Primary Holding

The Supreme Court held that the lower courts erred in dismissing the complaint based on a "failure to state a cause of action" by considering evidence beyond the allegations in the complaint. The Court ruled that the complaint sufficiently stated a cause of action for quieting of title, and the case was remanded to the trial court for a trial on the merits.

Background

The Naguit family filed a complaint seeking to annul the Quiazon family's title and quiet title in their favor, asserting a prior claim based on a deed of sale and continuous possession. The Quiazons countered that their Torrens title, derived from a land registration decree, was superior. The trial court conducted a preliminary hearing and dismissed the case, a decision affirmed by the Court of Appeals.

Facts

• 1. The Naguit family claimed ownership of a property in Magalang, Pampanga, based on a Deed of Sale dated April 20, 1894, and continuous possession since then.
• 2. The Quiazon family claimed ownership based on Transfer Certificate of Title (TCT) No. 213777-R, derived from Original Certificate of Title (OCT) No. RO-1138 (11376), which was issued pursuant to Land Registration Decree No. 122511 in 1919.
• 3. The Naguit family received demand letters from the Quiazons in 2005 to vacate the property.
• 4. The Quiazons’ predecessor-in-interest, Fausta Baluyut, was one of the registered owners under OCT No. RO-1138 (11376), as per the Project of Partition and Deed of Agreement, dated January 2, 1974.
• 5. The predecessors-in-interest of the Naguit family were oppositors in the land registration proceeding but the subject lot was awarded to the Quiazons' predecessor-in-interest.
• 6. A similar case for quieting of title was filed by the Naguit family against the Quiazons, docketed as Civil Case No. 5487, which the RTC-Br. 56 dismissed.

Arguments of the Petitioners

• 1. The Court of Appeals erred in considering factors beyond the allegations in the complaint.
• 2. Only the facts alleged in the complaint should be considered to determine the sufficiency of a cause of action.
• 3. The action to quiet title did not prescribe because they were in possession of the property.
• 4. They have been in possession of the property as owners for over 119 years.
• 5. The deed of sale should be considered hypothetically admitted when determining whether the complaint sufficiently states a cause of action.
• 6. The respondents had abandoned their right to the subject property, which thus rendered invalid whatever title they might have had.

Arguments of the Respondents

• 1. It was within the trial court's discretion to conduct a preliminary hearing on the affirmative defense of lack of cause of action or failure to state a cause of action.
• 2. The petitioners were given a reasonable opportunity to present evidence to prove their cause of action and are estopped from invoking the rule that only allegations in the complaint should be considered.
• 3. The 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.
• 4. The action was barred by prescription and that petitioners were guilty of laches in asserting their interest over the subject lot.
• 5. The action was also barred by res judicata and violated the prohibition against forum shopping.

Issues

• 1. Whether the Court of Appeals erred in affirming the dismissal of the petitioners' complaint on the ground of lack of cause of action or failure to state a cause of action.

Ruling

• 1. The Supreme Court found that the lower courts erred in treating the "lack of cause of action" as a "failure to state a cause of action," which is a ground for a motion to dismiss under Rule 16.
• 2. The trial court should have limited itself to the allegations in the complaint to determine if a cause of action was stated.
• 3. The complaint sufficiently stated a cause of action for quieting of title because it alleged an interest in the property based on a deed of sale and claimed the respondents' title was invalid.
• 4. The Court emphasized that in determining whether a complaint states a cause of action, only the facts alleged therein may be considered. It is improper to inject facts not alleged or proved and use these as a basis for the motion.
• 5. The case was remanded to the Regional Trial Court for trial on the merits.

Doctrines

• 1. Failure to State a Cause of Action: Refers to the insufficiency of allegations in the pleading.
• 2. Lack of Cause of Action: Refers to the insufficiency of the factual basis for the action.
• 3. Action to Quiet Title: An action brought to remove a cloud on title to real property.
• 4. Hypothetical Admission: In determining whether a complaint states a cause of action, the court must hypothetically admit the truth of the facts alleged in the complaint.

Precedents Cited

• 1. Dabuco vs. Court of Appeals, 379 Phil. 939 (2000): Distinguished between "failure to state a cause of action" and "lack of cause of action."
• 2. Insular Investment and Trust Corporation v. Capital One Equities Corporation, G.R. No. 183308, April 25, 2012: Reiterated the test for determining the existence of a cause of action.
• 3. Perpetual Savings Bank v. Fajardo, G.R. No. 79760, June 28, 1993: Explained the test of sufficiency of facts in a petition.
• 4. Evangelista v. Santiago, 497 Phil. 269 (2005): Discussed the requisites for an action for quieting of title to prosper.
• 5. Tan v. Director of Forestry, 210 Phil. 244 (1983): Discussed the exception to the rule that inquiry is confined to the complaint if evidence has been presented in the course of hearings related to the case.

Statutory and Constitutional Provisions

• 1. Article 476, Civil Code. This provision sets forth the requirements for an action to quiet title, stating that whenever there is a cloud on title to real property by reason of any instrument, record, claim, encumbrance or proceeding which is apparently valid but actually invalid, an action may be brought to remove such cloud or to quiet the title.
• 2. Rule 16, Rules of Court. This rule enumerates the various grounds for a motion to dismiss and includes Section 6 which discusses how grounds for dismissal may be pleaded as affirmative defenses in the answer, allowing for preliminary hearing as if a motion to dismiss had been filed.