FACTS:

First Sarmiento obtained from PBCOM a P40,000,000.00 loan, which was secured by a real estate mortgage over 1,076 parcels of land.

The loan agreement was subsequently amended with the increase of the loan amount up to P100,000,000.00.

Later, PBCOM filed a Petition for Extrajudicial Foreclosure of Real Estate Mortgage, claiming that it sent First Sarmiento several demand letters, yet First Sarmiento still failed to pay the principal amount and accrued interest on the loan. 

First Sarmiento attempted to file a Complaint for annulment of real estate mortgage with the RTC. However, the Clerk of Court refused to accept the Complaint in the absence of the mortgaged properties’ tax declarations, which would be used to assess the docket fees.

The Executive Judge Francisco and the Vice-Executive Judges of the RTC Malolos City, Bulacan, granted First Sarmiento’s Urgent Motion to Consider the Value of Subject Matter of the Complaint as Not Capable of Pecuniary Estimation, and ruled that First Sarmiento’s action for annulment of real estate mortgage was incapable of pecuniary estimation.

On the other hand, the mortgaged properties were auctioned and sold to PBCOM as the highest bidder.

First Sarmiento filed a Complaint for annulment of real estate mortgage and its amendments, with prayer for the issuance of temporary restraining order and preliminary injunction. It paid a filing fee of P5,545.00.

First Sarmiento claimed that it never received the loan proceeds of P100,000,000.00 from PBCOM. 

It prayed for the issuance of a TRO and preliminary injunction to enjoin the Ex-Officio Sheriff from proceeding with the foreclosure of the real estate mortgage or registering the certificate of sale in PBCOM’s favor with the Registry of Deeds of Bulacan.

That same day, Judge Francisco issued an ex-parte TRO for 72 hours, enjoining the registration of the certificate of sale.

The RTC directed the parties to observe the status quo ante.

Meanwhile, the Clerk of Court and Ex-Officio Sheriff of Malolos City, Bulacan issued a certificate of sale to PBCOM.

In its Opposition (Re: Application for Issuance of Temporary Restraining Order), PBCOM asserted that the RTC failed to acquire jurisdiction over First Sarmiento’s Complaint because the action for annulment of mortgage was a real action; thus, the filing fees filed should have been based on the fair market value of the mortgaged properties.

The RTC Malolos City, Bulacan dismissed the Complaint for lack of jurisdiction, as the plaintiff failed to pay the appropriate filing fees.

Following the denial of its MR, First Sarmiento sought direct recourse to this Court with its Petition for Review under Rule 45. 

ISSUE:

Whether or not a Complaint for Annulment of Real Estate Mortgage has a subject incapable of pecuniary estimation.

RULING:

The petition is meritorious.

To determine the nature of an action, whether or not its subject matter is capable or incapable of pecuniary estimation, the nature of the principal action or relief sought must be ascertained. If the principal relief is for 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 sum of money or real property, even if a claim over a sum of money or real property results as a consequence of the principal relief, the action is incapable of pecuniary estimation.

 Section 19(1) of B. P. Blg. 129, as amended, provides RTC with exclusive, original jurisdiction over “all civil actions in which the subject of the litigation is incapable of pecuniary estimation.”

Lapitan v. Scandia instructed that:

To determine whether the subject matter of an action is incapable of pecuniary estimation, the nature of the principal action or remedy sought must first be established. This finds support in this Court’s repeated pronouncement that jurisdiction over the subject matter is determined by examining the material allegations of the complaint and the relief sought.

Heirs of Dela Cruz v. Heirs of Cruz stated, thus:

It is axiomatic that the jurisdiction of a tribunal, including a quasi-judicial officer or government agency, over the nature and subject matter of a petition or complaint is determined by the material allegations therein and the character of the relief prayed for, irrespective of whether the petitioner or complainant is entitled to any or all such reliefs.

However, Lapitan stressed that where the money claim is only a consequence of the remedy sought, the action is said to be one incapable of pecuniary estimation:

A review of the jurisprudence of this Court indicates that in determining whether an action is one the subject matter of which is not capable of pecuniary estimation, this Court has adopted the criterion of first ascertaining the nature of the principal action or remedy sought. If it is primarily for the recovery of a sum of money, the claim is considered capable of pecuniary estimation, and whether jurisdiction is in the municipal courts or in the courts of first instance would depend on the amount of the claim. 

However, where the basic issue is something other than the right to recover a sum of money, or where the money claim is purely incidental to, or a consequence of, the principal relief sought like in suits to have the defendant perform his part of the contract (specific performance) and in actions for support, or for annulment of a judgment or to foreclose a mortgage, this Court has considered such actions as cases where the subject of the litigation may not be estimated in terms of money, and are cognizable exclusively by courts of first instance. The rationale of the rule is plainly that the second class cases, besides the determination of damages, demand an inquiry into other factors which the law has deemed to be more within the competence of courts of first instance, which were the lowest courts of record at the time that the first organic laws of the Judiciary were enacted allocating jurisdiction (Act 136 of the Philippine Commission of June 11, 1901). 

Heirs of Sebe v. Heirs of Sevilla likewise stressed that:

If the primary cause of action is based on a claim of ownership or a claim of legal right to control, possess, dispose, or enjoy such property, the action is a real action involving title to real property.

A careful reading of petitioner’s Complaint convinces this Court that petitioner never prayed for the reconveyance of the properties foreclosed during the auction sale, or that it ever asserted its ownership or possession over them. Rather, it assailed the validity of the loan contract with real estate mortgage that it entered into with respondent because it supposedly never received the proceeds of the P100,000,000.00 loan agreement.