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Republic of the Philippines SUPREME COURT Manila FIRST DIVISION

G.R. No. 47696 August 29, 1989 JOSE Ma. ANSALDO, petitioner, vs. COURT OF APPEALS, and PHILIPPINE COMMERCIAL AND INDUSTRIAL BANK, respondents. Bito, Misa & Lozada for petitioner. San Juan, Africa, Gonzalez & San Agustin for PCI Bank.

NARVASA, J.: A corporation known as Transoceanic Factors Corporation (hereafter TFC) executed six (6) promissory notes in favor of Philippine Commercial & Industrial Bank (hereafter, PCIB). The notes were signed for the firm by its president, A.S. Moreno, over a span of some three (3) months, and were made out in various amounts. One was for P50,000.00; two (2) were for P15,000.00 each; two (2), for P 20,000.00 each; and the sixth, for P 30,000.00, or an aggregate of P 150,000.00, exclusive of interest. The interest was fixed at the rate of 10 % per annum for all the notes except the first, as to which the interest rate was set at 11 % per annum. The notes all had the same maturity date. 1 At about the same time and in separate transactions, TFC in its turn extended two (2) loans at interest of 14 % per annum: one to Jose Ma. Ansaldo, in the sum of P 28,967.39, another, to Teofilo Reyes, Jr., in the amount of P 26,000.00. Each obligation was evidenced by a negotiable promissory note 2 in which, among other things, each promissor (1) waived "demand, presentment, protest and notice of protest and non-payment" (of the note) and (2) undertook, in case of default-

(a) . . . to pay the holder an additional sum of ten (10%) per centum of the balance due on . . (the) note, as liquidated damages; . . . (i)n case extra-judicial collection is indorsed to an attorney, . . . an additional sum equal to five (5 %) per centum of the amount due, or twenty-five (25 %) per centum of the amount due in case of suit, and an additional sum in case of appeal, as attorney's fees in addition to the legal costs provided in the Rules of Court;" and

(b) to waive "[i]n case of judicial execution . . . all rights under the provisions of Rule 39, Section 12 of the Rules of Court." TFC paid to PCIB on account of its obligation to the latter in the total amount of P 150,000.00, as above stated only P 78,504.43, leaving a balance of P 71,495.57, exclusive of interest. 3 TFC also endorsed to PCIB "for value," the promissory notes of Ansaldo and Reyes . 4 Alleging that despite the obligations having matured, and notwithstanding repeated demands for payment thereof, TFC as well as Ansaldo and Reyes had failed to pay, PCIB subsequently filed suit in the Court of First Instance of Manila to enforce said prestations in accordance with the terms of the corresponding, written agreements. 5 The suit ultimately resulted in a judgment in PCIB's favor, 6 ordering:

1) TFC "to pay the plaintiff (PCIB) the sum of P 71,495.57, with interest at the rate of 10 % per annum from June 1, 1966 until full payment, plus the further sum of 10 % of the amount due for and as attorney's fees;"

2) Ansaldo "to pay the plaintiff the sum of P 28,967.39 under the promissory note Exhibit G, with interest at the rate of 14 % per annum, from December 29, 1964 until full payment minus the sum of P 3,011.42 previously paid by him to defendant (TFC) Transoceanic;" and

3) Reyes "to pay the plaintiff the sum of P 26,000.00 under the promissory note Exhibit H, with interest at the rate of 12 % per annum from August 2, 1965 until full payment." The Court declared, among other things, that:

1) in an assignment of credit, the consent of the debtor is not necessary to make him liable to the assignee (adverting to Articles 1625, 1626 and 1627 of the Civil Code), what the law requires being notice to the debtor and not consent of the latter;

2) the promissory note, being payable to order, may be negotiated by mere indorsement (Sec. 184, Negotiable Instruments Law);

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3) the evidence sufficiently established that Ansaldo had received notice of the assignment of his promissory note; and

4) the requirement that the assignment be evidenced by a public instrument in Article 1625 of the Civil Code "is only necessary to produce effects against third persons, and Reyes . . . (like Ansaldo) is not a third person, he being the debtor of the credit which was assigned to the plaintiff. Ansaldo and Reyes appealed to the Court of Appeals. 7 That Court rendered judgment in due course, affirming that of the Trial Court. The affirming judgment has since been appealed to this Court, but only by Ansaldo. In its Decision, the First Division of the Appellate Tribunal, speaking through the Presiding Justice at the time, Hon. Magno S. Gatmaitan 8 held as regards Ansaldo's contentions, that---

1) it was TFC's right "to assign, in other words, sell" its credits against Ansaldo and Reyes, to a third person;

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2) there was no need that the assignment be in a public document this being required only "to produce . . . effect as against third persons" (Article 1625, Civil Code), i.e., "to adversely affect 3rd persons," i.e., "a 3rd person with a right against original creditor, for example, an original creditor of creditor against whom surely such an assignment by his debtor (creditor in the credit assigned) would be prejudicial, because he, creditor of assigning creditor, would thus be deprived of an attachable asset of his debtor . . . ;"

3) neither Ansaldo nor Reyes could complain against the assignment, "for whether assigned or not, their obligations were not changed nor enlarged; of course if they before notice of assignment, had paid unto Transoceanic, they should not be prejudiced either, such payments made previous to notice under the law, and in justice, should unto them be credited; as indeed, trial Judge credited Ansaldo with his payments made of P 3,011.42 previous to notice unto him. . . ;"

4) that it was the assignee (PCIB), instead of the creditor-assignor (TFC), which notified Ansaldo of the assignment is of no moment "irrespective of who notified him, . . . what is important is that he be notified; . . . it is assignee who is most interested to notify, not creditor-assignor who probably would have lost all interest after he has assigned; if it be argued that if it is assignee who notifies, that might be

questionable, debtor might have his doubts, it is easy for him; to inquire from his creditor . . . ;"

5) that the assignment of Ansaldo's credit was made "after it had become long overdue," is also inconsequential, since this would not "mean that Ansaldo's obligation had thereby disappeared . . . , for the Negotiable Instruments Law itself says that presentment for payment is not necessary in order to charge the person primarily liable . . . ; indeed, it is most difficult to understand that just because demand was not made with presentation of evidence of the obligation within a reasonable time, the promissory note can already be said to have become a dead obligation . . . (and) original drawer, primarily liable, should wait until lapse of prescriptive period for him to claim that . . . ;" and

(6) the claim that the assignment had not been made by an authorized official of TFC was untenable not only because "for the first time raised on appeal but also . . . (because) absent any disauthorization from Transoceanic's board of directors, the act of its President of endorsing unto plaintiff Bank is not easy to see as outside of the ordinary prerogative of an official in his position, more than this, perhaps also that should be an intramural matter . . . between Board and President Moreno of Transoceanic, but when President endorsed to plaintiff Bank, and Bank by that got possession of the promissory note, it already became duty of debtor to pay unto Bank,--- it would on the contrary have been rashness if after notice of that, debtor should still pay unto Transoceanic, banking on alleged lack of authority of President of Transoceanic to sign the assignment . . . . " Except for the question of the claimed lack of authority on the part of TFC's president to execute the assignment of credit in favor of PCIB --- improperly raised for the first time on appeal, as observed by the Court of Appeals---the issues raised by Ansaldo were set up by him in, and after analysis and assessment rejected by, both the Trial Court and the Appellate Tribunal. This court sees no error whatever in the appreciation of the facts by either Court or their application of the relevant law and jurisprudence to those facts, inclusive of the question posed anew by Ansaldo relative to the alleged absence of authority on the part of TFC's president to assign the corporation's credit to PCIB. The only other issue set up by Ansaldo in this Court is what he alleges to be the failure of PCIB to exhibit to him his promissory note, invoking Section 74 of the Negotiable Instruments Law to the effect that " (t)he instrument must be exhibited to the person from whom payment is demanded, and when it is paid must be delivered up to the party paying it." It suffices to dispose of this issue by pointing out that it was never raised in either the Court of Appeals or the Trial Court, and cannot be raised for the first time in this Court. In any case, it is on its face a petty issue, for (1) if, according to him, such an exhibition was needful to give him an opportunity to determine the genuineness of the instrument, 9 this was rendered unnecessary not only by his omission to contest it, but also by his admission of the authenticity of the note implicit from his averment that he had made substantial payments thereon; 10 and (2) he had, moreover expressly waived "demand, presentment, protest and notice of protest and non-payment" of the note. WHEREFORE, the appealed Decision of the Court of Appeals is hereby AFFIRMED, with costs against the petitioner. SO ORDERED. Cruz, Gancayco, Griñ;o-Aquino and Medialdea, JJ., concur.

Footnotes 1 Rollo, pp. 17-28. 2 Id., pp. 29-30, 31-32, respectively. 3 Id., pp. 13-14. 4 Id., p. 13. The Trial Court's finding is that Ansaldo's note "was assigned or indorsed by Transoceanic, acting thru Moreno, in favor of plaintiff (PCIB): and Reyes's note "was likewise assigned or indorsed by Transoceanic in favor of the plaintiff acting thru Anselmo del Rosario who succeeded Moreno as president of Transoceanic x x" (Rollo, p. 39).

R. NSC filed with the trial court an urgent motion to redeem both lots. On January 10. and then Associate Justice of the Supreme Court) Conrado M. PETITIONERS. REGISTER OF DEEDS. pp.43 as the redemption price for the lot covered by TCT No.013.36. the Regional Trial Court of Quezon City[2] rendered judgment in Civil Case No. The latter lot had already been purchased by respondent National Steel Corporation as of August 17. but had not yet been registered in its name. Vasquez (Rollo. DECISION CRUZ. Bautista sent the sheriff a letter bearing NSC’s conformity in which he availed himself of NSC’s check. His letter contained the following reservation: . 1985. Angel Bautista. 38-45) 7 The appeal was docketed as CA-G. ANGEL L. EDITH FORTUNADO. entitled “Alfaro Fortunado vs. 10 et seq. This was opposed by the petitioners on the ground that the movant did not have the personality to intervene. NSC gave notice to the sheriff of its intention to redeem the lot covered by TCT No. 1981. p. 74496. Pursuant to the said judgment. AS CITY SHERIFF OF ILIGAN CITY. Q22367. 1983. T-7625.R. which was sufficient to cover the full redemption price for both lots. The Lawphil Project . 1985. NSC issued to the sheriff on March 20. respondent Basilisa Campano. 6 Rendered by then Judge (later Court of Appeals Justice. T-7625 and T-14133. As the motion remained unresolved and the period of redemption would expire on April 18. ILIGAN CITY. On February 11. J. COURT OF APPEALS. After due notice. NESTOR FORTUNADO AND RAMON A. Rollo. On March 21. T-14133.. BASILISA CAMPANO. No.” ordering the defendant to pay damages to the plaintiff. 1985. 10 Id.5 The case was docketed as Civil Case No.384.: The petitioners assail the decision of the Court of Appeals[1] denying mandamus to compel the sheriff to execute a final deed of sale in their favor.00. April 25. 6. 1984. RESPONDENTS. GONZALES. City Sheriff of Iligan City. VS. both of them should be redeemed by NSC. 313551 in the amount of P296. PNB Check No. 8 With whom concurred de Castro and Reyes. levied upon two parcels of land registered in the name of Bautista located at Iligan City and covered by TCT Nos. 78556. The sheriff suggested that as the two lots had been sold together for the lump sum of P267. JJ. They were issued a certificate of sale which was registered on April 25. No. T-14133.Arellano Law Foundation Supreme Court of the Philippines First Division G. The sheriff acknowledged receipt of the check on the same date. pp. 1985. BAUTISTA AND NATIONAL STEEL CORPORATION. 54003-R of the First Division. 1984. pp. (Rollo. On April 21. these lots were sold at public auction to the petitioners as the only bidder on April 23. 1985. 1991 ALFARO FORTUNADO. 4857) 9 Rollo. p. to redeem the other lot covered by TCT No.

there was no payment within the meaning of Article 1233 of the Civil Code.[3] the right of redemption being in fact a privilege. notifying him of the deposit of the PNB check. The central issue in this case is whether or not redemption had been validly effected by the private respondents. it said that the payment of the redemption money to the sheriff was legally sanctioned under Rule 39. 1985. it was nevertheless withdrawn when on March 27. Bautista wrote the sheriff that he would no longer effect the redemption because there was nothing to redeem. When the request was not granted. the tender of the redemption price was not valid as the same was conditional under Bautista’s letter to the sheriff dated March 21. 1985. The sheriff acknowledged receipt of the check as redemption money for the two parcels of land on March 21.” On November 10. The respondent court observed. and his repudiation of the redemption made by NSC. as the case may be. issued a certificate of redemption in favor of NSC and Bautista. invoke Belisario v. the petitioners filed with the respondent court a petition for mandamus. the petitioners requested the sheriff to issue a final deed of sale over the two lots and deliver the same to them on the ground that no valid redemption had been effected within the 12-month period from the registration of the sale. On November 22.” They argued that this provision was applicable to redemption under Rule 39. which provides that “the payment of debts in money shall be made in the currency stipulated. NSC filed a Manifestation dated March 18. It is contended by the private respondents that Article 1249 of the New Civil Code is inapplicable as it “deals with a mode of extinction of debts”[5] while the “right to redeem is not an obligation. The respondent court rejected the petitioners’ contention that Article 1249 was applicable in cases of redemption and reiterated the settled jurisprudence that “the right of redemption is not an obligation nor is it intended to discharge a pre-existing debt. Natividad. On March 25. They also contended that the check issued by NSC. 1985. the auction sale being null and void. Bautista prayed that the sum of P296. the sheriff wired the petitioners’ counsel. 1985. And even granting the validity of the said tender. made his own redemption inofficious. 1985. 1985. This provides that “a debt shall not be understood to have been paid. T-27154 had been issued in its favor on September 12. 1985. The petitioners added that since there was no delivery to the creditor of the redemption price. The said counsel told the sheriff that he was rejecting the check because it was not legal tender and was not intended for payment but merely for deposit. NSC and Bautista failed to comply with the provisions of the Rules of Court in exercising their right of redemption.”[6] They rely on Javellana. 1986. unless the thing or service in which the obligation consists has been completely delivered or rendered. Section 30. nor is it intended to discharge a pre-existing debt. where we held that “a redemption of property sold under execution is not rendered invalid by reason of the fact that the payment to the sheriff for the purpose of redemption is effected by means of a check for the amount due. On March 29. of the Rules of Court. that the validity of redemption was dependent on the validity of the certificate of sale. Section 31. 1985.384.This redemption is made solely for the purpose of effecting the execution and delivery to me of the necessary certificate of redemption and the same shall not be taken to mean my acknowledgment of the validity of the aforesaid writ of execution and sale. not being legal tender. 1987.43 covered by the PNB check be delivered to and kept by the Clerk of Court of the Regional Trial Court of Quezon City until such time as all incidents relative to the validity of the auction sale conducted by the sheriff were finally resolved. and if it is not possible to deliver such currency. and on March 22. According to the petitioners. then in the currency which is legal tender in the Philippines. They invoked Article 1249 of the Civil Code. 1987. 1985. On April 25. the respondent court denied mandamus but granted injunction to restrain the registration of the certificate of redemption in favor of NSC and Bautista.” The respondent court considered NSC’s redemption as absolute and unconditional in view of its refusal to join Bautista in contesting the validity of the sale and in withdrawing the redemption. of the Rules of Court which provides that such payment “may be made to the purchaser x x x or x x x to the officer who made the sale. But Bautista’s reservation in his letter of March 21. informing the respondent court that the certificate of redemption had already been registered and TCT No. 1986. On May 8.[4] the respondent court said that “the redemption was not rendered invalid by the fact that the officer accepted a check for the amount necessary to make the redemption instead of requiring payment in money. Bautista filed his Urgent Motion to deposit the redemption money with the clerk of court. as evidenced by Bautista’s Urgent Motion of March 27.[7] where it was held that “even if the check had been good. on the other hand.” The petitioners. both of which I shall continue to contest. could not be considered payment of the redemption price.” Citing Javellana v. the petitioners moved for partial reconsideration. the defendant was not legally bound to accept it because such a check does not . While their motion was pending. 1985. Mirasol.” On the failure to deliver the redemption price to the petitioners directly. nor shall this be taken to mean as a waiver on my part of any of the legal rights and remedies available to me under the circumstances. In an Urgent Motion dated March 27. which had to be resolved by the trial court. this appeal by certiorari on the grounds that the Court of Appeals erred in holding inter alia that Article 1249 of the New Civil Code does not apply to the payment of the redemption price of property sold at public auction and that the redemption of NSC is unconditional and without reservation. 1985. however. Moreover. the respondent court denied the petitioners’ motion for reconsideration. Hence.

stresses the liberality of the courts in redemption cases. But this cannot affect the validity of the payment.. can in no sense. IAC. for the Tolentinos are under no compulsion to exercise the same. Bautista was exercising alternative reliefs. is always considered compatible with ownership.” They also cite Villanueva v. Seneris. [11] all of which.[13] If in good faith the redemptioner pays. In the United States. was in the exercise of an option to repurchase. as the positions occupied by this litigant are based upon alternative rather than upon opposed pretension. Said right. and Bautista filed an Urgent Motion (To Deposit Redemption Money with Quezon City Clerk of Court) dated March 27.” Had he not done so. The check as a medium of payment in commercial transactions is too firmly established by usage to permit of any doubt upon this point at the present day. In the instant case. they claim. It would appear from a study of the jurisprudence invoked by the parties that the case applicable to the present controversy is Javellana v.[15] “redemption is an implied admission of the regularity of the sale and would estop the petitioner from later impugning its validity on that ground. it should be noted that private respondents NSC filed an Urgent Motion for Redemption dated February 11. this Court held: x x x the aforequoted Article should not be applied in the instant case x x x. a liberal construction will be given to our redemption laws as well as to the exercise of the right of redemption. estoppel might have operated against him. In Javellana. an ordinary banker’s check. and the officer receives before the expiration of the time of redemption. CA. xxx Although the private respondents in the case at bar did not file a redemption case against petitioners. it has also been held and recognized that a payment by check or draft or bank bills or currency which is not legal tender is affective if the officer accepts such payment. in Legarda and New Pacific as payment of a mortgage indebtedness. This right of redemption is an absolute privilege. and one who fails to obtain relief in the sense of absolute owner may successfully assert the other right.[9] New Pacific Timber and Supply Co. No one can question the right of a litigant to claim property as owner and to seek in the same proceeding alternative relief founded upon some secondary right. be considered an obligation. for instance. To start with. The check tendered in Belisario. After said foreclosure and sale. Court of Appeals. if the redemptioners choose to exercise their right of redemption. xxx xxx xxx x x x And the redemption is not rendered invalid by the fact that the said officer accepted a check for the amount necessary to make the redemption instead of requiring payment in money. and he undoubtedly. in the same manner that a withdrawal of the redemption money being deposited cannot be deemed to have forfeited the right to redeem.satisfy the requirements of a legal tender. it is the policy of the law to aid rather than to defeat the right of redemption. Inc. and in the PAL case in satisfaction of a judgment. nobody can compel them to do so nor will such choice give rise to a cause of action in favor of the purchaser at the auction sale. It goes without saying that if he had seen fit to do so. the relationship between said purchaser and the redemptioners is not even that of creditor and debtor. for the same will not militate against the right of the Tolentinos to redeem.” In questioning the writ of execution and sale and at the same time redeeming his property. thus. Withal. in line with the policy aforesaid x x x. that redemptions should be looked upon with favor and where no injury is to follow. We reiterated that same view in Ybañez v. Should they choose not to exercise it. it was contended that the position of Luis Mirasol as a litigant in the prior appeal was inconsistent with his position as litigant in the redemption case and that he was estopped from now claiming as redemptioner the property which he had earlier claimed as owner. Santos. That which a litigant may do in any one case can of course be done in two different proceedings. In fact. the ends of justice would be better served by affording the Tolentinos the opportunity to redeem the properties in question other than the homestead land. the exercise of which is entirely dependent upon the will and discretion of the redemptioners. where he made his redemption of the lot covered by TCT No.[16] thus: Nor are the causes of action in the two (2) cases inconsistent with one another. As aptly pointed out by . The cases cited by the petitioners do not involve redemption by check. such redemption being optional and not compulsory. Court of Appeals.[8] Legarda v. 1985. in Villanueva in connection with a pacto de retro. the payment is regarded as sufficient. have overruled Javellana. 1985. v. the officer could have required payment to be made in lawful money. 1985. Miailhe. The motions were well within the redemption period.T-7625 subject to the reservation that “the same shall not be taken to mean my acknowledgment of the validity of the aforesaid writ of execution and sale x x x nor x x x as waiver on my part of any of the legal rights and remedies available to be under the circumstances. what remains is the right vested by law in favor of the Tolentinos to redeem the properties within the prescribed period. It stands to reason therefore. in accepting a check. No importance may thus be attached to the circumstance that a stop-payment order was issued against said check the day following the deposit.[14] We find nothing wrong with Bautista’s letter of March 21. The Court does not agree with these conclusions. On the other hand. Mirasol. On the issue of the applicability of Article 1249 of the Civil Code and the validity of the tender of payment through a crossed check. Tolentino v. The Court held: We are unable to see any force in the suggestions. it is not clearly shown that said stop-payment order was made in bad faith.[12] besides citing Javellana. As we held in Cometa v. placed himself in a position where he could be liable to the purchaser at the public auction if any damage had been suffered by the latter as a result of the medium in which payment was made. the Tolentinos are not indebted to BPI their mortgage indebtedness having been extinguished with the foreclosure and sale of the mortgaged properties. There is. The right of redemption.[10] and Philippine Air Lines V. no legal obligation to exercise the right of redemption.

In response to a query from this Court regarding the status of CC No. SO ORDERED. Golez v. Camara. Arenas. [14] Ibid. Bautista was also unconditional like that of the National Steel Corporation. [15] 151 SCRA 563. June 3. the aforesaid sum of P296. to the Clerk of Court. In effect. the same being a right and not an obligation. [12] 106 SCRA 513. Griño-Aquino. JJ. This entry was posted in Jurisprudence. Magno. p. sanctioning the use of a check for the payment of obligations over the objection of the creditor. [8] 67 Phil. [16] 180 SCRA 464. upon his encashment of PNB Check No. to remain thereat until the validity of the questioned orders and/or decision in the above entitled case are resolved with finality or until further orders from the Honorable Court. for the payment of the redemption price.S. in fact delivered the redemption money to one of the petitioners. xxx xxx xxx Finally. the Reconveyance Case presented an alternative cause of action . 156. they remain liable. [2] Presided by Judge Rodolfo A. Narvasa. [10] 101 SCRA 686. [9] 88 Phil. [7] 60 Phil. JJ. A-313551. which is the subject of inquiry in the Annulment Suit. No. had been made on time. Golez v. Executions 258. 35865-R. wherein he prayed that — “x x x Sheriff Basilisa Campano of Iligan City be directed and ordered to immediately transfer and deliver. with costs against the petitioners. with the modification that the redemption made by Angel L. Camara. 648. Aricayos v. while we hold that the private respondents properly exercised their right of redemption. 1988.R.384. Camara. p. of course. The tender of a check is sufficient to compel redemption but is not in itself a payment that relieves the redemptioner from his liability to pay the redemption price. No.. supra. 1985. and whether or not another money judgment against respondent Go had already been satisfied. 1971. L-22578 January 31. (Chairman).R. the said amount shall be returned and delivered back to herein defendant. concurring. 83 Phil. NATIONAL MARKETING vs.Although Bautista repudiated his redemption in his letter of March 25. and Medialdea. 1973 Facts: NAMARCO and the FEDERATION entered into a Contract of Sale. [5] Golez v. We are not. The latter case alleged irregularities in the conduct of the public auction sale. he backtracked in his Urgent Motion dated March 27. [4] 40 Phil.J. the issues raised in the Reconveyance Case call for a separate determination of such questions as whether respondent Go had. In other words. [11] 181 SCRA 557. [1] Penned by Tensuan. They contend that Bautista has not shown that the parcels of land would have been sold for a better price had they been offered separately and that he had not asked that they be sold by parcels. if there had been one. CA-G. The facts surrounding the sale are not before us. [13] 33 C. Regional Trial Court of Quezon City. 101 Phil. to the sheriff on the ground that the auction sale was illegal. WHEREFORE. Gancayco. FEDERATION OF UNITED NAMARCO DISTRIBUTORS G. 637. Magno. Apart from the circumstance that we are not a trier of facts.43 deposited to her by the National Steel Corporation. What we are saying is that a check may be used for the exercise of the right of redemption.the respondent Appellate Court. J. 363. the petitioners pray that we rule on the validity of the certificate of sale assailed by Bautista on the ground that it covers more than one lot and does not indicate the price paid for each parcel. 403. Q22367. the petition is DENIED. 761. NAMARCO was authorized to . 40 citing Paez v. [3] Rollo.. with Chua and Kapunan. x x x On the other hand. They also maintain that since we have the main jurisdiction to determine the validity of the redemption. concur. It is further prayed that the aforesaid amount be considered as sufficient redemption price if it shall finally be adjudged that plaintiffs are entitled thereto. supra. the facts we are asked to try are not at hand. there are issues in the Reconveyance Case that are set apart from the question of the validity of the auction sale.. through the authority of defendant. Accordingly. supra. we likewise have ancillary jurisdiction to rule on the validity of the sale. whether or not such delivery. Ortiz. 67 citing Paez v. the clerk of the trial court replied that the records of that court were totally burned during the fire which razed the Quezon City Hall on June 11. 1985. by this decision. the appealed decision is AFFIRMED. otherwise. [6] Rollo.

000 cartons of Juicy Fruit Chewing Gums. it refused to deliver the other goods mentioned in the said contract. 1960. in the first instance as payment.001.053. To insure the payment of those goods by the FEDERATION.00. 600606 and 600586. or bills of exchange or drafts or other mercantile document shall produce the effect of payment (1) only when realized. is applicable only to instruments executed by third persons and delivered by the debtor to the creditor. 500 cartons of Adams Chicklets. but the latter failed and refused to pay the said amount. PNB informed NAMARCO that it could not negotiate and effect payment on the sight drafts drawn under PNB Domestic L/Cs as the requirements of the covering letters of credit had not been complied with. 1249 New Civil Code. with a total value of P135.35. by delivering to the FEDERATION the undelivered goods. The fact that NAMARCO attempted to collect from the Philippine National Bank on the sight drafts on March 10. FEDERATION filed a complaint against the NAMARCO for specific performance and damages. NAMARCO has refused and declined to accept the cash payments by the FEDERATION. The mere fact that NAMARCO proceeded in good faith to try to collect payments thereon. therefore. .91.891. 1960. The common condition of the three letters of credit is that the sight drafts drawn on them must be duly accepted by the FEDERATION before they will be honored by the Philippine National Bank. it is not bound by the provisions thereof. FEDERATION received from the NAMARCO the 2. respectively.031.82 and P197. Issue: WON the mere delivery by the FEDERATION of the domestic letters of credit to NAMARCO operate to discharge the debt of the FEDERATION? Held: No. and does not apply to instruments executed by the debtor himself and delivered to the creditor. 1. all with a total value of P277. the Contract of Sale was not validly entered into by the NAMARCO and.000 cartons of Juicy Fruit Chewing Gums.000 cartons of PK Chewing Gums. did not amount to an appropriation by it of the amounts mentioned in the sight drafts so as to release its claims against the FEDERATION. and 500 cartons of Adams Chicklets. In the case at bar it is not even pretended that the negotiable character of the sight drafts was impaired as a result of the fault of NAMARCO. under the condition that the cost thereof would be paid in cash through PNB Domestic L/C Nos. or (2) when by the fault of the creditor. 168 cartons of Blue Denims. respectively. 600570.import the following items with the corresponding dollar value totalling $2.357. and 138 bales of Khaki Twill. the privileges inherent in their negotiable character have been impaired. and on February 20. According to NAMARCO. Among the goods covered by the Contract of Sale were 2.000 cartons of PK Chewing Gums. The delivery of promissory notes payable to order. the NAMARCO accepted three domestic letters of credit.” It was given therefore as a mere guarantee for the payment of the merchandise. As shown by the appealed judgment NAMARCO accepted the three letters of credit “to insure the payment of those goods by the FEDERATION. CFI Manila promulgated its decision ordering the NAMARCO to specifically perform its obligation in the Contract of Sale. As heretofore stated they were never taken.12. But the said drafts were not presented to the FEDERATION for acceptance. the FEDERATION received from the NAMARCO the 168 cartons of Blue Denims and 183 bales of Khaki Twill. is of no material significance. There was no agreement that they should be accepted as payment. alleging that after the NAMARCO had delivered a great portion of the goods listed in the Contract of Sale.) The clause of Article 1249 relative to the impairment of the negotiable character of the commercial paper by the fault of the creditor. 1. NAMARCO demanded from the FEDERATION the payment of the total amount of P611. under the condition that the cost thereof would be paid in cash through PNB Domestic L/C No. Mere delivery by the FEDERATION of the domestic letters of credit to NAMARCO did not operate to discharge the debt of the FEDERATION.804. (Art. A mere attempt to collect or enforce a bill or note from which no payment results is not such an appropriation of it as to discharge the debt.

WHEREAS. 46124. by virtue of NAMARCO Board Resolution dated November 3. is a government owned and controlled corporation duly organized and existing under and by virtue of Republic Act No. No. and the defendant. as follows: The plaintiff. Inc.. to wit: xxx ​ xxx ​ xxx "That. the defendant. INC. plaintiff-appellee.000. which are not disputed by the parties. FEDERATION OF UNITED NAMARCO DISTRIBUTORS.: Appeal by defendant. Jr.031. plus costs. the NAMARCO agrees to sell the said items and/or merchandise subject to the following terms and conditions: .000. the NAMARCO and the FEDERATION entered into a Contract of Sale which contains the following stipulations. Federation of United Namarco Distributors. from a decision of the Court of First Instance of Manila in Civil Case No. vs. 1959. Government Corporate Counsel Tomas P. defendant-appellant.001. L-22578 ​ January 31.00. and deposited by the FEDERATION with the NAMARCO upon signing of the items and/or merchandise above enumerated items and/or merchandise shall be paid on cash basis upon delivery of the duly indorsed negotiable shipping document covering the same. Matic. National Marketing Corporation the sum of P609. 1959. On November 16. is a non-stock corporation duly organized and existing under and by virtue of the laws of the Philippines. ordering said defendant to pay the plaintiff. as amended. J. the Management of NAMARCO was authorized to import the following items with the corresponding dollar value totalling Two Million One Thousand Thirty One Dollars ($2. and Assistant Government Corporate Counsel Lorenzo R. hereinafter to be called the FEDERATION.Republic of the Philippines SUPREME COURT Manila EN BANC G.00).00) as part payment of the items and/or merchandise above-mentioned. 1973 NATIONAL MARKETING CORPORATION. and not paid for by.014. and the sum of P5.. The facts of this case. terms and conditions: "That. representing the cost of merchandise delivered to. for and in consideration of the sum of Two Hundred Thousand Pesos (P200. with interest thereon at the legal rate from the date of delivery of the merchandise. are correctly set forth in the appealed decision from which we reproduce hereunder. ANTONIO. until the whole obligation is paid. for and as attorney's fees and other expenses of litigation.R.73. Gamboa and Gamboa for defendant-appellant. WHEREAS. Mosqueda for plaintiff-appellee. hereinafter to be called the NAMARCO. 1345.

covering the full invoice value of the 168 cartons of Blue Denims. 600606.91. the NAMARCO submitted to the FEDERATION Statement of Account for P277. in favor of the NAMARCO for the account of the FEDERATION.000 cartons of Juicy Fruit Chewing Gums. 1960. Upon arrival of the goods in Manila in January. dated January 27. and on February 20. that should there be any adjustment in the procurement costs the same shall be refunded to the FEDERATION. covering shipment of the 183 bales of Khaki Twill or a total of P611. with a total value of P135. as follows: . under the condition that the cost thereof would be paid in cash through PNB Domestic L/C Nos. etc.891. To insure the payment of those goods by the FEDERATION.000 cartons of PK Chewing Gums.000 cartons of Juicy Fruit Chewing Gums.891. dated January 28. dated January 28.824. 168 cartons of Blue Denims. covering the full invoice value of the 2. The pertinent allegations of the complaint in that case is. 1960. 500 cartons of Adams Chicklets. in favor of the NAMARCO for the account of the FEDERATION.804. That all handling and storage charges of the goods sold shall be for the account of the FEDERATION. "A"). respectively.891. Among the goods covered by the Contract of Sale were 2. alleging that after the NAMARCO had delivered a great portion of the goods listed in the Contract of Sale. for the FEDERATION to pay. 1960. 1960. 42684 of this Court for specific performance and damages. 1. and 500 cartons of Adams Chicklets.357. accepted draft and duly executed trust receipt approved by the Philippine National Bank. That the FEDERATION waives its right to claim for any loss or damage that may be suffered due to force majeure such as war. available by draft up to the aggregate amount of P197. which became Civil Case No..12. under the condition that the cost thereof would be paid in cash through PNB Domestic L/C No. and PNB Domestic L/C No. 600570. ​ ​ "3. That the items and/or merchandise sold by NAMARCO to the FEDERATION shall be distributed among its members and retailers in accordance with NAMARCO's existing rules and regulation.12. and 500 cartons of Adams Chicklets. to wit: PNB Domestic L/C No. covering shipment of the 168 cartons of Blue Denims. 600606 and 600586. in favor of the NAMARCO for the account of the FEDERATION.000 cartons of Juicy Fruit Chewing Gums. it refused to deliver the other goods mentioned in the said contract. except when such incident is directly or indirectly due to the negligence of the NAMARCO or its representative.357. provided. covering the full invoice value of the 183 bales of Khaki Twill. the NAMARCO accepted three domestic letters of credit. PNB Domestic L/C No. 1.357. 1960.xxx ​ xxx ​ xxx ​ "1. 600570.000 cartons of PK Chewing Gums. On March 2.000 cartons PK-5 Chewing Gums.12. 600586. respectively. 1960. On January 29. however. each to be accompanied by statement of account of buyer issued by the NAMARCO. and 500 cartons of Adams Chicklets.053.000 cartons of PK Chewing Gums.82 and P197. available by draft up to the aggregate amount of P135.35.804. governing the distribution of NAMARCO goods and at the wholesale and retail prices to be determined by NAMARCO. "4.. ​ xxx ​ xxx ​ xxx (Annex "A" to the Complaint or Exh. and Statement of Account of P197. Statement of Account of P135.82. 1. all with a total value of P277. 1960. strikes.000 cartons of Juicy Fruit Chewing Gums.32. the FEDERATION and some of its members filed a complaint against the NAMARCO. available by draft up to the aggregate amount of P277. That the FEDERATION shall pay the NAMARCO the value of the goods equivalent to the procurement costs plus 5% mark-up.91. covering shipment of the 2. riots.91. the FEDERATION received from the NAMARCO the 168 cartons of Blue Denims and 183 bales of Khaki Twill. "2. 1. and 138 bales of Khaki Twill. the FEDERATION received from the NAMARCO the 2.

" (Record on Appeal. through the FEDERATION. 46124. to the NAMARCO. that the FEDERATION'S act or omission in refusing to satisfy the former's valid. for payment Sight Draft. 1960. representing the cost of merchandise mentioned in the preceding paragraph. pp.804. that on October 15. 42684. the NAMARCO filed in Civil Case No. in the amounts of P277. 42684. holding that the Contract of Sale was valid. the Court of First Instance of Manila promulgated its decision in Civil Case No. with interest thereon at the legal rate from the date of delivery of the merchandise in question.804. and Sight Draft. to cover the full payment of the 168 cartons of Blue Denims." (Exh.357.000 cartons of Juicy Fruit Chewing Gums. in accordance with the terms and conditions of said contract. 1960. that when NAMARCO filed. it is not bound by the provisions thereof.000 cartons of PK Chewing Gums.357.00 as attorney's fees and other expenses of litigation. 600570. just and demandable claim has compelled it to file the instant action. for P197. 600606 and 606586. its answer to the complaint in Civil Case No. duly accompanied with supporting papers. dated March 10. the total cost of the goods was reduced from P611. On March 31. ordering the NAMARCO to specifically perform its obligation in the Contract of Sale. NAMARCO instituted the present action (Civil Case No.053. and still are willing to take deliveries of the same commodities and to pay for them. 1960.91. in accordance with such terms and conditions. "1") On March 10. 1960. until the whole obligation is paid. 63-71. and that the plaintiffs have always been. P20. in accordance with the terms and conditions stipulated in said contract. therefore. is also the basis of NAMARCO's present complaint in Civil Case No. for P277. duly accompanied with supporting papers.82 and P197. that said contract. 42684 its answer to the complaint. That now the defendant has refused and declined to accept the cash payments by the FEDERATION. to cover the full payment of 183 bales of Khaki Twill. On March 19. 1960. ordering."17. 1960. alleging that the Contract of Sale was not validly entered into by the NAMARCO and. without setting up any counterclaim for the value of the goods which it had already delivered but which had not yet been paid for by the FEDERATION.891. the FEDERATION moved to dismiss the complaint on the ground that the cause of action alleged therein is barred forever. the NAMARCO demanded from the FEDERATION the payment of the total amount of P611. among others.35. 1961. duly accompanied with supporting papers. dated March 10. the NAMARCO appealed from the decision. to cover the full payment of the 2.) On January 25.12. 42684. 1960.891. against deliveries to it of the commodities listed in paragraph 16 hereof.053.000. P135. 1960. 42684. for P135. the NAMARCO to specifically perform its obligation under the contract of sale by delivering to the FEDERATION the goods subject-matter of the contract as are involved in the ​ .35. plus costs. On November 11. 1961.014.82. by delivering to the FEDERATION the undelivered goods. 1962.35 to P609. the FEDERATION and some of its members instituted Civil Case No. In support thereof. 46124. 1960. 1960. But the said drafts were not presented to the FEDERATION for acceptance. it did not set up any counterclaim therein. Sight Draft. 1960. 42684 against NAMARCO for specific performance to enforce compliance with the contract of sale. the FEDERATION alleged that on March 2. and has refused and declined to make deliveries thereof to the FEDERATION. basis of Civil Case No. dated March 10. respectively. or any portion thereof. as the requirements of the covering letters of credit had not been complied with.91.053.12. the NAMARCO presented to the Philippine National Bank. among others. On June 7. Civil Case No. Annex "A" hereof. and praying that the FEDERATION be ordered to pay the NAMARCO the sum of P611. pursuant to Section 6 of Rule 10 of the Rules of Court. 42684. the Supreme Court 1 rendered a decision on NAMARCO's appeal in Civil Case No.73. In the readjustment made on the basis of actual expenditures. On February 7. 1960. 46124) alleging. Manila. and 500 cartons of Adams Chicklets. the Court of First Instance of Manila promulgated the decision in said Civil Case No. on March 19. but the latter failed and refused to pay the said amount. the Philippine National Bank informed the NAMARCO that could not negotiate and effect payment on the sight drafts drawn under PNB Domestic L/C Nos. "On May 19. On October 15. 1. The common condition of the three letters of credit is that the sight drafts drawn on them must be duly accepted by the FEDERATION before they will be honored by the Philippine National Bank.

as well as P17. Civil Case No. the date of filing. 1960. On February 11. and October 15. On June 21. in Civil Case No. such a counterclaim.00 as damages for improper issuance of a writ of attachment which writ. the date of the decision in that case. after due hearing. 42684 in the manner prescribed by section 4. the FEDERATION filed a rejoinder reiterating that the requirements on the rule of compulsory counterclaim are present. against the FEDERATION alone. On February 18. 1960. who was administratively charged therefor. NAMARCO interposed its opposition to said motion to dismiss contending that its claim for the recovery of the cost of merchandise delivered to the FEDERATION on January 29 and February 20. as the same evidence would not support or refute both. By way of counterclaim. . the FEDERATION contends that: I The lower court erred in failing to hold that the complaint does not state a cause of action against the defendant-appellant. 42684. and within the time between March 19.35. that NAMARCO's failure to set it up as a counterclaim in its answer in Civil Case No.000. being a compulsory counterclaim against the latter. 42684 against the NAMARCO and therefore it must have been set up in said Civil Case No. the FEDERATION sought P50. 1969 when NAMARCO demanded payment of the sum of P611. and that the failure of NAMARCO to set up.053. NAMARCO filed an answer to the FEDERATION'S counterclaim specifically denying the material averments thereof and maintaining that the present action is not barred by Civil Case No. that the issue in Civil Case No. Manila. therefore. Rule 9 of the new). 42684 on October 15. the lower court issued an order holding "in abeyance" action on the motion to dismiss till after the trial on the merits. Arive. 42684 for specific performance and. that the first requirement — that the counterclaim arises out of or is necessarily connected with the contract of sale subject-matter of NAMARCO's cause of action — is evident from the face of the complaint itself. On June 3. consent and approval of the Board of Directors and that the same was not approved by the Auditor General conformably with Administrative Order No. 42684. Rule 10 of the old Rules of Court (Section 4. 1960 constituted a bar to the institution of the present action. to enforce its claim. was the genuineness and due execution of said contract as the same was entered into by the General Manager of the NAMARCO without the knowledge. in said Civil Case No. 42684.complaint. and that the present claim is not necessarily connected with the transaction or occurrence that is the subject matter of Civil Case No. 1959 of the President of the Philippines and therefore it would have been inconsistent for NAMARCO to avail itself of the contract the validity of which it was impugning. that the claim of NAMARCO against the FEDERATION matured either on May 19. 1960 when the Philippine National Bank. 1961. informed the NAMARCO that it could not effect payment on the sight drafts. the present appeal. that the deliveries of the merchandise were effected through the fault or negligence of one of its personnel. 1964. In this appeal. precludes NAMARCO from raising it as an independent action. Hence. 42684 does not constitute res judicata. 1961. 1961. of the answer of NAMARCO. specifically denying other allegations and consistently with its position averred as affirmative defense that NAMARCO's failure to assert its claim against the FEDERATION before judgment in Civil Case No. 290 dated February 3. 42684. 46124. that the FEDERATION refused to pay said amount. does not fall under the category of compulsory counterclaim. 1961. evidently had been issued earlier by the court. 1961. that NAMARCO's claim in the present case. pursuant to Section 6 of Rule 10 of the Rules of Court. the lower court rendered its aforementioned decision. On January 13. found guilty and accordingly dismissed. 42684. the FEDERATION filed its answer to the NAMARCO's complaint admitting some material averments of the complaint. Rule 10 of the Rules of Court. or on June 7.000. On June 14. II The lower court erred in holding that the plaintiff-appellee's claim is not a compulsory counterclaim as defined and governed by section 6. 1960 is not necessarily connected with the suit in Civil Case No.00 as attorney's fees and other expenses of litigation. Juan T. in that it arose out of or is necessarily connected with the transaction or occurrence that is the subject-matter of the action of the FEDERATION in Civil Case No.

. Commercial Co." (Story. Story. consisting of various facts and acts done by the respective parties and it frequently happens that one or more of these acts.00 for and as attorney's fees and other expenses of litigation. that should have been asserted in the previous case the lower court had the following to say: As to the meaning of the terms "transactions" and "occurrence" used in Section 6. events. and whether two claims arise out of the same transaction or occurrence depends in part on whether the same evidence would support or refute both. Story. whether or not this action of NAMARCO for the collection of the payment of the merchandise delivered to. may be such a violation of duty as to give to the other a right of action.73 with interest thereon at the legal rate from the date of delivery of the merchandise. acts. 174). and viewed in another aspect results in the defendant's right of action. 42684 was predicated on the refusal of the latter to perform its obligation under the Contract of Sale. but the obligation thus created may be so counter-balanced by other matters growing out of the same transaction that no compensation ought to be made therefor. but not yet paid by. is already barred as a consequence of the failure of NAMARCO to set it up as a counterclaim in the previous case. To illustrate the meaning of that requisite. because the cause of action of the FEDERATION in Civil Case No. and the sum of P5. One of the definitions of the term "transaction" is. circumstances and defaults which viewed in one aspect results in the plaintiff's right of action. What is the "transaction or occurrence that is the subject-matter of the opposing party's (FEDERATION'S) claim' in Civil Case No. 35. etc. 671). The FEDERATION contends that NAMARCO's claim arose out of that transaction or occurrence. As these two opposing rights cannot be the same." Every transaction is more or less complex. Rules of Court.. the FEDERATION. Vol. 100 Cal. The complaint of the FEDERATION against the NAMARCO in Civil Case No. 35. or it must be "that combination of acts and events. with costs. 42684). In ruling that the present claim of NAMARCO is not compulsory counterclaim. 577. 42684? It must consist in "the facts and circumstances out of which a claim may arise". and generally must be. 34 Pac. Rule 10. circumstances and defaults which viewed in one aspect results in the plaintiff's right of action.. (Williams v. it follows that there may be. p. These terms are broader than the term "contract". "Mr. (Civil Case No. for while a contract is a transaction. Robinson. The refusal of the NAMARCO to perform its obligation under the Contract of Sale is the act or the event. "a matter or affair either completed or in course of completion. v. 100 Cal. or was necessarily connected with that transaction or occurrence. But it will be noted that one of the requisites for the application of the rule on compulsory counterclaim is that the counterclaim should at least be connected with or must arise out of the transaction or occurrence which gave rise to the opposing party's claim. 34 Pac. and defaults in the transaction as a whole which do not enter into each cause of action. We shall first proceed because of its decisive significance. . the following cases are cited: . 42684 and the cause of action of the NAMARCO in this case are based on the same Contract of Sale. Insuch a case.III The lower court erred in entering judgment in favor of the plaintiff-appellee and ordering defendantappellant to pay the former the sum of P609.014. if viewed by itself.. v. the circumstance or default. 3 Federal Rules Service. a transaction is not necessarily a contract. Francisco in his annotations and commentaries on the Rules of Court. with the issue posed by appellant in its second assignment of error . This is obvious. 671). and authorize matters to be counter-claimed which could not be counter-claimed as arising out of the contract sued upon by the plaintiff. I." (Story. and viewed in another aspect results in defendant's right of action. Commercial Co.000. etc. which constitutes the transaction or the occurrence... facts. simple equity requires that the respective causes of action in behalf of each be adjusted in a single suit. Pomeroy defines the term as "that combination of acts and events. cites the following: "The terms "transaction" and "occurrence" used in the section now under consideration include the facts and circumstances out of which a claim may arise.

) This ruling of the court a quo is now assigned as error by the FEDERATION for it is its position that the previous action which it filed against NAMARCO. 46124) and therefore this action must be considered as having arisen out of or is necessarily connected with the transaction or occurrence that was the subject matter of the previous case. Held: It is clear that the claim for repairs or necessary expenses allegedly made by Maclan in the property in dispute in case No. hence. for specific performance to compel NAMARCO to deliver the goods.200. Maclan filed a complaint against Garcia who acquired the property by inheritance from Mariano. as alleged in its answer in Civil Case No. In a former suit. but is not a compulsory counterclaim. 42684. Jimenez. B claimed realty under a will of her deceased husband and L claimed the same as a forced heir. Beltran v. 42684. 42684 because NAMARCO could have set it up as a counterclaim in a ​ . under the Contract of Sale. Berses v. for the purpose of recovering the sum of P5. was predicated upon the contract of sale of November 16. but rather to the fact that it believed. . Judgment was rendered in favor of Mariano. While the Contract of Sale created reciprocal obligations between the FEDERATION and the NAMARCO. and (b) the two actions are but the consequences of the reciprocal obligation imposed by law 3 upon the parties by virtue of the aforesaid contract. Therefore. The action of the FEDERATION in Civil Case No. based on the refusal of the NAMARCO to deliver the other goods. that the Contract of Sale was not validly entered into by it. Defendant pleaded res adjudicata alleging that B should have made a counterclaim in the first action. both in the previous case as well as in the present case. The right of the NAMARCO to the cost of the goods existed upon delivery of the said goods to the FEDERATION which. The alleged failure of the FEDERATION to pay for goods delivered should therefore have been raised by NAMARCO as a defense or counterclaim in the previous case notwithstanding the fact that said claim only accrued after NAMARCO's answer was filed in said Civil Case No. Villanueva. had nothing to do with the latter's claim for the cost of the goods delivered and. 42684.00 as necessary expenses allegedly incurred in the preservation of said property prior to the commencement of case No. 42684 is such that the claim of the NAMARCO in this case could not properly be pleaded as a compulsory counter-claim in that case. It insists that "logical relationship" exists between the previous action for specific performance (Civil Case No. 1959 executed by the FEDERATION and NAMARCO who are the same parties. 53 Phil. 2 (Emphasis supplied. is necessarily connected with the action of the plaintiff therein to recover said property from Maclan. 42684. About a year later. 451). After judgment dividing the property and requiring B to turn over a part of the same to L. . ​ "2.. the transaction or occurrence that is the subject-matter of the opposing party's claim. Mariano instituted an action (Civil Case No. Giness and Hernandez. 42684. Held: That the former suit was a petition for the inheritance and the present one being a claim for improvement is in no wise connected with the principal object of the former litigation and that a counterclaim could not properly have been presented in the first action (Bautista v. the failure of the FEDERATION to pay for the goods delivered could not have been properly raised by the NAMARCO as a defense or pleaded as a compulsory counterclaim in Civil Case No. However."1. the claim of the NAMARCO for the cost of the goods delivered arose out of the failure of the FEDERATION to pay for the said goods. 62 Phil. Said connection is substantially identical with that which exists between an action for recovery of a land and the claim for improvements therein made by the defendant in said case. 25 Phil. Jimenez. 106. Rules of Court. (Civil Case No. the NAMARCO is not precluded from bringing this present action. is not applicable. The claim of the NAMARCO in this case could have been a permissive counterclaim. and not out of the refusal of the NAMARCO to deliver the other goods to the FEDERATION. had the NAMARCO alleged its present claim in Civil Case No. in Civil Case No. Valbuena. A permissive counterclaim is one which does not arise out of. such claim was not necessarily connected therewith. 40 Phil. 697. Rule 10. the Court would have permitted it. 24 Phil. Since the cause of action of the FEDERATION in Civil Case No. 111. this suit was brought by B to recover the value of the improvements made on the property during the time she had possession of the same. 24 Phil. Mariano executed an instrument purporting to be a deed of conveyance of two parcels of land in favor of Maclan. 106. Lopez v. 473. It is well settled that such claim for improvements is barred unless set up by recovery of the land (Bautista v.. About two years later. Gloria. Calit v. 111). the refusal of the latter to deliver the other goods was not due to the failure of the FEDERATION to pay for the goods delivered. It is the theory of the FEDERATION that the applicable guiding principle is "that there be a logical relationship between" plaintiff's claim and defendant's counterclaim. or is not necessarily connected with. had to pay for them. 42684) and NAMARCO's present action for the payment of the goods delivered as (a) both actions are derived from the same contract of sale. Section 6. 76. Such being the case. 106) against Maclan for the annulment of the said instrument on the ground of fraud and the recovery of the property.

NAMARCO insists that the same evidence or substantial identity in the evidence criterion should be applied in determining whether or not its claim is compulsory. 11and in Pomeroy's Treatise on Remedies and Remedial Rights. 5 is taken from section 97 of Act No. such claim could neither have been asserted as a counterclaim by NAMARCO in its answer. 8 Under this Rule. 15 had been considered of doubtful utility for it assumes that. counterclaim not set up shall be barred if the following circumstances are present: (1) that it arises out of. Wright & Miller in their Federal Practice and Procedure 14 summarize them as follows: ​ 1. defendant will be both motivated and able to determine before answering whether his claim must be asserted as a . 9 Conversely. the court has no jurisdiction to entertain the claim or it requires for its adjudication the presence of third persons of whom the court cannot acquire jurisdiction. rather than attempting to define the key terms of the rule on compulsory counterclaim. 190. nor could NAMARCO file it as a counterclaim based on a contingent demand for the same cannot be allowed. would have been inconsistent with its defense that the same contract was a nullity and (c) in any event. as follows: The first test . 42684. 10 The first requisite that the claim should arise out of or is necessarily connected with the transaction or occurrence that is the subject matter of the opposing party's claim. because: (a) the evidence presented to support the genuineness and due execution of the contract of sale as ground for specific performance in Civil Case No. .. the transaction or occurrence that is the subject matter of the opposing party's claim (2) that it does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction. 1960. 4 On the other hand. to the complaint in Civil Case No. As a matter of fact most courts. subject of the instant appeal. 12 The formulation in Williams v. or even where there is such connection. 7 This rule is "mandatory" because the failure of the corresponding party to set it up will bar his right to interpose it in a subsequent litigation. 6 This rule is substantially the same as Rule 13 (a) of the Federal Rules of Civil Procedure. (b) for NAMARCO in Civil Case No.. Would res judicata bar a subsequent suit on defendant's claim absent the compulsory counterclaim rule? 3. may give rise to the critical question: What constitutes a "transaction" or "occurrence"? On this point the lower court has conveniently embodied in its decision. the meaning of the terms "transaction" or "occurrence". ​ ​ ​ ​ Are the issues of fact and law raised by the claim and counterclaim largely the same? 2. as defined in Williams v. or is necessarily connected with. under the rule. is not the same as the evidence presented to support NAMARCO's claim for recovery of the cost of the merchandise received by the FEDERATION. where it has logical relation with the transaction or occurrence that is the subject matter of the opposing party's claim. Is there any logical relation between the claim and the counter-claim? An affirmative answer to each of the foregoing questions suggests that the counterclaim is compulsory. a counterclaim is merely permissive and hence is not barred if not set up. 42684. Robinson shows the futility of attempting to reduce the term "transaction" or "occurrence" within the context of an all-embracing definition. identity of issues.. Will substantially the same evidence support or refute plaintiff's claim as well as defendant's counter-claim? 4. The rule on compulsory counterclaim contained the section 6 of Rule 10 of the old Rules of Court. filed on March 19. quoted elsewhere herein. in order to protect himself from inadvertently losing the right to present his claim in a later action. Robinson. and on the basis of such test its claim could not be considered compulsory. and thus seek in effect the enforcement of said contract. a claim to be available as a counterclaim to an action must be due and owing at the time of the commencement of the action. These tests or standards have been the object of extensive analysis and criticisms. and (3) that the court has jurisdiction to entertain the claim.supplemental pleading pursuant to section 4 of Rule 1 of the old Rules of Court. 42684 to interpose its claim for the payment of the goods delivered pursuant to the contract of sale.. I 1. for it had no cause of action as yet against the FEDERATION as. Such formulation does not adequately answer every question whether a particular claim is compulsory in character. 13 have preferred to suggest certain criteria or tests by which the compulsory or permissive nature of specific counterclaims can be determined.

New York Cotton Exchange (1926. 6 Cir. if a counterclaim is the kind not thus barred.S. 1947.. And see generally. supra. Co.. U. but the relief afforded by the dismissal of the bill is not complete without an injunction restraining appellant from continuing to obtain by stealthy appropriation what the court had said it could not have by judicial . (D. demurrage and expenses due to the unseaworthiness of the vessel (Eastern Transp. same evidence or substantial identity in the evidence relating to the claim and counterclaim 18 has been considered satisfactory if used with caution. he cannot in a later suit assert it against the plaintiff. Clark. that appellant is unlawfully getting the quotations. Kastar. The fourth test . The third test . 593. Co. Yet.. are. 46 S.. 2d 828. Verea Ruegg. That they are not precisely identical. To put it differently. The second test . and in many instances the issues are not really formulated until the pretrial conference.C. Serv.Y.. v. v. Essential facts alleged by appellant enter into and constitute in part the cause of action set forth in the counterclaim. that the counterclaim is compulsory if it would be barred by res judicata. Cleveland Engineering Co.N. then it is not thus barred. appellant is purloining or otherwise illegally obtaining them. that. Big Cola Corp.Ct 367.. However. 1949. but if it is "permissive". see Claim v. New York Cotton Exchange.. World Bottling Co. 138 F.L. the logical relationship between the claim and counterclaim has been called "the one compelling test of compulsoriness" 19 It was enunciated in the leading case of Moore v. 2d 718. 70 L.11 case 2) or an action for earned freight with counterclaims for damages to cargo. As aptly stated by Judge Frank in a dissenting opinion: . It may comprehend a series of many occurrences. of the four judicially formulated criteria it has by far attained the widest acceptance among the courts. 2d. and asks a mandatory injunction to compel appellees to furnish them..Ed 750. For instance in an action to void an insurance policy on the ground of fraud. 2 Cir. 2d. Compare Xenia Branch Bank v.R. The refusal to furnish the quotations is one of the links in the chain which constitutes the transaction upon which appellant here bases its cause of action.. the evidence of fraud is apt to be entirely different from the evidence as to the loss suffered by the insured (Mercury Ins.compulsory counterclaim. 17 This criterion has however been found inadequate as an overall standard. Its outstanding quality is its flexibility. 408 [243 Fed. if a counterclaim is not "compulsory"' it is "permissive" and that the following is the acid test in distinguishing the two: If a defendant fails to set up a "compulsory" counterclaim. Lee. D. So close is the connection between the case sought to be stated in the bill and that set up in the counterclaim.] Champion Spark Plug Co. is a compulsory counterclaim.. Pr.S. nevertheless. Champion Ignition Co. in which there is a counterclaim for the amount of the loss covered by the policy. if ever. 270 U. 159 F. Everyone agrees.. v. 45 A. v. On the other hand this flexibility necessarily entails some uncertainty in its application because of its looseness and potentially over broad scope.. 203-205.) 247 Fed. no one can be certain what the issues are until after the pleadings are closed and discovery is underway. 682. any claim a party has against an opposing party that is logically related to the claim being asserted by the opposing party and that is not within the exceptions to the rule. since the facts relied upon by the plaintiff rarely. The answer admits the refusal and justifies it. does not matter. To hold otherwise would be to rob this branch of the rule of all serviceable meaning. In the leading case of Moore v. C. It is an important part of the transaction constituting the subject-matter of the counterclaim. Galion Dynamic Motor Truck Co. Federal Practice. 16 has been judicially recognized by some courts as "the acid test" for distinguishing compulsory from permissive counterclaim. as for example.. Code Pleading. 447.C. v." We can have recently employed that test. It is the one circumstance without which neither party would have found it necessary to seek relief. p. depending not so much upon the immediateness of their connection as upon their logical relationship. 200. 1370) the logical relation or connection between the defendant's counterclaim and the plaintiff's claim has been explained thus: The bill sets forth the contract with the Western Union and the refusal of the New York Exchange to allow appellant to receive the continuous cotton quotations. The counterclaim sets up that. See also Moore. 12 F. it is "permissive. too. 20 Under this test. 13a. the same as those constituting the defendant's counterclaim. An examination of the cases on compulsory counterclaims may help clarify and illuminate the judicial application of the "logical relation test". and asks that this practice be enjoined. "Transaction" is a word of flexible meaning. or that the counterclaim embraces additional allegations. 349). 371. This difficulty notwithstanding.A. in all particulars. since it is barred by res judicata.R. A test based on similarity of evidence appears reasonable considering that the very purpose of making certain types of counterclaims compulsory is to prevent the relitigation of the same set of fact.. that it only needs the failure of the former to establish a foundation for the latter. 7 Abb. 134 F. 830. 390-394. . it has been shown that some counterclaims may be compulsory even if they do not meet this test. 372.

in Great Lakes Rubber Corporation v. Judge Biggs speaking for the Third Circuit Court said this: "We have indicated that a counterclaim is compulsory if it bears a "logical relationship" to an opposing party's claim. 1961. but which it apparently ignored and because of such inaction NAMARCO therefore sued FEDERATION for payment on January 25. is one of the recognized exceptions to the general rule that a counterclaim is compulsory and must be asserted if it arises out of the same transaction as the opposing party's claim. 1960 compelling NAMARCO to send on June 7..compulsion. is the important link in the chain of facts and events that constituted the transaction upon which Federation's cause of action was based in Civil Case No.014." A review of decided cases in this jurisdiction on compulsory counterclaims likewise demonstrates the nexus between plaintiff's claim and defendant's counterclaim showing the "logical relation" between the two. These two claims are separate and distinct. 2d 213. 221 F. NAMARCO's claim having accrued or matured after the service of its answer in the earlier case is in the nature of an after-acquired counterclaim which under the rules is not barred even if it is not set up in the previous case as a counterclaim. as they involve totally different factual and legal issues and do not represent the same "basic controversy". a counterclaim is logically related to the opposing party's claim where separate trials of each of their respective claims would involve a substantial duplication of effort and time by the parties and the courts. . Thus in actions for ejectment. For they are off-shoots of the same basic controversy between the parties which is the right of either to the possession of the property. Zion v. but the relief afforded by the dismissal of the bill is not complete without an injunction restraining appellant from continuing to obtain by stealthy appropriation what the court held it could not have by judicial compulsion.. 258 F. It is the one circumstance without which neither party could have found it necessary to seek relief. . Herbert Cooper Co. 1959. that constitutes the transaction upon which the plaintiff bases his cause of action. the important link which established that "logical relation" between plaintiff Moore's claim and defendant New York Cotton Exchange's counterclaim. When the domestic letters of credit were subsequently dishonored by the Philippine National Bank on May 19. 2d 31. So close is the connection between the case sought to be stated in the bill and that set up in the counterclaim. 3 Cir. such non-payment by FEDERATION was a matter which was distinct and separate from and had no logical relationship with the subject matter of FEDERATION's own suit. Masterpiece Productions. Where multiple claims involve many of the same factual issues. to compel NAMARCO to recognize the validity of their agreement and deliver the remainder of the goods to be paid "on cash basis" in no way involved the payment of the merchandise worth P609. 23 it is well settled that the defendant's claims for value of the improvements on the property or necessary expenses for its preservation are required to be interposed in the same action as compulsory counterclaims. For the action of FEDERATION on March 2. 1960.. 286 F. While the refusal of NAMARCO to deliver the remainder of the goods contracted for in its "trade assistance agreement" with FEDERATION. Thus. The phrase "logical relationship" is given meaning by the purpose of the rule which it was designed to implement. 2 Cir. or where they are off-shoots of the same basic controversy between the parties.. A counterclaim has been held to be compulsory if there is a logical relationship between it and the main claim. is the refusal of the latter to furnish to the former cotton price quotations because of its belief that Moore was purloining or otherwise illegally obtaining its cotton price quotations and distributing them to bucketshops. Inc. it is not even a part of the transaction constituting the subject matter of NAMARCO's present suit. 216.73.. See also United Artists Corp. . 2d 631 (1961).. Sentry Safety Control Corp. 1960. 1955. 24 II But even assuming for the nonce that NAMARCO's present claim is logically related to the claim of the FEDERATION in the previous case. already delivered and paid for in cash by means of the domestic letters of credit. Thus. 1960 a letter of demand for payment to FEDERATION which the latter received on July 5. 42684. An after-acquired counterclaim.. or the same factual and legal issues. As the Court pointed out "It is an important part of the transaction constituting the subject matter of the counterclaim. v. In such cases it is the refusal of the defendant to vacate or surrender possession of the premises that serves as the vital link in the chain of facts and events. that it only needs the failure of the former to establish a foundation for the latter. It is likewise an "important part of the transaction constituting the subject matter of the counterclaim" of defendant for the value of the improvements or the necessary expenses incurred for the preservation of the property. 21 It must be observed that in Moore.. 22 or for the recovery of possession of real property. fairness and considerations of convenience and of economy require that the counterclaimant be permitted to maintain his cause of action.

28 The provisions of Rule 13 of the Federal Rules of Civil Procedure. An after-acquired counterclaim. although one arises subsequent to the filing of his answer. They are: (1) Time of Filing. may have no controlling effect on the adopting state. which usually will be granted in order to enable the parties to litigate all the claims that they have against each other at one time thereby avoiding multiple actions. the counterclaim or cross-claim which a party may aver in his answer must be one which he may have "at the time" against the opposing party. 30 were taken. from Rule 13(e) and (a) of the said Federal Rules. Thus if P sues A and A does not have a claim arising out of the transaction or occurrence of P's suit at the time A files his answer A is not obliged to plead such a claim. and with other laws of the adopting jurisdiction on the subject. and in harmony with justice and public policy. the transaction or occurrence that is the subject-matter of the opposing party's claim. adverted to in the preceding commentaries and decisions of the federal courts. The claim which is the basis of the counterclaim must be in existence at the time of "counter-claimant" files his pleading. with section 4 of the same rule which provides that "a counterclaim . even if it arises out of the transaction or occurrence that is the subject matter of the opposing party's claim. it may be strongly persuasive and will be followed when it is considered to give true force and effect to the statute.Although the claim arises out of the transaction or occurrence three exceptions are made to the compulsory requirement that it be pleaded. 27 A counterclaim may be asserted under Rule 13(e) only by leave of court. or at least persuasive and will generally be followed if sound and reasonable. though not at the commencement of the action for under Section 3 of the former Rule 10. need not be pleaded supplementally. 31 It is a rational rule of statutory construction that a statute adopted from another state or country will be presumed to have been adopted with the construction placed upon it by the courts of that state or country before its adoption. Thus section 3 of Rule 10 29 of the former Rules of Court was taken from Rule 13 (a) and (g) of the Federal Rules of Civil Procedure. The counterclaim must be existing at the time of filing the answer." 33 We find no cogent reason why such uniform and settled construction of Rule 13 of the Federal Rules should not be applied in the interpretation of the aforesaid sections of Rule 10 of the old Rules of Court." Section 3 of the same rule. with the permission of the court. The decision to grant or deny a motion to serve a supplemental counterclaim is totally within the trial court's discretion. Such construction is regarded as of great weight. 32 And while the construction of a statute by courts of the original state after its adoption by another.. This construction is not only explicit from the language of the aforecited provisions but also serves to harmonize the aforecited sections of Rule 10. That phrase can only have reference to the time of the answer. have been engrafted into our procedural rules. 25 Wright & Miller. the after-acquired claim is not considered a compulsory counterclaim under Rule 13(a) and a failure to interpose it will not bar its assertion in a later suit. even if it arises out of the same transaction as does plaintiff's claim." ​ . be presented as a counterclaim ." A counterclaim acquired by defendant after he has answered will not be considered compulsory. 34 Certainly a premature counterclaim cannot be set up in the answer.. This is derived from the language in the rule limiting its application to claims the pleader has "at the time of serving the pleading. respectively. if a party should acquire a matured counterclaim after he has pleaded. a counterclaim acquired by plaintiff after he has replied to a counterclaim by defendant is not compulsory under Rule 13(a). while sections 4 and 6 of same Rule 10. which either matured or was acquired by a party after serving his pleading may. However. Federal Practice and Procedure. requires that such counterclaim must be in existence "at the time" the counter-claimant files his answer. by supplemental pleading before judgment.. Rule 13(e) is permissive in character. However. 26 explain this exception to the compulsory counterclaim requirement thus: The first exception is that the party need not assert a counterclaim that has not matured at the time he serves his pleading.. Rule 13(e) provides that he may obtain the court's permission to include it in a supplemental pleading under Rule 15(d). Similarly. Thus while Section 6 of Rule 10 of the old Rules defines a compulsory counterclaim as a claim that "arises out of or is necessarily connected with.

is not barred by its failure to assert it as a counterclaim in the previous case. 9 of Rule 6). and its default or refusal to make such payments. 39 In the case at bar it is not even pretended that the negotiable character of the sight drafts was impaired as a result of the fault of NAMARCO. and does not apply to instruments executed by the debtor himself and delivered to the creditor. 46124. in the first instance as payment. 1249 New Civil Code.. pursuant to the requirements of the letters of credit deprives NAMARCO of a cause of action against FEDERATION. NAMARCO having failed to set it up on a counterclaim in the previous case. The mere fact that NAMARCO proceeded in good faith to try to collect payments thereon. As shown by the appealed judgment NAMARCO accepted the three letters of credit "to insure the payment of those goods by the FEDERATION . with costs against defendant-appellant. 40 We note however. As heretofore stated they were never taken. (Art. Well settled is the rule that questions which were not raised in the lower court cannot be raised for the first time on appeal. and not from the date of the extra-judicial demand. the appealed judgment is hereby affirmed. 41 There being no stipulation as to when the aforesaid payments were to be made. the rule is that the obligor is considered in default only from the time the obligee judicially or extrajudicially demands fulfillment of the obligation and interest is recoverable only from the time such demand is made. 1960. did not amount to an appropriation by it of the amounts mentioned in the sight drafts so as to release its claims against the FEDERATION. "from the date of delivery of the merchandise". but on its legal right to the cost of the goods delivered to the FEDERATION the correlative obligation of the latter to pay for the same. as NAMARCO has neither alleged nor proved that it has complied with the conditions contained in the three domestic letters of credit. And the same may be allowed unless the case has progressed so far that it may be inconvenient or confusing to allow the additional claim to be pleaded. 1961 in Civil Case No. or when by the fault of the creditor. There was no agreement that they should be accepted as payment. is now barred. It must be noted however that such purported discharge from its obligation to NAMARCO due to the failure of the latter to comply with the requirements of the domestic letters of credit. or bills of exchange or drafts or other mercantile document shall produce the effect of payment only when realized. that the sight drafts drawn upon them be presented to FEDERATION for acceptance before they can be honored by the Bank. 35 We therefore rule that NAMARCO's present action. 38 Defendant-appellant therefore is now precluded from raising that question. 1961 36 or as an affirmative defense in its "answer" to the complaint on June 14. is applicable only to instruments executed by third persons and delivered by the debtor to the creditor. 1960.) The clause of Article 1249 relative to the impairment of the negotiable character of the commercial paper by the fault of the creditor. Furthermore the mere delivery by the FEDERATION of the domestic letters of credit to NAMARCO did not operate to discharge the debt of the FEDERATION. the date when NAMARCO made the extra-judicial demand upon said party. III The FEDERATION also contends that it has incurred no liability.." It was given therefore as a mere guarantee for the payment of the merchandise. In the absence of any stipulations on the matter. The fact that NAMARCO attempted to collect from the Philippine National Bank on the sight drafts on March 10. ACCORDINGLY. It is the theory of the FEDERATION in its brief that the failure of NAMARCO to present the sight drafts to the former for acceptance. The delivery of promissory notes payable to order.Thus a party who fails to interpose a counterclaim although arising out of or is necessarily connected with the transaction or occurrence of the plaintiff's suit but which did not exist or mature at the time said party files his answer is not thereby barred from interposing such claim in a future litigation. . the privileges inherent in their negotiable character have been impaired. was never invoked by FEDERATION as a basis for its "Motion to Dismiss" of February 7. 37 There is no showing that this question was raised as an issue during the trial. . that the lower court erred in imposing interest at the legal rate on the amount due. We likewise fail to find any factual or legal basis for the award of attorney's fees. is of no material significance. with the modifications above indicated. A mere attempt to collect or enforce a bill or note from which no payment results is not such an appropriation of it as to discharge the debt. the FEDERATION is therefore liable to pay interest at the legal rate only from June 7. As a matter of fact such matter was neither discussed nor mentioned in the appealed judgment since the entire theory of the FEDERATION in its defense is that the claim of NAMARCO being a "compulsory counterclaim". However such claim may with the court's permission be included in the same case by way of supplemental pleading before judgment under Section 4 of the former Rule 10 of the Rules (now Sec. In any event NAMARCO's action is not based on the domestic letters of credit.

73 representing the cost of admittedly unpaid merchandise delivered to defendant since January. to require Namarco to make delivery of the remainder of the merchandise contracted for in their "trade assistance agreement" and to accept the cash payments proferred therefor by the federation (since Namarco had second thoughts about the legality and validity of its agreement) in no way involved the merchandise worth P609. would honor its just commitments and see to it that the sight drafts drawn against its L/C's would be duly honored and made good. concur in the result. J. 1961 by Namarco as plaintiff this time against the federation as defendant to collect the unpaid price of P609. for distribution to Namarco retailers for resale supposedly under Namarco-approved prices. JJ. This collection suit by Namarco could not be deemed barred by the compulsory counterclaim rule provided in Rule 9. The merchandise was delivered by plaintiff Namarco to defendant under the so-called Namarco "trade assistance agreements" whereby Namarco imported the merchandise under its dollar allocation tax-andduty-free and in turn sold and delivered the same to defendant at procurement cost plus a mere 5% markup. concurring: I concur in the main opinion in effect affirming in toto the appealed judgment sentencing defendantappellant to pay plaintiff-appellee the sum of P609. 1961 this action for collection and payment of the sums justly due it. took no part. Separate Opinions TEEHANKEE.J. II. Makalintal. so as to bar the present action subsequently filed on January 25. section 4 (formerly Rule 10. which was suing it for further deliveries. such non-payment was entirely separate from the subject-matter of the federation's first suit against Namarco to compel it to recognize the validity of their agreement and deliver upon cash payment the remainder of the contracted merchandise.. Makasiar. Such non-payment could in no way be deemed a compulsory counterclaim that should have been filed as such by Namarco in the first suit.. section 6) since it was not a compulsory counterclaim that should have been set up as such in the first suit and it was long after Namarco had joined issues therein with the filing of its answer that its sight drafts for collection under the domestic letters of credit opened in its favor were dishonored by the bank. 1960. Namarco had every reason to expect that the federation.014.773 already delivered by Namarco and presumably paid for in cash under the domestic letters of credit opened therefor. with interests.73 justly due Namarco for the merchandise. concurs solely on the basis of reason No. Defendant in turn contracted to pay for the merchandise upon delivery in cash through domestic letters of credit opened through the Philippine National Bank in favor of Namarco. 1960 for specific performance. Zaldivar and Castro. attorney's fees and costs of suit.. JJ. concur.014. C. J. Concepcion.Fernando and Esguerra.. The mere fact that defendant federation as plaintiff filed suit against Namarco on March 2. 1960 that the sight drafts drawn by Namarco against the domestic letters of credit opened with the Philippine National Bank for collection of the payments due thereon were not honored.014. Namarco had every legal right therefore to institute in January. upon the federation's failing to make payment notwithstanding the . When it turned out subsequently on May 19..

42684) for specific performance by the delivery of the balance of the goods stipulated in the contract was still pending in the trial court. that Namarco chose to file this suit against the Federation only when the Federation's case against it was already pending appeal by Namarco in this court. the Federation's action against it (Civil Case No. seeking the delivery of the balance of the goods which Namarco allegedly agreed to sell to it. having in mind the objective of the rules in permitting counterclaims and. Hence. whereas Namarco has sued in the present action for the payment of the part thereof that it had already delivered to the Federation. more particularly. The Rules of Court were never intended to serve as a tool for a party to unjustly enrich itself to the extent of over P1 million (including interests) for merchandise long delivered to it in 1960 practically at procurement cost. dissenting: I was on the verge of expressing my reluctant concurrence in the judgment in this case. pursuant to the rule on prescription of compulsory counterclaims. as was long ago held by the Court. The issue now is whether or not Namarco should have made its claim against the Federation the subject of a counterclaim when the Federation's own claim against it was still pending in the lower court. when the decision of the trial court was promulgated on October 15. 1960 that it could not negotiate and effect payment of the sight drafts of the Federation totally worth P611. Both the claim of the Federation against the Namarco in Civil Case No. respectively. Villamor. which it could not otherwise have procured due to exchange and import control restrictions and which it has not paid for up to now notwithstanding its then having immediately enjoyed the benefits and profits thereof. 1964. As I see it now.lapse of over a year. with the particularity. it should no longer be allowed to maintain the case at bar. when it deserts its proper office as an aid to the administration of justice and becomes its great hindrance and chief enemy. 1960. with the consequence that. 1 It appears that when Namarco was informed by the Philippine National Bank on May 19. It is too obvious for equivocation or doubt that the material subject matter of both of said claims were the goods referred to in their contract. 1960. even if Namarco's present collection suit could technically be deemed a compulsory counterclaim which should have been filed by it as such in the first suit filed against it by the federation.. As I have already stated. deserves scant consideration from the courts. but which the former refused to deliver claiming that the contract was illegal. the situation confronting the Court in this case is very simple and is far from being unusual. in turn. The Federation had sued Namarco for the specific performance thereof. 16 Phil. I become more convinced that a reversal rather than an affirmance of the trial court's decision would be more in consonance with the fundamental principles on the prescription of compulsory counterclaims. (Alonso vs. the claim of Namarco for such payment of the goods it had delivered pursuant to the contract "arose out of" that contract.35. In fact. in making some of them compulsory. I would disregard such a technicality and hold nevertheless as a matter of plain and simple justice and equity that Namarco's failure to file such counterclaim should not bar the present action and Namarco's right to judgment against defendant federation for the sums justly due it. what was Section 6 of Rule 10 of the old rules and is now Section 4 of Rule 9 of the present rules in force since January 1. Its solution requires no more than the application of the basic rules on pleadings. however. 42684 within the contemplation of the rule on compulsory counterclaims. it is very clear to me that. I consider it beyond dispute that under these circumstances. whereas Namarco. not having done so. Namarco's present claim did arise out of or was necessarily connected with the transaction or occurrence that was the subject matter of the Federation's action in Civil Case No. 46124 arose from the same contract. 600606 and 600586. 1960 and covered by PNB Domestic L/C Nos. Notwithstanding the lengthy exposition in the main opinion regarding the meaning of the words "transaction" and "occurrence" used in the aforecited provisions. BARREDO. more specifically. 315). sued the Federation in the present action for the payment of the goods already delivered thereunder. J. which is precisely the very same one that was "the subject matter" of the Federation's claim for . it was the contract itself. The defendant-appellant's stance raises a mere technicality — which. when upon further study and deeper reflection. while juridically.053. without the need of any scholarly discourse which can only serve to confuse concepts and mislead one into error in the application of the proper rule. corresponding to the goods already received by the Federation since January 29. the Federation sued for their complete delivery. the Federation had already failed to pay notwithstanding Namarco's formal demand made on June 7. 42684 and the claim of the Namarco against the Federation in Civil Case No. 1960 and February 20.

instead of suffering delay in his exoneration by litigating with the plaintiff in regard to his (defendant's) own claims against him. and the fact that Section 4 of the same rule allows the filing of supplemental counterclaims before judgment does not alter the situation. I would still say that there is definitely such logical relation between the claim at bar of Namarco and the claim of the Federation in Civil Case No. 42684. I agree that the Court rule for the present that for a counterclaim to be considered as barred. and the other party. Otherwise stated. the rule should be that both claims should be made in the same action or in one single proceeding. now Section 9 of Rule 6. the cause of action thereof must have already accrued at the time the answer is filed by the defendant. they must be deemed barred? Stated differently. In other words. Since the subject matter involved in the defendant's claim is the same one on which the plaintiff has sued him. it is too plain to be overlooked or not to be understood that when. before the defendant has started presenting his evidence. Under Section 4 of Rule 10 of the old rules. thus avoiding any duplication of the time. the formers' cause of action could not have been considered as already matured when it filed its answer. in the fact that in its answer to the Federations complaint. because it is possible that the defendant may wish to immediately remove the risk of a judgment against him and thus have peace of mind as early as possible. at the precise time that Namarco filed its answer in Civil Case No. to yield to the observations noted in footnote 25 of the main opinion to the effect that for a counterclaim. effort and money that would have to be spent in the trial and disposition of more or less the same set of facts and circumstances as well as legal issues. In the case of permissive counterclaims which are unrelated to the adverse party's claims. must it have to be done in the case of counterclaims that do arise from the same transaction or occurrence. varying only in some details or aspects which can anyway be conveniently and properly determined in the same proceeding. Thus. which. On the other hand. Indeed. it was not yet certain that the Federation would not pay or that payment of its sight drafts would not be effected by the bank. one can easily see why the claims of the defendant arising out of the same transaction or occurrence are made compulsory in the sense of considering them as completely barred if they are not set up in the same action of the plaintiff. it becomes a matter of public policy that they should be settled in one proceeding. it pleaded the defense of illegality or nullity of the contract. a party sues for the complete delivery of goods covered by a contract. I feel constrained in the absence of any contrary precedent. and. much as I am inclined towards compelling parties to litigate all their claims against each other in one single proceeding in the interest of a more speedy restoration of normal relations between them. would prefer supplemental counterclaims. but inasmuch as. that said cause of action accrued before judgment was rendered by the trial court. however. Namarco's cause of action had not yet matured then. The whole trouble with Namarco's pose in this appeal lies. To believe otherwise is to ignore the fundamental reason behind the rule on counterclaims which is to avoid multiplicity of suits. claims payment for goods it has already delivered under the same contract. on the hypothesis that the contract were binding. I can understand the option given to the defendant to plead them in the same action or not. even if it were necessary to apply the so-called logical-relation test referred to in the main opinion. 42684. As I have explained above. will necessarily entail a longer and more complicated proceeding. from that point of view. a counterclaim which either matured or was acquired by a defendant after serving his answer may be set up in a supplemental pleading later before judgment.the delivery of the balance of the goods covered by it. on the hand. since that one was for the delivery of goods promised under the contract whereas the other was for the payment of goods delivered under it. as I will explain later. To make myself clearer. In this connection. there would have been no need for it to file this counterclaim. on the other hand. the doubt that assailed me in regard to this view of this case is whether or not the fact that a supplemental pleading could in fact have been filed by Namarco before judgment placed its present claim within the contemplation of Section 6 of Rule 10 of the old rules as a claim that should be barred. such that if not interposed. arising out of the same transaction or occurrence that is the subject matter of the plaintiff's claim to be compulsory. this must be the rule even if the legality or validity of the contract should be put in issue by any of the parties. Since this may be done or not in the case of counterclaims not arising out of the same transaction or occurrence the question that arises is. This to me in synthesis is the situation in the case at bar. my position is that the claim of Namarco in this case did arise out of the same transaction petition or occurrence that was the subject matter of the Federation's anterior action. of course. the defendant should just the same be compelled to allege it in such a supplemental pleading in those cases where his claim accrues before trial has began or at the latest. albeit reluctantly to sustain Namarco's position in this appeal. it was immaterial to Namarco's recovery of the purchase price of goods it had already delivered under the contract that there was in said contract any term for the payment thereof. under the above provisions. From that point of view. for one. so much so that the reliefs in one could in fact be possibly set-off against the reliefs in the other. It is also clear. however. although I. under the said Section 6 of Rule 10. As far as Namarco . It was the element of time herein involved that somehow induced me at the beginning to be inclined. it must be existing at the time of the filing of the answer by the defendant.

is without merit. with interests. in Camara vs. so as to bar the present action subsequently filed on January 25. IN VIEW OF ALL THE FOREGOING. 94 Phil." Hence. I vote to reverse the judgment of the lower court. (Article 1412 (2). Defendant in turn contracted to pay for the merchandise upon delivery in cash through domestic letters of credit opened through the Philippine National Bank in favor of Namarco. 1960 that the sight drafts drawn by Namarco against the domestic letters of credit opened with the Philippine National Bank for collection of the payments due thereon were not honored.014. Moreover. When it turned out subsequently on May 19. at least they were entitled as possessors in good faith to the coconut and other fruit-bearing trees planted by them in the parcel of land and their fruits or their value. to require Namarco to make delivery of the remainder of the merchandise contracted for in their "trade assistance agreement" and to accept the cash payments proferred therefor by the federation (since Namarco had second thoughts about the legality and validity of its agreement) in no way involved the merchandise worth P609. This means that as of the time Namarco filed its answer contesting the legality or validity of the contract. either in one cause of action or defense or in separate causes of action or defense. J. Aguilar. the foregoing consideration serves also to refute Namarco's contention that it could not have claimed for the payment now in question because it would have been inconsistent for it to do so.773 already delivered by Namarco and presumably paid for in cash under the domestic letters of credit opened therefor.014. 527. The mere fact that defendant federation as plaintiff filed suit against Namarco on March 2. id). specially when viewed from the angle of diligent protection of public interest.73 justly due Namarco for the merchandise.was concerned. the plaintiffs herein and intervenors in the former case could have set up the claim that they were entitled to the parcel of land and alternatively that assuming (hypothetically) they were not entitled to the parcel of land. with the result that Namarco's present suit should be dismissed. Such being the case. 1960. attorney's fees and costs of suit. Separate Opinions TEEHANKEE. those goods had been delivered illegally and should have been immediately returned unless their value had been paid for. concurring: I concur in the main opinion in effect affirming in toto the appealed judgment sentencing defendantappellant to pay plaintiff-appellee the sum of P609.014. 1961 by Namarco as plaintiff this time against the federation as defendant to collect the unpaid price of P609. such non-payment was entirely separate from the subject-matter of the federation's first suit against Namarco to compel it to recognize the validity of their agreement and deliver upon cash payment the remainder of the contracted merchandise. Nothing could be more logical and legally proper. without costs. it was incumbent upon it to then and there seek recovery of whatever it had delivered thereunder. its cause of action for the recovery of the price of the delivered goods was already existing and could have been the subject of a counterclaim. .. for distribution to Namarco retailers for resale supposedly under Namarco-approved prices. this Court already held that: The contention that a counterclaim for expenses incurred in clearing and cultivating the parcel of land and planting coconut and other fruit-bearing trees therein could not have been set up in the former case because that would have been inconsistent with or would have weakened the claim that they were entitled to the parcel of land. 1960 for specific performance. Such non-payment could in no way be deemed a compulsory counterclaim that should have been filed as such by Namarco in the first suit. The merchandise was delivered by plaintiff Namarco to defendant under the so-called Namarco "trade assistance agreements" whereby Namarco imported the merchandise under its dollar allocation tax-andduty-free and in turn sold and delivered the same to defendant at procurement cost plus a mere 5% markup. Namarco being a government corporation. Civil Code) or Namarco was in pari delicto (Article 1411. because "A party may set forth two or more statements of a claim or defense alternatively or hypothetically. it is quite evident that when Namarco filed its answer to the Federation's action.73 representing the cost of admittedly unpaid merchandise delivered to defendant since January. Obviously.

The Federation had sued Namarco for the specific performance thereof.This collection suit by Namarco could not be deemed barred by the compulsory counterclaim rule provided in Rule 9. 16 Phil. BARREDO. Namarco had every reason to expect that the federation.35. 1960 and covered by PNB Domestic L/C Nos. 315). 1961 this action for collection and payment of the sums justly due it. the situation confronting the Court in this case is very simple and is far from being unusual. when it deserts its proper office as an aid to the administration of justice and becomes its great hindrance and chief enemy. however. when upon further study and deeper reflection. 1 It appears that when Namarco was informed by the Philippine National Bank on May 19. with the particularity. In fact. . 42684 and the claim of the Namarco against the Federation in Civil Case No. what was Section 6 of Rule 10 of the old rules and is now Section 4 of Rule 9 of the present rules in force since January 1. 1964. 1960 that it could not negotiate and effect payment of the sight drafts of the Federation totally worth P611. seeking the delivery of the balance of the goods which Namarco allegedly agreed to sell to it. 46124 arose from the same contract. 1960. Namarco had every legal right therefore to institute in January. section 4 (formerly Rule 10. when the decision of the trial court was promulgated on October 15. as was long ago held by the Court. (Alonso vs. 600606 and 600586. without the need of any scholarly discourse which can only serve to confuse concepts and mislead one into error in the application of the proper rule. The issue now is whether or not Namarco should have made its claim against the Federation the subject of a counterclaim when the Federation's own claim against it was still pending in the lower court. which it could not otherwise have procured due to exchange and import control restrictions and which it has not paid for up to now notwithstanding its then having immediately enjoyed the benefits and profits thereof. upon the federation's failing to make payment notwithstanding the lapse of over a year. Villamor. pursuant to the rule on prescription of compulsory counterclaims. but which the former refused to deliver claiming that the contract was illegal. whereas Namarco. even if Namarco's present collection suit could technically be deemed a compulsory counterclaim which should have been filed by it as such in the first suit filed against it by the federation. the Federation had already failed to pay notwithstanding Namarco's formal demand made on June 7.053. deserves scant consideration from the courts. I become more convinced that a reversal rather than an affirmance of the trial court's decision would be more in consonance with the fundamental principles on the prescription of compulsory counterclaims. Its solution requires no more than the application of the basic rules on pleadings. As I see it now. The defendant-appellant's stance raises a mere technicality — which. the Federation's action against it (Civil Case No. would honor its just commitments and see to it that the sight drafts drawn against its L/C's would be duly honored and made good. which was suing it for further deliveries. I would disregard such a technicality and hold nevertheless as a matter of plain and simple justice and equity that Namarco's failure to file such counterclaim should not bar the present action and Namarco's right to judgment against defendant federation for the sums justly due it.. more specifically. it should no longer be allowed to maintain the case at bar. not having done so. that Namarco chose to file this suit against the Federation only when the Federation's case against it was already pending appeal by Namarco in this court. section 6) since it was not a compulsory counterclaim that should have been set up as such in the first suit and it was long after Namarco had joined issues therein with the filing of its answer that its sight drafts for collection under the domestic letters of credit opened in its favor were dishonored by the bank. Both the claim of the Federation against the Namarco in Civil Case No. Hence. The Rules of Court were never intended to serve as a tool for a party to unjustly enrich itself to the extent of over P1 million (including interests) for merchandise long delivered to it in 1960 practically at procurement cost. 1960. respectively. dissenting: I was on the verge of expressing my reluctant concurrence in the judgment in this case. sued the Federation in the present action for the payment of the goods already delivered thereunder. corresponding to the goods already received by the Federation since January 29. with the consequence that. in turn. 1960 and February 20. J. 42684) for specific performance by the delivery of the balance of the goods stipulated in the contract was still pending in the trial court.

of course. must it have to be done in the case of counterclaims that do arise from the same transaction or occurrence. having in mind the objective of the rules in permitting counterclaims and. Thus. and the fact that Section 4 of the same rule allows the filing of supplemental counterclaims before judgment does not alter the situation. one can easily see why the claims of the defendant arising out of the same transaction or occurrence are made compulsory in the sense of considering them as completely barred if they are not set up in the same action of the plaintiff. It is too obvious for equivocation or doubt that the material subject matter of both of said claims were the goods referred to in their contract. it becomes a matter of public policy that they should be settled in one proceeding. As I have already stated. In other words. which is precisely the very same one that was "the subject matter" of the Federation's claim for the delivery of the balance of the goods covered by it.Notwithstanding the lengthy exposition in the main opinion regarding the meaning of the words "transaction" and "occurrence" used in the aforecited provisions. whereas Namarco has sued in the present action for the payment of the part thereof that it had already delivered to the Federation. even if it were necessary to apply the so-called logical-relation test referred to in the main opinion. since that one was for the delivery of goods promised under the contract whereas the other was for the payment of goods delivered under it. they must be deemed barred? Stated differently. thus avoiding any duplication of the time. on the other hand. arising out of the same transaction or occurrence that is the subject matter of the plaintiff's claim to be compulsory. at the precise time that Namarco filed its answer in Civil Case No. while juridically. In this connection. in making some of them compulsory. a party sues for the complete delivery of goods covered by a contract. it is very clear to me that. Under Section 4 of Rule 10 of the old rules. to yield to the observations noted in footnote 25 of the main opinion to the effect that for a counterclaim. the Federation sued for their complete delivery. albeit reluctantly to sustain Namarco's position in this appeal. this must be the rule even if the legality or validity of the contract should be put in issue by any of the parties. and the other party. I agree that the Court rule for the present that for a counterclaim to be considered as barred. under the above provisions. Since the subject matter involved in the defendant's claim is the same one on which the plaintiff has sued him. under the said Section 6 of Rule 10. it is too plain to be overlooked or not to be understood that when. a counterclaim which either matured or was acquired by a defendant after serving his answer may be set up in a supplemental pleading later before judgment. much as I am inclined towards compelling parties to litigate all their claims against each other in one single proceeding in the interest of a more speedy restoration of normal relations between them. Indeed. 42684. on the hand. 42684 within the contemplation of the rule on compulsory counterclaims. as I will explain later. I would still say that there is definitely such logical relation between the claim at bar of Namarco and the claim of the Federation in Civil Case No. and. varying only in some details or aspects which can anyway be conveniently and properly determined in the same proceeding. it was not yet certain that the Federation would not pay or that payment of its sight drafts would not be effected by the bank. I can understand the option given to the defendant to plead them in the same action or not. the claim of Namarco for such payment of the goods it had delivered pursuant to the contract "arose out of" that contract. To believe otherwise is to ignore the fundamental reason behind the rule on counterclaims which is to avoid multiplicity of suits. On the other hand. Namarco's present claim did arise out of or was necessarily connected with the transaction or occurrence that was the subject matter of the Federation's action in Civil Case No. the rule should be that both claims should be made in the same action or in one single proceeding. It is also clear. that said cause of action accrued before judgment was rendered by the trial court. from that point of view. however. 42684. instead of suffering delay in his exoneration by litigating with the plaintiff in regard to his (defendant's) own claims against him. In the case of permissive counterclaims which are unrelated to the adverse party's claims. such that if not interposed. Namarco's cause of action had not yet matured then. more particularly. which. it was the contract itself. As I have explained above. it must be existing at the time of the filing of the answer by the defendant. claims payment for goods it has already delivered under the same contract. effort and money that would have to be spent in the trial and disposition of more or less the same set of facts and circumstances as well as legal issues. I consider it beyond dispute that under these circumstances. so much so that the reliefs in one could in fact be possibly set-off against the reliefs in the other. I feel constrained in the absence of any contrary precedent. now Section 9 of Rule 6. To make myself clearer. This to me in synthesis is the situation in the case at bar. Since this may be done or not in the case of counterclaims not arising out of the same transaction or occurrence the question that arises is. It was the element of time herein involved that somehow induced me at the beginning to be inclined. because it is possible that the defendant may wish to immediately remove the risk of a judgment against him and thus have peace of mind as early as possible. the doubt that assailed me in regard to this view of this case is whether or not the fact that a supplemental pleading could in fact have been filed by Namarco before judgment placed its present claim within the contemplation of Section 6 of Rule 10 of the old rules as a claim that should be barred. the cause of action thereof must have already accrued at the time . will necessarily entail a longer and more complicated proceeding.

et al. it was immaterial to Namarco's recovery of the purchase price of goods it had already delivered under the contract that there was in said contract any term for the payment thereof. for one. Federation of United Namarco Distributors. (Article 1412 (2). it was incumbent upon it to then and there seek recovery of whatever it had delivered thereunder. The whole trouble with Namarco's pose in this appeal lies. Nothing could be more logical and legally proper. 1528. is without merit. 97. the formers' cause of action could not have been considered as already matured when it filed its answer. IN VIEW OF ALL THE FOREGOING. This means that as of the time Namarco filed its answer contesting the legality or validity of the contract. this Court already held that: The contention that a counterclaim for expenses incurred in clearing and cultivating the parcel of land and planting coconut and other fruit-bearing trees therein could not have been set up in the former case because that would have been inconsistent with or would have weakened the claim that they were entitled to the parcel of land. my position is that the claim of Namarco in this case did arise out of the same transaction petition or occurrence that was the subject matter of the Federation's anterior action. it pleaded the defense of illegality or nullity of the contract.R. those goods had been delivered illegally and should have been immediately returned unless their value had been paid for. in the fact that in its answer to the Federations complaint. pp. 1524. From that point of view. PlaintiffsAppellees. As far as Namarco was concerned.the answer is filed by the defendant. at least they were entitled as possessors in good faith to the coconut and other fruit-bearing trees planted by them in the parcel of land and their fruits or their value. would prefer supplemental counterclaims. without costs. National Marketing Corporation. or is necessarily connected with the subject of the action. in Camara vs. Obviously." Hence. 3 Articles 1191. 5 Now Section 4 of Rule 9 of the new Rules of Court.. the foregoing consideration serves also to refute Namarco's contention that it could not have claimed for the payment now in question because it would have been inconsistent for it to do so. Namarco being a government corporation. 72-79. 1597 & 1598. the plaintiffs herein and intervenors in the former case could have set up the claim that they were entitled to the parcel of land and alternatively that assuming (hypothetically) they were not entitled to the parcel of land. But if the counterclaim arises out of transactions distinct from those set forth in the complaint as the foundation of the plaintiff's claim and not connected with the subject of the action. Inc. 4 Now Section 9 of Rule 6 of the new Rules of Court. Aguilar. before the defendant has started presenting his evidence. Otherwise stated. 6 SEC. with modification. its cause of action for the recovery of the price of the delivered goods was already existing and could have been the subject of a counterclaim. neither the defendant nor his assignee can afterwards maintain an action against the plaintiff therefor. but inasmuch as. No. with the result that Namarco's present suit should be dismissed. ​ ​ ​ ​ ​ ​ 2 See Decision. L-17819. Moreover. Civil Code of the Philippines. Defendant-Appellant. 94 Phil. however. 1583. the defendant should just the same be compelled to allege it in such a supplemental pleading in those cases where his claim accrues before trial has began or at the latest. on the hypothesis that the contract were binding. id).. specially when viewed from the angle of diligent protection of public interest. there would have been no need for it to file this counterclaim. I vote to reverse the judgment of the lower court. Effect of Omission to Set up Counterclaim. Record on Appeal. vs. because "A party may set forth two or more statements of a claim or defense alternatively or hypothetically. Footnotes 1 In case G. Civil Code) or Namarco was in pari delicto (Article 1411. 527. if the defendant omits to set up a counterclaim for the same. the defendant shall not be barred from any ​ . either in one cause of action or defense or in separate causes of action or defense. it is quite evident that when Namarco filed its answer to the Federation's action. Such being the case. although I. — If the right out of which the counterclaim arises exists at the time of the commencement of the action and arises out of the transaction set forth in the complaint as the foundation of the plaintiff's claim.

A. 1st 1948. . 981. 90 L. 102. Ct.A. 10 ​ ​ ​ ​ ​ ​ Sec. Nye Rubber Co. v. Florian.. Same issues of fact and law.P. World Bottling Co.A. 13 Sec. C. 651.C.A.. 9 F. 1901. 1948. International Union. 165 F.C. 3d. D.) ​ ​ 8 De Jesus v. 168 F. D. 1965. Story. 14 6 Fed. 8 of Rule 6 of the new Rules of Court.R. Big Cola Corp. Supp.. Practice & Proc. 385. Non Ferrous Metals. 1st. D. 1947. Ohio 1948. 340. emphasis supplied. Corp. supra. 1630. or (2) the opposing party brought suit upon his claim by attachment or other process by which the court did not acquire jurisdiction to render a personal judgment on that claim. v. 134 F.D. now Sec. 18 Same evidence or substantial identity test applied in: Non-Ferrous Metals.. Inc. 859. Supp. and the pleader is not stating any counterclaim under this Rule 13. Chaplain Corp. United Automobile.S.D. American Samec Corp. 635. 2d 814.D. if it arises out of the transaction or occurrence that is the subject matter of the opposing party's claim and does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction.. v. 17 SCRA 1083. v. v. Bilbar. 1948. 25 F. Pennsylvania R Co. 40 Phil. Papa v. 15 Same issues of fact and law test applied in: Connecticut Indem.R.D. Tomado v. Corp. 1. (Code of Civil Procedure of the P. Co. Nachtman v. V. 8 of Rule 6 of the new Rules of Court. Ohio 1960.. 818. 3 of Rule 10 of the old Rules. 18 SCRA 403.. But the pleader need not state the claim if (1) at the time the action was commenced the claim was the subject of another pending action. Sylvania Indus. v. D. v. D. 2d 718. 227.C. 1971 Ed. New Rules of Court. 34 Pac. 1949. 718. Banaag.. Conn. 81 F. v. Rules of Civil Procedure. v. v.R. v. ​ ​ 9 See Sec. Tuason & Co. emphasis supplied.. D.) 7 RULE 13(a) Compulsory Counterclaims.. Musante-Philipps. D. Rubber Co. Weber v. 1943. Aircraft & Agricultural Implement Workers of America v. v. 1353. Rule 13(a) Fed. . 102.R. Supp. Ohio 1960. Weber. 3 of Rule 10 of old Rules. Supp. Keyes Fibre Co. certiorari denied 66 S. 16 ​ Res Judicata as test applied in: Libbey-Owens-Ford Glass Co..A. Del. 241 F. 17 ​ ​ Libbey-Owens-Ford Glass Co. Rule 13(b) Federal Rules of Civil Procedure.I. 100 Cal. 154 F.C. Ed. Me. Saramar Aluminum Co. 2d 420. C. Crucible Steel Co. C. C. 671. 12 Cited in Story & Isham Commercial Co. C. 1968. 168 F. which took effect in 1938. (Federal Rules of Civil Procedure. 6th.C. Cf. Inc. which took effect on Oct.. Corp.. 42 F. 2d. Lee. 1946. now sec. Inc. test applied in: Connecticut Indem Co. 76 F. — A pleading shall state as a counterclaim any claim which at the time of serving the pleading the pleader has against any opposing party. Sylvania Indus. 17 SCRA 251. Galmes. 2d 420. Piasecki Aircraft. Lee. Yu Lay v.subsequent action upon such counterclaim by reason of his failure to set it up in his answer to the pending action. J. 2d 997.M. p. 328 U. 174. Pa.R. 11 3 Federal Rules Service. Civil Sec. 8 Rule 6. Saramar Aluminum Co. 42. 1410.C. 44 F.C. 25 F..

Supp. "The controversy between the parties which gave rise to this litigation was with respect to both jobs and arose from occurrence affecting both. 2d. 1079. C. Williams v. C. Ct. 46 S.S. 20 Logical relation as test applied in: Moore v. Fowler. These letters formed the basis of one of Heyward's major claims at the trial.. 1961. 1970.R. certiorari denied 90 S. 593.N. New York Cotton Exchange. C. 1950. that Heyward's counterclaim for alleged overpayments and extra costs of completing both the Navy construction contract and the construction of a plant for Stelma Inc. 449.S.C. 1970.C. 270 U. 425 F. 1965 threatening termination and terminating both jobs.D. Finally. Terminal Ry. 750. 1370.A. Ed. Supp. C. Koufakis v. 2d. Florian D. 397 U. 391.S.C. 5th. 1926. 1 F. 2d. 21 ​ 70 L. 228. Lee. Rental. 10 F. 130 F. Heyward had the right to terminate both subcontracts in the event of a breach by D'Agostino of either. National Equip. Farly. 70 L. 3d. 19 ​ ​ Rosenthal v.R. 709. & Sur. 5th. D.Y. Kissell Co. Heyward also had the right to withhold monies due on one to apply against any damages suffered on the other.R. 1955. 2d. 76 F. 9 F. 430 F.D. 2d. 631. "As the appellants themselves point out in their brief.. v. 12 F. 2d. D. Co.A. 43. the "Stelma and Navy claims were so interwoven at the trial that they are now absolutely incapable of separation. Inc.D.. Chaplin. 426 F. Heyward-Robinson Co. C. Great Lakes Rubber Corp. 421 F.N. pp." The proof as to payment and alleged defaults in payments was made without any differentiation between the two claims and neither of the parties was able to offer any evidence of apportionment. Progress payments made by Heyward were not allocated as between jobs and were made on a lump sum basis for both as though for a single account. 756-757.A. v. Indeed.R. 1531. because the payments it made to D'Agostino could not be allocated between the two jobs. 286 F. Keyes Fibre Co. was compulsory. v. Fowler. Heyward-Robinson Co. the evidence as to the breaches of . 367. Aetna Cas.A. 1077 [1970]) where the court ruled in an action by D'Agostino against Heyward to recover payments alleged to be due on a Navy construction job. The letters of Heyward to D'Agostino of October 8 and 19. D. Conn. 211. v. D. 7th 1969.L. Robinson. 1970.A. Diamond v.A. allegedly because of the cancellation by D'Agostino of this point insurance coverage and failure to properly man both projects. 2d.R. See also United States v. v. 2d. 718. 2d. 981. 1940. Carvel. for Use & Benefit of D'Agostino Excavators. "A single insurance policy covered both jobs. Alabama State Docks.. The court explaining the close and logical relationship between the two claims thus: "There was such a close and logical relationship between the claims on the Navy and Stelma jobs that the Stelma counterclaims arose out of the same "transaction or occurrence" as those terms are now broadly defined. 1961. 1180. Merbert Cooper Co. Cal. 388. v. 634.C.In the Matter of Farrell Publishing Corp. 417 F. Revere Copper & Brass Inc. 892. 1047. American Samec Corp. 350. Inc. D. C. 1949. 1077.C.. treated both jobs together. Both subcontracts were entered into by the same parties for the same type of work and carried on during substantially the same period. Ed. Ct.A. v. ed. 2d. Kuster Labs. it would seem to have been impossible for Heyward to have fully litigated the claims against it on the Navy job without including the Stelma job.D.. 25 L.Y.C. 371. 1970. U. C. 267 F. 45 A. 1952. 2 815. Me. 2d. Ltd. (430 F. v.

303 F..C. D. Soler. 11 F. Wood. & A. 397. Marcus v. Magna Pictures Corp.R. 1961. 268 F.C. 47.R. 1940. Esquire. Cyclotherm Corp.D. 230. 1061. Revised Rules of Court. 1959. 306 F.. International Union. 295. 1969. Federal Practice and Procedure. 1950. 29 F.. Camara v. AFL-CIO v.. Shurbert. pp. v. v. 697. Supp. v. Inc. 1967. supra. 1967. See also: Motos v.A. Cold Metal Process Co. 54-55. WKRS v. . 2d 217. 1964. D. Supp. pp. 2d 14. Wyo. Supp.C. 25 Phil. 41 F. Local Union 499 of Int'l Bhd. Bank of Cody. D. Iowa Power & Light Co. Goldlawr. Louis Marx & Co. 887. C. First Nat. Pa. v.. Inc. 224 F. 29 Now section 8 of Rule 6. C. A. 731. Co.. U. 3d. Cal. 424 F. 388- 25 I Moore's Federal Practice. 14 Phil. Supp. 533. 27 ​ ​ ​ Ibid. Allstate Ins. Slavics v. Vda. D. W. 965. Miner v. Ohio River Co. Mich. Civil section 1428.contract claimed by the respective parties related in the main to both contracts rather than to one or the other.I. Corp. 2 SCRA 293.A.C.C. Co. 384-385. Denys Fisher (Spirograph) Ltd. 1 SCRA 1060. 1950. 1.C. Supp. Inc. v.C. 280. 1970. Inc. Hartford Acc. Varga Enterprises. 956. 1st. 26. Iowa 1964. 26 6 Wright & Miller. Castro v. Civil section 1411. 738. D. 36 F.R. D. 55. 88. ​ ​ ​ ​ ​ 23 Berses v.C. 3d." 22 Berses v. pp.D. Montes. Beltran v. Valdez D. D. Va. 32 F. 190 F.C. 24 389.. Supp. Goodyear Tire & Rubber Co.. RFC v. Chua Jamco.D.. Villanueva. Supp. 1962. D. 1938. Ozoa v. p. 602. 24 F. vacated on other grounds C.R.R. v. Civil section 1411. 1962.C.A. Pa. PIASEK 1 Air Corp. 94 Phil. Workers. Aguilar. Marcoux. 185 F. 198 F.D. Aug. Pa. 241 Fed. pp. 107 Phil.. D. 7th. & Indem. 1955.C. 148-149.D. 1951. Villanueva. 53 Phil. v. 332. Valbuena. v. Yap Unli v. 279. of Elec. Carpena v. Del..R. Miller.. 265 F.R.A. 99 Phil. 2d 125. United Engineering & Foundry Co. Paramount Pictures Corp. 527. Pa. Levitt & Sons. 28 Ibid. 479. 17 F. v. D. 144. citing: Stahl v. Manalo. D. C. de Montaur. 2d 52. Marbon Corp.A. L-8621.C.R. . 1967. 1956. 473. Commerce Oil Ref.

The crucial time for determining whether a claim may be filed as a counterclaim under the Rule 13(a) and Rule 13(b) is the time pleadings are filed. Switzer Bros. See Cold Metal Process Co. with the permission of the court.R.30 ​ ​ ​ Now section 9 of Rule 6. 1967). be presented as a counterclaim by supplemental pleading. Cu v. 1938 ed. Moore. C. which at the time of filing the pleading the pleader has against any opposing party. Record on Appeal. if it arises out of the transaction or occurrence that is the subject matter of the opposing party's claim and does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction. 1951).A. Drummond.S. O. unless the case has progressed to a stage in the action that to do so would cause hardship or confusion (Newell v. par.D. 14 F. 229 F. pp.. 10 F. Federal Practice and Procedure. Such cross-claim may include a claim that the party against whom it is asserted is or may be liable to the cross-claimant for all or part of a claim asserted in the action against the cross-claimant. 13. (Stahl v. A pleading may state as a cross-claim any claim by one party against a co-party arising out of the transaction or occurrence that is the subject matter either of the original action or of a counterclaim therein.A. Inc. 473. 34 The counterclaim procedure in the federal courts is set forth in Rule 13 of the Federal Rules of Civil Procedure..) See also: Shwab v. D. 15-31.. par.D. 1956. Newton & Son Co.J. Barron & Holtzoff. Federal Practice. Dolz.D. 2d 749 Michigan Tool Co. A claim which either matured or was acquired by the pleader after serving his pleading may. United Engineering & Foundry Co. not the subject of a pending action. respectively of the Revised Rules. 1950. 85-88 (2d ed. ​ 36 ​ ​ Pp. 286. 540. xxx ​ xxx ​ xxx ​ (g) Cross-Claim Against Co-Party. 622 (1960) and cases cited therein. But under the specific language of Rule 13(e) such permission may be given only if the claim is a "matured" one at the time permission is requested. 2d 52).. 31 Rule 13. 35 A motion to serve a supplemental counterclaim should be granted when plaintiff cannot be seriously prejudiced by so doing inasmuch as the trial of the case will not be delayed. Claims which have "matured" after the filing of a party's pleadings in the action may be pleaded with the permanent mission of the court under Rule 13(e). .D. (Dazian's Inc. v. Record on Appeal. xxx ​ xxx ​ xxx ​ (e) Counterclaim Maturing or Acquired After Pleading. 7th.J. 89 Phil. 664 -665. p. Federal Practice. (a) Compulsory Counterclaim.32. Counterclaim and Cross-Claim. 2d 217 (3d Cir. 33 F. 24). (See 1 Moore's Federal Practice. Republic. 3 J. Del.C.C. D. 1938. 1966). 424 F. 54-61. Sec. A pleading shall state as a counterclaim any claim. 13.32. 46-47 (Supp. 867-868. 33 82 C. 1A. and section 4 of Rule 9.) 32 ​ ​ ​ 82 C. D. v. 190 F.S. Rule 13 refers only to claims which have "matured" at the time they are pleaded as counterclaims. 402. 3 J. Supp. v..C. Ohio 1953. 860-863. 37 Pp. Ohio River Company. pp.R. Moore.

The Lawphil Project . 23 SCRA 1093. Inc. RA 529 provides that an agreement to pay in dollars is null and void and of no effect however what the law specifically prohibits is payment in currency other than legal tender. San Miguel Brewery v. Ferrer v. 30 SCRA 111 and other cases.38 City of Manila v. NOTE: RA 529 has already been repealed by Republic Act 8183 which provides that every monetary obligation must be paid in Philippine currency which is legal tender in the Philippines. 1 SCRA 1086. the same is null and void as contrary to public policy. 907. Molina. Auditor General. de Joves. However. as it specifically provides that “every other domestic obligation … whether or not any such provision as to payment is contained therein or made with respect thereto. v. pursuant to Republic Act No. 2012 00 Negotiable Instruments Law – Negotiable Instruments in General – 90 SCRA 533 – Sum Certain in Money – RA 529 In 1969. The promissory note went due and was left unpaid despite demands from Ponce. dissenting: 1 ​ The action herein was filed and tried before the Revised Rules of 1964 took effect. 142.016. De Garcia.Arellano Law Foundation Ponce vs Court of Appeals on February 29. therefore pursuant to Republic Act 529. On the face of the promissory note. In June 1969. 41 Vda. ​ 39 ​ ​ ​ Compañia General de Tabacos v. Read full text of the case here.” A contrary rule would allow a person to profit or enrich himself inequitably at another’s expense. the transaction was illegal with neither party entitled to recover under the in pari delicto rule. If there is any agreement to pay an obligation in a currency other than Philippine legal tender. HELD: Yes. 529.868. 729. it says that it is payable in Philippine currency – the equivalent of the dollar amount loaned to Afable et al. the . 40 Olyphant v. Robles. 529.. Afable and her co-debtors executed a promissory note in favor of Ponce in the peso equivalent of the loan amount which was P814. Jesusa Afable and two others procured a loan from Nelia Ponce in the amount of $194. The trial court ruled in favor of Ponce. Vda. and the most that could be demanded is to pay said obligation in Philippine currency. Commissioner of Internal Revenue. 5 SCRA 1022. and.42. Luzon Surety Co. The Court of Appeals initially affirmed the trial court but it later reversed its decisions as it ruled that the promissory note under consideration was payable in US dollars. 2 SCRA 1051. 914. St. v. de Murciano v. It does not defeat a creditor’s claim for payment. 28 F. Louis Ore & Steel Co. ” which is what is specifically prohibited by RA No. This prompted Ponce to sue Afable et al. Ebay.29. shall be discharged upon payment in any coin or currency which at the time of payment is legal tender for public and private debts. Barredo. 5 Phil. 103 Phil. Zambales Chromite Co. It may likewise be pointed out that the Promissory Note contains no provision “giving the obligee the right to require payment in a particular kind of currency other than Philippine currency. ISSUE: Whether or not Ponce may recover.

Thereafter. The checks were sent for clearing and was thereafter cleared. Whenever a bank treats the signature at the back of the checks as indorsements and thus logically guarantees the same as such there can be no doubt that said bank had considered the checks as negotiable. Petitioner would delay the payments on the promissory notes until the seller completes its obligation under the warranty. Petitioner is likewise estopped from raising the non-negotiability of the checks in issue. A long line of cases also held that in the matter of forgery in endorsements. PCHC has jurisdiction over the case in question.. it is the collecting bank that generally suffers the loss because it had the dutyh to ascertain the genuineness of all prior indorsements considering that the act of presenting the check for payment to the drawee is an assertion that the party making the presentment has done its duty to ascertain the genuineness of the indorsements. IFC 149 SCRA 448 FACTS: Petitioner bought from Atlantic Gulf and Pacific Company. through its sister company Industrial Products Marketing. The petitioner cannot now deny its liability as it assumed the liability of an indorser by stamping its guarantee at the back of the checks. the participation of the two banks in the clearing operations is submission to the jurisdiction of the PCHC. The promissory note in question . BDO discovered that the indorsements in the back of the checks were forged. Further. This liability as a general rule extends to the corporation to whom it assigned its rights and interests unless the assignee is a holder in due course of the promissory note in question. Petitioner was issued a sales invoice for the two used tractors. HELD: First. the deed of sale with chattel mortgage with promissory note was issued. At the same time. in which case. the latter’s rights are based on a negotiable instrument and assuming further that the petitioner’s defense may not prevail against it. The articles of incorporation of PHHC extended its operation to clearing checks and other clearing items. This prompted BDO to file a complaint against Equitable and PCHC. the tractors broke down. HELD: It is patent that the seller is liable for the breach in warranty against the petitioner. 29) BANCO DE ORO SAVING V. The promissory note in question is not a negotiable instrument. The used tractors were then delivered but barely 14 days after. CONSOLIDATED PLYWOOD V. EQUITABLE 157 SCRA 188 FACTS: BDO drew checks payable to member establishments. The trial court and RTC held in favor of the Equitable and PCHC. No doubt transactions on nonnegotiable checks are within the ambit of its jurisdiction. (The Philippine Negotiable Instruments Law. p. The seller sent mechanics but the tractors were not repaired accordingly as they were no longer serviceable. the seller assigned the deed of sale with chattel mortgage and promissory note to respondent. It stamped its guarantee at the back of the checks and subsequently presented it for clearing and it was in the basis of these endorsements by the petitioner that the proceeds were credited in its clearing account. De Leon and De Leon Jr. Simultaneously.parties may agree that the obligation or transaction shall be settled in any other currency at the time of payment. a collection suit was filed against petitioner for the payment of the promissory note. It then demanded that Equitable credit its account but the latter refused to do so. Furthermore. two used tractors. Subsequently. the checks were deposited in Trencio’s account with Equitable. assuming the note is negotiable. the bank cannot escape liability of an indorser of a check and which may turn out to be a forged indorsement. Afterwards.

PECO V. his account was debited in pursuance of the letter given by the Chief. He didn’t do so but left the office with the money orders and the check. he was advised to see the Chief of the Money Order Division. Plaintiff was one of those who received the subject money orders and encashed it with the Bank of America. A notice was thereafter issued to all post offices as well as the Bank of America. . SORIANO 39 SCRA 587 FACTS: Montinola purchased money orders from the postal office. He issued a personal check to pay for the money orders and since it is irregular to have checks as payments. In establishing and operating a postal money order system. And as such. the petitioner may raise against the respondents all defenses available to it against the seller. about the irregularly issued money orders and the order not to accept such orders. it was given the money but later on. Moreover.lacks the so-called words of negotiability. some restrictions imposed money orders by postal laws and regulations are inconsistent with the character of negotiable instruments. At first. Thus. it follows that the respondent can never be a holder in due course but remains merely an assignee of the note in question. the government is not engaged in commercial transactions but merely exercises a governmental power for the public benefit. HELD: Postal money orders are not negotiable instruments.