VOL.

176, AUGUST 11, 1989 331

Hongkong Shanghai Banking Corporation vs. Sherman

*
G.R. No. 72494. August 11, 1989.

HONGKONG AND SHANGHAI BANKING

CORPORATION, petitioner, vs. JACK ROBERT
SHERMAN, DEODATO RELOJ AND THE
INTERMEDIATE APPELLATE COURT, respondents.

Remedial Law; Jurisdiction; 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.—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.
Same; Same; Same; Defense of private respondents that the
complaint should have been filed in Singapore is based merely on
technicality.—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.
Same; Same; Venue; 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.—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,

_______________

* FIRST DIVISION.

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332 SUPREME COURT REPORTS ANNOTATED

Hongkong Shanghai Banking Corporation vs. Sherman

‘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 sa 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.”
Same; Same; Same; Same; In the case at bar, the parties did
not stipulate that only the courts of Singapore to the exclusion of
all the rest has jurisdiction; Jurisdiction defined.—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.

PETITION for certiorari to review the decision of the then

Intermediate Appellate Court.

The facts are stated in the opinion of the court.

     Quiason, Makalintal, Barot & Torres for petitioner.
          Alejandro, Aranzaso & Associates for private
respondents.
MEDIALDEA, J.:

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

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VOL. 176, AUGUST 11, 1989 333

Hongkong Shanghai Banking Corporation vs. Sherman

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:
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334 SUPREME COURT REPORTS ANNOTATED

Hongkong Shanghai Banking Corporation vs. Sherman

“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 Philippines. 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:
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Hongkong Shanghai Banking Corporation vs. Sherman

“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 Singporean 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

336

336 SUPREME COURT REPORTS ANNOTATED

Hongkong Shanghai Banking Corporation vs. Sherman

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.
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VOL. 176, AUGUST 11, 1989 337

Hongkong Shanghai Banking Corporation vs. Sherman

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

338

338 SUPREME COURT REPORTS ANNOTATED

Hongkong Shanghai Banking Corporation vs. Sherman

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 copy-cat 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
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Hongkong Shanghai Banking Corporation vs. Sherman

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 costs against private
respondents. This decision is immediately executory.
SO ORDERED.

          Narvasa, Cruz, Gancayco and Griño-Aquino, JJ.,

concur.

Decision reversed.

Notes.—The jurisdiction of courts should not be made to

depend on the literal averments of the complaint where
actual issues are evident from the records. (Espejo vs.
Malate, 120 SCRA 269.)
Jurisdiction cannot be appropriated by a court no matter
how well-intentioned it is, even in pursuit of the clearest
substantial right, such as collection of judgment debt.
(Estanislao vs. Honrado, 114 SCRA 748.)

——o0o——

340

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