Sy-Vargas vs. Estate of Rolando Ogsos, Sr.

A counterclaim is permissive, not compulsory, when the issues, evidence, and legal theories required to resolve it are substantially different from those in the main action, such that separate trials would not entail duplication of effort; however, non-payment of docket fees for a permissive counterclaim does not warrant dismissal where the claimant relied in good faith on the trial court's erroneous classification of the claim as compulsory and there was no intent to defraud the government, with the unpaid fees instead constituting a judgment lien on the monetary award.

On February 10, 1994, Rolando Ogsos, Sr. and the Heirs of Fermina Pepico, represented by their Attorney-in-Fact Catalino V. Noel, entered into a Contract of Lease covering five parcels of agricultural land with an aggregate area of 23 hectares situated in Maaslum, Manjuyod, Negros Oriental. The contract required Ogsos, Sr. to pay 230 piculs (290.95 liquid-kilograms) of centrifugal sugar per crop year from 1994-1995 to 2000-2001. On June 5, 1996, the term was extended for three additional years until the end of crop year 2003-2004 due to improvements introduced by Ogsos, Sr. On December 30, 1996, the contract was amended to modify the lease rental to P150,000.00 cash per crop year beginning 1996-1997. Elizabeth Sy-Vargas and Kathryn T. Sy, as heirs of Fermina Pepico, later alleged that lease rentals from crop years 1994-1995 to 1998-1999 were unpaid, while respondents claimed that petitioner unlawfully took possession of the leased premises in December 1998 and harvested the sugarcane crops, depriving them of profits for the remaining term of the lease.

• On February 10, 1994, Ogsos, Sr. entered into a lease contract with the Heirs of Fermina Pepico covering five parcels of agricultural land (23 hectares) in Maaslum, Manjuyod, Negros Oriental, with a rental of 230 piculs of centrifugal sugar per crop year for the period 1994-1995 to 2000-2001.
• On June 5, 1996, the lease term was extended for three years until the end of crop year 2003-2004 due to improvements made by Ogsos, Sr.
• On December 30, 1996, the contract was amended to change the rental to P150,000.00 cash per crop year beginning 1996-1997.
• Petitioner and Kathryn T. Sy (heirs of Fermina) filed a complaint on April 27, 2000 claiming unpaid rentals for crop years 1994-1995 to 1998-1999, alleging that respondents abandoned the premises in crop year 1999-2000.
• Respondents countered that they paid rentals faithfully until crop year 1997-1998, but stopped when petitioner and Kathryn unlawfully took possession of the leased premises in December 1998 and harvested the sugarcane ready for harvest, applying the proceeds to the alleged unpaid rent.
• In 1998, Ogsos, Sr. and his wife fell ill, forcing them to obtain loans from businessmen (Emiliano Bacang, Zaldy Roleda, and Pastor Domocol) with an arrangement that the creditors would harvest the sugarcane to apply the proceeds to the loans; however, petitioner and Kathryn prevented the creditors from harvesting, resulting in default on the loans.
• Ogsos, Sr. died on March 22, 2000.
• Based on Planter's Production Reports, the average production from crop years 1994 to 1997-1998 was 1,308.68 liquid-kilograms of sugar and 30.409 tons of molasses per year.
• The RTC found that petitioner and Kathryn forcibly deprived respondents of possession in December 1998 despite respondents' payment of lease rentals, thereby breaching the lease contract.
• The RTC awarded respondents lost profits for six crop years (1999 to 2004) totaling P10,391,981.76, representing the value of sugar and molasses that could have been produced had respondents not been deprived of possession.

• The motion for reconsideration filed on March 31, 2014 was timely because March 29, 2014 (the 15th day from receipt of the decision on March 14) fell on a Saturday, making Monday, March 31 the next working day under Section 1, Rule 22 of the Rules of Court.
• The counterclaim for damages is permissive, not compulsory, because it does not arise out of the same transaction or occurrence as the main action for specific performance and collection of unpaid rentals; therefore, respondents should have paid docket fees, and the counterclaim should be dismissed for failure to do so.
• The factual findings of the trial court regarding unlawful dispossession and lost profits are erroneous and not supported by evidence.

• The motion for reconsideration was filed out of time because the 15-day period expired on March 29, 2014, and the filing on March 31 was already late.
• The counterclaim is compulsory in nature because it arises out of the same lease contract and transaction subject of the main case; alternatively, even if permissive, it should not be dismissed because the dismissal of the main case was caused by the plaintiff's fault, and respondents relied in good faith on the lower courts' finding that the counterclaim was compulsory.
• Respondents are entitled to damages for lost profits for six crop years because petitioner unlawfully deprived them of possession of the leased premises in December 1998, violating the lessor's obligation to maintain the lessee in peaceful and adequate enjoyment of the property.

• Procedural Issues:
  • Whether the Court of Appeals correctly ruled that the motion for reconsideration was filed out of time.
  • Whether the counterclaim is compulsory or permissive in nature, and whether the failure to pay docket fees warrants its dismissal.
• Substantive Issues:
  • Whether respondents are entitled to the counterclaim for lost profits.
  • Whether the award of lost profits should be reduced by the amount of unpaid lease rentals.

• Procedural:
  • The motion for reconsideration was filed on time. Under Section 1, Rule 22 of the Rules of Court, when the last day of a prescribed period falls on a Saturday, the time does not run until the next working day. Since March 29, 2014 was a Saturday, the filing on Monday, March 31, 2014 was proper.
  • The counterclaim is permissive, not compulsory. Applying the four tests from Spouses Mendiola v. CA: (1) the issues in the main case (unpaid rent) and counterclaim (damages for unlawful taking) are different; (2) res judicata would not bar a subsequent suit on the counterclaim; (3) the evidence required for each claim is different; and (4) there is no logical relation requiring substantial duplication of effort. The logical relation test is the compelling factor, and here the claims involve different factual occurrences.
  • However, the counterclaim should not be dismissed for non-payment of docket fees. While permissive counterclaims require docket fees for jurisdiction, dismissal is not automatic where: (a) the fees are paid within a reasonable period; (b) there is no intent to defraud the government; and (c) the claimant relied in good faith on the lower courts' erroneous classification of the claim as compulsory. The unpaid docket fees shall constitute a judgment lien on the monetary award under Section 2, Rule 141 of the Rules of Court.
• Substantive:
  • Respondents are entitled to the counterclaim for lost profits. Factual findings of the trial court, when affirmed by the Court of Appeals, are final and conclusive and may not be reviewed on appeal absent any of the recognized exceptions (e.g., grave abuse of discretion, contradictory findings), which petitioner failed to establish.
  • The award of P10,391,981.76 for lost profits is affirmed, but subject to a deduction of P900,000.00 representing unpaid lease rentals for the six crop years (1999-2004) at P150,000.00 per year. It is fair and just that respondents, who claim lost profits based on the lease contract, must also fulfill their obligation to pay rent for the duration of the contract.

• Computation of Time under Section 1, Rule 22 of the Rules of Court — When the last day of a prescribed period falls on a Saturday, Sunday, or legal holiday, the time shall not run until the next working day. Applied to hold that a motion for reconsideration filed on the Monday following a Saturday deadline is timely.
• Four Tests for Compulsory vs. Permissive Counterclaim — Derived from Spouses Mendiola v. CA, the tests are: (1) whether the issues of fact or law raised by the claim and counterclaim are largely the same; (2) whether res judicata would bar a subsequent suit on the counterclaim; (3) whether substantially the same evidence supports or refutes both claims; and (4) whether there is a logical relation between the claims such that separate trials would entail substantial duplication of effort. The logical relation is the compelling test.
• Effect of Non-Payment of Docket Fees in Permissive Counterclaims — Non-payment of docket fees for a permissive counterclaim does not automatically cause dismissal if the payment is made within a reasonable time and there is no intent to defraud the government; good faith reliance on a court's erroneous classification as compulsory is a valid defense to dismissal.
• Judgment Lien for Unpaid Docket Fees under Section 2, Rule 141 — Unpaid docket fees constitute a lien on the final judgment or monetary award, which the clerk of court is ordered to assess and collect.
• Finality of Factual Findings — Factual findings of the trial court affirmed by the Court of Appeals are final and conclusive and may not be reviewed on appeal under Rule 45 except under specific exceptions, such as when the findings are contradictory, grounded on speculation, or constitute grave abuse of discretion.

• "Since March 29, 2014 fell on a Saturday, petitioner and Kathryn were completely justified in filing their motion for reconsideration on the next working day: Monday, March 31, 2014."
• "Of the four, the one compelling test of compulsoriness is the logical relation between the claim alleged in the complaint and that in the counterclaim."
• "As the Court's counterclaim award of lost profits during the said period stems from the recognition that the lessor, i.e., petitioner and Kathryn, should have complied with their obligations to keep respondents in peaceful and adequate enjoyment of the leased premises for the entire duration of the lease, it is but fair and just that respondents be also held to their obligations thereunder that is, to pay the lease rentals for the entire duration of the contract."

• Spouses Mendiola v. CA — Cited for the four tests to determine whether a counterclaim is compulsory or permissive, emphasizing that the logical relation is the compelling test.
• Intercontinental Broadcasting Corporation v. Legasto — Cited for the rule that unpaid docket fees constitute a judgment lien on the monetary award in favor of the litigant.
• Unicapital, Inc. v. Consing, Jr. — Cited for the principle that non-payment of docket fees does not automatically cause dismissal of the case if there is no intent to defraud the government and the fees are paid within a reasonable time.
• Alba, Jr. v. Malapajo — Cited for the definition of compulsory counterclaim and the clarification that per OCA Circular No. 96-2009, the rule imposing docket fees on compulsory counterclaims remains suspended.
• Bacalso v. Aca-ac — Cited for the rule that factual findings of the trial court affirmed by the CA are final and conclusive.
• Treñas v. People — Cited for the ten exceptions to the rule that only questions of law may be raised in a petition for review under Rule 45.

• Section 1, Rule 22 of the Rules of Court — Governs the computation of time, specifically providing that when the last day of a period falls on a Saturday, Sunday, or legal holiday, the time runs until the next working day.
• Section 2, Rule 141 of the Rules of Court — Provides that where the court awards a claim not alleged or a relief different from that claimed, the party shall pay additional fees which shall constitute a lien on the judgment.
• Section 7, Rule 141 (as amended by A.M. No. 04-2-04-SC) — Originally required docket fees for compulsory counterclaims, but noted as suspended by OCA Circular No. 96-2009.
• Rule 45 of the Rules of Court — Governs petitions for review on certiorari, limiting review to questions of law except under recognized exceptions.