V.

Venue of Actions (Rule 4) the following sections shall govern as to the manner in
which the sale and redemption shall be effected,
whether or not provision for the same is made in the
Section 1. Venue of real actions. — Actions affecting power.
title to or possession of real property, or interest therein,
shall be commenced and tried in the proper court which Sec. 2. Said sale cannot be made legally outside of the
has jurisdiction over the area wherein the real property province in which the property sold is situated; and in
involved, or a portion thereof, is situated. case the place within said province in which the sale is
to be made is the subject of stipulation, such sale shall
Forcible entry and detainer actions shall be commenced be made in said place or in the municipal building of the
and tried in the municipal trial court of the municipality municipality in which the property or part thereof is
or city wherein the real property involved, or a portion situated.[5]
thereof, is situated. (1[a], 2[a]a)
The case at bar involves petitioners' mortgaged real
Section 2. Venue of personal actions. — All other property located in Parañaque City over which
actions may be commenced and tried where the plaintiff respondent bank was granted a special power to
or any of the principal plaintiffs resides, or where the foreclose extra-judicially. Thus, by express provision of
defendant or any of the principal defendants resides, or Section 2, the sale can only be made in Parañaque City.
in the case of a non-resident defendant where he may
be found, at the election of the plaintiff. (2[b]a) The exclusive venue of Makati City, as stipulated by the
parties[6] and sanctioned by Section 4, Rule 4 of the
Section 3. Venue of actions against nonresidents. Rules of Court,[7] cannot be made to apply to the
— If any of the defendants does not reside and is not Petition for Extrajudicial Foreclosure filed by respondent
found in the Philippines, and the action affects the bank because the provisions of Rule 4 pertain to venue
personal status of the plaintiff, or any property of said of actions, which an extrajudicial foreclosure is not.
defendant located in the Philippines, the action may be
commenced and tried in the court of the place where the Pertinent are the following disquisitions in Supena v. De
plaintiff resides, or where the property or any portion la Rosa:[8]
thereof is situated or found. (2[c]a)
Section 1, Rule 2 [of the Rules of Court] defines an
action in this wise:
Section 4. When Rule not applicable. — This Rule
shall not apply. (a) In those cases where a specific rule
"Action means an ordinary suit in a court of justice, by
or law provides otherwise; or (b) Where the parties have
which one party prosecutes another for the enforcement
validly agreed in writing before the filing of the action on
or protection of a right, or the prevention or redress of a
the exclusive venue thereof. (3a, 5a)
wrong."
1. SPOUSES OCHUA VS. CHINABANK Hagans v. Wislizenus does not depart from this
definition when it states that "[A]n action is a formal
For resolution is petitioners' motion for demand of one's legal rights in a court of justice in the
reconsideration[1] of our January 17, 2011 manner prescribed by the court or by the law. x x x." It
Resolution[2] denying their petition for review on is clear that the determinative or operative fact which
certiorari[3] for failing to sufficiently show any reversible converts a claim into an "action or suit" is the filing of the
error in the assailed judgment[4] of the Court of Appeals same with a "court of justice." Filed elsewhere, as with
(CA). some other body or office not a court of justice, the claim
may not be categorized under either term. Unlike an
Petitioners insist that it was error for the CA to rule that action, an extrajudicial foreclosure of real estate
the stipulated exclusive venue of Makati City is binding mortgage is initiated by filing a petition not with any
only on petitioners' complaint for Annulment of court of justice but with the office of the sheriff of the
Foreclosure, Sale, and Damages filed before the province where the sale is to be made. By no stretch of
Regional Trial Court of Parañaque City, but not on the imagination can the office of the sheriff come under
respondent bank's Petition for Extrajudicial Foreclosure the category of a court of justice. And as aptly observed
of Mortgage, which was filed with the same court. by the complainant, if ever the executive judge comes
into the picture, it is only because he exercises
We disagree. administrative supervision over the sheriff. But this
administrative supervision, however, does not change
The extrajudicial foreclosure sale of a real estate the fact that extrajudicial foreclosures are not judicial
mortgage is governed by Act No. 3135, as amended by proceedings, actions or suits.[9]
Act No. 4118, otherwise known as "An Act to Regulate
the Sale of Property Under Special Powers Inserted In These pronouncements were confirmed on August 7,
or Annexed to Real-Estate Mortgages." Sections 1 and 2001 through A.M. No. 99-10-05-0, entitled "Procedure
2 thereof clearly state: in Extra-Judicial Foreclosure of Mortgage," the
significant portions of which provide:
Section 1. When a sale is made under a special power
inserted in or attached to any real-estate mortgage In line with the responsibility of an Executive Judge
hereafter made as security for the payment of money or under Administrative Order No. 6, date[d] June 30,
the fulfillment of any other obligation, the provisions of
1975, for the management of courts within his
administrative area, included in which is the task of Issue: W/N the filing of the case before RTC Naga was
supervising directly the work of the Clerk of Court, who proper?
is also the Ex-Office Sheriff, and his staff, and the
issuance of commissions to notaries public and Ruling: Yes.
enforcement of their duties under the law, the following Exclusive venue stipulation embodied in a contract
procedures are hereby prescribed in extra-judicial restricts or confines parties thereto when the suit relates
foreclosure of mortgages: to breach of the said contract. Monasterio’s cause of
action was not based on the EWA. The cashiering
1. All applications for extrajudicial foreclosure of service was different from his functions as a warehouse
mortgage whether under the direction of the sheriff or a contractor, and the EWA would not apply.
notary public, pursuant to Act 3135, as amended by Act The collection for money, being a personal action, it was
4118, and Act 1508, as amended, shall be filed with the properly filed before the RTC Naga City where
Executive Judge, through the Clerk of Court who is also Monasterio resides.
the Ex-Officio Sheriff.
DOCTRINE
Verily then, with respect to the venue of extrajudicial The venue stipulation in the EWA should be construed
foreclosure sales, Act No. 3135, as amended, applies, as mandatory. Nothing therein being contrary to law,
it being a special law dealing particularly with morals, good custom or public policy, this provision is
extrajudicial foreclosure sales of real estate mortgages, binding upon the parties. The EWA stipulation on venue
and not the general provisions of the Rules of Court on is clear and unequivocal, thus it ought to be respected.
Venue of Actions.
However, we note that the cause of action in the
Consequently, the stipulated exclusive venue of Makati complaint filed by the Monasterio before the RTC of
City is relevant only to actions arising from or related to Naga was not based on the EWA, but concern services
the mortgage, such as petitioners' complaint for not enumerated in the EWA. Moreover, in the amended
Annulment of Foreclosure, Sale, and Damages. complaint, Monasterio’s cause of action was specifically
limited to the collection of the sum owing to him for his
The other arguments raised in the motion are a mere cashiering service in favor of SMC. He already omitted
reiteration of those already raised in the petition for SMC’s non-payment of warehousing fees. As
review. As declared in this Court's Resolution on previously ruled, allegations in the complaint
January 17, 2011, the same failed to show any sufficient determines the cause of action or the nature of the case.
ground to warrant the exercise of our appellate Thus, given the circumstances of this case now before
jurisdiction. us, we are constrained to hold that it would be
erroneous to rule, as the CA did, that the collection suit
WHEREFORE, premises considered, the motion for of Monasterio did not pertain solely to the unpaid
reconsideration is hereby DENIED. cashiering services but pertain likewise to the
warehousing services.
SO ORDERED.
Exclusive venue stipulation embodied in a contract
2. SAN MIGUEL CORPORATION V. restricts or confines parties thereto when the suit relates
MONASTERIO Rule 4, Sec 4 to breach of the said contract. But where the exclusivity
clause does not make it necessarily all encompassing,
Facts: such that even those not related to the enforcement of
San Miguel Corporation [SMC] entered into an the contract should be subject to the exclusive venue,
Exclusive Warehouse Agreement [EWA] with SMB the stipulation designating exclusive venues should be
Warehousing services, represented by its manager strictly confined to the specific undertaking or
Monasterio, wherein SMB would provide the necessary agreement. Otherwise, the basic principles of freedom
services for the storage and warehousing of SMC to contract might work to the great disadvantage of a
products. weak party-suitor who ought to be allowed free access
The EWA also contained a stipulation on the venue of to courts of justice.
actions: “Should it be necessary that an action be
brought in court to enforce the terms of this Agreement RESTRICTIVE STIPULATIONS are in derogation of the
or the duties or rights of the parties herein, it is agreed general policy of making it more convenient for the
that the proper court should be in the courts of Makati parties to institute actions arising from or in relation to
or Pasig, Metro Manila, to the exclusion of the other their agreements. Thus, the restriction should be strictly
courts at the option of the COMPANY.” construed as relating solely to the agreement for which
In 1998, Monasterio [a resident of Naga City] filed a the exclusive venue stipulation is embodied. Expanding
complaint for collection of sum of money against SMC the scope of such limitation on a contracting party will
before the RTC-Naga City. He alleged that he was not create unwarranted restrictions which the parties might
paid 900k for the services he rendered as a cashier. find unintended or worse, arbitrary and oppressive.
SMC filed a Motion to Dismiss on the ground of
improper venue. It argued that the money claim arose Moreover, since convenience is the raison d’être of the
from Monasterio’s services as a warehouse contractor, rules on venue, venue stipulation should be deemed
thus the EWA stipulation would apply [citing Sec 4b in merely permissive, and that interpretation should be
relation to Sec 2, Rule 4]. adopted which most serves the parties’ convenience.
Accordingly, since the present case for the collection of In response, Briones filed an
sum of money filed by herein respondent is a personal opposition,19 asserting, inter alia, that he should not be
action, we find no compelling reason why it could not be covered by the venue stipulation in the subject contracts
instituted in the RTC of Naga City, the place where as he was never a party therein. He also reiterated that
plaintiff resides. his signatures on the said contracts were
forgeries.20chanRobl
3. BRIONES, Petitioner, v. COURT OF
APPEALS The RTC Ruling
In an Order21 dated September 20, 2010, the RTC
Assailed in this petition for certiorari1 are the denied Cash Asia’s motion to dismiss for lack of merit.
Decision2 dated March 5, 2012 and the In denying the motion, the RTC opined that the parties
Resolution3 dated October 4, 2012 of the Court of must be afforded the right to be heard in view of the
Appeals(CA) in CA-G.R. SP No. 117474, which substance of Briones’s cause of action against Cash
annulled the Orders dated September 20, 20104 and Asia as stated in the complaint.22cCash Asia moved for
October 22, 20105 of the Regional Trial Court of Manila, reconsideration23 which was, however, denied in an
Branch 173 (RTC) in Civil Case No. 10-124040, denying Order24 dated October 22, 2010. Aggrieved, it filed a
private respondent Cash Asia Credit Corporation’s petition for certiorari25 before the CA.c
(Cash Asia) motion to dismiss on the ground of
improper venue. The CA Ruling
In a Decision26 dated March 5, 2012, the CA annulled
The Facts the RTC Orders, and accordingly, dismissed Briones’s
The instant case arose from a Complaint6 dated August complaint without prejudice to the filing of the same
2, 2010 filed by Virgilio C. Briones (Briones) for Nullity before the proper court in Makati City.27 It held that the
of Mortgage Contract, Promissory Note, Loan RTC gravely abused its discretion in denying Cash
Agreement, Foreclosure of Mortgage, Cancellation of Asia’s motion to dismiss, considering that the subject
Transfer Certificate of Title (TCT) No.290846, and contracts clearly provide that actions arising therefrom
Damages against Cash Asia before the RTC.7 In his should be exclusively filed before the courts of Makati
complaint, Briones alleged that he is the owner of a City only.28 As such, the CA concluded that Briones’s
property covered by TCT No. 160689 (subject complaint should have been dismissed outright on the
property),and that, on July 15, 2010, his sister informed ground of improper venue,29 this, notwithstanding
him that his property had been foreclosed and a writ of Briones’s claim of forgery.
possession had already been issued in favor of Cash
Asia.8 Upon investigation, Briones discovered that: (a) Dissatisfied, Briones moved for
on December 6, 2007, he purportedly executed a reconsideration,30 which was, however, denied in a
promissory note,9 loan agreement,10 and deed of real Resolution31 dated October 4, 2012, hence, this
estate mortgage11covering the subject property (subject petition.
contracts) in favor of Cash Asia in order to obtain a loan
in the amount of P3,500,000.00 from the latter;12 and (b) The Issue Before the Court
since the said loan was left unpaid, Cash Asia The primordial issue for the Court’s resolution is
proceeded to foreclose his property.13 In this relation, whether or not the CA gravely abused its discretion in
Briones claimed that he never contracted any loans ordering the outright dismissal of Briones’s complaint on
from Cash Asia as he has been living and working in the ground of improper venue.
Vietnam since October 31, 2007. He further claimed
that he only went back to the Philippines on December The Court’s Ruling
28, 2007 until January 3, 2008 to spend the holidays The petition is meritorious. At the outset, the Court
with his family, and that during his brief stay in the stresses that “[t]o justify the grant of the extraordinary
Philippines, nobody informed him of any loan remedy of certiorari, [the petitioner] must satisfactorily
agreement entered into with Cash Asia. Essentially, show that the court or quasi-judicial authority gravely
Briones assailed the validity of the foregoing contracts abused the discretion conferred upon it. Grave abuse of
claiming his signature to be forged.14chanRoblesvirtu discretion connotes judgment exercised in a capricious
alLawlibrary and whimsical manner that is tantamount to lack of
For its part, Cash Asia filed a Motion to Dismiss15 dated jurisdiction. To be considered ‘grave,’ discretion must
August 25, 2010, praying for the outright dismissal of be exercised in a despotic manner by reason of passion
Briones’s complaint on the ground of improper or personal hostility, and must be so patent and gross
venue.16 In this regard, Cash Asia pointed out the venue as to amount to an evasion of positive duty or to a virtual
stipulation in the subject contracts stating that “all legal refusal to perform the duty enjoined by or to act at all in
actions arising out of this notice in connection with the contemplation of law.”32chanRoblesvirtualLawlibrary
Real Estate Mortgage subject hereof shall only be
brought in or submitted to the jurisdiction of the proper Guided by the foregoing considerations, the Court finds
court of Makati City.”17 In view thereof, it contended that that the CA gravely abused its discretion in ordering the
all actions arising out of the subject contracts may only outright dismissal of Briones’s complaint against Cash
be exclusively brought in the courts of Makati City, and Asia, without prejudice to its re-filing before the proper
as such, Briones’s complaint should be dismissed for court in Makati City.
having been filed in the City of Manila.18chanRo Rule 4 of the Rules of Court governs the rules on venue
of civil actions.
Based therefrom, the general rule is that the venue of subject property is located.
real actions is the court which has jurisdiction over the
area wherein the real property involved, or a portion In conclusion, the CA patently erred and hence
thereof, is situated; while the venue of personal actions committed grave abuse of discretion in dismissing
is the court which has jurisdiction where the plaintiff or Briones’s complaint on the ground of improper
the defendant resides, at the election of the plaintiff. As venue.chanro
an exception, jurisprudence in Legaspi v. Rep. of the
Phils.33 instructs that the parties, thru a written WHEREFORE, the petition is GRANTED. Accordingly,
instrument, may either introduce another venue where the Decision dated March 5, 2012 and the Resolution
actions arising from such instrument may be filed, or dated October 4, 2012 of the Court of Appeals in CA-
restrict the filing of said actions in a certain exclusive G.R. SP No. 117474 are hereby ANNULLED and SET
venue, viz.:chanroblesvirtuallawlibrary
ASIDE. The Orders dated September 20, 2010 and
October 22, 2010 of the Regional Trial Court of Manila,
The parties, however, are not precluded from agreeing
in writing on an exclusive venue, as qualified by Section Branch 173 in Civil Case No. 10-124040
4 of the same rule. Written stipulations as to venue are REINSTATED.
may be restrictive in the sense that the suit may be
SO ORDERED
filed only in the place agreed upon, or merely
permissive in that the parties may file their suit not 4. MARCOS-ARANETA V CA (VENUE)
only in the place agreed upon but also in the places
fixed by law. As in any other agreement, what is The Facts
essential is the ascertainment of the intention of the
parties respecting the matter.  Sometime in 1968 and 1972, Ambassador
Roberto S. Benedicto, now deceased, and his business
As regards restrictive stipulations on venue, associates (Benedicto Group) organized Far East
jurisprudence instructs that it must be shown that Managers and Investors, Inc. (FEMII) and Universal
such stipulation is exclusive. In the absence of
Equity Corporation (UEC), respectively.
qualifying or restrictive words, such as “exclusively,”
“waiving for this purpose any other venue,” “shall only”  Irene Marcos-Araneta would later allege, both
preceding the designation of venue, “to the exclusion of corporations were organized pursuant to a contract
the other courts,” or words of similar import, the whereby Benedicto, as trustor, placed in his name and
stipulation should be deemed as merely an in the name of his associates, as trustees, the shares of
agreement on an additional forum, not as limiting stocks of FEMII and UEC with the obligation to hold
venue to the specified place.34 (Emphases and
those shares and their fruits in trust and for the benefit
underscoring supplied)
of Irene to the extent of 65% of such shares. Several
In this relation, case law likewise provides that in cases years after, Irene demanded the reconveyance of said
where the complaint assails only the terms, conditions, 65% stockholdings, but the Benedicto Group refused to
and/or coverage of a written instrument and not its oblige.
validity, the exclusive venue stipulation contained  In March 2000, Irene filed before the RTC two
therein shall still be binding on the parties, and thus, the similar complaints for conveyance of shares of stock,
complaint may be properly dismissed on the ground of accounting and receivership against the Benedicto
improper venue.35 Conversely, therefore, a complaint Group with prayer for the issuance of a temporary
directly assailing the validity of the written instrument restraining order (TRO).
itself should not be bound by the exclusive venue  In a consolidated opposition, Benedicto,
stipulation contained therein and should be filed in moved to dismiss on 5 grounds, among which were: (2)
accordance with the general rules on venue.To be sure,
venue was improperly laid
it would be inherently consistent for a complaint of this
 During the preliminary proceedings on their
nature to recognize the exclusive venue stipulation
when it, in fact, precisely assails the validity of the motions to dismiss, Benedicto presented the Joint
instrument in which such stipulation is contained. Affidavit of Gilmia B. Valdez, Catalino A. Bactat, and
Conchita R. Rasco who all attested being employed as
In this case, the venue stipulation found in the subject household staff at the Marcos’ Mansion in Brgy. Lacub,
contracts is indeed restrictive in nature, considering that Batac, Ilocos Norte and that Irene did not maintain
it effectively limits the venue of the actions arising residence in said place as she in fact only visited the
therefrom to the courts of Makati City. However, it must mansion twice in 1999; that she did not vote in Batac in
be emphasized that Briones’s complaint directly assails the 1998 national elections; and that she was staying at
the validity of the subject contracts, claiming forgery in her husband’s house in Makati City.
their execution. Given this circumstance, Briones  Irene presented her community tax
cannot be expected to comply with the aforesaid venue certificateissued on “11/07/99” in Curimao, Ilocos Norte
stipulation, as his compliance therewith would mean an
to support her claimed residency in Batac, Ilocos Norte.
implicit recognition of their validity. Hence, pursuant to
 RTC dismissed both complaints, stating that
the general rules on venue, Briones properly filed his
complaint before a court in the City of Manila where the these partly constituted “real action,” and that Irene did
not actually reside in Ilocos Norte, and, therefore, venue This contention is not well-taken. In a personal action,
was improperly laid. the plaintiff seeks the recovery of personal property, the
 The RTC eventually entertained an amended enforcement of a contract, or the recovery of damages.
complaint filed by Irene, dispositively stating: (1) Irene Real actions, on the other hand, are those affecting title
may opt to file, as a matter of right, an amended to or possession of real property, or interest therein. In
complaint. (2) The inclusion of additional plaintiffs, one accordance with the wordings of Sec. 1 of Rule 4, the
venue of real actions shall be the proper court which has
of whom was a Batac, an Ilocos Norte resident, in the
territorial jurisdiction over the area wherein the real
amended complaint setting out the same cause of
property involved, or a portion thereof, is situated. The
action cured the defect of improper venue. (3) Secs. 2
venue of personal actions is the court where the plaintiff
and 3 of Rule 3 in relation to Sec. 2 of Rule 4 allow the or any of the principal plaintiffs resides, or where the
filing of the amended complaint in question in the place defendant or any of the principal defendants resides, or
of residence of any of Irene’s co-plaintiffs. in the case of a non-resident defendant where he may
 The Benedictos filed on April 10, 2001 their be found, at the election of the plaintiff.
Answer to the amended complaint but also went the
CA via a petition for certiorari, seeking to nullify the Irene seeks to compel recognition of the trust
arrangement she has with the Benedicto Group. The
following RTC orders. The CA rendered a Decision,
amended complaint is an action in personam, it being a
setting aside the assailed RTC orders and dismissing
suit against Francisca and the late Benedicto (now
the amended complaints in Civil Case Nos. 3341-17
represented by Julita and Francisca), on the basis of
and 3342-17. their alleged personal liability to Irene upon an alleged
trust constituted in 1968 and/or 1972. They are not
Issue/s on Venue
actions in rem where the actions are against the real
(4) Did the respondents (Benedictos) waive improper properties instead of against persons.
venue by their subsequent acts of filing numerous
Interpretation of Secs. 2 and 3 of Rule 3; and Sec. 2
pleadings; and (5) Was Irene a resident of Batac, Ilocos
of Rule 4
Norte and if any of the principal parties are residents of
Ilocos Norte? SC: Irene, as categorically and peremptorily found by
the RTC after a hearing, is not a resident of Batac,
Held: SC affirms, but not for all the reasons set out in,
Ilocos Norte, as she claimed. Accordingly, Irene cannot,
the CA’s decision.
in a personal action, contextually opt for Batac as venue
Fourth Issue: Private Respondents did not Waive of her reconveyance complaint. As to her, Batac, Ilocos
Improper Venue Norte is not what Sec. 2, Rule 4 of the Rules of Court
adverts to as the place “where the plaintiff or any of the
Venue essentially concerns a rule of procedure which, principal plaintiffs resides” at the time she filed her
in personal actions, is fixed for the greatest convenience amended complaint. That Irene holds CTC No.
possible of the plaintiff and his witnesses. The ground 17019451[41] issued sometime in June 2000 in Batac,
of improperly laid venue must be raised seasonably, Ilocos Norte and in which she indicated her address as
else it is deemed waived. Where the defendant failed to Brgy. Lacub, Batac, Ilocos is really of no moment since
either file a motion to dismiss on the ground of improper it can easily be procured from the BIR with the
venue or include the same as an affirmative defense, he necessary desired information.
is deemed to have waived his right to object to improper
venue. In the case at bench, Benedicto and Francisca Petitioners, in an attempt to establish that the RTC in
raised at the earliest time possible, meaning “within the Batac, Ilocos Norte is the proper court venue,
time for but before filing the answer to the complaint,” asseverate that Batac, Ilocos Norte is where the
the matter of improper venue. They would thereafter principal parties reside. Pivotal to the resolution of the
reiterate and pursue their objection on venue, first, in venue issue is a determination of the status of Irene’s
their answer to the amended complaints and then in co-plaintiffs in the context of Secs. 2 and 3 of Rule 3 in
their petition for certiorari before the CA. Any relation to Sec. 2 of Rule 4,
suggestion, therefore, that Francisca and Benedicto or
Venue is Improperly Laid
his substitutes abandoned along the way improper
venue as ground to defeat Irene’s claim before the RTC There can be no serious dispute that the real party-in-
has to be rejected. interest plaintiff is Irene. As self-styled beneficiary of the
disputed trust, she stands to be benefited or entitled to
Fifth Issue: The RTC Has No Jurisdiction on the
the avails of the present suit. It is undisputed too that
Ground of Improper Venue
petitioners Daniel Rubio, Orlando G. Reslin, and Jose
Subject Civil Cases are Personal Actions G. Reslin, all from Ilocos Norte, were included as co-
plaintiffs in the amended complaint as Irene’s new
According to the Benedictos, venue was in this case designated trustees. As trustees, they can only serve as
improperly laid since the suit in question partakes of a mere representatives of Irene. Sec. 2 of Rule 4
real action involving real properties located outside the indicates quite clearly that when there is more than one
territorial jurisdiction of the RTC in Batac. plaintiff in a personal action case, the residences of
the principal parties should be the basis for additional 4% penalty would be charged upon
determining proper venue. Before the RTC in Batac, default.[10]
in Civil Case Nos. 3341-17 and 3342-17, Irene stands
undisputedly as the principal plaintiff, the real party-in- After Flaviano Maglasang (Flaviano) died intestate on
interest. Following Sec. 2 of Rule 4, the subject civil February 14, 1977, his widow Salud Maglasang (Salud)
cases ought to be commenced and prosecuted at the and their surviving children, herein petitioners Oscar
(Oscar), Concepcion Chona, Lerma, Felma, Fe Doris,
place where Irene resides.
Leolino, Margie Leila, Ma. Milalie, Salud and Ma.
Principal Plaintiff not a Resident in Venue of Action Flasalie, all surnamed Maglasang, and Glenda
Maglasang-Arnaiz, appointed[11] their brother
As earlier stated, no less than the RTC in Batac petitioner Edgar Maglasang (Edgar) as their attorney-in-
declared Irene as not a resident of Batac, Ilocos Norte. fact.[12] Thus, on March 30, 1977, Edgar filed a verified
Withal, that court was an improper venue for her petition for letters of administration of the intestate
conveyance action. The Court can concede that Irene’s estate of Flaviano before the then Court of First
three co-plaintiffs are all residents of Batac, Ilocos Instance of Leyte, Ormoc City, Branch 5 (probate court),
Norte. But it ought to be stressed in this regard that not docketed as Sp. Proc. No. 1604-0.[13] On August 9,
1977, the probate court issued an Order[14] granting
one of the three can be considered as principal party-
the petition, thereby appointing Edgar as the
plaintiffs . In the final analysis, the residences of Irene’s administrator[15] of Flaviano's estate.
co-plaintiffs cannot be made the basis in determining
the venue of the subject suit. Irene was a resident In view of the issuance of letters of administration, the
during the period material of Forbes Park, Makati City. probate court, on August 30, 1977, issued a Notice to
She was not a resident of Brgy. Lacub, Batac, Ilocos Creditors[16] for the filing of money claims against
Norte, although jurisprudence[44] has it that one can Flaviano's estate. Accordingly, as one of the creditors of
have several residences, if such were the established Flaviano, respondent notified[17] the probate court of its
fact. The Court will not speculate on the reason why claim in the amount of P382,753.19 as of October 11,
petitioner Irene, for all the inconvenience and expenses 1978, exclusive of interests and charges.
she and her adversaries would have to endure by a
Batac trial, preferred that her case be heard and During the pendency of the intestate proceedings,
Edgar and Oscar were able to obtain several loans from
decided by the RTC in Batac. On the heels of the
respondent, secured by promissory notes[18] which
dismissal of the original complaints on the ground of
they signed.
improper venue, three new personalities were added to
the complaint doubtless to insure, but in vain as it turned In an Order[19] dated December 14, 1978 (December
out, that the case stays with the RTC in Batac. 14, 1978 Order), the probate court terminated the
proceedings with the surviving heirs executing an extra-
Assailed in this petition for review on certiorari[1] are the
judicial partition of the properties of Flaviano's estate.
Decision[2] dated July 20, 2005 and Resolution[3] dated
The loan obligations owed by the estate to respondent,
January 4, 2006 of the Court of Appeals (CA) in CA-
however, remained unsatisfied due to respondent's
G.R. CV No. 50410 which dismissed petitioners' appeal
certification that Flaviano's account was undergoing a
and affirmed the Decision[4] dated April 6, 1987 of the
restructuring. Nonetheless, the probate court expressly
Regional Trial Court of Ormoc City, Branch 12 (RTC)
recognized the rights of respondent under the mortgage
directing petitioners to jointly and severally pay
and promissory notes executed by the Sps. Maglasang,
respondent Manila Banking Corporation the amount of
specifically, its "right to foreclose the same within the
P434,742.36, with applicable interests, representing the
statutory period."[20]
deficiency of the former's total loan obligation to the
latter after the extra-judicial foreclosure of the real
In this light, respondent proceeded to extra-judicially
estate mortgage subject of this case, including
foreclose the mortgage covering the Sps. Maglasang's
attorney's fees and costs of suit.
properties and emerged as the highest bidder at the
public auction for the amount of P350,000.00.[21]
5. Heirs of the Late Flaviano Maglasang v. Manila
There, however, remained a deficiency on Sps.
Banking Corporation, 2013 Maglasang's obligation to respondent. Thus, on June
24, 1981, respondent filed a suit to recover the
The Facts deficiency amount of P250,601.05 as of May 31, 1981
On June 16, 1975, spouses Flaviano and Salud against the estate of Flaviano, his widow Salud and
Maglasang (Sps. Maglasang) obtained a credit line from petitioners, docketed as Civil Case No. 1998-0.[22]
respondent[5] in the amount of P350,000.00 which was
secured by a real estate mortgage[6] executed over The RTC Ruling and Subsequent Proceedings
seven of their properties[7] located in Ormoc City and
the Municipality of Kananga, Province of Leyte.[8] They After trial on the merits, the RTC (formerly, the probate
availed of their credit line by securing loans in the court)[23] rendered a Decision[24] on April 6, 1987
amounts of P209,790.50 and P139,805.83 on October directing the petitioners to pay respondent, jointly and
24, 1975 and March 15, 1976, respectively,[9] both of severally, the amount of P434,742.36 with interest at
which becoming due and demandable within a period of the rate of 12% p.a., plus a 4% penalty charge,
one year. Further, the parties agreed that the said loans reckoned from September 5, 1984 until fully paid.[25]
would earn interest at 12% per annum (p.a.) and an The RTC found that it was shown, by a preponderance
of evidence, that petitioners, after the extra-judicial Likewise, petitioners maintain that the extra-judicial
foreclosure of all the properties mortgaged, still have an foreclosure of the subject properties was null and void,
outstanding obligation in the amount and as of the date not having been conducted in the capital of the Province
as above-stated. The RTC also found in order the of Leyte in violation of the stipulations in the real estate
payment of interests and penalty charges as above- mortgage contract.[39] They likewise deny any personal
mentioned as well as attorney's fees equivalent to 10% liability for the loans taken by their deceased
of the outstanding obligation.[26] parents.[40]

Dissatisfied, petitioners elevated the case to the CA on The Court's Ruling

appeal, contending,[27] inter alia, that the remedies The petition is partly meritorious.
available to respondent under Section 7, Rule 86 of the Claims against deceased persons should be filed during
Rules of Court (Rules) are alternative and exclusive, the settlement proceedings of their estate.[41] Such
such that the election of one operates as a waiver or proceedings are primarily governed by special rules
abandonment of the others. Thus, when respondent found under Rules 73 to 90 of the Rules, although rules
filed its claim against the estate of Flaviano in the governing ordinary actions may, as far as practicable,
proceedings before the probate court, it effectively apply suppletorily.[42]
abandoned its right to foreclose on the mortgage.
Moreover, even on the assumption that it has not so Among these special rules, Section 7, Rule 86 of the
waived its right to foreclose, it is nonetheless barred Rules (Section 7, Rule 86) provides the rule in dealing
from filing any claim for any deficiency amount. with secured claims against the estate:
SEC. 7. Mortgage debt due from estate. A creditor
During the pendency of the appeal, Flaviano's widow, holding a claim against the deceased secured by a
Salud, passed away on July 25, 1997.[28] mortgage or other collateral security, may abandon the
security and prosecute his claim in the manner provided
The CA Ruling in this rule, and share in the general distribution of the
In a Decision[29] dated July 20, 2005, the CA denied assets of the estate; or he may foreclose his mortgage
the petitioners' appeal and affirmed the RTC's Decision. or realize upon his security, by action in court, making
At the outset, it pointed out that the probate court erred the executor or administrator a party defendant, and if
when it, through the December 14, 1978 Order, closed there is a judgment for a deficiency, after the sale of the
and terminated the proceedings in Sp. Proc. No. 1604- mortgaged premises, or the property pledged, in the
0 without first satisfying the claims of the creditors of the foreclosure or other proceeding to realize upon the
estate in particular, respondent in violation of Section 1, security, he may claim his deficiency judgment in the
Rule 90 of the Rules.[30] As a consequence, manner provided in the preceding section; or he may
respondent was not able to collect from the petitioners rely upon his mortgage or other security alone, and
and thereby was left with the option of foreclosing the foreclose the same at any time within the period of the
real estate mortgage.[31] Further, the CA held that statute of limitations, and in that event he shall not be
Section 7, Rule 86 of the Rules does not apply to the admitted as a creditor, and shall receive no share in the
present case since the same does not involve a distribution of the other assets of the estate; but nothing
mortgage made by the administrator over any property herein contained shall prohibit the executor or
belonging to the estate of the decedent.[32] According administrator from redeeming the property mortgaged
to the CA, what should apply is Act No. 3135[33] which or pledged, by paying the debt for which it is held as
entitles respondent to claim the deficiency amount after security, under the direction of the court, if the court
the extra-judicial foreclosure of the real estate mortgage shall adjudged it to be for the best interest of the estate
of Sps. Maglasang's properties.[34] that such redemption shall be made. (Emphasis and
underscoring supplied)
Petitioners' motion for reconsideration was As the foregoing generally speaks of "[a] creditor
subsequently denied in a Resolution[35] dated January holding a claim against the deceased secured by a
4, 2006. Hence, the present recourse. mortgage or other collateral security" as above-
highlighted, it may be reasonably concluded that the
The Issue Before the Court aforementioned section covers all secured claims,
The essential issue in this case is whether or not the CA whether by mortgage or any other form of collateral,
erred in affirming the RTC's award of the deficiency which a creditor may enforce against the estate of the
amount in favor of respondent. deceased debtor. On the contrary, nowhere from its
language can it be fairly deducible that the said section
Petitioners assert[36] that it is not Act No. 3135 but would as the CA interpreted narrowly apply only to
Section 7, Rule 86 of the Rules which applies in this mortgages made by the administrator over any property
case. The latter provision provides alternative and belonging to the estate of the decedent. To note,
exclusive remedies for the satisfaction of respondent's mortgages of estate property executed by the
claim against the estate of Flaviano.[37] Corollarily, administrator, are also governed by Rule 89 of the
having filed its claim against the estate during the Rules, captioned as "Sales, Mortgages, and Other
intestate proceedings, petitioners argue that Encumbrances of Property of Decedent."
respondent had effectively waived the remedy of
foreclosure and, even assuming that it still had the right In this accord, it bears to stress that the CA's reliance
to do so, it was precluded from filing a suit for the on Philippine National Bank v. CA[43] (PNB) was
recovery of the deficiency obligation.[38] misplaced as the said case did not, in any manner, limit
the scope of Section 7, Rule 86. It only stated that the
aforesaid section equally applies to cases where the In Perez v. Philippine National Bank, reversing Pasno
administrator mortgages the property of the estate to vs. Ravina, we held:
secure the loan he obtained.[44] Clearly, the
pronouncement was a ruling of inclusion and not one The ruling in Pasno v. Ravina not having been reiterated
which created a distinction. It cannot, therefore, be in any other case, we have carefully reexamined the
doubted that it is Section 7, Rule 86 which remains same, and after mature deliberation have reached the
applicable in dealing with a creditor's claim against the conclusion that the dissenting opinion is more in
mortgaged property of the deceased debtor, as in this conformity with reason and law. Of the three alternative
case, as well as mortgages made by the administrator, courses that section 7, Rule 87 (now Rule 86), offers the
as that in the PNB case. mortgage creditor, to wit, (1) to waive the mortgage and
claim the entire debt from the estate of the mortgagor
Jurisprudence breaks down the rule under Section 7, as an ordinary claim; (2) foreclose the mortgage
Rule 86 and explains that the secured creditor has three judicially and prove any deficiency as an ordinary claim;
remedies/options that he may alternatively adopt for the and (3) to rely on the mortgage exclusively, foreclosing
satisfaction of his indebtedness. In particular, he may the same at any time before it is barred by prescription,
choose to: (a) waive the mortgage and claim the entire without right to file a claim for any deficiency, the
debt from the estate of the mortgagor as an ordinary majority opinion in Pasno v. Ravina, in requiring a
claim; (b) foreclose the mortgage judicially and prove judicial foreclosure, virtually wipes out the third
the deficiency as an ordinary claim; and (c) rely on the alternative conceded by the Rules to the mortgage
mortgage exclusively, or other security and foreclose creditor, and which would precisely include extra-
the same before it is barred by prescription, without the judicial foreclosures by contrast with the second
right to file a claim for any deficiency.[45] It must, alternative.
however, be emphasized that these remedies are
distinct, independent and mutually exclusive from each The plain result of adopting the last mode of foreclosure
other; thus, the election of one effectively bars the is that the creditor waives his right to recover any
exercise of the others. With respect to real properties, deficiency from the estate. Following the Perez ruling
the Court in Bank of America v. American Realty that the third mode includes extrajudicial foreclosure
Corporation[46] pronounced: sales, the result of extrajudicial foreclosure is that the
In our jurisdiction, the remedies available to the creditor waives any further deficiency claim. x x x.[51]
mortgage creditor are deemed alternative and not (Emphases and underscoring supplied; italics in the
cumulative. Notably, an election of one remedy original)
operates as a waiver of the other. For this purpose, a To obviate any confusion, the Court observes that the
remedy is deemed chosen upon the filing of the suit for operation of Act No. 3135 does not entirely discount the
collection or upon the filing of the complaint in an action application of Section 7, Rule 86, or vice-versa. Rather,
for foreclosure of mortgage, pursuant to the provision of the two complement each other within their respective
Rule 68 of the 1997 Rules of Civil Procedure. As to spheres of operation. On the one hand, Section 7, Rule
extrajudicial foreclosure, such remedy is deemed 86 lays down the options for the secured creditor to
elected by the mortgage creditor upon filing of the claim against the estate and, according to
petition not with any court of justice but with the Office jurisprudence, the availment of the third option bars him
of the Sheriff of the province where the sale is to be from claiming any deficiency amount. On the other
made, in accordance with the provisions of Act No. hand, after the third option is chosen, the procedure
3135, as amended by Act No. 4118.[47] (Emphasis governing the manner in which the extra-judicial
supplied) foreclosure should proceed would still be governed by
Anent the third remedy, it must be mentioned that the the provisions of Act No. 3135. Simply put, Section 7,
same includes the option of extra-judicially foreclosing Rule 86 governs the parameters and the extent to which
the mortgage under Act No. 3135, as availed of by a claim may be advanced against the estate, whereas
respondent in this case. However, the plain result of Act No. 3135 sets out the specific procedure to be
adopting the last mode of foreclosure is that the creditor followed when the creditor subsequently chooses the
waives his right to recover any deficiency from the third option specifically, that of extra-judicially
estate.[48] These precepts were discussed in the PNB foreclosing real property belonging to the estate. The
case, citing Perez v. Philippine National Bank[49] which application of the procedure under Act No. 3135 must
overturned the earlier Pasno v. Ravina ruling:[50] be concordant with Section 7, Rule 86 as the latter is a
Case law now holds that this rule grants to the special rule applicable to claims against the estate, and
mortgagee three distinct, independent and mutually at the same time, since Section 7, Rule 86 does not
exclusive remedies that can be alternatively pursued by detail the procedure for extra-judicial foreclosures, the
the mortgage creditor for the satisfaction of his credit in formalities governing the manner of availing of the third
case the mortgagor dies, among them: option such as the place where the application for extra-
(1) to waive the mortgage and claim the entire debt from judicial foreclosure is filed, the requirements of
the estate of the mortgagor as an ordinary claim; publication and posting and the place of sale must be
governed by Act No. 3135.
(2) to foreclose the mortgage judicially and prove any
deficiency as an ordinary claim; and In this case, respondent sought to extra-judicially
foreclose the mortgage of the properties previously
(3) to rely on the mortgage exclusively, foreclosing the belonging to Sps. Maglasang (and now, their estates)
same at any time before it is barred by prescription and, therefore, availed of the third option. Lest it be
without right to file a claim for any deficiency. misunderstood, it did not exercise the first option of
directly filing a claim against the estate, as petitioners Banking Corporation is hereby DISMISSED. The extra-
assert, since it merely notified[52] the probate court of judicial foreclosure of the mortgaged properties,
the outstanding amount of its claim against the estate of however, stands.
Flaviano and that it was currently restructuring the SO ORDERED.
account.[53] Thus, having unequivocally opted to
exercise the third option of extra-judicial foreclosure 6. Paglaum Management v. Union Bank
under Section 7, Rule 86, respondent is now precluded G.R. 179018 June 18, 2012
from filing a suit to recover any deficiency amount as
earlier discussed. Before this Court is a Petition for Review on Certiorari
under Rule 45 of the Rules of Court, assailing the
As a final point, petitioners maintain that the extra- Decision dated 31 May 2007[1] and Resolution dated
judicial foreclosure of the subject properties was null 24 July 2007[2] issued by the Court of Appeals (CA).
and void since the same was conducted in violation of
the stipulation in the real estate mortgage contract Petitioner Paglaum Management and Development
stating that the auction sale should be held in the capital Corporation (PAGLAUM) is the registered owner of
of the province where the properties are located, i.e., three parcels of land located in the Province of Cebu[3]
the Province of Leyte. and covered by Transfer Certificate of Title (TCT) Nos.
112488,[4] 112489,[5] and T-68516.[6] These lots are
The Court disagrees. co-owned by Benjamin B. Dy, the president of petitioner
As may be gleaned from the records, the stipulation Health Marketing Technologies, Inc. (HealthTech), and
under the real estate mortgage[54] executed by Sps. his mother and siblings.[7]
Maglasang which fixed the place of the foreclosure sale
at Tacloban City lacks words of exclusivity which would On 3 February 1994, respondent Union Bank of the
bar any other acceptable fora wherein the said sale may Philippines (Union Bank) extended HealthTech a credit
be conducted, to wit: line in the amount of ₱10,000,000.[8] To secure this
It is hereby agreed that in case of foreclosure of this obligation, PAGLAUM executed three Real Estate
mortgage under Act 3135, the auction sale shall be held Mortgages on behalf of HealthTech and in favor of
at the capital of the province if the property is within the Union Bank.[9] It must be noted that the Real Estate
territorial jurisdiction of the province concerned, or shall Mortgage, on the provision regarding the venue of all
be held in the city if the property is within the territorial suits and actions arising out of or in connection
jurisdiction of the city concerned; x x x.[55] therewith, originally stipulates:
Case law states that absent such qualifying or restrictive
words to indicate the exclusivity of the agreed forum, the Section 9. Venue. The venue of all suits and actions
stipulated place should only be as an additional, not a arising out of or in connection with this Mortgage shall
limiting venue.[56] As a consequence, the stipulated be in Makati, Metro Manila or in the place where any of
venue and that provided under Act No. 3135 can be the Mortgaged Properties is located, at the absolute
applied alternatively. option of the Mortgagee, the parties hereto waiving any
other venue.[10] (Emphasis supplied.)
In particular, Section 2 of Act No. 3135 allows the
foreclosure sale to be done within the province where However, under the two Real Estate Mortgages dated
the property to be sold is situated, viz.: 11 February 1994, the following version appears:
SEC. 2. Said sale cannot be made legally outside of the
province which the property sold is situated; and in case Section 9. Venue. The venue of all suits and actions
the place within said province in which the sale is to be arising out of or in connection with this Mortgage shall
made is subject to stipulation, such sale shall be made be in Cebu City Metro Manila or in the place where any
in said place or in the municipal building of the of the Mortgaged Properties is located, at the absolute
municipality in which the property or part thereof is option of the Mortgagee, the xxxxxxxxxxxxx any other
situated. (Italics supplied) venue.[11] (Emphasis supplied.)
In this regard, since the auction sale was conducted in
Ormoc City, which is within the territorial jurisdiction of Meanwhile, the same provision in the Real Estate
the Province of Leyte, then the Court finds sufficient Mortgage dated 22 April 1998 contains the following:
compliance with the above-cited requirement.
Section 9. Venue. The venue of all suits and actions
All told, finding that the extra-judicial foreclosure subject arising out of or in connection with this Mortgage shall
of this case was properly conducted in accordance with be in _________ or in the place where any of the
the formalities of Act No. 3135, the Court upholds the Mortgaged Properties is located, at the absolute option
same as a valid exercise of respondent's third option of the Mortgagee, the parties hereto waiving any other
under Section 7, Rule 86. To reiterate, respondent venue.[12]
cannot, however, file any suit to recover any deficiency
amount since it effectively waived its right thereto when HealthTech and Union Bank agreed to subsequent
it chose to avail of extra-judicial foreclosure as renewals and increases in the credit line,[13] with the
jurisprudence instructs. total amount of debt reaching ₱36,500,000.[14]
Unfortunately, according to HealthTech, the 1997 Asian
WHEREFORE, the petition is PARTLY GRANTED. The financial crisis adversely affected its business and
complaint for the recovery of the deficiency amount after caused it difficulty in meeting its obligations with Union
extra-judicial foreclosure filed by respondent Manila Bank.[15] Thus, on 11 December 1998, both parties
entered into a Restructuring Agreement,[16] which and (b) the mortgage contracts explicitly state that the
states that any action or proceeding arising out of or in choice of venue exclusively belongs to it.[30]
connection therewith shall be commenced in Makati
City, with both parties waiving any other venue.[17] Meanwhile, intervenor J. King & Sons Company, Inc.
adopts the position of Union Bank and reiterates the
Despite the Restructuring Agreement, HealthTech position that Cebu City is the proper venue.[31]
failed to pay its obligation, prompting Union Bank to
send a demand letter dated 9 October 2000, stating that The sole issue to be resolved is whether Makati City is
the latter would be constrained to institute foreclosure the proper venue to assail the foreclosure of the subject
proceedings, unless HealthTech settled its account in real estate mortgage. This Court rules in the affirmative.
full.[18]
Civil Case No. 01-1567, being an action for Annulment
Since HealthTech defaulted on its payment, Union Bank of Sale and Titles resulting from the extrajudicial
extra-judicially foreclosed the mortgaged properties.[19] foreclosure by Union Bank of the mortgaged real
The bank, as the sole bidder in the auction sale, was properties, is classified as a real action. In Fortune
then issued a Certificate of Sale dated 24 May 2001.[20] Motors v. Court of Appeals,[32] this Court held that a
Thereafter, it filed a Petition for Consolidation of case seeking to annul a foreclosure of a real estate
Title.[21] mortgage is a real action, viz:

Consequently, HealthTech filed a Complaint for An action to annul a real estate mortgage foreclosure
Annulment of Sale and Titles with Damages and sale is no different from an action to annul a private sale
Application for Temporary Restraining Order and Writ of of real property. (Muoz v. Llamas, 87 Phil. 737, 1950).
Injunction dated 23 October 2001, praying for: (a) the
issuance of a temporary restraining order, and later a While it is true that petitioner does not directly seek the
writ of preliminary injunction, directing Union Bank to recovery of title or possession of the property in
refrain from exercising acts of ownership over the question, his action for annulment of sale and his claim
foreclosed properties; (b) the annulment of the extra- for damages are closely intertwined with the issue of
judicial foreclosure of real properties; (c) the ownership of the building which, under the law, is
cancellation of the registration of the Certificates of Sale considered immovable property, the recovery of which
and the resulting titles issued; (d) the reinstatement of is petitioners primary objective. The prevalent doctrine
PAGLAUMs ownership over the subject properties; and is that an action for the annulment or rescission of a sale
(e) the payment of damages.[22] The case was of real property does not operate to efface the
docketed as Civil Case No. 01-1567 and raffled to the fundamental and prime objective and nature of the
Regional Trial Court, National Capital Judicial Region, case, which is to recover said real property. It is a real
Makati City, Branch 134 (RTC Br. 134), which issued in action.[33]
favor of PAGLAUM and HealthTech a Writ of
Preliminary Injunction restraining Union Bank from Being a real action, the filing and trial of the Civil Case
proceeding with the auction sale of the three mortgaged No. 01-1567 should be governed by the following
properties.[23] relevant provisions of the Rules of Court (the
Rules):Rule 4
On 23 November 2001, Union Bank filed a Motion to
Dismiss on the following grounds: (a) lack of jurisdiction In Sps. Lantin v. Lantion,[34] this Court explained that a
over the issuance of the injunctive relief; (b) improper venue stipulation must contain words that show
venue; and (c) lack of authority of the person who exclusivity or restrictiveness, as follows:
signed the Complaint.[24] RTC Br. 134 granted this
Motion in its Order dated 11 March 2003, resulting in the At the outset, we must make clear that under Section 4
dismissal of the case, as well as the dissolution of the (b) of Rule 4 of the 1997 Rules of Civil Procedure, the
Writ of Preliminary Injunction.[25] It likewise denied the general rules on venue of actions shall not apply where
subsequent Motion for Reconsideration filed by the parties, before the filing of the action, have validly
PAGLAUM and HealthTech.[26] agreed in writing on an exclusive venue. The mere
stipulation on the venue of an action, however, is not
PAGLAUM and HealthTech elevated the case to the enough to preclude parties from bringing a case in other
CA, which affirmed the Order dated 11 March 2003[27] venues. The parties must be able to show that such
and denied the Motion for Reconsideration.[28] stipulation is exclusive. In the absence of qualifying or
restrictive words, the stipulation should be deemed as
In the instant Petition, PAGLAUM and HealthTech merely an agreement on an additional forum, not as
argue that: (a) the Restructuring Agreement governs the limiting venue to the specified place.
choice of venue between the parties, and (b) the
agreement on the choice of venue must be interpreted Clearly, the words exclusively and waiving for this
with the convenience of the parties in mind and the view purpose any other venue are restrictive and used
that any obscurity therein was caused by Union advisedly to meet the requirements.[35] (Emphasis
Bank.[29] supplied.)

On the other hand, Union Bank contends that: (a) the According to the Rules, real actions shall be
Restructuring Agreement is applicable only to the commenced and tried in the court that has jurisdiction
contract of loan, and not to the Real Estate Mortgage, over the area where the property is situated. In this
case, all the mortgaged properties are located in the Obligations), shall continue to be secured by the
Province of Cebu. Thus, following the general rule, following security arrangements (the Collaterals):
PAGLAUM and HealthTech should have filed their case a. Real Estate Mortgage dated February 11,
in Cebu, and not in Makati. 1994 executed by Paglaum Management and
Development Corporation over a 474 square meter
However, the Rules provide an exception, in that real property covered by TCT No. 112489;
actions can be commenced and tried in a court other b. Real Estate Mortgage dated February 11,
than where the property is situated in instances where 1994 executed by Paglaum Management and
the parties have previously and validly agreed in writing Development Corporation over a 2,796 square meter
on the exclusive venue thereof. In the case at bar, the property covered by TCT No. T-68516;
parties claim that such an agreement exists. The only c. Real Estate Mortgage dated April 22, 1998
dispute is whether the venue that should be followed is executed by Paglaum Management and Development
that contained in the Real Estate Mortgages, as Corporation over a 3,711 square meter property
contended by Union Bank, or that in the Restructuring covered by TCT No. 112488;
Agreement, as posited by PAGLAUM and HealthTech. d. Continuing Surety Agreement of Benjamin
This Court rules that the venue stipulation in the B.
Restructuring Agreement should be controlling.
Without need of any further act and deed, the existing
The Real Estate Mortgages were executed by Collaterals, shall remain in full force and effect and
PAGLAUM in favor of Union Bank to secure the credit continue to secure the payment and performance of the
line extended by the latter to HealthTech. All three obligations of the BORROWER arising from the Notes
mortgage contracts contain a dragnet clause, which and this Restructuring Agreement.[37] (Emphasis
secures succeeding obligations, including renewals, supplied.)
extensions, amendments or novations thereof, incurred
by HealthTech from Union Bank, to wit: Meanwhile, Section 20 of the Restructuring Agreement
as regards the venue of actions state:
Section 1. Secured Obligations. The obligations 20. Venue Venue of any action or proceeding arising out
secured by this Mortgage (the Secured Obligations) are of or connected with this Restructuring Agreement, the
the following: Note, the Collateral and any and all related documents
a) All the obligations of the Borrower and/or shall be in Makati City, [HealthTech] and [Union Bank]
the Mortgagor under: (i) the Notes, the Agreement, and hereby waiving any other venue.[38] (Emphasis
this Mortgage; (ii) any and all instruments or documents supplied.)
issued upon the renewal, extension, amendment or
novation of the Notes, the Agreement and this These quoted provisions of the Real Estate Mortgages
Mortgage, irrespective of whether such obligations as and the later Restructuring Agreement clearly reveal the
renewed, extended, amended or novated are in the intention of the parties to implement a restrictive venue
nature of new, separate or additional obligations; and stipulation, which applies not only to the principal
(iii) any and all instruments or documents issued obligation, but also to the mortgages. The phrase
pursuant to the Notes, the Agreement and this waiving any other venue plainly shows that the choice
Mortgage; of Makati City as the venue for actions arising out of or
b) All other obligations of the Borrower and/or in connection with the Restructuring Agreement and the
the Mortgagor in favor of the Mortgagee, whether Collateral, with the Real Estate Mortgages being
presently owing or hereinafter incurred and whether or explicitly defined as such, is exclusive.
not arising from or connected with the Agreement, the
Notes and/or this Mortgage; and Even if this Court were to consider the venue
c) Any and all expenses which may be incurred stipulations under the Real Estate Mortgages, it must be
in collecting any and all of the above and in enforcing underscored that those provisions did not contain words
any and all rights, powers and remedies of the showing exclusivity or restrictiveness. In fact, in the
Mortgagee under this Mortgage.[36] Real Estate Mortgages dated 11 February 1994, the
phrase parties hereto waiving from the entire phrase the
On the other hand, the Restructuring Agreement was parties hereto waiving any other venue was stricken
entered into by HealthTech and Union Bank to modify from the final executed contract. Following the ruling in
the entire loan obligation. Section 7 thereof provides: Sps. Lantin as earlier quoted, in the absence of
qualifying or restrictive words, the venue stipulation
Security. The principal, interests, penalties and other should only be deemed as an agreement on an
charges for which the BORROWER may be bound to additional forum, and not as a restriction on a specified
the BANK under the terms of this Restructuring place
Agreement, including the renewal, extension, Considering that Makati City was agreed upon by the
amendment or novation of this Restructuring parties to be the venue for all actions arising out of or in
Agreement, irrespective of whether the obligations connection with the loan obligation incurred by
arising out of or in connection with this Restructuring HealthTech, as well as the Real Estate Mortgages
Agreement, as renewed, extended, amended or executed by PAGLAUM, the CA committed reversible
novated, are in the nature of new, separate or additional error in affirming the dismissal of Civil Case No. 01-
obligations, and all other instruments or documents 1567 by RTC Br. 134 on the ground of improper venue.
covering the Indebtedness or otherwise made pursuant Petition was granted (lower court reversed) (complaint
to this Restructuring Agreement (the Secured reinstitated)