REPUBLIC OF THE PHILIPPINES vs.

LUZON 2) Whether or not it was error for the Court to have

STEVEDORING CORPORATION permitted the plaintiff-appellee to introduce additional
evidence of damages after said party had rested its
G.R. No. L-21749, September 29, 1967 case.

FACTS:

In the early afternoon of August 17, 1960, barge L-

1892, owned by the Luzon Stevedoring Corporation was being
towed down the Pasig river by tugboats "Bangus" and
"Barbero"1 also belonging to the same corporation, when the
barge rammed against one of the wooden piles of the
Nagtahan bailey bridge, smashing the posts and causing the
bridge to list. The river, at the time, was swollen and the
current swift, on account of the heavy downpour of Manila and
the surrounding provinces on August 15 and 16, 1960.

Sued by the Republic of the Philippines for actual and

consequential damage caused by its employees, amounting to
P200,000 (Civil Case No. 44562, CFI of Manila), defendant
Luzon Stevedoring Corporation disclaimed liability therefor, on
the grounds that it had exercised due diligence in the selection
and supervision of its employees; that the damages to the
bridge were caused by force majeure; that plaintiff has no
capacity to sue; and that the Nagtahan bailey bridge is an
obstruction to navigation.

After due trial, the court rendered judgment on June

11, 1963, holding the defendant liable for the damage caused
by its employees and ordering it to pay to plaintiff the actual
cost of the repair of the Nagtahan bailey bridge which
amounted to P192,561.72, with legal interest thereon from the
date of the filing of the complaint.

Luzon Stevedoring directly appealed to the Supreme

Court.

ISSUE: What is the effect of the petitioners direct appeal to the

Supreme Court?

RULING:

However, it must be recalled that the established rule

in this jurisdiction is that when a party appeals directly to the
Supreme Court, and submits his case there for decision,
he is deemed to have waived the right to dispute any
finding of fact made by the trial Court. The only questions
that may be raised are those of law (Savellano vs. Diaz, L-
17441, July 31, 1963; Aballe vs. Santiago, L-16307, April 30,
1963; G.S.I.S. vs. Cloribel, L-22236, June 22, 1965). A
converso, a party who resorts to the Court of Appeals, and
submits his case for decision there, is barred from
contending later that his claim was beyond the jurisdiction
of the aforesaid Court. The reason is that a contrary rule
would encourage the undesirable practice of appellants'
submitting their cases for decision to either court in
expectation of favorable judgment, but with intent of
attacking its jurisdiction should the decision be
unfavorable (Tyson Tan, et al. vs. Filipinas Compañia de
Seguros) et al., L-10096, Res. on Motion to Reconsider, March
23, 1966).

Consequently, we are limited in this appeal to the

issues of law raised in the appellant's brief. Taking the
aforesaid rules into account, it can be seen that the only
reviewable issues in this appeal are reduced to two:

1) Whether or not the collision of appellant's barge with the

supports or piers of the Nagtahan bridge was in law
caused by fortuitous event or force majeure, and
 ISMAEL MATHAY VS. THE CONSOLIDATED BANK AND
TRUST COMPANY
G.R. No. L-23136 August 26, 1974
FACTS:
The complaint in this case, filed on December 24, 1963 as a
class suit, under Section 12, Rule 3, of the Rules of Court,
contained six causes of action.
The first cause of action consisted of: (1) the right of
appellants as well as of the other CMI stockholders to
subscribe, in proportion to their equities established under their
respective "Pre-Incorporation Agreements to Subscribe", to
that portion of the capital stock which was unsubscribed
because of failure of the CMI stockholders to exercise their
right to subscribe thereto; (2) the legal duty of the appellant to
have said portion of the capital stock to be subscribed by
appellants and other CMI stockholders; and (3) the violation or
breach of said right of appellants and other CMI stockholders
by the appellees.
Under the second cause of action that on or about August
28, 1963, defendants-appellees Antonio P. Madrigal, Jose P.
Madrigal: Fermin Z. Caram, Jr., and Wilfredo C. Tecson
"falsely certified to the calling of a special stockholders'
meeting allegedly pursuant to due notice and call of
Defendant Bank" although plaintiffs-appellants and other CMI
stockholders were not notified thereof, and amended the
Articles of Incorporation increasing the number of Directors
from 6 to 7, and had the illegally created Position of Director
filled up by defendant-appellee Alfonso Juan Olondriz, who
was not competent or qualified to hold such position.
In the third cause of action, plaintiffs-appellants claimed
actual damages in an amount equivalent to the difference
between the par value of the shares they were entitled, but
failed, to acquire and the higher market value of the same
shares.
In the fourth cause of action, Plaintiffs-appellants claimed
moral damages; in the fifth, exemplary damages; and in the
sixth, attorney's fees.
In his manifestation to the court on January 4, 1964, Francisco
Sevilla, who was one of the original plaintiffs, withdrew. On
January 15, 1964 Cipriano Azada, Maria Cristina Olondriz
Pertierra, Maria del Puy Olondriz de Stevens (who later
withdrew as intervenors-appellants) and Carmen Sievert de
Amoyo, filed a motion to intervene, and to join the plaintiffs-
appellants on record, to which motion defendants-appellees,
except Fermin Z. Caram, Jr., filed, on January 17, 1964 their
opposition.
On February 7, 1964 defendants-appellees, except Fermin Z.
Caram, Jr., filed a motion to dismiss on the grounds that (a)
plaintiffs-appellants had no legal standing or capacity to
institute the alleged class suit; (b) that the complaint did not
state a sufficient and valid cause of action; and (c) that
plaintiffs-appellants' complaint against the increase of the
number of directors did not likewise state a cause of action.
Plaintiffs-appellants filed their opposition thereto on February
21, 1964.
On March 4, 1964 appellants, plaintiffs and intervenors, filed a
verified petition for a writ of preliminary injunction to enjoin
defendants-appellees from considering or ratifying by
resolution, at the meeting of the stockholders of defendant-
appellee Bank to be held the following day, the unlawful
apportionment of the shares of the defendant-appellee Bank
and the illegal amendment to its Articles of Incorporation
increasing the number of Directors, The Court, after hearing,
granted the writ, but subsequently set it aside upon the
appellees' filing a counter bond.
Some subscribers to the capital stock of the Bank like
Concepcion Zuluaga, et al., and Carlos Moran Sison, et al.,
filed separate manifestations that they were opposing and
disauthorizing the suit of plaintiffs-appellants.
On March 7, 1964 defendants-appellees, except Fermin Z.
Caram, Jr., filed a supplemental ground for their motion to
dismiss, to wit, that the stockholders, except Fermin Z. Caram,
Jr., who abstained, had unanimously, at their regular annual
meeting held on March 5, 1964, ratified and confirmed all the
actuations of the organizers-directors in the incorporation,
organization and establishment of the Bank.
TRIAL COURT:
The trial court granted the motion to dismiss, holding, that
the class suit could not be maintained because of the absence
of a showing in the complaint that the plaintiffs-appellants
were sufficiently numerous and representative, and that
the complaint failed to state a cause of action.
The appellants, plaintiffs and intervenors directly appealed to
the Supreme Court.
CONTENTIONS:
PETITIONERS: Appellants supported their assigned error that
the court erred in holding that the complaint stated no valid
cause of action, by claiming that paragraph 15 together with
the other allegations of the complaint to the effect that
defendants-appellees had unlawfully acquired stockholdings in
the capital stock of defendant-appellee Bank in excess of what
they were lawfully entitled to, in violation of law and in breach
of trust and the contractual agreement, constituted a valid and
sufficient cause of action; 20 and that only the allegations in
the complaint should have been considered by the trial court in
determining whether the complaint stated a cause of action or
not.
RESPONDENTS: Defendants-appellees, on the contrary,
maintained that the allegations of the complaint should not be
the only ones to be considered in determining whether there is
a cause of action; that even if the ultimate facts alleged in the
first cause of action of the complaint be the only ones
considered the complaint would still fail to state a valid cause
of action on the following grounds: first, there was no allegation
regarding appellants' qualification to subscribe to the capital
stock of the appellee Bank, for under the CMI stockholders'
resolution of March 28, 1962, only those qualified under the
law were entitled to subscribe, and under the regulations of the
Monetary Board, only natural-born Filipino citizens could be
stockholders of a banking corporation organized under the
laws of the Philippines, and nowhere did the complaint alleged
that plaintiffs-appellants were natural born Filipino citizens. 21
Second, appellants' averment in paragraph 8 that they
"subscribed," and their averment in paragraph 15 that they
were "denied the right to subscribe ... to the capital stock of the
defendant Bank", were inconsistent, and hence neutralized
each other, thereby leaving in shambles the first cause of
action. Third, there was no allegation that appellants had not
yet received or had not been issued the corresponding
certificates of stock covering the shares they had subscribed
and paid for. Fourth, the allegations failed to show the
existence of the supposed trust; and fifth, the complaint failed
to allege that plaintiffs-appellants had paid or offered to pay for
the shares allegedly pertaining to them.
ISSUE: WHETHER OR NOT THE COMPLAINT STATED A
CAUSE OF ACTION.
RULING: NO.
Let us premise the legal principles governing the
motion to dismiss on the ground of lack of cause of action.
Section 1, Rule 16 of the Rules of Court providing in part that: .
Within the time for pleading a motion to dismiss may be made
on any of the following grounds: ....
(g) That the complaint states no cause of action. ..1.
explicitly requires that the sufficiency of the complaint must be
tested exclusively on the basis of the complaint itself and no
other should be considered when the ground for motion to
dismiss is that the complaint states no cause of action.
Pursuant thereto this Court has ruled that:
As a rule the sufficiency of the complaint, when Challenged in
a motion to dismiss, must be determined exclusively on the
basis of the facts alleged therein. 23
It has been likewise held that a motion to dismiss based on
lack of cause of action hypothetically admits the truth of the
allegations of fact made in the complaint. 24 It is to be noted
that only the facts well pleaded in the complaint, and likewise,
any inferences fairly deducible therefrom, are deemed
admitted by a motion to dismiss. Neither allegations of
conclusions 25 nor allegations of facts the falsity of which the
court may take judicial notice are deemed admitted. 26 The
question, therefore, submitted to the Court in a motion to
dismiss based on lack of cause of action is not whether the
facts alleged in the complaint are true, for these are
hypothetically admitted, but whether the facts alleged are
sufficient to constitute a cause of action such that the court
may render a valid judgment upon the facts alleged therein.
A cause of action is an act or omission of one party in violation
of the legal right of the other. Its essential elements are,
namely: (1) the existence of a legal right in the plaintiff, (2) a
correlative legal duty in the defendant, and (3) an act or
omission of the defendant in violation of plaintiff's right with
consequential injury or damage to the plaintiff for which he may
maintain an action for the recovery of damages or other
appropriate relief. 27 On the other hand, Section 3 of Rule 6 of
the Rules of Court provides that the complaint must state the
ultimate facts constituting the plaintiff's cause of action. Hence,
where the complaint states ultimate facts that constitute the
three essential elements of a cause of action, the complaint
states a cause of action; 28 otherwise, the complaint must
succumb to a motion to dismiss on that ground.
The legal principles having been premised, let us now analyze
and discuss appellant's various causes of action.
Appellants' first cause of action, pursuant to what has been
premised above, should have consisted of: (1) the right of
appellants as well as of the other CMI stockholders to
subscribe, in proportion to their equities established under their
respective "Pre-Incorporation Agreements to Subscribe", to
that portion of the capital stock which was unsubscribed
because of failure of the CMI stockholders to exercise their
right to subscribe thereto; (2) the legal duty of the appellant to
have said portion of the capital stock to be subscribed by
appellants and other CMI stockholders; and (3) the violation or
breach of said right of appellants and other CMI stockholders
by the appellees.
Did the complaint state the important and substantial facts
directly forming the basis of the primary right claimed by
plaintiffs? Before proceeding to elucidate this question, it
should be noted that a bare allegation that one is entitled to
something is an allegation of a conclusion. Such allegations
adds nothing to the pleading, it being necessary to plead
specifically the facts upon which such conclusion is
founded. 29 The complaint alleged that appellants were
stockholders of the CMI; that as such stockholders, they were
entitled; by virtue of the resolution of March 28, 1962, to
subscribe to the capital stock of the proposed Consolidated
Bank and Trust Co., at par value to the same extent and in the
same amount as said stockholders' respective share holdings
in the CMI as shown in the latter's stock book as of January 15,
1963, the right to subscribe to be exercised until January 15,
1963, provided said stockholders of the CMI were qualified
under the law to become stockholders of the proposed
Bank; 30 that appellants accomplished and filed their respective
"Pre-Incorporation Agreements to Subscribe" and fully paid the
subscription. 31
These alleged specific facts did not even show that appellants
were entitled to subscribe to the capital stock of the proposed
Bank, for said right depended on a condition precedent, which
was, that they were qualified under the law to become
stockholders of the Bank, and there was no direct averment in
the complaint of the facts that qualified them to become
stockholders of the Bank. The allegation of the fact that they
subscribed to the stock did not, by necessary implication, show
that they were possessed of the necessary qualifications to
become stockholders of the proposed Bank.
Assuming arguendo that appellants were qualified to become
stockholders of the Bank, they could subscribe, pursuant to the
explicit terms of the resolution of March 28, 1962, "to the same
extent and in the same amount as said stockholders'
respective stockholdings in the CMI" as of January 15,
1963. 32 This was the measure of the right they could claim to
subscribe to waived stocks. Appellants did not even aver that
the stocks waived to the subscription of which they claimed the
right to subscribe, were comprised in "the extent and amount"
of their respective share holdings in the CMI. It is not surprising
that they did not make such an averment for they did not even
allege the amount of shares of stock to which they claimed
they were entitled to subscribe. The failure of the complaint to
plead specifically the above facts rendered it impossible for the
court to conclude by natural reasoning that the appellants and
other CMI stockholders had a right to subscribe to the waived
shares of stock, and made any allegation to that effect a
conclusion of the pleader, not an ultimate fact, in accordance
with the test suggested by the California Supreme Court, to wit:
If from the facts in evidence, the result can
be reached by that process of natural
reasoning adopted in the investigation of
truth, it becomes an ultimate fact, to be
found as such. If, on the other hand, resort
must be had to the artificial processes of the
law, in order to reach a final determination,
the result is a conclusion of law. 33
Let us now pass to the second and third elements that would
have constituted the first cause of action. Did the complaint
allege as ultimate facts the legal duty of defendants-appellees
to have a portion of the capital stock subscribed to by
appellants? Did the complaint allege as ultimate facts that
defendants appellees had violated appellants' right?
Even if it be assumed arguendo that defendants-appellees had
the duty to have the waived stocks subscribed to by the CMI
stockholders, this duty was not owed to all the CMI
stockholders, but only to such CMI stockholders as were
qualified to become stockholders of the proposed Bank.
Inasmuch as it has been shown that the complaint did not
contain ultimate facts to show that plaintiffs-appellants were
qualified to become stockholders of the Bank, it follows that the
complaint did not show that defendants-appellees were under
duty to have plaintiffs-appellants subscribe to the stocks of the
proposed Bank. It inevitably follows also that the complaint did
not contain ultimate facts to show that the right of the plaintiffs-
appellants to subscribe to the shares of the proposed Bank
had been violated by defendants-appellees. How could a non-
existent right be violated?
Let us continue the discussion further. The complaint alleged
that by virtue of the resolution of March 28, 1962, the President
and Members of the Board of Directors of the CMI would be
constituted as a Board of Organizers to undertake and carry
out the organization of the Bank; 34 that the Board of
Organizers was constituted and proceeded with the
establishment of the Bank, 35 that the persons composing the
Board of Organizers were the individuals-defendants-
appellees; 36 that the Board of Organizers sent our circular
letters with "Pre-Incorporation Agreement to Subscribe"
forms 37 which specified, among others, "such subscription
right shall be deemed ipso facto waived and released in favor
of the Board of Organizers of the defendant Bank and their
assignees"; 38 that in the Articles of Incorporation prepared by
the Board of Organizers, the individuals-defendants-appellees
alone appeared to have subscribe to the 50, shares; 39 and that
individuals-defendants-appellees again subscribe to all the
additional 30,000 shares. 40 From these facts, appellants
concluded that they were denied their right to subscribe in
proportion to their equities; 41 that the individuals-defendants-
appellees unlawfully acquired stockholdings far in excess of
what they were lawfully entitled in violation of law and in
breach of trust and of contractual agreement; 42and that,
because of matters already alleged, the individuals-
defendants-appellees "hold their shares in the defendant bank
in trust for plaintiffs." 43
The allegation in the complaint that the individuals-defendants-
appellees held their shares "in trust" for plaintiffs-appellants
without averment of the facts from which the court could
conclude the existence of the alleged trust, was not deemed
admitted by the motion to dismiss for that was a conclusion of
law. Express averments "that a party was the beneficial owner
of certain property; ... that property or money was received or
held in trust, or for the use of another; that particular funds
were trust funds; that a particular transaction created an
irrevocable trust; that a person held Property as constructive
trustee; that on the transfer of certain property a trust resulted"
have been considered as mere conclusions of law. 44 The facts
alleged in the complaint did not, by logical reasoning,
necessarily lead to the conclusion that defendants-appellees
were trustees in favor of appellants of the shares of stock
waived by the CMI stockholders who failed to exercise their
right to subscribe. In this connection, it has been likewise said
that:
"The general rule is that an allegation of duty in terms
unaccompanied by a statement of the facts showing the
existence of the duty, is a mere conclusion of law, unless there
is a relation set forth from which the law raises the duty." 45
In like manner, the allegation that individuals-defendants-
appellees held said shares in trust was no more than an
interpretation by appellants of the effect of the waiver clause of
the Resolution and as such it was again a mere conclusion of
law. It has been said that:
The following are also conclusions of law: ... an allegation
characterizing an instrument or purporting to interpret it and
state its effects, ... 46
Allegations in petition in the nature of conclusions about the
meaning of contract, inconsistent with stated terms of the
contract, cannot be considered. 47
The allegation that the defendants-appellee acquired
stockholdings far in excess of what they were lawfully entitled,
in violation of law and in breach of trust and of contractual
agreement, is also mere conclusion of law.
Of course, the allegation that there was a violation of trust duty
was plainly a conclusion of law, for "a mere allegation that it
was the duty of a party to do this or that, or that he was guilty
of a breach of duty, is a statement of a conclusion not of
fact." 48
An averment ... that an act was 'unlawful' or 'wrongful' is a
mere legal conclusion or opinion of the pleader. 49
Moreover, plaintiffs-appellants did not state in the complaint
the amount of subscription the individual defendant-appellee
were entitled to; hence there was no basis for the court to
determine what amount subscribed to by them was excessive.
From what has been said, it is clear that the ultimate facts
stated under the first cause of action are not sufficient to
constitute a cause of action.
The further allegations in the second cause of action that the
calling of a special meeting was "falsely certified", that the
seventh position of Director was "illegally created" and that
defendant Alfonso Juan Olondriz was "not competent or
qualified" to be a director are mere conclusions of law, the
same not being necessarily inferable from the ultimate facts
stated in the first and second causes of action. It has been held
in this connection that:
An averment that ... an act was 'unlawful' or
'wrongful' is a mere legal conclusion or
opinion of the pleader. The same is true of
allegations that an instrument was 'illegally'
certified or ... that an act was arbitrarily done
..." 50
A pleader states a mere conclusion when he
makes any of the following allegations: that a
party was incapacitated to enter into a
contract or convey
property ... 51
The third, fourth, fifth and sixth causes of action depended on
the first cause of action, which, as has been shown, did not
state ultimate facts sufficient to constitute a cause of action. It
stands to reason, therefore, that said causes of action would
also be fatally defective.
DORIS CHIONGBIAN-OLIVA v. REPUBLIC OF THE
PHILIPPINES, THE DEPARTMENT OF ENVIRONMENT AND
NATURAL RESOURCES AND THE REGISTER OF DEEDS
OF CEBU CITY
G.R. NO. 163118, April 27, 2007
FACTS:
Petitioner Doris Chiongbian-Oliva is the registered
owner of a parcel of land in Talamban, Cebu City, as
evidenced by Transfer Certificate of Title (TCT) No. 5455.4 This
title originated from Original Certificate of Title (OCT) No. 1066
from a free patent granted on September 11, 1969 under
Commonwealth Act No. 141,5 as amended. The free patent,
OCT No. 1066, and TCT No. 5455 contained the condition that
a forty-meter legal easement from the bank of any river or
stream shall be preserved as permanent timberland.6
On October 1, 2001, petitioner filed a petition for
reduction of legal easement docketed as SP. Proc. No.
10746-CEB before the Regional Trial Court of Cebu City,
Branch 12. Petitioner alleged that the property is residential
as shown by the tax declaration7 and the Certification8 of the
Office of the City Assessor. Thus, the applicable legal
easement is only three meters pursuant to Department of
Environment and Natural Resources (DENR) Administrative
Order No. 99-21,9 and not forty meters, which applies to
timberlands and forest lands. Petitioner also alleged that
enforcing the forty-meter legal easement would virtually
deprive her of the use and enjoyment of the property since it
consists only of 1,000 square meters.
The DENR countered that the property is inalienable.
It also claimed that the applicant agreed on the forty-meter
legal easement when the free patent was applied for.
Trial Court
The trial court ruled in favor of petitioner. It said
that there is no longer any reason for the forty-meter legal
easement because the property had been transformed into
residential land and the area where it is located has been
reclassified as urban. Applying DENR A.O. No. 99-21, the
applicable legal easement is only three meters.
Court of Appeals
On appeal, the Court of Appeals reversed the trial
court's decision. It upheld the DENR's claim that the property
was inalienable. Accordingly, a positive act of the government
was necessary to declassify it from forest land to alienable
land. Declaration of the property as residential in the tax
declaration and reclassification of the area where it is located
as urban were insufficient bases to reclassify the property.
ISSUE: WHETHER OR NOT THE TRIAL COURT IS
CORRECT IN TAKING JUDICIAL NOTICE OF THE FACT
THAT PETITIONER'S LOT COVERED BY TCT NO. 5455 IS
SITUATED IN AN URBAN AREA AND NOT IN A FOREST
AREA, AND IN THUS CONCLUDING THAT THE LEGAL
EASEMENT APPLICABLE FOR RIVER BANK PROTECTION
IS THREE (3) METERS AND NOT FORTY (40) METERS.
RULING: YES.
Section 90(i) of C.A. No. 141 requires that a forty-meter legal
easement from the bank of any river or stream shall be
preserved as permanent timberland. More specifically, it
provides:
(i) That the applicant agrees that a strip forty meters
wide starting from the bank on each side of any river
or stream that may be found on the land applied for,
shall be demarcated and preserved as permanent
timberland to be planted exclusively to trees of known
economic value, and that he shall not make any
clearing thereon or utilize the same for ordinary
farming purposes even after patent shall have been
issued to him or a contract of lease shall have been
executed in his favor.
To implement this, the DENR promulgated A.O. No. 99-21
which provides the guidelines in the processing, verification,
and approval of isolated and cadastral surveys. Pertinent to
this case are the following provisions:
2.1 Original Surveys:
2.1.a Public Lands:
All alienable and disposable (A and D) lands of the
public domain shall be surveyed pursuant to Section 1
Par. (1) of R.A. 1273 [C.A. No. 141, Section 90(i)]
whereby a strip of forty (40) meters wide starting from
the banks on each side of any river or stream that
may be found on the land shall be demarcated and
preserved as permanent timberland.
Likewise, to be demarcated are public lands along the
banks of rivers and streams and the shores of the
seas and lakes throughout their entire length and
within a zone of three (3) meters in urban areas,
twenty (20) meters in agricultural areas and forty (40)
meters in forest area, along their margins which are
subject to the easement for public use in the interest
of recreation, navigation, floatage, fishing and
salvage.
x x x
2.3 Survey of Titled Lands:
2.3.1 Administratively Titled Lands:
The provisions of item 2.1.a and 2.1.b shall be
observed as the above. However, when these lands
are to be subdivided, consolidated or consolidated-
subdivided, the strip of three (3) meters which falls
within urban areas shall be demarcated and marked
on the plan for easement and bank protection.
The purpose of these strips of land shall be noted in
the technical description and annotated in the title.
x x x
Running in parallel vein is the Water Code of the
Philippines17 which provides:
Art. 51. The banks of rivers and streams and the
shores of the seas and lakes throughout their entire
length and within a zone of three (3) meters in urban
areas, twenty (20) meters in agricultural areas and
forty (40) meters in forest areas, along their margins,
are subject to the easement of public use in the
interest of recreation, navigation, floatage, fishing and
salvage. No person shall be allowed to stay in this
 zone longer than what is necessary for recreation,
navigation, floatage, fishing or salvage or to build
structures of any kind.

Since the property in this case was originally alienable land of

the public domain, the application for free patent contained the
condition that a forty-meter legal easement from the banks on
each side of any river or stream found on the land shall be
demarcated and preserved as permanent timberland.
However, after the property was administratively titled, it
underwent several surveys for purposes of subdivision,
consolidation, or consolidation-subdivision as evidenced by
TCT No. 5455. This title provides that it is a transfer from TCT
Nos. 3975 and 436018 and describes the property as Lot 2 of
the consolidation-subdivision plan Pcs-07-002121, being a
portion of Lot 6 and 7 Pcs-07-000974.19 Thus, presently only
three meters is required to be demarcated and preserved as
permanent timberland.

In this case, the trial court properly took judicial notice

that Talamban, Cebu City is an urban area. Judicial notice
is the cognizance of certain facts which judges may
properly take and act on without proof because they
already know them. A municipal jurisdiction, whether
designated as chartered city or provincial capital, is
considered as urban in its entirety if it has a population
density of at least 1,000 persons per square kilometer.
The City of Cebu was created on October 20, 1934 under
Commonwealth Act No. 58. It is a highly urbanized city
classified as entirely urban. Thus, all its barangays,
including Talamban, are considered urban.

Conformably with the foregoing considerations, the reduction

of the legal easement of forty meters on petitioner's property
covered by TCT No. 5455 to three meters now is in order.
 ELIZA ZUÑIGA-SANTOS,* REPRESENTED BY HER
ATTORNEY-IN FACT, NYMPHA Z.
SALES, Petitioners, v. MARIA DIVINA GRACIA SANTOS-
GRAN** AND REGISTER OF DEEDS OF MARIKINA
CITY, Respondents.
G.R. No. 197380, October 08, 2014
The Facts
On January 9, 2006, petitioner Eliza Zuñiga-Santos
(petitioner), through her authorized representative, Nympha Z.
Sales,5 filed a Complaint6 for annulment of sale and revocation
of title against respondents Maria Divina Gracia Santos-Gran
(Gran) and the Register of Deeds of Marikina City before the
RTC, docketed as Civil Case No. 2018-06. The said complaint
was later amended7 on March 10, 2006 (Amended Complaint).
In her Amended Complaint,8 petitioner alleged, among others,
that:
(a) she was the registered owner of three (3) parcels
of land located in the Municipality of Montalban,
Province of Rizal, covered by Transfer Certificate of
Title (TCT) Nos. N-5500,9 224174,10 and N-
423411 (subject properties) prior to their transfer in the
name of private respondent Gran;
(b) she has a second husband by the name of
Lamberto C. Santos (Lamberto), with whom she did
not have any children;
(c) she was forced to take care of Lamberto’s alleged
daughter, Gran, whose birth certificate was forged to
make it appear that the latter was petitioner’s
daughter;
(d) pursuant to void and voidable documents, i.e., a
Deed of Sale, Lamberto succeeded in transferring the
subject properties in favor of and in the name of Gran;
(e) despite diligent efforts, said Deed of Sale could
not be located; and (f) she discovered that the subject
properties were transferred to Gran sometime in
November 2005. Accordingly, petitioner prayed, inter
alia, that Gran surrender to her the subject properties
and pay damages, including costs of suit.12
For her part, Gran filed a Motion to Dismiss,13 contending, inter
alia, that (a) the action filed by petitioner had prescribed since
an action upon a written contract must be brought within ten
(10) years from the time the cause of action accrues, or in this
case, from the time of registration of the questioned documents
before the Registry of Deeds;14 and (b) the Amended
Complaint failed to state a cause of action as the void and
voidable documents sought to be nullified were not properly
identified nor the substance thereof set forth, thus, precluding
the RTC from rendering a valid judgment in accordance with
the prayer to surrender the subject properties.15
The 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”17 – was not attached. It likewise held that the
certificates of title covering the subject properties cannot be
collaterally attacked and that since the action was based on a
written contract, the same had already prescribed under Article
1144 of the Civil Code.
The CA Ruling
The CA sustained the dismissal of petitioner’s Amended
Complaint but on the ground of insufficiency of factual basis.
It disagreed with the RTC’s finding that the said pleading failed
to state a cause of action since it had averred that: (a)
petitioner has a right over the subject properties being the
registered owner thereof prior to their transfer in the name of
Gran; (b) Lamberto succeeded in transferring the subject
properties to his daughter, Gran, through void and voidable
documents; and (c) the latter’s refusal and failure to surrender
to her the subject properties despite demands violated
petitioner’s rights over them.20 The CA likewise ruled that the
action has not yet prescribed since an action for nullity of void
deeds of conveyance is imprescriptible.21 Nonetheless, it held
that since the Deed of Sale sought to be annulled was not
attached to the Amended Complaint, it was impossible for the
court to determine whether petitioner’s signature therein was a
forgery and thus, would have no basis to order the surrender or
reconveyance of the subject properties.22
Aggrieved, petitioner moved for reconsideration23 and
attached, for the first time, a copy of the questioned Deed of
Sale which she claimed to have recently recovered, praying
that the order of dismissal be set aside and the case be
remanded to the RTC for further proceedings. However, the
CA denied petitioner’s motion and held that the admission
of the contested Deed of Sale at this late stage would be
contrary to Gran’s right to due process.
ISSUE: Whether or not the dismissal of petitioner’s Amended
Complaint should be sustained.
RULING: YES.
Failure to state a cause of action and lack of cause of
action are distinct grounds to dismiss a particular action.
The former refers to the insufficiency of the allegations in
the pleading, while the latter to the insufficiency of the
factual basis for the action. Dismissal for failure to state a
cause of action may be raised at the earliest stages of the
proceedings through a motion to dismiss under Rule 16 of
the Rules of Court, while dismissal for lack of cause of
action may be raised any time after the questions of fact
have been resolved on the basis of stipulations,
admissions or evidence presented by the plaintiff.26
In Macaslang v. Zamora,27 the Court, citing the commentary of
Justice Florenz D. Regalado, explained:
Justice Regalado, a recognized commentator on
remedial law, has explained the distinction:
x x x 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.28
In the case at bar, both the RTC and the CA were one in
dismissing petitioner’s Amended Complaint, but varied on the
grounds thereof – that is, the RTC held that there was failure to
state a cause of action while the CA ruled that there was
insufficiency of factual basis.
At once, it is apparent that the CA based its dismissal on an
incorrect ground. From the preceding discussion, it is clear that
“insufficiency of factual basis” is not a ground for a motion to
dismiss. Rather, it is a ground which becomes available only
after the questions of fact have been resolved on the basis of
stipulations, admissions or evidence presented by the plaintiff.
The procedural recourse to raise such ground is a demurrer to
evidence taken only after the plaintiff’s presentation of
evidence. This parameter is clear under Rule 33 of the Rules
of Court:
RULE 33
Demurrer to Evidence
Section 1. Demurrer to evidence. — After the plaintiff
has completed the presentation of his evidence, the
defendant may move for dismissal on the ground that
upon the facts and the law the plaintiff has shown no
right to relief. If his motion is denied he shall have the
right to present evidence. If the motion is granted but
on appeal the order of dismissal is reversed he shall
be deemed to have waived the right to present
evidence.
At the preliminary stages of the proceedings, without any
presentation of evidence even conducted, it is perceptibly
impossible to assess the insufficiency of the factual basis on
which the plaintiff asserts his cause of action, as in this case.
Therefore, that ground could not be the basis for the dismissal
of the action.
However, the Amended Complaint is still dismissible but
on the ground of failure to state a cause of action, as
correctly held by the RTC. Said ground was properly
raised by Gran in a motion to dismiss pursuant to Section
1, Rule 16 of the Rules of Court:
RULE 16
Motion to Dismiss
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:
x x x x
(g) That the pleading asserting the claim states no
cause of action;
xxxx
A complaint states a cause of action if it sufficiently avers the
existence of the three (3) essential elements of a cause of
action, namely: (a) a right in favor of the plaintiff by whatever
means and under whatever law it arises or is created; (b) an
obligation on the part of the named defendant to respect or not
to violate such right; and (c) an act or omission on the part of
the named defendant violative of the right of the plaintiff or
constituting a breach of the obligation of defendant to the
plaintiff for which the latter may maintain an action for recovery
of damages.29 If the allegations of the complaint do not state
the concurrence of these elements, the complaint becomes
vulnerable to a motion to dismiss on the ground of failure to
state a cause of action.30
It is well to point out that the plaintiff’s cause of action should
not merely be “stated” but, importantly, the statement thereof
should be “sufficient.” This is why the elementary test in a
motion to dismiss on such ground is whether or not the
complaint alleges facts which if true would justify the relief
demanded.31 As a corollary, it has been held that only ultimate
facts and not legal conclusions or evidentiary facts are
considered for purposes of applying the test. 32 This is
consistent with Section 1, Rule 8 of the Rules of Court which
states that the complaint need only allege the ultimate facts or
the essential facts constituting the plaintiff’s cause of action. A
fact is essential if they cannot be stricken out without leaving
the statement of the cause of action inadequate.33 Since the
inquiry is into the sufficiency, not the veracity, of the material
allegations, it follows that the analysis should be confined to
the four corners of the complaint, and no other.34
A judicious examination of petitioner’s Amended Complaint
readily shows its failure to sufficiently state a cause of action.
Contrary to the findings of the CA, the allegations therein do
not proffer ultimate facts which would warrant an action for
nullification of the sale and recovery of the properties in
controversy, hence, rendering the same dismissible.
While the Amended Complaint does allege that petitioner was
the registered owner of the subject properties in dispute,
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 said properties that were
attached to the Amended Complaint are in the name of Gran.
At best, the attached copies of TCT Nos. N-5500 and N-4234
only mention petitioner as the representative of Gran at the
time of the covered property’s registration when she was a
minor. Nothing in the pleading, however, indicates that the
former had become any of the properties’ owner. This leads to
the logical conclusion that her right to the properties in
question – at least through the manner in which it was alleged
in the Amended Complaint – remains ostensibly unfounded.
Indeed, while the facts alleged 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 and material facts well pleaded in
the complaint as well as to inferences fairly deductible
therefrom.35 Verily, the filing of the motion to dismiss assailing
the sufficiency of the complaint does not hypothetically admit
allegations of which the court will take judicial notice of to be
not true, nor does the rule of hypothetical admission apply to
legally impossible facts, or to facts inadmissible in evidence, or
to facts that appear to be unfounded by record or
document included in the pleadings.36
Aside from the insufficiency of petitioner’s allegations with
respect to her right to the subject properties sought to be
recovered, the ultimate facts supposedly justifying the
“annulment of sale,” by which the reconveyance of the subject
properties is sought, were also insufficiently pleaded. The
following averments in the Amended Complaint betray no more
than an insufficient narration of facts:
6. That pursuant to a voidable [sic] and void
documents, the second husband of the
plaintiff succeed [sic] in transferring the
above TITLES in the name of MARIA
DIVINAGRACIA SANTOS, who is (sic)
alleged daughter of LAMBERTO C.
SANTOS in violation of Article 1409, Par. 2
of the Civil Code;
7. That the said properties [were] transferred to
the said defendant by a Deed of Sale (DOS)
to the said MARIA DIVINAGRACIA SANTOS
through a void documents [sic] considering
that the seller is the alleged mother of
defendant is also the buyer of the said
properties in favor of defendant;
8. x x x.
9. That the alleged sale and transfer of the said
properties in favor of defendant was only
discovered by [plaintiff’s] daughter
CYNTHIA BELTRAN-LASMARIAS when
[plaintiff] has been requesting for financial
assistance, considering that the said mother
of plaintiff [sic] has so many properties
which is now the subject of this complaint;
10. That plaintiff then return on [to] the
Philippines sometime [in] November, 2005
and discovered that all [plaintiff’s] properties
[had] been transferred to defendant MARIA
DIVINAGRACIA SANTOS who is not a
daughter either by consanguinity or affinity to
the plaintiff mother [sic];
11. That the titles that [were] issued in the name
of MARIA DIVINAGRACIA SANTOS by
virtue of the said alleged voidable and void
documents, should be annulled and
cancelled as the basis of the transfer is
through void and voidable documents;
x x x x37
Clearly, the claim that the sale was effected through “voidable
and void documents” partakes merely of a conclusion of law
that is not supported by any averment of circumstances that
will show why or how such conclusion was arrived at. In fact,
what these “voidable and void documents” are were not
properly stated and/or identified. In Abad v. Court of First
Instance of Pangasinan,38 the Court pronounced that:
A pleading should state the ultimate facts essential to the
rights of action or defense asserted, as distinguished from
mere conclusions of fact, or conclusions of law. General
allegations that a contract is valid or legal, or is just, fair, and
reasonable, are mere conclusions of law.
Likewise, allegations that a contract is void,
voidable,invalid, illegal, ultra vires, or against public policy,
without stating facts showing its invalidity, are mere
conclusions of law.39 (Emphases supplied)
Hence, by merely stating a legal conclusion, the Amended
Complaint presented no sufficient allegation upon which the
Court could grant the relief petitioner prayed for. Thus, said
pleading should be dismissed on the ground of failure to state
cause of action, as correctly held by the RTC.
That a copy of the Deed of Sale adverted to in the Amended
Complaint was subsequently submitted by petitioner does not
warrant a different course of action. The submission of that
document was made, as it was purportedly “recently
recovered,” only on reconsideration before the CA which,
nonetheless, ruled against the remand of the case. An
examination of the present petition, however, reveals no
counter-argument against the foregoing actions; hence, the
Court considers any objection thereto as waived.
In any event, the Court finds the Amended Complaint’s
dismissal to be in order considering that petitioner’s cause of
action had already prescribed.
It is evident that petitioner ultimately seeks for the
reconveyance to her of the subject properties through the
nullification of their supposed sale to Gran. An action for
reconveyance is one that seeks to transfer property, wrongfully
registered by another, to its rightful and legal owner. 40 Having
alleged the commission of fraud by Gran in the transfer and
registration of the subject properties in her name, there was, in
effect, an implied trust created by operation of law pursuant to
Article 1456 of the Civil Code which provides:
Art. 1456. If property is acquired through mistake or fraud, the
person obtaining it is, by force of law, considered a trustee of
an implied trust for the benefit of the person from whom the
property comes.
To determine when the prescriptive period commenced in an
action for 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 for reconveyance based on implied
trust prescribes in ten (10) years, the reference point being
the date of registration of the deed or the issuance of the
title. On the other hand, if the real owner of the property
remains in possession of the property, the prescriptive period
to recover title and possession of the property does not run
against him and in such case, the action for reconveyance
would be in the nature of a suit for quieting of title which is
imprescriptible.41
In the case at bar, a reading of the allegations of the Amended
Complaint failed to show that petitioner remained in
possession of the subject properties in dispute. On the
contrary, it can be reasonably deduced that it was Gran who
was in possession of the subject properties, there being an
admission by the petitioner that the property covered by TCT
No. 224174 was being used by Gran’s mother-in-law.42 In
fact, petitioner’s relief in the Amended Complaint for the
“surrender” of three (3) properties to her bolsters such
stance.43 And since the new titles to the subject properties in
the name of Gran were issued by the Registry of Deeds of
Marikina on the following dates: TCT No. 224174 on July 27,
1992,44TCT No. N-5500 on January 29, 1976,45 and TCT No.
N-4234 on November 26, 1975,46 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.
OLIVAREZ REALTY CORPORATION and DR. PABLO R.
OLIVAREZ vs. BENJAMIN CASTILLO
G.R. No. 196251, July 9, 2014
DECISION
FACTS:
Benjamin Castillo was the registered owner of a
346,918-squaremeter parcel of land located in Laurel,
Batangas, covered by Transfer Certificate of Title No. T-
19972.4 The Philippine Tourism Authority allegedly claimed
ownership of the sameparcel of land based on Transfer
Certificate of Title No. T-18493.5 On April 5, 2000, Castillo and
Olivarez Realty Corporation, represented by Dr. Pablo R.
Olivarez, entered into a contract of conditional sale6 over the
property. Under the deed of conditional sale, Castillo agreed to
sell his property to Olivarez Realty Corporation for
₱19,080,490.00. Olivarez Realty Corporation agreed toa down
payment of ₱5,000,000.00, to be paid in different schedule.
As to the balance of ₱14,080,490.00, Olivarez Realty
Corporation agreed to pay in 30 equal monthly installments
every eighth day of the month beginning in the month that the
parties would receive a decision voiding the Philippine Tourism
Authority’s title to the property.8 Under the deed of conditional
sale, Olivarez RealtyCorporation shall file the action against
the Philippine Tourism Authority "with the full assistance of
[Castillo]."9
The parties agreed thatOlivarez Realty Corporation
may immediately occupy the property upon signing of the deed
of conditional sale. Should the contract be cancelled, Olivarez
RealtyCorporation agreed to return the property’s possession
to Castillo and forfeit all the improvements it may have
introduced on the property.
On September 2, 2004, Castillo filed a
complaint14 against Olivarez Realty Corporation and Dr.
Olivarez with the Regional Trial Court of Tanauan City,
Batangas. Castillo alleged that Dr. Olivarez convinced him into
selling his property to Olivarez Realty Corporation on the
representation that the corporation shall be responsible in
clearing the property of the tenants and in paying them
disturbance compensation. He further alleged that Dr. Olivarez
solely prepared the deed of conditional sale and that he was
made to sign the contract with its terms "not adequately
explained [to him] in Tagalog."15
After the parties had signed the deed of conditional
sale, Olivarez Realty Corporation immediately took possession
of the property. However, the corporation only paid
2,500,000.00 ofthe purchase price. Contrary to the agreement,
the corporation did not file any action against the Philippine
Tourism Authority to void the latter’s title to the property. The
corporation neither cleared the land of the tenants nor paid
them disturbance compensation. Despite demand, Olivarez
Realty Corporation refused to fully pay the purchase price. 16
Arguing that Olivarez Realty Corporation committed
substantial breach of the contract of conditional sale and that
the deed of conditional sale was a contract of adhesion,
Castillo prayed for rescission of contract under Article 1191 of
the Civil Code of the Philippines. He further prayed that
Olivarez Realty Corporation and Dr. Olivarez be made
solidarily liable for moral damages, exemplary damages,
attorney’s fees, and costs of suit.17
In their answer,18 Olivarez Realty Corporation and Dr.
Olivarez admitted that the corporation only paid ₱2,500,000.00
ofthe purchase price. In their defense, defendants alleged that
Castillo failed to "fully assist"19 the corporation in filing an
action against the Philippine Tourism Authority. Neither did
Castillo clear the property of the tenants within six months from
the signing of the deed of conditional sale. Thus, according to
defendants, the corporation had "all the legal right to withhold
the subsequent payments to [fully pay] the purchase price."20
Olivarez Realty Corporation and Dr. Olivarez
prayedthat Castillo’s complaint be dismissed. By way of
compulsory counterclaim, they prayed for ₱100,000.00
litigation expenses and ₱50,000.00 attorney’s fees.21
Castillo replied to the counterclaim,22 arguing that
Olivarez Realty Corporation and Dr. Olivarez had no right to
litigation expenses and attorney’s fees. According to Castillo,
the deed of conditional sale clearly states that the corporation
"assume[d] the responsibility of taking necessary legal
action"23 against the Philippine Tourism Authority, yet the
corporation did not file any case. Also, the corporation did not
pay the tenants disturbance compensation. For the
corporation’s failure to fully pay the purchase price, Castillo
claimed that hehad "all the right to pray for the rescission of the
[contract],"24 and he "should not be held liable . . . for any
alleged damages by way of litigation expenses and attorney’s
fees."25
On January 10, 2005, Castillo filed a request for
admission,26 requesting Dr. Olivarez to admit under oath the
genuineness of the deed of conditional sale and Transfer
Certificate of Title No. T-19972. He likewise requested Dr.
Olivarez to admit the truth of the following factual allegations:
1. That Dr. Olivarez is the president of Olivarez Realty
Corporation;
2. That Dr. Olivarez offered to purchase the parcel of
land from Castillo and that he undertook to clear the
property of the tenants and file the court action to void
the Philippine Tourism Authority’s title to the property;
3. That Dr. Olivarez caused the preparation of the
deed of conditional sale;
4. That Dr. Olivarez signed the deed of conditional
sale for and on behalf of Olivarez Realty Corporation;
5. That Dr. Olivarez and the corporation did not file
any action against the Philippine Tourism Authority;
6. That Dr. Olivarez and the corporation did not pay
the tenants disturbance compensation and failed to
clear the property of the tenants; and
7. That Dr. Olivarez and the corporation only paid
₱2,500,000.00 of the agreed purchase price.27
On January 25, 2005, Dr. Olivarez and Olivarez Realty
Corporation filed their objections to the request for
admission,28 stating that they "reiterate[d] the allegations [and
denials] in their [answer]."29
The trial court conducted pre-trial conference on December 17,
2005.
On March 8, 2006, Castillo filed a motion for summary
judgment and/or judgment on the pleadings. 30 He argued that
Olivarez Realty Corporation and Dr. Olivarez "substantially
admitted the material allegations of [his]
complaint,"31specifically:
1. That the corporation failed to fully pay the purchase
price for his property;32
2. That the corporation failed to file an action to void
the Philippine Tourism Authority’s title to his
property;33and
3. That the corporation failed to clear the property of
the tenants and pay them disturbance
compensation.34
Should judgment on the pleadings beimproper, Castillo argued
that summary judgment may still be rendered asthere is no
genuine issue as to any material fact.35 He cited Philippine
National Bank v. Noah’s Ark Sugar Refinery36 as authority.
Castillo attached to his motion for summary judgment and/or
judgment on the pleadings his affidavit37 and the affidavit of a
Marissa Magsino38 attesting to the truth of the material
allegations of his complaint.
Olivarez Realty Corporation and Dr. Olivarez opposed 39 the
motion for summary judgment and/or judgment on the
pleadings, arguing that the motion was "devoid of
merit."40 They reiterated their claim that the corporation
withheld further payments of the purchase price because
"there ha[d] been no favorable decision voiding the title of the
Philippine Tourism Authority."41 They added that Castillo sold
the property to another person and that the sale was allegedly
litigated in Quezon City.42
Considering that a title adverse to that of Castillo’s existed,
Olivarez Realty Corporation and Dr. Olivarez argued that the
case should proceed to trial and Castillo be required to prove
that his title to the property is "not spurious or fake and that he
had not sold his property to another person."43
In reply to the opposition to the motion for summary judgment
and/or judgment on the pleadings,44 Castillo maintained that
Olivarez Realty Corporation was responsible for the filing of an
action against the Philippine Tourism Authority. Thus, the
corporation could not fault Castillo for not suing the
PhilippineTourism Authority.45 The corporation illegally withheld
payments of the purchase price.
As to the claim that the case should proceed to trial because a
title adverse to his title existed, Castillo argued that the
Philippine Tourism Authority’s title covered another lot, not his
property.46
During the hearing on August 3, 2006, Olivarez Realty
Corporation and Dr. Olivarez prayed that they be given 30
days to file a supplemental memorandum on Castillo’s motion
for summary judgment and/or judgment on the pleadings. 47
The trial court granted the motion. Itgave Castillo 20 days to
reply to the memorandum and the corporation and Dr. Olivarez
15 days to respond to Castillo’s reply.48
In their supplemental memorandum,49 Olivarez Realty
Corporation and Dr. Olivarez argued that there was "an
obvious ambiguity"50 as to which should occur first — the
payment of disturbance compensation to the tenants or the
clearing of the property of the tenants. 51 This ambiguity,
according to defendants, is a genuine issue and "oughtto be
threshed out in a full blown trial."52
Olivarez Realty Corporation and Dr. Olivarez added that
Castillo prayed for irreconcilable reliefs of reformation of
instrument and rescission of contract.53 Thus, Castillo’s
complaint should be dismissed.
Castillo replied54 to the memorandum, arguing that there was
no genuine issue requiring trial of the case. According to
Castillo, "common sense dictates . . . that the legitimate
tenants of the [property] shall not vacate the premises without
being paid any disturbance compensation . . ."55 Thus, the
payment of disturbance compensation should occur first before
clearing the property of the tenants.
With respect to the other issuesraised in the supplemental
memorandum, specifically, that Castillo sold the property to
another person, he argued that these issues should not be
entertained for not having been presented during pre-trial.56
In their comment on the reply memorandum,57 Olivarez Realty
Corporation and Dr. Olivarez reiterated their arguments that
certain provisions of the deed of conditional sale were
ambiguous and that the complaint prayed for irreconcilable
reliefs.58
As to the additional issues raised in the supplemental
memorandum, defendants argued that issues not raised and
evidence not identified and premarked during pre-trial may still
be raised and presented during trial for good cause shown.
Olivarez Realty Corporation and Dr. Olivarez prayed that
Castillo’s complaint be dismissed for lack of merit.59
Ruling of the trial court
The trial court rendered a summary judgment in favour of
Castillo. It found that Olivarez Realty Corporation and Dr.
Olivarez’s answer "substantially [admitted the material
allegations of Castillo’s] complaint and [did] not . . . raise any
genuine issue [as to any material fact]." Defendants admitted
that Castillo owned the parcel of land covered by Transfer
Certificate of Title No. T-19972. They likewise admitted the
genuineness of the deed of conditional sale and that the
corporation only paid ₱2,500,000.00 of the agreed purchase
price.
Ruling of the Court of Appeals
The Court of Appeals affirmed in totothe trial court’s decision.
According to the appellate court, the trial court "did not err in its
finding that there is no genuine controversy as to the facts
involved [in this case]."69 The trial court, therefore, correctly
rendered summary judgment.70
ISSUE: WHETHER THE TRIAL COURT ERRED IN
RENDERING SUMMARY JUDGMENT.
RULING: NO.
The trial court correctly rendered summary judgment, as there
were no genuine issues of material fact in this case
Trial "is the judicial examination and determination of the
issues between the parties to the action." 89 During trial, parties
"present their respective evidence of their claims and
defenses."90 Parties to an action have the right "to a plenary
trial of the case"91 to ensure that they were given a right to fully
present evidence on their respective claims.
There are instances, however, when trial may be dispensed
with. Under Rule 35 of the 1997 Rules of Civil Procedure, a
trial court may dispense with trial and proceed to decide a case
if from the pleadings, affidavits, depositions, and other papers
on file, there is no genuine issue as to any material fact. In
such a case, the judgment issued is called a summary
judgment.
A motion for summary judgment is filed either by the claimant
or the defending party.92 The trial court then hears the motion
for summary judgment. If indeed there are no genuine issues
of material fact, the trial court shall issue summary judgment.
Section 3, Rule 35 of the 1997 Rules of Civil Procedure
provides:
SEC. 3. Motion and proceedings thereon. – The
motion shall be served at least ten (10) days
beforethe time specified for the hearing. The adverse
party may serve opposing affidavits, depositions, or
admission at least three (3) days before the hearing.
After the hearing, the judgment sought shall be
rendered forthwith ifthe pleadings, supporting
affidavits, depositions, and admissions on file,
showthat, except as to the amount of damages, there
is no genuine issue as to any material fact and that
the moving party is entitled to a judgment as a matter
of law.
An issue of material fact exists if the answer or responsive
pleading filed specifically denies the material allegations of fact
set forth in the complaint or pleading. If the issue of fact
"requires the presentation of evidence, it is a genuine issue of
fact."93 However, if the issue "could be resolved judiciously by
plain resort"94 to the pleadings, affidavits, depositions, and
other papers on file, the issue of fact raised is sham, and the
trial court may resolve the action through summary judgment.
A summary judgment is usually distinguished from a
judgment on the pleadings. Under Rule 34 of the 1997 Rules
of Civil Procedure, trial may likewise be dispensed with and a
case decided through judgment on the pleadings if the answer
filed fails to tender an issue or otherwise admits the material
allegations of the claimant’s pleading.95
Judgment on the pleadings is proper when the answer
filed fails to tender any issue, or otherwise admits the
material allegations in the complaint. On the other hand, in
a summary judgment, the answer filed tenders issues as
specific denials and affirmative defenses are pleaded, but
the issues raised are sham, fictitious, or otherwise not
genuine.
In this case, Olivarez Realty Corporation admitted that it did
not fully pay the purchase price as agreed upon inthe deed of
conditional sale. As to why it withheld payments from Castillo,
it set up the following affirmative defenses: First, Castillo did
not file a case to void the Philippine Tourism Authority’s title to
the property; second,Castillo did not clear the land of the
tenants; third, Castillo allegedly sold the property to a third
person, and the subsequent sale is currently being litigated
before a Quezon City court.
Considering that Olivarez Realty Corporation and Dr.
Olivarez’s answer tendered an issue, Castillo properly availed
himself of a motion for summary judgment.
However, the issues tendered by Olivarez Realty Corporation
and Dr. Olivarez’s answer are not genuine issues of material
fact. These are issues that can be resolved judiciously by plain
resort to the pleadings, affidavits, depositions, and other
papers on file; otherwise, these issues are sham, fictitious, or
patently unsubstantial.
Petitioner corporation refused to fully pay the purchase price
because no court case was filed to void the Philippine Tourism
Authority’s title on the property. However, paragraph C of the
deed of conditional sale is clear that petitioner Olivarez Realty
Corporation is responsible for initiating court action against the
Philippine Tourism Authority:
C. [Olivarez Realty Corporation] assumes the responsibility of
taking necessary legal action thru Court to have the claim/title
TCT T-18493 of Philippine Tourism Authority over the above-
described property be nullified and voided; with the full
assistance of [Castillo].98
Castillo’s alleged failure to "fully assist"99 the corporation in
filing the case is not a defense. As the trial court said, "how can
[Castillo] assist [the corporation] when [the latter] did not file
the action [in the first place?]"100
Neither can Olivarez Realty Corporation argue that it refused to
fully pay the purchase price due to the Philippine Tourism
Authority’s adverse claim on the property. The corporation
knew of this adverse claim when it entered into a contract of
conditional sale. It even obligated itself under paragraph C of
the deed of conditional sale to sue the Philippine Tourism
Authority. This defense, therefore, is sham.
Contrary to petitioners’ claim, there is no "obvious
ambiguity"101 as to which should occur first — the payment of
the disturbance compensation or the clearing of the land within
six months from the signing of the deed of conditional sale.
The obligations must be performed simultaneously. In this
case, the parties should have coordinated to ensure that
tenants on the property were paid disturbance compensation
and were made to vacate the property six months after the
signingof the deed of conditional sale.
On one hand, pure obligations, or obligations whose
performance do not depend upon a future or uncertainevent, or
upon a past event unknown to the parties, are demandable at
once.102 On the other hand, obligations with a resolutory period
also take effect at once but terminate upon arrival of the day
certain.103
Olivarez Realty Corporation’s obligation to pay disturbance
compensation is a pure obligation. The performance of the
obligation to pay disturbance compensation did not depend on
any condition. Moreover, the deed of conditional sale did not
give the corporation a period to perform the obligation. As
such, the obligation to pay disturbance compensation was
demandable at once. Olivarez RealtyCorporation should have
paid the tenants disturbance compensation upon execution of
the deed of conditional sale.
With respect to Castillo’s obligation to clear the land of the
tenants within six months from the signing of the contract, his
obligation was an obligation with a resolutory period. The
obligation to clear the land of the tenants took effect at once,
specifically, upon the parties’ signing of the deed of conditional
sale. Castillo had until October 2, 2000, six months from April
5, 2000 when the parties signed the deed of conditional sale,
to clear the land of the tenants.
Olivarez Realty Corporation, therefore, had no right to withhold
payments of the purchase price. As the trial court ruled,
Olivarez Realty Corporation "can only claim non-compliance [of
the obligation to clear the land of the tenants in] October
2000."104 It said:
. . . it is clear that defendant [Olivarez Realty Corporation]
should have paid the installments on the ₱5 million
downpayment up to October 8, 2000, or a total of
₱4,500,000.00. That is the agreement because the only time
that defendant [corporation] can claim non-compliance of the
condition is after October, 2000 and so it has the clear
obligation topay up to the October 2000 the agreed
installments. Since it paid only 2,500,000.00, then a violation of
the contract has already been committed. . . .105

The claim that Castillo sold the property to another is fictitious

and was made in bad faith to prevent the trial court from
rendering summary judgment. Petitioners did not elaborate on
this defense and insisted on revealing the identity of the buyer
only during trial.106 Even in their petition for review on certiorari,
petitioners never disclosed the name of this alleged buyer.
Thus, as the trial court ruled, this defense did not tender a
genuine issue of fact, with the defense "bereft of details."107

Castillo’s alleged prayer for the irreconcilable reliefs of

rescission of contract and reformation of instrument is not a
ground to dismiss his complaint. A plaintiff may allege two or
more claims in the complaint alternatively or hypothetically,
either in one cause of action or in separate causes of action
per Section 2, Rule 8 of the 1997 Rules of Civil Procedure.108 It
is the filing of two separatecases for each of the causes of
action that is prohibited since the subsequently filed case may
be dismissed under Section 4, Rule 2 of the 1997 Rules of Civil
Procedure109 on splitting causes of action.

As demonstrated, there are no genuineissues of material fact

in this case. These are issues that can be resolved judiciously
by plain resort to the pleadings, affidavits, depositions, and
other papers on file. As the trial court found, Olivarez Realty
Corporation illegally withheld payments of the purchase price.
The trial court did not err in rendering summary judgment.