4:41 PM

BUTUAN DEVELOPMENT CORPORATION (BDC), Petitioner, v. THE

TWENTY-FIRST DIVISION OF THE HONORABLE COURT OF APPEALS
(MINDANAO STATION), MAX ARRIOLA, JR., DE ORO RESOURCES,
INC. (DORI) AND LOUIE A. LIBARIOS, Respondents.
Facts
 
Petition for certiorari under 65
 
BDC, while in the process of incorporation, purchased from Sps. Sering a parcel of land in Butuan. ROD issued a transfer if TCT in the name BDC.
 
Max Arriola Jr (Max Jr) representing himself as Chairman of BDC and armed with a duly notarized Res of the BOD, mortgaged the subject
property to De Oro Resources, Inc (DORI) and its president Libarios.
 
Articles of Incorporation were executed for BDC and it was approved by SEC
 
BDC filed a complaint for declaration of nullity of real estate mortgage with RTC against Libarios and DORI and Arriola. It was alleged that the
owners' copy of TCT went missing and effort to locate it were futile. However, it was discovered that the owner's duplicate copy of TCT was
already in Libario's possession, pursuant to the REM executed by the Arriolas who misrepresented themselves as the owners and directors of
BDC. Accordingly, claiming that the said REM was a nullity, BDC prayed that the same be nullified.
 
In their Answer, Libarios and DORI denied that Arriolas misrepresented themselves as directors of BDC since, at the time of the execution of the
REM, the Arriolas had possession of the subject property and the owner's duplicate copy of TCT. Further, the tax declaration over the subject
property filed with the Butuan City Assessor's Office indicated that Max Arriola, Sr. (Max Sr.) was the administrator of the subject property
 
As special and affirmative defense, Libarios and DORI claimed that the complaint filed by BDC should be dismissed outright for failing to state a
cause of action since at the time of the execution of the REM on May 5, 1998, BDC did not yet exist, having been incorporated only on May 23,
2002, and, hence, could not have claimed ownership of the subject property.
 
In his answer, Max claimed that the owner's duplicate copy had been in possession of their family since it was his father, who actually paid for
the acquisition of the subject property.
Case Flow
 
RTC - favors BDC
taking into account BDC's allegation that it purchased the subject property while it was still in the process of incorporation and, thus,
obtained title to the same in its name, any act which amounts to alienation of the subject property done by any person other than the
corporation itself, through its Board of Directors, shall give rise to violation of BDC's rights.
 
Respondent filed a petition for certiorari with CA
RTC GAD brushing aside their affirmative defense
Prayed for TOR
 
CA- petition granted- Dismissed the complaint for failure to state a cause of action.
corporate existence begins only from the moment a certificate of incorporation is issued, and, thus, BDC had no corporate existence and
juridical personality when it purchased the subject property. Thus, the CA held that, having no right over the subject property, no cause of
action could have accrued in favor of BDC when the subject property was mortgaged to Libarios and DORI
 
BDC sought reconsideration---denied for lack of merit
Issue:
Whether or not BDC failed to state a cause of action
SC
 
One of the grounds for the dismissal of a complaint is the failure of the pleading asserting the claim to state a cause of action
 
The elements of a cause of action are: (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) act or omission on the part of such defendant in
violation of the right of the plaintiff or constituting a breach of the obligation of the defendant to the plaintiff for which the latter may maintain
an action for recovery of damages or other appropriate relief.
 
In resolving whether the complaint states a cause of action or not, only the facts alleged in the complaint are considered.
 
Failure to state a cause of Lack of cause of action
action

insufficiency of the a situation where the

pleading, and is a ground evidence does not prove
for dismissal under Rule the cause of action
16 of the Rules of Court. alleged in the pleading.

Remedy: move for the Remedy: demur to the

dismissal of the pleading evidence
Ruling
 
No, BDC sufficiently stated a cause of action for declaration of nullity of the REM.
 
It bears stressing that a certificate of title issued is an absolute and indefeasible evidence of ownership of the property in favor of the person
whose name appears therein.48 BDC further alleged that the subject property was mortgaged to DORI and Libarios without their knowledge or
consent and that the Arriolas were not in any way connected with BDC.
Other doctrine:
 
One of the requisites of certiorari is that there be no available appeal or any plain, speedy and adequate remedy. Where an appeal is available,
certiorari will not prosper, even if the ground therefor is grave abuse of discretion.
 
While a petition for certiorari is dismissible for being the wrong remedy, there are exceptions to this rule, to wit: (a) when public welfare and the
advancement of public policy dictates; (b) when the broader interest of justice so requires; (c) when the writs issued are null and void; or (d)
when the questioned order amounts to an oppressive exercise of judicial authority.