SK Realty, Inc. v. Johnny KH Uy
REITERATIONFacts
The Antecedents: Petitioners and respondent Johnny KH Uy, members of the Uy family and stockholders of UBS Marketing Corporation and Soon Kee Commercial, Inc., experienced a severe conflict regarding the management of their businesses. This led to a settlement agreement executed on June 5, 1987, wherein respondent Johnny KH Uy and his wife assigned their stockholdings in Soon Kee Commercial, Inc. to petitioners in exchange for petitioners' stockholdings in UBS Marketing Corporation. The agreement stipulated a complete accounting of respective businesses and the transfer of eight parcels of land owned by respondents in Bacolod City to petitioners, in exchange for thirteen parcels of land owned by petitioners in Quezon City, Caloocan City, and Baguio City. A formal division of businesses and settlement terms were finalized on July 1, 1987. However, respondent Johnny KH Uy alleged that petitioners failed to render an accounting and turn over corporate records, books, and properties of UBS Marketing Corporation. He further claimed that petitioners incorporated SK Realty, Inc. and simulated the transfer of the eight Bacolod City parcels of land to it via a Deed of Absolute Sale dated July 2, 1987. Procedural History: On April 6, 1988, respondent Johnny KH Uy filed a complaint with the Securities and Exchange Commission (SEC) for the recovery of UBS Marketing Corporation's corporate books, records, funds, and properties, and for an accounting (SEC Case No. 3328). The SEC Hearing Officer ruled in favor of respondents on May 3, 1995. However, the SEC En Banc set aside this decision on December 21, 1995. Respondents then filed a petition for certiorari with the Court of Appeals (CA-G.R. SP No. 41198), which affirmed the SEC En Banc's order. This led to respondents filing a petition for review on certiorari with the Supreme Court (G.R. No. 130328), which remained pending. Meanwhile, on September 18, 1995, while the SEC case was pending before the SEC En Banc, respondents filed a complaint for reconveyance of properties, cancellation of titles, damages, and accounting with the Regional Trial Court (RTC), Branch 43, Bacolod City (Civil Case No. 95-9051), and filed a notice of lis pendens. The RTC dismissed the complaint for forum shopping on November 9, 1995, and ordered the cancellation of the notice of lis pendens on December 8, 1995. The Court of Appeals, on January 14, 2000, reversed the RTC's dismissal and allowed the notice of lis pendens to remain, ruling that no forum shopping occurred as the cases involved different parties and causes of action. Petitioners' motion for reconsideration was denied. The Petition: This case is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended, filed by SK Realty, Inc. and others. Petitioners assail the Decision dated January 14, 2000, and the Resolution dated June 30, 2000, of the Court of Appeals in CA-G.R. CV No. 57171. Petitioners contend that the Court of Appeals erred in declaring that respondents did not violate the rule against forum shopping and in not ordering the cancellation of the notice of lis pendens. The core issue is whether respondents' filing of Civil Case No. 95-9051 in the RTC constituted forum shopping, given that a similar case (SEC Case No. 3328, which reached the Supreme Court as G.R. No. 130328) involving the same parties and substantially the same issues was already pending. Petitioners argue that the RTC correctly dismissed the complaint on the ground of forum shopping, and that the notice of lis pendens was filed in bad faith to molest petitioners.
Issue(s)
Whether the filing of Civil Case No. 95-9051 with the RTC constitutes forum shopping. Whether the notice of lis pendens annotated on the subject properties should be cancelled.
Ruling
The petition is GRANTED. The assailed Decision dated January 14, 2000 and Resolution dated June 30, 2000 of the Court of Appeals in CA-G.R. CV No. 57171 are REVERSED. The Resolution dated November 9, 1995 and Order dated December 8, 1995 of the Regional Trial Court, Branch 43, Bacolod City dismissing respondents’ complaint and ordering the cancellation of the notice of lis pendens are AFFIRMED.
Ratio Decidendi
On the issue of forum shopping: The Supreme Court held that the respondents committed forum shopping. The Court emphasized that forum shopping is defined as the act of a party who 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. In this case, respondents filed Civil Case No. 95-9051 with the RTC for reconveyance of properties and cancellation of titles, while a similar case (SEC Case No. 3328) involving the same parties and substantially the same issues regarding the same properties was already pending before the SEC En Banc, which was subsequently elevated to the Court of Appeals and then to the Supreme Court. The Court noted that the intention of respondents in filing the RTC case was to obtain a favorable decision in another forum, which is precisely what forum shopping prohibits. The Court pointed out that the former counsel of respondents, Atty. Enrique S. Chua, was disbarred for forum shopping, and his actions in filing the RTC case while aware of the pending SEC case were similar to the respondents' actions in the present case. Therefore, the trial court was correct in dismissing the complaint on the ground of forum shopping. On the cancellation of the notice of lis pendens: The Supreme Court affirmed the RTC's order for the cancellation of the notice of lis pendens. The Court found no reason to reverse the RTC's finding that the annotation of the notice of lis pendens was for the purpose of molesting the adverse party and was done in bad faith. The RTC reasoned that the plaintiffs (respondents herein) filed the case and caused the annotation despite their knowledge of the pendency of another case in the Court of Appeals involving substantially the same facts, circumstances, and parties, which indicated bad faith. Section 14, Rule 13 of the 1997 Rules of Civil Procedure allows for the cancellation of a notice of lis pendens upon a proper showing that it is for the purpose of molesting the adverse party or is not necessary to protect the rights of the party who caused it to be recorded. Given the finding of forum shopping and the circumstances surrounding the filing of the RTC case, the Court concluded that the notice of lis pendens was indeed used to harass the petitioners.
Main Doctrine
The filing of a complaint for reconveyance of properties and cancellation of titles, when a similar case involving substantially the same facts, circumstances, and parties is already pending before a higher tribunal or agency, constitutes forum shopping, which is a ground for summary dismissal of the case and may result in contempt of court. A notice of lis pendens may be cancelled if it is shown to be for the purpose of molesting the adverse party or is not necessary to protect the rights of the party who caused it to be recorded.