Republic of the Philippines
SUPREME COURT
SECOND DIVISION
G.R. No. 129928 August 25, 2005
MISAMIS OCCIDENTAL II COOPERATIVE, INC., Petitioners,
vs.
VIRGILIO S. DAVID, Respondent.
D E C I S I O N
Tinga, J.:
In this Petition for Review1 under Rule 45 of the 1997 Rules of Civil Procedure, petitioner Misamis Occidental II Electric Cooperative, Inc. (hereinafter, MOELCI II) seeks the reversal of the Decision2 of the Court of Appeals, Former Ninth Division in C.A. G.R. SP No. 41626 and its Resolution3 denying MOELCI II’s motion for reconsideration. The questioned Decision dismissed MOELCI II’s petition for certiorari under Rule 65 and effectively affirmed the trial court’s orders dated 16 November 19954 and 13 March 19965 which respectively denied petitioner’s Motion (For Preliminary Hearing of Affirmative Defenses and Deferment of Pre-Trial Conference)6 and Motion for Reconsideration.7
The antecedents are as follows:
Private respondent Virgilio S. David (hereinafter, David), a supplier of electrical hardware,8 filed a case for specific performance and damages against MOELCI II, a rural electric cooperative in Misamis Occidental, docketed as Civil Case No. 94-69402 entitled "Virgilio David v. Misamis Occidental II Electric Cooperative, Inc. (MOELCI II)." The said case, which was essentially a collection suit, pending before Judge Felixberto Olalia (hereinafter, Judge Olalia) of the Regional Trial Court of Manila, Branch 8 (the trial court), was predicated on a document attached as Annex "A" to the Amended Complaint9 that according to David is the contract pursuant to which he sold to MOELCI II one (1) unit of 10 MVA Transformer.10
MOELCI II filed its Answer to Amended Complaint11 which pleaded, among others, affirmative defenses which also constitute grounds for dismissal of the complaint. These grounds were lack of cause of action, there being allegedly no enforceable contract between David and MOELCI II under the Statute of Frauds pursuant to Section 1 (g) and (i), Rule 16 of the Rules of Court, and improper venue.12
In accordance with Section 5, Rule 16 of the Rules of Court,13 (now Section 6, Rule 16 of the 1997 Rules of Civil Procedure) MOELCI II filed with the trial court a Motion (For Preliminary Hearing of Affirmative Defenses and Deferment of Pre-Trial Conference)14 (hereinafter referred to as Motion). In said Motion, MOELCI II in essence argued that the document attached as Annex "A" to the Amended Complaint was only a quotation letter and not a contract as alleged by David. Thus, it contends that David’s Amended Complaint is dismissible for failure to state a cause of action.15
In his opposition to MOELCI II’s Motion, David contended in the main that because a motion to dismiss on the ground of failure to state a cause of action is required to be based only on the allegations of the complaint, the "quotation letter," being merely an attachment to the complaint and not part of its allegations, cannot be inquired into.16
MOELCI II filed a rejoinder to the opposition in which it asserted, citing extensively the ruling of the Court in World Wide Insurance & Surety Co., Inc. v. Macrohon,17 that a complaint cannot be separated from its annexes; hence, the trial court in resolving a motion to dismiss on the ground of failure to state a cause of action must consider the complaint’s annexes.18
After the parties filed their respective memoranda, Judge Olalia issued an order dated 16 November 1995 denying MOELCI II’s motion for preliminary hearing of affirmative defenses. MOELCI II’s motion for reconsideration of the said order was likewise denied in another order issued by Judge Olalia on 13 March 1996.19
MOELCI II elevated this incident to the Court of Appeals by way of a special civil action for certiorari, alleging grave abuse of discretion on the part of Judge Olalia in the issuance of the two aforesaid orders.
On 14 March 1997, the Court of Appeals dismissed MOELCI II’s petition holding that the allegations in David’s complaint constitute a cause of action. With regard to MOELCI II’s contention that David’s Amended Complaint is dismissible as the document, attached thereto as Annex "A," upon which David’s claim is based is not a contract of sale but rather a quotation letter, the Court of Appeals ruled that the interpretation of the document requires evidence aliunde which is not allowed in determining whether or not the complaint states a cause of action. The appellate court further declared that when the trial court is confronted with a motion to dismiss on the ground of lack of cause of action, it is mandated to confine its examination for the resolution thereof to the allegations of the complaint and is specifically enjoined from receiving evidence for that purpose.20
With the denial of its Motion for Reconsideration, petitioner is now before this Court seeking a review of the appellate court’s pronouncements. MOELCI II asserts that the Court of Appeals committed serious error in: (1) ruling that the resolution of its motion to dismiss on the ground of lack of cause of action necessitated hearings by the trial court with the end in view of determining whether or not the document attached as Annex "A" to the Amended Complaint is a contract as alleged in the body of said pleading; and (2) not ordering the trial court to dismiss the Amended Complaint on the ground of lack of cause of action.21 Anent the first ground, MOELCI II further claims that with the denial of its Petition, the appellate court in effect exhorted the trial court to defer the resolution of its motion to dismiss until after the hearing of the case on the merits contrary to Rule 1622 of the Rules of Court and well-settled jurisprudence.23
In his comment,24 David counters that a sufficient cause of action exists. He also points out that he and MOELCI II differ in the interpretation of the construction of the document attached as Annex "A" of the Amended Complaint; hence, there is a need to conduct hearings thereon. He likewise contends that the trial court did not defer the resolution of petitioner’s motion to dismiss. On the contrary, the trial court denied squarely the motion "to abbreviate the proceedings and for the parties to proceed to trial and avoid piece meal resolution of issues."25
In its Reply,26 MOELCI II reiterates its position that the document attached as Annex "A" of the Amended Complaint clearly is a quotation letter and not a perfected contract of sale as alleged by David. The absence of doubt or ambiguity of the contents and import of the document leaves no room for its interpretation.
At issue is whether the Court of Appeals erred in dismissing the petition for certiorari and in holding that the trial court did not commit grave abuse of discretion in denying petitioner’s Motion.
We find no error in the ruling of the Court of Appeals.
In Municipality of Biñan, Laguna v. Court of Appeals,27 decided under the old Rules of Court, we held that a preliminary hearing permitted under Section 5, Rule 16, is not mandatory even when the same is prayed for. It rests largely on the sound discretion of the court, thus:
SEC. 5. Pleading grounds as affirmative defenses.- Any of the grounds for dismissal provided for in this rule, except improper venue, may be pleaded as an affirmative defense, and a preliminary hearing may be had thereon as if a motion to dismiss had been filed.
The use of the word "may" in the aforequoted provision shows that such a hearing is not mandatory but discretionary. It is an auxiliary verb indicating liberty, opportunity, permission and possibility.28
Such interpretation is now specifically expressed in the 1997 Rules of Civil Procedure. Section 6, Rule 16 provides that a grant of preliminary hearing rests on the sound discretion of the court, to wit-
SEC. 6. Pleading grounds as affirmative defenses.- If no motion to dismiss has been filed, any of the grounds for dismissal provided for in this Rule may be pleaded as an affirmative defense in the answer and, in the discretion of the court, a preliminary hearing may be had thereon as if a motion to dismiss had been filed. …
Based on the foregoing, a preliminary hearing undeniably is subject to the discretion of the trial court. Absent any showing that the trial court had acted without jurisdiction or in excess thereof or with such grave abuse of discretion as would amount to lack of jurisdiction, as in the present case, the trial court’s order granting or dispensing with the need for a preliminary hearing may not be corrected by certiorari.29
Moreover, consistent with our ruling in The Heirs of Juliana Clavano v. Genato,30 as MOELCI II’s Motion is anchored on the ground that the Complaint allegedly stated no cause of action, a preliminary hearing thereon is more than unnecessary as it constitutes an erroneous and improvident move. No error therefore could be ascribed to the trial court in the denial of such Motion. The Court ruled in the cited case, thus:
. . . . respondent Judge committed an error in conducting a preliminary hearing on the private respondent’s affirmative defenses. It is a well-settled rule that in a motion to dismiss based on the ground that the complaint fails to state a cause of action, the question submitted to the court for determination is the sufficiency of the allegations in the complaint itself. Whether those allegations are true or not is beside the point, for their truth is hypothetically admitted by the motion. The issue rather is: admitting them to be true, may the court render a valid judgment in accordance with the prayer of the complaint? Stated otherwise, the sufficiency of the cause of action must appear on the face of the complaint in order to sustain a dismissal on this ground. No extraneous matter may be considered nor facts not alleged, which would require evidence and therefore must be raised as defenses and await the trial. In other words, to determine the sufficiency of the cause of action, only the facts alleged in the complaint, and no other should be considered.
The respondent Judge departed from this rule in conducting a hearing and in receiving evidence in support of the private respondent’s affirmative defense, that is, lack of cause of action.31
To determine the existence of a cause of action, only the statements in the complaint may be properly considered. It is error for the court to take cognizance of external facts or hold preliminary hearings to determine their existence. If the allegations in a complaint furnish sufficient basis by which the complaint can be maintained, the same should not be dismissed regardless of the defenses that may be averred by the defendants.32
The test of sufficiency of facts alleged in the complaint as constituting a cause of action is whether or not admitting the facts alleged, the court could render a valid verdict in accordance with the prayer of said complaint.33
In the case at bar, the Amended Complaint states in paragraphs 3, 4, 5, and 6, thus:
FIRST CAUSE OF ACTION
3. On June 8 1992 the parties entered into a contract for the sale by the plaintiff to the defendant of one (1) unit 10 MVA Power transformer with accessories for a total price of ₱5,200,000.00 plus 69 KV Line Accessories for a total price of ₱2,169,500.00 under the following relevant terms and conditions:
1. Fifty percent (50%) downpayment upon signing of contract.
Fifty percent (50%) upon delivery
2. Delivery- Ninety (90) working days upon receipt of your Purchase Order and Downpayment
Copy of the contract is hereto attached as Annex "A."
4. Because of the standing relationship between the parties and the urgent need on the part of the defendant for the power transformer to remedy the electric supply deficiency in its area of coverage the plaintiff waived the 50% downpayment and delivered soon thereafter the 10 MVA transformer with accessories evidence (sic) by a copy of the sales invoice hereto attached as Annex "B".
5. Despite demands however, verbal and written, since December 1992, the defendant has failed to pay the price thereof of ₱5,200,000.00 plus the custom duties and incidental expenses of ₱272,722.27.
SECOND CAUSE OF ACTION
6. Apart from the above transaction, the plaintiff has been, on a regular basis, delivering various electrical hardware to the defendant which, as of 31 January 1994, despite demands, has an outstanding balance of ₱281,939.76.34
And David prayed as follows:
WHEREFORE, it is respectfully prayed that judgment render ordering the defendant to pay the plaintiff:
ON THE FIRST CAUSE OF ACTION
1. The total sum of ₱5,472,722.27 plus the stipulated interest at 24% per annum from December 1992 until fully paid.
ON THE SECOND CAUSE OF ACTION
2. The balance of ₱281,939.76 plus the stipulated interest at 24% per annum from due dates until fully paid.
COMMON PROPER (sic)
3. Attorney’s fee at 25% of the foregoing amounts plus expenses of litigation and not less than ₱100,000.00 with costs.
4. Other reliefs as may be just and equitable in the premises.35
It has been hypothetically admitted that the parties had entered into a contract sale David bound himself to supply MOELCI II (1) unit 10 MVA Power transformer with accessories for a total price of ₱5,200,000.00 plus 69 KV Line Accessories for a total price of ₱2,169,500.00; that despite written and verbal demands, MOELCI II has failed to pay the price thereof plus the custom duties and incidental expenses of ₱272,722.27; and that apart from the previously stated contract of sale, David regularly delivered various electrical hardware to MOELCI II which, despite demands, has an outstanding balance of ₱281,939.76.
We believe all the foregoing sufficiently lay out a cause of action. Even extending our scrutiny to Annex "A," which is after all deemed a part of the Amended Complaint, will not result to a change in our conclusion.
Contrary to MOELCI II’s assertion, Annex "A" is not an "undisguised quotation letter."36 While Annex "A" is captioned as such, the presence of the signatures of both the General Manager and the Chairman of the Committee of Management immediately below the word "CONFORME" appearing on the document’s last page37 lends credulity to David’s contention that there was, or might have been, a meeting of minds on the terms embodied therein. Thus, the appendage of Annex "A" does not entirely serve to snuff out David’s claims.
In fact, the ambiguity of the import and nature of Annex "A" which necessitates a resort to its proper interpretation, fortifies the propriety of the trial court’s
denial of MOELCI II’s Motion. The interpretation of a document requires introduction of evidence which is precisely disallowed in determining whether or not a complaint states a cause of action. The Court of Appeals therefore correctly dismissed MOELCI II’s petition and upheld the trial court’s ruling.
Now, whether in truth Annex "A" is, as entitled, a mere quotation letter is a matter that could best be proven during a full-blown hearing rather than through a preliminary hearing as this may involve extensive proof. Verily, where a preliminary hearing will not suffice, it is incumbent upon the trial court to deny a motion for preliminary hearing and go on to trial. The veracity of the assertions of the parties can be ascertained at the trial of the case on the merits.38
Finally, we do not agree with MOELCI II’s contention that the Court of Appeals sanctioned the trial court’s deferment of the resolution of MOELCI II’s Motion. The trial court squarely denied the Motion and not merely deferred its resolution.39 Thus, there is no deferment to speak of that should be enjoined.
WHEREFORE, the instant petition is DENIED. The Decision of the Court of Appeals dated 14 March 1997 and its Resolution dated 14 July 1997 are AFFIRMED. Costs against petitioner.
SO ORDERED.
DANTE O. TINGA Associate Justice
WE CONCUR:
REYNATO S. PUNO
Associate Justice
Chairman
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MA. ALICIA AUSTRIA-MARTINEZ
Associate Justice |
ROMEO J. CALLEJO, SR.
Associate Justice |
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MINITA V. CHICO-NAZARIO
Associate Justice |
ATTESTATION
I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.
REYNATO S. PUNO
Associate Justice
Chairman, Second Division
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairman’s Attestation, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.
HILARIO G. DAVIDE, JR.
Chief Justice
Footnotes
1 Rollo, pp. 6-18; Dated 6 August 1997.
2 Id. at 22-29; Promulgated on 14 March 1997; Penned by Associate Justice Jorge S. Imperial and concurred in by Associate Justices Buenaventura J. Guerrero and Oswaldo D. Agcaoili.
3 Id. at 33; Promulgated on 14 July 1997; Penned by Associate Justice Jorge S. Imperial and concurred in by Associate Justices Buenaventura J. Guerrero and Oswaldo D. Agcaoili.
4 Id. at 34-35.
5 Id. at 36.
6 See Id. at 34; Filed by MOELCI II on 4 September 1995.
7 See Id. at 36.
8 Id. at 37.
9 Id. at 37-39; Dated 10 March 1995.
10 Id. at 8.
11 Id. at 40-51; Dated 4 September 1995.
12 Id. at 23, 44, 49.
13 Section 5, Rule 16 reads as follows:
SEC. 5. Pleading grounds as affirmative defenses. – Any of the grounds for dismissal provided for in this rule, except improper venue, may be pleaded as an affirmative defense, and a preliminary hearing may be had thereon as if a motion to dismiss had been filed.
14 Rollo, pp. 70-75; Dated 4 September 1995.
15 Id. at 23.
16 Ibid.
17 105 Phil. 249 (1959).
18 Rollo, p. 23.
19 Id. at 24.
20 Id. at 26-27.
21 Id. at 9-10.
22 Section 3 thereof mandates the courts not to defer the resolution of the motion for the reason that the ground relied upon is not indubitable.
23 Rollo, pp. 10-11.
24 Id. at 82-90; Dated 14 November 1997.
25 Id. at 85-86, 34-35.
26 Id. at 96-102; Dated 6 August 1998.
27 G.R. No. 94733, 17 February 1993, 219 SCRA 69, 76.
28 Caltex (Philippines), Inc. v. Court of Appeals, G.R. No. 97753, 10 August 1992, 212 SCRA 448, 463.
29 Municipality of Biñan, Laguna v. Court of Appeals, supra note 27 at 77.
30 No. L-45837, 28 October 1977, 80 SCRA 217.
31 Id. at 222-223.
32 The Consolidated Bank and Trust Corp. v. Hon. Court of Appeals, et al., 274 Phil. 947, 955 (1991).
33 A. U. Valencia & Co. v. Layug, 103 Phil. 747, 749-750 (1958).
34 Rollo, pp. 37-38.
35 Id. at 38.
36 Id. at 12.
37 Id. at 67.
38 Paredes v. Intermediate Appellate Court, G.R. No. 70717, 8 May 1990, 185 SCRA 134, 139.
39 Rollo, pp. 34-35.
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