REPUBLIC OF THE PHILIPPINES, PLAINTIFF AND APPELLANT, VS. MARIA (MARUJA) P. VDA. DE YULO, ET AL., DEFENDANTS, LUIS F. RIVILLA, DEFENDANT AND APPELLEE.

Republic versus Rivilla

The Case

This is a civil action for the collection of a sum of money, brought by the Republic of the Philippines against Maria Vda. de Yulo and two other defendants, among them Luis F. Rivilla. The Republic sues as the transferee of the assets of the former Bank of Taiwan, Limited, which had extended the loans in question. The case matters to a reviewee because it is a compact lesson in reading a complaint and its annexes together: when the promissory notes themselves show that a defendant signed only as agent, the complaint states no cause of action against him, and the action must be dismissed as to that defendant.

Procedural History

The Republic filed its complaint in the Court of First Instance of Manila, seeking to recover a sum of money with interest, attorney's fees, and costs. Rivilla moved to dismiss the complaint on two grounds: prescription of the action, and insufficiency of the allegations to constitute a valid cause of action against him. After hearing, the trial court issued an order dismissing the complaint as against Rivilla for lack of sufficient cause of action. The Republic appealed that order directly to the Supreme Court, and the Supreme Court affirmed the order appealed from.

Facts

On several occasions in 1943, Maria P. Vda. de Yulo, for herself and through Luis F. Rivilla and Mariano Pacheco, obtained several loans from the former Bank of Taiwan, Limited, in the total amount of 7,372.94 pesos, with interest at six percent per annum compounded quarterly. The loans were evidenced by seventeen promissory notes executed in favor of the bank. As security, Maria Po Vda. de Yulo executed in favor of the bank a chattel mortgage on the standing crops growing on her hacienda Maruja, located in the Municipality of Isabela, Negros Occidental.

By virtue of a Vesting Order dated January 21, 1946, the Alien Property Custodian vested in the Government of the United States all the property and assets of the Bank of Taiwan, Limited. These assets, which included the loans secured by the chattel mortgage, were in turn transferred to the Government of the Republic of the Philippines under a Transfer Agreement dated July 20, 1954, supplemented by a Transfer Agreement dated June 15, 1957.

The Republic then sued to collect 16,357.03 pesos, with interest at six percent per annum compounded quarterly, attorney's fees equivalent to ten percent of the total indebtedness, and costs. Rivilla moved to dismiss, and the trial court dismissed the complaint as against him. The Supreme Court noted that a perusal of the promissory notes attached to the complaint shows that Rivilla signed some of them merely as agent of Maria P. Vda. de Yulo. The complaint itself alleged that it was Maria P. Vda. de Yulo, for herself and through Rivilla and Pacheco, who obtained the loans. That she alone owed them was corroborated by the chattel mortgage, which she alone signed and which was constituted on her exclusive property.

Issues

• Whether or not the complaint states a sufficient cause of action against Rivilla, considering that the promissory notes attached to it show that he signed merely as agent of Maria P. Vda. de Yulo.
• Whether or not the action had prescribed, as raised in the motion to dismiss.

Applicable Provisions

The decision does not quote any statutory provision; it rests on the settled rule that a complaint must allege facts sufficient to constitute a cause of action against each defendant, and that the complaint is read together with its annexes. The allegations of the complaint itself, as recited in the decision, are the operative text:

That on several occasions in 1943, the defendant Maria P. Vda. de Yulo, for herself and through defendants Luis F. Rivilla and Mariano Pacheco, obtained several loans.

This allegation bears on the case because it shows on its face that Rivilla acted for another, not for himself, and thus negates a cause of action against him personally.

Ruling

On the first issue, the Court held that the complaint states no sufficient cause of action against Rivilla. The promissory notes attached to the complaint show that he signed some of them merely as agent of Maria P. Vda. de Yulo. The complaint's own allegation that she obtained the loans for herself and through Rivilla and Pacheco confirms this. The chattel mortgage, signed only by her and constituted on her exclusive property, further corroborates that she alone owed the loans. An agent who signs in the name of a disclosed principal does not thereby become personally liable on the obligation, and no fact is alleged that would make him so.

On the second issue, the Court did not need to resolve prescription, because the dismissal could stand on the insufficiency of the cause of action against Rivilla. The order appealed from was affirmed, with costs.

Doctrine

First, a motion to dismiss for failure to state a cause of action is tested by the allegations of the complaint, and the complaint is read together with the documents annexed to it. If the promissory notes attached to the complaint show that the defendant signed merely as agent of a disclosed principal, the complaint fails to state a cause of action against him.

Second, an agent who contracts in the name of a disclosed principal does not incur personal liability on the contract; the principal alone is bound. The fact that the security was executed by the principal alone, on her exclusive property, confirms that the debt is hers.

Third, where the dismissal as to a defendant rests on the insufficiency of the cause of action, the appellate court may affirm on that ground without resolving the defense of prescription.

Disposition

The Supreme Court affirmed the order of the trial court dismissing the complaint as against Rivilla, with costs against the Republic.

Remember This

Memorize this line: an agent who signs a promissory note merely as agent of a disclosed principal is not personally liable, and the complaint against him states no cause of action. Examiners use this case to test the reading of a complaint together with its annexes, and the distinction between an agent's signature and a personal undertaking.