Pioneer Concrete Philippines, Inc. vs. Todaro

A complaint alleging breach of a contractual obligation to employ a person on a permanent basis states a cause of action for damages cognizable by the regular courts where no employer-employee relationship exists between the parties, and the doctrine of forum non conveniens is not a proper ground for a motion to dismiss under the Rules of Court but rather a matter of defense requiring factual determination at trial.

Pioneer International Limited (PIL) is an Australian corporation engaged in the ready-mix concrete and concrete aggregates business. Pioneer Philippines Holdings, Inc. (PPHI) was established by PIL to own and hold the stocks of its Philippine operating company, while Pioneer Concrete Philippines, Inc. (PCPI) was established by PIL to undertake its ready-mix concrete, concrete aggregates, and quarrying operations in the Philippines. Philip J. Klepzig served as President and Managing Director of both PPHI and PCPI, while John G. McDonald was the Chief Executive of PIL's Hong Kong office. Respondent Antonio D. Todaro had been the managing director of Betonval Readyconcrete, Inc., a company engaged in pre-mixed concrete and concrete aggregate production, before resigning in February 1996.

In May 1996, after respondent Antonio D. Todaro had resigned from his position as managing director of Betonval Readyconcrete, Inc. in February of that year, PIL contacted him regarding its intention to establish a ready-mix concrete plant and related operations in the Philippines. Todaro expressed his availability and interest, and PIL and Todaro reached an agreement whereby PIL would engage his services as a consultant for two to three months, after which he would be employed as the manager of PIL's ready-mix concrete operations should the company decide to invest in the Philippines. PIL subsequently commenced its Philippine operations through PCPI and PPHI but, according to Todaro, refused to comply with its undertaking to employ him on a permanent basis.

On January 16, 1998, Todaro filed a complaint for Sum of Money and Damages with Preliminary Attachment before the RTC of Makati City against PIL, PCPI, PPHI, McDonald, and Klepzig. He alleged that the petitioners reneged on their contractual obligation to employ him permanently and sought actual, moral, and exemplary damages. In the alternative, he invoked Articles 19 and 21 of the Civil Code. Instead of filing an answer, PCPI, PPHI, and Klepzig separately moved to dismiss the complaint on the grounds that it stated no cause of action, that the RTC lacked jurisdiction because the matter fell within the NLRC's exclusive jurisdiction, and that the complaint should be dismissed under the doctrine of forum non conveniens.

The RTC denied the motions to dismiss on January 4, 1999 and likewise denied the Urgent Omnibus Motion for reconsideration on June 3, 1999. Petitioners then elevated the matter to the Court of Appeals via a Petition for Certiorari, which the CA denied on October 31, 2000; the CA likewise denied petitioners' Motion for Reconsideration on August 21, 2002. Petitioners then filed the present Petition for Review on Certiorari before the Supreme Court, reiterating their three grounds for dismissal.

• No Perfected Employment Contract: Petitioners contended that there was no perfected employment contract between PIL and Todaro because the annexes to the complaint showed that PIL's offer was for Todaro to be employed as manager only of its pre-mixed concrete operations, not as managing director or CEO; when Todaro reiterated his intention to become manager of PIL's overall Philippine business venture, he effectively made a counter-offer that PIL never accepted, and under Articles 1318 and 1319 of the Civil Code, a qualified acceptance constitutes a counter-offer, not a perfected contract.
• No Liability Under Articles 19 and 21: Petitioners argued that Todaro's claim for damages under Articles 19 and 21 of the Civil Code was baseless because no perfected employment contract was shown to exist.
• Separate Corporate Personality of PCPI and PPHI: Petitioners maintained that PCPI and PPHI could not be held liable even if PIL were liable for breach, because they are juridical entities with personalities separate and distinct from PIL; they were not privy to the negotiations between PIL and Todaro, which took place through PIL's Hong Kong office, and under Article 1311 of the Civil Code, a contract is not binding upon one who was not a party to it.
• No Personal Liability of Klepzig: Petitioners asserted that Klepzig, acting merely as president of PCPI and PPHI, could not be held personally liable for acts done in the performance of his duties within the bounds of his authority, given the separate corporate personalities of PCPI and PPHI.
• NLRC Jurisdiction: Petitioners contended that since Todaro's claims for actual, moral, and exemplary damages were solely premised on an alleged breach of employment contract, the case fell within the exclusive jurisdiction of the NLRC.
• Forum Non Conveniens: Petitioners argued that the principle of forum non conveniens warranted dismissal because the majority of defendants were not Philippine residents, the events leading to the controversy occurred outside the Philippines, there was no indication that evidence could be better obtained in the Philippines, and the court's power to enforce its decision was questionable given the foreign residence of most defendants.

• Cause of Action Properly Pleaded: Respondent maintained that the factual allegations in the complaint determine whether it states a cause of action, and that his allegation that petitioners reneged on their contractual obligation to employ him permanently was sufficient to constitute a cause of action for damages.
• RTC Jurisdiction: Respondent countered that his complaint was not based on a contract of employment but on petitioners' unwarranted breach of their contractual obligation to employ him, which gave rise to an action for damages cognizable by the regular courts; even assuming an employment contract existed, the NLRC would acquire jurisdiction only if the claim for damages had a reasonable causal connection with an employer-employee relationship, which was absent here.
• Perfected Contract or Alternative Cause of Action: Respondent asserted that a perfected contract existed because both parties agreed that petitioners would employ him to manage and operate their ready-mix concrete operations in the Philippines; even if no perfected contract existed, his complaint alleged an alternative cause of action under Articles 19 and 21 of the Civil Code.
• Forum Non Conveniens as Discretionary: Respondent argued that the applicability of forum non conveniens depends on the facts of the particular case and is addressed to the sound discretion of the trial judge, who is best positioned to determine whether special circumstances require the court to desist from assuming jurisdiction.

• Cause of Action: Whether the complaint states a cause of action against petitioners.
• Jurisdiction: Whether the Regional Trial Court has jurisdiction over the complaint, or whether the matter falls within the exclusive jurisdiction of the NLRC.
• Forum Non Conveniens: Whether the doctrine of forum non conveniens is a proper ground for dismissing the complaint at the motion-to-dismiss stage.

• Cause of Action: Yes. The complaint's allegation that petitioners reneged on their contractual obligation to employ respondent permanently is sufficient to constitute a cause of action for damages, the test being whether the allegations, if true, would justify the relief demanded.
• Jurisdiction: Yes, the RTC has jurisdiction. Where no employer-employee relationship exists and the action seeks damages for breach of a contractual obligation to employ — an intrinsically civil dispute — jurisdiction belongs to the regular courts, not the NLRC.
• Forum Non Conveniens: No, the doctrine does not warrant dismissal at this stage. Forum non conveniens is not among the grounds for a motion to dismiss under Section 1, Rule 16 of the Rules of Court and is more properly treated as a matter of defense requiring factual determination at trial.

• Cause of Action: The test for failure to state a cause of action is whether the complaint alleges facts which, if true, would justify the relief demanded; the inquiry is into the sufficiency, not the veracity, of the material allegations. In resolving a motion to dismiss for lack of cause of action, the court is limited to examining the sufficiency of the allegations in the complaint and its annexes, and is proscribed from inquiring into the truth of the allegations or the authenticity of attached documents, which are deemed hypothetically admitted. Todaro alleged that petitioners reneged on their contractual obligation to employ him permanently — an allegation sufficient to constitute a cause of action for damages. Whether a perfected contract actually existed between the parties was not ripe for determination at the motion-to-dismiss stage, as its resolution would require examining the veracity of allegations from both parties, which properly belongs to trial. The Court also rejected petitioners' claim of non-privity, noting that the complaint's paragraphs 24 to 28 and Annex "H" showed that Klepzig himself conducted negotiations with Todaro and was the one who informed him that the company was no longer interested in employing him.
• Jurisdiction: Where no employer-employee relationship exists between the parties and no issue is involved which may be resolved by reference to the Labor Code, other labor statutes, or any collective bargaining agreement, the Regional Trial Court has jurisdiction. Todaro was not seeking relief under the Labor Code but sought payment of damages for petitioners' alleged breach of their obligation under their agreement to employ him. An action for breach of contractual obligation is intrinsically a civil dispute. In the alternative, Todaro sought redress under Articles 19 and 21 of the Civil Code, further confirming that the action was within the realm of civil law and jurisdiction belonged to the regular courts.
• Forum Non Conveniens: The doctrine of forum non conveniens emerged in private international law to deter global forum shopping by preventing non-resident litigants from choosing a forum for malicious reasons. Whether a suit should be dismissed on this basis depends on the facts of the particular case and is addressed to the sound discretion of the trial court. Critically, the doctrine is not included as a ground for a motion to dismiss under Section 1, Rule 16 of the Rules of Court. While a trial court may abstain from assuming jurisdiction on this ground, it should do so only after vital facts are established to determine whether special circumstances require desistance. The propriety of dismissal based on forum non conveniens requires a factual determination, making it more properly a matter of defense to be threshed out during trial rather than a basis for dismissal at the outset.

• Test for Cause of Action in a Motion to Dismiss — 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. The inquiry is into the sufficiency, not the veracity, of the material allegations. The court is proscribed from inquiring into the truth of the allegations or the authenticity of documents attached to the complaint, which are deemed hypothetically admitted. Applied in this case to hold that Todaro's allegation of breach of a contractual undertaking to employ him permanently sufficiently stated a cause of action.
• Jurisdiction Over Claims Arising From Breach of Obligation to Employ — Where no employer-employee relationship exists between the parties and no issue is involved which may be resolved by reference to the Labor Code, other labor statutes, or any collective bargaining agreement, the Regional Trial Court has jurisdiction. An action for breach of a contractual obligation to employ is intrinsically a civil dispute cognizable by the regular courts, not the NLRC.
• Forum Non Conveniens as a Matter of Defense — The doctrine of forum non conveniens is not a ground for a motion to dismiss under Section 1, Rule 16 of the Rules of Court. While a trial court may abstain from assuming jurisdiction on this ground in the exercise of sound discretion, it should do so only after vital facts are established to determine whether special circumstances require desistance. The propriety of dismissal based on this principle requires a factual determination, hence it is more properly considered a matter of defense. The requisites for a Philippine court to assume jurisdiction in conflicts-of-law cases are: (1) the Philippine court is one to which the parties may conveniently resort to; (2) the Philippine court is in a position to make an intelligent decision as to the law and the facts; and (3) the Philippine court has or is likely to have power to enforce its decision.

• "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. Stated otherwise, may the court render a valid judgment upon the facts alleged therein? The inquiry is into the sufficiency, not the veracity of the material allegations." — This passage states the canonical formulation of the test for cause of action in a motion to dismiss, distinguishing sufficiency of allegations from their truth, and is frequently cited in subsequent jurisprudence.
• "The issue as to whether or not there was a perfected contract between petitioners and respondent is a matter which is not ripe for determination in the present case; rather, this issue must be taken up during trial, considering that its resolution would necessarily entail an examination of the veracity of the allegations not only of herein respondent as plaintiff but also of petitioners as defendants." — This passage clarifies that the existence vel non of a perfected contract cannot be resolved at the motion-to-dismiss stage, as it requires evidentiary inquiry reserved for trial.
• "the doctrine of forum non conveniens should not be used as a ground for a motion to dismiss because Sec. 1, Rule 16 of the Rules of Court does not include said doctrine as a ground." — This passage, quoted from Bank of America NT & SA vs. Court of Appeals, establishes that forum non conveniens is not a proper ground for a motion to dismiss and is instead a matter of defense requiring factual determination.

• Hongkong and Shanghai Banking Corporation Limited vs. Catalan, G.R. No. 159590, October 18, 2004, 440 SCRA 498 — Followed for the test on failure to state a cause of action, specifically that the inquiry is into the sufficiency, not the veracity, of material allegations in the complaint.
• Mariño, Jr. vs. Gamilla, G.R. No. 132400, January 31, 2005, 450 SCRA 198 — Followed for the rule that where no employer-employee relationship exists and no issue is resolvable by reference to labor laws, the Regional Trial Court has jurisdiction.
• Yusen Air and Sea Service Philippines, Inc. vs. Villamor, G.R. No. 154060, August 16, 2005, 467 SCRA 167 — Followed for the principle that an action for breach of contractual obligation is intrinsically a civil dispute, citing in turn Dai-Chi Electronics Manufacturing vs. Villarama.
• Bank of America NT & SA vs. Court of Appeals, 448 Phil. 181 (2003) — Followed for the doctrine of forum non conveniens, including the three requisites for a Philippine court to assume jurisdiction in conflicts-of-law cases and the rule that the doctrine is not a ground for a motion to dismiss under Section 1, Rule 16 of the Rules of Court.
• Communication Materials and Design, Inc. vs. Court of Appeals — Cited within Bank of America for the three requisites for a Philippine court to assume jurisdiction in conflicts-of-law cases.
• Philsec. Investment Corporation vs. Court of Appeals — Cited within Bank of America for the rule that forum non conveniens is not a ground for a motion to dismiss and is more properly a matter of defense.

• Section 2, Rule 2, Rules of Court — Defines a cause of action as the act or omission by which a party violates a right of another; applied to determine whether Todaro's complaint sufficiently alleged a cause of action, requiring the presence of: (1) a right in favor of the plaintiff; (2) an obligation on the part of the defendant to respect such right; and (3) an act or omission by the defendant violative of that right.
• Section 1, Rule 16, Rules of Court — Enumerates the grounds for a motion to dismiss; applied to hold that forum non conveniens is not among the enumerated grounds and therefore cannot serve as a basis for dismissal at the motion-to-dismiss stage.
• Article 1318, Civil Code — Cited by petitioners for the requisites of a perfected contract, including the consent of the contracting parties; the Court declined to resolve whether these requisites were met, deferring the issue to trial.
• Article 1319, Civil Code — Cited by petitioners for the rule that consent is manifested by the meeting of offer and acceptance and that a qualified acceptance constitutes a counter-offer; the Court declined to resolve this at the motion-to-dismiss stage.
• Article 1311, Civil Code — Cited by petitioners for the rule that a contract is not binding upon one who was not a party to it; the Court found this inapplicable at the motion-to-dismiss stage given the complaint's allegations showing Klepzig's direct participation in negotiations.
• Articles 19 and 21, Civil Code — Invoked by respondent as an alternative cause of action for damages; the Court recognized this as further supporting the civil law nature of the action and the regular courts' jurisdiction.

Ynares-Santiago (Chairperson), Chico-Nazario, and Nachura, JJ., concurred.