G.R. No. 139018 - Cruz-Agana vs. Santiago-Lagman

On March 18, 1996, petitioner Estherlita Cruz-Agana filed a Complaint for annulment of title with a prayer for a preliminary mandatory injunction against respondent B. Serrano Enterprises, Inc.
Petitioner asserted that she, as the sole heir of Teodorico Cruz, is the rightful owner of a lot covered by Transfer Certificate of Title No. T-3907; she alleged that the lot was fraudulently sold to Eugenio Lopez, Jr. who subsequently transferred it to the respondent.

The case was raffled to the Regional Trial Court, Branch 77, Malolos, Bulacan, and was docketed as Civil Case No. 210-M-96.
Respondent timely filed its Answer, which included a compulsory counterclaim.
Petitioner moved to dismiss the respondent’s counterclaim on the ground of lacking a certificate of non-forum shopping, inviting application of Supreme Court Administrative Circular No. 04-94.
On March 11, 1999, the trial court initially denied petitioner’s motion to dismiss, ruling that the counterclaim was compulsory and therefore not subject to the certificate requirement imposed by the administrative circular.
Subsequently, on May 25, 1999, the trial court reversed its earlier position and dismissed the counterclaim on the basis of noncompliance with the certificate requirement.
Respondent filed a motion for reconsideration, arguing that Administrative Circular No. 04-94 should not apply to compulsory counterclaims, citing the precedent in Santo Tomas University Hospital v. Surla.
On June 4, 1999, the trial court again reversed itself by recalling its dismissal order of the counterclaim.

The counterclaim set forth by the respondent sought actual damages of at least P400,000,000.00 and attorney’s fees amounting to P2,000,000.00.
It was characterized as a compulsory counterclaim because it arose out of and was necessarily connected with the transaction or occurrence that was the subject of the petitioner’s complaint.
The respondent maintained that, as a compulsory counterclaim, it was inseparable from the main case and inherently did not require a certificate of non-forum shopping.

The petitioner contended that the trial court committed a grave abuse of discretion in refusing to dismiss the respondent's counterclaim, arguing that the certificate requirement under Administrative Circular No. 04-94 should have applied.
Petitioner sought to challenge the trial court’s reliance on the distinction between compulsory and permissive counterclaims, as previously elucidated in cases like Santo Tomas University Hospital v. Surla and Ponciano v. Judge Parentela, Jr.
The case raised questions regarding the proper interpretation and application of procedural rules and administrative circulars when dealing with compulsory counterclaims in civil proceedings.

Whether the trial court committed grave abuse of discretion by refusing to dismiss respondent’s counterclaim due to the lack of a certificate of non-forum shopping.
Whether the respondent’s counterclaim, being compulsory in nature and arising directly from the subject matter of the petitioner's complaint, is exempt from the certificate requirement prescribed under Supreme Court Administrative Circular No. 04-94.
Whether the distinction between compulsory and permissive counterclaims, as established in Santo Tomas University Hospital v. Surla and Ponciano v. Judge Parentela, Jr., is valid and binding in determining the applicability of the certificate of non-forum shopping.