STATE INVESTMENT HOUSE V CITIBANK

FACTS:
Consolidated Mines, Inc. (CMI) obtained loans from Citibank, Bank of America and
HSBC, all foreign corporations but with branches in the Philippines. Meanwhile, State
Investment House, Inc. (SIHI) and State Financing Center, Inc. (SFCI), also creditors
of CMI, filed collection suits against the latter with writs of preliminary attachment.
Subsequently, the three banks jointly filed with the court a petition for involuntary
insolvency of CMI. SHI and SFCI opposed the petition on the ground that the
petitioners are not resident creditors in contemplation of the Insolvency Law.
ISSUE: Whether or not a foreign corporation with a branch in the
Philippines and doing business therein can be considered a resident
HELD:
Foreign corporations duly licensed to do business in the Philippines are considered
residents of the Philippines, as the word is understood in Sec. 20 of the Insolvency
Law, authorizing at least three resident creditors of the Philippines to file a petition
to declare a corporation insolvent. The Tax Code declares that the term resident
foreign corporation applies to foreign corporation engaged in trade or business
within the Philippines as distinguished from a non-resident foreign corporation
which is not engaged in trade or business within the Philippines. The Offshore
Banking Law sates that: Branches, subsidiaries, affiliates, extension offices or any
other units of corporation or juridical person organized under the laws of any foreign
country operating in the Philippines shall be considered residents of the
Philippines. The General Banking Act places branches and agencies in the
Philippines of foreign banks in the category as commercial banks, rural banks,
stock savings and loan association making no distinction between the former ad the
latter in so far as the terms banking institutions and banks are used in said Act.

ROGERS V. GUARANTY TRUST CO

Brief Fact Summary. Plaintiff sued Defendant in equity for breach of fiduciary duty
in federal court based on diversity of citizenship. Defendant argued that the state
statute of limitations had run and that the court was required to apply the state
statute
of
limitations
under
the
Erie
doctrine.
Synopsis of Rule of Law. In a diversity suit brought in equity, an equitable right
created by a law of the state whose laws govern the case must be followed by a
federal district court if applying the federal law would significantly affect the
outcome of the case.
Facts. Guaranty Trust Company (Defendant) was a trustee of Van Sweringen
Corporation. Defendant loaned money to corporations affiliated with the Van
Sweringen. Van Sweringen was having trouble meeting its financial obligations, so
Defendant and other banks worked out a plan that Defendant would offer to
purchase notes by paying $500 and twenty shares of Van Sweringens stock for
each $1000 note. Plaintiff received $6000 of the notes from a donor who had not
accepted Defendants offer. Plaintiff brought a diversity suit against Defendant
alleging breach of fiduciary duty by fraud and misrepresentation, which was an
equitable remedy. The Court of Appeals found that if the suit was brought in equity,
a federal district court was not required to apply the state statute of limitations that
would govern similar suits in state courts, even though the exclusive basis of federal
jurisdiction
was
diversity.
The
Supreme
Court
granted
certiorari.
Issue. Are federal courts permitted to grant equitable remedies that are consistent
with state substantive law when an identical remedy would not be available in state
courts? Does the federal district court have to apply the state statute of limitations
to Plaintiffs cause of action under the Erie doctrine?
Held. First issue: No. Second issue: Yes. Reversed. When exercising diversity
jurisdiction, federal courts have not differentiated between law and equity. Federal
courts have traditionally had more respect for state rights in equity rather than law,
because legal rights were declared by state courts and rights in equity were defined
by legislative enactment. Congress never gave and the federal courts never claimed
that the courts had the power to deny substantive rights created by State law, or to
create substantive rights denied by State law. Prior to this case, federal courts were
enforcing state created substantive rights only if the state laws agreed with
traditional notions of equity. The outcome in the federal court case should be
substantially the same as the outcome had the case been brought in state court.
The statute of limitations involves the right to recover. The federal court must
therefore apply the state statute of limitations when following the Erie doctrine
because refusing to apply it would allow a party to bring suit that it would be barred
from bringing in state court.

Discussion. This case demonstrates that federal courts sitting in both law and
equity should apply state law if required by the Erie doctrine. The state statute of
limitations is applied in this case because statutes of limitations are inherently
outcome determinative. If the plaintiff is completely barred from bringing the suit
in state court, the federal court could not extend the right to bring suit without
discriminating in favor of non-residents.

ROGERS V. GUARANTY TRUST CO

Brief Fact Summary. Guaranty Trust Company (Petitioner) served as trustee
for some of the noteholders of the Van Sweringen Corporation (Van
Sweringen). In 1930, Petitioner loaned money to corporations affiliated with
Van Sweringen. When Petitioner began having financial problems, it agreed to
purchase notes for $500 and twenty shares of Van Sweringen stock for each
$1000.00 note. York (Respondent) received $6000.00 worth of the notes from
a
donor
who
had
not
accepted
Petitioners
offer.
Synopsis of Rule of Law. When there is diversity jurisdiction, the federal
court should use the outcome-determinative test to ensure that the outcome of
the federal courts application of law would not be different than the outcome if
the state had tried the case. In this case, the federal court sitting with diversity
jurisdiction must follow a state statute of limitations.
Facts. Respondent brought a diversity suit alleging that Petitioner had
breached its fiduciary duties. His complaint alleged fraud and
misrepresentation. Petitioner filed a Motion for Summary Judgment in the
district court, due to the fact, that the New York statute of limitations had run.
The district court granted this motion. The United States Court of Appeals for
the Second Circuit reversed this decision when it held that the district court did
not have to follow the New York statute of limitations even though jurisdiction
was based on diversity. The Supreme Court of the United States granted
certiorari.
Issue. When no recovery can be had in a state court because the action is
barred by the statute of limitations, can a federal court in equity take
cognizance of the suit because there is diversity of citizenship between the
parties?

Held. No. The Supreme Court of the United States essentially created an
outcome-determinative test to be followed in cases involving diversity
jurisdiction. What is important under this test is that the outcome of the
litigation in the federal court should be substantially the same as it would be if
tried in the state court. Therefore, the judgment of the court of appeals is
reversed. The federal district court is required to follow the applicable New
York statute of limitations.
Discussion. As a result of the outcome-determinative test, a party should not
be able to manipulate the state and federal court systems solely to bring a
claim in federal court that would, otherwise, be defeated by a statute of
limitations if brought in state court. This test is designed to prevent forum
shopping between federal and state courts. The states interest in controlling
the outcome is very important as it seeks to protect its citizens. Alternatively,
the federal interest is relatively weak, and there is very little to be gained from
uniformity between federal districts.

CLAVECILLA RADIO SYSTEM V. ANTILLON

CLAVECILLA Radio System v. Hon. Agustin AntillonFacts:
1.New Cagayan Grocery (NECAGRO) filed a complaint for damages against
Clavecilla Radio system. They alleged that Clavecilla omitted the word NOT in the
letter addressed to NECAGRO for
transmittal at Clavecilla Cagayan de Oro Branch.
2.NECAGRO alleged that the omission of the word not between the word
WASHED and AVAILABLE altered the contents of the same causing them to suffer
from damages.
3.Clavecilla filed a motion to dismiss on the ground of failure to state a cause of
action and improper venue.
4.City Judge of CDO denied the MTD. Clavecilla filed a petition for prohibition with
preliminary Injunction with the CFI praying that the City Judge be enjoined from
further proceeding with the case because of improper venue.
5.CFI dismissed the case and held that Clavecilla may be sued either in Manila
(principal office) or in CDO (branch office).
6.Clavecilla appealed to the SC contending that the suit against it should be filed
inManilawhere it holds its principal office.
Issue: WON the present case against Clavecilla should be filed in Manila
where itholds itsprincipal office.
Held: YES
It is clear that the case from damages is based upon a written contract. Under par.
(b)(3) Sec. 1 Rule 4 of the New Rules of Court, when an action is not upon a written
contract then the case should be filed in the municipality where the defendant or
any ofthe defendant resides or maybe served upon with summons. In corpo. Law,
the residence of the corporation is the place where the principal office is
established. Since Clavecillas principal office is in Manila, then the suit against it
may properly be file in the City of Manila. As stated in Evangelista v. Santos, the
laying of the venue of an action is not left to plaintiffs caprice because the matter
is regulated by the Rules of Court.

TAYAG V. BENGUET CONSOLIDATED

FACTS:
Idonah Slade Perkins, an American citizen who died in New York City, left among
others, two stock certificates issued by Benguet Consolidated, a corporation
domiciled in the Philippines. As ancillary administrator of Perkins estate in the
Philippines, Tayag now wants to take possession of these stock certificates but
County Trust Company of New York, the domiciliary administrator, refused to part
with them. Thus, the probate court of the Philippines was forced to issue an order
declaring the stock certificates as lost and ordering Benguet Consolidated to issue
new stock certificates representing Perkins shares. Benguet Consolidated appealed
the order, arguing that the stock certificates are not lost as they are in existence
and currently in the possession of County Trust Company of New York.
ISSUE:

Whether

or

not

the

order

of

the

lower

court

is

proper

HELD:
The

appeal

lacks merit.

Tayag, as ancillary administrator, has the power to gain control and possession of all
assets
of
the decedent within
the
jurisdiction
of
the
Philippines
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."

Probate court has authority to issue the order enforcing the ancillary administrators
right to the stock certificates when the actual situs of the shares of stocks is in the
Philippines.
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.
Our holding in Wells Fargo Bank and Union v. Collector of Internal Revenue
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.