Title
Lourdes Suites vs. Binarao
Case
G.R. No. 204729
Decision Date
Aug 6, 2014
Hotel owner sued for unpaid damages; court dismissed case due to insufficient evidence, ruling dismissal with prejudice as final in small claims.
hotel dispute
unpaid balance
damages
A

Case Summary (A.M. No. MTJ-02-1437)

Factual Background

The petitioner executed two separate contracts with the respondent for room accommodations for student groups. The first covered the period 27 March 2011 to 16 April 2011, and then May 2011 from May 1 to May 21, with a stated number of 12 rooms and a total contract price of P1,501,920.00 for the AQ College of Nursing & Health Sciences Students. The second covered multiple segments for the Mariano Marcos State University College of Nursing & Health Sciences Students, namely 27 March 2011 to May 7, May 9 to May 14, May 16 to May 21, May 23 to May 28, May 30 to June 4, and additional periods of June 6 to June 11 and June 13 to June 18, with a stated number of 13 rooms and a total contract price of P2,760,090.00. The total contract price across both groups was P4,262,010.00.

The petitioner alleged that the respondent had paid the full contract prices. The petitioner, however, claimed an additional unpaid balance of P47,810.00, which the petitioner attributed to charges for alleged damages to furniture, a lost key, and excess guests. On 25 July 2011, the petitioner sent a demand letter for the allegedly unsettled amount. When the respondent did not pay, the petitioner filed a Statement of Claim for collection of sum of money plus damages before the MeTC.

Proceedings in the MeTC

In her response, the respondent denied liability. She asserted that she was not obliged to pay because, according to her, the petitioner billed the charges twice. The petitioner challenged the response’s form, arguing that it was not submitted in the required manner of an Answer as required by Section 1, Rule 11 of the Revised Rules of Court.

The MeTC resolved the dispute on the merits of proof. It found that the petitioner failed to prove by preponderance of evidence the existence of an obligation in the petitioner’s favor for the alleged unpaid amount of P47,810.00. The MeTC noted that the respondent repeatedly requested a proper accounting, specifically to show the actual number of students who stayed and the number of rooms actually used. The MeTC observed that the respondent asked for a computation of the alleged unpaid amount, but the petitioner disregarded those requests.

Based on the evidence, the MeTC concluded that the respondent had already paid her monetary obligation and even overpaid in the amount of P43,060.00. Accordingly, the MeTC dismissed the complaint with prejudice for lack of cause of action. In the dispositive portion, it also ordered the petitioner to refund the P43,060.00 overpayment and to pay P10,000.00 as moral damages. The MeTC denied exemplary damages because the respondent failed to prove that the petitioner acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner.

RTC Review Through Petition for Certiorari

Aggrieved, the petitioner filed a petition for certiorari before the RTC on 25 May 2012, assailing the MeTC’s decision. The petitioner argued that a dismissal on the ground that the complaint states no cause of action cannot be treated as a dismissal with prejudice under the Rules. It further argued that lack of cause of action was not a valid ground for dismissal, and that dismissal with prejudice was likewise not proper. The petitioner also contended that lack of cause of action was not set forth as a ground for dismissal in either the Rules of Procedure For Small Claims Cases or the Rules of Civil Procedure.

In its 7 September 2012 Decision, the RTC denied the petition. It held that there was no grave abuse of discretion by the MeTC. The petitioner later moved for reconsideration, dated 3 October 2012, which the RTC denied in an Order dated 16 November 2012, prompting the present petition for review under Rule 45.

Issues Raised Before the Supreme Court

The petitioner maintained that the RTC could not sustain the MeTC decision because the MeTC allegedly acted with grave abuse of discretion. The petitioner anchored its arguments on the following points: first, that a dismissal for lack of cause of action cannot be deemed dismissal with prejudice under the Rules; second, that the MeTC’s ruling improperly relied on evidence of the respondent rather than on the allegations in the complaint; third, that lack of cause of action should arise only under particular circumstances such as when the action is not brought in the name of the real party in interest; and fourth, that the Rules on small claims and civil procedure do not treat lack of cause of action, much less dismissal with prejudice, as a proper ground.

The Parties’ Contentions in the Supreme Court

The Court addressed the petitioner’s core theory that, even after the presentation of evidence, a complaint should not be dismissed with prejudice on the ground of lack of cause of action. The petitioner posited two main reasons: the ground was allegedly not expressly provided in the Rules on small claims cases; and if the plaintiff failed to prove a cause of action, the only remedy should have been a demurrer filed by the defendant.

The respondent, consistent with the rulings below, relied on the MeTC’s finding that the petitioner failed to establish the alleged balance by preponderant evidence and that the respondent had in fact paid what was due, including the determination that an overpayment existed.

Legal Basis and Reasoning

The Court rejected the petitioner’s interpretation of the governing doctrine in Macaslang v. Zamora. The Court explained that the concepts of failure to state a cause of action and lack of cause of action are not synonymous. In Macaslang, the Court clarified that failure to state a cause of action refers to the insufficiency of the pleading and is a ground for dismissal under Rule 16. By contrast, lack of cause of action refers to a situation where the evidence does not prove the cause of action alleged in the pleading.

The Court adopted the remedial-law explanation attributed to Justice Regalado. The explanation distinguished the procedural remedy in the first scenario from the second. When the issue is insufficiency of the pleading, the defendant raises it through a motion for dismissal. When the issue is insufficiency of evidence, the defendant proceeds through the filing of a demurrer to evidence when warranted. The Court further emphasized that these remedies discussed in Macaslang were those available to the defendant, but it did not adopt the petitioner’s position that courts are absolutely precluded from dismissing a case for lack of cause of action when the trial evidence does not establish the plaintiff’s claim.

The Court pointed out the basic civil rule that courts must determine whether the plaintiff proved the case by preponderance of evidence, defined as the probability of truth and evidence more convincing to the court than the evidence offered in opposition.

In this case, the Court observed that the RTC correctly upheld the MeTC’s approach. The Court noted the RTC’s observation that the MeTC dismissed the complaint because the petitioner failed to preponderantly establish its claim by “clear and convincing evidence,” and that the MeTC’s dismissal relied on the evidence presented rather than on the bare allegations of the complaint. The Court further found that the dismissal with prejudice was not an exercise of wanton or palpable discretion. It explained that the case was an action for small claims, where decisions are rendered final and unappealable, and thus a decision dismissing the case necessarily results in a dismissal with prejudice.

Ruling of the Supreme Court

Finding no error

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