[G.R. No. 135548. September 29, 2000]

FAR EAST BANK AND TRUST COMPANY, petitioner, vs. COURT OF APPEALS and SMP, INC., respondents.



FAR EAST BANK AND TRUST COMPANY filed a Complaint against Clothespak Manufacturing Phils., Inc. (hereafter CLOTHESPAK) for recovery of sums of money before the Regional Trial Court of Pasig City.[1]

On 14 March 1995 the trial court issued a Writ of Preliminary Attachment by virtue of which the Sheriff levied on the personal properties found in the premises of CLOTHESPAK. On 28 March 1995 respondent SMP, Inc. (hereafter SMP) filed an Affidavit of Third-Party Claim asserting ownership over 4,000 bags of General Purpose (GPS) polystyrene products included among the attached properties. On 6 April 1995 petitioner posted a Sheriff's Indemnity Bond issued by Siddcor Insurance Corporation (hereafter SIDDCOR).

On 21 May 1996 the trial court ruled that the third-party claim can be best and fully ventilated in a vindicatory action under Sec. 17, Rule 39, of the Rules of Court.[2] On 13 January and 7 March 1997 it denied reconsideration.[3] Thereafter, a Decision was rendered in favor of petitioner and a Writ of Execution was accordingly issued upon the judgment becoming final and executory. Petitioner acquired the attached goods as highest bidder in the public auction.

Meanwhile, on 26 February 1997 respondent SMP filed a Complaint for damages against petitioner, the Sheriff and SIDDCOR before the Regional Trial Court of Quezon City, docketed as Civil Case No. Q-97-30372, pertinent portions of which read -

5. Plaintiff is engaged in the manufacture, production, formulation, tolling, distribution, trading, selling, import and export of polystyrene products and such other businesses related to or connected with polystyrene products.

6. On January 19, 1995, Maria Teresa Michaela Ong, one of the Sales Executives of plaintiff, personally undertook the acceptance and servicing of a purchase order of CLOTHESPAK MANUFACTURING PHILS., INC. (CLOTHESPAK for brevity) for 4,000 bags or sacks of General Purpose (GPS) polystyrene products to be made by CLOTHESPAK into "plastic hangers" x x x x

7. Pursuant to such Purchase Order, the ordered products (4,000 bags) were delivered on January 23, 24, 25, and 27, 1995 to the plant of CLOTHESPAK located at Bo. Panungyanan, General Trias, Cavite City, for which Delivery Receipts were issued x x x x

8. The total selling price of the above delivered products amounted to U.S. $118,500, as evidenced by Sales Invoices Nos. 5509, 5510, and 5511 x x x x

9. As "payment" for the goods ordered and duly delivered, CLOTHESPAK issued postdated checks in favor of plaintiff SMP, INC. and delivered the same to Maria Teresa Michaela Ong upon delivery of the ordered goods x x x x As agreed upon, the ownership over the goods delivered was explicitly retained by SMP until all the above-enumerated postdated checks shall have cleared and honored as good by the bank, with the understanding that SMP can get back the goods delivered at any time in case the check(s) are dishonored and returned by the bank for any reason, as contained in the Provisional Receipt issued by SMP to CLOTHESPAK upon receipt by SMP of the above postdated checks x x x x

10. When the above checks were deposited by SMP on their maturity dates, the drawee bank dishonored and returned them for the reason "Account Closed" x x x x

14. Deputy Sheriff Alejandro Loquinario of RTC-Pasig City x x x made an actual levy/attachment on the properties found on the premises of CLOTHESPAK at Panungyanan, Gen. Trias, Cavite on various dates in March 1995 before several witnesses including the representative of FEBTC. Among the properties levied/attached were "plastic resins" and "plastic hangers," as evidenced by the Notice of Levy/Attachment issued and submitted by Deputy Sheriff Loquinario for March 14, 1995 (plastic resins), March 15, 1995 (plastic resins) and March 16, 1995 (plastic hangers) x x x x

The LISTS OF INVENTORY attached to the Notice of Levy/Attachment did not fully describe with specificity the materials or goods attached; most of the sacks were described merely as "RAW MATERIALS' and 'GRINDED;' a few were labeled "DOW" which indicates a foreign brand and therefore probably imported. This would seem to indicate that FEBTC directed the Sheriff to attach any and all goods found in the premises of CLOTHESPAK without regard as to whether they are those "goods intended to be attached," and most likely in order to make it difficult to trace, verify or check, the Sheriff just listed the goods without detailed description or identification. Since FEBTC was desperate in recovering whatever it can recover from its credit exposure to CLOTHESPAK, even goods clearly not owned by FEBTC by virtue of its alleged Trust Receipts just had to be attached for any reason.

Yet, it is clear from the allegations made in FEBTC's Complaint (Annex "G") that it was only after goods imported by CLOTHESPAK and allegedly paid for through LC/TR. Hence, FEBTC should have attached only those plastic products that were imported and not those that are locally produced like those of SMP.

15. Yet, the main bulk of the plastic goods/materials attached by the sheriff belonged to the plaintiff as can easily be seen from the pictures of the sacks of goods attached which show clearly the labels "TOPRENE" (a brand name) and "SMP INCORPORATED" and Paseo de Blas, Valenzuela, Philippines", all of which indicate that the goods/materials are owned by plaintiff and locally made. The pictures were taken in the place where the sheriff brought the goods for safe-keeping, i.e, at the Tacoma Warehouse, Port Area, Manila x x x x[4]

On 8 April 1997 SIDDCOR filed a Motion to Dismiss the Complaint on the assertion that no action was filed by respondent SMP against the Sheriff within 120 days from the filing of the bond as provided in Sec. 17, Rule 39, of the Rules of Court. On 10 April 1997 petitioner and the Sheriff filed a Manifestation and Motion for a Bill of Particulars and Production of Documents. Movants averred that CLOTHESPAK was an indispensable party; that the Complaint did not state a cause of action; and, that certain allegations therein should be particularized.

On 15 July 1997 the trial court granted the Motion of SIDDCOR. It found that indeed the case was filed beyond the 120-day period, relieving SIDDCOR from any liability. On the other hand, it denied the Motion of petitioner and the Sheriff. It expressed the view that CLOTHESPAK was not responsible for the attachment and necessarily could not be made defendant in the present case; that the allegations in the Complaint were sufficient bases for them to properly formulate their defenses; and, that the matters they sought to be particularized were evidentiary in character and should therefore be threshed out during the trial proper.

On 12 August 1997 petitioner filed another Motion this time seeking the dismissal of the Complaint anchored on these grounds: (a) the Complaint stated no cause of action; and, (b) the cause of action, if any, was barred by prior judgment since the third-party claim of respondent SMP was denied in Civil Case No. 65006.

On 24 October 1997 the trial court denied petitioner's Motion explaining that the Complaint alleged ultimate facts constituting a cause of action and that from the denial of respondent SMP's third- party claim, SMP could file a separate action to vindicate its claim to the properties.[5] On 25 November 1997 reconsideration was denied.[6]

Through a Petition for Certiorari and Mandamus petitioner assailed the 24 October and 25 November 1997 Orders of the trial court before the Court of Appeals. On 31 July 1998 the Petition was dismissed. The appellate court concurred in the finding of the trial court that the Complaint stated a cause of action and held that neither certiorari nor mandamus was a proper remedy.[7] On 16 September 1998 reconsideration was denied.[8]

Petitioner asserts that the Complaint of respondent SMP does not state a cause of action because on the basis of the allegations therein, subject goods were already owned by CLOTHESPAK at the time of attachment. Petitioner also claims that respondent SMP raised a new theory in Civil Case No. Q-97-30372, i.e., that respondent SMP retained ownership of the goods based on a provisional receipt wherein its collector acknowledged having received postdated checks drawn by CLOTHESPAK and wherein the same collector placed a handwritten statement thereon that "materials belong to SMP until your checks clear." Petitioner argues that the statement is a unilateral condition inserted by a mere collector after delivery of the goods which cannot supersede the covering Sales Invoices prepared before delivery and signed by CLOTHESPAK stating that the sale was on credit "60 PDC."[9] Petitioner thus maintains that the trial court acted with grave abuse of discretion tantamount to lack or excess of jurisdiction when it did not dismiss the Complaint and respondent Court of Appeals committed serious error by sustaining the trial court.

There is no merit in the petition. A cause of action is an act or omission of one party in violation of the legal right of the other. Its essential elements are: (a) the existence of a legal right in the plaintiff; (b) a correlative legal duty in the defendant; and, (c) an act or omission of the defendant in violation of plaintiff's right with consequential injury or damage to the plaintiff for which he may maintain an action for the recovery of damages or other appropriate relief.[10] Readily discernible from the face of respondent SMP's Complaint is that there is a statement of causes of action. Assuming the facts to be true, (a) respondent SMP still owns subject goods on account of an agreement with CLOTHESPAK contained in a provisional receipt that "SMP can get back the goods delivered at any time in case the check(s) are dishonored and returned by the bank for any reason;" (b) petitioner has a correlative duty to respect such ownership; and, (c) the act of petitioner in including the goods among the attached properties violated the right of respondent SMP and entitled it to recover damages or other appropriate relief. On the basis of those allegations, the trial court can render a valid judgment.

It appears that petitioner outrightly regards as untrue the claim of respondent SMP that it retained ownership of subject goods; in effect, petitioner contradicts the allegations in the Complaint. This is improper. In a motion to dismiss a complaint based on lack of cause of action, the question submitted to the court for determination is the sufficiency of the allegations in the complaint to constitute a cause of action and not whether those allegations of fact are true, for such motion must hypothetically admit the truth of the facts alleged in the complaint.[11] Otherwise stated, the test of the sufficiency of the facts alleged in the complaint is whether, admitting the facts alleged, the court could render a valid judgment upon the same in accordance with the prayer of the complaint.[12] An inquiry regarding the veracity of respondent SMP's allegations is not proper in resolving the Motion to Dismiss. As to whether respondent SMP is still the owner of subject goods is an issue necessitating a full-blown trial on the merits.

An order denying a motion to dismiss is interlocutory and cannot be the subject of the extraordinary petition for certiorari or mandamus. The remedy of the aggrieved party is to file an answer and to interpose as defenses the objections raised in his motion to dismiss, proceed to trial, and in case of an adverse decision, to elevate the entire case by appeal in due course.[13] However, the rule is not ironclad. Under certain situations, recourse to certiorari or mandamus is considered appropriate, i.e., (a) when the trial court issued the order without or in excess of jurisdiction;[14] (b) where there is patent grave abuse of discretion by the trial court;[15] or, (c) appeal would not prove to be a speedy and adequate remedy as when an appeal would not promptly relieve a defendant from the injurious effects of the patently mistaken order maintaining the plaintiff's baseless action and compelling the defendant needlessly to go through a protracted trial and clogging the court dockets by another futile case.[16] At any rate, we find that the Petition for Certiorari and Mandamus filed by petitioner before the Court of Appeals is not the available remedy. The trial court did not issue the assailed Orders with grave abuse of discretion, or without or in excess of jurisdiction. The Orders did not produce any injurious effect on petitioner. Rather, the trial court issued the Orders based on a correct appreciation of the evidence which made them withstand appellate scrutiny twice.

WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals of 31 July 1998 sustaining the Orders of the Regional Trial Court-Br.92, Quezon City, which denied petitioner Far East Bank and Trust Company's Motion to Dismiss respondent SMP, Inc.'s Complaint, and its Resolution of 16 September 1998 denying reconsideration are AFFIRMED. Costs against petitioner.


Mendoza, Quisumbing, Buena, and De Leon, Jr., JJ., concur.

[1] Filed on 9 March 1995, docketed as Civil Case No. 65996.

[2] Order issued by Judge Celso D. Lavina, RTC-Br. 71, Pasig City; CA Rollo, pp. 94 - 95.

[3] Orders issued by Judge Alfredo C. Flores, RTC-Br. 167, Pasig City; CA Rollo, pp. 22-33, 96 and 98. The case was re-assigned to this Branch.

[4] Rollo, pp. 70-74.

[5] Order issued by Judge Juan Q. Enriquez Jr. of RTC-Br. 92, Quezon City; Rollo, pp. 61 - 62.

[6] Rollo, p. 63.

[7] Decision penned by Justice Ramon Mabutas Jr. with the concurrence of Justices Arturo B. Buena (now a Member of the Supreme Court) and Hilarion L. Aquino; Rollo, p. 41.

[8] Rollo, p. 43.

[9] Meaning sixty (60) days postdated check.

[10] Mathay v. Consolidated Bank and Trust Company, No. L-23136, 26 August 1974, 58 SCRA 559.

[11] Garcon v. Redemptorist Fathers, No. L-23510, 30 May 1966, 17 SCRA 341; Philippine National Bank v. Court of Appeals, G.R. No. 121251, 26 June 1998, 291 SCRA 271.

[12] Ramos v. Condez, No. L-22072, 30 August 1967, 20 SCRA 1146.

[13] National Investment and Development Corp. v. Aquino, No. L-34192, 30 June 1988, 163 SCRA 153.

[14] Casil v. Court of Appeals, G.R. No. 121534, 28 January 1998, 285 SCRA 264.

[15] Pineda v. Bartolome, 95 Phil. 930 (1954); Mead v. Argel, No. L-41958, 20 July 1982, 115 SCRA 256.

[16] MB Finance Corporation v. Abesamis, G. R. No. 93875, 22 March 1991, 195 SCRA 592.