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The Supreme Court ruled that an action to annul a loan contract and its accessory real estate mortgage is a personal action, not a real action. A personal action involves the recovery of personal property, enforcement of a contract, or recovery of damages. Here, ownership of the land was not transferred and remained with the defendant, so no real action was involved. As a personal action, venue was proper in the Regional Trial Court where the parties resided, even though the action also sought to annul the real estate mortgage contract. The Court of Appeals did not err in upholding the trial court's denial of the motion to dismiss based on improper venue.
The Supreme Court ruled that an action to annul a loan contract and its accessory real estate mortgage is a personal action, not a real action. A personal action involves the recovery of personal property, enforcement of a contract, or recovery of damages. Here, ownership of the land was not transferred and remained with the defendant, so no real action was involved. As a personal action, venue was proper in the Regional Trial Court where the parties resided, even though the action also sought to annul the real estate mortgage contract. The Court of Appeals did not err in upholding the trial court's denial of the motion to dismiss based on improper venue.
The Supreme Court ruled that an action to annul a loan contract and its accessory real estate mortgage is a personal action, not a real action. A personal action involves the recovery of personal property, enforcement of a contract, or recovery of damages. Here, ownership of the land was not transferred and remained with the defendant, so no real action was involved. As a personal action, venue was proper in the Regional Trial Court where the parties resided, even though the action also sought to annul the real estate mortgage contract. The Court of Appeals did not err in upholding the trial court's denial of the motion to dismiss based on improper venue.
Undeterred, petitioner elevated before SC a petition for review
raising the following issue: Antonio Chua vs. Total Office Products & Services (Topros) Inc ISSUE: Whether or not an action to annul a loan and mortgage contract duly alleged as fictitious with absolutely no consideration Facts: is a personal action or real action. Respondent Total Office Products and Services, Inc., Held: (TOPROS) lodged a complaint for annulment of contracts of loan and real estate mortgage against herein petitioner Antonio T. Chua In affirming the CA, the SC ruled.it is a personal Action. before the Regional Trial Court of Pasig City. Well settled is the rule that an action to annul a contract of The said suit sought to annul a loan contract allegedly extended by loan and its accessory real estate mortgage is a personal petitioner to respondent TOPROS in the amount of ten million four action. In personal action the plaintiff seeks the recovery of personal property, the enforcement of a contract or the recovery of hundred thousand pesos (P10,400,000) and the accessory real damages. In contrast, in a real action, the plaintiff seeks the estate mortgage contract covering two parcels of land situated in recovery of real property, or, as indicated in Section 2(a), Rule 4 of Quezon City as collateral, alleging that there was no authority the then Rules of Court, a real action is an action affecting title to granted to Chua (its president) by the corporation to enter into a real property or for the recovery of possession, or for partition or contract of loan. It was alleged that the contracts were fictitious. condemnation of, or foreclosure of mortgage on real property. In this case, ownership of the parcels of land subject of the Petitioner Chua filed a motion to dismiss on the ground of questioned real estate mortgage was never transferred to improper venue. He contended that the action filed by TOPROS petitioner, but remained with TOPROS. Thus, no real action for the affects title to or possession of the parcels of land subject of the recovery of real property is involved. This being the case, TOPROS real estate mortgage. Thus should have been filed in the Regional action for annulment of the contracts of loan and real estate Trial Court of Quezon City where the encumbered real properties mortgage remains a personal action. are located, instead of Pasig City where the parties reside. And thus falls under the catch-all provision on personal actions under paragraph (b) of the above-cited section, to wit: RTC Judge deny motion to dismiss. She reasoned that the action to annul the loan and mortgage contracts is a personal SEC. 2 (b) Personal actions. All other actions may be action and thus, the venue was properly laid in the RTC of Pasig City commenced and tried where the defendant or any of the where the parties reside. defendants resides or may be found, or where the plaintiff or any of the plaintiffs resides, at the election of the plaintiff. Petitioner moved for a reconsideration of the said order, which Judge denied. Hence, petitioner filed with the CA however CA In the same vein, the action for annulment of a real estate dismissed said petition. mortgage in the present case must fall under Section 2 of Rule 4, to wit: CA applied Hernandez v. Rural Bank of Lucena, Inc. and ruled that an action for the cancellation of a real estate mortgage is SEC. 2. Venue of personal actions. All other actions may be a personal action if the mortgagee has not foreclosed the mortgage commenced and tried where the plaintiff or any of the and the mortgagor is in possession of the premises, as neither the principal plaintiffs resides, or where the defendant or any of mortgagors title to nor possession of the property is disputed. the principal defendants resides, or in the case of a non- mortgage contracts. The Court of Appeals committed no reversible resident defendant where he may be found, at the election error in upholding the orders of the Regional Trial Court denying of the plaintiff. petitioners motion to dismiss the case on the ground of improper venue. Thus, Pasig City, where the parties reside, is the proper venue of the action to nullify the subject loan and real estate