Title
Far East Bank and Trust Co. vs. Spouses Plaza
Case
G.R. No. 154489
Decision Date
Jul 25, 2003
A dispute over mortgage release and loan coverage: respondents sought to pay P2.158M, petitioners refused, claiming additional obligations. Court ruled it a personal action, affirming jurisdiction and remanding factual issues.
personal action
mortgage debt
trial court

Case Summary (G.R. No. 154489)

Loan, Mortgage, and Failure to Pay

Charlie Ang obtained an initial loan of P2,158,000.00 from petitioners, and respondents’ land was used as collateral, resulting in a mortgage in favor of petitioners. Ang later obtained more loans from petitioners. These subsequent obligations were covered by promissory notes with a total amount of P4,800,000.00. When Ang failed to pay the loans upon maturity, petitioners initiated proceedings to foreclose the mortgage. Respondents then offered to pay the mortgage indebtedness of P2,158,000.00, but petitioners refused to accept the payment unless respondents assumed the other obligations of Ang with petitioners.

Filing of Civil Action and Prayer for Injunction

Respondents filed a civil action in the RTC against the petitioners and Charlie Ang. The complaint sought the release of the real estate mortgage and damages, with a prayer for a temporary restraining order and issuance of writ of injunction to halt foreclosure. Petitioners responded with a motion to dismiss, invoking lack of jurisdiction due to respondents’ alleged failure to pay the correct docket fees. Petitioners argued that the action to enjoin foreclosure of mortgage was a real action, and that there was no showing that docket fees were paid based on the assessed or estimated value of the real property involved.

RTC Rulings on Motion to Dismiss and Motion for Reconsideration

The RTC denied petitioners’ motion to dismiss and also denied petitioners’ motion for reconsideration. Petitioners then sought relief by filing a petition for certiorari before the Court of Appeals. The Court of Appeals dismissed the petition and denied petitioners’ motion for reconsideration. Thereafter, petitioners filed a petition for review before the Supreme Court. Separately, on 3 March 2003, the RTC issued a writ of preliminary injunction enjoining petitioners from foreclosing the mortgage while the case remained pending. The RTC likewise denied petitioners’ motion for reconsideration of the 3 March 2003 order.

Pre-trial Developments and Payment Offer

While the civil case proceeded to the pre-trial stage, petitioners expressed willingness to await any written offer to pay by respondents. Respondents then sent a formal letter offering to pay P2,158,000.00, and they enclosed a cashier’s check in that amount, requesting release of the real estate mortgage. Petitioners accepted the check, but only as partial payment, without prejudice to the remaining balance of the loans. Respondents insisted that they had already paid the loans in full and that petitioners should release the mortgage because of the payment. Petitioners maintained that the civil action filed by respondents was a real action and not a personal action of specific performance, because it involved title to real property or any interest therein, and therefore jurisdiction allegedly did not attach absent proper docket fees tied to property valuation.

Competing Characterization of the Action: Real vs. Personal

Petitioners anchored their jurisdictional challenge on the theory that respondents’ suit was a real action. Petitioners reasoned that the ultimate objective involved recovery of ownership of the real property, and thus the case concerned interests in land in a manner that required docket fees computed from property value. Respondents countered that the action was a personal one, relying on Hernandez v. Rural Bank of Lucena. Respondents argued that the primary purpose of their complaint was to compel the acceptance of the payment of the mortgage debt and obtain consequent cancellation or release of the real estate mortgage, and that such relief did not place title in issue because respondents remained in peaceful, actual, and physical possession of the property. Respondents further emphasized that petitioners had accepted the payment offered, yet had not released the mortgage. Respondents also maintained that their title to the property was not disputed; no foreclosure had yet taken place, so there had been no transfer of title affected by the case.

Court of Appeals’ Determination and the Doctrine It Applied

The Court of Appeals ruled that there was no reversible error in the RTC’s refusal to dismiss the case and held that respondents’ action was a personal action. The appellate court applied the rule that an action to compel a mortgagee to accept payment and to obtain the consequent cancellation of a real estate mortgage is personal when the mortgagee has not foreclosed the mortgage and the mortgagor is in possession of the premises, because neither the mortgagor’s title to nor possession of the property is questioned. This characterization depended on the status of foreclosure and the absence of any dispute over ownership or possession. The Court of Appeals also noted that respondents did not challenge the validity of the real estate mortgage they entered into, as they upheld its validity and were willing to comply with their obligation under the contract, after which the mortgage should be declared without legal effect.

Outstanding Substantive Issue: Scope of the Mortgage Security

Beyond the docket fee jurisdictional matter, the record showed that another substantive dispute remained pending in the RTC: whether the mortgage secured only the P2,158,000.00 loan or whether it also covered the additional loans Ang obtained later from petitioners. Petitioners argued that the mortgage constituted a continuing security for subsequent loans obtained by Ang beyond the principal amount. Respondents disputed this by limiting their willingness to repay to the extent of P2,158,000.00. The parties acknowledged that this evidentiary and contractual issue could be ventilated in the trial court where the civil suit was pending. In light of the pending RTC proceedings and the court’s order raising the issue on 17 March 2003, the Court of Appeals avoided ruling on the merits of the mortgage’s scope, reasoning that any decision on that issue at the appellate stage would be premature and could overlook evidence beyond the mortgage deed.

Disposition by the Supreme Court

The Supreme Court denied the petition and sustained the Court of Appeals’ disposition. It held that the classification of respondents’ suit as a personal action was proper under the governing doctrine, and that the RTC had jurisdiction to proceed with the case. The Supreme Court declined to resolve the additional dispute regarding whether the mortgage secured obligations beyond the P2,158,000.00, because the civil case was still pending in the RTC and the matter had been raised before it, making any ruling at this point premature. It likewise affirmed that no reversible error attended the Court of Appeals’ treatment of the jurisdictional question.

Legal Basis and Reasoning

The Supreme Court’s reasoning rested on the controlling distinction between real actions and personal actions in the mortgage context. It treated respondents’ complaint as personal because foreclosure had not yet occurred, respondents remained in poss

...continue reading

Analyze Cases Smarter, Faster
Jur helps you analyze cases smarter to comprehend faster, building context before diving into full texts. AI-powered analysis, always verify critical details.

About Privacy Terms