V.
Venue of Actions (Rule 4) the following sections shall govern as to the manner in
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. (1[a], 2[a]a)
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. (2[b]a)
Section 3. Venue of actions against nonresidents.
— If any of the defendants does not reside and 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. (2[c]a)
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. (3a, 5a)
1. SPOUSES OCHUA VS. CHINABANK
For resolution is petitioners' motion for
reconsideration[1] of our January 17, 2011
Resolution[2] denying their petition for review on
certiorari[3] for failing to sufficiently show any reversible
error in the assailed judgment[4] of the Court of Appeals
(CA).
Petitioners insist that it was error for the CA to rule that
the stipulated exclusive venue of Makati City is binding
only on petitioners' complaint for Annulment of
Foreclosure, Sale, and Damages filed before the
Regional Trial Court of Parañaque City, but not on
respondent bank's Petition for Extrajudicial Foreclosure
of Mortgage, which was filed with the same court.
We disagree.
The extrajudicial foreclosure sale of a real estate
mortgage is governed by Act No. 3135, as amended by
Act No. 4118, otherwise known as "An Act to Regulate
the Sale of Property Under Special Powers Inserted In
or Annexed to Real-Estate Mortgages." Sections 1 and
2 thereof clearly state:
Section 1. When a sale is made under a special power
inserted in or attached to any real-estate mortgage
hereafter made as security for the payment of money or
the fulfillment of any other obligation, the provisions of
which the sale and redemption shall be effected,
whether or not provision for the same is made in the
power.
Sec. 2. Said sale cannot be made legally outside of the
province in which the property sold is situated; and in
case the place within said province in which the sale is
to be made is the subject of stipulation, such sale shall
be made in said place or in the municipal building of the
municipality in which the property or part thereof is
situated.[5]
The case at bar involves petitioners' mortgaged real
property located in Parañaque City over which
respondent bank was granted a special power to
foreclose extra-judicially. Thus, by express provision of
Section 2, the sale can only be made in Parañaque City.
The exclusive venue of Makati City, as stipulated by the
parties[6] and sanctioned by Section 4, Rule 4 of the
Rules of Court,[7] cannot be made to apply to the
Petition for Extrajudicial Foreclosure filed by respondent
bank because the provisions of Rule 4 pertain to venue
of actions, which an extrajudicial foreclosure is not.
Pertinent are the following disquisitions in Supena v. De
la Rosa:[8]
Section 1, Rule 2 [of the Rules of Court] defines an
action in this wise:
"Action means an ordinary suit in a court of justice, by
which one party prosecutes another for the enforcement
or protection of a right, or the prevention or redress of a
wrong."
Hagans v. Wislizenus does not depart from this
definition when it states that "[A]n action is a formal
demand of one's legal rights in a court of justice in the
manner prescribed by the court or by the law. x x x." It
is clear that the determinative or operative fact which
converts a claim into an "action or suit" is the filing of the
same with a "court of justice." Filed elsewhere, as with
some other body or office not a court of justice, the claim
may not be categorized under either term. Unlike an
action, an extrajudicial foreclosure of real estate
mortgage is initiated by filing a petition not with any
court of justice but with the office of the sheriff of the
province where the sale is to be made. By no stretch of
the imagination can the office of the sheriff come under
the category of a court of justice. And as aptly observed
by the complainant, if ever the executive judge comes
into the picture, it is only because he exercises
administrative supervision over the sheriff. But this
administrative supervision, however, does not change
the fact that extrajudicial foreclosures are not judicial
proceedings, actions or suits.[9]
These pronouncements were confirmed on August 7,
2001 through A.M. No. 99-10-05-0, entitled "Procedure
in Extra-Judicial Foreclosure of Mortgage," the
significant portions of which provide:
In line with the responsibility of an Executive Judge
under Administrative Order No. 6, date[d] June 30,
1975, for the management of courts within his
administrative area, included in which is the task of
supervising directly the work of the Clerk of Court, who
is also the Ex-Office Sheriff, and his staff, and the
issuance of commissions to notaries public and
enforcement of their duties under the law, the following
procedures are hereby prescribed in extra-judicial
foreclosure of mortgages:
1. All applications for extrajudicial foreclosure of
mortgage whether under the direction of the sheriff or a
notary public, pursuant to Act 3135, as amended by Act
4118, and Act 1508, as amended, shall be filed with the
Executive Judge, through the Clerk of Court who is also
the Ex-Officio Sheriff.
Verily then, with respect to the venue of extrajudicial
foreclosure sales, Act No. 3135, as amended, applies,
it being a special law dealing particularly with
extrajudicial foreclosure sales of real estate mortgages,
and not the general provisions of the Rules of Court on
Venue of Actions.
Consequently, the stipulated exclusive venue of Makati
City is relevant only to actions arising from or related to
the mortgage, such as petitioners' complaint for
Annulment of Foreclosure, Sale, and Damages.
The other arguments raised in the motion are a mere
reiteration of those already raised in the petition for
review. As declared in this Court's Resolution on
January 17, 2011, the same failed to show any sufficient
ground to warrant the exercise of our appellate
jurisdiction.
WHEREFORE, premises considered, the motion for
reconsideration is hereby DENIED.
SO ORDERED.
2. SAN MIGUEL CORPORATION V.
MONASTERIO Rule 4, Sec 4
Facts:
San Miguel Corporation [SMC] entered into an
Exclusive Warehouse Agreement [EWA] with SMB
Warehousing services, represented by its manager
Monasterio, wherein SMB would provide the necessary
services for the storage and warehousing of SMC
products.
The EWA also contained a stipulation on the venue of
actions: “Should it be necessary that an action be
brought in court to enforce the terms of this Agreement
or the duties or rights of the parties herein, it is agreed
that the proper court should be in the courts of Makati
or Pasig, Metro Manila, to the exclusion of the other
courts at the option of the COMPANY.”
In 1998, Monasterio [a resident of Naga City] filed a
complaint for collection of sum of money against SMC
before the RTC-Naga City. He alleged that he was not
paid 900k for the services he rendered as a cashier.
SMC filed a Motion to Dismiss on the ground of
improper venue. It argued that the money claim arose
from Monasterio’s services as a warehouse contractor,
thus the EWA stipulation would apply [citing Sec 4b in
relation to Sec 2, Rule 4].
Issue: W/N the filing of the case before RTC Naga was
proper?
Ruling: Yes.
Exclusive venue stipulation embodied in a contract
restricts or confines parties thereto when the suit relates
to breach of the said contract. Monasterio’s cause of
action was not based on the EWA. The cashiering
service was different from his functions as a warehouse
contractor, and the EWA would not apply.
The collection for money, being a personal action, it was
properly filed before the RTC Naga City where
Monasterio resides.
DOCTRINE
The venue stipulation in the EWA should be construed
as mandatory. Nothing therein being contrary to law,
morals, good custom or public policy, this provision is
binding upon the parties. The EWA stipulation on venue
is clear and unequivocal, thus it ought to be respected.
However, we note that the cause of action in the
complaint filed by the Monasterio before the RTC of
Naga was not based on the EWA, but concern services
not enumerated in the EWA. Moreover, in the amended
complaint, Monasterio’s cause of action was specifically
limited to the collection of the sum owing to him for his
cashiering service in favor of SMC. He already omitted
SMC’s non-payment of warehousing fees. As
previously ruled, allegations in the complaint
determines the cause of action or the nature of the case.
Thus, given the circumstances of this case now before
us, we are constrained to hold that it would be
erroneous to rule, as the CA did, that the collection suit
of Monasterio did not pertain solely to the unpaid
cashiering services but pertain likewise to the
warehousing services.
Exclusive venue stipulation embodied in a contract
restricts or confines parties thereto when the suit relates
to breach of the said contract. But where the exclusivity
clause does not make it necessarily all encompassing,
such that even those not related to the enforcement of
the contract should be subject to the exclusive venue,
the stipulation designating exclusive venues should be
strictly confined to the specific undertaking or
agreement. Otherwise, the basic principles of freedom
to contract might work to the great disadvantage of a
weak party-suitor who ought to be allowed free access
to courts of justice.
RESTRICTIVE STIPULATIONS are in derogation of the
general policy of making it more convenient for the
parties to institute actions arising from or in relation to
their agreements. Thus, the restriction should be strictly
construed as relating solely to the agreement for which
the exclusive venue stipulation is embodied. Expanding
the scope of such limitation on a contracting party will
create unwarranted restrictions which the parties might
find unintended or worse, arbitrary and oppressive.
Moreover, since convenience is the raison d’être of the
rules on venue, venue stipulation should be deemed
merely permissive, and that interpretation should be
adopted which most serves the parties’ convenience.
Accordingly, since the present case for the collection of
sum of money filed by herein respondent is a personal
action, we find no compelling reason why it could not be
instituted in the RTC of Naga City, the place where
plaintiff resides.
3. BRIONES, Petitioner, v. COURT OF
APPEALS
Assailed in this petition for certiorari1 are the
Decision2 dated March 5, 2012 and the
Resolution3 dated October 4, 2012 of the Court of
Appeals(CA) in CA-G.R. SP No. 117474, which
annulled the Orders dated September 20, 20104 and
October 22, 20105 of the Regional Trial Court of Manila,
Branch 173 (RTC) in Civil Case No. 10-124040, denying
private respondent Cash Asia Credit Corporation’s
(Cash Asia) motion to dismiss on the ground of
improper venue.
The Facts
The instant case arose from a Complaint6 dated August
2, 2010 filed by Virgilio C. Briones (Briones) for Nullity
of Mortgage Contract, Promissory Note, Loan
Agreement, Foreclosure of Mortgage, Cancellation of
Transfer Certificate of Title (TCT) No.290846, and
Damages against Cash Asia before the RTC.7 In his
complaint, Briones alleged that he is the owner of a
property covered by TCT No. 160689 (subject
property),and that, on July 15, 2010, his sister informed
him that his property had been foreclosed and a writ of
possession had already been issued in favor of Cash
Asia.8 Upon investigation, Briones discovered that: (a)
on December 6, 2007, he purportedly executed a
promissory note,9 loan agreement,10 and deed of real
estate mortgage11covering the subject property (subject
contracts) in favor of Cash Asia in order to obtain a loan
in the amount of P3,500,000.00 from the latter;12 and (b)
since the said loan was left unpaid, Cash Asia
proceeded to foreclose his property.13 In this relation,
Briones claimed that he never contracted any loans
from Cash Asia as he has been living and working in
Vietnam since October 31, 2007. He further claimed
that he only went back to the Philippines on December
28, 2007 until January 3, 2008 to spend the holidays
with his family, and that during his brief stay in the
Philippines, nobody informed him of any loan
agreement entered into with Cash Asia. Essentially,
Briones assailed the validity of the foregoing contracts
claiming his signature to be forged.14chanRoblesvirtu
alLawlibrary
For its part, Cash Asia filed a Motion to Dismiss15 dated
August 25, 2010, praying for the outright dismissal of
Briones’s complaint on the ground of improper
venue.16 In this regard, Cash Asia pointed out the venue
stipulation in the subject contracts stating that “all legal
actions arising out of this notice in connection with the
Real Estate Mortgage subject hereof shall only be
brought in or submitted to the jurisdiction of the proper
court of Makati City.”17 In view thereof, it contended that
all actions arising out of the subject contracts may only
be exclusively brought in the courts of Makati City, and
as such, Briones’s complaint should be dismissed for
having been filed in the City of Manila.18chanRo
In response, Briones filed an
opposition,19 asserting, inter alia, that he should not be
covered by the venue stipulation in the subject contracts
as he was never a party therein. He also reiterated that
his signatures on the said contracts were
forgeries.20chanRobl
The RTC Ruling
In an Order21 dated September 20, 2010, the RTC
denied Cash Asia’s motion to dismiss for lack of merit.
In denying the motion, the RTC opined that the parties
must be afforded the right to be heard in view of the
substance of Briones’s cause of action against Cash
Asia as stated in the complaint.22cCash Asia moved for
reconsideration23 which was, however, denied in an
Order24 dated October 22, 2010. Aggrieved, it filed a
petition for certiorari25 before the CA.c
The CA Ruling
In a Decision26 dated March 5, 2012, the CA annulled
the RTC Orders, and accordingly, dismissed Briones’s
complaint without prejudice to the filing of the same
before the proper court in Makati City.27 It held that the
RTC gravely abused its discretion in denying Cash
Asia’s motion to dismiss, considering that the subject
contracts clearly provide that actions arising therefrom
should be exclusively filed before the courts of Makati
City only.28 As such, the CA concluded that Briones’s
complaint should have been dismissed outright on the
ground of improper venue,29 this, notwithstanding
Briones’s claim of forgery.
Dissatisfied, Briones moved for
reconsideration,30 which was, however, denied in a
Resolution31 dated October 4, 2012, hence, this
petition.
The Issue Before the Court
The primordial issue for the Court’s resolution is
whether or not the CA gravely abused its discretion in
ordering the outright dismissal of Briones’s complaint on
the ground of improper venue.
The Court’s Ruling
The petition is meritorious. At the outset, the Court
stresses that “[t]o justify the grant of the extraordinary
remedy of certiorari, [the petitioner] must satisfactorily
show that the court or quasi-judicial authority gravely
abused the discretion conferred upon it. Grave abuse of
discretion connotes judgment exercised in a capricious
and whimsical manner that is tantamount to lack of
jurisdiction. To be considered ‘grave,’ discretion must
be exercised in a despotic manner by reason of passion
or personal hostility, and must be so patent and gross
as to amount to an evasion of positive duty or to a virtual
refusal to perform the duty enjoined by or to act at all in
contemplation of law.”32chanRoblesvirtualLawlibrary
Guided by the foregoing considerations, the Court finds
that the CA gravely abused its discretion in ordering the
outright dismissal of Briones’s complaint against Cash
Asia, without prejudice to its re-filing before the proper
court in Makati City.
Rule 4 of the Rules of Court governs the rules on venue
of civil actions.
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.:chanroblesvirtuallawlibrary
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 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.
As regards restrictive stipulations on venue,
jurisprudence instructs that it must be shown that
such 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.
In conclusion, the CA patently erred and hence
committed grave abuse of discretion in dismissing
Briones’s complaint on the ground of improper
venue.chanro
WHEREFORE, the petition is GRANTED. Accordingly,
the Decision dated March 5, 2012 and the Resolution
dated October 4, 2012 of the Court of Appeals in CA-
G.R. SP No. 117474 are hereby ANNULLED and SET
ASIDE. The Orders dated September 20, 2010 and
October 22, 2010 of the Regional Trial Court of Manila,
Branch 173 in Civil Case No. 10-124040
are REINSTATED.
SO ORDERED
4. MARCOS-ARANETA V CA (VENUE)
The Facts
 Sometime in 1968 and 1972, Ambassador
Roberto S. Benedicto, now deceased, and his business
associates (Benedicto Group) organized Far East
Managers and Investors, Inc. (FEMII) and Universal
Equity Corporation (UEC), respectively.
 Irene Marcos-Araneta would later allege, both
corporations were organized pursuant to a contract
whereby Benedicto, as trustor, placed in his name and
in the name of his associates, as trustees, the shares of
stocks of FEMII and UEC with the obligation to hold
those shares and their fruits in trust and for the benefit
of Irene to the extent of 65% of such shares. Several
years after, Irene demanded the reconveyance of said
65% stockholdings, but the Benedicto Group refused to
oblige.
 In March 2000, Irene filed before the RTC two
similar complaints for conveyance of shares of stock,
accounting and receivership against the Benedicto
Group with prayer for the issuance of a temporary
restraining order (TRO).
 In a consolidated opposition, Benedicto,
moved to dismiss on 5 grounds, among which were: (2)
venue was improperly laid
 During the preliminary proceedings on their
motions to dismiss, Benedicto presented the Joint
Affidavit of Gilmia B. Valdez, Catalino A. Bactat, and
Conchita R. Rasco who all attested being employed as
household staff at the Marcos’ Mansion in Brgy. Lacub,
Batac, Ilocos Norte and that Irene did not maintain
residence in said place as she in fact only visited the
mansion twice in 1999; that she did not vote in Batac in
the 1998 national elections; and that she was staying at
her husband’s house in Makati City.
 Irene presented her community tax
certificateissued on “11/07/99” in Curimao, Ilocos Norte
to support her claimed residency in Batac, Ilocos Norte.
 RTC dismissed both complaints, stating that
these partly constituted “real action,” and that Irene did
not actually reside in Ilocos Norte, and, therefore, venue
was improperly laid.
 The RTC eventually entertained an amended
complaint filed by Irene, dispositively stating: (1) Irene
may opt to file, as a matter of right, an amended
complaint. (2) The inclusion of additional plaintiffs, one
of whom was a Batac, an Ilocos Norte resident, in the
amended complaint setting out the same cause of
action cured the defect of improper venue. (3) Secs. 2
and 3 of Rule 3 in relation to Sec. 2 of Rule 4 allow the
filing of the amended complaint in question in the place
of residence of any of Irene’s co-plaintiffs.
 The Benedictos filed on April 10, 2001 their
Answer to the amended complaint but also went the
CA via a petition for certiorari, seeking to nullify the
following RTC orders. The CA rendered a Decision,
setting aside the assailed RTC orders and dismissing
the amended complaints in Civil Case Nos. 3341-17
and 3342-17.
Issue/s on Venue
(4) Did the respondents (Benedictos) waive improper
venue by their subsequent acts of filing numerous
pleadings; and (5) Was Irene a resident of Batac, Ilocos
Norte and if any of the principal parties are residents of
Ilocos Norte?
Held: SC affirms, but not for all the reasons set out in,
the CA’s decision.
Fourth Issue: Private Respondents did not Waive
Improper Venue
Venue essentially concerns a rule of procedure which,
in personal actions, is fixed for the greatest convenience
possible of the plaintiff and his witnesses. The ground
of improperly laid venue must be raised seasonably,
else it is deemed waived. Where the defendant failed to
either file a motion to dismiss on the ground of improper
venue or include the same as an affirmative defense, he
is deemed to have waived his right to object to improper
venue. In the case at bench, Benedicto and Francisca
raised at the earliest time possible, meaning “within the
time for but before filing the answer to the complaint,”
the matter of improper venue. They would thereafter
reiterate and pursue their objection on venue, first, in
their answer to the amended complaints and then in
their petition for certiorari before the CA. Any
suggestion, therefore, that Francisca and Benedicto or
his substitutes abandoned along the way improper
venue as ground to defeat Irene’s claim before the RTC
has to be rejected.
Fifth Issue: The RTC Has No Jurisdiction on the
Ground of Improper Venue
Subject Civil Cases are Personal Actions
According to the Benedictos, venue was in this case
improperly laid since the suit in question partakes of a
real action involving real properties located outside the
territorial jurisdiction of the RTC in Batac.
This contention is not well-taken. In a personal action,
the plaintiff seeks the recovery of personal property, the
enforcement of a contract, or the recovery of damages.
Real actions, on the other hand, are those affecting title
to or possession of real property, or interest therein. In
accordance with the wordings of Sec. 1 of Rule 4, the
venue of real actions shall be the proper court which has
territorial jurisdiction over the area wherein the real
property involved, or a portion thereof, is situated. The
venue of personal actions is the court 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.
Irene seeks to compel recognition of the trust
arrangement she has with the Benedicto Group. The
amended complaint is an action in personam, it being a
suit against Francisca and the late Benedicto (now
represented by Julita and Francisca), on the basis of
their alleged personal liability to Irene upon an alleged
trust constituted in 1968 and/or 1972. They are not
actions in rem where the actions are against the real
properties instead of against persons.
Interpretation of Secs. 2 and 3 of Rule 3; and Sec. 2
of Rule 4
SC: Irene, as categorically and peremptorily found by
the RTC after a hearing, is not a resident of Batac,
Ilocos Norte, as she claimed. Accordingly, Irene cannot,
in a personal action, contextually opt for Batac as venue
of her reconveyance complaint. As to her, Batac, Ilocos
Norte is not what Sec. 2, Rule 4 of the Rules of Court
adverts to as the place “where the plaintiff or any of the
principal plaintiffs resides” at the time she filed her
amended complaint. That Irene holds CTC No.
17019451[41] issued sometime in June 2000 in Batac,
Ilocos Norte and in which she indicated her address as
Brgy. Lacub, Batac, Ilocos is really of no moment since
it can easily be procured from the BIR with the
necessary desired information.
Petitioners, in an attempt to establish that the RTC in
Batac, Ilocos Norte is the proper court venue,
asseverate that Batac, Ilocos Norte is where the
principal parties reside. Pivotal to the resolution of the
venue issue is a determination of the status of Irene’s
co-plaintiffs in the context of Secs. 2 and 3 of Rule 3 in
relation to Sec. 2 of Rule 4,
Venue is Improperly Laid
There can be no serious dispute that the real party-in-
interest plaintiff is Irene. As self-styled beneficiary of the
disputed trust, she stands to be benefited or entitled to
the avails of the present suit. It is undisputed too that
petitioners Daniel Rubio, Orlando G. Reslin, and Jose
G. Reslin, all from Ilocos Norte, were included as co-
plaintiffs in the amended complaint as Irene’s new
designated trustees. As trustees, they can only serve as
mere representatives of Irene. Sec. 2 of Rule 4
indicates quite clearly that when there is more than one
plaintiff in a personal action case, the residences of
the principal parties should be the basis for
determining proper venue. Before the RTC in Batac,
in Civil Case Nos. 3341-17 and 3342-17, Irene stands
undisputedly as the principal plaintiff, the real party-in-
interest. Following Sec. 2 of Rule 4, the subject civil
cases ought to be commenced and prosecuted at the
place where Irene resides.
Principal Plaintiff not a Resident in Venue of Action
As earlier stated, no less than the RTC in Batac
declared Irene as not a resident of Batac, Ilocos Norte.
Withal, that court was an improper venue for her
conveyance action. The Court can concede that Irene’s
three co-plaintiffs are all residents of Batac, Ilocos
Norte. But it ought to be stressed in this regard that not
one of the three can be considered as principal party-
plaintiffs . In the final analysis, the residences of Irene’s
co-plaintiffs cannot be made the basis in determining
the venue of the subject suit. Irene was a resident
during the period material of Forbes Park, Makati City.
She was not a resident of Brgy. Lacub, Batac, Ilocos
Norte, although jurisprudence[44] has it that one can
have several residences, if such were the established
fact. The Court will not speculate on the reason why
petitioner Irene, for all the inconvenience and expenses
she and her adversaries would have to endure by a
Batac trial, preferred that her case be heard and
decided by the RTC in Batac. On the heels of the
dismissal of the original complaints on the ground of
improper venue, three new personalities were added to
the complaint doubtless to insure, but in vain as it turned
out, that the case stays with the RTC in Batac.
Assailed in this petition for review on certiorari[1] are the
Decision[2] dated July 20, 2005 and Resolution[3] dated
January 4, 2006 of the Court of Appeals (CA) in CA-
G.R. CV No. 50410 which dismissed petitioners' appeal
and affirmed the Decision[4] dated April 6, 1987 of the
Regional Trial Court of Ormoc City, Branch 12 (RTC)
directing petitioners to jointly and severally pay
respondent Manila Banking Corporation the amount of
P434,742.36, with applicable interests, representing the
deficiency of the former's total loan obligation to the
latter after the extra-judicial foreclosure of the real
estate mortgage subject of this case, including
attorney's fees and costs of suit.
5. Heirs of the Late Flaviano Maglasang v. Manila
Banking Corporation, 2013
The Facts
On June 16, 1975, spouses Flaviano and Salud
Maglasang (Sps. Maglasang) obtained a credit line from
respondent[5] in the amount of P350,000.00 which was
secured by a real estate mortgage[6] executed over
seven of their properties[7] located in Ormoc City and
the Municipality of Kananga, Province of Leyte.[8] They
availed of their credit line by securing loans in the
amounts of P209,790.50 and P139,805.83 on October
24, 1975 and March 15, 1976, respectively,[9] both of
which becoming due and demandable within a period of
one year. Further, the parties agreed that the said loans
would earn interest at 12% per annum (p.a.) and an
additional 4% penalty would be charged upon
default.[10]
After Flaviano Maglasang (Flaviano) died intestate on
February 14, 1977, his widow Salud Maglasang (Salud)
and their surviving children, herein petitioners Oscar
(Oscar), Concepcion Chona, Lerma, Felma, Fe Doris,
Leolino, Margie Leila, Ma. Milalie, Salud and Ma.
Flasalie, all surnamed Maglasang, and Glenda
Maglasang-Arnaiz, appointed[11] their brother
petitioner Edgar Maglasang (Edgar) as their attorney-in-
fact.[12] Thus, on March 30, 1977, Edgar filed a verified
petition for letters of administration of the intestate
estate of Flaviano before the then Court of First
Instance of Leyte, Ormoc City, Branch 5 (probate court),
docketed as Sp. Proc. No. 1604-0.[13] On August 9,
1977, the probate court issued an Order[14] granting
the petition, thereby appointing Edgar as the
administrator[15] of Flaviano's estate.
In view of the issuance of letters of administration, the
probate court, on August 30, 1977, issued a Notice to
Creditors[16] for the filing of money claims against
Flaviano's estate. Accordingly, as one of the creditors of
Flaviano, respondent notified[17] the probate court of its
claim in the amount of P382,753.19 as of October 11,
1978, exclusive of interests and charges.
During the pendency of the intestate proceedings,
Edgar and Oscar were able to obtain several loans from
respondent, secured by promissory notes[18] which
they signed.
In an Order[19] dated December 14, 1978 (December
14, 1978 Order), the probate court terminated the
proceedings with the surviving heirs executing an extra-
judicial partition of the properties of Flaviano's estate.
The loan obligations owed by the estate to respondent,
however, remained unsatisfied due to respondent's
certification that Flaviano's account was undergoing a
restructuring. Nonetheless, the probate court expressly
recognized the rights of respondent under the mortgage
and promissory notes executed by the Sps. Maglasang,
specifically, its "right to foreclose the same within the
statutory period."[20]
In this light, respondent proceeded to extra-judicially
foreclose the mortgage covering the Sps. Maglasang's
properties and emerged as the highest bidder at the
public auction for the amount of P350,000.00.[21]
There, however, remained a deficiency on Sps.
Maglasang's obligation to respondent. Thus, on June
24, 1981, respondent filed a suit to recover the
deficiency amount of P250,601.05 as of May 31, 1981
against the estate of Flaviano, his widow Salud and
petitioners, docketed as Civil Case No. 1998-0.[22]
The RTC Ruling and Subsequent Proceedings
After trial on the merits, the RTC (formerly, the probate
court)[23] rendered a Decision[24] on April 6, 1987
directing the petitioners to pay respondent, jointly and
severally, the amount of P434,742.36 with interest at
the rate of 12% p.a., plus a 4% penalty charge,
reckoned from September 5, 1984 until fully paid.[25]
The RTC found that it was shown, by a preponderance
of evidence, that petitioners, after the extra-judicial
foreclosure of all the properties mortgaged, still have an
outstanding obligation in the amount and as of the date
as above-stated. The RTC also found in order the
payment of interests and penalty charges as above-
mentioned as well as attorney's fees equivalent to 10%
of the outstanding obligation.[26]
Dissatisfied, petitioners elevated the case to the CA on
appeal, contending,[27] inter alia, that the remedies
available to respondent under Section 7, Rule 86 of the
Rules of Court (Rules) are alternative and exclusive,
such that the election of one operates as a waiver or
abandonment of the others. Thus, when respondent
filed its claim against the estate of Flaviano in the
proceedings before the probate court, it effectively
abandoned its right to foreclose on the mortgage.
Moreover, even on the assumption that it has not so
waived its right to foreclose, it is nonetheless barred
from filing any claim for any deficiency amount.
During the pendency of the appeal, Flaviano's widow,
Salud, passed away on July 25, 1997.[28]
The CA Ruling
In a Decision[29] dated July 20, 2005, the CA denied
the petitioners' appeal and affirmed the RTC's Decision.
At the outset, it pointed out that the probate court erred
when it, through the December 14, 1978 Order, closed
and terminated the proceedings in Sp. Proc. No. 1604-
0 without first satisfying the claims of the creditors of the
estate in particular, respondent in violation of Section 1,
Rule 90 of the Rules.[30] As a consequence,
respondent was not able to collect from the petitioners
and thereby was left with the option of foreclosing the
real estate mortgage.[31] Further, the CA held that
Section 7, Rule 86 of the Rules does not apply to the
present case since the same does not involve a
mortgage made by the administrator over any property
belonging to the estate of the decedent.[32] According
to the CA, what should apply is Act No. 3135[33] which
entitles respondent to claim the deficiency amount after
the extra-judicial foreclosure of the real estate mortgage
of Sps. Maglasang's properties.[34]
Petitioners' motion for reconsideration was
subsequently denied in a Resolution[35] dated January
4, 2006. Hence, the present recourse.
The Issue Before the Court
The essential issue in this case is whether or not the CA
erred in affirming the RTC's award of the deficiency
amount in favor of respondent.
Petitioners assert[36] that it is not Act No. 3135 but
Section 7, Rule 86 of the Rules which applies in this
case. The latter provision provides alternative and
exclusive remedies for the satisfaction of respondent's
claim against the estate of Flaviano.[37] Corollarily,
having filed its claim against the estate during the
intestate proceedings, petitioners argue that
respondent had effectively waived the remedy of
foreclosure and, even assuming that it still had the right
to do so, it was precluded from filing a suit for the
recovery of the deficiency obligation.[38]
Likewise, petitioners maintain that the extra-judicial
foreclosure of the subject properties was null and void,
not having been conducted in the capital of the Province
of Leyte in violation of the stipulations in the real estate
mortgage contract.[39] They likewise deny any personal
liability for the loans taken by their deceased
parents.[40]
The Court's Ruling
The petition is partly meritorious.
Claims against deceased persons should be filed during
the settlement proceedings of their estate.[41] Such
proceedings are primarily governed by special rules
found under Rules 73 to 90 of the Rules, although rules
governing ordinary actions may, as far as practicable,
apply suppletorily.[42]
Among these special rules, Section 7, Rule 86 of the
Rules (Section 7, Rule 86) provides the rule in dealing
with secured claims against the estate:
SEC. 7. Mortgage debt due from estate. A creditor
holding a claim against the deceased secured by a
mortgage or other collateral security, may abandon the
security and prosecute his claim in the manner provided
in this rule, and share in the general distribution of the
assets of the estate; or he may foreclose his mortgage
or realize upon his security, by action in court, making
the executor or administrator a party defendant, and if
there is a judgment for a deficiency, after the sale of the
mortgaged premises, or the property pledged, in the
foreclosure or other proceeding to realize upon the
security, he may claim his deficiency judgment in the
manner provided in the preceding section; or he may
rely upon his mortgage or other security alone, and
foreclose the same at any time within the period of the
statute of limitations, and in that event he shall not be
admitted as a creditor, and shall receive no share in the
distribution of the other assets of the estate; but nothing
herein contained shall prohibit the executor or
administrator from redeeming the property mortgaged
or pledged, by paying the debt for which it is held as
security, under the direction of the court, if the court
shall adjudged it to be for the best interest of the estate
that such redemption shall be made. (Emphasis and
underscoring supplied)
As the foregoing generally speaks of "[a] creditor
holding a claim against the deceased secured by a
mortgage or other collateral security" as above-
highlighted, it may be reasonably concluded that the
aforementioned section covers all secured claims,
whether by mortgage or any other form of collateral,
which a creditor may enforce against the estate of the
deceased debtor. On the contrary, nowhere from its
language can it be fairly deducible that the said section
would as the CA interpreted narrowly apply only to
mortgages made by the administrator over any property
belonging to the estate of the decedent. To note,
mortgages of estate property executed by the
administrator, are also governed by Rule 89 of the
Rules, captioned as "Sales, Mortgages, and Other
Encumbrances of Property of Decedent."
In this accord, it bears to stress that the CA's reliance
on Philippine National Bank v. CA[43] (PNB) was
misplaced as the said case did not, in any manner, limit
the scope of Section 7, Rule 86. It only stated that the
aforesaid section equally applies to cases where the
administrator mortgages the property of the estate to
secure the loan he obtained.[44] Clearly, the
pronouncement was a ruling of inclusion and not one
which created a distinction. It cannot, therefore, be
doubted that it is Section 7, Rule 86 which remains
applicable in dealing with a creditor's claim against the
mortgaged property of the deceased debtor, as in this
case, as well as mortgages made by the administrator,
as that in the PNB case.
Jurisprudence breaks down the rule under Section 7,
Rule 86 and explains that the secured creditor has three
remedies/options that he may alternatively adopt for the
satisfaction of his indebtedness. In particular, he may
choose to: (a) waive the mortgage and claim the entire
debt from the estate of the mortgagor as an ordinary
claim; (b) foreclose the mortgage judicially and prove
the deficiency as an ordinary claim; and (c) rely on the
mortgage exclusively, or other security and foreclose
the same before it is barred by prescription, without the
right to file a claim for any deficiency.[45] It must,
however, be emphasized that these remedies are
distinct, independent and mutually exclusive from each
other; thus, the election of one effectively bars the
exercise of the others. With respect to real properties,
the Court in Bank of America v. American Realty
Corporation[46] pronounced:
In our jurisdiction, the remedies available to the
mortgage creditor are deemed alternative and not
cumulative. Notably, an election of one remedy
operates as a waiver of the other. For this purpose, a
remedy is deemed chosen upon the filing of the suit for
collection or upon the filing of the complaint in an action
for foreclosure of mortgage, pursuant to the provision of
Rule 68 of the 1997 Rules of Civil Procedure. As to
extrajudicial foreclosure, such remedy is deemed
elected by the mortgage creditor upon filing of the
petition not with any court of justice but with the Office
of the Sheriff of the province where the sale is to be
made, in accordance with the provisions of Act No.
3135, as amended by Act No. 4118.[47] (Emphasis
supplied)
Anent the third remedy, it must be mentioned that the
same includes the option of extra-judicially foreclosing
the mortgage under Act No. 3135, as availed of by
respondent in this case. However, the plain result of
adopting the last mode of foreclosure is that the creditor
waives his right to recover any deficiency from the
estate.[48] These precepts were discussed in the PNB
case, citing Perez v. Philippine National Bank[49] which
overturned the earlier Pasno v. Ravina ruling:[50]
Case law now holds that this rule grants to the
mortgagee three distinct, independent and mutually
exclusive remedies that can be alternatively pursued by
the mortgage creditor for the satisfaction of his credit in
case the mortgagor dies, among them:
(1) to waive the mortgage and claim the entire debt from
the estate of the mortgagor as an ordinary claim;
(2) to foreclose the mortgage judicially and prove any
deficiency as an ordinary claim; and
(3) to rely on the mortgage exclusively, foreclosing the
same at any time before it is barred by prescription
without right to file a claim for any deficiency.
In Perez v. Philippine National Bank, reversing Pasno
vs. Ravina, we held:
The ruling in Pasno v. Ravina not having been reiterated
in any other case, we have carefully reexamined the
same, and after mature deliberation have reached the
conclusion that the dissenting opinion is more in
conformity with reason and law. Of the three alternative
courses that section 7, Rule 87 (now Rule 86), offers the
mortgage creditor, to wit, (1) to waive the mortgage and
claim the entire debt from the estate of the mortgagor
as an ordinary claim; (2) foreclose the mortgage
judicially and prove any deficiency as an ordinary claim;
and (3) to rely on the mortgage exclusively, foreclosing
the same at any time before it is barred by prescription,
without right to file a claim for any deficiency, the
majority opinion in Pasno v. Ravina, in requiring a
judicial foreclosure, virtually wipes out the third
alternative conceded by the Rules to the mortgage
creditor, and which would precisely include extra-
judicial foreclosures by contrast with the second
alternative.
The plain result of adopting the last mode of foreclosure
is that the creditor waives his right to recover any
deficiency from the estate. Following the Perez ruling
that the third mode includes extrajudicial foreclosure
sales, the result of extrajudicial foreclosure is that the
creditor waives any further deficiency claim. x x x.[51]
(Emphases and underscoring supplied; italics in the
original)
To obviate any confusion, the Court observes that the
operation of Act No. 3135 does not entirely discount the
application of Section 7, Rule 86, or vice-versa. Rather,
the two complement each other within their respective
spheres of operation. On the one hand, Section 7, Rule
86 lays down the options for the secured creditor to
claim against the estate and, according to
jurisprudence, the availment of the third option bars him
from claiming any deficiency amount. On the other
hand, after the third option is chosen, the procedure
governing the manner in which the extra-judicial
foreclosure should proceed would still be governed by
the provisions of Act No. 3135. Simply put, Section 7,
Rule 86 governs the parameters and the extent to which
a claim may be advanced against the estate, whereas
Act No. 3135 sets out the specific procedure to be
followed when the creditor subsequently chooses the
third option specifically, that of extra-judicially
foreclosing real property belonging to the estate. The
application of the procedure under Act No. 3135 must
be concordant with Section 7, Rule 86 as the latter is a
special rule applicable to claims against the estate, and
at the same time, since Section 7, Rule 86 does not
detail the procedure for extra-judicial foreclosures, the
formalities governing the manner of availing of the third
option such as the place where the application for extra-
judicial foreclosure is filed, the requirements of
publication and posting and the place of sale must be
governed by Act No. 3135.
In this case, respondent sought to extra-judicially
foreclose the mortgage of the properties previously
belonging to Sps. Maglasang (and now, their estates)
and, therefore, availed of the third option. Lest it be
misunderstood, it did not exercise the first option of
directly filing a claim against the estate, as petitioners
assert, since it merely notified[52] the probate court of
the outstanding amount of its claim against the estate of
Flaviano and that it was currently restructuring the
account.[53] Thus, having unequivocally opted to
exercise the third option of extra-judicial foreclosure
under Section 7, Rule 86, respondent is now precluded
from filing a suit to recover any deficiency amount as
earlier discussed.
As a final point, petitioners maintain that the extra-
judicial foreclosure of the subject properties was null
and void since the same was conducted in violation of
the stipulation in the real estate mortgage contract
stating that the auction sale should be held in the capital
of the province where the properties are located, i.e.,
the Province of Leyte.
The Court disagrees.
As may be gleaned from the records, the stipulation
under the real estate mortgage[54] executed by Sps.
Maglasang which fixed the place of the foreclosure sale
at Tacloban City lacks words of exclusivity which would
bar any other acceptable fora wherein the said sale may
be conducted, to wit:
It is hereby agreed that in case of foreclosure of this
mortgage under Act 3135, the auction sale shall be held
at the capital of the province if the property is within the
territorial jurisdiction of the province concerned, or shall
be held in the city if the property is within the territorial
jurisdiction of the city concerned; x x x.[55]
Case law states that absent such qualifying or restrictive
words to indicate the exclusivity of the agreed forum, the
stipulated place should only be as an additional, not a
limiting venue.[56] As a consequence, the stipulated
venue and that provided under Act No. 3135 can be
applied alternatively.
In particular, Section 2 of Act No. 3135 allows the
foreclosure sale to be done within the province where
the property to be sold is situated, viz.:
SEC. 2. Said sale cannot be made legally outside of the
province which the property sold is situated; and in case
the place within said province in which the sale is to be
made is subject to stipulation, such sale shall be made
in said place or in the municipal building of the
municipality in which the property or part thereof is
situated. (Italics supplied)
In this regard, since the auction sale was conducted in
Ormoc City, which is within the territorial jurisdiction of
the Province of Leyte, then the Court finds sufficient
compliance with the above-cited requirement.
All told, finding that the extra-judicial foreclosure subject
of this case was properly conducted in accordance with
the formalities of Act No. 3135, the Court upholds the
same as a valid exercise of respondent's third option
under Section 7, Rule 86. To reiterate, respondent
cannot, however, file any suit to recover any deficiency
amount since it effectively waived its right thereto when
it chose to avail of extra-judicial foreclosure as
jurisprudence instructs.
WHEREFORE, the petition is PARTLY GRANTED. The
complaint for the recovery of the deficiency amount after
extra-judicial foreclosure filed by respondent Manila
Banking Corporation is hereby DISMISSED. The extra-
judicial foreclosure of the mortgaged properties,
however, stands.
SO ORDERED.
6. Paglaum Management v. Union Bank
G.R. 179018 June 18, 2012
Before this Court is a Petition for Review on Certiorari
under Rule 45 of the Rules of Court, assailing the
Decision dated 31 May 2007[1] and Resolution dated
24 July 2007[2] issued by the Court of Appeals (CA).
Petitioner Paglaum Management and Development
Corporation (PAGLAUM) is the registered owner of
three parcels of land located in the Province of Cebu[3]
and covered by Transfer Certificate of Title (TCT) Nos.
112488,[4] 112489,[5] and T-68516.[6] These lots are
co-owned by Benjamin B. Dy, the president of petitioner
Health Marketing Technologies, Inc. (HealthTech), and
his mother and siblings.[7]
On 3 February 1994, respondent Union Bank of the
Philippines (Union Bank) extended HealthTech a credit
line in the amount of ₱10,000,000.[8] To secure this
obligation, PAGLAUM executed three Real Estate
Mortgages on behalf of HealthTech and in favor of
Union Bank.[9] It must be noted that the Real Estate
Mortgage, on the provision regarding the venue of all
suits and actions arising out of or in connection
therewith, originally stipulates:
Section 9. Venue. The venue of all suits and actions
arising out of or in connection with this Mortgage shall
be in Makati, Metro Manila or in the place where any of
the Mortgaged Properties is located, at the absolute
option of the Mortgagee, the parties hereto waiving any
other venue.[10] (Emphasis supplied.)
However, under the two Real Estate Mortgages dated
11 February 1994, the following version appears:
Section 9. Venue. The venue of all suits and actions
arising out of or in connection with this Mortgage shall
be in Cebu City Metro Manila or in the place where any
of the Mortgaged Properties is located, at the absolute
option of the Mortgagee, the xxxxxxxxxxxxx any other
venue.[11] (Emphasis supplied.)
Meanwhile, the same provision in the Real Estate
Mortgage dated 22 April 1998 contains the following:
Section 9. Venue. The venue of all suits and actions
arising out of or in connection with this Mortgage shall
be in _________ or in the place where any of the
Mortgaged Properties is located, at the absolute option
of the Mortgagee, the parties hereto waiving any other
venue.[12]
HealthTech and Union Bank agreed to subsequent
renewals and increases in the credit line,[13] with the
total amount of debt reaching ₱36,500,000.[14]
Unfortunately, according to HealthTech, the 1997 Asian
financial crisis adversely affected its business and
caused it difficulty in meeting its obligations with Union
Bank.[15] Thus, on 11 December 1998, both parties
entered into a Restructuring Agreement,[16] which
states that any action or proceeding arising out of or in
connection therewith shall be commenced in Makati
City, with both parties waiving any other venue.[17]
Despite the Restructuring Agreement, HealthTech
failed to pay its obligation, prompting Union Bank to
send a demand letter dated 9 October 2000, stating that
the latter would be constrained to institute foreclosure
proceedings, unless HealthTech settled its account in
full.[18]
Since HealthTech defaulted on its payment, Union Bank
extra-judicially foreclosed the mortgaged properties.[19]
The bank, as the sole bidder in the auction sale, was
then issued a Certificate of Sale dated 24 May 2001.[20]
Thereafter, it filed a Petition for Consolidation of
Title.[21]
Consequently, HealthTech filed a Complaint for
Annulment of Sale and Titles with Damages and
Application for Temporary Restraining Order and Writ of
Injunction dated 23 October 2001, praying for: (a) the
issuance of a temporary restraining order, and later a
writ of preliminary injunction, directing Union Bank to
refrain from exercising acts of ownership over the
foreclosed properties; (b) the annulment of the extra-
judicial foreclosure of real properties; (c) the
cancellation of the registration of the Certificates of Sale
and the resulting titles issued; (d) the reinstatement of
PAGLAUMs ownership over the subject properties; and
(e) the payment of damages.[22] The case was
docketed as Civil Case No. 01-1567 and raffled to the
Regional Trial Court, National Capital Judicial Region,
Makati City, Branch 134 (RTC Br. 134), which issued in
favor of PAGLAUM and HealthTech a Writ of
Preliminary Injunction restraining Union Bank from
proceeding with the auction sale of the three mortgaged
properties.[23]
On 23 November 2001, Union Bank filed a Motion to
Dismiss on the following grounds: (a) lack of jurisdiction
over the issuance of the injunctive relief; (b) improper
venue; and (c) lack of authority of the person who
signed the Complaint.[24] RTC Br. 134 granted this
Motion in its Order dated 11 March 2003, resulting in the
dismissal of the case, as well as the dissolution of the
Writ of Preliminary Injunction.[25] It likewise denied the
subsequent Motion for Reconsideration filed by
PAGLAUM and HealthTech.[26]
PAGLAUM and HealthTech elevated the case to the
CA, which affirmed the Order dated 11 March 2003[27]
and denied the Motion for Reconsideration.[28]
In the instant Petition, PAGLAUM and HealthTech
argue that: (a) the Restructuring Agreement governs the
choice of venue between the parties, and (b) the
agreement on the choice of venue must be interpreted
with the convenience of the parties in mind and the view
that any obscurity therein was caused by Union
Bank.[29]
On the other hand, Union Bank contends that: (a) the
Restructuring Agreement is applicable only to the
contract of loan, and not to the Real Estate Mortgage,
and (b) the mortgage contracts explicitly state that the
choice of venue exclusively belongs to it.[30]
Meanwhile, intervenor J. King & Sons Company, Inc.
adopts the position of Union Bank and reiterates the
position that Cebu City is the proper venue.[31]
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
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 should be deemed as
merely an agreement on an additional forum, not as
limiting venue to the specified place.
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;
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.
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.
Petition was granted (lower court reversed) (complaint
reinstitated)