Chan v. CA
G.R. No. 109020; March 3, 1994
Petitioners: Felisa Chan
Respondents: Hon. Court of Appeals and Grace Cu
Doctrine/s:
1. A counterclaim for ejectment may be set up in a complaint for consignation.
Facts:
1. Felisa Chan and Grace Cu entered into a contract of lease whereby the latter
will occupy for residential purposes Room 401 and the rooftop of Room 442
of a building owned by the former located in Manila. The term of the lease
is 1 year. In the contracts, it was agreed that the premises shall be used as a
learning center. The monthly rental was raised every year.
2. Said contract of lease was renewed every year for 2 successive years or up
to February 1, 1986. After February 1, 1986, there was no written contract
of lease executed by the parties, but Cu has continuously occupied the
premises as a learning center.
3. Sometime in November 1989, Chan padlocked the way to the rooftop.
4. Cu insisted that she should be allowed to use the rooftop while Chan
maintained that only Room 401 was leased and that the use of the rooftop
was merely tolerated.
5. Eventually, Chan terminated the lease, giving Cu until January 1, 1990 to
vacate the premises.
6. Because of the dispute between the parties, Chan did not collect the rental
for December 1989. Whereupon, Cu tendered to Chan a check, which the
latter refused to accept. Cu’s lawyer tendered the payment in cash in the
same amount with notice to Chan that if she will not accept the payment,
the same will be deposited in court by way of consignation.
7. Chan allowed Cu to hold classes only up to March 1990.
8. On January 15, 1990, Cu filed a civil case for consignation with the
Metropolitan Trial Court of Manila. She alleged that Chan refused to accept,
without justifiable cause, the rentals for the premises in question.
9. Chan interposed in her answer a counterclaim for ejectment. She contended
that the lease, being month to month, had expired but that despite demand,
Cu refused to vacate the premises.
10. The MeTC declared that the rooftop is included in the lease and fixed the
term of the lease over the subject premises until June 30, 1992. It declared
the consignation of rentals made by Cu to be valid and legal and released Cu
from the obligation of paying the said rentals.
11. Both parties appealed to the RTC of Manila.
12. Cu maintained that the MeTC should have fixed a longer period, while Chan
contended that the court erred in extending the term of the lease and in
upholding the validity of the consignation.
13. RTC affirmed the MeTC’s decision.
14. CA reversed and set aside the decisions of the MeTC and the RTC and
dismissed the complaint for consignation for lack of merit.
o The MeTC and the RTC erred in passing upon the issue of ejectment
raised in Chan’s counterclaim since an action for ejectment can
only be initiated through a verified complaint, not a counterclaim.
Thus, the courts should not have fixed the term of the lease. This
issue can only be decided in a case of ejectment.
o In dismissing the complaint for consignation, CA ruled that Chan’s
refusal to accept the rental was justified and that she may not be
compelled to accept such rental payments.
Issue/s:
1. Whether the counterclaim for unlawful detainer was properly included in
the complaint for consignation. – YES.
Held:
1. It must be emphasized that the parties have conceded the propriety of the
counterclaim for ejectment and accepted the MeTC’s jurisdiction thereon.
As a matter of fact, the consignation was relegated to the background and
the parties heatedly tangled on the nagging issues on the duration of the
lease after the expiration of the last written contract, the power of the court
to extend the lease, and the length of the extension – all of which were
provoked by and linked to the counterclaim for ejectment.
A counterclaim is any claim for money or other relief which a defending
party may have against an opposing party. It need not diminish or defeat the
recovery sought by the opposing party, but may claim relief exceeding in
amount or different in kind from that sought by the opposing party’s claim.
Counterclaims are designed to enable the disposition of a whole controversy
of interested parties’ conflicting claims, at one time and in one action,
provided all the parties can be brought before the court and the matter
decided without prejudicing the rights of any party. A counterclaim “is in
itself a distinct and independent cause of action, so that when properly
stated as such, the defendant becomes, in respect to the matter stated by
him, an actor, and there are two simultaneous actions pending between the
same parties, wherein each is at the same time both a plaintiff and a
defendant . . . . A counterclaim stands on the same footing and is to be tested
by the same rules, as if it were an independent action.” In short, the
defendant is a plaintiff with respect to his counterclaim.
Section 8, Rule 6 of the Rules of Court provides that the answer may contain
any counterclaim which a party may have against the opposing party
provided that the court has jurisdiction to entertain the claim and can, if the
presence of third parties is essential for its adjudication, acquire jurisdiction
of such parties. Under Section 4 of Rule 9, a counterclaim not set up shall be
barred if it arises out of or is necessarily connected with 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. A counterclaim may be compulsory or
permissive. The former is that covered by Section 4 of Rule 9.
Chan’s counterclaim for ejectment is a compulsory counterclaim because it
is necessarily connected with the transaction or occurrence which is the
subject matter of Cu’s complaint, viz., the lease contract between them.
Consequently, the CA erred when it held that Chan’s cause of action for
ejectment could not be set up in a counterclaim.

Dispositive Portion: WHEREFORE, the instant petition is GRANTED and the

challenged Decision of 20 January 1993 of the Court of Appeals in CAG. R. SP No.
28870 is hereby SET ASIDE, and the Decisions of 27 March 1992 of Branch 11 of the
Regional Trial Court of Manila in Civil Case No. 9155879, and of 18 December 1990 of
Branch 15 of the Metropolitan Trial Court of Manila in Civil Case No. 131203CV are
REINSTATED. Costs against the private respondent. SO ORDERED.