Spouses Rigor v. Consolidated Orix Leasing and Finance Corporation
REITERATIONFacts
The Antecedents: Petitioners Spouses Efren and Zosima Rigor, owners of Chiara Construction, obtained a loan of P1,630,320.00 from respondent Consolidated Orix Leasing and Finance Corporation. They executed a promissory note on July 31, 1996, agreeing to pay in 24 equal monthly installments, with a stipulation that default in any installment would render the entire unpaid amount due and payable. To secure the loan, petitioners executed a deed of chattel mortgage over two dump trucks. Procedural History: Petitioners failed to pay several installments. Respondent filed a complaint for Replevin with Damages before the Regional Trial Court (RTC) of Dagupan City. Petitioners moved to dismiss, citing a venue provision in the promissory note that all legal actions shall only be brought in Makati City. Respondent opposed, citing a venue provision in the chattel mortgage that allowed litigation in Makati City, Rizal, or any court where the holder/mortgagee has a branch office, waiving any proper venue. The RTC denied the motion to dismiss. The Court of Appeals (CA) affirmed the RTC's denial, holding that both documents should be treated as a singular contract and interpreted together under Article 1374 of the Civil Code, and that venue was properly laid in Dagupan City. The Petition: Petitioners filed a petition for review, arguing that the promissory note should prevail, that the venue provision in the chattel mortgage did not modify the promissory note's exclusive venue, and that Article 1374 applies only to conflicting provisions within a single contract. They also argued that any ambiguity should be resolved against the respondent under the contract of adhesion doctrine.
Issue(s)
WHETHER VENUE WAS PROPERLY LAID UNDER THE PROVISIONS OF THE CHATTEL MORTGAGE CONTRACT IN THE LIGHT OF ARTICLE 1374 OF THE CIVIL CODE, CONSIDERING THE INTERPLAY BETWEEN THE PROMISSORY NOTE AND THE DEED OF CHATTEL MORTGAGE. WHETHER THE VENUE PROVISION IN THE CHATTEL MORTGAGE, ALLOWING FOR ALTERNATIVE VENUES, MODIFIED THE RESTRICTIVE VENUE PROVISION IN THE PROMISSORY NOTE.
Ruling
The petition is bereft of merit. The Court finds no reversible error in the Court of Appeals’ conclusion that venue was properly laid in the Dagupan trial court. The decision of the Court of Appeals affirming the denial of the motion to dismiss is affirmed.
Ratio Decidendi
On the issue of venue and the interpretation of the promissory note and chattel mortgage: The Court held that the promissory note and the deed of chattel mortgage must be construed together as they pertain to the same loan obligation and security. The chattel mortgage is an accessory contract to the principal loan obligation embodied in the promissory note. Therefore, the provisions of both contracts must be read in their entirety and interpreted together to arrive at their true meaning, applying the principle that "the various stipulations of a contract shall be interpreted together, attributing to the doubtful ones that sense which may result from all of them taken jointly" (Article 1374, Civil Code). The Court reiterated the doctrine that accessory contracts must be interpreted with their principal contracts, citing National Power Corporation vs. Court of Appeals and Velasquez vs. Court of Appeals. On the issue of the modification of the venue provision: In this case, the venue provision in the chattel mortgage, which allowed for alternative venues including where the mortgagee has a branch office, was deemed to have modified the restrictive venue provision in the promissory note. The Court presumed that petitioners, as businessmen of experience, signed both documents with full knowledge of their contents and import. The Court also noted that petitioners did not contest the deed of chattel mortgage under Section 8, Rule 8 of the Revised Rules of Civil Procedure. Consequently, the venue laid in Dagupan City, where the respondent had a branch office and where the loan was negotiated and booked, was deemed proper and more convenient for the parties, aligning with the purpose of venue rules to ensure convenience and promote the ends of justice. The insistence on an exclusive venue in Makati City was viewed as a dilatory tactic.
Main Doctrine
When a loan obligation is secured by a chattel mortgage, both the promissory note and the deed of chattel mortgage must be construed together as a single contract, and the venue provisions in both documents must be harmonized, giving effect to all stipulations.