Guaranteed Hotels, Inc. v. Baltao
REITERATIONFacts
The Antecedents: The underlying dispute concerns a Joint Venture Agreement (JVA) entered into on November 4, 1996, between Sta. Lucia Realty and Development, Inc. and Guaranteed Hotels, Inc. for the development of a resort complex. A key element of this JVA was a parcel of land covered by TCT No. 11391, allegedly registered in the name of Guaranteed Hotels, Inc. The controversy arose when derivative suits were filed, questioning the validity and authorization of this JVA and related corporate actions. Procedural History: Initially, a derivative suit (the OLONGAPO CASE) was filed on August 28, 2001, before the Regional Trial Court of Olongapo City, seeking the annulment of the JVA concerning TCT No. 11391, alleging it was done without the consent of Guaranteed Hotels, Inc. Subsequently, on June 21, 2002, a second derivative suit (the MANILA CASE) was filed before the Regional Trial Court of Manila, Branch 46, by Guaranteed Hotels, Inc., represented by Urma Chiongbian, against alleged stockholders and directors. This suit sought to annul corporate resolutions and acts, including those authorizing joint venture agreements. The respondents in the MANILA CASE moved to dismiss based on forum shopping, which the trial court denied. This denial led to a Petition for Certiorari before the Court of Appeals. The Petition: The instant petition is for review on certiorari under Rule 45 of the Rules of Court, seeking to reverse the Court of Appeals' decision and resolution. The Court of Appeals had reversed the Regional Trial Court's order and dismissed the MANILA CASE, finding that the petitioner engaged in willful and deliberate forum shopping. The petitioner argues that there was no forum shopping due to the lack of identity of parties and causes of action between the OLONGAPO CASE and the MANILA CASE. The Supreme Court, however, affirmed the Court of Appeals' finding of forum shopping, holding that there was substantial identity of parties and that the objective of both suits was to annul the JVA, thus violating the rules against forum shopping.
Issue(s)
Whether the petitioner engaged in forum shopping by filing two derivative suits. Whether there is an identity of parties between the OLONGAPO CASE and the MANILA CASE. Whether there is an identity of rights asserted and reliefs prayed for between the two derivative suits.
Ruling
The petition is denied. The decision of the Court of Appeals finding the petitioner guilty of willful and deliberate forum shopping and dismissing the MANILA CASE is affirmed.
Ratio Decidendi
On the issue of forum shopping: The Court affirmed the Court of Appeals' finding that the petitioner engaged in forum shopping. Forum shopping is defined as the act of filing multiple suits involving the same parties for the same cause of action, either simultaneously or successively, to obtain a favorable judgment. The Court reiterated the test for forum shopping, which involves the presence of the elements of litis pendentia: (a) identity of parties or at least parties representing the same interests; (b) identity of rights asserted and reliefs prayed for, founded on the same facts; and (c) the identity is such that a judgment in one case would amount to res judicata in the other. The Court emphasized that forum shopping is a condemnable practice that burdens the courts and undermines the administration of justice, leading to the dismissal of cases. On the identity of parties: The Court found substantial identity of parties between the OLONGAPO CASE and the MANILA CASE. While the petitioner argued that the plaintiffs were different, the Court applied the well-settled rule that lis pendens requires only substantial, not absolute, identity of parties. It noted that both cases were purportedly filed to protect the interests of Guaranteed Hotels, Inc., establishing a community of interest among the parties, thus satisfying the first requisite of litis pendentia. The Court cited TF Ventures, et al. v. Yoshitsugu Matsuura, et al. in support of this principle. On the identity of rights asserted and reliefs prayed for: The Court agreed with the Court of Appeals that the rights asserted and reliefs prayed for in both derivative suits were identical. The OLONGAPO CASE directly sought the nullification of the JVA, while the MANILA CASE indirectly assailed the JVA by questioning the authority of the respondents to execute it. The Court reasoned that although the reliefs were not similarly worded, their objective was the annulment of the JVA. The Court highlighted the grave evil of allowing two tribunals to render contradictory decisions on the same matter, which would wreak havoc on the judicial system. Therefore, the identity of the two suits was such that a judgment in one would amount to res judicata in the other, fulfilling the second and third requisites of litis pendentia.
Main Doctrine
Filing multiple suits involving the same parties for the same cause of action, either simultaneously or successively, for the purpose of obtaining a favorable judgment constitutes forum shopping. The elements of litis pendentia, namely, identity of parties (or substantial identity of interest), identity of rights asserted and reliefs prayed for founded on the same facts, and the identity such that a judgment in one case would amount to res judicata in the other, are determinative of forum shopping.