Foreclosure: Real action or incapable of pecuniary estimation?

In Roldan v. Spouses Barrios (G.R. No. 214803, April 23, 2018), the Regional Trial Court (RTC) dismissed the foreclosure cases finding that, being a real action and the assessed value of the mortgaged property being only P13,380.00, it is the first level court (Municipal/Metropolitan Trial Court or MTC) which has jurisdiction over the case and not the RTC.

Jurisdiction over the subject matter is the power to hear and determine cases of the general class to which the proceedings in question belong. It is conferred by law and an objection based on this ground cannot be waived by the parties.[1] To determine whether a court has jurisdiction over the subject matter of a case, it is important to determine the nature of the cause of action and of the relief sought.[2]Batas Pambansa Blg. (BP) 129 as amended by Republic Act No. (RA) 7691 pertinently provides for the jurisdiction of the RTC and the first level courts as follows:
Sec. 19. Jurisdiction in civil cases. - Regional Trial Courts shall exercise exclusive original jurisdiction:

1. In all civil actions in which the subject of the litigation is incapable of pecuniary estimation;

2. In all civil actions which involve the title to, or possession of, real property, or any interest therein, where the assessed value of the property involved exceeds Twenty thousand pesos (P20,000.00) or, for civil actions in Metro Manila, where such value exceeds Fifty thousand pesos (P50,000.00) except actions for forcible entry into and unlawful detainer of lands or buildings, original jurisdiction over which is conferred upon the Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial Courts.
and
Sec. 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts in civil cases. - Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial Courts shall exercise:
x x x x

3) Exclusive original jurisdiction in all civil actions which involve title to, or possession of, real property, or any interest therein where the assessed value of the property or interest therein does not exceed Twenty thousand pesos (P20,000.00) or, in civil actions in Metro Manila, where such assessed value does not exceed Fifty thousand pesos (P50,000.00) exclusive of interest, damages of whatever kind, attorney's fees, litigation expenses and costs: Provided, That in cases of land not declared for taxation purposes, the value of such property shall be determined by the assessed value of the adjacent lots.
From the foregoing provisions of law, it can be seen that the RTC exercises exclusive original jurisdiction in civil actions where the subject of the litigation is incapable of pecuniary estimation. It also has jurisdiction in civil cases involving title to, or possession of, real property or any interest in it where the assessed value of the property involved exceeds P20,000.00, and if it is below P20,000.00, it is the first level court which has jurisdiction.

An action "involving title to real property" means that the plaintiffs cause of action is based on a claim that he owns such property or that he has the legal right to have exclusive control, possession, enjoyment, or disposition of the same.[3]

In Roldan v. Spouses Barrios (G.R. No. 214803, April 23, 2018), the allegations and reliefs sought in petitioner's action for foreclosure of mortgage showed that the loan obtained by respondents spouses Barrios from petitioner Roldan fell due and they failed to pay such loan which was secured by a mortgage on the property of the respondents spouses; and prayed that in case of default of payment of such mortgage indebtedness to the court, the property be ordered sold to answer for the obligation under the mortgage contract and the accumulated interest.

It is worthy to mention that the essence of a contract of mortgage indebtedness is that a property has been identified or set apart from the mass of the property of the debtor-mortgagor as security for the payment of money or the fulfillment of an obligation to answer the amount of indebtedness, in case of default in payment.[4] Foreclosure is but a necessary consequence of non-payment of the mortgage indebtedness.[5] In a real estate mortgage when the principal obligation is not paid when due, the mortgagee has the right to foreclose the mortgage and to have the property seized and sold with the view of applying the proceeds to the payment of the obligation.[6] Therefore, the foreclosure suit is a real action so far as it is against property, and seeks the judicial recognition of a property debt, and an order for the sale of the res.[7]

As foreclosure of mortgage is a real action, it is the assessed value of the property which determines the court's jurisdiction. Considering that the assessed value of the mortgaged property is only P13,380.00, the RTC correctly found that the action falls within the jurisdiction of the first level court under Section 33(3) of BP 129 as amended.

[1] Heirs of Valeriano Concha, Sr. v. Sps. Lumocso, 564 Phil 581, 592-593, citing Republic v. Sangalang; 243 Phil. 46, 50 (1988).
[2] Id., citing Philippine Association of Free Labor Unions, et al. v. Padilla, et al., 106 Phil. 591 (1959), citing Perkins v. Roxas, 72 Phil. 514 (1941).
[3] Heirs of Generoso Sebe, et al., v. Heirs of Veronica Sevilla, et al., 618 Phil. 395, 407 (2009).
[4] Equitable PCI Bank, Inc. v. Fernandez, et al., 623 Phil. 343, 349 (2009), citing China Banking Corporation v. Court of Appeals, 333 Phil. (1996).
[5] Id. at 349-350, citing Producers Bank of the Philippines v. Court of Appeals, 417 Phil. 646, 656 (2001).
[6] Id., citing Union Bank of the Philippines v. Court of Appeals, 370 Phil. 837, 846-847 (1999).
[7] Banco Español-Filipino v. Palanca, 37 Phil. 921, 928-929 (1918).

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