Case Summary (G.R. No. 185595)
Restructuring Agreement and Venue Stipulation
Amid HealthTech’s default in December 1998, parties entered a Restructuring Agreement modifying the loan and reaffirming the mortgages as collateral. Section 20 provided that any action “arising out of or connected with” the agreement or collateral must be brought exclusively in Makati City, with express waiver of all other venues.
Procedural History
Union Bank extrajudicially foreclosed and purchased the properties at auction in May 2001, then filed to consolidate title. Paglaum and HealthTech sought annulment of the sale and injunctive relief in RTC Makati. The court initially granted a preliminary injunction but dismissed the case in March 2003 for lack of jurisdiction, improper venue, and defective signing authority. The CA affirmed in May 2007 and denied reconsideration in July 2007.
Issue
Whether Makati City is the proper venue for the annulment of the extrajudicial foreclosure of the Cebu properties.
Applicable Law on Venue of Real Actions
Rule 4, Section 1(a): Real actions affecting title or possession must be filed where the property is located.
Rule 4, Section 3(b): Parties may validly agree in writing on an exclusive venue. Such stipulations must include restrictive language (“exclusively,” “waiving any other venue”) to be binding (Sps. Lantin v. Lantion).
Court’s Analysis
The suit to annul the foreclosure is a real action (Fortune Motors v. CA). Absent agreement, venue lies in Cebu. The Restructuring Agreement’s Section 20 contains clear, restrictive language (“Makati City,” “waiving any other venue”) and applies to actions involving the collateral by virtue of the dragnet clause. Earlier mortgage provisions lacked exclusivity and, whe
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Facts
- Paglaum Management & Development Corp. (PAGLAUM) is registered owner of three parcels of land in Cebu, titled under TCT Nos. 112488, 112489, and T-68516, co-owned by Benjamin B. Dy and his family.
- Health Marketing Technologies, Inc. (HealthTech), presided by Dy, obtained a ₱10,000,000 credit line from Union Bank on February 3, 1994, secured by three real estate mortgages executed by PAGLAUM on HealthTech’s behalf.
- Section 9 (Venue) of the original mortgage form provided choice of Makati, Metro Manila, or location of the mortgaged property, with a waiver of any other venue.
- Two mortgages dated February 11, 1994, altered Section 9 to read “Cebu City Metro Manila or place where property is located,” striking the waiver language.
- A third mortgage dated April 22, 1998, left the first choice of venue blank and retained the waiver clause.
- Subsequent renewals and increases raised HealthTech’s debt to ₱36,500,000; the 1997 Asian financial crisis impaired its ability to pay.
- On December 11, 1998, Union Bank and HealthTech executed a Restructuring Agreement providing that all proceedings “arising out of or connected with” the agreement be brought in Makati City, with both parties “waiving any other venue.”
- Union Bank issued a demand letter on October 9, 2000; HealthTech defaulted, prompting extra-judicial foreclosure and a Certificate of Sale on May 24, 2001.
- Union Bank filed for consolidation of title; HealthTech and PAGLAUM responded with a Complaint for Annulment of Sale and Titles, damages, and injunctive relief on October 23, 2001, seeking to annul the foreclosure, cancel certificates, reinstate ownership, and restrain Union Bank’s acts.
- RTC Makati Branch 134 granted a preliminary injunction but later dismissed the case on March 11, 2003 for lack of jurisdiction, improper venue, and plaintiff’s lack of authority; the injunction was dissolved.
- The Court of Appeals af