Case Summary (G.R. No. 214046)
Trial Court Proceedings
PELI moved to dismiss for lack of personal jurisdiction (invalid summons), misjoinder, improper venue, and failure to state a cause of action. The Regional Trial Court denied the motion, finding valid service on PELI’s corporate secretary, proper venue (Taguig City offices), real-party-in-interest status of PELI, and sufficient factual allegations of bad faith under the Constitution, Civil Code and Agreement.
Court of Appeals Ruling
On certiorari under Rule 45, the CA reversed the RTC, holding grave abuse of discretion in denying dismissal. Relying on Santiago v. Pioneer, it considered evidence from the preliminary-injunction hearing under the Tan exception to conclude the non-exclusive Distribution Agreement had expired and thus the complaint stated no cause of action.
Legal Framework on Motion to Dismiss
Under Rule 16 § 1(g), failure to state a cause of action must appear from the complaint’s allegations alone. Pre-Tan jurisprudence forbids reference to extrinsic evidence. Tan v. Director of Forestry introduced a narrow exception: where a preliminary-injunction hearing produced evidence disproving complaint allegations, a court may look beyond the pleadings. Attachments to a complaint, however, are integral and may always be considered.
Civil Code Abuse-of-Rights Doctrine
Article 19 mandates exercise of rights with justice, honesty and good faith. Article 20 covers damages contrary to law; Article 21, lawful acts contrary to morals or public policy. Abuse of rights requires (1) a legal right, (2) exercise in bad faith, and (3) intent to injure—or, in lesser view, mere absence of good faith. Bad faith is a question of intent, proven by clear and convincing evidence.
Supreme Court Decision
The Court held that the Distribution Agreement annexed to the complaint properly formed part of the pleading. Hypothetically admitting Tocoms’ factual allegations—sudden non-renewal, collusion with Fabriano, clie
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Facts of the Case
- Tocoms Philippines, Inc. (“Tocoms”) served as non-exclusive distributor of Philips Domestic Appliance in the Philippines under annually renewed Distribution Agreements from 2001 to 2008 and later.
- Tocoms invested in more than 250 retail outlets nationwide, built goodwill and reputation, and consistently surpassed sales targets.
- Prior to end-2012, Tocoms disclosed 2013 marketing plans to Philips Singapore and complied with requirements for renewal of the Distribution Agreement.
- On January 2, 2013, at a meeting called by PELI’s General Manager Angela Oh, Tocoms was informed via letter signed by Selina Thurer (VP/GM Asia Pacific) that its distributorship would not be renewed.
- Tocoms alleged it received no sufficient notice; in December 2012, PELI and a new distributor, Fabriano, had already been selling the same products to Fabriano at lower prices, causing clients to accuse Tocoms of dishonesty.
- Major client Western Marketing threatened to return inventory worth ₱5,000,000; other stores threatened to return roughly ₱2,000,000 more.
- PELI demanded Tocoms sell back remaining inventory under onerous terms (phased-out models at 40% of price, Class B at 60%, excluding client-returned goods), resulting in potential losses of about ₱12,000,000.
- PELI recalled ICC stickers, barring Tocoms from selling its remaining stock.
- Tocoms offered fairer buy-back terms (landed cost plus 12%, phased payment, no selection of new boxed stock), but PELI refused.
- Tocoms filed suit on February 4, 2013 for damages and injunction, seeking actual and exemplary damages, attorney’s fees, and a TRO/preliminary injunction preventing the change of distributor, sale by Fabriano, and release of ICC stickers.
Procedural History
- Trial Court (RTC Pasig, Branch 266) denied PELI’s Motion to Dismiss (May 30, 2013; July 1, 2013), finding valid service, proper impleader, proper venue, and sufficient cause of action.
- PELI filed for certiorari before the Court of Appeals (CA-G.R. SP No. 130873).
- CA reversed and set aside RTC orders (Decision March 13, 2014; Resolution August 29, 2014), holding:
- Complaint’s thrust was damages for non-renewal of a non-exclusive, expired Distribution Agreement.
- Under Santiago v. Pioneer Savings & Loan, CA considered evidence from preliminary injunction hearing.
- Complaint failed to state a cause of action as Agreement had expired and was non-exclusive