FIDEL DABUCO, FELICIANO EBINA, MELICIO BOLO, AURELIO CABAJAR, EUSTIQUIO CABATUAN, RAFAEL OCAREZA, SAMUEL RECO, ALEJANDRO IBONALO TEMPLATURA, NEMESIO OBESO, ALEJANDRA CABILES, JU…

Dabuco versus Gabi Multi Purpose Cooperative

The Case

This is a petition for review on certiorari brought by Fidel Dabuco and his co-petitioners, farmers who were occupying and tilling agricultural lands in Gabi, Sudlon, Cebu City, against the Gabi Multi Purpose Cooperative, a registered non-stock, non-profit cooperative that claimed to own those lands. The cooperative had sued the farmers in the Regional Trial Court of Cebu City for quieting of title, recovery of possession, and damages. The trial court dismissed the complaint, the Court of Appeals reinstated it, and the Supreme Court was asked to settle whose ruling should stand. The case matters because it draws the sharp line every remedial law student must know: the difference between a complaint that fails to state a cause of action and a plaintiff who lacks a cause of action — and it tells us when a court may look beyond the four corners of the complaint.

Procedural History

The cooperative filed a civil complaint for quieting of title, accion publiciana, and damages before the Regional Trial Court of Cebu City, Branch 15, against the farmers who were residing on and tilling the land. The trial court issued a temporary restraining order against the farmers, then lifted and dissolved it after a hearing when the cooperative could not show certificates of title in its own name. The farmers answered and then moved to dismiss on the grounds of lack of cause of action, lack of personality to sue, and lack of jurisdiction. The trial court granted the dismissal, holding that the cooperative was neither the titled owner nor the real party in interest. The cooperative's motion for reconsideration was denied.

The cooperative appealed to the Court of Appeals, which reversed and set aside the dismissal and ordered the trial court to reinstate the complaint and proceed with trial. The farmers' motion for reconsideration was denied. The farmers then came to the Supreme Court by petition for review on certiorari under Rule 45, with a prayer for a restraining order or writ of preliminary injunction, asking that the dismissal be affirmed and the appellate decision set aside.

Facts

The Lazarrabal family were the registered owners of the properties in dispute. In 1991, on different occasions, the properties were sold to several individual buyers. On June 27, 1994, the Gabi Multi Purpose Cooperative, a registered non-stock, non-profit cooperative, filed a complaint against the farmers, who were found residing on or tilling the properties. The cooperative alleged that it was the owner in fee simple; that the farmers, without any authority, resided on, tilled, and planted on the land; and that they refused to vacate despite notice. It prayed for a preliminary mandatory injunction to remove a barricade the farmers had built, and for a writ of injunction to restrain them from preventing the cooperative from developing the properties.

On July 20, 1994, the trial court issued a temporary restraining order and required the farmers to show cause why no injunction should issue. At the hearing on July 27, 1994, the trial court asked the cooperative to show certificates of title in its name. The cooperative could show only deeds of sale from the original owners in favor of individual persons, not titles in its own name. The trial court lifted and dissolved the restraining order, but allowed the farmers to file a motion to dismiss questioning the cooperative's legal personality.

The farmers answered, alleging that the cooperative had no personality to sue because it was not the buyer and the properties were not titled in its name, and that the lands were part of a forest reserve that could not be privately acquired. They then moved to dismiss. On August 18, 1994, at another hearing, the cooperative was again required to show certificates of title and again failed to do so. The trial court then dismissed the complaint on the ground that the cooperative had no real interest in the case. The cooperative's motion for reconsideration was denied, so it appealed, and the Court of Appeals reversed. Hence this petition.

Issues

• Whether or not the dismissal of the complaint on the ground of lack of cause of action was proper.
• Whether or not the complaint was properly dismissed for failure to state a cause of action.

Applicable Provisions

Section 1 of Rule 16 of the Rules of Court, on the grounds for a motion to dismiss, provides:

Section 1. Grounds. Within the time for but before filing the answer to the complaint or pleading asserting a claim, a motion to dismiss may be made on any of the following grounds: xxx (g) That the pleading asserting the claim states no cause of action; xxx

This is the procedural ground invoked by the farmers, and the Court uses it to distinguish a dismissal for failure to state a cause of action from a dismissal for lack of cause of action.

Ruling

On the first issue, the Court held that dismissal for lack of cause of action was not proper. The Court stressed the distinction between the two grounds: failure to state a cause of action refers to the insufficiency of the allegations in the pleading, while lack of cause of action refers to the insufficiency of the factual basis for the action. Failure to state a cause may be raised in a motion to dismiss under Rule 16, while lack of cause may be raised at any time. Dismissal for failure to state a cause can be made at the earliest stages of an action, but dismissal for lack of cause is usually made only after questions of fact have been resolved on the basis of stipulations, admissions, or evidence presented. Because questions of fact are involved, courts hesitate to declare a plaintiff lacking in cause of action; that declaration is postponed until the insufficiency is apparent from a preponderance of evidence, usually after the parties have had the opportunity to present all relevant evidence. The trial court's ruling that the cooperative had no title and thus no cause of action was premature, because the issue of the cooperative's title had not yet been adequately ventilated at the preliminary stage.

On the second issue, the Court likewise found no basis to dismiss for failure to state a cause of action. In such a dismissal, the inquiry is into the sufficiency, not the veracity, of the material allegations. The test is whether the material allegations, assuming them to be true, state ultimate facts constituting the plaintiff's cause of action such that the plaintiff is entitled to a favorable judgment as a matter of law. The general rule is that the inquiry is confined to the four corners of the complaint. The Court recognized exceptions — where the falsity of the allegations is subject to judicial notice, where the allegations are legally impossible, where they refer to facts inadmissible in evidence, where the record or a document included in the pleading shows them to be unfounded, or where evidence has been presented by stipulation or in the course of hearings. The farmers relied on these exceptions, invoking the Tan versus Director of Forestry ruling. The Court distinguished that case: there the parties had been given ample opportunity in the preliminary hearing to present evidence, while here the cooperative did not have a sufficient chance to prove its allegation of ownership. The conclusion that its allegation of ownership was false therefore had no basis.

Doctrine

First, failure to state a cause of action is distinct from lack of cause of action. The former is an insufficiency of allegation in the pleading and may be raised in a motion to dismiss under Rule 16; the latter is an insufficiency of factual basis and may be raised at any time, but is ordinarily resolved only after the facts have been established by stipulations, admissions, or evidence. Second, a dismissal for lack of cause of action is premature where the factual issue of the plaintiff's title has not been adequately ventilated at a preliminary hearing. Third, in testing a complaint for failure to state a cause of action, the inquiry is confined to the four corners of the complaint, and the material allegations are hypothetically admitted as true; the recognized exceptions apply only where the falsity of the allegations is clearly established by evidence already properly before the court.

Disposition

The Supreme Court denied the petition, thereby sustaining the Court of Appeals and allowing the cooperative's complaint to proceed to trial, where the parties may adduce evidence to support their claims and defenses.

Remember This

Memorize the line: failure to state a cause of action looks at the allegations, while lack of cause of action looks at the evidence — and the second cannot be declared until the facts are fully heard. Examiners use this case to test the Rule 16 motion to dismiss, the four corners rule and its exceptions, and the timing of a dismissal for lack of cause of action.