Petitioner Lafarge Cement Philippines, Inc.

(Lafarge), on behalf of its affiliates and other

qualified entities, including Petitioner Luzon Continental Land Corporation (LCLC) , agreed to
purchase the cement business of Respondent Continental Cement Corporation (CCC). Both
parties entered into a Sale and Purchase Agreement (SPA), and the petitioners were aware that
during the transactions, CCC had a pending case with the SC entitled Asset Privatization Trust
(APT) v. CA and CCC. Anticipating an adverse judgment, the parties agreed under Clause 2 (c)
of the SPA to retain from the purchase price a portion of the contract price P117,020,846,84 to
be deposited with First National City Bank of New York for payment to APT but later on,
petitioners allegedly refused to pay APT despite the finality of judgment in APT vs. CA.
CCC filed a Complaint docketed as Civil Case No. Q-00-41103 with Application for Preliminary
Attachment with RTC QC.
Petitioners moved to dismiss the complaint for violating the prohibition against forum shopping
alleging that CCC made the same claim in another action filed before the International Chamber
of Commerce. RTC denied motion to dismiss, and petitioners elevated the matter before CA.
Petitioners denied the allegations in the Complaint, praying by way of compulsory counterclaims
against CCC, Gregory Lim (CCC President) and Anthony Mariano (CCC corporate secretary) for
sums of:
a) 2,700,000 each for actual damages
b) P100,000,000 each as exemplary damages
c) P100,000,000 each as moral damages
d) P5,000,000 each as attorney's fees plus costs.
Petitioners alleged that respondents filed the complaint in bad faith. Relying in Sapugay vs. CA,
petitioners prayed that Lim and Mariano be held "jointly and solidarily" liable with CCC.
CCC moved to dismiss petitioners' compulsory counterclaims on the grounds that essentially
constituted the issues for resolution in the instant petition.

RTC dismissed the counterclaims because:

a) the counterclaims against Respondent Lim and Mariano were not compulsory.
b) the Sapugay ruling was not applicable
c) petitioner's Answer with Counterclaims violated rules on joinder of causes of action.

Petitioner's filed a Motion for Reconsideration and RTC admitted that error was made in its
pronouncement that the petitioner's counterclaim had been pleaded against Mariano and Lim,
however, RTC clarified that the counterclaim was dismissed as it impleaded Respondents Lim
and Mariano, even if it included CCC.

Hence, this petition.

Issues:
1. WON RTC gravely erred in ruling that (i) petitioner's counterclaims against Lim and Mariano
are not compulsory;
(ii) Sapugay ruling is inapplicable (iii) petitioners violated rule on joinder of causes of action.
2. WON RTC gravely erred in refusing to rule that Respondent CCC has no personality to move
to dismiss petitioner's compulsory counterclaims against Lim and Mariano.
Ruling:
(i) Affirmative. Counterclaims are defined in Section 6 of Rule 6 of theRules of Civil Procedure
as “any claim which a defending party may have against an opposing party.” They are generally
allowed in order to avoid a multiplicity of suits and to facilitate the disposition of the whole
controversy in a single action, such that the defendant’s demand may be adjudged by a
counterclaim rather than by an independent suit. The only limitations to this principle are: (1)
that the court should have jurisdiction over the subject matter of the counterclaim, and (2) that it
could acquire jurisdiction over third parties whose presence is essential for its adjudication. A
counterclaim is compulsory when its object “arises out of or is necessarily connected with the
transaction or occurrence constituting 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.” The compelling test of compulsoriness characterizes a counterclaim as compulsory
if there is a "logical relationship" between the main claim and counterclaim. Logical relationship
exists when:
-conducting separate trials of the respective claims would entail more time and effort of the
parties and the court;
- when multiple claims involve same factual and legal issues;
- when the claims are offshoots of the same controversy between the parties.
In the present case, using the compelling test of compulsoriness, the recovery of counterclaims
is contingent upon the case filed by respondents and conducting separate trials will only entail
more time and effort from the parties and the court.
Since the counterclaim for damages is compulsory, it must be set up in the same action;
otherwise, it would be barred forever. If it is filed concurrently with the main action but in a
different proceeding, it would be abated on the ground of litis pendentia; if filed subsequently, it
would meet the same fate on the ground of res judicata.

ii. Negative. The inclusion of a corporate officer or stockholder—Cardenas in Sapugay

or Lim and Mariano in the instant case—is not premised on the assumption that the plaintiff
corporation does not have the financial ability to answer for damages, such that it has to share
its liability with individual defendants. Rather, such inclusion is based on the allegations of fraud
and bad faith on the part of the corporate officer or stockholder. These allegations may warrant
the piercing of the veil of corporate fiction, so that the said individual may not seek refuge
therein, but may be held individually and personally liable for his or her actions. Lim and
Mariano were made indispensable parties in the present case by petitioners' allegation of bad
faith from them and based on the alleged facts, both parties are parties in interest in the
counterclaim.
The correct procedure of impleading new parties per Sec. 12, Rule 6 of ROC is by directing that
summons be served on them, and it is through this that the trial court can obtain jurisdiction over
them.
In the Sapugay case, Cardenas did not file any responsive pleading against him but the Court
considered the trial court's treatment of the Complaint as the Answer of Cardenas to the
compulsory counterclaim. Such factual circumstances are unavailing in the present case. The
records does not show that Lim and Mariano are either aware of the counterclaims filed against
them or that they have actively participated in the proceedings involving [Link] dismissing the
counterclaims against Lim and Mariano, the court cannot be said to have treated CCC's Motion
to Dismiss as having filed on their behalf.

iii. Affirmative. Section 5, Rule 2 and Section 6, Rule 3 of ROC are meant to discourage
multiplicity of suits, and this is negated by insisting that the damages be dismissed and be
re-filed in a separate proceeding.
Respondents Lim and Mariano are real parties in interest to the compulsory counterclaim and
that they should be joined in the case.
Section 7 of Rule 3 provides:
Compulsory joinder of indispensable parties —Parties in interest without whom no final
determination can be had of an action shall be joined either as plaintiffs or defendants.
Moreover, in joining Lim and Mariano in the compulsory counterclaim, petitioners are being
consistent with the solitary nature of the liability alleged therein.

2.
Negative. Obligations may be classified as either joint or solidary.“Joint” or “jointly” or “conjoint”
means mancum or mancomunada or pro rata obligation; on the other hand,“solidary obligations”
may be used interchangeably with“joint and several” or “several.” Petitioners’ usage of “joint and
solidary” is confusing and ambiguous.
The ambiguity in petitioners’ counterclaims notwithstanding, respondents’ liability, if proven, is
solidary. This characterization finds basis in Article 1207 of the Civil Code, which provides that
obligations are generally considered joint, except when otherwiseexpressly stated or when the
law or the nature of the obligation requires solidarity. However, obligations arising from tort are,
by their nature, always solidary. In a “joint” obligation, each obligor answers only for a part of the
whole liability; in a “solidary” or “joint and several”obligation, the relationship between the active
and the passive subjects is so close that each of them must comply with or demand the
fulfillment of the whole obligation.

The fact that the liability sought against the CCC is for specific performance and tort, while that
sought against the individual respondents is based solely on tort does not negate the solidary
nature of their liability for tortuous acts alleged in the counterclaims. Article 1211 of the
CivilCode is explicit on this point:
“Solidarity may exist although the creditors and the debtors may not be bound in the same
manner and by the same periods and conditions.”

The solidary character of respondents' alleged liability allowed CCC to dismiss the
counterclaims on grounds that pertain solely to Lim and Mariano. In cases filed by the creditor, a
solidary debtor may invoke defenses arising from the nature of the obligation, from
circumstances personal to it, or even from those personal to its co-debtors.

Art. 1222 of the CC provides:

“A solidary debtor may, in actions filed by the creditor, avail itself of all defenses which are
derived from the nature of the obligation and of those which are personal to him, or pertain to
his own share. With respect to those which personally belong to the others, he may avail himself
thereof only as regards that part of the debt for which the latter are responsible .”

The act of Respondent CCC as a solidary debtor—that of filing a motion to dismiss the
counterclaim on grounds that pertain only to its individual co-debtors—is therefore allowed.

However, a perusal of its Motion to Dismiss the counterclaims shows that Respondent CCC filed
it on behalf of co respondents Lim and Mariano; it did not pray that the counterclaim against it
be dismissed. Be that as it may, Respondent CCC cannot be declared in [Link]
teaches that if the issues raised in the compulsory counterclaim are so intertwined with the
allegations in the complaint, such issues are deemed automatically joined.

Counterclaims that are only for damages and attorney’s fees and that arise from the filing of the
complaint shall be considered as special defense and need not be answered.

However, Respondent CCC cannot file Motion to Dismiss on behalf of Lim and Mariano as it
lacks the requisite authority to do so since a corporation has a legal personality separate and
distinct from its officers and cannot act for and on their behalf.

Dispositive: Petitioner granted, court of origin ordered to take cognizance of the counterclaims
and issue summons to Lim and Mariano.