The complaint filed by informal settlers whose residential structures are affected by a government infrastructure project sufficiently states a cause of action if it alleges their ownership of the structures, the government agency's obligation to respect their rights to due process (including procedures under R.A. No. 7279 for eviction and demolition), and the agency's violation of these rights. Underprivileged and homeless citizens cannot be summarily evicted or their dwellings demolished without adherence to the legal requirements for notice, consultation, and relocation or financial assistance as mandated by the Constitution and relevant statutes.

Respondents are owners of residential structures located on land owned by the Metropolitan Waterworks and Sewerage System (MWSS) along Luzon Avenue, Quezon City. These structures were directly affected by the Department of Public Works and Highways' (DPWH) C-5 extension project, designed to link the South Luzon Expressway and the North Luzon Expressway. The DPWH sought to clear the area for the project, leading to a dispute over compensation and the process of eviction and demolition.

• Respondents owned residential structures on a parcel of land in Luzon Avenue, Quezon City, owned by Metropolitan Waterworks and Sewerage System (MWSS), which was affected by the DPWH's C-5 extension project.
• On September 13, 2010, respondents filed a Complaint with the RTC seeking determination and payment of just compensation from DPWH, alleging DPWH neglected to initiate expropriation proceedings and was "cutting corners."
• Respondents claimed that DPWH's offer of financial assistance was "notoriously small" and they turned it down.
• Respondents asserted they should be paid replacement costs, similar to informal settlers of Barangay UP Campus, citing an August 6, 2008 Memorandum of Agreement (MOA) between DPWH and the Quezon City government where respondents were acknowledged as informal settlers.
• On November 15, 2010, the Quezon City Task Force Control and Prevention of Illegal Structures and Squatting issued a Notice of Demolition to respondents, offering P21,000.00 per family as financial assistance, which respondents refused.
• DPWH, in its Answer, argued that respondents were squatting on government-owned property and their structures could be demolished under Section 27 of Republic Act No. 7279.
• DPWH contended that respondents were only entitled to financial assistance under Section 28 of R.A. No. 7279, not replacement costs, and were builders in bad faith under Article 449 of the Civil Code with no right to reimbursement.

• Respondents' Complaint failed to state a cause of action.
• The trial court should not have considered the Memorandum of Agreement (MOA) because it was not formally identified, marked, or offered in evidence during the hearing for the motion to dismiss.
• The MOA, if considered, revealed that the obligation to relocate respondents rested with the Quezon City government, not the DPWH.
• Respondents, as informal settlers, are only entitled to financial assistance under Republic Act No. 7279, not just compensation equivalent to replacement costs.
• Respondents were professional squatters who could be summarily evicted and whose illegal structures could be demolished, and as builders in bad faith, they are not entitled to any reimbursement.

• Their Complaint undeniably stated a cause of action because they owned the structures demolished for the C-5 extension project.
• The core issue raised was their entitlement to just compensation, a matter over which the trial court had jurisdiction.
• They are entitled either to the payment of just compensation for their structures or to a suitable relocation.

• Whether the Court of Appeals erred in finding that the Regional Trial Court did not gravely abuse its discretion in denying the DPWH's prayer to dismiss respondents' Complaint for failure to state a cause of action.
• Whether the DPWH can extrajudicially and summarily evict respondents and demolish their structures.
• Whether respondents are entitled to just compensation for their structures.

• The Supreme Court denied the DPWH's Petition and affirmed the Court of Appeals' Decision. The case was remanded to the Regional Trial Court for appropriate action.
• The Complaint sufficiently stated a cause of action as it alleged: (1) respondents owned the residential structures and had rights under the August 6, 2008 MOA; (2) petitioner had an obligation to respect these rights and comply with due process; and (3) petitioner's inaction to provide what is due violated their rights.
• The trial court did not err in considering the MOA (an annex to the complaint) in determining the sufficiency of the cause of action, as inquiry is not strictly confined to the four corners of the complaint if annexes or other pleadings disclose facts sufficient to defeat or support the claim.
• Petitioner cannot extrajudicially and summarily evict respondents and demolish their structures. As underprivileged and homeless citizens (acknowledged by DPWH's offer of financial assistance under R.A. 7279), they are protected by Article XIII, Section 10 of the Constitution and R.A. No. 7279, which mandate specific procedures for eviction and demolition, including notice, consultation, and adequate relocation or financial assistance.
• The issue of whether respondents are entitled to "just compensation" in the eminent domain sense was not definitively ruled upon for the structures themselves, but the Court emphasized their entitlement to due process and the benefits under R.A. No. 7279. The case was remanded for the trial court to determine if respondents were prejudiced by the eviction and demolition and if they are entitled to damages.
• The Court did not rule on whether respondents were builders in bad faith as the landowner, Metropolitan Waterworks and Sewerage System, was not impleaded in the case.

• Cause of Action — An act or omission by which a party violates a right of another. Its essential elements are: (1) the plaintiff's legal right; (2) the defendant's correlative obligation; and (3) the act or omission of the defendant in violation of plaintiff's legal right. This was applied to determine that respondents' complaint sufficiently alleged these three elements.
• Failure to State a Cause of Action vs. Lack of Cause of Action — Failure to state a cause of action refers to insufficiency of allegations in the pleading and is a ground for a motion to dismiss before trial, while lack of cause of action refers to insufficiency of factual basis proven by evidence after trial. The Court clarified that DPWH's motion was based on failure to state a cause of action.
• Hypothetical Admission of Allegations — In a motion to dismiss for failure to state a cause of action, the material allegations of the complaint are hypothetically admitted to determine if, based on these allegations, the court can grant the relief demanded. This principle guided the assessment of respondents' complaint.
• Consideration of Annexes in Motion to Dismiss — While generally inquiry is limited to the four corners of the complaint, it may extend to annexes and other pleadings submitted by parties, or documentary evidence admitted by stipulation or during hearings related to the case. This justified the trial court's consideration of the MOA attached to the complaint.
• Judicial Economy — A principle aiming to have cases prosecuted with the least cost to parties and to review unnecessary or frivolous reviews of interlocutory orders together with the main merits of the case. The Court invoked this to proceed with determining the other substantive issues raised by the parties.
• Eminent Domain (Expropriation) — The State's inherent power to take private property for public use upon payment of just compensation. The Court noted that the primary basis of respondents' rights was not Article III, Section 9 (eminent domain clause) but Article XIII, Section 10 of the Constitution concerning urban poor dwellers.
• Inverse Expropriation — A remedy for a landowner to claim just compensation when their property is taken for public use without proper expropriation proceedings. Mentioned in the general discussion of expropriation but not the core of the ruling for informal settlers.
• Rights of Urban or Rural Poor Dwellers (Art. XIII, Sec. 10, Constitution) — Constitutional mandate that "Urban or rural poor dwellers shall not be evicted nor their dwellings demolished, except in accordance with law and in a just and humane manner." This was the primary constitutional provision safeguarding respondents' rights.
• Due Process for Underprivileged and Homeless Citizens (R.A. No. 7279 and R.A. No. 8974) — These laws outline specific procedures for eviction, demolition, and relocation or financial assistance for informal settlers affected by government projects. The Court found that DPWH's offer of financial assistance under Section 28(8) of R.A. No. 7279 acknowledged respondents as underprivileged and homeless citizens entitled to these procedures, which were not fully followed.

• "The mandate of our Constitution is clear: 'Urban or rural poor dwellers shall not be evicted nor their dwellings demolished, except in accordance with law and in a just and humane manner.'"

• Heirs of Pamaran v. Bank of Commerce — Cited to distinguish a motion to dismiss for failure to state a cause of action under Rule 16 (resolved based on allegations) from a motion to dismiss under Rule 33/demurrer to evidence (resolved based on evidence adduced).
• China Road and Bridge Corporation v. Court of Appeals — Referenced to support the principle that a trial court, in ruling on a motion to dismiss for failure to state a cause of action, can consider all pleadings filed, including annexes, motions, and evidence on record, by hypothetically admitting them.
• Aquino v. Quiazon — Cited for the principle that if the allegations in a complaint furnish sufficient basis for the suit, the complaint should not be dismissed regardless of the defenses that may be raised. Also cited for the allowance of considering annexes and other pleadings beyond the complaint.

• Constitution, Art. XIII, Sec. 10 — States that urban or rural poor dwellers shall not be evicted nor their dwellings demolished, except in accordance with law and in a just and humane manner. This was identified as the source of respondents' rights.
• Rules of Court, Rule 2, Sec. 2 — Provides the definition of a cause of action. Applied to assess the sufficiency of respondents' complaint.
• Constitution, Art. III, Sec. 9 — States that private property shall not be taken for public use without just compensation. The Court clarified this was not the primary source of respondents' rights as informal settlers.
• Republic Act No. 8974 (An Act to Facilitate the Acquisition of Right-Of-Way), Sec. 9 (Squatter Relocation) — Mandates that in case expropriated land is occupied by squatters, the implementing agency shall observe the procedure in Sections 28 and 29 of R.A. No. 7279. This section links infrastructure projects to the requirements of the UDHA.
• Republic Act No. 7279 (Urban Development and Housing Act of 1992), Sec. 27 (Action Against Professional Squatters and Squatting Syndicates) — Defines professional squatters and allows for their summary eviction. Petitioner invoked this but failed to substantiate that respondents were professional squatters.
• Republic Act No. 7279, Sec. 28 (Eviction and Demolition) — Discourages eviction or demolition but allows it under specific circumstances (like government infrastructure projects) provided mandatory procedures are followed (e.g., 30-day notice, consultations, relocation or financial assistance). The Court highlighted that petitioner's offer of financial assistance under this section acknowledged respondents as underprivileged and homeless citizens entitled to its protections.
• Republic Act No. 7279, Sec. 29 (Resettlement) — Mandates local government units, in coordination with the National Housing Authority, to implement relocation and resettlement for persons living in danger areas and other public places.
• Republic Act No. 7279, Sec. 3(m) — Provides the definition of "professional squatters." Petitioner failed to prove respondents fell under this definition.
• Civil Code, Art. 449 — Relates to builders in bad faith losing what is built without right to indemnity. The Court declined to rule on this issue as the landowner (MWSS) was not impleaded.