Fortune Motors, Inc. v CA (Civil procedure)

Fortune Motors, Inc. v. CA, Metropolitan Bank and Trust Company

Facts:

·       Private respondent extended various loans to petitioner for a total sum of P32,500,000.00;

·       Due to financial difficulties, and economic recession, the petitioner was not able to pay the loan which became due;

·       The respondent bank initiated extrajudicial foreclosure proceedings, the mortgaged property was sold at public auction where respondent was the highest bidder;

·       3 days before the expiration of the redemption period, petitioner filed a complaint for the annulment of the extrajudicial foreclosure sale at the RTC of Manila, alleging that:

(a)   the foreclosure was premature because its obligation to the Bank was not yet due,

(b)   the publication of the notice of sale was incomplete, there was no public auction,

(c)   thhe price for which was “shockingly low”;

·       Respondent filed a motion to dismiss the complaint on the ground that the venue of the action was improperly laid in Manila for the realty covered by the real estate mortgages is situated in Makati, therefore the action to annul the foreclosure sale should be filed in the RTC of Makati;

·       Petitioner argued that its action is a personal action and that the issue is the validity of the extrajudicial foreclosure proceedings so that it may have a new one year period to redeem the same.

Lower court rulings:

RTC: reserved the resolution of the Bank’s motion to dismiss until after the trial on the merits

CA: on petition for certiorari and prohibition, granted the petitions and dismissed the case without prejudice to the filing of the case before the proper courts

*Reconsideration was denied, hence the petition before the SC

Issue: WON petitioner’s action for annulment of the real estate mortgage extrajudicial foreclosure sale of Fortune Building is personal action or a real action for venue purposes

Ruling: Yes, the action is a real action which should have been filed before the RTC of Makati.

Real actions or actions affecting title to, or for the recovery of possession, or for the partition or condemnation of or foreclosure of mortgage on real property, must be instituted in the CFI of the province where the property or any part thereof lies.

Personal actions upon the other hand, may be instituted in the CFI where the defendant resides or may be found, or where the plaintiff or any of the plaintiffs resides, at the election of the plaintiff.

An action for the annulment or rescission of contract does not operate to efface the true objectives and nature of action which is to recover real property.

An action for annulment or rescission of sale of real property is a real action; its prime objective is to recover said real property.

An action to annul a real estate mortgage foreclosure is no different from an action to annul a private sale of real property.

Hence, the petition is denied for lack of merit. The decision of CA is affirmed.