20 Philippine Ports Authority (PPA) Employees

Hired After July 1, 1989 v. Commission on Audit,

G.R. No. 160396, September 6, 2005, 469 SCRA
397 per Panganiban, then acting CJ.

* FIRST DIV ISION.

500 SUPREME COURT REPORTS  

ANNOTATED
Chua vs. Total Office Products and 501

Services (Topros), Inc.

 
33
VOL. 471, SEPTEMBER 30, 2005 501
ANTONIO T. CHUA, petitioner, vs.
TOTAL OFFICE PRODUCTS AND Chua vs. Total Office Products and
SERVICES (TOPROS), INC., Services (Topros), Inc.
respondent.
foreclosure of mortgage on, real property.—
Well-settled is the rule that an action to
Actions; Loans; Real Estate Mortgages;
annul a contract of loan and its accessory
An action to annul a contract of loan and
real estate mortgage is a personal action. In
its accessory real estate mortgage is a
a personal action, the plaintiff seeks the
personal action; In a personal action, the
recovery of personal property, the
plaintiff seeks the recovery of personal
enforcement of a contract or the recovery of
property, the enforcement of a contract or the
damages. In contrast, in a real action, the
recovery of damages; A real action is an
plaintiff seeks the recovery of real property,
action affecting title to real property or for
or, as indicated in Section 2 (a), Rule 4 of
the recovery of possession, of for partition or
the then Rules of Court, a real action is an
condemnation of, or
action affecting title to real property or for
the recovery of possession, or for partition or
_______________
condemnation of, or foreclosure of mortgage action for the cancellation of a real estate
on, real property. mortgage. Exclusio unios est inclusio
Same; Same; Same; Venue; The rule on alterius. The latter thus falls under the
real actions only mentions an action for catch-all provision on personal actions
foreclosure of a real estate mortgage—it does under paragraph (b) of the above-cited
not include an action for the cancellation or section, to wit: SEC. 2 (b) Personal actions.
annulment of a real estate mortgage; The —All other actions may be commenced and
place where the parties reside is the proper tried where the defendant or any of the
venue for an action to nullify a loan and defendants resides or may be found, or
real estate mortgage contracts.—The Court where the plaintiff or any of the plaintiffs
of Appeals finds that Hernandez v. Rural resides, at the election of the plaintiff. In
Bank of Lucena, Inc. provides the proper the same vein, the action for annulment of
precedent in this case. In Hernandez, a real estate mortgage in the present case
appellants contended that the action of the must fall under Section 2 of Rule 4, to wit:
Hernandez spouses for the cancellation of SEC. 2. Venue of personal actions.—All
the mortgage on their lots was a real action other actions may be commenced and tried
affecting title to real property, which should where the plaintiff or any of the principal
have been filed in the place where the plaintiffs resides, or where the defendant or
mortgaged lots were situated. Rule 4, any of the principal
Section 2 (a), of the then Rules of Court,
502
was applied, to wit: SEC. 2. Venue in Courts
of First Instance.—(a) Real actions.—
Actions affecting title to, or for recovery of  
possession, or for partition or condemnation
of, or foreclosure of mortgage on, real 502 SUPREME COURT REPORTS
property, shall be commenced and tried in ANNOTATED
the province where the property or any part
thereof lies. The Court pointed out in the Chua vs. Total Office Products and
Services (Topros), Inc.
Hernandez case that with respect to
mortgage, the rule on real actions only
mentions an action for foreclosure of a real defendants resides, or in the case of a non-
estate mortgage. It does not include an resident defendant where he may be found,
at the election of the plaintiff. Thus, Pasig order the inclusion of such party. A person
City, where the parties reside, is the proper is not an indispensable party, however, if
venue of the action to nullify the subject his interest in the controversy or subject
loan and real estate mortgage contracts. matter is separable from the interest of the
The Court of Appeals committed no other parties, so that it will not necessarily
reversible error in upholding the orders of be directly or injuriously affected by a
the Regional Trial Court denying decree which does complete justice between
petitioner’s motion to dismiss the case on the them.
ground of improper venue. Same; Same; Same; Agency; A person
Same; Parties; Indispensable Parties; acting as a mere representative of another
The absence of an indispensable party acquires no rights whatsoever, nor does he
renders all subsequent actuations of the incur any liabilities arising from the said
court null and void, because of that court’s contract between his principal and another
want of authority to act, not only as to the party.—Is John Charles Chang, Jr., the
absent parties but even as to those present; A president of TOPROS who allegedly entered
person is not an indispensable party if his into the disputed contracts of loan and real
interest in the controversy of subject matter estate mortgage, an indispensable party in
is separable from the interest of the other this case? We note that although it is
parties, so that it will not necessarily be Chang’s signature that appears on the
directly or injuriously affected by a decree assailed real estate mortgage contract, his
which does complete justice between them.— participation is limited to being a
The presence of indispensable parties is representative of TOPROS, allegedly
necessary to vest the court with jurisdiction. without authority. The document which
The absence of an indispensable party constitutes as the contract of real estate
renders all subsequent actuations of the mortgage clearly points to petitioner and
court null and void, because of that court’s TOPROS as the sole parties-in-interest to
want of authority to act, not only as to the the agreement as mortgagee and mortgagor
absent parties but even as to those present. therein, respectively. Any rights or liabilities
Thus, whenever it appears to the court in arising from the said contract would
the course of a proceeding that an therefore bind only the petitioner and
indispensable party has not been joined, it TOPROS as principal
is the duty of the court to stop the trial and
           Lawyer’s Advocate Circle for
503 respondent.

QUISUMBING, J.:
  1
For review on certiorari is the decision
VOL. 471, SEPTEMBER 30, 2005 503 dated November 28, 2001 of the 2
Court
of Appeals and its resolution of April
Chua vs. Total Office Products and
1, 2002 in CA-G.R. SP No. 62592. The
Services (Topros), Inc.
assailed decision and resolution
dismissed the special civil action for
parties. Chang, acting as mere certiorari against the orders4 of August
3
representative of TOPROS, acquires no 9, 2000 and October 6, 2000 issued by
rights whatsoever, nor does he incur any Judge Lorifel Lacap Pahimna in Civil
liabilities, arising from the said contract Case No. 67736.
between petitioner and TOPROS. Certainly, The pertinent facts, based on the
in our view, the only indispensable parties records, are as follows: On December
to the mortgage contract are petitioner and 28, 1999, respondent Total Office
TOPROS alone. We thus hold that John Products and Services, Inc., (TOPROS)
Charles Chang, Jr., is not an indispensable lodged a complaint for annulment of
party in Civil Case No. 67736. This is contracts of loan and real estate
without prejudice to any separate action mortgage against herein petitioner
TOPROS may institute against Chang, Jr., Antonio T. Chua before the Regional
in a proper proceeding. Trial

PETITION for review on certiorari of

_______________
the decision and resolution of the
Court of Appeals. 1 Rollo, pp. 7-12, Penned by Associate Justice
Bienvenido L. Reyes, with Associate Justices
The facts are stated in the opinion of Cancio C. Garcia (now a Member of this Court),
the Court. and Roberto A. Barrios concurring.
          Fondevilla, Jasarino, Rondario 2 Id., at pp. 17-20.
& Librojo Law Offices for petitioner. 3 CA Rollo, pp. 11-12.
 4 Id., at p. 13. On February 28, 2000, petitioner
filed a motion to dismiss on the ground
504
of improper venue. He contended that
the action filed by TOPROS affects
504 SUPREME COURT REPORTS title to or possession of the parcels of
ANNOTATED land subject of the real estate
mortgage. He argued that it should
Chua vs. Total Office Products and
thus have been filed in the Regional
Services (Topros), Inc.
Trial Court of Quezon City where the
encumbered real properties are
Court of Pasig City. The case was located, instead of Pasig City where
docketed as Civil Case No. 67736 and the parties reside.
was raffled to the sala of Judge Lorifel On August 9, 2000, Judge Pahimna
Lacap Pahimna. issued an order denying the motion to
The said suit sought to annul a loan dismiss. She reasoned that the action
contract allegedly extended by to annul the loan and mortgage
petitioner to respondent TOPROS in contracts is a personal action and thus,
the amount of ten million four hundred the venue was properly laid in the
thousand pesos (P10,400,000) and the RTC of Pasig City where the parties
accessory real estate mortgage reside.
contract covering two parcels of land Petitioner moved for a
situated in Quezon City as collateral. reconsideration of the said order, which
It appeared on the face of the Judge Pahimna denied in its order of
subject contracts that TOPROS was October 6, 2000. Hence, petitioner filed
represented by its president John with the Court of Appeals a special
Charles Chang, Jr. However, TOPROS civil action for certiorari alleging:
alleged that the purported loan and
real estate mortgage contracts were THE RESPONDENT JUDGE COMMITTED
fictitious, since it never authorized GRAVE ABUSE OF DISCRETION IN
anybody, not even its president, to DISREGARDING THE RULING OF THE
enter into said transaction. SUPREME COURT IN PASCUAL VS.
PASCUAL REGARDING THE RULE ON
PROPER VENUE, AND CONSEQUENTLY Court of Appeals denied for lack of
ADJUDGING TO BE A PERSONAL merit in its resolution of April 1, 2002.
ACTION A CIVIL COMPLAINT Undeterred, petitioner now comes to
us on a petition for review raising the
505
following issues:

WHETHER AN ACTION TO ANNUL A

VOL. 471, SEPTEMBER 30, 2005 505
LOAN AND MORTGAGE CONTRACT
Chua vs. Total Office Products and DULY ALLEGED AS ‘FICTITIOUS’ FOR
Services (Topros), Inc.
BEING WITH ABSOLUTELY NO
CONSIDERATION IS A PERSONAL
FOR THE ANNULMENT OF AN
5 ACTION OR REAL ACTION?
ALLEGEDLY FICTITIOUS CONTRACT.
WHETHER IN AN ACTION TO ANNUL
The Court of Appeals dismissed said A LOAN AND MORTGAGE CONTRACT
petition in its decision dated November DULY ALLEGED AS ‘FICTITIOUS’ FOR
28, 2001. It held that the authorities BEING WITH ABSOLUTELY NO
relied upon by petitioner, namely CONSIDERATION, THE PERSON
Pascual v. Pascual
6
and 7Banco ALLEGED TO HAVE ‘[LACKED]
Español-Filipino v. Palanca, are AUTHORITY’ TO ENTER INTO SAID
inapplicable in the instant case. The CONTRACTS
9
IS AN INDISPENSABLE
appellate court instead applied PARTY?
Hernandez v. Rural Bank of Lucena,
8 Petitioner contends that Hernandez
Inc. wherein we ruled that an action
should not be applied here because in
for the cancellation of a real estate
the said case: (1) venue was improperly
mortgage is a personal action if the
laid at the outset; (2) the complaint
mortgagee has not foreclosed the
recognized the validity of the
mortgage and the mortgagor is in
possession of the premises, as neither
_______________
the mortgagor’s title to nor possession
of the property is disputed. 5 Rollo, p. 39.
Dissatisfied, petitioner filed a 6 No. 48140, 4 May 1942, 73 Phil. 561.
motion for reconsideration, which the 7 No. 11390, 26 March 1918, 37 Phil. 921.
 8 No. L-29791, 10 January 1978, 81 SCRA Petitioner likewise cites the Banco
75. Español-Filipino case, thus:
9 Rollo, p. 26.
Where the defendant in a mortgage
506 foreclosure lives out of the Islands and
refuses to appear or otherwise submit
himself to the authority of the court, the
506 SUPREME COURT REPORTS
jurisdiction of the latter is limited to the
ANNOTATED
mortgaged property, with respect to which
Chua vs. Total Office Products and the jurisdiction of the court is based upon
Services (Topros), Inc. the fact that the property is located within
the district and that the court, under the
principal contract involved; and (3) the provisions of law applicable in such cases, is
plaintiff sought to compel acceptance vested with the power to subject the
by the defendant of plaintiff’s payment property to the obligation created by the
of the latter’s mortgage debt. He insists mortgage. In such case personal jurisdiction
that the Pascual case should be over the nonresident defendant is
applied instead. He invokes our nonessential
11
and in fact cannot be
pronouncement in Pascual, to wit: acquired.

. . . It appearing, however, that the sale is Petitioner also alleges that John
alleged to be fictitious, with absolutely no Charles Chang, Jr., the president of
consideration, it should be regarded as a TOPROS, who allegedly entered into
non-existent, not merely null, contract. . . . the questioned loan and real estate
And there being no contract between the mortgage contracts, is an
deceased and the defendants, there is in indispensable party who has not been
truth nothing to annul by action. The action properly impleaded.
brought cannot thus be for annulment of TOPROS, however, maintains that
contract, but is one for recovery of a the appellate court correctly sustained
fishpond, a real action that should be, as it the lower court’s finding that the
has been, brought in Pampanga,
10
where the instant complaint for annulment of
property is located. . . . loan and real estate mortgage
_______________ Considering the facts and the
submission of the parties, we find the
10 Supra, note 6 at p. 562.
petition bereft of merit.
11 Supra, note 7.
Well-settled is the rule that an
507 action to annul a contract of loan and
its accessory real estate mortgage is a
personal action. In a personal action,
VOL. 471, SEPTEMBER 30, 507 the plaintiff seeks the recovery of
2005 personal property, the enforcement of a 12
Chua vs. Total Office Products and contract or the recovery of damages.
Services (Topros), Inc. In contrast, in a real action, the
plaintiff seeks the recovery of real
contracts is a personal action. property, or, as indicated in Section 2
TOPROS points out that a complaint (a), Rule 4 of the then Rules of Court, a
for the declaration of nullity of a loan real action is an action affecting title to
contract for lack of consent and real property or for the recovery of
consideration remains a personal possession, or for partition or
action even if the said action will condemnation of, or foreclosure
13
of
necessarily affect the accessory real mortgage on, real property.
estate mortgage. In the Pascual case, relied upon by
TOPROS argues that Pascual is petitioner, the contract of sale of the
inapplicable because the subject fishpond was assailed as fictitious for
contract therein was a contract of sale lack of consideration. We held that
of a parcel of land where title and there being no contract to begin with,
possession were already transferred to there is nothing to annul. Hence, we
the defendant. TOPROS further deemed the action for annulment of
contends that Banco Español-Filipino the said fictitious contract therein as
is also inapplicable since the personal one constituting a real action for the
action filed therein was one which recovery of the fishpond subject
affected the personal status of a thereof.
nonresident defendant. We cannot, however, apply the
foregoing doctrine to the instant case.
Note that in Pascual, title to and against a nonresident. We held therein
possession of the that jurisdiction is determined by the
place where the real property is located
_______________ and that personal jurisdiction over the
nonresident defendant is nonessential
12 Supra, note 8 at p. 84. and, in fact, cannot be acquired.
13 Ibid. Needless to stress, the instant case
bears no resemblance to the Banco
508
Español-Filipino case. In the first
place, this is not an action involving
508 SUPREME COURT REPORTS foreclosure of real estate mortgage. In
ANNOTATED the second place, none of the parties
here is a nonresident. We find no
Chua vs. Total Office Products and
Services (Topros), Inc. reason to apply here our ruling in
Banco Español-Filipino.
The Court of Appeals finds that
subject fishpond had already passed to
Hernandez v. Rural Bank of Lucena,
the vendee. There was, therefore, a
Inc. provides the proper precedent in
need to recover the said fishpond. But
this case. In Hernandez, appellants
in the instant case, ownership of the
contended that the action of the
parcels of land subject of the
Hernandez spouses for the cancellation
questioned real estate mortgage was
of the mortgage on their lots was a real
never transferred to petitioner, but
action affecting title to real property,
remained with TOPROS. Thus, no real
which should have been filed in the
action for the recovery of real property
place where the mortgaged lots were
is involved. This being the case,
situated. Rule 4, Section 2 (a), of the
TOPROS’ action for annulment of the
then Rules of Court, was applied, to
contracts of loan and real estate
wit:
mortgage remains a personal action.
Petitioner’s reliance on the Banco SEC. 2. Venue in Courts of First Instance.—
Español-Filipino case is likewise (a) Real actions.—Actions affecting title to,
misplaced. That case involved a or for recovery of possession, or for partition
foreclosure of real estate mortgage
or condemnation of, or foreclosure of In the same vein, the action for
mortgage on, real property, shall be annulment of a real estate mortgage in
commenced and tried in the province where the present case must fall under
the property or any part thereof lies. Section 2 of Rule 4, to wit:

509 SEC. 2. Venue of personal actions.—All

other actions may be commenced and tried
where the plaintiff or any of the principal
VOL. 471, SEPTEMBER 30, 509
plaintiffs resides, or where the defendant or
2005
any of the principal defendants resides, or
Chua vs. Total Office Products and in the case of a non-resident defendant
Services (Topros), Inc. where he may be found, at the election of
14
the plaintiff.
The Court pointed out in the
Hernandez case that with respect to Thus, Pasig City, where the parties
mortgage, the rule on real actions only reside, is the proper venue of the action
mentions an action for foreclosure of a to nullify the subject loan and real
real estate mortgage. It does not estate mortgage contracts. The Court
include an action for the cancellation of of Appeals committed no reversible
a real estate mortgage. Exclusio unios error in upholding the orders of the
est inclusio alterius. The latter thus Regional Trial Court denying
falls under the catch-all provision on petitioner’s motion to dismiss the case
personal actions under paragraph (b) on the ground of improper venue.
of the above-cited section, to wit: Anent the second issue, Section 7,
Rule 3 of the Revised Rules of Court
SEC. 2 (b) Personal actions.—All other provides:
actions may be commenced and tried where
the defendant or any of the defendants SEC. 7. Compulsory joinder of
resides or may be found, or where the indispensable parties.—Parties in interest
plaintiff or any of the plaintiffs resides, at without whom no final determination can
the election of the plaintiff. be had of an action shall be joined either as
plaintiffs or defendants. (Emphasis ours)
_______________ decree which 17 does complete justice
between them.
14 1997 Rules of Civil Procedure.
Is John Charles Chang, Jr., the
510 president of TOPROS who allegedly
entered into the disputed contracts of
loan and real estate mortgage, an
510 SUPREME COURT REPORTS indispensable party in this case?
ANNOTATED We note that although it is Chang’s
Chua vs. Total Office Products and signature that appears on the assailed
Services (Topros), Inc. real estate mortgage contract, his
participation is limited to being a
The presence of indispensable parties representative of TOPROS, allegedly18
is necessary to vest the court with without authority. The document
jurisdiction. The absence of an which constitutes as the contract of
indispensable party renders all real estate mortgage clearly points to
subsequent actuations of the court null petitioner and TOPROS as the sole
and void, because of that court’s want parties-in-interest to the agreement as
of authority to act, not only as to the mortgagee and mortgagor therein,
absent parties but even as to those respectively. Any rights or liabilities
15
present. Thus, whenever it appears to arising from the said contract would
the court in the course of a proceeding therefore bind only the petitioner and
that an indispensable party has not TOPROS as principal parties. Chang,
been joined, it is the duty of the court acting as mere representative of
to stop the trial and order the inclusion TOPROS, acquires no rights
of such party.
16
whatsoever, nor does he incur any
A person is not an indispensable liabilities, arising from the said
party, however, if his interest in the contract between petitioner and TO-
controversy or subject matter is
separable from the interest of the other _______________
parties, so that it will not necessarily
15 Metropolitan Bank & Trust Company v.
be directly or injuriously affected by a
Alejo, G.R. No. 141970, 10 September 2001, 364
SCRA 812, 821. SO ORDERED.
16 De Castro v. Court of Appeals, G.R. No.
115838, 18 July 2002, 384 SCRA 607, 613-614.           Davide, Jr. (C.J., Chairman),
17 Supra, note 15 at p. 820. Ynares-Santiago, Carpio and Azcuna,
18 Rollo, p. 60. JJ., concur.

511 Petition denied, assailed decision

and resolution affirmed.
VOL. 471, SEPTEMBER 30, 511 Notes.—A judgment of the
2005 Regional Trial Court, even if
Chua vs. Total Office Products and previously affirmed by the
Services (Topros), Inc. Intermediate Appellate Court and the
Supreme Court, may be nullified on
PROS. Certainly, in our view, the only the ground of lack of jurisdiction of the
indispensable parties to the mortgage trial court over the persons of
contract are petitioner and TOPROS indispensable parties where said issue
alone. of lack of jurisdiction was not raised in
We thus hold that John Charles the earlier appellate proceedings.
Chang, Jr., is not an indispensable (Arcelona vs. Court of Appeals, 280
party in Civil Case No. 67736. This is SCRA 20 [1997])
without prejudice to any separate Owners of property over which
action TOPROS may institute against reconveyance is asserted are
Chang, Jr., in a proper proceeding. indispensable parties without whom no
WHEREFORE, the petition is relief is available and without whom
DENIED. The assailed decision dated the court can render no valid
November 28, 2001 and resolution judgment, and their absence in the
dated April 1, 2002 of the Court of suit renders all subsequent actions of
Appeals upholding the Orders of Judge the trial court null and void for want of
Lorifel Lacap Pahimna are authority to act, not only as to the
AFFIRMED. absent parties but even as to those
No pronouncement as to costs. present. When indispensable parties
are not before the court, the action
 should be dismissed. (Metropolitan
Waterworks and Sewerage System
[MWSS] vs. Court of Appeals, 297
SCRA 287 [1998])

——o0o——

512

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