G.R. No. 197358 - Butuan Development Corp. vs. Court of Appeals, 21st Division

Butuan Development Corporation (BDC) purchased a 7.6923-hectare parcel of land from the Spouses Jose and Socorro Sering on March 31, 1966, while still in the process of incorporation.
The Registry of Deeds issued Transfer Certificate of Title (TCT) No. RT-4724 in BDC's name on January 28, 1969.
On May 5, 1998, Max L. Arriola, Jr., claiming to be BDC's Chairman, mortgaged the property to De Oro Resources, Inc. (DORI) and its President Louie A. Libarios.
BDC was officially incorporated on May 23, 2002, after executing its Articles of Incorporation.

BDC filed a complaint on August 23, 2005, seeking to declare the real estate mortgage (REM) null and void, alleging that the Arriolas misrepresented themselves as BDC's directors.
BDC claimed that the owner's duplicate copy of TCT No. RT-4724 was missing and later found in Libarios' possession, asserting that the REM was executed without their knowledge or consent.

Libarios and DORI denied the allegations, asserting that the Arriolas had possession of the property and the title at the time of the REM's execution.
They contended that BDC could not claim ownership of the property since it was not yet incorporated when the REM was executed, thus lacking the legal capacity to own property.

The RTC dismissed the respondents' special and affirmative defenses on August 11, 2006, stating that BDC's rights were violated by any alienation of the property not conducted by its Board of Directors.
The RTC denied the respondents' motions for reconsideration, maintaining that BDC had a valid claim.

The CA granted the respondents' petition for certiorari on January 14, 2011, ruling that BDC had no corporate existence at the time of the REM's execution, thus lacking the capacity to own property.
The CA dismissed BDC's complaint for failure to state a cause of action, asserting that BDC could not have a valid claim without corporate status.

BDC contended that it had a cause of action despite not being incorporated at the time of the REM's execution.
BDC argued that Libarios and DORI were estopped from questioning its legal personality since they treated BDC as a corporation during the REM's execution.

The respondents maintained that BDC's petition for certiorari was improperly filed, asserting that BDC should have pursued an appeal under Rule 45 of the Rules of Court.
They argued that the CA did not abuse its discretion in dismissing BDC's complaint.

The Supreme Court granted BDC's petition, clarifying that the CA's decision constituted a final judgment, thus allowing for a certiorari petition.
The Court emphasized that certiorari cannot substitute for an appeal and that BDC's failure to file a timely appeal under Rule 45 was a critical issue.

The Court found that the CA's dismissal of BDC's complaint without allowing it to present evidence constituted a denial of due process.
The Court noted that the CA's ruling on the failure to state a cause of action was premature, as the issues should have been resolved during trial.

The Court reiterated the elements of a cause of action: a right in favor of the plaintiff, an obligation on the part of the defendant, and an act or omission by the defendant violating the plaintiff's right.
BDC's allegations w...continue reading