5. April 27, 2000: Paule revoked the SPA he issued in favor of Mendoza.
a. As a consequence, NIA refused to pay Mendoza on her
Full Case Title: Zenaida G. Mendoza vs. Engr. Eduardo Paule et al.,
Date of Promulgation: February 13, 2009
Doctrine:
Recit - Ready Summary:
Facts:
1. Engr. Eduardo M. Paule (Paule) is the proprietor of E.M. Paule
Construction and Trading (EMPCT).
2. May 24, 1999: PAULE executed a special power of attorney (SPA)
authorizing Zenaida G. Mendoza (MENDOZA) to participate in the pre-
qualification and bidding of a National Irrigation Administration (NIA)
project and to represent him in all transactions related to it.
3. September 29, 1999: EMPCT through Mendoza participated in the
bidding for the NIA-Casecnan Multi-Purpose Irrigation and Power
Project (NIA-CMIPP) and was awarded two projects.
a. November 16, 1999: Mendoza received the Notice of Award,
signed by Engr. Coloma, who was then Acting Project Manager
of the NIA-CMIPP.
b. Packages A-10 and B-11 involved the construction of a road
system, canal structures and drainage box culverts with a
project cost of P5,613,591.69.
4. Manuel de la Cruz (Cruz) learned that Mendoza needed heavy
equipment for use in the NIA project, he met up with MENDOZA in
Bayuga, Muñoz, Nueva Ecija, in an apartment where the latter was
holding office under an EMPCT signboard. A series of meetings
followed in said EMPCT office among CRUZ, MENDOZA and PAULE.
a. December 2 and 20, 1999: MENDOZA and CRUZ signed two
Job Orders/Agreements for the lease of the latter’s heavy
equipment (dump trucks for hauling purposes) to EMPCT.
billings.
b. Cruz, therefore, could not be paid for the rent of the
equipment.
c. Cruz, upon advise of Mendoza, addressed demands for
payment of lease rentals to NIA, but NIA refused to
acknowledge the same, and told Cruz it would remit payment
only to EMPCT as the contractor.
6. June 30, 2000: Cruz filed a civil case with RTC in Nueva Ecija for
collection of sum of money with damages and prayer for issuance of
writ of preliminary injunction against Paule, Coloma, and NIA.
a. Paule filed a third party complaint against Mendoza
b. Mendoza filed her Answer with cross-claim against Paule.
Mendoza’s Cross-claim
MENDOZA alleged in her cross-claim that:
- because of PAULE’s "whimsical revocation" of the SPA, she was barred
from collecting payments from NIA, thus resulting in her inability to
fund her checks which she had issued to suppliers of materials,
equipment and labor for the project.
- She claimed that estafa and B.P. Blg. 22 cases were filed against her;
that she could no longer finance her children’s education; that she was
evicted from her home; that her vehicle was foreclosed upon; and that
her reputation was destroyed,
- thus entitling her to actual and moral damages in the respective
amounts of P3 million and P1 million.
7. August 23, 2000: Paule again took Mendoza as his attorney-in-fact.
8. At pre-trial, other parties were declared in default, Cruz presented his
evidence ex parte.
a. He presented Mendoza, who was impleaded as defendant in
Paule’s third-party complaint.
 9. March 6, 2003: Mendoza filed a motion to declare Paule non-suited
with prayer that she be allowed to present her evidence ex parte.
a. Without resolving this motion, and without granting the
opportunity to present evidence ex parte, RTC rendered its
decision.
RTC ruling: Ruled in favor of plaintiff.
- Ordered Paule to pay 726,000 in damages/compensation to Cruz
o 500k in moral
o 50k in attorney’s fees
o Costs of suit
- Ordered NIA to withhold the balance due to EMPCT and pay the
plaintiff to the extent of the liability adjudged.
CA ruling: Dismissed Cruz’s complaint, as well as Mendoza’s appeal. (relevant
part)
On the CA level:
- Mendoza argued that the TC erred in not giving her the opportunity to
present evidence on her cross-claim.
o As a result, her cross claim against Paule was unresolved,
leaving her unable to collect the unpaid costs of the project
and the amount Paule received in excess of payments made
by the NIA.
CA’s response: When the TC rendered judgment, not only did it rule on the
plaintiff’s complaint, it also in effect resolved the third-party complaint as well.
- The TC correctly dismissed the cross-claim and did not ignore it;
- Mendoza may not claim on her supposedly unpaid costs as these are
not covered by her cross-claim in the court a quo, because it
supposedly covered reimbursement for actual damages and moral
damages due to the revocation of the SPA.
- MRs were denied, hence the petition.
Relevant Issue: Did the CA commit error in dismissing Mendoza’s appeal to
present her evidence for her cross-claim? (Yes)
Ratio/ Legal Basis:
1. Paule should be made civilly liable for abandoning his partnership with
Mendoza, leaving her to fend for her own and unduly revoking her
authority to collect payment from NIA.
2. As such, the TC erred in disregarding Mendoza’s cross-claim.
a. It was a proper counterclaim since it was a claim made by
Mendoza as defendant in a third-party complaint against
Paule.
3. The Court explained that when a defendant has interposed a
counterclaim (whether compulsory or permissive) or is seeking
affirmative relief via cross complaint, the plaintiff cannot dismiss the
action so as to affect the defendant’s right to counterclaim or prayer
for affirmative relief.
4. The Court explained that when the answer of the defendant sets up an
independent action against the plaintiff, then it becomes an action by
the defendant against the plaintiff.
a. The plaintiff would have no right to ask for a dismissal of the
defendant’s action.
b. Sections 2 and 3 of Rule 17 ensures that any judgment
thereon is based on the merit of the counterclaim itself and
not on the survival of the main complaint.
5. The court explained that if the counterclaim is without merit or suffers
jurisdictional flaws independent of the complaint, the trial court would
not be precluded from dismissing it, provided that the judgment or
order dismissing the counterclaim is premised on such defects.
a. At the same time, if such counterclaim is justified, the
amended rules unequivocally protect such counterclaim
from peremptory dismissal by reason of dismissal of the
complaint.
Disposition: WHEREFORE, the petitions are GRANTED. The August 28, 2006 effect of an adjudication upon the merits, unless otherwise declared by the
Decision of the Court of Appeals in CA-G.R. CV No. 80819 dismissing the court. (3a)
complaint in Civil Case No. 18-SD (2000) and its December 11, 2006 Resolution
denying the motion for reconsideration are REVERSED and SET ASIDE. The
August 7, 2003 Decision of the Regional Trial Court of Nueva Ecija, Branch 37
in Civil Case No. 18-SD (2000) finding PAULE liable is REINSTATED, with the
MODIFICATION that the trial court is ORDERED to receive evidence on the
counterclaim of petitioner Zenaida G. Mendoza.
SO ORDERED.

Cases cited:

Laws cited:
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 of the plaintiffs 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 counterclaim in a separate action
unless within fifteen (15) days from notice of the motion he manifests his
preference to have his counterclaim resolved in the same action. Unless
otherwise specified in the order, a dismissal under this paragraph shall be
without prejudice. A class suit shall not be dismissed or compromised without
the approval of the court. (2a)

Section 3. Dismissal due to fault of plaintiff. — If, for no justifiable cause, the
plaintiff fails to appear on the date of the presentation of his evidence in chief
on the complaint, or to prosecute his action for an unreasonable length of
time, or to comply with these Rules or any order of the court, the complaint
may be dismissed upon motion of the defendant or upon the court's own
motion, without prejudice to the right of the defendant to prosecute his
counterclaim in the same or in a separate action. This dismissal shall have the