Case Summary (G.R. No. 199565)
Factual Background
Private respondent Almeda Development & Equipment Corporation (ADEC) filed a petition for cancellation of restrictions annotated on Transfer Certificate of Title No. 47348. ADEC alleged that it purchased the parcel with improvements on Pasay Road, San Lorenzo Village, Makati, by a Deed of Sale executed by Ponciano L. Almeda. The title contained an annotation, Entry No. 59599, imposing membership in the San Lorenzo Village Association, limitations on subdivision and use, building height and setback restrictions, easements, and requirements for approval of building plans. ADEC alleged changed conditions along Pasay Road rendered those restrictions obsolete and that the annotation unlawfully limited its property rights guaranteed by law.
Lower Court Petition and Relief Sought
ADEC prayed for a temporary restraining order to enjoin San Lorenzo Company, Inc. and agents from making ADEC a member of San Lorenzo Village Association, Inc. and from enforcing restrictions; it sought cancellation of Entry No. 59599 on TCT No. 47348; and it claimed actual damages, attorneys' fees, allowances per attendance, and costs. The petition asserted that ADEC had its own security and collection arrangements and intended to construct a taller building, thereby challenging the annotation as an unconstitutional or unlawful limitation on ownership.
Motion to Dismiss Filed by Petitioner
San Lorenzo Village Association, Inc. moved to dismiss for lack of cause of action and for lack of ADEC’s personality to sue. SLVAI contended that ADEC was not the registered owner; that an unregistered deed of sale could not bind third persons; and that ADEC, being neither owner nor member of SLVAI, was a stranger with no demandable right to seek cancellation of the annotation.
Trial Court Orders
The Regional Trial Court denied the motion to dismiss in an Order dated March 31, 1992. The court treated ADEC’s allegation of ownership by deed of sale as sufficient to show interest in the property and held that as successor-in-interest to the registered owner, ADEC could sue. SLVAI moved for reconsideration, arguing, inter alia, the nonapplication of Article 709 and that unregistered transfers did not bind third persons. The RTC denied reconsideration on October 15, 1992, reasoning that Article 709 did not apply to a party who merely caused an annotation of restraints on title and that as successor-in-interest, ADEC could assert the rights of the vendor to impugn restrictions.
Court of Appeals Proceedings and Ruling
San Lorenzo Village Association, Inc. sought certiorari relief in the Court of Appeals, challenging the RTC orders. The Court of Appeals denied the petition in a decision promulgated June 22, 1994. The appellate court applied the rule in Galeon v. Galeon that a motion to dismiss for failure to state a cause of action requires the court to hypothetically admit the truth of the complaint’s allegations. It held that ADEC’s allegation of ownership by deed of sale must be hypothetically admitted for purposes of ruling on the motion to dismiss, thereby giving ADEC capacity to sue. The Court of Appeals observed that the validity of ADEC’s acquisition and other defenses were matters for trial.
Issues Raised Before the Supreme Court
SLVAI raised three principal issues: (1) that the Court of Appeals erred in treating ADEC’s allegation of ownership as hypothetically admitted because such admission does not extend to inferences or conclusions drawn from alleged facts as held in De Dios v. Bristol Laboratories (Phils.), Inc.; (2) that even if ADEC were owner, the complaint still failed to state a cause of action because SLVAI’s deed of restrictions required cancellation to be initiated by members who are registered owners and by two-thirds vote; and (3) that ADEC was not the real party in interest.
Governing Legal Standards on Motions to Dismiss
The Court restated the Rules of Court requirement that a complaint must set forth the ultimate or essential facts constituting the plaintiff’s cause of action. It reiterated the three essential elements of a cause of action: the plaintiff’s legal right, the defendant’s correlative obligation, and the defendant’s act or omission violating that right. The Court reiterated that a motion to dismiss hypothetically admits the truth of material and relevant facts well pleaded and inferences fairly deductible therefrom, but does not admit legal conclusions, mere epithets, or inferences not supported by pleaded facts. The Court relied on its precedents, including De Dios v. Bristol Laboratories (Phils.), Inc., to delineate the limits of the hypothetical-admission rule.
Application of the Law to the Complaint
Applying the foregoing standards, the Court found that ADEC’s complaint alleged material and relevant
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Parties and Procedural Posture
- San Lorenzo Village Association, Inc. filed a petition for review on certiorari alleging error in the denial of its motion to dismiss in Civil Case No. 91-3450.
- Almeda Development & Equipment Corporation instituted the action below by a petition to cancel the restrictions annotated in Transfer Certificate of Title No. 47348.
- The Regional Trial Court, Makati, Branch 62, denied the motion to dismiss and subsequently denied reconsideration.
- The Court of Appeals denied the petition for certiorari and the motion for reconsideration, prompting the present petition to the Supreme Court.
Key Factual Allegations
- ADEC alleged that it purchased the subject parcel embraced in TCT No. 47348 by a Deed of Sale executed by Ponciano L. Almeda and that the deed conferred successor-in-interest status to ADEC.
- ADEC alleged that Entry No. 59599 in the memorandum of encumbrances imposed mandatory membership in the San Lorenzo Village Association and multiple restrictive building and use covenants.
- ADEC alleged that the physical character of Pasay Road in San Lorenzo Village had changed from strictly residential to commercial and industrial uses, thereby rendering the restrictions obsolete.
- ADEC prayed for provisional and permanent relief including cancellation of the annotation, injunctive relief against mandatory membership and collection of dues, and damages and attorneys fees.
Defenses and Contentions
- SLVAI moved to dismiss on grounds that ADEC lacked personality to sue and that the deed of sale did not bind third persons because it was not registered.
- SLVAI contended that Article 709, Civil Code and Section 50, Land Registration Act rendered unregistered instruments ineffective against third persons.
- ADEC countered that actual notice of the sale conferred capacity to sue and that SLVAI was not a third person for purposes of the annotation because SLVAI had caused the annotation restricting ownership.
Procedural History
- The trial court issued an Order dated March 31, 1992, denying SLVAI's motion to dismiss on the ground that ADEC alleged sufficient interest as successor-in-interest.
- The trial court denied reconsideration by Order dated October 15, 1992, reiterating that ADEC could sue as successor-in-interest of the registered owner.
- The Court of Appeals promulgated a Decision on June 22, 1994, denying certiorari and endorsing the rule that a motion to dismiss must hypothetically admit the truth of well-pleaded material facts.
- The Court of Appeals denied SLVAI's motion for reconsideration on August 26, 1994.
Issues Presented
- Whether the Court of Appeals erred in treating ADEC's allegation of ownership by deed of sale as hypothetically