Capati v. Ocampo
REITERATIONFacts
The Antecedents: Plaintiff Virgilio Capati, a contractor for Feati Bank, entered into a sub-contract with defendant Dr. Jesus Ocampo for the construction of certain parts of a building in Iriga, Camarines Sur. The sub-contract stipulated that "TIME IS ESSENTIAL, TO BE FINISHED 5 JUNE '67." Plaintiff claimed the defendant finished the construction on June 20, 1967, causing him P85,000.00 in consequential damages. Procedural History: Plaintiff filed an action for recovery of damages in the Court of First Instance of Pampanga. Defendant moved to dismiss the complaint on the ground of improper venue, citing a stipulation in the contract stating that "all actions arising out, or relating to this contract may be instituted in the Court of First Instance of the City of Naga." The lower court granted the motion, dismissing the complaint. The Petition: Plaintiff appealed the dismissal order, arguing that the stipulation on venue was merely optional, as indicated by the word "may."
Issue(s)
Whether the stipulation in the contract that "all actions arising out, or relating to this contract may be instituted in the Court of First Instance of the City of Naga" is restrictive or merely permissive. Whether the venue of the action was properly laid in the Court of First Instance of Pampanga.
Ruling
The Court set aside the order of dismissal and ordered the records returned to the court of origin for further proceedings. The venue of the action was deemed properly laid in the Court of First Instance of Pampanga.
Ratio Decidendi
On whether the stipulation on venue is restrictive or permissive: The Court held that the stipulation "may be instituted in the Court of First Instance of the City of Naga" is merely permissive. The word "may" is inherently permissive and operates to confer discretion upon a party, indicating possibility rather than certainty. Under ordinary circumstances, "may be" connotes possibility. The Court cited the case of Nicolas vs. Reparations Commission (64 SCRA 110) which involved a similar stipulation, holding that such an agreement is not mandatory. Therefore, the parties did not agree to file their suits solely and exclusively with the Court of First Instance of Naga City. They merely agreed to submit their disputes to the said court, without waiving their right to seek recourse in other venues allowed by law. The Court emphasized that the use of "may" grants liberty, opportunity, permission, or possibility, and does not impose a mandatory obligation. On whether the venue was properly laid: The Court ruled that since the complaint was filed in the Court of First Instance of Pampanga, where the plaintiff resides, the venue of the action is properly laid in accordance with Section 2(b), Rule 4 of the Rules of Court. This section provides that personal actions may be commenced and tried where the defendant or any of the defendants resides or may be found, or where the plaintiff or any of the plaintiffs resides, at the election of the plaintiff. The Court clarified that Section 3 of the same rule, which allows venue to be changed or transferred by written agreement, is qualified by the permissive nature of the stipulation in this case. The permissive stipulation did not divest the plaintiff of his right to choose the venue as provided by the general rule.
Main Doctrine
A stipulation in a contract regarding the venue of actions is merely permissive and not restrictive, unless the parties explicitly agree that suits may be filed ONLY in a specific court, thereby waiving their right to file in other venues allowed by law.