Travel Wide Associated Sales (Phils.), Inc. vs. Court of Appeals

The defense of lack of cause of action is not waived by the omnibus motion rule even if not raised in a prior motion to dismiss, as it is one of the exceptions under Rule 9, Section 2 of the Rules of Court. A defendant who is a real party-in-interest cannot have the complaint dismissed against him on the ground that he is a mere agent of a disclosed principal where the allegations of the complaint and the evidence show active participation in the transaction.

Travel Wide Associated Sales (Phils.), Inc. and Trans World Airlines, Inc. were involved in the promotion and sale of "Travel Pass '73 U.S.A.," a package deal consisting of a TWA ticket to Los Angeles, New York, and Boston, and hotel accommodations. Decision Systems Corporation and its President, Manuel A. Alcuaz, Jr., purchased this package and made corresponding payment in Manila. The dispute arose from the alleged failure of the travel companies to comply with their obligations under the package deal, leading to a complaint for damages filed in the Regional Trial Court of Manila.

In March 1975, Decision Systems Corporation and its President, Manuel A. Alcuaz, Jr., filed a complaint in the Regional Trial Court of Manila against Travel Wide Associated Sales (Phils.), Inc. and Trans World Airlines, Inc. The plaintiffs alleged that the defendants had failed to comply with their obligations under "Travel Pass '73 U.S.A.," a package deal consisting of a TWA ticket to Los Angeles, New York, and Boston, and hotel accommodations, for which the plaintiffs had made the corresponding payment in Manila.

Acting on a motion to dismiss filed by TWA on May 16, 1975, on the ground that the complaint did not state a cause of action, the trial court ordered the plaintiffs to amend their complaint and particularize their averments. The plaintiffs complied on June 27, 1975. On July 7, 1975, and July 11, 1975, respectively, TWA and Travel Wide filed separate motions to dismiss on the ground that the amended complaint still did not state a cause of action. Both motions were denied on July 11, 1975, the trial court holding that the allegations were now "sufficiently particular."

On September 5, 1975, the defendants filed a joint answer in which they alleged the special defense that they were not the real parties-in-interest because they had acted only as agents of a disclosed principal. They reiterated this argument at the pre-trial held on October 27, 1975. Subsequently, they filed a Joint Motion for Preliminary Hearing of Special Defense, which was opposed by the plaintiffs on the ground that the special defense was barred, not having been raised in the two motions to dismiss the amended complaint. The joint motion was nevertheless granted.

After the preliminary hearing, Judge Bernardo P. Fernandez issued his order dated September 13, 1976, dismissing the complaint. His finding was that Travel Wide was only the general agent of TWA and that the latter was only an agent of a disclosed principal, namely, Tour Services, Inc. As neither of the defendants was a real party-in-interest, there could be no cause of action against them. The motion for its reconsideration having been denied, the order was elevated to the then Intermediate Appellate Court, which, on June 30, 1983, reversed the trial court.

In disclaiming liability, the petitioners pointed to the stipulation on Responsibility in the Travel Pass '73 Plan brochure that "Tour Services, Inc. and/or their agents" were acting "as agents for the passengers." They stressed further that the Miscellaneous Charge Order issued to Alcuaz indicated that the amount of $218.00 was payable to Tour Services, Inc. and not to either of them. This would mean that, if at all, they were acting as agents of Tour Services, Inc. and not as principal obligors. The trial court, however, had observed the active participation of TWA in the promotion of the travel pass plan as an additional source of revenue for its airline business. The private respondent was entitled to prove that the petitioners did not provide adequately for the pre-paid hotel accommodations of Alcuaz, who had to incur additional expenses and was compelled to cut short his business trip because of his depleted dollar allocation. It was not established that the petitioners received any confirmation of the hotel reservations they sent, and yet they did not follow up their request nor did they inform Alcuaz that they had not received confirmation.

• Waiver of Defense: Petitioners invoked Rule 16, Section 1, of the Rules of Court and argued that "the defense of not being a real party-in-interest" is not one of the grounds enumerated therein for a motion to dismiss. Consequently, they could not have pleaded it in their motion to dismiss but only in their answer as a special defense.
• Agency as Defense: Petitioners argued that they were mere agents of a disclosed principal, Tour Services, Inc., pointing to the stipulation on Responsibility in the Travel Pass '73 Plan brochure and the Miscellaneous Charge Order indicating that the amount of $218.00 was payable to Tour Services, Inc., and not to either of them.

• Omnibus Motion Rule: The Court of Appeals held that the appellees should have pleaded the special defense that they were not real parties-in-interest in their motion to dismiss, conformably to the omnibus motion rule. Not having done so, they are deemed to have waived that ground, which therefore could not be used as the basis of the motion to dismiss.
• Bar of Special Defense: The plaintiffs opposed the Joint Motion for Preliminary Hearing of Special Defense on the ground that the special defense was barred, not having been raised in the two motions to dismiss the amended complaint.

• Waiver of Defense: Whether the defense of lack of cause of action, raised as a special defense in the answer and at the preliminary hearing, was barred by the omnibus motion rule for not having been raised in the earlier motions to dismiss.
• Real Party-in-Interest: Whether the petitioners, as defendants, were real parties-in-interest against whom the complaint could be maintained, notwithstanding their claim of being agents of a disclosed principal.
• Propriety of Preliminary Hearing: Whether the trial court erred in conducting a preliminary hearing on the affirmative defense of lack of cause of action and in receiving evidence thereon.

• Waiver of Defense: No. The defense of lack of cause of action was not waived. It is one of the two exceptions mentioned in Rule 9, Section 2, to the omnibus motion rule, and can be raised even during the trial on the merits.
• Real Party-in-Interest: Yes. The petitioners were real parties-in-interest as defendants in the suit below. The term "real party-in-interest" applies not only to the plaintiff but to the defendant, and the suit may be dismissed if neither of them is a real party-in-interest. If the suit is not brought in the name of or against the real party-in-interest, a motion to dismiss may be filed on the ground that the complaint states no cause of action.
• Propriety of Preliminary Hearing: Yes, the trial court erred. In a motion to dismiss based on the ground that the complaint fails to state a cause of action, the question submitted to the court for determination is the sufficiency of the allegations in the complaint itself. No extraneous matter may be considered nor facts not alleged, which would require evidence and therefore must be raised as defenses and await the trial.

• Waiver of Defense: The omnibus motion rule embodied in Rule 15, Section 8, of the Rules of Court provides that a motion attacking a pleading or a proceeding shall include all objections then available, and all objections not so included shall be deemed waived. This is reiterated in Rule 9, Section 2, which provides for exceptions: failure to state a cause of action may be alleged in a later pleading, if one is permitted, or by motion for judgment on the pleadings, or at the trial on the merits. The Court found that even if the special defense was not invoked in the motion to dismiss, it would still not be deemed waived because it is one of the two exceptions mentioned in Rule 9, Section 2, to the omnibus motion rule. The first is lack of jurisdiction, which can be invoked any time, even on appeal. The second is lack of a cause of action, which can be raised even during the trial on the merits.
• Real Party-in-Interest: The Court clarified the misconception of the term "real party-in-interest." As defined, a real party-in-interest is the party who stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit. Rule 3, Section 2, of the Rules of Court provides explicitly that "every action must be prosecuted and defended in the name of the real party-in-interest." The term applies not only to the plaintiff but to the defendant, and the suit may be dismissed if neither of them is a real party-in-interest. The Court noted that even the trial court observed the active participation of TWA in the promotion of the travel pass plan as an additional source of revenue for its airline business. Furthermore, if the petitioners were indeed acting as agents of the passengers, as the brochure stipulates, they could still be held liable under Article 1909 of the Civil Code, which provides that the agent is responsible not only for fraud, but also for negligence, which shall be judged with more or less rigor by the courts, according to whether the agency was or was not for a compensation.
• Propriety of Preliminary Hearing: The Court cited the doctrine laid down in The Heirs of Juliana Clavano vs. Genato that in a motion to dismiss based on the ground that the complaint fails to state a cause of action, the question submitted to the court for determination is the sufficiency of the allegations in the complaint itself. Whether those allegations are true or not is beside the point, for their truth is hypothetically admitted by the motion. The issue rather is: admitting them to be true, may the court render a valid judgment in accordance with the prayer of the complaint? The sufficiency of the cause of action must appear on the face of the complaint in order to sustain a dismissal on this ground. No extraneous matter may be considered nor facts not alleged, which would require evidence and therefore must be raised as defenses and await the trial. The respondent Judge departed from this rule in conducting a hearing and in receiving evidence in support of the private respondent's affirmative defense, that is, lack of cause of action.

• Omnibus Motion Rule — Under Rule 15, Section 8, of the Rules of Court, a motion attacking a pleading or a proceeding shall include all objections then available, and all objections not so included shall be deemed waived. The Court applied this rule but recognized the exceptions under Rule 9, Section 2, which provide that the failure to state a cause of action may be alleged in a later pleading, by motion for judgment on the pleadings, or at the trial on the merits.
• Real Party-in-Interest — A real party-in-interest is the party who stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit. The term applies not only to the plaintiff but to the defendant, and the suit may be dismissed if neither of them is a real party-in-interest. The Court applied this doctrine to hold that the petitioners, as defendants, were real parties-in-interest and could not escape liability merely by claiming to be agents of a disclosed principal.
• Sufficiency of Cause of Action Determined on the Face of the Complaint — In a motion to dismiss based on the ground that the complaint fails to state a cause of action, the question submitted to the court for determination is the sufficiency of the allegations in the complaint itself. The truth of the allegations is hypothetically admitted by the motion, and no extraneous matter may be considered. The Court applied this doctrine to find that the trial court erred in conducting a preliminary hearing and receiving evidence on the affirmative defense of lack of cause of action.

• "The omnibus motion rule embodied in Rule 15, Section 8, of the Rules of Court reads as follows: Sec. 8. Omnibus motion. — A motion attacking a pleading or a proceeding shall include all objections then available, and all objections not so included shall be deemed waived." — This passage states the omnibus motion rule, which was central to the procedural dispute in the case.
• "Indeed, even if the special defense was not invoked in the motion to dismiss, it would still not be deemed waived because it is one of the two exceptions mentioned in Rule 9, Section 2, to the omnibus motion rule. The first is lack of jurisdiction, which can be invoked any time, even on appeal. The second is lack of a cause of action, which can be raised even during the trial on the merits." — This passage articulates the Court's ruling that the defense of lack of cause of action is an exception to the omnibus motion rule and is not waived.
• "It is a well-settled rule that in a motion to dismiss based on the ground that the complaint fails to state a cause of action, the question submitted to the court for determination is the sufficiency of the allegations in the complaint itself. Whether those allegations are true or not is beside the point, for their truth is hypothetically admitted by the motion." — This passage states the doctrine that the sufficiency of a cause of action must be determined from the face of the complaint, without considering extraneous evidence.

• The Heirs of Juliana Clavano vs. Genato, 80 SCRA 217 — Cited as controlling precedent for the rule that in a motion to dismiss based on lack of cause of action, only the facts alleged in the complaint should be considered, and no extraneous matter may be received.
• Salonga vs. Warner Barnes & Co., Ltd., 88 Phil. 125 — Cited for the definition of a real party-in-interest as the party who stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit.
• Salmon & Pacific Commercial Co. vs. Tan Cueco, 36 Phil. 556 — Cited for the proposition that the term "real party-in-interest" applies not only to the plaintiff but to the defendant, and the suit may be dismissed if neither of them is a real party-in-interest.

• Rule 15, Section 8, Rules of Court — The omnibus motion rule, providing that a motion attacking a pleading or a proceeding shall include all objections then available, and all objections not so included shall be deemed waived. The Court applied this rule but recognized the exceptions under Rule 9, Section 2.
• Rule 9, Section 2, Rules of Court — Provides that defenses and objections not pleaded either in a motion to dismiss or in an answer are deemed waived, except the failure to state a cause of action, which may be alleged in a later pleading, by motion for judgment on the pleadings, or at the trial on the merits. The Court applied this provision to hold that the defense of lack of cause of action was not waived.
• Rule 3, Section 2, Rules of Court — Provides that "every action must be prosecuted and defended in the name of the real party-in-interest." The Court applied this provision to determine that the petitioners were real parties-in-interest as defendants.
• Rule 16, Section 1, Rules of Court — Enumerates the grounds for a motion to dismiss. The petitioners invoked this provision to argue that the defense of not being a real party-in-interest is not one of the grounds enumerated therein.
• Rule 16, Section 5, Rules of Court — Provides that any of the grounds for dismissal provided for in the rule, except improper venue, may be pleaded as an affirmative defense, and a preliminary hearing may be had thereon as if a motion to dismiss had been filed. The Court noted that the trial judge relied on this provision in granting the preliminary hearing.
• Article 1909, Civil Code — Provides that the agent is responsible not only for fraud, but also for negligence, which shall be judged with more or less rigor by the courts, according to whether the agency was or was not for a compensation. The Court cited this provision to note that even if the petitioners were agents, they could still be held liable.

Narvasa, Griño-Aquino, and Medialdea, JJ., concurred. Gancayco, J., was on leave.