Odilao vs. Union Bank of the Philippines

A venue stipulation granting a mortgagee the "absolute option" to choose between two specified venues is restrictive, and a mortgagor may independently file suit in either of the specified venues without needing the mortgagee's prior selection.

Borrowers executed loan and mortgage agreements containing a venue stipulation that limited suits to Pasig City or the location of the mortgaged properties, at the "absolute option" of the mortgagee. When the borrowers sued for reformation of the mortgage in Davao City (where the property was located), the bank sought dismissal, arguing the borrowers had no right to choose the venue.

• Original Filing: RTC of Davao City, Branch 17, Civil Case No. R-DVO-16-01024-CV
• Lower Court Decision: August 30, 2016 — RTC granted the bank's motion to dismiss based on improper venue; MR denied December 28, 2016.
• Appeal: CA Cagayan de Oro City Station, CA-G.R. CV No. 04749-MIN
• CA Decision: July 17, 2019 — CA affirmed the RTC dismissal; MR denied October 9, 2020.
• SC Action: Petition for Review on Certiorari filed, assailing the CA Decision and Resolution.

• The Loan and Mortgage Agreements: Petitioner Lucille Odilao and her husband executed loan and mortgage agreements in favor of respondent Union Bank.
• The Venue Stipulation: The Real Estate Mortgage contained Section 8 (Venue): "The venue of all suits and actions arising out of or in connection with this Mortgage shall be Pasig City or in the place where any of the Mortgaged properties are located, at the absolute option of the Mortgagee, the parties hereto waiving any other venue."
• The Complaint: Petitioner filed a complaint for reformation of mortgage, nullity of foreclosure, damages, and attorney's fees before the RTC of Davao City. She claimed the contracts were contracts of adhesion and sought to reform terms regarding notices, interest rates, penalties, and venue.
• The Motion to Dismiss: Respondent bank moved to dismiss, arguing that under the venue stipulation, only Pasig City was the proper venue, or alternatively, that the bank held the exclusive option to choose.
• Lower Court Rulings: The RTC granted the motion, interpreting "at the absolute option of the Mortgagee" to mean Davao City was not a proper venue absent the bank's express manifestation to litigate there. The CA affirmed this interpretation.

• The CA erred in dismissing the complaint for improper venue.
• Citing Briones v. Court of Appeals, petitioner argues venue stipulations in a contract are not controlling if the contract itself is assailed (here, as a contract of adhesion).
• Venue stipulations that impose an "exclusive option to choose venue" on one party are void because the Rules of Court only allow "exclusive venue," not an "exclusive option to choose venue."

• The loan documents stated that actions arising from the contract should be filed in Pasig City.
• Under Section 1(c), Rule 16 of the Rules of Court, the complaint is dismissible on the ground of improperly laid venue.

• Procedural Issues: Whether the complaint was correctly dismissed on the ground of improper venue given the "absolute option of the Mortgagee" clause in the venue stipulation.
• Substantive Issues: Whether a venue stipulation granting one party the "absolute option" to choose between two specified venues restricts the other party from independently filing suit in either of those specified venues.

• Procedural: The SC ruled the dismissal was erroneous. The venue stipulation was restrictive, meaning it limited venue to only two places: (a) Pasig City, or (b) the place where the mortgaged properties are located. Because the mortgaged property was in Davao City, filing there strictly complied with the restrictive venue stipulation.
• Substantive: The SC ruled that the phrase "at the absolute option of the Mortgagee" only takes significance when the bank is the party filing the case. Interpreting it to require the borrower to ask the bank which venue it prefers before filing would leave the borrower at the mercy of the bank and unreasonably restrict access to courts. Rules on venue are designed for convenience, not to curb the right to litigate. The SC also distinguished Briones, noting that unlike in Briones (where the contract's validity was directly assailed for forgery), petitioner here did not dispute the authenticity of the documents but merely sought their reformation, so the venue stipulation remained binding—however, filing in Davao City still complied with it.

• Restrictive vs. Permissive Venue Stipulations — A restrictive stipulation limits venue exclusively to the agreed place(s); a permissive stipulation adds an agreed place to those provided by law. Qualifying or restrictive words (e.g., "exclusively," "shall only," "waiving any other venue") indicate a restrictive intent. Here, the phrase "waiving any other venue" made the stipulation restrictive, limiting venue to only Pasig City or the property's location.
• Validity of Exclusive Venue Stipulations — An exclusive venue stipulation is valid and binding only when: (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.

• Rule 4, Sections 1-4, Rules of Court — Governs venue of real and personal actions. Section 4(b) provides that the general rules on venue do not apply where the parties have validly agreed in writing before the filing of the action on the exclusive venue thereof. The SC applied this to uphold the restrictive venue stipulation, but clarified that filing in Davao City fell within the stipulated exclusive venues.
• Section 1(c), Rule 16, Rules of Court — Allows dismissal of a case on the ground of improperly laid venue. The SC held this ground did not apply because Davao City was a proper venue under the contract.