Boracay Island Water Company vs. Malay Resorts Holdings, Inc.

Forum shopping cannot exist when the third element of litis pendentia is absent — specifically, when one forum lacks jurisdiction over the subject matter such that no judgment it renders could amount to res judicata in the other case — unless the circumstances clearly present the grave evil of conflicting decisions that the prohibition seeks to prevent.

Boracay Island Water Company (BIWC) operates one of two water utilities and the only sewerage utility in Boracay Island, Municipality of Malay, Aklan, distributing potable water to establishments and households. BIWC operates these utilities as agent of the Philippine Tourism Authority (PTA) pursuant to a concession agreement, implementing the PTA-approved Sewer Policies and Guidelines. The PTA charter grants it the power to develop tourism zones and construct, operate, and maintain water distribution and sewerage systems. The National Water Resources Board (NWRB) is the agency with general regulatory authority over water resources, but its jurisdiction over sewerage utilities and services was placed in question when the DOJ issued an Opinion stating that such regulatory power was not expressly granted to the NWRB by law or executive order.

Boracay Island Water Company (BIWC) operates one of two water utilities and the only sewerage utility in Boracay Island, Municipality of Malay, Aklan, distributing potable water to establishments and households in the area. BIWC operates these utilities as agent of the Philippine Tourism Authority (PTA) pursuant to a concession agreement, implementing the PTA-approved Sewer Policies and Guidelines.

BIWC issued the Terms and Conditions of a Factored Sewer Charging Program. Under the Program, customers exclusively patronizing BIWC-supplied water and connected to BIWC's sewer system would be charged according to existing sewer/tariff rates. However, sewer-only customers — those connected to BIWC's sewer system but not its water system — as well as customers with dual water sources, would be charged five times their computed sewer charge.

Two affected customers, Ambassador in Paradise Corporation and Real Maris Resort & Hotel, filed a civil case against BIWC before the RTC of Kalibo, Aklan for declaration of nullity of the Program and damages, docketed as Civil Case No. 8849. J. King and Sons Company, Inc. and respondent Malay Resorts Holdings, Inc. (MRHI) moved to intervene and filed their respective complaints-in-intervention, which the RTC admitted.

On 8 July 2010, BIWC moved to dismiss the complaint and complaints-in-intervention for failure to state a cause of action and forum shopping. BIWC argued that the PTA charter grants it the power to develop tourism zones and construct, operate, and maintain water distribution and sewerage systems, and that BIWC merely acted as PTA's designated concessionaire and agent. Regarding forum shopping, BIWC claimed that MRHI had previously filed a letter-complaint with the National Water Resources Board (NWRB) on 23 February 2010 regarding the increased sewerage charge, and that the issue was discussed in a public conference conducted by the NWRB. BIWC asserted that all elements of forum shopping were present: identity of parties, identity of arguments and reliefs, and that a decision of the RTC would preclude the NWRB from resolving the questioned Program and vice versa.

Meanwhile, the NWRB called a public conference on 26 May 2010 — after MRHI had already filed its complaint-in-intervention — in connection with letter-complaints alleging that BIWC was operating a water supply and sewerage system without a Certificate of Public Convenience (CPC). Although the declared topic was the lack of CPC, the imposition of increased sewer charges was also discussed during the public conference held on 3 July 2010. The issue of NWRB's jurisdiction over the matter was raised by BIWC, prompting the agency to seek the opinion of the Department of Justice (DOJ). On 13 August 2010, the DOJ issued an Opinion stating that regulatory power over sewerage utility and service was not expressly granted by law or executive order to the NWRB, and thus the latter could not regulate said businesses for want of legal basis. The NWRB's Order dated 30 July 2010 directed BIWC and the PTA to show cause why no cease and desist order should be issued against them for operating a water supply system without a CPC — limiting its action to the CPC issue rather than the sewer-rate concern.

The RTC, in its Order dated 31 August 2012, dismissed the amended complaint and complaints-in-intervention without prejudice for failure to comply with the requirements against forum shopping. The RTC found that the rule against forum shopping was violated when the parties failed to disclose the NWRB proceedings, noting that the relief sought in the civil case was substantially the same as that brought before the NWRB — to stop the imposition of the new sewer rates. The RTC observed that although the NWRB did not continue the proceedings due to its lack of jurisdiction over sewerage utilities, the agency had already asserted its authority when it allowed discussion of the issue during the public conference and issued a show cause order against BIWC. MRHI's motion for reconsideration was denied in the RTC Order dated 6 February 2014. On appeal, the CA, in its Decision dated 28 February 2017, granted the petition for certiorari and set aside the RTC orders, finding that the RTC committed grave abuse of discretion because the NWRB had no jurisdiction over the subject matter, and any judgment by the NWRB would not amount to res judicata in the RTC case.

• Forum Shopping Despite Lack of Jurisdiction: Petitioner argued that the CA erred in ruling that forum shopping may not be committed due to the NWRB's lack of jurisdiction, contending that jurisprudence holds that forum shopping may be committed even when one forum has no jurisdiction.
• Willful and Deliberate Forum Shopping: Petitioner claimed that MRHI committed willful and deliberate forum shopping by failing to disclose the pending NWRB proceedings in its certificate of non-forum shopping, justifying dismissal with prejudice of the complaint-in-intervention pursuant to Section 5, Rule 7 of the Rules of Court.
• Mootness: Petitioner posited that the case should be dismissed on the ground of mootness, considering that the questioned Program is no longer being implemented, there being new rates in place.

• Absence of Forum Shopping Elements: Respondent countered that the elements of forum shopping are not present since there is no pending case before the NWRB, as evidenced by an NWRB certificate of no pending case.
• Letter-Inquiry Not a Complaint: Respondent argued that its letter-inquiry should not be considered a complaint since it lacks the requirements for filing a formal complaint provided in the implementing rules and regulations of Presidential Decree No. 1067 (Water Code of the Philippines).
• No Identity of Rights and Reliefs: Respondent asserted there is no identity of rights and reliefs prayed for, as the issue before the NWRB pertained to BIWC's lack of a CPC and not the validity of the Program.
• No Res Judicata: Respondent maintained there could be no res judicata in view of the NWRB's lack of jurisdiction over the subject matter.
• Exception to Mootness: Respondent asseverated that the non-implementation of the Program does not render the case moot since the issue is capable of repetition yet evading review.

• Forum Shopping: Whether the CA erred when it ruled that the RTC committed grave abuse of discretion when it dismissed the complaint-in-intervention of MRHI on the ground of forum shopping.
• Mootness: Whether the complaint-in-intervention of MRHI should be dismissed for being moot and academic.

• Forum Shopping: No. MRHI did not commit forum shopping because the third element of litis pendentia was absent — the NWRB's lack of jurisdiction over sewerage utilities meant any judgment it rendered would not amount to res judicata in the RTC case.
• Mootness: No. The case falls under the exception to the mootness doctrine as the issue of increased sewer rates is capable of repetition yet evading review, the challenged rate imposition still being in place despite the Program's non-implementation.

• Forum Shopping: The test for determining forum shopping is whether the elements of litis pendentia are present or whether a final judgment in one case would amount to res judicata in another. The requisites of litis pendentia are: (a) identity of parties or interests represented; (b) identity of rights asserted and relief prayed for, founded on the same facts; and (c) identity of the two cases such that judgment in one would amount to res judicata in the other. The third element was absent because the NWRB lacked jurisdiction over sewerage utilities and services, as confirmed by the DOJ Opinion. Any judgment by the NWRB would not constitute res judicata in the RTC case. The NWRB did not even assume jurisdiction over the validity of the Program or sewer rates — it limited its action to the CPC issue, as shown by its show cause order directed only at the lack of a CPC. MRHI also presented a certification from the NWRB stating no pending case existed. While cases such as Villanueva vs. Adre, Joy Mart Consolidated Corp. vs. Court of Appeals, and Top Rate Construction vs. Paxton Development Corp. found forum shopping despite one forum's lack of jurisdiction, those cases presented the grave evil of conflicting decisions — the very evil the prohibition seeks to prevent. In Villanueva, the writ of execution was twice assailed; in Joy Mart, the trial court dissolved a writ pending CA review; and in Top Rate, the CA reversed its ruling despite a final Supreme Court affirmation. No such evil existed here. Res judicata is the conceptual backbone of forum shopping, and jurisdiction is an essential requirement. The Court stressed that an omission in the certificate of non-forum shopping about an event that would not constitute res judicata or litis pendentia should not merit dismissal when the evils sought to be prevented are absent. Even assuming the NWRB initially took cognizance of the sewer-rate issue, the forum-shopping issue was rendered moot when the NWRB made no further action after receiving the DOJ Opinion.

• Mootness: As a rule, the Court declines jurisdiction over moot and academic cases. However, an exception applies when the case is capable of repetition yet evading review, requiring two concurring elements: (i) the challenged action was too short in duration to be fully litigated prior to its cessation, and (ii) there was a reasonable expectation that the same complaining party would be subjected to the same action again. The summary dismissal by the RTC prevented MRHI from fully ventilating its claim, satisfying the first element. As to the second, notices of public hearing for proposed sewerage rates showed that the assailed imposition against sewer-only customers and customers with dual water sources — a rate five times the computed sewer charge — was still in place. The issue persisted despite the Program's non-implementation and the alleged new rates. Since factual determination was necessary to resolve the issues raised by MRHI, the case was remanded to the court of origin, the Supreme Court not being a trier of facts.

• Test for Forum Shopping — The test for determining the existence of forum shopping is whether the elements of litis pendentia are present, or whether a final judgment in one case will amount to res judicata in another. When litis pendentia or res judicata does not exist, neither can forum shopping exist. The requisites of litis pendentia are: (a) identity of parties, or at least such as representing the same interests in both actions; (b) identity of rights asserted and relief prayed for, the relief being founded on the same facts; and (c) identity of the two cases such that judgment in one, regardless of which party is successful, would amount to res judicata in the other. The elements of res judicata are: (a) the former judgment must be final; (b) the court which rendered it had jurisdiction over the subject matter and the parties; (c) it must be a judgment on the merits; and (d) identity of parties, subject matter, and causes of action. The Court applied this test and found the third element of litis pendentia absent because the NWRB lacked jurisdiction, precluding res judicata.

• Forum Shopping Despite Lack of Jurisdiction — Exception — Forum shopping may be committed despite the lack of jurisdiction of one forum when the circumstances of the case clearly present the grave evil sought to be prevented by the rule, i.e., the possibility of rendition of conflicting decisions. However, res judicata is the conceptual backbone upon which forum shopping rests, and jurisdiction is an essential requirement. Care must be taken when applying this exception. The Court distinguished Villanueva vs. Adre, Joy Mart Consolidated Corp. vs. Court of Appeals, and Top Rate Construction vs. Paxton Development Corp., where conflicting decisions were actually rendered or threatened, from the present case where the NWRB never assumed jurisdiction and ceased action after the DOJ Opinion.

• Exception to Mootness Doctrine — Capable of Repetition Yet Evading Review — The Court may take cognizance of a moot and academic case if it is capable of repetition yet evading review. Two elements must concur: (i) the challenged action was in its duration too short to be fully litigated prior to its cessation or expiration, and (ii) there was a reasonable expectation that the same complaining party would be subjected to the same action again. The Court found both elements present: the RTC's summary dismissal prevented full litigation, and notices of public hearing showed the challenged rate imposition was still in place.

• "Simply put, when litis pendentia or res judicata does not exist, neither can forum shopping exist." — This passage states the fundamental test for forum shopping, directly linking its existence to the presence of litis pendentia or res judicata, and is the ratio decidendi for the forum-shopping issue.

• "res judicata is the conceptual backbone upon which forum shopping rests; Jurisdiction is an essential requirement of the same." — This articulates why jurisdiction is indispensable to the forum-shopping analysis, anchoring the Court's distinction between cases where forum shopping was found despite one forum's lack of jurisdiction and the present case.

• "forum shopping may be committed despite the lack of jurisdiction of one forum when the circumstances of the case clearly present the grave evil sought to be prevented by the rule, i.e., the possibility of rendition of conflicting decisions." — This qualifies the exception to the general rule that jurisdiction is essential, limiting it to situations where the actual evil of conflicting decisions is demonstrably present.

• "the issue on forum shopping may be considered moot once the proliferation of contradictory decisions, which is precisely what the prohibition on forum shopping seeks to avoid, is no longer possible." — This explains the policy rationale underlying the forum-shopping prohibition and when the issue becomes moot, supporting the Court's conclusion that even assuming NWRB took cognizance, the issue was moot after the DOJ Opinion.

• First Philippine International Bank vs. Court of Appeals, 322 Phil. 280 (1996) — Discussed as the origin and evolution of forum shopping as a concept, tracing it from a choice of venue in private international law to an unethical legal practice in domestic law. Followed for background.
• Santos Ventura Hocorma Foundation, Inc. vs. Mabalacat Institute, Inc., G.R. No. 211563, 29 September 2021 — Pronounced the controlling test for forum shopping (whether litis pendentia or res judicata is present). Followed as the primary authority.
• Heirs of Vidad vs. Land Bank, 634 Phil. 9 (2010) — Demonstrated that forum shopping was not committed when one forum (the SAC) lacked jurisdiction, so filing before the correct forum (the DARAB) did not constitute forum shopping. Followed as directly analogous.
• Villanueva vs. Adre, 254 Phil. 882 (1989) — Found forum shopping despite one forum's lack of jurisdiction because the grave evil of conflicting decisions was present. Distinguished; the Court cautioned against haphazard application.
• Joy Mart Consolidated Corp. vs. Court of Appeals, 285 Phil. 315 (1992) — Found forum shopping when respondents petitioned the trial court to lift a writ after questioning the same before the CA. Distinguished on the same ground as Villanueva.
• Top Rate Construction & General Services vs. Paxton Development Corp., 457 Phil. 740 (2003) — Found forum shopping despite lack of jurisdiction where the CA reversed its ruling despite a final Supreme Court affirmation. Distinguished; conflicting decisions were actually rendered.
• Commissioner of Internal Revenue vs. Standard Insurance Co., Inc., G.R. No. 219340, 28 April 2021 — Cited for the proposition that forum shopping may be considered moot when the proliferation of contradictory decisions is no longer possible. Followed.
• Madrilejos vs. Gatdula, G.R. No. 184389, 24 September 2019 — Cited for the two-element test of the "capable of repetition yet evading review" exception to the mootness doctrine. Followed.

• Section 5, Rule 7, Rules of Court (Certification against Forum Shopping) — Requires the plaintiff or principal party to certify under oath that no other action involving the same issues is pending in any court, tribunal, or quasi-judicial agency. Failure to comply is cause for dismissal without prejudice, unless otherwise provided. Willful and deliberate forum shopping is ground for summary dismissal with prejudice. The Court applied this provision by holding that an omission in the certificate about an event that would not constitute res judicata or litis pendentia should not merit dismissal when the evils sought to be prevented are absent.
• Presidential Decree No. 1067 (Water Code of the Philippines) — Cited by MRHI for the requirements of filing a formal complaint with the NWRB under its implementing rules and regulations, supporting the argument that MRHI's letter-inquiry did not constitute a formal complaint.
• PTA Charter (Presidential Decree No. 564, as amended) — Cited by BIWC for the PTA's power to develop tourism zones and construct, operate, and maintain water distribution and sewerage systems, supporting BIWC's contention that it acted merely as PTA's agent in implementing the Sewer Policies and Guidelines.

Gesmundo, C.J. (Chairperson), Hernando, Rosario, and Marquez, JJ., concurred.