GR 73765; (August, 1991) (Digest)
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.
FACTS
Petitioner Hang Lung Bank, Ltd., a Hong Kong-based bank not licensed to do business in the Philippines, entered into two continuing guarantee agreements in Hong Kong with private respondent Cordova Chin San in 1979. The agreements secured the obligations of Worlder Enterprises to the bank. Upon default, the bank obtained a judgment against both Worlder Enterprises and Chin San from the Supreme Court of Hong Kong in 1984. Subsequently, the bank filed a collection suit against Chin San in the Regional Trial Court (RTC) of Makati to enforce the guarantee.
The RTC dismissed the complaint. It ruled that under Section 14 of the General Banking Act, a foreign bank not licensed to do business in the Philippines is barred from maintaining any suit for the recovery of a debt, claim, or demand. The court distinguished the case from precedents involving isolated Philippine transactions by noting that the guarantee agreements were perfected, executed, and consummated abroad. The RTC also viewed the action as an improper attempt to enforce a foreign judgment directly.
ISSUE
Whether the Regional Trial Court committed grave abuse of discretion in dismissing the complaint on the ground that the petitioner foreign bank lacks legal capacity to sue under the General Banking Act.
RULING
Yes, the Supreme Court found grave abuse of discretion and set aside the RTC’s orders. The legal logic proceeds from a distinction in applicable law and the nature of the action. The General Banking Act’s prohibition against an unlicensed foreign bank maintaining a suit applies only when the bank is “doing business” in the Philippines. The Court reiterated the settled rule that a foreign corporation not doing business in the Philippines, as in this case, can sue in Philippine courts on an isolated transaction executed entirely abroad, especially when seeking relief against a Philippine resident. The transaction’s foreign execution does not strip the court of jurisdiction.
Furthermore, the Court clarified the proper characterization of the complaint. While it prayed for relief identical to the Hong Kong judgment, it should be treated as a petition for the recognition of that foreign judgment under Section 50(b), Rule 39 of the Rules of Court, not a direct enforcement. This re-characterization allows the respondent to properly raise defenses such as lack of jurisdiction, fraud, or mistake of law or fact against the foreign judgment in a recognition proceeding. The RTC’s dismissal, based on a misapplication of the General Banking Act and a misunderstanding of the action’s nature, constituted a capricious and whimsical exercise of judgment. The case was reinstated for further proceedings.