Case Summary (G.R. No. 91666)
Procedural History and Prior Proceedings
The City of Manila filed an expropriation complaint on August 22, 1996. The Manila RTC rendered judgment declaring the parcels expropriated on June 30, 2000; the judgment became final and executory on January 28, 2001 and was entered March 23, 2001. The petitioner’s Motion to Intervene in Execution was denied as filed out of time. The petitioner proceeded with extrajudicial foreclosure and purchase at sheriff’s auction. The petitioner then filed Civil Case No. 03-450 in the Makati RTC to recover the alleged deficiency. The respondents moved to dismiss on grounds of res judicata, failure to state a cause of action, and waiver/abandonment; the Makati RTC denied the motion on October 17, 2003. Respondents filed a motion for reconsideration and, in subsequent pleadings, for the first time raised improper venue. The Makati RTC denied reconsideration on February 1, 2005. The respondents filed a petition for certiorari with the Court of Appeals (CA), which granted the petition on the ground of improper venue and dismissed the Makati action. The CA denied motions for reconsideration; the petitioner then sought review by the Supreme Court.
Issues Presented on Appeal
Primary issues presented were: (1) whether the CA’s dismissal of the petitioner’s complaint for money on the ground of improper venue was contrary to law; and (2) whether the CA erred in appreciating and acting upon the venue objection that the respondents raised only belatedly in proceedings below.
Applicable Law and Precedents
Constitutional foundation: 1987 Constitution (decision rendered post-1990). Controlling procedural law: Rules of Court — Section 1, Rule 4 (definition of real action); Section 2, Rule 4 (venue of personal actions); Section 1, Rule 9 (waiver of defenses not pleaded in motion to dismiss or answer). Jurisprudence cited in the decision includes Chua v. Total Office Products and Services (Topros), Hernandez v. Development Bank of the Philippines, Orbeta v. Orbeta, Caltex Philippines, Inc. v. Intermediate Appellate Court, Marcos-Araneta v. Court of Appeals, and Rudolf Lietz Holdings, Inc. v. Registry of Deeds of Parañaque City.
Supreme Court’s Analysis on Nature of the Action and Proper Venue
The Supreme Court reiterated the fundamental rule that the proper venue depends on whether an action is real (local) or personal (transitory). A real action affects title to or possession of real property, or an interest therein, and must be brought in the court having jurisdiction where the property is situated. By contrast, personal actions (including actions to enforce contracts or recover damages) are tried where the plaintiff or defendant resides, at the plaintiff’s election. Applying these principles, the Court held that an action to recover a deficiency after extrajudicial foreclosure is a personal action because it does not affect title to or possession of the real property or any interest therein. Accordingly, venue is determined under the rules applicable to personal actions, not by the situs of the foreclosed property.
Treatment of CA’s Reliance on Earlier Authority and Prescription Distinction
The Court addressed the CA’s reliance on Caltex Philippines, Inc. v. Intermediate Appellate Court, explaining that Caltex was concerned with the prescriptive period within which a deficiency action must be filed and did not resolve the venue question or categorize the action as real for venue purposes. The Supreme Court found that the CA erred in treating the deficiency action’s venue as necessarily the same as that of the foreclosure proceedings. The distinction between prescription (substantive/time-bar issue) and venue (procedural/place-of-trial issue) informed the Court’s reversal of the CA’s reasoning.
Waiver of Venu
...continue readingCase Syllabus (G.R. No. 91666)
The Core Holding
- The Supreme Court held that an action to recover the deficiency after extrajudicial foreclosure of a real property mortgage is a personal action because it does not affect title to or possession of real property, or any interest therein.
- Because the action is personal, venue is governed by the rules applicable to personal (transitory) actions, and not by the local-venue rule that applies to real actions affecting land.
- The Court granted the petition for review on certiorari, reversed and set aside the Court of Appeals decision of March 31, 2006, and reinstated the Makati Regional Trial Court (RTC), Branch 60, orders dated October 17, 2003 and February 1, 2005. The respondents were ordered to pay costs.
Case Caption, Procedural Posture, and Relief Sought
- Petitioner: BPI Family Savings Bank, Inc. (successor-in-interest to Citytrust Banking Corporation as mortgagee).
- Respondents: Spouses Benedicto and Teresita Yujuico (mortgagors).
- Nature of action below: Civil action (Civil Case No. 03-450, RTC Makati, Branch 60) filed by petitioner to recover a claimed deficiency of P18,522,155.42 following extrajudicial foreclosure and public auction sale of two mortgaged lots.
- Relief sought on appeal: Petitioner sought reversal of the Court of Appeals' dismissal of the Makati RTC action on the ground of improper venue.
Relevant Factual Background and Antecedents
- On August 22, 1996, the City of Manila filed an expropriation complaint against respondents for five parcels of land in Tondo, Manila registered in the name of Teresita Yujuico.
- Two of those parcels (TCT No. 261331 and TCT No. 261332) had been mortgaged to Citytrust Banking Corporation under a First Real Estate Mortgage Contract (Citytrust is petitioner’s predecessor-in-interest).
- On June 30, 2000, the Regional Trial Court in Manila rendered judgment declaring the five parcels expropriated for public use; judgment became final and executory on January 28, 2001 and was entered in the book of entries of judgment on March 23, 2001.
- The petitioner filed a Motion to Intervene in Execution with Partial Opposition to Defendant’s Request to Release, which the Manila RTC denied as filed out of time.
- Petitioner then pursued extrajudicial foreclosure of the mortgage on the two parcels. At the public auction, the sheriff awarded the two lots to the petitioner as highest bidder for P10,000,000.00.
- Petitioner thereafter sued the respondents in Makati RTC to recover the deficiency alleged to be P18,522,155.42.
Lower Court Proceedings and Motions
- Respondents moved to dismiss the Makati RTC complaint on multiple grounds:
- That the suit was barred by res judicata;
- That the complaint stated no cause of action;
- That the plaintiff’s claim had been waived, abandoned, or extinguished.
- In its October 17, 2003 order, the Makati RTC denied the respondents’ motion to dismiss:
- Found no res judicata;
- Found the complaint stated a sufficient cause of action to recover the deficiency;
- Found no support for respondents’ contention of abandonment or extinguishment other than assertion of expropriation.
- Respondents filed a motion for reconsideration on November 4, 2003, reiterating prior grounds.
- The petitioner filed its comment/opposition; respondents then filed a reply in which they raised, for the first time, an objection based on improper venue, arguing that the deficiency action was a supplementary mortgage/real action that should be brought in Manila where the properties were located.
- On February 1, 2005, the Makati RTC denied respondents’ motion for reconsideration for lack of merit and ruled on venue:
- Noted it would be improper to dismiss for improper venue where the ground was not raised in the motion to dismiss; cited the principle that a motion cannot be dismissed on a ground not alleged in the motion (citing Malig et al. v. Bush, L-22761, May 31, 1969).
- Held that respondents’ objection to venue was belatedly raised (only in the reply) and thus was not timely.
Petition for Certiorari to the Court of Appeals and CA Decision
- Respondents filed a petition for certiorari to the Court of Appeals (CA) assailing the Makati RTC orders dated October 17, 2003 and February 1, 2005.
- Issues submitted to the CA included: whether the trial court committed grave abuse of discretion in denying dismissal based on (A) res judicata, (B) no cause of action, (C) waiver/abandonment/extinguishment of claim, and (D) improper venue.
- On March 31, 2006, the CA granted respondents’ certiorari petition on the basis of the venue issue, reasoning:
- A suit for recovery of the deficiency after foreclosure is “in the nature of a mortgage action” because its purpose is to enforce the mortgage contract and is upon written contract and obligation created by law.
- Therefore, the venue of an action to recover deficiency must necessarily be the same as that of the extrajudicial foreclosure of mortgage.
- Noted that the parcels were located in Tondo, Manila (TCT Nos. 261331 and 261332) and that the extrajudicial foreclosure took place at the RTC of Manila on January 28, 2003; concluded the deficiency action should have been filed at the RTC of Manila, not in Makati.
- The CA denied both parties’ motions for partial reconsideration on December 7, 2006.
Issues Raised on Appeal to the Supreme Court
- The petitioner framed two principal issues in its petition for review on certiorari:
I. Whether the CA’s denial of the petitioner’s partial motion for reconsideration resulting in dismissal of the complaint for sum of money was contrary to law.
II. Whether the CA’s act of appreciating the additional ground of improper venue, which was only raised in the motion for reconsideration filed in the lower court after den