Rigor vs. Consolidated Orix Leasing and Finance Corporation

When a promissory note and the deed of chattel mortgage securing it contain conflicting venue provisions, both instruments must be construed together as complementary contracts pursuant to Article 1374 of the Civil Code, and the accessory contract's venue provision may validly modify the principal contract's exclusive venue stipulation.

Spouses Efren and Zosima Rigor, doing business as Chiara Construction, obtained a loan from Consolidated Orix Leasing and Finance Corporation (later renamed Orix Leasing and Finance Corporation), a financing company with a branch office in Dagupan City. The loan transaction was documented through two instruments: a promissory note and a deed of chattel mortgage over two dump trucks. Each instrument contained a distinct venue provision, the conflict between which gave rise to the procedural dispute. Private respondent's older standard promissory notes confined venue to Makati City, where it had its main office; after opening a Dagupan branch, it corrected the venue provision in the chattel mortgage but, through oversight, failed to update the promissory notes.

On July 31, 1996, spouses Efren and Zosima Rigor, doing business as Chiara Construction, obtained a loan from Consolidated Orix Leasing and Finance Corporation in the amount of ₱1,630,320.00. They executed a promissory note promising to pay the loan in twenty-four equal monthly installments of ₱67,930.00, due on the fifth day of each month commencing September 5, 1996. The promissory note stipulated that default in paying any installment would render the entire unpaid balance immediately due and payable. To secure the obligation, the spouses simultaneously executed a deed of chattel mortgage over two dump trucks in favor of private respondent.

The two instruments contained divergent venue provisions. The promissory note stated that all legal actions arising out of the note or in connection with the chattels "shall only be brought in or submitted to the proper court in Makati City, Philippines." The deed of chattel mortgage, however, provided that in case of litigation arising out of the transaction, "complete jurisdiction is given the proper court of the city of Makati or any proper court within the province of Rizal, or any court in the city, or province where the holder/mortgagee has a branch office, waiving for this purpose any proper venue." Private respondent later explained that its older standard promissory notes confined venue to Makati City where it maintained its main office; after opening a branch in Dagupan City, it corrected the venue provision in the chattel mortgage but, through oversight, failed to make corresponding corrections in the promissory notes.

Petitioners fell behind on several installments despite demand. On January 5, 1998, private respondent filed a complaint for replevin with damages before the Regional Trial Court of Dagupan City, Branch 41, seeking to foreclose the chattel mortgage and take possession of the two dump trucks, with an alternative prayer for payment of the outstanding obligation if manual delivery could not be effected. After service of summons, petitioners moved to dismiss on the ground of improper venue, invoking the promissory note's exclusive Makati City stipulation. Private respondent opposed the motion, pointing to the chattel mortgage's broader venue provision, which permitted filing in any court where the mortgagee maintained a branch office. The Dagupan trial court denied the motion to dismiss on June 3, 1998, and denied reconsideration on July 15, 1998. Petitioners then elevated the matter to the Court of Appeals via certiorari, which dismissed the petition on October 19, 1998, and denied reconsideration on November 27, 1998.

• Primacy of the Promissory Note: Petitioners argued that the promissory note should prevail over the deed of chattel mortgage because the promissory note is the principal contract being sued upon, while the chattel mortgage "merely accompanies" it.
• Exclusive Venue Language: Petitioners contended that the words "shall only" in the promissory note make venue exclusive and restrictive, confining all legal actions to the proper court in Makati City, and that the promissory note contains no qualifying language indicating that the chattel mortgage's venue provision was intended to modify it.
• Misapplication of Article 1374: Petitioners maintained that the Court of Appeals erroneously applied Article 1374 of the Civil Code, which governs conflicting provisions within one and the same contract, not provisions found in two distinct and entirely separate contracts.
• Contract of Adhesion: Petitioners asserted that any ambiguity in the contracts should be resolved against private respondent under the contract of adhesion doctrine.

• Valid Modification of Venue: Respondent countered that the alternative venues in the deed of chattel mortgage may not be disregarded as meaningless verbiage, and that the chattel mortgage validly modified the promissory note's exclusive venue stipulation.
• Nexus to Dagupan City: Respondent pointed out that the loan was negotiated and concluded in Dagupan City and booked at its Dagupan branch office, and that the seizure of the mortgaged vehicles in Dagupan City — as allowed by the chattel mortgage — constituted the cause of action filed in the Dagupan trial court.
• Convenience of the Parties: Respondent maintained that the convenience of the parties is the overriding consideration in determining venue, best achieved by laying venue in Dagupan City where respondent has a branch office and where petitioners reside in nearby Tarlac.
• Dilatory Tactic: Respondent bewailed that petitioners filed the motion to dismiss as a dilatory tactic to evade or prolong payment of an outstanding obligation.

• Proper Venue: Whether venue was properly laid under the provisions of the chattel mortgage contract in light of Article 1374 of the Civil Code, given the conflicting venue stipulations in the promissory note and the deed of chattel mortgage.

• Proper Venue: Yes. Venue was properly laid in Dagupan City. The promissory note and the deed of chattel mortgage, being principal and accessory contracts respectively, must be construed together under the "complementary contracts construed together" doctrine, such that the chattel mortgage's broader venue provision — permitting filing where the mortgagee has a branch office — validly modified the promissory note's exclusive Makati City stipulation.

• Proper Venue: The promissory note and the deed of chattel mortgage are not independent instruments to be read in isolation. A chattel mortgage is an accessory contract whose existence depends upon the principal obligation it secures; its consideration is the same as that of the principal contract, and a principal obligation is an indispensable condition for its existence. Under the "complementary contracts construed together" doctrine, as articulated in National Power Corporation vs. Court of Appeals and reiterated in Velasquez vs. Court of Appeals, the provisions of an accessory contract must be read in their entirety and together with the principal contract, closely adhering to the spirit of Article 1374 of the Civil Code, which directs that the various stipulations of a contract be interpreted together, attributing to doubtful ones the sense resulting from all taken jointly. Applying this doctrine, the promissory note's restrictive "shall only" language cannot be read in isolation to nullify the chattel mortgage's alternative venue provision. Private respondent explained that the discrepancy arose from an oversight: after opening a Dagupan branch, it updated the chattel mortgage's venue clause but failed to update the promissory note. The presumption that a person takes ordinary care of his concerns applies — petitioners, being businessmen of experience, are presumed to have signed both contracts with full knowledge of their contents. Moreover, petitioners did not contest the genuineness and due execution of the deed of chattel mortgage under Section 8, Rule 8 of the Revised Rules of Civil Procedure, effectively eliminating any defense relating to its authenticity. The rules on venue are intended to assure convenience for the parties and promote the ends of justice; Dagupan City, where respondent has a branch office and near where petitioners reside in Tarlac, is the more convenient forum. Petitioners' insistence on exclusive venue in Makati City was characterized as a dilatory tactic, the case having been pending for four years on the venue question alone.

• Complementary Contracts Construed Together — When a principal contract and an accessory contract (such as a chattel mortgage securing a loan) contain conflicting provisions, both must be read in their entirety and construed together to arrive at their true meaning. Certain stipulations cannot be segregated and made to control. This doctrine finds support in Article 1374 of the Civil Code and applies because the accessory contract cannot exist independently of the principal obligation. The Court applied this doctrine to hold that the chattel mortgage's broader venue provision validly modified the promissory note's exclusive venue stipulation.
• Accessory Contract Dependent on Principal Obligation — A chattel mortgage, pledge, mortgage, or suretyship is an accessory contract whose existence depends upon the principal obligation it secures; its consideration is the same as that of the principal contract. A principal obligation is an indispensable condition for the existence of an accessory contract. The Court relied on this principle to justify construing the two instruments together rather than treating them as entirely separate contracts.
• Presumption of Ordinary Care — It is presumed that a person takes ordinary care of his concerns. Applied here, petitioners — being of age and experienced businessmen — are presumed to have signed both contracts with full knowledge of their contents, including the chattel mortgage's venue provision.
• Deemed Admission of Genuineness and Due Execution — Under Section 8, Rule 8 of the Revised Rules of Civil Procedure, when an action or defense is founded upon a written instrument copied in or attached to the pleading, the genuineness and due execution of the instrument are deemed admitted unless the adverse party specifically denies them under oath. Petitioners' failure to contest the deed of chattel mortgage under this rule eliminated any defense relating to its authenticity or due execution.

• "The chattel mortgage constituted over the two dump trucks is an accessory contract to the loan obligation as embodied in the promissory note. The chattel mortgage cannot exist as an independent contract since its consideration is the same as that of the principal contract." — This passage articulates the ratio decidendi's foundational premise: the dependency of the accessory contract on the principal obligation, which justifies construing both instruments together.
• "The surety bond must be read in its entirety and together with the contract between NPC and the contractors. The provisions must be construed together to arrive at their true meaning. Certain stipulations cannot be segregated and then made to control." — Quoted from National Power Corporation vs. Court of Appeals, this is the canonical formulation of the "complementary contracts construed together" doctrine as applied to accessory contracts.
• "The rules on venue are intended to assure convenience for the plaintiff and his witnesses and to promote the ends of justice." — This statement defines the purpose of venue rules and underpins the Court's conclusion that Dagupan City, where respondent has a branch office and petitioners reside nearby, is the more convenient forum.

• National Power Corporation vs. Court of Appeals, 145 SCRA 533 (1986) — Controlling precedent for the "complementary contracts construed together" doctrine. The Court held that the provisions of an accessory contract (a surety bond) must be read in their entirety and together with the principal contract, and that certain stipulations cannot be segregated and made to control. This doctrine was applied directly to the promissory note and chattel mortgage.
• Velasquez vs. Court of Appeals, 309 SCRA 539 (1999) — Followed and reiterated the "complementary contracts construed together" doctrine, explaining that it finds support in Article 1374 of the Civil Code. Also cited for the proposition that failure to contest a written instrument under Section 8, Rule 8 eliminates defenses relating to authenticity and due execution.
• Perla Compania de Seguros, Inc. vs. Court of Appeals, 208 SCRA 487 (1992) — Cited for the principle that a chattel mortgage is an accessory contract to the loan obligation embodied in the promissory note.
• Banco de Oro vs. Bayuga, 93 SCRA 443 (1979) — Cited for the proposition that a chattel mortgage cannot exist as an independent contract since its consideration is the same as that of the principal contract.
• DBP vs. National Merchandising Corp., 40 SCRA 624 (1971) — Cited in support of the presumption that parties of age and experienced businessmen signed documents with full knowledge of their import and obligations.

• Article 1374, Civil Code of the Philippines — Provides that the various stipulations of a contract shall be interpreted together, attributing to doubtful ones the sense which may result from all of them taken jointly. Applied to justify construing the promissory note and chattel mortgage together as complementary contracts, despite petitioners' argument that the article applies only to provisions within a single contract.
• Rule 4, Section 2, 1997 Rules of Civil Procedure — Establishes the general rule that personal actions may be commenced and tried where the plaintiff or any principal plaintiff resides, or where the defendant or any principal defendant resides, at the election of the plaintiff.
• Rule 4, Section 4, 1997 Rules of Civil Procedure — Provides that by written agreement of the parties, the venue of an action may be changed or transferred from one place to another. This underpins the enforceability of the parties' venue stipulations.
• Rule 131, Section 3(D), Revised Rules on Evidence — Codifies the presumption that a person takes ordinary care of his concerns. Applied to presume that petitioners signed the chattel mortgage with full knowledge of its contents.
• Section 8, Rule 8, Revised Rules of Civil Procedure — Provides that when an action or defense is founded upon a written instrument, the genuineness and due execution of the instrument are deemed admitted unless the adverse party specifically denies them under oath. Petitioners' failure to contest the chattel mortgage under this rule was held to eliminate any defense relating to its authenticity or due execution.

Puno (Chairman) and Panganiban, JJ., concurred. Sandoval-Gutierrez, J., was on leave.