De Guzman, Jr. vs. Court of Appeals

A complaint states a sufficient cause of action when it alleges (1) the plaintiff's primary right and the defendant's corresponding duty, and (2) the defendant's wrongful act or omission that violated such right; the cause of action accrues only upon the occurrence of the wrongful act, not from the date of the original transaction.

Petitioner and private respondent had been friends who exchanged mutual favors, including the discounting of checks for cash. More than seven years before the controversy, petitioner issued several checks to private respondent in exchange for cash amounting to P280,900.00. Petitioner claimed these checks were fully paid, settled, extinguished, or condoned by agreement. On August 30, 1988, private respondent's lawyer sent a demand letter seeking payment of P568,541.00, representing the principal amount of the checks plus interest and attorney's fees. This prompted petitioner to file a complaint for damages.

Petitioner Nicanor G. De Guzman, Jr. and private respondent Enrique KP. Tan were friends who, in the course of their relationship, exchanged mutual favors and accommodations, including the discounting of checks for cash. More than seven years prior to the controversy, petitioner issued several checks to private respondent in exchange for cash amounting to P280,900.00. According to petitioner, these checks were in due time either fully paid, settled, extinguished, or condoned by agreement of the parties, and he did not redeem the checks precisely because of their close friendship.

On August 30, 1988, petitioner received a demand letter from private respondent's lawyer detailing an alleged obligation of P568,541.00, broken down as follows: P280,900.00 as principal representing the value of 66 dishonored checks, P235,956.00 as legal interest at 1% per month for 84 months or 7 years, and P51,685.00 as attorney's collection fees at 10%. The letter threatened that if payment was not made within ten days from receipt, private respondent would institute the proper action and hold petitioner liable for the consequences.

Petitioner alleged that the claim of P568,541.00 was not due and owing because the amounts of the checks had been settled, and that private respondent knew this. Petitioner further claimed that private respondent kept possession of the checks despite the obligation having been extinguished, and that private respondent failed to act with justice, observe honesty, and good faith in making the demand. Petitioner stated he was reluctant to file the complaint against his friend but was constrained to do so because of the clearly perceived injury from the demand letter.

On September 15, 1988, petitioner filed a complaint for damages and other equitable reliefs against private respondent in the RTC of Manila. The complaint prayed for actual or compensatory damages of P15,000.00, exemplary damages of P200,000.00, nominal damages, attorney's fees of P75,000.00, and an order for private respondent to return the checks. On October 8, 1988, private respondent filed a motion to dismiss the complaint for lack of cause of action and prescription. After the parties exchanged pleadings, the RTC dismissed the complaint on November 24, 1988 for failure to state a cause of action. Petitioner's motion for reconsideration was denied on March 17, 1989.

Petitioner then filed a petition for certiorari and mandamus with the CA, which dismissed the petition on January 30, 1990. The CA agreed with the RTC that the complaint failed to state a cause of action and that the claim had prescribed. Hence, petitioner elevated the matter to the SC.

• The RTC committed grave abuse of discretion in dismissing the complaint for failure to state a cause of action, as the complaint sufficiently alleged facts constituting a cause of action
• The CA likewise erred in affirming the dismissal and in disregarding a question of substance not in accord with law
• The complaint alleged a primary right (to have the checks returned or cancelled since the obligation had been settled) and a wrongful act (private respondent's demand for payment of a settled obligation while retaining the checks)
• The cause of action had not prescribed because it accrued only on August 30, 1988, when the demand letter was sent, and the complaint was filed on September 15, 1988, well within the four-year prescriptive period under Article 1146(1) of the Civil Code

• The complaint failed to state a cause of action because it did not allege facts showing a clear legal right and a corresponding violation thereof
• The action had already prescribed since the checks were issued more than seven years prior to the filing of the complaint
• The demand letter was a legitimate exercise of private respondent's right to collect on the checks, which he claimed were dishonored

• Sufficiency of Cause of Action: Whether the complaint filed by petitioner states a sufficient cause of action for damages against private respondent
• Prescription: Whether the cause of action had prescribed at the time the complaint was filed

• Sufficiency of Cause of Action: Yes. The complaint states a sufficient cause of action. A cause of action consists of two elements: (1) the plaintiff's primary right and the defendant's corresponding primary duty, and (2) the delict or wrongful act or omission of the defendant by which the primary right and duty have been violated. The complaint alleged that petitioner had a primary right to have the checks returned or cancelled because the obligation had been settled, and that this right was violated when private respondent demanded payment of a settled obligation while retaining the checks.

• Prescription: No. The cause of action had not prescribed. The cause of action accrued only on August 30, 1988, when private respondent committed the wrongful act of sending the demand letter for payment of a settled obligation. The complaint was filed on September 15, 1988, well within the four-year prescriptive period for actions based on injury to rights under Article 1146(1) of the Civil Code.

Sufficiency of Cause of Action: The SC began by defining a cause of action as the fact or combination of facts which affords a party a right to judicial interference in his behalf. A cause of action must consist of two elements: (1) the plaintiff's primary right and the defendant's corresponding primary duty, whatever may be the subject to which they relate — person, character, property, or contract; and (2) the delict or wrongful act or omission of the defendant by which the primary right and duty have been violated. The cause of action is determined not by the prayer of the complaint but by the facts alleged.

The SC emphasized that when a party files a motion to dismiss the complaint for lack of cause of action, he is deemed to have hypothetically admitted the allegations thereof. Applying this principle, the SC found that the complaint alleged: (1) petitioner had a primary right, because of having paid his obligation to private respondent, to have the checks he issued returned to him or otherwise cancelled by private respondent; and (2) this primary right was violated when private respondent demanded payment of a settled obligation relying on the very checks of petitioner he had not returned. Consequently, on account of such demand for payment for an obligation duly settled, petitioner suffered damages and should be afforded such relief as prayed for in the complaint. The SC cited Articles 19, 20, and 21, and Article 2176 of the Civil Code as bases for the damages claim.

Prescription: The SC rejected the lower courts' finding that the cause of action had prescribed. The SC held that the cause of action accrued only on August 30, 1988, when private respondent sent the demand letter for payment, thereby committing a wrongful act against petitioner. The complaint was filed promptly on September 15, 1988, well within the four-year prescriptive period for an action of this nature under Article 1146(1) of the Civil Code. The SC clarified that the right of action springs from the cause of action but does not accrue until all the facts which constitute the cause of action have occurred. There can be no right of action until there has been a wrong — a violation of a legal right.

• Cause of Action — A cause of action is the fact or combination of facts which affords a party a right to judicial interference in his behalf. It must consist of two elements: (1) the plaintiff's primary right and the defendant's corresponding primary duty; and (2) the delict or wrongful act or omission of the defendant by which the primary right and duty have been violated. The cause of action is determined not by the prayer of the complaint but by the facts alleged.

• Right of Action vs. Cause of Action — Right of action is the right to commence and maintain an action. In the law on pleadings, right of action is distinguished from cause of action in that the former is a remedial right belonging to some persons, while the latter is a formal statement of the operative facts that give rise to such remedial right. The former is a matter of right and depends on the substantive law, while the latter is a matter of statement and is governed by the law of procedure.

• Accrual of Cause of Action — The right of action springs from the cause of action but does not accrue until all the facts which constitute the cause of action have occurred. When there is an invasion of primary rights, then and not until then does the adjective or remedial law become operative, and under it arise rights of action. There can be no right of action until there has been a wrong — a violation of a legal right.

• Hypothetical Admission Rule — When a party files a motion to dismiss the complaint for lack of cause of action, he is deemed to hypothetically admit the allegations thereof. The court must therefore evaluate the sufficiency of the cause of action based on the facts alleged in the complaint, assuming them to be true.

• "A cause of action is the fact or combination of facts which affords a party a right to judicial interference in his behalf."

• "The cause of action must always consist of two elements: (1) the plaintiff's primary right and the defendant's corresponding primary duty, whatever may be the subject to which they relate — person, character, property or contract; and (2) the delict or wrongful act or omission of the defendant, by which the primary right and duty have been violated."

• "The cause of action is determined not by the prayer of the complaint but by the facts alleged."

• "The right of action springs from the cause of action, but does not accrue until all the facts which constitute the cause of action have occurred. When there is an invasion of primary rights, then and not until then does the adjective or remedial law become operative, and under it arise rights of action. There can be no right of action until there has been a wrong — a violation of a legal right — and it is then given by the adjective law."

• "When a party files a motion to dismiss the complaint for lack of cause of action he is deemed to hypothetically admit the allegations thereof."

• "The cause of action accrued only on August 20, 1988 when in a demand letter for payment private respondent thereby committed a wrongful act against petitioner. The complaint was filed promptly on September 15, 1988, well within the four (4) year prescriptive period of an action of this nature."

• Baltimore, etc., R. Co. vs. Larwill, 83 OH. St. 108, 115; 93 NB 619 — Cited for the definition of cause of action as the fact or combination of facts which affords a party a right to judicial interference in his behalf.

• Hagans vs. Wislezemus, 42 Phil. 880 (1920) — Cited in relation to the definition of cause of action.

• Cagibao vs. Lim, 50 Phil. 844 (1924) — Cited for the principle that the cause of action is determined not by the prayer of the complaint but by the facts alleged.

• Marquez vs. Varela, G.R. No. L-4845, December 24, 1952; 48 O.G. 5372, December, 1952 — Cited for the distinction between right of action and cause of action.

• Section 1, Rule 2, Rules of Court — Defines an action as an ordinary suit in a court of justice, by which one party prosecutes another for the enforcement or protection of a right, or the prosecution or redress of a wrong.

• Article 19, Civil Code — Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith. Cited as basis for petitioner's claim that private respondent failed to act with justice and good faith in demanding payment of a settled obligation.

• Article 20, Civil Code — Every person who, contrary to law, wilfully or negligently causes damage to another, shall indemnify the latter for the same. Cited as basis for the damages claim.

• Article 21, Civil Code — Any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damage. Cited as basis for the damages claim.

• Article 2176, Civil Code — Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. Cited as basis for the damages claim.

• Article 1146(1), Civil Code — Actions to enforce a right arising from an injury to the rights of the plaintiff must be brought within four years from the time the right of action accrues. Applied to hold that the complaint was filed within the prescriptive period.

• Justice Narvasa
• Justice Cruz
• Justice Griño-Aquino
• Justice Medialdea

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