FORTUNE MOTORS, (PHILS.), INC., PETITIONER, VS. THE HONORABLE COURT OF APPEALS, METROPOLITAN BANK AND TRUST COMPANY, RESPONDENTS.

This is a petition for review on certiorari seeking the
reversal of:  (a) the July 30, 1986
decision of the Court of Appeals in AC-G.R. SP No. 09255 entitled “Metropolitan
Bank & Trust Co. v. Hon. Herminio C. Mariano, et
al.” dis­missing Civil Case No. 85-33218 entitled “Fortune Motors (Phils.) Inc. v. Metropolitan Bank & Trust Co.” filed in
the Regional Trial Court of Manila, Branch IV for improper venue and (b) the
resolution dated October 30, 1986
denying petitioner’s motion for reconsideration.

The undisputed facts of the case are as follows:

On March 29, 1982 up to January 6, 1984, private respondent
Metropolitan Bank extended various loans to petitioner Fortune Motors in the
total sum of P32,500,000.00 (according to the borrower; or P34,150,000.00
according to the Bank) which loan was secured by a real estate mort­gage on the
Fortune building and lot in Makati, Rizal.  (Rollo, pp. 60-62)

Due to financial difficulties and the onslaught of economic
recession, the petitioner was not able to pay the loan which became due.  (Rollo, p. 62)

For failure of the petitioner to pay the loans, the respondent
bank initiated extrajudicial foreclosure proceedings.  After notices were served, posted, and
published, the mortgaged property was sold at public auction for the price of
P47,899,264.91 to mortgagee Bank as the highest
bidder.  (Rollo,
p. 11)

The sheriff’s certificate of sale was registered on October 24, 1984 with the one-year
redemption period to expire on October
24, 1985.  (Rollo, p. 12)

On October 21, 1985, three days before the expiration of the
redemption period, petitioner Fortune Motors filed a complaint for annulment of
the extrajudicial foreclosure sale alleging that the foreclosure was premature
because its obligation to the Bank was not yet due, the publication of the
notice of sale was incomplete, there was no public auction, and the price for
which the property was sold was “shockingly low”.  (Rollo, pp. 60-68)

Before summons could be served private respondent Bank 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 mortgage is
sit­uated in Makati, therefore the action to annul
the foreclosure sale should be filed in the Regional Trial Court of Makati.  (rollo, pp. 67-71-A)

The motion was opposed by petitioner Fortune Motors alleging 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.  (Rollo, pp. 72-73)

On January 8, 1986 an order was issued by the lower court
reserving the resolution of the Bank’s motion to dismiss until after the trial
on the merits as the grounds relied upon by the defendant were not clear and
indubitable.  (Rollo,
p. 81)

The Bank filed a motion for reconsideration of the order dated January 8, 1986 but it was denied by
the lower court in its order dated May
28, 1986.  (Rollo, Annex “L” pp. 93-96; Annex “N”
p. 99)

On June 11, 1986
the respondent Bank filed a petition for certiorari and prohibition in
the Court of Appeals.  (Rollo, Annex “O” pp. 100-115)

And on July 30, 1986,
a decision was issued by the Court of Appeals, the dispositive
part of which reads as follows:

“WHEREFORE, the petition for certiorari and prohibition
is granted.  The complaint in the Civil
Case No. 85-33218 is dismissed without prejudice to its being filed in the
proper venue.  Costs
against the private respondent.”

SO ORDERED.  (Rollo, p. 15)

A motion for reconsideration was filed on August 11, 1986 on the said decision and on October 30, 1986 a resolution was
issued denying such motion for reconsideration.  (Rollo, Annex
“O” pp. 121-123; Annex “S” p. 129)

Hence,
the petition for review on certiorari.

On June 10, 1987
the Court gave due course to the petition, required the parties to file their
respective memoranda within twenty (20) days from the notice hereof, and pay
deposit for costs in the amount of P80.40.

Both parties have filed their respective memoranda, and the case
was submitted for Court’s resolution in the resolution dated December 14, 1987.  (Rollo, Metrobank’s Memorandum pp. 45-59; petitioner’s memorandum
pp. 130-136; Res. p. 138)

The only issue in this case is whether petitioner’s action for
annulment of the real estate mortgage extra­judicial foreclosure sale of Fortune
Building is a personal action or a
real action for venue purposes.

In a real action, the plaintiff seeks the recovery of real
property, or as indicated in Sec. 2 (a) of Rule 4, a real action is an action
affecting title to real property, or
for the recovery of possession, or for the part­ition or condemnation of, or
foreclosure of a mortgage on real property. 
(Comments on the Rules of Court by Moran, Vol. I,
p. 122)

Real actions or actions
affecting title to, or for the recovery of possession, or for the partition or
condemnation of, for foreclosure of mortgage on real
property, must be instituted in the Court of First Instance of the province
where the property or any part thereof lies. 
(Enriquez v. Macadaeg, 84 Phil. 674, 1949; Garchitorena v. Register
of Deeds, 101 Phil. 1207, 1957)

Personal actions upon the
other hand, may be institu­ted in the Court of First
Instance 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 (Sec. 1, Rule 4, Revised Rules of Court).

A prayer for annulment or
rescission of contract does not operate to efface the true objectives and
nature of the action which is to recover real property.  (Inton, et al., v. Quintan, 81 Phil. 97, 1948)

An action for the
annulment or rescission of a sale of real property is a real action.  Its prime objective is to recover said real
property.  (Gavieres
v. Sanchez, 94 Phil. 760 1954)

An action to annul a real
estate mortgage foreclosure sale
is no different from an action to annul a private sale of real property.  (Munoz v. Llamas, 87 Phil. 737, 1950)

While it is true that petitioner does not directly seek the
recovery of title or possession of the property in question, his action for
annulment of sale and his claim for damages are closely intertwined with the
issue of ownership of the
building which, under the law, is considered immovable property, the recovery
of which is petitioner’s primary objective. 
The prevalent doctrine is that an action for the annulment or rescission
of a sale of real property does not operate to efface the fundamental and prime
objective and nature of the case, which is to recover said real property.  It is a real action.  Respondent Court, therefore, did not err in
dismissing the case on the ground of improper venue (Sec. 2, Rule 4) which was
timely raised (Sec. 1, Rule 16).  (Punzalan,
Jr. v. Vda. de Lacsamana, 121 SCRA 336, [1983]).

Thus, as aptly decided by
the Court of Appeals in a decision penned by then Court of Appeals Associate
Justice now Associate Justice of the Supreme Court
Carolina C. Grino-Aquino, the pertinent portion
reads: “Since an extra­judicial foreclosure of real property results in a
conveyance of the title of the property sold to the highest bidder at the sale,
an action to annul the foreclosure sale is necessarily an action affecting the title of
the property sold.  It is therefore a
real action which should be commenced
and tried in the province where the property or part thereof lies.”

PREMISES CONSIDERED, the instant petition is DENIED for lack of
merit and the assailed decision of the respond­ent Court of Appeals is
AFFIRMED.

SO ORDERED.

Melencio-Herrera, (Chairman),
Padilla, Sarmiento, and
Regalado, JJ., concur.