Gala vs Ellice Facts: Spouses Manuel and Alicia Gala, their children Guia Domingo, Ofelia Gala, Raul

l Gala, and Rita Benson, and their encargados Virgilio Galeon and JulianJader formed and organized the Ellice Agro-Industrial Corporation. Name Number of Shares Amount Manuel R. Gala 11, 700 1,170,000.00 Alicia E. Gala Guia G. Domingo Ofelia E. Gala Raul E. Gala Rita G. Benson Virgilio Galeon Julian Jader 1 23,200 16 40 40 2 1 2,320,000.00 1,600.00 4,000.00 4,000.00 200.00 100.00 100.00

TOTAL 35,000 P3,500,000.0 Also,Guia Domingo, Ofelia Gala, Raul Gala, Virgilio Galeon and Julian Jader incorporated the Margo Management and Development Corporation (Margo) Name Number of Shares Amount Raul E. Gala 6,640 66,400.00 Ofelia E. Gala 6,640 66,400.00 Guia G. Domingo 6,640 66,400.00 Virgilio Galeon 40 40.00 Julian Jader 40 40.00 TOTAL 20,000 P200,000.00 Several transfer took place in Margo and Ellice Corporation by the Stockholders Thus, as of the date on which this case was commenced, the stockholdings in Ellice were allocated as follows: Name Number of Shares Amount Margo 24,312.5 2,431,250.00 Alicia Gala 21,480.2 2,148,020.00 Raul Gala 2,704.5 270,450.00 Ofelia Gala 980.8 98,080.00 Gina Domingo 516 51,600.00 Rita Benson 2 200.00 Virgilio Galeon 1 100.00 Julian Jader 1 100.00 Adnan Alonto 1 100.00 Elias Cresencio 1 100.00 TOTAL 50,000 P5,000,000.00 A stockholders meeting of Margo was held, where a new board of directors was elected. That same day, the newly-elected board elected a new set of officers. o Raul Gala was elected as chairman, president and general manager. o The board approved several actions, including the commencement of proceedings to annul certain dispositions of Margos property made by Alicia Gala. The board also resolved to change the name of the corporation to MRG Management and Development Corporation

Similarly, a special stockholders meeting of Ellice was held to elect a new board of directors. Raul Gala was elected as chairman, president and general manager. Respondents filed against petitioners with the Securities and Exchange Commission (SEC) a petition o for the appointment of a management committee or receiver, accounting and restitution by the directors and officers, and the dissolution of Ellice AgroIndustrial Corporation for alleged mismanagement, diversion of funds, financial losses and the dissipation of assets and o Also praying for, among others, the nullification of the elections of directors and officers of both Margo Management and Development Corporation and Ellice Industrial Corporation. SEC ruled in favor of petitioners. SEC enbanc reversed the decision Petitioners insist that the purposes for which Ellice and Margo were organized should be declared as illegal and contrary to public policy for it was organized for exempting the properties of the Gala spouses from the coverage of land reform legislation and avoiding estate taxes and prays that the separate juridical entity of Ellice and Margo should be disregard and instead piercing of the corporate veil be applied Issue: W/N petitioners are correct? NO Petitioners contentions impugning the legality of the purposes for which Ellice and Margo were organized, amount to collateral attacks which are prohibited in this jurisdiction The best proof of the purpose of a corporation is its articles of incorporation and by-laws. o In the case at bar, The Articles of Incorporation of Ellice and Margo shows no sign of the allegedly illegal purposes that petitioners are complaining of. It is well to note that, if a corporations purpose, as stated in the Articles of Incorporation, is lawful, then the SEC has no authority to inquire whether the corporation has purposes other than those stated, and mandamus will lie to compel it to issue the certificate of incorporation Thus, even if Ellice and Margo were organized for the purpose of exempting the properties of the Gala spouses from the coverage of land reform legislation and avoiding estate taxes, SC cannot disregard their separate juridical personalities. The reliefs sought by petitioners should have been raised in a proceeding for settlement of estate, rather than in the present intra-corporate controversy. Lastly to warrant resort to the extraordinary remedy of piercing the veil of corporate fiction, there must be proof that the corporation is being used as a cloak or cover for fraud or illegality, or to work injustice and petitioners have failed to prove that Ellice and Margo were being used thus. They have not presented any evidence to show how the separate juridical entities of Ellice and Margo were used by the respondents to commit fraudulent, illegal or unjust acts. Hence, this contention, too, must fail. The concept of a close corporation organized for the purpose of running a family business or managing family property has formed the backbone of Philippine commerce and industry. Through this device, Filipino families have been able to turn their humble, hard-earned life savings into going concerns capable of providing them and their families with a modicum of material comfort and financial security as a reward for years of hard work. A family corporation should serve as a rallying point for family unity and prosperity, not as a flashpoint for familial strife. It is hoped that people reacquaint themselves with the concepts of mutual aid and security that are the original driving forces behind the formation of family corporations and use these tenets in order to facilitate more civil, if not more amicable, settlements of family corporate disputes. Dulay vs CA Petitioner Manuel R. Dulay Enterprises, Inc, a domestic corporation with the following as members of its Board of Directors: Manuel R. Dulay with 19,960 shares and designated as president, treasurer and general manager, Atty. Virgilio E. Dulay with 10 shares and designated as vice-president; Linda E. Dulay with 10 shares; Celia Dulay-Mendoza with 10 shares; and Atty. Plaridel C. Jose with 10 shares and designated as secretary, owned a property covered by TCT No. 17880 4 and known as Dulay

Apartment consisting of sixteen (16) apartment units on a six hundred eighty-nine (689) square meters lot, more or less, located at Seventh Street (now Buendia Extension) and F.B. Harrison Street, Pasay City. Dulay by virtue of board resolution no. 18 sold the subject property to respondents spouses Theresa and Veloso for 300k, evidenced by a deed of sale. Thereafter, Dulay and spouses Veloso executed a Memorandum to the Deed of Absolute Sale giving Manuel Dulay within (2) years P200k Private respondent Veloso, without knowledge of Manuel Dulay, mortgaged the property to private respondent Torres. Veloso failed to pay, torres acquired the property thru extrajudicial forclosure sale as evidenced by the certificate of Sheriffs sale. Private respondent Maria Veloso nor her assignee Manuel Dulay were not able to redeem. Private respondent Torress filed for ejectment against the tenants of petitioner corporation. MTC: Ordered the tenants of Dulay to vacate the premises RTC: Affirmed CA: Affirmed Hence this petition: there are 2 contentions 1. Petitioners contend that the respondent court had acted with grave abuse of discretion when it applied the doctrine of piercing the veil of corporate entity in the instant case considering that the sale of the subject property between private respondents spouses Veloso and Manuel Dulay has no binding effect on petitioner corporation as Board Resolution No. 18 which authorized the sale of the subject property was resolved without the approval of all the members of the board of directors and said Board Resolution was prepared by a person not designated by the corporation to be its secretary. W/n petitioners contention correct? No SC: We do not agree. Section 101 of the Corporation Code of the Philippines provides: Sec. 101. When board meeting is unnecessary or improperly held. Unless the by-laws provide otherwise, any action by the directors of a close corporation without a meeting shall nevertheless be deemed valid if: 1. Before or after such action is taken, written consent thereto is signed by all the directors, or 2. All the stockholders have actual or implied knowledge of the action and make no prompt objection thereto in writing; or 3. The directors are accustomed to take informal action with the express or implied acquiese of all the stockholders, or 4. All the directors have express or implied knowledge of the action in question and none of them makes prompt objection thereto in writing. If a directors' meeting is held without call or notice, an action taken therein within the corporate powers is deemed ratified by a director who failed to attend, unless he promptly files his written

objection with the secretary of the corporation after having knowledge thereof. In the instant case, petitioner corporation is classified as a close corporation and consequently a board resolution authorizing the sale or mortgage of the subject property is not necessary to bind the corporation for the action of its president. At any rate, corporate action taken at a board meeting without proper call or notice in a close corporation is deemed ratified by the absent director unless the latter promptly files his written objection with the secretary of the corporation after having knowledge of the meeting which, in his case, petitioner Virgilio Dulay failed to do.

2. Petitioners' claim that the sale of the subject property by its president, Manuel Dulay, to private respondents spouses Veloso is null and void as the alleged Board Resolution No. 18 was passed without the knowledge and consent of the other members of the board of directors cannot be sustained. As correctly pointed out by the respondent Court of Appeals: w/n petitioners contention correct? No Appellant Virgilio E. Dulay's is a incorporator and one of the board of directors designated at the time of the organization of Manuel R. Dulay Enterprise, Inc. In ordinary parlance, the said entity is loosely referred to as a "family corporation". The nomenclature, if imprecise, however, fairly reflects the cohesiveness of a group and the parochial instincts of the individual members of such an aggrupation of which Manuel R. Dulay Enterprises, Inc. is typical: four-fifths of its incorporators being close relatives namely, three (3) children and their father whose name identifies their corporation Consequently, petitioner corporation is liable for the act of Manuel Dulay and the sale of the subject property to private respondents by Manuel Dulay is valid and binding. As stated by the trial court: . . . the sale between Manuel R. Dulay Enterprises, Inc. and the spouses Maria Theresa V. Veloso and Castrense C. Veloso, was a corporate act of the former and not a personal transaction of Manuel R. Dulay. This is so because Manuel R. Dulay was not only president and treasurer but also the general manager of the corporation. The corporation was a closed family corporation and the only non-relative in the board of directors was Atty. Plaridel C. Jose who appeared on paper as the secretary. There is no denying the fact, however, that Maria Socorro R. Dulay at times acted as secretary. . . ., the Court can not lose sight of the fact that the Manuel R. Dulay Enterprises, Inc. is a closed family corporation where the incorporators and directors belong to one single family. It cannot be concealed that Manuel R. Dulay as president, treasurer and general manager almost had absolute control over the business and affairs of the corporation. 24 San Juan Steel Structural v. CA, Motorich Corp (1998)

Doctrine: Close Corporation. Narrow distribution of ownership does not, by itself, make a close corporation. Or just because there are just 1 or two owners of subscribed capital stock the corporation is a close one.

Facts: February 14, 1989, San Juan Steel (SJ) through its president, Andres Co, entered into an Agreement with Respondent Motorich Sales Corporation represented by its treasurer, Nenita Lee Gruenberg Agreement is for the sale of Motorichs 414 sqm lot in Acropolis, Quezon City to SJ Steel

Nenita received earnest money of P100,000 from Andres Co, this also is a downpayment Balance to be paid on 2 March 1989 o but Nenita did not show up during the meeting where Motorich was to give the check representing the balance Nenita gave a handwritten receipt to Andres Co However, Motorich refused to pursue the sale and said that Nenita was not authorized to sell Motorichs lot SJ alleged that piercing of veil of corporate fiction is in order as Nenita and her husband own 99.86% of the shares of Motorich, hence it is a close corporation

WON: 1. If piercing of veil of corporate fiction is in order as Nenita and husband own all the shares of stocks of Motorich? 2. Motorich is a close corporation HELD: Court ruled in favor of Motorich Contract not binding on Motorich as it did not authorize Nenita to sell its lot in Acropolis o Motorich has separate and distinct personality from its stockholder Motorich not a close corporation The articles of incorporation of Motorich Sales Corporation does not contain any provision that make it a close corporation (Close Corporation as defined in Sec. 96. Definition and Applicability of Title) stating that: o (1) the number of stockholders shall not exceed 20, or o (2) a preemption of shares is restricted in favor of any stockholder or of the corporation, or o (3) listing its stocks in any stock exchange or making a public offering of such stocks is prohibited. From its articles of incorporation, it is clear that Motorich is not a close corporation. Motorich does not become a close corporation just because Spouses Reynaldo and Nenita Gruenberg owned 99.866% of its subscribed capital stock. The mere ownership by a single stockholder or by another corporation of all or capital stock of a corporation is not of itself sufficient ground for disregarding the separate corporate personalities. Narrow distribution of ownership does not, by itself, make a close corporation.

Naguiat v. NLRC

Facts

CFTI [Sergio as President; Antolin as VP] held a concessionaire's contract with AAFES for the operation of taxi services in Clark Air Base. Respondents were previously employed by CFTI as taxi drivers. However, AAFES was dissolved as a result of the US military bases phase-out. During the negotiations between AAFES Taxi Drivers Association and CFTI re: separation benefits, it was agreed that separated drivers will be given P500/year of service. Other drivers accepted the amount, but respondents refused to accept it.

The respondents, through NOWM, filed a complaint against S. Naguiat (NE), AAFES, and AAFES TDA. They alleged that they were hired by CFTI and then assigned to NE which managed, controlled, and supervised their employment. They averred that they were entitled to separation pay based on their earnings of $15 for working 16 days/month. CFTI's defense that the cessation of business was due to financial losses and lost business opportunity. Labor Arbiter ruled in favor of the respondents, ordering CFTI to pay respondents P1,200/year of service for humanitarian consideration. NLRC affirmed LA's decision with modification by granting separation pay $120/year of service, and held that Naguiat Enterprises, S. Naguiat, and A. Naguiat are jointly and severally liable with CFTI. NLRC issued a second resolution denying the MfR of the petitioners.

Issues and Holding 1. Amount of separation pay a) Labor Arbiter correctly found that CFTI stopped the taxi business because of the phase-out of the US military bases, and NOT due to great financial loss as the business was earning profitably at the time of closure. b) LC 283: separation pay = 1 month pay or at least 1/2 month pay/year of service, whichever is higher c) NLRC did not commit GAD in ruling that respondents were entitled to separation pay of $120 (half of $240 monthly pay) per year of service Liability of NE, CFTI and officers NE not liable a) LA found that respondents were employees of CFTI as they received salary from said office, etc. (upheld by SC) b) S. Naguiat was presumed to be managing and controlling taxi business on behalf of NE; S. Naguiat, in supervising taxi drivers, was carrying out his responsibilities as CFTI c) NE is a separate corporation completely (trading business); it is neither respondents' indirect employer nor labor-only contractor d) Constitution of CFTI-AAFES TDA provided that members are CFTI employees and that for collective bargaining purposes, the definite employer is CFTI CFTI president solidarily liable [S. Naguiat] a) A.C. Ransom Labor Union-CCLU v. NLRC - family-owned corporation filed application for clearance to cease operations. Backwages were computed; however, none of the motions for execution could be implemented for failure to find leviable assets. LA granted union's prayer that officers and agents be personally held liable for payment of backwages. NLRC however said that officers of a corporation are not personally liable for official acts unless they exceeded scope of authority. SC however reversed NLRC and upheld LA, saying that if the policy of the law were otherwise, the employer can have ways for evading payment of backwages. b) Employer - any person acting in the interest of an employer, directly or indirectly (LC 212c) c) Applying the ruling on A.C. Ransom, S. Naguiat falls within the meaning of "employer" who may be held jointly and severally liable for the obligations of the corporation to the dismissed employees d) Both CFTI and NE were close family corporations (Corp. Code Sec. 100, par. 5) [To the extent that the stockholders are actively engaged in the management or

2. 3.

4.

operation of the business [...] Said stockholders shall be personally liable for corporate torts unless the corporation has obtained reasonably adequate liability insurance] e) cf. MAM Realty Development v. NLRC: director / officer may still be held solidarily liable with a corporation by a specific provision of law f) WON there was corporate tort. YES g) TORT - violation of a right given or the omission of a duty imposed by law; breach of legal duty h) S. Naguiat is solidarily liable for corporate tort because he actively engaged in CFTI's management or operation 5. CFTI VP not personally liable [A. Naguiat] a) Was not shown that he acted in the capacity of a GM b) No evidence on the extent of his participation in the management, operation of business 6. NOWM's personality to represent respondents a) Petitioners held in estoppel for not raising issue before LA or NLRC 7. No denial of due process since the Naguiats availed of the chance to present positions before LA VALLEY GOLF & COUNTRY CLUB, INC., Petitioner, vs. ROSA O. VDA. DE CARAM,Respondent.G.R. No. 158805 | April 16, 2009 Source: http://www.scribd.com/doc/133218369/Valley-Golf-Country-Club-vs-Rosa-Vda-Caram-digest FACTS: Petitioner is a duly constituted non-stock, non-profit corporation which operates a golf course.The members and their guests are entitled to play golf on the said course and avail of thefacilities and privilege. The shareholders are likewise assessed monthly membership dues.Cong. Fermin Z. Caram, Jr., respondents husband, subscribed and paid in full 1 Golf Share of the petitioner and was subsequently issued with a stock certificate which indicated a par valueof P9,000.00. It was alleged by the petitioner that Caram stopped paying his monthly dues andthat it has sent 5 letters to Caram concerning his delinquent account. The Golf Share wassubsequently sold at public auction for P25,000.00 after the BOD had authorized the sale andthe Notice of Auction Sale was published in the Philippine Daily Inquirer Caram thereafter died and hiis wife initiated intestate proceedings before the RTC of IloIlo. Unaware of the pending controversy over the Golf Share, the Caram family andthe RTC included the Golf Share as part of Carams estate. The RTC approved a project of partition of Carams estate and the Golf Share was adjudicated to the wife, who paid thecorresponding estate tax due, including that on the golf Share.It was only through a letter that the heirs of Caram learned of the sale of the Golf Sharefollowing their inquiry with Valley Golf about the Golf Share. After a series of correspondence,the Caram heirs were subsequently informed in a letter that they were entitled to the refund of P11,066.52 out of the proceeds of the sale of the Golf Share, which amount had been in the custody of the petitioner. Caramswife filed an action for reconveyance of the Golf Share with damages before the SECagainst Valley Golf. The SEC Hearing Officer rendered a decision in favor of the wife, orderingValley Golf to convey ownership of the Golf Share, or in the alternative. to issue one fully paidshare of stock of Valley Golf of the same class as the Golf Share to the wife. Damagestotaling P90,000.00 were also awarded to the wife. The SEC hearing officer ruled that under Section 67, paragraph 2 of the Corporation Code, ashare stock could only be deemed delinquent and sold in an extrajudicial sale at public auctiononly upon the failure of the stockholder to pay the unpaid subscription or balance for the share.However, the section could not have applied in Carams case since he had fully paid for the Golf Share and he had been assessed not for the share itself but for his delinquent club dues. Foreign Corporation

1. Marshal-Wells vs Elser-MAGSUMBOL DOCTRINE: Under Rationale for Requiring LicenseThe 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 the foreign corporation from performing single acts, but to prevent it from acquiring a domicile for the purpose of business without taking the steps necessary to render it amenable to suit in the local courts. FACTS: Marshall-Wells Company, an Oregon corporation, sued Henry W. Elser & Co., Inc., a domestic corporation for the unpaid balance of a bill of goods amounting to P2,660.74, sold by plaintiff to defendant and for which plaintiff holds accepted drafts. Defendant demurred to the complaint on the statutory ground that the plaintiff has no legal capacity to sue. In the demurrer, counsel stated that The said complaint does not show that the plaintiff has complied with the laws of the Philippine Islands in that which is required of foreign corporations desiring to do business in the Philippine Islands, neither does it show that it was authorized to do business in the Philippine Islands. The demurrer was sustained by the trial judge. Inasmuch as the plaintiff could not allege compliance with the statute, the order was allowed to become final and an appeal was perfected. Defendant isolates a portion of one sentence of section 69 of the Corporation Law and asks the court to give it a literal meaning. Counsel would have the law read thus: No foreign corporation shall be permitted to 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 section 68 of the law. Plaintiff, on the contrary, desires for the court to consider the particular point under discussion with reference to all the law, and thereafter to give the law a common sense interpretation. ISSUE: W/N the obtaining of the license prescribed in section 68, as amended, of the Corporation Law a condition precedent to the maintaining of any kind of action in the courts of the Philippine Islands by a foreign corporation? HELD: 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 the foreign corporation from performing single acts, but to prevent it from acquiring a domicile for the purpose of business without taking the steps necessary to render it amenable to suit in the local courts. The implication of the law 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 in the Philippine courts, and thus, in effect, to permit persons to avoid their contracts made with such foreign corporations. 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 law simply means that no foreign corporation shall be permitted to transact business in the Philippine Islands, as this phrase is known in corporation law, unless it shall have the license required by law, and, until it complies with the law, shall not be permitted to maintain any suit in the local courts. A contrary holding would bring the law to the verge of unconstitutionality, a result which should be and can be easily avoided. The noncompliance of a foreign corporation with the statute may be pleaded as an affirmative defense. Thereafter, it must appear from the evidence, first, that the plaintiff is a foreign corporation, second, that it is doing business in the Philippines, and third, that it has not obtained the proper license as provided by the statute. PROVISIONS GOVERNING FOREIGN CORPORATIONS: The Corporation Law (Act No. 1459) contains six sections relating particularly to foreign corporations. Section 68, as amended by Act No. 2900, provides that no foreign corporation shall be permitted to transact business in the Philippine Islands until after it shall have obtained a license for that purpose from the Chief of the Mercantile Register of the Bureau of Commerce and Industry, upon order either of the Secretary of Finance or the Secretary of Commerce and Communications. No order for a license shall be issued except upon a statement under oath of the managing agent of the corporation, showing to the satisfaction of the proper Secretary that the corporation is solvent and in sound financial condition, and setting forth the resources and

liabilities of the corporation. Said statement shall contain the following: (1) The name of the corporation; (2) the purpose for which it was organized; (3) the location of its principal or home office; (4) the capital stock of the corporation and the amount thereof actually subscribed and paid into the treasury; (5) the net assets of the corporation over and above all debts, liabilities, obligations, and claims outstanding against it; and (6) the name of an agent residing in the Philippine Islands authorized by the corporation to accept evidence of summons and process in all legal proceedings against the corporation and of all notices affecting the corporation. Further evidence of the solvency and fair dealing of the corporation may be required. Upon filing in the Mercantile Register of the Bureau of Commerce and Industry the said statement, a certified copy of its charter, and the order of the Secretary for the issuance of a license, the Chief of the Mercantile Register shall issue to the foreign corporation as directed in the order of license to do business in the Philippine Islands, and for the issuance of the license shall collect a fee fixed in accordance with the schedule established in section 8 of the Law. Sec. 69: No foreign corporation or corporation formed, organized, or existing under any laws other that those of the Philippine Islands shall be permitted to transact business in the Philippine Islands 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 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. Section 70, as amended, covers the cases of foreign corporations transacting business in the Islands at the time of the passage of the Act. Section 71 authorizes the Secretary of Finance or the Secretary of Commerce and Communications, as the case may be, by and with the approval of the Governor-General, to revoke the license to transact business in the Philippine Islands of any foreign corporation. Section 72 concerns summons and legal process. Section 73 makes a foreign corporation bound by all the laws, rules, and regulations applicable to domestic corporations of the same class, with certain exceptions. 2.Mentholatum vs Mangaliman-PEREZ 3. Agilent Technologies Singapore vs Integrated Silicon-TABAG Facts: Agilent Technologies Singapore (Pte.), Ltd. is a foreign corporation, which, by its own admission, is not licensed to do business in the Philippines. Integrated Silicon Technology Philippines Corporation is a private domestic corporation, 100% foreign owned, which is engaged in the business of manufacturing and assembling electronics components. Teoh Kiang Hong, Teoh Kiang Seng and Anthony Choo, Malaysian nationals, are current members of Integrated Silicons board of directors, while Joanne Kate M. dela Cruz, Jean Kay M. dela Cruz, and Rolando T. Nacilla are its former members. The juridical relation among the various parties in the case can be traced to a 5-year Value Added Assembly Services Agreement (VAASA), entered into on 2 April 1996 between Integrated Silicon and the Hewlett-Packard Singapore (Pte.) Ltd., Singapore Components Operation (HP-Singapore). Under the terms of the VAASA, Integrated Silicon was to locally manufacture and assemble fiber optics for export to HP-Singapore.

HP-Singapore, for its part, was to consign raw materials to Integrated Silicon; transport machinery to the plant of Integrated Silicon; and pay Integrated Silicon the purchase price of the finished products. The VAASA had a five-year term, beginning on 2 April 1996, with a provision for annual renewal by mutual written consent. On 19 September 1999, with the consent of Integrated Silicon, HP-Singapore assigned all its rights and obligations in the VAASA to Agilent. On 25 May 2001, Integrated Silicon filed a complaint for Specific Performance and Damages against Agilent and its officers Tan Bian Ee, Lim

Chin Hong, Tey Boon Teck and Francis Khor (Civil Case 3110-01-C), alleging that Agilent breached the parties oral agreement to extend the VAASA. Integrated Silicon thus prayed that Agilent be ordered to execute a written extension of the VAASA for a period of five years as earlier assured and promised; to comply with the extended VAASA; and to pay actual, moral, exemplary damages and attorneys fees.

On 1 June 2001, summons and a copy of the complaint were served on Atty. Ramon Quisumbing, who returned these processes on the claim that he was not the registered agent of Agilent. Later, he entered a special appearance to assail the courts jurisdiction over the person of Agilent. On 2 July 2001, Agilent filed a separate complaint against Integrated Silicon, Teoh Kang Seng, Teoh Kiang Gong, Anthony Choo, Joanne Kate M. dela Cruz, Jean Kay M. dela Cruz and Rolando T. Nacilla, for Specific Performance, Recovery of Possession, and Sum of Money with Replevin, Preliminary Mandatory Injunction, and Damages, before the Regional Trial Court, Calamba, Laguna, Branch 92 (Civil Case 3123-2001-C). Agilent prayed that a writ of replevin or, in the alternative, a writ of preliminary mandatory injunction, be issued ordering Integrated Silicon, et. al. to immediately return and deliver to Agilent its equipment, machineries and the materials to be used for fiber-optic components which were left in the plant of Integrated Silicon; and that the latter be ordered to pay actual and exemplary damages and attorneys fees. Integrated Silicon, et. al. filed a Motion to Dismiss in Civil Case No. 31232001-C, on the grounds of lack of Agilents legal capacity to sue; litis pendentia; forum shopping; and failure to state a cause of action. On 4 September 2001, the trial court denied the Motion to Dismiss and granted Agilents application for a writ of replevin.

Without filing a motion for reconsideration, Integrated Silicon, et. al. filed a petition for certiorari with the Court of Appeals. In the meantime, upon motion filed by Integrated Silicon, et. al., Judge Antonio S. Pozas of Branch 92 voluntarily inhibited himself in Civil Case 3123-2001-C. The case was re-raffled and assigned to Branch 35, the same branch where Civil Case 3110-2001-C is pending. On 12 August 2002, the Court of Appeals granted Integrated Silicon, et. al.s petition for certiorari, set aside the assailed Order of the trial court dated 4 September 2001, and ordered the dismissal of Civil Case 31232001-C. Agilent filed the petition for review.

Issue: 1.Whether a foreign corporation without a license is incapacitated from bringing an action in Philippine courts.

2.Whether Agilent was doing business in the Philippines.

Held: 1. A foreign corporation without a license is not ipso facto incapacitated from bringing an action in Philippine courts. A license is necessary only if a foreign corporation is transacting or doing business in the country. Section 133 of the Corporation Code provides that "No foreign corporation transacting business in the Philippines without a license, or its successors or assigns, shall be permitted to maintain or intervene in any action, suit or proceeding in any court or administrative agency of the Philippines; but such corporation may be sued or proceeded against before Philippine courts or administrative tribunals on any valid cause of action recognized under Philippine laws." The aforementioned provision prevents an unlicensed foreign corporation doing business in the Philippines from accessing our courts. In a number of cases, however, the Court held that an unlicensed foreign corporation doing business in the Philippines may bring suit in Philippine courts against a Philippine citizen or entity who had contracted with and benefited from said corporation.

Such a suit is premised on the doctrine of estoppel. A party is estopped from challenging the personality of a corporation after having acknowledged the same by entering into a contract with it. This doctrine of estoppel to deny corporate existence and capacity applies to foreign as well as domestic corporations. The application of this principle prevents a person contracting with a foreign corporation from later taking advantage of its noncompliance with the statutes chiefly in cases where such person has received the benefits of the contract. The principles regarding the right of a foreign corporation to bring suit in Philippine courts may thus be condensed in four statements: (1) if a foreign corporation does business in the Philippines without a license, it cannot sue before the Philippine courts; (2) if a foreign corporation is not doing business in the Philippines, it needs no license to sue before Philippine courts on an isolated transaction or on a cause of action entirely independent of any business transaction; (3) if a foreign corporation does business in the Philippines without a license, a Philippine citizen or entity which has contracted with said corporation may be estopped from challenging the foreign corporations corporate personality in a suit brought before Philippine courts; and (4) if a foreign corporation does business in the Philippines with the required license, it can sue before Philippine courts on any transaction.

2. The challenge to Agilents legal capacity to file suit hinges on whether or not it is doing business in the Philippines. However, there is no definitive rule on what constitutes doing, engaging in, or transacting business in the Philippines, the Corporation Code itself is silent as to what acts constitute doing or transacting business in the Philippines. An analysis of the relevant case law, in conjunction with Section 1 of the Implementing Rules and Regulations of the Foreign Investments Act of 1991 (FIA, as amended by RA 8179), would demonstrate that the acts enumerated in the VAASA do not constitute doing business in the Philippines. Section 1 of the Implementing Rules and Regulations of the FIA (as amended by RA 8179) provides that the following shall not be deemed doing business: (1) Mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do business, and/or the exercise of rights as such investor; (2) Having a nominee director or officer to represent its interest in such corporation; (3) Appointing a representative or distributor domiciled in the Philippines which transacts business in the representatives or distributors own name and account; (4) The publication of a general advertisement through any print or broadcast media; (5) Maintaining a stock of goods in the Philippines solely for the purpose of having the same processed by another entity in the Philippines; (6) Consignment by a foreign entity of equipment with a local company to be used in the processing of products for export; (7) Collecting information in the Philippines; and (8) Performing services auxiliary to an existing isolated contract of sale which are not on a continuing basis, such as installing in the Philippines machinery it has manufactured or exported to the Philippines, servicing the same, training domestic workers to operate it, and similar incidental services. By and large, to constitute doing business, the activity to be undertaken in the Philippines is one that is for profit-making. Herein, by the clear terms of the VAASA, Agilents activities in the Philippines were confined to (1) maintaining a stock of goods in the Philippines solely for the purpose of having the same processed by Integrated Silicon; and (2) consignment of equipment with Integrated Silicon to be used in the processing of products for export. As such, Agilent cannot be deemed to be doing business in the Philippines. Integrated Silicon, et. al.s contention that Agilent lacks the legal capacity to file suit is therefore devoid of merit. As a foreign corporation not doing business in the Philippines, it needed no license before it can sue before our courts.

4.Pacific Vegetable Oil-BISNAR (G.R. No. 7917; April 29, 1955) Source: http://www.scribd.com/doc/119787821/Corpo-Rev-Bar This is an action instituted by the plaintiff, a foreign corporation, against the defendant to recover a sum of money for damages suffered by the plaintiff as a consequence of the failure of the defendant to

deliver copra which he sold and bound himself to deliver tothe plaintiff. Defendant filed a motion to dismiss on the ground that the plaintiff failed to obtain a license to transact business in the Phil and, consequently, it had no personality to file an action.

Has appellant transacted business in the Philippines in contemplation of law?

Contrary to the findings of the trial court, the copra in question was actually sold by the defendant to the plaintiff in the US, the agreed price to be covered by an irrevocable letter of credit to be opened at the Bank of California, and delivery to be made at the port of destination. It follows that the appellant corporation has not transacted business in the Phil in contemplation of Sec. 68 and 69 which require any foreign corporation to obtain a license before it could transact business, or before it could have personality to file a suit in the Phil.. It was never the purpose of the Legislature to exclude a foreign corporation which happens to obtain an isolated order of business from the Phil., from securing redress in the Phil. Courts, and thus, in effect, to permit persons to avoid their contracts made with such foreign corp.. The lower court erred in holding that the appellant corporation has no personality to maintain the present action.

5.Aetna Casualty vs Pacific Star-BOMBALES Source: http://www.scribd.com/doc/119787821/Corpo-Rev-Bar Aetna as subrogee of I. Shalom sued Pacific Star Line (PSL), the common carrier forthe loss of Linen & Cotton piece goods due to pilferage and damage amounting toUS$2,300.00. PSL contends that Aetna has no license to transact insurance business in thePhilippines as gathered from the Insurance Commission and SEC . It also argues that sincesaid company has filed 13 other civil suits, they should be considered as doing business hereand not merely having entered into an isolated transaction. Based on rulings in Mentholatum and Eastboard Navigation, the Supreme Court heldthat Aetna is not transacting business in the Philippines for which it needs to have a license.The contract was entered into in New York and payment was made to the consignee in theNew York branch. Moreover, Aetna was not engaged in the business of insurance in thePhilippines but was merely collecting a claim assigned to it by consignee. Because it wasnot doing business in the Philippines, it was not subject to Sec. 68-69 of the CorporationLaw and therefore was not barred from filing the instant case although it had not secured alicense to transact insurance business in the Philippines.

6.Granger Associates vs Microwave Systems-FERNANDEZ Note: Granger is the principal and Microwave Systems is the agent. Facts: The foreign corporation is Granger Associates, the herein petitioner, which was organized in the United States and has no license to do business in this country. The domestic corporation is Microwave Systems, Inc., one of the herein private respondents, which has been sued for recovery of a sum equivalent to US$900,633.30 allegedly due from it to the petitioner. The claim arose from a series of agreements concluded between the two parties, principally the contract dated March 28, 1977, under which Granger licensed MSI to manufacture and sell its products in the Philippines and extended to the latter certain loans, equipment and parts; the contract dated May 17, 1979, for the sale by Granger of its Model 7100/7200 Multiplex Equipment to MSI

Payment of these contracts not having been made as agreed upon, Granger filed a complaint against MSI and the other private respondents on June 29, 1984, in the Regional Trial Court of Pasay City. This was docketed as Civil Case No. 1982-P. In its answer, MSI alleged the affirmative defense that the plaintiff had no capacity to sue, being an unlicensed foreign corporation, and moved to dismiss. The law invoked by the defendants was Section 133 of the Corporation Code reading as follows: 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; ... RTC: sustained the defendants and granted motion to dismiss CA: affirmed Hence this petition W/N Granger has capacity to sue? Yes, but not in this case because of technicality. Petitioner did not assail that it should be under the exception. The true test, however, seems to be whether the foreign corporation is continuing the body or substance of the business or enterprise for which it was organized or whether it has substantially retired from it and turned it over to another. The term implies a continuity of commercial dealings and arrangements, and contemplates, to that extent, the performance of acts or works or the exercise of some of the functions normally incident to, and in progressive prosecution of, the purpose and object of its organization. We are convinced from an examination of the terms and conditions of the contracts and agreements entered into between petitioner and private respondents indicate that they established within our country a continuous business, and not merely one of a temporary character. Such agreements did not constitute only one isolated transaction, as the petitioner contends, but a succession of acts signifying the intent of Granger to extend its operations in the Philippines. In any event, it is now settled that even one single transaction may be construed as transacting business in the Philippines under certain circumstances, as we observed in Far East International Import and Export Corporation v. Nankai Kogyo Co., Ltd., 10 thus: The rule stated in the preceding section that the doing of a single act does not constitute business within the meaning of statutes prescribing the conditions to be complied with by foreign corporations must be qualified to this extent, that a single act may bring the corporation within the purview of the statute where it is an act of the ordinary business of the corporation. In such a case, the single act or transaction is not merely incidental or casual, but is of such character as distinctly to indicate a purpose on the part of the foreign corporation to do other business in the state, and to make the state a base of operations for the conduct of a part of the corporations' ordinary business. It is also the rule that the factual findings of the lower court are binding on this Court in the absence of any of those exceptional circumstances we have enumerated in many cases that warrant a different conclusion. Having assailed the finding of the respondent court that the petitioner is doing business in the Philippines, the petitioner had the burden of showing that such finding fell under the exception rather than the rule and so should be reviewed and reversed. The petitioner has not done this. The purpose of the rule requiring foreign corporations to secure a license to do business in the Philippines is to enable us to exercise jurisdiction over them for the regulation of their activities in this country.

SC: Petition denied

7.Western Equipment and Supply v Reyes-FORTES

Western Equipment vs. Reyes GR 27897, 2 December 1927; En Banc, Johns (J)

Doctrine: Right to use corporate name and trade name of a foreign corporation is a property right Right in rem It may assert and protect in any courts of the world even in countries where it does not personally transact any business Sec 69: when foreign corp transacts business in the Philippines without obtaining a license, there is public policy of prohibiting it from seeking any remedy from Phil. courts and administrative bodies.

Facts: In 1925, Western Equipment and Supply Co. applied for the issuance of a license to engage in business in the Philippines. On the other hand, Western Electric Co. has never been licensed to engage in business, nor has it ever engaged in business in the Philippines. Western Equipment, since the issuance of its license, engaged in the importation and sale of electrical and telephone apparatus and supplies manufactured by Western Electric. A local corporation, Electric Supply Co. Inc. has been importing the same products in the Philippines. In 1926, Electric Supplys president, Henry Herman, along with other persons sought to organize a corporation to be known as Western Electric Co. Inc. Western Equipment, et al. filed against Herman to prevent them from organizing said corporation. The trial court ruled in favor of Western Equipment, holding that the purpose of the incorporation of the proposed corporation is illegal or void.

Issue: Whether the foreign corporation Western Electric Co. Inc. has right of action to prevent an officer of the government from issuing a certificate of incorporation to Philippine residents who attempt to pirate the corporate name of the foreign corporation and engage in the same business. -Yes

Held: Yes A trademark acknowledges no territorial boundaries of municipalities, states or nations, but extends to every market where the traders goods have become known and identified by the use of the mark

There was express finding or stipulation th at the foreign corporation did not do business in the Philippines.

8.Antam Consolidated vs CA-KLETO Facts:

On 9 April 1981, Stokely Van Camp. Inc. filed a complaint against Banahaw Milling Corporation, Antam Consolidated, Inc., Tambunting Trading Corporation, Aurora Consolidated Securities and Investment Corporation, and United Coconut Oil Mills, Inc. (Unicom) for collection of sum of money. In its complaint, Stokely alleged: o (1) that it is a corporation organized and existing under the laws of the state of Indiana, U.S.A. and has its principal office at 941 North Meridian Street, Indianapolis, Indiana, U.S.A., and one of its subdivisions "Capital City Product Company" (Capital City) has its office in Columbus, Ohio, U.S.A.; (2) that Stokely and Capital City were not engaged in business in the Philippines prior to the commencement of the suit so that Stokely is not licensed to do business in this country and is not required to secure such license; (3) that on 21 August 1978, Capital City and Coconut Oil Manufacturing (Phil.) Inc. (Comphil) with the latter acting through its broker Rothschild Brokerage Company, entered into a contract (RBS 3655) wherein Comphil undertook to sell and deliver and Capital City agreed to buy 500 long tons of crude coconut oil to be delivered in October/November 1978 at the c.i.f price of US$0.30/lb. but Comphil failed to deliver the coconut oil so that Capital City covered its coconut oil needs in the open market at a price substantially in excess of the contract and sustained a loss of US$103,600; that to settle Capital City's loss under the contract, the parties entered into a second contract (RBS 3738) on 3 November 1978 wherein Comphil undertook to buy and Capital City agreed to sell 500 long tons of coconut crude oil under the same terms and conditions but at an increased c.i.f. price of US$0.3925/lb.; (4) that the second contract states that "it is a wash out against RBS 3655" so that Comphil was supposed to repurchase the undelivered coconut oil at US $0.3925 from Capital City by paying the latter the sum of US$103,600.00 which is the same amount of loss that Capital City sustained under the first contract; that Comphil again failed to pay said amount, so to settle Capital City's loss, it entered into a third contract with Comphil on 24 January 1979 wherein the latter undertook to sell and deliver and Capital City agreed to buy the same quantity of crude coconut oil to be delivered in April/May 1979 at the c.i.f. price of US$0.3425/lb.; (5) that the latter price was 9.25 cents/lb. or US$103,600 for 500 long tons below the then current market price of 43.2 cents/lb. and by delivering said quantity of coconut oil to Capital City at the discounted price, Comphil was to have settled its US$103,600 liability to Capital City; (6) that Comphil failed to deliver the coconut oil so Capital City notified the former that it was in default;

o o

(7) that Capital City sustained damages in the amount of US$175,000; and (8) that after repeated demands from Comphil to pay the said amount, the latter still refuses to pay the same.

Stokely further prayed that a writ of attachment be issued against any and all the properties of Antam, et al. in an amount sufficient to satisfy any lien of judgment that Stokely may obtain in its action. In support of this provisional remedy and of its cause of action against Antam, et al., other than Comphil, Stokely alleged that: o 1) After demands were made by respondent on Comphil, the Tambuntings ceased to be directors and officers of Comphil and were replaced by their five employees, who were managers of Tambunting's pawnshops and said employees caused the name of Comphil to be changed to "Banahaw Milling Corporation" and authorized one of the Tambuntings, Antonio P. Tambunting, Jr., who was at that time neither a director nor officer of Banahaw to sell its oil mill; 2) Unicom has taken over the entire operations and assets of Banahaw because the entire and outstanding capital stock of the latter was sold to the former; 3) All of the issued and outstanding capital stock of Comphil are owned by the Tambuntings who were the directors and officers of Comphil and who were the ones who benefited from the sale of Banahaw's assets or shares to Unicom; 4) All of the petitioners evaded their obligation to respondent by the devious scheme of using Tambunting employees to replace the Tambuntings in the management of Banahaw and disposing of the oil mill of Banahaw or their entire interests to Unicom; and 5) Respondent has reasonable cause to believe and does believe that the coconut oil mill, which is the only substantial asset of Banahaw is about to be sold or removed so that unless prevented by the Court there will probably be no assets of Banahaw to satisfy its claim.

o o

On 10 April 1981, the trial court ordered the issuance of a writ of attachment in favor of Stokely upon the latter's deposit of a bond in the amount of P1,285,000.00. On 3 June 1981, Stokely filed a motion for reconsideration to reduce the attachment bond. On 11 June 1981, Antam, et al. filed a motion to dismiss the complaint on the ground that Stokely, being a foreign corporation not licensed to do business in the Philippines, has no personality to maintain the suit. Thereafter, the trial court issued an order, dated 10 August 1981, reducing the attachment bond to P500,000.00 and denying the motion to dismiss by Antam, et al. on the ground that the reason cited therein does not appear to be indubitable. Antam, et al. filed a petition for certiorari before the Intermediate Appellate Court. On 14 June 1982, the appellate court dismissed the petition. Antam, et al. filed a motion for reconsideration but the same was denied. Hence, they filed the petition for certiorari and prohibition with prayer for temporary restraining order.

Issue:

Whether Stokely Van Camp, Inc. has the capacity to sue, in light of three transactions it entered into with Comphil, Antam, etc. without license.

Held:

The transactions entered into by Stokely with Comphil, Antam, et al. are not a series of commercial dealings which signify an intent on the part of Stokely to do business in the Philippines but constitute an isolated one which does not fall under the category of "doing business." The only reason why Stokely entered into the second and third transactions with Comphil, Antam, et al. was because it wanted to recover the loss it sustained from the failure of Comphil, Antam, et al. to deliver the crude coconut oil under the first transaction and in order to give the latter a chance to make good on their obligation. Instead of making an outright demand on Comphil, Antam, et al., Stokely opted to try to push through with the transaction to recover the amount of US$103,600.00 it lost. This explains why in the second transaction, Comphil, Antam, et al. were supposed to buy back the crude coconut oil they should have delivered to the respondent in an amount which will earn the latter a profit of US$103,600.00. When this failed the third transaction was entered into by the parties whereby Comphil, Antam, et al. were supposed to sell crude coconut oil to the respondent at a discounted rate, the total amount of such discount being US$103,600.00. Unfortunately, Comphil, Antam, et al. failed to deliver again, prompting Stokely to file the suit below. From these facts alone, it can be deduced that in reality, there was only one agreement between Comphil, Antam, et al. and Stokely and that was the delivery by the former of 500 long tons of crude coconut oil to the latter, who in turn, must pay the corresponding price for the same. The three seemingly different transactions were entered into by the parties only in an effort to fulfill the basic agreement and in no way indicate an intent on the part of Stokely to engage in a continuity of transactions with Comphil, Antam, et al. which will categorize it as a foreign corporation doing business in the Philippines. Stokely, being a foreign corporation not doing business in the Philippines, does not need to obtain a license to do business in order to have the capacity to sue.