Hernando v. Golden Sun Finance
NEW DOCTRINEFacts
The Antecedents: Petitioner Elizabeth A. Hernando obtained a loan from respondent Golden Sun Finance Corporation (Golden Sun) evidenced by a Promissory Note and secured by a Chattel Mortgage. Both the Promissory Note and Chattel Mortgage contained venue stipulations exclusively designating Bacolod City for any legal action. Elizabeth issued 36 post-dated checks, 28 of which were dishonored, leading to violations of Batas Pambansa Blg. 22 cases. Subsequently, Golden Sun filed a Complaint for Sum of Money with Damages (Collection Case) in RTC Bacolod City, seeking PHP 384,634.96. A Writ of Preliminary Attachment was issued, annotated on Elizabeth's properties in Laoag City (Laoag City properties). Elizabeth failed to file an answer, was declared in default, and the RTC Bacolod City rendered judgment against her. A Writ of Execution was issued, and respondent Sheriff Ildefonso M. Villanueva, Jr. scheduled an auction sale of the Laoag City properties. Golden Sun emerged as the highest bidder, and a Certificate of Sale was issued, followed by a Final Certificate of Sale after the redemption period lapsed. Procedural History: Elizabeth filed a Complaint for Nullification of Execution Sale and Certificates of Sale (Nullity Case) with Branch 12, RTC, Laoag City, arguing improper notice, sale in excess of judgment debt, and failure to foreclose the chattel mortgage first. Golden Sun moved to dismiss based on improper venue, citing the stipulation in the Promissory Note. The RTC Laoag City dismissed the Complaint for improper venue. Elizabeth appealed to the Court of Appeals (CA). The CA dismissed her appeal, ruling it was filed by the wrong mode of appeal, as the issues raised were pure questions of law, necessitating a petition for review on certiorari under Rule 45. Elizabeth then filed the present Petition for Review on Certiorari with the Supreme Court. The Petition: Elizabeth argued that her appeal to the CA was proper as it involved mixed questions of law and fact. She implored liberality in the rules of procedure, citing the alleged illegality of the execution sale and unjust enrichment of Golden Sun. She contended that the venue stipulation did not apply because Golden Sun breached the contract by filing a collection case instead of foreclosing the chattel mortgage, and because the properties were located in Laoag City. She also argued that the Sheriff exceeded his authority. Golden Sun maintained that the venue stipulation was controlling as the Complaint was an offshoot of the loan agreement.
Issue(s)
Whether the Motion to Withdraw Petition should be granted. Whether the Court of Appeals correctly ruled that Elizabeth availed herself of the wrong mode of appeal. Whether the venue stipulation in the Promissory Note applies to the Complaint for the declaration of nullity of the execution sale and Certificates of Sale; and the nature of the action and proper venue.
Ruling
The Motion to Withdraw Petition is GRANTED. The Petition is DISMISSED. However, the Court resolved the case on the merits for the guidance of the bench and bar. 1. The venue stipulation in the Promissory Note does not apply to the Complaint in the Nullity Case. 2. The Complaint in the Nullity Case is a personal action that may be filed at the place of residence of Elizabeth or of Golden Sun, at Elizabeth's election. 3. The Court of Appeals correctly ruled that Elizabeth availed herself of the wrong mode of appeal.
Ratio Decidendi
On the Motion to Withdraw Petition: The Court granted the Motion to Withdraw Petition because the parties entered into a Compromise Agreement, which included Elizabeth's agreement to withdraw the present Petition. A compromise agreement is a contract that parties may enter into to avoid or end litigation, and it is encouraged by the courts. Since the withdrawal stipulation was not contrary to law, morals, good customs, public order, or public policy, and the filing of the motion occurred after Golden Sun had filed its Comment, the withdrawal was a matter of the Court's discretion, which was exercised in favor of granting the motion. The Court noted that while a compromise agreement generally renders a pending petition moot, it may still rule on the merits for the guidance of the bench, bar, and public, especially in cases involving novel issues. On the CA's ruling regarding the wrong mode of appeal: The Court affirmed the CA's ruling that Elizabeth availed herself of the wrong mode of appeal. The CA correctly determined that the RTC Laoag City's dismissal of the Complaint was a final order, but the issues raised (interpretation of the venue stipulation and its application) were pure questions of law. Therefore, the proper remedy from the RTC's decision was not an ordinary appeal to the CA but a petition for review on certiorari under Rule 45 directly to the Supreme Court. The CA's dismissal of the appeal for being filed by the wrong mode was thus proper, consistent with Administrative Circular No. 2-90. On the applicability of the venue stipulation and the nature of the action and proper venue: The Court ruled that the venue stipulation in the Promissory Note did not apply to Elizabeth's Complaint in the Nullity Case. The stipulation was for "any legal or court action arising under or by virtue of this note." The Court found that the Complaint did not arise from the terms of the Promissory Note but from alleged improprieties in the execution sale, such as lack of notice, sale in excess of the judgment debt, and failure to levy on the chattel mortgage property first. These actions of the Sheriff were independent of the Promissory Note and were governed by Rule 39 of the Rules of Court on Execution, Satisfaction and Effect of Judgments. Furthermore, the Court held that venue stipulations are restrictive and must be clear and categorical; since the Complaint assailed the validity of the execution sale and not the terms of the Note, and the Sheriff's conduct was not contemplated at the time of signing, the stipulation did not apply. Any doubt on the applicability of the venue stipulation should be resolved against its application. The Court classified Elizabeth's Complaint for the nullification of the execution sale and Certificates of Sale as a personal action, not a real action. This classification was based on the fact that the Complaint did not seek recovery of title or possession of the Laoag City properties, nor did it allege that title had been transferred to Golden Sun. Instead, it prayed for the declaration of nullity of the sale due to alleged irregularities. Pursuant to Rule 4, Section 2 of the Rules of Court, personal actions may be commenced and tried where the plaintiff or any of the principal defendants resides, or in the case of a non-resident defendant where he may be found, at the election of the plaintiff. Since Elizabeth resided in Laoag City, and the venue stipulation did not apply, filing the Complaint in RTC Laoag City was proper. The Court acknowledged the general rule that challenges to execution sales should be filed with the court that issued the writ, but noted that this applies only when the judgment is not yet fully satisfied. In this case, a Final Certificate of Sale had been issued, making a separate action for annulment the appropriate recourse.
Main Doctrine
A venue stipulation in a contract, such as a promissory note, applies only to actions arising directly from the terms and conditions of that contract. It does not extend to subsequent legal actions that are independent of the contract, like a complaint assailing the validity of an execution sale conducted to satisfy a judgment arising from the contract. Such actions are governed by the general rules on venue, and if they do not involve recovery of title or possession of real property, they are considered personal actions. Moreover, once a judgment is satisfied and a Final Certificate of Sale is issued, any challenge to the execution sale must be brought as a separate action, not as a motion before the court that issued the writ.