SECOND DIVISION

assignment and transfer in favor of the ASSIGNEE under the following

terms and conditions:

[G.R. No. 113074. January 22, 1997]

ALFRED HAHN, petitioner, vs. COURT OF APPEALS and
BAYERISCHE MOTOREN WERKE AKTIENGESELLSCHAFT (BMW),
respondents.
DECISION
MENDOZA, J.:
This is a petition for review of the decision[1] of the Court of Appeals
dismissing a complaint for specific performance which petitioner had
filed against private respondent on the ground that the Regional Trial
Court of Quezon City did not acquire jurisdiction over private
respondent, a nonresident foreign corporation, and of the appellate
court's order denying petitioner's motion for reconsideration.
The following are the facts:
Petitioner Alfred Hahn is a Filipino citizen doing business under the
name and style "Hahn-Manila." On the other hand, private respondent
Bayerische Motoren Werke Aktiengesellschaft (BMW) is a nonresident
foreign corporation existing under the laws of the former Federal
Republic of Germany, with principal office at Munich, Germany.
On March 7, 1967, petitioner executed in favor of private respondent a
"Deed of Assignment with Special Power of Attorney," which reads in
full as follows:
WHEREAS, the ASSIGNOR is the present owner and holder of the BMW
trademark and device in the Philippines which ASSIGNOR uses and has
been using on the products manufactured by ASSIGNEE, and for which
ASSIGNOR is the authorized exclusive Dealer of the ASSIGNEE in the
Philippines, the same being evidenced by certificate of registration
issued by the Director of Patents on 12 December 1963 and is referred
to as Trademark No. 10625;
WHEREAS, the ASSIGNOR has agreed to transfer and consequently
record said transfer of the said BMW trademark and device in favor of
the ASSIGNEE herein with the Philippines Patent Office;
NOW THEREFORE, in view of the foregoing and in consideration of the
stipulations hereunder stated, the ASSIGNOR hereby affirms the said

1. The ASSIGNEE shall take appropriate steps against any user other
than ASSIGNOR or infringer of the BMW trademark in the Philippines,
for such purpose, the ASSIGNOR shall inform the ASSIGNEE
immediately of any such use or infringement of the said trademark
which comes to his knowledge and upon such information the
ASSIGNOR shall automatically act as Attorney-In-Fact of the ASSIGNEE
for such case, with full power, authority and responsibility to prosecute
unilaterally or in concert with ASSIGNEE, any such infringer of the
subject mark and for purposes hereof the ASSIGNOR is hereby named
and constituted as ASSIGNEE's Attorney-In-Fact, but any such suit
without ASSIGNEE's consent will exclusively be the responsibility and
for the account of the ASSIGNOR,
2. That the ASSIGNOR and the ASSIGNEE shall continue business
relations as has been usual in the past without a formal contract, and
for that purpose, the dealership of ASSIGNOR shall cover the
ASSIGNEE's complete production program with the only limitation that,
for the present, in view of ASSIGNEE's limited production, the latter
shall not be able to supply automobiles to ASSIGNOR.
Per the agreement, the parties "continue[d] business relations as has
been usual in the past without a formal contract." But on February 16,
1993, in a meeting with a BMW representative and the president of
Columbia Motors Corporation (CMC), Jose Alvarez, petitioner was
informed that BMW was arranging to grant the exclusive dealership of
BMW cars and products to CMC, which had expressed interest in
acquiring the same. On February 24, 1993, petitioner received
confirmation of the information from BMW which, in a letter, expressed
dissatisfaction with various aspects of petitioner's business,
mentioning among other things, decline in sales, deteriorating
services, and inadequate showroom and warehouse facilities, and
petitioner's alleged failure to comply with the standards for an
exclusive BMW dealer.[2] Nonetheless, BMW expressed willingness to
continue business relations with the petitioner on the basis of a
"standard BMW importer" contract, otherwise, it said, if this was not
acceptable to petitioner, BMW would have no alternative but to
terminate petitioner's exclusive dealership effective June 30, 1993.
Petitioner protested, claiming that the termination of his exclusive
dealership would be a breach of the Deed of Assignment.[3] Hahn
insisted that as long as the assignment of its trademark and device
subsisted, he remained BMW's exclusive dealer in the Philippines
because the assignment was made in consideration of the exclusive

dealership. In the same letter petitioner explained that the decline in

sales was due to lower prices offered for BMW cars in the United States
and the fact that few customers returned for repairs and servicing
because of the durability of BMW parts and the efficiency of
petitioner's service.
Because of Hahn's insistence on the former business relation, BMW
withdrew on March 26, 1993 its offer of a "standard importer contract"
and terminated the exclusive dealer relationship effective June 30,
1993.[4] At a conference of BMW Regional Importers held on April 26,
1993 in Singapore, Hahn was surprised to find Alvarez among those
invited from the Asian region. On April 29, 1993, BMW proposed that
Hahn and CMC jointly import and distribute BMW cars and parts.
Hahn found the proposal unacceptable. On May 14, 1993, he filed a
complaint for specific performance and damages against BMW to
compel it to continue the exclusive dealership. Later he filed an
amended complaint to include an application for temporary restraining
order and for writs of preliminary, mandatory and prohibitory injunction
to enjoin BMW from terminating his exclusive dealership. Hahn's
amended complaint alleged in pertinent parts:
2. Defendant [BMW] is a foreign corporation doing business in the
Philippines with principal offices at Munich, Germany. It may be served
with summons and other court processes through the Secretary of the
Department of Trade and Industry of the Philippines. . . .
....
5. On March 7, 1967, Plaintiff executed in favor of defendant BMW a
Deed of Assignment with Special Power of Attorney covering the
trademark and in consideration thereof, under its first whereas clause,
Plaintiff was duly acknowledged as the "exclusive Dealer of the
Assignee in the Philippines" . . . .
....
8. From the time the trademark "BMW & DEVICE" was first used by the
Plaintiff in the Philippines up to the present, Plaintiff, through its firm
name "HAHN MANILA" and without any monetary contribution from
defendant BMW, established BMW's goodwill and market presence in
the Philippines. Pursuant thereto, Plaintiff has invested a lot of money
and resources in order to single-handedly compete against other
motorcycle and car companies .... Moreover, Plaintiff has built buildings
and other infrastructures such as service centers and showrooms to
maintain and promote the car and products of defendant BMW.

....
10. In a letter dated February 24, 1993, defendant BMW advised
Plaintiff that it was willing to maintain with Plaintiff a relationship but
only "on the basis of a standard BMW importer contract as adjusted to
reflect the particular situation in the Philippines" subject to certain
conditions, otherwise, defendant BMW would terminate Plaintiff's
exclusive dealership and any relationship for cause effective June 30,
1993. . . .
....
15. The actuations of defendant BMW are in breach of the assignment
agreement between itself and plaintiff since the consideration for the
assignment of the BMW trademark is the continuance of the exclusive
dealership agreement. It thus, follows that the exclusive dealership
should continue for so long as defendant BMW enjoys the use and
ownership of the trademark assigned to it by Plaintiff.
The case was docketed as Civil Case No. Q-93-15933 and raffled to
Branch 104 of the Quezon City Regional Trial Court, which on June 14,
1993 issued a temporary restraining order. Summons and copies of the
complaint and amended complaint were thereafter served on the
private respondent through the Department of Trade and Industry,
pursuant to Rule 14, 14 of the Rules of Court. The order, summons and
copies of the complaint and amended complaint were later sent by the
DTI to BMW via registered mail on June 15, 1993[5] and received by
the latter on June 24, 1993.
On June 17, 1993, without proof of service on BMW, the hearing on the
application for the writ of preliminary injunction proceeded ex parte,
with petitioner Hahn testifying. On June 30, 1993, the trial court issued
an order granting the writ of preliminary injunction upon the filing of a
bond of P100,000.00. On July 13, 1993, following the posting of the
required bond, a writ of preliminary injunction was issued.
On July 1, 1993, BMW moved to dismiss the case, contending that the
trial court did not acquire jurisdiction over it through the service of
summons on the Department of Trade and Industry, because it (BMW)
was a foreign corporation and it was not doing business in the
Philippines. It contended that the execution of the Deed of Assignment
was an isolated transaction; that Hahn was not its agent because the
latter undertook to assemble and sell BMW cars and products without
the participation of BMW and sold other products; and that Hahn was

an indentor or middleman transacting business in his own name and

for his own account.

thereon until after trial on the merit constitutes, to our mind, grave
abuse of discretion.

Petitioner Alfred Hahn opposed the motion. He argued that BMW was
doing business in the Philippines through him as its agent, as shown by
the fact that BMW invoices and order forms were used to document his
transactions; that he gave warranties as exclusive BMW dealer; that
BMW officials periodically inspected standards of service rendered by
him; and that he was described in service booklets and international
publications of BMW as a "BMW Importer" or "BMW Trading Company"
in the Philippines.

....

The trial court[6] deferred resolution of the Motion to dismiss until after
trial on the merits for the reason that the grounds advanced by BMW in
its motion did not seem to be indubitable.

Then, after stating that any ruling which the trial court might make on
the motion to dismiss would anyway be elevated to it on appeal, the
Court of Appeals itself resolved the motion. It ruled that BMW was not
doing business in the country and, therefore, jurisdiction over it could
not be acquired through service of summons on the DTI pursuant to
Rule 14, Section 14. The court upheld private respondent's contention
that Hahn acted in his own name and for his own account and
independently of BMW, based on Alfred Hahn's allegations that he had
invested his own money and resources in establishing BMW's goodwill
in the Philippines and on BMW's claim that Hahn sold products other
than those of BMW. It held that petitioner was a mere indentor or
broker and not an agent through whom private respondent BMW
transacted business in the Philippines. Consequently, the Court of
Appeals dismissed petitioner's complaint against BMW.

Without seeking reconsideration of the aforementioned order, BMW

filed a petition for certiorari with the Court of Appeals alleging that:
I. THE RESPONDENT JUDGE ACTED WITH UNDUE HASTE OR OTHERWISE
INJUDICIOUSLY IN PROCEEDINGS LEADING TOWARD THE ISSUANCE OF
THE WRIT OF PRELIMINARY INJUNCTION, AND IN PRESCRIBING THE
TERMS FOR THE ISSUANCE THEREOF.
II. THE RESPONDENT JUDGE PATENTLY ERRED IN DEFERRING
RESOLUTION OF THE MOTION TO DISMISS ON THE GROUND OF LACK
OF JURISDICTION, AND THEREBY FAILING TO IMMEDIATELY DISMISS THE
CASE A QUO.
BMW asked for the immediate issuance of a temporary restraining
order and, after hearing, for a writ of preliminary injunction, to enjoin
the trial court from proceeding further in Civil Case No. Q-93-15933.
Private respondent pointed out that, unless the trial court's order was
set aside, it would be forced to submit to the jurisdiction of the court
by filing its answer or to accept judgment in default, when the very
question was whether the court had jurisdiction over it.
The Court of Appeals enjoined the trial court from hearing petitioner's
complaint. On December 20, 1993, it rendered judgment finding the
trial court guilty of grave abuse of discretion in deferring resolution of
the motion to dismiss. It stated:
Going by the pleadings already filed with the respondent court before it
came out with its questioned order of July 26, 1993, we rule and so
hold that petitioner's (BMW) motion to dismiss could be resolved then
and there, and that the respondent judge's deferment of his action

. . . [T]here is not much appreciable disagreement as regards the

factual matters relating, to the motion to dismiss. What truly divide
(sic) the parties and to which they greatly differ is the legal conclusions
they respectively draw from such facts, (sic) with Hahn maintaining
that on the basis thereof, BMW is doing business in the Philippines
while the latter asserts that it is not.

Hence, this appeal. Petitioner contends that the Court of Appeals erred
(1) in finding that the trial court gravely abused its discretion in
deferring action on the motion to dismiss and (2) in finding that private
respondent BMW is not doing business in the Philippines and, for this
reason, dismissing petitioner's case.
Petitioner's appeal is well taken. Rule 14, 14 provides:
14. Service upon foreign corporations. If the defendant is a foreign
corporation, or a nonresident joint stock company or association, doing
business in the Philippines, service may be made on its resident agent
designated in accordance with law for that purpose, or, if there be no
such agent, on the government official designated by law to that
effect, or on any of its officers or agents within the Philippines.
(Emphasis added)
What acts are considered "doing business in the Philippines" are
enumerated in 3(d) of the Foreign Investments Act of 1991 (R.A. No.
7042) as follows:[7]

d) the phrase "doing business" shall include soliciting orders, service

contracts, opening offices, whether called "liaison" offices or branches,
appointing representatives or distributors domiciled in the Philippines
or who in any calendar year stay in the country for a period or periods
totalling one hundred eighty (180) days or more; participating in the
management, supervision or control of any domestic business, firm,
entity or corporation in the Philippines; and any other act or acts that
imply a continuity of commercial dealings or arrangements and
contemplate to that extent the performance of acts or works, or the
exercise of some of the functions normally incident to, and in
progressive prosecution of, commercial gain or of the purpose and
object of the business organization: Provided, however, That the
phrase "doing business" shall not be deemed to include mere
investment as a shareholder by a foreign entity in domestic
corporations duly registered to do business, and/or the exercise of
rights as such investor; nor having, a nominee director or officer to
represent its interests in such corporation; nor appointing a
representative or distributor domiciled in the Philippines which
transacts business in its own name and for its own account. (Emphasis
supplied)
Thus, the phrase includes "appointing representatives or distributors in
the Philippines" but not when the representative or distributor
"transacts business in its name and for its own account." In addition,
Section 1(f)(1) of the Rules and Regulations implementing (IRR) the
Omnibus Investment Code of 1987 (E.O. No. 226) provided:
(f) "Doing business" shall be any act or combination of acts,
enumerated in Article 44 of the Code. In particular, "doing business"
includes:
(1).... A foreign firm which does business through middlemen acting in
their own names, such as indentors, commercial brokers or commission
merchants, shall not be deemed doing business in the Philippines. But
such indentors, commercial brokers or commission merchants shall be
the ones deemed to be doing business in the Philippines.
The question is whether petitioner Alfred Hahn is the agent or
distributor in the Philippines of private respondent BMW. If he is, BMW
may be considered doing business in the Philippines and the trial court
acquired jurisdiction over it (BMW) by virtue of the service of summons
on the Department of Trade and Industry. Otherwise, if Hahn is not the
agent of BMW but an independent dealer, albeit of BMW cars and
products, BMW, a foreign corporation, is not considered doing business
in the Philippines within the meaning of the Foreign Investments Act of

1991 and the IRR, and the trial court did not acquire jurisdiction over it
(BMW).
The Court of Appeals held that petitioner Alfred Hahn acted in his own
name and for his own account and not as agent or distributor in the
Philippines of BMW on the ground that "he alone had contacts with
individuals or entities interested in acquiring BMW vehicles.
Independence characterizes Hahn's undertakings, for which reason he
is to be considered, under governing statutes, as doing business." (p.
13) In support of this conclusion, the appellate court cited the following
allegations in Hahn's amended complaint:
8. From the time the trademark "BMW & DEVICE" was first used by the
Plaintiff in the Philippines up to the present, Plaintiff, through its firm
name "HAHN MANILA" and without any monetary contributions from
defendant BMW; established BMW's goodwill and market presence in
the Philippines. Pursuant thereto, Plaintiff invested a lot of money and
resources in order to single-handedly compete against other
motorcycle and car companies.... Moreover, Plaintiff has built buildings
and other infrastructures such as service centers and showrooms to
maintain and promote the car and products of defendant BMW.
As the above quoted allegations of the amended complaint show,
however, there is nothing to support the appellate court's finding that
Hahn solicited orders alone and for his own account and without
"interference from, let alone direction of, BMW." (p. 13) To the contrary,
Hahn claimed he took orders for BMW cars and transmitted them to
BMW. Upon receipt of the orders, BMW fixed the down payment and
pricing charges, notified Hahn of the scheduled production month for
the orders, and reconfirmed the orders by signing and returning to
Hahn the acceptance sheets. Payment was made by the buyer directly
to BMW. Title to cars purchased passed directly to the buyer and Hahn
never paid for the purchase price of BMW cars sold in the Philippines.
Hahn was credited with a commission equal to 14% of the purchase
price upon the invoicing of a vehicle order by BMW. Upon confirmation
in writing that the vehicles had been registered in the Philippines and
serviced by him, Hahn received an additional 3% of the full purchase
price. Hahn performed after-sale services, including, warranty services,
for which he received reimbursement from BMW. All orders were on
invoices and forms of BMW.[8]
These allegations were substantially admitted by BMW which, in its
petition for certiorari before the Court of Appeals, stated:[9]
9.4. As soon as the vehicles are fully manufactured and full payment of
the purchase prices are made, the vehicles are shipped to the

Philippines. (The payments may be made by the purchasers or thirdpersons or even by Hahn.) The bills of lading are made up in the name
of the purchasers, but Hahn-Manila is therein indicated as the person
to be notified.
9.5. It is Hahn who picks up the vehicles from the Philippine ports, for
purposes of conducting pre-delivery inspections. Thereafter, he
delivers the vehicles to the purchasers.
9.6. As soon as BMW invoices the vehicle ordered, Hahn is credited
with a commission of fourteen percent (14%) of the full purchase price
thereof, and as soon as he confirms in writing, that the vehicles have
been registered in the Philippines and have been serviced by him, he
will receive an additional three percent (3%) of the full purchase prices
as commission.
Contrary to the appellate court's conclusion, this arrangement shows
an agency. An agent receives a commission upon the successful
conclusion of a sale. On the other hand, a broker earns his pay merely
by bringing the buyer and the seller together, even if no sale is
eventually made.
As to the service centers and showrooms which he said he had put up
at his own expense, Hahn said that he had to follow BMW
specifications as exclusive dealer of BMW in the Philippines. According
to Hahn, BMW periodically inspected the service centers to see to it
that BMW standards were maintained. Indeed, it would seem from
BMW's letter to Hahn that it was for Hahn's alleged failure to maintain
BMW standards that BMW was terminating Hahn's dealership.
The fact that Hahn invested his own money to put up these service
centers and showrooms does not necessarily prove that he is not an
agent of BMW. For as already noted, there are facts in the record which
suggest that BMW exercised control over Hahn's activities as a dealer
and made regular inspections of Hahn's premises to enforce
compliance with BMW standards and specifications.[10] For example,
in its letter to Hahn dated February 23, 1996, BMW stated:
In the last years we have pointed out to you in several discussions and
letters that we have to tackle the Philippine market more professionally
and that we are through your present activities not adequately
prepared to cope with the forthcoming challenges.[11]
In effect, BMW was holding Hahn accountable to it under the 1967
Agreement.

This case fits into the mould of Communications Materials, Inc. v. Court
of Appeals,[12] in which the foreign corporation entered into a
"Representative Agreement" and a "Licensing Agreement" with a
domestic corporation, by virtue of which the latter was appointed
"exclusive representative" in the Philippines for a stipulated
commission. Pursuant to these contracts, the domestic corporation
sold products exported by the foreign corporation and put up a service
center for the products sold locally. This Court held that these acts
constituted doing business in the Philippines. The arrangement showed
that the foreign corporation's purpose was to penetrate the Philippine
market and establish its presence in the Philippines.
In addition, BMW held out private respondent Hahn as its exclusive
distributor in the Philippines, even as it announced in the Asian region
that Hahn was the "official BMW agent" in the Philippines.[13]
The Court of Appeals also found that petitioner Alfred Hahn dealt in
other products, and not exclusively in BMW products, and, on this
basis, ruled that Hahn was not an agent of BMW. (p. 14) This finding is
based entirely on allegations of BMW in its motion to dismiss filed in
the trial court and in its petition for certiorari before the Court of
Appeals.[14] But this allegation was denied by Hahn[15] and therefore
the Court of Appeals should not have cited it as if it were the fact.
Indeed this is not the only factual issue raised, which should have
indicated to the Court of Appeals the necessity of affirming the trial
court's order deferring resolution of BMW's motion to dismiss.
Petitioner alleged that whether or not he is considered an agent of
BMW, the fact is that BMW did business in the Philippines because it
sold cars directly to Philippine buyers. [16] This was denied by BMW,
which claimed that Hahn was not its agent and that, while it was true
that it had sold cars to Philippine buyers, this was done without
solicitation on its part.[17]
It is not true then that the question whether BMW is doing business
could have been resolved simply by considering the parties' pleadings.
There are genuine issues of facts which can only be determined on the
basis of evidence duly presented. BMW cannot short circuit the process
on the plea that to compel it to go to trial would be to deny its right not
to submit to the jurisdiction of the trial court which precisely it denies.
Rule 16, 3 authorizes courts to defer the resolution of a motion to
dismiss until after the trial if the ground on which the motion is based
does not appear to be indubitable. Here the record of the case bristles
with factual issues and it is not at all clear whether some allegations
correspond to the proof.

Anyway, private respondent need not apprehend that by responding to

the summons it would be waiving its objection to the trial court's
jurisdiction. It is now settled that. for purposes of having summons
served on a foreign corporation in accordance with Rule 14, 14, it is
sufficient that it be alleged in the complaint that the foreign
corporation is doing business in the Philippines. The court need not go
beyond the allegations of the complaint in order to determine whether
it has jurisdiction.[18] A determination that the foreign corporation is
doing business is only tentative and is made only for the purpose of
enabling the local court to acquire jurisdiction over the foreign
corporation through service of summons pursuant to Rule 14, 14. Such
determination does not foreclose a contrary finding should evidence
later show that it is not transacting business in the country. As this
Court has explained:
This is not to say, however, that the petitioner's right to question the
jurisdiction of the court over its person is now to be deemed a
foreclosed matter. If it is true, as Signetics claims, that its only
involvement in the Philippines was through a passive investment in
Sigfil, which it even later disposed of, and that TEAM Pacific is not its
agent, then it cannot really be said to be doing business in the
Philippines. It is a defense, however, that requires the contravention of
the allegations of the complaint, as well as a full ventilation, in effect,
of the main merits of the case, which should not thus be within the
province of a mere motion to dismiss. So, also, the issue posed by the
petitioner as to whether a foreign corporation which has done business
in the country, but which has ceased to do business at the time of the
filing, of a complaint, can still be made to answer for a cause of action
which accrued while it was doing, business, is another matter that
would yet have to await the reception and admission of evidence.
Since these points have seasonably been raised by the petitioner,
there should be no real cause for what may understandably be its
apprehension, i.e., that by its participation during the trial on the
merits, it may, absent an invocation of separate or independent reliefs
of its own, be considered to have voluntarily submitted itself to the
court's jurisdiction.[19]
Far from committing an abuse of discretion, the trial court properly
deferred resolution of the motion to dismiss and thus avoided
prematurely deciding a question which requires a factual basis, with
the same result if it had denied the motion and conditionally assumed
jurisdiction. It is the Court of Appeals which, by ruling that BMW is not
doing business on the basis merely of uncertain allegations in the
pleadings, disposed of the whole case with finality and thereby
deprived petitioner of his right to be heard on his cause of action. Nor
was there justification for nullifying the writ of preliminary injunction

issued by the trial court. Although the injunction was issued ex parte,
the fact is that BMW was subsequently heard on its defense by filing a
motion to dismiss.
WHEREFORE, the decision of the Court of Appeals is REVERSED and the
case is REMANDED to the trial court for further proceedings.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 168266

March 15, 2010

CARGILL, INC., Petitioner,

vs.
INTRA STRATA ASSURANCE CORPORATION, Respondent.
DECISION
CARPIO, J.:
The Case
This petition for review1 assails the 26 May 2005 Decision2 of the
Court of Appeals in CA-G.R. CV No. 48447.
The Facts
Petitioner Cargill, Inc. (petitioner) is a corporation organized and
existing under the laws of the State of Delaware, United States of
America. Petitioner and Northern Mindanao Corporation (NMC)
executed a contract dated 16 August 1989 whereby NMC agreed to sell
to petitioner 20,000 to 24,000 metric tons of molasses, to be delivered

from 1 January to 30 June 1990 at the price of $44 per metric ton. The
contract provides that petitioner would open a Letter of Credit with the
Bank of Philippine Islands. Under the "red clause" of the Letter of
Credit, NMC was permitted to draw up to $500,000 representing the
minimum price of the contract upon presentation of some documents.
The contract was amended three times: first, on 11 January 1990,
increasing the purchase price of the molasses to $47.50 per metric
ton;3 second, on 18 June 1990, reducing the quantity of the molasses
to 10,500 metric tons and increasing the price to $55 per metric ton;4
and third, on 22 August 1990, providing for the shipment of 5,250
metric tons of molasses on the last half of December 1990 through the
first half of January 1991, and the balance of 5,250 metric tons on the
last half of January 1991 through the first half of February 1991.5 The
third amendment also required NMC to put up a performance bond
equivalent to $451,500, which represents the value of 10,500 metric
tons of molasses computed at $43 per metric ton. The performance
bond was intended to guarantee NMCs performance to deliver the
molasses during the prescribed shipment periods according to the
terms of the amended contract.
In compliance with the terms of the third amendment of the contract,
respondent Intra Strata Assurance Corporation (respondent) issued on
10 October 1990 a performance bond6 in the sum of P11,287,500 to
guarantee NMCs delivery of the 10,500 tons of molasses, and a surety
bond7 in the sum of P9,978,125 to guarantee the repayment of
downpayment as provided in the contract.

WHEREFORE, judgment is rendered in favor of plaintiff [Cargill, Inc.],

ordering defendant INTRA STRATA ASSURANCE CORPORATION to
solidarily pay plaintiff the total amount of SIXTEEN MILLION NINE
HUNDRED NINETY-THREE THOUSAND AND TWO HUNDRED PESOS
(P16,993,200.00), Philippine Currency, with interest at the legal rate
from October 10, 1990 until fully paid, plus attorneys fees in the sum
of TWO HUNDRED THOUSAND PESOS (P200,000.00), Philippine
Currency and the costs of the suit.
The Counterclaim of Intra Strata Assurance Corporation is hereby
dismissed for lack of merit.
SO ORDERED.11
On appeal, the Court of Appeals reversed the trial courts decision and
dismissed the complaint. Hence, this petition.
The Court of Appeals Ruling
The Court of Appeals held that petitioner does not have the capacity to
file this suit since it is a foreign corporation doing business in the
Philippines without the requisite license. The Court of Appeals held that
petitioners purchases of molasses were in pursuance of its basic
business and not just mere isolated and incidental transactions.
The Issues
Petitioner raises the following issues:

NMC was only able to deliver 219.551 metric tons of molasses out of
the agreed 10,500 metric tons. Thus, petitioner sent demand letters to
respondent claiming payment under the performance and surety
bonds. When respondent refused to pay, petitioner filed on 12 April
1991 a complaint8 for sum of money against NMC and respondent.
Petitioner, NMC, and respondent entered into a compromise
agreement,9 which the trial court approved in its Decision10 dated 13
December 1991. The compromise agreement provides that NMC would
pay petitioner P3,000,000 upon signing of the compromise agreement
and would deliver to petitioner 6,991 metric tons of molasses from 1631 December 1991. However, NMC still failed to comply with its
obligation under the compromise agreement. Hence, trial proceeded
against respondent.
On 23 November 1994, the trial court rendered a decision, the
dispositive portion of which reads:

1. Whether petitioner is doing or transacting business in the Philippines

in contemplation of the law and established jurisprudence;
2. Whether respondent is estopped from invoking the defense that
petitioner has no legal capacity to sue in the Philippines;
3. Whether petitioner is seeking a review of the findings of fact of the
Court of Appeals; and
4. Whether the advance payment of $500,000 was released to NMC
without the submission of the supporting documents required in the
contract and the "red clause" Letter of Credit from which said amount
was drawn.12
The Ruling of the Court
We find the petition meritorious.

Doing Business in the Philippines and Capacity to Sue

The principal issue in this case is whether petitioner, an unlicensed
foreign corporation, has legal capacity to sue before Philippine courts.
Under Article 12313 of the Corporation Code, a foreign corporation
must first obtain a license and a certificate from the appropriate
government agency before it can transact business in the Philippines.
Where a foreign corporation does business in the Philippines without
the proper license, it cannot maintain any action or proceeding before
Philippine courts as provided under Section 133 of the Corporation
Code:
Sec. 133. Doing business without a license. No foreign corporation
transacting business in the Philippines without a license, or its
successors or assigns, shall be permitted to maintain or intervene in
any action, suit or proceeding in any court or administrative agency of
the Philippines; but such corporation may be sued or proceeded
against before Philippine courts or administrative tribunals on any valid
cause of action recognized under Philippine laws.
Thus, the threshold question in this case is whether petitioner was
doing business in the Philippines. The Corporation Code provides no
definition for the phrase "doing business." Nevertheless, Section 1 of
Republic Act No. 5455 (RA 5455),14 provides that:
x x x the phrase "doing business" shall include soliciting orders,
purchases, service contracts, opening offices, whether called liaison
offices or branches; appointing representatives or distributors who are
domiciled in the Philippines or who in any calendar year stay in the
Philippines for a period or periods totalling one hundred eighty days or
more; participating in the management, supervision or control of any
domestic business firm, entity or corporation in the Philippines; and
any other act or acts that imply a continuity of commercial dealings or
arrangements, and contemplate to that extent the performance of acts
or works, or the exercise of some of the functions normally incident to,
and in progressive prosecution of, commercial gain or of the purpose
and object of the business organization. (Emphasis supplied)

which are not deemed "doing business." Section 3(d) of RA 7042

states:
[T]he phrase "doing business" shall include "soliciting orders, service
contracts, opening offices, whether called liaison offices or branches;
appointing representatives or distributors domiciled in the Philippines
or who in any calendar year stay in the country for a period or periods
totalling one hundred eighty (180) days or more; participating in the
management, supervision or control of any domestic business, firm,
entity or corporation in the Philippines; and any other act or acts that
imply a continuity of commercial dealings or arrangements, and
contemplate to that extent the performance of acts or works, or the
exercise of some of the functions normally incident to, and in
progressive prosecution of, commercial gain or of the purpose and
object of the business organization: Provided, however, That the
phrase doing business shall not be deemed to include mere
investment as a shareholder by a foreign entity in domestic
corporations duly registered to do business, and/or the exercise of
rights as such investor; nor having a nominee director or officer to
represent its interests in such corporation; nor appointing a
representative or distributor domiciled in the Philippines which
transacts business in its own name and for its own account.
Since respondent is relying on Section 133 of the Corporation Code to
bar petitioner from maintaining an action in Philippine courts,
respondent bears the burden of proving that petitioners business
activities in the Philippines were not just casual or occasional, but so
systematic and regular as to manifest continuity and permanence of
activity to constitute doing business in the Philippines. In this case, we
find that respondent failed to prove that petitioners activities in the
Philippines constitute doing business as would prevent it from bringing
an action.

This is also the exact definition provided under Article 44 of the

Omnibus Investments Code of 1987.

The determination of whether a foreign corporation is doing business in

the Philippines must be based on the facts of each case.15 In the case
of Antam Consolidated, Inc. v. CA,16 in which a foreign corporation
filed an action for collection of sum of money against petitioners
therein for damages and loss sustained for the latters failure to deliver
coconut crude oil, the Court emphasized the importance of the
element of continuity of commercial activities to constitute doing
business in the Philippines. The Court held:

Republic Act No. 7042 (RA 7042), otherwise known as the Foreign
Investments Act of 1991, which repealed Articles 44-56 of Book II of
the Omnibus Investments Code of 1987, enumerated not only the acts
or activities which constitute "doing business" but also those activities

In the case at bar, the transactions entered into by the respondent with
the petitioners are not a series of commercial dealings which signify an
intent on the part of the respondent to do business in the Philippines
but constitute an isolated one which does not fall under the category of

"doing business." The records show that the only reason why the
respondent entered into the second and third transactions with the
petitioners was because it wanted to recover the loss it sustained from
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 make good
on their obligation. x x x
x x x The three seemingly different transactions were entered into by
the parties only in an effort to fulfill the basic agreement and in no way
indicate an intent on the part of the respondent to engage in a
continuity of transactions with petitioners which will categorize it as a
foreign corporation doing business in the Philippines.17
Similarly, in this case, petitioner and NMC amended their contract
three times to give a chance to NMC to deliver to petitioner the
molasses, considering that NMC already received the minimum price of
the contract. There is no showing that the transactions between
petitioner and NMC signify the intent of petitioner to establish a
continuous business or extend its operations in the Philippines.
The Implementing Rules and Regulations of RA 7042 provide under
Section 1(f), Rule I, that "doing business" does not include the following
acts:
1. Mere investment as a shareholder by a foreign entity in domestic
corporations duly registered to do business, and/or the exercise of
rights as such investor;
2. Having a nominee director or officer to represent its interests in such
corporation;
3. Appointing a representative or distributor domiciled in the
Philippines which transacts business in the representative's or
distributor's own name and account;
4. The publication of a general advertisement through any print or
broadcast media;
5. Maintaining a stock of goods in the Philippines solely for the purpose
of having the same processed by another entity in the Philippines;
6. Consignment by a foreign entity of equipment with a local company
to be used in the processing of products for export;
7. Collecting information in the Philippines; and

8. Performing services auxiliary to an existing isolated contract of sale

which are not on a continuing basis, such as installing in the Philippines
machinery it has manufactured or exported to the Philippines,
servicing the same, training domestic workers to operate it, and similar
incidental services.
Most of these activities do not bring any direct receipts or profits to the
foreign corporation, consistent with the ruling of this Court in National
Sugar Trading Corp. v. CA18 that activities within Philippine jurisdiction
that do not create earnings or profits to the foreign corporation do not
constitute doing business in the Philippines.19 In that case, the Court
held that it would be inequitable for the National Sugar Trading
Corporation, a state-owned corporation, to evade payment of a
legitimate indebtedness owing to the foreign corporation on the plea
that the latter should have obtained a license first before perfecting a
contract with the Philippine government. The Court emphasized that
the foreign corporation did not sell sugar and derive income from the
Philippines, but merely purchased sugar from the Philippine
government and allegedly paid for it in full.
In this case, the contract between petitioner and NMC involved the
purchase of molasses by petitioner from NMC. It was NMC, the
domestic corporation, which derived income from the transaction and
not petitioner. To constitute "doing business," the activity undertaken
in the Philippines should involve profit-making.20 Besides, under
Section 3(d) of RA 7042, "soliciting purchases" has been deleted from
the enumeration of acts or activities which constitute "doing business."
Other factors which support the finding that petitioner is not doing
business in the Philippines are: (1) petitioner does not have an office in
the Philippines; (2) petitioner imports products from the Philippines
through its non-exclusive local broker, whose authority to act on behalf
of petitioner is limited to soliciting purchases of products from
suppliers engaged in the sugar trade in the Philippines; and (3) the
local broker is an independent contractor and not an agent of
petitioner.21
As explained by the Court in B. Van Zuiden Bros., Ltd. v. GTVL
Marketing Industries, Inc.:22
An exporter in one country may export its products to many foreign
importing countries without performing in the importing countries
specific commercial acts that would constitute doing business in the
importing countries. The mere act of exporting from ones own country,
without doing any specific commercial act within the territory of the
importing country, cannot be deemed as doing business in the

importing country. The importing country does not require jurisdiction

over the foreign exporter who has not yet performed any specific
commercial act within the territory of the importing country. Without
jurisdiction over the foreign exporter, the importing country cannot
compel the foreign exporter to secure a license to do business in the
importing country.
Otherwise, Philippine exporters, by the mere act alone of exporting
their products, could be considered by the importing countries to be
doing business in those countries. This will require Philippine exporters
to secure a business license in every foreign country where they
usually export their products, even if they do not perform any specific
commercial act within the territory of such importing countries. Such a
legal concept will have deleterious effect not only on Philippine
exports, but also on global trade.1avvphi1
To be doing or "transacting business in the Philippines" for purposes of
Section 133 of the Corporation Code, the foreign corporation must
actually transact business in the Philippines, that is, perform specific
business transactions within the Philippine territory on a continuing
basis in its own name and for its own account. Actual transaction of
business within the Philippine territory is an essential requisite for the
Philippines to to acquire jurisdiction over a foreign corporation and thus
require the foreign corporation to secure a Philippine business license.
If a foreign corporation does not transact such kind of business in the
Philippines, even if it exports its products to the Philippines, the
Philippines has no jurisdiction to require such foreign corporation to
secure a Philippine business license.23 (Emphasis supplied)
In the present case, petitioner is a foreign company merely importing
molasses from a Philipine exporter. A foreign company that merely
imports goods from a Philippine exporter, without opening an office or
appointing an agent in the Philippines, is not doing business in the
Philippines.
Review of Findings of Fact
The Supreme Court may review the findings of fact of the Court of
Appeals which are in conflict with the findings of the trial court.24 We
find that the Court of Appeals finding that petitioner was doing
business is not supported by evidence.
Furthermore, a review of the records shows that the trial court was
correct in holding that the advance payment of $500,000 was released
to NMC in accordance with the conditions provided under the "red

clause" Letter of Credit from which said amount was drawn. The Head
of the International Operations Department of the Bank of Philippine
Islands testified that the bank would not have paid the beneficiary if
the required documents were not complete. It is a requisite in a
documentary credit transaction that the documents should conform to
the terms and conditions of the letter of credit; otherwise, the bank will
not pay. The Head of the International Operations Department of the
Bank of Philippine Islands also testified that they received
reimbursement from the issuing bank for the $500,000 withdrawn by
NMC.25 Thus, respondent had no legitimate reason to refuse payment
under the performance and surety bonds when NMC failed to perform
its part under its contract with petitioner.
WHEREFORE , we GRANT the petition. We REVERSE the Decision dated
26 May 2005 of the Court of Appeals in CA-G.R. CV No. 48447. We
REINSTATE the Decision dated 23 November 1994 of the trial court.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

The juridical relation among the various parties in this case can be
traced to a 5-year Value Added Assembly Services Agreement
("VAASA"), entered into on April 2, 1996 between Integrated Silicon
and the Hewlett-Packard Singapore (Pte.) Ltd., Singapore Components
Operation ("HP-Singapore").4 Under the terms of the VAASA, Integrated
Silicon was to locally manufacture and assemble fiber optics for export
to HP-Singapore. HP-Singapore, for its part, was to consign raw
materials to Integrated Silicon; transport machinery to the plant of
Integrated Silicon; and pay Integrated Silicon the purchase price of the
finished products.5 The VAASA had a five-year term, beginning on April
2, 1996, with a provision for annual renewal by mutual written
consent.6 On September 19, 1999, with the consent of Integrated
Silicon,7 HP-Singapore assigned all its rights and obligations in the
VAASA to Agilent.8

FIRST DIVISION
G.R. No. 154618

April 14, 2004

AGILENT TECHNOLOGIES SINGAPORE (PTE) LTD., petitioner,

vs.
INTEGRATED SILICON TECHNOLOGY PHILIPPINES
CORPORATION, TEOH KIANG HONG, TEOH KIANG SENG,
ANTHONY CHOO, JOANNE KATE M. DELA CRUZ, JEAN KAY M.
DELA CRUZ and ROLANDO T. NACILLA, respondents.
DECISION
YNARES-SANTIAGO, J.:
This petition for review assails the Decision dated August 12, 2002 of
the Court of Appeals in CA-G.R. SP No. 66574, which dismissed Civil
Case No. 3123-2001-C and annulled and set aside the Order dated
September 4, 2001 issued by the Regional Trial Court of Calamba,
Laguna, Branch 92.
Petitioner Agilent Technologies Singapore (Pte.), Ltd. ("Agilent") is a
foreign corporation, which, by its own admission, is not licensed to do
business in the Philippines.1 Respondent Integrated Silicon Technology
Philippines Corporation ("Integrated Silicon") is a private domestic
corporation, 100% foreign owned, which is engaged in the business of
manufacturing and assembling electronics components.2 Respondents
Teoh Kiang Hong, Teoh Kiang Seng and Anthony Choo, Malaysian
nationals, are current members of Integrated Silicons board of
directors, while Joanne Kate M. dela Cruz, Jean Kay M. dela Cruz, and
Rolando T. Nacilla are its former members.3

On May 25, 2001, Integrated Silicon filed a complaint for "Specific

Performance and Damages" against Agilent and its officers Tan Bian
Ee, Lim Chin Hong, Tey Boon Teck and Francis Khor, docketed as Civil
Case No. 3110-01-C. It alleged that Agilent breached the parties oral
agreement to extend the VAASA. Integrated Silicon thus prayed that
defendant be ordered to execute a written extension of the VAASA for
a period of five years as earlier assured and promised; to comply with
the extended VAASA; and to pay actual, moral, exemplary damages
and attorneys fees.9
On June 1, 2001, summons and a copy of the complaint were served on
Atty. Ramon Quisumbing, who returned these processes on the claim
that he was not the registered agent of Agilent. Later, he entered a
special appearance to assail the courts jurisdiction over the person of
Agilent.
On July 2, 2001, Agilent filed a separate complaint against Integrated
Silicon, Teoh Kang Seng, Teoh Kiang Gong, Anthony Choo, Joanne Kate
M. dela Cruz, Jean Kay M. dela Cruz and Rolando T. Nacilla,10 for
"Specific Performance, Recovery of Possession, and Sum of Money with
Replevin, Preliminary Mandatory Injunction, and Damages", before the
Regional Trial Court, Calamba, Laguna, Branch 92, docketed as Civil
Case No. 3123-2001-C. Agilent prayed that a writ of replevin or, in the
alternative, a writ of preliminary mandatory injunction, be issued
ordering defendants to immediately return and deliver to plaintiff its
equipment, machineries and the materials to be used for fiber-optic
components which were left in the plant of Integrated Silicon. It further
prayed that defendants be ordered to pay actual and exemplary
damages and attorneys fees.11

Respondents filed a Motion to Dismiss in Civil Case No. 3123-2001-C,12

on the grounds of lack of Agilents legal capacity to sue;13 litis
pendentia;14 forum shopping;15 and failure to state a cause of
action.16
On September 4, 2001, the trial court denied the Motion to Dismiss and
granted petitioner Agilents application for a writ of replevin.17
Without filing a motion for reconsideration, respondents filed a petition
for certiorari with the Court of Appeals.18
In the meantime, upon motion filed by respondents, Judge Antonio S.
Pozas of Branch 92 voluntarily inhibited himself in Civil Case No. 31232001-C. The case was re-raffled and assigned to Branch 35, the same
branch where Civil Case No. 3110-2001-C is pending.
On August 12, 2002, the Court of Appeals granted respondents
petition for certiorari, set aside the assailed Order of the trial court
dated September 4, 2001, and ordered the dismissal of Civil Case No.
3123-2001-C.
Hence, the instant petition raising the following errors:
I.
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN NOT
DISMISSING RESPONDENTS PETITION FOR CERTIORARI FOR
RESPONDENTS FAILURE TO FILE A MOTION FOR RECONSIDERATION
BEFORE RESORTING TO THE REMEDY OF CERTIORARI.

IV.
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN
ORDERING THE DISMISSAL OF CIVIL CASE NO. 323-2001-C BELOW
INSTEAD OF ORDERING IT CONSOLIDATED WITH CIVIL CASE NO. 31102001-C.19
The two primary issues raised in this petition: (1) whether or not the
Court of Appeals committed reversible error in giving due course to
respondents petition, notwithstanding the failure to file a Motion for
Reconsideration of the September 4, 2001 Order; and (2) whether or
not the Court of Appeals committed reversible error in dismissing Civil
Case No. 3123-2001-C.
We find merit in the petition.
The Court of Appeals, citing the case of Malayang Manggagawa sa
ESSO v. ESSO Standard Eastern, Inc.,20 held that the lower court had
no jurisdiction over Civil Case No. 3123-2001-C because of the
pendency of Civil Case No. 3110-2001-C and, therefore, a motion for
reconsideration was not necessary before resort to a petition for
certiorari. This was error.
Jurisdiction is fixed by law. Batas Pambansa Blg. 129 vests jurisdiction
over the subject matter of Civil Case No. 3123-2001-C in the RTC.21
The Court of Appeals ruling that the assailed Order issued by the RTC
of Calamba, Branch 92, was a nullity for lack of jurisdiction due to litis
pendentia and forum shopping, has no legal basis. The pendency of
another action does not strip a court of the jurisdiction granted by law.

II.
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN
ANNULLING AND SETTING ASIDE THE TRIAL COURTS ORDER DATED 4
SEPTEMBER 2001 AND ORDERING THE DISMISSAL OF CIVIL CASE NO.
3123-2001-C BELOW ON THE GROUND OF LITIS PENDENTIA, ON
ACCOUNT OF THE PENDENCY OF CIVIL CASE NO. 3110-2001-C.
III.
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN
ANNULLING AND SETTING ASIDE THE TRIAL COURTS ORDER DATED 4
SEPTEMBER 2001 AND ORDERING THE DISMISSAL OF CIVIL CASE NO.
3123-2001-C BELOW ON THE GROUND OF FORUM SHOPPING, ON
ACCOUNT OF THE PENDENCY OF CIVIL CASE NO. 3110-2001-C.

The Court of Appeals further ruled that a Motion for Reconsideration

was not necessary in view of the urgent necessity in this case. We are
not convinced. In the case of Bache and Co. (Phils.), Inc. v. Ruiz,22
relied on by the Court of Appeals, it was held that "time is of the
essence in view of the tax assessments sought to be enforced by
respondent officers of the Bureau of Internal Revenue against
petitioner corporation, on account of which immediate and more direct
action becomes necessary." Tax assessments in that case were based
on documents seized by virtue of an illegal search, and the deprivation
of the right to due process tainted the entire proceedings with illegality.
Hence, the urgent necessity of preventing the enforcement of the tax
assessments was patent. Respondents, on the other hand, cite the
case of Geronimo v. Commission on Elections,23 where the urgent
necessity of resolving a disqualification case for a position in local
government warranted the expeditious resort to certiorari. In the case

at bar, there is no analogously urgent circumstance which would

necessitate the relaxation of the rule on a Motion for Reconsideration.

(b) identity of rights asserted and reliefs prayed for, the reliefs being
founded on the same facts; and

Indeed, none of the exceptions for dispensing with a Motion for

Reconsideration is present here. None of the following cases cited by
respondents serves as adequate basis for their procedural lapse.

(c) the identity in the two cases should be such that the judgment that
may be rendered in one would, regardless of which party is successful,
amount to res judicata in the other.28

In Vigan Electric Light Co., Inc. v. Public Service Commission,24 the

questioned order was null and void for failure of respondent tribunal to
comply with due process requirements; in Matanguihan v. Tengco,25
the questioned order was a patent nullity for failure to acquire
jurisdiction over the defendants, which fact the records plainly
disclosed; and in National Electrification Administration v. Court of
Appeals,26 the questioned orders were void for vagueness. No such
patent nullity is evident in the Order issued by the trial court in this
case. Finally, while urgency may be a ground for dispensing with a
Motion for Reconsideration, in the case of Vivo v. Cloribel,27 cited by
respondents, the slow progress of the case would have rendered the
issues moot had a motion for reconsideration been availed of. We find
no such urgent circumstance in the case at bar.

The Court of Appeals correctly appreciated the identity of parties in

Civil Cases No. 3123-2001-C and 3110-2001-C. Well-settled is the rule
that lis pendens requires only substantial, and not absolute, identity of
parties.29 There is substantial identity of parties when there is a
community of interest between a party in the first case and a party in
the second case, even if the latter was not impleaded in the first
case.30 The parties in these cases are vying over the interests of the
two opposing corporations; the individuals are only incidentally
impleaded, being the natural persons purportedly accused of violating
these corporations rights.

Respondents, therefore, availed of a premature remedy when they

immediately raised the matter to the Court of Appeals on certiorari;
and the appellate court committed reversible error when it took
cognizance of respondents petition instead of dismissing the same
outright.
We come now to the substantive issues of the petition.
Litis pendentia is a Latin term which literally means "a pending suit." It
is variously referred to in some decisions as lis pendens and auter
action pendant. While it is normally connected with the control which
the court has on a property involved in a suit during the continuance
proceedings, it is more interposed as a ground for the dismissal of a
civil action pending in court.
Litis pendentia as a ground for the dismissal of a civil action refers to
that situation wherein another action is pending between the same
parties for the same cause of action, such that the second action
becomes unnecessary and vexatious. For litis pendentia to be invoked,
the concurrence of the following requisites is necessary:
(a) identity of parties or at least such as represent the same interest in
both actions;

Likewise, 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 identity of parties for purposes of
determining whether the case is dismissible on the ground of litis
pendentia.31
The identity of parties notwithstanding, litis pendentia does not obtain
in this case because of the absence of the second and third requisites.
The rights asserted in each of the cases involved are separate and
distinct; there are two subjects of controversy presented for
adjudication; and two causes of action are clearly involved. The fact
that respondents instituted a prior action for "Specific Performance and
Damages" is not a ground for defeating the petitioners action for
"Specific Performance, Recovery of Possession, and Sum of Money with
Replevin, Preliminary Mandatory Injunction, and Damages."
In Civil Case No. 3110-2001-C filed by respondents, the issue is
whether or not there was a breach of an oral promise to renew of the
VAASA. The issue in Civil Case No. 3123-2001-C, filed by petitioner, is
whether petitioner has the right to take possession of the subject
properties. Petitioners right of possession is founded on the ownership
of the subject goods, which ownership is not disputed and is not
contingent on the extension or non-extension of the VAASA. Hence, the
replevin suit can validly be tried even while the prior suit is being
litigated in the Regional Trial Court.
Possession of the subject properties is not an issue in Civil Case No.
3110-2001-C. The reliefs sought by respondent Integrated Silicon

therein are as follows: (1) execution of a written extension or renewal

of the VAASA; (2) compliance with the extended VAASA; and (3)
payment of overdue accounts, damages, and attorneys fees. The
reliefs sought by petitioner Agilent in Civil Case No. 3123-2001-C, on
the other hand, are as follows: (1) issuance of a Writ of Replevin or Writ
of Preliminary Mandatory Injunction; (2) recovery of possession of the
subject properties; (3) damages and attorneys fees.
Concededly, some items or pieces of evidence may be admissible in
both actions. It cannot be said, however, that exactly the same
evidence will support the decisions in both, since the legally significant
and controlling facts in each case are entirely different. Although the
VAASA figures prominently in both suits, Civil Case No. 3110-2001-C is
premised on a purported breach of an oral obligation to extend the
VAASA, and damages arising out of Agilents alleged failure to comply
with such purported extension. Civil Case No. 3123-2001-C, on the
other hand, is premised on a breach of the VAASA itself, and damages
arising to Agilent out of that purported breach.
It necessarily follows that the third requisite for litis pendentia is also
absent. The following are the elements of res judicata:

We now proceed to the issue of forum shopping.

The test for determining whether a party violated the rule against
forum-shopping was laid down in the case of Buan v. Lopez.34 Forum
shopping exists where the elements of litis pendentia are present, or
where a final judgment in one case will amount to res judicata in the
final other. There being no litis pendentia in this case, a judgment in
the said case will not amount to res judicata in Civil Case No. 31102001-C, and respondents contention on forum shopping must likewise
fail.
We are not unmindful of the afflictive consequences that may be
suffered by both petitioner and respondents if replevin is granted by
the trial court in Civil Case No. 3123-2001-C. If respondent Integrated
Silicon eventually wins Civil Case No. 3110-2001-C, and the VAASAs
terms are extended, petitioner corporation will have to comply with its
obligations thereunder, which would include the consignment of
properties similar to those it may recover by way of replevin in Civil
Case No. 3123-2001-C. However, petitioner will also suffer an injustice
if denied the remedy of replevin, resort to which is not only allowed but
encouraged by law.

(a) The former judgment must be final;

(b) The court which rendered judgment must have jurisdiction over the
parties and the subject matter;
(c) It must be a judgment on the merits; and
(d) There must be between the first and second actions identity of
parties, subject matter, and cause of action.32
In this case, any judgment rendered in one of the actions will not
amount to res judicata in the other action. There being different causes
of action, the decision in one case will not constitute res judicata as to
the other.
Of course, a decision in one case may, to a certain extent, affect the
other case. This, however, is not the test to determine the identity of
the causes of action. Whatever difficulties or inconvenience may be
entailed if both causes of action are pursued on separate remedies, the
proper solution is not the dismissal order of the Court of Appeals. The
possible consolidation of said cases, as well as stipulations and
appropriate modes of discovery, may well be considered by the court
below to subserve not only procedural expedience but, more
important, the ends of justice.33

Respondents argue that since Agilent is an unlicensed foreign

corporation doing business in the Philippines, it lacks the legal capacity
to file suit.35 The assailed acts of petitioner Agilent, purportedly in the
nature of "doing business" in the Philippines, are the following: (1)
mere entering into the VAASA, which is a "service contract";36 (2)
appointment of a full-time representative in Integrated Silicon, to
"oversee and supervise the production" of Agilents products;37 (3) the
appointment by Agilent of six full-time staff members, who were
permanently stationed at Integrated Silicons facilities in order to
inspect the finished goods for Agilent;38 and (4) Agilents participation
in the management, supervision and control of Integrated Silicon,39
including instructing Integrated Silicon to hire more employees to meet
Agilents increasing production needs,40 regularly performing quality
audit, evaluation and supervision of Integrated Silicons employees,41
regularly performing inventory audit of raw materials to be used by
Integrated Silicon, which was also required to provide weekly inventory
updates to Agilent,42 and providing and dictating Integrated Silicon on
the daily production schedule, volume and models of the products to
manufacture and ship for Agilent.43
A foreign corporation without a license is not ipso facto incapacitated
from bringing an action in Philippine courts. A license is necessary only

if a foreign corporation is "transacting" or "doing business" in the

country. The Corporation Code provides:
Sec. 133. Doing business without a license. No foreign corporation
transacting business in the Philippines without a license, or its
successors or assigns, shall be permitted to maintain or intervene in
any action, suit or proceeding in any court or administrative agency of
the Philippines; but such corporation may be sued or proceeded
against before Philippine courts or administrative tribunals on any valid
cause of action recognized under Philippine laws.
The aforementioned provision prevents an unlicensed foreign
corporation "doing business" in the Philippines from accessing our
courts.

case of Mentholatum v. Mangaliman.50 The Corporation Code itself is

silent as to what acts constitute doing or transacting business in the
Philippines.
Jurisprudence has it, however, that the term "implies a continuity of
commercial dealings and arrangements, and contemplates, to that
extent, the performance of acts or works or the exercise of some of the
functions normally incident to or in progressive prosecution of the
purpose and subject of its organization."51
In Mentholatum,52 this Court discoursed on the two general tests to
determine whether or not a foreign corporation can be considered as
"doing business" in the Philippines. The first of these is the substance
test, thus:53

In a number of cases, however, we have held that an unlicensed

foreign corporation doing business in the Philippines may bring suit in
Philippine courts against a Philippine citizen or entity who had
contracted with and benefited from said corporation.44 Such a suit is
premised on the doctrine of estoppel. A party is estopped from
challenging the personality of a corporation after having acknowledged
the same by entering into a contract with it. This doctrine of estoppel
to deny corporate existence and capacity applies to foreign as well as
domestic corporations.45 The application of this principle prevents a
person contracting with a foreign corporation from later taking
advantage of its noncompliance with the statutes chiefly in cases
where such person has received the benefits of the contract.46

The true test [for doing business], however, seems to be whether the
foreign corporation is continuing the body of the business or enterprise
for which it was organized or whether it has substantially retired from it
and turned it over to another.

The principles regarding the right of a foreign corporation to bring suit

in Philippine courts may thus be condensed in four statements: (1) if a
foreign corporation does business in the Philippines without a license, it
cannot sue before the Philippine courts;47 (2) if a foreign corporation is
not doing business in the Philippines, it needs no license to sue before
Philippine courts on an isolated transaction or on a cause of action
entirely independent of any business transaction48; (3) if a foreign
corporation does business in the Philippines without a license, a
Philippine citizen or entity which has contracted with said corporation
may be estopped from challenging the foreign corporations corporate
personality in a suit brought before Philippine courts;49 and (4) if a
foreign corporation does business in the Philippines with the required
license, it can sue before Philippine courts on any transaction.

Although each case must be judged in light of its attendant

circumstances, jurisprudence has evolved several guiding principles for
the application of these tests. For instance, considering that it
transacted with its Philippine counterpart for seven years, engaging in
futures contracts, this Court concluded that the foreign corporation in
Merrill Lynch Futures, Inc. v. Court of Appeals and Spouses Lara,55 was
doing business in the Philippines. In Commissioner of Internal Revenue
v. Japan Airlines ("JAL"),56 the Court held that JAL was doing business
in the Philippines, i.e., its commercial dealings in the country were
continuous despite the fact that no JAL aircraft landed in the country
as it sold tickets in the Philippines through a general sales agent, and
opened a promotions office here as well.

The challenge to Agilents legal capacity to file suit hinges on whether

or not it is doing business in the Philippines. However, there is no
definitive rule on what constitutes "doing", "engaging in", or
"transacting" business in the Philippines, as this Court observed in the

The second test is the continuity test, expressed thus:54

The term [doing business] implies a continuity of commercial dealings
and arrangements, and contemplates, to that extent, the performance
of acts or works or the exercise of some of the functions normally
incident to, and in the progressive prosecution of, the purpose and
object of its organization.

In General Corp. of the Phils. v. Union Insurance Society of Canton and

Firemans Fund Insurance,57 a foreign insurance corporation was held
to be doing business in the Philippines, as it appointed a settling agent
here, and issued 12 marine insurance policies. We held that these
transactions were not isolated or casual, but manifested the continuity

of the foreign corporations conduct and its intent to establish a

continuous business in the country. In Eriks PTE Ltd. v. Court of Appeals
and Enriquez,58 the foreign corporation sold its products to a Filipino
buyer who ordered the goods 16 times within an eight-month period.
Accordingly, this Court ruled that the corporation was doing business in
the Philippines, as there was a clear intention on its part to continue
the body of its business here, despite the relatively short span of time
involved. Communication Materials and Design, Inc., et al. v. Court of
Appeals, ITEC, et al.59 and Top-Weld Manufacturing v. ECED, IRTI, et
al.60 both involved the License and Technical Agreement and
Distributor Agreement of foreign corporations with their respective
local counterparts that were the primary bases for the Courts ruling
that the foreign corporations were doing business in the Philippines.61
In particular, the Court cited the highly restrictive nature of certain
provisions in the agreements involved, such that, as stated in
Communication Materials, the Philippine entity is reduced to a mere
extension or instrument of the foreign corporation. For example, in
Communication Materials, the Court deemed the "No Competing
Product" provision of the Representative Agreement therein
restrictive.62
The case law definition has evolved into a statutory definition, having
been adopted with some qualifications in various pieces of legislation.
The Foreign Investments Act of 1991 (the "FIA"; Republic Act No. 7042,
as amended), defines "doing business" as follows:

Section 1 of the Implementing Rules and Regulations of the FIA (as

amended by Republic Act No. 8179) provides that the following shall
not be deemed "doing business":
(1) Mere investment as a shareholder by a foreign entity in domestic
corporations duly registered to do business, and/or the exercise of
rights as such investor;
(2) Having a nominee director or officer to represent its interest in such
corporation;
(3) Appointing a representative or distributor domiciled in the
Philippines which transacts business in the representatives or
distributors own name and account;
(4) The publication of a general advertisement through any print or
broadcast media;
(5) Maintaining a stock of goods in the Philippines solely for the
purpose of having the same processed by another entity in the
Philippines;
(6) Consignment by a foreign entity of equipment with a local company
to be used in the processing of products for export;
(7) Collecting information in the Philippines; and

Sec. 3, par. (d). The phrase "doing business" shall include soliciting
orders, service contracts, opening offices, whether called "liaison"
offices or branches; appointing representatives or distributors
domiciled in the Philippines or who in any calendar year stay in the
country for a period or periods totaling one hundred eighty (180) days
or more; participating in the management, supervision or control of
any domestic business, firm, entity, or corporation in the Philippines;
and any other act or acts that imply a continuity of commercial
dealings or arrangements, and contemplate to that extent the
performance of acts or works, or the exercise of some of the functions
normally incident to, and in the progressive prosecution of, commercial
gain or of the purpose and object of the business organization.
An analysis of the relevant case law, in conjunction with Section 1 of
the Implementing Rules and Regulations of the FIA (as amended by
Republic Act No. 8179), would demonstrate that the acts enumerated
in the VAASA do not constitute "doing business" in the Philippines.

(8) Performing services auxiliary to an existing isolated contract of sale

which are not on a continuing basis, such as installing in the Philippines
machinery it has manufactured or exported to the Philippines,
servicing the same, training domestic workers to operate it, and similar
incidental services.
By and large, to constitute "doing business", the activity to be
undertaken in the Philippines is one that is for profit-making.63
By the clear terms of the VAASA, Agilents activities in the Philippines
were confined to (1) maintaining a stock of goods in the Philippines
solely for the purpose of having the same processed by Integrated
Silicon; and (2) consignment of equipment with Integrated Silicon to be
used in the processing of products for export. As such, we hold that,
based on the evidence presented thus far, Agilent cannot be deemed
to be "doing business" in the Philippines. Respondents contention that
Agilent lacks the legal capacity to file suit is therefore devoid of merit.
As a foreign corporation not doing business in the Philippines, it
needed no license before it can sue before our courts.

Finally, as to Agilents purported failure to state a cause of action

against the individual respondents, we likewise rule in favor of
petitioner. A Motion to Dismiss hypothetically admits all the allegations
in the Complaint, which plainly alleges that these individual
respondents had committed or permitted the commission of acts
prejudicial to Agilent. Whether or not these individuals had divested
themselves of their interests in Integrated Silicon, or are no longer
members of Integrated Silicons Board of Directors, is a matter of
defense best threshed out during trial.
WHEREFORE, PREMISES CONSIDERED, the petition is GRANTED. The
Decision of the Court of Appeals in CA-G.R. SP No. 66574 dated August
12, 2002, which dismissed Civil Case No. 3123-2001-C,
is REVERSED and SET ASIDE. The Order dated September 4, 2001
issued by the Regional Trial Court of Calamba, Laguna, Branch 92, in
Civil Case No. 3123-2001-C, is REINSTATED. Agilents application for a
Writ of Replevin is GRANTED.
No pronouncement as to costs.
SO ORDERED.