Fortune Motors Inc v. CA (1989) Paras, J.

Facts: From 1982 up to 1984, MetroBank extended various loans to Fortune Motors in the total sum of P32,500,000.00 (according to the borrower; or P34,150,000.00 according to the Bank) which loan was secured by a real estate mortgage on the Fortune building and lot in Makati, Rizal. Due to financial difficulties and the onslaught of economic recession, the petitioner was not able to pay the loan which became due.

For failure of the petitioner to pay the loans, the respondent bank initiated extrajudicial foreclosure proceedings. After notices were served, posted, and published, the mortgaged property was sold at public auction for the price of P47,899,264.91 to mortgagee Bank as the highest bidder. The sheriff's certificate of sale was registered on October 24, 1984 with the one-year redemption period to expire on October 24,1985.

On October 21, 1985, three days before the expiration of the redemption period, petitioner Fortune Motors filed a complaint for annulment of the extrajudicial foreclosure sale alleging that the foreclosure was premature because its obligation to the Bank was not yet due, the publication of the notice of sale was incomplete, there was no public auction, and the price for which the property was sold was "shockingly low".

Before summons could be served private respondent Bank filed a motion to dismiss the complaint on the ground that the venue of the action was improperly laid in Manila for the realty covered by the real estate mortgage is situated in Makati, therefore the action to annul the foreclosure sale should be filed in the Regional Trial Court of Makati. The motion was opposed by petitioner Fortune Motors alleging that its action "is a personal action" and that "the issue is the validity of the extrajudicial foreclosure proceedings" so that it may have a new one year period to redeem.

Real actions or actions affecting title to, or for the recovery of possession, or for the partition or condemnation of, or foreclosure of mortgage on real property, must be instituted in the Court of First Instance of the province where the property or any part thereof lies. (Enriquez v. Macadaeg, 84 Phil. 674,1949; Garchitorena v. Register of Deeds, 101 Phil. 1207, 1957) Personal actions upon the other hand, may be instituted in the Court of First Instance where the defendant or any of the defendants resides or may be found, or where the plaintiff or any of the plaintiffs resides, at the election of the plaintiff (Sec.

1, Rule 4, Revised Rules of Court).A prayer for annulment or rescission of contract does not operate to efface the true objectives and nature of the action which is to recover real property. (Inton, et al., v. Quintan, 81 Phil. 97, 1948)An action for the annulment or rescission of a sale of real property is a real action. Its prime objective is to recover said real property. (Gavieres v. Sanchez, 94 Phil. 760,1954) An action to annul a real estate mortgage foreclosure sale is no different from an action to annul a private sale of real property. (Munoz v. Llamas, 87 Phil. 737,1950)

Issue: Whether petitioner's action for annulment of the real estate mortgage extrajudicial foreclosure sale of Fortune Building is a personal action or a real action for venue purposes.

Held: The SC (1) DENIED the instant petition for lack of merit (2) AFFIRMED the assailed decision of CA

Ratio: While it is true that petitioner does not directly seek the recovery of title or possession of the property in question, his action for annulment of sale and his claim for damages are closely intertwined with the issue of ownership of the building which, under the law, is considered immovable property, the recovery of which is petitioner's primary objective. The prevalent doctrine is that an action for the annulment or rescission of a sale of real property does not operate to efface the fundamental and prime objective and nature of the case, which is to recover said real property. It is a real action. Respondent Court, therefore, did not err in dismissing the case on the ground of improper venue (Sec. 2, Rule 4) which was timely raised (Sec. 1, Rule 16).

Torres v. Tuason (1964) Reyes, J.B.L., J.

Facts: The complaint, dated 4 December 1961, recites in substance that since prior to 1813 to his death, one Telesforo Deudor was the sole owner of a parcel of land situated in Matalahib, Tatalon and Masambong, Quezon City, when died he was succeeded by his son, Tomas, who sold one and a half quiñones of the land to one Juana de la Cruz; that when the latter died in 1944 she was succeeded by her only son, Eustaquio; that on 20 October 1951, he sold to the plaintiff, Dominga Torres, a portion of 690 square meters for a consideration of P2,760.00, as evidenced by a public instrument; that to quiet title to their property of 50 quiñones the successors in interest of Tomas Deudor filed in 1950 actions against J. M. Tuason & Co. in the Court of First Instance of

MQP 12-11-13

Quezon City (Civil Cases Nos. Q-135, Q-174, Q-177, Q-186); that plaintiff tried to intervene in said actions, but intervention was denied;

Issue: The Manila Court held that it "has no doubt that the action really concerns title of real property which is in Quezon City", and on 20 January 1962 dismissed the complaint on the ground of improper venue. Plaintiff duly appealed.

Held: In this Court, the appellant insists that her action is one of specific performance, and, therefore, personal and transitory in nature.

Held: [Manuel B. Ruiz vs. J. M. Tuason & Co., Inc., et al., L-18692, January 31 1963] There the Court, by unanimous vote of all the Justices, held as follows:

This contention has no merit. Although appellant's complaint is entitled to be one for specific performance, yet the fact that he asked that a deed of sale of a parcel of land situated in Quezon City be issued in his favor and that a transfer certificate of title covering said land be issued to him shows that the primary objective and nature of the action is to recover the parcel of land itself because to execute in favor of appellant the conveyance requested there is need to make a finding that he is the owner of the land which in the last analysis resolves itself into an issue of ownership. Hence, the action must be commenced in the province where the property is situated pursuant to Section 3, Rule 5, of the Rules of Court, which provides that actions affecting title to or recovery of possession of real property shall be commenced and tried in the province where the property or any part thereof lies.

Paderanga v. Hon. Buissan (1993) Bellosillo, J.

Facts: Sometime in 1973, petitioner JORGE C. PADERANGA and private respondent ELUMBA INDUSTRIES COMPANY, a partnership represented by its General Manager JOSE J. ELUMBA, entered into an oral contract of lease for the use of a commercial space within a building owned by petition in Ozamiz City. On 18 July 1977, private respondent instituted an action for damages 4 which, at the same time, prayed for the fixing of the period of lease at five (5) years, before the then court of First Instance of Zamboanga del Norte based in Dipolog City. 5 Petitioner, a resident of Ozamiz City, moved for its dismissal contending that the action was a real action which should have been filed with the Court of First Instance of Misamis Occidental

stationed in Ozamiz City where the property in question was situated

On 6 November 1978, respondent Judge Dimalanes B. Buissan denied the Motion to Dismiss and held that Civil Case No. 2901 merely involved the enforcement of the contract of lease, and while affecting a portion of real property, there was no question of ownership raised. Hence, venue was properly laid. Petitioner pleaded for reconsideration of the order denying his Motion to Dismiss. He contended that while the action did not involve a question of ownership, it was nevertheless seeking recovery of possession; thus, it was a real action which, consequently, must be filed in Ozamiz City. On 4 December 1978, respondent judge denied reconsideration. While admitting that Civil Case No. 2901 did pray for recovery of possession, he nonetheless ruled that this matter was not the main issue at hand; neither was the question of ownership raised. Not satisfied, petitioner instituted the present recourse.

In a personal action, the plaintiff seeks the recovery of personal property, the enforcement of a contract or the recovery of damages. In a real action, the plaintiff seeks the recovery of real property, or, as indicated in section 2(a) of Rule 4, a real action is an action affecting title to real property or for the recovery of possession, or for partition or condemnation of, or foreclosure of a mortgage on, real property.

An action in personam is an action against a person on the basis of his personal liability, while an action in rem is an action against the thing itself, instead of against the person. Hence, a real action may at the same time be an action in personam and not necessarily an action in rem.

While it may be that the instant complaint does not explicitly pray for recovery of possession, such is the necessary consequence thereof. The instant action therefore does not operate to efface the fundamental and prime objective of the nature of the case which is to recover the one-half portion repossessed by the lessor, herein petitioner. Indeed, where the ultimate purpose of an action involves title to or seeks recovery of possession, partition or condemnation of, or foreclosure of mortgage on, real property, such an action must be deemed a real action and must perforce be commenced and tried in the province where the property or any part thereof lies.

Held: Petition for Prohibition is GRANTED. The Orders of Judge Buissan are SET ASIDE. The branch

MQP 12-11-13

of the Regional Trial Court of Dipolog City where may be presently assigned is DIRECTED to DISMISS the case for improper venue. Decision is immediately executory.

Capati v. Ocampo Escolin, J.

Facts: Plaintiff, a resident of Pampanga, entered into a sub-contract with the Defendant, a resident of Naga City. The Defendant completed a construction job for the Plaintiff. However, the construction was completed on a date later than what was agreed in their contract. Hence, Plaintiff filed in the CFI of Pampanga an action for recovery of consequential damages due to the delay. Defendant filed a motion to dismiss the complaint on the ground that venue of action was improperly laid. The CFI of Pampanga dismissed the Plaintiff's complaint on ground of improper venue.

ISSUE: W/N the dismissal of the complaint on the ground of improper venue was correct.

HELD: No. The rule on venue of personal actions cognizable by the CFI is found in Sec. 2(b), Rule 4 of the Rules of Court, which provides that such "actions may be commenced and tried where the Defendant or any of the Defendants resides or may be found, or where the Plaintiff or any of the Plaintiffs resides, at the election of the Plaintiff." The word "may" is merely permissive and operates to confer discretion upon a party. Under ordinary circumstances, the term "may be" connotes possibility; it does not connote certainty. "May" is an auxillary verb indicating liberty, opportunity, permission or possibility.

Unimasters Conglomeration v. CA (1997) Narvasa, C.J.

Facts: On October 28, 1988 Kubota Agri-Machinery Philippines, Inc. (hereafter, simply KUBOTA) and Unimasters Conglomeration, Inc. (hereafter, simply UNIMASTERS) entered into a "Dealership Agreement for Sales and Services" of the former's products in Samar and Leyte Provinces. The contract contained, among others: 1) a stipulation reading: "** All suits arising out of this Agreement shall be filed with / in the proper Courts of Quezon City," and2) a provision binding UNIMASTERS to obtain (as it did in fact obtain) a credit line with Metropolitan Bank and Trust Co.-Tacloban Branch in the amount of P2,000,000.00 to answer for its obligations to KUBOTA. Some five years later, or

more precisely on December 24, 1993, UNIMASTERS filed an action in the Regional Trial Court of Tacloban City against KUBOTA, a certain Reynaldo Go, and Metropolitan Bank and Trust Company-Tacloban Branch (hereafter, simply METROBANK) for damages for breach of contract, and injunction with prayer for temporary restraining order. The action was docketed as Civil Case No. 93-12-241 and assigned to Branch 6. On January 4, 1994 KUBOTA filed two motions. One prayed for dismissal of the case on the ground of improper venue (said motion being set for hearing on January 11, 1994). The other prayed for the transfer of the injunction hearing.

Held: An analysis of these precedents reaffirms and emphasizes the soundness of the Polytrade principle. Of the essence is the ascertainment of the parties' intention in their agreement governing the venue of actions between them. That ascertainment must be done keeping in mind that convenience is the foundation of venue regulations, and that that construction should be adopted which most conduces thereto. Hence, the invariable construction placed on venue stipulations is that they do not negate but merely complement or add to the codal standards of Rule 4 of the Rules of Court. In other words, unless the parties make very clear, by employing categorical and suitably limiting language, that they wish the venue of actions between them to be laid only and exclusively at a definite place, and to disregard the prescriptions of Rule 4, agreements on venue are not to be regarded as mandatory or restrictive, but merely permissive, or complementary of said rule. The fact that in their agreement the parties specify only one of the venues mentioned in Rule 4, or fix a place for their actions different from those specified by said rule, does not, without more, suffice to characterize the agreement as a restrictive one. There must, to repeat, be accompanying language clearly and categorically expressing their purpose and design that actions between them be litigated only at the place named by them, regardless of the general precepts of Rule 4; and any doubt or uncertainty as to the parties' intentions must be resolved against giving their agreement a restrictive or mandatory aspect. Any other rule would permit of individual, subjective judicial interpretations without stable standards, which could well result in precedents in hopeless inconsistency.

In other words, Rule 4 gives UNIMASTERS the option to sue KUBOTA for breach of contract in the Regional Trial Court of either Tacloban City or Quezon City.

MQP 12-11-13