Mercado v. San Miguel Corporation
REITERATIONFacts
The Antecedents: Leonides Mercado had been distributing San Miguel Corporation (SMC) beer products since 1967. In 1991, SMC extended a P7.5 million credit line to Mercado. To secure his purchases, Mercado assigned three China Banking Corporation (CBC) certificates of deposit totaling P5 million to SMC and executed a continuing hold-out agreement. He also submitted surety bonds from Eastern Assurance and Surety Corporation (EASCO) totaling P2.6 million. On February 10, 1992, SMC notified CBC of Mercado's failure to pay for credit withdrawals and requested the release of the assigned certificates of deposit, which CBC granted. Procedural History: On March 2, 1992, Mercado filed an action in the Regional Trial Court (RTC) of Manila to annul the continuing hold-out agreement and deed of assignment, arguing it allowed forfeiture without foreclosure, violating Article 2088 of the Civil Code. He also claimed SMC erroneously applied payments to older accounts. SMC filed an answer with a counterclaim for P7,468,153.75, representing the value of goods Mercado withdrew on credit, and a third-party complaint against EASCO. The RTC denied Mercado's subsequent motion to dismiss and, after trial, ordered Mercado and EASCO to jointly and severally pay SMC the P7,468,153.75. Mercado and EASCO appealed to the Court of Appeals (CA), which affirmed the RTC decision. EASCO's petition for review to the Supreme Court was terminated after settlement. Mercado passed away and was substituted by his heirs, the petitioners. The Petition: The petitioners, heirs of Leonides Mercado, filed this petition asserting that the CA erred in affirming the RTC decision, arguing that the decision ordering Mercado to pay SMC P7,468,153.75 was void. They contend that SMC's counterclaim was permissive and that the RTC never acquired jurisdiction over it due to the lack of docket fees. The Supreme Court denied the petition, holding that SMC's counterclaim was compulsory because it arose from the same transaction or occurrence as Mercado's claim, thus requiring substantially the same evidence and having a logical relation. Consequently, the payment of docket fees was not necessary for the RTC to acquire jurisdiction.
Issue(s)
Whether the RTC acquired jurisdiction over SMC's counterclaim despite the absence of docket fees because the counterclaim was compulsory. Whether SMC's counterclaim was compulsory or permissive.
Ruling
The petition is denied. The Court of Appeals did not err in affirming the RTC decision in toto.
Ratio Decidendi
On Whether the RTC acquired jurisdiction over SMC's counterclaim despite the absence of docket fees because the counterclaim was compulsory: The Court held that the payment of docket fees is not necessary for the RTC to acquire jurisdiction over the subject matter if the counterclaim is compulsory in nature. A counterclaim is compulsory 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; it falls within the jurisdiction of the court; and it does not require for its adjudication the presence of third parties over whom the court cannot acquire jurisdiction. Otherwise, it is merely permissive. On Whether SMC's counterclaim was compulsory or permissive: In this case, Mercado sought to annul the continuing hold-out agreement and deed of assignment, which served as security for his credit purchases. He admitted outstanding obligations but disputed their coverage by the accessory contracts. SMC, in response, invoked the validity of these agreements and sought to collect the value of goods purchased on credit. Therefore, both Mercado's complaint and SMC's counterclaim touched upon the validity of the agreements and the existence of outstanding liabilities. The same evidence would be used to support or refute both claims, indicating a logical relationship. Had these issues been tried separately, the efforts of the court and the parties would have been duplicated. Thus, SMC's counterclaim was compulsory, and the absence of docket fees did not divest the RTC of jurisdiction.
Main Doctrine
A counterclaim is compulsory 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, falls within the court's jurisdiction, and does not require the presence of third parties over whom the court cannot acquire jurisdiction. For compulsory counterclaims, the payment of docket fees is not necessary for the court to acquire jurisdiction.