Young Auto Supply Co. vs. Court of Appeals

A corporation's residence for purposes of venue is the place where its principal office is located as stated in its articles of incorporation, not any place where it maintains a branch office; a corporation cannot file personal actions in a place other than its principal place of business unless that place is also the residence of a co-plaintiff or a defendant.

Young Auto Supply Co., Inc. (YASCO) is a domestic corporation whose articles of incorporation designate Cebu City as its principal office, though it also maintains a branch office at 1708 Dominga Street, Pasay City. Nemesio Garcia is YASCO's president and a resident of Cebu City. George Chiong Roxas purchased all shares of stock in Consolidated Marketing & Development Corporation (CMDC) from YASCO, Garcia, and two others. The dispute arose when Roxas failed to fully pay the purchase price, prompting petitioners to file a collection suit.

Sometime on October 28, 1987, Young Auto Supply Co., Inc. (YASCO), represented by its president Nemesio Garcia, together with Nelson Garcia and Vicente Sy, sold all of their shares of stock in Consolidated Marketing & Development Corporation (CMDC) to George Chiong Roxas. The purchase price was ₱8,000,000.00, payable as a downpayment of ₱4,000,000.00 and the balance of ₱4,000,000.00 in four postdated checks of ₱1,000,000.00 each. Immediately after the execution of the agreement, Roxas took full control of the four markets of CMDC, while the vendors retained the stock certificates of CMDC as security pending full payment of the balance.

The first check representing the ₱4,000,000.00 downpayment was honored by the drawee bank, but the four other checks representing the balance of ₱4,000,000.00 were dishonored. In the meantime, Roxas sold one of the markets to a third party. Out of the proceeds of that sale, YASCO received ₱600,000.00, leaving a balance of ₱3,400,000.00 unpaid. Subsequently, Nelson Garcia and Vicente Sy assigned all their rights and title to the proceeds of the sale of the CMDC shares to Nemesio Garcia.

On June 10, 1988, petitioners filed a complaint against Roxas in the Regional Trial Court, Branch 11, Cebu City, praying that Roxas be ordered to pay the sum of ₱3,400,000.00 or that full control of the three markets be turned over to YASCO and Garcia. The complaint also prayed for the forfeiture of the partial payment of ₱4,600,000.00 and the payment of attorney's fees and costs. Roxas filed two motions for extension of time to submit his answer but failed to do so, prompting petitioners to file a motion to have him declared in default. Roxas then filed, through new counsel, a third motion for extension of time.

On August 19, 1988, the trial court declared Roxas in default, but the order was lifted upon his motion. On August 22, 1988, Roxas filed a motion to dismiss on the grounds that the complaint stated no cause of action due to non-joinder of indispensable parties, that the claim had been waived or extinguished, and that venue was improperly laid. After a hearing with testimonial and documentary evidence from both parties, the trial court denied the motion to dismiss on February 8, 1991. Roxas filed a motion for reconsideration, which the trial court denied as pro-forma on April 10, 1991, and he was again declared in default. On May 3, 1991, Roxas filed an unverified motion to lift the order of default without the required affidavit of merit; without waiting for its resolution, he filed a petition for certiorari with the Court of Appeals. The appellate court sustained the trial court on the first two grounds but ordered dismissal on the ground of improper venue, relying on the Pasay City address appearing in the deed of sale and in petitioners' correspondence with Roxas.

• Improper Venue Ruling: Petitioners argued that the Court of Appeals erred in holding that venue should be in Pasay City rather than Cebu City, where both plaintiffs are residents.
• Estoppel: Petitioners maintained that Roxas was estopped from questioning the choice of venue, having been led by petitioners' representations to believe Pasay City was their residence.

• Improper Venue: Respondent argued that venue was improperly laid in Cebu City because the address of YASCO appearing in the Deed of Sale dated October 28, 1987 was "No. 1708 Dominga Street, Pasay City," the same address used in YASCO's letters and commercial documents in his possession.
• Reliance on Representations: Respondent contended that Garcia likewise gave Pasay City as his address in three letters sent to Roxas's brothers and sisters, and that he relied on these representations in believing petitioners resided in Pasay City.

• Venue of Personal Actions: Whether the Court of Appeals erred in holding that the venue was improperly laid in Cebu City.
• Estoppel: Whether Roxas was estopped from questioning the choice of Cebu City as venue.

• Venue of Personal Actions: Yes, the Court of Appeals erred. A corporation's residence for venue purposes is its principal place of business as stated in its articles of incorporation — here, Cebu City — not a branch-office address appearing in commercial documents.
• Estoppel: N/A. With the finding that YASCO's residence for venue purposes is Cebu City, it became unnecessary to decide whether Garcia was also a resident of Cebu City or whether Roxas was estopped.

• Venue of Personal Actions: Under Section 2(b), Rule 4 of the Revised Rules of Court, personal actions in the Regional Trial Courts are commenced and tried in the province or city where the defendant or any defendant resides or may be found, or where the plaintiff or any plaintiff resides, at the election of the plaintiff. There were two plaintiffs: YASCO, a domestic corporation, and Nemesio Garcia, a natural person. Both averred in their complaint that they were residents of Cebu City. YASCO's articles of incorporation (SEC Reg. No. 22083) expressly stated that its principal office is located in Cebu City, Philippines. A corporation has no residence in the same sense as a natural person, but for practical purposes it is a resident of the place where its principal office is located as stated in its articles of incorporation. The Corporation Code requires each corporation to specify in its articles the place where its principal office is to be located, precisely to fix its residence in a definite place rather than allow it to be ambulatory. Allowing a corporation to file personal actions in a place where it merely maintains a branch office would create confusion and inconvenience. The Court of Appeals erred in relying on the Pasay City branch-office address appearing in the deed of sale and correspondence, because the articles of incorporation control. Accordingly, Cebu City was the proper venue.
• Estoppel: Because YASCO's residence for venue purposes was established as Cebu City, the Court found it unnecessary to resolve whether Garcia was also a Cebu City resident or whether Roxas was estopped. The Court noted, however, that estoppel would have been more relevant had Roxas been the one suing YASCO in Pasay City and YASCO had questioned venue — in that scenario, Roxas could argue that YASCO misled him into believing Pasay City was its principal place of business. But that was not the case before the Court.

• Corporate Residence for Venue Purposes — A corporation has no residence in the same sense as a natural person, but for practical purposes it is deemed a resident of the place where its principal office is located as stated in its articles of incorporation. The purpose of requiring each corporation to specify its principal office in its articles is to fix its residence in a definite place instead of allowing it to be ambulatory. A corporation cannot file personal actions in a place other than its principal place of business unless that place is also the residence of a co-plaintiff or a defendant. Applied in this case, YASCO's residence was Cebu City — the principal office stated in its articles of incorporation — not Pasay City, where it merely maintained a branch office, notwithstanding that the Pasay City address appeared in the deed of sale and in correspondence.

• "A corporation has no residence in the same sense in which this term is applied to a natural person. But for practical purposes, a corporation is in a metaphysical sense a resident of the place where its principal office is located as stated in the articles of incorporation." — This passage articulates the controlling rule for determining a corporation's residence for venue purposes, distinguishing it from a natural person's residence and anchoring it in the articles of incorporation.
• "The purpose of this requirement is to fix the residence of a corporation in a definite place, instead of allowing it to be ambulatory." — This explains the rationale behind the Corporation Code's requirement that each corporation specify its principal office, reinforcing that venue cannot shift with branch-office locations.
• "By the same token, a corporation cannot be allowed to file personal actions in a place other than its principal place of business unless such a place is also the residence of a co-plaintiff or a defendant." — This establishes the limiting principle: a corporation plaintiff is confined to its principal place of business for venue, subject only to the co-plaintiff or defendant residence exception.

• Cohen vs. Benguet Commercial Co., Ltd., 34 Phil. 256 (1916) — Cited as early authority for the proposition that a corporation is a resident of the place where its principal office is located as stated in its articles of incorporation.
• Clavecilla Radio System vs. Antillon, 19 SCRA 379 (1967) — Followed for the rule that allowing actions against a corporation in any place where it maintains branch offices would create confusion and inconvenience; by the same logic, a corporation cannot file personal actions outside its principal place of business.

• Section 2(b), Rule 4, Revised Rules of Court — Provides that personal actions in the Regional Trial Courts are commenced and tried in the province or city where the defendant or any defendant resides or may be found, or where the plaintiff or any plaintiff resides, at the election of the plaintiff. Applied to allow petitioners to file in Cebu City, where YASCO's principal place of business is located.
• Section 14(3), Corporation Code — Requires each corporation to specify in its articles of incorporation the place where its principal office is to be located, which must be within the Philippines. Applied to fix YASCO's residence at Cebu City as stated in its articles of incorporation.

Cruz, Griño-Aquino, and Bellosillo, JJ., concurred.