Paglaum Management & Development Corp. and Health Marketing Technologies, Inc. v.

Union Bank
of the Philippines, et al.,
GR. No. 179018, June 18, 2012

Facts:
On 3 February 1994, respondent Union Bank extended HealthTech a credit line in the amount of
₱10,000,000. To secure this obligation, PAGLAUM executed three Real Estate Mortgages on behalf of
HealthTech and in favor of Union Bank. 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.

However, under the two Real Estate Mortgages dated February 11, 1994, it stated that the venue
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. Meanwhile, the same provision in Real Estate Mortgage date April
22, 1998 contains a blank space for the venue or in the place where any of the mortgaged properties is
located.

HealthTech and Union Bank agreed to subsequent renewals and increases in the credit line, with the
total amount of debt reaching ₱36,500,000. Unfortunately, according to HealthTech, the 1997 Asian
financial crisis adversely affected its business and caused it difficulty in meeting its obligations with Union
Bank. Thus, on December 11, 1998, both parties entered into a Restructuring Agreement, 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. 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. Since HealthTech defaulted on its payment, Union Bank extra-judicially foreclosed the mortgaged
properties. The bank as the sole bidder, was then issued a Certificate of Sale. Consequently, HealthTech
filed a Complaint for Annulment of Sale and Titles with Damages and Application for Temporary
Restraining Order and Writ of Injunction, which the RTC ruled in favor of them and issued the said writ.
Thereafter, Union Bank filed a Motion to Dismiss, which the RTC granted and resulted to the dismissal of
the case, as well as the dissolution of the Writ of Preliminary Injunction. It likewise denied the subsequent
Motion for Reconsideration filed by PAGLAUM and HealthTech. PAGLAUM and HealthTech elevated the
case to the CA, which affirmed the decision of the trial court and denied the Motion for Reconsideration.

Issue: Whether Makati City is the proper venue to assail the foreclosure of the subject real estate
mortgage.

Ruling:
 The Supreme Court rules in the affirmative. 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 said 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.

Dispositive Portion:

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.