FORTUNE MOTORS (PHILS.) INC., petitioner, vs.

METROPOLITAN
BANK
AND
TRUST
COMPANY,
and
THE
COURT
OF
APPEALS, respondents.
[G.R. No. 115068. November 28, 1996], FIRST DIVISION

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

HERMOSISIMA, JR., J.:

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 Banks motion to dismiss until
after the trial on the merits

ISSUE: WON petitioners action for annulment of the real estate

mortgage extrajudicial foreclosure sale of Fortune Building is
personal action or a real action for venue purposes
HELD: Yes, the action is a real action which should have been filed
before the RTC of Makati.
RATIO: 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.