Republic of the Philippines In appealing, the Clavecilla Radio System contends that the suit against it should be filed

ontends that the suit against it should be filed in Manila where it holds its
SUPREME COURT principal office.
Manila
It is clear that the case for damages filed with the city court is based upon tort and not upon a written contract.
EN BANC 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)
G.R. No. L-22238 February 18, 1967

Settled is the principle in corporation law that the residence of a corporation is the place where its principal office is
CLAVECILLIA RADIO SYSTEM, petitioner-appellant,
established. Since it is not disputed that the Clavecilla Radio System has its principal office in Manila, it follows that
vs.
the suit against it may properly be filed in the City of Manila.
HON. AGUSTIN ANTILLON, as City Judge of the Municipal Court of Cagayan de Oro City
and NEW CAGAYAN GROCERY, respondents-appellees.
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
B. C. Padua for petitioner and appellant.
Court has already held in the case of Cohen vs. Benguet Commercial Co., Ltd., 34 Phil. 526; that the term "may be
Pablo S. Reyes for respondents and appellees.
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
REGALA, J.: 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
This is an appeal from an order of the Court of First Instance of Misamis Oriental dismissing the petition of the mean that it can be sued in any of these places. To allow an action to be instituted in any place where a corporate
Clavecilla Radio System to prohibit the City Judge of Cagayan de Oro from taking cognizance of Civil Case No. 1048 entity has its branch offices would create confusion and work untold inconvenience to the corporation.
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:
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
NECAGRO CAGAYAN DE ORO (CLAVECILLA)
shall be laid properly. With costs against the respondents-appellees.

REURTEL WASHED NOT AVAILABLE REFINED TWENTY FIFTY IF AGREEABLE SHALL SHIP LATER Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Bengzon, J.P., Zaldivar, Sanchez and Castro, JJ., concur.
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
 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G. R. No. 76431 October 16, 1989
FORTUNE MOTORS, (PHILS.) INC., petitioner,
vs.
THE HONORABLE COURT OF APPEALS, METROPOLITAN BANK and TRUST COMPANY, respondents.
Quirante & Associates Law Office for petitioner.
Bautista, Cruz & Associates Law Offices for private respondent.
PARAS, J.:
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.

Melencio-Herrera (Chairperson), Padilla, Sarmiento and Regalado, JJ., concur.

 Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
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.
Angara, Abello, Concepcion, Regala & Cruz for petitioners.
Antonio Nuyles for private respondent.
QUIASON, J.:
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. Cruz, Griño-Aquino and Bellosillo, JJ., concur.

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.
 Republic of the Philippines "Actions affecting title to, or for recovery of possession, or for partition or condemnation of, or foreclosure
SUPREME COURT of mortgage on, real property, shall be commenced and tried in the province where the property or any part
Manila thereof lies."

EN BANC 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,
G.R. No. L-17699 March 30, 1962
pursuant to section 1 of said rule 5.

DR. ANTONIO A. LIZARES, INC., petitioner,

We are unable to share such view. Although the immediate remedy sought by Cacnio is to compel petitioner to
vs.
accept the tender of payment allegedly made by the former, it is obvious that this relief is merely the first step to
HON. HERMOGENES CALUAG, as Judge of the Court of First Instance of Quezon City,
establish Cacnio's title to the real property adverted to above. Moreover, Cacnio's complaint is a means resorted to
and FLAVIANO CACNIO, respondents.
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

Ramon C. Aquino for petitioner.

Paulino Carreon for respondents.
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
CONCEPCION, J.: respondent Flaviano Cacnio. It is so ordered.

Appeal by certiorari from a decision of the Court of Appeals dismissing the petition of Dr. Antonio A. Lizares & Co., Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Barrera, Paredes and Dizon, JJ., concur.
Inc., for a writ of prohibition, with costs against said petitioner. De Leon, J., took no part.

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:
 Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
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.
Romeo B. Esuerte for petitioners.
Eleno V. Andales & Sisinio M. Andales for private respondent.
MEDIALDEA, J.:
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. Her
1âw phi 1

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.

Narvasa, Cruz, Gancayco and Griño-Aquino, JJ., concur.

 Republic of the Philippines the defendants resides or may be found, or where the plaintiff or any of the plaintiffs resides, at the election of the
SUPREME COURT plaintiff." The said section is qualified by the following provisions of Section 3 of the same rule:
Manila
By written agreement of the parties the venue of an action may be changed or transferred from
SECOND DIVISION one province to another.

G.R. No. L-28742 April 30, 1982 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
VIRGILIO CAPATI, plaintiff-appellant,
venue is restrictive in the sense that any litigation arising from the contract can be filed only in
vs.
the court of Naga City, or merely permissive in that the parties may submit their disputes not
DR. JESUS P. OCAMPO, defendant-appellee.
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.

ESCOLIN, J.:
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."
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.

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 ... "
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.

Defendant filed a motion to dismiss the complaint on the ground that venue of action was improperly laid. The motion SO ORDERED.
was premised on the stipulation printed at the back of the contract which reads:
Barredo (Chairman), Aquino, De Castro and Ericta, JJ., concur.
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.
Concepcion, Jr. and Abad Santos, J., are on leave.

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
 EN BANC
[G.R. No. 119657. February 7, 1997]
UNIMASTERS CONGLOMERATION, INC., petitioner, vs. COURT OF APPEALS and KUBOTA AGRI-
MACHINERY PHILIPPINES, INC., respondents.
DECISION
NARVASA, C.J.:
The appellate proceeding at bar turns upon the interpretation of a stipulation in a contract governing venue of
actions thereunder arising.
On October 28, 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. The contract contained, among others:
[1]
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.
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. And on February 3, 1994, the same Court promulgated an
[3]
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 and this Court's relevant
[5]
rulings -- the stipulation respecting venue in its Dealership Agreement with UNIMASTERS did in truth limit the venue
[6]
of all suits arising thereunder only and exclusively to "the proper courts of Quezon City." The Court also held that the
[7]
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, that 'in the absence of qualifying or restrictive
[9]
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." It is plain that under
[10]
[2]
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." Parties may by stipulation waive the legal venue and such waiver is valid
[11]
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, it is easy to accept the proposition that normally,
[13]
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. In this case, the venue stipulation was as follows:
[14]
"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. In this case, the stipulation on venue read:
[15]
"** (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. Here, the stipulation in the promissory note and the chattel mortgage specifed
[16]
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. In this case, the provision of the contract relative to venue was as follows:
[17]
" ** (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. Here, the provision governing venue read:
[18]
"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. In this proceeding, the Sales Invoice of a linotype machine stated
[19]
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. Here the stipulation on venue read:
[20]
" ** (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, in which the venue stipulation in the promissory notes in question read:
[21]
" ** (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: In this case, the provision concerning venue was
[22]
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, et al., decided in
1993. Here, the stipulation on venue was contained in promissory notes and read as follows:
[23]
"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 Polytradeline of
cases."
11. Philippine Banking Corporation v. Hon. Salvador Tensuan, etc., Brinell Metal Works Corp., et al., decided in 1994: In this[24]
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. Here, the parties agreed in their sales contracts that the courts of Manila shall
[25]
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. In this case, a similar stipulation on venue, contained in the shipping ticket
[26]
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. In this case, the contract provided that in case of any litigation arising therefrom or in
[27]
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. Here the lease contract declared that
[28]
" ** (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, decided much earlier, in 1978, involved a strikingly similar stipulation, which read:
[29]
" ** (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. In this case, it was stipulated that if the lessor violated the contract of lease he
[30]
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. The condition respecting venue -- that any action against RCPI relative to the transmittal
[31]
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 WHEREFORE, the appealed judgment of the Court of Appeals is REVERSED, the Order of the Regional Trial
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 Court of Tacloban City, Branch 6, dated February 3, 1994, is REINSTATED and AFFIRMED, and said Court is
be inferred that the parties intended to definitely fix the venue of action, in connection with the written contract sued upon, in the DIRECTED to forthwith proceed with Civil Case No. 93-12-241 in due course.
courts of Quezon City only.
SO ORDERED.
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 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, regardless of the general precepts of Rule 4; and any doubt or uncertainty as to the parties' intentions must be
[32]

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." In other words,
[33]

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. The action at bar, for the recovery of damages in an amount considerably in excess of P20,000.00, is assuredly
[34]

within the jurisdiction of a Regional Trial Court. Assuming that venue were improperly laid in the Court where the action was
[35]

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 notwithstanding 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, the RTC would proceed in perfectly regular fashion if it
[36]

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" were commenced in a province or city other than that "where
[37]

the property or any part thereof lies," if no objection is seasonably made in a motion to dismiss, the objection is deemed waived,
[38]

and the Regional Trial Court would be acting entirely within its competence and authority in proceeding to try and decide the
suit.
[39]
 Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
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.
Ramon V. Sison for petitioner.
Public Attorney's Office for private respondent.
FERNAN, C.J.:
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, affirmed the order of dismissal of his complaint.
1 of legal process exercised over his person.
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 does not appear that said service had been properly effected or that private respondent had appeared voluntarily in
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, involving an action instituted before the then Court of First Instance of Batangas for
6
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
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, it 8
court or filed his answer to the complaint. At this stage, respondent trial court should have required petitioner to
9 10
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 propriothe
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.
 SECOND DIVISION
[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.
DECISION
DE LEON, JR., J.:
Before us is a petition for review on certiorari assailing the Decision dated August 31, 1993 rendered by the Sixteenth
Division of the Court of Appeals in CA-G.R. SP No. 29996, the dispositive portion of which states:
[1]
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 against private respondent
[2]
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 claiming that: (a) the complaint did not state a cause of
[3]
action; (b) the plaintiffs 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 Resolution dismissing petitioners complaint on the ground of improper venue. The
[4]
trial court stated that:
The plaintiff being a private corporation undoubtedly Banilad, Cebu City is the plaintiffs principal place of business as
alleged in the complaint and which for purposes of venue is considered as its residence. xxx.
However, in defendants 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 plaintiffs 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 xxx.
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.
Petitioners motion for reconsideration was denied in an Order dated October 1, 1992.
[5] [6]
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. We declined to take immediate cognizance of the case, and in a Resolution dated
[7]
January 11, 1993, referred the same to the Court of Appeals for resolution. The petition was docketed in the appellate court as CA-
[8]
G.R. SP No. 29996.
On August 31, 1993, the Court of Appeals rendered the assailed judgment denying due course and dismissing the
[9]
petition. Counsel for petitioner received a copy of the decision on September 6, 1993. Without filing a motion for reconsideration,
[10]
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. Petitioners 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 respondents 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 respondents 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
contracts entered into by petitioner with the National Power Corporation (NAPOCOR) where in the description of personal
[12]
circumstances, the former states that its principal office is at 163-165 P. Reyes St., Davao City. According to private respondent the
petitioners 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. In the aforesaid case, the
[14]
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 plaintiffs 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 WHEREFORE, the instant petition is hereby GRANTED. The appealed decision is hereby REVERSED and SET ASIDE. The
defendant or any of the defendants resides or may be found, or where the plaintiff or any of the plaintiffs resides, at Regional Trial Court of Cebu City, Branch 11 is hereby directed to proceed with Civil Case No. CEB-11578 with all deliberate
the election of the plaintiff xxx. dispatch. No pronouncement as to costs.

SO ORDERED.
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) xxx.

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. [italics supplied]

The same considerations apply to the instant case. It cannot be disputed that petitioners principal office is in Cebu City, per its
amended articles of incorporation and by-laws. An action for damages being a personal action, venue is determined pursuant to
[15] [16] [17]

Rule 4, section 2 of the Rules of Court, to wit:

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. [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.
 THIRD DIVISION
[G.R. No. 125027. August 12, 2002]
ANITA MANGILA, petitioner, vs. COURT OF APPEALS and LORETA GUINA, respondents.
DECISION
CARPIO, J.:
The Case
This is a petition fore review on certiorari under Rule 45 of the Rules of Court, seeking to set aside the
Decision of the Court of Appeals affirming the Decision of the Regional Trial Court, Branch 108, Pasay City. The
[1] [2]
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 attorneys 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 petitioners 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 respondents invoice
stipulates a charge of 18 percent interest per annum on all overdue accounts. In case of suit, the same invoice
stipulates attorneys 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 Sheriffs Return showing that summons was not served on petitioner. A
woman found at petitioners house informed the sheriff that petitioner transferred her residence to Sto. Nio, Guagua,
Pampanga. The sheriff found out further that petitioner had left the Philippines for Guam. [5]
Thus, on September 13, 1988, construing petitioners 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 against petitioner. The following day, the trial court issued a Writ of
[6]
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 petitioners 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 Attachment without submitting herself to
[8]
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 respondents 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 petitioners
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. It was only on January 26, 1989 that summons was finally served on petitioner.
[11] [12]
On February 9, 1989, petitioner filed a Motion to Dismiss the Complaint on the ground of improper venue.
Private respondents 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. Private respondent filed an
[13]
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 admitting such inadvertence. Moreover, private
[14]
respondent claimed that petitioner knew that private respondent was holding office in Pasay City and not in
Makati. The lower court, finding credence in private respondents assertion, denied the Motion to Dismiss and gave
[15]
petitioner five days to file her Answer. Petitioner filed a Motion for Reconsideration but this too was denied.
Petitioner filed her Answer on June 16, 1989, maintaining her contention that the venue was improperly laid.
[16]
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 Order terminating the pre-trial and
[17]
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 courts second call 20 minutes later, petitioners 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 respondents evidence ex-parte on October 10, 1989.
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 petitioners 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 attorneys fees and costs of
suit. Private respondent filed a Motion for Execution Pending Appeal but the trial court denied the same.
creditors had not been established; second, the value of the properties levied exceeded the value of private
respondents claim. However, the crux of petitioners 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 writs implementation,
petitioner claims that the trial court had not acquired jurisdiction over her person and thus the service of the writ is
void.

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.
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 petitioners 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. This phrase refers to the
[21]

Petitioner filed a Motion for Reconsideration on January 5, 1996 but the Court of Appeals denied the same in a date of filing of the complaint which is the moment that marks the commencement of the action. The reference plainly
Resolution dated May 20, 1996. is to a time before summons is served on the defendant, or even before summons issues.
Hence, this petition. In Davao Light & Power Co., Inc. v. Court of Appeals, this Court clarified the actual time when jurisdiction
[22]

should be had:

The Issues 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
The issues raised by petitioner may be re-stated as follows: court, either by service on him of summons or other coercive process or his voluntary submission to the courts
authority. Hence, when the sheriff or other proper officer commences implementation of the writ of attachment, it
I.
is essential that he serve on the defendant not only a copy of the applicants 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
WHETHER RESPONDENT COURT ERRED IN NOT HOLDING THAT THE WRIT OF ATTACHMENT defendant as well as a copy of the complaint xxx. (Emphasis supplied.)
WAS IMPROPERLY ISSUED AND SERVED;
Furthermore, we have held that the grant of the provisional remedy of attachment involves three stages: first, the
II. 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
WHETHER THERE WAS A VALID DECLARATION OF DEFAULT; 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]

III.
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
WHETHER THERE WAS IMPROPER VENUE.
months after the implementation of the writ of attachment.

IV. 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
WHETHER RESPONDENT COURT ERRED IN DECLARING THAT PETITIONER IS OBLIGED TO PAY petitioner. Yet, as was shown in the records of the case, the summons was actually served on petitioner several
P109, 376.95, PLUS ATTORNEYS FEES. [20]
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
The Ruling of the Court 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. Furthermore, respondent claims that petitioner was not even in
[24]

Improper Issuance and Service of Writ of Attachment

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
Petitioner ascribes several errors to the issuance and implementation of the writ of attachment. Among failed. Likewise, if it were true that private respondent could not ascertain the whereabouts of petitioner after a
petitioners arguments are: first, there was no ground for the issuance of the writ since the intent to defraud her 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 defendants 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 petitioners 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, Rule 14 of the Rules of Civil Procedure, providing for service of summons by publication.
[26]
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. The subsequent service of summons does not confer a
[27]
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 respondents
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. However, a mere stipulation on the venue of an action is not enough to preclude parties from
[29]
bringing a case in other venues. The parties must be able to show that such stipulation is exclusive. Thus, absent
[30]
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. In the absence of qualifying or restrictive words, they should be considered merely as an agreement
[31]
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. The exception to this rule is when the parties agree on an exclusive venue other than the places
[33]
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, Paraaque City.
In the earlier case of Sy v. Tyson Enterprises, Inc., the reverse happened. The plaintiff in that case was Tyson
[34]
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 corporations 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 while private respondent resides in Paraaque City. However, this case was brought in Pasay City,
[35] [36]
where the business of private respondent is found. This would have been permissible had private respondents
business been a corporation, just like the case in Sy v. Tyson Enterprises, Inc. However, as admitted by private
respondent in her Complaint in the lower court, her business is a sole proprietorship, and as such, does not have a
[37]
separate juridical personality that could enable it to file a suit in court. In fact, there is no law authorizing sole
[38]
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. The law merely recognizes the existence of a sole proprietorship as a form of business
[40]
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. The law does not vest a separate
[41]
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
(petitioners residence) or Paraaque (private respondents 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. Thereafter, petitioner timely filed a Motion to Dismiss on
[43] [44]
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 as a special and affirmative defense. Petitioner also continued to
[45]
raise the issue of improper venue in her Petition for Review before this Court. We thus hold that the dismissal of this
[46]
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.
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.
 FIRST DIVISION THE RESPONDENT JUDGE COMMITTED GRAVE ABUSE OF DISCRETION IN
DISREGARDING THE RULING OF THE SUPREME COURT IN PASCUAL VS. PASCUAL
ANTONIO T. CHUA, G.R. No. 152808 REGARDING THE RULE ON PROPER VENUE, AND CONSEQUENTLY ADJUDGING TO BE
Petitioner, A PERSONAL ACTION A CIVIL COMPLAINT FOR THE ANNULMENT OF AN ALLEGEDLY
Present: FICTITIOUS CONTRACT.[5]

Davide, Jr., C.J.,

(Chairman),
The Court of Appeals dismissed said petition in its decision dated November 28, 2001. It held that the authorities
- versus - Quisumbing,
relied upon by petitioner, namely Pascual v. Pascual[6] and Banco Espaol-Filipino v. Palanca,[7] are inapplicable in
Ynares-Santiago,
the instant case. The appellate court instead applied Hernandez v. Rural Bank of Lucena, Inc.[8] wherein we ruled
Carpio, and
that an action for the cancellation of a real estate mortgage is a personal action if the mortgagee has not foreclosed
Azcuna, JJ.
the mortgage and the mortgagor is in possession of the premises, as neither the mortgagors title to nor possession
of the property is disputed.
TOTAL OFFICE PRODUCTS AND SERVICES (TOPROS), INC., Promulgated:
Respondent. Dissatisfied, petitioner filed a motion for reconsideration, which the Court of Appeals denied for lack of merit in its
September 30, 2005 resolution of April 1, 2002.

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
Undeterred, petitioner now comes to us on a petition for review raising the following issues:
DECISION WHETHER AN ACTION TO ANNUL A LOAN AND MORTGAGE CONTRACT DULY
ALLEGED AS FICTITIOUS FOR BEING WITH ABSOLUTELY NO CONSIDERATION IS A
QUISUMBING, J.: PERSONAL ACTION OR REAL ACTION?

WHETHER IN AN ACTION TO ANNUL A LOAN AND MORTGAGE CONTRACT

For review on certiorari is the decision[1] dated November 28, 2001 of the Court of Appeals and its resolution[2] of DULY ALLEGED AS FICTITIOUS FOR BEING WITH ABSOLUTELY NO CONSIDERATION,
April 1, 2002 in CA-G.R. SP No. 62592. The assailed decision and resolution dismissed the special civil action THE PERSON ALLEGED TO HAVE [LACKED] AUTHORITY TO ENTER INTO SAID
for certiorari against the orders of August 9, 2000[3] and October 6, 2000[4] issued by Judge Lorifel Lacap Pahimna in CONTRACTS IS AN INDISPENSABLE PARTY?[9]
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.
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 plaintiffs payment of the latters 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]

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 certiorarialleging:
Petitioner likewise cites the Banco Espaol-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 courts 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
Espaol-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.
Petitioners reliance on the Banco Espaol-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 Espaol-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 Espaol-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 petitioners 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 courts 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 Changs 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.
 Republic of the Philippines In an Order dated September 20, 2010, the RTC denied Cash Asia’s motion to dismiss for lack of merit. In denying
21

SUPREME COURT the motion, the RTC opined that the parties must be afforded the right to be heard in view of the substance of
Manila Briones’s cause of action against Cash Asia as stated in the complaint. 22

FIRST DIVISION Cash Asia moved for reconsideration which was, however, denied in an Order dated October 22, 2010. Aggrieved,
23 24

it filed a petition for certiorari before the CA.

25

G.R. No. 204444 January 14, 2015

The CA Ruling
VIRGILIO C. BRIONES, Petitioner,
vs. In a Decision dated March 5, 2012, the CA annulled the RTC Orders, and accordingly, dismissed Briones’s
26

COURT OF APPEALS and CASH ASIA CREDIT CORPORATION, Respondents. complaint without prejudice to the filing of the same before the proper court in Makati City. It held that the RTC
27

gravely abused its discretion in denying Cash Asia’s motion to dismiss, considering that the subject contracts clearly
provide that actions arising therefrom should be exclusively filed before the courts of Makati City only. As such, the
28

DECISION
CA concluded that Briones’s complaint should have been dismissed outright on the ground of improper venue, this, 29

notwithstanding Briones’s claim of forgery.

PERLAS-BERNABE, J.:
Dissatisfied, Briones moved for reconsideration, which was, however, denied in a Resolution dated October 4,
30 31

Assailed in this petition for certiorari are the Decision dated March 5, 2012 and the Resolution dated October 4,
1 2 3 2012, hence, this petition.
2012 of the Court of Appeals (CA) in CA-G.R. SP No. 117474, which annulled the Orders dated September 20,
2010 and October 22, 2010 of the Regional Trial Court of Manila, Branch 173 (RTC) in Civil Case No. 10-124040,
4 5

The Issue Before the Court

denying private respondent Cash Asia Credit Corporation's (Cash Asia) motion to dismiss on the ground of improper
venue.
The primordial issue for the Court’s resolution is whether or not the CA gravely abused its discretion in ordering the
outright dismissal of Briones’s complaint on the ground of improper venue.
The Facts

The Court’s Ruling

The instant case arose from a Complaint dated August 2, 2010 filed by Virgilio C. Briones (Briones) for Nullity of
6

Mortgage Contract, Promissory Note, Loan Agreement, Foreclosure of Mortgage, Cancellation of Transfer Certificate
of Title (TCT) No. 290846, and Damages against Cash Asia before the RTC. In his complaint, Briones alleged that
7
The petition is meritorious.
he is the owner of a property covered by TCT No. 160689 (subject property), and that, on July 15, 2010, his sister
informed him that his property had been foreclosed and a writ of possession had already been issued in favor of
At the outset, the Court stresses that "[t]o justify the grant of the extraordinary remedy of certiorari, [the petitioner]
Cash Asia. Upon investigation, Briones discovered that: (a) on December 6, 2007, he purportedly executed a
8

must satisfactorily show that the court or quasi-judicial authority gravely abused the discretion conferred upon it.
promissory note, loan agreement, and deed of real estate mortgage covering the subject property (subject
9 10 11

Grave abuse of discretion connotes judgment exercised in a capricious and whimsical manner that is tantamount to
contracts) in favor of Cash Asia in order to obtain a loan in the amount of ₱3,500,000.00 from the latter; and (b)
12

lack of jurisdiction. To be considered ‘grave,’ discretion must be exercised in a despotic manner by reason of passion
since the said loan was left unpaid, Cash Asia proceeded to foreclose his property. In this relation, Briones claimed
13

or personal hostility, and must be so patent and gross as to amount to an evasion of positive duty or to a virtual
that he never contracted any loans from Cash Asia as he has been living and working in Vietnam since October 31,
refusal to perform the duty enjoined by or to act at all in contemplation of law." Guided by the foregoing
32

2007. He further claimed that he only went back to the Philippines on December 28, 2007 until January 3, 2008 to
considerations, the Court finds that the CA gravely abused its discretion in ordering the outright dismissal of
spend the holidays with his family, and that during his brief stay in the Philippines, nobody informed him of any loan
Briones’s complaint against Cash Asia, without prejudice to its re-filing before the proper court in Makati City.
agreement entered into with Cash Asia. Essentially, Briones assailed the validity of the foregoing contracts claiming
his signature to be forged.14

Rule 4 of the Rules of Court governs the rules on venue of civil actions, to wit:
For its part, Cash Asia filed a Motion to Dismiss dated August 25, 2010, praying for the outright dismissal of
15

Briones’s complaint on the ground of improper venue. In this regard, Cash Asia pointed out the venue stipulation in
16
Rule 4
the subject contracts stating that "all legal actions arising out of this notice in connection with the Real Estate VENUE OF ACTIONS
Mortgage subject hereof shall only be brought in or submitted tothe jurisdiction of the proper court of Makati City." In
17

view thereof, it contended that all actions arising out of the subject contracts may only be exclusively brought in the
courts of Makati City, and as such, Briones’s complaint should be dismissed for having been filed in the City of SECTION 1. Venue of real actions. — Actions affecting title to or possession of real property, or interest therein, shall
be commenced and tried in the proper court which has jurisdiction over the area wherein the real property involved,
Manila. 18

or a portion thereof, is situated.

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

Forcible entry and detainer actions shall be commenced and tried in the municipal trial court of the municipality or
in the subject contracts as he was never a party therein. He also reiterated that his signatures on the said contracts
were forgeries. 20
city wherein the real property involved, or a portion thereof, is situated.

The RTC Ruling

SEC. 2. Venue of personal actions. — All other actions may be commenced and tried where the plaintiff or any of the
principal plaintiffs resides, or where the defendant or any of the principal defendants resides, or in the case of a non-
resident defendant where he may be found, at the election of the plaintiff.
SEC. 3. Venue of actions against nonresidents. — If any of the defendants does not resideand is not found in the
Philippines, and the action affects the personal status of the plaintiff, or any property of said defendant located in the
Philippines,the action may be commenced and tried in the court of the place where the plaintiff resides, or where the
property or any portion thereof is situated or found.
WHEREFORE, the petition is GRANTED. Accordingly, the Decision dated March 5, 2012 and the Resolution dated
October 4, 2012 of the Court of Appeals in CA-G.R. SP No. 117474 are hereby ANNULLED and SET ASIDE. The
Orders dated September 20, 2010 and October 22, 2010 of the Regional Trial Court of Manila, Branch 173 in Civil
Case No. 10-124040 are REINSTATED.
SO ORDERED.

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

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

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

Based therefrom, the general rule is that the venue of real actions is the court which has jurisdiction over the area
wherein the real property involved, or a portion thereof, is situated; while the venue of personal actions is the court
which has jurisdiction where the plaintiff or the defendant resides, at the election of the plaintiff. As an exception,
jurisprudence in Legaspi v. Rep. of the Phils. instructs that the parties, thru a written instrument, may either
33

introduce another venue where actions arising from such instrument may be filed, or restrict the filing of said actions
in a certain exclusive venue, viz.:

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

As regards restrictive stipulations on venue, jurisprudence instructs that it must be shown thatsuch stipulation is
exclusive. In the absence of qualifying or restrictive words, such as "exclusively," "waiving for this purpose any other
1âw phi 1

venue," "shall only" preceding the designation of venue, "to the exclusion of the other courts," or words of similar
import, the stipulation should be deemed as merely an agreement on an additional forum,not as limiting venue to the
specified place. (Emphases and underscoring supplied)
34

In this relation, case law likewise provides that in cases where the complaint assails only the terms, conditions,
and/or coverage of a written instrument and not its validity, the exclusive venue stipulation contained therein shall still
be binding on the parties, and thus, the complaint may be properly dismissed on the ground of improper
venue. Conversely, therefore, a complaint directly assailing the validity of the written instrument itself should not be
35

bound by the exclusive venue stipulation contained therein and should be filed in accordance with the general rules
on venue. To be sure, it would be inherently consistent for a complaint of this nature to recognize the exclusive
venue stipulation when it, in fact, precisely assails the validity of the instrument in which such stipulation is contained.

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

In conclusion, the CA patently erred and hence committed grave abuse of discretion in dismissing Briones's
complaint on the ground of improper venue.
 THIRD DIVISION
[G.R. No. 138822. January 23, 2001]
EVANGELINE ALDAY, petitioner, vs. FGU INSURANCE CORPORATION, respondent.
DECISION
GONZAGA-REYES, J.:
On 5 May 1989, respondent FGU Insurance Corporation filed a complaint with the Regional Trial Court of Makati [1] alleging that
petitioner Evangeline K. Alday owed it P114,650.76, representing unliquidated cash advances, unremitted costs of premiums and
other charges incurred by petitioner in the course of her work as an insurance agent for respondent. [2] Respondent also prayed for
exemplary damages, attorneys fees, and costs of suit.[3] Petitioner filed her answer and by way of counterclaim, asserted her right for
the payment of P104,893.45, representing direct commissions, profit commissions and contingent bonuses earned from 1 July 1986
to 7 December 1986, and for accumulated premium reserves amounting to P500,000.00. In addition, petitioner prayed for attorneys
fees, litigation expenses, moral damages and exemplary damages for the allegedly unfounded action filed by respondent. [4] On 23
August 1989, respondent filed a Motion to Strike Out Answer With Compulsory Counterclaim And To Declare Defendant In Default
because petitioners answer was allegedly filed out of time.[5] However, the trial court denied the motion on 25 August 1989 and
similarly rejected respondents motion for reconsideration on 12 March 1990.[6] A few weeks later, on 11 April 1990, respondent filed a
motion to dismiss petitioners counterclaim, contending that the trial court never acquired jurisdiction over the same because of the
non-payment of docket fees by petitioner.[7] In response, petitioner asked the trial court to declare her counterclaim as exempt from
payment of docket fees since it is compulsory and that respondent be declared in default for having failed to answer such
counterclaim.[8]
In its 18 September 1990 Order, the trial court[9] granted respondents motion to dismiss petitioners counterclaim and
consequently, denied petitioners motion. The court found petitioners counterclaim to be merely permissive in nature and held that
petitioners failure to pay docket fees prevented the court from acquiring jurisdiction over the same.[10] The trial court similarly denied
petitioners motion for reconsideration on 28 February 1991.
On 23 December 1998, the Court of Appeals[11] sustained the trial court, finding that petitioners own admissions, as contained
in her answer, show that her counterclaim is merely permissive. The relevant portion of the appellate courts decision[12] is quoted
herewith
Contrary to the protestations of appellant, mere reading of the allegations in the answer a quo will readily show that
her counterclaim can in no way be compulsory. Take note of the following numbered paragraphs in her answer:
(14) That, indeed, FGUs cause of action which is not supported by any document other than the self-serving
Statement of Account dated March 28, 1988 x x x
(15) That it should be noted that the cause of action of FGU is not the enforcement of the Special Agents Contract
but the alleged cash accountabilities which are not based on written agreement x x x.
xxxx
(19) x x x A careful analysis of FGUs three-page complaint will show that its cause of action is not for specific
performance or enforcement of the Special Agents Contract rather, it is for the payment of the alleged cash
accountabilities incurred by defendant during the period form [sic] 1975 to 1986 which claim is executory and has not
been ratified. It is the established rule that unenforceable contracts, like this purported money claim of FGU, cannot
be sued upon or enforced unless ratified, thus it is as if they have no effect. x x x.
To support the heading Compulsory Counterclaim in her answer and give the impression that the counterclaim is
compulsory appellant alleged that FGU has unjustifiably failed to remit to defendant despite repeated demands in
gross violation of their Special Agents Contract x x x. The reference to said contract was included purposely to
mislead. While on one hand appellant alleged that appellees cause of action had nothing to do with the Special
Agents Contract, on the other hand, she claim that FGU violated said contract which gives rise of [sic] her cause of
action. Clearly, appellants cash accountabilities cannot be the offshoot of appellees alleged violation of the aforesaid
contract.
On 19 May 1999, the appellate court denied petitioners motion for reconsideration,[13] giving rise to the present petition.
Before going into the substantive issues, the Court shall first dispose of some procedural matters raised by the
parties. Petitioner claims that respondent is estopped from questioning her non-payment of docket fees because it did not raise this
particular issue when it filed its first motion - the Motion to Strike out Answer With Compulsory Counterclaim And To Declare
Defendant In Default with the trial court; rather, it was only nine months after receiving petitioners answer that respondent assailed
the trial courts lack of jurisdiction over petitioners counterclaims based on the latters failure to pay docket fees. [14] Petitioners position
is unmeritorious. Estoppel by laches arises from the negligence or omission to assert a right within a reasonable time, warranting a
presumption that the party entitled to assert it either has abandoned or declined to assert it.[15] In the case at bar, respondent cannot
be considered as estopped from assailing the trial courts jurisdiction over petitioners counterclaim since this issue was raised by
respondent with the trial court itself the body where the action is pending - even before the presentation of any evidence by the
parties and definitely, way before any judgment could be rendered by the trial court.
Meanwhile, respondent questions the jurisdiction of the Court of Appeals over the appeal filed by petitioner from the 18
September 1990 and 28 February 1991 orders of the trial court. It is significant to note that this objection to the appellate courts
jurisdiction is raised for the first time before this Court; respondent never having raised this issue before the appellate court. Although
the lack of jurisdiction of a court may be raised at any stage of the action, a party may be estopped from raising such questions if he
has actively taken part in the very proceedings which he questions, belatedly objecting to the courts jurisdiction in the event that that
the judgment or order subsequently rendered is adverse to him.[16]In this case, respondent actively took part in the proceedings before
the Court of Appeals by filing its appellees brief with the same.[17] Its participation, when taken together with its failure to object to the
appellate courts jurisdiction during the entire duration of the proceedings before such court, demonstrates a willingness to abide by
the resolution of the case by such tribunal and accordingly, respondent is now most decidedly estopped from objecting to the Court of
Appeals assumption of jurisdiction over petitioners appeal.[18]
The basic issue for resolution in this case is whether or not the counterclaim of petitioner is compulsory or permissive in
nature. A compulsory counterclaim is one which, being cognizable by the regular courts of justice, arises out of or is connected with
the transaction or occurrence constituting the subject matter of the opposing partys claim and does not require for its adjudication the
presence of third parties of whom the court cannot acquire jurisdiction.[19]
In Valencia v. Court of Appeals,[20] this Court capsulized the criteria or tests that may be used in determining whether a
counterclaim is compulsory or permissive, summarized as follows:
1. Are the issues of fact and law raised by the claim and counterclaim largely the same?
2. Would res judicata bar a subsequent suit on defendants claim absent the compulsory counterclaim rule?
3. Will substantially the same evidence support or refute plaintiffs claim as well as defendants counterclaim?
4. Is there any logical relation between the claim and the counterclaim?
Another test, applied in the more recent case of Quintanilla v. Court of Appeals,[21] is the compelling test of compulsoriness which
requires a logical relationship between the claim and counterclaim, that is, where conducting separate trials of the respective claims
of the parties would entail a substantial duplication of effort and time by the parties and the court.
As contained in her answer, petitioners counterclaims are as follows:
(20) That defendant incorporates and repleads by reference all the foregoing allegations as may be material to her
Counterclaim against FGU.
(21) That FGU is liable to pay the following just, valid and legitimate claims of defendant:
(a) the sum of at least P104,893.45 plus maximum interest thereon representing, among others, direct commissions,
profit commissions and contingent bonuses legally due to defendant; and
(b) the minimum amount of P500,000.00 plus the maximum allowable interest representing defendants accumulated
premium reserve for 1985 and previous years,
which FGU has unjustifiably failed to remit to defendant despite repeated demands in gross violation of their Special
Agents Contract and in contravention of the principle of law that every person must, in the exercise of his rights and
in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith.
(22) That as a result of the filing of this patently baseless, malicious and unjustified Complaint, and FGUs unlawful,
illegal and vindictive termination of their Special Agents Contract, defendant was unnecessarily dragged into this
litigation and to defense [sic] her side and assert her rights and claims against FGU, she was compelled to hire the
services of counsel with whom she agreed to pay the amount of P30,000.00 as and for attorneys fees and stands to
incur litigation expenses in the amount estimated to at least P20,000.00 and for which FGU should be assessed and
made liable to pay defendant.
(23) That considering further the malicious and unwarranted action of defendant in filing this grossly unfounded
action, defendant has suffered and continues to suffer from serious anxiety, mental anguish, fright and humiliation. In
addition to this, defendants name, good reputation and business standing in the insurance business as well as in the
community have been besmirched and for which FGU should be adjudged and made liable to pay moral damages to
defendant in the amount of P300,000.00 as minimum.
The above mentioned ruling in Sun Insurance has been reiterated in the recent case of Suson v. Court of Appeals. [28] In Suson,
the Court explained that although the payment of the prescribed docket fees is a jurisdictional requirement, its non-payment does not
result in the automatic dismissal of the case provided the docket fees are paid within the applicable prescriptive or reglementary
period. Coming now to the case at bar, it has not been alleged by respondent and there is nothing in the records to show that
petitioner has attempted to evade the payment of the proper docket fees for her permissive counterclaim. As a matter of fact, after
respondent filed its motion to dismiss petitioners counterclaim based on her failure to pay docket fees, petitioner immediately filed a
motion with the trial court, asking it to declare her counterclaim as compulsory in nature and therefore exempt from docket fees and,
in addition, to declare that respondent was in default for its failure to answer her counterclaim. [29] However, the trial court dismissed
petitioners counterclaim. Pursuant to this Courts ruling in Sun Insurance, the trial court should have instead given petitioner a reasonable
time, but in no case beyond the applicable prescriptive or reglementary period, to pay the filing fees for her permissive counterclaim.
Petitioner asserts that the trial court should have declared respondent in default for having failed to answer her
counterclaim.[30] Insofar as the permissive counterclaim of petitioner is concerned, there is obviously no need to file an answer until
petitioner has paid the prescribed docket fees for only then shall the court acquire jurisdiction over such claim.[31] Meanwhile, the
compulsory counterclaim of petitioner for damages based on the filing by respondent of an allegedly unfounded and malicious suit
need not be answered since it is inseparable from the claims of respondent. If respondent were to answer the compulsory
counterclaim of petitioner, it would merely result in the former pleading the same facts raised in its complaint.[32]
WHEREFORE, the assailed Decision of the Court of Appeals promulgated on 23 December 1998 and its 19 May 1999
Resolution are hereby MODIFIED. The compulsory counterclaim of petitioner for damages filed in Civil Case No. 89-3816 is ordered
REINSTATED. Meanwhile, the Regional Trial Court of Makati (Branch 134) is ordered to require petitioner to pay the prescribed
docket fees for her permissive counterclaim (direct commissions, profit commissions, contingent bonuses and accumulated premium
reserves), after ascertaining that the applicable prescriptive period has not yet set in.[33]
SO ORDERED.

(24) That in order to discourage the filing of groundless and malicious suits like FGUs Complaint, and by way of
serving [as] an example for the public good, FGU should be penalized and assessed exemplary damages in the sum
of P100,000.00 or such amount as the Honorable Court may deem warranted under the circumstances. [22]

Tested against the abovementioned standards, petitioners counterclaim for commissions, bonuses, and accumulated premium
reserves is merely permissive. The evidence required to prove petitioners claims differs from that needed to establish respondents
demands for the recovery of cash accountabilities from petitioner, such as cash advances and costs of premiums. The recovery of
respondents claims is not contingent or dependent upon establishing petitioners counterclaim, such that conducting separate trials
will not result in the substantial duplication of the time and effort of the court and the parties. One would search the records in vain for
a logical connection between the parties claims. This conclusion is further reinforced by petitioners own admissions since she
declared in her answer that respondents cause of action, unlike her own, was not based upon the Special Agents
Contract.[23] However, petitioners claims for damages, allegedly suffered as a result of the filing by respondent of its complaint, are
compulsory.[24]

There is no need for petitioner to pay docket fees for her compulsory counterclaim. [25] On the other hand, in order for the trial
court to acquire jurisdiction over her permissive counterclaim, petitioner is bound to pay the prescribed docket fees. [26] The rule on the
payment of filing fees has been laid down by the Court in the case of Sun Insurance Office, Ltd. v. Hon. Maximiano Asuncion [27]-

1. It is not simply the filing of the complaint or appropriate initiatory pleading, but the payment of the prescribed
docket fee, that vests a trial court with jurisdiction over the subject-matter or nature of the action. Where the filing of
the initiatory pleading is not accompanied by payment of the docket fee, the court may allow payment of the fee
within a reasonable time but in no case beyond the applicable prescriptive or reglementary period.

2. The same rule applies to permissive counterclaims, third-party claims and similar pleadings, which shall not be
considered filed until and unless the filing fee prescribed therefor is paid. The court may allow payment of said fee
within a reasonable time but also in no case beyond its applicable prescriptive or reglementary period.

3. Where the trial court acquires jurisdiction over a claim by the filing of the appropriate pleading and payment of the
prescribed filing fee but, subsequently, the judgment awards a claim not specified in the pleading, or if specified the
same has been left for determination by the court, the additional filing fee therefor shall constitute a lien on the
judgment. It shall be the responsibility of the Clerk of Court or his duly authorized deputy to enforce said lien and
assess and collect the additional fee.
 SECOND DIVISION
[G.R. No. 146019. June 8, 2004]
ARMANDO M. LASCANO, petitioner, vs. UNIVERSAL STEEL SMELTING CO., INC., REYNALDO U. LIM and
HON. REGIONAL TRIAL COURT OF QUEZON CITY, respondents.
DECISION
QUISUMBING, J.:
For review are (1) the resolution dated August 7, 2000 of the Court of Appeals in CA-G.R. SP No. 59972,
[1]
which dismissed petitioners special civil action for certiorari because of late filing; and (2) the resolution of November
[2]
15, 2000, denying petitioners motion for reconsideration. In the interest of the speedy administration of justice, we
shall also inquire into the merits of said special civil action.
The antecedent facts are as follows:
Sometime in 1990, petitioner Armando Lascano had a construction project at No. 18 Dalsol
Street, GSIS Village, Project 8, Quezon City. This project required a number of steel bars of various grades, which
petitioner ordered from private respondent Universal Steel Smelting Co., Inc. (USSCI). On August 30, 1990, the steel
bars valued at P104,268 were received by petitioners representative, Rolando Nanquil. When the amount due
thereon was not paid, USSCI demanded payment. Instead of complying, petitioner denied that he ordered the steel
bars from USSCI.
Upon advice of its lawyer, USSCI filed a criminal complaint for estafa against petitioner with the Quezon City
Prosecutors Office. The complaint was dismissed on September 5, 1991. USSCIs motion for reconsideration was
denied on November 14, 1991 and its petition for review filed with the Department of Justice was also
dismissed per resolution dated June 19, 1992.
In the meantime, the Manila Bulletin in its August 23, 1991 issue, published a news item entitled School Owner
in QC Sued. On August 27, 1991, another news item, School Owner Faces Rap, was published, this time
by Tempo. In both news items, the school owner referred to was petitioner Armando Lascano.
Hence, on August 25, 1992, petitioner filed with public respondent Regional Trial Court of Quezon City, Branch
93, a complaint for damages against private respondents USSCI and its Vice-President Reynaldo Lim, for alleged
malicious prosecution and allegedly causing the publication in two (2) newspapers of general circulation, that he was
being sued for estafa.
The case was docketed as Civil Case No. Q-92-13212 and on December 27, 1994, the trial court dismissed
the complaint, thus:
WHEREFORE, premises considered, the Court hereby dismisses the complaint for failure of plaintiff to establish his causes of
action by preponderant evidence.
On the counterclaim, the Court orders plaintiff to pay the defendants the following:
1. P104,268.00 with interest thereon at 14% per annum from August 30, 1990 until fully paid;
2. P100,000.00 for moral damages;
3. P50,000.00 for exemplary damages;
4. P35,000.00 as and for reasonable attorneys fees; and
5. Costs of suit.
SO ORDERED. [3]
Petitioner received said Decision on January 16, 1995. Petitioners counsel then filed a Notice of Appeal
on January 20, 1995, which was approved by the trial court in an Order dated January 25, 1995. However, the Court
of Appeals dismissed the appeal in its Resolution dated August 13, 1998, in this wise:
Pursuant to Section 1 (c), Rule 50 in relation to Section 4 of Rule 41 of the 1997 Rules of Civil Procedure, as amended, the
instant appeal is hereby DISMISSED for failure of the appellant to pay the docket and other lawful fees.
SO ORDERED. [4]
On September 5, 1998, said Resolution became final and executory and the Court of Appeals issued an entry
of judgment thereon. Private respondents then promptly filed on January 10, 2000 a motion for execution of
the December 27, 1994 judgment, which the court a quo granted on February 9, 2000. On March 15, 2000, petitioner
filed a motion for reconsideration of the trial courts Order granting the motion for execution, but the same was denied
on April 28, 2000.
Thus, on July 31, 2000, petitioner filed a special civil action for certiorari with the Court of Appeals. However,
the Court of Appeals, in its Resolution of August 7, 2000, dismissed said petition on the ground of late
filing.Petitioner then filed a motion for reconsideration, which was denied in the appellate courts Resolution
dated November 15, 2000.
Hence, the instant petition ascribing to the appellate court the following errors:
I
THE COURT OF APPEALS GRAVELY ERRED IN STRICTLY APPLYING THE RULES IN THE FILING OF PETITION
FOR CERTIORARI CONTRARY TO THE LIBERAL CONSTRUCTION RULE AS ECHOED IN SEVERAL SUPREME
COURT DECISIONS.
II
THE COURT OF APPEALS GRAVELY ERRED IN DISREGARDING THE RULE ON INTEREST OF JUSTICE AND
EQUITY IN FAVOR OF TECHNICALITY WHERE THE RTC DECISION SUBJECT OF EXECUTION WAS UNJUST AND
VOID HAVING BEEN RENDERED ON PURE SPECULATION AND CONJECTURE WITHOUT CITATION OF SPECIFIC
EVIDENCE. [5]
On the procedural aspect, we find merit in the petition.
In finding that the special civil action for certiorari was filed out of time, the Court of Appeals applied Supreme
Court Circular No. 39-98, which took effect on September 1, 1998. Said circular amended Section 4, Rule 65 of the
[6]
1997 Rules of Civil Procedure as follows:
Sec. 4. Where and when petition to be filed. The petition may be filed not later than sixty (60) days from notice of the judgment,
order or resolution sought to be assailed in the Supreme Court or, if it relates to the acts or omissions of a lower court or of a
corporation, board, officer or person, in the Regional Trial Court exercising jurisdiction over the territorial area as defined by the
Supreme Court. It may also be filed in the Court of Appeals whether or not the same is in aid of its appellate jurisdiction, or in
the Sandiganbayan if it is in aid of its jurisdiction. If it involves the acts or omissions of a quasi-judicial agency, and unless
otherwise provided by law or these Rules, the petition shall be filed in and cognizable only by the Court of Appeals.
If the petitioner had filed a motion for new trial or reconsideration in due time after notice of said judgment, order or resolution,
the period herein fixed shall be interrupted. If the motion is denied, the aggrieved party may file the petition within the remaining
period, but which shall not be less than five (5) days in any event, reckoned from notice of such denial. No extension of time to
file petition shall be granted except for the most compelling reason and in no case to exceed fifteen (15) days. (Underscoring
ours).
Records show that petitioner received on March 3, 2000 a copy of respondent trial courts February 9, 2000
Order granting the motion for execution of the December 27, 1994 judgment. He filed the motion for reconsideration
on March 15, 2000 or twelve (12) days after notice of the assailed Order. Thus, consistent with SC Circular No. 39-
98, the original 60-day period was interrupted when petitioner filed a motion for reconsideration. Since the motion
was denied, petitioner had the remaining period of forty-eight (48) days within which to file the special civil action for
certiorari with the Court of Appeals.
Evidence on record shows petitioner received on June 1, 2000 a copy of the trial courts April 28, 2000 Order
denying his motion for reconsideration. Therefore, conformably with SC Circular No. 39-98, the filing of the special
civil action for certiorari with the Court of Appeals on July 31, 2000, or on the 60th day, was twelve (12) days beyond
the reglementary period.
We must point out, however, that Supreme Court Circular No. 56-2000, which took effect on September 1,
[7]
2000 further amended Section 4 of Rule 65 as follows:
Sec 4. When and where petition filed. - The petition shall be filed not later than sixty (60) days from notice of the judgment,
order or resolution. In case a motion for reconsideration or new trial is timely filed, whether such motion is required or not, the
sixty (60) day period shall be counted from notice of the denial of the said motion. (Underscoring ours).
Under the second amendment, the 60-day period within which to file the special civil action for certiorari starts
to run from receipt of notice of the denial of the motion for reconsideration. However, it bears stressing, at the time of
petitioners filing of the special civil action for certiorari with the Court of Appeals on July 31, 2000, SC Circular No.
56-2000 was not yet in effect. Therefore, the sole issue for our consideration in this case is whether or not said
circular may be applied retroactively.
The present question does not pose a novel issue. In an analogous case, San Luis v. Court of Appeals, the [8]
Court of Appeals likewise reckoned the counting of the 60-day period from petitioners receipt of a copy of the
assailed Order, considered the interruption of the running of the period by the filing of the motion for reconsideration,
and held that the remaining period resumed to run on the date petitioner received the Order denying his motion for
reconsideration.
In said case of San Luis, petitioners special civil action for certiorari was filed with the Court of Appeals
on January 7, 2000, long before SC Circular No. 56-2000 took effect. Nonetheless, we applied the circular
retroactively and held that the appellate court erred in dismissing the special civil action for certiorari on the ground of
late filing. We said therein:
Settled is the rule that remedial statutes or statutes relating to remedies or modes of procedure, which do not create new rights or
take away vested rights but only operate in furtherance of the remedy or confirmation of rights already existing, do not come
within the purview of the general rule against the retroactive operation of statutes. Procedural laws are construed to be applicable
to actions pending and undetermined at the time of their passage, and are deemed retroactive in that sense and to that extent. As a
general rule, the retroactive application of procedural laws cannot be considered violative of any personal rights because no
vested right may attach to nor arise therefrom.[9]
We see no reason why we should treat the instant case differently. Thus, pursuant to SC Circular No. 56-2000,
petitioners 60-day period to file the special civil action for certiorari should be counted from his receipt on June 1,
2000 of the Order of April 28, 2000, denying his motion for reconsideration. Hence, the special civil action for
certiorari having been filed on July 31, 2000, or the last day before the reglementary period expired, the Court of
Appeals should not have dismissed the same on the ground of late filing.
Considering the circumstances in this case, we could direct the Court of Appeals to decide on the merits the
issues raised in petitioners special civil action for certiorari. However, that would only result in further delay before
the resolution of this case. In our view, it is preferable to settle the entire controversy now in a single proceeding,
leaving no root or branch to bear the seeds of future litigation. Following the San Luis decision, if based on the
records including the pleadings and the evidence, the dispute could be resolved by us, we will do so to serve the
ends of justice, instead of remanding the case to the lower court for further proceedings. [10]
In the petition for certiorari, petitioner assigns the following errors to the trial court:
I
THE RESPONDENT COURT GRAVELY ABUSED ITS DISCRETION IN GRANTING THE ISSUANCE OF WRIT OF
EXECUTION.
II
THE RESPONDENT COURT GRAVELY ABUSED ITS DISCRETION IN UPHOLDING THAT IT IS THE MINISTERIAL
DUTY THE (sic) COURT TO ISSUE THE WRIT OF EXECUTION.
III
THE RESPONDENT COURT GRAVELY ABUSED ITS DISCRETION IN UPHOLDING THAT THE EXECUTION OF
WHATEVER JUDGMENT THAT MAY HAVE BEEN RENDERED WILL PUT THE (SIC) REST THE CONTROVERSY
BETWEEN PARTY LITIGANTS.
IV
THE RESPONDENT COURT GRAVELY ABUSED ITS DISCRETION IN DISREGARDING THE RULE THAT A WRIT
OF EXECUTION MAY BE DISALLOWED ON EQUITABLE GROUNDS. [11]
Petitioner contends that the December 27, 1994 judgment is devoid of factual and legal bases. He protests the
order to pay private respondents P104,268 representing the value of the steel bars delivered to him.According to
petitioner, he transacted business with LNG Marketing, not with private respondents. He claims that LNG Marketing
was a dealer of private respondents, but that both could not compete for one client. [12]
In our view, that petitioner transacted with LNG Marketing for the purchase of steel bars might well be true, but
it did not preclude the fact that private respondents had delivered steel bars to petitioner. The fact of delivery to
petitioner of the subject steel bars is evidenced by delivery receipts signed by one Rolando Nanquil acting as
petitioners agent. While petitioner denied knowing said Rolando Nanquil, the delivery receipts of LNG Marketing
were signed by the same Rolando Nanquil, as duly authorized agent of petitioner. Delivery of subject steel bars to
petitioner having been established by preponderance of evidence, we could not conclude that the trial court erred
when it ordered petitioner to pay private respondents the value of said steel bars.
Petitioner questions the trial courts order to pay private respondents P100,000 and P50,000 as moral and
exemplary damages, respectively. He maintains that he filed the complaint in good faith, which is inconsistent with
the order to pay moral damages; and that there was no proof he acted in a wanton, fraudulent, reckless, oppressive
and malevolent manner, as to justify exemplary damages.
Petitioner misses the point that the court a quo ordered the payment of moral damages not because he filed
the complaint in bad faith, but because of his unjustified refusal to pay a just debt. Article 2220 of the Civil Code
provides:
ART. 2220. Willful injury to property may be a legal ground for awarding moral damages if the court should find that, under the
circumstances, such damages are justly due. The same rule applies to breaches of contract where the defendant acted
fraudulently or in bad faith. (Underscoring ours).
 When payment on the delivered steel bars was demanded, petitioner, instead of complying with his obligation,
denied having transacted with private respondents. Such cold refusal to pay a just debt amounts to a breach of
contract in bad faith, as contemplated by the aforecited provision. Hence, the order to pay moral damages is in
accordance with law, but only with regard to respondent individual (Reynaldo Lim) and not to respondent corporation
(USSCI). A corporation cannot suffer nor be entitled to moral damages. [13]

As to exemplary damages, although the same cannot be recovered as a matter of right, they need not be
proved. But before considering whether exemplary damages should be awarded, it must first be shown that an
award of moral, temperate or compensatory damages obtains. In the instant case, as the order to pay moral
[14]

damages to private individual respondent is proper, it follows that the adjudication of exemplary damages on that
basis is also in order.

As to the amount of damages, the court a quo ordered payment of P100,000 for moral damages and P50,000
for exemplary damages. However, considering the amount of the unpaid debt at issue in this case, we are of the
considered view that P10,000 as moral damages and P5,000 in exemplary damages would suffice under the
circumstances.

Finally, petitioner argues private respondents counterclaims are merely permissive, which require payment of
docket fees. Indeed, before the trial court may acquire jurisdiction over permissive counterclaims, docket fees
thereon must first be paid. However, we find that the counterclaims herein are not permissive, but compulsory. On
[15] [16]

this point, Section 7, Rule 6 of the Revised Rules of Civil Procedure is pertinent:

SEC. 7. Compulsory counterclaim. A compulsory counterclaim is one which, being cognizable by the regular courts of justice,
arises out of or is connected with the transaction or occurrence constituting the subject matter of the opposing partys claim and
does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction. Such a
counterclaim must be within the jurisdiction of the court both as to the amount and the nature thereof, except that in an original
action before the Regional Trial Court, the counterclaim may be considered compulsory regardless of the amount.

The alleged malicious filing of estafa against petitioner is necessarily connected with the non-payment of the
value of steel bars delivered to petitioner. The resolution of the latter issue does not require the presence of third
parties of whom the court a quo cannot acquire jurisdiction. Therefore, the counterclaims raised by private
respondents are clearly compulsory in nature. Thus, non-payment of docket fees does not affect the jurisdiction of
the trial court to rule thereon.

In sum, we find no error nor grave abuse of discretion on the part of public respondent in rendering the
assailed judgment dismissing the complaint. But the award to private respondents of damages as part of their
counterclaims against the petitioner, particularly with regard to damages as herein elucidated, ought to be modified
accordingly.

WHEREFORE, the resolutions of the appellate court dated August 7, 2000 and November 15, 2000 in CA-
G.R. SP No. 59972 are SET ASIDE. The assailed decision of the Regional Trial Court of Quezon City, Branch 93, in Civil
Case No. Q-92-13212, dated December 27, 1994, is AFFIRMED, except as to the amounts of moral and exemplary
damages, which are MODIFIED and reduced to only P10,000.00 and P5,000.00, respectively. No pronouncement as
to costs.

SO ORDERED.
 THIRD DIVISION
[G.R. No. 155173. November 23, 2004]
LAFARGE CEMENT PHILIPPINES, INC., (formerly Lafarge Philippines, Inc.), LUZON CONTINENTAL LAND
CORPORATION, CONTINENTAL OPERATING CORPORATION and PHILIP ROSEBERG, petitioners,
vs. CONTINENTAL CEMENT CORPORATION, GREGORY T. LIM and ANTHONY A.
MARIANO, respondents.
DECISION
PANGANIBAN, J.:
May defendants in civil cases implead in their counterclaims persons who were not parties to the original
complaints? This is the main question to be answered in this controversy.
The Case
Before us is a Petition for Review[1] under Rule 45 of the Rules of Court, seeking to nullify the May 22,
2002 and the September 3, 2002 Orders[3] of the Regional Trial Court (RTC) of Quezon City (Branch 80) in Civil
[2]
Case No. Q-00-41103. The decretal portion of the first assailed Order reads:
WHEREFORE, in the light of the foregoing as earlier stated, the plaintiffs motion to dismiss claims is granted. Accordingly, the
defendants claims against Mr. Lim and Mr. Mariano captioned as their counterclaims are dismissed. [4]
The second challenged Order denied petitioners Motion for Reconsideration.
The Facts
Briefly, the origins of the present controversy can be traced to the Letter of Intent (LOI) executed by both
parties on August 11, 1998, whereby Petitioner Lafarge Cement Philippines, Inc. (Lafarge) -- on behalf of its affiliates
and other qualified entities, including Petitioner Luzon Continental Land Corporation (LCLC) -- agreed to purchase
the cement business of Respondent Continental Cement Corporation (CCC). On October 21, 1998, both parties
entered into a Sale and Purchase Agreement (SPA). At the time of the foregoing transactions, petitioners were well
aware that CCC had a case pending with the Supreme Court. The case was docketed as GR No. 119712,
entitled Asset Privatization Trust (APT) v. Court of Appeals and Continental Cement Corporation.
In anticipation of the liability that the High Tribunal might adjudge against CCC, the parties, under Clause 2 (c)
of the SPA, allegedly agreed to retain from the purchase price a portion of the contract price in the amount
of P117,020,846.84 -- the equivalent of US$2,799,140. This amount was to be deposited in an interest-bearing
account in the First National City Bank of New York (Citibank) for payment to APT, the petitioner in GR No. 119712.
However, petitioners allegedly refused to apply the sum to the payment to APT, despite the subsequent finality
of the Decision in GR No. 119712 in favor of the latter and the repeated instructions of Respondent CCC. Fearful
that nonpayment to APT would result in the foreclosure, not just of its properties covered by the SPA with Lafarge
but of several other properties as well, CCC filed before the Regional Trial Court of Quezon City on June 20, 2000, a
Complaint with Application for Preliminary Attachment against petitioners. Docketed as Civil Case No. Q-00-41103,
the Complaint prayed, among others, that petitioners be directed to pay the APT Retained Amount referred to in
Clause 2 (c) of the SPA.
Petitioners moved to dismiss the Complaint on the ground that it violated the prohibition on forum-shopping.
Respondent CCC had allegedly made the same claim it was raising in Civil Case No. Q-00-41103 in another action,
which involved the same parties and which was filed earlier before the International Chamber of Commerce. After the
trial court denied the Motion to Dismiss in its November 14, 2000 Order, petitioners elevated the matter before the
Court of Appeals in CA-GR SP No. 68688.
In the meantime, to avoid being in default and without prejudice to the outcome of their appeal, petitioners filed
their Answer and Compulsory Counterclaims ad Cautelam before the trial court in Civil Case No. Q-00-41103. In
their Answer, they denied the allegations in the Complaint. They prayed -- by way of compulsory counterclaims
against Respondent CCC, its majority stockholder and president Gregory T. Lim, and its corporate secretary Anthony
A. Mariano -- for the sums of (a) P2,700,000 each as actual damages, (b) P100,000,000 each as exemplary
damages, (c) P100,000,000 each as moral damages, and (d) P5,000,000 each as attorneys fees plus costs of suit.
Petitioners alleged that CCC, through Lim and Mariano, had filed the baseless Complaint in Civil Case No. Q-
00-41103 and procured the Writ of Attachment in bad faith. Relying on this Courts pronouncement in Sapugay v.
CA,[5] petitioners prayed that both Lim and Mariano be held jointly and solidarily liable with Respondent CCC.
On behalf of Lim and Mariano who had yet to file any responsive pleading, CCC moved to dismiss petitioners
compulsory counterclaims on grounds that essentially constituted the very issues for resolution in the instant Petition.
Ruling of the Trial Court
On May 22, 2002, the Regional Trial Court of Quezon City (Branch 80) dismissed petitioners counterclaims for
several reasons, among which were the following: a) the counterclaims against Respondents Lim and Mariano were
not compulsory; b) the ruling in Sapugay was not applicable; and c) petitioners Answer with Counterclaims violated
procedural rules on the proper joinder of causes of action. [6]
Acting on the Motion for Reconsideration filed by petitioners, the trial court -- in an Amended Order dated
September 3, 2002[7] -- admitted some errors in its May 22, 2002 Order, particularly in its pronouncement that their
counterclaim had been pleaded against Lim and Mariano only. However, the RTC clarified that it was dismissing the
counterclaim insofar as it impleaded Respondents Lim and Mariano, even if it included CCC.
Hence this Petition.[8]
Issues
In their Memorandum, petitioners raise the following issues for our consideration:
[a] Whether or not the RTC gravely erred in refusing to rule that Respondent CCC has no personality to move to dismiss petiti oners
compulsory counterclaims on Respondents Lim and Marianos behalf.
[b] Whether or not the RTC gravely erred in ruling that (i) petitioners counterclaims against Respondents Lim and Mariano are not
compulsory; (ii) Sapugay v. Court of Appeals is inapplicable here; and (iii) petitioners violated the rule on joinder of causes of
action.[9]
For clarity and coherence, the Court will resolve the foregoing in reverse order.
 The Courts Ruling
The Petition is meritorious.
First Issue:
Counterclaims and
Joinder of Causes of Action.
Petitioners Counterclaims
Compulsory
Counterclaims are defined in Section 6 of Rule 6 of the Rules of Civil Procedure as any claim which a
defending party may have against an opposing party. They are generally allowed in order to avoid a multiplicity of
suits and to facilitate the disposition of the whole controversy in a single action, such that the defendants demand
may be adjudged by a counterclaim rather than by an independent suit. The only limitations to this principle are (1)
that the court should have jurisdiction over the subject matter of the counterclaim, and (2) that it could acquire
jurisdiction over third parties whose presence is essential for its adjudication.[10]
A counterclaim may either be permissive or compulsory. It is permissive if it does not arise out of or is not
necessarily connected with the subject matter of the opposing partys claim.[11] A permissive counterclaim is
essentially an independent claim that may be filed separately in another case.
A counterclaim is compulsory when its object arises out of or is necessarily connected with the transaction or
occurrence constituting the subject matter of the opposing partys claim and does not require for its adjudication the
presence of third parties of whom the court cannot acquire jurisdiction.[12]
Unlike permissive counterclaims, compulsory counterclaims should be set up in the same action; otherwise,
they would be barred forever. NAMARCO v. Federation of United Namarco Distributors [13] laid down the following
criteria to determine whether a counterclaim is compulsory or permissive: 1) Are issues of fact and law raised by the
claim and by the counterclaim largely the same? 2) Would res judicata bar a subsequent suit on defendants claim,
absent the compulsory counterclaim rule? 3) Will substantially the same evidence support or refute plaintiffs claim as
well as defendants counterclaim? 4) Is there any logical relation between the claim and the counterclaim? A positive
answer to all four questions would indicate that the counterclaim is compulsory.
Adopted in Quintanilla v. CA[14] and reiterated in Alday v. FGU Insurance Corporation,[15] the compelling test of
compulsoriness characterizes a counterclaim as compulsory if there should exist a logical relationship between the
main claim and the counterclaim. There exists such a relationship when conducting separate trials of the respective
claims of the parties would entail substantial duplication of time and effort by the parties and the court; when the
multiple claims involve the same factual and legal issues; or when the claims are offshoots of the same basic
controversy between the parties.
We shall now examine the nature of petitioners counterclaims against respondents with the use of the
foregoing parameters.
Petitioners base their counterclaim on the following allegations:
Gregory T. Lim and Anthony A. Mariano were the persons responsible for making the bad faith decisions for, and causing
plaintiff to file this baseless suit and to procure an unwarranted writ of attachment, notwithstanding their knowledge that plaintiff
has no right to bring it or to secure the writ. In taking such bad faith actions, Gregory T. Lim was motivated by his personal
interests as one of the owners of plaintiff while Anthony A. Mariano was motivated by his sense of personal loyalty to Gregory
T. Lim, for which reason he disregarded the fact that plaintiff is without any valid cause.
Consequently, both Gregory T. Lim and Anthony A. Mariano are the plaintiffs co-joint tortfeasors in the commission of the acts
complained of in this answer and in the compulsory counterclaims pleaded below. As such they should be held jointly and
solidarily liable as plaintiffs co-defendants to those compulsory counterclaims pursuant to the Supreme Courts decision in
Sapugay v. Mobil.
xxxxxxxxx
The plaintiffs, Gregory T. Lim and Anthony A. Marianos bad faith filing of this baseless case has compelled the defendants to
engage the services of counsel for a fee and to incur costs of litigation, in amounts to be proved at trial, but in no case less than
P5 million for each of them and for which plaintiff Gregory T. Lim and Anthony A. Mariano should be held jointly and
solidarily liable.
The plaintiffs, Gregory T. Lims and Anthony A. Marianos actions have damaged the reputations of the defendants and they
should be held jointly and solidarily liable to them for moral damages of P100 million each.
In order to serve as an example for the public good and to deter similar baseless, bad faith litigation, the plaintiff, Gregory T.
Lim and Anthony A. Mariano should be held jointly and solidarily liable to the defendants for exemplary damages of P100
million each. [16]
The above allegations show that petitioners counterclaims for damages were the result of respondents (Lim
and Mariano) act of filing the Complaint and securing the Writ of Attachment in bad faith. Tiu Po v.
Bautista[17] involved the issue of whether the counterclaim that sought moral, actual and exemplary damages and
attorneys fees against respondents on account of their malicious and unfounded complaint was compulsory. In that
case, we held as follows:
Petitioners counterclaim for damages fulfills the necessary requisites of a compulsory counterclaim. They are damages claimed
to have been suffered by petitioners as a consequence of the action filed against them. They have to be pleaded in the same
action; otherwise, petitioners would be precluded by the judgment from invoking the same in an independent action. The
pronouncement in Papa vs. Banaag (17 SCRA 1081) (1966) is in point:
Compensatory, moral and exemplary damages, allegedly suffered by the creditor in consequence of the debtors action, are also
compulsory counterclaim barred by the dismissal of the debtors action. They cannot be claimed in a subsequent action by the
creditor against the debtor.
Aside from the fact that petitioners counterclaim for damages cannot be the subject of an independent action, it is the same
evidence that sustains petitioners counterclaim that will refute private respondents own claim for damages. This is an additional
factor that characterizes petitioners counterclaim as compulsory.[18]
Moreover, using the compelling test of compulsoriness, we find that, clearly, the recovery of petitioners
counterclaims is contingent upon the case filed by respondents; thus, conducting separate trials thereon will result in
a substantial duplication of the time and effort of the court and the parties.
Since the counterclaim for damages is compulsory, it must be set up in the same action; otherwise, it would be
barred forever. If it is filed concurrently with the main action but in a different proceeding, it would be abated on the
ground of litis pendentia; if filed subsequently, it would meet the same fate on the ground of res judicata.[19]
Sapugay v. Court of Appeals
Applicable to the Case at Bar
 Sapugay v. Court of Appeals finds application in the present case. In Sapugay, Respondent Mobil Philippines
filed before the trial court of Pasig an action for replevin against Spouses Marino and Lina Joel Sapugay. The
Complaint arose from the supposed failure of the couple to keep their end of their Dealership Agreement. In their
Answer with Counterclaim, petitioners alleged that after incurring expenses in anticipation of the Dealership
Agreement, they requested the plaintiff to allow them to get gas, but that it had refused. It claimed that they still had
to post a surety bond which, initially fixed at P200,000, was later raised to P700,000.
The spouses exerted all efforts to secure a bond, but the bonding companies required a copy of the Dealership
Agreement, which respondent continued to withhold from them. Later, petitioners discovered that respondent and its
manager, Ricardo P. Cardenas, had intended all along to award the dealership to Island Air Product Corporation.
In their Answer, petitioners impleaded in the counterclaim Mobil Philippines and its manager -- Ricardo P.
Cardenas -- as defendants. They prayed that judgment be rendered, holding both jointly and severally liable for pre-
operation expenses, rental, storage, guarding fees, and unrealized profit including damages. After both Mobil and
Cardenas failed to respond to their Answer to the Counterclaim, petitioners filed a Motion to Declare Plaintiff and its
Manager Ricardo P. Cardenas in Default on Defendants Counterclaim.
Among the issues raised in Sapugay was whether Cardenas, who was not a party to the original action, might
nevertheless be impleaded in the counterclaim. We disposed of this issue as follows:
A counterclaim is defined as any claim for money or other relief which a defending party may have against an opposing party.
However, the general rule that a defendant cannot by a counterclaim bring into the action any claim against persons other than
the plaintiff admits of an exception under Section 14, Rule 6 which provides that when the presence of parties other than those to
the original action is required for the granting of complete relief in the determination of a counterclaim or cross-claim, the court
shall order them to be brought in as defendants, if jurisdiction over them can be obtained. The inclusion, therefore, of Cardenas
in petitioners counterclaim is sanctioned by the rules.[20]
The prerogative of bringing in new parties to the action at any stage before judgment is intended to accord
complete relief to all of them in a single action and to avert a duplicity and even a multiplicity of suits thereby.
In insisting on the inapplicability of Sapugay, respondents argue that new parties cannot be included in a
counterclaim, except when no complete relief can be had. They add that [i]n the present case, Messrs. Lim and
Mariano are not necessary for petitioners to obtain complete relief from Respondent CCC as plaintiff in the lower
court. This is because Respondent CCC as a corporation with a separate [legal personality] has the juridical capacity
to indemnify petitioners even without Messrs. Lim and Mariano.[21]
We disagree. The inclusion of a corporate officer or stockholder -- Cardenas in Sapugay or Lim and Mariano in
the instant case -- is not premised on the assumption that the plaintiff corporation does not have the financial ability
to answer for damages, such that it has to share its liability with individual defendants. Rather, such inclusion is
based on the allegations of fraud and bad faith on the part of the corporate officer or stockholder. These allegations
may warrant the piercing of the veil of corporate fiction, so that the said individual may not seek refuge therein, but
may be held individually and personally liable for his or her actions.
In Tramat Mercantile v. Court of Appeals,[22] the Court held that generally, it should only be the corporation that
could properly be held liable. However, circumstances may warrant the inclusion of the personal liability of a
corporate director, trustee, or officer, if the said individual is found guilty of bad faith or gross negligence in directing
corporate affairs.
Remo Jr. v. IAC[23] has stressed that while a corporation is an entity separate and distinct from its stockholders,
the corporate fiction may be disregarded if used to defeat public convenience, justify a wrong, protect fraud, or
defend crime. In these instances, the law will regard the corporation as an association of persons, or in case of two
corporations, will merge them into one. Thus, there is no debate on whether, in alleging bad faith on the part of Lim
and Mariano the counterclaims had in effect made them indispensable parties thereto; based on the alleged facts,
both are clearly parties in interest to the counterclaim.[24]
Respondents further assert that Messrs. Lim and Mariano cannot be held personally liable [because their
assailed acts] are within the powers granted to them by the proper board resolutions; therefore, it is not a personal
decision but rather that of the corporation as represented by its board of directors.[25] The foregoing assertion,
however, is a matter of defense that should be threshed out during the trial; whether or not fraud is extant under the
circumstances is an issue that must be established by convincing evidence.[26]
Suability and liability are two distinct matters. While the Court does rule that the counterclaims against
Respondent CCCs president and manager may be properly filed, the determination of whether both can in fact be
held jointly and severally liable with respondent corporation is entirely another issue that should be ruled upon by the
trial court.
However, while a compulsory counterclaim may implead persons not parties to the original complaint, the
general rule -- a defendant in a compulsory counterclaim need not file any responsive pleading, as it is deemed to
have adopted the allegations in the complaint as its answer -- does not apply. The filing of a responsive pleading is
deemed a voluntary submission to the jurisdiction of the court; a new party impleaded by the plaintiff in a compulsory
counterclaim cannot be considered to have automatically and unknowingly submitted to the jurisdiction of the court.
A contrary ruling would result in mischievous consequences whereby a party may be indiscriminately impleaded as a
defendant in a compulsory counterclaim; and judgment rendered against it without its knowledge, much less
participation in the proceedings, in blatant disregard of rudimentary due process requirements.
The correct procedure in instances such as this is for the trial court, per Section 12 of Rule 6 of the Rules of
Court, to order [such impleaded parties] to be brought in as defendants, if jurisdiction over them can be obtained, by
directing that summons be served on them. In this manner, they can be properly appraised of and answer the
charges against them. Only upon service of summons can the trial court obtain jurisdiction over them.
In Sapugay, Cardenas was furnished a copy of the Answer with Counterclaim, but he did not file any
responsive pleading to the counterclaim leveled against him. Nevertheless, the Court gave due consideration to
certain factual circumstances, particularly the trial courts treatment of the Complaint as the Answer of Cardenas to
the compulsory counterclaim and of his seeming acquiescence thereto, as evidenced by his failure to make any
objection despite his active participation in the proceedings. It was held thus:
It is noteworthy that Cardenas did not file a motion to dismiss the counterclaim against him on the ground of lack of jurisdiction.
While it is a settled rule that the issue of jurisdiction may be raised even for the first time on appeal, this does not obtain in the
instant case. Although it was only Mobil which filed an opposition to the motion to declare in default, the fact that the trial court
denied said motion, both as to Mobil and Cardenas on the ground that Mobils complaint should be considered as the answer to
petitioners compulsory counterclaim, leads us to the inescapable conclusion that the trial court treated the opposition as having
been filed in behalf of both Mobil and Cardenas and that the latter had adopted as his answer the allegations raised in the
complaint of Mobil. Obviously, it was this ratiocination which led the trial court to deny the motion to declare Mobil and
Cardenas in default. Furthermore, Cardenas was not unaware of said incidents and the proceedings therein as he testified and
was present during trial, not to speak of the fact that as manager of Mobil he would necessarily be interested in the case and
could readily have access to the records and the pleadings filed therein.
By adopting as his answer the allegations in the complaint which seeks affirmative relief, Cardenas is deemed to have
recognized the jurisdiction of the trial court over his person and submitted thereto. He may not now be heard to repudiate or
question that jurisdiction.[27]
Such factual circumstances are unavailing in the instant case. The records do not show that Respondents Lim
and Mariano are either aware of the counterclaims filed against them, or that they have actively participated in the
proceedings involving them. Further, in dismissing the counterclaims against the individual respondents, the court a
quo -- unlike in Sapugay -- cannot be said to have treated Respondent CCCs Motion to Dismiss as having been filed
on their behalf.
Rules on Permissive Joinder of Causes
of Action or Parties Not Applicable
Respondent CCC contends that petitioners counterclaims violated the rule on joinder of causes of action. It
argues that while the original Complaint was a suit for specific performance based on a contract, the counterclaim for
damages was based on the tortuous acts of respondents. [28] In its Motion to Dismiss, CCC cites Section 5 of Rule 2
and Section 6 of Rule 3 of the Rules of Civil Procedure, which we quote:
Section 5. Joinder of causes of action. A party may in one pleading assert, in the alternative or otherwise, as many causes of
action as he may have against an opposing party, subject to the following conditions:
(a) The party joining the causes of action shall comply with the rules on joinder of parties; x x x
Section 6. Permissive joinder of parties. All persons in whom or against whom any right to relief in respect to or arising
out of the same transaction or series of transactions is alleged to exist whether jointly, severally, or in the alternative, may,
except as otherwise provided in these Rules, join as plaintiffs or be joined as defendants in one complaint, where any question of
law or fact common to all such plaintiffs or to all such defendants may arise in the action; but the court may make such orders as
may be just to prevent any plaintiff or defendant from being embarrassed or put to expense in connection with any proceedings
in which he may have no interest.
The foregoing procedural rules are founded on practicality and convenience. They are meant to discourage
duplicity and multiplicity of suits. This objective is negated by insisting -- as the court a quo has done -- that the
compulsory counterclaim for damages be dismissed, only to have it possibly re-filed in a separate proceeding. More
important, as we have stated earlier, Respondents Lim and Mariano are real parties in interest to the compulsory
counterclaim; it is imperative that they be joined therein. Section 7 of Rule 3 provides:
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.
Moreover, in joining Lim and Mariano in the compulsory counterclaim, petitioners are being consistent with the
solidary nature of the liability alleged therein.
Second Issue:
CCCs Personality to Move to Dismiss
the Compulsory Counterclaims
Characterizing their counterclaim for damages against Respondents CCC, Lim and Mariano as joint and
solidary, petitioners prayed:
WHEREFORE, it is respectfully prayed that after trial judgment be rendered:
1. Dismissing the complaint in its entirety;
2. Ordering the plaintiff, Gregory T. Lim and Anthony A. Mariano jointly and solidarily to pay defendant actual
damages in the sum of at least P2,700,000.00;
3. Ordering the plaintiff, Gregory T. Lim and Anthony A, Mariano jointly and solidarily to pay the
defendants LPI, LCLC, COC and Roseberg:
a. Exemplary damages of P100 million each;
b. Moral damages of P100 million each; and
c. Attorneys fees and costs of suit of at least P5 million each.
Other reliefs just and equitable are likewise prayed for.[29]
Obligations may be classified as either joint or solidary. Joint or jointly or conjoint
means mancum or mancomunada or pro rata obligation; on the other hand, solidary obligations may be used
interchangeably with joint and several or several. Thus, petitioners usage of the term joint and solidary is confusing
and ambiguous.
The ambiguity in petitioners counterclaims notwithstanding, respondents liability, if proven, is solidary. This
characterization finds basis in Article 1207 of the Civil Code, which provides that obligations are generally considered
joint, except when otherwise expressly stated or when the law or the nature of the obligation requires solidarity.
However, obligations arising from tort are, by their nature, always solidary. We have assiduously maintained this legal
principle as early as 1912 in Worcester v. Ocampo,[30] in which we held:
x x x The difficulty in the contention of the appellants is that they fail to recognize that the basis of the present action is tort.
They fail to recognize the universal doctrine that each joint tort feasor is not only individually liable for the tort in which he
participates, but is also jointly liable with his tort feasors. x x x
It may be stated as a general rule that joint tort feasors are all the persons who command, instigate, promote, encourage, advise,
countenance, cooperate in, aid or abet the commission of a tort, or who approve of it after it is done, if done for their benefit.
They are each liable as principals, to the same extent and in the same manner as if they had performed the wrongful act
themselves. x x x
Joint tort feasors are jointly and severally liable for the tort which they commit. The persons injured may sue all of them or any
number less than all. Each is liable for the whole damages caused by all, and all together are jointly liable for the whole damage.
It is no defense for one sued alone, that the others who participated in the wrongful act are not joined with him as defendants; nor
is it any excuse for him that his participation in the tort was insignificant as compared to that of the others. x x x
Joint tort feasors are not liable pro rata. The damages can not be apportioned among them, except among themselves. They
cannot insist upon an apportionment, for the purpose of each paying an aliquot part. They are jointly and severally liable for the
whole amount. x x x
A payment in full for the damage done, by one of the joint tort feasors, of course satisfies any claim which might exist against
the others. There can be but satisfaction. The release of one of the joint tort feasors by agreement generally operates to discharge
all. x x x
Of course the court during trial may find that some of the alleged tort feasors are liable and that others are not liable. The courts
may release some for lack of evidence while condemning others of the alleged tort feasors. And this is true even though they are
charged jointly and severally.
In a joint obligation, each obligor answers only for a part of the whole liability; in a solidary or joint and several
obligation, the relationship between the active and the passive subjects is so close that each of them must comply
with or demand the fulfillment of the whole obligation.[31] The fact that the liability sought against the CCC is for
specific performance and tort, while that sought against the individual respondents is based solely on tort does not
negate the solidary nature of their liability for tortuous acts alleged in the counterclaims. Article 1211 of the Civil Code
is explicit on this point:
Solidarity may exist although the creditors and the debtors may not be bound in the same manner and by the same periods and
conditions.
The solidary character of respondents alleged liability is precisely why credence cannot be given to petitioners
assertion. According to such assertion, Respondent CCC cannot move to dismiss the counterclaims on grounds that
pertain solely to its individual co-debtors.[32] In cases filed by the creditor, a solidary debtor may invoke defenses
arising from the nature of the obligation, from circumstances personal to it, or even from those personal to its co-
debtors. Article 1222 of the Civil Code provides:
A solidary debtor may, in actions filed by the creditor, avail itself of all defenses which are derived from the nature of the
obligation and of those which are personal to him, or pertain to his own share. With respect to those which personally belong
to the others, he may avail himself thereof only as regards that part of the debt for which the latter are
responsible. (Emphasis supplied).

The act of Respondent CCC as a solidary debtor -- that of filing a motion to dismiss the counterclaim on
grounds that pertain only to its individual co-debtors -- is therefore allowed.

However, a perusal of its Motion to Dismiss the counterclaims shows that Respondent CCC filed it on behalf of
Co-respondents Lim and Mariano; it did not pray that the counterclaim against it be dismissed. Be that as it may,
Respondent CCC cannot be declared in default. Jurisprudence teaches that if the issues raised in the compulsory
counterclaim are so intertwined with the allegations in the complaint, such issues are deemed automatically
joined.[33] Counterclaims that are only for damages and attorneys fees and that arise from the filing of the complaint
shall be considered as special defenses and need not be answered. [34]

CCCs Motion to Dismiss the

Counterclaim on Behalf of
Respondents Lim and
Mariano Not Allowed

While Respondent CCC can move to dismiss the counterclaims against it by raising grounds that pertain to
individual defendants Lim and Mariano, it cannot file the same Motion on their behalf for the simple reason that it
lacks the requisite authority to do so. A corporation has a legal personality entirely separate and distinct from that of
its officers and cannot act for and on their behalf, without being so authorized. Thus, unless expressly adopted by
Lim and Mariano, the Motion to Dismiss the compulsory counterclaim filed by Respondent CCC has no force and
effect as to them.

In summary, we make the following pronouncements:

1. The counterclaims against Respondents CCC, Gregory T. Lim and Anthony A. Mariano are compulsory.

2. The counterclaims may properly implead Respondents Gregory T. Lim and Anthony A. Mariano, even if both were
not parties in the original Complaint.

3. Respondent CCC or any of the three solidary debtors (CCC, Lim or Mariano) may include, in a Motion to Dismiss,
defenses available to their co-defendants; nevertheless, the same Motion cannot be deemed to have been filed on
behalf of the said co-defendants.

4. Summons must be served on Respondents Lim and Mariano before the trial court can obtain jurisdiction over them.

WHEREFORE, the Petition is GRANTED and the assailed Orders REVERSED. The court of origin is hereby
ORDERED to take cognizance of the counterclaims pleaded in petitioners Answer with Compulsory Counterclaims
and to cause the service of summons on Respondents Gregory T. Lim and Anthony A. Mariano. No costs.

SO ORDERED.