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Rimbunan Hijau v. Oriental Wood Processing September 23, 2005 J. Tinga Facts: 1.

Rimbunan and Niugini are unlicensed foreign corporations who entered into a contract to sell and export PNG round logs to Oriental Wood Processing (domestic corporation) for a total purchase price of $543, 699.52. a. Rimbunan and Niugini are foreign corporation organized and existing under the laws of Papua New Guinea. i. Niugini is Rimbunans subsidiary with the same set of directors and officers. b. Oriental Wood Processing is a private domestic corporation. c. PNG round logs are mixed group of series of Papua New Guinea round logs. 2. Oriental Wood only managed to pay $199, 958 in installments via telegraphic transfers to Rimbunans bank account. 3. When Oriental refused to pay the remaining balance of $343, 741. 52, Rimbunan instituted a complaint for sum of money against Oriental in the RTC Bulacan. 4. Oriental filed a motion to dismiss- alleging the following: a. Rimbunanan and Niugini have no legal capacity to sue in our jurisdiction. b. Rimbunan and Niugini had been doing business in the Philippines without a license and had made 14 transactions with Oriental involving round logs with a total amount of $4M. c. Such transactions as stated above constitute a continuity of commercial dealings in the progressive prosecution of the purpose and object of Rimbunans organization. 5. Rimbunan and Niugini filed a motion to Expunge Orientals Motion to Dismiss. a. In this motion, R&N argued that Oriental is ESTOPPED from questioning their capacity to sue when they entered a contract with them. 6. Rimbunan and Niugini also filed a motion to Declare Defendant (Oriental) in default. a. This is for the failure of Oriental to pay the balance of the exported logs. 7. RTC Bulacan ruled in favor of Rimbunan. In dismissing Orientals motion to dismiss, RTC decided that: a. Rimbunan and Niugini were merely suing on an isolated transaction. b. Also, Oriental is ESTOPPED in questioning the personality of Rimbunan and Niugini since Oriental acknowledged their personalities by entering into a contract with them. 8. Oriental elevated the matter to the CA via SPECIAL CIVIL ACTION FOR CETIORARI UNDER RULE 65. CA reversed the decision of the RTC because: (basically affirmed the arguments of Oriental) a. Based on the facts, petitioners dealings constituted doing business in the Philippines. b. Rimbunan and Niugini never [having denied] but even admitted [that their acts and transactions] constitute not merely incidental or casual performance of business, but are of such character as distinctly to indicate a purpose on [their] part to do business in the Philippines. 9. With this, Rimbunan and Niugini went to the SC via PETITION for review on certiorari. Issue

1. Whether or not the CA was correct in granting the extraordinary remedy of certiorari. NO. 2. Whether or not Rimbunan and Niugini have legal capacity to sue in our jurisdiction. YES. Held/Ratio

On the CAs grant of the extraordinary remedy of certiorari


A. First of all, Oriental should not have appealed the denial of their motion to dismiss through a special civil action for certiorari. 1. An order denying a motion to dismiss is an interlocutory order which neither terminates nor finally disposes of a case as it leaves something to be done by the court before the case is finally decided on the merits. As such, the general rule is that the denial of a motion to dismiss cannot be questioned in a special civil action for certiorari which is a remedy designed to correct errors of jurisdiction and not errors of judgment. B. Second, CA granted the extraordinary remedy of certiorari 1)without regard to the evidence on Rimbunans legal capacity to sue and; 2) no showing of grave abuse of discretion. 2. CA had substituted its evaluation of the motion to dismiss and the opposition thereto for that of the trial courts, without regard to the evidence which was still to be presented on the issue of whether or not petitioners are doing business in the Philippines or merely suing on an isolated transaction. It must be remembered that the standard of grave abuse of discretion is error of jurisdiction as distinguished from error of judgment. a. What the CA essentially do is that they ruled against Rimbunan based on mere allegations of Oriental (those in the motion to dismiss) and NOT based on evidence. b. Moreover, CA relied on Oriental assertion that Rimbunan did not deny the allegations to the motion to dismiss and therefore can constitute hard evidence against Rimbunan. 3. No showing or evidence that there was grave abuse of discretion to justify the grant of extraordinary remedy of certiorari.

On Rimbunan and Niuginis legal capacity to sue


Rimbunan and Niugini have legal capacity to sue because Oriental is stopped from questioning their capacity when they entered into a contract with Rimbunan. A. The ascertainment of whether a foreign corporation is merely suing on an isolated transaction or is actually doing business in the Philippines requires the elicitation of at least a preponderant set of facts (preponderance of evidence). It simply cannot be answered through conjectures or acceptance of unsubstantiated allegations. B. Courts could not afford to dismiss a litigants complaint on the basis of a half-baked conclusion that a party is incapacitated to sue in this jurisdiction with no evidence to show for it. The issue has to be determined in accordance with the facts presented, not on the basis of unsubstantiated allegations.

C. 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. SC grants the petition. Reversed CAs decision.