Ley Construction and Development Corporation vs. Sedano

An exclusive venue stipulation in a written contract is valid and enforceable when it is (a) exclusive in nature or intent, (b) expressed in writing by the parties, and (c) entered into before the filing of the suit, and the use of restrictive phrases such as "exclusive of all others" clearly manifests the parties' intent to limit venue to the designated court without constituting an invalid attempt to stipulate jurisdiction.

Ley Construction and Development Corporation entered into a contract of lease with the Philippine National Construction Corporation (PNCC) for a 50,000-square meter parcel of land located at the Financial Center Area, Pasay City. On September 11, 2006, Ley Construction subleased 14,659.80 square meters of the property to Marvin Medel Sedano, doing business as "Lola Taha Lalo Pata Palengke at Paluto sa Seaside," for a ten-year term commencing November 15, 2005, with a monthly rent of ₱1,174,780.00 subject to annual increases. The sublease contract contained Section 21, which provided that all actions or cases filed in connection with the lease shall be filed with the Regional Trial Court of Pasay City, "exclusive of all others."

• The Principal Lease: On January 14, 2005, Ley Construction leased a 50,000-square meter parcel of land from PNCC located at the Financial Center Area, Pasay City (later designated as Lot 5-A Diosdado Macapagal Boulevard, Pasay City).
• The Sublease Agreement: On September 11, 2006, Ley Construction subleased 14,659.80 square meters of the property to Sedano for a term of ten years beginning November 15, 2005, with a monthly rent of ₱1,174,780.00 and a ten percent increase every year beginning the third year. Section 21 of the contract stated: "All actions or case[s] filed in connection with this lease shall be filed with the Regional Trial Court of Pasay City, exclusive of all others."
• The Alleged Breach: Petitioner alleged that respondent failed to pay rent for the period August 2011 to December 2011, amounting to ₱8,828,025.46, despite demands.
• Respondent's Defense: Respondent claimed that he had paid rent directly to PNCC during the disputed period after learning that petitioner had been evicted from the premises by virtue of a court order. He also claimed overpayment of deposits and advance rentals totaling ₱3,918,352.00.
• Procedural Posture: Petitioner filed suit in Valenzuela City where its principal office is located. Respondent raised improper venue in his Answer and filed a compulsory counterclaim for reimbursement and damages, as well as a third-party complaint against PNCC for reimbursement of rentals paid to PNCC in the event petitioner prevailed.

• Invalid Jurisdiction Stipulation: Petitioner maintained that Section 21 is void as a stipulation on jurisdiction, not venue, because it purports to limit the filing of cases to the RTC even when the subject matter falls within the exclusive jurisdiction of Municipal Trial Courts, such as actions for unlawful detainer. Jurisdiction cannot be subject to stipulation.
• Waiver by Active Participation: Petitioner argued that respondent waived any objection to venue by submitting himself to the jurisdiction of the Valenzuela RTC when he sought affirmative reliefs, including filing several motions for extension of time to file his answer, interposing counterclaims, and impleading PNCC as a third-party defendant.

• Valid Exclusive Venue: Respondent countered that Section 21 is a valid exclusive venue stipulation. The phrase "exclusive of all others" clearly manifests the parties' intent to restrict venue to Pasay City, and the stipulation satisfies the requisites for validity.
• No Waiver: Respondent argued that the defense of improper venue was timely raised in his Answer and thus not waived. The compulsory counterclaim and third-party complaint do not constitute waiver because they are not actions "filed in connection with this lease" covered by the venue stipulation, but rather independent claims arising from the filing of the complaint itself.

• Validity of Venue Stipulation: Whether Section 21 of the lease contract constitutes a valid exclusive venue stipulation or an invalid stipulation on jurisdiction.
• Waiver of Venue Defense: Whether respondent waived his right to object to improper venue by filing a compulsory counterclaim and third-party complaint.

• Validity of Venue Stipulation: Section 21 is a valid exclusive venue stipulation. The phrase "exclusive of all others" demonstrates exclusivity of intent. It is not a jurisdiction stipulation because jurisdiction is conferred by law and cannot be subject to party agreement; parties are charged with knowledge of the law and are presumed to contract with awareness that the law deems venue stipulations as procedural limitations only. The stipulation applies to actions within the RTC's jurisdiction, such as the collection suit for over ₱8 million.
• Waiver of Venue Defense: Respondent did not waive the defense. He raised it in his Answer at the earliest opportunity as required by Rule 4. Filing a compulsory counterclaim—which would be barred if not raised—and a third-party complaint seeking reimbursement does not constitute waiver because these pleadings are not covered by the venue stipulation. The doctrine in Pangasinan Transportation Co., Inc. v. Yatco (waiver by active participation) does not apply where the party invoking the venue defense is not bound by the same venue rule he seeks to enforce against the opposing party.

• Exclusive Venue Stipulation Requisites — An exclusive venue stipulation is valid and binding provided that: (a) the stipulation on the chosen venue is exclusive in nature or in intent; (b) it is expressed in writing by the parties thereto; and (c) it is entered into before the filing of the suit. The Court applied these requisites to uphold Section 21 of the lease contract.
• Construction of Venue Clauses — In the absence of qualifying or restrictive words, such as "exclusively," "waiving for this purpose any other venue," "shall only" preceding the designation of venue, "to the exclusion of the other courts," or words of similar import, the stipulation should be deemed as merely an agreement on an additional forum, not as limiting venue to the specified place. The Court found that Section 21's use of "exclusive of all others" satisfied the requirement for exclusivity.
• Jurisdiction vs. Venue — Jurisdiction is conferred by law and not subject to stipulation of the parties; venue is procedural and may be stipulated. Parties are charged with knowledge of the existing law at the time they enter into the contract. The Court held that Section 21 merely limited venue and did not improperly attempt to confer jurisdiction.
• Waiver of Venue Objections — Objections to improper venue must be raised at the earliest opportunity, as in an answer or a motion to dismiss; otherwise, it is deemed waived. However, filing a compulsory counterclaim or third-party complaint does not constitute waiver if the counterclaim is not covered by the venue stipulation or if the party raising the defense is not bound by the venue rule he invokes against the opposing party.

• "Written stipulations as to venue may be restrictive in the sense that the suit may be filed only in the place agreed upon, or merely permissive in that the parties may file their suit not only in the place agreed upon but also in the places fixed by law." — Articulating the distinction between restrictive and permissive venue stipulations.
• "It is fundamental that jurisdiction is conferred by law and not subject to stipulation of the parties." — Establishing that parties cannot stipulate jurisdiction.
• "The parties are charged with knowledge of the existing law at the time they enter into the contract and at the time it is to become operative." — Basis for construing the stipulation as one on venue rather than jurisdiction.
• "The rationale for the Pantranco ruling is that a party cannot invoke a violation of a rule on venue against his counter-party, when he himself is bound by the same rule, but nonetheless, seeks his own relief and in so doing, violates it." — Explaining why Pantranco does not apply when the counterclaim is not covered by the venue stipulation.

• Briones v. Court of Appeals, G.R. No. 204444, January 14, 2015 — Cited for the rule on distinguishing restrictive from permissive venue stipulations and the requirement of qualifying words for exclusivity.
• Pilipino Telephone Corporation v. Tecson, 472 Phil. 411 (2004) — Cited for the three requisites of a valid exclusive venue stipulation.
• Pangasinan Transportation Co., Inc. v. Yatco (Pantranco), 128 Phil. 767 (1967) — Distinguished; held that active participation constitutes waiver of venue, but held inapplicable where the party invoking the defense is not bound by the venue rule he seeks to enforce against the other party.
• Legaspi v. Republic of the Philippines, 581 Phil. 381 (2008) — Cited in Briones regarding construction of venue stipulations.

• Section 2 and Section 4(b), Rule 4 of the Rules of Court — Govern venue of personal actions and exceptions thereto through written stipulations. The Court applied these to determine that parties may validly agree on exclusive venue.
• Section 19(8) of Batas Pambansa Blg. 129 (The Judiciary Reorganization Act of 1980), as amended by Republic Act No. 7691 — Defines the exclusive original jurisdiction of Regional Trial Courts over civil cases where the demand exceeds specified amounts. The Court referenced this to confirm that the collection suit fell within RTC jurisdiction and thus within the scope of the venue stipulation.

Antonio T. Carpio (Acting Chief Justice and Chairperson), Diosdado M. Peralta, Alfredo Benjamin S. Caguioa, and Andres B. Reyes, Jr.