G.R. No. 153171 - Spouses Carpio vs. Rural Bank of Sto. Tomas , Inc.

Petitioners: Spouses Rodolfo Carpio and Remedios Orendain, owners of a parcel of land covering approximately 19,405 square meters located in Barangay San Vicente, Sto. Tomas, Batangas.
Respondent: Rural Bank of Sto. Tomas (Batangas), Inc., which had provided a loan to the petitioners.

On May 30, 1996, petitioners obtained a loan amounting to P515,000.00 from the respondent bank, with an agreed full payment term provided on January 27, 1996.
To secure the loan, petitioners executed a real estate mortgage over their property in favor of the respondent bank on the same day.

Without any prior demand or notice to petitioners, the respondent bank filed a petition for extra-judicial foreclosure of the mortgage on July 26, 1996.
On September 26, 1996, the property's auction sale was conducted by Sheriff Jaime Ozaeta. The sale was contested on two counts:

The sale was allegedly held without proper public notice, as the notice was printed in a newspaper of limited circulation.
Petitioners claimed that they were not notified and consequently were deprived of their opportunity to redeem the property.

The respondent bank emerged as the sole bidder in the auction, acquiring the property for P702,889.77, and a certificate of sale was issued on the same day.

Petitioners initially filed a complaint for annulment of the foreclosure sale and for damages against both the respondent bank and Jaime Ozaeta (clerk of court/ex-officio sheriff).
On August 9, 1999, the respondent bank filed its Answer with Counterclaim:

The bank denied petitioners’ allegations, asserting that proper notice and publication were effected, that adequate demands for payment were made, and that petitioners had more than two years to redeem the property.
The counterclaim included claims for actual damages (P100,000.00), compensatory damages (P100,000.00), moral damages (P500,000.00), and litigation expenses (no less than P50,000.00).

Petitioners moved to dismiss the counterclaim on the ground that it lacked the required certification against forum shopping, as mandated under Section 5, Rule 7 of the Rules of Court.
The Regional Trial Court (RTC) denied the motion to dismiss, holding that the counterclaim was a compulsory responsive pleading rather than an initiatory pleading subject to the certification requirement.

Petitioners filed motions for reconsideration in the RTC which were denied (RTC Order, April 4, 2000).
Petitioners elevated the issue by filing a Petition for Certiorari with the Court of Appeals, contending grave abuse of discretion for not dismissing the counterclaim due to the absence of the certification.
The Court of Appeals, in its Decision dated September 28, 2001, affirmed the RTC’s orders and denied petitioners’ claims.
A subsequent Motion for Reconsideration was also denied by the Court of Appeals (Resolution dated April 2, 2002).
The petition for review on certiorari was ultimately filed with the Supreme Court, which rendered the final decision.

Whether the RTC and the Court of Appeals committed grave abuse of discretion in refusing to dismiss the respondent bank’s counterclaim for the absence of a certification against forum shopping.
Whether the counterclaim filed by the respondent bank qualifies as an initiatory pleading that would mandate a certification against forum shopping under Section 5, Rule 7 of the Rules of Court.
Whether the failure to accompany the counterclaim with the required certification could lead to its dismissal, given that the rule prescribes dismissal of the main complaint (or initiatory pleading) rather than a compulsory counterclaim.