Case Summary (G.R. No. 213230)
Petitioner
Naoaki Hirakawa claims to be assignee of four postdated checks representing part of the proceeds from the sale of the Windfields Subdivision project in Consolacion, Cebu City, and seeks collection of those checks and accrued damages.
Respondents
Lopzcom Realty Corporation and Atty. Gari Tiongco contend that Hirakawa was neither party to the Deed of Sale nor assignee of the underlying contract, and thus lacks cause of action.
Key Dates
• December 28, 1995: Sale of Windfields Subdivision for ₱100 million.
• September 30, 1996: Sakai assigns four postdated checks totaling ₱65 million to Hirakawa.
• October 30, 1996–1999: Due dates of assigned checks; only the first is paid.
• February 9, 1999: Deed of Assignment of golf-course shares in lieu of ₱40 million balance.
• October 30, 2004 & 2005: Issuance of two ₱20 million PNB checks, both dishonored or unpaid.
• March 22, 2010: Final demand notice served.
• June 22, 2010: Complaint for breach of contract and attachment filed.
• May 15, 2012: RTC denies respondents’ motion to dismiss.
• November 19, 2013: Court of Appeals reverses and dismisses complaint.
• July 8, 2014: CA denies motions for reconsideration.
• December 5, 2019: Supreme Court decision on certiorari petition.
Applicable Law
• 1987 Philippine Constitution (decision after 1990).
• Civil Code of the Philippines, Art. 1311 (relativity of contracts).
• Rules of Court, Rule 65 (certiorari).
Facts
- Lopzcom, through Tiongco, bought Windfields Subdivision from Sakai et al. for ₱100 million, paying by nine Westmont Bank postdated personal checks.
- Sakai assigned four of those checks (totaling ₱65 million) to Hirakawa, with respondents’ knowledge and agreement.
- Respondents replaced the remaining checks in Hirakawa’s name, drawn on Tiongco’s PDCP account. Only the first PDCP check was honored; the next two were dishonored for closed account.
- In 1999 respondents executed a Deed of Assignment of purported golf-course shares as full payment of the ₱40 million balance; no shares were ever issued.
- Respondents later issued two PNB postdated checks of ₱20 million each, both unpaid when due, despite extensions.
- Hirakawa’s demand and partial payments left an unpaid balance of ₱114,027,812.22 by December 2009.
Procedural History
• Trial Court: Issued ex parte preliminary attachment; discharged upon counter-bond. Denied respondents’ motion to dismiss for lack of cause of action.
• Court of Appeals: Held that Hirakawa, not a party to the Deed of Sale, had no cause of action; dismissed complaint without prejudice. Denied reconsideration.
• Supreme Court: Petition for certiorari under Rule 65, arguing CA exceeded jurisdiction in dismissing a collection suit.
Issue
Whether the Court of Appeals gravely erred in dismissing the complaint for lack of cause of action, given that Hirakawa’s suit is essentially a collection action.
Ruling
The Supreme Court grants the petition. It holds that:
- Under the principle of relativity of contracts (Art. 1311), Hirakawa cannot sue for breach of the original Deed of Sale, but only for collection of checks and damages arising from respondents’ failure to pay the assigned instruments.
- The nature of an action is determined by the averments in the body of the complaint, not by its title. Although m
Case Syllabus (G.R. No. 213230)
Antecedents
- Petitioner: Naoaki Hirakawa, a Japanese national, represented by Erica M. Shibamura
- Respondents: Lopzcom Realty Corporation (domestic realty developer) and Atty. Gari M. Tiongco (its President and Chairman)
- Underlying transaction: Sale on December 28, 1995 of Windfields Subdivision (92 hectares in Consolacion, Cebu City) for ₱100,000,000
Facts of the Case
- Payment by nine Westmont Bank postdated personal checks drawn by Tiongco payable to Takezo Sakai
- On September 30, 1996, Sakai assigned to Hirakawa four of those checks (totaling ₱65,000,000); Lopzcom and Tiongco acknowledged and accepted the assignment
- Upon encashment of the first check, respondents replaced the remaining three Westmont checks with PDCP Development Bank checks in Hirakawa’s name, drawn on Tiongco’s personal account
- PDCP Check No. 0050992 due October 30, 1997 was postponed at Tiongco’s request with 18% per annum interest; subsequent PDCP checks due October 30, 1998 and October 30, 1999 were dishonored for “ACCOUNT CLOSED”
- On February 9, 1999, respondents executed a Deed of Assignment offering 115 shares in a golf course joint venture (valued at ₱350,000 each) to settle the remaining ₱40,000,000; no shares or certificates were delivered
- In 2002, respondents issued two PNB postdated checks for ₱20,000,000 each due October 30, 2004 and October 30, 2005; first check deferred with interest, but both remained unpaid upon maturity
- By December 2009, respondents’ partial payments (₱28,000,000) left an outstanding indebtedness of ₱114,027,812.22 (inclusive of interest)
- On March 22, 2010, Hirakawa served a final demand for payment; respondents failed to pay
Procedural History Before the Trial Court
- Complaint filed June 22, 2010 for breach of contract, damages (fraud, issuance of wor