Facts:

Emiliano Acuna (Plaintiff-Appellant) filed a complaint on August 9, 1962, against the Batac Producers Cooperative Marketing Association, Inc., and several individual defendants, including Justino Galano, Teodoro Narciso, and Leon Q. Verano (Defendants-Appellees). The dispute arose from an alleged agreement made on May 5, 1962, between Acuna and Verano, manager of Batac Procoma, for Acuna to secure P20,000.00 in funding for the cooperative's Virginia tobacco buying operations. In return, Acuna would act as the corporation’s representative in Manila, helping with tobacco shipments and remuneration of P0.50 per kilo would be paid for his services. However, this was later adjusted to P0.30 per kilo after discussions with other members of the Board of Directors.

On May 10, 1962, Acuna made a cash advance of P20,000.00 to Batac Procoma, received a receipt, and fulfilled several obligations including delivering 3,000 sacks of required material and advancing an additional P5,000.00.

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Facts:

Background of the Transaction

• On or about May 5, 1962, plaintiff Emiliano Acuna and defendant Leon Q. Verano (Manager of Batac Producers Cooperative Marketing Association, Inc. – Batac Procoma, Inc.) reached a tentative agreement.
• The agreement involved plaintiff securing a sum of at least P20,000.00 to be advanced to Batac Procoma, Inc. as additional funds for Virginia tobacco buying operations during the redrying season.
• Plaintiff was to be designated as the corporation’s representative in Manila to facilitate the shipment, delivery, and payment for tobacco, with remuneration based on a per kilo rate.

Negotiation and Execution of the Agreement

• The preliminary understanding was modified upon discussions with the entire Board of Directors (except Manager Verano) where it was agreed that the payment rate for Acuna’s services would be P0.30 per kilo instead of P0.50.
• On May 6, 1962, the defendants constituting the Board (including officials such as Justino Galano and Teodoro Narciso) formally authorized the Manager to enter into an agreement for securing funds and services.
• A formal “Agreement” was executed on May 10, 1962, with required signatures and acknowledgment by Atty. Fernando Alcantara (Secretary and Legal Counsel), serving as instrumental evidence of the parties’ consensus.

Performance Under the Agreement

• Plaintiff delivered the sum of P20,000.00 to the defendant corporation through its treasurer, Dominador T. Cocson, on May 10, 1962, with an Official Receipt issued immediately thereafter.
• Plaintiff performed his part by:
• Diligently fulfilling the services as stipulated in the agreement;
• Furnishing 3,000 sacks of tobacco costing P6,000.00 on request; and
• Advancing an additional P5,000.00 from his own funds with the full knowledge and consent of all individual members of the Board.

Subsequent Developments and Disapproval

• The defendant Board of Directors, despite earlier acquiescence, eventually disapproved the "Agreement" by a resolution passed on June 6, 1962, citing alleged non-fulfillment of contractual promises and differing interpretations on plaintiff’s remuneration.
• The Board resolution indicated plaintiff’s failure to comply with certain obligations and criticized his interpretation of the contract, particularly concerning the subject matter referred to as the “suspensive condition.”
• Based on these developments, the controversy arose on whether the contract had been validly perfected.

Procedural History and Court Proceedings

• Plaintiff initially filed a complaint on August 9, 1962, later amended on August 13, 1962, seeking:
• Issuance of a writ of attachment against the defendant corporation’s properties; and
• A judgment for payment of P300,000.00 for services rendered, plus additional sums for cash advances (P31,000.00) and attorney’s fees (P25,000.00).
• On August 14, 1962, a writ of preliminary attachment was issued after the plaintiff posted the requisite bond.
• On August 22, 1962, defendants moved to dismiss the complaint on the ground of stating no cause of action and to discharge the writ of preliminary attachment, arguing:
• The contract was never perfected due to non-approval/ratification by the Board; and
• Plaintiff had not, in any substantive manner, facilitated the collection or delivery of the tobacco.
• On September 10, 1962, the lower court granted the motion to dismiss, stating that the complaint failed to allege a sufficient cause of action because the contract was void ab initio.
• Consequently, the writ of preliminary attachment was discharged, although a deposit representing the funds advanced by plaintiff was maintained in court for eventual withdrawal.

Appellate Issues Raised by Plaintiff

• Plaintiff-appellant challenged the dismissal on several counts, assigning four errors to the lower court’s ruling:
• The error concerning the extent of factual inquiry beyond the complaint’s allegations when adjudicating the motion to dismiss.
• The error in considering beyond the complaint’s averments additional facts and documents which should have awaited trial on the merits.
• The error surrounding the determination that, even if a contract existed, its object was illegal (specifically relating to the "upgrading" clause in the contract) and therefore void.
• Incidental errors relating to the interpretation of evidentiary affidavits, particularly those explaining the “upgrading” and “downgrading” of tobacco.

Issue:

Whether or not the lower court properly limited its inquiry only to the allegations contained in the complaint when ruling on the defendants’ motion to dismiss.

• Specifically, if the court erred by considering additional evidence (affidavits and documents) beyond the complaint’s allegations.
• Whether the court should have presumed the truth of the complaint’s averments for the purpose of testing if a cause of action existed.

Whether the contract between plaintiff and defendant had been perfected despite lacking formal Board approval, given that there was evidence of implied ratification through the conduct of the parties.

• The issue of whether the Board’s later disapproval/rescission of the agreement affects the validity of the contract.
• Whether plaintiff’s performance (delivery of funds, services, and other contributions) constituted ratification of an otherwise valid contract.

Whether the contract, or any part thereof (notably the “upgrading” clause), was illegal or void ab initio due to the alleged involvement in prohibited tobacco upgrading/downgrading practices.

• Whether the explanation given by defendants regarding “upgrading” carries an illegal or fraudulent connotation.
• Whether the factual disputes regarding the practice of tobacco grading should be resolved at the trial of merits rather than disposed of summarily in a motion to dismiss.

• Whether the lower court improperly decided factual issues (such as the purpose and interpretation of the “upgrading” clause) that should have been left for trial.

Ruling:

• (Subscriber-Only)

Ratio:

• (Subscriber-Only)

Doctrine:

• (Subscriber-Only)