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KONG v. CECILIA DIEZ CATALAN

FACTS:

The case involves the refusal of HSBANK and HSBC TRUSTEE to pay five checks issued by Thomson to Catalan. Catalan alleges that HSBANK and HSBC TRUSTEE acted in bad faith by declining payment of the checks despite proper funding and instructions from the drawer to honor them. As a result, Catalan demands that HSBANK and HSBC TRUSTEE be ordered to pay the value of the checks.

In response, HSBANK filed a motion to dismiss the amended complaint on various grounds, including lack of jurisdiction and forum shopping. HSBC TRUSTEE, on the other hand, filed a special appearance challenging the jurisdiction of the court, stating that it is a separate corporation from HSBANK and does not transact business in the Philippines.

The RTC denied the motions to dismiss, asserting its jurisdiction over the subject matter of the case and rejecting the argument of forum shopping. The RTC also found that it acquired jurisdiction over the defendants and their motions to dismiss raised other grounds aside from lack of jurisdiction. The defendants filed separate motions for reconsideration, but these were denied.

Catalan then moved to declare HSBANK and HSBC TRUSTEE in default for their failure to answer the amended complaint. However, before the court could rule on the motion, the defendants filed separate answers as a precaution against being declared in default. Subsequently, the defendants filed petitions for certiorari and/or prohibition with the CA, seeking to challenge the RTC's rulings.

The CA dismissed the petitions, stating that the filing of the answers before the RTC rendered moot the issue of lack of jurisdiction. The CA also held that the RTC had jurisdiction over the subject matter of the case and that the amended complaint stated a cause of action. The CA noted that although Catalan prayed for payment of the value of the checks, the relief sought was only used as a basis for computing damages.

The case involves a dispute between Catalan and HSBANK (the drawee bank) regarding the payment of checks issued by Frederick Arthur Thomson. Catalan alleged that the checks were issued by Thomson as payment for his indebtedness to her. She initially filed a complaint seeking payment of the value of the checks but later amended her complaint to include a claim for damages, computed on the basis of the value of the checks. HSBANK argued that the court did not have jurisdiction over the amended complaint and that the allegations in the amended complaint did not constitute a cause of action against them. Catalan was accused of engaging in forum shopping by filing the amended complaint.

ISSUES:

  1. Does the complaint state a cause of action?

  2. Did Catalan engage in forum-shopping?

  3. Did the RTC acquire jurisdiction over HSBANK and HSBC TRUSTEE? Corollary thereto, did the filing of the answer before the RTC render the issue of lack of jurisdiction moot and academic?

  4. Whether the allegations in the amended complaint are in the nature of an action based on tort under Article 19 of the Civil Code.

  5. Whether Catalan engaged in forum-shopping.

  6. Whether the RTC acquired jurisdiction over HSBANK and HSBC TRUSTEE.

RULING:

  1. The complaint states a cause of action. The complaint alleges facts which, if true, would justify the relief demanded. Catalan's complaint for damages is anchored on Article 19 of the Civil Code which establishes the principle that a person must act with justice, observe honesty and good faith, and not abuse his/her rights. The complaint sufficiently alleges that the defendants, HSBANK and HSBC TRUSTEE, exercised their rights in bad faith and with the sole intent of prejudicing or injuring Catalan.

  2. Catalan did not engage in forum-shopping. The filing of a petition for probate of the alleged last will of Thomson in another branch of the RTC does not constitute forum-shopping. Catalan's complaint is for damages while the probate petition concerns the validity of the will. These two actions involve different causes of action and remedies.

  3. The RTC acquired jurisdiction over HSBANK and HSBC TRUSTEE. The filing of an answer to the amended complaint by the petitioners does not render the issue of lack of jurisdiction moot and academic. The issue of jurisdiction can be raised at any stage of the proceedings and cannot be waived by the parties.

  4. The allegations in the amended complaint are in the nature of an action based on tort under Article 19 of the Civil Code. HSBANK's failure to pay the checks and its failure to inform Catalan of the reason for its inaction and non-payment, as well as HSBC TRUSTEE's rejection of Catalan's claim without providing a reason, constitute clear abuse of right for which they may be held liable to Catalan for any damages she incurred.

  5. Catalan did not engage in forum-shopping. There is no identity of parties, rights asserted, and reliefs prayed for between the present case and the probate proceeding. The merits of the action for damages and the allowance of the alleged last will are not to be determined in the probate proceeding, and the facts and evidence supporting the two causes of action are not the same.

  6. The RTC did not acquire jurisdiction over HSBANK and HSBC TRUSTEE. The inclusion of other grounds aside from lack of jurisdiction in their Motions to Dismiss does not amount to a voluntary appearance. However, the omission does not aid HSBANK's case.

PRINCIPLES:

  • Abuse of rights principle - a person must exercise his/her rights in accordance with the purpose for which it was established and must not act with bad faith or unduly harm another.

  • Forum-shopping - the act of filing multiple suits involving the same parties and causes of action in different courts to increase the chances of obtaining a favorable judgment.

  • Jurisdiction - the authority of a court to hear and decide a case. Jurisdiction can be raised at any stage of the proceedings and cannot be waived by the parties.

  • The action based on the unjustified and willful refusal to pay the value of checks falls under a tort action governed by Article 19 of the Civil Code.

  • Forum-shopping exists where there is (a) identity of parties, (b) identity of rights asserted and relief prayed for, and (c) the identity of the two preceding particulars is such that any judgment rendered in the pending case would amount to res judicata in the other.

  • A court acquires jurisdiction over a person through valid service of summons or the person's voluntary appearance in court. The inclusion of other grounds in a Motion to Dismiss, aside from lack of jurisdiction, does not constitute a voluntary appearance.

  • Filing motions seeking affirmative relief is considered as a voluntary submission to the jurisdiction of the court.

  • A party who makes a special appearance challenging the jurisdiction of the court cannot be considered to have submitted to the jurisdiction of the court.

  • For proper service of summons on foreign corporations, it must be established by appropriate allegations in the complaint that the defendant foreign corporation is doing business in the Philippines. A general allegation that a party is doing business in the Philippines, without substantiation, does not suffice.

  • Consent to a contract must be free, intelligent, and informed.

  • Mistake as to the identity of the subject matter of a contract vitiates consent.

  • A contract with a mistaken identity is voidable.