AUCTION IN MALINTA, INC., PETITIONER, VS. WARREN EMBES LUYABEN, RESPONDENT.

Auction in Malinta versus Lubayen

The Case

This is a petition for review brought by Auction in Malinta, Incorporated against Warren Embes Lubayen, arising from a complaint for damages that Lubayen filed after the auction company failed to deliver the wheel loader for which he had been declared the highest bidder. The company moved to dismiss, insisting that the parties had agreed in writing to litigate only in the courts of Valenzuela City. The case matters because it is the Supreme Court's clean restatement of the rule on contractual venue: a stipulation fixing a place for litigation is presumed merely permissive unless the parties employ categorical and restrictive language making that place exclusive.

Procedural History

Lubayen filed his complaint for damages with the Regional Trial Court of Bulanao, Tabuk, Kalinga. Auction in Malinta moved to dismiss on the ground of improper venue, invoking the venue clause in the Bidders Application and Registration Bidding Agreement. The Kalinga trial court granted the motion and dismissed the complaint, holding that the parties clearly intended to limit venue to the proper court of Valenzuela City.

Lubayen appealed to the Court of Appeals, which reversed and set aside the trial court's resolution, reinstated the complaint, and remanded the case. The appellate court held that venue was properly laid in Kalinga. Auction in Malinta's motion for reconsideration was denied, so it came to the Supreme Court by petition for review under Rule 45.

Facts

Lubayen, a resident of Magsaysay, Tabuk, Kalinga, participated in a public auction conducted by Auction in Malinta, a corporation engaged in the public auction of heavy equipment, trucks, and assorted machineries, with business address in Malinta, Valenzuela City. At the auction held on May 29, 2001, Lubayen was declared the highest bidder for a wheel loader.

On June 7, 2001, Lubayen tendered payment for the item, but the company could no longer produce the loader. It offered a replacement, yet failed to deliver even that replacement up to the time the complaint was filed.

Lubayen therefore sued for actual, moral, and exemplary damages plus attorney's fees, filing in the Regional Trial Court of Bulanao, Tabuk, Kalinga, the court of his residence. The company resisted, pointing to the Bidders Application and Registration Bidding Agreement, which provided that all court litigation procedures shall be conducted in the appropriate courts of Valenzuela City, Metro Manila.

Issues

• Whether or not the stipulation in the parties' Bidders Application and Registration Bidding Agreement effectively limited the venue of the case exclusively to the proper court of Valenzuela City.
• Whether or not the complaint for damages was properly filed with the Regional Trial Court of Bulanao, Tabuk, Kalinga.

Applicable Provisions

Section 2, Rule 4 of the Rules of Court provides the general rule on venue of personal actions:

Section 2. Venue of personal actions. All other actions may be commenced and tried where the plaintiff or any of the principal plaintiffs resides, or where the defendant or any of the principal defendants resides, or in the case of a nonresident defendant, where he may be found, at the election of the plaintiff.

This is the default rule that governs Lubayen's action for damages, and it allows him to choose the place of his own residence.

Section 4, Rule 4 of the Rules of Court states the exception:

Section 4. 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.

The exception requires an agreement on the exclusive venue; a stipulation that is merely permissive leaves the general rule intact.

Ruling

On the first issue, the Court ruled in the negative. The general rule on venue of personal actions yields only where the parties, before the filing of the action, have validly agreed in writing on an exclusive venue. But a mere stipulation on venue is not enough; it must be shown that the stipulation is exclusive. Absent qualifying or restrictive words such as "exclusively," "waiving for this purpose any other venue," "shall only" preceding the designation of venue, "to the exclusion of the other courts," or words of similar import, the stipulation is deemed merely an agreement on an additional forum, not a limitation of venue to the specified place.

The Court traced this rule to the 1969 case of Polytrade Corporation versus Blanco, where a clause agreeing to sue and be sued in the courts of Manila was held permissive, and to Unimasters Conglomeration, Incorporated versus Court of Appeals, which explained:

In other words, unless the parties make very clear, by employing categorical and suitably limiting language, that they wish the venue of actions between them to be laid only and exclusively at a definite place, and to disregard the prescriptions of Rule 4, agreements on venue are not to be regarded as mandatory or restrictive, but merely permissive, or complementary of said rule.

Applying this to the clause before it, the Court held that the stipulation that all court litigation procedures shall be conducted in the appropriate courts of Valenzuela City evidently lacks the restrictive and qualifying words that would limit venue exclusively to the Valenzuela court. Valenzuela is therefore only an additional choice of venue. The company's reliance on the older Hoechst Philippines case was rejected, because that ruling had already been superseded by current decisions on venue.

On the second issue, the Court held that the complaint was properly filed in Kalinga. The case for damages may be filed with the Regional Trial Court of Valenzuela City under the stipulation, with the Regional Trial Court of Bulanao, Tabuk, Kalinga, which has jurisdiction over the residence of the plaintiff, or with the Regional Trial Court of Valenzuela City, which has jurisdiction over the business address of the defendant. Lubayen being a resident of Tabuk, Kalinga, his choice of the Kalinga court was proper.

Doctrine

A stipulation on venue is presumed merely permissive unless the parties employ categorical and restrictive language clearly expressing their purpose that actions between them be litigated only at the place named. The words that make a stipulation exclusive include "exclusively," "waiving for this purpose any other venue," "shall only" before the designated venue, and "to the exclusion of the other courts," or words of similar import. Without such language, the agreed place is simply an additional forum, and the plaintiff may still elect any venue allowed by Section 2, Rule 4 of the Rules of Court, including the place of the plaintiff's or the defendant's residence. Any doubt as to the parties' intention is resolved against giving the agreement a restrictive or mandatory aspect. This doctrine implements Section 4, Rule 4, which suspends the general rule only where the parties have validly agreed in writing on the exclusive venue.

Disposition

The petition was denied, the Court of Appeals decision was affirmed, and the complaint for damages was reinstated before the Regional Trial Court of Bulanao, Tabuk, Kalinga, with costs against the petitioner.

Remember This

Memorize the line: a venue stipulation without restrictive words is merely permissive and adds a forum rather than limiting one. Examiners use this case to test whether you can spot the qualifying words that convert an agreed venue into an exclusive one, and to remind you that the old Hoechst ruling no longer governs.