1.

SECOND DIVISION

UNITED OVERSEAS BANK G.R. Nos. 159669 &

PHILS. (formerly WESTMONT 163521

BANK),

Petitioner, Present:

QUISUMBING, J.,

- versus - Chairperson,

CARPIO,

CARPIO MORALES,

TINGA, and

ROSEMOORE MINING & DEVE- VELASCO, JR., JJ.

LOPMENT CORP. and DRA.

LOURDES PASCUAL,

Respondents. Promulgated:

________________

x----------------------------------------------------------------------------x
 DECISION

TINGA, J.:

We resolve these two consolidated cases, which though with

distinct courts of origin, pertain to issues stemming from the
same loan transaction.

The antecedent facts follow.

Respondent Rosemoor Mining and Development Corporation

(Rosemoor), a Philippine mining corporation with offices at
Quezon City, applied for and was granted by petitioner Westmont
Bank[1] (Bank) a credit facility in the total amount of P80 million
consisting of P50,000,000.00 as long term loan
and P30,000,000.00 as revolving credit line. [2]

To secure the credit facility, a lone real estate mortgage

agreement was executed by Rosemoor and Dr. Lourdes Pascual
(Dr. Pascual), Rosemoors president, as mortgagors in favor of the
Bank as mortgagee in the City of Manila.[3] The agreement,
however, covered six (6) parcels of land located in San Miguel,
Bulacan[4] (Bulacan properties), all registered under the name of
Rosemoor,[5] and two (2) parcels of land[6] situated in Gapan,
Nueva Ecija (Nueva Ecija properties), owned and registered under
the name of Dr. Pascual.[7]

Rosemoor subsequently opened with the Bank four (4)

irrevocable Letters of Credit (LCs) totaling US$1,943,508.11. [8] To
cover payments by the Bank under the LCs, Rosemoor proceeded
to draw against its credit facility and thereafter executed
promissory notes amounting collectively to P49,862,682.50.[9] Two
(2) other promissory notes were also executed by Rosemoor in the
amounts of P10,000,000.00 and P3,500,000.00, respectively, to
be drawn from its revolving credit line.[10]

Rosemoor defaulted in the payment of its various drawings

under the LCs and promissory notes. In view of the default, the
Bank caused the extra-judicial foreclosure of the Nueva Ecija
properties on 22 May 1998 and the Bulacan properties on 10
August 1998. The Bank was the highest bidder on both occasions.
[11]

On 8 October 1999, the Bank caused the annotation of the

Notarial Certificate of Sale covering the Nueva Ecija properties on
the certificates of title concerned. Later, on 16 March 2001, the
Notarial Certificate of Sale covering the Bulacan properties was
annotated on the certificates of title of said properties. [12]
 The foregoing facts led to Rosemoors filing of separate
complaints against the Bank, one before the Regional Trial Court
of Manila (Manila RTC) and the other before the Regional Trial
Court of Malolos, Bulacan (Malolos RTC).

The Manila Case (G.R. No. 163521)

On 5 August 1998, Rosemoor and Dr. Pascual filed a

Complaint, originally captioned as one for Damages, Accounting
and Release of Balance of Loan and Machinery and for Injunction
before the Manila RTC.[13] Impleaded as defendants were the Bank
and Notary Public Jose Sineneng, whose office was used to
foreclose the mortgage.[14] The complaint was twice amended, the
caption eventually reflecting an action for Accounting, Specific
Performance and Damages.[15] Through the amendments, Pascual
was dropped as a plaintiff while several officers of the Bank were
included as defendants.[16]

The Bank moved for the dismissal of the original and

amended complaints on the ground that the venue had been
improperly laid.[17] The motion was denied by the trial court
through an Omnibus Resolution dated 24 January 2000.[18]
 Rosemoors prayer in the Second Amended Complaint, which
was filed in November of 1999, reads as follows:

WHEREFORE, plaintiff Rosemoor Mining &

Development Corporation respectfully prays that, after
trial of the issues, this court promulgate judgment

1. Directing Westmont to render an accounting of the loan

account of Rosemoor under the Long Term Loan Facility
and the Revolving Credit Line at least up to the dates of
foreclosure of Rosemoors mortgaged properties on May
22, 1998 and August 18, 1998, showing among others (a)
the sums of money paid by Rosemoor or otherwise
debited from its deposit account in payment of the loans it
had obtained from Westmont to cover the cost of the
machinery to be imported under the Unpaid LCs and
under LC No. 97-058 for the tiling plant, as well as for
working capital, and (b) all interests, penalties and
charges imposed on the loans pertaining to the Unpaid
LCs and LC No. 97-058 and for which Westmont had
foreclosed Rosemoors and Dra. Pascuals real estate
mortgage; (c) the amount of import and customs duties,
demurrage, storage and other fees which Rosemoor had
paid or which was otherwise debited from Rosemoors
deposit account, in connection with the importation of the
tiling plant and as a consequence of the non-release
thereof by Westmont;
2. Ordering all the defendants jointly and severally to pay
to Rosemoor, by way of actual damages, the dollar
equivalent of the amounts in (1) (a), (b) and (c) at the
exchange rate prevailing at the time of the opening of
the LCs;

3. Ordering defendants jointly and severally to pay to

Rosemoor actual damages for operational losses suffered
by Rosemoor due to its failure to use the tiling plaint
which Westmont had refused to release to Rosemoor, in
such amount as may be proven at the trial;

4. Directing the defendants jointly and severally to pay, by

way of correction for the public good, exemplary damages
in the amount of P500,000.00 each;

5. Ordering defendants jointly and severally to indemnify

Rosemoor in the sum of P350,000.00, representing
attorneys fees and litigation expenses incurred by
Rosemoor for the protection and enforcement of its rights
and interests.

Plaintiff prays for further and other relief as may be just

and equitable under the circumstances. [19]
 On 15 August 2002, the Bank filed another motion to dismiss
the Second Amended Complaint on the ground of forum-shopping
since, according to it, Rosemoor had filed another petition earlier
on 11 March 2002 before the Malolos RTC.[20] The Bank contended
that as between the action before the Manila RTC and the petition
before the Malolos RTC, there is identity of parties, rights
asserted, and reliefs prayed for, the relief being founded on the
same set of facts. The Bank further claimed that any judgment
that may be rendered in either case will amount to res judicata in
the other case.[21] Still, the

Manila RTC denied the motion to dismiss.[22] It also denied the

Banks motion for reconsideration of the order of denial. [23]

The Bank challenged the Manila RTCs denial of the Banks

second motion to dismiss before the Court of Appeals, through a
petition for certiorari. The appellate court dismissed the petition
in a Decision dated 26 February 2004.[24] The Bank filed a motion
for reconsideration which, however, was denied through a
Resolution dated 30 April 2004.[25]

In the Petition for Review on Certiorari in G.R. No. 163521,

the Bank argues that the Court of Appeals erred in holding that no
forum-shopping attended the actions brought by Rosemoor. [26]
The Malolos Case (G.R. No. 159669)

After the complaint with the Manila RTC had been lodged,
on 11 March 2002, Rosemoor and Dr. Pascual filed another action
against the Bank, this time before the Malolos RTC. Impleaded
together with the Bank as respondent was the Register of Deeds
for the Province of Bulacan in the Petition for Injunction with
Damages,

with Urgent Prayer for Temporary Restraining Order and/or

Preliminary Injunction.[27]

In the Malolos case, Rosemoor and Dr. Pascual alleged that

the redemption period for the Bulacan properties would expire
on 16 March 2002. They claimed that the threatened
consolidation of titles by the Bank is illegal, stressing that the
foreclosure of the real estate mortgage by the Bank was
fraudulent and without basis,[28] as the Bank had made them sign
two blank forms of Real Estate Mortgage and several promissory
notes also in blank forms. It appeared later, according to
Rosemoor and Dr. Pascual, that the two Real Estate Mortgage
blank forms were made as security for two loans, one for P80
million and the other for P48 million, when the total approved loan
was only for P80 million. The Bank later released only the amount
of P10 million out of the P30 million revolving credit line, to the
prejudice of Rosemoor, they added.[29]

The Petitions prayer reads as follows:

WHEREFORE, premises considered, it is most respectfully
prayed that this Honorable Court

1. Issue ex-parte a temporary restraining order before the

matter could be heard on notice to restrain and enjoin
respondent BANK from proceeding with its threatened
consolidation of its titles over the subject properties of
petitioner Rosemoor in San Miguel, Bulacan covered by
TCT Nos. 42132; 42133; 42134; 42135; 42136 and RT
34569 (T-222448) on March 16, 2002 or at any time
thereafter; that the respondent Register of Deeds for the
Province of Bulacan be enjoined and restrained from
registering any document(s) submitted and/or to be
submitted by respondent BANK consolidating its titles
over the above-named properties of petitioner Rosemoor
in San Miguel, Bulacan; and likewise, that the Register of
Deeds for the province of Bulacan be restrained and
enjoined from canceling the titles of Rosemoor over its
properties, namely, TCT Nos. 42132; 42133; 42134;
42135; 42136 and RT 34569 (T-222448);

2. That after due notice, a writ of preliminary injunction

be issued upon the posting of a bond in such amount as
may be fixed by this Court;

3. That after due hearing and trial, judgment be rendered

in favor of petitioners and against respondent BANK

a. Permanently enjoining respondent BANK from

proceeding with the consolidation of its titles to
the subject properties of Rosemoor covered by
 TCT Nos. 42132; 42133; 42134; 42135; 42136
and RT 34569 (T-222448); and permanently
restraining respondent Register of Deeds for the
Province of Bulacan from registering any
document(s) submitted and/or to be submitted by
respondent BANK consolidating its titles over the
above-named properties of petitioner Rosemoor
in San Miguel, Bulacan; and likewise, that the
Register of Deeds for the province of Bulacan be
restrained and enjoined from cancelling the titles
of Rosemoor over its properties, namely, TCT Nos.
42132; 42133; 42134; 42135; 42136 and RT
34569 (T-222448);

b. Declaring the foreclosures of Real Estate

Mortgages on the properties of petitioners
Rosemoor and Dra. Pascual to be null and void;

c. Recognizing the ownership in fee simple of the

petitioners over their properties above-mentioned;
 d. Awarding to petitioners the damages prayed for,
including attorneys fees and costs and expenses
of litigation.

Petitioners pray for such other reliefs and remedies

as may be deemed just and equitable in the premises.[30]

As it did before the Manila RTC, the Bank filed a motion to

dismiss on 26 March 2002 on the ground that Rosemoor had
engaged in forum-shopping, adverting to the
pending Manila case. [31]
The Bank further alleged that Dr. Pascual
has no cause of action since the properties registered in her name
are located in Nueva Ecija. The Malolos RTC denied the motion to
dismiss in an Order dated 13 May 2002.[32] In the same Order, the
Malolos RTC directed the Bank to file its answer to the petition
within five (5) days from notice.[33]

Despite receipt of the Order on 21 May 2002, the Bank opted

not to file its answer as it filed instead a motion for
reconsideration on 5 June 2002.[34] Meanwhile, Rosemoor and Dr.
Pascual moved to declare the Bank in default for its failure to
timely file its answer.[35] On 10 September 2002, the Malolos RTC
issued an order denying the Banks motion for reconsideration for
lack of merit and at the same time declaring the Bank in default
for failure to file its answer.[36]

Hence, the Bank filed a second petition for certiorari before

the Court of Appeals, where it assailed the Orders dated 13 May
2002 and 10 September 2002 of the Malolos RTC. During the
pendency of this petition for certiorari, the Malolos RTC decided
the Malolos case on the merits in favor of Rosemoor. [37] The
decision in the Malolos case was also appealed to the Court of
Appeals.[38] Based on these developments, the appellate court
considered the prayer for preliminary injunction as moot and
academic and proceeded with the resolution of the petition, by
then docketed as CA-G.R. SP No.73358, on the merits. The
appellate court dismissed the petition in a Decision dated 20 June
2003.[39] Undaunted, the Bank filed the petition in G.R. No. 159669
before this Court.

The two petitions before this Court have been consolidated.

We find one common issue in G.R. No. 159669 and G.R. No.
163521 whether Rosemoor committed forum-shopping in filing
the two cases against the Bank. The other issues for resolution
were raised in G.R. No. 159669, pertaining as they do to the
orders issued by the Malolos RTC. These issues are whether the
action to invalidate the foreclosure sale was properly laid with the
Malolos RTC even as regards the Nueva Ecija properties; whether
it was proper for the Malolos RTC to declare the Bank in default;
and whether it was proper for the Malolos RTC to deny the Banks
motion to dismiss through a minute resolution. [40]

Forum-Shopping

The central issue in these consolidated cases is whether

Rosemoor committed forum-shopping in filing the Malolos case
during the pendency of the Manila case.

The essence of forum-shopping is the filing of multiple suits

involving the same parties for the same cause of action, either
simultaneously or successively, for the purpose of obtaining a
favorable judgment.[41] The elements of forum-shopping are: (a)
identity of parties, or at least such parties as represent the same
interests in both actions; (b) identity of rights asserted and reliefs
prayed for, the reliefs being founded on the same facts; and (c)
the identity with respect to the two preceding particulars in the
two cases is such that any judgment rendered in the pending
cases, regardless of which party is successful, amount to res
judicata in the other case.[42]

As to the existence of identity of parties, several bank

officers and employees impleaded in the Amended Complaint in
the Manila case were not included in the Malolos case. These
bank officers and employees were sued in Manila in their personal
capacity. A finding of negligence or bad faith in their participation
in the preparation and execution of the loan agreement would
render them personally liable. Dr. Pascual, on the other hand, was
included as petitioner only in the Malolos case because it involved
properties registered in her name. As correctly pointed out by the
Court of Appeals, Dr. Pascual is a real party-in-interest in the
Malolos case because she stood to benefit or suffer from the
judgment in the suit. Dr. Pascual, however, was not included as
plaintiff in the Manila case because her interest therein was not
personal but merely in her capacity as officer of Rosemoor.

As regards the identity of rights asserted and reliefs prayed

for, the main contention of Rosemoor in the Manila case is that
the Bank had failed to deliver the full amount of the loan, as a
consequence of which Rosemoor demanded the remittance of the
unreleased portion of the loan and payment of damages
consequent thereto.[43] In contrast, the Malolos case was filed for
the purpose of restraining the Bank from proceeding with the
consolidation of the titles over the foreclosed Bulacan properties
because the loan secured by the mortgage had not yet become
due and demandable.[44] While the right asserted in
the Manila case is to receive the proceeds of the loan, the right
sought in the Malolos case is to restrain the foreclosure of the
properties mortgaged to secure a loan that was not yet due.

Moreover, the Malolos case is an action to annul the

foreclosure sale that is necessarily an action affecting the title of
the property sold.[45] It is therefore a real action which should be
commenced and

tried in the province where the property or part thereof lies.

[46]
The Manila case, on the other hand, is a personal
action[47]involving as it does the enforcement of a contract
between Rosemoor, whose office is in Quezon City, and the Bank,
whose principal office is in Binondo, Manila.[48] Personal actions
may be commenced and tried where the plaintiff or any of the
principal plaintiffs resides, or where the defendants or any of the
principal defendants resides, at the election of the plaintiff. [49]

It was subsequent to the filing of the Manila case that

Rosemoor and Dr. Pascual saw the need to secure a writ of
injunction because the consolidation of the titles to the
mortgaged properties in favor of the Bank was in the offing. But
then, this action can only be commenced where the properties, or
a portion thereof, is located. Otherwise, the petition for injunction
would be dismissed for improper venue. Rosemoor, therefore, was
warranted in filing the Malolos case and cannot in turn be accused
of forum-shopping.

Clearly, with the foregoing premises, it cannot be said that

respondents committed forum-shopping.

Action to nullify foreclosure sale of

mortgaged properties in Bulacan and

Nueva Ecija before the Malolos RTC

The Bank challenges the Malolos RTCs jurisdiction over the

action to nullify the foreclosure sale of the Nueva Ecija properties
along with the Bulacan properties. This question is actually a
question of venue and not of jurisdiction, [50] which if improperly
laid, could lead to the dismissal of the case. [51]

The rule on venue of real actions is provided in Section 1,

Rule 4 of the 1997 Rules of Civil Procedure, which reads in part:

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.

xxx
 The venue of the action for the nullification of the foreclosure
sale is properly laid with the Malolos RTC although two of the
properties together with the Bulacan properties are situated in
Nueva Ecija. Following the above-quoted provision of the Rules of
Court, the venue of real actions affecting properties found in
different provinces

is determined by the singularity or plurality of the transactions

involving said parcels of land. Where said parcels are the object of
one and the same transaction, the venue is in the court of any of
the provinces wherein a parcel of land is situated. [52]

Ironically, the Bank itself correctly summarized the

applicable jurisprudential rule in one of the pleadings before the
Court.[53] Yet the Bank itself has provided the noose on which it
would be hung. Resorting to deliberate misrepresentation, the
Bank stated in the same pleading that the Bulacan and Nueva
Ecija [p]roperties were not the subject of one single real
estate mortgage contract.[54]

In the present case, there is only one proceeding sought to

be nullified and that is the extra-judicial mortgage foreclosure
sale. And there is only one initial transaction which served as the
basis of the foreclosure sale and that is the mortgage contract.
Indeed, Rosemoor, through Dr. Pascual, executed a lone mortgage
contract where it undertook to mortgage the land/real property
situated in Bulacan and Nueva Ecija, with the list of mortgaged
properties annexed thereto revealing six (6) properties in Bulacan
and two (2) properties in Nueva Ecija subject of the mortgage.
 This apparent deliberate misrepresentation cannot simply
pass without action. The real estate mortgage form supplied to
Rosemoor is the Banks standard pre-printed form. Yet the Bank
perpetrated the misrepresentation. Blame must be placed on its
doorstep. But as the Banks pleading was obviously prepared by its
counsel, the latter should also share the blame. A lawyer shall not
do any falsehood, nor consent to the doing of any in court; nor
shall he mislead, or allow the Court to be misled by any artifice.
[55]
Both the Banks president and counsel should be made to
explain why they should not be sanctioned for contempt of court.

Propriety of Default Order

The Court of Appeals did not touch upon the soundness or

unsoundness of the order of default although it is one of the
orders assailed by the Bank. However, the silence of the appellate
court on the issue does not improve the legal situation of the
Bank.

To recall, the Bank filed a motion to dismiss the Malolos case.

The Malolos RTC denied the motion in an Order dated 13 May
2002.[56] In the same Order, the Malolos RTC directed the Bank to
file

its answer to the petition within five (5) days from the receipt of
the Order.[57] The Bank received a copy of the Order on 21 May
2002. Instead of filing an answer, the Bank filed a motion for
reconsideration but only on 5 June 2002.[58]
 The motion for reconsideration[59] could not have tolled the
running of the period to answer for two reasons. One, it was filed
late, nine (9) days after the due date of the answer. Two, it was a
mere rehash of the motion to dismiss; hence, pro forma in
nature. Thus, the Malolos RTC did not err in declaring the Bank in
default.

Deviation from the Prescribed

Content of an Order

Denying a Motion to Dismiss

Finally, the Bank questions the Malolos RTCs Order dated 13

May 2002 denying its motion to dismiss on the ground that it is
contrary to law and jurisprudence because it had failed to apprise
the Bank of the legal basis for the denial.

The Bank adverts to the content requirement of an order

denying a motion to dismiss prescribed by Sec. 3, Rule 16 of the
Rules of Court. The Court in Lu Ym v. Nabua[60] made a thorough
discussion on the matter, to quote:

Sec. 3, Rule 16 of the Rules provides:

 Sec. 3. Resolution of motion.After the
hearing, the court may dismiss the action or
claim, deny the motion or order the
amendment of the pleading.

The court shall not defer the resolution of

the motion for the reason that the ground
relied upon is not indubitable.

In every case, the resolution shall state

clearly and distinctly the reasons therefor.

xxxx

Further, it is now specifically required that the

resolution on the motion shall clearly and
distinctly state the reasons therefor. This
proscribes the common practice of
perfunctorily dismissing the motion for lack of
merit. Such cavalier dispositions can often
pose difficulty and misunderstanding on the part of
the aggrieved party in taking recourse therefrom
and likewise on the higher court called upon to
resolve the same, usually on certiorari.[61]

The questioned order of the trial court denying the

motion to dismiss with a mere statement that there are
justiciable questions which require a full blown trial falls
short of the requirement of Rule 16 set forth above.
Owing to the terseness of its expressed justification, the
 challenged order ironically suffers from undefined
breadth which is a hallmark of imprecision. With its
unspecific and amorphous thrust, the issuance is
inappropriate to the grounds detailed in the motion to
dismiss.

While the requirement to state clearly and distinctly

the reasons for the trial courts resolutory order under
Sec. 3, Rule 16 of the Rules does call for a liberal
interpretation, especially since
jurisprudence dictates that it is decisions on cases
submitted for

decision that are subject to the stringent requirement

of specificity of rulings under Sec. 1, Rule 36 [62] of the
Rules, the trial courts order in this case leaves too much
to the imagination. (Emphasis supplied.)[63]

The assailed order disposed of the motion to dismiss in this

wise:

xxxx
 After a careful scrutiny of the grounds cited in the
Motion to Dismiss and the arguments en contra contained
in the Opposition thereto and finding the Motion to
Dismiss to be not well taken as grounds cited are not
applicable to the case at bar, the Court
hereby DENIES the instant Motion to Dismiss.

x x x x[64]

Clearly, the subject order falls short of the content

requirement as expounded in Lu Ym v. Nabua. Despite the
aberration, however, the Bank was not misled, though it could
have encountered difficulties or inconvenience because of it.
Comprehending, as it did, that the Malolos RTC did not share its
position that Rosemoor had engaged in forum-shopping, it went to
great lengths to impress upon the Court of

Appeals that there was indeed forum-shopping on Rosemoors

part. But the appellate court did not likewise agree with the Bank
as it soundly debunked the forum-shopping charge. In fact, the
same forum-shopping argument has been fully ventilated before
the Court but we are utterly unimpressed as we made short shrift
of the argument earlier on. In the ultimate analysis, therefore, the
trial courts blunder may be overlooked as it proved to be
harmless.
 WHEREFORE, considering the foregoing, the Decision of the
Court of Appeals in G.R. 163521 dated 26 February 2004 and in
G.R No. 159669 dated 20 June 2003 are AFFIRMED. Costs against
petitioner. Petitioner, United Overseas Bank, Phils. and its counsel,
Siguion Reyna Montecillo & Ongsiako Law Offices, are given ten
(10) days from notice to EXPLAIN why they should not be held in
contempt of court for making a misrepresentation before the
Court as adverted to in this Decision.

SO ORDERED.

2. Republic of the Philippines

Supreme Court
Manila

SECOND DIVISION

SPOUSES HERMES P. OCHOA and G.R. No. 192877

ARACELI D. OCHOA,
Petitioners, Present:

CARPIO, J.,
Chairperson,
NACHURA,
- versus - BRION,*
PERALTA, and
ABAD, JJ.

Promulgated:
CHINA BANKING CORPORATION,
Respondent. March 23, 2011
x------------------------------------------------------------------------------------x

RESOLUTION

NACHURA, J.:

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 Paraaque City, but not on respondent banks 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 the following sections shall govern as to the manner in
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 Paraaque 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 ParaaqueCity.
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 Courts 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.
 3. Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 190071 August 15, 2012

UNION BANK OF THE PHILIPPINES, Petitioner,

vs.
MAUNLAD HOMES, INC. and all other persons or entities claiming rights under
it, Respondents.

VILLARAMA, JR.,*

DECISION

BRION, J.:

Before the Court is the petition for review on certiorari1 under Rule 45 of the Rules of Court filed by
petitioner Union Bank of the Philippines (Union Bank), assailing the decision dated October 28,
20092 of the Court of Appeals (CA) in CA-G.R. SP No. 107772.

THE FACTS

Union Bank is the owner of a commercial complex located in Malolos, Bulacan, known as the
Maunlad Shopping Mall.

Sometime in August 2002, Union Bank, as seller, and respondent Maunlad Homes, Inc. (Maunlad
Homes), as buyer, entered into a contract to sell3 involving the Maunlad Shopping Mall. The contract
set the purchase price at P 151 million, P 2.4 million of which was to be paid by Maunlad Homes as
down payment payable on or before July 5, 2002, with the balance to be amortized over the
succeeding 180-month period.4 Under the contract, Union Bank authorized Maunlad Homes to take
possession of the property and to build or introduce improvements thereon. The parties also agreed
that if Maunlad Homes violates any of the provisions of the contract, all payments made will be
applied as rentals for the use and possession of the property, and all improvements introduced on
the land will accrue in favor of Union Bank.5 In the event of rescission due to failure to pay or to
comply with the terms of the contract, Maunlad Homes will be required to immediately vacate the
property and must voluntarily turn possession over to Union Bank.6

When Maunlad Homes failed to pay the monthly amortization, Union Bank sent the former a Notice
of Rescission of Contract7 dated February 5, 2003, demanding payment of the installments due
within 30 days from receipt; otherwise, it shall consider the contract automatically rescinded.
Maunlad Homes failed to comply. Hence, on November 19, 2003, Union Bank sent Maunlad Homes
a letter demanding payment of the rentals due and requiring that the subject property be vacated
and its possession turned over to the bank. When Maunlad Homes continued to refuse, Union Bank
instituted an ejectment suit before the Metropolitan Trial Court (MeTC) of Makati City, Branch 64, on
February 19, 2004. Maunlad Homes resisted the suit by claiming, among others, that it is the owner
of the property as Union Bank did not reserve ownership of the property under the terms of the
contract.8By virtue of its ownership, Maunlad Homes claimed that it has the right to possess the
property.

On May 18, 2005, the MeTC dismissed Union Banks ejectment complaint. 9 It found that Union
Banks cause of action was based on a breach of contract and that both parties are claiming a better
right to possess the property based on their respective claims of ownership of the property.

The MeTC ruled that the appropriate action to resolve these conflicting claims was an accion
reivindicatoria, over which it had no jurisdiction.

On appeal, the Regional Trial Court (RTC) of Makati City, Branch 139, affirmed the MeTC in its
decision dated July 17, 2008;10 it agreed with the MeTC that the issues raised in the complaint
extend beyond those commonly involved in an unlawful detainer suit. The RTC declared that the
case involved a determination of the rights of the parties under the contract. Additionally, the RTC
noted that the property is located in Malolos, Bulacan, but the ejectment suit was filed by Union Bank
in Makati City, based on the contract stipulation that "the venue of all suits and actions arising out or
in connection with the Contract to Sell shall be in Makati City." 11 The RTC ruled that the proper venue
for the ejectment action is in Malolos, Bulacan, pursuant to the second paragraph of Section 1, Rule
4 of the Rules of Court, which states:

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. [emphasis
ours]

The RTC declared that Union Bank cannot rely on the waiver of venue provision in the contract
because ejectment is not an action arising out of or connected with the contract.

Union Bank appealed the RTC decision to the CA through a petition for review under Rule 42 of the
Rules of Court. The CA affirmed the RTC decision in its October 28, 2009 decision, 12 ruling that
Union Banks claim of possession is based on its claim of ownership which in turn is based on its
interpretation of the terms and conditions of the contract, particularly, the provision on the
consequences of Maunlad Homes breach of contract. The CA determined that Union Banks cause
of action is premised on the interpretation and enforcement of the contract and the determination of
the validity of the rescission, both of which are matters beyond the jurisdiction of the MeTC.
Therefore, it ruled that the dismissal of the ejectment suit was proper. The CA, however, made no
further ruling on the issue of venue of the action.

From the CAs judgment, Union Bank appealed to the Court by filing the present petition for review
on certiorari under Rule 45 of the Rules of Court.
 THE PARTIES ARGUMENTS

Union Bank disagreed with the CAs finding that it is claiming ownership over the property through
the ejectment action. It claimed that it never lost ownership over the property despite the execution
of the contract, since only the right to possess was conceded to Maunlad Homes under the contract;
Union Bank never transferred ownership of the property to Maunlad Homes. Because of Maunlad
Homes failure to comply with the terms of the contract, Union Bank believes that it rightfully
rescinded the sale, which rescission terminated Maunlad Homes right to possess the subject
property. Since Maunlad Homes failed to turn over the possession of the subject property, Union
Bank believes that it correctly instituted the ejectment suit.

The Court initially denied Union Banks petition in its Resolution dated March 17, 2010. 13 Upon
motion for reconsideration filed by Union Bank, the Court set aside its Resolution of March 17, 2010
(in a Resolution dated May 30, 201114) and required Maunlad Homes to comment on the petition.

Maunlad Homes contested Union Banks arguments, invoking the rulings of the lower courts. It
considered Union Banks action as based on the propriety of the rescission of the contract, which, in
turn, is based on a determination of whether Maunlad Homes indeed failed to comply with the terms
of the contract; the propriety of the rescission, however, is a question that is within the RTCs
jurisdiction. Hence, Maunlad Homes contended that the dismissal of the ejectment action was
proper.

THE COURTS RULING

We find the petition meritorious.

The authority of the MeTC to

interpret contracts in an unlawful
detainer action

In any case involving the question of jurisdiction, the Court is guided by the settled doctrine that the
jurisdiction of a court is determined by the nature of the action pleaded by the litigant through the
allegations in his complaint.15

Unlawful detainer is an action to recover possession of real property from one who unlawfully
withholds possession after the expiration or termination of his right to hold possession under any
contract, express or implied. The possession of the defendant in unlawful detainer is originally legal
but became illegal due to expiration or termination of the right to possess. 16 Under Section 1, Rule 70
of the Rules of Court, the action must be filed "within one (1) year after the unlawful deprivation or
withholding of possession." Thus, to fall within the jurisdiction of the MeTC, the complaint must
allege that

1. the defendant originally had lawful possession of the property, either by virtue of a contract
or by tolerance of the plaintiff; 2. eventually, the defendants possession of the property
becameillegal or unlawful upon notice by the plaintiff to defendant of the expiration or the
termination of the defendants right of possession;
 3. thereafter, the defendant remained in possession of the property and deprived the plaintiff
the enjoyment thereof; and

4. within one year from the unlawful deprivation or withholding of possession, the plaintiff
instituted the complaint for ejectment.17

Contrary to the findings of the lower courts, all four requirements were alleged in Union Banks
Complaint. Union Bank alleged that Maunlad Homes "maintained possession of the subject
properties" pursuant to the Contract to Sell.18 Maunlad Homes, however, "failed to faithfully comply
with the terms of payment," prompting Union Bank to "rescind the Contract to Sell in a Notice of
Rescission dated February 5, 2003."19 When Maunlad Homes "refused to turn over and vacate the
subject premises,"20 Union Bank sent another Demand Letter on November 19, 2003 to Maunlad
Homes requiring it (1) "[t]o pay the equivalent rentals-in-arrears as of October 2003 in the amount
of P 15,554,777.01 and monthly thereafter until the premises are fully vacated and turned over" to
Union Bank, and (2) to vacate the property peacefully and turn over possession to Union Bank. 21 As
the demand went unheeded, Union Bank instituted an action for unlawful detainer before the MeTC
on February 19, 2004, within one year from the date of the last demand. These allegations clearly
demonstrate a cause of action for unlawful detainer and vested the MeTC jurisdiction over Union
Banks action.

Maunlad Homes denied Union Banks claim that its possession of the property had become
unlawful. It argued that its failure to make payments did not terminate its right to possess the
property because it already acquired ownership when Union Bank failed to reserve ownership of the
property under the contract. Despite Maunlad Homes claim of ownership of the property, the Court
rules that the MeTC retained its jurisdiction over the action; a defendant may not divest the MeTC of
its jurisdiction by merely claiming ownership of the property.22 Under Section 16, Rule 70 of the Rules
of Court, "when the defendant raises the defense of ownership in his pleadings and the question of
possession cannot be resolved without deciding the issue of ownership, the issue of ownership shall
be resolved only to determine the issue of possession." Section 18, Rule 70 of the Rules of Court,
however, states that "the judgment x x x shall be conclusive with respect to the possession only and
shall in no wise bind the title or affect the ownership of the land or building."

The authority granted to the MeTC to preliminarily resolve the issue of ownership to determine the
issue of possession ultimately allows it to interpret and enforce the contract or agreement between
the plaintiff and the defendant. To deny the MeTC jurisdiction over a complaint merely because the
issue of possession requires the interpretation of a contract will effectively rule out unlawful detainer
as a remedy. As stated, in an action for unlawful detainer, the defendants right to possess the
property may be by virtue of a contract, express or implied; corollarily, the termination of the
defendants right to possess would be governed by the terms of the same contract. Interpretation of
the contract between the plaintiff and the defendant is inevitable because it is the contract that
initially granted the defendant the right to possess the property; it is this same contract that the
plaintiff subsequently claims was violated or extinguished, terminating the defendants right to
possess. We ruled in Sps. Refugia v. CA23 that
where the resolution of the issue of possession hinges on a determination of the validity and
interpretation of the document of title or any other contract on which the claim of possession is
premised, the inferior court may likewise pass upon these issues.

The MeTCs ruling on the rights of the parties based on its interpretation of their contract is, of
course, not conclusive, but is merely provisional and is binding only with respect to the issue of
possession.

Thus, despite the CAs opinion that Union Banks "case involves a determination of the rights of the
parties under the Contract to Sell,"24 it is not precluded from resolving this issue. Having acquired
jurisdiction over Union Banks action, the MeTC can resolve the conflicting claims of the parties
based on the facts presented and proved.

The right to possess the property was

extinguished when the contract to
sell failed to materialize

Maunlad Homes acquired possession of the property based on its contract with Union Bank. While
admitting that it suspended payment of the installments, 25 Maunlad Homes contended that the
suspension of payment did not affect its right to possess the property because its contract with Union
Bank was one of sale and not to sell; hence, ownership of the

property has been transferred to it, allowing it to retain possession notwithstanding nonpayment of
installments. The terms of the contract, however, do not support this conclusion.

Section 11 of the contract between Union Bank and Maunlad Homes provides that "upon payment in
full of the Purchase Price of the Property x x x, the SELLER shall execute and deliver a Deed of
Absolute Sale conveying the Property to the BUYER."26 "Jurisprudence has established that where
the seller promises to execute a deed of absolute sale upon the completion by the buyer of the
payment of the price, the contract is only a contract to sell."27 The presence of this provision
generally identifies the contract as being a mere contract to sell.28 After reviewing the terms of the
contract between Union Bank and Maunlad Homes, we find no reasonable ground to exempt the
present case from the general rule; the contract between Union Bank and Maunlad Homes is a
contract to sell.

In a contract to sell, the full payment of the purchase price is a positive suspensive condition whose
non-fulfillment is not a breach of contract, but merely an event that prevents the seller from
conveying title to the purchaser. "The non-payment of the purchase price renders the contract to sell
ineffective and without force and effect."29Maunlad Homes act of withholding the installment
payments rendered the contract ineffective and without force and effect, and ultimately deprived
itself of the right to continue possessing Maunlad Shopping Mall.

The propriety of filing the unlawful

detainer action in Makati City
pursuant to the venue stipulation in
the contract
Maunlad Homes questioned the venue of Union Banks unlawful detainer action which was filed in
Makati City while the contested property is located in Malolos, Bulacan. Citing Section 1, Rule 4 of
the Rules of Court, Maunlad Homes claimed that the unlawful detainer action should have been filed
with the municipal trial court of the municipality or city where the real property involved is situated.
Union Bank, on the other hand, justified the filing of the complaint with the MeTC of Makati City on
the venue stipulation in the contract which states that "the venue of all suits and actions arising out
of or in connection with this Contract to Sell shall be at Makati City."30

While Section 1, Rule 4 of the Rules of Court states that ejectment actions shall be filed in "the
municipal trial court of the municipality or city wherein the real property involved x x x is situated,"
Section 4 of the same Rule provides that the rule shall not apply "where the parties have validly
agreed in writing before the filing of the action on the exclusive venue thereof." Precisely, in this
case, the parties provided for a different venue. In Villanueva v. Judge Mosqueda, etc., et al., 31 the
Court upheld the validity of a stipulation in a contract providing for a venue for ejectment actions
other than that stated in the Rules of Court. Since the unlawful detainer action is connected with the
contract, Union Bank rightfully filed the complaint with the MeTC of Makati City.

WHEREFORE, we hereby GRANT the petition and SET ASIDE the decision dated October 28, 2009
of the Court of Appeals in CA-G.R. SP No. 107772. Respondent Maunlad Homes, Inc. is ORDERED
TO VACATE the Maunlad Shopping Mall, the property subject of the case, immediately upon the
finality of this Decision. Respondent Maunlad Homes, Inc. is further ORDERED TO PAY the rentals-
in-arrears, as well as rentals accruing in the interim until it vacates the property.

The case is REMANDED to the Metropolitan Trial Court of Makati City, Branch 64, to determine the
amount of rentals due. In addition to the amount determined as unpaid rent, respondent Maunlad
Homes, Inc. is ORDERED TO PAY legal interest of six percent (6o/o) per annum, from November
19, 2003, when the demand to pay and to vacate was made, up to the finality of this Decision.
Thereafter, an interest of twelve percent ( 12%) per annum shall be imposed on the total amount due
until full payment is made.

SO ORDERED.

4. Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-37750 May 19, 1978

SWEET LINES, INC., petitioner,

vs.
HON. BERNARDO TEVES, Presiding Judge, CFI of Misamis Oriental Branch VII, LEOVIGILDO
TANDOG, JR., and ROGELIO TIRO, respondents.

Filiberto Leonardo, Abelardo C. Almario & Samuel B. Abadiano for petitioner.

Leovigildo Vallar for private respondents.

SANTOS, J.:

This is an original action for Prohibition with Pre Injunction filed October 3, 1973 to restrain
respondent Judge from proceeding further with Civil Case No. 4091, entitled Leovigildo D. Tandog,
Jr. and Rogelio Tiro v. Sweet Lines, Inc." after he denied petitioner's Motion to Dismiss the
complaint, and the Motion for Reconsideration of said order. 1

Briefly, the facts of record follow. Private respondents Atty. Leovigildo Tandog and Rogelio Tiro, a
contractor by professions, bought tickets Nos. 0011736 and 011737 for Voyage 90 on December 31,
1971 at the branch office of petitioner, a shipping company transporting inter-island passengers and
cargoes, at Cagayan de Oro City. Respondents were to board petitioner's vessel, M/S "Sweet Hope"
bound for Tagbilaran City via the port of Cebu. Upon learning that the vessel was not proceeding to
Bohol, since many passengers were bound for Surigao, private respondents per advice, went to the
branch office for proper relocation to M/S "Sweet Town". Because the said vessel was already filled
to capacity, they were forced to agree "to hide at the cargo section to avoid inspection of the officers
of the Philippine Coastguard." Private respondents alleged that they were, during the trip," "exposed
to the scorching heat of the sun and the dust coming from the ship's cargo of corn grits," and that the
tickets they bought at Cagayan de Oro City for Tagbilaran were not honored and they were
constrained to pay for other tickets. In view thereof, private respondents sued petitioner for damages
and for breach of contract of carriage in the alleged sum of P10,000.00 before respondents Court of
First Instance of Misamis Oriental. 2

Petitioner moved to dismiss the complaint on the ground of improper venue. This motion was
premised on the condition printed at the back of the tickets, i.e., Condition No. 14, which reads:

14. It is hereby agreed and understood that any and all actions arising out of the
conditions and provisions of this ticket, irrespective of where it is issued, shall be filed
in the competent courts in the City of Cebu. 3

The motion was denied by the trial court. 4 Petitioner moved to reconnsider the order of denial, but no
avail. 5 Hence, this instant petition for prohibition for preliminary injunction, 'alleging that the respondent
judge has departed from the accepted and usual course of judicial preoceeding" and "had acted without
or in excess or in error of his jurisdicton or in gross abuse of discretion. 6

In Our resolution of November 20, 1973, We restrained respondent Judge from proceeding further
with the case and required respondent to comment. 7 On January 18, 1974, We gave due course to the
petition and required respondent to answer. 8 Thereafter, the parties submitted their respesctive
memoranda in support of their respective contentions. 9

Presented thus for Our resolution is a question is aquestion which, to all appearances, is one of first
impression, to wit Is Condition No. 14 printed at the back of the petitioner's passage tickets
purchased by private respondents, which limits the venue of actions arising from the contract of
carriage to theCourt of First Instance of Cebu, valid and enforceable? Otherwise stated, may a
common carrier engaged in inter-island shipping stipulate thru condition printed at the back of
passage tickets to its vessels that any and all actions arising out of the ocntract of carriage should be
filed only in a particular province or city, in this case the City of Cebu, to the exclusion of all others?

Petitioner contends thaty Condition No. 14 is valid and enforceable, since private respndents
acceded to tit when they purchased passage tickets at its Cagayan de Oro branch office and took its
vessel M/S "Sweet Town" for passage to Tagbilaran, Bohol that the condition of the venue of
actions in the City of Cebu is proper since venue may be validly waived, citing cases; 10 that is an
effective waiver of venue, valid and binding as such, since it is printed in bold and capital letters and not in
fine print and merely assigns the place where the action sing from the contract is institution likewise citing
cases; 11 and that condition No. 14 is unequivocal and mandatory, the words and phrases "any and all",
"irrespective of where it is issued," and "shag" leave no doubt that the intention of Condition No. 14 is to
fix the venue in the City of Cebu, to the exclusion of other places; that the orders of the respondent Judge
are an unwarranted departure from established jurisprudence governing the case; and that he acted
without or in excess of his jurisdiction in is the orders complained of. 12

On the other hand, private respondents claim that Condition No. 14 is not valid, that the same is not
an essential element of the contract of carriage, being in itself a different agreement which requires
the mutual consent of the parties to it; that they had no say in its preparation, the existence of which
they could not refuse, hence, they had no choice but to pay for the tickets and to avail of petitioner's
shipping facilities out of necessity; that the carrier "has been exacting too much from the public by
inserting impositions in the passage tickets too burdensome to bear," that the condition which was
printed in fine letters is an imposition on the riding public and does not bind respondents, citing
cases; 13 that while venue 6f actions may be transferred from one province to another, such arrangement
requires the "written agreement of the parties", not to be imposed unilaterally; and that assuming that the
condition is valid, it is not exclusive and does not, therefore, exclude the filing of the action in Misamis
Oriental, 14

There is no question that there was a valid contract of carriage entered into by petitioner and private
respondents and that the passage tickets, upon which the latter based their complaint, are the best
evidence thereof. All the essential elements of a valid contract, i.e., consent, cause or consideration
and object, are present. As held in Peralta de Guerrero, et al. v. Madrigal Shipping Co., Inc., 15

It is a matter of common knowledge that whenever a passenger boards a ship for

transportation from one place to another he is issued a ticket by the shipper which
has all the elements of a written contract, Namely: (1) the consent of the contracting
parties manifested by the fact that the passenger boards the ship and the shipper
consents or accepts him in the ship for transportation; (2) cause or consideration
which is the fare paid by the passenger as stated in the ticket; (3) object, which is the
transportation of the passenger from the place of departure to the place of
destination which are stated in the ticket.

It should be borne in mind, however, that with respect to the fourteen (14) conditions one of which
is "Condition No. 14" which is in issue in this case printed at the back of the passage tickets,
these are commonly known as "contracts of adhesion," the validity and/or enforceability of which will
have to be determined by the peculiar circumstances obtaining in each case and the nature of the
conditions or terms sought to be enforced. For, "(W)hile generally, stipulations in a contract come
about after deliberate drafting by the parties thereto, ... there are certain contracts almost all the
provisions of which have been drafted only by one party, usually a corporation. Such contracts are
called contracts of adhesion, because the only participation of the party is the signing of his
signature or his 'adhesion' thereto. Insurance contracts, bills of lading, contracts of make of lots on
the installment plan fall into this category" 16

By the peculiar circumstances under which contracts of adhesion are entered into namely, that it
is drafted only by one party, usually the corporation, and is sought to be accepted or adhered to by
the other party, in this instance the passengers, private respondents, who cannot change the same
and who are thus made to adhere thereto on the "take it or leave it" basis certain guidelines in the
determination of their validity and/or enforceability have been formulated in order to that justice and
fan play characterize the relationship of the contracting parties. Thus, this Court speaking through
Justice J.B.L. Reyes in Qua Chee Gan v. Law Union and Rock Insurance Co., 17 and later through
Justice Fernando in Fieldman Insurance v. Vargas, 18 held

The courts cannot ignore that nowadays, monopolies, cartels and concentration of
capital endowed with overwhelm economic power, manage to impose upon parties d
with them y prepared 'agreements' that the weaker party may not change one whit
his participation in the 'agreement' being reduced to the alternative 'to take it or leave
it,' labelled since Raymond Saleilles 'contracts by adherence' (contracts d' adhesion)
in contrast to those entered into by parties bargaining on an equal footing. Such
contracts (of which policies of insurance and international bill of lading are prime
examples) obviously cap for greater strictness and vigilance on the part of the courts
of justice with a view to protecting the weaker party from abuses and imposition, and
prevent their becoming traps for the unwary.

To the same effect and import, and, in recognition of the character of contracts of this kind, the
protection of the disadvantaged is expressly enjoined by the New Civil Code

In all contractual property or other relations, when one of the parties is at a

disadvantage on account of his moral dependence, ignorance indigence, mental
weakness, tender age and other handicap, the courts must be vigilant for his
protection. 19

Considered in the light Of the foregoing norms and in the context Of circumstances Prevailing in the
inter-island ship. ping industry in the country today, We find and hold that Condition No. 14 printed at
the back of the passage tickets should be held as void and unenforceable for the following reasons
first, under circumstances obligation in the inter-island ship. ping industry, it is not just and fair to bind
passengers to the terms of the conditions printed at the back of the passage tickets, on which
Condition No. 14 is Printed in fine letters, and second, Condition No. 14 subverts the public policy on
transfer of venue of proceedings of this nature, since the same will prejudice rights and interests of
innumerable passengers in different s of the country who, under Condition No. 14, will have to file
suits against petitioner only in the City of Cebu.
1. It is a matter of public knowledge, of which We can take judicial notice, that there is a dearth of
and acute shortage in inter- island vessels plying between the country's several islands, and the
facilities they offer leave much to be desired. Thus, even under ordinary circumstances, the piers are
congested with passengers and their cargo waiting to be transported. The conditions are even worse
at peak and/or the rainy seasons, when Passengers literally scramble to whatever accommodations
may be availed of, even through circuitous routes, and/or at the risk of their safety their immediate
concern, for the moment, being to be able to board vessels with the hope of reaching their
destinations. The schedules are as often as not if not more so delayed or altered. This was
precisely the experience of private respondents when they were relocated to M/S "Sweet Town" from
M/S "Sweet Hope" and then any to the scorching heat of the sun and the dust coming from the ship's
cargo of corn grits, " because even the latter was filed to capacity.

Under these circumstances, it is hardly just and proper to expect the passengers to examine their
tickets received from crowded/congested counters, more often than not during rush hours, for
conditions that may be printed much charge them with having consented to the conditions, so
printed, especially if there are a number of such conditions m fine print, as in this case. 20

Again, it should be noted that Condition No. 14 was prepared solely at the ms of the petitioner,
respondents had no say in its preparation. Neither did the latter have the opportunity to take the into
account prior to the purpose chase of their tickets. For, unlike the small print provisions of contracts
the common example of contracts of adherence which are entered into by the insured in his
awareness of said conditions, since the insured is afforded the op to and co the same, passengers
of inter-island v do not have the same chance, since their alleged adhesion is presumed only from
the fact that they purpose chased the tickets.

It should also be stressed that slapping companies are franchise holders of certificates of public
convenience and therefore, posses a virtual monopoly over the business of transporting passengers
between the ports covered by their franchise. This being so, shipping companies, like petitioner,
engaged in inter-island shipping, have a virtual monopoly of the business of transporting passengers
and may thus dictate their terms of passage, leaving passengers with no choice but to buy their
tickets and avail of their vessels and facilities. Finally, judicial notice may be taken of the fact that the
bulk of those who board these inter-island vested come from the low-income groups and are less
literate, and who have little or no choice but to avail of petitioner's vessels.

2. Condition No. 14 is subversive of public policy on transfers of venue of actions. For, although
venue may be changed or transferred from one province to another by agreement of the parties in
writing t to Rule 4, Section 3, of the Rules of Court, such an agreement will not be held valid where it
practically negates the action of the claimants, such as the private respondents herein. The
philosophy underlying the provisions on transfer of venue of actions is the convenience of the
plaintiffs as well as his witnesses and to promote 21 the ends of justice. Considering the expense and
trouble a passenger residing outside of Cebu City would incur to prosecute a claim in the City of Cebu, he
would most probably decide not to file the action at all. The condition will thus defeat, instead of enhance,
the ends of justice. Upon the other hand, petitioner has branches or offices in the respective ports of call
of its vessels and can afford to litigate in any of these places. Hence, the filing of the suit in the CFI of
Misamis Oriental, as was done in the instant case, will not cause inconvenience to, much less prejudice,
petitioner.
Public policy is ". . . that principle of the law which holds that no subject or citizen can lawfully do that
which has a tendency to be injurious to the public or against the public good ... 22 Under this
principle" ... freedom of contract or private dealing is restricted by law for the good of the public. 23 Clearly,
Condition No. 14, if enforced, will be subversive of the public good or interest, since it will frustrate in
meritorious cases, actions of passenger cants outside of Cebu City, thus placing petitioner company at a
decided advantage over said persons, who may have perfectly legitimate claims against it. The said
condition should, therefore, be declared void and unenforceable, as contrary to public policy to make
the courts accessible to all who may have need of their services.

WHEREFORE, the petition for prohibition is DISMISS. ED. The restraining order issued on
November 20, 1973, is hereby LIFTED and SET ASIDE. Costs against petitioner.

Fernando (Chairman), Aquino, Concepcion, Jr., JJ., concur.

Antonio, J., reserves his vote.

Separate Opinions

BARREDO, J., concurring:

I concur in the dismissal of the instant petition.

Only a few days ago, in Hoechst Philippines, Inc. vs. Francisco Torres, et al., G. R. No. L-44351,
promulgated May 18, 1978, We made it clear that although generally, agreements regarding change
of venue are enforceable, there may be instances where for equitable considerations and in the
better interest of justice, a court may justify the laying of, the venue in the place fixed by the rules
instead of following written stipulation of the parties.

In the particular case at bar, there is actually no written agreement as to venue between the parties
in the sense contemplated in Section 3 of Rule 4, which governs the matter. I take it that the
importance that a stipulation regarding change of the venue fixed by law entails is such that nothing
less than mutually conscious agreement as to it must be what the rule means. In the instant case, as
well pointed out in the main opinion, the ticket issued to private respondents by petitioner constitutes
at best a "contract of adhesion". In other words, it is not that kind of a contract where the parties sit
down to deliberate, discuss and agree specifically on all its terms, but rather, one which respondents
took no part at all in preparing, since it was just imposed upon them when they paid for the fare for
the freight they wanted to ship. It is common knowledge that individuals who avail of common
carriers hardly read the fine prints on such tickets to note anything more than the price thereof and
the destination designated therein.
Under these circumstances, it would seem that, since this case is already in respondent court and
there is no showing that, with its more or less known resources as owner of several inter-island
vessels plying between the different ports of the Philippines for sometime already, petitioner would
be greatly inconvenienced by submitting to the jurisdiction of said respondent court, it is best to allow
the proceedings therein to continue. I cannot conceive of any juridical injury such a step can cause
to anyone concerned. I vote to dismiss the petition.

Separate Opinions

BARREDO, J., concurring:

I concur in the dismissal of the instant petition.

Only a few days ago, in Hoechst Philippines, Inc. vs. Francisco Torres, et al., G. R. No. L-44351,
promulgated May 18, 1978, We made it clear that although generally, agreements regarding change
of venue are enforceable, there may be instances where for equitable considerations and in the
better interest of justice, a court may justify the laying of, the venue in the place fixed by the rules
instead of following written stipulation of the parties.

In the particular case at bar, there is actually no written agreement as to venue between the parties
in the sense contemplated in Section 3 of Rule 4, which governs the matter. I take it that the
importance that a stipulation regarding change of the venue fixed by law entails is such that nothing
less than mutually conscious agreement as to it must be what the rule means. In the instant case, as
well pointed out in the main opinion, the ticket issued to private respondents by petitioner constitutes
at best a "contract of adhesion". In other words, it is not that kind of a contract where the parties sit
down to deliberate, discuss and agree specifically on all its terms, but rather, one which respondents
took no part at all in preparing, since it was just imposed upon them when they paid for the fare for
the freight they wanted to ship. It is common knowledge that individuals who avail of common
carriers hardly read the fine prints on such tickets to note anything more than the price thereof and
the destination designated therein.

Under these circumstances, it would seem that, since this case is already in respondent court and
there is no showing that, with its more or less known resources as owner of several inter-island
vessels plying between the different ports of the Philippines for sometime already, petitioner would
be greatly inconvenienced by submitting to the jurisdiction of said respondent court, it is best to allow
the proceedings therein to continue. I cannot conceive of any juridical injury such a step can cause
to anyone concerned. I vote to dismiss the petition.
 5. Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-44351 May 18, 1978

HOECHST PHILIPPINES, INC., petitioner,

vs.
FRANCISCO TORRES and the Honorable PROCORO J. DONATO, Judge of the Court of First
Instance of Isabela, respondents.

Manuel S. Fornacier, Jr., for petitioner.

Melanio T. Singson for private respondent.

BARREDO, J.:

Petition for certiorari and prohibition to declare respondent court without authority to take cognizance
of private respondent's action for "Breach of Contract with Preliminary Injunction" and to enjoin said
court from further taking any action in said case upon the ground of improper laying of the venue.

On April 8, 1976, private respondent, Francisco Torres, filed with respondent Court of First Instance
of Isabela complaint in Civil Case No. V-296 alleging breach of a distributorship contract on the part
of petitioner, Hoechst Philippines, Inc. On April 14, 1976, petitioner filed a motion to dismiss said
complaint based on the ground that as the contract, the very actionable document invoked in the
complaint, provides that "(I)n case of any litigation arising out of this agreement, the venue of any
action shall be in the competent courts of the Province of Rizal", venue has been improperly laid in
respondent court, petitioner citing in his said motion principally the ruling of this Supreme Court
in Bautista vs. De Borja, 18 SCRA 474.

Respondent court nevertheless denied the said motion to dismiss as well as the motion for
reconsideration of that denial, hence the present petition. Respondent do not deny in their respective
answers the clear tenor of the above-quoted stipulation as to venue in the contract in dispute. It is
the position of respondent judge, however, that inasmuch as the contract was "a prepared standard
form for the defendant-company, wherein blanks were merely filled up after the party-distributor
agreed on the valuation of products which he may order from the company for one year" and "all
stipulations were standard and pre-made by the company, prepared by, as your Respondent can
safely and rightly assume, its legal department" and "it (only) remains upon party-distributor to stamp
his approval to the whole contract", hence "plaintiff distributor was given no option whatsoever
except 'to take it or leave it ", the word "shall" in the stipulation in question should be construed to be
merely permissive and not mandatory. It is argued that this construction serves not only the
exclusive interests o petitioner but also that of private respondent.
It is further contended in said answer that reading the terms of the contract, it can be gathered that
most likely, it would be petitioner who would have to sue private respondent, and, therefore, the
stipulation as to venue was meant to apply only to suits to be filed by petitioner. Finally, it is
maintained that there are no words in the contract expressly restricting the venue to the courts of
Rizal.

Upon the other hand, in the answer of private respondent, he capitalizes on theory that inasmuch as
petitioner is a multinational company, it is against public policy for it to stipulate in any contract that
the venue of actions thereunder should be in any particular place, much less its place of residence,
to the prejudice of small-time distributors, the private respondent. It is urged that to give effect to the
stipulation in controversy "is to serve the convenience and the purpose of the petitioner only; its
effect is to discourage, to deter to render expensive and uneconomical and filing of suits by small-
time company distributors against the petitioner even for extremely meritorious cases of latter's
breach or violation of such distribution agreement. "

The pose taken by respondents does evoke sympathy, but it can hardly carry the day for them.
Change or transfer of venue from that fixed in the rules may be effected upon written agreement of
the parties not only before the actual filing of the action but even after the same has been filed. The
settled rule of jurisprudence in this jurisdiction is that a written agreement of the parties as to venue,
as authorized by Section 3, Rule 4, is not only binding between the parties but also enforceable by
the courts. 1 It is only after the action has been filed already that change or transfer of venue by
agreement of the parties is understandably controllable in the discretion of the court. 2

The agreement in this case was entered into long before the petitioner's action was filed. It is clear
and unequivocal. The parties therein stipulated that "(I)n case of any litigation arising out of this
agreement, the venue of any action shall be in the competent courts of the Province of Rizal." No
further stipulations are necessary to elicit the thought that both parties agreed that any action by
either of them would be filed only in the competent courts of Rizal province exclusively.

Respondent judge rather vehemently argues, however, that under the circumstances obtaining
between the parties, as earlier stated in this decision, it is permissible, notwithstanding Our ruling in
Bautista, supra, that the word "shall" in the agreement in question be construed as "may", hence not
strictly obligatory. Private respondent points out that he had no choice but to sign the "Distributorship
Agreement" in question, he being practically at the mercy of petitioner company which is allegedly a
multinational corporation. He maintains that to enforce the agreement literally would amount to a
denial to him, and to other distributors similarly situated, of the opportunity to file any suit against
petitioner.

We have given due attention to this posture of respondents. Indeed, there may be instances when
an agreement as to venue may be so oppressive as to effectively deny to the party concerned
access to the courts by reason of poverty. The difficulties pictured y respondents that a poor plaintiff
from a distant province may have to encounter in filing suit in a particular place ran indeed happen.
In such an eventuality and depending on the peculiar circumstances of the case, the Court may
declare the agreement as to venue to be in effect contrary to public policy, despite that in general,
changes and transfers of venue by written agreement of the parties is allowable whenever it is
shown that a stipulation as to venue works injustice by practically denying to the party concerned a
fair opportunity to file suit in the place designated by the rules.

But a cursory inquiry into the respective economic conditions of the parties herein as reflected in the
record before Us does not show that private respondent Francisco Torres is really in no position to
carry on a litigation in the Province of Rizal, because of his residence or place of business being in
Isabela province. The volume of business covered by the Distributorship Agreement in question,
Annex C of the Petition, and to be handled by private respondent Torres is P700,000. The amount
sought to he recovered by said respondent in his complaint, Annex A of the Petition, totals more than
P300,000. These circumstances preclude, in Our view, the need to apply equitable considerations to
the case of respondent Torres. It is quite obvious that his economic condition does not warrant non-
enforcement of the stipulation as to venue that he has agreed to. We are persuaded that his
pretension that he had no alternative but to agree, even if true, does not merit relief. Considering the
nature and volume of the business he has with petitioner, there is nothing oppressive in his being
required to litigate out of his province. After all, for practical reasons, there seems to justification also
for petitioner to see to it that all suits against it be concentrated in the Province of Rizal, as
otherwise, considering the nationwide extent of its business, it would be greatly inconvenienced if it
has to appear in so many provinces everytime an action is filed against it. We are convinced both
parties agreed to the venue in controversy with eyes wide open.

IN VIEW OF ALL THE FOREGOING, the petition is granted, the orders of respondent judge of May
13, 1976 and July 12, 1976 are hereby set aside, and petitioner's motion to dismiss private
respondent's complaint in question is granted. Costs against private respondent Francisco Torres.

Fernando (Chairman), Antonio, Aquino, Concepcion, Jr., and Santos, JJ., concur.

6. Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-58287 August 19, 1982

EDUARDO VILLANUEVA, petitioner,

vs.
JUDGE LORENZO MOSQUEDA, Court of First Instance of Pampanga, San Fernando Branch
VII, and HEIRS OF BASILIO BONIFACIO, respondent.

Ceferino R. Magat petitioner.

Marciano V. Guevarra for respondents.

&
AQUINO, J.: 1wph1.t

This case is about the venue of an ejectment suit. In the supplementary lease agreement of August
19, 1970 executed between Basilio Bonifacio as lessor and Eduardo Villanueva as lessee regarding
Bonifacio's house located at 329-31 Lakandula Street Extension, Tondo, Manila, it was stipulated
that if the lessor violates the contract, he can be sued in Manila and if the lessee violates the
contract, he can be sued in Masantol, Pampanga. Bonifacio resided at Masantol. Villanueva resided
in Tondo (p. 23, Rollo).

In June, 1980, the heirs of Bonifacio filed an ejectment suit against Villanueva in the municipal court
of Masantol. Villanueva filed a motion to dismiss on the ground of lack of jurisdiction, his contention
being that the venue of the action is Manila where the property is located and that the stipulation that
the action can be filed in Masantol is void for being contrary to section 2(a), Rule 4 of the Rules of
Court. The municipal court denied the motion. Villanueva answered the complaint.
t@lF

He also filed a certiorari petition in the Court of First Instance of Pampanga wherein he assailed the
municipal court's order denying his motion to dismiss. The Court of First Instance dismissed the
petition. It ruled that the venue was properly laid in Masantol pursuant to the agreement of the
parties who had validly waived the legal venue (Central Azucarera de Tarlac vs. De Leon and
Fernandez, 56 Phil. 169).

Villanueva in his instant petition for certiorari assails that decision of the Court of First Instance.

We hold that the petition has no merit. It is incontrovertible that the municipal court of Masantol, like
other inferior courts, has exclusive original jurisdiction to entertain ejectment suits.

The rule in section 1(a), Rule 4 of the Rules of Court that "forcible entry and detainer actions
regarding real property shall be brought in the municipality or city in which the subject matter thereof
is situated" does not refer to the jurisdiction over the subject matter but only to the place where the
ejectment suit may be brought.

Section 3 of Rule 4 provides that "by written agreement of the parties the venue of an action may be
changed or transferred from one province to another". In this case, such an agreement was
formalized between the lessor and the lessee. The agreement is valid, binding and enforceable
(Hoechst Philippines, Inc. vs. Torres, L-44351, May 18, 1978, 83 SCRA 297; Bautista vs. De Borja,
124 Phil. 1056).

This case should be distinguished from a case where the parties stipulated that actions on a
construction contract may be instituted in the Court of First Instance of Naga City and the Contractor,
a resident of Bacolor, Pampanga, instead of suing the other party in that court, sued him in the Court
of First Instance of Pampanga.

It was held that the suit was properly filed in Pampanga because the agreement of the parties on the
venue of the actions between them was "simply permissive". They did not waive their right to choose
the venue provided for in section 2(b), Rule 4 of the Rules of Court Capati vs. Ocampo, L-28742,
April 30, 1982).
WHEREFORE, the petition is dismiss. The lower court's decision is affirmed. Costs against the
petitioner.

SO ORDERED.

Barredo (Chairman), Concepcion, Jr., Guerrero, Abad Santos, De Castro and Escolin, JJ., concur. 1wph1.t

7. Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-56763 December 15, 1982

JOHN SY and UNIVERSAL PARTS SUPPLY CORPORATION, petitioners,

vs.
TYSON ENTERPRISES, INC., JUDGE GREGORIO G. PINEDA of the Court of First Instance of
Rizal, Pasig Branch XXI and COURT OF APPEALS, respondents.

Abraham D. Cana for petitioners.

Alberto A. Domingo for private respondent.

AQUINO, J:

This is a case about the venue of a collection suit. On August 29, 1979, Tyson Enterprises, Inc. filed
against John Sy and Universal Parts Supply Corporation in the Court of First Instance of Rizal, Pasig
Branch XXI, a complaint for the collection of P288,534.58 plus interest, attorney's fees and litigation
expenses (Civil Case No. 34302).

It is alleged in the complaint that John Sy, doing business under the trade name, Universal Parts
Supply, is a resident of Fuentebella Subdivision, Bacolod City and that his co-defendant, Universal
Parts Supply Corporation, allegedly controlled by Sy, is doing business in Bacolod City.

Curiously enough, there is no allegation in the complaint as to the office or place of business of
plaintiff Tyson Enterprises, Inc., a firm actually doing business at 1024 Magdalena, now G.
Masangkay Street, Binondo, Manila (p. 59, Rollo).

What is alleged is the postal address or residence of Dominador Ti, the president and general
manager of plaintiff firm, which is at 26 Xavier Street, Greenhills Subdivision, San Juan, Rizal. The
evident purpose of alleging that address and not mentioning the place of business of plaintiff firm
was to justify the filing of the suit in Pasig, Rizal instead of in Manila.
Defendant Sy and Universal Parts Supply Corporation first filed a motion for extension of time to file
their answer and later a motion for a bill of particulars. The latter motion was denied. Then, they filed
a motion to dismiss on the ground of improper venue.

They invoked the provision of section 2(b), Rule 4 of the Rules of Court that personal actions "may
be commenced and tried where the defendant or any of the defendants resides or may be found, or
where the plaintiffs or any of the plaintiffs resides, at the election of the plaintiff."

To strengthen that ground, they also cited the stipulation in the sales invoice that "the parties
expressly submit to the jurisdiction of the Courts of the City of Manila for any legal action arising out
of" the transaction which stipulation is quoted in paragraph 4 of plaintiff's complaint.

The plaintiff opposed the motion to dismiss on the ground that the defendants had waived the
objection based on improper venue because they had previously filed a motion for a bill of
particulars which was not granted. The trial court denied the motion to dismiss on the ground that by
filing a motion for a bill of particulars the defendants waived their objection to the venue. That denial
order was assailed in a petition for certiorari and prohibition in the Court of Appeals which issued on
July 29, 1980 a restraining order, enjoining respondent judge from acting on the case. He
disregarded the restraining order (p. 133, Rollo).

The Appellate Court in its decision of October 6, 1980 dismissed the petition. It ruled that the parties
did not intend Manila as the exclusive venue of the actions arising under their transactions and that
since the action was filed in Pasig, which is near Manila, no useful purpose would be served by
dismissing the same and ordering that it be filed in Manila (Sy vs. Pineda, CA-G.R. No. SP-10775).
That decision was appealed to this Court.

There is no question that the venue was improperly laid in this case. The place of business of
plaintiff Tyson Enterprises, Inc., which for purposes of venue is considered as its residence (18 C.J.S
583; Clavecilla Radio system vs. Antillon, L-22238, February 18, 1967, 19 SCRA 379), because a
corporation has a personality separate and distinct from that of its officers and stockholders.

Consequently, the collection suit should have been filed in Manila, the residence of plaintiff
corporation and the place designated in its sales invoice, or it could have been filed also in Bacolod
City, the residence of defendant Sy.

We hold that the trial court and the Court of Appeals erred in ruling that the defendants, now the
petitioners, waived their objection to the improper venue. As the trial court proceeded in defiance of
the Rules of Court in not dismissing the case, prohibition lies to restrain it from acting in the case
(Enriquez vs. Macadaeg, 84 Phil. 674).

Section 4, Rule 4 of the Rules of Court provides that, "when improper venue is not objected to in a
motion to dismiss it is deemed waived" and it can no longer be pleaded as an affirmative defense in
the answer (Sec. 5, Rule 16).

In this case, the petitioners, before filing their answer, filed a motion to dismiss based on improper
venue. That motion was seasonably filed (Republic vs. Court of First Instance of Manila, L-30839,
November 28, 1975, 68 SCRA 231, 239). The fact that they filed a motion for a bill of particulars
before they filed their motion to dismiss did not constitute a waiver of their objection to the venue.

It should be noted that the provision of Section 377 of the Code of Civil Procedure that "the failure of
a defendant to object to the venue of the action at the time of entering his appearance in the action
shall be deemed a waiver on his part of all objection to the place or tribunal in which the action is
brought" is not found in the Rules of Court.

And the provision of section 4, Rule 5 of the 1940 Rules of Court that "when improper venue is not
objected to prior to the trial, it is deemed waived" is not reproduced in the present Rules of Court.

To repeat, what section 4 of Rule 4 of the present Rules of court provides is that the objection to
improper venue should be raised in a motion to dismiss seasonably filed and, if not so raised, then
the said objection is waived. Section 4 does not provide that the objection based on improper venue
should be interposed by means of a special appearance or before any pleading is filed.

The rules on venue, like the other procedural rules, are designed to insure a just and orderly
administration of justice or the impartial and evenhanded determination of every action and
proceeding. Obviously, this objective will not be attained if the plaintiff is given unrestricted freedom
to choose the court where he may file his complaint or petition.

The choice of venue should not be left to the plaintiff's whim or caprice. He may be impelled by some
ulterior motivation in choosing to file a case in a particular court even if not allowed by the rules on
venue.

As perspicaciously observed by Justice Moreland, the purpose of procedure is not to restrict the
court's jurisdiction over the subject matter but to give it effective facility "in righteous action", "to
facilitate and promote the administration of justice" or to insure "just judgments" by means of a fair
hearing. If that objective is not achieved, then "the administration of justice becomes incomplete and
unsatisfactory and lays itself open to grave criticism." (Manila Railroad Co. vs. Attorney General, 20
Phil. 523, 530.)

The case of Marquez Lim Cay vs. Del Rosario, 55 Phil. 962, does not sustain the trial court's order of
denial because in that case the defendants, before filing a motion to dismiss on the ground of
improper venue, interposed a demurrer on the ground that the complaint does not state a cause of
action. Then, they filed a motion for the dissolution of an attachment, posted a bond for its
dissolution and later filed a motion for the assessment of the damages caused by the attachment. All
those acts constituted a submission to the trial court's jurisdiction and a waiver of the objection
based on improper venue under section 377 of the Code of Civil Procedure.

The instant case is similar to Evangelista vs. Santos, 86 Phil. 387, where the plaintiffs sued the
defendant in the Court of First Instance of Rizal on the assumption that he was a resident of Pasay
City because he had a house there. Upon receipt of the summons, the defendant filed a motion to
dismiss based on improper venue. He alleged under oath that he was a resident of Iloilo City.
This Court sustained the dismissal of the complaint on the ground of improper venue, because the
defendant was really a resident of Iloilo City. His Pasay City residence was used by his children who
were studying in Manila. Same holding in Casilan vs. Tomassi, 90 Phil. 765; Corre vs. Corre, 100
Phil. 321; Calo vs. Bislig Industries, Inc., L-19703, January 30, 1967, 19 SCRA 173; Adamos vs. J.
M. Tuason, Co., Inc.,. L-21957, October 14, 1968, 25 SCRA 529.

Where one Cesar Ramirez, a resident of Quezon City, sued in the Court of First Instance of Manila
Manuel F. Portillo, a resident of Caloocan City, for the recovery of a sum of money, the trial court
erred in not granting Portillo's motion to dismiss the complaint on the ground of improper venue This
Court issued the writ of prohibition to restrain the trial court from proceeding in the case (Portillo vs.
Judge Reyes and Ramirez, 113 Phil. 288).

WHEREFORE, the decision of the Court of Appeals and the order of respondent judge denying the
motion to dismiss are reversed and set aside. The writ of prohibition is granted. Civil Case No. 34302
should be considered dismissed without prejudice to refiling - it in the Court of First Instance of
Manila or Bacolod City at the election of plaintiff which should be allowed to withdraw the
documentary evidence submitted in that case. All the proceedings in said case, including the
decision, are also set aside. Costs against Tyson Enterprises, Inc.

SOORDERED.

Makasiar (Chairman), Concepcion, Jr., Guerrero and Abad Santos, JJ., concur.

Separate Opinions

ESCOLIN, J., dissenting:

It is my view that petitioners, by filing a motion for a bill of particulars, had submitted themselves to
the jurisdiction of the respondent court, and has thus waived their objection to the venue of action.

DE CASTRO, J., concurring:

I concur, because as stated in the main opinion, the residence of the plaintiff is not alleged in the
complaint. The fact of improper venue is, therefore, not manifest on the face of the complaint. Were
it so manifest, I would say, along with Justice Escolin, that, in filing a motion for a bill of particulars,
petitioners as defendants in Civil Case No. 34302 of the Court of First Instance of Rizal, waived
objection to improper venue.

Separate Opinions
ESCOLIN, J., dissenting:

It is my view that petitioners, by filing a motion for a bill of particulars, had submitted themselves to
the jurisdiction of the respondent court, and has thus waived their objection to the venue of action.

DE CASTRO, J., concurring:

I concur, because as stated in the main opinion, the residence of the plaintiff is not alleged in the
complaint. The fact of improper venue is, therefore, not manifest on the face of the complaint. Were
it so manifest, I would say, along with Justice Escolin, that, in filing a motion for a bill of particulars,
petitioners as defendants in Civil Case No. 34302 of the Court of First Instance of Rizal, waived
objection to improper venue.

8. THIRD DIVISION

PACIFIC CONSULTANTS G.R. No. 166920

INTERNATIONAL ASIA,
INC. and JENS PETER Present:
HENRICHSEN,
Petitioners, YNARES-SANTIAGO, J.,
Chairperson,
AUSTRIA-MARTINEZ,
- versus - CALLEJO, SR., and
CHICO-NAZARIO, JJ.

Promulgated:
KLAUS K. SCHONFELD,
Respondent. February 19, 2007

x--------------------------------------------------x

DECISION

CALLEJO, SR., J.:

Before us is a Petition for Review on Certiorari under Rule 45 of the

Revised Rules of Court of the Decision[1] of the Court of Appeals (CA) in CA-G.R.
SP No. 76563. The CA decision reversed the Resolution of the National Labor
Relations Commission (NLRC) in NLRC NCR CA No. 029319-01, which, in turn,
affirmed the Decision of the Labor Arbiter in NLRC NCR Case No. 30-12-04787-
00 dismissing the complaint of respondent Klaus K. Schonfeld.

The antecedent facts are as follows:

Respondent is a Canadian citizen and was a resident of New Westminster, British

Columbia, Canada. He had been a consultant in the field of environmental
engineering and water supply and sanitation. Pacicon Philippines, Inc. (PPI) is a
corporation duly established and incorporated in accordance with the laws of
the Philippines. The primary purpose of PPI was to engage in the business of
providing specialty and technical services both in and out of the Philippines.[2] It is
a subsidiary of Pacific Consultants International of Japan (PCIJ). The president of
PPI, Jens Peter Henrichsen, who was also the director of PCIJ, was based
in Tokyo, Japan. Henrichsen commuted from Japan to Manila and vice versa, as
well as in other countries where PCIJ had business.

In 1997, PCIJ decided to engage in consultancy services for water and

sanitation in the Philippines. In October 1997, respondent was employed by PCIJ,
through Henrichsen, as Sector Manager of PPI in its Water and Sanitation
Department.However, PCIJ assigned him as PPI sector manager in
the Philippines. His salary was to be paid partly by PPI and PCIJ.

On January 7, 1998, Henrichsen transmitted a letter of employment to

respondent in Canada, requesting him to accept the same and affix his conformity
thereto. Respondent made some revisions in the letter of employment and signed
the contract.[3] He then sent a copy to Henrichsen. The letter of employment reads:

Mr. Klaus K. Schonfeld

II-365 Ginger Drive
New Westminster, B.C.
Canada V3L 5L5
Tokyo 7 January 1998

Dear Mr. Schonfeld,

Letter of Employment

This Letter of Employment with the attached General Conditions of

Employment constitutes the agreement under which you will be engaged
by our Company on the terms and conditions defined hereunder. In case
of any discrepancies or contradictions between this Letter of
Employment and the General Conditions of Employment, this Letter of
Employment will prevail.

You will, from the date of commencement, be [seconded] to our

subsidiary Pacicon Philippines, Inc. in Manila, hereinafter referred as
Pacicon. Pacicon will provide you with a separate contract, which will
define that part of the present terms and conditions for which Pacicon is
responsible. In case of any discrepancies or contradictions between the
present Letter of Employment and the contract with Pacicon Philippines,
Inc. or in the case that Pacicon should not live up to its obligations, this
Letter of Employment will prevail.

1. Project Country: The Philippines with possible short-term assignments

in other countries.
2. Duty Station: Manila, the Philippines.
3. Family Status: Married.
4. Position: Sector Manager, Water and Sanitation.
5. Commencement: 1st October 1997.
6. Remuneration: US$7,000.00 per month. The amount will be paid
partly as a local salary (US$2,100.00 per month) by
Pacicon and partly as an offshore salary
(US$4,900.00) by PCI to bank accounts to be
nominated by you.
A performance related component corresponding to 17.6% of the total
annual remuneration, subject to satisfactory
performance against agreed tasks and targets, paid
offshore.
7. Accommodation: The company will provide partly furnished
accommodation to a rent including association fees,
 taxes and VAT not exceeding the Pesos equivalent of
US$2,900.00 per month.
8. Transportation: Included for in the remuneration.
9. Leave Travels: You are entitled to two leave travels per year.
10. Shipment of Personal
Effects: The maximum allowance is US$4,000.00.
11. Mobilization
Travel: Mobilization travel will be from New Westminster,
B.C., Canada.

This letter is send (sic) to you in duplicate; we kindly request you to sign
and return one copy to us.

Yours sincerely,
Pacific Consultants International

Jens Peter Henrichsen

Above terms and conditions accepted

Date: 2 March 1998
(Sgd.)
Klaus Schonfeld

as annotated and initialed[4]

Section 21 of the General Conditions of Employment appended to the letter of

employment reads:

21 Arbitration

Any question of interpretation, understanding or fulfillment of the

conditions of employment, as well as any question arising between
the Employee and the Company which is in consequence of or
connected with his employment with the Company and which can
not be settled amicably, is to be finally settled, binding to both
parties through written submissions, by the Court of Arbitration in
London.[5]
Respondent arrived in the Philippines and assumed his position as PPI Sector
Manager. He was accorded the status of a resident alien.

As required by Rule XIV (Employment of Aliens) of the Omnibus Rules

Implementing the Labor Code, PPI applied for an Alien Employment Permit
(Permit) for respondent before the Department of Labor and Employment (DOLE).
It appended respondents contract of employment to the application.

On February 26, 1999, the DOLE granted the application and issued the
Permit to respondent. It reads:

Republic of the Philippines

Department of Labor & Employment
National Capital Region

ALIEN EMPLOYMENT PERMIT

ISSUED TO: SCHONFELD, KLAUS KURT

DATE OF BIRTH: January 11, 1942 NATIONALITY: Canadian
POSITION: VP WATER & SANITATION
EMPLOYER: PACICON PHILIPPINES, INC.
ADDRESS: 27/F Rufino Pacific Towers Bldg.,
Ayala Ave., Makati City
PERMIT
ISSUED ON: February 26, 1999 SIGNATURE OF BEARER:
VALID UNTIL: January 7, 2000 (Sgd.)
APPROVED: BIENVENIDO S. LAGUESMA

By: MAXIMO B. ANITO

REGIONAL DIRECTOR
(Emphasis supplied)[6]

Respondent received his compensation from PPI for the following periods:
February to June 1998, November to December 1998, and January to August
1999. He was also reimbursed by PPI for the expenses he incurred in connection
with his work as sector manager. He reported for work in Manila except for
occasional assignments abroad, and received instructions from Henrichsen.[7]
On May 5, 1999, respondent received a letter from Henrichsen informing him that
his employment had been terminated effective August 4, 1999 for the reason that
PCIJ and PPI had not been successful in the water and sanitation sector in
the Philippines.[8]However, on July 24, 1999, Henrichsen, by electronic mail,
[9]
requested respondent to stay put in his job after August 5, 1999, until such time
that he would be able to report on certain projects and discuss all the opportunities
he had developed.[10] Respondent continued his work with PPI until the end of
business hours on October 1, 1999.
Respondent filed with PPI several money claims, including unpaid salary,
leave pay, air fare from Manila to Canada, and cost of shipment of goods
to Canada. PPI partially settled some of his claims (US$5,635.99), but refused to
pay the rest.

On December 5, 2000, respondent filed a Complaint[11] for Illegal Dismissal

against petitioners PPI and Henrichsen with the Labor Arbiter. It was docketed as
NLRC-NCR Case No. 30-12-04787-00.

In his Complaint, respondent alleged that he was illegally dismissed; PPI

had not notified the DOLE of its decision to close one of its departments, which
resulted in his dismissal; and they failed to notify him that his employment was
terminated after August 4, 1999. Respondent also claimed for separation pay and
other unpaid benefits. He alleged that the company acted in bad faith and
disregarded his rights. He prayed for the following reliefs:

1. Judgment be rendered in his favor ordering the respondents to

reinstate complainant to his former position without loss of seniority and
other privileges and benefits, and to pay his full backwages from the
time compensation was with held (sic) from him up to the time of his
actual reinstatement. In the alternative, if reinstatement is no longer
feasible, respondents must pay the complainant full backwages, and
separation pay equivalent to one month pay for every year of service, or
in the amount of US$16,400.00 as separation pay;

2. Judgment be rendered ordering the respondents to pay the

outstanding monetary obligation to complainant in the amount of
 US$10,131.76 representing the balance of unpaid salaries, leave pay,
cost of his air travel and shipment of goods from Manila to Canada; and

3. Judgment be rendered ordering the respondent company to pay

the complainant damages in the amount of no less than US $10,000.00
and to pay 10% of the total monetary award as attorneys fees, and costs.

Other reliefs just and equitable under the premises are, likewise,
prayed for.[12]

Petitioners filed a Motion to Dismiss the complaint on the following

grounds: (1) the Labor Arbiter had no jurisdiction over the subject matter; and (2)
venue was improperly laid. It averred that respondent was a Canadian citizen, a
transient expatriate who had left the Philippines. He was employed and dismissed
by PCIJ, a foreign corporation with principal office in Tokyo, Japan. Since
respondents cause of action was based on his letter of employment executed
in Tokyo, Japan dated January 7, 1998, under the principle of lex loci contractus,
the complaint should have been filed in Tokyo, Japan. Petitioners claimed that
respondent did not offer any justification for filing his complaint against PPI before
the NLRC in the Philippines. Moreover, under Section 12 of the General
Conditions of Employment appended to the letter of employment dated January 7,
1998, complainant and PCIJ had agreed that any employment-related dispute
should be brought before the London Court of Arbitration. Since even the Supreme
Court had already ruled that such an agreement on venue is valid, Philippine courts
have no jurisdiction.[13]

Respondent opposed the Motion, contending that he was employed by PPI to work
in the Philippines under contract separate from his January 7, 1998 contract of
employment with PCIJ. He insisted that his employer was PPI, a Philippine-
registered corporation; it is inconsequential that PPI is a wholly-owned subsidiary
of PCIJ because the two corporations have separate and distinct personalities; and
he received orders and instructions from Henrichsen who was the president of
PPI. He further insisted that the principles of forum non conveniens and lex loci
contractus do not apply, and that although he is a Canadian citizen, Philippine
Labor Laws apply in this case.
 Respondent adduced in evidence the following contract of employment
dated January 9, 1998 which he had entered into with Henrichsen:

Mr. Klaus K. Schonfeld

II-365 Ginger Drive
New Westminster, B.C.
Canada V3L 5L5

Manila 9 January, 1998

Dear Mr. Schonfeld,

Letter of Employment

This Letter of Employment with the attached General Conditions of

Employment constitutes the agreement, under which you will be
engaged by Pacicon Philippines, Inc. on the terms and conditions defined
hereunder.

1. Project Country: The Philippines with possible assignments

in other countries.

2. Duty Station: Manila, the Philippines.

3. Family Status: Married.

4. Position: Sector Manager Water and Sanitation

Sector.
5. Commencement: 1 January, 1998.

6. Remuneration: US$3,100.00 per month payable to a bank

account to be nominated by you.

7. Accommodation: The company will provide partly furnished

accommodation to a rent including
association fees, taxes and VAT not
exceeding the Pesos equivalent of
US$2300.00 per month.

8. Transportation: Included for in the remuneration.

9. Shipment of Personal The maximum allowance is US$2500.00 in
Effects: connection with initial shipment of personal
effects from Canada.

10. Mobilization Travel: Mobilization travel will be from New

Westminster, B.C., Canada.

This letter is send (sic) to you in duplicate; we kindly request you to sign
and return one copy to us.

Yours sincerely,
Pacicon Philippines, Inc.

Jens Peter Henrichsen

President[14]
According to respondent, the material allegations of the complaint, not petitioners
defenses, determine which quasi-judicial body has jurisdiction. Section 21 of the
Arbitration Clause in the General Conditions of Employment does not provide for
an exclusive venue where the complaint against PPI for violation of the Philippine
Labor Laws may be filed. Respondent pointed out that PPI had adopted two
inconsistent positions: it was first alleged that he should have filed his complaint
in Tokyo, Japan; and it later insisted that the complaint should have been filed in
the London Court of Arbitration.[15]

In their reply, petitioners claimed that respondents employer was PCIJ, which had
exercised supervision and control over him, and not PPI. Respondent was
dismissed by PPI via a letter of Henrichsen under the letterhead of PCIJ in Japan.
[16]
The letter of employment dated January 9, 1998 which respondent relies upon
did not bear his (respondents) signature nor that of Henrichsen.

On August 2, 2001, the Labor Arbiter rendered a decision granting

petitioners Motion to Dismiss. The dispositive portion reads:

WHEREFORE, finding merit in respondents Motion to Dismiss,

the same is hereby granted. The instant complaint filed by the
complainant is dismissed for lack of merit.
 SO ORDERED.[17]

The Labor Arbiter found, among others, that the January 7, 1998 contract of
employment between respondent and PCIJ was controlling; the Philippines was
only the duty station where Schonfeld was required to work under the General
Conditions of Employment. PCIJ remained respondents employer despite his
having been sent to the Philippines. Since the parties had agreed that any
differences regarding employer-employee
relationship should be submitted to the jurisdiction of the court of arbitration
in London, this agreement is controlling.

On appeal, the NLRC agreed with the disquisitions of the Labor Arbiter and
affirmed the latters decision in toto.[18]

Respondent then filed a petition for certiorari under Rule 65 with the CA
where he raised the following arguments:

I
WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR
RELATIONS COMMISSION GRAVELY ABUSED ITS DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT
AFFIRMED THE LABOR ARBITERS DECISION CONSIDERING
THAT:

A. PETITIONERS TRUE EMPLOYER IS NOT PACIFIC

CONSULTANTS INTERNATIONAL OF JAPAN BUT
RESPONDENT COMPANY, AND THEREFORE,
THE LABOR ARBITER HAS JURISDICTION OVER
THE INSTANT CASE; AND
B. THE PROPER VENUE FOR THE PRESENT
COMPLAINT IS THE ARBITRATION BRANCH OF
THE NLRC AND NOT THE COURT OF
ARBITRATION IN LONDON.

II
WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR
RELATIONS COMMISSION GRAVELY ABUSED ITS DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT
 AFFIRMED THE DISMISSAL OF THE COMPLAINT
CONSIDERING THAT PETITIONERS TERMINATION FROM
EMPLOYMENT IS ILLEGAL:

A. THE CLOSURE OF RESPONDENT COMPANYS

WATER AND SANITATION SECTOR WAS
NOT BONA FIDE.
B. ASSUMING ARGUENDO THAT THE CLOSURE OF
RESPONDENT COMPANYS WATER AND
SANITATION SECTOR WAS JUSTIFIABLE,
PETITIONERS DISMISSAL WAS INEFFECTUAL
AS THE DEPARTMENT OF LABOR AND
EMPLOYMENT (DOLE) AND PETITIONER WAS
NOT NOTIFIED THIRTY (30) DAYS BEFORE THE
ALLEGED CLOSURE.[19]

Respondent averred that the absence or existence of a written contract of

employment is not decisive of whether he is an employee of PPI. He maintained
that PPI, through its president Henrichsen, directed his work/duties as Sector
Manager of PPI; proof of this was his letter-proposal to the Development Bank of
the Philippines for PPI to provide consultancy services for the Construction
Supervision of the Water Supply and Sanitation component of the World Bank-
Assisted LGU Urban Water and Sanitation Project. [20] He emphasized that as
gleaned from Alien Employment Permit (AEP) No. M-029908-5017 issued to him
by DOLE on February 26, 1999, he is an employee of PPI. It was PPI president
Henrichsen who terminated his employment; PPI also paid his salary and
reimbursed his expenses related to transactions abroad. That PPI is a wholly-owned
subsidiary of PCIJ is of no moment because the two corporations have separate and
distinct personalities.

The CA found the petition meritorious. Applying the four-fold test[21] of

determining an employer-employee relationship, the CA declared that respondent
was an employee of PPI. On the issue of venue, the appellate court declared that,
even under the January 7, 1998 contract of employment, the parties were not
precluded from bringing a case related thereto in other venues. While there was,
indeed, an agreement that issues between the parties were to be resolved in the
London Court of Arbitration, the venue is not exclusive, since there is no
stipulation that the complaint cannot be filed in any other forum other than in
the Philippines.

On November 25, 2004, the CA rendered its decision granting the petition,
the decretal portion of which reads:
WHEREFORE, the petition is GRANTED in that the assailed
Resolutions of the NLRC are hereby REVERSED and SET ASIDE. Let
this case be REMANDED to the Labor Arbiter a quo for disposition of
the case on the merits.

SO ORDERED.[22]
A motion for the reconsideration of the above decision was filed by PPI and
Henrichsen, which the appellate court denied for lack of merit.[23]

In the present recourse, PPI and Henrichsen, as petitioners, raise the

following issues:

I
THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT
AN EMPLOYMENT RELATIONSHIP EXISTED BETWEEN
PETITIONERS AND RESPONDENT DESPITE THE UNDISPUTED
FACT THAT RESPONDENT, A FOREIGN NATIONAL, WAS HIRED
ABROAD BY A FOREIGN CORPORATION, EXECUTED HIS
EMPLOYMENT CONTRACT ABROAD, AND WAS MERELY
SECONDED TO PETITIONERS SINCE HIS WORK ASSIGNMENT
WAS IN MANILA.

II
THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT
THE LABOR ARBITER A QUO HAS JURISDICTION OVER
RESPONDENTS CLAIM DESPITE THE UNDISPUTED FACT THAT
RESPONDENT, A FOREIGN NATIONAL, WAS HIRED ABROAD
BY A FOREIGN CORPORATION, EXECUTED HIS EMPLOYMENT
CONTRACT ABROAD, AND HAD AGREED THAT ANY DISPUTE
BETWEEN THEM SHALL BE FINALLY SETTLED BY THE COURT
OF ARBITRATION IN LONDON.[24]
 Petitioners fault the CA for reversing the findings of the Labor Arbiter and
the NLRC. Petitioners aver that the findings of the Labor Arbiter, as affirmed by
the NLRC, are conclusive on the CA. They maintain that it is not within the
province of the appellate court in a petition for certiorari to review the facts and
evidence on record since there was no conflict in the factual findings and
conclusions of the lower tribunals. Petitioners assert that such findings and
conclusions, having been made by agencies with expertise on the subject matter,
should be deemed binding and conclusive. They contend that it was the PCIJ which
employed respondent as an employee; it merely seconded him to petitioner PPI in
the Philippines, and assigned him to work in Manila as Sector Manager. Petitioner
PPI, being a wholly-owned subsidiary of PCIJ, was never the employer of
respondent.

Petitioners assert that the January 9, 1998 letter of employment which

respondent presented to prove his employment with petitioner PPI is of doubtful
authenticity since it was unsigned by the purported parties. They insist that PCIJ
paid respondents salaries and only coursed the same through petitioner PPI. PPI,
being its subsidiary, had supervision and control over respondents work, and had
the responsibilities of monitoring the daily administration of
respondent. Respondent cannot rely on the pay slips, expenses claim forms, and
reimbursement memoranda to prove that he was an employee of petitioner PPI
because these documents are of doubtful authenticity.

Petitioners further contend that, although Henrichsen was both a director of

PCIJ and president of PPI, it was he who signed the termination letter of
respondent upon instructions of PCIJ. This is buttressed by the fact that PCIJs
letterhead was used to inform him that his employment was terminated. Petitioners
further assert that all work instructions came from PCIJ and that petitioner PPI
only served as a conduit. Respondents Alien Employment Permit stating that
petitioner PPI was his employer is but a necessary consequence of his being
seconded thereto. It is not sufficient proof that petitioner PPI is respondents
employer. The entry was only made to comply with the DOLE requirements.

There being no evidence that petitioner PPI is the employer of respondent,

the Labor Arbiter has no jurisdiction over respondents complaint.
 Petitioners aver that since respondent is a Canadian citizen, the CA erred in
ignoring their claim that the principlesof forum non conveniens and lex loci
contractus are applicable. They also point out that the principal office, officers and
staff of PCIJ are stationed in Tokyo, Japan; and the contract of employment of
respondent was executed in Tokyo, Japan.

Moreover, under Section 21 of the General Conditions for Employment

incorporated in respondents January 7, 1998 letter of employment, the dispute
between respondent and PCIJ should be settled by the court of arbitration
of London. Petitioners claim that the words used therein are sufficient to show the
exclusive and restrictive nature of the stipulation on venue.

Petitioners insist that the U.S. Labor-Management Act applies only

to U.S. workers and employers, while the Labor Code of the Philippines applies
only to Filipino employers and Philippine-based employers and their employees,
not to PCIJ. In fine, the jurisdictions of the NLRC and Labor Arbiter do not extend
to foreign workers who executed employment agreements with foreign employers
abroad, although seconded to the Philippines.[25]

In his Comment,[26] respondent maintains that petitioners raised factual

issues in their petition which are proscribed under Section 1, Rule 45 of the Rules
of Court. The finding of the CA that he had been an employee of petitioner PPI and
not of PCIJ is buttressed by his documentary evidence which both the Labor
Arbiter and the NLRC ignored; they erroneously opted to dismiss his complaint on
the basis of the letter of employment and Section 21 of the General Conditions of
Employment. In contrast, the CA took into account the evidence on record and
applied case law correctly.

The petition is denied for lack of merit.

It must be stressed that in resolving a petition for certiorari, the CA is not

proscribed from reviewing the evidence on record.Under Section 9 of Batas
Pambansa Blg. 129, as amended by R.A. No. 7902, the CA is empowered to pass
upon the evidence, if and when necessary, to resolve factual issues. [27] If it appears
that the Labor Arbiter and the NLRC misappreciated the evidence to such an extent
as to compel a contrary conclusion if such evidence had been properly appreciated,
the factual findings of such tribunals cannot be given great respect and finality.[28]

Inexplicably, the Labor Arbiter and the NLRC ignored the documentary
evidence which respondent appended to his pleadings showing that he was an
employee of petitioner PPI; they merely focused on the January 7, 1998 letter of
employment and Section 21 of the General Conditions of Employment.

Petitioner PPI applied for the issuance of an AEP to respondent before the
DOLE. In said application, PPI averred that respondent is its employee. To show
that this was the case, PPI appended a copy of respondents employment
contract. The DOLE then granted the application of PPI and issued the permit.

It bears stressing that under the Omnibus Rules Implementing the Labor
Code, one of the requirements for the issuance of an employment permit is the
employment contract. Section 5, Rule XIV (Employment of Aliens) of the
Omnibus Rules provides:

SECTION 1. Coverage. This rule shall apply to all aliens

employed or seeking employment in the Philippines and the present or
prospective employers.

SECTION 2. Submission of list. All employers employing

foreign nationals, whether resident or non-resident, shall submit a list of
nationals to the Bureau indicating their names, citizenship, foreign and
local address, nature of employment and status of stay in the Philippines.

SECTION 3. Registration of resident aliens. All employed

resident aliens shall register with the Bureau under such guidelines as
may be issued by it.

SECTION 4. Employment permit required for entry. No alien

seeking employment, whether as a resident or non-resident, may enter
the Philippines without first securing an employment permit from the
Ministry. If an alien enters the country under a non-working visa and
wishes to be employed thereafter, he may only be allowed to be
employed upon presentation of a duly approved employment permit.
 SECTION 5. Requirements for employment permit applicants.
The application for an employment permit shall be accompanied by the
following:

(a) Curriculum vitae duly signed by the applicant

indicating his educational background, his work experience
and other data showing that he possesses technical skills in
his trade or profession.

(b) Contract of employment between the employer

and the principal which shall embody the following, among
others:

1. That the non-resident alien worker shall comply

with all applicable laws and rules and regulations of
the Philippines;
2. That the non-resident alien worker and the
employer shall bind themselves to train at least two (2)
Filipino understudies for a period to be determined by the
Minister; and
3. That he shall not engage in any gainful
employment other than that for which he was issued a
permit.

(c) A designation by the employer of at least two (2)

understudies for every alien worker. Such understudies
must be the most ranking regular employees in the section
or department for which the expatriates are being hired to
insure the actual transfer of technology.

Under Section 6 of the Rule, the DOLE may issue an alien employment
permit based only on the following:

(a) Compliance by the applicant and his employer with the

requirements of Section 2 hereof;

(b) Report of the Bureau Director as to the availability or non-

availability of any person in the Philippines who is competent and
willing to do the job for which the services of the applicant are desired;
 (c) His assessment as to whether or not the employment of the
applicant will redound to the national interest;

(d) Admissibility of the alien as certified by the Commission on

Immigration and Deportation;

(e) The recommendation of the Board of Investments or other

appropriate government agencies if the applicant will be employed in
preferred areas of investments or in accordance with the imperative of
economic development.

Thus, as claimed by respondent, he had an employment contract with petitioner

PPI; otherwise, petitioner PPI would not have filed an application for a Permit with
the DOLE. Petitioners are thus estopped from alleging that the PCIJ, not petitioner
PPI, had been the employer of respondent all along.

We agree with the conclusion of the CA that there was an employer-

employee relationship between petitioner PPI and respondent using the four-fold
test. Jurisprudence is firmly settled that whenever the existence of an employment
relationship is in dispute, four elements constitute the reliable yardstick: (a) the
selection and engagement of the employee; (b) the payment of wages; (c) the
power of dismissal; and (d) the employers power to control the employees
conduct. It is the so-called control test which constitutes the most important index
of the existence of the employer-employee relationshipthat is, whether the
employer controls or has reserved the right to control the employee not only as to
the result of the work to be done but also as to the means and methods by which
the same is to be accomplished. Stated otherwise, an employer-employee
relationship exists where the person for whom the services are performed reserves
the right to control not only the end to be achieved but also the means to be used in
reaching such end.[29] We quote with approval the following ruling of the CA:

[T]here is, indeed, substantial evidence on record which would erase any
doubt that the respondent company is the true employer of petitioner. In
the case at bar, the power to control and supervise petitioners work
performance devolved upon the respondent company. Likewise, the
power to terminate the employment relationship was exercised by the
President of the respondent company. It is not the letterhead used by the
company in the termination letter which controls, but the person who
 exercised the power to terminate the employee. It is also inconsequential
if the second letter of employment executed in the Philippines was not
signed by the petitioner. An employer-employee relationship may indeed
exist even in the absence of a written contract, so long as the four
elements mentioned in the Mafinco case are all present.[30]

The settled rule on stipulations regarding venue, as held by this Court in the
vintage case of Philippine Banking Corporation v. Tensuan,[31] is that while they
are considered valid and enforceable, venue stipulations in a contract do not, as a
rule, supersede the general rule set forth in Rule 4 of the Revised Rules of Court in
the absence of qualifying or restrictive words. They should be considered merely
as an agreement or additional forum, not as limiting venue to the specified
place. They are not exclusive but, rather permissive. If the intention of the parties
were to restrict venue, there must be accompanying language clearly and
categorically expressing their purpose and design that actions between them be
litigated only at the place named by them.[32]

In the instant case, no restrictive words like only, solely, exclusively in this
court, in no other court save , particularly,nowhere else but/except , or words of
equal import were stated in the contract.[33] It cannot be said that the court of
arbitration in London is an exclusive venue to bring forth any complaint arising out
of the employment contract.

Petitioners contend that respondent should have filed his Complaint in his
place of permanent residence, or where the PCIJ holds its principal office, at the
place where the contract of employment was signed, in London as stated in their
contract. By enumerating possible venues where respondent could have filed his
complaint, however, petitioners themselves admitted that the provision on venue in
the employment contract is indeed merely permissive.

Petitioners insistence on the application of the principle of forum non

conveniens must be rejected. The bare fact that respondent is a Canadian citizen
and was a repatriate does not warrant the application of the principle for the
following reasons:
First. The Labor Code of the Philippines does not include forum non conveniens as
a ground for the dismissal of the complaint.[34]

Second. The propriety of dismissing a case based on this principle requires a

factual determination; hence, it is properly considered as defense.[35]

Third. In Bank of America, NT&SA, Bank of America International, Ltd. v. Court

of Appeals,[36] this Court held that:

x x x [a] Philippine Court may assume jurisdiction over the case if it

chooses to do so; provided, that the following requisites are met: (1) that
the Philippine Court is one to which the parties may conveniently resort
to; (2) that the Philippine Court is in a position to make an intelligent
decision as to the law and the facts; and, (3) that the Philippine Court has
or is likely to have power to enforce its decision. x x x

Admittedly, all the foregoing requisites are present in this case.

WHEREFORE, the petition is DENIED. The Decision of the Court of

Appeals in CA-G.R. SP No. 76563 is AFFIRMED. This case is REMANDED to
the Labor Arbiter for disposition of the case on the merits. Cost against petitioners.

SO ORDERED.

9. Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 204444 January 14, 2015

VIRGILIO C. BRIONES, Petitioner,

vs.
COURT OF APPEALS and CASH ASIA CREDIT CORPORATION, Respondents.

DECISION

PERLAS-BERNABE, J.:
Assailed in this petition for certiorari are the Decision dated March 5, 2012 and the
1 2

Resolution dated October 4, 2012 of the Court of Appeals (CA) in CA-G.R. SP No. 117474, which
3

annulled the Orders dated September 20, 2010 and October 22, 2010 of the Regional Trial Court of
4 5

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 Complaint dated August 2, 2010 filed by Virgilio C. Briones (Briones)
6

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. In his complaint, Briones alleged that he is the owner of a property covered by TCT
7

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. Upon 8

investigation, Briones discovered that: (a) on December 6, 2007, he purportedly executed a

promissory note, loan agreement, and deed of real estate mortgage covering the subject property
9 10 11

(subject contracts) in favor of Cash Asia in order to obtain a loan in the amount of P3,500,000.00
from the latter; and (b) since the said loan was left unpaid, Cash Asia proceeded to foreclose his
12

property. In this relation, Briones claimed that he never contracted any loans from Cash Asia as he
13

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. 14

For its part, Cash Asia filed a Motion to Dismiss dated August 25, 2010, praying for the outright
15

dismissal of Brioness complaint on the ground of improper venue. In this regard, Cash Asia pointed
16

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 tothe jurisdiction of the proper court of Makati City." In view thereof, it contended that all
17

actions arising out of the subject contracts may only be exclusively brought in the courts of Makati
City, and as such, Brioness complaint should be dismissed for having been filed in the City of
Manila.18

In response, Briones filed an opposition, asserting, inter alia, that he should not be covered by the
19

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. 20

The RTC Ruling

In an Order dated September 20, 2010, the RTC denied Cash Asias motion to dismiss for lack of
21

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 Brioness cause of action against Cash Asia as stated in the complaint. 22

Cash Asia moved for reconsideration which was, however, denied in an Order dated October 22,
23 24

2010. Aggrieved, it filed a petition for certiorari before the CA.

25
 The CA Ruling

In a Decision dated March 5, 2012, the CA annulled the RTC Orders, and accordingly, dismissed
26

Brioness complaint without prejudice to the filing of the same before the proper court in Makati
City. It held that the RTC gravely abused its discretion in denying Cash Asias motion to dismiss,
27

considering that the subject contracts clearly provide that actions arising therefrom should be
exclusively filed before the courts of Makati City only. As such, the CA concluded that Brioness
28

complaint should have been dismissed outright on the ground of improper venue, this, 29

notwithstanding Brioness claim of forgery.

Dissatisfied, Briones moved for reconsideration, which was, however, denied in a Resolution dated
30 31

October 4, 2012, hence, this petition.

The Issue Before the Court

The primordial issue for the Courts resolution is whether or not the CA gravely abused its discretion
in ordering the outright dismissal of Brioness complaint on the ground of improper venue.

The Courts 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." Guided by the foregoing considerations,
32

the Court finds that the CA gravely abused its discretion in ordering the outright dismissal of
Brioness 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, to wit:

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. 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. instructs that
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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,"
1wphi1

"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. (Emphases and
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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. Conversely, therefore, a complaint directly
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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.

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.