THIRD DIVISION
[G.R. No. 228323. September 27, 2017.]
BDO LEASING AND FINANCE, INC., petitioner,vs. THE HONORABLE PRESIDING JUDGE OF THE REGIONAL TRIAL COURT OF APARRI, CAGAYAN, BRANCH 7, AND HEIRS OF ROGER U. MIGUEL, respondents.
NOTICE
Sirs/Mesdames :
Please take notice that the Court, Third Division, issued a Resolution datedSeptember 27, 2017, which reads as follows:
"G.R. No. 228323 (BDO Leasing and Finance, Inc. vs. The Honorable Presiding Judge of the Regional Trial Court of Aparri, Cagayan, Branch 7, and Heirs of Roger U. Miguel). — The Court NOTES the transmittal letter dated August 10, 2017 of Doerlyn D. Durali, Records Officer II, Officer-in-Charge, Archives Section of the Court of Appeals (CA), Manila, elevating to this Court the CA rollo of this case.
This is a Petition for Review on Certiorari under Rule 45 from the Decision 1 dated May 19, 2016 and the Resolution 2 dated November 11, 2016 of the Court of Appeals (CA) in CA-G.R. SP No. 140658. The assailed Decision affirmed the Order dated November 3, 2014 and Resolution dated March 23, 2015 issued by the Regional Trial Court (RTC) of Aparri, Cagayan, Branch 7 in Civil Case No. II-5570, which directed the case to proceed to pre-trial conference upon finding that it is premature to rule on the affirmative defense of petitioner that the complaint lacks a cause of action, and denied petitioner's Motion for Reconsideration, respectively.
The Facts
The petition involves a case for Specific Performance and Damages filed by respondent Heirs of the late Roger U. Miguel (Roger) against petitioner BDO Leasing and Finance, Inc. (BDOLF), a financing company engaged in providing leasing and financing products to its clients. Respondents prayed that petitioner provide them with a copy of the Mortgage Redemption Insurance (MRI) policy of Roger, or pay the value of the outstanding mortgage debt, and to pay them damages. 3
It appears that on October 24, 2010, spouses Roger and Judie Linda G. Miguel (Spouses Miguel), as sole proprietors of Mig 21 Gasoline Station and R.U. Miguel Construction Supply & Trading, entered into a Facility Agreement with petitioner for an Amortized Commercial Loan (ACL) to augment their working capital requirements. The total amount loaned under the ACL was Php11,200,000.00, secured by a third party Real Estate Mortgage (REM) executed by the spouses over several parcels of land covered by Transfer Certificate of Title (TCT) Nos. T-170984, T-170985, and T-170986 (Mortgaged Properties), owned by Roger's brother, Arnel U. Miguel (Arnel). 4
Aside from the REM, petitioner and Spouses Miguel also entered into a Lease Agreement over various motor vehicles, heavy equipment and machines, which were necessary in the operation of Mig 21 Gasoline Station. 5
Due to unexpected business reverses, Spouses Miguel were unable to pay their loan obligations under the ACL despite repeated demands. 6 Petitioner was thus compelled to cause the extra-judicial foreclosure of the third party REM. The Mortgaged Properties were sold at a public auction on March 21, 2013 and petitioner emerged as the highest bidder with a total bid of Php16,163,720.46. The certificate of sale was registered and annotated on the titles on June 28, 2013. 7
Unfortunately, Roger died on July 9, 2013. Before the redemption period expired, respondents requested petitioner to provide them with a copy of Roger's MRI policy in relation to his loan obligation secured by the REM. The request was made to allow respondents to submit their claim with the insurance company involved and to claim the proceeds of the MRI for the payment of Roger's outstanding loan. 8
Petitioner claims that respondents did not mention in their letters if there was an agreement for petitioner to procure an MRI on the life of Roger. 9 Thus, on February 26, 2014, petitioner replied and clarified that Roger did not have an MRI and that petitioner only required insurance coverage against loss or damage by fire, typhoon, flood, earthquake, or any other natural calamity. 10
Feeling aggrieved, respondents filed a complaint for specific performance and damages against petitioner with the RTC of Aparri, Cagayan, docketed as Civil Case No. II-5570. The complaint prayed for the following: 1) for petitioner to be compelled to provide respondents with a copy of the MRI policy of Roger; 2) in case petitioner failed to apply or renew the MRI, that petitioner should be obligated to pay the value of the outstanding mortgage debt; and 3) for petitioner to pay moral damages, exemplary damages, attorney's fees, and cost of suit. 11
Petitioner received the summons together with the Amended Complaint on April 24, 2014. 12 On May 9, 2014, it filed a Motion to Dismiss with Leave of Court. 13
In its motion to dismiss, petitioner argued that the complaint lacked cause of action since there was no MRI executed by the parties, and there is no law requiring financial institutions such as petitioner to secure an MRI for each and every REM transaction. It also argued that respondents are not the real parties in interest since the REM was executed by Arnel and not by Roger. Petitioner thus asserted that Roger had no insurable interest over the mortgaged real estate properties since he was not the owner thereof. It also claimed that Judie Linda had no capacity to sue in behalf of the heirs since there was no showing that she was authorized to represent the other respondents. 14
Respondents opposed petitioner's motion to dismiss, arguing first and foremost that Judie Linda has legal capacity to file the case since, aside from being one of the compulsory heirs of Roger, she was also given authority of her co-heirs by virtue of a Special Power of Attorney to represent them. Thus, she has legal interest in the case. Respondents also claimed that the actual mortgagors of the properties were the spouses Miguel and not Arnel, as claimed by petitioner, since Arnel authorized the spouses to use his property as collateral. They further argued that petitioner is estopped from claiming otherwise because ever since the start of their transaction, petitioner had always recognized Roger Miguel as the person-in-interest, and only transacted with the Spouses Miguel, and not Arnel. 15
Finally, respondents asserted that the case cannot be dismissed for "lack of cause of action" since it is not one of the grounds for dismissal of the case under Rule 16 of the Rules of Court. Even assuming that the ground raised by petitioner is for "failure to state a cause of action," the motion to dismiss should still be denied since a perusal of the complaint would show that there is sufficiency of the material allegations stated which constitute respondents' cause of action. 16
In a Resolution dated June 24, 2014, the RTC denied petitioner's motion to dismiss. It found that the amended complaint sufficiently stated a cause of action, as may be seen in paragraph 6 thereof. The trial court also rejected petitioner's argument that respondents are not the real parties in interest. It ruled otherwise, on the ground that that respondents are the ones who will eventually pay Roger's outstanding obligation, which is the contract principal to the REM. Finally, the trial court declared that Judie Linda can file the case since she is the surviving spouse and compulsory heir of Roger. 17
On July 15, 2014, petitioner BDOLF filed an Answer Ad Cautelam with Compulsory Counterclaim. On the same date, it also filed an Omnibus Motion for Reconsideration with Leave of Court to Set for Preliminary Hearing the Affirmative Defense of Lack of Cause of Action. Petitioner presented its witness on the preliminary hearing for its affirmative defense, and the parties thereafter submitted their respective position papers. 18
Ruling of the Regional Trial Court
In an Order 19 dated November 3, 2014, the RTC rejected the plea to rule on the affirmative defense of lack of cause of action raised by petitioner and directed the case to proceed to preliminary/pre-trial conference, ruling as follows:
The Court wonders why the comprehensive insurance policies over the leased agreement executed one year earlier than the real estate mortgage were deducted on the loan of the spouses. Is there an agreement on the matter?
Considering the foregoing, the Court finds it prudent to let the parties present their evidence in court to prove the existence of other terms agreed upon after the execution of the loan and real estate mortgage, i.e., the procurement of an MRI and the deduction of insurance premiums of leased properties from the loan proceeds of spouses Miguel. SDAaTC
Accordingly, set the Preliminary/Pre-Trial Conference on December 3, 2014 at 8:30 in the morning.
SO ORDERED. 20
Petitioner filed a Motion for Reconsideration, 21 but this was denied by the trial court in a Resolution dated March 23, 2015. 22
Aggrieved, petitioner elevated the matter to the CA through a petition for certiorari. 23
Ruling of the Court of Appeals
In the assailed Decision dated May 19, 2016, the CA found that the RTC did not commit grave abuse of discretion in issuing the November 3, 2014 Order and the March 23, 2015 Resolution. The dispositive portion of the assailed Decision reads:
WHEREFORE, the instant Petition for Certiorari is DENIED. The assailed November 3, 2014 Order and March 23, 2015 Resolution of the Regional Trial Court of Aparri, Cagayan, Branch 7, in Civil Case No. II-5570 are hereby AFFIRMED. Accordingly, let the case be set for Pre-trial Conference.
SO ORDERED. 24
The CA found that the RTC was correct in ruling that lack of cause of action is not one of the grounds for the dismissal of the case at that stage of the proceedings, since it must be differentiated from failure to state a cause of action which is a ground for dismissal under Section 1 (g), Rule 16 of the 1997 Rules of Civil Procedure. Since there was no evidence presented, it is impossible to determine and evaluate the insufficiency of the factual basis of respondents' claims.
The CA also ruled that, even on the ground of failure to state a cause of action, the case still cannot be dismissed since a perusal of the complaint would show that it clearly states the ultimate facts and material allegations which constitute respondents' cause of action.
Petitioner filed a motion for reconsideration of the assailed Decision, but this was denied by the CA in its Resolution dated November 11, 2016.
Hence, this petition.
Petitioner raises the following issues in its petition:
I.
THE HONORABLE COURT OF APPEALS ACTED WITHOUT OR IN EXCESS OF JURISDICTION OR WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT FAILED TO DISMISS THE AMENDED COMPLAINT ON PETITIONER BDOLF'S AFFIRMATIVE DEFENSE OF FAILURE TO STATE A CAUSE OF ACTION AFTER THE CONDUCT OF PRELIMINARY HEARING.
II.
THE HONORABLE COURT OF APPEALS ACTED WITHOUT OR IN EXCESS OF JURISDICTION OR WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT FAILED TO RULE THAT PRIVATE RESPONDENT ARE NOT THE REAL PARTIES-IN-INTEREST.
The Court's Ruling
The petition is without merit.
Generally, an order denying a motion to dismiss is only interlocutory which is neither appealable until final judgment. However, while the denial of the motion to dismiss may be raised in a petition for certiorari, the petition will only prosper where there was grave abuse of discretion amounting to lack or excess of jurisdiction committed by the trial court. 25
In the case before Us, We agree with the findings of the CA that there was no grave abuse of discretion on the part of the trial court.
Petitioner raised three grounds in the motion to dismiss which it filed with the RTC. The grounds are: 1) the complaint lacked cause of action since there was no MRI executed by the parties and there is no law requiring financial institutions such as petitioner to secure an MRI for each and every REM transaction; 2) respondents are not the real parties in interest since the REM was executed by Arnel and not by Roger; and 3) respondent Judie Linda had no capacity to sue in behalf of the heirs. However, the motion to dismiss was denied by the trial court in its Resolutions dated June 24, 2014 and November 3, 2014. 26
However, petitioner reiterated its position of lack of cause of action as an affirmative defense in its Answer. The trial court did not rule on said affirmative defense and found it premature to resolve at that stage. This is correct.
In Aquino v. Quiazon, 27 this Court had the opportunity to explain the correct procedure in resolving the affirmative defense of lack of cause of action and likewise expound on the difference between "lack of cause of action" as an affirmative defense versus "failure to state a cause of action" as a ground for the dismissal of the complaint, to wit:
The Court notes that respondents raised the affirmative defense in their Answer that petitioners "have no valid, legal and sufficient cause of action," raising factual matters, which is effectively the ground of "lack of cause of action." Respondents' arguments made no assertion that the complaint failed to state a cause of action. The ground of "lack of cause of action" has been frequently confused with the ground of "failure to state a cause of action," and this is the situation prevailing in the present case. The terms were, in fact, used interchangeably by both the respondents and the lower courts.
The distinction between the grounds of "failure to state a cause of action" and "lack of cause of action" was aptly discussed in Dabuco vs. Court of Appeals, to wit:
As a preliminary matter, we wish to stress the distinction between the two grounds for dismissal of an action: failure to state a cause of action, on the one hand, and lack of cause of action, on the other hand. The former refers to the insufficiency of allegation in the pleading, the latter to the insufficiency of factual basis for the action. Failure to state a cause may be raised in a Motion to Dismiss under Rule 16, while lack of cause may be raised any time. Dismissal for failure to state a cause can be made at the earliest stages of an action. Dismissal for lack of cause is usually made after questions of fact have been resolved on the basis of stipulations, admissions or evidence presented.
Although the two grounds were used interchangeably, it can be gleaned from the decisions of both the trial court and the CA that respondents' defense of "lack of cause of action" was actually treated as a "failure to state a cause of action," which is a ground for a motion to dismiss under Rule 16. This is apparent from their reliance on Section 6 of Rule 16, which pertains to grounds of a motion to dismiss raised as affirmative defense; as well as the doctrines cited in resolving the case. The CA even referred to both as one and the same ground for a motion to dismiss when it stated that: "Indubitably, lack of cause of action or failure to state a cause of action, being one of the grounds for a motion to dismiss, is included thereby."
Also confused, respondents, on their part, asserted that "it is within the discretion of the Court a quo to conduct a preliminary hearing on the affirmative defense of lack of cause of action or failure to state a cause of action," the very basis of their argument being hinged on the application of Section 6. They also insisted on the applicability of the exceptions to the general rule that only averments in the complaint must be considered, which pertains to the ground of "failure to state a cause of action."
The trial court held a preliminary hearing resolving the ground of "lack of cause of action" pursuant to Section 6 of Rule 16, which allows the court to hold a preliminary hearing on grounds for dismissal provided in the same rule that have been raised as an affirmative defense in the answer. The groundof "lack of cause of action," as already explained, however, is not one of the grounds for a motion to dismiss under Rule 16, and hence, not proper for resolution during a preliminary hearing held pursuant to Section 6. On this point alone, the trial court clearly erred in receiving evidence on the ground of "lack of cause of action" during the preliminary hearing. The factual matters raised by respondents in their affirmative defense arguing the non-existence of a cause of action, should have been dulyresolved during a trial on the merits of the case. 28 (Emphasis supplied)
It must be emphasized that the complaint herein is for specific performance and damages for the court to compel petitioner to provide respondents with a copy of the MRI policy. Petitioner, on the other hand, repeatedly prayed for the dismissal of the complaint, based on lack of cause of action. As correctly ruled by the trial court and affirmed by the CA, it is still premature at this stage of the proceedings to dismiss the complaint on such ground. The right course of action to take is for the RTC to proceed with trial to make a thorough factual determination on whether or not petitioner was indeed obligated to secure an MRI in favor of respondents.
As for the second issue raised by petitioner, We agree with the finding of the CA that the heirs of Roger are the real parties in interest to institute the said case for specific performance. Regardless of whether or not there is an MRI, it is the heirs of the late debtor/borrower Roger Miguel who will stand to be benefited or injured on whatever judgment the court may render in the instant suit for specific performance.
On the last issue, it is quite clear that respondent Judie Linda is armed by a special power of attorney and hence is capacitated to represent her co-heirs.
IN VIEW OF THE FOREGOING, finding no reversible error in the assailed Decision dated May 19, 2016 and Resolution dated November 11, 2016 of the Court of Appeals in CA-G.R. SP No. 140658, the Court resolves to DENY the petition and, thus, AFFIRM said Decision and Resolution. acEHCD
SO ORDERED."
Very truly yours,
(SGD.) WILFREDO V. LAPITANDivision Clerk of Court
Footnotes
1.Rollo, pp. 50-57. Penned by Associate Justice Jose C. Reyes, Jr., and concurred in by Associate Justices Ramon Paul L. Hernando and Zenaida T. Galapate-Laguilles.
2.Id. at 59-60.
3.Id. at 50-51.
4.Id. at 16.
5.Id.
6.Id. at 51.
7.Id. at 16.
8.Id. at 51.
9.Id. at 16.
10.Id. at 18.
11.Id. at 51-52.
12.Id. at 52.
13.Id. at 19, 52.
14.Id. at 89-94.
15.Id. at 98-101.
16.Id. at 101-102.
17.Id. at 107-109.
18.Id. at 20.
19.Id. at 193-198. Issued by Judge Oscar T. Zaldivar.
20.Id. at 197-198.
21.Id. at 199-204.
22.Id. at pp. 205-206.
23.Id. at 207-229.
24.Id. at 57.
25.La Tondeña Distillers, Inc. v. Ponferrada, G.R. No. 109656, November 21, 1996, 264 SCRA 540.
26.Rollo, pp. 107-109.
27. G.R. No. 201248, March 11, 2015, 753 SCRA 98.
28.Id. at 109-111.