Civ Pro Cases - Venue

8/13/2019 Civ Pro Cases - Venue

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November 16, 1920

G.R. No. L-15141

THE MANILA RAILROAD CO., plaintiff-appellant,

vs.

THE ATTORNEY-GENERAL, ET AL., defendant-appellees.

Orense & Vera and Jose A. Santos for appellant.

Rafael de la Sierra for appellees.

, J.:

On February 17, 1914, the plaintiff, The Manila Railroad Co., instituted this action in the Court of First

Instance of Albay, for the purpose of condemning the lands described in the complaint, alleging that it

was necessary for it to acquire said lands for the construction of a railway branch from Legaspi to

Nueva Caceres, that it had the right to do so in accordance with the franchise granted to it by Acts

Nos. 1510 and 1905 of the Philippine Legislature, and that it could not acquire said lands through

extra-judicial transactions as the true owners of some of these lands were unknown to the plaintiff,while those that are known demand highly excessive prices which are not the true value of their lands.

The plaintiff asked that, after trial, it be declared owner of the lands described in the complaint and

that the reasonable and true value, which it should pay to those who show themselves to be the true

owners of said lands, be fixed.

The owners, who appeared and answered the complaint, are Eleuteria Diaz, Eugenia Pinilla, Ceferino

Guanzon, Gutierrez Hermanos, and Florencia Quijano. They admitted the right of the plaintiff to

expropriate the lands described in the complaint, and they merely stated the different sums which

they claimed as compensation for their lands, the improvements existing thereon at the time of their

occupation by the plaintiff and the damages occasioned to the unexpropriated part of their lots due tothe segregation of that occupied by the railway line.

With the consent of the parties, three commissioners were appointed to hear the evidence, assess the

value of the lands sought to be expropriated, and submit to the court a complete and detailed report

of the proceedings had, in accordance with sections 243 and 244 of the Code of Civil Procedure.

After the commissioners had been appointed, Domingo Valenciano appeared and, with the courts

permission, intervened in this case with the object of presenting evidence upon the value of parcel No.

334 in the plaintiffs plan, and the amount of damages caused to the remainder of the lot from which

said parcel was taken.

The evidence having been taken before the commissioners, two of them submitted their report to the

court on November 17, 1916, stating: (1) That they assessed the value of parcel No. 280, which

belonged to Gutierrez Hermanos, at P0.20 per square meter, independently of the improvements, to

which they gave a total value of P18,820.10 and they granted to said commercial firm the sum of

P5,000 as damages to the remaining part of their lot; (2) that they fixed the value of parcel No. 282,

which belonged to Eleuterio Diaz at P1 per square meter, excluding the improvements thereon, to


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which they gave the value of P433.50, and they assessed the damages to the unexpropriated part of

the lot at P150; (3) that they gave the value of P2.50 per square meter to parcels Nos. 330 and 334,

which belonged to Eugenia Pinilla and Domingo Valenciano, respectively, and they adjudicated to the

spouses Antonio Porcalla and Eugenia Pinilla the additional sum of P400 for their house on said land,

and to Domingo Valenciano, respectively, and they adjudicated to the spouses Antonio Porcalla and

Eugenia Pinilla the additional sum of P400 for their house on said land, and to Domingo Valenciano the

sum of P560 for the damages occasioned to him by the transfer of his house on said land; and (4) that

they assessed the value of parcel No. 353, which belonged to Ceferino Guanzon at P2 per square

meter, excluding the improvements thereon, which they valued at P500, and they further granted him

the sum of P300 for the damages suffered by him in removing to another place one of the three

houses that he had on said land and a further sum of P300 for the value of the two other houses

thereon.

The third commissioner, who did not sign the preceding report, presented on March 1st, a dissenting

report, in which he stated: (1) That parcel No. 280, belonging to Gutierrez Hermanos, should be

assessed at P0.50 per square meter, including its improvements, and that instead of P5,000, only the

sum of P4,000 should be granted to it, as damages caused to the unexpropriated part of the land; (2)

that parcel No. 282 belonging to Eleuterio Diaz should be assessed at P1 per square meter, including

its improvements; (3) that he agrees that the value of P2 per square meter should be given to parcel

No. 253 belonging to Ceferino Guanzon, but he assessed the value of the trees thereon at P300 only,

and the damages occasioned to him by the removal of his house to another place at P300, and the

value of the two houses that were destroyed at P200; and (4) that he completely agrees with the

report of the other commissioners with respect to parcels Nos. 330 and 334 belonging to Antonio

Porcalla and Domingo Valenciano.

The plaintiff objected to the report of the commissioners, alleging that said commissioners have

adopted wrong principles in the assessment of the lands, and the majority of them assessed the value

of the lands separately from their improvements, fixing for each of them excessive and exorbitant

prices.

On February 26, 1918, the court rendered judgment, approving the report of the majority of the

commissioners, and adjudicating to the plaintiff the ownership of the lands described in the complaint,

but condemning to pay to their respective owners the sums assigned by the commissioners to each of

them, with legal interest from February 17, 1914, until full payment.

With respect to parcel No. 14, belonging to Florencia Quijano, but not mentioned in the report of the

commissioners, the court also rendered judgment, adjudicating it to the plaintiff and condemning the

latter to pay to said Florencia Quijano the sum of P559, with interest from May 20, 1908, until the

date of payment.

The plaintiff excepted to this judgment and at the same time moved for a new trial, on the ground

that the judgment was manifestly contrary to the weight of the evidence and the law. The motion


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having been overruled, the plaintiff excepted to the order overruling the motion, and appealed the

case to the Supreme Court by means of a bill of exceptions.

This appeal was taken by the plaintiff from the whole judgment, which deals, among others, with

parcel No. 14, belonging to Florencia Quijano. But we do not find in the record before us the evidence

with respect to this parcel, or the report of the commissioners thereon, and consequently there is no

other course for us to take but to dismiss the appeal with respect to parcel No. 14. Furthermore,

nowhere in the record does it appear that the appellant has furnished counsel for Florencia Quijano

with a copy of his brief, as required by article 21 of the Rules of this Court; and therefore, it is proper

to dismiss the appeal, in accordance with article 23 of said Rules, in so far as parcel No. 14, belonging

to Florencia Quijano, is concerned.

The errors assigned by the appellant in its brief are the following: (1) The act of the court in approving

the report of the commissioners of appraisal and basing his judgment thereon; (2) the act of the court

in granting legal interest to the defendants; and (3) the act of the court in denying the motion for new

trial.

In discussing the first error imputed to the court below, counsel for the appellant argues that the

evidence of the defendants, upon which the report of the commissioners is based, is incompetent,

inasmuch as it consists of mere opinions of witnesses, who are not shown to have intervened in real

estate transactions, either as brokers or in any other capacity that may give them knowledge of the

value of lands in said localities. The appellant also attacks the report of the commissioners on the

ground that they did not consider the evidence presented by said appellant. The question is therefore

raised as to whether the evidence supports the conclusions of the majority of the commissioners. To

decide it, we will deal separately with the five parcels covered by the report of the commissioners.

Parcel No. 280. This parcel is part of the hacienda known as Hacienda de Mapulangbato, belonging

to Gutierrez Hermanos. It is land suitable to be planted to hemp and coconut. It is situated in Ligao,

Albay, a small party being in the municipality of Guinobatan.

Constancio Benito declared that he has been living in Ligao for about twenty-two years; that he had

sold to Mariano Lim a part of the land administered by him and situated about 50 meters from the

Hacienda de Mapulangbato; that said hacienda is of greater value than the land sold by him; that the

price obtained by him at said sale was P0.29 per square meter, which was less than the value of

the land, but he decided to effect the sale to avoid litigation with a third person who, claiming to be

the owner thereof, had previously sold it; that the document of conveyance, to which he refer, is

Exhibit 1 of the defendants. This exhibit bears date, January 31, 1913, that is, one year before the

railroad took possession of parcel No. 280, which took place in February, 1914, as appears from

Exhibit 1 and others of the defendants. Said Exhibit 1 proves the sale of a part of lot No. 284 of the

plan of the railroad at P0.29 per square meter. The land thus sold is hemp land, according to the

document itself, and is 50 meters from the Hacienda de Mapulangbato, according to the testimony of

Constancia Benito, above noted.


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Another witness, Roman Jaucian, gave the value of Hacienda de Mapulangbato at P0.30 per square

meter. This witness has been administering lands in the vicinity of said hacienda and has been living

there for more than ten years without having intervened in any voluntary sale of lands.

The witness Leopoldo Teran fixed the price of the expropriated part of said hacienda at P0.40 per

square meter, but his experience on the subject consists only in his having administered lands near

said hacienda.

Venancio Cavada Diaz, another witness for the defendants, fixed the price at P0.40 to P0.50 per

square meter for parcel No. 280. His competency to testify as to the value of the land is indisputable,

because he knows perfectly parcel No. 280, having possessed it, first as owner and later as caretaker

of Gutierrez Hermanos, and having lived in the municipality of Ligao for twenty years. Furthermore he

had bought and sold much lands situated in said municipality and had administered them, farming and

dealing in merchandise having been his principal occupation; and therefore he is a business man of

great experience who must have acquired special knowledge of the value of the lands in the locality.

In the case of Manila Railroad Co. vs. Alano (36 Phil., 500), this court accepted the declarations of the

clerk of court and of the provincial treasurer of Batangas as competent, with respect to the value of

the lands in their province, for the reason that their experience as men of affairs in the Province of

Batangas, whose official duties could not fail to have given them some special knowledge as to land

valuations in that province, lends great weight, to their expressions of opinion as to land values in the

province in which they live, and justifies us in the belief that their estimates of the true market value

of the land in question are not far astray. (See page 505 of the volume cited.)

On the other hand the plaintiff did not present any evidence except Exhibits 1 to 15, of which the first

eleven show sales of lands situated in different sitios or barrios of the municipality of Ligao, and the

last four are real-estate tax declarations of lots belonging to Gutierrez Hermanos and G. Urrutia and

Co. The plaintiff has not established by means of other evidence the identity of similarity between the

lands referred to in those exhibits and those that are the object of the expropriation proceedings. It

attempted to do so, but the witnesses presented by it stated that said lands were situated far from

parcel No. 280, while the record does not show whether the lands referred to in the other exhibits,

with the exception of Exhibits 12, 13 and 14, are near or far from the expropriated lands and have

some similarity or relation to each other.

Venancio Cavada Diaz in rebuttal declared that the lands referred to in Exhibits 12 and 14 of the

plaintiff were situated about 20 kilometers from the expropriated lands. He also states that Exhibit 13,

dated November 21, 1911, is no more than a reproduction of the real-estate tax declaration which he

presented in 1906, for when he sold the Hacienda de Mapulangbato to Gutierrez Hermanos, he did

nothing more than to put the declaration in the name of gutierrez Hermanos, and did not change the

assessed valuation of the land, such change having been made by the Government only in 1915. It

thus results that the value stated in said Exhibits 12 and 14 cannot be made the basis in assessing the

value of the lands in question which were expropriated in 1914, the hacienda having been greatly

improved during the time that elapsed between 1906 and 1914, according to the declaration of


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Venancio Cavada Diaz himself. The same thing occurred with the land described in Exhibit 15,

according to the same witness.

In the case of Manila Railroad Co. vs. Velasquez (32 Phil., 286), this court held that in order that sales

of other lands may be admitted as evidence of the value of the expropriated lands, they must have

been effected sufficiently near in point of time with the date of the condemnation proceedings to

exclude general increases or decreases in property values due to changed commercial conditions in

the vicinity and the lands thus, sold must be in the immediate neighborhood, that is, in the zone of

commercial activity with which the condemned property is identified. Applying these rules to the case

at bar, it results that the exhibits presented by the plaintiff cannot be made the basis in the

assessment of the value of the lands here in question, although Exhibit 13 should be considered to

determine only whether the price fixed by the commissioners for parcel No. 280 is excessive or

reasonable. (Manila Railroad vs. Alano, supra.)

From Exhibit 13, which seems to refer to the Hacienda de Mapulangbato, it appears that it was

assessed at less than one centavo per square meter, but it should be noted that that was anassessment of the whole land which, according to the testimony of Cavada Diaz, was in part

mountainous and difficult to cultivate and in part level and tillable, as it was in effect planted with

hemp and coconut and other plants and trees. It should also be noted that the railroad had occupied

the parts that are level and easily cultivated. Now, then, considering that the assessment was made

about eight years prior to the expropriation proceedings, that during this period of time the land was

cultivated with care, and that the expropriated part of the Hacienda de Mapulangbato is level and

easily cultivated, and therefore, of great value, we do not believe that the value of P0.20 per square

meter fixed by the commissioners is excessive.

With respect to the valuation of the improvements on the expropriated part, the plaintiff has noreasonable grounds for complaint, not only because it has not presented any evidence on the point,

but also because the witnesses for the defendant, who testified on the value of said improvements,

have shown such experience in the lumber business, in the planting of trees, and such knowledge as

to the use, enjoyment and value of the trees and plants existing on the lands, that it is impossible to

question their competency in fixing the value of said improvements. More than this, the

commissioners reduced the values fixed by said witnesses. We are therefore of the opinion that in

assessing the value of these improvements the commissioners committed no error prejudicial to the

interests of the plaintiff.

The appellant, in order to support its contention that the improvement on the expropriated lands

should have been assessed jointly with the lands, invokes the doctrine laid down by this court in the

case of Manila Railroad Co. vs. Aguilar (35 Phil, 118), where it was said: When the land is preferably

intended for the raising of a given crop or for the planting of trees of a certain kind, although these or

the crop be deemed improvements of the land they should not be appraised apart from the land as

they are an integral part thereof and their value is inherent or forms a part of that of the land. In the

present case it has not been shown that the land is better adapted to a particular kind of plant; on the

contrary, it is shown to be planted with several kinds of trees and plants, and therefore we are of the


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opinion that said improvements may be valued separately from the land, inasmuch as the owners of

expropriated lands have the right to be indemnified for the improvements existing thereon, as was

held by this court in the case of Manila Railroad Co., vs. Velasquez (32 Phil., 286).

Finally there can be no doubt that damages were occasioned to the unexpropriated part of the land,

because the remaining portion was divided into two parts, with the result that it is very difficult to

pass from one part to the other. The witness Cavada Diaz fixed the value of these damages at

P20,000, while the commissioners fixed it at P5,000. These damages consists in the fact that now

transportation to and from the hacienda is costly because there is no direct way from one side of the

railroad line to the other, and these damages are not compensated by any special benefit derived form

the construction of the line, for no station was established near the hacienda, for which reason the

value of the unexpropriated land was necessarily reduced. According to Exhibit 13, the hacienda had a

total area of 160 hectares, and an extent of about 52 hectares having been expropriated, 108

hectares remain, and the sum of P500 adjudicated by the commissioners to Gutierrez Hermanos

represents the decrease in the value of the 108 hectares at the rate of less than one-half centavo per

square meter, that is, 2 per cent if the price of the unexpropriated part be fixed at P0.20, or 4 per

cent if it be fixed at P0.10 per square meter, which appears to be reasonable, inasmuch as the

remaining or unexpropriated part is of less value than the part occupied by the railroad because its

tillable portion is less. The amount granted by the commissioners as damages occasioned to the

unexpropriated part is therefore not excessive.

Parcel No. 282. This parcel belongs to Eleuterio Diaz, who is represented in these proceedings by

Venancio Cavada Diaz, as is shown by a power of attorney duly executed in favor of the latter by the

former who is now absent in Spain.

It is situated in the sitio of Paolog, barrio of Tuburan, municipality of Ligao, at a distance of about 50meters from the main road from Albay to Ligao and in the corner of the bridge of Paolog. The whole

land of Eleuterio Diaz borders on said road and was rented by the International Purchasing

Company, which had a camarin thereon of strong materials, which camarin contained important

machinery and a press belonging to said company. Upon it there was also one building in which two

ilang-ilang stills had been installed, another building used as a storehouse for copra, and another

building of strong materials. There were also many tress and plants of several kinds. The land was

principally suitable for construction of buildings, although plants and trees had been planted thereon in

order to utilize the part not covered by the buildings. On several sides the land was enclosed with wire

fencing and there were about twelve houses near it. With these facts which clearly appear in the

record there can be no doubt that parcel No. 282 is a lot.

The witness Cavada Diaz who knows this lot, for he is the agent of the owner, fixed its value at P1 per

square meter, excluding the improvements.

The plaintiff did not present any evidence in these proceedings with the exception of Exhibits 1 to 15,

nor did it present any witness to establish the relation between these documents and the expropriated

land. Of these fifteen documents, Exhibits 8, 13 and 15 refer to lands situated in the barrio of Tuburan


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where parcel No. 282 is situated, but the first of said lands is, according to the exhibits themselves,

hemp and coconut land, the second is a rustic and hemp land, and the last is hemp land; while parcel

No. 282 commissioners as to the value of this parcel is in accordance with the evidence.

From the declaration of Venancio Cavada Diaz it is to be inferred that the land described in

assessment sheet Exhibit 15 is the same parcel No. 282, but even supposing that this is true, said

exhibit is not sufficient proof that the value fixed by the commissioners for said parcel is erroneous,

for said Exhibit 15 was presented in 1908 and it therefore cannot be affirmed that the value stated

therein is the value of parcel No. 282 in 1914, when it was occupied by the plaintiff, inasmuch as it

appears in the record that the land has increased in value due to the improvements made thereon.

With respect to the improvements and the damages caused to the remainder of the lot, what has been

said with respect to parcel No. 280 is applicable to No. 282, for the prices given by the witness Cavada

Diaz for each three and plant, which do not appear to be exaggerated, were yet reduced by the

referees; and the damages caused to the unexpropriated part are almost identical with those caused

to parcel No. 280. The whole of the land of which parcel No. 282 forms part is less than 2 hectares inarea, the expropriated part measuring 2,619 square meters, and the remaining part being about 1 1/2

hectares. The witness Cavada Diaz fixed the damages at P400, but the commissioners reduced them

to P150, or approximately 1 cent per square meter for the unexpropriated part; and P1 per square

meter being the price given to the lot, it results that the diminution in value of the unexpropriated part

is only 1 per cent, which is far from being excessive.

Parcel No. 330. This parcel belongs to the spouses Antonio Porcalla and Eugenia Pinilla. It is situated

in the barrio of Bagumbayan about 19 meters from the new market of Ligao. At the time of its

condemnation by the railroad, that is, in February 1914, there was on it a house of wood and bamboo

with nipa roof and therefore it was a lot.

The evidence on the value of this parcel consist of the declaration of Venancio Cavada Diaz and Calixto

Verar and Exhibit 24 of the defendants.

This exhibit is a notarial document executed by one Higino Cipriano in favor of the witness Calixto

Verar, which evidences a sale between these two persons of a lot situated in the barrio of

Bagumbayan, municipality of Ligao. In describing the land the document says that it bordered on one

side by lands of the municipality, that is, by the market then under construction. The area of the lot

does not appear in the document though it states that it has a circumference of sixty-six meters.

According to the testimony of Venancio Cavada Diaz, the land described in said document, Exhibit 24,is identical with parcel No. 330; they are situated in the same barrio, at the same distance from the

public market, and are under the same conditions. It also appears that the sale was effected under

normal circumstances, for the purchaser himself declared that he was not obliged to buy the land, and

that he bought it because he wanted to put up a store near the market which was intended to be

constructed there; and although it does not appear whether the vendor was or was not in need of


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money, nevertheless, the purchaser himself stated that the sale was effected in a free and voluntary

manner.

It therefore results that the price at which the land described in Exhibit 24 was sold is a reasonable

basis for the valuation of parcel No. 330. (Manila Railroad Co. vs. Velasquez, 32 Phil, 286; City of

Manila vs. Neal, 33 Phil., 291; and City of Manila vs. Estrada and Estrada, 25 Phil., 208.)

The purchaser Calixto Verar was a caretaker of the firm Gutierrez Hermanos, and he took the money

with which he paid the price of the land covered by Exhibit 24 from that firm, by reason of which

Venancio Cavada Diaz learned of the transaction. Later on Calixto Verar attempted to sell the same

land and then Venancio Diaz, with the intention of acquiring it, had a surveyor measure it, and the

land was measured in the presence of Cavada Diaz, who not only aided in the work of locating the

course of the boundaries of the land and the longitudes, but also in the calculation of the area, he

having noted the data secured by him on a piece of paper. Said witness, Diaz, states that this note is

what he consulted when he declared that the land had a length of 21 meters on the longest side and a

width of 12 meters on the widest side, and an area of 238 square meters which, at the price of P500mentioned in Exhibit 21, gives a price of P2.14 per square meter. But as the public market mentioned

in said Exhibit 24, as the future boundary, did not yet exist when the sale was made, and market

having been opened a few months before the occupation of parcel No. 330 by the railroad, according

to the testimony of Venancio Cavada Diaz, it is evident that the existence of said market must have

increased the value of the lot referred to in Exhibit 24 and also of parcel No. 330 which is nearby, as

was the opinion of the witness Cavada Diaz; and, therefore, the value of parcel No. 330 at the time of

its occupation by the railroad must be greater than the price at which the land mentioned in Exhibit 24

was sold. The witness, Cavada Diaz, fixed this price at P2.50 and the commissioners, including the

dissenting one, accepted it without reducing or increasing it. On the other hand, there is no evidence

in the record in favor of the contention of the plaintiff, and therefore there is no ground for declaring

the conclusions of the commissioners as erroneous.

It has been proved that the house located on the land was destroyed by the employees or laborers of

the railroad company and that the owners did not in any way benefit from the materials thereof. The

witness Cavada Diaz who knew the house, having been there several times when Antonio Porcalla

lived there as mayordomo, stated that said house cost P450, but at the time of its destruction by the

company, part of the kitchen was already in a fallen condition and for this reason he fixed its value at

P400, which was accepted completely by the three commissioners.

Parcel No. 334. What has been said with respect to No. 330 is wholly applicable to this parcel No.

334, because it is also a lot situated in the center of the town at a distance of 100 meters from the

new public market of Ligao. The dissenting commissioner himself had to accept the price of P2.50 per

square meter.

For the damage caused to the house on the lot due to the opening of the railway line and the transfer

thereof to another place, the commissioners including the dissenting one, adjudicated P560 to its


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owner, their action being based on the testimony of the latter, who was the only one to testify on the

subject and the only one who would know the value of said damages.

Of the fifteen exhibits presented by the plaintiff, Exhibit 1 refers to the land situated in Bagumbayan,

which seems to be the same barrio in which parcels Nos. 330 and 334 are situated, but according to

said exhibit the land therein referred to is rice land, and therefore it cannot be made the basis in

assessing the value of the lands in question, which are lots.

Parcel No. 353. This parcel is a lot situated 200 meters from the public square of the town and is

therefore similar to the two preceding lots. But the three commissioners fixed its value at P2 because

it is at a greater distance from the zone of commercial activity than the others; and therefore the

plaintiffs objection to the report of the commissioners is groundless so far as it concerns parcel No.

353.

As to the improvements on this parcel, the majority of the commissioners assessed their value, basing

their assessment upon the uncontradicted testimony of its owner Ceferino Guanzon and upon other

evidence in the record, but reduced some of the amounts claimed by said owner. The appellant has

not shown in what respect the court erred, if it committed any error, and therefore, there is no reason

for rejecting or modifying the report of the commissioners which was approved by the lower court.

With respect to the interest granted by the lower court to the owners of the expropriated lands, this

court has held in unequivocal terms that the owners of exproriated lands are entitled to recover

interest from the date that the company, exercising the right of eminent domain, takes possession of

the condemned lands, and the amounts granted by the court shall cease to earn interest only from the

moment they are paid to the owners or are deposited in court. (Philippine Railway Co. vs. Solon, 13

Phil., 34 and Philippine Railway Co. vs. Duran 33 Phil., 156.)

For the reasons above stated it is proper to affirm, as we do affirm, the judgment appealed from, and

the appeal is dismissed with respect to parcel No. 14, with the costs of this instance against the

appellant. So ordered.

Mapa, C.J., Johnson, Araullo, Street and Malcolm, JJ., concur.

G.R. No. L-55729 March 28, 1983

ANTONIO PUNSALAN, JR., petitioner,vs.

REMEDIOS VDA. DE LACSAMANA and THE HONORABLE JUDGE RODOLFO A.ORTIZ, respondents.

Benjamin S. Benito & Associates for petitioner.

Expedito Yummul for private respondent.


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MELENCIO-HERRERA, J .:

The sole issue presented by petitioner for resolution is whether or not respondent Court erred indenying the Motion to Set Case for Pre-trial with respect to respondent Remedios Vda. deLacsamana as the case had been dismissed on the ground of improper venue upon motion of co-respondent Philippine National Bank (PNB).

It appears that petitioner, Antonio Punsalan, Jr., was the former registered owner of a parcel of landconsisting of 340 square meters situated in Bamban, Tarlac. In 1963, petitioner mortgaged said landto respondent PNB (Tarlac Branch) in the amount of P10,000.00, but for failure to pay said amount,the property was foreclosed on December 16, 1970. Respondent PNB (Tarlac Branch) was thehighest bidder in said foreclosure proceedings. However, the bank secured title thereto only onDecember 14, 1977.

In the meantime, in 1974, while the properly was still in the alleged possession of petitioner and withthe alleged acquiescence of respondent PNB (Tarlac Branch), and upon securing a permit from theMunicipal Mayor, petitioner constructed a warehouse on said property. Petitioner declared saidwarehouse for tax purposes for which he was issued Tax Declaration No. 5619. Petitioner then

leased the warehouse to one Hermogenes Sibal for a period of 10 years starting January 1975.

On July 26, 1978, a Deed of Sale was executed between respondent PNB (Tarlac Branch) andrespondent Lacsamana over the property. This contract was amended on July 31, 1978, particularlyto include in the sale, the building and improvement thereon. By virtue of said instruments,respondent - Lacsamana secured title over the property in her name (TCT No. 173744) as well asseparate tax declarations for the land and building. 1

On November 22, 1979, petitioner commenced suit for "Annulment of Deed of Sale with Damages"against herein respondents PNB and Lacsamana before respondent Court of First Instance of Rizal,Branch XXXI, Quezon City, essentially impugning the validity of the sale of the building as embodiedin the Amended Deed of Sale. In this connection, petitioner alleged:

xxx xxx xxx

22. That defendant, Philippine National Bank, through its Branch Manager ... byvirtue of the request of defendant ... executed a document dated July 31, 1978,entitled Amendment to Deed of Absolute Sale ... wherein said defendant bank asVendor sold to defendant Lacsamana the building owned by the plaintiff under TaxDeclaration No. 5619, notwithstanding the fact that said building is not owned by thebank either by virtue of the public auction sale conducted by the Sheriff and sold tothe Philippine National Bank or by virtue of the Deed of Sale executed by the bankitself in its favor on September 21, 1977 ...;

23. That said defendant bank fraudulently mentioned ... that the sale in its favor

should likewise have included the building, notwithstanding no legal basis for thesame and despite full knowledge that the Certificate of Sale executed by the sheriff inits favor ... only limited the sale to the land, hence, by selling the building which neverbecame the property of defendant, they have violated the principle against 'pactumcommisorium'.

Petitioner prayed that the Deed of Sale of the building in favor of respondent Lacsamana bedeclared null and void and that damages in the total sum of P230,000.00, more or less, be awardedto him.2


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In her Answer filed on March 4, 1980,-respondent Lacsamana averred the affirmative defense oflack of cause of action in that she was a purchaser for value and invoked the principle in Civil Lawthat the "accessory follows the principal". 3

On March 14, 1980, respondent PNB filed a Motion to Dismiss on the ground that venue wasimproperly laid considering that the building was real property under article 415 (1) of the New Civil

Code and therefore section 2(a) of Rule 4 should apply.4

Opposing said Motion to Dismiss, petitioner contended that the action for annulment of deed of salewith damages is in the nature of a personal action, which seeks to recover not the title norpossession of the property but to compel payment of damages, which is not an action affecting titleto real property.

On April 25, 1980, respondent Court granted respondent PNB's Motion to Dismiss as follows:

Acting upon the 'Motion to Dismiss' of the defendant Philippine National Bank datedMarch 13, 1980, considered against the plaintiff's opposition thereto dated April 1, 1980,including the reply therewith of said defendant, this Court resolves to DISMISS the

plaintiff's complaint for improper venue considering that the plaintiff's complaint whichseeks for the declaration as null and void, the amendment to Deed of Absolute Saleexecuted by the defendant Philippine National Bank in favor of the defendant RemediosT. Vda. de Lacsamana, on July 31, 1978, involves a warehouse allegedly owned andconstructed by the plaintiff on the land of the defendant Philippine National Bank situatedin the Municipality of Bamban, Province of Tarlac, which warehouse is an immovableproperty pursuant to Article 415, No. 1 of the New Civil Code; and, as such the action ofthe plaintiff is a real action affecting title to real property which, under Section 2, Rule 4 ofthe New Rules of Court, must be tried in the province where the property or any partthereof lies.5

In his Motion for Reconsideration of the aforestated Order, petitioner reiterated the argument that theaction to annul does not involve ownership or title to property but is limited to the validity of the deed

of sale and emphasized that the case should proceed with or without respondent PNB asrespondent Lacsamana had already filed her Answer to the Complaint and no issue on venue hadbeen raised by the latter.

On September 1, 1980,.respondent Court denied reconsideration for lack of merit.

Petitioner then filed a Motion to Set Case for Pre-trial, in so far as respondent Lacsamana wasconcerned, as the issues had already been joined with the filing of respondent Lacsamana's Answer.

In the Order of November 10, 1980 respondent Court denied said Motion to Set Case for Pre-trial asthe case was already dismissed in the previous Orders of April 25, 1980 and September 1, 1980.

Hence, this Petition for Certiorari, to which we gave due course.

We affirm respondent Court's Order denying the setting for pre-trial.

The warehouse claimed to be owned by petitioner is an immovable or real property as provided inarticle 415(l) of the Civil Code. 6Buildings are always immovable under the Code. 7A buildingtreated separately from the land on which it stood is immovable property and the mere fact that theparties to a contract seem to have dealt with it separate and apart from the land on which it stood inno wise changed its character as immovable property. 8


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While it is true that petitioner does not directly seek the recovery of title or possession of the propertyin question, his action for annulment of sale and his claim for damages are closely intertwined withthe issue of ownership of the building which, under the law, is considered immovable property, therecovery of which is petitioner's primary objective. The prevalent doctrine is that an action for theannulment or rescission of a sale of real property does not operate to efface the fundamental andprime objective and nature of the case, which is to recover said real property. It is a real action. 9

Respondent Court, therefore, did not err in dismissing the case on the ground of improper venue(Section 2, Rule 4) 10, which was timely raised (Section 1, Rule 16) 11.

Petitioner's other contention that the case should proceed in so far as respondent Lacsamana isconcerned as she had already filed an Answer, which did not allege improper venue and, therefore,issues had already been joined, is likewise untenable. Respondent PNB is an indispensable party asthe validity of the Amended Contract of Sale between the former and respondent Lacsamana is inissue. It would, indeed, be futile to proceed with the case against respondent Lacsamana alone.

WHEREFORE, the petition is hereby denied without prejudice to the refiling of the case by petitionerAntonio Punsalan, Jr. in the proper forum.

Costs against petitioner.

SO ORDERED.

G.R. No. L-17699 March 30, 1962

DR. ANTONIO A. LIZARES, INC.,petitioner,vs.HON. HERMOGENES CALUAG, as Judge of the Court of First Instance of Quezon City,and FLAVIANO CACNIO,respondents.

Ramon C. Aquino for petitioner.Paulino Carreon for respondents.

CONCEPCION, J .:

Appeal by certiorarifrom a decision of the Court of Appeals dismissing the petition of Dr. Antonio A.Lizares & Co., Inc., for a writ of prohibition, with costs against said petitioner.

On or about June 14, 1960, Flaviano Cacnio instituted Civil Case No. Q-5197 of the Court of FirstInstance of Rizal, Quezon City Branch, against said petitioner. In his complaint, Cacnio alleged thaton April 20, 1955, he bought from petitioner, on installment, Lot 4, Block 1 of the SinkangSubdivision in Bacolod City, making therefor a downpayment of P1,206, the balance of P10,858 to

be paid in ten (10) yearly installments of P1,085.80 each, with interest thereon at the rate of 6% perannum; that on March 25, 1960, Cacnio received from petitioner a letter demanding payment ofP7,324.69, representing arrears in the payment of installments up to April 20, 1960, plus "regularand overdue" interest, as well as "land taxes up to 70% of 1960"; that the sum then due from Cacnioby way of arrears amounted only to P5,824.69, he having paid P1,500 to petitioner "sometime in1958"; that in view of the aforementioned demand of petitioner, Cacnio sent thereto a check forP5,824.69, dated May 26, 1960, drawn by one Antonino Bernardo in favor of said petitioner, inpayment of the amount due from Cacnio by way of arrears; that "without legal and equitablegrounds" therefor, petitioner returned said check and "refused the tender of payment"


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aforementioned; that by reason of said illegal act of petitioner, Cacnio is entitled to compensatorydamages in the sum of P5,000, plus P2,000 by way of attorney's fees, Cacnio having beenconstrained to engage the services of counsel and bring the action; and that petitioner "is doingthreatens, or is about to do, or is procuring or suffering to be done some act in violation of" Cacnio'srights respecting the subject of the action, viz. the repossession of the lot bought by" the latter, who,accordingly, prayed that petitioner be ordered "to accept the payment being made" by him (Cacnio)

and to pay him P5,000 as compensatory damages and P2,000 as attorney's fees, and that, upon thefiling of a bond to be fixed by the court, a writ of preliminary injunction enjoining petitioner and itsagents or representatives from repossessing the lot adverted to above be issued. Said writ ofpreliminary injunction was issued on June 16, 1960.

On July 5, 1960, petitioner moved to dismiss the complaint upon the ground that "venue isimproperly laid," for the action affects the title to or possession of real property located in BacolodCity, which was the subject matter of a contract, between petitioner and Cacnio, made in said City.The motion having been denied by the Court of First Instance of Rizal, Quezon City Branch, by anorder of July 9, 1960, upon the ground that the action was in personam,petitioner filed with theCourt of Appeals a petition, which was docketed as Civil Case CA-G.R. No. 28013-R, praying thatsaid order be set aside and that a writ of prohibition be issued commanding respondent Hon.Hermogenes Caluag, as Judge of said Court, to desist from taking cognizance of said Civil Case No.Q-5197. In due course, the Court of Appeals rendered a decision on October 27, 1960, dismissingsaid petition. Hence, this appeal by certiorari taken by petitioner herein.

The issue is whether or not the main case falls under section 3 of Rule 5 of the Rules of Court,reading:

"Actions affecting title to, or for recovery of possession, or for partition or condemnation of, orforeclosure of mortgage on, real property, shall be commenced and tried in the provincewhere the property or any part thereof lies."

The Court of Appeals and the Court of First Instance of Rizal, Quezon City Branch, held that CivilCase No. Q-5197 of the latter court is an actionin personam,and that, as such, it does not fall within

the purview of said section 3, and was properly instituted in the court of first instance of the provincein which Cacnio, as plaintiff in said case, resided, pursuant to section 1 of said rule 5.

We are unable to share such view. Although the immediate remedy sought by Cacnio is to compelpetitioner to accept the tender of payment allegedly made by the former, it is obvious that this reliefis merely the first step to establish Cacnio's title to the real property adverted to above. Moreover,Cacnio's complaint is a means resorted to by him in order that he could retain the possession of saidproperty. In short, venue in the main case was improperly laid and the Court of First Instance ofRizal, Quezon City Branch, should have granted the motion to dismiss. 1wph1.t

WHEREFORE, the decision appealed from is hereby reversed and another one shall be entereddirecting respondent Judge to desist from taking further cognizance of Civil Case No. Q-5197 of said

court, with costs against respondent Flaviano Cacnio. It is so ordered.

PAULINO NAVARRO, Petitioner, vs. THE HONORABLE ANTONIO G. LUCERO, Judge of the Court of First

Instance of Manila, MANUEL H. BARREDO, THE TREASURER OF THE PHILIPPINES, IGNACIO DE

GUZMAN and ALFREDO EDWARD FAWCETT, Respondents.

D E C I S I O N


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CONCEPCION, J.:

PetitionerPaulino Navarro seeks a writ of prohibition, to enjoin the Respondent, Hon. Antonio G. Lucero,

as Judge of the Court of First Instance of Manila, from hearing and deciding Civil Case No. 17061 of said

court.

Said case was instituted by Manuel H. Barredo against (originally) the Treasurer of the Philippines, and

Ignacio de Guzman and Alfredo Edward Fawcett, all of whom areRespondentsin the case at bar. In an

amended complaint, dated April 30, 1955, which likewise, included Petitionerherein, as Defendant, it

was alleged, that on September 16, 1944, Barredo purchased from Ana Brodeck a lot situated in the

municipality of Pasay, province of Rizal, and covered by Transfer Certificate of Title No. 16372 of the

Office of the Register of Deeds of Rizal, subject to redemption within two (2) years; chan roblesvirtualawlibrarythat upon the

filing of the corresponding deed of conditional sale with the Office of the Register of Deeds of the City of

Manila (of which the municipality of Pasay formed part during the Japanese occupation), said TCT No.

16372 was cancelled, and, in lieu thereof, TCT No. 76578 of said office was issued, on September 18,

1944, in Barredos name, with an annotation of said option to repurchase, which was not exercised

within the period aforementioned; chan roblesvirtualawlibrarythat, claiming to be the only child and legal heir of Brodek, on

January 20, 1946, DefendantIgnacio de Guzman (oneRespondentsherein) filed a petition with the Court

of First Instance of Rizal for the reconstitution of said TCT No. 16372, alleging that its original and theowners duplicate had been destroyed or lost and could no longer be found although he knew that this

was not true and that said TCT No. 16372 had been cancelled on account of the aforementioned

conditional sale to Barredo; chan roblesvirtualawlibrarythat, on February 1, 1946, said court declared said TCT No. 16372

reconstituted, and ordered the Register of Deeds of Rizal to issue its corresponding owners duplicate;chan

roblesvirtualawlibrarythat, soon thereafter, or on July 22, 1946, De Guzman executed an affidavit adjucating said land to

himself as the only child and sole heir of Ana Brodek; chan roblesvirtualawlibrarythat, based upon said affidavit, de Guzman

obtained from said court order, dated July 25, 1946, directing the Register of Deeds of Rizal to cancel the

reconstituted TCT No. 16372 and to issue, in lieu thereof, another certificate of title to his name;chan

roblesvirtualawlibrarythat, accordingly, said Register of Deeds issued TCT No. 380-A 49002 in De Guzmans name, in lieu of

TCT No. 16372; chanroblesvirtualawlibrarythat, acting in connivance with Alfredo Edward Fawcett (one of the Defendantsin said

case and Respondentherein), who was aware of the aforementioned conditional sale by Ana Brodek (hiswife), to Barredo, De Guzman executed in favor of Fawcett, a deed of conditional sale of the lot in

question, which deed was filed with the office of the Register of Deeds of Rizal, and annotated on said

TCT No. 380-A 49002; chanroblesvirtualawlibrarythat, upon expiration of the period of redemption stipulated with de Guzman,

November 23, 1948, said Fawcett fraudulently consolidated his ownership upon said lot and caused TCT

No. 862 to be issued in his name, free from liens and encumbrances, in lieu of said TCT No. 380 A

49002; chanroblesvirtualawlibrarythat Fawcett also, conveyed the property to Amado Acayan, and, as a consequence, said TCT

No. 862, was cancelled, and another one, bearing No. 863, was issued on the date last mentioned, in

favor of Acayan, free from all liens and encumbrances; chanroblesvirtualawlibrarythat, thereafter Acayan assigned the property

to hereinPetitioner, Paulino Navarro, in whose name TCT No. 1371 was issued on September 21, 1949,

free from all liens and encumbrances upon cancellation of said TCT No. 863; chan roblesvirtualawlibrarythat, owing to the

fraudulent reconstitution of TCT No. 16372, and the subsequent conveyances of the lot in dispute, there

are now two (2) certificates of title thereon, namely, TCT No. 76578, in Barredos name, and TCT No.

1371 in Navarros name;chanroblesvirtualawlibrarythat TCT No. 1371 is null and void, it being derived from transfer certificate

of title which are, also, null and void, for the latter were issued in consequence of the fraudulent

reconstitution of another certificates of title (No. 16372), that, the existence of said TCT No. 1371

jeopardizes Barredos title to the aforementioned property, which is worth P3,000;chanroblesvirtualawlibraryand that, Barredo

has suffered damages in the sum of P1,000.00 representing attorneys fees, in view of the action he has

thus constrained to file. His prayer is:chanroblesvirtuallawlibrary


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(a) That Transfer Certificate of Title No. 1371 issued by the Register of Deeds of Rizal City in the name

of Paulino Navarro, be declared null and void, and Transfer Certificate No. 76578 in the name

of PlaintiffManuel H. Barredo, as valid certificate of title over the land in question;

(b) In the event that Plaintiffis deprived of, or has lost his title or ownership of the land in question by

virtue of the operation of the provisions of Act 496, that DefendantIgnacio de Guzman and Alfredo E.

Fawcett be ordered to pay, joint]y and severally, to the Plaintiffthe sum of P6,000.00;

(c) That DefendantsIgnacio de Guzman and Alfredo Fawcett be ordered to pay, jointly and severally, to

the Plaintiffthe sum of P1,000.00 as attorneys fees, plus costs;

(d) In the alternative paragraphs (b) and (c) above, that Defendant Treasurer of the Philippines be

ordered to pay to the Plaintiffthe sum of P6,000.00, in case DefendantsIgnacio de Guzman and Alfredo

F. Fawcett are unable to pay the said amount, or such portion thereof as may remain unpaid, in the

case Defendantsmay partially satisfy the same, plus costs, pursuant to the provisions of Act 496.

Plaintifffurther prays that he be granted such other relief as may be just and equitable in the

premises.

Paulino Navarro, as one of the Defendantsin said Civil Case No. 17061, moved to dismiss Barredos

amended complaint therein, upon the ground that venue is improperly laid. Upon denial of this

motion, Navarro sought a reconsideration, with the same result. Hence, the present action, in

which Petitionerassails the jurisdiction of the Court of First Instance of Manila to hear and decide said

Civil Case No. 17061, the property in question being located in Pasay City.

In his answer to the petition, the Treasurer of the Philippines expressed no interest in the subject matter

thereof. Upon the other hand, Respondent Manuel H. Barredo asserted, in his answer, that said Civil

Case No. 17061 was originally one for damages against de Guzman, Fawcett and the Treasurer of the

Philippines; chan roblesvirtualawlibrarythat the latter was sued under section 101 and 102 of the Act No. 496, for recovery of

damages from the assurance fund; chanroblesvirtualawlibraryand that Navarro was later included as party-Defendant, since the

determination of the validity or nullity of his title is indispensable to Barredos claim for damages. De

Guzman and Fawcett have not been served with summons in the case at bar, for neither could be

located. However, the main party Respondent in the present case is RespondentManuel H. Barredo,

and, accordingly, we may proceed to pass upon the issue raised by the pleadings, to wit: chanroblesvirtuallawlibraryMay the

Court of First Instance of Manila entertain Civil Case No. 17061, considering that the property in dispute

is located in Pasay City, or outside Manila? RespondentBarredo maintains the affirmative, relying upon

the following authorities:chanroblesvirtuallawlibrary

Under the Land Registration Act, actions may be brought in any court of competent jurisdiction against

the Treasurer of the Philippines Islands for the recovery of damages to be paid out of the assurance

fund. As the indemnity here claimed is for alleged damages caused to the mortgages by the refusal of

the register of deeds to note his mortgage lien, the provisions of section 377 of the Code of Civil

Procedure to the effect that, in order, to obtain indemnity for damages caused to real property, the

action must be brought in the province where the land is situated is not applicable; chan roblesvirtualawlibrarybut that which

says that all actions not therein otherwise provided may be brought in the province where

the Defendantor the Plaintiffresides at the election of the latter. (Hodges vs. Treasurer of the

Philippines, 50 Phil., 16)

A statutes providing that the actions for the recovery of real property or for the determination of any

right or interest therein must be tried in the country where the real property is situated is effective only

when the real property or title thereto is the exclusive subject matter of the action cralaw. (Turlock Theatre

vs. Laws, 120 ALR 786.)


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Statutes which made local action involving title to real estate do not apply to action in which the

question of title is merely incidental to the main controversy. (Hewitt vs. Price, 102 S.W. 647.)

These cases are not in point. The first involved exclusively a personal action, unlike the case at bar,

which mainly seeks to quiet the title to an immovable property, and, hence, it is a real action. The

principal relief prayed for in Barredos amended complaint is that TCT No. 1371 issued by the Register

of Deeds of Rizalcralaw

in the name of Paulino Navarro be declared null and void.

The complaint in the Turlock case alleged three separate causes of action, one of which was personal

and the others real. Moreover, the question of the venue raised therein hinged on the meaning of

sections 392 and 395 of the Code of Civil Procedure of California. Pursuant to section 392, actions for

the recovery of real property, or all for the determinations of any right or interest therein, shall be tried

in the country where the real property, is situated, whereas section 395, declares that in all other

cases, the action must be tried in the county in which the Defendants, or some of them, reside at the

commencement of the action. Construing both provisions, the Supreme Court of California held that

the first applied only when the real property or the title thereto is the exclusive subject matter of the

action and that all the cases including those involving a personal action, in addition to the real

action shall be governed by sections 395.

Said case has no parity with the one at bar. To begin with, only one cause of action is involved in the

latter. Again, Rule 5, sections 1 and 3, of our rules of Court provides:chanroblesvirtuallawlibrary

SECTION 1.General Rule. Civil action in Courts of First Instance may be commenced and tried where

the Defendantor any of the Defendantsresides or may be found, or where thePlaintiffor any of

the Plaintiffsresides, at the election of the Plaintiff.

SEC. 3. Real action. Actions affecting title to, or for recovery of possession, or for partition or

condemnation of, foreclosure of mortgage on, real property shall be commenced and tried in the

province where the property or any part thereof lies.

Pursuant thereto, actions in personam are transitory. However, if besides said actions, the complaint

sets up a real action, or even an action quasi in rem, such as foreclosure of a real estate mortgage (in

which Plaintiffseeks principally the recovery of a sum of money, the foreclosure are to take place only in

the event of failure of the Defendantto voluntarily pay said sum), the case shall be commenced and

tried in the province where the property or any part thereof lies. Thus, the principle under our Rules of

Court is opposite to that obtaining in California. In the languages of the editors of the American Law

Reports Annotated:chanroblesvirtuallawlibrary

cralawin some jurisdictions, as subsequently appears herein, the rule is that the venue of an action relating

to real property must be laid in, or changed to, the county in which the property is located, although

personal causes of action or personal relief are included which may be tried in another county, upon the

theory that the purpose of the legislature in enacting the mandatory statute as to the venue of actions

relating to land is to have the records of the county in which the land involved is situated show all

matters that in any way affect the title of such land. (120 A. L. R. 791.) (Emphasis supplied)

The Hewit case was an action to recover the balance of a promisory note, after deducting the price at

which an immovable, given as security therefor, had been sold to the Plaintiffin extrajudicial foreclosure

proceedings, the legality of which was assailed by the Defendant in his answer, upon the ground of

inadequacy of the price, lack of notice and fraud or misrepresentation of Plaintiffs part. Although the

suit was instituted in a county other than that of the situs of the immovable, and Defendants answer

questioned Plaintiffs title thereto, it was held that the court had the jurisdiction to decide the case, said

issue of title being merely incidental to the personal action for recovery of a sum of money. Such is not


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the case before us, for the title to a real property is the main point for determination therein. In the

words of Plaintiff, it is indispensable to his cause of action. The rule is set forth in the American Law

Reports Annonated as follows:chanroblesvirtuallawlibrary

There was an ancient right to have an action brought against one in the county of residence so as to

protect him from the trouble and expenses of traveling a long distance to defend the action, and in

some jurisdictions, as subsequently shown herein, to safeguard this right the venue statute haveprescribed the general rule as to venue that an action must be brought in the county of the Defendants

residence, and have made the provisions for venue in another county an exception to such rule. In such

jurisdictions, where a personal cause of action is joined, or personal relief is prayed, in a complaint in

action relating to real property whose venue is laid in the county of the location of such property,

the Defendant is generally entitled to have the venue changed to another county in which he resides.

There appears to be, however, an exception to this rule where the cause of action as to the real

property is the primary object of the action, and the personal cause of action, or the prayer for personal

relief, is merely incidental to such object.

There is another pertinent principle, subsequently applied herein to the question under annotation, to

the effect that where two causes of action are properly joined, which require different places of trial,

the venue, as against a motion for its change, may be retained of the entire action in the county in whichit is laid, if that is the proper venue for one of the causes of action, under the general policy of the law to

avoid multiplicity of suits. This principle appears, however, to be made dependent in some cases upon

the question whether the statutory designation of the place of trial of the other cause of action in

another country uses the word may or must . (120 A. L. R. 790-791.) (Emphasis supplied.)

As indicated above, whenever a case involves a real action or an action quasi in rem it shall, and,

therefore, must be commenced and tried in the province where the property or any part thereof

lies, pursuant to Rule 5, section 3, of the Rules of Court. Independently of the foregoing, the primary

object of the present case in the light of the allegations of the amended complaint is to nullify the

title of Petitionerherein. The alternative relief sought in said amended complaint, to the effect.

cralawthat DefendantTreasurer of the Philippines be ordered to pay to the Plaintiffthe sum of P6,000.00 in

case DefendantsIgnacio de Guzman and Alfredo E. Fawcett are unable to pay the said amount, or such

portion thereof as may be remain unpaid, in case Defendantsmay partially satisfy the same, plus the

costs, pursuant to the provisions of Act 496.

cannot affect the application of said section of the Rules of Court, inasmuch as Barredo could not

possibly recover damages unless Navarros title is declared valid, and the venue therefor, is, according to

said rules, in the Court of First Instance of Rizal.

Wherefore, the petition is granted, and the Court of First Instance of Manila is hereby enjoined from

hearing and deciding the aforementioned Civil Case No. 17061 thereof, with costs

against RespondentManuel H. Barredo, without prejudice to the institution by the latter of the

corresponding action before the proper court. It is SO ORDERED.

G.R. No. L-29791 January 10, 1978

FRANCISCO S. HERNANDEZ and JOSEFA U. ATIENZA, plaintiffs-appellees,vs.RURAL BANK OF LUCENA, INC., CENTRAL BANK OF THE PHILIPPINES, in its capacity asLiquidator of Rural Bank of Lucena, and JOSE S. MARTINEZ in his capacity as Receiver ofRural Bank of Lucena,defendants-appellants.


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Ciceron B. Angeles & Fabian S. Lombos for appellants.

Tomas Yumol and Felipe Dimaculangan for appellees.

AQUINO, J .:

This case is about the propriety of a separate action to compel a distress rural bank. which is underJudicial liquidation, to accept a check in payment of a mortgage debt. The fact are as follows:

On March 21, 1961 the spouses Francisco S. Hernandez and Josefa U. Atienza obtained from theRural Bank of Lucena, Inc. a loan of P6,000 which was payable on March 21, 1962. The loan wascured by a mortgage on their two lots situated in Cubao, Quezon City with a total area of 600 squaremeters. The interest for one year was paid in advance.

About three months after that loan was obtained, the Lucena Bank became a distress bank. In aletter dated June 6, 1961 the Acting Governor of the Central Bank apprised the stockholders of the

Lucena bank that the Monetary Board in its Resolution No. 928, which was approved on June 13,1961 allegedly after hearing the Lucena bank. found that its officers, directors and employees hadcommitted certain anomalies or had resorted to unsound and unsafe banking practices which wereprejudicial to the government, its depositors and creditors.

The Monetary Board advised the stockholders to reorganize the Lucena bank by electing a newboard of directors and directed that bank (a) not to grant new loans or renewals; (b) not to acceptdeposits from new depositors; (c) to service only the existing deposit accounts and (d) not to issuedrafts or make any disbursements without the prior approval of Central Bank examiners.

The Monetary Board gave the warning that, if its directives were not obeyed, the Central Bank.would take over the management of the Lucena bank.

The Central Bank Governor informed the Lucena bank that the chief examiner of the department ofrural banks would oversee the operations of the Lucena bank.

That letter of the Central Bank Governor was construed as a directive to the Lucena bank tosuspend operations. The Manila times in its issue of June 21, 1961 carried a news story with theheading "Bank told to suspend operations". The story was accompanied by a picture of depositorswho jammed the lobby of the bank trying to withdraw their money.

Instead of bowing to the will of the Monetary Board, the Lucena bank and its board of directors filedwith the Court of First Instance of Manila a complaint dated June 21, 1961 seeking to restrain theimplementation of Resolution No. 928 (Civil Case No. 47345).

Before the expiration of the one-year term of the loan, or on August 22, 1961, Hernandez went to theLucena bank and offered to pay the loan by means of a check for P6,000 dated August 8, 1961which was drawn against the bank by a depositor, the San Pablo Colleges, and which was payableto Fernandez As the bank's executive vice president was not available, the payment was notconsummated.

At the time that the check was issued, the San Pablo Colleges, had a deposit in the Lucena bankamounting to P11,890.16 (27 tsn April 25, 1966). Instead of withdrawing P6,000 from that deposit,


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the San Pablo Colleges chose to issue a check for that amount w Hernandez. It is not clear whetherin August, 1961 the San Pablo Colleges could make a withdrawal from its deposit in the Lucenabank.

On the following day, August 23, Hernandez sent to the bank by registered mail a photostat of thecheck and a letter inquiring whether the bank would honor the check and when he should go

personally to the bank for that purpose. That letter was received by the bank on August 29.

On August 30, the executive vice-president wrote to Hernandez and informed him that the checkcould not be honored for the time being because of adverse events that had disrupted the bank'soperations. What the vice-president meant was that by reason of the letter of the Central BankGovernor dated June 16. 1961 the operations of the Lucena bank were suspended (6 tsn August 15,1966).

The vice-president explained that because there was a run the bank its assets were exhausted, andso the check sent by Hernandez, which check was drawn against the Lucena bank, could not beaccepted (16, 21-24 tsn August 15, 1966).

The vice-president said that when Hernandez presented the check, the Lucena bank was no longerin a position to honor withdrawals and that had Hernandez paid cash, his payment would have beenaccepted. To honor the check would have been tantamount to allowing a depositor (San PabloColleges) to make a withdrawal but the Lucena bank could not entertain withdrawals without theconsent of the Central Bank examiners (26-28 tsn). Payment by check was a disbursement (31 tsn).

Apparently, the vice-president did not take the trouble of asking the Central Bank examiners whetherthe payment by check made by Hernandez could be accepted. Hernandez himself who should haveknown that the bank was a distressed bank which had suspended operations and which was underthe supervision of Central Bank examiners, did not bother to take up his problem with the saidexaminers.

Hernandez, in his letter of October 18, 1961, again asked the bank when he could deliver the check.The executive vice-president, in his reply of October 24, told Hernandez that the bank could not yethonor the check because it had not resumed its banking operations; that it was awaiting the outcomeof a case filed by the bank against the Central Bank; that it might reopen in January, 1962, and that,anyway, the loan would not be due until March 21, 1962.

Hernandez sent another letter dated February 1, 1962. Finally, he enclosed the original check (dulyendorsed) with his letter to the bank dated March 7, 1962, which was sent by registered mail andspecial delivery. That letter of March 7, together with the check, was returned to Hernandez becausethe bank's manager was allegedly in Manila. Undeterred, Hernandez again mailed the check to thebank on April 25, with the request that his mortgage be cancelled.

In the meantime, the Monetary Board had decided to liquidate the Lucena Bank. The Governor of

the Central Bank in a letter dated February 8, 1962 enjoined the Lucena bank from transactingbusiness and advised it to turn over its assets, documents and records to the chief bank examiner.The bank building was sealed.

The following notice was posted at the entrance of the building:

This bank is temporarily closed pending final decision of the courts as to its status.Payments of loans would be accepted; meanwhile, no payments of withdrawals


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against deposits can be made. Please transact business with the Central Bank'srepresentatives only.

To head off the liquidation, the Lucena Bank filed with the Court of First Instance of Lucena City acomplaint dated February 12, 1962, praying that the Central Bank be enjoined from liquidating thesaid bank. On February 14, the court issued an ex partepreliminary injunction which it dissolved ten

days later (civil Case No. 6471; Rural Bank of Lucena, Inc. vs. Arca, L-21146, September 20, 1965,15 SCRA 66).

On February 14, 1962, the Manila court rendered a decision in Civil Case No. 47345, restraining theenforcement of the Monetary Board resolution, which required the Lucena bank to undertake areorganization and to curtail its operations. The Central Bank appealed. (This Court reversed thatdecision and dismissed the complaint for injunction. Rural Bank of Lucena, Inc. vs. Central Bank, L-19621, November 29, 1969, 30 SCRA 628).

To implement the resolution of the Monetary Board for the Liquidation of the Lucena bank, theCentral Bank, pursuant to section 29 of its charter and on the assumption that the Lucena bank wasinsolvent, filed with the Court of first Instance of Manila a petition dated March 27, 1962 for

assistance and supervision in the liquidation of the Lucena bank (Civil Case No. 50019).

Acting on that petition, the Court of First Instance of Manila issued an order dated march 28, 1963,directing the Lucena bank to turn over its assets to the Central Bank's authorized representative.

The Monetary Board in its Resolution No. 426 dated April 2, 1963 designated the Superintendent ofBanks or his duly authorized representative to take charge of the assets of the Lucena bank.

The Board in its resolution of November 27, 1963 ordered the Superintendent of Banks to convertthe assets of the Lucena bank to money. The Lucena bank, by means of certiorari sought to annulthe liquidation proceeding . This Court denied its petition (Rural Bank of Lucena, Inc. vs. Arca, L-21146, September 20, 1965, 15 SCRA 66).

Among the accounts receivable of the Lucena bank inventoried by the Central Bank's representativewas the account of Hernandez- In a letter dated October 29, 1963 Hernandez informed the CentralBank that he had sent to the Lucena bank on April 25, 1962 the chock for P6,000. He againrequested that his mortgage be cancelled.

The Associate Superintendent of Banks in his answer dated December 9, 1963 returned the chockto Hernandez and informed him that, according to the Lucena bank's executive vice-president, thecheck could not be applied to the payment of Hernandez' loan because the bank was already closedwhen he received the check. Moreover, the chock was drawn against the current deposits of the SanPablo Colleges in the Lucena bank which was in the process of liquidation. Hernandez was advisedto settle his account by paying cash or by means of a chock drawn against a bank other than theLucena bank.

Disregarding that suggestion, Hernandez announced to the Associate Superintendent of Banks inhis letter of December 16, 1963 that he was going to deposit the said check in the court of FirstInstance of Lipa City on or before December 26, 1963.

Instead of filing a consignation complaint, Hernandez enclosed the check with his letter datedJanuary 2, 1964 to the clerk of court of the Court of First Instance at Lipa City. That letter wasreceived in court on January 6, 1964. Hernandez wrote a letter dated January 11, 1964 informing the


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Associate Superintendent of Banks of the judicial deposit of the check. Copies of that letter werefurnished the Lucena bank and the San Pablo Colleges.

It was only on October 12, 1964when Hernandez and his wife filed an action in the Court of FirstInstance at Lipa City to compel the Rural Bank of Lucena, Inc., the Central Bank as liquidator, andJose S. Martinez as receiver, to accept the check and to execute the cancellation of the real estate

mortgage. The Hernandez spouses also asked for moral damages in the amount of P10.000andattorney's fees of P3,000 (Civil Case No. 1615).

On October 20, 1964 the Central Bank filed a motion to dismiss. It contended that there wasimproper venue because, as the action allegedly involved title to real property, it should have beeninstituted in Quezon City where the encumbered lots are situated. It Mother contended that since theLucena bank is under liquidation and is in the hands of a receiver, its properties and assets arein custodia legisand may, therefore, be reached only by motion or petition in Civil Case No. 50019of the Court of First Instance of Manila. The motion was denied.

To complete the facts, it should be stated that the counsel for the Lucena bank on January 30, 1967offered to compromise the case by stipulating that the Central Bank would apply the check in

question to the mortgage debt of Hernandez if the balance of the deposit of the San Pablo Collegeswould be enough to cover the amount of the check of P6,000 and that, by virtue of that compromise,the complaint and counterclaim would be dismissed.

That conditional and equivocal compromise offer fizzled out, because the lawyers of Hernandez andthe Central Bank did not assent to it.

After trial, the lower court rendered an amended decision dated October 31, 1967, ordering theLucena Bank or the Central Bank, as liquidator, to accept the honor the check, to cancel themortage, and to pay Hernandez spouses (P25,000as moral damages (not P10,000 as prayed forthe complaint) plus P1,000 as attorney's fees.

The Lucena bank, the Central Bank and its employee, the receiver, appealed to this Court.

The Central Bank contends that the trial court erred (1) in not holding that the venue was improperlylaid; (2) in not holding that it had no jurisdiction because the Hernandez spouses should haveventilated their claim in the liquidation proceeding pending in the Court of First Instance of Manila.instead of filing a separate action in the Court of First Instance at Lipa City; (3) in not holding thatthere was no valid consignation, (4) in awarding moral damages and attorney's fees, and (5) inordering execution pending appeal in spite of the tact that the assets of the Lucena bank are incustodia legis or in the custody of the liquidation court and the receiver appointed by it.

On the issue of venue, defendants-appellants contend that the action of the Hernandez spouses tocompel them to honor the check in question and to cancel the mortgage on their two lots is a realaction affecting title to real property which should have been filed in the Court of First Instance of

Rizal at Quezon City where the mortgaged lots are situated.

Section 2(a), Rule 4 of the Rules of Court provides that "actions affecting title to, or for recovery ofpossession, or for partition or condemnation of, or foreclosure of mortgage on, real property, shall becommenced 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 mentionan action for the cancellation of a real mortgage. In the instant case, the action is primarily to compelthe mortgagee to accept payment of the mortgage debt and to release the mortgage.


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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. Themortgagee has, not foreclosure the mortgage, Plaintiffs' title is not in question. They are inpossession 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 theelection of the plaintiff (Sec. 2[b], Rule 4).

The plaintiffs in their brief confound a real action with an action in rem and a personal action with anaction in personam. They argue that their action is not an action in rem and, therefore, it could bebrought in a place other than the place where the mortgaged lots are located.

A real action is not the same as an action in rem and a personal action is not the same as anaction in personam.

In a personal action, the plaintiff seeks the recovery of personal property, the enforcement of acontract 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 orfor 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 anaction 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 inrem.

In this case, the plaintiffs alleged in their complaint that they were residents of San Juan, Batangas,which in their brief (They characterize as their legal residence and which appears to be their domicileof origin. On the other hand, it is indicated in the promissory note and mortgage signed by them andin the Torrens title covering the mortgaged lots that their residence is at 11 Chicago Street, Cubao,Quezon City, which apparently is the place where the said lots are located, The plaintiffs did nottestify during the trial. So, they have no testimony in the records as to their actual residence.

We hold that the trial court should have dismissed the action because the venue thereof wasimproperly laid in Batangas. The term "resides" in section 2[b] of Rule 4 refers to the place of actualresidence or domicile.)

San Juan, Batangas might be the place where the plaintiffs have their domicile or legal residence butthere is no question that 11 Chicago Street, Cubao, Quezon City is their place of abode or the placewhere they actually reside. So, the action in this case, which is a personal action to compel thedefendants to honor the check in question and to Cancel the mortgage, should have been filed inQuezon City if the plaintiffs intended to use their residence as the basis for their choice of venue.

Thus, it was held that venue was improperly laid in a case where plaintiff Jose Coloma filed acomplaint in the Court of First Instance of Ilocos Norte, because he was allegedly a resident of SanNicolas, Ilocos Norte, where he was born and reared, but his actual residence was at 57 K-6thKamias, 486 Barangka Drive, Mandaluyong, Rizal (Koh vs. Court of Appeals, L-40428, December17, 1975; 70 SCRA 298).

In Gracia Fule vs. Court of Appeals,L-404502, November 29, 1976, 74 SCRA 189, it was held thatan intestate proceedings 9 for the settlement of the estate of the deceased Amado G. Garcia was


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improperly filed in the Court of First Instance of Laguna. The deceased was allegedly domiciled inCalamba, Laguna. He was a delegate of the first district of Laguna to the constitutional convention.However, at the time of his death he was actually a resident of Quezon City. Hence. the propervenue of the intestate proceeding was Quezon City.

In the foregoing discussion. it is assumed that the plaintiff could bring a separate action to compel

the defendants honor the check in question in spite of the fact that the Lucena bank is underliquidation in Civil Case No. 50019 of the Court of First Instance of Manila.

The Central Bank contends that such a separate action was not maintainable and that theHernandez spouse should have ventilated in the liquidation proceeding their claim that they hadalready paid their mortgage debt by means of the check issued by the San Pablo Colleges and thattheir mortgage should be cancelled.

The Central Bank points out that the redemption action the Hernandez spouses would ultimatelyaffect the funds and property of the Lucena Bank. Hence, the liquidation court is the competenttribunal to pass upon the issue as to whether the Hernandez spouses could validly pay their mortagedebt by means of the check of the San Pablo Colleges.

On the other hand, the Hernandez spouses argue that their action in the Court of First Instance atLipa City "deals with a sum of money which is still not in the possession, custody, andadministration" of the Central Bank and the receiver; that their action had "nothing to do with thefunds and property" held by the receiver; that the Lucena bank had not lost its juridical personalityafter it was placed under liquidation, and that the issue as to whether the Lucena bank should haveaccepted the chock in question was "not in anyway connected with the causes and grounds underwhich the liquidation proceedings were instituted nor with the administration of the property andfunds under liquidation"

Those contentions of the Hernandez spouse are untenable. The trial court did not rule squarely onthe Jurisdictional issue raised by the Central Bank and the receiver

We hold that the liquidation court or the Manila court has exclusive jurisdiction to entertain the claimof the Hernandez spouses that their mortgage obligation had already been extinguished by means oftheir tender of the check issued by the San Pablo Colleges.

At the time the Hernandez spouses filed in 1964their consignation complaint the Lucena bank wasalready under liquidation. The Manila court in its order of March 28,1963 had ordered the officers ofthe Lucena bank to turn over to the Central Bank or to the receiver, the Superintendent of Banks, allof its assets, properties and papers. Among the assets turned over to the receiver was theoutstanding or unpaid account of the Hernandez spouses which appears in the inventory as: "393.Hernandez, Francisco St., 11 Chicago St., Cubao, Q.C. TCT-34262 3/21/61, P6,000.00" (Exh. 4-CB).

And among the papers or obligations turned over to the receiver was Ledger No. 056 evidencing thedeposit of the San Pablo Colleges in the Lucena bank in the sum of P11,890.16. against which thecheck for P6,000 was drawn. It was that check which the Hernandez spouses had issued to pay themortgage debt to the Lucena bank.

Under the section 29 of the Central Bank Act, republic Act No. 265, when the Monetary Board, uponinformation submitted by the Superintendent of the Bank, finds a bank to be insolvent, it shall beforbid the bank to do the business and it shall take care of its assets according to law.


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In that case, if the Monetary Board finds out that the insolvent bank cannot resume business withsafety to its creditors, it shall through the Solicitor General, file a petition in the Court of FirstInstance, praying for the assistance and supervision of the court in the liquidation of the bank'saffairs. Thereafter, the Superintendent of Banks, upon order of the Monetary Board and under thesupervision of the court, shall convert to money the bank's assets. "Subido es que uno de losdeberes primordiales de un depositario es hacerse cargo immediatemente de todol el activo y

pasivo de un banco" (Luy Lam & Co. vs. Mercantile Bank of China, 71 Phil. 573, 576).

The fact the insolvent bank is forbidden to do business, that its assets are turn over to theSuperintendent of Banks, as a receiver, for conversation into cash, and that its liquidation isundertaken with judicial intervention means that, as far as lawful and practicable, all claims againstthe insolvent bank and that the liquidation court should be filed in the liquidation proceeding.

The judicial liquidation is intended to prevent multiplicity of actions against the insolvent bank. Thelawmaking body contemplated that for convenience only one court, if possible, should pass upon theclaims against the insolvent bank and that the liquidation court should assist the Superintended ofBanks and control his operations.

In the course of the liquidation, contentious cases might arise wherein a full-dress hearing would berequired and legal issues would have to be resolved. Hence, it would be necessary in justice to allconcerned that a Court of First Instance should assist and supervise the liquidation and should actumpire and arbitrator in the allowance and disallowance of claims.

The judicial liquidation is a pragmatic arrangement designed to establish due process andorderliness in the liquidation of the bank, to obviate the proliferation of litigations and to avoidinjustice and arbitrariness.

Thus, in the liquidation before the war of the insolvement Mercantile Bank of china, various claimswere adjudicated by the liquidation Court, which was the court of First Instance of Manila, pursuantto section 1639 of the Revised Administrative Code, from which section 29 pf the Central Bank Lawwas taken. (SeeIn reLiquidation of Mercantile Bank of China: Tan Tiong Tick vs. American

Apothecaries Co., 65 Phil. 414; Pacific Coast Biscuit Co. vs Chinese Grocers Association, 65 Phil.375; Fletcher American National Bank vs. Ang cheng Lian, 65 Phil. 385; Pacific Commercial Co. vs.

American Apothecaries Co., 65 Phil. 429; Gopoco Grocery vs. Pacific Coast Biscuit co., 65 Phil. 443;Chinese Grocers' Association vs. American Apothecaries Co., 65 Phil. 395; and Yu Ping Kun, 65Phil. 410).

There is a ruling that, although the taking over of a bank by state officials for liquidation does notdissolve the bank, a court has no jurisdiction (after such takeover) to entertain an action or to rendera judgment against the bank (9 C.J.S. 852, note 38 citing Bushnell vs. F.W. Woolworth co., 241 Pac.738. 112 Okl. 297; State vs. Quigley, 220 Pac. 918, 93 Okl. 296).

It has been held that an insolvent bank, which was under the control of the finance commissioner for

liquidation, was without power or capacity to sue or be sued, prosecute or defend or otherwisefunction except through the finance commissioner or liquidator (Wauer vs. Bank of Pendleton, 65S.W. 2nd

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Civ Pro Cases - Venue