Cause of Action

1. ) SOLOIL, INC vs. PHILIPPINE COCONUT AUTHORITY

G.R. No. 174806 August 11, 2010

Facts

Petitioner Soloil, Inc. (Soloil) is a domestic corporation engaged in the

exportation of copra, crude coconut oil, and other coconut products.
Respondent Philippine Coconut Authority (PCA) is a government owned
and controlled corporation created under Presidential Decree No. 232,
otherwise known as the Law Creating A Philippine Coconut Authority,
mandated to promote the rapid development of the coconut and palm oil
industry in the country.

In January 1995, the Office of the Government Corporate Counsel sent by

registered mail a final demand letter addressed to Soloil for the payment of
the latters overdue fees to PCA for the domestic sale of coconut
products. Soloil still did not pay the fees.
On 6 December 1995, PCA filed in the Regional Trial Court (Branch 84) of
Quezon City a complaint alleging that Soloil refused to pay the PCA fees.
PCA further claimed that as of 31 December 1994, Soloils overdue account
had reached P403,543.29.In its answer, Soloil raised the defense that
PCAs demand for the payment of PCA fees based on domestic sales had
no factual basis as Soloil never engaged in the domestic sale of coconut
products.

The case was set for pre-trial. However, for failure of the parties to settle
the case amicably, pre-trial was terminated. Trial on the merits ensued.
PCA presented its lone witness, Trade Control Examiner Victoria
Evangelista. Evangelista testified that she was in charge of
monitoring Soloils export sales transactions and that she was the one who
prepared Soloils Summary of Outstanding PCA Fee Obligations attached
as Annex A of the complaint. PCA then presented itemized schedules
of Soloilsoutstanding PCA fee obligations as well as certified reports of the
marine cargo surveyor showing that Soloil made export shipments without
paying the requisite PCA fees. On the other hand, Soloil presented its sole
witness, Assistant Vice-President for Trading and Administration
Cause of Action

Fernando Uy. Uy testified that Soloil had no record of any domestic sale of
coconut products. On cross-examination, Uy admitted Soloil purchased
copra in the course of its business of exporting coconut products.

In their respective memoranda, the parties raised the following issues: (1)
whether the complaint stated a cause of action; and (2) if so,
whether Soloil was liable to pay PCA fees in the amount of P403,543.29.

In its 29 September 2000 Decision, the RTC ruled PCA failed to prove that
the claimed amount of unpaid PCA fees was from Soloils domestic sale of
coconut products. PCA appealed to the Court of Appeals insisting
that Soloil was liable to pay PCA fees on its purchases of copra for both
domestic and export sale of coconut products.The appellate court held that
PCA fees attached upon purchase of copra by copra exporters. The Court
of Appeals pointed out that there was no distinction whether the purchase
was for domestic or for export sale of coconut products. In its 12 May 2006
Decision, the Court of Appeals granted PCAs appeal. Soloil filed a motion
for reconsideration, which the Court of Appeals denied for lack of merit in
its 10 October 2006 Resolution.Hence, the instant petition for review.

Issue:

The issues for resolution are (1) whether the complaint, alleging non-
payment of PCA fees due on Soloils domestic sale of coconut products,
sufficiently stated a cause of action when evidence adduced during trial
consisted of Soloils export sale of coconut products; and (2) if so,
whether Soloil was liable for the amount of P403,543.29 representing PCA
fees as of 31 December 1994.

Ruling

The petition has no merit.

Petitioner Soloil belabors the fact that the complaint alleged non-payment
of PCA fees on Soloils domestic sale of coconut products while the
Cause of Action

attached annexes showing Soloilsunpaid PCA fees did not indicate whether
the amounts due were from domestic or from export sale of coconut
products. Soloil maintains it never had any domestic sale of coconut
products as its sales were all for export. Soloil argues that the complaint
should have been dismissed for lack of cause of action and the RTC should
not have allowed PCA, despite Soloils vehement objection, to adduce
evidence pertaining to export sales.

Respondent PCA counters that the complaint sufficiently established that

PCA was mandated by law to impose and collect PCA fees for every kilo of
copra purchased by copra exporters such as Soloil. PCA insists that PCA
fees attached upon Soloils purchase of copra whether such purchase was
for domestic or for export sale of coconut products.

Rule 2 of the Rules of Court defines a cause of action as:

Sec. 2. Cause of action, defined. A cause of action is the act or

omission by which a party violates a right of another.

The essential elements of a cause of action are (1) a right in favor of the
plaintiff by whatever means and under whatever law it arises or is created;
(2) an obligation on the part of the named defendant to respect or not to
violate such right; and (3) an act or omission on the part of such defendant
in violation of the right of the plaintiff or constituting a breach of the
obligation of the defendant to the plaintiff for which the latter may maintain
an action for recovery of damages or other appropriate relief.

The complaint in this case, paragraph 4 in particular, contained the

following averments:

4. To defray its operating expenses plaintiff is authorized

under P.D. 1854 entitled Authorizing An Adjustment of the
Funding Support of the Philippine Coconut Authority and
Instituting a Procedure for the Management of Such Fund to
impose and collect a fee of three centavos for every kilo of
copra or its equivalent in copra terms of other coconut products
delivered to and/or purchased by copra exporters, oil millers,
Cause of Action

desiccators, and other end-users of coconut products. This fee

is otherwise known as PCA fee; (Emphasis supplied)

This portion of the complaint together with the attached

annexes showing Soloils unpaid PCA fees sufficiently constituted a cause
of action in this case, namely (1) under P.D. 1854, PCA has a right to
collect PCA fees in the amount of three centavos for every kilo of copra
purchased by copra exporters; (2) Soloil, as a copra exporter, is legally
bound to pay PCA fees; and (3) Soloils non-payment of PCA fees is in
violation of PCAs right to collect the same.

In determining whether a complaint states a cause of action, the trial court

can consider all the pleadings filed, including annexes, motions, and the
evidence on record. The focus is on the sufficiency, not the veracity, of the
material allegations. Moreover, the complaint does not have to establish
facts proving the existence of a cause of action at the outset; this will have
to be done at the trial on the merits of the case.

The fact that the complaint specifically mentioned assessed PCA fees due
on Soloils domestic sale of coconut products did not preclude a cause of
action for PCA fees due on Soloils export sale of coconut products.
PCA sufficiently alleged on paragraph 4 of the complaint that PCA fees
attached upon purchase of copra by copra exporters, such as Soloil,
whether for domestic or for export sale of coconut products.

Presidential Decree No. 1468, otherwise known as the Revised Coconut

Industry Code, granted PCA the power to impose and collect PCA fees to
defray its operating expenses, thus:

Sec. 3. Power. In the implementation of the declared national

policy, the Authority [PCA] shall have the following powers and
functions:
xxxx
k) To impose and collect, under such rules that it may
promulgate, a fee of ten centavos for every one hundred
kilos of desiccated coconut, to be paid by the desiccating
factory, coconut oil to be paid by the oil mills, and copra to be
Cause of Action

paid by the exporters, which shall be used exclusively to

defray its operating expenses; (Emphasis supplied)

Presidential Decree No. 1854, otherwise known as the Law Authorizing an

Adjustment of the Funding Support of the Philippine Coconut Authority and
Instituting a Procedure for the Management of such Fund, increased such
PCA fees to three centavos per kilo of copra or husked nuts or their
equivalent in other coconut products delivered to and/or purchased by
copra exporters, oil millers, desiccators, and other end-users of coconut
products, to wit:

Section 1. The PCA fee imposed and collected pursuant to the

provisions of R.A. No. 1145 and Sec. 3(k), Article II of P.D.
1468, is hereby increased to three centavos per kilo of
copra or husked nuts or their equivalent in other coconut
products delivered to and/or purchased by copra exporters,
oil millers, desiccators, and other end-users of coconut
products. The fee shall be collected under such rules that
PCA may promulgate, and shall be paid by said copra
exporters, oil millers, desiccators, and other end-users of
coconut products, receipt of which shall be remitted to the
National Treasury on a quarterly basis. (Emphasis supplied)

Under P.D. 1854, PCA fees automatically attach upon purchase of copra
by copra exporters, such as Soloil in this case. The law does not
distinguish whether the purchase of copra is for domestic or for export sale
of coconut products. When the law does not distinguish, neither should we.
However, the law expressly requires that the PCA fees shall be paid by
said copra exporters for copra purchased by copra exporters.

The Summary of Outstanding PCA Fee Obligations, attached as Annex A

of the complaint, contains itemized schedules of Soloils outstanding PCA
fee obligations in the total amount of P403,543.29 as of 31 December
1994. It was duly prepared by Trade Control Examiner Victoria Evangelista,
reviewed by Trade Control Examiner II Sylvia Carpio, certified correct by
Supervising Trade Industry and Development Specialist Jennifer Lumawag,
and finally noted by Manager Zenaida Leoncio. Under Section 3 paragraph
Cause of Action

(m), Rule 131 of the Rules of Court, the Summary of Outstanding PCA Fee
Obligations enjoys the presumption of regularity in the performance of
official duties absent any evidence that it was made in violation of any
relevant law or regulation.

As to the appropriate penalty for late payment of PCA fees, P.D. 1468 and
P.D. 1854 authorized PCA to collect PCA fees under such rules as it may
promulgate. Pursuant to this mandate, PCA issued Administrative Order
No. 001, Series of 1983 fixing the interest rate for PCA fees paid after the
due date at 14% per annum, thus:

Sec. 6 Sanctions. For any violation of the provisions of these

Rules, the Authority [PCA] may impose any or all of the
following sanctions:
1. Interest equal to fourteen percent (14%) per annum of the
PCA Fee paid after the due date thereof;

Fully supported as it is by law and the evidence on record, we find no

reason to disturb the appellate courts Decision ordering Soloil to pay PCA
the amount of P403,543.29representing PCA fees as of 31 December 1994
with interest at the rate of 14% per annum beginning January 1995, when
final demand was made, until fully paid.

P.D. 1468 and P.D. 1854 enabled PCA to have a self-sustaining funding
system precisely to allow it to defray its own operating expenses without
regular financial support from the government. The imposition of PCA fees
is intended to provide PCA with adequate financial resources to carry out
its mandate of promoting the rapid growth of the countrys coconut industry
while making coconut farmers direct beneficiaries of this growth. Soloil, as
a copra exporter, cannot evade its legal obligation to pay PCA fees on the
lame pretext that it never engaged in domestic sale of coconut products
or worse, that the complaint for collection of PCA fees failed to state a
cause of action.

WHEREFORE, we DENY the petition. We AFFIRM the 12 May 2006

Decision and the 10 October 2006 Resolution of the Court of Appeals in
CA-G.R. CV No. 69629.
Cause of Action

ADA et al vs. BAYLO

Facts: This case involves the estate of the late spouses FlorentinoBaylon
andMaximinaElnasBaylon.At the time of their death, Spouses Baylon were
survived by their legitimate children namely,Rita Baylon, Victoria Baylon,
Dolores Baylon, Panfila Gomez and Ramon Baylon and hereinpetitioner
Lilia Ada.On July 3, 1996, the petitioners file with the RTC a complaint for
partition, accounting anddamages against Florante, Rita and Panfila. They
alleged therein that after the death of theSpouses Baylon, Rita took
possession of the (inheritance) estates and appropriated hereslef
theincome from the same. Using the income produced by the said estate
(parcels of land), Ritaallegedly purchased two parcels of land, Lot No.4706.
The petitioners averred that Rita refusedto effect a partition of the said
parcels of land.

During the pendency of the case, Rita, through a Deed of Donation dated
July 6, 1997, conveyedLot No.4709 and half of Lot No.4706 to Florante. On
July 16, 2000, Rita died intestate andwithout any issue.Thereafter, learning
of the said donation inter vivos in favor of Florante, the petitioners filed
aSupplemental Pleading dated February 6, 2002, praying that the said
donation in favor of therespondent be rescinded.On October 20, 2005, the
RTC rendered a Decision, in favor of the petitioners and rescinded
thedonation inter vivos of Lot No.4709 and half of Lot No. 4706 in favor of
Florante.On appeal, the CA rendered a decision reversing and setting
aside the decision of the RTC.The CA held that,1.

Before the petitioners may file an action for rescission, they must first
obtain a favorable judicial ruling that Lot No. 4709 and half of Lot No.
4706 actually belonged to the estateof Spouses Baylon and not to Rita.
Until then, the CA asserted an action for rescission ispremature.2.

That the petitioner’s action for rescission cannot be joined

with their action forpartition, accounting and damages through a mere
supplemental pleading. Hence thispetition (In effect, the CA dismissed a
case on the ground of misjoinder or causes ofaction)
Issue: Whether or not petitioner’s action for rescission
cannot be joined with their action forpartition, accounting and damages
through a mere supplemental pleading.(WON the court can dismiss action
for rescission for being a misjoinder on action for partition,accounting and
Cause of Action

damages.Held: The complaint filed by the petitioners with the RTC

involves two separate, distinct andi n d e p e n d e n t a c t i o n s -
partition and rescission. First, the
petitioners raised ther e f u s a l o f t h e i r
c o - h e i r s , F l o r a n t e , R i t a a n d
P a n f i l a , t o p a r t i t i o n t h e properties, which
they inherited from Spouses Baylon. Second, in their supplemental
pleading,t h e p e t i t i o n e r s a s s a i l e d t h e d o n a t i o n i n t e r vi vo s L o t
No. 4709 and half of Lot No. 4706m a d e b y R i t a i n
f a v o r o f F l o r a n t e p e n d e n t e l i t e .
T h e a c t i o n s o f p a r t i t i o n a n d rescission cannot
be joined in a single action.By a joinder of causes of action is meant the
uniting of two or more demands or rights of actionin one action, the
statement of more than one cause of action in adeclaration. It is the union
oftwo or more civil causes of action, each of which couldbe made the basis
of a separate suit, inthe same complaint, declaration or petition.The
objectives of the rule or provision are to avoid a multiplicity of suits where
the same partiesa n d s u b j e c t m a t t e r a r e t o b e d e a l t w i t h b y
effecting in one action a completedetermination of all
matters in controversy and litigation between
t h e p a r t i e s i n v o l v i n g one subject matter, and to expedite the
disposition of litigation at minimum cost. The provisions h o u l d b e
construed so as toavoid such
multiplicity, where possible,
withoutp r e j u d i c e t o t h e r i g h t s o f
t h e l i t i g a n t s . Nevertheless,
while parties to an action may assert in one
pleading, in thealternative or otherwise, as
many causes of action as they may have
against anopposing party, such joinder of
causes of action is subject to the
c o n d i t i o n , interalia, that the joinder shall not include special civil
actions governed by special rules.Here, there was a misjoinder of causes
of action. The action for partition (led by the petitionerscould not be joined
with theaction for the rescission of the said donation inter vivos in favor
ofFlorante. Lest it be overlooked, an action for partition is a special civil
action governed by Rule10 of the Rules of Court while an action for
rescission is an ordinary civil action governedby theordinary rules of civil
procedure. The variance in the procedure in the specialcivil action
ofpartition and in the ordinary civil action of rescission precludes their
Cause of Action

joinder in one complaint ortheir being tried in a single proceeding to avoid

confusion in determining what rules shall governthe conduct of the
proceedings aswell as in the determination of the presence of
requisiteelements of each particularcause of action.

A misjoined cause of action, if not severed upon motion of a party or by the

court suasponte,maybe adjudicated by the court together with the other
causes of action.Nevertheless, the misjoinder of causes of action is not a
ground for dismissal. Indeed, the courtshave the power, acting upon the
motion of a party to the case or suasponte, to order theseverance of the
misjoined cause of action to be proceeded with separately. However, if
there isno objection to the improper joinder or the court did not motuproprio
direct a severance, thenthere exists no bar in the simultaneous adjudication
of all the erroneously joined causes ofaction.Here, Florante posed no
objection, and neither did the RTC direct the severance of the
petitioners’ action for rescission from the
ir action for partition. While this may be a patentomission on the part of the
RTC, this does not constitute a ground to assail the validity andcorrectness
of its decision. The RTC validly adjudicated the issues raised in the actions
forpartition and rescission filed by the petitioners

2.) REBECCA PACAÑA-CONTRERAS v. ROVILA WATER SUPPLY

GR No. 168979, Dec 02, 2013

BRION, J.:
Cause of Action

Before the Court is a petition for review on certiorari[1] under Rule 45 of the
Rules of Court seeking the reversal of the decision[2] dated January 27,
2005 and the resolution[3] dated June 6, 2005 of the Court of Appeals (CA)
in CA-G.R. SP No. 71551. The CA set aside the orders dated February 28,
2002[4] and April 1, 2002[5] of the Regional Trial Court (RTC), Branch 8,
Cebu City, which denied the motion to dismiss and the motion for
reconsideration, respectively, of respondents Rovila Water Supply, Inc.
(Rovila Inc.), Earl U. Kokseng, Lilia Torres, Dalla P. Romanillos and Marisa
Gabuya.

THE FACTUAL ANTECEDENTS

Petitioners Rebecca Pacaña-Contreras and Rosalie Pacaña, children of

Lourdes Teves Pacaña and Luciano Pacaña, filed the present case against
Rovila Inc., Earl, Lilia, Dalla and Marisa for accounting and damages.[6] The
petitioners claimed that their family has long been known in the community
to be engaged in the water supply business; they operated the "Rovila
Water Supply" from their family residence and were engaged in the
distribution of water to customers in Cebu City.

The petitioners alleged that Lilia was a former trusted employee in the
family business who hid business records and burned and ransacked the
family files. Lilia also allegedly posted security guards and barred the
members of the Pacaña family from operating their business. She then
claimed ownership over the family business through a corporation named
"Rovila Water Supply, Inc." (Rovila Inc.) Upon inquiry with the Securities
and Exchange Commission (SEC), the petitioners claimed that Rovila Inc.
was surreptitiously formed with the respondents as the majority
stockholders. The respondents did so by conspiring with one another and
forming the respondent corporation to takeover and illegally usurp the
family business' registered name.[7]

In forming the respondent corporation, the respondents allegedly used the

name of Lourdes as one of the incorporators and made it appear in the
SEC documents that the family business was operated in a place other
than the Pacaña residence. Thereafter, the respondents used the Pacaña
family's receipts and the deliveries and sales were made to appear as
those of the respondent Rovila Inc. Using this scheme, the respondents
fraudulently appropriated the collections and payments.[8]
Cause of Action

The petitioners filed the complaint in their own names although Rosalie was
authorized by Lourdes through a sworn declaration and special power of
attorney (SPA). The respondents filed a first motion to dismiss on the
ground that the RTC had no jurisdiction over an intra-corporate
controversy.[9] The RTC denied the motion.

On September 26, 2000, Lourdes died[10] and the petitioners amended their
complaint, with leave of court, on October 2, 2000 to reflect this
development.[11] They still attached to their amended complaint the sworn
declaration with SPA, but the caption of the amended complaint remained
the same.[12] On October 10, 2000, Luciano also died.[13]

The respondents filed their Answer on November 16, 2000.[14] The

petitioners' sister, Lagrimas Pacaña-Gonzales, filed a motion for leave to
intervene and her answer-in-intervention was granted by the trial court. At
the subsequent pre-trial, the respondents manifested to the RTC that a
substitution of the parties was necessary in light of the deaths of Lourdes
and Luciano. They further stated that they would seek the dismissal of the
complaint because the petitioners are not the real parties in interest to
prosecute the case. The pre-trial pushed through as scheduled and the
RTC directed the respondents to put into writing their earlier manifestation.
The RTC issued a pre-trial order where one of the issues submitted was
whether the complaint should be dismissed for failure to comply with
Section 2, Rule 3 of the Rules of Court which requires that every action
must be prosecuted in the name of the real party in interest.[15]

On January 23, 2002,[16] the respondents again filed a motion to dismiss on

the grounds, among others, that the petitioners are not the real parties in
interest to institute and prosecute the case and that they have no valid
cause of action against the respondents.

THE RTC RULING

The RTC denied the respondents' motion to dismiss. It ruled that, save for
the grounds for dismissal which may be raised at any stage of the
proceedings, a motion to dismiss based on the grounds invoked by the
respondents may only be filed within the time for, but before, the filing of
their answer to the amended complaint. Thus, even granting that the
Cause of Action

defenses invoked by the respondents are meritorious, their motion was

filed out of time as it was filed only after the conclusion of the pre-trial
conference. Furthermore, the rule on substitution of parties only applies
when the parties to the case die, which is not what happened in the present
case.[17] The RTC likewise denied the respondents' motion for
reconsideration.[18]

The respondents filed a petition for certiorari under Rule 65 of the Rules of
Court with the CA, invoking grave abuse of discretion in the denial of their
motion to dismiss. They argued that the deceased spouses Luciano and
Lourdes, not the petitioners, were the real parties in interest. Thus, the
petitioners violated Section 16, Rule 3 of the Rules of Court on the
substitution of parties.[19] Furthermore, they seasonably moved for the
dismissal of the case[20] and the RTC never acquired jurisdiction over the
persons of the petitioners as heirs of Lourdes and Luciano.[21]

THE CA RULING

The CA granted the petition and ruled that the RTC committed grave abuse
of discretion as the petitioners filed the complaint and the amended
complaint as attorneys-in-fact of their parents. As such, they are not the
real parties in interest and cannot bring an action in their own names; thus,
the complaint should be dismissed[22] pursuant to the Court's ruling
in Casimiro v. Roque and Gonzales.[23]

Neither are the petitioners suing as heirs of their deceased parents.

Pursuant to jurisprudence,[24] the petitioners should first be declared as
heirs before they can be considered as the real parties in interest. This
cannot be done in the present ordinary civil case but in a special
proceeding for that purpose.

The CA agreed with the respondents that they alleged the following issues
as affirmative defenses in their answer: 1) the petitioners are not the real
parties in interest; and 2) that they had no legal right to institute the action
in behalf of their parents.[25] That the motion to dismiss was filed after the
period to file an answer has lapsed is of no moment. The RTC judge
entertained it and passed upon its merit. He was correct in doing so
because in the pre-trial order, one of the submitted issues was whether the
case must be dismissed for failure to comply with the requirements of the
Cause of Action

Rules of Court. Furthermore, in Dabuco v. Court of Appeals,[26] the Court

held that the ground of lack of cause of action may be raised in a motion to
dismiss at anytime.[27]

The CA further ruled that, in denying the motion to dismiss, the RTC judge
acted contrary to established rules and jurisprudence which may be
questioned via a petition for certiorari. The phrase "grave abuse of
discretion" which was traditionally confined to "capricious and whimsical
exercise of judgment" has been expanded to include any action done
"contrary to the Constitution, the law or jurisprudence[.]"[28]

THE PARTIES' ARGUMENTS

The petitioners filed the present petition and argued that, first, in annulling
the interlocutory orders, the CA unjustly allowed the motion to dismiss
which did not conform to the rules.[29] Specifically, the motion was not filed
within the time for, but before the filing of, the answer to the amended
complaint, nor were the grounds raised in the answer. Citing Section 1,
Rule 9 of the Rules of Court, the respondents are deemed to have waived
these grounds, as correctly held by the RTC.[30]

Second, even if there is non-joinder and misjoinder of parties or that the

suit is not brought in the name of the real party in interest, the remedy is
not outright dismissal of the complaint, but its amendment to include the
real parties in interest.[31]

Third, the petitioners sued in their own right because they have actual and
substantial interest in the subject matter of the action as heirs or co-
owners, pursuant to Section 2, Rule 3 of the Rules of Court.[32] Their
declaration as heirs in a special proceeding is not necessary, pursuant to
the Court's ruling in Marabilles, et al. v. Quito.[33] Finally, the sworn
declaration is evidentiary in nature which remains to be appreciated after
the trial is completed.[34]

The respondents reiterated in their comment that the petitioners are not the
real parties in interest.[35] They likewise argued that they moved for the
dismissal of the case during the pre-trial conference due to the petitioners'
procedural lapse in refusing to comply with a condition precedent, which is,
to substitute the heirs as plaintiffs. Besides, an administrator of the estates
Cause of Action

of Luciano and Lourdes has already been appointed.[36]

The respondents also argued that the grounds invoked in their motion to
dismiss were timely raised, pursuant to Section 2, paragraphs g and i, Rule
18 of the Rules of Court. Specifically, the nature and purposes of the pre-
trial include, among others, the dismissal of the action, should a valid
ground therefor be found to exist; and such other matters as may aid in the
prompt disposition of the action. Finally, the special civil action
of certiorari was the proper remedy in assailing the order of the RTC.[37]

THE COURT'S RULING

We find the petition meritorious.

Petition for certiorari under Rule 65 is a proper remedy for a denial of a

motion to dismiss attended by grave abuse of discretion

In Barrazona v. RTC, Branch 61, Baguio City,[38] the Court held that while
an order denying a motion to dismiss is interlocutory and non-
appealable, certiorari and prohibition are proper remedies to address an
order of denial made without or in excess of jurisdiction. The writ
of certiorari is granted to keep an inferior court within the bounds of its
jurisdiction or to prevent it from committing grave abuse of discretion
amounting to lack or excess of jurisdiction.

The history and development of the ground "fails to state a cause of action"
in the 1940, 1964 and the present 1997 Rules of Court

Preliminarily, a suit that is not brought in the name of the real party in
interest is dismissible on the ground that the complaint "fails to state a
cause of action."[39] Pursuant to jurisprudence,[40] this is also the ground
invoked when the respondents alleged that the petitioners are not the real
parties in interest because: 1) the petitioners should not have filed the case
in their own names, being merely attorneys-in-fact of their mother; and 2)
the petitioners should first be declared as heirs.

A review of the 1940, 1964 and the present 1997 Rules of Court shows that
the fundamentals of the ground for dismissal based on "failure to state a
cause of action" have drastically changed over time. A historical
Cause of Action

background of this particular ground is in order to preclude any confusion

or misapplication of jurisprudence decided prior to the effectivity of the
present Rules of Court.

The 1940 Rules of Court provides under Section 10, Rule 9 that:

Section 10. Waiver of defenses - Defenses and objections not pleaded

either in a motion to dismiss or in the answer are deemed waived; except
the defense of failure to state a cause of action, which may be alleged in a
later pleading, if one is permitted, or by motion for judgment on the
pleadings, or at the trial on the merits; but in the last instance, the motion
shall be disposed of as provided in section 5 of Rule 17 in the light of any
evidence which may have been received. Whenever it appears that the
court has no jurisdiction over the subject-matter, it shall dismiss the action.
[underscoring supplied]
This provision was essentially reproduced in Section 2, Rule 9 of the 1964
Rules of Court, and we quote:

Section 2. Defenses and objections not pleaded deemed waived. Defenses

and objections not pleaded either in a motion to dismiss or in the answer
are deemed waived; except the failure to state a cause of action which may
be alleged in a later pleading, if one is permitted, or by motion for judgment
on the pleadings, or at the trial on the merits; but in the last instance, the
motion shall be disposed of as provided in section 5 of Rule 10 in the light
of any evidence which may have been received. Whenever it appears that
the court has no jurisdiction over the subject-matter, it shall dismiss the
action. [underscoring supplied]
Under the present Rules of Court, this provision was reflected in Section 1,
Rule 9, and we quote:

Section 1. Defenses and objections not pleaded. Defenses and objections

not pleaded either in a motion to dismiss or in the answer are deemed
waived. However, when it appears from the pleadings or the evidence on
record that the court has no jurisdiction over the subject matter, that there
is another action pending between the same parties for the same cause, or
that the action is barred by a prior judgment or by statute of limitations, the
court shall dismiss the claim. [underscoring supplied]

Notably, in the present rules, there was a deletion of the ground of "failure
to state a cause of action" from the list of those which may be waived if not
Cause of Action

invoked either in a motion to dismiss or in the answer.

Another novelty introduced by the present Rules, which was totally absent
in its two precedents, is the addition of the period of time within which a
motion to dismiss should be filed as provided under Section 1, Rule 16 and
we quote:

Section 1. Grounds. Within the time for but before filing the answer to the
complaint or pleading asserting a claim, a motion to dismiss may be made
on any of the following grounds: xxx [underscoring supplied]
All these considerations point to the legal reality that the new Rules
effectively restricted the dismissal of complaints in general, especially when
what is being invoked is the ground of "failure to state a cause of action."
Thus, jurisprudence governed by the 1940 and 1964 Rules of Court to the
effect that the ground for dismissal based on failure to state a cause of
action may be raised anytime during the proceedings, is already
inapplicable to cases already governed by the present Rules of Court which
took effect on July 1, 1997.

As the rule now stands, the failure to invoke this ground in a motion to
dismiss or in the answer would result in its waiver. According to Oscar M.
Herrera,[41] the reason for the deletion is that failure to state a cause of
action may be cured under Section 5, Rule 10 and we quote:

Section 5. Amendment to conform to or authorize presentation of evidence.

When issues not raised by the pleadings are tried with the express or
implied consent of the parties they shall be treated in all respects as if they
had been raised in the pleadings. Such amendment of the pleadings as
may be necessary to cause them to conform to the evidence and to raise
these issues may be made upon motion of any party at any time, even after
judgment; but failure to amend does not effect the result of the trial of these
issues. If evidence is objected to at the trial on the ground that it is not
within the issues made by the pleadings, the court may allow the pleadings
to be amended and shall do so with liberality if the presentation of the
merits of the action and the ends of substantial justice will be subserved
thereby. The court may grant a continuance to enable the amendment to
be made.
With this clarification, we now proceed to the substantial issues of the
petition.
Cause of Action

The motion to dismiss in the present case based on failure to state a cause
of action was not timely filed and was thus waived

Applying Rule 16 of the Rules of Court which provides for the grounds for
the dismissal of a civil case, the respondents' grounds for dismissal fall
under Section 1(g) and (j), Rule 16 of the Rules of Court, particularly,
failure to state a cause of action and failure to comply with a condition
precedent (substitution of parties), respectively.

The first paragraph of Section 1,[42] Rule 16 of the Rules of Court provides
for the period within which to file a motion to dismiss under the grounds
enumerated. Specifically, the motion should be filed within the time for, but
before the filing of, the answer to the complaint or pleading asserting a
claim. Equally important to this provision is Section 1,[43] Rule 9 of the Rules
of Court which states that defenses and objections not pleaded either in a
motion to dismiss or in the answer are deemed waived, except for the
following grounds: 1) the court has no jurisdiction over the subject matter;
2) litis pendencia; 3) res judicata; and 4) prescription.

Therefore, the grounds not falling under these four exceptions may be
considered as waived in the event that they are not timely invoked. As the
respondents' motion to dismiss was based on the grounds which should be
timely invoked, material to the resolution of this case is the period within
which they were raised.

Both the RTC and the CA found that the motion to dismiss was only filed
after the filing of the answer and after the pre-trial had been concluded.
Because there was no motion to dismiss before the filing of the answer, the
respondents should then have at least raised these grounds as affirmative
defenses in their answer. The RTC's assailed orders did not touch on this
particular issue but the CA ruled that the respondents did, while the
petitioners insist that the respondents did not. In the present petition, the
petitioners reiterate that there was a blatant non-observance of the rules
when the respondents did not amend their answer to invoke the grounds
for dismissal which were raised only during the pre-trial and, subsequently,
in the subject motion to dismiss.[44]

The divergent findings of the CA and the petitioners' arguments are

essentially factual issues. Time and again, we have held that the
jurisdiction of the Court in a petition for review on certiorari under Rule 45,
Cause of Action

such as the present case, is limited only to questions of law, save for
certain exceptions. One of these is attendant herein, which is, when the
findings are conclusions without citation of specific evidence on which they
are based.[45]

In the petition filed with the CA, the respondents made a passing allegation
that, as affirmative defenses in their answer, they raised the issue that the
petitioners are not the real parties in interest.[46] On the other hand, the
petitioners consistently argued otherwise in their opposition[47] to the motion
to dismiss, and in their comment[48] and in their memorandum[49] on the
respondents' petition before the CA.

Our examination of the records shows that the CA had no basis in its
finding that the respondents alleged the grounds as affirmative defenses in
their answer. The respondents merely stated in their petition
for certiorari that they alleged the subject grounds in their answer.
However, nowhere in the petition did they support this allegation; they did
not even attach a copy of their answer to the petition. It is basic that the
respondents had the duty to prove by substantial evidence their positive
assertions. Considering that the petition forcertiorari is an original and not
an appellate action, the CA had no records of the RTC's proceedings upon
which the CA could refer to in order to validate the respondents' claim.
Clearly, other than the respondents' bare allegations, the CA had no basis
to rule, without proof, that the respondents alleged the grounds for
dismissal as affirmative defenses in the answer. The respondents, as the
parties with the burden of proving that they timely raised their grounds for
dismissal, could have at least attached a copy of their answer to the
petition. This simple task they failed to do.

That the respondents did not allege in their answer the subject grounds is
made more apparent through their argument, both in their motion to
dismiss[50] and in their comment,[51] that it was only during the pre-trial stage
that they verbally manifested and invited the attention of the lower court on
their grounds for dismissal. In order to justify such late invocation, they
heavily relied on Section 2(g) and (i), Rule 18[52] of the Rules of Court that
the nature and purpose of the pre-trial include, among others, the propriety
of dismissing the action should there be a valid ground therefor and matters
which may aid in the prompt disposition of the action.

The respondents are not correct. The rules are clear and require no
Cause of Action

interpretation. Pursuant to Section 1, Rule 9 of the Rules of Court, a motion

to dismiss based on the grounds invoked by the respondents may be
waived if not raised in a motion to dismiss or alleged in their answer. On
the other hand, "the pre-trial is primarily intended to make certain that all
issues necessary to the disposition of a case are properly raised. The
purpose is to obviate the element of surprise, hence, the parties are
expected to disclose at the pre-trial conference all issues of law and fact
which they intend to raise at the trial, except such as may involve privileged
or impeaching matter."[53] The issues submitted during the pre-trial are thus
the issues that would govern the trial proper. The dismissal of the case
based on the grounds invoked by the respondents are specifically covered
by Rule 16 and Rule 9 of the Rules of Court which set a period when they
should be raised; otherwise, they are deemed waived.

The Dabuco ruling is inapplicable in the present case; the ground for
dismissal "failure to state a cause of action" distinguished from "lack of
cause of action"

To justify the belated filing of the motion to dismiss, the CA reasoned out
that the ground for dismissal of "lack of cause of action" may be raised at
any time during the proceedings, pursuant to Dabuco v. Court of
Appeals.[54] This is an erroneous interpretation and application of I>Dabuco
as will be explained below.

First, in Dabuco, the grounds for dismissal were raised as affirmative

defenses in the answer which is in stark contrast to the present
case. Second, in Dabuco, the Court distinguished between the dismissal of
the complaint for "failure to state a cause of action" and "lack of cause of
action." The Court emphasized that in a dismissal of action for lack of
cause of action, "questions of fact are involved, [therefore,] courts hesitate
to declare a plaintiff as lacking in cause of action. Such declaration is
postponed until the insufficiency of cause is apparent from a
preponderance of evidence. Usually, this is done only after the parties have
been given the opportunity to present all relevant evidence on such
questions of fact."[55] In fact, in Dabuco, the Court held that even the
preliminary hearing on the propriety of lifting the restraining order was
declared insufficient for purposes of dismissing the complaint for lack of
cause of action. This is so because the issues of fact had not yet been
adequately ventilated at that preliminary stage. For these reasons, the
Court declared in Dabuco that the dismissal by the trial court of the
Cause of Action

complaint was premature.

In the case of Macaslang v. Zamora,[56] the Court noted that the incorrect
appreciation by both the RTC and the CA of the distinction between the
dismissal of an action, based on "failure to state a cause of action" and
"lack of cause of action," prevented it from properly deciding the case, and
we quote:

Failure to state a cause of action and lack of cause of action are really
different from each other. On the one hand, failure to state a cause of
action refers to the insufficiency of the pleading, and is a ground for
dismissal under Rule 16 of the Rules of Court. On the other hand, lack of
cause [of] action refers to a situation where the evidence does not prove
the cause of action alleged in the pleading. Justice Regalado, a recognized
commentator on remedial law, has explained the distinction:

xxx What is contemplated, therefore, is a failure to state a cause of action

which is provided in Sec. 1(g) of Rule 16. This is a matter of insufficiency of
the pleading. Sec. 5 of Rule 10, which was also included as the last mode
for raising the issue to the court, refers to the situation where the
evidence does not prove a cause of action. This is, therefore, a matter of
insufficiency of evidence. Failure to state a cause of action is different from
failure to prove a cause of action. The remedy in the first is to move for
dismissal of the pleading, while the remedy in the second is to demur to the
evidence, hence reference to Sec. 5 of Rule 10 has been eliminated in this
section. The procedure would consequently be to require the pleading to
state a cause of action, by timely objection to its deficiency; or, at the trial,
to file a demurrer to evidence, if such motion is warranted. [italics supplied]
Based on this discussion, the Court cannot uphold the dismissal of the
present case based on the grounds invoked by the respondents which they
have waived for failure to invoke them within the period prescribed by the
Rules. The Court cannot also dismiss the case based on "lack of cause of
action" as this would require at least a preponderance of evidence which is
yet to be appreciated by the trial court.

Therefore, the RTC did not commit grave abuse of discretion in issuing the
assailed orders denying the respondents' motion to dismiss and motion for
reconsideration. The Court shall not resolve the merits of the respondents'
grounds for dismissal which are considered as waived.
Cause of Action

Other heirs of the spouses Pacaña to be impleaded in the case

It should be emphasized that insofar as the petitioners are concerned, the

respondents have waived the dismissal of the complaint based on the
ground of failure to state a cause of action because the petitioners are not
the real parties in interest.

At this juncture, a distinction between a real party in interest and an

indispensable party is in order. In Carandang v. Heirs of de Guzman, et
al.,[57] the Court clarified these two concepts and held that "[a] real party in
interest is the party who stands to be benefited or injured by the judgment
of the suit, or the party entitled to the avails of the suit. On the other hand,
an indispensable party is a party in interest without whom no final
determination can be had of an action, in contrast to a necessary party,
which is one who is not indispensable but who ought to be joined as a party
if complete relief is to be accorded as to those already parties, or for a
complete determination or settlement of the claim subject of the action. xxx
If a suit is not brought in the name of or against the real party in interest, a
motion to dismiss may be filed on the ground that the complaint states no
cause of action. However, the dismissal on this ground entails an
examination of whether the parties presently pleaded are interested in the
outcome of the litigation, and not whether all persons interested in such
outcome are actually pleaded. The latter query is relevant in discussions
concerning indispensable and necessary parties, but not in discussions
concerning real parties in interest. Both indispensable and necessary
parties are considered as real parties in interest, since both classes of
parties stand to be benefited or injured by the judgment of the suit."

At the inception of the present case, both the spouses Pacaña were not
impleaded as parties-plaintiffs. The Court notes, however, that they are
indispensable parties to the case as the alleged owners of Rovila Water
Supply. Without their inclusion as parties, there can be no final
determination of the present case. They possess such an interest in the
controversy that a final decree would necessarily affect their rights, so that
the courts cannot proceed without their presence. Their interest in the
subject matter of the suit and in the relief sought is inextricably intertwined
with that of the other parties.[58]

Jurisprudence on the procedural consequence of the inclusion or non-

inclusion of an indispensable party is divided in our jurisdiction. Due to the
Cause of Action

non-inclusion of indispensable parties, the Court dismissed the case

in Lucman v. Malawi, et al.[59] and Go v. Distinction Properties Development
Construction, Inc.,[60] while in Casals, et al. v. Tayud Golf and Country Club
et al.,[61] the Court annulled the judgment which was rendered without the
inclusion of the indispensable parties.

In Arcelona et al. v. Court of Appeals[62] and Bulawan v.

Aquende,[63] and Metropolitan Bank & Trust Company v. Alejo et al.[64] the
Court ruled that the burden to implead or order the impleading of an
indispensable party rests on the plaintiff and on the trial court, respectively.
Thus, the non-inclusion of the indispensable parties, despite notice of this
infirmity, resulted in the annulment of these cases.

In Plasabas, et al. v. Court of Appeals, et al.,[65] the Court held that the trial
court and the CA committed reversible error when they summarily
dismissed the case, after both parties had rested their cases following a
protracted trial, on the sole ground of failure to implead indispensable
parties. Non-joinder of indispensable parties is not a ground for the
dismissal of an action. The remedy is to implead the non-party claimed to
be indispensable.

However, in the cases of Quilatan, et al. v. Heirs of Quilatan, et

al.[66] and Lagunilla, et al. v. Monis, et al.,[67] the Court remanded the case
to the RTC for the impleading of indispensable parties. On the other hand,
in Lotte Phil. Co., Inc. v. Dela Cruz,[68] PepsiCo, Inc. v. Emerald
Pizza,[69] and Valdez-Tallorin, v. Heirs of Tarona, et al.,[70] the Court directly
ordered that the indispensable parties be impleaded.

Mindful of the differing views of the Court as regards the legal effects of the
non-inclusion of indispensable parties, the Court clarified in Republic of the
Philippines v. Sandiganbayan, et al.[71], that the failure to implead
indispensable parties is a curable error and the foreign origin of our
present rules on indispensable parties permitted this corrective measure.
This cited case held:

Even in those cases where it might reasonably be argued that the failure of
the Government to implead the sequestered corporations as defendants is
indeed a procedural aberration xxx, slight reflection would nevertheless
lead to the conclusion that the defect is not fatal, but one correctible under
applicable adjective rules e.g., Section 10, Rule 5 of the Rules of Court
Cause of Action

[specifying the remedy of amendment during trial to authorize or to conform

to the evidence]; Section 1, Rule 20 [governing amendments before trial], in
relation to the rule respecting omission of so-called necessary or
indispensable parties, set out in Section 11, Rule 3 of the Rules of Court. It
is relevant in this context to advert to the old familiar doctrines that the
omission to implead such parties "is a mere technical defect which can be
cured at any stage of the proceedings even after judgment"; and that,
particularly in the case of indispensable parties, since their presence and
participation is essential to the very life of the action, for without them no
judgment may be rendered, amendments of the complaint in order to
implead them should be freely allowed, even on appeal, in fact even after
rendition of judgment by this Court, where it appears that the complaint
otherwise indicates their identity and character as such indispensable
parties."

Although there are decided cases wherein the non-joinder of indispensable

parties in fact led to the dismissal of the suit or the annulment of judgment,
such cases do not jibe with the matter at hand. The better view is that non-
joinder is not a ground to dismiss the suit or annul the judgment. The rule
on joinder of indispensable parties is founded on equity. And the spirit of
the law is reflected in Section 11, Rule 3 of the 1997 Rules of Civil
Procedure. It prohibits the dismissal of a suit on the ground of non-joinder
or misjoinder of parties and allows the amendment of the complaint at any
stage of the proceedings, through motion or on order of the court on its own
initiative.

Likewise, jurisprudence on the Federal Rules of Procedure, from which our

Section 7, Rule 3 on indispensable parties was copied, allows the joinder of
indispensable parties even after judgment has been entered if such is
needed to afford the moving party full relief. Mere delay in filing the joinder
motion does not necessarily result in the waiver of the right as long as the
delay is excusable.

In Galicia, et al. v. Vda. De Mindo, et al.,[72] the Court ruled that in line with
its policy of promoting a just and inexpensive disposition of a case, it
allowed the intervention of the indispensable parties instead of dismissing
the complaint. Furthermore, in Commissioner Domingo v. Scheer,[73] the
Court cited Salvador, et al. v. Court of Appeals, et al.[74] and held that the
Court has full powers, apart from that power and authority which are
inherent, to amend the processes, pleadings, proceedings and decisions by
Cause of Action

substituting as party-plaintiff the real party in interest. The Court has the
power to avoid delay in the disposition of this case, and to order its
amendment in order to implead an indispensable party.

With these discussions as premises, the Court is of the view that the proper
remedy in the present case is to implead the indispensable parties
especially when their non-inclusion is merely a technical defect. To do so
would serve proper administration of justice and prevent further delay and
multiplicity of suits. Pursuant to Section 9, Rule 3 of the Rules of Court,
parties may be added by order of the court on motion of the party or on its
own initiative at any stage of the action. If the plaintiff refuses to implead an
indispensable party despite the order of the court, then the court may
dismiss the complaint for the plaintiff's failure to comply with a lawful court
order.[75] The operative act that would lead to the dismissal of the case
would be the refusal to comply with the directive of the court for the joinder
of an indispensable party to the case.[76]

Obviously, in the present case, the deceased Pacañas can no longer be

included in the complaint as indispensable parties because of their death
during the pendency of the case. Upon their death, however, their
ownership and rights over their properties were transmitted to their heirs,
including herein petitioners, pursuant to Article 774[77] in relation with Article
777[78] of the Civil Code. In Orbeta, et al. v. Sendiong,[79] the Court
acknowledged that the heirs, whose hereditary rights are to be affected by
the case, are deemed indispensable parties who should have been
impleaded by the trial court.

Therefore, to obviate further delay in the proceedings of the present case

and given the Court's authority to order the inclusion of an indispensable
party at any stage of the proceedings, the heirs of the spouses Pacaña,
except the petitioners who are already parties to the case and Lagrimas
Pacaña-Gonzalez who intervened in the case, are hereby ordered
impleaded as parties-plaintiffs.

WHEREFORE, the petition is GRANTED. The decision dated January 27,

2005 and the resolution dated June 6, 2005 of the Court of Appeals in CA-
G.R. SP No. 71551 are REVERSED and SET ASIDE. The heirs of the
spouses Luciano and Lourdes Pacaña, except herein petitioners and
Lagrimas Pacaña-Gonzalez, are ORDERED IMPLEADED as parties-
plaintiffs and the RTC is directed to proceed with the trial of the case
Cause of Action

with DISPATCH.

SO ORDERED.

3.)

G.R. No. 201248, March 11, 2015

LETICIA NAGUIT AQUINO, MELVIN NAGUIT, ROMMEL NAGUIT, ELMA

NAGUIT TAYAG, YSSEL L. NAGUIT, ROSALINA NAGUIT
AUMENTADO, RIZEL NAGUIT CUNANAN, CARIDAD NAGUIT
PARAJAS, MILLIE NAGUIT FLORENDO, MARNEL NAGUIT, EDUARDO
NAGUIT, JOSE NAGUIT, ZOILO NAGUIT, AND AMELIA NAGUIT
DIZON, REPRESENTED BY YSSEL L. NAGUIT, Petitioners, v. CESAR B.
QUIAZON, AMANDA QUIAZON, JOSE B. QUIAZON AND REYNALDO
B. QUIAZON, REPRESENTED BY JAIME B. QUIAZON, Respondent.

DECISION

MENDOZA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the
Rules of Court assailing the March 13, 2012 Decision1 of the Court of
Appeals (CA), in CA-G.R. CV No. 92887, which affirmed the Orders2 of the
Regional Trial Court (RTC), Angeles City, Branch 59, in SP Civil Case No.
05-076, dismissing the complaint for quieting of title filed by the
petitioners.chanRoblesvirtualLawlibrary
The Facts

On December 16, 2005, a complaint3 for Annulment and Quieting of Title

was filed before the RTC-Branch 59 by the petitioners, namely, Leticia
Naguit Aquino, Melvin Naguit, Rommel Naguit, Elma Naguit Tayag, Yssel
L. Naguit, Rosalina Naguit Aumentado, Rizel Naguit Cunanan, Caridad
Naguit Parajas, Millie Naguit Florendo, Marnel Naguit, Eduardo Naguit,
Jose Naguit, Zoilo Naguit, and Amelia Naguit Dizon, represented by Yssel
L. Naguit (petitioners). They alleged that they were the heirs of the late
Cause of Action

Epifanio Makam and Severina Bautista, who acquired a house and lot
situated in Magalang, Pampanga, consisting of 557 square meters, by
virtue of a Deed of Sale, dated April 20, 1894; that since then, they and
their predecessors-in-interest had been in open, continuous, adverse, and
notorious possession for more than a hundred years, constructing houses
and paying real estate taxes on the property; that sometime in June 2005,
they received various demand letters from the respondents, namely, Cesar
B. Quiazon, Amanda Quiazon, Jose B. Quiazon, and Reynaldo B. Quiazon,
represented by Jaime B. Quiazon (respondents), claiming ownership over
the subject property and demanding that they vacate the same; that upon
inquiry with the Register of Deeds of San Fernando, Pampanga, they
confirmed that the property had been titled in the name of respondents
under Transfer Certificate of Title (TCT) No. 213777-R; that the said title
was invalid, ineffective, voidable or unenforceable; and that they were the
true owners of the property.

Hence, they prayed that the title be cancelled and a new title be issued in
their favor.

In their Answer,4 respondents asserted that they were the absolute owners
of the subject land as per TCT No. 213777-R; that they had inherited the
same from their predecessor-in-interest, Fausta Baluyut, one of the
registered owners under Original Certificate of Title (OCT) No. RO-1138
(11376), as per the Project of Partition and Deed of Agreement, dated
January 2, 1974; and that petitioners had been occupying the property by
mere tolerance. They denied the allegations in the complaint and proffered
affirmative defenses with counterclaims.

They argued that: First, the petitioners "have no valid, legal and sufficient
cause of action"5 against them, because their deed of sale was spurious
and could not prevail over Land Registration Decree No. 122511 issued on
June 28, 1919 in Land Registration Case No. 5, LRC Records No. 128, by
the Court of First Instance of Pampanga, in favor of their predecessor-in-
interest. The predecessors-in-interest of petitioners were among the
oppositors in the land registration proceeding but, nevertheless, after the
trial, the subject lot was awarded, decreed and titled in favor of
respondents' predecessor-in-interest, as per OCT No. RO-1138 (11376) of
the Registry of Deeds of Pampanga. Second, the action was barred by
prescription and that petitioners were guilty of laches in asserting their
interest over the subject lot, considering that Land Registration Decree No.
Cause of Action

122511 was issued on June 28, 1919 and OCT No. RO-1138 (11376) was
issued on May 12, 1922. Hence, it was much too late for petitioners to
institute the action after more than 80 years. They also raised the settled
rule that a title registered under the Torrens system could not be defeated
by adverse, open and notorious possession, or by prescription. Third, the
action was also barred by res judicata and violated the prohibition against
forum shopping, considering that petitioners had earlier filed a similar case
for quieting of title against respondents, docketed as Civil Case No. 5487,
which the RTC-Br. 56 dismissed.

Petitioners filed their Comment to Defendant's Affirmative Defenses.6 Anent

the alleged lack of cause of action due to the spurious deed of sale,
petitioners argued that this contention was a matter of evidence which
might only be resolved in a full-blown trial. They insisted that the deed of
sale was genuine and authentic and was issued and certified by the Deputy
Clerk of Court of the RTC. They added that the settled rule was that to
determine the sufficiency of the cause of action, only the facts alleged in
the complaint should be considered, and that the allegations in their
complaint sufficiently stated a cause of action.

As regards the allegation of prescription, the petitioners countered that an

action to quiet title did not prescribe if the plaintiffs were in possession of
the property in question. They argued that they were neither guilty of laches
nor were they in possession of the property by mere tolerance, their
possession being in the concept of owner for more than a hundred years.

Lastly, regarding the argument on res judicata, petitioners explained that

they were not the same plaintiffs in Civil Case No. 5487 and that the case
was dismissed without prejudice.

The RTC set a preliminary hearing on the affirmative defenses.

Respondents presented Atty. Charlemagne Tiqui Calilung, RTC Clerk of

Court of San Fernando, Pampanga, who presented the record of Cadastral
Case No. 5, dated June 28, 1919, as well as Decree No. 122511. They
also presented Luis Samuel Ragodon, the Registration Examiner of the
Registry of Deeds of San Fernando, Pampanga, who presented the original
copy of OCT No. 11376, reconstituted as RO-1138, and testified that the
title was derived from Decree No. 122511. He further testified that the
original title had been cancelled pursuant to a project of partition, which
Cause of Action

was registered on December 17, 1984, and in lieu thereof, TCT Nos.
213775, 213776, 213777, 213778, 213779, 213780, and 213781 were
issued. He presented the original copy of TCT No. 213777-R issued in the
names of respondents.

Henry Y. Bituin, the court interpreter who translated the June 28, 1919
decision of the Court of First Instance of Pampanga in Land Registration
Case No. 5 from Spanish to English, also testified.

Petitioners manifested that they were opting to submit the incident for
resolution without presenting evidence, relying on their position that only
the facts alleged in the complaint should be considered.

In their formal offer of evidence,7 respondents offered the following

documents: (1) the June 28, 1919 Decision and its English translation; (2)
Transmittal Letter, dated May 6, 1922; (3) Decree No. 122511; (4) OCT No.
RO-1138; (5) TCT No. 213777-R; (6) the petition, dated July 29, 1988, and
its annexes in Civil Case No. 5487; (7) the September 7, 1990 Order
dismissing Civil Case No. 5487, without prejudice; and (8) the July 29,
1916 Decision in Expediente No. 132, G.L.R.O. Record No. 11958 and its
English translation.

In their comment/opposition8 to the formal offer of evidence, petitioners

argued (1) that the claims of Epifanio Makam and Severina Bautista, their
predecessors-in-interest, were not adjudicated in the June 28, 1919
decision and, thus, res judicata was inapplicable; (2) that Civil Case No.
5487 was dismissed without prejudice and that they were not the plaintiffs
therein; (3) that the allegedly spurious nature of the deed of sale and the
supposed indefeasibility of respondents' title were matters of evidence to
be resolved in a full-blown trial and the trial court was only confined to the
allegations in the complaint; (4) that their action was not barred by
prescription because an action to quiet title did not prescribe if the plaintiffs
were in possession of the subject property and that they had been in
possession in the concept of owner for more than 100 years; and (5) that
respondents were guilty of laches having taken more than 80 years to
attempt to enforce their claimed title to the
property.chanRoblesvirtualLawlibrary
Ruling of the RTC
Cause of Action

On July 14, 2008, the RTC-Br. 59 issued the Order dismissing petitioners'
complaint. It found that based on the decision, dated June 28, 1919, in
Cadastral Case No. 5, the Baluyut siblings, respondents' predecessors-in-
interest, were declared the absolute owners of the subject property, over
the claim of Jose Makam, the predecessor-in-interest of petitioners, who
was one of the oppositors in the said case. From this decision, OCT No.
RO-1138 (11376) was derived, which later became the subject of a project
of partition and deed of agreement among the Baluyut siblings, dated
January 2, 1972, which, in turn, was annotated on the OCT as Entry No.
8132. TCT No. 213777-R, covering the subject lot, was later derived from
the partition. The RTC-Br. 59 also noted that it was stated in the said
decision that in 1907, a warehouse was constructed on the subject lot by
virtue of an agreement between the Chairman of Magalang and Enrique
Baluyut, with no objection from the Makams. It was further noted that the
deed of sale being asserted by petitioners was not mentioned in the 1919
decision despite the claim of their predecessors-in-interest.

The RTC-Br. 59, thus, ruled that the deed of sale had become invalid by
virtue of the June 28, 1919 decision. It held that although the deed of sale
dated, April 20, 1894, was never challenged, it was nevertheless
unenforceable by virtue of the June 28, 1919 decision. It found that
petitioners had lost whatever right they had on the property from the
moment the said decision was rendered and an OCT was issued. Finding
that petitioners were not holders of any legal title over the property and
were bereft of any equitable claim thereon, the RTC-Branch 59 stated that
the first requisite of an action to quiet title was miserably wanting. It also
found the second requisite to be wanting because respondents had proved
that the TCT registered in their names was valid.

Anent petitioners' argument that only the complaint may be considered in

determining the sufficiency of the cause of action, the RTC-Br. 59 ruled that
under Section 2 in relation to Section 6, Rule 16 of the Rules of Court, a
preliminary hearing on the affirmative defense in the answer might be had
at the discretion of the court, during which the parties could present their
arguments and their evidence.

On December 22, 2008, the RTC-Br. 59 denied petitioners' motion for

reconsideration. It stated that the court may consider evidence presented in
hearings related to the case, which was an exception to the general rule
Cause of Action

that only the complaint should be taken into consideration. It stated that
petitioners were without legal or equitable title to the subject property, thus,
lacking the legal personality to file an action for quieting of title and,
therefore, "the complaint was properly dismissed for failing to state a cause
of action."9

Ruling of the CA

In the assailed Decision, dated March 13, 2012, the CA dismissed

petitioners' appeal. It explained that under Section 6, Rule 16 of the Rules
of Court, a court is allowed to conduct a preliminary hearing, motu proprio,
on the defendant's affirmative defenses, including the ground of "lack of
cause of action or failure to state a cause of action."10 It gave the reason
that because the rule spoke in general terms, its manifest intention was to
apply it to all grounds for a motion to dismiss under the rules which were
pleaded as affirmative defenses in the responsive pleading. Thus, it held
that the trial court might consider other evidence aside from the averments
in the complaint in determining the sufficiency of the cause of action. The
CA explained:chanroblesvirtuallawlibrary
But as shown in the foregoing rule, the holding of a preliminary hearing on
any of the grounds for a motion to dismiss which is pleaded as an
affirmative defense is within the full discretion of the trial court. The rule
speaks of affirmative defenses that are grounds for a motion to dismiss.
Indubitably, lack of cause of action or failure to state a cause of action,
being one of the grounds for a motion to dismiss, is included thereby.

Since the rule allows the trial court to conduct a preliminary hearing on this
kind of an affirmative defense, it follows then that evidence could be
submitted and received during the proceedings which the court may
consider in forming its decision. It would be plain absurdity if the evidence
already presented therein would not be allowed to be considered in
resolving whether the case should be dismissed or not. To rule otherwise
would render nugatory the provision of Section 6, Rule 16 and would make
the holding of a preliminary hearing a plain exercise in futility. No well-
meaning judge would hold a preliminary hearing and receive evidence only
to disregard later the evidence gathered in the course thereof. If the
intention of the rule is for the trial court to confine itself to the allegations in
the complaint in determining the sufficiency of the cause of action, as the
plaintiffs-appellants would want to impress upon this Court, then it should
have been so expressly stated by barring the court from conducting a
Cause of Action

preliminary hearing based on the said ground. The fact, however, that the
said rule speaks in general terms, it is its manifest intention to apply it in all
grounds for a motion to dismiss under the rules which are pleaded as an
affirmative defense in the responsive pleading. Thus, we find that that trial
court did not err in considering the evidence already presented and in not
confining itself to the allegations in the plaintiffs-
appeallants'complaint.11cralawlawlibrary
The CA gave credence to the evidence presented by respondents and
noted that, except for petitioners' bare allegation that respondents' title was
invalid, there was nothing more to support the same. It further noted that
the deed of sale was written in a local dialect without the translation and
with no ascertainable reference to the area of the property being conveyed.
The CA, therefore, found that petitioners did not have the title required to
avail of the remedy of quieting of title, while respondents had sufficiently
proven the validity of their Torrens title.

Hence, the subject petition.chanRoblesvirtualLawlibrary

ISSUE
Whether the CA erred in affirming the dismissal of petitioners'
complaint on the ground of lack of cause of action or failure to state a
cause of action.
Petitioners argue that the CA gravely erred in considering external factors
beyond the allegations in the petition. They aver that it is a settled rule that
to determine the sufficiency of a cause of action, only facts alleged in the
complaint shall be considered, and it is error for the court to take
cognizance of external facts or hold a preliminary hearing to determine their
existence.

Respondents, on the other hand, echo the ruling of the CA that it was
within the disrection of the trial court to conduct a preliminary hearing on
the affirmative defense of lack of cause of action or failure to state a cause
of action, where both parties were given the chance to submit arguments
and evidence for or against the dismissal of the complaint. Furthermore,
they argue that the Court has previously upheld cases where the court took
into account external factors in the dismissal of the complaint on the ground
of lack of cause of action. They assert that since petitioners were given
reasonable opportunity to present evidence to prove their cause of action,
they are now estopped from invoking the rule that only allegations in the
complaint should be considered.12
Cause of Action

Petitioners reiterate that they have been in possession of the property in

the concept of owner for more than 119 years, where they built their
houses, reared their families, and paid realty taxes thereon. They point out
that their possession was never disputed by respondents, and that
respondents had only attempted to enforce their supposed rights over the
property in 2005, or 86 years after the purported decree awarding the
property to them. Petitioners argue that respondents had abandoned their
right to the subject property which, thus, rendered invalid whatever title they
might have had. They argue that it has been held that a registered owner's
right to recover possession and title to property may be converted into a
stale demand by virtue of laches. They also claim that the allegations
contained in their complaint sufficiently state a cause of action, and that it
was an error for the trial court to declare it unenforceable considering that
the deed of sale should be considered hypothetically admitted when
determining whether the complaint sufficiently states a cause of action.13

Ruling of the Court

Preliminary matters

The Court notes that respondents raised the affirmative defense in their
Answer that petitioners "have no valid, legal and sufficient cause of action,"
raising factual matters,14 which is effectively the ground of "lack of cause of
action." Respondents' arguments made no assertion that the complaint
failed to state a cause of action. The ground of "lack of cause of action" has
been frequently confused with the ground of "failure to state a cause of
action," and this is the situation prevailing in the present case. The terms
were, in fact, used interchangeably by both the respondents and the lower
courts.

The distinction between the grounds of "failure to state a cause of action"

and "lack of cause of action" was aptly discussed in Dabuco vs. Court of
Appeals, to wit:chanroblesvirtuallawlibrary
As a preliminary matter, we wish to stress the distinction between the two
grounds for dismissal of an action: failure to state a cause of action, on the
one hand, and lack of cause of action, on the other hand. The former refers
to the insufficiency of allegation in the pleading, the latter to the
insufficiency of factual basis for the action. Failure to state a cause may be
raised in a Motion to Dismiss under Rule 16, while lack of cause may be
Cause of Action

raised any time. Dismissal for failure to state a cause can be made at the
earliest stages of an action. Dismissal for lack of cause is usually made
after questions of fact have been resolved on the basis of stipulations,
admissions or evidence presented.15cralawlawlibrary
Although the two grounds were used interchangeably, it can be gleaned
from the decisions of both the trial court and the CA that respondents'
defense of "lack of cause of action" was actually treated as a "failure to
state a cause of action," which is a ground for a motion to dismiss under
Rule 16. This is apparent from their reliance on Section 6 of Rule 16, which
pertains to grounds of a motion to dismiss raised as affirmative defenses;
as well as the doctrines cited in resolving the case. The CA even referred
to both as one and the same ground for a motion to dismiss when it stated
that: "Indubitably, lack of cause of action or failure to state a cause of
action, being one of the grounds for a motion to dismiss, is included
thereby."16

Also confused, respondents, on their part, asserted that "it is within the
discretion of the Court a quo to conduct a preliminary hearing on the
affirmative defense of lack of cause of action or failure to state a cause of
action,"17 the very basis of their argument being hinged on the application
of Section 6. They also insisted on the applicability of the exceptions to the
general rule that only averments in the complaint must be considered,
which pertains to the ground of "failure to state a cause of action."

The trial court held a preliminary hearing resolving the ground of "lack of
cause of action" pursuant to Section 6 of Rule 16, which allows the court to
hold a preliminary hearing on grounds for dismissal provided in the same
rule that have been raised as an affirmative defense in the answer.18 The
ground of "lack of cause of action," as already explained, however, is not
one of the grounds for a motion to dismiss under Rule 16, and hence, not
proper for resolution during a preliminary hearing held pursuant to Section
6. On this point alone, the trial court clearly erred in receiving evidence on
the ground of "lack of cause of action" during the preliminary hearing. The
factual matters raised by respondents in their affirmative defense arguing
the non-existence of a cause of action, should have been duly resolved
during a trial on the merits of the case.

In any case, even if the Court were to treat respondents' argument as a

"failure to state a cause of action," their defense would still fail.
Cause of Action

Court limited to averments in the complaint

Rule 16 of the Rules of Court enumerates the grounds for a motion to

dismiss. The pertinent ground is found under Section 1(g), which reads as
follows:chanroblesvirtuallawlibrary
xxxx

(g) That the pleading asserting the claim states no cause of action;
xxxx (Emphasis supplied)
The test for determining the existence of a cause of action was amply
discussed in Insular Investment and Trust Corporation v. Capital One
Equities Corporation,19 citing Perpetual Savings Bank v. Fajardo,20to
wit:chanroblesvirtuallawlibrary
The familiar test for determining whether a complaint did or did not
state a cause of action against the defendants is whether or not,
admitting hypothetically the truth of the allegations of fact made in
the complaint, a judge may validly grant the relief demanded in the
complaint. In Rava Development Corporation v. Court of Appeals, the
Court elaborated on this established standard in the following
manner:chanroblesvirtuallawlibrary
"The rule is that a defendant moving to dismiss a complaint on the ground
of lack of cause of action is regarded as having hypothetically admitted all
the averments thereof. The test of the sufficiency of the facts found in a
petition as constituting a cause of action is whether or not, admitting the
facts alleged, the court can render a valid judgment upon the same in
accordance with the prayer thereof (Consolidated Bank and Trust Corp. v.
Court of Appeals, 197 SCRA 663 [1991]).

In determining the existence of a cause of action, only the statements

in the complaint may properly be considered. It is error for the court to
take cognizance of external facts or hold preliminary hearings to determine
their existence. If the allegation in a complaint furnish sufficient basis by
which the complaint may be maintained, the same should not be dismissed
regardless of the defenses that may be assessed by the defendants
(supra).21cralawlawlibrary
Thus, in determining the existence of a cause of action, only the allegations
in the complaint may properly be considered. For the court to do otherwise
would be a procedural error and a denial of the plaintiffs right to due
process.22
Cause of Action

In the case at bench, petitioners' cause of action relates to an action to

quiet title under Article 476 of the Civil Code, which
provides:chanroblesvirtuallawlibrary
Article 476. Whenever there is a cloud on title to real property or any
interest therein, by reason of any instrument, record, claim, encumbrance
or proceeding which is apparently valid or effective but is in truth and in fact
invalid, ineffective, voidable, or unenforceable, and may be prejudicial to
said title, an action may be brought to remove such cloud or to quiet title.

An action may also be brought to prevent a cloud from being cast upon title
to real property or any interest therein.
A "cloud on title" is an outstanding instrument, record, claim, encumbrance
or proceeding which is actually invalid or inoperative, but which may
nevertheless impair or affect injuriously the title to property. The matter
complained of must have a prima facie appearance of validity or legal
efficacy. The cloud on title is a semblance of title which appears in some
legal form but which is in fact unfounded. The invalidity or inoperativeness
of the instrument is not apparent on the face of such instrument, and it has
to be proved by extrinsic evidence.23

In order that an action for quieting of title may prosper, two requisites must
concur: (1) the plaintiff or complainant has a legal or equitable title or
interest in the real property subject of the action; and (2) the deed, claim,
encumbrance, or proceeding claimed to be casting cloud on his title must
be shown to be in fact invalid or inoperative despite its prima
facie appearance of validity or legal efficacy.24

Turning then to petitioners' complaint, the relevant allegations as to the

cause of action for quieting of title read as
follows:chanroblesvirtuallawlibrary
3. Plaintiffs are the heirs of the late Epifanio Makam and Severina Bautista
who acquired a house and lot on 20 April 1894 situated in Magalang,
Pampanga, consisting of Five Hundred Seventy Seven (577) square
meters more or less, by virtue of a Deed of Sale, hereby quoted for ready
reference:

xxx

4. From 1894 and up to the present, plaintiffs and through their

predecessors-in-interest have been in open, continuous, adverse and
Cause of Action

notorious possession for more than a hundred years of the piece of

property mentioned above, constructed their houses thereon and dutifully
and faithfully paid the real estate taxes on the said property;

5. That sometime in June 2005, plaintiffs received various demand letters

from defendants demanding plaintiffs to vacate the premises, claiming
ownership of the subject property;

6. That when plaintiffs inquired from the Office of the Register of Deeds of
San Fernando, Pampanga, they were able to confirm that their property
had been titled in the name of herein defendants under TCT No. 213777-R;

7. That the said title is in fact invalid, ineffective, voidable or unenforceable,

the existence of which is pre-judicial to the ownership and possession of
plaintiffs who are the true owners and actual possessors of the above
described real property;

8. That equity demands that the said title be surrendered by defendants

and cancelled as it is a cloud upon the legal or equitable title to or interest
of plaintiffs over the subject property.25cralawlawlibrary
It is readily apparent from the complaint that petitioners alleged that (1)
they had an interest over the subject property by virtue of a Deed of Sale,
dated April 20, 1894; and that (2) the title of respondents under TCT No.
213777-R was invalid, ineffective, voidable or unenforceable.
Hypothetically admitting these allegations as true, as is required in
determining whether a complaint fails to state a cause of action, petitioners
may be granted their claim. Clearly, the complaint sufficiently stated a
cause of action. In resolving whether or not the complaint stated a cause of
action, the trial court should have limited itself to examining the sufficiency
of the allegations in the complaint. It was proscribed from inquiring into the
truth of the allegations in the complaint or the authenticity of any of the
documents referred or attached to the complaint, as these were deemed
hypothetically admitted by the respondents.26

Evangelista v. Santiago elucidates:chanroblesvirtuallawlibrary

The affirmative defense that the Complaint stated no cause of action,
similar to a motion to dismiss based on the same ground, requires
a hypothetical admission of the facts alleged in the Complaint. In the
case of Garcon v. Redemptorist Fathers, this Court laid down the rules as
Cause of Action

far as this ground for dismissal of an action or affirmative defense is

concerned:chanroblesvirtuallawlibrary
It is already well-settled that in a motion to dismiss a complaint based on
lack of cause of action, the question submitted to the court for
determination is the sufficiency of the allegations of fact made in the
complaint to constitute a cause of action, and not on whether these
allegations of fact are true, for said motion must hypothetically admit the
truth of the facts alleged in the complaint; that the test of the sufficiency of
the facts alleged in the complaint is whether or not, admitting the facts
alleged, the court could render a valid judgment upon the same in
accordance with the prayer of said complaint. Stated otherwise, the
insufficiency of the cause of action must appear in the face of the complaint
in order to sustain a dismissal on this ground, for in the determination of
whether or not a complaint states a cause of action, only the facts alleged
therein and no other matter may be considered, and the court may not
inquire into the truth of the allegations, and find them to be false before a
hearing is had on the merits of the case; and it is improper to inject in the
allegations of the complaint facts not alleged or proved, and use these as
basis for said motion.27 (Emphasis and underscoring supplied)
Exceptions and Section 6 of Rule 16 not applicable

The Court does not discount, however, that there are exceptions to the
general rule that allegations are hypothetically admitted as true and inquiry
is confined to the face of the complaint. First, there is no hypothetical
admission of (a) the veracity of allegations if their falsity is subject to judicial
notice; (b) allegations that are legally impossible; (c) facts inadmissible in
evidence; and (d) facts which appear, by record or document included in
the pleadings, to be unfounded.28Second, inquiry is not confined to the
complaint if culled (a) from annexes and other pleadings submitted by the
parties;29 (b) from documentary evidence admitted by stipulation which
disclose facts sufficient to defeat the claim; or (c) from evidence admitted in
the course of hearings related to the case.30

Pointing to the exception that inquiry was not confined to the complaint if
evidence had been presented in the course of hearings related to the case,
the CA ruled that it was within the trial court's discretion to receive and
consider other evidence aside from the allegations in the complaint in
resolving a party's affirmative defense. It held that this discretion was
recognized under Section 6 of Rule 16 of the Rules of Court, which allowed
the court to conduct a preliminary hearing, motu proprio, on the defendant's
Cause of Action

affirmative defense if no corresponding motion to dismiss was filed. This

section reads in part:chanroblesvirtuallawlibrary
Section 6. Pleading grounds as affirmative defenses. - If no motion to
dismiss has been filed, any of the grounds for dismissal provided for in this
Rule may be pleaded as an affirmative defense in the answer and, in the
discretion of the court, a preliminary hearing may be had thereon as if a
motion to dismiss had been filed.
In their answer, respondents raised the affirmative defenses of "lack of
cause of action, prescription, and res judicata,"31 stated in the following
manner:chanroblesvirtuallawlibrary
xxxx

6. Plaintiffs have no valid, legal and sufficient cause of action against

the defendants. The alleged "deed of sale" (Annex "B" -Amended
Complaint) is spurious and the same cannot prevail over the Land
Registration Decree No. 122511 issued on June 28, 1919 in Land
Registration Case No. 5, LRC Record No. 128, by the Court of First
Instance of Pampanga, in favor of defendants' predecessor-in-interest. In
fact, plaintiffs' predecessors-in-interest were among the oppositors in that
land registration proceeding but after trial the lot in question was awarded,
decreed and titled in favor and in the names of defendants' predecessors-
in-interest, as per Original Certificate of Title No. RO-1138 (11376) of the
Registry of Deeds of Pampanga;

7. The instant action, which is actually an action of reconveyance, is

already barred by prescription. Moreover, plaintiffs are guilty of laches in
asserting their alleged title or interest over the subject lot. Said Land
Registration Decree No. 122511 was issued on June 28, 1919 and OCT
No. RO 1138 (11376) was issued on May 12, 1922. Clearly, it is much too
late for the plaintiffs, after more than eighty (80) long years to institute this
action against the defendants;

xxxx

9. The present action is also barred by res judicata and violates

the prohibition against forum shopping. There was already a prior
similar case for quieting of title filed by plaintiffs' predecessor-in-interest
against defendant Jaime Quiazon and his co-owners, before Branch 56 of
this Honorable Court, docketed as Civil Case No. 5487, which was
dismissed;32 xxxx (Emphases supplied)
Cause of Action

A review of the first ground under paragraph 6 of the answer reveals that
respondents alleged that "[p]laintiffs have no valid, legal and sufficient
cause of action against the defendants." It is at this point that it must again
be emphasized that it is not "lack or absence of cause of action" that is a
ground for dismissal of the complaint under Rule 16, but rather, that "the
complaint states no cause of action."33 The issue submitted to the court
was, therefore, the determination of the sufficiency of the allegations in the
complaint to constitute a cause of action and not whether those allegations
of fact were true, as there was a hypothetical admission of facts alleged in
the complaint.34 An affirmative defense, raising the ground that there is no
cause of action as against the defendants poses a question of fact that
should be resolved after the conduct of the trial on the merits.35 A reading
of respondents' arguments in support of this ground readily reveals that the
arguments relate not to the failure to state a cause of action, but to the
existence of the cause of action, which goes into the very crux of the
controversy and is a matter of evidence for resolution after a full-blown
hearing.

The trial court may indeed elect to hold a preliminary hearing on affirmative
defenses as raised in the answer under Section 6 of Rules 16 of the Rules
of Court. It has been held, however, that such a hearing is not necessary
when the affirmative defense is failure to state a cause of action,36 and that
it is, in fact, error for the court to hold a preliminary hearing to determine the
existence of external facts outside the complaint.37 The reception and the
consideration of evidence on the ground that the complaint fails to state a
cause of action, has been held to be improper and impermissible.38 Thus,
in a preliminary hearing on a motion to dismiss or on the affirmative
defenses raised in an answer, the parties are allowed to present evidence
except when the motion is based on the ground of insufficiency of the
statement of the cause of action which must be determined on the basis
only of the facts alleged in the complaint and no other.39 Section 6,
therefore, does not apply to the ground that the complaint fails to state a
cause of action. The trial court, thus, erred in receiving and considering
evidence in connection with this ground.

The lower courts also relied on the exception that external evidence may
be considered when received "in the course of hearings related to the
case," which is rooted in the case of Tan v. Director of Forestry (Tan).40 In
said case, a hearing was conducted on the prayer for preliminary injunction
where evidence was submitted by the parties. In the meantime, a motion to
Cause of Action

dismiss was filed by the defendant, citing as one of the grounds that the
petition did not state a cause of action. The trial court resolved the prayer
for the issuance of a writ of preliminary injunction simultaneously with the
motion to dismiss. It dismissed the petition for failure to state a cause of
action on the basis of the evidence presented during the hearing for
preliminary injuction. On appeal, this Court ruled that the trial court was
correct in considering the evidence already presented and in not confining
itself to the allegations in the petition.

Tan, however, is not on all fours with the present case. First, the trial court
therein considered evidence presented during a preliminary hearing on an
injunction and not during a hearing on a motion to dismiss. As discussed, a
preliminary hearing on a motion to dismiss is proscribed when the ground is
failure to state a cause of action. The exception of "hearings related to the
case," therefore, pertains to hearings other than the hearing on a motion to
dismiss on the ground of failure to state a cause of action. To reiterate, the
ground that the complaint fails to state a cause of action should be tested
only on the allegations of facts contained in the complaint, and no other. If
the allegations show a cause of action, or furnish sufficient basis by which
the complaint can be maintained, the complaint should not be dismissed
regardless of the defenses averred by the defendants.41 The trial court may
not inquire into the truth of the allegations, and find them to be false before
a hearing is conducted on the merits of the case.42 If the court finds the
allegations to be sufficient but doubts their veracity, the veracity of the
assertions could be asserted during the trial on the merits.43

Second, Tan noted that the plaintiff had readily availed of his opportunity to
introduce evidence during the hearing and, as a result, was estopped from
arguing that the court is limited to the allegations in the complaint.44 This is
in contrast to the present case, where petitioners steadfastly argued from
the beginning that the trial court was limited to the allegations in the
complaint. Petitioners maintained their stance during the preliminary
hearing on the affirmative defenses, opting not to file rebuttal evidence and
opposing respondents' formal offer of evidence on the same ground.
Having been consistent in their position from the start, petitioners cannot be
estopped from arguing that the trial court was precluded from considering
external evidence in resolving the motion to dismiss.

Third, it was noted in Tan that the documentary evidence given credence
by the trial court had effectively been admitted by stipulation during the
Cause of Action

hearing,45 and another had been an annex to the complaint,46both of which

are exceptions to the general rule that external facts cannot be considered.
Neither of the said exceptions is availing in the present case. The Court
notes that only the OCT of respondents was attached as an annex to their
answer. The June 28, 1919 Decision in the Cadastral case, which was
given considerable weight by the trial court, was not attached and was only
presented during the preliminary hearing.

Fourth, Tan ruled that the rigid application of the rules could not be
countenanced considering the overriding public interest involved, namely,
the welfare of the inhabitants of the province whose lives and properties
would be directly and immediately imperilled by forest denudation.47 There
appears to be no overriding public interest in the present case to justify a
similar relaxation of the rules.

It is of note that although the trial court might not have erred in holding a
preliminary hearing on the affirmative defenses of prescription and res
judicata, it is readily apparent from the decisions of the lower courts that no
disquisition whatsoever was made on these grounds. It cannot be denied
that evidence in support of the ground of "lack of cause of action" was
received and given great weight by the trial court. In fact, all the evidence
given credence by the trial court were only in support of the ground of "lack
of cause of action." This all the more highlights that the trial court erred in
receiving evidence to determine whether the complaint failed to state a
cause of action.

Although neither the RTC or the CA ruled on the affirmative defenses of

prescription and res judicata, it appears that this case could not have been
dismissed on these grounds. First, an action to quiet title is imprescriptible
if the plaintiffs are in possession of the property,48 which is the situation
prevailing in the present case. Second, there appears to be no res
judicata nor a violation of the prohibition against forum shopping
considering that Civil Case No. 5487 had been dismissed, without
prejudice, years before petitioners initiated their complaint for quieting of
title.

In sum, the trial court erred in dismissing the complaint on the ground of
failure to state a cause of action. Evidence should have been received not
during a preliminary hearing under Section 6 of Rule 16, but should have
been presented during the course of the trial. The case should, thus, be
Cause of Action

remanded to the RTC-Br. 59 for trial on the merits.cralawred

WHEREFORE, the petition is GRANTED. The March 13, 2012 Decision of

the Court of Appeals, in CA-G.R. CV No. 92887 is REVERSED and SET
ASIDE. The case is ordered REMANDED to the

Regional Trial Court for trial on the merits of the case.

SO ORDERED.chanroblesvirtuallawlibrary

Carpio, (Chairperson), Brion, Del Castillo, and Leonen, JJ., concur.

Endnotes:

1
Rollo, pp. 21-32; penned by Associate Justice Amelita G. Tolentino, with
Associate Justice Ramon R. Garcia and Associate Justice Samuel H.
Gaerlan, concurring.
2
Id. at 64-70 and 74-75.
3
Id. at 36-39.
4
Id. at 48-52.
5
Id. at 49.
6
Id. at 59-63.
7
Records, pp. 173-175.
8
Id. at 279-283.
9
Rollo, p. 75.
10
Id. at 28.
11
Id. at 28-29.
12
Id. at 155-161.
Cause of Action

13
Id. at 199-203.
14
Id. at 49.
15
379 Phil. 939, 944-945 (2000).
16
Rollo, p. 28.
17
Id. at 90.
18
Section 6. Pleading grounds as affirmative defenses. - If no motion to
dismiss has been filed, any of the grounds for dismissal provided for in this
Rule may be pleaded as an affirmative defense in the answer and, in the
discretion of the court, a preliminary hearing may be had thereon as if a
motion to dismiss had been filed.

xxx
19
G.R. No. 183308, April 25, 2012, 671 SCRA 112.
20
G.R. No. 79760, June 28, 1993, 223 SCRA 720.
21
Insular Investment and Trust Corporation v. Capital One Equities
Corporation, supra note 19, at 142.
22
Indiana Aerospace University v. Commissioner of Higher Education, 408
Phil. 483, 502 (2001).
23
Evangelista v. Santiago, 497 Phil. 269, 290 (2005).
24
Phil-Ville Development and Housing Corporation v. Bonifacio, G.R. No.
167391, June 8, 2011, 651 SCRA 327, 341.
25
Rollo, pp. 37-39.
26
Evangelista v. Santiago, supra note 23, at 286.
27
Id. at 285-286.
Cause of Action

28
Dabuco v. Court of Appeals, 379 Phil. 939, 950-951 (2000).
29
Philippine Army v. Pamittan, G.R. No. 187326, June 15, 2011, 652 SCRA
306, 312.
.

4.) ELIZA ZUNIGA-SANTOS vs. MARIA DIVINA GRACIA SANTOS-GRAN

G.R. No. 197380 October 8, 2014

Facts: On January 9, 2006, petitioner Eliza Zuñiga-Santos (petitioner),

through her authorizedrepresentative, Nympha Z. Sales, filed a
Complaintfor annulment of sale and revocation of titleagainst respondents
Maria DivinaGracia Santos-Gran (Gran) and the Register of Deeds
ofMarikina City before the RTC, docketed asCivil Case No. 2018-
06.).Respondent filed a motion to dismiss on the following grounds:(a)

the action filed by petitioner had prescribed since an action upon a written
contractmust be brought within ten (10) years from the time the cause of
action accrues,(b)

the Amended Complaint failed to state a cause of action as the void and
voidabledocuments sought to be nullified were not properly identified nor
the substance thereofset forth, thus, precluding the RTC from rendering a
valid judgment in accordancewiththe prayer to surrender the subject
properties.RTC Ruling:
RTC granted Gran’s motion and dismissed the Amended Complaint for its
failure to
state a cause of action, considering that the deed of sale sought to be
nullified
–
an "essential
and indispensable part of *petitioner’s+ cause of action"was not att
ached.

CA Ruling:
CA sustained the dismissal of petitioner’s Amended Complaint buton the
ground ofinsufficiency of factual basis. It disagreed with the RTC’s
findingthat the said pleading failed to
Cause of Action

state a cause of action since

Issue: W/N failure to state a cause of action and lack of cause of action are
distinct grounds todismiss a particular action?

Held: SC Ruling: Yes, this is a matter of insufficiency of the pleading. Sec.

5 of Rule 10, which wasalso included as the last mode for raising the issue
to the court, refers to the situation where theevidence does not provea
cause of action. This is, therefore, a matter of insufficiency ofevidence.
Failure to state a cause of action is different from failure to prove a cause of
action.The remedy in the first is to move for dismissal of the pleading,
whilethe remedy in the second isto demur to the evidence; hence reference
to Sec. 5 of Rule 10 has been eliminated in thissection.

Sale could not be located; and (f) she discovered that the subject
properties were transferred toGran sometime in November 2005. For her
part, Gran filed a Motion to Dismiss,contending,inter alia, that (a) the action
filed by petitioner had prescribed since an action upon a writtencontract
must be brought within ten (10) years from the time the cause of action
accrues, or inthis case, from the time of registration of the questioned
documents before the Registry ofDeeds; and (b) the Amended Complaint
failed to state a cause of action as the void and voidabledocuments sought
to be nullified were not properly identified nor the substance thereof set
forth. RTC granted Gran’s motion and dismissed the Complaint for its
failure to state a cause of
action, considering that the deed of sale sought to be nullified
–
an "essential and indispensable
part of *petitioner’s+ cause of action" –
was not attached. It likewise held that the certificates oftitle covering the
subject properties cannot be collaterally attacked and that since the
actionwas based on a written contract, the same had already prescribed
under Article 1144 of the Civil
Code. CA sustained the dismissal of petitioner’s Amended Complaint but
on the ground of
insufficiency of factual basis.
Cause of Action

ISSUE: Whether or not the the dismissal of petitioner’s Amended Complai

nt should be sustained.
HELD: YES. A judicious examination of petitioner’s Complaint readily
shows its failure to
sufficiently state a cause of action. Contrary to the findings of the CA, the
allegations therein donot proffer ultimate facts which would warrant an
action for nullification of the sale andrecovery of the properties in
controversy, hence, rendering the same dismissible. While theComplaint
does allege that petitioner was the registered owner of the subject
properties indispute, nothing in the said pleading or its annexes would
show the basis of that assertion,
either through statements/documents tracing the root of petitioner’s title or
copies of previous
certificates of title registered in her name. Instead, the certificates of title
covering the saidproperties that were attached to the Complaint are in the
name of Gran. Indeed, while the factsalleged in the complaint are
hypothetically admitted for purposes of the motion, it must,nevertheless, be
remembered that the hypothetical admission extends only to the relevant
andmaterial facts well pleaded in the complaint as well as to inferences
fairly deductible therefrom.Verily, the filing of the motion to dismiss
assailing the sufficiency of the complaint does nothypothetically admit
allegations of which the court will take judicial notice of to be not true,
nordoes the rule of hypothetical admission apply to legally impossible facts,
or to facts inadmissiblein evidence, or to facts that appear to be unfounded
by record or document included in thepleadings. A pleading should state
the ultimate facts essential to the rights of action or defenseasserted, as
distinguished from mere conclusions of fact, or conclusions of law.
Generalallegations thata contract is valid or legal, or is just, fair, and
reasonable, are mere conclusionsof law. Likewise, allegations that a
contract is void, voidable, invalid, illegal, ultra vires, or againstpublic policy,
without stating facts showing its invalidity, are mere conclusions of law.
Hence, bymerely stating a legal conclusion, the Complaint presented no
sufficient allegation upon whichthe Court could grant the relief petitioner
prayed for. Thus, said pleading should be dismissed onthe ground of failure
to state cause of action, as correctly held by the RTC. As to the issue
ofpresecription: 1âwphi1 To determine when the prescriptive period
commenced in an action for
Cause of Action

reconveyance, the plaintiff’s possession of the disputed property is

material. If there is an actual
need to reconvey the property as when the plaintiff is not in possession, the
action forreconveyance based on implied trust prescribes in ten (10) years,
the reference point being thedate of registration of the deed or the issuance
of the title. On the other hand, if the real ownerof the property remains in
possession of the property, the prescriptive period to recover titleand
possession of the property does not run against him and in such case, the
action forreconveyance would be in the nature of a suit for quieting of title
which is imprescriptible. In thecase at bar, a reading of the allegations of
the Complaint failed to show that petitioner remainedin possession of the
subject properties in dispute. On the contrary, it can be reasonably
deducedthat it was Gran who was in posse
ssion of the subject properties. The filing of the petitioner’s
complaint before the RTC on January 9, 2006 was obviously beyond the
ten-year prescriptive
period, warranting the Amended Complaint’s dismissal all the same.

5. ) HEIRS OF MAGDALENO YPON vs. GAUDIOSO PONTERAS RICAFORTE

A.K.A. "GAUDIOSO E.YPON,"
G.R. No. 198680 July 8, 2013

FACTS: On July 29, 2010, petitioners, together with some of their cousins,
filed a complaint forCancellation of Title and Reconveyance with Damages
(subject complaint) against respondentGaudioso Ponteras Ricaforte a.k.a.
"Gaudioso E. Ypon" (Gaudioso). In their complaint, theyalleged that
Magdaleno died intestate and childless on June 28, 1968, leaving behind 4
parcel oflands. Claiming to be the sole heir of Magdaleno, Gaudioso
executed an Affidavit of Self-Adjudication and caused the cancellation of
the certificates of title, leading to their subsequent
transfer in his name to the prejudice of petitioners who are Magdaleno’s
collateral relatives and
successors-in-interest. In his Answer, Gaudioso alleged that he is the
lawful son of Magdaleno asevidenced by: (a) his certificate of Live Birth; (b)
two (2) letters from Polytechnic School; and (c)a certified true copy of his
passport. Further, by way of affirmative defense, he claimed that:
(a)petitioners have no cause of action against him; (b) the complaint fails to
state a cause of action;and (c) the case is not prosecuted by the real
Cause of Action

parties-in-interest, as there is no showing that thepetitioners have been

judicially d
eclared as Magdaleno’s lawful heirs. RTC found that the subject
complaint failed to state a cause of action against Gaudioso. It observed
that while the plaintiffstherein had established their relationship with
Magdaleno in a previous special proceeding forthe issuance of letters of
administration, this did not mean that they could already be
considered as the decedent’s compulsory heirs. Quite the contrary,
Gaudioso satisfactorilyestablished the fact that he is Magdaleno’s son –
and hence, his compulsory heir
–
through thedocumentary evidence he submitted which consisted of: (a) a
marriage contract betweenMagdaleno and Epegenia Evangelista; (b) a
Certificate of Live Birth; (c) a Letter dated February19, 1960; and (d) a
passport.

SSUE: Whether or no
t the RTC’s dismissal of the case on the ground that the subject complaint
failed to state a cause of action was proper.RULING: YES. Cause of
action is defined as the act or omission by which a party violates a right
ofanother. It is well-settled that the existence of a cause of action is
determined by the allegationsin the complaint. In this relation, a complaint
is said to assert a sufficient cause of action if,admitting what appears solely
on its face to be correct, the plaintiff would be entitled to therelief prayed
for. As stated in the subject complaint, petitioners, who were among the
plaintiffstherein, alleged that they are the lawful heirs of Magdaleno and
based on the same, prayed thatthe Affidavit of Self-Adjudication executed
by Gaudioso be declared null and void and that the
transfer certificates of title issued in the latter’s favor be cancelled. While
the foregoing
allegations, if admitted to be true, would consequently warrant the reliefs
sought for in the saidcomplaint, the rule tha
t the determination of a decedent’s lawful heirs should be made in the
corresponding special proceeding precludes the RTC, in an ordinary action
for cancellation oftitle and reconveyance, from granting the same. This
must take precedence over the action forrecovery of possession and
ownership. The Court has consistently ruled that the trial courtcannot make
a declaration of heirship in the civil action for the reason that such a
declarationcan only be made in a special proceeding. There lies the need
Cause of Action

to institute the proper specialproceeding in order to determine the heirship

of the parties involved, ultimately resulting to thedismissal of Civil Case
No. T-2246. Verily, while a court usually focuses on the complaint
indetermining whether the same fails to state a cause of action, a court
cannot disregarddecisions material to the proper appreciation of the
questions before it. Thus, concordant withapplicable jurisprudence, since a
determination of heirship cannot be made in an ordinaryaction for recovery
of ownership and/or possession, the dismissal of Civil Case No. T-2246
was
altogether proper. In this light, it must be pointed out that the RTC erred in
ruling on Gaudioso’s
heirship which should, as herein discussed, be threshed out and
determined in the properspecial proceeding. As such, the foregoing
pronouncement should therefore be devoid of any legal effect.