G.R. No. L-2294, May 25, 1951
- A corporation borrows its citizenship from the citizenship of majority of its stockholders, regardless of the country under whose laws it was organized and created.
FACTS:
Christern Huenefeld Corporation bought a fire insurance policy from Filipinas Compania de Seguros to cover merchandise contained in a building. During the Japanese military occupation, this same merchandise and the building were burned, so Huenefeld filed a claim under the policy.
Filipinas Compania refused to pay, alleging that the policy had ceased to be in force when the US declared war against Germany. Filipinas Compania contended that Huenefeld, although organized and created under Philippine laws, is a German subject, and hence, a public enemy, since majority of its stockholders are Germans. On the other hand, Filipinas Compania is under American jurisdiction.
However, the Director of Bureau of Financing, Philippine Executive Commission ordered Filipinas Compania to pay, so Filipinas Compania did pay. The case at bar is about the recovery of that sum paid.
ISSUES:
- W/N Christern Huenefeld is a German subject because majority of its stockholders are under German jurisdiction, despite the fact that it was organized and created under Philippine laws
- If so, W/N the fire insurance policy is enforceable against an enemy state
HELD:
The Court of Appeals ruled that a private corporation is a citizen of the country or state by and under the laws of which it was created or organized. It rejected the theory that nationality of a private corporation is determined by the character or citizenship of its controlling stockholders.
But the Supreme Court held that Christern Huenefeld is an enemy corporation since majority of its stockholders are German subjects. The two American cases relied up by the Court of Appeals have lost their force in view of a newer case where the control test was adopted.
The Philippine Insurance Law provides that anyone, except a public enemy, may be insured. It stands to reason that an insurance policy ceases to be allowable as soon as the insured becomes a public enemy.
Since Christern Huenefeld became a public enemy on Dec. 10, 1941, then the policy has ceased to be enforcible and therefore Huenefeld is not entitled to indemnity. However, elementary rules of justice require that the premium paid from Dec. 11, 1941 should be returned.
Thus, Filipinas Compania is allowed to recover the sum paid but only its equivalent in actual Philippine currency, minus the premium that Huenefeld paid after Dec. 11.
