"x x x.
It is apparent from these minutes that the survival of the counterclaim despite the dismissal of the complaint under Section 3 stood irrespective of whether the counterclaim was permissive or compulsory. Moreover, when the Court itself approved the revisions now contained in the 1997 Rules of Civil Procedure, not only did Justice Regalados amendment to Section 3, Rule 17 remain intact, but the final version likewise eliminated the qualification formerly offered under Section 2 on counterclaims that can remain pending for independent adjudication by the court.[53] At present, even Section 2, concerning dismissals on motion of the plaintiff, now recognizes the right of the defendant to prosecute the counterclaim either in the same or separate action notwithstanding the dismissal of the complaint, and without regard as to the permissive or compulsory nature of the counterclaim.
In his commentaries on the 1997 Rules of Civil Procedure, Justice Regalado expounds on the effects of the amendments to Section 2 and 3 of Rule 17:
2. Under this revised section [2], where the plaintiff moves for the dismissal of his complaint to which a counterclaim has been interposed, the dismissal shall be limited to the complaint. Such dismissal shall be without prejudice to the right of the defendant to either prosecute his counterclaim in a separate action or to have the same resolved in the same action. Should he opt for the first alternative, the court should render the corresponding order granting and reserving his right to prosecute his claim in a separate complaint. Should he choose to have his counterclaim disposed of in the same action wherein the complaint had been dismissed, he must manifest such preference to the trial court within 15 days from notice to him of plaintiffs motion to dismiss. These alternative remedies of the defendant are available to him regardless of whether his counterclaim is compulsory or permissive. A similar alternative procedure, with the same underlying reason therefor, is adopted in Sec. 6, Rule 16 and Sec. 3 of this Rule, wherein the complaint is dismissed on the motion of the defendant or, in the latter instance, also by the court motu proprio.
x x x x
2. The second substantial amendment to [Section 3] is with respect to the disposition of the defendants counterclaim in the event the plaintiffs complaint is dismissed. As already observed, he is here granted the choice to prosecute that counterclaim in either the same or a separate action. x x x x
3. With the aforestated amendments in Secs. 2 and 3 laying down specific rules on the disposition of counterclaims involved in the dismissal actions, the controversial doctrine in BA Finance Corporation vs. Co, et al., (G.R. No. 105751, June 30, 1993) has been abandoned, together with the apparent confusion on the proper application of said Secs. 2 and 3. Said sections were distinguished and discussed in the authors separate opinion in that case, even before they were clarified by the present amendments x x x.[54]
Similarly, Justice Feria notes that the present rule reaffirms the right of the defendant to move for the dismissal of the complaint and to prosecute his counterclaim, as stated in the separate opinion [of Justice Regalado in BA Finance.][55] Retired Court of Appeals Justice Herrera pronounces that the amendment to Section 3, Rule 17 settles that nagging question whether the dismissal of the complaint carries with it the dismissal of the counterclaim, and opines that by reason of the amendments, the rulings in Metals Engineering, International Container, and BA Finance may be deemed abandoned.[56] On the effect of amendment to Section 3, Rule 17, the commentators are in general agreement,[57] although there is less unanimity of views insofar as Section 2, Rule 17 is concerned.[58]
To be certain, when the Court promulgated the 1997 Rules of Civil Procedure, including the amended Rule 17, those previous jural doctrines that were inconsistent with the new rules incorporated in the 1997 Rules of Civil Procedure were implicitly abandoned insofar as incidents arising after the effectivity of the new procedural rules on 1 July 1997. BA Finance, or even the doctrine that a counterclaim may be necessarily dismissed along with the complaint, clearly conflicts with the 1997 Rules of Civil Procedure. The abandonment of BA Finance as doctrine extends as far back as 1997, when the Court adopted the new Rules of Civil Procedure. If, since then, such abandonment has not been affirmed in jurisprudence, it is only because no proper case has arisen that would warrant express confirmation of the new rule. That opportunity is here and now, and we thus rule that the dismissal of a complaint due to fault of the plaintiff is without prejudice to the right of the defendant to prosecute any pending counterclaims of whatever nature in the same or separate action. We confirm that BA Finance and all previous rulings of the Court that are inconsistent with this present holding are now abandoned.
Accordingly, the RTC clearly erred when it ordered the dismissal of the counterclaim, since Section 3, Rule 17 mandates that the dismissal of the complaint is without prejudice to the right of the defendant to prosecute the counterclaim in the same or separate action. If the RTC were to dismiss the counterclaim, it should be on the merits of such counterclaim. Reversal of the RTC is in order, and a remand is necessary for trial on the merits of the counterclaim.
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