G.R. No. L-41313 - Mondiguing vs. Abad

On October 7, 1956, petitioner-developer (referred to as the CAPITALIST) and respondents-owners entered into a Subdivision Contract (Annex "A").
Under the contract, the CAPITALIST was granted full possession of the land in Gumaca, Quezon Province for the purpose of surveying, subdividing into commercial and residential lots, and selling them once improvements were introduced, in compliance with requirements of the National Planning Commission.
Specific obligations of the CAPITALIST included:

Constructing avenues and roads that are 10 to 15 meters wide (with a minimum width of 10 meters), complete with water and electrical facilities, and an adequate drainage system, as well as other improvements mandated by the National Planning Commission.
Bearing all expenses related to the development, including the payment of real estate taxes and other impositions on the property while the lots remain unsold.
Exercising full, exclusive discretion in the development and sale of the lots, including the determination of their prices.

Retaining the title over the land, with all sales to be made in their names.
Reserving 9,622 square meters of the property, with its exact location to be determined by both parties.
Receiving a fixed participation amounting to 40% of the gross receipts from the subdivision sales, based on the actual sale prices.

On September 9, 1977, private respondents (owners) filed a complaint in Civil Case No. 23788 before the Court of First Instance of Rizal, Branch I, Quezon City.
The complaint alleged that the petitioner-developer breached the subdivision contract by:

Failing to construct the required avenues, roads, and associated facilities (water, electricity, drainage).
Not paying the tax assessments, fees, and other impositions related to the property.
Failing to render a complete accounting of the sales, which was necessary for determining the owners’ 40% share in the gross receipts.

Termination of the contract and turnover of all Torrens titles, contracts of sale, and pertinent documents.
Payment of moral, exemplary, and compensatory damages, which also encompassed attorney’s fees and an amount for unrealized profits.

The petitioner, upon being served, filed a Motion to Dismiss based on several grounds:

On January 26, 1978, the respondent Judge of the Court of First Instance, Rizal, Branch XVIII, issued an Order deferring the resolution of the Motion to Dismiss until after the trial on the merits.
The petitioner then filed a motion for reconsideration regarding the deferral, which was denied by the respondent Judge on March 20, 1978.
Subsequent to a Resolution of the Court dated June 7, 1978, private respondents filed their Comment in response.
The First Division of the appellate court gave due course to the petition by ordering both parties to file their respective Memoranda within 30 days.

The petitioner submitted his Memorandum on October 2, 1978.
Private respondents failed to file a Memorandum, prompting the case to be decided without their input.

The principal issue identified was whether the action brought by the respondent-owners was a real action (an action for recovery of possession of land) or merely a personal action.
The jurisdictional determination was critical as it influenced the proper venue for the case, considering that the land at issue was situated in Gumaca, Quezon Province.

Whether the suit filed by respondents for breach of the subdivision contract constitutes a real action aimed at the recovery of possession of land, or if it is a personal action relating to contractual claims and damages.

Given that the property in question is located in Gumaca, Quezon Province and the contract was executed there, whether venue should strictly be established in the province where the land is situated, in accordance with the Rules of Court.

Whether the termination or rescission of the Subdivision Contract necessarily entails the recovery of possession of the unsold lots and the reception of Torrens Titles by private respondents, thereby linking the contractual breach directly with a real action for possession.

Whether the precedents, particularly De Jesus v. Coloso and Punsalan, Jr. vs. Vda. de Lacsamana, sufficiently support the contention that when a contract breach leads to a demand for cancellation and recovery of property, the suit is inherently a real action, and thus subject to venue based on the location of the property.