AGILENT TECHNOLOGIES SINGAPORE (PTE) LTD., vs.

INTEGRATED SILICON
TECHNOLOGY PHILIPPINES CORP et al

G.R. No. 154618 | April 14, 2004

Digested by: John B. Pudlao

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.

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 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.

ISSUE: Whether an unlicensed foreign corporation not doing business in the Philippines lacks
the legal capacity to file suit.

RULING: No, Agilent Technologies Singapore does not lack the legal capacity to file suit.
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.

In a number of cases, however, The Supreme Court 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:

a) If a foreign corporation does business in the Philippines without a license, it cannot sue
before the Philippine courts;
b) 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;
c) 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
d) 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.

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.”