Republic of the
Supreme Court
Manila
SECOND DIVISION
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PAGLAUM
MANAGEMENT & DEVELOPMENT CORP. and HEALTH MARKETING TECHNOLOGIES, INC., Petitioners, - versus - UNION
BANK OF THE PHILIPPINES, NOTARY PUBLIC JOHN DOE, and REGISTER OF DEEDS of Cebu
City and Cebu Province Respondents. J. KING &
SONS CO., INC. Intervenor. |
G.R. No. 179018 Present: CARPIO, J.,
Chairperson, BRION, PEREZ, SERENO, and REYES, JJ. Promulgated: June 18, 2012 |
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D
E C I S I O N
SERENO,
J.:
Before this Court is a Petition for
Review on Certiorari under Rule 45 of the Rules of Court, assailing the
Decision dated 31 May 2007[1]
and Resolution dated 24 July 2007[2]
issued by the Court of Appeals (CA).
Petitioner Paglaum Management and
Development Corporation (PAGLAUM) is the registered owner of three parcels of
land located in the Province of Cebu[3]
and covered by Transfer Certificate of Title (TCT) Nos. 112488,[4]
112489,[5]
and T-68516.[6] These
lots are co-owned by Benjamin B. Dy, the president of petitioner Health
Marketing Technologies, Inc. (HealthTech), and his mother and siblings.[7]
On 3 February 1994, respondent Union
Bank of the Philippines (Union Bank) extended HealthTech a credit line in the
amount of ₱10,000,000.[8]
To secure this obligation, PAGLAUM executed three Real Estate Mortgages on
behalf of HealthTech and in favor of Union Bank.[9]
It must be noted that the Real Estate Mortgage, on the provision regarding the
venue of all suits and actions arising out of or in connection therewith, originally stipulates:
Section
9. Venue. The venue of all suits and actions arising out of or in connection
with this Mortgage shall be in Makati,
Metro Manila or in the place where any of the Mortgaged Properties is located,
at the absolute option of the Mortgagee, the
parties hereto waiving any other venue.[10]
(Emphasis supplied.)
However, under the two Real Estate Mortgages dated 11 February
1994, the following version
appears:
Section
9. Venue. The venue of all suits and actions arising out of or in connection
with this Mortgage shall be in Cebu City
Metro Manila or in the place where any of the Mortgaged Properties is located,
at the absolute option of the Mortgagee, the xxxxxxxxxxxxx any other venue.[11]
(Emphasis supplied.)
Meanwhile, the same provision in the Real Estate Mortgage dated 22 April 1998
contains the following:
Section
9. Venue. The venue of all suits and actions arising out of or in connection
with this Mortgage shall be in _________ or in the place where any of the
Mortgaged Properties is located, at the absolute option of the Mortgagee, the
parties hereto waiving any other venue.[12]
HealthTech and Union Bank agreed to subsequent
renewals and increases in the credit line,[13]
with the total amount of debt reaching ₱36,500,000.[14]
Unfortunately, according to HealthTech, the 1997 Asian financial crisis
adversely affected its business and caused it difficulty in meeting its
obligations with Union Bank.[15]
Thus, on 11 December 1998, both parties entered into a Restructuring Agreement,[16]
which states that any action or proceeding arising out of or in connection
therewith shall be commenced in Makati
City, with both parties waiving any
other venue.[17]
Despite the Restructuring Agreement,
HealthTech failed to pay its obligation, prompting Union Bank to send a demand
letter dated 9 October 2000, stating that the latter would be constrained to
institute foreclosure proceedings, unless HealthTech settled its account in
full.[18]
Since HealthTech defaulted on its
payment, Union Bank extra-judicially foreclosed the mortgaged properties.[19]
The bank, as the sole bidder in the auction sale, was then issued a Certificate
of Sale dated 24 May 2001.[20]
Thereafter, it filed a Petition for Consolidation of Title.[21]
Consequently, HealthTech filed a Complaint
for Annulment of Sale and Titles with Damages and Application for Temporary
Restraining Order and Writ of Injunction dated 23 October 2001, praying for:
(a) the issuance of a temporary restraining order, and later a writ of
preliminary injunction, directing Union Bank to refrain from exercising acts of
ownership over the foreclosed properties; (b) the annulment of the
extra-judicial foreclosure of real properties; (c) the cancellation of the
registration of the Certificates of Sale and the resulting titles issued; (d)
the reinstatement of PAGLAUMs ownership over the subject properties; and (e)
the payment of damages.[22]
The case was docketed as Civil Case No. 01-1567 and raffled to the Regional
Trial Court, National Capital Judicial Region, Makati City, Branch 134 (RTC Br.
134), which issued in favor of PAGLAUM and HealthTech a Writ of Preliminary
Injunction restraining Union Bank from proceeding with the auction sale of the
three mortgaged properties.[23]
On 23 November 2001, Union Bank filed a
Motion to Dismiss on the following grounds: (a) lack of jurisdiction over the
issuance of the injunctive relief; (b) improper venue; and (c) lack of
authority of the person who signed the Complaint.[24]
RTC Br. 134 granted this Motion in its Order dated 11 March 2003, resulting in
the dismissal of the case, as well as the dissolution of the Writ of
Preliminary Injunction.[25]
It likewise denied the subsequent Motion for Reconsideration filed by PAGLAUM
and HealthTech.[26]
PAGLAUM and HealthTech elevated the case
to the CA, which affirmed the Order dated 11 March 2003[27]
and denied the Motion for Reconsideration.[28]
In the instant Petition, PAGLAUM and
HealthTech argue that: (a) the Restructuring Agreement governs the choice of
venue between the parties, and (b) the agreement on the choice of venue must be
interpreted with the convenience of the parties in mind and the view that any
obscurity therein was caused by Union Bank.[29]
On the other hand, Union Bank contends
that: (a) the Restructuring Agreement is applicable only to the contract of
loan, and not to the Real Estate Mortgage, and (b) the mortgage contracts
explicitly state that the choice of venue exclusively belongs to it.[30]
Meanwhile, intervenor J. King & Sons
Company, Inc. adopts the position of Union Bank and reiterates the position
that Cebu City is the proper venue.[31]
The sole issue to be resolved is whether
Makati City is the proper venue to assail the foreclosure of the subject real
estate mortgage. This Court rules in the affirmative.
Civil Case No. 01-1567, being an action
for Annulment of Sale and Titles resulting from the extrajudicial foreclosure
by Union Bank of the mortgaged real properties, is classified as a real action.
In Fortune Motors v. Court of Appeals,[32]
this Court held that a case seeking to annul a foreclosure of a real estate
mortgage is a real action, viz:
An action to annul a real estate mortgage foreclosure sale is no different from an action to annul a private sale of real property. (Muoz v. Llamas, 87 Phil. 737, 1950).
While it is true that petitioner does not directly seek the recovery of title or possession of the property in question, his action for annulment of sale and his claim for damages are closely intertwined with the issue of ownership of the building which, under the law, is considered immovable property, the recovery of which is petitioners primary objective. The prevalent doctrine is that an action for the annulment or rescission of a sale of real property does not operate to efface the fundamental and prime objective and nature of the case, which is to recover said real property. It is a real action.[33]
Being a real action, the filing and
trial of the Civil Case No. 01-1567 should be governed by the following relevant
provisions of the Rules of Court (the Rules):
Rule
4
VENUE
OF ACTIONS
Section
1. Venue of real actions. Actions affecting title to or possession of real
property, or interest therein, shall be commenced and tried in the proper court which has jurisdiction
over the area wherein the real property involved, or a portion thereof, is
situated.
Forcible
entry and detainer actions shall be commenced and tried in the municipal trial
court of the municipality or city wherein the real property involved, or a
portion thereof, is situated.
Sec.
3. When Rule not applicable. This Rule shall not apply
(a)
In those cases where a specific rule or
law provides otherwise; or
(b)
Where the parties have validly agreed in
writing before the filing of the action on the exclusive venue thereof.
(Emphasis supplied.)
In Sps. Lantin v. Lantion,[34]
this Court explained that a venue stipulation must contain words that show
exclusivity or restrictiveness, as follows:
At the outset, we must make clear that
under Section 4 (b) of Rule 4 of the 1997 Rules of Civil Procedure, the general
rules on venue of actions shall not apply where the parties, before the filing
of the action, have validly agreed in writing on an exclusive venue. The mere
stipulation on the venue of an action, however, 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.
x x x x
x x x x x
Clearly, the words exclusively and waiving for this purpose any other venue
are restrictive and used advisedly to meet the requirements.[35]
(Emphasis supplied.)
According to the Rules,
real actions shall be commenced and tried in the court that has jurisdiction
over the area where the property is situated. In this case, all the mortgaged
properties are located in the Province of Cebu. Thus, following the general
rule, PAGLAUM and HealthTech should have filed their case in Cebu, and not in Makati.
However, the Rules provide
an exception, in that real actions can be commenced and tried in a court other
than where the property is situated in instances where the parties have previously and validly agreed in writing on the
exclusive venue thereof. In the case at bar, the parties claim that such an
agreement exists. The only dispute is whether the venue that should be followed
is that contained in the Real Estate Mortgages, as contended by Union Bank, or that
in the Restructuring Agreement, as posited by PAGLAUM and HealthTech. This
Court rules that the venue stipulation
in the Restructuring Agreement should be controlling.
The Real Estate Mortgages were executed
by PAGLAUM in favor of Union Bank to secure the credit line extended by the
latter to HealthTech. All three mortgage contracts contain a dragnet clause,
which secures succeeding obligations, including renewals, extensions,
amendments or novations thereof, incurred by HealthTech from Union Bank, to
wit:
Section
1. Secured Obligations. The obligations secured by this Mortgage (the
Secured Obligations) are the following:
a)
All the obligations of the Borrower
and/or the Mortgagor under: (i) the Notes, the Agreement, and this Mortgage;
(ii) any and all instruments or documents issued upon the renewal, extension,
amendment or novation of the Notes, the Agreement and this Mortgage,
irrespective of whether such obligations as renewed, extended, amended or
novated are in the nature of new, separate or additional obligations; and (iii)
any and all instruments or documents issued pursuant to the Notes, the
Agreement and this Mortgage;
b)
All other obligations of the Borrower
and/or the Mortgagor in favor of the Mortgagee, whether presently owing or
hereinafter incurred and whether or not arising from or connected with the
Agreement, the Notes and/or this Mortgage; and
c)
Any and all expenses which may be
incurred in collecting any and all of the above and in enforcing any and all
rights, powers and remedies of the Mortgagee under this Mortgage.[36]
On the other hand, the Restructuring
Agreement was entered into by HealthTech and Union Bank to modify the entire
loan obligation. Section 7 thereof provides:
Security. The
principal, interests, penalties and other charges for which the BORROWER may be
bound to the BANK under the terms of this Restructuring Agreement, including
the renewal, extension, amendment or novation of this Restructuring Agreement,
irrespective of whether the obligations arising out of or in connection with
this Restructuring Agreement, as renewed, extended, amended or novated, are in
the nature of new, separate or additional obligations, and all other
instruments or documents covering the Indebtedness or otherwise made pursuant
to this Restructuring Agreement (the Secured Obligations), shall continue to
be secured by the following security arrangements (the Collaterals):
a.
Real
Estate Mortgage dated February 11, 1994 executed by
Paglaum Management and Development Corporation over a 474 square meter property
covered by TCT No. 112489;
b.
Real
Estate Mortgage dated February 11, 1994 executed by
Paglaum Management and Development Corporation over a 2,796 square meter
property covered by TCT No. T-68516;
c.
Real
Estate Mortgage dated April 22, 1998 executed by
Paglaum Management and Development Corporation over a 3,711 square meter
property covered by TCT No. 112488;
d.
Continuing Surety Agreement of Benjamin
B. Dy;
Without
need of any further act and deed, the existing Collaterals, shall remain in
full force and effect and continue to secure the payment and performance of the
obligations of the BORROWER arising from the Notes and this Restructuring
Agreement.[37]
(Emphasis supplied.)
Meanwhile, Section 20 of the
Restructuring Agreement as regards the venue of actions state:
20.
Venue Venue of any action or proceeding arising out of or connected
with this Restructuring Agreement, the
Note, the Collateral and any and all related documents shall be in Makati City, [HealthTech] and [Union
Bank] hereby waiving any other venue.[38] (Emphasis
supplied.)
These quoted provisions of the Real
Estate Mortgages and the later Restructuring Agreement clearly reveal the
intention of the parties to implement a restrictive venue stipulation, which
applies not only to the principal obligation, but also to the mortgages. The phrase
waiving any other venue plainly
shows that the choice of Makati City as the venue for actions arising out of or
in connection with the Restructuring Agreement and the Collateral, with the
Real Estate Mortgages being explicitly defined as such, is exclusive.
Even if this Court were to consider the
venue stipulations under the Real Estate Mortgages, it must be underscored that
those provisions did not contain words showing exclusivity or restrictiveness.
In fact, in the Real Estate Mortgages dated 11 February 1994, the phrase
parties hereto waiving from the entire phrase the parties hereto waiving
any other venue was stricken from the final executed contract. Following the
ruling in Sps. Lantin as earlier
quoted, in the absence of qualifying or restrictive words, the venue
stipulation should only be deemed as an agreement on an additional forum, and
not as a restriction on a specified place.
Considering that Makati City was agreed
upon by the parties to be the venue for all actions arising out of or in
connection with the loan obligation incurred by HealthTech, as well as the Real
Estate Mortgages executed by PAGLAUM, the CA committed reversible error in
affirming the dismissal of Civil Case No. 01-1567 by RTC Br. 134 on the ground
of improper venue.
WHEREFORE, the Petition for Review is GRANTED.
The Decision dated 31 May 2007 and Resolution dated 24 July 2007 in CA-G.R. CV
No. 82053 of the Court of Appeals, as well as the Orders dated 11 March 2003
and 19 September 2003 issued by the Regional Trial Court, Makati City, Branch
134, are REVERSED and SET ASIDE. The Complaint in Civil Case No. 01-1567 is hereby REINSTATED.
SO
ORDERED.
MARIA LOURDES P. A. SERENO
Associate
Justice
WE
CONCUR:
ANTONIO T. CARPIO
Senior Associate Justice
Chairperson
|
ARTURO
D. BRION Associate Justice |
JOSE
PORTUGAL PEREZ Associate
Justice |
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BIENVENIDO L.
REYES
Associate
Justice
I certify that the conclusions in the above Decision had
been reached in consultation before the case was assigned to the writer of the
opinion of the Courts Division.
Senior
Associate Justice
(Per
Section 12, R.A. 296,
The
Judiciary Act of 1948, as amended)
[1] Rollo, pp. 45-53. Penned by CA Associate Justice Fernanda Lampas Peralta and
concurred in by Associate Justices Edgardo P. Cruz and Normandie B. Pizarro.
[2] Rollo, p. 55.
[3] Petition, p. 5; rollo, p. 19.
[4] Rollo, pp. 75-76.
[5] Rollo, pp. 73-74.
[6] Rollo, pp. 77-78.
[7] Petition,
p. 6; rollo, p. 20. See also Stockholders Resolution of
PAGLAUM dated 11 December 1998, rollo,
pp. 116-117.
[8] Credit
Line Agreement dated 3 February 1994, rollo,
pp. 80-81; CA Decision, p. 2, rollo,
p. 46.
[9] Real
Estate Mortgage dated 11 February 1994, rollo,
pp. 173-176; Real Estate Mortgage dated 11 February 1994, rollo, pp. 177-180; Real Estate Mortgage dated 22 April 1998, rollo, pp. 181-184.
[10] Rollo, pp. 176, 180 and 184.
[11] Rollo, pp. 176 and 180.
[12] Rollo, p. 184.
[13] Letter
dated 14 March 1995 of Union Bank to HealthTech, rollo, pp. 82-83; letter dated 11 February 1997 of Union Bank to
HealthTech, rollo, pp. 84-85; Petition, p. 5, rollo, p. 19; CA Decision, p. 2, rollo, p. 46; Restructuring Agreement dated 11 December 1998, rollo, pp. 99-108.
[14] Restructuring Agreement
dated 11 December 1998, rollo, pp.
99-108.
[15] Petition, p. 6; rollo, p. 20.
[16] Rollo, pp. 99-108.
[17] Id. at 106.
[18] Letter dated 9 October
2000, rollo, p. 122.
[19] Petition, p. 8; rollo, p. 22.
[20] Petition, p. 8; rollo, p. 22; CA Decision, p. 2, rollo, p. 46.
[21] Petition, p. 8; rollo, p. 22.
[22] Rollo, pp. 59-72.
[23] Resolution dated 13 December 2001, rollo, pp. 125-129.
[24] Rollo, pp. 130-135.
[25] Order dated 11 March 2003, rollo, pp. 166-170.
[26] Order
dated 19 September 2003, rollo, p. 171-172.
[27] CA Decision, rollo, pp. 44-53.
[28] Resolution dated 24 July 2007, rollo, pp. 54-55.
[29] Petition, p. 12; rollo, p. 26.
[30] Comment [on] Petition for Review on
Certiorari; rollo, pp. 260-268.
[31] Comment (On the Petition for Review on
Certiorari) dated 26 December 2007; rollo,
pp. 270-277.
[32] 258-A
Phil. 336 (1989).
[33] Id. at 340-341.
[34] 531
Phil. 318 (2006).
[35] Id. at 322-323.
[36] Real Estate Mortgage dated 11 February 1994, rollo, p. 173; Real Estate Mortgage
dated 11 February 1994, rollo, p. 177;
Real Estate Mortgage dated 22 April 1998, rollo,
p. 181.
[37] Restructuring Agreement, pp. 3-4; rollo, pp. 101-102.
[38] Restructuring
Agreement, p. 8; rollo, p. 106.