[FOREIGN CORPORATIONS—Concept of “Doing Business”; Effect of Doing Business (b) The spouses were never informed that MLPI
(b) The spouses were never informed that MLPI was not licensed to do business in the
without License]
09 MERRILL LYNCH V. CA
July 24, 1992 | Narvasa, C.J.
Doctrine: The general rule is, in the absence of fraud by a person who has dealt with a
corporation of foreign origin as a corporate entity, that person is estopped to deny the corporate
existence in any action leading out of or involving such contract or dealing with the corporation.
It is inequitable to evade payment of an otherwise legitimate indebtedness due and owing to a
foreign corporation upon the plea that it should not have done business in the country in the first
place, or that its agent had no to operate here. The exception is when its existence is attacked
for causes which have arisen after the contract, or other dealing relied on as an estoppel, was
made.
Facts:
 Merrill Lynch Futures, Inc. (ML FUTURES) is a non-resident foreign corporation, not
doing business in the Philippines, duly organized in Delaware, U.S.A. It is a "futures
commission merchant" duly licensed to act as such in the futures markets and exchanges
in the US. Essentially, ML functions as a broker executing orders to buy and sell futures
contracts1 received from its customers on U.S. futures exchanges.
 According to ML FUTURES, it entered into a Futures Customer Agreement with spouses
Lara on September 28, 1983.
o Under this contract, ML FUTURES agreed to act as the spouses’ broker for the
purchase & sale of futures contracts in the U.S.
o Pursuant to such contract, orders to buy and sell futures contracts were transmitted
to ML FUTURES by the spouses through the facilities of Merrill Lynch Philippines,
Inc. (MLPI), a Philippine corporation.
o Allegedly, spouses Lara knew and were duly advised that MLPI was not a broker in
futures contracts, and did not have a license from the SEC to operate as a commodity
trading advisor.2
 In line with the above mentioned agreement and through Merrill Lynch Philippines, Inc.,
the spouses Lara actively traded in futures contracts, including "stock index futures" for 4
years (1983-1987).
 However, due to a loss amounting to US$160,749.69, which was incurred by the 3
transactions involving "index futures," and after setting this off against an amount of
US$75,913.42 which ML FUTURES owed to spouses Lara, the latter became indebted to
ML FUTURES for the ensuing balance of US$84,836.27.
 Hence, on November 23, 1987, ML FUTURES filed a complaint with the RTC against the
sps. Lara for the recovery of debt, interest thereon, damages, and attorney's fees. ML
FUTURES prayed for a preliminary attachment of spouses’ properties up to the value of at
least P2,267,139.50.
 The preliminary attachment was issued and summons were duly served on the spouses Lara
who then filed an MR.
 In their defense, spouses Lara alleged that—
(a) Although not licensed to do so, ML FUTURES has been doing business in the
Philippines for the last 4 years, as shown clearly by the allegations in its complaint.
Thus, ML FUTURES is prohibited by law "to maintain or intervene in any action,
suit or proceeding in any court or administrative agency of the Philippines” since it
was doing business without license.
1 2
Futures contract: a "contractual commitment to buy and sell a standardized quantity of a particular item at a
specified future settlement date and at a price agreed upon, with the purchase or sale being executed on a
regulated futures exchange.
country. Contrary to the allegations, all transactions had actually been with Merrill
Lynch Pierce Fenner & Smith, Inc. As proof, the spouses attached to their MTD
copies of 8 agreements, receipts or reminders, executed on standard printed forms
of said Merrill Lynch Pierce Fenner & Smith Inc., not ML FUTURES.
 In its Opposition, ML FUTURES said that –
(a) Paragraph 4 of its complaint, which was admitted by the spouses, states that ML
FUTURES has been actively trading in futures contracts in U.S. futures exchanges
from 1983-1987. Therefore, if the trading was in the U.S., ML FUTURES cannot be
considered to be doing business in the Philippines.
(b) In addition, ML FUTURES presented a printed form of "Merrill Lynch Futures, Inc."
filled out and signed by the spouses when they opened an account with ML Futures.
The form provides that Merrill Lynch, Pierce, Fenner & Smith Philippines, Inc. is
prohibited by the SEC from accepting funds in the trading advisor's name for trading
commodity interests. All funds in the trading program are, supposedly, to be placed
with ML FUTURES instead. The form also provides that all legal relationships are
governed by applicable laws in countries outside the Philippines where sale and
purchase transactions take place, and
(c) Defendant spouses should not be allowed to invoke the aid of the court with unclean
hands.
 In their REPLY, the defendants reaffirmed their lack of awareness of MLPI’s lack of a
license, claiming that they learned of this only after inquiring with the SEC.
 TRIAL COURT: ruled in favor of spouses, sustaining MTD and discharging of the writ
of preliminary attachment.
 CA: affirmed. “The Trial Court had seen through the charade in the representation of
MLPI that it is only a trading advisor when in fact it is a conduit in plaintiff's business
transactions in the Philippines.” As section 133 of the Corporation Code provides:
o “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 in 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.”
o As regards the fact that ML FUTURES had been “doing business" in this country
in legal contemplation, the CA cites the case of Mentholatum v. Mangaliman, and
Section 1 of Republic Act No. 5455 which defines doing business to 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 totaling 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 functions normally incident
to, and in progressive prosecution of commercial gain or of the purpose and object
of the business organization.”
o In any event, there is adequate proof of the activities of MLPI which manifestly
show that it performed a series of business acts, consummated contracts and
According to the case, a commodity trading advisor is 'an entity which, not being a broker, furnishes advice
on commodity futures to persons who trade in futures contracts
 undertook transactions for the period from 1983 to October 1987 and because ML
FUTURES had done so without license, it consequently had "no legal personality
to bring suit in Philippine courts.
Issues:
W/N ML FUTURES was doing business in the Philippines without a license—YES
W/N ML FUTURES may sue in the Philippine courts to enforce its rights even if it had
transacted business in the country without being licensed to do so—YES
Held:
1st issue: YES, the facts on record adequately establish this.
● Preliminarily, the SC had to address the issue raised as regards the evidence presented.
Although no affidavit or deposition was attached to the Lara Spouses' MTD and the
motion itself was not verified, it is significant that ML FUTURES raised no issue relative
to the authenticity of the documents. There being no question respecting their
genuineness, the SC found no error in the Trial Court’s decision. Neither may ML
FUTURES argue that it had been denied due process since the claim of lack of its
capacity to sue was being made to rest squarely on the documents annexed, and ML
FUTURES had more than ample opportunity to impugn the documents and require their
authentication, but did not do so.
● The SC is satisfied that the facts on record adequately establish that ML FUTURES,
operating in the US, had done business with the Lara Spouses through MLPI & executed
the transactions without ML FUTURES being licensed to transact business here. This is
consistent with the factual findings of the Trial Court, CA and the SEC.
● SC found it unnecessary to determine whether the domestic was MLPI or Merrill Lynch
Pierce Fenner & Smith (MLPI's alleged predecessor). The fact is that ML FUTURES
did deal with futures contracts in exchanges in the US in behalf and for the account
of the Lara spouses, and that, on several occasions, the latter received account
documents and money in connection with those transactions.
 In fact, even their last transaction, in which the spouses suffered a loss, they nonetheless
still received some monetary advantage, for ML FUTURES credited them with the
amount of US$75,913.42, thus reducing their debt to US$84,836.27.
 Given these facts, and assuming that the Lara Spouses were aware from the outset that
(1) ML FUTURES had no license to do business in this country and (2) MLPI had no
authority to act as broker for it, it is inequitable for the Laras to evade payment of an
otherwise legitimate indebtedness due and owing to ML FUTURES upon the plea
that it should not have done business in this country in the first place, or that its
agent in this country, MLPI, had no license either to operate as a "commodity
and/or financial futures broker."
 Considerations of equity dictate that, at the very least, the issues of whether the Laras
are liable to ML FUTURES and if so in what amount, and whether they were so far
aware of the absence of the requisite licenses on the part of ML FUTURES and its
Philippine correspondent, MLPI, as to be estopped from alleging that fact as defense to
such liability, should be ventilated and adjudicated on the merits by the proper trial court.
Dispositive
WHEREFORE, the decision of the Court of Appeals in CA-G.R. CV No. 16478 dated November 27, 1990
and its Resolution of March 7, 1991 are REVERSED and SET ASIDE, and the Regional Trial Court at
Quezon City, Branch 84, is ORDERED to reinstate Civil Case No. Q-52360 and forthwith conduct a hearing
to adjudicate the issues set out in the preceding paragraph on the merits.

2nd issue: YES, this case falls under the general rule on estoppel. Even if ML FUTURES
was not licensed to do business here, the spouses are estopped from assailing its corporate
existence after deriving benefits from their business relations.
● Citing the case of Asia Banking Corporation v. Standard Products Co., the SC held
that—
○ General rule: In the absence of fraud by the person who has contracted or dealt
with an association in such a way as to recognize and, in effect, admit its legal
existence as a corporate body, the person is thereby estopped to deny its
corporate existence in any action leading out of or involving such contract or
dealing
○ Exception: Its existence is attacked for causes which have arisen since making
the contract, or of another dealing relied on, as an estoppel
● The doctrine of estoppel to deny corporate existence applies to foreign as well as to
domestic corporations and one who has dealt with a corporation of foreign origin
as a corporate entity is estopped to deny its corporate existence and capacity.
○ REASON: To prevent 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, having acted as agent for
the corporation.
 IN THIS CASE, there is no question that the spouses received benefits generated by
their business relations with ML FUTURES. Those business relations, according to the
Laras themselves, spanned a period of 7 years. SC found that they evidently found such
relations to be profitable; otherwise, they would have terminated their dealings
with ML FUTURES much earlier.