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[ G.R. No. 228617, September 20, 2017 ]




Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the Decision[1] dated July 5, 2016 and Resolution[2] dated December 7, 2016 of the Court of Appeals (CA) in CA-G.R. SP No. 140264.

Antecedent Facts

The facts show that in July 2012, Spouses Victoriano and Melanie Ramos (Spouses Ramos) applied for several credit lines with Planters Development Bank (PDB) for the construction of a warehouse in Barangay Santo Tomas, Nueva Ecija.[3] The said application was approved for P40,000,000.00, secured by Real Estate Mortgage[4] dated July 25, 2012 over properties owned by the spouses, particularly covered by Transfer Certificate of Title (TCT) Nos. 048-2011000874 and 048-2011000875.

Subsequently, Spouses Ramos requested for additional loan and PDB allegedly promised to extend them a further loan of P140,000,000.00, the amount they supposed was necessary for the completion of the construction of the warehouse with a capacity of 250,000 cavans of palay.[5] Despite the assurance of the bank, only P25,000,000.00 in additional loan was approved and released by PDB, which was secured by a Real Estate Mortgage[6] over four (4) real properties covered by TCT Nos. 048-2012000909, 048-2012000443, 048-2012000445, and 048-2012000446.

Due to financial woes, Spouses Ramos were not able to pay their obligations as they fell due. They appealed to PDB for the deferment of debt servicing and requested for a restructuring scheme but the parties failed to reach an agreement.

On April 23, 2014, PDB filed a Petition for Extra-judicial Foreclosure of Real Estate Mortgage under Act 3135, as amended, before the Regional Trial Court of San Jose City, Nueva Ecija, which was docketed as EJF-2014-112-SJC. A Notice to Parties of Sheriff's Public Auction Sale dated May 7, 2014 was thereafter issued.[7]

On June 18, 2014, Spouses Ramos filed a Complaint[8] for Annulment of Real Estate Mortgages and Promissory Notes, Accounting and Application of Payments, Injunction with Preliminary Injunction and Temporary Restraining Order against PDB and its officers, namely, Ma. Agnes J. Angeles, Virgilio I. Libunao, Carmina S. Magallanes and Norberto P. Siega, also before the RTC of San Jose City, Nueva Ecija, which was docketed as Civil Case No. 2014-485-SJC.

Instead of filing an Answer, PDB filed an Urgent Motion[9] to Dismiss, alleging that the venue of the action was improperly laid considering that the real estate mortgages signed by the parties contained a stipulation that any suit arising therefrom shall be filed in Makati City only.[10] It further noted that the complaint failed to state a cause of action and must therefore be dismissed.[11]

Ruling of the RTC

In an Omnibus Order[12] dated November 17, 2014, the RTC denied the Urgent Motion to Dismiss, the pertinent portions of which read as follows:
I. The Venue is Improperly Laid

Pursuant to autonomy of contract, Venue can be waived. Rule 5, Section 4(d) of the 1997 Rules of Civil Procedure allows parties to validly agree in writing before the filing of the action on the exclusive venue thereof. Indeed, on the defendants they have the contract where the venue allegedly agreed upon by them with the plaintiffs is Makati City. However, one of the contentions of the plaintiffs is that the contracts between them and the defendants take the form of an adhesion contract (par. 20, Complaint). As such, this Court has to apply Section 1, Rule 4 of the 1997 Rules of Civil Procedure regarding the venue of real actions to avoid ruling on the merits without any evidence that would sufficiently support the same.

II. The Complaint Fails to State a Cause of Action.

With such an issue raised, the Court examined the records and it has to tell the defendants that in civil cases before the Court orders the issuance of summons, it looks on whether or not the facts alleged on the Complaint are sufficient to constitute a cause of action and not whether the allegations of fact are true. Hence, as summons were issued in this case, the Court had already found that the allegations in the Complaint are sufficient to constitute a cause of action.

x x x x

FOREGOING CONSIDERED, the Motion to Dismiss is hereby DENIED.

x x x x

Unyielding, PDB filed a motion for reconsideration of the Omnibus Order dated November 17, 2014, instead of filing an answer to the complaint. This prompted Spouses Ramos to file a motion to declare PDB in default. Subsequently, in an Order[14] dated February 20, 2015, the RTC denied both motions, ratiocinating thus:
Necessarily, the defendants were allowed to Isle Motion to Dismiss before filing an Answer or responsive pleading. As a consequence of the Motion to Dismiss that the defendants filed, the running of the period during which the rules required her to file her Answer was deemed suspended. When the Court denied the Motion to Dismiss, therefore the defendants had the balance of the period for filing an Answer under Section 4, Rule 16 within which to file the same but in no case less than five days, computed from the receipt of the notice of denial of the Motion to Dismiss. x x x x

x x x x

However, after the Court denied the Motion to Dismiss, the defendants filed Motion for Reconsideration which is not precluded by the rules. Only after this Court shall have denied it would the defendants become bound to file the Answer to the Complaint. It is only if the defendants failed to file Answer after the period given by the foregoing rules would the plaintiff be entitled to have the defendants be declared in default. This was the same ruling of the Supreme Court in the case of Narciso v. Garcia, G.R. No. 196877, November 12, 2012.

With regard to the Motion for Reconsideration of the Omnibus Order dated November 17, 2014, there being no new arguments presented, the Court finds no cogent reason to reconsider and reverse the said Omnibus Order.

WHEREFORE, the Motion to Declare Defendants in Default and the Motion for Reconsideration are hereby DENIED.

Aggrieved, PDB filed a petition for certiorari with the CA, imputing grave abuse of discretion on the RTC for denying its motion to dismiss, despite the fact that the venue was clearly improperly laid.

Ruling of the CA

In a Decision[16] dated July 5, 2016, the CA denied the petition, the pertinent portion of which reads as follows:
The order of the public respondent in denying the motion to dismiss and the consequent denial of the motion for reconsideration is correct and judicious. Petitioner anchors its claim on the validity of the mortgage, and thereby the provisional therein on venue must be upheld. On the other hand, respondents anchor its claim on the invalidity of the mortgage, and thereby the complaint is filed in the proper venue. Clearly, no valid judgment can be passed upon the allegations of both parties.[17]

Thus, having found no grave abuse on the part of the public respondent in denying the motion to dismiss and the resulting denial of the motion for reconsideration, We find no cogent reason to disturb or modify the assailed Decision. What the petitioners should have done was to file an answer to the petition filed in the trial court, proceed to the hearing and appeal the decision of the court if adverse to them.[18]

WHEREFORE, premises considered, the petition is DENIED. The Omnibus Order dated 17 November 2014 and the Order dated 20 February 2015 is hereby AFFIRMED in TOTO.

PDB filed a motion for reconsideration but the CA denied the same in its Resolution dated December 7, 2016, the dispositive portion of which reads, thus:
WHEREFORE, in view of the foregoing, the motion for reconsideration is hereby DENIED.

Unyielding, PDB filed the present petition with this Court, reiterating its claim that the CA erred in affirming the order of the RTC, which denied the motion to dismiss despite the improper venue of the case. It argues that since there is a stipulation on venue, the same should govern the parties.

Ruling of this Court

The petition is meritorious.

Rule 4 of the Rules of Civil Procedure provides the rules on venue in filing an action, to wit:

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.

Section 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.

x x x x

Section 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 on the foregoing, the general rules on venue admit of exceptions in Section 4 thereof, i.e., where a specific rule or law provides otherwise, or when the parties agreed in writing before the filing of the action on the exclusive venue thereof.

Stipulations on venue, however, may either be permissive or restrictive. "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 suit not 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."[21]

Further, in Unimasters Conglomeration, Inc. v. Court of Appeals,[22] the Court elaborated, thus:
Since convenience is the raison d'etre of the rules of venue, it is easy to accept the proposition that normally, venue stipulations should be deemed permissive merely, and that interpretation should be adopted which most serves the parties' convenience. In other words, stipulations designating venues other than those assigned by Rule 4 should be interpreted as designed to make it more convenient for the parties to institute actions arising from or in relation to their agreements; that is to say, as simply adding to or expanding the venues indicated in said Rule 4.

On the other hand, because restrictive stipulations are in derogation of this general policy, the language of the parties must be so clear and categorical as to leave no doubt of their intention to limit the place or places, or to fix places other than those indicated in Rule 4, for their actions. x x x.[23]
In view of the predilection to view a stipulation on venue as merely permissive, the parties must therefore employ words in the contract that would clearly evince a contrary intention. In Spouses Lantin v. Judge Lantion,[24] the Court emphasized that "the mere stipulation on the venue of an action 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 should be deemed as merely an agreement on an additional forum, not as limiting venue to the specified place."[25]

In the instant case, there is an identical stipulation in the real estate mortgages executed by the parties, pertaining to venue. It reads as follows:
18. In the event of suit arising from out of or in connection with this mortgage and/or the promissory note/s secured by this mortgage, the parties hereto agree to bring their causes of action exclusively in the proper court/s of Makati, Metro Manila, the MORTGAGOR waiving for this purpose any other venue.[26] (Emphasis ours)
In Spouses Lantin, the Court ruled that "the words exclusively and waiving for this purpose any other venue are restrictive."[27] Therefore, the employment of the same language in the subject mortgages signifies the clear intention of the parties to restrict the venue of any action or suit that may arise out of the mortgage to a particular place, to the exclusion of all other jurisdictions.

In view of the foregoing, the RTC should have granted the Urgent Motion to Dismiss filed by PDB on the ground that the venue was improperly laid. The complaint being one for annulment of real estate mortgages and promissory notes is in the nature of a personal action, the venue of which may be fixed by the parties to the contract. In this case, it was agreed that any suit or action that may arise from the mortgage contracts or the promissory notes must be filed and tried in Makati only. Not being contrary to law or public policy, the stipulation on venue, which PDB and Spouses Ramos freely and willingly agreed upon, has the force of law between them, and thus, should be complied with in good faith.[28]

The CA, however, ruled that the RTC correctly denied the motion to dismiss in view of the contradicting claim of the parties on the validity of the mortgage contracts, which, in turn, affects the enforceability of the stipulation on venue. The CA agreed with the RTC that the ruling on the validity of the stipulation on venue depends on whether the mortgage is valid which means there has to be full-blown hearing and presentation of evidence. It added that what PDB should have done was to file an answer to the complaint, proceed to trial and appeal the decision, if adverse to them.[29]

The ruling of the CA renders meaningless the very purpose of the stipulation on venue. In Unimasters, the Court emphasized:
Parties may by stipulation waive the legal venue and such waiver is valid and effective being merely a personal privilege, which is not contrary to public policy or prejudicial to third persons. It is a general principle that a person may renounce any right which the law gives unless such renunciation would be against public policy.[30]
In the present case, Spouses Ramos had validly waived their right to choose the venue for any suit or action arising from the mortgages or promissory notes when they agreed to the limit the same to Makati City only and nowhere else. True enough, the stipulation on the venue was couched in a language showing the intention of the parties to restrict the filing of any suit or action to the designated place only. It is crystal clear that the intention was not just to make the said place an additional forum or venue but the only jurisdiction where any suit or action pertaining to the mortgage contracts may be filed. There being no showing that such waiver was invalid or that the stipulation on venue was against public policy, the agreement of the parties should be upheld. It is therefore a grave abuse of discretion on the part of the RTC to deny the motion to dismiss filed by PDB on the ground of improper venue, especially when the said issue had been raised at the most opportune time, that is, within the time for but before the filing of an answer. The CA should have given this matter a more serious consideration and not simply brushed it aside.

Moreover, Spouses Ramos never really assailed the validity of the mortgage contracts and promissory notes. Apparently, what they were only claiming was that the said contracts contain stipulations which are illegal, immoral and otherwise contrary to customs or public policy.[31] For instance, they alleged that the interest was pegged at an excessive rate of 8% which the bank unilaterally increased to 9%. They likewise claimed that the penalty interest rate of 3% was unconscionable. Further, they claimed that the escalation clause provided in the mortgage contracts was violative of Presidential Decree No. 1684.[32] These matters, however, do not affect the validity of the mortgage contracts. Thus, with all the more reason that the stipulation on venue should have been upheld pursuant to the ruling of the Court in Briones v. Court of Appeals,[33] viz.:
[I]n 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. 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.[34]
Spouses Ramos impliedly admitted the authenticity and due execution of the mortgage contracts. They do not claim to have been duped into signing the mortgage contracts or that the same was not their free and voluntary act. While they may have qualms over some of the terms stated therein, the same do not pertain to the lack of any of the essential elements of a contract that would render it void altogether. Such being the case, the stipulation on venue stands and should have been upheld by RTC and the CA.

WHEREFORE, the Decision dated July 5, 2016 and Resolution dated December 7, 2016 of the Court of Appeals in CA-G.R. SP No. 140264 are REVERSED and SET ASIDE. Civil Case No. 2014-485-SJC is hereby DISMISSED on the ground of improper venue.


Carpio, Peralta, and Caguioa, JJ., concur.
Perlas-Bernabe, J., on official leave.

[1] Penned by Associate Justice Danton Q. Bueser with Associate Justices Apolinario D. Bruselas, Jr., and Renato C. Francisco, concurring; rollo, pp. 26-39.

[2] Id. at 40-44.

[3] Id. at 183.

[4] Id. at 72-74.

[5] Id. at 184.

[6] Id. at 76-80.

[7] Id. at 28.

[8] Id. at 181-199.

[9] Id. at 50-65.

[10] Id. at 51.

[11] Id. at 54.

[12] Id. at 45-46.

[13] Id.

[14] Id. at 47-49.

[15] Id. at 48-49.

[16] Id. at 26-39.

[17] Id. at 33.

[18] Id. at 38.

[19] Id. at 38-39.

[20] Id. at 44.

[21] Unimasters Conglomeration Inc. v. Court of Appeals, 335 Phil. 415 (1997).

[22] Id. at 424-425.

[23] Id.

[24] 531 Phil. 318, (2006).

[25] Id. at 322-323.

[26] Rollo, pp. 73, 77.

[27] Supra note 24, at 323.

[28] Art. 1159. Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith.

[29] Rollo, pp. 38-39.

[30] Unimasters Conglomeration Inc. v. Court of Appeals, supra note 21, at 424.

[31] Rollo, pp. 88.

[32] Id. at 89.

[33] 750 Phil. 891 (2015).

[34] Id. at 899.