G.R. No. 73765 - Hang Lung Bank, Ltd. vs. Saulog

Case Summary (G.R. No. 73765)

Factual Background

On July 18, 1979 and July 25, 1980, Hang Lung Bank, Ltd., a Hongkong banking corporation not doing business in the Philippines, obtained two continuing guarantee agreements from Cordova Chin San in Hongkong, by which Chin San guaranteed sums potentially due the bank from Worlder Enterprises up to HK$250,000. Worlder Enterprises defaulted. Petitioner sued Worlder Enterprises and Chin San in the Supreme Court of Hongkong. Summonses were allegedly served in Hongkong and, after no defense was filed, the Supreme Court of Hongkong entered a default judgment dated June 14, 1984, awarding specified sums against Worlder Enterprises and HK$279,325.00 against Chin San, plus interest and costs, as set forth in the reproduced judgment.

Events Leading to Suit in the Philippines

After the Hongkong judgment, petitioner sent a demand letter to Cordova Chin San at a Philippine address. Receiving no payment, petitioner filed Civil Case No. 8762 in the Regional Trial Court, Branch CXLII, Makati, on October 18, 1984, seeking to enforce its claims against Chin San in the Philippines. The complaint recited the continuing guarantees, the Hongkong proceedings, the judgment, the demand, and prayed for the amounts awarded by the Hongkong judgment together with attorney’s fees and costs.

Trial Court Proceedings

Private respondent filed an answer raising lack of cause of action, incapacity to sue, and improper venue. Pretrial was set and postponed, and on July 10, 1985 Chin San filed a motion to dismiss. On December 20, 1985, Judge Felintriye G. Saulog granted the motion to dismiss. The RTC grounded dismissal on Section 14 of the General Banking Act, reasoning that a foreign bank not doing business in the Philippines lacked authority to maintain a suit without a license from the Monetary Board. The RTC distinguished prior decisions dealing with isolated transactions in the Philippines and concluded that the transactions here were consummated in Hongkong; it therefore dismissed the complaint as not the proper action. A motion for reconsideration by petitioner was denied.

Petition for Certiorari and Issues Presented

Petitioner sought relief by certiorari in the Supreme Court, alleging grave abuse of discretion by the RTC in dismissing the complaint. Petitioner argued that the complaint was the proper action to collect the amount guaranteed by Chin San as adjudged by the Hongkong court, that Section 14 was misinterpreted to bar a foreign bank not doing business in the Philippines from suing here, and that the RTC implicitly accepted the defense of improper venue. The Supreme Court noted the RTC’s ruling and framed the central legal question as whether a foreign banking corporation not doing business in the Philippines has the legal capacity to sue in Philippine courts.

The Parties’ Contentions

Petitioner contended that it was not transacting business in the Philippines and therefore Section 14 should not prevent it from litigating an isolated transaction or enforcing a foreign adjudication against a local resident. Private respondent contended that the General Banking Act barred the foreign bank from maintaining suit without a license and also raised venue and other procedural defenses in the RTC.

The Court’s Analysis and Legal Reasoning

The Court applied the jurisprudence construing provisions equivalent to Section 14, particularly the long line of cases interpreting the near-identical provision formerly found in the old Corporation Law and later in the Corporation Code. The Court reiterated that those provisions were intended to prevent foreign corporations from transacting business in the Philippines without license and thereby gaining access to local courts while evading regulatory controls. The Court observed that prior decisions, including Marshall-Wells Co. vs. Elser & Co., held that the statutes do not categorically prohibit an unlicensed foreign corporation from suing in the Philippines where the corporation is not doing business here. The Court cited Universal Shipping Lines vs. Intermediate Appellate Court and other authorities to emphasize the settled rule: it is doing business without a license, not merely lacking a license, that bars access to Philippine courts. The Court further noted that Section 133 of the Corporation Code was reformulated to make this distinction clearer. The Court stressed that denying a foreign corporation the right to sue where it is not doing business in the Philippines would impede legitimate cross-border commercial relations and could protect local wrongdoers from accountability for obligations contracted abroad.

Nature of the Complaint and Appropriate Procedural Characterization

The Court observed that petitioner’s complaint, in its prayer, mirrored

Case Syllabus (G.R. No. 73765)

Parties and Procedural Posture

Hang Lung Bank, Ltd. was the petitioner in a petition for certiorari anchored on grave abuse of discretion.
Hon. Felintriye G. Saulog, Presiding Judge, Regional Trial Court, Branch CXLII, Makati, Metro Manila was the respondent in her judicial capacity for having dismissed the complaint below.
Cordova Chin San was the private respondent and defendant in Civil Case No. 8762 before the RTC.
The petitioner sought review of the RTC orders dismissing Civil Case No. 8762 and denying reconsideration that barred the petitioner from maintaining suit in the Philippines.
The Supreme Court, Third Division, resolved the petition by setting aside the questioned orders and reinstating Civil Case No. 8762.

Key Factual Allegations

Hang Lung Bank, Ltd. was a Hongkong corporation not doing business in the Philippines that executed two continuing guarantee agreements with Cordova Chin San on July 18, 1979 and July 25, 1980 in Hongkong.
The guarantees bound private respondent to pay on demand sums due the bank from Worlder Enterprises up to HK$250,000.
After Worlder Enterprises defaulted, petitioner sued Worlder Enterprises and Cordova Chin San in the Supreme Court of Hongkong and obtained a judgment dated June 14, 1984 adjudging specific sums and interest against both defendants.
Petitioner sent a demand to Cordova Chin San at his Philippine address and received no response.
Petitioner filed Civil Case No. 8762 in the RTC, Makati, on October 18, 1984, seeking enforcement of the claims and praying essentially for the relief adjudged by the Hongkong judgment.
Private respondent filed an answer asserting lack of cause of action, incapacity to sue, and improper venue, and later moved to dismiss on grounds including petitioner’s lack of legal capacity under the General Banking Act.

Procedural History

The pre-trial was initially set for June 17, 1985 and postponed to July 12, 1985.
Private respondent filed a motion to dismiss on July 10, 1985 which the RTC heard and resolved.
On December 20, 1985, the RTC, Branch CXLII, presided by Judge Felintriye G. Saulog, granted the motion to dismiss on the ground that Section 14 of the General Banking Act barred the foreign bank from maintaining suit because it had no license to do business in the Philippines.
Petitioner’s motion for reconsideration of the dismissal was denied.
Petitioner filed the present petition for certiorari in the Supreme Court challenging the dismissal as grave abuse of discretion.

Issues Presented

Whether a foreign bank not doing business in the Philippines has the legal capacity to maintain an action in Philippine courts under Section 14, General Banking Act.
Whether the RTC gravely abused its discretion in dismissing the complaint and denying reconsideration solely on the ground that the petitioner was a foreign bank without a license to do business in the Philippines.
Whether private respondent validly preserved the objection of improper venue.

Contentions of the Parties

Petitioner contended that the RTC erred in holding that the complaint was not the proper action and in interpreting Section 14 to bar its suit despite its not doing business in the Philippines and despite the und