Racpan vs. Barroga-Haigh

An action for the annulment of a deed of sale over real property is a personal action, not a real action, where the complaint does not allege transfer of title or possession to the defendant and does not pray for recovery or reconveyance of the property. The proper venue of such a personal action is the place of residence of either the plaintiff or the defendant at the election of the plaintiff, pursuant to Section 2, Rule 4 of the Rules of Court.

Petitioner Rudy L. Racpan is the registered owner of a real property in Bo. Tuganay, Municipality of Carmen, Province of Davao del Norte, covered by Transfer Certificate of Title No. T-142-2011009374. Respondent Sharon Barroga-Haigh is a person whom petitioner met only after his wife's death in December 2011. Both petitioner and respondent reside in Davao City. The dispute centers on a Deed of Sale with Right to Repurchase dated March 29, 2011, purportedly signed by petitioner and his late wife, which petitioner claims is falsified.

Petitioner Rudy L. Racpan is the registered owner of a real property located in Bo. Tuganay, Municipality of Carmen, Province of Davao del Norte, covered by Transfer Certificate of Title No. T-142-2011009374 issued in his name alone. He purchased the property from his brother Lorenzo L. Racpan, formerly covered by TCT No. T-189893. He was married to Ma. Lucila B. Racpan, who died on November 12, 2011 in Oroville, California. Her remains were returned to Davao City, and the couple's daughter, Lani Racpan, arrived first in Davao City ahead of the body.

Upon petitioner's instruction, his daughter arranged his late wife's important documents. On December 12, 2011, she showed him a Deed of Sale with Right to Repurchase dated March 29, 2011, purportedly signed by him and his late wife, which appeared to convey the subject property to respondent Sharon Barroga-Haigh. Petitioner claimed he had never met respondent before the wake of his wife sometime on December 7 or 8, 2011, when he was introduced to her by one Orly Gabriel. He maintained that his signature on the deed was completely falsified, that he had not executed any special power of attorney in favor of his wife authorizing her to sell the property, and that the property remained registered in his name alone — the words "married to Ma. Lucila B. Racpan" on the title merely signified his civil status. To date, petitioner remained in possession of the subject property, though his daughter had been receiving text messages from respondent requiring him to settle an alleged obligation of his deceased wife.

Petitioner filed a Complaint for Declaration of Nullity of Deed of Sale with Right to Repurchase and Attorney's Fees before the RTC of Davao City, Branch 11, docketed as Civil Case No. 34,742-2012. In her Answer with Compulsory Counterclaim, respondent raised the affirmative defenses of improper venue and failure to secure a Barangay Clearance, and moved for a preliminary hearing on these defenses. The trial court dismissed the complaint for improper venue and non-compliance with the condition precedent of barangay conciliation. The Court of Appeals affirmed, classifying the complaint as a real action that should have been filed in the RTC of Davao del Norte where the property is situated, and characterizing the prayer for preliminary injunction as a mere ploy to evade barangay conciliation.

• Nature of the Action and Venue: Petitioner maintained that his complaint was a personal action, not a real action, because it was not concerned with title to or possession of real property — no transfer of possession or title to respondent had occurred, and the complaint did not pray for recovery or reconveyance of the property. Thus, venue was properly laid in Davao City where both he and respondent reside.
• Barangay Conciliation Exemption: Petitioner argued that because his complaint was coupled with a prayer for the issuance of a writ of preliminary injunction, it fell within the exceptions to the mandatory barangay conciliation requirement under Section 412(b)(3) of the Local Government Code.

• Improper Venue: Respondent contended by way of affirmative defense that the venue of the complaint was improperly laid, asserting that the action was a real action affecting title to real property and should have been filed in the RTC of Davao del Norte where the property is situated.
• Failure to Comply with Condition Precedent: Respondent argued that the filing of the case lacked the mandatory requirement of a Barangay Clearance, as the dispute was never referred to the Barangay Lupon for conciliation before the complaint was instituted.

• Venue of Actions: Whether the complaint for nullification of a deed of sale over real property is a real action or a personal action, and consequently whether venue was properly laid in Davao City.
• Barangay Conciliation: Whether the complaint was exempt from the mandatory barangay conciliation proceedings under Section 412 of the Local Government Code.

• Venue of Actions: Yes. The complaint was a personal action, and venue was properly laid in Davao City where both parties reside. An action seeking solely the annulment of a contract over real property, without alleging transfer of title or possession and without praying for recovery or reconveyance, is a personal action under Section 2, Rule 4 of the Rules of Court.
• Barangay Conciliation: Yes. The complaint was exempt from barangay conciliation proceedings. Section 412(b)(3) of the Local Government Code expressly allows parties to go directly to court where actions are coupled with provisional remedies such as preliminary injunction.

• Venue of Actions: The nature of an action is determined by the allegations in the complaint, and the nature of the action in turn determines its proper venue. Under Section 1, Rule 4 of the Rules of Court, a real action is one affecting title to or possession of real property, or an interest therein, and must be commenced where the property is situated. Under Section 2, Rule 4, all other actions are personal actions that may be filed where the plaintiff or defendant resides. The Court drew upon Bank of the Philippine Islands vs. Hontanosas, Jr., which delineated the distinction: if the plaintiff seeks recovery of real property, or the action affects title to or possession of real property, it is a real action; if the plaintiff seeks recovery of personal property, enforcement of a contract, or recovery of damages, it is a personal action. In Chua vs. Total Office Products and Services, Inc., the Court ruled that where the action is not intended for the recovery of real property but solely for the annulment of a contract, it is a personal action. The Court distinguished Pascual, where the action for annulment of a fictitious contract was deemed a real action because title and possession had already passed to the vendee, necessitating recovery of the property. In the present case, petitioner alleged that the deed of sale was falsified, that he never signed it nor executed any special power of attorney, that the property remained registered in his name, and that he remained in possession. The complaint did not allege or pray for recovery or reconveyance of the property. Accordingly, the action was purely for annulment of a contract and was a personal action properly venued in Davao City.

• Barangay Conciliation: Section 412(a) of the Local Government Code requires that complaints involving matters within the authority of the lupon be referred to barangay conciliation before filing in court. However, Section 412(b)(3) expressly exempts actions coupled with provisional remedies such as preliminary injunction. There was no dispute that petitioner's complaint included a prayer for the issuance of a writ of preliminary injunction. The Court rejected the CA's assumption that the prayer for injunction was a mere ploy to evade barangay conciliation, holding that good faith is always presumed and that an action cannot be dismissed on the basis of an unproven assertion of bad faith.

• Nature of Action Determines Venue — The nature of an action is determined by the allegations in the complaint, and the nature of the action in turn determines its proper venue. If the plaintiff seeks recovery of real property, or if the action affects title to or possession of real property, it is a real action that must be brought where the property is situated. If the plaintiff seeks the annulment of a contract without praying for recovery of the property, it is a personal action that may be filed where either party resides.
• Annulment of Contract as Personal Action — An action for annulment of a contract over real property is a personal action where the complaint does not allege that title or possession has been transferred to the defendant and does not pray for recovery or reconveyance of the property. This contrasts with cases where title and possession have already passed to the vendee, in which the annulment action is treated as a real action for recovery of the property.
• Exemption from Barangay Conciliation for Actions with Provisional Remedies — Under Section 412(b)(3) of the Local Government Code, actions coupled with provisional remedies such as preliminary injunction are exempt from the mandatory barangay conciliation requirement. The exemption applies where the complaint genuinely includes a prayer for a provisional remedy, and bad faith cannot be presumed to evade the requirement without proof of improper motive.

• "Well-settled is the rule that an action to annul a contract of loan and its accessory real estate mortgage is a personal action. In a personal action, the plaintiff seeks the recovery of personal property, the enforcement of a contract or the recovery of damages. In contrast, in a real action, the plaintiff seeks the recovery of real property, or, as indicated in Section 2 (a), Rule 4 of the then Rules of Court, 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 mortgage on, real property." — This passage, quoted from Chua vs. Total Office Products and Services, Inc., articulates the canonical distinction between real and personal actions and is the controlling formulation applied to determine venue in cases involving annulment of contracts over real property.

• "as there was no allegation that the possession and title to the property have been transferred to respondent, nowhere in the Complaint did petitioner allege or pray for the recovery or reconveyance of the real property." — This statement applies the personal-action doctrine to the facts of the case, pinpointing the absence of allegations of transfer and the absence of a prayer for recovery as the decisive factors classifying the complaint as a personal action.

• "This Court cannot sustain a dismissal of an action on account of an unproven assertion of bad faith." — This pronouncement establishes that courts may not dismiss an action based on speculative imputations of bad faith where the law provides a clear statutory exemption, reinforcing the presumption of good faith.

• Bank of the Philippine Islands vs. Hontanosas, Jr., 737 Phil. 38 (2014) — Followed. This case delineated the basic distinction between real and personal actions and their respective venues under Rule 4 of the Rules of Court, providing the analytical framework applied in the present case.
• Chua vs. Total Office Products and Services, Inc., 508 Phil. 490 (2005) — Followed. Held that an action not intended for recovery of real property but solely for annulment of a contract is a personal action. This was the direct controlling precedent for classifying petitioner's complaint as a personal action.
• Pascual (cited via Chua) — Distinguished. In Pascual, title to and possession of the subject fishpond had already passed to the vendee, necessitating recovery of the property and making the annulment action a real action. The Court distinguished it because in the present case, title and possession remained with petitioner.

• Section 1, Rule 4, Rules of Court — Defines venue of real actions: actions affecting title to or possession of real property, or interest therein, shall be commenced and tried where the real property is situated. The CA applied this provision to classify the complaint as a real action; the Supreme Court held it inapplicable because the complaint did not seek recovery of or affect title to the property.
• Section 2, Rule 4, Rules of Court — Defines venue of personal actions: all other actions may be commenced where the plaintiff or defendant resides, at the election of the plaintiff. The Court applied this provision to hold that Davao City, where both parties reside, was the proper venue.
• Section 412, Local Government Code — Governs barangay conciliation as a pre-condition to filing complaints in court. Section 412(a) requires referral to the lupon before filing; Section 412(b)(3) exempts actions coupled with provisional remedies such as preliminary injunction. The Court applied the exemption to uphold the complaint's direct filing in court.

Bersamin, Leonen, Martires, and Gesmundo, JJ., concurred.