Legaspi v. Social Security System
REITERATIONFacts
The Antecedents: Petitioner, Jesusito D. Legaspi, doing business as J.D. Legaspi Construction, entered into a P88,348,533.74 contract with the Social Security System (SSS) in June 1997 for the construction of a four-storey building in Baguio City. Following the 1997 Philippine peso devaluation, the cost of imported materials significantly increased, exceeding the original contract price. Petitioner informed SSS of his financial difficulties and requested an adjustment to the contract price, which was denied. Procedural History: Consequently, petitioner filed a complaint for sum of money plus damages with the Regional Trial Court (RTC) of Makati City. The respondent, SSS, filed a Motion to Dismiss, arguing improper venue and lack of cause of action. The RTC denied the motion, ruling that the venue was properly laid as the suit was a collection for increased material costs based on Article 1267 of the Civil Code, not a breach of the construction agreement. SSS's motion for reconsideration was also denied. SSS then filed a petition for certiorari with the Court of Appeals (CA), which granted the petition and ordered the RTC to dismiss the case. The CA's decision was upheld upon denial of petitioner's motion for reconsideration. The Petition: Petitioner seeks review via certiorari under Rule 45 of the Rules of Court, arguing that the Court of Appeals erred in ordering the dismissal of his civil case. He contends that the venue stipulation in the Construction Agreement does not apply because his cause of action arises from Article 1267 of the Civil Code due to the extraordinary devaluation of the peso, not from the agreement itself. Petitioner asserts his action is personal and can be filed in Makati City, his place of residence, as per Section 2, Rule 4 of the Rules of Court. Respondent counters that the claim, though anchored on Article 1267, emanates from the Construction Agreement, thus the restrictive venue provision applies.
Issue(s)
Whether the venue stipulation in the Construction Agreement is restrictive and applies to petitioner's claim for price adjustment. Whether petitioner has a cause of action against respondent.
Ruling
The Supreme Court denied the petition for lack of merit. It affirmed the Court of Appeals' ruling that the venue stipulation in the Construction Agreement was exclusive and that petitioner's cause of action arose from the said agreement, thus requiring the case to be filed in Quezon City. The Court also agreed with the CA that petitioner had a cause of action, but this was a matter to be threshed out during trial.
Ratio Decidendi
On the issue of venue: The Court held that the venue stipulation in Article XIV of the Construction Agreement, which stated that "the CONTRACTOR hereby expressly waiving any other venue," was clearly restrictive and exclusive. It emphasized that in the absence of qualifying or restrictive words, stipulations on venue are generally permissive, but the inclusion of phrases like "expressly waiving any other venue" connotes exclusivity. The Court found that the petitioner's claim for price adjustment, despite being anchored on Article 1267 of the Civil Code, originated from the Construction Agreement. The factual basis of the claim—the contract price, the devaluation of the peso, and the increased cost of imported materials—all directly related to the performance and terms of the Construction Agreement. Therefore, the restrictive venue provision requiring actions to be brought before the proper courts in Quezon City applied. The Court adopted the CA's reasoning that the court would necessarily have to refer to the Construction Agreement to determine the intent of the parties regarding contractual risks and the validity of the price adjustment claim, thus confirming that the dispute arose from and related to the provisions of the Agreement. On the issue of cause of action: The Court agreed with the CA that petitioner had a cause of action against respondent. It reiterated the principle that a motion to dismiss based on lack of cause of action hypothetically admits the truth of the allegations in the complaint. The Court found that the complaint filed by petitioner set forth ultimate facts upon which his claim for price adjustment was based. Respondent's contention that petitioner was not entitled to the adjustment was deemed a matter of defense to be raised in the answer and threshed out in full-blown proceedings. Thus, the CA correctly ruled that the complaint did not need to establish the existence of a cause of action at the outset, as this would be determined during the trial on the merits.
Main Doctrine
A stipulation on venue in a contract, accompanied by words of exclusivity such as 'expressly waiving any other venue,' is considered restrictive and binds the parties to the designated forum for actions arising from the said agreement. The nature of the cause of action, not merely the legal basis cited, determines if it arises from the contract.