VOL.

201, AUGUST 26, 1991 137

Hang Lung Bank, Ltd. vs. Saulog

*
G.R. No. 73765. August 26,1991 .

HANG LUNG BANK, LTD., petitioner, vs. HON.

FELINTRIYE G. SAULOG, Presiding Judge, Regional
Trial Court, National Capital Judicial Region, Branch
CXLII, Makati, Metro Manila and CORDOVA CHIN SAN,
respondents.

Corporation Law; Actions; Capacity of petitioner to file an

action in this jurisdiction is governed by the General Banking Act.
—Private respondent correctly contends that since petitioner is a
bank, its capacity to file an action in this jurisdiction is governed
by the General Banking Act (Republic Act No. 337).
Same; Same; A foreign corporation not licensed to do business
in the Philippines is not altogether prohibited from suing or
maintaining an action in Philippine Courts.—In a long line of
cases, this Court has interpreted this last quoted provision as not
altogether prohibiting a foreign corporation not licensed to do
business in the Philippines from suing or maintaining an action
in Philippine courts. What it seeks to prevent is a foreign
corporation doing business in the Philippines without a license
from gaining access to Philippine courts.
Same; Same; Same; It is not the lack of the prescribed license
(to do business in the Philippines) but doing business without
license which bars a foreign corporation from access to our courts.
—The fairly recent case of Universal Shipping Lines vs.
Intermediate Appellate Court, although dealing with the amended
version of Section 69 of the old Corporation Code, Section 133 of
the Corporation Code (Batas Pambansa Blg. 68), but which is
nonetheless apropos, states the rule succinctly: “it is not the lack
of the prescribed license (to do business in the Philippines) but
doing business without license, which bars a

________________

* THIRD DIVISION.

138
138 SUPREME COURT REPORTS ANNOTATED

Hang Lung Bank, Ltd. vs. Saulog

foreign corporation from access to our courts.”

Same; Same; Same; Same; A foreign corporation not licensed
to do business in the Philippines may not be denied the right to file
an action in our courts for an isolated transaction in this country.
—We even went further to say that a foreign corporation not
licensed to do business in the Philippines may not be denied the
right to file an action in our courts for an isolated transaction in
this country.
Same; Same; Same; Same; Same; Petitioner may not he
denied the privilege of pursuing its claims against private
respondent for a contract entered into and consummated outside
the Philippines.—Since petitioner foreign banking corporation
was not doing business in the Philippines, it may not be denied
the privilege of pursuing its claims against private respondent for
a contract which was entered into and consummated outside the
Philippines. Otherwise we will be hampering the growth and
development of business relations between Filipino citizens and
foreign nationals, Worse, we will be allowing the law to serve as a
protective shield for unscrupulous Filipino citizens who have
business relationships abroad.
Remedial Law; Complaint; The complaint appears to be one
for the enforcement of the Hongkong judgment because it prays for
the grant of the affirmative relief given by said foreign judgment.
—The complaint therefore appears to be one for the enforcement
of the Hongkong judgment because it prays for the grant of the
affirmative relief given - by said foreign judgment. Although
petitioner asserts that it is merely seeking the recognition of its
claims based on the contract sued upon and not the enforcement
of the Hongkong judgment, it should be noted that in the prayer
of the complaint, petitioner simply copied the Hongkong judgment
with respect to private respondent’s liability.
Same; Same; Same; The complaint should be considered as a
petition for the recognition of the Hongkong judgment under
Section 50 (b), Rule 39 of the Rules of Court.—However, a foreign
judgment may not be enforced if it is not recognized in the
jurisdiction where affirmative relief is being sought. Hence, in the
interest of justice, the complaint should be considered as a
petition for the recognition of the Hongkong judgment under
Section 50 (b), Rule 39 of the Rules of Court in order that the
defendant, private respondent herein, may present evidence of
lack of jurisdiction, notice, collusion, fraud or clear mistake of fact
and law, if applicable.

139
 VOL. 201, AUGUST 26, 1991 139
Hang Lung Bank, Ltd. vs. Saulog

PETITION for certiorari to review the orders of the

Regional Trial Court of Makati, Metro Manila, Br. 142;
Saulog, J.

The facts are stated in the opinion of the Court.

     Belo, Abiera & Associates for petitioner.
     Castelo Law Office for private respondent.

FERNAN, C.J.:

Challenged in this petition for certiorari which is anchored

on grave abuse of discretion, are two orders of the Regional
Trial Court, Branch CXLII of Makati, Metro Manila
dismissing the complaint for collection of a sum of money
and denying the motion for reconsideration of the dismissal
order on the ground that petitioner, a Hongkong-based
bank, is barred by the General Banking Act from
maintaining a suit in this jurisdiction.
The records show that on July 18, 1979, petitioner Hang
Lung Bank, Ltd., which was not doing business in the
Philippines, entered into two (2) continuing guarantee
agreements with Cordova Chin San in Hongkong whereby
the latter agreed to pay on demand all sums of money
which may be due the bank from Worlder Enterprises to
the extent of the total amount of two 1
hundred fifty
thousand Hongkong dollars (HK S250,00).
Worlder Enterprises having defaulted in its payment,
petitioner filed in the Supreme Court of Hongkong a
collection suit against Worlder Enterprises and Chin San.
Summonses were allegedly served upon Worlder
Enterprises and Chin San at their addresses in Hongkong
but they failed to respond thereto.
Consequently, the Supreme Court of Hongkong issued
the following:

“JUDGMENT

“THE 14th DAY OF JUNE, 1984

“No notice of intention to defend having been given by the 1st and
2nd Defendants herein, IT IS THIS DAY ADJUDGED that:—
"(1) the 1st Defendant (Ko Ching Chong Trading otherwise
known as the Worlder Enterprises)... do pay the Plaintiff the sum
of HK$1,117,968.36 together with interest on the respective
principal

________________

1 Rollo, pp. 24–29.

 140

140 SUPREME COURT REPORTS ANNOTATED

Hang Lung Bank, Ltd. vs. Saulog

sums of HK$1 96,591.38, HK$200,216.29, HK$526,557.63,

HK$49,350.00 and HK$3,965.50 at the rates of 1.7% per month
(or HK$111.40 per day), 18.5% per annum (or HK$101.48 per
day), 1.85% per month (or HK$324.71 per day), 1.55% per month
(or HK$25.50 per day) and 1.7% per month (or HK$2.25 per day)
respectively from 4th May 1984 up to the date of payment; and
"(2) the 2nd Defendant (Cordova Chin San) do pay the Plaintiff
the sum of HK$279,325.00 together with interest on the principal
sum of HK$250,000.00 at the rate of 1.7% per month (or
HK$141.67 per day) from 4th May 1984 up to the date of
payment.
“AND IT IS ADJUDGED that the 1st and 2nd Defendants do
pay the Plaintiff the sum of HK$970.00 fixed costs.
“N.J. BARNETT
Registrar”

Thereafter, petitioner through counsel sent a demand letter

to Chin San at his Philippine address but again, no
response was made thereto. Hence, on October 18,1984,
petitioner instituted in the court below an action seeking
“the enforcement of its just and valid claims against
private respondent, who is a local resident, for a sum of
money based on a transaction which 2
was perfected,
executed and consummated abroad."
In his answer to the complaint, Chin San raised as
affirmative defenses: lack3
of cause of action, incapacity to
sue and improper venue.
Pre-trial of the case was set for June 17, 1985 but it was
postponed to July 12, 1985. However, a day before the
latter pre-trial date, Chin San filed a motion to dismiss the
case and to set the same for hearing the next day. The
motion to dismiss was based on the grounds that petitioner
had no legal capacity to sue and that venue was improperly
laid.
Acting on said4
motion to dismiss, on December 20, 1985,
the lower court issued the following order:

“On defendant Chin San Cordova’s motion to dismiss, dated July

10, 1985; plaintiff’s s opposition, dated July 12? 1985; defendant’s
reply.

________________

2 Civil Case No. 8762. Petitioner’s Reply, pp. 2–3; Rollo, pp. 56 & 58.
3 Rollo, p. 7.
4 Presided by Judge Felintriye G. Saulog.
 141

VOL. 201, AUGUST 26, 1991 141

Hang Lung Bank, Ltd. vs. Saulog

dated July 22, 1985; plaintiff’s supplemental opposition, dated

September 13, 1985; and defendant’s rejoinder filed on September
23, 1985, said motion to dismiss is granted.
“Section 14, General Banking Act provides:

‘No foreign bank or banking corporation formed, organized or existing

under any laws other than those of the Republic of the Philippines, shall
be permitted to transact business in the Philippines, or maintain by itself
any suit for the recovery of any debt, claims or demands whatsoever until
after it shall have obtained, upon order of the Monetary Board, a license
for that purpose.’

“Plaintiff Hang Lung Bank, Ltd. with business and postal

address at the 3rd Floor, United Centre, 95 Queensway,
Hongkong, does not do business in the Philippines. The
continuing guarantee, Annexes ‘A' and ‘B' appeared to have been
transacted in Hongkong. Plaintiff’s Annex ‘C' shows that it had
already obtained judgment from the Supreme Court of Hongkong
against defendant involving the same claim on June 14,1984.
“The cases of Mentholatum Company, Inc. versus Mangaliman,
72 Phil. 524 and Eastern Seaboard Navigation, Ltd. versus Juan
Ysmael & Company, Inc., 102 Phil. 1–8, relied upon by plaintiff,
deal with isolated transaction in the Philippines of foreign
corporation. Such transaction though isolated is the one that
conferred jurisdiction to Philippine courts, but in the instant case,
the transaction occurred in Hongkong.
“Case dismissed. 5The instant complaint not the proper action.
“SO ORDERED."

Petitioner filed a motion for the reconsideration

6
of said
order but it was denied for lack of merit. Hence, the
instant petition for certiorari seeking the reversal of said
orders “so as to allow petitioner to enforce through the
court below its claims against private respondent 7
as
recognized by the Supreme Court of Hongkong."
Petitioner asserts that the lower court gravely abused
its discretion in: (a) holding that the complaint was not the
proper action for purposes of collecting the amount
guaranteed by

________________

5 Rollo, p. 21.
6 Ibid., p. 23.
7 Petition, p. 4.

142
142 SUPREME COURT REPORTS ANNOTATED
Hang Lung Bank, Ltd. vs. Saulog

Chin San “as recognized and adjudged by the Supreme

Court of Hongkong;” (b) interpreting Section 14 of the
General Banking Act as precluding petitioner from
maintaining a suit before Philippine courts because it is a
foreign corporation not licensed to do business in the
Philippines despite the fact that it does not do business
here, and (c) impliedly sustaining private respondent’s
allegation of improper venue.
We need not detain ourselves on the issue of improper
venue. Suffice it to state that private respondent waived
his right to invoke it when he forthwith filed his answer to
the complaint thereby necessarily
8
implying submission to
the jurisdiction of the court.
The resolution of this petition hinges on a determination
of whether petitioner foreign banking corporation has the
capacity to file the action below.
Private respondent correctly contends that since
petitioner is a bank, its capacity to file an action in this
jurisdiction is governed by the General Banking Act
(Republic Act No. 337), particularly Section 14 thereof
which provides:

“SEC. 14. No foreign bank or banking corporation formed,

organized or existing under any laws other than those of the
Republic of the Philippines shall be permitted to transact
business in the Philippines, or maintain by itself or assignee any
suit for the recovery of any debt, claims, or demand whatsoever,
until after it shall have obtained, upon order of the Monetary
Board, a license for that purpose from the Securities and
Exchange Commissioner. Any officer, director or agent of any
such corporation who transacts business in the Philippines
without the said license shall be punished by imprisonment for
not less than one year nor more than ten years and by a fine of
not less than one thousand pesos nor more than ten thousand
pesos.” (45 O.G. No. 4, 1647, 1649–1650)

In construing this provision, we adhere to the

interpretation given by this Court to the almost identical
Section 69 of the old corporation Law (Act No. 1459) which
reads:.

________________

8 Pangasinan Transportation Co., Inc. v. Yatco, L-23090, October 31,

1967, 21 SCRA 658.

143

VOL. 201, AUGUST 26, 1991 143

 Hang Lung Bank, Ltd. vs. Saulog

“SEC. 69. No foreign corporation or corporation formed,

organized, or existing under any laws other than those of the
Philippines shall be permitted to transact business in the
Philippines or maintain by itself or assignee any suit for the
recovery of any debt, claim, or demand whatever, unless it shall
have the license prescribed in the section immediately preceding.
Any officer, director or agent of the corporation or any person
transacting business for any foreign corporation not having the
license prescribed shall be punished by imprisonment for not less
than six months nor more than two years or by a fine of not less
than two hundred pesos nor more than one thousand pesos, or by
both such imprisonment and fine, in the discretion of the Court.”

In a long line of cases, this Court has interpreted this last

quoted provision as not altogether prohibiting a foreign
corporation not licensed to do business in the Philippines9
from suing or maintaining an action in Philippine courts.
What it seeks to prevent is a foreign corporation doing
business in the Philippines without a license from gaining
access to Philippine courts. As elucidated in Marshall Welte
Co. vs. Elser & Co., 46 Phil. 70.

“The object of the statute was to subject the foreign corporation

doing business in the Philippines to the jurisdiction of its courts.
The object of the statute was not to prevent it from performing
single acts but to prevent it from acquiring a domicile for the
purpose of business without taking the steps necessary to render
it amenable to suit in the local courts. The implication of the law
is that it was never the purpose of the Legislature to exclude a
foreign corporation which happens to obtain an isolated order for
business from the Philippines from securing redress from
Philippine courts, and thus, in effect, to permit persons to avoid
their contract made with such foreign corporation, The effect of
the statute preventing foreign corporations from doing business
and from bringing actions in the local courts, except on
compliance with elaborate requirements, must not be unduly
extended or improperly applied. It should not be contrued to
extend

________________

9 Atlantic Mutual Ins. Co. v. Cebu Stevedoring Co., Inc., G.R. No. L-18961,
August 31, 1966, 17 SCRA 1037; Pacific Vegetable Oil Corporation v. Singson, 96
Phil. 986; The Swedish East Asia Co., Ltd. v. Manila Port Service, et al., G.R. No.
L-26332, October 26, 1968, 25 SCRA 633; Central Bank & Trust Co. v.
Bustamante, 71 Phil. 359; Eastboard Navigation Ltd. v. Ysmael & Co., 102 Phil. 1.
1.

144
144 SUPREME COURT REPORTS ANNOTATED
Hang Lung Bank, Ltd. vs. Saulog

beyond the plain meaning of its terms, considered in connection

with its object, and in connection with the spirit of the entire law.”

The fairly recent case of Universal

10
Shipping Lines vs.
Intermediate Appellate Court, although dealing with the
amended version of Section 69 of the old Corporation Code,
Section 133 of the Corporation Code (Batas Pambansa Blg.
68), but which is nonetheless apropos, states the rule
succinctly: “it is not the lack of the prescribed license (to do
business in the Philippines) but doing business without
license, which bars a foreign corporation from access to our
courts.”
Thus, we have ruled that a foreign corporation not
licensed to do business in the Philippines may file a suit in
this country
11
due to the collision of two vessels at the harbor
of Manila and for the loss of goods 12bound for Hongkong
but erroneously discharged in Manila.
Indeed, the phraseologies of Section 14 of the General
Banking Act and its almost identical counterpart Section
69 of the old Corporation Code are misleading in that they
seem to require a foreign corporation, including a foreign
bank or banking corporation, not licensed to do business
and not doing business in the Philippines to secure a
license from the Securities and Exchange Commission
before it can bring or maintain an action in Philippine
courts. To avert such misimpression, Section 133 of the
Corporation Code is now more plainly worded thus:

“No foreign corporation transacting business in the Philippines

without a license, or its successors or assigns, shall be permitted
to maintain or intervene in any action, suit or proceeding in any
court or administrative agency of the Philippines.”

Under this provision, we have ruled that a foreign

corporation may sue in this jurisdiction for infringement of
trademark and unfair competition although it is not doing
business in the

________________

10 G.R. No. 74125, July 31, 1990, 188 SCRA 170.

11 Dampfschiefs Rhederei Union v. La Campania Transatlantica, 8
Phil. 766 (1907).
12 The Swedish East Asia Co. Ltd. v. Manila Port Service, supra.

145

VOL. 201, AUGUST 26, 1991 145

Hang Lung Bank, Ltd. vs. Saulog
13
 13
Philippines because the Philippines was a party to the
Convention of the 14Union of Paris for the Protection of
Industrial Property.
We even went farther to say that a foreign corporation
not licensed to do business in the Philippines may not be
denied the right to file an action15 in our courts for an
isolated transaction in this country.
Since petitioner foreign banking corporation was not
doing business in the Philippines, it may not be denied the
privilege of pursuing its claims against private respondent
for a contract which was entered into and consummated
outside the Philippines. Otherwise we will be hampering
the growth and development of business relations between
Filipino citizens and foreign nationals. Worse, we will be
allowing the law to serve as a protective shield for
unscrupulous Filipino citizens who have business
relationships abroad.
In its pleadings before the court, petitioner appears to be
in a quandary as to whether the suit below is one for
enforcement or recognition of the Hongkong judgment. Its
complaint states:

“COMES NOW Plaintiff, by undersigned counsel, and to this

Honorable Court, most respectfully alleges that:
“1. Plaintiff is a corporation duly organized and existing under
and by virtue of the laws of Hongkong with business and postal
address at the 3rd Floor, United Centre, 95 Queensway,
Hongkong, not doing business in the Philippines, but is suing for
this isolated transaction, but for purposes of this complaint may
be served with summons and legal processes of of this Honorable
Court, at the 6th Floor, Cibeles Building, 6780 Ayala Avenue,
Makati, Metro Manila, while defendant Cordova Chin San, may
be served with summons and other legal processes of this
Honorable Court at the Municipality of Moncada, Province of
Tarlac, Philippines;

________________

13 Puma Sportschuhfabriken Rudolf Dassler, K.G. V. Intermediate

Appellate Court, G.R. No. 75067, February 26, 1988, 158 SCRA 233.
14 Converse Rubber Corporation v. Universal Rubber Products, Inc., L-
27906, January 8, 1987, 147 SCRA 155.
15 Commissioner of Customs v. K.M.K. Gani, G.R. No. 73760, February
26,1990, 182 SCRA 591 citing Bulakhidas v. Navarro, L49695, April 7,
1986, 142 SCRA 1.

146

146 SUPREME COURT REPORTS ANNOTATED

Hang Lung Bank, Ltd. vs. Saulog
 On July 18, 1979 and July 25, 1980, the defendant
“2. executed Continuing Guarantees, in consideration of
plaintiffs from time to time making advances, or coming to
liability or discounting bills or otherwise giving credit or
granting banking facilities from time to time to, or on
account of the Wolder Enterprises (sic), photocopies of the
Contract of Continuing Guarantees are hereto attached as
Annexes ‘A' and ‘B', respectively, and made parts hereof;
“3. In June 1984, a complaint was filed by plaintiff against
the Wolder Enterprises (sic) and defendant Cordova Chin
San, in The Supreme Court of Hongkong, under Case No.
3176, and pursuant to which complaint, a judgment dated
14th day of July, 1984 was rendered by The Supreme
Court of Hongkong ordering to (sic) defendant Cordova
Chin San to pay the plaintiff the sum of HK$279,325.00
together with interest on the principal sum of
HK$250,000.00 at the rate of HK$1.7% per month or
(HK$141.67) per day from 4th May, 1984 up to the date
the said amount is paid in full, and to pay the sum of
HK$970.00 as fixed cost, a photocopy of the Judgment
rendered by The Supreme Court of Hongkong is hereto
attached as Annex ‘C' and made an integral part hereof;
“4. Plaintiff has made demands upon the defendant in this
case to pay the aforesaid amount the last of which is by
letter dated July 16, 1984 sent by undersigned counsel, a
photocopy of the letter of demand is hereto attached as
Annex ‘D' and the Registry Return Card hereto attached
as Annex ‘E' respectively, and made parts hereof.
However. this notwithstanding, defendant failed and
refused and still continue to fail and refuse to make any
payment to plaintiff on the aforesaid amount of
HK$279,325.00 plus interest on the principal sum of
HK$250,000.00 at the rate of (HK$141.67) per day from
May 4,1984 up to the date of payment;
“5. In order to protect and safeguard the rights and interests
of herein plaintiff, it has engaged the services of
undersigned counsel, to file the suit at bar, and for whose
services it has agreed to pay an amount equivalent to 25%
of the total amount due and owing, as of and by way of
attorney’s fees plus costs of suit.

“WHEREFORE, premises considered, it is most respectfully

prayed of this Honorable Court that judgment be rendered
ordering the defendant:

“a) To pay plaintiff the sum of HK$279,325.00 together with

interest on the principal sum of HK$250,000.00 at the rate
of HK$1.7% (sic) per month (or HK$141,67 per day) from
May 4, 1984 until the aforesaid amount is paid in full;
“b) To pay an amount equivalent to 25% of the total amount
due and demandable as of and by way of attorney’s fees,
 and

147

VOL. 201, AUGUST 26, 1991 147

Hang Lung Bank, Ltd. vs. Saulog

“c) To pay costs of suit, and

“Plaintiff prays for such other and

16
further reliefs, to which it may
by law and equity, be entitled."

The complaint therefore appears to be one of the

enforcement of the Hongkong judgment because it prays for
the grant 17of the affirmative relief given by said foreign
judgment. Although petitioner asserts that it is merely
seeking the recognition of its claims based on the contract
sued upon18 and not the enforcement of the Hongkong
judgment, it should be noted that in the prayer of the
complaint, petitioner simply copied the Hongkong
judgment with respect to private respondent’s liability.
However, a foreign judgment may not be enforced if it is
not recognized in the jurisdiction where affirmative relief is
being sought. Hence, in the interest of justice, the
complaint should be considered as a petition for the
recognition of the Hongkong judgment under Section 50 (b),
Rule 39 of the Rules of Court in order that the defendant,
private respondent herein, may present evidence of lack of
jurisdiction, notice, collusion, fraud or clear mistake of fact
and law, if applicable.
WHEREFORE, the questioned orders of the lower court
are hereby set aside. Civil Case No. 8762 is reinstated and
the lower court is directed to proceed with dispatch in the
disposition of said case. This decision is immediately
executory. No costs.
SO ORDERED.

     Gutierrez, Jr., Bidin and Davide, Jr., JJ., concur.

     Feliciano, J., On leave.

Orders set aside.

Note.—Rule that one single or isolated business

transaction does not constitute “doing business.” (Gonzales
vs. Raquiza, 180 SCRA 254.)

——o0o——

________________

16 Rec rd of Civil Case No. 8762, pp. 2–3.

17 Salonga, Private International Law, 1979 ed., p. 429.
 18 Petition, p. 10.

148

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