CASE BRIEF NO. 2019-0043


“If the action is a personal action, the action shall be filed with the proper court 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.


CASE: Hygienic Packaging Corp.  vs. Nutri-asia, Inc., doing business under the name and Style of UFC Philippines [G.R. No. 201302, January 23, 2019]

PONENTE: Associate Justice Mario Victor F. Leonen

SUBJECT:

          A.       CIVIL LAW:
                  i.        Characteristics of Contracts – Autonomy/Freedom to Contract    (Article 1306)
                   ii.       Essential Requisites of Contracts – Consent (meeting of the minds)

          B.       REMEDIAL LAW:
                   i.        Venue – Definition
                                      – Rules on venue

FACTS:        Hygienic Packaging Corporation (Hygienic) is a domestic corporation that manufactures and sells packaging materials such as plastic bottles. Nutri-Asia, also a domestic corporation, manufactures, and distributes food products such as banana-based and tomato-based condiments, vinegar, soy sauce, and other sauces.

From 1998 to 2009, Hygienic supplied Nutri-Asia with plastic bottles for its banana catsup products. Every transaction was covered by a Purchase Order issued by Nutri-Asia. The Purchase Order contains terms and conditions, among which is an Arbitration clause which provides:

“13. Arbitration of all disputes arising in connection with this Contract shall be referred to an Arbitration Committee, in accordance with the Philippine Arbitration Law, composed of three members: xxx

For every purchase of plastic containers by Nutri-Asia, Hygienic issues Sales Invoices to cover these transactions. These Sales Invoices contains a stipulation that the parties submit themselves to the jurisdiction of the Courts of the City of Manila in any legal action arising out of their transactions.

On July 29, 2009, Hygienic filed a Complaint for sum of money against Nutri-Asia when the latter refused to pay for the plastic containers amounting to P9,737,674.62 despite oral and written demands. It instituted the case before the RTC of Manila.

In its Answer with Compulsory Counter-Claim, Nutri-Asia argued that the case should be dismissed for failure to comply with a condition precedent. It claimed that under the Terms and Conditions of the Purchase Orders, Hygienic should have first referred the matter to the Arbitration Committee. 

Further, Nutri-Asia alleged that the venue was also improperly laid since the RTC of Manila was not the proper venue for the institution of Hygienic’s personal action. The Complaint should have been filed either before the trial courts of San Pedro, Laguna or Pasig City, where the principal places of business of Hygienic and Nutri-Asia are located, respectively. The venue of actions as stated in the Sales Invoices could not bind Nutri-Asia since it did not give its express conformity to that stipulation.

The RTC of Manila held that the venue was properly laid. It considered the signatures of Nutri-Asia’s representatives in the Sales Invoices as the company’s concurrence that any dispute would be raised before the courts of Manila.

Nutri-Asia filed a Motion for Reconsideration. However, the RTC Manila denied the Motion.

Thus, Nutri-Asia filed a Petition for Certiorari before the Court of Appeals.

The Court of Appeals granted the Petition.

Hygienic filed a Motion for Reconsideration, but it was denied by the Court of Appeals.

Hence, Hygienic filed a Petition for Review on Certiorari against Nutri-Asia before the Supreme Court.

Hygienic maintains that the arbitration clause lacks the elements of a valid arbitration agreement because it was not properly subscribed, and the person who signed the Purchase Orders was only a messenger, not its authorized agent. Thus, the arbitration clause cannot bind Hygienic.

Hygienic argues that the Purchase Orders constitute Nutri-Asia’s offer to Hygienic to enter into a contract with it. Meanwhile, the Sales Invoices constitute Hygienic’s counter-offer rejecting the stipulation clause. Since the parties did not agree on the arbitration agreement, the arbitration clause is “inoperative and incapable of being performed, if not totally null and void.”

Hygienic also insists that the venue was properly laid when it filed the Complaint before the trial court in Manila. It claims that when Nutri-Asia accepted the Sales Invoices without protest, it adhered to the contract, which included the venue stipulation. Hygienic points out that the person who signed the Sales Invoices was a high-ranking officer of Nutri-Asia, not a mere messenger. By signing the Sales Invoices, Nutri-Asia’s representative bound the company to the venue stipulation.

On the other hand, Nutri-Asia contends that the arbitration clause is operative and capable of being performed. Aside from being in writing, both parties subscribed to the Terms and Conditions of the Purchase Orders. Hygienic’s acceptance of the Terms and Conditions, which included the arbitration clause, is “manifested by its issuance of the corresponding Sales Invoices, which made reference to the relevant Purchase Orders.” By reflecting in its Sales Invoices the serial numbers of Nutri-Asia’s Purchase Orders, Hygienic “effectively incorporated the Purchase Order and its contents into the Sales Invoice, including the arbitration clause.” For failing to refer the case to arbitration-a condition precedent before taking judicial action the case should be dismissed.

ISSUES:
A.       May the parties allowed to constitute stipulation on the venue or mode of dispute resolution?
          a.       Whether the provision on venue stipulations in the Sales Invoice is binding between Hygienic and Nutri-Asia.
          b.       Whether the arbitration clause in the Purchase Order binding between Hygienic and Nutri-Asia.

B.       Whether Hygienic’s complaint for sum of money was properly flied in RTC Manila.
          a.       Define venue.
          b.       What are the rules on venue of actions?

RULING:

A.       Parties are allowed to constitute any stipulation on the venue or mode of dispute resolution as part of their freedom to contract under Article 1306 of the Civil Code of the Philippines, which provides:

ARTICLE 1306. The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy.

Here, however, the parties failed to provide evidence of any contract, which could have contained stipulations on the venue of dispute resolution.

Upon examination of the Sales Invoices and the Purchase Orders, these documents cannot be considered as contracts that would bind the parties as to the venue of dispute resolution.

A closer look at the Sales Invoices issued by Hygienic reveal that above the signature of Nutri-Asia’s representative is the phrase, “Received the above goods in good order and condition.” Clearly, the purpose of Nutri-Asia’s representative in signing the Sales Invoices is merely to acknowledge that he or she has received the plastic containers in good condition. He or she did not affix his or her signature in any other capacity except as the recipient of the goods. To extend the effect of the signature by including the venue stipulation would be to stretch the intention of the signatory beyond his or her objective. Hence, Hygienic cannot bind Nutri-Asia to the other stipulations in the Sales Invoices.

On the other hand, a scrutiny of the Purchase Orders issued by Nutri-Asia also reveals that above the signature of Hygienic’s representative is the phrase “Acknowledged By Supplier.” Since the Purchase Orders indicated how many pieces of plastic containers Nutri-Asia wanted to order from Hygienic, the signatory merely affixed his or her signature to acknowledge Nutri-Asia’s order. Moreover, the Purchase Orders included a note stating that the “Purchase Order must be DULY acknowledged to facilitate payment.”

Thus, it was necessary for Hygienic’s representative to sign the document for the processing of payment. The act of signing the Purchase Orders, then, was limited to acknowledging Nutri-Asia’s order and facilitating the payment of the goods to be delivered. It did not bind Hygienic to the terms and conditions in the Purchase Orders, which included the arbitration clause.

Cathay Metal Corporation v. Laguna West Multi-Purpose Cooperative, Inc.[738 Phil. 37 (2014)] provides, “for there to be a contract, there must be a meeting of the minds between the parties.” Here, no evidence shows that Hygienic and Nutri-Asia had a meeting of minds and agreed to submit any future issue either to the trial court or to arbitration.

B.       The venue was improperly laid.

Since there is no contractual stipulation that can be enforced on the venue of dispute resolution, the venue of Hygienic’s personal action will be governed by the 1997 Revised Rules of Civil Procedure. Rule 4 provides:

xxxx
SECTION 2. Venue of Personal Actions. – All other actions may be commenced and tried 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.

In City of Lapu-Lapu v. Philippine Economic Zone Authority [748 Phil. 473 (2014)]: Venue is “the place of trial or geographical location in which an action or proceeding should be brought.”

The venue of an action depends on whether the action is a real or personal action. Should the action affect title to or possession of real property, or interest therein, it is a real action. The action should be filed in the proper court which has jurisdiction over the area wherein the real property involved, or a portion thereof, is situated. If the action is a personal action, the action shall be filed with the proper court 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.

An action for collection of sum of money is a personal action. Taking into account that no exception can be applied in this case, the venue, then, is “where the plaintiff or any of the principal plaintiffs resides, or where the defendant or any of the principal defendants resides, . . . at the election of the plaintiff.” For a corporation, its residence is considered “the place where its principal office is located as stated in its Articles of Incorporation.”[Pilipinas Shell Petroleum Corporation v. Royal Ferry Services, Inc., G.R. No. 188146, February 1, 2017].

Here, Hygienic’s principal place of business is in San Pedro, Laguna whereas, Nutri-Asia’s principal office is at Ortigas Center, Pasig City. Considering that the amount Hygienic claims falls within the jurisdiction of the RTC, Hygienic may file its Complaint for sum of money either in the RTC of San Pedro, Laguna or in the RTC of Pasig City. The filing in the RTC of Manila is improper.

The rules on venue, like the other procedural rules, are designed to insure a just and orderly administration of justice or the impartial and even-handed determination of every action and proceeding. Obviously, this objective will not be attained if the plaintiff is given unrestricted freedom to choose the court where he may file his complaint or petition. The choice of venue should not be left to the plaintiff’s whim or caprice [Ang v. Sps. Ang, 693 Phil. 106, 117(2012)].

Related CASE BrieFs:

a)       Cathay Metal Corp. v. Laguna West Multi-Purpose Coop., Inc. [738 Phil. 37 (2014)]
b)       Ang v. Sps. Ang, 693 Phil. 106, 117(2012)
c)       Pilipinas Shell Petroleum Corp. v. Royal Ferry Services, Inc., G.R. No. 188146, February 1, 2017
d)       City of Lapu-Lapu v. Philippine Economic Zone Authority [748 Phil. 473 (2014)]

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THINGS DECIDED:

A.       Parties are allowed to constitute any stipulation on the venue or mode of dispute resolution as part of their freedom to contract under Article 1306 of the Civil Code of the Philippines.

B.       For there to be a contract, there must be a meeting of the minds between the parties.

C.       Venue is “the place of trial or geographical location in which an action or proceeding should be brought.”

D.      The venue of an action depends on whether the action is a real or personal action. Should the action affect title to or possession of real property, or interest therein, it is a real action. The action should be filed in the proper court which has jurisdiction over the area wherein the real property involved, or a portion thereof, is situated.

E.       If the action is a personal action, the action shall be filed with the proper court 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.

F.       An action for collection of sum of money is a personal action.

G.      For a corporation, its residence is considered “the place where its principal office is located as stated in its Articles of Incorporation.”

H.      The rules on venue, like the other procedural rules, are designed to insure a just and orderly administration of justice or the impartial and even-handed determination of every action and proceeding. Obviously, this objective will not be attained if the plaintiff is given unrestricted freedom to choose the court where he may file his complaint or petition. The choice of venue should not be left to the plaintiff’s whim or caprice.

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