HONGKONG
SHANGAI BANKING CORPORATION v. SHERMAN
G.R. No.
72494 August 11, 1989
FACTS
In 1981, Eastern Book Supply Service PTE, Ltd., (Eastern)
a company incorporated in Singapore applied w/, & was granted by the
Singapore branch of HSBC an overdraft facility in the max amount of Singapore
$200,000 (w/c amount was
subsequently increased to Singapore $375,000) w/ interest at 3% over HSBC prime
rate, payable monthly, on amounts due under said overdraft facility. As a
security for the repayment by Eastern of sums advanced by HSBC to it through
the aforesaid overdraft facility, in 1982, Jack Sherman, Dodato Reloj, and a
Robin de Clive Lowe, all of whom were directors of Eastern at such time,
executed a Joint and Several Guarantee in favor of HSBC whereby Sherman, Reloj
and Lowe agreed to pay, jointly and severally, on demand all sums owed by Eastern
to HSBC 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
over all disputes arising under this guarantee.”
Eastern
failed to pay its obligation. Thus, HSBC
demanded payment of the obligation from Sherman & Reloj, conformably w/ the
provisions of the Joint and Several Guarantee. Inasmuch as Sherman & Reloj
still failed to pay, HSBC filed a complaint for collection of a sum of money
against them. Sherman & Reloj filed a motion to dismiss on the grounds that
(1) the court has no jurisdiction over the subject matter of the complaint, and
(2) the court has no jurisdiction over the person of the defendants.
ISSUE
W/N Philippine courts should have jurisdiction over the
suit.
RULING
YES. 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 "this guarantee and all rights, obligations &
liabilities arising hereunder shall be construed & determined under & may
be enforced in accordance w/ 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 HSBC 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, w/ more reason as a defendant. However, in
this case, Sherman & Reloj 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. Their
stance is hardly comprehensible, unless their ultimate intent is to evade, or
at least delay, the payment of a just obligation.
The
defense of Sherman & Reloj 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 Sherman & Reloj.
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 w/in 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 w/ the
permission of the latter's authorities. This authority, which finds its source
in the concept of sovereignty, is exclusive w/in 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.
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