September 2005 - Philippine Supreme Court Decisions/Resolutions
G.R. No. 152808 - Antonio T. Chua v. Total Office Products and Services, Inc.
[G.R. NO. 152808. September 30, 2005]
ANTONIO T. CHUA, Petitioners, v. TOTAL OFFICE PRODUCTS AND SERVICES (TOPROS), INC., Respondent.
D E C I S I O N
For review on certiorari is the decision1 dated November 28, 2001 of the Court of Appeals and its resolution2 of April 1, 2002 in CA-G.R. SP No. 62592. The assailed decision and resolution dismissed the special civil action for certiorari against the orders of August 9, 20003 and October 6, 20004 issued by Judge Lorifel Lacap Pahimna in Civil Case No. 67736.
The pertinent facts, based on the records, are as follows:
On December 28, 1999, respondent Total Office Products and Services, Inc., (TOPROS) lodged a complaint for annulment of contracts of loan and real estate mortgage against herein petitioner Antonio T. Chua before the Regional Trial Court of Pasig City. The case was docketed as Civil Case No. 67736 and was raffled to the sala of Judge Lorifel Lacap Pahimna.
The said suit sought to annul a loan contract allegedly extended by petitioner to respondent TOPROS in the amount of ten million four hundred thousand pesos (
P10,400,000) and the accessory real estate mortgage contract covering two parcels of land situated in Quezon City as collateral.
It appeared on the face of the subject contracts that TOPROS was represented by its president John Charles Chang, Jr. However, TOPROS alleged that the purported loan and real estate mortgage contracts were fictitious, since it never authorized anybody, not even its president, to enter into said transaction.
On February 28, 2000, petitioner filed a motion to dismiss on the ground of improper venue. He contended that the action filed by TOPROS affects title to or possession of the parcels of land subject of the real estate mortgage. He argued that it should thus have been filed in the Regional Trial Court of Quezon City where the encumbered real properties are located, instead of Pasig City where the parties reside.
On August 9, 2000, Judge Pahimna issued an order denying the motion to dismiss. She reasoned that the action to annul the loan and mortgage contracts is a personal action and thus, the venue was properly laid in the RTC of Pasig City where the parties reside.
Petitioner moved for a reconsideration of the said order, which Judge Pahimna denied in its order of October 6, 2000. Hence, petitioner filed with the Court of Appeals a special civil action for certiorari alleging:
THE RESPONDENT JUDGE COMMITTED GRAVE ABUSE OF DISCRETION IN DISREGARDING THE RULING OF THE SUPREME COURT IN PASCUAL v. PASCUAL REGARDING THE RULE ON PROPER VENUE, AND CONSEQUENTLY ADJUDGING TO BE A PERSONAL ACTION A CIVIL COMPLAINT FOR THE ANNULMENT OF AN ALLEGEDLY FICTITIOUS CONTRACT.5
The Court of Appeals dismissed said petition in its decision dated November 28, 2001. It held that the authorities relied upon by petitioner, namely Pascual v. Pascual6 and Banco Español-Filipino v. Palanca,7 are inapplicable in the instant case. The appellate court instead applied Hernandez v. Rural Bank of Lucena, Inc.8 wherein we ruled that an action for the cancellation of a real estate mortgage is a personal action if the mortgagee has not foreclosed the mortgage and the mortgagor is in possession of the premises, as neither the mortgagor's title to nor possession of the property is disputed.
Dissatisfied, petitioner filed a motion for reconsideration, which the Court of Appeals denied for lack of merit in its resolution of April 1, 2002.
Undeterred, petitioner now comes to us on a Petition for Review raising the following issues:
WHETHER AN ACTION TO ANNUL A LOAN AND MORTGAGE CONTRACT DULY ALLEGED AS 'FICTITIOUS' FOR BEING WITH ABSOLUTELY NO CONSIDERATION IS A PERSONAL ACTION OR REAL ACTION?cralawlibrary
WHETHER IN AN ACTION TO ANNUL A LOAN AND MORTGAGE CONTRACT DULY ALLEGED AS 'FICTITIOUS' FOR BEING WITH ABSOLUTELY NO CONSIDERATION, THE PERSON ALLEGED TO HAVE '[LACKED] AUTHORITY' TO ENTER INTO SAID CONTRACTS IS AN INDISPENSABLE PARTY?9
Petitioner contends that Hernandez should not be applied here because in the said case: (1) venue was improperly laid at the outset; (2) the complaint recognized the validity of the principal contract involved; and (3) the plaintiff sought to compel acceptance by the defendant of plaintiff's payment of the latter's mortgage debt. He insists that the Pascual case should be applied instead. He invokes our pronouncement in Pascual, to wit:
'It appearing, however, that the sale is alleged to be fictitious, with absolutely no consideration, it should be regarded as a non-existent, not merely null, contract'. And there being no contract between the deceased and the defendants, there is in truth nothing to annul by action. The action brought cannot thus be for annulment of contract, but is one for recovery of a fishpond, a real action that should be, as it has been, brought in Pampanga, where the property is located'.10
Petitioner likewise cites the Banco Español-Filipino case, thus:
Where the defendant in a mortgage foreclosure lives out of the Islands and refuses to appear or otherwise submit himself to the authority of the court, the jurisdiction of the latter is limited to the mortgaged property, with respect to which the jurisdiction of the court is based upon the fact that the property is located within the district and that the court, under the provisions of law applicable in such cases, is vested with the power to subject the property to the obligation created by the mortgage. In such case personal jurisdiction over the nonresident defendant is nonessential and in fact cannot be acquired.11
Petitioner also alleges that John Charles Chang, Jr., the president of TOPROS, who allegedly entered into the questioned loan and real estate mortgage contracts, is an indispensable party who has not been properly impleaded.
TOPROS, however, maintains that the appellate court correctly sustained the lower court's finding that the instant complaint for annulment of loan and real estate mortgage contracts is a personal action. TOPROS points out that a complaint for the declaration of nullity of a loan contract for lack of consent and consideration remains a personal action even if the said action will necessarily affect the accessory real estate mortgage.
TOPROS argues that Pascual is inapplicable because the subject contract therein was a contract of sale of a parcel of land where title and possession were already transferred to the defendant. TOPROS further contends that Banco Español-Filipino is also inapplicable since the personal action filed therein was one which affected the personal status of a nonresident defendant.
Considering the facts and the submission of the parties, we find the petition bereft of merit.
Well-settled is the rule that an action to annul a contract of loan and its accessory real estate mortgage is a personal action. In a personal action, the plaintiff seeks the recovery of personal property, the enforcement of a contract or the recovery of damages.12 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.13
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 estate mortgage 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.
Petitioner's reliance on the Banco Español-Filipino case is likewise misplaced. That case involved a foreclosure of real estate mortgage against a nonresident. We held therein that jurisdiction is determined by the place where the real property is located and that personal jurisdiction over the nonresident defendant is nonessential and, in fact, cannot be acquired.
Needless to stress, the instant case bears no resemblance to the Banco Español-Filipino case. In the first place, this is not an action involving foreclosure of real estate mortgage. In the second place, none of the parties here is a nonresident. We find no reason to apply here our ruling in Banco Español-Filipino.
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 Hernandez case 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 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, 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.14
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.
Anent the second issue, Section 7, Rule 3 of the Revised Rules of Court provides:
SEC. 7. Compulsory joinder of indispensable parties. - Parties in interest without whom no final determination can be had of an action shall be joined either as plaintiffs or defendants. (Emphasis ours)
The presence of indispensable parties is necessary to vest the court with jurisdiction. The absence of an indispensable party renders all subsequent actuations of the court null and void, because of that court's want of authority to act, not only as to the absent parties but even as to those present.15 Thus, whenever it appears to the court in the course of a proceeding that an indispensable party has not been joined, it is the duty of the court to stop the trial and order the inclusion of such party.16
A person is not an indispensable party, however, if his interest in the controversy or subject matter is separable from the interest of the other parties, so that it will not necessarily be directly or injuriously affected by a decree which does complete justice between them.17
Is John Charles Chang, Jr., the president of TOPROS who allegedly entered into the disputed contracts of loan and real estate mortgage, an indispensable party in this case?cralawlibrary
We note that although it is Chang's signature that appears on the assailed real estate mortgage contract, his participation is limited to being a representative of TOPROS, allegedly without authority. The document18 which constitutes as the contract of real estate mortgage clearly points to petitioner and TOPROS as the sole parties-in-interest to the agreement as mortgagee and mortgagor therein, respectively. Any rights or liabilities arising from the said contract would therefore bind only the petitioner and TOPROS as principal parties. Chang, acting as mere representative of TOPROS, acquires no rights whatsoever, nor does he incur any liabilities, arising from the said contract between petitioner and TOPROS. Certainly, in our view, the only indispensable parties to the mortgage contract are petitioner and TOPROS alone.
We thus hold that John Charles Chang, Jr., is not an indispensable party in Civil Case No. 67736. This is without prejudice to any separate action TOPROS may institute against Chang, Jr., in a proper proceeding.
WHEREFORE, the petition is DENIED. The assailed decision dated November 28, 2001 and resolution dated April 1, 2002 of the Court of Appeals upholding the Orders of Judge Lorifel Lacap Pahimna are AFFIRMED.
No pronouncement as to costs.
Davide, Jr., J., (Chairman), Ynares-Santiago, Carpio, and Azcuna, JJ., concur.
1 Rollo, pp. 7-12, Penned by Associate Justice Bienvenido L. Reyes, with Associate Justices Cancio C. Garcia (now a Member of this Court), and Roberto A. Barrios concurring.
2 Id. at 17-20.
3 CA Rollo, pp. 11-12.
4 Id. at 13.
5 Rollo, p. 39.
6 No. 48140, 4 May 1942, 73 Phil. 561.
7 No. 11390, 26 March 1918, 37 Phil. 921.
8 No. L-29791, 10 January 1978, 81 SCRA 75.
9 Rollo, p. 26.
10 Supra, note 6 at 562.
11 Supra, note 7.
12 Supra, note 8 at 84.
14 1997 Rules of Civil Procedure.
15 Metropolitan Bank & Trust Company v. Alejo, G.R. No. 141970, 10 September 2001, 364 SCRA 812, 821.
16 De Castro v. Court of Appeals, G.R. No. 115838, 18 July 2002, 384 SCRA 607, 613-614.
17 Supra, note 15 at 820.
18 Rollo, p. 60.