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R 151319

Florencia Baluyot offered Atty. Pedro L. Linsangan a lot called Garden State at the Holy Cross Memorial
Park owned by petitioner (MMPCI). According to Baluyot, a former owner of a memorial lot under Contract
No. 25012 was no longer interested in acquiring the lot and had opted to sell his rights subject to
reimbursement of the amounts he already paid. The contract was for P95,000.00. Baluyot reassured Atty.
Linsangan that once reimbursement is made to the former buyer, the contract would be transferred to
him. Atty. Linsangan agreed and gave Baluyot P35,295.00 representing the amount to be reimbursed to
the original buyer and to complete the down payment to MMPCI. Baluyot issued handwritten and
typewritten receipts for these payments. Baluyot verbally advised Atty. Linsangan that Contract No. 28660
was cancelled for reasons the latter could not explain, and presented to him another proposal for the
purchase of an equivalent property. He refused the new proposal and insisted that Baluyot and MMPCI
honor their undertaking. For the alleged failure of MMPCI and Baluyot to conform to their agreement, Atty.
Linsangan filed a Complaint for Breach of Contract and Damages against the former. For its part, MMPCI
alleged that Contract No. 28660 was cancelled conformably with the terms of the contract because of
non-payment of arrearages. MMPCI stated that Baluyot was not an agent but an independent contractor,
and as such was not authorized to represent MMPCI or to use its name except as to the extent expressly
stated in the Agency Manager Agreement.

ISSUE: Whether or not a contract of agency exists between Baluyot and MMPCI.

RULING: NO. The acts of an agent beyond the scope of his authority do not bind the principal, unless he
ratifies them, expressly or impliedly. Only the principal can ratify; the agent cannot ratify his own
unauthorized acts. Moreover, the principal must have knowledge of the acts he is to ratify. No ratification
can be implied in the instant case. Atty. Linsangan failed to show that MMPCI had knowledge of the
arrangement. As far as MMPCI is concerned, the contract price was P132,250.00, as stated in the Offer
to Purchase signed by Atty. Linsangan and MMPCI's authorized officer. Likewise, this Court does not find
favor in the Court of Appeals' findings that "the authority of defendant Baluyot may not have been
expressly conferred upon her; however, the same may have been derived impliedly by habit or custom
which may have been an accepted practice in their company in a long period of time." A perusal of the
records of the case fails to show any indication that there was such a habit or custom in MMPCI that
allows its agents to enter into agreements for lower prices of its interment spaces, nor to assume a
portion of the purchase price of the interment spaces sold at such lower price. No evidence was ever
presented to this effect.

CORPORATION, petitioners, vs. HON. COURT OF APPEALS and JAIME SAHOT, respondents.
[G.R. No. 142293. February 27, 2003]

FACTS: Sometime in 1958, private respondent Jaime Sahot[5] started working as a truck helper for
petitioners family-owned trucking business named Vicente Sy Trucking. In 1965, he became a truck
driver of the same family business, renamed T. Paulino Trucking Service, later 6Bs Trucking Corporation
in 1985, and thereafter known as SBT Trucking Corporation since 1994. Throughout all these changes in
names and for 36 years, private respondent continuously served the trucking business of petitioners.
When Sahot was 59 years old, he incurred several absences due to various ailments. Particularly causing
him pain was his left thigh, which greatly affected the performance of his task as a driver. He inquired
about his medical and retirement benefits with the Social Security System (SSS) on April 25, 1994, but
discovered that his premium payments had not been remitted by his employer.Sahot filed a week-long
leave to get medical attention. He was treated for EOR, presleyopia, hypertensive retinopathy G II and
heart enlargement. Because of such, Belen Paulino of the SBT Trucking Service management told him to
file a formal request for extension of his leave. When Sahot applied for an extended leave, he was
threatened of termination of employment should he refuse to go back to work. Eventually, Sahot was
dismissed from employment which prompted the latter to file an illegal dismissal case with the NLRC. For
their part, petitioners admitted they had a trucking business in the 1950s but denied employing helpers
and drivers. They contend that private respondent was not illegally dismissed as a driver because he was
in fact petitioners industrial partner. They add that it was not until the year 1994, when SBT Trucking
Corporation was established, and only then did respondent Sahot become an employee of the company,
with a monthly salary that reached P4,160.00 at the time of his separation. The NLRC and the CA ruled
that Sahot was an employee of the petitioner.

ISSUE: Whether Sahot is an industrial partner


No. Article 1767 of the Civil Code states that in a contract of partnership two or more persons bind
themselves to contribute money, property or industry to a common fund, with the intention of dividing the
profits among themselves. Not one of these circumstances is present in this case. No written agreement
exists to prove the partnership between the parties. Private respondent did not contribute money, property
or industry for the purpose of engaging in the supposed business. There is no proof that he was receiving
a share in the profits as a matter of course, during the period when the trucking business was under
operation. Neither is there any proof that he had actively participated in the management, administration
and adoption of policies of the business. Thus, the NLRC and the CA did not err in reversing the finding of
the Labor Arbiter that private respondent was an industrial partner from 1958 to 1994. On this point, the
Court affirmed the findings of the appellate court and the NLRC. Private respondent Jaime Sahot was not
an industrial partner but an employee of petitioners from 1958 to 1994. The existence of an employer-
employee relationship is ultimately a question of fact and the findings thereon by the NLRC, as affirmed
by the Court of Appeals, deserve not only respect but finality when supported by substantial evidence.
Substantial evidence is such amount of relevant evidence which a reasonable mind might accept as
adequate to justify a conclusion.

HEIRS OF TAN ENG KEE vs.CA 341 SCRA 740, G.R. No. 126881, October 3, 2000


After the second World War, Tan EngKee and Tan Eng Lay, pooling their resources and industry together,
entered into a partnership engaged in the business of selling lumber and hardware and construction
supplies. They named their enterprise "Benguet Lumber" which they jointly managed until Tan EngKee's
death. Petitioners herein averred that the business prospered due to the hard work and thrift of the
alleged partners. However, they claimed that in 1981, Tan Eng Lay and his children caused the
conversion of the partnership "Benguet Lumber" into a corporation called "Benguet Lumber Company."
The incorporation was purportedly a ruse to deprive Tan EngKee and his heirs of their rightful participation
in the profits of the business. Petitioners prayed for accounting of the partnership assets, and the
dissolution, winding up and liquidation thereof, and the equal division of the net assets of Benguet
Lumber. The RTC ruled in favor of petitioners, declaring that Benguet Lumber is a joint venture which is
akin to a particular partnership. The Court of Appeals rendered the assailed decision reversing the
judgment of the trial court.
ISSUE: Whether the deceased Tan EngKee and Tan Eng Lay are joint adventurers and/or partners in a
business venture and/or particular partnership called Benguet Lumber and as such should share in the
profits and/or losses of the business venture or particular partnership


There was no partnership whatsoever. Except for a firm name, there was no firm account, no firm
letterheads submitted as evidence, no certificate of partnership, no agreement as to profits and losses,
and no time fixed for the duration of the partnership. There was even no attempt to submit an accounting
corresponding to the period after the war until Kee's death in 1984. It had no business book, no written
account nor any memorandum for that matter and no license mentioning the existence of a partnership.
Also, the trial court determined that Tan EngKee and Tan Eng Lay had entered into a joint venture, which
it said is akin to a particular partnership. A particular partnership is distinguished from a joint adventure, to
wit:(a) A joint adventure (an American concept similar to our joint accounts) is a sort of informal
partnership, with no firm name and no legal personality. In a joint account, the participating merchants can
transact business under their own name, and can be individually liable therefor. (b) Usually, but not
necessarily a joint adventure is limited to a SINGLE TRANSACTION, although the business of pursuing to
a successful termination maycontinue for a number of years; a partnership generally relates to a
continuing business of various transactions of a certain kind. A joint venture "presupposes generally a
parity of standing between the joint co-ventures or partners, in which each party has an equal proprietary
interest in the capital or property contributed, and where each party exercises equal rights in the conduct
of the business. The evidence presented by petitioners falls short of the quantum of proof required to
establish a partnership. In the absence of evidence, we cannot accept as an established fact that Tan
EngKee allegedly contributed his resources to a common fund for the purpose of establishing a
partnership. Besides, it is indeed odd, if not unnatural, that despite the forty years the partnership was
allegedly in existence, Tan EngKee never asked for an accounting. The essence of a partnership is that
the partners share in the profits and losses .Each has the right to demand an accounting as long as the
partnership exists. A demand for periodic accounting is evidence of a partnership. During his lifetime, Tan
EngKee appeared never to have made any such demand for accounting from his brother, Tang Eng Lay.
We conclude that Tan EngKee was only an employee, not a partner since they did not present and offer
evidence that would show that Tan EngKee received amounts of money allegedly representing his share
in the profits of the enterprise. There being no partnership, it follows that there is no dissolution, winding
up or liquidation to speak of.

Republic v. Tancinco G.R. No. 139256, December 27, 2002


The National Sugar Trading Corporation (NASUTRA), a domestic corporation created for the purpose of
engaging in the trading of sugar, and a subsidiary of the Philippine Sugar Commission (Philsucom), an
entity owned and controlled by the Philippine government, leased the warehouse of Sulpicio Tancinco in
Cagayan de Oro City. The contract was for a period of 3 months starting November 23, 1984 renewable
for another 3 years. On December 29, 1984, the eastern wall of the warehouse collapsed causing death
and injuries to several persons and damage to houses within the area. Tancinco was constrained to incur
expenses for the repair and restoration of the warehouse and indemnity for the victims. Due to
NASUTRAs refusal to reimburse Tancinco, the latter filed on March 28, 1985 a complaint for Damages
with the Regional Trial Court of Cagayan de Oro City (Branch 23). NASUTRA filed its Answer disclaiming
any liability. In the meantime, NASUTRA was converted into a private corporation called the Philippine
Sugar Marketing Corporation (Philsuma), the sole marketing agency for the sugar industry to be owned
completely by sugar producers. Thereafter, Philsucom was phased out by Executive Order No. 18 in
1986, at same time creating petitioner SRA. NASUTRA substituted petitioner SRA and filed on February
8, 1988, an Answer putting up the defenses that it cannot be liable for NASUTRAs obligation as it was
created after the incident took place and that it is a separate and distinct entity from the former.
Issue: Whether or not Tancinco or his heirs may recover NASUTRAs adjudged liability from SRA.


YES. There is no question that Executive Order No. 18 abolished the Philippine Sugar Commission
(Philsucom) and created the Sugar Regulatory Administration (SRA). However, the abolition of NASUTRA
and eventually Philsucom did not abate the pendency of the suits filed against them. The termination of
the life of a juridical entity does not by itself cause the extinction or diminution of the rights and liabilities of
such entity; specially in this case where, pursuant to the transitory provision of E.O. No. 18, Philsucom,
under the supervision of SRA, was allowed to continue as a juridical entity for 3 years for the purpose of
prosecuting and defending suits by or against it and enabling it to settle and close its affairs, to dispose of
and convey its property; and to distribute its assets. If and when a pending action cannot be terminated
within said 3-year period, SRA, which has been appointed by law to supervise the closing affairs of
Philsucom, is considered a trustee which shall continue to prosecute and defend suits filed by or against
it. It being the trustee, SRA must therefore continue the legal personality of the defunct NASUTRA and
Philsucom until final judgment and execution stage of the case.

G.R. No. 135813 October 25, 2001

FERNANDO SANTOS, petitioner, vs. SPOUSES ARSENIO and NIEVES REYES, respondents.

FACTS: In June 1986, Fernando Santos (70%), Nieves Reyes (15%), and Melton Zabat (15%) orally
instituted a partnership with them as partners. Their venture is to set up a lending business where it was
agreed that Santos shall be financier and that Nieves and Zabat shall contribute their industry. **The
percentages after their names denote their share in the profit. Later, Nieves introduced Cesar Gragera to
Santos. Gragera was the chairman of a corporation. It was agreed that the partnership shall provide loans
to the employees of Grageras corporation and Gragera shall earn commission from loan payments. In
August 1986, the three partners put into writing their verbal agreement to form the partnership. As earlier
agreed, Santos shall finance and Nieves shall do the daily cash flow more particularly from their dealings
with Gragera, Zabat on the other hand shall be a loan investigator. But then later, Nieves and Santos
found out that Zabat was engaged in another lending business which competes with their partnership
hence Zabat was expelled. The two continued with the partnership and they took with them Nieves
husband, Arsenio, who became their loan investigator. Later, Santos accused the spouses of not remitting
Grageras commissions to the latter. He sued them for collection of sum of money. The spouses
countered that Santos merely filed the complaint because he did not want the spouses to get their shares
in the profits. Santos argued that the spouses, insofar as the dealing with Gragera is concerned, are
merely his employees. Santos alleged that there is a distinct partnership between him and Gragera which
is separate from the partnership formed between him, Zabat and Nieves. The trial court as well as the
Court of Appeals ruled against Santos and ordered the latter to pay the shares of the spouses.

ISSUE: Whether or not the spouses are partners.

HELD: Yes. Though it is true that the original partnership between Zabat, Santos and Nieves was
terminated when Zabat was expelled, the said partnership was however considered continued when
Nieves and Santos continued engaging as usual in the lending business even getting Nieves husband,
who resigned from the Asian Development Bank, to be their loan investigator who, in effect, substituted
Zabat. There is no separate partnership between Santos and Gragera. The latter being merely a
commission agent of the partnership. This is even though the partnership was formalized shortly after
Gragera met with Santos (Note that Nieves was even the one who introduced Gragera to Santos exactly
for the purpose of setting up a lending agreement between the corporation and the partnership).
HOWEVER, the order of the Court of Appeals directing Santos to give the spouses their shares in the
profit is premature. The accounting made by the trial court is based on the total income of the
partnership. Such total income calculated by the trial court did not consider the expenses sustained by the
partnership. All expenses incurred by the money-lending enterprise of the parties must first be deducted
from the total income in order to arrive at the net profit of the partnership. The share of each one of
them should be based on this net profit and not from the gross income or total income.


Vesagas vs. CA Case Digest

Vesagas vs. Court of Appeals
[GR 142924, December 5, 2001]

Facts: Spouses Delfino and Helenda Raniel are members in good standing of the Luz Village Tennis
Club, Inc. Teodoro B. Vesagas, who claims to be the club's duly elected president, with Wilfred D.
Asis, who, in turn, claims to be its duly elected vice-president and legal counsel, allegedly summarily
stripped them of their lawful membership, without due process of law. Thereafter, the spouses filed a
Complaint with the Securities and Exchange Commission (SEC) on 26 March 1997 against the
Vesagas and Asis (SEC Case 03-97-5598). The spouses Raniel asked the Commission to declare
as illegal their expulsion from the club as it was allegedly done in utter disregard of the provisions of
its by-laws as well as the requirements of due process. They likewise sought the annulment of the
amendments to the by-laws made on 8 December 1996, changing the annual meeting of the club
from the last Sunday of January to November and increasing the number of trustees from nine to
fifteen. Finally, they prayed for the issuance of a Temporary Restraining Order and Writ of
Preliminary Injunction.

The application for TRO was denied by SEC Hearing Officer Soller in an Order dated 29 April 1997.
Before the hearing officer could start proceeding with the case, however, Vesagas and Asis filed a
motion to dismiss on the ground that the SEC lacks jurisdiction over the subject matter of the case.
The motion was denied on 5 August 1997. Their subsequent move to have the ruling reconsidered
was likewise denied. Unperturbed, they filed a petition for certiorari with the SEC En Banc seeking a
review of the hearing officer's orders. The petition was again denied for lack of merit, and so was the
motion for its reconsideration in separate orders, dated 14 July 1998 and 17 November 1998,
respectively. Dissatisfied with the verdict, Vesagas and Asis promptly sought relief with the Court of
Appeals contesting the ruling of the Commission en banc. The appellate court, however, dismissed
the petition for lack of merit in a Decision promulgated on 30 July 1999. Then, in a resolution
rendered on 16 March 2000, it similarly denied their motion for reconsideration. Vesagas and Asis
filed the petition for review on certiorari.

Issue: Whether the club has already ceased to be a corporate body.

Held: The club, according to the SEC's explicit finding, was duly registered and a certificate of
incorporation was issued in its favor. The question of whether the club was indeed registered and
issued a certification or not is one which necessitates a factual inquiry. The finding of the
Commission, as the administrative agency tasked with among others the function of registering and
administering corporations, is given great weight and accorded high respect. Moreover, by their own
admission contained in the various pleadings which they have filed in the different stages of this
case, Vesagas and Asis themselves have considered the club as a corporation. Otherwise, there is
no cogency in spearheading the move for its dissolution. Vesagas and Asis were therefore well
aware of the incorporation of the club and even agreed to get elected and serve as its responsible
officers before they reconsidered dissolving its corporate form. On the other hand, at the time of the
institution of the case with the SEC, the club was not dissolved by virtue of an alleged Board
resolution. The Corporation Code establishes the procedure and other formal requirements a
corporation needs to follow in case it elects to dissolve and terminate its structure voluntarily and
where no rights of creditors may possibly be prejudiced. Section 118 (Voluntary dissolution where no
creditors are affected) of the Corporation Code provides that "If dissolution of a corporation does not
prejudice the rights of any creditor having a claim against it, the dissolution may be effected by
majority vote of the board of directors or trustees and by a resolution duly adopted by the affirmative
vote of the stockholders owning at least two-thirds (2/3) of the outstanding capital stock or at least
two-thirds (2/3) of the members at a meeting to be held upon call of the directors or trustees after
publication of the notice of time, place and object of the meeting for three (3) consecutive weeks in a
newspaper published in the place where the principal office of said corporation is located; and if no
newspaper is published in such place, then in a newspaper of general circulation in the Philippines,
after sending such notice to each stockholder or member either by registered mail or by personal
delivery at least 30 days prior to said meeting. A copy of the resolution authorizing the dissolution
shall be certified by a majority of the board of directors or trustees and countersigned by the
secretary of the corporation. The Securities and Exchange Commission shall thereupon issue the
certificate of dissolution." To substantiate their claim of dissolution, Vesagas and Asis submitted only
two relevant documents: the Minutes of the First Board Meeting held on 5 January 1997, and the
board resolution issued on 14 April 1997 which declared "to continue to consider the club as a non-
registered or a non-corporate entity and just a social association of respectable and respecting
individual members who have associated themselves, since the 1970's, for the purpose of playing
the sports of tennis." These two documents will not suffice. The requirements mandated by the
Corporation Code should have been strictly complied with by the members of the club. The records
reveal that no proof was offered by Vesagas and Asis with regard to the notice and publication
requirements. Similarly wanting is the proof of the board members' certification. Lastly, and most
important of all, the SEC Order of Dissolution was never submitted as evidence


CORPORATION G.R. No. 144767. March 21, 2002


Petitioner was the Assistant General Manager for Finance/Administration and Comptroller of
private respondent Intercontinental Broadcasting Corporation (IBC) from 1996 until April
1997. Upon assumption of Emiliano Templo as the IBC President, petitioner was forced to
retire. Templo refused to pay him his retirement benefits. Hence, in 1997, petitioner filed
with the Labor Arbiter a complaint for illegal dismissal and non-payment of benefits.

IBC alleged that the Labor Arbiter had no jurisdiction over the case, that the petitioner was
a corporate officer who was duly elected by the Board of Directors of IBC; hence, the case
qualifies as an intra-corporate dispute falling within the jurisdiction of the Securities and
Exchange Commission (SEC).

Petitioner argues that he is not a corporate officer of the IBC but an employee thereof since
he had not been elected nor appointed as Comptroller and Assistant Manager by the IBC's
Board of Directors. He pointed out that he had actually been appointed on January 11, 1995
by the IBC's General Manager, Ceferino Basilio.


Whether or not the Labor Arbiter had jurisdiction over the case for illegal dismissal and non-
payment of benefits filed by petitioner.


Dismissal or non-appointment of a corporate officer is clearly an intra-corporate matter and

jurisdiction over the case properly belongs to the SEC, not to the NLRC. Under Presidential
Decree No. 902-A (the Revised Securities Act), Controversies in the election or appointment
of directors, trustees, officers, or managers of such corporations, partnerships or
associations fall under the exclusive of the SEC. Two elements are to be considered in
determining whether the SEC has jurisdiction over the controversy, to wit: (1) the status or
relationship of the parties; and (2) the nature of the question that is the subject of their

Since complainant's appointment was approved unanimously by the Board of Directors of

the corporation, he is therefore considered a corporate officer and his claim of illegal
dismissal is a controversy that falls under the jurisdiction of the SEC as contemplated by
Section 5 of P.D. 902-A. That the position of Comptroller is not expressly mentioned among
the officers of the IBC in the By-Laws is of no moment, because the IBC's Board of Directors
is empowered under Section 25 of the Corporation Code and under the corporation's By-
Laws to appoint such other officers as it may deem necessary.


Petitioner spouses Lipat owned Belas Export Trading (BET) a single
proprietorship engaged in the manufacture of garments for domestic and
foreign consumption. The spouses by virtue of an SPA appointed and
authorized their daughter to obtain loan from respondent Pacific Bank. A loan
was secured and as security therefore a REM was executed over the property
of the spouses. Sometime after, BET was incorporated into a family
corporation named Belas Export Corporation (BEC) and the loan was
restructured in its name. Subsequent loans were obtained in behalf of BEC all
secured by the previous REM. BEC defaulted in its payments which led to the
foreclosure and sale of the mortgaged property. The spouses moved to annul
the sale alleging that BEC is a distinct and separate personality from them
and that the REM was executed only to secure BETs loan. Both trial court
and CA ruled to pierce the corporate veil to hold petitioner spouses liable for
BECs obligations.
Whether or not the doctrine of piercing the veil of corporate fiction is
applicable in this case.
Ruling: YES.
We find that the evidence on record demolishes, rather than buttresses,
petitioners contention that BET and BEC are separate business entities. Note
that Estelita Lipat admitted that she and her husband, Alfredo, were the
owners of BET and were two of the incorporators and majority stockholders
of BEC. It is also undisputed that Estelita Lipat executed a special power of
attorney in favor of her daughter, Teresita, to obtain loans and credit lines
from Pacific Bank on her behalf. Incidentally, Teresita was designated as
executive-vice president and general manager of both BET and BEC,
It could not have been coincidental that BET and BEC are so intertwined with
each other in terms of ownership, business purpose, and management.
Apparently, BET and BEC are one and the same and the latter is a conduit of
and merely succeeded the former. Petitioners attempt to isolate themselves
from and hide behind the corporate personality of BEC so as to evade their
liabilities to Pacific Bank is precisely what the classical doctrine of piercing
the veil of corporate entity seeks to prevent and remedy.
In our view, BEC is a mere continuation and successor of BET and petitioners
cannot evade their obligations in the mortgage contract secured under the
name of BEC on the pretext that it was signed for the benefit and under the
name of BET. We are thus constrained to rule that the Court of Appeals did
not err when it applied the instrumentality doctrine in piercing the corporate
veil of BEC.

International Express Travel And Tour Services Inc. vs Court

of Appeals
343 SCRA 674 [GR No. 119002 October 19, 2000]

Facts: On June 30, 1989, petitioner International Express Travel and

Tours Services Inc., through its managing director, wrote a letter to
the Philippine Football Federation through its President Henri Kahn,
wherein the former offered its services as a travel agency to the
latter. The offer was accepted. Petitioner secured the airline tickets
for the trips of the athletes and officials of the Federation to the
South East Asian Games in Kuala Lumpur as well as various other
trips to the Peoples Republic of China and Brisbane. The total cost
of the tickets amounted to Php449,654.83. For the tickets received,
the Federation made two partial payments, both in September of
1989 in the total amount of Php176,467.50. On October 4, 1989,
petitioner wrote the Federation, through the private respondent a
demand letter requesting for the amount of Php265,844.33. On
October 30, 1989, the Federation, through the project gintong alay,
paid the amount of Php31,603. On December 27, 1989, Henri Kahn
issued a personal check in the amount of Php50,000 as partial
payment for the outstanding balance of the Federation. Thereafter,
no further payments were made despite repeated demands. Hence,
this petition.

Issue: Whether or not private respondent can be made personally

liable for the liabilities of the Philippines Football Federation.

Held: Yes. A voluntary unincorporated association, like defendant

Federation has no power to enter into, or to ratify a contract. The
contract entered into by its officers or agents on behalf of such
association is binding or, as enforceable against it. The officers or
agents are themselves personally liable.

In attempting to prove the juridical existence of the Federation,

Henri Kahn attached to his motion for reconsideration before the
trial court a copy of the constitution and by-laws of the Philippine
Football Federation. Unfortunately, the same does not prove that
said Federation has indeed been recognized and accredited by
either the Philippine Amateur Athletic Federation or the Department
of Youth and Sports Development. Accordingly, we rule that the
Philippine Football Federation is not a national sports association
within the purview of the aforementioned laws and does not have
corporate existence of its own.

Thus being said, it follows that private respondent Henri Kahn should
be liable for the unpaid obligations of the unincorporated Philippine
Football Federation. It is a settled principle in corporation law that
any person acting or purporting to act on behalf of the corporation
which has no valid existence assumed such privileges and becomes
personally liable for contract entered into or for other acts
performed as such agent.


G.R. No. 154618
April 14, 2004

FACTS: Petitioner Agilent is a foreign corporation, which, by its own admission, is not
licensed to do business in the Philippines. Respondent Integrated Silicon is a private
domestic corporation, 100% foreign owned, which is engaged in the business of
manufacturing and assembling electronics components.
The juridical relation among the various parties in this case can be traced to a 5-year
Value Added Assembly Services Agreement (VAASA), between Integrated Silicon and
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. The VAASA had a five-year
term with a provision for annual renewal by mutual written consent. Later, with the
consent of Integrated Silicon, HP-Singapore assigned all its rights and obligations in the
VAASA to Agilent.

Later, Integrated Silicon filed a complaint for Specific Performance and Damages
against Agilent and its officers. It alleged that Agilent breached the parties oral
agreement to extend the VAASA. Agilent filed a separate complaint against Integrated
Silicon for Specific Performance, Recovery of Possession, and Sum of Money with
Replevin, Preliminary Mandatory Injunction, and Damages.
Respondents filed a MTD in the 2nd case, on the grounds of lack of Agilents legal
capacity to sue; litis pendentia; forum shopping; and failure to state a cause of action.

The trial court denied the MTD and granted petitioner Agilents application for a writ of
replevin. Without filing a MR, respondents filed a petition for certiorari with the CA.
The CA granted respondents petition for certiorari, set aside the assailed Order of the
trial court (denying the MTD) and ordered the dismissal of the 2nd case. Hence, the
instant petition.

ISSUE: WON an unlicensed foreign corporation not doing business in the Philippines
lacks the legal capacity to file suit.
HELD: The petition is GRANTED. The Decision of the CA which dismissed the 2nd case
is REVERSED and SET ASIDE. The Order denying the MTD is REINSTATED. Agilents
application for a Writ of Replevin is GRANTED.
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. The Corporation Code provides:
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 aforementioned provision prevents an unlicensed foreign corporation doing

business in the Philippines from accessing our courts.

[In a number of cases, however, we have 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:

if a foreign corporation does business in the Philippines without a license, it cannot sue
before the Philippine courts;

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;

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

if a foreign corporation does business in the Philippines with the required license, it can
sue before Philippine courts on any transaction.

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

[Jurisprudence has it, however, that 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 or in progressive
prosecution of the purpose and subject of its organization.

In the Mentholatum case this Court discoursed on the two general tests to determine
whether or not a foreign corporation can be considered as doing business in the
Philippines. The first of these is the substance test, thus:

The true test [for doing business], however, seems to be whether the foreign corporation
is continuing the body 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 second test is the continuity test, expressed thus:

The term [doing business] 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 the progressive
prosecution of, the purpose and object of its organization.]

The Foreign Investments Act of 1991 (the FIA; Republic Act No. 7042, as amended),
defines doing business as follows:

Sec. 3, par. (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 totaling 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 the progressive prosecution of, commercial gain or of the
purpose and object of the business organization.

An analysis of the relevant case law, in conjunction with Sec 1 of the IRR of the FIA (as
amended by RA 8179), would demonstrate that the acts enumerated in the VAASA
do not constitute doing business in the Philippines. The said provision 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.

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, we hold
that, based on the evidence presented thus far, Agilent cannot be deemed to be doing
business in the Philippines. Respondents 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.