Leticia Naguit Aquino vs Cesar B.

Quiason
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.

A complaint for Annulment and Quieting of Title was filed before the RTC by the
petitioners. They alleged that they were the heirs of the late Epifanio Makam and
Severina Bautista, who acquired a house and lot 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.

The 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. 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 and those 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 "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. 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.

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. 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
discretion 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.

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.

Held:
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, which is effectively the ground of "lack of cause of action."

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:
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 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.

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."

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. 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. 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:

(g) That the pleading asserting the claim states no cause of action;

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,
citing Perpetual Savings Bank v. Fajardo, to wit:
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:

"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.

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:
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.

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.
Evangelista v. Santiago elucidates:
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 far as this ground for dismissal of an action or affirmative
defense is concerned:

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.
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., inquiry is not confined to
the complaint if culled (a) from annexes and other pleadings submitted by the parties;
(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.

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 affirmative defense if no corresponding motion to dismiss was filed. This
section reads in part:
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.

A review of the first ground under paragraph 6 of the answer reveals that respondents
alleged that "plaintiffs 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." 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. 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. 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.

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 highlight that the trial court
erred in receiving evidence to determine whether the complaint failed to state a cause
of action.

Although neither the RTC nor 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, 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.