El Banco Espanol-Filipino vs. Vicente Palanca G.R. No.

L-11390, March 26, 1918

El Banco Espanol-Filipino vs. Palanca
G.R. No. L-11390, March 26, 1918

* JURISDICTION, HOW ACQUIRED: Jurisdiction over the property which is the subject
of the litigation may result either from a seizure of the property under legal process,
whereby it is brought into the actual custody of the law, or it may result from the
institution of legal proceedings wherein, under special provisions of law, the power
of the court over the property is recognized and made effective.
* The action to foreclose a mortgage is said to be a proceeding quasi in rem, by
which is expressed the idea that while it is not strictly speaking an action in rem yet
it partakes of that nature and is substantially such.
* DUE PROCESS IN FORECLOSURE PROCEEDINGS: Property is always assumed to be
in the possession of its owner, in person or by agent; and he may be safely held,
under certain conditions, to be affected with knowledge that proceedings have been
instituted for its condemnation and sale.

FACTS:

Engracio Palanca Tanquinyeng y Limquingco mortgaged various parcels of real

property in Manila to El Banco Espanol-Filipino. Afterwards, Engracio returned to
China and there he died on January 29, 1810 without returning again to the
Philippines. The mortgagor then instituted foreclosure proceeding but since
defendant is a non-resident, it was necessary to give notice by publication. The
Clerk of Court was also directed to send copy of the summons to the defendants
last known address, which is in Amoy, China. It is not shown whether the Clerk
complied with this requirement. Nevertheless, after publication in a newspaper of

the City of Manila, the cause proceeded and judgment by default was rendered. The
decision was likewise published and afterwards sale by public auction was held with
the bank as the highest bidder. On August 7, 1908, this sale was confirmed by the
court. However, about seven years after the confirmation of this sale, a motion was
made by Vicente Palanca, as administrator of the estate of the original defendant,
wherein the applicant requested the court to set aside the order of default and the
judgment, and to vacate all the proceedings subsequent thereto. The basis of this
application was that the order of default and the judgment rendered thereon were
void because the court had never acquired jurisdiction over the defendant or over
the subject of the action.

ISSUE:

* Whether or not the lower court acquired jurisdiction over the defendant and the
subject matter of the action
* Whether or not due process of law was observed

RULING:

On Jurisdiction

The word jurisdiction is used in several different, though related, senses since it
may have reference (1) to the authority of the court to entertain a particular kind of
action or to administer a particular kind of relief, or it may refer to the power of the
court over the parties, or (2) over the property which is the subject to the litigation.

The sovereign authority which organizes a court determines the nature and extent
of its powers in general and thus fixes its competency or jurisdiction with reference
to the actions which it may entertain and the relief it may grant.

How Jurisdiction is Acquired

Jurisdiction over the person is acquired by the voluntary appearance of a party in

court and his submission to its authority, or it is acquired by the coercive power of
legal process exerted over the person.

Jurisdiction over the property which is the subject of the litigation may result either
from a seizure of the property under legal process, whereby it is brought into the
actual custody of the law, or it may result from the institution of legal proceedings
wherein, under special provisions of law, the power of the court over the property is
recognized and made effective. In the latter case the property, though at all times
within the potential power of the court, may never be taken into actual custody at
all. An illustration of the jurisdiction acquired by actual seizure is found in
attachment proceedings, where the property is seized at the beginning of the
action, or some subsequent stage of its progress, and held to abide the final event
of the litigation. An illustration of what we term potential jurisdiction over the res, is
found in the proceeding to register the title of land under our system for the
registration of land. Here the court, without taking actual physical control over the
property assumes, at the instance of some person claiming to be owner, to exercise
a jurisdiction in rem over the property and to adjudicate the title in favor of the
petitioner against all the world.

In the terminology of American law the action to foreclose a mortgage is said to be

a proceeding quasi in rem, by which is expressed the idea that while it is not strictly
speaking an action in rem yet it partakes of that nature and is substantially such.
The expression "action in rem" is, in its narrow application, used only with reference
to certain proceedings in courts of admiralty wherein the property alone is treated
as responsible for the claim or obligation upon which the proceedings are based.
The action quasi rem differs from the true action in rem in the circumstance that in
the former an individual is named as defendant, and the purpose of the proceeding
is to subject his interest therein to the obligation or lien burdening the property. All
proceedings having for their sole object the sale or other disposition of the property
of the defendant, whether by attachment, foreclosure, or other form of remedy, are
in a general way thus designated. The judgment entered in these proceedings is
conclusive only between the parties.

It is true that in proceedings of this character, if the defendant for whom publication
is made appears, the action becomes as to him a personal action and is conducted

as such. This, however, does not affect the proposition that where the defendant
fails to appear the action is quasi in rem; and it should therefore be considered with
reference to the principles governing actions in rem.

Hernandez & Atienza vs. Rural Bank of Lucena, Central Bank & Martinez
Facts:
Petitioners obtained from Rural Bank of Lucena a loan secured by a mortgage on
their two lots. About three months after the loan was obtained, the Lucena Bank
became a distress bank. Before the expiration of the one-year term of the loan,
Hernandez went to the bank and offered to pay the loan but was refused reasoning
that the operations of the Lucena Bank were suspended. Instead of filing a
consignation complaint, Hernandez enclosed the check with his letter to the clerk of
court of the CFI of Lipa City. Later on, petitioners filed an action in the CFI of Lipa
City to compel the respondents to accept the check and to execute the cancellation
of the real estate mortgage. Central Bank filed a motion to dismiss alleging that the
venue was improperly laid because the action of the petitioners is a real action
affecting title to rel property which should have been filed in the CFI of Rizal at QC
where the mortgaged lots are situated. The motion was denied.
Issue:
WON the action of the petitioners to compel the bank to honor the check and to
cancel the mortgage on their two lots is a real action.
Held: NO, it is not a real action, it is a personal action.
Section 2(a), Rule 4 of the Rules of Court provides that 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.

Note that the rule mentions an action for foreclosure of a real estate mortgage but
does not mention an action for the cancellation of a real mortgage. In the instant
case, the action is primarily to compel the mortgagee to accept payment of the
mortgage debt and to release the mortgage.

That action, which is not expressive included in the enumeration found in section
2(a) of Rule 4, does not involve the title to the mortgage lots. It is a personal action
and not a real action. The mortgagee has, not foreclosure the mortgage, Plaintiffs
title is not in question. They are in possession of the mortgaged lots.

Hence, the venue of plaintiffs personal action is the place 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.

******
A real action is not the same as an action in rem and a personal action is not the
same as an action in personam.
In a personal action, the plaintiff seeks the recovery of personal property, the
enforcement of a contract or the recovery of damages. In a real action, the plaintiff
seeks the recovery of real property. or, as indicated in section 2(a) of Rule 4, a real
action Is an action affecting tithe to real property or for the recovery of possession
or for partition or condemnation of, or foreclosure of a mortage on, real property.
An action in personam is an action against a person on the basis of his personal
liability, while an action in rem is an action against the thing itself, instead of
against the person (1 C. J. S. 943-4), Hence, a real action may at the same time be
an action in personam and not necessary an action in rem.

Rayray vs. Chae Kyung Lee

Facts:
Lorenzo Rayray seeks the annulment of his marriage to Chae Kyung Lee.
Defendants whereabouts being unknown, summons was served by publication. Not
having filed an answer, Rayray moved that defendant be declared in default, which
was granted after finding that there was no collusion between the parties. The trial
court dismissed the complaint ruling that it had no jurisdiction to pass upon the

validity of Rayrays marriage to defendant, it having been solemnized in Seoul,

Korea.
Issue:
WON the trial courts dismissal of the complaint is correct; or, WON the trial court
has jurisdiction to pass upon the validity of the marriage though such was
solemnized in Korea.
Held: No, the dismissal is not correct, thus, it could validly inquire into the validity of
the marriage.
1. In order that a given case could be validly decided by a court of justice, it must
have jurisdiction over (1) the subject-matter of the litigation; (2) the person of the
parties therein; and (3) in actions in rem or quasi-in-rem, the res. The subjectmatter of the present case is the annulment of plaintiffs marriage to the defendant,
which is within the jurisdiction of our courts of first instance, and, in Manila, of its
Court of Juvenile and Domestic Relations.
2. The court acquired jurisdiction over plaintiff herein by his submission thereto in
consequence of the filing of the complaint. Defendant was placed under the
jurisdiction of said court, upon the service of summons by publication.
3. This is an action in rem, for it concerns the status of the parties herein, and status
affects or binds the whole word. The res in the present case is the relation between
said parties, or their marriage tie. Jurisdiction over the same depends upon the
nationality or domicile of the parties, not the place of celebration of marriage, or the
locus celebrationis.
******
The prevailing rule is, accordingly, that a court has jurisdiction over the res, in an
action for annulment of marriage, provided, at least, one of the parties is domiciled
in, or a national of, the forum. Since plaintiff is a Filipino, domiciled in the
Philippines, it follows that the lower court had jurisdiction over the res, in addition to
its jurisdiction over the subject-matter and the parties. In other words, it could
validly inquire into the legality of the marriage between the parties herein.

II.

JURISDICTION

Armoganda (lessees) vs. CA & Saycon (lessors)

Facts:
Sps. Saycon leased to Sps. Armoganda a fishpond. The rentals for the entire leased
period were duly paid. Later on, the lessors, allegedly with the aid of armed men,
forcibly entered the leased fishpond and prevented the lessees and their workmen
from entering the premises since, according them, the fishpond had been forfeited
in favour of the govt and thus the rights of the lessees over the fishpond were not
anymore existing. The lessees filed a complaint against the lessors to compel them
to return the leased premises and prayed for a writ of preliminary injunction which
was granted by the RTC. On appeal, the IAC ruled that the trial court has no
jurisdiction over the case since the complaint filed is in the nature of recovery of
possession(forcible entry) and thus should have been filed in the MTC.
Issue:
WON the RTC has jurisdiction over the case.
Held: YES.
The action is, in reality, one for specific performance, i.e., to compel the private
respondents, as lessors, to comply with their obligations under the lease contract
and return the possession of the leased premises to them, and for damages due to
their (private respondents) unjust occupation of the land. Such action is one not
capable of pecuniary estimation and comes within the exclusive original jurisdiction
of regional trial courts.
A review of the jurisprudence of this Court indicates that in determining whether
anaction is one not capable of peculliary 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
courts of first instance would depend on the amount of the claim. However, where
the basic issue is something other than the right to recover a sum of money,
or where the money claim is purely incidental to, or a consequence of, the principal
relief sought like in the suits to have the defendant perform his paint of the
contract(specific performance) and in actions for support, or for annulment of a
judgment orto foreclose a mortgage, this Court has considered such actions as
cases where the subject of the litigation may not be estimated in terms of money,
and are cognizable exclusively by courts of first instance.
Since the present action is to compel the private respondents to perform their part
of the contract of lease to maintain the lessee in the peaceful and adequate
enjoyment of the lease for the entire duration of the contract, the action is within
the exclusive original jurisdiction of the regional trial court.

Good Devt Corporation vs. Hon. Tutaan, Delos Reyes & Marcelo
Facts:
Good Devt Corp filed in the CFI a complaint against Delos Reyes & Marcelo for the
collection of a sum of money (P1,520.00) plus interest, and the sum equivalent to
25% of the total amount due as attys fees, and in default thereof to order the
foreclosure of the chattel mortgage covering personal properties valued at
P15,340.00. Subsequently, private respondents filed a motion to dismiss the
complaint for lack of jurisdiction for the reason that, among others, the petitioner in
its complaint prays for a sum of money amounting to P1,520.00 under the municipal
court. The trial court dismissed the complaint on the ground that the case being one
for a sum of money, the cause of action must be governed by the law on
jurisdiction. Assuming the validity of plaintiffs principal claim the total thereof
cannot and will not reach P10,000.00. It then becomes clear that this case must fall
within the exclusive original jurisdiction of the city court.
Issue:
WON the CFI was correct in dismissing the complaint; or WON the CFI has
jurisdiction over the case.
Held:
The CFI should not have dismissed the complaint for such has jurisdiction over the
case.
Based on jurisprudence, although the purpose of an action is to recover an amount
plus interest which comes within the original jurisdiction of the Justice of the Peace
Court, yet when said action involves the foreclosure of a chattel mortgage covering
personal properties valued at more than P2,000, (now P10,000.00) the action should
be instituted before the Court of First Instance.
In the instant case, the action is to recover the amount of P1,520.00 plus interest
and costs, and involves the foreclosure of a chattel mortgage of personal properties
valued at P15,340.00, so that it is clearly within the competence of the respondent
court to try and resolve.