Rule 4 - Venue of Actions

CASE NO. 1 G.R. No. 208232 March 10, 2014

SURVIVING HEIRS OF ALFREDO R. BAUTISTA, namely: EPIFANIA G. BAUTISTA

and ZOEY G. BAUTISTA,Petitioners,
vs.
FRANCISCO LINDO and WELHILMINA LINDO; and HEIRS OF FILIPINA
DAQUIGAN, namely: MA. LOURDES DAQUIGAN, IMELDA CATHERINE
DAQUIGAN, IMELDA DAQUIGAN and CORSINO DAQUIGAN, REBECCA QUIAMCO
and ANDRES QUIAMCO, ROMULO LORICA and DELIA LORICA, GEORGE CAJES
and LAURA CAJES, MELIDA BANEZ and FRANCISCO BANEZ, MELANIE
GOFREDO, GERV ACIO CAJES and ISABEL CAJES, EGMEDIO SEGOVIA and
VERGINIA SEGOVIA, ELSA N. SAM, PEDRO M. SAM and LINA SAM, SANTIAGO
MENDEZ and MINA MENDEZ, HELEN M. BURTON and LEONARDO BURTON,
JOSE JACINTO and BIENVENIDA JACINTO, IMELDA DAQUIGAN, LEO MA TIGA
and ALICIA MATIGA, FLORENCIO ACEDO JR., and LYLA VALERIO, Respondents.

DECISION

VELASCO, JR., J.:

The Case

This is a Petition for Review on Certiorari under Rule 45 assailing the April 25, 2013
Order of the Regional Trial Court (RTC) in Civil Case No. (1798)-021 as well as its
Order of July 3, 2013 denying reconsideration.

The Facts

Alfredo R. Bautista (Bautista), petitioner’s predecessor, inherited in 1983 a free-patent

land located in Poblacion, Lupon, Davao Oriental and covered by Original Certificate of
Title (OCT) No. (1572) P-6144. A few years later, he subdivided the property and sold it
to several vendees, herein respondents, via a notarized deed of absolute sale dated
May 30, 1991. Two months later, OCT No. (1572) P-6144 was canceled and Transfer
Certificates of Title (TCTs) were issued in favor of the vendees. 1

Three years after the sale, or on August 5, 1994, Bautista filed a complaint for
repurchase against respondents before the RTC, Branch 32, Lupon, Davao Oriental,
docketed as Civil Case No. 1798,2 anchoring his cause of action on Section 119 of
Commonwealth Act No. (CA) 141, otherwise known as the "Public Land Act," which
reads:

SECTION 119. Every conveyance of land acquired under the free patent or homestead
provisions, when proper, shall be subject to repurchase by the applicant, his widow, or
legal heirs, within a period of five years from the date of the conveyance.

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Respondents, in their Answer, raised lack of cause of action, estoppel, prescription, and
laches, as defenses.

Meanwhile, during the pendency of the case, Bautista died and was substituted by
petitioner Epifania G. Bautista (Epifania).

Respondents Francisco and Welhilmina Lindo later entered into a compromise

agreement with petitioners, whereby they agreed to cede to Epifania a three thousand
two hundred and thirty square meter (3,230 sq.m.)-portion of the property as well as to
waive, abandon, surrender, and withdraw all claims and counterclaims against each
other. The compromise was approved by the RTC in its Decision dated January 27,
2011, the fallo of which reads:

WHEREFORE, a DECISION is hereby rendered based on the above-quoted

Compromise Agreement and the parties are enjoined to strictly comply with the terms
and conditions of the same.

SO ORDERED.3

Other respondents, however, filed a Motion to Dismiss 4 dated February 4, 2013,

alleging that the complaint failed to state the value of the property sought to be
recovered. Moreover, they asserted that the total selling price of all the properties is
only sixteen thousand five hundred pesos (PhP 16,500), and the selling price or market
value of a property is always higher than its assessed value. Since Batas Pambansa
Blg. (BP) 129, as amended, grants jurisdiction to the RTCs over civil actions involving
title to or possession of real property or interest therein where the assessed value is
more than PhP 20,000, then the RTC has no jurisdiction over the complaint in question
since the property which Bautista seeks to repurchase is below the PhP 20,000
jurisdictional ceiling.

RTC Ruling5

Acting on the motion, the RTC issued the assailed order dismissing the complaint for
lack of jurisdiction. The trial court found that Bautista failed to allege in his complaint
that the value of the subject property exceeds 20 thousand pesos. Furthermore, what
was only stated therein was that the total and full refund of the purchase price of the
property is PhP 16,500. This omission was considered by the RTC as fatal to the case
considering that in real actions, jurisdictional amount is determinative of whether it is the
municipal trial court or the RTC that has jurisdiction over the case.

With respect to the belated filing of the motion, the RTC, citing Cosco Philippines
Shipping, Inc. v. Kemper Insurance Company,6 held that a motion to dismiss for lack of
jurisdiction may be filed at any stage of the proceedings, even on appeal, and is not lost
by waiver or by estoppel. The dispositive portion of the assailed Order reads:

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WHEREFORE, the complaint for Repurchase, Consignation, with Preliminary Injunction
and Damages is hereby dismissed for lack of jurisdiction.

SO ORDERED.7

Assignment of Errors

Their motion for reconsideration having been denied, petitioners now seek recourse
before this Court with the following assigned errors:

THE PUBLIC RESPONDENT RTC ERRED IN ADMITTING THE MOTION TO DISMISS

DATED FEBRUARY 4, 2013, BELATEDLY FILED BY THE PRIVATE RESPONDENTS
IN THE CASE.

II

THE PUBLIC RESPONDENT RTC ERRED IN HOLDING THAT THE INSTANT CASE
FOR REPURCHASE IS A REAL ACTION.8

The Issue

Stated differently, the issue for the Court’s resolution is: whether or not the RTC erred in
granting the motion for the dismissal of the case on the ground of lack of jurisdiction
over the subject matter.

Arguments

Petitioners argue that respondents belatedly filed their Motion to Dismiss and are now
estopped from seeking the dismissal of the case, it having been filed nine (9) years after
the filing of the complaint and after they have actively participated in the proceedings.
Additionally, they allege that an action for repurchase is not a real action, but one
incapable of pecuniary estimation, it being founded on privity of contract between the
parties. According to petitioners, what they seek is the enforcement of their right to
repurchase the subject property under Section 119 of CA 141.

Respondents, for their part, maintain that since the land is no longer devoted to
agriculture, the right of repurchase under said law can no longer be availed of, citing
Santana v. Mariñas.9 Furthermore, they suggest that petitioners intend to resell the
property for a higher profit, thus, the attempt to repurchase. This, according to
respondents, goes against the policy and is not in keeping with the spirit of CA 141
which is the preservation of the land gratuitously given to patentees by the State as a
reward for their labor in cultivating the property. Also, the Deed of Absolute Sale
presented in evidence by Bautista was unilaterally executed by him and was not signed

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by respondents. Lastly, respondents argue that repurchase is a real action capable of
pecuniary estimation.

Our Ruling

The petition is meritorious.

Jurisdiction of courts is granted by the Constitution and pertinent laws.

Jurisdiction of RTCs, as may be relevant to the instant petition, is provided in Sec. 19 of

BP 129, which reads:

Sec. 19. Jurisdiction in civil cases.―Regional Trial Courts shall exercise exclusive
original jurisdiction:

1) In all civil actions in which the subject of the litigation is incapable of pecuniary
estimation;

2) In all civil actions which involve the title to, or possession of, real property, or
any interest therein, where the assessed value of the property involved exceeds
Twenty thousand pesos (₱20,000.00) or, for civil actions in Metro Manila, where
such value exceeds Fifty thousand pesos (₱50,000.00) except actions for forcible
entry into and unlawful detainer of lands or buildings, original jurisdiction over
which is conferred upon the Metropolitan Trial Courts, Municipal Trial Courts, and
Municipal Circuit Trial Courts.

On the other hand, jurisdiction of first level courts is prescribed in Sec. 33 of BP 129,
which provides:

Sec. 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and Municipal
Circuit Trial Courts in civil cases.―Metropolitan Trial Courts, Municipal Trial Courts, and
Municipal Circuit Trial Courts shall exercise:

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3) Exclusive original jurisdiction in all civil actions which involve title to, or possession of,
real property, or any interest therein where the assessed value of the property or
interest therein does not exceed Twenty thousand pesos (₱20,000.00) or, in civil
actions in Metro Manila, where such assessed value does not exceed Fifty thousand
pesos (₱50,000.00) exclusive of interest, damages of whatever kind, attorney’s fees,
litigation expenses and costs: Provided, That in cases of land not declared for taxation
purposes, the value of such property shall be determined by the assessed value of the
adjacent lots.

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The core issue is whether the action filed by petitioners is one involving title to or
possession of real property or any interest therein or one incapable of pecuniary
estimation.

The course of action embodied in the complaint by the present petitioners’ predecessor,
Alfredo R. Bautista, is to enforce his right to repurchase the lots he formerly owned
pursuant to the right of a free-patent holder under Sec. 119 of CA 141 or the Public
Land Act.

The Court rules that the complaint to redeem a land subject of a free patent is a civil
action incapable of pecuniary estimation.

It is a well-settled rule that jurisdiction of the court is determined by the allegations in the
complaint and the character of the relief sought. 10 In this regard, the Court, in Russell v.
Vestil,11 wrote that "in determining whether an action is one the subject matter of which
is not capable of pecuniary estimation this Court has adopted the criterion of first
ascertaining the nature of the principal action or remedy sought. If it is primarily for the
recovery of a sum of money, the claim is considered capable of pecuniary estimation,
and whether jurisdiction is in the municipal courts or in the RTCs would depend on the
amount of the claim." But where the basic issue is something other than the right to
recover a sum of money, where the money claim is purely incidental to, or a
consequence of, the principal relief sought, this Court has considered such actions as
cases where the subject of the litigation may not be estimated in terms of money, and,
hence, are incapable of pecuniary estimation. These cases are cognizable exclusively
by RTCs.12

Settled jurisprudence considers some civil actions as incapable of pecuniary estimation,

viz:

1. Actions for specific performance;

2. Actions for support which will require the determination of the civil status;

3. The right to support of the plaintiff;

4. Those for the annulment of decisions of lower courts;

5. Those for the rescission or reformation of contracts; 13

6. Interpretation of a contractual stipulation.14

The Court finds that the instant cause of action to redeem the land is one for specific
performance.

The facts are clear that Bautista sold to respondents his lots which were covered by a
free patent. While the deeds of sale do not explicitly contain the stipulation that the sale

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is subject to repurchase by the applicant within a period of five (5) years from the date
of conveyance pursuant to Sec. 119 of CA 141, still, such legal provision is deemed
integrated and made part of the deed of sale as prescribed by law. It is basic that the
law is deemed written into every contract.15 Although a contract is the law between the
parties, the provisions of positive law which regulate contracts are deemed written
therein and shall limit and govern the relations between the parties. 16 Thus, it is a
binding prestation in favor of Bautista which he may seek to enforce. That is precisely
what he did. He filed a complaint to enforce his right granted by law to recover the lot
subject of free patent. Ergo, it is clear that his action is for specific performance, or if not
strictly such action, then it is akin or analogous to one of specific performance. Such
being the case, his action for specific performance is incapable of pecuniary estimation
and cognizable by the RTC.

Respondents argue that Bautista’s action is one involving title to or possession of real
property or any interests therein and since the selling price is less than PhP 20,000,
then jurisdiction is lodged with the MTC. They rely on Sec. 33 of BP 129.

Republic Act No. 769117 amended Sec. 33 of BP 129 and gave Metropolitan Trial
Courts, Municipal Trial Courts, and Municipal Circuit Trial Courts exclusive original
jurisdiction in all civil actions which involve title to, or possession of, real property, or any
interest therein where the assessed value of the property or interest therein does not
exceed twenty thousand pesos (PhP 20,000) or, in civil actions in Metro Manila, where
such assessed value does not exceed fifty thousand pesos (PhP 50,000) exclusive of
interest, damages of whatever kind, attorney’s fees, litigation expenses and costs.

At first blush, it appears that the action filed by Bautista involves title to or possession of
the lots he sold to respondents. Since the total selling price is less than PhP 20,000,
then the MTC, not the RTC, has jurisdiction over the case. This proposition is incorrect
for the re-acquisition of the lots by Bautista or herein successors-in-interests, the
present petitioners, is but incidental to and an offshoot of the exercise of the right by the
latter to redeem said lots pursuant to Sec. 119 of CA 141. The reconveyance of the title
to petitioners is solely dependent on the exercise of such right to repurchase the lots in
question and is not the principal or main relief or remedy sought. Thus, the action of
petitioners is, in reality, incapable of pecuniary estimation, and the reconveyance of the
lot is merely the outcome of the performance of the obligation to return the property
conformably to the express provision of CA 141.

Even if we treat the present action as one involving title to real property or an interest
therein which falls under the jurisdiction of the first level court under Sec. 33 of BP 129,
as the total selling price is only PhP 16,000 way below the PhP 20,000 ceiling, still, the
postulation of respondents that MTC has jurisdiction will not hold water. This is because
respondents have actually participated in the proceedings before the RTC and
aggressively defended their position, and by virtue of which they are already barred to
question the jurisdiction of the RTC following the principle of jurisdiction by estoppel.

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In Heirs of Jose Fernando v. De Belen, it was held that the party raising defenses to the
complaint, actively participating in the proceedings by filing pleadings, presenting his
evidence, and invoking its authority by asking for an affirmative relief is deemed
estopped from questioning the jurisdiction of the court. 18

Here, we note that aside from the belated filing of the motion to dismiss––it having been
filed nine (9) years from the filing of the complaint––respondents actively participated in
the proceedings through the following acts:

1. By filing their Answer and Opposition to the Prayer for Injunction 19 dated
September 29, 1994 whereby they even interposed counterclaims, specifically:
PhP 501,000 for unpaid survey accounts, PhP 100,000 each as litigation
expenses, PhP 200,000 and PhP 3,000 per daily appearance by way of
attorney’s fees, PhP 500,000 as moral damages, PhP 100,000 by way of
exemplary damages, and costs of suit;

2. By participating in Pre-trial;

3. By moving for the postponement of their presentation of evidence; 20

4. By presenting their witness;21 and

5. By submitting the compromise agreement for approval. 22

Having fully participated in all stages of the case, and even invoking the RTC’s authority
by asking for affirmative reliefs, respondents can no longer assail the jurisdiction of the
said trial court. Simply put, considering the extent of their participation in the case, they
are, as they should be, considered estopped from raising lack of jurisdiction as a ground
for the dismissal of the action.1âwphi1

WHEREFORE, premises considered, the instant petition is hereby GRANTED. The

April 25, 2013 and July 3, 2013 Orders of the Regional Trial Court in Civil Case No.
(1798)-021 are hereby REVERSED and SET ASIDE.

The Regional Trial Court, Branch 32 in Lupon, Davao Oriental is ORDERED to proceed
with dispatch in resolving Civil Case No. (1798)-021.

No pronouncement as to costs.

SO ORDERED.

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CASE NO. 2 G.R. No. 157163 June 25, 2014

BANK OF THE PHILIPPINE ISLANDS, Petitioner,

vs.
HON. JUDGE AGAPITO L. HONTANOSAS, JR., REGIONAL TRIAL COURT,
BRANCH 16, CEBU CITY, SILVERIO BORBON, SPOUSES XERXES AND ERLINDA
FACULTAD, AND XM FACULTAD & DEVELOPMENT
CORPORATION, Respondents.

DECISION

BERSAMIN, J.:

Injunction should not issue except upon a clear showing that the applicant has a right in
esse to be protected, and that the acts sought to be enjoined are violative of such right.
A preliminary injunction should not determine the merits of a case, or decide
controverted facts, for, being a preventive remedy, it only seeks to prevent threatened
wrong, further injury, and irreparable harm or injustice until the rights of the parties can
be settled.

The Case

Under review at the instance of the defendant, now the petitioner herein, is the decision
promulgated on July 9, 2002,1 whereby the Court of Appeals (CA) upheld the order
issuedon July 5, 2001 in Civil Case No. CEB-26468 entitled Spouses Silverio & Zosima
Borbon, et al. v. Bank of the Philippine Islandsby the Regional Trial Court (RTC),
Branch 16, in Cebu City, presided by Hon. Judge Agapito L. Hontanosas, Jr.

Antecedents

On May 22, 2001, respondents Spouses Silverio and Zosima Borbon, Spouses Xerxes
and Erlinda Facultad,and XM Facultad and Development Corporation commenced Civil
Case No. CEB-26468 to seek the declaration of the nullity of the promissory notes,real
estate and chattel mortgages and continuing surety agreement they had executed in
favor of the petitioner. They further sought damages and attorney’s fees, and applied for
a temporary restraining order (TRO) orwrit of preliminary injunction to prevent the
petitioner from foreclosing on the mortgages against their properties.

The complaintalleged that the respondents had obtained a loan from the petitioner, and
had executed promissory notes binding themselves, jointly and severally, to pay the
sum borrowed; that as security for the payment of the loan, they had constituted real
estate mortgages on several parcels of land in favor of the petitioner; and that they had
been made to sign a continuing surety agreement and a chattel mortgage on their
Mitsubishi Pajero.

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It appears that the respondents’obligation to the petitioner had reached ₱17,983,191.49,
but they had only been able to pay ₱13 Million because they had been adversely
affected by the economic turmoil in Asia in 1997. The petitioner required them to issue
postdated checks to cover the loan under threat of foreclosing on the mortgages. Thus,
the complaint sought a TRO or a writ of preliminary injunction to stay the threatened
foreclosure.

On June 6, 2001, the petitioner filed its answer with affirmative defenses and
counterclaim, as well as its oppositionto the issuance of the writ of preliminary
injunction, contending that the foreclosure of the mortgages was within itslegal right to
do.2

Also on June 6, 2001 the petitioner filed a motion to dismiss reiterating its affirmative
defenses, to wit:

I) THAT THE COMPLAINT SHOULD BE DISMISSED BECAUSE VENUE IS

IMPROPERLYLAID. (RULE 16, SECITON 1, PARAGRAPH (C);

II) THAT THE COURT HAS NOTACQUIRED JURISDICTION OVER THE

SUBJECT MATTER OFTHE CLAIM BECAUSE THE PROPER LEGAL FEES
HAS NOT BEEN PAID IN ACCORDANCE WITH RULE 14, OF THE RULES OF
COURT AND CIRCULAR NO. 7 OF THE SUPREME COURT, SERIES OF 1988;

III) THAT ZOSIMA BORBON’S COMPLAINT SHOULD BE DISMISSED

BECAUSE PLAINTIFF ZOSIMA BORBON HAS NO LEGAL PERSONALITY TO
SUE BEING DECEASED, SPOUSE OF PLAINTIFF SILVERIO BORBON. (RULE
16, SECTION 1(d);

IV) THAT THE ESTATE OF ZOSIMA BORBON BEING AN INDISPENSABLE

PARTY, THE COMPLAINT SHOULD BE AMENDED TO INCLUDE THE
ESTATE OF ZOSIMA BORBON. (RULE 16, SECTION 1(j);

V) THAT THE COMPLAINT OFPLAINTIFF XM FACULTAD AND

DEVELOPMENT CORPORATION, SHOULD BE DISMISSED BECAUSE
THERE IS NO BOARD RESOLUTION AUTHORIZING THE FILING OF THIS
CASE. [RULE 16, SECTION 1 (d)];

VI) THAT THE PLEADING ASSERTING THE CLAIM STATES NO CAUSE OF

ACTION.3

On July 5, 2001, the RTC denied the petitioner’s motion to dismissfor being
unmeritorious,4 but granted the respondents’ application for preliminary injunction, 5 to
wit:

WHEREFORE, premises considered, the application for preliminary injunction is

GRANTED. Upon filing by the plaintiffapplicants of a bond in the amount of ₱2,000,000

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in favor of defendant to the effect that applicants will pay to adverse party all damages
which it may sustain by reason of the injunction, let a writ of preliminary injunction be
issued directing the defendant and its agents or representatives, to cease and desist
from commencing foreclosure and sale proceedings of the mortgaged properties; from
taking possession of the Mitsubishi Pajero subject of the chattel mortgage; and from
using the questioned post-dated checks as evidence for the filing of complaint against
plaintiffs Facultad for violation of Batas Pambansa Blg. 22, while the present case is
pending litigation.

This writ of preliminary injunction shall continue until further orders from the Court.

Notify the parties of this Order.

SO ORDERED.6

The RTC later denied the petitioner’s motion for reconsideration through its order 7 of
August 22, 2001.

Ruling of the CA

Dissatisfied, the petitioner assailed the orders of the RTC by petition for certiorariin the
CA, submitting the lone issue of:

WHETHER OR NOT THE PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF

DISCRETION WHEN IT ISSUED AN ORDER DENYING THE MOTION TO DISMISS
AND GRANTING THE WRIT OF PRELIMINARY MANDATORY INJUNCTION.

On July 9, 2002, however, the CArendered the adverse decision under review, to wit:

WHEREFORE, premises considered, the assailed order of the Regional Trial Court
(RTC) of Cebu City, Branch 16 dated July 5, 2001 and August 22, 2001 are hereby
AFFIRMED. Let the original records of this case be remanded immediately to the court
a quo for further proceedings. SO ORDERED.8

The CA held that the petitioner’s averment of non-payment of the proper docket fee by
the respondents asthe plaintiffs in Civil Case No. CEB-26468 was not substantiated;
that even if the correct docket fee was not in fact paid, the strict application of the rule
thereon could be mitigated in the interest of justice;9 and that Civil Case No. CEB-
26468, being a personal action, was properly filed in Cebu City where respondent XM
Facultad and Development Corporation’s principal office was located. 10

The CA further held that ZosimaBorbon’s death rendered respondent Silverio Borbon,
her surviving spouse, the successor to her estate; that although there was a valid
transfer of interest pending the litigation, the dismissal of the complaintwould not be in
order because it was permissible under the rules to continue the action in the name of
the original party;11 and that the RTC did not commit grave abuse of discretion in issuing

10
the writ of preliminary injunction because it thereby only applied the pertinent law and
jurisprudence.12

The CA denied the petitioner’s motion for reconsiderationthrough its resolution of

February 12, 2003.13

Issues

Hence, this appeal, with the petitioner positing as follows:

1. Whether or not Civil Case No. CEB-26468 should be dismissed for (a) non-
payment of the correct amount of docket fee; and (b) improper venue;14

2. Whether or not the issuance of the writ of preliminary injunction against the
petitioner, its agents and representatives, was in order.

Ruling of the Court

The appeal is partly meritorious.

1. Civil Case No. CEB-26468 was a personal action; hence, venue was properly laid

The CA and the RTC held that Civil Case No. CEB-26468, being for the declaration of
the nullity of a contract of loan and its accompanying continuing surety agreement, and
the real estate and chattel mortgages, was a personal action; hence, its filing in Cebu
City, the place of business of one of the plaintiffs, was correct under Section 2, Rule 4 of
the Rules of Court.

The petitioner contends, however, that Civil Case No. CEB-26468 was a real action that
should be commenced and tried in the proper court having jurisdiction over the area
wherein the real property involved, or a portion thereof, was situated; and
thatconsequently the filing and docket fees for the complaintshould be based on the
value of the property as stated in the certificate of sale attached thereto.

We sustain the lower courts’ holdings.

The determinants of whether an action is of a real or a personal nature have been fixed
by the Rules of Courtand relevant jurisprudence. According to Section 1, Rule 4 of the
Rules of Court, a real action is one that affects title to or possession of real property, or
an interest therein. Such action is to be commenced and tried in the proper court having
jurisdiction over the area wherein the real property involved, ora portion thereof, is
situated, which explains why the action is also referred to as a localaction. In contrast,
the Rules of Courtdeclares all other actionsas personal actions. 15 Such actions may
include those brought for the recovery of personal property, or for the enforcement of
some contract or recovery of damages for its breach, or for the recovery of damages for
the commission of an injury to the person or property. 16 The venue of a personal action

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isthe place where the plaintiff or any of the principal plaintiffs resides,or where the
defendant or any of the principal defendants resides, or in the case of a non-resident
defendant where he may be found, at the election of the plaintiff, 17 for which reason the
action is considered a transitory one.

The complaintin Civil Case No. CEB-26468 pertinently alleged as follows:18

xxxx

3.1 Plaintiffs signed blank pre-printed forms of promissory note no. 501253-000,
continuing surety agreement, real estate mortgages, chattel mortgage which
violates the principle of mutuality of contracts. These contracts are in the nature
of contracts of adhesion with provisions favouring defendant bank and plaintiffs
had nothing to do except to sign the unjust stipulations which should be declared
as NULL AND VOID. These contracts do not reflect the real agreement of the
parties and the stipulations are tilted infavor of defendant bank.

3.2 Moreover, these real estate mortgages, chattel mortgages and continuing
surety agreement are securing specific amounts of obligation and upon the
payment of ₱13,000,000 to defendant bank, automatically, these became functus
de oficioand should be released immediately without the encumbrance.

3.3 As the chattel mortgage involving the Mitsubishi Pajero secured only
₱600,000.00, upon liquidation of more than ₱800,000.00 principal payment, the
same became null and void, and defendant bank should be ordered to cancel the
mortgage and to be directed not to take any appropriate action to take
possession.

3.4 In addition, Penbank Checks Nos. 11237 to 11242 with amounts of

₱200,000.00 each and BPI Check Nos. 019098 & 019099 with amounts of
₱400,000.00 each, issued against the will of plaintiffs Facultad and without any
consideration, should be declared null and void. Defendant bank should be
directed not to deposit the samefor collection with the drawee bank.

xxxx

3.6 Furthermore, the total obligation of plaintiffs is void and baseless because it
is based on illegal impositions of exorbitant interest and excessive charges.
Interest was converted into principal which in turn earns interest. These illegal
impositions are considered by law and jurisprudence as null and void. These
excessive interest and charges should be applied to the principal unless there
isapplication, defendant bank is enriching itself at the expense of plaintiffs. x x x x

Based on the aforequoted allegations of the complaintin Civil Case No. CEB-26468, the
respondents seek the nullification of the promissory notes, continuing surety agreement,
checks and mortgage agreements for being executed against their will and vitiated by

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irregularities, not the recovery of the possession or title to the properties burdened by
the mortgages. There was no allegation that the possession of the properties under the
mortgages had already been transferred to the petitioner in the meantime. Applying the
determinants, Civil Case No. CEB-26468 was unquestionably a personal action, for, as
ruled in Chua v. Total Office Products and Services (Topros),Inc.:19

Well-settled is the rule that an action to annul a contract of loan and its accessory real
estate mortgageis a personal action. In a personal action, the plaintiff seeks the
recovery of personal property, the enforcement of a contractor the recovery of
damages. In contrast, in a real action, the plaintiff seeks the recovery of real property,
or, as indicated in Section 2 (a), Rule 4 of the then Rules of Court, 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 mortgage on, real property.

In the Pascual case, relied upon by petitioner, the contract of sale of the fishpond was
assailed as fictitious for lack of consideration. We held that there being no contract to
begin with, there is nothing to annul. Hence, we deemed the action for annulment of the
said fictitious contract therein as one constituting a real action for the recovery of the
fishpond subject thereof.

We cannot, however, apply the foregoing doctrine to the instant case. Note that in
Pascual, title to and possession of the subject fishpond had already passed to the
vendee. There was, therefore, a need to recover the said fishpond. But in the instant
case, ownership of the parcels of land subject of the questioned real estatemortgage
was never transferred to petitioner, but remained with TOPROS. Thus, no real action for
the recovery of real property is involved. This being the case, TOPROS’ action for
annulment of the contracts of loan and real estate mortgage remains a personal action.

xxxx

The Court of Appeals finds that Hernandez v. Rural Bank of Lucena, Inc.provides the
proper precedent in this case. In Hernandez, appellants contended that the action of the
Hernandez spouses for the cancellation of the mortgage on their lots was a real action
affecting title to real property, which should have been filed in the place where the
mortgaged lots were situated. Rule 4, Section 2 (a), of the then Rules of Court, was
applied, to wit:

SEC. 2. Venue in Courts of First Instance. – (a) Real actions. – Actions affecting title to,
or for recovery of possession, or for partition or condemnation of, or foreclosure of
mortgage on, real property, shall be commenced and tried in the province where the
property or any part thereof lies.

The Court pointed out in the Hernandezcase that with respect to mortgage, the rule on
real actions only mentions an action for foreclosure of a real estate mortgage. It does
not include an action for the cancellation of a real estate mortgage. Exclusio unios est

13
inclusio alterius. The latter thus falls under the catch-all provision on personal actions
under paragraph (b) of the above-cited section, to wit:

SEC. 2 (b) Personal actions. – All other 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.

In the same vein, the action for annulment of a real estate mortgage in the present case
must fall under Section 2 of Rule 4, to wit:

SEC. 2. Venue of personal actions. – All other actions may be commenced and tried
where the plaintiff or any of the principal plaintiffs resides, orwhere the defendant or any
of the principal defendants resides, or in the case of a nonresident defendant where he
may be found, at the election of the plaintiff.

Thus, Pasig City, where the parties reside, is the proper venue of the action to nullify the
subject loan and real estate mortgage contracts. The Court of Appeals committed no
reversible error in upholding the orders of the Regional Trial Court denying petitioner’s
motion to dismiss the case on the ground of improper venue.

Being a personal action, therefore, Civil Case No. CEB-26468 was properly brought in
the RTC in Cebu City, where respondent XM Facultad and Development Corporation, a
principal plaintiff, had its address.

Upon the same consideration, the petitioner’s contention that the filing and docket fees
for the complaintshould be based on the assessed values of the mortgaged real
properties due to Civil Case No. CEB-26468 being a real action cannot be upheld for
lack of factual and legal bases.

2. Respondents were not entitled to the writ of preliminary injunction

In their application for the issuance of the writ of preliminary injunction, the respondents
averred that the nullity of the loan and mortgage agreements entitled them to the relief
of enjoining the petitioner from: (a) foreclosing the real estateand chattel mortgages;
(b)taking possession, by replevin, of the Mitsubishi Pajero; and (c) depositing the
postdated checks; that respondents Spouses Facultad would suffer injustice and
irreparable injury should the petitioner foreclose the mortgages and file criminal
complaints for violation of Batas Pambansa Blg.22 against them; and that such
threatened acts, if done, would render ineffectual the judgment of the trial court. 20 They
prayed that the petitioner be enjoined from doing acts that would disturb their material
possession of the mortgaged properties, manifesting their willingness to post a bond for
the issuance of the writ of preliminary injunction.21

As mentioned, the RTC issued the writ of preliminary injunction on July 16, 2001 based
on the foregoing allegations of the respondents’ application,22 and the CA upheld the
issuance in its assailed July 9, 2002 decision.23

14
The petitioner submits that the issuance of the writ of preliminary injunction constituted
a violation of Administrative Circular (AC) No. 07-99 dated June 25, 1999, and thus
subjected respondent Judge to administrative sanction;24that injunction could not issue
to enjoin the prosecution of the criminal offenses because such prosecution was imbued
with public interest;25 and that the petitioner, as the mortgagee, could not be prohibited
from exercising its legal right to foreclose the mortgages because foreclosure of the
mortgages was its proper remedy under the law.26

AC No. 07-99 was issued as a guideline for lower court judges in the issuance of TROs
and writs of preliminary injunctions to prevent the implementation of infrastructure
projects, or the seizure and forfeiture proceedings by the Bureau of Customs, viz:

ADMINISTRATIVE CIRCULAR NO. 07-99 June 25, 1999

TO: ALL JUDGES OF LOWER COURTS RE: EXERCISE OF UTMOST CAUTION,

PRUDENCE, AND JUDICIOUSNESS IN ISSUANCE OF TEMPORARY RESTRAINING
ORDERS AND WRITS OF PRELIMINARY INJUNCTIONS

Despite well-entrenched jurisprudence and circulars regarding exercise of judiciousness

and care in the issuance of temporary restraining orders (TRO) or grant of writs
ofpreliminary injunction, reports or complaints on abuses committed by trial judges in
connection therewith persist. Some even intimated thatirregularities, including
corruption, might have influenced the issuance ofthe TRO or the writ of preliminary
injunction.

No less than the President of the Philippines has requested this Court to issue a circular
reminding judges to respect P.D. No. 1818, which prohibits the issuance of TROs in
cases involving implementation of government infrastructure projects. The Office of the
President has likewise brought to the attention of this Court orders of judges releasing
imported articles under seizure and forfeiture proceedings by the Bureau of Customs.

Judges are thus enjoined to observe utmost caution, prudence and judiciousness in the
issuance of TRO and in the grant of writs of preliminary injunction to avoid any
suspicion that its issuance or grant was for considerations other than the strict merits of
the case.

Judges should bear in mind that in Garcia v. Burgos(291 SCRA 546, 571-572 [1998]),
this Court explicitly stated:

Sec. 1 of PD 1818 distinctly provides that "[n]o court in the Philippines shall have
jurisdiction to issue any restraining order, preliminary injunction, or preliminary
mandatory injunction in any case, dispute, orcontroversy involvingan infrastructure
project . . . of the government, . . . to prohibit any person or persons, entity or
government official from proceeding with, or continuing the execution or implementation
of any such project . . . or pursuing any lawful activity necessary for such execution,
implementation or operation." At the risk of being repetitious, we stress that the

15
foregoing statutory provision expressly deprives courts of jurisdiction to issue injunctive
writs against the implementation or execution of an infrastructure project.

Their attention is further invited to Circular No. 68-94, issued on 3 November 1994 by
the OCA OIC Deputy Court Administrator Reynaldo L. Suarez, on the subject "Strict
Observance of Section 1 of P.D. 1818 Envisioned by Circular No. 13-93 dated March 5,
1993, and Circular No. 20-92 dated March 24, 1992.

Finally, judges should never forget what the Court categorically declared in Mison v.
Natividad(213 SCRA 734, 742 [1992] that "[b]y express provision of law, amply
supported by well-settled jurisprudence, the Collector of Customs has exclusive
jurisdiction over seizure and forfeiture proceedings, and regular courts cannot interfere
with his exercise thereof or stifleor put it to naught."

The Office of the Court Administrator shall see to it that this circular is immediately
disseminated and shall monitor implementation thereof.

STRICT OBSERVANCE AND COMPLIANCE of this Circular is hereby enjoined.

AC No. 07-99 was irrelevant herein, however, because Civil Case No. CEB-26468 did
not involve the implementation of infrastructure projects, or the seizure and forfeiture
proceedings by the Bureau of Customs. Consequently, the petitioner’s urging that
respondent Judge be held administratively liable for violating AC No. 07-99 was
misplaced.

However, the RTC’s issuance of the writ of preliminary injunction to enjoin the petitioner
from proceeding withthe foreclosure of the mortgages was plainly erroneous and
unwarranted.

A preliminary injunction is an order granted at any stage of an action prior to the

judgment or final order requiring a party or a court, agency or a person to refrain from a
particular act or acts.27 It is the "strong arm of equity," an extraordinary peremptory
remedy that must be used with extreme caution, affecting as it does the respective
rights of the parties.28 The requirements for the issuance of a writ of preliminary
injunction or TRO are enumerated in Section 3, Rule 58 of the Rules of Court, to wit:

Section 3. Grounds for issuance of preliminary injunction. - A preliminary injunction may

be granted when it is established:

(a) That the applicant is entitled to the relief demanded, and the whole or part of
such relief consists in restraining the commission or continuance of the act or
acts complained of, or in requiring the performance of an act or acts, eitherfor a
limited period or perpetually;

16
 (b) That the commission, continuance or non-performance of the act or acts
complained of during the litigation would probably work injustice to the applicant;
or

(c) That a party, court, agency or a person is doing, threatening, or is attempting

to do, or is procuring or suffering to be done, some act or acts probably in
violation of the rights of the applicant respecting the subject of the action or
proceeding, and tending to render the judgment ineffectual.

In City Government of Butuan v. Consolidated Broadcasting System (CBS), Inc., 29 the

Court restated the nature and concept of a writ of preliminary injunction, as follows:

A preliminary injunction is an order granted at any stage of an action or proceeding prior

to the judgment orfinal order requiring a party or a court, an agency, or a person to
refrain from a particular act or acts. It may also require the performance of a particular
act or acts, in which case it is known as a preliminary mandatory injunction. Thus, a
prohibitory injunction is one that commands a party to refrain from doing a particular act,
while a mandatory injunction commands the performance of some positive act to correct
a wrong in the past.

As with all equitable remedies, injunction must be issued only at the instance of a party
who possesses sufficient interest in or title to the right or the property sought to be
protected. It is proper only when the applicant appears to be entitled to the relief
demanded in the complaint, which must aver the existence of the right and the violation
of the right, or whose averments must in the minimum constitute a prima facieshowing
of a right to the final relief sought. Accordingly, the conditions for the issuance of the
injunctive writ are: (a) that the right to be protected exists prima facie; (b) that the act
sought to be enjoined is violative of that right; and (c) that there is an urgent and
paramount necessity for the writ to prevent serious damage. An injunction will not issue
to protect a right not in esse, or a right which is merely contingent and may never arise;
or to restrain an act which does not give rise to a cause of action; or to prevent the
perpetration of an act prohibited bystatute. Indeed, a right, to be protected by injunction,
means a right clearly founded on or granted by law or is enforceable as a matter of law.
(Bold emphasis supplied)

Under the circumstances averred in the complaintin Civil Case No. CEB-26468, the
issuance ofthe writ of preliminary injunction upon the application of the respondents was
improper. They had admittedly constituted the real estate and chattel mortgages to
secure the performance of their loan obligation to the petitioner, and, as such, they were
fully aware of the consequences on their rights in the properties given as collaterals
should the loan secured be unpaid. The foreclosure of the mortgages would be the
remedy provided by law for the mortgagee to exact payment. 30 In fact, they did not
dispute the petitioner’sallegations that they had not fully paid their obligation, and that
Civil Case No. CEB-26468 was precisely brought by them in order to stave off the
impending foreclosure of the mortgages based on their claim that they had been
compelled to sign pre-printed standard bank loan forms and mortgage agreements.

17
It is true that the trial courts are given generous latitude to act on applications for the
injunctive writ for the reason that conflicting claims in an application for the writ more
often than not involve a factual determination that is not the function of the appellate
courts;31 and that the exercise of sound discretion by the issuing courts in injunctive
matters ought not to be interfered with exceptwhen there is manifest
abuse.32 Nonetheless, the exercise of such discretion must be sound, that is, the
issuance of the writ, though discretionary, should be upon the grounds and in the
manner provided by law.33 Judges should always bear in mind that the writ of
preliminary injunction is issued uponthe satisfaction of two requisite conditions, namely:
(1) the right to be protected exists prima facie; and (2) the acts sought to be enjoined
are violative of that right. According toSaulog v. Court of Appeals, 34 the applicant must
have a sufficient interest or right to be protected, but it is enough that:-

x x x for the court to act, there must be an existing basis of facts affording a present
right which is directly threatened by an act sought to be enjoined. And while a clear
showing ofthe right claimed is necessary, its existence need not be conclusively
established. In fact, the evidence to be submitted to justify preliminary injunction at the
hearing thereon need not be conclusive or complete but need only be a "sampling"
intended merely to give the court an idea of the justification for the preliminary injunction
pending the decision of the case on the merits. This should really be so since our
concern here involves only the propriety of the preliminary injunction and not the merits
of the case still pending with the trial court.

Thus, to be entitled to the writ ofpreliminary injunction, the private respondent needs
only to show that it has the ostensible right to the final relief prayed for in its complaint x
x x.

It is also basic that the power to issue a writ of injunction is to be exercised only where
the reason and necessity therefor are clearly established, and only in cases reasonably
free from doubt.35 For, truly, a preliminary injunction should not determine the merits of
a case,36 or decide controverted facts.37 As a preventive remedy, injunction only seeks
to prevent threatened wrong,38 further injury,39 and irreparable harm40 or injustice41 until
the rights of the parties can be settled.1âwphi1 As an ancillary and preventive remedy, it
may be resorted to by a party to protect or preserve his rights during the pendency of
the principal action, and for no other purpose.42 Such relief will accordingly protect the
ability of the court to render a meaningful decision; 43 it will further serve to guard against
a change of circumstances that will hamper orprevent the granting of proper relief after
a trial on the merits.44 Verily, its essential function is to preserve the status quo between
the parties until the merits of the case can be heard.45

Moreover, the applicant must prove that the violation sought to be prevented would
cause an irreparable injustice.46But the respondents failed to establish the irreparable
injury they would suffer should the writ of preliminary injunction not be issued.
Theyprincipally feared the loss of their possession and ownership of the mortgaged
properties, and faced the possibility of a criminal prosecution for the post-dated checks
they issued. But such fear of potential loss ofpossession and ownership, or facing a

18
criminal prosecution did not constitute the requisite irreparable injury that could have
warranted the issuance of the writ of injunction. "An injury is considered irreparable,"
according to Philippine National Bank v. Castalloy Technology Corporation, 47

x x x if it is of such constant and frequent recurrence that no fair or reasonable redress

can be had therefor ina court of law, or where there is no standard by which their
amount canbe measured with reasonable accuracy, that is, it is not susceptible of
mathematical computation. The provisional remedy of preliminary injunction may only
be resorted to when there is a pressing necessity to avoid injurious consequences
which cannot be remedied under any standard of compensation.

The injury being fearedby the herein respondents is not of such nature. Ultimately, the
amount to which the mortgagee-bank shall be entitled will be determined by the
disposition of the trial court in the main issue of the case. We have explained in
Equitable PCI Bank, Inc. v. OJMark Trading, Inc.that all is not lost for defaulting
mortgagors whose properties were foreclosed by creditors-mortgagees. The
respondents will not be deprived outrightly of their property, given the right of
redemption granted to them under the law. Moreover, in extrajudicial foreclosures,
mortgagors have the right toreceive any surplus in the selling price. Thus, if the
mortgagee is retaining more of the proceeds of the sale than he is entitled to, this fact
alone will not affect the validity of the sale but will give the mortgagor a cause of action
to recover such surplus.

As a general rule, the courts will not issue writs of prohibition or injunction – whether
preliminary or final – in order to enjoin or restrain any criminal prosecution.48 But there
are extreme cases in which exceptions to the general rule have been recognized,
including: (1) when the injunction is necessary to afford adequate protection to the
constitutional rights of the accused; (2) when it is necessary for the orderly
administration of justice or to avoid oppression or multiplicity of actions; (3) when there
is a prejudicial question that is sub judice; (4) when the acts of the officer are without or
in excess of authority; (5) when the prosecution is under an invalid law, ordinance or
regulation; (6) when double jeopardy is clearly apparent; (7) when the court has no
jurisdiction over the offense; (8) when it is a case of persecution rather than
prosecution; (9) when the charges are manifestly false and motivated by the lust for
vengeance; and (10) when there is clearly no prima faciecase against the accused and
a motion to quash on that ground has been denied.49 However, the respondents did not
sufficiently show that Civil Case No. CEB-26468 came under any of the foregoing
exceptions. Hence, the issuance by the RTC of the writ of preliminary injunction to
enjoin the petitioner from instituting criminal complaints for violation of BP No. 22
against the respondents was unwarranted.

Every court should remember that an injunction should not be granted lightly or
precipitately because it isa limitation upon the freedom of the defendant's action. It
should be granted only when the court is fully satisfied that the law permits it and the
emergency demands it,50 for no power exists whose exercise is more delicate, which

19
requires greater caution and deliberation, or is more dangerous in a doubtful case, than
the issuance of an injunction.51

In view of the foregoing, the CA grossly erred in not declaring that the RTC committed
grave abuse of discretion in granting the application of the respondents as the plaintiffs
in Civil Case No. CEB-26468. The RTC apparently disregarded the aforecited well-
known norms and guidelines governing the issuance of the writ of injunction. Thereby,
the RTC acted capriciously and arbitrarily. Grave abuse of discretion means either that
the judicial or quasi-judicial power was exercised in an arbitrary or despotic manner by
reason of passion or personal hostility, or that the respondent judge, tribunal or board
evaded a positive duty, or virtually refused to perform the duty enjoined or to act in
contemplation of law, such as when such judge, tribunal or board exercising judicial or
quasi-judicial powers acted in a capricious or whimsical manner as to be equivalent to
lack of jurisdiction.52

WHEREFORE, the Court PARTIALLY GRANTS the petition for review on certiorari;
MODIFIES the decision promulgated on July 9, 2002 by annulling and setting aside the
writ of preliminary injunction in Civil Case No. CEB-26468 issued by the Regional Trial
Court, Branch 16, in Cebu City for being devoid of factual and legal bases; ORDERS
the Regional Trial Court, Branch 16, in Cebu City to proceed with dispatch in Civil Case
No. CEB-26468; and DIRECTS the respondents to pay the costs of suit.

SO ORDERED.

LUCAS P. BERSAMIN
Associate Justice

WE CONCUR:

20
CASE NO. 3 G.R. No. 175796 July 22, 2015

BPI FAMILY SAVINGS BANK INC., Petitioner,

vs.
SPOUSES BENEDICTO & TERESITA YUJUICO, Respondents,

DECISION

BERSAMIN, J.:

An action to recover the deficiency after extrajudicial foreclosure of a real property

mortgage is a personal action because it does not affect title to or possession of real
property, or any interest therein.

The Case

This appeal is taken by the petitioner to overturn the decision promulgated on March 31,
2006,1 whereby the Court of Appeals (CA) set aside the orders issued by the Regional
Trial Court, Branch 60, in Makati City (Makati RTC) on October 17, 2003 2 and February
1, 2005 3 dismissing

their action against the respondents to recover the deficiency after the extrajudicial
foreclosure of their mortgage (Civil Case No.03-450) on the ground of improper venue.

Antecedents

On August 22, 1996, the City of Manila filed a complaint against the respondents for the
expropriation of five parcels of land located in Tondo, Manila and registered in the name
of respondent Teresita Yujuico. Two of the parcels of land, covered by Transfer
Certificate of Title (TCT) No. 261331 and TCT No. 261332, were previously mortgaged
to Citytrust Banking Corporation, the petitioner's predecessor-in-interest, under a First
Real Estate Mortgage Contract.4On June 30, 2000, the Regional Trial Court in Manila
(Manila RTC) rendered its judgment declaring the five parcels of land expropriated for
public use. The judgment became final and executory on January 28, 2001 and was
entered in the book of entries of judgment on March 23, 2001. 5 The petitioner
subsequently filed a Motion to Intervene in Execution with Partial Opposition to
Defendant's Request to Release, but the RTC denied the motion for having been "filed
out of time." Hence, the petitioner decided to extrajudicially foreclose the mortgage
constituted on the two parcels of land subject of the respondents' loan. After holding the
public auction, the sheriff awarded the two lots to the petitioner as the highest bidder at
₱10, 000, 000.00. 6

Claiming a deficiency amounting to Pl8, 522155.42, the pet1t1oner sued the

respondents to recover such deficiency in the Makati RTC (Civil Case No. 03-
450).1âwphi1 The respondents moved to dismiss the complaint on several grounds,

21
namely: that the suit was barred by res judicata; that the complaint stated no cause of
action; and that the plaintiffs claim had been waived, abandoned, or extinguished. 7

In its order issued on October 17, 2003, the Makati RTC denied the respondents' motion
to dismiss, ruling that there was no res judicata; that the complaint stated a sufficient
cause of action to recover the deficiency; and that there was nothing to support the
claim that the obligation had been abandoned or extinguished apart from the
respondents' contention that the properties had been subjected to expropriation by the
City of Manila.8

On November 4, 2003, the respondents moved for reconsideration, reiterating their

grounds earlier made in their motion to dismiss. 9

In turn, the petitioner adopted its comment/opposition to the motion to dismiss. 10

The respondents then filed their reply, 11 in which they raised for the first time their
objection on the ground of improper venue. They contended that the action for the
recovery of the deficiency, being a supplementary action of the extrajudicial foreclosure
proceedings, was a real action that should have been brought in the Manila RTC
because Manila was the place where the properties were located. 12

On February 1, 2005, the Makati RTC denied the respondents' motion for
reconsideration for its lack of merit; and held on the issue of improper venue that:

It would be improper for this Court to dismiss the plaintiffs complaint on the ground of
improper venue, assuming that the venue is indeed improperly laid, since the said
ground was not raised in the defendant's Motion to Dismiss. On this point, it was held in
the case of Malig, et al. vs. Bush, L 22761, May 31, 1969 that "an action cannot be
dismissed on a ground not alleged in the motion therefore even if said ground, e.g.,
prescription, is provided in Rule 16. 13

Decision of the CA

Not satisfied, the respondents assailed the orders dated October 1 7, 2003 and
February 1, 2005 by petition for certiorari.14 They submitted for consideration by the CA
the following issues, namely:

x x x (WHETHER OR NOT) RESPONDENT TRIAL COURT COMMITTED GRAVE

ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION
WHEN IT ISSUED ITS ASSAILED ORDERS CONSIDERING THAT:

A THE COMPLAINT A QUO IS BARRED BY RES JUDICATA.

B. THE COMPLAINT STATED NO CAUSE OF ACTION.

22
 C. PRIVATE RESPONDENT'S CLAIM HAS BEEN WAIVED, ABANDONED OR
OTHERWISE EXTINGUISHED.
15
D. VENUE WAS IMPROPERLY LAID.

On March 31, 2006, the CA granted the petition for certiorari of the respondents on the
basis of the fourth issue, opining:

xxxx

Thus, a suit for recovery of the deficiency after the foreclosure of a mortgage is in the
nature of a mortgage action because its purpose is precisely to enforce the mortgage
contract; it is upon a written contract and upon an obligation of the mortgage-debtor to
pay the deficiency which is created by law. As such, the venue of an action for recovery
of deficiency must necessarily be the same venue as that of the extrajudicial foreclosure
of mortgage.

xxxx

In this regard, We take note that the parcels of land subject of the mortgage contract are
located in Tondo, Manila, under Transfer Certificates of Title Nos. 216331 and 216332.
On the other hand, the extrajudicial foreclosure of the real estate mortgage took place at
the R TC of Manila on January 28, 2003. Thus, the suit for judgment on the deficiency
filed by respondent BPI against petitioners Yujuico, being an action emanating from the
foreclosure of the real estate mortgage contract between them, must necessarily be
filed also at the RTC of Manila, not at the RTC of Makati.

x x x x 16

The CA denied the respondents' Motion for Partial Reconsideration and the petitioner's
Partial Motion for Reconsideration on December 7, 2006.17

Issues

Hence, this appeal by the petitioner, to assail the CA's dismissal of Civil Case No. 03-
450 on the ground of improper venue upon the following grounds, 18 namely:

I.

WHETHER OR NOT THE HONORA.BLE COURT OF APPEALS' DENIAL OF THE

PETITIONER'S PARTIAL MOTION FOR RECONSIDERATION ON THE GROUND OF
IMPROPER VENUE AS A RESULT DISMISSED THE COMPLAINT FOR SUM OF
MONEY IS CONTRARY TO LAW.

II.

23
WHETHER OR NOT THE HONORABLE COURT OF APPEALS['] ACT OF
APPRECIATING THE ADDITIONAL GROUND OF IMPROPER VENUE, ONLY
RAISED IN THE MOTION FOR RECONSIDERATION FILED IN THE LOWER COURT
AFTER IT DENIED RESPONDENTS' MOTION TO DISMISS, IS CONTRARY TO LAW
AND JURISPRUDENCE.19

Ruling of the Court

We grant the petition for review on certiorari.

It is basic that the venue of an action depends on whether it is a real or a personal

action. The determinants of whether an action is of a real or a personal nature have
been fixed by the Rules of Court and relevant jurisprudence. According to Section 1,
Rule 4 of the Rules of Court, a real action is one that affects title to or possession of real
property, or an interest therein. Thus, an action for partition or condemnation of, or
foreclosure of mortgage on, real property is a real action. 20 The real action is to be
commenced and tried in the proper court having jurisdiction over the area wherein the
real property involved, or a portion thereof, is situated, which explains why the action is
also referred to as a local action. In contrast, the Rules of Court declares all other
actions as personal actions. 21 such actions may include those brought for the recovery
of personal property, or for the enforcement of some contract or recovery of damages
for its breach, or for the recovery of damages for the commission of an injury to the
person or property.22 The venue of a personal action is the place where the plaintiff or
any of the principal plaintiffs resides, or where the defendant or any of the principal
defendants resides, or in the case of a non-resident defendant where he may be found,
at the election of the plaintiff, 23 for which reason the action is considered a transitory
one.

Based on the distinctions between real and personal actions, an action to recover the
deficiency after the extrajudicial foreclosure of the real property mortgage is a personal
action, for it does not affect title to or possession of real property, or any interest therein.

It is true that the Court has said in Caltex Philippines, Inc. v. Intermediate Appellate
Court 24 that "a suit for the recovery of the deficiency after the foreclosure of a mortgage
is in the nature of a mortgage action because its purpose is precisely to enforce the
mortgage contract." However, the CA erred in holding, upon the authority of Caltex
Philippines, Inc., that the venue of Civil Case No. 03 450 must necessarily be Manila,
the same venue as that of the extrajudicial foreclosure of mortgage. An examination of
Caltex Philippines, Inc. reveals that the Court was thereby only interpreting the
prescriptive period within which to bring the suit for the recovery of the deficiency after
the foreclosure of the mortgage, and was not at all ruling therein on the venue of such
suit or on the nature of such suit being either a real or a personal action.

Given the foregoing, the petitioner correctly brought Civil Case No.03-450 in the Makati
RTC because Makati was the place where the main office of the petitioner was
located.1avvphi1

24
Moreover, the Makati RTC observed, and the observation is correct in our view, that it
would be improper to dismiss Civil Case No. 03-450 on the ground of improper venue,
assuming that the venue had been improperly laid, considering that the respondents
had not raised such ground in their Motion to Dismiss. As earlier indicated, they came to
raise the objection of improper venue for the first time only in their reply to the
petitioner's comment on their Motion for Reconsideration. They did so belatedly.

We underscore that in civil proceedings, venue is procedural, not jurisdictional, and may
be waived by the defendant if not seasonably raised either in a motion to dismiss or in
the answer.25 Section 1, Rule 9 of the Rules of Court thus expressly stipulates that
defenses and objections not pleaded either in a motion to dismiss or in the answer are
deemed waived. As it relates to the place of trial, indeed, venue is meant to provide
convenience to the parties, rather than to restrict their access to the courts. 26 In other
words, unless the defendant seasonably objects, any action may be tried by a court
despite its being the improper venue.

WHEREFORE, we GRANT the petition for review on certiorari; REVERSE and SET
ASIDE the decision promulgated by the Court of Appeals on March 31, 2006;
REINSTATE the orders dated October 17, 2003 and February 1, 2005 of the Regional
Trial Court, Branch 60, in Makati City; and ORDER the respondents to pay the costs of
suit.

SO ORDERED.

25
CASE NO. 4 G.R. No. 146089 December 13, 2001

VIRGINIA GOCHAN, LOUISE GOCHAN, LAPU-LAPU REAL ESTATE

CORPORATION, FELIX GOCHAN AND SONS REALTY CORPORATION, MACTAN
REALTY DEVELOPMENT CORPORATION, petitioners,
vs.
MERCEDES GOCHAN, ALFREDO GOCHAN, ANGELINA GOCHAN-HERNAEZ, MA.
MERCED GOCHAN GOROSPE, CRISPO GOCHAN, JR., and MARLON
GOCHAN, respondents.

YNARES-SANTIAGO, J.:

This is a petition for review seeking to set aside the decision of the Court of Appeals
dated September 10, 1999 in CA-G.R. SP No. 49084,1 as well as its Resolution2 dated
November 22, 2000, denying the Motion for Reconsideration.

Respondents were stockholders of the Felix Gochan and Sons Realty Corporation and
the Mactan Realty Development Corporation. Sometime in 1996, respondents offered to
sell their shares in the two corporations to the individual petitioners, the heirs of the late
Ambassador Esteban Gochan, for and in consideration of the sum of P200,000,000:00.
Petitioners accepted and paid the said amount to respondents. Accordingly,
respondents issued to petitioners the necessary "Receipts."3 In addition, respondents
executed their respective "Release, Waiver and Quitclaim,"4 wherein .they undertook
that they would not initiate any suit, action or complaint against petitioners for whatever
reason or purpose.

In turn, respondents, through Crispo Gochan, Jr., required individual petitioners to

execute a "promissory note,"5undertaking not to divulge the actual consideration they
paid for the shares of stock. For this purpose, Crispo Gochan, Jr. drafted a document
entitled "promissory note" in his own handwriting and had the same signed by Felix
Gochan, III, Louise Gochan and Esteban Gochan, Jr.

Unbeknown to petitioners, Crispo Gochan, Jr. inserted in the "promissory note" a

phrase that says, "Said amount is in partial consideration of the sale." 6

On April 3, 1998, respondents filed a complaint against petitioners for specific

performance and damages with the Regional Trial Court of Cebu City, Branch 11,
docketed as Civil Case No. CEB-21854. Respondents alleged that sometime in
November 1996, petitioner Louise Gochan, on behalf of all the petitioners, offered to
buy their shares of stock, consisting of 254 shares in the Felix Gochan and Sons Realty
Corporation and 1,624 shares of stock in the Mactan Realty Development Corporation;
and that they executed a Provisional Memorandum of Agreement, wherein they
enumerated the following as consideration for the sale:

1. Pesos: Two Hundred Million Pesos (P200M)

26
 2. Two (2) hectares more or less of the fishpond in Gochan Compound, Mabolo,
Lot 4F-2-B

3. Lot 2, Block 9 with an area of 999 square meters in Gochan Compound,

Mabolo, Cebu

4. Three Thousand (3,000) square meters of Villas Magallanes in Mactan, Cebu

5. Lot 423 New Gem Building with an area of 605 square meters. 7

Accordingly, respondents claimed that they are entitled to the conveyance of the
aforementioned properties, in addition to the amount of P200,000,000.00, which they
acknowledge to have received from petitioners. Further, respondents prayed for moral
damages of P15,000,000.00, exemplary damages of P2,000,000.00, attorney's fees of
P14,000,000.00, and litigation expenses of P2,000,000.00.

Petitioners filed their answer, raising the following affirmative defenses: (a) lack of
jurisdiction by the trial court for non-payment of the correct docket fees; (b)
unenforceability of the obligation to convey real properties due to lack of a written
memorandum thereof, pursuant to the Statute of Frauds; (c) extinguishment of the
obligation by payment; (d) waiver, abandonment and renunciation by respondent of all
their claims against petitioners; and (e) non-joinder of indispensable parties.

On August 7, 1998, petitioners filed with the trial court a motion for a preliminary hearing
on the affirmative defenses. In an Order dated August 11, 1998, the trial court denied
the motion, ruling as follows:

As the grant of said motion lies in the discretion of the court under Section 6 of
Rule 16 of the 1997 Rules of Civil Procedure, this Court in the exercise of its
discretion, hereby denies the said motion because the matters sought to be
preliminarily heard do not appear to be tenable. For one, the statute of frauds
does not apply in this case because the contract which is the subject matter of
this case is already an executed contract. The statute of frauds applies only to
executory contracts. According to Dr. Arturo M. Tolentino, a leading authority in
civil law, since the statute of frauds was enacted for the purpose of preventing
frauds, it should not be made the instrument to further them. Thus, where one
party has performed his obligation under a contract, equity would agree that all
evidence should be admitted to prove the alleged agreement (PNB vs. Philippine
Vegetable Oil Company, 49 Phil. 897). For another, the contention of the
defendants that the claims of the plaintiffs are already extinguished by full
payment thereof does not appear to be indubitable because the plaintiffs denied
under oath the due execution and genuineness of the receipts which are
attached as Annexes 1-A, 1-B and 1-C of defendants' answer. This issue
therefore has to be determined on the basis of preponderance of evidence to be
adduced by both parties. Then, still for another, the contention that the complaint
is defective because it allegedly has failed to implead indispensable parties

27
 appears to be wanting in merit because the parties to the memorandum of
agreement adverted to in the complaint are all parties in this case. Then the
matter of payment of docketing and filing fees is not a fatal issue in this case
because the record shows that the plaintiffs had paid at least P165,000.00 plus in
the form of filing and docketing fees. Finally, regarding exerting earnest efforts
toward a compromise by the plaintiffs, the defendants cannot say that there is an
absence of an allegation to this effect in the complaint because paragraph 11 of
the complaint precisely states that "before filing this case, earnest efforts toward
a compromise have been made."

Petitioners' motion for reconsideration of the above Order was denied by the trial court
on September 11, 1998.

Petitioners thus filed a petition for certiorari with the Court of Appeals, docketed as CA-
G.R. SP No. 49084. On September 10, 1999, the Court of Appeals rendered the
appealed decision dismissing the petition on the ground that respondent court did not
commit grave abuse of discretion, tantamount to lack or in excess of jurisdiction in
denying the motion to hear the affirmative defenses. 8

Again, petitioners filed a motion for reconsideration, but the same was denied by the
Court of Appeals in its assailed Resolution of November 22, 2000. 9

Petitioners, thus, filed the instant petition for review anchored on the following grounds:

I.

THE COURT OF APPEALS COMMITTED GRAVE AND PALPABLE ERROR IN

FINDING THAT THE CORRECT DOCKET FEES HAVE BEEN PAID.

II.

THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN RULING THAT

THE PMOA WAS A PARTIALLY EXECUTED CONTRACT AND HENCE NOT
COVERED BY THE STATUTE OF FRAUDS.

III.

THE COURT OF APPEALS COMMITTED GRAVE ERROR IN DECIDING THAT

THE CLAIMS OF PRIVATE RESPONDENTS HAVE NOT BEEN
EXTINGUISHED BY PAYMENT OR FULL SETTLEMENT DESPITE THE
PRESENCE OF RECEIPTS SIGNED BY THE PRIVATE RESPONDENTS
SHOWING THE CONTRARY.

IV.

28
 THE COURT OF APPEALS COMMITTED GRAVE ERROR IN RESOLVING
THAT FELIX GOCHAN III AND ESTEBAN GOCHAN, JR. ARE NOT
INDISPENSABLE PARTIES AND THEREFORE NEED NOT BE IMPLEADED
AS PARTIES.10

Respondents filed their Comment,11 arguing, in fine, that petitioners are guilty of forum-
shopping when they filed two petitions for certiorari with the Court of Appeals; and that
the Court of Appeals did not err in dismissing the petition for certiorari.

The instant petition has merit.

The rule is well-settled that the court acquires jurisdiction over any case only upon the
payment of the prescribed docket fees. In the case of Sun Insurance Office, Ltd. (SIOL)
v. Asuncion,12 this Court held that it is not simply the filing of the complaint or
appropriate initiatory pleading, but the payment of the prescribed docket fee that vests a
trial court with jurisdiction over the subject matter or nature of the action.

Respondents maintain that they paid the correct docket fees in the amount of
P165,000.00 when they filed the complaint with the trial court. Petitioners, on the other
hand, contend that the complaint is in the nature of a real action which affects title to
real properties; hence, respondents should have alleged therein the value of the real
properties which shall be the basis for the assessment of the correct docket fees.

The Court of Appeals found that the complaint was one for specific performance and
incapable of pecuniary estimation. We do not agree.

It is necessary to determine the true nature of the complaint in order to resolve the issue
of whether or not respondents paid the correct amount of docket fees therefor. In this
jurisdiction, the dictum adhered to is that the nature of an action is determined by the
allegations in the body of the pleading or complaint itself, rather than by its title or
heading.13 The caption of the complaint below was denominated as one for "specific
performance and damages." The relief sought, however, is the conveyance or transfer
of real property, or ultimately, the execution of deeds of conveyance in their favor of the
real properties enumerated in the provisional memorandum of agreement. Under these
circumstances, the case below was actually a real action, affecting as it does title to or
possession of real property.

In the case of Hernandez v. Rural Bank of Lucena,14 this Court held that a real action is
one where the plaintiff seeks the recovery of real property or, as indicated in section
2(a) of Rule 4 (now Section 1, Rule 4 of the 1997 Rules of Civil Procedure), a real
action is an action affecting title to or recovery of possession of real property.

It has also been held that where a complaint is entitled as one for specific performance
but nonetheless prays for the issuance of a deed of sale for a parcel of land, its primary
objective and nature is one to recover the parcel of land itself and, thus, is deemed a

29
real action. In such a case, the action must be filed in the proper court where the
property is located:

In this Court, the appellant insists that her action is one for specific performance,
and, therefore, personal and transitory in nature.

This very issue was considered and decided by this Court in the case of Manuel
B. Ruiz vs. J.M. Tuason & Co., Inc. et al., L-18692, promulgated 31 January
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 parcel of 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 recovery of
possession of real property shall be commenced and tried in the province
where the property or any part thereof lies."15

In the case at bar, therefore, the complaint filed with the trial court was in the nature of a
real action, although ostensibly denominated as one for specific performance.
Consequently, the basis for determining the correct docket fees shall be the assessed
value of the property, or the estimated value thereof as alleged by the claimant. Rule
141, Section 7, of the Rules of Court, as amended by A.M. No. 00-2-01-SC, provides:

Section 7. Clerks of Regional Trial Courts. — x x x

(b) xxx xxx xxx

In a real action, the assessed value of the property, or if there is none, the
estimated value thereof shall be alleged by the claimant and shall be the basis in
computing the fees.

We are not unmindful of our pronouncement in the case of Sun Insurance,16 to the
effect that in case the filing of the initiatory pleading is not accompanied by payment of
the docket fee, the court may allow payment of the fee within a reasonable time but in
no case beyond the applicable prescriptive period. However, the liberal interpretation of
the rules relating to the payment of docket fees as applied in the case of Sun
Insurance cannot apply to the instant case as respondents have never demonstrated
any willingness to abide by the rules and to pay the correct docket fees. Instead,
respondents have stubbornly insisted that the case they filed was one for specific

30
performance and damages and that they actually paid the correct docket fees therefor
at the time of the filing of the complaint. Thus, it was stated in the case of Sun
Insurance:17

The principle in Manchester could very well be applied in the present case. The
pattern and the intent to defraud the government of the docket fee due it is
obvious not only in the filing of the original complaint but also in the filing of the
second amended complaint.

However, in Manchester, petitioner did not pay any additional docket fee until the
case was decided by this Court on May 7, 1987. Thus, in Manchester, due to the
fraud committed on the government, this Court held that the court a quo did not
acquire jurisdiction over the case and that the amended complaint could not have
been admitted inasmuch as the original complaint was null and void.

In the present case, a more liberal interpretation of the rules is called for
considering that, unlike Manchester, private respondent demonstrated his
willingness to abide by the rules by paying the additional docket fees as required.
The promulgation of the decision in Manchester must have had that sobering
influence on private respondent who thus paid the additional docket fee as
ordered by the respondent court. It triggered his change of stance by manifesting
his willingness to pay such additional docket fee as may be ordered.

Respondents accuse petitioners of forum-shopping when they filed two petitions before
the Court of Appeals. Petitioners, on the other hand, contend that there was no forum-
shopping as there was no identity of issues or identity of reliefs sought in the two
petitions.

We agree with petitioners that they are not guilty of forum-shopping. The deplorable
practice of forum-shopping is resorted to by litigants who, for the purpose of obtaining
the same relief, resort to two different fora to increase his or her chances of obtaining a
favorable judgment in either one. In the case of Golangco v. Court of Appeals,18 we laid
down the following test to determine whether there is forum-shopping:

Ultimately, what is truly important to consider in determining whether forum-

shopping exists or not is the vexation caused the courts and the parties-litigant
by a person who asks different courts and/or administrative agencies to rule on
the same or related causes and/or grant the same or substantially the same
reliefs, in the process creating the possibility of conflicting decisions being
rendered by the different fora upon the same issues.

In sum, two different orders were questioned, two distinct causes of action and
issues were raised, and two objectives were sought; thus, forum shopping cannot
be said to exist in the case at bar.

31
Likewise, we do not find that there is forum-shopping in the case at bar. The first
petition, docketed as CA-G.R. SP. No. 49084, which is now the subject of the instant
petition, involved the propriety of the affirmative defenses relied upon by petitioners in
Civil Case No. CEB-21854. The second petition, docketed as CA-G.R. SP No. 54985,
raised the issue of whether or not public respondent Judge Dicdican was guilty of
manifest partiality warranting his inhibition from further hearing Civil Case No. CEB-
21854.

More importantly, the two petitions did not seek the same relief from the Court of
Appeals. In CA-G.R. SP. No. 49084, petitioners prayed, among others, for the
annulment of the orders of the trial court denying their motion for preliminary hearing on
the affirmative defenses in Civil Case No. CEB-21854. No such reliefs are involved in
the second petition, where petitioners merely prayed for the issuance of an order
enjoining public respondent Judge Dicdican from further trying the case and to assign a
new judge in his stead.

True, the trial court has the discretion to conduct a preliminary hearing on affirmative
defenses. In the case at bar, however, the trial court committed a grave abuse of its
discretion when it denied the motion for preliminary hearing. As we have discussed
above, some of these defenses, which petitioners invoked as grounds for the dismissal
of the action, appeared to be indubitable, contrary to the pronouncement of the trial
court. Indeed, the abuse of discretion it committed amounted to an evasion of positive
duty or virtual refusal to perform a duty enjoined by law, or to act at all in contemplation
of law,19 which would have warranted the extraordinary writ of certiorari. Hence, the
Court of Appeals erred when it dismissed the petition for certiorari filed by petitioners.

WHEREFORE, in view of the foregoing, the instant petition is GRANTED. This case is
REMANDED to the Regional Trial Court of Cebu City, Branch 11, which is directed to
forthwith conduct the preliminary hearing on the affirmative defenses in Civil Case No.
CEB-21854.

SO ORDERED.

Davide, Jr., C.J.;Kapunan, and Pardo, JJ., concur.

DISSENTING OPINION

DAVIDE, JR., C.J.:

I respectfully make of record my dissent to both drafts of the decision penned by Mme.
Justice Consuelo Y. Santiago.

I. The first draft

32
The first draft (1) sets aside the Decision and Resolution of the Court of Appeals in CA-
G.R. SP No. 49084 and the Orders of the Regional Trial Court of Cebu City, Branch 11,
in Civil Case No. CEB-21854; and (2) orders of the dismissal of said civil case.

I seriously doubt the propriety of this action, even if it is principally based on the non-
payment of the deficiency of the docket fee. Sun Life Insurance Office Ltd. v.
Asuncion (170 SCRA 274 [1989]) is not the final word on deficiency of docket
fees. Tacay v. Regional Trial Court of Tagum, Davao del Norte, (180 SCRA 433, 443
[1989]) further liberalized the rule. Thus:

Two situations may arise. One is where the complaint or similar pleading sets out
a claim purely for money or damages and there is no precise statement of the
amounts being claimed. In this event the rule is that the pleading will 'not be
accepted nor admitted, or shall otherwise be expunged from the record.' In other
words, the complaint or pleading may be dismissed, or the claims as to which the
amounts are unspecified may be expunged, although as aforestated the Court
may, on motion, permit amendment of the complaint and payment of the fees
provided the claim has not in the meantime become time-barred. The other is
where the pleading does specify the amount of every claim, but the fees paid are
insufficient; and here again, the rule now is that the court may allow a reasonable
time for the payment of the prescribed fees, or the balance thereof, and upon
such payment, the defect is cured and the court may properly take cognizance of
the action, unless in the meantime prescription has set in and consequently
barred the right of action.

Where the action involves real property and a related claim for damages as well,
the legal fees shall be assessed on the basis of both (a) the value of the property
and (b) the total amount of related damages sought. The Court acquires
jurisdiction over the action if the filing of the initiatory pleading is accompanied by
the payment of the requisite fees, or, if the fees are not paid at the time of the
filing of the pleading, as of the time of full payment of the fees within such
reasonable time as the court may grant, unless, of course, prescription has set in
in the meantime. But where — as in the case at bar — the fees prescribed for an
action involving real property have been paid, but the amounts of certain of the
related damages (actual, moral and nominal) being demanded are unspecified,
the action may not be dismissed. The Court undeniably has jurisdiction over the
action involving the real property, acquiring it upon the filing of the complaint or
similar pleading and payment of the prescribed fee. And it is not divested of that
authority by the circumstance that it may not have acquired jurisdiction over the
accompanying claims for damages because of lack of specification thereof. What
should be done is simply to expunge those claims for damages as to which no
amounts are stated, which is what the respondent Courts did, or allow, on
motion, a reasonable time far the amendment of the complaints so as to allege
the precise amount of each item of damages and accept payment of the requisite
fees therefor within the relevant prescriptive period.

33
Even if we would still cling to Sun Life, the rule therein laid down would still be
applicable to this case, contrary to the assertion in the ponencia in question. The evil
contemplated in Manchester case which prompted the pronouncement therein does not
exist in the instant case.

Verily, there is good faith on the part of the private respondents in insisting on what their
cause of action is. Even the Court of Appeals sustained their position in this issue.

Therefor, private respondents should only be required to pay the deficiency in docket
fees.

II. The second draft

The second draft ponencia declares the trial court and the Court of Appeals as having
acted with grave abuse of discretion in denying the motion for a preliminary hearing on
the affirmative defenses. The order of the trial court denying the motion is an
interlocutory order. There can be no appeal from such order of denial. A special civil
action of certiorari under Rule 65 of the Rules of Court may be resorted to, but there
must be a clear showing that the court had acted without or in excess of jurisdiction or
with grave abuse of discretion amounting to lack of or in excess of abuse of discretion
means arbitrary and jurisdiction. Grave despotic action.

I submit that the trial court did not commit any grave abuse of discretion in denying the
motion for a preliminary hearing on the affirmative defenses on the ground that such
defenses do not appear to be indubitable. The ponenciaitself admits that only some of
the defenses appeared indubitable. The last paragraph of page 10 of the latest draft of
the ponencia reads:

True, the trial court has the discretion to conduct a preliminary hearing on
affirmative defenses. In the case at bar, however, the trial court committed a
grave abuse of its discretion when it denied the motion for preliminary
hearing. As we have discussed above, some of these defenses, which petitioners
invoked as grounds for the dismissal of the action, appeared to be indubitable,
contrary to the pronouncement of the trial court. Indeed, the abuse of discretion it
committed amounted to an evasion of positive duty or virtual refusal to perform a
duty enjoined by law, or to act at all in contemplation of law, which would have
warranted the extraordinary writ of certiorari. Hence, the Court of Appeals erred
when it dismissed the petition for certiorarifiled by petitioners. (Underscoring
supplied for supplied)

Accordingly, since the orders of the trial court are not tainted with grave abuse of
discretion, the Court of Appeals committed no error in dismissing the petition
for certiorari against said orders.

I then vote to deny due course to the petition.

34
CASE NO. 5

IRENE MARCOS-ARANETA, DANIEL G.R. No. 154096

RUBIO, ORLANDO G. RESLIN, and
JOSE G. RESLIN, Present:
Petitioners,
QUISUMBING, J., Chairperson,
CARPIO MORALES,
- versus - TINGA,
VELASCO, JR., and
BRION, JJ.
COURT OF APPEALS, JULITA C.
BENEDICTO, and FRANCISCA Promulgated:
BENEDICTO-PAULINO,
Respondents. August 22, 2008
x-----------------------------------------------------------------------------------------x

DECISION

VELASCO, JR., J.:

The Case

This Petition for Review on Certiorari under Rule 45 assails and seeks to nullify

the Decision[1] dated October 17, 2001 of the Court of Appeals (CA) in CA-G.R. SP No.

64246 and its Resolution[2] of June 20, 2002 denying petitioners motion for

reconsideration. The assailed CA decision annulled and set aside the Orders

dated October 9, 2000, December 18, 2000, and March 15, 2001 of the Regional Trial

Court (RTC), Branch 17 in Batac, Ilocos Norte which admitted petitioners amended

complaint in Civil Case Nos. 3341-17 and 3342-17.

The Facts

Sometime in 1968 and 1972, Ambassador Roberto S. Benedicto, now

deceased, and his business associates (Benedicto Group) organized Far East

Managers and Investors, Inc. (FEMII) and Universal Equity Corporation (UEC),

35
respectively. As petitioner Irene Marcos-Araneta would later allege, both corporations

were organized pursuant to a contract or arrangement whereby Benedicto, as trustor,

placed in his name and in the name of his associates, as trustees, the shares of stocks

of FEMII and UEC with the obligation to hold those shares and their fruits in trust and for

the benefit of Irene to the extent of 65% of such shares. Several years after, Irene,

through her trustee-husband, Gregorio Ma. Araneta III, demanded the reconveyance of

said 65% stockholdings, but the Benedicto Group refused to oblige.

In March 2000, Irene thereupon instituted before the RTC two similar complaints

for conveyance of shares of stock, accounting and receivership against the Benedicto

Group with prayer for the issuance of a temporary restraining order (TRO). The first,

docketed as Civil Case No. 3341-17, covered the UEC shares and named Benedicto,

his daughter, and at least 20 other individuals as defendants. The second, docketed as

Civil Case No. 3342-17, sought the recovery to the extent of 65% of FEMII shares held

by Benedicto and the other defendants named therein.

Respondent Francisca Benedicto-Paulino,[3] Benedictos daughter, filed a Motion

to Dismiss Civil Case No. 3341-17, followed later by an Amended Motion to Dismiss.

Benedicto, on the other hand, moved to dismiss[4] Civil Case No. 3342-17, adopting in

toto the five (5) grounds raised by Francisca in her amended motion to dismiss. Among

these were: (1) the cases involved an intra-corporate dispute over which the Securities

36
and Exchange Commission, not the RTC, has jurisdiction; (2) venue was improperly

laid; and (3) the complaint failed to state a cause of action, as there was no allegation

therein that plaintiff, as beneficiary of the purported trust, has accepted the trust created

in her favor.

To the motions to dismiss, Irene filed a Consolidated Opposition, which

Benedicto and Francisca countered with a Joint Reply to Opposition.

Upon Benedictos motion, both cases were consolidated.

During the preliminary proceedings on their motions to dismiss, Benedicto and

Francisca, by way of bolstering their contentions on improper venue, presented the

Joint Affidavit[5] of Gilmia B. Valdez, Catalino A. Bactat, and Conchita R. Rasco who all

attested being employed as household staff at the Marcos Mansion in Brgy. Lacub,

Batac, Ilocos Norte and that Irene did not maintain residence in said place as she in fact

only visited the mansion twice in 1999; that she did not vote in Batac in the 1998

national elections; and that she was staying at her husbands house in Makati City.

Against the aforesaid unrebutted joint affidavit, Irene presented her PhP 5

community tax certificate[6] (CTC) issued on 11/07/99 in Curimao, Ilocos Norte to

support her claimed residency in Batac, Ilocos Norte.

37
 In the meantime, on May 15, 2000, Benedicto died and was substituted by his

wife, Julita C. Benedicto, and Francisca.

On June 29, 2000, the RTC dismissed both complaints, stating that these partly

constituted real action, and that Irene did not actually reside in Ilocos Norte, and,

therefore, venue was improperly laid. In its dismissal order,[7] the court also declared all

the other issues raised in the different Motions to Dismiss x x x moot and academic.

From the above order, Irene interposed a Motion for Reconsideration[8] which

Julita and Francisca duly opposed.

Pending resolution of her motion for reconsideration, Irene filed on July 17,

2000 a Motion (to Admit Amended Complaint),[9] attaching therewith a copy of the

Amended Complaint[10] dated July 14, 2000 in which the names of Daniel Rubio,

Orlando G. Reslin, and Jose G. Reslin appeared as additional plaintiffs. As stated in the

amended complaint, the added plaintiffs, all from Ilocos Norte, were Irenes new

trustees. Parenthetically, the amended complaint stated practically the same cause of

action but, as couched, sought the reconveyance of the FEMII shares only.

38
 During the August 25, 2000 hearing, the RTC dictated in open court an order

denying Irenes motion for reconsideration aforementioned, but deferred action on her

motion to admit amended complaint and the opposition thereto. [11]

On October 9, 2000, the RTC issued an Order[12] entertaining the amended

complaint, dispositively stating:

WHEREFORE, the admission of the Amended Complaint being

tenable and legal, the same is GRANTED.

Let copies of the Amended Complaint be served to the defendants

who are ordered to answer within the reglementary period provided by the
rules.

The RTC predicated its order on the following premises:

(1) Pursuant to Section 2, Rule 10 of the Rules of Court, [13] Irene may opt to file,

as a matter of right, an amended complaint.

(2) The inclusion of additional plaintiffs, one of whom was a Batac, an Ilocos

Norte resident, in the amended complaint setting out the same cause of action cured

the defect of improper venue.

(3) Secs. 2 and 3 of Rule 3 in relation to Sec. 2 of Rule 4 allow the filing of the

amended complaint in question in the place of residence of any of Irenes co-plaintiffs.

39
In time, Julita and Francisca moved to dismiss the amended complaint, but the RTC, by

Order[14] dated December 18, 2000, denied the motion and reiterated its directive for the

two to answer the amended complaint.

In said order, the RTC stood pat on its holding on the rule on amendments of pleadings.

And scoffing at the argument about there being no complaint to amend in the first place

as of October 9, 2000 (when the RTC granted the motion to amend) as the original

complaints were dismissed with finality earlier, i.e., on August 25, 2000 when the court

denied Irenes motion for reconsideration of the June 29, 2000 order dismissing the

original complaints, the court stated thusly: there was actually no need to act on Irenes

motion to admit, it being her right as plaintiff to amend her complaints absent any

responsive pleading thereto. Pushing its point, the RTC added the observation that the

filing of the amended complaint on July 17, 2000 ipso facto superseded the original

complaints, the dismissal of which, per the June 29, 2000 Order, had not yet become

final at the time of the filing of the amended complaint.

Following the denial on March 15, 2001 of their motion for the RTC to reconsider

its December 18, 2000 order aforestated, Julita and Francisca, in a bid to evade being

declared in default, filed on April 10, 2001 their Answer to the amended complaint.[15]But

on the same day, they went to the CA via a petition for certiorari, docketed as CA-G.R.

SP No. 64246, seeking to nullify the following RTC orders: the first, admitting the

40
amended complaint; the second, denying their motion to dismiss the amended

complaint; and the third, denying their motion for reconsideration of the second

issuance.

Inasmuch as the verification portion of the joint petition and the certification on

non-forum shopping bore only Franciscas signature, the CA required the joint

petitioners to submit x x x either the written authority of Julita C. Benedicto to Francisca

B. Paulino authorizing the latter to represent her in these proceedings, or a

supplemental verification and certification duly signed by x x x Julita C.

Benedicto.[16] Records show the submission of the corresponding authorizing

Affidavit[17] executed by Julita in favor of Francisca.

Later developments saw the CA issuing a TRO[18] and then a writ of preliminary

injunction[19] enjoining the RTC from conducting further proceedings on the subject civil

cases.

On October 17, 2001, the CA rendered a Decision, setting aside the assailed

RTC orders and dismissing the amended complaints in Civil Case Nos. 3341-17 and

3342-17. The fallo of the CA decision reads:

WHEREFORE, based on the foregoing premises, the petition is

hereby GRANTED. The assailed Orders admitting the amended
complaints are SET ASIDE for being null and void, and the amended
complaints a quo are, accordingly, DISMISSED.[20]

41
 Irene and her new trustees motion for reconsideration of the assailed decision

was denied through the equally assailed June 20, 2002 CA Resolution. Hence, this

petition for review is before us.

The Issues

Petitioners urge the setting aside and annulment of the assailed CA decision

and resolution on the following submissions that the appellate court erred in: (1)

allowing the submission of an affidavit by Julita as sufficient compliance with the

requirement on verification and certification of non-forum shopping; (2) ruling on the

merits of the trust issue which involves factual and evidentiary determination, processes

not proper in a petition for certiorari under Rule 65 of the Rules of Court; (3) ruling that

the amended complaints in the lower court should be dismissed because, at the time it

was filed, there was no more original complaint to amend; (4) ruling that the

respondents did not waive improper venue; and (5) ruling that petitioner Irene was not a

resident of Batac, Ilocos Norte and that none of the principal parties are residents of

Ilocos Norte.[21]
The Courts Ruling

We affirm, but not for all the reasons set out in, the CAs decision.

First Issue: Substantial Compliance with the Rule

on Verification and Certification of Non-Forum Shopping

42
 Petitioners tag private respondents petition in CA-G.R. SP No. 64246 as

defective for non-compliance with the requirements of Secs. 4 [22] and 5[23] of Rule 7 of

the Rules of Court at least with regard to Julita, who failed to sign the verification and

certification of non-forum shopping. Petitioners thus fault the appellate court for directing

Julitas counsel to submit a written authority for Francisca to represent Julita in the

certiorari proceedings.

We are not persuaded.

Verification not Jurisdictional; May be Corrected

Verification is, under the Rules, not a jurisdictional but merely a formal

requirement which the court may motu proprio direct a party to comply with or correct,

as the case may be. As the Court articulated in Kimberly Independent Labor Union for

Solidarity, Activism and Nationalism (KILUSAN)-Organized Labor Associations in Line

Industries and Agriculture (OLALIA) v. Court of Appeals:

[V]erification is a formal, not a jurisdictional requisite, as it is mainly

intended to secure an assurance that the allegations therein made are
done in good faith or are true and correct and not mere speculation. The
Court may order the correction of the pleading, if not verified, or act on the
unverified pleading if the attending circumstances are such that a strict
compliance with the rule may be dispensed with in order that the ends of
justice may be served.[24]

43
 Given this consideration, the CA acted within its sound discretion in ordering the

submission of proof of Franciscas authority to sign on Julitas behalf and represent her in

the proceedings before the appellate court.

Signature by Any of the Principal Petitioners is Substantial Compliance

Regarding the certificate of non-forum shopping, the general rule is that all the

petitioners or plaintiffs in a case should sign it.[25] However, the Court has time and

again stressed that the rules on forum shopping, which were designed to promote the

orderly administration of justice, do not interdict substantial compliance with its

provisions under justifiable circumstances.[26] As has been ruled by the Court, the

signature of any of the principal petitioners[27] or principal parties,[28] as Francisca is in

this case, would constitute a substantial compliance with the rule on verification and

certification of non-forum shopping. It cannot be overemphasized that Francisca herself

was a principal party in Civil Case No. 3341-17 before the RTC and in the certiorari

proceedings before the CA. Besides being an heir of Benedicto, Francisca, with her

mother, Julita, was substituted for Benedicto in the instant case after his demise.

And should there exist a commonality of interest among the parties, or where the

parties filed the case as a collective, raising only one common cause of action or

presenting a common defense, then the signature of one of the petitioners or

44
complainants, acting as representative, is sufficient compliance. We said so in Cavile v.

Heirs of Clarita Cavile.[29] Like Thomas Cavile, Sr. and the other petitioners

in Cavile, Francisca and Julita, as petitioners before the CA, had filed their petition as a

collective, sharing a common interest and having a common single defense to protect

their rights over the shares of stocks in question.

Second Issue: Merits of the Case cannot be Resolved

on Certiorari under Rule 65

Petitioners posture on the second issue is correct. As they aptly pointed out, the

CA, in the exercise of its certiorari jurisdiction under Rule 65, is limited to reviewing and

correcting errors of jurisdiction only. It cannot validly delve into the issue of trust which,

under the premises, cannot be judiciously resolved without first establishing certain

facts based on evidence.

Whether a determinative question is one of law or of fact depends on the nature

of the dispute. A question of law exists when the doubt or controversy concerns the

correct application of law or jurisprudence to a certain given set of facts; or when the

issue does not call for an examination of the probative value of the evidence presented,

the truth or falsehood of facts being admitted. A question of fact obtains when the doubt

or difference arises as to the truth or falsehood of facts or when the query invites the

calibration of the whole evidence considering mainly the credibility of the witnesses, the

45
existence and relevancy of specific surrounding circumstances, as well as their relation

to each other and to the whole, and the probability of the situation. [30]

Clearly then, the CA overstepped its boundaries when, in disposing of private

respondents petition for certiorari, it did not confine itself to determining whether or not

lack of jurisdiction or grave abuse of discretion tainted the issuance of the assailed RTC

orders, but proceeded to pass on the factual issue of the existence and enforceability of

the asserted trust. In the process, the CA virtually resolved petitioner Irenes case for

reconveyance on its substantive merits even before evidence on the matter could be

adduced. Civil Case Nos. 3341-17 and 3342-17 in fact have not even reached the pre-

trial stage. To stress, the nature of the trust allegedly constituted in Irenes favor and its

enforceability, being evidentiary in nature, are best determined by the trial court. The

original complaints and the amended complaint certainly do not even clearly indicate

whether the asserted trust is implied or express. To be sure, an express trust differs

from the implied variety in terms of the manner of proving its existence. [31] Surely, the

onus of factually determining whether the trust allegedly established in favor of Irene, if

one was indeed established, was implied or express properly pertains, at the first

instance, to the trial court and not to the appellate court in a special civil action for

certiorari, as here. In the absence of evidence to prove or disprove the constitution and

necessarily the existence of the trust agreement between Irene, on one hand, and the

Benedicto Group, on the other, the appellate court cannot intelligently pass upon the

46
issue of trust. A pronouncement on said issue of trust rooted on speculation and

conjecture, if properly challenged, must be struck down. So it must be here.

Third Issue: Admission of Amended Complaint Proper

As may be recalled, the CA veritably declared as reversibly erroneous the

admission of the amended complaint. The flaw in the RTCs act of admitting the

amended complaint lies, so the CA held, in the fact that the filing of the amended

complaint on July 17, 2000 came after the RTC had ordered with finality the dismissal of

the original complaints. According to petitioners, scoring the CA for its declaration

adverted to and debunking its posture on the finality of the said RTC order, the CA

failed to take stock of their motion for reconsideration of the said dismissal order.

We agree with petitioners and turn to the governing Sec. 2 of Rule 10 of the

Rules of Court which provides:

SEC. 2. Amendments as a matter of right. A party may amend his

pleading once as a matter of right at any time before a responsive
pleading is served or in the case of a reply, at any time within ten (10)
days after it is served.

As the aforequoted provision makes it abundantly clear that the plaintiff may

amend his complaint once as a matter of right, i.e., without leave of court, before any

47
responsive pleading is filed or served. Responsive pleadings are those which seek

affirmative relief and/or set up defenses,[32] like an answer. A motion to dismiss is not a

responsive pleading for purposes of Sec. 2 of Rule 10.[33] Assayed against the foregoing

perspective, the RTC did not err in admitting petitioners amended complaint, Julita and

Francisca not having yet answered the original complaints when the amended

complaint was filed. At that precise moment, Irene, by force of said Sec. 2 of Rule 10,

had, as a matter of right, the option of amending her underlying reconveyance

complaints. As aptly observed by the RTC, Irenes motion to admit amended complaint

was not even necessary. The Court notes though that the RTC has not offered an

explanation why it saw fit to grant the motion to admit in the first place.

In Alpine Lending Investors v. Corpuz, the Court, expounding on the propriety of

admitting an amended complaint before a responsive pleading is filed, wrote:

[W]hat petitioner Alpine filed in Civil Case No. C-20124 was a

motion to dismiss, not an answer. Settled is the rule
that a motion to dismiss is not a responsive pleading for purposes of
Section 2, Rule 10. As no responsive pleading had been filed, respondent
could amend her complaint in Civil Case No. C-20124 as a matter of
right. Following this Courts ruling in Breslin v. Luzon Stevedoring
Co.considering that respondent has the right to amend her complaint, it is
the correlative duty of the trial court to accept the amended complaint;
otherwise, mandamus would lie against it. In other words, the trial courts
duty to admit the amended complaint was purely ministerial. In fact,
respondent should not have filed a motion to admit her amended
complaint.[34]

48
 It may be argued that the original complaints had been dismissed through

the June 29, 2000 RTC order. It should be pointed out, however, that the finality of such

dismissal order had not set in when Irene filed the amended complaint on July 17, 2000,

she having meanwhile seasonably sought reconsideration thereof. Irenes motion for

reconsideration was only resolved on August 25, 2000. Thus, when Irene filed the

amended complaint on July 17, 2000, the order of dismissal was not yet final, implying

that there was strictly no legal impediment to her amending her original complaints. [35]

Fourth Issue: Private Respondents did not Waive Improper Venue

Petitioners maintain that Julita and Francisca were effectively precluded from

raising the matter of improper venue by their subsequent acts of filing numerous

pleadings. To petitioners, these pleadings, taken together, signify a waiver of private

respondents initial objection to improper venue.

This contention is without basis and, at best, tenuous. Venue essentially

concerns a rule of procedure which, in personal actions, is fixed for the greatest

convenience possible of the plaintiff and his witnesses. The ground of improperly laid

venue must be raised seasonably, else it is deemed waived. Where the defendant failed

to either file a motion to dismiss on the ground of improper venue or include the same

as an affirmative defense, he is deemed to have waived his right to object to improper

49
venue.[36] In the case at bench, Benedicto and Francisca raised at the earliest time

possible, meaning within the time for but before filing the answer to the complaint,[37] the

matter of improper venue. They would thereafter reiterate and pursue their objection on

venue, first, in their answer to the amended complaints and then in their petition for

certiorari before the CA. Any suggestion, therefore, that Francisca and Benedicto or his

substitutes abandoned along the way improper venue as ground to defeat Irenes claim

before the RTC has to be rejected.

Fifth Issue: The RTC Has No Jurisdiction

on the Ground of Improper Venue

Subject Civil Cases are Personal Actions

It is the posture of Julita and Francisca that the venue was in this case

improperly laid since the suit in question partakes of a real action involving real

properties located outside the territorial jurisdiction of the RTC in Batac.

This contention is not well-taken. In a personal action, the plaintiff seeks the

recovery of personal property, the enforcement of a contract, or the recovery of

damages.[38] Real actions, on the other hand, are those affecting title to or possession of

real property, or interest therein. In accordance with the wordings of Sec. 1 of Rule 4,

the venue of real actions shall be the proper court which has territorial jurisdiction over

50
the area wherein the real property involved, or a portion thereof, is situated. The venue

of personal actions is the court where the plaintiff or any of the principal plaintiffs

resides, or where the defendant or any of the principal defendants resides, or in the

case of a non-resident defendant where he may be found, at the election of the

plaintiff.[39]

In the instant case, petitioners are basically asking Benedicto and his Group, as

defendants a quo, to acknowledge holding in trust Irenes purported 65%

stockownership of UEC and FEMII, inclusive of the fruits of the trust, and to execute in

Irenes favor the necessary conveying deed over the said 65% shareholdings. In other

words, Irene seeks to compel recognition of the trust arrangement she has with the

Benedicto Group. The fact that FEMIIs assets include real properties does not

materially change the nature of the action, for the ownership interest of a stockholder

over corporate assets is only inchoate as the corporation, as a juridical person, solely

owns such assets. It is only upon the liquidation of the corporation that the stockholders,

depending on the type and nature of their stockownership, may have a real inchoate

right over the corporate assets, but then only to the extent of their stockownership.

The amended complaint is an action in personam, it being a suit against

Francisca and the late Benedicto (now represented by Julita and Francisca), on the

51
basis of their alleged personal liability to Irene upon an alleged trust constituted in 1968

and/or 1972.They are not actions in rem where the actions are against the real

properties instead of against persons. [40] We particularly note that possession or title to

the real properties of FEMII and UEC is not being disputed, albeit part of the assets of

the corporation happens to be real properties.

Given the foregoing perspective, we now tackle the determinative question of

venue in the light of the inclusion of additional plaintiffs in the amended complaint.

Interpretation of Secs. 2 and 3 of Rule 3; and Sec. 2 of Rule 4

We point out at the outset that Irene, as categorically and peremptorily found by

the RTC after a hearing, is not a resident of Batac, Ilocos Norte, as she claimed. The

Court perceives no compelling reason to disturb, in the confines of this case, the factual

determination of the trial court and the premises holding it together. Accordingly, Irene

cannot, in a personal action, contextually opt for Batac as venue of her reconveyance

complaint. As to her, Batac, Ilocos Norte is not what Sec. 2, Rule 4 of the Rules of Court

adverts to as the place where the plaintiff or any of the principal plaintiffs resides at the

time she filed her amended complaint. That Irene holds CTC No. 17019451[41] issued

sometime in June 2000 in Batac, Ilocos Norte and in which she indicated her address

as Brgy. Lacub, Batac, Ilocos is really of no moment. Let alone the fact that one can

52
easily secure a basic residence certificate practically anytime in any Bureau of Internal

Revenue or treasurers office and dictate whatever relevant data one desires

entered, Irene procured CTC No. 17019451 and appended the same to her motion for

reconsideration following the RTCs pronouncement against her being a resident of

Batac.

Petitioners, in an attempt to establish that the RTC in Batac, Ilocos Norte is the

proper court venue, asseverate that Batac, Ilocos Norte is where the principal parties

reside.

Pivotal to the resolution of the venue issue is a determination of the status of

Irenes co-plaintiffs in the context of Secs. 2 and 3 of Rule 3 in relation to Sec. 2 of Rule

4, which pertinently provide as follows:

Rule 3
PARTIES TO CIVIL ACTIONS

SEC. 2. Parties in interest. A real party in interest is the party who

stands to be benefited or injured by the judgment in the suit, or the party
entitled to the avails of the suit. Unless otherwise authorized by law or
these Rules, every action must be prosecuted or defended in the name of
the real party in interest.

SEC. 3. Representatives as parties. Where the action is allowed to

be prosecuted or defended by a representative or someone acting in a
fiduciary capacity, the beneficiary shall be included in the title of the case
and shall be deemed to be the real party in interest. A representative may
be a trustee of an express trust, a guardian, an executor or administrator,
or a party authorized by law or these Rules. An agent acting in his own
name and for the benefit of an undisclosed principal may sue or be sued
without joining the principal except when the contract involves things
belonging to the principal.

Rule 4

53
 VENUE OF ACTIONS

SEC. 2. Venue of personal actions. All other actions may be

commenced and tried where the plaintiff or any of the principal plaintiffs
resides, or where the defendant or any of the principal defendants resides,
or in the case of a non-resident defendant where he may be found, at the
election of the plaintiff.

Venue is Improperly Laid

There can be no serious dispute that the real party-in-interest plaintiff is Irene. As

self-styled beneficiary of the disputed trust, she stands to be benefited or entitled to the

avails of the present suit. It is undisputed too that petitioners Daniel Rubio, Orlando G.

Reslin, and Jose G. Reslin, all from Ilocos Norte, were included as co-plaintiffs in the

amended complaint as Irenes new designated trustees. As trustees, they can only serve

as mere representatives of Irene.

Upon the foregoing consideration, the resolution of the crucial issue of whether or

not venue had properly been laid should not be difficult.

Sec. 2 of Rule 4 indicates quite clearly that when there is more than one plaintiff

in a personal action case, the residences of the principal parties should be the basis for

determining proper venue. According to the late Justice Jose Y. Feria, the word

principal has been added [in the uniform procedure rule] in order to prevent the plaintiff

from choosing the residence of a minor plaintiff or defendant as the venue. [42] Eliminate

54
the qualifying term principal and the purpose of the Rule would, to borrow from Justice

Regalado, be defeated where a nominal or formal party is impleaded in the action since

the latter would not have the degree of interest in the subject of the action which would

warrant and entail the desirably active participation expected of litigants in a case. [43]

Before the RTC in Batac, in Civil Case Nos. 3341-17 and 3342-17, Irene stands

undisputedly as the principal plaintiff, the real party-in-interest. Following Sec. 2 of Rule

4, the subject civil cases ought to be commenced and prosecuted at the place where

Irene resides.

Principal Plaintiff not a Resident in Venue of Action

As earlier stated, no less than the RTC in Batac declared Irene as not a resident

of Batac, Ilocos Norte. Withal, that court was an improper venue for her conveyance

action.

The Court can concede that Irenes three co-plaintiffs are all residents of Batac,

Ilocos Norte. But it ought to be stressed in this regard that not one of the three can be

considered as principal party-plaintiffs in Civil Case Nos. 3341-17 and 3342-17,

included as they were in the amended complaint as trustees of the principal plaintiff. As

trustees, they may be accorded, by virtue of Sec. 3 of Rule 3, the right to prosecute a

suit, but only on behalf of the beneficiary who must be included in the title of the case

55
and shall be deemed to be the real party-in-interest. In the final analysis, the residences

of Irenes co-plaintiffs cannot be made the basis in determining the venue of the subject

suit. This conclusion becomes all the more forceful considering that Irene herself

initiated and was actively prosecuting her claim against Benedicto, his heirs, assigns, or

associates, virtually rendering the impleading of the trustees unnecessary.

And this brings us to the final point. Irene was a resident during the period

material of Forbes Park, Makati City. She was not a resident of Brgy. Lacub, Batac,

Ilocos Norte, although jurisprudence[44] has it that one can have several residences, if

such were the established fact. The Court will not speculate on the reason why

petitioner Irene, for all the inconvenience and expenses she and her adversaries would

have to endure by a Batac trial, preferred that her case be heard and decided by the

RTC in Batac. On the heels of the dismissal of the original complaints on the ground of

improper venue, three new personalities were added to the complaint doubtless to

insure, but in vain as it turned out, that the case stays with the RTC in Batac.

Litigants ought to bank on the righteousness of their causes, the superiority of

their cases, and the persuasiveness of arguments to secure a favorable verdict. It is

high time that courts, judges, and those who come to court for redress keep this ideal in

mind.

WHEREFORE, the instant petition is hereby DISMISSED. The Decision and

Resolution dated October 17, 2001 and June 20, 2002, respectively, of the CA in CA-

56
G.R. SP No. 64246, insofar as they nullified the assailed orders of the RTC, Branch 17

in Batac, Ilocos Norte in Civil Case Nos. 3341-17 and 3342-17 on the ground of lack of

jurisdiction due to improper venue, are hereby AFFIRMED. The Orders dated October

9, 2000, December 18, 2000, and March 15, 2001 of the RTC in Civil Case Nos. 3341-

17 and 3342-17 are accordingly ANNULLED and SET ASIDE and said civil cases

are DISMISSED.

Costs against petitioners.

SO ORDERED.

57
CASE NO. 6

HI-YIELD REALTY, G.R. No. 168863

INCORPORATED,
Petitioner, Present:

QUISUMBING, J., Chairperson,

- versus - YNARES-SANTIAGO,*
CHICO-NAZARIO,**
LEONARDO-DE CASTRO,*** and
BRION, JJ.
HON. COURT OF APPEALS, HON.
CESAR O. UNTALAN, in his capacity as Promulgated:
PRESIDING JUDGE OF RTC-MAKATI,
BRANCH 142, HONORIO TORRES & June 23, 2009
SONS, INC., and ROBERTO H. TORRES,
Respondents.
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

QUISUMBING, J.:

This is a special civil action for certiorari seeking to nullify and set aside the

Decision[1] dated March 10, 2005 and Resolution[2]dated May 26, 2005 of the Court of

Appeals in CA-G.R. SP. No. 83919. The appellate court had dismissed the petition for

certiorari and prohibition filed by petitioner and denied its reconsideration.

The antecedent facts of the case are undisputed.

On July 31, 2003, Roberto H. Torres (Roberto), for and on behalf of Honorio Torres &

Sons, Inc. (HTSI), filed a Petition for Annulment of Real Estate Mortgage and

Foreclosure Sale[3] over two parcels of land located in Marikina and Quezon City. The

suit was filed against Leonora, Ma. Theresa, Glenn and Stephanie, all surnamed

Torres, the Register of Deeds of Marikina and Quezon City, and petitioner Hi-Yield

58
Realty, Inc. (Hi-Yield). It was docketed as Civil Case No. 03-892 with Branch 148 of the

Regional Trial Court (RTC) of Makati City.

On September 15, 2003, petitioner moved to dismiss the petition on grounds of

improper venue and payment of insufficient docket fees. The RTC denied said motion in

an Order[4] dated January 22, 2004. The trial court held that the case was, in nature, a

real action in the form of a derivative suit cognizable by a special commercial court

pursuant to Administrative Matter No. 00-11-03-SC.[5] Petitioner sought reconsideration,

but its motion was denied in an Order[6] dated April 27, 2004.

Thereafter, petitioner filed a petition for certiorari and prohibition before the Court of

Appeals. In a Decision dated March 10, 2005, the appellate court agreed with the RTC

that the case was a derivative suit. It further ruled that the prayer for annulment of

mortgage and foreclosure proceedings was merely incidental to the main action. The

dispositive portion of said decision reads:

WHEREFORE, premises considered, this Petition is
hereby DISMISSED. However, public respondent is hereby DIRECTED to
instruct his Clerk of Court to compute the proper docket fees and
thereafter, to order the private respondent to pay the
same IMMEDIATELY.
SO ORDERED.[7]

Petitioners motion for reconsideration[8] was denied in a Resolution dated May 26, 2005.

Hence, this petition which raises the following issues:

I.
WHETHER THE HONORABLE COURT OF APPEALS GRAVELY
ABUSED ITS DISCRETION IN NOT DISMISSING THE CASE AGAINST
HI-YIELD FOR IMPROPER VENUE DESPITE FINDINGS BY THE TRIAL
COURT THAT THE ACTION IS A REAL ACTION.

II.

59
 WHETHER THE HONORABLE COURT OF APPEALS ERRED IN NOT
DISMISSING THE COMPLAINT AS AGAINST HI-YIELD EVEN IF THE
JOINDER OF PARTIES IN THE COMPLAINT VIOLATED THE RULES
ON VENUE.

III.
WHETHER THE HONORABLE COURT OF APPEALS ERRED IN
HOLDING THAT THE ANNULMENT OF REAL ESTATE MORTGAGE
AND FORECLOSURE SALE IN THE COMPLAINT IS MERELY
INCIDENTAL [TO] THE DERIVATIVE SUIT.[9]

The pivotal issues for resolution are as follows: (1) whether venue was properly laid; (2)

whether there was proper joinder of parties; and (3) whether the action to annul the real

estate mortgage and foreclosure sale is a mere incident of the derivative suit.

Petitioner imputes grave abuse of discretion on the Court of Appeals for not dismissing

the case against it even as the trial court found the same to be a real action. It explains

that the rule on venue under the Rules of Court prevails over the rule prescribing the

venue for intra-corporate controversies; hence, HTSI erred when it filed its suit only

in Makati when the lands subjects of the case are in Marikina and Quezon City. Further,

petitioner argues that the appellate court erred in ruling that the action is mainly a

derivative suit and the annulment of real estate mortgage and foreclosure sale is merely

incidental thereto. It points out that the caption of the case, substance of the allegations,

and relief prayed for revealed that the main thrust of the action is to recover the

lands. Lastly, petitioner asserts that it should be dropped as a party to the case for it has

been wrongly impleaded as a non-stockholder defendant in the intra-corporate dispute.

On the other hand, respondents maintain that the action is primarily a derivative suit to

redress the alleged unauthorized acts of its corporate officers and major stockholders in

connection with the lands. They postulate that the nullification of the mortgage and

60
foreclosure sale would just be a logical consequence of a decision adverse to said

officers and stockholders.

After careful consideration, we are in agreement that the petition must be dismissed.

A petition for certiorari is proper if a tribunal, board or officer exercising judicial or quasi-

judicial functions acted without or in excess of jurisdiction or with grave abuse of

discretion amounting to lack or excess of jurisdiction and there is no appeal, or any

plain, speedy and adequate remedy in the ordinary course of law. [10]

Petitioner sought a review of the trial courts Orders dated January 22,

2004 and April 27, 2004 via a petition for certiorari before the Court of Appeals. In

rendering the assailed decision and resolution, the Court of Appeals was acting under its

concurrent jurisdiction to entertain petitions for certiorari under paragraph 2,[11] Section 4

of Rule 65 of the Rules of Court. Thus, if erroneous, the decision and resolution of the

appellate court should properly be assailed by means of a petition for review on certiorari

under Rule 45 of the Rules of Court. The distinction is clear: a petition for certiorari seeks

to correct errors of jurisdiction while a petition for review on certiorari seeks to correct

errors of judgment committed by the court a quo.[12] Indeed, this Court has often

reminded members of the bench and bar that a special civil action for certiorari under

Rule 65 lies only when there is no appeal nor plain, speedy and adequate remedy in the

ordinary course of law.[13] In the case at hand, petitioner impetuously filed a petition for

certiorari before us when a petition for review was available as a speedy and adequate

remedy. Notably, petitioner filed the present petition 58[14] days after it received a copy of

the assailed resolution dated May 26, 2005. To our mind, this belated action evidences

petitioners effort to substitute for a lost appeal this petition for certiorari.

61
 For the extraordinary remedy of certiorari to lie by reason of grave abuse of

discretion, the abuse of discretion must be so patent and gross as to amount to an

evasion of positive duty, or a virtual refusal to perform the duty enjoined or to act in

contemplation of law, or where the power is exercised in an arbitrary and despotic

manner by reason of passion and personal hostility. [15] We find no grave abuse of

discretion on the part of the appellate court in this case.

Simply, the resolution of the issues posed by petitioner rests on a determination of the

nature of the petition filed by respondents in the RTC. Both the RTC and Court of

Appeals ruled that the action is in the form of a derivative suit although captioned as a

petition for annulment of real estate mortgage and foreclosure sale.

A derivative action is a suit by a shareholder to enforce a corporate cause of action.[16] Under

the Corporation Code, where a corporation is an injured party, its power to sue is lodged with

its board of directors or trustees. But an individual stockholder may be permitted to institute a

derivative suit on behalf of the corporation in order to protect or vindicate corporate rights

whenever the officials of the corporation refuse to sue, or are the ones to be sued, or hold

control of the corporation. In such actions, the corporation is the real party-in-interest while

the suing stockholder, on behalf of the corporation, is only a nominal party.[17]

In the case of Filipinas Port Services, Inc. v. Go,[18] we enumerated the foregoing

requisites before a stockholder can file a derivative suit:

a) the party bringing suit should be a shareholder as of the time of

the act or transaction complained of, the number of his shares not being
material;

b) he has tried to exhaust intra-corporate remedies, i.e., has made

a demand on the board of directors for the appropriate relief but the latter
has failed or refused to heed his plea; and

62
 c) the cause of action actually devolves on the corporation, the
wrongdoing or harm having been, or being caused to the corporation and
not to the particular stockholder bringing the suit. [19]

Even then, not every suit filed on behalf of the corporation is a derivative suit. For a

derivative suit to prosper, the minority stockholder suing for and on behalf of the

corporation must allege in his complaint that he is suing on a derivative cause of action

on behalf of the corporation and all other stockholders similarly situated who may wish

to join him in the suit.[20] The Court finds that Roberto had satisfied this requirement in

paragraph five (5) of his petition which reads:

5. Individual petitioner, being a minority stockholder, is instituting

the instant proceeding by way of a derivative suit to redress wrongs done
to petitioner corporation and vindicate corporate rights due to the
mismanagement and abuses committed against it by its officers and
controlling stockholders, especially by respondent Leonora H. Torres
(Leonora, for brevity) who, without authority from the Board of Directors,
arrogated upon herself the power to bind petitioner corporation from
incurring loan obligations and later allow company properties to be
foreclosed as hereinafter set forth;[21]

Further, while it is true that the complaining stockholder must satisfactorily show that he

has exhausted all means to redress his grievances within the corporation; such remedy

is no longer necessary where the corporation itself is under the complete control of the

person against whom the suit is being filed. The reason is obvious: a demand upon the

board to institute an action and prosecute the same effectively would have been useless

and an exercise in futility.[22]

Here, Roberto alleged in his petition that earnest efforts were made to reach a

compromise among family members/stockholders before he filed the case. He also

maintained that Leonora Torres held 55% of the outstanding shares while Ma. Theresa,

Glenn and Stephanie excluded him from the affairs of the corporation. Even more

63
glaring was the fact that from June 10, 1992, when the first mortgage deed was

executed until July 23, 2002, when the properties mortgaged were foreclosed, the

Board of Directors of HTSI did nothing to rectify the alleged unauthorized transactions of

Leonora. Clearly, Roberto could not expect relief from the board.

Derivative suits are governed by a special set of rules under A.M. No. 01-2-04-

SC[23] otherwise known as the Interim Rules of Procedure Governing Intra-Corporate

Controversies under Republic Act No. 8799.[24] Section 1,[25] Rule 1 thereof expressly

lists derivative suits among the cases covered by it.

As regards the venue of derivative suits, Section 5, Rule 1 of A.M. No. 01-2-04-SC

states:

SEC. 5. Venue. - All actions covered by these Rules shall be

commenced and tried in the Regional Trial Court which has jurisdiction
over the principal office of the corporation, partnership, or association
concerned. Where the principal office of the corporation, partnership or
association is registered in the Securities and Exchange Commission as
Metro Manila, the action must be filed in the city or municipality where the
head office is located.

Thus, the Court of Appeals did not commit grave abuse of discretion when it found that

respondents correctly filed the derivative suit before the Makati RTC where HTSI had its

principal office.

There being no showing of any grave abuse of discretion on the part of the Court of

Appeals the other alleged errors will no longer be passed upon as mere errors of

judgment are not proper subjects of a petition for certiorari.

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WHEREFORE, the instant petition is hereby DISMISSED. The Decision dated March

10, 2005 and the Resolution dated May 26, 2005 of the Court of Appeals in CA-G.R.

SP. No. 83919 are AFFIRMED.

No pronouncement as to costs.

SO ORDERED.

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CASE NO. 7 G.R. No. 160053 August 28, 2006

SPS. RENATO & ANGELINA LANTIN, Petitioners,

vs.
HON. JANE AURORA C. LANTION, Presiding Judge of the Regional Trial Court of
Lipa City, Fourth Judicial Region, Branch 13, PLANTERS DEVELOPMENT BANK,
ELIZABETH C. UMALI, ALICE PERCE, JELEN MOSCA, REGISTER OF DEEDS FOR
LIPA CITY, BATANGAS, THE CLERK OF COURT and EX-OFFICIO SHERIFF OF
THE REGIONAL TRIAL COURT OF BATANGAS, Respondents.

DECISION

QUISUMBING, J.:

This is a petition for certiorari assailing the orders dated May 15, 2003 1 and September
15, 20032 in Civil Case No. 2002-0555 issued by public respondent, Presiding Judge
Jane Aurora C. Lantion, of the Regional Trial Court (RTC) of Lipa City, Batangas.

The facts of the case are as follows:

Petitioners Renato and Angelina Lantin took several peso and dollar loans from
respondent Planters Development Bank and executed several real estate mortgages
and promissory notes to cover the loans. They defaulted on the payments so
respondent bank foreclosed the mortgaged lots. The foreclosed properties, in partial
satisfaction of petitioners’ debt, were sold at a public auction where the respondent
bank was the winning bidder. On November 8, 2003, petitioners filed against Planters
Development Bank and its officers Elizabeth Umali, Alice Perce and Jelen Mosca
(private respondents), a Complaint for Declaration of Nullity and/or Annulment of Sale
and/or Mortgage, Reconveyance, Discharge of Mortgage, Accounting, Permanent
Injunction, and Damages with the RTC of Lipa City, Batangas. Petitioners alleged that
only their peso loans were covered by the mortgages and that these had already been
fully paid, hence, the mortgages should have been discharged. They challenged the
validity of the foreclosure on the alleged non-payment of their dollar loans as the
mortgages did not cover those loans.

Private respondents moved to dismiss the complaint on the ground of improper venue
since the loan agreements restricted the venue of any suit in Metro Manila.

On May 15, 2003, the respondent judge dismissed the case for improper venue.

Petitioners sought reconsideration. They argued that the trial court in effect prejudged
the validity of the loan documents because the trial court based its dismissal on a venue
stipulation provided in the agreement. The motion for reconsideration was denied and
the lower court held that the previous order did not touch upon the validity of the loan
documents but merely ruled on the procedural issue of venue.

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Petitioners now come before us alleging that:

THE HONORABLE JUDGE COMMITTED GRAVE ABUSE OF DISCRETION

AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN HOLDING THAT THE
VENUE STIPULATIONS IN THE "REAL ESTATE MORTGAGE" AND "PROMISSORY
NOTES" FALL WITHIN THE PURVIEW OF SECTION 4(B) OF RULE 4 OF THE 1997
RULES OF CIVIL PROCEDURE IN THAT IT LIMITED THE VENUE OF ACTIONS TO
A DEFINITE PLACE.

II

THE HONORABLE JUDGE COMMITTED GRAVE ABUSE OF DISCRETION

AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN NOT FINDING THAT THE
MERE USE OF THE WORD "EXCLUSIVELY" DOES NOT, BY ITSELF, MEAN THAT
SUCH STIPULATIONS AUTOMATICALLY PROVIDE FOR AN "EXCLUSIVE VENUE",
AS CONTEMPLATED BY SECTION 4(B) OF RULE 4 OF THE 1997 RULES OF CIVIL
PROCEDURE, SPECIALLY WHEN THE TENOR OR LANGUAGE OF
THE ENTIRE VENUE STIPULATION CLEARLY PROVIDES OTHERWISE.

III

THE HONORABLE JUDGE COMMITTED GRAVE ABUSE OF DISCRETION

AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN DISREGARDING THE
FACT THAT HEREIN PETITIONERS’ COMPLAINT INVOLVES SEVERAL CAUSES
OF ACTION WHICH DO NOT ARISE SOLELY FROM THE "REAL ESTATE
MORTGAGE" AND "PROMISSORY NOTES" AND WHICH OTHER CAUSES OF
ACTION MAY BE FILED IN OTHER VENUES UNDER SECTIONS 1 AND 2 OF RULE
4 OF THE 1997 RULES OF CIVIL PROCEDURE.

IV

THE HONORABLE JUDGE COMMITTED GRAVE ABUSE OF DISCRETION

AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN DISREGARDING THE
PRINCIPLE THAT THE RULE ON VENUE OF ACTIONS IS ESTABLISHED FOR THE
CONVENIENCE OF THE PLAINTIFFS.3

The main issue in the present petition is whether respondent judge committed grave
abuse of discretion when she dismissed the case for improper venue.

Petitioners contend that, since the validity of the loan documents were squarely put in
issue, necessarily this meant also that the validity of the venue stipulation also was at
issue. Moreover, according to the petitioners, the venue stipulation in the loan
documents is not an exclusive venue stipulation under Section 4(b) of Rule 4 of the
1997 Rules of Civil Procedure.4 The venue in the loan agreement was not specified with

67
particularity. Besides, petitioners posit, the rule on venue of action was established for
the convenience of the plaintiff, herein petitioners. Further, petitioners also contend that
since the complaint involves several causes of action which did not arise solely from or
connected with the loan documents, the cited venue stipulation should not be made to
apply.

Private respondents counter that, in their complaint, petitioners did not assail the loan
documents, and the issue of validity was merely petitioners’ afterthought to avoid being
bound by the venue stipulation. They also aver that the venue stipulation was not
contrary to the doctrine in Unimasters,5 which requires that a venue stipulation employ
categorical and suitably limiting language to the effect that the parties agree that the
venue of actions between them should be laid only and exclusively at a definite place.
According to private respondents, the language of the stipulation is clearly exclusive.

At the outset, we must make clear that under Section 4 (b) of Rule 4 of the 1997 Rules
of Civil Procedure, the general rules on venue of actions shall not apply where the
parties, before the filing of the action, have validly agreed in writing on an exclusive
venue. The mere stipulation on the venue of an action, however, is not enough to
preclude parties from bringing a case in other venues. The parties must be able to show
that such stipulation is exclusive.6 In the absence of qualifying or restrictive words, the
stipulation should be deemed as merely an agreement on an additional forum, not as
limiting venue to the specified place.7

The pertinent provisions of the several real estate mortgages and promissory notes
executed by the petitioner respectively read as follows:

18. In the event of suit arising out of or in connection with this mortgage and/or the
promissory note/s secured by this mortgage, the parties hereto agree to bring their
causes of auction (sic) exclusively in the proper court of Makati, Metro Manila or at such
other venue chosen by the Mortgagee, the Mortgagor waiving for this purpose any other
venue.8 (Emphasis supplied.)

I/We further submit that the venue of any legal action arising out of this note
shall exclusively be at the proper court of Metropolitan Manila, Philippines or any other
venue chosen by the BANK, waiving for this purpose any other venue provided by the
Rules of Court.9 (Emphasis supplied.)

Clearly, the words "exclusively" and "waiving for this purpose any other venue" are
restrictive and used advisedly to meet the requirements.

Petitioners claim that effecting the exclusive venue stipulation would be tantamount to a
prejudgment on the validity of the loan documents. We note however that in their
complaint, petitioners never assailed the validity of the mortgage contracts securing
their peso loans. They only assailed the terms and coverage of the mortgage contracts.
What petitioners claimed is that their peso loans had already been paid thus the
mortgages should be discharged, and that the mortgage contracts did not include their

68
dollar loans. In our view, since the issues of whether the mortgages should be properly
discharged and whether these also cover the dollar loans, arose out of the said loan
documents, the stipulation on venue is also applicable thereto.

Considering all the circumstances in this controversy, we find that the respondent judge
did not commit grave abuse of discretion, as the questioned orders were evidently in
accord with law and jurisprudence.

WHEREFORE, the petition is DISMISSED. The assailed orders dated May 15, 2003
and September 15, 2003 of the Regional Trial Court of Lipa City, Batangas, in Civil
Case No. 2002-0555 are AFFIRMED.

Costs against petitioners.

SO ORDERED.

69