Below is a comprehensive discussion of Rule 17, Section 2 of the Rules of Court (2019 Amendments), focusing on the dismissal upon motion by the plaintiff and its effect on an existing counterclaim under Philippine procedural law. I have structured this presentation into key points to ensure clarity and thoroughness.

1. Overview of Dismissal of Actions under Rule 17

Rule 17 of the Revised Rules of Court governs the dismissal of actions. It recognizes two primary modes by which a plaintiff may seek dismissal of his or her own case:

Section 1 (Dismissal by Notice) – A plaintiff’s absolute right to dismiss before the service of an answer or a motion for summary judgment;
Section 2 (Dismissal upon Motion) – Dismissal after the defendant has served an answer or a motion for summary judgment, and thus requires court approval on terms and conditions deemed proper.

The topic at hand—the effect of dismissal upon an existing counterclaim—is primarily governed by Section 2.

2. Text of Rule 17, Section 2 (2019 Rules of Court)

Below is the most relevant portion of Rule 17, Section 2:

Section 2. Dismissal upon Motion of Plaintiff. – Except as provided in the preceding section, a complaint shall not be dismissed at the plaintiff’s instance save upon approval of the court and upon such terms and conditions as the court deems proper. If a counterclaim has been pleaded by a defendant prior to the service upon him or her of the plaintiff’s motion for dismissal, the dismissal shall be limited to the complaint. The dismissal shall be without prejudice to the right of the defendant to prosecute his or her counterclaim in a separate action unless within fifteen (15) calendar days from notice of the motion he or she manifests his or her preference to have his or her counterclaim resolved in the same action. If the defendant does not manifest such preference within the said period, the counterclaim shall be dismissed without prejudice. In either case, the dismissal is without prejudice unless otherwise specified by the court.

Important points from this text:

Dismissal of the complaint generally does not automatically carry with it the dismissal of the counterclaim;
The defendant has options on how to proceed with his or her counterclaim;
The dismissal is without prejudice to the defendant filing or prosecuting the counterclaim, unless certain steps or preferences are manifested (or unless the court specifies otherwise).

3. Purpose and Rationale

Balancing Plaintiff’s Right to Dismiss vs. Defendant’s Right to Be Heard
When a plaintiff decides to stop pursuing a case, courts also ensure that a defendant is not deprived of his or her existing counterclaims or left without a forum for redress. Thus, a counterclaim survives the dismissal of the main case unless the defendant opts otherwise.
Avoiding Multiple Suits
If the defendant’s counterclaim is intrinsically linked to the main action or if substantial effort has already been expended, it is more efficient for the court (and less burdensome on the parties) to allow the counterclaim to continue in the same proceeding—unless the defendant prefers to file it separately.
Preventing Abuse
A plaintiff should not be able to unilaterally dismiss an action if doing so would unfairly prejudice the defendant, especially if the defendant’s counterclaim is close to resolution, or if the plaintiff repeatedly dismisses and refiles to harass the defendant.

4. Stages When Plaintiff May Move to Dismiss and the Effect on Counterclaims

A. Before Answer or Motion for Summary Judgment (Section 1)

The plaintiff typically files a “notice of dismissal” rather than a motion.
No counterclaim could yet have been served because the defendant’s answer has not been filed (though, theoretically, a defendant might have initiated a special scenario, but practically, a counterclaim arises in an answer).
The dismissal is as a matter of right, without need of court approval.
Effect on counterclaim: Since no counterclaim has usually been pleaded, there is no direct effect.

B. After the Defendant Has Served an Answer or Motion for Summary Judgment (Section 2)

Now, the plaintiff must file a motion for dismissal, subject to court approval and on such terms as the court deems proper.
If the defendant has already pleaded a counterclaim before the plaintiff’s motion is served, special rules apply to protect the defendant’s right to that counterclaim.

5. Detailed Rules on the Effect of Dismissal on Existing Counterclaims (Section 2)

Counterclaim Remains Pending Unless Defendant Consents to Dismissal
- If a counterclaim has been pleaded prior to service of the motion to dismiss, the rule states that “the dismissal shall be limited to the complaint.”
- By default, the counterclaim is not automatically dismissed. It remains pending for resolution, unless the defendant chooses otherwise.
Defendant’s Options
- The defendant is given 15 calendar days from notice of the plaintiff’s motion for dismissal to manifest a preference to have the counterclaim resolved in the same action (i.e., remain under the existing case).
- If the defendant fails to manifest such preference within the 15-day period, the counterclaim is deemed dismissed without prejudice, meaning the defendant may refile the counterclaim in a separate action.
Dismissal “Without Prejudice,” Unless Specified
- The general rule: Dismissal of the complaint under Section 2 is without prejudice, unless the court states otherwise (e.g., imposes it as a dismissal with prejudice).
- Similarly, if a defendant does not opt to pursue the counterclaim in the same action, or if the court decides to dismiss everything, the defendant’s counterclaim is also dismissed without prejudice. The defendant is therefore free to initiate a separate action to pursue his or her claim.
Court’s Discretion on Terms and Conditions
- Even if the motion is granted, the court may impose terms—such as payment of attorney’s fees, litigation expenses, or costs—to address any prejudice to the defendant or to discourage vexatious dismissals and refilings.

6. Distinction Between Compulsory and Permissive Counterclaims

While Rule 17, Section 2 does not explicitly distinguish between compulsory and permissive counterclaims in the text of the dismissal rule, in practice:

Compulsory Counterclaims
- Arise out of or are necessarily connected with the subject matter of the plaintiff’s complaint.
- If the defendant wishes to press a compulsory counterclaim, the more logical approach is to continue within the same proceeding.
- If the case is dismissed and the defendant does not manifest a preference within the 15-day period, the compulsory counterclaim is dismissed without prejudice; the defendant, strictly speaking, may still refile it, but it is generally in the defendant’s best interest to continue it in the same forum so that issues are resolved together.
Permissive Counterclaims
- Do not arise out of the transaction or occurrence that is the subject matter of the plaintiff’s claim.
- The defendant might more readily choose to bring such permissive counterclaims in a separate suit if it is not prejudicial to do so.
- The same 15-day rule applies under Section 2: if the defendant does not opt to continue, the permissive counterclaim is dismissed without prejudice.

7. Jurisprudential Guidance

Philippine Supreme Court rulings underscore the principle that:

A defendant’s counterclaim—especially if it states a valid cause of action—should not be adversely affected by a unilateral act of the plaintiff (i.e., motion to dismiss the main claim).
The court must ensure the defendant’s right to be heard is protected.
If the defendant elects not to proceed with the counterclaim or fails to manifest a preference within the period set by the Rules, the counterclaim is likewise dismissed without prejudice.

Illustrative case discussions often revolve around the balancing test: if substantial proceedings have already been conducted and the defendant has a meritorious counterclaim, the court will typically allow the counterclaim to proceed unless the defendant consents or requests a separate filing.

8. Practical Tips and Strategy for Litigants

For the Plaintiff
- Before moving for dismissal (especially after an Answer is filed), assess whether the defendant might pursue a counterclaim.
- Be prepared for a scenario where the defendant will proceed solely on its counterclaim—turning the “defendant” effectively into the “plaintiff in the counterclaim,” and you might still have to litigate the case.
- Consider the possibility the court may impose costs or conditions for dismissal.
For the Defendant
- Upon receiving the plaintiff’s motion to dismiss, promptly decide whether to continue litigating your counterclaim in the same action or to refile it in a separate action.
- File a timely manifestation (within 15 days) to avoid having your counterclaim automatically dismissed without prejudice.
- Weigh litigation expenses, convenience, and strategic considerations (e.g., is your counterclaim strongly tied to the same facts or evidence as the main complaint, or is it better pursued on its own?).
For the Court
- Exercise discretion to ensure that neither party is unduly prejudiced.
- Impose terms if necessary to do equity—particularly where the defendant has already incurred significant expenses in defending and prosecuting a counterclaim.

9. Summary of Core Principles

Court Approval Required: After an answer or motion for summary judgment is filed, the plaintiff’s dismissal is not a matter of right; it requires court approval (Rule 17, Sec. 2).
Counterclaim Survives: If filed before the motion is served, the counterclaim remains unless the defendant chooses otherwise. Dismissal of the complaint does not automatically dismiss the counterclaim.
15-Day Window: The defendant must manifest within 15 days if he or she prefers to continue the counterclaim in the same case; otherwise, it is deemed dismissed (but without prejudice).
Without Prejudice, Generally: The default is that the dismissal of the complaint—and the counterclaim if not pursued—is without prejudice, unless the court specifies that it is with prejudice.
Terms and Conditions: The court may impose conditions (payment of costs, attorney’s fees, etc.) to protect the defendant from undue inconvenience or expense.

10. Conclusion

Under Rule 17, Section 2 of the Philippine Rules of Court, a plaintiff’s motion to dismiss after the filing of an answer or motion for summary judgment does not automatically terminate any counterclaim raised by the defendant. The defendant’s counterclaim is preserved, and the defendant is given a specific window of time (15 days) to decide whether to litigate the counterclaim in the same action or to proceed in a separate case. This mechanism protects the defendant’s substantive rights, prevents abuse of dismissals by the plaintiff, and upholds efficiency and fairness in judicial proceedings.

In practice, both plaintiffs and defendants must carefully weigh their strategies and timely comply with procedural requirements. Ultimately, courts retain broad discretion to impose terms that serve the interests of justice and prevent prejudice to the parties.