G.R. No. 228617. September 20, 2017
PLANTERS DEVELOPMENT BANK, PETITIONER, VS. SPOUSES VICTORIANO AND MELANIE RAMOS, RESPONDENTS.

FACTS

Spouses Ramos obtained loans from Planters Development Bank (PDB), secured by real estate mortgages over several properties. The mortgage contracts contained a stipulation that any suit arising from the agreements shall be filed exclusively in the courts of Makati City. After the spouses defaulted, PDB initiated extra-judicial foreclosure. In response, the spouses filed a Complaint for Annulment of Real Estate Mortgages and Promissory Notes, Accounting, and Injunction before the Regional Trial Court (RTC) of San Jose City, Nueva Ecija, alleging the contracts were void or voidable due to alleged violations of banking laws and PDB’s failure to fulfill a promised additional loan.
PDB filed an Urgent Motion to Dismiss primarily on the ground of improper venue, citing the exclusive venue stipulation. The RTC denied the motion, reasoning that the complaint’s characterization of the contracts as adhesion contracts and its direct attack on their validity necessitated applying general venue rules under Rule 4 of the Rules of Court, rather than enforcing the stipulation. The RTC also held the complaint sufficiently stated a cause of action. The Court of Appeals affirmed the RTC’s denial, agreeing that since the action sought to nullify the mortgages themselves, the exclusive venue clause therein could not bind the parties.

ISSUE

Whether the Court of Appeals erred in upholding the RTC’s denial of the motion to dismiss based on improper venue, despite the exclusive venue stipulation in the real estate mortgage contracts.

RULING

Yes. The Supreme Court reversed the CA and RTC, ruling that the complaint should have been dismissed for improper venue. The Court clarified the governing principle: an exclusive venue stipulation in a contract is valid and binding unless the suit directly assails the validity or existence of the contract itself. To determine if the action is a direct attack, the allegations in the complaint are controlling.
Examining the complaint, the Court found that while the spouses prayed for annulment, their core allegations did not constitute a direct challenge to the validity of the mortgage contracts. They did not allege vitiated consent (such as fraud, intimidation, or mistake) or the absence of any essential element (like cause or object) that would render the contracts void or voidable ab initio. Instead, their grievances pertained to PDB’s alleged subsequent acts—failure to extend a promised additional loan and violations of banking laws in the contract’s terms—which relate to the contracts’ enforcement or performance, not their fundamental validity. Since the complaint impliedly admitted the contracts’ authenticity and due execution, the exclusive venue stipulation remained operative and enforceable. Consequently, the stipulation requiring suits to be filed in Makati City was binding, and filing in San Jose City, Nueva Ecija, constituted improper venue. The case was dismissed on this ground.