G.R. No.

L-23145 November 29, 1968

TESTATE ESTATE OF IDONAH SLADE PERKINS, deceased. RENATO D.

TAYAG, ancillary administrator-appellee,
vs.
BENGUET CONSOLIDATED, INC., oppositor-appellant.

Cirilo F. Asperillo, Jr., for ancillary administrator-appellee.

Ross, Salcedo, Del Rosario, Bito and Misa for oppositor-appellant.

FERNANDO, J.:

Confronted by an obstinate and adamant refusal of the domiciliary

administrator, the County Trust Company of New York, United States of
America, of the estate of the deceased Idonah Slade Perkins, who died in New
York City on March 27, 1960, to surrender to the ancillary administrator in the
Philippines the stock certificates owned by her in a Philippine corporation,
Benguet Consolidated, Inc., to satisfy the legitimate claims of local creditors,
the lower court, then presided by the Honorable Arsenio Santos, now retired,
issued on May 18, 1964, an order of this tenor: "After considering the motion of
the ancillary administrator, dated February 11, 1964, as well as the opposition
filed by the Benguet Consolidated, Inc., the Court hereby (1) considers as lost
for all purposes in connection with the administration and liquidation of the
Philippine estate of Idonah Slade Perkins the stock certificates covering the
33,002 shares of stock standing in her name in the books of the Benguet
Consolidated, Inc., (2) orders said certificates cancelled, and (3) directs said
corporation to issue new certificates in lieu thereof, the same to be delivered by
said corporation to either the incumbent ancillary administrator or to the
Probate Division of this Court."1

From such an order, an appeal was taken to this Court not by the domiciliary
administrator, the County Trust Company of New York, but by the Philippine
corporation, the Benguet Consolidated, Inc. The appeal cannot possibly
prosper. The challenged order represents a response and expresses a policy, to
paraphrase Frankfurter, arising out of a specific problem, addressed to the
attainment of specific ends by the use of specific remedies, with full and ample
support from legal doctrines of weight and significance.

The facts will explain why. As set forth in the brief of appellant Benguet
Consolidated, Inc., Idonah Slade Perkins, who died on March 27, 1960 in New
York City, left among others, two stock certificates covering 33,002 shares of
appellant, the certificates being in the possession of the County Trust Company
of New York, which as noted, is the domiciliary administrator of the estate of
the deceased.2 Then came this portion of the appellant's brief: "On August 12,
1960, Prospero Sanidad instituted ancillary administration proceedings in the
Court of First Instance of Manila; Lazaro A. Marquez was appointed ancillary
1
administrator, and on January 22, 1963, he was substituted by the appellee
Renato D. Tayag. A dispute arose between the domiciary administrator in New
York and the ancillary administrator in the Philippines as to which of them was
entitled to the possession of the stock certificates in question. On January 27,
1964, the Court of First Instance of Manila ordered the domiciliary
administrator, County Trust Company, to "produce and deposit" them with the
ancillary administrator or with the Clerk of Court. The domiciliary
administrator did not comply with the order, and on February 11, 1964, the
ancillary administrator petitioned the court to "issue an order declaring the
certificate or certificates of stocks covering the 33,002 shares issued in the
name of Idonah Slade Perkins by Benguet Consolidated, Inc., be declared [or]
considered as lost."3

It is to be noted further that appellant Benguet Consolidated, Inc. admits that

"it is immaterial" as far as it is concerned as to "who is entitled to the
possession of the stock certificates in question; appellant opposed the petition
of the ancillary administrator because the said stock certificates are in
existence, they are today in the possession of the domiciliary administrator, the
County Trust Company, in New York, U.S.A...."4

It is its view, therefore, that under the circumstances, the stock certificates
cannot be declared or considered as lost. Moreover, it would allege that there
was a failure to observe certain requirements of its by-laws before new stock
certificates could be issued. Hence, its appeal.

As was made clear at the outset of this opinion, the appeal lacks merit. The
challenged order constitutes an emphatic affirmation of judicial authority
sought to be emasculated by the wilful conduct of the domiciliary administrator
in refusing to accord obedience to a court decree. How, then, can this order be
stigmatized as illegal?

As is true of many problems confronting the judiciary, such a response was

called for by the realities of the situation. What cannot be ignored is that
conduct bordering on wilful defiance, if it had not actually reached it, cannot
without undue loss of judicial prestige, be condoned or tolerated. For the law is
not so lacking in flexibility and resourcefulness as to preclude such a solution,
the more so as deeper reflection would make clear its being buttressed by
indisputable principles and supported by the strongest policy considerations.

It can truly be said then that the result arrived at upheld and vindicated the
honor of the judiciary no less than that of the country. Through this challenged
order, there is thus dispelled the atmosphere of contingent frustration brought
about by the persistence of the domiciliary administrator to hold on to the
stock certificates after it had, as admitted, voluntarily submitted itself to the
jurisdiction of the lower court by entering its appearance through counsel on

2
June 27, 1963, and filing a petition for relief from a previous order of March
15, 1963.

Thus did the lower court, in the order now on appeal, impart vitality and
effectiveness to what was decreed. For without it, what it had been decided
would be set at naught and nullified. Unless such a blatant disregard by the
domiciliary administrator, with residence abroad, of what was previously
ordained by a court order could be thus remedied, it would have entailed,
insofar as this matter was concerned, not a partial but a well-nigh complete
paralysis of judicial authority.

1. Appellant Benguet Consolidated, Inc. did not dispute the power of the
appellee ancillary administrator to gain control and possession of all assets of
the decedent within the jurisdiction of the Philippines. Nor could it. Such a
power is inherent in his duty to settle her estate and satisfy the claims of local
creditors.5 As Justice Tuason speaking for this Court made clear, it is a
"general rule universally recognized" that administration, whether principal or
ancillary, certainly "extends to the assets of a decedent found within the state
or country where it was granted," the corollary being "that an administrator
appointed in one state or country has no power over property in another state
or country."6

It is to be noted that the scope of the power of the ancillary administrator was,
in an earlier case, set forth by Justice Malcolm. Thus: "It is often necessary to
have more than one administration of an estate. When a person dies intestate
owning property in the country of his domicile as well as in a foreign country,
administration is had in both countries. That which is granted in the
jurisdiction of decedent's last domicile is termed the principal administration,
while any other administration is termed the ancillary administration. The
reason for the latter is because a grant of administration does not ex proprio
vigore have any effect beyond the limits of the country in which it is granted.
Hence, an administrator appointed in a foreign state has no authority in the
[Philippines]. The ancillary administration is proper, whenever a person dies,
leaving in a country other than that of his last domicile, property to be
administered in the nature of assets of the deceased liable for his individual
debts or to be distributed among his heirs."7

It would follow then that the authority of the probate court to require that
ancillary administrator's right to "the stock certificates covering the 33,002
shares ... standing in her name in the books of [appellant] Benguet
Consolidated, Inc...." be respected is equally beyond question. For appellant is
a Philippine corporation owing full allegiance and subject to the unrestricted
jurisdiction of local courts. Its shares of stock cannot therefore be considered
in any wise as immune from lawful court orders.

3
Our holding in Wells Fargo Bank and Union v. Collector of Internal Revenue8
finds application. "In the instant case, the actual situs of the shares of stock is
in the Philippines, the corporation being domiciled [here]." To the force of the
above undeniable proposition, not even appellant is insensible. It does not
dispute it. Nor could it successfully do so even if it were so minded.

2. In the face of such incontrovertible doctrines that argue in a rather

conclusive fashion for the legality of the challenged order, how does appellant,
Benguet Consolidated, Inc. propose to carry the extremely heavy burden of
persuasion of precisely demonstrating the contrary? It would assign as the
basic error allegedly committed by the lower court its "considering as lost the
stock certificates covering 33,002 shares of Benguet belonging to the deceased
Idonah Slade Perkins, ..."9 More specifically, appellant would stress that the
"lower court could not "consider as lost" the stock certificates in question when,
as a matter of fact, his Honor the trial Judge knew, and does know, and it is
admitted by the appellee, that the said stock certificates are in existence and
are today in the possession of the domiciliary administrator in New York."10

There may be an element of fiction in the above view of the lower court. That
certainly does not suffice to call for the reversal of the appealed order. Since
there is a refusal, persistently adhered to by the domiciliary administrator in
New York, to deliver the shares of stocks of appellant corporation owned by the
decedent to the ancillary administrator in the Philippines, there was nothing
unreasonable or arbitrary in considering them as lost and requiring the
appellant to issue new certificates in lieu thereof. Thereby, the task incumbent
under the law on the ancillary administrator could be discharged and his
responsibility fulfilled.

Any other view would result in the compliance to a valid judicial order being
made to depend on the uncontrolled discretion of the party or entity, in this
case domiciled abroad, which thus far has shown the utmost persistence in
refusing to yield obedience. Certainly, appellant would not be heard to contend
in all seriousness that a judicial decree could be treated as a mere scrap of
paper, the court issuing it being powerless to remedy its flagrant disregard.

It may be admitted of course that such alleged loss as found by the lower court
did not correspond exactly with the facts. To be more blunt, the quality of truth
may be lacking in such a conclusion arrived at. It is to be remembered
however, again to borrow from Frankfurter, "that fictions which the law may
rely upon in the pursuit of legitimate ends have played an important part in its
development."11

Speaking of the common law in its earlier period, Cardozo could state fictions
"were devices to advance the ends of justice, [even if] clumsy and at times
offensive."12 Some of them have persisted even to the present, that eminent
jurist, noting "the quasi contract, the adopted child, the constructive trust, all
4
of flourishing vitality, to attest the empire of "as if" today."13 He likewise noted
"a class of fictions of another order, the fiction which is a working tool of
thought, but which at times hides itself from view till reflection and analysis
have brought it to the light."14

What cannot be disputed, therefore, is the at times indispensable role that

fictions as such played in the law. There should be then on the part of the
appellant a further refinement in the catholicity of its condemnation of such
judicial technique. If ever an occasion did call for the employment of a legal
fiction to put an end to the anomalous situation of a valid judicial order being
disregarded with apparent impunity, this is it. What is thus most obvious is
that this particular alleged error does not carry persuasion.

3. Appellant Benguet Consolidated, Inc. would seek to bolster the above

contention by its invoking one of the provisions of its by-laws which would set
forth the procedure to be followed in case of a lost, stolen or destroyed stock
certificate; it would stress that in the event of a contest or the pendency of an
action regarding ownership of such certificate or certificates of stock allegedly
lost, stolen or destroyed, the issuance of a new certificate or certificates would
await the "final decision by [a] court regarding the ownership [thereof]."15

Such reliance is misplaced. In the first place, there is no such occasion to

apply such by-law. It is admitted that the foreign domiciliary administrator did
not appeal from the order now in question. Moreover, there is likewise the
express admission of appellant that as far as it is concerned, "it is immaterial
... who is entitled to the possession of the stock certificates ..." Even if such
were not the case, it would be a legal absurdity to impart to such a provision
conclusiveness and finality. Assuming that a contrariety exists between the
above by-law and the command of a court decree, the latter is to be followed.

It is understandable, as Cardozo pointed out, that the Constitution overrides a

statute, to which, however, the judiciary must yield deference, when
appropriately invoked and deemed applicable. It would be most highly
unorthodox, however, if a corporate by-law would be accorded such a high
estate in the jural order that a court must not only take note of it but yield to
its alleged controlling force.

The fear of appellant of a contingent liability with which it could be saddled

unless the appealed order be set aside for its inconsistency with one of its by-
laws does not impress us. Its obedience to a lawful court order certainly
constitutes a valid defense, assuming that such apprehension of a possible
court action against it could possibly materialize. Thus far, nothing in the
circumstances as they have developed gives substance to such a fear.
Gossamer possibilities of a future prejudice to appellant do not suffice to nullify
the lawful exercise of judicial authority.

5
4. What is more the view adopted by appellant Benguet Consolidated, Inc. is
fraught with implications at war with the basic postulates of corporate theory.

We start with the undeniable premise that, "a corporation is an artificial being
created by operation of law...."16 It owes its life to the state, its birth being
purely dependent on its will. As Berle so aptly stated: "Classically, a
corporation was conceived as an artificial person, owing its existence through
creation by a sovereign power."17 As a matter of fact, the statutory language
employed owes much to Chief Justice Marshall, who in the Dartmouth College
decision defined a corporation precisely as "an artificial being, invisible,
intangible, and existing only in contemplation of law."18

The well-known authority Fletcher could summarize the matter thus: "A
corporation is not in fact and in reality a person, but the law treats it as though
it were a person by process of fiction, or by regarding it as an artificial person
distinct and separate from its individual stockholders.... It owes its existence to
law. It is an artificial person created by law for certain specific purposes, the
extent of whose existence, powers and liberties is fixed by its charter."19 Dean
Pound's terse summary, a juristic person, resulting from an association of
human beings granted legal personality by the state, puts the matter neatly.20

There is thus a rejection of Gierke's genossenchaft theory, the basic theme of

which to quote from Friedmann, "is the reality of the group as a social and legal
entity, independent of state recognition and concession."21 A corporation as
known to Philippine jurisprudence is a creature without any existence until it
has received the imprimatur of the state according to law. It is logically
inconceivable therefore that it will have rights and privileges of a higher priority
than that of its creator. More than that, it cannot legitimately refuse to yield
obedience to acts of its state organs, certainly not excluding the judiciary,
whenever called upon to do so.

As a matter of fact, a corporation once it comes into being, following American

law still of persuasive authority in our jurisdiction, comes more often within
the ken of the judiciary than the other two coordinate branches. It institutes
the appropriate court action to enforce its right. Correlatively, it is not immune
from judicial control in those instances, where a duty under the law as
ascertained in an appropriate legal proceeding is cast upon it.

To assert that it can choose which court order to follow and which to disregard
is to confer upon it not autonomy which may be conceded but license which
cannot be tolerated. It is to argue that it may, when so minded, overrule the
state, the source of its very existence; it is to contend that what any of its
governmental organs may lawfully require could be ignored at will. So
extravagant a claim cannot possibly merit approval.

6
5. One last point. In Viloria v. Administrator of Veterans Affairs,22 it was shown
that in a guardianship proceedings then pending in a lower court, the United
States Veterans Administration filed a motion for the refund of a certain sum of
money paid to the minor under guardianship, alleging that the lower court had
previously granted its petition to consider the deceased father as not entitled to
guerilla benefits according to a determination arrived at by its main office in
the United States. The motion was denied. In seeking a reconsideration of such
order, the Administrator relied on an American federal statute making his
decisions "final and conclusive on all questions of law or fact" precluding any
other American official to examine the matter anew, "except a judge or judges
of the United States court."23 Reconsideration was denied, and the
Administrator appealed.

In an opinion by Justice J.B.L. Reyes, we sustained the lower court. Thus: "We
are of the opinion that the appeal should be rejected. The provisions of the U.S.
Code, invoked by the appellant, make the decisions of the U.S. Veterans'
Administrator final and conclusive when made on claims property submitted to
him for resolution; but they are not applicable to the present case, where the
Administrator is not acting as a judge but as a litigant. There is a great
difference between actions against the Administrator (which must be filed
strictly in accordance with the conditions that are imposed by the Veterans'
Act, including the exclusive review by United States courts), and those actions
where the Veterans' Administrator seeks a remedy from our courts and
submits to their jurisdiction by filing actions therein. Our attention has not
been called to any law or treaty that would make the findings of the Veterans'
Administrator, in actions where he is a party, conclusive on our courts. That,
in effect, would deprive our tribunals of judicial discretion and render them
mere subordinate instrumentalities of the Veterans' Administrator."

It is bad enough as the Viloria decision made patent for our judiciary to accept
as final and conclusive, determinations made by foreign governmental
agencies. It is infinitely worse if through the absence of any coercive power by
our courts over juridical persons within our jurisdiction, the force and
effectivity of their orders could be made to depend on the whim or caprice of
alien entities. It is difficult to imagine of a situation more offensive to the
dignity of the bench or the honor of the country.

Yet that would be the effect, even if unintended, of the proposition to which
appellant Benguet Consolidated seems to be firmly committed as shown by its
failure to accept the validity of the order complained of; it seeks its reversal.
Certainly we must at all pains see to it that it does not succeed. The deplorable
consequences attendant on appellant prevailing attest to the necessity of
negative response from us. That is what appellant will get.

That is all then that this case presents. It is obvious why the appeal cannot
succeed. It is always easy to conjure extreme and even oppressive possibilities.
7
That is not decisive. It does not settle the issue. What carries weight and
conviction is the result arrived at, the just solution obtained, grounded in the
soundest of legal doctrines and distinguished by its correspondence with what
a sense of realism requires. For through the appealed order, the imperative
requirement of justice according to law is satisfied and national dignity and
honor maintained.

WHEREFORE, the appealed order of the Honorable Arsenio Santos, the Judge
of the Court of First Instance, dated May 18, 1964, is affirmed. With costs
against oppositor-appelant Benguet Consolidated, Inc.

Makalintal, Zaldivar and Capistrano, JJ., concur.

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.

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 $250,000).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:

8
 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 sums of
HK$196,591.38, 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 court4
issued the following order:
9
 On defendant Chin San Cordova's motion to dismiss, dated July 10,
1985; plaintiff's opposition, dated July 12, 1985; defendant's reply, 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.6 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 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 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
10
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:

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.

11
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.9
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-Wells 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 construed to extend 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,10 although dealing with the amended version of Section 69 of the old
Corporation Law, 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 Manila11 and for the loss of goods bound for Hongkong but
erroneously 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 Law 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:

12
 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 Philippines13 because the Philippines was a party to
the Convention of the Union of Paris for the Protection of IndustrialProperty.14

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.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 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;

2. On July 18, 1979 and July 25, 1980, the defendant executed
Continuing Guarantees, in consideration of plaintiff's 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

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 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$260,000.00 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

c) To pay costs of suit, and

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 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.17 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 judgment18 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.1âwphi1 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.

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