CASE BRIEFS – REMEDIAL LAW REVIEW I 1

PACIFIC CONSULTANTS INTERNATIONAL ASIA, INC. AND JENS PETER HERNRICHSEN VS. KLAUS K. SCHONFELD

FACTS:

PPI is a corporation duly established and incorporated in accordance with the laws of the Philippines. The primary
purpose of PPI was to engage in the business of providing specialty and technical services both in and out of the
Philippines. It is a subsidiary of Pacific Consultants International of Japan (PCIJ). The president of PPI is Jens Peter
Henrichsen. In 1997, PCIJ decided to engage in consultancy services for water and sanitation in the Philippines. For
this purpose, PCIJ, through Henrichsen, emplyed Klaus Schonfeld as Sector Manager of PPI in its Water and
Sanitation Department. PCIJ assigned him as PPI sector manager in the Philippines. In the contract (Letter of
Employment) between PCIJ and Schonfeld, an arbitration clause provided the following stipulation:

Any question of interpretation, understanding or fulfillment of the conditions of employment, as well as any
question arising between the Employee and the Company which is in consequence of or connected with his
employment with the Company and which can not be settled amicably, is to be finally settled, binding to both
parties through written submissions, by the Court of Arbitration in London.

On May 5, 1999, respondent received a letter from Henrichsen informing him that his employment had been
terminated effective August 4, 1999 for the reason that PCIJ and PPI had not been successful in the water and
sanitation sector in the Philippines. However, on July 24, 1999, Henrichsen, by electronic mail, requested
respondent to stay put in his job after August 5, 1999, until such time that he would be able to report on certain
projects and discuss all the opportunities he had developed. Respondent continued his work with PPI until the end
of business hours on October 1, 1999. Thereafter, Respondent filed with PPI several money claims, including unpaid
salary, leave pay, air fare from Manila to Canada, and cost of shipment of goods to Canada. PPI partially settled
some of his claims (US$5,635.99), but refused to pay the rest. On December 5, 2000, respondent filed a Complaint
for Illegal Dismissal against petitioners PPI and Henrichsen with the Labor Arbiter. To this, Petitioners filed a Motion
to Dismiss on the following grounds: (1) the Labor Arbiter had no jurisdiction over the subject matter; and (2) venue
was improperly laid. It averred that respondent was a Canadian citizen, a transient expatriate who had left the
Philippines. He was employed and dismissed by PCIJ, a foreign corporation with principal office in Tokyo, Japan. Since
respondent’s cause of action was based on his letter of employment executed in Tokyo, Japan dated January 7, 1998,
under the principle of lex loci contractus, the complaint should have been filed in Tokyo, Japan. Moreover, under
Section 12 of the General Conditions of Employment appended to the letter of employment dated January 7, 1998,
complainant and PCIJ had agreed that any employment-related dispute should be brought before the London Court
of Arbitration. Since even the Supreme Court had already ruled that such an agreement on venue is valid, Philippine
courts have no jurisdiction. Respondent opposed the Motion, contending that he was employed by PPI to work in
the Philippines under contract separate from his January 7, 1998 contract of employment with PCIJ. He insisted
that his employer was PPI, a Philippine-registered corporation; it is inconsequential that PPI is a wholly-owned
subsidiary of PCIJ because the two corporations have separate and distinct personalities; and he received orders
and instructions from Henrichsen who was the president of PPI. He further insisted that the principles of forum non
conveniens and lex loci contractus do not apply, and that although he is a Canadian citizen, Philippine Labor Laws
apply in this case. Also, Respondent Schonfeld maintain that the material allegations of the complaint, not the
Petitioner’s defenses, determine which quasi-judicial body has jurisdiction. Section 21 of the Arbitration Clause in
the General Conditions of Employment does not provide for an exclusive venue where the complaint against PPI
for violation of the Philippine Labor Laws may be filed. Respondent pointed out that PPI had adopted two
inconsistent positions: it was first alleged that he should have filed his complaint in Tokyo, Japan; and it later insisted
that the complaint should have been filed in the London Court of Arbitration.

Written by: MARIA KRISTINA D. SIUAGAN, RN (TINA SIUAGAN)

 CASE BRIEFS – REMEDIAL LAW REVIEW I 2

The Labor Arbiter (LA) granted PPI’s Motion to Dismiss. He ruled among others that the January 7, 1998 contract of
employment between respondent and PCIJ was controlling. Since the parties had agreed therein that any
differences regarding employer-employee relationship should be submitted to the jurisdiction of the court of
arbitration in London, this agreement is controlling. The NLRC in turn agreed with the LA’s decision and affirmed it
in toto. However, in the Court of Appeals (CA) level, the appellate court reversed the NLRC’s ruling. On the issue of
venue, the CA ruled the parties were not precluded from bringing the case in other venues. While there was, indeed,
an agreement that issues between the parties were to be resolved in the London Court of Arbitration, the venue is
not exclusive, since there is no stipulation that the complaint cannot be filed in any other forum other than in the
Philippines.

Aggrieved, petitioners, via a Petition for Review under Rule 45, elevated the case before the Supreme Court.
Petitioners aver that since PCIJ is Schonfeld’s true employer and that his employment contract was executed where
PCIJ is located, i.e., in Japan. Consequently, the Labor Arbiter had no jurisdiction in the first place. Moreover, under
Section 21 of the General Conditions for Employment incorporated in respondent’s January 7, 1998 letter of
employment, the dispute between respondent and PCIJ should be settled by the court of arbitration of London.
Petitioners claim that the words used therein are sufficient to show the exclusive and restrictive nature of the
stipulation on venue.

ISSUE: Was the Court of Appeals correct in ruling, among others, that the controversy between the parties may be
brought to other venues?

RULING: Yes. In the instant case, the Supreme Court held that no restrictive words like "only," "solely," "exclusively
in this court," "in no other court save —," "particularly," "nowhere else but/except —," or words of equal import
were stated in the contract, which would have made the court of arbitration in London the exclusive venue to bring
forth the complaint, pursuant to Rule 4 of the Rules of Court.

The settled rule on stipulations regarding venue, as held by this Court in the vintage case of Philippine Banking
Corporation v. Tensuan, is that while they are considered valid and enforceable, venue stipulations in a contract do
not, as a rule, supersede the general rule set forth in Rule 4 of the Revised Rules of Court in the absence of qualifying
or restrictive words. They should be considered merely as an agreement or additional forum, not as limiting venue to
the specified place. They are not exclusive but, rather permissive. If the intention of the parties were to restrict venue,
there must be accompanying language clearly and categorically expressing their purpose and design that actions
between them be litigated only at the place named by them.

Petitioners contend that respondent should have filed his Complaint in his place of permanent residence, or where
the PCIJ holds its principal office, at the place where the contract of employment was signed, in London as stated
in their contract. By enumerating possible venues where respondent could have filed his complaint, however,
petitioners themselves admitted that the provision on venue in the employment contract is indeed merely
permissive.

Likewise, their insistence on the application of the principle of forum non conveniens1 must be rejected.

Meanwhile, the bare fact that respondent is a Canadian citizen and was a repatriate does not warrant the
application of the principle for the following reasons:

1 According to Cornell Law School’s Legal Information Institute, forum non conveniens means a court’s discretionary power to decline to exercise its
jurisdiction where another court may more conveniently or is better suited to hear a case. (The dismissal on this ground does not prevent the plaintiff
from re-filing his case with the more appropriate forum. This doctrine may be invoked either by the defendant or the court, motu proprio.)

Written by: MARIA KRISTINA D. SIUAGAN, RN (TINA SIUAGAN)

 CASE BRIEFS – REMEDIAL LAW REVIEW I 3

1) The Labor Code of the Philippines does not include forum non conveniens as a ground for the dismissal of
the complaint;

2) The propriety of dismissing a case based on this principle requires a factual determination. Hence, it is
properly considered as defense;

3) In Bank of America, NT&SA, Bank of America International, Ltd. v. Court of Appeals, this Court held that:
“x x x [a] Philippine Court may assume jurisdiction over the case if it chooses to do so; provided, that the
following requisites are met:
 that the Philippine Court is one to which the parties may conveniently resort to;
 that the Philippine Court is in a position to make an intelligent decision as to the law and the facts; and
 that the Philippine Court has or is likely to have power to enforce its decision. x x x

Admittedly, all the foregoing requisites are present in this case.

WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. SP No. 76563 is AFFIRMED.
This case is REMANDED to the Labor Arbiter for disposition of the case on the merits. Cost against petitioners.

SO ORDERED.

Written by: MARIA KRISTINA D. SIUAGAN, RN (TINA SIUAGAN)

 CASE BRIEFS – REMEDIAL LAW REVIEW I 4

MA. TERESA CHAVES BIACO, Petitioner, vs. PHILIPPINE COUNTRYSIDE RURAL BANK, Respondent

FACTS:

Ernesto Biaco obtained several loans from the Philippine Countryside Rural Bank (herein to be referred to as the
Bank) during his time as its branch manager. As a security for these loans, a real estate mortgage in favor of the
bank, which bears his and Ma. Teresa Biaco’s (petitioner), his wife, was executed. When Ernesto defaulted in paying
the loans for the period of 1998 and the demand letters sent to him were proved to be futile, the Bank filed a
complaint for foreclosure of mortgage against Spouses Ernesto and Ma. Teresa Biaco before the RTC of Misamis
Oriental. Summons was served to the spouses Biaco through Ernesto at his office. Ernesto received the Summons,
as shown by his signature on the Sheriff’s Return, but, for some unknown reasons, he failed to file an answer. Hence,
upon motion by the Bank, Spouses Biaco were declared in default. With this, the Bank was allowed to present its
evidence ex parte before the Branch Clerk of Court of Misamis Oriental RTC, who was appointed by the court as
Commissioner.

The RTC ruled in favor of the Bank. It ordered Spouses Biaco to pay, within ninety days the Bank the sum of
₱1,260,304.33, representing the amount of the balance of the loan, litigation expenses (₱7,640.00), attorney’s fees
in ₱252,030.43, and cost of this suit. In case of non-payment within the specified period, the trial likewise ordered
the Sheriff to sell at public auction the mortgaged lot to satisfy the mortgage debt and return any surplus therefrom
to Spouses Biaco. But if the proceeds of the auction sale is not enough to pay the obligation, the trial court also
ordered the spouses to pay the deficiency of the judgment to the Bank as their personal liability. Consequently, the
RTC’s judgment was served upon Ernesto at his office. As Spouses Biaco did not take an appeal against the trial
court’s decision and that no payments were made by them within the aforesaid 90-day period, the Bank filed an ex
parte motion for execution in order to have the mortgaged lot sold in a public auction, which was then granted by
the trial court. Thereafter, the sheriff served a copy of the writ of execution upon Spouses Biaco, which was received
personally, once again, by Ernesto, this time, at their residence. By virtue of this writ of execution, the mortgaged
lot was sold in a public auction. However, as the value of the property is not sufficient to to satisfy the judgment
debt, the Bank once again filed an ex parte motion for judgment for the issuance of writ of execution against the
other properties owned by Spouses Biaco, which was also granted by the RTC.

Ma. Teresa sought filed a petition for the annulment of the RTC’s judgment before the Court of Appeals (CA)
contending, among others, that the trial court had no jurisdiction over her because the summons were served only
through her husband without any explanation as to why the same was not personally served upon her. However,
the CA dismissed her petition. It ruled that judicial foreclosure proceedings, being actions in rem, jurisdiction over
her person as a defendant is not required so long as the court acquires jurisdiction over the res, such as in this case.
Undaunted by the CA’s denial of her motion for reconsideration, Ma. Teresa filed the present petition for review
before the Supreme Court, asserting that even if the action is quasi in rem, personal service of summons is essential
in order to afford her due process. She maintains that the substituted service made by the sheriff at her husband’s
office cannot be deemed proper service absent any explanation that efforts had been made to personally serve
summons upon her but that such efforts failed. Petitioner then contends that extrinsic fraud was perpetrated not
so much by her husband, who did not inform her of the judicial foreclosure proceedings, but by the sheriff who
allegedly connived with her husband to just leave a copy of the summons intended for her at the latter’s office.

ISSUES: Was the Court of Appeals correct in denying Ma. Teresa’s petition for annulment of the RTC’s judgment?

RULING: No; the Court of appeals was incorrect in denying Ma. Teresa’s petition for the annulment of the judgment
of the RTC of Misamis Oriental. This is because the appellate court failed to consider that the trial court, in enforcing

Written by: MARIA KRISTINA D. SIUAGAN, RN (TINA SIUAGAN)

 CASE BRIEFS – REMEDIAL LAW REVIEW I 5

personal liability against Spouses Biaco without first acquiring jurisdiction over the person of Ma. Teresa, violated
her constitutional right to due process.

The Supreme Court held that the judicial foreclosure proceeding instituted by respondent PCRB undoubtedly vested
the trial court jurisdiction over the res. A judicial foreclosure proceeding is an action quasi in rem. As such,
jurisdiction over the person of petitioner is not required, it being sufficient that the trial court is vested with
jurisdiction over the subject matter.

This was explained by the Court, thus:

“ xxx the question of whether the trial court has jurisdiction depends on the nature of the action, i.e., whether the
action is in personam, in rem, or quasi in rem. The rules on service of summons under Rule 14 of the Rules of Court
likewise apply according to the nature of the action. An action in personam is an action against a person on the basis
of his personal liability. An action in rem is an action against the thing itself instead of against the person. An action
quasi in rem is one wherein an individual is named as defendant and the purpose of the proceeding is to subject
his interest therein to the obligation or lien burdening the property. In an action in personam, jurisdiction over the
person of the defendant is necessary for the court to validly try and decide the case. In a proceeding in rem or quasi
in rem, jurisdiction over the person of the defendant is not a prerequisite to confer jurisdiction on the court
provided that the court acquires jurisdiction over the res. Jurisdiction over the res is acquired either (1) by the
seizure of the property under legal process, whereby it is brought into actual custody of the law; or (2) as a result
of the institution of legal proceedings, in which the power of the court is recognized and made effective.”

Nonetheless, summons must be served upon the defendant not for the purpose of vesting the court with jurisdiction
but merely for satisfying the due process requirements. A resident defendant who does not voluntarily appear in
court, such as petitioner in this case, must be personally served with summons as provided under Sec. 6, Rule 14 of
the Rules of Court. If she cannot be personally served with summons within a reasonable time, substituted service
may be effected (1) by leaving copies of the summons at the defendant’s residence with some person of suitable
age and discretion then residing therein, or (2) by leaving the copies at defendant’s office or regular place of
business with some competent person in charge thereof in accordance with Sec. 7, Rule 14 of the Rules of Court.
Significantly, the Court went on to rule, citing De Midgely v. Ferandos, et. al. and Perkins v. Dizon, et al. that in a
proceeding in rem or quasi in rem, the only relief that may be granted by the court against a defendant over whose
person it has not acquired jurisdiction either by valid service of summons or by voluntary submission to its jurisdiction,
is limited to the res. Similarly, in this case, while the trial court acquired jurisdiction over the res, its jurisdiction is
limited to a rendition of judgment on the res. It cannot extend its jurisdiction beyond the res and issue a judgment
enforcing petitioner’s personal liability. In doing so without first having acquired jurisdiction over the person of
petitioner, as it did, the trial court violated her constitutional right to due process, warranting the annulment of the
judgment rendered in the case.

There is more, the trial court granted respondent PCRB’s ex-parte motion for deficiency judgment and ordered the
issuance of a writ of execution against the spouses Biaco to satisfy the remaining balance of the award. In short, the
trial court went beyond its jurisdiction over the res and rendered a personal judgment against the spouses Biaco. This
cannot be countenanced.

In Sahagun v. Court of Appeals, suit was brought against a non-resident defendant, Abelardo Sahagun, and a writ
of attachment was issued and subsequently levied on a house and lot registered in his name. Claiming ownership
of the house, his wife, Carmelita Sahagun, filed a motion to intervene. For failure of plaintiff to serve summons
extraterritorially upon Abelardo, the complaint was dismissed without prejudice. Subsequently, plaintiff filed a
motion for leave to serve summons by publication upon Abelardo. The trial court granted the motion. Plaintiff later

Written by: MARIA KRISTINA D. SIUAGAN, RN (TINA SIUAGAN)

 CASE BRIEFS – REMEDIAL LAW REVIEW I 6

filed an amended complaint against Abelardo, this time impleading Carmelita and Rallye as additional defendants.
Summons was served on Abelardo through publication in the Manila Evening Post. Abelardo failed to file an answer
and was declared in default. Carmelita went on certiorari to the Court of Appeals assailing as grave abuse of
discretion the declaration of default of Abelardo. The Court of Appeals dismissed the petition and denied
reconsideration. In her petition with this Court, Carmelita raised the issue of whether the trial court acquired
jurisdiction over her husband, a non-resident defendant, by the publication of summons in a newspaper of general
circulation in the Philippines. The Court sustained the correctness of extrajudicial service of summons by publication
in such newspaper. The Court explained, citing El Banco Español-Filipino v. Palanca, that foreclosure and attachment
proceedings are both actions quasi in rem. As such, jurisdiction over the person of the (non-resident) defendant is
not essential. Service of summons on a non-resident defendant who is not found in the country is required, not for
purposes of physically acquiring jurisdiction over his person but simply in pursuance of the requirements of fair play,
so that he may be informed of the pendency of the action against him and the possibility that property belonging to
him or in which he has an interest may be subjected to a judgment in favor of a resident, and that he may thereby be
accorded an opportunity to defend in the action, should he be so minded.

Therefore, as the RTC of Misamis Oriental cannot extend its jurisdiction beyond the res and issue a judgment enforcing
Ma. Teresa’s (Ernesto’s as well) personal liability without first having acquired jurisdiction over her person, as it did in
this case. In doing so, the trial court violated her constitutional right to due process, warranting the annulment of the
judgment rendered in the case.

WHEREFORE, the instant petition is GRANTED. The Decision dated August 27, 2003 and the Resolution dated
December 15, 2003 of the Court of Appeals in CA-G.R. SP No. 67489 are SET ASIDE. The Judgment dated July 11,
2000 and Order dated February 9, 2001 of the Regional Trial Court of Cagayan de Oro City, Branch 20, are likewise
SET ASIDE.

SO ORDERED.

Written by: MARIA KRISTINA D. SIUAGAN, RN (TINA SIUAGAN)

 CASE BRIEFS – REMEDIAL LAW REVIEW I 7

BPI FAMILY SAVINGS BANK INC., Petitioner, Vs. SPOUSES BENEDICTO & TERESITA YUJUICO, Respondents

FACTS:

Spouses Yujuico own five parcels of land which were expropriated by the City of Manila. Two of said lands were
covered by a real estate mortgage (REM) in favor of City Trust Banking Corp., BPI’s predecessor-in-interet.
Eventually, BPO extrajudicially foreclosed these mortgaged properties in order to apply the proceeds thereof on
the spouse’s debt. Claiming that a deficiency exists after such foreclosure, BPI then sued Spouses Yujuico in order
to recover the amount of said deficiency in the RTC of Makati, where its main office is situated. The spouses then
moved to dismiss the complaint on the ground that the same states no cause of action and that their claim,
according to them, have been waived, abandoned, and extinguished. Said motion to dismiss was subsequently
denied by Makati RTC. Upon motion for reconsideration (MR), and for the first time, the spouses raised the issue
on improper venue. They contended that the present suit for the recovery of the deficiency, being a supplementary
action of the extrajudicial foreclosure done proceedings, is a real action that should have been brought instead in
the RTC of Manila, where the subject lands are located. Still, the Makati RTC dismissed the spouses’ MR. This
prompted Spouses Yujuico to file a petition for certiorari with the Court of Appeals, which, in turn, ruled in their
favor and reversed the Makati RTC’s ruling. The CA opined that since the suit emanated from the foreclosure
proceedings, the same should have been filed with the RTC in Manila.

Hence, the present petition.

ISSUE: Was the Court of Appeals correct in setting aside the Makati RTC’s ruling and holding that the suit for the
recovery of the deficiency amount should have been filed in an RTC in Manila?

RULING: NO; the Court of Appeals was incorrect in holding that the BPI should have filed its suit for recovery of the
deficiency amount in Manila. This is because such suit, being a personal action, maybe instituted in Makati where
BPI’s main office is located, pursuant to Rule 4 (Venue of Actions) of the Rules of Court.

The Supreme Court held that the venue of an action depends on whether it is a real or a personal action. The
determinants of whether an action is of a real or a personal nature have been fixed by the Rules of Court and
relevant jurisprudence. According to Section 1, Rule 4 of the Rules of Court, a real action is one that affects title to
or possession of real property, or an interest therein. Thus, an action for partition or condemnation of, or
foreclosure of mortgage on, real property is a real action. The real action is to be commenced and tried in the
proper court having jurisdiction over the area wherein the real property involved, or a portion thereof, is situated,
which explains why the action is also referred to as a local action. In contrast, the Rules of Court declares all other
actions as personal actions. Such actions may include those brought for the recovery of personal property, or for
the enforcement of some contract or recovery of damages for its breach, or for the recovery of damages for the
commission of an injury to the person or property. The venue of a personal action is the place where the plaintiff
or any of the principal plaintiffs resides, or where the defendant 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, for which reason the
action is considered a transitory one.

Based on the distinctions between real and personal actions, an action to recover the deficiency after the extrajudicial
foreclosure of the real property mortgage is a personal action, for it does not affect title to or possession of real
property, or any interest therein.

Therefore, BPI was correct in instituting the case in the Makati RTC, not in Manila.

Written by: MARIA KRISTINA D. SIUAGAN, RN (TINA SIUAGAN)

 CASE BRIEFS – REMEDIAL LAW REVIEW I 8

WHEREFORE, we GRANT the petition for review on certiorari; REVERSE and SET ASIDE the decision promulgated by
the Court of Appeals on March 31, 2006; REINSTATE the orders dated October 17, 2003 and February 1, 2005 of
the Regional Trial Court, Branch 60, in Maka_ City; and ORDER the respondents to pay the costs of suit.

SO ORDERED.

Written by: MARIA KRISTINA D. SIUAGAN, RN (TINA SIUAGAN)

 CASE BRIEFS – REMEDIAL LAW REVIEW I 9

PLANTERS DEVELOPMENT BANK VS. SPOUSES VICTORIANO AND MELANIE RAMOS

FACTS:

Spouses Victoriano and Melanie Ramos (Spouses Ramos) applied for several credit lines with Planters Development
Bank (PDB) for the construction of a warehouse in Barangay Santo Tomas, Nueva Ecija. The said application was
approved for P40,000,000.00, secured by Real Estate Mortgage over properties owned by said spouses.
Subsequently, Spouses Ramos requested for additional loan for which PDB allegedly promised to extend them a
further loan of P140,000,000.00, the amount they think was necessary for the completion of the construction of
the warehouse. Despite the assurance of the bank, only P25,000,000.00 in additional loan was approved and
released by PDB, which was secured by a Real Estate Mortgage over another four (4) of Spouses Ramos’ real
properties. The real estate mortgages executed by the parties contain the following stipulations:

“In the event of suit arising from out of or in connection with this mortgage and/or the promissory note/s secured by this
mortgage, the parties hereto agree to bring their causes of action exclusively in the proper court/s of Makati, Metro Manila, the
MORTGAGOR waiving for this purpose any other venue.”

Due to financial woes, Spouses Ramos were not able to pay their obligations as they fell due. They appealed to PDB
for the deferment of debt servicing and requested for a restructuring scheme but the parties failed to reach an
agreement. Consequently, PDB filed a Petition for Extra-judicial Foreclosure of Real Estate Mortgage before the
Regional Trial Court of San Jose City, Nueva Ecija. A Notice to Parties of Sheriff’s Public Auction Sale was thereafter
issued. Spouses Ramos filed a Complaint for Annulment of Real Estate Mortgages and Promissory Notes, Accounting
and Application of Payments, Injunction with Preliminary Injunction and Temporary Restraining Order against PDB
and its officers also before the RTC of San Jose City, Nueva Ecija.

However, instead of filing an Answer, PDB filed an Urgent Motion to Dismiss, alleging among others2 that the venue
of the action was improperly laid considering that the real estate mortgages signed by the parties contained a
stipulation that any suit arising therefrom shall be filed in Makati City only. The RTC of San Jose denied PDB’s motion.
The trial court applied Section 1 of the Rules of Court after considering the contention that the contract under
consideration is a contract of adhesion. Unyielding, PDB filed a motion for reconsideration instead of filing an
answer to the complaint. This prompted Spouses Ramos to file a motion to declare PDB in default. However, the
RTC denied both motions.

Aggrieved, PDB filed a petition for certiorari with the CA, imputing grave abuse of discretion on the RTC for having
denied their Urgent Motion to Dismiss despite the fact that venue was improperly laid. In turn, the appellate court
dismissed the petition and even ruled that what PDB should have done was to file an Answer to the spouses’
complaint. When the CA denied its Motion for Reconsideration, PDB, undaunted, filed a Petition for Review on
Certiorari (under Rule 45) before the Supreme Court.

ISSUE: Was Spouses Ramos’ complaint filed in the proper venue?

RULING: No. The complaint filed by Spouses Ramos was filed in the wrong venue in view of the restrictive stipulation
on venue between them and PDB in all the mortgage contracts they have entered into, pursuant to Rule 4 of the
Rules of Court.

2 PDB likewise alleges that the complaint filed by Spouses Ramos has no cause of action.

Written by: MARIA KRISTINA D. SIUAGAN, RN (TINA SIUAGAN)

 CASE BRIEFS – REMEDIAL LAW REVIEW I 10

The general rules on venue admit of exceptions in Section 4 thereof, i.e., where a specific rule or law provides
otherwise, or when the parties agreed in writing before the filing of the action on the exclusive venue thereof.

Stipulations on venue, however, may either be permissive or restrictive. “Written stipulations as to venue may be
restrictive in the sense that the suit may be filed only in the place agreed upon, or merely permissive in that the
parties may file their suit not only in the place agreed upon but also in the places fixed by law. As in any other
agreement, what is essential is the ascertainment of the intention of the parties respecting the matter. In
Unimasters Conglomeration, Inc. v. Court of Appeals,22 the Court elaborated, thus:

“Since convenience is the raison d’être of the rules of venue, it is easy to accept the proposition that normally, venue stipulations
should be deemed permissive merely, and that interpretation should be adopted which most serves the parties’ convenience. In
other words, stipulations designating venues other than those assigned by Rule 4 should be interpreted as designed to make it
more convenient for the parties to institute actions arising from or in relation to their agreements; that is to say, as simply
adding to or expanding the venues indicated in said Rule 4.

On the other hand, because restrictive stipulations are in derogation of this general policy, the language of the parties must be
so clear and categorical as to leave no doubt of their intention to limit the place or places, or to fix places other than those
indicated in Rule 4, for their actions. x x x”

In view of the predilection to view a stipulation on venue as merely permissive, the parties must therefore employ
words in the contract that would clearly evince a contrary intention. In Spouses Lantin v. Judge Lantion,24 the Court
emphasized that “the mere stipulation on the venue of an action is not enough to preclude parties from bringing a
case in other venues. The parties must be able to show that such stipulation is exclusive. In the absence of qualifying
or restrictive words, the stipulation should be deemed as merely an agreement on an additional forum, not as
limiting venue to the specified place.”

In the instant case, there is an identical stipulation in the real estate mortgages executed by the parties, pertaining
to venue: “… the parties hereto agree to bring their causes of action exclusively in the proper court/s of Makati, Metro
Manila, the MORTGAGOR waiving for this purpose any other venue.” The words exclusively and waiving for this
purpose any other venue are restrictive.”27 Therefore, the employment of the same language in the subject
mortgages signifies the clear intention of the parties to restrict the venue of any action or suit that may arise out
of the mortgage to a particular place, to the exclusion of all other jurisdictions.

In view of the foregoing, the RTC should have granted the Urgent Motion to Dismiss filed by PDB on the ground
that the venue was improperly laid. The complaint being one for annulment of real estate mortgages and
promissory notes is in the nature of a personal action, the venue of which may be fixed by the parties to the
contract. In this case, it was agreed that any suit or action that may arise from the mortgage contracts or the
promissory notes must be filed and tried in Makati only. Not being contrary to law or public policy3, the stipulation
on venue, which PDB and Spouses Ramos freely and willingly agreed upon, has the force of law between them4,
and thus, should be complied with in good faith.

33 Here, the Spouses Ramos alleged that some stipulations in the mortgage contracts were void for being contrary to law and public policy.
For instance, they alleged that the interest was pegged at an excessive rate of 8% which the bank unilaterally increased to 9%. They likewise
claimed that the penalty interest rate of 3% was unconscionable. Further, they claimed that the escalation clause provided in the mortgage
contracts was violative of Presidential Decree No. 1684.32 However, the Court ruled that these do not affect the validity of the mortgage
contracts. Thus, with all the more reason that the stipulation on venue should have been upheld.
4 The Court likewise emphasized that Spouses Ramos impliedly admitted the authenticity and due execution of the mortgage contracts.

They do not claim to have been duped into signing the mortgage contracts or that the same was not their free and voluntary act. While
they may have qualms over some of the terms stated therein, the same do not pertain to the lack of any of the essential elements of a

Written by: MARIA KRISTINA D. SIUAGAN, RN (TINA SIUAGAN)

 CASE BRIEFS – REMEDIAL LAW REVIEW I 11

WHEREFORE, the Decision dated July 5, 2016 and Resolution dated December 7, 2016 of the Court of Appeals in
C.A.-G.R. S.P. No. 140264 are REVERSED and SET ASIDE. Civil Case No. 2014-485-SJC is hereby DISMISSED on the
ground of improper venue.

SO ORDERED.

contract that would render it void altogether. Such being the case, the stipulation on venue stands and should have been upheld by RTC
and the CA.

Written by: MARIA KRISTINA D. SIUAGAN, RN (TINA SIUAGAN)