Hongkong and Shanghai Banking Corporation vs. Sherman

The governing principle is that a contractual stipulation conferring jurisdiction upon foreign courts does not, by itself, divest Philippine courts of their own jurisdiction. Such a clause is construed as permissive, merely adding the foreign court as an available forum, unless the parties' intent to make it exclusive is clearly and unequivocally expressed.

Eastern Book Supply Service PTE, Ltd., a Singaporean company, obtained an overdraft facility from the Singapore branch of petitioner Hongkong and Shanghai Banking Corporation (HSBC). As security, private respondents Jack Robert Sherman and Deodato Reloj, directors of the company, executed a Joint and Several Guarantee in favor of HSBC. The guarantee contained a clause stating that all rights and obligations "shall be construed and determined under and may be enforced in accordance with the laws of the Republic of Singapore" and that "the Courts in Singapore shall have jurisdiction over all disputes arising under this guarantee." After the company defaulted, HSBC demanded payment from the respondents. Upon their failure to pay, HSBC filed a collection suit before the Regional Trial Court of Quezon City.

In 1981, Eastern Book Supply Service PTE, Ltd., a Singaporean company, was granted an overdraft facility by the Singapore branch of petitioner HSBC. As security, private respondents Sherman and Reloj, along with another director, executed a Joint and Several Guarantee on October 7, 1982. The guarantee contained a clause (paragraph 14) stating that all rights and obligations "shall be construed and determined under and may be enforced in accordance with the laws of the Republic of Singapore" and that "the Courts in Singapore shall have jurisdiction over all disputes arising under this guarantee." The company defaulted. HSBC made a demand on the respondents, who failed to pay. Consequently, HSBC filed a collection suit in the RTC of Quezon City. Private respondents, both Philippine residents, filed a Motion to Dismiss based on the choice-of-forum clause.

• Petitioner HSBC argued that the choice-of-forum clause was merely permissive and did not expressly or impliedly exclude the jurisdiction of Philippine courts.
• HSBC contended that jurisdiction over the subject matter is conferred by law, not by the will or consent of the parties, and that the RTC had jurisdiction over a collection suit.
• HSBC asserted that the respondents' stance was a mere technicality intended to evade or delay the payment of a just obligation, as they failed to show any prejudice from litigating in the Philippines.
• HSBC invoked the principle that a defendant cannot raise defenses not interposed in the court below, noting that the respondents' claim about the petitioner's corporate identity was a new argument.

• Private respondents argued that the mandatory word "shall" in the choice-of-forum clause made it imperative that all disputes be adjudicated exclusively by the courts of Singapore.
• They maintained that the entire transaction—the loan, the guarantee, the currency—was situated in Singapore, making Singapore law the proper governing law and its courts the proper forum.
• They characterized the clause as a mandatory jurisdictional stipulation that deprived Philippine courts of authority to hear the case.

• Procedural Issues: Whether the respondents waived any objection to improper venue by failing to explicitly invoke it in their Motion to Dismiss.
• Substantive Issues: Whether the choice-of-forum clause in the Joint and Several Guarantee divested the Philippine courts of jurisdiction over the collection suit filed by the petitioner.

• Procedural: The Court found that the issue of waiver of improper venue was moot in light of its ruling on the substantive issue. It noted, however, that the respondents' motion, while using the term "jurisdiction," substantively conveyed the concept of improper venue, and thus the appellate court did not err in considering it.
• Substantive: The Court reversed the IAC. It held that the choice-of-forum clause was not exclusive. The stipulation that the courts of Singapore "shall have jurisdiction" did not contain qualifying or restrictive words indicating that Singapore was the only venue. Therefore, the clause was merely permissive, adding the Singapore courts as an available forum but not removing the jurisdiction conferred by law on Philippine courts. The Court emphasized that jurisdiction is fixed by law and cannot be conferred or divested by the mere agreement of the parties unless such intent is unequivocally expressed.

• Interpretation of Choice-of-Forum Clauses — A contractual stipulation designating a foreign court as the forum for disputes is construed as permissive, not exclusive, unless the language clearly and unequivocally expresses the parties' intent to make it the sole and exclusive venue. The use of the word "shall" alone is insufficient to create exclusivity.
• Jurisdiction vs. Venue — Jurisdiction over the subject matter is conferred by law and cannot be vested in or stripped from a court by the agreement of the parties. A choice-of-forum clause relates more to the convenience of the parties (venue) than to the court's fundamental power to adjudicate (jurisdiction).
• Forum Non Conveniens — While a court may dismiss a case under this principle if another forum is more appropriate, the decision rests in the sound discretion of the trial court based on the facts. The IAC erred in applying it as a strict rule based solely on the contract.

• "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." — From the RTC order, affirmed by the Supreme Court, highlighting the core distinction between jurisdiction and party agreement.
• "The plain meaning is that the parties merely consented to be sued in [the named forum]. Qualifying or restrictive words which would indicate that [the named forum] and [the named forum] alone is the venue are totally absent therefrom." — Cited from Polytrade Corporation v. Blanco, illustrating the interpretive rule applied to the clause in this case.

• Polytrade Corporation v. Blanco, G.R. No. L-27033, October 31, 1969 — Cited as controlling precedent for the rule that a stipulation agreeing to sue and be sued in a particular court is permissive and does not preclude filing suits in the residence of the plaintiff or defendant under the Rules of Court, absent clear restrictive language.
• Neville Y. Lamis Ents. v. Lagamon, G.R. No. 57250, October 30, 1981 — Reiterated the Polytrade doctrine, holding that a stipulation vesting jurisdiction in a specific court does not, without more, make that venue exclusive.

• Section 2(b), Rule 4 of the Rules of Court (1964) — The general rule on venue for personal actions, which allows filing in the residence of the plaintiff or defendant. The Court held that the choice-of-forum clause did not constitute a waiver of this right, as it lacked exclusive language.