G.R. No. 254787 - Odilao vs. Union Bank of the Philippines

Case Summary (G.R. No. 254787)

Factual Background

Petitioner executed a loan and a real estate mortgage in favor of Union Bank of the Philippines together with her husband, Tyrone Victor G. Odilao, and later filed a Complaint for reformation of mortgage, nullity of foreclosure, damages, and attorney’s fees with temporary restraining order and preliminary injunction. Petitioner sought judicial reformation of the loan and mortgage instruments on the ground that they were contracts of adhesion and did not reflect the true and mutual intention of the parties, and she proposed specific changes to the loan terms, interest, penalties, venue clause, and amortization schedule.

Trial Court Proceedings

Respondent moved to dismiss the complaint on the ground of improperly laid venue, invoking the venue stipulations in the promissory note and in the real estate mortgage which, respondent asserted, specified the courts of Pasig City as the agreed forum. In an Order dated August 30, 2016, the trial court granted the motion and dismissed the complaint, reasoning that the venue clauses were restrictive and that the action could not be heard in Davao City absent an express manifestation by the mortgagee choosing that forum. Petitioner’s motion for reconsideration was denied by the trial court.

Court of Appeals Proceedings

Petitioner appealed to the Court of Appeals. The CA, by Decision dated July 17, 2019, affirmed the trial court’s dismissal for improper venue. The CA later denied petitioner’s motion for reconsideration in a Resolution dated October 9, 2020. Petitioner then sought review by the Supreme Court by filing the present Petition for Review on Certiorari.

Parties’ Contentions on Appeal

Petitioner contended that dismissal on venue grounds was erroneous because she directly assailed the contractual instruments as contracts of adhesion and sought their reformation; she relied on Briones vs. Court of Appeals for the principle that a complaint attacking the validity of an instrument should not be bound by an exclusive venue stipulation contained in that instrument. Respondent maintained that the parties had validly agreed in writing to stipulate venue and relied on the promissory note and mortgage clause which identified Pasig City as the proper forum, invoking Rule 16, Section 1(c), Rules of Court as authorizing dismissal for improperly laid venue.

Issue Presented

The principal issue was whether the trial court and the Court of Appeals correctly dismissed petitioner’s complaint for improperly laid venue in view of the venue clause in the Real Estate Mortgage which provided that suits arising out of or in connection with the mortgage shall be in Pasig City or the place where the mortgaged property is located, at the absolute option of the mortgagee, the parties waiving any other venue.

Supreme Court Ruling

The Supreme Court granted the Petition for Review on Certiorari, reversed and set aside the Decision and Resolution of the Court of Appeals, and reinstated petitioner’s Complaint filed before Branch 77 of the Regional Trial Court of Davao City. The Court ordered the trial court to proceed with the disposition of the case with dispatch.

Legal Basis and Reasoning

The Court examined the venue clause in Section 8 of the Real Estate Mortgage which provided that the venue of suits arising out of or in connection with the mortgage shall be Pasig City or the place where any of the mortgaged properties are located, at the absolute option of the mortgagee, the parties waiving any other venue. The Court recognized the general rules on venue under Rule 4, Rules of Court, and reiterated jurisprudence that parties may validly agree in writing on an exclusive venue provided the stipulation is exclusive in nature, expressed in writing, and entered into before the filing of the action. The Court observed that the mortgage’s stipulation was restrictive in that it effectively limited venue to Pasig City or the place where the mortgaged property is located. Because the mortgaged property was in Davao City, the complaint filed in the RTC, Davao City, complied with the restrictive venue clause. The Court rejected the trial court’s interpretation that the phrase “at the absolute option of the Mortgagee” required prior inquiry of the bank’s choice before filing suit, reasoning that such an interpretation would unduly restrict access to courts and leave the plaintiff at the mercy of the mortgagee; the phrase only bears significance when the mortgagee itself initiates suit. The Court

Case Syllabus (G.R. No. 254787)

Parties and Procedural Posture

Petitioner is Lucille B. Odilao, represented in the petition by Ariel B. Odilao.
Respondent is Union Bank of the Philippines and co-respondent Atty. Natasha M. Go-De Mesa in her capacity as Register of Deeds of Davao City.
The Complaint for reformation of mortgage, nullity of foreclosure, damages, and attorney’s fees with TRO and preliminary injunction was filed in the Regional Trial Court of Davao City in Civil Case No. R-DVO-16-01024-CV.
The trial court granted Respondent’s motion to dismiss for improper venue and dismissed the Complaint in an Order dated August 30, 2016.
The trial court denied Petitioner’s motion for reconsideration in an order dated December 28, 2016.
Petitioner appealed to the Court of Appeals, Cagayan de Oro City Station, in CA-G.R. CV No. 04749-MIN, where the challenged Decision dated July 17, 2019 and Resolution dated October 9, 2020 affirmed dismissal.
Petitioner filed a Petition for Review on Certiorari before the Supreme Court seeking reversal of the CA Decision and reinstatement of the Complaint.

Key Factual Allegations

Petitioner and her husband executed a loan and a Real Estate Mortgage in favor of Respondent.
Petitioner alleged that the loan and mortgage were contracts of adhesion that did not reflect the true and mutual intention of the parties.
Petitioner prayed for reformation of the loan and mortgage to impose fairness, honesty, and transparency in notices, to provide specific rules for escalation of loan balance, to reduce regular interest to current market or the legal rate of six percent per annum, to reduce or eliminate penalties and hidden charges, to cancel the contractual venue clause, and to recompute a fair amortization schedule.
The Real Estate Mortgage contained a venue clause stating that suits arising out of the mortgage shall be in Pasig City or where the mortgaged property is located, “at the absolute option of the Mortgagee,” with the parties waiving any other venue.
The mortgaged property was located in Davao City, where the Complaint was filed.

Legal and Statutory Framework

Rule 4, Rules of Court governs venue of civil actions and provides that real actions shall be tried in the court having jurisdiction where the real property is situated.
Rule 4, Sec. 2 provides that personal actions may be commenced where the plaintiff or principal plaintiffs reside, or where the defendant resides, at the election of the plaintiff.
Rule 4, Sec. 4 recognizes two exceptions to the rule on venue, including where parties have validly agreed in writing before the filing of the action on the exclusive venue thereof.
The trial court relied on Section 1(c), Rule 16, Rules of Court as invoked by Respondent in asserting dismissal for improperly laid venue.

Issues Presented

Whether the trial court erred in dismissing the Complaint for improperly laid venue despite the Real Estate Mortgage designating Pasig City or the place where the mortgaged property is located as venue.
Whether a contractual venue stipulation phrased “at the absolute option of the Mortgagee” compels a plaintiff assailing the contract by way of reformation to await the mortgagee’s choice of forum before filing suit.
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