Case Summary (G.R. No. L-21957)
The Plaintiffs’ Complaint and Its Legal Theory
The plaintiffs instituted an action for “Specific Performance and Damages.” They asserted four (4) causes of action. In the first cause of action, they alleged that they were in possession of the residential lots they acquired in 1949 from the Deudors. They further alleged that these lots were included in a larger parcel covered by a Torrens title in the name of J. M. Tuason & Co., Inc. They claimed that after 1949, the lots became the subject of several civil cases in the Court of First Instance of Rizal (Quezon City) between the Deudors and J. M. Tuason & Co., Inc..
A pivotal event followed: on March 16, 1953, the parties in those cases entered into a compromise agreement, later embodied in a decision of the court. The compromise, as pleaded by the plaintiffs, provided that legitimate purchasers named in an attached list, including the plaintiffs, “who are to continue and/or who are entitled to elect and have elected to buy their respective lots from the legal owners who are now the defendants (J.M. Tuason & Co. Inc.) shall be credited the sums already paid” under their former purchase contracts. The compromise also allegedly required that the defendants “shall make new purchase contracts” in favor of the plaintiffs at the current rate existing at the time of the compromise’s execution.
The plaintiffs alleged willingness to buy or continue purchasing and to sign new purchase contracts. They asserted that, despite “verbal and written demands,” and despite alleged commitments, the defendants refused and failed “to make new purchase contracts in favor of” the plaintiffs “up to the present time.” The third and fourth causes of action, incorporating the first, dealt with the prices the plaintiffs contended they should pay under the compromise agreement. The fourth cause of action included a claim for damages and attorney’s fees. The ultimate relief sought included an order requiring the defendants to execute new purchase contracts “at the current price ranging from P17.00 to P20.00 (per square meter) at the time of the execution of the compromise agreement.”
Motions to Dismiss in the Trial Court
The defendants filed separate motions to dismiss. They pleaded improper venue and failure to state a cause of action. One of the motions added defenses of extinctive prescription and misjoinder of parties. The plaintiffs opposed. The trial court dismissed the complaint on one ground alone: failure to state a cause of action.
The Trial Court’s Reasoning: Rescission of the Compromise
The trial court held that the compromise agreement on which the plaintiffs based their action had already been “rescinded and set aside.” It relied on subsequent incidents and orders issued by the Court of First Instance of Rizal, Quezon City Branch, in related civil cases identified in the order as Civil Cases Nos. Q-135, Q-139, Q-174 and Q-177. It cited an order dated February 28, 1957 directing the Deudors to clear and deliver peaceful possession of “the 30 ’quinones’” to the defendants within four (4) months. It then described a later order dated January 10, 1958 granting a motion by Gregorio Araneta, Inc., which, as quoted in the order, reasoned that the Deudors’ failure to deliver “four (4) years and 8 months after the execution and approval of the compromise agreement” justified “the setting aside of the compromise agreement of March 16, 1953, so far as it still remains unimplemented or executory.” The trial court further stated that Deudors appealed, but the Supreme Court affirmed those orders on May 30, 1961 in Florencio Deudor, et al. vs. J. M. Tuason & Co., Inc., G. R. L-13768, May 30, 1961, and characterized the effect as extinguishing the right to comply after expiration of a resolutory period. Finally, the trial court said any remaining doubt was dispelled by J. M. Tuason & Co., Inc., et al. vs. Bienvenido Sanvictores, G. R. L-16886, promulgated January 30, 1962, which, according to the order, recognized that the compromise between Deudor and Tuason upon which the buyer predicates his right had “been validly rescinded and set aside.”
Because of this perceived rescission, the trial court concluded that the complaint stated no cause of action and dismissed it, without costs.
The Supreme Court’s Review Standard in a Motion to Dismiss
On appeal, the Supreme Court addressed the procedural correctness of the trial court’s approach. It reiterated a settled rule that in a motion to dismiss on the ground that the complaint fails to state a cause of action, the issue concerns the sufficiency of the allegations in the complaint itself. It emphasized that the truth of the allegations is hypothetically admitted for purposes of the motion. The question was whether, assuming the allegations to be true, the court could render a valid judgment in accordance with the prayer.
The Court added that insufficiency must appear on the face of the complaint to sustain dismissal on that ground. It stated that courts may not consider extraneous matters or facts not alleged, because those facts would require evidence and therefore should be treated as defenses raised and proven in the trial. It relied on the rule pronounced in Garcon vs. Redemptorist Fathers, L-23510, May 30, 1966, and further referred to the norm that if there is doubt about the truth of averments, the complaint should not be dismissed and the case should proceed on the merits, as stated in Republic Bank vs. Cuaderno, L-22399, March 30, 1967.
Error Attributed to the Trial Court: Consideration of Matters Outside the Complaint
Applying these rules, the Supreme Court held that the trial court erred by departing from the governing standard. It ruled that by taking cognizance of facts not alleged in the complaint—specifically the supposed rescission of the compromise agreement—the trial court effectively considered a matter that was not properly within the pleadings for purposes of dismissal.
The Court characterized the alleged rescission, and the extent of its effects on the various aspects of the compromise agreement and specifically on the plaintiffs’ present claims, as matters of defense. It held that such issues should be properly raised in the answer and should be established through trial, rather than by dismissal for failure to state a cause of action.
The Supreme Court further explained that it was “unsafe” to lift the idea of rescission from the context in which it was used in the two cases relied upon by the trial court and to apply it directly here without a prior inquiry into the relevant facts to determine whether rescission was indeed applicable to the plaintiffs’ claims.
The Alternative Ground on Venue and the Court’s Disposition
The defendants argued on appeal that the trial court should have sustained dismissal on the alternative ground of improper venue, even though the trial court had not resolved that issue. The Supreme Court rejected the venue argument.
The Court examined the allegations and prayer of the complaint. It held that the action was not a real but a personal action, meant to compel the defendants to execute purchase contracts in favor of the plaintiffs and to pay damages. The plaintiffs did not claim ownership of the lots. Instead, the plaintiffs acknowledged the title of J. Tuason, Inc. They also did not seek delivery of possession; they alleged that they were already in possession.
The Supreme Court distinguished Abao et al. vs. J. M. Tuason & Co., Inc., G. R. L-16796, Jan. 30, 1962, on which the defendants relied. It explained that in Abao, the plaintiffs’ action was predicated on the theory that they were occupants and landholders and that the compromise agreement had been used to acknowledge the Deudors’ right and title and to waive invocation of the indefeasibility of the Torrens title by the defendant corporations. It stated that, for that reason
...continue reading
Case Syllabus (G.R. No. L-21957)
- The Court considered a regular appeal from an order of the Court of First Instance of Manila dismissing the plaintiffs’ civil case No. 53067.
- The plaintiffs, numbering thirty-three (33), instituted an action for “Specific Performance and Damages” against J. M. Tuason & Co., Inc., and Gregorio Araneta, Inc., the latter acting as managing partner and attorney-in-fact of the former.
- The Court reversed the dismissal and remanded the case for further proceedings, with costs against the defendants-appellees in this instance.
Parties and Procedural Posture
- The plaintiffs-appellants were a group of residential lot purchasers or successors in interest who claimed entitlement to buy and purchase their respective lots pursuant to a prior compromise agreement.
- The defendants-appellees were J. M. Tuason & Co., Inc. and Gregorio Araneta, Inc. as managing partner and attorney-in-fact.
- The trial court dismissed the complaint on a single ground: failure to state a cause of action.
- The trial court denied the plaintiffs’ motion for reconsideration, and the plaintiffs then appealed directly to the Supreme Court.
Key Factual Allegations
- The complaint alleged that the plaintiffs were in possession of residential lots in Matalahib and Tatalon, Quezon City, purchased in or about 1949 from persons designated collectively as the Deudors.
- The complaint alleged that the lots were embraced in a larger parcel covered by a Torrens title in the name of J. M. Tuason & Co., Inc.
- The complaint further alleged that, after 1949, the subject lots became the subject of several civil cases in the Court of First Instance of Rizal (Quezon City) between the Deudors and J. M. Tuason & Co., Inc.
- The complaint alleged that on March 16, 1953, the parties entered into a compromise agreement, later embodied in a decision, under which the legitimate purchasers named in an attached list, including the plaintiffs, were to be credited for sums already paid under their former purchase contracts from their predecessors-in-interest.
- The complaint alleged that the compromise agreement also required the so-called owners (J. M. Tuason & Co., Inc.) to execute new purchase contracts in favor of the plaintiffs at the current rate then existing at the time of the compromise agreement’s execution.
- The plaintiffs alleged their willingness to buy or elect to continue purchasing and to sign new purchase contracts, but alleged that the defendants deliberately refused to make new purchase contracts despite verbal and written demands and alleged commitments.
- The complaint’s third and fourth causes of action incorporated the first cause’s allegations and focused on the prices at which the defendants should sell the lots under the compromise agreement.
- The fourth cause of action included a claim for damages and attorney’s fees.
- The complaint’s principal relief sought an order for the defendants to execute new purchase contracts at the current price ranging from P17.00 to P20.00 per square meter at the time of the compromise agreement’s execution.
Causes of Action Claimed
- The first cause of action was grounded on the plaintiffs’ possession, their 1949 purchases, the existence of the March 16, 1953 compromise agreement, and the defendants’ alleged refusal to execute the required new purchase contracts.
- The third and fourth causes of action were tied to the pricing that the plaintiffs claimed the compromise agreement required the defendants to observe.
- The fourth cause of action sought damages and attorney’s fees in addition to the specific performance relief.
Motions to Dismiss
- The defendants filed separate motions to dismiss, each invoking improper venue and failure to state a cause of action.
- J. M. Tuason & Co., Inc. raised, among others, failure to state a cause of action and improper venue.
- Gregorio Araneta, Inc. similarly invoked improper venue and failure to state a cause of action, aligned with its separate motion.
- The first motion also pleaded extinctive prescription and misjoinder of parties.
- The trial court granted the motion and dismissed the complaint based solely on failure to state a cause of action, without resolving the other defenses.
Trial Court’s Ground
- The trial court held that the compromise agreement on which the plaintiffs based their complaint had already been rescinded and set aside.
- The trial court relied on subsequent incidents arising in connection with implementation, including orders issued in Civil Cases Nos. Q-135, Q-139, Q-174, and Q-177 in the Court of First Instanc