Cabaero vs. Cantos

A compulsory counterclaim arising from the same transaction as the criminal offense may be filed in a criminal case where the civil action is impliedly instituted, but in the absence of clear-cut procedural rules governing its prosecution, trial courts should set aside or refuse cognizance of such counterclaim without prejudice to its filing in separate proceedings. The trial court should confine its jurisdiction to the criminal aspect and the possible civil liability of the accused arising out of the crime.

The petitioners were officers of Aqualand Ventures & Management Corporation, a joint business venture organized by petitioner Amado F. Cabaero and private respondent Epifanio Ceralde. The criminal case arose from an alleged fraudulent scheme involving funds advanced by Ceralde for the purchase of six parcels of land in Pangasinan. The case implicates Section 1, Rule 111 of the Rules on Criminal Procedure, which provides that unless the offended party waives, reserves, or institutes the civil action prior to the criminal action, the civil action for recovery of civil liability is impliedly instituted with the criminal action.

Petitioners Amado F. Cabaero and Carmen C. Perez were charged with estafa in an Information filed on October 18, 1990, before the Regional Trial Court of Manila. The Information alleged that petitioners, conspiring together, defrauded private respondent Epifanio Ceralde of P1,550,000.00 by inducing him to advance said amount to M.C. Castro Construction Co. as payment for six parcels of land in Pangasinan purchased by Aqualand Ventures & Management Corporation, a joint business venture organized by Cabaero and Ceralde. The amount was to be returned to Ceralde once a loan of P1,500,000.00 applied for by the corporation with Solid Bank was released. Petitioners allegedly induced the bank cashier to release the loan check to Perez, who encashed it, and instead of turning over the amount to Ceralde, misappropriated and converted it to their own use despite repeated demands.

Arraigned on January 7, 1991, petitioners entered a plea of not guilty. On February 5, 1991, Atty. Ambrosio Blanco entered his appearance as private prosecutor. The Presiding Judge of Branch IV, Hon. Elisa R. Israel, inhibited herself from further hearing the case, and it was re-raffled to Branch VII presided over by respondent Judge Alfredo Cantos.

On April 2, 1991, petitioners filed an Answer with Counterclaim alleging that the money loaned from Solidbank was duly applied to the purchase of the six parcels of land, and that the filing of the Information was unjustified and malicious. They prayed for dismissal of the information and the civil action impliedly instituted therein, and sought P1,500,000.00 in moral damages, P500,000.00 in exemplary damages, P100,000.00 in attorney's fees, and P20,000.00 in litigation expenses from Ceralde.

During the initial hearing on April 15, 1991, the prosecution verbally moved to expunge the answer with counterclaim. The private prosecutor justified the motion on two grounds: (1) the trial court had no jurisdiction over the answer with counterclaim for non-payment of prescribed docket fees, and (2) the compulsory counterclaim against the complainant was barred for failure to file it before arraignment. Petitioners opposed, citing Javier vs. Intermediate Appellate Court and arguing that their counterclaim was compulsory in nature, thus not requiring docket fees, and that the Rules do not specifically provide for the period for filing counterclaims in criminal cases.

Respondent Judge Cantos granted the prosecution's motion to expunge on July 1, 1991, and denied reconsideration on August 21, 1991. Petitioners then filed the instant petition for certiorari. The Solicitor General, appearing as counsel for respondent court, sided with petitioners in maintaining that the petition was meritorious. Private respondent Ceralde belatedly interposed litis pendentia, alleging that the petition was barred by a cross-claim filed by petitioners in a separate civil case, but this defense was deemed waived for not having been raised in the trial court.

• Right to File Counterclaim: Petitioners invoked Section 1, Rule 111 of the Rules on Criminal Procedure, contending that it is not only a right but an "outright duty" of the accused to file an answer with counterclaim since failure to do so shall result in the counterclaim being forever barred.
• Compulsory Counterclaim and Docket Fees: Petitioners argued that inasmuch as their counterclaim was compulsory in nature, they were not required to pay docket fees therefor, citing Javier vs. Intermediate Appellate Court which laid down the rule that a counterclaim should be permitted in a criminal action where the civil aspect is not reserved.
• Timeliness of Filing: Petitioners contended that the Rules do not specifically provide for the period for filing counterclaims in criminal cases, whereas Section 3 of Rule 9 and Section 9 of Rule 6 allow the filing, with leave of court, of a counterclaim at any time before judgment.
• Completeness of Records: Petitioners argued that respondent Judge erred in expunging all records relating to the Answer with Counterclaim, as incomplete and inaccurate records on appeal would frustrate the ends of justice and due process.
• Constitutional Requirement: Petitioners alleged that the Order of July 1, 1991, failed to state the legal basis therefor as required by Section 14, Article VIII of the Constitution, leaving them to speculate on why they were being deprived of their right to plead and prove their defenses and counterclaim.

• Litis Pendentia: Private respondent belatedly interposed litis pendentia, alleging that the present petition was barred by the cross-claim of petitioners against Aqualand Ventures and Management Corporation in Civil Case No. 90-53035 filed by Solidbank.
• Jurisdiction and Docket Fees: The private prosecutor argued that the trial court had no jurisdiction over the answer with counterclaim for non-payment of the prescribed docket fees.
• Barred Counterclaim: The private prosecutor argued that the compulsory counterclaim against the complainant was barred for failure to file it before arraignment.

• Propriety of Answer with Counterclaim: Whether the respondent judge committed grave abuse of discretion, amounting to lack or excess of jurisdiction, in ordering that the answer with counterclaim of the petitioners in Criminal Case No. 90-88126, together with all pleadings filed in relation thereto, be expunged from the records.
• Litis Pendentia as a Defense: Whether the petition is barred by litis pendentia based on the cross-claim filed by petitioners in a separate civil case.
• Payment of Filing Fees: Whether docket fees are required for the filing of a compulsory counterclaim in a criminal case.

• Propriety of Answer with Counterclaim: Modified. The questioned Orders dated July 1, 1991 and August 21, 1991 were modified, and the counterclaim of the accused was set aside without prejudice. The trial court was directed to proceed with the trial of the criminal action and the civil action impliedly instituted therein with all judicious dispatch.
• Litis Pendentia as a Defense: Deemed waived. The ground of litis pendentia, not having been argued in the court a quo, was deemed waived pursuant to Section 8, Rule 15 of the Rules of Court, which requires that a motion attacking a pleading or proceeding shall include all objections then available.
• Payment of Filing Fees: No. Inasmuch as the counterclaim is compulsory, there is no necessity to pay docket fees, as the Rules do not require them. The Court cited Sun Insurance Office, Ltd. vs. Asuncion to clarify that the same rule on payment of docket fees applies to permissive counterclaims, third-party claims and similar pleadings, but not to compulsory counterclaims.

• Propriety of Answer with Counterclaim: The Court recognized that under Javier vs. Intermediate Appellate Court, a counterclaim for malicious prosecution is compulsory in nature and should be filed in the criminal case upon the implied institution of the civil action. The Court noted that in both Javier and the present case, the accused sought recovery of damages for what they perceived to be malicious prosecution against them. A claim for malicious prosecution as a compulsory counterclaim has no appropriate venue other than the same criminal case which is alleged to be a malicious suit. However, the Court expressed reservations about the application of Javier due to the obvious lacuna in the Rules of Court, which contains no express provision for the adjudication of a counterclaim in a civil action impliedly instituted in a criminal case. The Court enumerated several problems: (1) the rules on criminal procedure are silent on how such counterclaim shall be pursued; (2) a judgment in a criminal action is not required to provide for the award of a counterclaim under Section 2, Rule 120; (3) allowing counterclaims will delay the criminal action; (4) adjudication of compulsory counterclaims logically includes the application of other rules which apply only to civil actions; (5) an accused is not sufficiently apprised of the specific basis of the claims against him; (6) the accused may file a motion for bill of particulars or take advantage of discovery procedures; (7) the Rules do not specify the reckoning date for filing an answer in an impliedly instituted civil action; (8) an accused can file his answer with counterclaim only after the initial hearing because the private complainant may still reserve his civil action; (9) confusion in the application of the rules will encourage litigants to challenge interlocutory incidents, causing delay; and (10) a cause of action for malicious prosecution may be premature because there is as yet no finding of such wrongful prosecution. The Court concluded that the real problem lies in the absence of clear-cut rules governing the prosecution of impliedly instituted civil actions. Thus, the counterclaim of the accused cannot be tried together with the criminal case because it will unnecessarily complicate and confuse the criminal proceedings. The trial court should confine itself to the criminal aspect and the possible civil liability of the accused arising out of the crime. The counterclaim should be set aside or refused cognizance without prejudice to their filing in separate proceedings at the proper time.
• Litis Pendentia as a Defense: The Court refused to take up the merits of the litis pendentia argument because considerations of due process prevented it. The cross-claim was never raised in the trial court, and the Rules require that a motion attacking a pleading or proceeding shall include all objections then available, and all objections not so included shall be deemed waived.
• Payment of Filing Fees: The Court agreed with petitioners that inasmuch as the counterclaim is compulsory, there is no necessity to pay docket fees. The Court cited Sun Insurance Office, Ltd. vs. Asuncion which clarified that it is the payment of the prescribed docket fee that vests a trial court with jurisdiction over the subject-matter or nature of the action, and that the same rule applies to permissive counterclaims, third-party claims and similar pleadings, but obviously no docket fees are required in connection with the filing of a compulsory counterclaim.

• Compulsory Counterclaim in Criminal Cases — A counterclaim is compulsory and is considered barred if not set up where the following circumstances are present: (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 of whom the court cannot acquire jurisdiction; and (3) the court has jurisdiction to entertain the claim. The Court applied this doctrine in recognizing that a claim for malicious prosecution is a compulsory counterclaim that should be filed in the criminal case upon the implied institution of the civil action, but held that the absence of clear-cut procedural rules prevents its adjudication together with the criminal case.
• Implied Institution of Civil Action — Under Section 1, Rule 111 of the Revised Rules of Court, when a criminal action is instituted, the civil action for the recovery of civil liability is impliedly instituted with the criminal action, unless the offended party waives the civil action, reserves his right to institute it separately, or institutes the civil action prior to the criminal action. Such civil action includes recovery of indemnity under the Revised Penal Code, and damages under Articles 32, 33, 34 and 2176 of the Civil Code arising from the same act or omission of the accused. The Court applied this doctrine in recognizing that the accused should have the right to file a counterclaim in the criminal case.
• Waiver of Objections — Under Section 8, Rule 15 of the Rules of Court, a motion attacking a pleading or proceeding shall include all objections then available, and all objections not so included shall be deemed waived. The Court applied this doctrine in deeming the ground of litis pendentia waived for not having been argued in the court a quo.
• Payment of Docket Fees — It is not simply the filing of the complaint or appropriate initiatory pleading, but the payment of the prescribed docket fee, that vests a trial court with jurisdiction over the subject-matter or nature of the action. The same rule applies to permissive counterclaims, third-party claims and similar pleadings, which shall not be considered filed until and unless the filing fee prescribed therefor is paid. No docket fees are required in connection with the filing of a compulsory counterclaim.

• "A counterclaim is compulsory and is considered barred if not set up where the following circumstances are present: (1) that 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) that it does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction, and (3) that the court has jurisdiction to entertain the claim." — This passage from Javier vs. Intermediate Appellate Court, quoted by the Court, defines the canonical formulation of a compulsory counterclaim and is the doctrinal basis for recognizing the accused's right to file such a claim in a criminal case.
• "By the foregoing discussion, we do not imply any fault in Javier. The real problem lies in the absence of clear-cut rules governing the prosecution of impliedly instituted civil actions and the necessary consequences and implications thereof. For this reason, the counter-claim of the accused cannot be tried together with the criminal case because, as already discussed, it will unnecessarily complicate and confuse the criminal proceedings." — This passage states the Court's ratio decidendi: while Javier was correctly decided, the lack of procedural rules prevents the adjudication of counterclaims together with the criminal case.
• "At balance, until there are definitive rules of procedure to govern the institution, prosecution and resolution of the civil aspect (and the consequences and implications thereof) impliedly instituted in a criminal case, trial courts should limit their jurisdiction to the civil liability of the accused arising from the criminal case." — This passage articulates the controlling rule that trial courts should confine their jurisdiction to the criminal aspect and the civil liability of the accused arising from the crime.

• Javier vs. Intermediate Appellate Court, 171 SCRA 605 (1989) — Controlling precedent. The Court relied on this case in recognizing that a counterclaim for malicious prosecution is compulsory in nature and should be filed in the criminal case upon the implied institution of the civil action. The Court distinguished its application, however, due to the absence of clear-cut procedural rules.
• Sun Insurance Office, Ltd. vs. Asuncion, 170 SCRA 274 (1989) — Followed. The Court cited this case to clarify the instances when docket fees are required to be paid to enable the court to acquire jurisdiction, and to support the conclusion that no docket fees are required for compulsory counterclaims.
• Vda. de Chua vs. Intermediate Appellate Court, 229 SCRA 99 (1994) — Cited. The Court cited this case for the proposition that a counterclaim stands on the same footing and is to be tested by the same rules as if it were an independent action.
• Sapugay vs. Court of Appeals, 183 SCRA 464 (1990) — Cited. The Court cited this case for the definition of a counterclaim as any claim for money or other relief which a defending party may have against an opposing party.
• Lopez vs. Gloria and Sheriff of Leyte, 40 Phil. 26 (1919) — Cited. The Court cited this case for the definition of a compulsory counterclaim as one 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 plaintiff's complaint.
• Papa vs. Banaag, 17 SCRA 1083 (1966) — Cited. The Court cited this case for the proposition that a compulsory counterclaim must be set up if it is within the jurisdiction of the court and 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.
• Lopez Realty, Inc. vs. Fontecha, 247 SCRA 183 (1985) — Cited. The Court cited this case in connection with considerations of due process preventing the Court from taking up the merits of the litis pendentia argument.

• Section 1, Rule 111, Rules on Criminal Procedure — Provides that when a criminal action is instituted, the civil action for the recovery of civil liability is impliedly instituted with the criminal action, unless the offended party waives the civil action, reserves his right to institute it separately, or institutes the civil action prior to the criminal action. The Court applied this provision in recognizing the accused's right to file a counterclaim in the criminal case.
• Section 2, Rule 120, Rules of Court — Provides the form and contents of judgment in a criminal action, stating that if it is for conviction, the judgment shall state the civil liability or damages caused by the wrongful act to be recovered from the accused by the offended party. The Court noted that a judgment in a criminal action is not required to provide for the award of a counterclaim.
• Section 6, Rule 110, Rules of Court — Provides the sufficiency of complaint or information, stating that it is sufficient if it states the name of the accused, the designation of the offense, the acts or omissions complained of, the name of the offended party, the approximate time of the commission of the offense, and the place wherein the offense was committed. The Court noted that this provision does not mandate the inclusion of the ultimate facts which can be specifically admitted or denied in an answer.
• Section 8, Rule 15, Rules of Court — Requires that a motion attacking a pleading or proceeding shall include all objections then available, and all objections not so included shall be deemed waived. The Court applied this provision in deeming the ground of litis pendentia waived.
• Section 1, Rule 30, Rules of Court — Provides the order of trial, stating that the defendant shall offer evidence in support of his defense, counterclaim, cross-claim, and third-party claim. The Court cited this provision to show that the rules on civil procedure expressly recognize a defendant's entitlement to plead his counterclaim.
• Section 8, Rule 8, Rules of Court — Provides that the genuineness and due execution of an actionable document are deemed admitted unless specifically denied under oath. The Court cited this provision as one of the matters that may be invoked in connection with the filing of an answer with a counterclaim.
• Article 1288, Civil Code — Disallows compensation, a mode for extinguishing obligation, if one of the debts consists in civil liability arising from a penal offense. The Court cited this provision as substantively consistent with the conclusion that the counterclaim should be set aside without prejudice.
• Section 14, Article VIII, Constitution — Requires that no decision shall be rendered by any court without expressing therein clearly and distinctly the facts and the law on which it is based. Petitioners invoked this provision in alleging that the Order of July 1, 1991, failed to state the legal basis therefor.

Davide, Jr., Romero, Bellosillo, Melo, Puno, Mendoza, Francisco and Torres, Jr., JJ., concurred. Narvasa, C.J. and Kapunan, J., concurred in the result. Padilla, J., joined J. Vitug in his separate opinion. Hermosisima, Jr., J., was on leave.

• Justice Regalado — Filed a separate opinion, the contents of which are not detailed in the provided text.
• Justice Vitug — Filed a separate opinion, joined by Justice Padilla, the contents of which are not detailed in the provided text.