Chua v. Total Office Products
REITERATIONFacts
The Antecedents: Respondent Total Office Products and Services, Inc. (TOPROS) filed a complaint against petitioner Antonio T. Chua seeking the annulment of a loan contract for P10,400,000.00 and an accessory real estate mortgage contract. TOPROS alleged that these contracts, which appeared to be executed by its president, John Charles Chang, Jr., were fictitious and that Chang, Jr. lacked the authority to enter into such transactions on behalf of the company. Procedural History: The case was initially filed before the Regional Trial Court (RTC) of Pasig City, docketed as Civil Case No. 67736. Petitioner Chua filed a motion to dismiss, arguing improper venue as the real estate mortgage involved properties in Quezon City. The RTC, through Judge Lorifel Lacap Pahimna, denied this motion, classifying the action as personal. After the denial of a motion for reconsideration, petitioner elevated the matter to the Court of Appeals via a special civil action for certiorari. The Court of Appeals dismissed the petition, finding the RTC's orders proper and citing Hernandez v. Rural Bank of Lucena, Inc. as precedent. Petitioner's subsequent motion for reconsideration was also denied. The Petition: Petitioner seeks review on certiorari of the Court of Appeals' decision and resolution. He raises two main issues: first, whether an action to annul a loan and mortgage contract alleged as fictitious is a personal or real action, and second, whether the president of TOPROS, John Charles Chang, Jr., is an indispensable party. Petitioner argues that the action is real and should have been filed in Quezon City, citing Pascual v. Pascual and Banco Español-Filipino v. Palanca. He also contends that Chang, Jr. is an indispensable party whose absence renders the proceedings void. TOPROS maintains that the action is personal and that the cited precedents are inapplicable.
Issue(s)
Whether an action to annul a loan and mortgage contract alleged as 'fictitious' for being without consideration is a personal action or a real action. Whether the person alleged to have 'lacked authority' to enter into said contracts is an indispensable party.
Ruling
The petition is denied. The assailed decision and resolution of the Court of Appeals upholding the Orders of the Regional Trial Court are affirmed.
Ratio Decidendi
On the nature of the action (Personal vs. Real): The Court reiterated the well-settled rule that an action to annul a contract of loan and its accessory real estate mortgage is a personal action. A personal action seeks the recovery of personal property, the enforcement of a contract, or the recovery of damages. Conversely, a real action involves the recovery of real property, or affects title to real property, or is for recovery of possession, partition, condemnation, or foreclosure of mortgage. The Court distinguished the present case from Pascual v. Pascual, where the action was deemed real because title and possession had already passed to the vendee, necessitating recovery. In this case, ownership of the mortgaged parcels of land remained with TOPROS, and thus no real action for recovery was involved. The Court also distinguished the case from Banco Español-Filipino v. Palanca, which involved foreclosure against a nonresident, where jurisdiction is based on the property's location. The Court found the precedent in Hernandez v. Rural Bank of Lucena, Inc. to be applicable, which held that an action for cancellation of a real estate mortgage is a personal action, as the Rules of Court only explicitly mention foreclosure of mortgage as a real action concerning mortgages. Therefore, the action for annulment of the loan and mortgage contracts falls under the provision for personal actions, making the venue proper in Pasig City where the parties reside. On the indispensable party issue: The Court clarified that an indispensable party is one without whom no final determination can be had of the action. The presence of indispensable parties is necessary to vest the court with jurisdiction. However, a person is not an indispensable party if their interest is separable and will not be directly or injuriously affected by a decree between the other parties. In this case, John Charles Chang, Jr., as the president of TOPROS who allegedly entered into the contracts without authority, acted merely as a representative. The contract clearly shows petitioner and TOPROS as the sole principal parties. Any rights or liabilities arising from the contract would bind only petitioner and TOPROS. Therefore, Chang, Jr., was not an indispensable party, as his interest was separable and his inclusion was not necessary for a complete determination of the case between the petitioner and TOPROS. This ruling is without prejudice to any separate action TOPROS might file against Chang, Jr.
Main Doctrine
An action to annul a contract of loan and its accessory real estate mortgage is a personal action, and thus the venue is determined by the residence of the parties, not the location of the property, unless the action involves foreclosure or recovery of possession of the property.