G.R. No. 155680 ; July 2, 2012
FIRST LEVERAGE AND SERVICES GROUP, INC., Petitioner, vs. SOLID BUILDERS, INC., Respondent.

FACTS

PNB Republic Bank owned two parcels of land in Tagaytay City. After failed public biddings, it offered the properties for negotiated sale. Respondent Solid Builders, Inc. submitted a formal offer to purchase both lots for a package price of ₱61,000,000.00, payable in installments. PNB Republic’s Loan Recovery and Acquired Assets Division (LRAAD) communicated its approval of Solid Builders’ improved offer of ₱67,000,000.00 via a letter dated August 12, 1994. Subsequently, on August 17, 1994, petitioner First Leverage and Services Group, Inc. submitted a higher cash offer of ₱70,000,000.00. PNB Republic refused to accept this later offer, stating it had already contracted with Solid Builders. A Deed of Promise to Sell was eventually executed between PNB Republic and Solid Builders on September 19, 1994.
First Leverage filed a Complaint for Annulment of the Promise to Sell, Mandamus, and Prohibitory Injunction against PNB Republic and Solid Builders. It argued that the approval by the LRAAD was ultra vires, as the Board of Directors’ approval was required for sales over ₱3,000,000.00, and that its superior cash offer should have been accepted. The Regional Trial Court dismissed the complaint. The Court of Appeals affirmed, prompting First Leverage to elevate the case to the Supreme Court via a petition for review on certiorari.

ISSUE

Whether the Court of Appeals erred in affirming the dismissal of the complaint for Annulment of Promise to Sell, Mandamus, and Prohibitory Injunction.

RULING

The Supreme Court denied the petition and affirmed the appellate court’s decision. The core legal logic rests on the nature of the action and the absence of a cause of action against the respondent, Solid Builders. The complaint sought the annulment of the Deed of Promise to Sell between PNB Republic and Solid Builders. For such an action to prosper, the complaint must allege facts demonstrating that Solid Builders was a party to the alleged fraud, mistake, or duress that vitiated PNB Republic’s consent, or that it was a purchaser in bad faith.
The Court meticulously examined the amended complaint and found no such factual allegations against Solid Builders. The petition’s grievances were directed solely at the acts of PNB Republic and its officers, such as the alleged ultra vires approval by the LRAAD and the refusal to accept a higher offer. There was no assertion that Solid Builders conspired with PNB Republic’s officers or had knowledge of any irregularity. Without these essential factual premises, no cause of action existed against Solid Builders. Consequently, the trial court correctly dismissed the complaint as against Solid Builders for failure to state a cause of action. The Court emphasized that a cause of action requires a clear right of the plaintiff, a correlative obligation of the defendant, and an act or omission by the defendant violating that right—elements absent in the petitioner’s claims against the respondent.