G.R. No. L-48117 - Tenorio vs. Pano

Case Summary (G.R. No. L-48117)

Factual Background

Under the Subdivision Contract (Annex “A”), the petitioner was to obtain full possession of the Gumaca land in order to survey, subdivide it into commercial and residential lots, and to execute specified improvements, including the provision of roads of ten to fifteen meter-wide avenues (with no road less than ten meters wide), water and electrical facilities (if the electrical plant so permitted), an adequate drainage system, and other improvements required by the National Planning Commission. The petitioner also undertook to bear the expenses in connection with the subdivision, including real estate taxes and the other specified impositions while the lots remained unsold. The petitioner retained discretion over the development and sale of the lots, including fixing prices.

The respondents, for their part, retained title over the land and arranged that sales would be made in their names. They also reserved 9,622 sq.m. to be located by both parties. In return, they were to receive a fixed participation equal to forty percent (40%) of the gross receipts of the subdivision based on actual sales prices.

After alleged non-compliance by the petitioner, the respondents filed a complaint for accounting, breach of contract and damages and termination of contract in Civil Case No. 23788. The complaint was filed on September 9, 1977 before the Court of First Instance of Rizal, Branch I, Quezon City. The respondents alleged that the petitioner failed to (a) construct the required roadways, water and electrical facilities, and drainage system; (b) pay the relevant tax assessments, fees, and impositions; and (c) provide full accounting of sales to determine their 40% share in gross receipts.

The respondents sought termination of the contract and the return or turnover of torrens titles for the lots, the corresponding contracts of sale, records, and other pertinent documents. They also prayed for damages, including moral damages of P20,000.00, exemplary damages of P20,000.00, compensatory damages of P16,000.00, attorney’s fees, and P30,000.00 for unrealized profits.

Proceedings on the Motion to Dismiss

Upon being served with summons, the petitioner filed a Motion to Dismiss grounded on (1) improperly laid venue, (2) no valid cause of action, and (3) the action being barred by estoppel and laches.

On January 26, 1978, the respondent judge issued an order deferring resolution of the motion to dismiss until the trial on the merits. On March 20, 1978, the judge denied the petitioner’s motion for reconsideration.

The petitioner then filed the present petition for review on certiorari. After the Court issued a resolution on June 7, 1978 requiring a comment, the respondents complied. The First Division thereafter gave due course by a resolution dated July 24, 1978, requiring both parties to file memoranda within thirty (30) days from notice. The petitioner filed his memorandum on October 2, 1978, while the private respondents failed to file their memorandum. The matter was thus submitted for decision without the private respondents’ memorandum based on the resolution dated November 10, 1978.

Issue Framed for Resolution

The principal issue was whether the respondents’ complaint constituted a real action—as the petitioner contended—or a personal action, as the respondent court held. This determination was crucial because the classification of the action would dictate the correct venue under the Rules of Court.

The Parties’ Positions

The petitioner maintained that the action was, in substance, a real action. Although the complaint did not expressly pray for recovery of possession, the petitioner argued that the termination or rescission of the Subdivision Contract would necessarily require delivery of possession of the land and the turnover of the torrens titles and related documents to the respondents. He also asserted that venue should therefore be in Quezon Province, where the property was situated, rather than in the Rizal court sitting in Quezon City.

The respondents, through the posture adopted below and the direction of the assailed orders, treated the complaint as not warranting a dismissal for improper venue at the pleading stage and aligned the action with the court’s view that it was not properly classified as a real action requiring litigation in the place where the land lay.

Legal Basis and Reasoning

The Court held that the property subject of the dispute was situated in Gumaca, Quezon, and that the Subdivision Contract itself was executed there. The Court further reasoned that the respondents’ complaint, although framed as accounting, breach of contract, damages, and termination, necessarily implied an action for the recovery of possession because the relief of contract termination (or rescission) would entail delivery of possession of the land—at least the unsold lots—and the corresponding delivery of Torrens titles.

The Court treated the damages claims as incidental to the primary controversy involving the return of property rights and possession arising from the alleged breach and the requested termination of the contract. It emphasized that, under venue rules, real actions should be filed in the province where the land is situated. It relied on De Jesus v. Coloso (1 SCRA 274 [1961]), where the Court had held that when a contract is alleged to have been breached and the other party demands rescission and return of the property subject thereof, the action becomes one for recovery of possession of land, and should thus be filed in the place where the property is located under Section 3 of Rule 5 of the Rules of Court. The Court also reiterated Punsalan, Jr. vs. Vda. de Lacsamana (121 SCRA 336 [1983]), which reaffirmed the same doctrine.

The Court additionally explained that venue rules are anchored on considerations of convenience and s

Case Syllabus (G.R. No. L-48117)

Parties and Procedural Posture

Briccio B. Tenorio filed a petition for review on certiorari seeking reversal of two interlocutory orders issued by Hon. Ernani Cruz Pano, then District Judge, CFI-Rizal, Branch XVIII.
The assailed orders were: the January 26, 1978 Order deferring resolution of the Motion to Dismiss until trial on the merits, and the March 20, 1978 Order denying the Motion for Reconsideration of the January 26, 1978 Order.
The private respondents were Lagrimas C. Lagdameo, Sol C. Lagdameo, and the heirs of the late Alfredo C. Lagdameo namely Milagros R. Lagdameo, Marilou Lagdameo, Elle Rose Lagdameo, Senonica Lagdameo, Sol Carmen Lagdameo, and Maria Teresa Lagdameo.
The respondents had sued Tenorio as defendant below for accounting, breach of contract and damages and termination of contract in Civil Case No. 23788 before the Court of First Instance of Rizal, Branch I, Quezon City.
After the Supreme Court gave the petition due course and required simultaneous memoranda, private respondents failed to file their memorandum, and the case was submitted for decision without it.

Key Factual Allegations

The parties entered into a Subdivision Contract dated October 7, 1956 between the petitioner-developer and the respondent-owners.
The contract gave the Capitalist full possession of land in Gumaca, Quezon Province to survey, subdivide into commercial and residential lots, and sell them after improvements were introduced.
The Subdivision Contract required, among other obligations, that the subdivision be provided with specified avenues and roads widths, water and electrical facilities if feasible, an adequate drainage system, and other improvements required by the National Planning Commission.
The contract imposed expenses on the Capitalist, including the payment of real estate taxes and other impositions while the lots remained unsold.
The contract granted the Capitalist discretion in development and sale, including fixing prices, while the Owners retained title and required that sales be made in their names.
The Owners were to receive a fixed participation equal to 40% of gross receipts based on actual sales prices and were to hold in reserve 9,622 sq.m. as mutually determined.
On September 9, 1977, private respondents filed their complaint alleging petitioner’s failure to: construct required roads and utilities; pay tax assessments and impositions; and render full accounting of sales to determine the 40% share.
Private respondents demanded termination of the contract, turnover of torrens titles to the lots, delivery of contracts of sale and records, and payment of damages including moral damages, exemplary damages, compensatory damages, attorney’s fees, and unrealized profits.

Grounds for Dismissal

The petitioner moved to dismiss on three grounds: improper venue, no valid cause of action, and that the action was barred by estoppel and laches.
The trial court, in its January 26, 1978 Order, deferred resolution of the motion to dismiss until the trial on the merits because the grounds relied upon were not considered indubitable.
The trial court denied reconsideration in its March 20, 1978 Order, prompting the petitioner’s petition for review on certiorari.

Statutory and Rules on Venue

The case turned on whether the action was a real action or a personal action, because the classification determines the proper venue.
The decisio