Civil procedure; Compulsory

counterclaim; Where counterclaim exceeds

court's jurisdiction; Case at bar.—Where
plaintiffs' claim exceeds the jurisdiction of
the trial court, the rule that a compulsory
counterclaim not set up is barred does not
996 SUPREME COURT REPORTS apply.
ANNOTATED Same; Same Same; Reason.—The rule
Calo vs. Ajax International, Inc. on compulsory counterclaim presupposes
that the amount involved is within the
No. L-22485. March 13, 1968. court's jurisdiction. Otherwise, we would
come to the absurd situation where a claim
must be filed with the court which is beyond
CONSUELO V. C ALO, doing business
its jurisdiction. Besides, the reason for the
under the trade name CVC Lumber
rule which is to settle all related
Industries, assisted by MARCOS M.
controversies in one sitting only does not
CALO, plaintiffs-appellants, vs. AJAX
obtain.
INTERNATIONAL,
INCORPORATED, defendant- APPEAL from an order of dismissal of
appellee. the Court of First Instance of Agusan.

The facts are stated in the opinion of

____________
the Court.
* Editor's Note: See Decision in 21 SCRA           Tranquilin o O. Carlo, Jr. for
346. plaintiffs-appella
     Sergio P. Villareal for defendant-
997 appellee.

BENGZON, J.P., J.:

VOL. 22, MARCH 13, 1968 997
Calo vs. Ajax International, Inc. Sometime on May 7, 1959, plaintiff-
appellant Calo ordered from
defendant-appellee Ajax International, ______________
Inc., 1,200 ft. of John Shaw wire rope at
1 Calo v. Aragon, L-19356, Nov. 30, 1962.
P2.85 per foot. The transaction was
evidenced by Charge Order No. 37071, 998
for P3,420.00.
According to plaintiff Calo, when
the wire rope was delivered to Butuan 998 SUPREME COURT REPORTS
City, the same was found short of 300 ANNOTATED
ft. Plaintiff then wrote two letters to Calo vs. Ajax International, Inc.
defendant asking for either completion
of delivery or account adjustment of On January 23, 1962, plaintiff Calo,
the alleged undelivered 300 ft. of wire assisted by her husband, Marcos Calo,
rope. filed in the Court of First Instance of
On November 20, 1961, a complaint Agusan a complaint against defendant
docketed as Civil Case No. IV-93062 asking (1) that the latter either effect
was filed in the Municipal Court of complete delivery of Charge Order No.
Manila by one Adolfo Benavides who 37071 or that she be relieved from
claimed to have acquired the paying P855.00 and (2) that the latter
outstanding credit account of Calo indemnify her for P12,000 as
from defendant Ajax International, attorney's fees, damages and expenses
Inc. Charge Order No. 37071 was 2
of litigation. The case was docketed as
among those included in the assigned Civil Case No. 860.
account. Subsequently, a judgment by Instead of filing an answer,
default was entered, and a writ of defendant moved for the dismissal of
execution issued, against plaintiff Civil Case 860 on the ground, inter
Calo. The latter resorted to this Court alia, that the, subject thereof was
on a petition for 1certiorari, prohibition involved and intimately related to that
and mandamus. We set aside the in Civil Case No. IV-93062 of the
judgment of default and writ of Municipal Court of Manila. The court
execution issued against plaintiff Calo a quo sustained the motion and
and remanded the case for further dismissed the case.
proceedings.
 Plaintiff-appellant moved for with the municipal court which it is
reconsideration and new trial. When prohibited from taking cognizance of,
this failed, she instituted the present being beyond its jurisdiction.
appeal.
The dismissal of Civil Case No. 860 ____________
by the court a quo because of the
pendency of Civil Case No. IV-93062 2 Record on Appeal, p. 4.
in the municipal court of Manila is 3 40 Phil. 651, at 662. See also Rule 5, Sec.
predicated on the supposition that 19, in connection with Rule 6, Section 8, of the
plaintiffs claim is a compulsory Rules of Court.
counter-claim that should be filed in
999
the latter case. There is no question
that it arises out of the same
transaction which is the basis of the VOL. 22, MARCH 13, 1968 999
complaint in Civil Case No. IV-93062
Calo vs. Ajax International, Inc.
and does not require the presence of
third parties over whom the municipal
court of Manila could not acquire Besides, the reason underlying the
jurisdiction. rule, which is to settle all related
However, plaintiff's claim is not a controversies in one sitting only, does
compulsory counterclaim in Civil Case not obtain. For, even if the
No. IV-93062 for the simple reason counterclaim in excess of the amount
that the amount thereof exceeds the cognizable by the inferior court is set
jurisdiction of the municipal court. The up, the defendant cannot obtain
rule that a compulsory counterclaim positive relief. The Rules allow this
not set up is barred, when applied to only for the defendant to prevent4
the municipal court, presupposes that plaintiff from recovering from him.
the amount involved is within the said This means that should the court find
court's jurisdiction. Otherwise, as this both plaintiff's complaint and
Court had already noted in Yu Lay v. defendant's counterclaim (for an
3
Galmes, we would come to the absurd amount exceeding said court's
situation where a claim must be filed jurisdiction) meritorious, it will simply
dismiss the complaint on the ground transaction or occurrence that is the
that defendant has a bigger credit. subject matter of the opposing party's
Since defendant still has to institute a claim and, therefore, if not set up is
separate action for the remaining deemed barred (Sec. 4, Rule 9, Revised
balance of his counterclaim, the Rules of Court; Quemuel vs. Olaes, L-
previous litigation did not really settle 11084, April 29, 1961, 1 SCRA 1159).
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 4 Rule 5, Section 5, Rules of Court.
be filed there. The pendency then of
1000
said civil case could not be pleaded in
abatement of Civil Case No. 860.
Consequently, the lower court erred in 1000 SUPREME COURT REPORT
dismissing plaintiffs complaint. S ANNOTAT
WHEREFORE, the order of Paredes vs. Espino
dismissal appealed from is hereby
reversed and the case remanded for
It has already been held that the
further proceedings. Costs against
release of a claim for subsidiary civil
appellee Ajax International, Inc.
liability arising from crime is not in
So ordered.
the nature of a counterclaim, and may
     Reyes, J.B.L., Actg. C.J., Dizon, not be properly set up as such. Rather,
Makalintal, Zaldivar, Sanchez, Castro, it must be raised as, being properly, a
Angeles and Fernando, JJ., concur. matter of defense (De la Cruz vs.
     Concepcion, C.J. , is on leave Berroya, L-21950, Dec. 28, 1966, 18
SCRA 1232).
Order reversed and case remanded
to lower court for further proceedings. _____________

Notes.—A compulsory
counterclaim is one arising out of or
which is necessarily connected with the
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