PHILIPPINE BANKING CORPORATION, PETITIONER, VS. HON. SALVADOR S. TENSUAN, JUDGE OF THE REGIONAL TRIAL COURT OF MAKATI, NATIONAL CAPITAL JUDI­CIAL REGION, BRANCH 146; CIRCLE FINA…

In this Petition for
Review on Certiorari, petitioner asks us to review and set aside
the Order of Judge Salvador A. Tensuan dated 3 August 1992, dismissing
petitioner’s complaint in Civil Case No. 91-2220 entitled “Philippine
Banking Corporation vs. Circle Financial Corporation, et. al.”

Petitioner Philippine
Banking Corporation (hereafter “Bank”) is a commercial banking
corporation with principal office at Makati, Metro Manila. Petitioner Bank instituted a complaint for collection of a sum
of money, with a prayer for
preliminary attachment, at the Regional Trial Court of Makati. It appears from the allegations of the
Bank’s complaint that respondent Circle Financial Co. (hereafter
“Circle”), sometime in 1983 and 1984, through its representatives,
obtained several loans aggregating P1,000,000.00 from petitioner. Respondent Circle, for value received,
delivered to petitioner Bank four (4) promissory notes, each of which contained
the stipulation that:

“I/We hereby expressly submit to the jurisdiction of the
courts of Valenzuela any legal action which may arise out of this promissory
note.”

As
security for the re-payment by respondent Circle of the sums loaned by
petitioner Bank, eight (8) individuals, who were impleaded as defendants in the
complaint — namely, Avelino Deato, Miguel Violago, Benjamin Santiago, Socorro
Gomez, Nerissa Gloria, Filemon Marquez, Domingo Santiago and Hilario Lopez —
executed a Continuing Surety Agreement and undertook to pay jointly and
severally respondent Circle’s obligations. Only five (5) out of the eight (8) individual obligors are respondents
in present case, namely: Domingo
Santiago, Hilario Lopez, Avelino Deato, Benjamin P. Santiago and Socorro Gomez.

On their due dates,
Circle failed to pay its obligations under the promissory notes. Thereupon, petitioner Bank demanded payment
from the eight (8) individual sureties conformably with their promises
contained in the Continuing Surety Agreement; the individual obligors, however,
also failed to pay.

Petitioner moved for
issuance of a writ of preliminary attachment, alleging that respondent Circle
had become insolvent and had been placed under receiver­ship by the Central Bank. The trial
judge granted the motion and issued a writ of preliminary attachment. The sheriff’s return indicated, however,
that no properties belonging to the respondent Circle and the individual
obligors could be found. Per sheriff’s
return, summons was served upon Domingo Santiago,^[1] Hilario P. Lopez,^[2] Avelino Deato,^[3] Benjamin P. Santiago^[4] and Socorro Gomez.^[5] The sheriff failed to serve summons on (a)
Miguel Violago, who had died; (b) Nerissa T. Gloria^[6] and Filemon Marquez,^[7] whose whereabouts were unknown; and (c)
Circle, which had ceased to engage in business at the address given by petitioner
and could not be located.

A motion to dismiss was
filed by the respondents (Circle and the five [5] individual sureties served
with summons) and averred that the venue of the action was improperly laid
since an agreement had fixed the venue of actions arising from the promissory
notes in Valenzuela, Metro Manila, only. Respondents called the trial court’s attention to the stipulation
contained in the promissory note, quoted in limine.

Acting upon respondents’
motion, respondent Judge Tensuan issued the challenged Order which read as
follows:

“Acting on defendants’ motion to dismiss on grounds of
improper venue in relation with actionable promissory notes which stipulate
that the parties ‘expressly submit to the jurisdiction of the Courts of Valenzuela,
Metro Manila any legal action which may arise’, and,

Finding said motion to be impressed with merit consistent with Sec.
13, Rule 14 of the Rules of Court as well as in line with the doctrinal rule in
Bautista vs. Hon. Juan de Borja, et al. (18 SCRA 474) that the proper venue for an action is that stipulated in
a document ‘in case of any litigation herefrom or in connection herewith’ upon
a rationale that had the parties intended to reserve the right to choose venue
under Section 2 (b), Rule 4 of the Rules of Court, such reservation should have
been reflected in the document as against the rationale in Polytrade
Corporation vs. Blanco (30 SCRA 187) which should allow choice of venue
where an actionable document does not set forth qualifying or restrictive words
in point, and

In order to more clearly define the parameters of the rule on
proper venue vis-a-vis a clear perception that a stipulation to ‘expressly
submit to the jurisdiction of the Courts of Valenzuela, Metro Manila’ amount to
an unequivocal agreement to sue and be sued in Valenzuela, Metro Manila.

WHEREFORE, premises considered and finding the motion to be
meritorious, same is hereby granted and the above-entitled case is accordingly
dismissed. Without pronouncement as to
costs.

SO ORDERED.”^[8]

Petitioner moved for
reconsideration of the above Order of the trial court, without success.

Hence, this Petition.

We consider that the
Petition is meritorious.

It is settled in this
jurisdiction that the parties, by written agreement, may change or transfer the
venue of an action from one province to another.^[9] We have many times sustained the validity
and enforceability of contractual stipulations relating to venue. In the enforcement of the parties’
stipulations concerning venue, it is, of course, the tenor of their agreement
which is of critical relevance. The
relevant task, in other words, is determining the intent of the parties as
manifested in the words employed by them and, where such words are less
than clear, in other recognized indicators of the will of the contracting
parties.

Petitioner Bank contends that the stipulation contained in the
promissory notes is merely an agreement to add the courts of Valenzuela to the
tribunals to which the parties may resort. Petitioner thus insists that the venue stipulation set out in the notes
did not restrict or limit the permissible venue of actions arising out of those
notes to the courts of Valenzuela, to the exclusion of all the other courts
recourse to any one of which is authorized or permitted under the Rules of
Court. Thus, venue was properly laid by
petitioner Bank in the place where its principal offices are located: i.e., Makati, Metropolitan Manila.

Private respondents, in opposition, aver that the words used in
the stipulation here involved are clear and unambiguous. A promise to submit to the jurisdiction of a
specific court, without an express reservation of the right to resort to one or
more of the tribunals otherwise accessible under the Rules of Court, is an
agreement definitely fixing the permissible venue in only one place, i.e.,
Valenzuela, to the exclusion of other competent courts.

A careful reading of the terms of the stipulation — “I/We
hereby expressly submit to the
jurisdiction of the courts of Valenzuela any legal action which may arise out of this promissory
note” — shows that that stipulation does not require the laying of venue in
Valenzuela exclusively or
mandatorily. The plain or ordinary import of the stipulation is the authorizing
of, or permission to bring, suit in Valenzuela; there is not the slightest indication of an intent
to bar suit in other competent courts.

Permissive stipulations
like the one here considered have invariably received judicial approval and we have declared
that either of the parties is authorized to lay venue of an action in the court named in the stipulation. The stipulation here does not purport to deprive
either party of its right to elect, or option to have resort to, another competent court as expressly permitted
by Section 2(b) of Rule 4 of the Rules of Court, should such party choose to
initiate a suit. The stipulation here
merely operated to confer or confirm a right upon a party to elect recourse to the courts of Valenzuela or, alternatively, to
go before any of the tribunals
envisaged by the rules on venue, i.e., the courts of Makati, Quezon City and Bulacan.^[10]

In principle, the
stipulation on venue here involved must be distinguished from stipulations
which purport to require or compel the parties to lay venue of an
action in a specified place, and in that particular place only. The latter type of venue stipulation must
clearly indicate, through qualifying and restrictive words, that the parties
deliberately intended to exclude causes or actions from the operation of the
ordinary permissive rules on venue,^[11] and that they intended contractually to
designate a specific venue to the exclusion of any other court also
competent and accessible to the parties under the ordinary rules on the venue
of actions. Stipulations of this
exclusionary nature may, under certain circumstances, be characterized as
unreasonable or as contrary to public policy^[12] and, accordingly, not judicially
enforceable.

In practice, the task, as
noted earlier, of this Court when confronted with issues of this kind is always
basically that of contract interpretation. In the case at bar, neither qualifying nor restrictive words (e.g.,
“must,” “only” or “exclusively”) were employed
which could yield an ????? on the part of the parties mandatorily to restrict
the venue of actions arising out of the promissory notes
to the courts of Valenzuela only. Private respondents suggest that the use of the words “any
legal action” expressed a supposed agreement to bar actions before any
court other than a Valenzuela court. We
do not agree, for we see no necessary or customary connection between the words
“any legal action” and an intent strictly to limit permissible venue
to the Valenzuela courts. Intent so to
establish an inflexible restriction of otherwise permissible venue to one
single place is not lightly to be presumed or inferred from stipulations which,
like that here before us, include no qualifying or exclusionary terms. Express reservation of the right to elect
venue under the ordinary rules was, accordingly, unnecessary in the case at
bar.

Such is the thrust of the
great bulk of the caselaw of this Court where this issue was directly raised
and discussed.

In Polytrade
Corporation v. Blanco,^[13] the stipulation on venue there involved
read:

“The parties agree to sue and be sued in the courts of
Manila”

The
Court, in upholding that stipulation and ruling that venue had been properly
laid in the then Court of First Instance of Bulacan (the place of defendant’s residence), speaking through Mr. Justice
Sanchez, said:

“x x x. An accurate
reading, however, of the stipulation, ‘The parties agree to sue and be sued in
the Courts of Manila,’ does not preclude the filing of suits in the residence
of plaintiff or defendant. The plain
meaning is that the parties merely consented to be sued in Manila. Qualifying or restrictive words which
would indicate that Manila and Manila alone is the venue are totally absent
therefrom. We cannot read into that
clause that plaintiff and defendant bound themselves to file suits with respect
to the last two transactions in question only or exclusively in Manila. For, that agreement did not change or
transfer venue. It simply is
permissive. The parties solely
agreed to add the courts of Manila as tribunals to which they may resort. They did not waive their right to pursue
remedy in the courts specifically mentioned in Section 2 (b) of Rule 4. Renuntiatio non praesumitur..”^[14]
(Underscoring supplied)

In Nicolas v. Reparations Commission,^[15]
the stipulation on venue provided that:

“All legal actions arising out of this contract x x x may be
brought in and submitted to the jurisdiction of the proper courts in the City
of Manila.”^[16]

This Court read the above stipulation as
merely permissive, relying upon and reinforcing Polytrade:

“x x x the venue in personal actions is fixed for the
convenience of the plaintiff and his witnesses and to promote the ends of
justice. We cannot conceive how the
interests of justice may be served by confining the situs of the action to
Manila, considering that the residences or offices of all the parties,
including the situs of the acts sought to be restrained or required to be done,
are all within the territorial jurisdiction of Rizal.

While the parties have agreed to submit their dispute to the jurisdiction
of the Manila courts, there is nothing in the language used x x x which
clearly shows that the intention of the parties was to limit the venue of the
action to the City of Manila only. Such
agreements should be construed reasonably and should not be applied in such a
manner that it would work more to the inconvenience of the parties without
promoting the ends of justice.”^[17]
(Underscoring supplied)

In Lamis Enterprises v. Lagamon,^[18]
the promissory note sued on had the following stipulation:

“In case of litigation, jurisdiction shall be vested in the
courts of Davao City.”^[19]

The collection suit was instituted in the
then Court of First Instance of Tagum, Davao. The Supreme Court rejected the defense of improper venue and held:

“x x x it is alleged that the proper venue for Civil Case No.
1395 should be Davao City where the plaintiff resides and as stipulated in the
promissory note dated February 26, 1979 and in the chattel mortgage dated
February 27, 1979. However, the
respondent judge found that Maningo has not only legal residence but also
physical and actual residence in Busaon, Tagum, Davao and we are not inclined
to disturb this finding. Anent the
claim that Davao City had been stipulated as the venue, suffice it to say that
a stipulation as to venue does not preclude the filing of suits in the
residence of plaintiff or defendant under Section 2(b), Rule 4, Rules of Court,
in the absence of qualifying or restrictive words in the agreement which
would indicate that the place named is the only venue agreed upon by the
parties. The stipulation did not
deprive Maningo of his right to pursue remedy in the court specifically
mentioned in Section 2(b) of Rule 4, Rules of Courts, Renuntiatio non
praesumitur. x x x.”^[20]
(Underscoring supplied)

In Western Minolco v. Court of Appeals,^[21]
the clause on venue read:

“The parties stipulate that the venue of the actions referred
to in Section 12.01 [Article XII of the Agreement] shall be in the City of
Manila.”

The initial action was commenced in the
Court of First Instance of Baguio and Benguet. This Court took the occasion to reiterate once more the Polytrade
doctrine:

“x x x In any event, it is not entirely amiss to restate the
doctrine that stipulations in a contract, which specify a definite place
for the institution of an action arising in connection therewith, do not, as a rule,
supersede the general rules on the matter set out in Rule 4 of the Rules of
Court, but should be construed merely as an agreement on an additional
forum, not as limiting venue to the specified place.”^[22]
(Underscoring supplied)

It is not necessary to
pretend that the decisions of the Supreme Court have been absolutely consistent
in this regard. There have been a few
decisions — notably Bautista v. de Borja^[23]
and Hoechst Philippines v. Torres^[24]
— which are not easy to reconcile with the line of cases beginning with Polytrade
discussed above. It is useful therefore
to make clear that to the extent Bautista and Hoechst Philippines
are inconsistent with Polytrade (an en banc decision later in
time than Bautista) and subsequent cases reiterating Polytrade, Bautista
and Hoechst Philippines have been rendered obsolete by the Polytrade
line of cases.

We note, finally, that no one of the private respondents has
claimed to have been put to undue hardship or inconvenience as a result of the
institution of the action in Makati. Venue relates to the trial and touches more upon the convenience of the
parties rather than upon the substance or merits of the case.^[25]

WHEREFORE, the Petition for Review on Certiorari is
hereby GRANTED DUE COURSE and the Orders dated 3 August 1992 and 28 August 1992
of public respondent Judge Salvador S. Tensuan are hereby REVERSED and SET
ASIDE. The case is hereby REMANDED to
the court of origin for resolution on the merits, with all deliberate
dispatch. No pronouncement as to costs.

SO ORDERED.

Bidin, Romero, Melo, and Vitug, JJ., concur.

^[1]
Per the complaint, a resident of Baliwag, Bulacan.

^[2]
Per the complaint, with address at c/o Rural Bank of Bustos, Inc., Bustos,
Bulacan.

^[3]
Per the complaint, a resident of Valenzuela, Metro Manila.

^[4]
Per the complaint, residing at Valenzuela, Metro Manila.

^[5]
Per the complaint, a resident of Philam Homes, Quezon City.

^[6]
Per the complaint, residing at Meycauayan, Bulacan.

^[7]
Per the complaint, with address at Rural Bank of del Pilar, Inc., Plaridel,
Bulacan.

^[8]
Annex “E” of the Petition, Rollo, p. 26.

^[9]
Section 3, Rule 4 of the Rules of
Court.

^[10]
See Polytrade vs. Blanco, 30 SCRA 187 (1969); Nicolas vs.
Reparations, 64 SCRA 110 (1975); Tantoco vs. Court of Appeals, 77 SCRA
225 (1977); Lamis Ents. vs. Lagamon, 108 SCRA 740 (1981); Capati vs.
Ocampo, 113 SCRA 794 (1982). See also
Western Minolco vs. Court of Appeals, 167 SCRA 592 (1988); Nasser vs.
Court of Appeals, 191 SCRA 783 (1990).

^[11]
See Moles vs. Intermediate Appellate Court, 169 SCRA 777 (1989).

^[12]
See Sweet Lines vs. Teves, 83 SCRA 361 (1978).

^[13]
30 SCRA 187 (1969).

^[14]
30 SCRA at 191. The Court cited Engel
v. Schubert Theatrical Co. (151 N.Y.S. 593 [1915]) where the
agreement on venue read:

“In case
of dispute, both contracting parties agree to submit to the jurisdiction of the
Vienna courts.”

The New York
court’s ruling, quoted with approval by our Supreme Court, was:

“By the clause in question, the parties do not agree to submit their disputes
to the jurisdiction of the
Viennese court, and to those courts only. There is nothing exclusive in the language used. They do agree to submit to the Viennese
jurisdiction, but they say not a word in restriction of the jurisdiction of
courts elsewhere; and whatever may be said on the subject of the legality of contracts to submit
controversies to courts of certain jurisdiction exclusively, it is
entirely plain that such agreements, should he strictly construed, and
should not be extended by implication.” (Underscoring supplied)

^[15]
64 SCRA 110 (1975).

^[16]
64 SCRA at 111.

^[17]
64 SCRA at 116.

^[18]
108 SCRA 740 (1981).

^[19]
108 SCRA at 743.

^[20]
108 SCRA at 753.

^[21]
167 SCRA 592 (1988).

^[22]
167 SCRA at 593.

^[23]
18 SCRA 475 (1966). In Bautista v.
de Borja, the venue stipulation read:

“[I]n
case of any litigation, arising [t]herefrom or in connection [t]herewith, the
venue of the action shall be in the City of Manila.”

The Court read
the above stipulation as an agreement to definitely fix the venue of actions
arising out of the written contracts sued upon, in the proper courts of the
City of Manila and granted dismissal of the complaint. The Court did not seek to
analyze the stipulation; not finding any clause reserving to the parties the
right of election, the Court surmised that the agreement was one requiring
venue to be laid in one place only, to the exclusion of other competent tribunals.

^[24]
83 SCRA 297 (1978). In Hoechst Philippines v. Torres
(a Division case), the venue clause provided:

“[I]n
case of any litigation arising out of this agreement, the venue of any action
shall be in the competent courts of the Province of Rizal.”

The Supreme
Court, through Mr. Justice Barredo, followed the case of Bautista v.
de Borja (supra) and interpreted the venue clause as an agreement
requiring venue to be laid in only one place, i.e., the Province of Rizal, and
sustained the trial court’s dismissal of the action for improper venue. The Court said that

“no further
stipulations are necessary to elicit the thought that both parties agreed that
any action by either of them would be filed only in the competent courts
of Rizal Province exclusively.” (83 SCRA at 301) (Underscoring
supplied)

The contract
involved was a standard distribution agreement relating to products of Hoechst
Philippines. Barredo, J. added that there was

“justification
also for petitioner [Hoechst Philippines] to see to it that all suits against
it be concentrated in the Province of Rizal [principal place of business of
Hoechst Philippines]. If otherwise,
considering the nationwide extent of its business, it would be greatly
inconvenience if it had to appear in so many provinces everytime an action is filed
against it [on a distribution agreement].” (83 SCRA at 302).

Private
respondent did not controvert the trial court’s reading of the venue
clause. Instead, private respondent
sought to have the stipulation set aside as contrary to public policy, alleging
that Hoechst Philippines was a multinational company and that the stipulation
prejudiced small-time distributors like private respondent.

^[25]
Manila Railroad Co. vs. Attorney General, 20 Phil. 523 (1911).