FINANCIAL BUILDING CORP V FORBES PARK

Facts:
The USSR owned a lot in Forbes Park and it engaged the services of Financial Building for the
construction of a multi-level office and staff apartment building. Due to the USSRs representation that it
would be building a residence for its Trade Representative, Forbes Park authorized its construction and
work began shortly thereafter. However, Financial building submitted to the Makati City Government a
second building plan for the construction of a multi-level apartment building, which was different from the
first plan for the construction of a residential building submitted to Forbes Park.
Forbes Park discovered the second plan and it enjoined further construction work. Forbes Park
suspended all permits of entry for the personnel and materials of Financial Building in the said
construction site.
Financial Building filed in the Regional Trial Court a complaint for Injunction and Damages with a prayer
for Preliminary Injunction against Forbes Park. Forbes Par, in turn, filed a Motion to Dismiss on the
ground that Financial Building had no cause of action because it was not the real party-in-interest. Forbes
Park won in this case thus it sought to vindicate its rights by filing a complaint for damages against
Financial Building arising from the violation of its regulations. Trial court rendered a decision in favor or
Forbes Park.
Issue:
W/N THE ALLEGED CLAIMS AND CAUSES OF ACTION THEREIN ARE BARRED BY PRIOR
JUDGMENT AND/OR ARE DEEMED WAIVED FOR ITS FAILURE TO INTERPOSE THE SAME AS
COMPULSORY COUNTERCLAIMS IN THE EARLIER CASE
Held:
Yes. The instant case is barred due to Forbes Parks failure to set it up as a compulsory counterclaim in
the earlier case.
A compulsory counterclaim is one which arises out of or is necessarily connected with the
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transaction or occurrence that is the subject matter of the opposing partys claim. If it is 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, such compulsory counterclaim is barred if it is not set up in the
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action filed by the opposing party.
Thus, a compulsory counterclaim cannot be the subject of a separate action but it should instead be
asserted in the same suit involving the same transaction or occurrence, which gave rise to it
To determine whether a counterclaim is compulsory or not, we have devised the following tests: (1) Are
the issues of fact or law raised by the claim and the counterclaim largely the same? (2) Would res
judicata bar a subsequent suit on defendants claim absent the compulsory counterclaim rule? (3) Will
substantially the same evidence support or refute plaintiffs claim as well as the defendants counterclaim?
and (4) Is there any logical relation between the claim and the counterclaim? Affirmative answers to the
above queries indicate the existence of a compulsory counterclaim.
Since Forbes Park filed a motion to dismiss in Civil Case No. 16540, its existing compulsory
counterclaim at that time is now barred.
A compulsory counterclaim is auxiliary to the proceeding in the original suit and derives its
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jurisdictional support therefrom. A counterclaim presupposes the existence of a claim against the party
filing the counterclaim. Hence, where there is no claim against the counterclaimant, the counterclaim is
improper and it must dismissed, more so where the complaint is dismissed at the instance of the
counterclaimant.