G.R. No. 256924 - Spouses Veloso vs. Banco de Oro Unibank, Inc.

Case Summary (G.R. No. 256924)

Factual Background

Spouses Fortunato G. Veloso and Adeline C. Veloso executed a Mortgage Loan Agreement on June 25, 2010 to secure a P5,184,900.00 real estate loan from Banco De Oro Unibank, Inc. and constituted a real estate mortgage over condominium units and a parking area covered by Condominium Certificates of Title Nos. N-57600, N-57476, N-57475, and N-57490 recorded with the Registry of Deeds, Quezon City. After default, Banco De Oro Unibank, Inc. filed an extrajudicial foreclosure petition before the Clerk of Court of the RTC of Quezon City on October 10, 2012 (FRE No. 9302). The properties were auctioned on November 27, 2012, where Banco De Oro Unibank, Inc. emerged as the highest bidder; a certificate of sale issued to the bank was annotated on the CCTs on December 27, 2012. Meanwhile, the Spouses Veloso filed a separate complaint in Branch 147, RTC, Makati City on November 23, 2012 (Civil Case No. 12-1148) contesting the validity of the loan documents.

Complaint and Reliefs Sought

In Civil Case No. 13-01126 filed June 19, 2013, Spouses Fortunato G. Veloso and Adeline C. Veloso sought declaratory and injunctive reliefs styled as: "Declaration of Nullity of Real Estate Mortgage, Extrajudicial Foreclosure of Real Estate Mortgage, Certificate of Sale, Registration of Certificate of Sale, and All Related Entries." The complaint alleged that the mortgage and related stipulations were null and void ab initio as unconscionable and contrary to law and public policy. The principal prayers requested annulment of the mortgage, annulment of the foreclosure proceedings and certificate of sale, cancellation of registration and annotations in the Registry of Deeds, permanent injunction against enforcement of any rights arising from the foreclosure, and an alternative remedy granting the plaintiffs a right to redeem the properties within a specified one-year period and to redeem one or more of the distinct properties with proportional fixation of redemption amounts.

Procedural History

Branch 97, RTC, Quezon City dismissed the complaint by Resolution dated March 18, 2019 for lack of jurisdiction on the ground that the action concerned title to or interest in real property and that the plaintiffs failed to allege the assessed value of the properties. The RTC denied reconsideration by Order dated July 29, 2019. Spouses Fortunato G. Veloso and Adeline C. Veloso filed a petition for review under Rule 41 with the Court of Appeals, which affirmed the RTC in its Decision dated November 16, 2020 and denied reconsideration in its June 16, 2021 Resolution. The Spouses Veloso then filed a petition for review on certiorari under Rule 45, Rules of Court before the Supreme Court, which promulgated its decision on June 14, 2023.

Parties' Contentions

Spouses Fortunato G. Veloso and Adeline C. Veloso maintained that the action is essentially personal, rooted in privity of contract, and aims primarily at declaring the mortgage contract void rather than recovering title or possession; they asserted that a declaration of nullity is incapable of pecuniary estimation and therefore cognizable by the RTC. In the alternative, they argued that the assessed value could be inferred from the attachments to the complaint, notably the Disclosure Statement on Loan/Credit Transaction showing the P5,184,900.00 loan, invoking jurisprudence such as Agarrado v. Librando-Agarrado and Foronda-Crystal v. Son. Banco De Oro Unibank, Inc. countered that the complaint directly affects title to and possession of real property because the bank acquired title as highest bidder and that the complaint seeks to recover ownership and possession; consequently, the plaintiffs’ failure to allege the assessed value of the properties was fatal to jurisdiction.

Issue Presented

The sole issue presented to the Supreme Court was whether Branch 97, RTC, Quezon City acquired jurisdiction over the subject matter of Civil Case No. 13-01126.

Ruling of the Supreme Court

The Supreme Court denied the petition and affirmed the Court of Appeals and the RTC. The Court held that the action is a real action affecting title to or possession of real property and that the RTC lacked jurisdiction because the complaint failed to allege the assessed value of the mortgaged properties as required by Section 19 and Section 33 of BP 129, as amended by RA 7691.

Legal Reasoning

The Court reiterated the settled rule that the nature of an action and the court with exclusive original jurisdiction are determined by the material allegations of the complaint, the principal relief prayed for, and the law in effect when the action was filed. Citing authorities including Heirs of Sps. Ramiro v. Sps. Bacaron and First Sarmiento Property Holdings, Inc. v. Philippine Bank of Communications, the Court explained that if the principal relief directly affects recovery of real property or title thereto the action is a real action even if consequential monetary claims may arise. The Court found that the allegations and prayers in the complaint—seeking annulment of the mortgage, cancellation of the foreclosure sale and certificate of sale, recall or cancellation of registry annotations, permanent injunctive reliefs preventing the bank from enforcing rights, and alternative prayers fixing redemption rights—demonstrated that the underlying thrust was the recovery of ownership and possession of the mortgaged properties rather than a mere contractual nullity. The Court observed that ownership had already been conveyed to Banco De Oro Unibank, Inc. upon issuance and registration of the certificate of sale, and that a declaration of nullity or validity of the foreclosure sale would directly aff

Case Syllabus (G.R. No. 256924)

Parties and Procedural Posture

SPOUSES FORTUNATO G. VELOSO * AND ADELINE C. VELOSO, PETITIONERS filed Civil Case No. 13-01126 in Branch 97, RTC, Quezon City seeking annulment of a real estate mortgage, extrajudicial foreclosure, certificate of sale, registration of certificate of sale, and related entries, with damages and injunctive relief.
BANCO DE ORO UNIBANK, INC., CLERK OF COURT AND EX-OFFICIO SHERIFF AND JOHN DOE, RESPONDENTS answered and moved to dismiss for lack of jurisdiction on the ground that the complaint involved title to or interest in real property without alleging assessed value.
The RTC dismissed the complaint for lack of jurisdiction in a Resolution dated March 18, 2019, and denied reconsideration in an Order dated July 29, 2019.
Petitioners elevated the case to the Court of Appeals by a petition under Rule 41, Rules of Court, which affirmed the RTC in a Decision dated November 16, 2020, and denied reconsideration in a Resolution dated June 16, 2021.
Petitioners filed a petition for review on certiorari under Rule 45, Rules of Court, which the Supreme Court resolved by denying the petition and affirming the rulings below.

Key Factual Allegations

Petitioners executed a Mortgage Loan Agreement on June 25, 2010 to secure a P5,184,900.00 real estate loan from BANCO DE ORO UNIBANK, INC. and mortgaged condominium units covered by CCT Nos. N-57600, N-57476, N-57475, and N-57490 recorded in the Registry of Deeds of Quezon City.
After default, respondent BDO filed a petition for extrajudicial foreclosure (FRE No. 9302) on October 10, 2012, and the mortgaged properties were publicly auctioned on November 27, 2012.
Respondent BDO emerged as the highest bidder, a certificate of sale issued to BDO was annotated on the CCTs on December 27, 2012, and BDO sent petitioners a Notice to Redeem dated May 30, 2013.
Petitioners previously filed a Complaint for Accounting and related reliefs in Branch 147, RTC, Makati City docketed as Civil Case No. 12-1148, challenging the legality and unconscionability of the promissory notes and related documents.
Petitioners filed the instant Complaint on June 19, 2013 alleging nullity ab initio of the mortgage, extrajudicial foreclosure, certificate of sale, and registration and seeking injunctive and alternative redemption reliefs.
The Complaint attached a Disclosure Statement on Loan/Credit Transaction reflecting the loan amount, which petitioners argued allowed inference of the assessed value of the mortgaged properties.

Issues

The sole issue presented was whether the Regional Trial Court of Quezon City acquired jurisdiction over the subject matter of Civil Case No. 13-01126.

Contentions of the Parties

Petitioners contended that the action is essentially a personal action for the declaration of nullity of a contract that is incapable of pecuniary estimation and therefore properly cognizable by the RTC irrespective of assessed value.
Petitioners alternatively argued that, if the complaint were a real action, the assessed value of the mortgaged properties could be inferred from attachments to the complaint, relying on Agarrado v. Librando-Agarrado and Foronda-Crystal v. Son.
Respondent BDO maintained that the complaint was a real action affecting title to or possession of real property because its principal thrust was to recover ownership and possession of the mortgaged properties acquired by BDO at auction.
Respondent BDO argued that petitioners failed to allege the required assessed value, which was fatal to jurisdiction under the statutory scheme.

Statutory Framework

The RTC’s exclusive original