G.R. No. L-29094 September 5, 1985
LEONCIO BONCATO, plaintiff-appellant, vs. CIRILO G. SIASON, MARCELINA F. SIASON and PEOPLE’S HOMESITE AND HOUSING CORPORATION, defendants-appellees.

FACTS

Plaintiff Leoncio Boncato alleged he was the bona fide occupant of a residential lot (Lot 4, Block E-140) in the PHHC’s Piñahan area in Quezon City since 1956. Following a Presidential Directive from President Magsaysay ordering the subdivision and sale of the area to its actual occupants, Boncato, a qualified Filipino citizen without a home lot, filed a purchase application with the PHHC. Despite subsequent Presidential Directives from President Garcia reaffirming the policy of selling lots to actual occupants and creating a committee to investigate irregular awards, the PHHC sold the lot to spouses Amado and Angela Tolentino, who were not occupants. The Tolentinos, in turn, sold the lot within one year to spouses Cirilo and Marcelina Siason, in violation of the PHHC’s prohibition against such early transfer.
Boncato filed a complaint seeking to annul the two deeds of sale and the resulting certificate of title issued to the Siasons. The defendants filed motions to dismiss, contending Boncato was a mere squatter whose unapproved application conferred no legal or preferential right, making him a stranger to the transactions with no cause of action. The trial court dismissed the complaint, agreeing that Boncato had established no legal right over the lot and was merely a squatter.

ISSUE

Did the trial court err in dismissing the complaint for failure to state a cause of action?

RULING

Yes. The Supreme Court reversed the dismissal order. In resolving a motion to dismiss based on failure to state a cause of action, the court must examine only the material allegations in the complaint, which are deemed hypothetically admitted. The sufficiency of the cause of action is determined solely from the face of the complaint, not from the defenses or allegations in the motion to dismiss.
The complaint’s averments—that Boncato was a qualified actual occupant under the Presidential Directives, that he had a preferential right to purchase, that he filed an application, and that the PHHC illegally sold the lot to unqualified parties in violation of the directives—sufficiently outlined a cause of action. The elements were present: a legal right (the preferential right under the directives), a correlative violation by the defendants, and a basis for the relief of annulment. The trial court’s conclusion that Boncato was a “mere squatter” was improperly drawn from the defendants’ motion, not from the complaint’s allegations. If the court doubted the veracity of the allegations, the proper course was to deny the motion, require an answer, and proceed to trial on the merits. The case was remanded for further proceedings.