Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 166920 February 19, 2007

PACIFIC CONSULTANTS INTERNATIONAL ASIA, INC. and JENS PETER

HENRICHSEN, Petitioners,
vs.
KLAUS K. SCHONFELD, Respondent.

DECISION

CALLEJO, SR., J.:

Before us is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court of the
Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 76563. The CA decision reversed the
Resolution of the National Labor Relations Commission (NLRC) in NLRC NCR CA No. 029319-01,
which, in turn, affirmed the Decision of the Labor Arbiter in NLRC NCR Case No. 30-12-04787-00
dismissing the complaint of respondent Klaus K. Schonfeld.

The antecedent facts are as follows:

Respondent is a Canadian citizen and was a resident of New Westminster, British Columbia,
Canada. He had been a consultant in the field of environmental engineering and water supply and
sanitation. Pacicon Philippines, Inc. (PPI) is a corporation duly established and incorporated in
accordance with the laws of the Philippines. The primary purpose of PPI was to engage in the
business of providing specialty and technical services both in and out of the Philippines.2 It is a
subsidiary of Pacific Consultants International of Japan (PCIJ). The president of PPI, Jens Peter
Henrichsen, who was also the director of PCIJ, was based in Tokyo, Japan. Henrichsen commuted
from Japan to Manila and vice versa, as well as in other countries where PCIJ had business.

In 1997, PCIJ decided to engage in consultancy services for water and sanitation in the Philippines.
In October 1997, respondent was employed by PCIJ, through Henrichsen, as Sector Manager of PPI
in its Water and Sanitation Department. However, PCIJ assigned him as PPI sector manager in the
Philippines. His salary was to be paid partly by PPI and PCIJ.

On January 7, 1998, Henrichsen transmitted a letter of employment to respondent in Canada,

requesting him to accept the same and affix his conformity thereto. Respondent made some
revisions in the letter of employment and signed the contract.3 He then sent a copy to Henrichsen.
The letter of employment reads:

Mr. Klaus K. Schonfeld

II-365 Ginger Drive
New Westminster, B.C.
Canada V3L 5L5
Tokyo 7

January 1998
Dear Mr. Schonfeld,

Letter of Employment

This Letter of Employment with the attached General Conditions of Employment constitutes the
agreement under which you will be engaged by our Company on the terms and conditions defined
hereunder. In case of any discrepancies or contradictions between this Letter of Employment and
the General Conditions of Employment, this Letter of Employment will prevail.

You will, from the date of commencement, be ["seconded"] to our subsidiary Pacicon Philippines,
Inc. in Manila, hereinafter referred as Pacicon. Pacicon will provide you with a separate contract,
which will define that part of the present terms and conditions for which Pacicon is responsible. In
case of any discrepancies or contradictions between the present Letter of Employment and the
contract with Pacicon Philippines, Inc. or in the case that Pacicon should not live up to its
obligations, this Letter of Employment will prevail.

1. Project Country: The Philippines with possible short-term assignments in other countries.

2. Duty Station: Manila, the Philippines.

3. Family Status: Married.

4. Position: Sector Manager, Water and Sanitation.

5. Commencement: 1st October 1997.

6. Remuneration: US$7,000.00 per month. The amount will be paid partly as a local salary
(US$2,100.00 per month) by Pacicon and partly as an offshore salary (US$4,900.00) by PCI
to bank accounts to be nominated by you.

A performance related component corresponding to 17.6% of the total annual remuneration,

subject to satisfactory performance against agreed tasks and targets, paid offshore.

7. Accommodation: The company will provide partly furnished accommodation to a rent

including association fees, taxes and VAT not exceeding the Pesos equivalent of
US$2,900.00 per month.

8. Transportation: Included for in the remuneration.

9. Leave Travels: You are entitled to two leave travels per year.

10. Shipment of Personal

Effects: The maximum allowance is US$4,000.00.

11. Mobilization

Travel: Mobilization travel will be from New Westminster, B.C., Canada.

This letter is send (sic) to you in duplicate; we kindly request you to sign and return one copy to us.
Yours sincerely,

Pacific Consultants International

Jens Peter Henrichsen

Above terms and conditions accepted

Date: 2 March 1998

(Sgd.)
Klaus Schonfeld

as annotated and initialed4

Section 21 of the General Conditions of Employment appended to the letter of employment reads:

21 Arbitration

Any question of interpretation, understanding or fulfillment of the conditions of employment, as well

as any question arising between the Employee and the Company which is in consequence of or
connected with his employment with the Company and which can not be settled amicably, is to be
finally settled, binding to both parties through written submissions, by the Court of Arbitration in
London.5

Respondent arrived in the Philippines and assumed his position as PPI Sector Manager. He was
accorded the status of a resident alien.

As required by Rule XIV (Employment of Aliens) of the Omnibus Rules Implementing the Labor
Code, PPI applied for an Alien Employment Permit (Permit) for respondent before the Department of
Labor and Employment (DOLE). It appended respondents contract of employment to the
application.
1aw phi 1.net

On February 26, 1999, the DOLE granted the application and issued the Permit to respondent. It
reads:

Republic of the Philippines

Department of Labor & Employment
National Capital Region

ALIEN EMPLOYMENT PERMIT

ISSUED TO: SCHONFELD, KLAUS KURT

DATE OF BIRTH: January 11, 1942 NATIONALITY: Canadian

POSITION: VP WATER & SANITATION

EMPLOYER: PACICON PHILIPPINES, INC.

ADDRESS: 27/F Rufino Pacific Towers Bldg., Ayala Ave., Makati City
 PERMIT

ISSUED ON: February 26, 1999 SIGNATURE OF BEARER:

VALID UNTIL: January 7, 2000 (Sgd.)

APPROVED: BIENVENIDO S. LAGUESMA

By: MAXIMO B. ANITO

REGIONAL DIRECTOR

(Emphasis supplied)6

Respondent received his compensation from PPI for the following periods: February to June 1998,
November to December 1998, and January to August 1999. He was also reimbursed by PPI for the
expenses he incurred in connection with his work as sector manager. He reported for work in Manila
except for occasional assignments abroad, and received instructions from Henrichsen.7

On May 5, 1999, respondent received a letter from Henrichsen informing him that his employment
had been terminated effective August 4, 1999 for the reason that PCIJ and PPI had not been
successful in the water and sanitation sector in the Philippines.8 However, on July 24, 1999,
Henrichsen, by electronic mail,9 requested respondent to stay put in his job after August 5, 1999,
until such time that he would be able to report on certain projects and discuss all the opportunities he
had developed.10 Respondent continued his work with PPI until the end of business hours on
October 1, 1999.

Respondent filed with PPI several money claims, including unpaid salary, leave pay, air fare from
Manila to Canada, and cost of shipment of goods to Canada. PPI partially settled some of his claims
(US$5,635.99), but refused to pay the rest.

On December 5, 2000, respondent filed a Complaint11 for Illegal Dismissal against petitioners PPI
and Henrichsen with the Labor Arbiter. It was docketed as NLRC-NCR Case No. 30-12-04787-00.

In his Complaint, respondent alleged that he was illegally dismissed; PPI had not notified the DOLE
of its decision to close one of its departments, which resulted in his dismissal; and they failed to
notify him that his employment was terminated after August 4, 1999. Respondent also claimed for
separation pay and other unpaid benefits. He alleged that the company acted in bad faith and
disregarded his rights. He prayed for the following reliefs:

1. Judgment be rendered in his favor ordering the respondents to reinstate complainant to

his former position without loss of seniority and other privileges and benefits, and to pay his
full backwages from the time compensation was with held (sic) from him up to the time of his
actual reinstatement. In the alternative, if reinstatement is no longer feasible, respondents
must pay the complainant full backwages, and separation pay equivalent to one month pay
for every year of service, or in the amount of US$16,400.00 as separation pay;

2. Judgment be rendered ordering the respondents to pay the outstanding monetary

obligation to complainant in the amount of US$10,131.76 representing the balance of unpaid
salaries, leave pay, cost of his air travel and shipment of goods from Manila to Canada; and
 3. Judgment be rendered ordering the respondent company to pay the complainant damages
in the amount of no less than US $10,000.00 and to pay 10% of the total monetary award as
attorneys fees, and costs.

Other reliefs just and equitable under the premises are, likewise, prayed for.12 1aw phi 1.net

Petitioners filed a Motion to Dismiss the complaint on the following grounds: (1) the Labor Arbiter
had no jurisdiction over the subject matter; and (2) venue was improperly laid. It averred that
respondent was a Canadian citizen, a transient expatriate who had left the Philippines. He was
employed and dismissed by PCIJ, a foreign corporation with principal office in Tokyo, Japan. Since
respondents cause of action was based on his letter of employment executed in Tokyo, Japan dated
January 7, 1998, under the principle of lex loci contractus, the complaint should have been filed in
Tokyo, Japan. Petitioners claimed that respondent did not offer any justification for filing his
complaint against PPI before the NLRC in the Philippines. Moreover, under Section 12 of the
General Conditions of Employment appended to the letter of employment dated January 7, 1998,
complainant and PCIJ had agreed that any employment-related dispute should be brought before
the London Court of Arbitration. Since even the Supreme Court had already ruled that such an
agreement on venue is valid, Philippine courts have no jurisdiction.13

Respondent opposed the Motion, contending that he was employed by PPI to work in the Philippines
under contract separate from his January 7, 1998 contract of employment with PCIJ. He insisted that
his employer was PPI, a Philippine-registered corporation; it is inconsequential that PPI is a wholly-
owned subsidiary of PCIJ because the two corporations have separate and distinct personalities;
and he received orders and instructions from Henrichsen who was the president of PPI. He further
insisted that the principles of forum non conveniens and lex loci contractus do not apply, and that
although he is a Canadian citizen, Philippine Labor Laws apply in this case.

Respondent adduced in evidence the following contract of employment dated January 9, 1998 which
he had entered into with Henrichsen:

Mr. Klaus K. Schonfeld

II-365 Ginger Drive

New Westminster, B.C.
Canada V3L 5L5

Manila 9 January, 1998

Dear Mr. Schonfeld,

Letter of Employment

This Letter of Employment with the attached General Conditions of Employment constitutes the
agreement, under which you will be engaged by Pacicon Philippines, Inc. on the terms and
conditions defined hereunder.

1. Project Country: The Philippines with possible assignments in other countries.

2. Duty Station: Manila, the Philippines.

3. Family Status: Married.

 4. Position: Sector Manager Water and Sanitation Sector.

5. Commencement: 1 January, 1998.

6. Remuneration: US$3,100.00 per month payable to a bank account to be nominated by

you.

7. Accommodation: The company will provide partly furnished accommodation to a rent

including association fees, taxes and VAT not exceeding the Pesos equivalent of
US$2300.00 per month.

8. Transportation: Included for in the remuneration.

9. Shipment of Personal The maximum allowance is US$2500.00 in Effects: connection with

initial shipment of personal effects from Canada.

10. Mobilization Travel: Mobilization travel will be from New Westminster, B.C., Canada.

This letter is send (sic) to you in duplicate; we kindly request you to sign and return one copy to us.

Yours sincerely,

Pacicon Philippines, Inc.

Jens Peter Henrichsen
President14

According to respondent, the material allegations of the complaint, not petitioners defenses,
determine which quasi-judicial body has jurisdiction. Section 21 of the Arbitration Clause in the
General Conditions of Employment does not provide for an exclusive venue where the complaint
against PPI for violation of the Philippine Labor Laws may be filed. Respondent pointed out that PPI
had adopted two inconsistent positions: it was first alleged that he should have filed his complaint in
Tokyo, Japan; and it later insisted that the complaint should have been filed in the London Court of
Arbitration.15

In their reply, petitioners claimed that respondents employer was PCIJ, which had exercised
supervision and control over him, and not PPI. Respondent was dismissed by PPI via a letter of
Henrichsen under the letterhead of PCIJ in Japan.16 The letter of employment dated January 9, 1998
which respondent relies upon did not bear his (respondents) signature nor that of Henrichsen.

On August 2, 2001, the Labor Arbiter rendered a decision granting petitioners Motion to Dismiss.
The dispositive portion reads:

WHEREFORE, finding merit in respondents Motion to Dismiss, the same is hereby granted. The
instant complaint filed by the complainant is dismissed for lack of merit.

SO ORDERED.17

The Labor Arbiter found, among others, that the January 7, 1998 contract of employment between
respondent and PCIJ was controlling; the Philippines was only the "duty station" where Schonfeld
was required to work under the General Conditions of Employment. PCIJ remained respondents
employer despite his having been sent to the Philippines. Since the parties had agreed that any
differences regarding employer-employee relationship should be submitted to the jurisdiction of the
court of arbitration in London, this agreement is controlling.

On appeal, the NLRC agreed with the disquisitions of the Labor Arbiter and affirmed the latters
decision in toto.18

Respondent then filed a petition for certiorari under Rule 65 with the CA where he raised the
following arguments:

WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION
GRAVELY ABUSED ITS DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION
WHEN IT AFFIRMED THE LABOR ARBITERS DECISION CONSIDERING THAT:

A. PETITIONERS TRUE EMPLOYER IS NOT PACIFIC CONSULTANTS INTERNATIONAL OF

JAPAN BUT RESPONDENT COMPANY, AND THEREFORE, THE LABOR ARBITER HAS
JURISDICTION OVER THE INSTANT CASE; AND

B. THE PROPER VENUE FOR THE PRESENT COMPLAINT IS THE ARBITRATION BRANCH OF
THE NLRC AND NOT THE COURT OF ARBITRATION IN LONDON.

II

WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION
GRAVELY ABUSED ITS DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION
WHEN IT AFFIRMED THE DISMISSAL OF THE COMPLAINT CONSIDERING THAT
PETITIONERS TERMINATION FROM EMPLOYMENT IS ILLEGAL:

A. THE CLOSURE OF RESPONDENT COMPANYS WATER AND SANITATION SECTOR

WAS NOT BONA FIDE.

B. ASSUMING ARGUENDO THAT THE CLOSURE OF RESPONDENT COMPANYS

WATER AND SANITATION SECTOR WAS JUSTIFIABLE, PETITIONERS DISMISSAL
WAS INEFFECTUAL AS THE DEPARTMENT OF LABOR AND EMPLOYMENT (DOLE)
AND PETITIONER WAS NOT NOTIFIED THIRTY (30) DAYS BEFORE THE ALLEGED
CLOSURE.19

Respondent averred that the absence or existence of a written contract of employment is not
decisive of whether he is an employee of PPI. He maintained that PPI, through its president
Henrichsen, directed his work/duties as Sector Manager of PPI; proof of this was his letter-proposal
to the Development Bank of the Philippines for PPI to provide consultancy services for the
Construction Supervision of the Water Supply and Sanitation component of the World Bank-Assisted
LGU Urban Water and Sanitation Project.20 He emphasized that as gleaned from Alien Employment
Permit (AEP) No. M-029908-5017 issued to him by DOLE on February 26, 1999, he is an employee
of PPI. It was PPI president Henrichsen who terminated his employment; PPI also paid his salary
and reimbursed his expenses related to transactions abroad. That PPI is a wholly-owned subsidiary
of PCIJ is of no moment because the two corporations have separate and distinct personalities.

The CA found the petition meritorious. Applying the four-fold test21 of determining an employer-
employee relationship, the CA declared that respondent was an employee of PPI. On the issue of
venue, the appellate court declared that, even under the January 7, 1998 contract of employment,
the parties were not precluded from bringing a case related thereto in other venues. While there
was, indeed, an agreement that issues between the parties were to be resolved in the London Court
of Arbitration, the venue is not exclusive, since there is no stipulation that the complaint cannot be
filed in any other forum other than in the Philippines.

On November 25, 2004, the CA rendered its decision granting the petition, the decretal portion of
which reads:

WHEREFORE, the petition is GRANTED in that the assailed Resolutions of the NLRC are hereby
REVERSED and SET ASIDE. Let this case be REMANDED to the Labor Arbiter a quo for
disposition of the case on the merits.

SO ORDERED.22

A motion for the reconsideration of the above decision was filed by PPI and Henrichsen, which the
appellate court denied for lack of merit.23

In the present recourse, PPI and Henrichsen, as petitioners, raise the following issues:

THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT AN EMPLOYMENT

RELATIONSHIP EXISTED BETWEEN PETITIONERS AND RESPONDENT DESPITE THE
UNDISPUTED FACT THAT RESPONDENT, A FOREIGN NATIONAL, WAS HIRED ABROAD BY A
FOREIGN CORPORATION, EXECUTED HIS EMPLOYMENT CONTRACT ABROAD, AND WAS
MERELY "SECONDED" TO PETITIONERS SINCE HIS WORK ASSIGNMENT WAS IN MANILA.

II

THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT THE LABOR ARBITER A QUO
HAS JURISDICTION OVER RESPONDENTS CLAIM DESPITE THE UNDISPUTED FACT THAT
RESPONDENT, A FOREIGN NATIONAL, WAS HIRED ABROAD BY A FOREIGN CORPORATION,
EXECUTED HIS EMPLOYMENT CONTRACT ABROAD, AND HAD AGREED THAT ANY DISPUTE
BETWEEN THEM "SHALL BE FINALLY SETTLED BY THE COURT OF ARBITRATION IN
LONDON."24

Petitioners fault the CA for reversing the findings of the Labor Arbiter and the NLRC. Petitioners aver
that the findings of the Labor Arbiter, as affirmed by the NLRC, are conclusive on the CA. They
maintain that it is not within the province of the appellate court in a petition for certiorari to review the
facts and evidence on record since there was no conflict in the factual findings and conclusions of
the lower tribunals. Petitioners assert that such findings and conclusions, having been made by
agencies with expertise on the subject matter, should be deemed binding and conclusive. They
contend that it was the PCIJ which employed respondent as an employee; it merely seconded him to
petitioner PPI in the Philippines, and assigned him to work in Manila as Sector Manager. Petitioner
PPI, being a wholly-owned subsidiary of PCIJ, was never the employer of respondent.

Petitioners assert that the January 9, 1998 letter of employment which respondent presented to
prove his employment with petitioner PPI is of doubtful authenticity since it was unsigned by the
purported parties. They insist that PCIJ paid respondents salaries and only coursed the same
through petitioner PPI. PPI, being its subsidiary, had supervision and control over respondents
work, and had the responsibilities of monitoring the "daily administration" of respondent. Respondent
cannot rely on the pay slips, expenses claim forms, and reimbursement memoranda to prove that he
was an employee of petitioner PPI because these documents are of doubtful authenticity.

Petitioners further contend that, although Henrichsen was both a director of PCIJ and president of
PPI, it was he who signed the termination letter of respondent upon instructions of PCIJ. This is
buttressed by the fact that PCIJs letterhead was used to inform him that his employment was
terminated. Petitioners further assert that all work instructions came from PCIJ and that petitioner
PPI only served as a "conduit." Respondents Alien Employment Permit stating that petitioner PPI
was his employer is but a necessary consequence of his being "seconded" thereto. It is not sufficient
proof that petitioner PPI is respondents employer. The entry was only made to comply with the
DOLE requirements.

There being no evidence that petitioner PPI is the employer of respondent, the Labor Arbiter has no
jurisdiction over respondents complaint.

Petitioners aver that since respondent is a Canadian citizen, the CA erred in ignoring their claim that
the principlesof forum non conveniens and lex loci contractus are applicable. They also point out that
the principal office, officers and staff of PCIJ are stationed in Tokyo, Japan; and the contract of
employment of respondent was executed in Tokyo, Japan.

Moreover, under Section 21 of the General Conditions for Employment incorporated in respondents
January 7, 1998 letter of employment, the dispute between respondent and PCIJ should be settled
by the court of arbitration of London. Petitioners claim that the words used therein are sufficient to
show the exclusive and restrictive nature of the stipulation on venue.

Petitioners insist that the U.S. Labor-Management Act applies only to U.S. workers and employers,
while the Labor Code of the Philippines applies only to Filipino employers and Philippine-based
employers and their employees, not to PCIJ. In fine, the jurisdictions of the NLRC and Labor Arbiter
do not extend to foreign workers who executed employment agreements with foreign employers
abroad, although "seconded" to the Philippines.25

In his Comment,26 respondent maintains that petitioners raised factual issues in their petition which
are proscribed under Section 1, Rule 45 of the Rules of Court. The finding of the CA that he had
been an employee of petitioner PPI and not of PCIJ is buttressed by his documentary evidence
which both the Labor Arbiter and the NLRC ignored; they erroneously opted to dismiss his complaint
on the basis of the letter of employment and Section 21 of the General Conditions of Employment. In
contrast, the CA took into account the evidence on record and applied case law correctly.

The petition is denied for lack of merit.

It must be stressed that in resolving a petition for certiorari, the CA is not proscribed from reviewing
the evidence on record. Under Section 9 of Batas Pambansa Blg. 129, as amended by R.A. No.
7902, the CA is empowered to pass upon the evidence, if and when necessary, to resolve factual
issues.27 If it appears that the Labor Arbiter and the NLRC misappreciated the evidence to such an
extent as to compel a contrary conclusion if such evidence had been properly appreciated, the
factual findings of such tribunals cannot be given great respect and finality.28

Inexplicably, the Labor Arbiter and the NLRC ignored the documentary evidence which respondent
appended to his pleadings showing that he was an employee of petitioner PPI; they merely focused
on the January 7, 1998 letter of employment and Section 21 of the General Conditions of
Employment.
Petitioner PPI applied for the issuance of an AEP to respondent before the DOLE. In said
application, PPI averred that respondent is its employee. To show that this was the case, PPI
appended a copy of respondents employment contract. The DOLE then granted the application of
PPI and issued the permit.

It bears stressing that under the Omnibus Rules Implementing the Labor Code, one of the
requirements for the issuance of an employment permit is the employment contract. Section 5, Rule
XIV (Employment of Aliens) of the Omnibus Rules provides:

SECTION 1. Coverage. This rule shall apply to all aliens employed or seeking employment in the
Philippines and the present or prospective employers.

SECTION 2. Submission of list. All employers employing foreign nationals, whether resident or
non-resident, shall submit a list of nationals to the Bureau indicating their names, citizenship, foreign
and local address, nature of employment and status of stay in the Philippines.

SECTION 3. Registration of resident aliens. All employed resident aliens shall register with the
Bureau under such guidelines as may be issued by it.

SECTION 4. Employment permit required for entry. No alien seeking employment, whether as a
resident or non-resident, may enter the Philippines without first securing an employment permit from
the Ministry. If an alien enters the country under a non-working visa and wishes to be employed
thereafter, he may only be allowed to be employed upon presentation of a duly approved
employment permit.

SECTION 5. Requirements for employment permit applicants. The application for an employment
permit shall be accompanied by the following:

(a) Curriculum vitae duly signed by the applicant indicating his educational background, his
work experience and other data showing that he possesses technical skills in his trade or
profession.

(b) Contract of employment between the employer and the principal which shall embody the
following, among others:

1. That the non-resident alien worker shall comply with all applicable laws and rules
and regulations of the Philippines;

2. That the non-resident alien worker and the employer shall bind themselves to train
at least two (2) Filipino understudies for a period to be determined by the Minister;
and

3. That he shall not engage in any gainful employment other than that for which he
was issued a permit.

(c) A designation by the employer of at least two (2) understudies for every alien worker.
Such understudies must be the most ranking regular employees in the section or department
for which the expatriates are being hired to insure the actual transfer of technology.

Under Section 6 of the Rule, the DOLE may issue an alien employment permit based only on the
following:
 (a) Compliance by the applicant and his employer with the requirements of Section 2 hereof;

(b) Report of the Bureau Director as to the availability or non-availability of any person in the
Philippines who is competent and willing to do the job for which the services of the applicant
are desired;

(c) His assessment as to whether or not the employment of the applicant will redound to the
national interest;

(d) Admissibility of the alien as certified by the Commission on Immigration and Deportation;

(e) The recommendation of the Board of Investments or other appropriate government

agencies if the applicant will be employed in preferred areas of investments or in accordance
with the imperative of economic development.

Thus, as claimed by respondent, he had an employment contract with petitioner PPI; otherwise,
petitioner PPI would not have filed an application for a Permit with the DOLE. Petitioners are thus
estopped from alleging that the PCIJ, not petitioner PPI, had been the employer of respondent all
along.

We agree with the conclusion of the CA that there was an employer-employee relationship between
petitioner PPI and respondent using the four-fold test. Jurisprudence is firmly settled that whenever
the existence of an employment relationship is in dispute, four elements constitute the reliable
yardstick: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the
power of dismissal; and (d) the employers power to control the employees conduct. It is the so-
called "control test" which constitutes the most important index of the existence of the employer-
employee relationshipthat is, whether the employer controls or has reserved the right to control the
employee not only as to the result of the work to be done but also as to the means and methods by
which the same is to be accomplished. Stated otherwise, an employer-employee relationship exists
where the person for whom the services are performed reserves the right to control not only the end
to be achieved but also the means to be used in reaching such end.29 We quote with approval the
following ruling of the CA:

[T]here is, indeed, substantial evidence on record which would erase any doubt that the respondent
company is the true employer of petitioner. In the case at bar, the power to control and supervise
petitioners work performance devolved upon the respondent company. Likewise, the power to
terminate the employment relationship was exercised by the President of the respondent company.
It is not the letterhead used by the company in the termination letter which controls, but the person
who exercised the power to terminate the employee. It is also inconsequential if the second letter of
employment executed in the Philippines was not signed by the petitioner. An employer-employee
relationship may indeed exist even in the absence of a written contract, so long as the four elements
mentioned in the Mafinco case are all present.30

The settled rule on stipulations regarding venue, as held by this Court in the vintage case of
Philippine Banking Corporation v. Tensuan,31 is that while they are considered valid and enforceable,
venue stipulations in a contract do not, as a rule, supersede the general rule set forth in Rule 4 of the
Revised Rules of Court in the absence of qualifying or restrictive words. They should be considered
merely as an agreement or additional forum, not as limiting venue to the specified place. They are
not exclusive but, rather permissive. If the intention of the parties were to restrict venue, there must
be accompanying language clearly and categorically expressing their purpose and design that
actions between them be litigated only at the place named by them.32
In the instant case, no restrictive words like "only," "solely," "exclusively in this court," "in no other
court save ," "particularly," "nowhere else but/except ," or words of equal import were stated in
the contract.33 It cannot be said that the court of arbitration in London is an exclusive venue to bring
forth any complaint arising out of the employment contract.

Petitioners contend that respondent should have filed his Complaint in his place of permanent
residence, or where the PCIJ holds its principal office, at the place where the contract of
employment was signed, in London as stated in their contract. By enumerating possible venues
where respondent could have filed his complaint, however, petitioners themselves admitted that the
provision on venue in the employment contract is indeed merely permissive.

Petitioners insistence on the application of the principle of forum non conveniens must be rejected.
The bare fact that respondent is a Canadian citizen and was a repatriate does not warrant the
application of the principle for the following reasons:

First. The Labor Code of the Philippines does not include forum non conveniens as a ground
for the dismissal of the complaint.34

Second. The propriety of dismissing a case based on this principle requires a factual
determination; hence, it is properly considered as defense.35

Third. In Bank of America, NT&SA, Bank of America International, Ltd. v. Court of

Appeals,36 this Court held that:

x x x [a] Philippine Court may assume jurisdiction over the case if it chooses to do so; provided, that
the following requisites are met: (1) that the Philippine Court is one to which the parties may
conveniently resort to; (2) that the Philippine Court is in a position to make an intelligent decision as
to the law and the facts; and, (3) that the Philippine Court has or is likely to have power to enforce its
decision. x x x

Admittedly, all the foregoing requisites are present in this case.

WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. SP No.
76563 is AFFIRMED. This case is REMANDED to the Labor Arbiter for disposition of the case on the
merits. Cost against petitioners.

SO ORDERED.

SECOND DIVISION
MA. TERESA CHAVES BIACO, G.R. No. 161417
Petitioner,
Present:

QUISUMBING, J.,
Chairperson,
- versus - CARPIO,
CARPIO MORALES,
 TINGA, and
VELASCO, JR., JJ.
PHILIPPINE COUNTRYSIDE RURAL
BANK,
Respondent. Promulgated:
February 8, 2007

x----------------------------------------------------------------------------x

DECISION

TINGA, J.:

Petitioner, Ma. Teresa Chaves Biaco, seeks a review of the Decision[1] of the Court
of Appeals in CA-G.R. No. 67489 dated August 27, 2003, which denied her petition
for annulment of judgment, and the Resolution[2] dated December 15, 2003 which
denied her motion for reconsideration.

The facts as succinctly stated by the Court of Appeals are as follows:

Ernesto Biaco is the husband of petitioner Ma. Teresa Chaves

Biaco. While employed in the Philippine Countryside Rural Bank (PCRB)
as branch manager, Ernesto obtained several loans from the respondent
bank as evidenced by the following promissory notes:

Feb. 17, 1998 P 65,000.00

Mar. 18, 1998 30,000.00
May 6, 1998 60,000.00
May 20, 1998 350,000.00
July 30, 1998 155,000.00
Sept. 8, 1998 40,000.00
Sept. 8, 1998 120,000.00

As security for the payment of the said loans, Ernesto executed a

real estate mortgage in favor of the bank covering the parcel of land
described in Original Certificate of Title (OCT) No. P-14423. The real
estate mortgages bore the signatures of the spouses Biaco.
 When Ernesto failed to settle the above-mentioned loans on its due
date, respondent bank through counsel sent him a written demand
on September 28, 1999. The amount due as of September 30, 1999 had
already reached ONE MILLION EIGHTY THOUSAND SIX
HUNDRED SEVENTY SIX AND FIFTY CENTAVOS (P1,080,676.50).

The written demand, however, proved futile.

On February 22, 2000, respondent bank filed a complaint for

foreclosure of mortgage against the spouses Ernesto and Teresa Biaco
before the RTC of Misamis Oriental. Summons was served to the spouses
Biaco through Ernesto at his office (Export and Industry Bank) located at
Jofelmor Bldg., Mortola Street, Cagayan de Oro City.

Ernesto received the summons but for unknown reasons, he failed

to file an answer. Hence, the spouses Biaco were declared in default upon
motion of the respondent bank. The respondent bank was allowed to
present its evidence ex parte before the Branch Clerk of Court who was
then appointed by the court as Commissioner.

Arturo Toring, the branch manager of the respondent bank, testified

that the spouses Biaco had been obtaining loans from the bank since 1996
to 1998. The loans for the years 1996-1997 had already been paid by the
spouses Biaco, leaving behind a balance of P1,260,304.33 representing
the 1998 loans. The amount being claimed is inclusive of interests,
penalties and service charges as agreed upon by the parties. The appraisal
value of the land subject of the mortgage is only P150,000.00 as reported
by the Assessors Office.

Based on the report of the Commissioner, the respondent judge

ordered as follows:

WHEREFORE, judgment is hereby rendered ordering

defendants spouses ERNESTO R. BIACO and MA. THERESA
[CHAVES] BIACO to pay plaintiff bank within a period of not less
than ninety (90) days nor more than one hundred (100) days from
receipt of this decision the loan of ONE MILLION TWO
 HUNDRED SIXTY THOUSAND THREE HUNDRED FOUR
PESOS and THIRTY THREE CENTAVOS (P1,260,304.33) plus
litigation expenses in the amount of SEVEN THOUSAND SIX
HUNDRED FORTY PESOS (P7,640.00) and attorneys fees in the
amount of TWO HUNDRED FIFTY TWO THOUSAND THIRTY
PESOS and FORTY THREE CENTAVOS (P252,030.43) and cost
of this suit.

In case of non-payment within the period, the Sheriff of this

Court is ordered to sell at public auction the mortgaged Lot, a parcel
of registered land (Lot 35802, Cad. 237 {Lot No. 12388-B, Csd-
10-002342-D}), located at Gasi, Laguindingan, Misamis Oriental
and covered by TCT No. P-14423 to satisfy the mortgage debt, and
the surplus if there be any should be delivered to the defendants
spouses ERNESTO and MA. THERESA [CHAVES] BIACO. In
the event however[,] that the proceeds of the auction sale of the
mortgage[d] property is not enough to pay the outstanding
obligation, the defendants are ordered to pay any deficiency of the
judgment as their personal liability.

SO ORDERED.

On July 12, 2000, the sheriff personally served the above-

mentioned judgment to Ernesto Biaco at his office at Export and Industry
Bank. The spouses Biaco did not appeal from the adverse decision of the
trial court. On October 13, 2000, the respondent bank filed an ex
parte motion for execution to direct the sheriff to sell the mortgaged lot at
public auction. The respondent bank alleged that the order of the court
requiring the spouses Biaco to pay within a period of 90 days had passed,
thus making it necessary to sell the mortgaged lot at public auction, as
previously mentioned in the order of the court. The motion for execution
was granted by the trial court per Order dated October 20, 2000.

On October 31, 2000, the sheriff served a copy of the writ of

execution to the spouses Biaco at their residence in #92
9th Street, Nazareth, Cagayan de Oro City. The writ of execution was
personally received by Ernesto. By virtue of the writ of execution issued
by the trial court, the mortgaged property was sold at public auction in
favor of the respondent bank in the amount of ONE HUNDRED FIFTY
THOUSAND PESOS (P150,000.00).
 The amount of the property sold at public auction being insufficient
to cover the full amount of the obligation, the respondent bank filed an ex
parte motion for judgment praying for the issuance of a writ of execution
against the other properties of the spouses Biaco for the full settlement of
the remaining obligation. Granting the motion, the court ordered that a
writ of execution be issued against the spouses Biaco to enforce and
satisfy the judgment of the court for the balance of ONE MILLION
THREE HUNDRED SIXTY NINE THOUSAND NINE HUNDRED
SEVENTY FOUR PESOS AND SEVENTY CENTAVOS
(P1,369,974.70).

The sheriff executed two (2) notices of levy against properties

registered under the name of petitioner Ma. Teresa Chaves Biaco.
However, the notices of levy were denied registration because Ma. Teresa
had already sold the two (2) properties to her daughters on April 11,
2001.[3]

Petitioner sought the annulment of the Regional Trial Court decision

contending that extrinsic fraud prevented her from participating in the judicial
foreclosure proceedings. According to her, she came to know about the judgment in
the case only after the lapse of more than six (6) months after its finality. She claimed
that extrinsic fraud was perpetrated against her because the bank failed to verify the
authenticity of her signature on the real estate mortgage and did not inquire into the
reason for the absence of her signature on the promissory notes. She moreover
asserted that the trial court failed to acquire jurisdiction because summons were
served on her through her husband without any explanation as to why personal
service could not be made.

The Court of Appeals considered the two circumstances that kept petitioner
in the dark about the judicial foreclosure proceedings: (1) the failure of the sheriff to
personally serve summons on petitioner; and (2) petitioners husbands concealment
of his knowledge of the foreclosure proceedings. On the validity of the service of
summons, the appellate court ruled that judicial foreclosure proceedings are
actions quasi in rem. As such, jurisdiction over the person of the defendant is not
essential as long as the court acquires jurisdiction over the res. Noting that the
spouses Biaco were not opposing parties in the case, the Court of Appeals further
ruled that the fraud committed by one against the other cannot be considered
extrinsic fraud.

Her motion for reconsideration having been denied, petitioner filed the instant
Petition for Review,[4] asserting that even if the action is quasi in rem, personal
service of summons is essential in order to afford her due process. The substituted
service made by the sheriff at her husbands office cannot be deemed proper service
absent any explanation that efforts had been made to personally serve summons upon
her but that such efforts failed. Petitioner contends that extrinsic fraud was
perpetrated not so much by her husband, who did not inform her of the judicial
foreclosure proceedings, but by the sheriff who allegedly connived with her husband
to just leave a copy of the summons intended for her at the latters office.

Petitioner further argues that the deficiency judgment is a personal judgment

which should be deemed void for lack of jurisdiction over her person.

Respondent PCRB filed its Comment,[5] essentially reiterating the appellate

courts ruling. Respondent avers that service of summons upon the defendant is not
necessary in actions quasi in rem it being sufficient that the court acquire
jurisdiction over the res. As regards the alleged conspiracy between petitioners
husband and the sheriff, respondent counters that this is a new argument which
cannot be raised for the first time in the instant petition.

We required the parties to file their respective memoranda in the

Resolution[6] dated August 18, 2004. Accordingly, petitioner filed her
Memorandum[7] dated October 10, 2004, while respondent filed its Memorandum
for Respondent[8] dated September 9, 2004.

Annulment of judgment is a recourse equitable in character, allowed only in

exceptional cases as where there is no available or other adequate
remedy. Jurisprudence and Sec. 2, Rule 47 of the 1997 Rules of Civil Procedure
(Rules of Court) provide that judgments may be annulled only on grounds of
extrinsic fraud and lack of jurisdiction or denial of due process.[9]

Petitioner asserts that extrinsic fraud consisted in her husbands concealment

of the loans which he obtained from respondent PCRB; the filing of the complaint
for judicial foreclosure of mortgage; service of summons; rendition of judgment by
default; and all other proceedings which took place until the writ of garnishment was
served.[10]

Extrinsic fraud exists when there is a fraudulent act committed by

the prevailing party outside of the trial of the case, whereby the defeated party was
prevented from presenting fully his side of the case by fraud or deception practiced
on him by the prevailing party.[11] Extrinsic fraud is present where the unsuccessful
party had been prevented from exhibiting fully his case, by fraud or deception
practiced on him by his opponent, as by keeping him away from court, a false
promise of a compromise; or where the defendant never had knowledge of the suit,
being kept in ignorance by the acts of the plaintiff; or where an attorney fraudulently
or without authority assumes to represent a party and connives at his defeat; or where
the attorney regularly employed corruptly sells out his clients interest to the other
side. The overriding consideration is that the fraudulent scheme of the prevailing
litigant prevented a party from having his day in court.[12]

With these considerations, the appellate court acted well in ruling that there
was no fraud perpetrated by respondent bank upon petitioner, noting that the spouses
Biaco were co-defendants in the case and shared the same interest. Whatever fact or
circumstance concealed by the husband from the wife cannot be attributed to
respondent bank.

Moreover, petitioners allegation that her signature on the promissory notes

was forged does not evince extrinsic fraud. It is well-settled that the use of forged
instruments during trial is not extrinsic fraud because such evidence does not
preclude the participation of any party in the proceedings.[13]

The question of whether the trial court has jurisdiction depends on the nature
of the action, i.e., whether the action is in personam, in rem, or quasi in rem. The
rules on service of summons under Rule 14 of the Rules of Court likewise apply
according to the nature of the action.

An action in personam is an action against a person on the basis of his

personal liability. An action in rem is an action against the thing itself instead of
against the person. An action quasi in rem is one wherein an individual is named as
defendant and the purpose of the proceeding is to subject his interest therein to the
obligation or lien burdening the property.[14]

In an action in personam, jurisdiction over the person of the defendant is

necessary for the court to validly try and decide the case. In a proceeding in
rem or quasi in rem, jurisdiction over the person of the defendant is not a
prerequisite to confer jurisdiction on the court provided that the court acquires
jurisdiction over the res. Jurisdiction over the res is acquired either (1) by the seizure
of the property under legal process, whereby it is brought into actual custody of the
law; or (2) as a result of the institution of legal proceedings, in which the power of
the court is recognized and made effective.[15]

Nonetheless, summons must be served upon the defendant not for the purpose
of vesting the court with jurisdiction but merely for satisfying the due process
requirements.[16]

A resident defendant who does not voluntarily appear in court, such as

petitioner in this case, must be personally served with summons as provided under
Sec. 6, Rule 14 of the Rules of Court. If she cannot be personally served with
summons within a reasonable time, substituted service may be effected (1) by
leaving copies of the summons at the defendants residence with some person of
suitable age and discretion then residing therein, or (2) by leaving the copies at
defendants office or regular place of business with some competent person in charge
thereof in accordance with Sec. 7, Rule 14 of the Rules of Court.

In this case, the judicial foreclosure proceeding instituted by respondent

PCRB undoubtedly vested the trial court with jurisdiction over the res. A judicial
foreclosure proceeding is an action quasi in rem. As such, jurisdiction over the
person of petitioner is not required, it being sufficient that the trial court is vested
with jurisdiction over the subject matter.

There is a dimension to this case though that needs to be delved

into. Petitioner avers that she was not personally served summons. Instead,
summons was served to her through her husband at his office without any
explanation as to why the particular surrogate service was resorted to. The Sheriffs
Return of Service dated March 21, 2000 states:
xxxx

That on March 16, 2000, the undersigned served the copies of

Summons, complaint and its annexes to the defendants Sps. Ernesto R. &
Ma. Teresa Ch. Biaco thru Ernesto R. Biaco[,] defendant of the above-
entitled case at his office EXPORT & INDUSTRY
BANK, Jofelmore Bldg.[,] Mortola St., Cagayan de Oro City and he
acknowledged receipt thereof as evidenced with his signature appearing
on the original copy of the Summons.[17] [Emphasis supplied]

Without ruling on petitioners allegation that her husband and the sheriff
connived to prevent summons from being served upon her personally, we can see
that petitioner was denied due process and was not able to participate in the judicial
foreclosure proceedings as a consequence. The violation of petitioners constitutional
right to due process arising from want of valid service of summons on her warrants
the annulment of the judgment of the trial court.

There is more, the trial court granted respondent PCRBs ex-parte motion for
deficiency judgment and ordered the issuance of a writ of execution against the
spouses Biaco to satisfy the remaining balance of the award. In short, the trial court
went beyond its jurisdiction over the res and rendered a personal judgment against
the spouses Biaco. This cannot be countenanced.

In Sahagun v. Court of Appeals,[18] suit was brought against a non-resident

defendant, Abelardo Sahagun, and a writ of attachment was issued and subsequently
levied on a house and lot registered in his name. Claiming ownership of the house,
his wife, Carmelita Sahagun, filed a motion to intervene. For failure of plaintiff to
serve summons extraterritorially upon Abelardo, the complaint was dismissed
without prejudice.

Subsequently, plaintiff filed a motion for leave to serve summons by

publication upon Abelardo. The trial court granted the motion. Plaintiff later filed an
amended complaint against Abelardo, this time impleading Carmelita and Rallye as
additional defendants. Summons was served on Abelardo through publication in
the Manila Evening Post. Abelardo failed to file an answer and was declared in
default. Carmelita went on certiorari to the Court of Appeals assailing as grave abuse
of discretion the declaration of default of Abelardo. The Court of Appeals dismissed
the petition and denied reconsideration.

In her petition with this Court, Carmelita raised the issue of whether the trial
court acquired jurisdiction over her husband, a non-resident defendant, by the
publication of summons in a newspaper of general circulation in the Philippines. The
Court sustained the correctness of extrajudicial service of summons by publication
in such newspaper.

The Court explained, citing El Banco Espaol-Filipino v. Palanca,[19] that

foreclosure and attachment proceedings are both actions quasi in rem. As such,
jurisdiction over the person of the (non-resident) defendant is not essential. Service
of summons on a non-resident defendant who is not found in the country is required,
not for purposes of physically acquiring jurisdiction over his person but simply in
pursuance of the requirements of fair play, so that he may be informed of the
pendency of the action against him and the possibility that property belonging to him
or in which he has an interest may be subjected to a judgment in favor of a resident,
and that he may thereby be accorded an opportunity to defend in the action, should
he be so minded.

Significantly, the Court went on to rule, citing De Midgely v. Ferandos, et.

al. and Perkins v. Dizon, et al.[21] that in a proceeding in rem or quasi in rem, the
[20]

only relief that may be granted by the court against a defendant over whose person
it has not acquired jurisdiction either by valid service of summons or by voluntary
submission to its jurisdiction, is limited to the res.

Similarly, in this case, while the trial court acquired jurisdiction over the res,
its jurisdiction is limited to a rendition of judgment on the res. It cannot extend its
jurisdiction beyond the res and issue a judgment enforcing petitioners personal
liability. In doing so without first having acquired jurisdiction over the person of
petitioner, as it did, the trial court violated her constitutional right to due process,
warranting the annulment of the judgment rendered in the case.

WHEREFORE, the instant petition is GRANTED. The Decision

dated August 27, 2003 and the Resolution dated December 15, 2003 of the Court of
Appeals in CA-G.R. SP No. 67489 are SET ASIDE. The Judgment dated July 11,
2000 and Order dated February 9, 2001 of the Regional Trial Court of Cagayan de
Oro City, Branch 20, are likewise SET ASIDE.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 175796 July 22, 2015

BPI FAMILY SAVINGS BANK INC., Petitioner,

vs.
SPOUSES BENEDICTO & TERESITA YUJUICO, Respondents,

DECISION

BERSAMIN, J.:

An action to recover the deficiency after extrajudicial foreclosure of a real property mortgage is a
personal action because it does not affect title to or possession of real property, or any interest
therein.

The Case

This appeal is taken by the petitioner to overturn the decision promulgated on March 31,
2006,1 whereby the Court of Appeals (CA) set aside the orders issued by the Regional Trial Court,
Branch 60, in Makati City (Makati RTC) on October 17, 2003 2 and February 1, 2005 3 dismissing

their action against the respondents to recover the deficiency after the extrajudicial foreclosure of
their mortgage (Civil Case No.03-450) on the ground of improper venue.

Antecedents

On August 22, 1996, the City of Manila filed a complaint against the respondents for the
expropriation of five parcels of land located in Tondo, Manila and registered in the name of
respondent Teresita Yujuico. Two of the parcels of land, covered by Transfer Certificate of Title
(TCT) No. 261331 and TCT No. 261332, were previously mortgaged to Citytrust Banking
Corporation, the petitioner's predecessor-in-interest, under a First Real Estate Mortgage
Contract.4On June 30, 2000, the Regional Trial Court in Manila (Manila RTC) rendered its judgment
declaring the five parcels of land expropriated for public use. The judgment became final and
executory on January 28, 2001 and was entered in the book of entries of judgment on March 23,
2001.5 The petitioner subsequently filed a Motion to Intervene in Execution with Partial Opposition to
Defendant's Request to Release, but the RTC denied the motion for having been "filed out of time."
Hence, the petitioner decided to extrajudicially foreclose the mortgage constituted on the two parcels
of land subject of the respondents' loan. After holding the public auction, the sheriff awarded the two
lots to the petitioner as the highest bidder at 10, 000, 000.00. 6

Claiming a deficiency amounting to Pl8, 522155.42, the pet1t1oner sued the respondents to recover
such deficiency in the Makati RTC (Civil Case No. 03-450). The respondents moved to dismiss the
1wphi1

complaint on several grounds, namely: that the suit was barred by res judicata; that the complaint
stated no cause of action; and that the plaintiffs claim had been waived, abandoned, or
extinguished. 7

In its order issued on October 17, 2003, the Makati RTC denied the respondents' motion to dismiss,
ruling that there was no res judicata; that the complaint stated a sufficient cause of action to recover
the deficiency; and that there was nothing to support the claim that the obligation had been
abandoned or extinguished apart from the respondents' contention that the properties had been
subjected to expropriation by the City of Manila.8

On November 4, 2003, the respondents moved for reconsideration, reiterating their grounds earlier
made in their motion to dismiss. 9

In turn, the petitioner adopted its comment/opposition to the motion to dismiss. 10

The respondents then filed their reply, 11 in which they raised for the first time their objection on the
ground of improper venue. They contended that the action for the recovery of the deficiency, being a
supplementary action of the extrajudicial foreclosure proceedings, was a real action that should have
been brought in the Manila RTC because Manila was the place where the properties were located.12

On February 1, 2005, the Makati RTC denied the respondents' motion for reconsideration for its lack
of merit; and held on the issue of improper venue that:

It would be improper for this Court to dismiss the plaintiffs complaint on the ground of improper
venue, assuming that the venue is indeed improperly laid, since the said ground was not raised in
the defendant's Motion to Dismiss. On this point, it was held in the case of Malig, et al. vs. Bush, L
22761, May 31, 1969 that "an action cannot be dismissed on a ground not alleged in the motion
therefore even if said ground, e.g., prescription, is provided in Rule 16. 13

Decision of the CA

Not satisfied, the respondents assailed the orders dated October 1 7, 2003 and February 1, 2005 by
petition for certiorari.14 They submitted for consideration by the CA the following issues, namely:

x x x (WHETHER OR NOT) RESPONDENT TRIAL COURT COMMITTED GRAVE ABUSE OF

DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT ISSUED ITS
ASSAILED ORDERS CONSIDERING THAT:

A THE COMPLAINT A QUO IS BARRED BY RES JUDICATA.

B. THE COMPLAINT STATED NO CAUSE OF ACTION.

C. PRIVATE RESPONDENT'S CLAIM HAS BEEN WAIVED, ABANDONED OR

OTHERWISE EXTINGUISHED.

D. VENUE WAS IMPROPERLY LAID. 15

On March 31, 2006, the CA granted the petition for certiorari of the respondents on the basis of the
fourth issue, opining:

xxxx

Thus, a suit for recovery of the deficiency after the foreclosure of a mortgage is in the nature of a
mortgage action because its purpose is precisely to enforce the mortgage contract; it is upon a
written contract and upon an obligation of the mortgage-debtor to pay the deficiency which is created
by law. As such, the venue of an action for recovery of deficiency must necessarily be the same
venue as that of the extrajudicial foreclosure of mortgage.

xxxx

In this regard, We take note that the parcels of land subject of the mortgage contract are located in
Tondo, Manila, under Transfer Certificates of Title Nos. 216331 and 216332. On the other hand, the
extrajudicial foreclosure of the real estate mortgage took place at the R TC of Manila on January 28,
2003. Thus, the suit for judgment on the deficiency filed by respondent BPI against petitioners
Yujuico, being an action emanating from the foreclosure of the real estate mortgage contract
between them, must necessarily be filed also at the RTC of Manila, not at the RTC of Makati.

x x x x 16

The CA denied the respondents' Motion for Partial Reconsideration and the petitioner's Partial
Motion for Reconsideration on December 7, 2006.17

Issues

Hence, this appeal by the petitioner, to assail the CA's dismissal of Civil Case No. 03-450 on the
ground of improper venue upon the following grounds,18 namely:

I.

WHETHER OR NOT THE HONORA.BLE COURT OF APPEALS' DENIAL OF THE PETITIONER'S

PARTIAL MOTION FOR RECONSIDERATION ON THE GROUND OF IMPROPER VENUE AS A
RESULT DISMISSED THE COMPLAINT FOR SUM OF MONEY IS CONTRARY TO LAW.

II.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS['] ACT OF APPRECIATING THE

ADDITIONAL GROUND OF IMPROPER VENUE, ONLY RAISED IN THE MOTION FOR
RECONSIDERATION FILED IN THE LOWER COURT AFTER IT DENIED RESPONDENTS'
MOTION TO DISMISS, IS CONTRARY TO LAW AND JURISPRUDENCE.19

Ruling of the Court

We grant the petition for review on certiorari.

It is basic that the venue of an action depends on whether it is a real or a personal action. The
determinants of whether an action is of a real or a personal nature have been fixed by the Rules of
Court and relevant jurisprudence. According to Section 1, Rule 4 of the Rules of Court, a real action
is one that affects title to or possession of real property, or an interest therein. Thus, an action for
partition or condemnation of, or foreclosure of mortgage on, real property is a real action. 20 The real
action is to be commenced and tried in the proper court having jurisdiction over the area wherein the
real property involved, or a portion thereof, is situated, which explains why the action is also referred
to as a local action. In contrast, the Rules of Court declares all other actions as personal
actions. 21 such actions may include those brought for the recovery of personal property, or for the
enforcement of some contract or recovery of damages for its breach, or for the recovery of damages
for the commission of an injury to the person or property.22 The venue of a personal action is the
place where the plaintiff or any of the principal plaintiffs resides, or where the defendant or any of the
principal defendants resides, or in the case of a non-resident defendant where he may be found, at
the election of the plaintiff, 23 for which reason the action is considered a transitory one.

Based on the distinctions between real and personal actions, an action to recover the deficiency
after the extrajudicial foreclosure of the real property mortgage is a personal action, for it does not
affect title to or possession of real property, or any interest therein.

It is true that the Court has said in Caltex Philippines, Inc. v. Intermediate Appellate Court 24 that "a
suit for the recovery of the deficiency after the foreclosure of a mortgage is in the nature of a
mortgage action because its purpose is precisely to enforce the mortgage contract." However, the
CA erred in holding, upon the authority of Caltex Philippines, Inc., that the venue of Civil Case No.
03 450 must necessarily be Manila, the same venue as that of the extrajudicial foreclosure of
mortgage. An examination of Caltex Philippines, Inc. reveals that the Court was thereby only
interpreting the prescriptive period within which to bring the suit for the recovery of the deficiency
after the foreclosure of the mortgage, and was not at all ruling therein on the venue of such suit or on
the nature of such suit being either a real or a personal action.

Given the foregoing, the petitioner correctly brought Civil Case No.03-450 in the Makati RTC
because Makati was the place where the main office of the petitioner was located. 1avv phi1

Moreover, the Makati RTC observed, and the observation is correct in our view, that it would be
improper to dismiss Civil Case No. 03-450 on the ground of improper venue, assuming that the
venue had been improperly laid, considering that the respondents had not raised such ground in
their Motion to Dismiss. As earlier indicated, they came to raise the objection of improper venue for
the first time only in their reply to the petitioner's comment on their Motion for Reconsideration. They
did so belatedly.

We underscore that in civil proceedings, venue is procedural, not jurisdictional, and may be waived
by the defendant if not seasonably raised either in a motion to dismiss or in the answer.25 Section 1,
Rule 9 of the Rules of Court thus expressly stipulates that defenses and objections not pleaded
either in a motion to dismiss or in the answer are deemed waived. As it relates to the place of trial,
indeed, venue is meant to provide convenience to the parties, rather than to restrict their access to
the courts.26 In other words, unless the defendant seasonably objects, any action may be tried by a
court despite its being the improper venue.

WHEREFORE, we GRANT the petition for review on certiorari; REVERSE and SET ASIDE the
decision promulgated by the Court of Appeals on March 31, 2006; REINSTATE the orders dated
October 17, 2003 and February 1, 2005 of the Regional Trial Court, Branch 60, in Makati City;
and ORDER the respondents to pay the costs of suit.

SO ORDERED.