G.R. No. 158138.

April 12, 2005

PHILIPPINE BANK OF, COMMUNICATIONS, Petitioners,

DECISION

PANGANIBAN, J.:

A restrictive stipulation on the venue of actions contained in a promissory note applies to the
surety agreement supporting it, because the nature of the two contracts and the factual
circumstances surrounding their execution are intertwined or interconnected. The surety
agreement is merely an accessory to the principal loan agreement embodied in the promissory
note. Hence, the enforcement of the former depends upon the latter.

The Case

Before us is a Petition for Review1 under Rule 45 of the Rules of Court, assailing the April 29, 2003
Decision2 of the Court of Appeals (CA) in CA-GR SP No. 69786. The challenged Decision
disposed as follows:

"WHEREFORE, based on the foregoing, the instant petition is hereby GRANTED. The assailed
Orders dated June 9, 2000 and January 9, 2002 are hereby ANNULED and SET ASIDE. Civil
Case No. 99-94976 is hereby ordered DISMISSED without prejudice to the filing thereof in the
venue exclusively stipulated by the parties."3

The Facts

The facts are related by the CA as follows:

"On September 3, 1999, the Philippine Bank of Communications (hereinafter ‘[petitioner’]) filed a
complaint against [Respondents Elena Lim, Ramon Calderon and Tri-Oro International Trading &
Manufacturing Corporation (‘Tri-Oro’ for brevity)] with the Regional Trial Court of Manila for the
collection of a deficiency amounting to ₱4,014,297.23 exclusive of interest. [Petitioner] alleged
therein that [respondents] obtained a loan from it and executed a continuing surety agreement
dated November 16, 1995 in favor of [petitioner] for all loans, credits, etc., that were extended or
may be extended in the future to [respondents]. [Petitioner] granted a renewal of said loan upon
[respondent’s] request, the most recent being on January 21, 1998 as evidenced by Promissory
Note Renewal BD-Variable No. 8298021001 in the amount of ₱3,000,000.00. It was expressly
stipulated therein that the venue for any legal action that may arise out of said promissory note
shall be Makati City, ‘to the exclusion of all other courts’ x x x. [Respondents allegedly] failed to
pay said obligation upon maturity. Thus, [petitioner] foreclosed the real estate mortgage executed
by [respondents] valued at ₱1,081,600.00 leaving a deficiency balance of ₱4,014,297.23 as of
August 31, 1999.

"[Respondents] moved to dismiss the complaint on the ground of improper venue, invoking the
stipulation contained in the last paragraph of the promissory note with respect to the
restrictive/exclusive venue. [The trial court] denied said motion asseverating that [petitioner] ha[d]
separate causes of action arising from the promissory note and the continuing surety agreement.
Thus, [under] Rule 4, Section 2, of the 1997 Rules of Civil Procedure, as amended, x x x venue
was properly laid in Manila. [The trial court] supported [its] order with cases where venue was held
to be merely permissive. A motion for reconsideration of said order was likewise denied." 4
Ruling of the Court of Appeals

On appeal, the CA ruled that respondents’ alleged debt was based on the Promissory Note, which
had provided an exclusionary stipulation on venue "to the exclusion of all other courts." 5 The
parties’ Surety Agreement, though silent as to venue, was an accessory contract that should have
been interpreted in consonance with the Promissory Note.6

Hence, this Petition.7

The Issue

Petitioner raises the following issue for our consideration:

"Whether or not the Honorable Court of Appeals had decided the issue of venue in a way not in
accord with law and applicable decisions of this Honorable Court and had thereby departed from
the accepted and usual course of judicial proceedings, as to call for this Honorable Supreme
Court’s power of supervision and appellate review."8

The Court’s Ruling

The Petition is unmeritorious.

Sole Issue:

Venue

At the outset, this Court observes that petitioner took liberties with the stipulated facts to suit its
allegations in the present Petition. In its Complaint, petitioner bank averred that respondents had
entered into the Surety Agreement (SA) to guarantee existing and future credit facilities, and that
they had executed the Promissory Note (PN) to document their loan.9 Now, the bank is claiming
that Tri-Oro issued the PN on which the other respondents should be made liable as sureties.10

This strategy is obviously intended to disconnect the SA from the PN and to support the claim of
petitioner that the stipulation on venue does not apply to the SA. However, as will be discussed
below, the cause of action to recover on the basis of the SA is inseparable from that which is
based on the PN.

Rule on Venue

Section 2 of Rule 4 of the Rules of Court provides that personal actions11 must be commenced and
tried (1) in the place where the plaintiff resides, or (2) where the defendant resides, or (3) in case
of non-resident defendants, where they may be found, at the choice of the plaintiff. 12 This rule on
venue does not apply when the law specifically provides otherwise, or when -- before the filing of
the action -- the contracting parties agree in writing on the exclusive venue thereof. 13 Venue is not
jurisdictional and may be waived by the parties.14

A stipulation as to venue does not preclude the filing of the action in other places, unless qualifying
or restrictive words are used in the agreement.15

In the instant case, the stipulation on the exclusivity of the venue as stated in the PN is not at
issue. What petitioner claims is that there was no restriction on the venue, because none was
stipulated in the SA on which petitioner had allegedly based its suit.16 Accordingly, the action on the
SA may be filed in Manila, petitioner’s place of residence.
Petitioner adds that its Complaint filed in the trial court had two causes of action: the first was
founded on a breach of the PN; and the second, on a violation of the SA.17 Consequently, it was
allegedly correct to join the causes of action and to file the case in Manila, per Section 5 of Rule 2
of the Rules of Court, which reads:18

"Section 5. Joinder of Causes of Action. –A party may in one pleading assert, in the alternative or
otherwise, as many causes of action as he may have against an opposing party, subject to the
following conditions:

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(c) Where the causes of action are between the same parties but pertain to different venue or
jurisdictions, the joinder may be allowed in the Regional Trial Court provided one of the causes of
action falls within the jurisdiction of the said court and venue lies therein." 19

Surety Agreement

Suretyship arises upon the solidary binding of a person -- deemed the surety -- with the principal
debtor, for the purpose of fulfilling an obligation.20 The prestation is not an original and direct
obligation for the performance of the surety’s own act, but merely accessory or collateral to the
obligation contracted by the principal.21 Although the surety contract is secondary to the principal
obligation, the surety assumes liability as a regular party to the undertaking. 22

In enforcing a surety contract, the "complementary-contracts-construed-together" doctrine finds

"Art. 1374. The various stipulations of a contract shall be interpreted together, attributing to the
doubtful ones that sense which may result from all of them taken jointly."

The aforementioned doctrine is applicable to the present case. Incapable of standing by itself, the
SA can be enforced only in conjunction with the PN. The latter documents the debt that is sought
to be collected in the action against the sureties.

The factual milieu of the present case shows that the SA was entered into to facilitate existing and
future loan agreements. Petitioner approved the loan covered by the PN, partly because of the SA
that assured the payment of the principal obligation. The circumstances that related to the
issuance of the PN and the SA are so intertwined that neither one could be separated from the
other. It makes no sense to argue that the parties to the SA were not bound by the stipulations in
the PN.

Notably, the PN was a contract of adhesion that petitioner required the principal debtor to execute
as a condition of the approval of the loan. It was made in the form and language prepared by the
bank. By inserting the provision that Makati City would be "the venue for any legal action [that]
may arise out of [the] Promissory Note,"26 petitioner also restricted the venue of actions against the
sureties. The legal action against the sureties arose not only from the SA, but also from the PN.

Cause of Action

Petitioner correctly argues that there are two causes of action contained in its Complaint. A cause
of action is a party’s act or omission that violates the rights of the other.27 Only one suit may be
commenced for a single cause of action.28 If two or more suits are instituted on the basis of the
same cause of action, only one case should remain and the others must be dismissed. 29
As against Tri-Oro International Trading & Manufacturing Corporation, petitioner’s cause of action
is the alleged failure to pay the debt in violation of the PN; as against Elena Lim and Ramon
Calderon, in violation of the SA.

Because of the variance between the causes of action, petitioner could have filed separate actions
against respondents to recover the debt, on condition that it could not recover twice from the same
cause. It could have proceeded against only one or all of them,30 as full payment by any one of
them would have extinguished the obligation.31 By the same token, respondents could have been
joined as defendants in one suit, because petitioner’s alleged right of relief arose from the same
transaction or series of transactions that had common questions of fact. 32 To avoid a multiplicity of
suits, joinder of parties is encouraged by the law.

The cause of action, however, does not affect the venue of the action. The vital issue in the
present case is whether the action against the sureties is covered by the restriction on venue
stipulated in the PN. As earlier stated, the answer is in the affirmative. Since the cases pertaining
to both causes of action are restricted to Makati City as the proper venue, petitioner cannot rely on
Section 5 of Rule 2 of the Rules of Court.

Liberal Construction

Petitioner’s final plea for liberality in applying the rules on venue must be rejected. As earlier
discussed, the PN was a contract of adhesion. Ambiguities therein are to be construed against the
party that prepared the contract.33 On the same principle, petitioner can no longer disavow the
stipulation on venue, considering that it drafted the Surety Agreement. Besides, this alleged
technicality caused no miscarriage of substantial justice, as petitioner may refile the case.34 The
inconveniences brought about by its failure to observe the rules on venue sprang from its own
acts. Hence, it cannot blame the courts or anyone else for the resulting delay in the adjudication of
the merits of its cause.

WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED.

Costs against petitioner.

SO ORDERED.