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G.R. No. 119657. February 7, 1997

The Facts:

Kubota Agri-Machinery Philippines, Inc. and Unimasters

Conglomeration, Inc. entered into a Dealership Agreement for Sales and
Services of the former's products in Samar and Leyte Provinces.

The Agreement contained a stipulation that “All suits arising out of

this Agreement shall be filed with the proper Court of Quezon City.”

Five years later, Unimasters filed an action in the RTC of Tacloban

against Kubota, Reynaldo Go and Metrobank for damages and breach of
contracts, and injunction with prayer for temporary restraining order.

Kubota filed two motions, one for the dismissal of the case on the
ground of improper venue, the other prayed for the transfer of the injunction
hearing because its counsel is unavailable on the given date.

The court issued an order allowing the issuance of preliminary

injunction. Also, said court denied the motion to dismiss on the reason that
Unimasters’ place of business is in Tacloban City while Kubota’s principal
place of business is in Quezon City. In accordance with the Rules of Court,
the proper venue would either be Quezon City or Tacloban City at the
election of the plaintiff. Hence, the filing in the RTC of Tacloban is proper.

Kubota appealed to both orders on the grounds they were issued with
grave abuse of discretion in a special action for certiorari and prohibition
filed with the CA. Kubota asserted that RTC of Tacloban had no jurisdiction
was improperly laid.

The Court of Appeals decided in favor of Kubota and it held that: “the
stipulation respecting venue in its Dealership Agreement with Unimasters
did in truth limit the venue of all suits arising thereunder only and
exclusively to the proper courts of Quezon City.”

Subsequently, Unimasters filed a motion for reconsideration, but was

turned down by the appellate court.


Whether the venue stipulated in the contract has the effect of limiting the
venue to a specified place.

1.No. The Polytrade Corporation v. Blanco (1969) doctrine was applied in

the case at bar.

This doctrine enunciated that as long as the stipulation does not set
forth qualifying or restrictive words to indicate that the agreed place alone
and none other is the venue of the action, the parties do not lose the option of
choosing the venue. It has been settled that, in the absence of qualifying or
restrictive words, venue stipulations in a contract should be considered
merely as agreement on additional forum, not as limiting venue to the
specified place. Unless the parties make it clear, by employing categorical
and suitably limiting language, that they wish the venue of actions between
them be laid only and exclusively at a definite place, and to disregard the
prescriptions of Rule 4, agreements on venue are not to be regarded as
mandatory or restrictive, but merely permissive, or complementary of said

The record of the case at bar discloses that UNIMASTERS has its
principal place of business in Tacloban City, and KUBOTA, in Quezon City.
Under Rule 4, the venue of any personal action between them is "where the
defendant or any of the defendants resides or may be found, or where the
plaintiff or any of the plaintiffs resides, at the election of the plaintiff." In
other words, Rule 4 gives UNIMASTERS the option to sue KUBOTA for
breach of contract in the Regional Trial Court of either Tacloban City or
Quezon City.

The contract-in-question between them provides that "All suits arising out of
this Agreement shall be filed with/in the proper Courts of Quezon City,"
without mention of Tacloban City.

Absent additional words and expressions definitely and unmistakably

denoting the parties' desire and intention that actions between them should
be ventilated only at the place selected by them, Quezon City -- or other
contractual provisions clearly evincing the same desire and intention -- the
stipulation should be construed, not as confining suits between the parties
only to that one place, Quezon City, but as allowing suits either in Quezon
City or Tacloban City, at the option of the plaintiff (UNIMASTERS in this