G.R. No.

121510 November 23, 1995

FABIANA C. VDA. DE SALAZAR, petitioner, vs. COURT OF APPEALS, PRIMITIVO NEPOMUCENO and
EMERENCIANA NEPOMUCENO, respondents.
Where the defendant in an ejectment case dies before the rendition by the trial court of its decision therein,
does the trial court's failure to effectuate a substitution of heirs before its rendition of judgment render such
judgment jurisdictionally infirm?
On July 23, 1970, both private respondents Primitive Nepomuceno and Emerenciana Nepomuceno filed
separate complaints 1 with the then Court of Agrarian Relations of Malolos, Bulacan, for ejectment on the
ground of personal cultivation and conversion of land for useful non-agricultural purposes against petitioner's
deceased husband, Benjamin Salazar. After protracted proceedings in the agrarian court and then the Regional
Trial Court 2 spanning from 1970 to 1993, the trial court rendered its joint decision 3 in favor of private
respondents. An appeal 4 therefrom was interposed in the name of petitioner's deceased husband on the ground
that private respondents herein failed to satisfy the requirements pertaining to personal cultivation and
conversion of the landholdings into non-agricultural uses. The Court of Appeals rejected such contention upon
finding that the record was replete with evidence justifying private respondents' assertion of their right of
cultivation and conversion of their landholdings. 5
Almost a year after the termination of that appeal, the same trial court decision subject thereof was once again
assailed before the Court of Appeals through a petition 6 for annulment of judgment. Herein petitioner assailed
the same trial court decision as having been rendered by a court that did not have jurisdiction over her and the
other heirs of her deceased husband because notwithstanding the fact that her husband had already died on
October 3, 1991, the trial court still proceeded to render its decision on August 23, 1993 without effecting the
substitution of heirs in accordance with Section 17, Rule 3, of the Rules of Court thereby depriving her of her
day in court.
Petitioner, not having asserted the matter of fraud or collusion in her petition for annulment of judgment, the
Court of Appeals decided the same on the basis of the sole issue of non-jurisdiction resulting from the alleged
deprivation of petitioner's right to due process and ruled in favor of the validity of the challenged decision.
7Petitioner filed a motion for reconsideration of the decision of the appellate court reiterating the trial court's

lack of jurisdiction over the heirs of petitioner's deceased husband as a consequence of the failure of the trial
court to effectuate a valid substitution of heirs. Said motion was denied in a resolution promulgated on August
14, 1995. Hence this petition.
The petition is bereft of merit.
The need for substitution of heirs is based on the right to due process accruing to every party in any
proceeding. 8The rationale underlying this requirement in case a party dies during the pendency of proceedings
of a nature not extinguished by such death, is that
. . . the exercise of judicial power to hear and determine a cause implicitly presupposes in the trial
court, amongst other essentials, jurisdiction over the persons of the parties. That jurisdiction was
inevitably impaired upon the death of the protestee pending the proceedings below such that
unless and until a legal representative is for him duly named and within the jurisdiction of the trial
court, no adjudication in the cause could have been accorded any validity or binding effect upon
any party, in representation of the deceased, without trenching upon the fundamental right to a
day in court which is the very essence of the constitutionally enshrined guarantee of due process.
9

We are not unaware of several cases 10 where we have ruled that a party having died in an action that
survives, the trial held by the court without appearance of the deceased's legal representative or
substitution of heirs and the judgment rendered after such trial, are null and void because the court
acquired no jurisdiction over the persons of the legal representatives or of the heirs upon whom the trial
and the judgment would be binding. This general rule notwithstanding, in denying petitioner's motion for
reconsideration, the Court of Appeals correctly ruled that formal substitution of heirs is not necessary
when the heirs themselves voluntarily appeared, participated in the case and presented evidence in
defense of deceased defendant. Attending the case at bench, after all, are these particular circumstances
which negate petitioner's belated and seemingly ostensible claim of violation of her rights to due
process. We should not lose sight of the principle underlying the general rule that formal substitution of
heirs must be effectuated for them to be bound by a subsequent judgment. Such had been the general
rule established not because the rule on substitution of heirs and that on appointment of a legal
representative are jurisdictional requirements per se but because non-compliance therewith results in
the undeniable violation of the right to due process of those who, though not duly notified of the
proceedings, are substantially affected by the decision rendered therein. Viewing the rule on substitution
of heirs in this light, the Court of Appeals, in the resolution denying petitioner's motion for
reconsideration, thus expounded:
Although the jurisprudential rule is that failure to make the substitution is a jurisdictional defect, it
should be noted that the purpose of this procedural rule is to comply with due process
requirements. The original party having died, he could not continue to defend himself in court
despite the fact that the action survived him. For the case to continue, the real party in interest
must be substituted for the deceased. The real party in interest is the one who would be affected
by the judgment. It could be the administrator or executor or the heirs. In the instant case, the
heirs are the proper substitutes. Substitution gives them the opportunity to continue the defense
for the deceased. Substitution is important because such opportunity to defend is a requirement
to comply with due process. Such substitution consists of making the proper changes in the
caption of the case which may be called the formal aspect of it. Such substitution also includes the
process of letting the substitutes know that they shall be bound by any judgment in the case and
that they should therefore actively participate in the defense of the deceased. This part may be
 called the substantive aspect. This is the heart of the procedural rule because this substantive
aspect is the one that truly embodies and gives effect to the purpose of the rule. It is this court's
view that compliance with the substantive aspect of the rule despite failure to comply with the
formal aspect may be considered substantial compliance. Such is the situation in the case at
bench because the only inference that could be deduced from the following facts was that there
was active participation of the heirs in the defense of the deceased after his death:
1. The original lawyer did not stop representing the deceased. It would be absurd to think that the
lawyer would continue to represent somebody if nobody is paying him his fees. The lawyer
continued to represent him in the litigation before the trial court which lasted for about two more
years. A dead party cannot pay him any fee. With or without payment of fees, the fact remains
that the said counsel was allowed by the petitioner who was well aware of the instant litigation to
continue appearing as counsel until August 23, 1993 when the challenged decision was rendered;
2. After the death of the defendant, his wife, who is the petitioner in the instant case, even
testified in the court and declared that her husband is already deceased. She knew therefore that
there was a litigation against her husband and that somehow her interest and those of her
children were involved;
3. This petition for annulment of judgment was filed only after the appeal was decided against the
defendant on April 3, 1995, more than one and a half year (sic) after the decision was rendered
(even if we were to give credence to petitioner's manifestation that she was not aware that an
appeal had been made);
4. The Supreme Court has already established that there is such a thing as jurisdiction by
estoppel. This principle was established even in cases where jurisdiction over the subject matter
was being questioned. In the instant case, only jurisdiction over the person of the heirs is in issue.
Jurisdiction over the person may be acquired by the court more easily than jurisdiction over the
subject matter. Jurisdiction over the person may be acquired by the simple appearance of the
person in court as did herein petitioner appear;
5. The case cited by the herein petitioner (Ferreria et al. vs. Manuela Ibarra vda. de Gonzales, et
al.) cannot be availed of to support the said petitioner's contention relative to non-acquisition of
jurisdiction by the court. In that case, Manolita Gonzales was not served notice and, more
importantly, she never appeared in court, unlike herein petitioner who appeared and even testified
regarding the death of her husband. 11
Consequently, we rule that, as in the case at bench, the defendant in an ejectment case having died
before the rendition by the trial court of its decision therein, its failure to effectuate a formal substitution
of heirs before its rendition of judgment, does not invalidate such judgment where the heirs themselves
appeared before the trial court, participated in the proceedings therein, and presented evidence in
defense of deceased defendant, it undeniably being evident that the heirs themselves sought their day in
court and exercised their right to due process.
Respondent Court of Appeals also correctly ruled that ejectment, being an action involving recovery of real
property, is a real action which as such, is not extinguished by the defendant's death.
. . . The question as to whether an action survives or not depends on the nature of the action and
the damage sued for. In the causes of action which survive, the wrong complained affects
primarily and principally property and property rights, the injuries to the person being merely
incidental, while in the causes of action which do not survive, the injury complained of is to the
person, the property and rights of property affected being incidental. 12
There is no dispute that an ejectment case survives the death of a party, which death did not extinguish
the deceased's civil personality. 13 More significantly, a judgment in an ejectment case is conclusive
between the parties and their successors in interest by title subsequent to the commencement of the
action. 14 Thus, we have held that:
. . . In such a case and considering that the supervening death of appellant did not extinguish her
civil personality, the appellate court was well within its jurisdiction to proceed as it did with the
case. There is no showing that the appellate court's proceedings in the case were tainted with
irregularities.
It appears that petitioners are heirs of Adela Salindon. In fact, it was because of this relationship
that the petitioners were able to transfer the title of Adela Salindon over the subject lot to their
names. . . . Considering all this, the appellate decision is binding and enforceable against the
petitioners as successors-in-interest by title subsequent to the commencement of the action
(Section 49 [b] Rule 39, Rules of Court). Furthermore, . . . judgment in an ejectment case may be
enforced not only against defendants therein but also against the members of their family, their
relatives, or privies who derive their right of possession from the defendants (Ariem v. De los
Angeles, 49 SCRA 343). Under the circumstances of this case, the same rule should apply to the
successors-in-interest . . . . 15
While it is true that a decision in an action for ejectment is enforceable not only against the defendant himself
but also against members of his family, his relatives, and his privies who derived their right of possession from
the defendant and his successors-in-interest, 16 it had been established that petitioner had, by her own acts,
submitted to the jurisdiction of the trial court. She is now estopped to deny that she had been heard in defense
of her deceased husband in the proceedings therein. As such, this petition evidently has no leg to stand on.
WHEREFORE, the instant petition is dismissed for lack of merit. Costs against petitioner. SO ORDERED.
G.R. No. 106795 November 16, 1999
STATE INVESTMENT HOUSE, INC., petitioner, vs. COURT OF APPEALS and ALLIED BANKING
CORPORATION, respondents.
Petitioner State Investment House, Inc. ("SIHI") appeals from the Decision dated June 11, 1992 and the
Resolution dated August 21, 1992 rendered by the Court of Appeals in CA-G.R. SP No. 27142 entitled "Allied
Banking Corp. vs. Hon. Martin S. Villarama, Jr., et al."
SIHI is the plaintiff in Civil Case No. 59449 entitled "State Investment House, Inc. vs. Cheng Ban Yek Co., Inc.
et al.", an action for foreclosure of mortgage.
The antecedents are recited in the questioned decision as follows:
(1) Defendant CBY is a domestic corporation engaged in the business of manufacturing edible oil bearing
the brand "Baguio Oil", and in the conduct of its business, it has incurred millions of pesos of obligations
with plaintiff SIHI and many other creditors, including defendant Allied Banking Corporation (ALLIED for
short) who is the creditor of SIHI in the principal amount of P10 million, exclusive of interests, service
charges, penalties, and attorney's fees.
(2) On December 28, 1982, defendant CBY, plaintiff SIHI, and other creditors of CBY entered into an
Agreement for the restructuring of CBY's existing obligations to its creditors, but excluding defendant
ALLIED and several other creditors who did not sign said Agreement (pp. 72-72, Rollo).
(3) To secure the prompt and full payment of all amounts owed by CBY to its creditors who participated
in said Agreement and as required thereunder, the parties thereto executed a Mortgage Indenture dated
December 28, 1982 with CBY and FOUR SEAS as Mortgagors and SIHI and 15 other creditors of CBY as
mortgagees involving 23 parcels of registered lands and the improvements therein (pp. 17-19, id.),
which Mortgage Indenture was subsequently modified several times (pp. 19-20, id.). Moreover, as
additional security to said Agreement, the parties also agreed that the Existing Comprehensive Surety
Agreement previously executed by defendant Alfredo Ching would continue to subsist and that he would
remain jointly and severally liable with CBY for the payment of the amounts owed by the latter to the
creditors who were parties to the aforesaid Agreement (p. 20, id.).
(4) On June 28, 1986, CBY defaulted in the payment of its obligations, and in a letter dated August 8,
1988, the CBY Creditors' Committee, pursuant to the aforesaid Agreement and Mortgage Indenture,
declared all of CBY's obligations due and payable (p. 24, id.). This letter was followed by a letter dated
August 9, 1989 of plaintiff SIHI likewise declaring all of CBY's particular obligations to it immediately due
and payable (id.). Then on April 16, 1990, SIHI notified the Creditors' Committee of CBY that it would
institute proceedings for the enforcement of the remedies granted under the Mortgage Indenture earlier
mentioned, and in a resolution dated April 20, 1990, said Creditors' Committee authorized SIHI to
institute the appropriate foreclosure proceedings provided that the proceeds of the foreclosure sale
would be distributed and applied to all of CBY's obligations under the terms of the Agreement previously
mentioned (p. 25, id.).
(5) Hence, plaintiff SIHI filed on May 10, 1990, C.C. No. 59559 with the respondent court against CBY,
FOUR SEAS, and Alfredo Ching, and impleading twenty-two (22) other creditors of CBY including herein
petitioner ALLIED, allegedly because they hold inferior or subordinate mortgage rights to the properties
sought to be foreclosed (pp. 8-28, id.).
(6) On January 31, 1991, defendant ALLIED filed its Answer to the complaint, denying that its interests
in the mortgaged properties in question are subordinate in right to that of plaintiff SIHI; alleging that it
was not a party to the Agreement attached to the complaint as Annex "B" and, therefore, not bound by
its provisions; likewise denying that it was a party to the Fourth Amendatory Agreement also attached to
the complaint as its Annex "S" which it claimed "was never valid, binding and effective for lack of
consent on the part of the other creditors as shown by the fact that they did not sign the same";
claiming that defendant CBY owes it the principal amount P10 million, exclusive of interest, service
charges, penalties, and attorney’s fees; alleging that as defendant CBY's biggest, single, creditor, plaintiff
SIHI "was able to work its way and secure for its representatives/nominees/designees key positions in
defendant CBY, including but not limited to seats with full voting rights in defendant CBY's Board of
Directors, Executive Committee, and Creditors' Committee, and that in taking control and management
of CBY's operations, it "committed irregularities, abuses excesses, and other acts inimical to defendant
CBY draining its resources and driving the latter to the financial quagmire it now faces, to the prejudice
of herein defendant creditors", as a consequence of which acts, CBY allegedly suffered losses of not less
than P50 million or such amount as may be proved at the trial, which losses it claims represent assets of
CBY answerable to its creditors other than plaintiff SIHI; and that plaintiff should be held liable for such
losses, as well as for defendant ALLIED's moral damages and attorney's fees which it alleged in its
counterclaim (pp. 29-33, id.). Defendant ALLIED thus prayed for the dismissal of the complaint or, in the
alternative, for plaintiff to be ordered to pay CBY's creditors including ALLIED the amount of P50 million
to be deducted from the proceeds of the foreclosure sale of the mortgaged properties in question to be
distributed among CBY's creditors, and that plaintiff be also ordered to pay ALLIED moral damages and
attorney's fees (29-34, id.).
(7) However, on January 31, 1991, plaintiff SIHI, for the consideration of P33 million, entered into a
Deed of Assignment with FIL-NIPPON transferring to the latter all its rights, interests, claims, and causes
of action arising out of the Agreement mentioned in and annexed to its complaint in C. C. No. 59449 and
certain promissory notes and mortgages contracts upon which said civil case was brought, and in which
Deed of Assignment FIL-NIPPON also agreed to assume all the obligations of SIHI as party-plaintiff in
said civil case (pp. 40-44, 64, id.).
(8) Thereafter, FIL-NIPPON filed in C. C. No. 59449 on April 16, 1991 a "Motion for Substitution of Party
Plaintiff" in lieu of plaintiff SIHI (pp. 35-39, id.), which motion was opposed by defendant ALLIED on the
grounds that it has a counterclaim against SIHI arising from irregularities, excesses, abuses and inimical
 acts committed by it in managing defendant CBY; that as long as said counterclaim has not been finally
resolved, the substitution of plaintiff SIHI would be improper; and that if at all, FIL-NIPPON can
intervene and be a co-plaintiff in C. C. No. 59449 (pp. 45-46, id.).
(9) On July 4, 1991, the respondent court, finding no legal basis for the objections of ALLIED and
another defendant, Producers Bank of the Philippines, to the motion for substitution of movant Fil-
NIPPON for plaintiff SIHI, granted the motion for substitution (p. 8, id.). and when defendant ALLIED
moved for a reconsideration of said order, it denied the motion for reconsideration on August 22, 1991
(p. 9, id.)." 1
Allied Banking Corp. ("Allied") filed a petition for certiorari in the Court of Appeals assailing the above
mentioned orders of the Regional Trial Court granting Fil-Nippon's motion for substitution of SIHI as plaintiff in
Civil Case No. 59449.
The Court of Appeals granted the petition and ordered SIHI to continue as plaintiff. The dispositive portion of
the decision, now assailed in the instant petition, reads:
WHEREFORE, the instant petition is GRANTED; the respondent court's orders of July 4, 1991 and August
22, 1991 are hereby SET ASIDE; and herein private respondent State Investment House, Inc. (SIHI)
shall continue to be the plaintiff in C. C. No. 59449 before the respondent court, with the other private
respondent herein Fil-Nippon Holdings, Inc. (FIL-NIPPON) ordered impleaded therein as co-plaintiff. 2
In this petition for review on certiorari, SIHI submits the following grounds:
(1)
THE CA ERRED IN FINDING THAT ALLIED'S PERMISSIVE COUNTERCLAIMS CREATE A DEBTOR-CREDITOR
RELATIONSHIP BETWEEN SIHI AND ALLIED; ALLIED IS NOT SIHI'S CREDITOR.
(2)
THE CA ERRED IN FINDING THAT A WITNESS WHO MAY BE CALLED TO TESTIFY HAS A MATERIAL
INTEREST IN CASE AS TO MAKE HIM A PARTY-LITIGANT.
(3)
THE CA ERRED IN NOT FINDING THAT SUBSTITUTION OF A PARTY-PLAINTIFF PENDENTE LITE IS
ALLOWED AND IS LARGELY A MATTER OF DISCRETION; THE LOWER COURT DID NOT COMMIT
ARBITRARINESS OR GRAVE ABUSE OF DISCRETION IN ALLOWING THE SUBSTITUTION. 3
We find no merit in the petition.
The issue is whether respondent court erred in ruling that the substitution of SIHI by its assignee Fil-Nippon in
C. C. No. 59449 is improper.
Respondent court ruled that even without substitution Fil-Nippon, as assignee of all of SIHI's rights, interests
claims and causes of action arising out of the Agreement, would be bound by any judgment for or against SIHI.
Moreover, Allied had a counterclaim for damages against SIHI of not less than P50 million allegedly caused by
SIHI's taking over the control and management of defendant CBY (Cheng Ban Yek Co. Inc.) through its men
which it had put in key positions in the latter's Board of Directors, Executive Committee and Creditors
Committee, and who allegedly committed gross mismanagement, nepotism, irregularities, abuses, excesses
and other acts inimical to CBY which drained the latter's resources and drove it to the financial quagmire that
now faces it to the prejudice of all its creditors. Such acts of SIHI do not arise out of the foreclosure of
mortgage which is the subject of C. C. No. 59449 but constitute a permissive counterclaim. Moreover, SIHI had
no choice but to actively participate in C. C. No. 59449 in order to defend its assignee Fil-Nippon against Allied's
permissive counterclaim. Finally, Fil-Nippon cannot be substituted as debtor under said counterclaim without its
consent in view of Article 1293 of the Civil Code which provides that novation which consists in substituting a
new debtor in the place of the original one cannot be made without the consent of the creditor.
It is petitioner's position, in defending the substitution of parties ordered by the trial court, that Allied is not
SIHI's creditor; what Allied admitted is that it is a creditor of CBY for P10 million. Equally important is that
Allied's permissive counterclaim for damages does not make SIHI a debtor/obligor of Allied, as a counterclaim
is not a source of obligation until a judgment is issued upholding it. Petitioner also submits that even assuming
that SIHI, or its officers or employees, can be compelled to be witnesses regarding Allied's permissive
counterclaim, the same does not justify the retention of SIHI as party plaintiff below. In fine, petitioner SIHI
contends that the trial court did not commit grave abuse of discretion in allowing the substitution of parties that
should be corrected by certiorari.
On the other hand, respondent Allied submits that the substitution was improper; for as long as the
counterclaim is not finally resolved, the substitution of party plaintiff despite the objection of private respondent
and which may result in the discharge of the petitioner as original plaintiff, would be improper. If at all, Fil-
Nippon can intervene in the case below and be co-plaintiff with SIHI. Allied also points out that the
counterclaim for damages is based on quasi-delict, which is a legal source of obligation.
The rule on substitution of parties in case of transfer of interest is found in Section 19, Rule 3, which states:
Sec. 19. Transfer of Interest — In case of any transfer of interest, the action may be continued by or
against the original party, unless the court upon motion directs the person to whom the interest is
transferred to be substituted in the action or joined with the original party.
It has been held that a transferee pendente lite does not have to be included or impleaded by name in order to
be bound by the judgment because the action or suit may be continued for or against the original party or the
transferor and still be binding on the transferee. 4
More specifically , this Court has ruled that a transferee pendente lite is a proper party in the case but it is not
an indispensable party. 5
Respondent court did not err in ruling that SIHI should continue to be the plaintiff, and Fil-Nippon should be
impleaded as co-plaintiff. The order of the trial court authorizing the substitution of parties failed to take into
account the fact that there is a counterclaim for damages contained in Allied Bank's Answer arising from the
alleged inimical acts committed by SIHI in manipulating the operations of CBY that drained the latter's
resources to the prejudice of its creditors. The counterclaim for damages is severable and independent of SIHI's
cause of action under the Agreement dated December 28, 1982 entered into by SIHI, CBY and other creditors
of CBY for the restructuring of CBY's existing obligations. As aptly ruled by the Court of Appeals, the alleged
acts of SIHI that gave rise to the complaint (counterclaim) for damages do not arise out of the foreclosure of
mortgage which is the subject of C. C. No. 59449. Thus —
Upon the other hand, if the substitution of party-plaintiff sought by FIL-NIPPON is granted, what would
happen to petitioner ALLIED's claim for damages of not less than P50 million in its answer allegedly
caused by plaintiff SIHI's taking over the control and management of defendant CBY's through its men
which it had put in key positions in the latter's Board of Directors, Executive Committee, and Creditors'
Committee, and who allegedly committed gross mismanagement, nepotism, irregularities, abuses,
excesses and other acts inimical to defendant CBY which drained its resources and drove it to the
financial quagmire that its faces at present, to the prejudice of all its creditors? Can petitioner ALLIED
still prove and recover these damages against FIL-NIPPON if the latter is substituted as party-plaintiff in
C. C. No. 59449? We do not think so, for the subject-matter of the Deed of Assignment between plaintiff
SIHI and FIL-NIPPON (see pp. 40-44, 64, Rollo) are certain credits, rights, claims and interests which
SIHI has against the principal defendants CBY, FOUR SEAS, and Alfredo Ching in C. C. No. 59449, and its
SIHI's right to foreclose certain mortgages in favor of SIHI and other creditors of CBY arising out of the
agreement between CBY and its creditors, including SIHI, attached to the complaint in C. C. No. 59449.
True that SIHI's assignee FIL-NIPPON also assumed all the risks attendant to said civil case and agreed
not to have any recourse or claim against SIHI regardless of the outcome of said case or if it is
prevented for any reason from foreclosing the properties subject-matter of the case, but such
assumption of risk clearly does not include liability for the purely personal acts of abuses, irregularities,
nepotism, etc. which petitioner ALLIED charged plaintiff SIHI to have committed while managing and
taking over the control of the business of defendant CBY which acts do not arise out of the foreclosure of
mortgage which is the subject-matter of C. C. No. 59449, but which constitute, as even private
respondent FIL-NIPPON admitted in its Comment to the instant petition, a permissive counterclaim in
said civil case (p. 61, Rollo). Respondent FIL-NIPPON, impliedly recognizing that it cannot be liable for
said alleged acts of SIHI, even suggests that after plaintiff SIHI is dropped from C. C. No. 59449,
petitioner ALLIED can bring original plaintiff SIHI back into said case by filing a third-party complaint
against the latter. But why should petitioner ALLIED resort to such a run-about process to hold SIHI
liable for the aforementioned alleged personal acts of mismanagement and abuses while in the control of
defendant CBY, when it has already claimed the damages supposedly arising from said acts in a
permissive counterclaim in its answer to SIHI's complaint and the Rules allow it to do so? 6
Thus, although Fil-Nippon became an assignee of all of SIHI's rights, interests, claims, and causes of action
arising out of the Agreement, the counterclaim for actual and moral damages and attorney's fees filed by Allied
Bank was in no way contemplated in the assignment. It was accordingly error to discharge SIHI as original
plaintiff from the case.
The Court of Appeals also correctly pointed out that Fil-Nippon could not be substituted as debtor of Allied with
respect to the counterclaim for damages without the latter's consent; thus:
But there is yet still another reason why the respondent court should not have allowed the substitution of
plaintiff SIHI's assignee Fil-Nippon as party-plaintiff in C. C. No. 59449, and it is petitioner ALLIED's
contention, which we find valid and tenable, that plaintiff SIHI is its debtor/obligor as far as its
permissive counterclaim for damages in its answer is concerned, and that FIL-NIPPON cannot be
substituted as its debtor under said counterclaim without its consent, in view of Art. 1293 of the Civil
Code of the Philippines providing
that —
Novation which consists in substituting a new debtor in the place of the original one, may be
made even without the knowledge or against the will of the latter but not without the consent of
the creditor. . . ." (Emphasis ours)
Private respondent SIHI answers this argument in its Comment to the instant petition by saying that the
above-quoted article finds no application to this case because Sec. 17.7 of the Agreement which it and
its creditors had executed expressly allows the assignment which it had made in favor of FIL-NIPPON (p.
67, Rollo). But as pointed out by petitioner ALLIED in its Reply to SIHI's aforesaid Comment, it was not a
party to the Agreement in question as shown by the fact that it never signed the same (see p. 82,
Rollo); hence, it is not bound by said Agreement including the provision therein allowing the parties to
assign their respective rights thereunder. 7
As stated earlier, Fil-Nippon, as transferee of SIHI's interests pendente lite, is not even an indispensable party
in the case.
It bears emphasis that Allied claims to be not a party to the Agreement dated December 28, 1982 and
therefore not bound by it. Even assuming that Fil-Nippon agreed to assume all the obligations of SIHI in the
case and not only those arising under the said Agreement, the assignment cannot bind or prejudice Allied who
did not consent to the assignment. It was improvident for the trial court to discharge SIHI on the basis alone of
the transfer of its interests under the Agreement to Fil-Nippon. The counterclaim for actual, moral and other
damages should be pursued and enforced against the real party-in-interest, which is SIHI, which cannot be
discharged from the case over the opposition of Allied.
WHEREFORE, there being no reversible error in the decision and resolution appealed from, the instant petition
is denied. No pronouncement as to costs.SO ORDERED.
G.R. No. 117355 April 5, 2002
RIVIERA FILIPINA, INC., petitioner, vs. COURT OF APPEALS, JUAN L. REYES, (now deceased),
substituted by his heirs, namely, Estefania B. Reyes, Juanita R. de la Rosa, Juan B. Reyes, Jr. and Fidel B.
Reyes, PHILIPPINE CYPRESS CONSTRUCTION & DEVELOPMENT CORPORATION, CORNHILL TRADING
CORPORATION and URBAN DEVELOPMENT BANK, respondents.
Before us is a petition for review on certiorari of the Decision1 of the Court of Appeals2 dated June 6, 1994 in
CA-G.R. CV No. 26513 affirming the Decision3 dated March 20, 1990 of the Regional Trial Court of Quezon City,
Branch 89 dismissing Civil Case No. Q-89-3371.
Civil Case No. Q-89-3371 is a suit instituted by Riviera Filipina, Inc. (Riviera) on August 31, 19894 to compel
the defendants therein Juan L. Reyes, now deceased, Philippine Cypress Construction & Development
Corporation (Cypress), Cornhill Trading Corporation (Cornhill) and Urban Development Bank to transfer the title
covering a 1,018 square meter parcel of land located along EDSA, Quezon City for alleged violation of Riviera’s
right of first refusal.
It appears that on November 23, 1982, respondent Juan L. Reyes (Reyes, for brevity) executed a Contract of
Lease with Riviera. The ten-year (10) renewable lease of Riviera, which started on August 1, 1982, involved a
1,018 square meter parcel of land located along Edsa, Quezon City, covered and described in Transfer
Certificate of Title No. 186326 of the Registry of Deeds of Quezon City in the name of Juan L. Reyes.5
The said parcel of land was subject of a Real Estate Mortgage executed by Reyes in favor of Prudential Bank.
Since the loan with Prudential Bank remained unpaid upon maturity, the mortgagee bank extrajudicially
foreclosed the mortgage thereon. At the public auction sale, the mortgagee bank emerged as the highest
bidder. The redemption period was set to expire on March 7, 1989. Realizing that he could not possibly raise in
time the money needed to redeem the subject property, Reyes decided to sell the same.6
Since paragraph 11 of the lease contract expressly provided that the "LESSEE shall have the right of first
refusal should the LESSOR decide to sell the property during the term of the lease,"7 Reyes offered to sell the
subject property to Riviera, through its President Vicente C. Angeles, for Five Thousand Pesos (P5,000.00) per
square meter. However, Angeles bargained for Three Thousand Five Hundred Pesos (P3,500.00) per square
meter. Since Reyes was not amenable to the said price and insisted on Five Thousand Pesos (P5,000.00) per
square meter, Angeles requested Reyes to allow him to consult the other members of the Board of Directors of
Riviera.8
Seven (7) months later, or sometime in October 1988, Angeles communicated with Reyes Riviera’s offer to
purchase the subject property for Four Thousand Pesos (P4,000.00) per square meter. However, Reyes did not
accept the offer. This time he asked for Six Thousand Pesos (P6,000.00) per square meter since the value of
the property in the area had appreciated in view of the plans of Araneta to develop the vicinity.9
In a letter dated November 2, 1988, Atty. Irineo S. Juan, acting as counsel for Reyes, informed Riviera that
Reyes was selling the subject property for Six Thousand Pesos (P6,000.00) per square meter, net of capital
gains and transfer taxes, registration fees, notarial fees and all other attendant charges. He further stated
therein that:
In this connection, conformably to the provisions stipulated in Paragraph/Item No. 11 of your CONTRACT
OF LEASE (Doc. No. 365, Page No. 63, Book No. X, Series of 1982, of the Notarial Registry of Notary
Public Leovillo S. Agustin), notice is served upon your goodselves for you to exercise "the right of first
refusal" in the sale of said property, for which purpose you are hereby given a period of ten (10) days
from your receipt hereof within which to thus purchase the same under the terms and conditions
aforestated, and failing which you shall be deemed to have thereby waived such pre-emptive right and
my client shall thereafter be absolutely free to sell the subject property to interested buyers.10
To answer the foregoing letter and confirm their telephone conversation on the matter, Riviera sent a letter
dated November 22, 1988 to Atty. Juan, counsel for Reyes, expressing Riviera’s interest to purchase the subject
property and that Riviera is already negotiating with Reyes which will take a couple of days to formalize.11
Riviera increased its offer to Five Thousand Pesos (P5,000.00) per square meter but Reyes did not accede to
said price as it was still lower than his quoted price of Six Thousand Pesos (P6,000.00) per square meter. 12
Angeles asked Reyes to give him until the end of November 1988 for Riviera’s final decision. 1âwphi1.nêt
In a letter dated December 2, 1988, Angeles wrote Reyes confirming Riviera’s intent to purchase the subject
property for the fixed and final13 price of Five Thousand Pesos (P5,000.00) per square meter, complete payment
within sixty (60) to ninety (90) days which "offer is what we feel should be the market price of your property."
Angeles asked that the decision of Reyes and his written reply to the offer be given within fifteen (15) days
since there are also other properties being offered to them at the moment.14
In response to the foregoing letter, Atty. Juan sent a letter to Riviera dated December 5, 1988 informing Riviera
that Riviera’s offer is not acceptable to his client. He further expressed, "let it be made clear that, much as it is
the earnest desire of my client to really give you the preference to purchase the subject property, you have
unfortunately failed to take advantage of such opportunity and thus lost your right of first refusal in sale of said
property."15
Meanwhile, on December 4, 1988, Reyes confided to Rolando P. Traballo, a close family friend and President of
Cypress, his predicament about the nearing expiry date of the redemption period of the foreclosed mortgaged
property with Prudential Bank, the money for which he could not raise on time thereby offering the subject
property to him for Six Thousand Pesos (P6,000.00) per square meter. Traballo expressed interest in buying the
said property, told Reyes that he will study the matter and suggested for them to meet the next day.16
They met the next day, December 5, 1988, at which time Traballo bargained for Five Thousand Three Hundred
Pesos (P5,300.00) per square meter. After considering the reasons cited by Traballo for his quoted price, Reyes
accepted the same. However, since Traballo did not have the amount with which to pay Reyes, he told the latter
that he will look for a partner for that purpose.17 Reyes told Traballo that he had already afforded Riviera its
right of first refusal but they cannot agree because Riviera’s final offer was for Five Thousand Pesos (P5,000.00)
per square meter.18
Sometime in January 1989, apprehensive of the impending expiration in March 1989 of the redemption period
of the foreclosed mortgaged property with Prudential Bank and the deal between Reyes and Traballo was not
yet formally concluded, Reyes decided to approach anew Riviera. For this purpose, he requested his nephew,
Atty. Estanislao Alinea, to approach Angeles and find out if the latter was still interested in buying the subject
property and ask him to raise his offer for the purchase of the said property a little higher. As instructed, Atty.
Alinea met with Angeles and asked the latter to increase his offer of Five Thousand Pesos (P5,000.00) per
square meter but Angeles said that his offer is Five Thousand Pesos (P5,000.00) per square meter.19
Following the meeting, Angeles sent a letter dated February 4, 1989 to Reyes, through Atty. Alinea, that his
offer is Five Thousand Pesos (P5,000.00) per square meter payment of which would be fifty percent (50%)
down within thirty (30) days upon submission of certain documents in three (3) days, the balance payable in
five (5) years in equal monthly installments at twelve percent (12%) interest in diminishing balance.20 With the
terms of this second offer, Angeles admittedly downgraded the previous offer of Riviera on December 2, 1988.21
Atty. Alinea conveyed to Reyes Riviera’s offer of Five Thousand Pesos (P5,000.00) per square meter but Reyes
did not agree. Consequently, Atty. Alinea contacted again Angeles and asked him if he can increase his price.
Angeles, however, said he cannot add anymore.22 Reyes did not expressly offer his subject property to Riviera
at the price of Five Thousand Three Hundred Pesos (P5,300.00) per square meter.23
Sometime in February 1989, Cypress and its partner in the venture, Cornhill Trading Corporation, were able to
come up with the amount sufficient to cover the redemption money, with which Reyes paid to the Prudential
Bank to redeem the subject property.24 On May 1, 1989, a Deed of Absolute Sale covering the subject property
was executed by Reyes in favor of Cypress and Cornhill for the consideration of Five Million Three Hundred
Ninety Five Thousand Four Hundred Pesos (P5,395,400.00).25 On the same date, Cypress and Cornhill
mortgaged the subject property to Urban Development Bank for Three Million Pesos (P3,000,000.00).26
Thereafter, Riviera sought from Reyes, Cypress and Cornhill a resale of the subject property to it claiming that
its right of first refusal under the lease contract was violated. After several unsuccessful attempts,27 Riviera filed
the suit to compel Reyes, Cypress, Cornhill and Urban Development Bank to transfer the disputed title to the
land in favor of Riviera upon its payment of the price paid by Cypress and Cornhill.
Following trial on the merits, the trial court dismissed the complaint of Riviera as well as the counterclaims and
cross-claims of the other parties.28 It ruled that the defendants therein did not violate Riviera’s right of first
refusal, ratiocinating in this wise:
Resolving the first issue, this Court takes note that since the beginning of the negotiation between the
plaintiff and defendant Reyes for the purchase of the property, in question, the plaintiff was firm and
steadfast in its position, expressed in writing by its President Vicente Angeles, that it was not willing to
buy the said property higher than P5,000.00, per square meter, which was far lower than the asking
price of defendant Reyes for P6,000.00, per square meter, undoubtedly, because, in its perception, it
would be difficult for other parties to buy the property, at a higher price than what it was offering, since
it is in occupation of the property, as lessee, the term of which was to expire after about four (4) years
more.
On the other hand, it was obvious, upon the basis of the last ditch effort of defendant Reyes, thru his
nephew, Atty. Alinea, to have the plaintiff buy the property, in question, that he was willing to sell the
said property at a price less than P6,000.00 and a little higher than P5,000.00, per square meter,
precisely, because Atty. Alinea, in behalf of his uncle, defendant Reyes, sought plaintiff’s Angeles and
asked him to raise his price a little higher, indicating thereby the willingness of defendant Reyes to sell
said property at less than his offer of P6,000.00, per square meter.
This being the case, it can hardly be validly said by the plaintiff that he was deprived of his right of first
refusal to buy the subject property at a price of P5,300.00, per square meter which is the amount
defendants Cypress/Cornhill bought the said property from defendant Reyes. For, it was again given such
an opportunity to exercise its right of first refusal by defendant Reyes had it only signified its willingness
to increase a little higher its purchase price above P5,000.00, per square meter, when its President,
Angeles, was asked by Atty. Alinea to do so, instead of adamantly sticking to its offer of only P5,000.00
per square meter, by reason of which, therefore, the plaintiff had lost, for the second time, its right of
first refusal, even if defendant Reyes did not expressly offer to sell to it the subject land at P5,300.00,
per square meter, considering that by the plea of Atty. Alinea, in behalf of defendant Reyes, for it to
increase its price a little, the plaintiff is to be considered as having forfeited again its right of first refusal,
it having refused to budged from its regid (sic) offer to buy the subject property at no more than
P5,000.00, per square meter.
As such, this Court holds that it was no longer necessary for the defendant Reyes to expressly and
categorically offer to the plaintiff the subject property at P5,300.00, per square meter, in order that he
can comply with his obligation to give first refusal to the plaintiff as stipulated in the Contract of Lease,
the plaintiff having had already lost its right of first refusal, at the first instance, by refusing to buy the
said property at P6,000.00, per square meter, which was the asking price of defendant Reyes, since to
do so would be a useless ceremony and would only be an exercise in futility, considering the firm and
unbending position of the plaintiff, which defendant Reyes already knew, that the plaintiff, at any event,
was not amenable to increasing its price at over P5,000.00, per square meter.
Dissatisfied with the decision of the trial court, both parties appealed to the Court of Appeals. 29 However, the
appellate court, through its Special Seventh Division, rendered a Decision dated June 6, 1994 which affirmed
the decision of the trial court in its entirety.30 In sustaining the decision of the trial court, the Court of Appeals
adopted the above-quoted ratiocination of the trial court and further added:
To put things in its proper perspective in accordance with the peculiar attendant circumstances herein,
particular stress should be given to RIVIERA’s uncompromising counter offer of only P5,000.00 per
square meter on all the occasions when REYES offered the subject property to it. RIVIERA, in its letter to
REYES dated December 2, 1988 (Exhibit "D", p. 68, Rollo) justified its rigid offer by saying that "the
 above offer is what we feel should be the market price of your property." If that be the case, We are
convinced, the same manner that REYES was, that RIVIERA was unwilling to increase its counter offer at
any present or future time. RIVIERA’s unilateral valuation of the subject property thus binds him, it
cannot now be heard to claim that it could have upped its offer had it been informed of CYPRESS’ and
CORNHILL’S offer of P5,000.00 (sic) per square meter. Defendants CYPRESS and CORNHILL were
therefore right in saying that:
On the basic assumption that RIVIERA really meant what it said in its letter, DR. REYES could not
be faulted for believing that RIVIERA was definitely NOT WILLING TO PAY MORE THAN P5,000.00
PER SQUARE METER ON HIS PROPERTY. The fault lies with the deceptive and insincere words of
RIVIERA. Injustice (sic) and equity, RIVIERA must be deemed in estoppel in now belatedly
asserting that it would have been willing to pay a price higher than P5,000.00 x x x."
(Defendants-Appellees Cypress’ and Cornhill’s Brief, p. 8)
For this reason, no adverse inference can be drawn from REYES’ failure to disclose to RIVIERA the
intervening counter-offer of CYPRESS and CORNHILL.
It would have been far different had REYES’ non-disclosure of CYPRESS’ and CORNHILL’s counter-offer to
RIVIERA resulted in the sale of the subject property at equal or less than RIVIERA’s offer; in which case,
REYES would have been rightly accused of cunningly circumventing RIVIERA’s right of first refusal. But
the incontrovertible antecedents obtaining here clearly reveal REYES’ earnest efforts in respecting
RIVIERA’s contractual right to initially purchase the subject property. Not only once – but twice – did
REYES approach RIVIERA, the last one being the most telling indication of REYES’ sincerest intention in
RIVIERA eventually purchasing the subject property if only the latter would increase a little its offer of
P5,000.00 per square meter. And to this REYES was desperately willing to accede to despite the financial
quandary he was then in as the expiration of the redemption period drew closer and closer, and despite
the better offer of CYPRESS and CORNHILL. REYES unquestionably had displayed good faith. Can the
same be said of RIVIERA? We do not think so. It appears that RIVIERA all along was trying to push
REYES’ back against the wall, for RIVIERA was well-aware of REYES’ precarious financial needs at that
time, and by clinging to its offer, REYES might eventually succumb to its offer out of sheer desperation.
RIVIERA was, to be frank, whimsically exercising its contractual right to the prejudice of REYES who had
commendably given RIVIERA extra leeway in exercising it. And to this We say that no amount of
jurisprudence RIVIERA might avail of for the purpose of construing the right of first refusal, however
enlightening and persuasive they may be, will cover-up for its arrogant exercise of its right as can be
gleaned from the factual premises. Equity in this case tilts in favor of defendants REYES, CYPRESS and
CORNHILL that the consummated sale between them concerning the subject property be given this
Court’s imprimatur, for if RIVIERA lost its opportunity to acquire it, it has only itself to blame. For after
all, REYES’ fundamental and intrinsic right of ownership which necessarily carries with it the exclusive
right to dispose of it to whoever he pleases, must ultimately prevail over RIVIERA’s right of first refusal
which it unscrupulously tried to exercise.
From this decision, Riviera filed a motion for reconsideration,31 but the appellate court denied the same in a
Resolution dated September 22, 1994.32
Hence, Riviera interposed the instant petition anchored on the following errors:33
I
THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION TANTAMOUNT TO
LACK OR EXCESS OF ITS JURISDICTION IN RULING THAT PETITIONER RIVIERA FILIPINA, INC. ALREADY
LOST ITS RIGHT OF FIRST REFUSAL.
II
THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION TANTAMOUNT TO
LACK OR EXCESS OF ITS JURISDICTION IN NOT FINDING THAT IT WAS THE PETITIONER, NOT
RESPONDENT JUAN L. REYES, WHICH HAD BEEN THOROUGHLY DECEIVED BY THE LATTER OUT OF ITS
RIGHTS TO ITS CONTINUING PREJUDICE.
III
THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION TANTAMOUNT TO
LACK OR EXCESS OF ITS JURISDICTION IN DENYING RECONSIDERATION.
IV
THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION TANTAMOUNT TO
LACK OR EXCESS OF ITS JURISDICTION IN DECIDING PETITIONER’S APPEAL AT A TIME WHEN THE
PRINCIPAL APPELLEE IS ALLEGEDLY DEAD AND NO PROPER SUBSTITUTION OF THE ALLEGED DECEASED
PARTY HAS BEEN MADE; HENCE, THE DECISION OF THE COURT OF APPEALS AND ITS RESOLUTION
DENYING RECONSIDERATION, IS NULL AND VOID.
At the outset, we note that, while Riviera alleges that the Court of Appeals committed grave abuse of discretion
amounting to lack or excess of jurisdiction, the instant petition is, as it should be, treated as a petition for
review under Rule 45 and not as a special civil action for certiorari under Rule 65 of the Revised Rules of Court,
now the 1997 Rules of Civil Procedure.
The distinctions between Rule 45 and 65 are far and wide, the most notable of which is that errors of
jurisdiction are best reviewed in a special civil action for certiorari under Rule 65, while errors of judgment are
correctible only by appeal in a petition for review under Rule 45.34 The rationale for the distinction is simple.
When a court exercises its jurisdiction an error committed while so engaged does not deprive it of the
jurisdiction being exercised when the error is committed. If it did, every error committed by a court would
deprive it of its jurisdiction and every erroneous judgment would be a void judgment. This cannot be allowed.
The administration of justice would not countenance such a rule. Thus, an error of judgment that the court may
commit in the exercise of its jurisdiction is not correctible through the original special civil action of certiorari. 35
Appeal from a final disposition of the Court of Appeals, as in the case at bar, is by way of a petition for review
under Rule 45.36
In the petition at bar, Riviera posits the view that its right of first refusal was totally disregarded or violated by
Reyes by the latter’s sale of the subject property to Cypress and Cornhill. It contends that the right of first
refusal principally amounts to a right to match in the sense that it needs another offer for the right to be
exercised.
The concept and interpretation of the right of first refusal and the consequences of a breach thereof evolved in
Philippine juristic sphere only within the last decade. It all started in 1992 with Guzman, Bocaling & Co. v.
Bonnevie37 where the Court held that a lease with a proviso granting the lessee the right of first priority "all
things and conditions being equal" meant that there should be identity of the terms and conditions to be
offered to the lessee and all other prospective buyers, with the lessee to enjoy the right of first priority. A deed
of sale executed in favor of a third party who cannot be deemed a purchaser in good faith, and which is in
violation of a right of first refusal granted to the lessee is not voidable under the Statute of Frauds but
rescissible under Articles 1380 to 1381 (3) of the New Civil Code.
Subsequently in 1994, in the case of Ang Yu Asuncion v. Court of Appeals,38 the Court en banc departed
from the doctrine laid down in Guzman, Bocaling & Co. v. Bonnevie and refused to rescind a contract of sale
which violated the right of first refusal. The Court held that the so-called "right of first refusal" cannot be
deemed a perfected contract of sale under Article 1458 of the New Civil Code and, as such, a breach thereof
decreed under a final judgment does not entitle the aggrieved party to a writ of execution of the judgment but
to an action for damages in a proper forum for the purpose.
In the 1996 case of Equatorial Realty Development, Inc. v. Mayfair Theater, Inc.,39 the Court en banc
reverted back to the doctrine in Guzman Bocaling & Co. v. Bonnevie stating that rescission is a relief
allowed for the protection of one of the contracting parties and even third persons from all injury and damage
the contract may cause or to protect some incompatible and preferred right by the contract.
Thereafter in 1997, in Parañaque Kings Enterprises, Inc. v. Court of Appeals,40 the Court affirmed the
nature of and the concomitant rights and obligations of parties under a right of first refusal. The Court,
summarizing the rulings in Guzman, Bocaling & Co. v. Bonnevie and Equatorial Realty Development,
Inc. v. Mayfair Theater, Inc., held that in order to have full compliance with the contractual right granting
petitioner the first option to purchase, the sale of the properties for the price for which they were finally sold to
a third person should have likewise been first offered to the former. Further, there should be identity of terms
and conditions to be offered to the buyer holding a right of first refusal if such right is not to be rendered
illusory. Lastly, the basis of the right of first refusal must be the current offer to sell of the seller or offer to
purchase of any prospective buyer.
Thus, the prevailing doctrine is that a right of first refusal means identity of terms and conditions to be offered
to the lessee and all other prospective buyers and a contract of sale entered into in violation of a right of first
refusal of another person, while valid, is rescissible.
However, we must remember that general propositions do not decide specific cases. Rather, laws are
interpreted in the context of the peculiar factual situation of each proceeding. Each case has its own flesh and
blood and cannot be ruled upon on the basis of isolated clinical classroom principles.41 Analysis and
construction should not be limited to the words used in the contract, as they may not accurately reflect the
parties’ true intent.42 The court must read a contract as the average person would read it and should not give it
a strained or forced construction.43
In the case at bar, the Court finds relevant and significant the cardinal rule in the interpretation of contracts
that the intention of the parties shall be accorded primordial consideration and in case of doubt, their
contemporaneous and subsequent acts shall be principally considered.44 Where the parties to a contract have
given it a practical construction by their conduct as by acts in partial performance, such construction may be
considered by the court in construing the contract, determining its meaning and ascertaining the mutual
intention of the parties at the time for contracting. The parties’ practical construction of their contract has been
characterized as a clue or index to, or as evidence of, their intention or meaning and as an important,
significant, convincing, persuasive, or influential factor in determining the proper construction of the contract.45
An examination of the attendant particulars of the case do not persuade us to uphold Riviera’s view. As clearly
shown by the records and transcripts of the case, the actions of the parties to the contract of lease, Reyes and
Riviera, shaped their understanding and interpretation of the lease provision "right of first refusal" to mean
simply that should the lessor Reyes decide to sell the leased property during the term of the lease, such sale
should first be offered to the lessee Riviera. And that is what exactly ensued between Reyes and Riviera, a
series of negotiations on the price per square meter of the subject property with neither party, especially
Riviera, unwilling to budge from his offer, as evidenced by the exchange of letters between the two contenders.
It can clearly be discerned from Riviera’s letters dated December 2, 1988 and February 4, 1989 that Riviera
was so intractable in its position and took obvious advantage of the knowledge of the time element in its
negotiations with Reyes as the redemption period of the subject foreclosed property drew near. Riviera strongly
exhibited a "take-it or leave-it" attitude in its negotiations with Reyes. It quoted its "fixed and final" price as
Five Thousand Pesos (P5,000.00) and not any peso more. It voiced out that it had other properties to consider
so Reyes should decide and make known its decision "within fifteen days." Riviera, in its letter dated February
4, 1989, admittedly, even downgraded its offer when Reyes offered anew the property to it, such that whatever
amount Reyes initially receives from Riviera would absolutely be insufficient to pay off the redemption price of
the subject property. Naturally, Reyes had to disagree with Riviera’s highly disadvantageous offer.
Nary a howl of protest or shout of defiance spewed forth from Riviera’s lips, as it were, but a seemingly
whimper of acceptance when the counsel of Reyes strongly expressed in a letter dated December 5, 1989 that
Riviera had lost its right of first refusal. Riviera cannot now be heard that had it been informed of the offer of
Five Thousand Three Hundred Pesos (P5,300.00) of Cypress and Cornhill it would have matched said price. Its
stubborn approach in its negotiations with Reyes showed crystal-clear that there was never any need to
disclose such information and doing so would be just a futile effort on the part of Reyes. Reyes was under no
obligation to disclose the same. Pursuant to Article 1339 46 of the New Civil Code, silence or concealment, by
itself, does not constitute fraud, unless there is a special duty to disclose certain facts, or unless according to
good faith and the usages of commerce the communication should be made. 47 We apply the general rule in the
case at bar since Riviera failed to convincingly show that either of the exceptions are relevant to the case at
bar.
In sum, the Court finds that in the interpretation of the right of first refusal as understood by the parties herein,
the question as to what is to be included therein or what is meant by the same, as in all other provisions of the
contract, is for the parties and not for the court to determine, and this question may not be resolved by what
the parties might have provided had they thought about it, which is evident from Riviera claims, or by what the
court might conclude regarding abstract fairness.48
The Court would be rewriting the contract of Reyes and Riviera under the guise of construction were we to
interpret the right of first refusal as Riviera propounds it, despite a contrary construction as exhibited by its
actions. A court, even the Supreme Court, has no right to make new contracts for the parties or ignore those
already made by them, simply to avoid seeming hardships. Neither abstract justice nor the rule of liberal
construction justifies the creation of a contract for the parties which they did not make themselves or the
imposition upon one party to a contract of an obligation not assumed.49
On the last error attributed to the Court of Appeals which is the effect on the jurisdiction of the appellate court
of the non-substitution of Reyes, who died during the pendency of the appeal, the Court notes that when
Riviera filed its petition with this Court and assigned this error, it later filed on October 27, 1994 a
Manifestation50 with the Court of Appeals stating that it has discovered that Reyes is already dead, in view of
which the appellate court issued a Resolution dated December 16, 1994 which noted the manifestation of
Riviera and directed the counsel of Reyes to submit a copy of the latter’s death certificate and to file the proper
motion for substitution of party.51 Complying therewith, the necessary motion for substitution of deceased
Reyes, who died on January 7, 1994, was filed by the heirs, namely, Estefania B. Reyes, Juanita R. de la Rosa,
Juan B. Reyes, Jr. and Fidel B. Reyes.52 Acting on the motion for substitution, the Court of Appeals granted the
same.53
Notwithstanding the foregoing, Section 1654 and 1755 of Rule 3 of the Revised Rules of Court, upon which
Riviera anchors its argument, has already been amended by the 1997 Rules of Civil Procedure. 56 Even applying
the old Rules, the failure of a counsel to comply with his duty under Section 16 of Rule 3 of the Revised Rules of
Court, to inform the court of the death of his client and no substitution of such is effected, will not invalidate
the proceedings and the judgment thereon if the action survives the death of such party, 57 as this case does,
since the death of Reyes did not extinguish his civil personality. The appellate court was well within its
jurisdiction to proceed as it did with the case since the death of a party is not subject to its judicial notice.
Needless to stress, the purpose behind the rule on substitution of parties is the protection of the right of every
party to due process. This purpose has been adequately met in this case since both parties argued their
respective positions through their pleadings in the trial court and the appellate court. Besides, the Court has
already acquired jurisdiction over the heirs of Reyes by voluntarily submitting themselves to our jurisdiction. 58
In view of all the foregoing, the Court is convinced that the appellate court committed no reversible error in its
challenged Decision.1âwphi1.nêt
WHEREFORE, the instant petition is hereby DENIED, and the Decision of the Court of Appeals dated June 6,
1994 in CA-G.R. CV No. 26513 is AFFIRMED. No pronouncement as to costs. SO ORDERED.
G.R. No. 186993 August 22, 2012
THEODORE and NANCY ANG, represented by ELDRIGE MARVIN B. ACERON, Petitioners, vs. SPOUSES
ALAN and EM ANG, Respondents.
Before this Court is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to annul and
set aside the Decision1 dated August 28, 2008 and the Resolution2 dated February 20, 2009 rendered by the
Court of Appeals (CA) in CA-G.R. SP No. 101159. The assailed decision annulled and set aside the Orders dated
April 12, 20073 and August 27, 20074 issued by the Regional Trial Court (RTC) of Quezon City, Branch 81 in Civil
Case No. Q-06-58834.
The Antecedent Facts
On September 2, 1992, spouses Alan and Em Ang (respondents) obtained a loan in the amount of Three
Hundred Thousand U.S. Dollars (US$300,000.00) from Theodore and Nancy Ang (petitioners). On even date,
the respondents executed a promissory note5 in favor of the petitioners wherein they promised to pay the latter
the said amount, with interest at the rate of ten percent (10%) per annum, upon demand. However, despite
repeated demands, the respondents failed to pay the petitioners.
Thus, on August 28, 2006, the petitioners sent the respondents a demand letter asking them to pay their
outstanding debt which, at that time, already amounted to Seven Hundred Nineteen Thousand, Six Hundred
Seventy-One U.S. Dollars and Twenty-Three Cents (US$719,671.23), inclusive of the ten percent (10%) annual
interest that had accumulated over the years. Notwithstanding the receipt of the said demand letter, the
respondents still failed to settle their loan obligation.
On August 6, 2006, the petitioners, who were then residing in Los Angeles, California, United States of America
(USA), executed their respective Special Powers of Attorney6 in favor of Attorney Eldrige Marvin B. Aceron
(Atty. Aceron) for the purpose of filing an action in court against the respondents. On September 15, 2006,
Atty. Aceron, in behalf of the petitioners, filed a Complaint 7 for collection of sum of money with the RTC of
Quezon City against the respondents.
On November 21, 2006, the respondents moved for the dismissal of the complaint filed by the petitioners on
the grounds of improper venue and prescription.8 Insisting that the venue of the petitioners’ action was
improperly laid, the respondents asserted that the complaint against them may only be filed in the court of the
place where either they or the petitioners reside. They averred that they reside in Bacolod City while the
petitioners reside in Los Angeles, California, USA. Thus, the respondents maintain, the filing of the complaint
against them in the RTC of Quezon City was improper.
The RTC Orders
On April 12, 2007, the RTC of Quezon City issued an Order9 which, inter alia, denied the respondents’ motion to
dismiss. In ruling against the respondents’ claim of improper venue, the court explained that:
Attached to the complaint is the Special Power of Attorney x x x which clearly states that plaintiff Nancy Ang
constituted Atty. Eldrige Marvin Aceron as her duly appointed attorney-in-fact to prosecute her claim against
herein defendants. Considering that the address given by Atty. Aceron is in Quezon City, hence, being the
plaintiff, venue of the action may lie where he resides as provided in Section 2, Rule 4 of the 1997 Rules of Civil
Procedure.10
The respondents sought reconsideration of the RTC Order dated April 12, 2007, asserting that there is no law
which allows the filing of a complaint in the court of the place where the representative, who was appointed as
such by the plaintiffs through a Special Power of Attorney, resides.11
The respondents’ motion for reconsideration was denied by the RTC of Quezon City in its Order 12 dated August
27, 2007.
The respondents then filed with the CA a petition for certiorari 13 alleging in the main that, pursuant to Section
2, Rule 4 of the Rules of Court, the petitioners’ complaint may only be filed in the court of the place where they
or the petitioners reside. Considering that the petitioners reside in Los Angeles, California, USA, the
respondents assert that the complaint below may only be filed in the RTC of Bacolod City, the court of the place
where they reside in the Philippines.
The respondents further claimed that, the petitioners’ grant of Special Power of Attorney in favor of Atty. Aceron
notwithstanding, the said complaint may not be filed in the court of the place where Atty. Aceron resides, i.e.,
RTC of Quezon City. They explained that Atty. Aceron, being merely a representative of the petitioners, is not
the real party in interest in the case below; accordingly, his residence should not be considered in determining
the proper venue of the said complaint.
The CA Decision
On August 28, 2008, the CA rendered the herein Decision,14 which annulled and set aside the Orders dated
April 12, 2007 and August 27, 2007 of the RTC of Quezon City and, accordingly, directed the dismissal of the
complaint filed by the petitioners. The CA held that the complaint below should have been filed in Bacolod City
and not in Quezon City. Thus:
As maybe clearly gleaned from the foregoing, the place of residence of the plaintiff’s attorney-in-fact is of no
moment when it comes to ascertaining the venue of cases filed in behalf of the principal since what should be
considered is the residence of the real parties in interest, i.e., the plaintiff or the defendant, as the case may
be. Residence is the permanent home – the place to which, whenever absent for business or pleasure, one
intends to return. Residence is vital when dealing with venue. Plaintiffs, herein private respondents, being
residents of Los Angeles, California, U.S.A., which is beyond the territorial jurisdiction of Philippine courts, the
case should have been filed in Bacolod City where the defendants, herein petitioners, reside. Since the case
was filed in Quezon City, where the representative of the plaintiffs resides, contrary to Sec. 2 of Rule 4 of the
1997 Rules of Court, the trial court should have dismissed the case for improper venue.15
The petitioners sought a reconsideration of the Decision dated August 28, 2008, but it was denied by the CA in
its Resolution dated February 20, 2009.16
Hence, the instant petition.
Issue
In the instant petition, the petitioners submit this lone issue for this Court’s resolution:
WHETHER OR NOT THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR OF LAW WHEN IT RULED THAT
THE COMPLAINT MUST BE DISMISSED ON THE GROUND THAT VENUE WAS NOT PROPERLY LAID.17
The Court’s Ruling
The petition is denied.
Contrary to the CA’s disposition, the petitioners maintain that their complaint for collection of sum of money
against the respondents may be filed in the RTC of Quezon City. Invoking Section 3, Rule 3 of the Rules of
Court, they insist that Atty. Aceron, being their attorney-in-fact, is deemed a real party in interest in the case
below and can prosecute the same before the RTC. Such being the case, the petitioners assert, the said
complaint for collection of sum of money may be filed in the court of the place where Atty. Aceron resides,
which is the RTC of Quezon City.
On the other hand, the respondents in their Comment18 assert that the petitioners are proscribed from filing
their complaint in the RTC of Quezon City. They assert that the residence of Atty. Aceron, being merely a
representative, is immaterial to the determination of the venue of the petitioners’ complaint.
The petitioners’ complaint should
have been filed in the RTC of
Bacolod City, the court of the place
where the respondents reside, and
not in RTC of Quezon City.
It is a legal truism that the rules on the venue of personal actions are fixed for the convenience of the plaintiffs
and their witnesses. Equally settled, however, is the principle that choosing the venue of an action is not left to
a plaintiff’s caprice; the matter is regulated by the Rules of Court.19
The petitioners’ complaint for collection of sum of money against the respondents is a personal action as it
primarily seeks the enforcement of a contract. The Rules give the plaintiff the option of choosing where to file
his complaint. He can file it in the place (1) where he himself or any of them resides, or (2) where the
defendant or any of the defendants resides or may be found. The plaintiff or the defendant must be residents of
the place where the action has been instituted at the time the action is commenced.20
However, if the plaintiff does not reside in the Philippines, the complaint in such case may only be filed in the
court of the place where the defendant resides. In Cohen and Cohen v. Benguet Commercial Co., Ltd.,21 this
Court held that there can be no election as to the venue of the filing of a complaint when the plaintiff has no
residence in the Philippines. In such case, the complaint may only be filed in the court of the place where the
defendant resides. Thus:
Section 377 provides that actions of this character "may be brought in any province where the defendant or any
necessary party defendant may reside or be found, or in any province where the plaintiff or one of the plaintiffs
resides, at the election of the plaintiff." The plaintiff in this action has no residence in the Philippine Islands.
Only one of the parties to the action resides here. There can be, therefore, no election by plaintiff as to the
place of trial. It must be in the province where the defendant resides. x x x.22 (Emphasis ours)
Here, the petitioners are residents of Los Angeles, California, USA while the respondents reside in Bacolod City.
Applying the foregoing principles, the petitioners’ complaint against the respondents may only be filed in the
RTC of Bacolod City – the court of the place where the respondents reside. The petitioners, being residents of
Los Angeles, California, USA, are not given the choice as to the venue of the filing of their complaint.
Thus, the CA did not commit any reversible error when it annulled and set aside the orders of the RTC of
Quezon City and consequently dismissed the petitioners’ complaint against the respondents on the ground of
improper venue.
In this regard, it bears stressing that the situs for bringing real and personal civil actions is fixed by the Rules of
Court to attain the greatest convenience possible to the litigants and their witnesses by affording them
maximum accessibility to the courts.23 And even as the regulation of venue is primarily for the convenience of
the plaintiff, as attested by the fact that the choice of venue is given to him, it should not be construed to
unduly deprive a resident defendant of the rights conferred upon him by the Rules of Court.24
Atty. Aceron is not a real party in
interest in the case below; thus, his
residence is immaterial to the venue
of the filing of the complaint.
Contrary to the petitioners’ claim, Atty. Aceron, despite being the attorney-in-fact of the petitioners, is not a
real party in interest in the case below. Section 2, Rule 3 of the Rules of Court reads:
Sec. 2. Parties in interest. – A real party in interest is the party who stands to be benefited or injured by the
judgment in the suit, or the party entitled to the avails of the suit. Unless otherwise authorized by law or these
Rules, every action must be prosecuted or defended in the name of the real party in interest. (Emphasis ours)
Interest within the meaning of the Rules of Court means material interest or an interest in issue to be affected
by the decree or judgment of the case, as distinguished from mere curiosity about the question involved. 25 A
real party in interest is the party who, by the substantive law, has the right sought to be enforced.26
Applying the foregoing rule, it is clear that Atty. Aceron is not a real party in interest in the case below as he
does not stand to be benefited or injured by any judgment therein. He was merely appointed by the petitioners
as their attorney-in-fact for the limited purpose of filing and prosecuting the complaint against the respondents.
Such appointment, however, does not mean that he is subrogated into the rights of petitioners and ought to be
considered as a real party in interest.
Being merely a representative of the petitioners, Atty. Aceron in his personal capacity does not have the right to
file the complaint below against the respondents. He may only do so, as what he did, in behalf of the
petitioners – the real parties in interest. To stress, the right sought to be enforced in the case below belongs to
the petitioners and not to Atty. Aceron. Clearly, an attorney-in-fact is not a real party in interest.27
The petitioner’s reliance on Section 3, Rule 3 of the Rules of Court to support their conclusion that Atty. Aceron
is likewise a party in interest in the case below is misplaced. Section 3, Rule 3 of the Rules of Court provides
that:
Sec. 3. Representatives as parties. – Where the action is allowed to be prosecuted and defended by a
representative or someone acting in a fiduciary capacity, the beneficiary shall be included in the title of the case
and shall be deemed to be the real property in interest. A representative may be a trustee of an expert trust, a
guardian, an executor or administrator, or a party authorized by law or these Rules. An agent acting in his own
name and for the benefit of an undisclosed principal may sue or be sued without joining the principal except
when the contract involves things belonging to the principal. (Emphasis ours)
Nowhere in the rule cited above is it stated or, at the very least implied, that the representative is likewise
deemed as the real party in interest. The said rule simply states that, in actions which are allowed to be
prosecuted or defended by a representative, the beneficiary shall be deemed the real party in interest and,
hence, should be included in the title of the case.
Indeed, to construe the express requirement of residence under the rules on venue as applicable to the
attorney-in-fact of the plaintiff would abrogate the meaning of a "real party in interest", as defined in Section 2
of Rule 3 of the 1997 Rules of Court vis-à-vis Section 3 of the same Rule.28
On this score, the CA aptly observed that:
As may be unerringly gleaned from the foregoing provisions, there is nothing therein that expressly allows,
much less implies that an action may be filed in the city or municipality where either a representative or an
attorney-in-fact of a real party in interest resides. Sec. 3 of Rule 3 merely provides that the name or names of
the person or persons being represented must be included in the title of the case and such person or persons
shall be considered the real party in interest. In other words, the principal remains the true party to the case
and not the representative. Under the plain meaning rule, or verba legis, if a statute is clear, plain and free
from ambiguity, it must be given its literal meaning and applied without interpretation. xxx29 (Citation omitted)
At this juncture, it bears stressing that the rules on venue, like the other procedural rules, are designed to
insure a just and orderly administration of justice or the impartial and even-handed 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.30
WHEREFORE, in consideration of the foregoing disquisitions, the petition is DENIED. The Decision dated
August 28, 2008 and Resolution dated February 20, 2009 rendered by the Court of Appeals in CA-G.R. SP No.
101159 are AFFIRMED. SO ORDERED.
G. R. No. 76431 October 16, 1989FORTUNE MOTORS, (PHILS.) INC., petitioner, vs.THE HONORABLE
COURT OF APPEALS, METROPOLITAN BANK and TRUST COMPANY, respondents.
This is a petition for review on certiorari seeking the reversal of: (a) the July 30, 1986 decision of the Court of
Appeals in AC-G.R. SP No. 09255 entitled "Metropolitan Bank & Trust Co. v. Hon. Herminio C. Mariano, et al."
dismissing Civil Case No. 8533218 entitled "Fortune Motors (Phils.) Inc. v. Metropolitan Bank & Trust Co." filed
in the Regional Trial Court of Manila, Branch IV for improper venue and (b) the resolution dated October 30,
1986 denying petitioner's motion for reconsideration.
The undisputed facts of the case are as follows:
On March 29,1982 up to January 6,1984, private respondent Metropolitan Bank extended various loans to
petitioner Fortune Motors in the total sum of P32,500,000.00 (according to the borrower; or P34,150,000.00
according to the Bank) which loan was secured by a real estate mortgage on the Fortune building and lot in
Makati, Rizal. (Rollo, pp. 60-62)
Due to financial difficulties and the onslaught of economic recession, the petitioner was not able to pay the loan
which became due. (Rollo, p. 62)
For failure of the petitioner to pay the loans, the respondent bank initiated extrajudicial foreclosure
proceedings. After notices were served, posted, and published, the mortgaged property was sold at public
auction for the price of P47,899,264.91 to mortgagee Bank as the highest bidder. (Rollo, p. 11)
The sheriff's certificate of sale was registered on October 24, 1984 with the one-year redemption period to
expire on October 24,1985. (Rollo, p. 12)
On October 21, 1985, three days before the expiration of the redemption period, petitioner Fortune Motors filed
a complaint for annulment of the extrajudicial foreclosure sale alleging that the foreclosure was premature
because its obligation to the Bank was not yet due, the publication of the notice of sale was incomplete, there
was no public auction, and the price for which the property was sold was "shockingly low". (Rollo, pp. 60-68)
Before summons could be served private respondent Bank filed a motion to dismiss the complaint on the
ground that the venue of the action was improperly laid in Manila for the realty covered by the real estate
mortgage is situated in Makati, therefore the action to annul the foreclosure sale should be filed in the Regional
Trial Court of Makati. (Rollo, pp. 67-71-A )
The motion was opposed by petitioner Fortune Motors alleging that its action "is a personal action" and that
"the issue is the validity of the extrajudicial foreclosure proceedings" so that it may have a new one year period
to redeem. (Rollo, pp. 72-73)
On January 8, 1986 an order was issued by the lower court reserving the resolution of the Bank's motion to
dismiss until after the trial on the merits as the grounds relied upon by the defendant were not clear and
indubitable. (Rollo, p. 81)
The Bank filed a motion for reconsideration of the order dated January 8, 1986 but it was denied by the lower
court in its order dated May 28, 1986. (Rollo, Annex "L" pp. 93-96; Annex "N" p. 99)
On June 11, 1986 the respondent Bank filed a petition for certiorari and prohibition in the Court of Appeals.
(Rollo, Annex "O" pp. 100-115)
And on July 30, 1986, a decision was issued by the Court of Appeals, the dispositive part of which reads as
follows:
WHEREFORE, the petition for certiorari and prohibition is granted. The complaint in the Civil Case No. 85-33218
is dismissed without prejudice to its being filed in the proper venue. Costs against the private respondent. SO
ORDERED. (Rollo, p. 15)
A motion for reconsideration was filed on August 11, 1986 on the said decision and on October 30, 1986 a
resolution was issued denying such motion for reconsideration. (Rollo, Annex "O" pp. 121-123; Annex "S" p.
129)
Hence, the petition for review on certiorari.
On June 10, 1987 the Court gave due course to the petition, required the parties to file their respective
memoranda within twenty (20) days from the notice hereof, and pay deposit for costs in the amount of P80.40.
Both parties have filed their respective memoranda, and the case was submitted for Court's resolution in the
resolution dated December 14, 1987. (Rollo,Metrobank's Memorandum pp. 45-59; petitioner's memorandum
pp.130-136; Res. p. 138)
The only issue in this case is whether petitioner's action for annulment of the real estate mortgage extrajudicial
foreclosure sale of Fortune Building is a personal action or a real action for venue purposes.
In a real action, the plaintiff seeks the recovery of real property, or as indicated in Sec. 2 (a) of Rule 4, a real
action is an action affecting title to real property, or for the recovery of possession, or for the partition or
condemnation of, or foreclosure of a mortgage on real property. (Comments on the Rules of Court by Moran,
Vol. 1, p. 122)
Real actions or actions affecting title to, or for the recovery of possession, or for the partition or condemnation
of, or foreclosure of mortgage on real property, must be instituted in the Court of First Instance of the province
where the property or any part thereof lies. (Enriquez v. Macadaeg, 84 Phil. 674,1949; Garchitorena v. Register
of Deeds, 101 Phil. 1207, 1957)
Personal actions upon the other hand, may be instituted in the Court of First Instance where the defendant or
any of the defendants resides or may be found, or where the plaintiff or any of the plaintiffs resides, at the
election of the plaintiff (Sec. 1, Rule 4, Revised Rules of Court).
A prayer for annulment or rescission of contract does not operate to efface the true objectives and nature of the
action which is to recover real property. (Inton, et al., v. Quintan, 81 Phil. 97, 1948)
An action for the annulment or rescission of a sale of real property is a real action. Its prime objective is to
recover said real property. (Gavieres v. Sanchez, 94 Phil. 760,1954)
An action to annul a real estate mortgage foreclosure sale is no different from an action to annul a private sale
of real property. (Munoz v. Llamas, 87 Phil. 737,1950)
While it is true that petitioner does not directly seek the recovery of title or possession of the property in
question, his action for annulment of sale and his claim for damages are closely intertwined with the issue of
ownership of the building which, under the law, is considered immovable property, the recovery of which is
petitioner's primary objective. The prevalent doctrine is that an action for the annulment or rescission of a sale
of real property does not operate to efface the fundamental and prime objective and nature of the case, which
is to recover said real property. It is a real action. Respondent Court, therefore, did not err in dismissing the
case on the ground of improper venue (Sec. 2, Rule 4) which was timely raised (Sec. 1, Rule 16). (Punzalan, Jr.
v. Vda. de Lacsamana, 121 SCRA 336, [1983]).
Thus, as aptly decided by the Court of Appeals in a decision penned by then Court of Appeals Associate Justice
now Associate Justice of the Supreme Court Carolina C. Griño-Aquino, the pertinent portion reads: "Since an
extrajudicial foreclosure of real property results in a conveyance of the title of the property sold to the highest
bidder at the sale, an action to annul the foreclosure sale is necessarily an action affecting the title of the
property sold. It is therefore a real action which should be commenced and tried in the province where the
property or part thereof lies."
PREMISES CONSIDERED, the instant petition is DENIED for lack of merit and the assailed decision of the
respondent Court of Appeals is AFFIRMED. SO ORDERED.
G.R. No. L-22238 February 18, 1967
CLAVECILLIA RADIO SYSTEM, petitioner-appellant, vs. HON. AGUSTIN ANTILLON, as City Judge of the
Municipal Court of Cagayan de Oro City
and NEW CAGAYAN GROCERY, respondents-appellees.
This is an appeal from an order of the Court of First Instance of Misamis Oriental dismissing the petition of the
Clavecilla Radio System to prohibit the City Judge of Cagayan de Oro from taking cognizance of Civil Case No.
1048 for damages.
It appears that on June 22, 1963, the New Cagayan Grocery filed a complaint against the Clavecilla Radio
System alleging, in effect, that on March 12, 1963, the following message, addressed to the former, was filed at
the latter's Bacolod Branch Office for transmittal thru its branch office at Cagayan de Oro:
NECAGRO CAGAYAN DE ORO (CLAVECILLA)
REURTEL WASHED NOT AVAILABLE REFINED TWENTY FIFTY IF AGREEABLE SHALL SHIP LATER REPLY
POHANG
The Cagayan de Oro branch office having received the said message omitted, in delivering the same to
the New Cagayan Grocery, the word "NOT" between the words "WASHED" and "AVAILABLE," thus
changing entirely the contents and purport of the same and causing the said addressee to suffer
damages. After service of summons, the Clavecilla Radio System filed a motion to dismiss the complaint
on the grounds that it states no cause of action and that the venue is improperly laid. The New Cagayan
Grocery interposed an opposition to which the Clavecilla Radio System filed its rejoinder. Thereafter, the
City Judge, on September 18, 1963, denied the motion to dismiss for lack of merit and set the case for
hearing.1äwphï1.ñët
Hence, the Clavecilla Radio System filed a petition for prohibition with preliminary injunction with the Court of
First Instance praying that the City Judge, Honorable Agustin Antillon, be enjoined from further proceeding with
the case on the ground of improper venue. The respondents filed a motion to dismiss the petition but this was
opposed by the petitioner. Later, the motion was submitted for resolution on the pleadings.
In dismissing the case, the lower court held that the Clavecilla Radio System may be sued either in Manila
where it has its principal office or in Cagayan de Oro City where it may be served, as in fact it was served, with
summons through the Manager of its branch office in said city. In other words, the court upheld the authority of
the city court to take cognizance of the case.1äwphï1.ñët
In appealing, the Clavecilla Radio System contends that the suit against it should be filed in Manila where it
holds its principal office.
It is clear that the case for damages filed with the city court is based upon tort and not upon a written contract.
Section 1 of Rule 4 of the New Rules of Court, governing venue of actions in inferior courts, provides in its
paragraph (b) (3) that when "the action is not upon a written contract, then in the municipality where the
defendant or any of the defendants resides or may be served with summons." (Emphasis supplied)
Settled is the principle in corporation law that the residence of a corporation is the place where its principal
office is established. Since it is not disputed that the Clavecilla Radio System has its principal office in Manila, it
follows that the suit against it may properly be filed in the City of Manila.
The appellee maintain, however, that with the filing of the action in Cagayan de Oro City, venue was properly
laid on the principle that the appellant may also be served with summons in that city where it maintains a
branch office. This Court has already held in the case of Cohen vs. Benguet Commercial Co., Ltd., 34 Phil. 526;
that the term "may be served with summons" does not apply when the defendant resides in the Philippines for,
in such case, he may be sued only in the municipality of his residence, regardless of the place where he may be
found and served with summons. As any other corporation, the Clavecilla Radio System maintains a residence
which is Manila in this case, and a person can have only one residence at a time (See Alcantara vs. Secretary of
the Interior, 61 Phil. 459; Evangelists vs. Santos, 86 Phil. 387). The fact that it maintains branch offices in
some parts of the country does not mean that it can be sued in any of these places. To allow an action to be
instituted in any place where a corporate entity has its branch offices would create confusion and work untold
inconvenience to the corporation.
It is important to remember, as was stated by this Court in Evangelista vs. Santos, et al., supra, that the laying
of the venue of an action is not left to plaintiff's caprice because the matter is regulated by the Rules of Court.
Applying the provision of the Rules of Court, the venue in this case was improperly laid.
The order appealed from is therefore reversed, but without prejudice to the filing of the action in Which the
venue shall be laid properly. With costs against the respondents-appellees.
G.R. No. 104175 June 25, 1993
YOUNG AUTO SUPPLY CO. AND NEMESIO GARCIA, petitioners, vs. THE HONORABLE COURT OF
APPEALS (THIRTEENTH DIVISION) AND GEORGE CHIONG ROXAS, respondents.
Petitioners seek to set aside the decision of respondent Court of Appeals in CA-G.R. SP No. 25237, which
reversed the Order dated February 8, 1991 issued by the Regional Trial Court, Branch 11, Cebu City in Civil
Case No. CEB 6967. The order of the trial court denied the motion to dismiss filed by respondent George C.
Roxas of the complaint for collection filed by petitioners.
It appears that sometime on October 28, 1987, Young Auto Supply Co. Inc. (YASCO) represented by Nemesio
Garcia, its president, Nelson Garcia and Vicente Sy, sold all of their shares of stock in Consolidated Marketing &
Development Corporation (CMDC) to Roxas. The purchase price was P8,000,000.00 payable as follows: a
downpayment of P4,000,000.00 and the balance of P4,000,000.00 in four post dated checks of P1,000,000.00
each.
Immediately after the execution of the agreement, Roxas took full control of the four markets of CMDC.
However, the vendors held on to the stock certificates of CMDC as security pending full payment of the balance
of the purchase price.
The first check of P4,000,000.00, representing the down-payment, was honored by the drawee bank but the
four other checks representing the balance of P4,000,000.00 were dishonored. In the meantime, Roxas sold
one of the markets to a third party. Out of the proceeds of the sale, YASCO received P600,000.00, leaving a
balance of P3,400,000.00 (Rollo, p. 176).
Subsequently, Nelson Garcia and Vicente Sy assigned all their rights and title to the proceeds of the sale of the
CMDC shares to Nemesio Garcia.
On June 10, 1988, petitioners filed a complaint against Roxas in the Regional Trial Court, Branch 11, Cebu City,
praying that Roxas be ordered to pay petitioners the sum of P3,400,00.00 or that full control of the three
markets be turned over to YASCO and Garcia. The complaint also prayed for the forfeiture of the partial
payment of P4,600,000.00 and the payment of attorney's fees and costs (Rollo, p. 290).
Roxas filed two motions for extension of time to submit his answer. But despite said motion, he failed to do so
causing petitioners to file a motion to have him declared in default. Roxas then filed, through a new counsel, a
third motion for extension of time to submit a responsive pleading.
On August 19, 1988, the trial court declared Roxas in default. The order of default was, however, lifted upon
motion of Roxas.
On August 22, 1988, Roxas filed a motion to dismiss on the grounds that:
1. The complaint did not state a cause of action due to non-joinder of indispensable parties;
2. The claim or demand set forth in the complaint had been waived, abandoned or otherwise
extinguished; and
3. The venue was improperly laid (Rollo, p. 299).
After a hearing, wherein testimonial and documentary evidence were presented by both parties, the trial court
in an Order dated February 8, 1991 denied Roxas' motion to dismiss. After receiving said order, Roxas filed
another motion for extension of time to submit his answer. He also filed a motion for reconsideration, which the
trial court denied in its Order dated April 10, 1991 for being pro-forma (Rollo, p. 17). Roxas was again declared
in default, on the ground that his motion for reconsideration did not toll the running of the period to file his
answer.
On May 3, 1991, Roxas filed an unverified Motion to Lift the Order of Default which was not accompanied with
the required affidavit or merit. But without waiting for the resolution of the motion, he filed a petition for
certiorari with the Court of Appeals.
The Court of Appeals sustained the findings of the trial court with regard to the first two grounds raised in the
motion to dismiss but ordered the dismissal of the complaint on the ground of improper venue (Rollo, p. 49).
A subsequent motion for reconsideration by petitioner was to no avail.
Petitioners now come before us, alleging that the Court of Appeals
erred in:
1. holding the venue should be in Pasay City, and not in Cebu City (where both petitioners/plaintiffs are
residents;
2. not finding that Roxas is estopped from questioning the choice of venue (Rollo, p. 19).
The petition is meritorious.
In holding that the venue was improperly laid in Cebu City, the Court of Appeals relied on the address of
YASCO, as appearing in the Deed of Sale dated October 28, 1987, which is "No. 1708 Dominga Street, Pasay
City." This was the same address written in YASCO's letters and several commercial documents in the
possession of Roxas (Decision, p. 12; Rollo, p. 48).
In the case of Garcia, the Court of Appeals said that he gave Pasay City as his address in three letters which he
sent to Roxas' brothers and sisters (Decision, p. 12; Rollo, p. 47). The appellate court held that Roxas was led
by petitioners to believe that their residence is in Pasay City and that he had relied upon those representations
(Decision, p. 12, Rollo, p. 47).
The Court of Appeals erred in holding that the venue was improperly laid in Cebu City.
In the Regional Trial Courts, all personal actions are commenced and tried in the province or city where the
defendant or any of the defendants resides or may be found, or where the plaintiff or any of the plaintiffs
resides, at the election of the plaintiff [Sec. 2(b) Rule 4, Revised Rules of Court].
There are two plaintiffs in the case at bench: a natural person and a domestic corporation. Both plaintiffs aver
in their complaint that they are residents of Cebu City, thus:
1.1. Plaintiff Young Auto Supply Co., Inc., ("YASCO") is a domestic corporation duly organized and
existing under Philippine laws with principal place of business at M. J. Cuenco Avenue, Cebu City. It also
has a branch office at 1708 Dominga Street, Pasay City, Metro Manila.
Plaintiff Nemesio Garcia is of legal age, married, Filipino citizen and with business address at Young Auto
 Supply Co., Inc., M. J. Cuenco Avenue, Cebu City. . . . (Complaint, p. 1; Rollo, p. 81).
The Article of Incorporation of YASCO (SEC Reg. No. 22083) states:
THIRD That the place where the principal office of the corporation is to be established or located is at
Cebu City, Philippines (as amended on December 20, 1980 and further amended on December 20, 1984)
(Rollo, p. 273).
A corporation has no residence in the same sense in which this term is applied to a natural person. But for
practical purposes, a corporation is in a metaphysical sense a resident of the place where its principal office is
located as stated in the articles of incorporation (Cohen v. Benguet Commercial Co., Ltd., 34 Phil. 256 [1916]
Clavecilla Radio System v. Antillon, 19 SCRA 379 [1967]). The Corporation Code precisely requires each
corporation to specify in its articles of incorporation the "place where the principal office of the corporation is to
be located which must be within the Philippines" (Sec. 14 [3]). The purpose of this requirement is to fix the
residence of a corporation in a definite place, instead of allowing it to be ambulatory.
In Clavencilla Radio System v. Antillon, 19 SCRA 379 ([1967]), this Court explained why actions cannot be filed
against a corporation in any place where the corporation maintains its branch offices. The Court ruled that to
allow an action to be instituted in any place where the corporation has branch offices, would create confusion
and work untold inconvenience to said entity. By the same token, a corporation cannot be allowed to file
personal actions in a place other than its principal place of business unless such a place is also the residence of
a co-plaintiff or a defendant.
If it was Roxas who sued YASCO in Pasay City and the latter questioned the venue on the ground that its
principal place of business was in Cebu City, Roxas could argue that YASCO was in estoppel because it misled
Roxas to believe that Pasay City was its principal place of business. But this is not the case before us.
With the finding that the residence of YASCO for purposes of venue is in Cebu City, where its principal place of
business is located, it becomes unnecessary to decide whether Garcia is also a resident of Cebu City and
whether Roxas was in estoppel from questioning the choice of Cebu City as the venue.
WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals appealed from is SET ASIDE and
the Order dated February 8, 1991 of the Regional Trial Court is REINSTATED.
SO ORDERED.
G.R. No. L-17699 March 30, 1962
DR. ANTONIO A. LIZARES, INC., petitioner, vs. HON. HERMOGENES CALUAG, as Judge of the Court of
First Instance of Quezon City, and FLAVIANO CACNIO, respondents.
Appeal by certiorari from a decision of the Court of Appeals dismissing the petition of Dr. Antonio A. Lizares &
Co., Inc., for a writ of prohibition, with costs against said petitioner.
On or about June 14, 1960, Flaviano Cacnio instituted Civil Case No. Q-5197 of the Court of First Instance of
Rizal, Quezon City Branch, against said petitioner. In his complaint, Cacnio alleged that on April 20, 1955, he
bought from petitioner, on installment, Lot 4, Block 1 of the Sinkang Subdivision in Bacolod City, making
therefor a downpayment of P1,206, the balance of P10,858 to be paid in ten (10) yearly installments of
P1,085.80 each, with interest thereon at the rate of 6% per annum; that on March 25, 1960, Cacnio received
from petitioner a letter demanding payment of P7,324.69, representing arrears in the payment of installments
up to April 20, 1960, plus "regular and overdue" interest, as well as "land taxes up to 70% of 1960"; that the
sum then due from Cacnio by way of arrears amounted only to P5,824.69, he having paid P1,500 to petitioner
"sometime in 1958"; that in view of the aforementioned demand of petitioner, Cacnio sent thereto a check for
P5,824.69, dated May 26, 1960, drawn by one Antonino Bernardo in favor of said petitioner, in payment of the
amount due from Cacnio by way of arrears; that "without legal and equitable grounds" therefor, petitioner
returned said check and "refused the tender of payment" aforementioned; that by reason of said illegal act of
petitioner, Cacnio is entitled to compensatory damages in the sum of P5,000, plus P2,000 by way of attorney's
fees, Cacnio having been constrained to engage the services of counsel and bring the action; and that
petitioner "is doing threatens, or is about to do, or is procuring or suffering to be done some act in violation of"
Cacnio's rights respecting the subject of the action, viz. the repossession of the lot bought by" the latter, who,
accordingly, prayed that petitioner be ordered "to accept the payment being made" by him (Cacnio) and to pay
him P5,000 as compensatory damages and P2,000 as attorney's fees, and that, upon the filing of a bond to be
fixed by the court, a writ of preliminary injunction enjoining petitioner and its agents or representatives from
repossessing the lot adverted to above be issued. Said writ of preliminary injunction was issued on June 16,
1960.
On July 5, 1960, petitioner moved to dismiss the complaint upon the ground that "venue is improperly laid," for
the action affects the title to or possession of real property located in Bacolod City, which was the subject
matter of a contract, between petitioner and Cacnio, made in said City. The motion having been denied by the
Court of First Instance of Rizal, Quezon City Branch, by an order of July 9, 1960, upon the ground that the
action was in personam, petitioner filed with the Court of Appeals a petition, which was docketed as Civil Case
CA-G.R. No. 28013-R, praying that said order be set aside and that a writ of prohibition be issued commanding
respondent Hon. Hermogenes Caluag, as Judge of said Court, to desist from taking cognizance of said Civil
Case No. Q-5197. In due course, the Court of Appeals rendered a decision on October 27, 1960, dismissing said
petition. Hence, this appeal by certiorari taken by petitioner herein.
The issue is whether or not the main case falls under section 3 of Rule 5 of the Rules of Court, reading:
"Actions affecting title to, or for recovery of possession, or for partition or condemnation of, or foreclosure of
mortgage on, real property, shall be commenced and tried in the province where the property or any part
thereof lies."
The Court of Appeals and the Court of First Instance of Rizal, Quezon City Branch, held that Civil Case No. Q-
5197 of the latter court is an action in personam, and that, as such, it does not fall within the purview of said
section 3, and was properly instituted in the court of first instance of the province in which Cacnio, as plaintiff in
said case, resided, pursuant to section 1 of said rule 5.
We are unable to share such view. Although the immediate remedy sought by Cacnio is to compel petitioner to
accept the tender of payment allegedly made by the former, it is obvious that this relief is merely the first step
to establish Cacnio's title to the real property adverted to above. Moreover, Cacnio's complaint is a means
resorted to by him in order that he could retain the possession of said property. In short, venue in the main
case was improperly laid and the Court of First Instance of Rizal, Quezon City Branch, should have granted the
motion to dismiss. 1äwphï1.ñët
WHEREFORE, the decision appealed from is hereby reversed and another one shall be entered directing
respondent Judge to desist from taking further cognizance of Civil Case No. Q-5197 of said court, with costs
against respondent Flaviano Cacnio. It is so ordered.
G.R. No. L-53485 February 6, 1991
PATRIA ESUERTE and HERMINIA JAYME, petitioners, vs. HON. COURT OF APPEALS (Eleventh
Division), HON. RAFAEL T. MENDOZA, Judge, Branch VI, Court of First Instance of Cebu and MA.
BEVERLY TAN, respondents.
This petition for certiorari with a prayer for preliminary injunction seeks to set aside the decision of the Court of
Appeals in CA G.R. No. SP-08999-R, involving the same parties.
An action for damages was filed by private respondent Beverly Tan against herein petitioners Patria Esuerte and
Herminia Jayme with the Court of First Instance (now Regional Trial Court) of Cebu and docketed as Civil Case
No. R-17584. The claim for damages arose from an incident involving the parties and summarized by the Court
of Appeals, as follows:
. . . that on September 22, 23 and 27, 1978, private respondent Ma. Beverly Tan, a Junior Resident
Physician of Corazon Locsin-Montelibano Memorial Hospital, Bacolod City, without any justifiable reason
shouted at, humiliated and insulted the petitioner, Patria Esuerte, Head Nurse, Medicare Department of
the said hospital and as a result of the said incident, said petitioner complained to the Chief of the
Hospital, Dr. Teodoro P. Motus, in writing. The other petitioner, Herminia Jayme, who was one of those
who were present at the time of the incident also sent a letter to the Chief of the Hospital, Dr. Teodoro
Motus, informing the latter of what she had witnessed. As a result thereof, private respondent was
advised to explain in writing by the Chief of the Hospital, but private respondent instead of explaining
only her side of the incident also complained against the petitioners. The Discipline and Grievance
Committee, Corazon Locsin-Montelibano Memorial Hospital, conducted a fact-finding investigation and
later, the Chief of the Hospital, Dr. Teodoro P. Motus, issued a resolution dated November 8, 1978,
transmitting the records of the case to the Regional Health Office, No. 6, Jaro, Iloilo City for appropriate
action; . . . . (pp. 91-92, Rollo)
Esuerte and Jayme filed a motion to dismiss the complaint on the ground of improper venue and for being
premature for failure of Tan to exhaust administrative remedies.
On January 2, 1979, the trial court denied the motion to dismiss. The motion for reconsideration of the denial
was likewise denied by the court on February 16, 1979.
Esuerte and Jayme filed a petition for certiorari and prohibition with a prayer for preliminary injunction with the
Court of Appeals. On September 18, 1979, the petition was dismissed without pronouncement as to costs. The
motion for reconsideration of the decision was likewise denied for lack of merit on February 18, 1980.
The following reasons were advanced by petitioners for the allowance of this petition:
1) The Court of Appeals committed gross error and grave abuse of discretion when it dismissed the
petition despite petitioners' overwhelming evidence showing that the venue of private respondent's
action (Civil Case No. R-17584) was improperly laid.
2) The Court of Appeals committed gross error and grave abuse of discretion when it dismissed the
petition despite petitioners' overwhelming evidence showing that the filing of Civil Case No. R-17584 is
premature due to non-exhaustion of administrative remedies.
It is the contention of petitioners that the proper venue of the action filed by Tan should be Bacolod City and
not Cebu City. At the time of the filing of her action in court, Tan was actually residing and may be found in
Bacolod City. In fact, in her "Statement of Assets and Liabilities," submitted by Tan to her employer, the
Corazon Locsin Montelibano Memorial Hospital, she declared that she is a resident of FRAYU INTERIOR, 6th
Street, Bacolod City.
Section 2(b), Rule 4 of the Rules of Court provides:
Sec. 2. Venue in Courts of First Instance. —
xxx xxx xxx
(b) Personal Actions. — All other actions may be commenced and tried where the defendants or any of
the defendants resides or may be found, or where the plaintiff or any of the plaintiffs resides, at the
election of the plaintiff.
The choice of venue for personal actions cognizable by the Regional Trial Court is given to the plaintiff but not
to the plaintiff's caprice because the matter is regulated by the Rules of Court (see Clavecilla Radio System v.
Antillon, 19 SCRA 379). The rule on venue, like 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 (Sy v.
Tyson Enterprises Inc., 19 SCRA 367). The option of the plaintiff in personal actions cognizable by the Regional
Trial Court is either the place where the defendant resides or may be found or the place where the plaintiff
resides. If plaintiff opts for the latter, he is limited to that place.
"Resides" in the rules on venue on personal actions means the place of abode, whether permanent or
temporary, of the plaintiff or defendants as distinguished from "domicile" which denotes a fixed permanent
residence (Dangwa Transportation Co., Inc. v. Sarmiento, G.R. No. L-22795, January 31, 1977, 75 SCRA 124).
And, in Hernandez v. Rural Bank of Lucena, Inc., G.R. No. L-29791, January 10, 1978, 81 SCRA 75), venue of
personal actions should be at the place of abode or place where plaintiffs actually reside, not in domicile or
legal residence.
In Koh v. CA, L-40428, December 17, 1975, 70 SCRA 298; 305, We ruled:
Applying the foregoing observation to the present case, We are fully convinced that private respondent
Coloma's protestations of domicile in San Nicolas, Ilocos Norte, based on his manifested intention to
return there after the retirement of his wife from government service to justify his bringing of an action
for damages against petitioner in the C.F.I. of Ilocos Norte, is entirely of no moment since what is of
paramount importance is where he actually resided or where he may be found at the time he brought
the action, to comply substantially with the requirements of Sec. 2(b) of Rule 4, Rules of Court, on
venue of personal actions. . ..
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 the objective
is not achieved, then "the administration of justice becomes incomplete and unsatisfactory and lays itself open
to criticism." (Manila Railroad Co. v. Attorney General, 20 Phil. 523, 530).
There is no question that private respondent as plaintiff in the Civil Case is a legal resident of Cebu
City.1âwphi1 Her parents live there. However, it cannot also be denied that at the time of her filing of the
complaint against petitioners, she was a temporary resident of Bacolod City. She was then employed with the
Corazon Locsin Montelibano Memorial Hospital, Bacolod City, as resident physician. Moreover, the acts
complained of were committed in Bacolod City. The private respondents were all residents of Bacolod City at the
time of the bringing of the action. Though Tan's employment was only temporary there was no showing when
this employment will end. Justice would be better served if the complaint were heard and tried in Bacolod City
where all the parties resided.
The second ground raised by petitioners is devoid of merit. The alleged need by private respondent Tan to
exhaust administrative remedies before filing the complaint for damages does not apply to the instant case.
Private respondent as plaintiff in the civil Case for damages has no administrative remedy available to her. It is
true that the same incident complained of in the administrative case filed by petitioners against Tan is the
subject of the action for damages filed by Tan against the petitioners in the trial court. However, the cause of
action in the administrative case is different from that of the civil case for damages. While the complainant in
the administrative case may be a private person, it is the government who is the aggrieved party and no award
for damages may be granted in favor of private persons. In the civil action for damages, the trial court's
concern is whether or not damages, personal to the plaintiff, were caused by the acts of the defendants. The
civil action for damages can proceed notwithstanding the pendency of the administrative action.
WHEREFORE, the position is GRANTED. The questioned decision of the Court of Appeals is SET ASIDE. Civil
Case No. R-17584 is DISMISSED for improper venue. SO ORDERED.
G.R. No. L-28742 April 30, 1982
VIRGILIO CAPATI, plaintiff-appellant, vs. DR. JESUS P. OCAMPO, defendant-appellee.
We set aside the order of the Court of First Instance of Pampanga in Civil Case No. 3188 which dismissed the
plaintiff's complaint on ground of improper venue.
Plaintiff Virgilio Capati a resident of Bacolor, Pampanga, was the contractor of the Feati Bank for the
construction of its building in Iriga, Camarines Sur. On May 23, 1967, plaintiff entered into a sub-contract with
the defendant Dr. Jesus Ocampo, a resident of Naga City, whereby the latter, in consideration of the amount of
P2,200.00, undertook to construct the vault walls, exterior walls and columns of the said Feati building in
accordance with the specifications indicated therein. Defendant further bound himself to complete said
construction on or before June 5, 1967 and, to emphasize this time frame for the completion of the construction
job, defendant affixed his signature below the following stipulation written in bold letters in the sub-contract:
"TIME IS ESSENTIAL, TO BE FINISHED 5 JUNE' 67."
Claiming that defendant finished the construction in question only on June 20, 1967, plaintiff filed in the Court
of First Instance of Pampanga an action for recovery of consequential damages in the sum of P85,000.00 with
interest, plus attorney's fees and costs. The complaint alleged inter alia that "due to the long unjustified delay
committed by defendant, in open violation of his express written agreement with plaintiff, the latter has
suffered great irreparable loss and damage ... "
Defendant filed a motion to dismiss the complaint on the ground that venue of action was improperly laid. The
motion was premised on the stipulation printed at the back of the contract which reads:
14. That all actions arising out, or relating to this contract may be instituted in the Court of First
Instance of the City of Naga.
Plaintiff filed an opposition to the motion, claiming that their agreement to hold the venue in the Court of First
Instance of Naga City was merely optional to both contracting parties. In support thereof, plaintiff cited the use
of the word "may " in relation with the institution of any action arising out of the contract.
The lower court, in resolving the motion to dismiss, ruled that "there was no sense in providing the aforequoted
stipulation, pursuant to Sec. 3 of Rule 4 of the Revised Rules of Court, if after all, the parties are given the
discretion or option of filing the action in their respective residences," and thereby ordered the dismissal of the
complaint.
Hence, this appeal.
The rule on venue of personal actions cognizable by the courts of first instance is found in Section 2 (b), Rule 4
of the Rules of Court, which provides that such "actions may be commenced and tried where the defendant or
any of the defendants resides or may be found, or where the plaintiff or any of the plaintiffs resides, at the
election of the plaintiff." The said section is qualified by the following provisions of Section 3 of the same rule:
By written agreement of the parties the venue of an action may be changed or transferred from one
province to another.
Defendant stands firm on his contention that because of the aforequoted covenant contained in par. 14
of the contract, he cannot be sued in any court except the Court of First Instance of Naga City. We are
thus called upon to rule on the issue as to whether the stipulation of the parties on venue is restrictive in
the sense that any litigation arising from the contract can be filed only in the court of Naga City, or
merely permissive in that the parties may submit their disputes not only in Naga City but also in the
court where the defendant or the plaintiff resides, at the election of the plaintiff, as provided for by
Section 2 (b) Rule 4 of the Rules of Court.
It is well settled that the word "may" is merely permissive and operates to confer discretion upon a
party. Under ordinary circumstances, the term "may be" connotes possibility; it does not connote
certainty. "May" is an auxillary verb indicating liberty, opportunity, permission or possibility. 1
In Nicolas vs. Reparations Commission 2, a case involving the interpretation of a stipulation as to venue along
lines similar to the present one, it was held that the agreement of the parties which provided that "all legal
actions arising out of this contract ... may be brought in and submitted to the jurisdiction of the proper courts
in the City of Manila," is not mandatory.
We hold that the stipulation as to venue in the contract in question is simply permissive. By the said stipulation,
the parties did not agree to file their suits solely and exclusively with the Court of First Instance of Naga. They
merely agreed to submit their disputes to the said court, without waiving their right to seek recourse in the
court specifically indicated in Section 2 (b), Rule 4 of the Rules of Court.
Since the complaint has been filed in the Court of First Instance of Pampanga, where the plaintiff resides, the
venue of action is properly laid in accordance with Section 2 (b), Rule 4 of the Rules of Court.
WHEREFORE, the order appealed from is hereby set aside. Let the records be returned to the court of origin for
further proceedings. Costs against defendant-appellee. SO ORDERED.
G.R. No. 119657 February 7, 1997
UNIMASTERS CONGLOMERATION, INC., petitioner, vs. COURT OF APPEALS and KUBOTA AGRI
MACHINERY PHILIPPINES, INC., respondents.
The appellate proceeding at bar turns upon the interpretation of a stipulation in a contract governing venue of
actions thereunder arising.
On October 8, 1988 Kubota Agri-Machinery Philippines, Inc. (hereafter, simply KUBOTA) and Unimasters
Conglomeration, Inc. (hereafter, simply UNIMASTERS) entered into a "Dealership Agreement for Sales and
Services" of the former's products in Samar and Leyte Provinces. 1 The contract contained, among others:
1) a stipulation reading: ". . . All suits arising out of this Agreement shall be filed with/in the proper Courts of
Quezon City," and
2) a provision binding UNIMASTERS to obtain (as it did in fact obtain) a credit line with Metropolitan Bank and
Trust Co.-Tacloban Branch in the amount of P2,000,000.00 to answer for its obligations to KUBOTA.
Some five years later, or more precisely on December 24, 1993, UNIMASTERS filed an action in the Regional
Trial Court of Tacloban City against KUBOTA, a certain Reynaldo Go, and Metropolitan Bank and Trust Company-
Tacloban Branch (hereafter, simply METROBANK) for damages for breach of contract, and injunction with prayer
for temporary restraining order. The action was docketed as Civil Case No. 93-12-241 and assigned to Branch
6.
On the same day the Trial Court issued a restraining order enjoining METROBANK from "authorizing or effecting
payment of any alleged obligation of . . (UNIMASTERS) to defendant . . KUBOTA arising out of or in connection
with purchases made by defendant Go against the credit line caused to be established by . . (UNIMASTERS) for
and in the amount of P2 million covered by defendant METROBANK . . or by way of charging . . (UNIMASTERS)
for any amount paid and released to defendant . . (KUBOTA) by the Head Office of METROBANK in Makati,
Metro-Manila . . ." The Court also set the application for preliminary injunction for hearing on January 10, 1994
at 8:30 o'clock in the morning.
On January 4, 1994 KUBOTA filed-two motions. One prayed for dismissal of the case on the ground of improper
venue (said motion being set for hearing on January 11, 1994). The other prayed for the transfer of the
injunction hearing to January 11, 1994 because its counsel was not available on January 10 due to a prior
commitment before another court.
KUBOTA claims that notwithstanding that its motion to transfer hearing had been granted, the Trial Court went
ahead with the hearing on the injunction incident on January 10, 1994 during which it received the direct
testimony of UNIMASTERS' general manager, Wilford Chan; that KUBOTA's counsel was "shocked" when he
learned of this on the morning of the 11th, but was nonetheless instructed to proceed to cross-examine the
witness; that when said counsel remonstrated that this was unfair, the Court reset the hearing to the afternoon
of that same day, at which time Wilford Chan was recalled to the stand to repeat his direct testimony. It
appears that cross-examination of Chan was then undertaken by KUBOTA's lawyer with the "express
reservation that . . (KUBOTA was) not (thereby) waiving and/or abandoning its motion to dismiss;" and that in
the course of the cross-examination, exhibits (numbered from 1 to 20) were presented by said attorney who
afterwards submitted a memorandum in lieu of testimonial evidence. 2
On January 13, 1994, the Trial Court handed down an Order authorizing the issuance of the preliminary
injunction prayed for, upon a bond of P2,000,000.00. 3 And on February 3, 1994, the same Court promulgated
an Order denying KUBOTA's motion to dismiss. Said the Court:
The plaintiff UNIMASTERS Conglomeration is holding its principal place of business in the City of Tacloban
while the defendant . . (KUBOTA) is holding its principal place of business in Quezon City. The proper
venue therefore pursuant to Rules of Court would either be Quezon City or Tacloban City at the election
of the plaintiff. Quezon City and Manila (sic), as agreed upon by the parties in the Dealership Agreement,
are additional places other than the place stated in the Rules of Court. The filing, therefore, of this
complaint in the Regional Trial Court in Tacloban City is proper.
Both orders were challenged as having been issued with grave abuse of discretion by KUBOTA in a special civil
action of certiorari and prohibition filed with the Court of Appeals, docketed as CA-G.R. SP No. 33234. It
contended, more particularly, that (1) the RTC had "no jurisdiction to take cognizance of . . (UNIMASTERS')
action considering that venue was improperly laid," (2) UNIMASTERS had in truth "failed to prove that it is
entitled to the . . writ of preliminary injunction;" and (3) the RTC gravely erred "in denying the motion to
dismiss." 4
The Appellate Court agreed with KUBOTA that — in line with the Rules of Court 5 and this Court's relevant
rulings 6 — the stipulation respecting venue in its Dealership Agreement with UNIMASTERS did in truth limit the
venue of all suits arising thereunder only and exclusively to "the proper courts of Quezon City." 7 The Court also
held that the participation of KUBOTA's counsel at the hearing on the injunction incident did not in the premises
operate as a waiver or abandonment of its objection to venue; that assuming that KUBOTA's standard printed
invoices provided that the venue of actions thereunder should be laid at the Court of the City of Manila, this was
inconsequential since such provision would govern "suits or legal actions between petitioner and its buyers" but
not actions under the Dealership Agreement between KUBOTA and UNIMASTERS, the venue of which was
controlled by paragraph No. 7 thereof; and that no impediment precludes issuance of a TRO or injunctive writ
by the Quezon City RTC against METROBANK-Tacloban since the same "may be served on the principal office of
METROBANK in Makati and would be binding on and enforceable against, METROBANK branch in Tacloban."
After its motion for reconsideration of that decision was turned down by the Court of Appeals, UNIMASTERS
appealed to this Court. Here, it ascribes to the Court of Appeals several errors which it believes warrant
reversal of the verdict, namely: 8
1) "in concluding, contrary to decisions of this . . Court, that the agreement on venue between petitioner
(UNIMASTERS) and private respondent (KUBOTA) limited to the proper courts of Quezon City the venue of any
complaint filed arising from the dealership agreement between . . (them);"
2) "in ignoring the rule settled in Philippine Banking Corporation vs. Tensuan, 9 that 'in the absence of
qualifying or restrictive words, venue stipulations in a contract should be considered merely as agreement on
additional forum, not as limiting venue to the specified place;" and in concluding, contrariwise, that the
agreement in the case at bar "was the same as the agreement on venue in the Gesmundo case," and therefore,
the Gesmundo case was controlling; and
3) "in concluding, based solely on the self-serving narration of . . (KUBOTA that its) participation in the hearing
for the issuance of a . . preliminary injunction did not constitute waiver of its objection to venue."
The issue last mentioned, of whether or not the participation by the lawyer of KUBOTA at the injunction hearing
operated as a waiver of its objection to venue, need not occupy the Court too long. The record shows that when
KUBOTA's counsel appeared before the Trial Court in the morning of January 11, 1994 and was then informed
that he should cross-examine UNIMASTERS' witness, who had testified the day before, said counsel drew
attention to the motion to dismiss on the ground of improper venue and insistently attempted to argue the
matter and have it ruled upon at the time; and when the Court made known its intention (a) "to (resolve first
the) issue (of) the injunction then rule on the motion to dismiss," and (b) consequently its desire to forthwith
conclude the examination of the witness on the injunction incident, and for that purpose reset the hearing in
the afternoon of that day, the 11th, so that the matter might be resolved before the lapse of the temporary
restraining order on the 13th, KUBOTA's lawyer told the Court: "Your Honor, we are not waiving our right to
submit the Motion to Dismiss." 10 It is plain that under these circumstances, no waiver or abandonment can be
imputed to KUBOTA.
The essential question really is that posed in the first and second assigned errors, i.e., what construction should
be placed on the stipulation in the Dealership Agreement that" (a)ll suits arising out of this Agreement shall be
filed with/in the proper Courts of Quezon City."
Rule 4 of the Rules of Court sets forth the principles generally governing the venue of actions, whether real or
personal, or involving persons who neither reside nor are found in the Philippines or otherwise. Agreements on
venue are explicitly allowed. "By written agreement of the parties the venue of an action may be changed or
transferred from one province to another." 11 Parties may by stipulation waive the legal venue and such waiver
is valid and effective being merely a personal privilege, which is not contrary to public policy or prejudicial to
third persons. It is a general principle that a person may renounce any right which the law gives unless such
renunciation would be against public policy. 12
Written stipulations as to venue may be restrictive in the sense that the suit may be filed only in the place
agreed upon, or merely permissive in that the parties may file their suit not only in the place agreed upon but
also in the places fixed by law (Rule 4, specifically). As in any other agreement, what is essential is the
ascertainment of the intention of the parties respecting the matter.
Since convenience is the raison d'etre of the rules of venue, 13 it is easy to accept the proposition that normally,
venue stipulations should be deemed permissive merely, and that interpretation should be adopted which most
serves the parties' convenience. In other words, stipulations designating venues other than those assigned by
Rule 4 should be interpreted as designed to make it more convenient for the parties to institute actions arising
from or in relation to their agreements; that is to say, as simply adding to or expanding the venues indicated in
said Rule 4.
On the other hand, because restrictive stipulations are in derogation of this general policy, the language of the
parties must be so clear and categorical as to leave no doubt of their intention to limit the place or places, or to
fix places other than those indicated in Rule 4, for their actions. This is easier said than done, however, as an
examination of precedents involving venue covenants will immediately disclose.
In at least thirteen (13) cases, this Court construed the venue stipulations involved as merely permissive.
These are:
1. Polytrade Corporation v. Blanco, decided in 1969. 14 In this case, the venue stipulation was as follows:
The parties agree to sue and be sued in the Courts of Manila.
This Court ruled that such a provision "does not preclude the filing of suits in the residence of the plaintiff or the
defendant. The plain meaning is that the parties merely consented to be sued in Manila. Qualifying or restrictive
words which would indicate that Manila and Manila alone is the venue are totally absent therefrom. It simply is
permissive. The parties solely agreed to add the courts of Manila as tribunals to which they may resort. They
did not waive their right to pursue remedy in the courts specifically mentioned in Section 2(b) of Rule 4."
The Polytrade doctrine was reiterated expressly or implicitly in subsequent cases, numbering at least ten (10).
2. Nicolas v. Reparations Commission, decided in 1975. 15 In this case, the stipulation on venue read:
. . . (A)ll legal actions arising out of this contract . . may be brought in and submitted to the jurisdiction
of the proper courts in the City of Manila.
This Court declared that the stipulation does not clearly show the intention of the parties to limit the venue of
the action to the City of Manila only. "It must be noted that the venue in personal actions is fixed for the
convenience of the plaintiff and his witnesses and to promote the ends of justice. We cannot conceive how the
interest of justice may be served by confining the situs of the action to Manila, considering that the residences
or offices of all the parties, including the situs of the acts sought to be restrained or required to be done, are all
within the territorial jurisdiction of Rizal. . . Such agreements should be construed reasonably and should not be
applied in such a manner that it would work more to the inconvenience of the parties without promoting the
ends of justice.
3. Lamis Ents. v. Lagamon, decided in 1981. 16 Here, the stipulation in the promissory note and the chattel
mortgage specified Davao City as the venue.
The Court, again citing Polytrade, stated that the provision "does not preclude the filing of suits in the residence
of plaintiff or defendant under Section 2(b), Rule 4, Rules of Court, in the absence of qualifying or restrictive
words in the agreement which would indicate that the place named is the only venue agreed upon by the
parties. The stipulation did not deprive . . (the affected party) of his right to pursue remedy in the court
specifically mentioned in Section 2(b) of Rule 4, Rules of Court. Renuntiato non praesumitur."
4. Capati v. Ocampo, decided in 1982 17 In this case, the provision of the contract relative to venue was as
follows:
. . . (A)ll actions arising out, or relating to this contract may be instituted in the Court of First Instance of
the City of Naga.
The Court ruled that the parties "did not agree to file their suits solely and exclusively with the Court of First
Instance of Naga;" they "merely agreed to submit their disputes to the said court without waiving their right to
seek recourse in the court specifically indicated in Section 2 (b), Rule 4 of the Rules of Court."
5. Western Minolco v. Court of Appeals, decided in 1988. 18 Here, the provision governing venue read:
The parties stipulate that the venue of the actions referred to in Section 12.01 shall be in the City of
Manila.
The court restated the doctrine that a stipulation in a contract fixing a definite place for the institution of an
action arising in connection therewith, does not ordinarily supersede the general rules set out in Rule 4, and
should be construed merely as an agreement on an additional forum, not as limiting venue to the specified
place.
6. Moles v. Intermediate Appellate Court, decided in 1989. 19 In this proceeding, the Sales Invoice of a linotype
machine stated that the proper venue should be Iloilo.
This Court held that such an invoice was not the contract of sale of the linotype machine in question;
consequently the printed provisions of the invoice could not have been intended by the parties to govern the
sale of the machine, especially since said invoice was used for other types of transactions. This Court said: "It is
obvious that a venue stipulation, in order to bind the parties, must have been intelligently and deliberately
intended by them to exclude their case from the reglementary rules on venue. Yet, even such intended variance
may not necessarily be given judicial approval, as, for instance, where there are no restrictive or qualifying
words in the agreement indicating that venue cannot be laid in any place other than that agreed upon by the
parties, and in contracts of adhesion."
7. Hongkong and Shanghai Banking Corp. v. Sherman, decided in 1989. 20 Here the stipulation on venue read:
. . (T)his guarantee and all rights, obligations and liabilities arising hereunder shall be construed and
determined under and may be enforced in accordance with the laws of the Republic of Singapore. We
hereby agree that the Courts in Singapore shall have jurisdiction over all disputes arising under this
guarantee. . .
This Court held that due process dictates that the stipulation be liberally construed. The parties did not thereby
stipulate that only the courts of Singapore, to the exclusion of all the others, had jurisdiction. The clause in
question did not operate to divest Philippine courts of jurisdiction.
8. Nasser v. Court of Appeals, decided in 1990, 21 in which the venue stipulation in the promissory notes in
question read:
. . (A)ny action involving the enforcement of this contract shall be brought within the City of Manila,
Philippines.
The Court's verdict was that such a provision does not as a rule supersede the general rule set out in Rule 4 of
the Rules of Court, and should be construed merely as an agreement on an additional forum, not as limiting
venue to the specified place.
9. Surigao Century Sawmill Co., Inc. v. Court of Appeals, decided in 1993: 22 In this case, the provision
concerning venue was contained in a contract of lease of a barge, and read as follows:
. . . (A)ny disagreement or dispute arising out of the lease shall be settled by the parties in the proper
court in the province of Surigao del Norte.
The venue provision was invoked in an action filed in the Regional Trial Court of Manila to recover damages
arising out of marine subrogation based on a bill of lading. This Court declared that since the action did not
refer to any disagreement or dispute arising out of the contract of lease of the barge, the venue stipulation in
the latter did not apply; but that even assuming the contract of lease to be applicable, a statement in a
contract as to venue does not preclude the filing of suits at the election of the plaintiff where no qualifying or
restrictive words indicate that the agreed place alone was the chosen venue.
10. Philippine Banking Corporation, v. Hon. Salvador Tensuan, etc., Circle Financial Corporation, at al., decided
in 1993. 23 Here, the stipulation on venue was contained in promissory notes and read as follows:
I/We hereby expressly submit to the jurisdiction of the courts of Valenzuela any legal action which may
arise out of this promissory note.
This Court held the stipulation to be merely permissive since it did not lay the venue in Valenzuela exclusively
or mandatorily. The plain or ordinary import of the stipulation is the grant of authority or permission to bring
suit in Valenzuela; but there is not the slightest indication of an intent to bar suit in other competent courts.
The Court stated that there is no necessary or customary connection between the words "any legal action" and
an intent strictly to limit permissible venue to the Valenzuela courts. Moreover, since the venue stipulations
include no qualifying or exclusionary terms, express reservation of the right to elect venue under the ordinary
rules was unnecessary in the case at bar. The Court made clear that "to the extent Bautista and Hoechst
Philippines are inconsistent with Polytrade (an en banc decision later in time than Bautista) and subsequent
cases reiterating Polytrade, Bautista and Hoechst Philippines have been rendered obsolete by the Polytrade line
of cases."
11. Philippine Banking Corporation v. Hon. Salvador Tensuan, etc., Brinell Metal Works Corp., et al., decided in
1994: 24 In this case the subject promissory notes commonly contained a stipulation reading:
I/we expressly submit to the jurisdiction of the courts of Manila, any legal action which may arise out of
this promissory note.
the Court restated the rule in Polytrade that venue stipulations in a contract, absent any qualifying or
restrictive words, should be considered merely as an agreement on additional forum, not limiting venue
to the specified place. They are not exclusive, but rather, permissive. For to restrict venue only to that
place stipulated in the agreement is a construction purely based on technicality; on the contrary, the
stipulation should be liberally construed. The Court stated: "The later cases of Lamis Ents v. Lagamon
 [108 SCRA 1981], Capati v. Ocampo [113 SCRA 794 [1982], Western Minolco v. Court of Appeals [167
SCRA 592 [1988], Moles v. Intermediate Appellate Court [169 SCRA 777 [1989], Hongkong and
Shanghai Banking Corporation v. Sherman [176 SCRA 331], Nasser v. Court of Appeals [191 SCRA 783
[1990] and just recently, Surigao Century Sawmill Co. v. Court of Appeals [218 SCRA 619 [1993], all
treaded the path blazed by Polytrade. The conclusion to be drawn from all these is that the more recent
jurisprudence shall properly be deemed modificatory of the old ones."
The lone dissent observed: "There is hardly any question that a stipulation of contracts of adhesion, fixing
venue to a specified place only, is void for, in such cases, there would appear to be no valid and free waiver of
the venue fixed by the Rules of Courts. However, in cases where both parties freely and voluntarily agree on a
specified place to be the venue of actions, if any, between them, then the only considerations should be
whether the waiver (of the venue fixed by the Rules of Court) is against public policy and whether the parties
would suffer, by reason of such waiver, undue hardship and inconvenience; otherwise, such waiver of venue
should be upheld as binding on the parties. The waiver of venue in such cases is sanctioned by the rules on
jurisdiction."
Still other precedents adhered to the same principle.
12. Tantoco v. Court of Appeals, decided in 1977. 25 Here, the parties agreed in their sales contracts that the
courts of Manila shall have jurisdiction over any legal action arising out of their transaction. This Court held that
the parties agreed merely to add the courts of Manila as tribunals to which they may resort in the event of suit,
to those indicated by the law: the courts either of Rizal, of which private respondent was a resident, or of
Bulacan, where petitioner resided.
13. Sweet Lines, Inc. v. Teves, promulgated in 1987. 26 In this case, a similar stipulation on venue, contained
in the shipping ticket issued by Sweet Lines, Inc. (as Condition 14) —
. . that any and all actions arising out or the condition and provisions of this ticket, irrespective of
where it is issued, shall be filed in the competent courts in the City of Cebu
— was declared unenforceable, being subversive of public policy. The Court explained that the philosophy
on transfer of venue of actions is the convenience of the plaintiffs as well as his witnesses and to
promote the ends of justice; and 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.
On the other hand, in the cases hereunder mentioned, stipulations on venue were held to be restrictive,
or mandatory.
1. Bautista vs. De Borja, decided in 1966. 27 In this case, the contract provided that in case of any litigation
arising therefrom or in connection therewith, the venue of the action shall be in the City of Manila. This Court
held that without either party reserving the right to choose the venue of action as fixed by law, it can
reasonably be inferred that the parties intended to definitely fix the venue of the action, in connection with the
contract sued upon in the proper courts of the City of Manila only, notwithstanding that neither party is a
resident of Manila.
2. Gesmundo v. JRB Realty Corporation, decided in 1994. 28 Here the lease contract declared that
. . (V)enue for all suits, whether for breach hereof or damages or any cause between the LESSOR and
LESSEE, and persons claiming under each, . . (shall be) the courts of appropriate jurisdiction in Pasay
City. . .
This Court held that: "(t)he language used leaves no room for interpretation. It clearly evinces the parties'
intent to limit to the 'courts of appropriate jurisdiction of Pasay City' the venue for all suits between the lessor
and the lessee and those between parties claiming under them. This means a waiver of their right to institute
action in the courts provided for in Rule 4, sec. 2(b)."
3. Hoechst Philippines, Inc. v. Torres, 29 decided much earlier, in 1978, involved a strikingly similar stipulation,
which read:
. . (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.
This Court held: "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."
4. Villanueva v. Mosqueda, decided in 1982. 30 In this case, it was stipulated that if the lessor violated the
contract of lease he could be sued in Manila, while if it was the lessee who violated the contract, the lessee
could be sued in Masantol, Pampanga. This Court held that there was an agreement concerning venue of action
and the parties were bound by their agreement. "The agreement as to venue was not permissive but
mandatory."
5. Arquero v. Flojo, decided in 1988. 31 The condition respecting venue — that any action against RCPI relative
to the transmittal of a telegram must be brought in the courts of Quezon City alone — was printed clearly in the
upper front portion of the form to be filled in by the sender. This Court held that since neither party reserved
the right to choose the venue of action as fixed by Section 2 [b], Rule 4, as is usually done if the parties mean
to retain the right of election so granted by Rule 4, it can reasonably be inferred that the parties intended to
definitely fix the venue of action, in connection with the written contract sued upon, in the courts of Quezon
City only.
An analysis of these precedents reaffirms and emphasizes the soundness of the Polytrade principle. Of the
essence is the ascertainment of the parties' intention in their agreement governing the venue of actions
between them. That ascertainment must be done keeping in mind that convenience is the foundation of venue
regulations, and that construction should be adopted which most conduces thereto. Hence, the invariable
construction placed on venue stipulations is that they do not negate but merely complement or add to the codal
standards of Rule 4 of the Rules of Court. In other words, unless the parties make very clear, by employing
categorical and suitably limiting language, that they wish the venue of actions between them to be laid only
and exclusively at a definite place, and to disregard the prescriptions of Rule 4, agreements on venue are not to
be regarded as mandatory or restrictive, but merely permissive, or complementary of said rule. The fact that in
their agreement the parties specify only one of the venues mentioned in Rule 4, or fix a place for their actions
different from those specified by said rule, does not, without more, suffice to characterize the agreement as a
restrictive one. There must, to repeat, 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 regardless of
the general precepts of Rule 4; and any doubt or uncertainty as to the parties' intentions must be resolved
against giving their agreement a restrictive or mandatory aspect. Any other rule would permit of individual,
subjective judicial interpretations without stable standards, which could well result in precedents in hopeless
inconsistency.
The record of the case at bar discloses that UNIMASTERS has its principal place of business in Tacloban City,
and KUBOTA, in Quezon City. Under Rule 4, the venue of any personal action between them is "where the
defendant or any of the defendants resides or may be found, or where the plaintiff or any of the plaintiffs
resides, at the election of the plaintiff." 33 In other words, Rule 4 gives UNIMASTERS the option to sue KUBOTA
for breach of contract in the Regional Trial Court of either Tacloban City or Quezon City.
But the contract between them provides that " . . All suits arising out of this Agreement shall be filed with / in
the proper Courts of Quezon City," without mention of Tacloban City. The question is whether this stipulation
had the effect of effectively eliminating the latter as an optional venue and limiting litigation between
UNIMASTERS and KUBOTA only and exclusively to Quezon City.
In light of all the cases above surveyed, and the general postulates distilled therefrom, the question should
receive a negative answer. Absent additional words and expressions definitely and unmistakably denoting the
parties' desire and intention that actions between them should be ventilated only at the place selected by them,
Quezon City — or other contractual provisions clearly evincing the same desire and intention — the stipulation
should be construed, not as confining suits between the parties only to that one place, Quezon City, but as
allowing suits either in Quezon City or Tacloban City, at the option of the plaintiff (UNIMASTERS in this case).
One last word, respecting KUBOTA's theory that the Regional Trial Court had "no jurisdiction to take cognizance
of . . (UNIMASTERS') action considering that venue was improperly laid." This is not an accurate statement of
legal principle. It equates venue with jurisdiction; but venue has nothing to do with jurisdiction, except in
criminal actions. This is fundamental. 34 The action at bar, for the recovery of damages in an amount
considerably in excess of P20,000,00, is assuredly within the jurisdiction of a Regional Trial Court. 35 Assuming
that venue were improperly laid in the Court where the action was instituted, the Tacloban City RTC, that would
be a procedural, not a jurisdictional impediment — precluding ventilation of the case before that Court of wrong
venue notwitstanding that the subject matter is within its jurisdiction. However, if the objection to venue is
waived by the failure to set it up in a motion to dismiss, 36 the RTC would proceed in perfectly regular fashion if
it then tried and decided the action.
This is true also of real actions. Thus, even if a case "affecting title to, or for recovery of possession, or for
partition or condemnation of, or foreclosure of mortgage on, real property" 37 were commenced in a province or
city other than that "where the property or any part thereof lies," 38 if no objection is seasonably made in a
motion to dismiss, the objection is deemed waived, and the Regional Trial Court would be acting entirely within
its competence and authority in proceeding to try and decide the suit. 39
WHEREFORE, the appealed judgment of the Court of Appeals is REVERSED, the Order of the Regional Trial
Court of Tacloban City, Branch 6, dated February 3, 1994, is REINSTATED and AFFIRMED, and said Court is
DIRECTED to forthwith proceed with Civil Case No. 93-12-241 in due course. SO ORDERED.
G.R. No. 74854 April 2, 1991
JESUS DACOYCOY, petitioner, vs. HON. INTERMEDIATE APPELLATE COURT, HON. ANTONIO V.
BENEDICTO, Executive Judge, Regional Trial Court, Branch LXXI, Antipolo, Rizal, and RUFINO DE
GUZMAN, respondents.
May the trial court motu proprio dismiss a complaint on the ground of improper venue? This is the issue
confronting the Court in the case at bar.
On March 22, 1983, petitioner Jesus Dacoycoy, a resident of Balanti, Cainta, Rizal, filed before the Regional Trial
Court, Branch LXXI, Antipolo, Rizal, a complaint against private respondent Rufino de Guzman praying for the
annulment of two (2) deeds of sale involving a parcel of riceland situated in Barrio Estanza, Lingayen,
Pangasinan, the surrender of the produce thereof and damages for private respondent's refusal to have said
deeds of sale set aside upon petitioner's demand.
On May 25, 1983, before summons could be served on private respondent as defendant therein, the RTC
Executive Judge issued an order requiring counsel for petitioner to confer with respondent trial judge on the
matter of venue. After said conference, the trial court dismissed the complaint on the ground of improper
venue. It found, based on the allegations of the complaint, that petitioner's action is a real action as it sought
not only the annulment of the aforestated deeds of sale but also the recovery of ownership of the subject parcel
of riceland located in Estanza, Lingayen, Pangasinan, which is outside the territorial jurisdiction of the trial
court.
Petitioner appealed to the Intermediate Appellate Court, now Court of Appeals, which in its decision of April 11,
1986,1 affirmed the order of dismissal of his complaint.
In this petition for review, petitioner faults the appellate court in affirming what he calls an equally erroneous
finding of the trial court that the venue was improperly laid when the defendant, now private respondent, has
not even answered the complaint nor waived the venue.2
Petitioner claims that the right to question the venue of an action belongs solely to the defendant and that the
court or its magistrate does not possess the authority to confront the plaintiff and tell him that the venue was
improperly laid, as venue is waivable. In other words, petitioner asserts, without the defendant objecting that
the venue was improperly laid, the trial court is powerless to dismiss the case motu proprio.
Private respondent, on the other hand, maintains that the dismissal of petitioner's complaint is proper because
the same can "readily be assessed as (a) real action." He asserts that "every court of justice before whom a
civil case is lodged is not even obliged to wait for the defendant to raise that venue was improperly laid. The
court can take judicial notice and motu proprio dismiss a suit clearly denominated as real action and improperly
filed before it. . . . the location of the subject parcel of land is controlling pursuant to Sec. 2, par. (a), Rule 4 of
the New Rules of Court . . .3
We grant the petition.
The motu proprio dismissal of petitioner's complaint by respondent trial court on the ground of improper venue
is plain error, obviously attributable to its inability to distinguish between jurisdiction and venue.
Questions or issues relating to venue of actions are basically governed by Rule 4 of the Revised Rules of Court.
It is said that the laying of venue is procedural rather than substantive. It relates to the jurisdiction of the court
over the person rather than the subject matter. Provisions relating to venue establish a relation between the
plaintiff and the defendant and not between the court and the subject matter. Venue relates to trial not to
jurisdiction, touches more of the convenience of the parties rather than the substance of the case.4
Jurisdiction treats of the power of the court to decide a case on the merits; while venue deals on the locality,
the place where the suit may be had.5
In Luna vs. Carandang,6 involving an action instituted before the then Court of First Instance of Batangas for
rescission of a lease contract over a parcel of agricultural land located in Calapan, Oriental Mindoro, which
complaint said trial court dismissed for lack of jurisdiction over the leased land, we emphasized:
(1) A Court of First Instance has jurisdiction over suits involving title to, or possession of, real estate
wherever situated in the Philippines, subject to the rules on venue of actions (Manila Railroad Company
vs. Attorney General, etc., et al., 20 Phil. 523; Central Azucarera de Tarlac vs. De Leon, et al., 56 Phil.
169; Navarro vs. Aguila, et al., 66 Phil. 604; Lim Cay, et al. vs. Del Rosario, etc., et al., 55 Phil. 692);
(2) Rule 4, Section 2, of the Rules of Court requiring that an action involving real property shall be
brought in the Court of First Instance of the province where the land lies is a rule on venue of actions,
which may be waived expressly or by implication.
In the instant case, even granting for a moment that the action of petitioner is a real action, respondent trial
court would still have jurisdiction over the case, it being a regional trial court vested with the exclusive original
jurisdiction over "all civil actions which involve the title to, or possession of, real property, or any interest
therein . . ." in accordance with Section 19 (2) of Batas Pambansa Blg. 129. With respect to the parties, there is
no dispute that it acquired jurisdiction over the plaintiff Jesus Dacoycoy, now petitioner, the moment he filed his
complaint for annulment and damages. Respondent trial court could have acquired jurisdiction over the
defendant, now private respondent, either by his voluntary appearance in court and his submission to its
authority, or by the coercive power of legal process exercised over his person.7
Although petitioner contends that on April 28, 1963, he requested the City Sheriff of Olongapo City or his
deputy to serve the summons on defendant Rufino de Guzman at his residence at 117 Irving St., Tapinac,
Olongapo City,8 it does not appear that said service had been properly effected or that private respondent had
appeared voluntarily in court9 or filed his answer to the complaint.10 At this stage, respondent trial court should
have required petitioner to exhaust the various alternative modes of service of summons under Rule 14 of the
Rules of Court, i.e., personal service under Section 7, substituted service under Section 8, or service by
publication under Section 16 when the address of the defendant is unknown and cannot be ascertained by
diligent inquiry.
Dismissing the complaint on the ground of improper venue is certainly not the appropriate course of action at
this stage of the proceeding, particularly as venue, in inferior courts as well as in the courts of first instance
(now RTC), may be waived expressly or impliedly. Where defendant fails to challenge timely the venue in a
motion to dismiss as provided by Section 4 of Rule 4 of the Rules of Court, and allows the trial to be held and a
decision to be rendered, he cannot on appeal or in a special action be permitted to challenge belatedly the
wrong venue, which is deemed waived.11
Thus, unless and until the defendant objects to the venue in a motion to dismiss, the venue cannot be truly
said to have been improperly laid, as for all practical intents and purposes, the venue, though technically
wrong, may be acceptable to the parties for whose convenience the rules on venue had been devised. The trial
court cannot pre-empt the defendant's prerogative to object to the improper laying of the venue by motu
proprio dismissing the case.
Indeed, it was grossly erroneous for the trial court to have taken a procedural short-cut by dismissing motu
proprio the complaint on the ground of improper venue without first allowing the procedure outlined in the
Rules of Court to take its proper course. Although we are for the speedy and expeditious resolution of cases,
justice and fairness take primary importance. The ends of justice require that respondent trial court faithfully
adhere to the rules of procedure to afford not only the defendant, but the plaintiff as well, the right to be heard
on his cause.
WHEREFORE, in view of the foregoing, the decision of the Intermediate Appellate Court, now Court of Appeals,
dated April 11, 1986, is hereby nullified and set aside. The complaint filed by petitioner before the Regional Trial
Court of Antipolo, Branch LXXI is revived and reinstated. Respondent court is enjoined to proceed therein in
accordance with law. SO ORDERED.
G.R. No. 106847. March 5, 1993.
PATRICIO P. DIAZ, petitioner, vs. JUDGE SANTOS B. ADIONG, RTC, Br. 8, Marawi City, SULTAN
MACORRO L. MACUMBAL, SULTAN LINOG M. INDOL, MACABANGKIT LANTO and MOHAMADALI
ABEDIN, respondents.
SYLLABUS
1. REMEDIAL LAW; ACTIONS; VENUE OF LIBEL CASE WHERE OFFENDED PARTY IS AN PUBLIC OFFICIAL. —
From the provision of Article 360, third paragraph of the Revised Penal Code as amended by R.A. 4363, it is
clear that an offended party who is at the same time a public official can only institute an action arising from
libel in two (2) venues: the place where he holds office, and the place where the alleged libelous articles were
printed and first published.
2. ID.; ID.; IMPROPER VENUE; MUST BE RAISED IN A NOTION TO DISMISS PRIOR TO A RESPONSIVE
PLEADING. — Unless and until the defendant objects to the venue in a motion to dismiss prior to a responsive
pleading, the venue cannot truly be said to have been improperly laid since, for all practical intents and
purposes, the venue though technically wrong may yet be considered acceptable to the parties for whose
convenience the rules on venue had been devised.
3. ID.; ID.; ID.; WAIVED IN CASE AT BAR BY FILING ANSWER. — Petitioner Diaz then, as defendant in the
court below, should have timely challenged the venue laid in Marawi City in a motion to dismiss, pursuant to
Sec. 4, Rule 4, of the Rules of Court. Unfortunately, petitioner had already submitted himself to the jurisdiction
of the trial court when he filed his Answer to the Complaint with Counterclaim. His motion to dismiss was
therefore belatedly filed and could no longer deprive the trial court of jurisdiction to hear and decide the instant
civil action for damages. Well-settled is the rule that improper venue may be waived and such waiver may
occur by laches. Sec. 1 of Rule 16 provides that objections to improper venue must be made in a motion to
dismiss before any responsive pleading is filed. Responsive pleadings are those which seek affirmative relief
and set up defenses. Consequently, having already submitted his person to the jurisdiction of the trial court,
petitioner may no longer object to the venue which, although mandatory in the instant case, is nevertheless
waivable. As such, improper venue must be seasonably raised, otherwise, it may be deemed waived.
4. ID.; ID.; ID.; RELATES TO TRIAL AND NOT TO JURISDICTION. — Indeed, the laying of venue is procedural
rather than substantive, relating as it does to jurisdiction of the court over the person rather than the subject
matter. Venue relates to trial and not to jurisdiction.
DECISION
BELLOSILLO, J p:
VENUE in the instant civil action for damages arising from libel was improperly laid; nonetheless, the trial court
refused to dismiss the complaint. Hence, this Petition for Certiorari, with prayer for the issuance of a temporary
restraining order, assailing that order of denial 1 as well as the order denying reconsideration. 2
The facts: On 16 July 1991, the Mindanao Kris, a newspaper of general circulation in Cotabato City, published in
its front page the news article captioned "6-Point Complaint Filed vs. Macumbal," and in its Publisher's Notes
the editorial, "Toll of Corruption," which exposed alleged anomalies by key officials in the Regional Office of the
Department of Environment and Natural Resources. 3
On 22 July 1991, the public officers alluded to, namely, private respondents Sultan Macorro L. Macumbal,
Sultan Linog M. Indol, Atty. Macabangkit M. Lanto and Atty. Mohamadali Abedin, instituted separate criminal
and civil complaints arising from the libel before the City Prosecutor's Office and the Regional Trial Court in
Marawi City. The publisher-editor of the Mindanao Kris, petitioner Patricio P. Diaz, and Mamala B. Pagandaman,
who executed a sworn statement attesting to the alleged corruption, were named respondents in both
complaints. 4
On 2 September 1991, the City Prosecutor's Office dismissed the criminal case thus 5 —
"WHEREFORE . . . this investigation in the light of Agbayani vs. Sayo case finds that it has no jurisdiction to
handle this case and that the same be filed or instituted in Cotabato City where complainant is officially holding
office at the time respondents caused the publication of the complained news item in the Mindanao Kris in
Cotabato City, for which reason it is recommended that this charge be dropped for lack of jurisdiction."
In the interim, the civil complaint for damages, docketed as Civil Case No. 385-91 and raffled to Branch 10 of
the Regional Trial Court in Marawi City, was set for Pre-Trial Conference. The defendants therein had already
filed their respective Answers with Counterclaim.
On 18 November 1991, petitioner Diaz moved for the dismissal of the action for damages on the ground that
the trial court did not have jurisdiction over the subject matter. He vehemently argued that the complaint
should have been filed in Cotabato City and not in Marawi City. 6
Pending action on the motion, the presiding judge of Branch 10 inhibited himself from the case which was
thereafter reraffled to the sala of respondent judge.
On 15 June 1991, respondent judge denied petitioner's Motion to Dismiss for lack of merit. Diaz thereafter
moved for reconsideration of the order of denial. The motion was also denied in the Order of 27 August 1991,
prompting petitioner to seek relief therefrom.
Petitioner Diaz contends that the civil action for damages could not be rightfully filed in Marawi City as none of
the private respondents, who are all public officers, held office in Marawi City; neither were the alleged libelous
news items published in that city. Consequently, it is petitioner's view that the Regional Trial Court in Marawi
City has no jurisdiction to entertain the civil action for damages.
The petitioner is correct. Not one of the respondents then held office in Marawi City: respondent Macumbal was
the Regional Director for Region XII of the DENR and held office in Cotabato City; respondent Indol was the
Provincial Environment and Natural Resources Officer of Lanao del Norte and held office in that province;
respondent Lanto was a consultant of the Secretary of the DENR and, as averred in the complaint, was
temporarily residing in Quezon City; and, respondent Abedin was the Chief of the Legal Division of the DENR
Regional Office in Cotabato City. 7 Indeed, private respondents do not deny that their main place of work was
not in Marawi City, although they had sub-offices therein.
Apparently, the claim of private respondents that they maintained sub-offices in Marawi City is a mere
afterthought, considering that it was made following the dismissal of their criminal complaint by the City
Prosecutor of Marawi City. Significantly, in their complaint in civil Case No. 385-91 respondents simply alleged
that they were residents of Marawi City, except for respondent Lanto who was then temporarily residing in
Quezon City, and that they were public officers, nothing more. This averment is not enough to vest jurisdiction
upon the Regional Trial Court of Marawi City and may be properly assailed in a motion to dismiss.
The Comment of private respondents that Lanto was at the time of the commission of the offense actually
holding office in Marawi City as consultant of LASURECO can neither be given credence because this is
inconsistent with their allegation in their complaint that respondent Lanto, as consultant of the Secretary of the
DENR, was temporarily residing in Quezon City.
Moreover, it is admitted that the libelous articles were published and printed in Cotabato City. Thus,
respondents were limited in their choice of venue for their action for damages only to Cotabato City where
Macumbal, Lanto and Abedin had their office and Lanao del Norte where Indol worked. Marawi City is not
among those where venue can be laid.
The third paragraph of Art. 360 of the Revised Penal Code, as amended by R.A. No. 4363, specifically requires
that —
"The criminal and civil action for damages in cases of written defamations as provided for in this chapter, shall
be filed simultaneously or separately with the Court of First Instance (now Regional Trial Court) of the province
or city where the libelous article is printed and first published or where any of the offended parties actually
resides at the time of the commission of the offense: Provided, however, that where one of the offended parties
is a public officer . . . (who) does not hold office in the City of Manila, the action shall be filed in the Court of
First Instance (Regional Trial Court) of the province or city where he held office at the time of the commission
of the offense or where the libelous article is printed and first published and in case one of the the offended
parties is a private individual, the action shall be filed in the Court of First Instance of the province or city
where he actually resides at the time of the commission of the offense or where the libelous matter is printed
and first published . . . . " (emphasis supplied)
From the foregoing provision, it is clear that an offended party who is at the same time a public official can only
institute an action arising from libel in two (2) venues: the place where he holds office, and the place where the
alleged libelous articles were printed and first published.
Private respondents thus appear to have misread the provisions of Art. 360 of the Revised Penal Code, as
amended, when they filed their criminal and civil complaints in Marawi City. They deemed as sufficient to vest
jurisdiction upon the Regional Trial Court of Marawi City the allegation that "plaintiffs are all of legal age, all
married, Government officials by occupation and residents of Marawi City." 8 But they are wrong.
Consequently, it is indubitable that venue was improperly laid. However, unless and until the defendant objects
to the venue in a motion to dismiss prior to a responsive pleading, the venue cannot truly be said to have been
improperly laid since, for all practical intents and purposes, the venue though technically wrong may yet be
considered acceptable to the parties for whose convenience the rules on venue had been devised. 9
Petitioner Diaz then, as defendant in the court below, should have timely challenged the venue laid in Marawi
City in a motion to dismiss, pursuant to Sec. 4, Rule 4, of the Rules of Court. Unfortunately, petitioner had
already submitted himself to the jurisdiction of the trial court when he filed his Answer to the Complaint with
Counterclaim. 10
His motion to dismiss was therefore belatedly filed and could no longer deprive the trial court of jurisdiction to
hear and decide the instant civil action for damages. Well-settled is the rule that improper venue may be
waived and such waiver may occur by laches. 11
Petitioner was obviously aware of this rule when he anchored his motion to dismiss on lack of cause of action
over the subject matter, relying on this Court's ruling in Time, Inc. v. Reyes. 12 Therein, We declared that the
Court of First Instance of Rizal was without jurisdiction to take cognizance of Civil Case No. 10403 because the
complainants held office in Manila, not in Rizal, while the alleged libelous articles were published abroad.
It may be noted that in Time, Inc. v. Reyes, the defendant therein moved to dismiss the case without first
submitting to the jurisdiction of the lower court, which is not the case before Us. More, venue in an action
arising from libel is only mandatory if it is not waived by defendant. Thus —
"The rule is that where a statute creates a right and provides a remedy for its enforcement, the remedy is
exclusive; and where it confers jurisdiction upon a particular court, that jurisdiction is likewise exclusive, unless
otherwise provided. Hence, the venue provisions of Republic Act No. 4363 should be deemed mandatory for the
party bringing the action, unless the question of venue should be waived by the defendant . . . . " 13
Withal, objections to venue in civil actions arising from libel may be waived; it does not, after all, involve a
question of jurisdiction. Indeed, the laying of venue is procedural rather than substantive, relating as it does to
jurisdiction of the court over the person rather than the subject matter. 14 Venue relates to trial and not to
jurisdiction.
Finally, Sec. 1 of Rule 16 provides that objections to improper venue must be made in a motion to dismiss
before any responsive pleading is filed. Responsive pleadings are those which seek affirmative relief and set up
defenses. Consequently, having already submitted his person to the jurisdiction of the trial court, petitioner
may no longer object to the venue which, although mandatory in the instant case, is nevertheless waivable. As
such, improper venue must be seasonably raised, otherwise, it may be deemed waived.
WHEREFORE, for lack of merit, the Petition for Certiorari is DISMISSED and the Temporary Restraining Order
heretofore issued is LIFTED. This case is remanded to the court of origin for further proceedings. SO ORDERED.
G.R. No. 111685 August 20, 2001
DAVAO LIGHT & POWER CO., INC., petitioner, vs. THE HON. COURT OF APPEALS, HON. RODOLFO M.
BELLAFLOR, Presiding Judge of Branch 11, RTC-Cebu and FRANCISCO TESORERO, respondents.
Before us is a petition for review on certiorari assailing the Decision dated August 31, 1993 rendered by the
Sixteenth Division1 of the Court of Appeals in CA-G.R. SP No. 29996, the dispositive portion of which states:
WHEREFORE, the petition for review filed by Davao Light & Power Co., Inc. is hereby DENIED DUE
COURSE and the same is DISMISSED. IT IS SO ORDERED.
The antecedent facts are:
On April 10, 1992, petitioner Davao Light & Power Co., Inc. filed a complaint for damages 2 against private
respondent Francisco Tesorero before the Regional Trial Court of Cebu City, Branch 11. Docketed as CEB-11578,
the complaint prayed for damages in the amount of P11,000,000.00.
In lieu of an answer, private respondent filed a motion to dismiss 3 claiming that: (a) the complaint did not state
a cause of action; (b) the plaintiff's claim has been extinguished or otherwise rendered moot and academic; (c)
there was non-joinder of indispensable parties; and (d) venue was improperly laid. Of these four (4) grounds,
the last mentioned is most material in this case at bar.
On August 3, 1992, the trial court issued a Resolution4 dismissing petitioner's complaint on the ground of
improper venue. The trial court stated that:
The plaintiff being a private corporation undoubtedly Banilad, Cebu City is the plaintiff's principal place of
business as alleged in the complaint and which for purposes of venue is considered as its residence. x x
x.
However, in defendant's motion to dismiss, it is alleged and submitted that the principal office of plaintiff
is at "163-165 P. Reyes Street, Davao City as borne out by the Contract of Lease (Annex 2 of the motion)
and another Contract of Lease of Generating Equipment (Annex 3 of the motion) executed by the
plaintiff with the NAPOCOR.
The representation made by the plaintiff in the 2 aforementioned Lease Contracts stating that its
principal office is at "163-165 P. Reyes Street, Davao City" bars the plaintiff from denying the same.
The choice of venue should not be left to plaintiff's whim or caprises [sic]. He may be impelled by some
ulterior motivation in choosing to file a case in a court even if not allowed by the rules of venue.
Another factor considered by the Courts in deciding controversies regarding venue are considerations of
judicial economy and administration, as well as the convenience of the parties for which the rules of
procedure and venue were formulated x x x.
Considering the foregoing, the Court is of the opinion that the principal office of plaintiff is at Davao City
which for purposes of venue is the residence of plaintiff.
Hence, the case should be filed in Davao City.
The motion on the ground of improper venue is granted and the complaint DISMISSED on that ground.
SO ORDERED.
Petitioner's motion for reconsideration5 was denied in an Order6 dated October 1, 1992.
From the aforesaid resolution and order, petitioner originally filed before this Court on November 20, 1992 a
petition for review on certiorari docketed as G.R. No. 107381.7 We declined to take immediate cognizance of
the case, and in a Resolution dated January 11, 1993,8 referred the same to the Court of Appeals for resolution.
The petition was docketed in the appellate court as CA-G.R. SP No. 29996.
On August 31, 1993, the Court of Appeals rendered the assailed judgment9 denying due course and dismissing
the petition. Counsel for petitioner received a copy of the decision on September 6, 1993. 10 Without filing a
motion for reconsideration, petitioner filed the instant petition, assailing the judgment of the Court of Appeals
on the following grounds:
5.01. Respondent Court of Appeals denied petitioner procedural due process by failing to resolve the
third of the above-stated issues.
5.02. Petitioner's right to file its action for damages against private respondent in Cebu City where its
principal office is located, and for which it paid P55,398.50 in docket fees, may not be negated by a
supposed estoppel absent the essential elements of the false statement having been made to private
respondent and his reliance on good faith on the truth thereof, and private respondent's action or
inaction based thereon of such character as to change his position or status to his injury, detriment or
prejudice.
The principal issue in the case at bar involves a question of venue. It is to be distinguished from jurisdiction, as
follows:
Venue and jurisdiction are entirely distinct matters. Jurisdiction may not be conferred by consent or
waiver upon a court which otherwise would have no jurisdiction over the subject-matter of an action; but
the venue of an action as fixed by statute may be changed by the consent of the parties and an
objection that the plaintiff brought his suit in the wrong county may be waived by the failure of the
defendant to make a timely objection. In either case, the court may render a valid judgment. Rules as to
jurisdiction can never be left to the consent or agreement of the parties, whether or not a prohibition
exists against their alteration.11
It is private respondent's contention that the proper venue is Davao City, and not Cebu City where petitioner
filed Civil Case No. CEB-11578. Private respondent argues that petitioner is estopped from claiming that its
residence is in Cebu City, in view of contradictory statements made by petitioner prior to the filing of the action
for damages. First, private respondent adverts to several contracts12 entered into by petitioner with the
National Power Corporation (NAPOCOR) where in the description of personal circumstances, the former states
that its principal office is at "163-165 P. Reyes St., Davao City." According to private respondent the petitioner's
address in Davao City, as given in the contracts, is an admission which should bind petitioner.
In addition, private respondent points out that petitioner made several judicial admissions as to its principal
office in Davao City consisting principally of allegations in pleadings filed by petitioner in a number of civil cases
pending before the Regional Trial Court of Davao in which it was either a plaintiff or a defendant. 13
Practically the same issue was addressed in Young Auto Supply Co. v. Court of Appeals.14 In the aforesaid case,
the defendant therein sought the dismissal of an action filed by the plaintiff, a corporation, before the Regional
Trial Court of Cebu City, on the ground of improper venue. The trial court denied the motion to dismiss; on
certiorari before the Court of Appeals, the denial was reversed and the case was dismissed. According to the
appellate tribunal, venue was improperly laid since the address of the plaintiff was supposedly in Pasay City, as
evidenced by a contract of sale, letters and several commercial documents sent by the plaintiff to the
defendant, even though the plaintiff's articles of incorporation stated that its principal office was in Cebu City.
On appeal, we reversed the Court of Appeals. We reasoned out thus:
In the Regional Trial Courts, all personal actions are commenced and tried in the province or city where
the defendant or any of the defendants resides or may be found, or where the plaintiff or any of the
plaintiffs resides, at the election of the plaintiff x x x.
There are two plaintiffs in the case at bench: a natural person and a domestic corporation. Both plaintiffs
aver in their complaint that they are residents of Cebu City, thus:
xxx xxx xxx
The Article of Incorporation of YASCO (SEC Reg. No. 22083) states:
"THIRD. That the place where the principal office of the corporation is to be established or located is at
Cebu City, Philippines (as amended on December 20, 1980 and further amended on December 20,
1984)" x x x.
A corporation has no residence in the same sense in which this term is applied to a natural person. But
for practical purposes, a corporation is in a metaphysical sense a resident of the place where its principal
office is located as stated in the articles of incorporation (Cohen v. Benguet Commercial Co., Ltd., 34
Phil. 526 [1916] Clavecilla Radio System v. Antillo, 19 SCRA 379 [1967]). The Corporation Code
precisely requires each corporation to specify in its articles of incorporation the "place where the
principal office of the corporation is to be located which must be within the Philippines" (Sec. 14[3]). The
purpose of this requirement is to fix the residence of a corporation in a definite place, instead of allowing
it to be ambulatory.
In Clavecilla Radio System v. Antillon, 19 SCRA 379 ([1967]), this Court explained why actions cannot
be filed against a corporation in any place where the corporation maintains its branch offices. The Court
ruled that to allow an action to be instituted in any place where the corporation has branch offices, would
create confusion and work untold inconvenience to said entity. By the same token, a corporation cannot
be allowed to file personal actions in a place other than its principal place of business unless such a place
is also the residence of a co-plaintiff or a defendant.
If it was Roxas who sued YASCO in Pasay City and the latter questioned the venue on the ground that its
principal place of business was in Cebu City, Roxas could argue that YASCO was in estoppel because it
misled Roxas to believe that Pasay City was its principal place of business. But this is not the case before
us.
With the finding that the residence of YASCO for purposes of venue is in Cebu City, where its principal
place of business is located, it becomes unnecessary to decide whether Garcia is also a resident of Cebu
City and whether Roxas was in estoppel from questioning the choice of Cebu City as the venue.
[emphasis supplied]
The same considerations apply to the instant case. It cannot be disputed that petitioner's principal office is in
Cebu City, per its amended articles of incorporation15 and by-laws.16 An action for damages being a personal
action,17venue is determined pursuant to Rule 4, section 2 of the Rules of Court, to wit:
Venue of personal actions. — All other actions may be commenced and tied 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.18
Private respondent is not a party to any of the contracts presented before us. He is a complete stranger to the
covenants executed between petitioner and NAPOCOR, despite his protestations that he is privy thereto, on the
rather flimsy ground that he is a member of the public for whose benefit the electric generating equipment
subject of the contracts were leased or acquired. We are likewise not persuaded by his argument that the
allegation or representation made by petitioner in either the complaints or answers it filed in several civil cases
that its residence is in Davao City should estop it from filing the damage suit before the Cebu courts. Besides
there is no showing that private respondent is a party in those civil cases or that he relied on such
representation by petitioner.
WHEREFORE, the instant petition is hereby GRANTED. The appealed decision is hereby REVERSED and SET
ASIDE. The Regional Trial Court of Cebu City, Branch 11 is hereby directed to proceed with Civil Case No. CEB-
11578 with all deliberate dispatch. No pronouncement as to costs. WE CONCUR:
G.R. No. 125027 August 12, 2002
ANITA MANGILA, petitioner, vs. COURT OF APPEALS and LORETA GUINA, respondents.
The Case
This is a petition fore review on certiorari under Rule 45 of the Rules of Court, seeking to set aside the Decision 1
of the Court of Appeals affirming the Decision2 of the Regional Trial Court, Branch 108, Pasay City. The trial
court upheld the writ of attachment and the declaration of default on petitioner while ordering her to pay
private respondent P109,376.95 plus 18 percent interest per annum, 25 percent attorney’s fees and costs of
suit.
The Facts
Petitioner Anita Mangila ("petitioner" for brevity) is an exporter of sea foods and doing business under the
name and style of Seafoods Products. Private respondent Loreta Guina ("private respondent" for brevity) is the
President and General Manager of Air Swift International, a single registered proprietorship engaged in the
freight forwarding business.
Sometime in January 1988, petitioner contracted the freight forwarding services of private respondent for
shipment of petitioner’s products, such as crabs, prawns and assorted fishes, to Guam (USA) where petitioner
maintains an outlet. Petitioner agreed to pay private respondent cash on delivery. Private respondent’s invoice
stipulates a charge of 18 percent interest per annum on all overdue accounts. In case of suit, the same invoice
stipulates attorney’s fees equivalent to 25 percent of the amount due plus costs of suit.3
On the first shipment, petitioner requested for seven days within which to pay private respondent. However, for
the next three shipments, March 17, 24 and 31, 1988, petitioner failed to pay private respondent shipping
charges amounting to P109, 376.95.4
Despite several demands, petitioner never paid private respondent. Thus, on June 10, 1988, private respondent
filed Civil Case No. 5875 before the Regional Trial Court of Pasay City for collection of sum of money.
On August 1, 1988, the sheriff filed his Sheriff’s Return showing that summons was not served on petitioner. A
woman found at petitioner’s house informed the sheriff that petitioner transferred her residence to Sto. Niño,
Guagua, Pampanga. The sheriff found out further that petitioner had left the Philippines for Guam. 5
Thus, on September 13, 1988, construing petitioner’s departure from the Philippines as done with intent to
defraud her creditors, private respondent filed a Motion for Preliminary Attachment. On September 26, 1988,
the trial court issued an Order of Preliminary Attachment 6 against petitioner. The following day, the trial court
issued a Writ of Preliminary Attachment.
The trial court granted the request of its sheriff for assistance from their counterparts in RTC, Pampanga. Thus,
on October 28, 1988, Sheriff Alfredo San Miguel of RTC Pampanga served on petitioner’s household help in San
Fernando, Pampanga, the Notice of Levy with the Order, Affidavit and Bond.7
On November 7, 1988, petitioner filed an Urgent Motion to Discharge Attachment8 without submitting herself to
the jurisdiction of the trial court. She pointed out that up to then, she had not been served a copy of the
Complaint and the summons. Hence, petitioner claimed the court had not acquired jurisdiction over her
person.9
In the hearing of the Urgent Motion to Discharge Attachment on November 11, 1988, private respondent
sought and was granted a re-setting to December 9, 1988. On that date, private respondent’s counsel did not
appear, so the Urgent Motion to Discharge Attachment was deemed submitted for resolution. 10
The trial court granted the Motion to Discharge Attachment on January 13, 1989 upon filing of petitioner’s
counter-bond. The trial court, however, did not rule on the question of jurisdiction and on the validity of the writ
of preliminary attachment.
On December 26, 1988, private respondent applied for an alias summons, which the trial court issued on
January 19, 1989.11 It was only on January 26, 1989 that summons was finally served on petitioner.12
On February 9, 1989, petitioner filed a Motion to Dismiss the Complaint on the ground of improper venue.
Private respondent’s invoice for the freight forwarding service stipulates that "if court litigation becomes
necessary to enforce collection xxx the agreed venue for such action is Makati, Metro Manila." 13 Private
respondent filed an Opposition asserting that although "Makati" appears as the stipulated venue, the same was
merely an inadvertence by the printing press whose general manager executed an affidavit 14 admitting such
inadvertence. Moreover, private respondent claimed that petitioner knew that private respondent was holding
office in Pasay City and not in Makati.15 The lower court, finding credence in private respondent’s assertion,
denied the Motion to Dismiss and gave petitioner five days to file her Answer. Petitioner filed a Motion for
Reconsideration but this too was denied.
Petitioner filed her Answer16 on June 16, 1989, maintaining her contention that the venue was improperly laid.
On June 26, 1989, the trial court issued an Order setting the pre-trial for July 18, 1989 at 8:30 a.m. and
requiring the parties to submit their pre-trial briefs. Meanwhile, private respondent filed a Motion to Sell
Attached Properties but the trial court denied the motion.
On motion of petitioner, the trial court issued an Order resetting the pre-trial from July 18, 1989 to August 24,
1989 at 8:30 a.m..
On August 24, 1989, the day of the pre-trial, the trial court issued an Order17 terminating the pre-trial and
allowing the private respondent to present evidence ex-parte on September 12, 1989 at 8:30 a.m.. The Order
stated that when the case was called for pre-trial at 8:31 a.m., only the counsel for private respondent
appeared. Upon the trial court’s second call 20 minutes later, petitioner’s counsel was still nowhere to be found.
Thus, upon motion of private respondent, the pre-trial was considered terminated.
On September 12, 1989, petitioner filed her Motion for Reconsideration of the Order terminating the pre-trial.
Petitioner explained that her counsel arrived 5 minutes after the second call, as shown by the transcript of
stenographic notes, and was late because of heavy traffic. Petitioner claims that the lower court erred in
allowing private respondent to present evidence ex-parte since there was no Order considering the petitioner as
in default. Petitioner contends that the Order of August 24, 1989 did not state that petitioner was declared as in
default but still the court allowed private respondent to present evidence ex-parte.18
On October 6, 1989, the trial court denied the Motion for Reconsideration and scheduled the presentation of
private respondent’s evidence ex-parte on October 10, 1989.1âwphi1.nêt
On October 10, 1989, petitioner filed an Omnibus Motion stating that the presentation of evidence ex-parte
should be suspended because there was no declaration of petitioner as in default and petitioner’s counsel was
not absent, but merely late.
On October 18, 1989, the trial court denied the Omnibus Motion.19
On November 20, 1989, the petitioner received a copy of the Decision of November 10, 1989, ordering
petitioner to pay respondent P109,376.95 plus 18 percent interest per annum, 25 percent attorney’s fees and
costs of suit. Private respondent filed a Motion for Execution Pending Appeal but the trial court denied the
same.
The Ruling of the Court of Appeals
On December 15, 1995, the Court of Appeals rendered a decision affirming the decision of the trial court. The
Court of Appeals upheld the validity of the issuance of the writ of attachment and sustained the filing of the
action in the RTC of Pasay. The Court of Appeals also affirmed the declaration of default on petitioner and
concluded that the trial court did not commit any reversible error.
Petitioner filed a Motion for Reconsideration on January 5, 1996 but the Court of Appeals denied the same in a
Resolution dated May 20, 1996.
Hence, this petition.
The Issues
The issues raised by petitioner may be re-stated as follows:
I.
WHETHER RESPONDENT COURT ERRED IN NOT HOLDING THAT THE WRIT OF ATTACHMENT WAS
IMPROPERLY ISSUED AND SERVED;
II.
WHETHER THERE WAS A VALID DECLARATION OF DEFAULT;
III.
WHETHER THERE WAS IMPROPER VENUE.
IV.
WHETHER RESPONDENT COURT ERRED IN DECLARING THAT PETITIONER IS OBLIGED TO PAY P109,
376.95, PLUS ATTORNEY’S FEES.20
The Ruling of the Court
Improper Issuance and Service of Writ of Attachment
Petitioner ascribes several errors to the issuance and implementation of the writ of attachment. Among
petitioner’s arguments are: first, there was no ground for the issuance of the writ since the intent to defraud
her creditors had not been established; second, the value of the properties levied exceeded the value of private
respondent’s claim. However, the crux of petitioner’s arguments rests on the question of the validity of the writ
of attachment. Because of failure to serve summons on her before or simultaneously with the writ’s
implementation, petitioner claims that the trial court had not acquired jurisdiction over her person and thus the
service of the writ is void.
As a preliminary note, a distinction should be made between issuance and implementation of the writ of
attachment. It is necessary to distinguish between the two to determine when jurisdiction over the person of
the defendant should be acquired to validly implement the writ. This distinction is crucial in resolving whether
there is merit in petitioner’s argument.
This Court has long settled the issue of when jurisdiction over the person of the defendant should be acquired
in cases where a party resorts to provisional remedies. A party to a suit may, at any time after filing the
complaint, avail of the provisional remedies under the Rules of Court. Specifically, Rule 57 on preliminary
attachment speaks of the grant of the remedy "at the commencement of the action or at any time
thereafter."21 This phrase refers to the date of filing of the complaint which is the moment that marks "the
commencement of the action." The reference plainly is to a time before summons is served on the defendant,
or even before summons issues.
In Davao Light & Power Co., Inc. v. Court of Appeals,22 this Court clarified the actual time when
jurisdiction should be had:
"It goes without saying that whatever be the acts done by the Court prior to the acquisition of
jurisdiction over the person of defendant - issuance of summons, order of attachment and writ of
attachment - these do not and cannot bind and affect the defendant until and unless
jurisdiction over his person is eventually obtained by the court, either by service on him of
summons or other coercive process or his voluntary submission to the court’s authority. Hence, when the
sheriff or other proper officer commences implementation of the writ of attachment, it is essential that
he serve on the defendant not only a copy of the applicant’s affidavit and attachment bond, and of the
order of attachment, as explicitly required by Section 5 of Rule 57, but also the summons addressed to
said defendant as well as a copy of the complaint xxx." (Emphasis supplied.)
Furthermore, we have held that the grant of the provisional remedy of attachment involves three stages: first,
the court issues the order granting the application; second, the writ of attachment issues pursuant to the order
granting the writ; and third, the writ is implemented. For the initial two stages, it is not necessary that
jurisdiction over the person of the defendant be first obtained. However, once the implementation
of the writ commences, the court must have acquired jurisdiction over the defendant for without such
jurisdiction, the court has no power and authority to act in any manner against the defendant. Any order
issuing from the Court will not bind the defendant.23
In the instant case, the Writ of Preliminary Attachment was issued on September 27, 1988 and implemented on
October 28, 1988. However, the alias summons was served only on January 26, 1989 or almost three
months after the implementation of the writ of attachment.
The trial court had the authority to issue the Writ of Attachment on September 27 since a motion for its
issuance can be filed "at the commencement of the action." However, on the day the writ was implemented, the
trial court should have, previously or simultaneously with the implementation of the writ, acquired jurisdiction
over the petitioner. Yet, as was shown in the records of the case, the summons was actually served on
petitioner several months after the writ had been implemented.
Private respondent, nevertheless, claims that the prior or contemporaneous service of summons contemplated
in Section 5 of Rule 57 provides for exceptions. Among such exceptions are "where the summons could not be
served personally or by substituted service despite diligent efforts or where the defendant is a resident
temporarily absent therefrom x x x." Private respondent asserts that when she commenced this action, she
tried to serve summons on petitioner but the latter could not be located at her customary address in Kamuning,
Quezon City or at her new address in Guagua, Pampanga.24 Furthermore, respondent claims that petitioner was
not even in Pampanga; rather, she was in Guam purportedly on a business trip.
Private respondent never showed that she effected substituted service on petitioner after her personal service
failed. Likewise, if it were true that private respondent could not ascertain the whereabouts of petitioner after a
diligent inquiry, still she had some other recourse under the Rules of Civil Procedure.
The rules provide for certain remedies in cases where personal service could not be effected on a party. Section
14, Rule 14 of the Rules of Court provides that whenever the defendant’s "whereabouts are unknown and
cannot be ascertained by diligent inquiry, service may, by leave of court, be effected upon him by publication in
a newspaper of general circulation x x x." Thus, if petitioner’s whereabouts could not be ascertained after the
sheriff had served the summons at her given address, then respondent could have immediately asked the court
for service of summons by publication on petitioner.25
Moreover, as private respondent also claims that petitioner was abroad at the time of the service of summons,
this made petitioner a resident who is temporarily out of the country. This is the exact situation contemplated in
Section 16,26 Rule 14 of the Rules of Civil Procedure, providing for service of summons by publication.
In conclusion, we hold that the alias summons belatedly served on petitioner cannot be deemed to have cured
the fatal defect in the enforcement of the writ. The trial court cannot enforce such a coercive process on
petitioner without first obtaining jurisdiction over her person. The preliminary writ of attachment must be
served after or simultaneous with the service of summons on the defendant whether by personal service,
substituted service or by publication as warranted by the circumstances of the case.27 The subsequent service
of summons does not confer a retroactive acquisition of jurisdiction over her person because the law does not
allow for retroactivity of a belated service.
Improper Venue
Petitioner assails the filing of this case in the RTC of Pasay and points to a provision in private respondent’s
invoice which contains the following:
"3. If court litigation becomes necessary to enforce collection, an additional equivalent (sic) to 25% of
the principal amount will be charged. The agreed venue for such action is Makati, Metro Manila,
Philippines."28
Based on this provision, petitioner contends that the action should have been instituted in the RTC of Makati
and to do otherwise would be a ground for the dismissal of the case.
We resolve to dismiss the case on the ground of improper venue but not for the reason stated by petitioner.
The Rules of Court provide that parties to an action may agree in writing on the venue on which an action
should be brought.29 However, a mere stipulation on the venue of an action is not enough to preclude parties
from bringing a case in other venues.30 The parties must be able to show that such stipulation is exclusive.
Thus, absent words that show the parties’ intention to restrict the filing of a suit in a particular place, courts will
allow the filing of a case in any venue, as long as jurisdictional requirements are followed. Venue stipulations in
a contract, while considered valid and enforceable, do not as a rule supersede the general rule set forth in Rule
4 of the Revised Rules of Court.31 In the absence of qualifying or restrictive words, they should be considered
merely as an agreement on additional forum, not as limiting venue to the specified place. 32
In the instant case, the stipulation does not limit the venue exclusively to Makati. There are no qualifying or
restrictive words in the invoice that would evince the intention of the parties that Makati is the "only or
exclusive" venue where the action could be instituted. We therefore agree with private respondent that Makati
is not the only venue where this case could be filed.
Nevertheless, we hold that Pasay is not the proper venue for this case.
Under the 1997 Rules of Civil Procedure, the general rule is venue in personal actions is "where the defendant
or any of the defendants resides or may be found, or where the plaintiff or any of the plaintiffs resides, at the
election of the plaintiff."33 The exception to this rule is when the parties agree on an exclusive venue other than
the places mentioned in the rules. But, as we have discussed, this exception is not applicable in this case.
Hence, following the general rule, the instant case may be brought in the place of residence of the plaintiff or
defendant, at the election of the plaintiff (private respondent herein).
In the instant case, the residence of private respondent (plaintiff in the lower court) was not alleged in the
complaint. Rather, what was alleged was the postal address of her sole proprietorship, Air Swift International. It
was only when private respondent testified in court, after petitioner was declared in default, that she mentioned
her residence to be in Better Living Subdivision, Parañaque City.
In the earlier case of Sy v. Tyson Enterprises, Inc.,34 the reverse happened. The plaintiff in that case was Tyson
Enterprises, Inc., a corporation owned and managed by Dominador Ti. The complaint, however, did not allege
the office or place of business of the corporation, which was in Binondo, Manila. What was alleged was the
residence of Dominador Ti, who lived in San Juan, Rizal. The case was filed in the Court of First Instance of
Rizal, Pasig. The Court there held that the evident purpose of alleging the address of the corporation’s president
and manager was to justify the filing of the suit in Rizal, Pasig instead of in Manila. Thus, the Court ruled that
there was no question that venue was improperly laid in that case and held that the place of business of Tyson
Enterpises, Inc. is considered as its residence for purposes of venue. Furthermore, the Court held that the
residence of its president is not the residence of the corporation because a corporation has a personality
separate and distinct from that of its officers and stockholders.
In the instant case, it was established in the lower court that petitioner resides in San Fernando, Pampanga 35
while private respondent resides in Parañaque City.36 However, this case was brought in Pasay City, where the
business of private respondent is found. This would have been permissible had private respondent’s business
been a corporation, just like the case in Sy v. Tyson Enterprises, Inc. However, as admitted by private
respondent in her Complaint37 in the lower court, her business is a sole proprietorship, and as such, does not
have a separate juridical personality that could enable it to file a suit in court. 38 In fact, there is no law
authorizing sole proprietorships to file a suit in court.39
A sole proprietorship does not possess a juridical personality separate and distinct from the personality of the
owner of the enterprise.40 The law merely recognizes the existence of a sole proprietorship as a form of
business organization conducted for profit by a single individual and requires its proprietor or owner to secure
licenses and permits, register its business name, and pay taxes to the national government.41 The law does not
vest a separate legal personality on the sole proprietorship or empower it to file or defend an action in court. 42
Thus, not being vested with legal personality to file this case, the sole proprietorship is not the plaintiff in this
case but rather Loreta Guina in her personal capacity. In fact, the complaint in the lower court acknowledges in
its caption that the plaintiff and defendant are Loreta Guina and Anita Mangila, respectively. The title of the
petition before us does not state, and rightly so, Anita Mangila v. Air Swift International, but rather Anita
Mangila v. Loreta Guina. Logically then, it is the residence of private respondent Guina, the proprietor with the
juridical personality, which should be considered as one of the proper venues for this case.
All these considered, private respondent should have filed this case either in San Fernando, Pampanga
(petitioner’s residence) or Parañaque (private respondent’s residence). Since private respondent (complainant
below) filed this case in Pasay, we hold that the case should be dismissed on the ground of improper venue.
Although petitioner filed an Urgent Motion to Discharge Attachment in the lower court, petitioner expressly
stated that she was filing the motion without submitting to the jurisdiction of the court. At that time, petitioner
had not been served the summons and a copy of the complaint. 43 Thereafter, petitioner timely filed a Motion to
Dismiss44 on the ground of improper venue. Rule 16, Section 1 of the Rules of Court provides that a motion to
dismiss may be filed "[W]ithin the time for but before filing the answer to the complaint or pleading asserting a
claim." Petitioner even raised the issue of improper venue in his Answer 45 as a special and affirmative defense.
Petitioner also continued to raise the issue of improper venue in her Petition for Review 46 before this Court. We
thus hold that the dismissal of this case on the ground of improper venue is warranted.
The rules on venue, like 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 where to file the complaint or
petition.47
We find no reason to rule on the other issues raised by petitioner.1âwphi1.nêt
WHEREFORE, the petition is GRANTED on the grounds of improper venue and invalidity of the service of the
writ of attachment. The decision of the Court of Appeals and the order of respondent judge denying the motion
to dismiss are REVERSED and SET ASIDE. Civil Case No. 5875 is hereby dismissed without prejudice to
refiling it in the proper venue. The attached properties of petitioner are ordered returned to her immediately.
SO ORDERED.
G.R. No. 152808 September 30, 2005
ANTONIO T. CHUA, Petitioners, vs. TOTAL OFFICE PRODUCTS AND SERVICES (TOPROS), INC.,
Respondent.
For review on certiorari is the decision1 dated November 28, 2001 of the Court of Appeals and its resolution 2 of
April 1, 2002 in CA-G.R. SP No. 62592. The assailed decision and resolution dismissed the special civil action
for certiorari against the orders of August 9, 20003 and October 6, 20004 issued by Judge Lorifel Lacap Pahimna
in Civil Case No. 67736.
The pertinent facts, based on the records, are as follows:
On December 28, 1999, respondent Total Office Products and Services, Inc., (TOPROS) lodged a complaint for
annulment of contracts of loan and real estate mortgage against herein petitioner Antonio T. Chua before the
Regional Trial Court of Pasig City. The case was docketed as Civil Case No. 67736 and was raffled to the sala of
Judge Lorifel Lacap Pahimna.
The said suit sought to annul a loan contract allegedly extended by petitioner to respondent TOPROS in the
amount of ten million four hundred thousand pesos (P10,400,000) and the accessory real estate mortgage
contract covering two parcels of land situated in Quezon City as collateral.
It appeared on the face of the subject contracts that TOPROS was represented by its president John Charles
Chang, Jr. However, TOPROS alleged that the purported loan and real estate mortgage contracts were fictitious,
since it never authorized anybody, not even its president, to enter into said transaction.
On February 28, 2000, petitioner filed a motion to dismiss on the ground of improper venue. He contended that
the action filed by TOPROS affects title to or possession of the parcels of land subject of the real estate
mortgage. He argued that it should thus have been filed in the Regional Trial Court of Quezon City where the
encumbered real properties are located, instead of Pasig City where the parties reside.
On August 9, 2000, Judge Pahimna issued an order denying the motion to dismiss. She reasoned that the
action to annul the loan and mortgage contracts is a personal action and thus, the venue was properly laid in
the RTC of Pasig City where the parties reside.
Petitioner moved for a reconsideration of the said order, which Judge Pahimna denied in its order of October 6,
2000. Hence, petitioner filed with the Court of Appeals a special civil action for certiorari alleging:
THE RESPONDENT JUDGE COMMITTED GRAVE ABUSE OF DISCRETION IN DISREGARDING THE RULING OF THE
SUPREME COURT IN PASCUAL VS. PASCUAL REGARDING THE RULE ON PROPER VENUE, AND CONSEQUENTLY
ADJUDGING TO BE A PERSONAL ACTION A CIVIL COMPLAINT FOR THE ANNULMENT OF AN ALLEGEDLY
FICTITIOUS CONTRACT.5
The Court of Appeals dismissed said petition in its decision dated November 28, 2001. It held that the
authorities relied upon by petitioner, namely Pascual v. Pascual6 and Banco Español-Filipino v. Palanca,7 are
inapplicable in the instant case. The appellate court instead applied Hernandez v. Rural Bank of Lucena, Inc.8
wherein we ruled that an action for the cancellation of a real estate mortgage is a personal action if the
mortgagee has not foreclosed the mortgage and the mortgagor is in possession of the premises, as neither the
mortgagor’s title to nor possession of the property is disputed.
Dissatisfied, petitioner filed a motion for reconsideration, which the Court of Appeals denied for lack of merit in
its resolution of April 1, 2002.
Undeterred, petitioner now comes to us on a petition for review raising the following issues:
WHETHER AN ACTION TO ANNUL A LOAN AND MORTGAGE CONTRACT DULY ALLEGED AS ‘FICTITIOUS’ FOR
BEING WITH ABSOLUTELY NO CONSIDERATION IS A PERSONAL ACTION OR REAL ACTION?
WHETHER IN AN ACTION TO ANNUL A LOAN AND MORTGAGE CONTRACT DULY ALLEGED AS ‘FICTITIOUS’ FOR
BEING WITH ABSOLUTELY NO CONSIDERATION, THE PERSON ALLEGED TO HAVE ‘[LACKED] AUTHORITY’ TO
ENTER INTO SAID CONTRACTS IS AN INDISPENSABLE PARTY?9
Petitioner contends that Hernandez should not be applied here because in the said case: (1) venue was
improperly laid at the outset; (2) the complaint recognized the validity of the principal contract involved; and
(3) the plaintiff sought to compel acceptance by the defendant of plaintiff’s payment of the latter’s mortgage
debt. He insists that the Pascual case should be applied instead. He invokes our pronouncement in Pascual, to
wit:
… It appearing, however, that the sale is alleged to be fictitious, with absolutely no consideration, it should be
regarded as a non-existent, not merely null, contract…. And there being no contract between the deceased and
the defendants, there is in truth nothing to annul by action. The action brought cannot thus be for annulment of
contract, but is one for recovery of a fishpond, a real action that should be, as it has been, brought in
Pampanga, where the property is located….10
Petitioner likewise cites the Banco Español-Filipino case, thus:
Where the defendant in a mortgage foreclosure lives out of the Islands and refuses to appear or otherwise
submit himself to the authority of the court, the jurisdiction of the latter is limited to the mortgaged property,
with respect to which the jurisdiction of the court is based upon the fact that the property is located within the
district and that the court, under the provisions of law applicable in such cases, is vested with the power to
subject the property to the obligation created by the mortgage. In such case personal jurisdiction over the
nonresident defendant is nonessential and in fact cannot be acquired.11
Petitioner also alleges that John Charles Chang, Jr., the president of TOPROS, who allegedly entered into the
questioned loan and real estate mortgage contracts, is an indispensable party who has not been properly
impleaded.
TOPROS, however, maintains that the appellate court correctly sustained the lower court’s finding that the
instant complaint for annulment of loan and real estate mortgage contracts is a personal action. TOPROS points
out that a complaint for the declaration of nullity of a loan contract for lack of consent and consideration
remains a personal action even if the said action will necessarily affect the accessory real estate mortgage.
TOPROS argues that Pascual is inapplicable because the subject contract therein was a contract of sale of a
parcel of land where title and possession were already transferred to the defendant. TOPROS further contends
that Banco Español-Filipino is also inapplicable since the personal action filed therein was one which affected
the personal status of a nonresident defendant.
Considering the facts and the submission of the parties, we find the petition bereft of merit.
Well-settled is the rule that an action to annul a contract of loan and its accessory real estate mortgage is a
personal action. In a personal action, the plaintiff seeks the recovery of personal property, the enforcement of a
contract or the recovery of damages.12 In contrast, in a real action, the plaintiff seeks the recovery of real
property, or, as indicated in Section 2 (a), Rule 4 of the then Rules of Court, a real action is an action affecting
title to real property or for the recovery of possession, or for partition or condemnation of, or foreclosure of
mortgage on, real property.13
In the Pascual case, relied upon by petitioner, the contract of sale of the fishpond was assailed as fictitious for
lack of consideration. We held that there being no contract to begin with, there is nothing to annul. Hence, we
deemed the action for annulment of the said fictitious contract therein as one constituting a real action for the
recovery of the fishpond subject thereof.
We cannot, however, apply the foregoing doctrine to the instant case. Note that in Pascual, title to and
possession of the subject fishpond had already passed to the vendee. There was, therefore, a need to recover
the said fishpond. But in the instant case, ownership of the parcels of land subject of the questioned real estate
mortgage was never transferred to petitioner, but remained with TOPROS. Thus, no real action for the recovery
of real property is involved. This being the case, TOPROS’ action for annulment of the contracts of loan and real
estate mortgage remains a personal action.
Petitioner’s reliance on the Banco Español-Filipino case is likewise misplaced. That case involved a foreclosure of
real estate mortgage against a nonresident. We held therein that jurisdiction is determined by the place where
the real property is located and that personal jurisdiction over the nonresident defendant is nonessential and, in
fact, cannot be acquired.
Needless to stress, the instant case bears no resemblance to the Banco Español-Filipino case. In the first place,
this is not an action involving foreclosure of real estate mortgage. In the second place, none of the parties here
is a nonresident. We find no reason to apply here our ruling in Banco Español-Filipino.
The Court of Appeals finds that Hernandez v. Rural Bank of Lucena, Inc. provides the proper precedent in this
case. In Hernandez, appellants contended that the action of the Hernandez spouses for the cancellation of the
mortgage on their lots was a real action affecting title to real property, which should have been filed in the
place where the mortgaged lots were situated. Rule 4, Section 2 (a), of the then Rules of Court, was applied, to
wit:
SEC. 2. Venue in Courts of First Instance. – (a) Real actions. – Actions affecting title to, or for recovery of
possession, or for partition or condemnation of, or foreclosure of mortgage on, real property, shall be
commenced and tried in the province where the property or any part thereof lies.
The Court pointed out in the Hernandez case that with respect to mortgage, the rule on real actions only
mentions an action for foreclosure of a real estate mortgage. It does not include an action for the cancellation
of a real estate mortgage. Exclusio unios est inclusio alterius. The latter thus falls under the catch-all provision
on personal actions under paragraph (b) of the above-cited section, to wit:
SEC. 2 (b) Personal actions. – All other actions may be commenced and tried where the defendant or any of the
defendants resides or may be found, or where the plaintiff or any of the plaintiffs resides, at the election of the
plaintiff.
In the same vein, the action for annulment of a real estate mortgage in the present case must fall under
Section 2 of Rule 4, to wit:
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.14
Thus, Pasig City, where the parties reside, is the proper venue of the action to nullify the subject loan and real
estate mortgage contracts. The Court of Appeals committed no reversible error in upholding the orders of the
Regional Trial Court denying petitioner’s motion to dismiss the case on the ground of improper venue.
Anent the second issue, Section 7, Rule 3 of the Revised Rules of Court provides:
SEC. 7. Compulsory joinder of indispensable parties. – Parties in interest without whom no final determination
can be had of an action shall be joined either as plaintiffs or defendants. (Emphasis ours)
The presence of indispensable parties is necessary to vest the court with jurisdiction. The absence of an
indispensable party renders all subsequent actuations of the court null and void, because of that court’s want of
authority to act, not only as to the absent parties but even as to those present. 15 Thus, whenever it appears to
the court in the course of a proceeding that an indispensable party has not been joined, it is the duty of the
court to stop the trial and order the inclusion of such party.16
A person is not an indispensable party, however, if his interest in the controversy or subject matter is separable
from the interest of the other parties, so that it will not necessarily be directly or injuriously affected by a
decree which does complete justice between them.17
Is John Charles Chang, Jr., the president of TOPROS who allegedly entered into the disputed contracts of loan
and real estate mortgage, an indispensable party in this case?
We note that although it is Chang’s signature that appears on the assailed real estate mortgage contract, his
participation is limited to being a representative of TOPROS, allegedly without authority. The document 18 which
constitutes as the contract of real estate mortgage clearly points to petitioner and TOPROS as the sole parties-
in-interest to the agreement as mortgagee and mortgagor therein, respectively. Any rights or liabilities arising
from the said contract would therefore bind only the petitioner and TOPROS as principal parties. Chang, acting
as mere representative of TOPROS, acquires no rights whatsoever, nor does he incur any liabilities, arising from
the said contract between petitioner and TOPROS. Certainly, in our view, the only indispensable parties to the
mortgage contract are petitioner and TOPROS alone.
We thus hold that John Charles Chang, Jr., is not an indispensable party in Civil Case No. 67736. This is without
prejudice to any separate action TOPROS may institute against Chang, Jr., in a proper proceeding.
WHEREFORE, the petition is DENIED. The assailed decision dated November 28, 2001 and resolution dated
April 1, 2002 of the Court of Appeals upholding the Orders of Judge Lorifel Lacap Pahimna are AFFIRMED. No
pronouncement as to costs. SO ORDERED.