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CivPro 120 ICTSI vs CA (1992) Doctrine: The dismissal of the complaint operates to dismiss the counterclaim since (1)

) ICTSI itself moved for the dismissal of the complaint and (2) also because this is a compulsory counterclaim so intertwined with the complaint. Facts: SHARP filed a COMPLAINT FOR PROHIBITION WITH PRAYER FOR WRIT OF PRELIMINARY INJUNCTION against (1) Sec of Transportation and Communication, (2) Philippine Ports Authority (PPA), (3) E. Razon, Inc. and (4) International Container Terminal Services, Inc. (ICTSI) with RTC, Manila. ICTSI filed ANSWER with COMPULSORY COUNTERCLAIM against SHARP for its unfounded and frivolous action, the consequence of which it had suffered injuries. RTC nullified the writ of preliminary injunction it earlier issued on the grounds that SHARP is not a proper party to stop the negotiationa nd awarding of contract for the developlment. Furthermore, SHARP violated the doctrine of exhaustion of administrative remedies. In view of the nullification of the writ of PI, PPA and ICTSI filed a motion to dismiss. RTC: dismissed the complaint as well as the counterclaim. SC: ICTSI filed this petition for review, alleging that the dismissal of the counterclaim by the RTC was tainted with grave abuse of discretion. Issue/s: WON RTC erred in dismissing the counterclaim? NO! Held/Ratio: ICTIs counterclaim in this case is COMPULSORY. Requisites for a compulsory counterclaim: 1. it arises out of, or is necessarily connected with, the transaction or occurrence that is the subject matter of the opposing party s claim; 2. it does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction; and 3. the court has jurisdiction to entertain the claim. In this case, the evidence needed to sustain the counterclaim would also refute the cause of action alleged in the complaint. It is clear that the counterclaim would succeed only if the claim would not. The dismissal of the complaint operated also to dismiss the counterclaim for 2 reasons: 1. ICTSI itself joined PPA in moving for the dismissal of the complaint. 2. The compulsory counterclaim was so intertwined with the complaint that it could not remain pending for adjudicaton by the court after the dismisal of the complaint which had provoked the counterclaim in the first place. In this case, ICTSI souldve objected to the dismissal of the complaint or at least reserved its right to prosecute it. (OBITER, but might be impt) Distinction between compulsory and permissive counterclaim: the latter does not arise out of nor is necessarily connected with the subject matter of the opposing partys claim. It is not barred even if not set up in the action.

Digested by: Cari Mangalindan (A2015)