G.R. No. 188773 - Heirs of Basbas vs. Basbas

Metals Engineering Resources Corporation (petitioner) and private respondent Plaridel Jose entered into an Agreement to Buy and Sell several parcels of land on October 31, 1987.
The agreement was fraught with uncertainties and conditions, including:

The seller’s obligation to look for a new location for its offices and plant within 120 days.
A payment scheme where one-half of the purchase price was contingent on relocation, with the remaining half to be determined in a separate agreement and executed via a Deed of Absolute Sale.

The agreement was deemed incomplete and imperfect because it failed to establish definite terms for the payment and overall consideration, rendering it non-binding and unenforceable.

Despite the contractual imperfections, defendant proceeded to prepare a subdivision plan and advertised the lots for sale, thereby acting on the assumption of a valid agreement.
Plaintiff, recognizing the defects in the agreement, withdrew from the contract on December 24, 1987, by sending a letter and tendering a check for P50,000.00 as a full refund of the earnest money.
The defendant refused to accept the refund, claiming that the agreement was binding and that his financial commitments, subdivision expenses, and associated losses had been adversely affected.

The dispute was initially filed as Civil Case No. 55560 before the Regional Trial Court of Pasig, Branch 160.
The defendant, in his Answer with Counterclaim, asserted a compulsory counterclaim detailing:

Expenses incurred for subdividing and advertising the property.
Damages suffered, including moral and exemplary damages, as well as attorney’s fees and litigation expenses.

Prior to hearing on the counterclaim, the defendant moved to expunge the complaint on the ground that it did not specify the amount of damages, citing established rulings and procedural circulars.
The trial court initially directed the petitioner to amend its complaint to include the specific damages.
Subsequent motions arose regarding:

The validity of the amended complaint, particularly when the wrong docket fee was paid, thereby questioning the court’s jurisdiction.
The defendant’s motion to set the case for presentation of evidence in support of the compulsory counterclaim.

The trial court issued orders allowing the defendant to present evidence on his counterclaim, asserting that:

A compulsory counterclaim is essentially a separate complaint against the plaintiff if not raised timely in the answer.
Proceeding with the counterclaim would avoid its waiver or preclusion by res judicata, despite the dismissal of the main complaint.

In response to the trial court’s orders, petitioner filed a special civil action for certiorari and prohibition before the Court of Appeals.
Petitioner contended that:

The trial court acted without or in excess of its jurisdiction by allowing evidence on the compulsory counterclaim after dismissing the main complaint for docket fee non-payment.
A compulsory counterclaim is ancillary to the principal claim and must be dismissed if the main complaint is dismissed.
Allowing separate adjudication of the counterclaim could lead to multiplicity of suits and inconsistent judgments.

The lower courts maintained that the compulsory counterclaim could be brought forward as long as it was asserted timely, despite disputes over docket fee requirements.

The case was brought before the Supreme Court on certiorari, challenging the lower court’s allowance of evidence on the compulsory counterclaim after dismissing the main complaint.
The petition sought the annulment of the trial court’s order and the dismissal of the defendant’s compulsory counterclaim under the principle that it cannot subsist separately from the main action.

Whether the trial court erred in permitting the presentation of evidence on the defendant’s compulsory counterclaim after dismissing the main complaint.

Does the nature of a compulsory counterclaim allow it to remain operative when the principal complaint is dismissed?
Is the non-payment of docket fees applicable to a compulsory counterclaim, or does this rule solely pertain to permissive counterclaims?

Whether the order allowing the presentation of evidence on the compulsory counterclaim is subject to correction by way of certiorari and prohibition.

Did the trial court exceed its jurisdiction by proceeding with the counterclaim when no valid main claim remained?
Is the defendant entitled to have his compulsory counterclaim treated as an independent cause of action even after the dismissal of the complaint?