Below is a comprehensive discussion of counterclaims under the 2019 Amendments to the 1997 Rules of Civil Procedure in the Philippines (particularly Rule 6). This covers (1) the nature and kinds of counterclaims; (2) their classification as compulsory or permissive; (3) the effect on a counterclaim when the main complaint is dismissed; and (4) the effect if a compulsory counterclaim is not answered.

1. Definition and Nature of Counterclaims

A counterclaim is a claim that a defending party may have against an opposing party. Typically, the counterclaim is pleaded by the defendant against the plaintiff, but there can also be counterclaims against a co-defendant or a third-party defendant under certain circumstances (e.g., when the rules on cross-claims or third-party claims apply).

Legal Basis: Section 6, Rule 6 of the 2019 Amendments to the Rules of Civil Procedure states:

“A counterclaim is any claim which a defending party may have against an opposing party. It may be compulsory or permissive…”

2. Kinds of Counterclaims

A. Compulsory Counterclaim

Definition
A counterclaim is compulsory if it arises out of or is necessarily connected with the transaction or occurrence that is the subject matter of the opposing party’s claim, and does not require the presence of third parties over whom the court cannot acquire jurisdiction. In essence, it is a claim that, by the nature of the parties’ controversy, should be resolved together with the principal cause of action to avoid multiplicity of suits.
Characteristics and Tests to Determine Compulsory Counterclaim
The Supreme Court has enumerated common tests for determining whether a counterclaim is compulsory:
- It arises out of the same transaction or occurrence subject of the plaintiff’s complaint.
- It does not require for its adjudication the presence of third parties beyond the court’s jurisdiction.
- It is cognizable by the regular courts of justice (i.e., within the same court’s jurisdiction over the subject matter).
- There is a logical connection between the claim in the complaint and the counterclaim.
- The evidence or issues substantially overlap.
Effect of Failure to Plead a Compulsory Counterclaim
As a general rule, a compulsory counterclaim not set up in the same action is barred forever. This is due to the policy of discouraging multiple suits and encouraging final resolution of all related claims in a single action.
Formal Requirements under the 2019 Amendments
- A defending party must state in the Answer all compulsory counterclaims arising out of the same transaction or occurrence that is the subject of the opposing party’s claim.
- Non-joinder of a compulsory counterclaim will generally bar the defendant from instituting a separate action based on such claim.

B. Permissive Counterclaim

Definition
A permissive counterclaim is one that does not arise out of or is not necessarily connected with the transaction or occurrence that is the subject matter of the opposing party’s claim. The defending party may—but is not required to—set it up in the same action.
No Bar if Not Pleaded
Since a permissive counterclaim does not arise out of the same occurrence or transaction, failure to allege it in the pending action does not preclude the defendant from bringing a separate action based on that claim in the future.
Requirements
Even if it is permissive, if the defendant wishes to litigate a permissive counterclaim in the same suit, (a) it must meet jurisdictional requirements (i.e., the court must have jurisdiction over the amount or subject matter of the counterclaim), and (b) venue must be proper as to the counterclaim (unless waived).

3. Effect on the Counterclaim When the Complaint Is Dismissed

A. General Principle

Under the 2019 Rules, if the complaint is dismissed, the dismissal does not necessarily carry with it the dismissal of any counterclaim that has already been pleaded. In fact, a counterclaim may survive the dismissal of the complaint.

B. Distinctions Depending on Dismissal With or Without Prejudice

Dismissal With Prejudice
- If a complaint is dismissed with prejudice, the plaintiff’s cause of action is deemed adjudicated on the merits (i.e., it can no longer be refiled).
- The compulsory counterclaim may continue to be prosecuted by the defendant in the same action because it arises out of the same transaction or occurrence. The defendant is entitled to a resolution of its claim despite the dismissal of the complaint.
- A permissive counterclaim, likewise, can continue if the defendant so desires and if the court still has jurisdiction over it. However, the court has discretion to decide whether or not it is proper to continue hearing a purely permissive counterclaim, especially if the basis for the main action’s dismissal with prejudice also implicates the viability of the permissive counterclaim.
Dismissal Without Prejudice
- If the complaint is dismissed without prejudice, the plaintiff is generally allowed to refile the complaint (subject to any time-bar or prescription issues).
- The defendant’s counterclaim (compulsory or permissive) may remain pending, but if the complaint is refiled, the defendant may just reassert the same counterclaim in that refiled action.
- In practice, the defendant may move to proceed with the counterclaim, or the court may consider whether it would be more expedient to dismiss the counterclaim without prejudice as well—though typically a counterclaimant has the right to proceed.

C. Dismissal at Defendant’s Instance (or Upon Motion)

Should the plaintiff move to dismiss after the defendant’s compulsory counterclaim has been raised, the dismissal of the complaint will generally not affect the compulsory counterclaim unless the defendant gives consent. If the defendant opposes the dismissal, the court should allow the compulsory counterclaim to proceed to adjudication on its merits.

4. Effect If a Compulsory Counterclaim Is Not Answered

When the defendant (now counterclaimant) includes a counterclaim in the Answer, the plaintiff (now counter-defendant) is required to file an Answer to the Counterclaim. The same rules on the period to answer and the consequences of failing to file an Answer apply, mutatis mutandis, to the counterclaim.

Obligation to Answer
- The Rules provide that a reply to a counterclaim is optional, but an Answer to the counterclaim (when it is stated in the Answer itself) is mandatory if it is denominated as a counterclaim.
- The plaintiff (counter-defendant) must file the Answer to the counterclaim within the period provided by the Rules (commonly, 20 calendar days from service of the defendant’s Answer if no different period is fixed by the court).
Consequence of Failure to Answer a Compulsory Counterclaim
- The counter-defendant who fails to answer the counterclaim may be declared in default as to that counterclaim.
- Once declared in default with respect to the counterclaim, the allegations in the counterclaim may be taken as admitted, and the court can proceed to render judgment based on the counterclaimant’s evidence ex parte.
Motion to Declare in Default
- Under the Rules, a counterclaimant can move to have the opposing party declared in default if the latter fails to answer within the reglementary period.
- If granted, the court conducts proceedings ex parte on the counterclaim, allowing the counterclaimant to present evidence to prove damages or entitlement to the claim stated therein.

5. Practical and Strategic Considerations

Importance of Proper Classification
- Litigants must carefully determine whether a counterclaim is compulsory or permissive. Misclassification can lead to waiver of the claim (if a compulsory counterclaim is not pleaded) or unnecessary joinder (if a permissive counterclaim is forced into the same action without verifying jurisdiction/venue requirements).
Avoiding Multiplicity of Suits
- The rationale behind requiring compulsory counterclaims to be pleaded is to settle all related claims in one proceeding and prevent multiple cases involving the same facts.
Survival of the Counterclaim
- Even if a plaintiff decides to withdraw or dismiss the main complaint, the defendant can maintain and prosecute the counterclaim to its conclusion, especially when it is compulsory.
Answering the Counterclaim
- Plaintiffs should be mindful that once a counterclaim is lodged against them, they must answer it within the period provided to avoid default, which can have serious consequences if there is a substantial amount of money or vital interests at stake.

6. Summary of Key Points

Counterclaim: A claim by the defendant against the plaintiff (or other opposing party).
Compulsory Counterclaim:
- Arises out of the same transaction/occurrence as the main claim.
- Must be set up in the same action or it is barred forever.
- Does not require presence of third parties beyond the court’s jurisdiction.
- Continues even if the complaint is dismissed.
- Must be answered by the plaintiff to avoid being declared in default.
Permissive Counterclaim:
- Does not arise out of the same transaction/occurrence.
- May be set up in the same action but not required; failing to do so does not bar a separate action.
- Must meet jurisdiction and venue requirements if joined in the same case.
Effect of Complaint’s Dismissal:
- Dismissal of the complaint (with or without prejudice) does not automatically dismiss the counterclaim. A compulsory counterclaim especially may survive.
Effect if Compulsory Counterclaim Is Not Answered:
- Counter-defendant risks being declared in default as to the counterclaim, resulting in an ex parte reception of evidence and a possible adverse judgment.

Final Note

In all instances, parties and counsel should keep abreast of the specific procedural periods and requirements under the 2019 Amendments to the Rules of Civil Procedure. Properly pleading and timely answering counterclaims are critical steps that can decisively affect the outcome of litigation. Failure to raise a compulsory counterclaim is a fatal omission (leading to waiver), and failure to answer it can lead to default and an adverse judgment. On the other hand, permissive counterclaims offer flexibility but require careful consideration of jurisdiction, venue, and procedural efficiency.