Paderanga vs. Buissan

An action for damages and to fix the period of a lease, where its ultimate purpose necessarily includes recovery of possession of the leased real property, is a real action that must be commenced and tried in the province where the property or any part thereof lies.

Petitioner Jorge C. Paderanga owned a building in Ozamiz City. Private respondent Elumba Industries Company, a partnership represented by its General Manager Jose J. Elumba, leased a commercial space in that building under an oral contract of lease for an indefinite period, paying P150.00 per month on a month-to-month basis, and used the area as the Sales Office of Allied Air Freight in Ozamiz City. Under the then Rules of Court, venue for personal actions lies where the defendant or plaintiff resides at the plaintiff's election, while real actions must be brought where the subject property or part thereof lies.

In 1973, petitioner Jorge C. Paderanga and private respondent Elumba Industries Company, a partnership represented by its General Manager Jose J. Elumba, entered into an oral contract of lease over a commercial space within a building owned by Paderanga in Ozamiz City. The lease was for an indefinite period, with rent of P150.00 per month paid on a month-to-month basis. Elumba Industries Company used the leased area as the Sales Office of Allied Air Freight in Ozamiz City.

On 4 April 1977, Paderanga subdivided the leased premises into two by constructing a partition wall. He then took possession of the other half. The repossession was said to have been undertaken with the acquiescence of the local manager of Elumba, although private respondent maintains that this was not the case. The validity of the repossession was not in issue.

On 18 July 1977, private respondent instituted an action for damages before the then Court of First Instance of Zamboanga del Norte based in Dipolog City. The action also prayed for the fixing of the period of lease at five years and was docketed as Civil Case No. 2901. Private respondent sought moral damages of P100,000.00, exemplary damages of P50,000.00, attorney's fees of P5,000.00, and costs of P1,000.00. Petitioner, a resident of Ozamiz City, moved for dismissal, contending that the action was a real action that should have been filed with the Court of First Instance of Misamis Occidental stationed in Ozamiz City, where the property in question was situated.

On 6 November 1978, respondent Judge Dimalanes B. Buissan denied the Motion to Dismiss. He held that Civil Case No. 2901 merely involved the enforcement of the contract of lease and, while it affected a portion of real property, no question of ownership was raised; hence venue was properly laid. Petitioner sought reconsideration, contending that although the action did not involve ownership, it nevertheless sought recovery of possession and was therefore a real action that had to be filed in Ozamiz City. On 4 December 1978, respondent judge denied reconsideration. While admitting that Civil Case No. 2901 did pray for recovery of possession, he ruled that this matter was not the main issue and that ownership was not raised. Petitioner then instituted the present recourse.

• Real Action and Venue: Petitioner argued that because Elumba sought to recover possession of the portion surrendered to him by the local manager and to fix the lease period at five years, Dipolog City could not be the proper venue; the action being a real action, venue is laid in the court having jurisdiction over the territory where the property lies.

• Damages as Main Action: Respondent countered that the action was chiefly for damages arising from an alleged breach of the lease contract, so the issue of recovery of possession was merely incidental.
• In Personam and Venue: Respondent argued that the action was one in personam and not in rem; therefore venue may be laid in the place where the plaintiff or defendant resides, at the option of the plaintiff.

• Nature of Action and Venue: Whether an action for damages and to fix the period of a contract of lease, where it necessarily includes recovery of possession of the leased real property, is a real action that must be filed in the province where the property lies.
• Grave Abuse of Discretion: Whether respondent judge gravely abused his discretion amounting to lack or excess of jurisdiction in denying petitioner's Motion to Dismiss for improper venue.

• Nature of Action and Venue: Yes. The action is a real action because its ultimate purpose necessarily includes recovery of possession of the leased real property; venue lies in the province where the property or part thereof lies.
• Grave Abuse of Discretion: Yes. The denial of the Motion to Dismiss for improper venue constituted grave abuse of discretion amounting to lack or excess of jurisdiction.

• Nature of Action and Venue: The Court first distinguished personal and real actions from actions in personam and in rem. The former determines venue; the latter determines the binding effect of a judgment. The action affected only the parties, not the whole world, so it was in personam, but that did not make it a personal action for venue. Under Hernandez vs. Rural Bank of Lucena, Inc., a personal action seeks recovery of personal property, enforcement of a contract, or recovery of damages; a real action seeks recovery of real property or affects title, possession, partition, condemnation, or foreclosure of mortgage on real property. A real action may be in personam and not necessarily in rem. Thus, the distinction between in personam and in rem was irrelevant to venue; the inquiry was whether the action was personal or real. Personal actions may be instituted where the defendant or plaintiff resides, at the plaintiff's election; real actions must be brought where the property or part lies. Although the complaint was for damages arising from breach of lease, it also prayed for fixing the lease period at five years. If meritorious, private respondent would be entitled to remain as lessee for another five years and to recover the portion earlier taken, because the original leased premises was the whole commercial space, not merely the subdivided portion. Although the complaint did not explicitly pray for recovery of possession, that was its necessary consequence. The action did not efface its fundamental and prime objective: recovery of the one-half portion repossessed by the lessor. Where the ultimate purpose involves title to or recovery of possession, partition, condemnation, or foreclosure of mortgage on real property, the action is real and must be commenced and tried in the province where the property or part lies. The denial of the Motion to Dismiss was therefore grave abuse of discretion.
• Grave Abuse of Discretion: Because the action was real and venue was improperly laid in Dipolog City, respondent judge's denial of the Motion to Dismiss constituted grave abuse of discretion amounting to lack or excess of jurisdiction. The Petition for Prohibition was accordingly granted, the challenged orders set aside, and Civil Case No. 2901 directed dismissed for improper venue.

• Real Action vs. Personal Action for Venue — Venue is determined by whether an action is personal or real, not by whether it is in personam or in rem. A personal action seeks recovery of personal property, enforcement of a contract, or recovery of damages; it may be filed where the defendant or any defendant resides or may be found, or where the plaintiff or any plaintiff resides, at the plaintiff's election. A real action seeks recovery of real property or affects title to real property, recovery of possession, partition, condemnation, or foreclosure of mortgage on real property; it must be filed where the property or part lies. The Court applied this rule by treating the action for damages and fixing the lease period as a real action because its ultimate purpose necessarily included recovery of possession.
• In Personam vs. In Rem — An action in personam is against a person on the basis of personal liability, while an action in rem is against the thing itself. The distinction concerns the binding effect of a judgment, not venue. A real action may at the same time be an action in personam and not necessarily an action in rem. The Court applied this by noting that the action affected only the parties, making it in personam, but still real for venue purposes.
• Ultimate Purpose / Necessary Consequence Test — Even if a complaint does not explicitly pray for recovery of possession, if such recovery is the necessary consequence of the relief sought and the ultimate purpose involves title to or recovery of possession of real property, the action is real. The Court applied this because fixing the lease period at five years would entitle private respondent to remain and to recover the portion earlier taken, making the action essentially one for recovery of possession.

• "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, as indicated in section 2(a) of Rule 4, a real action is an action affecting title to real property or for the recovery of possession, or for partition or condemnation of, or foreclosure of a mortgage on, real property." — The Court quotes Hernandez vs. Rural Bank of Lucena, Inc. to distinguish personal and real actions for venue purposes.
• "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. Hence, a real action may at the same time be an action in personam and not necessarily an action in rem." — The Court explains why the in personam/in rem distinction does not control venue and why a real action may still be in personam.
• "While it may be that the instant complaint does not explicitly pray for recovery of possession, such is the necessary consequence thereof." — This is the Court's key application of the necessary-consequence test to the complaint for damages and fixing of the lease period.
• "Indeed, where the ultimate purpose of an action involves title to or seeks recovery of possession, partition or condemnation of, or foreclosure of mortgage on, real property, such an action must be deemed a real action and must perforce be commenced and tried in the province where the property or any part thereof lies." — The Court states the controlling rule that made venue in Dipolog City improper and required dismissal of the case.

• Hernandez vs. Rural Bank of Lucena, Inc., No. L-29791, 10 January 1978, 81 SCRA 75, 84-85 — Cited and quoted for the distinction between personal and real actions and between actions in personam and in rem.
• Ching vs. Court of Appeals, G.R. No. 59731, 11 January 1990, 181 SCRA 9 — Cited for the rule that an action in personam is binding only upon the parties properly impleaded.
• Fortune Motors (Phils.), Inc. vs. Court of Appeals, G.R. No. 76431, 16 October 1989, 178 SCRA 565 — Cited for the rule that personal actions may be instituted where the defendant or plaintiff resides, at the plaintiff's election, under Section 1, Rule 4.
• Carandang vs. Court of Appeals, No. L-44932, 15 April 1988, 160 SCRA 266 — Cited for the rule that real actions should be brought before the court having jurisdiction over the territory where the subject property or part lies.
• Tenorio vs. Paño, No. L-48117, November 1986, 146 SCRA 74 — Cited for the principle that recovery of possession may be the necessary consequence of the relief sought even if not explicitly prayed for.
• Punsalan, Jr. vs. Vda. de Lacsamana, G.R. No. 55729, 28 March 1983, 121 SCRA 331 — Cited for the rule that where the ultimate purpose involves recovery of possession of real property, the action is real.

• Section 1, Rule 4, Revised Rules of Court — Provides that personal actions may be instituted in the Regional Trial Court 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. The Court found this provision inapplicable because the action was real, not personal.
• Section 2, paragraph (a), Rule 4, Revised Rules of Court — Defines a real action as one affecting title to real property or for the recovery of possession, partition, condemnation, or foreclosure of mortgage on real property. The Court applied this provision in holding that the action had to be filed where the property lies.

Cruz, Davide, Jr., and Quiason, JJ., concurred. Griño-Aquino, J., was on leave.