FIRST DIVISION

[G.R. No. 161431. October 13, 2010.]

CALIBRE TRADERS, INC., MARIO SISON SEBASTIAN, and MINDA

BLANCO SEBASTIAN , petitioners, vs . BAYER PHILIPPINES, INC. ,
respondent.

DECISION

DEL CASTILLO , J : p

This petition for review on certiorari 1 assails the July 31, 2002 Decision 2 and the
December 19, 2003 Resolution 3 of the Court of Appeals (CA) in CA-G.R. CV No. 45546,
that denied petitioners' action for damages against respondent Bayer Philippines, Inc.
(Bayerphil) and instead granted the latter's counterclaim for P1,272,103.07,
representing unpaid purchases of Bayerphil's products.
Factual Antecedents
Calibre Traders, Inc. (Calibre) was one of Bayerphil's distributors/dealers of its
agricultural chemicals within the provinces of Pangasinan and Tarlac. 4 Their last
distributorship agreement was effective from June 1989 to June 1991. 5 However,
Bayerphil stopped delivering stocks to Calibre on July 31, 1989 after the latter failed to
settle its unpaid accounts in the total amount of P1,751,064.56. 6
As Bayerphil's authorized dealer, Calibre then enjoyed discounts and rebates.
Subsequently, however, the parties had a disagreement as to the entitlement and
computations of these discounts. Calibre, although aware of the deadline to pay its
debts with Bayerphil, nevertheless withheld payment to compel Bayerphil to reconcile
its accounts. 7
In a letter dated August 16, 1989, Calibre requested Bayerphil for a reconciliation
of accounts. It enumerated the following claims that amounted to P968,265.82:
1. Interest charged to our 1984-1985 Volume Rebate. These were charged to
us without our acknowledgment and was under protest since your people
were not serving our account during that period. This amounts to
P60,000.00 more or less. HSIADc

2. Request for retroactive application of your special rebate as per our letter
dated August 29, 1988 and your reply dated September 3, 1988. The reply
is not acceptable to us. This amounts to P33,127.26.
3. Special rebates of Machete EC and EN for CY 1988 which [were] not
granted to us, [but were] given to the other distributors after we have
withdrawn a sizeable quantity. This amounts to P68,244.30.
4. The difference between our claim dated March 31, 1989 amounting to
P47,746.30 against your Credit Memo 11868 dated April 28, 1989
amounting to P21,214.85. The amount of difference is P26,531.47.

5. The difference between our claim dated October 31, 1988 amounting to
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 P23,342.09 against your Credit Memo 11693 dated January 31, 1989
amounting to P21,222.48. The amount of difference is P2,119.61.
6. Sales Returns as per your CRR 2159 dated December 19, 1988 amounting
to P8,047.71.

7. Special rebates of 8% for Machete 5G as per Invoice No. 834159 dated

February 14, 1989. This amounts to [P1,376.80].
8. Request for Sales returns due to overdelivery as per our letter dated April 3,
1989 amounting to P147,108.86.

9. Request for Sales returns due to leakage as per our letter dated April 3,
1989 amounting to P8,681.24.
10. 1988-1989 Volume Rebate amounting to P520,548.41.

11. 5% Prompt Payment on P1,839,603.15 amounting to P92,480.16 since

your Sales Representative was not servicing our account due to his
[forth]coming resignation. 8

Calibre sent follow-up letters dated September 17, October 13, and November
16, 1989. 9
On September 29, 1989, Bayerphil's credit and collection o cer, Leon Abesamis,
conferred with Calibre's General Manager Mario Sebastian (Sebastian). The attempt to
settle failed. Again, on October 27, 1989, Bayerphils' Sales Manager of the Agro
Division, Vidal Lingan, met with Sebastian. The results of their discussion were put in
writing in Bayerphil's letter dated November 10, 1989, to wit:
xxx xxx xxx

Gentlemen: IEAHca

Following our October 27, 1989 discussions with yourself for the nal resolution
of your overdue accounts with our company in the amount of exactly
P1,718,822.57, we have arrived at a nal arrangement which will no doubt be
more than fair specially for your firm.
We will now go by your claims per your letter of August 16, 1989[. We] now
confirm the following:

1. The alleged interest charges of P60,000.00 . . . for unpaid invoices against

your volume rebate for the year 1984-1985 was not charged at all. Our
records show that we granted your year-end rebate per our:

Credit Note #9089 of July 1985 - P973,511.56

and
Credit Note #9149 of September 1985 - 181,441.15
———————
Total rebate from retention scheme P1,154,952.71
1984-1985 ===========

These credit notes do not bear any interest charges as you claimed during that
discussion. It means you were not charged any penalty on delayed payments of
subject invoices.

2. Retroactive application against inventory of special deal rebates have

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 never been paid to any of our distributors nationwide since we began
business operations in this country. As a matter of policy, we regret that we
cannot grant this request.

3. Special rebates on Machete EN and Machete EC on the basis of 30-day

COD arrangement were granted during the last quarter of 1988. This
agreement did not apply to your purchases on the same products from
January 1, 1988 to September 30, 1988. We found your claim di cult to
accept.

4. Your claim for P26,531.47 from our 30-day COD terms with 5% rebate on
selected products only, i.e., Gusathion, Folidol, Machete EC & EN. You have,
in your claim included other products than those listed. Inasmuch as our
former Sales Representative agreed to the inclusion of the other [products],
we will grant that claim for P26,531.47 net of our earlier issued CM
#11868, as an honorable business organization is expected to act.

5. Your claim on the difference of P2,119.61 [as stated in] your letter of
October 31, 1988 in the amount of P23,342.09 and our Credit Note #11693
dated January 31, 1989, is granted. Our computations are absolutely
correct but we shall not argue over a trivial figure.

6. Your claims on returned stocks on December 19, 1988 per CRR No. 2159
for P8,047.71. We issued the corresponding credit note dated July 25, 1989
in the amount of P7,242.26, which is based on the prices of the returned
goods at the time you acquired them, not at the time when you returned
them when there was a corresponding increase in prices. The difference is
P805.45. Any business house will reluctantly consider this claim but we
thought we should gallantly grant you that oversight. We are sure you did
not intend to do that.AcHSEa

7. Special 8% rebates on Machete 5G in the amount of P1,376.80. We have

given you a Credit Note #12160 to offset that claim.

8. Your volume rebate claim for the year 1988-1989 is in the sum of
P520,548.41, however, our computation stands at P479,326.49. Enclosed
herewith please nd our CM #12250 in the amount of P320,849.42
representing your volume rebate for 1988-1989 on the paid portion of your
volume rebate year purchases. As soon as payment is received on your
balance of P1,042,248.16 (net of additional volume rebate of P158,477.07
on the unpaid portion and prompt payment rebate of P63,196.06), we shall
issue you the aforementioned additional volume rebate and prompt
payment rebate CMs.

9. Your claim of 5% prompt payment rebate per your note dated June 30,
1989 has been computed to amount to P63,196.06 in view of the returns
and application of your volume rebate against the total outstanding
unpaid balances.
10. Your intention to return stocks per your letter of April 3, 1989. We have
withdrawn the following products on October 28, 1989, as follows:
Basagran 250 ml. - 230 bottles
500 ml. - 102 bottles
Baycarb 1000 ml. - 64 "
Baythroid 100 ml. - 373 "
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 250 ml. - 336 "
Gusacarb 500 ml. - 20 "
Roundup 250 ml. - 30 "
Machete EC 500 ml. - 12 "
1000 ml. - 12 "

The net value of the above materials has been computed at P124,493.28,
[for which]a credit note will be issued shortly.

We believe that we have been more than fair in meeting your claims. We granted
your requests as a gesture of benevolence in assisting your rm in softening the
burdens as inevitable consequences of business difficulties.
And as the time tested physical law rightly states — for every action, there must be
an equal positive reaction. We feel that you now react favorably in the nal and
complete resolution of your main problem.
Yours faithfully,

BAYER PHILIPPINES, INC. 1 0 CHEDAc

Bayerphil's Assistant Sales Manager Rene Garcia (Garcia) gave this letter to
Sebastian 1 1 on November 17, and offered to grant Calibre's claims just so that it may
nally settle all its unpaid accounts with Bayerphil. Sebastian wrote Bayerphil to con rm
Garcia's offer. 1 2 In reply, Bayerphil speci ed in its November 24, 1989 letter the additional
claims it granted and clarified the other claims:
xxx xxx xxx
[Gentlemen]:

We have your letter of November 22, 1989 with your request that we con rm or
deny the verbal offer of our Mr. Renato G. Garcia granting all your claims with us
per your letter of August 16, 1989.
Please be informed that we con rm that offer subject to the conditions hereunder
made explicit, to wit:
1. We will grant you a credit note for P33,127.26 referring to your Item #2 in
your letter dated August 16, 1989.

2. We will also grant you a credit note for P68,244.30 referring to your Item #3
in your above-named letter.

3. We will likewise grant the amount of P6,572.29 by CM to cover your Item

#4 in your above-named letter. We have excluded the free goods portion in
your claim. CaTSEA

4. We will further grant the sum of P2,119.61 by CM as claimed in Item #5 of

your above-named letter.

5. We will also grant P805.45 through a CM to complete our CM #4975 as per

your Item #6 in your said letter.

6. Items 7, 8 & 9 in your letter has [sic] been earlier granted by our CM Nos.
12160 and 5263.

7. We will also grant your additional volume rebate amounting to

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 P147,590.03 (see also CM #12250 — P320,849.42 VR earlier granted upon
full payment of the hereunder mentioned net payable to us).
8. Lastly, we will grant you under Item #11 of your August 16 letter, the sum
of P79,557.21 (credited free goods and volume rebate which shall be
applied against outstanding account are excluded).

All the foregoing are premised on our receipt of your full payment of the sum of
P934,086.92, in full and total settlement of your outstanding account after the
crediting of the eight (8) above-named concessions totaling to P338,016.15.
We strongly urge you to accept and adhere to the foregoing offer by remitting to
us the said sum of P934,086.92 through a bank demand draft on or before close
of business hours of December 8, 1989. Your failure to remit the said demand
draft within the allotted time shall effectively cancel our herein offer, and much to
our regret we shall be left with no other recourse but to protect our interests by
and through an appropriately more drastic legal action.

Yours faithfully,
BAYER PHILIPPINES, INC. 1 3

In his December 8, 1989 letter, Sebastian expressed discontent in Bayerphil's

refusal to credit his claims in full and underscored the alleged inaction of Bayerphil in
reconciling Calibre's accounts. 1 4
This was followed by a demand letter requiring Bayerphil to pay the sum of
P10,000,000.00 for the damages it had allegedly caused to Calibre. 1 5 Bayerphil replied,
reminding that Calibre owed it P1,272,103.07 as of December 31, 1989. 1 6
Accusing Bayerphil of maliciously breaching the distributorship agreement by
manipulating Calibre's accounts, withholding discounts and rebates due it, charging
unwarranted penalties, refusing to supply goods, and favoring the new
distributors/dealers to drive it out of business, Calibre, on March 14, 1990, led a suit
for damages, docketed as Civil Case No. 59258, before the Regional Trial Court (RTC)
of Pasig. 1 7 Calibre prayed for P8,000,000.00 actual damages, representing alleged
actual losses and pro ts; 1 8 P2,000,000.00 award as alleged damage to its goodwill
and business reputation; P3,500,000.00 as exemplary damages; and, attorney's fees of
P1,500,000.00.
In its Answer with Counterclaim, 1 9 Bayerphil denied its alleged wanton
appointment of other distributors, reasoning that it could not be faulted for a difference
in treatment between a paying dealer and a non-paying one. It maintained that Calibre
led the damage suit to avoid paying its overdue accounts. Considering that those
purchased on credit remained unpaid, Bayerphil had to refuse to further supply Calibre
with its products. aAEIHC

Bayerphil also averred that the dealership agreement provides that rebates and
discounts would only be granted if the previous purchases had been rst fully paid. It
denied that it failed to reconcile Calibre's accounts since it conferred with Calibre, and
even acceded to a number of deductions demanded by Calibre subject to the latter's
settlement of accounts. Bayerphil thus prayed for the collection of P1,272,103.07, with
interest of 14% per annum accruing daily and compounded monthly from the date of
default (as provided in the dealership agreement); P1,000,000.00 exemplary damages;
and, P200,000.00 attorney's fees and costs of suit.
Bayerphil also moved that Mario Sebastian and his wife Minda (Sebastians) be
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 impleaded as co-defendants, considering that the Sebastians bound themselves as
solidary debtors under the distributorship/dealership agreement. 2 0
Calibre opposed Bayerphil's motion to implead the Sebastians and moved to
strike out the counterclaim, reasoning that the spouses are not parties in its suit
against Bayerphil and thus are not the proper parties to the counterclaim. It stressed
that the issues between the damages suit it led and Bayerphil's counterclaim for
collection of money are totally unrelated. 2 1
On the other hand, Bayerphil contended that both causes of action arose from
the same contract of distributorship, and that the Sebastians' inclusion is necessary for
a full adjudication of Bayerphil's counterclaim to avoid duplication of suits. 2 2
In its October 24, 1990 Resolution, 2 3 the trial court rejected Calibre's arguments
and granted the motion to implead the Sebastians as co-defendants in the
counterclaim. The spouses then led their answer to Bayerphil's counterclaim, 2 4
adopting all the allegations and defenses of Calibre. They raised the issue that the
counterclaim against them is permissive, and since Bayerphil failed to pay the required
docket fees, the trial court has no jurisdiction over the counterclaim.
Ruling of the Regional Trial Court
On December 6, 1993, the trial court rendered judgment 2 5 favoring Calibre. It
held that Calibre was justi ed in withholding payment because there was deliberate
inaction/employment of dilatory tactics on the part of Bayerphil to reconcile accounts
making it liable for damages for 'abuse of rights' and 'unfair competition' under Articles
19, 20, and 28 of the Civil Code. 2 6 It opined that Bayerphil unfairly favored other
dealers and deliberately refused to supply the plaintiff with its products to drive it out
of business. As for Bayerphil's counterclaim, the court a quo adjudged that aside from
being unmeritorious for lack of valid demand, the counterclaim was permissive in
character. Therefore, it must be dismissed for Bayerphil's failure to pay the required
docket fees. The dispositive portion of the Decision states:
WHEREFORE, judgment is hereby rendered in favor of plaintiff and against
defendant Bayer Philippines, Inc., ordering said defendant to pay to plaintiff the
amounts of P8,000,000.00 as actual damages, plus P80,000.00 as attorney's
fees, plus costs. DEIHAa

The "Counter-Complaint" of defendant against the spouses Mario and

Minda Sebastian is DISMISSED, for defendant's failure to pay the required docket
and ling fees, considering that the counterclaim is permissive in character, and
not compulsory. Defendant's counterclaim is likewise DISMISSED for lack of
merit.

SO ORDERED. 2 7

Ruling of the Court of Appeals

The CA reversed the trial court's factual findings. In its July 31, 2002 Decision, the
CA found no reason to award Calibre anything as it has no cause of action against
Bayerphil. The CA said:
We agree with the appellant that nothing in the evidence suggests that it
deliberately and maliciously withheld approval of Calibre's claims. Indeed, the
correspondences between the parties show that either there was an honest
difference in the computation of the amount, and/or a variance in opinion as to
the validity of the claims. There is abundant evidence that Bayer actually
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 examined its records so much so that through a letter dated November 10, 1989, it
gave its explanation why it was denying certain claims. Bayer sent its
representatives to discuss the matter with Calibre's General Manager Mario
Sebastian. Bayer exerted efforts to arrive at a compromise with Calibre, and
expressed its willingness to grant several concessions to plaintiff-appellee
(Exhibit "N", Record, pp. 256-257)
Parenthetically, Bayer's offer of compromise cannot be taken as an
admission of liability on its part for the entire claim of appellee Calibre. In civil
cases, an offer of compromise is not an admission of any liability. The
compromise settlement of a claim or cause of action is not an admission that the
claim is valid, but merely admits that there is a dispute, and that the amount is
being paid just to buy peace. (Servicewide Specialists, Inc. vs. Court of Appeals,
G.R. No. 117728, June 26, 1996, 257 SCRA 643) After all, it is the policy of the law
to encourage compromises.
xxx xxx xxx

It must also be noted that plaintiff-appellee was not entitled to be the sole
distributor within its area of coverage for Bayer. Under number 3, Part III of the
latest Distributorship/Dealership Agreement (p. 231, Record) between the parties,
it was stipulated that unless otherwise agreed upon, formally and in writing,
plaintiff-appellee's appointment as distributor/dealer was to be on a non-
exclusive basis. The agreement expressly reserved Bayer's right to
appoint other distributors and/or dealers, in any number desired and
anywhere in the appointed area. There is no evidence of a formal and written
agreement appointing plaintiff-appellee as sole distributor in Pangasinan and
Tarlac. Hence, it cannot validly claim that Bayer caused its business injury by
appointing other dealers and distributors within its area.aDcHIS

Signi cantly, the Distributorship/Dealership Agreement also reserved to

both parties the right to cancel the agreement at any time. Under the
circumstances obtaining, Bayer was justi ed, in the exercise of sound business
decision, to stop supplying goods to plaintiff-appellee until the latter's
outstanding account had been finally settled. 2 8

Furthermore, the CA favored Bayerphil's counterclaim. It ruled that Bayerphil's

counterclaim was compulsory hence it need not pay the docket and ling fees. It noted
that it arose out of the same dealership agreement from which the claims of Calibre in
its complaint were likewise based. Finding that Calibre never denied that it owes
Bayerphil, and that the evidence of Bayerphil regarding the amount owed by Calibre was
unrebutted, the CA deemed justified the award of actual damages. Hence:
WHEREFORE, premises considered, the Decision of the lower court is
hereby REVERSED and SET ASIDE and a new one is entered ordering plaintiff-
appellee Calibre Traders and/or Mario Sison Sebastian and Minda Blanco
Sebastian to pay defendant-appellant the amount of One Million Two Hundred
Seventy-Two Thousand One Hundred Three Pesos and Seven Centavos
(P1,272,103.07) with interest thereon at the rate of 14% per annum compounded
from December 31, 1989 until fully paid.
Without pronouncement as to costs.
SO ORDERED. 2 9

In its December 19, 2003 Resolution, 3 0 the CA denied the motion for
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 reconsideration.
Issues

Based on the parties' contentions, the Court should now resolve the following
issues: a) Calibre's entitlement to an award of damages; and, b) the propriety of
granting relief to Bayerphil's counterclaim.
Our Ruling
No form of damages can be awarded to
Calibre for it miserably failed to prove
its right to the reliefs it sought.
While only questions of law are reviewed in petitions for review on certiorari, the
Court shall delve into the factual milieu of this case in view of the con icting ndings of
facts by the trial court and the CA. 3 1 The question arises whether Calibre has a cause
of action against Bayerphil. The records before us though, highlight the lack of it.
The lower court's ruling against the latter is premised on a nding of malice or
bad faith, i.e., a nding of an abuse of right on Bayerphil's part in exercising inimical acts
that prejudiced Calibre's business. However, we agree with the CA's conclusion that
there is no adequate proof that Bayerphil was guilty of abusing its rights. "[G]ood faith
is presumed and that the burden of proving bad faith rests upon a party alleging the
same." 3 2 "In civil cases, the law requires that the party who alleges a fact and
substantially asserts the a rmative of the issue has the burden of proving it." 3 3 This is
where Calibre failed. DTSaHI

As regards the allegations of inaction/refusal to reconcile accounts, accounts

manipulation by withholding discounts/rebates, imposition of penalties, and refusal to
supply goods, the records reveal that Bayerphil never ignored the request for accounts
reconciliation. Bayerphil acted on Calibre's letter and sent its representatives to meet
with Sebastian. It wrote a letter answering point-by-point why some demands for
discounts and rebates had to be refused. Bayerphil's second letter, wherein some
claims were additionally granted, was on Bayerphil's part an act of concession in its
desire to be paid since Calibre remained adamant in not paying its accounts. If ever
Calibre found the second letter to be apparently inconsistent with the rst letter, bad
faith cannot be immediately imputed to Bayerphil since the latter is not precluded from
making prompt corrections in its computations.
We cannot subscribe to the accusation of accounts manipulation. As the CA had
found, this matter involves an "honest difference in the computation of the amount,
and/or a variance in opinion as to the validity of the claims." Moreover, Bayerphil could
not be blamed for disallowing some of the claimed discounts and rebates. Under the
latest dealership agreement and the volume rebate agreement executed, payment is a
precondition for the discounts and rebates. 3 4 Bayerphil, to minimize further losses,
was justi ed in stopping the supply of its products when its dealer still had outstanding
accounts. Lastly, Calibre did not specify during the trial the unwarranted penalties
Bayerphil had allegedly imposed. SCDaHc

Neither do we nd any abuse in Bayerphil's exercise of appointing other

distributors within Calibre's area. The fact that the distributors appointed were Calibre's
former customers or salesmen or their relatives does not prove any ill intention to drive
Calibre out of business. Notably, the distributorship/dealership agreement was on a
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 non-exclusive basis. Bayerphil merely accorded the same business opportunities to
others to better themselves. Naturally, an increase in the number of distributors in an
area will entail corresponding decline in volume sales of the individual distributors. Even
then Bayerphil's assistant sales manager for internal administration Ofelia Castillo, who
named during the trial the other distributors Bayerphil appointed in Pangasinan, not
only acknowledged that Bayerphil's former salesmen had resigned to be dealers, but
also admitted that competition is part of business risk:
Q You said in Manaoag, this Rosalyn Agricultural Supply was there as early
as 1980 is that correct?

A At about.
Q But somehow, it was a distributor for only 2 or 3 years?
A Yes, shortly, unlike those dealers who have several years.
Q This Samson in Urdaneta was also short lived?

A It began in the area and operating until now.

Q Would you know when Samson began as a distributor?
A Between the period '82 and '85.
Q This San Carlos Agricultural Center owned by William?
A It is owned by Ricardo Rule. There are two operating in San Carlos.

Q There are two dealers operating in San Carlos?

A Yes, sir.
Q How many in Urdaneta?
A Calibre and Samson. Only those two.
Q You would admit Mrs. Castillo that the Bayer Phils. Salesmen of agro
chemicals are experienced in the products of Bayer Philippines?
A Having worked and dealt with Bayer chemicals, with the training they got, I
suppose they get that experience. CTAIDE

Q And this experience would be invaluable in their distributorship?

A Valuable.
Q Very valuable?
A Very valuable.
Q And in fact, you know of many salesmen of Bayer Phils. who resigned?
A Yes, sir.

Q Because the chances of getting more is there if you are an independent

distributor?

A Yes, sir.
Q In fact, this is true not only in Pangasinan but all over the country, Mrs.
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 Castillo?
A Yes, because we have mentioned one in Cotabato, in San Jose, Nueva Ecija,
in Tuguegarao.
Q And from the records that you mentioned earlier on, it would seem some of
them succeeded beautifully and some closed shop afterwards?
A Yes, sir.
Q It is just a matter of luck and yes, business luck?
A Yes, sir. 3 5

Incidentally, under actual or compensatory damages, indemni cation comprises

not only the value of the loss suffered, but likewise the pro ts the obligee failed to
obtain. 3 6 In its attempt to support this claim for compensatory damages, Calibre,
based its computation of more or less a loss of P8 million on a 10-year sales
projection. 3 7 But as could be gleaned from Sebastian's testimony, there is no solid
evidence upon which this sales projection was based:
Q You prepared a projection of your total sales for another ten (10) years
from 1989.
A Yes, sir.

Q In the preparation of your projection, I assume that you based it on the

records of your sales of previous years?

A No.
Q You did not in preparing your projection of sales to determine your alleged
lost profits refer at all to your previous records?
ISDHEa

A No.
Q What then was the basis of your projection?
A The basis of my projection is, as one of the valued clients of Bayer
Philippines which is a member of the World Club, we are in the bracket of
10 million per year sales.
Q So you only had capability to sell?
A Yes.
Q Have you ever sold before in the 10 million per year sales?

A Yes.
Q That is why I am asking you, you did not at all base your assumption on
your prior sales record of Bayer Philippines products?

A I cannot possibly base it on the past sales. Cost of money is going up so I

based it on a bracket that Bayer Philippines put us which is in the 10
million per year sales that is projected for another 10 years because we are
the valued clients of Bayer.
Q You also projected your profits for the next 10 years?

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 A Yes, sir.
Q And you did not consider the pro ts from the Bayer business of the prior
years in making your projection?

A Yes, sir.
Q I assume then that in determining your pro ts for the previous years you
used the gures of the summary Exhibit O as to your sales from 1977 to
1989?

A No, sir.
Q You did not refer at all to your profits for the previous years?
A No, sir.
Q Why did you not refer to your previous pro ts to determine your projection
of probable profits?
A We projected our projection based on our being a valued client of Bayer
Philippines, and based on the contract of the minimum 5% profit. 3 8
AEcTCD

To justify a grant of actual or compensatory damages, the amount of loss must

be proved with a reasonable degree of certainty, based upon competent proof and the
best evidence obtainable by the injured party. 3 9 The projected sum of P10 million sales
cannot thus be the proper base in computing actual damages. Calibre computed its
lost income based only on its capability to sell around P10 Million, not on the actual
income earned in the past years to properly compute the average income/profit.
At any rate, since Calibre had no cause of action at all against Bayerphil, there can
be no basis to award it with damages.
Bayerphil's counterclaim is permissive,
but the trial court should have given it
the opportunity to pay the docket fees
since it did not avoid paying said fees.
"A compulsory counterclaim is any claim for money or other relief, which a
defending party may have against an opposing party, which at the time of suit arises
out of, or is necessarily connected with, the same transaction or occurrence that is the
subject matter of plaintiff's complaint. It is compulsory in the sense that it is within the
jurisdiction of the court, does not require for its adjudication the presence of third
parties over whom the court cannot acquire jurisdiction, and will be barred . . . if not set
up in the answer to the complaint in the same case. Any other claim is permissive." 4 0 "
[The] Court has already laid down the following tests to determine whether a
counterclaim is compulsory or not, to wit: (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 defendant's claims, absent the compulsory counterclaim rule? (3) Will
substantially the same evidence support or refute plaintiff's claim as well as the
defendant's counterclaim? and (4) Is there any logical relation between the claim and
the counterclaim, such that the conduct of separate trials of the respective claims of
the parties would entail a substantial duplication of effort and time by the parties and
the court?" 4 1 The fourth test is the 'compelling test of compulsoriness'. 4 2
Bayerphil's suit may independently proceed in a separate action. Although the
rights and obligations of the parties are anchored on the same contract, the causes of
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 action they led against each other are distinct and do not involve the same factual
issues. We nd no logical relationship between the two actions in a way that the
recovery or dismissal of plaintiff's suit will establish a foundation for the other's claim.
The counterclaim for collection of money is not intertwined with or contingent on
Calibre's own claim for damages, which was based on the principle of abuse of rights.
Both actions involve the presentation of different pieces of evidence. Calibre's suit had
to present evidence of malicious intent, while Bayerphil's objective was to prove
nonpayment of purchases. The allegations highlighting bad faith are different from the
transactions constituting the subject matter of the collection suit. Respondent's
counterclaim was only permissive. Hence, the CA erred in ruling that Bayerphil's claim
against the petitioners partakes of a compulsory counterclaim.
Be that as it may, the trial court was incorrect in dismissing Bayerphil's
counterclaim for non-payment of docket fees.
All along, Bayerphil has never evaded payment of the docket fees on the honest
belief that its counterclaim was compulsory. It has always argued against Calibre's
contention that its counterclaim was permissive ever since the latter opposed
Bayerphil's motion before the RTC to implead the Sebastian spouses. Lastly, Bayerphil's
belief was reinforced by Judge Claravall's October 24, 1990 Resolution when she
denied Calibre's motion to strike out Bayerphil's counterclaim. Thus: DEICaA

With respect to the motion to strike out the counterclaim, the Rejoinder and
Reply of CALIBRE mentioned two reasons to support it. These are: 1) that the
counterclaim is not against the opposing party only, and 2) that the plaintiff's
claim against the defendant is totally unrelated to the latter's claim against the
Sebastian spouses because they are "not the same."
To resolve the issues abovementioned, the elements of a
compulsory counterclaim are thus given:

A counterclaim is compulsory and is considered barred if

not set up where the following circumstances are present: 1) that
it arises out of the, or is necessarily connected with the
transaction or occurrence that is the subject matter of the
opposing party's claim, 2) that it does not require for its
adjudication the presence of third parties of whom the court
cannot acquire jurisdiction, and 3) that the court has jurisdiction
to entertain the claim. ( Javier vs. IAC, 171 SCRA 605)

The provisions of Section 8, Rule 6 must necessarily be mentioned also. To

wit:

Sec. 8, Rule 6.Counterclaim or cross-claim in the answer. — The

answer may contain any counterclaim or crossclaim which a party may
have at the time against the opposing party or a co-defendant 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.

The rules and jurisprudence do not require that the parties to the
counterclaim be the original parties only. In fact, the presence of third parties is
allowed, the only provision being their capacity to be subjected under the court's
jurisdiction. As regards the nature of the claims of the parties, neither is it required
that they be of the same nature, only that they arise from the same transaction or
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 occurrence. 4 3

It cannot be gainsaid that the emerging trend in the rulings of this Court is to
afford every party litigant the amplest opportunity for the proper and just determination
of his cause, free from the constraints of technicalities. 4 4 Rules on the payment of
filing fees have already been relaxed:
1. It is not simply the ling of the complaint or appropriate initiatory
pleading, but the payment of the prescribed docket fee, that vests a trial court with
jurisdiction over the subject-matter or nature of the action. Where the ling of
the initiatory pleading is not accompanied by payment of the docket
fee, the court may allow payment of the fee within a reasonable time
but in no case beyond the applicable prescriptive or reglementary
period.
2. The same rule applies to permissive counterclaims, third-
party claims and similar pleadings, which shall not be considered led
until and unless the ling fee prescribed therefor is paid. The court may
also allow payment of said fee within a reasonable time but also in no
case beyond its applicable prescriptive or reglementary period. AcHEaS

3. Where the trial court acquires jurisdiction over a claim by the ling
of the appropriate pleading and payment of the prescribed ling fee but,
subsequently, the judgment awards a claim not speci ed in the pleading, or if
speci ed the same has been left for determination by the court, the additional
ling fee therefor shall constitute a lien on the judgment. It shall be the
responsibility of the Clerk of Court or his duly authorized deputy to enforce said
lien and assess and collect the additional fee. 4 5

It is a settled doctrine that "although the payment of the prescribed docket fees
is a jurisdictional requirement, its non-payment . . . should not result in the automatic
dismissal of the case provided the docket fees are paid within the applicable
prescriptive period." 4 6 "The prescriptive period therein mentioned refers to the period
within which a speci c action must be led. It means that in every case, the docket fee
must be paid before the lapse of the prescriptive period. Chapter 3, Title V, Book III of
the Civil Code is the principal law governing prescription of actions." 4 7
In accordance with the aforementioned rules on payment of docket fees, the trial
court upon a determination that Bayerphil's counterclaim was permissive, should have
instead ordered Bayerphil to pay the required docket fees for the permissive
counterclaim, giving it reasonable time but in no case beyond the reglementary period.
4 8 At the time Bayerphil led its counter-claim against Calibre and the spouses
Sebastian without having paid the docket fees up to the time the trial court rendered its
Decision on December 6, 1993, Bayerphil could still be ordered to pay the docket fees
since no prescription has yet set in. 4 9 Besides, Bayerphil should not suffer from the
dismissal of its case due to the mistake of the trial court.
Considering the foregoing discussion, we nd no need to remand the case to the
trial court for the resolution of Bayerphil's counterclaim. In Metromedia Times
Corporation v. Pastorin, 5 0 we discussed the rule as to when jurisdiction by estoppel
applies and when it does not, thus:
Lack of jurisdiction over the subject matter of the suit is yet another matter.
Whenever it appears that the court has no jurisdiction over the subject matter, the
action shall be dismissed (Section 2, Rule 9, Rules of Court). This defense may be
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 interposed at any time, during appeal (Roxas vs. Rafferty, 37 Phil. 957) or even
after nal judgment (Cruzcosa vs. Judge Concepcion, et al., 101 Phil. 146) . Such
is understandable, as this kind of jurisdiction is conferred by law and not within
the courts, let alone the parties, to themselves determine or conveniently set aside.
In People vs. Casiano (111 Phil. 73, 93-94), this Court, on the issue of estoppel,
held:

"The operation of the principle of estoppel on the question of

jurisdiction seemingly depends upon whether the lower court actually had
jurisdiction or not. If it had no jurisdiction, but the case was tried and
decided upon the theory that it had jurisdiction, the parties are not barred,
on appeal, from assailing such jurisdiction, for the same 'must exist as a
matter of law, and may not be conferred by consent of the parties or by
estoppel' (5 C.J.S., 861-863). However, if the lower court had jurisdiction,
and the case was heard and decided upon a given theory, such, for
instance, as that the court had no jurisdiction, the party who induced it to
adopt such theory will not be permitted, on appeal, to assume an
inconsistent position — that the lower court had jurisdiction. Here, the
principle of estoppel applies. The rule that jurisdiction is conferred by law,
and does not depend upon the will of the parties, has no bearing thereon."
caCTHI

In this case, the trial court had jurisdiction over the counterclaim although it
erroneously ordered its automatic dismissal. As already discussed, the trial court
should have instead directed Bayerphil to pay the required docket fees within a
reasonable time. Even then, records show that the trial court heard the counterclaim
although it again erroneously found the same to be unmeritorious. Besides, it must also
be mentioned that Bayerphil was lulled into believing that its counterclaim was indeed
compulsory and thus there was no need to pay docket fees by virtue of Judge
Claravall's October 24, 1990 Resolution. Petitioners also actively participated in the
adjudication of the counterclaim which the trial court adjudge to be unmeritorious.
However, we are more inclined to a rm the CA's ruling anent Bayerphil's
counterclaim. It held thus:
What remains to be determined now is whether or not defendant-appellant
is entitled to its counterclaim. On this score, We note that plaintiff-appellee never
denied that it still owes defendant-appellant for purchases it had made. Bayer had
already recognized that Calibre was entitled to a volume rebate for the years
1988-1989 in the amount of P320,849.42 on paid purchases, and a 5% prompt
payment rebate of P63,196.06 in view of the application of the volume rebate to
Calibre's outstanding balance, or a total of P384,045.48, as stated in Bayer's letter
dated November 10, 1989 (Exhibit "10", Record, pp. 373-375) earlier quoted.

Since no evidence was presented by plaintiff-appellee to rebut the

correctness of Bayer's computation. We therefore assume it to be correct.
Moreover, We note that the stocks Bayer had withdrawn per plaintiff-appellee's
request under Claims 10 and 11 amounting to P124,493.28 had been credited to
plaintiff-appellee as shown by the Statement of Account (Exhibit "4", Record, pp.
366-367) which shows that Calibre's outstanding indebtedness as of December
31, 1989 was One Million Two Hundred Seventy-Two Thousand One Hundred
Three Pesos and Seventeen Centavos (P1,272,103.17) (Exhibit "4-E", p. 367). We
also note that the Distributorship/Dealership Agreement entered into by the
parties provides that default in payment on any account by the
DISTRIBUTOR/DEALER when and as they fall due shall entitle BAYERPHIL to
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 interests thereon at the then maximum lawful interest rates which in no case shall
be lower than twelve per cent (12%) per annum for accounts fully secured by a
mortgage on realty or fourteen per cent (14%) per annum when otherwise
unsecured. (Exhibit "1-F", Record, p. 328). 5 1

WHEREFORE , the July 31, 2002 Decision of the Court of Appeals in CA-G.R. CV
No. 45546 is AFFIRMED . Considering that the counterclaim is permissive, respondent
Bayer Philippines, Inc. is ORDERED to pay the prescribed docket fees with the Regional
Trial Court of Pasig City within fifteen (15) days from receipt of this Decision.
SO ORDERED . DaAISH

Corona, C.J., Velasco, Jr., Leonardo-de Castro and Perez, JJ., concur.

Footnotes

1.Rollo, pp. 12-67.

2.CA rollo, pp. 399-412; penned by Associate Justice Portia Aliño-Hormachuelos and concurred
in by Associate Justices Elvi John S. Asuncion and Edgardo F. Sundiam.

3.Id. at 547-548.
4.Calibre began as a dealer for Bayerphil in 1977.

5.Records, pp. 231-235.

6.Id. at 336-367; TSN Vidal Lingad, November 28, 1991, p. 15. The last payment of Calibre was
in March 1989 in the amount of P216,070.80.

7.TSN Mario Sebastian, July 31, 1991, pp. 21-22.

8.Records, pp. 241-242.

9.Id. at 243, 245, and 247.

10.Id. at 248-250.

11.Id. at 376.
12.Id. at 377.

13.Id. at 378-379.
14.Id. at 380-381.

15.Id. at 382. Dated January 15, 1990.

16.Id. at 383. Dated March 22, 1990.

17.Raffled off to Branch 69.

18.Calibre's computed sales projection in 10 years from 1989. It was based on the minimum
5% profit and the capability to sell P10,000,000/year (thus being inducted by Bayerphil
as a member of the "Multimillionaire's Club" for falling into such sales bracket for a
number of years), Records, p. 259, TSN Mario Sebastian, July 31, 1991, pp. 5-7.

19.Records, pp. 39-54.

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 20.Records, pp. 36-38.
21.Id. at 108-114, 125-128.

22.Id. at 116-124; 132-134.

23.Id. at 135-136; penned by Judge Graduacion A. Reyes-Claravall.

24.Id. at 140-144; penned by Judge Willelmo Fortun.

25.Id. at 516-530.
26.The trial court invoked the following provisions:

ART. 19. Every person must, in the exercise of his rights and in the performance of his
duties, act with justice, give everyone his due, and observe honesty and good faith.
Art. 20. Every person who contrary to law, wilfully or negligently causes damage to
another, shall indemnify the latter for the same.

Art. 28. Unfair competition in agricultural, commercial or industrial enterprises or in labor

through the use of force, intimidation, deceit, machination or any other unjust,
oppressive or highhanded method shall give rise to a right of action by the person who
thereby suffers damage.
27.Records, p. 530.

28.CA rollo, pp. 408-409.

29.Id. at 411-412.

30.Supra note 3.

31.Ontimare, Jr. v. Elep, G.R. No. 159224, January 20, 2006, 479 SCRA 257, 265. The findings
of fact of the Court of Appeals are conclusive and binding on the parties and are not
reviewable by this Court, unless the case falls under any of the following recognized
exceptions:

(1) When the conclusion is a finding grounded entirely on speculation, surmises and
conjectures;
(2) When the inference made is manifestly mistaken, absurd or impossible;

(3) Where there is a grave abuse of discretion;

(4) When the judgment is based on a misapprehension of facts;

(5) When the findings of fact are conflicting;

(6) When the Court of Appeals, in making its findings, went beyond the issues of the
case and the same is contrary to the admissions of both appellant and appellee;
(7) When the findings are contrary to those of the trial court;

(8) When the findings of fact are conclusions without citation of specific evidence on
which they are based;
(9) When the facts set forth in the petition as well as in the petitioners' main and reply
briefs are not disputed by the respondents; and

(10) When the findings of fact of the Court of Appeals are premised on the supposed
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 absence of evidence and contradicted by the evidence on record.

32.Martires v. Cokieng, 492 Phil. 81, 90 (2005), citing Barons Marketing Corp. v. Court of
Appeals, 349 Phil. 769, 778 (1998).
33.Spouses Hutchison v. Buscas, 498 Phil. 257, 261 (2005).

34.Pertinent provisions are the following:

Under the Dealership Agreement:

DISTRIBUTOR'S/DEALER'S DISCOUNT

xxx xxx xxx

c) An additional five percent (5%) discount, hereinafter referred to as CASH DISCOUNT,
based on BAYERPHIL'S then existing listed price less BASIC and TURNOVER
DISCOUNTS in cases of full CASH BEFORE OR ON DELIVERY payment on purchases.

xxx xxx xxx

CREDIT LINE, TERM AND CONDITIONS THEREOF

xxx xxx xxx

(8) BAYERPHIL agrees to grant the DISTRIBUTOR/DEALER a prompt payment rebate
equivalent to three percent (3%) of the gross invoiced amount after BASIC and
TURNOVER DISCOUNTS provided that the net amount of the invoice shall have been
paid on or before the 30th day from and after invoice date and provided further that no
other invoiced or debited accounts are then outstanding, overdue, and unpaid.
xxx xxx xxx

Under the Volume Rebate and Premium Volume Rebate Agreement:

xxx xxx xxx

I. BASIC VOLUME REBATE

PURCHASE (BRACKET) PERCENTAGE REBATE

P4,500,000.01 to P5,000,000.00 Ten Percent (10%) on total paid net

volume purchases
P3,750,000.01 to P4,500,000.00 Eight Percent (8%) on total paid net
volume purchases
P2,750,000.01 to P3,750,000.00 Six Percent (6%) on total paid net
volume purchases
P1,500,000.01 to P2,750,000.00 Four Percent (4%) on total paid net
volume purchases
up to P1,500,000.00 Two Percent (2%) on total paid net
volume purchases

xxx xxx xxx

e. The percentage bracket attained shall be reckoned on total purchases regardless of

the fact of payment provided that no rebate shall be allowed on any invoiced or debited
purchase where the invoice and/or debit note is not fully paid.
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 xxx xxx xxx
g. . . . In cases where all delivered and/or invoiced purchases dated on or before June 30,
1989 shall have been earlier paid in full, BAYERPHIL guarantees to pay accrued rebates
within 15 days from receipt of DISTRIBUTOR'S claim therefore. . . .

xxx xxx xxx

Debit Notes for erroneous billings or price adjustments, Delivery Notes and Invoices
appertaining to the period shall not be included in the computation of the actual volume
rebate unless fully paid by July 30, 1989 but 1/2 of said unpaid accounts shall be
credited and included in the succeeding annual period for this volume rebates.
35.TSN Ofelia Castillo, September 4, 1991, pp. 20-22.

36.CIVIL CODE, Article 2200.

37.Records, p. 259.
38.TSN Mario Sebastian, July 31, 1991, pp. 5-7.

39.Philippine National Bank v. RBL Enterprises, G.R. No. 149569, May 28, 2004, 430 SCRA 299,
309, citing Integrated Packaging Corporation v. Court of Appeals, 388 Phil. 835, 846
(2000).

40.Cruz-Agana v. Judge Santiago-Lagman, 495 Phil. 188, 193-194 (2005), citing Rule 6, Section
7 of the Rules of Court.

41.Sandejas v. Ignacio, Jr., G.R. No. 155033, December 19, 2007, 541 SCRA 61, 77, citing Tan v.
Kaakbay Finance Corporation, 452 Phil. 637, 646-647 (2003), Intestate Estate of Dalisay
v. Hon. Marasigan, 327 Phil. 298, 301 (1996) and Quintanilla v. Court of Appeals, 344
Phil. 811, 819 (1997).

42.Alday v. FGU Insurance Corporation, 402 Phil. 962, 972 (2001).

43.Records, p. 136. Emphasis supplied.

44.Peñoso v. Dona, G.R. No. 154018, April 3, 2007, 520 SCRA 232, 240.

45.Sun Insurance Office, Ltd. v. Judge Asuncion, 252 Phil. 280, 291-293 (1989). Emphasis
supplied.

46.Alday v. FGU Insurance Corporation, supra note 42 at 975 and Suson v. Court of Appeals,
343 Phil. 816, 827 (1997).
47.Central Bank of the Philippines v. Court of Appeals, G.R. Nos. 88353 and 92943, May 8,
1992, 208 SCRA 652, 683.

48.Alday v. FGU Insurance Corporation, supra note 42 at 976.

49.N.B. Since Bayerphil's claim for sum of money was based on a written contract, it has 10
years to file a claim for collection of money under Art. 1144 (1) of the Civil Code from the
time Calibre defaulted in its payments beginning 1989.

50.503 Phil. 288, 303-304 (2005), citing Lozon v. National Labor Relations Commission, 310
Phil. 1 (1995).
51.Rollo, pp. 203-204.

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