259867270-far-east-bank-v-spouses-plaza.docx 4c512t

In the syllabus, this case falls under the topic Right of Action v Cause of Action but there is close to nothing in this case in connection with that topic. In the Arellano Reviewer, this case is under Real Action v Personal Action which is really what the case was all about. Thank you.

FAR EAST BANK AND TRUST CO V SPOUSES PLAZA July 25, 2003 | Bellosillo, J. | Petition for Review | Right of Action v Cause of Action PETITIONER: Far East Bank and Trust Company (FEBTC) and/or Bank of the Philippine Islands RESPONDENT: Spouses Romulo and Wilma Plaza SUMMARY: The Spouses Plaza file a civil suit to compel the Banks to accept their payment to cancel the mortgage over their property constituted to secure a Charlie Ang’s loan. The Banks file a Motion to dismiss the the complaint on the ground of lack of jurisdiction for nonpayment of docket fees. The Banks assert that the action is a real action while the Spouses maintain that their action is a personal one as the possession or ownership of the property is not in question. DOCTRINE: A right of action is the right of the plaintiff to bring an action and to prosecute that action to final judgment. “A cause of action is an act or omission by which a party violates a right of another.” (Rule 2, §2) Cause of Action Right of Action delict or wrong committed by the defendant right of the plaintiff to institute the action created by substantive law regulated by procedural law not affected by statute of limitations, estoppel or other affected by statute of limitations, estoppel or other circumstances circumstances

As to the Subject As to what it is founded on As to Venue

Real Action Ownership or possession of real property Privity of real estate

Personal Action Recovery of personal property, or damages are sought for breach of contract Privity of contract

In the court in whose territorial jurisdiction the property of any of its parts is located

In the court in whose territorial jurisdiction the plaintiff or any of the defendants reside at the plaintiff’s option

FACTS: 1. One Charlie Ang obtained from the Banks a loan of P2,158,000.00 secured by a mortgage over a piece of land owned by respondent-spouses. Ang later obtained more loans from the Banks covered by promissory notes amounting to P4,800,000.00. When Ang failed to pay the loans upon maturity, the Banks started proceedings to foreclose the mortgage. The Spouses offered to pay the mortgage indebtedness of P2,158,000.00 but the Banks refused to accept payment unless the spouses assumed the other obligations of Ang to them. 2. The spouses filed a civil action against Banks and Charlie Ang for release of the real estate mortgage and damages with prayer for a TRO and issuance of writ of injunction. Banks filed a motion to dismiss the complaint on the ground of lack of jurisdiction for nonpayment of docket fees. The RTC of Cebu denied the Motion to Dismiss as well as their MR. Banks filed a petition for certiorari before the CA. The appellate court dismissed the petition and MR. The Banks then filed this petition for review. 3. On 3 March 2003, the trial court issued a writ of preliminary injunction ening Banks from foreclosing the mortgage while the case before it was pending. The trial court also denied their MR. 4. In the meantime, the civil case before the trial court proceeded to the pre-trial stage where petitioners expressed their willingness to await any written offer to pay by respondents. Respondents sent a formal letter to petitioners offering to pay the mortgage indebtedness and asking the release of the real estate mortgage with a cashier’s check in that amount. Petitioners accepted the check only as partial payment without prejudice to the remaining balance of the loans. Respondents now insist that they have already paid the loans in full and that petitioners should release the mortgage in view of the payment. Petitioners already accepted the payment of P2,158,000.00 but the mortgage has not been released. ISSUE: Whether the action filed by the spouses is a real action or a personal one. – PERSONAL ACTION WoN the RTC of Cebu lacks jurisdiction over the case. – NO.

RULING: The Petition is DENIED. RATIO: The action filed by respondent-spouses before the RTC is a personal action. An action to compel the mortgagee to accept payment and for the consequent cancellation of a real estate mortgage is a personal action if the mortgagee has not foreclosed the mortgage and the mortgagor is in possession of the premises since neither the mortgagor’s title to nor possession of the property is in question. Rule 4 Section 1. Venue of real actions. - Actions affecting title to or possession of real property, or interest therein, shall be commenced and tried in the proper court which has jurisdiction over the area wherein the real property involved, or a portion thereof, is situated. Forcible entry and detainer actions shall be commenced and tried in the municipal trial court of the municipality or city wherein the real property involved, or a portion thereof, is situated. Sec. 2. Venue of personal actions. All other actions may be commenced and tried where the plaintiff or any of the principal plaintiffs resides, or where the defendant or any of the principal defendants resides, or in the case of a non-resident defendant where he may be found, at the election of the plaintiff. Contrary to petitioners’ contention, respondents do not question the validity of the real estate mortgage they entered into. In fact they uphold its validity since they are willing to pay their obligation under the contract after which the contract should then be declared without legal effect. Also, there is as yet no transfer of title from respondents to petitioners. Respondents maintain that the title remains in their name and they are still in actual physical possession of the property. There is no foreclosure yet of the mortgage. Hence, there is no title to the land to be affected by the action.