Paglaum

2/26/2019 SUPREME COURT REPORTS ANNOTATED VOLUME 673
G.R. No. 179018. June 18, 2012.*

PAGLAUM MANAGEMENT & DEVELOPMENT CORP.
and HEALTH MARKETING TECHNOLOGIES, INC.,
petitioners, vs. UNION BANK OF THE PHILIPPINES,
NOTARY PUBLIC JOHN DOE, and REGISTER OF
DEEDS of Cebu City and Cebu Province, respondents, J.
KING & SONS CO., INC., intervenor.
Civil Procedure; Actions; Venue; Real actions shall be

commenced and tried in the court that has jurisdiction over the
area where the property is situated.—According to the Rules, real
actions shall be commenced and tried in the court that has
jurisdiction over the area where the property is situated. In this
case, all the mortgaged properties are located in the Province of
Cebu. Thus, following the general rule, PAGLAUM and
HealthTech should have filed their case in Cebu, and not in
Makati. However, the Rules provide an exception, in that real
actions can be commenced and tried in a court other than where
the property is situated in instances where the parties have
previously and validly agreed in writing on the exclusive
venue thereof. In the case at bar, the parties claim that such an
agreement exists. The only dispute is whether the venue
_______________
* SECOND DIVISION.
507
VOL. 673, JUNE 18, 2012 507
Paglaum Management & Development Corp. vs. Union Bank of

the Philippines
that should be followed is that contained in the Real Estate

Mortgages, as contended by Union Bank, or that in the
Restructuring Agreement, as posited by PAGLAUM and
HealthTech. This Court rules that the venue stipulation in the
Restructuring Agreement should be controlling.
http://www.central.com.ph/sfsreader/session/0000016929aec4123f0d3947003600fb002c009e/t/?o=False 1/12
PETITION for review on certiorari of the decision and

resolution of the Court of Appeals.
The facts are stated in the opinion of the Court.
Franklin Delano M. Sacmar for petitioners.
Macalino and Associates for Union Bank.
Romeo C. Dela Cruz & Associates for intervenor.
Macam, Raro, Ulep & Partners collaborating counsel
for intervenor.
SERENO, J.:
Before this Court is a Petition for Review on Certiorari
under Rule 45 of the Rules of Court, assailing the Decision
dated 31 May 20071 and Resolution dated 24 July 20072
issued by the Court of Appeals (CA).
Petitioner Paglaum Management and Development
Corporation (PAGLAUM) is the registered owner of three
parcels of land located in the Province of Cebu3 and covered
by Transfer Certificate of Title (TCT) Nos. 112488,4
112489,5 and T-68516.6 These lots are co-owned by
Benjamin B. Dy, the president of
_______________
1 Rollo, pp. 45-53. Penned by CA Associate Justice Fernanda Lampas
Peralta and concurred in by Associate Justices Edgardo P. Cruz and
Normandie B. Pizarro.
2 Rollo, p. 55.
3 Petition, p. 5; Rollo, p. 19.
4 Rollo, pp. 75-76.
5 Rollo, pp. 73-74.
6 Rollo, pp. 77-78.
508
508 SUPREME COURT REPORTS ANNOTATED

Paglaum Management & Development Corp. vs. Union
Bank of the Philippines
petitioner Health Marketing Technologies, Inc.

7
(HealthTech), and his mother and siblings.
On 3 February 1994, respondent Union Bank of the
Philippines (Union Bank) extended HealthTech a credit
line in the amount of P10,000,000.8 To secure this
obligation, PAGLAUM executed three Real Estate
Mortgages on behalf of HealthTech and in favor of Union
Bank.9 It must be noted that the Real Estate Mortgage, on
the provision regarding the venue of all suits and actions
arising out of or in connection therewith, originally

stipulates:
“Section 9. Venue.—The venue of all suits and actions arising

out of or in connection with this Mortgage shall be in Makati,
Metro Manila or in the place where any of the Mortgaged
Properties is located, at the absolute option of the Mortgagee, the
parties hereto waiving any other venue.”10 (Emphasis
supplied.)
However, under the two Real Estate Mortgages dated

11 February 1994, the following version appears:

out of or in connection with this Mortgage shall be in Cebu City
Metro Manila or in the place where any of the Mortgaged
Properties is located, at the absolute option of the Mortgagee, the
xxxxxxxxxxxxx any other venue.”11 (Emphasis supplied.)
_______________
7 Petition, p. 6; Rollo, p. 20. See also Stockholders Resolution of
PAGLAUM dated 11 December 1998, Rollo, pp. 116-117.
8 Credit Line Agreement dated 3 February 1994, Rollo, pp. 80-81; CA
Decision, p. 2, Rollo, p. 46.
9 Real Estate Mortgage dated 11 February 1994, Rollo,
pp. 173-176; Real Estate Mortgage dated 11 February 1994, Rollo, pp.
177-180; Real Estate Mortgage dated 22 April 1998, Rollo, pp. 181-184.
10 Rollo, pp. 176, 180 and 184.
11 Rollo, pp. 176 and 180.
509
VOL. 673, JUNE 18, 2012 509

Meanwhile, the same provision in the Real Estate

Mortgage dated 22 April 1998 contains the following:

out of or in connection with this Mortgage shall be in _________ or
in the place where any of the Mortgaged Properties is located, at
the absolute option of the Mortgagee, the parties hereto waiving
any other venue.”12
HealthTech and Union Bank agreed to subsequent

renewals and increases in the credit line,13 with the total
amount of debt reaching P36,500,000.14 Unfortunately,
according to HealthTech, the 1997 Asian financial crisis
adversely affected its business and caused it difficulty in

meeting its obligations with Union Bank.15 Thus, on 11
December 1998, both parties entered into a Restructuring
Agreement,16 which states that any action or proceeding
arising out of or in connection therewith shall be
commenced in Makati City, with both parties waiving
any other venue.17
Despite the Restructuring Agreement, HealthTech failed
to pay its obligation, prompting Union Bank to send a
demand letter dated 9 October 2000, stating that the latter
would be constrained to institute foreclosure proceedings,
unless HealthTech settled its account in full.18
_______________
12 Rollo, p. 184.
13 Letter dated 14 March 1995 of Union Bank to HealthTech, Rollo, pp.
82-83; letter dated 11 February 1997 of Union Bank to HealthTech, Rollo,
pp. 84-85; Petition, p. 5, Rollo, p. 19; CA Decision, p. 2, Rollo, p. 46;
Restructuring Agreement dated 11 December 1998, Rollo, pp. 99-108.
14 Restructuring Agreement dated 11 December 1998, Rollo,
pp. 99-108.
16 Rollo, pp. 99-108.
17 Id., at p. 106.
18 Letter dated 9 October 2000, Rollo, p. 122.
510

Since HealthTech defaulted on its payment, Union Bank

extrajudicially foreclosed the mortgaged properties.19 The
bank, as the sole bidder in the auction sale, was then
issued a Certificate of Sale dated 24 May 2001.20
Thereafter, it filed a Petition for Consolidation of Title.21
Consequently, HealthTech filed a Complaint for
Annulment of Sale and Titles with Damages and
Application for Temporary Restraining Order and Writ of
Injunction dated 23 October 2001, praying for: (a) the
issuance of a temporary restraining order, and later a writ
of preliminary injunction, directing Union Bank to refrain
from exercising acts of ownership over the foreclosed
properties; (b) the annulment of the extrajudicial
foreclosure of real properties; (c) the cancellation of the
registration of the Certificates of Sale and the resulting
titles issued; (d) the reinstatement of PAGLAUM’s

ownership over the subject properties; and (e) the payment
of damages.22 The case was docketed as Civil Case No. 01-
1567 and raffled to the Regional Trial Court, National
Capital Judicial Region, Makati City, Branch 134 (RTC Br.
134), which issued in favor of PAGLAUM and HealthTech
a Writ of Preliminary Injunction restraining Union Bank
from proceeding with the auction sale of the three
mortgaged properties.23
On 23 November 2001, Union Bank filed a Motion to
Dismiss on the following grounds: (a) lack of jurisdiction
over the issuance of the injunctive relief; (b) improper
venue; and (c) lack of authority of the person who signed
the Complaint.24 RTC Br. 134 granted this Motion in its
Order dated 11 March 2003, resulting in the dismissal of
the case, as well as the dissolution of the Writ of
Preliminary Injunction.25 It likewise
_______________
20 Petition, p. 8; Rollo, p. 22; CA Decision, p. 2, Rollo, p. 46.
22 Rollo, pp. 59-72.
23 Resolution dated 13 December 2001, Rollo, pp. 125-129.
24 Rollo, pp. 130-135.
25 Order dated 11 March 2003, Rollo, pp. 166-170.
511
VOL. 673, JUNE 18, 2012 511

denied the subsequent Motion for Reconsideration filed by

PAGLAUM and HealthTech.26
PAGLAUM and HealthTech elevated the case to the CA,
which affirmed the Order dated 11 March 200327 and
denied the Motion for Reconsideration.28
In the instant Petition, PAGLAUM and HealthTech
argue that: (a) the Restructuring Agreement governs the
choice of venue between the parties, and (b) the agreement
on the choice of venue must be interpreted with the
convenience of the parties in mind and the view that any
obscurity therein was caused by Union Bank.29
On the other hand, Union Bank contends that: (a) the
Restructuring Agreement is applicable only to the contract
of loan, and not to the Real Estate Mortgage, and (b) the
mortgage contracts explicitly state that the choice of venue

exclusively belongs to it.30
Meanwhile, intervenor J. King & Sons Company, Inc.
adopts the position of Union Bank and reiterates the
position that Cebu City is the proper venue.31
The sole issue to be resolved is whether Makati City is
the proper venue to assail the foreclosure of the subject real
estate mortgage. This Court rules in the affirmative.
Civil Case No. 01-1567, being an action for Annulment
of Sale and Titles resulting from the extrajudicial
foreclosure by Union Bank of the mortgaged real
properties, is classified as a real action. In Fortune Motors
v. Court of Appeals,32 this Court
_______________
26 Order dated 19 September 2003, Rollo, p. 171-172.
27 CA Decision, Rollo, pp. 44-53.
28 Resolution dated 24 July 2007, Rollo, pp. 54-55.
30 Comment [on] Petition for Review on Certiorari; Rollo, pp. 260-268.
31 Comment (On the Petition for Review on Certiorari) dated 26
December 2007; Rollo, pp. 270-277.
32 258-A Phil. 336; 178 SCRA 564 (1989).
512

held that a case seeking to annul a foreclosure of a real

estate mortgage is a real action, viz.:
“An action to annul a real estate mortgage foreclosure sale is

no different from an action to annul a private sale of real
property. (Muñoz v. Llamas, 87 Phil. 737, 1950).
While it is true that petitioner does not directly seek the
recovery of title or possession of the property in question, his
action for annulment of sale and his claim for damages are closely
intertwined with the issue of ownership of the building which,
under the law, is considered immovable property, the recovery of
which is petitioner’s primary objective. The prevalent doctrine is
that an action for the annulment or rescission of a sale of real
property does not operate to efface the fundamental and prime
objective and nature of the case, which is to recover said real
property. It is a real action.”33
Being a real action, the filing and trial of the Civil Case
No. 01-1567 should be governed by the following relevant
provisions of the Rules of Court (the Rules):
Rule 4
VENUE OF ACTIONS
“Section 1. Venue of real actions.—Actions affecting title to or
possession of real property, or interest therein, shall be
commenced and tried in the proper court which has
jurisdiction over the area wherein the real property
involved, or a portion thereof, is situated.
Forcible entry and detainer actions shall be commenced and
tried in the municipal trial court of the municipality or city
wherein the real property involved, or a portion thereof, is
situated.
Sec. 3. When Rule not applicable.—This Rule shall not apply
—
(a) In those cases where a specific rule or law provides
otherwise; or
_______________
33 Id., at pp. 340-341; p. 568.
513
VOL. 673, JUNE 18, 2012 513

the Philippines
(b) Where the parties have validly agreed in writing

before the filing of the action on the exclusive venue
thereof.” (Emphasis supplied.)
In Sps. Lantin v. Lantion,34 this Court explained that a

venue stipulation must contain words that show exclusivity
or restrictiveness, as follows:
“At the outset, we must make clear that under Section 4 (b) of
Rule 4 of the 1997 Rules of Civil Procedure, the general rules on
venue of actions shall not apply where the parties, before the
filing of the action, have validly agreed in writing on an exclusive
venue. The mere stipulation on the venue of an action, however, is
not enough to preclude parties from bringing a case in other
venues. The parties must be able to show that such
stipulation is exclusive. In the absence of qualifying or
restrictive words, the stipulation should be deemed as
merely an agreement on an additional forum, not as
limiting venue to the specified place.
x x x x x x x x x
Clearly, the words “exclusively” and “waiving for this

purpose any other venue” are restrictive and used
advisedly to meet the requirements.”35 (Emphasis supplied.)
According to the Rules, real actions shall be commenced

and tried in the court that has jurisdiction over the area
where the property is situated. In this case, all the
mortgaged properties are located in the Province of Cebu.
Thus, following the general rule, PAGLAUM and
HealthTech should have filed their case in Cebu, and not in
Makati.
However, the Rules provide an exception, in that real
actions can be commenced and tried in a court other than
where the property is situated in instances where the
parties have previously and validly agreed in
writing on the exclusive venue thereof. In the case at
bar, the parties
_______________
34 531 Phil. 318; 499 SCRA 718 (2006).
35 Id., at pp. 322-323; pp. 722-723.
514

claim that such an agreement exists. The only dispute is

whether the venue that should be followed is that
contained in the Real Estate Mortgages, as contended by
Union Bank, or that in the Restructuring Agreement, as
posited by PAGLAUM and HealthTech. This Court rules
that the venue stipulation in the Restructuring
Agreement should be controlling.
The Real Estate Mortgages were executed by
PAGLAUM in favor of Union Bank to secure the credit line
extended by the latter to HealthTech. All three mortgage
contracts contain a dragnet clause, which secures
succeeding obligations, including renewals, extensions,
amendments or novations thereof, incurred by HealthTech
from Union Bank, to wit:
“Section 1. Secured Obligations.—The obligations secured by

this Mortgage (the “Secured Obligations”) are the following:
a) All the obligations of the Borrower and/or the Mortgagor
under: (i) the Notes, the Agreement, and this Mortgage; (ii) any
and all instruments or documents issued upon the renewal,
extension, amendment or novation of the Notes, the Agreement

and this Mortgage, irrespective of whether such obligations as
renewed, extended, amended or novated are in the nature of new,
separate or additional obligations; and (iii) any and all
instruments or documents issued pursuant to the Notes, the
Agreement and this Mortgage;
b) All other obligations of the Borrower and/or the Mortgagor
in favor of the Mortgagee, whether presently owing or hereinafter
incurred and whether or not arising from or connected with the
Agreement, the Notes and/or this Mortgage; and
c) Any and all expenses which may be incurred in collecting
any and all of the above and in enforcing any and all rights,
powers and remedies of the Mortgagee under this Mortgage.36
_______________
36 Real Estate Mortgage dated 11 February 1994, Rollo, p. 173; Real
Estate Mortgage dated 11 February 1994, Rollo, p. 177; Real Estate
Mortgage dated 22 April 1998, Rollo, p. 181.
515
VOL. 673, JUNE 18, 2012 515

On the other hand, the Restructuring Agreement was

entered into by HealthTech and Union Bank to modify the
entire loan obligation. Section 7 thereof provides:
“Security.—The principal, interests, penalties and other

charges for which the BORROWER may be bound to the BANK
under the terms of this Restructuring Agreement, including the
renewal, extension, amendment or novation of this Restructuring
Agreement, irrespective of whether the obligations arising out of
or in connection with this Restructuring Agreement, as renewed,
extended, amended or novated, are in the nature of new, separate
or additional obligations, and all other instruments or documents
covering the Indebtedness or otherwise made pursuant to this
Restructuring Agreement (the “Secured Obligations”), shall
continue to be secured by the following security arrangements
(the “Collaterals”):
a. Real Estate Mortgage dated February 11, 1994
executed by Paglaum Management and Development Corporation
over a 474 square meter property covered by TCT No. 112489;
b. Real Estate Mortgage dated February 11, 1994
executed by Paglaum Management and Development Corporation
over a 2,796 square meter property covered by TCT No. T-68516;

c. Real Estate Mortgage dated April 22, 1998 executed by
Paglaum Management and Development Corporation over a 3,711
square meter property covered by TCT No. 112488;
d. Continuing Surety Agreement of Benjamin B. Dy;
Without need of any further act and deed, the existing
Collaterals, shall remain in full force and effect and continue to
secure the payment and performance of the obligations of the
BORROWER arising from the Notes and this Restructuring
Agreement.”37 (Emphasis supplied.)
Meanwhile, Section 20 of the Restructuring Agreement

as regards the venue of actions state:
“20. Venue—Venue of any action or proceeding arising out of

or connected with this Restructuring Agreement, the Note,
the
_______________
37 Restructuring Agreement, pp. 3-4; Rollo, pp. 101-102.
516

the Philippines
Collateral and any and all related documents shall be in

Makati City, [HealthTech] and [Union Bank] hereby waiving
any other venue.”38 (Emphasis supplied.)
These quoted provisions of the Real Estate Mortgages

and the later Restructuring Agreement clearly reveal the
intention of the parties to implement a restrictive venue
stipulation, which applies not only to the principal
obligation, but also to the mortgages. The phrase “waiving
any other venue” plainly shows that the choice of Makati
City as the venue for actions arising out of or in connection
with the Restructuring Agreement and the Collateral, with
the Real Estate Mortgages being explicitly defined as such,
is exclusive.
Even if this Court were to consider the venue
stipulations under the Real Estate Mortgages, it must be
underscored that those provisions did not contain words
showing exclusivity or restrictiveness. In fact, in the Real
Estate Mortgages dated 11 February 1994, the phrase
“parties hereto waiving”—from the entire phrase “the
parties hereto waiving any other venue”—was stricken
from the final executed contract. Following the ruling in
Sps. Lantin as earlier quoted, in the absence of qualifying

or restrictive words, the venue stipulation should only be
deemed as an agreement on an additional forum, and not
as a restriction on a specified place.
Considering that Makati City was agreed upon by the
parties to be the venue for all actions arising out of or in
connection with the loan obligation incurred by
HealthTech, as well as the Real Estate Mortgages executed
by PAGLAUM, the CA committed reversible error in
affirming the dismissal of Civil Case No. 01-1567 by RTC
Br. 134 on the ground of improper venue.
WHEREFORE, the Petition for Review is GRANTED.
The Decision dated 31 May 2007 and Resolution dated 24
July 2007 in CA-G.R. CV No. 82053 of the Court of
Appeals, as
_______________
38 Restructuring Agreement, p. 8; Rollo, p. 106.
517
VOL. 673, JUNE 18, 2012 517

well as the Orders dated 11 March 2003 and 19 September

2003 issued by the Regional Trial Court, Makati City,
Branch 134, are REVERSED and SET ASIDE. The
Complaint in Civil Case No. 01-1567 is hereby
REINSTATED.
SO ORDERED.
Carpio (Chairperson), Brion, Perez and Reyes, JJ.,

concur.
Petition granted, judgment and resolution reversed and

set aside.
Notes.—Article 1141 of the Civil Code plainly provides

that real actions over immovables prescribe after thirty
years. (Republic vs. Mangotara, 624 SCRA 360 [2010])
The venue for real actions is the court of the place where
the real property is located. (Home Guaranty Corporation
vs. R-II Builders, Inc., 645 SCRA 219 [2011])
——o0o——
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2/26/2019 SUPREME COURT REPORTS ANNOTATED VOLUME 673

G.R. No. 179018. June 18, 2012.*

Civil Procedure; Actions; Venue; Real actions shall be

VOL. 673, JUNE 18, 2012 507

Paglaum Management & Development Corp. vs. Union Bank of

that should be followed is that contained in the Real Estate

PETITION for review on certiorari of the decision and

508 SUPREME COURT REPORTS ANNOTATED

petitioner Health Marketing Technologies, Inc.

arising out of or in connection therewith, originally

“Section 9. Venue.—The venue of all suits and actions arising

However, under the two Real Estate Mortgages dated

“Section 9. Venue.—The venue of all suits and actions arising

VOL. 673, JUNE 18, 2012 509

Meanwhile, the same provision in the Real Estate

“Section 9. Venue.—The venue of all suits and actions arising

HealthTech and Union Bank agreed to subsequent

adversely affected its business and caused it difficulty in

510 SUPREME COURT REPORTS ANNOTATED

Since HealthTech defaulted on its payment, Union Bank

titles issued; (d) the reinstatement of PAGLAUM’s

VOL. 673, JUNE 18, 2012 511

denied the subsequent Motion for Reconsideration filed by

mortgage contracts explicitly state that the choice of venue

512 SUPREME COURT REPORTS ANNOTATED

held that a case seeking to annul a foreclosure of a real

“An action to annul a real estate mortgage foreclosure sale is

VOL. 673, JUNE 18, 2012 513

(b) Where the parties have validly agreed in writing

In Sps. Lantin v. Lantion,34 this Court explained that a

Clearly, the words “exclusively” and “waiving for this

According to the Rules, real actions shall be commenced

514 SUPREME COURT REPORTS ANNOTATED

claim that such an agreement exists. The only dispute is

“Section 1. Secured Obligations.—The obligations secured by

extension, amendment or novation of the Notes, the Agreement

VOL. 673, JUNE 18, 2012 515

On the other hand, the Restructuring Agreement was

“Security.—The principal, interests, penalties and other

over a 2,796 square meter property covered by TCT No. T-68516;

Meanwhile, Section 20 of the Restructuring Agreement

“20. Venue—Venue of any action or proceeding arising out of

516 SUPREME COURT REPORTS ANNOTATED

Collateral and any and all related documents shall be in

These quoted provisions of the Real Estate Mortgages

Sps. Lantin as earlier quoted, in the absence of qualifying

VOL. 673, JUNE 18, 2012 517

well as the Orders dated 11 March 2003 and 19 September

Carpio (Chairperson), Brion, Perez and Reyes, JJ.,

Petition granted, judgment and resolution reversed and

Notes.—Article 1141 of the Civil Code plainly provides

© Copyright 2019 Central Book Supply, Inc. All rights reserved.

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