G.R. No. 146595 - Tan vs. Kaakbay Fice Corp.

In the latter part of 1995, petitioner Carlo A. Tan applied for and was granted a loan of four million pesos (₱4,000,000.00) by private respondent Kaakbay Finance Corporation, represented by its president, Dennis S. Lazaro.
As security for the loan, petitioner executed a real estate mortgage on his parcel of land (covered by Transfer Certificate Title No. T-207125, located along Rizal St., Calamba, Laguna) which contained certain improvements.
Petitioner asserted that the agreed interest rate was 12% per annum, although this rate was not stated in the mortgage document when he signed it on November 16, 1995.
The loan amount was disbursed in two tranches: ₱2,500,000.00 on November 23, 1995 and ₱1,500,000.00 on December 23, 1995.

By November 22, 1996, petitioner failed to pay his obligation, prompting disputes over the true rate of interest applied on his loan.
Petitioner claimed that Kaakbay Finance Corporation never furnished him a copy of the real estate mortgage and that the effective interest rate applied was 0.3925% for less than a year rather than the agreed 12% per annum.
To secure his obligation, petitioner was made to issue two postdated checks: one (UCPB Check No. CBA 052985) for ₱5,570,000.00 postdated November 5, 1996, and another (UCPB Check No. CBA 095215) for ₱6,175,000.00, postdated January 31, 1997.

Petitioner negotiated with Kaakbay for an extension of time to pay his debt, during which an agreement was reached that upon the expiration of a two-year period (January 8, 1998, to January 8, 2000), a Deed of Sale Under Pacto de Retro would be signed by both parties.
On January 8, 1998, petitioner was given a blank Deed of Sale Under Pacto de Retro, which he duly signed.
Suspicion arose when petitioner later obtained a Statement of Account indicating his obligation had ballooned to ₱13,333,750.00, and on October 21, 1999, he discovered an accomplished Deed of Sale Under Pacto de Retro allegedly notarized on February 5, 1998, a document he, his wife, and their witness claimed they neither signed nor executed as stated.

On January 5, 2000, petitioner filed a complaint in the Regional Trial Court (RTC) of Calamba, Laguna (Civil Case No. 2881-2000-C) seeking:

Declaration of nullity of the promissory notes purportedly attached to the real estate mortgage.
Attacks on the allegedly usurious and unconscionable rates of interest and fees.
Declaration of unenforceability of the Deed of Sale Under Pacto de Retro.
A claim for moral and exemplary damages along with attorney’s fees.

On the same day, petitioner also filed a Notice of Lis Pendens with the Registry of Deeds regarding the affected property.

On January 17, 2000, respondents (Kaakbay Finance Corporation, Dennis S. Lazaro, and Roldan M. Noynay) filed a Consolidated Answer with a compulsory counterclaim and opposition to petitioner’s motion for a Temporary Restraining Order (TRO) and Preliminary Injunction.
The parties agreed in open court to a compromise wherein petitioner withdrew the TRO application, and respondents agreed to hold the registration of the Deed of Sale Under Pacto de Retro in abeyance pending resolution of the case.
Respondents, through subsequent appearances by different counsels (initial appearance by Atty. Roldan M. Noynay and later by the law firm Ortega, Del Castillo, Bacorro, Odulio, Calma, and Carbonell), filed further pleadings including:

A motion for an extension of time to file an Answer.
A motion for the withdrawal of the previously filed Consolidated Answer with Compulsory Counterclaim (at least as far as Kaakbay and Lazaro were concerned).
A Supplemental Opposition to the petitioner’s request for a preliminary injunction.

On February 3, 2000, respondents filed an Answer with Counterclaim, praying for:

Payment of the ₱4,000,000.00 principal loan.
Payment of compounded monthly interest and annual penalty interest amounting to ₱9,333,750.00.
Litigation expenses of ₱250,000.00.
Attorney’s fees amounting to ₱500,000.00.
Admission of the counterclaim without payment of filing fees on the ground that it was compulsory in nature.

On February 21, 2000, petitioner filed an Urgent Motion to Expunge several motions and pleadings filed by the respondents, contending procedural irregularities particularly relating to the substitution of counsel and the filing of a permissive counterclaim without proper fee payment.
The trial court, on February 8, 2000, issued an order granting respondents’ motion for admission of their counterclaim without the requisite payment of fees, a decision later challenged by petitioner.

Petitioner appealed the trial court’s decision on the ground that the counterclaim was permissive in nature and should have required the payment of docket fees, arguing that the evidence for his claims and respondents’ counterclaims were distinct.
On August 22, 2000, the Court of Appeals affirmed the trial court’s rulings by holding that the counterclaim was compulsory in nature, thereby not necessitating the payment of docket fees.
Petitioner’s subsequent motion for reconsideration was denied by the Court of Appeals on December 20, 2000.
Petitioner then sought review by the Supreme Court, contending errors in the appellate decision, particularly regarding the nature of the counterclaim and the proper application of procedural rules on compulsory versus permissive counterclaims.

Whether the counterclaim filed by respondents is compulsory or permissive in nature.

Petitioner contends that the counterclaim is permissive, arguing that the evidence required to establish the payment of the loan and the corresponding interest differs from that required to prove his fraud claims regarding the alleged usurious rates, the falsified promissory note, and the questionable Deed of Sale Under Pacto de Retro.
Respondents maintain that their counterclaim is compulsory since it arises out the same transaction that formed the subject matter of petitioner’s complaint.

Whether the trial court had acquired jurisdiction over the Answer with Counterclaim due to the nature of the counterclaim and the waiver of filing fees by the respondents.

Petitioner challenged the trial court’s decision on the ground that, if the counterclaim were permissive, the proper filing fees should have been collected, and jurisdiction would be questionable.
Respondents argued that, as a compulsory counterclaim, no fee was necessary and the trial court appropriately acquired jurisdiction over the matter.

Whether the procedural requirements on substitution or change of counsel were properly complied with by the respondents in their filings.