HONGKONG AND SHANGHAI BANKING CORPORATION, PETITIONER, VS. JACK ROBERT SHERMAN, DEODATO RELOJ AND THE INTERMEDIATE APPELLATE COURT, RESPONDENTS.

This is a petition for
review on certiorari of the decision of the Intermediate Appellate Court
(now Court of Appeals) dated August 2,
1985, which reversed the order of the Regional Trial Court dated February
28, 1985 denying the Motion to Dismiss filed by private respondents
Jack Robert Sherman and Deodato Reloj.

A complaint for collection of a sum of money (pp. 49-52, Rollo) was filed by petitioner Hongkong
and Shanghai Banking Corporation (hereinafter referred to as petitioner BANK)
against private respondents Jack Robert Sherman and Deodato
Reloj, docketed as Civil Case No. Q-42850 before the
Regional Trial Court of Quezon City, Branch 84.

It appears that sometime in 1981, Eastern Book Supply Service
PTE, Ltd. (hereinafter referred to as COMPANY), a company incorporated in Singapore applied with, and was
granted by, the Singapore branch
of petitioner BANK an overdraft facility in the maximum amount of Singapore
dollars 200,000.00 (which amount was subsequently increased to Singapore
dollars 375,000.00) with interest at 3% over petitioner BANK’s
prime rate, payable monthly, on amounts
due under said overdraft facility; as a security for the repayment by the
COMPANY of sums advanced by
petitioner BANK to it through the aforesaid overdraft facility, on October 7,
1982, both private respondents and a certain Robin de Clive Lowe, all of whom
were directors of the COMPANY at such time, executed a Joint and Several
Guarantee (p. 53, Rollo) in favor of
petitioner BANK whereby private respondents and Lowe agreed to pay, jointly and
severally, on demand all sums owed by the COMPANY to petitioner BANK under the aforestated overdraft facility.

The Joint and Several Guarantee provides, inter alia, that;

“This guarantee and all rights, obligations and liabilities
arising hereunder shall be construed and determined under and may be enforced
in accordance with the laws of the Republic
of Singapore.  We hereby agree that the Courts of Singapore
shall have jurisdiction over all disputes arising under this guarantee x x x.”
(p. 33-A, Rollo).

The COMPANY failed to pay its obligation.  Thus, petitioner BANK demanded payment of the
obligation from private respondents, conformably
with the provisions of the Joint and
Several Guarantee.  Inasmuch as the
private respondents still failed to pay, petitioner BANK filed the
above-mentioned complaint.

On December
14, 1984, private respondents filed a motion to dismiss (pp. 54-56, Rollo)
which was opposed by petitioner BANK (pp. 58-62, Rollo). 
Acting on the motion, the
trial court issued an order dated February 28, 1985 (pp. 64-65, Rollo),
which read as follows:

“In a Motion To Dismiss filed on December 14, 1984, the defendants
seek the dismissal of the complaint on two grounds, namely:

“1.  That
the court has no jurisdiction over the subject matter of the complaint; and

“2.  That the court has no jurisdiction
over the persons of the defendants.

“In the light of the Opposition thereto filed by
plaintiff, the Court finds no merit in the motion.

“On the first ground, defendants claim that by virtue of the
provision in the Guarantee (the actionable document) which reads –

“‘This guarantee and all rights, obligations and liabilities
arising hereunder shall be construed and determined under and may be enforced
in accordance with the laws of the Republic of Singapore.  We
hereby agree that the courts in Singapore shall have jurisdiction over all disputes arising under this guarantee,’

the Court has no
jurisdiction over the subject matter of the case.  The Court finds and concludes otherwise.  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. 
Also, it has long been
established in law and jurisprudence that jurisdiction of courts is fixed by law; it cannot be conferred
by the will, submission or consent of the parties.

“On the second ground, it is asserted that defendant Robert
Sherman is not a citizen nor a resident of the
Philippine.  This argument holds no
water.  Jurisdiction over the persons of
defendants is acquired by service of summons and copy of the complaint on
them.  There has been a valid service of
summons on both defendants and in fact
the same is admitted when said defendants filed a ‘Motion for Extension of Time
to File Responsive Pleading’ on December
5, 1984.

“WHEREFORE, the Motion to Dismiss is hereby DENIED.

“SO ORDERED.”

A motion for
reconsideration of the said order was filed by private respondents
which was, however, denied (p. 66, Rollo).

Private respondents then
filed before the respondent Intermediate Appellate Court (now Court of Appeals)
a petition for prohibition with preliminary injunction and/or prayer for a
restraining order (pp. 39-48, Rollo).  On August 2, 1985, the respondent Court rendered a decision
(p. 37, Rollo), the dispositive portion of which reads:

“WHEREFORE, the petition for prohibition with preliminary
injunction is hereby GRANTED.  The
respondent-Court is enjoined from taking further cognizance of the case and to
dismiss the same for filing with the proper court of Singapore which is the
proper forum.  No costs.

“SO ORDERED.”

The motion for reconsideration was denied (p. 38, Rollo), hence, the present petition.

The main issue is whether or not Philippine courts have jurisdiction over the suit.

The controversy stems from
the interpretation of a provision in the Joint and Several Guarantee, to wit:

“(14) This guarantee and all rights, obligations and
liabilities arising hereunder shall be construed and determined under and may be enforced in accordance with the
laws of the Republic of Singapore.  We hereby agree that the Courts in Singapore
shall have jurisdiction over all disputes arising under this guarantee x x x.” (p. 53-A, Rollo)

In rendering the decision in favor of private respondents, the Court of Appeals made the
following observations (pp. 35-36, Rollo):

“There are significant aspects of the case to which our
attention is invited.  The loan was obtained by Eastern Book Service
PTE, Ltd., a company incorporated in Singapore.  The loan was granted by the Singapore
Branch of Hongkong and Shanghai Banking
Corporation.  The Joint and Several
Guarantee was also concluded in Singapore.  The loan was in Singaporean dollars and the
repayment thereof also in the
same currency.  The transaction, to say
the least, took place in Singaporean setting in which the law of that country
is the measure by which that relationship of the parties will be governed.

x x x              x x x                 x x x

“Contrary to the
position taken by respondents, the guarantee agreement commands that any
litigation will be before the courts of Singapore
and that the rights and obligations of the parties shall be construed and
determined in accordance with the laws of the
Republic of Singapore.  A
closer examination of paragraph 14 of the Guarantee Agreement upon which the
motion to dismiss is based, employs in clear and unmistakeable
(sic) terms the word ‘shall’ which under statutory construction is
mandatory.

“Thus, it was ruled that:

‘x x x the word ‘shall’ is imperative,
operating to impose a duty which may be enforced’ (Dizon
vs. Encarnacion,
9 SCRA 714).

“There is nothing more imperative and restrictive than what
the agreement categorically commands that all rights, obligations, and liabilities arising hereunder shall be construed and determined under and may be enforced
in accordance with the laws of
the Republic of Singapore.”

While it is true that “the transaction took place in
Singaporean setting” and that the Joint and Several Guarantee contains a
choice-of-forum clause, the very essence of due process dictates that the
stipulation that “[t]his guarantee and all rights, obligations and
liabilities arising hereunder shall be construed and determined under and may
be enforced in accordance with the laws of the Republic of Singapore.  We hereby agree that the Courts in Singapore
shall have jurisdiction over all disputes arising under this guarantee” 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 (J. Salonga, Private
International Law, 1981, p. 46).  Indeed,
as pointed-out by petitioner BANK at the outset, the instant case presents a
very odd situation.  In the ordinary
habits of life, anyone would be disinclined to litigate before a foreign
tribunal, with more reason as a
defendant.  However, in this case,
private respondents are Philippine residents (a fact which was not disputed by
them) who would rather face a complaint against them before a foreign court and
in the process incur considerable expenses, not to mention inconvenience, than
to have a Philippine court try and resolve the case.  Private respondents’ stance is hardly comprehensible, unless their ultimate intent
is to evade, or at least delay, the payment of a just obligation.

The defense of private
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.  On the other hand,
there is no showing that petitioner BANK filed the action here just to harass
private respondents.

In the
case of Polytrade Corporation vs. Blanco, G.R. No. L-27033, October
31, 1969, 30 SCRA
187, it was ruled:

“x x x.  An accurate
reading, however, of the stipulation,
‘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.  The plain meaning is that the parties merely
consented to be sued in Manila.  Qualifying or restrictive
words which would indicate that Manila and Manila alone is the venue are totally absent therefrom.  We cannot
read into that clause that plaintiff and defendant bound themselves to file
suits with respect to the last two transactions in question only or exclusively
in Manila.  For,
that agreement did not change or transfer venue.  It simply is permissive.  The parties solely agreed to add the courts of Manila as tribunals to which they may resort. 
They did not waive their right to pursue remedy in the courts
specifically mentioned in Section 2(b) of Rule 4.  Renuntiatio non praesumitur.”

This ruling was
reiterated in the case of Neville Y. Lamis Ents., et al. v.
Lagamon, etc., et al., G.R. No. 57250, October 30,
1981, 108 SCRA 740, where the stipulation was “[i]n
case of litigation, jurisdiction shall be vested in the Court of Davao City.” We held:

“Anent the claim that Davao City had
been stipulated as the venue, suffice it to say that a stipulation as to venue does not preclude the filing
of suits in the residence of
plaintiff or defendant under Section 2(b), Rule 4, Rules of Court, in the absence of qualifying or
restrictive words in the agreement which would indicate that the place named is the only venue agreed upon by the
parties.”

Applying the foregoing to
the case at bar, the parties did
not thereby stipulate that only the courts of Singapore, to the exclusion of all the rest, has jurisdiction. 
Neither did the clause in question operate to divest Philippine courts
of jurisdiction.  In International Law,
jurisdiction is often defined as the right of a State to exercise authority
over persons and things within its boundaries subject to certain
exceptions.  Thus, a State does not
assume jurisdiction over travelling sovereigns,
ambassadors and diplomatic representatives of other States, and foreign
military units stationed in or marching through State territory with the
permission of the latter’s authorities. 
This authority, which finds its source in the concept of sovereignty, is
exclusive within and throughout the domain of the State.  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 (J. Salonga, Private International Law, 1981, pp. 37-38).

As regards the issue on
improper venue, petitioner BANK avers that the objection to improper venue has
been waived.  However, We
agree with the ruling of the respondent Court that:

“While in the main, the motion to dismiss fails to categorically
use with exactitude the words ‘improper venue’ it can be perceived from the
general thrust and context of the motion that what is meant is improper
venue.  The use of the word
‘jurisdiction’ was merely an attempt to copy­cat the same word employed in the
guarantee agreement but conveys the concept of ‘venue.’ Brushing aside all
technicalities, it would appear that jurisdiction was used loosely as to be
synonymous with venue.  It is in this spirit
that this Court must view the motion to dismiss.  x x
x” (p. 35, Rollo).

At
any rate, this issue is now of no moment because We
hold that venue here was properly laid for the same reasons discussed above.

The respondent Court
likewise ruled that (pp. 36-37, Rollo):

“x x x.  In a
conflict problem, a court will simply refuse to entertain the case if it is not
authorized by law to exercise jurisdiction. 
And even if it is so authorized,
it may still refuse to entertain the case by applying the principle of forum
non conveniens.  x x x.”

However,
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 (J.
Salonga, Private International Law, 1981, p. 49).  Thus, the respondent Court should not have
relied on such principle.

Although
the Joint and Several Guarantee prepared by petitioner BANK is a contract of
adhesion and that consequently, it cannot be permitted to take a stand contrary
to the stipulations of the contract, substantial bases exist for petitioner BANK’s choice of forum, as discussed earlier.

Lastly,
private respondents allege that neither the petitioner based at Hongkong nor its Philippine branch is involved in the
transaction sued upon.  This is a vain
attempt on their part to further thwart the proceedings below inasmuch as
well-known is the rule that a defendant cannot plead any defense that has not
been interposed in the court below.

ACCORDINGLY, the decision of the respondent Court is hereby
REVERSED and the decision of the Regional Trial Court is REINSTATED, with cost against
private respondents.  This decision is
immediately executory.

SO ORDERED.

Narvasa, (Chairman), Cruz, Gancayco, and Griño-Aquino, JJ., concur.