Fortunato G. Veloso and Adeline C. Veloso vs. Banco de Oro Unibank, Inc., Clerk of Court and Ex-Officio Sheriff and John Doe

The Court held that an action seeking the annulment of a real estate mortgage, foreclosure sale, and certificate of sale constitutes a real action when the underlying relief sought is the recovery of ownership and possession of the foreclosed property. Because jurisdiction over real actions is strictly determined by the assessed value of the realty as alleged in the complaint, the failure to plead such value—or to attach annexes reflecting it—deprives the trial court of jurisdiction and mandates dismissal.

Petitioner-spouses secured a P5,184,900.00 real estate loan from respondent BDO, securing the obligation through a mortgage over four condominium units and a parking space covered by Condominium Certificates of Title registered in Quezon City. Following the spouses' default, BDO initiated extrajudicial foreclosure proceedings, emerged as the highest bidder at the public auction, and obtained a certificate of sale that was subsequently registered with the Registry of Deeds. BDO later issued a notice to redeem. The spouses filed a complaint for the declaration of nullity of the mortgage, foreclosure proceedings, certificate of sale, and its registration, alleging that the underlying promissory notes and mortgage stipulations were unconscionable, illegal, and void. They sought to permanently enjoin BDO from taking possession, enforcing the sale, or disturbing their physical occupancy, while praying for the cancellation of all related registry entries.

• Petitioner-spouses executed a Mortgage Loan Agreement with respondent BDO to secure a P5,184,900.00 loan, constituting a real estate mortgage over four condominium units and a parking space in Quezon City.
• Following the spouses' default, BDO filed a petition for extrajudicial foreclosure with the Clerk of Court of the RTC, Quezon City.
• At the public auction, BDO emerged as the highest bidder. The Clerk of Court issued a certificate of sale, which was subsequently annotated on the titles at the Registry of Deeds.
• BDO furnished the spouses with a Notice to Redeem, informing them of the registration and reminding them of their redemption right.
• The spouses filed a complaint seeking the declaration of nullity of the mortgage, foreclosure proceedings, certificate of sale, and its registration. They alleged the underlying promissory notes and mortgage stipulations were unconscionable and illegal.
• The complaint prayed for the annulment of the mortgage and sale, cancellation of registry entries, and a permanent injunction barring BDO from taking possession, enforcing the sale, or disturbing the spouses' occupancy. It included an alternative prayer for the right to redeem the properties once their liability was judicially fixed.
• The complaint failed to allege the assessed value of the mortgaged properties.
• BDO moved to dismiss the complaint on the ground of lack of jurisdiction, characterizing the suit as a real action requiring the allegation of assessed value.
• The RTC dismissed the complaint for lack of jurisdiction. The CA affirmed. The Supreme Court resolved the petition.

• Petitioner-spouses maintained that the complaint constitutes a personal action grounded in privity of contract, as the primary relief sought is the nullification of the mortgage agreement rather than recovery of possession, noting they remain in physical occupancy of the properties.
• They argued that an action for the declaration of nullity of a contract is beyond pecuniary estimation and thus falls within the RTC's exclusive original jurisdiction regardless of property value.
• In the alternative, petitioners contended that the assessed value of the mortgaged properties could be reasonably inferred from the attached Disclosure Statement on Loan/Credit Transaction, which reflected the P5.18M loan amount, thereby exceeding the jurisdictional threshold for first-level courts.

• Respondent BDO countered that the complaint is a real action affecting title to or interest in real property, as the ultimate objective is to recover ownership and possession from BDO, which acquired the properties as the highest bidder.
• BDO argued that the failure to allege the assessed value of the mortgaged properties in the complaint is a fatal jurisdictional defect, warranting dismissal.
• BDO maintained that both the RTC and the CA correctly applied the jurisdictional rules governing real actions and properly affirmed the dismissal.

• Procedural Issues: Whether the RTC acquired jurisdiction over the subject matter of the action given the petitioners' failure to allege the assessed value of the mortgaged properties.
• Substantive Issues: Whether an action for the nullification of a real estate mortgage, extrajudicial foreclosure, certificate of sale, and its registration is classified as a real action or a personal action, and whether the failure to allege the assessed value of the property warrants dismissal for lack of jurisdiction.

• Procedural: The Court ruled that the RTC lacked jurisdiction because jurisdiction over real actions is conferred by law and strictly determined by the assessed value of the subject property as alleged in the complaint. Because the petitioners failed to plead the assessed value, the court could not ascertain which trial court possessed exclusive original jurisdiction. The Court rejected the argument that jurisdiction could be inferred from the loan amount or market value, emphasizing that courts cannot take judicial notice of property valuations and that jurisdiction cannot be presumed. The dismissal was upheld.
• Substantive: The Court classified the complaint as a real action. Although petitioners framed the suit as a nullification of a contract, the material allegations and prayers revealed that the underlying thrust and ultimate relief sought were the recovery of ownership and possession of the foreclosed condominium units. Because BDO acquired ownership as the highest bidder, nullifying the foreclosure sale and certificate of sale directly affects title. The Court held that in real actions, the assessed value of the realty determines jurisdiction, while the location determines venue. The failure to allege assessed value, absent a tax declaration or similar annex reflecting it, is fatal and does not warrant liberal application of procedural rules. The complaint was properly dismissed.

• Nature of Action and Jurisdictional Determination — The nature of an action and the court's jurisdiction are determined by the material allegations in the complaint, the relief prayed for, and the governing law at the time of filing, not by the plaintiff's characterization or potential defenses. For real actions involving title to or possession of real property, jurisdiction is strictly determined by the assessed value of the property as pleaded in the complaint.
• Assessed Value as the Exclusive Jurisdictional Standard in Real Actions — Jurisdiction over actions affecting title to or possession of real property is pegged solely on the assessed value, not on market value, loan amounts, or fair market value. Courts cannot presume jurisdiction or take judicial notice of property valuations. The failure to allege assessed value in the complaint or its annexes warrants dismissal for lack of jurisdiction, and liberal application of the rule is unavailable absent documentary proof, such as a tax declaration, reflecting the assessed value.

• "The nature of the action and which court has original and exclusive jurisdiction over the same is determined by the material allegations of the complaint, the type of relief prayed for by the plaintiff and the law in effect when the action is filed, irrespective of whether the plaintiffs are entitled to some or all of the claims asserted therein." — The Court invoked this principle to establish that jurisdiction is determined by the substantive thrust of the complaint, not by the petitioners' label of the suit as a personal action for contract nullification.
• "Jurisdiction is conferred by law; it cannot be presumed or conferred on the court's erroneous belief that it had jurisdiction over a case." — The Court applied this rule to reject the petitioners' contention that the assessed value could be inferred from the loan amount, emphasizing that jurisdictional requirements must be expressly pleaded and cannot be supplied by judicial inference.

• Gabrillo v. Heirs of Pastor — Cited to affirm that the failure to allege the assessed value of real property is fatal to jurisdiction even if the market value is stated, and to clarify that market value or loan amounts cannot substitute for assessed value in determining jurisdictional thresholds.
• Foronda-Crystal v. Son and Agarrado v. Librando-Agarrado — Cited by petitioners to support the liberal application of the rule if assessed value can be inferred from annexes; the Court clarified that these cases require the actual attachment of documents reflecting assessed value (e.g., tax declarations), which were absent in this case.

• Sections 19 and 33 of Batas Pambansa Bilang 129, as amended by Republic Act No. 7691 — Establish the exclusive original jurisdiction of Regional Trial Courts and first-level courts over civil actions involving title to or possession of real property, with the jurisdictional threshold strictly pegged to the assessed value of the property.
• Sections 1 and 2, Rule 4 of the Rules of Court — Define real actions as those affecting title to or possession of real property or any interest therein, and mandate that such actions must be filed in the court having jurisdiction over the location of the subject property.