G.R. No. L-41641 September 30, 1976
THE GOOD DEVELOPMENT CORPORATION, petitioner, vs. THE HON. EDUARDO C. TUTAAN, GUILLERMO V. DE LOS REYES AND MARCELINA MARCELO, respondents.

FACTS

Petitioner Good Development Corporation filed a complaint in the Court of First Instance of Rizal to recover from private respondents Guillermo De los Reyes and Marcelina Marcelo the sum of P1,520.00 plus interest and attorney’s fees. The complaint included an alternative prayer for the foreclosure of a chattel mortgage executed by the respondents covering personal properties valued at P15,340.00 and located in Meycauayan, Bulacan. Two co-makers of the promissory note were also named as defendants. The private respondents filed an answer, and later moved to dismiss the complaint for lack of jurisdiction.
The respondents argued that the principal monetary claim, even with interest and fees, did not exceed P10,000.00, placing it within the exclusive original jurisdiction of the municipal court. They further contended that if the action was truly for foreclosure, it should have been filed in Bulacan where the mortgaged chattels were located. The respondent court granted the motion to dismiss, reasoning that the inclusion of the co-makers indicated the suit was primarily for a sum of money, and the total claim fell below the jurisdictional amount for the CFI.

ISSUE

Whether the Court of First Instance had jurisdiction over the complaint, which sought a monetary claim below its jurisdictional threshold but included a prayer for foreclosure of a chattel mortgage on properties valued above that threshold.

RULING

The Supreme Court granted the petition and set aside the orders of dismissal. The Court clarified that the determinative factor for jurisdiction is the nature of the action as pleaded. Although the complaint sought to recover a sum below P10,000.00, its essential character was defined by its alternative prayer for the foreclosure of a chattel mortgage. Citing the precedent in Seno v. Pastolante, the Court held that when an action involves the foreclosure of a chattel mortgage on personal properties valued at more than P10,000.00, jurisdiction is vested in the Court of First Instance, regardless of the incidental monetary claim.
The legal logic is that foreclosure actions are in rem proceedings affecting property rights, distinct from simple collection suits in personam. The valuation of the mortgaged chattels (P15,340.00) controlled the jurisdictional determination, not the smaller outstanding loan balance. The inclusion of co-makers did not alter this fundamental nature, as they were proper parties to the foreclosure proceeding due to their liability on the secured obligation. Consequently, the respondent CFI had jurisdiction and erred in dismissing the case. The Court directed the CFI to resume proceedings.