G.R. No.

L-14441      December 17, 1966

PEDRO R. PALTING, petitioner, 
vs.
SAN JOSE PETROLEUM INCORPORATED, respondent.

BARRERA, J.:

This is a petition for review of the order of August 29, 1958, later supplemented and amplified by another dated
September 9, 1958, of the Securities and Exchange Commission denying the opposition to, and instead, granting
the registration, and licensing the sale in the Philippines, of 5,000,000 shares of the capital stock of the respondent-
appellee San Jose Petroleum, Inc. (hereafter referred to as SAN JOSE PETROLEUM), a

On September 7, 1956, SAN JOSE PETROLEUM corporation organized and existing in the Republic of
Panama. filed with the Philippine Securities and Exchange Commission a sworn registration statement, for the
registration and licensing for sale of shares in the Philippines Voting Trust Certificates representing 2,000,000
shares of its capital stock of a par value of $0.35 a share, at P1.00 per share. It was alleged that the entire proceeds
of the sale of said securities will be devoted or used exclusively to finance the operations of San Jose Oil Company,
Inc. (a domestic mining corporation hereafter to be referred to as SAN JOSE OIL) which has 14 petroleum
exploration concessions covering an area of a little less than 1,000,000 hectares, located in the provinces of
Pangasinan, Tarlac, Nueva Ecija, La Union, Iloilo, Cotabato, Davao and Agusan. It was the express condition of the
sale that every purchaser of the securities shall not receive a stock certificate, but a registered or bearer-voting-trust
certificate from the voting trustees named therein James L. Buckley and Austin G.E. Taylor, the first residing in
Connecticut, U.S.A., and the second in New York City. While this application for registration was pending
consideration by the Securities and Exchange Commission, SAN JOSE PETROLEUM filed an amended Statement
on June 20, 1958, for registration of the sale in the Philippines of its shares of capital stock, which was increased
from 2,000,000 to 5,000,000, at a reduced offering price of from P1.00 to P0.70 per share. At this time the par value
of the shares has also been reduced from $.35 to $.01 per share.1

Pedro R. Palting and others, allegedly prospective investors in the shares of SAN JOSE PETROLEUM, filed with the
Securities and Exchange Commission an opposition to registration and licensing of the securities on the grounds
that (1) the tie-up between the issuer, SAN JOSE PETROLEUM, a Panamanian corporation and SAN JOSE OIL, a
domestic corporation, violates the Constitution of the Philippines, the Corporation Law and the Petroleum Act of
1949; (2) the issuer has not been licensed to transact business in the Philippines; (3) the sale of the shares of the
issuer is fraudulent, and works or tends to work a fraud upon Philippine purchasers; and (4) the issuer as an
enterprise, as well as its business, is based upon unsound business principles.

Answering the foregoing opposition of Palting, et al., the registrant SAN JOSE PETROLEUM claimed that it was a
"business enterprise" enjoying parity rights under the Ordinance appended to the Constitution, which parity
right, with respect to mineral resources in the Philippines, which may be exercised, pursuant to the Laurel-
Langley Agreement, only through the medium of a domestic corporation organized under the laws of the
Philippines.

Thus, registrant which is allegedly qualified to exercise rights under the Parity Amendment, had to do so through the
medium of a domestic corporation, which is the SAN JOSE OIL.

It did not violate the Corporation Law was being violated, by alleging that Section 13 thereof applies only to
foreign corporations doing business in the Philippines, and considering that it was not doing business here. The
mere fact that it was a holding company of SAN JOSE OIL and that registrant undertook the financing of and
giving technical assistance to said corporation did not constitute transaction of business in the Philippines.
Registrant also denied that the offering for sale in the Philippines of its shares of capital stock was fraudulent or
would work or tend to work fraud on the investors. On August 29, 1958, and on September 9, 1958 the Securities
and Exchange Commissioner issued the orders object of the present appeal. Philippine Constitution, and Section
13 of the Corporation Law, which inhibits a mining corporation from acquiring an interest in another mining
corporation

ISSUE: Whether or not the "tie-up" between the respondent SAN JOSE PETROLEUM, a foreign corporation,
IS ENTITLED TO PARITY RIGHTS (NO)

But more fundamental than this consideration, we agree with the late Senator Claro M. Recto, who appeared
as amicus curiae in this case, that while apparently the immediate issue in this appeal is the right of respondent
SAN JOSE PETROLEUM to dispose of and sell its securities to the Filipino public, the real and ultimate
controversy here would actually call for the construction of the constitutional provisions governing the disposition,
utilization, exploitation and development of our natural resources. And certainly this is neither moot nor
academic.

3. We now come to the meat of the controversy — the "tie-up" between SAN JOSE OIL on the one hand, and the
respondent SAN JOSE PETROLEUM and its associates, on the other. The relationship of these corporations
involved or affected in this case is admitted and established through the papers and documents which are parts of
the records: SAN JOSE OIL, is a domestic mining corporation, 90% of the outstanding capital stock of which
is owned by respondent SAN JOSE PETROLEUM, a foreign (Panamanian) corporation, the majority interest
of which is owned by OIL INVESTMENTS, Inc., another foreign (Panamanian) company. This latter
corporation in turn is wholly (100%) owned by PANTEPEC OIL COMPANY, C.A., and PANCOASTAL
PETROLEUM COMPANY, C.A., both organized and existing under the laws of Venezuela. As of September 30,
1956, there were 9,976 stockholders of PANCOASTAL PETROLEUM found in 49 American states and U.S.
territories, holding 3,476,988 shares of stock; whereas, as of November 30, 1956, PANTEPEC OIL COMPANY was
said to have 3,077,916 shares held by 12,373 stockholders scattered in 49 American state. In the two lists of
stockholders, there is no indication of the citizenship of these stockholders,7 or of the total number of authorized
stocks of each corporation, for the purpose of determining the corresponding percentage of these listed
stockholders in relation to the respective capital stock of said corporation. 

Petitioner, as well as the amicus curiae and the Solicitor General8 contend that the relationship between herein
respondent SAN JOSE PETROLEUM and its subsidiary, SAN JOSE OIL, violates the Petroleum Law of 1949, the
Philippine Constitution, and Section 13 of the Corporation Law, which inhibits a mining corporation from
acquiring an interest in another mining corporation. It is respondent's theory, on the other hand, that far from
violating the Constitution; such relationship between the two corporations is in accordance with the Laurel-Langley
Agreement which implemented the Ordinance Appended to the Constitution, and that Section 13 of the Corporation
Law is not applicable because respondent is not licensed to do business, as it is not doing business, in the
Philippines. 

Article XIII, Section 1 of the Philippine Constitution provides:

SEC. 1. All agricultural, timber, and mineral lands of the public domain, waters, minerals, coal, petroleum,
and other mineral oils, all forces of potential energy, and other natural resources of the Philippines belong
to the State, and their disposition, exploitation, development, or utilization shall be limited to citizens
of the Philippines, or to corporations or associations at least sixty per centum of the capital of which
is owned by such citizens, subject to any existing right, grant, lease or concession at the time of the
inauguration of this Government established under this Constitution. . . . (Emphasis supplied)

In the 1946 Ordinance Appended to the Constitution, this right (to utilize and exploit our natural resources)
was extended to citizens of the United States, thus:

Notwithstanding the provisions of section one, Article Thirteen, and section eight, Article Fourteen, of the
foregoing Constitution, during the effectivity of the Executive Agreement entered into by the President of the
Philippines with the President of the United States on the fourth of July, nineteen hundred and forty-six,
pursuant to the provisions of Commonwealth Act Numbered Seven hundred and thirty-three, but in no case
to extend beyond the third of July, nineteen hundred and seventy-four, the disposition, exploitation,
development, and utilization of all agricultural, timber, and mineral lands of the public domain, waters,
minerals, coal, petroleum, and other mineral oils, all forces of potential energy, and other natural resources
of the Philippines, and the operation of public utilities shall, if open to any person, be open to citizens
of the United States, and to all forms of business enterprises owned or controlled, directly or
indirectly, by citizens of the United States in the same manner as to, and under the same conditions
imposed upon, citizens of the Philippines or corporations or associations owned or controlled by
citizens of the Philippines (Emphasis supplied.)

In the 1954 Revised Trade Agreement concluded between the United States and the Philippines, also known as the
Laurel-Langley Agreement, embodied in Republic Act 1355, the following provisions appear:

ARTICLE VI

1. The disposition, exploitation, development and utilization of all agricultural, timber, and mineral lands of
the public domain, waters, minerals, coal, petroleum and other mineral oils, all forces and sources of
potential energy, and other natural resources of either Party, and the operation of public utilities, shall, if
open to any person, be open to citizens of the other Party and to all forms of business enterprise owned or
controlled, directly or indirectly, by citizens of such other Party in the same manner as to and under the
same conditions imposed upon citizens or corporations or associations owned or controlled by citizens of
the Party granting the right.

2. The rights provided for in Paragraph 1 may be exercised, . . . in the case of citizens of the United States,
with respect to natural resources in the public domain in the Philippines, only through the medium of a
corporation organized under the laws of the Philippines and at least 60% of the capital stock of which is
owned or controlled by citizens of the United States. . . .

3. The United States of America reserves the rights of the several States of the United States to limit the
extent to which citizens or corporations or associations owned or controlled by citizens of the Philippines
may engage in the activities specified in this Article. The Republic of the Philippines reserves the power to
deny any of the rights specified in this Article to citizens of the United States who are citizens of States, or to
corporations or associations at least 60% of whose capital stock or capital is owned or controlled by citizens
of States, which deny like rights to citizens of the Philippines, or to corporations or associations which are
owned or controlled by citizens of the Philippines. . . . (Emphasis supplied.)

Re-stated, As the privilege to utilize, exploit, and develop the natural resources of this country was granted,
by Article XIII of the Constitution, to Filipino citizens or to corporations or associations 60% of the capital of
which is owned by such Filipino citizens. With the Parity Amendment to the Constitution, the same right
was extended to citizens of the United States and business enterprises owned or controlled directly or
indirectly, by citizens of the United States. 

There could be no serious doubt as to the meaning of the word "citizens" used in the aforementioned provisions
of the in the Constitution. The right was granted to 2 types of persons: natural persons (Filipino or American
citizens) and juridical persons (corporations 60% of which capital is owned by Filipinos and business
enterprises owned or controlled directly or indirectly, by citizens of the United States). In American law,
"citizen" has been defined as "one who, under the constitution and laws of the United States, has a right to
vote for representatives in congress and other public officers, and who is qualified to fill offices in the gift
of the people. (1 Bouvier's Law Dictionary, p. 490.) A citizen is —

One of the sovereign people. A constituent member of the sovereignty, synonymous with the people." (Scott
v. Sandford, 19 Ho. [U.S.] 404, 15 L. Ed. 691.)

A member of the civil state entitled to all its privileges. (Cooley, Const. Lim. 77. See U.S. v. Cruikshank 92
U.S. 542, 23 L. Ed. 588; Minor v. Happersett 21 Wall. [U.S.] 162, 22 L. Ed. 627.)

These concepts clarified, is herein respondent SAN JOSE PETROLEUM an American business enterprise entitled
to parity rights in the Philippines? The answer must be in the negative, for the following reasons:

 Firstly — It is not owned or controlled directly by citizens of the United States, because it is owned
and controlled by a corporation, the OIL INVESTMENTS, another foreign (Panamanian) corporation.

 Secondly — Neither can it be said that it is not indirectly owned and controlled by American citizens
through the OIL INVESTMENTS, for this corporation is owned and controlled, not by citizens of the
United States, but still by two foreign (Venezuelan) corporations, the PANTEPEC OIL COMPANY and
PANCOASTAL PETROLEUM.

 Thirdly — Although it is claimed that these two last corporations are owned and controlled respectively by
12,373 and 9,979 stockholders residing in the different American states, there is no proof that in the
certification furnished by respondent that the stockholders of PANCOASTAL (Venezuelan corp) or
those of them holding the controlling stock, are citizens of the United States.

 Fourthly — Even Granting that they stockholders are American citizens of different states, it is
necessary to establish that the different states of which they are citizens, they allow Filipino citizens or
corporations or associations owned or controlled by Filipino citizens, to engage in the exploitation,
etc. of the natural resources of these states (see paragraph 3, Article VI of the Laurel-Langley
Agreement, supra). Respondent has presented no proof to this effect. 

 Fifthly — But even if the requirements mentioned in the two immediately preceding paragraphs are satisfied,
nevertheless to hold that the set-up disclosed in this case, with a long chain of intervening foreign
corporations, comes within the purview of the Parity Amendment regarding business enterprises indirectly
owned or controlled by citizens of the United States, is to unduly stretch and strain the language and intent
of the law. For, to what extent must the word "indirectly" be carried? Must we trace the ownership or
control of these various corporations ad infinitum for the purpose of determining whether the
American ownership-control-requirement is satisfied? Add to this the admitted fact that the shares of
stock of the PANTEPEC and PANCOASTAL (Venezuelan Corps) which are allegedly owned or
controlled directly by citizens of the United States, are traded in the stock exchange in New York,
and you have a situation where it becomes a practical impossibility to determine at any given time, the
citizenship of the controlling stock required by the law.

In the Case court had to hold that the respondent SAN JOSE PETROLEUM, as presently constituted, is not a
business enterprise that is authorized to exercise the parity privileges under the Parity Ordinance, the
Laurel-Langley Agreement and the Petroleum Law. Its tie-up with SAN JOSE OIL is, consequently, illegal. 

What, then, would be the Status of SAN JOSE OIL, about 90% of whose stock is owned by SAN JOSE
PETROLEUM? This is a query which we need not resolve in this case as SAN JOSE OIL is not a party and it is not
necessary to do so to dispose of the present controversy. But it is a matter that probably the Solicitor General would
want to look into.

ISSUE: This is whether or not an American mining corporation may lawfully "be in anywise interested in any other
corporation (domestic or foreign) organized for the purpose of engaging in agriculture or in mining," in the
Philippines or whether an American citizen owning stock in more than one corporation organized for the purpose of
engaging in agriculture or in mining, may own more than 15% of the capital stock then outstanding and entitled to
vote, of each of such corporations, in view of the express prohibition contained in Section 13 of the Philippine
Corporation Law.

The petitioner in this case contends that the provisions of the Corporation Law must be applied to American citizens
and business enterprise otherwise entitled to exercise the parity privileges, because both the Laurel-Langley
Agreement (Art. VI, par. 1) and the Petroleum Act of 1948 (Art. 31), specifically provide that the enjoyment by them
of the same rights and obligations granted under the provisions of both laws shall be "in the same manner as to, and
under the same conditions imposed upon, citizens of the Philippines or corporations or associations owned or
controlled by citizens of the Philippines." The petitioner further contends that, as the enjoyment of the privilege of
exploiting mineral resources in the Philippines by Filipino citizens or corporations owned or controlled by citizens of
the Philippines (which corporation must necessarily be organized under the Corporation Law), is made subject to
the limitations provided in Section 13 of the Corporation Law, so necessarily the exercise of the parity rights by
citizens of the United States or business enterprise owned or controlled, directly or indirectly, by citizens of the
United States, must equally be subject to the same limitations contained in the aforesaid Section 13 of the
Corporation Law. 

In view of the conclusions we have already arrived at, we deem it not indispensable for us to pass upon this legal
question, especially taking into account the statement of the respondent (SAN JOSE PETROLEUM) that it is
essentially a holding company, and as found by the Securities and Exchange Commissioner, its principal activity is
limited to the financing and giving technical assistance to SAN JOSE OIL. 

4. Respondent SAN JOSE PETROLEUM, whose shares of stock were allowed registration for sale in the
Philippines, was incorporated under the laws of Panama in April, 1956 with an authorized capital stock of
$500,000.00, American currency, divided into 50,000,000 shares at par value of $0.01 per share. By virtue of a 3-
party Agreement of June 14, 1956, respondent was supposed to have received from OIL INVESTMENTS 8,000,000
shares of the capital stock of SAN JOSE OIL (at par value of $0.01 per share), plus a note for $250,000.00 due in 6
months, for which respondent issued in favor of OIL INVESTMENTS 16,000,000 shares of its capital stock, at $0.01
per share or with a value of $160,000.00, plus a note for $230,297.97 maturing in 2 years at 6% per annum
interest,9 and the assumption of payment of the unpaid price of 7,500,000 (of the 8,000,000 shares of SAN JOSE
OIL).

On June 27, 1956, the capitalization of SAN JOSE PETROLEUM was increased from $500,000.00 to
$17,500,000.00 by increasing the par value of the same 50,000,000 shares, from $0.01 to $0.35. Without any
additional consideration, the 16,000,000 shares of $0.01 previously issued to OIL INVESTMENTS with a total value
of $160,000.00 were changed with 16,000,000 shares of the recapitalized stock at $0.35 per share, or valued at
$5,600,000.00. And, to make it appear that cash was received for these re-issued 16,000,000 shares, the board of
directors of respondent corporation placed a valuation of $5,900,000.00 on the 8,000,000 shares of SAN JOSE OIL
(still having par value of $0.10 per share) which were received from OIL INVESTMENTS as part-consideration for
the 16,000,000 shares at $0.01 per share. 

In the Balance Sheet of respondent, dated July 12, 1956, from the $5,900,000.00, supposedly the value of the
8,000,000 shares of SAN JOSE OIL, the sum of $5,100,000.00 was deducted, corresponding to the alleged
difference between the "value" of the said shares and the subscription price thereof which is $800,000.00 (at $0.10
per share). From this $800,000.00, the subscription price of the SAN JOSE OIL shares, the amount of $319,702.03
was deducted, as allegedly unpaid subscription price, thereby giving a difference of $480,297.97, which was placed
as the amount allegedly paid in on the subscription price of the 8,000,000 SAN JOSE OIL shares. Then, by adding
thereto the note receivable from OIL INVESTMENTS, for $250,000.00 (part-consideration for the 16,000,000 SAN
JOSE PETROLEUM shares), and the sum of $6,516.21, as deferred expenses, SAN JOSE PETROLEUM appeared
to have assets in the sum of $736,814.18. 

These figures are highly questionable. Take the item $5,900,000.00 the valuation placed on the 8,000,000 shares of
SAN JOSE OIL. There appears no basis for such valuation other than belief by the board of directors of respondent
that "should San Jose Oil Company be granted the bulk of the concessions applied for upon reasonable terms, that
it would have a reasonable value of approximately $10,000,000." 10 Then, of this amount, the subscription price of
$800,000.00 was deducted and called it "difference between the (above) valuation and the subscription price for the
8,000,000 shares." Of this $800,000.00 subscription price, they deducted the sum of $480,297.97 and the difference
was placed as the unpaid portion of the subscription price. In other words, it was made to appear that they paid in
$480,297.97 for the 8,000,000 shares of SAN JOSE OIL. This amount ($480,297.97) was supposedly that
$250,000.00 paid by OIL INVESMENTS for 7,500,000 shares of SAN JOSE OIL, embodied in the June 14
Agreement, and a sum of $230,297.97 the amount expended or advanced by OIL INVESTMENTS to SAN JOSE
OIL. And yet, there is still an item among respondent's liabilities, for $230,297.97 appearing as note payable to Oil
Investments, maturing in two (2) years at six percent (6%) per annum. 11 As far as it appears from the records, for
the 16,000,000 shares at $0.35 per share issued to OIL INVESTMENTS, respondent SAN JOSE PETROLEUM
received from OIL INVESTMENTS only the note for $250,000.00 plus the 8,000,000 shares of SAN JOSE OIL, with
par value of $0.10 per share or a total of $1,050,000.00 — the only assets of the corporation. In other words,
respondent actually lost $4,550,000.00, which was received by OIL INVESTMENTS.

But this is not all. Some of the provisions of the Articles of Incorporation of respondent SAN JOSE PETROLEUM are
noteworthy; viz:

(1) the directors of the Company need not be shareholders;

(2) that in the meetings of the board of directors, any director may be represented and may vote through a
proxy who also need not be a director or stockholder; and

(3) that no contract or transaction between the corporation and any other association or partnership will be
affected, except in case of fraud, by the fact that any of the directors or officers of the corporation is
interested in, or is a director or officer of, such other association or partnership, and that no such contract or
transaction of the corporation with any other person or persons, firm, association or partnership shall be
affected by the fact that any director or officer of the corporation is a party to or has an interest in, such
contract or transaction, or has in anyway connected with such other person or persons, firm, association or
partnership; and finally, that all and any of the persons who may become director or officer of the corporation
shall be relieved from all responsibility for which they may otherwise be liable by reason of any contract
 entered into with the corporation, whether it be for his benefit or for the benefit of any other person, firm,
association or partnership in which he may be interested.

These provisions are in direct opposition to our corporation law and corporate practices in this country. These
provisions alone would outlaw any corporation locally organized or doing business in this jurisdiction. Consider the
unique and unusual provision that no contract or transaction between the company and any other association or
corporation shall be affected except in case of fraud, by the fact that any of the directors or officers of the company
may be interested in or are directors or officers of such other association or corporation; and that none of such
contracts or transactions of this company with any person or persons, firms, associations or corporations shall be
affected by the fact that any director or officer of this company is a party to or has an interest in such contract or
transaction or has any connection with such person or persons, firms associations or corporations; and that any and
all persons who may become directors or officers of this company are hereby relieved of all responsibility which they
would otherwise incur by reason of any contract entered into which this company either for their own benefit, or for
the benefit of any person, firm, association or corporation in which they may be interested.

The impact of these provisions upon the traditional judiciary relationship between the directors and the stockholders
of a corporation is too obvious to escape notice by those who are called upon to protect the interest of investors.
The directors and officers of the company can do anything, short of actual fraud, with the affairs of the corporation
even to benefit themselves directly or other persons or entities in which they are interested, and with immunity
because of the advance condonation or relief from responsibility by reason of such acts. This and the other
provision which authorizes the election of non-stockholders as directors, completely disassociate the stockholders
from the government and management of the business in which they have invested.

To cap it all on April 17, 1957, admittedly to assure continuity of the management and stability of SAN JOSE
PETROLEUM, OIL INVESTMENTS, as holder of the only subscribed stock of the former corporation and acting "on
behalf of all future holders of voting trust certificates," entered into a voting trust agreement12 with James L. Buckley
and Austin E. Taylor, whereby said Trustees were given authority to vote the shares represented by the outstanding
trust certificates (including those that may henceforth be issued) in the following manner:

(a) At all elections of directors, the Trustees will designate a suitable proxy or proxies to vote for the election
of directors designated by the Trustees in their own discretion, having in mind the best interests of the
holders of the voting trust certificates, it being understood that any and all of the Trustees shall be eligible
for election as directors;

(b) On any proposition for removal of a director, the Trustees shall designate a suitable proxy or proxies to
vote for or against such proposition as the Trustees in their own discretion may determine, having in mind
the best interest of the holders of the voting trust certificates;

(c) With respect to all other matters arising at any meeting of stockholders, the Trustees will instruct such
proxy or proxies attending such meetings to vote the shares of stock held by the Trustees in accordance
with the written instructions of each holder of voting trust certificates. (Emphasis supplied.)

It was also therein provided that the said Agreement shall be binding upon the parties thereto, their successors, and
upon all holders of voting trust certificates. 

And these are the voting trust certificates that are offered to investors as authorized by Security and Exchange
Commissioner. It can not be doubted that the sale of respondent's securities would, to say the least, work or tend to
work fraud to Philippine investors. 

FOR ALL THE FOREGOING CONSIDERATIONS, the motion of respondent to dismiss this appeal, is denied and
the orders of the Securities and Exchange Commissioner, allowing the registration of Respondent's securities and
licensing their sale in the Philippines are hereby set aside. The case is remanded to the Securities and Exchange
Commission for appropriate action in consonance with this decision. With costs. Let a copy of this decision be
furnished the Solicitor General for whatever action he may deem advisable to take in the premises. So ordered.

G.R. Nos. 79926-27 October 17, 1991

STATE INVESTMENT HOUSE, INC. and STATE FINANCING CENTER, INC., petitioners, 

vs.
CITIBANK, N.A., BANK OF AMERICA, NT & SA, HONGKONG & SHANGHAI BANKING CORPORATION, and
the COURT OF APPEALS, respondents.

The chief question in the appeal at bar is whether or not foreign banks licensed to do business in the
Philippines, may be considered "residents of the Philippine Islands" within the meaning of Section 20 of the
Insolvency Law (Act No. 1956, as amended, eff. May 20, 1909) reading in part as follows: 1

An adjudication of insolvency may be made on the petition of three or more creditors, residents of the
Philippine Islands, whose credits or demands accrued in the Philippine Islands, and the amount of which
credits or demands are in the aggregate not less than one thousand pesos: Provided, that none of said
creditors has become a creditor by assignment, however made, within thirty days prior to the filing of said
petition. Such petition must be filed in the Court of First Instance of the province or city in which the debtor
resides or has his principal place of business, and must be verified by at least three (3) of the petitioners. . . .

The foreign banks involved in the controversy are Bank of America NT and SA, Citibank N.A. and Hongkong and
Shanghai Banking Corporation. On December 11, 1981, they jointly filed with the Court of First Instance of Rizal a
petition for involuntary insolvency of Consolidated Mines, Inc. (CMI), which they amended four days later. 2 The
case was docketed as Sp. Proc. No. 9263 and assigned to Branch 28 of the Court.

The petition for involuntary insolvency alleged:

1) that CMI had obtained loans from the three petitioning banks, and that as of November/December, 1981, its
outstanding obligations were as follows:

a) In favor of Bank of America (BA) P15,297,367.67

(as of December 10, 1981) US$ 4,175,831.88

(b) In favor of Citibank US$ 4,920,548.85

(as of December 10, 1981)

c) In favor of Hongkong & Shanghai Bank US$ 5,389,434.12

(as of November 30, 1981); P6,233,969.24

2) that in November, 1981, State Investment House, Inc. (SIHI) and State Financing Center, Inc. (SFCI) had
separately instituted actions for collection of sums of money and damages in the Court of First Instance of Rizal
against CMI, docketed respectively as Civil Cases Numbered 43588 and 43677; and that on application of said
plaintiffs, writs of preliminary attachment had been issued which were executed on "the royalty/profit sharing
payments due CMI from Benguet Consolidated Mining, Inc;" and

3) that CMI had "committed specific acts of insolvency as provided in Section 20 of the Insolvency Law, to wit:

x x x           x x x          x x x

5. that he (CMI) has suffered his (CMI's) property to remain under attachment or legal process for three days
for the purpose of hindering or delaying or defrauding his (CMI's) creditors;

x x x           x x x          x x x

11. that being a merchant or tradesman he (CMI) has generally defaulted in the payment of his (CMI's)
current obligations for a period of thirty days; . . .

The petition by the foreign banks was opposed by State Investment House, Inc. (SIHI) and State Financing Center,
Inc. (SFCI). 3 It claimed that:

1) the three petitioner banks had come to court with unclean hands in that they filed the petition for insolvency —
alleging the CMI was defrauding its creditors, and they wished all creditors to share in its assets — although a few
days earlier, they had "received for the account of CMI substantial payments aggregating P10,800,000.00;"

2) the Court had no jurisdiction because the alleged acts of insolvency were false: the writs of attachment against
CMI had remained in force because there were "just, valid and lawful grounds for the(ir) issuance," and CMI was not
a "merchant or tradesman" nor had it "generally defaulted in the payment of (its) obligations for a period of thirty
days . . . ;"

3) the Court had no jurisdiction to take cognizance of the petition for insolvency because petitioners
are not resident creditors of CMI in contemplation of the Insolvency Law; and

4) the Court has no power to set aside the attachment issued in favor of intervenors-oppositors SIHI and SFCI.

CMI filed its Answer to the petition for insolvency, asserting in the main that it was not insolvent, 4 and later filed a
"Motion to Dismiss Based on Affirmative Defense of Petitioner's Lack of Capacity to Sue," echoing the theory of SIHI
and SFCI that the petitioner banks are not "Philippine residents." 5 Resolution on the motion was "deferred until after
hearing of the case on the merits" it appearing to the Court that the grounds therefor did not appear to be
indubitable. 6

RTC  found merit in the motion for summary judgment. By Order dated October 10, 1983, it rendered "summary
judgment dismissing the . . . petition for lack of jurisdiction over the subject matter, with costs against
petitioners." 14 It ruled that on the basis of the "facts on record, as shown in the pleadings, motions and admissions
of the parties, an insolvency court could "not acquire jurisdiction to adjudicate the debtor as insolvent if the creditors
petitioning for adjudication of insolvency are not "residents" of the Philippines" — citing a decision of the California
Supreme Court which it declared "squarely applicable especially considering that one of the sources of our
Insolvency Law is the Insolvency Act of California of 1895 . . . " And it declared that since petitioners had been they
merely licensed to do business in the Philippines, they could not be deemed residents thereof.
The Appellate Court reversed the Trial Court's Order of October 10, 1983 and remanded the case to it for further
proceedings. It ruled:

1) that the purpose of the Insolvency Law was "to convert the assets of the bankrupt in cash for distribution among
creditors, and then to relieve the honest debtor from the weight of oppressive indebtedness and permit him to start
life anew, free from the obligations and responsibilities consequent upon business misfortunes;" 19 and that it was
"crystal clear" that the law was "designed not only for the benefit of the creditors but more importantly for the benefit
of the debtor himself," the object being "to provide not only for the suspension of payments and the protection of
creditors but also the discharge of insolvent honest debtors to enable them to have a fresh start;"

2) that the Trial Court had placed "a very strained and restrictive interpretation of the term "resident," as to
exclude foreign banks which have been operating in this country since the early part of the century," and
"the better approach . . . would have been to harmonize the provisions . . . (of the Insolvency Law) with
similar provisions of other succeeding laws, like the Corporation Code of the Philippines, the General
Banking Act, the Offshore Banking Law and the National Internal Revenue Code in connection with or
related to their doing business in the Philippines;"

3) that in light of said statutes, the three banks "are in truth and in fact considered as "residents" of the
Philippines for purposes of doing business in the Philippines and even for taxation matters;"

4) that the banks had "complied with all the laws, rules and regulations (for doing business in the country)
and have been doing business in the Philippines for many years now;" that the authority granted to them by
the Securities and Exchange Commission upon orders of the Monetary Board "covers not only transacting banking
business . . . but likewise maintaining suits "for recovery of any debt, claims or demand whatsoever," and that
their petition for involuntary insolvency was "nothing more than a suit aimed at recovering a debt granted
by them to Consolidated Mines, Inc., or at least a portion thereof;"

4) that to deprive the foreign banks of their right to proceed against their debtors through insolvency proceedings
would "contravene the basic standards of equity and fair play, . . . would discourage their operations in economic
development projects that create not only jobs for our people but also opportunities for advancement as a nation;"
and

5) that the terms "residence" and "domicile" do not mean the same thing, and that as regards a corporation, it is
generally deemed an "inhabitant" of the state under whose law it is incorporated, and has a "residence" wherever it
conducts its ordinary business, and may have its legal "domicile" in one place and "residence" in another.

SIHI and SFCI moved for reconsideration and then, when rebuffed, took an appeal to this Court. Here, they argue
that the Appellate Court's judgment should be reversed because it failed to declare that —

1) the failure of the three foreign banks to allege under oath in their petition for involuntary insolvency that they are
Philippine residents, wishing only to "be considered Philippine residents," is fatal to their cause;

2) also fatal to their cause is their failure to prove, much less allege, that under the domiciliary laws of the foreign
banks, a Philippine corporation is allowed the reciprocal right to petition for a debtor's involuntary insolvency;

3) in fact and in law, the three banks are not Philippine residents because:

a) corporations have domicile and residence only in the state of their incorporation or in the place
designated by law, although for limited and exclusive purposes, other states may consider them as
residents;

b) juridical persons may not have residence separate from their domicile;

4) actually, the non-resident status of the banks within the context of the Insolvency Law is confirmed by other laws;

5) the license granted to the banks to do business in the Philippines does not make them residents;

6) no substantive law explicitly grants foreign banks the power to petition for the adjudication of the Philippine
corporation as a bankrupt;

7) the Monetary Board can not appoint a conservator or receiver for a foreign bank or orders its liquidation having
only the power to revoke its license, subject to such proceedings as the Solicitor General may thereafter deem
proper to protect its creditors;

8) the foreign banks are not denied the right to collect their credits against Philippine debtors, only the right to
"petition for the harsh remedy of involuntary insolvency" not being conceded to them;

9) said banks have come to court with unclean hands, their filing of the petition for involuntary insolvency being an
attempt to defeat validly acquired rights of domestic corporations.

ISSUE: WON the Banks are residents under the Insolvency LAW (YES)

The concept of a foreign corporation under Section 123 of the Corporation Code is of "one formed, organized or
existing under laws other than those of the Philippines and . . . (which) laws allow Filipino citizens and corporations
to do business . . . ." There is no question that the three banks are foreign corporations in this sence, with principal
offices situated outside of the Philippines. There is no question either that said banks have been licensed to do
business in this country and have in fact been doing business here for many years, through branch offices
or agencies, including "foreign currency deposit units;" in fact, one of them, Hongkong & Shanghai Bank has been
doing business in the Philippines since as early as 1875.

The issue is whether these Philippine branches or units may be considered "residents of the Philippine Islands" as
that term is used in Section 20 of the Insolvency Law, supra, 20 or residents of the state under the laws of which they
were respectively incorporated. The answer cannot be found in the Insolvency Law itself, which contains no
definition of the term, resident, or any clear indication of its meaning. There are however other statutes, albeit of
subsequent enactment and effectivity, from which enlightening notions of the term may be derived.

The National Internal Revenue Code declares that the term "'resident foreign corporation' applies to a
foreign corporation engaged in trade or business within the Philippines," as distinguished from a " "non-
resident foreign corporation" . . . (which is one) not engaged in trade or business within the
Philippines." 21 

The Offshore Banking Law, Presidential Decree No. 1034, states "that branches, subsidiaries, affiliation, extension
offices or any other units of corporation or juridical person organized under the laws of any foreign country operating
in the Philippines shall be considered residents of the Philippines." 22 

The General Banking Act, Republic Act No. 337, places "branches and agencies in the Philippines of foreign banks .
. . (which are) called Philippine branches," in the same category as "commercial banks, savings associations,
mortgage banks, development banks, rural banks, stock savings and loan associations" (which have been formed
and organized under Philippine laws), making no distinction between the former and the later in so far, as the terms
"banking institutions" and "bank" are used in the Act, 23 declaring on the contrary that in "all matters not specifically
covered by special provisions applicable only to foreign banks, or their branches and agencies in the Philippines,
said foreign banks or their branches and agencies lawfully doing business in the Philippines "shall be bound by all
laws, rules, and regulations applicable to domestic banking corporations of the same class, except such laws, rules
and regulations as provided for the creation, formation, organization, or dissolution of corporations or as fix the
relation, liabilities, responsibilities, or duties of members, stockholders or officers or corporations." 24

This Court itself has already had occasion to hold 25 that a foreign corporation licitly doing business in the
Philippines, which is a defendant in a civil suit, may not be considered a non-resident within the scope of the
legal provision authorizing attachment against a defendant not residing in the Philippine Islands;" 26 in other
words, a preliminary attachment may not be applied for and granted solely on the asserted fact that the defendant is
a foreign corporation authorized to do business in the Philippines — and is consequently and necessarily, "a party
who resides out of the Philippines." Parenthetically, if it may not be considered as a party not residing in the
Philippines, or as a party who resides out of the country, then, logically, it must be considered a party who does
reside in the Philippines, who is a resident of the country. Be this as it may, this Court pointed out that:

. . . Our laws and jurisprudence indicate a purpose to assimilate foreign corporations, duly licensed to do
business here, to the status of domestic corporations. (Cf. Section 73, Act No. 1459, and Marshall Wells Co.
vs. Henry W. Elser & Co., 46 Phil. 70, 76; Yu; Cong Eng vs. Trinidad, 47 Phil. 385, 411) We think it would be
entirely out of line with this policy should we make a discrimination against a foreign corporation, like the
petitioner, and subject its property to the harsh writ of seizure by attachment when it has complied not only
with every requirement of law made specially of foreign corporations, but in addition with every requirement
of law made of domestic corporations. . . . .

Obviously, the assimilation of foreign corporations authorized to do business in the Philippines "to the
status of domestic corporations," includes their being found and operating as corporations,
hence, residing, in the country.

The same principle is recognized in American law: that the "residence of a corporation, if it can be said to have
a residence, is the place where it exercises corporate functions . . . ;" that it is .considered as dwelling "in the
place where its business is done . . . ," as being "located where its franchises are exercised . . . ," and as
being "present where it is engaged in the prosecution of the corporate enterprise;" that a "foreign corporation
licensed to do business in a state is a resident of any country where it maintains an office or agent for transaction of
its usual and customary business for venue purposes;" and that the "necessary element in its signification is locality
of existence."27 Courts have held that "a domestic corporation is regarded as having a residence within the
state at any place where it is engaged in the particulars of the corporate enterprise, and not only at its chief
place or home office;" 28that "a corporation may be domiciled in one state and resident in another; its legal
domicil in the state of its creation presents no impediment to its residence in a real and practical sense in the state
of its business activities." 29

The foregoing propositions are in accord with the dictionary concept of residence as applied to juridical persons, a
term which appears to comprehend permanent as well as temporary residence.

The Court cannot thus accept the petitioners' theory that corporations may not have a residence (i.e., the
place where they operate and transact business) separate from their domicile (i.e., the state of their
formation or organization), and that they may be considered by other states as residents only for limited
and exclusive purposes. Of course, as petitioners correctly aver, it is not really the grant of a license to a
foreign corporation to do business in this country that makes it a resident; the license merely gives
legitimacy to its doing business here. What effectively makes such a foreign corporation a resident
corporation in the Philippines is its actually being in the Philippines and licitly doing business here,
"locality of existence" being, to repeat, the "necessary element in . . . (the) signification" of the term, resident
corporation.

Neither can the Court accept the theory that the omission by the banks in their petition for involuntary insolvency of
an explicit and categorical statement that they are "residents of the Philippine Islands," is fatal to their cause. In
truth, in light of the concept of resident foreign corporations just expounded, when they alleged in that petition
that they are foreign banking corporations, licensed to do business in the Philippines, and actually doing
business in this Country through branch offices or agencies, they were in effect stating that they are
resident foreign corporations in the Philippines.

There is, of course, as petitioners argue, no substantive law explicitly granting foreign banks the power to petition for
the adjudication of a Philippine corporation as a bankrupt. This is inconsequential, for neither is there any legal
provision expressly giving domestic banks the same power, although their capacity to petition for insolvency can
scarcely be disputed and is not in truth disputed by petitioners. The law plainly grants to a juridical person, whether it
be a bank or not or it be a foreign or domestic corporation, as to natural persons as well, such a power to petition for
the adjudication of bankruptcy of any person, natural or juridical, provided that it is a resident corporation and joins
at least two other residents in presenting the petition to the Bankruptcy Court.

The petitioners next argue that "Philippine law is emphatic that only foreign corporations whose own laws give
Philippine nationals reciprocal rights may do business in the Philippines." As basis for the argument they invoke
Section 123 of the Corporation Code which, however, does not formulate the proposition in the same way. Section
123 does not say, as petitioners assert, that it is required that the laws under which foreign corporations are formed
"give Philippine nationals, reciprocal rights." What it does say is that the laws of the country or state under which a
foreign corporation is "formed, organized or existing . . . allow Filipino citizens and corporations to do business in its
own country or state," which is not quite the same thing. Now, it seems to the Court that there can be no serious
debate about the fact that the laws of the countries under which the three (3) respondent banks were formed or
organized (Hongkong and the United States) do "allow Filipino citizens and corporations to do business" in their own
territory and jurisdiction. It also seems to the Court quite apparent that the Insolvency Law contains no requirement
that the laws of the state under which a foreign corporation has been formed or organized should grant reciprocal
rights to Philippine citizens to apply for involuntary insolvency of a resident or citizen thereof. The petitioners' point is
thus not well taken and need not be belabored.

That the Monetary Board can not appoint a conservator or receiver for a foreign bank or order its liquidation having
only the power to revoke its license, subject to such proceedings as the Solicitor General may thereafter deem
proper to protect its creditors, which is another point that petitioners seek to make, is of no moment. It has no logical
connection to the matter of whether or not the foreign bank may properly ask for a judicial declaration of the
involuntary insolvency of a domestic corporation, which is the issue at hand. The fact is, in any event, that the law is
not lacking in sanctions against foreign banks or powerless to protect the latter's creditors.

The petitioners contend, too, that the respondent banks have come to court with unclean hands, their filing of the
petition for involuntary insolvency being an attempt to defeat validly acquired rights of domestic corporations. The
Court wishes to simply point out that the effects of the institution of bankruptcy proceedings on all the creditors of
the alleged bankrupt are clearly spelled out by the law, and will be observed by the Insolvency Court regardless of
whatever motives — apart from the desire to share in the assets of the insolvent in satisfying its credits — that the
party instituting the proceedings might have.

Still another argument put forth by the petitioners is that the three banks' failure to incorporate their branches in the
Philippines into new banks in accordance with said Section 68 of the General Banking Act connotes an intention on
their part to continue as residents of their respective states of incorporation and not to be regarded as residents of
the Philippines. The argument is based on an incomplete and inaccurate quotation of the cited Section. What
Section 68 required of a "foreign bank presently having branches and agencies in the Philippines, . . . within one
year from the effectivity" of the General Banking Act, was to comply with any of three (3) options, not merely with
one sole requirement. These three (3) options are the following:

1) (that singled out and quoted by the petitioners, i.e.:) "incorporate its branch or branches into a new bank
in accordance with Philippine laws . . . ; or

2) "assign capital permanently to the local branch with the concurrent maintenance of a 'net due to' head
office account which shall include all net amounts due to other branches outside the Philippines in an
amount which when added to the assigned capital shall at all times be not less than the minimum amount of
capital accounts required for domestic commercial banks under section twenty-two of this Act;" or

3) "maintain a "net due to" head office account which shall include all net amounts due to other branches
outside the Philippines, in an amount which shall not be less than the minimum amount of capital accounts
required for domestic commercial banks under section twenty-two of this Act."

The less said about this argument then, the better.

The petitioners allege that three days before respondent banks filed their petition for involuntary insolvency against
CMI, they received from the latter substantial payments on account in the aggregate amount of P6,010,800.00, with
the result that they were "preferred in the distribution of CMI's assets thereby defrauding other creditors of
CMI." Non sequitur. It is in any case a circumstance that the Bankruptcy Court may well take into consideration in
determining the manner and proportion by which the assets of the insolvent company shall be distributed among its
creditors; but it should not be considered a ground for giving the petition for insolvency short shrift. Moreover, the
payment adverted to does not appear to be all that large. The total liabilities of CMI to the three respondent banks
as of December, 1981 was P21,531,336.91, and US$14,485,814.85. Converted into Philippine currency at the rate
of P7.899 to the dollar, the average rate of exchange during December, 1981, 30 the dollar account would be
P114,423,451.50. Thus, the aggregate liabilities of CMI to the banks, expressed in Philippine currency, was
P135,954,788.41 as of December, 1981, and therefore the payment to them of P6,010,800.00 constituted only
some 4.42% of the total indebtedness.

WHEREFORE, the petition is DENIED and the challenged Decision of the Court of Appeals is AFFIRMED in toto,
with costs against the petitioners.

G.R. No. 171995               April 18, 2012

STEELCASE, INC., Petitioner, 
vs.
DESIGN INTERNATIONAL SELECTIONS, INC., Respondent.

DECISION

MENDOZA, J.:

This is a petition for review on certiorari under Rule 45 assailing the March 31, 2005 Decision1 of the Court of
Appeals (CA) which affirmed the May 29, 2000 Order2 of the Regional Trial Court, Branch 60, Makati City (RTC),
dismissing the complaint for sum of money in Civil Case No. 99-122 entitled "Steelcase, Inc. v. Design International
Selections, Inc."

The Facts

Petitioner Steelcase, Inc. (Steelcase) is a foreign corporation existing under the laws of Michigan, United
States of America (U.S.A.), and engaged in the manufacture of office furniture with dealers
worldwide.3 Respondent Design International Selections, Inc. (DISI) is a domestic corporation existing under
Philippine Laws and engaged in the furniture business, including the distribution of furniture.4 

Sometime in 1986 or 1987, Steelcase and DISI orally entered into a dealership agreement whereby Steelcase
granted DISI the right to market, sell, distribute, install, and service its products to end-user customers within the
Philippines. The business relationship continued smoothly until it was terminated sometime in January 1999 after
the agreement was breached with neither party admitting any fault.5 

On January 18, 1999, Steelcase filed a complaint6 for sum of money against DISI alleging, among others, that DISI
had an unpaid account of US$600,000.00. Steelcase prayed that DISI be ordered to pay actual or compensatory
damages, exemplary damages, attorney’s fees, and costs of suit.

In its Answer with Compulsory Counterclaims7 dated February 4, 1999, DISI sought the following: (1) the issuance of
a temporary restraining order (TRO) and a writ of preliminary injunction to enjoin Steelcase from selling its products
in the Philippines except through DISI; (2) the dismissal of the complaint for lack of merit; and (3) the payment of
actual, moral and exemplary damages together with attorney’s fees and expenses of litigation. DISI alleged that the
complaint failed to state a cause of action and to contain the required allegations on Steelcase’s capacity to sue in
the Philippines despite the fact that it (Steelcase) was doing business in the Philippines without the required license
to do so. Consequently, it posited that the complaint should be dismissed because of Steelcase’s lack of legal
capacity to sue in Philippine courts.

On March 3, 1999, Steelcase filed its Motion to Admit Amended Complaint8 which was granted by the RTC, through
then Acting Presiding Judge Roberto C. Diokno, in its Order9 dated April 26, 1999. However, Steelcase sought to
further amend its complaint by filing a Motion to Admit Second Amended Complaint10 on March 13, 1999.

In his Order11 dated November 15, 1999, Acting Presiding Judge Bonifacio Sanz Maceda dismissed the complaint,
granted the TRO prayed for by DISI, set aside the April 26, 1999 Order of the RTC admitting the Amended
Complaint, and denied Steelcase’s Motion to Admit Second Amended Complaint. The RTC stated that in requiring
DISI to meet the Dealer Performance Expectation and in terminating the dealership agreement with DISI based on
its failure to improve its performance in the areas of business planning, organizational structure, operational
effectiveness, and efficiency, Steelcase unwittingly revealed that it participated in the operations of DISI. It then
concluded that Steelcase was "doing business" in the Philippines, as contemplated by Republic
Act (R.A.) No. 7042 (The Foreign Investments Act of 1991), and since it did not have the license to do
business in the country, it was barred from seeking redress from our courts until it obtained the requisite
license to do so. Its determination was further bolstered by the appointment by Steelcase of a representative in the
Philippines. Finally, despite a showing that DISI transacted with the local customers in its own name and for its own
account, it was of the opinion that any doubt in the factual environment should be resolved in favor of a
pronouncement that a foreign corporation was doing business in the Philippines, considering the twelve-year period
that DISI had been distributing Steelcase products in the Philippines.

Steelcase moved for the reconsideration of the questioned Order but the motion was denied by the RTC in its May
29, 2000 Order.12 

Aggrieved, Steelcase elevated the case to the CA by way of appeal, assailing the November 15, 1999 and May 29,
2000 Orders of the RTC. On March 31, 2005, the CA rendered its Decision affirming the RTC orders, ruling that
Steelcase was a foreign corporation doing or transacting business in the Philippines without a license. The
CA stated that the following acts of Steelcase showed its intention to pursue and continue the conduct of its
business in the Philippines: (1) sending a letter to Phinma, informing the latter that the distribution rights for its
products would be established in the near future and directing other questions about orders for Steelcase products
to Steelcase International; (2) cancelling orders from DISI’s customers, particularly Visteon, Phils., Inc. (Visteon); (3)
continuing to send its products to the Philippines through Modernform Group Company Limited (Modernform), as
evidenced by an Ocean Bill of Lading; and (4) going beyond the mere appointment of DISI as a dealer by making
several impositions on management and operations of DISI. Thus, the CA ruled that Steelcase was barred from
access to our courts for being a foreign corporation doing business here without the requisite license to do
so.

(1) Whether or not Steelcase is doing business in the Philippines without a license; NO

(2) Whether or not DISI is estopped from challenging the Steelcase’s legal capacity to sue.

The Court’s Ruling

The Court rules in favor of the petitioner.

Steelcase is an unlicensed foreign corporation NOT doing business in the Philippines

Anent the first issue, Steelcase argues that Section 3(d) of R.A. No. 7042 or the Foreign Investments Act of
1991 (FIA) expressly states that the phrase "doing business" excludes the appointment by a foreign
corporation of a local distributor domiciled in the Philippines which transacts business in its own name and
for its own account. Steelcase claims that it was not doing business in the Philippines when it entered into a
dealership agreement with DISI where the latter, acting as the former’s appointed local distributor, transacted
business in its own name and for its own account. Specifically, Steelcase contends that it was DISI that sold
Steelcase’s furniture directly to the end-users or customers who, in turn, directly paid DISI for the furniture
they bought. Steelcase further claims that DISI, as a non-exclusive dealer in the Philippines, had the right to
market, sell, distribute and service Steelcase products in its own name and for its own account. Hence, DISI
was an independent distributor of Steelcase products, and not a mere agent or conduit of Steelcase.

On the other hand, DISI argues that it was appointed by Steelcase as the latter’s exclusive distributor of Steelcase
products. DISI likewise asserts that it was not allowed by Steelcase to transact business in its own name and for its
own account as Steelcase dictated the manner by which it was to conduct its business, including the management
and solicitation of orders from customers, thereby assuming control of its operations. DISI further insists that
Steelcase treated and considered DISI as a mere conduit, as evidenced by the fact that Steelcase itself
directly sold its products to customers located in the Philippines who were classified as part of their "global
accounts." DISI cited other established circumstances which prove that Steelcase was doing business in the
Philippines including the following: (1) the sale and delivery by Steelcase of furniture to Regus, a Philippine
client, through Modernform, a Thai corporation allegedly controlled by Steelcase; (2) the imposition by
Steelcase of certain requirements over the management and operations of DISI; (3) the representations
made by Steven Husak as Country Manager of Steelcase; (4) the cancellation by Steelcase of orders placed
by Philippine clients; and (5) the expression by Steelcase of its desire to maintain its business in the
Philippines. Thus, Steelcase has no legal capacity to sue in Philippine Courts because it was doing business in the
Philippines without a license to do so.

The Court agrees with the petitioner.

The rule that an unlicensed foreign corporations doing business in the Philippine do not have the capacity
to sue before the local courts is well-established. Section 133 of the Corporation Code of the Philippines
explicitly states:

Sec. 133. Doing business without a license. - No foreign corporation transacting business in the Philippines without
a license, or its successors or assigns, shall be permitted to maintain or intervene in any action, suit or proceeding in
any court or administrative agency of the Philippines; but such corporation may be sued or proceeded against
before Philippine courts or administrative tribunals on any valid cause of action recognized under Philippine laws.

The phrase "doing business" is clearly defined in Section 3(d) of R.A. No. 7042 (Foreign Investments Act of
1991), to wit:

d) The phrase "doing business" shall include soliciting orders, service contracts, opening offices, whether called
"liaison" offices or branches; appointing representatives or distributors domiciled in the Philippines or who in any
calendar year stay in the country for a period or periods totalling one hundred eighty (180) days or more;
participating in the management, supervision or control of any domestic business, firm, entity or corporation in the
Philippines; and any other act or acts that imply a continuity of commercial dealings or arrangements, and
contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally
incident to, and in progressive prosecution of, commercial gain or of the purpose and object of the business
organization: Provided, however, That the phrase "doing business" shall not be deemed to include mere investment
as a shareholder by a foreign entity in domestic corporations duly registered to do business, and/or the exercise of
rights as such investor; nor having a nominee director or officer to represent its interests in such corporation; nor
appointing a representative or distributor domiciled in the Philippines which transacts business in its own name and
for its own account; (Emphases supplied)
This definition is supplemented by its Implementing Rules and Regulations, Rule I, Section 1(f) which elaborates on
the meaning of the same phrase:

f. "Doing business" shall include

- soliciting orders, service contracts, opening offices, whether liaison offices or branches;

- appointing representatives or distributors, operating under full control of the foreign corporation,
domiciled in the Philippines or who in any calendar year stay in the country for a period 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.

The following acts shall not be deemed "doing business" in the Philippines:

1. Mere investment as a shareholder by a foreign entity in domestic corporations duly registered to

do business, and/or the exercise of rights as such investor;

2. Having a nominee director or officer to represent its interest in such corporation;

3. Appointing a representative or distributor domiciled in the Philippines which transacts business

in the representative's or distributor's own name and account;

4. The publication of a general advertisement through any print or broadcast media;

5. Maintaining a stock of goods in the Philippines solely for the purpose of having the same
processed by another entity in the Philippines;

6. Consignment by a foreign entity of equipment with a local company to be used in the processing
of products for export;

7. Collecting information in the Philippines; and

8. Performing services auxiliary to an existing isolated contract of sale which are not on a continuing
basis, such as installing in the Philippines machinery it has manufactured or exported to the
Philippines, servicing the same, training domestic workers to operate it, and similar incidental
services. (Emphases supplied)

Therefore, the appointment of a distributor in the Philippines is not sufficient to constitute "doing business"
unless it is under the full control of the foreign corporation. On the other hand, if the distributor is an
independent entity which buys and distributes products, other than those of the foreign corporation, for its
own name and its own account, the foreign corporation cannot be considered to be doing business in the
Philippines.14 It should be kept in mind that the determination of whether a foreign corporation is doing business in
the Philippines must be judged in light of the attendant circumstances.15 

In the case at bench, it is undisputed that DISI was founded in 1979 and is independently owned and managed by
the spouses Leandro and Josephine Bantug.16 In addition to Steelcase products, DISI also distributed products of
other companies including carpet tiles, relocatable walls and theater settings.17 The dealership agreement
between Steelcase and DISI had been described by the owner of DISI himself as:

xxx basically a buy and sell arrangement whereby we would inform Steelcase of the volume of the products
needed for a particular project and Steelcase would, in turn, give ‘special quotations’ or discounts after considering
the value of the entire package. In making the bid of the project, we would then add out profit margin over
Steelcase’s prices. After the approval of the bid by the client, we would thereafter place the orders to Steelcase. The
latter, upon our payment, would then ship the goods to the Philippines, with us shouldering the freight charges and
taxes.18 [Emphasis supplied]

This clearly belies DISI’s assertion that it was a mere conduit through which Steelcase conducted its business in the
country. From the preceding facts, the only reasonable conclusion that can be reached is that DISI was an
independent contractor, distributing various products of Steelcase and of other companies, acting in its
own name and for its own account.

The CA, in finding Steelcase to be unlawfully engaged in business in the Philippines, took into consideration the
delivery by Steelcase of a letter to Phinma informing the latter that the distribution rights for its products would be
established in the near future, and also its cancellation of orders placed by Visteon. The foregoing acts were
apparently misinterpreted by the CA. Instead of supporting the claim that Steelcase was doing business in the
country, the said acts prove otherwise. It should be pointed out that no sale was concluded as a result of these
communications. Had Steelcase indeed been doing business in the Philippines, it would have readily accepted and
serviced the orders from the abovementioned Philippine companies. Its decision to voluntarily cease to sell its
products in the absence of a local distributor indicates its refusal to engage in activities which might be construed as
"doing business."

Another point being raised by DISI is the delivery and sale of Steelcase products to a Philippine client by
Modernform allegedly an agent of Steelcase. Basic is the rule in corporation law that a corporation has a separate
and distinct personality from its stockholders and from other corporations with which it may be connected.19 Thus,
despite the admission by Steelcase that it owns 25% of Modernform, with the remaining 75% being owned and
controlled by Thai stockholders,20 it is grossly insufficient to justify piercing the veil of corporate fiction and declare
that Modernform acted as the alter ego of Steelcase to enable it to improperly conduct business in the Philippines.
The records are bereft of any evidence which might lend even a hint of credence to DISI’s assertions. As such,
Steelcase cannot be deemed to have been doing business in the Philippines through Modernform.

Finally, both the CA and DISI rely heavily on the Dealer Performance Expectation required by Steelcase of its
distributors to prove that DISI was not functioning independently from Steelcase because the same imposed certain
conditions pertaining to business planning, organizational structure, operational effectiveness and efficiency, and
financial stability. It is actually logical to expect that Steelcase, being one of the major manufacturers of office
systems furniture, would require its dealers to meet several conditions for the grant and continuation of a
distributorship agreement. The imposition of minimum standards concerning sales, marketing, finance and
operations is nothing more than an exercise of sound business practice to increase sales and maximize profits for
the benefit of both Steelcase and its distributors. For as long as these requirements do not impinge on a distributor’s
independence, then there is nothing wrong with placing reasonable expectations on them.

All things considered, it has been sufficiently demonstrated that DISI was an independent contractor which sold
Steelcase products in its own name and for its own account. As a result, Steelcase cannot be considered to be
doing business in the Philippines by its act of appointing a distributor as it falls under one of the exceptions under
R.A. No. 7042.

DISI is estopped from challenging Steelcase’s legal capacity to sue

Regarding the second issue, Steelcase argues that assuming arguendo that it had been "doing business" in
the Philippines without a license, DISI was nonetheless estopped from challenging Steelcase’s capacity to
sue in the Philippines. Steelcase claims that since DISI was aware that it was doing business in the
Philippines without a license and had benefited from such business, then DISI should be estopped from
raising the defense that Steelcase lacks the capacity to sue in the Philippines by reason of its doing
business without a license.

On the other hand, DISI argues that the doctrine of estoppel cannot give Steelcase the license to do business in the
Philippines or permission to file suit in the Philippines. DISI claims that when Steelcase entered into a dealership
agreement with DISI in 1986, it was not doing business in the Philippines. It was after such dealership was put in
place that it started to do business without first obtaining the necessary license. Hence, estoppel cannot work
against it. Moreover, DISI claims that it suffered as a result of Steelcase’s "doing business" and that it never
benefited from the dealership and, as such, it cannot be estopped from raising the issue of lack of capacity to sue
on the part of Steelcase.

The argument of Steelcase is meritorious.

If indeed Steelcase had been doing business in the Philippines without a license, DISI would nonetheless be
estopped from challenging the former’s legal capacity to sue.

It cannot be denied that DISI entered into a dealership agreement with Steelcase and profited from it for 12 years
from 1987 until 1999. DISI admits that it complied with its obligations under the dealership agreement by exerting
more effort and making substantial investments in the promotion of Steelcase products. It also claims that it was
able to establish a very good reputation and goodwill for Steelcase and its products, resulting in the establishment
and development of a strong market for Steelcase products in the Philippines. Because of this, DISI was very
proud to be awarded the "Steelcase International Performance Award" for meeting sales objectives,
satisfying customer needs, managing an effective company and making a profit.21 

Unquestionably, entering into a dealership agreement with Steelcase charged DISI with the knowledge that
Steelcase was not licensed to engage in business activities in the Philippines. This Court has carefully
combed the records and found no proof that, from the inception of the dealership agreement in 1986 until
September 1998, DISI even brought to Steelcase’s attention that it was improperly doing business in the
Philippines without a license. It was only towards the latter part of 1998 that DISI deemed it necessary to
inform Steelcase of the impropriety of the conduct of its business without the requisite Philippine license. It
should, however, be noted that DISI only raised the issue of the absence of a license with Steelcase after it
was informed that it owed the latter US$600,000.00 for the sale and delivery of its products under their
special credit arrangement.

By acknowledging the corporate entity of Steelcase and entering into a dealership agreement with it and
even benefiting from it, DISI is estopped from questioning Steelcase’s existence and capacity to sue. This is
consistent with the Court’s ruling in Communication Materials and Design, Inc. v. Court of Appeals22 where it was
written:

Notwithstanding such finding that ITEC is doing business in the country, petitioner is nonetheless estopped from
raising this fact to bar ITEC from instituting this injunction case against it.
  A foreign corporation doing business in the Philippines although not authorized to do business here
may sue in Philippine Courts against a Philippine citizen or entity who had contracted with and
benefited by said corporation. To put it in another way, 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 a 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.

The rule is deeply rooted in the time-honored axiom of Commodum ex injuria sua non habere debet — no person
ought to derive any advantage of his own wrong. This is as it should be for as mandated by law, "every person must
in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe
honesty and good faith."

Concededly, corporations act through agents, like directors and officers. Corporate dealings must be characterized
by utmost good faith and fairness. Corporations cannot just feign ignorance of the legal rules as in most cases, they
are manned by sophisticated officers with tried management skills and legal experts with practiced eye on legal
problems. Each party to a corporate transaction is expected to act with utmost candor and fairness and, thereby
allow a reasonable proportion between benefits and expected burdens. This is a norm which should be observed
where one or the other is a foreign entity venturing in a global market.

xxx

By entering into the "Representative Agreement" with ITEC, petitioner is charged with knowledge that ITEC was not
licensed to engage in business activities in the country, and is thus estopped from raising in defense such incapacity
of ITEC, having chosen to ignore or even presumptively take advantage of the same.23 (Emphases supplied)

The case of Rimbunan Hijau Group of Companies v. Oriental Wood Processing Corporation24 is likewise instructive:

Respondent’s unequivocal admission of the transaction which gave rise to the complaint establishes the applicability
of estoppel against it. Rule 129, Section 4 of the Rules on Evidence provides that a written admission made by a
party in the course of the proceedings in the same case does not require proof. We held in the case of Elayda v.
Court of Appeals, that an admission made in the pleadings cannot be controverted by the party making such
admission and are conclusive as to him. Thus, our consistent pronouncement, as held in cases such as Merril Lynch
Futures v. Court of Appeals, is apropos:

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 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 . . ."

All things considered, respondent can no longer invoke petitioner’s lack of capacity to sue in this
jurisdiction.1âwphi1Considerations of fair play dictate that after having contracted and benefitted from its business
transaction with Rimbunan, respondent should be barred from questioning the latter’s lack of license to transact
business in the Philippines.

In the case of Antam Consolidated, Inc. v. CA, this Court noted that it is a common ploy of defaulting local
companies which are sued by unlicensed foreign corporations not engaged in business in the Philippines to invoke
the latter’s lack of capacity to sue. This practice of domestic corporations is particularly reprehensible considering
that in requiring a license, the law never intended to prevent foreign corporations from performing single or isolated
acts in this country, or to favor domestic corporations who renege on their obligations to foreign firms unwary
enough to engage in solitary transactions with them. Rather, the law was intended to bar foreign corporations from
acquiring a domicile for the purpose of business without first taking the steps necessary to render them amenable to
suits in the local courts. It was to prevent the foreign companies from enjoying the good while disregarding the bad.

As a matter of principle, this Court will not step in to shield defaulting local companies from the repercussions of
their business dealings. While the doctrine of lack of capacity to sue based on failure to first acquire a local license
may be resorted to in meritorious cases, it is not a magic incantation. It cannot be called upon when no evidence
exists to support its invocation or the facts do not warrant its application. In this case, that the respondent is
estopped from challenging the petitioners’ capacity to sue has been conclusively established, and the forthcoming
trial before the lower court should weigh instead on the other defenses raised by the respondent.25 (Emphases
supplied)

As shown in the previously cited cases, this Court has time and again upheld the principle that a foreign corporation
doing business in the Philippines without a license may still sue before the Philippine courts a Filipino or a Philippine
entity that had derived some benefit from their contractual arrangement because the latter is considered to be
estopped from challenging the personality of a corporation after it had acknowledged the said corporation by
entering into a contract with it.26 

In Antam Consolidated, Inc. v. Court of Appeals,27 this Court had the occasion to draw attention to the common ploy
of invoking the incapacity to sue of an unlicensed foreign corporation utilized by defaulting domestic companies
which seek to avoid the suit by the former. The Court cannot allow this to continue by always ruling in favor of local
companies, despite the injustice to the overseas corporation which is left with no available remedy.

During this period of financial difficulty, our nation greatly needs to attract more foreign investments and encourage
trade between the Philippines and other countries in order to rebuild and strengthen our economy. While it is
essential to uphold the sound public policy behind the rule that denies unlicensed foreign corporations doing
business in the Philippines access to our courts, it must never be used to frustrate the ends of justice by becoming
an all-encompassing shield to protect unscrupulous domestic enterprises from foreign entities seeking redress in our
country. To do otherwise could seriously jeopardize the desirability of the Philippines as an investment site and
would possibly have the deleterious effect of hindering trade between Philippine companies and international
corporations.

WHEREFORE, the March 31, 2005 Decision of the Court of Appeals and its March 23, 2006 Resolution are
hereby REVERSED and SET ASIDE. The dismissal order of the Regional Trial Court dated November 15, 1999 is
hereby set aside. Steelcase’s Amended Complaint is hereby ordered REINSTATED and the case is REMANDED to
the RTC for appropriate action.

G.R. No. 72147 December 1, 1987

WANG LABORATORIES, INC., petitioner, 

vs.
THE HONORABLE RAFAEL T. MENDOZA, then Presiding Judge, Regional Trial Court, Branch CXXXIV,
Makati, Metro Manila, THE HONORABLE BERNARDO ABESAMIS, incumbent Presiding Judge, Regional
Trial Court, Branch CXX-XIV, Makati, Metro Manila, Public Respondents and ANGARA CONCEPCION
REGALA & CRUZ LAW OFFICES Private Respondents, respondents.

PARAS, J.:

Petitioner WANG LABORATORIES is a foreign corporation duly organized under the laws of the United States with
principal address at One Industrial Avenue, Lowell, Massachusetts, U.S.A., engaged in the business of
manufacturing and selling computers worldwide. In the Philippines, petitioner sells its products to EXXBYTE
TECHNOLOGIES CORPORATION, hereinafter referred to as EXXBYTE, its exclusive distributor. EXXBYTE is a
domestic corporation engaged in the business of selling computer products to the public in its own name for its own
account (Petitioner's Brief, p. 2; Rollo, pp. 268-319). 

Angara, Concepcion, Regala & Cruz Law Offices (hereinafter referred to as ACCRALAW for brevity) is a duly
registered professional partnership (Rollo, p. 4). 

On September 10, 1980, respondent ACCRALAW entered into a contract with EXXBYTE for acquisition and
installation of a Wang 2200 US Integrated Information System at the former's office. As stipulated in the above-said
contract, a letter of credit for US$ 86,142.55 was thereafter opened by ACCRALAW in favor of petitioner herein to
pay for the Wang 2200 US System. Sometime in May 1981, the hardware was delivered and installed by EXXBYTE
in ACCRALAW's office (Rollo, p. 151). 

On June 10, 1981, ACCRALAW and EXXBYTE entered into another contract for the development of a data
processing software program needed to computerize the ACCRALAW office (Petitioner's Brief, p. 2). 

Subsequent thereto and for one reason or the other, the contract for the development of a data processing
software program or ISLA was not implemented. 

On May 7, 1984, ACCRALAW filed a complaint for breach of contract with damages, replevin and attachment
against herein petitioner (Rollo, p. 152), in Civil Case No. 7183 of the Regional Trial Court, Makati (Petitioner's Brief,
p. 3). 

On May 23, 1984, petitioner Wang Laboratories filed a Motion to Dismiss the complaint on the ground that there
was improper service of summons, hence, the court below had not obtained jurisdiction over the person of the
petitioner (Petitioner's Brief, p. 3). In its Motion to Dismiss, petitioner interposed that the court has no jurisdiction
over its person primarily because it is a United States corporation with principal address at One Industrial Avenue,
Lowell, Massachusetts, U.S.A., is not domiciled in the Philippines, does not have any office or place of business in
the Philippines, is not licensed to engage and is not engaging in business here. EXXBYTE upon whom summons
was served on behalf of this defendant is a local company entirely separate and distinct from and is not the
representative of Wang lab (Rollo, pp. 57-60). 

On July 13, 1984, petitioner filed a Motion for Deposition by Oral Examination for the purpose of presenting
testimonial evidence in support of its motion to dismiss. The respondent court thereafter ordered the taking of the
deposition by way of oral examination. 

On February 21, 1985, petitioner filed its reply to the opposition to motion to dismiss (Petitioner's Brief, P. 3). 
On March 29, 1985, ACCRALAW filed an Ex-Abundante Cautela Motion for leave to Effect Extraterritorial Service of
Summons on petitioner. Which was granted by RTC

In an order dated April 24, 1985, respondent Judge Mendoza, among others, granted the Ex-Abundante Cautela
Motion to Effect Extraterritorial Service of Summons, denied the petitioner's motion to dismiss on the ground that it
had voluntarily submitted itself to the jurisdiction of the court, and thus declined to consider the legal and factual
issues raised in the Motion to Dismiss. 

ISSUE: whether or not respondent Court has acquired jurisdiction over the person of the petitioner, a
foreign corporation (YES) wang lab is doing business in the Philippines

Petitioner's contention is untenable. The issue is not novel in our jurisdiction. 

There are three (3) modes of effecting service of summons upon private foreign corporations as provided for
in Section 14, Rule 7 of the Rules of Court, to wit:

(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 office;

and (3) by serving on any officer or agent of said corporation within the Philippines (Far East Int'l. Import and
Export Corp. v. Nankai Kogyo Co., Ltd., 6 SCRA 725 [1962]). 

Summons intended for the petitioner was served on EXXBYTE at the 3rd. Floor, Zeta Building, 191 Salcedo
Street, Legaspi Village, Makati, Metro Manila (Rollo, p. 57) as its duly authorized and exclusive representative
and distributor in the Philippines of WANG LAB (Rollo, p. 24 and p. 149). Petitioner opposed such service and
filed a Motion to Dismiss on the ground of lack of jurisdiction on its person, being a foreign corporation not engaged
in business in the Philippines. Evidence presented by private respondent however, shows that contrary to
petitioner's allegations,

 the various public advertisements of WANG and EXXBYTE clearly show that Wang has appointed
EXXBYTE, which is domiciled in the Philippines, as its authorized exclusive representative in this
country.
 In fact, WANG represents that its office in the Philippines is EXXBYTE, while the letterhead of
EXXBYTE and its invoices show that it is WANG's representative. (Rollo, p. 65).
 Moreover, in its Reply to Opposition to Motion to Dismiss, WANG itself admitted that it deals exclusively
with EXXBYTE in the sale of its products in the Philippines (Rollo, pp. 79 and 154). 

In any event, as previously stated, private respondent moved further, ex abundante cautela, for leave to effect
extraterritorial service of summons on petitioner WANG. Private respondent presented to the Court
documentary evidence proving that the defendant Wang has properties in the Philippines consisting of
trademarks registered with the Philippine Patent Office and that WANG designated Rafael E. Evangelists of
638 Philippine Banking Building, Ayala Avenue, Makati, Metro Manila as its Resident Agent upon whom
notice or process affecting the mark may be served. The same counsel represented petitioner in the oral
deposition of Mr. Yeoh Asia Controller for Wang Laboratories (Annex "S," Petition). Private respondent further
showed that said trademarks have been judicially attached (Rollo, p. 110). Petitioner in its Rejoinder to
ACCRALAW's Reply, prays for the issuance of an order holding in abeyance any and all proceedings relative to
ACCRALAW's motion for leave of court to effect extraterritorial service of summons (Rollo, p. 155). 

Petitioner insists on its argument that extra-judicial summons or any kind thereof cannot bind the petitioner
inasmuch as it is not doing business in the Philippines nor is it licensed to do business in the country. 

In the cases of Mentholatum Co., Inc. v. Mangaliman (72 Phil. 524 119411 and Topweld Manufacturing, Inc. v. Eced
S.A. et al., 138 SCRA 118 [1985]), it was held that no general rule or governing principle can be laid down as to
what constitutes doing or "engaging" or "trading" in business. Indeed each case must be judged in the light of its
peculiar environmental circumstances; upon peculiar facts and upon the language of the Statute applicable (Far
East Int'l. Import Export Corp. v. Nankai Kogyo, Co., Ltd. (6 SCRA 725 [1962]). 

Under the circumstances; petitioner cannot unilaterally declare that it is not doing business in the
Philippines. In fact, it has installed, at least 26 different products in several corporations in the Philippines
since 1976 (Respondent's Brief, Rollo, p. 272). It has registered its trade name with the Philippine Patents
Office (ibid) and Mr. Yeoh who is petitioner's controller in Asia has visited the office of its distributor for at least four
times where he conducted training programs in the Philippines (Oral Deposition, pp. 16; 22-23, Rollo, pp. 335;
341-342, Annex "S" to Petitioner's Brief). Wang has allowed its registered logo and trademark to be used by
EXXBYTE (Pran Deposition, p. 23, Rollo, p. 342) and made it known that there exists a designated distributor in the
Philippines as published in its advertisements. 

Indeed it has been 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 to do other business in the
State, such act constitutes doing business within the meaning of statutes prescribing the conditions under
which a foreign corporation may be served with summons (Far East Int'l. Import and Export Corp. v. Nankai
Kogyo Co. Ltd., 6 SCRA 725 [1962]). 

Be that as it may, the issue on the suability of foreign corporation whether or not doing business in the Philippines
has already been laid to rest. The Court has categorically stated that although a foreign corporation is not
doing business in the Philippines, it may be sued for acts done against persons in the Philippines. The
Court has ruled as follows: 

Indeed if a foreign corporation, not engaged in business in the Philippines, is not barred from
seeking redress from courts in the Philippines, a fortiori, that same corporation cannot claim
exemption from being sued in Philippine courts for acts done against a person or persons in the
Philippines (Facilities Management Corporation v. De la Osa, 89 SCRA 131 [1979]). 

Furthermore, even though petitioner objects to the jurisdiction of the Court over its person, the fact that it alleged
non-jurisdictional grounds in its pleadings indicates that it has waived lack of jurisdiction of the court. 

As noted by the trial court, defendant Wang (petitioner herein) in its Motion to Dismiss sought affirmative reliefs
requiring the exercise of jurisdiction, by praying: (1) for authority to take testimony by way of deposition upon oral
examination; (2) for extension of time to file opposition to plaintiffs' motion to effect Extraterritorial Service of
Summons; (3) to hold in abeyance any and all proceedings relative to plaintiffs' foregoing motion and (4) to consider
as a mere scrap of paper plaintiff's motion to strike out Deposition (Rollo, p. 111). 

In addition, the records show that petitioner also prayed for: (1) authority to reset date of taking of deposition; (2)
admission of the formal stenographic notes and (3) suspension of time to file responsive pleadings, not to mention
its various participation in the proceedings in the court other than for the purpose of objecting to lack of jurisdiction
(Rollo, p. 169). 

In fact, it is well settled that "A voluntary appearance is a waiver of the necessity of formal notice." Thus, it has been
held that when the appearance is by motion for the purpose of objecting to the jurisdiction of the court over the
person it must be for the sole and separate purpose of objecting to the jurisdiction of the Court. If the appearance is
for any other purpose, the defendant is deemed to have submitted himself to the jurisdiction of the court. Such an
appearance gives the court jurisdiction over the person (Flores v. Zurbito, 37 Phil. 746 [1918]). Clarifying further, the
Court has likewise ruled that even though the defendant objects to the jurisdiction of the Court, if at the same time
he alleges any non-jurisdictional ground for dismissing the action, the Court acquires jurisdiction over him (Far East
International Import & Export Corporation v. Nankai Kogyo, Co., Ltd., 6 SCRA 725 11962]). 

PREMISES CONSIDERED, the petition is DISMISSED for lack of merit, with costs against the petitioner. The
temporary restraining order is hereby lifted immediately.

G.R. No. L-40163 June 19, 1982

LEVITON INDUSTRIES, NENA DE LA CRUZ LIM, DOMINGO GO, and LIM KIAT, petitioners, 
vs.
HON. SERAFIN SALVADOR, Judge, Court of First Instance of Rizal, Caloocan City, Branch XIV and LEVITON
MANUFACTURING CO., INC., respondents.

On April 17, 1973, private respondent Leviton Manufacturing Co., Inc. filed a complaint for unfair competition against
petitioners Leviton Industries, Nena de la Cruz Lim, Domingo Go and Lim Kiat before the Court of First Instance of
Rizal, Branch XXXIII, presided by respondent Judge Serafin Salvador.

The complaint substantially it alleges that plaintiff Leviton Manufacturing is a foreign corporation organized and
existing under the laws of the State of New York, United States of America, with office located at 236 Greenpoint
Avenue, Brooklyn City, State of New York, U.S.A.;

that defendant Leviton Industries is a partnership organized and existing under the laws of the Philippines
with principal office at 382 10th Avenue, Grace Park, Caloocan City;

while defendants Nena de la Cruz Lim, Domingo Go and Lim Kiat are the partners, with defendant Domingo Go
acting as General Manager of defendant Leviton Industries; that Leviton Manufacturing founded in 1906 by Isidor
Leviton, is the largest manufacturer of electrical wiring devices in the United States under the trademark Leviton,
which various electrical wiring devices bearing the trademark Leviton and trade name Leviton Manufacturing Co.,
Inc. had been exported to the Philippines since 1954; that due to the superior quality and widespread use of its
products by the public, the same are well known to Filipino consumers under the trade name Leviton Manufacturing
Co., Inc. and trademark Leviton; that long subsequent to the use of plaintiff's trademark and trade name in the
Philippines, defendants Leviton Industries began manufacturing and selling electrical devices ballast, fuse and
oval buzzer under the trademark Leviton and trade name Leviton Industries Co.;

that Domingo Go, partner and general manager of defendant thr partnership, had registered with the Philippine
Patent Office the trademarks Leviton Label and Leviton with respect to ballast and fuse under Certificate of
Registration Nos. SR-1132 and 15517, respectively, which registration was contrary to paragraphs (d) and (e) of
Section 4 of RA 166, as amended, and violative of plaintiff's right over the trademark Leviton; that defendants not
only used the trademark Leviton but likewise the partnership copied the design used by plaintiff in
distinguishing its trademark; and that the use thereof by defendants of its products would cause confusion
in the minds of the consumers and likely to deceive them as to the source of origin, thereby enabling
defendants to pass off their products as those of plaintiff's. Invoking the provisions of Section 21-A of Republic Act
No. 166, plaintiff prayed for damages. It also sought the issuance of a writ of injunction to prohibit defendants from
using the trade name Leviton Industries, Co. and the trademark Leviton. 

Defendants Leviton industries moved to dismiss the complaint for failure to state a cause of action, drawing
attention to the due plaintiff's failure to allege therein its capacity to sue under Section 21-A of Republic Act No.
166, as amended. After the filing of the plaintiff's opposition and the defendant's reply, the respondent judge denied
the motion on the ground that the same did not appear to be indubitable. On September 21, 1973, defendants filed
their answer, reiterating the ground supporting their motion to dismiss.

Thereafter, defendants Leviton Industries served upon plaintiff a request for admission under Rule 26 of the Rules
of Court, of the following matters of fact, to wit: 

(1) That the plaintiff is not actually manufacturing, selling and/or distributing ballasts generally used
in flourescent lighting; 

(2) That plaintiff has no registered trademark or trade name in the Philippine Patent Office of any of
its products; and 

(3) That plaintiff has no license to do business in the Philippines under and by virtue of the
provision of Act No. 1459, better known as the Philippine Corporation Law, at the time it filed the
complaint. 1

Complying with the said request, plaintiff admitted: 

That it does not manufacture ballasts; that it has not registered its trademark in the Philippine Patent Office, but has
filed with the same office an application of its trade mark on April 16, 1971; and that it has no license to do
business in the Philippines. 2

On the basis of these admissions, defendants filed an Urgent Supplemental Motion to Dismiss. This was followed by
the plaintiff's opposition, and the defendant's rejoinder, after which respondent judge issued the questioned
order 3denying the motion, thus: 

Acting on the Urgent Supplemental Motion to Dismiss, dated July 2, 1974, filed by counsels for the
defendants, as well as the oppositions thereto, the Court after a careful consideration of the reasons
adduced for and against said motion, is of the opinion that the same should be, as it is hereby
DENIED. 

SO ORDERED. 

ISSUE: WoN Leviton Manufacturing Company (plaintiff) has capacity to sue before Ph Courts---. NONE

We agree with petitioners that respondent Leviton Marketing Co., Inc. had failed to allege the essential facts bearing
upon its capacity to sue before Philippine courts. Private respondent's action is squarely founded on Section 21-A
of Republic Act No. 166 or trademark law, as amended, which we quote: 

Sec. 21-A. Any foreign corporation or juristic person to which a mark or tradename has been
registered or assigned under this Act may bring an action hereunder for infringement, 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 the complaint; Provided,
That the country of which the said foreign corporation or juristic person is a citizen, or in which it is
domiciled, by treaty, convention or law, grants a similar privilege to corporate or juristic persons of
the Philippines. (As amended by R.A. No. 638) 

Undoubtedly, the foregoing section grants to a foreign corporation, whether or not licensed to do business in
the Philippines, the right to sue for unfair competition before Philippine courts. But the said law is not without
qualifications. Its literal tenor indicates as a condition sine qua non the registration of the trade mark of the
suing foreign corporation with the Philippine Patent Office or, in the least, that it be an asignee of such
registered trademark.

The said section further it also requires that the country, of which the plaintiff foreign corporation or juristic
person is a citizen or domicilliary, grants to Filipino corporations or juristic entities the same reciprocal
treatment, either thru treaty, convention or law, 

In this case, All that is alleged in private respondent's complaint of Leviton Manufacturing Co is that it is a
foreign corporation. Such bare averment not only it fails to comply with the requirements provided in R.A>
166 imposed by the aforesaid Section 21-A but violates as well the directive of Section 4, Rule 8 of the Rules of
Court that "facts showing the capacity of a party to sue or be sued or the authority of a party to sue or be
sued in a representative capacity or the legal existence of an organized association of persons that is made
a party, must be averred " 

In the case at bar, private respondent has chosen to anchor its action under the Trademark Law of the
Philippines, a law which, as pointed out, explicitly sets down the conditions precedent for the successful
prosecution thereof. It is therefore incumbent upon private respondent to comply with these requirements or
aver its exemption therefrom, if such be the case. It may be that private respondent has the right to sue
before Philippine courts, but our rules on pleadings require that the necessary qualifying circumstances
which clothe it with such right be affirmatively pleaded. And the reason therefor, as enunciated in "Atlantic
Mutual Insurance Co., et al. versus Cebu Stevedoring Co., Inc." 4 is that — 
 these are matters peculiarly within the knowledge of appellants alone, and it would be unfair to
impose upon appellees the burden of asserting and proving the contrary. It is enough that foreign
corporations are allowed by law to seek redress in our courts under certain conditions: the
interpretation of the law should not go so far as to include, in effect, an inference that those
conditions had been met from the mere fact that the party sued is a foreign corporation.

It was indeed in the light of this and other considerations that this Court has seen fit to amend the
former rule by requiring in the revised rules (Section 4, Rule 8) that "facts showing the capacity of a
party to sue or be sued or the authority of a party to sue or be sued in a representative capacity or
the legal existence of an organized association of persons that is made a party, must be averred,

IN VIEW OF THE FOREGOING, the instant petition is hereby granted and, accordingly, the order of the respondent
judge dated September 27, 1974 denying petitioner's motion to dismiss is hereby set aside. The Court of First
Instance of Rizal (Caloocan City), the court of origin, is hereby restrained from conducting further proceedings in
Civil Case No. C-2891, except to dismiss the same. No costs. 

G.R. No. L-63796-97 May 2, 1984

LA CHEMISE LACOSTE, S. A., petitioner, 

vs.
HON. OSCAR C. FERNANDEZ, Presiding Judge of Branch XLIX, Regional Trial Court, National Capital
Judicial Region, Manila and GOBINDRAM HEMANDAS, respondents.

G.R. No. L-65659 May 2l, 1984

GOBINDRAM HEMANDAS SUJANANI, petitioner, 

vs.
HON. ROBERTO V. ONGPIN, in his capacity as Minister of Trade and Industry, and HON. CESAR SAN
DIEGO, in his capacity as Director of Patents, respondents.

La Chemise Lacoste, S.A., a foreign corporation,not doing business in the PH well known European
manufacturer of clothings and sporting apparels sold in the international market and bearing the
trademarks "LACOSTE" "CHEMISE LACOSTE", "CROCODILE DEVICE" and a composite mark consisting of
the word "LACOSTE" and a representation of a crocodile/alligator. The petitioner asks us to set aside as null
and void, the order of judge Oscar C. Fernandez, of Branch XLIX, Regional Trial Court, National Capital Judicial
Region, granting the motion to quash the search warrants previously issued by him and ordering the return of the
seized items.

It is a foreign corporation, organized and existing under the laws of France and not doing business in the
Philippines, It is undeniable from the records that it is the actual owner of the abovementioned trademarks used on
clothings and other goods specifically sporting apparels sold in many parts of the world and which have been
marketed in the Philippines since 1964, The main basis of the private respondent's case is its claim of alleged prior
registration.

In 1975, Hemandas & Co., a duly licensed domestic firm applied for and was issued Registration No. SR-
2225 (SR stands for Supplemental Register) for the trademark "CHEMISE LACOSTE & CROCODILE DEVICE"
by the Philippine Patent Office for use on T-shirts, sportswear and other garment products of the company.
Two years later, it applied for the registration of the same trademark under the Principal Register. The Patent Office
eventually issued an order dated March 3, 1977 which states that:

xxx xxx xxx

... Considering that the mark was already registered in the Supplemental Register in favor of herein
applicant, the Office has no other recourse but to allow the application, however, Reg. No. SR-2225
is now being contested in a Petition for Cancellation docketed as IPC No. 1046, still registrant is
presumed to be the owner of the mark until after the registration is declared cancelled. 

Thereafter, Hemandas & Co. assigned to respondent Gobindram Hemandas all rights, title, and interest in the
trademark "CHEMISE LACOSTE & DEVICE".

On November 21, 1980, the petitioner filed its application for registration of the trademark "Crocodile Device"
(Application Serial No. 43242) and "Lacoste" (Application Serial No. 43241).The former was approved for
publication while the latter was opposed by Games and Garments in Inter Partes Case No. 1658. In 1982, the
petitioner filed a Petition for the Cancellation of Reg. No. SR-2225 docketed as Inter Partes Case No. 1689. Both
cases have now been considered by this Court in Hemandas v. Hon. Roberto Ongpin (G.R. No. 65659).

On March 21, 1983, the petitioner filed with the National Bureau of Investigation (NBI) a letter-complaint
alleging therein the acts of unfair competition being committed by Hemandas and requesting their assistance
in his apprehension and prosecution. The NBI conducted an investigation and subsequently filed with the
respondent court two applications for the issuance of search warrants which were granted by the RTC
which would they were authorize the search of the premises used and occupied by the Lacoste Sports Center
and Games and Garments both owned and operated by Hemandas.

The respondent court issued Search Warrant Nos. 83-128 and 83-129 for violation of Article 189 of the Revised
Penal Code, "it appearing to the satisfaction of the judge after examining under oath applicant and his witnesses
that there are good and sufficient reasons to believe that Gobindram Hemandas ... has in his control and
possession in his premises the ... properties subject of the offense," (Rollo, pp. 67 and 69) The NBI agents executed
the two search warrants and as a result of the search found and seized various goods and articles described in the
warrants.

Hemandas filed a motion to quash the search warrants alleging that the trademark used by him was
different from petitioner's trademark and that pending the resolution of IPC No. 1658 before the Patent Office,
any criminal or civil action on the same subject matter and between the same parties would be premature.

The petitioner filed its opposition to the motion arguing that the motion to quash was fatally defective as it cited no
valid ground for the quashal of the search warrants and that the grounds alleged in the motion were absolutely
without merit. The State Prosecutor likewise filed his opposition on the grounds that the goods seized were
instrument of a crime and necessary for the resolution of the case on preliminary investigation and that the release
of the said goods would be fatal to the case of the People should prosecution follow in court.

The respondent court was, however, convinced that there was no probable cause to justify the issuance of the
search warrants. Thus, in its order dated March 22, 1983, the search warrants were recalled and set aside and the
NBI agents or officers in custody of the seized items were ordered to return the same to Hemandas. (Rollo, p. 25)

That La chemise HAS NO CAPACITY TO SUE BEFORE PHILIPPINE COURTS.

II 

THE RESPONDENT JUDGE DID NOT COMMIT A GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK
OF JURISDICTION IN ISSUING THE ORDER DATED APRIL 22, 1983.

Hemandas argues in his comment on the petition for certiorari that the petitioner being a foreign corporation
failed to allege essential facts bearing upon its capacity to sue before Philippine courts. He states that not
only is the petitioner is not doing business in the Philippines but it also is not licensed to do business in the
Philippines. He also cites the case of Leviton Industries v. Salvador (114 SCRA 420) to support his contention
The Leviton case, however, involved a complaint for unfair competition under Section 21-A of Republic Act No. 166
which provides:

Sec. 21 — A. Any foreign corporation or juristic person to which a mark or tradename has been
registered or assigned under this Act may bring an action hereunder for infringement, 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 the complaint; Provided,
That the country of which the said foreign corporation or juristic person is a citizen, or in which it is
domiciled, by treaty, convention or law, grants a similar privilege to corporate or juristic persons of
the Philippines. 

ISSUE: WON LA CHEMISE LACOSTE HAS CAPACITY TO SUE IN PHILIPPINE COURTS--- YES

We held that it was not enough for Leviton, a foreign corporation organized and existing under the laws of the State
of New York, United States of America, to merely allege that it is a foreign corporation. It averred in Paragraph 2 of
its complaint that its action was being filed under the provisions of Section 21-A of Republic Act No. 166, as
amended. Compliance with the requirements imposed by the abovecited provision was necessary because Section
21-A of Republic Act No. 166 having explicitly laid down certain conditions in a specific proviso, the same must be
expressly averred before a successful prosecution may ensue. It is therefore, necessary for the foreign corporation
to comply with these requirements or aver why it should be exempted from them, if such was the case. The foreign
corporation may have the right to sue before Philippine courts, but our rules on pleadings require that the qualifying
circumstances necessary for the assertion of such right should first be affirmatively pleaded.

In contradistinction, the present case involves a complaint for violation of Article 189 of the Revised Penal Code.
The Leviton case is not applicable.

Asserting a distinctly different position from the Leviton argument, Hemandas argued in his brief that the petitioner
was doing business in the Philippines but was not licensed to do so. To support this argument, he states that the
applicable ruling is the case of Mentholatum Co., Inc. v. Mangaliman: (72 Phil. 524) where Mentholatum Co. Inc., a
foreign corporation and Philippine-American Drug Co., the former's exclusive distributing agent in the Philippines
filed a complaint for infringement of trademark and unfair competition against the Mangalimans.

The argument has no merit. The Mentholatum case is distinct from and inapplicable to the case at bar. Philippine
American Drug Co., Inc., was admittedly selling products of its principal Mentholatum Co., Inc., in the latter's name
or for the latter's account. Thus, this Court held that "whatever transactions the Philippine-American Drug Co., Inc.
had executed in view of the law, the Mentholatum Co., Inc., did it itself. And, the Mentholatum Co., Inc., being a
foreign doing business in the Philippines without the license required by Section 68 of the Corporation Law, it may
not prosecute this action for violation of trademark and unfair competition." 

In the present case, however, the petitioner is a foreign corporation not doing business in the Philippines. The
marketing of its products in the Philippines is done through an exclusive distributor, Rustan Commercial
Corporation WHICH IS AN independent entity which buys and then markets not only products of the petitioner but
also many other products bearing equally well-known and established trademarks and tradenames. in other words,
Rustan is not a mere agent or conduit of the petitioner.
The rules and regulations promulgated by the Board of Investments pursuant to its rule-making power under
Presidential Decree No. 1789, otherwise known as the Omnibus Investment Code, support a finding that the
petitioner is not doing business in the Philippines. Rule I, Sec. 1 (g) of said rules and regulations defines "doing
business" as one" which includes, inter alia:

(1) ... A foreign firm which does business through middlemen acting on their own names,
such as indentors, commercial brokers or commission merchants, shall not be deemed doing
business in the Philippines. But such indentors, commercial brokers or commission merchants
shall be the ones deemed to be doing business in the Philippines.

(2) Appointing a representative or distributor who is domiciled in the Philippines, unless said
representative or distributor has an independent status, i.e., it transacts business in its name and for
its account, and not in the name or for the account of a principal Thus, where a foreign firm is
represented by a person or local company which does not act in its name but in the name of the
foreign firm the latter is doing business in the Philippines.

xxx xxx xxx

Applying the above provisions to the facts of this case, we find and conclude that the petitioner is not doing business
in the Philippines. Rustan is actually a middleman acting and transacting business in its own name and or its
own account and not in the name or for the account of the petitioner.

But even assuming the truth of the private respondent's allegation that the petitioner failed to allege
material facts in its petition relative to capacity to sue, the petitioner may still maintain the present suit
against respondent Hemandas. As early as 1927, this Court was, and it still is, of the view that a foreign
corporation not doing business in the Philippines needs no license to sue before Philippine courts for infringement of
trademark and unfair competition. Thus, in Western Equipment and Supply Co. v. Reyes (51 Phil. 115), this Court
held that a foreign corporation which has never done any business in the Philippines and which is
unlicensed and unregistered to do business here, but is widely and favorably known in the Philippines
through the use therein of its products bearing its corporate and tradename, has a legal right to maintain an
action in the Philippines to restrain the residents and inhabitants thereof from organizing a corporation
therein bearing the same name as the foreign corporation, when it appears that they have personal knowledge
of the existence of such a foreign corporation, and it is apparent that the purpose of the proposed domestic
corporation is to deal and trade in the same goods as those of the foreign corporation.

We further held:

xxx xxx xxx

... That company is not here seeking to enforce any legal or control rights arising from, or growing
out of, any business which it has transacted in the Philippine Islands. The sole purpose of the action:

Is to protect its reputation, its corporate name, its goodwill, whenever that reputation, corporate
name or goodwill have, through the natural development of its trade, established themselves.' And it
contends that its rights to the use of its corporate and trade name:

Is a property right, a right in rem, which it may assert and protect against all the world, 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. Citing sec. 10, Nims
on Unfair Competition and TradeMarks and cases cited; secs. 21-22, Hopkins on TradeMarks, Trade
Names and Unfair Competition and cases cited.' That point is sustained by the authorities, and is
well stated in Hanover Star Mining Co. v. Allen and Wheeler Co. (208 Fed., 513). in which the
syllabus says:

Since it is the trade and not the mark that is to be protected, a trade-mark acknowledges no
territorial boundaries of municipalities or states or nations, but extends to every market where the
trader's goods have become known and Identified by the use of the mark.

Our recognizing the capacity of the petitioner to sue is not by any means novel or precedent setting. Our
jurisprudence is replete with cases illustrating instances when foreign corporations not doing business in the
Philippines may nonetheless sue in our courts. In East Board Navigation Ltd, v. Ysmael and Co., Inc. (102 Phil. 1),
we recognized a right of foreign corporation to sue on isolated transactions. In General Garments Corp. v. Director
of Patents (41 SCRA 50), we sustained the right of Puritan Sportswear Corp., a foreign corporation not licensed to
do and not doing business in the Philippines, to file a petition for cancellation of a trademark before the Patent
Office.

More important is the nature of the case which led to this petition. What preceded this petition for certiorari was
a letter complaint filed before the NBI charging Hemandas with a criminal offense, i.e., violation of Article 189
of the Revised Penal Code. If prosecution follows after the completion of the preliminary investigation being
conducted by the Special Prosecutor FILES the information IT shall be in the name of the People of the
Philippines and no longer the petitioner which is only an aggrieved party since a criminal offense is
essentially an act against the State. It is the latter which is principally the injured party although there is a private
right violated. Petitioner's capacity to sue would become, therefore, of not much significance in the main
case. We cannot snow a possible violator of our criminal statutes to escape prosecution upon a far-fetched
contention that the aggrieved party or victim of a crime has no standing to sue.
  In upholding the right of the petitioner to maintain the present suit before our courts for unfair competition or
infringement of trademarks of a foreign corporation, we are moreover recognizing our duties and the
rights of foreign states under the Paris Convention for the Protection of Industrial Property to which
the Philippines and France are parties. We are simply interpreting and enforcing a solemn international
commitment of the Philippines embodied in a multilateral treaty to which we are a party and which we
entered into because it is in our national interest to do so.

The Paris Convention provides in part that:

ARTICLE 1

(1) The countries to which the present Convention applies constitute themselves into a Union for the
protection of industrial property.

(2) The protection of industrial property is concerned with patents, utility models, industrial designs,
trademarks service marks, trade names, and indications of source or appellations of origin, and the
repression of unfair competition.

xxx xxx xxx

ARTICLE 2

(2) Nationals of each of the countries of the Union shall as regards the protection of industrial
property, enjoy in all the other countries of the Union the advantages that their respective
laws now grant, or may hereafter grant, to nationals, without prejudice to the rights specially
provided by the present Convention.

Consequently, they shall have the same protection as the latter, and the same legal remedy
against any infringement of their rights, provided they observe the conditions and formalities
imposed upon nationals.

xxx xxx xxx

ARTICLE 6

(1) The countries of the Union undertake, either administratively if their legislation so permits, or at
the request of an interested party, to refuse or to cancel the registration and to prohibit the use of a
trademark which constitutes a reproduction, imitation or translation, liable to create confusion, of a
mark considered by the competent authority of the country of registration or use to be well-known in
that country as being already the mark of a person entitled to the benefits of the present Convention
and used for Identical or similar goods. These provisions shall also apply when the essential part of
the mark constitutes a reproduction of any such well-known mark or an imitation liable to create
confusion therewith.

xxx xxx xxx

ARTICLE 8

A trade name shall be protected in all the countries of the Union without the obligation of filing or
registration, whether or not it forms part of a trademark.

xxx xxx xxx

ARTICLE 10bis

(1) The countries of the Union are bound to assure to persons entitled to the benefits of the Union
effective protection against unfair competition.

xxx xxx xxx

ARTICLE 10ter

(1) The countries of the Union undertake to assure to nationals of the other countries of the Union
appropriate legal remedies to repress effectively all the acts referred to in Articles 9, 10 and l0bis.

(2) They undertake, further, to provide measures to permit syndicates and associations which
represent the industrialists, producers or traders concerned and the existence of which is not
contrary to the laws of their countries, to take action in the Courts or before the administrative
authorities, with a view to the repression of the acts referred to in Articles 9, 10 and 10bis, in so far
as the law of the country in which protection is claimed allows such action by the syndicates and
associations of that country.

xxx xxx xxx

ARTICLE 17

Every country party to this Convention undertakes to adopt, in accordance with its constitution, the
measures necessary to ensure the application of this Convention.

It is understood that at the time an instrument of ratification or accession is deposited on behalf of a

country; such country will be in a position under its domestic law to give effect to the provisions of
this Convention. (61 O.G. 8010)

xxx xxx xxx

In Vanity Fair Mills, Inc. v. T Eaton Co. (234 F. 2d 633) the United States Circuit Court of Appeals had occasion to
comment on the extraterritorial application of the Paris Convention It said that:

[11] The International Convention is essentially a compact between the various member countries to
accord in their own countries to citizens of the other contracting parties trademark and other rights
comparable to those accorded their own citizens by their domestic law. The underlying principle is
that foreign nationals should be given the same treatment in each of the member countries as that
country makes available to its own citizens. In addition, the Convention sought to create uniformity in
certain respects by obligating each member nation 'to assure to nationals of countries of the Union
an effective protection against unfair competition.'

[12] The Convention is not premised upon the Idea that the trade-mark and related laws of each
member nation shall be given extra-territorial application, but on exactly the converse principle that
each nation's law shall have only territorial application. Thus a foreign national of a member nation
using his trademark in commerce in the United States is accorded extensive protection here against
infringement and other types of unfair competition by virtue of United States membership in the
Convention. But that protection has its source in, and is subject to the limitations of, American law,
not the law of the foreign national's own country. ...

By the same token, the petitioner should be given the same treatment in the Philippines as we make available to our
own citizens. We are obligated to assure to nationals of "countries of the Union" an effective protection against
unfair competition in the same way that they are obligated to similarly protect Filipino citizens and firms.

Pursuant to this obligation, the Ministry of Trade on November 20, 1980 issued a memorandum addressed to the
Director of the Patents Office directing the latter:

xxx xxx xxx

... to reject all pending applications for Philippine registration of signature and other world famous
trademarks by applicants other than its original owners or users.

The conflicting claims over internationally known trademarks involve such name brands as Lacoste,
Jordache, Gloria Vanderbilt, Sasson, Fila, Pierre Cardin, Gucci, Christian Dior, Oscar de la Renta,
Calvin Klein, Givenchy, Ralph Lauren, Geoffrey Beene, Lanvin and Ted Lapidus.

It is further directed that, in cases where warranted, Philippine registrants of such trademarks should
be asked to surrender their certificates of registration, if any, to avoid suits for damages and other
legal action by the trademarks' foreign or local owners or original users.

The memorandum is a clear manifestation of our avowed adherence to a policy of cooperation and amity with all
nations. It is not, as wrongly alleged by the private respondent, a personal policy of Minister Luis Villafuerte which
expires once he leaves the Ministry of Trade. For a treaty or convention is not a mere moral obligation to be
enforced or not at the whims of an incumbent head of a Ministry. It creates a legally binding obligation on the parties
founded on the generally accepted principle of international law of pacta sunt servanda which has been adopted as
part of the law of our land. (Constitution, Art. II, Sec. 3). The memorandum reminds the Director of Patents of his
legal duty to obey both law and treaty. It must also be obeyed.

We have carefully gone over the records of all the cases filed in this Court and find more than enough evidence to
sustain a finding that the petitioner is the owner of the trademarks "LACOSTE", "CHEMISE LACOSTE", the
crocodile or alligator device, and the composite mark of LACOSTE and the representation of the crocodile
or alligator. Any pretensions of the private respondent that he is the owner are absolutely without basis. Any further
ventilation of the issue of ownership before the Patent Office will be a superfluity and a dilatory tactic.

The issue of whether or not the trademark used by the private respondent is different from the petitioner's
trade mark is a matter of defense and will be better resolved in the criminal proceedings before a court of
justice instead of raising it as a preliminary matter in an administrative proceeding.

The purpose of the law protecting a trademark cannot be overemphasized. They are to point out distinctly the origin
or ownership of the article to which it is affixed, to secure to him, who has been instrumental in bringing into market
a superior article of merchandise, the fruit of his industry and skill, and to prevent fraud and imposition (Etepha v.
Director of Patents, 16 SCRA 495).
The legislature has enacted laws to regulate the use of trademarks and provide for the protection thereof. Modern
trade and commerce demands that depredations on legitimate trade marks of non-nationals including those who
have not shown prior registration thereof should not be countenanced. The law against such depredations is not
only for the protection of the owner of the trademark but also, and more importantly, for the protection of purchasers
from confusion, mistake, or deception as to the goods they are buying. (Asari Yoko Co., Ltd. v. Kee Boc, 1 SCRA 1;
General Garments Corporation v. Director of Patents, 41 SCRA 50).

The law on trademarks and tradenames is based on the principle of business integrity and common justice' This
law, both in letter and spirit, is laid upon the premise that, while it encourages fair trade in every way and aims to
foster, and not to hamper, competition, no one, especially a trader, is justified in damaging or jeopardizing another's
business by fraud, deceipt, trickery or unfair methods of any sort. This necessarily precludes the trading by one
dealer upon the good name and reputation built up by another (Baltimore v. Moses, 182 Md 229, 34 A (2d) 338).

The records show that the goodwill and reputation of the petitioner's products bearing the trademark
LACOSTE date back even before 1964 when LACOSTE clothing apparels were first marketed in the
Philippines. To allow Hemandas to continue using the trademark Lacoste for the simple reason that he was
the first registrant in the Supplemental Register of a trademark used in international commerce and not
belonging to him is to render nugatory the very essence of the law on trademarks and tradenames.

We now proceed to the consideration of the petition in Gobindram Hemandas Suianani u. Hon. Roberto V
Ongpin, et al. (G.R. No. 65659).

Actually, three other petitions involving the same trademark and device have been filed with this Court.

In Hemandas & Co. v. Intermediate Appellate Court, et al. (G.R. No. 63504) the petitioner asked for the following
relief:

IN VIEW OF ALL THE FOREGOING, it is respectfully prayed (a) that the Resolutions of the
respondent Court of January 3, 1983 and February 24, 1983 be nullified; and that the Decision of the
same respondent Court of June 30, 1983 be declared to be the law on the matter; (b) that the
Director of Patents be directed to issue the corresponding registration certificate in the Principal
Register; and (c) granting upon the petitioner such other legal and equitable remedies as are
justified by the premises.

On December 5, 1983, we issued the following resolution:

Considering the allegations contained, issues raised and the arguments adduced in the petition for
review, the respondent's comment thereon, and petitioner's reply to said comment, the Court
Resolved to DENY the petition for lack of merit.

The Court further Resolved to CALL the attention of the Philippine Patent Office to the pendency in
this Court of G.R. No. 563796-97 entitled 'La Chemise Lacoste, S.A. v. Hon. Oscar C. Fernandez
and Gobindram Hemandas' which was given due course on June 14, 1983 and to the fact that G.R.
No. 63928-29 entitled 'Gobindram Hemandas v. La Chemise Lacoste, S.A., et al.' filed on May 9,
1983 was dismissed for lack of merit on September 12, 1983. Both petitions involve the same
dispute over the use of the trademark 'Chemise Lacoste'.

The second case of Gobindram Hemandas vs. La Chemise Lacoste, S.A., et al. (G.R. No. 63928-29) prayed for the
following:

I. On the petition for issuance of writ of preliminary injunction, an order be issued after due hearing:

l. Enjoining and restraining respondents Company, attorneys-in-fact, and Estanislao Granados from
further proceedings in the unfair competition charges pending with the Ministry of Justice filed
against petitioner;

2. Enjoining and restraining respondents Company and its attorneys-in-fact from causing undue
publication in newspapers of general circulation on their unwarranted claim that petitioner's products
are FAKE pending proceedings hereof; and

3. Enjoining and restraining respondents Company and its attorneys-in-fact from sending further
threatening letters to petitioner's customers unjustly stating that petitioner's products they are dealing
in are FAKE and threatening them with confiscation and seizure thereof.

II. On the main petition, judgment be rendered:

l. Awarding and granting the issuance of the Writ of Prohibition, prohibiting, stopping, and restraining
respondents from further committing the acts complained of;

2. Awarding and granting the issuance of the Writ of Mandamus, ordering and compelling
respondents National Bureau of Investigation, its aforenamed agents, and State Prosecutor
Estanislao Granados to immediately comply with the Order of the Regional Trial Court, National
Capital Judicial Region, Branch XLIX, Manila, dated April 22, 1983, which directs the immediate
return of the seized items under Search Warrants Nos. 83-128 and 83-129;
 3. Making permanent any writ of injunction that may have been previously issued by this Honorable
Court in the petition at bar: and

4. Awarding such other and further relief as may be just and equitable in the premises. 

As earlier stated, this petition was dismissed for lack of merit on September 12, 1983. Acting on a motion for
reconsideration, the Court on November 23, 1983 resolved to deny the motion for lack of merit and declared the
denial to be final.

Hemandas v. Hon. Roberto Ongpin (G.R. No. 65659) is the third petition.

In this last petition, the petitioner prays for the setting aside as null and void and for the prohibiting of the
enforcement of the following memorandum of respondent Minister Roberto Ongpin:

MEMORANDUM:

FOR: THE DIRECTOR OF PATENTS

Philippine Patent Office

xxx xxx xxx

Pursuant to Executive Order No. 913 dated 7 October 1983 which strengthens the rule-making and adjudicatory
powers of the Minister of Trade and Industry and provides inter alia, that 'such rule-making and adjudicatory powers
should be revitalized in order that the Minister of Trade and Industry can ...apply more swift and effective solutions
and remedies to old and new problems ... such as the infringement of internationally-known tradenames and
trademarks ...'and in view of the decision of the Intermediate Appellate Court in the case of LA CHEMISE
LACOSTE, S.A., versus RAM SADWHANI [AC-G.R. Sp. No. 13359 (17) June 1983] which affirms the validity of the
MEMORANDUM of then Minister Luis R. Villafuerte dated 20 November 1980 confirming our obligations under the
PARIS CONVENTION FOR THE PROTECTION OF INDUSTRIAL PROPERTY to which the Republic of the
Philippines is a signatory, you are hereby directed to implement measures necessary to effect compliance with our
obligations under said convention in general, and, more specifically, to honor our commitment under Section 6
bis thereof, as follows:

1. Whether the trademark under consideration is well-known in the Philippines or is a mark already
belonging to a person entitled to the benefits of the CONVENTION, this should be established,
pursuant to Philippine Patent Office procedures in inter partes and ex parte cases, according to any
of the following criteria or any combination thereof:

(a) a declaration by the Minister of Trade and Industry that' the trademark being considered is
already well-known in the Philippines such that permission for its use by other than its original owner
will constitute a reproduction, imitation, translation or other infringement;

(b) that the trademark is used in commerce internationally, supported by proof that goods bearing
the trademark are sold on an international scale, advertisements, the establishment of factories,
sales offices, distributorships, and the like, in different countries, including volume or other measure
of international trade and commerce;

(c) that the trademark is duly registered in the industrial property office(s) of another country or
countries, taking into consideration the dates of such registration;

(d) that the trademark has been long established and obtained goodwill and general international
consumer recognition as belonging to one owner or source;

(e) that the trademark actually belongs to a party claiming ownership and has the right to registration
under the provisions of the aforestated PARIS CONVENTION.

2. The word trademark, as used in this MEMORANDUM, shall include tradenames, service marks,
logos, signs, emblems, insignia or other similar devices used for Identification and recognition by
consumers.

3. The Philippine Patent Office shall refuse all applications for, or cancel the registration of,
trademarks which constitute a reproduction, translation or imitation of a trademark owned by a
person, natural or corporate, who is a citizen of a country signatory to the PARIS CONVENTION
FOR THE PROTECTION OF INDUSTRIAL PROPERTY.

4. The Philippine Patent Office shall give due course to the Opposition in cases already or hereafter
filed against the registration of trademarks entitled to protection of Section 6 bis of said PARIS
CONVENTION as outlined above, by remanding applications filed by one not entitled to such
protection for final disallowance by the Examination Division.

5. All pending applications for Philippine registration of signature and other world famous trademarks
filed by applicants other than their original owners or users shall be rejected forthwith. Where such
applicants have already obtained registration contrary to the abovementioned PARIS CONVENTION
 and/or Philippine Law, they shall be directed to surrender their Certificates of Registration to the
Philippine Patent Office for immediate cancellation proceedings.

6. Consistent with the foregoing, you are hereby directed to expedite the hearing and to decide
without delay the following cases pending before your Office:

1. INTER PARTES CASE NO. 1689-Petition filed by La Chemise Lacoste, S.A. for the cancellation
of Certificate of Registration No. SR-2225 issued to Gobindram Hemandas, assignee of Hemandas
and Company;

2. INTER PARTES CASE NO. 1658-Opposition filed by Games and Garments Co. against the
registration of the trademark Lacoste sought by La Chemise Lacoste, S.A.;

3. INTER PARTES CASE NO. 1786-Opposition filed by La Chemise Lacoste, S.A. against the
registration of trademark Crocodile Device and Skiva sought by one Wilson Chua.

Considering our discussions in G.R. Nos. 63796-97, we find the petition in G.R. No. 65659 to be patently without
merit and accordingly deny it due course.

In complying with the order to decide without delay the cases specified in the memorandum, the Director of Patents
shall limit himself to the ascertainment of facts in issues not resolved by this decision and apply the law as
expounded by this Court to those facts.

One final point. It is essential that we stress our concern at the seeming inability of law enforcement officials to stem
the tide of fake and counterfeit consumer items flooding the Philippine market or exported abroad from our country.
The greater victim is not so much the manufacturer whose product is being faked but the Filipino consuming public
and in the case of exportations, our image abroad. No less than the President, in issuing Executive Order No. 913
dated October 7, 1983 to strengthen the powers of the Minister of Trade and Industry for the protection of
consumers, stated that, among other acts, the dumping of substandard, imitated, hazardous, and cheap goods, the
infringement of internationally known tradenames and trademarks, and the unfair trade practices of business firms
has reached such proportions as to constitute economic sabotage. We buy a kitchen appliance, a household tool,
perfume, face powder, other toilet articles, watches, brandy or whisky, and items of clothing like jeans, T-shirts,
neck, ties, etc. — the list is quite length — and pay good money relying on the brand name as guarantee of its
quality and genuine nature only to explode in bitter frustration and genuine nature on helpless anger because the
purchased item turns out to be a shoddy imitation, albeit a clever looking counterfeit, of the quality product. Judges
all over the country are well advised to remember that court processes should not be used as instruments to,
unwittingly or otherwise, aid counterfeiters and intellectual pirates, tie the hands of the law as it seeks to protect the
Filipino consuming public and frustrate executive and administrative implementation of solemn commitments
pursuant to international conventions and treaties.

WHEREFORE, the petition in G.R. NOS. 63797-97 is hereby GRANTED. The order dated April 22, 1983 of the
respondent regional trial court is REVERSED and SET ASIDE. Our Temporary Restraining Order dated April 29,
1983 is ma(i.e. PERMANENT. The petition in G.R. NO. 65659 is DENIED due course for lack of merit. Our
Temporary Restraining Order dated December 5, 1983 is LIFTED and SET ASIDE, effective immediately.

G.R. No. 73765               August 26, 1991

HANG LUNG BANK, LTD., petitioner, 

vs.
HON. FELINTRIYE G. SAULOG, Presiding Judge, Regional Trial Court, National Capital Judicial Region,
Branch CXLII, Makati, Metro Manila, and CORDOVA CHIN SAN, respondents.

The records show that on July 18, 1979, petitioner Hang Lung Bank, Ltd., which was not doing business in the
Philippines, entered into two (2) continuing guarantee agreements with Cordova Chin San in Hongkong whereby the
Chin San agreed to pay on demand all sums of money which may be due the bank from Worlder Enterprises to the
extent of the total amount of two hundred fifty thousand Hongkong dollars (HK $250,000).1

Worlder Enterprises having defaulted in its payment, HANG LUNG BANK r filed in the Supreme Court of Hongkong
a collection suit against Worlder Enterprises and Chin San. Summonses were allegedly served upon Worlder
Enterprises and Chin San at their addresses in Hongkong but they failed to respond thereto. Consequently, the
Supreme Court of Hongkong issued judgment in favor of hang lung bank

JUDGMENT

THE 14th DAY OF JUNE, 1984

No notice of intention to defend having been given by the 1st and 2nd Defendants herein, IT IS THIS DAY
ADJUDGED that: —

(1) the 1st Defendant (Ko Ching Chong Trading otherwise known as the Worlder Enterprises) do pay the
Plaintiff the sum of HK$1,117,968.36 together with interest on the respective principal sums of
HK$196,591.38, HK$200,216.29, HK$526,557.63, HK$49,350.00 and HK$3,965.50 at the rates of 1.7% per
month (or HK$111.40 per day), 18.5% per annum (or HK$101.48 per day), 1.85% per month (or HK$324.71
 per day), 1.55% per month (or HK$25.50 per day) and 1.7% per month (or HK$2.25 per day) respectively
from 4th May 1984 up to the date of payment; and

(2) the 2nd Defendant (Cordova Chin San) do pay the Plaintiff the sum of HK$279,325.00 together with
interest on the principal sum of HK$250,000.00 at the rate of 1.7% per month (or HK$141.67 per day) from
4th May 1984 up to the date of payment.

AND IT IS ADJUDGED that the 1st and 2nd Defendants do pay the Plaintiff the sum of HK$970.00 fixed
costs.

N.J. BARNETT 
Registrar

Thereafter, HANG LUNG BANK through counsel sent a demand letter to Chin San at his Philippine address but
again, no response was made thereto. Hence, on October 18, 1984 HANG LUNG BANK filed in the RTC an action
seeking "the enforcement of its just and valid claims against private respondent Chin San, who is a local resident,
for a sum of money based on a transaction which was perfected, executed and consummated abroad."2

In his answer to the complaint, Chin San raised as affirmative defenses: lack of cause of action, incapacity to
sue and improper venue.3

Pre-trial of the case was set for June 17, 1985 but it was postponed to July 12, 1985. However, a day before the
latter pre-trial date, Chin San filed a motion to dismiss the case and to set the same for hearing the next day. The
motion to dismiss was based on the grounds that petitioner HANG LUNG BANK had no legal capacity to sue and
that venue was improperly laid. RTC dismissed the case

Acting on said motion to dismiss, on December 20, 1985, the lower court4 issued the following order:

On defendant Chin San Cordova's motion to dismiss, dated July 10, 1985; plaintiff's opposition, dated July
12, 1985; defendant's reply, dated July 22, 1985; plaintiff's supplemental opposition, dated September 13,
1985, and defendant's rejoinder filed on September 23, 1985, said motion to dismiss is granted.

Section 14, General Banking Act provides:

"No foreign bank or banking corporation formed, organized or existing under any laws other than
those of the Republic of the Philippines, shall be permitted to transact business in the Philippines, or
maintain by itself any suit for the recovery of any debt, claims or demands whatsoever until after it
shall have obtained, upon order of the Monetary Board, a license for that purpose."

Plaintiff Hang Lung Bank, Ltd. with business and postal address at the 3rd Floor, United Centre, 95
Queensway, Hongkong, does not do business in the Philippines. The continuing guarantee, Annexes "A"
and "B" appeared to have been transacted in Hongkong. Plaintiff's Annex "C" shows that it had already
obtained judgment from the Supreme Court of Hongkong against defendant involving the same claim on
June 14, 1984.

The cases of Mentholatum Company, Inc. versus Mangaliman, 72 Phil. 524 and Eastern Seaboard
Navigation, Ltd. versus Juan Ysmael & Company, Inc., 102 Phil. 1-8, relied upon by plaintiff, deal with
isolated transaction in the Philippines of foreign corporation. Such transaction though isolated is the one that
conferred jurisdiction to Philippine courts, but in the instant case, the transaction occurred in Hongkong.

Case dismissed. The instant complaint not the proper action.

SO ORDERED.5

Petitioner filed a motion for the reconsideration of said order but it was denied for lack of merit.6 Hence, the instant
petition for certiorari seeking the reversal of said orders "so as to allow petitioner to enforce through the court below
its claims against private respondent as recognized by the Supreme Court of Hongkong."7

Petitioner asserts that the lower court gravely abused its discretion in: (a) holding that the complaint was not the
proper action for purposes of collecting the amount guaranteed by Chin San "as recognized and adjudged by the
Supreme Court of Hongkong;" (b) interpreting Section 14 of the General Banking Act as precluding petitioner from
maintaining a suit before Philippine courts because it is a foreign corporation not licensed to do business in the
Philippines despite the fact that it does not do business here; and (c) impliedly sustaining private respondent's
allegation of improper venue.

We need not detain ourselves on the issue of improper venue. Suffice it to state that private respondent waived his
right to invoke it when he forthwith filed his answer to the complaint thereby necessarily implying submission to the
jurisdiction of the court.8

ISSUE: whether petitioner foreign banking corporation has the capacity to file the action in ph courts (YES)

Private respondent correctly contends that since petitioner is a bank, its capacity to file an action in this
jurisdiction is governed by the General Banking Act (Republic Act No. 337), particularly Section 14 thereof
which provides:
 SEC. 14. No foreign bank or banking corporation formed, organized or existing under any laws other
than those of the Republic of the Philippines shall be permitted to transact business in the
Philippines, or maintain by itself or assignee any suit for the recovery of any debt, claims, or
demand whatsoever, until after it shall have obtained, upon order of the Monetary Board, a license
for that purpose from the Securities and Exchange Commissioner. Any officer, director or agent of any
such corporation who transacts business in the Philippines without the said license shall be punished by
imprisonment for not less than one year nor more than ten years and by a fine of not less than one thousand
pesos nor more than ten thousand pesos. (45 O.G. No. 4, 1647, 1649-1650)

In construing this provision, we adhere to the interpretation given by this Court to the almost identical Section 69 of
the old Corporation Law (Act No. 1459) which reads:

SEC. 69. No foreign corporation or corporation formed, organized, or existing under any laws other
than those of the Philippines shall be permitted to transact business in the Philippines or maintain
by itself or assignee any suit for the recovery of any debt, claim, or demand whatever, unless it shall
have the license prescribed in the section immediately preceding. Any officer, director or agent of the
corporation or any person transacting business for any foreign corporation not having the license prescribed
shall be punished by imprisonment for not less than six months nor more than two years or by a fine of not
less than two hundred pesos nor more than one thousand pesos, or by both such imprisonment and fine, in
the discretion of the Court.

In a long line of cases, this Court has interpreted this last quoted provision as not altogether prohibiting therefore,a
foreign corporation not licensed to do business in the Philippines is not at all prohibited from suing or
maintaining an action in Philippine courts.9

 What it seeks to prevent is a foreign corporation doing business in the Philippines without a license
from gaining access to Philippine courts. As elucidated in Marshall-Wells Co. vs. Elser & Co., 46 Phil.
70:

The object of the statute was to subject the foreign corporation doing business in the Philippines to the
jurisdiction of its courts. The object of the statute was not to prevent it 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 is that 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 from Philippine courts, and thus, in effect, to permit persons to avoid their
contract made with such foreign corporation. The effect of the statute preventing foreign corporations from
doing business and from bringing actions in the local courts, except on compliance with elaborate
requirements, must not be unduly extended or improperly applied. It should not be construed to extend
beyond the plain meaning of its terms, considered in connection with its object, and in connection with the
spirit of the entire law.

The fairly recent case of Universal Shipping Lines vs. Intermediate Appellate Court,10 although dealing with the
amended version of Section 69 of the old Corporation Law, Section 133 of the Corporation Code (Batas Pambansa
Blg. 68), but which is nonetheless apropos, states the rule succinctly: "it is not the lack of the prescribed license
(to do business in the Philippines) but doing business without license, which bars a foreign corporation
from access to our courts."

Thus, we have ruled that a foreign corporation not licensed to do business in the Philippines may file a suit in this
country due to the collision of two vessels at the harbor of Manila11 and for the loss of goods bound for Hongkong
but erroneously discharged in Manila.12

Indeed, the phraseologies of Section 14 of the General Banking Act and its almost identical counterpart Section 69
of the old Corporation Law are misleading in that they seem to require a foreign corporation, including a foreign
bank or banking corporation, not licensed to do business and not doing business in the Philippines to secure a
license from the Securities and Exchange Commission before it can bring or maintain an action in Philippine courts.
To avert such misimpression, Section 133 of the Corporation Code is now more plainly worded thus:

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.

Under this provision, we have ruled that a foreign corporation may sue in this jurisdiction for infringement of
trademark and unfair competition although it is not doing business in the Philippines13 because the
Philippines was a party to the Convention of the Union of Paris for the Protection of IndustrialProperty.14

We even went further to say that a foreign corporation not licensed to do business in the Philippines may not
be denied the right to file an action in our courts for an isolated transaction in the Philippines.15

Since petitioner foreign banking corporation was not doing business in the Philippines, it may not be
denied the privilege of pursuing its claims against private respondent for a contract which was entered into
and consummated outside the Philippines. Otherwise we will be hampering the growth and development of
business relations between Filipino citizens and foreign nationals. Worse, we will be allowing the law to
serve as a protective shield for unscrupulous Filipino citizens who have business relationships abroad.
In its pleadings before the court, petitioner appears to be in a quandary as to whether the suit below is one for
enforcement or recognition of the Hongkong judgment. Its complaint states:

COMES NOW Plaintiff, by undersigned counsel, and to this Honorable Court, most respectfully alleges that:

1. Plaintiff is a corporation duly organized and existing under and by virtue of the laws of Hongkong
with business and postal address at the 3rd Floor, United Centre, 95 Queensway, Hongkong, not
doing business in the Philippines, but is suing for this isolated transaction, but for purposes of this
complaint may be served with summons and legal processes of this Honorable Court, at the 6th
Floor, Cibeles Building, 6780 Ayala Avenue, Makati, Metro Manila, while defendant Cordova Chin
San, may be served with summons and other legal processes of this Honorable Court at the
Municipality of Moncada, Province of Tarlac, Philippines;

2. On July 18, 1979 and July 25, 1980, the defendant executed Continuing Guarantees, in
consideration of plaintiff's from time to time making advances, or coming to liability or discounting
bills or otherwise giving credit or granting banking facilities from time to time to, or on account of the
Wolder Enterprises (sic), photocopies of the Contract of Continuing Guarantees are hereto attached
as Annexes "A" and "B", respectively, and made parts hereof;

3. In June 1984, a complaint was filed by plaintiff against the Wolder Enterprises (sic) and defendant
Cordova Chin San, in The Supreme Court of Hongkong, under Case No. 3176, and pursuant to
which complaint, a judgment dated 14th day of July, 1984 was rendered by The Supreme Court of
Hongkong ordering to (sic) defendant Cordova Chin San to pay the plaintiff the sum of
HK$279,325.00 together with interest on the principal sum of HK$250,000.00 at the rate of HK$1.7%
per month or (HK$141.67) per day from 4th May, 1984 up to the date the said amount is paid in full,
and to pay the sum of HK$970.00 as fixed cost, a photocopy of the Judgment rendered by The
Supreme Court of Hongkong is hereto attached as Annex "C" and made an integral part hereof.

4. Plaintiff has made demands upon the defendant in this case to pay the aforesaid amount the last
of which is by letter dated July 16, 1984 sent by undersigned counsel, a photocopy of the letter of
demand is hereto attached as Annex "D" and the Registry Return Card hereto attached as Annex
"E", respectively, and made parts hereof. However, this notwithstanding, defendant failed and
refused and still continue to fail and refuse to make any payment to plaintiff on the aforesaid amount
of HK$279,325.00 plus interest on the principal sum of HK$250,000.00 at the rate of (HK$141.67)
per day from May 4, 1984 up to the date of payment;

5. In order to protect and safeguard the rights and interests of herein plaintiff, it has engaged the
services of undersigned counsel, to file the suit at bar, and for whose services it has agreed to pay
an amount equivalent to 25% of the total amount due and owing, as of and by way of attorney's fees
plus costs of suit.

WHEREFORE, premises considered, it is most respectfully prayed of this Honorable Court that judgment be
rendered ordering the defendant:

a) To pay plaintiff the sum of HK$279,325.00 together with interest on the principal sum of
HK$260,000.00 at the rate of HK$1.7% (sic) per month (or HK$141.67 per day) from May 4, 1984
until the aforesaid amount is paid in full;

b) To pay an amount equivalent to 25% of the total amount due and demandable as of and by way
of attorney's fees; and

c) To pay costs of suit, and

Plaintiff prays for such other and further reliefs, to which it may by law and equity, be entitled.16

The complaint therefore appears to be one of is for the enforcement of the Hongkong judgment because it
prays for the grant of the affirmative relief given by said foreign judgment.17 Although petitioner asserts that it is
merely seeking the recognition of its claims based on the contract sued upon and not the enforcement of the
Hongkong judgment18it should be noted that in the prayer of the complaint, petitioner simply copied the Hongkong
judgment with respect to private respondent's liability.

However, a foreign judgment may not be enforced if it is not recognized in the jurisdiction where affirmative
relief is being sought.1âwphi1 Hence, in the interest of justice, the complaint should be considered as a
petition for the recognition of the Hongkong judgment under Section 50 (b), Rule 39 of the Rules of Court in
order that the defendant Chi San, private respondent herein, may present evidence of lack of jurisdiction,
notice, collusion, fraud or clear mistake of fact and law, if applicable.

WHEREFORE, the questioned orders of the lower court are hereby set aside. Civil Case No. 8762 is reinstated and
the lower court is directed to proceed with dispatch in the disposition of said case. This decision is immediately
executory. No costs.