ZAIDA RUBY S. ALBERTO, PETITIONER, VS. COURT OF APPEALS, EPIFANIO J. ALANO, CECILIA P. ALANO, YOLANDA P. ALANO, AND NATALIA REALTY, INC., RESPONDENTS.

Alberto versus Court of Appeals

The Case

This is a petition for review on certiorari brought by Attorney Zaida Ruby S. Alberto against the Court of Appeals, her former clients the spouses Epifanio and Cecilia Alano, their daughter Yolanda Alano, and Natalia Realty, Inc. The petitioner sued to annul, as simulated, a deed of sale by which twenty three hectares of land were conveyed to the daughter, and to maintain a notice of lis pendens and an attorney's lien over the property. The case matters because it fixes the boundaries of two rules every litigator must know: how a court tests the sufficiency of a cause of action, and when a notice of lis pendens may be carried on a title even though the plaintiff is a stranger to the contract she attacks.

Procedural History

The petitioner first obtained a judgment in her favor in the Regional Trial Court of Pasig, Branch 151, in a civil case for collection of sum of money with damages, awarding her ten percent of the land recovered by her clients and the balance of her monetary fee. That judgment became final and executory, and a writ of execution issued, but the sheriff levied only a small amount of personal property. The petitioner then filed a complaint, later a second amended complaint, to declare the deed of sale void ab initio as simulated. The trial court, in an omnibus order, dismissed the second amended complaint for insufficiency of cause of action and cancelled the annotations of lis pendens and attorney's lien. The Court of Appeals affirmed both the dismissal and the cancellations. The petitioner elevated the matter to the Supreme Court by petition for review on certiorari.

Facts

The spouses Epifanio and Cecilia Alano retained the petitioner to represent them before the Securities and Exchange Commission in an action to recover real properties, money, and other assets due them by reason of their stockholdings in Natalia Realty, Inc. Their retainer agreement provided for a contingent fee: the equivalent in kind of ten percent of whatever real estate might be awarded, plus 200,000 pesos. The petitioner filed the commission case and appeared at the hearings.

On January 3, 1989, the petitioner learned that her clients had moved to dismiss their own case, and that the opposing parties had joined them on account of a settlement. The case was dismissed on January 19, 1989. Confronted, the spouses admitted the settlement and said they expected to receive 35 hectares. They refused to pay the stipulated fees despite repeated demands, so the petitioner sued and won in the Regional Trial Court of Pasig.

Execution proved hollow. The sheriff levied only 3,500 pesos of personal property. The petitioner then discovered that on December 28, 1988, six days before her clients moved to dismiss the commission case, Natalia Realty, Inc. had sold 23 hectares out of the 32.4 hectares awarded to the spouses to their daughter Yolanda Alano for 500,000 pesos. The pleadings further disclosed that the remaining 12 hectares had already been ceded to the spouses' former lawyer, Antonio Raquiza. The petitioner caused a notice of lis pendens and an attorney's lien to be annotated on the titles, and sought to annul the sale as simulated.

Issues

• Whether or not the second amended complaint states a sufficient cause of action against the respondents, the petitioner being a stranger to the deed of sale she seeks to annul.
• Whether or not the notice of lis pendens and the annotation of the attorney's lien were properly cancelled.

Applicable Provisions

Article 1397 of the Civil Code, invoked by the Court of Appeals, provides:

The action for annulment of contract may be instituted by all those who are thereby obliged principally or subsidiarily.

The Court of Appeals used this provision to hold that the petitioner, not being a party to the deed of sale, had no personality to attack it; the Supreme Court did not rest its ruling on this provision but on the sufficiency of the allegations.

Section 24 of Rule 14 of the Rules of Court, together with Section 76 of the Property Registration Decree, governs the notice of lis pendens, which the Court describes through the enumeration in Viewmaster Construction Corporation versus Maulit:

According to Section 24, Rule 14 of the Rules of Court and Section 76 of Presidential Decree No. 1529, a notice of lis pendens is proper in the following cases, viz.: a) An action to recover possession of real estate; b) An action to quiet title thereto; c) An action to remove clouds thereon; d) An action for partition; and e) Any other proceedings of any kind in Court directly affecting the title to the land or the use or occupation thereof or the buildings thereon.

The fifth category is the hinge of the second issue, because it reaches proceedings beyond those strictly involving title or possession.

Ruling

On the first issue, the Court ruled for the petitioner. It held that the sufficiency of a cause of action is tested solely by the facts alleged, admitting them to be true, and it restated the elements:

A cause of action exists if the following elements are present: (1) a right in favor of the plaintiff by whatever means and under whatever law it arises or is created; (2) an obligation on the part of the named defendant to respect or not to violate such right; and (3) an act or omission on the part of such defendant violative of the right of 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.

All three appear on the face of the complaint: the retainer agreement created the petitioner's right, confirmed by the final judgment in the collection case; the spouses were bound to honor it; and they breached it by refusing to pay and by conveying the land away. The Court also held that the trial court and the Court of Appeals were too rigid in confining themselves to the complaint. Documents attached to the complaint whose genuineness is not denied under oath form part of it, and other responsive pleadings may be considered, since a dismissal on this ground is summary in nature. The allegation of simulation need not be proved at the outset; it is for the trial. The timing of the sale and the cession of the remaining land to the former lawyer strengthened the suspicion that the spouses meant to defraud the petitioner.

On the second issue, the Court also ruled for the petitioner. A notice of lis pendens is an announcement to the whole world that the property is in litigation, a warning that one who acquires an interest does so at his own risk. Even granting that the action does not directly affect title or possession, the Viewmaster doctrine extends lis pendens to suits brought to establish an equitable interest in specific real property or to enforce a lien or encumbrance against it. The petitioner claimed such an interest in the very land subject of the alleged simulated sale, and her prayer was adequate to justify the annotation.

Doctrine

First, a motion to dismiss for failure to state a cause of action is tested by the allegations of the complaint, but the court may also consider documents attached to it whose genuineness is not denied under oath, and the other responsive pleadings, because such a dismissal is a summary judgment. Second, a complaint should not be dismissed unless it clearly appears from its face that the plaintiff is entitled to no relief under any state of facts provable within its allegations. Third, a notice of lis pendens is proper not only in actions affecting title or possession, but in any proceeding directly affecting the land, including one to establish an equitable interest or to enforce a lien or encumbrance against it.

Disposition

The petition was granted; the decision of the Court of Appeals and the omnibus order of the trial court were reversed and set aside, and the notice of lis pendens and the annotation of the attorney's lien were ordered restored.

Remember This

Memorize the line that a complaint is dismissed for insufficiency of cause of action only when it clearly appears from its face that the plaintiff is entitled to no relief under any provable state of facts. Examiners use this case to test the exceptions to the complaint-only rule and the expanded reach of lis pendens.