G.R. No. 213230 , December 05, 2019
Naoaki Hirakawa represented by Erica M. Shibamura, Petitioner, vs. Lopzcom Realty Corporation and Atty. Gari M. Tiongco, Respondent.

FACTS

Respondent Lopzcom Realty Corporation, through its President Atty. Gari Tiongco, purchased a subdivision project from Takezo Sakai for P100,000,000.00, paying via nine postdated checks. On September 30, 1996, Sakai assigned his rights and interests over four of these checks, totaling P65,000,000.00, to petitioner Naoaki Hirakawa, a Japanese national. Respondents were informed and agreed to the assignment. At Hirakawa’s request, respondents replaced the remaining checks with new ones payable to him, drawn against Tiongco’s personal account. These replacement checks were later dishonored. Respondents then proposed, and Hirakawa agreed, to assign shares of stock in a golf course project as payment for the outstanding P40,000,000.00 obligation. A Deed of Assignment was executed. Years later, Hirakawa discovered the golf course was never developed and no stock certificates were issued to him. After further demands, respondents issued two more postdated checks, which were also dishonored. Hirakawa’s final demand for payment, including interest, amounted to P114,027,812.22. Upon respondents’ continued failure to pay, Hirakawa filed a Complaint for Breach of Contract and Attachment. The trial court issued a writ of preliminary attachment, later discharged upon respondents’ posting of a counter-bond. Respondents filed a Motion to Dismiss, arguing Hirakawa had no cause of action as he was not a party to the original contract of sale and lacked legal capacity to sue. The trial court denied the motion. The Court of Appeals reversed, granting respondents’ petition for certiorari and dismissing the complaint, holding that Hirakawa, not being a party to the Deed of Sale, had no cause of action for breach of that contract.

ISSUE

Did the Court of Appeals gravely err in dismissing the complaint below due to Hirakawa’s lack of cause of action against respondents?

RULING

Yes. The Supreme Court reversed the Court of Appeals and remanded the case to the trial court. The Court agreed that Hirakawa was not a party to the original Deed of Sale and, under the principle of relativity of contracts, could not sue for its breach. However, the complaint was not merely for breach of that specific contract. An examination of the allegations in the body of the complaint revealed a cause of action for collection of a sum of money based on respondents’ issuance of worthless checks, failure to deliver the assigned shares of stock, and other fraudulent acts, which constituted an actionable wrong under Article 20 of the Civil Code. The nature of an action is determined by the allegations in the complaint, not its title. The complaint sufficiently alleged a cause of action for sum of money with damages. Furthermore, respondents’ defenses of payment and novation pertained to the merits of the case and required a full-blown trial for resolution. Dismissing the complaint outright would be unjust. The case was remanded to the Regional Trial Court for resolution on the merits.