Surigao Century Sawmill, Co., Inc. vs. Court of Appeals

A venue stipulation in a contract must contain qualifying or restrictive words clearly indicating the parties' intent to confine actions to a particular court to the exclusion of all others; absent such language, the stipulation merely adds an additional forum and does not override the plaintiff's statutory right to elect venue under Section 2, Rule 4 of the Rules of Court.

Surigao Century Sawmill Co., Inc. (SURIGAO) owned and operated the barge LCT "Tantoy," which it leased out to Standard Plywood Corporation (STANDARD) for the transport of plywood. STANDARD had insured its cargo with Phoenix Assurance Co., Inc. (PHOENIX). When the shipment was lost and PHOENIX indemnified STANDARD, PHOENIX became subrogated to STANDARD's rights and sought recovery from SURIGAO. The dispute centered on whether the venue clause in the lease contract between SURIGAO and STANDARD bound PHOENIX as subrogee, or whether the bill of lading — the document on which PHOENIX's cause of action was predicated — controlled the determination of proper venue.

On January 4, 1982, Standard Plywood Corporation (STANDARD) leased the barge LCT "Tantoy" from Surigao Century Sawmill Co., Inc. (SURIGAO), manned by SURIGAO's crew, for the delivery of plywood from Butuan City to its consignee, A-1 Construction, Inc., in Surigao City. The arrangement was covered by a Contract of Lease dated January 4, 1982 and a bill of lading dated January 8, 1982. The contract of lease specified that the subject of the lease was the LCT "Tantoy," to load at Butuan City between January 7 or 8, 1982, 7,000 pieces of panel plywood in 140 crates, with the shipper being STANDARD of Butuan City, for delivery to its consignee A-1 Construction, Inc. at Surigao City.

The shipment was loaded on "Tantoy" on January 7 and 8, 1982, but failed to reach the consignee, resulting in damages to STANDARD in the amount of P490,000.00. The cargo had been insured by STANDARD with Phoenix Assurance Co., Inc. (PHOENIX) under Certificate of Insurance No. OP-204/516 in the same amount. PHOENIX settled its obligation to STANDARD in the aforesaid amount and was thereby subrogated to the rights and interests of STANDARD as shipper.

Failing to satisfy its demand from SURIGAO, PHOENIX filed a complaint with the Regional Trial Court of Manila. Instead of filing an answer, SURIGAO filed a motion to dismiss on the ground of improper venue, citing paragraph 12 of the lease contract of the barge, which provided that "[a]ny disagreement or dispute arising out of the lease shall be settled by the parties in the proper court in the Province of Surigao del Norte." The trial court denied the motion, calling attention to Section 2, Rule 4 of the Rules of Court, which gives the choice of venue to the plaintiff. The Court of Appeals affirmed, holding that the cause of action was the recovery of damages ex-contractu on the basis of the bill of lading, not the lease contract, and that no "disagreement or dispute arising out of the lease" was being claimed in the complaint.

• Improper Venue: Petitioner argued that the complaint should be dismissed for improper venue because paragraph 12 of the lease contract stipulated that any disagreement or dispute arising out of the lease shall be settled in the proper court in the Province of Surigao del Norte, and that PHOENIX, as subrogee of STANDARD, was bound by this stipulation.
• Charter Party Doctrine: Petitioner relied on Home Insurance Co. vs. American Steamship Agencies, Inc., asserting that in a charter of the entire vessel, the bill of lading is merely a receipt and document of title, not a contract, because the contract is the charter party; thus the lease contract should prevail over the bill of lading for purposes of venue.

• Cause of Action Based on Bill of Lading: Respondent countered that the cause of action was the recovery of damages ex-contractu on the basis of the bill of lading, not the lease contract, and that the complaint never asserted violation of any term or condition of the lease agreement.
• No Dispute Arising Out of the Lease: Respondent argued that there was no "disagreement or dispute arising out of the lease" within the meaning of paragraph 12, as the claim was based on the shipment covered by the bill of lading that was not received by the consignee.

• Applicable Document for Venue: Whether the bill of lading should prevail over the lease contract for purposes of venue.
• Sufficiency of Venue Stipulation: Whether the venue stipulation in the lease contract was restrictive enough to preclude the plaintiff from filing the action in Manila.

• Applicable Document for Venue: Yes. The bill of lading prevails over the lease contract for purposes of venue because the cause of action was based on the bill of lading as a contract of carriage, not on any provision of the lease agreement.
• Sufficiency of Venue Stipulation: No. The venue stipulation in the lease contract was not restrictive enough to preclude filing in other courts, as it lacked qualifying or restrictive words indicating that Surigao del Norte was the exclusive venue to the exclusion of all others.

• Applicable Document for Venue: The Court examined the complaint and found that PHOENIX never asserted violation of any term or condition of the lease agreement. What was claimed was the shipment of 140 crates or 7,000 panel plywood covered by Bill of Lading No. 1, which was not received by the consignee, resulting in damage, loss, and prejudice in the amount of P490,000.00. While reference was made to the lease of the barge, the cause of action was not based on any provision of the lease but precisely on the bill of lading. Petitioner's reliance on Home Insurance Co. vs. American Steamship Agencies, Inc. was rejected because the facts were not "four-square" with the present case: in Home Insurance, the bill of lading was stamped "Freight prepaid as per charter party. Subject to all terms, conditions and exceptions of charter party," a condition absent here. The bill of lading in this case instead contained a provision "subject to the condition printed in the original of this bill of lading." A bill of lading serves three distinct functions — as a receipt for goods, as a contract of carriage, and as documentary evidence of title — and PHOENIX's reliance on it as the contract of carriage to support its cause of action was well-taken.
• Sufficiency of Venue Stipulation: Even assuming arguendo that the lease contract should prevail over the bill of lading, the Court had previously held that a statement in a contract designating venue does not preclude the filing of suits at the election of the plaintiff. Section 3, Rule 4 of the Rules of Court provides an alternative to Section 2(b) such that parties may, by written agreement, change or transfer venue of an action from one province to another, but such written agreement should clearly and explicitly state the intention of the parties to restrict the filing of action to a particular court to the exclusion of other courts. Following Polytrade Corporation vs. Blanco, the stipulation that disputes "shall be settled by the parties in the proper court in the Province of Surigao del Norte" merely consented to Surigao del Norte as an additional venue; qualifying or restrictive words indicating that Surigao del Norte and Surigao del Norte alone is the venue were absent. The parties did not waive their right to pursue remedies in the courts specifically mentioned in Section 2(b) of Rule 4.

• Permissive vs. Restrictive Venue Stipulations — A stipulation in a contract designating a particular court as venue does not, by itself, restrict the parties to that court exclusively. For a venue stipulation to be exclusive, it must contain qualifying or restrictive words clearly indicating the parties' intent to confine actions to that court to the exclusion of all others. Absent such language, the stipulation is merely permissive and adds an additional forum without ousting the plaintiff's statutory right to elect venue under Section 2(b), Rule 4 of the Rules of Court. The Court applied this doctrine by holding that paragraph 12 of the lease contract — providing that disputes "shall be settled by the parties in the proper court in the Province of Surigao del Norte" — lacked restrictive words and was therefore merely permissive.
• Functions of a Bill of Lading — A bill of lading serves three distinct functions: (1) as a receipt for the goods, (2) as a contract of carriage, and (3) as documentary evidence of title to the goods. The Court relied on this tripartite characterization to uphold PHOENIX's cause of action as properly based on the bill of lading as a contract of carriage, independent of the lease contract.
• Hypothetical Admission in a Motion to Dismiss — In filing a motion to dismiss, the movant hypothetically admits the factual allegations in the complaint. Petitioner could not belatedly present a purported similar bill of lading as evidence in its motion for reconsideration before the Court of Appeals, having already admitted the complaint's factual allegations by filing the motion to dismiss.

• "An accurate reading, however, of the stipulation, 'The parties agree to sue and be sued In the Courts of Manila,' does not preclude the filing of suits in the residence of plaintiff or defendant. The plain meaning is that the parties merely consented to be sued in Manila. Qualifying or restrictive words which would indicate that Manila and Manila alone is the venue are totally absent therefrom . . ." — This passage, quoting Polytrade Corporation vs. Blanco, articulates the canonical test for distinguishing permissive from restrictive venue stipulations and is the controlling rationale for the Court's ruling on the insufficiency of the lease contract's venue clause.
• "What was claimed in litigation was the shipment of '140 crates . . . . or 7,000 Panel Plywood . . . covered by Bill of Lading No. 1,' which shipment was not received by consignee, 'resulting in the damage, loss and prejudice to plaintiff in the amount of P490,000.00.' While reference was made of the lease of the barge, the cause of action was not based on any provision of the lease, but precisely on the bill of lading." — This passage from the Court of Appeals, adopted by the Supreme Court, establishes the ratio decidendi that the cause of action arose from the bill of lading, not the lease contract, thereby determining the applicable document for venue purposes.
• "A bill of lading serves three distinct functions: first, as a receipt for the goods; second, as contract of carriage; and third, as documentary evidence of title to the goods." — This passage defines the tripartite legal nature of a bill of lading, a formulation frequently cited in subsequent transportation and commercial law jurisprudence.

• Home Insurance Co. vs. American Steamship Agencies, Inc., L-25599, 23 SCRA 24 (1968) — Distinguished. Petitioner relied on this case for the proposition that in a charter of the entire vessel, the bill of lading is merely a receipt and document of title, not a contract. The Court found the facts not "four-square" with the present case because the bill of lading in Home Insurance was stamped "Subject to all terms, conditions and exceptions of charter party," a condition absent in the case at bar.
• Polytrade Corporation vs. Blanco, L-27033, 30 SCRA 187 (1969) — Followed. The Court applied its ruling that a venue stipulation agreeing to sue and be sued in a particular court does not preclude filing suits in the residence of plaintiff or defendant absent qualifying or restrictive words indicating exclusivity.

• Section 2, Rule 4, Rules of Court — Gives the plaintiff the choice of venue. The trial court relied on this provision in denying the motion to dismiss, and the Supreme Court affirmed its applicability in light of the absence of a restrictive venue stipulation.
• Section 3, Rule 4, Rules of Court — Provides an alternative to Section 2(b) such that parties may, by written agreement, change or transfer venue of an action from one province to another. The Court held that such written agreement must clearly and explicitly state the intention to restrict filing to a particular court to the exclusion of others, a requirement the lease contract's venue clause failed to meet.

Narvasa, C.J., Feliciano, Regalado, and Campos, Jr., JJ., concurred.