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Chapter XVIII – Foreign Corporations maintaining any kind of action in RP courts.

H: The object of the statute was to subject the foreign corporation doing
Definition, status businesss in the Philippines to the jurisdiction of its courts. Its object was
not to prevent the foreign corporation from performing single acts, but to
— Sec 123: a foreign corporation is one formed, organized, or existing prevent it from acquiring a domicile for the purpose of business without
under any laws other than those of the Phils and whose laws allow taking the steps necessary to render it amenable to suit in the local
Filipino citizens and corporations to do business in its own country or courts. The effect of the statute preventing foreign corporations from
state doing business and bringing action in the courts except on compliance
with elaborate requirements must not be unduly extended or improperly
applied.
Not doing business no need for license
to sue and be sued Thus confronted with the option of construing the law to mean that any
Doing business need license corporation in the US, which might ant to sell to a person in the Phils
must sent some representative here before the sale and go through the
Jack: doing business is extending the business of the foreign entity to the RP, complicated formulae provided by the corporation law with regard to
on a continuing and permanent basis, in order to make profits! That’s all it obtaining of the license, before the sale was made in order to avoid being
is! swindled by Filipinos, there can be no other construction. The law simply
means that no foreign corporation shall be permitted to transact business
Call cases (except Merrill Lynch and TopWeld, are exceptions to doing in the Phils unless it shall have the license required by law, and until it
business! Compare with Agilent. Compare Wells and Mentholatum. complies with the law, shall not be permitted to maintain any suit in the
local courts.
Set aside cases of foreign corporation enforcing IPRs from the other cases
(Le Chemise, Gelhaar, Columbia, Puritan) The non-compliance of a foreign corporation with the requirements of the
statute may be pleaded as an affirmative defense. Thereafter it must
Methods of investment appear from the evidence, first—that the plaintiff is a foreign corporation,
and second—that it is doing business in the Phils, and third—that it has
Permitted areas of investment not obtained the proper license.

1. partially nationalized areas — To subject foreign corporations doing business in the RP to the
2. preferred areas; incentives for investment jurisdiction of the courts; and to prevent it from acquiring domicile
3. non-preferred areas of investment without taking steps to make it amenable to suits
— Requirement to obtain license applies only to foreign corporations
Legal Requirements prior to transaction of business doing business in RP

1. BOI Certificate Marshall Wells + Metholatum = isolated txns NOT doing business
2. SEC license to do business
3. Certificate from appropriate government agency Columbia Pictures v CA. F: Columbia Pictures et al lodged a formal
complaint with the NBI for violation of PD No. 49, as amended, and
Effect of failure to secure SEC license sought its assistance in their anti-film piracy drive. Agents of the NBI and
private researchers made discreet surveillance on various video
Marshall Wells v Elser. F: Marshall Wells Co. (foreign) sued Henry Elser Co establishments in Metro Manila including Sunshine Home Video Inc. NBI
(local) for the unpaid balance on the sale of goods. Elser Co files a demurrer, Senior Agent Lauro C. Reyes applied for a search warrant with the court a
contending that Marshall has no legal capacity to sue, not having complied quo against Sunshine seeking the seizure, among others, of pirated video
with the laws required of foreign corporations doing business in the RP and tapes of copyrighted films all of which were enumerated in a list attached
not authorized to do business in RP. TC sustains demurrer. to the application; and, television sets, video cassettes and/or laser disc
I: W/n the obtaining of the license to do business is a condition precedent to recordings equipment and other machines and paraphernalia used or

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intended to be used in the unlawful exhibition, showing, reproduction, sale, there engaged in carrying on and transacting through them some
lease or disposition of videograms tapes in the premises above substantial part of its ordinary or customary business, usually continuous
described. TC granted and issued the SW. The search warrant was served to in the sense that it may be distinguished from merely casual, sporadic, or
Sunshine and/or their representatives. In the course of the search of the occasional transactions and isolated acts. Jurisprudence has, however,
premises indicated in the search warrant, the NBI Agents found and seized held that the term implies a continuity of commercial dealings and
various video tapes of duly copyrighted motion pictures/films owned or arrangements, and contemplates, to that extent, the performance of acts
exclusively distributed by private complainants, and machines, equipment, or works or the exercise of some of the functions normally incident to or
television sets, paraphernalia, materials, accessories all of which were in progressive prosecution of the purpose and subject of its organization.
included in the receipt for properties accomplished by the raiding
team. Sunshine filed a motion to lift warrant but was denied by the TC. Based on Article 133 of the Corporation Code and gauged by such
Sunshine contended that being foreign corporations, Columbia Pictures et al statutory standards, petitioners are not barred from maintaining the
should have such license to be able to maintain an action in Philippine present action. There is no showing that, under our statutory or case law,
courts. In so challenging petitioners’ personality to sue, Sunshine pointed to petitioners are doing, transacting, engaging in or carrying on business in
the fact that petitioners are the copyright owners or owners of exclusive the Philippines as would require obtention of a license before they can
rights of distribution in the Philippines of copyrighted motion pictures or seek redress from our courts. No evidence has been offered to show that
films, and also to the appointment of Atty. Rico V. Domingo as their attorney- petitioners have performed any of the enumerated acts or any other
in-fact, as being constitutive of “doing business in the Philippines” under BOI specific act indicative of an intention to conduct or transact business in
Rules. As foreign corporations doing business in the Philippines, Section 133 the Philippines.
of the Corporation Code denies them the right to maintain a suit in Philippine
courts in the absence of a license to do business, and thus have no right to Accordingly, the certification issued by the SEC stating that its records do
ask for the issuance of a search warrant. Upon MR, the TC granted the same, not show the registration of petitioner film companies either as
holding that the master tapes of the copyrighted films from which the corporations or partnerships or that they have been licensed to transact
pirated films were allegedly copies, were never presented in the proceedings business in the Philippines, while undeniably true, is of no consequence
for the issuance of the search warrants in question. The orders of the Court to petitioners’ right to bring action in the Philippines. Verily, no record of
granting the search warrants and denying the urgent motion to lift order of such registration by petitioners can be expected to be found for, as
search warrants were, therefore, issued in error and was set aside. aforestated, said foreign film corporations do not transact or do business
Petitioners appealed. in the Philippines and, therefore, do not need to be licensed in order to
H: The obtainment of a license prescribed by Section 125 of the Corporation take recourse to our courts. As a general rule, a foreign corporation will
Code is not a condition precedent to the maintenance of any kind of action not be regarded as doing business in the State simply because it enters
in Philippine courts by a foreign corporation. However, under the into contracts with residents of the State, where such contracts are
aforequoted provision, no foreign corporation shall be permitted to transact consummated outside the State. In fact, a view is taken that a foreign
business in the Philippines, as this phrase is understood under the corporation is not doing business in the state merely because sales of its
Corporation Code, unless it shall have the license required by law, and until product are made there or other business furthering its interests is
it complies with the law in transacting business here, it shall not be transacted there by an alleged agent, whether a corporation or a natural
permitted to maintain any suit in local courts. As thus interpreted, any person, where such activities are not under the direction and control of
foreign corporation not doing business in the Philippines may maintain an the foreign corporation but are engaged in by the alleged agent as an
action in our courts upon any cause of action, provided that the subject independent business.
matter and the defendant are within the jurisdiction of the court. It is not
In accordance with the rule that “doing business” imports only acts in
the absence of the prescribed license but “doing business” in the Philippines
furtherance of the purposes for which a foreign corporation was
without such license which debars the foreign corporation from access to our
organized, it is held that the mere institution and prosecution or defense
courts. In other words, although a foreign corporation is without license to
of a suit, particularly if the transaction which is the basis of the suit took
transact business in the Philippines, it does not follow that it has no capacity
place out of the State, do not amount to the doing of business in the
to bring an action. Such license is not necessary if it is not engaged in
State. The institution of a suit or the removal thereof is neither the
business in the Philippines. it is recognized that a foreign corporation is
making of a contract nor the doing of business within a constitutional
“doing,” “transacting,” “engaging in,” or “carrying on” business in the State
provision placing foreign corporations licensed to do business in the State
when, and ordinarily only when, it has entered the State by its agents and is

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under the same regulations, limitations and liabilities with respect to such Director of Patents.
acts as domestic corporations. Merely engaging in litigation has been I: W/N Puritan Sportswear Corp, not licensed to do business and not doing
considered as not a sufficient minimum contact to warrant the exercise of business in the RP, has legal capacity to maintain a suit in the Phil. Patent
jurisdiction over a foreign corporation. Office.
H: The fact that it may not transact business in the Phils unless it obtains
As to Sunshine’s contention that petitioners have no legal personality to sue, a license or maintains a suit does not make the respondent any less a
among the grounds for a motion to dismiss under the Rules of Court are lack juridical person. An exception to the license requirement is where a
of legal capacity to sue and that the complaint states no cause of action. foreign corporation sues on an isolated transaction. It cites the Marshall
Lack of legal capacity to sue means that the plaintiff is not in the exercise of Wells case (supra)
his civil rights, or does not have the necessary qualification to appear in the
case, or does not have the character or representation he claims. On the It should be pointed out that Puritan is not suing in the courts to recover
other hand, a case is dismissible for lack of personality to sue upon proof a debt claim or demand—which would require a license—but filed a
that the plaintiff is not the real party-in-interest, hence grounded on failure petition to cancel the trademark registered by General Garments. A
to state a cause of action. The term “lack of capacity to sue” should not be foreign corporation which has never done business in the Phils and which
confused with the term “lack of personality to sue.” While the former refers is unlicensed and unregistered to do so, but is widely and favorable
to a plaintiff’s general disability to sue, such as on account of minority, known in the Phils through the use therein of its products bearing its
insanity, incompetence, lack of juridical personality or any other general corporate name has a legal right to maintain an action. The purpose of
disqualifications of a party, the latter refers to the fact that the plaintiff is such a suit is to protect its reputation, corporate name, and goodwill,
not the real party- in-interest. Correspondingly, the first can be a ground for which has been established through the natural development of its trade,
a motion to dismiss based on the ground of lack of legal capacity to sue; in the doing of which it does not seek to enforce any legal or contract
whereas the second can be used as a ground for a motion to dismiss based rights arising from, or growing out of any business transacted in the Phils.
on the fact that the complaint, on the face thereof, evidently states no cause
of action. The lawful entry into the Phils of goods bearing the trademark since 1949
should entitle the owner to the right to use the same to the exclusion of
Applying the above discussion to the instant petition, the ground available others. The law is not only for the protection of the owner of the
for barring recourse to our courts by an unlicensed foreign corporation doing trademark but also for the protection of purchasers from confusion or
or transacting business in the Philippines should properly be “lack of deception.
capacity to sue,” not “lack of personality to sue.” Certainly, a corporation
whose legal rights have been violated is undeniably such, if not the only, General Garments invokes the Mentholatum ruling in support of his case,
real party-in-interest to bring suit thereon although, for failure to comply but the SC held that Congress, in seeking to purposely counteract the
with the licensing requirement, it is not capacitated to maintain any suit effects of the case, enacted RP 638 and inserted Sec 21-A in the
before our courts. Trademark Law, to allow foreign corporations to bring an action in RP
courts for infringement of a mark or trade name, or unfair competition, or
— Columbia: ownership of copyright or distribution rights and enforcement false designation of origin and false description, whether or not it has
of IPR ≠ doing business been licensed to do business in the RP.
— Entering into contracts with residents in the RP ≠ doing business
Le Chemise Lacoste v Fernandez. F: La Chemise Lacoste is a French
General Garments Corp v Director of Patents. F: General Garments corporation and not doing business in the RP, and is also the actual
Corp is the owner of the trademark “Puritan” for assorted men’s wear and owner of the trademarks Lacoste and Crocodile Device. Hemandas & Co
underwear. The Puritan Sportswear Corporation of Pennsylvania, filed a secured a registration of the trademarks in its name from the Phil Patent
petition for cancellation of the trademark registered in the name of General Office of the trademarks owned by Le Chemise. Hemandas then assigned
Garments Corporation, alleging ownership and prior use of the name. all its rights title and interest in the trademark to Gobindram Hemandas.
General Garments contends that Puritan being a foreign corporation which is Le Chemise filed its own application for registration of the trademarks
not licensed to do and is not doing business in the RP, is not considered a Crocodile Device and Lacoste, and the Patent Office approved the former
person under RP laws and consequently not comprehended within the term was but rejected the latter. Le Chemise then filed a letter-complaint with
“any person” under the Trademark Law then in force. MTD was denied by the the NBI alleging acts of unfair competition committed by Hemandas and

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requesting their apprehension and prosecution. The NBI secured search mere agent or conduit of Le Chemise. BOI rules also support a finding
warrants, but Hemandas files a MTQ the warrant alleging that his that Le Chemise is not doing business. Rustans is a middleman acting
trademarks is different from Le Chemise. Search warrants were recalled and and transacting business in its own name and account.
items seized returned to Hemandas. Le Chemise questions the quashal.
In upholding the rights of Le Chemise, SC held that we are recognizing
I: W/n petitioner has no legal capacity to sue because it is not doing our duties and rights of foreign states to which the Philippines and France
business in the Philippines and is not licensed to do so, and that it failed to are parties. We are simply interpreting and enforcing a solemn
allege certain facts in its petition relative to its capacity to sue. international commitment of the Philippines embodied in a multilateral
H: In Leviton case, which is relied on by Hemandas, it was ruled that it is not treaty, the Paris Convention for the Protection of Industrial Property to
enough for a foreign corporation to merely allege that it is a foreign which we are a party. The convention has extraterritorial application, and
corporation. Compliance with the requirements under the law or statute is essentially a compact between the member countries to accord to
from which it seeks relief and upon which the grounds of the illegal act are member-countries’ citizens the same rights comparable to those
alleged, is necessary. It is therefore necessary for the foreign corporation to accorded their own citizens by domestic law. The underlying principle is
comply with these requirements or aver why it should be exempted from that foreign nationals should be given the same treatment in each of the
them. The foreign corporation may have the right to sue before RP courts, member-countries as that country makes available to its own citizens. It
but our rules on pleadings require that the qualifying circumstances is not premised upon the idea that the trademark and related laws shall
necessary for the assertion of that right be affirmatively pleaded. Since the be given extra-territorial application, but on exactly the converse that
present case involves a criminal offense, the Leviton case is inapplicable. Le each nation’s law shall have only territorial application. A treaty or
Chemise may still sue even if it failed to allege material facts. A foreign convention is not a mere moral obligation to be enforced but creates a
corporation not doing business needs no license to sue before RP courts for legally binding obligation on the parties founded on the generally
infringement of trademark and unfair competition. A foreign corporation accepted principles of international law of pacta sunt servanda, which
favorable known in the Phils through the use of its products bearing its has been adopted as the law of the law.
corporate name has a legal right to maintain action in the Philippines to
restrain the formation in BF of a corporation bearing the same name as the — Foreign corporation not doing business has personality to commence
foreign corporation; the sole purpose of its suit is to protect its reputation, criminal proceedings for violation of RPC
corporate name, goodwill whenever the same has established themselves. A — Mentholatum does not apply! Le Chemise’s exclusive distributor buys
corporate and trade name are property rights, rights in rem, which the and then sells it shirts for its own account and for its own profit and is
owner may assert and protect against the whole world, in any courts of the not an agent or conduit of Le Chemise
world—even in jurisdictions where it does not transact business. Since it is — Not every sale to an exclusive agent in RP constitutes doing business!
the trademark and not the mark that is to be protected, a trademark The agent must sell or transact in the foreign corporation’s name and
acknowledges no territorial boundaries or municipalities or states or nations, for the foreign entity’s own account to constitute doing business
but extends to every market where the trader’s goods have become known — Villanueva: but buying the products to be resold in the RP from
and identified. foreign entities involve the foreign entity as direct parties!

The letter-complaint that preceded the petition was filed with the NBI. If What constitutes doing business
prosecution would follow after the PI then the information shall be in the
name of the People of the RP and no longer the petitioner which is only an — Isolated transaction: set apart from common business; no intention to
aggrieved party, since a criminal act is an act against the State. Le Chemise engage in a progressive pursuit of the business or corporate purpose
capacity to sue, would then be of no significance.
Litton Mills v CA. F: Petitioner Litton Mills, Inc. (Litton) entered into an
The Mentholatum case relied upon by Hemandas is also not on all fours with agreement with Empire Sales Philippines Corporation (Empire), as local
the present case. The foreign corporation in Mentholatum is in fact doing agent of Gelhaar Uniform Company (Gelhaar), an American corporation,
business in the RP but without the requisite license. In the present case, Le whereby Litton agreed to supply Gelhaar 7,770 dozens of soccer jerseys.
Chemise is a foreign corporation not doing business in the RP. It has an The agreement stipulated that before it could collect from the bank on
exclusive distributor, Rustans Commercial, which is an independent entity the letter of credit, Litton must present an inspection certificate issued by
which buys and sells the products of Le Chemise, and is in other words not a Gelhaar’s agent in the Philippines, Empire Sales, that the goods were in

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satisfactory condition. Litton then sent four shipments totaling 4,770 dozens In accordance with Rule 14, § 14, service upon Gelhaar could be made in
of the soccer jerseys. A fifth shipment of 2,110 dozens of the jerseys, was three ways: (1) by serving upon the agent designated in accordance with
inspected by Empire, but Empire refused to issue the required certificate of law to accept service of summons; (2) if there is no resident agent, by
inspection. Alleging that Empire’s refusal to issue a certificate was without service on the government official designated by law to that effect; and
valid reason, Litton filed a complaint for specific performance to compel (3) by serving on any officer or agent of said corporation within the
Empire to issue the inspection certificate covering the 2,110 dozen jerseys Philippines.6 Here, service was made through Gelhaar’s agent, the
plus damages. The trial court issued the writ and the next day, Empire Empire Sales Philippines Corp. There was, therefore, a valid service of
issued the inspection certificate, so that the cargo was shipped on time. The summons on Gelhaar, sufficient to confer on the trial court jurisdiction
law firm of Sycip, Salazar, Feliciano and Hernandez entered a special over the person of Gelhaar.
appearance for the purpose of objecting to the jurisdiction of the court over
Gelhaar, and moved to dismiss the case and to quash the summons on the — Single transaction most not simply be casual or incidental to
ground that Gelhaar was a foreign corporation not doing business in the constitute doing business… it must be in the ordinary course of the
Philippines, and as such, was beyond the reach of the local courts. It business of the foreign corporation
contended that Litton failed to allege and prove that Gelhaar was doing
business in the Philippines. Mentholatum v Mangaliman. F: MEntholatum Co Inc, a Kansas
corporation which manfactures “Mentholatum” (a medicament and salve
H: We sustain petitioner’s contention based on the first ground, namely, that adapted for the treatment of colds, nasal irritations etc) and its
the trial court acquired jurisdiction over Gelhaar by service of summons distributing agent Philam Drug Co filed an action against Mangaliman et
upon its agent as required by of Rule 14, § 14. But, it should be noted, in al for infringement of trademark and unfair competition. They allege that
order that service may be effected in the manner above stated, said section the Mangaliman et al prepared a medicament and salve named
also requires that the foreign corporation be one which is doing business in “Mentoliman” which they sold in a container of the same size, color,
the Philippines. This is a sine qua non requirement. This fact must first be shape as “Mentholatum,” and allege damages and diminutions of sales
established in order that summons can be made and jurisdiction acquired. and loss of goodwill and reputation. TC ruled ifo Mentholatum Co. CA
The fact of doing business must then, in the first place, be established by reverses, holding that the activities of Mentholatum were business
appropriate allegations in the complaint. Hence, a court need not go beyond transactions in the Philippines through its agent PhilAm Drug, and that
the allegations in the complaint to determine whether or not a defendant under the Corpo Law they cannot maintain their suit. Mentholatum claims
foreign corporation is doing business for the purpose of Rule 14, § 14. In the that they have not personally sold any of their products in the RP and
case at bar, the allegation that Empire, for and in behalf of Gelhaar, ordered that the Philam Drug Co was merely an importer of the products, their
7,770 dozens of soccer jerseys from Litton and for this purpose Gelhaar sales not being for the account of Mentholatum but for their own.
caused the opening of an irrevocable letter of credit in favor of Litton is a Mangaliman countered that PhilAm Drug is the exclusive distributor of
sufficient allegation that Gelhaar was doing business in the Philippines. Mentholatum and that because of this arrangement, the acts of the
former became acts of the latter, and thus Mentholatum is engaged in
Gelhaar contends that the contract with Litton was a single, isolated doing business in the RP and would require a license before it can sue.
transaction and that it did not constitute “doing business.” where a single I: W/N Mentholatum is doing business in the RP; W/N Mentholatum Inc
act or transaction of a foreign corporation is not merely incidental or casual could prosecute their action without having secured the license; W/N the
but is of such character as distinctly to indicate a purpose on the part of the PhilAm Drug co could by itself maintain the suit.
foreign corporation to do other business in the state, such act will be H: There is no general rule regarding what constitutes doing business in
considered as constituting doing business. This Court referred to acts which the Phils. The true test is whether the foreign corporation is continuing
were in the ordinary course of business of the foreign corporation. 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
In the case at bar, the trial court was certainly correct in holding that to another, thus implying a continuity of dealings and arrangements, and
Gelhaar’s act in purchasing soccer jerseys to be within the ordinary course contemplates the performance of acts and exercise of functions normally
of business of the company considering that it was engaged in the incident to the purpose and object of its organization. In this case, as
manufacture of uniforms. The acts noted above are of such a character as to stipulated in their respective pleadings, whatever transactions of PhilAm
indicate a purpose to do business. Drug had executed in view of the law, the Mentholatum Co. being a
foreign corporation doing business without the license, may not

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prosecute the action. Neither may the PhilAm Drug maintain the action for foreign corporation is “transacting” or “doing business” in the country.
the reason that the distinguishing features of the agent being his The Corporation Code provides:
representative character and derivative authority, it cannot, to the
advantage of its principal, claim an independent standing in court. Sec. 133. Doing business without a license. — No foreign
corporation transacting business in the Philippines without a
— Sale of products of a foreign entity through a local distributor is license, or its successors or assigns, shall be permitted to
equivalent to doing business; isolated transaction is not doing business maintain or intervene in any action, suit or proceeding in any
— Mentholatum tests: court or administrative agency of the Philippines; but such
(1) substance test: continuing the substance of the business and corporation may be sued or proceeded against before
purpose for which it was organized Philippine courts or administrative tribunals on any valid cause
(2) continuity test: continuity of dealings and arrangements, or acts of action recognized under Philippine laws.
normally incidental to the purpose and object
The aforementioned provision prevents an unlicensed foreign corporation
Agilent Technologies Singapore v. Integrated Silicon Technology “doing business” in the Philippines from accessing our courts. In a
Phils. F: Petitioner Agilent Technologies Singapore (Pte.), Ltd. (“Agilent”) is a number of cases, however, we have held that an unlicensed foreign
foreign corporation, which, by its own admission, is not licensed to do corporation doing business in the Philippines may bring suit in Philippine
business in the Philippines. Respondent Integrated Silicon Technology courts against a Philippine citizen or entity who had contracted with and
Philippines Corporation (“Integrated Silicon”) is a private domestic benefited from said corporation. Such a suit is premised on the doctrine
corporation, 100% foreign owned, which is engaged in the business of of estoppel. A party is estopped from challenging the personality of a
manufacturing and assembling electronics components. A 5-year Value corporation after having acknowledged the same by entering into a
Added Assembly Services Agreement (“VAASA”), was entered into on April 2, contract with it. This doctrine of estoppel to deny corporate existence
1996 between Integrated Silicon and the Hewlett-Packard Singapore (Pte.) and capacity applies to foreign as well as domestic corporations. The
Ltd., Singapore Components Operation (“HP-Singapore”). Under the terms of application of this principle prevents a person contracting with a foreign
the VAASA, Integrated Silicon was to locally manufacture and assemble fiber corporation from later taking advantage of its noncompliance with the
optics for export to HP-Singapore. HP-Singapore, for its part, was to consign statutes chiefly in cases where such person has received the benefits of
raw materials to Integrated Silicon; transport machinery to the plant of the contract.
Integrated Silicon; and pay Integrated Silicon the purchase price of the
finished products. HP-Singapore assigned all its rights and obligations in the
VAASA to Agilent. Integrated Silicon sues Agilent and its officers for specific The principles regarding the right of a foreign corporation to bring suit in
performance, alleging that Agilent breached the parties’ oral agreement to Philippine courts may thus be condensed in four statements:
extend the VAASA. Integrated Silicon thus prayed that defendant be ordered (1) if a foreign corporation does business in the Philippines without a
to execute a written extension of the VAASA for a period of five years as license, it cannot sue before the Philippine courts;
earlier assured and promised. Agilent then filed a separate complaint for (2) if a foreign corporation is not doing business in the Philippines, it
specific performance against Integrated Silicon, Teoh Kang Seng, Teoh Kiang needs no license to sue before Philippine courts on an isolated
Gong, Anthony Choo, Joanne Kate M. dela Cruz, Jean Kay M. dela Cruz and transaction or on a cause of action entirely independent of any business
Rolando T. Nacilla, and prayed for the immediate return and delivery to transaction;
plaintiff its equipment, machineries and the materials to be used for fiber- (3) if a foreign corporation does business in the Philippines without a
optic components which were left in the plant of Integrated Silicon. TC license, a Philippine citizen or entity which has contracted with said
denied MTD of Silicon. CA reverses. Integrated Silicon et al argue that since corporation may be estopped from challenging the foreign corporation’s
Agilent is an unlicensed foreign corporation doing business in the corporate personality in a suit brought before Philippine courts; and
Philippines, it lacks the legal capacity to file suit, assailing various acts of (4) if a foreign corporation does business in the Philippines with the
Agilent, purportedly in the nature of “doing business” in the Philippines. required license, it can sue before Philippine courts on any transaction.

In Mentholatum, the Court discoursed on the two general tests to
H: A foreign corporation without a license is not ipso facto incapacitated determine whether or not a foreign corporation can be considered as
from bringing an action in Philippine courts. A license is necessary only if a “doing business” in the Philippines. The first of these is the substance

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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 a. Mere investment as a shareholder by a foreign entity in
for which it was organized or whether it has substantially retired from it and domestic corporations duly registered to do business,
turned it over to another. and/or the exercise of rights as such investor;
The second test is the continuity test, expressed thus: The term [doing b. Having a nominee director or officer to represent its
business] implies a continuity of commercial dealings and arrangements, interest in such corporation;
and contemplates, to that extent, the performance of acts or works or the c. Appointing a representative or distributor domiciled in the
exercise of some of the functions normally incident to, and in the Philippines which transacts business in the representative’s
progressive prosecution of, the purpose and object of its organization. or distributor’s own name and account;
d. The publication of a general advertisement through any
Although each case must be judged in light of its attendant circumstances, print or broadcast media;
jurisprudence has evolved several guiding principles for the application of e. Maintaining a stock of goods in the Philippines solely for
these tests. For instance, considering that it transacted with its Philippine the purpose of having the same processed by another
counterpart for seven years, engaging in futures contracts, this Court entity in the Philippines;
concluded that the foreign corporation in Merrill Lynch Futures, Inc. v. Court f. Consignment by a foreign entity of equipment with a local
of Appeals and Spouses Lara, was doing business in the Philippines. In Top- company to be used in the processing of products for
Weld Manufacturing v. ECED, IRTI, et al. both involved the License and export;
Technical Agreement and Distributor Agreement of foreign corporations with g. Collecting information in the Philippines; and
their respective local counterparts that were the primary bases for the h. Performing services auxiliary to an existing isolated
Court’s ruling that the foreign corporations were doing business in the contract of sale which are not on a continuing basis, such
Philippines. In particular, the Court cited the highly restrictive nature of as installing in the Philippines machinery it has
certain provisions in the agreements involved, such that… the Philippine manufactured or exported to the Philippines, servicing the
entity is reduced to a mere extension or instrument of the foreign same, training domestic workers to operate it, and similar
corporation. incidental services.

The case law definition has evolved into a statutory definition, having been By and large, to constitute “doing business”, the activity to be
adopted with some qualifications in various pieces of legislation. The undertaken in the Philippines is one that is for profit-making. By the clear
Foreign Investments Act of 1991 (the “FIA”; Republic Act No. 7042, as terms of the VAASA, Agilent’s activities in the Philippines were confined
amended), Sec 3 (d) defines “doing business” as those which “include to (1) maintaining a stock of goods in the Philippines solely for the
soliciting orders, service contracts, opening offices, whether called “liaison” purpose of having the same processed by Integrated Silicon; and (2)
offices or branches; appointing representatives or distributors domiciled in consignment of equipment with Integrated Silicon to be used in the
the Philippines or who in any calendar year stay in the country for a period processing of products for export. As such, we hold that, based on the
or periods totaling one hundred eighty (180) days or more; participating in evidence presented thus far, Agilent cannot be deemed to be “doing
the management, supervision or control of any domestic business, firm, business” in the Philippines. Respondents’ contention that Agilent lacks
entity, or corporation in the Philippines; and any other act or acts that imply the legal capacity to file suit is therefore devoid of merit. As a foreign
a continuity of commercial dealings or arrangements, and contemplate to corporation not doing business in the Philippines, it needed no license
that extent the performance of acts or works, or the exercise of some of the before it can sue before our courts.
functions normally incident to, and in the progressive prosecution of,
commercial gain or of the purpose and object of the business organization.” — Jqck: Agilent sums up everything; it’s the controlling doctrine now
An analysis of the relevant case law, in conjunction with Section 1 of the
Implementing Rules and Regulations of the FIA (as amended by Republic Act Merrill Lynch Futures v CA. F: Merrill Lynch Futures, Inc. a non-resident
No. 8179), would demonstrate that the acts enumerated in the VAASA do foreign corporation not doing business in the Philippines, sued the
not constitute “doing business” in the Philippines. Spouses Pedro M. Lara and Elisa G. Lara for the recovery of a debt and
interest thereon. Merrill Lynch is a "futures commission merchant" duly
The IRR of the FIA (as amended by Republic Act No. 8179) provides that the licensed to act as such in the futures markets and exchanges in the
following shall not be deemed “doing business”: United States, and essentially functioning as a broker… (executing)

7
orders to buy and sell futures contracts received from its customers on U.S.
futures exchanges. The facts on record adequately establish that ML FUTURES, operating in
the United States, had indeed done business with the Lara Spouses in the
It also defined a "futures contract" as a "contractual commitment to buy and Philippines over several years, had done so at all times through Merrill
sell a standardized quantity of a particular item at a specified future Lynch Philippines, Inc. (MLPI), a corporation organized in this country, and
settlement date and at a price agreed upon, with the purchase or sale being had executed all these transactions without ML FUTURES being licensed
executed on a regulated futures exchange." It entered into a Futures to so transact business here, and without MLPI being authorized to
Customer Agreement with the defendant spouses, in virtue of which it operate as a commodity futures trading advisor. The Laras did transact
agreed to act as the latter's broker for the purchase and sale of futures business with ML FUTURES through its agent corporation organized in the
contracts in the U.S. and that pursuant to the contract, orders to buy and Philippines, it being unnecessary to determine whether this domestic firm
sell futures contracts were transmitted to ML FUTURES by the Lara Spouses was MLPI (Merrill Lynch Philippines, Inc.) or Merrill Lynch Pierce Fenner &
"through the facilities of Merrill Lynch Philippines, Inc., a Philippine Smith (MLPI's alleged predecessor). The fact is that ML FUTURES did deal
corporation and a company servicing plaintiffs customers. Later, the Laras with futures contracts in exchanges in the United States in behalf and for
would reaffirm their lack of awareness that Merrill Lynch Philippines, Inc. the account of the Lara Spouses, and that on several occasions the latter
(formerly registered as Merrill Lynch, Pierce, Fenner & Smith Philippines, received account documents and money in connection with those
Inc.) did not have a license, claiming that they learned of this only from transactions.
inquiries with the Securities and Exchange Commission which elicited the
information that it had denied said corporation's application to operate as a I: W/N ML FUTURES may sue in Philippine Courts to establish and enforce
commodity futures trading advisor. Lara Spouses actively traded in futures its rights against said spouses, in light of the undeniable fact that it had
contracts, including "stock index futures" for four years or so, i.e., from 1983 transacted business in this country without being licensed to do so. W/N
to October, 1987. A loss amounting to US$160,749.69 was incurred in the Lara Spouses are now estopped to impugn ML FUTURES' capacity to
respect of three (3) transactions involving "index futures," and after setting sue them in the courts of the forum.
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 H: The rule is that a party is estopped to challenge the personality of a
ensuing balance of US$84,836.27. Lara Spouses however refused to pay this corporation after having acknowledged the same by entering into a
balance, "alleging that the transactions were null and void because Merrill contract with it. And the "doctrine of estoppel” to deny corporate
Lynch Philippines, Inc., the Philippine company servicing accounts of existence applies to foreign as well as to domestic corporations; "one who
plaintiff… had no license to operate as a 'commodity and/or financial futures has dealt with a corporation of foreign origin as a corporate entity is
broker. Lara files a MTD, and TC sustains the motion. CA affirms, holding that estopped to deny its corporate existence and capacity." The principle "will
the Trial Court had seen "through the charade in the representation of MLPI be applied to prevent a person contracting with a foreign corporation
and the plaintiff that MLPI is only a trading advisor and in fact it is a conduit from later taking advantage of its noncompliance with the statutes,
in the plaintiff's business transactions in the Philippines,” citing the ruling in chiefly in cases where such person has received the benefits of the
Mentholatum v Mangaliman. contract where such person has acted as agent for the corporation and
has violated his fiduciary obligations as such, and where the statute does
I: W/n (a) ML FUTURES is prohibited from suing in Philippine Courts because not provide that the contract shall be void, but merely fixes a special
doing business in the country without a license, and that (b) it is not a real penalty for violation of the statute… "
party in interest since the Lara Spouses had not been doing business with it,
but with another corporation, Merrill Lynch, Pierce, Fenner & Smith, Inc. There would seem to be no question that the Laras received benefits
H: The ground that the plaintiff has no legal capacity to sue — may be generated by their business relations with ML FUTURES. Those business
understood in two senses: one, that the plaintiff is prohibited or otherwise relations, according to the Laras themselves, spanned a period of seven
incapacitated by law to institute suit in Philippine Courts; or two, although (7) years; and they evidently found those relations to be of such
not otherwise incapacitated in the sense just stated, that it is not a real profitability as warranted their maintaining them for that not insignificant
party in interest. Now, the Lara Spouses contend that ML Futures has no period of time; otherwise, it is reasonably certain that they would have
capacity to sue them because the transactions subject of the complaint were terminated their dealings with ML FUTURES much, much earlier. In fact,
had by them, not with the plaintiff ML FUTURES, but with Merrill Lynch Pierce even as regards their last transaction, in which the Laras allegedly
Fenner & Smith, Inc.

8
suffered a loss in the sum of US$160,749.69, the Laras nonetheless still termination and thus TopWeld cannot invoke the same. To impose a
received some monetary advantage, for ML FUTURES credited them with the requirement would perpetuate or condone an unlawful business
amount of US$75,913.42 then due to them, thus reducing their debt to operation. The CA finally held that TopWeld ought to know whether or not
US$84,836.27. Given these facts, and assuming that the Lara Spouses were IRTI and ECED were properly authorized to engage in business in the RP.
aware from the outset that ML FUTURES had no license to do business in this TopWeld appeals to SC.
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 I: W/n IRTI and ECED can be considered as doing business and thus
indebtedness due and owing to ML FUTURES upon the plea that it should not subject to the requirements of RA 5455.
have done business in this country in the first place, or that its agent in this H: IRTI and ECED are foreign corporations not licensed to do business in
country, MLPI, had no license either to operate as a "commodity and/or the Phils. SC reverted to the lack of a general rule as to what exactly
financial futures broker." constitutes doing or engaging in business in the RP, and acknowledged
that each case must be judged in light of its peculiar circumstances. Acts
— Estoppel doctrine: if local parties knew that the foreign entity does not of corporations should be distinguished from single or isolate business
have a license, yet it is doing business, and they still transacted with transactions or occasional, incidental, or casual transactions. Where a
them—estopped from invoking lack of license! single act or transaction is not merely incidental or casual but indicates
— Villanueva: Merrill Lynch lacks an element of estoppel— the foreign corporation’s intention to do other business in the Phils, said
action/representation by the local which induces the foreign to believe single act constitutes doing or engaging in business in the RP.
that he would be entitled to relief… the simple act of entering into a
contract with a foreign entity does not of itself give rise to estoppel. The SC concurs with the CA that the IRTI and ECED were doing business
in the RP. When they entered into the dispute contracts with TopWeld,
Topweld Manufacturing v ECED. F: TopWeld, a domestic corporation they were carrying out the purposes for which they were created—to
engaged in manufacturing and selling welding supplies and equipment, manufacture and market welding products and equipment. The terms and
entered into separate contracts with 2 different foreign entities. The first conditions of the contracts indicate that they established within the RP, a
contract is a License and Technical Assistance Agreement with the IRTI, a continuous business, and not merely one of a temporary character. This is
Swiss corporation, which constituted TopWeld a licensee of IRTI to buttressed by the admission that they were negotiating with another
manufacture welding products under certain specifications with raw domestic company. Their acts enable them to enter into the mainstream
materials to be purchased by TopWeld from suppliers designated by IRTI. The of our economic life in competition with local business interests, bringing
second contract is a Distributor Agreement with the ECED SA, a Panamanian them under the provisions of RA 5455. IRTI and ECED contends
corporation, which designated TopWeld as ECED’s distributor in the RP of its exemption from RA 5455 because TopWeld maintained an independent
welding products and equipment. Upon learning that the two foreign status during the existence of the contracts. But a perusal of the
corporations were negotiating with another group to replace TopWeld, the agreements shows that they are highly restrictive, and in assuming
latter sued IRTI, ECED and an American corporation, EUTECTIC, and also TopWeld to have an independent status, in essence it merely extends to
Victor Gaerlan, the alleged representative of the three corporations. TopWeld the Islands the business of IRTI and ECED.
sought to restrain the corporations from negotiating with third parties and
from terminating its contract. TC grants petition and issues TRO. IRTI and As between the parties, RA 5455 does not declare void or invalid the
ECED writes TopWeld to inform it of their intent to sever their agreement. contracts entered without the license being secured. What is created is
TopWeld amended its complaint to ask the court to compel the ECED to an illegal situation between the parties having entered into agreements
deliver items covered by the agreement and to prohibit them from importing without the license or certificate. In this case, TopWeld had actual
into the RP any EUTECTIC products. TC granted the amended prayer. CA knowledge of the applicability of RA 5455 at the time of execution of the
reverses, holding that IRTI and ECED, by entering into licensing and contract. It was incumbent upon TopWeld to know whether or not IRTI and
distributing agreements with TopWeld, were doing business in the RP and ECED were properly authorized to engage in the RP. The very purpose of
thus should have required a certificate from the BOI. It held that having not the law was circumvented when they etered into the licensing and
obtained the requisite certificate, the provisions of RA 5455 prohibiting alien distributorship agreements, and the parties being equally guilty and are
firms from terminating their franchise or licensing agreements with domestic in pari delicto, it follows that TopWeld is not entitled to the relief prayed
firms without payment of compensation and reimbursement of expenses for.
cannot be applied to them. They are not bound by the requirement on

9
— TopWeld: “pari delicto rule”—local company knew that the law it alleges business.” The records show that the only reason why the second and
to have been violated by the foreign corporation is in force at the time of third contracts were entered into was to recover the loss sustained from
the questioned contracts were consummated; while foreign corporation the failure of Antam et al to deliver the crude coconut oil under the first
is doing business without a license! contract. Instead of outright demand, the foreign company even tried to
— The contracts cannot be voided! push through with the transaction to recover the amount lost. And again
— Highly restrictive agreements which has the effect of reducing the local petitioners failed to make good. It can be deduced therefore, that in
corporation to mere conduits or extensions of the foreign corporation reality there was only one agreement—to deliver 500 long tons of
coconut oil—and the 3 different transactions were entered into in an
Antam Consolidated v CA. F: Stokely (parent) and Capital City (subsidiary) effort to fulfill the basic agreement and in no way indicate an intent to
companies are foreign corporations not engaged and not licensed to do engage in a continuity of transactions with the petitioners which would
business in the RP. Capital City and Comphil acting through broker Rothschild categorize it as a foreign corporation doing business in the RP.
entered into a contract wherein Comphil undertook to sell and deliver and
Capital City agreed to buy 500 long tons of crude coconut oil. Comphil failed It is a common ploy of defaulting companies sued by unlicensed foreign
to deliver the coconut oil so that Capital decided to cover its oil needs in the companies not engaged in business in the RP to invoke lack of capacity to
open market, resulting in a loss of $103,600. The parties entered into a sue. The doctrine of lack of capacity to sue based on failure to acquire a
second contract—designated as a “wash out” of the first contract—wherein local license is based on considerations of sound public policy. It was
Comphil undertook to buy back the 500 long tons of coconut oil at a higher never intended to favor domestic corporations who enter into solitary
price, the difference in price offsetting the loss sustained in the first obligations simply because the latter are not licensed to do business in
contract. Comphil failed to pay. A third contract was entered into, wherein the country.
Comphil was to sell the same quantity of coconut oil at a discounted price
from the market value thereof, again offsetting the loss of $103,600 — Antam: “auxiliary rule”—performance of services auxiliary to an
sustained by Capital City. Again Comphil failed to deliver, and despite existing contract is not doing business!
repeated demands Comphil refused to settle its obligations to Capital City
under the agreements. The Tambuntings, former directors of Comphil, left How courts acquire jurisdiction over foreign corporations
the company and were replaced by 5 employees of their pawnshop
business, and caused the name of Comphil to be changed to Banahaw Laws governing licensed foreign corporations
Milling. The new directors also authorized Tambunting to sell the oil mill of
Comphil/Banahaw, which is the only substantial asset of Banahaw and would Merger of licensed foreign corporation
thus leave it with no assets to satisfy claims of creditors. Unicom also took
over the assets and capital stock of Banahaw. Capital City alleged that all Withdrawal of foreign corporation
petitioners evaded their obligation thereto through the devious scheme of
using Tambunting employees to replace the Tambuntings in the Revocation and suspension of license
management of Banahaw and disposing part of the assets and entire
interests in Comphil/Banahaw to Unicom. TC ordered the writ of attachment. Existing Licensed Foreign Corporations
Petitioners Antam et al file MTD on the ground that petitioners are foreign
corporations no licensed to do business in the RP and has no personality to
maintain the instant suit. TC denies MTD, and Antam et al appeals. Antam
claims Stokely and Capital city are doing business in the RP, because it
entered into three transactions/contracts with them either as seller or buyer,
and which are in the pursuit of the purpose and object for which they are
organized. They are thus required to obtain a license first before maintaining
any legal action against them.

H: the transactions are not a series of commercial dealings which signify an
intent on the part of Stokely and Capital City to do business in the RP, but
constitute an isolated one which does not fall under the category of “doing

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