First Sarmiento Property Holdings, Inc. vs. Philippine Bank of Communications

The nature of an action as capable or incapable of pecuniary estimation is determined solely by the principal relief sought in the complaint, irrespective of ancillary prayers or consequential results; where the principal relief sought is the annulment of a mortgage to remove a lien rather than the recovery of the mortgaged real property, the action is incapable of pecuniary estimation cognizable by Regional Trial Courts under Section 19(1) of Batas Pambansa Blg. 129.

First Sarmiento Property Holdings, Inc. obtained a P40,000,000.00 loan from Philippine Bank of Communications (PBCOM) on June 19, 2002, secured by a real estate mortgage over 1,076 parcels of land. The loan was subsequently amended on March 15, 2003 to increase the amount to P51,200,000.00, and again on September 15, 2003 to P100,000,000.00. On January 2, 2006, PBCOM filed a Petition for Extrajudicial Foreclosure of Real Estate Mortgage, alleging that First Sarmiento failed to pay despite demand. On December 29, 2011, the mortgaged properties were auctioned and sold to PBCOM as the highest bidder.

• The Loan and Mortgage: On June 19, 2002, First Sarmiento obtained a P40,000,000.00 loan from PBCOM, secured by a real estate mortgage over 1,076 parcels of land. The loan was amended on March 15, 2003 (increasing to P51,200,000.00) and September 15, 2003 (increasing to P100,000,000.00).
• Foreclosure Proceedings: On January 2, 2006, PBCOM filed a Petition for Extrajudicial Foreclosure, alleging default despite demand letters. On December 29, 2011, the properties were auctioned and sold to PBCOM as highest bidder.
• The Complaint for Annulment: On December 27, 2011, First Sarmiento attempted to file a Complaint for annulment of the real estate mortgage and its amendments, claiming it never received the P100,000,000.00 loan proceeds. The Clerk of Court refused acceptance for lack of tax declarations needed to assess docket fees based on property value.
• Executive Judge Ruling: On December 29, 2011, the Executive Judge and Vice-Executive Judges of RTC Malolos granted First Sarmiento's motion, ruling the action incapable of pecuniary estimation and directing acceptance of the complaint.
• Filing and Injunctive Relief: On January 2, 2012, First Sarmiento filed the Complaint, paid P5,545.00 in docket fees, and prayed for a temporary restraining order and preliminary injunction to enjoin registration of the certificate of sale. Judge Francisco issued a 72-hour ex-parte TRO. On January 4, 2012, the RTC issued a status quo ante order.
• Certificate of Sale: On January 24, 2012, the Ex-Officio Sheriff issued the certificate of sale to PBCOM, after the Complaint was filed but after the TRO was issued.
• Opposition and Dismissal: PBCOM opposed the injunctive relief, arguing the action was real and required docket fees based on property value. On April 3, 2012, the RTC dismissed the Complaint for lack of jurisdiction, relying on Home Guaranty Corporation v. R-II Builders to hold that the action was essentially for recovery of real property.

• Nature of Action: First Sarmiento maintained that its Complaint for annulment of real estate mortgage was an action incapable of pecuniary estimation because the principal relief sought was the removal of the lien on the mortgaged properties, not the recovery or reconveyance of the properties themselves.
• Ownership and Possession: Petitioner argued that it remained the registered owner and in possession of the mortgaged properties when the Complaint was filed; thus, it could not have sought recovery of what it already owned and possessed.
• Precedent: Petitioner cited Lu v. Lu Ym and Bunayog v. Tunas to support the proposition that actions questioning the validity of a mortgage or conveyance are incapable of pecuniary estimation.
• Hierarchy of Decisions: Petitioner contended that Home Guaranty Corporation v. R-II Builders, which the RTC relied upon, was rendered by a Division of the Supreme Court and could not modify or reverse doctrines established by the Court En Banc in Lu v. Lu Ym.
• Docket Fees: Petitioner emphasized that it paid the docket fees as assessed by the Clerk of Court upon the direction of the Executive Judge, and that dismissal was improper even if the fees were insufficient, citing Fedman Development Corporation v. Agcaoili.

• Real Action: PBCOM countered that the Complaint was a real action because its true objective was to restore First Sarmiento's ownership of the foreclosed properties, effectively seeking recovery of real property.
• Principal Relief: Respondent argued that the allegations in the Complaint revealed an intention to assert title and recover the properties sold at auction, making the action capable of pecuniary estimation requiring docket fees based on the fair market value of the mortgaged properties.
• Distinction of Precedents: Respondent maintained that Home Guaranty Corporation did not modify Lu v. Lu Ym because the factual and legal milieus were different, and that the former correctly applied the test of determining the true objective of the action.

• Jurisdiction: Whether the Regional Trial Court acquired jurisdiction over First Sarmiento's Complaint for annulment of real estate mortgage given the docket fees paid.
• Nature of Action: Whether an action for annulment of real estate mortgage, where the plaintiff remains the registered owner and possessor of the mortgaged property, is capable or incapable of pecuniary estimation.
• Validity of TRO Extension: Whether the Regional Trial Court committed grave abuse of discretion in issuing a status quo ante order that indefinitely extended the 72-hour temporary restraining order.

• Jurisdiction: The Regional Trial Court acquired jurisdiction over the Complaint. Jurisdiction over the subject matter is determined by the material allegations of the complaint and the relief sought, not by the defenses raised or the ultimate motive of the plaintiff.
• Nature of Action: The action for annulment of real estate mortgage was incapable of pecuniary estimation. The principal relief sought was the annulment of the mortgage contract to remove the lien, not the recovery of the real properties. Because First Sarmiento remained the registered owner and possessor when the Complaint was filed, it could not have sought reconveyance of property it already owned.
• Rejection of Home Guaranty: The Court set aside the doctrine in Home Guaranty Corporation v. R-II Builders which allowed courts to look beyond the principal relief to discern the "true objective" of the complaint. Subject matter jurisdiction must be textually based on the body of the complaint and the relief sought, without reference to extraneous facts or evidence still to be presented.
• Docket Fees: Even assuming arguendo that the action was real and the docket fees insufficient, dismissal was improper. Under Fedman Development Corporation v. Agcaoili, where assessed docket fees have been paid without bad faith or intent to defraud, the court acquires jurisdiction subject only to payment of the deficiency as a lien on the judgment.
• TRO Extension: The Regional Trial Court committed grave abuse of discretion in issuing the January 4, 2012 status quo ante order. Rule 58, Section 5 of the Rules of Court explicitly prohibits the extension or renewal of a temporary restraining order beyond the 72-hour or 20-day periods; a TRO cannot be extended indefinitely to substitute for a preliminary injunction.

• Principal Relief Test for Nature of Action: To determine whether the subject matter of an action is capable or incapable of pecuniary estimation, the nature of the principal action or remedy sought must be ascertained. If the principal relief is for the recovery of a sum of money or real property, the action is capable of pecuniary estimation. If the principal relief sought is not for the recovery of money or real property, even if a money claim or property recovery results as a consequence, the action is incapable of pecuniary estimation. Jurisdiction is determined by the material allegations of the complaint and the character of the relief prayed for, irrespective of whether the plaintiff is entitled to such reliefs.
• Annulment of Mortgage: An action for annulment of a real estate mortgage is incapable of pecuniary estimation where the plaintiff seeks merely to remove the lien and does not pray for the recovery or reconveyance of the mortgaged property, especially where the plaintiff remains the registered owner and possessor.
• Docket Fees and Jurisdiction: Where the assessed docket fees have been paid and the assessment turns out to be insufficient, the court still acquires jurisdiction over the case, subject to payment of the deficiency as a lien on the judgment award. The only exception is when the deficiency is accompanied by bad faith and an intention to defraud the government.
• Temporary Restraining Orders: A temporary restraining order issued by a trial court may not be extended or renewed beyond the statutory periods (20 days from service, or 72 hours if issued ex-parte for extreme urgency). A status quo ante order cannot be used to circumvent the sunset clause of Rule 58. In no case shall the total period of effectivity exceed 20 days, including the original 72 hours.

• "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."
• "It is clear that subject matter jurisdiction cannot be dependent on the supposed ultimate motive or true objective of the complaint because this will require the judge to speculate on the defenses of the plaintiff beyond the material allegations contained in the complaint."
• "Henceforth, this Court will demand stricter compliance with the rules from the members of the bench as regards their issuances of these injunctive reliefs."
• "In light of the foregoing, this Court reaffirms that the nature of an action is determined by the principal relief sought in the complaint, irrespective of the other causes of actions that may also crop up as a consequence of the principal relief prayed for. The contrary rule espoused in Home Guaranty is thereby set aside."

• Lapitan v. Scandia, 133 Phil. 526 (1968) — Established the criterion of ascertaining the nature of the principal action or remedy sought to determine if the subject matter is capable of pecuniary estimation; cited as controlling precedent.
• Lu v. Lu Ym, 585 Phil. 251 (2008) — En Banc decision holding that where the basic issue is something other than the right to recover a sum of money, the action is incapable of pecuniary estimation; followed and reaffirmed.
• Bunayog v. Tunas, 106 Phil. 715 (1959) — Held that an action questioning the validity of a mortgage is one incapable of pecuniary estimation; followed.
• Home Guaranty Corporation v. R-II Builders, Inc., 660 Phil. 517 (2011) — Division decision which held that courts may look beyond the principal relief to the "true objective" of the action; set aside and disapproved insofar as it permits speculation on the plaintiff's ultimate motive.
• Fedman Development Corporation v. Agcaoili, 672 Phil. 20 (2011) — Held that where assessed docket fees have been paid, jurisdiction is acquired subject to payment of deficiency as a lien on the judgment; applied.
• Far East Bank and Trust Company v. Shemberg Marketing Corporation, 540 Phil. 7 (2006) — Reaffirmed that an action for cancellation of mortgage has a subject incapable of pecuniary estimation; followed.

• Rule 45, Section 1 and Rule 41, Section 2(c), Rules of Court — Govern appeals by certiorari to the Supreme Court on questions of law only; basis for direct recourse to the Supreme Court.
• Rule 58, Section 5, Rules of Court — Governs the issuance and effectivity of temporary restraining orders; prohibits extension beyond 20 days (or 72 hours for ex-parte TROs).
• Section 19(1), Batas Pambansa Blg. 129 (Judiciary Reorganization Act of 1980), as amended — Grants Regional Trial Courts exclusive original jurisdiction over civil actions in which the subject of the litigation is incapable of pecuniary estimation.
• Section 6, Act No. 3135 (An Act to Regulate the Sale of Property Under Special Powers Inserted In or Annexed to Real-Estate Mortgages) — Provides for the redemption period of one year from and after the date of the sale (interpreted as the registration of the certificate of sale).

Carpio (Acting C.J.), Velasco, Jr., Leonardo-De Castro, Peralta, Bersamin, Del Castillo, Perlas-Bernabe, Jardeleza, Caguioa, Martires, Tijam, Reyes, Jr., and Gesmundo.