Misamis Occidental II Cooperative, Inc. vs. David

A preliminary hearing on affirmative defenses is discretionary, and when a motion to dismiss based on lack of cause of action requires interpreting an ambiguous annexed document through evidence aliunde, the trial court correctly denies the motion and proceeds to trial.

A supplier of electrical hardware filed a collection suit against a rural electric cooperative based on a document the supplier claimed was a contract of sale. The cooperative disputed the existence of a perfected contract, arguing the document was merely a quotation letter falling under the Statute of Frauds, and sought a preliminary hearing on this affirmative defense to dismiss the case early.

• Original Filing: RTC of Manila, Branch 8, Civil Case No. 94-69402
• Lower Court Decision: 16 November 1995 (denied Motion for Preliminary Hearing of Affirmative Defenses); 13 March 1996 (denied Motion for Reconsideration)
• Appeal: Petition for Certiorari under Rule 65 to the CA (C.A. G.R. SP No. 41626)
• CA Decision: 14 March 1997 (dismissed petition; held interpretation of document requires evidence aliunde); 14 July 1997 (denied MR)
• SC Action: Petition for Review on Certiorari under Rule 45

• The Collection Suit: David, a supplier of electrical hardware, filed a case for specific performance and damages against MOELCI II, essentially a collection suit for the sale of a 10 MVA Power transformer and accessories, plus other electrical hardware.
• The Annexed Document: David anchored his claim on a document attached as Annex "A" to his Amended Complaint, alleging it was the contract of sale wherein he sold the transformer for P5,200,000.00 and accessories for P2,169,500.00.
• The Affirmative Defenses: MOELCI II filed an Answer with affirmative defenses claiming lack of cause of action and improper venue. MOELCI II argued Annex "A" was only a quotation letter and not an enforceable contract under the Statute of Frauds.
• The Motion for Preliminary Hearing: MOELCI II filed a Motion for Preliminary Hearing of Affirmative Defenses and Deferment of Pre-Trial Conference, asserting the complaint should be dismissed for failure to state a cause of action since no contract existed.
• The Lower Court's Denial: Judge Olalia denied the motion and the subsequent MR, opting to abbreviate proceedings and avoid piecemeal resolution of issues by proceeding to trial.

• The CA erred in ruling that resolving the motion to dismiss necessitated hearings to determine if Annex "A" was a contract.
• The CA should have ordered the dismissal of the Amended Complaint for lack of cause of action.
• Annex "A" is clearly an "undisguised quotation letter" with no ambiguity requiring interpretation; thus, no evidence aliunde is needed.
• The CA effectively exhorted the trial court to defer the resolution of the motion to dismiss until after trial, contrary to Rule 16 of the Rules of Court.

• A sufficient cause of action exists based on the allegations in the complaint.
• The parties differ on the interpretation of Annex "A," necessitating a hearing.
• The trial court did not defer the resolution of the motion to dismiss; it squarely denied it to avoid piecemeal resolution of issues.

• Procedural Issues: Whether the CA erred in dismissing the petition for certiorari and holding that the trial court did not commit grave abuse of discretion in denying the motion for preliminary hearing.
• Substantive Issues: Whether the Amended Complaint states a cause of action despite the annexed document being a mere quotation letter; whether a preliminary hearing is proper when determining the cause of action requires interpreting an ambiguous annexed document.

• Procedural: The SC found no grave abuse of discretion by the trial court. The grant of a preliminary hearing under Section 6, Rule 16 is discretionary, not mandatory. The use of "may" in the provision indicates liberty and permission. Absent a clear showing of grave abuse of discretion, the trial court's denial of a preliminary hearing cannot be corrected by certiorari. Furthermore, the trial court squarely denied the motion; it did not defer its resolution as petitioner claimed.
• Substantive: The Amended Complaint sufficiently states a cause of action. The test is whether, admitting the facts alleged, the court could render a valid verdict. Here, the complaint alleges a contract of sale, delivery, and non-payment. Even considering Annex "A" as part of the complaint, the document is ambiguous—while captioned as a quotation letter, it bears the signatures of MOELCI II's General Manager and Chairman below the word "CONFORME." Interpreting this ambiguous document requires evidence aliunde, which is strictly prohibited when resolving a motion to dismiss based on lack of cause of action. Since the nature of Annex "A" requires extensive proof best presented in a full-blown trial, the trial court correctly denied the preliminary hearing.

• Preliminary Hearing of Affirmative Defenses — The grant of a preliminary hearing on affirmative defenses under Section 6, Rule 16 of the 1997 Rules of Civil Procedure is discretionary, not mandatory. The word "may" indicates that the trial court has the option to conduct it or dispense with it.
• Hypothetical Admission Rule in Motion to Dismiss — In a motion to dismiss based on failure to state a cause of action, the sufficiency of the allegations must appear on the face of the complaint. The truth of the allegations is hypothetically admitted. No extraneous matter or evidence aliunde may be considered; facts requiring evidence must be raised as defenses and await trial.
• Test of Sufficiency of Cause of Action — Whether, admitting the facts alleged in the complaint to be true, the court could render a valid judgment in accordance with the prayer of the complaint.

• Section 6, Rule 16, 1997 Rules of Civil Procedure — Provides that grounds for dismissal may be pleaded as affirmative defenses and a preliminary hearing may be had thereon in the discretion of the court. Applied to affirm the discretionary nature of preliminary hearings.
• Section 1(g) and (i), Rule 16, Rules of Court — Grounds for dismissal including lack of cause of action and Statute of Frauds. Invoked by petitioner as basis for its affirmative defenses.