010 ERIKS LTD. v.
CA (MATSUMURA) DOCTRINE: Foreign corporations which conduct regular business should be denied any
Feb. 6, 1997 | Panganiban J. | Estoppel Doctrine
PETITIONER: Eriks PTE., Ltd
RESPONDENTS: Court of Appeals and Delfin Enriquez, Jr.
SUMMARY: Eriks Pte., Ltd is a non-resident foreign corporation engaged in the
manufacture and sale of elements such as valves and pipes used for industrial purposes. It
transacted with Delfin Enriquez (under the business name Darlene EB Controls Centre
and/or EB Karmine Commercial) 16 times in the span of 5 months where Enriquez ordered
various elements from Eriks on various occasions which would be paid through the 90-day
credit term of Enriquez. However, Enriquez didn’t settle his account despite demand, so
Eriks filed a case with the RTC of Makati. This was dismissed on the ground that Eriks is a
foreign corporation doing business in the Philippines without a license. Such was affirmed
by the SC.
The issue in this case is W/N Eriks, a foreign corporation, can maintain an action in the
Philippine courts without first obtaining a license to do business in the Philippine —NO.
The SC ruled that Section 133 of the Corporation Code prohibits, not merely absence of the
prescribed license, but it also bars a foreign corporation “doing business” in the Philippines
without such license access to our courts. Note that the operative word is “doing business”
meaning foreign corporations doing isolated transactions may seek recourse in philippine
courts even without a license. Thus, the court looked into what “doing business” meant under
our jurisdiction because the Corporation Code does not provide such.What is determinative
of “doing business” is not really the number or the quantity of the transactions, but more
importantly, the intention of an entity to continue the body of its business in the country. The
number and quantity are merely evidence of such intention. Moreover, the accepted rule in
jurisprudence is that each case must be judged in the light of its own environmental
circumstances.
In this case, facts show that Eriks showed an intention to continue transacting with Enriquez
because of facts such as (1) the sale by Eriks was actually carried out in the progressive
prosecution of commercial gain and the pursuit of the purpose and object of its business,
pure and simple (2) it granted and extended the 90-day credit terms to Enriquez, and (3)
absence of any fact or circumstance which might tend even remotely to negate such intention
to continue the progressive prosecution of Eriks’s business activities in this country. Given
the facts, the SC cannot see how Eriks’ business dealings will fit the category of “isolated
transactions” considering that its intention to continue and pursue the corpus of its business
in the country had been clearly established. Hence, Eriks must be held to be incapacitated to
maintain the action a quo against Enriquez. The Court cannot allow foreign corporations or
entities which conduct regular business any access to courts without the fulfillment by such
corporations of the necessary requisites to be subjected to our government’s regulation and
authority. However, this judgment will not create res judicata, and Eriks may seek redress
from the courts once it acquires a license.
access to courts until they secure a license so as to ensure that they will abide by the decisions
of our courts, even if adverse to it. Dismissal of the petition would be without prejudice to
the foreign corporation subsequently re-filing the case when it has obtained the requisite
license.
FACTS:
1. Eriks Pte., Ltd. is a non-resident foreign corporation engaged in the manufacture
and sale of elements used in sealing pumps, valves and pipes for industrial purposes,
valves and control equipment used for industrial fluid control and PVC pipes and
fittings for industrial uses.
2. On various dates during the period of January 17 to August 16, 1989, Delfin
Enriquez, under the business name Darlene EB Controls Center and/or EB Karmine
Commercial, ordered and received from Eriks various elements used in sealing
pumps, valves, pipes and control equipment, PVC pipes and fittings. (A total of 16
times over the past 5 months)
3. These ordered materials were delivered via airfreight with corresponding invoices.
4. The transfers of goods were perfected in Singapore, for Enriquez’s account, F.O.B.
Singapore, with a 90-day credit term. Subsequently, Eriks demanded that Enriquez
settle his account, but the latter refused.
5. On August 28, 1991, Eriks filed a case with the RTC of Makati against Enriquez
for the recovery of S$41,939.63 or its equivalent in Philippine currency, plus
interest thereon and damages.
6. Enriquez responded with a Motion to Dismiss, contending that Eriks had no legal
capacity to sue.
7. The RTC dismissed the action on the ground that Eriks is a foreign corporation
doing business in the Philippines without a license.
8. The CA affirmed this decision stating that Eriks had no legal capacity to sue.
9. Hence, this petition.
10. Eriks insists that the series of sales made to Enriquez would still constitute isolated
transactions despite the number of invoices covering several separate and distinct
items sold and shipped over a span of four to five months, and that an affirmation
of the CA’s ruling would result in injustice and unjust enrichment.
11. Enriquez counters that to declare Eriks as possessing capacity to sue will render
nugatory the provisions of the Corporation Code and constitute a gross violation of
our laws. Thus, he argues, petitioner is undeserving of legal protection.
ISSUE/s:
1. WoN a foreign corporation which sold its products sixteen times over a five-month
period to the same Filipino buyer can maintain maintaining an action to collect
payment therefor in Philippine courts without first obtaining a license to do business
in the Philippines – NO because a foreign corporation doing business in the
Philippines needs a license to have access to our courts.
RULING: WHEREFORE, premises considered, the instant petition is hereby DENIED and
the assailed Decision is AFFIRMED.
RATIO:
1. The resolution of this issue depends on whether Eriks’ business with Enriquez may
be treated as isolated transactions.
2. Section 133 of the Corporation Code states that: 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
3. This provision prohibits, not merely absence of the prescribed license, but it
also bars a foreign corporation “doing business” in the Philippines without
such license access to our courts.
4. A foreign corporation without such license is not ipso facto incapacitated from
bringing an action. A license is necessary only if it is “transacting or doing
business” in the country.
5. However, there is no definitive rule on what constitutes “doing,” “engaging in,” or
“transacting” business. The Corporation Code itself does not define such terms.
6. To fill the gap, the evolution of its statutory definition has produced a rather all-
encompassing concept in Republic Act No. 7042 (An Act to Promote Foreign
Investments, Prescribe the Procedures for Registering Enterprises Doing Business
in the Philippines, and for Other Purposes)
“SEC. 3. Definitions.—As used in this Act:
xxx xxx xxx
(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 eight(y) (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.”
7. In The Mentholatum Co., Inc. vs. Mangaliman, the SC discussed the test to
determine whether a foreign company is “doing business” in the Philippines:
The true test, however, seems to be whether the foreign corporation is continuing
the body or substance 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 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, and in progressive prosecution of, the purpose and
object of its organization.
8. The accepted rule in jurisprudence is that each case must be judged in the light
of its own environmental circumstances. It should be kept in mind that the
purpose of the law is to subject the foreign corporation doing business in the
Philippines to the jurisdiction of our courts.
9. It is not to prevent the foreign corporation from performing single or isolated acts,
but to bar it from acquiring a domicile for the purpose of business without first
taking the steps necessary to render it amenable to suits in the local courts.
10. More than the sheer number of transactions entered into, a clear and unmistakable
intention on the part of petitioner to continue the body of its business in the
Philippines is more than apparent.
11. As alleged in its complaint, it is engaged in the manufacture and sale of elements
used in sealing pumps, valves, and pipes for industrial purposes, valves and control
equipment used for industrial fluid control and PVC pipes and fittings for industrial
use. Thus, the sale by Eriks of the items covered by the receipts, which are part and
parcel of its main product line, was actually carried out in the progressive
prosecution of commercial gain and the pursuit of the purpose and object of its
business, pure and simple.
12. Further, its grant and extension of 90-day credit terms to Enriquez for every
purchase made, unarguably shows an intention to continue transacting with
Enriquez, since in the usual course of commercial transactions, credit is extended
only to customers in good standing or to those on whom there is an intention to
maintain long-term relationship. This being so, the existence of a distributorship
agreement between the parties, as alleged but not proven by Enriquez, would,
if duly established by competent evidence, be merely corroborative, and failure
to sufficiently prove said allegation will not significantly affect the finding of
the courts below. Nor our own ruling.
13. It is precisely upon the set of facts above detailed that the SC concur with the CA
that Eriks corporation was doing business in the country.
14. Equally important is the absence of any fact or circumstance which might tend
even remotely to negate such intention to continue the progressive prosecution of
Eriks’s business activities in this country. Had Enriquez not turned out to be a bad
risk, in all likelihood Eriks would have indefinitely continued its commercial
transactions with him, and not surprisingly, in ever increasing volumes.
15. The series of transactions in question could not have been isolated or casual
transactions.
16. What is determinative of “doing business” is not really the number or the quantity
of the transactions, but more importantly, the intention of an entity to continue
the body of its business in the country. The number and quantity are merely
evidence of such intention.
17. The phrase “isolated transaction” has a definite and fixed meaning, i.e. a transaction
or series of transactions set apart from the common business of a foreign enterprise
in the sense that there is no intention to engage in a progressive pursuit of the
purpose and object of the business organization. Whether a foreign corporation is
“doing business” does not necessarily depend upon the frequency of its transactions,
but more upon the nature and character of the transactions.
18. Given the facts, the SC cannot see how Eriks’ business dealings will fit the category
of “isolated transactions” considering that its intention to continue and pursue the
corpus of its business in the country had been clearly established. It has not
presented any convincing argument with equally convincing evidence for us to rule
otherwise.
19. Hence, Eriks must be held to be incapacitated to maintain the action a quo against
Enriquez.
20. It was never the intent of the legislature to bar court access to a foreign corporation
or entity which happens to obtain an isolated order for business in the Philippines.
Neither, did it intend to shield debtors from their legitimate liabilities or obligations.
But it cannot allow foreign corporations or entities which conduct regular
business any access to courts without the fulfillment by such corporations of
the necessary requisites to be subjected to our government’s regulation and
authority.
21. By securing a license, the foreign entity would be giving assurance that it will abide
by the decisions of our courts, even if adverse to it.
22. However, the SC mentions that there are still remedies that Eriks may avail of. Res
judicata does not set in a case dismissed for lack of capacity to sue, because there
has been no determination on the merits.
23. Subsequent acquisition of the license will cure the lack of capacity at the time
of the execution of the contract. The requirement of a license is not meant to put
foreign corporations at a disadvantage. Rather, the doctrine of lack of capacity to
sue is based on considerations of sound public policy.
 014 GEORG GROTJAHN v. ISNANI (Fordan)
Aug. 10, 1994 | Puno, J. | Estoppel Doctrine
PETITIONER: Georg Grotjahn GMBH & Co.
RESPONDENT: Hon. Lucia Violago Isnani, Presiding Judge, RTC Makati;
Romana R. Lachinebre; and Teofilo A. Lachinebre
SUMMARY: GMBH is a multinational company organized and existing under the
laws of the Federal Republic of Germany. It filed an application with the SEC for
the establishment of a regional or area headquarters in the Philippines, pursuant to
Presidential Decree No. 218. The application was then approved by the Board of
Investments (BOI) and the SEC issued a Certificate of Registration and License.
Romana, sales representative, secured loan and cash advances from GMBH wherein
P12,170.37 was still outstanding and remained unpaid. Thereafter, she filed a
complaint with the NLRC for illegal suspension, dismissal, and non-payment of
commissions against GMBH. In turn, GMBH filed a complaint for damages of
P120,000 against Romana also with NLRC. The 2 cases were consolidated. GMBH
filed another complaint for collection of sum of money against spouses Romana and
Teofilo. Spouses Romana and Teofilo moved to dismiss the complaint which was
granted by Judge Isnani contending that GMBH has no capacity to sue. Hence, the
current petition.
The issue is whether or not GMBH, registered as regional/area headquarters, has the
capacity to sue in the Philippines. YES. It is clear that GMBH is a foreign corporation
doing business in the Philippines. It is covered by the Omnibus Investment Code of
1987 wherein it defined what constitutes “doing business”. However, There is no
general rule or governing principle as to what constitutes “doing” or “engaging in”
or “transacting” business in the Philippines. Each case must be judged in the light of
its peculiar circumstances. In this case, GMBH does not engage in commercial
dealings or activities in the country because it is precluded from doing so by PD 218,
under which it was established. Nonetheless, since 1983, it has been continuously
acting as a supervision, communications and coordination center for its home
office’s affiliates in Singapore, and in the process has named its local agent and has
employed Philippine nationals like Romana. From this uninterrupted performance
by petitioner of acts pursuant to its primary purposes and functions as a regional/area
headquarters for its home office, it is clear that GMBH is doing business in the
country. Moreover, Romana and Teofilo are estopped from assailing the personality
of GMBH, as held in Merrill Lynch Futures, Inc. vs. Court of Appeals. *doctrine*
DOCTRINE: The rule is that a party is estopped to challenge the personality of a
corporation after having acknowledged the same by entering into a contract with it.
And the ‘doctrine of estoppel to deny corporate existence applies to foreign as well
as to domestic corporations;’ ‘one who has dealt with a corporation of foreign origin
as a corporate entity is estopped to deny its corporate existence and capacity.’ The
principle ‘will be applied 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.
FACTS:
1. Georg Grotjahn GMBH & Co. (GMBH) is a multinational company organized and
existing under the laws of the Federal Republic of Germany.
2. On July 6, 1983, GMBH filed an application with the Securities and Exchange
Commission (SEC) for the establishment of a regional or area headquarters in the
Philippines, pursuant to Presidential Decree No. 218 (PD 218).
3. The application was then approved by the Board of Investments (BOI) and the SEC
issued a Certificate of Registration and License.
4. Romana R. Lanchinebre (Romana) was a sales representative of GMBH from 1983
to mid-1992. On March 12, 1992, she secured a loan of P25,000 from GMBH. On
March 26 and June 10, 1992, she made additional cash advances of P10,000. Of the
total amount, P12,170.37 remained unpaid despite the demand made by GMBH.
5. On July 22, 1992, Romana filed with the Arbitration Branch of National Labor
Relations Commission (NLRC) in Manila, a complaint for illegal suspension,
dismissal, and non-payment of commissions against GMBH.
6. In turn, GMBH filed a complaint for damages of P120,000 against Romana also
with NLRC. The 2 cases were consolidated.
7. However, on Sept. 2, 1992, GMBH filed another complaint for collection of sum of
money against spouses Romana and Teofilo. Spouses Romana and Teofilo moved
to dismiss the complaint which was opposed by GMBH.
8. On Dec. 21, 1992, Judge Lucia Violago Isnani (Judge Isnani) granted the motion to
dismiss on the ground that:
a. the jurisdiction for claim of advances (complaint for sum of money) is with
the NLRC since it arises from employer-employee relationship
b. GMBH has no legal capacity to sue since the Certificate of Registration and
License issued to it does not include the license to do business in the
Philippines
9. Hence, the current petition.
ISSUE: Whether or not GMBH, registered as regional/area headquarters, has the
capacity to sue in the Philippines. – YES, since it performed acts pursuant to its primary
purposes and functions as a regional/area headquarters for its home office, it is clear that it
is doing business in the country, thus, has the capacity to sue.
RULING: The instant petition is granted. The orders are reversed and set aside. The RTC
of Makati is hereby ordered to here the reinstated case on its merits.
RATIO:
1. The trial court erred in holding that GMBH does not have capacity to sue in the
Philippines.
2. It is clear that GMBH is a foreign corporation doing business in the Philippines. It
is covered by the Omnibus Investment Code of 1987. Said law defines “doing
business,” as follows:
“x x x 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 (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.”
3. There is no general rule or governing principle as to what constitutes “doing” or
“engaging in” or “transacting” business in the Philippines. Each case must be
judged in the light of its peculiar circumstances.
4. In this case, GMBH does not engage in commercial dealings or activities in the
country because it is precluded from doing so by PD 218, under which it was
established.
5. Nonetheless, since 1983, it has been continuously acting as a supervision,
communications and coordination center for its home office’s affiliates in
Singapore, and in the process has named its local agent and has employed Philippine
nationals like Romana.
6. From this uninterrupted performance by GMBH of acts pursuant to its primary
purposes and functions as a regional/area headquarters for its home office, it is clear
that it is doing business in the country.
7. Moreover, Romana and Teofilo are estopped from assailing the personality of
GMBH. In Merrill Lynch Futures, Inc. vs. Court of Appeals:
“The rule is that a party is estopped to challenge the personality of a
corporation after having acknowledged the same by entering into a contract
with it. And the ‘doctrine of estoppel to deny corporate existence applies to
foreign as well as to domestic corporations;’ ‘one who has dealt with a
corporation of foreign origin as a corporate entity is estopped to deny its
corporate existence and capacity.’ The principle ‘will be applied 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, x x x.” (Citations omitted.)
 015 LITTON MILLS v. CA (Gonzales)
May 15, 1996 | Mendoza, J. | Foreign Corporations
PETITIONER: Litton Mills, Inc.
RESPONDENT: Court of Appeals and Gelhaar Uniform Company, Inc.
SUMMARY: Litton entered into an agreement with Empire, local agent of Gelhaar, which
is foreign corporation. Litton agreed to supply Gelhaar 7,770 dozens of soccer jerseys.
Before Litton could collect on the letter of credit, it must present inspection certificate from
Empire. However, Empire refused to issue the certificate despite the delivery of the goods.
Litton thus filed a complaint for specific performance. Atty. Noval in behalf of Empire filed
an Answer. The Sycip Law Firm filed motions to dimiss and to quash the summons on the
ground that Gelhaar was a foreign corporation not doing business in the Philippines. RTC
denied the motions. CA reversed.
The issues in this case are:
1. WoN the fact of doing business must first be established before summons can
be served – NO because it is enough that the fact of doing business be alleged
in the complaint. Here, the allegation that Empire, for and in behalf of Gelhaar,
ordered 7,770 dozens of soccer jerseys from Litton and for this purpose Gelhaar
caused the opening of an irrevocable letter of credit in favor of Litton is a
sufficient allegation that Gelhaar was doing business in the Philippines.
2. WoN the contract was a single and isolated transaction that it did not constitute
doing business – NO because the purchasing of soccer jerseys is within the
ordinary course of business of the company and is thus doing business in the
Philippines.
3. WoN the appearance of Atty. Noval in behalf of Gelhaar was binding on the
latter – NO because Atty. Noval was not appointed as counsel by Gelhaar.
Thus, since the service of summons was validly made through Gelhaar’s agent, Empire,
(because sufficient complaint and Gelhaar was doing business in the Philippines), the court
acquired jurisdiction over Gelhaar. However, the answer filed by Atty. Noval is not binding
on Gelhaar so the latter was given time to file its answer.
DOCTRINE: A court need not go beyond the allegations in the complaint to determine
whether or not a defendant foreign corporation is doing business for the purpose of Rule
14, Sec. 14.
Where a single act or transaction of a foreign corporation is not merely incidental or casual
but is of such character as distinctly to indicate a purpose on the part of the foreign
corporation to do other business in the state, such act will be considered as constituting
doing business.
FACTS:
1. Litton entered into an agreement with Empire Sales Philippines Corporation
(Empire), as local agent of Gelhaar, a corporation organized under the laws of the
United States.
2. Litton agreed to supply Gelhaar 7,770 dozens of soccer jerseys. Before Litton could
collect from the bank on the letter of credit, it must present an inspection certificate
issued by Empire that the goods were in satisfactory condition.
3. Litton sent four shipments. A fifth shipment was inspected by Empire, but Empire
refused to issue the required certificate of inspection.
4. Litton filed a complaint for specific performance with the RTC alleging that
Empire’s refusal to issue the certificate was without valid reason. Litton sought the
issuance of a writ of preliminary mandatory injunction and the recovery of
damages.
5. The trial court issued the writ.
6. The next day, Empire issued the inspection certificate, so that the cargo was
shipped on time.
7. Atty. Remie Noval filed in behalf of the Empire a "Motion For Extension of Time
To File An Answer/Responsive Pleading."
a. He filed ten motions of extension, which were all granted.
b. Atty. Noval filed the answer and pretrial brief for the Empire.
8. The law firm of Sycip, Salazar, Feliciano and Hernandez entered a special
appearance.
a. It moved to dismiss the case and to quash the summons on the ground that
Gelhaar was a foreign corporation not doing business in the Philippines,
and as such, was beyond the reach of the local courts.
b. Litton failed to allege and prove that Gelhaar was doing business in the
Philippines, which was required by the ruling in Pacific Micronisian
Lines, Inc. v. Del Rosario, before summons could be served under Rule
14, Sec. 14.
c. It denied the authority of Atty. Noval to appear for Gelhaar and that the
answer filed by Atty. Noval could not bind Gelhaar and its filing did not
amount to Gelhaar's submission to the jurisdiction of the court.
9. Litton opposed.
10. Empire moved to dismiss on the ground of failure of the complaint to state a cause
of action since the complaint alleged that Empire only acted as agent of Gelhaar;
that it was made party-defendant only for the purpose of securing the issuance of
an inspection certificate; and that it had already issued such certificate and the
shipment had already been shipped on time.
11. Atty. Noval claimed that he had been authorized by Gelhaar to appear for it in the
case and that the belated repudiation of his authority could be only an afterthought
because of problems which had developed between Gelhaar and Empire. (Gelhaar
refused to pay Empire for its services as agent). Nevertheless, Atty. Noval
withdrew his appearance with respect to Gelhaar.
12. RTC issued an order denying for lack of merit Gelhaar's motion to dismiss and to
quash the summons.
 a. Gelhaar was doing business in the Philippines, and that the service of
summons on Gelhaar was therefore valid.
13. CA set aside the orders of the RTC.
a. The proof that Gelhaar was doing business in the Philippines should have
been presented because, under the doctrine of Pacific Micronisian, this is
a condition sine qua non for the service of summons under Rule 14, Sec.
14 of the Rules of Court, and that it was error for the RTC to rely on the
mere allegations of the complaint.
b. RTC did not acquire jurisdiction over Gelhaar through voluntary
submission because the authority of Atty. Noval to represent Gelhaar had
been questioned.
c. CA ordered the RTC to issue anew summons to be served on Empire, after
the allegation in the complaint that Gelhaar was doing business in the
Philippines had been established.
14. Hence this petition.
15. Litton contends that jurisdiction over Gelhaar was acquired by the RTC by the
service of summons through Gelhaar's agent and, at any rate, by the voluntary
appearance of Atty. Remie Noval as counsel of Gelhaar.
ISSUES:
1. WoN the fact of doing business must first be established before summons can be
served – NO because it is enough that the fact of doing business be alleged in the
complaint
2. WoN the contract was a single and isolated transaction that it did not constitute
doing business – NO because the purchasing of soccer jerseys is within the ordinary
course of business of the company and is thus doing business in the Philippines
3. WoN the appearance of Atty. Noval in behalf of Gelhaar was binding on the latter
– NO because Atty. Noval was not appointed as counsel by Gelhaar
RULING: CA decision reversed. RTC’s order denying the motion to dismiss is reinstated,
with the modification that Gelhaar is given a new period of ten (10) days for the purpose of
filing its answer.
RATIO:
Whether the fact of doing business must first be established
1. CA invoked the ruling in Pacific Micronisian, in which it was stated that the fact
of doing business must first be established before summons can be served in
accordance with Rule 14, Sec. 14.
2. In the later case of Signetics Corporation v. Court of Appeals, however, we
clarified the holding in Pacific Micronisian, thus:
a. It should be recalled that jurisdiction and venue of actions are, as they
should so be, initially determined by the allegations of the complaint.
b. The fact of doing business must then, in the first place, be established
by appropriate allegations in the complaint. This is what the Court
should be seen to have meant in the Pacific Micronisian case.
3. Hence, a court need not go beyond the allegations in the complaint to determine
whether or not a defendant foreign corporation is doing business for the purpose
of Rule 14, Sec. 14.
4. In the case at bar, the allegation that Empire, for and in behalf of Gelhaar, ordered
7,770 dozens of soccer jerseys from Litton and for this purpose Gelhaar caused
the opening of an irrevocable letter of credit in favor of Litton is a sufficient
allegation that Gelhaar was doing business in the Philippines.
Whether the contract is a single, isolated transaction
5. Gelhaar contends that the contract with Litton was a single, isolated transaction
and that it did not constitute "doing business." Reference is made to Pacific
Micronisian in which the only act done by the foreign company was to employ
a Filipino as a member of the crew on one of its ships – this act was an isolated,
incidental or casual transaction, not sufficient to indicate a purpose to engage in
business.
6. It is not really the fact that there is only a single act done that is material.
The other circumstances of the case must be considered.
7. Thus, in Wang Laboratories, Inc. v. Mendoza, it was held that where a single act
or transaction of a foreign corporation is not merely incidental or casual but is of
such character as distinctly to indicate a purpose on the part of the foreign
corporation to do other business in the state, such act will be considered as
constituting doing business. This Court referred to acts which were in the
ordinary course of business of the foreign corporation.
8. In the case at bar, the trial court was certainly correct in holding that Gelhaar's
act in purchasing soccer jerseys to be within the ordinary course of business
of the company considering that it was engaged in the manufacture of
uniforms. The acts noted above are of such a character as to indicate a purpose
to do business.
9. In accordance with Rule 14, Sec. 14, service upon Gelhaar could be made in three
ways: (1) by serving upon the agent designated in accordance with law to accept
service of summons; (2) if there is no resident agent, by service on the
government official designated by law to that effect; and (3) by serving on any
officer or agent of said corporation within the Philippines.
10. Here, service was made through Gelhaar's agent, the Empire. There was,
therefore, a valid service of summons on Gelhaar, sufficient to confer on the trial
court jurisdiction over the person of Gelhaar.
Whether the appearance of Noval was binding on Gelhaar
11. Atty. Noval admits that he was not appointed by Gelhaar as its counsel. What he
claims is simply that Gelhaar knew of the filing of the case in the RTC and of his
representation but Gelhaar did not object. Atty. Noval contends that there was
thus a tacit confirmation of his authority.
12. Gelhaar claims, however, that it was only sometime in December, 1994 when it
found out that the answer which Atty. Noval had filed was also made in its behalf.
 Gelhaar in fact sent a telex message dated January 15, 1985 to its counsel, the
Sycip law firm, stating that
WE NEVER AUTHORIZED THE RETENTION OF MR. NOVAL ON
OUR BEHALF. WE HAVE NEVER EXCHANGED
CORRESPONDENCE NOR HAD ANY TELEPHONE
CONVERSATIONS WITH HIM RE ANY ASPECT OF THIS CASE,
INCL. HIS FEES. WE ARE TOLD THAT HE HAS FILED AN
ANSWER TO LTN'S (Litton's) COMPLT. PURPORTEDLY ON OUR
BEHALF BUT HE HAS NEVER DISCUSSED THAT ANSWER WITH
US NOR EVEN SENT US A DRAFT OR THE FINAL VERSION OF
SUCH ANSWER…
13. Atty. Noval has not denied these statements. He claims that the advisory opinions
he had rendered in the case was sent to Gelhaar by the president of Empire, Chiu,
and that he was informed by Chiu that Gelhaar had been advised on all
developments in the case and the necessity of filing an answer, and that a copy of
the answer he had filed was furnished Gelhaar.
14. All this is, however, merely hearsay.
15. There is no evidence to show that he notified Gelhaar of his appearance in its
behalf, or that he furnished Gelhaar with copies of pleadings or the answer which
he filed in its behalf.
16. Gelhaar should be allowed a new period for filing its own answer.
 European Resources v. Ingenieuburo (Buenaventura)
July 26, 2004 | Ynares-Santiago, J. | Doing business
PETITIONER: European Resources and Technologies, Inc. and Delfin J. Wenceslao
(ERTI)
RESPONDENTS: Ingenieuburo Birkhahn + Nolte, Ingeniurgesellschaft Mbh and
Heers & Brockstedt Gmbh & Co (German Consortium)
SUMMARY:
Respondents German Consortium submitted its bid and was awarded by the CDC
the waste management project. In their agreement, German Consortium must organize
a local corporation as its representative. German Consortium did so by partnering with
local companies and they made ERTI. When the rights to the waste management project
was transferred to ERTI, the CDC terminated the contract saying that the German
Consortiums assignment of an eighty-five percent (85%) majority interest to another
party violated its representation to undertake both the financial and technical aspects of
the project. The dilution of the Consortiums interest in ERTI is a substantial
modification of the Consortiums representations which were used as bases for the
award of the project to it.
The German Consortium filed a TRO against petitioner ERTI ordering petitioner
ERTI to cease and desist from misrepresenting to third parties or the public that it has
any right or interest in the waste management center
RTC approved, CA affirmed. ERTI claims that German Consortium has no right
to sue since it is a foreign company doing business in the Philippines without the
appropriate license. But CA held that it is estopped from questioning the capacity.
Main issue is WoN ERTI is estopped to question the capacity of German
Consortium to sue. (other issues are not directly related to our topic, but I still added it
just in case)
SC held that the German Consortium is doing business in the Philippines without
the appropriate license as required by our laws. By participating in the bidding
conducted by the CDC for the operation of the waste management center, the German
Consortium exhibited its intent to transact business in the Philippines.
SC also held that ERTI is not estopped since petitioners have clearly not received
any benefit from its transactions with the German Consortium
DOCTRINE:
The object of requiring a license is not to prevent the foreign corporation from
performing single acts, but to prevent it from acquiring domicile for the purpose of
business without taking the steps necessary to render it amenable to suits in the local
courts. In other words, the foreign corporation is merely prevented from being in a
position where it takes the good without accepting the bad.
FACTS:
1. European Resources and Technologies Inc. (ERTI), a corporation organized and
existing under the laws of the Republic of the Philippines, is joined by Delfin J.
Wenceslao as petitioner in this case. Ingenieuburo Birkhan + Nolte
Ingiurgesellschaft mbh and Heers & Brockstedt Gmbh & Co. are German
corporations who are respondents in this case and shall be collectively referred to
as the German Consortium.
2. The German Consortium tendered and submitted its bid to the Clark Development
Corporation (CDC) to construct, operate and manage the Integrated Waste
Management Center at the Clark Special Economic Zone (CSEZ). CDC accepted
the German Consortiums bid and awarded the contract to it. CDC and the German
Consortium executed the Contract for Services which embodies the terms and
conditions of their agreement.
3. The Contract for Services provides that the German Consortium shall be
empowered to enter into a contract or agreement for the use of the integrated waste
management center by corporations, local government units, entities, and persons
not only within the CSEZ but also outside. For waste collected within the CSEZ,
the German Consortium may impose a tipping fee per ton of waste collected from
locators and residents of the CSEZ, which fees shall be subject to the schedule
agreed upon by the parties and specified in the Contract for Services. For its
operations outside of the CSEZ, the German Consortium shall pay CDC US$1.50
per ton of non-hazardous solid waste collected. The CDC shall guarantee that
nineteen thousand eighteen hundred (19,800) tons per year of solid waste volume
shall be collected from inside and outside the CSEZ. The contract has a term of
twenty-five (25) years, during which time the German Consortium shall operate the
waste management center on a day-to-day basis.
4. Article VIII, Section 7 of the Contract for Services provides that the German
Consortium shall undertake to organize a local corporation as its representative for
this project. On April 18, 2000, the German Consortium entered into a Joint
Venture with D.M. Wenceslao and Associates, Inc. (DMWAI) and Ma. Elena B.
Villarama (doing business as LBV and Associates), embodied in a Memorandum
of Understanding (MOU) signed by the parties. Under the MOU, the parties agreed
to jointly form a local corporation to which the German Consortium shall assign its
rights under the Contract for Services. Pursuant to this agreement, petitioner
European Resources and Technologies, Inc. was incorporated. The parties likewise
agreed to prepare and finalize a Shareholders Agreement within one (1) month from
the execution of the MOU, which shall provide that the German Consortium shall
own fifteen percent (15%) of the equity in the joint venture corporation, DMWAI
shall own seventy percent (70%) and LBV&A shall own fifteen percent (15%). In
the event that the parties fail to execute the Shareholders Agreement, the MOU shall
be considered null and void.
5. On August 1, 2000, without the Shareholders Agreement having been executed, the
 German Consortium and petitioner ERTI entered into a Memorandum of
Agreement (MOA) whereby the German Consortium ceded its rights and
obligations under the Contract for Services in favor of ERTI and assigned unto
ERTI, among others, its license from CDC to engage in the business of providing
environmental services needed in the CSEZ in connection with the waste
management. Likewise, the parties agreed that should there be a disagreement
between or among them relative to the interpretation or implementation of the MOA
and the collateral documents including but not limited to the Contract for Services
between the German Consortium and CDC, the dispute shall be referred to a panel
of arbitrators.
6. On December 11, 2000, ERTI received a letter from BN Consultants Philippines,
Inc., signed by Mr. Holger Holst for and on behalf of the German Consortium,
stating that the German Consortiums contract with DMWAI, LBV&A and ERTI
has been terminated or extinguished on the following grounds: (a) the CDC did not
give its approval to the Consortiums request for the approval of the assignment or
transfer by the German Consortium in favor of ERTI of its rights and interests under
the Contract for Services; (b) the parties failed to prepare and finalize the
Shareholders Agreement pursuant to the provision of the MOU; (c) there is no more
factual or legal basis for the joint venture to continue; and (d) with the termination
of the MOU, the MOA is also deemed terminated or extinguished.
7. Attached to the letter was a copy of the letter of the CDC, stating that the German
Consortiums assignment of an eighty-five percent (85%) majority interest to
another party violated its representation to undertake both the financial and
technical aspects of the project. The dilution of the Consortiums interest in ERTI is
a substantial modification of the Consortiums representations which were used as
bases for the award of the project to it.
8. On February 20, 2001, petitioner ERTI, through counsel, sent a letter to CDC
requesting for the reconsideration of its disapproval of the agreement between ERTI
and the German Consortium.
9. Before CDC could act upon petitioner ERTIs letter, the German Consortium filed
a complaint for injunction against herein petitioners before the Regional Trial Court
of Angeles City. The German Consortium claimed that petitioner ERTIs continued
misrepresentation as to their right to accept solid wastes from third parties for
processing at the waste management center will cause irreparable damage to the
Consortium and its exclusive right to operate the waste management center at the
CSEZ. Moreover, petitioner ERTIs acts destroy the Consortiums credibility and
undermine customer confidence in it. Hence, the German Consortium prayed that a
writ of temporary restraining order be issued against petitioner ERTI and, after
hearing, a writ of preliminary injunction be likewise issued ordering petitioner
ERTI to cease and desist from misrepresenting to third parties or the public that it
has any right or interest in the waste management center at CSEZ.
10. Petitioners filed their Opposition to the application for preliminary
injunction. ERTI sent a letter demanding that the parties proceed to arbitration in
accordance with Section 17 of the MOA. At the hearings on the application for
injunction, petitioners objected to the presentation of evidence on the ground that
the trial court had no jurisdiction over the case since the German Consortium was
composed of foreign corporations doing business in the country without a
license. Moreover, the MOA between the parties provides that the dispute should
be referred to arbitration.
11. RTC issued an Order granting the writ of preliminary injunction. Petitioners filed
MR, denied
12. Petitioners filed a petition for certiorari and prohibition under Rule 65 of the Rules
of Court before the CA
13. Meanwhile, the TRO issued was lifted in view of respondents failure to file
sufficient bond. All proceedings in were suspended until the petition for certiorari
pending before the Court of Appeals shall have been resolved.
14. Court of Appeals dismissed the petition for certiorari. Petitioners Motion for
Reconsideration was denied.
ISSUES:
1. WoN ERTI is estopped from assailing the capacity of the German Consortium to
institute the suit for injunction – NO, ERTI has yet to derive any gain from the
agreement, thus it is not estopped. the German Consortium is doing business in
the Philippines without the appropriate license as required by our laws
2. WoN the dispute is covered by the arbitration clause in the memorandum of
agreement. – NO, the arbitration clause only applies to ERTI and the German
Consortium and not to CDC, thus no issue would be resolved
3. WoN Issuing the writ of preliminary injunction that is tantamount to a decision of
the case on the merits. – NO, issue is moot since German Consortium has no
capacity to sue.
RULING: WHEREFORE, the decision of the Court of Appeals in CA-G.R. SP No. 68923
dated May 15, 2003 is REVERSED and SET ASIDE. The Orders of the trial court dated June
28, 2001 and November 21, 2001 are ANNULLED and SET ASIDE and Civil Case No.
10049 is DISMISSED for lack of legal capacity of respondents to institute the action. Costs
against respondents. SO ORDERED.
RATIO:
1. The petition is partly meritorious.
2. There is no general rule or governing principle laid down as to what constitutes
doing or engaging in or transacting business in the Philippines. Thus, it has often
been held that a single act or transaction may be considered as doing business
 when a corporation performs acts for which it was created or exercises some
of the functions for which it was organized. We have held that the act of
participating in a bidding process constitutes doing business because it shows
the foreign corporations intention to engage in business in the Philippines. In
this regard, it is the performance by a foreign corporation of the acts for which it
was created, regardless of volume of business, that determines whether a foreign
corporation needs a license or not.
3. Consequently, the German Consortium is doing business in
the Philippines without the appropriate license as required by our laws. By
participating in the bidding conducted by the CDC for the operation of the waste
management center, the German Consortium exhibited its intent to transact business
in the Philippines. Although the Contract for Services provided for the
establishment of a local corporation to serve as respondents representative, it is
clear from the other provisions of the Contract for Services as well as the letter by
the CDC containing the disapproval that it will be the German Consortium which
shall manage and conduct the operations of the waste management center for at
least twenty-five years. Moreover, the German Consortium was allowed to transact
with other entities outside the CSEZ for solid waste collection. Thus, it is clear that
the local corporation to be established will merely act as a conduit or extension of
the German Consortium.
4. As a general rule, unlicensed foreign non-resident corporations cannot file suits in
the Philippines as provided by Section 133 of the Corporation Code
5. However, there are exceptions to this rule. In a number of cases, we have declared
a party estopped from challenging or questioning the capacity of an unlicensed
foreign corporation from initiating a suit in our courts. In the case
of Communication Materials and Design, Inc. v. Court of Appeals, a foreign
corporation instituted an action before our courts seeking to enjoin a local
corporation, with whom it had a Representative Agreement, from using its
corporate name, letter heads, envelopes, sign boards and business dealings as well
as the foreign corporations trademark. The case arose when the foreign corporation
discovered that the local corporation has violated certain contractual commitments
as stipulated in their agreement. In said case, we held that a foreign corporation
doing business in the Philippines without license may sue in Philippine Courts a
Philippine citizen or entity that had contracted with and benefited from it.
6. Hence, the party is estopped from questioning the capacity of a foreign corporation
to institute an action in our courts where it had obtained benefits from its dealings
with such foreign corporation and thereafter committed a breach of or sought to
renege on its obligations. The rule relating to estoppel is deeply rooted in the axiom
of commodum ex injuria sua non habere debetno person ought to derive any
advantage from his own wrong.
7. In the case at bar, petitioners have clearly not received any benefit from its
transactions with the German Consortium. In fact, there is no question that
petitioners were the ones who have expended a considerable amount of money and
effort preparatory to the implementation of the MOA. Neither do petitioners seek
to back out from their obligations under both the MOU and the MOA by challenging
respondents capacity to sue. The reverse could not be any more accurate. Petitioners
are insisting on the full validity and implementation of their agreements with the
German Consortium.
8. To rule that the German Consortium has the capacity to institute an action
against petitioners even when the latter have not committed any breach of its
obligation would be tantamount to an unlicensed foreign corporation gaining
access to our courts for protection and redress. We cannot allow this without
violating the very rationale for the law prohibiting a foreign corporation not licensed
to do business in the Philippines from suing or maintaining an action in Philippine
courts. The object of requiring a license is not to prevent the foreign
corporation from performing single acts, but to prevent it from acquiring
domicile for the purpose of business without taking the steps necessary to
render it amenable to suits in the local courts. In other words, the foreign
corporation is merely prevented from being in a position where it takes the
good without accepting the bad.
9. For the same reason, petitioners assertion that the instant case should be referred to
arbitration pursuant to the provision of the MOA is untenable.
10. We have ruled in several cases that arbitration agreements are valid, binding,
enforceable and not contrary to public policy such that when there obtains a written
provision for arbitration which is not complied with, the trial court should suspend
the proceedings and order the parties to proceed to arbitration in accordance with
the terms of their agreement. In the case at bar, the MOA between petitioner ERTI
and respondent German Consortium provided:
11. 17. Should there be a disagreement between or among the Parties relative to the
interpretation or implementation of this Agreement and the collateral documents
including but not limited to the Contract for Services between GERMAN
CONSORTIUM and CDC and the Parties cannot resolve the same by themselves,
the same shall be endorsed to a panel of arbitrators which shall be convened in
accordance with the process ordained under the Arbitration Law of the Republic of
the Philippines.
12. Indeed, to brush aside a contractual agreement calling for arbitration in case of
disagreement between parties would be a step backward. But there are exceptions
to this rule. Even if there is an arbitration clause, there are instances when referral
to arbitration does not appear to be the most prudent action. The object of arbitration
is to allow the expeditious determination of a dispute. Clearly, the issue before us
could not be speedily and efficiently resolved in its entirety if we allow
simultaneous arbitration proceedings and trial, or suspension of trial pending
arbitration.
13. As discussed earlier, the dispute between respondent German Consortium and
 petitioners involves the disapproval by the CDC of the assignment by the German
Consortium of its rights under the Contract for Services to petitioner 1. possession and control.
ERTI. Admittedly, the arbitration clause is contained in the MOA to which only the
German Consortium and petitioner ERTI were parties. Even if the case is brought
before an arbitration panel, the decision will not be binding upon CDC who is a
non-party to the arbitration agreement. What is more, the arbitration panel will not
be able to completely dispose of all the issues of this case without including CDC
in its proceedings. Accordingly, the interest of justice would only be served if the
trial court hears and adjudicates the case in a single and complete proceeding.
14. Lastly, petitioners question the propriety of the issuance of writ of preliminary
injunction claiming that such is already tantamount to granting the main prayer of
respondents complaint without the benefit of a trial. Petitioners point out that the
purpose of a preliminary injunction is to prevent threatened or continuous
irremediable injury to some of the parties before their claims can be thoroughly
studied and decided. It cannot be used to railroad the main case and seek a judgment
without a full-blown trial as in the instant case.
15. At the outset, it must be noted that with the finding that the German Consortium is
without any personality to file the petition with the trial court, the propriety of the
injunction writ issued is already moot and academic.
16. Even assuming for the sake of argument that respondents have the capacity to file
the petition, we find merit in the issue raised by petitioners against the injunction
writ issued.
17. Before an injunctive writ can be issued, it is essential that the following requisites
are present: (1) there must be a right in esse or the existence of a right to be
protected; and (2) the act against which injunction to be directed is a violation of
such right. The onus probandi is on movant to show that there exists a right to be
protected, which is directly threatened by the act sought to be enjoined. Further,
there must be a showing that the invasion of the right is material and substantial and
that there is an urgent and paramount necessity for the writ to prevent a serious
damage.
18. Thus, it is clear that for the issuance of the writ of preliminary injunction to be
proper, it must be shown that the invasion of the right sought to be protected is
material and substantial, that the right of complainant is clear and unmistakable and
that there is an urgent and paramount necessity for the writ to prevent serious
damage. At the time of its application for an injunctive writ, respondents right to
operate and manage the waste management center, to the exclusion of or without
any participation by petitioner ERTI, cannot be said to be clear and
unmistakable. The MOA executed between respondents and petitioner ERTI has
not yet been judicially declared as rescinded when the complaint was lodged in
court. Hence, a cloud of doubt exists over respondent German Consortiums
exclusive right relating to the waste management center.
 017 General Garments Corporation v. Director of Patents (Rosales)
September 30, 1971 | Makalintal, J. | Doing Business in the PH
PETITIONER: General Garments Corporation
RESPONDENTS: Director of Patents and Puritan Sportswear Corporation
SUMMARY: General Garments Corporation is the owner of trademark Puritan.
Puritan Sportswear Corporation, a foreign corporation, filed a petition with the
Philippine Patent Office for the cancellation of the trademark “Puritan” registered
in the name of General Garments Corporation, alleging ownership and prior use
in the Philippines. It also alleges that General Garments violates Section 17 (c) in
relation to Section 4(d) of the Trademark Law. Issue is WoN Puritan Sportswear
Corporation, which is a foreign corporation not licensed to do business and not
doing business in the Philippines, has legal capacity to maintain a suit in the
Philippine Patent Office for cancellation of a trademark registered therein? SC
held YES, because right to the use of the corporate or trade name is a property
right, a right in rem, which it may assert and protect in any of the courts of the
world even in jurisdictions where it does not transact business. Puritan Sportswear
is not suing in our courts “for the recovery of any debt, claim or demand,” for
which a license to transact business in the Philippines is required by Section 69 of
the Corporation Law. Puritan Sportswear went to the Philippine Patent Office on
a petition for cancellation of a trademark registered by General Garments,
invoking Section 17(c) in relations to Section 4(d) of the Trademark Law. The law
against such depredations is not only for the protection of the owner of the
trademark who has acquired prior use thereof but also, and more importantly, for
the protection of purchasers from confusion, mistake or deception as to the goods
they are buying. This is clear from a reading of Section 4(d) of the Trademark
Law.
DOCTRINE: A foreign corporation which has never done business in the
Philippine Islands and which is unlicensed and unregistered to do business here,
but is widely and favorably known in the Islands through the use therein of its
products bearing its corporate and trade name has a legal right to maintain an
action in the Islands.
FACTS:
1. The General Garments Corporation, organized and existing under the laws of the
Philippines, is the owner of the trademark "Puritan," under Registration No. 10059
issued on November 15, 1962 by the Philippine Patent Office, for assorted men's
wear, such as sweaters, shirts, jackets, undershirts and briefs.
2. The Puritan Sportswear Corporation, organized and existing in and under the laws
of the state of Pennsylvania, U.S.A., filed a petition with the Philippine Patent
Office for the cancellation of the trademark "Puritan" registered in the name of
General Garments Corporation, alleging ownership and prior use in the Philippines
of the said trademark on the same kinds of goods, which use it had not abandoned;
and alleging further that the registration thereof by General Garments Corporation
had been obtained fraudulently and in violation of Section 17(c) of Republic Act
No. 166, as amended, in relation to Section 4(d) thereof.
3. General Garments Corporation moved to dismiss the petition on several grounds,
all of which may be synthesized in one single issue: whether or not Puritan
Sportswear Corporation, which is a foreign corporation not licensed to do business
and not doing business in the Philippines, has legal capacity to maintain a suit in
the Philippine Patent Office for cancellation of a trademark registered therein.
4. The Director of Patents denied the motion to dismiss, whereupon General Garments
Corporation filed the instant petition for review.
ISSUE/s:
1. WoN Puritan Sportswear Corporation, which is a foreign corporation not licensed
to do business and not doing business in the Philippines, has legal capacity to
maintain a suit in the Philippine Patent Office for cancellation of a trademark
registered therein – YES, because right to the use of the corporate or trade name is
a property right, a right in rem, which it may assert and protect in any of the courts
of the world even in jurisdictions where it does not transact business.
RULING: WHEREFORE, the petition is dismissed, and the resolution of the Director of
Patents dated August 6, 1964 is affirmed, with costs.
RATIO:
1. Section 17 (c) and Section 4 (d) of the Trademark Law provide respectively as
follows:
SEC. 17. Grounds for cancellation. — Any person, who believes that he
is or will be damaged by the registration of a mark or trade-name, may,
upon the payment of the prescribed fee, apply to cancel said registration
upon any of the following grounds:
xxx xxx xxx
(c) That the registration was obtained fraudulently or contrary to the
provisions of section four, Chapter II thereof: ...
(d) SEC. 4. Registration of trademarks, tradenames and service-marks
which shall be known as the principal register. The owner of a trade-mark,
trade-name or service-mark used to distinguish his goods, business or
services from the goods, business or services of others shall have the right
to register the same on the principal register, unless it:
xxx xxx xxx
(d) Consists of or comprises a mark or trade-name which so resembles a
mark or trade-name registered in the Philippines or a mark or tradename
previously used in the Philippines by another and not abandoned, as to be
likely, when applied to or used in connection with goods, business or
services of the applicant, to cause confusion or mistake or to deceive
purchasers; or ...
2. General Garment contends that Puritan Sportswear Corporation is not considered
as a person under Philippine laws and consequently is not comprehended within the
term “any person” who may apply for cancellation of a mark or trade-name under
Section 17(c) of the Trademark Law aforequoted.
3. That Puritan Sportswear is a juridical person should be beyond serious dispute. The
fact that it may not transact business in the Philippines unless it has obtained a
license for that purpose, nor maintain a suit in Philippine courts for the recovery of
any debt, claim or demand without such license (Secs. 68 and 69, Corporation Law)
does not make Puritan Sportswear any less a juridical person.
4. Indeed an exception to the license requirement has been recognized in this
jurisdiction, namely, where a foreign corporation sues on an isolated transaction.
As first enunciated in Marshall-Wells Co. v. Elser & Co. “it was never the purpose
of the legislature to exclude a foreign corporation which happens to obtain an
isolated order for business from the Philippines, from securing redress in the
Philippine Courts.”
5. To recognize Puritan Sportswear as a juridical person, however, does not resolve
the issue in this case. It should be postulated at this point that Puritan Sportswear is
not suing in our courts “for the recovery of any debt, claim or demand,” for which
a license to transact business in the Philippines is required by Section 69 of the
Corporation Law, subject only to the exception already noted. Puritan Sportswear
went to the Philippine Patent Office on a petition for cancellation of a trademark
registered by General Garments, invoking Section 17(c) in relations to Section 4(d)
of the Trademark Law.
6. A more or less analogous question arose in Western Equipment & Supply Co. v.
Reyes. The syllabus of the report, which is a correct statement of the doctrine laid
down in the decision, reads as follows:
A foreign corporation which has never done ... business in the
Philippine Islands and which is unlicensed and unregistered to do
business here, but is widely and favorably known in the Islands
through the use therein of its products bearing its corporate and trade
name has a legal right to maintain an action in the Islands.
xxx xxx xxx
The purpose of such a suit is to protect its reputation, corporate name and
goodwill which has been established, through the natural development of
its trade for a long period of years, in the doing of which it does not seek
to enforce any legal or contract rights arising from, or growing out of any
business which it has transacted in the Philippine Islands.
The right to the use of the corporate or trade name is a property right,
a right in rem, which it may assert and protect in any of the courts of
the world — even in jurisdictions where it does not transact business
— just the same as it may protect its tangible property, real or
personal against trespass or conversion.
7. In Asari Yoko Co., Ltd. v. Kee Boc (Jan. 20, 1961), the plaintiff, a Japanese
corporation which had acquired prior use in the Philippines of the trademark
"RACE" for men's shirts and undershirts but which had not shown prior registration
thereof, successfully maintained a suit opposing the application of the defendant, a
local businessman, to register the same trademark for similar goods produced by
him. The law against such depredations is not only for the protection of the owner
of the trademark who has acquired prior use thereof but also, and more importantly,
for the protection of purchasers from confusion, mistake or deception as to the
goods they are buying. This is clear from a reading of Section 4(d) of the Trademark
Law.
8. General Garment argues that the ruling in Western Equipment has been superseded
by the later decision of this Court in Mentholatum Co., Inc. v. Mangaliman (1941),
72 Phil. 524, where it was held that inasmuch as Mentholatum Co., Inc. was a
foreign corporation doing business in the Philippines without the license required
by Section 68 of the Corporation Law it could not prosecute an action for
infringement of its trademark which was the subject of local registration. The court
itself, however, recognized a distinction between the two cases, in that in Western
Equipment the foreign corporation was not engaged in business in the Philippines,
and observed that if it had been so engaged without first obtaining a license "another
and a very different question would be presented."
9. It may be stated that the ruling in the Mentholatum case was subsequently derogated
when Congress, purposely to "counteract the effects" of said case, enacted Republic
Act No. 638, inserting Section 21-A in the Trademark Law, which allows a foreign
corporation or juristic person to bring an action in Philippine courts for infringement
of a mark or trade-name, for unfair competition, or false designation of origin and
false description, "whether or not it has been licensed to do business in the
Philippines under Act Numbered Fourteen hundred and fifty-nine, as amended,
otherwise known as the Corporation Law, at the time it brings complaint."
10. General Garment argues that Section 21-A militates against Puritan Sportswear
capacity to maintain a suit for cancellation, since it requires, before a foreign
corporation may bring an action, that its trademark or tradename has been registered
under the Trademark Law.
a. The argument misses the essential point in the said provision, which is that
the foreign corporation is allowed there under to sue “whether or not it has
been licensed to do business in the Philippines” pursuant to the
Corporation Law (precisely to counteract the effects of the decision in the
Mentholatum case).
11. In any event, Puritan Sportswear in the present case is not suing for
infringement or unfair competition under Section 21-A, but for cancellation
under Section 17, on one of the grounds enumerated in Section 4. While a suit
under Section 21-A requires that the mark or tradename alleged to have been
infringed has been “registered or assigned” to the suing foreign corporation, a suit
for cancellation of the registration of a mark or tradename under Section 17 has no
such requirement.
12. General Garment’s last argument is that under Section 37 of the Trademark Law
Puritan Sportswear is not entitled to the benefits of said law because the Philippines
is not a signatory to any international treaty or convention relating to marks or
tradenames or to the repression of unfair competition.
13. As correctly pointed out by Puritan Sportswear, this provision was incorporated in
the law in anticipation of the eventual adherence of the Philippines to any
international convention or treaty for the protection of industrial property. The
provision will be operative only when the Philippines becomes a party to such a
convention or treaty.
14. That this was the intention of Congress is clear from the explanatory note to House
Bill No. 1157 (now Republic Act 166), in reference to Section 37, which is the only
provision in Chapter XI of the Trademark Law on Foreign Industrial Property: “The
necessary provisions to qualify the Philippines under the international convention
for the protection of industrial property have been specifically incorporated in the
Act.”
15. In the meantime, regardless of Section 37, aliens or foreign corporations are
accorded benefits under the law. Thus, under Section 2, for instance, the
trademarks, tradenames and service-marks owned by persons, corporations,
partnerships or associations domiciled in any foreign country may be registered in
the Philippines, provided that the country of which the applicant for registration is
a citizen grants by law substantially similar privileges to citizens of the Philippines.
 018 LORENZO SHIPPING v. CHUBBS AND SON (Fordan)
June 8, 2004 | Puno, J. | Capacity to sue on isolated transaction
PETITIONER: Lorenzo Shipping Corporation
RESPONDENTS: Chubbs and Sons, Inc., Gearbulk, Ltd., & Philippine
Transmarine Carriers, Inc.
SUMMARY: Mayer Steel loaded 581 bundles of black steel pipes on board the
M/V Lorcon IV (owned by Lorenzo Shipping) for shipment to Davao City. This
shipment is insured by Chubb and Sons. Upon arrival in Davao City, Transmarine
Carriers received the shipment and discovered that steelpipes had been submerged
to saltwater which caused the latter to be rusted. Despite this fact, Gearbulk loaded
the shipment on board its M/V San Mateo Victory for carriage to US. Upon
arriving in the US, Sumitomo hired the services of Toplis and Harding to survey
the steel pipes and the latter affirmed the earlier findings that the said steelpipes
had been in contact with saltwater which caused it to be rusted. Thus, Sumitomo
rejected the steel pipes and claimed damages from Chubb and Sons. On the other
hand, Chubb and Sons filed a complaint againt Lorenzo Shipping, Gearbulk, and
Transmarine Carriers wherein the latter raised the defense that Chubb and Sons
has no legal capacity to sue before the Philippine courts since it has no license to
do business here. The RTC and the CA ruled in favor of Chubb and Sons that the
latter has the capacity to sue. Hence, the current petition.
The issue is whether or not Chubb and Sons has capacity to sue before the
Philippine courts. YES. The law on corporations is clear in depriving foreign
corporations which are doing business in the Philippines without a license from
bringing or maintaining actions before, or intervening in Philippine courts. The
law does not prohibit foreign corporations from performing single acts of
business. A foreign corporation needs no license to sue before Philippine courts
on an isolated transaction. Furthermore, the SC rejected the claim of Lorenzo
Shipping that Chubb and Sons is not suing under an isolated transaction because
the steel pipes, subject of this case, are covered by 2 bills of lading; hence, 2
transactions. The stubborn fact remains that these 2 bills of lading spawned from
the single marine insurance policy that Chubb and Sons issued in favor of the
Sumitomo, covering the damaged steel pipes. The execution of the policy is a
single act, an isolated transaction. This Court has not construed the term “isolated
transaction” to literally mean “one” or a mere single act. In the case of Gonzales
vs. Raquiza, et al., 3 contracts, hence 3 transactions were challenged as void on
the ground that the 3 American corporations which are parties to the contracts are
not licensed to do business in the Philippines. This Court held that “one single or
isolated business transaction does not constitute doing business within the
meaning of the law. Transactions which are occasional, incidental, and casual—
not of a character to indicate a purpose to engage in business—do not constitute
the doing or engaging in business as contemplated by law. Where the 3
transactions indicate no intent by the foreign corporation to engage in a continuity
of transactions, they do not constitute doing business in the Philippines.”
DOCTRINE: In Gonzales vs. Raquiza, one single or isolated business transaction
does not constitute doing business within the meaning of the law. Transactions
which are occasional, incidental, and casual—not of a character to indicate a
purpose to engage in business—do not constitute the doing or engaging in business
as contemplated by law.
FACTS:
1. On Nov. 21, 1987, Mayer Steel Pipe Corporation (Mayer Steel) of Binondo,
Manila, loaded 581 bundles of ERW black steel pipes (at US$137,912.84) on board
the vessel M/V Lorcon IV, owned by Lorenzo Shipping Corporation (Lorenzo
Shipping), for shipment to Davao City.
2. Lorenzo Shipping issued a clean bill of lading (BOL No. T-3) for the account of the
consignee, Sumitomo Corporation (Sumitomo) of San Francisco, California, USA,
which in turn, insured the goods with Chubb and Sons, Inc. (Chubbs and Sons).
3. On Dec. 2, 1987, M/V Lorcon IV arrived at the Sasa Wharf in Davao City and
Philippine Transmarine Carriers, Inc. (Transmarine Carriers), agent of Norwegian
corporation, Gearbulk, Ltd. (Gearbulk), received the shipment as evidenced by
delivery cargo receipt.
4. However, it discovered seawater in the hatch of M/V Lorcon IV and found the steel
pipes submerged in it. Sumitomo then hired the services of R.J. Del Pan Surveyors
(Del Pan) to inspect the shipment prior to and subsequent to discharge.
5. Del Pan’s Report showed that the shipment was no longer in good condition as the
pipes were found with rust formation on top and/or at the sides. Furthermore, M/V
Lorcon IV was flooded with seawater and the tank top was rusty, thinning and with
several holes at different places.
6. After the survey, Gearbulk loaded the shipment on board its vessel M/V San Mateo
Victory for carriage to US and it issued 2 corresponding bill of ladings (BOL 1 –
Oakland, California, USA and BOL 2 – Vancouver, Washington, USA). All the bill
of ladings were marked “all units heavily rusted”.
7. While the cargo was on transit from Davao City to USA, Sumitomo sent a letter to
Lorenzo Shipping informing the latter its intention to file a claim based on the
damaged cargo once the same was ascertained.
8. On Jan. 17, 1988, M/V San Mateo Victory arrived at Oakland, California, where it
unloaded 364 bundles of steel pipes and then sailed to Vancouver, Washington
where it unloaded the remaining 217 bundles.
9. Toplis and Harding, Inc. (Toplis and Harding) of San Franciso, California, surveyed
the steel pipes, and also discovered the latter heavily rusted. When the steel pipes
were tested with a silver nitrate solution, Toplis and Harding found that they had
come in contact with salt water.
10. Due to its heavily rusted condition, Sumitomo rejected the damaged steel pipes and
declared them unfit for the purpose they were intended. It then filed a marine
insurance claim with Chubb and Sons which the latter settled in the amount of
 US$104,151.
11. On Dec. 2, 1988, Chubb and Sons filed a complaint for collection of sum of money
against Lorenzo Shipping, Gearbulk, and Transmarine Carriers. In its complaint,
Chubb and Sons alleged that it is not doing business in the Philippines and that it is
suing under an isolated transaction.
12. Gearbulk and Transmarine Carriers denied liability on the ground that:
a. Chubb and Sons has no capacity to sue before Philippine courts;
b. the action should be dismissed on the ground of forum non conveniens;
c. damage to the steel pipes was due to the inherent nature of the goods or to the
insufficiency of packing thereof;
d. damage to the steel pipes was not due to their fault or negligence; and,
e. the law of the country of destination, U.S.A., governs the contract of carriage.
13. On the other hand, Lorenzo Shipping also denied liability alleging that:
a. that rust easily forms on steel by mere exposure to air, moisture and other marine
elements;
b. that it made a disclaimer in the bill of lading;
c. that the goods were improperly packed; and,
d. prescription, laches, and extinguishment of obligations and actions had set in.
14. The RTC ruled in favor of Chubb and Sons finding that: (1) Chubb and Sons has
the right to institute this action; and, (2) Lorenzo Shipping was negligent in the
performance of its obligations as a carrier.
15. On appeal, the CA affirmed the decision of the trial court.
16. Hence, the current petition.
ISSUES:
1. Whether or not Chubb and Sons has capacity to sue before the Philippine
courts. – YES, since the execution of the insurance policy is an isolated transaction.
2. Whether or not Lorenzo Shipping is negligent in carrying the subject cargo. – YES,
since as evidence by the clean bill of lading, the steel pipes were in good condition
when it received but when it discharged in Davao port, the same were all rusted.
RULING: The petition is denied. The decision of the CA and its resolution are hereby
affirmed. Costs against Lorenzo Shipping.
RATIO:
(IMPORTANT) Capacity to sue
1. Lorenzo Shipping claimed that Chubb and Sons is a foreign corporation not licensed
to do business in the Philippines, and is not suing on an isolated transaction.
Furthermore, it is an insurance company that was merely subrogated to the rights
of its insured, Sumitomo, after paying the latter’s policy claim. Sumitomo, however,
is a foreign corporation doing business in the Philippines without a license and does
1
Art. 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
not have capacity to sue before Philippine courts. Since Sumitomo does not have
capacity to sue, Lorenzo Shipping then concludes that, neither the subrogee, Chubb
and Sons, could sue before Philippine courts.
2. SC disagree with Lorenzo Shipping since:
a. Firstly, it failed to raise the defense that Sumitomo is a foreign corporation doing
business in the Philippines without a license. It is therefore estopped from
litigating the issue on appeal especially because it involves a question of fact
which this Court cannot resolve.
b. Secondly, assuming arguendo that Sumitomo cannot sue in the Philippines, it
does not follow that Chubb and Sons, as subrogee, has also no capacity to sue
in our jurisdiction.
3. The law on corporations is clear in depriving foreign corporations which are doing
business in the Philippines without a license from bringing or maintaining actions
before, or intervening in Philippine courts, as stated in Art. 1331 of the Corporation
Code.
4. The law does not prohibit foreign corporations from performing single acts of
business. A foreign corporation needs no license to sue before Philippine courts on
an isolated transaction.
5. As held by this Court in the case of Marshall-Wells Company vs. Elser & Company:
The object of the statute (Secs. 68 and 69, Corporation Law) was not to prevent the
foreign corporation from performing single acts, but to prevent it from acquiring a
domicile for the purpose of business without taking the steps necessary to render it
amenable to suit in the local courts . . . the implication of the law (being) that it was
never the purpose of the legislature to exclude a foreign corporation which happens
to obtain an isolated order for business for the Philippines, from seeking redress in
the Philippine courts.
6. Likewise, this Court ruled in Universal Shipping Lines, Inc. vs. Intermediate
Appellate Court that:
. . . The private respondent may sue in the Philippine courts upon the marine
insurance policies issued by it abroad to cover international-bound cargoes shipped
by a Philippine carrier, even if it has no license to do business in this country, for it
is not the lack of the prescribed license (to do business in the Philippines) but doing
business without such license, which bars a foreign corporation from access to our
courts.
7. The SC reject the claim of Lorenzo Shipping that Chubb and Sons is not suing under
an isolated transaction because the steel pipes, subject of this case, are covered by
2 bills of lading; hence, two transactions. The stubborn fact remains that these 2
bills of lading spawned from the single marine insurance policy that Chubb and
Sons issued in favor of Sumitomo, covering the damaged steel pipes.
8. The execution of the policy is a single act, an isolated transaction. This Court has
not construed the term “isolated transaction” to literally mean “one” or a mere
single act. In Eriks Pte. Ltd. vs. Court of Appeals, this Court held that:
. . . What is determinative of “doing business” is not really the number or the quantity
against before Philippine courts or administrative tribunals on any valid cause of action recognized under Philippine
laws.
 of the transactions, but more importantly, the intention of an entity to continue the
body of its business in the country. The number and quantity are merely evidence of
such intention. The phrase “isolated transaction” has a definite and fixed meaning,
i.e. a transaction or series of transactions set apart from the common business of a
foreign enterprise in the sense that there is no intention to engage in a progressive
pursuit of the purpose and object of the business organization. Whether a foreign
corporation is “doing business” does not necessarily depend upon the frequency of
its transactions, but more upon the nature and character of the transactions.
[Emphasis supplied.]
9. In the case of Gonzales vs. Raquiza, et al., three contracts, hence three transactions
were challenged as void on the ground that the three American corporations which
are parties to the contracts are not licensed to do business in the Philippines. This
Court held that “one single or isolated business transaction does not constitute doing
business within the meaning of the law. Transactions which are occasional,
incidental, and casual—not of a character to indicate a purpose to engage in
business—do not constitute the doing or engaging in business as contemplated by
law. Where the three transactions indicate no intent by the foreign corporation to
engage in a continuity of transactions, they do not constitute doing business in the
Philippines.”

On the negligence of Lorenzo Shipping

10. The SC affirm the findings of the lower courts that Lorenzo Shipping was negligent
in its care and custody of the goods.
11. The steel pipes, subject of this case, were in good condition when they were loaded
at the port of origin (Manila) on board Lorenzo Shipping’s M/V Lorcon IV en route
to Davao City. Lorenzo Shipping issued clean bills of lading covering the subject
shipment. A bill of lading, aside from being a contract and a receipt, is also a symbol
of the goods covered by it. A bill of lading which has no notation of any defect or
damage in the goods is called a “clean bill of lading.” A clean bill of lading
constitutes prima facie evidence of the receipt by the carrier of the goods as therein
described.
12. The case law teaches us that mere proof of delivery of goods in good order to a
carrier and the subsequent arrival in damaged condition at the place of destination
raises a prima facie case against the carrier.
13. In the case at bar, M/V Lorcon IV of Lorenzo Shipping received the steel pipes in
good order and condition, evidenced by the clean bills of lading it issued. When the
cargo was unloaded from Lorenzo Shipping’s vessel at the Sasa Wharf in Davao
City, the steel pipes were rusted all over.
 019 UNIVERSAL SHIPPING LINES v. IAC (Gonzales)
July 31, 1990 | Grino-Aquino, J. | Doing business in the Philippines
PETITIONER: Universal Shipping Lines, Inc.
RESPONDENT: Intermediate Appellate Court and Alliance Assurance Company
SUMMARY: Universal Shipping shipped two cargoes of palletized cartons from
Rotterdam, Netherlands to Bangkok, Thailand. These two shipments were insured with
Alliance Assurance. When the vessel arrived at Bangkok, the first cargo was not delivered
while the second was delivered but there was weight shortage. The consignees filed their
claims and Alliance Assurance paid both. Alliance Assurance then filed an action to recover
from Universal Shiiping the amount it paid to the consignees. Universal Shipping Lines
argues that Alliance Assurance may not sue in the Philippine courts because it has no
license to do business in the country.
The issue is WoN Alliance Assurance has the capacity to sue – YES. Alliance Assurance
may sue in Philippine courts upon the marine insurance policies issued by it abroad to cover
international-bound cargoes shipped by a Philippine carrier, even if it has no license to do
business in this country, for it is not the lack of the prescribed license (to do business in the
Philippines) but doing business without such license, which bars a foreign corporation from
access to our courts.
DOCTRINE: It is not the lack of the prescribed license (to do business in the Philippines)
but doing business without such license, which bars a foreign corporation from access to
our courts.
FACTS:
1. SEVALCO, Limited, owned and operated by Universal Shipping, shipped from
Rotterdam, Netherlands, to Bangkok, Thailand, aboard its M/V "TAIWAN", two
(2) cargoes of 50 palletized cartons consisting of 2,000 units of 25-kilogram bags
of Statex R Brand carton black, with a declared gross weight of 53,000 kilos each.
2. They were respectively consigned to S. Lersen Company, Ltd. and Muang Ngarm
Retreads, Ltd., per Bills of Lading Nos. RB-15 (Exh. A) and RB-16 (Exh. B).
3. Both shipments were insured with Alliance Assurance, a foreign insurance
company domiciled in London, England, which had withdrawn from the Philippine
market on June 30, 1951 yet (before the shipping happened)
2
"By investigation, the source of the water could not be definitely ascertained where it comes from.
However, the bilge pump was employed to pump out continue working for almost 12 hours No. 2. The
bilge pump was employed every other day to pump out the water, but it was seems to be almost same
soundings. Suspecting of some leakage of suction pipes.
"That the hold No. 2 cannot be inspected on account of the full cargoes inside the hold, rendering it to
be inaccessible.
4. Despite the arrival of the vessel at Bangkok, the cargo covered by Bill of Lading
No. RB-15 was not unloaded nor delivered to the consignee, S. Lersen Company,
Ltd.
5. The shipment under Bill of Lading No. RB-16 was delivered to Muang Ngarm
Retreads, Ltd. with a total weight shortage of 11,070 kilos because the cargoes had
been either totally or partially dissolved in saltwater which flooded Hatch No. 2 of
the vessel where they had been stored.
6. Upon arrival in Manila, Arturo C. Saavedra, master of M/V TAIWAN, filed a
marine protest.2
7. The consignees filed their respective formal claims for loss and damage to their
cargoes. The insurer paid both claims.
8. Alliance Assurance, as insurer-subrogee, filed an action in CFI Manila to recover
from Universal Shipping and its Manila agent, Carlos Go Thong & Company, what
it paid the consignees of the cargo.
9. CFI ruled in favor of Alliance Assurance.
10. CA affirmed but exculpated the Manila agent from any liability on the ground that
it had no participation in the shipment of the cargo which had been loaded and
discharged in places other than Manila.
ISSUES:
1. WoN Universal Shipping is liable for damages – YES. Universal Shipping failed to
prove that the losses and damages were to cause other than the negligence or fault
of its employees.
2. WoN Alliance Assurance has the capacity to sue – YES. It is not the lack of the
prescribed license (to do business in the Philippines) but doing business
without such license, which bars a foreign corporation from access to our
courts.
3. WoN the action has prescribed – NO. The parties agreed to extend the period for
the filing of a claim.
RULING: Petition denied.
RATIO:
1. As held by the CA: It was incumbent upon Universal Shipping to prove that the
losses and damages were due to causes other than the negligence or fault of their
employees. Said defendants have not adduced proof on this point. It having been
shown that the losses and damages were incurred while the shipments were in the
custody of the M/V 'Taiwan' the liability of its owner/operator and shipping agent
is clear.
"Suspecting that the water comes from outside passing through some loosen rivets on starboard side of
the ship. (sic.)
"That the pumping out the water from the hold was done by shore help upon arrival at Bangkok." (sic.)
2. Alliance Assurance may sue in Philippine courts upon the marine insurance
policies issued by it abroad to cover international-bound cargoes shipped by a
Philippine carrier, even if it has no license to do business in this country, for it is
not the lack of the prescribed license (to do business in the Philippines) but doing
business without such license, which bars a foreign corporation from access to
our courts.

3. Anent the issue of prescription of the action under Section 3(6), Title I, of
theCarriage of Goods by Sea Act (Commonwealth Act No. 65) which provides
that: ". . . the carrier and the ship shall be discharged from all liability in respect
of loss or damage unless suit is brought within one year after delivery of the goods
or the date when the goods should have been delivered. . . ."
4. This provision of the law admits of an exception: if the one-year period is
suspended by express agreement of the parties for in such a case, their agreement
becomes the law for them.
5. The exchange of correspondence between the parties and or their
associates/representatives shows that the parties had mutually agreed to extend
the time within which Alliance Assurance or its predecessors-in-interest may file
suit until December 27, 1976. When the complaint was filed on June 25, 1976,
that deadline had not yet expired.

6. An award of attorney's fees lies within the discretion of the court and depends
upon the circumstances of each case.
7. In this case, the award of P10,000 as attorney's fees was reasonable and justified
because Universal Shipping’s rejection of Alliance Assurance’s demand,
compelled the latter to litigate and incur expenses to protect and enforce its just
and valid claim.
 020 MR HOLDINGS, LTD. v. BAJAR (Alcazar)
April 11, 2001 | Sandoval-Gutierrez, J. | Doing Business in the PH
PETITIONER: MR Holdings, Ltd.
RESPONDENTS: Sheriff Carlos P. Bajar, Sheriff Ferdinand M. Jandusay,
Solidbank Corporation, And Marcopper Mining Corporation
SUMMARY: Marcopper obtained a loan from Asian Development Bank (ADB)
to fund its mining project. However Marcopper defaulted on the loan, which led
ADB to assign all its rights, interests and obligation on the loan contract in favor
of MR Holdings. Marcopper also executed a deed of assignment in favor of
petitioner assigning all its assets and properties. As this was going on, Marcopper
was ordered to pay Php52M to Solidbank in a separate civil case. The respondent
sherrif moved to sell some of the property of Marcopper at an auction. MR
Holdings filed a motion for preliminary injunction to stop the auction sale. The
RTC denied the petitioners application on the ground that Petitioner had no legal
capacity to sue. CA affirmed the RTC decision. The issue is: whether the petitioner
has the legal capacity to sue. YES. The petitioner has the legal capacity to sue and
to seek redress from Philippine courts as it is a non-resident foreign corporation
not doing business in the Philippines and suing on isolated transactions.
Jurisprudence holds that if a foreign corporation is not doing business in the
Philippines, it needs no license to sue before Philippine courts on an isolated
transaction. In this case, the CA failed to prove that the petitioner was doing
business in the Philippines and merely relied on conjectures and speculation. The
mere ownership by a foreign corporation of a property in a certain
state, unaccompanied by its active use in furtherance of the business for which it
was formed, is insufficient in itself to constitute doing business.
DOCTRINE: The principles governing a foreign corporations right to sue in local
courts are:
a) if a foreign corporation does business in the Philippines without a license,
it cannot sue before the Philippine courts;
b) 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 transaction; and
c) if a foreign corporation does business in the Philippines with the required
license, it can sue before Philippine courts on any transaction.
FACTS:
1. Asian Development Bank (ADB), a multilateral development finance
institution, agreed to extend to Marcopper Mining Corporation (Marcopper)
a loan in the aggregate amount of US$40,000,000.00 to finance the latters
mining project at Sta. Cruz, Marinduque.
2. ADB and Placer Dome, Inc., (Placer Dome), a foreign corporation which
owns 40% of Marcopper, executed a Support and Standby Credit
Agreement whereby the latter agreed to provide Marcopper with cash flow
support for the payment of its obligations to ADB.
3. Marcopper secured its loan with a real estate and chattel mortgage, covering
substantially all of its (Marcoppers) properties and assets in Marinduque.
4. When Marcopper defaulted in the payment of its loan obligation, Placer
Dome, in fulfillment of its undertaking under the Support and Standby
Credit Agreement, and presumably to preserve its international credit
standing, agreed to have its subsidiary corporation, petitioner MR
Holding, Ltd., assume Marcoppers obligation to ADB in the amount of
US$ 18,453,450.02.
5. ADB assigned to petitioner all its rights, interests and obligations under
the principal and complementary loan agreements, (Deed of Real
Estate and Chattel Mortgage, and Support and Standby Credit
Agreement).
6. Marcopper also executed a deed of assignment in favor of petitioner
assigning all its assets and properties.
7. As this was going on, Solidbank Corporation (Solidbank) obtained a Partial
Judgment against Marcopper in a civil case ordering Marcopper to pay it
Php 52M.
8. Upon Solidbanks motion, the RTC of Manila issued a writ of execution
pending appeal directing Carlos P. Bajar, respondent sheriff, to require
Marcopper to pay the sums of money to satisfy the Partial Judgment.
9. Respondent Bajar issued two notices of levy on Marcoppers personal and
real properties, and over all its stocks of scrap iron and unserviceable mining
equipment and issued two notices to have the same auctioned.
10. MR Holdings filed an Affidavit of Third-Party Claim and preliminary
injuction on the sale stating that it was the owner of all the properties of
Marcopper by virtue of the deed of assignment.
11. RTC: Denied the petitioners application on the ground that petitioner has
no legal capacity to sue, it being a foreign corporation doing business in the
Philippines without license
12. CA: Affirmed the RTC Decision and categorized the petitioners
participation under the Assignment Agreement and the Deed of Assignment
as doing business.
 13. Petitioner alleges that it is not doing business in the Philippines and
characterizes its participation in the assignment contracts (whereby
Marcoppers assets where transferred to it) as mere isolated acts that cannot
foreclose its right to sue in local courts.
14. Hence, this petition.
ISSUE/s:
1. Whether the petitioner has the legal capacity to sue. YES. The petitioner
has the legal capacity to sue and to seek redress from Philippine courts as it
is a non-resident foreign corporation not doing business in the Philippines
and suing on isolated transactions.
RULING: WHEREFORE, the petition is GRANTED. The decision and resolution
of the CA are set aside.
RATIO:
1. The principles governing a foreign corporations right to sue in local courts
are:
a) if a foreign corporation does business in the Philippines without a license,
it cannot sue before the Philippine courts;
b) 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 transaction; and
c) if a foreign corporation does business in the Philippines with the required
license, it can sue before Philippine courts on any transaction.
2. Apparently, it is not the absence of the prescribed license but the doing (of)
business in the Philippines without such license which debars the foreign
corporation from access to our courts.
3. Republic Act No. 7042, otherwise known as the Foreign Investment Act of
1991, defines doing business as follows:
4. X x x 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; x x x x
5. In the case at bar, the Court of Appeals categorized as doing
business petitioners participation under the Assignment Agreement and the
Deed of Assignment. This is simply untenable.
6. The expression doing business should not be given such a strict and
literal construction as to make it apply to any corporate
dealing whatsoever.
7. At this early stage and with petitioners acts or transactions limited to the
assignment contracts, it cannot be said that it had performed acts intended
to continue the business for which it was organized.
8. It may not be amiss to point out that the purpose or business for which
petitioner was organized is not discernible in the records. No effort was
exerted by the Court of Appeals to establish the nexus between
petitioners business and the acts supposed to constitute doing business.
9. The Court of Appeals holding that petitioner was determined to be doing
business in the Philippines is based mainly on conjectures and speculation.
10. Absent overt acts of petitioner from which we may directly infer its intention
to continue Marcoppers business, we cannot give our concurrence. The
mere ownership by a foreign corporation of a property in a certain
state, unaccompanied by its active use in furtherance of the business for
which it was formed, is insufficient in itself to constitute doing business.
11. Moreover, petitioners payment of US$ 18,453, 450.12 to ADB was more of
a fulfillment of an obligation under the Support and Standby Credit
Agreement rather than an investment. That petitioner had to step into the
shoes of ADB as Marcoppers creditor was just a necessary legal
consequence of the transactions that transpired. Also, we must hasten to add
that the Support and Standby Credit Agreement was executed four (4) years
prior to Marcoppers insovency, hence, the alleged intention of petitioner
to continue Marcoppers business could have no basis for at that time,
Marcoppers fate cannot yet be determined.
12. Hence, petitioner was only engaged in isolated acts or transactions. Single
or isolated acts, contracts, or transactions of foreign corporations are not
regarded as a doing or carrying on of business.