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G.R. No.

113074 January 22, 1997


ALFRED HAHN, petitioner,vs. COURT OF
APPEALS and BAYERSCHE MOTOREN WERKE
AKTIENGSELLSCHAFT (BMW), respondents.
FACTS:
1. Petitioner Alfred Hahn is a Filipino citizen doing
business under the name and style "HahnManila." On the other hand, private respondent
Bayerische Motoren Werke Aktiengesellschaft
(BMW) is a nonresident foreign corporation
existing under the laws of the former Federal
Republic of Germany, with principal office at
Munich, Germany.
2. On March 7, 1967, petitioner executed in favor
of private respondent a "Deed of Assignment
with Special Power of Attorney," stating that
BMW has agreed to transfer and consequently
record said transfer of the said BMW trademark
and device in favor of the Hahn with the
Philippines Patent Office and BMW affirms the
said assignment and transfer in favor of the
Hahn.
3. Per their agreement, the parties "continue[d]
business relations as has been usual in the past
without a formal contract." But on February 16,
1993, petitioner was informed that BMW was
arranging to grant the exclusive dealership of
BMW cars and products to Columbia Motors
Corporation (CMC), which had expressed interest
in acquiring the same.
4. Petitioner received confirmation of the
information
from
BMW
which
expressed
dissatisfaction
with
various
aspects
of
petitioner's business, mentioning among other
things, decline in sales, deteriorating services,
and inadequate showroom and warehouse
facilities, and petitioner's alleged failure to
comply with the standards for an exclusive BMW
dealer. Nonetheless, BMW expressed willingness
to continue business relations with the petitioner
on the basis of a "standard BMW importer"
contract, otherwise, if this was not acceptable to
petitioner, BMW would have no alternative but to
terminate petitioner's exclusive dealership.
5. Petitioner protested, claiming that the
termination of his exclusive dealership would be
a breach of the Deed of Assignment. Hahn
insisted that as long as the assignment of its
trademark and device subsisted, he remained
BMW's exclusive dealer in the Philippines
because
the
assignment
was
made
in
consideration of the exclusive dealership.
6. Because of Hahn's insistence on the former
business relation, BMW withdrew its offer of a
"standard importer contract" and terminated the
exclusive dealer relationship.
7. On April 29, 1993, BMW proposed that Hahn
and CMC jointly import and distribute BMW cars
and parts.
8. Hahn found the proposal unacceptable. He
filed a complaint for specific performance and
damages against BMW to compel it to continue

the exclusive dealership. Later he filed an


amended complaint to include an application for
temporary restraining order and for writs of
preliminary,
mandatory
and
prohibitory
injunction to enjoin BMW from terminating his
exclusive dealership. Hahn's amended complaint
alleged in pertinent parts:
- that Plaintiff executed in favor of
defendant BMW a Deed of Assignment
with Special Power of Attorney covering
the trademark and in consideration
thereof, Plaintiff was duly acknowledged
as the "exclusive Dealer of the Assignee
in the Philippines. . . .
- From the time the trademark "BMW &
DEVICE" was first used by the Plaintiff in
the Philippines up to the present, Plaintiff,
through its firm name "HAHN MANILA"
and without any monetary contribution
from defendant BMW, established BMW's
goodwill and market presence in the
Philippines. Pursuant thereto, Plaintiff has
invested a lot of money and resources in
order to single-handedly compete against
other motorcycle and car companies. .
Moreover, Plaintiff has built buildings and
other infrastructures such as service
centers and showrooms to maintain and
promote the car and products of
defendant BMW.
8. Regional Trial Court issued a temporary
restraining order. Summons and copies of the
complaint
and
amended
complaint
were
thereafter served on the private respondent
through the Department of Trade and Industry.
The order, summons and copies of the complaint
and amended complaint were later sent by the
DTI to BMW via registered mail and received by
the latter.
9. The trial court issued an order granting the
writ of preliminary injunction upon the filing of a
bond of P100,000.00. And following the posting
of the required bond, a writ of preliminary
injunction was issued.
10. BMW moved to dismiss the case, contending
that the trial court did not acquire jurisdiction
over it through the service of summons on the
Department of Trade and Industry, because it
(BMW) was a foreign corporation and it was not
doing business in the Philippines. It contended
that the execution of the Deed of
Assignment was an isolated transaction;
that Hahn was not its agent because the
latter undertook to assemble and sell BMW
cars and products without the participation
of BMW and sold other products; and that
Hahn was an indentor or middleman
transacting business in his own name and
for his own account.
11. Petitioner argued that BMW was doing
business in the Philippines through him as its
agent, as shown by the fact that BMW invoices
and order forms were used to document his
transactions; that he gave warranties as
exclusive BMW dealer; that BMW officials

periodically inspected standards of service


rendered by him; and that he was described in
service booklets and international publications of
BMW as a "BMW Importer" or "BMW Trading
Company" in the Philippines.
12. The trial court deferred resolution of the
motion to dismiss until after trial on the merits
for the reason that the grounds advanced by
BMW in its motion did not seem to be
indubitable.
13. The Court of Appeals enjoined the trial court
from
hearing
petitioner's
complaint.
On
December 20, 1993, it rendered judgment finding
the trial court guilty of grave abuse of discretion
in deferring resolution of the motion to dismiss. It
ruled that BMW was not doing business in the
country and, therefore, jurisdiction over it could
not be acquired through service of summons on
the DTI pursuant to Rule 14, 14. 'The court
upheld private respondent's contention that
Hahn acted in his own name and for his own
account and independently of BMW, based on
Alfred Hahn's allegations that he had invested his
own money and resources in establishing BMW's
goodwill in the Philippines and on BMW's claim
that Hahn sold products other than those of
BMW. It held that petitioner was a mere indentor
or broker and not an agent through whom private
respondent BMW transacted business in the
Philippines. Consequently, the Court of Appeals
dismissed petitioner's complaint against BMW.
ISSUE:
1. WON HAHN IS AN AGENT OF BMW.

HELD:
The question is whether petitioner Alfred Hahn is
the agent or distributor in the Philippines of
private respondent BMW. If he is, BMW may be
considered doing business in the Philippines and
the trial court acquired jurisdiction over it (BMW)
by virtue of the service of summons on the
Department of Trade and Industry. Otherwise, if
Hahn is not the agent of BMW but an
independent dealer, albeit of BMW cars and
products, BMW, a foreign corporation, is not
considered doing business in the Philippines
within the meaning of the Foreign Investments
Act of 1991 and the IRR, and the trial court did
not acquire jurisdiction over it (BMW).
1. HAHN IS AN EGENT OF BMW IN THE
PHILIPPINES.
Hahn took orders for BMW cars and transmitted
them to BMW. Upon receipt of the orders, BMW
fixed the downpayment and pricing charges,
notified Hahn of the scheduled production month
for the orders, and reconfirmed the orders by
signing and returning to Hahn the acceptance
sheets. Payment was made by the buyer directly
to BMW. Title to cars purchased passed directly
to the buyer and Hahn never paid for the
purchase price of BMW cars sold in the
Philippines.

Hahn was credited with a commission equal to


14% of the purchase price upon the invoicing of a
vehicle order by BMW. Upon confirmation in
writing that the vehicles had been registered in
the Philippines and serviced by him, Hahn
received an additional 3% of the full purchase
price. Hahn performed after-sale services,
including warranty services, for which he
received reimbursement from BMW. All orders
were on invoices and forms of BMW.
Contrary to the appellate court's conclusion, this
arrangement shows an agency. An agent receives
a commission upon the successful conclusion of
a sale. On the other hand, a broker earns his pay
merely by bringing the buyer and the seller
together, even if no sale is eventually made.
As to the service centers and showrooms which
he said he had put up at his own expense, Hahn
said that he had to follow BMW specifications as
exclusive dealer of BMW in the Philippines.
According to Hahn, BMW periodically inspected
the service centers to see to it that BMW
standards were maintained. Indeed, it would
seem from BMW's letter to Hahn that it was for
Hahn's alleged failure to maintain BMW
standards that BMW was terminating Hahn's
dealership.
The fact that Hahn invested his own money to
put up these service centers and showrooms
does not necessarily prove that he is not an
agent of BMW. For as already noted, there are
facts in the record which suggest that BMW
exercised control over Hahn's activities as a
dealer and made regular inspections of Hahn's
premises to enforce compliance with BMW
standards and specifications.

DISPOSITIVE PORTION: The decision of the


Court of Appeals is REVERSED and the case is
REMANDED to the trial court for further
proceedings.
SO ORDERED.