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

1 SUPREME COURT REPORTS ANNOTATED

38
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 hundred fifty thousand Hongkong dollars
(HK S250,00). 1

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 was perfected, executed and
consummated abroad." 2

In his answer to the complaint, Chin San raised as affirmative defenses: lack of
cause of action, incapacity to sue and improper venue. 3

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 said motion to dismiss, on December 20, 1985, the lower court issued4

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. The instant complaint not the proper action.
“SO ORDERED." 5

Petitioner filed a motion for the reconsideration of said order but it was denied for
lack of merit. Hence, the instant petition for certiorari seeking the reversal of said
6

orders “so as to allow petitioner to enforce through the court below its claims
against private respondent as recognized by the Supreme Court of Hongkong." 7

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 implying submission to the jurisdiction
of the court. 8

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
Philippines from suing or maintaining an action in Philippine courts. What it seeks 9

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 Shipping Lines vs. Intermediate Appellate
Court, although dealing with the amended version of Section 69 of the old
10

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 due to the collision of two vessels at the
harbor of Manila and for the loss of goods bound for Hongkong but erroneously
11

discharged in Manila. 12

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
Philippines because the Philippines was a party to the Convention of the Union of
13

Paris for the Protection of Industrial Property. 14

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 action in our
courts for an isolated transaction in this country. 15

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

1. “2.On July 18, 1979 and July 25, 1980, the defendant 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;
2. “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;
3. “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;
4. “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:

1. “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;
2. “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

1. “c)To pay costs of suit, and

“Plaintiff prays for such other and further reliefs, to which it may by law and equity, be
entitled."
16
The complaint therefore appears to be one of 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
17

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,
18

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——