Abacan, Jr. vs. Northwestern University, Inc.

A complaint states a cause of action where it alleges ultimate facts that the defendants, taking undue advantage of their positions, participated in a tortious withdrawal of corporate funds, even if they are not privy to the deposit contract. A motion for reconsideration before filing a petition for certiorari may be dispensed with where the issues are purely legal and the errors sought to be corrected have already been raised and passed upon by the trial court. The principle underlying prejudicial question may be applied by analogy to suspend a civil case pending another tribunal’s resolution of a logically antecedent issue—such as which corporate faction is the de jure board—that is crucial to the case.

Northwestern University, Inc. (NUI) was divided between the “Castro” and “Nicolas” factions, both claiming control as the legitimate board. The two factions were parties to SEC Case No. 12-96-5469, an action by the “Nicolas faction” to nullify the election of NUI directors belonging to the “Castro faction,” and SEC Case No. 12-96-5511, a counter-suit by the “Castro faction” to nullify several board resolutions passed by the “Nicolas faction.” Petitioners were officers of Metropolitan Bank (Metrobank) Laoag City branch: Antonio Abacan, Jr., President; Rufo C. Venus, Jr. and Enriqueto I. Magpantay, legal officers; and Marieta Y. Palanca, assistant branch manager.

Northwestern University, Inc. (NUI) was divided between the “Castro” and “Nicolas” factions, both seeking control as the legitimate board of the corporation. These two factions were parties to SEC Case No. 12-96-5469, an action filed by the “Nicolas faction” to nullify the election of NUI directors belonging to the “Castro faction,” and SEC Case No. 12-96-5511, a counter-suit initiated by the “Castro faction” seeking nullification of several board resolutions passed by the “Nicolas faction.” Petitioners were officers of Metropolitan Bank (Metrobank) Laoag City branch: Antonio Abacan, Jr., President; Rufo C. Venus, Jr. and Enriqueto I. Magpantay, legal officers; and Marieta Y. Palanca, assistant branch manager.

On December 19, 1996, SEC Hearing Officer Rolando G. Andaya, Jr., pursuant to SEC Case No. 12-96-5511, issued an Order authorizing the “Castro faction” and Metrobank Laoag City branch to withdraw ₱2,555,274.99 from the account of NUI with said bank. Metrobank complied and released ₱1.4 M in favor of the “Castro faction.” The “Nicolas faction” then initiated a criminal complaint for estafa against the “Castro faction” as well as petitioners. The criminal case was later dismissed insofar as petitioners were concerned.

On July 16, 1997, NUI, through Roy A. Nicolas of the “Nicolas faction,” filed Civil Case No. 11296-14 before the RTC of Laoag for damages with application for attachment against petitioners together with employees of NUI belonging to the “Castro faction”—Jose G. Castro, Ernesto B. Asuncion, Gervacio A. Velasco, Mariel S. Hernando, and Virginio C. Rasos—as well as their counsel, Edgar S. Asuncion, and SEC Hearing Officer Rolando G. Andaya, Jr. NUI claimed that between December 16 and December 20, 1996, the “Castro faction” defendants, acting together and helping one another, with petitioners taking undue and unlawful advantage of their respective positions in Metrobank, withdrew and released to themselves, for their own personal gain and benefit, corporate funds of NUI deposited with said bank in the sum of ₱1.4 M without NUI’s knowledge, consent, or approval, to its grave damage. NUI also claimed that the defendants had not accounted for the amount despite several demands.

• Motion for Reconsideration: Petitioners argued that, following Klaveness Maritime Agency, Inc. vs. Palmos, prior resort to a motion for reconsideration before filing a petition for certiorari or prohibition is not mandatory and may be dispensed with because the issues involved are purely legal and have already been passed upon.
• Judicial Delay and Multiplicity of Suits: Petitioners maintained that it is contrary to the policy against judicial delay and multiplicity of suits for a higher court to remand the case to the trial court when the former is in a position to resolve the dispute based on the records before it.
• Real Party-in-Interest: Petitioners argued that the impleaded bank officers are not real parties-in-interest since they are not privy to the contract of deposit between NUI and Metrobank, and they merely complied with the SEC Order authorizing the release of funds from NUI’s account.
• Legal Capacity to Sue: Petitioners argued that the “Nicolas faction” has no legal capacity to sue in behalf of NUI, not being the de jure board of trustees.
• Precedence of SEC Case: Petitioners argued that intra-corporate case No. 12-96-5469, lodged before the SEC, must take precedence over the damage suit pending before the trial court; they prayed for dismissal of the complaint or, in the alternative, that the proceedings be held in abeyance until final determination of SEC Case No. 12-96-5469.

• Inapplicability of Klaveness: Respondent NUI contended that Klaveness does not apply because the issues raised are dependent upon facts the proof of which have neither been entered into the records nor admitted by the parties, and no hearing for the presentation of evidence was had before the trial court on the factual matters raised in the motion to dismiss.
• Motion for Reconsideration Requirement: Respondent argued that petitioners cannot, on their bare and self-serving representation that reconsideration is unnecessary, unilaterally disregard what the law requires and deny the trial court its right to review its pronouncements before being hailed to a higher court.
• Cause of Action and Real Party-in-Interest: Respondent argued that the complaint alleged petitioners acted in connivance with their co-defendants and, as joint tortfeasors, are solidarily liable with their principal for the wrongful act; as officers and employees of the bank, they are also considered agents liable for fraud and negligence; and their act of conniving to unlawfully withdraw NUI’s funds violated NUI’s legal right, making them real parties-in-interest.
• Compliance with SEC Order: Respondent argued that it is not true petitioners could not be held liable for damages since they merely complied with the SEC Order; the amount allegedly authorized to be withdrawn was ₱2,555,274.99 while the amount sought to be recovered was ₱1.6 M, so it cannot be inferred conclusively that the amount subject of the complaint refers to the same amount authorized by the SEC, and in any case such argument is more a subject of defense rather than a proper ground for a motion to dismiss.
• Legal Capacity to Sue: Respondent disagreed with petitioners’ contention that it has no legal capacity to sue, stating that NUI had already conducted subsequent elections wherein Roy A. Nicolas was elected as member of the board of directors and concurrently the administrator of NUI.
• Prejudicial Question: Respondent averred that there is no merit to the claim of a prejudicial question; the rule on prejudicial question finds no application between the civil complaint below and the case before the SEC as the rule presupposes the pendency of a civil action and a criminal action; and even assuming that the issues pending before the SEC bear a similarity to the cause of action below, the complaint can stand and proceed separately from the SEC case inasmuch as there is no identity in the reliefs prayed for.

• Cause of Action: Whether the complaint states a cause of action against petitioners.
• Motion for Reconsideration: Whether a motion for reconsideration of the RTC order denying the motion to dismiss is dispensable prior to the filing of a petition for certiorari before the Court of Appeals.
• Suspension of Proceedings: Whether the proceedings in Civil Case No. 11296-14 must be held in abeyance pending resolution of SEC Case No. 12-96-5469.

• Cause of Action: Yes. The complaint alleges ultimate facts that petitioners, taking undue advantage of their positions, participated in the wrongful withdrawal of NUI’s funds, which if true would justify the relief demanded; liability may arise from tort independent of contract.
• Motion for Reconsideration: Yes. Although a motion for reconsideration is generally required before certiorari, it may be dispensed with where the questions are purely legal and the errors sought to be corrected were already raised and passed upon by the trial court, as in this case.
• Suspension of Proceedings: Yes. The principle underlying prejudicial question applies by analogy; the SEC’s determination of which faction is the de jure board is a logical antecedent crucial to petitioners’ liability and NUI’s capacity to sue, so the RTC should suspend proceedings.

• Cause of Action: The existence of a cause of action is determined solely by the allegations in the complaint; in resolving a motion to dismiss for failure to state a cause of action, only the facts alleged in the complaint are considered. The test is whether the court can render a valid judgment on the complaint based on the facts alleged and the prayer, or whether the complaint alleges facts which, if true, would justify the relief demanded. Only ultimate facts, not legal conclusions or evidentiary facts, are considered. Paragraph 10 of the complaint alleged that between December 16 and December 20, 1996, the defendants, acting together and helping one another, with petitioners taking undue and unlawful advantage of their positions, withdrew and released to themselves, for their own personal gain and benefit, NUI’s corporate funds deposited with Metrobank Laoag City Branch under Current Account No. 7-140-525096 and Savings Account No. 3-140-52509 in the sum of ₱1,400,000.00 without NUI’s knowledge, consent, or approval, to its grave damage. These allegations sufficiently stated a cause of action. Petitioners’ argument that they were not privy to the contract of deposit did not negate the cause of action because the complaint was based not on the deposit contract but on the alleged tortious act of wrongfully withdrawing NUI’s funds; contracts are not the only sources of obligations. Thus, the complaint stated a cause of action against petitioners.
• Motion for Reconsideration: The general rule is that a motion for reconsideration is a prerequisite to a petition for certiorari, to give the lower court an opportunity to correct itself. An order denying a motion to dismiss is interlocutory, not appealable until final judgment, and generally not assailable by certiorari; the remedy is to file an answer and interpose the objections as defenses. However, exceptions exist, including where the questions raised in certiorari have been duly raised and passed upon by the lower court, or where a motion for reconsideration would be useless, or where the issue is purely of law. In this case, the questions were essentially legal, and the errors sought to be corrected—the trial court’s ruling that a cause of action existed and its refusal to hold the case in abeyance pending the SEC case—had already been raised in the motion to dismiss and passed upon by the trial court. Under Klaveness Maritime Agency, Inc. vs. Palmos, a prior motion for reconsideration is not indispensable when the errors sought to be corrected had been duly heard and passed upon or were similar to issues already resolved, and when the motion would be pro forma and the questions essentially legal. Thus, the CA erred in dismissing the petition for failure to file a motion for reconsideration.
• Suspension of Proceedings: The general rule on prejudicial question applies where a civil action and a criminal action are both pending and the civil action presents an issue that must be preemptively resolved before the criminal action may proceed because its resolution would be determinative juris et de jure of the accused’s guilt or innocence. Technically, no prejudicial question existed here because the SEC case is not a criminal action. However, the rationale of the principle—to avoid two conflicting decisions—justified its analogous application. A prejudicial question is one whose resolution is a logical antecedent of the issue involved and whose cognizance pertains to another tribunal; it must be determinative of the case before the court, but jurisdiction to resolve it must be lodged in another court or tribunal. The question of which faction—Castro or Nicolas—is the de jure board of NUI was pending before the SEC. The complaint before the RTC alleged that petitioners and the Castro faction wrongfully withdrew ₱1.4 M from NUI’s account. Whether Roy A. Nicolas was a duly elected member of the board and had capacity to institute the complaint in NUI’s behalf depended on the SEC’s findings. The presence or absence of petitioners’ liability for allowing the withdrawal in favor of the Castro faction likewise depended on the SEC’s determination of which faction was the de jure board. Because that determination was crucial to the RTC case, the trial court should suspend proceedings until the SEC issued its findings. The Court applied by analogy Quiambao vs. Osorio, which held that a court may hold an action in abeyance to abide the outcome of another pending case where the rights of the parties cannot be properly determined until the questions in the first action are settled, to avoid unnecessary expenditure of time, effort, and money.

• Cause of action and failure to state a cause of action — The existence of a cause of action is determined by the allegations in the complaint. In resolving a motion to dismiss for failure to state a cause of action, only the facts alleged in the complaint are considered. The test is whether the court can render a valid judgment on the complaint based on the facts alleged and the prayer, or whether the complaint alleges facts which if true would justify the relief demanded. Only ultimate facts, not legal conclusions or evidentiary facts, are considered. The Court applied this doctrine in holding that the complaint sufficiently alleged a tortious withdrawal of NUI’s funds by petitioners, even though petitioners were not privy to the deposit contract.
• Contracts as a source of obligation; tort liability — Contracts are not the only sources of obligations. A defendant may be held liable for a tortious act causing damage even without contractual privity with the plaintiff. The Court applied this in rejecting petitioners’ argument that as bank officers they could not be liable because they had no contract with NUI.
• Motion for reconsideration as a prerequisite to certiorari — The filing of a motion for reconsideration is generally a prerequisite to a special civil action for certiorari, to give the lower court an opportunity to correct itself. An order denying a motion to dismiss is interlocutory, neither appealable until final judgment nor generally assailable by certiorari; the remedy is to file an answer and interpose the objections as defenses. The recognized exceptions are:
  • (a) where the order is a patent nullity, as where the court a quo has no jurisdiction;
  • (b) where the questions raised in the certiorari proceedings have been duly raised and passed upon by the lower court, or are the same as those raised and passed upon in the lower court;
  • (c) where there is an urgent necessity for the resolution of the question and any further delay would prejudice the interests of the Government or of the petitioner or the subject matter of the action is perishable;
  • (d) where, under the circumstances, a motion for reconsideration would be useless;
  • (e) where petitioner was deprived of due process and there is extreme urgency for relief;
  • (f) where, in a criminal case, relief from an order of arrest is urgent and the granting of such relief by the trial court is improbable;
  • (g) where the proceedings in the lower court are a nullity for lack of due process;
  • (h) where the proceeding was ex parte or in which the petitioner had no opportunity to object; and
  • (i) where the issue raised is one purely of law or where public interest is involved. The Court found exceptions (b) and (d) present because the issues were purely legal and had already been raised and passed upon by the trial court, making reconsideration pro forma and useless.
• Prejudicial question — A prejudicial question is that which arises in a case, the resolution of which is a logical antecedent of the issue involved therein and the cognizance of which pertains to another tribunal. It must be determinative of the case before the court, but the jurisdiction to try and resolve it must be lodged in another court or tribunal. The general rule contemplates pending civil and criminal actions. The Court, however, applied the principle underlying the doctrine by analogy to avoid conflicting decisions, holding that the RTC should suspend the civil case until the SEC determines which NUI faction is the de jure board, because that determination was crucial to petitioners’ liability and NUI’s capacity to sue.
• Stay of proceedings to avoid conflicting decisions and judicial waste — A court may hold an action in abeyance to abide the outcome of another pending case where the rights of the parties cannot be properly determined until the questions raised in the first action are settled. The power is inherent in every court to control the disposition of causes on its docket with economy of time and effort for itself, counsel, and litigants. The Court applied this by analogy from Quiambao vs. Osorio, directing the RTC to suspend proceedings in Civil Case No. 11296-14 pending final determination of SEC Case No. 12-96-5469.

• "Indeed, the elementary test for failure to state a cause of action is whether the complaint alleges facts which if true would justify the relief demanded." — This states the canonical test applied by the Court in holding that NUI’s complaint sufficiently alleged a cause of action against the bank officers.
• "A prior motion for reconsideration is not indispensable for commencement of certiorari proceedings if the errors sought to be corrected in such proceedings had been duly heard and passed upon, or were similar to the issues already resolved by the tribunal or agency below." — Quoted from Klaveness Maritime Agency, Inc. vs. Palmos, this passage supplied the exception relied upon by the Court in excusing the non-filing of a motion for reconsideration.
• "A prejudicial question is that which arises in a case, the resolution of which is a logical antecedent of the issue involved therein and the cognizance of which pertains to another tribunal." — This defines the prejudicial question principle that the Court applied by analogy to justify suspending the RTC proceedings.
• "Since the determination of the SEC as to which of the two factions is the de jure board of NUI is crucial to the resolution of the case before the RTC, we find that the trial court should suspend its proceedings until the SEC comes out with its findings." — This is the ratio decidendi for the dispositive directive to suspend Civil Case No. 11296-14 pending the SEC’s determination.

• Klaveness Maritime Agency, Inc. vs. Palmos, G.R. Nos. 102310-12, May 20, 1994, 232 SCRA 448 — Relied upon by petitioners and adopted by the Court to hold that a prior motion for reconsideration is not indispensable where the errors sought to be corrected had been duly heard and passed upon or were similar to issues already resolved, and where the questions are essentially legal.
• Tan vs. CA, 275 SCRA 568 — Cited by the Court of Appeals for the general rule that certiorari will not lie unless a motion for reconsideration is first filed; the Supreme Court recognized the general rule but found the case within the exceptions.
• Quiambao vs. Osorio, No. L-48157, March 16, 1988, 158 SCRA 674 — Applied by analogy to justify suspension of the RTC proceedings pending resolution of the SEC case, on the rationale of avoiding conflicting decisions and judicial waste.
• Peltan Development, Inc. vs. Court of Appeals, G.R. No. 117029, March 19, 1997, 270 SCRA 82 — Cited for the test of a cause of action: whether the court can render a valid judgment on the complaint based on the facts alleged and the prayer.
• G & S Transport Corp. vs. Court of Appeals, G.R. No. 120287, May 28, 2002, 382 SCRA 262 — Cited for the rule that only ultimate facts, not legal conclusions or evidentiary facts, are considered in testing whether the complaint states a cause of action.
• Abraham vs. NLRC, G.R. No. 143823, March 6, 2001, 353 SCRA 739 — Cited for the enumerated exceptions to the requirement of a motion for reconsideration before certiorari.
• Manalo vs. Court of Appeals, G.R. No. 141297, October 8, 2001, 366 SCRA 752 — Cited for the general rule on prejudicial question involving pending civil and criminal actions.
• Tuanda vs. Sandiganbayan, G.R. No. 110544, October 17, 1995, 249 SCRA 342 — Cited for the rationale of the prejudicial question principle: to avoid two conflicting decisions.
• People vs. Consing, G.R. No. 148193, January 16, 2003, 395 SCRA 366 — Cited for the requirement that the prejudicial question be determinative of the case before the court and that jurisdiction to resolve it be lodged in another court or tribunal.
• La Tondeña Distillers, Inc. vs. Judge Bernardo T. Ponferrada, et al., G.R. No. 109656, November 21, 1996, 264 SCRA 540 — Cited for the rule that an order denying a motion to dismiss is interlocutory and the remedy is to file an answer and interpose defenses.
• Republic of the Philippines vs. Express Telecommunications Co., Inc., G.R. No. 147096, January 15, 2002, 373 SCRA 316 — Cited for the general rule that a motion for reconsideration is a prerequisite to certiorari to give the lower court an opportunity to correct itself.

• Section 5, Rule 7, New Rules of Civil Procedure — Invoked by Palanca in her motion to dismiss as a ground for dismissal for failure to comply with the certification against forum shopping. The RTC denied the motion, and the Supreme Court’s disposition did not rest on this provision.
• Section 1, Rule 65, Rules of Court — Referred to in the CA decision as the basis for the petition for certiorari and prohibition. The Supreme Court discussed the general requirement of a prior motion for reconsideration before a petition under Rule 65 and the recognized exceptions, ultimately holding that the requirement was excused in this case.

Puno (Chairman), Callejo, Sr., Tinga, and Chico-Nazario, JJ., concur.