G.R. No. 123292 April 20, 1998
FLETCHER CHALLENGE PETROLEUM PHILIPPINES, LIMITED, KIRKLAND RESOURCES (HOLDINGS) PLC, BALABAC OIL EXPLORATION AND DRILLING CO., INC., ORIENTAL PETROLEUM AND MINERALS CORPORATION, and BASIC PETROLEUM AND MINERALS, INC., petitioners, vs. THE COURT OF APPEALS (FIRST DIVISION), THE REGIONAL TRIAL COURT OF PASIG, BRANCH 157, PHILODRILL CORPORATION, ANGLO PHILIPPINE OIL AND MINING CORPORATION, and SAN JOSE OIL CO., INC., respondents.

FACTS

Petitioners and private respondents were members of a consortium with a government service contract for oil drilling in Palawan. Private respondents failed to comply with cash calls, leading them to assign their shares in Block A to petitioners. Petitioners objected to the partial transfer and declared private respondents to have forfeited their interest in both blocks. Private respondents filed a complaint in the Regional Trial Court (RTC) to compel their restoration to the consortium. Petitioners filed an answer with a counterclaim for the collection of cash call defaults, interests, and damages. Private respondents moved to dismiss the counterclaim. After a hearing on affirmative defenses and the filing of memoranda, private respondents filed a reply to the memorandum, moving to dismiss their own complaint and the counterclaim, arguing the latter was a compulsory counterclaim that could not stand alone. On July 7, 1993, the RTC dismissed both the complaint and the counterclaim. Petitioners filed a petition for review with the Supreme Court (G.R. No. 113104), raising issues on the lack of notice and hearing for the dismissal of the counterclaim. The Supreme Court referred the case to the Court of Appeals (CA), which treated it as an ordinary appeal. The CA dismissed the appeal, holding the filing of a petition for review was inappropriate as the question involved was factual, and petitioners should have filed an ordinary appeal. Petitioners’ motion for reconsideration was denied, prompting this petition.

ISSUE

Whether the Court of Appeals committed a reversible error in dismissing petitioners’ appeal.

RULING

The Supreme Court denied the petition, finding no reversible error committed by the Court of Appeals. The Court held that the CA correctly dismissed the appeal because the issues raised involved factual questions, making an ordinary appeal the proper remedy, not a petition for review. The Supreme Court noted that its prior referral of the case to the CA implicitly found factual issues underlying the appeal, a finding that had become final. The Court further sustained the RTC’s order dismissing the counterclaim. It found that the motion to dismiss the counterclaim, initially raised in private respondents’ answer, was considered at the hearing on affirmative defenses. The subsequent reply and supplemental memorandum were mere supplements to the pending motion. Although petitioners claimed they did not receive a copy and that it lacked a notice of hearing, the record showed their counsel received it on June 9, 1993, giving them ample time before the July 7 order to file opposition or seek a hearing. Their failure to do so constituted a waiver. The Court also clarified that while the RTC erroneously applied the principle from Metals Engineering Resources Corp. v. Court of Appeals (that dismissal of a complaint carries dismissal of a compulsory counterclaim) — which applies only when the court lacks jurisdiction over the main action — the dismissal was valid as petitioners did not object. Moreover, the dismissal was without prejudice, allowing petitioners to file a separate action for the amounts owed.