JOSE M. ROY III v. CHAIRPERSON TERESITA HERBOSA, GR No.

207246, 2016-11-22
Facts:
The Court issued the Gamboa Decision,... that the term "capital" in Section 11, Article XII of the
1987 Constitution refers only to shares of stock entitled to vote in the election of directors, and thus
in the present case only to common shares, and not to the total outstanding capital stock (common
and non-voting preferred shares).
The Gamboa Decision attained finality on October 18, 2012, and Entry of Judgment was thereafter
issued on December 11, 2012
On May 20, 2013, the SEC, through respondent Chairperson Teresita J. Herbosa, issued SEC-MC No.
8
Section 2. All covered corporations shall, at all times, observe the constitutional or statutory
ownership requirement. For purposes of determining compliance therewith, the required
percentage of Filipino ownership shall be applied to BOTH (a) the total number of outstanding
shares of stock entitled to vote in the election of directors; AND (b) the total number of outstanding
shares of stock, whether or not entitled to vote in the election of directors.
On June 10, 2013, petitioner Roy, as a lawyer and taxpayer, filed the Petition,[15] assailing the
validity of SEC-MC No. 8 for not conforming to the letter and spirit of the Gamboa Decision and
Resolution and for having been issued by the SEC with grave abuse of discretion.
Issues:
whether the SEC gravely abused its discretion in issuing SEC-MC No. 8 in light of the Gamboa
Decision and Gamboa Resolution
Ruling:
SEC did not commit grave abuse of discretion amounting to lack or excess of jurisdiction when it
issued SEC-MC No. 8. To the contrary, the Court finds SEC-MC No. 8 to have been issued in fealty to
the Gamboa Decision and Resolution.
Gamboa Decision
"capital" in Section II, Article XII of the I987 Constitution refers only to shares of stock entitled to
vote in the election of directors, and thus in the present case only to common shares, and not to
the total outstanding capital stock (common and non-voting preferred shares).
the Gamboa Resolution
Foreign Investments Act of 1991 ("FIA")
Gamboa Resolution put to rest the Court's interpretation of the term "capital"
Full beneficial ownership of stocks, coupled with appropriate voting rights is essential... reiterates
and confirms the interpretation that the term "capital" in Section 11, Article XII of the 1987
Constitution refers to shares with voting rights, as well as with full beneficial ownership.
Section 2 of SEC-MC No. 8 clearly incorporates the Voting Control Test or the controlling interest
requirement. In fact, Section 2 goes beyond requiring a 60-40 ratio in favor of Filipino nationals in
the voting stocks; it moreover requires the 60-40 percentage ownership in the total number of
outstanding shares of stock, whether voting or not. The SEC formulated SEC-MC No. 8 to adhere to
the Court's unambiguous pronouncement that "[f]ull beneficial ownership of 60 percent of the
outstanding capital stock, coupled with 60 percent of the voting rights is required."[79] Clearly, SEC-
MC No. 8 cannot be said to have been issued with grave abuse of discretion
While SEC-MC No. 8 does not expressly mention the Beneficial Ownership Test or full beneficial
ownership of stocks requirement in the FIA, this will not, as it does not, render it invalid meaning, it
does not follow that the SEC will not apply this test in determining whether the shares claimed to
be owned by Philippine nationals are Filipino, i.e., are held by them by mere title or in full beneficial
ownership. To be sure, the SEC takes its guiding lights also from the FIA and its implementing rules,
the Securities Regulation Code

Agilent Technologies Singapore vs. Integrated Silicon Techngology Philippines Corp.

[GR 154618, 14 April 2004]

 Agilent Technologies Singapore (Pte.), Ltd. is a foreign corporation, which, by its own admission,
is not licensed to do business in the Philippines.
 Integrated Silicon Technology Philippines Corporation is a private domestic corporation, 100%
foreign owned, which is engaged in the business of manufacturing and assembling electronics
components. Teoh Kiang Hong, Teoh Kiang Seng and Anthony Choo, Malaysian nationals, are
current members of Integrated Silicon’s board of directors, while Joanne Kate M. dela Cruz, Jean
Kay M. dela Cruz, and Rolando T. Nacilla are its former members. The juridical relation among
the various parties in the case can be traced to a 5-year Value Added Assembly Services
Agreement (VAASA), entered into on 2 April 1996 between Integrated Silicon and the Hewlett-
Packard Singapore (Pte.) Ltd., Singapore Components Operation (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; transport machinery to the
plant of Integrated Silicon; and pay Integrated Silicon the purchase price of the finished products. The
VAASA had a five-year term, beginning on 2 April 1996, with a provision for annual renewal by mutual
written consent. On 19 September 1999, with the consent of Integrated Silicon, HP-Singapore assigned
all its rights and obligations in the VAASA to Agilent. On 25 May 2001, Integrated Silicon filed a
complaint for “Specific Performance and Damages” against Agilent and its officers Tan Bian Ee, Lim Chin
Hong, Tey Boon Teck and Francis Khor (Civil Case 3110-01-C), alleging that Agilent breached the parties’
oral agreement to extend the VAASA. Integrated Silicon thus prayed that Agilent be ordered to execute
a written extension of the VAASA for a period of five years as earlier assured and promised; to comply
with the extended VAASA; and to pay actual, moral, exemplary damages and attorney’s fees. 
On 1 June 2001, summons and a copy of the complaint were served on Atty. Ramon Quisumbing, who
returned these processes on the claim that he was not the registered agent of Agilent. Later, he entered
a special appearance to assail the court’s jurisdiction over the person of Agilent. On 2 July 2001, Agilent
filed a separate complaint against Integrated Silicon, Teoh Kang Seng, Teoh Kiang Gong, Anthony Choo,
Joanne Kate M. dela Cruz, Jean Kay M. dela Cruz and Rolando T. Nacilla, for “Specific Performance,
Recovery of Possession, and Sum of Money with Replevin, Preliminary Mandatory Injunction, and
Damages”, before the Regional Trial Court, Calamba, Laguna, Branch 92 (Civil Case 3123-2001-C). Agilent
prayed that a writ of replevin or, in the alternative, a writ of preliminary mandatory injunction, be issued
ordering Integrated Silicon, et. al. to immediately return and deliver to Agilent its equipment,
machineries and the materials to be used for fiber-optic components which were left in the plant of
Integrated Silicon; and that the latter be ordered to pay actual and exemplary damages and attorney’s
fees. Integrated Silicon, et. al. filed a Motion to Dismiss in Civil Case No. 3123-2001-C, on the grounds of
lack of Agilent’s legal capacity to sue; litis pendentia; forum shopping; and failure to state a cause of
action. On 4 September 2001, the trial court denied the Motion to Dismiss and granted Agilent’s
application for a writ of replevin. 

Issue:. 

1. Whether Agilent was doing business in the Philippines. 

Held: 

2. 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. An analysis of the relevant case law, in conjunction with
Section 1 of the Implementing Rules and Regulations of the Foreign Investments Act of 1991 (FIA, as
amended by RA 8179), would demonstrate that the acts enumerated in the VAASA do not constitute
“doing business” in the Philippines. Section 1 of the Implementing Rules and Regulations of the FIA (as
amended by RA 8179) provides that the following shall not be deemed “doing business”:

(1) Mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do
business, and/or the exercise of rights as such investor;
(2) Having a nominee director or officer to represent its interest in such corporation;
(3) Appointing a representative or distributor domiciled in the Philippines which transacts business in
the representative’s or distributor’s own name and account;
(4) The publication of a general advertisement through any print or broadcast media;
(5) Maintaining a stock of goods in the Philippines solely for the purpose of having the same processed
by another entity in the Philippines;
(6) Consignment by a foreign entity of equipment with a local company to be used in the processing of
products for export;
(7) Collecting information in the Philippines; and
(8) Performing services auxiliary to an existing isolated contract of sale which are not on a continuing
basis, such as installing in the Philippines machinery it has manufactured or exported to the Philippines,
servicing the same, training domestic workers to operate it, and similar incidental services.

By and large, to constitute “doing business”, the activity to be undertaken in the Philippines is one that
is for profit-making. Herein, by the clear terms of the VAASA, Agilent’s activities in the Philippines were
confined to (1) maintaining a stock of goods in the Philippines solely for the purpose of having the same
processed by Integrated Silicon; and (2) consignment of equipment with Integrated Silicon to be used in
the processing of products for export. As such, Agilent cannot be deemed to be “doing business” in the
Philippines. Integrated Silicon, et. al.’s contention that Agilent lacks the legal capacity to file suit is
therefore devoid of merit. As a foreign corporation not doing business in the Philippines, it needed no
license before it can sue before our courts.

Cargill, Inc. v. Intra Strata Assurance Corporation

G.R. No. 168266, 15 March 2010

FACTS:

Petitioner Cargill (foreign) is a corporation organized and existing under the laws of the State of
Delaware. Cargill executed a contract with Northern Mindanao Corporation (NMC)(domestic), whereby
NMC agreed to sell to petitioner molasses to be delivered from Jan 1 to 30 1990 for $44 per metric ton.
The contract provided that CARGILL was to open a Letter of Credit with the BPI. NMC was permitted to
draw up 500,000 representing the minimum price of the contract. The contract was amended 3 times (in
relation to the amount and the price). But the third amendment required NMC to put up a performance
bond which was intended to guarantee NMC’s performance to deliver the molasses during the
prescribed shipment periods.

In compliance, INTRA STRATA issued a performance bond to guarantee NMC’s delivery. NMC was only
able to deliver 219551 metric tons out of the agreed 10,500.Thus CARGILL sent demand letters to INTRA
claiming payment under the performance and surety bonds. When INTRA failed to pay, CARGILL filed a
complaint.

CARGILL NMC and INTRA entered into a compromise agreement approved by the court, such provided
that NMC would pay CARGILL 3 million upon signing and would deliver to CARGILL 6,991 metric tons of
molasses. But NMC still failed to comply.

ISSUE:

Whether or not petitioner is doing or transacting business in the Philippines in contemplation of the law
and established jurisprudence.

RULING:
NO. The determination of whether a foreign corporation is doing business in the Philippines must be
based on the facts of each case. In the case at bar, the transactions entered into by the respondent with
the petitioners are not a series of commercial dealings which signify an intent on the part of the
respondent to do business in the Philippines but constitute an isolated one which does not fall under the
category of “doing business.” The records show that the only reason why the respondent entered into
the second and third transactions with the petitioners was because it wanted to recover the loss it
sustained from the failure of the petitioners to deliver the crude coconut oil under the first transaction
and in order to give the latter a chance to make good on their obligation.

In the present case, petitioner is a foreign company merely importing molasses from a Philipine
exporter. A foreign company that merely imports goods from a Philippine exporter, without opening an
office or appointing an agent in the Philippines, is not doing business in the Philippines.

Steelcase, Inc. v. Design International Selections, Inc. (DISI), G.R. No. 171995, 18 April 2012

FACTS

Steelcase, Inc. (Steelcase) granted Design International Selections, Inc. (DISI) the right to market, sell,
distribute, install, and service its products to end-user customers within the Philippines.

Steelcase argues that Section 3(d) of R.A. No. 7042 or the Foreign Investments Act of
1991 (FIA) expressly states that the phrase doing business excludes the appointment by a foreign
corporation of a local distributor domiciled in the Philippines which transacts business in its own name
and for its own account. 

On the other hand, DISI argues that it was appointed by Steelcase as the latter’s exclusive distributor of
Steelcase products. 

The dealership agreement between Steelcase and DISI had been described by the owner himself as
basically a buy and sell arrangement.

ISSUE

Whether Steelcase had been doing business in the Philippines.

RULING

NO.
[T]he appointment of a distributor in the Philippines is not sufficient to constitute doing business unless
it is under the full control of the foreign corporation. On the other hand, if the distributor is an
independent entity which buys and distributes products, other than those of the foreign corporation, for
its own name and its own account, the latter cannot be considered to be doing business in
the Philippines. Here, DISI was an independent contractor which sold Steelcase products in its own
name and for its own account. As a result, Steelcase cannot be considered to be doing business in
the Philippines by its act of appointing a distributor as it falls under one of the exceptions under R.A. No.
7042.

B. Van Zuiden Bros. Ltd. v. GTVL Manufacturing, G.R. No. 147905, 28 May 2007

18APR

FACTS

B. Van Zuiden Bros. Ltd. (Zuiden) is a corporation incorporated under the laws of Hong Kong, suing in
Philippine court for collection of sum of money. In its complaint, petitioner alleged that it is engaged in
the importation and exportation of several products, including lace products. Petitioner asserted that on
several occasions, respondent purchased lace products from it. Petitioner also claimed that respondent
instructed it to deliver the purchased goods to Kenzar, which is a Hong Kong company based in Hong
Kong. Upon Kenzars receipt of the goods, the products were considered sold. Kenzar, in turn, had the
obligation to deliver the lace products to the Philippines. In other words, the sale of lace products was
consummated in Hong Kong. Instead of filing an Answer, GTVL Manufacturing (GVTL) filed a Motion to
Dismiss

ISSUES

(1) Whether the petitioner, an unlicensed foreign corporation, has legal capacity to sue before Philippine
courts.

(2) What constitutes doing business in the Philippines?

 RULINGS

(1) YES, if the foreign corporation is not doing business in the Philippines. NO, if the foreign corporation
is doing business in the Philippines.
Section 133 of the Corporation Code provides:

Doing business without license.  No foreign corporation transacting business in the Philippines without a
license, or its successors or assigns, shall be permitted to maintain or intervene in any action, suit or
proceeding in any court or administrative agency of the Philippines; but such corporation may be sued or
proceeded against before Philippine courts or administrative tribunals on any valid cause of action
recognized under Philippine laws.

The law is clear. An unlicensed foreign corporation doing business in the Philippines cannot sue before
Philippine courts. On the other hand, an unlicensed foreign corporation not doing business in the
Philippines can sue before Philippine courts.

The series of transactions between petitioner and respondent cannot be classified as doing business in
the Philippines under Section 3(d) of RA 7042. An essential condition to be considered as doing business
in the Philippines is the actual performance of specific commercial acts within the territory of the
Philippines for the plain reason that the Philippines has no jurisdiction over commercial acts performed
in foreign territories. Here, there is no showing that petitioner performed within the Philippine
territory the specific acts of doing business mentioned in Section 3(d) of RA 7042.  Petitioner did not also
open an office here in the Philippines, appoint a representative or distributor, or manage, supervise or
control a local business. While petitioner and respondent entered into a series of transactions implying a
continuity of commercial dealings, the perfection and consummation of these transactions were done
outside the Philippines.

(2) To be doing or transacting business in the Philippines for purposes of Section 133 of the Corporation
Code, the foreign corporation must actually transact business in the Philippines, that is, perform specific
business transactions within the Philippine territory on a continuing basis in its own name and for its
own account. Actual transaction of business within the Philippine territory is an essential requisite for
the Philippines to acquire jurisdiction over a foreign corporation and thus require the foreign
corporation to secure a Philippine business license. If a foreign corporation does not transact such kind
of business in the Philippines, even if it exports its products to the Philippines, the Philippines has no
jurisdiction to require such foreign corporation to secure a Philippine business license.