G.R. No. 49475 - Paderanga vs. Buissan

In 1973, petitioner Jorge C. Paderanga and respondent Elumba Industries Company (represented by its General Manager, Jose J. Elumba) entered into an oral lease contract.
The lease concerned a commercial space within a building owned by Paderanga in Ozamiz City.
The lease was for an indefinite period with a monthly rental payment of P150.00 on a month-to-month basis.
Elumba Industries Company utilized the leased premises as the Sales Office of Allied Air Freight in Ozamiz City.

On April 4, 1977, petitioner constructed a partition wall dividing the leased commercial space into two parts.
Petitioner took possession of one of the subdivided portions.
The repossession was allegedly done with the acquiescence of the local manager of Elumba, though the respondent later contested this assertion.
The validity of the repossession itself was not at issue in the proceedings.

On July 18, 1977, respondent Elumba instituted an action for damages and simultaneously prayed for the fixing of the period of the lease contract at five years.
The action was filed before the then Court of First Instance of Zamboanga del Norte in Dipolog City.
Respondent’s claim for damages included moral damages, exemplary damages, attorney’s fees, and costs of suit.

Petitioner, being a resident of Ozamiz City, moved to dismiss the case arguing that the action was a real action requiring venue in the court of Misamis Occidental where the leased property is situated.
On November 6, 1978, Judge Dimalanes B. Buissan denied petitioner’s Motion to Dismiss, reasoning that the case involved the enforcement of the lease contract rather than a question of ownership, thereby justifying the venue in Dipolog City.
Petitioner sought reconsideration on December 4, 1978, contending that, despite the absence of an explicit plea for recovery of possession, the remedy sought necessarily involved recovering the portion of the property from which he had been dispossessed.
The respondent judge again denied the reconsideration, maintaining that neither the primary issue nor any question of ownership was improperly placed before the court in Dipolog City.

Petitioner argued that because the action involved recovery of possession and fixing the lease period, it was fundamentally a real action, hence, proper venue must be where the property is located (Ozamiz City).
Respondent contended that the action was chiefly for damages arising from an alleged breach of the lease contract, thereby making it an action in personam that could be filed in the court where either party resided.
The distinction between a personal action and a real action, as well as between an action in personam and in rem, became central to the dispute on proper venue.

The Supreme Court explained that the mere label “in personam” does not necessarily preclude the classification of the action as a real action if it involves recovery of possession or has effects upon real property.
Citing earlier decisions such as Hernandez v. Rural Bank of Lucena, Inc., the Court clarified that the determination hinges on whether the lawsuit is fundamentally directed at recovering possession or affecting title to real property.
The decision ultimately focused on the fact that, notwithstanding the damages claim, the essential purpose of the suit was recovering the one-half portion of the property that was repossessed by petitioner.

Is the action instituted by respondent essentially a real action (concerned with recovery of possession or affecting title to real property) or a personal action (concerned primarily with contractual disputes and damages)?

Given the dual nature of the claims—damages and fixing the period of the lease—what constitutes the proper venue for the action?
Does the inclusion of a damages claim alter the requirement that actions involving disputes about possession of real property be filed in the territorial jurisdiction where the property is located?

How should the Court distinguish between actions in personam and in rem in this context, and does that distinction impact the venue?
Can an action be both in personam and a real action simultaneously, and what is the legal effect of that on venue determination?