GR 152808; (September, 2005) (Digest)
G.R. No. 152808 September 30, 2005
ANTONIO T. CHUA, Petitioner, vs. TOTAL OFFICE PRODUCTS AND SERVICES (TOPROS), INC., Respondent.
FACTS
Respondent TOPROS filed a complaint for annulment of loan and real estate mortgage contracts against petitioner Antonio T. Chua before the Regional Trial Court (RTC) of Pasig City. TOPROS alleged the contracts were fictitious, as it never authorized its president, John Charles Chang, Jr., to enter into the transaction involving a ₱10.4 million loan secured by a mortgage on two Quezon City parcels of land. Petitioner moved to dismiss on grounds of improper venue, contending the action affected title to the mortgaged properties and thus should have been filed in Quezon City where the lands are situated.
The RTC denied the motion, ruling the action was personal and venue was properly laid in Pasig, where the parties reside. The Court of Appeals dismissed petitioner’s subsequent certiorari petition, applying Hernandez v. Rural Bank of Lucena, Inc., which held an action for cancellation of a real estate mortgage is personal if the mortgage has not been foreclosed and the mortgagor remains in possession, as title and possession are not disputed.
ISSUE
Whether the action for annulment of the loan and mortgage contracts is a personal action or a real action, and whether John Charles Chang, Jr. is an indispensable party.
RULING
The Supreme Court denied the petition, affirming the appellate court’s decision. The action is a personal action. The Court explained that an action to annul a loan and its accessory real estate mortgage is personal, as it primarily seeks to nullify the contractual obligations between the parties rather than to recover title to or possession of the mortgaged property. The ruling in Hernandez is controlling: where the mortgage has not been foreclosed and the mortgagor remains in possession, the action does not directly affect title or possession, making it personal. The cited case of Pascual v. Pascual is inapplicable, as it involved a direct action for recovery of real property based on a claim of a fictitious sale, which is inherently a real action.
Regarding the indispensable party issue, John Charles Chang, Jr. is not indispensable. He signed the contracts merely as a representative of TOPROS, and any rights or liabilities arising from the contracts bind only the principal parties, petitioner and TOPROS. His interest is separable, and a judgment between the direct parties can achieve complete justice without his participation.