Libiran v. Elisan Credit Corporation
REITERATIONFacts
The Antecedents: Spouses Tomas Libiran and Potenciana Feliciano (Spouses Libiran) obtained several loans from Elisan Credit Corporation (Elisan) between January 8, 2003, and June 15, 2006, with amounts totaling PHP 200,000.00, PHP 609,000.00, PHP 118,000.00, and PHP 474,000.00. These loans were secured by a promissory note and a real estate mortgage over a parcel of land. Spouses Libiran failed to pay the outstanding balances and accrued interests and penalties, amounting to PHP 885,380.00. Procedural History: Elisan filed a complaint for judicial foreclosure with the Regional Trial Court (RTC) of Quezon City. Spouses Libiran denied the allegations, claiming they did not receive any loan proceeds, were made to sign blank documents, and that Elisan was merely holding the title in trust. They also questioned the venue and alleged falsification of documents. The RTC ruled in favor of Elisan, ordering Spouses Libiran to pay the outstanding obligation and, in case of default, for the mortgaged property to be sold at public auction. The Court of Appeals (CA) affirmed the RTC Decision with modification, reducing the interest rate to 12% per annum. The Petition: Spouses Libiran filed a Petition for Review on Certiorari, raising issues on venue, jurisdiction due to failure to allege assessed value, non-payment of docket fees, denial of loan, and the alleged void nature of the mortgage contract due to Elisan's lack of lending authority. Elisan countered that the case was properly filed, the venue was not challenged timely, and its evidence prevailed over Spouses Libiran's bare denials. Elisan also presented a subsequent SEC decision regarding its authority to operate.
Issue(s)
Whether the RTC of Quezon City has jurisdiction over the complaint for judicial foreclosure of mortgage, considering the assessed value of the property and its impact on jurisdiction and docket fees. Whether the venue of the action for foreclosure of real estate mortgage was properly laid. Whether the failure to allege the assessed value of the subject property in the complaint is fatal to the plaintiff's cause of action, and the related claims of falsification and denial of the loan. Whether the interest rate imposed was unconscionable.
Ruling
The Petition is meritorious. The Decision and Resolution of the Court of Appeals are SET ASIDE, and the Complaint for judicial foreclosure of mortgage is DISMISSED without prejudice to the filing of a separate case in the proper court.
Ratio Decidendi
On the issue of jurisdiction and the nature of a judicial foreclosure suit: The Supreme Court reiterated that a complaint for judicial foreclosure of mortgage is a real action. While it is an action incapable of pecuniary estimation under Section 19(1) of Batas Pambansa Blg. 129 (BP 129), as amended, it is also a real action concerning title to or possession of real property. Therefore, pursuant to Sections 19(2) and 33(3) of BP 129, as amended by Republic Act No. 7691, the jurisdiction of the court is determined by the assessed value of the property involved. The RTC exercises exclusive original jurisdiction in civil actions involving title to, or possession of, real property where the assessed value exceeds PHP 400,000.00, while lower courts handle cases where the assessed value does not exceed PHP 50,000.00 in Metro Manila. The Court emphasized that the failure to allege the assessed value of the subject property in the complaint is fatal to the plaintiff's cause, as it prevents the determination of which tribunal has original jurisdiction. This failure also impacts the computation of docket fees. The Court cited OCA Circular No. 256-2022 for the guidelines on assessing filing fees in real actions, which requires the fair market value or zonal valuation, whichever is higher, or the stated value in the pleading. On the issue of venue: The Court found it unnecessary to delve into the issue of venue, as the primary issue of jurisdiction was determinative of the case's outcome. However, it noted that the defense of lack of jurisdiction over the subject matter may be raised at any stage of the proceedings, including on appeal, as Spouses Libiran had done by raising it in their Answer and reiterating it before the CA and the Supreme Court. On the issue of alleged falsification and denial of loan and the failure to allege assessed value: The Court did not extensively rule on the factual claims of falsification or denial of loan, as the dismissal was based on a procedural defect concerning jurisdiction. However, it noted that the CA found Elisan's documentary evidence and testimony to have greater evidentiary weight than the bare denial of Spouses Libiran. The Court also reiterated that the failure to allege the assessed value of the subject property in the complaint is fatal to the plaintiff's cause. On the issue of unconscionable interest rates: The Court affirmed the CA's modification reducing the interest rate to 12% per annum, finding the original stipulated rate of 26% per annum plus 2.5% per month penalty unconscionable. This ruling on interest rates, however, became moot due to the dismissal of the case on jurisdictional grounds.
Main Doctrine
A complaint for judicial foreclosure of mortgage is a real action, and the jurisdiction of the court is determined by the assessed value of the property involved. Failure to allege the assessed value in the complaint is fatal to the plaintiff's cause.