Paglaum Management v. Union Bank
REITERATIONFacts
The Antecedents: Petitioner Paglaum Management and Development Corporation (PAGLAUM) owned parcels of land co-owned by Benjamin B. Dy, president of petitioner Health Marketing Technologies, Inc. (HealthTech). Union Bank extended a credit line to HealthTech, secured by Real Estate Mortgages executed by PAGLAUM. The original mortgage contracts had a venue stipulation allowing suits in Makati or where the property is located, at the bank's option, with parties waiving other venues. Subsequent mortgages had variations, with one version striking out the waiver of other venues. HealthTech's debt increased, and due to financial difficulties, a Restructuring Agreement was executed, which stipulated that any action arising from it shall be commenced in Makati City, with both parties waiving any other venue. HealthTech defaulted, leading Union Bank to extra-judicially foreclose the mortgaged properties. Union Bank was the sole bidder and was issued a Certificate of Sale, after which it filed a Petition for Consolidation of Title. Procedural History: HealthTech filed a Complaint for Annulment of Sale and Titles with Damages, praying for injunctive relief, annulment of foreclosure, cancellation of titles, reinstatement of ownership, and damages. The case was docketed as Civil Case No. 01-1567 and raffled to the RTC of Makati City, Branch 134. Union Bank filed a Motion to Dismiss on grounds of lack of jurisdiction, improper venue, and lack of authority. The RTC granted the motion, dismissing the case and dissolving the injunction. The CA affirmed the RTC's order and denied the motion for reconsideration. The Petition: Petitioners PAGLAUM and HealthTech argued that the Restructuring Agreement governed the choice of venue and should be interpreted with the parties' convenience in mind, attributing any obscurity to Union Bank. Union Bank contended that the Restructuring Agreement applied only to the loan, not the mortgage, and that the mortgage contracts explicitly gave it the exclusive option for venue. Intervenor J. King & Sons Company, Inc. adopted Union Bank's position.
Issue(s)
Whether Makati City is the proper venue to assail the foreclosure of the subject real estate mortgage. Whether the venue stipulation in the Restructuring Agreement controls over the venue stipulations in the Real Estate Mortgages.
Ruling
The Supreme Court granted the Petition for Review, reversed and set aside the decisions of the CA and RTC, and reinstated the Complaint in Civil Case No. 01-1567. It ruled that Makati City is the proper venue.
Ratio Decidendi
On whether Makati City is the proper venue to assail the foreclosure of the subject real estate mortgage: The Court held that Civil Case No. 01-1567, being an action for Annulment of Sale and Titles resulting from the extrajudicial foreclosure of real properties, is classified as a real action. According to Rule 4, Section 1 of the Rules of Court, real actions shall be commenced and tried in the proper court which has jurisdiction over the area wherein the real property involved is situated. In this case, the mortgaged properties are located in Cebu Province. However, Rule 4, Section 3(b) provides an exception where parties have validly agreed in writing on the exclusive venue thereof. The Court found that such an agreement existed in the Restructuring Agreement. On whether the venue stipulation in the Restructuring Agreement controls over the venue stipulations in the Real Estate Mortgages: The Court ruled that the venue stipulation in the Restructuring Agreement should be controlling. The Restructuring Agreement, which modified the entire loan obligation, explicitly stated in Section 20 that the venue of any action or proceeding arising out of or connected with the agreement, the note, the collateral, and any and all related documents shall be in Makati City, with both parties waiving any other venue. The Court emphasized that the phrase "waiving any other venue" clearly indicates an exclusive stipulation. Furthermore, the Restructuring Agreement explicitly defined the existing Real Estate Mortgages as "Collaterals" securing the obligations under the agreement, thus making the venue stipulation applicable to actions involving these mortgages. The Court also noted that the venue stipulations in the original Real Estate Mortgages did not contain words showing exclusivity or restrictiveness, and in one instance, the waiver of other venues was even struck out, reinforcing the controlling nature of the Restructuring Agreement's exclusive venue clause.
Main Doctrine
A venue stipulation in a Restructuring Agreement, which explicitly states that venue shall be in a specific city and that parties waive any other venue, controls over venue stipulations in prior Real Estate Mortgages, even if the action involves the foreclosure of such mortgages, provided the Restructuring Agreement covers the mortgage obligations and contains restrictive venue provisions.