Paglaum Management & Development Corp.

and Health Marketing

Technologies, Inc. v. Union Bank of the Philippines, et al
G.R. No. 179018, June 18, 2012
FACTS:
PAGLAUM and HealthTech are co-owners of three parcels of land located
in the Province of Cebu. Respondent Union Bank extended HealthTech a credit
line. As security, PAGLAUM executed three Real Estate Mortgages on behalf of
HealthTech and in favor of Union Bank. In the original Real Estate Mortgage,
there was a stipulation that 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.
Meanwhile, both parties entered into a Restructuring Agreement to increase
the credit line of HealthTech. In the new agrrement, they stipulated 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
and defaulted on its payment. Thereafter, Union Bank extra-judicially foreclosed
the mortgaged properties. Consequently, HealthTech filed a Complaint for
Annulment of Sale and Titles with Damages and Application for Temporary
Restraining Order and Writ of Injunction in RTC Makati. The RTC Makati ruled in
favor of PAGLAUM and HealthTech. However, Union Bank filed a Motion to
Dismiss on the ground of improper venue. The motion was granted by the RTC
and 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 RTC decision. Hence, this petition.
ISSUE:
Whether or not Makati City is the proper venue to assail the foreclosure of
the subject real estate mortgage. (YES)
RULING:
Being an action for Annulment of Sale and Titles resulting from the
extrajudicial foreclosure by Union Bank of the mortgaged real properties, the civil
case is classified as a real action. In Fortune Motors v. Court of Appeals,  this Court
held that a case seeking to annul a foreclosure of a real estate mortgage is a real
action.
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 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.