Planters Development Bank vs. Spouses Victoriano and Melanie Ramos

An exclusive venue stipulation in a written contract is enforceable and binding on the parties where the complaint assails only the terms, conditions, or coverage of the instrument rather than its validity or existence, provided the stipulation contains clear restrictive language evincing the parties' intention to limit venue to the designated place to the exclusion of all others.

Spouses Victoriano and Melanie Ramos obtained credit lines totaling P65,000,000.00 from Planters Development Bank (PDB) for warehouse construction in Barangay Santo Tomas, Nueva Ecija, secured by real estate mortgages over several properties. When financial difficulties prevented payment, PDB initiated extrajudicial foreclosure proceedings. The spouses subsequently filed a complaint for annulment of the mortgages and promissory notes in the Regional Trial Court of San Jose City, Nueva Ecija, challenging the interest rates, penalty clauses, and escalation provisions as unconscionable and illegal.

• Loan Application and Approval: In July 2012, Spouses Ramos applied for credit lines with PDB for the construction of a warehouse in Barangay Santo Tomas, Nueva Ecija. PDB approved a P40,000,000.00 loan secured by a Real Estate Mortgage dated July 25, 2012 over properties covered by Transfer Certificate of Title (TCT) Nos. 048-2011000874 and 048-2011000875.
• Additional Loan: The spouses requested an additional P140,000,000.00, but PDB approved only P25,000,000.00, secured by a second Real Estate Mortgage over four properties covered by TCT Nos. 048-2012000909, 048-2012000443, 048-2012000445, and 048-2012000446.
• Default and Foreclosure: Due to financial difficulties, the spouses failed to pay their obligations as they fell due. Requests for debt restructuring were denied. On April 23, 2014, PDB filed a Petition for Extra-judicial Foreclosure of Real Estate Mortgage under Act 3135 before the RTC of San Jose City, Nueva Ecija (EJF-2014-112-SJC). A Notice to Parties of Sheriff's Public Auction Sale was issued on May 7, 2014.
• Complaint for Annulment: On June 18, 2014, Spouses Ramos filed a Complaint for Annulment of Real Estate Mortgages and Promissory Notes, Accounting and Application of Payments, and Injunction with Preliminary Injunction and Temporary Restraining Order against PDB before the same RTC (Civil Case No. 2014-485-SJC). The complaint alleged that the interest rates (8% increased to 9%), penalty interest (3%), and escalation clauses were excessive, unconscionable, and violative of Presidential Decree No. 1684.
• Venue Stipulation: The Real Estate Mortgages executed by the parties contained an identical stipulation on venue: "In the event of suit arising from out of or in connection with this mortgage and/or the promissory note/s secured by this mortgage, the parties hereto agree to bring their causes of action exclusively in the proper court/s of Makati, Metro Manila, the MORTGAGOR waiving for this purpose any other venue."
• Motion to Dismiss: Instead of filing an Answer, PDB filed an Urgent Motion to Dismiss alleging that the venue was improperly laid in Nueva Ecija in view of the exclusive venue stipulation, and that the complaint failed to state a cause of action.

• Exclusive Venue Stipulation: PDB maintained that the real estate mortgages contained valid stipulations that any suit arising therefrom must be brought exclusively in the proper courts of Makati, Metro Manila, with the mortgagor waiving any other venue. The use of the words "exclusively" and "waiving for this purpose any other venue" clearly restricted venue to Makati City alone.
• Improper Venue: The complaint filed in Nueva Ecija violated the restrictive venue stipulation. Since the complaint assailed only the terms and conditions of the mortgage (interest rates, penalties, escalation clauses) rather than the validity of the contract itself, the exclusive venue provision remained enforceable and binding.
• Grave Abuse of Discretion: The RTC and CA committed grave abuse of discretion in denying the motion to dismiss, as the venue issue could be resolved without passing upon the merits of the case, and the stipulation had the force of law between the parties under Article 1159 of the Civil Code.

• Adhesion Contract: Spouses Ramos contended that the mortgage contracts were contracts of adhesion, implying that the venue stipulation should not be enforced against them as they had no bargaining power.
• Validity of Mortgage Affects Venue: They argued that the validity of the mortgage contracts was disputed, and since the stipulation on venue was part of the mortgage, its enforceability depended on the validity of the mortgage itself, requiring a full-blown hearing and presentation of evidence.
• Nature of the Action: The complaint questioned the legality of specific provisions (excessive interest rates, unconscionable penalties, escalation clauses), which effectively challenged the validity of the mortgage instruments, thereby placing the case outside the scope of the exclusive venue stipulation.

• Enforceability of Exclusive Venue Stipulation: Whether the RTC properly denied the motion to dismiss notwithstanding the exclusive venue stipulation in the real estate mortgages designating Makati City as the sole venue.
• Effect of Challenge to Contract Terms: Whether a complaint assailing only the terms, conditions, and coverage of a written instrument (rather than its validity or existence) is subject to the exclusive venue stipulation contained therein.

• Enforceability of Exclusive Venue Stipulation: The motion to dismiss should have been granted. Venue stipulations may be restrictive or permissive. Restrictive stipulations require clear and categorical language showing the parties' intention to limit venue to the exclusion of other jurisdictions. The mortgage contracts employed the words "exclusively" and "waiving for this purpose any other venue," which in Spouses Lantin v. Judge Lantion were held to create a restrictive stipulation. Such stipulations have the force of law between the parties under Article 1159 of the Civil Code and should be complied with in good faith.
• Effect of Challenge to Contract Terms: The exclusive venue stipulation applies where the complaint assails only the terms, conditions, or coverage of the written instrument, not its validity or existence. Spouses Ramos challenged the interest rates, penalty clauses, and escalation provisions but did not claim that the mortgages were void ab initio, that their consent was vitiated, or that the contracts lacked essential elements. Following Briones v. Court of Appeals, the complaint was bound by the exclusive venue stipulation and should have been dismissed for improper venue, as it would be inherently inconsistent to recognize the stipulation while assailing the instrument containing it.

• Restrictive vs. Permissive Venue Stipulations — Venue stipulations in contracts are presumed permissive unless the language clearly shows an intention to restrict. Restrictive stipulations must employ clear and categorical words evincing the parties' intent to limit venue to the designated place to the exclusion of all others. Words such as "exclusively" and "waiving for this purpose any other venue" create a restrictive stipulation that precludes filing in other venues.
• Effect of Validity Challenge on Venue Stipulations — Where a complaint directly assails the validity of the written instrument itself (e.g., claiming vitiated consent, lack of essential elements, or void ab initio status), the exclusive venue stipulation contained therein does not apply, and general venue rules govern. Conversely, where the complaint assails only the terms, conditions, or coverage of the instrument (e.g., excessive interest rates, unconscionable penalties), the exclusive venue stipulation remains binding and enforceable.

• "Since convenience is the raison d'etre of the rules of venue, it is easy to accept the proposition that normally, venue stipulations should be deemed permissive merely, and that interpretation should be adopted which most serves the parties' convenience." — Explaining the presumption that venue stipulations are permissive rather than restrictive.
• "The words exclusively and waiving for this purpose any other venue are restrictive." — Establishing the test for determining when a venue stipulation is exclusive rather than permissive.
• "[I]n cases where the complaint assails only the terms, conditions, and/or coverage of a written instrument and not its validity, the exclusive venue stipulation contained therein shall still be binding on the parties, and thus, the complaint may be properly dismissed on the ground of improper venue. Conversely, therefore, a complaint directly assailing the validity of the written instrument itself should not be bound by the exclusive venue stipulation contained therein and should be filed in accordance with the general rules on venue." — The Briones rule applied to distinguish between challenges to contract terms and challenges to contract validity.

• Unimasters Conglomeration, Inc. v. Court of Appeals, 335 Phil. 415 (1997) — Controlling precedent establishing that venue stipulations are normally deemed permissive, and restrictive stipulations require clear and categorical language showing intent to limit venue.
• Spouses Lantin v. Judge Lantion, 531 Phil. 318 (2006) — Followed for the proposition that the words "exclusively" and "waiving for this purpose any other venue" create a restrictive venue stipulation.
• Briones v. Court of Appeals, 750 Phil. 891 (2015) — Controlling precedent distinguishing between complaints assailing the validity of the instrument (not bound by venue stipulation) and those assailing only terms/conditions (bound by venue stipulation).
• Narciso v. Garcia, G.R. No. 196877, November 12, 2012 — Cited by the RTC regarding the effect of filing a motion for reconsideration on the period to file an answer.

• Rule 4, Sections 1, 2, and 4, Rules of Civil Procedure — General rules on venue for real and personal actions, and exceptions allowing written stipulations on exclusive venue.
• Article 1159, Civil Code — Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith.
• Act 3135, as amended — Law governing extra-judicial foreclosure of real estate mortgages.

Carpio, Peralta, and Caguioa, JJ.