Hernandez vs. Rural Bank of Lucena, Inc.

A claim that a mortgage obligation to an insolvent bank has been extinguished by tender of a check must be pursued in the bank's judicial liquidation proceeding, not in a separate action; and an action to compel acceptance of payment and cancellation of mortgage is a personal action governed by the venue rules for personal actions.

Francisco S. Hernandez and Josefa U. Atienza were borrowers of Rural Bank of Lucena, Inc., their P6,000 loan secured by a real estate mortgage over two lots in Cubao, Quezon City. The bank later became the subject of Central Bank regulatory action and judicial liquidation, with the Central Bank acting as liquidator and Jose S. Martinez as receiver. Section 29 of Republic Act No. 265, the Central Bank Act, governs the liquidation of insolvent banks and the role of the Superintendent of Banks under court supervision.

On March 21, 1961, the spouses Francisco S. Hernandez and Josefa U. Atienza obtained from the Rural Bank of Lucena, Inc. a loan of P6,000 payable on March 21, 1962. The loan was secured by a mortgage on their two lots situated in Cubao, Quezon City with a total area of 600 square meters. The interest for one year was paid in advance.

About three months after the loan was obtained, the Lucena Bank became a distressed bank. In a letter dated June 6, 1961, the Acting Governor of the Central Bank apprised the stockholders that the Monetary Board, in Resolution No. 928 approved on June 13, 1961 allegedly after hearing the bank, found that its officers, directors, and employees had committed certain anomalies or had resorted to unsound and unsafe banking practices prejudicial to the government, its depositors, and creditors. The Monetary Board advised the stockholders to reorganize the bank by electing a new board of directors and directed the bank not to grant new loans or renewals, not to accept deposits from new depositors, to service only existing deposit accounts, and not to issue drafts or make any disbursements without the prior approval of Central Bank examiners. It warned that if its directives were not obeyed, the Central Bank would take over the management of the Lucena Bank. The Central Bank Governor informed the bank that the chief examiner of the department of rural banks would oversee its operations. That letter was construed as a directive to suspend operations; the Manila Times in its June 21, 1961 issue carried a news story entitled "Bank told to suspend operations," accompanied by a picture of depositors who jammed the lobby trying to withdraw their money. Instead of bowing to the Monetary Board, the Lucena Bank and its board of directors filed with the Court of First Instance of Manila a complaint dated June 21, 1961 seeking to restrain the implementation of Resolution No. 928 (Civil Case No. 47345).

Before the expiration of the one-year term of the loan, on August 22, 1961, Hernandez went to the Lucena Bank and offered to pay the loan by means of a check for P6,000 dated August 8, 1961, drawn against the bank by a depositor, San Pablo Colleges, and payable to Hernandez. As the bank's executive vice president was not available, the payment was not consummated. At the time the check was issued, San Pablo Colleges had a deposit in the Lucena Bank amounting to P11,890.16. Instead of withdrawing P6,000 from that deposit, San Pablo Colleges chose to issue a check for that amount to Hernandez. It was not clear whether in August 1961 San Pablo Colleges could make a withdrawal from its deposit in the Lucena Bank. On the following day, August 23, Hernandez sent to the bank by registered mail a photostat of the check and a letter inquiring whether the bank would honor the check and when he should go personally to the bank for that purpose. That letter was received by the bank on August 29. On August 30, the executive vice president wrote to Hernandez and informed him that the check could not be honored for the time being because of adverse events that had disrupted the bank's operations. What the vice president meant was that by reason of the letter of the Central Bank Governor dated June 16, 1961, the operations of the Lucena Bank were suspended. The vice president explained that because there was a run on the bank its assets were exhausted, and so the check sent by Hernandez, which was drawn against the Lucena Bank, could not be accepted. He said that when Hernandez presented the check, the Lucena Bank was no longer in a position to honor withdrawals and that had Hernandez paid cash, his payment would have been accepted. To honor the check would have been tantamount to allowing a depositor, San Pablo Colleges, to make a withdrawal, but the Lucena Bank could not entertain withdrawals without the consent of the Central Bank examiners. Payment by check was a disbursement. Apparently, the vice president did not take the trouble of asking the Central Bank examiners whether the payment by check made by Hernandez could be accepted. Hernandez himself, who should have known that the bank was a distressed bank which had suspended operations and which was under the supervision of Central Bank examiners, did not bother to take up his problem with the said examiners.

Hernandez, in his letter of October 18, 1961, again asked the bank when he could deliver the check. The executive vice president, in his reply of October 24, told Hernandez that the bank could not yet honor the check because it had not resumed its banking operations; that it was awaiting the outcome of a case filed by the bank against the Central Bank; that it might reopen in January 1962; and that, anyway, the loan would not be due until March 21, 1962. Hernandez sent another letter dated February 1, 1962. Finally, he enclosed the original check, duly endorsed, with his letter to the bank dated March 7, 1962, which was sent by registered mail and special delivery. That letter of March 7, together with the check, was returned to Hernandez because the bank's manager was allegedly in Manila. Undeterred, Hernandez again mailed the check to the bank on April 25, with the request that his mortgage be cancelled.

In the meantime, the Monetary Board had decided to liquidate the Lucena Bank. The Governor of the Central Bank, in a letter dated February 8, 1962, enjoined the Lucena Bank from transacting business and advised it to turn over its assets, documents, and records to the chief bank examiner. The bank building was sealed. The following notice was posted at the entrance of the building: "This bank is temporarily closed pending final decision of the courts as to its status. Payments of loans would be accepted; meanwhile, no payments of withdrawals against deposits can be made. Please transact business with the Central Bank's representatives only." To head off the liquidation, the Lucena Bank filed with the Court of First Instance of Lucena City a complaint dated February 12, 1962, praying that the Central Bank be enjoined from liquidating the said bank. On February 14, the court issued an ex parte preliminary injunction which it dissolved ten days later (Civil Case No. 6471; Rural Bank of Lucena, Inc. vs. Arca, L-21146, September 20, 1965, 15 SCRA 66). On February 14, 1962, the Manila court rendered a decision in Civil Case No. 47345, restraining the enforcement of the Monetary Board resolution which required the Lucena Bank to undertake a reorganization and to curtail its operations. The Central Bank appealed. This Court reversed that decision and dismissed the complaint for injunction (Rural Bank of Lucena, Inc. vs. Central Bank, L-19621, November 29, 1969, 30 SCRA 628).

To implement the resolution of the Monetary Board for the liquidation of the Lucena Bank, the Central Bank, pursuant to Section 29 of its charter and on the assumption that the Lucena Bank was insolvent, filed with the Court of First Instance of Manila a petition dated March 27, 1962 for assistance and supervision in the liquidation of the Lucena Bank (Civil Case No. 50019). Acting on that petition, the Court of First Instance of Manila issued an order dated March 28, 1963, directing the Lucena Bank to turn over its assets to the Central Bank's authorized representative. The Monetary Board, in its Resolution No. 426 dated April 2, 1963, designated the Superintendent of Banks or his duly authorized representative to take charge of the assets of the Lucena Bank. The Board, in its resolution of November 27, 1963, ordered the Superintendent of Banks to convert the assets of the Lucena Bank to money. The Lucena Bank, by means of certiorari, sought to annul the liquidation proceeding. This Court denied its petition (Rural Bank of Lucena, Inc. vs. Arca, L-21146, September 20, 1965, 15 SCRA 66). Among the accounts receivable of the Lucena Bank inventoried by the Central Bank's representative was the account of Hernandez. In a letter dated October 29, 1963, Hernandez informed the Central Bank that he had sent to the Lucena Bank on April 25, 1962 the check for P6,000. He again requested that his mortgage be cancelled. The Associate Superintendent of Banks, in his answer dated December 9, 1963, returned the check to Hernandez and informed him that, according to the Lucena Bank's executive vice president, the check could not be applied to the payment of Hernandez's loan because the bank was already closed when he received the check. Moreover, the check was drawn against the current deposits of San Pablo Colleges in the Lucena Bank, which was in the process of liquidation. Hernandez was advised to settle his account by paying cash or by means of a check drawn against a bank other than the Lucena Bank.

Disregarding that suggestion, Hernandez announced to the Associate Superintendent of Banks in his letter of December 16, 1963 that he was going to deposit the said check in the Court of First Instance of Lipa City on or before December 26, 1963. Instead of filing a consignation complaint, Hernandez enclosed the check with his letter dated January 2, 1964 to the clerk of court of the Court of First Instance at Lipa City. That letter was received in court on January 6, 1964. Hernandez wrote a letter dated January 11, 1964 informing the Associate Superintendent of Banks of the judicial deposit of the check. Copies of that letter were furnished the Lucena Bank and the San Pablo Colleges. It was only on October 12, 1964 when Hernandez and his wife filed an action in the Court of First Instance at Lipa City to compel the Rural Bank of Lucena, Inc., the Central Bank as liquidator, and Jose S. Martinez as receiver to accept the check and to execute the cancellation of the real estate mortgage. The Hernandez spouses also asked for moral damages in the amount of P10,000 and attorney's fees of P3,000 (Civil Case No. 1615). On October 20, 1964, the Central Bank filed a motion to dismiss. It contended that there was improper venue because, as the action allegedly involved title to real property, it should have been instituted in Quezon City where the encumbered lots are situated. It further contended that since the Lucena Bank is under liquidation and is in the hands of a receiver, its properties and assets are in custodia legis and may, therefore, be reached only by motion or petition in Civil Case No. 50019 of the Court of First Instance of Manila. The motion was denied. On January 30, 1967, counsel for the Lucena Bank offered to compromise the case by stipulating that the Central Bank would apply the check in question to the mortgage debt of Hernandez if the balance of the deposit of San Pablo Colleges would be enough to cover the amount of the check of P6,000 and that, by virtue of that compromise, the complaint and counterclaim would be dismissed. That conditional and equivocal compromise offer fizzled out because the lawyers of Hernandez and the Central Bank did not assent to it. After trial, the lower court rendered an amended decision dated October 31, 1967, ordering the Lucena Bank or the Central Bank, as liquidator, to accept and honor the check, to cancel the mortgage, and to pay Hernandez spouses P25,000 as moral damages (not P10,000 as prayed for in the complaint) plus P1,000 as attorney's fees. The Lucena Bank, the Central Bank, and its employee, the receiver, appealed to this Court.

Defendants-appellants, as the parties seeking reversal, contended as follows:

• Venue: The Central Bank contended that the trial court erred in not holding that venue was improperly laid; the action to compel honor of the check and cancellation of the mortgage was a real action affecting title to real property and should have been filed in the Court of First Instance of Rizal at Quezon City where the mortgaged lots are situated.
• Jurisdiction: The Central Bank contended that the trial court had no jurisdiction because the Hernandez spouses should have ventilated their claim in the liquidation proceeding pending in the Court of First Instance of Manila, instead of filing a separate action in the Court of First Instance at Lipa City; the assets of the Lucena Bank were in custodia legis and could be reached only by motion or petition in Civil Case No. 50019.
• Consignation: The Central Bank contended that the trial court erred in not holding that there was no valid consignation.
• Moral Damages and Attorney's Fees: The Central Bank contended that the trial court erred in awarding moral damages and attorney's fees.
• Execution Pending Appeal: The Central Bank contended that the trial court erred in ordering execution pending appeal despite the fact that the assets of the Lucena Bank are in custodia legis or in the custody of the liquidation court and the receiver appointed by it.

The Hernandez spouses, as appellees, argued as follows:

• Nature of Action and Venue: The Hernandez spouses argued that their action was not an action in rem and, therefore, it could be brought in a place other than the place where the mortgaged lots are located; the Court noted that they confounded a real action with an action in rem and a personal action with an action in personam.
• No Connection to Liquidation: The Hernandez spouses argued that their action dealt with a sum of money which was still not in the possession, custody, and administration of the Central Bank and the receiver; that their action had nothing to do with the funds and property held by the receiver; that the Lucena Bank had not lost its juridical personality after it was placed under liquidation; and that the issue of whether the Lucena Bank should have accepted the check was not in any way connected with the causes and grounds under which the liquidation proceedings were instituted nor with the administration of the property and funds under liquidation.

• Venue: Whether the action to compel acceptance of the check and cancellation of the mortgage is a real action that must be filed where the mortgaged lots are situated, or a personal action governed by the venue rules for personal actions.
• Jurisdiction: Whether the Court of First Instance at Lipa City had jurisdiction over the claim against the Lucena Bank while it was under liquidation in the Court of First Instance of Manila, or whether the liquidation court had exclusive jurisdiction.
• Validity of Consignation: Whether there was a valid consignation of the check.
• Moral Damages and Attorney's Fees: Whether the awards of moral damages and attorney's fees were proper.
• Execution Pending Appeal: Whether execution pending appeal was proper given that the assets of the Lucena Bank were in custodia legis.

• Venue: No. The action was a personal action, not a real action, because it did not affect title to the mortgaged lots and was not among the real actions enumerated in Section 2(a), Rule 4. Venue was therefore governed by Section 2(b), Rule 4, and the trial court should have dismissed the action because venue was improperly laid in Batangas.
• Jurisdiction: No. The liquidation court or the Manila court had exclusive jurisdiction to entertain the claim that the mortgage obligation had already been extinguished by tender of the check. All claims against the insolvent bank should be filed in the liquidation proceeding, and the separate action was not maintainable.
• Validity of Consignation: Not reached. The Court resolved the case on venue and jurisdiction and dismissed the action without prejudice to the Hernandez spouses' right to take up with the liquidation court the settlement of their mortgage obligation.
• Moral Damages and Attorney's Fees: Reversed. The entire trial court judgment, including the awards of moral damages and attorney's fees, was reversed and set aside; the Court did not separately adjudicate the merits of those awards.
• Execution Pending Appeal: Reversed. The entire trial court judgment, including the order of execution pending appeal, was reversed and set aside; the Court noted that the assets were under liquidation and execution could not be enforced.

• Venue: Section 2(a), Rule 4 of the Rules of Court provides that actions affecting title to, or for recovery of possession, or for partition or condemnation of, or foreclosure of mortgage on, real property shall be commenced and tried in the province where the property or any part thereof lies. The rule mentions an action for foreclosure of a real estate mortgage but does not mention an action for the cancellation of a real mortgage. The Hernandez spouses' action was primarily to compel the mortgagee to accept payment of the mortgage debt and to release the mortgage. That action was not expressly included in the enumeration in Section 2(a) and did not involve title to the mortgaged lots. It was a personal action and not a real action. The mortgagee had not foreclosed the mortgage, plaintiffs' title was not in question, and they were in possession of the mortgaged lots. Hence, the venue of plaintiffs' personal action was the place where the defendant or any of the defendants resides or may be found, or where the plaintiff or any of the plaintiffs resides, at the election of the plaintiff under Section 2(b), Rule 4. The Court clarified that a real action is not the same as an action in rem and a personal action is not the same as an action in personam. In a personal action, the plaintiff seeks the recovery of personal property, the enforcement of a contract, or the recovery of damages. In a real action, the plaintiff seeks the recovery of real property, or an action affecting title to real property or for recovery of possession, partition, condemnation, or foreclosure of mortgage on real property. An action in personam is an action against a person on the basis of his personal liability, while an action in rem is an action against the thing itself instead of against the person. A real action may at the same time be an action in personam and not necessarily an action in rem. The plaintiffs alleged in their complaint that they were residents of San Juan, Batangas, which in their brief they characterized as their legal residence and which appears to be their domicile of origin. On the other hand, the promissory note and mortgage signed by them and the Torrens title covering the mortgaged lots indicated that their residence was at 11 Chicago Street, Cubao, Quezon City, which apparently is the place where the said lots are located. The plaintiffs did not testify during the trial, so they had no testimony in the records as to their actual residence. The term "resides" in Section 2(b), Rule 4 refers to the place of actual residence or domicile. San Juan, Batangas might be the place where the plaintiffs have their domicile or legal residence, but there was no question that 11 Chicago Street, Cubao, Quezon City was their place of abode or the place where they actually reside. Thus, the action, which was a personal action to compel the defendants to honor the check and to cancel the mortgage, should have been filed in Quezon City if the plaintiffs intended to use their residence as the basis for their choice of venue. The trial court should have dismissed the action because venue was improperly laid in Batangas. Koh vs. Court of Appeals and Gracia Fule vs. Court of Appeals were cited in support.
• Jurisdiction: At the time the Hernandez spouses filed their consignation complaint in 1964, the Lucena Bank was already under liquidation. The Manila court, in its order of March 28, 1963, had ordered the officers of the Lucena Bank to turn over to the Central Bank or to the receiver, the Superintendent of Banks, all of its assets, properties, and papers. Among the assets turned over to the receiver was the outstanding or unpaid account of the Hernandez spouses, which appeared in the inventory as: "393. Hernandez, Francisco St., 11 Chicago St., Cubao, Q.C. TCT-34262 — 3/21/61, P6,000.00" (Exh. 4-CB). Among the papers or obligations turned over to the receiver was Ledger No. 056 evidencing the deposit of San Pablo Colleges in the Lucena Bank in the sum of P11,890.16, against which the check for P6,000 was drawn. Under Section 29 of the Central Bank Act, Republic Act No. 265, when the Monetary Board, upon information submitted by the Superintendent of Banks, finds a bank to be insolvent, it shall forbid the bank to do business and shall take care of its assets according to law. If the Monetary Board finds that the insolvent bank cannot resume business with safety to its creditors, it shall, through the Solicitor General, file a petition in the Court of First Instance praying for the assistance and supervision of the court in the liquidation of the bank's affairs. Thereafter, the Superintendent of Banks, upon order of the Monetary Board and under the supervision of the court, shall convert to money the bank's assets. The fact that the insolvent bank is forbidden to do business, that its assets are turned over to the Superintendent of Banks as a receiver for conversion into cash, and that its liquidation is undertaken with judicial intervention means that, as far as lawful and practicable, all claims against the insolvent bank should be filed in the liquidation proceeding. The judicial liquidation is intended to prevent multiplicity of actions against the insolvent bank. The lawmaking body contemplated that for convenience only one court, if possible, should pass upon the claims against the insolvent bank and that the liquidation court should assist the Superintendent of Banks and control his operations. In the course of the liquidation, contentious cases might arise wherein a full-dress hearing would be required and legal issues would have to be resolved. Hence, it would be necessary in justice to all concerned that a Court of First Instance should assist and supervise the liquidation and should act as umpire and arbitrator in the allowance and disallowance of claims. The judicial liquidation is a pragmatic arrangement designed to establish due process and orderliness in the liquidation of the bank, to obviate the proliferation of litigations, and to avoid injustice and arbitrariness. The Court cited the pre-war liquidation of the insolvent Mercantile Bank of China, where various claims were adjudicated by the liquidation court, the Court of First Instance of Manila, pursuant to Section 1639 of the Revised Administrative Code, from which Section 29 of the Central Bank Law was taken. It also cited Central Bank of the Philippines vs. Morfe, where a depositor could not bring a separate action against an insolvent savings bank for the recovery of his time deposit; his remedy was to intervene in the liquidation proceeding. In the instant case, the Hernandez spouses, after having become cognizant of the fact that the Lucena Bank was under liquidation, chose to file a separate action against that bank for redemption and damages. Although residents of Cubao, Quezon City, where the mortgage lots are located and which was the address used by them in dealing with the Lucena Bank, they chose Lipa City as the venue of their action. They ignored the liquidation court. Evidently, one of their objectives was to obtain against the Lucena Bank a judgment for moral damages which they surmised would not be granted by the Manila liquidation court. They attained more than what they had originally desired because, instead of the moral damages of P10,000 indicated in their complaint, the trial court awarded them P25,000. The trial court also granted execution pending appeal although it was aware that eventually the claim of the Hernandez spouses would have to be submitted to the liquidation court for allowance. The sheriff could not enforce the writ of execution because the Lucena Bank was under liquidation. Hence, the Hernandez spouses had to file a claim with the liquidation court. The Court held that the liquidation court or the Manila court had exclusive jurisdiction to entertain the claim of the Hernandez spouses that their mortgage obligation had already been extinguished by means of their tender of the check issued by the San Pablo Colleges.
• Validity of Consignation: The Court did not resolve the validity of the consignation. It held that the separate action was not maintainable and dismissed it without prejudice to the right of the Hernandez spouses to take up with the liquidation court the settlement of their mortgage obligation.
• Moral Damages and Attorney's Fees: The Court did not separately adjudicate the merits of the awards. It observed that the separate action was evidently intended to obtain moral damages which the Hernandez spouses surmised would not be granted by the Manila liquidation court, and that the trial court awarded P25,000 instead of the P10,000 prayed for. The entire trial court judgment, including the awards, was reversed and set aside.
• Execution Pending Appeal: The Court did not separately resolve the propriety of execution pending appeal. It noted that the trial court granted execution pending appeal although it was aware that the claim would eventually have to be submitted to the liquidation court for allowance, and that the sheriff could not enforce the writ because the Lucena Bank was under liquidation. The entire judgment was reversed and set aside.

• Real action vs. personal action; action in rem vs. action in personam — A real action affects title to real property or is for recovery of possession, partition, condemnation, or foreclosure of mortgage on real property; a personal action seeks recovery of personal property, enforcement of a contract, or recovery of damages. An action in personam is against a person on the basis of personal liability, while an action in rem is against the thing itself. A real action may at the same time be an action in personam and not necessarily an action in rem. In this case, the action to compel acceptance of the check and cancellation of the mortgage was a personal action because it did not affect title to the mortgaged lots and the mortgagee had not foreclosed.
• Venue of personal actions; actual residence — Under Section 2(b), Rule 4, venue for personal actions lies where the defendant or any defendant resides or may be found, or where the plaintiff or any plaintiff resides, at the election of the plaintiff. "Resides" means actual residence or domicile, not merely domicile of origin. The Hernandez spouses alleged San Juan, Batangas as their legal residence, but their actual residence was 11 Chicago Street, Cubao, Quezon City, so venue in Batangas was improper.
• Exclusive jurisdiction of the liquidation court over claims against an insolvent bank — Under Section 29 of the Central Bank Act, Republic Act No. 265, when the Monetary Board finds a bank insolvent and liquidation is undertaken with judicial intervention, all claims against the insolvent bank should be filed in the liquidation proceeding. Judicial liquidation prevents multiplicity of actions, allows one court to pass upon claims, and makes the liquidation court the umpire and arbitrator in the allowance and disallowance of claims. The Hernandez spouses' claim that their mortgage debt had been extinguished by tender of the check should have been ventilated in the Manila liquidation court.
• Judicial liquidation as a pragmatic arrangement — Judicial liquidation is designed to establish due process and orderliness, obviate the proliferation of litigations, and avoid injustice and arbitrariness. The Court applied this to reject the separate action filed in Lipa City and to require the claim to be taken up in the liquidation proceeding.

• "That action, which is not expressive included in the enumeration found in section 2(a) of Rule 4, does not involve the title to the mortgage lots. It is a personal action and not a real action." — This states the ratio for the venue ruling: the action to compel acceptance of payment and cancel the mortgage was personal, not real.
• "We hold that the trial court should have dismissed the action because the venue thereof was improperly laid in Batangas." — This is the Court's direct disposition on venue, holding that the Court of First Instance at Lipa City should have dismissed the action.
• "We hold that the liquidation court or the Manila court has exclusive jurisdiction to entertain the claim of the Hernandez spouses that their mortgage obligation had already been extinguished by means of their tender of the check issued by the San Pablo Colleges." — This is the core jurisdictional holding: claims against the insolvent bank must be brought in the liquidation proceeding.
• "The judicial liquidation is a pragmatic arrangement designed to establish due process and orderliness in the liquidation of the bank, to obviate the proliferation of litigations and to avoid injustice and arbitrariness." — This articulates the policy basis for the exclusive jurisdiction of the liquidation court.

• Central Bank of the Philippines vs. Morfe, L-38427, March 12, 1975, 63 SCRA 144 — Cited as controlling precedent for the rule that after a bank is declared insolvent by the Monetary Board, a depositor cannot bring a separate action for recovery of a time deposit but must intervene in the liquidation proceeding.
• Koh vs. Court of Appeals, L-40428, December 17, 1975, 70 SCRA 298 — Cited to define "resides" as actual residence or domicile; venue was improperly laid where the plaintiff alleged residence in Ilocos Norte but actually resided in Mandaluyong.
• Gracia Fule vs. Court of Appeals, L-404502, November 29, 1976, 74 SCRA 189 — Cited for the same rule; intestate proceedings were improperly filed in Laguna because the deceased actually resided in Quezon City at the time of death.
• Luy Lam & Co. vs. Mercantile Bank of China, 71 Phil. 573, 576 — Cited for the duty of a depositary or receiver to take immediate charge of all assets and liabilities of a bank.
• Rural Bank of Lucena, Inc. vs. Arca, L-21146, September 20, 1965, 15 SCRA 66 — Cited as prior related litigation; the Supreme Court denied the Lucena Bank's certiorari seeking to annul the liquidation proceeding.
• Rural Bank of Lucena, Inc. vs. Central Bank, L-19621, November 29, 1969, 30 SCRA 628 — Cited as prior related litigation; the Supreme Court reversed the Manila court's decision and dismissed the complaint for injunction.
• Tan Tiong Tick vs. American Apothecaries Co., 65 Phil. 414 — Cited as part of the pre-war Mercantile Bank of China liquidation cases where claims were adjudicated by the liquidation court under Section 1639 of the Revised Administrative Code.

• Section 2(a), Rule 4, Rules of Court — Enumerates real actions that must be commenced and tried where the real property lies. The Court held the Hernandez spouses' action was not among those enumerated and did not affect title to the mortgaged lots, so it was not a real action.
• Section 2(b), Rule 4, Rules of Court — Governs venue of personal actions. The Court applied it to hold that the action should have been filed where the defendants or plaintiffs actually reside, and since the Hernandez spouses actually resided in Cubao, Quezon City, venue in Batangas was improper.
• Section 29, Central Bank Act, Republic Act No. 265 — Provides for liquidation of insolvent banks under court supervision. The Court relied on it to hold that the liquidation court had exclusive jurisdiction over claims against the Lucena Bank.
• Section 1639, Revised Administrative Code — Cited as the source of Section 29 of the Central Bank Law and as the basis for the pre-war liquidation court's adjudication of claims against the Mercantile Bank of China.

Fernando (Chairman), Barredo, Antonio, and Concepcion, Jr., JJ., concurred. Santos, J., was on leave.