GR 162461; (November, 2005) (Digest)
G.R. No. 162461 November 23, 2005
AMOS P. FRANCIA, JR. and CECILIA ZAMORA, Petitioners, vs. POWER MERGE CORPORATION, Respondent.
FACTS
Petitioners Amos P. Francia, Jr. and Cecilia Zamora placed substantial sums of money with Westmont Investment Corporation (WINCORP) under investment schemes that were periodically rolled over. WINCORP, acting as an agent, subsequently invested these funds in respondent Power Merge Corporation (PMC) as the borrower. This was evidenced by Confirmation Advices issued to petitioners, which stated the transactions were made for the client’s benefit and account without recourse to WINCORP. When petitioners failed to withdraw their investments due to financial difficulties faced by WINCORP and Westmont Bank, they sent a demand letter to PMC for payment. PMC did not respond.
Petitioners filed a Complaint for Sum of Money and Damages against both WINCORP and PMC before the Makati RTC. PMC filed a Motion to Dismiss, arguing the complaint failed to state a cause of action against it. The RTC denied the motion. PMC elevated the matter to the Court of Appeals via a petition for certiorari. The CA granted PMC’s petition, set aside the RTC orders, and dismissed the complaint against PMC, ruling that the allegations were insufficient to establish a cause of action.
ISSUE
Whether the Court of Appeals erred in ruling that the complaint failed to state a cause of action against respondent Power Merge Corporation.
RULING
Yes, the Supreme Court reversed the Court of Appeals and reinstated the complaint against PMC. The legal logic is anchored on the rule for a motion to dismiss based on failure to state a cause of action. In such a motion, the sufficiency of the cause of action is determined solely by the allegations in the complaint, which are hypothetically admitted as true. The court does not consider evidence or other matters outside the pleading.
The complaint alleged that petitioners’ funds were placed with WINCORP, which then invested them with PMC as the borrower. It further alleged that PMC failed to pay the loan upon demand. These factual allegations, taken as true, sufficiently establish the elements of a cause of action for sum of money: (1) that PMC is indebted to petitioners for a sum of money, and (2) that PMC failed to pay despite demand. The Confirmation Advices, annexed to the complaint, identified PMC as the borrower of the specific funds. Whether PMC is indeed liable, or whether the relationship is one of agency or loan, involves evidentiary matters that are improper for resolution in a motion to dismiss. These are substantive defenses that must be raised in an answer and proven during trial. Therefore, the complaint on its face stated a valid cause of action, and the trial court correctly denied the motion to dismiss.