G.R. No. 104175 - Young Auto Supply Co. vs. Court of Appeals

On October 28, 1987, Young Auto Supply Co., Inc. (YASCO), represented by its president Nemesio Garcia, together with Nelson Garcia and Vicente Sy, sold all their shares of stock in Consolidated Marketing & Development Corporation (CMDC) to George Chiong Roxas for P8,000,000.00, payable by P4,000,000.00 downpayment and four postdated checks of P1,000,000.00 each for the balance.
Immediately after execution, Roxas took full control of CMDC’s four markets, while the vendors retained the CMDC stock certificates as security pending full payment.
The P4,000,000.00 downpayment check was honored; the four postdated checks totaling P4,000,000.00 were dishonored upon presentment.
Roxas subsequently sold one of the markets to a third party. From the proceeds, YASCO received P600,000.00, leaving an unpaid balance of P3,400,000.00.
Nelson Garcia and Vicente Sy later assigned to Nemesio Garcia all their rights and title to the proceeds from the sale of the CMDC shares.

On June 10, 1988, YASCO and Nemesio Garcia filed a complaint in the RTC, Branch 11, Cebu City (Civil Case No. CEB 6967) against Roxas for collection of the unpaid balance of P3,400,000.00 or, in the alternative, for the return of full control over the remaining three markets to YASCO and Garcia.
Petitioners also prayed for the forfeiture of the partial payments totaling P4,600,000.00 (P4,000,000.00 downpayment plus P600,000.00 from the sale of one market), attorney’s fees, and costs.

Roxas twice moved for extensions to file an answer but failed to do so, prompting petitioners to seek his default; Roxas then filed a third motion for extension through new counsel.
On August 19, 1988, the RTC declared Roxas in default; the order was later lifted upon his motion.
On August 22, 1988, Roxas moved to dismiss on the grounds of: (a) failure to state a cause of action due to non-joinder of indispensable parties; (b) waiver, abandonment, or extinguishment of the claim; and (c) improper venue.
After hearing with testimonial and documentary evidence from both sides, the RTC denied the motion to dismiss in an Order dated February 8, 1991.
Roxas then sought another extension to answer and filed a motion for reconsideration, which the RTC denied on April 10, 1991 as pro forma; he was again declared in default, the MR not tolling the period to answer.
Roxas filed an unverified Motion to Lift Order of Default without an affidavit of merit, and thereafter filed a petition for certiorari in the Court of Appeals (CA-G.R. SP No. 25237).

The Court of Appeals sustained the RTC in rejecting the grounds of failure to state a cause of action and waiver/extinguishment, but dismissed the complaint for improper venue, relying on petitioners’ purported Pasay City addresses appearing in the October 28, 1987 Deed of Sale, correspondence, and commercial documents.
Petitioners moved for reconsideration, which the CA denied. Petitioners then elevated the case via petition to the Supreme Court, arguing: (a) venue properly lay in Cebu City; and (b) Roxas was estopped from questioning venue.
The Supreme Court granted the petition, set aside the CA decision, and reinstated the RTC’s February 8, 1991 Order denying the motion to dismiss.

Whether venue for the personal action for collection was properly laid in the RTC of Cebu City, considering YASCO’s articles of incorporation and the addresses reflected in the Deed of Sale and correspondence indicating Pasay City.

Corollary: For venue purposes, what determines a corporation’s “residence” — the principal office in the articles of incorporation or addresses used in contracts/letters and the existence of branch offices?

Whether Roxas is estopped from assailing petitioners’ choice of venue in Cebu City due to petitioners’ use of a Pasay City address in transactional documents.

Ancillary (resolved by the RTC and sustained by the CA, and not disturbed on review): Whether the complaint failed to state a cause of action due to non-joinder of indispensable parties, and whether the claim had been waived, abandoned, or extinguished.