Case Summary (G.R. No. 175796)
Petitioner
A banking institution that acquired mortgage rights over two parcels owned by respondents and conducted extrajudicial foreclosure following respondents’ default.
Respondents
Homeowners whose Manila properties were expropriated by the City of Manila and previously mortgaged to petitioner’s predecessor.
Key Dates
• August 22, 1996: Manila expropriation suit filed.
• June 30, 2000: RTC–Manila judgment declaring expropriation final.
• January 28, 2001: Expropriation judgment became final and executory.
• January 28, 2003: Extrajudicial foreclosure of mortgage.
• October 17, 2003: Makati RTC denied respondents’ motion to dismiss.
• February 1, 2005: Makati RTC denied motion for reconsideration.
• March 31, 2006: CA granted certiorari, dismissed petitioner’s suit for improper venue.
• July 22, 2015: Supreme Court promulgated decision.
Applicable Law
1987 Philippine Constitution; Rules of Court, Rule 4 (real vs. personal actions), Rule 9 (waiver of defenses); jurisprudence on venue and nature of deficiency actions.
Antecedents
Following the RTC–Manila expropriation judgment, petitioner’s Motion to Intervene in execution was denied. Petitioner proceeded with extrajudicial foreclosure, purchased the foreclosed lots for ₱10 million, and sought a deficiency of ₱18,522,155.42 in Makati RTC (Civil Case No. 03-450). Respondents moved to dismiss on res judicata, lack of cause of action, waiver/extinguishment, and, belatedly in a reply, improper venue.
Procedural History
• Makati RTC denied the initial motion to dismiss (Oct. 17, 2003) and the motion for reconsideration (Feb. 1, 2005), ruling respondents waived venue objection by not raising it in their motion to dismiss.
• Court of Appeals granted certiorari on March 31, 2006, holding that a deficiency action is akin to a real action and must be filed in the RTC where the mortgaged property is located (Manila).
Issues
- Whether the CA erred in ruling that venue was improper in Makati and thus dismissing the deficiency suit.
- Whether the CA improperly entertained the venue objection raised only in respondents’ motion for reconsideration, after denial of their motion to dismiss.
Ruling of the Supreme Court
The petition is granted. The CA decision is reversed and orders of Makati RTC reinstated. Respondents to pay costs.
Legal Analysis and Ratio Decidendi
- Nature of Deficiency Action: Under Rule 4, Section 1, real actions affect title or possession; all others are personal. Recovery of a deficiency after extrajudicial foreclosure does not affect title or possession and is a personal action.
- Venue of Personal Action: Per Rule 4, Section 2, plaintiff may choose venue where it or defendant resides or may be found. Petitioner’s principal office was in Makati, making ve
Case Syllabus (G.R. No. 175796)
Antecedents and Procedural Posture
- On August 22, 1996, the City of Manila filed an expropriation complaint against the respondents for five parcels of land in Tondo, Manila, two of which (TCT Nos. 261331 and 261332) were mortgaged to Citytrust Banking Corporation, the petitioner’s predecessor.
- The Manila RTC rendered final judgment on June 30, 2000 (final and executory January 28, 2001; entered March 23, 2001), declaring the parcels expropriated.
- The petitioner’s Motion to Intervene in Execution with Partial Opposition to Defendant’s Request to Release was denied by the Manila RTC for lateness.
- The petitioner proceeded with an extrajudicial foreclosure of the mortgage, and at sheriff’s sale acquired the two mortgaged lots for ₱10,000,000.00.
- Claiming a deficiency of ₱18,522,155.42, the petitioner filed Civil Case No. 03-450 in the Makati RTC to recover the shortfall.
Trial Court Proceedings
- The respondents moved to dismiss the complaint on grounds of res judicata, lack of cause of action, and waiver or extinguishment of the obligation.
- On October 17, 2003, the Makati RTC denied the motion to dismiss, finding:
• No res judicata effect from the expropriation proceeding.
• The complaint sufficiently stated a cause of action for the deficiency.
• No evidence of abandonment or extinguishment of the debt beyond the expropriation. - On November 4, 2003, respondents filed a motion for reconsideration reiterating the same g