Alba, Jr. vs. Malapajo

A counterclaim is compulsory when it arises out of or is connected with the transaction or occurrence constituting the subject matter of the opposing party's claim, such that the same evidence would support or refute both the claim and counterclaim, and conducting separate trials would result in substantial duplication of time and effort; in such cases, no docket fees or certification against forum shopping is required.

Petitioner Arturo C. Alba, Jr. was the registered owner of a 98,146 square meter parcel of land in Bolo, Roxas City, covered by TCT No. T-22345. He discovered that his title was canceled and a new title (TCT No. T-56840) was issued in the names of respondents Raymund and Ramil Malapajo, allegedly by virtue of a deed of absolute sale for P500,000.00 which he claimed was forged. Respondents contended they were innocent purchasers for value and asserted that prior to the sale, petitioner had obtained loans from them and their mother, secured by real estate mortgages over the same property.

• Petitioner Arturo C. Alba, Jr., represented by his attorneys-in-fact, was the registered owner of a 98,146 square meter parcel of land situated in Bolo, Roxas City, covered by TCT No. T-22345.
• The title was subsequently canceled and new TCT No. T-56840 was issued in the names of respondents Raymund D. Malapajo and Ramil D. Malapajo, allegedly by virtue of a deed of absolute sale executed by petitioner for a consideration of P500,000.00.
• Petitioner alleged that the deed of sale was a forged document and that respondents were co-authors of the forgery.
• Respondents claimed they were innocent purchasers for value and that the deed was a unilateral document presented to them already prepared and notarized.
• Respondents alleged that prior to the sale, petitioner had obtained loans from them (P600,000.00) and from their mother, Alma D. David, both secured by separate real estate mortgages over the subject property, neither of which had been discharged.
• Respondents filed a counterclaim for reimbursement of the loans plus agreed monthly interest in the event the deed of absolute sale is declared null and void on the ground of forgery.
• Petitioner filed a motion to set the case for preliminary hearing as if a motion to dismiss had been filed, arguing that the counterclaims were permissive in nature and should be dismissed for lack of docket fees and certification against forum shopping, and that respondents were not real parties-in-interest regarding the loan from their mother.

• The counterclaims interposed by respondents are permissive, not compulsory, because they do not arise out of or are not necessarily connected with the subject matter of the opposing party's claim.
• As permissive counterclaims, they constitute initiatory pleadings that should have been accompanied by a certification against forum shopping and payment of corresponding docket fees, failing which they should be dismissed.
• Respondents are not the real parties-in-interest with respect to the loan allegedly extended by their mother to petitioner, and this portion of the counterclaim is dismissible on that ground.
• The Court of Appeals committed serious error when it dismissed the petition for certiorari based on pure technicality regarding proof of service, thereby disregarding the merits of the petition.

• They are innocent purchasers for value who relied on the deed of absolute sale which was presented to them already prepared, accomplished, and notarized.
• The plaintiff obtained loans from them and their mother secured by real estate mortgages over the same property, which mortgages have never been discharged.
• The counterclaim is compulsory because it arises from the same transaction or occurrence as the main claim, specifically the sale and mortgage of the subject property.
• The logical relationship between the claim and counterclaim is evident as the same evidence that would prove the validity of the mortgages would disprove the allegation of forgery regarding the deed of sale.

• Procedural Issues:
  • Whether the petitioner complied with the requirements for proof of service in filing the petition for certiorari with the Court of Appeals.
• Substantive Issues:
  • Whether the respondents' counterclaim for reimbursement of loans is compulsory or permissive in nature.
  • Whether the counterclaim requires payment of docket fees and filing of a certification against forum shopping for the court to acquire jurisdiction.

• Procedural:
  • The Court of Appeals erred in dismissing the petition for certiorari for alleged failure to show proper proof of service.
  • Under Section 13, Rule 13 of the 1997 Rules of Civil Procedure, service made through registered mail is proved by the registry receipt issued by the mailing office and an affidavit of the person mailing showing compliance with the rule.
  • Petitioner complied with these requirements: the secretary of petitioner's counsel executed an affidavit of personal service and service by registered mail, and attached registry receipts issued by the Roxas City Post Office.
  • The CA resolutions dated February 28, 2011 and August 31, 2011 are set aside.
• Substantive:
  • The counterclaim is compulsory, not permissive.
  • Applying the four tests: (1) the issues of fact and law raised by the claim and counterclaim are largely the same; (2) res judicata would bar a subsequent suit on defendants' claims; (3) substantially the same evidence would support or refute both the claim and counterclaim; and (4) there is a logical relation between the claim and counterclaim.
  • The counterclaim for reimbursement of loans is connected with the transaction or occurrence constituting the subject matter of the opposing party's claim (the property sale and prior loans secured by mortgage on the same property).
  • Notably, the same evidence to sustain respondents' counterclaim would disprove petitioner's case (e.g., proving the validity of the mortgages and loans would contradict the claim of forgery regarding the sale).
  • Since the counterclaim is compulsory, it must be set up in the same action; otherwise, it would be barred forever. There is no need for respondents to pay docket fees or file a certification against forum shopping.
  • The petition for certiorari is denied and the RTC Orders dated June 4, 2010 and September 30, 2010 are affirmed.

• Compulsory vs. Permissive Counterclaim — A compulsory counterclaim 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; a permissive counterclaim does not arise out of or is not necessarily connected with the subject matter of the opposing party's claim and is essentially an independent claim that may be filed separately. In this case, the counterclaim was deemed compulsory because it shared a logical relationship with the main claim regarding the same property and the same evidence would refute both claims.
• Four Tests for Determining Compulsory Counterclaims — The tests are: (a) Are the issues of fact and law raised by the claim and by the counterclaim largely the same? (b) Would res judicata bar a subsequent suit on defendants' claims, absent the compulsory counterclaim rule? (c) Will substantially the same evidence support or refute plaintiffs' claim as well as the defendants' counterclaim? and (d) Is there any logical relation between the claim and the counterclaim? A positive answer to all four questions indicates that the counterclaim is compulsory.
• Proof of Service by Registered Mail — Under Section 13, Rule 13 of the 1997 Rules of Civil Procedure, proof of service by registered mail consists of an affidavit of the person mailing showing facts of compliance and the registry receipt issued by the mailing office. Registry receipts alone are insufficient; they merely evidence the mail matter with the post office of the sender, not delivery to the addressee.

• "A counterclaim is any claim which a defending party may have against an opposing party."
• "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."
• "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."
• "A positive answer to all four questions would indicate that the counterclaim is compulsory."
• "There is a logical relationship between the claim and the counterclaim, as the counterclaim is connected with the transaction or occurrence constituting the subject matter of the opposing party's claim."
• "Since respondents' counterclaim is compulsory, it must be set up in the same action; otherwise, it would be barred forever."

• Lafarge Cement Philippines, Inc. v. Continental Cement Corporation — Cited for the distinction between compulsory and permissive counterclaims and the rule that a compulsory counterclaim is barred if not set up in the same action.
• Lopez v. Gloria — Cited in Lafarge for the definition of a permissive counterclaim as one that does not arise out of or is not necessarily connected with the subject matter of the opposing party's claim.
• Valencia v. Court of Appeals — Cited for the four tests to determine whether a counterclaim is compulsory or permissive.
• Tan v. Kaakbay Finance Corporation — Cited for the principle that there must be a logical relation between the claim and the counterclaim, and that conducting separate trials would result in substantial duplication of time and effort.

• Section 10, Rule 13 of the 1997 Rules of Civil Procedure — Provides that service by registered mail is complete upon actual receipt by the addressee, or after five (5) days from the date he received the first notice of the postmaster, whichever is earlier.
• Section 13, Rule 13 of the 1997 Rules of Civil Procedure — Specifies that proof of service by registered mail shall be made by affidavit of the person mailing and the registry receipt issued by the mailing office.
• Rule 6, Section 6 of the Rules of Court — Defines a counterclaim as any claim which a defending party may have against an opposing party.
• Rule 6, Section 7 of the Rules of Court — Defines a compulsory counterclaim as one which arises out of or is connected with the transaction or occurrence constituting the subject matter of the opposing party's claim.