Aquino vs. Quiazon

In testing whether a complaint fails to state a cause of action, courts must limit themselves to the allegations in the complaint, which are hypothetically admitted; receiving and considering external evidence to resolve this ground is procedural error.

Dispute over a 557-square meter property in Magalang, Pampanga. Petitioners claim ownership through an 1894 Deed of Sale and over a century of open possession. Respondents claim ownership through a 1919 Land Registration Decree and a derived Torrens title.

• Original Filing: RTC-Branch 59, Angeles City, SP Civil Case No. 05-076 (Complaint for Annulment and Quieting of Title)
• Lower Court Decision: July 14, 2008 — RTC dismissed the complaint for lack of cause of action based on evidence presented during a preliminary hearing. December 22, 2008 — RTC denied reconsideration.
• Appeal: CA-G.R. CV No. 92887
• SC Action: Petition for Review on Certiorari under Rule 45 assailing the CA decision.

• Petitioners' Claim: Petitioners are heirs of Epifanio Makam and Severina Bautista, who allegedly acquired the property via a Deed of Sale dated April 20, 1894. They and their predecessors have possessed the property openly, continuously, adversely, and notoriously for over 100 years, building houses and paying real estate taxes.
• Respondents' Claim: Respondents inherited the property from their predecessor-in-interest, Fausta Baluyut, one of the registered owners under OCT No. RO-1138 (11376), pursuant to a Project of Partition. They hold TCT No. 213777-R. They claim petitioners occupy the property by mere tolerance.
• The Demand and Discovery: In June 2005, petitioners received demand letters from respondents to vacate. Petitioners inquired with the Register of Deeds and confirmed the property was titled in respondents' names.
• Prior Cadastral Case: In a 1919 decision (Cadastral Case No. 5), the Court of First Instance awarded the subject lot to the Baluyut siblings (respondents' predecessors) over the opposition of Jose Makam (petitioners' predecessor). OCT No. RO-1138 (11376) was issued in 1922.
• Procedural Posture in RTC: Respondents raised affirmative defenses of lack of cause of action, prescription, and res judicata. The RTC held a preliminary hearing on these defenses. Respondents presented documentary evidence (1919 Decision, Decree, OCT, TCT). Petitioners opted not to present evidence, consistently arguing the RTC must only consider the complaint's allegations. The RTC dismissed the complaint based on the external evidence showing the 1894 deed was invalid/unenforceable due to the 1919 decision. The CA affirmed, holding that Sec. 6, Rule 16 allows the reception of evidence during a preliminary hearing on affirmative defenses.

• The CA gravely erred in considering external factors beyond the complaint's allegations.
• The settled rule is that determining sufficiency of a cause of action requires hypothetically admitting the facts alleged in the complaint; courts cannot take cognizance of external facts or hold preliminary hearings to determine their existence.
• The complaint sufficiently states a cause of action for quieting of title.
• The action does not prescribe because an action to quiet title is imprescriptible when plaintiffs are in possession.
• Respondents are guilty of laches for waiting 86 years to enforce their title, rendering it a stale demand.

• The trial court has discretion under Sec. 6, Rule 16 to conduct a preliminary hearing on affirmative defenses, including lack of cause of action, and consider evidence presented therein.
• The SC has previously upheld considering external factors in dismissing complaints for lack of cause of action (citing Tan v. Director of Forestry).
• Petitioners are estopped from invoking the rule confining the court to the complaint because they were given a reasonable opportunity to present evidence during the preliminary hearing.
• Petitioners have no valid cause of action because their alleged deed of sale is spurious and cannot prevail over the Land Registration Decree and Torrens title.

• Procedural Issues: Whether the CA erred in affirming the dismissal of the complaint on the ground of lack of cause of action or failure to state a cause of action—specifically, whether external evidence may be considered in resolving this ground.
• Substantive Issues: Whether the complaint sufficiently states a cause of action for quieting of title.

• Procedural: The SC held that the lower courts confused lack of cause of action with failure to state a cause of action. Lack of cause of action refers to the insufficiency of factual basis for the action (a question of fact resolved after trial via evidence). Failure to state a cause of action refers to the insufficiency of allegations in the pleading (a question of law resolved at the earliest stage). Because respondents raised "lack of cause of action," they were posing a question of fact that should have been resolved during a trial on the merits, not a preliminary hearing under Sec. 6, Rule 16. Even if treated as "failure to state a cause of action," the lower courts erred in receiving evidence. Sec. 6, Rule 16 does not apply to this ground; a preliminary hearing is unnecessary and impermissible because the court must only look at the complaint's face. The exception in Tan v. Director of Forestry does not apply here because: (1) Tan involved evidence from an injunction hearing, not a motion to dismiss hearing; (2) Petitioners were not estopped as they consistently objected to the evidence; (3) The documents in Tan were admitted by stipulation or annexed to the complaint, unlike the 1919 decision here; (4) There is no overriding public interest to justify relaxing the rules.
• Substantive: The complaint sufficiently states a cause of action for quieting of title. It alleges the two requisites under Art. 476 of the Civil Code: (1) legal or equitable title/interest via the 1894 Deed of Sale; and (2) a cloud on title via respondents' TCT which is allegedly invalid. Hypothetically admitting these allegations, the court could render a valid judgment. The SC also noted that the affirmative defenses of prescription and res judicata would not warrant dismissal: quieting of title is imprescriptible if plaintiffs are in possession, and the prior case (Civil Case No. 5487) was dismissed without prejudice.

• Distinction between Failure to State a Cause of Action vs. Lack of Cause of Action — Failure to state a cause of action refers to the insufficiency of allegation in the pleading, while lack of cause of action refers to the insufficiency of factual basis for the action. The former is a ground for motion to dismiss under Rule 16 resolved at the earliest stages; the latter may be raised anytime and is usually resolved after questions of fact are resolved based on evidence.
• Hypothetical Admission of Facts — In determining whether a complaint fails to state a cause of action, the facts alleged in the complaint are hypothetically admitted by the defendant. The court cannot inquire into the truth of the allegations or the authenticity of documents before a trial on the merits.
• Requisites of Quieting of Title — Two requisites must concur: (1) the plaintiff 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 title must be shown to be in fact invalid or inoperative despite its prima facie appearance of validity or legal efficacy.
• Imprescriptibility of Quieting of Title — An action to quiet title does not prescribe if the plaintiffs are in possession of the property.

• Section 1(g), Rule 16, Rules of Court — Ground for motion to dismiss: "That the pleading asserting the claim states no cause of action." Applied to emphasize that the ground is insufficiency of allegations, not insufficiency of factual basis.
• Section 6, Rule 16, Rules of Court — Pleading grounds as affirmative defenses; preliminary hearing. Applied: The SC held this section does not apply to the ground of failure to state a cause of action because a preliminary hearing is unnecessary and erroneous for this specific ground, which must be resolved solely on the complaint's face.
• Article 476, Civil Code — Quieting of title. Applied: The SC used this provision to determine if the complaint stated a cause of action, finding that the petitioners' allegations satisfied the two requisites for quieting of title under this article.