KOREA EXCHANGE BANK, vs. FILKOR BUSINESS INTEGRATED, INC.

, KIM EUNG (b) the property mortgaged be foreclosed and sold at public auction in case
JOE, and LEE HAN SANG respondents failed to pay petitioner within ninety days from entry of judgment;
G.R. No. 138292 April 10, 2002 and
(c) other reliefs just and equitable be granted.
DOCTRINE:
Petitioners allegations in its complaint, and its prayer that the mortgaged Petitioner moved for summary judgment trial court then rendered judgment
property be foreclosed and sold at public auction, indicate that petitioners in favor of petitioner, granting its prayers under all its twenty-seven causes of
action was one for foreclosure of real estate mortgage. action. The Trial Court however, failed to order that the property
mortgaged by respondent Filkor be foreclosed and sold at public auction
We have consistently ruled that what determines the nature of an action, as in the event that Filkor fails to pay its obligations to petitioner.
well as which court or body has jurisdiction over it, are the allegations of the
complaint and the character of the relief sought. Petitioner filed a motion for partial reconsideration of the trial courts
order, praying that the aforesaid relief of foreclosure and sale at public auction
FACTS: be granted.
On January 9, 1997, respondent Filkor Business Integrated, Inc. (Filkor)
borrowed US$140,000 from petitioner Korea Exchange Bank (Korea Bank), In an order dated April 16, 1999, the trial court denied petitioners motion,
payable on July 9, 1997. Of this amount, only US$40,000 was paid by Filkor. ruling as follows:

In addition, Filkor executed nine trust receipts in favor of petitioner Korea Plaintiff, in opting to file a civil action for the collection of defendants
Bank. However, Filkor failed to turn over to petitioner the proceeds from the obligations, has abandoned its mortgage lien on the property subject of the
sale of the goods, or the goods themselves as required by the trust receipts. real estate mortgage.

In the period from June 9, 1997 to October 1, 1997, Filkor also negotiated to The issue has already been resolved in Danao vs. Court of Appeals, 154
petitioner the proceeds of seventeen letters of credit issued by the Republic SCRA 446 (1987), citing Manila Trading and Supply Co. vs. Co Kim, et al.,
Bank of New York and the Banque Leumi France, S.A. to pay for goods which 71 Phil. 448, where the Supreme Court ruled that:
Filkor sold to Segerman International, Inc. and Davyco, S.A. When petitioner The rule is now settled that a mortgage creditor may elect to waive his
Korea Bank tried to collect the proceeds of the letters of credit by presenting security and bring, instead, an ordinary action to recover the indebtedness
the bills of exchange drawn to collect the proceeds, they were dishonored with the right to execute a judgment thereon on all the properties of the
because of discrepancies. debtor including the subject matter of the mortgage, subject to the
qualification that if he fails in the remedy by him elected, he cannot pursue
Prior to all the foregoing, in order to secure payment of all its obligations, further the remedy he has waived.
Filkor executed a Real Estate Mortgage on February 9, 1996. It mortgaged
to petitioner Korea Bank the improvements belonging to it constructed WHEREFORE, the Partial Motion for Reconsideration filed by the plaintiff
on the lot it was leasing at the Cavite Export Processing Zone Authority. of the Courts Order dated March 12, 1999 is hereby denied for lack of
Respondents Kim Eung Joe and Lee Han Sang also executed Continuing merit. SO ORDERED.
Suretyships binding themselves jointly and severally with respondent
Filkor to pay for the latters obligations to petitioner. Hence, the present petition, where petitioner ascribes the following error to the
trial court.
As respondents failed to make good on their obligations, petitioner Korea Bank
filed Civil Case No. N 6689 in the Regional Trial Court of Cavite City, docketed as ISSUE:
Korea Exchange Bank vs. Filkor Business Integrated, Inc. 1. Whether petitioners complaint before the trial court was an action for
In its complaint, petitioner Korea Bank prayed that foreclosure of a real estate mortgage, or an action for collection of a
(a) it be paid by respondents under its twenty seven causes of action; sum of money.
Action for foreclosure of real estate mortgage.
 Thus, the trial court erred in concluding that petitioner had
2. Whether the present appeal was correctly lodged before us rather abandoned its mortgage lien on Filkors property, and that what
than with the Court of Appeals. it had filed was an action for collection of a sum of money.
Appeal before SC Proper.
Petitioners action being one for foreclosure of real estate mortgage, it
RULING: was incumbent upon the trial court to order that the mortgaged
1. In petitioners complaint before the trial court, Paragraph 183 thereof property be foreclosed and sold at public auction in the event that
alleges: respondent Filkor fails to pay its outstanding obligations. the
183. To secure payment of the obligations of defendant dispositive portion of the decision of the trial court dated March 12,
Corporation under the First to the Twenty-Seventh Cause of 1999, must be modified to comply with the provisions of Section 2 of
Action, on February 9, 1996, defendant Corporation executed a Rule 68 of the 1997 Rules of Civil Procedure. This modification is
Real Estate Mortgage by virtue of which it mortgaged to plaintiff subject to any appeal filed by respondents of said decision.
the improvements standing on Block 13, to defendant
Corporation covered by Tax Declaration No. 5906-1 and 2. What petitioner impugns is the determination by the trial court
consisting of a one story building called warehouse and spooling of the nature of action filed by petitioner, based on the
area, the guard house, the cutting/sewing area building and the allegations in the complaint. Such a determination as to the
packing area building. correctness of the conclusions drawn from the pleadings
undoubtedly involves a question of law. As the present appeal
This allegation satisfies in part the requirements of Section 1, Rule 68 involves a question of law, petitioner appropriately filed it with this
of the 1997 Rules of Civil Procedure on foreclosure of real estate Court, pursuant to Section 1 of Rule 45 of the 1997 Rules of Civil
mortgage, which provides: Procedure, which provides:
SECTION 1. Complaint in action for foreclosure.In an action for
the foreclosure of a mortgage or other encumbrance upon real SECTION 1. Filing of petition with Supreme Court.A party
estate, the complaint shall set forth the date and due execution of desiring to appeal by certiorari from a judgment or final order or
the mortgage; its assignments, if any; the names and residences resolution of the Court of Appeals, the Sandiganbayan, the
of the mortgagor and the mortgagee; a description of the Regional Trial Court or other courts whenever authorized by law,
mortgaged property; a statement of the date of the note or other may file with the Supreme Court a verified petition for review on
documentary evidence of the obligation secured by the mortgage, certiorari. The petition shall raise only questions of law which must
the amount claimed to be unpaid thereon; and the names and be distinctly set forth. (Italics supplied). There is no dispute with
residences of all persons having or claiming an interest in the respect to the fact that when an appeal raises only pure questions
property subordinate in right to that of the holder of the of law, this Court has jurisdiction to entertain the same.
mortgage, all of whom shall be made defendants in the action.
DISPOSITIVE PORTION:
Petitioners allegations in its complaint, and its prayer that the
mortgaged property be foreclosed and sold at public auction, WHEREFORE, the petition is GRANTED. The Order dated March 12,
indicate that petitioners action was one for foreclosure of real 1999, of the Regional Trial Court of Cavite City, Branch 88, in Civil Case No. N-
estate mortgage. 6689 is hereby MODIFIED, to state that the mortgaged property of respondent
We have consistently ruled that what determines the nature of Filkor be ordered foreclosed and sold at public auction in the event said
an action, as well as which court or body has jurisdiction over it, respondent fails to pay its obligations to petitioner within ninety (90) days
are the allegations of the complaint and the character of the from entry of judgment.
relief sought. No pronouncement as to costs.

In addition, we find no indication whatsoever that petitioner had