Forum Shopping Dismissal: Redundant Suits and Lis Pendens Cancellation

SK Realty, Inc. v. Johnny KH Uy (G.R. No. 144282, June 8, 2004) is a clear reminder that a party cannot pursue the same dispute in multiple courts, even if the pleadings are artfully worded to look different. The Supreme Court reversed the Court of Appeals and reinstated the trial court's dismissal of a complaint for reconveyance and cancellation of titles, holding that the filing of that suit while an earlier SEC case involving the same properties was pending constituted willful forum shopping.

The Facts

Petitioners and respondent Johnny KH Uy were members of the Uy family and interlocking stockholders of UBS Marketing Corporation and Soon Kee Commercial, Inc. After a dispute over business operations, they executed deeds of assignment in 1987, dividing their businesses and properties. Under the settlement, eight parcels of land in Bacolod City were to be transferred to petitioners in exchange for their properties in Quezon City, Caloocan City, and Baguio City.

Respondent later claimed that petitioners reneged on their obligation to render an accounting and turn over corporate records. In April 1988, respondent filed a complaint with the Securities and Exchange Commission (SEC) for recovery of corporate books, funds, and properties, and for an accounting — docketed as SEC Case No. 3328.

The SEC Hearing Officer ruled in favor of respondent, ordering, among others, the cancellation and annulment of titles covering the same eight parcels of land. On appeal, however, the SEC En Banc set aside that decision. Respondent then elevated the matter to the Court of Appeals and eventually to the Supreme Court as G.R. No. 130328, which remained pending.

While the SEC case was still on appeal, respondent filed a new complaint with the Regional Trial Court (RTC) of Bacolod City for reconveyance of the same eight parcels of land, cancellation of titles, damages, and accounting — docketed as Civil Case No. 95-9051. Respondent also caused a notice of lis pendens to be annotated on the titles.

The Issue

The decisive issue was whether the filing of the RTC complaint for reconveyance and cancellation of titles, while the SEC case involving the same properties was still pending, constituted forum shopping.

The Ruling

The Supreme Court ruled that it did. The Court noted that the SEC Hearing Officer's decision had already directed the cancellation and annulment of the very same titles and the reversion of the properties to UBS Marketing Corporation. When respondent filed the RTC case on September 18, 1995, he knew that the controversy over the properties was still pending with the SEC En Banc and later with the appellate courts.

The Court cited its earlier ruling in Biñan Steel Corporation v. Court of Appeals (G.R. Nos. 142013 and 148430, October 15, 2002), which defined forum shopping as the repetitive availment 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. The exact wording of this definition appears in the Court's decision in this case.

The Court also pointed to Republic v. Carmel Development, Inc. (G.R. No. 142572, February 20, 2002), holding that willful and deliberate forum shopping is a ground for summary dismissal and constitutes direct contempt of court.

Significantly, the Court noted that respondent's former counsel had already been disbarred for forum shopping in connection with the same filings, in Ban Hua U. Flores v. Atty. Enrique S. Chua (Adm. Case No. 4500). The IBP Investigating Commissioner found that the counsel knew of the pending SEC case yet still filed the RTC complaint and submitted a verification falsely stating that no prior action involving the same issues was pending.

The Notice of Lis Pendens

The Court also affirmed the cancellation of the notice of lis pendens. Under Section 14, Rule 13 of the 1997 Rules of Civil Procedure, a notice of lis pendens may be cancelled upon a proper showing that it was filed "for the purpose of molesting the adverse party." The trial court found that respondent filed the RTC case precisely to enable the annotation, despite knowledge of the pending SEC appeal involving substantially the same facts, circumstances, and parties — an indication of bad faith.

Practical Takeaways

• Forum shopping is not just about identical parties and causes of action. Even if the pleadings frame the issues differently, a second case substantially founded on the same transactions, facts, and issues will be dismissed.
• A pending appeal counts. Filing a new case while an earlier case is on appeal, even before a different tribunal, can constitute forum shopping.
• Verifications must be truthful. Signing a certification that no other action is pending, when one is, exposes the party and counsel to sanctions, including dismissal and contempt.
• Lis pendens is not a weapon. A notice of lis pendens filed in bad faith to harass the adverse party may be cancelled by the court.
• Counsel face personal liability. Lawyers who file redundant suits may be disciplined, as demonstrated by the disbarment of respondent's former counsel in this case.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.