G.R. No. 216566 February 24, 2016
Magellan Aerospace Corporation, Petitioner, vs. Philippine Air Force, Respondent.

FACTS

The Philippine Air Force (PAF) contracted Chervin Enterprises, Inc. for the overhaul of two aircraft engines. Chervin, lacking technical capability, subcontracted the work to petitioner Magellan Aerospace Corporation (MAC). MAC subsequently outsourced the service to National Flight Services, Inc. The overhauled engines were delivered and accepted by PAF. MAC demanded payment from Chervin for the balance of the contract price. PAF confirmed it had released payment to Chervin, withholding only a retention fund. Despite this, MAC remained unpaid.
MAC filed a complaint for sum of money against Chervin and PAF before the Regional Trial Court (RTC). MAC alleged Chervin acted as an agent of PAF and prayed that, should Chervin fail to pay, PAF be ordered to pay the claimed amount and release the retention fund. PAF moved to dismiss, arguing its contract was solely with Chervin, it was not privy to MAC’s contract, and it had already fully paid Chervin. The RTC granted the motion to dismiss. The Court of Appeals affirmed the dismissal against PAF, ruling MAC’s complaint failed to state a cause of action against it.

ISSUE

Whether the Court of Appeals erred in affirming the dismissal of MAC’s complaint against PAF for failure to state a cause of action.

RULING

No, the Court of Appeals did not err. A motion to dismiss based on failure to state a cause of action tests the legal sufficiency of the allegations in the complaint. The plaintiff must plead ultimate facts showing a legal right, a correlative duty of the defendant, and an act or omission violating that right. The court examines only the facts alleged in the complaint, presuming them to be true, and determines whether they constitute a valid cause of action.
The Court found MAC’s complaint deficient. The core allegation was that Chervin acted as PAF’s agent, making PAF liable for Chervin’s debt to MAC. However, the complaint failed to plead specific facts demonstrating that an agency relationship was established between PAF and Chervin. The contract attached to the complaint was a standard procurement contract between PAF and Chervin as an independent contractor, not as an agent. There were no factual averments that PAF authorized Chervin to act on its behalf or that PAF exercised control over Chervin’s dealings with MAC. Mere allegation of agency, without supporting ultimate facts, is a conclusion of law insufficient to withstand a motion to dismiss. Since the complaint did not adequately plead facts establishing PAF’s correlative obligation to pay MAC, it correctly failed to state a cause of action against PAF. The dismissal was proper.