Professional Documents
Culture Documents
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* SECOND DIVISION.
In view of the foregoing, the Court deems it unnecessary
to resolve the other issues raised in this case.
WHEREFORE, the Court GRANTS the petition in part. 305
The Court SETS ASIDE the 30 November 2004 Decision
and 11 April 2005 Resolution of the Court of Appeals in
CA-G.R. CV No. 76988, and deletes the award of all VOL. 615, March 15, 2010 305
damages and fees. The Court awards to respondent Gargill, Inc. vs. Intra Strata Assurance Corporation
Reynald R. Suarez nominal damages in the sum of
P75,000.00.
SO ORDERED. Philippines without the proper license, it cannot maintain any
action or proceeding before Philippine courts as provided under
Brion, Del Castillo, Abad and Perez, JJ., concur. Section 133 of the Corporation Code.
Same; Same; Same; The determination of whether a foreign
Petition granted in part, judgment and resolution set
corporation is doing business in the Philippines must be based on
aside.
the facts of each case; Court gives emphasis to the importance of
Note.—A bank is “under obligation to treat the accounts the element of continuity of commercial activities to constitute
of its depositors with meticulous care.” (Philippine Saving doing business in the Philippines.—The determination of whether
Bank vs. Chowking Food Corporation, 557 SCRA 318 a foreign corporation is doing business in the Philippines must be
[2008]) based on the facts of each case. In the case of Antam
——o0o—— Consolidated, Inc. v. CA, 143 SCRA 288 (1986), in which a foreign
corporation filed an action for collection of sum of money against
petitioners therein for damages and loss sustained for the latter’s
failure to deliver coconut crude
oil, the Court emphasized the importance of the element of
G.R. No. 168266. March 15, 2010.*
continuity of commercial activities to constitute doing business in
the Philippines.
CARGILL, INC., petitioner, vs. INTRA STRATA
Same; Same; Same; There is no showing that the transactions
ASSURANCE CORPORATION, respondent.
between petitioner and Northern Mindanao Corporation (NMC)
signify the intent of petitioner to establish a continuous business or
Corporation Law; Foreign Corporations; Actions; Where a extend its operations in the Philippines.—In this case, petitioner
foreign corporation does business in the Philippines without the and NMC amended their contract three times to give a chance to
proper license, it cannot maintain any action or proceeding before NMC to deliver to petitioner the molasses, considering that NMC
Philippine Courts.—The principal issue in this case is whether already received the minimum price of the contract. There is no
petitioner, an unlicensed foreign corporation, has legal capacity to showing that the transactions between petitioner and NMC
sue before Philippine courts. Under Article 123 of the Corporation signify the intent of petitioner to establish a continuous business
Code, a foreign corporation must first obtain a license and a or extend its operations in the Philippines.
certificate from the appropriate government agency before it can
Same; Same; Same; Activities with Philippine jurisdiction without opening an office or appointing an agent in the
that do not constitute doing business in the Philippines.—Most of Philippines, is not doing business in the Philippines.
these activities do not bring any direct receipts or profits to the
PETITION for review on certiorari of a decision of the
foreign corporation, consistent with the ruling of this Court in
Court of Appeals.
National Sugar Trading Corp. v. CA, 246 SCRA 465 (1995), that
The facts are stated in the opinion of the Court.
activities within Philippine jurisdiction that do not create
Romulo, Mabanta, Buenaventura, Sayoc & Delos
earnings or profits to the foreign corporation do not constitute
Angeles for petitioner.
doing business in the Philippines. In that case, the Court held
Jose J. Ferrer, Jr. for respondent.
that it would be inequitable for the National Sugar Trading
Corporation, a state-owned corporation, to evade payment of a 307
legitimate indebtedness owing to the foreign corporation on the
plea that the latter should have obtained a license first before
perfecting a contract with the Philippine gov- VOL. 615, March 15, 2010 307
Gargill, Inc. vs. Intra Strata Assurance Corporation
306
CARPIO, J.:
306 SUPREME COURT REPORTS ANNOTATED
The Case
Gargill, Inc. vs. Intra Strata Assurance Corporation
This petition for review1 assails the 26 May 2005
Decision2 of the Court of Appeals in CA-G.R. CV No. 48447.
ernment. The Court emphasized that the foreign corporation did
not sell sugar and derive income from the Philippines, but merely The Facts
purchased sugar from the Philippine government and allegedly
paid for it in full. Petitioner Cargill, Inc. (petitioner) is a corporation
Same; Same; Same; To constitute “doing business,” the organized and existing under the laws of the State of
activity undertaken in the Philippines should involve profit- Delaware, United States of America. Petitioner and
making; “Soliciting purchases” has been deleted from the Northern Mindanao Corporation (NMC) executed a
enumeration of acts or activities which constitute “doing contract dated 16 August 1989 whereby NMC agreed to sell
business.”—In this case, the contract between petitioner and NMC to petitioner 20,000 to 24,000 metric tons of molasses, to be
involved the purchase of molasses by petitioner from NMC. It was delivered from 1 January to 30 June 1990 at the price of
NMC, the domestic corporation, which derived income from the $44 per metric ton. The contract provides that petitioner
transaction and not petitioner. To constitute “doing business,” the would open a Letter of Credit with the Bank of Philippine
activity undertaken in the Philippines should involve profit- Islands. Under the “red clause” of the Letter of Credit,
making. Besides, under Section 3(d) of RA 7042, “soliciting NMC was permitted to draw up to $500,000 representing
purchases” has been deleted from the enumeration of acts or the minimum price of the contract upon presentation of
activities which constitute “doing business.” some documents.
The contract was amended three times: first, on 11
Same; Same; Same; A foreign company that merely imports January 1990, increasing the purchase price of the
goods from a Philippines exporter, without opening an office or molasses to $47.50 per metric ton;3 second, on 18 June
appointing an agent in the Philippines is not doing business in the 1990, reducing the quantity of the molasses to 10,500
Philippines.—In the present case, petitioner is a foreign company metric tons and increasing the price to $55 per metric ton;4
merely importing molasses from a Philipine exporter. A foreign and third, on 22 August 1990, providing for the shipment of
company that merely imports goods from a Philippine exporter, 5,250 metric tons of molasses on the last half of December
1990 through the first half of January 1991, and the P3,000,000 upon signing of the compromise agreement and
balance of 5,250 metric tons on the last half of January would deliver to petitioner 6,991 metric tons of molasses
1991 through the first half of February 1991.5 The from 16-31 December 1991. However, NMC still failed to
comply with its obligation under the compromise
_______________ agreement. Hence, trial proceeded against respondent.
11 CA Rollo, pp. 89-90. certificate of authority from the appropriate government agency.
(Emphasis supplied)
310
311
313
312 SUPREME COURT REPORTS ANNOTATED
Gargill, Inc. vs. Intra Strata Assurance Corporation
VOL. 615, March 15, 2010 313
56 of Book II of the Omnibus Investments Code of 1987, Gargill, Inc. vs. Intra Strata Assurance Corporation
enumerated not only the acts or activities which constitute
“doing business” but also those activities which are not each case.15 In the case of Antam Consolidated, Inc. v.
deemed “doing business.” Section 3(d) of RA 7042 states: CA,16 in which a foreign corporation filed an action for
collection of sum of money against petitioners therein for
“[T]he phrase “doing business” shall include “soliciting orders,
damages and loss sustained for the latter’s failure to
service contracts, opening offices, whether called ‘liaison’ offices or
deliver coconut crude oil, the Court emphasized the
branches; appointing representatives or distributors domiciled in
importance of the element of continuity of commercial
the Philippines or who in any calendar year stay in the country
activities to constitute doing business in the Philippines.
for a period or periods totalling one hundred eighty (180) days or
The Court held:
more; participating in the management, supervision or control of
any domestic business, firm, entity or corporation in the “In the case at bar, the transactions entered into by the
Philippines; and any other act or acts that imply a continuity of respondent with the petitioners are not a series of commercial
commercial dealings or arrangements, and contemplate to that dealings which signify an intent on the part of the respondent to
extent the performance of acts or works, or the exercise of some of do business in the Philippines but constitute an isolated one
the functions normally incident to, and in progressive prosecution which does not fall under the category of “doing business.” The
records show that the only reason why the respondent entered 2. Having a nominee director or officer to represent its
into the second and third transactions with the petitioners was interests in such corporation;
because it wanted to recover the loss it sustained from the failure 3. Appointing a representative or distributor domiciled in the
of the petitioners to deliver the crude coconut oil under the first Philippines which transacts business in the representative’s or
transaction and in order to give the latter a chance to make good distributor’s own name and account;
on their obligation. x x x 4. The publication of a general advertisement through any
x x x The three seemingly different transactions were entered print or broadcast media;
into by the parties only in an effort to fulfill the basic agreement 5. Maintaining a stock of goods in the Philippines solely for
and in no way indicate an intent on the part of the respondent to the purpose of having the same processed by another entity in the
engage in a continuity of transactions with petitioners which will Philippines;
categorize it as a foreign corporation doing business in the 6. Consignment by a foreign entity of equipment with a local
Philippines.”17 company to be used in the processing of products for export;
7. Collecting information in the Philippines; and
Similarly, in this case, petitioner and NMC amended 8. Performing services auxiliary to an existing isolated
their contract three times to give a chance to NMC to contract of sale which are not on a continuing basis, such as
deliver to petitioner the molasses, considering that NMC installing in the Philippines machinery it has manufactured or
already received the minimum price of the contract. There exported to the Philippines, servicing the same, training domestic
is no showing that the transactions between petitioner and workers to operate it, and similar incidental services.”
NMC signify the intent of petitioner to establish a
continuous business or extend its operations in the Most of these activities do not bring any direct receipts
Philippines. or profits to the foreign corporation, consistent with the
ruling of this Court in National Sugar Trading Corp. v.
_______________ CA18 that activities within Philippine jurisdiction that do
not create earnings or profits to the foreign corporation do
15 Rimbunan Hijau Group of Companies v. Oriental Wood Processing not constitute doing business in the Philippines.19 In that
Corporation, G.R. No. 152228, 23 September 2005, 470 SCRA 650; MR case, the Court held that it would be inequitable for the
Holdings, Ltd. v. Sheriff Bajar, 430 Phil. 443; 380 SCRA 617 (2002); Top- National Sugar Trading Corporation, a state-owned
Weld Manufacturing, Inc. v. ECED, S.A., IRTI, S.A., Eutectic Corp., 222 corporation, to evade payment
Phil. 424; 138 SCRA 118 (1985).
16 227 Phil. 267; 143 SCRA 288 (1986). _______________
17 Id., at pp. 274-275; p. 296.
314 18 316 Phil. 562; 246 SCRA 465 (1995).
19 C. Villanueva, Philippine Corporate Law 801-802 (2001).
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