Digest HSBC Vs Sherman and CA

G.R. No. 72494, Aug.
11, 1989
o
o
o
Choice-of-forum clause
Jurisdiction and Venue
Parties can stipulate as to their choice of venue. But if the stipulation is not
restrictive, it shall be treated as merely permissive and will not bar the other party
from airing the case in a different forum which has jurisdiction over the subject
matter.
FACTS:
Sometime in 1981, Eastern Book Supply PTE, Ltd. (Company), a company
incorporated in Singapore, applied with and was granted by the Singapore Branch of
HSBC an overdraft facility. To secure the overdraft facility, private respondents who
were directors of the Company executed a Joint and Several Guarantee in favour of
HSBC,
which
provides
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.
However, when the Company failed to pay its obligation, HSBC filed this
the Philippine courts. In a Motion to Dismiss, the private respondents
abovementioned provision of the Joint and Several Guarantee. The
affirmed the plaintiffs but CA reversed, citing said provision
action with
raised the
trial court
as basis.
ISSUE:
o
Whether or not Philippine courts have jurisdiction over the suit

HELD:
The Supreme Court held that the clause in question did not operate to divest the
Philippine
courts
of
jurisdiction.
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. 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.
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 light 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.
Minimum Contract: Hongkong and Shanghai Banking Corporation vs. Jack Robert
Sherman G.R. No. 7249411 August 1989 Medialdea, J:
Facts
: Eastern Book Supply Service PTE, Ltd., a company incorporated in Singapore
applied with, and was granted by, the Hongkong and Shanghai Banking Corporation
Singapore branch an overdraft facility in the maximum amount of Singapore dollars
200,000.00 (which amount was subsequently increased to Singapore dollar
375,000.00). As a security for the repayment by the COMPANY of the sum
advanced, Jack Robert Sherman and Deodato Reloj, herein private respondents,
and a certain Robin de Clive Lowe, all of whom were directors of said COMPANY at
such time, executed a Joint and Several Guarantee in favor of petitioner BANK
whereby they 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 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 overall disputes arising under this
guarantee . . ."The COMPANY failed to pay its obligation. Thus, petitioner BANK
demanded payment from the private respondents, conformably with the provisions of
the Joint and Several Guarantee. Inasmuch as the private respondents still failed to
pay, petitioner BANK filed a civil case for a collection of a sum of money against
Sherman and Reloj before the Regional Trial Court of Quezon City. In turn, the
private respondents filed a motion to dismiss on the ground of lack of jurisdiction
over the subject matter of the complaint and over the persons of the defendants, but,
it was denied. Subsequently, the court granted the petition for prohibition with
preliminary injunction. Hence, this petition for review on certiorari.
Issue
: Whether or not Philippine courts have jurisdiction over the suit.
Held
: Yes. The parties did not 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. InInternational Law, jurisdiction is often defined as
the right of a State to exercise authority over personsand things within its boundaries
subject to certain exceptions. This authority, which finds its source inthe concept of
sovereignty, is exclusive within and throughout the domain of the State. A State
iscompetent 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.
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 thestipulation be liberally construed. One basic principle
underlies all rules of jurisdiction in InternationalLaw: 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
jurisdictionmust be based on some minimum contacts that will not offend traditional
notions of fair play andsubstantial justice.

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What was the nature of the transaction between Eastern Book Supply and HSBC?

What was the dispute between HSBC and the private respondents?

G.R. No. 72494, Aug.

Whether or not Philippine courts have jurisdiction over the suit

substantial justice. Indeed, as pointed-out by petitioner BANK at the outset, the

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