Manila Banking Corp. v. University of Baguio
REITERATIONFacts
The Antecedents: Petitioner Manila Banking Corporation granted a P14 million credit line to respondent University of Baguio, Inc. for construction and equipment purchases. The loan was secured by promissory notes and a continuing suretyship agreement signed by Fernando C. Bautista, Jr. on behalf of the university. However, Bautista, Jr. allegedly diverted the loan proceeds to respondent Group Developers, Inc. (GDI), and the loan was not repaid. Procedural History: The bank filed a complaint for a sum of money against the university and Bautista, Jr. in 1990, later amending it to include GDI. The university sought to hold GDI liable, while GDI filed motions to dismiss. A deed of dacion en pago was executed between the bank and GDI, ceding a parcel of land in full settlement of the loan. The trial court issued several orders, including dismissing the case against Bautista, Jr. due to his death, and initially considering the dacion en pago as mooting certain motions. Subsequently, the deed was expunged from the record, and the trial court eventually dismissed the bank's amended complaint, ruling that the dacion en pago had settled the debt and thus the bank had no cause of action. The bank appealed this dismissal. The Petition: The petitioner is appealing the Regional Trial Court's dismissal of its amended complaint, arguing that the dismissal was based on a document (the deed of dacion en pago) that had been expunged from the record and that the issues raised were evidentiary, requiring a full trial. The petitioner contends that the trial court erred in dismissing the case without allowing the presentation of evidence and in ruling on a motion to dismiss after it had already been denied. The appeal is brought under Section 2, Rule 41, on a pure question of law, seeking to set aside the dismissal orders and have the case proceed to pre-trial.
Issue(s)
Whether the trial court erred in dismissing the amended complaint without trial based on a deed of dacion en pago that had been expunged from the record. Whether the grounds raised in the motion to dismiss were evidentiary in nature and thus improper for a motion to dismiss under Rule 16, and whether the motion was filed at the proper time. Whether the trial court erred in ruling, without trial, that the Deed of Dacion en Pago had not been rescinded, and on the alleged settlement and lack of cause of action. Whether the trial court erred in granting a motion to dismiss after it had previously denied a similar motion and after the defendant had already filed an Answer, and on procedural inconsistencies. Whether the trial court applied inconsistent policies to parties similarly situated.
Ruling
The Supreme Court granted the petition, set aside the trial court's April 11, 2002 and June 27, 2003 Orders, and ordered the trial court to proceed with the pre-trial and hear the case with dispatch.
Ratio Decidendi
On the basis of the dismissal: The trial court erred in dismissing the amended complaint based on the deed of dacion en pago because this document had been expunged from the record. The RTC's finding of payment and lack of cause of action was therefore based on evidence that was no longer considered part of the case. The Court noted the trial court's inconsistent rulings regarding the dacion en pago, which initially mooted certain motions but was later expunged, leading to contradictory conclusions. On the propriety of the motion to dismiss: The Court distinguished between a motion to dismiss for failure to state a cause of action under Rule 16 and a motion to dismiss based on lack of cause of action, which is in the nature of a demurrer to evidence under Rule 33. The university's motion to dismiss was improper under Rule 16 as it was filed after the Answer and was based on the deed of dacion en pago, which was not alleged in the complaint and had been expunged from the record. Furthermore, the motion alleged "no more cause of action," which, following Domondon v. Lopez, is a Rule 33 matter proper only after the plaintiff has presented evidence and rested its case. In this instance, no evidence had been presented yet, making the dismissal premature. On the timing of the motion to dismiss: The university's motion to dismiss, filed on March 19, 1998, was improper under Rule 16 as it was filed after the Answer was submitted. Moreover, the grounds relied upon, particularly the alleged settlement through dacion en pago, were evidentiary in nature and could not be determined solely from the allegations of the amended complaint. The RTC's denial of a similar motion on August 17, 1999, correctly recognized these issues as evidentiary. On the alleged settlement and lack of cause of action: The Court found that the trial court prematurely ruled on the issue of payment through dacion en pago without trial. The existence and effect of the dacion en pago were contested and had been expunged from the record. The Court also pointed out the trial court's earlier statement that the university was a "dummy" of GDI, suggesting potential fraud that needed to be uncovered through trial, rather than being summarily dismissed based on an unproven settlement. On procedural inconsistencies: The Supreme Court highlighted the trial court's inconsistent rulings, including the initial consideration of the dacion en pago as settlement, its subsequent expungement, and the conflicting pronouncements on whether the case was settled or if the university was a "dummy." These inconsistencies, coupled with the premature dismissal, led to confusion and delay. The Court emphasized the importance of strictly following procedural rules to facilitate adjudication, noting that the trial court failed to exercise its inherent power to control proceedings effectively. On procedural inconsistencies: The Supreme Court highlighted the trial court's inconsistent rulings, including the initial consideration of the dacion en pago as settlement, its subsequent expungement, and the conflicting pronouncements on whether the case was settled or if the university was a "dummy." These inconsistencies, coupled with the premature dismissal, led to confusion and delay. The Court emphasized the importance of strictly following procedural rules to facilitate adjudication, noting that the trial court failed to exercise its inherent power to control proceedings effectively.
Main Doctrine
A motion to dismiss based on lack of cause of action, filed after the plaintiff has presented evidence, is in the nature of a demurrer to evidence under Rule 33 and can only be resolved on the basis of the evidence presented. A motion to dismiss under Rule 16, filed before a responsive pleading, can only be determined from the allegations in the initiatory pleading.