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FIRST SARMIENTO PROPERTY HOLDINGS v. PHILIPPINE BANK OF COMMUNICATIONS

FACTS:

The case involves a Petition for Review filed by First Sarmiento Property Holdings, Inc. (First Sarmiento) against the Regional Trial Court's dismissal of its Complaint for annulment of real estate mortgage. On June 19, 2002, First Sarmiento obtained a loan from Philippine Bank of Communications (PBCOM), secured by a real estate mortgage over 1,076 parcels of land. PBCOM filed a Petition for Extrajudicial Foreclosure of Real Estate Mortgage on January 2, 2006, claiming that First Sarmiento failed to pay the loan and interest. First Sarmiento attempted to file a Complaint for annulment of real estate mortgage in December 2011 but was refused acceptance by the Clerk of Court due to lack of tax declarations. On December 29, 2011, the Executive Judge granted First Sarmiento's motion, ruling that the action was incapable of pecuniary estimation. However, on the same day, the mortgaged properties were auctioned and sold to PBCOM. First Sarmiento then filed a Complaint for annulment of real estate mortgage on January 2, 2012, seeking to enjoin the foreclosure proceedings. The Regional Trial Court dismissed the Complaint on April 3, 2012, for lack of jurisdiction. First Sarmiento's motion for reconsideration was denied on July 25, 2012.

The petitioner filed a Complaint for annulment of real estate mortgage against the respondent. The petitioner argued that the subject of their complaint was incapable of pecuniary estimation because they did not seek to recover ownership or possession of the mortgaged properties. They claimed that they already had ownership and possession of the properties when they filed the Complaint. The petitioner filed its appeal directly with the Court as it believed that the issue of jurisdiction is a pure question of law. The petitioner contended that jurisdiction is based on the cause of action, the subject matter or thing, the parties involved, and the remedy sought. They argued that jurisdiction over the subject matter should be determined by examining the material allegations of the complaint and the relief sought. The petitioner cited relevant laws, such as the Judiciary Reorganization Act of 1980, which provided for the jurisdictional division between the first and second level courts based on the complexity and value of the cases. The petitioner also referred to previous cases that discussed jurisdiction on whether the subject matter of an action is capable of pecuniary estimation.

The petitioner in this case filed a complaint against respondent PBCOM questioning the validity of a loan contract with a real estate mortgage. The petitioner alleged that it never received the proceeds of the loan agreement amounting to P100,000,000. The petitioner sought the application of a preliminary injunction and temporary restraining order to halt the foreclosure of properties in connection with the loan agreement. The petitioner did not pray for the reconveyance of the properties or assert ownership or possession over them. The petitioner argued that the case falls under the jurisdiction of the regional trial court as it involves the determination of damages and other factors beyond the recovery of monetary claims.

ISSUES:

  1. Whether the case involves the right to recover a sum of money or something other than the right to recover a sum of money.

  2. Whether the action is a real action involving title to real property.

  3. Whether the action for cancellation of mortgage is one incapable of pecuniary estimation.

  4. Whether the trial court acquired jurisdiction over the case.

  5. Whether the certificate of sale was registered with the Registry of Deeds.

  6. Whether the Regional Trial Court obtained jurisdiction over the Complaint for annulment of real estate mortgage.

  7. Whether the case should have been dismissed due to non-payment of correct docket fees.

  8. Whether the Regional Trial Court Order, which extended the temporary restraining order indefinitely, was illegal.

  9. Whether the extension of the temporary restraining order (TRO) indefinitely is valid.

  10. Whether a TRO can be extended to take the place of a writ of preliminary injunction.

  11. Whether the action for resolution and/or nullification of the Deed of Assignment and Conveyance in this case is capable of pecuniary estimation.

  12. Whether the proper docket fees were paid for the action.

  13. Whether or not the trial court erred in dismissing the complaint for lack of jurisdiction.

  14. Whether or not the trial court erred in dismissing the complaint due to non-payment of the correct filing fees.

RULING:

  1. The case involves something other than the right to recover a sum of money as the primary relief sought is the validity of the loan contract and not the reconveyance of the foreclosed properties.

  2. The action is not a real action involving title to real property as the plaintiff did not assert its ownership or possession over the foreclosed properties.

  3. The action for cancellation of mortgage is one incapable of pecuniary estimation.

  4. The trial court acquired jurisdiction over the case as the respondents paid the docket fees.

  5. The certificate of sale was not registered with the Registry of Deeds since it was restrained from doing so.

  6. The Regional Trial Court obtained jurisdiction over the Complaint for annulment of real estate mortgage as the docket fees were paid as computed by the clerk of court upon the direction of the Executive Judge.

  7. Even if the correct docket fees were not paid, the case should not have been dismissed. Instead, the payment of additional docket fees should have been made a lien on the judgment award. There was no evidence of bad faith or intention to defraud the government that would have merited the dismissal of the Complaint.

  8. The Regional Trial Court Order, which extended the temporary restraining order indefinitely, was illegal. A temporary restraining order can only be issued by a trial court in two instances: when great or irreparable injury would result to the applicant before the application for a writ of preliminary injunction can be heard, or when the matter is of extreme urgency and the applicant will suffer grave injustice and irreparable injury. The temporary restraining order may only have an effectivity of 20 days or 72 hours, depending on the circumstances, and cannot be extended.

  9. The extension of the TRO indefinitely is not valid. A TRO is intended to have a limited lifespan and is deemed automatically vacated upon the expiration of 72 hours or 20 days, depending on the circumstances. In this case, the TRO expired due to the absence of a preliminary injunction.

  10. A TRO cannot be extended indefinitely to take the place of a writ of preliminary injunction. A TRO is a temporary remedy meant to preserve the status quo until the application for a preliminary injunction can be heard. Once the application for a preliminary injunction is denied or not acted upon within the allotted time (20 days), the TRO is deemed automatically vacated.

  11. The action for resolution and/or nullification of the Deed of Assignment and Conveyance is not capable of pecuniary estimation. The principal remedy sought by the petitioner was the resolution of the contract, and the conveyance and transfer of possession of the real property was only incidental to the principal relief. Therefore, the action should be considered incapable of pecuniary estimation.

  12. The respondent erred in treating the action as a real action simply because it included a prayer for the conveyance of real property. The proper docket fees for an action incapable of pecuniary estimation, such as this case, should be computed based on the assessed or estimated value of the properties involved.

  13. The Supreme Court held that the trial court erred in dismissing the complaint for lack of jurisdiction. It ruled that subject matter jurisdiction should be determined based on the allegations in the complaint and the relief sought, without reference to extraneous facts or evidence still to be presented. In this case, the complaint prayed for the annulment of the real estate mortgage and not for the recovery or reconveyance of the mortgaged properties. The evidence on record supported the petitioner's claim that it was still the registered owner of the properties when it filed the complaint, thus, there was no lack of jurisdiction.

  14. The Supreme Court also found that the trial court erred in dismissing the complaint due to non-payment of the correct filing fees. It emphasized that where the assessed docket fees have been paid and the assessment turns out to be insufficient, the court still acquires jurisdiction over the case, subject to payment of the deficiency assessment. The exception to this rule is when the deficiency in docket fees is accompanied by bad faith and an intention to defraud the government. In this case, the petitioner had paid the assessed docket fees, which negated any bad faith or intent to defraud the government.

PRINCIPLES:

  • The jurisdiction of municipal courts or courts of first instance depends on the amount of the claim, except when the basic issue is something other than the right to recover a sum of money.

  • Real actions involving title to real property are cognizable exclusively by courts of first instance.

  • Actions for cancellation of mortgage are incapable of pecuniary estimation.

  • Registration of the certificate of sale is necessary for the conveyance of the property to the new owner and to start the period of redemption.

  • The payment of docket fees is necessary for a court to obtain jurisdiction over a case.

  • Non-payment of correct docket fees does not automatically warrant dismissal of the case; the payment of additional fees may be required as a lien on the judgment.

  • Temporary restraining orders can only be issued in specific instances and have limited effectivity periods. They cannot be extended beyond their prescribed duration.

  • Preliminary injunction and temporary restraining order (TRO) are distinct remedies. A preliminary injunction is an order granted at any stage of an action or proceeding, requiring a party or a court, agency or person to perform or refrain from performing a particular act. It is an extraordinary remedy that preserves or maintains the status quo until the merits of the case can be heard. A TRO, on the other hand, is meant to preserve the status quo until the hearing of the application for a preliminary injunction.

  • A TRO has a limited lifespan and is automatically vacated upon the expiration of 72 hours or 20 days, depending on the circumstances. It cannot be extended indefinitely to take the place of a preliminary injunction.

  • Lower courts must strictly comply with the rules regarding the issuance of injunctive reliefs and must not interchange the remedies of TRO and preliminary injunction. Ignorance or defiance of these remedies, particularly the sunset clause of a TRO, is a disservice to the public and may be seen as favoritism towards a party.

  • In determining whether an action is capable or incapable of pecuniary estimation, the nature of the principal action or remedy sought must be considered.

  • If the principal relief sought is the recovery of a sum of money or real property, then the action is capable of pecuniary estimation. However, if the principal relief sought is not for the recovery of money or real property but the money claim is only a consequence of the principal relief, then the action is incapable of pecuniary estimation.

  • The true objective or ultimate motive of the complaint should not be used to determine subject matter jurisdiction, as it would require the judge to speculate on the defenses of the plaintiff beyond the material allegations in the complaint. Subject matter jurisdiction should be based on the textual basis in the complaint and the relief sought.

  • Subject matter jurisdiction should be determined based on the allegations in the complaint and the relief sought, without reference to extraneous facts or evidence still to be presented.

  • Where the assessed docket fees have been paid and the assessment turns out to be insufficient, the court still acquires jurisdiction over the case, subject to payment of the deficiency assessment, unless there is bad faith or an intention to defraud the government.