CEROFERR REALTY CORPORATION, PETITIONER, VS. COURT OF APPEALS AND ERNESTO D. SANTIAGO, RESPONDENTS.

Ceroferr Realty versus Santiago

The Case

This is a petition for review on certiorari brought by Ceroferr Realty Corporation against Ernesto D. Santiago and the Court of Appeals. Ceroferr sued Santiago for damages and injunction, claiming that Santiago was encroaching on its registered lot and using it as a jeepney terminal. The trial court dismissed the complaint for failure to state a cause of action and for lack of jurisdiction, and the Court of Appeals affirmed. The case matters because the Supreme Court uses it to restate two foundational rules of civil procedure: the three indispensable elements of a cause of action, and the principle that jurisdiction over the subject matter is determined by the allegations of the complaint, not by the defenses raised in the answer.

Procedural History

Ceroferr filed its complaint for damages and injunction, with a prayer for a preliminary injunction, before the Regional Trial Court of Quezon City, Branch 93. Santiago answered, denying that he claimed any part of Ceroferr's lot and asserting that the disputed area fell within his own titled property. During the proceedings, conflicting claims over the exact identity and location of the vacant lot prompted verification and relocation surveys. After the second survey report showed results adverse to Santiago, he filed a motion to dismiss, arguing that the trial court could not adjudicate damages without first passing upon the conflicting claims of ownership, which would amount to a collateral attack on his Torrens title.

The trial court granted the motion and dismissed the case for lack of cause of action and lack of jurisdiction. Ceroferr appealed to the Court of Appeals, which dismissed the appeal. Ceroferr moved for reconsideration, and the Court of Appeals denied the motion for lack of merit. Ceroferr then elevated the matter to the Supreme Court through a petition for review on certiorari, and the Supreme Court gave the petition due course.

Facts

Ceroferr Realty Corporation owned Lot 68 of the Tala Estate Subdivision in Quezon City, covered by a transfer certificate of title, and used a portion of that lot as a jeepney terminal. Ernesto D. Santiago, for his part, owned Lot 90 of the same subdivision, covered by his own transfer certificate of title. Santiago claimed that the portion used as a jeepney terminal actually fell within Lot 90, and he took steps to fence the area, securing a fencing permit from the Building Official of Quezon City.

Ceroferr insisted that the terminal was inside Lot 68 and not Lot 90, but Santiago persisted in his plan to fence the property. Ceroferr alleged that Santiago was preventing it and its agents from entering the property under threats of bodily harm and was destroying existing structures. This prompted Ceroferr to file the complaint for damages and injunction in March 1994.

In the course of the litigation, the precise identity and location of the vacant lot became the central question. A verification survey and then a relocation survey were conducted, and the results appeared to place the lot inside Lot 68. Santiago vigorously objected, presenting the report of his own geodetic engineer to the effect that the disputed portion lay within Lot 90 and that the two lots were separated by a concrete fence. Because the parties' competing claims turned on property boundaries and on the validity of their respective titles, Santiago moved to dismiss, and the trial court granted the dismissal.

Issues

• Whether or not Ceroferr's complaint states a sufficient cause of action.
• Whether or not the trial court has jurisdiction to determine the identity and location of the vacant lot involved in the case.

Applicable Provisions

The decision applies the settled rule on what constitutes a cause of action, which the Court states as follows:

A complaint states a cause of action only when it has its three indispensable elements, namely: (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.

This test governs the first issue, because if the three elements appear on the face of the complaint, a motion to dismiss for failure to state a cause of action must fail.

On jurisdiction, the Court applies this rule:

Jurisdiction over the subject matter is conferred by law and is determined by the allegations of the complaint irrespective of whether the plaintiff is entitled to all or some of the claims asserted therein.

This rule governs the second issue, because it means the trial court's jurisdiction is fixed by what Ceroferr alleged in its complaint, not by Santiago's defense that the case would require an inquiry into his title.

Ruling

On the first issue, the Court ruled that the complaint does state a sufficient cause of action. A defendant who moves to dismiss on the ground of lack of cause of action hypothetically admits all the averments of the complaint, including the relevant and material facts well pleaded and the inferences fairly deducible from them. The test is whether, admitting the facts alleged, the court can render a valid judgment in accordance with the prayer. Applying that test, the Court found all three elements present: Ceroferr's right of ownership and peaceful use and possession of Lot 68, Santiago's obligation to respect that right, and Santiago's acts of encroachment and fencing in violation of it. If those allegations were admitted, Ceroferr would be entitled to damages.

On the second issue, the Court ruled that the trial court has jurisdiction to determine the identity and location of the vacant lot. Jurisdiction over the subject matter is conferred by law and is determined by the allegations of the complaint, and it cannot be made to depend upon the defenses set up in the answer. The Court added that while lack of jurisdiction may be raised at any stage, a party may be estopped if he has actively taken part in the very proceedings he questions and objects only because the outcome is adverse to him. Santiago was held estopped, because he did not question jurisdiction in his answer, his geodetic engineers participated in both surveys, and he moved to dismiss only after the second survey report showed results adverse to his case. The Court also explained that after land has been originally registered, the Court of Land Registration ceases to have jurisdiction over contests concerning the location of boundary lines, and such an action in personam must be brought before an ordinary court of general jurisdiction. The regional trial court therefore has jurisdiction to fix the precise identity and location of the lot.

Doctrine

A complaint states a cause of action only when it alleges the three indispensable elements: a right in favor of the plaintiff, an obligation on the part of the defendant to respect that right, and an act or omission of the defendant violative of the right or constituting a breach of the obligation. A motion to dismiss for failure to state a cause of action hypothetically admits all the well-pleaded facts and the inferences fairly deducible from them, so the complaint must not be dismissed if its allegations furnish a sufficient basis for the relief prayed for.

Jurisdiction over the subject matter is conferred by law and is determined exclusively by the allegations of the complaint, irrespective of whether the plaintiff is ultimately entitled to the claims asserted. It cannot be made to depend on the defenses in the answer. A party who actively participates in the proceedings and raises the question of jurisdiction only after an adverse ruling may be estopped from questioning it. Finally, after original registration, contests over the location of boundary lines are matters for the ordinary court of general jurisdiction, not the land registration court.

Disposition

The Supreme Court granted the petition, reversed the decision of the Court of Appeals and the order of the trial court dismissing the case, and remanded the case to the Regional Trial Court of Quezon City, Branch 93, for further proceedings, with no costs.

Remember This

Memorize the line that jurisdiction is determined by the allegations of the complaint and cannot be made to depend upon the defenses set up in the answer. Examiners use this case to test the three elements of a cause of action, the hypothetical admission rule on motions to dismiss, and the doctrine of estoppel by active participation against a party who belatedly questions jurisdiction.