Fortune Motors Inc v. CA (1989) Paras, J.

Facts: From 1982 up to 1984, MetroBank extended

various loans to Fortune Motors in the total sum of
P32,500,000.00 (according to the borrower; or
P34,150,000.00 according to the Bank) which loan
was secured by a real estate mortgage on the Fortune
building and lot in Makati, Rizal. Due to financial
difficulties and the onslaught of economic recession,
the petitioner was not able to pay the loan which
became due.
For failure of the petitioner to pay the loans, the
respondent bank initiated extrajudicial foreclosure
proceedings. After notices were served, posted, and
published, the mortgaged property was sold at public
auction for the price of P47,899,264.91 to mortgagee
Bank as the highest bidder. The sheriff's certificate of
sale was registered on October 24, 1984 with the oneyear redemption period to expire on October 24,1985.
On October 21, 1985, three days before the
expiration of the redemption period, petitioner
Fortune Motors filed a complaint for annulment of
the extrajudicial foreclosure sale alleging that the
foreclosure was premature because its obligation to
the Bank was not yet due, the publication of the
notice of sale was incomplete, there was no public
auction, and the price for which the property was sold
was "shockingly low".
Before summons could be served private respondent
Bank filed a motion to dismiss the complaint on the
ground that the venue of the action was improperly
laid in Manila for the realty covered by the real estate
mortgage is situated in Makati, therefore the action to
annul the foreclosure sale should be filed in the
Regional Trial Court of Makati. The motion was
opposed by petitioner Fortune Motors alleging that its
action "is a personal action" and that "the issue is the
validity of the extrajudicial foreclosure proceedings"
so that it may have a new one year period to redeem.
Real actions or actions affecting title to, or for the
recovery of possession, or for the partition or
condemnation of, or foreclosure of mortgage on real
property, must be instituted in the Court of First
Instance of the province where the property or any

MQP 12-11-13

part thereof lies. (Enriquez v. Macadaeg, 84 Phil.

674,1949; Garchitorena v. Register of Deeds, 101
Phil. 1207, 1957) Personal actions upon the other
hand, may be instituted in the Court of First Instance
where the defendant or any of the defendants resides
or may be found, or where the plaintiff or any of the
plaintiffs resides, at the election of the plaintiff (Sec.
1, Rule 4, Revised Rules of Court).A prayer for
annulment or rescission of contract does not operate
to efface the true objectives and nature of the action
which is to recover real property. (Inton, et al., v.
Quintan, 81 Phil. 97, 1948)An action for the
annulment or rescission of a sale of real property is a
real action. Its prime objective is to recover said real
property. (Gavieres v. Sanchez, 94 Phil. 760,1954) An
action to annul a real estate mortgage foreclosure sale
is no different from an action to annul a private sale
of real property. (Munoz v. Llamas, 87 Phil.
737,1950)
Issue: Whether petitioner's action for annulment of
the real estate mortgage extrajudicial foreclosure sale
of Fortune Building is a personal action or a real
action for venue purposes.
Held: The SC (1) DENIED the instant petition for
lack of merit (2) AFFIRMED the assailed decision of
CA
Ratio: While it is true that petitioner does not directly
seek the recovery of title or possession of the
property in question, his action for annulment of sale
and his claim for damages are closely intertwined
with the issue of ownership of the building which,
under the law, is considered immovable property, the
recovery of which is petitioner's primary objective.
The prevalent doctrine is that an action for the
annulment or rescission of a sale of real property
does not operate to efface the fundamental and prime
objective and nature of the case, which is to recover
said real property. It is a real action. Respondent
Court, therefore, did not err in dismissing the case on
the ground of improper venue (Sec. 2, Rule 4) which
was timely raised (Sec. 1, Rule 16).
Torres v. Tuason (1964) Reyes, J.B.L., J.

Facts: The complaint, dated 4 December 1961, recites

in substance that since prior to 1813 to his death, one
Telesforo Deudor was the sole owner of a parcel of
land situated in Matalahib, Tatalon and Masambong,
Quezon City, when died he was succeeded by his son,
Tomas, who sold one and a half quiones of the land
to one Juana de la Cruz; that when the latter died in
1944 she was succeeded by her only son, Eustaquio;
that on 20 October 1951, he sold to the plaintiff,
Dominga Torres, a portion of 690 square meters for a
consideration of P2,760.00, as evidenced by a public
instrument; that to quiet title to their property of 50
quiones the successors in interest of Tomas Deudor
filed in 1950 actions against J. M. Tuason & Co. in
the Court of First Instance of Quezon City (Civil
Cases Nos. Q-135, Q-174, Q-177, Q-186); that
plaintiff tried to intervene in said actions, but
intervention was denied;
Issue: The Manila Court held that it "has no doubt
that the action really concerns title of real property
which is in Quezon City", and on 20 January 1962
dismissed the complaint on the ground of improper
venue. Plaintiff duly appealed.
Held: In this Court, the appellant insists that her
action is one of specific performance, and, therefore,
personal and transitory in nature.
Held: [Manuel B. Ruiz vs. J. M. Tuason & Co., Inc.,
et al., L-18692, January 31 1963] There the Court, by
unanimous vote of all the Justices, held as follows:
This contention has no merit. Although appellant's
complaint is entitled to be one for specific
performance, yet the fact that he asked that a deed of
sale of a parcel of land situated in Quezon City be
issued in his favor and that a transfer certificate of
title covering said land be issued to him shows that
the primary objective and nature of the action is to
recover the parcel of land itself because to execute in
favor of appellant the conveyance requested there is
need to make a finding that he is the owner of the
land which in the last analysis resolves itself into an
issue of ownership. Hence, the action must be
commenced in the province where the property is
situated pursuant to Section 3, Rule 5, of the Rules of
Court, which provides that actions affecting title to or

MQP 12-11-13

recovery of possession of real property shall be

commenced and tried in the province where the
property or any part thereof lies.
Paderanga v. Hon. Buissan (1993) Bellosillo, J.
Facts: Sometime in 1973, petitioner JORGE C.
PADERANGA and private respondent ELUMBA
INDUSTRIES COMPANY, a partnership represented
by its General Manager JOSE J. ELUMBA, entered
into an oral contract of lease for the use of a
commercial space within a building owned by
petition in Ozamiz City. On 18 July 1977, private
respondent instituted an action for damages 4 which,
at the same time, prayed for the fixing of the period
of lease at five (5) years, before the then court of
First Instance of Zamboanga del Norte based in
Dipolog City. 5 Petitioner, a resident of Ozamiz City,
moved for its dismissal contending that the action
was a real action which should have been filed with
the Court of First Instance of Misamis Occidental
stationed in Ozamiz City where the property in
question was situated
On 6 November 1978, respondent Judge Dimalanes
B. Buissan denied the Motion to Dismiss and held
that Civil Case No. 2901 merely involved the
enforcement of the contract of lease, and while
affecting a portion of real property, there was no
question of ownership raised. Hence, venue was
properly laid. Petitioner pleaded for reconsideration
of the order denying his Motion to Dismiss. He
contended that while the action did not involve a
question of ownership, it was nevertheless seeking
recovery of possession; thus, it was a real action
which, consequently, must be filed in Ozamiz City.
On 4 December 1978, respondent judge denied
reconsideration. While admitting that Civil Case No.
2901 did pray for recovery of possession, he
nonetheless ruled that this matter was not the main
issue at hand; neither was the question of ownership
raised. Not satisfied, petitioner instituted the present
recourse.
In a personal action, the plaintiff seeks the recovery
of personal property, the enforcement of a contract or
the recovery of damages. In a real action, the plaintiff
seeks the recovery of real property, or, as indicated in

section 2(a) of Rule 4, a real action is an action

affecting title to real property or for the recovery of
possession, or for partition or condemnation of, or
foreclosure of a mortgage on, real property.
An action in personam is an action against a person
on the basis of his personal liability, while an action
in rem is an action against the thing itself, instead of
against the person. Hence, a real action may at the
same time be an action in personam and not
necessarily an action in rem.
While it may be that the instant complaint does not
explicitly pray for recovery of possession, such is the
necessary consequence thereof. The instant action
therefore does not operate to efface the fundamental
and prime objective of the nature of the case which is
to recover the one-half portion repossessed by the
lessor, herein petitioner. Indeed, where the ultimate
purpose of an action involves title to or seeks
recovery of possession, partition or condemnation of,
or foreclosure of mortgage on, real property, such an
action must be deemed a real action and must
perforce be commenced and tried in the province
where the property or any part thereof lies.
Held: Petition for Prohibition is GRANTED. The
Orders of Judge Buissan are SET ASIDE. The branch
of the Regional Trial Court of Dipolog City where
may be presently assigned is DIRECTED to
DISMISS the case for improper venue. Decision is
immediately executory.
Capati v. Ocampo Escolin, J.
Facts: Plaintiff, a resident of Pampanga, entered
into a sub-contract with the Defendant, a resident
of Naga City.
The Defendant completed a
construction job for the Plaintiff. However, the
construction was completed on a date later than what
was agreed in their contract. Hence, Plaintiff filed in
the CFI of Pampanga an action for recovery of
consequential damages due to the delay. Defendant
filed a motion to dismiss the complaint on the ground
that venue of action was improperly laid. The CFI of
Pampanga dismissed the Plaintiff's complaint on
ground of improper venue.

MQP 12-11-13

ISSUE: W/N the dismissal of the complaint on the

ground of improper venue was correct.
HELD: No. The rule on venue of personal actions
cognizable by the CFI is found in Sec. 2(b), Rule 4
of the Rules of Court, which provides that such
"actions may be commenced and tried where the
Defendant or any of the Defendants resides or may
be found, or where the Plaintiff or any of the
Plaintiffs resides, at the election of the Plaintiff." The
word "may" is merely permissive and operates to
confer discretion upon a party. Under ordinary
circumstances, the term "may be" connotes
possibility; it does not connote certainty. "May"
is an auxillary verb indicating liberty, opportunity,
permission or possibility.
Unimasters Conglomeration v. CA (1997) Narvasa,
C.J.
Facts: On October 28, 1988 Kubota Agri-Machinery
Philippines, Inc. (hereafter, simply KUBOTA) and
Unimasters Conglomeration, Inc. (hereafter, simply
UNIMASTERS) entered into a "Dealership
Agreement for Sales and Services" of the former's
products in Samar and Leyte Provinces. The contract
contained, among others: 1)
a stipulation reading:
"** All suits arising out of this Agreement shall be
filed with / in the proper Courts of Quezon City,"
and2)
a provision binding UNIMASTERS to
obtain (as it did in fact obtain) a credit line with
Metropolitan Bank and Trust Co.-Tacloban Branch in
the amount of P2,000,000.00 to answer for its
obligations to KUBOTA. Some five years later, or
more precisely on December 24, 1993,
UNIMASTERS filed an action in the Regional Trial
Court of Tacloban City against KUBOTA, a certain
Reynaldo Go, and Metropolitan Bank and Trust
Company-Tacloban Branch (hereafter, simply
METROBANK) for damages for breach of contract,
and injunction with prayer for temporary restraining
order. The action was docketed as Civil Case No. 9312-241 and assigned to Branch 6. On January 4, 1994
KUBOTA filed two motions. One prayed for
dismissal of the case on the ground of improper
venue (said motion being set for hearing on January
11, 1994). The other prayed for the transfer of the
injunction hearing.

Held: An analysis of these precedents reaffirms and

emphasizes the soundness of the Polytrade principle.
Of the essence is the ascertainment of the parties'
intention in their agreement governing the venue of
actions between them. That ascertainment must be
done keeping in mind that convenience is the
foundation of venue regulations, and that that
construction should be adopted which most conduces
thereto. Hence, the invariable construction placed on
venue stipulations is that they do not negate but
merely complement or add to the codal standards of
Rule 4 of the Rules of Court. In other words, unless
the parties make very clear, by employing categorical
and suitably limiting language, that they wish the
venue of actions between them to be laid only and
exclusively at a definite place, and to disregard the
prescriptions of Rule 4, agreements on venue are not
to be regarded as mandatory or restrictive, but merely
permissive, or complementary of said rule. The fact
that in their agreement the parties specify only one of

MQP 12-11-13

the venues mentioned in Rule 4, or fix a place for

their actions different from those specified by said
rule, does not, without more, suffice to characterize
the agreement as a restrictive one. There must, to
repeat, be accompanying language clearly and
categorically expressing their purpose and design that
actions between them be litigated only at the place
named by them, regardless of the general precepts of
Rule 4; and any doubt or uncertainty as to the parties'
intentions must be resolved against giving their
agreement a restrictive or mandatory aspect. Any
other rule would permit of individual, subjective
judicial interpretations without stable standards,
which could well result in precedents in hopeless
inconsistency.
In other words, Rule 4 gives UNIMASTERS the
option to sue KUBOTA for breach of contract in the
Regional Trial Court of either Tacloban City or
Quezon City.