Is this grounds for appeal?
No, or at least probably not, because the answer is also no to
or can the judge decide not bring up or just ignore the counter suit?
There must be some disposition of matters properly before the court, even if that means that they are dismissed as frivolous or lacking in merit or granted and treated as an off-set against the case in chief or whatever else might have been done. The operative phrases may be “acknowledged in court” (there may have been a disposition that you failed to recognize) and “properly before the court” (there may have been a legitimate error – yours or the court’s).
You only provide basis for a yes/no answer and speculation. Review the court record and find out what ruling was made on the counterclaim. With Small Claims, the easiest and best way to do that is commonly to review the physical file for a single paper showing the court’s ruling on all matters. If there was actually an error, you might first consider a Motion for Reconsideration, but one can only speculate about an explanation.