G.R. No. 146595. June 20, 2003 CARLO A. TAN, petitioner, vs. KAAKBAY FINANCE CORPORATION, DENNIS S. LAZARO and ROLDAN M. NOYNAY, respondents.

TOPIC: COMPULSORY COUNTERCLAIM – TEST OF COMPULSORINESS

NATURE OF THE CASE: In elevating this case to the SC, Tan prays for the SC to reverse and set aside the decision of the CA against him, which, among others, is the admission of Kaakbay’s Answer with Counterclaims and consequently declaring such as a compulsory counterclaim.

FACTS: Carlo Tan obtained a loan of P4 million from Kaakbay Finance Corporation as represented by its president, Dennis Lazaro. To secure the loan, Tan mortgaged his land with the improvements therein which is located at Laguna. The loan was released to him in 2 installments.

TAN: He alleged that the stipulated interest rate of 12 % per annum until fully paid was not stated in the mortgage he signed it on, and that he was not furnished copy of the mortgage contract.

           

            The following year, Tan failed to pay his obligation. He claimed that Kaakbay informed him that his obligation had reached P5,570,000 because the actual interest was 0.3925% for a period of less than one year instead of the agreed-upon interest of 12% per annum. Tan was also allegedly made to issue two postdated checks to guarantee his obligation; the first one was valued at P5,570,000.00, while the second is worth P6,175,000.00.

Moreover, he claims that he negotiated with Kaakbay for a further extension of time to pay his obligation, which the latter agreed to.  It was agreed that petitioner and Kaakbay would sign, execute, and acknowledge a Deed of Sale under Pacto de Retro upon the expiration of a two-year period.  He was then given a blank Deed of Sale Under Pacto de Retro which he signed. His suspicions that Kaakbay was charging him usurious rates of interest were confirmed when he obtained a Statement of Account stating that his obligation had now reached P13,333,750.00.

Later, he learned of the existence of an accomplished Deed of Sale Under Pacto de Retro, which appeared that the same was signed by him and his wife Maria Rosario Delmo Tan, on one hand, and private respondent Lazaro on the other, and was allegedly notarized by private respondent Atty. Roldan M. Noynay. But, he asserts that he, his wife, and their witness Charito Morales did not sign it on the alleged date, nor did they execute it before Atty. Noynay or any other notary public.

So, he filed a complaint against Kaakbay, et.al. praying for his obligation to Kaakbay Finance Corporation be subject to interest of only 12% per annum from November 23, 1995; that the promissory notes attached to his Real Estate Mortgage be declared void; that the Deed of Sale Under Pacto de Retro be declared unenforceable; and that respondents pay moral and exemplary damages as well as attorney’s fees. Additionally, Tan also filed a Notice of Lis Pendens which was annotated on the title of the mortgaged lot. 

KAAKBAY, ET.AL.: Filed a ‘Consolidated Answer With Compulsory Counterclaim And Opposition To Temporary Restraining Order (TRO) and Preliminary Injunction.’

RTC: It issued an order granting an agreement by the parties that Tan would withdraw his TRO, and in turn, Kaakbay will hold in abeyance the registration of the Deed of Sale Under Pacto de Retro until the case was terminated.  

Kaakbay: Later, another law firm handled their case and they moved for an extension of time to file an Answer, and also moved for the withdrawal of the ‘Consolidated Answer’ filed by Atty. Noynay insofar as respondents Kaakbay and Lazaro are concerned. Further, they also filed a ‘Supplemental Opposition To The Prayer For Preliminary Injunction Or To Temporary Injunction.’

Then, they filed their Answer with Counterclaim, praying that petitioner pay them P4 million pesos representing the principal amount of the loan, P9,333,750.00 representing the ‘compounded monthly interest and annual penalty interest’, P250,000.00 as litigation expenses, and P500,000.00 as attorney’s fees.

In addition, they filed a Motion for Admission of Counterclaim Without Payment of Fees, on the ground that their counterclaim is compulsory in nature, hence it may be admitted without payment of fees.

TAN: He filed an urgent motion to expunge Kaakbay’s Answer with Counterclaim and Motion for Admission of Counterclaim on the ground that while Kaakbay is being represented by a new law firm, it didn’t state if said law firm is in collaboration with or in substitution of their previous counsel, respondent Atty. Roldan M. Noynay.  Thus, he is pointing out that the rules concerning the change or substitution of counsel of a party litigant had not been properly complied with by Kaakbay, et.al. and thus the motions filed by the said law firm should be expunged.  

Further, the Answer with Counterclaim should not be admitted, as it partook of the nature of a permissive counterclaim, which required the payment of the prescribed filing fees; and since the fees were not paid, the lower court did not acquire jurisdiction over said Answer.

RTC: Through an order, it granted Kaakbay’s motion for admission of counterclaim without payment of fees.

TAN: Filed a “Supplemental Motion by Way of Motion for Reconsideration” but this was denied. So, he filed an appeal to the CA questioning the admission of the answer with counterclaim alleging that it is permissive; hence, it needs the correct filing fees. Since Kaakbay did not pay the necessary filing fees, then, the RTC did not acquire jurisdiction over the answer with counterclaim.

CA: Denied the appeal.

ISSUE: WON the counterclaims of Kaakbay are compulsory in nature.

TAN: Since Kaakbay demand the payment of the loan and the interests pursuant to the contract of loan, it is completely inconsistent with his claim that subject documents were a nullity. Thus, the counterclaim cannot be deemed compulsory. 

KAAKBAY: They contend that their counterclaims are for payment of the unpaid loan of Tan in the amount of P4,000,000.00, the compounded interest with annual penalty equivalent to P9,333,750.00, litigation expenses of P250,000 and attorney’s fees of P500,000.Thus, they are all compulsory counterclaims. 

            Tan admitted in his complaint his indebtedness to respondent Kaakbay Finance Corporation in the amount of P4,000,000.00 and his liability for interest at the rate of 12% per annum only.  These admissions arise out of, or are necessarily connected with, or have a logical relation to the transaction or occurrence forming the subject matter of the Tan’s claim.  Consequently, Kaakbay concludes that the trial court did not err in ruling that payment of the docket fees is no longer necessary as their counterclaims are compulsory in nature.

HELD:  Yes, the counterclaim is a compulsory one.

            The test for compulsoriness was provided for in Intestate Estate of Dalisay v. Hon. Marasigan: a counterclaim is compulsory where: (1) it arises out of, or is necessarily connected with the transaction or occurrence that is the subject matter of the opposing party’s claim; (2) it does not require the presence of third parties of whom the court cannot acquire jurisdiction; and (3) the trial court has jurisdiction to entertain the claim.  

To determine whether a counterclaim is compulsory or not, the SC had devised the following tests: (1) Are the issues of fact or law raised by the claim and the counterclaim largely the same?  (2) Would res judicata bar a subsequent suit on defendant’s claims absent the compulsory counterclaim rule? (3) Will substantially the same evidence support or refute plaintiff’s claim as well as the defendant’s counterclaim? and (4) Is there any logical relation between the claim and the counterclaim?

Such was again clarified in Quintanilla v. Court of Appeals: a “compelling test of compulsoriness” is whether there is “a logical relationship between the claim and counterclaim, that is, where conducting separate trials of the respective claims of the parties would entail a substantial duplication of effort and time by the parties and the court.”

Tested against the abovementioned standards, Kaakbay’s counterclaims are compulsory in nature.  Tan’s complaint was for declaration of nullity, invalidity or annulment of the promissory notes purportedly attached to the Real Estate Mortgage and the usurious and void interest rates appearing therein and the Deed of Sale Under Pacto De Retro. Kaakbay’s counterclaim was for the payment of the principal amount of the loan, compounded monthly interest and annual penalty interest arising out of the non-payment of the principal loan, litigation expenses and attorney’s fees.  

There is no dispute as to the principal obligation of P4,000,000, but there is a dispute as to the rate and amount of interest.  Tan insists that the amount of interest is only 12% yearly until fully paid, while Kaakbay insist on 3.5% monthly.  Also, Kaakbay allege that Tan owes them P9,333,750.00 representing the compounded monthly interest and annual penalty, which is disputed by Tan.  Tan further seeks the nullification of the Deed of Sale Under Pacto de Retro for being falsified, while Kaakbay aver the deed is valid.  

It thus appears that the evidence required to prove Tan’s claims are similar or identical to that needed to establish Kaakbay, et.al’s demands for the payment of unpaid loan from Tan such as amount of interest rates.  Clearly, Tan’s claim is so related logically to Kaakbay’s counterclaim, such that conducting separate trials for the claim and the counterclaim would result in the substantial duplication of the time and effort of the court and the parties. Thus, this is the situation contemplated under the “compelling test of compulsoriness.” 

The counterclaims of Kaakbay herein are obviously compulsory, not permissive.  In this light, considering that the counterclaims Kaakbay are compulsory in nature, payment of docket fees is not required.  The CA did not err in holding that the trial court had acquired jurisdiction on the matter.

Thus, the PETITION IS DENIED.

G. R. No. 156966 May 7, 2004 PILIPINO TELEPHONE CORPORATION, petitioner, vs. DELFINO TECSON, respondent.

TOPIC: Stipulation as to venue of adhesion contract, valid

Nature of the Case: The SC, through this petition, clarifies the query on whether a stipulation as to venue of suits in a contract of adhesion is immediately deemed invalid.

Facts: Delfin Tecson applied for 6 cellular phone subscriptions with PILTEL on various dates in 1996, which were all approved and later on covered by 6 mobiline service agreements. However, in 2001, Tecson filed with the RTC of Iligan City a complaint against PILTEL for “Sum of Money and Damages”.

PILTEL: Moved to dismiss the case on the ground of improper venue, citing a common provision in the mobiline service agreements to the effect that -

"Venue of all suits arising from this Agreement or any other suit directly or indirectly arising from the relationship between PILTEL and subscriber shall be in the proper courts of Makati, Metro Manila. Subscriber hereby expressly waives any other venues.”

RTC of Iligan: Denied the motion to dismiss and required PILTEL to file an answer on the complaint within 15 days from receipt thereof. It also denied PILTEL’s subsequent MFR.

PILTEL: Appealed to the CA

CA: Affirmed the Decision of the RTC and denied the subsequent MFR filed by PILTEL.

ISSUE: WON the provision in the mobiline service agreements fixing the venue of all suits arising from the contract is clear and binding and that the venue of the complaint was improperly laid.

HELD: Yes, the provision is clear and binding, and the venue was improperly laid.  Section 4, Rule 4, of the Revised Rules of Civil Procedure allows the parties to agree and stipulate in writing, before the filing of an action, on the exclusive venue of any litigation between them. Such an agreement would be valid and binding provided that the stipulation on the chosen venue is exclusive in nature or in intent, that it is expressed in writing by the parties thereto, and that it is entered into before the filing of the suit.

So, the added stipulation that the subscriber "expressly waives any other venue" should indicate, clearly enough, the intent of the parties to consider the venue stipulation as being preclusive in character.

Although such is a clearly a contract of adhesion, it doesn’t invalidate the subject stipulation. The rule is that, should there be ambiguities in a contract of adhesion, such ambiguities are to be construed against the party that prepared it. If, however, the stipulations are not obscure, but are clear and leave no doubt on the intention of the parties, the literal meaning of its stipulations must be held controlling.

A contract of adhesion is just as binding as ordinary contracts. It is true that the SC struck down such contracts as being assailable when the weaker party is left with no choice by the dominant bargaining party and is thus completely deprived of an opportunity to bargain effectively. Nevertheless, contracts of adhesion are not prohibited even as the courts remain careful in scrutinizing the factual circumstances underlying each case to determine the respective claims of contending parties on their efficacy.

In the case at bar, respondent secured six (6) subscription contracts for cellular phones on various dates. It would be difficult to assume that, during each of those times, respondent had no sufficient opportunity to read and go over the terms and conditions embodied in the agreements. Respondent continued, in fact, to acquire in the pursuit of his business subsequent subscriptions and remained a subscriber of petitioner for quite sometime.

A contract duly executed is the law between the parties, and they are obliged to comply fully and not selectively with its terms. A contract of adhesion is no exception.

Hence, PETITION IS GRANTED.

G.R. No. L-37750 May 19, 1978 SWEET LINES, INC., petitioner, vs. HON. BERNARDO TEVES, Presiding Judge, CFI of Misamis Oriental Branch VII, LEOVIGILDO TANDOG, JR., and ROGELIO TIRO, respondents.

TOPIC: IN ADHESION CONTRACTS, STIPULATION VOID IF CONTRARY TO PUBLIC POLICY

NATURE OF THE CASE: This case was elevated to the SC to restrain the CFI of Misamis Oriental to proceed in the complaint filed by Tandog and Tiro against Sweet Lines on the ground that the venue was improperly laid.

FACTS:

            Sweet Lines is a shipping company which transports inter-island passengers and cargoes at Cagayan de Oro City. Rogelio Tiro, a contractor, and Atty. Leovigildo Tandog bought tickets from Sweet Lines and were bound to Bohol. When they were about to board M/S “Sweet Hope” which was bound for Tagbilaran City via the port of Cebu, they were informed that the vessel will not proceed to Bohol because most of the passengers were bound to Surigao. They were advised to relocate and board to M/S “Sweet Town”. However, the said vessel was already full and they were forced to agree “ to hide at the cargo section to avoid inspection of the officers of the Philippine Coastguard." Private respondents alleged that they were, during the trip," "exposed to the scorching heat of the sun and the dust coming from the ship's cargo of corn grits.” Further, the tickets they bought at Cagayan de Oro City for Tagbilaran were not honored and they were constrained to pay for other tickets. Thus, Tandog and Tiro filed a complaint against Sweet Lines for damages and breach of contract of carriage in the CFI of Misamis Oriental (Cagayan de Oro is the capital of Misamis Oriental).

SWEET LINES: It moved to dismiss the complaint on the ground of improper venue. This was based on the condition printed at the back of the tickets purchased by Tandog and Tiro which reads:

14. It is hereby agreed and understood that any and all actions arising out of the conditions and provisions of this ticket, irrespective of where it is issued, shall be filed in the competent courts in the City of Cebu.

CFI: Denied the motion to dismiss.

Sweet Lines: Motion for Reconsideration.

CFI: Denied the motion for reconsideration.

---Hence, this petition.

ISSUE: WON a common carrier engaged in inter-island shipping may stipulate thru condition printed at the back of passage tickets to its vessels that any and all actions arising out of the contract of carriage should be filed only in a particular province or city, in this case the City of Cebu, to the exclusion of all others.

WON the venue of the action should be in the City of Cebu as stipulated by the condition in the ticket bought by Tandog and Tiro.

SWEET LINES: The condition is valid and enforceable since Tandog and Tiro acceded to it when they purchased the tickets at its Cagayan de Oro branch office and took its vessel M/S "Sweet Town" for passage to Tagbilaran, Bohol. Moreover, venue may be validly waived and it is clear that the ticket stipulates that the condition had fixed the venue in the City of Cebu. Thus, the orders of the CFI Judge are an unwarranted departure from established jurisprudence governing the case; and that he acted without or in excess of his jurisdiction in is the orders complained of.

TANDOG AND TIRO: The condition in the ticket is not valid as it is not an essential element of the contract of carriage, being in itself a different agreement which requires the mutual consent of the parties to it. Tandog and Tiro had no say in its preparation, the existence of which they could not refuse, hence, they had no choice but to pay for the tickets and to avail of petitioner's shipping facilities out of necessity. Further, the carrier "has been exacting too much from the public by inserting impositions in the passage tickets too burdensome to bear," and the condition which was printed in fine letters is an imposition on the riding public and does not bind respondents. Lastly, while venue of actions may be transferred from one province to another, such arrangement requires the "written agreement of the parties", not to be imposed unilaterally; and that assuming that the condition is valid, it is not exclusive and does not, therefore, exclude the filing of the action in Misamis Oriental.

HELD: No, the actuations of Sweet Lines (putting a condition at the back of its tickets fixing the venue for any complaints filed against them in the City of Cebu) is contrary to public policy. Thus, the venue was not improperly laid in the CFI of Misamis Oriental.

There is no question that there was a valid contract of carriage entered into by petitioner and private respondents and that the passage tickets, upon which the latter based their complaint, are the best evidence thereof. All the essential elements of a valid contract, i.e., consent, cause or consideration and object, are present.

However, with respect to the condition which is in issue in this case — printed at the back of the passage tickets, these are commonly known as "contracts of adhesion," the validity and/or enforceability of which will have to be determined by the peculiar circumstances obtaining in each case and the nature of the conditions or terms sought to be enforced. For, "(W)hile generally, stipulations in a contract come about after deliberate drafting by the parties thereto, ... there are certain contracts almost all the provisions of which have been drafted only by one party, usually a corporation. Such contracts are called contracts of adhesion, because the only participation of the party is the signing of his signature or his 'adhesion' thereto. Insurance contracts, bills of lading, contracts of make of lots on the installment plan fall into this category"

By the peculiar circumstances under which contracts of adhesion are entered into — namely, that it is drafted only by one party, usually the corporation, and is sought to be accepted or adhered to by the other party, in this instance the passengers, private respondents, who cannot change the same and who are thus made to adhere thereto on the "take it or leave it" basis — certain guidelines in the determination of their validity and/or enforceability have been formulated in order to that justice and fair play characterize the relationship of the contracting parties.

To the same effect and import, and, in recognition of the character of contracts of this kind, the protection of the disadvantaged is expressly enjoined in Art. 24 of the New Civil Code —

In all contractual property or other relations, when one of the parties is at a disadvantage on account of his moral dependence, ignorance indigence, mental weakness, tender age and other handicap, the courts must be vigilant for his
protection.

Considered in the light Of the foregoing norms and in the context of circumstances prevailing in the inter-island shipping industry in the country today, the SC declared the condition at the back of the passage to be void and unenforceable. First, under circumstances obligation in the inter-island shipping industry, it is not just and fair to bind passengers to the terms of the conditions printed at the back of the passage tickets. Second, the condition subverts the public policy on transfer of venue of proceedings of this nature, since the same will prejudice rights and interests of innumerable passengers in different s of the country who, under the said condition, will have to file suits against petitioner only in the City of Cebu.

Moreover, it is hardly just and proper to expect the passengers to examine their tickets received from crowded/congested counters, more often than not during rush hours, for conditions that may be printed much charge them with having consented to the conditions, so printed, especially if there are a number of such conditions m fine print, as in this case. Thus, passengers cannot be expected to read all the conditions much less consider the public policies that the conditions therein violate.

Additionally, although venue may be changed or transferred from one province to another by agreement of the parties in writing t to Rule 4, Section 3, of the Rules of Court, such an agreement will not be held valid where it practically negates the action of the claimants, such as the private respondents herein. The philosophy underlying the provisions on transfer of venue of actions is the convenience of the plaintiffs as well as his witnesses and to promote the ends of justice. Considering the expense and trouble a passenger residing outside of Cebu City would incur to prosecute a claim in the City of Cebu, he would most probably decide not to file the action at all. The condition will thus defeat, instead of enhance, the ends of justice. Upon the other hand, petitioner has branches or offices in the respective ports of call of its vessels and can afford to litigate in any of these places. Hence, the filing of the suit in the CFI of Misamis Oriental, as was done in the instant case, will not cause inconvenience to, much less prejudice, petitioner.

Public policy is ". . . that principle of the law which holds that no subject or citizen can lawfully do that which has a tendency to be injurious to the public or against the public good ... ²² Under this principle" ... freedom of contract or private dealing is restricted by law for the good of the public. Clearly, the subject condition, if enforced, will be subversive of the public good or interest, since it will frustrate in meritorious cases, actions of passenger cants outside of Cebu City, thus placing petitioner company at a decided advantage over said persons, who may have perfectly legitimate claims against it. The said condition should, therefore, be declared void and unenforceable, as contrary to public policy — to make the courts accessible to all who may have need of their services.

            Thus, PETITION IS DENIED.