Case Summary (G.R. No. 76431)
Material Facts
Between March 29, 1982 and January 6, 1984, Metropolitan Bank extended loans to Fortune Motors totaling approximately P32,500,000 (borrower’s figure) or P34,150,000 (bank’s figure), secured by a real estate mortgage on the Fortune Building and lot in Makati. Due to nonpayment, the bank initiated extrajudicial foreclosure. After notices, publication, and posting, the property was sold at public auction to the bank for P47,899,264.91. The sheriff’s certificate of sale was registered October 24, 1984, with a one-year redemption period expiring October 24, 1985. Fortune Motors filed a complaint to annul the extrajudicial foreclosure sale on October 21, 1985, three days before the redemption period lapsed, alleging premature foreclosure, defective publication, absence of public auction, and a shockingly low sale price.
Procedural History
Fortune Motors filed its annulment complaint in the RTC of Manila, Branch IV. Before summons was served, the bank moved to dismiss for improper venue on the ground that the mortgaged real property was situated in Makati and thus the proper venue was the RTC of Makati. The trial court issued an order on January 8, 1986 reserving the venue question until after trial, and denied the bank’s motion for reconsideration on May 28, 1986. The bank petitioned the Court of Appeals for certiorari and prohibition; the Court of Appeals granted relief, dismissed the complaint without prejudice for being filed in an improper venue, and ordered costs against the lower court. Fortune Motors’ motion for reconsideration in the Court of Appeals was denied on October 30, 1986. Fortune Motors then sought review in the Supreme Court.
Central Legal Issue
Whether an action to annul an extrajudicial foreclosure sale of real property is a “personal action” (permitting venue where the defendant or plaintiff resides) or a “real action” affecting title to real property that must be filed in the court of the province where the property or any part thereof lies (Rule 4, Secs. 1–2, Revised Rules of Court).
Governing Law on Venue and Nature of Actions
Rule 4, Sec. 1 (personal actions) permits instituting personal actions where the defendant may be found or where a plaintiff may elect to sue. Rule 4, Sec. 2 specifies that real actions affecting title to real property, recovery of possession, partition, condemnation, or foreclosure of a mortgage must be instituted in the court of the province where the property or any part thereof is located. Rule 16, Sec. 1 requires that venue objections be timely raised. The jurisprudence cited establishes that an action to annul or rescind a sale of real property, including annulment of a foreclosure sale, is, in substance and objective, an action affecting title to real property and thus a real action.
Analysis of Nature of the Action
The courts below treated the annullment of an extrajudicial foreclosure sale as equivalent in character to an annulment of a private sale of immovable property. Even though Fortune Motors’ complaint sought annulment and damages rather than explicitly seeking recovery of title or possession, the courts emphasized that the prime objective and fundamental nature of the action was to contest and regain title to the immovable property (the Fortune Building), because annulment of the foreclosure sale would impact ownership and title. The presence of a claim for damages does not alter the character of the suit when the principal relief sought is the annulment of a conveyance affecting immovable property.
Application of Preced
...continue readingCase Syllabus (G.R. No. 76431)
Facts
- From March 29, 1982 up to January 6, 1984, private respondent Metropolitan Bank extended various loans to petitioner Fortune Motors in the total sum of P32,500,000.00 (according to the borrower) or P34,150,000.00 (according to the Bank).
- The loan was secured by a real estate mortgage on the Fortune Building and lot located in Makati, Rizal.
- Petitioner experienced financial difficulties and was unable to pay the loan which became due.
- For failure to pay, the respondent bank initiated extrajudicial foreclosure proceedings.
- After notices were served, posted, and published, the mortgaged property was sold at public auction to the mortgagee Bank as the highest bidder for the price of P47,899,264.91.
- The sheriff’s certificate of sale was registered on October 24, 1984, with the one-year redemption period to expire on October 24, 1985.
- On October 21, 1985, petitioner Fortune Motors filed a complaint for annulment of the extrajudicial foreclosure sale, three days before the expiration of the redemption period.
- Petitioner’s complaint alleged: the foreclosure was premature because the obligation was not yet due; the publication of the notice of sale was incomplete; there was no public auction; and the price for which the property was sold was “shockingly low.”
Procedural History
- Before summons could be served, the private respondent Bank filed a motion to dismiss the complaint on the ground of improper venue, asserting the action should have been filed in the Regional Trial Court of Makati because the realty is situated in Makati.
- Petitioner opposed the motion, characterizing its action as “a personal action” and stressing that the issue was the validity of the extrajudicial foreclosure proceedings to obtain a new one-year redemption period.
- On January 8, 1986, the lower court issued an order reserving resolution of the Bank’s motion to dismiss until after trial on the merits, finding the defendant’s grounds not clear and indubitable.
- The Bank’s motion for reconsideration of the January 8, 1986 order was denied by the lower court in an order dated May 28, 1986.
- On June 11, 1986, the respondent Bank filed a petition for certiorari and prohibition in the Court of Appeals.
- On July 30, 1986, the Court of Appeals granted the petition and dismissed Civil Case No. 85-33218, ruling the venue was improper and ordering costs against the private respondent; the dismissal was without prejudice to refiling in the proper venue.
- Petitioner filed a motion for reconsideration on August 11, 1986; the Court of Appeals denied the motion by resolution dated October 30, 1986.
- Petitioner filed a petition for review on certiorari with the Supreme Court. On June 10, 1987, the Supreme Court gave due course to the petition, required memoranda and a costs deposit, and the parties filed memoranda; the case was submitted for resolution in a resolution dated December 14, 1987.
- The Supreme Court rendered its decision on October 16, 1989.
Issue Presented
- Whether petitioner’s action for annulment of the real estate mortgage extrajudicial foreclosure sale of the Fortune Building is a personal action or a real action for purposes of venue.
Parties’ Contentions (as reflected in the record)
- Petitioner Fortune Motors:
- Contended the action is a personal action.
- Argued the action seeks annulment of the foreclosure proceedings so that petitioner may have a new one-year period to redeem.
- Alleged substantive defects in the foreclosure: foreclosure was premature, publication of notice incomplete, there was no public auction, and the sale price was shockingly low.
- Respondent Metropolitan Bank:
- Contended the venue was improperly laid in Manila because the realty covered by the mortgage is situated in Makati; therefore, the action should be filed in the Regional Trial Court of Makati.
- Timely raised the improper-venue objection pursuant to applicable procedural rules.
Applicable Law and Doctrines (as stated in the decision)
- Distinction between real actions and personal actions for venue purposes:
- A real action includes actions affecting title to real property, for recovery of possession, for partition or condemnation, or foreclosure of mortgage on real property (Sec. 2(a), Rule 4, as cited).
- Real actions affecting title to or for recovery of possession of real property must be instituted in the Court of First Instance of the province where the property or any part thereof lies (authorities cited in the decision: Enriquez v. Macadaeg; Garchitorena v. Register of Deeds).