Bacolod-Murcia Milling Co., Inc. v. First Farmers Milling Co., Inc.
REITERATIONFacts
The Antecedents: Plaintiff-appellant, Bacolod-Murcia Milling Co., Inc. (BMCI), commenced an action for Injunction and Prohibition with Damages against First Farmers Milling Co., Inc. (FFMC), various planters, and the Sugar Quota Administrator. BMCI alleged that FFMC illegally transferred its quota "A" allotments for the crop years 1964-65 and 1965-66, which was approved by the Sugar Quota Administration despite BMCI's objections. Procedural History: After FFMC and others filed their Answers, BMCI filed an Amended and Supplemental Complaint, including Philippine National Bank (PNB) and National Investment and Development Corporation (NIDC) as new defendants. PNB and NIDC were included based on FFMC's assertion that they were necessary parties as creditors of FFMC prior to the case's institution. The Amended Complaint alleged that PNB and NIDC assisted in the illegal creation and operation of FFMC by extending loans, making them joint tortfeasors. PNB and NIDC moved for a preliminary hearing on their special and affirmative defenses, arguing they had no participation in the alleged illegal transfers and that their loans were granted in the ordinary course of business, authorized by their respective charters, thus not committing any tortious action. The trial court dismissed the Amended and Supplemental Complaint against PNB and NIDC for lack of cause of action. BMCI appealed this dismissal and the denial of its motion for reconsideration. The Petition: The appeal questioned the dismissal of the Amended and Supplemental Complaint against PNB and NIDC on the ground of lack of cause of action.
Issue(s)
Whether the allegations in the Amended and Supplemental Complaint constituted a sufficient cause of action against PNB and NIDC. Whether the extension of loans by PNB and NIDC to FFMC, in the ordinary course of business, rendered them liable as joint tortfeasors for the alleged illegal transfer of sugar quotas.
Ruling
The Supreme Court affirmed the Order of the Court of First Instance of Rizal dismissing the Amended and Supplemental Complaint against PNB and NIDC, and denied the motion for reconsideration. The appeal was dismissed.
Ratio Decidendi
On the issue of whether the allegations in the Amended and Supplemental Complaint constituted a sufficient cause of action against PNB and NIDC: The Court held that a negative finding is called for. It is basic that a complaint must contain a concise statement of the ultimate facts constituting the plaintiff's cause of action. "Ultimate facts" are the important and substantial facts which form the basis of the plaintiff's primary right and duty, or make up the wrongful acts or omissions by the defendant. When the ground for dismissal is lack of cause of action, the sufficiency is determined solely by the facts alleged in the complaint, accepting them as true, and without considering matters outside the complaint or defenses averred by the defendant. The Amended and Supplemental Complaint failed to meet this test. While it charged PNB and NIDC with assisting in the "illegal" creation and operation of FFMC, it lacked well-pleaded averments of facts to support this claim. Crucially, it did not allege that PNB and NIDC had any notice, information, or knowledge of any flaw or illegality in FFMC's actuations, which absence is fatal to the cause of action against them. A bare allegation of bad faith, without supporting facts, does not establish a cause of action and does not apprise the defendants of the acts complained of. Bad faith is never presumed, and facts justifying its inference must be alleged and proven. The allegation that PNB and NIDC extended loans to assist in the illegal creation and operation of the mill, making them joint tortfeasors, is a mere conclusion not warranted by sufficient facts. The record indicates that PNB and NIDC extended loans in the ordinary and usual course of business after FFMC had established itself as capable of operating as a new milling district. The act of extending lawful loans, even if it unintentionally assists another in committing a wrong, does not render the lender liable as a tortfeasor, assuming such a wrong occurred. On the issue of whether the extension of loans by PNB and NIDC to FFMC, in the ordinary course of business, rendered them liable as joint tortfeasors for the alleged illegal transfer of sugar quotas: The Court found that the allegations in the complaint did not support this claim. The complaint did not allege that PNB and NIDC had any knowledge of any illegality in FFMC's operations or the planters' transfers. The loans were extended in the "ordinary and usual course of business," as authorized by the respective charters of PNB and NIDC. The Court reiterated the principle that the doing of an act which is in itself lawful will not render one liable as for a tort simply because the unintended effect of such act is to enable or assist another person to do or accomplish a wrong, provided there was no knowledge or participation in the wrongful act itself. Therefore, PNB and NIDC did not commit any tortious action against the plaintiff, and consequently, the plaintiff had no cause of action against them.
Main Doctrine
A complaint must contain a concise statement of the ultimate facts constituting the plaintiff's cause of action. A bare allegation of bad faith, without supporting facts, does not establish a cause of action. Loans extended in the ordinary course of business, even if they incidentally assist another in a wrongful act, do not create liability unless the lender had notice of the illegality.