Grace Park International Corporation and Woodlink Realty Corporation vs. Eastwest Banking Corporation

Forum shopping does not exist where the plaintiffs in two pending actions represent substantially different interests—one seeking subrogation to creditor rights under a Mortgage Trust Indenture (individuals in Makati) and the other seeking enforcement of debtor rights to proper foreclosure procedures (corporations in Malolos)—and where the causes of action arise from different underlying circumstances, such that a judgment in one would not constitute res judicata in the other.

Grace Park International Corporation and Woodlink Realty Corporation entered into a Mortgage Trust Indenture with Eastwest Banking Corporation (as trustee), Allied Banking Corporation, Security Banking Corporation, and Banco De Oro Unibank, securing loans aggregating P162,314,499.00 and US$797,176.47 with eight parcels of land and improvements covered by Transfer Certificate of Title Nos. 439068 to 439075. BDO held the majority creditor position at 58.04%. During the pendency of the MTI, Sherwyn Yao, Jeremy Jerome Sy, and Leveric Ng effectively paid for BDO's majority share and claimed subrogation to BDO's rights, but Eastwest Banking Corporation refused to recognize this subrogation. Meanwhile, Eastwest commenced foreclosure proceedings without obtaining the required written instructions from the majority creditors under Section 6.05 of the MTI.

• Petitioners Grace Park International Corporation and Woodlink Realty Corporation entered into a Mortgage Trust Indenture with Eastwest Banking Corporation (as trustee), Allied Banking Corporation, Security Banking Corporation, and Banco De Oro Unibank, securing loans aggregating P162,314,499.00 and US$797,176.47 with eight parcels of land and improvements covered by TCT Nos. 439068 to 439075.
• Under the MTI, BDO held the majority creditor position at 58.04%, while EBC held 18.33%, Allied 12.58%, and Security 11.05%.
• Section 6.05 of the MTI required that foreclosure proceedings could only commence upon written instructions from the Majority Creditors (those holding more than 50% of the aggregate principal amount).
• During the pendency of the MTI, Sherwyn Yao, Jeremy Jerome Sy, and Leveric Ng effectively paid for BDO's majority share and claimed subrogation to BDO's rights under the MTI.
• EBC refused to honor the subrogation, prompting Sherwyn, et al. to file an action for subrogation and injunction before the RTC of Makati City (Civil Case No. 10-323).
• EBC commenced foreclosure proceedings without obtaining written instructions from the majority creditors, allegedly in breach of the MTI provisions.
• Petitioners filed an Amended Complaint for Injunction and Annulment of Foreclosure Sale before the RTC of Malolos City (Civil Case No. 543-M-2010), alleging that EBC violated Section 6.05 of the MTI by foreclosing without majority creditor instructions.

• There is no identity of parties between Civil Case No. 543-M-2010 (corporate plaintiffs) and Civil Case No. 10-323 (individual plaintiffs Sherwyn, et al.), as the former are debtors under the MTI while the latter are claiming creditors seeking subrogation.
• There is no identity of causes of action because the Makati case seeks subrogation to creditor rights while the Malolos case seeks enforcement of debtor rights regarding proper foreclosure procedures under the MTI.
• The judgment in the Makati case will not amount to res judicata in the Malolos case because it can only be used as evidence to prove non-compliance with MTI foreclosure requirements, not as a bar to the action.
• The dismissal on grounds of forum shopping and litis pendentia was improper because the essential elements for these grounds were absent.

• The action in RTC-Makati (subrogation) and RTC-Malolos (injunction/annulment) involve the same parties because Sherwyn, et al. (individual plaintiffs in Makati) represent the same interests as the corporation plaintiffs (petitioners) in Malolos, since they are the respective owners of the petitioner corporations.
• Both complaints contain glaring similarities and essentially seek the same relief: injunction of the foreclosure sale and inclusion of Sherwyn, et al.'s claims in the foreclosure.
• Both cases allege the same facts and require the same evidence to substantiate the claims, particularly regarding the right of Sherwyn, et al. to be subrogated to BDO's rights under the MTI.
• The resolution of the subrogation issue in the Makati case would necessarily determine the validity of the foreclosure in the Malolos case, creating res judicata.

• Procedural Issues: Whether the Court of Appeals correctly upheld the dismissal of Civil Case No. 543-M-2010 on the ground of forum shopping in the concept of litis pendentia.
• Substantive Issues: Whether the elements of forum shopping/litis pendentia—specifically identity of parties, identity of rights/reliefs prayed for, and res judicata—are present between the Makati and Malolos cases.

• Procedural: The Supreme Court granted the petition, reversed the CA Decision and Resolution, and reinstated Civil Case No. 543-M-2010 to the RTC-Malolos for further proceedings. The Court held that both the RTC and CA erred in dismissing the case on grounds of forum shopping and/or litis pendentia.
• Substantive: The Court ruled that forum shopping was not established because: (1) there was no identity of parties—the plaintiffs in the Makati case (individuals seeking subrogation to creditor rights) represented substantially different interests from the plaintiffs in the Malolos case (corporations seeking enforcement of debtor rights to proper foreclosure); (2) there was no identity of causes of action—the Makati case arose from EBC's refusal to subrogate Sherwyn, et al. to BDO's rights, while the Malolos case stemmed from EBC's alleged breach of Section 6.05 of the MTI by foreclosing without majority creditor written instructions; and (3) there would be no res judicata effect because the Makati case (an action in personam for subrogation) would not bind non-parties such as the corporate plaintiffs and other defendants in the Malolos case who represent separate and distinct interests. At most, the Makati judgment would constitute factum probans (evidentiary facts) for the Malolos case, not res judicata.

• Forum Shopping — Defined as the act of a litigant who repetitively avails of several judicial remedies in different courts, simultaneously or successively, all substantially founded on the same transactions and the same essential facts and circumstances, and all raising substantially the same issues, either pending in or already resolved adversely by some other court, to increase chances of obtaining a favorable decision. The test is whether the elements of litis pendentia are present or whether a final judgment in one case amounts to res judicata in the other.
• Litis Pendentia — A Latin term meaning "a pending suit," referring to the situation where two actions are pending between the same parties for the same cause of action, so that one becomes unnecessary and vexatious. It is based on the policy against multiplicity of suits.
• Identity of Parties — Absolute identity is not required; shared identity of interest is sufficient. There is identity where the parties are the same, or there is privity between them, or they are successors-in-interest litigating for the same thing under the same title and capacity. A community of interest between a party in the first case and a party in the second case suffices.
• Identity of Causes of Action — Does not mean absolute identity; otherwise, a party could escape res judicata by changing the form of action. The test is whether the same evidence would sustain both actions, or whether there is identity in the facts essential to the maintenance of the two actions. If the same facts or evidence would sustain both, the two actions are considered the same.
• Res Judicata — A judgment in one case will bar a subsequent action if there is identity of parties and causes of action. However, a judgment in an action in personam does not bind non-parties who represent interests separate and distinct from the parties in the first case.

• "What is important in determining whether [forum shopping] exists is the vexation caused the courts and parties-litigants by a party who asks different courts and/or administrative agencies to rule on the same or related causes and/or grant the same or substantially the same reliefs, in the process creating the possibility of conflicting decisions being rendered by the different fora upon the same issues."
• "The test to determine the existence of forum shopping is whether the elements of litis pendentia are present, or whether a final judgment in one case amounts to res judicata in the other."
• "Absolute identity of parties is not required, shared identity of interest is sufficient to invoke the coverage of this principle."
• "Hornbook is the rule that identity of causes of action does not mean absolute identity; otherwise, a party could easily escape the operation of res judicata by changing the form of the action or the relief sought."
• "Being principally a subrogation case which is an action in personam, a judgment in Civil Case No. 10-323 will not bind any non-parties to it, such as the corporation plaintiffs and the other defendants (aside from EBC) in Civil Case No. 543-M-2010 that represent interests separate and distinct from the parties in Civil Case No. 10-323."

• Heirs of Sotto v. Palicte — Cited for the test to determine forum shopping: whether elements of litis pendentia are present or whether final judgment in one case amounts to res judicata in the other; also cited for the three elements of forum shopping.
• Pentacapital Investment Corporation v. Mahinay — Cited for the definition of forum shopping emphasizing the vexation caused to courts and parties by asking different fora to rule on the same causes and reliefs.
• Benavidez v. Salvador — Cited for the definition of litis pendentia as a ground for dismissal based on the policy against multiplicity of suits.
• Degayo v. Magbanua-Dinglasan — Cited for the principle that absolute identity of parties is not required and that community of interest suffices.
• Yap v. Chua — Cited for the test to determine identity of causes of action (whether same evidence would sustain both actions).
• Macasaet v. Co, Jr. — Cited for the definition of action in personam.
• Green Acres Holdings, Inc. v. Cabral — Cited for the principle that judgment in an action in personam does not bind non-parties.
• Dare Adventure Farm Corporation v. CA — Cited for the same principle regarding non-binding effect of in personam judgments on non-parties.

• Section 1(e), Rule 16 of the Rules of Court — Grounds for motion to dismiss, specifically that there is another action pending between the same parties for the same cause (litis pendentia).
• Section 6.05 of the Mortgage Trust Indenture — Provision requiring written instructions from Majority Creditors before foreclosure can commence.
• Section 1.08 of the Mortgage Trust Indenture — Definition of "Majority Creditors" as those holding more than 50% of the aggregate principal amount of obligations.