G.R. No. L-27033 - Polytrade Corp. vs. Blanco

Case Summary (G.R. No. L-27033)

Factual Background

Polytrade Corporation sold and delivered raw hide to Victoriano Blanco on four separate transactions for which plaintiff sought recovery of the purchase prices. The sales were supported by confirmation orders and by trust receipts executed by defendant. Plaintiff alleged nonpayment and conversion of the raw hide into leather that was sold by defendant.

Procedural History

Defendant moved to dismiss on the ground of improper venue, invoking a contractual stipulation that suits be brought in the courts of Manila. The Court of First Instance of Bulacan overruled the motion. Defendant did not file an answer and the trial court entered a default judgment on September 21, 1966, awarding specified principal sums on each cause of action with interest at one percent per month, attorney's fees fixed at twenty-five percent of the principal amount due in each cause, and costs, with a deduction of P400 from the total. Defendant appealed to this Court.

Venue Issue and Court's Analysis

The principal question was whether venue was properly laid in Bulacan where defendant resided. The Court recognized that Section 2(b), Rule 4 permits actions to be commenced where the defendant resides. It also noted Section 3, Rule 4 permits parties by written agreement to change or transfer venue. The contractual clause relied upon by defendant — "The parties agree to sue and be sued in the Courts of Manila" — appeared only in the agreements covering the third and fourth causes of action and was absent from the contracts for the first two causes. The Court construed the stipulation as permissive rather than exclusive; it added Manila as a forum to which the parties consented but did not operate to waive the statutory venues specified in Section 2(b), Rule 4. The Court invoked the principle renuntiatio non praesumitur and cited Engel v. Shubert Theatrical Co. to support strict construction of non-exclusive venue clauses. Accordingly, venue in Bulacan was proper as to all causes of action.

Interest Claim and Rationale

Defendant contested the award of interest at one percent per month, pointing to the terms in the sales confirmation orders which read: "TERMS - 60 days after delivery with interest accruing on postdated cheques beyond 30 days." The Court found the decisive provision as to interest in the trust receipts, which expressly stipulated that "All obligations of the undersigned under this agreement of trust shall bear interest at the rate of one per centum (1%) per month from the date due until paid." On this basis the Court upheld the trial court's allowance of interest at one percent per month, but corrected the commencement date of interest on the fourth cause of action to March 24, 1965.

Attorneys' Fees as Liquidated Damages

The trial court awarded attorneys' fees amounting to P51,961.63, representing twenty-five percent of the total principal indebtedness of P207,846.51. The Court characterized the contractual attorneys' fees provision as a form of liquidated damages or penal clause, distinguishing it from fees recoverable under the Rules of Court. It held that such stipulations are binding unless they contravene law, morals, or public order, but that Article 2227 of the Civil

Case Syllabus (G.R. No. L-27033)

Parties and Procedural Posture

POLYTRADE CORPORATION, PLAINTIFF-APPELLEE sued VICTORIANO BLANCO, DEFENDANT-APPELLANT in the Court of First Instance of Bulacan on four causes of action to recover purchase price of raw hide delivered by plaintiff to defendant.
The Defendant moved to dismiss for improper venue and the trial court overruled the motion.
The Defendant did not file an answer and a default judgment was rendered by the trial court on September 21, 1966.
The Defendant appealed the default judgment to the Supreme Court.

Key Factual Allegations

The Plaintiff maintained its principal office and place of business in Makati, Rizal.
The Defendant resided in Meycauayan, Bulacan.
The trial court awarded the Plaintiff judgment for amounts due on four causes of action in the sums of P60,845.67, P51,952.55, P53,973.07, and P41,075.22 respectively, plus interest at one percent per month, attorneys' fees amounting to twenty-five percent of the principal amount due, and costs, with P400 deducted in accordance with the writ of attachment.
The writ of attachment executed below yielded only P400 against the Defendant's properties.
The Defendant did not deny conversion of the raw hide into leather and sale thereof nor deny principal liability.

Issues Presented

Whether venue was properly laid in Bulacan in view of an alleged stipulation to litigate in the courts of Manila.
Whether interest at the rate of one percent per month was properly awarded.
Whether the award of attorneys' fees in the amount of twenty-five percent of principal was iniquitous or unconscionable and therefore subject to equitable reduction under Article 2227 of the Civil Code.

Contentions of Parties

The Defendant contended that a written stipulation in the contracts required all suits to be filed only in the courts of Manila and thus rendered venue in Bulacan improper.
The Plaintiff maintained that Section 2(b), Rule 4 permitted suit in the province of the defendant's residence and that the clause in question did not exclude other forums.
The Defendant argued that the trial court erred in awarding interest at the stated rate because the sales confirmation orders limited interest to postdated checks beyond thirty days.
The Defendant argued that the attorneys' fees fixed at twenty-five percent were exorbitant and unconscionable.

Statutory Framework

Section 2(b), Rule 4, Rules of Court provided that personal actions triable by courts of first instance may be commenced where the defendant resides or may be found, or where the plaintiff resides, at the plaintiff's election.
Section 3, Rule 4, Rules of Court provided that venue may be stipulated by written agreement and that by written agreement venue may be changed or transferred from one province to another.
Article 2227 of the Civil Code provided that liquidated damages shall be equitably reduced if they are iniquitous or unconscionable.

Venue Clause

The stipulation "The parties agree to sue and be sued in the Courts of Manila" appeared only in the agreements covering the third and fourth causes of action.