Misamis Occidental II Cooperative v. David
REITERATIONFacts
The Antecedents: Private respondent Virgilio S. David, a supplier of electrical hardware, filed a collection suit against petitioner Misamis Occidental II Electric Cooperative, Inc. (MOELCI II). David alleged that MOELCI II purchased one unit of a 10 MVA Transformer and accessories for P5,200,000.00, plus P2,169,500.00 for 69 KV Line Accessories, based on a contract. He further claimed that MOELCI II failed to pay the outstanding balance of P5,200,000.00 plus P272,722.27 for customs duties and incidental expenses, despite demands. David also asserted an outstanding balance of P281,939.76 for other electrical hardware regularly delivered to MOELCI II. Procedural History: MOELCI II filed an Answer to the Amended Complaint, pleading affirmative defenses including lack of cause of action due to the alleged absence of an enforceable contract under the Statute of Frauds, and improper venue. MOELCI II then filed a Motion for Preliminary Hearing of Affirmative Defenses and Deferment of Pre-Trial Conference, arguing that the document attached to David's complaint was merely a quotation letter, not a contract. The trial court denied this motion, as well as MOELCI II's subsequent Motion for Reconsideration. MOELCI II elevated the matter to the Court of Appeals via a special civil action for certiorari, alleging grave abuse of discretion. The Court of Appeals dismissed MOELCI II's petition, holding that the complaint stated a cause of action and that interpreting the document required evidence aliunde, which is not permissible when determining the sufficiency of a complaint. The Petition: Petitioner MOELCI II seeks review of the Court of Appeals' decision and resolution through a Petition for Review under Rule 45 of the 1997 Rules of Civil Procedure. MOELCI II contends that the Court of Appeals erred in ruling that the resolution of its motion to dismiss on the ground of lack of cause of action necessitated hearings and in not ordering the trial court to dismiss the Amended Complaint. MOELCI II argues that the document in question is clearly a quotation letter and not a contract, and its nature is unambiguous, thus not requiring further evidence. The petition also asserts that the Court of Appeals improperly allowed the trial court to defer the resolution of the motion to dismiss, contrary to procedural rules.
Issue(s)
Whether the Court of Appeals erred in dismissing the petition for certiorari. Whether the trial court committed grave abuse of discretion in denying MOELCI II's motion for preliminary hearing of affirmative defenses. Whether the Amended Complaint sufficiently states a cause of action, considering Annex "A."
Ruling
The petition is denied. The Decision of the Court of Appeals dated 14 March 1997 and its Resolution dated 14 July 1997 are affirmed.
Ratio Decidendi
On the dismissal of the petition for certiorari: The Court clarified that the trial court did not defer the resolution of MOELCI II's motion; rather, it squarely denied it to abbreviate proceedings and proceed to trial. Thus, there was no deferment to speak of that would warrant a certiorari action. On the denial of the motion for preliminary hearing: The Court reiterated that a preliminary hearing on affirmative defenses, as provided under Section 5 of Rule 16 of the Rules of Court (now Section 6, Rule 16 of the 1997 Rules of Civil Procedure), is not mandatory but discretionary. The use of the word "may" signifies that the grant of such a hearing rests on the sound discretion of the trial court. Absent any showing of jurisdiction issues or grave abuse of discretion, the trial court's decision to dispense with or grant a preliminary hearing cannot be corrected by certiorari. In this case, the trial court's denial was within its discretion. On the sufficiency of the cause of action and the nature of Annex "A": The Court emphasized that when a motion to dismiss is based on the ground of failure to state a cause of action, the court must confine its examination solely to the allegations within the four corners of the complaint and its annexes. Extraneous matters or evidence requiring proof are not to be considered at this stage. The test is whether, admitting the facts alleged, the court could render a valid judgment in accordance with the prayer of the complaint. The Court found that the allegations in the Amended Complaint, including those in Annex "A," sufficiently laid out a cause of action for collection. While Annex "A" was captioned as a quotation letter, the presence of signatures below the word "CONFORME" lent credibility to David's claim that there might have been a meeting of minds on the terms therein. The ambiguity of Annex "A's" import and nature necessitated the introduction of evidence for proper interpretation, which is precisely what is disallowed in a motion to dismiss for failure to state a cause of action. Therefore, the trial court's denial of the motion was proper, as the issue of whether Annex "A" constituted a perfected contract required a full-blown hearing on the merits.
Main Doctrine
A preliminary hearing on affirmative defenses is discretionary and not mandatory. Furthermore, a motion to dismiss based on failure to state a cause of action should be resolved solely on the allegations in the complaint and its annexes, without requiring extraneous evidence or preliminary hearings.