FACTS:

Petitioners filed a complaint seeking the cancellation of spurious titles and the nullification of an original title. Respondent filed a motion to dismiss, which was denied by the trial court. Petitioners then filed a Second Amended Complaint, alleging the nullity of additional titles derived from the original title. Respondent moved to dismiss the Second Amended Complaint, raising several grounds.

The subject lots in the case are part of the Piedad Estate, which was acquired by the Philippine Government in 1903 and registered in 1910. These lots were disposed of through sales under the Friar Lands Act. The Piedad Estate is now private land registered under the Torrens system.

Under the Friar Lands Act, only actual settlers and occupants at the time of acquisition by the Government were given preference to lease, purchase, or acquire their holdings. Successors-in-interest cannot claim rights to purchase by reason of occupation from time immemorial as the lands were bought from companies and a religious order.

The complaint filed by petitioners alleging fraud in the sale of lots in the Piedad Estate was dismissed by the Court of Appeals for failure to state a cause of action. The complaint lacked a sufficient statement of ultimate facts and contained mere conclusions of law.

ISSUES:

1. Whether the complaints sufficiently stated the ultimate facts constituting the plaintiff's cause of action and specified the relief sought.

2. Whether the allegations in the complaints were mere conclusions of law and lacked particularity.

3. Whether the complaint sufficiently alleged fraud and stated a cause of action for cancellation of the subject titles.

4. Whether the petitioners are the proper parties to initiate the suit for cancellation of the subject titles.

5. Whether or not the petitioners have the necessary interest to prosecute the case for cancellation of title.

6. Whether or not the petitioners have exhausted administrative remedies.

RULING:

1. The Supreme Court ruled that the complaints failed to state a cause of action and lacked particularity in their allegations. The allegations in the complaints were mere conclusions of law and failed to provide the essential facts constituting the plaintiff's cause of action. The complaints did not specify the relief sought and did not contain a concise statement of all the facts constituting the plaintiff's cause of action. The complaints also lacked incipient substantiation and failed to provide documentary or other exhibits to support their claims. As a result, the complaints were vulnerable to a motion to dismiss on the ground of failure to state a cause of action.

2. The complaint failed to sufficiently allege fraud and did not state a cause of action for cancellation of the subject titles. The allegations in the complaint were mere conclusions of law unsupported by specific averments of circumstances. The complaint lacked a basis upon which the court should act or for the defendant to provide an intelligent answer. Therefore, the complaint was defective in its allegations.

3. The petitioners were not the proper parties to initiate the suit for cancellation of the subject titles. Only the State, through the Solicitor General, may institute such a suit. The petitioners, by seeking to be declared as bona fide occupants of the property instead of owners, acknowledged the State's ownership of the property. As such, they could not be considered the real parties in interest. Under settled jurisprudence, the government is the entity entitled to seek the cancellation of titles and the reversion of properties to the public domain.

4. The petitioners do not have the necessary interest to prosecute the case for cancellation of title. They are not the owners of the property and they do not possess the qualifications necessary to avail of the preference granted under the Friar Lands Act.

5. The petitioners do not have the right to pursue administrative remedies outside the courts since they do not possess the necessary interest to prosecute the case for cancellation of title. They are not the owners of the property nor are they qualified applicants.

PRINCIPLES:

• A pleading should state the ultimate facts essential to the rights of action or defense asserted, as distinguished from mere conclusions of fact or conclusions of law.

• General allegations that a contract is valid or legal, or is just, fair and reasonable, are mere conclusions of law.

• Ultimate facts are the essential facts constituting the plaintiff's cause of action, which cannot be stricken out without leaving the statement of the cause of action inadequate.

• A cause of action is an act or omission of one party in violation of the legal right or rights of the other, and its essential elements are a right in favor of the plaintiff, an obligation on the part of the defendant, and an act or omission on the part of the defendant violative of the plaintiff's right or constituting a breach of the defendant's obligation.

• In resolving a motion to dismiss based on failure to state a cause of action, only the facts alleged in the complaint and its annexes must be considered, and the test is whether a court can render a valid judgment based on the facts alleged and the prayer in the complaint.

• The question of whether a complaint states a cause of action or the action is premature is one of law.

• The trial court must apply relevant statutes and jurisprudence in determining whether the allegations in a complaint establish a cause of action.

• Failure of any court to apply decisions of the Supreme Court shall constitute an abdication of its duty to resolve a dispute in accordance with the law and shall be a ground for administrative action.

• A complaint must sufficiently allege fraud and state a cause of action for cancellation of titles.

• Only the State, through the Solicitor General, may institute a suit for the cancellation of titles and the reversion of properties to the public domain.

• A real party in interest is the party who stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit. The interest must be personal and substantial, not based on a desire to vindicate the constitutional rights of a third party.

• A real interest is a present substantial interest, as opposed to mere expectancy or future, contingent, subordinate, or consequential interest.

• Only the State has the privilege to prosecute a case for cancellation of title under the Friar Lands Act.

• The exhaustion of administrative remedies is not applicable in this case because the petitioners do not have the necessary interest to pursue administrative remedies.