Ley Construction v. Sedano
REITERATIONFacts
The Antecedents: Ley Construction and Development Corporation (Ley Construction) leased a parcel of land from Philippine National Construction Corporation (PNCC) and subsequently subleased a portion of it to Marvin Medel Sedano (Sedano). Sedano agreed to pay a monthly rent of P1,174,780.00, with a ten percent increase annually starting the third year, for a term of ten years. Sedano allegedly failed to pay the rent for August to December 2011, totaling P8,828,025.46, despite demands from Ley Construction. Procedural History: Ley Construction filed a complaint for collection of sum of money and damages against Sedano before the Regional Trial Court (RTC) of Valenzuela City. Sedano countered that he had paid the rent directly to PNCC because Ley Construction had been evicted from the property. He also argued that the venue was improperly laid, citing a clause in the lease contract stipulating that all actions should be filed with the RTC of Pasay City. Sedano further filed a third-party complaint against PNCC, seeking reimbursement if he were found liable to Ley Construction, and a counterclaim against Ley Construction for alleged overpayments and damages. The Valenzuela-RTC dismissed Ley Construction's complaint on the ground of improper venue, finding the contractual stipulation to be valid for cases within the RTC's jurisdiction. The RTC denied Ley Construction's motion for reconsideration. The Petition: Ley Construction filed a petition for review on certiorari with the Supreme Court, assailing the Valenzuela-RTC's orders dismissing its complaint due to improper venue. The core issue presented to the Supreme Court was whether the Valenzuela-RTC erred in ruling that the venue was improperly laid, considering the contractual stipulation in Section 21 of the lease agreement which designated the RTC of Pasay City as the exclusive venue for all actions or cases filed in connection with the lease.
Issue(s)
Whether the Regional Trial Court of Valenzuela City erred in ruling that venue was improperly laid. Whether respondent Sedano waived his right to question the venue.
Ruling
The petition is denied. The Orders dated June 15, 2015 and January 27, 2016 of the Regional Trial Court of Valenzuela City, Branch 75 in Civil Case No. 40-V-12 are affirmed.
Ratio Decidendi
On the issue of improper venue: The Court affirmed the RTC's ruling that venue was improperly laid. Section 4(b) of Rule 4 of the Rules of Court allows parties to validly agree in writing on the exclusive venue of actions. The lease contract between Ley Construction and Sedano contained Section 21, which stipulated that "All actions or case[s] filed in connection with this lease shall be filed with the Regional Trial Court of Pasay City, exclusive of all others." The Court found that this stipulation was exclusive in nature, as evidenced by the phrase "exclusive of all others," and clearly indicated the parties' intention to limit the venue for actions arising from the lease contract to the RTC of Pasay City. The Court clarified that this stipulation pertains to venue and not jurisdiction, as jurisdiction is conferred by law. Since Ley Construction's complaint for collection of sum of money, an amount within the RTC's exclusive original jurisdiction, arose from the breach of the lease contract, it should have been filed in the RTC of Pasay City as per the contractual stipulation. The filing of the complaint in the Valenzuela-RTC was therefore improper. On the issue of waiver of venue: The Court ruled that Sedano did not waive his right to question the venue. While Sedano filed several motions for extension to file his responsive pleading and interposed a counterclaim and a third-party complaint, these actions did not constitute a waiver. The prevailing rule is that objections to improper venue must be raised at the earliest opportunity, either in a motion to dismiss or in the answer, which Sedano did. The Court distinguished this case from Pangasinan Transportation Co., Inc. v. Yatco (Pantranco), explaining that Sedano's counterclaim was a compulsory counterclaim, seeking reimbursement for alleged overpayment and damages, which arose from the filing of the complaint. His third-party complaint merely sought reimbursement from PNCC for rentals paid. These counterclaims and third-party complaints were not covered by the venue stipulation as they did not assert violations of the lease contract itself but rather independent rights or claims arising from the main action or the circumstances surrounding it. Therefore, Sedano's act of filing these did not preclude him from raising the affirmative defense of improper venue against Ley Construction's complaint, which was covered by the venue stipulation.
Main Doctrine
A stipulation on venue in a contract is considered valid and binding if it is exclusive in nature or intent, expressed in writing, and entered into before the filing of the suit. The filing of a counterclaim or a third-party complaint does not necessarily constitute a waiver of the defense of improper venue if these are compulsory or do not fall within the scope of the venue stipulation.