1. Maricalum Mining Corporation vs. Florentino, et. al. G.R. No.

221813, July 23, 2018

Carmela Salapare

Doctrine: While the veil of corporate fiction may be pierced under certain instances, mere ownership of a
subsidiary does not justify the imposition of liability on the parent company. It must further appear that
to recognize a parent and a subsidiary as separate entities would aid in the consummation of a
wrong. Thus, a holding corporation has a separate corporate existence and is to be treated as a
separate entity; unless the facts show that such separate corporate existence is a mere sham, or has
been used as an instrument for concealing the truth.

Facts: The dispute traces its roots back to when the Philippine National Bank (PNB, a former
government-owned-and-controlled corporation) and the Development Bank of the Philippines (DBP)
transferred its ownership of Maricalum Mining to the National Government for disposition or
privatization because it had become a non-performing asset.

On October 2, 1992, the National Government thru the Asset Privatization Trust (APT) executed a
Purchase and Sale Agreement (PSA) with G Holdings, a domestic corporation primarily engaged in the
business of owning and holding shares of stock of different companies.

Upon the signing of the PSA and paying the stipulated down payment, G Holdings immediately took
physical possession of Maricalum Mining's Sipalay Mining Complex, as well as its facilities, and took full
control of the latter's management and operations.

On January 26, 1999, the Sipalay General Hospital, Inc. (Sipalay Hospital) was duly incorporated to
provide medical services and facilities to the general public.

In 2000, each of the said cooperatives executed identical sets of Memorandum of Agreement with
Maricalum Mining wherein they undertook, among others, to provide the latter with a steady supply of
workers, machinery and equipment for a monthly fee.

On June 1, 2001, Maricalum Mining's Vice President and Resident Manager Jesus H. Bermejo wrote a
Memorandum to the cooperatives informing them that Maricalum Mining has decided to stop its mining
and milling operations effective July 1, 2001 in order to avert continuing losses brought about by the low
metal prices and high cost of production.

 July 2001, the properties of Maricalum Mining, which had been mortgaged to secure the PNs, were
extrajudicially foreclosed and eventually sold to G Holdings as the highest bidder on December 3, 2001.

On September 23, 2010, some of Maricalum Mining's workers, including complainants, and some of
Sipalay General Hospital's employees jointly filed a Complaint with the LA against G Holdings, its
president, and officer-in-charge, and the cooperatives and its officers for illegal dismissal, underpayment
and nonpayment of salaries, underpayment of overtime pay, underpayment of premium pay for holiday,
nonpayment of separation pay, underpayment of holiday pay, nonpayment of service incentive leave
pay, nonpayment of vacation and sick leave, nonpayment of 13th month pay, moral and exemplary
damages, and attorneys fees.

In its decision, the LA ruled in favor of complainants. It held that G Holdings is guilty of labor-only
contracting with the manpower cooperatives thereby making all of them solidarily and directly liable to
complainants.

The NLRC modified the LA ruling. It held that Dr. Welilmo T. Neri, Erlinda L. Fernandez and Edgar M.
Sobrino are not entitled to the monetary awards because they were not able to establish the fact of
their employment relationship with G Holdings or Maricalum Mining because Sipalay Hospital has a
separate and distinct corporate personality. As to the remaining complainants, it found that no evidence
was adduced to prove that the salaries/wages and the 13 th month pay had been paid.

The CA denied the petitions and affirmed the decision of the NLRC. It ratiocinated that factual issues are
not fit subjects for review via the extraordinary remedy of certiorari. The CA emphasized that the NLRC's
factual findings are conclusive and binding on the appellate courts when they are supported by
substantial evidence. Thus, it maintained that it cannot review and re-evaluate the evidence all over
again because there was no showing that the NLRC's findings of facts were reached arbitrarily. 

Issue/s: Did the CA erred in affirming the NLRC’s ruling which allowed the piercing of the corporate veil
against the Maricalum Mining but not against Sipalay Hospital?

Held: No, Sipalay Hospital was incorporated by Romulo G. Zafra, Eleanore B. Gutierrez, Helen Grace B.
Fernandez, Evelyn B. Badajos and Helen Grace L. Arbolario. However, there is absence of indication that
G Holdings subsequently acquired the controlling interests of Sipalay Hospital. There is also no evidence
that G Holdings entered into a contract with Sipalay Hospital to provide medical services for its officers
and employees. This lack of stockholding or contractual connection signifies that Sipalay Hospital is not
affiliated with G Holdings. Thus, due to this absence of affiliation, the Court must apply the tests used to
determine the existence of an employee-employer relationship; rather than piercing the corporate veil.

         It is immediately apparent that Sipalay Hospital, even if its facilities are located inside the Sipalay
Mining Complex, does not limit its medical services only to the employees and officers of Maricalum
Mining and/or G Holdings. Its act of holding out services to the public reinforces the fact of its
independence from either Maricalum Mining or G Holdings because it is free to deal with any client
without any legal or contractual restriction. Moreover, G Holdings is a holding company primarily
engaged in investing substantially in the stocks of another company-not in directing and managing the
latter's daily business operations. Because of this corporate attribute, the Court can reasonably draw an
inference that G Holdings does not have a considerable ability to control means and methods of work
of Sipalay Hospital employees. Markedly, the records are simply bereft of any evidence that G Holdings
had, in fact, used its ownership to control the daily operations of Sipalay Hospital as well as the working
methods of the latter's employees. There is no evidence showing any subsequent transfer of shares
from the original incorporators of Sipalay Hospital to G Holdings. Worse, it appears that complainants
Dr. Welilmo T. Neri, Erlinda L. Fernandez, Wilfredo C. Taganile, Sr. and Edgar M. Sobrino are trying to
derive their employment connection with G Holdings merely on an assumed premise that the latter
owns the controlling stocks of Maricalum Mining.

On this score, the CA committed no reversible error in allowing the NLRC to delete the monetary awards
of Dr. Welilmo T. Neri, Erlinda L. Fernandez, Wilfredo C. Taganile, Sr. and Edgar M. Sobrino imposed by
the Labor Arbiter against G Holdings.

A holding company may be held liable for the acts of its subsidiary only when it is adequately proven
that: a) there was control over the subsidiary; (b) such control was used to protect a fraud (or gross
negligence amounting to bad faith) or evade an obligation; and c) fraud was the proximate cause of
another's existing injury. Further, an employee is duly-burdened to prove the crucial test or factor of
control thru substantial evidence in order to establish the existence of an employment relationship-
especially as against an unaffiliated corporation alleged to be exercising control.

In this case, complainants have not successfully proven that G Holdings fraudulently exercised its control
over Maricalum Mining to fraudulently evade any obligation. They also fell short of proving that G
Holdings had exercised operational control over the employees of Sipalay Hospital. Due to these
findings, the Court sees no reversible error on the part of the CA, which found no grave abuse of
discretion and affirmed in toto the factual findings and legal conclusions of the NLRC.

2. Sadadsad

1. Zuellig Freight and Cargo vs. NLRC and Ronaldo vs. San Miguel, G.R. No. 157900, July 22,
2013
Kevin Ashley Foronda

Doctrine:  The mere change in the corporate name is not considered under the law as the creation of a
new corporation; hence, the renamed corporation remains liable for the illegal dismissal of its employee
separated under that guise.

Facts: Zeta filed a petition to amend its articles of incorporation for the purposes of changing its name –
to Zuellig - and to upgrade the stocks of the corporation. After it successfully changed its corporate name,
they terminated the employment its several employees, including San Miguel, on the ground of cessation
of business operations.

The latter then filed a complaint for illegal dismissal before the NLRC contending that change of name
does not amount to creation of a corporation; thus, in effect, the corporation merely continued its
operations under a new name.

The Labor Arbiter, NLRC, and Court of Appeals all ruled in favor of San Miguel, the illegally dismissed
employee prompting Zuellig to file a special civil action for certiorari.
Issue/s: Whether change of corporate name creates a new corporation

Held: The unanimous conclusions of the CA, the NLRC and the Labor Arbiter, being in accord with law,
were not tainted with any abuse of discretion, least of all grave, on the part of the NLRC. Verily, the
amendments of the articles of incorporation of Zeta to change the corporate name to Zuellig Freight and
Cargo Systems, Inc. did not produce the dissolution of the former as a corporation. For sure, the
Corporation Code defined and delineated the different modes of dissolving a corporation, and
amendment of the articles of incorporation was not one of such modes. The effect of the change of name
was not a change of the corporate being, for, as well stated in Philippine First Insurance Co., Inc. v.
Hartigan: “The changing of the name of a corporation is no more the creation of a corporation than the
changing of the name of a natural person is begetting of a natural person. The act, in both cases, would
seem to be what the language which we use to designate it imports – a change of name, and not a change
of being.”
Zeta and petitioner remained one and the same corporation. The change of name did not give petitioner
the license to terminate employees of Zeta like San Miguel without just or authorized cause. The situation
was not similar to that of an enterprise buying the business of another company where the purchasing
company had no obligation to rehire terminated employees of the latter. Petitioner, despite its new name,
was the mere continuation of Zeta’s corporate being, and still held the obligation to honor all of Zeta’s
obligations, one of which was to respect San Miguel’s security of tenure. The dismissal of San Miguel
from employment on the pretext that petitioner, being a different corporation, had no obligation to accept
him as its employee, was illegal and ine

1. 28MARC II Marketing, Inc. vs. Alfredo M. Joson G.R. No. 171993, Dec. 12, 2011
Cherelie Bugarin

Doctrine:the corporation has a personality separate and distinct from its officers, stockholders and
members such that corporate officers are not personally liable for their official acts unless it is shown
that they have exceeded their authority. However, this corporate veil can be pierced when the notion of
the legal entity is used as a means to perpetrate fraud, an illegal act, as a vehicle for the evasion of an
existing obligation, and to confuse legitimate issues

Facts:Marc II Marketing, Inc. (petitioner corporation) is a corporation duly organized and existing under
and by virtue of the laws of the Philippines. It is primarily engaged in buying, marketing, selling and
distributing in retail or wholesale for export or import household appliances and products and other
items.Lucila V. Joson (Lucila) is the President and majority stockholder of petitioner corporation.
Respondent Alfredo M. Joson (Alfredo), on the other hand, was the General Manager, incorporator,
director and stockholder of petitioner corporation. Before petitioner corporation was officially
incorporated, respondent has already been engaged by petitioner Lucila, in her capacity as President of
Marc Marketing, Inc., to work as the General Manager of petitioner corporation. It was formalized
through the execution of a Management Contract dated 16 January 1994 under the letterhead of Marc
Marketing, Inc. as petitioner corporation is yet to be incorporated at the time of its execution. It was
explicitly provided therein that respondent shall be entitled to 30% of its net income for his work as
General Manager. Respondent will also be granted 30% of its net profit to compensate for the possible
loss of opportunity to work overseas. Petitioner corporation decided to stop and cease its operations, as
evidenced by an Affidavit of Non-Operation16 dated 31 August 1998, due to poor sales collection
aggravated by the inefficient management of its affairs. On the same date, it formally informed
respondent of the cessation of its business operation. Concomitantly, respondent was apprised of the
termination of his services as General Manager since his services as such would no longer be necessary
for the winding up of its affairs. Feeling aggrieved, respondent filed a Complaint for Reinstatement and
Money Claim against petitioners before the Labor Arbiter which was docketed as NLRC NCR Case No.
00-03-04102-99.In his complaint, respondent averred that petitioner Lucila dismissed him from his
employment with petitioner corporation due to the feeling of hatred she harbored towards his family. The
same was rooted in the filing by petitioner Lucila’s estranged husband, who happened to be respondent’s
brother, of a Petition for Declaration of Nullity of their Marriage. The Labor Arbiter rendered his
Decision in favor of respondent. Petitioners opted to file a Motion to Dismiss grounded on the Labor
Arbiter’s lack of jurisdiction as the case involved an intra-corporate controversy, which jurisdiction
belongs to the SEC [now with the Regional Trial Court (RTC). The Labor Arbiter  directive the
petitioners to submit position paper. Still, petitioners did not comply. Labor Arbiter rendered his Decision
in favor of respondent. The Labor Arbiter elucidated that petitioners failed to adduce evidence to prove
that the present case involved an intra-corporate controversy. Also, respondent’s money claim did not
arise from his being a director or stockholder of petitioner corporation but from his position as being its
General Manager. The Labor Arbiter likewise held that respondent was not a corporate officer under
petitioner corporation’s by-laws. As such, respondent’s complaint clearly arose from an employer-
employee relationship, thus, subject to the Labor Arbiter’s jurisdiction. The Labor Arbiter then declared
respondent’s dismissal from employment as illegal. Aggrieved, petitioners appealed the aforesaid Labor
Arbiter’s Decision to the NLRC. The NLRC ruled in favor of petitioners by giving credence to the
Secretary’s Certificate, which evidenced petitioner corporation’s Board of Directors’ meeting in which a
resolution was approved appointing respondent as its corporate officer with designation as General
Manager. Therefrom, the NLRC reversed and set aside the Labor Arbiter’s Decision dated 1 October
2001 and dismissed respondent’s Complaint for want of jurisdictionThe NLRC went further by stating
that respondent’s claim for 30% of the net profit of the corporation can only emanate from his right of
ownership therein as stockholder, director and/or corporate officer. Dividends or profits are paid only to
stockholders or directors of a corporation and not to any ordinary employee in the absence of any profit
sharing scheme. In addition, the question of remuneration of a person who is not a mere employee but a
stockholder and officer of a corporation is not a simple labor problem. Such matter comes within the
ambit of corporate affairs and management and is an intra-corporate controversy in contemplation of the
Corporation Code. Respondent filed a Petition for Certiorari with the Court of Appeals ascribing grave
abuse of discretion on the part of the NLRC. The Court of Appeals rendered its now assailed Decision
declaring that the Labor Arbiter has jurisdiction over the present controversy. It upheld the finding of the
Labor Arbiter that respondent was a mere employee of petitioner corporation, who has been illegally
dismissed from employment without valid cause and without due process. The CA remanded the case to
NLRC for further proceedings to determine the appropriate amount of monetary awards to be adjudged in
favor of respondent and costs against the [petitioners] in solidum. Petitioners are now before this Court
contends  that  Lucila cannot be held solidarily liable with petitioner corporation. There was neither
allegation nor of evidence presented to show that she acted with malice and bad faith in her dealings with
respondent.
Issue/s:WHETHER OR NOT LUCILA BEING A PRESIDENT OF THE CORPORATION IS
SOLIDARY LIABLE WITH THE CORPORATION?

Held:yes,

 As a rule, corporation has a personality separate and distinct from its officers, stockholders and members
such that corporate officers are not personally liable for their official acts unless it is shown that they have
exceeded their authority. However, this corporate veil can be pierced when the notion of the legal entity is
used as a means to perpetrate fraud, an illegal act, as a vehicle for the evasion of an existing obligation,
and to confuse legitimate issues. Under the Labor Code, for instance, when a corporation violates a
provision declared to be penal in nature, the penalty shall be imposed upon the guilty officer or officers of
the corporation.
Based on the prevailing circumstances in this case, petitioner Lucila, being the President of petitioner
corporation, acted in bad faith and with malice in effecting respondent’s dismissal from employment.
Although petitioner corporation has a valid cause for dismissing respondent due to cessation of business
operations, however, the latter’s dismissal therefrom was done abruptly by its President, petitioner Lucila.
Respondent was not given the required one-month prior written notice that petitioner corporation will
already cease its business operations. As can be gleaned from the records, respondent was dismissed
outright by petitioner Lucila on the same day that petitioner corporation decided to stop and cease its
business operations. Worse, respondent was not given separation pay considering that petitioner
corporation’s cessation of business was not due to business losses or financial reverses.

1. 29Jose Emmanuel Guillermo vs. Crisanto Uson, G.R. No. 198967, March 07, 2016
Cherelie Bugarin

Doctrine:Personal liability attaches only when, as enumerated by the said Section 31 of theCorporation
Code, there is a wilfull and knowing assent to patently unlawful acts of the corporation, there is gross
negligence or bad faith in directing the affairs of the corporation, or there is a conflict of interest resulting
in damages to the corporation. It also bears emphasis that in cases where personal liability attaches not
even all officers are made accountable. Rather, only the "responsible officer," i.e., the  person directly
responsible for and who "acted in bad faith"in committing the illegal dismissal or any act violative of the
Labor Code, is held solidarily liable, in cases wherein the corporate veil is pierced. In other instances,
such as cases of so-called corporate tort of a close corporation, it is the person "actively engaged" in the
management of the corporation who is held liable. In the absence of a clearly identifiable officer(s)
directly responsible for the legal infraction, the Court considers the president of the corporation as such
officer. However the veil of corporate fiction can be pierced, and responsible
corporate directors and officers or even a separate but related corporation may be impleaded and held
answerable solidarily in a labor case, even after final judgment and on execution, so long as it is
established that such persons have deliberately used the corporate vehicle to unjustly evade the
judgment obligation, or have resorted to fraud, bad faith or malice in doing so. When the shield of a  
separate corporate identity is used to commit wrongdoing and opprobriously elude responsibility, the
courts and the legal authorities in a labor case have not hesitated to step in and shatter the said shield
and deny the usual protections to the offending party, even after final judgment. The key element is the
presence of fraud, malice or bad faith. Bad faith, in this instance, does not connote bad judgment or
negligence but a dishonest purpose or some moral obliquity and conscious doing of wrong; it means
breach of a known duty through some motive or interest or ill will; it partakes of the nature of fraud. 

Facts:On March 11, 1 996, respondent Crisan to P. Uson (Uson) began his employment with Royal Class
Venture Phils., Inc. (Royal Class Venture) as an accounting clerk. Eventually, he was promoted to the
position of accounting supervisor, with a salary of Phpl3, 000.00 a month, until he was allegedly
dismissed from employment on December 20, 2000. On March 2, 2001, Uson filed with the Sub-Regional
ArbitrationBranch No. 1, Dagupan City, of the NLRC a Complaint for Illegal Dismissal, with prayers for
backwages, reinstatement, salaries and 13 month pay, moral and exemplary damages and attorney's fees
against Royal Class Venture. Royal Class Venture did not make an appearance in the case despite its
receipt of summon. Labor Arbiter Jose G. De Vera rendered a decision in favor of the complainant Uson
and ordering therein respondent Royal Class Venture to reinstate him to his former position and pay his
backwages, 13  month pay as well as moral and exemplary damages and attorney's fees. Royal Class
Venture, as the losing party, did not file an appeal of the decision. An Alias Writ of Execution was issued.
But with the judgment still unsatisfied, a Second Alias Writ of Execution but still unsatisfied. The motion
quoted from a portion of the Sheriffs Return, which states: On September 12, 2002, the undersigned
proceeded at the stated present business office address of the respondent which is at Minien East,Sta.
Barbara~ Pangasinan to serve the writ of execution. Upon arrival, I found out that the establishment
erected thereat is not the respondent's name but JOEL and SONS CORPORATION, a family corporation
owned by the Guillermos of which, Jose Emmanuel F. Guillermo the General Manager of the respondent,
is one of the stockholders who received the writ using his nickname "Joey," [and who]  concealed his real
identity and pretended that he was the brother of Jose, which was contrary to the statement of the guard-
on-duty that Jose and Joey were one and the same person. The former also informed the undersigned that
the respondent's corporation has been dissolved. On the succeeding day, as per advice by the
complainant's counsel that the respondent has an account at the Bank of Philippine Islands Magsaysay
Branch, A.B. Fernandez Ave., Dagupan City, the undersigned immediately served a notice of
garnishment, thus, the bank replied on the same day stating that the respondent does not have an account
with the branch. Labor Arbiter Irenarco R. Rimando issued an order granting the  motion filed by Uson.
The order held that officers of a corporation are jointly and severally liable for the obligations of the
corporation to the employees and there is no denial of due process in holding them so even if the said
officers were not parties to the case when the judgment in favor of the employees was rendered.Thus, the
Labor Arbiter pierced the veil of corporate fiction of Royal Class Venture and held herein petitioner Jose
Emmanuel Guillermo in his personal capacity, jointly and severally liable with the corporation for the
enforcement of the claims of Uson. Guillermo asserts that he was impleaded in the case only more than a
year after its decision had become final and executory, an act which he claims to be unsupported in law
and jurisprudence. He contends that the decision had become final, immutable and unalterable and that
any amendment thereto is null and void. Guillermo assails the so-called"piercing the veil" of corporate
fiction which allegedly discriminated against him when he alone was belatedly impleaded despite the
existence of other directors and officers in Royal Class Venture.

Issue/s:Whether  or not an officer of a corporation may be included as judgment obligor in a labor case?

Held: YES

Personal liability attaches only when, as enumerated by the said Section 31 of theCorporation Code, there
is a wilfull and knowing assent to patently unlawful acts of the corporation, there is gross negligence or
bad faith in directing the affairs of the corporation, or there is a conflict of interest resulting in damages to
the corporation. It also bears emphasis that in cases where personal liability attaches not even all officers
are made accountable. Rather, only the "responsible officer," i.e., the  person directly responsible for and
who "acted in bad faith"in committing the illegal dismissal or any act violative of the Labor Code, is held
solidarily liable, in cases wherein the corporate veil is pierced. In other instances, such as cases of so-
called corporate tort of a close corporation, it is the person "actively engaged" in the management of the
corporation who is held liable. In the absence of a clearly identifiable officer(s) directly responsible for
the legal infraction, the Court considers the president of the corporation as such officer. However the veil
of corporate fiction can be pierced, and responsible corporate directors and officers or even a separate but
related corporation may be impleaded and held answerable solidarily in a labor case, even after final
judgment and on execution, so long as it is established that such persons have deliberately used the
corporate vehicle to unjustly evade the judgment obligation, or have resorted to fraud, bad faith or malice
in doing so. When the shield of a  separate corporate identity is used to commit wrongdoing and
opprobriously elude responsibility, the courts and the legal authorities in a labor case have not hesitated to
step in and shatter the said shield and deny the usual protections to the offending party, even after final
judgment. The key element is the presence of fraud, malice or bad faith. Bad faith, in this instance, does
not connote bad judgment or negligence but a dishonest purpose or some moral obliquity and conscious
doing of wrong; it means breach of a known duty through some motive or interest or ill will; it partakes of
the nature of fraud. Guillermo, the officer being held liable, is the person responsible in the actual running
of the company and for the malicious and illegal dismissal of the complainant; he, likewise, was shown to
have a role in dissolving the original obligor company in an obvious" scheme to avoid liability" which
jurisprudence has always looked upon with a suspicious eye in order to protect the rights of labor.
Guillermo's knowledge of the case's filing and existence and his unexplained refusal to participate in it as
the responsible official of his company, again is an indication of his bad faith and malicious intent to
evade the judgment of the labor tribunals  venture and helped incorporate a new firm, located in the same
address as the former, wherein he is again a stockholder. This is borne by the Sheriffs Return which
reported: that at Royal Class Venture's business address at Minien East, Sta. Barbara, Pangasinan, there is
a new establishment named "Joel and Sons Corporation," a family corporation owned by the Guillermos
in which Jose Emmanuel F. Guillermo is again one of the stockholders; that Guillermo received the writ
of execution but used the nickname "Joey" and denied being Jose Emmanuel F. Guillermo and instead,
pretended to be Jose's brother; that the guard on duty confirmed that Jose and Joey are one and the same
person and that the respondent corporation Royal Class Venture had been dissolved. The foregoing
clearly indicate a pattern or scheme to avoid the obligations to Uson and frustrate the execution of the
judgment award.

1. 51European Resources and Technologies, Inc., et. al. vs. Ingenieuburo Birkhahn + Nolte, et.
al., G.R. No. 159586, July 26, 2004
Lorenz Allan Gatpolintan

Doctrine: A  foreign corporation doing business in the Philippines without license may sue in Philippine
Courts a Philippine citizen or entity that had contracted with and benefited from it.

Facts: European Resources and Technologies Inc. (hereinafter “ERTI”), a corporation organized and existing
under the laws of the Republic of the Philippines, is joined by Delfin J. Wenceslao as petitioner in this case.
Ingenieuburo Birkhan + Nolte Ingiurgesellschaft mbh and Heers & Brockstedt Gmbh & Co. are German
corporations who are respondents in this case and shall be collectively referred to as the “German Consortium.”
The German Consortium tendered and submitted its bid to the Clark Development Corporation (“CDC”) to
construct, operate and manage the Integrated Waste Management Center at the Clark Special Economic Zone
(“CSEZ”). CDC accepted the German Consortium’s bid and awarded the contract to it. On October 6, 1999, CDC and
the German Consortium executed the Contract for Services which embodies the terms and conditions of their
agreement. The Contract for Services provides that the German Consortium shall be empowered to enter into a
contract or agreement for the use of the integrated waste management center by corporations, local government
units, entities, and persons not only within the CSEZ but also outside. Article VIII, Section 7 of the Contract for
Services provides that the German Consortium shall undertake to organize a local corporation as its representative
for this project. 

On April 18, 2000, the German Consortium entered into a Joint Venture with D.M. Wenceslao and Associates, Inc.
(“DMWAI”) and Ma. Elena B. Villarama (doing business as LBV and Associates), embodied in a Memorandum of
Understanding (“MOU”) signed by the parties. Under the MOU, the parties agreed to jointly form a local
corporation to which the German Consortium shall assign its rights under the Contract for Services. Pursuant to
this agreement, petitioner European Resources and Technologies, Inc. was incorporated. On December 11, 2000,
ERTI received a letter from BN Consultants Philippines, Inc., signed by Mr. Holger Holst for and on behalf of the
German Consortium, stating that the German Consortium’s contract with DMWAI, LBV&A and ERTI has been
terminated or extinguished.

 On February 20, 2001, petitioner ERTI, through counsel, sent a letter to CDC requesting for the reconsideration of
its disapproval of the agreement between ERTI and the German Consortium. Before CDC could act upon petitioner
ERTI’s letter, the German Consortium filed a complaint for injunction against herein petitioners before the Regional
Trial Court of Angeles City, Branch 61. Petitioners filed their Opposition to the application for preliminary
injunction on February 7, 2001. The following day, February 8, 2001, petitioners sent respondents, through Mr.
Holger Holst, a letter demanding that the parties proceed to arbitration in accordance with Section 17 of the MOA.
At the hearings on the application for injunction, petitioners objected to the presentation of evidence on the
ground that the trial court had no jurisdiction over the case since the German Consortium was composed of
foreign corporations doing business in the country without a license.

Issue: Whether or not respondents are entitled to an injunctive writ

Held: NO, As a general rule, unlicensed foreign non-resident corporations cannot file suits in the Philippines.
Section 133 of the Corporation Code specifically provides:

SECTION 133. 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.

A corporation has legal status only within the state or territory in which it was organized. For this reason, a
corporation organized in another country has no personality to file suits in the Philippines. In order to subject a
foreign corporation doing business in the country to the jurisdiction of our courts, it must acquire a license from
the Securities and Exchange Commission (SEC) and appoint an agent for service of process. Without such license, it
cannot institute a suit in the Philippines.
However, there are exceptions to this rule. In a number of cases,we have declared a party estopped from
challenging or questioning the capacity of an unlicensed foreign corporation from initiating a suit in our courts. It
has been held that a foreign corporation doing business in the Philippines without license may sue in Philippine
Courts a Philippine citizen or entity that had contracted with and benefited from it.
Hence, the party is estopped from questioning the capacity of a foreign corporation to institute an action in our
courts where it had obtained benefits from its dealings with such foreign corporation and thereafter committed a
breach of or sought to renege on its obligations. 
In the case at bar, petitioners have clearly not received any benefit from its transactions with the German
Consortium. In fact, there is no question that petitioners were the ones who have expended a considerable
amount of money and effort preparatory to the implementation of the MOA. Neither do petitioners seek to back
out from their obligations under both the MOU and the MOA by challenging respondents’ capacity to sue. The
reverse could not be any more accurate. Petitioners are insisting on the full validity and implementation of their
agreements with the German Consortium.

3.