Padilla vs. Globe Asiatique Realty Holdings Corporation

A compulsory counterclaim for damages based on an unfounded suit may be prosecuted in the same action despite the prior dismissal of the complaint for lack of jurisdiction over the main case, and the principle of judicial stability does not bar such prosecution when adjudicating the counterclaim does not necessitate ruling on the correctness of orders issued by another court of concurrent jurisdiction. The cause of action in a counterclaim for unfounded suit is not eliminated by the mere dismissal of the complaint, and the court’s jurisdiction over the counterclaim is distinct from its jurisdiction over the plaintiff’s complaint.

Globe Asiatique Realty Holdings Corporation and Filmal Realty Corporation, represented by Delfin S. Lee and Dexter L. Lee, obtained CTS Facility Agreements from Philippine National Bank amounting to ₱1.2 billion and assigned accounts receivables as security. In 2010, they defaulted. PNB discovered widespread fraud—231 out of 240 Contracts to Sell had fictitious buyers or addresses—and filed a complaint for sum of money with a prayer for preliminary attachment before the Pasay City RTC. Aida Padilla, PNB’s Senior Vice-President for Remedial Management, executed the verification, certification against forum shopping, and the affidavit in support of the writ of preliminary attachment. The Pasay City RTC granted the writ in August 2010.

While the Pasay case was still pending, respondents Globe Asiatique, Filmal, Delfin Lee, and Dexter Lee filed a separate complaint for damages in the Pasig City RTC against Padilla and the Pasay RTC judge, alleging that Padilla executed a perjured affidavit and that the attachment was improperly issued.

• The CTS Facility Agreements and Default: From 2005 to 2008, Philippine National Bank (PNB) entered into several CTS Facility Agreements with Globe Asiatique Realty Holdings Corporation and Filmal Realty Corporation, represented by Delfin S. Lee and Dexter L. Lee. PNB extended a facility initially of ₱200 million, later increased to ₱1.2 billion, for the purchase of accounts receivables arising from the sale of subdivision houses. Respondents executed Deeds of Assignment covering receivables aggregating ₱1.195 billion. PNB released to respondents approximately ₱1.395 billion. In early 2010, respondents defaulted. PNB’s credit verification allegedly revealed that 231 out of 240 Contracts to Sell involved either fictitious buyers or non-existent addresses.

• The Pasay City RTC Case (Civil Case No. R-PSY-10-04228-CV): PNB filed a complaint for recovery of sum of money and damages with a prayer for a writ of preliminary attachment against the respondents in the RTC of Pasay City. The complaint detailed fraudulent misrepresentations in obtaining the loan. Aida Padilla, as PNB’s Senior Vice-President for Remedial Management, signed the verification, certification of non-forum shopping, and an affidavit in support of the application for a writ of preliminary attachment. On August 25, 2010, the Pasay City RTC granted the writ upon finding prima facie evidence of fraud. Respondents filed answers with counterclaims and motions to dismiss and to discharge the attachment, assailing Padilla’s affidavit for lack of personal knowledge and denying fraud. While various motions were pending, including PNB’s motion for summary judgment, respondents filed the separate damage suit in Pasig.

• The Pasig City RTC Damage Suit (Civil Case No. 73132): On August 10, 2011, respondents Globe Asiatique, Filmal, Delfin Lee, and Dexter Lee filed a complaint for damages in the RTC of Pasig City against Judge Pedro De Leon Gutierrez and Aida Padilla in their personal capacities. They alleged that the CTS Facility Agreements had been novated into a term loan not yet due, that Padilla knowingly executed a “perjured” affidavit to support the writ of preliminary attachment, and that Judge Gutierrez issued the writ despite the obligation being secured and despite an insufficient attachment bond. Padilla filed an Answer with Compulsory Counterclaims, seeking dismissal of the complaint on grounds of forum shopping, litis pendentia, and failure to state a cause of action, and praying for damages and attorney’s fees caused by the unfounded suit.

• Dismissal of the Complaint and Denial of the Counterclaim: The Pasig City RTC dismissed the complaint on April 2, 2012 for lack of jurisdiction, holding that it could not interfere with the orders and processes of a co-equal court (the Pasay City RTC) without violating the principle of judicial stability. Respondents appealed the dismissal. Meanwhile, Padilla moved to set her compulsory counterclaims for pre-trial. The RTC denied the motion, reasoning that hearing the counterclaims would require it to determine the veracity of respondents’ allegations of illegality of the Pasay RTC’s orders and writ of attachment, thereby indirectly interfering with the pending Pasay case. The denial was without prejudice to re-filing after final resolution of the Pasay case.

• Compulsory Counterclaim Independent of Complaint: Petitioner maintained that her counterclaim for damages arising from the malicious filing of a baseless complaint is a compulsory counterclaim that survives the dismissal of the complaint. The court’s jurisdiction over the counterclaim is separate from its jurisdiction over the main action, and its cause of action is not eliminated by the dismissal. She invoked the rulings in Pinga v. Heirs of German Santiago and Perkin Elmer Singapore Pte Ltd. v. Dakila Trading Corporation.

• No Violation of Judicial Stability: Petitioner argued that adjudicating her counterclaim would not require the Pasig RTC to pass upon the validity of the writ of attachment and related orders issued by the Pasay City RTC. The counterclaim merely requires a determination that respondents filed an unfounded suit prematurely, with no final judicial pronouncement yet that the attachment was irregular.

• Wrong Mode of Appeal: Respondents contended that the remedy from an order dismissing a counterclaim without prejudice is a petition for certiorari under Rule 65, not a petition for review on certiorari under Rule 45.

• Judicial Stability Bars the Counterclaim: Respondents asserted that allowing petitioner to prove her counterclaims would compel them to justify their complaint by revisiting the allegations that the writ of attachment and the underlying affidavit were illegal, thus forcing the Pasig RTC to interfere with the proceedings of a co-equal court in violation of the principle of judicial stability.

• Propriety of Appeal: Whether a petition for review on certiorari under Rule 45 is the proper remedy to assail an order that denies a motion to set a compulsory counterclaim for pre-trial and effectively dismisses it without prejudice.

• Compulsory Counterclaim After Dismissal: Whether a compulsory counterclaim for damages founded on an unfounded suit may be prosecuted in the same action after the plaintiffs’ complaint has been dismissed for lack of jurisdiction.

• Judicial Stability: Whether the principle of judicial stability bars a court from hearing a defendant’s compulsory counterclaim when the main complaint was dismissed precisely to avoid interfering with proceedings in a co-equal court, and the counterclaim allegedly requires examination of the same orders of the co-equal court.

• Propriety of Appeal: The petition under Rule 45 was proper. Petitioner raised only a question of law—the correct interpretation of the Rules of Civil Procedure on whether the dismissal of a complaint automatically dismisses the compulsory counterclaim. No examination of probative evidence was required. Jurisprudence recognizes that a Rule 45 petition directly to the Supreme Court is available where the issue involves a pure question of law.

• Compulsory Counterclaim After Dismissal: The compulsory counterclaim for damages based on an unfounded suit survives dismissal of the complaint for lack of jurisdiction. Under the 1997 Rules of Civil Procedure, particularly Section 3, Rule 17, a dismissal due to the fault of the plaintiff is without prejudice to the defendant’s right to prosecute the counterclaim in the same or a separate action. The doctrinal shift in Pinga v. Heirs of German Santiago abandoned the earlier rule in Metals Engineering Resources Corp. v. Court of Appeals that a compulsory counterclaim necessarily falls with the dismissal of the complaint. In Perkin Elmer Singapore Pte Ltd. v. Dakila Trading Corporation, the Court definitively held that the court’s jurisdiction over a plaintiff’s complaint is distinct from its jurisdiction over a defendant’s counterclaim, and that a counterclaim arising from an unfounded suit states a cause of action that is not eliminated merely because the complaint was dismissed. To hold otherwise would be iniquitous, as the defendant would be forced to plead the counterclaim under threat of bar yet have its fate wholly dependent on the plaintiff’s complaint.

• Judicial Stability: The principle of judicial stability did not bar the prosecution of the counterclaim. The counterclaim for damages caused by a baseless suit did not require the Pasig City RTC to rule on the validity of the Pasay City RTC’s writ of attachment or related orders. Rather, it faulted respondents for prematurely filing a separate damage suit when no final judicial determination of irregularity in the attachment proceedings had yet been made. The counterclaim could be adjudicated on the issue of whether the suit was unfounded and malicious, without impugning the acts of a co-equal court. Allowing respondents to use the very principle that led to the dismissal of their own complaint as a shield against the counterclaim would permit them to profit from their own procedural misstep.

• Separate Jurisdiction over Counterclaim: The jurisdiction of a trial court over a plaintiff’s complaint is distinct and independent from its jurisdiction over a defendant’s counterclaim. A compulsory counterclaim appended to an answer may be treated as a separate action in which the defendant is the plaintiff. Its survival does not depend on the continued viability of the main complaint.

• Survival of Counterclaim for Unfounded Suit: A compulsory counterclaim for damages and attorney’s fees based on the wrongful filing of a suit states a cause of action that is not eliminated by the dismissal of the complaint, including dismissal for lack of jurisdiction over the plaintiff’s action. The defendant may prosecute the counterclaim in the same proceeding even after the complaint has been dismissed.

• Abandonment of the “Metals Engineering” Rule: The prior doctrine that a compulsory counterclaim is necessarily dismissed when the complaint is dismissed for lack of jurisdiction (Metals Engineering Resources Corp. v. Court of Appeals) has been abandoned under the 1997 Rules of Civil Procedure, as confirmed in Pinga v. Heirs of German Santiago and Perkin Elmer Singapore Pte Ltd. v. Dakila Trading Corporation.

• Principle of Judicial Stability — Limits: The principle that no court of concurrent jurisdiction may interfere with the orders or judgments of a co-equal court does not bar a counterclaim for unfounded suit when adjudication of the counterclaim does not require the court to pass upon the validity or correctness of the co-equal court’s orders.

• “Distinction must be made … as to the jurisdiction of the RTC over respondent’s complaint and over petitioner’s counterclaim – while it may have no jurisdiction over the former, it may exercise jurisdiction over the latter. The compulsory counterclaim attached to petitioner’s Answer ad cautelam can be treated as a separate action, wherein petitioner is the plaintiff while respondent is the defendant.” — from Perkin Elmer, quoted with approval, establishing the doctrinal foundation for separate jurisdictional treatment.

• “It will then be iniquitous and the height of injustice to require the petitioner to make the counterclaim in the present action, under threat of losing his right to claim the same ever again in any other court, yet make his right totally dependent on the fate of the respondent’s complaint.” — a central equitable rationale for allowing the counterclaim to proceed independently.

• “To allow the respondents to cite their own unlawful actions as a shield against the harm that they have inflicted upon petitioner Padilla would indubitably allow the respondents to profit from their own misdeeds.” — the Court’s policy justification for not applying judicial stability to bar the counterclaim.

• Metals Engineering Resources Corp. v. Court of Appeals, 203 SCRA 273 (1991) — The earlier rule that a compulsory counterclaim is ancillary to the main action and must be dismissed when the complaint is dismissed for lack of jurisdiction. This precedent was abandoned by the 1997 Rules and subsequent rulings.

• Pinga v. The Heirs of German Santiago, 526 Phil. 868 (2006) — Held that the 1997 Rules of Civil Procedure abandoned the doctrine that a counterclaim is necessarily dismissed along with the complaint. The dismissal of a complaint under Section 3, Rule 17 is without prejudice to the right of the defendant to prosecute pending counterclaims in the same or a separate action.

• Perkin Elmer Singapore Pte Ltd. v. Dakila Trading Corporation, 556 Phil. 822 (2007) — Expressly ruled that a compulsory counterclaim for damages arising from an unfounded suit may proceed despite dismissal of the complaint for lack of jurisdiction over the defendant’s person; jurisdiction over the counterclaim is separate from jurisdiction over the complaint.

• Republic v. Sunvar Realty Development Corporation, 674 SCRA 320 (2012) — Applied to hold that a Rule 45 petition is proper when only questions of law are raised.

• Rizal Commercial Banking Corporation v. Royal Cargo Corporation, 602 SCRA 545 (2009) — Applied the Perkin Elmer ruling, allowing a compulsory counterclaim for attorney’s fees to proceed despite dismissal of the complaint.

• Section 7, Rule 6, 1997 Rules of Civil Procedure — Defines a compulsory counterclaim as one arising out of or connected with the transaction or occurrence constituting the subject matter of the opposing party’s claim and not requiring the presence of third parties. The Court held that petitioner’s counterclaim for damages from the unfounded suit was compulsory in nature.

• Section 3, Rule 17, 1997 Rules of Civil Procedure — Provides that dismissal of a complaint due to the fault of the plaintiff is without prejudice to the right of the defendant to prosecute a counterclaim in the same or a separate action. This provision was central to the abandonment of the Metals Engineering rule.

• Section 1, Rule 45, 1997 Rules of Civil Procedure — Allows a party to file a petition for review on certiorari with the Supreme Court raising only questions of law. The Court relied on this provision in holding that the mode of appeal was correct.

Chief Justice Maria Lourdes P.A. Sereno (Chairperson), Justice Lucas P. Bersamin, Justice Jose Catral Mendoza, and Justice Bienvenido L. Reyes concurred.