HEIRS OF ANDRES NAYA: TERESITA B. NAYA, NORMA N. ORBISO, CARMENCITA N. FERNAN, AND NARCISO P. NAYA, PLAINTIFFS-APPELLANTS, VS. ORLANDO P. NAYA AND SPS. HONESIMO C. RUIZ AND GLOR…

Heirs of Andres Naya versus Naya

The Case

This is a case about a family land in Cebu City and a complaint that told a story of fraud without ever telling the court how the fraud was done. The heirs of Andres Naya, Sr. sued Orlando Naya and the spouses Honesimo and Gloria Ruiz to quiet title over a parcel of land, to declare void a deed of sale and the transfer certificate of title and tax declaration issued under it, and to recover damages. The case matters to a reviewee because it is a clean teaching vehicle on two things: what a cause of action is, and the strict requirement that fraud be pleaded with particularity. It also shows how a trial court may hear affirmative defenses and dismiss a complaint before trial, and why the Supreme Court will not disturb that dismissal when the complaint itself is the problem.

Procedural History

The heirs filed their complaint for quieting of title, declaration of absolute nullity of a deed of sale, transfer certificate of title, tax declaration, and damages before the Regional Trial Court of Cebu City, Branch 7. The spouses Ruiz moved to dismiss on the ground that the court had no jurisdiction over their persons, because summons was served on their son at his residence in Tandag, Surigao del Sur, while they had been residents of the United States for seven years. The trial court initially dismissed the case. On reconsideration, the trial court allowed the plaintiffs to serve summons by publication and directed the defendants to answer. The spouses Ruiz then filed an answer with cross-claims and counterclaims, and later an omnibus motion to defer pre-trial and to set the affirmative defenses for preliminary hearing. After the parties submitted memoranda, the trial court, in its order of August 9, 2010, dismissed the complaint for failure to state a cause of action and on the ground of laches. The heirs moved for reconsideration, which was denied on October 7, 2010. The heirs appealed directly to the Supreme Court, assigning as errors the trial court's hearing of the affirmative defenses and its dismissal of the complaint.

Facts

Andres C. Naya, Sr. owned a parcel of land, Lot No. 6100-C-1, consisting of 576 square meters, more or less, located along V. Rama Avenue, Cebu City. Through an extra-judicial adjudication and settlement of his estate, the property was adjudicated to Gregoria P. Naya, subject to the condition that she assume all the debts and pay all the obligations of the estate. The heirs alleged that pending compliance with that condition, Gregoria held the property in trust for the other heirs, and that she failed to comply, so that in the 1970's the heirs filed intestate proceedings for judicial settlement, which remained pending before another branch of the Regional Trial Court of Cebu City.

The heirs alleged that Orlando Naya, by deceit and fraudulent scheme, maneuvered the sale of the property, under his parents' names, to Alfonso Uy by a document of sale dated September 28, 1965. That sale was annotated on the title only on February 5, 1971, almost three years after the death of Andres Naya, Sr. and six months before the death of Gregoria Palang Naya, who was then seriously ill. A new transfer certificate of title was issued to Alfonso Uy. Three months later, Orlando Naya had the property reconveyed to himself by a deed of sale dated May 20, 1971. The heirs learned of these transactions in September 1974 and caused an adverse claim to be annotated on the title. Orlando Naya later sold the property to Honesimo Ruiz on September 27, 1974, but that transaction was annotated on the title only on December 6, 2007, so the heirs' adverse claim appeared ahead of the sale to Ruiz.

After the deaths of the parents, Teresita Naya occupied the property with the consent of all the plaintiffs, who paid the real property taxes. In 1997 the property was sold at public auction by the City of Cebu for delinquent taxes, but nine days later the plaintiffs paid the delinquent taxes and a certificate of redemption was issued to them. The spouses Ruiz, for their part, claimed they bought the property from Orlando Naya in 1974 after verifying the title in his name, that they allowed him to stay on the property in exchange for his paying the yearly real property taxes, and that they migrated to the United States in 2000. The complaint was filed on March 10, 2008.

Issues

• Whether or not the trial court erred in hearing and resolving the affirmative defenses of the spouses Ruiz despite the omnibus motion rule.
• Whether or not the trial court erred in dismissing the complaint for failure to state a cause of action.
• Whether or not the trial court erred in dismissing the complaint on the ground of laches.

Applicable Provisions

Section 2 of Rule 2 of the Rules of Court defines a cause of action:

Section 2. Cause of action, defined. – A cause of action is the act or omission by which a party violates a right of another.

This definition supplies the three elements the complaint must aver, and the Court used it to test whether the heirs' pleading could survive a motion to dismiss.

Section 5 of Rule 8 of the Rules of Court governs the pleading of fraud:

Section 5. Fraud, mistake, condition of the mind. - In all averments of fraud or mistake, the circumstances constituting fraud or mistake must be stated with particularity. Malice, intent, knowledge or other condition of the mind of a person may be averred generally.

This is the provision on which the dismissal ultimately rests, because the heirs pleaded fraud in general terms only.

Ruling

On the first issue, the Court denied the appeal and found no cogent reason to reverse the trial court. It held that the trial court had sufficient grounds to dismiss the complaint, and it affirmed the dismissal for lack of cause of action. On the procedural objection, the Court did not disturb the trial court's action of setting the affirmative defenses for preliminary hearing before trial.

On the second issue, the Court laid down the elements of a cause of action: a right in favor of the plaintiff by whatever means and under whatever law it arises or is created; an obligation on the part of the named defendant to respect or not to violate such right; and an act or omission on the part of such defendant in violation of the right of the plaintiff or constituting a breach of the obligation for which the plaintiff may maintain an action for recovery of damages or other appropriate relief. A complaint states a cause of action only if it avers all three. The Court found the complaint wanting. The extra-judicial settlement did not provide that it would be invalidated if Gregoria Naya failed to pay the taxes and debts. There was no showing that the sale to Alfonso Uy was made under duress or deceit, or without cause or consideration, and the plaintiffs themselves admitted that it was Andres Naya and Gregoria Palang who sold the property. As to Orlando Naya, the Court quoted the complaint's paragraph 6 and held that the allegations of deceit and fraudulent scheme were sweeping statements that gave no clear picture of how the fraud was committed. The complaint did not even state that the deeds were forgeries or that the signatures were procured by fraud. The Court applied the particularity requirement:

In all averments of fraud or mistake, the circumstances constituting fraud or mistake must be stated with particularity.

On the third issue, the trial court had also invoked laches, reasoning that the sale to Alfonso Uy was made in 1965 while the complaint was filed only in 2008, turning the claim into a stale demand. The Supreme Court resolved the appeal on the failure to state a cause of action and affirmed the dismissal on that ground.

Doctrine

A cause of action is the act or omission by which a party violates a right of another, and it has three essential elements: the legal right of the plaintiff, the correlative obligation of the defendant to respect that right, and the act or omission of the defendant in violation of that right. A complaint states a cause of action only when it avers all three, and its sufficiency is judged from the allegations themselves, not from the evidence the plaintiff hopes to present.

Fraud is never pleaded by label. Under Section 5 of Rule 8, the circumstances constituting fraud must be stated with particularity; general averments of deceit and fraudulent scheme are mere conclusions of law and are inoperative. Malice, intent, and other conditions of the mind may be averred generally, but the facts of the fraud itself may not. A complaint that attacks a deed of sale for fraud must say how the fraud was perpetrated, for example that the deed was a forgery or that the signatures were procured by fraud.

These two rules work together: a complaint that pleads fraud only in general terms fails to show the third element of a cause of action, the defendant's act or omission in violation of the plaintiff's right, and may be dismissed for failure to state a cause of action.

Disposition

The Supreme Court denied the appeal and affirmed the orders of the Regional Trial Court of Cebu City, Branch 7, dismissing the complaint for lack of cause of action, with costs against the plaintiffs-appellants.

Remember This

Memorize this line: fraud must be stated with particularity, and a complaint that merely chants deceit and fraudulent scheme states no cause of action. Examiners use this case in civil procedure on the elements of a cause of action and the particularity requirement for fraud, and in special civil actions on quieting of title where the pleading itself defeats the claim.