Capati vs. Ocampo

A venue stipulation that actions “may be instituted” in a named court is permissive, not restrictive, and does not bar the plaintiff from filing in the court where the plaintiff resides under Section 2(b), Rule 4 of the Rules of Court.

Capati was the contractor for the Feati Bank building in Iriga, Camarines Sur, and Ocampo was the subcontractor engaged for its vault walls, exterior walls, and columns. The subcontract carried a printed venue stipulation at the back, and the dispute turns on whether that clause confined suits to the CFI of Naga City or merely added a permissible venue.

Plaintiff Virgilio Capati, a resident of Bacolor, Pampanga, was the contractor of the Feati Bank for the construction of its building in Iriga, Camarines Sur. On May 23, 1967, he entered into a sub-contract with defendant Dr. Jesus P. Ocampo, a resident of Naga City, under which Ocampo, in consideration of P2,200.00, undertook to construct the vault walls, exterior walls and columns of the Feati building in accordance with the specifications indicated in the subcontract. Ocampo bound himself to complete the construction on or before June 5, 1967, and, to emphasize this time frame, affixed his signature below the stipulation written in bold letters in the sub-contract: “TIME IS ESSENTIAL, TO BE FINISHED 5 JUNE’ 67.” The sub-contract also contained, at the back, paragraph 14: “That all actions arising out, or relating to this contract may be instituted in the Court of First Instance of the City of Naga.”

Capati claimed that Ocampo finished the construction only on June 20, 1967. Because the construction was not completed by the stipulated date, Capati filed in the CFI of Pampanga an action for recovery of consequential damages in the sum of P85,000.00 with interest, plus attorney’s fees and costs. The complaint alleged inter alia that “due to the long unjustified delay committed by defendant, in open violation of his express written agreement with plaintiff, the latter has suffered great irreparable loss and damage ...”

Ocampo filed a motion to dismiss the complaint on the ground that venue of action was improperly laid. The motion was premised on the stipulation printed at the back of the contract, paragraph 14. Capati opposed the motion, claiming that their agreement to hold the venue in the CFI of Naga City was merely optional to both contracting parties; in support, he cited the use of the word “may” in relation to the institution of any action arising out of the contract.

• Venue Stipulation Is Permissive: Petitioner argued that the agreement to hold venue in the CFI of Naga City was merely optional to both contracting parties, because the stipulation used the word “may” in relation to the institution of any action arising out of the contract.

• Restrictive Venue Stipulation: Respondent countered that under paragraph 14 of the subcontract, he could not be sued in any court except the CFI of Naga City, so the action in Pampanga was improperly venued.

• Venue Stipulation — Restrictive or Permissive: Whether the stipulation in paragraph 14 of the subcontract — that all actions arising out of or relating to the contract “may be instituted” in the CFI of Naga City — is restrictive and exclusive, or merely permissive so that Capati could file the action in the CFI of Pampanga where he resides under Section 2(b), Rule 4.

• Venue Stipulation — Restrictive or Permissive: No. The stipulation is merely permissive; the word “may” confers discretion and does not waive the plaintiff’s right to seek recourse in the court indicated by Section 2(b), Rule 4. Because Capati filed in the CFI of Pampanga where he resides, venue was properly laid.

• Venue Stipulation — Restrictive or Permissive: The SC started from Section 2(b), Rule 4, which allows personal actions to be commenced and tried where the defendant or any defendant resides or may be found, or where the plaintiff or any plaintiff resides, at the election of the plaintiff. Section 3 of the same rule permits the parties to change venue by written agreement. The question was whether paragraph 14 made Naga City the exclusive venue or merely added a permissive venue. The SC held that the word “may” is merely permissive and operates to confer discretion; “may be” connotes possibility, not certainty, and “may” is an auxiliary verb indicating liberty, opportunity, permission, or possibility. It relied on Nicolas vs. Reparations Commission, where a stipulation that actions “may be brought in and submitted to the jurisdiction of the proper courts in the City of Manila” was held not mandatory. Applying that rule, the SC concluded that the parties did not agree to file their suits solely and exclusively in the CFI of Naga; they merely agreed to submit their disputes to that court without waiving the plaintiff’s right to seek recourse in the court indicated by Section 2(b), Rule 4. Since Capati filed in the CFI of Pampanga where he resides, venue was properly laid.

• Permissive Venue Stipulation — A written venue stipulation is permissive when it uses language such as “may be instituted” and does not clearly make one court exclusive; it does not waive the plaintiff’s right to choose venue under Section 2(b), Rule 4. In this case, paragraph 14’s “may be instituted in the Court of First Instance of the City of Naga” was merely permissive, so Capati could sue in Pampanga where he resided.
• “May” as a Word of Permission — The word “may” is merely permissive and operates to confer discretion; “may be” connotes possibility, not certainty, and indicates liberty, opportunity, permission, or possibility. The SC used this to interpret the venue clause as non-exclusive.
• Venue of Personal Actions — Under Section 2(b), Rule 4, a personal action may be commenced and tried where the defendant or plaintiff resides, at the plaintiff’s election; Section 3 allows a written agreement to change venue. The SC applied these rules by sustaining the plaintiff’s choice of his residence as venue because the contractual stipulation was not restrictive.

• “It is well settled that the word “may” is merely permissive and operates to confer discretion upon a party. Under ordinary circumstances, the term “may be” connotes possibility; it does not connote certainty. “May” is an auxillary verb indicating liberty, opportunity, permission or possibility.” — The SC uses this definition to interpret the venue clause’s use of “may” as permissive rather than mandatory.
• “We hold that the stipulation as to venue in the contract in question is simply permissive. By the said stipulation, the parties did not agree to file their suits solely and exclusively with the Court of First Instance of Naga. They merely agreed to submit their disputes to the said court, without waiving their right to seek recourse in the court specifically indicated in Section 2 (b), Rule 4 of the Rules of Court.” — This is the core holding: the clause is permissive and preserves statutory venue.
• “Since the complaint has been filed in the Court of First Instance of Pampanga, where the plaintiff resides, the venue of action is properly laid in accordance with Section 2 (b), Rule 4 of the Rules of Court.” — The SC applies the permissive interpretation to sustain venue in Pampanga.

• Nicolas vs. Reparations Commission, 64 SCRA 110 — Controlling precedent; the SC followed it in holding that a venue stipulation using “may be brought in” a named city is not mandatory.
• In Re: Hirsh’s Estate, 5A. 2d 160, 163; 334 Pa. 172 — Cited for the definition of “may” as permissive and as connoting possibility rather than certainty.

• Section 2(b), Rule 4, Rules of Court — Provides that personal actions may be commenced and tried where the defendant or any defendant resides or may be found, or where the plaintiff or any plaintiff resides, at the election of the plaintiff. The SC applied it to allow Capati to file in Pampanga where he resides.
• Section 3, Rule 4, Rules of Court — Provides that by written agreement of the parties the venue of an action may be changed or transferred from one province to another. The SC treated paragraph 14 as not a restrictive change because its “may” language was permissive.