G.R. No. L-23017 May 23, 1968
LA SUERTE CIGAR AND CIGARETTE FACTORY, plaintiff, vs. CENTRAL AZUCARERA DEL DANAO, ET AL., defendants; CENTRAL AZUCARERA DEL DANAO, third-party plaintiff-appellant, vs. TALISAY-SILAY MILLING CO., INC. and J. AMADO ARANETA, third-party defendants-appellees.

FACTS

On January 23, 1962, La Suerte Cigar and Cigarette Factory filed a money claim against Central Azucarera del Danao (Central), Talisay-Silay Milling Company, Inc., and J. Amado Araneta. The complaint against Talisay-Silay and Araneta was later dismissed, leaving Central as the sole defendant. On June 15, 1962, Central filed a third-party complaint against Talisay-Silay and Araneta, seeking to shift liability for La Suerte’s claim to them. The third-party complaint was based on an agreement dated March 3, 1960, among the Philippine National Bank (PNB), Talisay-Silay, and Central. Under this agreement, PNB acquired Talisay-Silay’s shares in Central. Paragraph 9 of the agreement stipulated that obligations of Central incurred before the agreement, outstanding in its books and listed, would be paid by Central only if approved and acknowledged by PNB. Paragraph 10 stipulated that any obligations purporting to be of Central but not appearing in its books nor acknowledged as per paragraph 9 would be borne and paid by Talisay-Silay and/or Araneta. The third-party complaint alleged that the amount claimed by La Suerte had never been approved or acknowledged by PNB but did not allege whether the obligation appeared in the books of Central. The third-party defendants moved to dismiss the complaint for lack of cause of action, which the trial court granted.

ISSUE

Whether the third-party complaint states a cause of action against Talisay-Silay Milling Co., Inc. and J. Amado Araneta.

RULING

No, the third-party complaint does not state a cause of action. The Supreme Court affirmed the dismissal. The liability of the third-party defendants arises from and is defined by the agreement. For a cause of action to accrue, the essential conditions stipulated in the agreement must be alleged. The third-party complaint failed to allege that the obligation in question does not appear in the books of Central, which is a necessary condition under paragraph 10 of the agreement to hold Talisay-Silay and/or Araneta liable. Merely alleging that the obligation was not approved or acknowledged by PNB is insufficient. The test for sufficiency is whether, admitting the alleged facts, the court could render a valid judgment. The omission is fatal. The third-party complaint would have stated a cause of action if it had averred either: (1) that the obligation is outstanding in Central’s books, listed, and itemized, but not approved by PNB; or, alternatively, (2) that the obligation purports to be of Central but does not appear in its books. The order of dismissal was affirmed without prejudice to filing another action.