G.R. No. L-77032 September 30, 1988
EXCEL AGRO-INDUSTRIAL CORPORATION, petitioner, vs. JUAN T. GOCHANGCO AND COURT OF APPEALS, respondents.

FACTS

Petitioner Excel Agro-Industrial Corporation filed a complaint against private respondent Juan T. Gochangco to compel acceptance of a Republic Bank Check for P100,000 as payment for a loan secured by a Deed of Assignment over nine parcels of land. The complaint sought to declare the Deed of Assignment ineffective and to restrain Gochangco from disposing of the properties. The loan was due on October 1, 1983, the same day petitioner allegedly tendered the check. The Deed of Assignment contained a stipulation for forfeiture and sale of the properties if the loan remained unpaid on that date.
Private respondent filed an Answer raising the affirmative defense of lack of cause of action, arguing a check is not legal tender and the Deed was valid. He later filed a Motion to Dismiss on the same grounds. The Regional Trial Court dismissed the complaint. The Court of Appeals affirmed, ruling that the motion could be treated as one for preliminary hearing on affirmative defenses and that, hypothetically admitting the complaint’s allegations, a check does not constitute valid tender of payment, thus the complaint stated no cause of action.

ISSUE

Whether the trial court erred in dismissing the complaint without conducting a hearing on the motion to dismiss which was based on an affirmative defense already raised in the answer.

RULING

Yes. The Supreme Court set aside the appellate court’s decision and reinstated the case. The Court held that while the procedure of filing a motion to dismiss after an answer was unusual, it was within the trial court’s discretionary power and could be treated as a motion for a preliminary hearing on the affirmative defense. However, the trial court committed reversible error by dismissing the complaint without conducting the required hearing. Under Section 3, Rule 16 of the Revised Rules of Court, a hearing is necessary before resolving a motion to dismiss unless the ground is indubitable. The petitioner alleged in its complaint that the respondent refused acceptance without legal justification and, in its appeal, asserted it had proof of respondent’s prior assent to a check payment and bad faith in refusing it to trigger forfeiture of the valuable collateral. These factual allegations disputing the sufficiency of the tender and the validity of the forfeiture clause warranted a hearing where evidence could be presented. The Court, citing Asejo v. Leonoso, emphasized that a party must be accorded a hearing before being deprived of a cause of action, regardless of the court’s preliminary opinion on the pleadings. The matter was not indubitable; thus, a hearing should have been conducted to determine the factual issues surrounding the tender of payment and the Deed’s enforcement before dismissal.