Go v. United Coconut Planters Bank
REITERATIONFacts
The Antecedents: Petitioner Jimmy T. Go and Alberto T. Looyuko were co-owners of various businesses and properties. In August 1996, they applied for and were granted an Omnibus Line accommodation of P900,000,000 by United Coconut Planters Bank (UCPB). This accommodation was secured by Real Estate Mortgages over two parcels of land located in Mandaluyong City, registered under the names of Looyuko and Noah's Ark Sugar Refinery. On July 21, 1997, UCPB cancelled the approved Omnibus Line. Subsequently, Go demanded the return of the Transfer Certificates of Title (TCTs) for the mortgaged properties, but UCPB refused. UCPB then proceeded to have two pre-signed Real Estate Mortgages notarized and registered them. On June 15, 1999, UCPB initiated an extrajudicial foreclosure of the real estate mortgage over the property covered by TCT No. 64070 due to alleged non-payment of the secured obligation. Procedural History: To prevent the foreclosure and protect his interests, petitioner Jimmy T. Go filed a complaint for Cancellation of Real Estate Mortgage and damages with a prayer for injunctive relief against UCPB and its officers before the Regional Trial Court (RTC) of Pasig City, Branch 266, docketed as Civil Case No. 67878. The amended complaint alleged Go's co-ownership of the mortgaged property, UCPB's awareness of this, the cancellation of the omnibus credit line, UCPB's refusal to return the TCTs, and the improper notarization and registration of the mortgages despite the cancellation of the credit line. UCPB filed a motion to dismiss, citing lack of jurisdiction, improper venue, failure to implead an indispensable party, improper verification, and forum shopping. The RTC granted Go's application for a preliminary injunction, enjoining the auction sale, and subsequently denied UCPB's motion to dismiss. UCPB elevated the matter to the Court of Appeals (CA) via a petition for certiorari. On July 31, 2002, the CA granted UCPB's petition, setting aside the RTC orders and directing the dismissal of Civil Case No. 67878 on the ground of improper venue. Go's motion for reconsideration was denied. The Petition: Petitioner Jimmy T. Go filed this Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the decision of the Court of Appeals. The sole issue raised is whether the CA committed reversible error in ruling that Go's complaint for cancellation of real estate mortgage is a real action, thereby determining venue based on the location of the property rather than the residence of the parties. Go contends that the action is personal, as he resides in Pasig City, and that the CA misapplied established jurisprudence. The Supreme Court, in its review, considered the nature of the action, distinguishing between real and personal actions and analyzing various precedents. The Court ultimately affirmed the CA's ruling, holding that an action for cancellation of a real estate mortgage, especially when foreclosure proceedings have been initiated, is a real action affecting title to the property and thus must be filed in the court where the property is located, which in this case is Mandaluyong City.
Issue(s)
Whether the Court of Appeals committed reversible error when it failed to apply the law and established jurisprudence by issuing the questioned resolutions finding that the case a quo is a "real action", and whether petitioner’s complaint for cancellation of real estate mortgage is a personal or real action for the purpose of determining venue.
Ruling
The Supreme Court denied the petition for lack of merit and affirmed the decision of the Court of Appeals, upholding the dismissal of Civil Case No. 67878 on the ground of improper venue.
Ratio Decidendi
On the nature of the action and venue: The Court reiterated the distinction between real and personal actions. A real action is one affecting title to or possession of real property, including foreclosure of mortgage, and must be filed in the court where the property lies. A personal action is for the recovery of personal property, enforcement of contracts, or damages, and can be filed where the plaintiff or defendant resides. The primary objective of the action determines its nature. In this case, the action for cancellation of real estate mortgage, especially in light of the initiated extrajudicial foreclosure proceedings, is fundamentally an action affecting the title to the property. The prime objective is to recover the real properties covered by the TCTs, which were already subject to foreclosure. Therefore, it is a real action. The venue was correctly determined by the Court of Appeals to be Mandaluyong City, where the subject properties are located, not Pasig City, where the petitioner resides. The Court cited several cases, including Commodities Storage & Ice Plant Corp. v. Court of Appeals, Fortune Motors (Phils.), Inc. v. Court of Appeals, and Carandang v. Court of Appeals, to support the classification of actions involving annulment of mortgage and foreclosure as real actions. The ruling in Francisco S. Hernandez v. Rural Bank of Lucena was distinguished as it involved a situation where foreclosure had not yet commenced and the primary objective was to compel acceptance of payment, making it a personal action. In the present case, foreclosure proceedings had already been initiated, making the title to the property the central issue. The Court also noted that a real estate mortgage is a real right and a real property by itself, and an action for its cancellation necessarily affects the title to the property, thus classifying it as a real action.
Main Doctrine
An action for cancellation of real estate mortgage is a real action, and thus must be filed in the court of the place where the property lies, not where the plaintiff resides.