Fortune Motors (Phils.), Inc. v. The Honorable Court of Appeals
REITERATIONFacts
The Antecedents: Metropolitan Bank and Trust Company extended loans totaling P32,500,000.00 (or P34,150,000.00) to Fortune Motors (Phils.) Inc. between March 29, 1982, and January 6, 1984. These loans were secured by a real estate mortgage on Fortune Motors' building and lot in Makati, Rizal. Due to financial difficulties, Fortune Motors failed to pay the loans when they became due. Consequently, Metropolitan Bank initiated extrajudicial foreclosure proceedings. The mortgaged property was sold at public auction to the Bank as the highest bidder for P47,899,264.91, with the sheriff's certificate of sale registered on October 24, 1984, establishing a one-year redemption period. Procedural History: On October 21, 1985, three days before the redemption period expired, Fortune Motors filed a complaint in the Regional Trial Court of Manila, Branch IV, seeking to annul the extrajudicial foreclosure sale. Fortune Motors alleged that the foreclosure was premature, the notice of sale was incomplete, no public auction was held, and the sale price was shockingly low. Metropolitan Bank filed a motion to dismiss, arguing that the venue was improperly laid in Manila, as the property was located in Makati, making the action a real action. The trial court initially reserved its ruling on the motion to dismiss, and later denied the Bank's motion for reconsideration. Metropolitan Bank then filed a petition for certiorari and prohibition with the Court of Appeals. On July 30, 1986, the Court of Appeals granted the petition, dismissing Fortune Motors' complaint for improper venue without prejudice to its refiling in the proper court. A motion for reconsideration was denied by the Court of Appeals on October 30, 1986. The Petition: Fortune Motors (Phils.) Inc. filed this petition for review on certiorari, seeking to reverse the decision of the Court of Appeals. The core issue presented to the Supreme Court is whether Fortune Motors' action for annulment of the real estate mortgage extrajudicial foreclosure sale constitutes a personal action or a real action for venue purposes. Fortune Motors contends that the action is personal, while Metropolitan Bank argues it is a real action, requiring it to be filed in the court of the location of the property. The Supreme Court granted due course to the petition and required the parties to submit their respective memoranda.
Issue(s)
Whether the action for annulment of the real estate mortgage extrajudicial foreclosure sale is a real action for venue purposes.
Ruling
The petition is DENIED for lack of merit, and the assailed decision of the Court of Appeals is AFFIRMED.
Ratio Decidendi
On the venue of the action for annulment of the extrajudicial foreclosure sale: The Supreme Court affirmed the Court of Appeals' ruling that the action for annulment of the extrajudicial foreclosure sale is a real action. The Court reiterated the definition of a real action as one affecting title to real property, or for the recovery of possession, partition, condemnation, or foreclosure of a mortgage on real property, which must be instituted in the province where the property lies. It was held that a prayer for annulment or rescission of a contract, particularly concerning real property, does not alter the true objective of the action, which is to recover said real property. The Court emphasized that an action to annul a real estate mortgage foreclosure sale is no different from an action to annul a private sale of real property. Although Fortune Motors did not directly seek recovery of title or possession, its action for annulment and claim for damages were intrinsically linked to the issue of ownership of the building, which is considered immovable property. Therefore, the action was deemed real in nature, necessitating its filing in the proper venue, which is Makati, where the property is situated. The Court concluded that the respondent Court of Appeals did not err in dismissing the case on the ground of improper venue, as timely raised by the respondent bank.
Main Doctrine
An action for the annulment of an extrajudicial foreclosure sale of real property is a real action, and therefore must be filed in the court of the province where the property is located.