VENUE AND STIPULATION IN CONTRACT

PAGLAUM MANAGEMENT & DEVELOPMENT CORP. and HEALTH MARKETING

TECHNOLOGIES, INC. vs. UNION BANK OF THE PHILIPPINES, G.R. No. 179018, June 18, 2012

The sole issue to be resolved is whether Makati City is the proper venue to assail the foreclosure of
the subject real estate mortgage. This Court rules in the affirmative.

Civil Case No. 01-1567, being an action for Annulment of Sale and Titles resulting from the
extrajudicial foreclosure by Union Bank of the mortgaged real properties, is classified as a real action.
In Fortune Motors v. Court of Appeals,[32] this Court held that a case seeking to annul a foreclosure of a real
estate mortgage is a real action, viz:

An action to annul a real estate mortgage foreclosure sale is no different from an

action to annul a private sale of real property. (Muoz v. Llamas, 87 Phil. 737, 1950).
While it is true that petitioner does not directly seek the recovery of title or
possession of the property in question, his action for annulment of sale and his claim for
damages are closely intertwined with the issue of ownership of the building which, under the
law, is considered immovable property, the recovery of which is petitioners primary
objective. The prevalent doctrine is that an action for the annulment or rescission of a sale of
real property does not operate to efface the fundamental and prime objective and nature of
the case, which is to recover said real property. It is a real action. [33]

Being a real action, the filing and trial of the Civil Case No. 01-1567 should be governed by the
following relevant provisions of the Rules of Court (the Rules):

Rule 4
VENUE OF ACTIONS

Section 1. Venue of real actions. Actions affecting title to or possession of real

property, or interest therein, shall be commenced and tried in the proper court which has
jurisdiction over the area wherein the real property involved, or a portion thereof, is
situated.

Forcible entry and detainer actions shall be commenced and tried in the municipal
trial court of the municipality or city wherein the real property involved, or a portion thereof,
is situated.

Sec. 3. When Rule not applicable. This Rule shall not apply

(a) In those cases where a specific rule or law provides otherwise; or

(b) Where the parties have validly agreed in writing before the filing of
the action on the exclusive venue thereof. (Emphasis supplied.)

In Sps. Lantin v. Lantion,[34] this Court explained that a venue stipulation must contain words that
show exclusivity or restrictiveness, as follows:

At the outset, we must make clear that under Section 4 (b) of Rule 4 of the 1997
Rules of Civil Procedure, the general rules on venue of actions shall not apply where the
parties, before the filing of the action, have validly agreed in writing on an exclusive venue.
The mere stipulation on the venue of an action, however, is not enough to preclude parties
from bringing a case in other venues. The parties must be able to show that such
stipulation is exclusive. In the absence of qualifying or restrictive words, the stipulation
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should be deemed as merely an agreement on an additional forum, not as limiting

venue to the specified place.

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Clearly, the words exclusively and waiving for this purpose any other venue are
restrictive and used advisedly to meet the requirements.[35] (Emphasis supplied.)

According to the Rules, real actions shall be commenced and tried in the court that has jurisdiction
over the area where the property is situated. In this case, all the mortgaged properties are located in the
Province of Cebu. Thus, following the general rule, PAGLAUM and HealthTech should have filed their case
in Cebu, and not in Makati.

However, the Rules provide an exception, in that real actions can be commenced and tried in a court
other than where the property is situated in instances where the parties have previously and validly agreed
in writing on the exclusive venue thereof. In the case at bar, the parties claim that such an agreement exists.
The only dispute is whether the venue that should be followed is that contained in the Real Estate Mortgages,
as contended by Union Bank, or that in the Restructuring Agreement, as posited by PAGLAUM and
HealthTech. This Court rules that the venue stipulation in the Restructuring Agreement should be
controlling.

The Real Estate Mortgages were executed by PAGLAUM in favor of Union Bank to secure the credit
line extended by the latter to HealthTech. All three mortgage contracts contain a dragnet clause, which
secures succeeding obligations, including renewals, extensions, amendments or novations thereof, incurred
by HealthTech from Union Bank, to wit:

Section 1. Secured Obligations. The obligations secured by this Mortgage (the

Secured Obligations) are the following:

a) All the obligations of the Borrower and/or the Mortgagor under: (i) the
Notes, the Agreement, and this Mortgage; (ii) any and all instruments or documents issued
upon the renewal, extension, amendment or novation of the Notes, the Agreement and this
Mortgage, irrespective of whether such obligations as renewed, extended, amended or
novated are in the nature of new, separate or additional obligations; and (iii) any and all
instruments or documents issued pursuant to the Notes, the Agreement and this Mortgage;

b) All other obligations of the Borrower and/or the Mortgagor in favor of

the Mortgagee, whether presently owing or hereinafter incurred and whether or not arising
from or connected with the Agreement, the Notes and/or this Mortgage; and

c) Any and all expenses which may be incurred in collecting any and all
of the above and in enforcing any and all rights, powers and remedies of the Mortgagee
under this Mortgage.[36]

On the other hand, the Restructuring Agreement was entered into by HealthTech and Union Bank to
modify the entire loan obligation. Section 7 thereof provides:

Security. The principal, interests, penalties and other charges for which the
BORROWER may be bound to the BANK under the terms of this Restructuring Agreement,
including the renewal, extension, amendment or novation of this Restructuring Agreement,
irrespective of whether the obligations arising out of or in connection with this Restructuring
Agreement, as renewed, extended, amended or novated, are in the nature of new, separate or
additional obligations, and all other instruments or documents covering the Indebtedness or
otherwise made pursuant to this Restructuring Agreement (the Secured Obligations), shall
continue to be secured by the following security arrangements (the Collaterals):

a. Real Estate Mortgage dated February 11, 1994 executed by

Paglaum Management and Development Corporation over a 474 square meter property
covered by TCT No. 112489;
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b. Real Estate Mortgage dated February 11, 1994 executed by Paglaum

Management and Development Corporation over a 2,796 square meter property covered
by TCT No. T-68516;

c. Real Estate Mortgage dated April 22, 1998 executed by Paglaum

Management and Development Corporation over a 3,711 square meter property covered
by TCT No. 112488;

d. Continuing Surety Agreement of Benjamin B. Dy;

Without need of any further act and deed, the existing Collaterals, shall remain in
full force and effect and continue to secure the payment and performance of the obligations
of the BORROWER arising from the Notes and this Restructuring Agreement. [37] (Emphasis
supplied.)

Meanwhile, Section 20 of the Restructuring Agreement as regards the venue of actions state:

20. Venue Venue of any action or proceeding arising out of or connected with
this Restructuring Agreement, the Note, the Collateral and any and all related
documents shall be in Makati City, [HealthTech] and [Union Bank] hereby waiving any
other venue.[38] (Emphasis supplied.)

These quoted provisions of the Real Estate Mortgages and the later Restructuring Agreement clearly
reveal the intention of the parties to implement a restrictive venue stipulation, which applies not only to the
principal obligation, but also to the mortgages. The phrase waiving any other venue plainly shows that the
choice of Makati City as the venue for actions arising out of or in connection with the Restructuring
Agreement and the Collateral, with the Real Estate Mortgages being explicitly defined as such, is exclusive.

Even if this Court were to consider the venue stipulations under the Real Estate Mortgages, it must
be underscored that those provisions did not contain words showing exclusivity or restrictiveness. In fact, in
the Real Estate Mortgages dated 11 February 1994, the phrase parties hereto waiving from the entire phrase
the parties hereto waiving any other venue was stricken from the final executed contract. Following the
ruling in Sps. Lantin as earlier quoted, in the absence of qualifying or restrictive words, the venue stipulation
should only be deemed as an agreement on an additional forum, and not as a restriction on a specified place.

Considering that Makati City was agreed upon by the parties to be the venue for all actions arising
out of or in connection with the loan obligation incurred by HealthTech, as well as the Real Estate Mortgages
executed by PAGLAUM, the CA committed reversible error in affirming the dismissal of Civil Case No. 01-
1567 by RTC Br. 134 on the ground of improper venue.

WHEREFORE, the Petition for Review is GRANTED. The Decision dated 31 May 2007 and
Resolution dated 24 July 2007 in CA-G.R. CV No. 82053 of the Court of Appeals, as well as the Orders
dated 11 March 2003 and 19 September 2003 issued by the Regional Trial Court, Makati City, Branch 134,
are REVERSED and SET ASIDE.The Complaint in Civil Case No. 01-1567 is hereby REINSTATED.

SO ORDERED.

VIRGILIO C. BRIONES vs. COURT OF APPEALS and CASH ASIA CREDIT CORPORATION,
G.R. No. 204444, January 14, 2015

Rule 4 of the Rules of Court governs the rules on venue of civil actions, to wit:

Rule 4
VENUE OF ACTIONS
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SECTION 1. Venue of real actions. Actions affecting title to or possession of real property, or interest
therein, shall be commenced and tried in the proper court which has jurisdiction over the area wherein the
real property involved, or a portion thereof, is situated.

Forcible entry and detainer actions shall be commenced and tried in the municipal trial court of the
municipality or city wherein the real property involved, or a portion thereof, is situated.

SEC. 2. Venue of personal actions. All other actions may be commenced and tried where the plaintiff or
any of the principal plaintiffs resides, or where the defendant or any of the principal defendants resides, or in
the case of a non-resident defendant where he may be found, at the election of the plaintiff.

SEC. 3. Venue of actions against nonresidents. If any of the defendants does not resideand is not found in
the Philippines, and the action affects the personal status of the plaintiff, or any property of said defendant
located in the Philippines,the action may be commenced and tried in the court of the place where the plaintiff
resides, or where the property or any portion thereof is situated or found.

SEC. 4. When Rule not applicable. This Rule shall not apply

(a) In those cases where a specific rule or law provides otherwise; or

(b) Where the parties have validly agreed in writing before the filing of the action on the exclusive
venue thereof.

Based therefrom, the general rule is that the venue of real actions is the court which has jurisdiction over the
area wherein the real property involved, or a portion thereof, is situated; while the venue of personal actions
is the court which has jurisdiction where the plaintiff or the defendant resides, at the election of the plaintiff.
As an exception, jurisprudence in Legaspi v. Rep. of the Phils. 33 instructs that the parties, thru a written
instrument, may either introduce another venue where actions arising from such instrument may be filed, or
restrict the filing of said actions in a certain exclusive venue, viz.:

The parties, however, are not precluded from agreeing in writing on an exclusive venue, as qualified by
Section 4 of the same rule. Written stipulations as to venue may be restrictive in the sense that the suit may
be filed only in the place agreed upon, or merely permissive in that the parties may file their suitnot only in
the place agreed upon but also in the places fixed by law. As in any other agreement, what is essential is the
ascertainment of the intention of the parties respecting the matter.

As regards restrictive stipulations on venue, jurisprudence instructs that it must be shown thatsuch stipulation
is exclusive. In the absence of qualifying or restrictive words, such as "exclusively," "waiving for this
purpose any other venue," "shall only" preceding the designation of venue, "to the exclusion of the other
courts," or words of similar import, the stipulation should be deemed as merely an agreement on an
additional forum,not as limiting venue to the specified place. 34 (Emphases and underscoring supplied)

In this relation, case law likewise provides that in cases where the complaint assails only the terms,
conditions, and/or coverage of a written instrument and not its validity, the exclusive venue stipulation
contained therein shall still be binding on the parties, and thus, the complaint may be properly dismissed on
the ground of improper venue.35 Conversely, therefore, a complaint directly assailing the validity of the
written instrument itself should not be bound by the exclusive venue stipulation contained therein and should
be filed in accordance with the general rules on venue. To be sure, it would be inherently consistent for a
complaint of this nature to recognize the exclusive venue stipulation when it, in fact, precisely assails the
validity of the instrument in which such stipulation is contained.

In this case, the venue stipulation found in the subject contracts is indeed restrictive in nature, considering
that it effectively limits the venue of the actions arising therefrom to the courts of Makati City. However, it
must be emphasized that Briones' s complaint directly assails the validity of the subject contracts, claiming
forgery in their execution. Given this circumstance, Briones cannot be expected to comply with the aforesaid
venue stipulation, as his compliance therewith would mean an implicit recognition of their validity. Hence,
pursuant to the general rules on venue, Briones properly filed his complaint before a court in the City of
Manila where the subject property is located.