Before this Court is a Petition for Review on Certiorari under Rule 45, with a prayer for issuance of a Restraining Order or Writ of Preliminary Injunction. The Petition assails the Decision1 [Rollo, p. 39.], dated October 6, 1997 and the Order, dated April 30, 1998, both of the Court of Appeals. The issue raised in the petition before the Court of Appeals was whether the dismissal of Civil Case No. CEB-16217 by the Regional Trial Court of Cebu City, Branch 15, was proper. LEX

The case in the trial court, Civil Case No. CEB-16217, was an action for quieting of title, accion publiciana and damages involving agricultural lands located in Gabi, Sudlon, Cebu City. Private respondent GABI Multi Purpose Cooperative (GABI, for brevity) was the plaintiff in the case below, while petitioners were the defendants.

As an incident to the instant petition, petitioners filed an Urgent Motion, dated June 10, 1998, for the issuance of a Restraining Order or Writ of Preliminary Injunction, wherein they alleged that GABI had commenced to enter the disputed lands. On July 17, 1998, an Opposition by GABI to petitioners' Urgent Motion was received by the Court. Petitioners filed a Reply to the Opposition on July 28, 1998, and a Rejoinder, dated August 28, 1998 was filed by GABI.

GABI filed a 2-page Comment,2 [Id., at 78-80.] wherein GABI dismissed petitioners' contentions as a mere rehash of its arguments in the appellate court. The Solicitor General also filed a Comment3 [Id., at 141-156.] in behalf of the respondent Court of Appeals. On February 18, 1999, the Court received petitioners' Reply to the Comment of the Solicitor General. ScÓ jj

The antecedent facts are summarized in the assailed Decision of the Court of Appeals. We quote the pertinent portions below:

GABI appealed to the Court of Appeals. Thereafter, the respondent court issued its assailed decision, the dispositive portion of which reads:

Petitioners' Motion for Reconsideration was denied by the appellate court in its assailed Order, dated April 30, 1998. They then filed the instant petition praying that the dismissal of Civil Case No. CEB-16217 by the trial court be affirmed, and the decision by the appellate court reversing such dismissal be set aside. Jä lexj

The success of this petition rests on the validity of the dismissal by the trial court. Petitioners assert that there was sufficient reason to dismiss the action below on the ground that GABI had no cause of action against petitioners. They also aver in the alternative that the Complaint by GABI was properly dismissed on the ground that it failed to state a cause of action.

As a preliminary matter, we wish to stress the distinction between the two grounds for dismissal of an action: failure to state a cause of action, on the one hand, and lack of cause of action, on the other hand. The former refers to the insufficiency of allegation in the pleading, the latter to the insufficiency of factual basis for the action. Failure to state a cause may be raised in a Motion to Dismiss under Rule 16,6 [Rule 16 of the Rules of Court reads: LexjÓ uris

xxx] while lack of cause may be raised any time.7 [Quiaoit vs. Consolacion, 73 SCRA 208, 212 (1976), per Antonio, J.] Dismissal for failure to state a cause can be made at the earliest stages of an action. Dismissal for lack of cause is usually made after questions of fact have been resolved on the basis of stipulations, admissions or evidence presented.8 [For further discussion on other distinctions and difference in procedure between these two grounds for dismissal, refer to REGALADO, I REMEDIAL LAW CONPENDIUM 164 (6th rev. ed. 1997); MORAN, I COMMENTS ON THE RULES OF COURT 608 (1995 ed. as revised by Dr. Fortunato Gupit, Jr.)]

We find no merit in petitioners' first contention that dismissal was proper on the ground of lack of cause of action. We note that the issue of sufficiency of GABI's cause of action does not appear to have been passed upon by the appellate court in its assailed decision. However, inasmuch as this issue was raised in the trial court as an affirmative defense by petitioners and is now assigned in error, we resolve the same. JuriÓ smis

The pertinent portions of the trial court Order dismissing the action are reproduced below:

It appears that the trial court dismissed the case on the ground that GABI was not the owner of the lands or one entitled to the possession thereof, and thus had no cause of action. In dismissal for lack of cause of action, the court in effect declared that plaintiff is not entitled to a favorable judgment inasmuch as one or more elements of his cause of action do not exist in fact.

Because questions of fact are involved, courts hesitate to declare a plaintiff as lacking in cause of action. Such declaration is postponed until the insufficiency of cause is apparent from a preponderance of evidence. Usually, this is done only after the parties have been given the opportunity to present all relevant evidence on such questions of fact. lex

We do not here rule on whether GABI has a cause of action against petitioners. What we are saying is that the trial court's ruling, to the effect that GABI had no title to the lands and thus had no cause of action, was premature. Indeed, hearings were conducted. And the view of the Court of Appeals was that such hearings were sufficient. In its assailed decision, the appellate court stated the following:

The Court disagrees with the appellate court's ruling. The hearing of July 27, 1994 was on the propriety of lifting the restraining order. At such preliminary hearing, the trial court required GABI to produce Certificates of Title to the lands in its name. GABI admitted that it did not have such Certificates, only Deeds of Sale from the registered owners. The order of the trial court dated July 27, 1994, reads in part: Jksm

Instead, GABI offered to present evidence to prove its title in the ordinary course of trial. The pertinent portions of the Transcript of Stenographic Notes quoted by petitioners in their Manifestation and Motion, dated September 29, 1998, are reproduced below: Esmsc

On August 18, 1994, another hearing was conducted wherein GABI was again required to show Certificates of Title to the property in its name. On the basis of GABI's failure to show such Certificates at this second preliminary hearing, the trial court concluded that GABI had no title and thereafter dismissed the case.13 [Supra, note 8.] Such action by the trial court was premature inasmuch as the issues of fact pertaining to GABI's title had not yet been adequately ventilated at that preliminary stage. Ms-esm

Anent petitioners' thesis that dismissal of the complaint by the trial court was proper for failure to state a cause of action, we, likewise, find no valid basis to sustain the same.

Dismissal of a Complaint for failure to state a cause of action is provided for by the Rules of Court.14 [Supra, note 6.]

In dismissal for failure to state a cause, the inquiry is into the sufficiency, not the veracity, of the material allegations.15 [Ventura vs. Bernabe, 38 SCRA 587, 598 (1971), per Barredo, J., citing Palma vs. Graciano, 99 Phil. 72 (1956).] The test is whether the material allegations, assuming these to be true, state ultimate facts which constitute plaintiff's cause of action, such that plaintiff is entitled to a favorable judgment as a matter of law.16 [Suyom, et al. v. Collantes, et al., 69 SCRA 514, 520 (1976), per Esguerra, J.] The general rule is that inquiry is confined to the four corners of the complaint, and no other.17 [Acuña vs. Batac Producers Cooperative, 20 SCRA 526, 531 (1967), per Makalintal, J., citing De Jesus, et al. vs. Santos Belarmino, 50 O.G. 3004-3068; Verzosa vs. Rigonan, G.R. No. L-6459, April 23, 1954; Dimayuga vs. Dimayuga, 51 O.G. 2397-2400.] E-xsm

This general rule was applied by the Court of Appeals. Said court stated:

The appellate court, relying on the general rule, made the following conclusion:

There are well-recognized exceptions to the rule that the allegations are hypothetically admitted as true and inquiry is confined to the face of the complaint. There is no hypothetical admission of the veracity of allegations if their falsity is subject to judicial notice,20 [U. Bañez Electric Light Co. vs. Abra Electric Cooperative, Inc., et al., 119 SCRA 90, 93 (1982), per Plana, J.] or if such allegations are legally impossible, or if these refer to facts which are inadmissible in evidence, or if by the record or document included in the pleading these allegations appear unfounded.21 [Regalado, I Remedial Law Compendium (5th rev. ed.) 151, citing Marcopper Mining Corp. vs. Garcia, 143 SCRA 178, 188 (1986), per Gutierrez, J., and Tan vs. Director of Forestry, 125 SCRA 302 (1983) per Makasiar, J.] Also, inquiry is not confined to the complaint if there is evidence which has been presented to the court by stipulation of the parties,22 [Locals No. 1470, No. 1469, and No. 1512 of the International Longshoremen's Association vs. Southern Pacific Co., 131 F. 2d 605.] or in the course of hearings related to the case.23 [Tan vs. Director of Forestry, 125 SCRA 302 (1983) per Makasiar, J.] Calr-ky

Petitioners invoke these exceptions to justify the dismissal by the RTC. They particularly rely on the ruling of this Court in Tan vs. Director of Forestry.24 [125 SCRA 302 (1983) per Makasiar, J.] As in this case, Tan involved the issue of whether the dismissal for failure to state a cause of action was proper. A hearing was conducted on Tan's prayer for preliminary injunction, wherein evidence was submitted by the parties and extensive discussion held. The trial court then resolved the Motion to Dismiss and dismissed Tan's petition for failure to state a cause of action. The trial court held that, on the basis of the evidence presented in the hearings, the timber license relied upon by Tan was null and void. Such license being void, Tan's allegation that his right had been violated was false. On appeal, this Court ruled that the trial court was correct in considering the evidence already presented and in not confining itself to the allegations in Tan's petition.

The theory behind Tan is that the trial court must not rigidly apply the device of hypothetical admission of allegations when, on the basis of evidence already presented, such allegations are found to be false. Thus, findings of fact are not postponed until after trial, but are made at the preliminary stage because there is sufficient evidence available.

We find, however, that Tan is not applicable in this case. Unlike in Tan where the parties were given ample opportunity in the preliminary hearing to present evidence on their contentions, GABI did not have sufficient chance to prove its allegation of ownership. Thus, the conclusion that GABI's allegation of ownership is false and that its complaint stated no cause of action, appears to be without basis. Me-sm

Petitioners also invoke Drilon vs. Court of Appeals.25 [270 SCRA 211 (1997), per Hermosisima, Jr., J.] Yet, a close reading of Drilon reveals that petitioners' contention is weakened rather than strengthened by said case. Drilon also involved the issue of whether the dismissal for failure to state a cause of action was proper. However, the Court applied the general rule that inquiry is confined to the face of the complaint and no other.26 [Id., at 225.]

In sum, as appears from the available records, the Court of Appeals was correct in ruling that the dismissal by the trial court of GABI's complaint was incorrect. The case should, therefore, proceed to trial where the parties may adduce evidence to support their claims and defenses.

IN VIEW OF THE FOREGOING, the Court resolved to DENY the Petition.

Davide, Jr., C.J., (Chairman), Puno, Pardo, and Ynares-Santiago, JJ., concur.