STATE INVESTMENT HOUSE, INC. vs. CITIBANK (Conflict of Laws)

G.R. Nos. 79926-27 October 17, 1991

STATE INVESTMENT HOUSE, INC. and STATE FINANCING CENTER, INC., petitioners,

vs.

CITIBANK, N.A., BANK OF AMERICA, NT & SA, HONGKONG & SHANGHAI BANKING CORPORATION, and the COURT OF APPEALS, respondents.

FACTS:

The foreign banks involved in the controversy are Bank of America NT and SA, Citibank N.A. and Hongkong and Shanghai Banking Corporation.  They jointly filed with the Court of First Instance of Rizal a petition for involuntary insolvency of Consolidated Mines, Inc. (CMI), said CMI had obtained loans from the three petitioning bank. 

The petition was opposed om the ground that the Court had no jurisdiction to take cognizance of the petition for insolvency because petitioners are not resident creditors of CMI in contemplation of the Insolvency Law.

ISSUE:

Whether foreign banks licensed to do business in the Philippines, may be considered "residents of the Philippine Islands" within the meaning of Section 20 of the Insolvency Law (Act No. 1956, as amended, eff. May 20, 1909)

RULING:

There is no question that the three banks are foreign corporations in this sense, with principal offices situated outside of the Philippines. There is no question either that said banks have been licensed to do business in this country and have in fact been doing business here for many years, through branch offices or agencies, including "foreign currency deposit units;" 

The issue is whether these Philippine branches or units may be considered "residents of the Philippine Islands" as that term is used in Section 20 of the Insolvency Law, or residents of the state under the laws of which they were respectively incorporated. The answer cannot be found in the Insolvency Law itself, which contains no definition of the term, resident, or any clear indication of its meaning. There are however other statutes, albeit of subsequent enactment and effectivity, from which enlightening notions of the term may be derived. (NIRC and Corporation Law)

It is imperative to know the following:

DOMESTIC CORPORATION

The principal place of business is considered as the residence of domestic corporation. (Under remedial law, it is where summon must be served through the enumerated persons provided therein)

Corporation Law

FOREIGN CORPORATION

If entity is incorporated pursuant to laws other than those of the Philippines it is foreign entity.

But under Philippine jurisdiction

For as long as there is observance of the rule of RECIPROCITY wherein a Philippine corporation should also be allowed in another jurisdiction to do business therein then any corporation incorporated pursuant to laws of that foreign jurisdiction would be considered here as foreign corporation. 

In other words, an entity incorporated pursuant to laws other than those of the Philippines will be  considered as foreign corporation provided there is compliance with rule on reciprocity.

RECIPROCITY - meaning that other country under those whose laws the foreign entity was incorporated must also be affording the same privilege and benefits to Filipino citizens.

It will only be a foreign corporation if it is incorporated pursuant to laws of another jurisdiction subject to the rule on reciprocity.

If there is no reciprocity it is not a foreign corporation here it is nothing but foreign entity. Only foreign corporation is licensed to do business in the Philippines.

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Domestic corporation is considered as domicile and resident in the Philippines. Whereas the domicile of foreign corporation is the place of incorporation.

Foreign corporation if it is domiciled in the place of incorporation may it considered as resident of the Philippines as far as the branches are concern?

The SC ruled in affirmative, on the ground that because foreign corporation is license to do business in the Philippines. And that foreign corporation does not only have principal place of business in that other jurisdiction but also it has branches or places of operations in different parts of the world. For that purpose therefore there becomes a distinction between domicile and residence as far as foreign corporation is concern.

Thus, if foreign corporation is deemed to be domicile in place of incorporation.

But if it is license to do business in Philippines. It has branch or branches or has operation as foreign corporation license to do business in Philippine. It shall be considered as resident foreign corporation.

How to serve summon to resident foreign corporation?

Answer: Through designated officer, the resident agent, he is fully authorized to receive summon. Service upon that resident agent is deemed as service upon the foreign corporation. Absence of which it may be served to designated government agencies. Like, Foreign bank to BSP; Insurance Corporation to Insurance Commission; any other corporation to SEC.