Case # 1

G.R. No. 154618 April 14, 2004

AGILENT TECHNOLOGIES SINGAORE !TE" LT#., petitioner,
vs.
INTEGRATE# SILICON TECHNOLOG$ HILIINES CORORATION, TEOH %IANG HONG, TEOH
%IANG SENG, ANTHON$ CHOO, &OANNE %ATE '. #ELA CR(), &EAN %A$ '. #ELA CR() a*+
ROLAN#O T. NACILLA, respondents.
DECISION
$NARES,SANTIAGO, J.-
This petition for review assails the Decision dated August 1, !! of the Court of Appeals in CA"#.$. S% No. &&'(),
which dis*issed Civil Case No. +1+"!!1"C and annulled and set aside the Order dated Septe*,er ), !!1 issued ,- the
$egional Trial Court of Cala*,a, .aguna, /ranch 0.
%etitioner Agilent Technologies Singapore 1%te.2, .td. 13Agilent32 is a foreign corporation, which, ,- its own ad*ission, is
not licensed to do ,usiness in the %hilippines.
1
$espondent Integrated Silicon Technolog- %hilippines Corporation
13Integrated Silicon32 is a private do*estic corporation, 1!!4 foreign owned, which is engaged in the ,usiness of
*anufacturing and asse*,ling electronics co*ponents.

$espondents Teoh 5iang 6ong, Teoh 5iang Seng and Anthon-

Choo, 7ala-sian nationals, are current *e*,ers of Integrated Silicon8s ,oard of directors, while 9oanne 5ate 7. dela
Cru:, 9ean 5a- 7. dela Cru:, and $olando T. Nacilla are its for*er *e*,ers.
+
The ;uridical relation a*ong the various parties in this case can ,e traced to a '"-ear <alue Added Asse*,l- Services
Agree*ent 13<AASA32, entered into on April , 100& ,etween Integrated Silicon and the 6ewlett"%ac=ard Singapore
1%te.2 .td., Singapore Co*ponents Operation 136%"Singapore32.
)
>nder the ter*s of the <AASA, Integrated Silicon was
to locall- *anufacture and asse*,le fi,er optics for e?port to 6%"Singapore. 6%"Singapore, for its part, was to consign
raw *aterials to Integrated Silicon@ transport *achiner- to the plant of Integrated Silicon@ and pa- Integrated Silicon the
purchase price of the finished products.
'
The <AASA had a five"-ear ter*, ,eginning on April , 100&, with a provision
for annual renewal ,- *utual written consent.
&
On Septe*,er 10, 1000, with the consent of Integrated Silicon,
(
6%"
Singapore assigned all its rights and o,ligations in the <AASA to Agilent.
A
On 7a- ', !!1, Integrated Silicon filed a co*plaint for 3Specific %erfor*ance and Da*ages3 against Agilent and its
officers Tan /ian Ee, .i* Chin 6ong, Te- /oon Tec= and Brancis 5hor, doc=eted as Civil Case No. +11!"!1"C. It alleged
that Agilent ,reached the parties8 oral agree*ent to e?tend the <AASA. Integrated Silicon thus pra-ed that defendant ,e
ordered to e?ecute a written e?tension of the <AASA for a period of five -ears as earlier assured and pro*ised@ to co*pl-
with the e?tended <AASA@ and to pa- actual, *oral, e?e*plar- da*ages and attorne-8s fees.
0
On 9une 1, !!1, su**ons and a cop- of the co*plaint were served on Att-. $a*on Cuisu*,ing, who returned these
processes on the clai* that he was not the registered agent of Agilent. .ater, he entered a special appearance to assail the
court8s ;urisdiction over the person of Agilent.
On 9ul- , !!1, Agilent filed a separate co*plaint against Integrated Silicon, Teoh 5ang Seng, Teoh 5iang #ong,
Anthon- Choo, 9oanne 5ate 7. dela Cru:, 9ean 5a- 7. dela Cru: and $olando T. Nacilla,
1!
for 3Specific %erfor*ance,
$ecover- of %ossession, and Su* of 7one- with $eplevin, %reli*inar- 7andator- In;unction, and Da*ages3, ,efore the
$egional Trial Court, Cala*,a, .aguna, /ranch 0, doc=eted as Civil Case No. +1+"!!1"C. Agilent pra-ed that a writ
of replevin or, in the alternative, a writ of preli*inar- *andator- in;unction, ,e issued ordering defendants to i**ediatel-
return and deliver to plaintiff its eDuip*ent, *achineries and the *aterials to ,e used for fi,er"optic co*ponents which
were left in the plant of Integrated Silicon. It further pra-ed that defendants ,e ordered to pa- actual and e?e*plar-
da*ages and attorne-8s fees.
11
$espondents filed a 7otion to Dis*iss in Civil Case No. +1+"!!1"C,
1
on the grounds of lac= of Agilent8s legal
capacit- to sue@
1+
litis pendentia@
1)
foru* shopping@
1'
and failure to state a cause of action.
1&
1 | P a g e
On Septe*,er ), !!1, the trial court denied the 7otion to Dis*iss and granted petitioner Agilent8s application for a writ
of replevin.
1(
Eithout filing a *otion for reconsideration, respondents filed a petition for certiorari with the Court of Appeals.
1A
In the *eanti*e, upon *otion filed ,- respondents, 9udge Antonio S. %o:as of /ranch 0 voluntaril- inhi,ited hi*self in
Civil Case No. +1+"!!1"C. The case was re"raffled and assigned to /ranch +', the sa*e ,ranch where Civil Case No.
+11!"!!1"C is pending.
On August 1, !!, the Court of Appeals granted respondents8 petition for certiorari, set aside the assailed Order of the
trial court dated Septe*,er ), !!1, and ordered the dis*issal of Civil Case No. +1+"!!1"C.
6ence, the instant petition raising the following errorsF
I.
T6E CO>$T OB A%%EA.S CO77ITTED $E<E$SI/.E E$$O$ IN NOT DIS7ISSIN# $ES%ONDENTS8
%ETITION BO$ CE$TIO$A$I BO$ $ES%ONDENTS8 BAI.>$E TO BI.E A 7OTION BO$ $ECONSIDE$ATION
/EBO$E $ESO$TIN# TO T6E $E7EDG OB CE$TIO$A$I.
II.
T6E CO>$T OB A%%EA.S CO77ITTED $E<E$SI/.E E$$O$ IN ANN>..IN# AND SETTIN# ASIDE T6E
T$IA. CO>$T8S O$DE$ DATED ) SE%TE7/E$ !!1 AND O$DE$IN# T6E DIS7ISSA. OB CI<I. CASE NO.
+1+"!!1"C /E.OE ON T6E #$O>ND OB LITIS PENDENTIA, ON ACCO>NT OB T6E %ENDENCG OB CI<I.
CASE NO. +11!"!!1"C.
III.
T6E CO>$T OB A%%EA.S CO77ITTED $E<E$SI/.E E$$O$ IN ANN>..IN# AND SETTIN# ASIDE T6E
T$IA. CO>$T8S O$DE$ DATED ) SE%TE7/E$ !!1 AND O$DE$IN# T6E DIS7ISSA. OB CI<I. CASE NO.
+1+"!!1"C /E.OE ON T6E #$O>ND OB BO$>7 S6O%%IN#, ON ACCO>NT OB T6E %ENDENCG OB CI<I.
CASE NO. +11!"!!1"C.
I<.
T6E CO>$T OB A%%EA.S CO77ITTED $E<E$SI/.E E$$O$ IN O$DE$IN# T6E DIS7ISSA. OB CI<I.
CASE NO. ++"!!1"C /E.OE INSTEAD OB O$DE$IN# IT CONSO.IDATED EIT6 CI<I. CASE NO. +11!"
!!1"C.
10
The two pri*ar- issues raised in this petitionF 112 whether or not the Court of Appeals co**itted reversi,le error in
giving due course to respondents8 petition, notwithstanding the failure to file a 7otion for $econsideration of the
Septe*,er ), !!1 Order@ and 12 whether or not the Court of Appeals co**itted reversi,le error in dis*issing Civil Case
No. +1+"!!1"C.
Ee find *erit in the petition.
The Court of Appeals, citing the case of Malayang Manggagawa sa ESSO v. ESSO Standard Eastern, Inc.,
!
held that the
lower court had no ;urisdiction over Civil Case No. +1+"!!1"C ,ecause of the pendenc- of Civil Case No. +11!"!!1"C
and, therefore, a *otion for reconsideration was not necessar- ,efore resort to a petition for certiorari. This was error.
9urisdiction is fi?ed ,- law. /atas %a*,ansa /lg. 10 vests ;urisdiction over the su,;ect *atter of Civil Case No. +1+"
!!1"C in the $TC.
1
2 | P a g e
The Court of Appeals8 ruling that the assailed Order issued ,- the $TC of Cala*,a, /ranch 0, was a nullit- for lac= of
;urisdiction due to litis pendentia and foru* shopping, has no legal ,asis. The pendenc- of another action does not strip a
court of the ;urisdiction granted ,- law.
The Court of Appeals further ruled that a 7otion for $econsideration was not necessar- in view of the urgent necessit- in
this case. Ee are not convinced. In the case of Bache and !. "Phils.#, Inc. v. $%i&,

relied on ,- the Court of Appeals, it

was held that 3ti*e is of the essence in view of the ta? assess*ents sought to ,e enforced ,- respondent officers of the
/ureau of Internal $evenue against petitioner corporation, on account of which i**ediate and *ore direct action
,eco*es necessar-.3 Ta? assess*ents in that case were ,ased on docu*ents sei:ed ,- virtue of an illegal search, and the
deprivation of the right to due process tainted the entire proceedings with illegalit-. 6ence, the urgent necessit- of
preventing the enforce*ent of the ta? assess*ents was patent. $espondents, on the other hand, cite the case of 'er!ni(!
v. !((issi!n !n Electi!ns,
+
where the urgent necessit- of resolving a disDualification case for a position in local
govern*ent warranted the e?peditious resort to certiorari. In the case at ,ar, there is no analogousl- urgent circu*stance
which would necessitate the rela?ation of the rule on a 7otion for $econsideration.
Indeed, none of the e?ceptions for dispensing with a 7otion for $econsideration is present here. None of the following
cases cited ,- respondents serves as adeDuate ,asis for their procedural lapse.
In )igan Electric Light !., Inc. v. P%*lic Service !((issi!n,
)
the Duestioned order was null and void for failure of
respondent tri,unal to co*pl- with due process reDuire*ents@ in Matang%ihan v. Tengc!,
'
the Duestioned order was a
patent nullit- for failure to acDuire ;urisdiction over the defendants, which fact the records plainl- disclosed@ and
in Nati!nal Electri+icati!n Ad(inistrati!n v. !%rt !+ Appeals,
&
the Duestioned orders were void for vagueness. No such
patent nullit- is evident in the Order issued ,- the trial court in this case. Binall-, while urgenc- *a- ,e a ground for
dispensing with a 7otion for $econsideration, in the case of )iv! v. l!ri*el,
(
cited ,- respondents, the slow progress of
the case would have rendered the issues *oot had a *otion for reconsideration ,een availed of. Ee find no such urgent
circu*stance in the case at ,ar.
$espondents, therefore, availed of a pre*ature re*ed- when the- i**ediatel- raised the *atter to the Court of Appeals
on certiorari@ and the appellate court co**itted reversi,le error when it too= cogni:ance of respondents8 petition instead
of dis*issing the sa*e outright.
Ee co*e now to the su,stantive issues of the petition.
Litis pendentia is a .atin ter* which literall- *eans 3a pending suit.3 It is variousl- referred to in so*e decisions as lis
pendens and a%ter acti!n pendant. Ehile it is nor*all- connected with the control which the court has on a propert-
involved in a suit during the continuance proceedings, it is *ore interposed as a ground for the dis*issal of a civil action
pending in court.
Litis pendentia as a ground for the dis*issal of a civil action refers to that situation wherein another action is pending
,etween the sa*e parties for the sa*e cause of action, such that the second action ,eco*es unnecessar- and ve?atious.
Bor litis pendentia to ,e invo=ed, the concurrence of the following reDuisites is necessar-F
1a2 identit- of parties or at least such as represent the sa*e interest in ,oth actions@
1,2 identit- of rights asserted and reliefs pra-ed for, the reliefs ,eing founded on the sa*e facts@ and
1c2 the identit- in the two cases should ,e such that the ;udg*ent that *a- ,e rendered in one would, regardless of
which part- is successful, a*ount to res ,%dicata in the other.
A
The Court of Appeals correctl- appreciated the identit- of parties in Civil Cases No. +1+"!!1"C and +11!"!!1"C.
Eell"settled is the rule that lis pendens reDuires onl- su,stantial, and not a,solute, identit- of parties.
0
There is su,stantial
identit- of parties when there is a co**unit- of interest ,etween a part- in the first case and a part- in the second case,
even if the latter was not i*pleaded in the first case.
+!
The parties in these cases are v-ing over the interests of the two
opposing corporations@ the individuals are onl- incidentall- i*pleaded, ,eing the natural persons purportedl- accused of
violating these corporations8 rights.
3 | P a g e
.i=ewise, the fact that the positions of the parties are reversed, i.e., the plaintiffs in the first case are the defendants in the
second case or vice versa, does not negate the identit- of parties for purposes of deter*ining whether the case is
dis*issi,le on the ground of litis pendentia.
+1
The identit- of parties notwithstanding, litis pendentia does not o,tain in this case ,ecause of the a,sence of the second
and third reDuisites. The rights asserted in each of the cases involved are separate and distinct@ there are two su,;ects of
controvers- presented for ad;udication@ and two causes of action are clearl- involved. The fact that respondents instituted
a prior action for 3Specific %erfor*ance and Da*ages3 is not a ground for defeating the petitioners8 action for 3Specific
%erfor*ance, $ecover- of %ossession, and Su* of 7one- with $eplevin, %reli*inar- 7andator- In;unction, and
Da*ages.3
In Civil Case No. +11!"!!1"C filed ,- respondents, the issue is whether or not there was a ,reach of an oral pro*ise to
renew of the <AASA. The issue in Civil Case No. +1+"!!1"C, filed ,- petitioner, is whether petitioner has the right to
ta=e possession of the su,;ect properties. %etitioner8s right of possession is founded on the ownership of the su,;ect goods,
which ownership is not disputed and is not contingent on the e?tension or non"e?tension of the <AASA. 6ence, the
replevin suit can validl- ,e tried even while the prior suit is ,eing litigated in the $egional Trial Court.
%ossession of the su,;ect properties is not an issue in Civil Case No. +11!"!!1"C. The reliefs sought ,- respondent
Integrated Silicon therein are as followsF 112 e?ecution of a written e?tension or renewal of the <AASA@ 12 co*pliance
with the e?tended <AASA@ and 1+2 pa-*ent of overdue accounts, da*ages, and attorne-8s fees. The reliefs sought ,-
petitioner Agilent in Civil Case No. +1+"!!1"C, on the other hand, are as followsF 112 issuance of a Erit of $eplevin or
Erit of %reli*inar- 7andator- In;unction@ 12 recover- of possession of the su,;ect properties@ 1+2 da*ages and
attorne-8s fees.
Concededl-, so*e ite*s or pieces of evidence *a- ,e ad*issi,le in ,oth actions. It cannot ,e said, however,
thate?actl- the sa*e evidence will support the decisions in ,oth, since the legall- significant and controlling facts in each
case are entirel- different. Although the <AASA figures pro*inentl- in ,oth suits, Civil Case No. +11!"!!1"C is
pre*ised on a purported ,reach of an oral o,ligation to e?tend the <AASA, and da*ages arising out of Agilent8s alleged
failure to co*pl- with such purported e?tension. Civil Case No. +1+"!!1"C, on the other hand, is pre*ised on a ,reach
of the <AASA itself, and da*ages arising to Agilent out of that purported ,reach.
It necessaril- follows that the third reDuisite for litis pendentia is also a,sent. The following are the ele*ents of res
;udicataF
1a2 The for*er ;udg*ent *ust ,e final@
1,2 The court which rendered ;udg*ent *ust have ;urisdiction over the parties and the su,;ect *atter@
1c2 It *ust ,e a ;udg*ent on the *erits@ and
1d2 There *ust ,e ,etween the first and second actions identit- of parties, su,;ect *atter, and cause of action.
+
In this case, an- ;udg*ent rendered in one of the actions will not a*ount to res ,%dicata in the other action. There ,eing
different causes of action, the decision in one case will not constitute res ;udicata as to the other.
Of course, a decision in one case *a-, to a certain e?tent, affect the other case. This, however, is not the test to deter*ine
the identit- of the causes of action. Ehatever difficulties or inconvenience *a- ,e entailed if ,oth causes of action are
pursued on separate re*edies, the proper solution is not the dis*issal order of the Court of Appeals. The possi,le
consolidation of said cases, as well as stipulations and appropriate *odes of discover-, *a- well ,e considered ,- the
court ,elow to su,serve not onl- procedural e?pedience ,ut, *ore i*portant, the ends of ;ustice.
++
Ee now proceed to the issue of foru* shopping.
The test for deter*ining whether a part- violated the rule against foru*"shopping was laid down in the case ofB%an v.
L!pe&.
+)
Boru* shopping e?ists where the ele*ents of litis pendentia are present, or where a final ;udg*ent in one case
4 | P a g e
will a*ount to res ,%dicata in the final other. There ,eing no litis pendentia in this case, a ;udg*ent in the said case will
not a*ount to res ,%dicata in Civil Case No. +11!"!!1"C, and respondents8 contention on foru* shopping *ust li=ewise
fail.
Ee are not un*indful of the afflictive conseDuences that *a- ,e suffered ,- ,oth petitioner and respondents if replevin is
granted ,- the trial court in Civil Case No. +1+"!!1"C. If respondent Integrated Silicon eventuall- wins Civil Case No.
+11!"!!1"C, and the <AASA8s ter*s are e?tended, petitioner corporation will have to co*pl- with its o,ligations
thereunder, which would include the consign*ent of properties si*ilar to those it *a- recover ,- wa- of replevin in Civil
Case No. +1+"!!1"C. 6owever, petitioner will also suffer an in;ustice if denied the re*ed- of replevin, resort to which
is not onl- allowed ,ut encouraged ,- law.
$espondents argue that since Agilent is an unlicensed foreign corporation doing ,usiness in the %hilippines, it lac=s the
legal capacit- to file suit.
+'
The assailed acts of petitioner Agilent, purportedl- in the nature of 3doing ,usiness3 in the
%hilippines, are the followingF 112 *ere entering into the <AASA, which is a 3service contract3@
+&
12 appoint*ent of a full"
ti*e representative in Integrated Silicon, to 3oversee and supervise the production3 of Agilent8s products@
+(
1+2 the
appoint*ent ,- Agilent of si? full"ti*e staff *e*,ers, who were per*anentl- stationed at Integrated Silicon8s facilities in
order to inspect the finished goods for Agilent@
+A
and 1)2 Agilent8s participation in the *anage*ent, supervision and
control of Integrated Silicon,
+0
including instructing Integrated Silicon to hire *ore e*plo-ees to *eet Agilent8s
increasing production needs,
)!
regularl- perfor*ing Dualit- audit, evaluation and supervision of Integrated Silicon8s
e*plo-ees,
)1
regularl- perfor*ing inventor- audit of raw *aterials to ,e used ,- Integrated Silicon, which was also
reDuired to provide wee=l- inventor- updates to Agilent,
)
and providing and dictating Integrated Silicon on the dail-
production schedule, volu*e and *odels of the products to *anufacture and ship for Agilent.
)+
A foreign corporation without a license is not ips! +act! incapacitated fro* ,ringing an action in %hilippine courts. A
license is necessar- onl- if a foreign corporation is 3transacting3 or 3doing ,usiness3 in the countr-. The Corporation Code
providesF
Sec. 1++. D!ing *%siness with!%t a license. H No foreign corporation transacting ,usiness in the %hilippines
without a license, or its successors or assigns, shall ,e per*itted to *aintain or intervene in an- action, suit or
proceeding in an- court or ad*inistrative agenc- of the %hilippines@ ,ut such corporation *a- ,e sued or
proceeded against ,efore %hilippine courts or ad*inistrative tri,unals on an- valid cause of action recogni:ed
under %hilippine laws.
The afore*entioned provision prevents an unlicensed foreign corporation 3doing ,usiness3 in the %hilippines fro*
accessing our courts.
In a nu*,er of cases, however, we have held that an unlicensed foreign corporation doing ,usiness in the %hilippines *a-
,ring suit in %hilippine courts against a %hilippine citi:en or entit- who had contracted with and ,enefited fro* said
corporation.
))
Such a suit is pre*ised on the doctrine of estoppel. A part- is estopped fro* challenging the personalit- of a
corporation after having ac=nowledged the sa*e ,- entering into a contract with it. This doctrine of estoppel to den-
corporate e?istence and capacit- applies to foreign as well as do*estic corporations.
)'
The application of this principle
prevents a person contracting with a foreign corporation fro* later ta=ing advantage of its nonco*pliance with the
statutes chiefl- in cases where such person has received the ,enefits of the contract.
)&
The principles regarding the right of a foreign corporation to ,ring suit in %hilippine courts *a- thus ,e condensed in four
state*entsF 112 if a foreign corporation does ,usiness in the %hilippines without a license, it cannot sue ,efore the
%hilippine courts@
)(
12 if a foreign corporation is not doing ,usiness in the %hilippines, it needs no license to sue ,efore
%hilippine courts on an isolated transaction or on a cause of action entirel- independent of an- ,usiness transaction
)A
@ 1+2
if a foreign corporation does ,usiness in the %hilippines without a license, a %hilippine citi:en or entit- which has
contracted with said corporation *a- ,e estopped fro* challenging the foreign corporation8s corporate personalit- in a
suit ,rought ,efore %hilippine courts@
)0
and 1)2 if a foreign corporation does ,usiness in the %hilippines with the reDuired
license, it can sue ,efore %hilippine courts on an- transaction.
The challenge to Agilent8s legal capacit- to file suit hinges on whether or not it is doing ,usiness in the %hilippines.
6owever, there is no definitive rule on what constitutes 3doing3, 3engaging in3, or 3transacting3 ,usiness in the
5 | P a g e
%hilippines, as this Court o,served in the case of Menth!lat%( v. Mangali(an.
'!
The Corporation Code itself is silent as to
what acts constitute doing or transacting ,usiness in the %hilippines.
9urisprudence has it, however, that the ter* 3i*plies a continuit- of co**ercial dealings and arrange*ents, and
conte*plates, to that e?tent, the perfor*ance of acts or wor=s or the e?ercise of so*e of the functions nor*all- incident
to or in progressive prosecution of the purpose and su,;ect of its organi:ation.3
'1
In Menth!lat%(,
'
this Court discoursed on the two general tests to deter*ine whether or not a foreign corporation can ,e
considered as 3doing ,usiness3 in the %hilippines. The first of these is the su,stance test, thusF
'+
The true test Ifor doing ,usinessJ, however, see*s to ,e whether the foreign corporation is continuing the ,od- of
the ,usiness or enterprise for which it was organi:ed or whether it has su,stantiall- retired fro* it and turned it
over to another.
The second test is the continuit- test, e?pressed thusF
')
The ter* Idoing ,usinessJ i*plies a continuit- of co**ercial dealings and arrange*ents, and conte*plates, to
that e?tent, the perfor*ance of acts or wor=s or the e?ercise of so*e of the functions nor*all- incident to, and in
the progressive prosecution of, the purpose and o,;ect of its organi:ation.
Although each case *ust ,e ;udged in light of its attendant circu*stances, ;urisprudence has evolved several guiding
principles for the application of these tests. Bor instance, considering that it transacted with its %hilippine counterpart for
seven -ears, engaging in futures contracts, this Court concluded that the foreign corporation inMerrill Lynch -%t%res, Inc.
v. !%rt !+ Appeals and Sp!%ses Lara,
''
was doing ,usiness in the %hilippines. In!((issi!ner !+ Internal $even%e v.
.apan Airlines "/.AL/#,
'&
the Court held that 9A. was doing ,usiness in the %hilippines, i.e., its co**ercial dealings in
the countr- were continuous K despite the fact that no 9A. aircraft landed in the countr- K as it sold tic=ets in the
%hilippines through a general sales agent, and opened a pro*otions office here as well.
In 'eneral !rp. !+ the Phils. v. 0ni!n Ins%rance S!ciety !+ ant!n and -ire(an1s -%nd Ins%rance,
'(
a foreign insurance
corporation was held to ,e doing ,usiness in the %hilippines, as it appointed a settling agent here, and issued 1 *arine
insurance policies. Ee held that these transactions were not isolated or casual, ,ut *anifested the continuit- of the foreign
corporation8s conduct and its intent to esta,lish a continuous ,usiness in the countr-. In Eri2s PTE Ltd. v. !%rt !+
Appeals and Enri3%e&,
'A
the foreign corporation sold its products to a Bilipino ,u-er who ordered the goods 1& ti*es
within an eight"*onth period. Accordingl-, this Court ruled that the corporation was doing ,usiness in the %hilippines, as
there was a clear intention on its part to continue the ,od- of its ,usiness here, despite the relativel- short span of ti*e
involved. !((%nicati!n Materials and Design, Inc., et al. v. !%rt !+ Appeals, ITE, et al.
'0
and T!p45eld
Man%+act%ring v. EED, I$TI, et al.
&!
,oth involved the .icense and Technical Agree*ent and Distri,utor Agree*ent of
foreign corporations with their respective local counterparts that were the pri*ar- ,ases for the Court8s ruling that the
foreign corporations were doing ,usiness in the %hilippines.
&1
In particular, the Court cited the highl- restrictive nature of
certain provisions in the agree*ents involved, such that, as stated in Co**unication 7aterials, the %hilippine entit- is
reduced to a *ere e?tension or instru*ent of the foreign corporation. Bor e?a*ple, in !((%nicati!n Materials, the
Court dee*ed the 3No Co*peting %roduct3 provision of the $epresentative Agree*ent therein restrictive.
&
The case law definition has evolved into a statutor- definition, having ,een adopted with so*e Dualifications in various
pieces of legislation. The Boreign Invest*ents Act of 1001 1the 3BIA3@ $epu,lic Act No. (!), as a*ended2, defines
3doing ,usiness3 as followsF
Sec. +, par. 1d2. The phrase 3doing ,usiness3 shall include soliciting orders, service contracts, opening offices,
whether called 3liaison3 offices or ,ranches@ appointing representatives or distri,utors do*iciled in the
%hilippines or who in an- calendar -ear sta- in the countr- for a period or periods totaling one hundred eight-
11A!2 da-s or *ore@ participating in the *anage*ent, supervision or control of an- do*estic ,usiness, fir*,
entit-, or corporation in the %hilippines@ and an- other act or acts that i*pl- a continuit- of co**ercial dealings
or arrange*ents, and conte*plate to that e?tent the perfor*ance of acts or wor=s, or the e?ercise of so*e of the
functions nor*all- incident to, and in the progressive prosecution of, co**ercial gain or of the purpose and
o,;ect of the ,usiness organi:ation.
6 | P a g e
An anal-sis of the relevant case law, in con;unction with Section 1 of the I*ple*enting $ules and $egulations of
the BIA 1as a*ended ,- $epu,lic Act No. A1(02, would de*onstrate that the acts enu*erated in the <AASA
do not constitute 3doing ,usiness3 in the %hilippines.
Section 1 of the I*ple*enting $ules and $egulations of the BIA 1as a*ended ,- $epu,lic Act No. A1(02 provides
that the following shall not ,e dee*ed 3doing ,usiness3F
112 7ere invest*ent as a shareholder ,- a foreign entit- in do*estic corporations dul- registered to do
,usiness, andLor the e?ercise of rights as such investor@
12 6aving a no*inee director or officer to represent its interest in such corporation@
1+2 Appointing a representative or distri,utor do*iciled in the %hilippines which transacts ,usiness in the
representative8s or distri,utor8s own na*e and account@
1)2 The pu,lication of a general advertise*ent through an- print or ,roadcast *edia@
1'2 7aintaining a stoc= of goods in the %hilippines solel- for the purpose of having the sa*e processed
,- another entit- in the %hilippines@
1&2 Consign*ent ,- a foreign entit- of eDuip*ent with a local co*pan- to ,e used in the processing of
products for e?port@
1(2 Collecting infor*ation in the %hilippines@ and
1A2 %erfor*ing services au?iliar- to an e?isting isolated contract of sale which are not on a continuing
,asis, such as installing in the %hilippines *achiner- it has *anufactured or e?ported to the %hilippines,
servicing the sa*e, training do*estic wor=ers to operate it, and si*ilar incidental services.
/- and large, to constitute 3doing ,usiness3, the activit- to ,e underta=en in the %hilippines is one that is for
profit"*a=ing.
&+
/- the clear ter*s of the <AASA, Agilent8s activities in the %hilippines were confined to 112 *aintaining a stoc= of goods
in the %hilippines solel- for the purpose of having the sa*e processed ,- Integrated Silicon@ and 12 consign*ent of
eDuip*ent with Integrated Silicon to ,e used in the processing of products for e?port. As such, we hold that, ,ased on the
evidence presented thus far, Agilent cannot ,e dee*ed to ,e 3doing ,usiness3 in the %hilippines. $espondents8 contention
that Agilent lac=s the legal capacit- to file suit is therefore devoid of *erit. As a foreign corporation not doing ,usiness in
the %hilippines, it needed no license ,efore it can sue ,efore our courts.
Binall-, as to Agilent8s purported failure to state a cause of action against the individual respondents, we li=ewise rule in
favor of petitioner. A 7otion to Dis*iss h-potheticall- ad*its all the allegations in the Co*plaint, which plainl- alleges
that these individual respondents had co**itted or per*itted the co**ission of acts pre;udicial to Agilent. Ehether or
not these individuals had divested the*selves of their interests in Integrated Silicon, or are no longer *e*,ers of
Integrated Silicon8s /oard of Directors, is a *atter of defense ,est threshed out during trial.
.HERE/ORE, RE'ISES CONSI#ERE#, the petition is GRANTE#.
The Decision of the Court of Appeals in CA"#.$. S% No. &&'() dated August 1, !!, which dis*issed Civil Case No.
+1+"!!1"C,
is RE0ERSE# and SET ASI#E. The Order dated Septe*,er ), !!1 issued ,- the $egional Trial Court of Cala*,a,
.aguna, /ranch 0, in Civil Case No. +1+"!!1"C, is REINSTATE#. Agilent8s application for a Erit of $eplevin
is GRANTE#.
No pronounce*ent as to costs.
SO OR#ERE#.
Case # 2
7 | P a g e
G.R. No. L,44144 A232s4 1, 1185
TO,.EL# 'AN(/ACT(RING, INC., petitioner,
vs.
ECE#, S.A., IRTI, S.A., E(TECTIC CORORATION, 0ICTOR C. GAERLAN, a*+ THE HON. CO(RT O/
AEALS, respondents.
G(TIERRE), &R., J.:
This is a petition to review the decision of the Court of Appeals now Inter*ediate Appellate Court annulling portions of
the orders issued ,- 9udge #regorio %ineda of the Court of Birst Instance of $i:al.
%etitioner Top"weld 7anufacturing, Inc. 1Top"weld2 is a %hilippine corporation engaged in the ,usiness of *anufacturing
and selling welding supplies and eDuip*ent.
In pursuance of its ,usiness, the petitioner entered into separate contracts with two different foreign entities. One contract,
entitled a 3.ICENSE AND TEC6NICA. ASSISTANCE A#$EE7ENT3 and dated 9anuar- , 10( was entered into
with I$TI, S.A., 1I$TI2, a corporation organi:ed and e?isting under the laws of Swit:erland with principal office at
Bri,ourg, Swit:erland. /- virtue of this agree*ent, the petitioner was constituted a licensee of I$TI to *anufacture
welding products under certain specifications, with raw *aterials to ,e purchased ,- the for*er fro* suppliers designated
,- I$TI, for a period of three 1+2 -ears or up to 9anuar- 1, 10('. This contract was later e?tended up to Dece*,er +1,
10(' in a su,seDuent agree*ent.
The other contract was a 3DIST$I/>TO$ A#$EE7ENT3 dated 9anuar- 1, 10(' entered into with ECED, S.A., 1ECED2,
a co*pan- organi:ed and e?isting under the laws of %ana*a with principal office at Apartado 10!+, %ana*a I, Cit- of
%ana*a. >nder this agree*ent, the petitioner was designated as ECEDMs distri,utor in the %hilippines of certain welding
products and eDuip*ent. /- its ter*s, the contract was to re*ain effective until ter*inated ,- either part- upon giving si?
1&2 *onths or 1A! da-s written notice to the other.
>pon learning that the two foreign entities were negotiating with another group to replace the petitioner as their licensee
and distri,utor, the latter instituted on 9une 1&, 10(', Civil Case No. 1)!0 against I$TI, ECED another corporation
na*ed E>TECTIC Corporation, organi:ed under the laws of the State of New Gor=, >.S.A., and an individual na*ed
<ictor C. #aerlan, a Bilipino citi:en alleged to ,e the representative and e*plo-ee of these three corporations.
In its co*plaint, the petitioner sought the issuance of a writ of preli*inar- in;unction to restrain the corporations fro*
negotiating with third persons or fro* actuall- carr-ing out the transfer of its distri,utorship and franchising rights, It also
as=ed the court to prohi,it the defendants fro* ter*inating their contracts with the petitioner, and if said ter*ination had
alread- ,een acco*plished, fro* putting into effect and carr-ing out the ter*s and the conseDuences of said ter*ination
until after good faith negotiations on e?isting contracts ,etween the* had ,een carried out and co*pleted.
On 9une 1(, 10(', the lower court issued a restraining order against the corporation pending the hearing on the issuance of
a writ of preli*inar- in;unction.
On 9ul- ',10(', I$TI and ECED wrote Top"weld separate notices a,out the ter*ination of their respective contracts.
On Septe*,er +,10(', Top"weld filed an a*ended co*plaint together with a supple*ental co*plaint which e*,odied a
new application for a preli*inar- *andator- in;unction to co*pel ECED to ship and deliver various ite*s covered ,- the
distri,utorship contract, and to prohi,it the corporations fro* i*porting into the %hilippines directl- or indirectl- an-
E>TECTIC *aterials, supplies or eDuip*ent e?cept to andLor through the petitioner.
A*ong others, the petitioner invo=ed the provisions of No. 0. Section ) of $epu,lic Act ')'' on alien fir*s doing
,usiness in the %hilippines.
The corporations filed their answers setting up as affir*ative defenses violations of the contracts allegedl- co**itted ,-
the petitioner consisting of the followingF
8 | P a g e
a2 Bailure to pa- respondent I$TI the stipulated +4 ro-alties@
,2 The use of other wrong *aterials in the *anufacture of welding products ,earing the Eutectic la,el@
c2 The use of the wrong core wire in the *anufacture of Eutectic &A!@
d2 The use of o,solete and antiDuated eDuip*ent@
e2 $e,randing of other *anufactured welding products or non"Eutectic products with the Eutectic la,el@
f2 The *anufacture and sale of inferior and su,standard Dualit- products ,earing the Eutectic la,el
resulting in nu*erous co*plaints fro* custo*ers such as Saulog Transit and 7anila 7ining Corporation@
g2 The falsification of ECED pro"for*a invoices in order to procure Eutectic goods at lower prices@
h2 The illegal channeling of sales of Eutectic products through the Cue %e 6ardware Store@ and
i2 The sale of welding products ,earing ,rands other than Eutectic, such as Bu;iweld, and even Eutectic
products not included in its authorit- and for which it has never ,een supplied ,- respondent E>TECTIC
with the raw *aterials for its *anufacture nor with finished products thereof.
The respondent corporation further alleged that Section ) 102 of $.A. No. ')'' cannot possi,l- appl- to the instant case
,ecauseF
a2 Eith the violations of the contracts ,- the plaintiff and 3other ;ust causes3 earlier *entioned, the
defendants I$TI and ECED are full- ;ustified in ter*inating the* without ,eing o,liged to pa- an-
co*pensation nor to rei*,urse plaintiff of invest*ent or other e?penses@
,2 In fact, the defendants have sent written notices dated 9ul- ', 10(' of the ter*ination of their
respective agree*ents with plaintiffs@ and
c2 Since no written certificate was applied for nor o,tained ,- defendant entities fro* the /oard of
Invest*ents, the latter cannot legall- reDuire of the* co*pliance with No. 0, Section ), $.A. No, ')''.
On Octo,er 0, 10(', the trial court issued an order granting the petitionerMs application for preli*inar- in;unction
e*,odied in the a*ended co*plaint and its application for a writ of *andator- preli*inar- in;unction e*,odied in the
supple*ental co*plaint,
The corporations filed with the trial court a *otion for reconsideration.
On Dece*,er 1A, 10(', the trial court issued another order den-ing the said *otion for reconsideration with respect to the
lifting of the writ of preli*inar- in;unction ,ut granting the pra-er for the lifting of the writ of preli*inar- *andator-
in;unction.
The case was elevated to the Court of Appeals on a petition for certiorari with preli*inar- in;unction filed ,- the
corporations. In setting aside the Duestioned orders, the appelate court held thatF
The deter*inative Duestion defined ,- the contentions of the parties in this case is, whether or not TO%"
EE.D *a- rightfull- invo=e the provisions of Sec. ), $epu,lic Act No. ')'' to en;oin petitioner
corporations fro* ter*inating the su,;ect licensing and distri,utorship contracts the- have with TO%"
EE.D. The pertinent portion of the provision readsF
Section ). Licenses t! d! *%siness."No alien, and no fir*, association, partnership,
corporation, or an- other for* of ,usiness organi:ation for*ed, organi:ed, chartered or
9 | P a g e
e?isting under an- laws other than those of the %hilippines, or which is not a %hilippine
National, or *ore than thirt- per cent of the outstanding capital of which is owned or
controlled ,- aliens shall do ,usiness or engage in an- econo*ic activit- in alien the
%hilippines, or ,e registered, licensed, or per*itted ,- the Securities and E?change
Co**ission, or ,- an- other ,ureau, office, agenc-, political su,division, or
instru*entalit- of the govern*ent, to do ,usiness, or engage in an econo*ic activit- in
the %hilippines without first securing a written certificate fro* the /oard of Invest*ents
to the effect ... .
>pon granting said certificate, the /oard shall i*pose the following reDuire*ents on the
alien or the fir*, association, partnership, corporation, or other for* of ,usiness
organi:ation that is not organi:ed or e?isting under the laws of the %hilippines. ... .
102 Not to ter*inate an- franchise, licensing or other agree*ent that applicant *a- have
with a resident of the %hilippines, authori:ing the latter to asse*,le, *anufacture or sell
within the %hilippines the products of the applicant, e?cept for violation thereof or other
;ust cause and upon pa-*ent of co*pensation and rei*,urse*ent and other e?penses
incurred ,- the licensee in developing a *ar=et for the said products@ %rovided. however,
That in case of disagree*ent, the a*ount of co*pensation or rei*,urse*ent shall ,e
deter*ined ,- the court where the licensee is do*iciled or has its principal office who
shall reDuire the applicant to file a ,ond in such a*ount as, in its opinion, is sufficient for
this purpose.
/- the licensing and distri,utorship arrange*ents had with TO%EE.D, there is no dou,t that I$TI and
ECED were doing ,usiness and engaging in econo*ic activit- in the %hilippines 1see Sections 1 and ),
$.A. No. ')''2, as a prereDuisite to which the- should have first secured a written certificate fro* the
/oard of Invest*ents. It is not disputed, however, that I$TI and ECED have not secured such written
certificate in conseDuence of which there was no occasion for the /oard of Invest*ents to i*pose the
reDuire*ents prescri,ed in the aforeDuoted provisions of Sec. ), $.A. No. ')'', a*ong which is that the
grantee of the certificate shall not ter*inate an- franchise, licensing or other agree*ent it *a- have with
a resident of the %hilippines for the asse*,l-, *anufacture or sale within the countr- of the products of
said grantee, e?cept for violation thereof or other ;ust cause and upon pa-*ent of co*pensation and
rei*,urse*ent and other e?penses incurred ,- the resident licensee in developing a *ar=et for said
products. In this case, while the parties are in dispute as to the e?istence of a violation of the contracts
involved or of other ;ust cause, there is no Duarrel over the fact that I$TI and ECED have not paid, and do
not intend to pa-, such co*pensation or rei*,urse*ent conte*plated in the law, *aintaining that
TO%EE.D is not entitled to the sa*e.
>nder the particular situation o,taining in this case, this Court is of the opinion that petitioner
corporations are not ,ound ,- the reDuire*ent on ter*ination, and TO%EE.D cannot invo=e the sa*e
against the for*er. The reason is not si*pl- ,ecause I$TI and ECED, ,- failing to get the reDuired
certificate fro* the /oard of Invest*ent, were not *ade su,;ect ,- the said /oard to the reDuire*ent on
ter*ination, as *aintained ,- petitioners. To i*pose such reDuire*ent on petitioners would ,e to
perpetuate, and force the* to re*ain in, an unlawful ,usiness operation. 7oreover, it was incu*,ent
upon TO%EE.D to =now whether or not I$TI and ECED were properl- authori:ed to engage into the
licensing and distri,utorship agree*ents. At the ver- least TO%EE.D has not co*e to court with clear
hands, and cannot ,e heard to invo=e the eDuita,le re*ed- of in;unction to perpetuate an illegal situation
it voluntaril- helped ,ring a,out.
If onl- for the foregoing considerations, there appears a grave a,use of discretion on the part of
respondent 9udge in issuing the orders co*plained of.
%etitioner, TO%"EE.D filed this present petition putting in issue the following assign*ents of errorsF
I
10 | P a g e
$espondent Court of Appeals co**itted a grave error when it held that a foreign corporation, which is
ad*ittedl- Mdoing ,usiness in the %hilippinesM ,ut which has failed to secure the reDuired certificate and
license to do ,usiness in the %hilippines, is not su,;ect to the stricture i*posed ,- Sec. ) 102 of $epu,lic
Act No. ')''.
II
$espondent Court of Appeals co**itted a grave error when it held that the failure of petitioner to =now
at the outset whether or not respondents were properl- authori:ed to engage in ,usiness in the %hilippines
stops petitioner to invo=e the protection of Sec. ) 102 of $epu,lic Act No. ')''.
III
$espondent Court of Appeals co**itted a grave error when it held that petitioner cannot invo=e the
re*ed- of in;unction against respondents.
At the vorte? of the controvers- is the issue whether or not respondent corporations can ,e considered as 3doing ,usiness3
in the %hilippines and, therefore, su,;ect to the provisions of $.A. No. ')''. There is no dispute that respondents are
foreign corporations not licensed to do ,usiness in the %hilippines. 7ore i*portant, however, there is no serious o,;ection
interposed ,- the respondents as to their a*ena,ilit- to the ;urisdiction of our courts.
There is no general rule or governing principle laid down as to what constitutes 3doing3 or engaging in3 or 3transacting3
,usiness in the %hilippines. Each case *ust ,e ;udged in the light of its peculiar circu*stances. 17entholatu* Co. <.
7angali*an, ( %hil. ')2. Thus, a foreign corporation with a settling agent in the %hilippines which issued twelve
*arine policies covering different ship*ents to the %hilippines 1#eneral Corporation of the %hilippines v. >nion Insurance
Societ- of Canton, .td., A( %hil. +1+2 and a foreign corporation which had ,een collecting pre*iu*s on outstanding
policies 17anufacturing .ife Insurance Co. v. 7eer, A0 %hil. +'12 were regarded as doing ,usiness here. The acts of these
corporations should ,e distinguished fro* a single or isolated ,usiness transaction or occasional, incidental and casual
transactions which do not co*e within the *eaning of the law. Ehere a single act or transaction, however, is not *erel-
incidental or casual ,ut indicates the foreign corporationMs intention to do other ,usiness in the %hilippines, said single act
or transaction constitutes 3doing3 or 3engaging in3 or 3transacting3 ,usiness in the %hilippines. 1Bar East International
I*port and E?port Corporation v. Nan=ai 5og-o, Co., & SC$A ('2.
In the Menth!lat%( !. v. Mangali(an case earlier cited, this Court heldF
??? ??? ???
... The true test, however, see*s to ,e whether the foreign corporation is continuing the ,od- or su,stance
of the ,usiness or enterprise for which it was organi:ed or whether it has su,stantiall- retired fro* it and
turned it over to another. 1Traction Cos. v. Collectors of Int. $evenue IC.C.A. OhioJ, + B. 0A), 0A(.2
The ter* i*plies a continuit- of co**ercial dealings and arrange*ents, and conte*plates, to that e?tent,
the perfor*ance of acts or wor=s or the e?ercise of so*e of the functions nor*all- incident to, and in
progressive prosecution of, the purpose and o,;ect of its organi:ation. 1#riffin v. I*ple*ent DealersM 7ut.
Bire Ins. Co., )1 N.E. (', ((, %auline Oil N #as Co. v. 7utual Tan= .ine Co., )& %. A'1, A', 11A O=l.
111 Auto*otive 7aterial Co. v. A*erican Standard 7etal %roducts Corp., 1'A N.E. &0A, (!+, +( 111.
+&(.2
9udged ,- the foregoing standards, we agree with the Court of Appeals in considering the respondents as 3doing ,usiness3
in the %hilippines. Ehen the respondents entered into the disputed contracts with the petitioner, the- were carr-ing out the
purposes for which the- were created, i.e. to *anufacture and *ar=et welding products and eDuip*ent. The ter*s and
conditions of the contracts as well as the respondentsM conduct indicate that the- esta,lished within our countr- a
continuous ,usiness, and not *erel- one of a te*porar- character. This fact is even *ore strengthened ,- the ad*ission of
the respondents that the- are negotiating with another group for the transfer of the distri,utorship and franchising rights
fro* the petitioner.
11 | P a g e
$espondentsM acts ena,led the* to enter into the *ainstrea* of our econo*ic life in co*petition with our local ,usiness
interests. This necessaril- ,rings the* under the provisions of $.A. No. ')''.
The respondents contend that the- should ,e e?e*pted fro* the reDuire*ents of $.A. ')'' ,ecause the petitioner
*aintained an independent status during the e?istence of the disputed contracts.
This *a- ,e true if the petitioner is an independent entit- which ,u-s and distri,utes products not onl- of the petitioner
,ut also of other *anufacturers or transacts ,usiness in its na*e and for its account and not in the na*e or for the account
of the foreign principal.
A perusal of the agree*ents ,etween the petitioner and the respondents shows that the- are highl- restrictive in nature.
The agree*ents provide in part the following ter*sF
??? ??? ???
1!. No Sales in Territor- ,- I$TI
I$TI shall not solicitor or cause or per*it its e*plo-ees, licensees or agents to solicit or *a=e an- sales,
directl- or indirectl-, of EE.DIN# %$OD>CTS within or to the %hilippines. I$TI agrees to refer to
.ICENSEE all product inDuiries received ,- I$TI for EE.DIN# %$OD>CTS destined for %hilippines.
??? ??? ???
1&. ? ? ? ? ? ? ? ? ?
$estrictive !venant
.ICENSEE will not, directl- or indirectl-, without the written consent of I$TI at an- ti*e during the
continuance of this Agree*ent and for a period of two -ears after the date of the ter*ination of this
Agree*ent, engage either directl- or indirectl- in the ,usiness of selling products si*ilar to said
EE.DIN# %$OD>CTS, either as principal, agent, e*plo-ee or through stoc= or proprietar- interests in
a third part entit-.
??? ??? ???
$EST$ICTI
)E O)ENANT
&. DIST$I/>TO$ shall not during the continuance of this agree*ent distri,ute products of an- other
*anufacturer or supplier in the Territor- assigned to hi*, which are si*ilar to the %roducts.
>pon the ter*ination of this agree*ent ,- either part-, DIST$I/>TO$ agrees not to engage, directl- or
indirectl-, in the co**erciali:ation, distri,ution andLor *anufacture of products co*peting with an-
E>TECTIC O CASTO.IN products covered ,- this agree*ent, or of products li=el- to affect the sale of
an- E>TECTIC O CASTO.IN products, either as principal, agent or e*plo-ee in the Territor-, this
prohi,ition to e?tend for a period of two 12 -ears fro* the date of ter*ination, e?cept for the e?plicit
purpose of selling an- re*aining %roducts still in DIST$I/>TO$Ms possession on the date of ter*ination
of this agree*ent which sales shall not ,e ,elow the DIST$I/>TO$Ms preter*ination selling price for
such %roducts unless such sale is to ECED or its no*inee in which case Clause 10 hereof shall govern.
??? ??? ???
12 | P a g e
Ee can conclude that assu*ing the petitioner *aintains an independent status, in essence it *erel- e?tends to the
%hilippines the ,usiness of the foreign corporations.
On the ,asis of the foregoing, we uphold the appellate courtMs finding that 3I$TI AND ECED were doing ,usiness and
engaging in econo*ic activit- in the %hilippines ... as a prereDuisite to which the- should have first secured a written
certificate fro* the /oard of Invest*ents.3
The respondent court, however, erred in holding that 3I$TI and ECED have not secured such written certificate in
conseDuence of which there is no occasion for the /oard of Invest*ents to i*pose the reDuire*ents prescri,ed in the
aforeDuoted provisions of Sec. ), $.A. No. ')'' ... .3 To accept this view would open the wa- for an interpretation that ,-
doing ,usiness in the countr- without first securing the reDuired written certificate fro* the /oard of Invest*ents, a
foreign corporation *a- violate or disregard the safeguards which the law, ,- its provisions, see=s to esta,lish.
Ee agree, however, that there is a *ore co*pelling reason ,ehind the finding that the 3corporations are not ,ound ,- the
reDuire*ent on ter*ination, and TO%"EE.D cannot invo=e the sa*e against the for*er.3
As ,etween the parties the*selves, $.A. No. ')'' does not declare as void or invalid the contracts entered into without
first securing a license or certificate to do ,usiness in the %hilippines. Neither does it appear to intend to prevent the courts
fro* enforcing contracts *ade in contravention of its licensing provisions. There is no den-ing, though, that an 3illegal
situation,3 as the appellate court has put it, was created when the parties voluntaril- contracted without such license.
The parties are charged with =nowledge of the e?isting law at the ti*e the- enter into the contract and at the ti*e it is to
,eco*e operative. 1Twiehaus v. $osner, )' SE d 1!(@ 6all v. /ucher, ( SE d 0A2. 7oreover, a person is presu*ed
to ,e *ore =nowledgea,le a,out his own state law than his alien or foreign conte*porar-. In this case, the record shows
that, at least, petitioner had actual =nowledge of the applica,ilit- of $.A. No. ')'' at the ti*e the contract was e?ecuted
and at all ti*es thereafter. This conclusion is co*pelled ,- the fact that the sa*e statute is now ,eing propounded ,- the
petitioner to ,olster its clai*. Ee, therefore, sustain the appellate courtMs view that 3it was incu*,ent upon TO%"EE.D to
=now whether or not I$TI and ECED were properl- authori:ed to engage in ,usiness in the %hilippines when the- entered
into the licensing and distri,utorship agree*ents.3 The ver- purpose of the law was circu*vented and evaded when the
petitioner entered into said agree*ents despite the prohi,ition of $.A. No. ')''. The parties in this case ,eing eDuall-
guilt- of violating $.A, No. ')'', the- are in pari delicto, in which case it follows as a conseDuence that petitioner is not
entitled to the relief pra-ed for in this case.
In B!%gh v. antiver!s 1)! %hil. 1!2, the principle is laid down in these wordsF 3The rule of pari delicto is e?pressed in
the *a?i*s 3e? dolo *alo non eritur actio3 and 3in pari delicto potior est conditio defedentis.3 The law will not aid either
part- to an illegal agree*ent. It leaves the parties where it finds the*.3
No re*ed- could ,e afforded to the parties ,ecause of their presu*ptive =nowledge that the transaction was tainted with
illegalit-. 1Soriano v. Ong 6oo, 1!+ %hil. A02. EDuit- cannot lend its aid to the enforce*ent of an alleged right clai*ed
,- virtue of an agree*ent entered into in contravention of law.
.astl-, we co*e to the issue of 3;ust cause3 for the ter*ination of the contracts or the alleged violations of the contracts
*ade ,- petitioner. Though properl- ventilated ,elow, this factual issue was not deter*ined ,- ,oth the trial court and the
appellate court.
The record shows that respondents, in opposing the in;unction suit and alleging the violations of the contracts, su,*itted
and relied on their affidavits. The petitioner, however, to refute these charges, su,*itted a 3$epl- to Opposition3 which is
neither verified nor supported ,- counter"affidavits. There is no showing in the records ,efore us whether oral testi*on-
was presented ,- an- of the parties or whether the affiants were su,;ected to the test of cross"e?a*ination and if an-, what
was stated during the oral testi*on-.
The ,urden of overco*ing the responsive effect of the answer is upon the petitioner. 6e who alleges a fact has the ,urden
of proving it and a *ere allegation is not evidence. 1.egasca v. De <era, (0 %hil. +(&2 6earsa- evidence alone *a- ,e
insufficient to esta,lish a fact in an in;unction suit 1%ar=er v. Burlong, & %. )0!2 ,ut, when no o,;ection is *ade thereto, it
is, li=e an- other evidence, to ,e considered and given the i*portance it deserves. 1S*ith v. Delaware N Atlantic
13 | P a g e
Telegraph N Telephone Co., '1 A )&)2. Although we should warn of the undesira,ilit- of issuing ;udg*ents solel- on the
,asis of the affidavits su,*itted, where as here, said affidavits are overwhel*ing, uncontroverted ,- co*petent evidence
and not inherentl- i*pro,a,le, we are constrained to uphold the allegations of the respondents regarding the *ultifarious
violations of the contracts *ade ,- the petitioner. Accordingl-, we rule that there e?ists a ;ust cause for respondents to
*ove for the ter*ination of their contracts with the petitioner.
7oreover, the facts on record show that the 3.icense and Technical Assistance Agree*ent3 ,etween petitioner and
respondent I$TI was e?tended onl- for a period of one -ear or to ,e precise, fro* 9anuar- 1, 10(' to Dece*,er +1, 10('.
The original in;unction suit was ,rought in the court a Duo in 9une10(', the purpose ,eing to stop the respondent fro*
ter*inating the contract. This purpose was reali:ed when the court granted the in;unction. /- the ti*e respondentsM appeal
was decided ,- the Court of Appeals, it was alread- past the e?tended period. The dispute ,etween the parties had ,een
rendered *oot and acade*ic. It should ,e stated that the courts ,e it the original trial court or the appellate court have no
power to *a=e contracts for the parties. No court would ,e ;ustified in e?tending the life of the contracts, su,;ect of this
controvers-, since that would do violence to the ,asic principle that contracts *ust ,e the voluntar- agree*ents of parties,
%arties can not ,e coerced to enter into a contract where no agree*ent is had ,etween the* as to the principal ter*s and
condition of the contract 1$epu,lic v. %hilippine .ong Distance Telephone Co., & SC$A &!2.
Eith the a,ove o,servations, there is nothing *ore for this Court to do e?cept to dis*iss the petition.
ACCO$DIN#.G, the petition is here,- dis*issed. The appealed decision of the Court of Appeals is ABBI$7ED,
SO O$DE$ED.
Case # 5
G.R. No. L,61525 &2l6 51, 1186
ANTA' CONSOLI#ATE#, INC., TA'7(NTING TRA#ING CORORATION a*+ A(RORA
CONSOLI#ATE# SEC(RITIES a*+ IN0EST'ENT CORORATION, petitioners,
vs.
THE CO(RT O/ AEALS, THE HONORA7LE 'A8I'IANO C. AS(NCION !Co2r4 o9 /irs4 I*s4a*:e o9
La32*a, 7ra*:; II <S4a. Cr2=>" a*+ STO%EL$ 0AN CA', INC., respondents.
G(TIERRE), &R., J.:
This petition for certiorari and prohi,ition see=s to set aside the order of the $egional Trial Court of .aguna which denied
the petitionersM *otion to dis*iss on the ground that the reason relied upon ,- the* does not appear to ,e indu,ita,le.
%etitioners also see= to set aside the decision and resolution of the Inter*ediate Appellate Court which respectivel- upheld
the order of the trial court and denied the petitionersM *otion for reconsideration of the sa*e.
On April 0, 10A1, respondent Sto=el- <an Ca*p. Inc. 1Sto=el-2 filed a co*plaint against /anahaw 7illing Corporation
1/anahaw2, Anta* Consolidated, Inc., Ta*,unting Trading Corporation 1Ta*,unting2, Aurora Consolidated Securities
and Invest*ent Corporation, and >nited Coconut Oil 7ills, Inc. 1>nico*2 for collection of su* of *one-.
In its co*plaint, Sto=el- allegedF 112 that it is a corporation organi:ed and e?isting under the laws of the state of Indiana,
>.S.A. and has its principal office at 0)1 North 7eridian Street, Indianapolis, Indiana, >.S.A., and one of its su,divisions
3Capital Cit- %roduct Co*pan-3 1Capital Cit-2 has its office in Colu*,us, Ohio, >.S.A.@ 12 that Sto=el- and Capital Cit-
were not engaged in ,usiness in the %hilippines prior to the co**ence*ent of the suit so that Sto=el- is not licensed to do
,usiness in this countr- and is not reDuired to secure such license@ 1+2 that on August 1, 10(A, Capital Cit- and Coconut
Oil 7anufacturing 1%hil.2 Inc. 1Co*phil2 with the latter acting through its ,ro=er $oths child /ro=erage Co*pan-,
entered into a contract 1No. $/S +&''2 wherein Co*phil undertoo= to sell and deliver and Capital Cit- agreed to ,u- '!!
long tons of crude coconut oil to ,e delivered in Octo,erLNove*,er 10(A at the c.i.f. price of >SP!.+!L1,. ,ut Co*phil
failed to deliver the coconut oil so that Capital Cit- covered its coconut oil needs in the open *ar=et at a price
su,stantiall- in e?cess of the contract and sustained a loss of >SP1!+,&!!@ that to settle Capital Cit-Ms loss under the
14 | P a g e
contract, the parties entered into a second contract 1No. $/S +(+A2 on Nove*,er +, 10(A wherein Co*phil undertoo= to
,u- and Capital Cit- agreed to sell '!! long tons of coconut crude oil under the sa*e ter*s and conditions ,ut at an
increased c.i.f. price of >SP!.+0'Ll,.@ 1)2 that the second contract states that 3it is a wash out against $/S +&''3 so that
Co*phil was supposed to repurchase the undelivered coconut oil at >SP!.+0' fro* Capital Cit- ,- pa-ing the latter the
su* of >SP1!+,&!!.!! which is the sa*e a*ount of loss that Capital Cit- sustained under the first contract@ that Co*phil
again failed to pa- said a*ount, so to settle Capital Cit-Ms loss, it entered into a third contract with Co*phil on 9anuar- ),
10(0 wherein the latter undertoo= to sell and deliver and Capital Cit- agreed to ,u- the sa*e Duantit- of crude coconut oil
to ,e delivered in AprilL7a- 10(0 at the c.i.f. price of >SP!.+)'Ll,.@ 1'2 that the latter price was 0.' centsLl,. or
>SP1!+,&!! for '!! long tons ,elow the then current *ar=et price of )+. centsLl,. and ,- delivering said Duantit- of
coconut oil to Capital Cit- at the discounted price, Co*phil was to have settled its >SP1!+,&!! lia,ilit- to Capital Cit-@
1&2 that Co*phil failed to deliver the coconut oil so Capital Cit- notified the for*er that it was in default@ 1(2 that Capital
Cit- sustained da*ages in the a*ount of >SP1(',!!!@ and 1A2 that after repeated de*ands fro* Co*phil to pa- the said
a*ount, the latter still refuses to pa- the sa*e.
$espondent Sto=el- further pra-ed that a writ of attach*ent ,e issued against an- and all the properties of the petitioners
in an a*ount sufficient to satisf- an- lien of ;udg*ent that the respondent *a- o,tain in its action. In support of this
provisional re*ed- and of its cause of action against the rest of the petitioners other than Co*phil, the respondent alleged
the followingF 12 After de*ands were *ade ,- respondent on Co*phil, the Ta*,untings ceased to ,e directors and
officers of Co*phil and were replaced ,- their five e*plo-ees, who were *anagers of Ta*,untingMs pawnshops and said
e*plo-ees caused the na*e of Co*phil to ,e changed to 3/anahaw 7illing Corporation3 and authori:ed one of the
Ta*,untings, Antonio %. Ta*,unting, 9r., who was at that ti*e neither a director nor officer of /anahaw to sell its oil *ill@
2 >nico* has ta=en over the entire operations and assets of /anahaw ,ecause the entire and outstanding capital stoc= of
the latter was sold to the for*er@ +2 A.. of the issued and outstanding capital stoc= of Co*phil are owned ,- the
Ta*,untings who were the directors and officers of Co*phil and who were the ones who ,enefited fro* the sale of
/anahawMs assets or shares to >nicorn@ )2 A.. of the petitioners evaded their o,ligation to respondent ,- the devious
sche*e of using Ta*,unting e*plo-ees to replace the Ta*,untings in the *anage*ent of /anahaw and disposing of the
oil *ill of /anahaw or their entire interests to >nicorn@ and '2 $espondent has reasona,le cause to ,elieve and does
,elieve that the coconut oil *il= which is the onl- su,stantial asset of /anahaw is a,out to ,e sold or re*oved so that
unless prevented ,- the Court there will pro,a,l- ,e no assets of /anahaw to satisf- its clai*.
On April 1!, 10A1, the trial court ordered the issuance of a writ of attach*ent in favor of the respondent upon the latterMs
deposit of a ,ond in the a*ount of % l,A',!!!.!!.
On 9une +, 10A1, the respondent filed a *otion for reconsideration to reduce the attach*ent ,ond. Attached to this *otion
is an affidavit ,- the assistant attorne- of the respondentMs counsel stating that he has verified with the records of Co*phil
and the Securities and E?change Co**ission 1SEC2 the facts he alleged in the pra-er for the attach*ent order.
On 9une 11, 10A1, the petitioners filed a *otion to dis*iss the co*plaint on the ground that the respondent, ,eing a
foreign corporation not licensed to do ,usiness in the %hilippines, has no personalit- to *aintain the instant suit.
After the respondent had filed an opposition to the *otion to dis*iss and petitioner has opposed the attach*ent and the
*otion to reduce the attach*ent ,ond, the trial court issued an order, dated August 1!, 10A1, reducing the attach*ent
,ond to % '!!,!!!.!! and den-ing the *otion to dis*iss ,- petitioners on the ground that the reason cited therein does not
appear to ,e indu,ita,le.
%etitioners filed a petition for certiorari ,efore the Indianapolis inter*ediate Appellate Court.
On 9une 1), 10A, the appellate court dis*issed the petition stating that the respondent ;udge did not co**it an- grave
a,use of discretion in deferring the petitionersM *otion to dis*iss ,ecause the said ;udge is not -et satisfied that he has the
necessar- facts which would per*it hi* to *a=e a ;udicious resolution. The appellate court further ruled that in another
case entitled >nited Coconut Oil 7ills, Inc. and /anahaw 7illing Corporation v. 6on. 7a?i*iano C. Asuncion and
Sto=el- <an Ca*p, Inc. where the facts and issues raised therein are intrinsicall- the sa*e as in the case at ,ar, it has
alread- denied the petition for certiorari filed ,- >nico* and /anahaw for lac= of *erit and the sa*e was upheld ,- the
Supre*e Court.
15 | P a g e
%etitioners filed a *otion for reconsideration ,ut the sa*e was denied. 6ence, the- filed this instant petition for certiorari
and prohi,ition with pra-er for te*porar- restraining order, Duestioning the propriet- of the appellate courtMs decision inF
a2 affir*ing the defer*ent of the resolution on petitionerM *otion to dis*iss@ and ,2 den-ing the *otion to set, aside the
order of attach*ent.
Eith regards to the first Duestion, petitioners *aintain that the appellate court erred in den-ing their *otion to dis*iss
since the ground relied upon ,- the* is clear and indu,ita,le, that is, that the respondent has no personalit- to sue.
%etitioners argue that to *aintain the suit filed with the trial court, the respondent should have secured the reDuisite
license to do ,usiness in the %hilippines ,ecause, in fact, it is doing ,usiness here. %etitioners anchor their argu*ent that
the respondent is a foreign corporation doing ,usiness in the %hilippines on the fact that ,- the respondentMs own
allegations, it has participated in three transactions, either as a seller or ,u-er, which are ,- their nature, in the pursuit of
the purpose and o,;ect for which it was organi:ed. %etitioners further argue that the test of whether one is doing ,usiness
or not is 3whether there is continuit- of transactions which are in the pursuance of the nor*al ,usiness of the corporation3
and that the transactions entered into ,- respondent undou,tedl- fall within this categor-.
Ee re;ect the petitionersM argu*ents.
In the case of T!p45eld Man%+act%ring, Inc. v. EED, S.A. 11+A SC$A 11A,1("1A2, we statedF
There is no general rule or governing principle laid down as to what constitutesMdoingMorMengaging inM or
Mtransacting ,usiness in the %hilippines. Each case *ust ,e ;udged in the .ight of its peculiar circu*stance
17entholatu* Co. v. 7angali*an, ( %hil.')2. Thus, a foreign corporation with a settling agent in the
%hilippines which issues twelve *arine policies covering different ship*ents to the %hilippines 1#eneral
Corporation of the %hilippines v. >nion Insurance Societ- of Canton, .td., A( %hil. +1+2 and a foreign
corporation which had ,een collecting pre*iu*s on outstanding policies 17anufacturing .ife Insurance
Co., v. 7eer, A0 %hil. +'12 were regarded as doing ,usiness here. The acts of these corporations should ,e
distinguished fro* a single or isolated ,usiness transaction or occasional, incidental and casual
transactions which do not co*e within the *eaning of the law. Ehere a single act or transaction ,
however, is not *erel- incidental or casual ,ut indicates the foreign corporationMs intention to do other
,usiness in the %hilippines, said single act or transaction constitutes MdoingM or Mengaging inM or MtransactingM
,usiness in the %hilippines. 1Bar East International I*port and E?port Corporation v. Nan=ai 5og-o, Co.,
& SC$A ('2.
In the Menth!lat%( !. v. Mangali(an case earlier cited, this Court heldF
??? ??? ???
...The true test, however, see*s to ,e whether the foreign corporation is continuing the ,od- or su,stance
of the ,usiness or enterprise for which it warning"organi:ed or whether it has su,stantiall- was retired
fro* it and turned it over to another. 1Traction Cos. v. Collectors of Int. $evenue ICCA., OhioJ, + B.
0A), 0A(.2 The ter* i*plies a continuit- of co**ercial dealings and arrange*ents, and conte*plates, to
that e?tent, the perfor*ance of acts or wor=ers or the e?ercise of so*e of the functions nor*all- incident
to, and in progressive prosecution of, the purpose and o,;ect of its organi:ation. 1#riffin v. I*ple*ent
DealersM 7ut. Bire Ins. Co., )1 N.E. (', ((, %auline Oil N #as Co. v. 7utual Tan= .ine Co., )& %. A'1,
A', 11A O=l. 111@ Auto*otive 7aterial Co. v. A*erican Standard 7etal %roducts Corp., 1'A N.E. &0A,
(!+, +( 111. +&(.2 M
In the case at ,ar, the transactions entered into ,- the respondent with the petitioners are not a series of co**ercial
dealings which signif- an intent on the part of the respondent to do ,usiness in the %hilippines ,ut constitute an isolated
one which does not fall under the categor- of 3doing ,usiness.3 The records show that the onl- reason wh- the respondent
entered into the second and third transactions with the petitioners was ,ecause it wanted to recover the loss it sustained
fro* the failure of the petitioners to deliver the crude coconut oil under the first transaction and in order to give the latter a
chance to *a=e good on their o,ligation. Instead of *a=ing an outright de*and on the petitioners, the respondent opted to
tr- to push through with the transaction to recover the a*ount of >SP1!+,&!!.!! it lost. This e?plains wh- in the second
transaction, the petitioners were supposed to ,u- ,ac= the crude coconut oil the- should have delivered to the respondent
16 | P a g e
in an a*ount which will earn the latter a profit of >SP1!+,&!!.!!. Ehen this failed the third transaction was entered into
,- the parties where,- the petitioners were supposed to sell crude coconut oil to the respondent at a discounted rate, the
total a*ount of such discount ,eing >SP1!+,&!!.!!. >nfortunatel-, the petitioners failed to deliver again, pro*pting the
respondent to file the suit ,elow.
Bro* these facts alone, it can ,e deduced that in realit-, there was onl- one agree*ent ,etween the petitioners and the
respondent and that was the deliver- ,- the for*er of '!! long tons of crude coconut oil to the latter, who in turn, *ust
pa- the corresponding price for the sa*e. The three see*ingl- different transactions were entered into ,- the parties onl-
in an effort to fulfill the ,asic agree*ent and in no wa- indicate an intent on the part of the respondent to engage in a
continuit- of transactions with petitioners which will categori:e it as a foreign corporation doing ,usiness in the
%hilippines. Thus, the trial court, and the appellate court did not err in den-ing the petitionersM *otion to dis*iss not onl-
,ecause the ground thereof does not appear to ,e indu,ita,le ,ut ,ecause the respondent, ,eing a foreign corporation not
doing ,usiness in the %hilippines, does not need to o,tain a license to do ,usiness in order to have the capacit- to sue. As
we have held in East*!ard Navigati!n Ltd. v. .%an 6s(ael and !., Inc. 11! %hil. 1, 1A2F
??? ??? ???
1d2 Ehile plaintiff is a foreign corporation without license to transact ,usiness in the %hilippines, it does
not follow that it has no capacit- to ,ring the present action. Such license is M not necessar- ,ecause it is
not engaged in ,usiness in the %hilippines. In fact, the transaction herein involved is the first ,usiness
underta=en ,- plaintiff in the %hilippines, although on a previous occasion plaintiffMs vessel was chartered
,- the National $ice and Corn Corporation to carr- rice cargo fro* a,road to the %hilippines. These two
isolated transactions do not constitute engaging in ,usiness in the %hilippines within the purview of
Sections &A and &0 of the Corporation .aw so as to ,ar plaintiff fro* see=ing redress in our courts
17arshall"Eells Co. v. 6enr- E. Elser N Co. )0 %hil. (!@ %acific <egeta,le Oil Corporation v. Angel !.
Singson, #.$. No. ."(01(, April 0, 10''@ also cited in Bacilities 7anage*ent Corporation v. De la Osa,
A0 SC$A 1+1, 1+A2.
Ee agree with the respondent that it is a co**on plo- of defaulting local co*panies which are sued ,- unlicensed foreign
co*panies not engaged in ,usiness in the %hilippines to invo=e lac= of capacit- to sue. The respondent cites decisions
fro* 10!( to 10'( recogni:ing and re;ecting the i*proper use of this procedural tactic. 1Da*fschieffs $hedered >nion v.
Cia Trans"atlantica, A %hil. (&& 110!(J@ 7arshall"Eells Co. v. 6enr- E. Elser N Co., )0 %hil. (! I10)J@ Eestern
EDuip*ent Co. v. $e-es, '1 %hil. 11' I10(J@ Central $epu,lic /an= v. /usta*ante, (1 %hil. +'0 I10)1J@ %acific
<egeta,le Oil Co. v. Singson, 0& %hil."0A& I10''J@ East,oard Navigation, .td. v. 9uan Gs*ael and Co., Inc., 1! %hil. 1
I10'(J2. The doctrine of lac= of capacit- to sue ,ased on failure to first acDuire a local license is ,ased on considerations
of sound pu,lic polic-. It intended to favor do*estic corporations who enter was never into solitar- transactions with
unwar- foreign fir*s and then repudiate their o,ligations si*pl- ,ecause the latter are not licensed to do ,usiness in this
countr-. The petitioners in this case are engaged in the e?portation of coconut oil, an e?port ite* so vital in our countr-Ms
econo*-. The- filed this petition on the ground that Sto=el- is an unlicensed foreign corporation without a ,are allegation
or showing that their defenses in the collection case are valid and *eritorious. Ee cannot fault the two courts ,elow for
acting as the- did.
Anent the second issue the- raise, the petitioners contend that the trial court should not have issued the order of
attach*ent and the appellate court should not have affir*ed the sa*e ,ecause the verification in support of the pra-er for
attach*ent is insufficient. The- state that the person who *ade such verification does not personall- =now the facts relied
upon for the issuance of the attach*ent order. %etitioners capitali:e on the fact that $enato Cal*a, the assistant attorne- of
/ito, 7isa, and .o:ada, counsel for respondent, stated in his verification that 3he has read the foregoing co*plaint and
that according to his infor*ation and ,elief the allegations therein contained are true and correct.3
The a,ove contention deserves scant consideration.
Ee rule that the defect in the original verification was cured when $enato Cal*a su,seDuentl- e?ecuted an affidavit to the
effect that the allegations he *ade in support of the pra-er for attach*ent were verified ,- hi* fro* the records of
Co*phil and the Securities and E?change Co**ission. 7oreover, petitioner had the opportunit- to oppose the issuance
of the writ.
17 | P a g e
As to the *erit of the attach*ent order itself, we find that the allegations in the respondentMs co*plaint satisfactoril-
;ustif- the issuance of said order.
E6E$EBO$E, IN <IEE OB T6E BO$E#OIN#, the petition is DIS7ISSED for lac= of *erit. The Te*porar-
$estraining Order dated Be,ruar- , 10A+ is here,- DISSO.<ED. Costs against the petitioners.
SO O$DE$ED.
Case # 4
G.R. No. 102225 A232s4 22, 1116
CO''(NICATION 'ATERIALS AN# #ESIGN, INC., ASAC '(LTI,TRA#E, INC., !9or?erl6 ASAC,ITEC
HILIINES, INC." a*+ /RANCISCO S. AG(IRRE, petitioners,
vs.
THE CO(RT O/ AEALS, ITEC INTERNATIONAL, INC., a*+ ITEC, INC., respondents.
TORRES, &R., J.:
/usiness Corporations, according to .ord Co=e, 3have no souls.3 The- do ,usiness peddling goods, wares or even
services across national ,oundaries in 3souless for*s3 in Duest for profits al,eit at ti*es, unwelco*ed in these
strange lands venturing into uncertain *ar=ets and, the ris= of dealing with wil- co*petitors.
This is one of the issues in the case at ,ar.
Contested in this petition for review on erti!rari is the Decision of the Court of Appeals on 9une (, 1001,
sustaining the $TC Order dated Be,ruar- , 1001, den-ing the petitionersM 7otion to Dis*iss, and directing the
issuance of a writ of preli*inar- in;unction, and its co*panion $esolution of Octo,er 0, 1001, den-ing the
petitionersM 7otion for $econsideration.
%etitioners CO77>NICATION 7ATE$IA.S AND DESI#N, INC., 1C7DI, for ,revit-2 and AS%AC 7>.TI"
T$ADE INC., 1AS%AC, for ,revit-2 are ,oth do*estic corporations, while petitioner Brancisco S. Aguirre is their
%resident and *a;orit- stoc=holder. %rivate $espondents ITEC, INC. andLor ITEC, INTE$NATIONA., INC.
1ITEC, for ,revit-2 are corporations dul- organi:ed and e?isting under the laws of the State of Ala,a*a, >nited
States of A*erica. There is no dispute that ITEC is a foreign corporation not licensed to do ,usiness in the
%hilippines.
On August 1), 10A(, ITEC entered into a contract with petitioner AS%AC referred to as 3$epresentative
Agree*ent3.
1
%ursuant to the contract, ITEC engaged AS%AC as its 3e?clusive representative3 in the %hilippines
for the sale of ITECMs products, in consideration of which, AS%AC was paid a stipulated co**ission. The
agree*ent was signed ,- #.A. Clar= and Brancisco S. Aguirre, presidents of ITEC and AS%AC respectivel-, for
and in ,ehalf of their co*panies.
2
The said agree*ent was initiall- for a ter* of twent-"four *onths. After the
lapse of the agreed period, the agree*ent was renewed for another twent-"four *onths.
Through a 3.icense Agree*ent3
5
entered into ,- the sa*e parties on Nove*,er 1!, 10AA, AS%AC was a,le to
incorporate and use the na*e 3ITEC3 in its own na*e. Thus , AS%AC 7ulti"Trade, Inc. ,eca*e legall- and
pu,licl- =nown as AS%AC"ITEC 1%hilippines2.
/- virtue of said contracts, AS%AC sold electronic products, e?ported ,- ITEC, to their sole custo*er, the
%hilippine .ong Distance Telephone Co*pan-, 1%.DT, for ,revit-2.
To facilitate their transactions, AS%AC, dealing under its new appellation, and %.DT e?ecuted a docu*ent
entitled 3%.DT"AS%ACLITEC %$OTOCO.3
4
which defined the pro;ect details for the suppl- of ITECMs Interface
EDuip*ent in connection with the Bifth E?pansion %rogra* of %.DT.
18 | P a g e
One -ear into the second ter* of the partiesM $epresentative Agree*ent, ITEC decided to ter*inate the sa*e,
,ecause petitioner AS%AC allegedl- violated its contractual co**it*ent as stipulated in their agree*ents.
5
ITEC charges the petitioners and another %hilippine Corporation, DI#ITA. /ASE CO77>NICATIONS, INC.
1DI#ITA., for ,revit-2, the %resident of which is li=ewise petitioner Aguirre, of using =nowledge and infor*ation
of ITECMs products specifications to develop their own line of eDuip*ent and product support, which are si*ilar,
if not identical to ITECMs own, and offering the* to ITECMs for*er custo*er.
On 9anuar- +1, 1001, the co*plaint
6
in Civil Case No. 01"0), was filed with the $egional Trial Court of 7a=ati,
/ranch 1+) ,- ITEC, INC. %laintiff sought to en;oin, first, preli*inaril- and then, after trial, per*anentl-@ 112
defendants DI#ITA., C7DI, and Brancisco Aguirre and their agents and ,usiness associates, to cease and desist
fro* selling or atte*pting to sell to %.DT and to an- other part-, products which have ,een copied or
*anufactured 3in li=e *anner, si*ilar or identical to the products, wares and eDuip*ent of plaintiff,3 and 12
defendant AS%AC, to cease and desist fro* using in its corporate na*e, letter heads, envelopes, sign ,oards and
,usiness dealings, plaintiffMs trade*ar=, internationall- =nown as ITEC@ and the recover- fro* defendants in
s!lid%(, da*ages of at least %'!!,!!!.!!, attorne-Ms fees and litigation e?penses.
In due ti*e, defendants filed a *otion to dis*iss
@
the co*plaint on the following groundsF
112 That plaintiff has no legal capacit- to sue as it is a foreign corporation doing ,usiness in the %hilippines
without the reDuired /OI authorit- and SEC license, and 12 that plaintiff is si*pl- engaged in foru* shopping
which ;ustifies the application against it of the principle of 3foru* n!n c!nveniens3.
On Be,ruar- A, 1001, the co*plaint was a*ended ,- virtue of which ITEC INTE$NATIONA., INC. was
su,stituted as plaintiff instead of ITEC, INC.
8
In their Supple*ental 7otion to Dis*iss,
1
defendants too= note of the a*end*ent of the co*plaint and as=ed the
court to consider in t!t! their *otion to dis*iss and their supple*ental *otion as their answer to the a*ended
co*plaint.
After conducting hearings on the pra-er for preli*inar- in;unction, the court a 3%! on Be,ruar- , 1001, issued
its OrderF
10
112 den-ing the *otion to dis*iss for ,eing devoid of legal *erit with a re;ection of ,oth grounds
relied upon ,- the defendants in their *otion to dis*iss, and 12 directing the issuance of a writ of preli*inar-
in;unction on the sa*e da-.
Bro* the foregoing order, petitioners elevated the case to the respondent Court of Appeals on a %etition
forerti!rari and %rohi,ition
11
under $ule &' of the $evised $ules of Court, assailing and see=ing the
nullification and the setting aside of the Order and the Erit of %reli*inar- In;unction issued ,- the $egional Trial
Court.
The respondent appellate court stated, thusF
Ee find no reason whether in law or fro* the facts of record, to disagree with the 1lower courtMs2 ruling.
Ee therefore are una,le to find in respondent 9udgeMs issuance of said writ the grave a,use of discretion
ascri,ed thereto ,- the petitioners.
In fine, Ee find that the petition pri(a +acie does not show that erti!rari lies in the present case and
therefore, the petition does not deserve to ,e given due course.
E6E$EBO$E, the present petition should ,e, as it is here,-, denied due course and accordingl-, is
here,- dis*issed. Costs against the petitioners.
SO O$DE$ED.
12
19 | P a g e
%etitioners filed a *otion for reconsideration
15
on 9une (, 1001, which was li=ewise denied ,- the respondent
court.
E6E$EBO$E, the present *otion for reconsideration should ,e, as it is here,-, denied for lac= of *erit.
Bor the sa*e reason, the *otion to have the *otion for reconsideration set for oral argu*ent li=ewise
should ,e and is here,- denied.
SO O$DE$ED.
14
%etitioners are now ,efore us via %etition for $eview on erti!rari
15
under $ule )' of the $evised $ules of
Court.
It is the petitionersM su,*ission that private respondents are foreign corporations actuall- doing ,usiness in the
%hilippines without the reDuisite authorit- and license fro* the /oard of Invest*ents and the Securities and
E?change Co**ission, and thus, disDualified fro* instituting the present action in our courts. It is their
contention that the provisions of the $epresentative Agree*ent, petitioner AS%AC e?ecuted with private
respondent ITEC, are si*ilarl- 3highl- restrictive3 in nature as those found in the agree*ents which confronted
the Court in the case of T!p45eld Man%+act%ring, Inc. vs. EED S.A. et al.,
16
as to reduce petitioner AS%AC to a
*ere conduit or e?tension of private respondents in the %hilippines.
In that case, we ruled that respondent foreign corporations are doing ,usiness in the %hilippines ,ecause when the
respondents entered into the disputed contracts with the petitioner, the- were carr-ing out the purposes for which
the- were created, i.e., to *anufacture and *ar=et welding products and eDuip*ent. The ter*s and conditions of
the contracts as well as the respondentsM conduct indicate that the- esta,lished within our countr- a continuous
,usiness, and not *erel- one of a te*porar- character. The respondents could ,e e?e*pted fro* the reDuire*ents
of $epu,lic Act ')'' if the petitioner is an independent entit- which ,u-s and distri,utes products not onl- of the
petitioner, ,ut also of other *anufacturers or transacts ,usiness in its na*e and for its account and not in the na*e
or for the account of the foreign principal. A reading of the agree*ents ,etween the petitioner and the respondents
shows that the- are highl- restrictive in nature, thus *a=ing the petitioner a *ere conduit or e?tension of the
respondents.
It is alleged that certain provisions of the 3$epresentative Agree*ent3 e?ecuted ,- the parties are si*ilar to those
found in the .icense Agree*ent of the parties in the Top"Eeld case which were considered as 3highl- restrictive3
,- this Court. The provisions in point areF
.! Ter*s and Conditions of Sales.
.1 Sale of ITEC products shall ,e at the purchase price set ,- ITEC fro* ti*e to ti*e. >nless otherwise
e?pressl- agreed to in writing ,- ITEC the purchase price is net to ITEC and does not include an-
transportation charges, i*port charges or ta?es into or within the Territor-. All orders fro* custo*ers are
su,;ect to for*al acceptance ,- ITEC at its 6untsville, Ala,a*a >.S.A. facilit-.
??? ??? ???
+.! Duties of $epresentative
+.1. $E%$ESENTATI<E S6A..F
+.1.1. Not represent or offer for sale within the Territor- an- product which co*petes with an e?isting
ITEC product or an- product which ITEC has under active develop*ent.
+.1.. Activel- solicit all potential custo*ers within the Territor- in a s-ste*atic and ,usiness li=e
*anner.
20 | P a g e
+.1.+. Infor* ITEC of all reDuest for proposals, reDuests for ,ids, invitations to ,id and the li=e within the
Territor-.
+.1.). Attain the Annual Sales #oal for the Territor- esta,lished ,- ITEC. The Sales #oals for the first )
*onths is set forth on Attach*ent two 12 hereto. The Sales #oal for additional twelve *onth periods, if
an-, shall ,e sent to the Sales Agent ,- ITEC at the ,eginning of each period. These Sales #oals shall ,e
incorporated into this Agree*ent and *ade a part hereof.
??? ??? ???
&.!. $epresentative as Independent Contractor
??? ??? ???
&.. Ehen acting under this Agree*ent $E%$ESENTATI<E is authori:ed to solicit sales within the
Territor- on ITECMs ,ehalf ,ut is authori:ed to ,ind ITEC onl- in its capacit- as $epresentative and no
other, and then onl- to specific custo*ers and on ter*s and conditions e?pressl- authori:ed ,- ITEC in
writing.
1
@
Aside fro* the a,ovestated provisions, petitioners point out the following *atters of record, which allegedl- ,ear
witness to the respondentsM activities within the %hilippines in pursuit of their ,usiness dealingsF
a. Ehile petitioner AS%AC was the authori:ed e?clusive representative for three 1+2 -ears, it solicited
fro* and closed several sales for and on ,ehalf of private respondents as to their products onl- and no
other, to %.DT, worth no less than >S P 1' 7illion 1p. !, tsn, Be,. 1A, 10012@
,. Contract No. 1 1E?hi,it for %etitioners2 which covered these sales and identified ,- private
respondentsM sole witness, 7r. Clarence .ong, is not in the na*e of petitioner AS%AC as such
representative, ,ut in the na*e of private respondent ITEC, INC. 1p. !, tsn, Be,. 1A, 10012@
c. The docu*ent deno*inated as 3%.DT"AS%ACLITEC %$OTOCO. 1Anne? C of the original and
a*ended co*plaints2 which defined the responsi,ilities of the parties thereto as to the suppl-, installation
and *aintenance of the ITEC eDuip*ent sold under said Contract No. 1 is, as its ver- title indicates, in
the na*es ;ointl- of the petitioner AS%AC and private respondents@
d. To evidence receipt of the purchase price of >S P 1' 7illion, private respondent ITEC, Inc. issued in
its letter head, a Confir*ation of pa-*ent dated Nove*,er 1+, 10A0 and its Invoice dated Nove*,er ,
10A0 1Anne?es 1 and of the 7otion to Dis*iss and *ar=ed as E?hi,its and + for the petitioners2, ,oth
of which were identified ,- private respondentMs sole witness, 7r. Clarence .ong 1pp. '"(, tsn, Be,. 1A,
10012.
18
%etitioners contend that the a,ove acts or activities ,elie the supposed independence of petitioner AS%AC fro*
private respondents. 3The unre,utted evidence on record ,elow for the petitioners li=ewise reveal the continuous
character of doing ,usiness in the %hilippines ,- private respondents ,ased on the standards laid down ,- this
Court in 5ang La*!rat!ries, Inc. vs. 7!n. $a+ael T . Mend!&a, et al.
11
and again in TO%"EE.D. 1s%pra23 It thus
appears that as the respondent Court of Appeals and the trial courtMs failure to give credence on the grounds relied
upon in support of their 7otion to Dis*iss that petitioners ascri,e grave a,use of discretion a*ounting to an
e?cess of ;urisdiction of said courts.
%etitioners li=ewise argue that since private respondents have no capacit- to ,ring suit here, the %hilippines is not
the 3*ost convenient foru*3 ,ecause the trial court is devoid of an- power to enforce its orders issued or
decisions rendered in a case that could not have ,een co**enced to ,egin with, such that in insisting to assu*e
and e?ercise ;urisdiction over the case ,elow, the trial court had gravel- a,used its discretion and even actuall-
e?ceeded its ;urisdiction.
21 | P a g e
As against petitionerMs insistence that private respondent is 3doing ,usiness3 in the %hilippines, the latter *aintains that it
is not.
Ee can discern fro* a reading of Section 1 1f2 112 and 1 1f2 12 of the $ules and $egulations I*ple*enting the O*ni,us
Invest*ents Code of 10A(, the followingF
112 A foreign fir* is dee*ed not engaged in ,usiness in the %hilippines if it transacts ,usiness through
*iddle*en, acting in their own na*es, such as inde,tors, co**ercial ,oo=ers co**ercial *erchants.
12 A foreign corporation is dee*ed not 3doing ,usiness3 if its representative do*iciled in the %hilippines
has an independent status in that it transacts ,usiness in its na*e and for its account. 20
%rivate respondent argues that a scrutin- of its $epresentative Agree*ent with the %etitioners will show that
although AS%AC was na*ed as representative of ITEC., AS%AC actuall- acted in its own na*e and for its own
account. The following provisions are particularl- *entionedF
+.1.(.1. In the event that $E%$ESENTATI<E i*ports directl- fro* ITEC, $E%$ESENTATI<E will pa-
for its own account@ all custo*s duties and i*port fees i*posed on an- ITEC products@ all i*port
e?pediting or handling charges and e?penses i*posed on ITEC products@ and an- sta*p ta? fees i*posed
on ITEC.
??? ??? ???
).1. As co*plete consideration and pa-*ent for acting as representative under this Agree*ent,
$E%$ESENTATI<E shall receive a sales co**ission eDuivalent to a per cent%( of the BO/ value of all
ITEC eDuip*ent sold to custo*ers within the territor- as a direct result of $E%$ESENTATI<EMs sales
efforts.
21
7ore i*portantl-, private respondent charges AS%AC of ad*itting its independence fro* ITEC ,- entering and
ascri,ing to provision No. & of the $epresentative Agree*ent.
&.! $epresentative as Independent Contractor
&.1. Ehen perfor*ing an- of its duties under this Agree*ent, $E%$ESENTATI<E shall act as an
independent contractor and not as an e*plo-ee, wor=er, la,orer, partner, ;oint venturer of ITEC as these
ter*s are defined ,- the laws, regulations, decrees or the li=e of an- ;urisdiction, including the
;urisdiction of the >nited States, the state of Ala,a*a and the Territor-.
22
Although it ad*its that the $epresentative Agree*ent contains provisions which ,oth support and ,elie the
independence of AS%AC, private respondent echoes the respondent courtMs finding that the lower court did not
co**it grave a,use of discretion nor acted in e?cess of ;urisdiction when it found that the ground relied upon ,-
the petitioners in their *otion to dis*iss does not appear to ,e indu,ita,le.
25
The issues ,efore us now are whether or not private respondent ITEC is an unlicensed corporation doing ,usiness
in the %hilippines, and if it is, whether or not this fact ,ars it fro* invo=ing the in;unctive authorit- of our courts.
Considering the a,ove, it is necessar- to state what is *eant ,- 3doing ,usiness3 in the %hilippines. Section 1++
of the Corporation Code, provides that 3No foreign corporation, transacting ,usiness in the %hilippines without a
license, or its successors or assigns, shall ,e per*itted to *aintain or intervene in an- action, suit or proceeding in
an- court or ad*inistrative agenc- of the %hilippines@ ,ut such corporation *a- ,e sued or proceeded against
,efore %hilippine Courts or ad*inistrative tri,unals on an- valid cause of action recogni:ed under %hilippine
laws.3
24
22 | P a g e
#enerall-, a 3foreign corporation3 has no legal e?istence within the state in which it is foreign. This proceeds
fro* the principle that ;uridical e?istence of a corporation is confined within the territor- of the state under whose
laws it was incorporated and organi:ed, and it has no legal status ,e-ond such territor-. Such foreign corporation
*a- ,e e?cluded ,- an- other state fro* doing ,usiness within its li*its, or conditions *a- ,e i*posed on the
e?ercise of such privileges.
25
/efore a foreign corporation can transact ,usiness in this countr-, it *ust first o,tain
a license to transact ,usiness in the %hilippines, and a certificate fro* the appropriate govern*ent agenc-. If it
transacts ,usiness in the %hilippines without such a license, it shall not ,e per*itted to *aintain or intervene in
an- action, suit, or proceeding in an- court or ad*inistrative agenc- of the %hilippines, ,ut it *a- ,e sued on an-
valid cause of action recogni:ed under %hilippine laws.
26
In a long line of decisions, this Court has not altogether prohi,ited foreign corporation not licensed to do ,usiness
in the %hilippines fro* suing or *aintaining an action in %hilippine Courts. Ehat it see=s to prevent is a foreign
corporation doing ,usiness in the %hilippines without a licensed fro* gaining access to %hilippine Courts.
2
@
The purpose of the law in reDuiring that foreign corporations doing ,usiness in the %hilippines ,e licensed to do
so and that the- appoint an agent for service of process is to su,;ect the foreign corporation doing ,usiness in the
%hilippines to the ;urisdiction of its courts. The o,;ect is not to prevent the foreign corporation fro* perfor*ing
single acts, ,ut to prevent it fro* acDuiring a do*icile for the purpose of ,usiness without ta=ing steps necessar-
to render it a*ena,le to suit in the local courts.
28
The i*plication of the law is that it was never the purpose of the
legislature to e?clude a foreign corporation which happens to o,tain an isolated order for ,usiness fro* the
%hilippines, and thus, in effect, to per*it persons to avoid their contracts *ade with such foreign corporations.
21
There is no e?act rule or governing principle as to what constitutes 3doing3 or 3engaging3 or 3transacting3
,usiness. Indeed, such case *ust ,e ;udged in the light of its peculiar circu*stances, upon its peculiar facts and
upon the language of the statute applica,le. The true test, however, see*s to ,e whether the foreign corporation is
continuing the ,od- or su,stance of the ,usiness or enterprise for which it was organi:ed.
50
Article )) of the O*ni,us Invest*ents Code of 10A( defines the phrase to includeF
soliciting orders, purchases, service contracts, opening offices, whether called 3liaison3 offices or
,ranches@ appointing representatives or distri,utors who are do*iciled in the %hilippines or who in an-
calendar -ear sta- in the %hilippines for a period or periods totalling one hundred eight- 11A!2 da-s or
*ore@ participating in the *anage*ent, supervision or control of an- do*estic ,usiness fir*, entit- or
corporation in the %hilippines, and an- other act or acts that i*pl- a continuit- or co**ercial dealings or
arrange*ents and conte*plate to that e?tent the perfor*ance of acts or wor=s, or the e?ercise of so*e of
the functions nor*all- incident to, and in progressive prosecution of, co**ercial gain or of the purpose
and o,;ect of the ,usiness organi:ation.
Thus, a foreign corporation with a settling agent in the %hilippines which issued twelve *arine policies covering
different ship*ents to the %hilippines
51
and a foreign corporation which had ,een collecting pre*iu*s on
outstanding policies
52
were regarded as doing ,usiness here.
The sa*e rule was o,served relating to a foreign corporation with an 3e?clusive distri,uting agent3 in the
%hilippines, and which has ,een selling its products here since 100,
55
and a foreign corporation engaged in the
,usiness of *anufacturing and selling co*puters worldwide, and had installed at least & different products in
several corporations in the %hilippines, and allowed its registered logo and trade*ar= to ,e used and *ade it
=nown that there e?ists a designated distri,utor in the %hilippines.
54
In 'e!rg 'r!t,ahn 'MB7 and !. vs. Isnani,
55
it was held that the uninterrupted perfor*ance ,- a foreign
corporation of acts pursuant to its pri*ar- purposes and functions as a regional area headDuarters for its ho*e
office, Dualifies such corporation as one doing ,usiness in the countr-.
These foregoing instances should ,e distinguished fro* a single or isolated transaction or occasional, incidental,
or casual transactions, which do not co*e within the *eaning of the law,
56
for in such case, the foreign
corporation is dee*ed not engaged in ,usiness in the %hilippines.
23 | P a g e
Ehere a single act or transaction, however, is not *erel- incidental or casual ,ut indicates the foreign
corporationMs intention to do other ,usiness in the %hilippines, said single act or transaction constitutes 3doing3 or
3engaging in3 or 3transacting3 ,usiness in the %hilippines.
5
@
In deter*ining whether a corporation does ,usiness in the %hilippines or not, aside fro* their activities within the
foru*, reference *a- ,e *ade to the contractual agree*ents entered into ,- it with other entities in the countr-.
Thus, in the Top"Eeld case 1s%pra2, the foreign corporationMs .ICENSE AND TEC6NICA. A#$EE7ENT and
DIST$I/>TO$ A#$EE7ENT with their local contacts were *ade the ,asis of their ,eing regarded ,- this
Tri,unal as corporations doing ,usiness in the countr-. .i=ewise, in Merill Lynch -%t%res,Inc. vs. !%rt !+
Appeals, etc.
58
the B>T>$ES CONT$ACT entered into ,- the petitioner foreign corporation weighed heavil- in
the courtMs ruling.
Eith the a,ovestated precedents in *ind, we are persuaded to conclude that private respondent had ,een
3engaged in3 or 3doing ,usiness3 in the %hilippines for so*e ti*e now. This is the inevita,le result after a scrutin-
of the different contracts and agree*ents entered into ,- ITEC with its various ,usiness contacts in the countr-,
particularl- AS%AC and Telephone EDuip*ent Sales and Services, Inc. 1TESSI, for ,revit-2. The latter is a local
electronics fir* engaged ,- ITEC to ,e its local technical representative, and to create a service center for ITEC
products sold locall-. Its arrange*ents, with these entities indicate convincingl- ITECMs purpose to ,ring a,out the
situation a*ong its custo*ers and the general pu,lic that the- are dealing directl- with ITEC, and that ITEC is
activel- engaging in ,usiness in the countr-.
In its 7aster Service Agree*ent
51
with TESSI, private respondent reDuired its local technical representative to
provide the e*plo-ees of the technical and service center with ITEC identification cards and ,usiness cards, and
to correspond onl- on ITEC, Inc., letterhead. TESSI personnel are instructed to answer the telephone with 3ITEC
Technical Assistance Center.3, such telephone ,eing listed in the telephone ,oo= under the heading of ITEC
Technical Assistance Center, and all calls ,eing recorded and forwarded to ITEC on a wee=l- ,asis.
Ehat is *ore, TESSI was o,liged to provide ITEC with a *onthl- report detailing the failure and repair of ITEC
products, and to reDuisition *onthl- the *aterials and co*ponents needed to replace stoc= consu*ed in the
warrant- repairs of the prior *onth.
A perusal of the agree*ents ,etween petitioner AS%AC and the respondents shows that there are provisions which
are highl- restrictive in nature, such as to reduce petitioner AS%AC to a *ere e?tension or instru*ent of the
private respondent.
The 3No Co*peting %roduct3 provision of the $epresentative Agree*ent ,etween ITEC and AS%AC providesF
3The $epresentative shall not represent or offer for sale within the Territor- an- product which co*petes with an
e?isting ITEC product or an- product which ITEC has under active develop*ent.3 .i=ewise pertinent is the
following provisionF 3Ehen acting under this Agree*ent, $E%$ESENTATI<E is authori:ed to solicit sales
within the Territor- on ITECMs ,ehalf ,ut is authori:ed to ,ind ITEC onl- in its capacit- as $epresentative and no
other, and then onl- to specific custo*ers and on ter*s and conditions e?pressl- authori:ed ,- ITEC in writing.3
Ehen ITEC entered into the disputed contracts with AS%AC and TESSI, the- were carr-ing out the purposes for
which it was created, i.e., to *ar=et electronics and co**unications products. The ter*s and conditions of the
contracts as well as ITECMs conduct indicate that the- esta,lished within our countr- a continuous ,usiness, and
not *erel- one of a te*porar- character.
40
Notwithstanding such finding that ITEC is doing ,usiness in the countr-, petitioner is nonetheless estopped fro*
raising this fact to ,ar ITEC fro* instituting this in;unction case against it.
A foreign corporation doing ,usiness in the %hilippines *a- sue in %hilippine Courts although not authori:ed to
do ,usiness here against a %hilippine citi:en or entit- who had contracted with and ,enefited ,- said
corporation.
41
To put it in another wa-, a part- is estopped to challenge the personalit- of a corporation after
having ac=nowledged the sa*e ,- entering into a contract with it. And the doctrine of estoppel to den- corporate
e?istence applies to a foreign as well as to do*estic corporations.
42
One who has dealt with a corporation of
24 | P a g e
foreign origin as a corporate entit- is estopped to den- its corporate e?istence and capacit-F The principle will ,e
applied to prevent a person contracting with a foreign corporation fro* later ta=ing advantage of its
nonco*pliance with the statutes chiefl- in cases where such person has received the ,enefits of the contract.
45
The rule is deepl- rooted in the ti*e"honored a?io* of !((!d%( e8 in,%ria s%a n!n ha*ere de*et H no person
ought to derive an- advantage of his own wrong. This is as it should ,e for as *andated ,- law, 3ever- person
*ust in the e?ercise of his rights and in the perfor*ance of his duties, act with ;ustice, give ever-one his due, and
o,serve honest- and good faith.3
44
Concededl-, corporations act through agents, li=e directors and officers. Corporate dealings *ust ,e characteri:ed
,- ut*ost good faith and fairness. Corporations cannot ;ust feign ignorance of the legal rules as in *ost cases,
the- are *anned ,- sophisticated officers with tried *anage*ent s=ills and legal e?perts with practiced e-e on
legal pro,le*s. Each part- to a corporate transaction is e?pected to act with ut*ost candor and fairness and,
there,- allow a reasona,le proportion ,etween ,enefits and e?pected ,urdens. This is a nor* which should ,e
o,served where one or the other is a foreign entit- venturing in a glo,al *ar=et.
As o,served ,- this Court in TO%"EE.D 1s%pra2, vi&F
The parties are charged with =nowledge of the e?isting law at the ti*e the- enter into a contract and at the ti*e it
is to ,eco*e operative. 1Twiehaus v. $osner, )' SE d 1!(@ 6all v. /ucher, ( SE d 0A2. 7oreover, a person
is presu*ed to ,e *ore =nowledgea,le a,out his own state law than his alien or foreign conte*porar-. In this
case, the record shows that, at least, petitioner had actual =nowledge of the applica,ilit- of $.A. No. ')'' at the
ti*e the contract was e?ecuted and at all ti*es thereafter. This conclusion is co*pelled ,- the fact that the sa*e
statute is now ,eing propounded ,- the petitioner to ,olster its clai*. Ee, therefore sustain the appellate courtMs
view that 3it was incu*,ent upon TO%"EE.D to =now whether or not I$TI and ECED were properl- authori:ed
to engage in ,usiness in the %hilippines when the- entered into the licensing and distri,utorship agree*ents.3 The
ver- purpose of the law was circu*vented and evaded when the petitioner entered into said agree*ents despite
the prohi,ition of $.A. No. ')''. The parties in this case ,eing eDuall- guilt- of violating $.A. No. ')'', the- are
in pari delicto, in which case it follows as a conseDuence that petitioner is not entitled to the relief pra-ed for in
this case.
The doctrine of lac= of capacit- to sue ,ased on the failure to acDuire a local license is ,ased on considerations of
sound pu,lic polic-. The license reDuire*ent was i*posed to su,;ect the foreign corporation doing ,usiness in the
%hilippines to the ;urisdiction of its courts. It was never intended to favor do*estic corporations who enter into
solitar- transactions with unwar- foreign fir*s and then repudiate their o,ligations si*pl- ,ecause the latter are
not licensed to do ,usiness in this countr-.
45
In Anta( !ns!lidated Inc. vs. !%rt !+ Appeals, et al.
46
we e?pressed our chagrin over this co**onl- used
sche*e of defaulting local co*panies which are ,eing sued ,- unlicensed foreign co*panies not engaged in
,usiness in the %hilippines to invo=e the lac= of capacit- to sue of such foreign co*panies. O,viousl-, the sa*e
plo- is resorted to ,- AS%AC to prevent the in;unctive action filed ,- ITEC to en;oin petitioner fro* using
=nowledge possi,l- acDuired in violation of fiduciar- arrange*ents ,etween the parties.
/- entering into the 3$epresentative Agree*ent3 with ITEC, %etitioner is charged with =nowledge that ITEC was
not licensed to engage in ,usiness activities in the countr-, and is thus estopped fro* raising in defense such
incapacit- of ITEC, having chosen to ignore or even presu*ptivel- ta=e advantage of the sa*e.
In Top"Eeld, we ruled that a foreign corporation *a- ,e e?e*pted fro* the license reDuire*ent in order to
institute an action in our courts if its representative in the countr- *aintained an independent status during the
e?istence of the disputed contract. %etitioner is dee*ed to have acceded to such independent character when it
entered into the $epresentative Agree*ent with ITEC, particularl-, provision &. 1s%pra2.
%etitionerMs insistence on the dis*issal of this action due to the application, or non application, of the private
international law rule of foru* n!n c!nveniens defies well"settled rules of fair pla-. According to petitioner, the
%hilippine Court has no venue to appl- its discretion whether to give cogni:ance or not to the present action,
25 | P a g e
,ecause it has not acDuired ;urisdiction over the person of the plaintiff in the case, the latter allegedl- having no
personalit- to sue ,efore %hilippine Courts. This argu*ent is *isplaced ,ecause the court has alread- acDuired
;urisdiction over the plaintiff in the suit, ,- virtue of his filing the original co*plaint. And as we have alread-
o,served, petitioner is not at li,ert- to Duestion plaintiffMs standing to sue, having alread- acceded to the sa*e ,-
virtue of its entr- into the $epresentative Agree*ent referred to earlier.
Thus, having acDuired ;urisdiction, it is now for the %hilippine Court, ,ased on the facts of the case, whether to
give due course to the suit or dis*iss it, on the principle of foru* n!n c!nvenience.
4
@ 6ence, the %hilippine Court
*a- refuse to assu*e ;urisdiction in spite of its having acDuired ;urisdiction. Conversel-, the court *a- assu*e
;urisdiction over the case if it chooses to do so@ provided, that the following reDuisites are *etF 12 That the
%hilippine Court is one to which the parties *a- convenientl- resort to@ 2 That the %hilippine Court is in a
position to *a=e an intelligent decision as to the law and the facts@ and, +2 That the %hilippine Court has or is
li=el- to have power to enforce its decision.
48
The aforesaid reDuire*ents having ,een *et, and in view of the courtMs disposition to give due course to the
Duestioned action, the *atter of the present foru* not ,eing the 3*ost convenient3 as a ground for the suitMs
dis*issal, deserves scant consideration.
IN <IEE OB T6E BO$E#OIN# %$E7ISES, the instant %etition is here,- DIS7ISSED. The decision of the
Court of Appeals dated 9une (, 1001, upholding the $TC Order dated Be,ruar- , 1001, den-ing the petitionersM
7otion to Dis*iss, and ordering the issuance of the Erit of %reli*inar- In;unction, is here,- affir*ed in t!t!.
SO O$DE$ED.
Case # 5
G.R. No. L,58641 'ar:; 26, 11@1
/ACILITIES 'ANAGE'ENT CORORATION, &. S. #RE$ER, a*+ &. 0. CAT(IRA, petitioners,
vs.
LEONAR#O #E LA ROSA AN# THE HONORA7LE CO(RT O/ IN#(STRIAL RELATIONS, respondents.
'A%ASIAR, J:
%etition for review on certiorari of the decision of the Court of Industrial $elations, dated Be,ruar- 1), 10(, ordering
petitioners herein to pa- private respondent .eonardo de la Osa his overti*e co*pensation, as wen as his swing shift and
grave-ard shift pre*iu*s at the rate of fift- 1'!42 per cent of his ,asic sa 1Anne? E, p. +1, rollo2.
The aforesaid decision was ,ased on a report su,*itted ,- the 6earing E?a*iner, CI$ 1Dagupan Cit- /ranch2, the
pertinent portions of which are Duoted herein,elowFFF
In a petition filed on 9ul- 1, 10&(, .eonardo dela Osa sought his reinstate*ent. with full ,ac=wages, as
well as the recover- of his overti*e co*pensation, swing shift and grave-ard shift differentials. %etitioner
alleged that he was e*plo-ed ,- respondents as followsF 112 painter with an hourl- rate of P1.' fro*
7arch, 10&) to Nove*,er, 10&), inclusive@ 12 house,o- with an hourl- rate of P1.& fro* Dece*,er,
10&) to Nove*,er, 10&', inclusive@ 1+2 house,o- with an hourl- rate of P1.++ fro* Dece*,er, 10&' to
August, 10&&, inclusive@ and 1)2 cashier with an hourl- rate of P1.)! fro* August, 10&& to 7arch (,
10&(, inclusive. 6e further averred that fro* Dece*,er, 10&' to August, 10&&, inclusive, he rendered
overti*e services dail- and that this entire period was divided into swing and grave-ard shifts to which he
was assigned, ,ut he was not paid ,oth overti*e and night shift pre*iu*s despite his repeated de*ands
fro* respondents.
$espondents filed on August (, 10&( their letter" answer without su,stantiall- den-ing the *aterial
allegations of the ,asic petition ,ut interposed the following special defenses, na*el-F That respondents
Bacilities 7anage*ent Corporation and 9. S. Dre-er are do*iciled in Ea=e Island which is ,e-ond the
26 | P a g e
territorial ;urisdiction of the %hilippine #overn*ent@ that respondent 9. <. Catuira, though an e*plo-ee of
respondent corporation presentl- stationed in 7anila, is without power and authorit- of legal
representation@ and that the e*plo-*ent contract ,etween petitioner and respondent corporation carries
"the approval of the Depart*ent of .a,or of the %hilippines.
Su,seDuentl- on 7a- +, 10&A. respondents filed a *otion to dis*iss the su,;ect petition on the ground
that this Court has no 9urisdiction over the instant case, and on 7a- ), 10&A, petitioner interposed an
opposition thereto. Said *otion was denied ,- this Court in its Order issued on 9ul- 1, 10&A sustaining
;urisdiction in accordance with the prevailing doctrine of the Supre*e Court in si*ilar cases.
??? ??? ???
/ut ,efore we consider and discuss the foregoing issues, let us first ascertain if this Court could acDuire
;urisdiction over the case at ,ar, it having ,een contended ,- respondents that the- are do*iciled in Ea=e
Island which is ,e-ond the territorial ;urisdiction of the %hilippine #overn*ent. To this incidental
Duestion, it *a- ,e stated that while it is true the site of wor= is Identified as Ea=e Island, it is eDuall-
true the place of hire is esta,lished in 7anila 1See Section /, Bilipino E*plo-*ent Contract, E?hi,it M1M2.
7oreover, what is i*portant is the fact that the contract of e*plo-*ent ,etween the parties litigant was
shown to have ,een originall- e?ecuted and su,seDuentl- renewed in 7anila, as asserted ,- petitioner
and not denied ,- respondents. 6ence, an- dispute arising therefro* should necessaril- ,e deter*ined in
the place or venue where it was contracted.
??? ??? ???
Bro* the evidence on hand, it has ,een proven ,e-ond dou,t that petitioner canvas assigned to and
perfor*ed wor= in respondent co*pan- at slight ti*e which consisted of two different schedules, na*el-,
swing shift and grave-ard shifts, particularl- during his tenure as house,o- for the second period and as
cashier. %etitionerMs testi*on- to this effect was not contradicted, *uch less re,utted, ,- respondents, as
revealed ,- the records. Since petitioner actuall- rendered night ti*e services as reDuired ,- respondents,
and considering the ph-sical, *oral and sociological effects arising fro* the perfor*ance of such
nocturnal duties, we thin= and honestl- ,elieve that petitioner should ,e co*pensated at least fift- percent
1'!42 *ore than his ,asic wage rate. This night shift pre*iu* pa- would indeed ,e at par with the
overti*e co*pensation stipulated at one and one"half 11 Q2 ti*es of the straight ti*e rate.
??? ??? ??? 1pp. +1"+&, rollo2.
Apropos ,efore this Court were filed three 1+2 other cases involving the sa*e petitioner, all of which had ,een finall-
dispoded of, as followsF
#.$. No Date of Biling Disposition
1. ."+(11( 9ul- +!, 10(+ %etition denied for
lac= of *erit on Sept.
1+, 10(+. 7otion for
$econsideration
denied lac= of
*erit, Nov. !,10(+.
. ."+A(A1 9une 1(,10() %etition denied for
lac= of *erit on 9une
1,10().
+. ."+0111"1 Sept. ,10() Case dis*issed on Be,.
&, 10(&, pursuant to
voluntar- *anifesta
27 | P a g e
tion of private respon
dent Inocente $. $iel
that his clai*s had all
,een settled to his entire
satisfaction.
Incidentall-, in connection with #.$. No. ."+0111"1 1No. + a,ove2, EE found strong evidence that petitioner therein,
which is also the petitioner in the case at ,ar, 3twisted the ar*3 of private respondent, when the latter in his 7anifestation
dated 9ul- +, 10(', statedF
+. ... Burther*ore, since petitioner B7C is a foreign corporation do*iciled in California, >.S.A. and has
never ,een engaged in ,usiness in the %hilippines, nor does it have an agent or an office in this countr-,
there e?ists no valid reason for *e to participate in the continuation andLor prosecution of this case 1p.
10), rollo2.
H as if ;urisdiction depends on the will of the parties to a case. At an- rate, considering that petitioner paid the clai*s of
private respondent, the case had ,eco*e *oot and acade*ic. /esides, the fact of such pa-*ent a*ounts to an
ac=nowledg*ent on the part of petitioner of the ;urisdiction of the court over it.
EE have also noted that the principal Duestion involved in each of the a,ove"nu*,ered three 1+2 cases is *ore or less
Identical, to witF Is the *ere act ,- a non"resident foreign corporation of recruiting Bilipino wor=ers for its own use
a,road, in law doing ,usiness in the %hilippinesR
In the case at ,ar, which was filed with this Court on 9une +, 10(), petitioners presented, inter alia, the following issueF ...
can the CI$ validl- affir* a ;udg*ent against persons do*iciled outside and not doing ,usiness in the %hilippines, and
over who* it did not acDuire ;urisdictionM2
Ehile it is true that the issues presented in the decided cases are worded differentl- fro* the principal issue raised in the
case at ,ar, the fact re*ains that the- all ,oil down to one and the sa*e issue, which was aptl- for*ulated and a,l-
resolved ,- 7r. 9ustice $a*on C. Bernande:, then with the Court of Appeals and now a *e*,er of this Court, in CA"
#.$. No. S%"!1)A'"$, later elevated to this Court on appeal ,- certiorari in Case #.$. No. ."+(11( this case, the *a;orit-
opinion of the Court of Appeals, which was penned ,- 9ustice Bernande: and which EE here,- adopt, runs as followsF
The principal issue presented in this special civil action is whether petitioner has ,een Mdoing ,usiness in
the %hilippinesM so that the service of su**ons upon its agent in the %hilippines vested the Court of Birst
Instance of 7anila with ;urisdiction.
Bro* the facts of record, the petitioner *a- ,e considered as doing ,usuness un the %hilippines within the
the scope of Section 1), $ule 1) of the $ules of the Court which provideF
SEC 1). Service upon private foreign corporations. If the defendant is a foreign
corporation or a non"resident ;oint stoc= co*pan- or associationF doing ,usiness in the
%hilippines, service *a- ,e *ade on its resident agent designated in accordance with law
for that purpose or, if there ,e no such agent, on the govern*ent official designated ,-
law to that effect, or on an- of its officers or agents within the %hilippines.
Indeed, the petitioner, in co*pliance with Act )A& as i*ple*ented ,- Depart*ent of .a,or Order No.
I< dated 7a- !, 10&A had to appoint 9ai*e <. Catuira, 1+ A. 7a,ini, Er*ita, 7anila as agent for
B7C with authorit- to e?ecute E*plo-*ent Contracts and receive, in ,ehalf of that corporation, legal
services fro* and ,e ,ound ,- processes of the %hilippine Courts of 9ustice, for as long as he re*ains an
e*plo-ee of B7C 1Anne? MIM, rollo, p. '&2. It is a fact that when the su**ons for the petitioner was
served on 9ai*e <. Catuira he was still in the e*plo- of the B7C.
In his *otion to dis*iss Anne? /M, p. 10, $ollo2, petitioner ad*its that 7r. Catuira represented it in this
countr- Mfor the purpose of *a=ing arrange*ents for the approval ,- the Depart*ent of .a,or of the
28 | P a g e
e*plo-*ent of Bilipinos who are recruited ,- the Co*pan- as its own e*plo-ees for assign*ent a,road.M
In effect, 7r. Catuira was a on officer representing petitioner in the %hilippines.
>nder the rules and regulations pro*ulgated ,- the /oard of Invest*ents which too= effect Be,. +, 10&0,
i*ple*enting $ep. Act No. ')'', which too= effect Sept. +!, 10&A, the phrase Mdoing ,usinessM has ,een
e?e*ption with illustrations, a*ong the* ,eing as followsF
??? ??? ???
1f2 the perfor*ance within the %hilippines of an- act or co*,ination of acts enu*erated
in section l1l2 of the Act shall constitute Mdoing ,usinessM therein. in particular, Mdoing
,usiness includesF
112 Soliciting orders, purchases 1sales2 or service contracts. Concrete and specific
solicitations ,- a foreign fir*, not acting independentl- of the foreign fir* a*ounting to
negotiation or fi?ing of the ter*s and conditions of sales or service contracts, regardless
of whether the contracts are actuall- reduced to writing, shall constitute doing ,usiness
even if the enterprise has no office or fi?ed place of ,usiness in the %hilippines. ???
12 Appointing a representative or distri,utor who is dociled in the %hilippines, unless
said representative or distri,utor has an independent status, i.e., it transacts ,usiness in its
na*e and for its own account, and not in the na*e or for the account of the principal.
??? ??? ???
1)2 Opening offices, whether called MliaisonMoffices, agencies or ,ranches, unless proved
otherwise.
??? ??? ???
11!2 An- other act or acts that i*pl- a continuit- of co**ercial dealings or
arrange*ents, and conte*plate to that e?tent the perfor*ance of acts or wor=s, or the
e?ercise of so*e of the functions nor*all- incident to, or in the progressive prosecution
of, co**ercial gain or of the purpose and o,;ective of the ,usiness organi:ation 1') O.#.
'+2.
$ecentl- decided ,- this Court H again thru 7r. 9ustice $a*on C. Bernande: H which is si*ilar to the case at ,ar, is
#.$. No. ."&A!0, entitled Aetna as%alty 9 %rety !(pany, plainti++4 appellant vers%s Paci+ic Star Line, the Brad(an
!., Inc., Manila P!rt Service and:!r Manila $ailr!ad !(pany, Inc., de+endants4appellees.3 The case is an appeal fro*
the decision of the Court of Birst Instance of 7anila, /ranch S<I, in its Civil Case No. '+!(), entitled Aetna as%alty 9
S%rety !(pany vs. Paci+ic Star Lines, The Brad(an !., Inc., Manila P!rt Service and:!r Manila $ailr!ad !(pany,
Inc.3 dis*issing the co*plaint on the ground that the plaintiff has no legal capacit- to ,ring the suit.
It appears that on Be,ruar- 11, 10&+, S*ith /ell N Co. 1%hilippines2, Inc. and Aetna Casualt- N Suret- Co., Inc., as
su,rogee instituted Civil Case No. '+!() in the Court of Birst Instance of 7anila against %acific Star .ine, The /rad*an
Co., Inc., 7anila %ort Service andLor 7anila $ailroad Co*pan-, Inc. to recover the a*ount of >SP,+!!.!! representing
the value of stolen and da*aged cargo plus litigation e?penses and e?e*plar- da*ages in the a*ounts of %1,!!!.!! and
%,!!!.!!, respectivel-, with legal interest thereon fro* the filing of the suit and costs.
After all the defendants had filed their answer, the defendants 7anila %ort Service and 7anila $ailroad Co*pan-, Inc.
a*ended their answer to allege that the plaintiff, Aetna Casualt- N Suret- Co*pan-, is a foreign corporation not dul-
licensed to do ,usiness in the %hilippines and, therefore, without capacit- to sue and ,e sued.
After the parties su,*itted a partial stipulation of facts and additional docu*entar- evidence, the case was su,*itted for
decision of the trial court, which dis*issed the co*plaint on the ground that the plaintiff insurance co*pan- is su,;ect to
29 | P a g e
the reDuire*ents of Sections &A and &0 of Act 1)'0, as a*ended, and for its failure to co*pl- therewith, it has no legal
capacit- to ,ring suit in this ;urisdiction. %laintiff appealed to this Court.
The *ain issue involved in the appeal is whether or not the plaintiff appellant has ,een doing ,usiness in the %hilippines,
considering the fact that it has no license to transact ,usiness in the %hilippines as a foreign corporation. EE ruledF
The o,;ect of Sections &A and &0 of the Corporation .aw was not to prevent the foreign corporation fro*
perfor*ing single acts, ,ut to prevent it fro* acDuiring a do*icile for the purpose of ,usiness without
ta=ing the steps necessar- to render it a*ena,le to suit in the local courts. It was never the purpose of the
.egislature to e?clude a foreign corporation which happens to o,tain an isolated order for ,usiness fro*
the %hilippines, fro* securing redress in the %hilippine courts 17arshall Co. vs. Elser N Co., )& %hil
(!,('2.
In 7entholatu* Co., Inc., et al vs" 7 Court rules that"
No general rule or governing principle can ,e laid down as to what constitutes MdoingM or
Mengaging inM or MtransactingM ,usiness. Indeed, each case *ust ,e ;udged in the light of its
peculiar environ*ental circu*stances. The true test, however, see*s to ,e whether the
foreign corporation is continuing the ,od- or su,stance of the ,usiness or enterprise for
which it was organi:ed or whether it has su,stantiall- retired fro* it and turned it over to
another. 1Traction Cos. v. Collectors of Int $evenue IC.C.A OhioJ, + B. 0A), 0A(2. The
ter* i*plies a continuit- of co**ercial dealings and arrange*ents, and conte*plates, to
that e?tent, the perfor*ance of acts or wor=s or the e?ercise of so*e of the functions
nor*all- incident to, and in progressive prosecution of, the purpose and o,;ect of its
organi:ation 1#riffin v. I*ple*ent DealersM 7ut. Bire Ins. Co., )1 N.E. (', ((@ %auline
Oil N #as Co. v. 7utual Tan= .ine Co., )& %. A'1, A', 11A O=l. III@ Auto*otive
7aterial Co. vs. A*erican Standard 7etal %roducts Corp., 1'A N.E. &0A, (!+, +( III.
+&(2M. ( %hil. '), 'A"'0.
And in East*!ard Navigati!n, Ltd., et al. vs. .%an 6s(ael 9 !., Inc., this Court heldF
1d2 Ehile plaintiff is a foreign corporation without license to transact ,usiness in the
%hilippines, it does not follow that it has no capacit- to ,ring the present action. Such
license is not necessar- ,ecause it is not engaged in ,usiness in the %hilippines. In fact,
the transaction herein involved is the first ,usiness underta=en ,- plaintiff in the
%hilippines, although on a previous occasion plaintiffMs vessel was chartered ,- the
National $ice and Corn Corporation to carr- rice cargo fro* a,road to the %hilippines.
These two isolated transactions do not constitute engaging in ,usiness in the %hilippines
within the purview of Sections &A and &0 of the Corporation .aw so as to ,ar plaintiff
fro* see=ing redress in our courts. 17arshall Eens Co. vs. 6enr- E. Elser N Co. )0
%hil., (!@ %acific <egeta,le Oil Corporation vs. Angel O. Singson, #.$. No. ."(01(,
April 0, 10''2M. 1! %hil., pp. 1, 1A.
/ased on the rulings laid down in the foregoing cases, it cannot ,e said that the Aetna Casualt- N Suret-
Co*pan- is transacting ,usiness of insurance in the %hilippines for which it *ust have a license. The
Contract of insurance was entered into in New Gor=, >.S.A., and pa-*ent was *ade to the consignee in
its New Gor= ,ranch. It appears fro* the list of cases issued ,- the Cler= of Court of the Court of Birst
Instance of 7anila that all the actions, e?cept two 12 cases filed ,- S*ith, /eer N Co., Inc. against the
Aetna Casualt- N Suret- Co*pan-, are clai*s against the shipper and the arrastre operators ;ust li=e the
case at ,ar.
ConseDuentl-, since the appellant Aetna Casualt- N Suret- Co*pan- is not engaged in the ,usiness of
insurance in the %hilippines ,ut is *erel- collecting a clai* assigned to it ,- the consignee, it is not
,arred fro* filing the instant case although it has not secured a license to transact insurance ,usiness in
the %hilippines.
30 | P a g e
Indeed, if a foreign corporation, not engaged in ,usiness in the %hilippines, is not ,anned fro* see=ing redress fro*
courts in the %hilippines, a +!rti!ri, that sa*e corporation cannot clai* e?e*ption fro* ,eing sued in %hilippine courts
for acts done against a person or persons in the %hilippines.
E6E$EBO$E, T6E %ETITION IS 6E$E/G DENIED EIT6 COSTS A#AINST T6E %ETITIONE$S.
SO O$DE$ED.
Case # 6
G.R. No. 118845 /eAr2ar6 6, 111@
ERI%S TE. LT#., petitioner,
vs.
CO(RT O/ AEALS, a*+ #EL/IN /. ENRIB(E), &R., respondents.
ANGANI7AN, J.:
Is a foreign corporation which sold its products si?teen ti*es over a five"*onth period to the sa*e Bilipino ,u-er without
first o,taining a license to do ,usiness in the %hilippines, prohi,ited fro* *aintaining an action to collect pa-*ent
therefor in %hilippine courtsR In other words, is such foreign corporation 3doing ,usiness3 in the %hilippines without the
reDuired license and thus ,arred access to our court s-ste*R
This is the *ain issue presented for resolution in the instant petition for review, which see=s the reversal of the
Decision
1
of the Court of Appeals, Seventh Division, pro*ulgated on 9anuar- ', 100', in CA"#.$. C< No. )1(' which
affir*ed, for want of capacit- to sue, the trial courtMs dis*issal of the collection suit instituted ,- petitioner.
The -acts
%etitioner Eri=s %te. .td. is a non"resident foreign corporation engaged in the *anufacture and sale of ele*ents used in
sealing pu*ps, valves and pipes for industrial purposes, valves and control eDuip*ent used for industrial fluid control and
%<C pipes and fittings for industrial uses. In its co*plaint, it alleged thatF
2
1I2t is a corporation dul- organi:ed and e?isting under the laws of the $epu,lic of Singapore with address
at 1A %asir %an;ang $oad T!0"!1, %SA 7ulti"Store- Co*ple?, Singapore !'11. It is not licensed to do
,usiness in the %hilippines and i1s2 not so engaged and is suing on an isolated transaction for which it has
capacit- to sue . . . 1par. 1, Co*plaint@ p. 1, $ecord2
On various dates covering the period 9anuar- 1( H August 1&, 10A0, private respondent Delfin EnriDue:, 9r., doing
,usiness under the na*e and st-le of Delrene E/ Controls Center andLor E/ 5ar*ine Co**ercial, ordered and received
fro* petitioner various ele*ents used in sealing pu*ps, valves, pipes and control eDuip*ent, %<C pipes and fittings. The
ordered *aterials were delivered via airfreight under the following invoicesF
5
Date Invoice No. AE/ No. A*ount
HH HHHHH HHHH HHH
1( 9an A0 (!&' &1A"()0&"0)1 SP ',!1!.'0
) Be, A0 ((+A &1A"(''+"&&( 1),)!.1+
! 7ar A0 (A'' 1freight N hand" 1,1&).1A
ling charges per
Inv. ((+A2
!+ 7ar A0 (A(& &1A"(''+"('!1 1,+0).+
!+ 7ar A0 (A(( &1A"(''+"('!1 1,&)1.'(
1! 7ar A0 A!)& &1A"('(A"+'&L (,A').&!
31 | P a g e
&1A"('(A"+)A1
1 7ar A0 A'A &1A"('(A")&+) (.(
1) Apr A0 A0!1 &1A"(()1"(&+1 ,('&.'+
10 Apr A0 0!!1 Self"collect )'A.A!
1& Aug A0 +1&&0 1handcarried ,- 1,A&.!!
,u-er2
HHHHH
SP+&,+0.))
1 7ar A0 A'( &1A"('(A")&+) )1'.'!
!) Apr A0 A&!1 &1A"(()1"(&!' AA).!0
1) Apr A0 A0!! &1A"(()1"(&+1 1,&0.'!
' Apr A0 01( &1A"(()1"0(! AA+.A!
! 7a- A0 0+ 1/- seafreight2 1!.!!
!' 7a- A0 0++ &1A"((0&"+'' 1,10A.)!
1' 7a- A0 0)0( 1Breight N hand" 111.0)
ling charges per
Inv. 01( HHHHHH
SP ),0A0.0
+1 7a- A0 0A)) &1A"((0&"'&)& ')'.(!
SP ')'.(!
HHHHHH
Total SP )1,0(.)+
The transfers of goods were perfected in Singapore, for private respondentMs account, B.O./. Singapore, with a 0!"da-
credit ter*. Su,seDuentl-, de*ands were *ade ,- petitioner upon private respondent to settle his account, ,ut the latter
failedLrefused to do so.
On August A, 1001, petitioner corporation filed with the $egional Trial Court of 7a=ati, /ranch 1+A,
4
Civil Case No.
01"+(+ entitled 3Eri=s %te. .td. vs. Delfin EnriDue:, 9r.3 for the recover- of SP)1,0+0.&+ or its eDuivalent in %hilippine
currenc-, plus interest thereon and da*ages. %rivate respondent responded with a 7otion to Dis*iss, contending that
petitioner corporation had no legal capacit- to sue. In an Order dated 7arch A, 100+,
5
the trial court dis*issed the action
on the ground that petitioner is a foreign corporation doing ,usiness in the %hilippines without a license. The dispositive
portion of said order readsF
6
E6E$EBO$E, in view of the foregoing, the *otion to dis*iss is here,- #$ANTED and accordingl-,
the a,ove"entitled case is here,- DIS7ISSED.
SO O$DE$ED.
On appeal, respondent Court affir*ed said order as it dee*ed the series of transactions ,etween petitioner, corporation
and private respondent not to ,e an 3isolated or casual transaction.3 Thus, respondent Court li=ewise found petitioner to ,e
without legal capacit- to sue, and disposed of the appeal as followsF
@
E6E$EBO$E, the appealed Order should ,e, as it is here,- ABBI$7ED. The co*plaint is dis*issed.
No costs.
SO O$DE$ED.
6ence, this petition.
The Iss%e
The *ain issue in this petition is whether petitioner corporation *a- *aintain an action in %hilippine courts considering
that it has no license to do ,usiness in the countr-. The resolution of this issue depends on whether petitionerMs ,usiness
with private respondent *a- ,e treated as isolated transactions.
32 | P a g e
%etitioner insists that the series of sales *ade to private respondent would still constitute isolated transactions despite the
nu*,er of invoices covering several separate and distinct ite*s sold and shipped over a span of four to five *onths, and
that an affir*ation of respondent CourtMs ruling would result in in;ustice and un;ust enrich*ent.
%rivate respondent counters that to declare petitioner as possessing capacit- to sue will render nugator- the provisions of
the Corporation Code and constitute a gross violation of our laws. Thus, he argues, petitioner is undeserving of legal
protection.
The !%rt;s $%ling
The petition has no *erit.
The !ncept !+ D!ing B%siness
The Corporation Code providesF
Sec. 1++. Doing ,usiness without a license. H No foreign corporation transacting ,usiness in the
%hilippines without a license, or its successors or assigns, shall ,e per*itted to *aintain or intervene in
an- action, suit or proceeding in an- court or ad*inistrative agenc- of the %hilippines@ ,ut such
corporation *a- ,e sued or proceeded against ,efore %hilippine courts or ad*inistrative tri,unals on an-
valid cause of action recogni:ed under %hilippine laws.
The afore*entioned provision prohi,its, not *erel- a,sence of the prescri,ed license, ,ut it also ,ars a foreign
corporation 3doing ,usiness3 in the %hilippines without such license access to our courts.
8
A foreign corporation without
such license is not ips! +act! incapacitated fro* ,ringing an action. A license is necessar- onl- if it is 3transacting !r
d!ing *%siness in the countr-.
6owever, there is no definitive rule on what constitutes 3doing,3 3engaging in,3 or 3transacting3 ,usiness. The Corporation
Code itself does not define such ter*s. To fill the gap, the evolution of its statutor- definition has produced a rather all"
enco*passing concept in $epu,lic Act No. (!)
1
in this wiseF
Sec. +. De+initi!ns. H As used in this ActF
??? ??? ???
1d2 the phrase 3doing ,usiness3 shall include soliciting orders, service contracts, opening offices, whether
called 3liaison3 offices or ,ranches@ appointing representatives or distri,utors do*iciled in the %hilippines
or who in an- calendar -ear sta- in the countr- for a period or periods totalling one hundred eight1-2
11A!2 da-s or *ore@ participating in the *anage*ent, supervision or control of an- do*estic ,usiness,
fir*, entit- or corporation in the %hilippines@ and any !ther act !r acts that i(ply a c!ntin%ity !+
c!((ercial dealings !r arrange(ents, and c!nte(plate t! that e8tent the per+!r(ance !+ acts !r
w!r2s,!r the e8ercise !+ s!(e !+ the +%ncti!ns n!r(ally incident t!, and in pr!gressive pr!sec%ti!n !+,
c!((ercial gain !r !+ the p%rp!se and !*,ect !+ the *%siness !rgani&ati!nF Pr!vided, h!wever, That the
phrase 3doing ,usiness3 shall not ,e dee*ed to include *ere invest*ent as a shareholder ,- a foreign
entit- in do*estic corporations dul- registered to do ,usiness, andLor the e?ercise of rights as such
investor@ nor having a no*inee director or officer to represent its interests in such corporation@ nor
appointing a representative or distri,utor do*iciled in the %hilippines which transacts ,usiness in its own
na*e and for its own account. 1e*phasis supplied2
In the dura,le case of The Menth!lat%( !. vs. Mangali(an, this Court discoursed on the test to deter*ine whether a
foreign co*pan- is 3doing ,usiness3 in the %hilippines, thusF
10
. . . The true test, however, see*s to ,e whether the foreign corporation is continuing the ,od- or
su,stance of the ,usiness or enterprise for which it was organi:ed or whether it has su,stantiall- retired
fro* it and turned it over to another. 1Traction Cos. v. Collectors of Int. $evenue IC.C.A., OhioJ, + B.
33 | P a g e
0A), 0A(.J The ter* i*plies a continuit- of co**ercial dealings and arrange*ents, and conte*plates, to
that e?tent, the perfor*ance of acts or wor=s or the e?ercise of so*e of the functions nor*all- incident
to, and in progressive prosecution of, the purpose and o,;ect of its organi:ation.J 1sic2 1#riffin v.
I*ple*ent DealerMs 7ut. Bire Ins. Co., )1 N.E. (', ((@ %auline Oil N #as Co. v. 7utual Tan= .ine Co.,
)& %. A'1, A', 11A O=l. 111@ Auto*otive 7aterial Co. v. A*erican Standard 7etal %roducts Corp., 1'A
N.E. &0A, (!+, +( III. +&(.2
The accepted rule in ;urisprudence is that each case *ust ,e ;udged in the light of its own environ*ental
circu*stances.
11
It should ,e =ept in *ind that the purpose of the law is to su,;ect the foreign corporation doing ,usiness
in the %hilippines to the ;urisdiction of our courts. It is not to prevent the foreign corporation fro* perfor*ing single or
isolated acts, ,ut to ,ar it fro* acDuiring a do*icile for the purpose of ,usiness without first ta=ing the steps necessar- to
render it a*ena,le to suits in the local courts.
The trial court held that petitioner"corporation was doing ,usiness without a license, finding thatF
12
The invoices and deliver- receipts covering the period of 1sic2 fro* 9anuar- 1(, 10A0 to August 1&, 10A0
cannot ,e treated to a *ean singular and isolated ,usiness transaction that is te*porar- in character.
#ranting that there is no distri,utorship agree*ent ,etween herein parties, -et ,- the *ere fact that
plaintiff, each ti*e that the defendant posts an order delivers the ite*s as evidenced ,- the several
invoices and receipts of various dates onl- indicates that plaintiff has the intention and desire to repeat the
1sic2 said transaction in the future in pursuit of its ordinar- ,usiness. Burther*ore, 3and if the corporation
is doing that for which it was created, the a*ount or volu*e of the ,usiness done is i**aterial and a
single act of that character *a- constitute doing ,usiness3. 1See p. &!+, Corp. Code, De .eon H 10A&
Ed.2.
$espondent Court affir*ed this finding in its assailed Decision with this e?planationF
15
. . . Considering the factual ,ac=ground as laid out a,ove, the transaction cannot ,e considered as an
isolated one. Note that there were 1( orders and deliveries 1onl- si?teen per our count2 over a four"*onth
period. The appellee 1private respondent2 *ade separate orders at various dates. The transactions did not
consist of separate deliveries for one single order. In the case at ,ar, the transactions entered into ,- the
appellant with the appellee are a series of co**ercial dealings which would signif- an intent on the part
of the appellant 1petitioner2 to do ,usiness in the %hilippines and could not ,- an- stretch of the
i*agination ,e considered an isolated one, thus would fall under the categor- ofMdoing ,usiness.
Even if Ee were to view, as contended ,- the appellant, that the transactions which occurred ,etween
9anuar- to August 10A0, constitute a single act or isolated ,usiness transaction, this ,eing the ordinar-
,usiness of appellant corporation, it can ,e said to ,e illegall- doing or transacting ,usiness without a
license. . . . 6ere it can ,e clearl- gleaned fro* the four"*onth period of transactions ,etween appellant
and appellee that it was a continuing ,usiness relationship, which would, without dou,t, constitute doing
,usiness without a license. Bor all intents and purposes, appellant corporation is doing or transacting
,usiness in the %hilippines without a license and that, therefore in accordance with the specific *andate
of section 1)) of the Corporation Code, it has no capacit- to sue. 1e*phasis ours2
Ee find no reason to disagree with ,oth lower courts. 7ore than the sheer nu*,er of transactions entered into, a clear and
un*ista=a,le intention on the part of petitioner to continue the ,od- of its ,usiness in the %hilippines is *ore than
apparent. As alleged in its co*plaint, it is engaged in the *anufacture and sale of ele*ents used in sealing pu*ps, valves,
and pipes for industrial purposes, valves and control eDuip*ent used for industrial fluid control and %<C pipes and
fittings for industrial use. Thus, the sale ,- petitioner of the ite*s covered ,- the receipts, which are part and parcel of its
*ain product line, was actuall- carried out in the progressive prosecution of co**ercial gain and the pursuit of the
purpose and o,;ect of its ,usiness, pure and si*ple. Burther, its grant and e?tension of 0!"da- credit ter*s to private
respondent for ever- purchase *ade, unargua,l- shows an intention to continue transacting with private respondent, since
in the usual course of co**ercial transactions, credit is e?tended onl- to custo*ers in good standing or to those on who*
there is an intention to *aintain long"ter* relationship. This ,eing so, the e?istence of a distri,utorship agree*ent
,etween the parties, as alleged ,ut not proven ,- private respondent, would, if dul- esta,lished ,- co*petent evidence, ,e
34 | P a g e
*erel- corro,orative, and failure to sufficientl- prove said allegation will not significantl- affect the finding of the courts
,elow. Nor our own ruling. It is precisel- upon the set of facts a,ove detailed that we concur with respondent Court that
petitioner corporation was doing ,usiness in the countr-.
EDuall- i*portant is the a,sence of an- fact or circu*stance which *ight tend even re*otel- to negate such intention to
continue the progressive prosecution of petitionerMs ,usiness activities in this countr-. 6ad private respondent not turned
out to ,e a ,ad ris=, in all li=elihood petitioner would have indefinitel- continued its co**ercial transactions with hi*,
and not surprisingl-, in ever increasing volu*es.
Thus, we hold that the series of transactions in Duestion could not have ,een isolated or casual transactions. Ehat is
deter*inative of 3doing ,usiness3 is not reall- the nu*,er or the Duantit- of the transactions, ,ut *ore i*portantl-, the
intention of an entit- to continue the ,od- of its ,usiness in the countr-. The nu*,er and Duantit- are *erel- evidence of
such intention. The phrase 3isolated transaction3 has a definite and fi?ed *eaning, i.e. a transaction or series of
transactions set apart fro* the co**on ,usiness of a foreign enterprise in the sense that there is no intention to engage in
a progressive pursuit of the purpose and o,;ect of the ,usiness organi:ation. Ehether a foreign corporation is 3doing
,usiness3 does not necessaril- depend upon the freDuenc- of its transactions, ,ut *ore upon the nature and character of
the transactions.
14
#iven the facts of this case, we cannot see how petitionerMs ,usiness dealings will fit the categor- of 3isolated
transactions3 considering that its intention to continue and pursue the corpus of its ,usiness in the countr- had ,een
clearl- esta,lished. It has not presented an- convincing argu*ent with eDuall- convincing evidence for us to rule
otherwise.
Incapacitated t! Maintain S%it
Accordingl- and inelucta,l-, petitioner *ust ,e held to ,e incapacitated to *aintain the action a 3%! against private
respondent.
It was never the intent of the legislature to ,ar court access to a foreign corporation or entit- which happens to o,tain an
isolated order for ,usiness in the %hilippines. Neither, did it intend to shield de,tors fro* their legiti*ate lia,ilities or
o,ligations.
15
/ut it cannot allow foreign corporations or entities which conduct regular ,usiness an- access to courts
without the fulfill*ent ,- such corporations of the necessar- reDuisites to ,e su,;ected to our govern*entMs regulation and
authorit-. /- securing a license, the foreign entit- would ,e giving assurance that it will a,ide ,- the decisions of our
courts, even if adverse to it.
Other $e(edy Still Availa*le
/- this ;udg*ent, we are not foreclosing petitionerMs right to collect pa-*ent. $es ,%dicata does not set in a case dis*issed
for lac= of capacit- to sue, ,ecause there has ,een no deter*ination on the *erits.
16
7oreover, this Court has ruled that
su,seDuent acDuisition of the license will cure the lac= of capacit- at the ti*e of the e?ecution of the contract.
1@
The reDuire*ent of a license is not *eant to put foreign corporations at a disadvantage. $ather, the doctrine of lac= of
capacit- to sue is ,ased on considerations of sound pu,lic polic-.
18
Thus, it has ,een ruled in 7!(e Ins%rance thatF
11
. . . The pri*ar- purpose of our statute is to co*pel a foreign corporation desiring to do ,usiness within
the state to su,*it itself to the ;urisdiction of the courts of this state. The statute was not intended to
e?clude foreign corporations fro* the state. . . . The ,etter reason, the wiser and fairer polic-, and the
greater weight lie with those decisions which hold that where, as here, there is a prohi,ition with a
penalt-, with no e?press or i*plied declarations respecting the validit- of enforcea,ilit- of contracts *ade
,- Dualified foreign corporations, the contracts . . . are enforcea,le . . . upon co*pliance with the law.
1%eter N, /urghard Stone Co. v. Carper, 1( N.E. +10 I10+!J.2
Ehile we agree with petitioner that the count- needs to develop trade relations and foster friendl- co**ercial relations
with other states, we also need to enforce our laws that regulate the conduct of foreigners who desire to do ,usiness here.
Such strangers *ust follow our laws and *ust su,;ect the*selves to reasona,le regulation ,- our govern*ent.
35 | P a g e
E6E$EBO$E, pre*ises considered, the instant petition is here,- DENIED and the assailed Decision is ABBI$7ED.
SO O$DE$ED.
Case # @
G.R. No. @185@ &2l6 26, 1188
CH(NG %A 7IO, .ELLINGTON CH(NG, CH(NG SIONG E%, 0ICTORIANO CH(NG, a*+ 'AN(EL
CH(NG TONG OH, petitioners,
vs.
INTER'E#IATE AELLATE CO(RT !2*+ Spe:ial Cases #iCisio*", SEC(RITIES a*+ E8CHANGE
CO''ISSION EN 7ANC, HON. ANTONIO R. 'ANA7AT, HON. &A'ES %. A7(GAN, HON. ANTERO /.L.
0ILLA/LOR, &R., HON. SI8TO T.&. #E G()'AN, &R., AL/RE#O CHING, CHING TAN, CHIONG TIONG
TA$, CH(NG %IAT H(A, CHENG L( %(N, E'ILIO TADE#O, RO7ERTO G. CENON a*+ HILIINE
7LOO'ING 'ILLS CO'AN$, INC., respondents.
CR(), J.:
The %hilippine /loo*ing 7ills Co*pan-, Inc. was incorporated on 9anuar- 10, 10', for a ter* of ' -ears which
e?pired on 9anuar- 10,10((.
1
On 7a- 1), 10((, the *e*,ers of its ,oard of directors e?ecuted a deed of assign*ent of
all of the accounts receiva,les, properties, o,ligations and lia,ilities of the old %/7 in favor of Chung Siong %e= in his
capacit- as treasurer of the new %/7, then in the process of reincorporation.
2
On 9une 1), 10((, the new %7/ was
issued a certificate of incorporation ,- the Securities and E?change Co**ission.
5
On 7a- ', 10A1, Chung 5a /io and the other petitioners herein, all stoc=holders of the old %/7, filed with the SEC a
petition for liDuidation 1,ut not for dissolution2 of ,oth the old %/7 and the new %/7. The allegation was that the for*er
had ,eco*e legall- non"e?istent for failure to e?tend its corporate life and that the latter had li=ewise ,eenips!
+act! dissolved for non"use of the charter and continuous failure to operate within -ears fro* incorporation.
4
Dis*issed for lac= of a cause of action, the case, doc=eted as AC No. !'', was reinstated on appeal to the SECen
*anc and re*anded to a new panel of hearing officers for further proceedings, including the proper accounting of the
assets and lia,ilities of the old %/7. This order was appealed to the Inter*ediate Appellate Court in a petition for partial
review, doc=eted as AC #$ S% No. !!A)+, Duestioning the authorit- of the SEC in Case No. !'' to ad;udicate a *atter
not properl- raised on appeal or resolved in the order appealed fro*.
5
In a related develop*ent, Alfredo Ching, one of the *e*,ers of the ,oard of directors of the old %/7 who e?ecuted the
deed of assign*ent, filed with the Inter*ediate Appellate Court a separate petition for certiorari, doc=eted as AC #$ No.
!1!00, in which he Duestioned the sa*e order and the decision of the SEC in AC Case No. !''. 6e alleged that the SEC
had gravel- erred in not dis*issing the petition for liDuidation since the action a*ounted to a 3%! warrant! proceeding
which onl- the state could institute through the Solicitor #eneral.
6
Earlier, on April 1, 10A, the new %/7 and Alfredo Ching had filed with the SEC a petition for suspension of pa-*ent,
which was opposed ,- Chung 5a /io, et al., on the ground that the SEC had no ;urisdiction over a petition for suspension
of pa-*ents initiated ,- a *ere individual. The opposition was re;ected and the case was set for hearing. Chung 5a /io
elevated the *atter to the SEC en *anc on certi!rari with preli*inar- in;unction and receivership, doc=eted as SEC E/
No. !1A, pra-ing for the annul*ent and setting aside of the proceedings. On 7a- 1!, 10A+, the case was re*anded to the
hearing officers for further proceedings.
@
Chung 5a /io ca*e to this Court ,ut we referred his case to the Inter*ediate Appellate Court where it was doc=eted as
#$ S% No. !1!!(. The three cases, vi&., PBM !., Inc. v. SE, A '$ SP <<=>?@ h%ng Aa Bi!, et al. v. SE, AC #$ S%
No. !1!!(@ and Al+red! hing, et al. v. SE, AC #$ S% No. !1!00 were then consolidated in the respondent court which,
on Be,ruar- A, 10A', issued the decision now challenged on certi!rari ,- the petitioners in the case at ,ar. The decision
affir*ed the orders issued ,- the SEC in the said cases e?cept the reDuire*ent for the accounting of the assets of the old
%/7, which was set aside.
8
36 | P a g e
The petitioners now contend as followsF
1. The ,oard of directors of an alread- dissolved corporation does not have the inherent power, without the e?press
consent of the stoc=holders, to conve- all its assets to a new corporation.
. The new corporation is accounta,le for the said assets to the stoc=holders of the dissolved corporation who had not
consented to the conve-ance of the sa*e to the new corporation.
+. The new corporation has not su,stantiall- co*plied with the two"-ear reDuire*ent of Section of the new
Corporation Code on non"user ,ecause its stoc=holders never adopted a set of ,-"laws.
). A 3%! warrant! proceeding is no longer necessar- to dissolve a corporation which is alread- 3dee*ed dissolved3 under
Section of the new Corporation Code.
'. The Securities and E?change Co**ission has no ;urisdiction over a petition for suspension of pa-*ents filed ,- an
individual onl-.
1
On the first contention, the petitioners insist that the- have never given their consent to the creation of the new corporation
nor have the- indicated their agree*ent to transfer their respective stoc=s in the old %/7 to the new %/7. The creation of
the new corporation with the transfer thereto of the assets of the old corporation was not within the powers of the ,oard of
directors of the latter as it was authori:ed onl- to wind up the affairs of such co*pan- and not in an- case to continue its
,usiness. 7oreover, no stoc=holdersM *eeting had ,een convened to discuss the deed of assign*ent and the L+ vote
reDuired ,- the Corporation .aw to authori:e such conve-ance had not ,een o,tained.
10
The pertinent provisions of the Corporation .aw, which was the law then in force, are the followingF
SEC. ((. Ever- corporation whose charter e?pired ,- its own li*itation or is annulled ,- forfeiture or
otherwise, or whose corporate e?istence for other purposes is ter*inated in an- other *anner, shall
nevertheless ,e continued as a ,od- corporate for three -ears after the ti*e when it would have ,een
dissolved, for the purpose of prosecuting and defending suits ,- or against it and of ena,ling it graduall-
to settle and close its affairs, to dispose of and conve- its propert- and to divide its capital stoc=, ,ut not
for the purpose of continuing the ,usiness for which it was esta,lished.3
SEC. A"1L. A corporation *a-, ,- action ta=en at an- *eeting of its ,oard of directors, sell, lease,
e?change, or otherwise dispose of all or su,stantiall- all of its propert- and assets, including its goodwill,
upon such ter*s and conditions and for such considerations, which *a- ,e *one-, stoc=s ,onds, or other
instru*ents for the pa-*ent of *one- or other propert- or other considerations, as its ,oard of directors
dee* e?pedient, when and as authori:ed ,- the affir*ative vote of shareholders holding shares in the
corporation entitling the* to e?ercise at least two"thirds of the voting power on such a proposal at a
shareholdersM *eeting called for that purpose. Notice of such *eeting shall ,e given to all of the
shareholders of record of the corporation whether or not the- shall ,e entitled to vote thereatF %rovided,
however, That an- stoc=holder who did not vote to authori:e the action of the ,oard of directors, *a-,
within fort- da-s after the date upon which such action was authori:ed, o,;ect thereto in writing and
de*and pa-*ent for his shares. If, after such a de*and ,- a stoc=holder, the corporation and the
stoc=holder can not agree upon the value of his share or shares at the ti*e such corporate action was
authori:ed, such value shall ,e ascertained ,- three disinterested persons, one of who* shall ,e na*ed ,-
the stoc=holder, another ,- the corporation, and the third ,- the two thus chosen. The finding of the
appraisers shall ,e final and if their award is not paid ,- the corporation within thirt- da-s after it is
*ade, it *a- ,e recovered in an action ,- the stoc=holder against the corporation. >pon pa-*ent ,- the
corporation to the stoc=holder of the agreed or awarded price of his shares, the stoc=holder shall forthwith
transfer and assign the share or shares held ,- hi* as directed ,- the corporation.
>nless and until such sale, lease, or e?change shall ,e a,andoned, the stoc=holder *a=ing such de*and
in writing ceases to ,e a stoc=holder and shall have no rights with respect to such shares e?cept the right
to receive pa-*ent therefor as aforesaid.
37 | P a g e
A stoc=holder shall not ,e entitled to pa-*ent for his shares under the provisions of this section unless the
value of the corporate assets which would re*ain after such pa-*ent would ,e at least eDual to the
aggregate a*ount of its de,ts and lia,ilities e?clusive of capital stoc=.
Nothing in this section is intended to restrict the power of an- corporation, without the authori:ation
thereof ,- the shareholders, to sell, lease, e?change, or otherwise dispose of, an- of its propert- if there,-
the corporate ,usiness ,e not su,stantiall- li*ited, or if the proceeds of such propert- ,e appropriated to
the conduct or develop*ent of its re*aining ,usiness.
These are now Sections 1 and )!, respectivel-, with *odifications, of the Corporation Code.
As the first contention is ,ased on the negative aver*ent that no stoc=holdersM *eeting was held and the L+ consent vote
was not o,tained, there is no need for affir*ative proof. Even so, there is the presu*ption of regularit- which *ust
operate in favor of the private respondents, who insist that the proper authori:ation as reDuired ,- the Corporation .aw
was dul- o,tained at a *eeting called for the purpose. 1That authori:ation was e*,odied in a unani*ous resolution dated
7arch 10, 10((, which was reproduced ver*ati( in the deed of assign*ent.2
11
Otherwise, the new %/7 would not have
,een issued a certificate of incorporation, which should also ,e presu*ed to have ,een done regularl-. It *ust also ,e
noted that under Section A"1L, 3an- stoc=holder who did not vote to authori:e the action of the ,oard of directors *a-,
within fort- da-s after the date upon which such action was authori:ed, o,;ect thereto in writing and de*and pa-*ent for
his shares.3 The record does not show, nor have the petitioners alleged or proven, that the- filed a written o,;ection and
de*anded pa-*ent of their shares during the regle*entar- fort-"da- period. This circu*stance should ,olster the private
respondentsM clai* that the authori:ation was unani*ous.
Ehile we agree that the ,oard of directors is not nor*all- per*itted to underta=e an- activit- outside of the usual
liDuidation of the ,usiness of the dissolved corporation, there is nothing to prevent the stoc=holders fro* conve-ing their
respective shareholdings toward the creation of a new corporation to continue the ,usiness of the old. Einding up is the
sole activit- of a dissolved corporation that does not intend to incorporate anew. If it does, however, it is not unlawful for
the old ,oard of directors to negotiate and transfer the assets of the dissolved corporation to the new corporation intended
to ,e created as long as the stoc=holders have given their consent. This was not prohi,ited ,- the Corporation Act. In fact,
it was e?pressl- allowed ,- Section A"1L.
Ehat the Court finds especiall- intriguing in this case is the fact that although the deed of assign*ent was e?ecuted in
10((, it was onl- in 10A1 that it occurred to the petitioners to Duestion its validit-. All of four -ears had elapsed ,efore the
petitioners filed their action for liDuidation of ,oth the old and the new corporations, and during this period, the new %/7
was in full operation, openl- and Duite visi,l- conducting the sa*e ,usiness underta=en earlier ,- the old dissolved %/7.
The petitioners and the private respondents are not strangers ,ut relatives and close ,usiness associates.
12
The %/7 office
is in the heart of 7etro 7anila.
15
The new corporation, li=e the old, e*plo-s as *an- as ,!!! persons, the sa*e
personnel who wor=ed for the old %/7.
14
Additionall-, one of the petitioners, Chung Siong %e= was one of the directors
who e?ecuted the deed of assign*ent in favor of the old %/7 and it was he also who received the deeded assets on ,ehalf
and as treasurer of the new %/7.
15
Surel-, these circu*stances *ust operate to ,ar the petitioners now fro* Duestioning
the deed of assign*ent after this long period of inaction in the protection of the rights the- are now ,elatedl- asserting.
.aches has operated against the*.
Ee have said in a nu*,er of cases that laches, in a general sense, *eans the failure or neglect, for an unreasona,le and
une?plained length of ti*e, to do that which, ,- e?ercising due diligence, could or should have ,een done earlier.
16
It is
negligence or o*ission to assert a right within a reasona,le ti*e, warranting a presu*ption that the part- entitled to assert
it either has a,andoned or declined to assert it.
1@
%u,lic polic- reDuires, for the peace of societ-, the discourage*ent of
clai*s grown stale for non"assertion.
18
>nli=e the statute of li*itations, laches does not involve *ere lapse or passage of
ti*e ,ut is principall- an i*pedi*ent to the assertion or enforce*ent of a right which has ,eco*e under the
circu*stances ineDuita,le or unfair to per*it.
11
The essential ele*ents of laches areF 112 conduct on the part of the defendant, or of one under who* he clai*s, giving rise
to the sitution co*plained of@ 12 dela- in asserting co*plainantMs right after he had =nowledge of the defendantMs conduct
and after he has an opportunit- to sue@ 1+2 lac= of =nowledge or notice on the part of the defendant that the co*plainant
38 | P a g e
would assert the right on which he ,ases his suit@ 1)2 in;ur- or pre;udice to the defendant in the event relief is accorded to
the co*plainant.
20
All the reDuisites are present in the case at ,ar. To ,egin with, what gave rise to the situation now co*plained of ,- the
petitioners was the adoption of the deed of assign*ent ,- the directors of the old %/7 allegedl- without the consent of its
stoc=holders and the acceptance of the deeded assets ,- the new %/7. Secondl-, there was dela- on the petitionersM part
since it too= the* nearl- four -ears, i.e., fro* 7a- 1), 10(( to 7a- ',10A1, ,efore the- *ade their *ove to assail the
transfer despite co*plete =nowledge of the transaction. It is also evident that the new %/7 could not have had the
slightest suspicion that the petitioners would assert the right on which the- now ,ase their suit, especiall- Chung Siong
%e=, who in fact acted not onl- as director of the old %/7 ,ut also as treasurer of the new %/7 in the transaction. Binall-,
the in;ur- or pre;udice in the event relief is granted is o,vious as all the transactions of the new %/7 will have to ,e
undone, including credits e?tended and co**it*ents *ade to third parties in good faith.
The second contention *ust also fall with the first, and for the sa*e reasons.
The third contention is li=ewise re;ected for, as alread- shown, it is undenia,le that the new %/7 has in fact ,een
operating all these -ears. The petitionersM argu*ent that Alfredo Ching was *erel- continuing the ,usiness of the old %/7
is self"defeating for the- the*selves argue that the old %/7 had alread- ,een dissolved. As for the contention that the
election of Eellington Chung and 9.$. /lanco as directors was su,;ect to the outco*e of the petition for liDuidation, this is
clearl- self"serving and co*pletel- without proof. 7oreover, failure to file the ,-"laws does not auto*aticall- operate to
dissolve a corporation ,ut is now considered onl- a ground for such dissolution.
Section 10 of the Corporation .aw, part of which is now Section of the Corporation Code, provided that the powers of
the corporation would cease if it did not for*all- organi:e and co**ence the transaction of its ,usiness or the
continuation of its wor=s within two -ears fro* date of its incorporation. Section !, which has ,een reproduced with
so*e *odifications in Section )& of the Corporation Code, e?pressl- declared that 3ever- corporation for*ed under this
Act, *ust within one *onth after the filing of the articles of incorporation with the Securities and E?change Co**ission,
adopt a code of ,-"laws.3 Ehether this provision should ,e given *andator- or onl- director- effect re*ained a
controversial Duestion until it ,eca*e acade*ic with the adoption of %D 0!"A. >nder this decree, it is now clear that the
failure to file ,-"laws within the reDuired period is onl- a ground for suspension or revocation of the certificate of
registration of corporations.
Non"filing of the ,-"laws will not result in auto*atic dissolution of the corporation. >nder Section &1i2 of %D 0!"A, the
SEC is e*powered to 3suspend or revo=ed, after proper notice and hearing, the franchise or certificate of registration of a
corporation3 on the ground inter alia of 3failure to file ,-"laws within the reDuired period.3 It is clear fro* this provision
that there *ust first of all ,e a hearing to deter*ine the e?istence of the ground, and secondl-, assu*ing such finding, the
penalt- is not necessaril- revocation ,ut *a- ,e onl- suspension of the charter. In fact, under the rules and regulations of
the SEC, failure to file the ,-"laws on ti*e *a- ,e penali:ed *erel- with the i*position of an ad*inistrative fine without
affecting the corporate e?istence of the erring fir*.
21
It should ,e stressed in this connection that su,stantial co*pliance with conditions su,seDuent will suffice to perfect
corporate personalit-. Organi:ation and co**ence*ent of transaction of corporate ,usiness are ,ut conditions su,seDuent
and not prereDuisites for acDuisition of corporate personalit-. The adoption and filing of ,-"laws is also a condition
su,seDuent. >nder Section 10 of the Corporation Code, a corporation co**ences its corporate e?istence and ;uridical
personalit- and is dee*ed incorporated fro* the date the Securities and E?change Co**ission issues certificate of
incorporation under its official seal. This *a- ,e done even ,efore the filing of the ,-"laws, which under Section )& of the
Corporation Code, *ust ,e adopted 3within one *onth after receipt of official notice of the issuance of its certificate of
incorporation.3
Distinguishing creation fro* defects in organi:ation, Bletcher has the following to sa-F
Ordinaril-, want of, or defects in, the organi:ation of a corporation, as distinguished fro* its creation, do
not preclude the e?istence of a de +act! corporation@ and reDuire*ents in special charters or general
incorporation laws relating to organi:ation are often construed to ,e *erel- director-, or to conditions
su,seDuent rather than conditions precedent, so that co*pliance therewith is not necessar- to create even
39 | P a g e
a de,%re corporation. It has ,een held that there *a- ,e a de +act!corporation notwithstanding a failure to
give the notice reDuired ,- the statute of the *eeting for the of or organi:ation@ or though there would
failure to fi? and li*it the a*ount of the capital stoc= of the co*pan- at the first *eeting@ or a failure to
issue stoc=@ or that there were infor*alities in the proceedings of such *eeting, or that no certificate of
organi:ation was e?ecuted or filed. And the sa*e has ,een held to ,e true though no ,oard of directors
has ,een elected, and though there were irregularities with respect to the nu*,er, ter*, place of residence
and of *eeting of the ,oard of directors, or so*e of the persons chosen as directors are not Dualified, even
though the ta=ing of these various steps is necessar- to the proper use of the franchise. ....
In an- case, the deficienc- clai*ed ,- the petitioners was corrected when the new %/7 adopted and filed its ,-"laws on
Septe*,er &, 10A1,
22
thus rendering the third issue also *oot and acade*ic.
It is needless as well to dwell on the fourth contention, in view of the findings that the new %/7 has not ,een ips!
+act! dissolved.
On the fifth and final issue, the respondent court ;ustifies assu*ption ,- the SEC of ;urisdiction over the petition for
suspension of pa-*ent filed ,- the individual on the general principle against *ultiplicit- of suits.
>nder Section '1d2, %D 0!"A, as a*ended ,- %D 1('A, however, it is clearl- provided that such ;urisdiction *a- ,e
e?ercised onl- inF
d2 %etitions of corporations, partnerships or associations to ,e declared in the state of suspension of
pa-*ents in cases where the corporation, partnership or association possess sufficient propert- to cover
all its de,ts ,ut foresees the i*possi,ilit- of *eeting the* when the- respectivel- fall due or in cases
where the corporation, partnership or association has no sufficient assets to cover its lia,ilities ,ut is
under the *anage*ent of a $eha,ilitation $eceiver or 7anage*ent Co**ittee created pursuant to this
Decree.
This section clearl- does not allow a *ere individual to file the petition which is li*ited to 3corporations, partnerships or
associations.3 Ad*inistrative agencies li=e the SEC are tri,unals of li*ited ;urisdiction and, as such, can e?ercise onl-
those powers which are specificall- granted to the* ,- their ena,ling statutes.
25
ConseDuentl-, where no authorit- is
granted to hear petitions of individ%als for suspension of pa-*ents, such petitions are ,e-ond the co*petence of the SEC.
The analog- offered ,- the respondent court is clearl- inappropriate for while it is true that the Sandigan,a-an *a-
assu*e ;urisdiction over private individuals, it is ,ecause its charter e?pressl- allows this in specified cases. No si*ilar
per*ission is found in %D 0!"A.
The circu*stance that Ching is a co"signer in the corporationMs pro*issor- notes, collateral or guarantee or securit-
agree*ents, does not *a=e hi* a proper part-. 9urisdiction over the su,;ect *atter *ust e?ist as a *atter of law and
cannot ,e fi?ed ,- agree*ent of the parties, acDuired through, or waived, enlarged or di*inished ,-, an- act or o*ission@
neither can it ,e conferred ,- acDuiescence of the tri,unal. 6ence, Alfredo Ching, as a *ere individual, cannot ,e allowed
as a co"petitioner in SEC Case No. '!.
E6E$EBO$E, the appealed decision is ABBI$7ED as a,ove *odified, with costs against the petitioners.
SO O$DE$ED.
Case # 8
G.R. No. 152512 'a6 26, 2005
E8ERTRA0EL E TO(RS, INC., petitioner,
vs.
CO(RT O/ AEALS a*+ %OREAN AIRLINES, respondent.
40 | P a g e
D E C I S I O N
CALLE&O, SR., J.-
/efore us is a petition for review on certi!rari of the Decision
1
of the Court of Appeals 1CA2 in CA"#.$. S% No. &1!!!
dis*issing the petition for certi!rari and (anda(%s filed ,- E?pertravel and Tours, Inc. 1ETI2.
T;e A*4e:e+e*4s
5orean Airlines 15A.2 is a corporation esta,lished and registered in the $epu,lic of South 5orea and licensed to do
,usiness in the %hilippines. Its general *anager in the %hilippines is Su= 5-oo 5i*, while its appointed counsel was Att-.
7ario Aguinaldo and his law fir*.
On Septe*,er &, 1000, 5A., through Att-. Aguinaldo, filed a Co*plaint

against ETI with the $egional Trial Court

1$TC2 of 7anila, for the collection of the principal a*ount of %&!,1'!.!!, plus attorne-8s fees and e?e*plar- da*ages.
The verification and certification against foru* shopping was signed ,- Att-. Aguinaldo, who indicated therein that he
was the resident agent and legal counsel of 5A. and had caused the preparation of the co*plaint.
ETI filed a *otion to dis*iss the co*plaint on the ground that Att-. Aguinaldo was not authori:ed to e?ecute the
verification and certificate of non"foru* shopping as reDuired ,- Section ', $ule ( of the $ules of Court. 5A. opposed
the *otion, contending that Att-. Aguinaldo was its resident agent and was registered as such with the Securities and
E?change Co**ission 1SEC2 as reDuired ,- the Corporation Code of the %hilippines. It was further alleged that Att-.
Aguinaldo was also the corporate secretar- of 5A.. Appended to the said opposition was the identification card of Att-.
Aguinaldo, showing that he was the law-er of 5A..
During the hearing of 9anuar- A, !!!, Att-. Aguinaldo clai*ed that he had ,een authori:ed to file the co*plaint through
a resolution of the 5A. /oard of Directors approved during a special *eeting held on 9une ', 1000. >pon his *otion,
5A. was given a period of 1! da-s within which to su,*it a cop- of the said resolution. The trial court granted the
*otion. Att-. Aguinaldo su,seDuentl- filed other si*ilar *otions, which the trial court granted.
Binall-, 5A. su,*itted on 7arch &, !!! an Affidavit
+
of even date, e?ecuted ,- its general *anager Su= 5-oo 5i*,
alleging that the ,oard of directors conducted a special teleconference on 9une ', 1000, which he and Att-. Aguinaldo
attended. It was also averred that in that sa*e teleconference, the ,oard of directors approved a resolution authori:ing
Att-. Aguinaldo to e?ecute the certificate of non"foru* shopping and to file the co*plaint. Su= 5-oo 5i* also alleged,
however, that the corporation had no written cop- of the aforesaid resolution.
On April 1, !!!, the trial court issued an Order
)
den-ing the *otion to dis*iss, giving credence to the clai*s of Att-.
Aguinaldo and Su= 5-oo 5i* that the 5A. /oard of Directors indeed conducted a teleconference on 9une ', 1000,
during which it approved a resolution as Duoted in the su,*itted affidavit.
ETI filed a *otion for the reconsideration of the Order, contending that it was inappropriate for the court to ta=e ;udicial
notice of the said teleconference without an- prior hearing. The trial court denied the *otion in its Order
'
dated August A,
!!!.
ETI then filed a petition for certi!rari and (anda(%s, assailing the orders of the $TC. In its co**ent on the petition,
5A. appended a certificate signed ,- Att-. Aguinaldo dated 9anuar- 1!, !!!, worded as followsF
SEC$ETA$G8SL$ESIDENT A#ENT8S CE$TIBICATE
5NOE A.. 7EN /G T6ESE %$ESENTSF
I, 7ario A. Aguinaldo, of legal age, Bilipino, and dul- elected and appointed Corporate Secretar- and $esident
Agent of 5O$EAN AI$.INES, a foreign corporation dul- organi:ed and e?isting under and ,- virtue of the laws
of the $epu,lic of 5orea and also dul- registered and authori:ed to do ,usiness in the %hilippines, with office
41 | P a g e
address at #round Bloor, .%. %la:a /uilding, 1) Alfaro St., Salcedo <illage, 7a=ati Cit-, 6E$E/G CE$TIBG
that during a special *eeting of the /oard of Directors of the Corporation held on 9une ', 1000 at which a
Duoru* was present, the said /oard unani*ousl- passed, voted upon and approved the following resolution
which is now in full force and effect, to witF
$ESO.<ED, that 7ario A. Aguinaldo and his law fir* 7.A. Aguinaldo N Associates or an- of its
law-ers are here,- appointed and authori:ed to ta=e with whatever legal action necessar- to effect the
collection of the unpaid account of E?pert Travel N Tours. The- are here,- specificall- authori:ed to
prosecute, litigate, defend, sign and e?ecute an- docu*ent or paper necessar- to the filing and
prosecution of said clai* in Court, attend the %re"Trial %roceedings and enter into a co*pro*ise
agree*ent relative to the a,ove"*entioned clai*.
IN EITNESS E6E$EOB, I have hereunto affi?ed *- signature this 1!
th
da- of 9anuar-, 1000, in the Cit- of
7anila, %hilippines.
1Sgd.2
7A$IO A. A#>INA.DO
$esident Agent
S>/SC$I/ED AND SEO$N to ,efore *e this 1!
th
da- of 9anuar-, 1000, Att-. 7ario A. Aguinaldo e?hi,iting to
*e his Co**unit- Ta? Certificate No. 1)01)')', issued on 9anuar- (, !!! at 7anila, %hilippines.
Doc. No. 110@
%age No. '@
/oo= No. SSI<
Series of !!!.
1Sgd.2
ATTG. 6EN$G D. ADASA
Notar- %u,lic
>ntil Dece*,er +1, !!!
%T$ TAA0'A+L7.A 1L+L!!!
&
On Dece*,er 1A, !!1, the CA rendered ;udg*ent dis*issing the petition, ruling that the verification and certificate of
non"foru* shopping e?ecuted ,- Att-. Aguinaldo was sufficient co*pliance with the $ules of Court. According to the
appellate court, Att-. Aguinaldo had ,een dul- authori:ed ,- the ,oard resolution approved on 9une ', 1000, and was the
resident agent of 5A.. As such, the $TC could not ,e faulted for ta=ing ;udicial notice of the said teleconference of the
5A. /oard of Directors.
ETI filed a *otion for reconsideration of the said decision, which the CA denied. Thus, ETI, now the petitioner, co*es to
the Court ,- wa- of petition for review on certi!rari and raises the following issueF
DID %>/.IC $ES%ONDENT CO>$T OB A%%EA.S DE%A$T B$O7 T6E ACCE%TED AND >S>A.
CO>$SE OB 9>DICIA. %$OCEEDIN#S E6EN IT $ENDE$ED ITS C>ESTIONED DECISION AND
E6EN IT ISS>ED ITS C>ESTIONED $ESO.>TION, ANNESES A AND / OB T6E INSTANT %ETITIONR
(
The petitioner asserts that co*pliance with Section ', $ule (, of the $ules of Court can ,e deter*ined onl- fro* the
contents of the co*plaint and not ,- docu*ents or pleadings outside thereof. 6ence, the trial court co**itted grave a,use
of discretion a*ounting to e?cess of ;urisdiction, and the CA erred in considering the affidavit of the respondent8s general
*anager, as well as the Secretar-8sL$esident Agent8s Certification and the resolution of the ,oard of directors contained
therein, as proof of co*pliance with the reDuire*ents of Section ', $ule ( of the $ules of Court. The petitioner also
*aintains that the $TC cannot ta=e ;udicial notice of the said teleconferencewithout prior hearing, nor an- *otion
therefor. The petitioner reiterates its su,*ission that the teleconference and the resolution adverted to ,- the respondent
was a *ere fa,rication.
The respondent, for its part, avers that the issue of whether *odern technolog- is used in the field of ,usiness is a factual
issue@ hence, cannot ,e raised in a petition for review on certi!rari under $ule )' of the $ules of Court. On the *erits of
the petition, it insists that Att-. Aguinaldo, as the resident agent and corporate secretar-, is authori:ed to sign and e?ecute
42 | P a g e
the certificate of non"foru* shopping reDuired ,- Section ', $ule ( of the $ules of Court, on top of the ,oard resolution
approved during the teleconference of 9une ', 1000. The respondent insists that 3technological advances in this ti*e and
age are as co**onplace as da-,rea=.3 6ence, the courts *a- ta=e ;udicial notice that the %hilippine .ong Distance
Telephone Co*pan-, Inc. had provided a record of corporate conferences and *eetings through Bi,erNet using fi,er"optic
trans*ission technolog-, and that such technolog- facilitates voice and i*age trans*ission with ease@ this *a=es constant
co**unication ,etween a foreign",ased office and its %hilippine",ased ,ranches faster and easier, allowing for cost"
cutting in ter*s of travel concerns. It points out that even the E"Co**erce .aw has recogni:ed this *odern technolog-.
The respondent posits that the courts are aware of this develop*ent in technolog-@ hence, *a- ta=e ;udicial notice thereof
without need of hearings. Even if such hearing is reDuired, the reDuire*ent is nevertheless satisfied if a part- is allowed to
file pleadings ,- wa- of co**ent or opposition thereto.
In its repl-, the petitioner pointed out that there are no rulings on the *atter of teleconferencing as a *eans of conducting
*eetings of ,oard of directors for purposes of passing a resolution@ until and after teleconferencing is recogni:ed as a
legiti*ate *eans of gathering a Duoru* of ,oard of directors, such cannot ,e ta=en ;udicial notice of ,- the court. It
asserts that safeguards *ust first ,e set up to prevent an- *ischief on the pu,lic or to protect the general pu,lic fro* an-
possi,le fraud. It further proposes possi,le a*end*ents to the Corporation Code to give recognition to such *anner of
,oard *eetings to transact ,usiness for the corporation, or other related corporate *atters@ until then, the petitioner asserts,
teleconferencing cannot ,e the su,;ect of ;udicial notice.
The petitioner further avers that the supposed holding of a special *eeting on 9une ', 1000 through teleconferencing
where Att-. Aguinaldo was supposedl- given such an authorit- is a farce, considering that there was no *ention of where
it was held, whether in this countr- or elsewhere. It insists that the Corporation Code reDuires ,oard resolutions of
corporations to ,e su,*itted to the SEC. Even assu*ing that there was such a teleconference, it would ,e against the
provisions of the Corporation Code not to have an- record thereof.
The petitioner insists that the teleconference and resolution adverted to ,- the respondent in its pleadings were *ere
fa,rications foisted ,- the respondent and its counsel on the $TC, the CA and this Court.
The petition is *eritorious.
Section ', $ule ( of the $ules of Court providesF
SEC. '. erti+icati!n against +!r%( sh!pping.B The plaintiff or principal part- shall certif- under oath in the
co*plaint or other initiator- pleading asserting a clai* for relief, or in a sworn certification anne?ed thereto and
si*ultaneousl- filed therewithF 1a2 that he has not theretofore co**enced an- action or filed an- clai* involving
the sa*e issues in an- court, tri,unal or Duasi";udicial agenc- and, to the ,est of his =nowledge, no such other
action or clai* is pending therein@ 1,2 if there is such other pending action or clai*, a co*plete state*ent of the
present status thereof@ and 1c2 if he should thereafter learn that the sa*e or si*ilar action or clai* has ,een filed
or is pending, he shall report that fact within five 1'2 da-s therefro* to the court wherein his aforesaid co*plaint
or initiator- pleading has ,een filed.
Bailure to co*pl- with the foregoing reDuire*ents shall not ,e cura,le ,- *ere a*end*ent of the co*plaint or
other initiator- pleading ,ut shall ,e cause for the dis*issal of the case without pre;udice, unless otherwise
provided, upon *otion and after hearing. The su,*ission of a false certification or non"co*pliance with an- of
the underta=ings therein shall constitute indirect conte*pt of court, without pre;udice to the corresponding
ad*inistrative and cri*inal actions. If the acts of the part- or his counsel clearl- constitute willful and deli,erate
foru* shopping, the sa*e shall ,e ground for su**ar- dis*issal with pre;udice and shall constitute direct
conte*pt, as well as a cause for ad*inistrative sanctions.
It is settled that the reDuire*ent to file a certificate of non"foru* shopping is *andator-
A
and that the failure to co*pl-
with this reDuire*ent cannot ,e e?cused. The certification is a peculiar and personal responsi,ilit- of the part-, an
assurance given to the court or other tri,unal that there are no other pending cases involving ,asicall- the sa*e parties,
issues and causes of action. 6ence, the certification *ust ,e acco*plished ,- the part- hi*self ,ecause he has actual
=nowledge of whether or not he has initiated si*ilar actions or proceedings in different courts or tri,unals. Even his
43 | P a g e
counsel *a- ,e unaware of such facts.
0
6ence, the reDuisite certification e?ecuted ,- the plaintiff8s counsel will not
suffice.
1!
In a case where the plaintiff is a private corporation, the certification *a- ,e signed, for and on ,ehalf of the said
corporation, ,- a specificall- authori:ed person, including its retained counsel, who has personal =nowledge of the facts
reDuired to ,e esta,lished ,- the docu*ents. The reason was e?plained ,- the Court in Nati!nal Steel !rp!rati!n v.
!%rt !+ Appeals,
11
as followsF
>nli=e natural persons, corporations *a- perfor* ph-sical actions onl- through properl- delegated individuals@
na*el-, its officers andLor agents.
U
The corporation, such as the petitioner, has no powers e?cept those e?pressl- conferred on it ,- the Corporation
Code and those that are i*plied ,- or are incidental to its e?istence. In turn, a corporation e?ercises said powers
through its ,oard of directors andLor its dul-"authori:ed officers and agents. %h-sical acts, li=e the signing of
docu*ents, can ,e perfor*ed onl- ,- natural persons dul-"authori:ed for the purpose ,- corporate ,-"laws or ,-
specific act of the ,oard of directors. 3All acts within the powers of a corporation *a- ,e perfor*ed ,- agents of
its selection@ and e?cept so far as li*itations or restrictions which *a- ,e i*posed ,- special charter, ,-"law, or
statutor- provisions, the sa*e general principles of law which govern the relation of agenc- for a natural person
govern the officer or agent of a corporation, of whatever status or ran=, in respect to his power to act for the
corporation@ and agents once appointed, or *e*,ers acting in their stead, are su,;ect to the sa*e rules, lia,ilities
and incapacities as are agents of individuals and private persons.3
U
U Bor who else =nows of the circu*stances reDuired in the Certificate ,ut its own retained counsel. Its regular
officers, li=e its ,oard chair*an and president, *a- not even =now the details reDuired therein.
Indeed, the certificate of non"foru* shopping *a- ,e incorporated in the co*plaint or appended thereto as an integral part
of the co*plaint. The rule is that co*pliance with the rule after the filing of the co*plaint, or the dis*issal of a co*plaint
,ased on its non"co*pliance with the rule, is i*per*issi,le. 6owever, in e?ceptional circu*stances, the court *a- allow
su,seDuent co*pliance with the rule.
1
If the authorit- of a part-8s counsel to e?ecute a certificate of non"foru* shopping
is disputed ,- the adverse part-, the for*er is reDuired to show proof of such authorit- or representation.
In this case, the petitioner, as the defendant in the $TC, assailed the authorit- of Att-. Aguinaldo to e?ecute the reDuisite
verification and certificate of non"foru* shopping as the resident agent and counsel of the respondent. It was, thus,
incu*,ent upon the respondent, as the plaintiff, to allege and esta,lish that Att-. Aguinaldo had such authorit- to e?ecute
the reDuisite verification and certification for and in its ,ehalf. The respondent, however, failed to do so.
The verification and certificate of non"foru* shopping which was incorporated in the co*plaint and signed ,- Att-.
Aguinaldo readsF
I, 7ario A. Aguinaldo of legal age, Bilipino, with office address at Suite 1! #edisco Centre, 1'&) A. 7a,ini cor.
%. #il Sts., Er*ita, 7anila, after having sworn to in accordance with law here,- deposes and sa-F T6AT "
1. I a* the $esident Agent and .egal Counsel of the plaintiff in the a,ove entitled case and have caused the
preparation of the a,ove co*plaint@
. I have read the co*plaint and that all the allegations contained therein are true and correct ,ased on the records
on files@
+. I here,- further certif- that I have not co**enced an- other action or proceeding involving the sa*e issues in
the Supre*e Court, the Court of Appeals, or different divisions thereof, or an- other tri,unal or agenc-. If I
su,seDuentl- learned that a si*ilar action or proceeding has ,een filed or is pending ,efore the Supre*e Court,
44 | P a g e
the Court of Appeals, or different divisions thereof, or an- tri,unal or agenc-, I will notif- the court, tri,unal or
agenc- within five 1'2 da-s fro* such noticeL=nowledge.
1Sgd.2
7A$IO A. A#>INA.DO
Affiant
CITG OB 7ANI.A
S>/SC$I/ED AND SEO$N TO ,efore *e this +!
th
da- of August, 1000, affiant e?hi,iting to *e his
Co**unit- Ta? Certificate No. !!&(1!)( issued on 9anuar- (, 1000 at 7anila, %hilippines.
Doc. No. 1!!'@
%age No. 10A@
/oo= No. SSI
Series of 1000.
1Sgd.2
ATTG. 6EN$G D. ADASA
Notar- %u,lic
>ntil Dece*,er +1, !!!
%T$ No. +!'!1 7la. 1L)L00
1+
As gleaned fro* the aforeDuoted certification, there was no allegation that Att-. Aguinaldo had ,een authori:ed to e?ecute
the certificate of non"foru* shopping ,- the respondent8s /oard of Directors@ *oreover, no such ,oard resolution was
appended thereto or incorporated therein.
Ehile Att-. Aguinaldo is the resident agent of the respondent in the %hilippines, this does not *ean that he is authori:ed to
e?ecute the reDuisite certification against foru* shopping. >nder Section 1(, in relation to Section 1A of the
Corporation Code, the authorit- of the resident agent of a foreign corporation with license to do ,usiness in the
%hilippines is to receive, for and in ,ehalf of the foreign corporation, services and other legal processes in all actions and
other legal proceedings against such corporation, thusF
SEC. 1(. 5h! (ay *e a resident agent. C A resident agent *a- either ,e an individual residing in the %hilippines
or a do*estic corporation lawfull- transacting ,usiness in the %hilippinesF Pr!vided, That in the case of an
individual, he *ust ,e of good *oral character and of sound financial standing.
SEC. 1A. $esident agent@ service !+ pr!cess. K The Securities and E?change Co**ission shall reDuire as a
condition precedent to the issuance of the license to transact ,usiness in the %hilippines ,- an- foreign
corporation that such corporation file with the Securities and E?change Co**ission a written power of attorne-
designating so*e persons who *ust ,e a resident of the %hilippines, on who* an- su**ons and other legal
processes *a- ,e served in all actions or other legal proceedings against such corporation, and consenting that
service upon such resident agent shall ,e ad*itted and held as valid as if served upon the dul-"authori:ed officers
of the foreign corporation as its ho*e office.
1)
>nder the law, Att-. Aguinaldo was not specificall- authori:ed to e?ecute a certificate of non"foru* shopping as reDuired
,- Section ', $ule ( of the $ules of Court. This is ,ecause while a resident agent *a- ,e aware of actions filed against his
principal 1a foreign corporation doing ,usiness in the %hilippines2, such resident *a- not ,e aware of actions initiated ,-
its principal, whether in the %hilippines against a do*estic corporation or private individual, or in the countr- where such
corporation was organi:ed and registered, against a %hilippine registered corporation or a Bilipino citi:en.
The respondent =new that its counsel, Att-. Aguinaldo, as its resident agent, was not specificall- authori:ed to e?ecute the
said certification. It atte*pted to show its co*pliance with the rule su,seDuent to the filing of its co*plaint ,- su,*itting,
on 7arch &, !!!, a resolution purporting to have ,een approved ,- its /oard of Directors during a teleconference held
on 9une ', 1000, allegedl- with Att-. Aguinaldo and Su= 5-oo 5i* in attendance. 6owever, such atte*pt of the
respondent casts verita,le dou,t not onl- on its clai* that such a teleconference was held, ,ut also on the approval ,- the
/oard of Directors of the resolution authori:ing Att-. Aguinaldo to e?ecute the certificate of non"foru* shopping.
45 | P a g e
In its April 1, !!! Order, the $TC too= ;udicial notice that ,ecause of the onset of *odern technolog-, persons in one
location *a- confer with other persons in other places, and, ,ased on the said pre*ise, concluded that Su= 5-oo 5i* and
Att-. Aguinaldo had a teleconference with the respondent8s /oard of Directors in South 5orea on 9une ', 1000. The CA,
li=ewise, gave credence to the respondent8s clai* that such a teleconference too= place, as contained in the affidavit of
Su= 5-oo 5i*, as well as Att-. Aguinaldo8s certification.
#enerall- spea=ing, *atters of ;udicial notice have three *aterial reDuisitesF 112 the *atter *ust ,e one of co**on and
general =nowledge@ 12 it *ust ,e well and authoritativel- settled and not dou,tful or uncertain@ and 1+2 it *ust ,e =nown
to ,e within the li*its of the ;urisdiction of the court. The principal guide in deter*ining what facts *a- ,e assu*ed to ,e
;udiciall- =nown is that of notoriet-. 6ence, it can ,e said that ;udicial notice is li*ited to facts evidenced ,- pu,lic
records and facts of general notoriet-.
I1'J
7oreover, a ;udiciall- noticed fact *ust ,e one not su,;ect to a reasona,le
dispute in that it is eitherF 112 generall- =nown within the territorial ;urisdiction of the trial court@ or 12 capa,le of
accurate and read- deter*ination ,- resorting to sources whose accurac- cannot reasona,l- ,e Duestiona,le.
1&
Things of 3co**on =nowledge,3 of which courts ta=e ;udicial *atters co*ing to the =nowledge of *en generall- in the
course of the ordinar- e?periences of life, or the- *a- ,e *atters which are generall- accepted ,- *an=ind as true and are
capa,le of read- and unDuestioned de*onstration. Thus, facts which are universall- =nown, and which *a- ,e found in
enc-clopedias, dictionaries or other pu,lications, are ;udiciall- noticed, provided, the- are of such universal notoriet- and
so generall- understood that the- *a- ,e regarded as for*ing part of the co**on =nowledge of ever- person. As the
co**on =nowledge of *an ranges far and wide, a wide variet- of particular facts have ,een ;udiciall- noticed as ,eing
*atters of co**on =nowledge. B%t a c!%rt cann!t ta2e ,%dicial n!tice !+ any +act which, in part, is dependent !n the
e8istence !r n!n4e8istence !+ a +act !+ which the c!%rt has n! c!nstr%ctive 2n!wledge.
1(
In this age of *odern technolog-, the courts *a- ta=e ;udicial notice that ,usiness transactions *a- ,e *ade ,-
individuals through teleconferencing. Teleconferencing is interactive group co**unication 1three or *ore people in two
or *ore locations2 through an electronic *ediu*. In general ter*s, teleconferencing can ,ring people together under one
roof even though the- are separated ,- hundreds of *iles.
1A
This t-pe of group co**unication *a- ,e used in a nu*,er
of wa-s, and have three ,asic t-pesF 112 video conferencing " television"li=e co**unication aug*ented with sound@ 12
co*puter conferencing " printed co**unication through =e-,oard ter*inals, and 1+2 audio"conferencing"ver,al
co**unication via the telephone with optional capacit- for telewriting or telecop-ing.
10
A teleconference represents a uniDue alternative to face"to"face 1BTB2 *eetings. It was first introduced in the 10&!8s with
A*erican Telephone and Telegraph8s %icturephone. At that ti*e, however, no de*and e?isted for the new technolog-.
Travel costs were reasona,le and consu*ers were unwilling to pa- the *onthl- service charge for using the picturephone,
which was regarded as *ore of a novelt- than as an actual *eans for ever-da- co**unication.
!
In ti*e, people found it
advantageous to hold teleconferencing in the course of ,usiness and corporate governance, ,ecause of the *one- saved,
a*ong other advantages includeF
1. %eople 1including outside guest spea=ers2 who wouldn8t nor*all- attend a distant BTB *eeting can participate.
. Bollow"up to earlier *eetings can ,e done with relative ease and little e?pense.
+. Sociali:ing is *ini*al co*pared to an BTB *eeting@ therefore, *eetings are shorter and *ore oriented to the
pri*ar- purpose of the *eeting.
). So*e routine *eetings are *ore effective since one can audio"conference fro* an- location eDuipped with a
telephone.
'. Co**unication ,etween the ho*e office and field staffs is *a?i*i:ed.
&. Severe cli*ate andLor unrelia,le transportation *a- necessitate teleconferencing.
(. %articipants are generall- ,etter prepared than for BTB *eetings.
A. It is particularl- satisfactor- for si*ple pro,le*"solving, infor*ation e?change, and procedural tas=s.
0. #roup *e*,ers participate *ore eDuall- in well"*oderated teleconferences than an BTB *eeting.
1
On the other hand, other private corporations opt not to hold teleconferences ,ecause of the following disadvantagesF
1. Technical failures with eDuip*ent, including connections that aren8t *ade.
. >nsatisfactor- for co*ple? interpersonal co**unication, such as negotiation or ,argaining.
+. I*personal, less eas- to create an at*osphere of group rapport.
). .ac= of participant fa*iliarit- with the eDuip*ent, the *ediu* itself, and *eeting s=ills.
'. Acoustical pro,le*s within the teleconferencing roo*s.
46 | P a g e
&. Difficult- in deter*ining participant spea=ing order@ freDuentl- one person *onopoli:es the *eeting.
(. #reater participant preparation ti*e needed.
A. Infor*al, one"to"one, social interaction not possi,le.

Indeed, teleconferencing can onl- facilitate the lin=ing of people@ it does not alter the co*ple?it- of group
co**unication. Although it *a- ,e easier to co**unicate via teleconferencing, it *a- also ,e easier to *isco**unicate.
Teleconferencing cannot satisf- the individual needs of ever- t-pe of *eeting.
+
In the %hilippines, teleconferencing and videoconferencing of *e*,ers of ,oard of directors of private corporations is a
realit-, in light of $epu,lic Act No. A(0. The Securities and E?change Co**ission issued SEC 7e*orandu* Circular
No. 1', on Nove*,er +!, !!1, providing the guidelines to ,e co*plied with related to such conferences.
)
Thus, the
Court agrees with the $TC that persons in the %hilippines *a- have a teleconference with a group of persons in South
5orea relating to ,usiness transactions or corporate governance.
Even given the possi,ilit- that Att-. Aguinaldo and Su= 5-oo 5i* participated in a teleconference along with the
respondent8s /oard of Directors, the Court is not convinced that one was conducted@ even if there had ,een one, the Court
is not inclined to ,elieve that a ,oard resolution was dul- passed specificall- authori:ing Att-. Aguinaldo to file the
co*plaint and e?ecute the reDuired certification against foru* shopping.
The records show that the petitioner filed a *otion to dis*iss the co*plaint on the ground that the respondent failed to
co*pl- with Section ', $ule ( of the $ules of Court. The respondent opposed the *otion on Dece*,er 1, 1000, on its
contention that Att-. Aguinaldo, its resident agent, was dul- authori:ed to sue in its ,ehalf. The respondent, however,
failed to esta,lish its clai* that Att-. Aguinaldo was its resident agent in the %hilippines. Even the identification card
'
of
Att-. Aguinaldo which the respondent appended to its pleading *erel- showed that he is the co*pan- law-er of the
respondent8s 7anila $egional Office.
The respondent, through Att-. Aguinaldo, announced the holding of the teleconference onl- during the hearing of 9anuar-
A, !!!@ Att-. Aguinaldo then pra-ed for ten da-s, or until Be,ruar- A, !!!, within which to su,*it the ,oard resolution
purportedl- authori:ing hi* to file the co*plaint and e?ecute the reDuired certification against foru* shopping. The court
granted the *otion.
&
The respondent, however, failed to co*pl-, and instead pra-ed for 1' *ore da-s to su,*it the said
resolution, contending that it was with its *ain office in 5orea. The court granted the *otion per its Order
(
dated
Be,ruar- 11, !!!. The respondent again pra-ed for an e?tension within which to su,*it the said resolution, until 7arch
&, !!!.
A
It was on the said date that the respondent su,*itted an affidavit of its general *anager Su= 5-oo 5i*,
stating, inter alia, that he and Att-. Aguinaldo attended the said teleconference on 9une ', 1000, where the /oard of
Directors supposedl- approved the following resolutionF
$ESO.<ED, that 7ario A. Aguinaldo and his law fir* 7.A. Aguinaldo N Associates or an- of its law-ers are
here,- appointed and authori:ed to ta=e with whatever legal action necessar- to effect the collection of the unpaid
account of E?pert Travel N Tours. The- are here,- specificall- authori:ed to prosecute, litigate, defend, sign and
e?ecute an- docu*ent or paper necessar- to the filing and prosecution of said clai* in Court, attend the %re"trial
%roceedings and enter into a co*pro*ise agree*ent relative to the a,ove"*entioned clai*.
0
/ut then, in the sa*e affidavit, Su= 5-oo 5i* declared that the respondent 3doIesJ not =eep a written cop- of the
aforesaid $esolution3 ,ecause no records of ,oard resolutions approved during teleconferences were =ept. This ,elied the
respondent8s earlier allegation in its Be,ruar- 1!, !!! *otion for e?tension of ti*e to su,*it the Duestioned resolution
that it was in the custod- of its *ain office in 5orea. The respondent gave the trial court the i*pression that it needed ti*e
to secure a cop- of the resolution =ept in 5orea, onl- to allege later 1via the affidavit of Su= 5-oo 5i*2 that it had no
such written cop-. 7oreover, Su= 5-oo 5i* stated in his affidavit that the resolution was e*,odied in the
Secretar-8sL$esident Agent8s Certificate signed ,- Att-. Aguinaldo. 6owever, no such resolution was appended to the said
certificate.
The respondent8s allegation that its ,oard of directors conducted a teleconference on 9une ', 1000 and approved the said
resolution 1with Att-. Aguinaldo in attendance2 is incredi,le, given the additional fact that no such allegation was *ade in
the co*plaint. If the resolution had indeed ,een approved on 9une ', 1000, long ,efore the co*plaint was filed, the
respondent should have incorporated it in its co*plaint, or at least appended a cop- thereof. The respondent failed to do
47 | P a g e
so. It was onl- on 9anuar- A, !!! that the respondent clai*ed, for the first ti*e, that there was such a *eeting of the
/oard of Directors held on 9une ', 1000@ it even represented to the Court that a cop- of its resolution was with its *ain
office in 5orea, onl- to allege later that no written cop- e?isted. It was onl- on 7arch &, !!! that the respondent alleged,
for the first ti*e, that the *eeting of the /oard of Directors where the resolution was approved was
held via teleconference.
Eorse still, it appears that as early as .an%ary D<, DEEE, Att-. Aguinaldo had signed a Secretar-8sL$esident Agent8s
Certificate alleging that the ,oard of directors held a telec!n+erence !n .%ne FG, DEEE. No such certificate was appended
to the co*plaint, which was filed on Septe*,er &, 1000. 7ore i*portantl-, the respondent did not e?plain wh- the said
certificate was signed ,- Att-. Aguinaldo as earl- as 9anuar- 0, 1000, and -et was notari:ed one -ear later 1on 9anuar- 1!,
!!!2@ it also did not e?plain its failure to append the said certificate to the co*plaint, as well as to its Co*pliance dated
7arch &, !!!. It was onl- on 9anuar- &, !!1 when the respondent filed its co**ent in the CA that it su,*itted the
Secretar-8sL$esident Agent8s Certificate
+!
dated 9anuar- 1!, !!!.
The Court is, thus, *ore inclined to ,elieve that the alleged teleconference on 9une ', 1000 never too= place, and that the
resolution allegedl- approved ,- the respondent8s /oard of Directors during the said teleconference was a *ere
concoction purposefull- foisted on the $TC, the CA and this Court, to avert the dis*issal of its co*plaint against the
petitioner.
IN LIGHT O/ ALL THE /OREGOING, the petition is #$ANTED. The Decision of the Court of Appeals in CA"#.$.
S% No. &1!!! is $E<E$SED and SET ASIDE. The $egional Trial Court of 7anila is here,- O$DE$ED to dis*iss,
without pre;udice, the co*plaint of the respondent.
SO OR#ERE#.
***Nothing Follows***
48 | P a g e