G.R. No. 119657 - Unimasters Conglomeration, Inc. vs. Court of Appeals

Case Summary (G.R. No. 119657)

Factual Background

On October 28, 1988 KUBOTA and UNIMASTERS executed a "Dealership Agreement for Sales and Services" covering Samar and Leyte provinces. The agreement contained a venue clause stating that "All suits arising out of this Agreement shall be filed with / in the proper Courts of Quezon City" and required UNIMASTERS to obtain a credit line of P2,000,000.00 with Metropolitan Bank and Trust Company-Tacloban Branch to answer for obligations to KUBOTA. On December 24, 1993 UNIMASTERS filed Civil Case No. 93-12-241 in the Regional Trial Court of Tacloban City against KUBOTA, Reynaldo Go, and METROBANK for breach of contract and sought injunctive relief. That same day the Trial Court issued a temporary restraining order enjoining METROBANK from effecting payment against the established credit line.

Trial Court Proceedings

The injunction incident was initially set for hearing on January 10, 1994. On January 4, 1994 KUBOTA filed a motion to dismiss for improper venue and a separate motion to transfer the injunction hearing to January 11, 1994. The record reflects that the Court proceeded with the hearing on January 10, 1994 and received direct testimony from UNIMASTERS' general manager, Wilford Chan. KUBOTA's counsel appeared on January 11, 1994, protested that the motion to dismiss remained pending, cross-examined the witness with reservation that venue was not thereby waived, and offered documentary exhibits and a memorandum. On January 13, 1994 the Trial Court authorized the issuance of a preliminary injunction upon bond of P2,000,000.00. On February 3, 1994 the RTC denied KUBOTA's motion to dismiss, reasoning that plaintiff's principal place of business was Tacloban City and defendant's principal place was Quezon City, and that venue was therefore proper at either Quezon City or Tacloban City at the plaintiff's election.

Court of Appeals Proceedings

KUBOTA elevated the two RTC orders to the Court of Appeals via a special civil action in certiorari and prohibition, contending that the RTC acted with grave abuse of discretion by maintaining jurisdiction despite an exclusive venue stipulation favoring Quezon City, that UNIMASTERS failed to prove entitlement to injunctive relief, and that the motion to dismiss should have been granted. The Court of Appeals agreed with KUBOTA, held that the Dealership Agreement's venue clause limited suits exclusively to "the proper courts of Quezon City," and found that participation by KUBOTA's counsel in the injunction hearing did not waive its venue objection. The Appellate Court thus set aside the injunction and the denial of the motion to dismiss.

Issues Presented on Appeal to the Supreme Court

The principal issue before this Court was the proper construction of the stipulation in the Dealership Agreement that "All suits arising out of this Agreement shall be filed with / in the proper Courts of Quezon City" — whether that language limited venue exclusively to Quezon City or merely added Quezon City as an additional, permissive forum. A subsidiary issue was whether KUBOTA had waived its objection to venue by participating in the injunction hearing.

Parties' Contentions

UNIMASTERS argued that the Court of Appeals erred in construing the venue stipulation as restrictive and relied upon precedent, notably Philippine Banking Corporation v. Tensuan, to urge that venue stipulations in the absence of qualifying words are merely permissive. KUBOTA maintained that the clause was clear and categorical and therefore operated to confine all suits under the agreement to Quezon City alone, thus rendering the Tacloban RTC of improper venue to entertain UNIMASTERS' suit.

Waiver of Venue Objection

This Court examined the record bearing on counsel's conduct at the injunction hearing and concluded that KUBOTA did not waive its motion to dismiss. The record showed that KUBOTA's counsel expressly reserved the right to press the motion to dismiss, attempted to have the venue issue ruled upon before the injunction hearing, and objected when the Court proceeded with the injunction hearing. Under those circumstances no waiver was imputable to KUBOTA.

Legal Principles Governing Venue Stipulations

The Court reviewed the jurisprudential taxonomy on contractual venue clauses and reiterated governing precepts from Rule 4, Rules of Court, which allows written agreements changing or transferring venue (Sec. 3) and provides plaintiff an election among prescribed venues (Sec. 2(b)). The Court explained that venue stipulations are generally to be construed in light of the parties' intention and the raison d'être of venue rules — convenience of the plaintiff and his witnesses and the promotion of justice. Accordingly, absent clear, categorical, and exclusionary language (e.g., "only," "solely," "exclusively"), stipulations naming a particular place are ordinarily permissive and operate merely to add an additional forum rather than to displace the statutory venues prescribed in Rule 4. The Court surveyed thirteen decisions in which stipulations were held permissive and several decisions in which stipulations were held restrictive, and distilled the standard that restrictive effect requires unmistakable language evincing the parties' intention to oust the Rule 4 venues.

Court's Analysis and Reasoning

Applying the foregoing principles to the Dealership Agreement's clause, the Court found the phrase "All suits arising out of this Agreement shall be filed with / in the proper Courts of Quezon City" insufficiently categorical to amount to a waiver of the Rule 4 election in favor of Tacloban City. The record established that UNIMASTERS had its principal place of business in Tacloban City and KUBOTA in Quezon City, and that under Rule 4 the plaintiff could elect to sue in either place. Because the contractual stipulation contained no qualifying, restrictive, or exclusionary words to demonstrate an unequivocal intention to limit venue exclusively to Quezon City, the stipulation must be construed as permissive. The Court also emphasized that venue is a procedural matter and not juris

Case Syllabus (G.R. No. 119657)

Parties and Procedural Posture

UNIMASTERS CONGLOMERATION, INC. filed Civil Case No. 93-12-241 in the Regional Trial Court of Tacloban City, Branch 6, against KUBOTA AGRI-MACHINERY PHILIPPINES, INC., Reynaldo Go, and METROPOLITAN BANK AND TRUST COMPANY-Tacloban Branch for breach of contract and for injunction with prayer for a temporary restraining order.
KUBOTA AGRI-MACHINERY PHILIPPINES, INC. invoked a motion to dismiss for improper venue and separately sought transfer of the injunction hearing.
The RTC issued a temporary restraining order and subsequently a preliminary injunction conditioned upon a bond of P2,000,000.00, and later denied KUBOTA's motion to dismiss.
KUBOTA petitioned the Court of Appeals via certiorari and prohibition, which reversed and held the contractual venue stipulation exclusive to Quezon City, and denied reconsideration.
UNIMASTERS elevated the case to the Supreme Court by certiorari following denial of reconsideration by the Court of Appeals.

Key Factual Allegations

KUBOTA and UNIMASTERS entered into a "Dealership Agreement for Sales and Services" dated October 28, 1988, covering Samar and Leyte Provinces.
The agreement required UNIMASTERS to obtain a credit line with METROBANK-Tacloban Branch in the amount of P2,000,000.00, which UNIMASTERS obtained.
On December 24, 1993 UNIMASTERS sued for breach arising from purchases made by a third party, Reynaldo Go, allegedly charged to the established credit line.
The Dealership Agreement expressly provided that "All suits arising out of this Agreement shall be filed with/in the proper Courts of Quezon City."

Contract Provision on Venue

The Dealership Agreement contained the clause: "All suits arising out of this Agreement shall be filed with / in the proper Courts of Quezon City," and no language expressly reserved alternative venues.
The contract’s venue clause did not mention Tacloban City or include qualifying words such as "only," "solely," or "exclusively."

Proceedings in the RTC Tacloban

The RTC-Tacloban issued a TRO on December 24, 1993 enjoining METROBANK from effecting payments or charging UNIMASTERS for amounts alleged due KUBOTA.
An injunction hearing was scheduled for January 10, 1994 but counsel scheduling issues produced proceedings on January 10 and January 11, 1994 during which testimony and exhibits were received.
On January 13, 1994 the RTC authorized issuance of the preliminary injunction upon a bond of P2,000,000.00.
On February 3, 1994 the RTC denied KUBOTA's motion to dismiss for improper venue, holding that venue could be proper in Tacloban at plaintiff’s election pursuant to Rule 4, Section 2(b), Rules of Court.

Motions, Waiver, and Evidentiary Acts

KUBOTA contended that its counsel expressly reserved the motion to dismiss for improper venue yet nonetheless participated in the injunction hearing and cross-examination.
The Court of Appeals found that participation in the injunction hearing did not constitute waiver of the venue objection because KUBOTA had timely asserted and reserved its motion to dismiss.
The RTC received exhibits and a memorandum in lieu of testimony, and later ordered the preliminary injunction and denied the motion to dismiss.

Court of Appeals Decision

The Court of Appeals held that the venue stipulation in the Dealership Agreement limited venue exclusively to Quezon City and therefore the Tacloban RTC was the wrong venue.
The Court of Appeals concluded that any printed invoice clause referring to the City of Manila did not govern the Dealership Agreement between KUBOTA and UNIMASTERS.
The Court of Appeals ruled that a TRO or injunction issued by Quezon City courts could be served on METROBANK's principal office in Makati and be enforceable against the Tacloban branch.

Issues Presented on Appeal to the Supreme Court

Whether the stipulation "All suits arising out of this Agreement shall be filed with/in the proper Courts of Quezon City" operated to rest