HONGKONG AND SHANGHAI BANKING CORPORATION (HSBC) vs.

SHERMAN et al
HSBC vs. SHERMAN
G.R. No. 72494 August 11, 1989
FACTS:
Sometime in 1981, Eastern Book Supply Service PTE, Ltd. (COMPANY), a c o m p a n y
i n c o r p o r a t e d i n S i n g a p o r e a p p l i e d w i t h , a n d w a s g r a n t e d b y, t h e Singapore branch
of petitioner BANK an overdraft facility. As a security for therepayment by the COMPANY of
sums advanced by petitioner BANK, both privaterespondents and a certain Robin de Clive
Lowe, all of whom were directors of the C O M P A N Y a t s u c h t i m e , e x e c u t e d a J o i n t a n d
S e v e r a l G u a r a n t e e i n f a v o r o f petitioner BANK whereby private respondents and Lowe agreed
to pay, jointly andseverally, on demand all sums owed by the COMPANY to petitioner. The Joint
andSeveral Guarantee contains a choice-of-forum-clause that all rights and obligationsa risin g f ro m
t he con t ra ct sha ll be co n st ru e d a nd go ve rn e d u nd e r b y t he la ws Republic of Singapore. The
COMPANY failed to pay its obligation. Thus, petitionerBANK demanded payment of the obligation from
private respondents. Inasmuch asthe private respondents still failed to pay, petitioner BANK filed a
complaint forcollection of a sum of money against private respondents before the RTC of Quezon Cit y,
B ran ch 8 4. O n De ce mb e r 14 , 19 84 , p riva t e re spo n de n t s f iled a m ot ion to dismiss on the
grounds of lack of jurisdiction over the subject matter and over theirpersons. Said motion was denied. A
motion for reconsideration of the said order wasfiled by the private respondents which was however,
denied. Private respondentst he n f iled be f o re t he re sp on de n t In t e rm e d ia t e App e lla te
Co u rt a pe t it ion f or prohibition with preliminary injunction and/or prayer for a restraining order.
Theappellate court granted the said petition. Motion for reconsideration was denied, hence this
for review on
certiorari.
ISSUE:
Whether or not Philippine courts have jurisdiction over the suit.
RULING:
One basic principle underlies all rules of jurisdiction in International Law: aSt a te do e s n ot h a ve
ju risd ict io n in t he ab se n ce o f so me rea son a b le b asis f or exercising it, whether the
proceedings are in rem quasi in rem or in personam
. Tobe reasonable, the jurisdiction must be based on some minimum contacts that willnot offend
traditional notions of fair play and substantial justice. 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 foreignt r i b u n a l , w i t h m o r e r e a s o n a s a d e f e n d a n t .
H o w e v e r , i n t h i s c a s e , p r i v a t e respondents are Philippine residents (a fact which was not
disputed by them) whowo u ld rat he r f a ce a co mp la in t a ga in st t he m b ef ore a f o re ign co u rt
a nd in t he process incur considerable expenses, not to mention inconvenience, than to have
aPhilippine court try and resolve the case. Private respondents' stance is
hardlyco mp re he n sib le, u n le ss th e ir u lt im a te in te n t is t o e va d e, o r at lea st de la y, th e
payment of a just obligation.