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3. Paglaum Management and Development Corp. vs.

Union Bank of the Ph


G.R. No. 179018 | June 18, 2012 | Sereno, J;

Doctrine: When the rules on venue do not apply; Real actions shall be commenced and tried in the court that has jurisdiction over the area where
the property is situated.—According to the Rules, real actions shall be commenced and tried in the court that has jurisdiction over the area where the
property is situated.

Emergency Recit: In this case, all the mortgaged properties are located in the Province of Cebu. Thus, following the general rule, PAGLAUM and
HealthTech should have filed their case in Cebu, and not in Makati. However, the Rules provide an exception, in that real actions can be
commenced and tried in a court other than where the property is situated in instances where the parties have previously and validly agreed in
writing on the exclusive venue thereof. In the case at bar, the parties claim that such an agreement exists. The only dispute is whether the venue
that should be followed is that contained in the Real Estate Mortgages, as contended by Union Bank, or that in the Restructuring Agreement, as
posited by PAGLAUM and HealthTech. This Court rules that the venue stipulation in the Restructuring Agreement should be controlling.

The sole issue to be resolved is whether Makati City is the proper venue to assail the foreclosure of the subject real estate mortgage. This Court
rules in the affirmative.
According to the Rules, real actions shall be commenced and tried in the court that has jurisdiction over the area where the property is situated. In
this case, all the mortgaged properties are located in the Province of Cebu. Thus, following the general rule, PAGLAUM and HealthTech should have
filed their case in Cebu, and not in Makati.

However, the Rules provide an exception, in that real actions can be commenced and tried in a court other than where the property is situated in
instances where the parties have previously and validly agreed in writing on the exclusive venue thereof. In the case at bar, the parties claim
that such an agreement exists. The only dispute is whether the venue that should be followed is that contained in the Real Estate Mortgages, as
contended by Union Bank, or that in the Restructuring Agreement, as posited by PAGLAUM and HealthTech. This Court rules that the venue
stipulation in the Restructuring Agreement should be controlling.

FACTS
Paglaum Management and Development Corporation (PAGLAUM) is the registered owner of three parcels of land located in the Province of Cebu
with Benjamin B. Dy, the president of petitioner Health Marketing Technologies, Inc. (HealthTech) as co-owner. On 3 February 1994, Union Bank of
the Philippines (Union Bank) extended HealthTech a credit line in the amount of P 10,000,000 which was eventually increased to 36,500,000. This
was secured by three real estate mortgage on the lands.

The venue in the real estate mortgage was stipulated to be in Makati, Metro Manila or in the place where any of the Mortgaged Properties is located
(Cebu), at the absolute option of the Mortgagee, the parties hereto waiving any other venue. Unfortunately, Healthtech is having difficulties on paying
its obligation. They both executed a Restructuring Agreement whereby it states that that any action or proceeding arising out of or in connection
therewith shall be commenced in Makati City, with both parties waiving any other venue.

Healthtech still defaulted on the obligation. Union Bank foreclosed the properties through an auction sale, bought it as the sole bidder as secured a
Certificate of Sale. Healthcare filed a complaint for annulment of sale and titles on the RTC of MAKATI. The RTC ruled in favor of Healthtech and
restrained restraining Union Bank from proceeding with the auction sale. Union Bank filed a Motion to Dismiss citing lack of jurisdiction and improper
venue. RTC of Makati granted Union Banks motion to dismiss. CA affirmed Makati RTC.

Union Bank argues that the Restructuring Agreement only pertains to the loan and does not affect the stipulations in the real mortgage which states
that it has the option to choose the venue. Healthtech argues the restructuring agreement also carries with it the venue for the settlement of cases
for the real mortgages. Hence, this appeal to the Supreme Court.

ISSUE Whether or not RTC Makati is a proper venue for the case

RULING
YES.

The Supreme Court held that an action to annul a real estate mortgage foreclosure sale is no different from an action to annul a private sale of real
property. Therefore, this case falls under Rule 4. The general rule in Rule 4 is that the venue is on where the property is located. However, among
the exceptions is where the parties have validly agreed in writing before the filing of the action on the exclusive venue thereof. The Supreme Court
adds that the mere stipulation on the venue of an action, however, is not enough to preclude parties from bringing a case in other venues. The
parties must be able to show that such stipulation is exclusive. Failure to do so would result to the parties stipulating additional venues for the case.

In the case at bar, both the stipulation in the Real Estate Mortgage and the Restructuring Agreement have words of exclusivity. The Supreme Court
held that the Restructuring Agreement should prevail as this modified the entire loan obligation. The later Restructuring Agreement reveals the
intention of the parties to implement a restrictive venue stipulation, which applies not only to the principal obligation, but also to the mortgages.