First Sarmiento Property Holdings v. Philippine Bank of Communications
ABANDONMENTFacts
The Antecedents: First Sarmiento Property Holdings, Inc. (First Sarmiento) obtained a P40,000,000.00 loan from Philippine Bank of Communications (PBCOM) on June 19, 2002, which was secured by a real estate mortgage over 1,076 parcels of land. The loan agreement was subsequently amended twice, increasing the principal amount to P51,200,000.00 and later to P100,000,000.00. PBCOM initiated an extrajudicial foreclosure of the real estate mortgage on January 2, 2006, citing First Sarmiento's failure to pay the principal amount and accrued interest despite several demand letters. Procedural History: First Sarmiento attempted to file a Complaint for annulment of the real estate mortgage on December 27, 2011, but the Clerk of Court refused to accept it due to insufficient docket fees. Subsequently, on December 29, 2011, the Executive Judge and Vice-Executive Judges of the Regional Trial Court (RTC) of Malolos City, Bulacan, ruled that First Sarmiento's action was incapable of pecuniary estimation. On the same day, the mortgaged properties were auctioned and sold to PBCOM. First Sarmiento filed its Complaint for annulment of the real estate mortgage and its amendments on January 2, 2012, paying P5,545.00 in filing fees. The RTC, however, dismissed the Complaint for lack of jurisdiction on April 3, 2012, ruling that the action was a real action and the appropriate filing fees were not paid. The RTC denied First Sarmiento's motion for reconsideration on July 25, 2012. The Petition: First Sarmiento filed a Petition for Review under Rule 45 of the Rules of Court, directly assailing the RTC's dismissal. Petitioner argues that its Complaint for annulment of the real estate mortgage was an action incapable of pecuniary estimation, as it did not seek to recover ownership or possession of the mortgaged properties but merely to remove the lien. Petitioner contends that the RTC erred in relying on a division ruling of the Supreme Court (Home Guaranty Corporation v. R. II Builders, Inc.) which, according to petitioner, cannot overturn a doctrine established by the Supreme Court En Banc. Petitioner asserts that its action was primarily to question the validity of the mortgage, not to recover property, and that it paid the docket fees assessed by the clerk of court. The Court is asked to determine if the RTC acquired jurisdiction over the Complaint.
Issue(s)
Whether the Regional Trial Court acquired jurisdiction over First Sarmiento's Complaint for annulment of real estate mortgage. Whether the action for annulment of real estate mortgage is an action capable or incapable of pecuniary estimation; and whether the RTC erred in dismissing the Complaint for lack of jurisdiction based on insufficient docket fees. Whether the RTC's order to observe the status quo ante indefinitely extended the temporary restraining order beyond its legal limit. Whether the contrary rule espoused in Home Guaranty Corporation v. R-II Builders, Inc. should be set aside.
Ruling
The Petition is GRANTED. The assailed Decision and Order of the Regional Trial Court are REVERSED and SET ASIDE. The case is REMANDED to the Regional Trial Court for continued trial.
Ratio Decidendi
On the nature of the action and jurisdiction: The Court held that to determine if an action is capable or incapable of pecuniary estimation, the nature of the principal action or relief sought must be ascertained. If the principal relief is for the recovery of a sum of money or real property, the action is capable of pecuniary estimation. However, if the principal relief is not for the recovery of money or real property, even if a claim over a sum of money or real property results as a consequence, the action is incapable of pecuniary estimation. In this case, First Sarmiento's Complaint assailed the validity of the loan contract and mortgage because it allegedly never received the loan proceeds, not to recover ownership or possession of the properties. The primary relief sought was the annulment of the mortgage, making it an action incapable of pecuniary estimation. The Court reiterated that an action for cancellation of mortgage has a subject that is incapable of pecuniary estimation, citing Far East Bank and Trust Company v. Shemberg Marketing Corporation and Bunayog v. Tumas. On the nature of the action, dismissal for lack of jurisdiction, and docket fees: The Court noted that even if the properties were foreclosed, the certificate of sale was only issued to PBCOM after the Complaint was filed. Since the certificate of sale was not registered with the Registry of Deeds due to the TRO and the status quo ante order, the ownership and possession of the properties remained with First Sarmiento. This supported its claim that it did not seek reconveyance or assert ownership when it filed its Complaint, as it still enjoyed ownership and possession. The registration of the certificate of sale is mandatory for the sale to take effect as a conveyance and for the redemption period to begin. The Court found that First Sarmiento paid the docket fees as assessed by the clerk of court. Even if there was a deficiency, the case should not have been dismissed outright but should have imposed the payment of additional docket fees as a lien on the judgment award, absent bad faith or intent to defraud the government. The Court found no evidence of bad faith on the part of First Sarmiento. On the status quo ante order: The Court found that the RTC's January 4, 2012 order directing the parties to observe the status quo ante, effectively extending the 72-hour ex-parte TRO indefinitely, was a contravention of Rule 58, Section 5 of the Rules of Court. A temporary restraining order has a limited lifespan and cannot be extended indefinitely to take the place of a writ of preliminary injunction. The Court emphasized that lower courts must strictly comply with the rules regarding injunctive reliefs and avoid erroneous extensions that disregard the sunset clause inherent in a TRO. On the modification of jurisprudence: The Court explicitly stated that the contrary rule espoused in Home Guaranty Corporation v. R-II Builders, Inc. is set aside. The Court reaffirmed that the nature of an action is determined by the principal relief sought, irrespective of other causes of action that may arise as a consequence. Home Guaranty erred in treating an action for annulment or rescission of contract as a real action simply because it was accompanied by a prayer for conveyance of real property. The Court stressed that subject matter jurisdiction cannot be dependent on the supposed ultimate motive or true objective of the complaint, as this requires speculation and may lead to impropriety.
Main Doctrine
The nature of an action is determined by the principal relief sought in the complaint, irrespective of other causes of action that may arise as a consequence. An action for annulment of real estate mortgage, where the principal relief sought is to assail the validity of the mortgage contract and not to recover ownership or possession of the property, is an action incapable of pecuniary estimation. The ruling in Home Guaranty Corporation v. R-II Builders, Inc. is modified to the extent that it erred in treating an action for annulment or rescission of contract as a real action solely because it was accompanied by a prayer for conveyance of real property.