FOREIGN CORPORATIONS

 Marshall-Wells Co., vs. Elser, 46 Phil 71

 Columbia Pictures vs. CA 216 SCRA 144
 General garments vs. Dir of Patents, 41 SCRA 50
 La Chemise Lacoste vs. Fernandez, 129 SCRA 373
 Litton Mills vs. CA 256 SCRA 696
 Mentholatum vs. Mangaliman, 72 Phil 524
 Agilent Technologies Singapore (Pte) Ltd. Vs Integrated Silicon technology
Philippines Corporation, 427 SCRA 593
 Merryl Lynch Futures, Inc. vs CA, 211 SCRA 824
 Top Weld Manufacturing, Inc. vs. ECED, SA, 138 SCRA 118
 Antam Consolidated vs. CA., 143 SCRA 288
 Cargill, Inc. vs. intra Strata Assurance Corporations, 615 SCRA 304

MISCELLANEOUS

 Barlin vs. Ramirez, 7 Phil 41

 G.R. No. 22015 September 1, 1924
MARSHALL-WELLS COMPANY, plaintiff-appellant,
vs.
HENRY W. ELSER & CO., INC., defendant-appellee.

Facts:
Marshall-Wells Company, an Oregon corporation, sued Henry W. Elser & Co., Inc., a
domestic corporation, in the Court of First Instance of Manila, for the unpaid balance
of a bill of goods 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 not 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.

Issue:
Is 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?

Ruling:
Yes. 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 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.

The literal terminology of Section 69 of the Corporation Law is as follows:

No foreign corporation or corporation formed, organized, or existing under any laws
other than 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.
 COLUMBIA PICTURES, INC.
vs.
COURT OF APPEALS
G.R. No. 110318 August 28, 1996

FACTS:

Complainants thru counsel lodged a formal complaint with the NBI for violation
of PD No. 49 and sought its assistance in their anti-film piracy drive. Agents of the
NBI and private researchers made discreet surveillance on various video
establishments in Metro Manila including Sunshine Home Video Inc., owned and
operated by Danilo A. Pelindario.
NBI Senior Agent Lauro C. Reyes applied for a search warrant with the court a
quo against Sunshine seeking the seizure, among others, of pirated video tapes of
copyrighted films all of which were enumerated in a list attached to the application;
and, television sets, video cassettes and/or laser disc recordings equipment and other
machines and paraphernalia used or intended to be used in the unlawful exhibition,
showing, reproduction, sale, lease or disposition of videograms tapes in the premises
above described.
The search warrant was served to Sunshine and/or their representatives. In
the course of the search of the premises indicated in the search warrant, the NBI
Agents found and seized various video tapes of duly copyrighted motion pictures/films
owned or exclusively distributed by private complainants, and machines, equipment,
television sets, paraphernalia, materials, accessories all of which were included in the
receipt for properties accomplished by the raiding team. Copy of the receipt was
furnished and/or tendered to Mr. Danilo A. Pelindario, registered owner-proprietor of
Sunshine Home Video.

ISSUE:

Whether or not petitioners have capacity to sue in court.

RULING:

NO.

The obtainment of a license prescribed by Section 125 of the Corporation Code

is not a condition precedent to the maintenance of any kind of action in Philippine
courts by a foreign corporation.
As thus interpreted, any foreign corporation not doing business in the
Philippines may maintain an action in our courts upon any cause of action, provided
that the subject matter and the defendant are within the jurisdiction of the court. It is
not the absence of the prescribed license but “doing business” in the Philippines
without such license which debars the foreign corporation from access to our courts.
In other words, although a foreign corporation is without license to transact
business in the Philippines, it does not follow that it has no capacity to bring an
action. Such license is not necessary if it is not engaged in business in the
Philippines. Based on Article 133 of the Corporation Code and gauged by such
statutory standards, petitioners are not barred from maintaining the present action.
There is no showing that, under our statutory or case law, petitioners are doing,
transacting, engaging in or carrying on business in the Philippines as would require
obtention of a license before they can seek redress from our courts. No evidence has
been offered to show that petitioners have performed any of the enumerated acts or
any other specific act indicative of an intention to conduct or transact business in the
Philippines.
Accordingly, the certification issued by the Securities and Exchange
Commission stating that its records do not show the registration of petitioner film
companies either as corporations or partnerships or that they have been licensed to
transact business in the Philippines, while undeniably true, is of no consequence to
petitioners’ right to bring action in the Philippines.
 G.R. No. L-24295 September 30, 1971
GENERAL GARMENTS CORPORATION, petitioner,
vs.
THE DIRECTOR OF PATENTS and PURITAN SPORTSWEAR CORPORATION,
respondents.

Facts:
The General Garments Corporation, organized and existing under the laws of the
Philippines, is the owner of the trademark "Puritan.” Puritan Sportswear Corporation,
organized and existing in and under the laws of the state of Pennsylvania, U.S.A., filed
a petition with the Philippine Patent Office for the cancellation of the trademark
"Puritan" registered in the name of General Garments Corporation, alleging ownership
and prior use in the Philippines of the said trademark on the same kinds of goods,
which use it had not abandoned; and alleging further that the registration thereof by
General Garments Corporation had been obtained fraudulently and in violation of
Section 17(c) of Republic Act No. 166, as amended, in relation to Section 4(d) thereof.
On March 30, 1964 General Garments Corporation moved to dismiss the petition.

Issue:
Whether or not Puritan Sportswear Corporation, which is a foreign corporation not
licensed to do business and not doing business in the Philippines, has legal capacity
to maintain a suit in the Philippine Patent Office for cancellation of a trademark
registered therein.

Ruling:
Yes. Respondent is not suing in our courts "for the recovery of any debt, claim or
demand," for which a license to transact business in the Philippines is required by
Section 69 of the Corporation Law, subject only to the exception already noted. The
purpose of such a suit is to protect its reputation, corporate name and goodwill which
has been established, through the natural development of its trade for a long period of
years, in the doing of which it does not seek to enforce any legal or contract rights
arising from, or growing out of any business which it has transacted in the Philippine
Islands.

The right to the use of the corporate or trade name is a property right, a right in rem,
which it may assert and protect in any of the courts of the world — even in
jurisdictions where it does not transact business — just the same as it may protect its
tangible property, real or personal against trespass or conversion.

A foreign corporation is allowed there under to sue "whether or not it has been
licensed to do business in the Philippines" pursuant to the Corporation Law. In any
event, respondent in the present case is not suing for infringement or unfair
competition under Section 21- A, but for cancellation under Section 17, on one of the
grounds enumerated in Section 4. And while a suit under Section 21-A requires that
the mark or tradename alleged to have been infringed has been "registered or
assigned" to the suing foreign corporation, a suit for cancellation of the registration of
a mark or tradename under Section 17 has no such requirement. For such mark or
tradename should not have been registered in the first place (and consequently may
be cancelled if so registered) if it "consists of or comprises a mark or tradename which
so resembles a mark or tradename ... previously used in the Philippines by another
and not abandoned, as to be likely, when applied to or used in connection with goods,
business or services of the applicant, to cause confusion or mistake or to deceive
purchasers.”
 LA CHEMISE LACOSTE, S. A.
vs.
FERNANDEZ
G.R. No. L-65659 May 21, 1984

FACTS:

The petitioner is a foreign corporation, organized and existing under the laws of
France and not doing business in the Philippines. It is the actual owner of the
abovementioned trademarks used on clothings and other goods specifically sporting
apparels sold in many parts of the world and which have been marketed in the
Philippines since 1964. The main basis of the private respondent's case is its claim of
alleged prior registration.
In 1975, Hemandas & Co., a duly licensed domestic firm applied for and was
issued Reg. No. SR-2225 (SR stands for Supplemental Register) for the trademark
"CHEMISE LACOSTE & CROCODILE DEVICE" by the Philippine Patent Office for use
on T-shirts, sportswear and other garment products of the company. Two years later,
it applied for the registration of the same trademark under the Principal Register. The
Patent Office eventually issued an order which granted the application."Thereafter,
Hemandas & Co. assigned to respondent Gobindram Hemandas all rights, title, and
interest in the trademark "CHEMISE LACOSTE & DEVICE".
The petitioner filed its application for registration of the trademark "Crocodile
Device" and "Lacoste". The former was approved for publication while the latter was
opposed by Games and Garments. The petitioner filed with the National Bureau of
Investigation (NBI) a letter-complaint alleging therein the acts of unfair competition
being committed by Hemandas and requesting their assistance in his apprehension
and prosecution.

ISSUE:

Whether or not petitioner has the capacity to sue.

RULING:

YES.

The petitioner is a foreign corporation not doing business in the Philippines.

The marketing of its products in the Philippines is done through an exclusive
distributor, Rustan Commercial Corporation. The latter is an independent entity which
buys and then markets not only products of the petitioner but also many other
products bearing equally well-known and established trademarks and tradenames. In
other words, Rustan is not a mere agent or conduit of the petitioner.
The court finds and concludes that the petitioner is not doing business in the
Philippines. Rustan is actually a middleman acting and transacting business in its
own name and or its own account and not in the name or for the account of the
petitioner. More important is the nature of the case which led to this petition. What
preceded this petition for certiorari was a letter-complaint filed before the NBI charging
Hemandas with a criminal offense, i.e., violation of Article 189 of the Revised Penal
Code. If prosecution follows after the completion of the preliminary investigation being
conducted by the Special Prosecutor the information shall be in the name of the
People of the Philippines and no longer the petitioner which is only an aggrieved party
since a criminal offense is essentially an act against the State.
It is the latter which is principally the injured party although there is a private
right violated. Petitioner's capacity to sue would become, therefore, of not much
significance in the main case. We cannot allow a possible violator of our criminal
statutes to escape prosecution upon a far-fetched contention that the aggrieved party
or victim of a crime has no standing to sue. In upholding the right of the petitioner to
maintain the present suit before our courts for unfair competition or infringement of
trademarks of a foreign corporation, we are moreover recognizing our duties and the
rights of foreign states under the Paris Convention for the Protection of Industrial
Property to which the Philippines and France are parties.
LITTON MILLS, INC. vs. CA

G.R. No. 9498 May 15, 1996

FACTS:

Litton entered into an agreement with Empire Sales Philippines Corporation, as local
agent of private respondent Gelhaar Uniform Company, a corporation organized under
the laws of the United States, whereby Litton agreed to supply Gelhaar 7,770 dozens
of soccer jerseys. The agreement stipulated that before it could collect from the bank
on the letter of credit, Litton must present an inspection certificate issued by Gelhaar's
agent in the Philippines, Empire Sales, that the goods were in satisfactory condition.
Litton sent four shipments totalling 4,770 dozens of the soccer jerseys between
December 2 and December 30, 1983. A fifth shipment, consisting of 2,110 dozens of
the jerseys, was inspected by Empire from January 9 to January 19, 1984, but Empire
refused to issue the required certificate of inspection. Alleging that Empire's refusal to
issue a certificate was without valid reason, Litton filed a complaint with the RTC of
Pasig on January 23, 1984, for specific performance. Litton also sought the issuance
of a writ of preliminary mandatory injunction to compel Empire to issue the inspection
certificate covering the 2,110 dozen jerseys and the recovery of compensatory and
exemplary damages, costs, attorney's fees and other just and equitable relief. The trial
court issued the writ on January 25, 1984. The next day, Empire issued the
inspection certificate, so that the cargo was shipped on time. On February 8, 1984,
Atty. Remie Noval filed in behalf of the defendants a "Motion For Extension of Time To
File An Answer/Responsive Pleading. The court admitted the answer of the
defendants. The law firm of Sycip, Salazar, Feliciano and Hernandez entered a special
appearance for the purpose of objecting to the jurisdiction of the court over Gelhaar.
On February 4, 1985, it moved to dismiss the case and to quash the summons on the
ground that Gelhaar was a foreign corporation not doing business in the Philippines,
and as such, was beyond the reach of the local courts. It likewise denied the authority
of Atty. Noval to appear for Gelhaar and contended that the answer filed by Atty. Noval
on June 15, 1984 could not bind Gelhaar and its filing did not amount to Gelhaar's
submission to the jurisdiction of the court. On September 24, 1986, the trial court
issued an order denying for lack of merit Gelhaar's motion to dismiss and to quash the
summons. It held that Gelhaar was doing business in the Philippines, and that the
service of summons on Gelhaar was therefore valid. Gelhaar filed a motion for
reconsideration, but its motion was denied. Gelhaar then filed a special civil action
of certiorari with the CA to set aside the orders of the trial court. The CA ordered the
trial court to issue anew summons to be served on Empire Sales Philippines
Corporation, after the allegation in the complaint that Gelhaar was doing business in
the Philippines had been established. Hence this petition.

ISSUE:

WON the RTC acquired jurisdiction over Gelhaar a foreign corporation.

RULING:

A court need not go beyond the allegations in the complaint to determine whether or
not a defendant foreign corporation is doing business for the purpose of Rule 14, Sec
14. In the case at bar, the allegation that Empire, for and in behalf of Gelhaar, ordered
7,770 dozens of soccer jerseys from Litton and for this purpose Gelhaar caused the
opening of an irrevocable letter of credit in favor of Litton is a sufficient allegation that
Gelhaar was doing business in the Philippines. It is not really the fact that there is
only a single act done that is material. The other circumstances of the case must be
considered. In the case at bar, the trial court was certainly correct in holding that
Gelhaar' s act in purchasing soccer jerseys to be within the ordinary course of
business of the company considering that it was engaged in the manufacture of
uniforms. The acts noted above are of such a character as to indicate a purpose to do
business. In accordance with Rule 14, Section 14, service upon Gelhaar could be
made in three ways: (1) by serving upon the agent designated in accordance with law
to accept service of summons; (2) if there is no resident agent, by service on the
government official designated by law to that effect; and (3) by serving on any officer or
agent of said corporation within the Philippines.   Here, service was made through
Gelhaar's agent, the Empire Sales Philippines Corp. There was, therefore, a valid
service of summons on Gelhaar, sufficient to confer on the trial court jurisdiction over
the person of Gelhaar. On the question, however, of whether the appearance of Atty.
Noval in behalf of Gelhaar was binding on the latter, Noval's representations in the
answer cannot be considered binding on Gelhaar. Noval does not claim that he ever
directly conferred with Gelhaar regarding the case. There is no evidence to show that
he notified Gelhaar of his appearance in its behalf, or that he furnished Gelhaar with
copies of pleadings or the answer which he filed in its behalf. Thus, Gelhaar should be
allowed a new period for filing its own answer.
 The Mentholatum Co. Inc. vs. Mangaliman Case Digest
The Mentholatum Co. Inc. vs. Mangaliman

[GR 47701, June 27, 1941]

Facts:

The Mentholatum Co., Inc., is a Kansas corporation which manufactures

"Mentholatum," a medicament and salve adapted for the treatment of colds, nasal
irritations, chapped skin, insect bites, rectal irritation and other external ailments of
the body. The Philippine-American Drug Co., Inc., is its exclusive distributing agent in
the Philippines authorized by it to look after and protect its interests. On 26 June
1919 and on 21 January 1921, the Mentholatum Co., Inc., registered with the Bureau
of Commerce and Industry the word, "Mentholatum", as trade mark for its products.
The Mangaliman brothers prepared a medicament and salve named "Mentholiman"
which they sold to the public packed in a container of the same size, color and shape
as "Mentholatum." As a consequence of these acts of the Mangalimans, Mentholatum,
etc. suffered damages from the diminution of their sales and the loss of goodwill and
reputation of their product in the market. On 1 October 1935, the Mentholatum Co.,
Inc., and the Philippine-American Drug, Co., Inc. instituted an action in the Court of
First Instance (CFI) of Manila against Anacleto Mangaliman, Florencio Mangaliman
and the Director of the Bureau of Commerce for infringement of trade mark and unfair
competition (Civil case 48855). 

Mentholatum, etc. prayed for the issuance of an order restraining Anacleto and
Florencio Mangaliman from selling their product "Mentholiman," and directing them to
render an accounting of their sales and profits and to pay damages. After a protracted
trial, featured by the dismissal of the case on 9 March 1936 for failure of plaintiff's
counsel to attend, and its subsequent reinstatement on April 4, 1936, the Court of
First Instance of Manila, on 29 October 1937, rendered judgment in favor of
Mentholatum, etc. In the Court of Appeals (CA-GR 46067), the decision of the trial
court was, on 29 June 1940, reversed, said tribunal holding that the activities of the
Mentholatum Co., Inc., were business transactions in the Philippines, and that by
section 69 of the Corporation Law, it may not maintain the suit. Mentholatum, etc.
filed the petition for certiorari. 

Issue:

Whether Mentholatum, etc. could prosecute the instant action without having secured
the license required in section 69 of the Corporation Law. 

Held:

No general rule or governing principle can be laid down as to what constitutes "doing"
or "engaging in" or "transacting" business. Indeed, each case must be judged in the
light of its peculiar environmental circumstances. 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. Herein, Mentholatum Co.,
through its agent, the Philippine-American Drug Co., Inc., has been doing business in
the Philippines by selling its products here since the year 1929, at least. Whatever
transactions the Philippine-American Drug Co., Inc., had executed in view of the law,
the Mentholatum Co., Inc., being a foreign corporation doing business in the
Philippines without the license required by section 68 of the Corporation Law, it may
not prosecute this action for violation of trade mark and unfair competition. Neither
may the Philippine-American Drug Co., Inc., maintain the action here for the reason
that the distinguishing features of the agent being his representative character and
derivative authority, it cannot now, to the advantage of its principal, claim an
independent standing in court. Further, the recognition of the legal status of a foreign
corporation is a matter affecting the policy of the forum, and the distinction drawn in
Philippine Corporation Law is an expression of the policy. The general statement made
in Western Equipment and Supply Co. vs. Reyes regarding the character of the right
involved should not be construed in the derogation of the policy-determining authority
of the State. The right of Mentholatum conditioned upon compliance with the
requirement of section 69 of the Corporation Law to protect its rights, is reserved.
 AGILENT TECHNOLOGIES SINGAPORE (PTE) LTD., vs. INTEGRATED SILICON
TECHNOLOGY PHILIPPINES CORP et al

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 an MTD in the 2nd case, on the grounds of lack of Agilent’s 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 Agilent’s 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. Agilent’s
application for a Writ of Replevin is GRANTED. NO

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 corporation’s 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 Agilent’s 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.

[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 representative’s or distributor’s own name and account;

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

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

(6) Consignment by a foreign entity of equipment with a local company to be used in

the processing of products for export;

(7) Collecting information in the Philippines; and

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

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, Agilent’s 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.

Merrill Lynch Futures vs. CA Case Digest

Merrill Lynch Futures vs. Court of Appeals

[GR 97816, 24 July 1992]

Facts:

On 23 November 1987, Merrill Lynch futures, Inc. (ML FUTURES) filed a complaint
with the Regional Trial Court at Quezon City against the Spouses Pedro M. Lara and
Elisa G. Lara for the recovery of a debt and interest thereon, damages, and attorney's
fees. In its complaint ML FUTURES described itself as (a) "a non-resident foreign
corporation, not doing business in the Philippines, duly organized and existing under
and by virtue of the laws of the state of Delaware, U.S.A.;" as well as (b) a 'futures
commission merchant' duly licensed to act as such in the futures markets and
exchanges in the United States, . . . essentially functioning as a broker (executing)
orders to buy and sell futures contracts received from its customers on U.S. futures
exchanges." In its complaint ML FUTURES alleged (1) that on 28 September 1983 it
entered into a Futures Customer Agreement with the spouses (Account 138-12161), in
virtue of which it agreed to act as the latter's broker for the purchase and sale of
futures contracts in the U.S.; (2) that pursuant to the contract, orders to buy and sell
futures contracts were transmitted to ML FUTURES by the Lara Spouses "through the
facilities of Merrill Lynch Philippines, Inc., a Philippine corporation and a company
servicing ML Futures' customers;" (3) that from the outset, the Lara Spouses "knew
and were duly advised that Merrill Lynch Philippines, Inc. was not a broker in futures
contracts," and that it "did not have a license from the Securities and Exchange
Commission to operate as a commodity trading advisor (i.e., "and entity which, not
being a broker, furnishes advice on commodity futures to persons who trade in futures
contracts"); (4) that in line with the above mentioned agreement and through said
Merill Lynch Philippines, Inc., the Lara Spouses actively traded in futures contracts,
including "stock index futures" for four years or so, i.e., from 1983 to October, 1987,
there being more or less regular accounting and corresponding remittances of money
(or crediting or debiting) made between the spouses and ML FUTURES; (5) that
because of a loss amounting to US $160,749.69 incurred in respect of 3 transactions
involving "index futures," and after setting this off against an amount of US
$75,913.42 then owing by ML FUTURES to the Lara Spouses, said spouses became
indebted to ML FUTURES for the ensuing balance of US $84,836.27, which the latter
asked them to pay; (6) that the Lara Spouses however refused to pay this balance,
"alleging that the transactions were null and void because Merrill Lynch Philippines,
Inc., the Philippine company servicing accounts of ML Futures, had no license to
operate as a "commodity and/or financial futures broker." 

On the foregoing essential facts, ML FUTURES prayed (1) for a preliminary attachment
against the spouses' properties "up to the value of at least P2,267,139.50," and (2) for
judgment, after trial, sentencing the spouses to pay ML FUTURES: (a) the Philippine
peso equivalent of $84,836.27 at the applicable exchange rate on date of payment,
with legal interest from the date of demand until full payment; (b) exemplary damages
in the sum of at least P500,000,00; and (c) attorney's fees and expenses of litigation as
may be proven at the trial. Preliminary attachment issued ex parte on 2 December
1987, and the spouses were duly served with summons. The spouses filed a motion to
dismiss dated 18 December 1987 on the grounds that (1) ML FUTURES had "no legal
capacity to sue" and (2) its "complaint states no cause of action since it is not the real
party in interest." On 12 January 1988, the Trial Court promulgated an Order
sustaining the motion to dismiss, directing the dismissal of the case and discharging
the writ of preliminary attachment. It later denied ML FUTURES's motion for
reconsideration, by Order dated 29 February 1988. ML FUTURES appealed to the
Court of Appeals. In its own decision promulgated on 27 November 1990, the Court of
Appeals affirmed the Trial Court's judgment. Its motion for reconsideration having
been denied, ML FUTURES appealed to the Supreme Court on certiorari. 

Issue: 

1. Whether ML FUTURES was doing business in the Philippines without license. 

2. Whether – in light of the fact that the Laras were fully aware of its lack of
license to do business in the Philippines, and in relation to those transactions had
made payments to, and received money from it for several years –the Lara Spouses are
estopped to impugn ML FUTURES capacity to sue them in the courts of the forum. 

Held:
 

1. The facts on record adequately establish that ML FUTURES, operating in the United
States, had indeed done business with the Lara Spouses in the Philippines over
several years, had done so at all times through Merrill Lynch Philippines, Inc. (MLPI),
a corporation organized in this country, and had executed all these transactions
without ML FUTURES being licensed to so transact business here, and without MLPI
being authorized to operate as a commodity futures trading advisor. These are the
factual findings to both the Trial Court and the Court of Appeals. These, too, are the
conclusions of the Securities & Exchange Commission which denied MLPI's
application to operate as a commodity futures trading advisor, a denial subsequently
affirmed by the Court of Appeals. Prescinding from the proposition that factual
findings of the Court of Appeals are generally conclusive, the Supreme Court has been
cited to no circumstance of substance to warrant reversal of said Appellate Court's
findings or conclusions in this case. Further, the Laras did transact business with ML
FUTURES through its agent corporation organized in the Philippines, it being
unnecessary to determine whether this domestic firm was MLPI (Merrill Lynch
Philippines, Inc.) or Merrill Lynch Pierce Fenner & Smith (MLPI's alleged predecessor).
The fact is that ML FUTURES did deal with futures contracts in exchanges in the
United States in behalf and for the account of the Lara Spouses, and that on several
occasions the latter received account documents and money in connection with those
transactions. Given these facts, if indeed the last transaction executed by ML
FUTURES in the Laras's behalf had resulted in a loss amounting to US $160,749.69;
that in relation to this loss, ML FUTURES had credited the Laras with the amount of
US $ 75,913.42 — which it (ML FUTURES) then admittedly owed the spouses — and
thereafter sought to collect the balance, US $84,836.27, but the Laras had refused to
pay (for the reasons already above stated). 
2. The Laras received benefits generated by their business relations with ML
FUTURES. Those business relations, according to the Laras themselves, spanned a
period of 7 years; and they evidently found those relations to be of such profitability as
warranted their maintaining them for that not insignificant period of time; otherwise,
it is reasonably certain that they would have terminated their dealings with ML
FUTURES much, much earlier. In fact, even as regards their last transaction, in which
the Laras allegedly suffered a loss in the sum of US$160,749.69, the Laras
nonetheless still received some monetary advantage, for ML FUTURES credited them
with the amount of US $75,913.42 then due to them, thus reducing their debt to US
$84,836.27. Given these facts, and assuming that the Lara Spouses were aware from
the outset that ML FUTURES had no license to do business in this country and MLPI,
no authority to act as broker for it, it would appear quite inequitable for the Laras to
evade payment of an otherwise legitimate indebtedness due and owing to ML
FUTURES upon the plea that it should not have done business in this country in the
first place, or that its agent in this country, MLPI, had no license either to operate as a
"commodity and/or financial futures broker." Considerations of equity dictate that, at
the very least, the issue of whether the Laras are in truth liable to ML FUTURES and if
so in what amount, and whether they were so far aware of the absence of the requisite
licenses on the part of ML FUTURES and its Philippine correspondent, MLPI, as to be
estopped from alleging that fact as a defense to such liability, should be ventilated and
adjudicated on the merits by the proper trial court.
 TOP-WELD MANUFACTURING v ECED

August 9, 1985 | Gutierrez, J. | Foreign Corporation

Digester: Angat, Christine Joy

SUMMARY: Top-weld Manufacturing, a Philippine corporation, entered into two

separate contracts with two foreign corporations: a License and Technical Assistance
Agreement with IRTI, a Swiss corporation, and a Distributorship Agreement with
ECED, a Panama corporation. Top-weld eventually learned that the two corporations
were searching for Top-weld’s replacement as their licensee and distributor. Top-weld
then filed an injunction suit, invoking RA 5455, Sec. 4(9) which prohibits foreign
corporations doing business in the Philippines from terminating existing contacts with
Philippine residents except for just cause. IRTI and ECED raised the defense that
since they were not required to apply for certification from the Board of Investments
when they entered into the contracts with Top-weld, the condition stated in Sec. 4(9)
does not apply to them. The Court held IRTI and ECED are foreign corporations doing
business in the Philippines, and pursuant to RA 5455, Sec. 4, they should have
secured a certification with the BOI before they commenced their business
transactions in the Philippines. However, given the circumstance that Top-weld knew
of the requirements of RA 5455 yet it failed to compel IRTI and ECED to comply with
the same, and following the doctrine of in pari delicto, Top-weld does not have a cause
of action against the two corporations and cannot therefore enjoin them from
terminating the said contracts pursuant to Sec. 4(9). To rule otherwise would be to use
the law to perpetuate an illegal situation. Moreover, based on their allegations that
Top-weld committed multifarious violations of the contract, IRTI and ECED is justified
in terminating the contracts.

DOCTRINE:

On doing business in the Philippines

There is no general rule or governing principle laid down as to what constitutes "doing"
or engaging in" or "transacting" business in the Philippines. Each case must be judged
in the light of its peculiar circumstances. The acts of foreign corporations engaged in
business in the Philippines should be distinguished from a single or isolated business
transaction or occasional, incidental and casual transactions which do not come
within the meaning of the law. Where a single act or transaction, however, is not
merely incidental or casual but indicates the foreign corporation's intention to do
other business in the Philippines, said single act or transaction constitutes "doing" or
"engaging in" or "transacting" business in the Philippines.

On RA 5455

Sec. 4(9) of RA 5455 states that an alien corporation must possess the required
certification from the Board of Investments before he can engage in business in the
Philippines. Once said certificate is granted, such alien corporation cannot terminate
any agreement it had with a Philippine resident upon showing of breach of contract or
other just cause.
However, as between the parties themselves, R.A. No. 5455 does not declare as void or
invalid the contracts entered into without first securing a license or certificate to do
business in the Philippines. Neither does it appear to intend to prevent the courts from
enforcing contracts made in contravention of its licensing provisions.

FACTS:

 Top-weld Manufacturing Inc., a Philippine corporation engaged in the business of

manufacturing and selling welding supplies and equipment, entered into separate
contracts with two different foreign entities:
o With IRTI, S.A. (IRTI), a corporation organized and existing under the laws of
Switzerland with principal office in Fribourg, Switzerland: a “License and
Technical Assistance Agreement”
 Top-weld will be a licensee of IRTI, wherein the former will purchase raw
materials from the suppliers designated by the IRTI and will manufacture in
favor of the latter welding products under certain specifications
 The contract is for a period of three years, up to Jan. 1, 1975, but was later
extended up to Dec. 31, 1975.
o With ECED, S.A., (ECED), a company organized and existing under the laws of
Panama, with principal office at Apartado 1903, Panama I, City of Panama: a
“Distributor Agreement”
 Top-weld will the ECED’s distributor in the Philippines of certain welding
products and equipment.
 The contract was to remain effective until terminated by either party upon
giving 6 months written notice to the other.
 Top-weld learned that the two corporations were negotiating with another group to
replace it as their licensee and distributor.
 Top-weld then filed a case against the two corporations, EUTECTIC Corporation, a
corporation organized and existing under the laws of the State of the New York,
USA, and a certain Victor Gaerlan, a Filipino citizen alleged to the representative of
these three corporations. The petition for issuance of preliminary injunction seeks:
o to enjoin the two corporations from negotiating with third persons or from
actually transferring its distributorship and franchising rights
o to prohibit the corporations from terminating their contracts with Top-weld, and
in case the same was already terminated, to refrain from effecting the said
termination until after good faith negotiations between them have been carried
out and completed
 The trial court issued a TRO pending the hearing on the petition for injunction.
However, IRTI and ECED still wrote Top-weld separate notices about the
termination of their respective contracts.
 Top-weld then filed an amended complaint and a supplemental complaint for
preliminary mandatory injunction invoking RA 5455, Sec. 4(9) [prohibiting alien
firms doing business in the PH from terminating existing contracts except for just
cause] and seeking:
o to compel ECED to ship and deliver various items covered by the
distributorship contract
o to prohibit the corporations from importing into the Philippines any EUTECTIC
materials, supplies or equipment except through Top-weld
 On the other hand, IRTI and ECED argue:

o That they are justified in terminating the contract due to the several violations
committed by Top-weld, i.e. failure to pay royalties, use of wrong materials in
manufacture of products, use of obsolete and antiquated equipment,
rebranding of non-Eutectic products using Eutectic label, falsification of
invoices, etc.
o RA 5455, Sec. 4(9) does not apply in the instant case since they were not
required to apply for a written certificate with the Board of Investments
 RTC ruled in favor of Top-weld (both on original complaint and supplemental
complaint). On MR, RTC affirmed the grant of preliminary injunction (original
 complaint) but lifted the preliminary mandatory injunction (supplemental
complaint).
 On appeal, CA ruled in favor of the foreign corporations and set aside the RTC
orders.
o While IRTI and ECED are foreign corporations contemplated by RA 5455 and
are therefore bound to secure a written certificate from the Board of
Investments. However, the latter failed to enforce said requirements, therefore it
cannot likewise require compliance with Sec. 4(9) on prohibition on termination
of contracts
o Top-weld did not come to court with clean hands as it entered into business
with the corporations knowing that the do not possess the requisite certificate.
Thus, it cannot invoke the equitable remedy of injunction as to do so would
only perpetuate an illegal situation of holding business with foreign
corporations who do not possess the requisite authorization.
 Hence, the instant petition.

RULING: Petition granted.

Whether IRTI and ECED are foreign corporations “doing business in the
Philippines” who should comply with the requirements of Sec. 4(9) RA 5455 –
YES, they are foreign corporations doing business in the Philippines, but given
the circumstances present in the instant case, they are NOT obligated to follow
Sec. 4(9) of RA 5455.

 IRTI and ECED are foreign corporations “doing business in the Philippines”
o What constitutes “doing” or “engaging in” or “transacting” business in the
Philippines depends on the peculiar circumstances of each case. 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.
 When the foreign corporation extends the business for which it is organized
here in the Philippines, then it can be considered as doing business in the
Philippines. The term implies a continuity of commercial dealings and
arrangements, 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.
 Where a single act or transaction is not merely incidental or casual but
indicates the foreign corporation's intention to do other business in the
Philippines, said single act or transaction constitutes "doing" or "engaging
in" or "transacting" business in the Philippines.
o IN THIS CASE: When IRTI and ECED entered into the disputed contracts with
Top-weld, they were carrying out the purpose for which they were created, i.e.
to manufacture and market welding products and equipment. The contracts
actually stipulate that they were carrying out in the Philippines a continuous
business, not a mere temporary transaction. Therefore, they can be considered
as doing business in the Philippines.
 Having been engaged in business in the Philippines, IRTI and ECED should be
within the purview of RA 5455.
o Contrary to IRTI and ECED’s contention that Top-weld is an independent entity
which does not conduct business exclusively with them, the foreign principal,
Top-weld’s contract is exclusive and IRTI and ECED are actually corporations
dependent on Top-weld for their manufacturing and distribution activities in
the Philippines.
 IRTI’s contract provides that IRTI or its employees cannot sell its welding
products in the Philippines except to Top-weld. Likewise, Top-weld cannot
sell in the Philippines any other welding products that is the same as that of
IRTI’s without its written consent.
  Top-weld cannot distribute any product of other manufacturer or supplier
except that of ECED’s. Further, upon termination of the contract, Top-weld
cannot engage in the commercialization, distribution and/or manufacture of
products competing with ECED’s products covered by the agreement.
o Therefore, being engaged in business in the Philippines enabled IRTI and ECED
to enter into the mainstream of Philippine economic life in competition with
Filipino business interests, necessarily bringing them under the provisions of
RA 5455
 HOWEVER, there are compelling reasons present in the instant case to
exempt them from the requirements of Sec. 4(9).
o RA 5455, Sec. 4(9) provides:
Section 4. Licenses to do business.-No alien, and no firm, association,
partnership, corporation, or any other form of business organization formed,
organized, chartered or existing under any laws other than those of the
Philippines, or which is not a Philippine National, or more than thirty per cent of
the outstanding capital of which is owned or controlled by aliens shall do
business or engage in any economic activity in the Philippines, or be registered,
licensed, or permitted by the Securities and Exchange Commission, or by any
other bureau, office, agency, political subdivision, or instrumentality of the
government, to do business, or engage in an economic activity in the Philippines
without first securing a written certificate from the Board of Investments to the
effect …
xxxx
Upon granting said certificate, the Board shall impose the following requirements
on the alien or the firm, association, partnership, corporation, or other form of
business organization that is not organized or existing under the laws of the
Philippines.
(9) Not to terminate any franchise, licensing or other agreement that applicant
may have with a resident of the Philippines, authorizing the latter to assemble,
manufacture or sell within the Philippines the products of the applicant, except for
violation thereof or other just cause and upon payment of compensation and
reimbursement and other expenses incurred by the licensee in developing a
market for the said products; Provided. however, That in case of disagreement,
the amount of compensation or reimbursement shall be determined by the court
where the licensee is domiciled or has its principal office who shall require the
applicant to file a bond in such amount as, in its opinion, is sufficient for this
purpose.
o Sec. 4(9) of RA 5455 states that an alien corporation must possess the required
certification from the Board of Investments before he can engage in business in
the Philippines. Once said certificate is granted, such alien corporation cannot
terminate any agreement it had with a Philippine resident upon showing of
breach of contract or other just cause.
o IN THIS CASE: It is admitted that IRTI and ECED did not possess the required
certification from the BOI when it entered into the contracts with Top-weld,
thereby violating RA 5455. However, while non-compliance with the law created
an illegal situation as between the parties, it did not void or invalidate the
contracts they entered into.
 It is important to note that the CA erred in finding that because IRTI and
ECED failed to secure the certification, then there is no occasion for the BOI
to impose the requirements stated in Sec. 4. To rule otherwise would open
the way for an interpretation that by doing business in the country without
first securing the required written certificate from the Board of Investments,
a foreign corporation may violate or disregard the safeguards which the law,
by its provisions, seeks to establish.
o Nonetheless, termination of the contract (and noncompliance with Sec.
4(9)) can be justified under the rule of in pari delicto. Apart from IRTI and
ECED, Top-weld also violated RA 5455.
  The parties in a contract are charged with knowledge of the existing law at
the time they enter into the agreement and at the time it is to become
operative. Between a Philippine national and an alien, there is a
presumption that the former is more knowledgeable about his own state law
than his alien or foreign contemporary.
 In this case, Top-weld is presumed to be more knowledgeable of
Philippine law and the requirements of RA 5455. It was incumbent
upon Top-weld to know whether IRTI and ECED were properly
authorized to engage in business in the Philippines under RA 5455—a
duty it failed to dispose when it entered into the licensing and
distributorship agreements with the two corporations
 In fact, it is shown that Top-weld knew of RA 5455 at the time when they
entered into the contracts. Still, it entered into the said contracts despite
knowledge that the two corporations were violating RA 5455.
 Thus, by overlooking the required certification, Top-weld is equally
guilty of violating RA 5455. They are, therefore, in pari delicto, in
which case Top-weld is not entitled to any relief against IRTI and
ECED.
o Even assuming Sec. 4(9) of RA 5455 applies in the instant case, there is just
cause for IRTI and ECED to terminate the contract.
 The burden of overcoming the responsive effect of the answer is upon the
petitioner. He who alleges a fact has the burden of proving it and a mere
allegation is not evidence.
 In the case at bar, Top-weld failed to refute the charges made by IRTI and
ECED in their opposition wherein they stated that Top-weld violated their
contracts in several instances. IRTI and ECED presented overwhelming
evidence of the supposed breaches of the contract.
 Top-weld, instead of rebutting the charges, filed a “Reply to Opposition”
which was neither verified nor supported by counter-affidavits to show its
innocence. It failed to substantiate its allegation that it did not violate the
contracts, leaving IRTI and ECED’s affidavits uncontroverted and sufficient
enough for the court to rule that there is just cause for the contract’s
termination.
 In any case, the dispute had been rendered moot and academic as the contract had
already expired.
o As between Top-weld and IRTI, the contract was extended only until December
31, 1975. The original injunction suit to stop the contract’s termination was
filed in June 1975, but the appeal was filed past December 1975. Therefore, the
dispute had already been moot and academic as the contract had already
expired.
o The courts have no power to make contracts for the parties. Parties cannot be
coerced to enter into a contract where no agreement is had between them as to
the principal terms and conditions of the contract.

NOTES:

For those details which are not important but seems important
 01 Antam v. CA
No. L – 61523 (31 July 1986)
Gutierrez Jr., J. / Tita K

Subject Matter: Foreign Corporations

Summary:
 Respondent entered into an agreement with petitioner wherein petitioner agreed to
sell and deliver to respondent 500 tons of coconut oil. Petitioner failed to deliver
and so respondent resorted to buying from the open market at a higher price. As a
result, respondent incurred a loss of US$103,600. Subsequently, to compensate for
the said loss, a second and third agreements were entered into. However, petitioner
still defaulted in the succeeding agreement. Respondent filed a complaint against
petitioner. Petitioner filed a motion to dimiss alleging respondent’s lack of
personality to sue. However the trial court and appelate court denied the motion to
dismiss on the ground that respondent, a foreign corporation not doing business in
the Philippines is not required to obtain a license to do business to have the
capacity to sue. The SC as well denied this petition.
Doctrines:
 Where the three transactions indicate no intent by foreign corporation to engage in
continuity of transactions, they do not constitute doing business in the Philippines.
 Foreign corporation not doing business in the Philippines is not required to obtain
a license to do business to have the capacity to sue.
 It is a common ploy of defaulting local companies by unlicensed foreign
corporations not engaged in business in the Philippines to invoke lack of capacity
to sue.
Parties:
Antam Consolidated, Inc. (Antan),
Tambunting Trading Corporation (Tambunting), and
Petitioner
Aurora Consolidated Securities and Investment Corporation
(Aurora)
Court of Appeals,
Respondent CFI Judge Maximiano Asuncion, and
Stokelyn Van Camp, Inc. (Stokelyn)
Facts:
Stokelyn is a foreign Corporation organized under the laws of Indiana, USA, whose
principal office is also in Indiana.
One of Stokelyn’s subdivision is Capital City Product Company (Capital City) whose
principal office is in Ohio.
Contract #1:
On August 21, 1978, Capital City and Coconut Oil Manufacturing (Phil.) Inc.
(Comphil) entered into a contract wherein Comphil undertook to sell and deliver
500 long tons of crude coconut oil to Capital City at c.i.f. price of US$0.30/lb.
However, Comphil failed to deliver the coconut oil. Capital City covered its need for
coconut oil by buying from the open market although at a price substantially
higher than Comphil’s price. As a result, Capital City sustained a loss of US$
103,600.
Contract #2:
 To settle Capital City’s loss under the (first) contract, the parties entered into a
second conract on November 3, 1978.
Comphil undertook to buy 500 long tons of coconut oil from Capital City at c.i.f.
price of US$0.3925/lb.
The second contract states that “it was a wash out against the first contract” so
that Comphil was supposed to repurchase the undelivered coconut oil at
US$.0.3925 from Capital City by paying the latter US$ 103,600, which is Capital
City’s total loss under the first contract.
However, Comphil again failed to pay said amount.
Contract #3:
To settle Capital City’s loss, it entered into a third contract with Comphil on
January 24, 1978,
Wherein Comphil undertook to sell and deliver to Capital City the same quantity of
crude oil at a discounted price 1 such that Comphil wwas to have settled its US$
103,600 liability to Capital City.
However, Comphil failed to deliver the coconut oil.
Capital City sustained damages in the maount of US$175,000.
After repeated demads from Comphil, the latter still refuses to pay the said
amount.
The filing of action:
Stokelyn filed a complaint for collection of money against Antam, Tambunting,
Aurora, Banahaw Milling Corp (Banahaw). and United Coconut Oil Mills, Inc.
(Unicom).
Stokelyn prayed for a writ of attachment.
Why petitioners were included in the action?:
It was alleged that the petitioners evaded their obligation to respondent by the
devious scheme of using Tambunting employees to replace the Tambuntings in the
management of Banahaw (previously Comphil) and disposing of Banahaw’s oil mill
or their interests to Unicom.
More specific allegations (you can skip this part!):
After Capital City made repeated demands against Comphil, the Tambuntings
ceased to become directors of Comphil and were replaced by Tambuntings
employees. These new directors then changed the name of Comphil to
Banahaw. These directors also authorized Antonio Tambunting, who was
neither a director nor officer, to sell its oil mill. Banahaw also sold its entire
outstanding capital stock to Unicom resulting to Unicom taking over the
operations and assets of Banahaw. The OCS sold to Unicom were owned by the
Tambuntings, thus it was actually the Tambuntings who benefitted from the
sale.
Petitioner’s motion to dismiss:

Petitioners filed a motion to dismiss the complaint on the ground that respondent,
being a foreign corporation not licensed to do business in the Philippines, had no
personality to maintain the instant suit.

CFI denied the motion to dismiss because the reson cited does not appear to be
indubitable.
1
 The IAC also dismissed the petition due to res judicata. It ruled that in Unicom and
Banahav vs. Asuncion and Stokelyn, where the facts and issued raised were
intrinsically the same, it already denied the petition for certiorari for lack of merit
and the same was upheld by the SC.
Issue/s:

1. WON the IAC erred in denying the petitioner’s motion to dismiss because the
respondent. (NO)
Petitioner’s argument:

1) Stokelyn is a foreign corporation, doing business in the Philippines as it has

partisipated in three transactions, either as a seller or buyer, which are in the
pursuit of the purpose for which it was organized.
2) The test of whether one is doing business in the Philippines is “Whether there is
continuity of transactions which are in the pursuance of the normal business of
the corporation”.
Ratio:

No – the TC and IAC did not err in denying the motion to dismiss because the
respondent, 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.

 Top-Weld Manufacturing, Inc. v. ECED, SA:

There is no general rule or governing principle laid down as to what constitute
‘doing’ or ‘engaging in’ or ‘transacting’ business in the Philippines. Each case
must be adjudged in the light of its peculiar circumstances.

Where a single act or transaction is not merely incidental or casual but

indicates the foreign corporation’s intention to do other business in the
Philippines, said single act or transaction constitutes ‘doing’ or ‘engaging’ or
‘transacting’ business in the Philippines.

 Mentholatum Co. v. Mangaliman

The true test is 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 the performance of acts or workers or the exercise of some of the
functions normally incident to, and in progressive prosecution, of the purpose
and objcet of its organization.

o In this case, the transactions between the respondent and petitioners are
not a series of commercial dealings showing intent on the part of the
respondent to do business in the Philippines.
o The only reason why the respondent entered into the second and third
transactions with the petitioners was because it wanted to recover the
loss it sustained from petitioner’s failure to deliver coconut oil under the
first transaction and to give the latter a chance to make good on their
obligation instead of making an outright demand on the petitioner.
o There was only one agreement that is the delivery of 500 tons coconut oil
by Comphil to Capital City. The Succeeding transactions were in effort to
fulfill the basic agreement and IN NO WAY indicate intent on the part of
the respondent to engage in a continuity of transactions with petitioners
 which will categorize it as a foreign corporation doing business in the
Philippines.
 It is a common ploy of defaulting local companies by unlicensed foreign
corporations not engaged in business in the Philippines to invoke lack of
capacity to sue.

Wherefore, in view of the foregoing, the petition is dismissed for lack of merit.
 CARGILL, INC.
vs.
INTRA STRATA ASSURANCE CORPORATION
G.R. No. 168266               March 15, 2010

FACTS:

Cargill (foreign) is a corporation organized and existing under the laws of the
State of Delaware. Cargill executed a contract with Northern Mindanao Corporation
(NMC)(domestic), whereby NMC agreed to sell to petitioner 20,000 to 24,000 metric
tons of molasses to be delivered from Jan 1 to 30 1990 for $44 per metric ton. The
contract provided that CARGILL was to open a Letter of Credit with them. NMC was
permitted to draw up 500,000 representing the minimum price of the contract. The
contract was amended 3 times (in relation to the amount and the price). But the third
amendment required NMC to put up a performance bond which was intended to
guarantee NMC’s performance to deliver the molasses during the prescribed shipment
periods.
In compliance, INTRA STRATA issued a performance bond to guarantee NMC’s
delivery. NMC was only able to deliver 219551 metric tons out of the agreed 10,500.
Thus, CARGILL sent demand letters to INTRA claiming payment under the
performance and surety bonds. When INTRA failed to pay, CARGILL filed a complaint.
CARGILL NMC and INTRA entered into a compromise agreement approved by
the court, such provided that NMC would pay CARGILL 3 million upon signing and
would deliver to CARGILL 6,991 metric tons of molasses. But NMC still failed to
comply.

ISSUE:

Whether or not petitioner is doing or transacting business in the Philippines in

contemplation of the law and established jurisprudence.

RULING:

NO.

The determination of whether a foreign corporation is doing business in the

Philippines must be based on the facts of each case. In the case at bar, the
transactions entered into by the respondent with the petitioners are not a series of
commercial dealings which signify an intent on the part of the respondent to do
business in the Philippines but constitute an isolated one which does not fall under
the category of "doing business." The records show that the only reason why the
respondent entered into the second and third transactions with the petitioners was
because it wanted to recover the loss it sustained from the failure of the petitioners 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.
In the present case, petitioner is a foreign company merely importing molasses
from a Philippine exporter. A foreign company that merely imports goods from a
Philippine exporter, without opening an office or appointing an agent in the
Philippines, is not doing business in the Philippines.
 CASE DIGEST ON BARLIN V. RAMIREZ
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CASE DIGEST ON BARLIN V. RAMIREZ [7 P 41] - F: The def., Ramirez, having been
appointed by the pltff parish priest, took possession of the church on 7/5/01. He
administered if as such under the orders of his superiors until 11/14/02. His
successor having been then appointed, the latter made a demand on this def. for the
delivery to him of the church, convent, and cemetery, and the sacred ornaments,
books, jewels, money, and other prop. of the church. The def., by a written document
of that date, refused to make such delivery, stating that "the town of Lagonoy, in
conjunction w/ the parish priest of thereof, has seen fit to sever connection w/ the
Pope at Rome and his representatives in these Islands, and to join the Filipino
Church, the head of w/c is at Mla.
In 1/4, the pltff. brought this action against def., alleging in his amended complaint
that the Roman Catholic Church was the owner of the church bldg, the convent,
cemetery, the books, money, and other prop. belonging thereto, and asking that it be
restored to the possession thereof and that the def. render an account of the prop. w/c
he had received and w/c was retained by him, and for other relief. The CFI-Ambos
Camarines ruled in favor of the pltff.

HELD: It is suggested by the appellant that the Roman Catholic Church has no legal
personality in the Philippine Islands. This suggestion, made with reference to an
institution w/c antedates by almost a thousand years any other personality in Europe,
and w/c existed "when Grecian eloquence still flourished in Antioch, and when idols
were still worshipped in the temple of Mecca," does not require serious consideration.