Hongkong Shanghai Banking Corporation v Sherman
Topic: Choice of the Forum Clause
Doctrine: A stipulation that the parties agree to sue and be sued in the courts of Manila
does not preclude the filing of suits in the residence of plaintiff or defendant.
Facts:
(1) A complaint for collection of a sum of money was filed by petitioner HSBC against
private respondents Jack Robert Sherman and Deodato Reloj before the RTC.
(2) It appears that sometime in 1981, Eastern Book Supply Service PTE Ltd.
(Company), a company incorporated in Singapore, applied with and was granted
by the Singapore branch of HSBC, an overdraft facility in the maximum amount
of SGD200,000 (which amount was subsequently increased to SGD375,000) with
interest at 3% payable monthly, on amounts due under said overdraft facility.
(3) As a security for repayment by the Company of sums advanced by HSBC, directors
of the Company, including respondents herein, agreed to pay on demand all sums
owed by the Company to HSBC under the facility.
(4) The Joint and Several Guarantee provides that all rights and obligations shall be
construed and determined, and enforced in accordance with the laws of
Singapore. It was also agreed therein that the Courts of Singapore shall have
jurisdiction over all disputes arising under the guarantee.
(5) The Company subsequently failed to pay its obligation. Thus, HSBC demanded
payment of its obligation from respondents, conformably with the provisions of
the Guarantee. However, such was unheeded. Hence, HSBC filed this complaint.
(6) Respondents filed a MTD on 2 grounds: lack of jurisdiction over subject matter of
the complaint and lack of jurisdiction over the persons of the defendants. This
which was opposed by HSBC.
(7) RTC: Denied MTD. There is nothing in the Guarantee which says that the courts
of Singapore shall have jurisdiction to the exclusion of the courts of other
countries or nations. It has long been established in law or jurisprudence that
jurisdiction of courts is fixed by law, it cannot be conferred by the will,
submission, or consent of the parties. Respondents appealed to the CA.
(8) CA: Granted MTD. A closer examination of the Guarantee upon which the MTD is
based employs in clear and unmistakable terms the word “shall,” which under
statutory construction is mandatory.
Issue: W/N Philippine courts have jurisdiction over the suit. (YES)
Held:
(1) While it is true that the transaction took place in Singapore setting and that the
Joint and Several Guarantee contains a choice-of-forum clause, the very essence
of due process dictates that the stipulation be liberally construed. One basic
principle underlies all rules of jurisdiction in International Law: a State does not
have jurisdiction in the absence of some reasonable basis for exercising it,
whether the proceedings are in rem, quasi in rem, or in personam. To be
reasonable, the jurisdiction must be based on some minimum contacts that will
not offend traditional notions of fair play and substantial justice.
 Court notes that the instant case presents an odd situation as
respondents are Philippine residents, but would rather face a complaint
against them before a foreign court and in the process incur
considerable expenses and inconvenience, than to have a Philippine
court try and resolve the case. Their stance is hardly comprehensible
unless their ultimate intent is to evade or delay the payment of the
obligation.
(2) The defense of respondents that the complaint should have been filed in
Singapore is based merely on technicality. They did not even claim, much less
prove, that the filing of the action here will cause them any unnecessary trouble,
damage or expense.
(3) Moreover, the parties herein did not stipulate in the Guarantee that only the
courts of Singapore, to the exclusion of the rest, has jurisdiction. Neither did the
clause in question operate to divest Philippine courts of jurisdiction. A State is
competent to take hold of any judicial matter it sees fit by making its courts and
agencies assume jurisdiction over all kinds of cases brought before them.
(4) Whether a suit should be entertained or dismissed on the basis of the principle
of forum non conveniens depends largely upon the facts of the particular case
and is addressed to the sound discretion of the trial court. Although the
Guarantee is a contract of adhesion, hence HSBC may not take a stand contrary
to its stipulations, substantial basis exists for HSBC’s choice of forum, as
previously discussed.
Fallo: REVERSED. RTC Decision reinstated.