction.

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On the same day, the petitioner filed an answer with a compulsory counterclaim against Sharp for its
"unfounded and frivolous action." and claimed damages in the amount of P100M.cralaw virtua1aw library

SC nullified the writ of preliminary injunction.

o That Sharp was not a proper party to stop the negotiation and awarding of the contract for the
development, management and operation of the Container Terminal at the Port of Manila.
o That petition was premature because Sharp had not exhausted the administrative remedies (PPA,
the Bidding Committee, and the Office of the President)c

PPA
filed a motion to dismiss Sharps complaint. Motion was adopted by petitioner CCTSI in a
manifestation.

RTC Judge Edilberto G. Sandoval dismissed the complaint as well as the counterclaim.

CCTSI filed a motion for reconsideration of the order insofar as it dismissed its counterclaim. MR denied.

Trial Court held:chanrob1es virtual 1

. . indeed a compulsory counterclaim by the nature of its nomenclature arises out of or is so intertwined
with the transaction or occurrence that is the subject matter of the complaint so that by the dismissal of
the latter, the same has to be discarded, especially since the complaint was dismissed without any trial.

CA upheld the dismissal of the counterclaim

o Compulsory counterclaims for actual damages are not the claims recoverable against the bond.
o ITCSIs manifestation adopting PPAs motion to dismiss did not contain any reservation. Hence, Sec.
2, Rule 17 of the Rules of Court will not apply. The counterclaim for damages being compulsory in
nature, for which no filing fee has been paid, was correctly dismissed.
o Damages (recoverable against the bond) may be awarded only upon application and after proper
hearing, and shall be included in the final judgment. The application must be filed before the trial
wc is distinct and separate from the compulsory counterclaim asserted in the answer.
o The filing in court of claim against the injunction bond, with copy thereof being furnished the
surety, was not sufficient notice to the latter of an application against it under this bond.

CCTSI has filed the present petition for review

ISSUE:
WON the dismissal of the counterclaim was proper
RULING:
YES. The counterclaim for damages alleged that the delay in the award of the MICT contract caused by Sharps
complaint and writ of preliminary injunction jeopardized the petitioners timetable to attain the projected volumes
in its winning bid and, as well, caused it to incur litigation expenses, including attorneys fees.
Court held that a counterclaim is compulsory where:
(1) it arises out of, or is necessarily connected with, the transaction or occurrence that is the subject matter of the
opposing partys claim;
(2) it does not require for its adjudication the presence of third parties of whom the court cannot acquire
jurisdiction; and (3) the court has jurisdiction to entertain the claim.
In the case at bar, petitioners counterclaim was clearly compulsory. The petitioner itself so denominated it. There
is no doubt that the same evidence needed to sustain it would also refute the cause of action alleged in the private
respondents complaint; in other words, the counterclaim would succeed only if the complaint did not.
Rule 17, Sec. 2 of the ROC provides:
SECTION 2. Dismissal by order of the court. Except as provided in the preceding section, an action
shall not be dismissed at the plaintiffs instance save upon order of the court and upon such terms and
conditions as the court may deem proper. If a counterclaim has been pleaded by a defendant prior to
the service upon him of the plaintiffs motion to dismiss, the action shall not be dismissed against the
defendants objection unless the counterclaim can remain pending for independent adjudication by the
court. Unless otherwise specified in the order, a dismissal under this paragraph shall be without
prejudice.
The petitioner itself joined the PPA in moving for the dismissal of the complaint. Secondly, the compulsory
counterclaim was so interwined with the complaint that it could not remain pending for independent adjudication
by the court after the dismissal of the complaint which had provoked the counterclaim in the first place. As a
consequence, the dismissal of the complaint (on the petitioners own motion) also dismissed the counterclaim
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questioning

that

complaint.

Thus, the petitioner caused the dismissal of its counterclaim when it not only did not object to, but actually moved
for, the dismissal of the complaint. If it wanted the counterclaim to subsist, it should have objected to the dismissal
of the complaint or at least reserved its right to prosecute it, assuming this would still be possible. It did neither of
these. The petitioner claims that there is no law requiring that reservation, but there is no law presuming it either.
Also, the counterclaim was not permissive. A counterclaim is permissive if it does not arise out of nor is it
necessarily connected with the subject matter of the opposing partys claim. It is not barred even if not set up in
the action. The petitioners counterclaim was within the jurisdiction of the trial court. Most importantly, it had no
independent existence, being merely ancillary to the main action. The petitioner knew all this and did not object to
the dismissal of the complaint. On the contrary, it actually moved to dismiss that main action, and in so doing also
moved,
in
effect,
for
the
dismissal
of
its
counterclaim.

METALS ENGINEERING RESOURCES CORPORATION vs. CA

FACTS:

Metals filed a case private respondent Plaridel Jose, for the annulment of an agreement to buy and sell
executed between the parties, before the Regional Trial Court of Pasig, Branch 160, the
complaint alleging, inter alia, that the agreement is imperfect and incomplete.
Jose filed his Answer with Counterclaim alleging a compulsory counterclaim; that due to the adamant and
unreasonable posture of Star, Joses timetable to generate funds and profits was severely stalled and placed at
a standstill to the damage and prejudice of his investment and financial projection, among others. She prayed
that she be awarded exemplary and moral damages, among others.
Before the case could be heard on pre-trial, Jose filed a Motion to Expunge the Complaint on the ground that
the same did not specify the amount of damages sought either in the body or in the prayer of the complaint.
Trial court required petitioner to amend its complaint by specifying the amount of damages prayed for. Metals
complied with.
Jose moved for the reconsideration of the trial court's order with respect to the portion allowing petitioner to
file an amended complaint, stating that the court did not acquire jurisdiction when the wrong docket fee was
paid, hence the amendment of the complaint did not vest jurisdiction upon the court. Motion granted.
Jose filed a Motion to Set Case for Presentation of Evidence in support of his counterclaim. In its Opposition,
Metals averred that since Joses counterclaim is compulsory in nature because it is necessarily connected with
and arose out of the same transaction subject of the complaint, with the dismissal of petitioner's complaint the
compulsory counterclaim can no longer remain pending for independent adjudication. Trial court granted Joses
motion. Metals filed an MR, which was denied.
Metals filed a special civil action for certiorari and prohibition with prayer for preliminary injunction and/or TRO
with CA. CA dismissed stating that since the order is merely interlocutory in nature, it cannot be corrected by
certiorari. MR denied.

ISSUE:
Whether or not Jose should be allowed to present evidence in support of his compulsory counterclaim despite the
dismissal of the complaint
HELD:
No.
Joses counterclaim is compulsory in nature since (1) it arises out of, or is necessarily connected with the
transaction or occurrence that is the subject matter of the opposing party's claim; 2) it does not require for its
adjudication the presence of third parties over whom the court cannot acquire jurisdiction; and 3) the court has
jurisdiction to entertain the claim. And the rule is that a compulsory counterclaim not set up shall be barred if not
raised on time and the party in error is precluded from setting it up in a subsequent litigation on the ground of res
judicata, the theory being that what are barred by prior judgment are not only the matters actually raised and
litigated upon, but also such matters as could have been raised but were not. In other words, a compulsory
counterclaim cannot be made the subject of a separate action but should be asserted in the same suit involving
the same transaction or occurrence giving rise to it. Where the counterclaim is made the subject of a separate suit,
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it may be abated upon a plea of auter action pendant or litis pendentia, and/or dismissed on the ground of res
judicata.
In the petition, Jose has properly raised a counterclaim against Metals claim that the agreement to buy and sell is
imperfect and incomplete. Ironically, the insistence of Jose in proceeding with the trial of the case is premised on
the very existence of his counterclaim. Hence, there can be no res judicata to speak of because a counterclaim was
correctly invoked against herein petitioner's complaint. In fine, what private respondent is in effect saying is that
his counterclaim should be allowed to proceed independently of the main action.
Such proposition runs counter to the nature of a compulsory counterclaim in that it cannot remain pending for
independent adjudication by the court. This is because a compulsory counterclaim is auxiliary to the proceeding in
the original suit and derives its jurisdictional support therefrom, inasmuch as it arises out of or is necessarily
connected with the transaction or occurrence that is the subject matter of the complaint. It follows that if the court
does not have jurisdiction to entertain the main action of the case and dismisses the same, then the compulsory
counterclaim, being ancillary to the principal controversy, must likewise be dismissed since no jurisdiction
remained for any grant of relief under the counterclaim.
The aforementioned doctrine is in consonance with the primary objective of a counterclaim which is to avoid and
prevent circuity of action by allowing the entire controversy between the parties to be litigated and finally
determined in one action, wherever this can be done with entire justice to all parties before the court. The
philosophy of the rule is to discourage multiplicity of suits.

COJUANGCO vs. VILLEGAS

FACTS:

Lualhati Cojuangco is the widow of Don Juan Cojuangco, the registered owner of the disputed parcel of land in
Bulacan.
Many years back, the parents of Purificacion Villegas, with the acquiescence of Don Juan Cojuangco,
constructed a residential house and a bakery on the lot. It was understood that they would vacate the premises
when needed by the owner.
After her parent's death, Villegas remained in the property, renovating the same. She leased out a portion of
the land without the knowledge and consent of Don Juan, who later on demanded that she leave the property.
Villegas refused. Don Juan instituted ejectment proceedings.
Don Juan died intestate. His wife Lualhati, herein petitioner, together with nephews and nieces, were subconstituted as parties-plaintiffs.
MTC dismissed the action for ejectment for lack of jurisdiction. As Villegas asserted an adverse claim of
ownership, the suit was transformed into an accion publiciana which is properly cognizable by CFIs.
On appeal to the CFI, decision was reversed. Villegas was ordered to vacate the premises and to surrender
possession thereof to herein petitioner Cojuangco.
CA and SC upheld Cojuangco's right of possession. Petitioner went to the Regional Trial Court of Malolos,
Branch XV, where she filed a motion for execution of the judgment, which the court granted. A writ of
demolition was issued against Villegas, who did not oppose the ordered demolition but instead asked the lower
court to give her more time to which the court acceded.
Before the lapse of the grace period, Villegas filed a separate civil action docketed against petitioner Cojuangco
and the provincial sheriff "for specific performance with urgent prayer for issuance of a temporary restraining
order and preliminary injunction." This case, instead of being referred to Branch XV which had earlier issued
the writ of demolition, was raffled to another Malolos branch of the Bulacan Trial Court, specifically Branch XVII
which issued on the same day a TRO enjoining Cojuangco and particularly the sheriff "from enforcing or
implementing the Order of Demolition. This was followed by another order granting a writ of preliminary
injunction.
The twin orders are now the subject of the instant petition for certiorari.

ISSUES:
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1.
2.

Whether or not the assailed orders constituted an undue interference by the respondent court with a final and
executory decision of a co-equal court
Whether or not Villegas can still legally institute a separate action on the ground that she is a builder in good
faith

HELD:
1.

Yes. The argument is impressed with merit. As early as 1922 in the case of Cabigao v. Del Rosario, this Court
laid down the doctrine that "no court has power to interfere by injunction with the judgments or decrees of a
court of concurrent or coordinate jurisdiction having power to grant the relief sought by injunction."
The various branches of the court of first instance of a province or city, having as they have the same or equal
authority and exercising as they do concurrent and coordinate jurisdiction, should not, cannot and are not
permitted to interfere with their respective cases, much less with their orders or judgments. A contrary rule
would obviously lead to confusion and seriously hamper the administration of justice.

2.

No.

Rule 9, Section 4 of the Revised Rules of Court on compulsory counterclaim provides the answer.
A counterclaim or cross-claim not set up shall be barred if it arises out of or is necessarily
connected with, the transaction or occurrence that is the subject-matter of the opposing party's or
co-party's claim and does not require for its adjudication the presence of third parties of whom the
court cannot acquire jurisdiction.
Villegas' claim to recover compensation for improvements made on the land is essentially in the nature of a
counterclaim since it is inter-woven with the fact of possession. Said claim for compensation should have been
presented as a counterclaim in the ejectment suit. It is deemed barred if not raised on time and the party in error is
precluded from setting it up in a subsequent litigation.
According to Villegas, the reason why the counterclaim for indemnification was not made in the original action was
because it became a "ripe issue" only after the ejectment proceedings.
The argument is untenable. Villegas repeatedly stressed that the residential house which her parents had
constructed was already there on the questioned lot for as long as she could remember. She completely negate her
absurd claim that the factual basis for her subsequent action arose after the ejectment suit became final.
Thus, Villegas should have set forth, simultaneously with the assertion that she was entitled to the parcel of land
by right of inheritance, the alternative claim that assuming she was not legally entitled to the disputed lot, at least
as a builder in good faith, she has the right to the value of the buildings and improvements which she and her
parents had introduced on the land.
Since Villegas failed to set up such alternative defense (i.e. a builder in good faith is entitled to recover the value of
improvements) and instead relied on the sole defense that she inherited the land from her parents, the rejection
thereof was a complete resolution of the controversy between the parties which bars a later case based upon the
unpleaded defense.

MONGAO V PRYCE PROPERTIES

Petition for certiorari under Rule 45 assailing CA Decision reversing RTC Judgment and Resolution denying
petitioners MR

FACTS:
Complaint
-

A complaint for rescission and damages by Sps. Mongao (petitioner: Pesane Mongao only) against Pryce
Properties (respondent) before RTC General Santos alleging that both parties executed a MOA wherein Sps.
Mongao agreed to sell to Pryce a parcel of land in S. Cotabato for P5M (registered in the name of
petitioner).
Pryce paid P550,000 as earnest money. After considerable delay, it offered to pay balance by check to
Mongao and her mother, which was rejected. Pryce refused to pay balance solely to Mongao.
Mongao did not execute a Deed of Absolute Sale (DAS)

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Answer
-

Pedro Animas IV approached Mole, a Pryce officer, and negotiated the sale of properties belonging to the
Animas family, which were to be foreclosed
Subject property was one of the two parcels it purchased, allegedly belonging to Mongaos parents but was
registered in Mongaos name as trustee
Pryce did not pay earnest money directly to Mongao but to Development Bank of the Philippines, to
redeem certain properties of the Animas family
Both Mongao and Pedro Animas, registered owner of subject properties, executed DOS and MOA after
delivery of checks to the bank
However, Mongao demanded that payment be made to her alone excluding the Animas family
Pryce issued P3.3M check to Mongao and her mother but was refused by Mongao
Pryce therefore was constrained to deposit the payment with Clerk of Court of RTC Davao City
By way of a compulsory counterclaim, Pryce prayed that petitioner be adjudged liable for attorneys fees for
their hasty and unjustified institution of the case
Petitioner
-

Moved for judgment on the pleadings on the ground that the Answer admitted the material allegations of
the complaint- Pryce admitting the existence of COS and its refusal to satisfy the unpaid balance of the
purchase price despite demand, and thus failed to tender an issue
Respondent
-

Opposed Motion for judgment on the pleadings arguing that material allegations, that Mongao did not
execute DOS and that Mongao was owner of the subject property, were disputed in the answer
RTC Decision
Granted Motion for judgment on the pleadings
Rescinded DAS
Pryce directed to execute Deed of reconveyance
CA Decision
-

Reversed RTC
Judgment on the pleadings not proper as there were actual issues raised in the answer requiring
presentation and assessment of evidence
The genuineness of DOS and nature of Mongaos title to the subject of property were also put in issue

ISSUE: WON judgment on the pleadings is proper in this case

HELD: YES, IT IS NOT PROPER IN THIS CASE. PETITION GRANTED.

-

Sec. 1, Rule 19: Where an answer fails to tender an issue, or otherwise admits the material allegations of
the adverse partys pleading, the court may, on motion of that party, direct judgment on such pleading.
Answer fails to tender an issue when:
o It does not comply with the requirements for a specific denial
o It would admit material allegations of the adverse partys pleadings not only where it expressly
confesses the truthfulness thereof but also if it omits to deal with them at all
Nothing from the allegations in Pryce;s answer makes out a proper joinder of issues (where the answer
makes a specific denial of the material allegations or asserts affirmative defenses which would bar
recovery from by the plaintiff)
o Allegations in answer do not make out a specific denial that a COS was perfected between the
parties
o Does not contest the due execution and/or genuineness of MOA
The answer implied admission by Pryce that it effected payment contrary to the express terms of the COS
thereby admitting its breach of contractual obligation and supports petitioners cause of action for
rescission

BUNGCAYAO V FORT ILOCANDIA

Petition for review assailing CA Decision
FACTS:
-

In July 1980, 6 parcels of land in Calayad were transferred, ceded, conveyed to Phil. Tourism Authority (PTA)
pursuant to PD 1704. Fort Ilocandia Resort was erected in the area.

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-

In 1992, Bungcayao and other DSierto members applied for a foreshore lease with the Community
Environment and Natural Resources Office (CENRO) and was granted provisional permit
Fort Ilocandia however filed also for a foreshore application including the 5-he portion applied for by
DSierto members
DENR Regional Executive Director Ancheta denied foreshore lease applications of DSierto members on the
ground that the subject area fell either within the titled property or within the foreshore areas applied for
by Fort Ilocandia
Dsierto appealed the denial of their applications
In a Resolution, DENR Sec. Gozun denied the appeal on the ground that the area encroached on the titled
property of Fort Ilocandia based on the final verification plan
In 2003, DSierto and Fort Ilocandia had a meeting to settle the dispute wherein Atty Marcos was present,
as a mediator.
Atty Marcos offered P300k to DSierto as financial settlement in consideration of the improvements
introduced on the condition that they vacate the area
A DSierto member made a counter-offer of P400k, to which the other DSierto members agreed
o Bungcayao alleged that his son, who attended the meeting, manifested that he had to consult his
parents about the offer but upon undue pressure exerted by Atty Marcos, he accepted payment
and signed the Deed of Assignment, Release, Waiver and Quitclaim in favor of Fort Ilocandia
o Thus, Bungcayao filed an action for declaration of nullity of contract before RTC Laoag City, alleging
his son had no authority to represent him and that the deed was void and not binding upon him
Fort Ilocandia countered that the area upon which Dsierto members constructed their improvements was
part of its titled property
o That Bungcayaos sons attended the meeting on their own volition and they were able to talk to
their parents through a cellular phone before they accepted the offer
o As counterclaim, Fort Ilocandia prayed that Bungcayao return the P400k and vacate the area

RTC
-

Confirmed agreement of parties to cancel the Deed of Assignment, Release, Waiver, and Quitclaim, and
return P400k
Both parties agreed to consider the case submitted for resolution on summary judgment
o Court then considered the case submitted for Resolution
Bungcayao filed a MR alleging that he manifested in open court that he was withdrawing his earlier
manifestation submitting the case for resolution
Fort Ilocandia filed a Motion for Summary Judgment, in which the RTC rendered
o That the alleged pressure on Bungcayaos sons could not constitute force, violence or intimidation
that could vitiate consent
o That the established property occupied by Bungcayao/DSierto was within the titled property of Fort
Ilocandia

CA
-

Affirmed RTC decision

o Summary judgment a valid procedural device for the prompt disposition of actions in which the
pleadings raise only a legal issue and not a genuine issue as to any material fact
o That Fort Ilocandias counterclaims were compulsory in nature, as they arose out of or were
connected with the transaction or occurrence constituting the subject matter of the opposing
partys claim and did not require for its adjudication the presence of 3 rd parties of whom the court
could not acquire jurisdiction
o Fort Ilocandia was rightful owner and had the right to recover its possession

ISSUE: WON respondents counterclaim is compulsory; won summary judgment is appropriate in this case

HELD: NO, JUST A PERMISSIVE COUNTERCLAIM; YES, SUMMARY JUDGMENT PROPERLY RENDERED
-

Criteria
o
o
o

to determine whether counterclaim is compulsory or permissive:

Are issues of fact and law raised by the claim and by the counterclaim largely the same?
Would res judicata bar a subsequent suit on defendants claim, absent compulsory rule?
Will substantially the same evidence support or refute plaintiffs claim as well as defendants
counterclaim?
o Is there any logical relation between the claim and the counterclaim?
Positive answer to all 4 questions would indicate a compulsory counterclaim
Fort Ilocandia filed 3 counterclaims:
o Recover P400k rendered moot
o Recover possession of subject property remained
o Claim damages waived and renounced

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-

The remaining counterclaim was an offshoot of the same basic controversy between the parties, it is very
clear that it will not be barred if not set up in the answer to the complaint; thus, it is only permissive
Rule in permissive counterclaim is that for RTC to acquire jurisdiction, counterclaimant is bound to pay the
prescribed docket fees
o Any jurisdiction rendered without jurisdiction is a total nullity and may be struck down at any time,
even on appeal before SC; CC is considered null and void, with Fort Ilocandia not disputing the nonpayment of docket fees

RULE 6: Kinds of Pleadings

VICTORINA (VICTORIA) ALICE LIM LAZARO, v BREWMASTER INTERNATIONAL, INC.,

J. Carpio, GR 182779, August 23, 2010
DOCTRINE:
1.
2.

A Complaint must make a plain, concise, and direct statement of the ultimate facts on which the plaintiff
relies for his claim.
Non-appearance in the Preliminary Conference on cases filed for Summary Procedure places the case
under Rule 6 of the Revised Rules of Summary Procedure: it will be decided according to the material
allegations of the complaint.

FACTS:
Nature: Petition for review on Certiorari of CA decision awarding amount sought by respondents because their
complaints, in the words of Section 6 of the Revised Rule on Summary Procedure, the judgment warranted by the
facts alleged in the complaint.
Original Action (2005): Collection case filed by Brewmaster International (Asia Brewery distributor) against Prescillo
Lazaro and Victoria Lazaro in the MeTC of Makati for the collection of Php 180,502.00 worth of goods unpaid by the
Lazaros.
Brewmaster attached Sales Invoice in their complaint as proof. Said Sales Invoice states Total as purchaser of the
goods and Daniel Limuco (spouses employee) as the one who accepted the goods.
Prescillo filed an answer with counterclaim stating that he and petitioner had lived separately since January 2002
and he never authorized to purchase anything from respondent.
Victoria filed her answer with a counterclaim denying she transacted with Brewmaster and that the documents
show that it was not she but Total who purchased goods from the respondent.
During the scheduled preliminary conference, petitioner and co-defendant did not appear. MeTC submitted the
case for decision consequently. MeTC dismissed the case stating that Brewmaster were not able to establish the
required burden of proof to establish its claim by preponderance of evidence. They noted that Brewmaster was not
able to prove that any of the spouse received the goods.
RTC: Elevasted to RTC through notice of appeal, Brewmaster attached its memorandum as additional evidence
showing it transacted with petitioner and husband who owned a Total Gas Station where Daniel Limuco was their
employee. RTC agreed with MeTC and affirmed the decision in toto.
Court of Appeals: Via petition for review, CA reversed the decision and granted the petitioners prayers applying
Section 7 and Section 6 of the Revised Rules on Summary Procedure stating that judgment should have been
rendered as may be warranted by the facts alleged in the complaint considering that both defendants failed to
appear during the preliminary conference.
MR denied.
ISSUE:
WoN the Court of Appeals erred in applying the provisions of the Revised Rules of Summary Procedure
HELD:
No. The Court of Appeals correctly applied the Rules of Summary Procedure in this case. Since this is a collection
case under the MeTC, it should be under Summary Procedure hence the CA was correct in using the ff rules:
Sec. 7. Preliminary conference; appearance of parties. Not later than thirty (30) days after the last
answer is filed, a preliminary conference shall be held. The rules on pre-trial in ordinary cases shall be
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applicable to the preliminary conference unless inconsistent with the provisions of this Rule.chan robles
virtual law library
The failure of the plaintiff to appear in the preliminary conference shall be a cause for the dismissal of his
complaint. The defendant who appears in the absence of the plaintiff shall be entitled to
judgment on his counterclaim in accordance with Section 6 hereof. All cross-claims shall be
dismissed.
If a sole defendant shall fail to appear, the plaintiff shall be entitled to judgment in accordance with Section
6 hereof. This Rule shall not apply where one of two or more defendants sued under a common cause of
action who had pleaded a common defense shall appear at the preliminary conference.
Sec. 6. Effect of failure to answer. Should the defendant fail to answer the complaint within the period
above provided, the court, motu proprio, or on motion of the plaintiff, shall render judgment as may be
warranted by the facts alleged in the complaint and limited to what is prayed for therein:
Provided, however, that the court may in its discretion reduce the amount of damages and attorney's fees
claimed for being excessive or otherwise unconscionable. This is without prejudice to the applicability of
Section 4, Rule 15 of the Rules of Court, if there are two or more defendants.
Thus, the non-appearance of the Spouses Lazaro in the preliminary conference meant that the MeTC should have
decided on the case based on the facts alleged in the complaint. The Sales Invoice where the MeTC founded their
ruling upon is irrelevant in the case since it is evidenciary and should not have been recognized by the MeTC. The
only material facts are those alleged in the case and the MeTC should have decided on the case based on it.
**Petitioner is saying that the complaint did not state a cause of action. SC says it did. Petitioner says the invoice
proves that she was not the purchaser. SC says thats evidenciary, and the Court does not go there if the case is
supposed to be only judged according to the material allegations of the complaint.
On requirements for a complaint:
The basic requirement under the rules of procedure is that a complaint must make a plain, concise,
and direct statement of the ultimate facts on which the plaintiff relies for his claim. Ultimate
facts mean the important and substantial facts which either directly form the basis of the plaintiffs
primary right and duty or directly make up the wrongful acts or omissions of the defendant. They refer to
the principal, determinative, constitutive facts upon the existence of which the cause of action rests. The
term does not refer to details of probative matter or particulars of evidence which establish the material
elements.
The test of sufficiency of the facts alleged in a complaint to constitute a cause of action is
whether, admitting the facts alleged, the court could render a valid judgment upon the same in
accordance with the prayer of the petition or complaint. To determine whether the complaint states
a cause of action, all documents attached thereto may, in fact, be considered, particularly when referred to
in the complaint. We emphasize, however, that the inquiry is into the sufficiency, not the veracity of the
material allegations in the complaint. Thus, consideration of the annexed documents should only be taken
in the context of ascertaining the sufficiency of the allegations in the complaint.

RULE 6: Kinds of Pleadings

GOVERNMENT SERVICE INSURANCE SYSTEM (GSIS),, v HEIRS OF FERNANDO F.

CABALLERO, represented by his daughter, JOCELYN G. CABALLERO,
J. Peralta, GR 158090, October 4, 2010
DOCTRINE:
3.
4.

A Complaint must make a plain, concise, and direct statement of the ultimate facts on which the plaintiff
relies for his claim.
Non-appearance in the Preliminary Conference on cases filed for Summary Procedure places the case
under Rule 6 of the Revised Rules of Summary Procedure: it will be decided according to the material
allegations of the complaint.

FACTS:

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Nature: Petition for Review on Certiorari under Rule 45 to set aside CA decision affirming RTCs decision dismissing
the complaint and granting the petitioners counterclaim.
Factual Background: Caballero previously owned a lot which GSIS foreclosed after Caballeros failure to pay his loan
with it. During the bidding, Caballero bid but was beat by CMTC.
Original Action (2005): Fernando Caballero (and subsequently after his death, his heirs) filed a complaint in the RTC
against GSIS, RD of Cotobato, CMTC, and its officers, to nullify GSIS Board of Trustees Resolution No. 199 and to
declare void ab initio the Deed of Absolute sale between GSIS and a third party over the lot that was previously
owned by respondents Caballero.
Caballero contends:
-

The public bidding over the lot had a lot of irregularities

That CMTC (the eventual buyer) is not authorized to bid in the said auction but was allowed anyway by
GSIS
That GSIS disregarded Fernandos prior right to buy back his family home
That the RD of Cotobato acted with abuse of power when it issued a TCT in favor of CMTC without
requiring CMTC to submit its supporting papers

Answer: Petitioner GSIS filed an Answer with Affirmative Defenses and Counterclaim stating that Fernando lost his
right of redemption when it was not able to do so during the period he was given. GSIS also denies all irregularities
averred by Fernando. They are also asking for Php 130,365.81 for back rentals and interests plus additional Php
249,800.00 excluding interests for rentals Fernando illegally collected from Carmelita Ang Hao (who used to lease
the land, owner of CMTC) from 1973 to 1988.
RTC: Ruled in favor of petitioner and dismissed complaint, granting petitioners motion to dismiss and granting
GSIS counterclaim, compelling Fernando to pay the petitioner rentals collected and the said back-rentals. MR
denied.
Court of Appeals: Affirmed decision of RTC with modification, but deleted the grant of paying the rentals collected
amounting to Php 249k. CA denied reasoning that the said counterclaim for 249k is permissive and GSIS failed to
pay docket fees, thus the courts never gained jurisdiction over said counterclaim. GSIS files MR, denied.
Fernando died. Exparte motion for Substitution of Party with his daughter replacing him.
ISSUE:
WoN the Court of Appeals erred in removing the grant of Php 249,800.00 counterclaim by GSIS for the
rentals collected illegally by Fernando
HELD:
NO. The Court of Appeals decision is correct. GSIS counterclaim over the 249k for backrentals allegedly
erroneously collected by respondents is a permissive counterclaim, thus GSIS was required to pay docket fees.
Their failure to do so means that RTC never gained jurisdiction over the counterclaim and thus the RTC decision is
void.
From Bungcayao v Fort Ilocandia (not cited, but provides a good definition):
A compulsory counterclaim is any claim for money or any relief, which a defending party may
have against an opposing party, which at the time of suit arises out of, or is necessarily
connected with, the same transaction or occurrence that is the subject matter of the
plaintiffs complaint. It is compulsory in the sense that it is within the jurisdiction of the court, does
not require for its adjudication the presence of third parties over whom the court cannot acquire
jurisdiction, and will be barred in the future if not set up in the answer to the complaint in the same case.
[14] Any other counterclaim is permissive.

CRUZ-AGANA vs HON. LAGMAN, and B. SERRANO ENTERPRISES

***Complaint for Annulment of sale. Defendant files an Answer with counterclaim for damages from the malicious
filing but without certification of Non-Forum Shopping. SC held this is in the nature of a compulsory counterclaim,
NOT an initiatory pleading and thus doesnt require such certification.
FACTS:

This is a petition for certiorari under Rule 65 assailing the RTC Malolos decision recalling its previous Order
to dismiss the counterclaim of B. Serrano as against the original plaintiff Agana.
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Petitioner filed a complaint for annulment of title with preliminary injunction with the RTC Malolos. She
avers that she is the only heir of her fathers land (subject property), and that the land was fraudulently
sold to Lopez, who sold the same to B. Serrano.
B. Serrano seasonably filed its Answer with a compulsory counterclaim.
Petitioner filed MTD the counterclaim on the ground of no certification of non-forum shopping.

Procedure in the TC:

RTC initially granted the counterclaim considering it as compulsory and therefore excluded from such
requirement per Rule 7 Sec 5. Petitioner filed a MR, alleging that per Admin Circular 04-94, the certification
is needed. RTC granted MR and dismissed the counterclaim.

B. Serrano now files an MR with the RTC, averring that Admin Circular 04-94 does not apply to compulsory
counterclaims per the case of Santo Tomas vs Surla. RTC again granted MR, and recalled the dismissal of
the counterclaim.
ISSUE:
WON the compulsory counterclaim must include a certification of non-forum shopping
RULING:
NO. PETITION DENIED.
Santo Tomas clarified the scope of Administrative Circular No. 04-94 with respect to counterclaims. The Court
pointed out that this circular is intended primarily to cover "an initiatory pleading or an incipient application
of a party asserting a claim for relief." The distinction between a compulsory and a permissive counterclaim is
vital in the application of the circular.
Administrative Circular No. 04-94 does not apply to compulsory counterclaims. The circular applies to initiatory
and similar pleadings. A compulsory counterclaim set up in the answer is not an "initiatory" or similar pleading.
The initiatory pleading is the plaintiff's complaint. A respondent has no choice but to raise a compulsory
counterclaim the moment the plaintiff files the complaint. Otherwise, respondent waives the compulsory
counterclaim. In short, the compulsory counterclaim is a reaction or response, mandatory upon pain of waiver, to
an initiatory pleading which is the complaint. A compulsory counterclaim does not require a certificate of
non-forum shopping because a compulsory counterclaim is not an initiatory pleading.
In the case at bar, B. Serranos counterclaim is for DAMAGES. As set up in its Answer, because of the
unwarranted, baseless, and unjustified acts of the plaintiff, herein defendant has suffered and continue to suffer
actual damages in the sum of at least P400,000,000.00 which the law, equity, and justice require that to be paid by
the plaintiff and further to reimburse the attorney's fees of P2,000,000.00.
Clearly, it arose from the filing of Aganas complaint, and is so intertwined with the plaintiffs case that it is
incapable of proceeding independently.

PHILTRANCO SERVICES vs PARAS and INLAND TRAILWAYS, CA

FACTS:

This is a petition for Review under Rule 45 assailing the CA decision affirming the RTC decision.

Parties: Paras passenger, a bus operated by Philtranco, and another bus operated by Inland.

Paras is on Inland bus. Philtranco bus rear-ended the Inland bus, causing Inland bus to hit a cargo truck,
causing multiple injuries, and death of the Inland bus driver. Paras incurred medical expenses to heal his
fractures.

Unable to obtain sufficient financial assistance from Inland, Paras filed the suit for damages based on
breach of contract of carriage against Inland with RTC Rizal.

Inland filed an Answer denying the allegations, insisting on its exercise of extraordinary diligence and upon
leave of court, filed a third-party complaint against Philtranco and the Philtranco bus driver. Inland averred
that the cause of action should be directed against Philtranco.

RTC Rizal found Philtranco liable for damages to Paras.

All parties appealed to the CA. CA modified, increasing the amount of damages to Paras by Philtranco, and
ALSO ordering Philtranco to pay damages to Inland. Philtranco MR denied.
ISSUE:
WON moral damages can be awarded to Paras against Philtranco when the cause of action is the breach of contract
of carriage.
RULING:
YES. CA affirmed.
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Generally, moral damages are not recoverable in an action for breach of contract (since it is not included in NCC
2219). By way of exception, moral damages are recoverable in an action for breach of contract of carriage if death
results (NCC1764), or the carrier is in bad faith (NCC 2220).
Although this action does not fall under either of the exceptions, the award of moral damages to Paras was
nonetheless proper and valid. Inland filed its third-party complaint against Philtranco and its driver in order to
establish in this action that they, instead of Inland, should be directly liable to Paras for the physical injuries he had
sustained because of their negligence. Philtranco and its driver were brought into the action on the theory of
liability that the proximate cause of the collision between Inlands bus and Philtrancos bus had been the
negligence of the Philtranco bus driver.
The apparent objective of Inland was not to merely subrogate the third-party defendants for itself, as Philtranco
appears to suggest, but, rather, to obtain a different relief whereby the third-party defendants would be
held directly, fully and solely liable to Paras and Inland for whatever damages each had suffered from the
negligence committed by Philtranco and its driver. In other words, Philtranco and its driver were charged here as
joint tortfeasors who would be jointly and severally be liable to Paras and Inland.
Impleading Philtranco and its driver through the third-party complaint was correct. The device of the third-party
action, also known as impleader, was in accord with Section 12, Rule 6 of the Revised Rules of Court, the rule then
applicable. From its explicit language it does not compel the defendant to bring the third-parties into the litigation,
rather it simply permits the inclusion of anyone who meets the standard set forth in the rule. Hence, the impleader
of new parties under this rule is proper only when a right to relief exists under the applicable substantive law.
Apart from the requirement that the third-party complainant should assert a derivative or secondary claim for relief
from the third-party defendant there are other limitations on said partys ability to implead. The requisites for a
third party action are:
a. the party to be impleaded must not yet be a party to the action.
b. the original defendant has a claim against the third-party defendant.
c. the claim of the original defendant against the third-party defendant must be based upon the plaintiffs
claim against the original defendant.
d. defendant is attempting to transfer to the third-party defendant the liability asserted against him by the
original plaintiff
The third-party claim need not be based on the same theory as the main claim . For example, there are cases in
which the third-party claim is based on an express indemnity contract and the original complaint is framed in
terms of negligence. Similarly, there need not be any legal relationship between the third-party defendant and any
of the other parties to the action. Impleader also is proper even though the third partys liability is contingent, and
technically does not come into existence until the original defendants liability has been established. In addition,
the words is or may be liable in Rule 14(a) make it clear that impleader is proper even though the third-party
defendants liability is not automatically established once the third-party plaintiffs liability to the original plaintiff
has been determined.
Under this Rule, a person not a party to an action may be impleaded by the defendant either (a) on an allegation of
liability to the latter; (b) on the ground of direct liability to the plaintiff-; or, (c) both (a) and (b). The situation in (a)
is covered by the phrase "for contribution, indemnity or subrogation;" while (b) and (c) are subsumed under the
catch all "or any other relief, in respect of his opponents claim."
The claim that the third-party complaint asserts against the third-party defendant must be predicated on
substantive law. Here, the substantive law on which the right of Inland to seek such other relief through its thirdparty complaint rested were Article 2176 and Article 2180 of the NCC.
Paras cause of action against Inland (breach of contract of carriage) did not need to be the same as the cause of
action of Inland against Philtranco and its driver (tort or quasi-delict) in the impleader. It is settled that a defendant
in a contract action may join as third-party defendants those who may be liable to him in tort for the plaintiffs
claim against him, or even directly to the plaintiff. The case at bar is one in which the third party defendants are
brought into the action as directly liable to the plaintiffs.

SINGAPORE AIRLINES VS CA
Sancho Rayos was an overseas contract worker who had a renewed contract with the Arabian American Oil
Company (Aramco). As part of Aramco's policy, its employees returning to Dhahran, Saudi Arabia from Manila are
allowed to claim reimbursement for amounts paid for excess baggage of up to 50 kilograms, as long as it is
properly supported by receipt. Rayos took a Singapore Airlines (SIA) flight to report for his new assignment, with a
50-kilogram excess baggage for which he paid P4,147.50. Aramco reimbursed said amount upon presentation of
the excess baggage ticket.
Rayos was being investigated by Aramco for fraudulent claims. He immediately asked his wife Beatriz in Manila to
seek a written confirmation from SIA that he indeed paid for an excess baggage of 50 kilograms. SIA's manager
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notified Beatriz of their inability to issue the certification requested because their records showed that only three
kilograms were entered as excess and accordingly charged. SIA issued the certification requested by the spouses
Rayos only on April 8, 1981, after its investigation of the anomaly and after Beatriz, assisted by a lawyer,
threatened it with a lawsuit. Aramco gave Rayos his travel documents without a return visa. His employment
contract was not renewed.
Spouses Rayos, convinced that SIA was responsible for the non-renewal of Rayos' employment contract with
Aramco, sued it for damages. SIA claimed that it was not liable to the Rayoses because the tampering was
committed by its handling agent, Philippine Airlines (PAL). It then filed a third-party complaint against PAL. PAL, in
turn, countered that its personnel did not collect any charges for excess baggage; that it had no participation in the
tampering of any excess baggage ticket; and that if any tampering was made, it was done by SIA's personnel.
RTC ruled in favor of Rayos and ordered SIA to pay the plaintiff. The lower court then ordered third-party defendant
PAL to pay defendant and third-party plaintiff SIA whatever the latter has paid the plaintiffs.
All parties appealed to the Court of Appeals. SIA's appeal was dismissed for non-payment of docket fees, which
dismissal was eventually sustained by this Court. The Rayos spouses withdrew their appeal when SIA satisfied the
judgment totaling P802,435.34.
In its appeal, PAL claimed that the spouses Rayos had no valid claim against SIA because it was the inefficiency of
Rayos which led to the non-renewal of his contract with Aramco, and not the alleged tampering of his excess
bagged ticket On the other hand, SIA argued that the only issue in the said appeal is whether or not it was entitled
to reimbursement from PAL. the case of Firestone Tire and Rubber Company of the Philippines v. Tempongko.
CA granted PALs appeal.
Issue : Whether or not CA erred in granting the appeal of PAL assailing for the first time on appeal the trial courts
decision sustaining the validity of plaintiff's complaint against SIA.
Held : Petition is impressed with merit.
Ratio:
The petitioner correctly pointed out that the case of Firestone squarely applies to the case at bench. In said case,
the Court expounded on the nature of a third-party complaint and the effect of a judgment in favor of the plaintiff
against the defendant and in favor of such defendant as third-party plaintiff against, ultimately, the third-party
defendant. The Court stated:
The third-party complaint is, therefore, a procedural device whereby a "third party" who is neither a party
nor privy to the act or deed complained of by the plaintiff, may be brought into the case with leave of
court, by the defendant, who acts as third-party plaintiff to enforce against such third-party defendant a
right for contribution, indemnity, subrogation or any other relief, in respect of the plaintiff's claim. The
third-party complaint is actually independent of and separate and distinct from the plaintiff's complaint. . . .
When leave to file the third-party complaint is properly granted, the Court renders in effect two judgments
in the same case, one on the plaintiff's complaint and the other on the third-party complaint. When he
finds favorably on both complaints, as in this case, he renders judgment on the principal complaint in favor
of plaintiff against defendant and renders another judgment on the third-party complaint in favor of
defendant as third-party plaintiff, ordering the third-party defendant to reimburse the defendant whatever
amount said defendant is ordered to pay plaintiff in the case. Failure of any of said parties in such a case to
appeal the judgment as against him makes such judgment final and executory. By the same token, an
appeal by one party from such judgment does not inure to the benefit of the other party who has not
appealed nor can it be deemed to be an appeal of such other party from the judgment against him.
It must be noted that in the proceedings below, PAL disclaimed any liability to the Rayoses and imputed the alleged
tampering to SIA's personnel. On appeal, however, PAL changed its theory and averred that the spouses Rayos had
no valid claim against SIA on the around that the non-renewal of Sancho's contract with Aramco was his
unsatisfactory performance rather than the alleged tampering of his excess baggage ticket. In response to PAL's
appeal, SIA argued that it was improper for PAL to question SIA's liability to the plaintiff, since this was no longer an
issue on account of the finality and, in fact, satisfaction of the judgment.
One of the defenses available to SIA was that the plaintiffs had no cause of action, that is, it had no valid claim
against SIA. SIA investigated the matter and discovered that tampering was, indeed, committed, not by its
personnel but by PAL's. This became its defense as well as its main cause of action in the third-party complaint it
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filed against PAL. For its part, PAL could have used the defense that the plaintiffs had no valid claim against it or
against SIA. This could be done indirectly by adopting such a defense in its answer to the third-party complaint if
only SIA had raised the same in its answer to the main complaint, or directly by so stating in unequivocal terms in
its answer to SIA's complaint that SIA and PAL were both blameless. Yet, PAL opted to deny any liability which
it imputed to SIA's personnel. It was only on appeal in a complete turn around of theory that PAL
raised the issue of no valid claim by the plaintiff against SIA. This simply cannot be allowed.
While the third-party defendant; would benefit from a victory by the third-party plaintiff against the plaintiff, this is
true only when the third-party plaintiff and third-party defendant have non-contradictory defenses. Here, the
defendant and third-party defendant had no common defense against the plaintiffs' complaint, and they were even
blaming each other for the fiasco.
The judgment, therefore, as far as the Rayoses and SIA are concerned, has already gained finality. What remains to
be resolved, as correctly pointed out by petitioner, is whether it is entitled to reimbursement from PAL, considering
that PAL appealed that part of the decision to the appellate court. This is where the rule laid down in Firestone
becomes applicable.
PAL should not, however, absorbed all the damages. Because of SIAs mishandling of the request by delaying the
issuance of certificate, which led to the non-renewal of Rayos contract, SIA should also be held liable for half of the
total damages awarded to Rayos.

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