Case Summary (G.R. No. 184661)
Factual Background
On June 19, 2002, First Sarmiento Property Holdings, Inc. obtained a P40,000,000 loan from Philippine Bank of Communications, secured by a real estate mortgage covering 1,076 parcels of land; the loan was amended upward to P51,200,000 on March 15, 2003 and later to P100,000,000 on September 15, 2003. PBCOM asserted that despite demand letters, First Sarmiento failed to pay principal and accrued interest, and on January 2, 2006 it initiated extrajudicial foreclosure proceedings. The extrajudicial sale was set and, on December 29, 2011, the mortgaged properties were auctioned and sold to PBCOM as highest bidder; a certificate of sale was issued by the Ex-Officio Sheriff on January 24, 2012.
Complaint and Preliminary Relief
On December 27, 2011, First Sarmiento attempted to file a Complaint for annulment of the real estate mortgage but the Clerk of Court initially refused filing for lack of tax declarations to assess docket fees. The Executive Judge and Vice-Executive Judges of the RTC, Malolos, ruled on December 29, 2011 that the action was not capable of pecuniary estimation. On January 2, 2012, First Sarmiento filed its Complaint alleging it never received the P100,000,000 loan proceeds, prayed for annulment of the mortgage and sought a temporary restraining order and preliminary injunction to enjoin registration of the certificate of sale; it paid a filing fee of P5,545.00. Judge Renato C. Francisco issued an ex parte temporary restraining order effective for seventy-two hours, and on January 4, 2012 the RTC directed the parties to observe the status quo ante.
Trial Court Dismissal and Motion for Reconsideration
In opposition, PBCOM contended that the RTC lacked jurisdiction because the action was a real action and the correct docket fees should have been based on the fair market value of the mortgaged properties; it further argued that the extended status quo order improperly prolonged the TRO beyond the prescribed period. On April 3, 2012 Branch 11, RTC, Malolos dismissed the Complaint for lack of jurisdiction for failure to pay appropriate filing fees, citing Home Guaranty Corporation v. R. II Builders, Inc. and National Housing Authority. The RTC denied reconsideration on July 25, 2012.
Petition for Review and Procedural Posture in the Supreme Court
First Sarmiento filed a verified petition for review on certiorari under Rule 45 on August 17, 2012, asserting that its Complaint was incapable of pecuniary estimation and noting the trial court executive judges had so found. The petition raised only questions of law, including a contention that the RTC misapplied Home Guaranty and that En Banc precedent such as Lu v. Lu Ym and Bunayog v. Tunas supported its position. PBCOM filed a comment asserting the Complaint hid a true objective to recover title or possession and that the action was therefore a real action.
Issue Presented
The sole issue adjudicated by the Court was whether the Regional Trial Court acquired jurisdiction over First Sarmiento’s Complaint for annulment of real estate mortgage given the filing fees paid, which required determining whether the subject of the litigation was capable of pecuniary estimation.
Governing Rules on Jurisdiction and Nature of Action
The Court reiterated the settled principle that subject matter jurisdiction is determined by the material allegations of the complaint and the relief sought, and that courts acquire jurisdiction over matters where the subject of the litigation is incapable of pecuniary estimation as provided by Batas Pambansa Blg. 129, sec. 19(1). The controlling test is the nature of the principal action or remedy prayed for: if the principal relief is for recovery of a sum of money or real property, the action is capable of pecuniary estimation; if the principal relief is something else and any money or property claim is merely consequential or incidental, the action is incapable of pecuniary estimation, as articulated in Lapitan v. Scandia and reaffirmed in later decisions including Lu v. Lu Ym.
Application to the Complaint — Principal Relief Analyzed
A close reading of First Sarmiento’s Complaint demonstrated that the principal relief sought was annulment of the mortgage for want of consideration because the loan proceeds were allegedly not delivered, and not the reconveyance or recovery of the mortgaged properties. The Complaint’s allegations and prayers sought removal of the mortgage lien and injunctive relief to prevent foreclosure, not a declaration of title or recovery of possession. Consequently, the Court concluded the action’s subject was incapable of pecuniary estimation.
Effect of Extrajudicial Sale and Certificate of Sale
The Court examined Act No. 3135, sec. 6, and Mahinay v. Dura Tire & Rubber Industries, Inc., for the proposition that the date of sale in an extrajudicial foreclosure is the date the certificate of sale is registered with the Register of Deeds; until registration the sale does not convey title. Because the Clerk and sheriff were restrained from registering the certificate of sale while the Complaint was pending and because the certificate was issued only after the Complaint had been filed, First Sarmiento retained ownership and possession at the time of filing, supporting the conclusion that the Complaint did not seek reconveyance and was not a real action.
Docket Fees and Jurisdictional Consequences
The Court applied Fedman Development Corporation v. Agcaoili to hold that when the docket fees assessed by the clerk were paid, the trial court acquired jurisdiction and any deficiency should be recovered as an additional assessment or lien on the judgment award rather than by dismissal, absent bad faith to defraud the government. There was no evidence of bad faith by First Sarmiento in paying the clerk’s computed fee; therefore dismissal for nonpayment of correct fees was improper.
Temporary Restraining Order and Status Quo Order
Although not raised by the parties, the Court reviewed the RTC’s January 4, 2012 order directing the status quo ante and found it unlawful to effectively extend the seventy-two hour TRO indefinitely without compliance with Rule 58, Section 5. The Court emphasized that a TRO is temporally limited and cannot be extended to supplant a preliminary injunction; absent a timely preliminary injunction the TRO automatically expires. The RTC’s indefinite status quo order thus contravened the Rules and the TRO had long expired in the absence of a preliminary injunction.
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Case Syllabus (G.R. No. 184661)
Parties and Procedural Posture
- First Sarmiento Property Holdings, Inc. filed a Complaint for annulment of real estate mortgage with prayer for temporary restraining order and preliminary injunction against Philippine Bank of Communications.
- The Clerk of Court initially refused to accept the Complaint for lack of tax declarations needed to assess docket fees, and petitioner thereafter paid assessed fees of P5,545.00.
- Branch 11, Regional Trial Court, Malolos City dismissed the Complaint for lack of jurisdiction for failure to pay appropriate filing fees and denied reconsideration.
- First Sarmiento brought a petition for review under Rule 45 directly to the Supreme Court raising only questions of law concerning the trial court’s jurisdiction.
Key Facts
- First Sarmiento and PBCOM entered a loan agreement secured by mortgage, which was amended to increase the principal to P100,000,000.00.
- PBCOM filed an extrajudicial foreclosure petition and scheduled an auction of the mortgaged properties for December 29, 2011.
- First Sarmiento attempted to file its annulment complaint before the auction and obtained an ex-parte 72-hour temporary restraining order and later a court order directing status quo ante.
- The mortgaged properties were auctioned on December 29, 2011, but the certificate of sale was issued and registered only after the Complaint was filed, which under Act No. 3135 and controlling jurisprudence meant redemption and transfer had not yet taken effect.
Legal Issue
- Whether the Regional Trial Court acquired jurisdiction over First Sarmiento’s Complaint for annulment of real estate mortgage given the amount of docket fees paid and the character of the action as capable or incapable of pecuniary estimation.
Contentions
- First Sarmiento contended that its action for annulment of mortgage was an action incapable of pecuniary estimation because it sought only removal of the lien and did not seek reconveyance, ownership, or possession of the properties.
- PBCOM contended that the Complaint masked a real action to recover title and possession and thus required docket fees computed on the fair market value of the mortgaged properties, citing Home Guaranty Corporation v. R-II Builders, Inc..
- First Sarmiento also emphasized the Executive Judge and Vice-Executive Judges of the RTC had earlier ruled the action incapable of pecuniary estimation.
Statutory Framework
- Rule 45 and Rule 41, Section 2(c) of the Rules of Court govern direct appeals to the Supreme Court where only questions of law are raised.
- Batas Pambansa Blg. 129 defines the jurisdictional division between first and second level courts and grants Regional Trial Courts exclusive original jurisdiction over civil actions the subject of which is incapable of pecuniary estimation.
- Rule 58, Section 5 of the Rules of Court prescribes the limited lifespans and procedures for temporary restraining orders and preliminary injunctions.
- Act No. 3135, Section 6 governs redemption after extrajudicial sale and establishes that transfer of registered land takes effect only upon registration o