COrporation Cases Set V  

G.R. No. 171995

 
1. STEELCASE, INC., Present:
Petitioner,  
- versus - VELASCO, JR., J., Chairperson,
DESIGN INTERNATIONAL PERALTA,
SELECTIONS, INC., ABAD,
Respondent. MENDOZA, and
PERLAS-BERNABE, JJ.
Promulgated:
April 18, 2012
x-----------------------------------------------------------------------------------------x
DECISION
MENDOZA, J.:
 
This is a petition for review on certiorari under Rule 45 assailing the March 31, 2005 Decision [1] of the Court of Appeals (CA) which
affirmed the May 29, 2000 Order[2] of the Regional Trial Court, Branch 60, Makati City (RTC), dismissing the complaint for sum of money in
Civil Case No. 99-122 entitled Steelcase, Inc. v. Design International Selections, Inc.

The Facts
 
Petitioner Steelcase, Inc. (Steelcase) is a foreign corporation existing under the laws of Michigan, United States of America (U.S.A.), and
engaged in the manufacture of office furniture with dealers worldwide. [3] Respondent Design International Selections, Inc. (DISI) is a
corporation existing under Philippine Laws and engaged in the furniture business, including the distribution of furniture. [4]
 
Sometime in 1986 or 1987, Steelcase and DISI orally entered into a dealership agreement whereby Steelcase granted DISI the right to market,
sell, distribute, install, and service its products to end-user customers within the  Philippines. The business relationship continued smoothly
until it was terminated sometime in January 1999 after the agreement was breached with neither party admitting any fault. [5]
 
On January 18, 1999, Steelcase filed a complaint [6] for sum of money against DISI alleging, among others, that DISI had an unpaid account of
US$600,000.00. Steelcase prayed that DISI be ordered to pay actual or compensatory damages, exemplary damages, attorneys fees, and costs
of suit.
 
In its Answer with Compulsory Counterclaims [7] dated February 4, 1999, DISI sought the following: (1) the issuance of a temporary
restraining order (TRO) and a writ of preliminary injunction to enjoin Steelcase from selling its products in the Philippines except through
DISI; (2) the dismissal of the complaint for lack of merit; and (3) the payment of actual, moral and exemplary damages together with attorneys
fees and expenses of litigation. DISI alleged that the complaint failed to state a cause of action and to contain the required allegations on
Steelcases capacity to sue in the Philippines despite the fact that it (Steelcase) was doing business in the Philippines without the required
license to do so. Consequently, it posited that the complaint should be dismissed because of Steelcases lack of legal capacity to sue in Philippine
courts.
 
On March 3, 1999, Steelcase filed its Motion to Admit Amended Complaint [8] which was granted by the RTC, through then Acting
Presiding Judge Roberto C. Diokno, in its Order [9] dated April 26, 1999. However, Steelcase sought to further amend its complaint by filing a
Motion to Admit Second Amended Complaint [10] on March 13, 1999.
 
In his Order[11] dated November 15, 1999, Acting Presiding Judge Bonifacio Sanz Maceda dismissed the complaint, granted the TRO
prayed for by DISI, set aside the April 26, 1999 Order of the RTC admitting the Amended Complaint, and denied Steelcases Motion to Admit
Second Amended Complaint. The RTC stated that in requiring DISI to meet the Dealer Performance Expectation and in terminating the
dealership agreement with DISI based on its failure to improve its performance in the areas of business planning, organizational structure,
operational effectiveness, and efficiency, Steelcase unwittingly revealed that it participated in the operations of DISI. It then concluded that
Steelcase was doing business in the Philippines, as contemplated by Republic Act (R.A.)No. 7042 (The Foreign Investments Act of 1991), and
since it did not have the license to do business in the country, it was barred from seeking redress from our courts until it obtained the requisite
license to do so. Its determination was further bolstered by the appointment by Steelcase of a representative in the  Philippines. Finally, despite
a showing that DISI transacted with the local customers in its own name and for its own account, it was of the opinion that any doubt in the
factual environment should be resolved in favor of a pronouncement that a foreign corporation was doing business in the Philippines,
considering the twelve-year period that DISI had been distributing Steelcase products in the Philippines.
 
Steelcase moved for the reconsideration of the questioned Order but the motion was denied by the RTC in its May 29, 2000 Order.[12]
 
Aggrieved, Steelcase elevated the case to the CA by way of appeal, assailing the  November 15, 1999 and May 29, 2000 Orders of the
RTC. On March 31, 2005, the CA rendered its Decision affirming the RTC orders, ruling that Steelcase was a foreign corporation doing or
transacting business in the Philippines without a license. The CA stated that the following acts of Steelcase showed its intention to pursue and
continue the conduct of its business in the Philippines: (1) sending a letter to Phinma, informing the latter that the distribution rights for its
products would be established in the near future and directing other questions about orders for Steelcase products to Steelcase International;
(2) cancelling orders from DISIs customers, particularly Visteon, Phils., Inc. (Visteon); (3) continuing to send its products to the Philippines
through Modernform Group Company Limited (Modernform), as evidenced by an Ocean Bill of Lading; and (4) going beyond the mere
appointment of DISI as a dealer by making several impositions on management and operations of DISI.  Thus, the CA ruled that Steelcase was
barred from access to our courts for being a foreign corporation doing business here without the requisite license to do so.
 
Steelcase filed a motion for reconsideration but it was denied by the CA in its Resolution dated March 23, 2006.[13]
 
Hence, this petition.
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The Issues
 
Steelcase filed the present petition relying on the following grounds:
 
I
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR WHEN IT FOUND THAT STEELCASE HAD BEEN DOING
BUSINESS IN THE PHILIPPINES WITHOUT A LICENSE.

II
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN NOT FINDING THAT RESPONDENT WAS ESTOPPED
FROM CHALLENGING STEELCASES LEGAL CAPACITY TO SUE, AS AN AFFIRMATIVE DEFENSE IN ITS ANSWER.
The issues to be resolved in this case are:
 
(1) Whether or not Steelcase is doing business in the Philippines without a license; and
 
(2) Whether or not DISI is estopped from challenging the Steelcases legal capacity to sue.
 
The Courts Ruling
 
The Court rules in favor of the petitioner.
 
Steelcase is an unlicensed foreign corporation NOT doing business in the Philippines
 
Anent the first issue, 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.  Steelcase claims that it was not doing business in the Philippines when it entered
into a dealership agreement with DISI where the latter, acting as the formers appointed local distributor, transacted business in its own name
and for its own account.Specifically, Steelcase contends that it was DISI that sold Steelcases furniture directly to the end-users or customers
who, in turn, directly paid DISI for the furniture they bought. Steelcase further claims that DISI, as a non-exclusive dealer in the Philippines,
had the right to market, sell, distribute and service Steelcase products in its own name and for its own account.  Hence, DISI was an
independent distributor of Steelcase products, and not a mere agent or conduit of Steelcase.
 
On the other hand, DISI argues that it was appointed by Steelcase as the latters exclusive distributor of Steelcase products.  DISI likewise asserts
that it was not allowed by Steelcase to transact business in its own name and for its own account as Steelcase dictated the manner by which it
was to conduct its business, including the management and solicitation of orders from customers, thereby assuming control of its operations.
DISI further insists that Steelcase treated and considered DISI as a mere conduit, as evidenced by the fact that Steelcase itself directly sold its
products to customers located in the Philippines who were classified as part of their global accounts. DISI cited other established circumstances
which prove that Steelcase was doing business in the Philippines including the following: (1) the sale and delivery by Steelcase of furniture to
Regus, a Philippine client, through Modernform, a Thai corporation allegedly controlled by Steelcase; (2) the imposition by Steelcase of certain
requirements over the management and operations of DISI; (3) the representations made by Steven Husak as Country Manager of Steelcase;
(4) the cancellation by Steelcase of orders placed by Philippine clients; and (5) the expression by Steelcase of its desire to maintain its business
in the Philippines. Thus, Steelcase has no legal capacity to sue in Philippine Courts because it was doing business in the  Philippines without a
license to do so.

The Court agrees with the petitioner.

 
The rule that an unlicensed foreign corporations doing business in the Philippine do not have the capacity to sue before the local courts is well-
established. Section 133 of the Corporation Code of the Philippines explicitly states:
 
Sec. 133. Doing business without a license. - No foreign corporation transacting business in the Philippines without a license, or its successors
or assigns, shall be permitted to maintain or intervene in any action, suit or proceeding in any court or administrative agency of the Philippines;
but such corporation may be sued or proceeded against before Philippine courts or administrative tribunals on any valid cause of action
recognized under Philippine laws.
 
The phrase doing business is clearly defined in Section 3(d) of R.A. No. 7042 (Foreign Investments Act of 1991), to wit:
 
d) The phrase doing business shall include soliciting orders, service contracts, opening offices, whether called liaison offices or branches;
appointing representatives or distributors domiciled in the Philippines or who in any calendar year stay in the country for a period or periods
totalling one hundred eighty (180) days or more; participating in the management, supervision or control of any domestic business, firm, entity
or corporation in the Philippines; and any other act or acts that imply a continuity of commercial dealings or arrangements, and contemplate to
that extent the performance of acts or works, or the exercise of some of the functions normally incident to, and in progressive prosecution of,
commercial gain or of the purpose and object of the business organization: Provided, however, That the phrase doing business shall not
be deemed to include 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; nor having a nominee director or officer to represent its interests in such corporation; nor  appointing a
representative or distributor domiciled in the Philippines which transacts business in its own name and for its own
account; (Emphases supplied)
 
This definition is supplemented by its Implementing Rules and Regulations, Rule I, Section 1(f) which elaborates on the meaning of the same
phrase:
 
f.  Doing business shall include soliciting orders, service contracts, opening offices, whether liaison offices or branches; appointing
representatives or distributors, operating under full control of the foreign corporation, domiciled in the Philippines or who in any calendar year
stay in the country for a period totalling one hundred eighty [180] days or more; participating in the management, supervision or control of any
2
domestic business, firm, entity or corporation in the Philippines; and any other act or acts that imply a continuity of commercial dealings or
arrangements, and contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally incident to
and in progressive prosecution of commercial gain or of the purpose and object of the business organization.
 
The following acts shall not be deemed doing business in the Philippines:
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. (Emphases supplied)
 
From the preceding citations, the 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.[14] It should be kept in mind that the determination of whether a foreign corporation is doing business in the  Philippines must
be judged in light of the attendant circumstances. [15]
 
In the case at bench, it is undisputed that DISI was founded in 1979 and is independently owned and managed by the spouses Leandro and
Josephine Bantug.[16] In addition to Steelcase products, DISI also distributed products of other companies including carpet tiles, relocatable
walls and theater settings.[17] The dealership agreement between Steelcase and DISI had been described by the owner himself as:
 
xxx basically a buy and sell arrangement whereby we would inform Steelcase of the volume of the products needed for a particular project
and Steelcase would, in turn, give special quotations or discounts after considering the value of the entire package.  In making the bid of the
project, we would then add out profit margin over Steelcases prices. After the approval of the bid by the client, we would thereafter place the
orders to Steelcase. The latter, upon our payment, would then ship the goods to the  Philippines, with us shouldering the freight charges and
taxes.[18] [Emphasis supplied]
 
This clearly belies DISIs assertion that it was a mere conduit through which Steelcase conducted its business in the country.  From the
preceding facts, the only reasonable conclusion that can be reached is that DISI was an independent contractor, distributing various products of
Steelcase and of other companies, acting in its own name and for its own account.
The CA, in finding Steelcase to be unlawfully engaged in business in the  Philippines, took into consideration the delivery by Steelcase of a letter
to Phinma informing the latter that the distribution rights for its products would be established in the near future, and also its cancellation of
orders placed by Visteon. The foregoing acts were apparently misinterpreted by the CA. Instead of supporting the claim that Steelcase was
doing business in the country, the said acts prove otherwise. It should be pointed out that no sale was concluded as a result of these
communications. Had Steelcase indeed been doing business in the Philippines, it would have readily accepted and serviced the orders from the
abovementioned Philippine companies. Its decision to voluntarily cease to sell its products in the absence of a local distributor indicates its
refusal to engage in activities which might be construed as doing business.
 
Another point being raised by DISI is the delivery and sale of Steelcase products to a Philippine client by Modernform allegedly an agent of
Steelcase. Basic is the rule in corporation law that a corporation has a separate and distinct personality from its stockholders and from other
corporations with which it may be connected. [19] Thus, despite the admission by Steelcase that it owns 25% of Modernform, with the remaining
75% being owned and controlled by Thai stockholders, [20] it is grossly insufficient to justify piercing the veil of corporate fiction and declare that
Modernform acted as the alter ego of Steelcase to enable it to improperly conduct business in the  Philippines. The records are bereft of any
evidence which might lend even a hint of credence to DISIs assertions.As such, Steelcase cannot be deemed to have been doing business in
the Philippines through Modernform.
 
Finally, both the CA and DISI rely heavily on the Dealer Performance Expectation required by Steelcase of its distributors to prove that DISI
was not functioning independently from Steelcase because the same imposed certain conditions pertaining to business planning, organizational
structure, operational effectiveness and efficiency, and financial stability. It is actually logical to expect that Steelcase, being one of the major
manufacturers of office systems furniture, would require its dealers to meet several conditions for the grant and continuation of a
distributorship agreement. The imposition of minimum standards concerning sales, marketing, finance and operations is nothing more than an
exercise of sound business practice to increase sales and maximize profits for the benefit of both Steelcase and its distributors.  For as long as
these requirements do not impinge on a distributors independence, then there is nothing wrong with placing reasonable expectations on them.
All things considered, it has been sufficiently demonstrated that 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.
 
 
DISI is estopped from challenging Steelcases legal capacity to sue
3
  
Regarding the second issue, Steelcase argues that assuming arguendo that it had been doing business in the  Philippines without a
license, DISI was nonetheless estopped from challenging Steelcases capacity to sue in the  Philippines. Steelcase claims that since DISI was
aware that it was doing business in the Philippines without a license and had benefited from such business, then DISI should be estopped from
raising the defense that Steelcase lacks the capacity to sue in the Philippines by reason of its doing business without a license.
 
On the other hand, DISI argues that the doctrine of estoppel cannot give Steelcase the license to do business in the  Philippines or permission to
file suit in the Philippines. DISI claims that when Steelcase entered into a dealership agreement with DISI in 1986, it was not doing business in
the Philippines. It was after such dealership was put in place that it started to do business without first obtaining the necessary license.  Hence,
estoppel cannot work against it. Moreover, DISI claims that it suffered as a result of Steelcases doing business and that it never benefited from
the dealership and, as such, it cannot be estopped from raising the issue of lack of capacity to sue on the part of Steelcase.
 
The argument of Steelcase is meritorious.
 
If indeed Steelcase had been doing business in the Philippines without a license, DISI would nonetheless be estopped from
challenging the formers legal capacity to sue.
 
It cannot be denied that DISI entered into a dealership agreement with Steelcase and profited from it for 12 years from 1987 until
1999. DISI admits that it complied with its obligations under the dealership agreement by exerting more effort and making substantial
investments in the promotion of Steelcase products. It also claims that it was able to establish a very good reputation and goodwill for Steelcase
and its products, resulting in the establishment and development of a strong market for Steelcase products in the  Philippines. Because of this,
DISI was very proud to be awarded the Steelcase International Performance Award for meeting sales objectives, satisfying customer needs,
managing an effective company and making a profit. [21]
 
Unquestionably, entering into a dealership agreement with Steelcase charged DISI with the knowledge that Steelcase was not licensed
to engage in business activities in the Philippines. This Court has carefully combed the records and found no proof that, from the inception of
the dealership agreement in 1986 until September 1998, DISI even brought to Steelcases attention that it was improperly doing business in
the Philippines without a license. It was only towards the latter part of 1998 that DISI deemed it necessary to inform Steelcase of the
impropriety of the conduct of its business without the requisite Philippine license. It should, however, be noted that DISI only raised the issue
of the absence of a license with Steelcase after it was informed that it owed the latter US$600,000.00 for the sale and delivery of its products
under their special credit arrangement.
 
By acknowledging the corporate entity of Steelcase and entering into a dealership agreement with it and even benefiting from it, DISI
is estopped from questioning Steelcases existence and capacity to sue. This is consistent with the Courts ruling in Communication Materials
and Design, Inc. v. Court of Appeals[22] where it was written:
 
Notwithstanding such finding that ITEC is doing business in the country, petitioner is nonetheless estopped from raising this fact to
bar ITEC from instituting this injunction case against it.
 
A foreign corporation doing business in the Philippines may sue in Philippine Courts although not authorized to do
business here against a Philippine citizen or entity who had contracted with and benefited by said corporation.  To put it in
another way, a party is estopped to challenge the personality of a corporation after having acknowledged the same by
entering into a contract with it. And the doctrine of estoppel to deny corporate existence applies to a foreign as well as to domestic
corporations. One who has dealt with a corporation of foreign origin as a corporate entity is estopped to deny its corporate existence and
capacity: The principle will be applied to prevent a person contracting with a foreign corporation from later taking advantage of its
noncompliance with the statutes chiefly in cases where such person has received the benefits of the contract.
 
The rule is deeply rooted in the time-honored axiom of Commodum ex injuria sua non habere debet no person
ought to derive any advantage of his own wrong. This is as it should be for as mandated by law, every person must in the
exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and
good faith.
 
Concededly, corporations act through agents, like directors and officers. Corporate dealings must be characterized by utmost good
faith and fairness. Corporations cannot just feign ignorance of the legal rules as in most cases, they are manned by sophisticated officers with
tried management skills and legal experts with practiced eye on legal problems. Each party to a corporate transaction is expected to act with
utmost candor and fairness and, thereby allow a reasonable proportion between benefits and expected burdens. This is a norm which should be
observed where one or the other is a foreign entity venturing in a global market.
 
xx
By entering into the "Representative Agreement" with ITEC, petitioner is charged with knowledge that ITEC was not licensed to
engage in business activities in the country, and is thus estopped from raising in defense such incapacity of ITEC, having chosen to ignore or
even presumptively take advantage of the same. [23] (Emphases supplied)
 
The case of Rimbunan Hijau Group of Companies v. Oriental Wood Processing Corporation [24] is likewise instructive:
 
Respondents unequivocal admission of the transaction which gave rise to the complaint establishes the applicability of estoppel
against it. Rule 129, Section 4 of the Rules on Evidence provides that a written admission made by a party in the course of the proceedings in
the same case does not require proof. We held in the case of Elayda v. Court of Appeals, that an admission made in the pleadings cannot be
controverted by the party making such admission and are conclusive as to him. Thus, our consistent pronouncement, as held in cases such
as Merril Lynch Futures v. Court of Appeals, is apropos:
 
The rule is that a party is estopped to challenge the personality of a corporation after having acknowledged the same by
entering into a contract with it. And the doctrine of estoppel to deny corporate existence applies to foreign as well as to
4
domestic corporations; one who has dealt with a corporation of foreign origin as a corporate entity is estopped to deny its
existence and capacity. The principle will be applied to prevent a person contracting with a foreign corporation from later
taking advantage of its noncompliance with the statutes, chiefly in cases where such person has received the benefits of the
contract . . .
 
All things considered, respondent can no longer invoke petitioners lack of capacity to sue in this jurisdiction. Considerations of fair
play dictate that after having contracted and benefitted from its business transaction with Rimbunan, respondent should be barred from
questioning the latters lack of license to transact business in the Philippines.
 
In the case of Antam Consolidated, Inc. v. CA, this Court noted that it is a common ploy of defaulting local companies which are sued
by unlicensed foreign corporations not engaged in business in the Philippines to invoke the latters lack of capacity to sue. This practice of
domestic corporations is particularly reprehensible considering that in requiring a license, the law never intended to prevent foreign
corporations from performing single or isolated acts in this country, or to favor domestic corporations who renege on their obligations to
foreign firms unwary enough to engage in solitary transactions with them. Rather, the law was intended to bar foreign corporations from
acquiring a domicile for the purpose of business without first taking the steps necessary to render them amenable to suits in the local courts. It
was to prevent the foreign companies from enjoying the good while disregarding the bad.
 
As a matter of principle, this Court will not step in to shield defaulting local companies from the repercussions of
their business dealings. While the doctrine of lack of capacity to sue based on failure to first acquire a local license may be
resorted to in meritorious cases, it is not a magic incantation. It cannot be called upon when no evidence exists to support
its invocation or the facts do not warrant its application. In this case, that the respondent is estopped from challenging the petitioners
capacity to sue has been conclusively established, and the forthcoming trial before the lower court should weigh instead on the other defenses
raised by the respondent.[25] (Emphases supplied)
 
As shown in the previously cited cases, this Court has time and again upheld the principle that a foreign corporation doing business in
the Philippines without a license may still sue before the Philippine courts a Filipino or a Philippine entity that had derived some benefit from
their contractual arrangement because the latter is considered to be estopped from challenging the personality of a corporation after it had
acknowledged the said corporation by entering into a contract with it. [26]
 
In Antam Consolidated, Inc. v. Court of Appeals,[27] this Court had the occasion to draw attention to the common ploy of invoking the
incapacity to sue of an unlicensed foreign corporation utilized by defaulting domestic companies which seek to avoid the suit by the former.  The
Court cannot allow this to continue by always ruling in favor of local companies, despite the injustice to the overseas corporation which is left
with no available remedy.
 
During this period of financial difficulty, our nation greatly needs to attract more foreign investments and encourage trade between
the Philippines and other countries in order to rebuild and strengthen our economy. While it is essential to uphold the sound public policy
behind the rule that denies unlicensed foreign corporations doing business in the  Philippines access to our courts, it must never be used to
frustrate the ends of justice by becoming an all-encompassing shield to protect unscrupulous domestic enterprises from foreign entities seeking
redress in our country. To do otherwise could seriously jeopardize the desirability of the Philippines as an investment site and would possibly
have the deleterious effect of hindering trade between Philippine companies and international corporations.
 
WHEREFORE, the March 31, 2005 Decision of the Court of Appeals and its March 23, 2006 Resolution are
hereby REVERSED and SET ASIDE. The dismissal order of the Regional Trial Court dated November 15, 1999 is hereby set aside. Steelcases
Amended Complaint is hereby ordered REINSTATED and the case is REMANDED to the RTC for appropriate action.
SO ORDERED.

2.
CARGILL, INC., Petitioner, - versus - INTRA STRATA ASSURANCE CORPORATION, Respondent G.R. No. 168266
Present:
CARPIO, J., Chairperson, BRION, ABAD, VILLARAMA, JR.,* and PEREZ, JJ. Promulgated: March 15, 2010
x--------------------------------------------------x
D E C I S I O N CARPIO, J.:

The Case
This petition for review[1] assails the 26 May 2005 Decision[2] of the Court of Appeals in CA-G.R. CV No. 48447.

The Facts

Petitioner Cargill, Inc. (petitioner) is a corporation organized and existing under the laws of the State of Delaware, United States of America.
Petitioner and Northern Mindanao Corporation (NMC) executed a contract dated 16 August 1989 whereby NMC agreed to sell to petitioner
20,000 to 24,000 metric tons of molasses, to be delivered from 1 January to 30 June 1990 at the price of $44 per metric ton. The contract
provides that petitioner would open a Letter of Credit with the Bank of Philippine Islands. Under the red clause of the Letter of Credit, NMC
was permitted to draw up to $500,000 representing the minimum price of the contract upon presentation of some documents.

The contract was amended three times: first, on 11 January 1990, increasing the purchase price of the molasses to $47.50 per metric ton;[3]
second, on 18 June 1990, reducing the quantity of the molasses to 10,500 metric tons and increasing the price to $55 per metric ton;[4] and
third, on 22 August 1990, providing for the shipment of 5,250 metric tons of molasses on the last half of December 1990 through the first half
of January 1991, and the balance of 5,250 metric tons on the last half of January 1991 through the first half of February 1991.[5] The third
amendment also required NMC to put up a performance bond equivalent to $451,500, which represents the value of 10,500 metric tons of
molasses computed at $43 per metric ton. The performance bond was intended to guarantee NMCs performance to deliver the molasses during
the prescribed shipment periods according to the terms of the amended contract.

5
In compliance with the terms of the third amendment of the contract, respondent Intra Strata Assurance Corporation (respondent) issued on
10 October 1990 a performance bond[6] in the sum of P11,287,500 to guarantee NMCs delivery of the 10,500 tons of molasses, and a surety
bond[7] in the sum of P9,978,125 to guarantee the repayment of downpayment as provided in the contract.

NMC was only able to deliver 219.551 metric tons of molasses out of the agreed 10,500 metric tons. Thus, petitioner sent demand letters to
respondent claiming payment under the performance and surety bonds. When respondent refused to pay, petitioner filed on 12 April 1991 a
complaint[8] for sum of money against NMC and respondent.

Petitioner, NMC, and respondent entered into a compromise agreement,[9] which the trial court approved in its Decision[10] dated 13
December 1991. The compromise agreement provides that NMC would pay petitioner P3,000,000 upon signing of the compromise agreement
and would deliver to petitioner 6,991 metric tons of molasses from 16-31 December 1991. However, NMC still failed to comply with its
obligation under the compromise agreement. Hence, trial proceeded against respondent.

On 23 November 1994, the trial court rendered a decision, the dispositive portion of which reads:

WHEREFORE, judgment is rendered in favor of plaintiff [Cargill, Inc.], ordering defendant INTRA STRATA ASSURANCE CORPORATION to
solidarily pay plaintiff the total amount of SIXTEEN MILLION NINE HUNDRED NINETY-THREE THOUSAND AND TWO HUNDRED
PESOS (P16,993,200.00), Philippine Currency, with interest at the legal rate from October 10, 1990 until fully paid, plus attorneys fees in the
sum of TWO HUNDRED THOUSAND PESOS (P200,000.00), Philippine Currency and the costs of the suit.

The Counterclaim of Intra Strata Assurance Corporation is hereby dismissed for lack of merit.

SO ORDERED.[11]

On appeal, the Court of Appeals reversed the trial courts decision and dismissed the complaint. Hence, this petition.
The Court of Appeals Ruling

The Court of Appeals held that petitioner does not have the capacity to file this suit since it is a foreign corporation doing business in the
Philippines without the requisite license. The Court of Appeals held that petitioners purchases of molasses were in pursuance of its basic
business and not just mere isolated and incidental transactions.

The Issues

Petitioner raises the following issues:

1. Whether petitioner is doing or transacting business in the Philippines in contemplation of the law and established jurisprudence;
2. Whether respondent is estopped from invoking the defense that petitioner has no legal capacity to sue in the Philippines;
3. Whether petitioner is seeking a review of the findings of fact of the Court of Appeals; and
4. Whether the advance payment of $500,000 was released to NMC without the submission of the supporting documents required in the
contract and the red clause Letter of Credit from which said amount was drawn.[12]

The Ruling of the Court

We find the petition meritorious.

Doing Business in the Philippines and Capacity to Sue

The principal issue in this case is whether petitioner, an unlicensed foreign corporation, has legal capacity to sue before Philippine courts.
Under Article 123[13] of the Corporation Code, a foreign corporation must first obtain a license and a certificate from the appropriate
government agency before it can transact business in the Philippines. Where a foreign corporation does business in the Philippines without the
proper license, it cannot maintain any action or proceeding before Philippine courts as provided under Section 133 of the Corporation Code:

Sec. 133. Doing business without a license. No foreign corporation transacting business in the Philippines without a license, or its successors or
assigns, shall be permitted to maintain or intervene in any action, suit or proceeding in any court or administrative agency of the Philippines;
but such corporation may be sued or proceeded against before Philippine courts or administrative tribunals on any valid cause of action
recognized under Philippine laws.

Thus, the threshold question in this case is whether petitioner was doing business in the Philippines. The Corporation Code provides no
definition for the phrase doing business. Nevertheless, Section 1 of Republic Act No. 5455 (RA 5455),[14] provides that:

x x x the phrase doing business shall include soliciting orders, purchases, service contracts, opening offices, whether called liaison offices or
branches; appointing representatives or distributors who are domiciled in the Philippines or who in any calendar year stay in the Philippines
for a period or periods totalling one hundred eighty days or more; participating in the management, supervision or control of any domestic
business firm, entity or corporation in the Philippines; and any other act or acts that imply a continuity of commercial dealings or
arrangements, and contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally incident to,
and in progressive prosecution of, commercial gain or of the purpose and object of the business organization. (Emphasis supplied)

This is also the exact definition provided under Article 44 of the Omnibus Investments Code of 1987.

6
Republic Act No. 7042 (RA 7042), otherwise known as the Foreign Investments Act of 1991, which repealed Articles 44-56 of Book II of the
Omnibus Investments Code of 1987, enumerated not only the acts or activities which constitute doing business but also those activities which
are not deemed doing business. Section 3(d) of RA 7042 states:

[T]he phrase doing business shall include soliciting orders, service contracts, opening offices, whether called liaison offices or branches;
appointing representatives or distributors domiciled in the Philippines or who in any calendar year stay in the country for a period or periods
totalling one hundred eighty (180) days or more; participating in the management, supervision or control of any domestic business, firm, entity
or corporation in the Philippines; and any other act or acts that imply a continuity of commercial dealings or arrangements, and contemplate to
that extent the performance of acts or works, or the exercise of some of the functions normally incident to, and in progressive prosecution of,
commercial gain or of the purpose and object of the business organization: Provided, however, That the phrase doing business shall not be
deemed to include 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; nor having a nominee director or officer to represent its interests in such corporation; nor appointing a
representative or distributor domiciled in the Philippines which transacts business in its own name and for its own account.

Since respondent is relying on Section 133 of the Corporation Code to bar petitioner from maintaining an action in Philippine courts,
respondent bears the burden of proving that petitioners business activities in the Philippines were not just casual or occasional, but so
systematic and regular as to manifest continuity and permanence of activity to constitute doing business in the Philippines. In this case, we find
that respondent failed to prove that petitioners activities in the Philippines constitute doing business as would prevent it from bringing an
action.

The determination of whether a foreign corporation is doing business in the Philippines must be based on the facts of each case.[15] In the case
of Antam Consolidated, Inc. v. CA,[16] in which a foreign corporation filed an action for collection of sum of money against petitioners therein
for damages and loss sustained for the latters failure to deliver coconut crude oil, the Court emphasized the importance of the element of
continuity of commercial activities to constitute doing business in the Philippines. The Court held:
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. x x x

x x x The three seemingly different transactions were entered into by the parties only in an effort to fulfill the basic agreement and in no way
indicate an intent on the part of the respondent to engage in a continuity of transactions with petitioners which will categorize it as a foreign
corporation doing business in the Philippines.[17]

Similarly, in this case, petitioner and NMC amended their contract three times to give a chance to NMC to deliver to petitioner the molasses,
considering that NMC already received the minimum price of the contract. There is no showing that the transactions between petitioner and
NMC signify the intent of petitioner to establish a continuous business or extend its operations in the Philippines.

The Implementing Rules and Regulations of RA 7042 provide under Section 1(f), Rule I, that doing business does not include the following
acts:

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 interests 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.

Most of these activities do not bring any direct receipts or profits to the foreign corporation, consistent with the ruling of this Court in National
Sugar Trading Corp. v. CA[18] that activities within Philippine jurisdiction that do not create earnings or profits to the foreign corporation do
not constitute doing business in the Philippines.[19] In that case, the Court held that it would be inequitable for the National Sugar Trading
Corporation, a state-owned corporation, to evade payment of a legitimate indebtedness owing to the foreign corporation on the plea that the
latter should have obtained a license first before perfecting a contract with the Philippine government. The Court emphasized that the foreign
corporation did not sell sugar and derive income from the Philippines, but merely purchased sugar from the Philippine government and
allegedly paid for it in full.

In this case, the contract between petitioner and NMC involved the purchase of molasses by petitioner from NMC. It was NMC, the domestic
corporation, which derived income from the transaction and not petitioner. To constitute doing business, the activity undertaken in the
Philippines should involve profit-making.[20] Besides, under Section 3(d) of RA 7042, soliciting purchases has been deleted from the
enumeration of acts or activities which constitute doing business.

Other factors which support the finding that petitioner is not doing business in the Philippines are: (1) petitioner does not have an office in the
Philippines; (2) petitioner imports products from the Philippines through its non-exclusive local broker, whose authority to act on behalf of
petitioner is limited to soliciting purchases of products from suppliers engaged in the sugar trade in the Philippines; and (3) the local broker is
an independent contractor and not an agent of petitioner.[21]
7
As explained by the Court in B. Van Zuiden Bros., Ltd. v. GTVL Marketing Industries, Inc.:[22]

An exporter in one country may export its products to many foreign importing countries without performing in the importing countries specific
commercial acts that would constitute doing business in the importing countries. The mere act of exporting from ones own country, without
doing any specific commercial act within the territory of the importing country, cannot be deemed as doing business in the importing country.
The importing country does not require jurisdiction over the foreign exporter who has not yet performed any specific commercial act within the
territory of the importing country. Without jurisdiction over the foreign exporter, the importing country cannot compel the foreign exporter to
secure a license to do business in the importing country.

Otherwise, Philippine exporters, by the mere act alone of exporting their products, could be considered by the importing countries to be doing
business in those countries. This will require Philippine exporters to secure a business license in every foreign country where they usually
export their products, even if they do not perform any specific commercial act within the territory of such importing countries. Such a legal
concept will have deleterious effect not only on Philippine exports, but also on global trade.

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 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.[23] (Emphasis supplied)

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.

Review of Findings of Fact

The Supreme Court may review the findings of fact of the Court of Appeals which are in conflict with the findings of the trial court.[24] We find
that the Court of Appeals finding that petitioner was doing business is not supported by evidence.

Furthermore, a review of the records shows that the trial court was correct in holding that the advance payment of $500,000 was released to
NMC in accordance with the conditions provided under the red clause Letter of Credit from which said amount was drawn. The Head of the
International Operations Department of the Bank of Philippine Islands testified that the bank would not have paid the beneficiary if the
required documents were not complete. It is a requisite in a documentary credit transaction that the documents should conform to the terms
and conditions of the letter of credit; otherwise, the bank will not pay. The Head of the International Operations Department of the Bank of
Philippine Islands also testified that they received reimbursement from the issuing bank for the $500,000 withdrawn by NMC.[25] Thus,
respondent had no legitimate reason to refuse payment under the performance and surety bonds when NMC failed to perform its part under its
contract with petitioner.
WHEREFORE , we GRANT the petition. We REVERSE the Decision dated 26 May 2005 of the Court of Appeals in CA-G.R. CV No. 48447. We
REINSTATE the Decision dated 23 November 1994 of the trial court.

SO ORDERED.

3. SECOND DIVISION

G.R. No. L-61523 July 31, 1986

ANTAM CONSOLIDATED, INC., TAMBUNTING TRADING CORPORATION and AURORA CONSOLIDATED SECURITIES
and INVESTMENT CORPORATION, petitioners,
vs.
THE COURT OF APPEALS, THE HONORABLE MAXIMIANO C. ASUNCION (Court of First Instance of Laguna, Branch II
[Sta. Cruz]) and STOKELY VAN CAMP, INC., respondents.

GUTIERREZ, JR., J.:

This petition for certiorari and prohibition seeks to set aside the order of the Regional Trial Court of Laguna which denied the petitioners'
motion to dismiss on the ground that the reason relied upon by them does not appear to be indubitable. Petitioners also seek to set aside the
decision and resolution of the Intermediate Appellate Court which respectively upheld the order of the trial court and denied the petitioners'
motion for reconsideration of the same.

On April 9, 1981, respondent Stokely Van Camp. Inc. (Stokely) filed a complaint against Banahaw Milling Corporation (Banahaw), Antam
Consolidated, Inc., Tambunting Trading Corporation (Tambunting), Aurora Consolidated Securities and Investment Corporation, and United
Coconut Oil Mills, Inc. (Unicom) for collection of sum of money.

In its complaint, Stokely alleged: (1) that it is a corporation organized and existing under the laws of the state of Indiana, U.S.A. and has its
principal office at 941 North Meridian Street, Indianapolis, Indiana, U.S.A., and one of its subdivisions "Capital City Product Company"
(Capital City) has its office in Columbus, Ohio, U.S.A.; (2) that Stokely and Capital City were not engaged in business in the Philippines prior to
the commencement of the suit so that Stokely is not licensed to do business in this country and is not required to secure such license; (3) that
on August 21, 1978, Capital City and Coconut Oil Manufacturing (Phil.) Inc. (Comphil) with the latter acting through its broker Roths child
Brokerage Company, entered into a contract (No. RBS 3655) wherein Comphil undertook to sell and deliver and Capital City agreed to buy 500
8
long tons of crude coconut oil to be delivered in October/November 1978 at the c.i.f. price of US$0.30/1b. but Comphil failed to deliver the
coconut oil so that Capital City covered its coconut oil needs in the open market at a price substantially in excess of the contract and sustained a
loss of US$103,600; that to settle Capital City's loss under the contract, the parties entered into a second contract (No. RBS 3738) on November
3, 1978 wherein Comphil undertook to buy and Capital City agreed to sell 500 long tons of coconut crude oil under the same terms and
conditions but at an increased c.i.f. price of US$0.3925/lb.; (4) that the second contract states that "it is a wash out against RBS 3655" so that
Comphil was supposed to repurchase the undelivered coconut oil at US$0.3925 from Capital City by paying the latter the sum of
US$103,600.00 which is the same amount of loss that Capital City sustained under the first contract; that Comphil again failed to pay said
amount, so to settle Capital City's loss, it entered into a third contract with Comphil on January 24, 1979 wherein the latter undertook to sell
and deliver and Capital City agreed to buy the same quantity of crude coconut oil to be delivered in April/May 1979 at the c.i.f. price of
US$0.3425/lb.; (5) that the latter price was 9.25 cents/lb. or US$103,600 for 500 long tons below the then current market price of 43.2
cents/lb. and by delivering said quantity of coconut oil to Capital City at the discounted price, Comphil was to have settled its US$103,600
liability to Capital City; (6) that Comphil failed to deliver the coconut oil so Capital City notified the former that it was in default; (7) that
Capital City sustained damages in the amount of US$175,000; and (8) that after repeated demands from Comphil to pay the said amount, the
latter still refuses to pay the same.

Respondent Stokely further prayed that a writ of attachment be issued against any and all the properties of the petitioners in an amount
sufficient to satisfy any lien of judgment that the respondent may obtain in its action. In support of this provisional remedy and of its cause of
action against the rest of the petitioners other than Comphil, the respondent alleged the following: 1) After demands were made by respondent
on Comphil, the Tambuntings ceased to be directors and officers of Comphil and were replaced by their five employees, who were managers of
Tambunting's pawnshops and said employees caused the name of Comphil to be changed to "Banahaw Milling Corporation" and authorized
one of the Tambuntings, Antonio P. Tambunting, Jr., who was at that time neither a director nor officer of Banahaw to sell its oil mill; 2)
Unicom has taken over the entire operations and assets of Banahaw because the entire and outstanding capital stock of the latter was sold to
the former; 3) ALL of the issued and outstanding capital stock of Comphil are owned by the Tambuntings who were the directors and officers of
Comphil and who were the ones who benefited from the sale of Banahaw's assets or shares to Unicorn; 4) ALL of the petitioners evaded their
obligation to respondent by the devious scheme of using Tambunting employees to replace the Tambuntings in the management of Banahaw
and disposing of the oil mill of Banahaw or their entire interests to Unicorn; and 5) Respondent has reasonable cause to believe and does
believe that the coconut oil milk which is the only substantial asset of Banahaw is about to be sold or removed so that unless prevented by the
Court there will probably be no assets of Banahaw to satisfy its claim.

On April 10, 1981, the trial court ordered the issuance of a writ of attachment in favor of the respondent upon the latter's deposit of a bond in
the amount of P l,285,000.00.

On June 3, 1981, the respondent filed a motion for reconsideration to reduce the attachment bond. Attached to this motion is an affidavit by the
assistant attorney of the respondent's counsel stating that he has verified with the records of Comphil and the Securities and Exchange
Commission (SEC) the facts he alleged in the prayer for the attachment order.

On June 11, 1981, the petitioners filed a motion to dismiss the complaint on the ground that the respondent, being a foreign corporation not
licensed to do business in the Philippines, has no personality to maintain the instant suit.

After the respondent had filed an opposition to the motion to dismiss and petitioner has opposed the attachment and the motion to reduce the
attachment bond, the trial court issued an order, dated August 10, 1981, reducing the attachment bond to P 500,000.00 and denying the
motion to dismiss by petitioners on the ground that the reason cited therein does not appear to be indubitable.

Petitioners filed a petition for certiorari before the Indianapolis intermediate Appellate Court.

On June 14, 1982, the appellate court dismissed the petition stating that the respondent judge did not commit any grave abuse of discretion in
deferring the petitioners' motion to dismiss because the said judge is not yet satisfied that he has the necessary facts which would permit him to
make a judicious resolution. The appellate court further ruled that in another case entitled United Coconut Oil Mills, Inc. and Banahaw Milling
Corporation v. Hon. Maximiano C. Asuncion and Stokely Van Camp, Inc. where the facts and issues raised therein are intrinsically the same as
in the case at bar, it has already denied the petition for certiorari filed by Unicom and Banahaw for lack of merit and the same was upheld by
the Supreme Court.

Petitioners filed a motion for reconsideration but the same was denied. Hence, they filed this instant petition for certiorari and prohibition with
prayer for temporary restraining order, questioning the propriety of the appellate court's decision in: a) affirming the deferment of the
resolution on petitioner' motion to dismiss; and b) denying the motion to set, aside the order of attachment.

With regards to the first question, petitioners maintain that the appellate court erred in denying their motion to dismiss since the ground relied
upon by them is clear and indubitable, that is, that the respondent has no personality to sue. Petitioners argue that to maintain the suit filed
with the trial court, the respondent should have secured the requisite license to do business in the Philippines because, in fact, it is doing
business here. Petitioners anchor their argument that the respondent is a foreign corporation doing business in the Philippines on the fact that
by the respondent's own allegations, it has participated in three transactions, either as a seller or buyer, which are by their nature, in the pursuit
of the purpose and object for which it was organized. Petitioners further argue that the test of whether one is doing business or not is "whether
there is continuity of transactions which are in the pursuance of the normal business of the corporation" and that the transactions entered into
by respondent undoubtedly fall within this category.

We reject the petitioners' arguments.

In the case of Top-Weld Manufacturing, Inc. v. ECED, S.A. (138 SCRA 118,127-128), we stated:

There is no general rule or governing principle laid down as to what constitutes'doing'or'engaging in' or 'transacting business in the Philippines.
Each case must be judged in the Light of its peculiar circumstance (Mentholatum Co. v. Mangaliman, 72 Phil.524). Thus, a foreign corporation
with a settling agent in the Philippines which issues twelve marine policies covering different shipments to the Philippines (General
Corporation of the Philippines v. Union Insurance Society of Canton, Ltd., 87 Phil. 313) and a foreign corporation which had been collecting
9
premiums on outstanding policies (Manufacturing Life Insurance Co., v. Meer, 89 Phil. 351) were regarded as doing business here. The acts of
these corporations should be distinguished from a single or isolated business transaction or occasional, incidental and casual transactions
which do not come within the meaning of the law. Where a single act or transaction , however, is not merely incidental or casual but indicates
the foreign corporation's intention to do other business in the Philippines, said single act or transaction constitutes 'doing' or 'engaging in' or
'transacting' business in the Philippines. (Far East International Import and Export Corporation v. Nankai Kogyo, Co., 6 SCRA 725).

In the Mentholatum Co. v. Mangaliman case earlier cited, this Court held
xxx xxx xxx
...The true test, however, seems to be whether the foreign corporation is continuing the body or substance of the business or enterprise for
which it warning-organized or whether it has substantially was retired from it and turned it over to another. (Traction Cos. v. Collectors of Int.
Revenue [CCA., Ohio], 223 F. 984, 987.) The term implies a continuity of commercial dealings and arrangements, and contemplates, to that
extent, the performance of acts or workers or the exercise of some of the functions normally incident to, and in progressive prosecution of, the
purpose and object of its organization. (Griffin v. Implement Dealers' Mut. Fire Ins. Co., 241 N.W. 75, 77, Pauline Oil & Gas Co. v. Mutual Tank
Line Co., 246 P. 851, 852, 118 Okl. 111; Automotive Material Co. v. American Standard Metal Products Corp., 158 N.E. 698, 703, 327 111. 367.) '

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. Instead of making an outright demand on the petitioners,
the respondent opted to try to push through with the transaction to recover the amount of US$103,600.00 it lost. This explains why in the
second transaction, the petitioners were supposed to buy back the crude coconut oil they should have delivered to the respondent in an amount
which will earn the latter a profit of US$103,600.00. When this failed the third transaction was entered into by the parties whereby the
petitioners were supposed to sell crude coconut oil to the respondent at a discounted rate, the total amount of such discount being
US$103,600.00. Unfortunately, the petitioners failed to deliver again, prompting the respondent to file the suit below.

From these facts alone, it can be deduced that in reality, there was only one agreement between the petitioners and the respondent and that was
the delivery by the former of 500 long tons of crude coconut oil to the latter, who in turn, must pay the corresponding price for the same. The
three seemingly different transactions were entered into by the parties only in an effort to fulfill the basic agreement and in no way indicate an
intent on the part of the respondent to engage in a continuity of transactions with petitioners which will categorize it as a foreign corporation
doing business in the Philippines. Thus, the trial court, and the appellate court did not err in denying the petitioners' motion to dismiss not only
because the ground thereof does not appear to be indubitable but because the respondent, being a foreign corporation not doing business in the
Philippines, does not need to obtain a license to do business in order to have the capacity to sue. As we have held in Eastboard Navigation Ltd.
v. Juan Ysmael and Co., Inc. (102 Phil. 1, 18):

xxx xxx xxx

(d) While plaintiff is a foreign corporation without license to transact business in the Philippines, it does not follow that it has no capacity to
bring the present action. Such license is ' not necessary because it is not engaged in business in the Philippines. In fact, the transaction herein
involved is the first business undertaken by plaintiff in the Philippines, although on a previous occasion plaintiff's vessel was chartered by the
National Rice and Corn Corporation to carry rice cargo from abroad to the Philippines. These two isolated transactions do not constitute
engaging in business in the Philippines within the purview of Sections 68 and 69 of the Corporation Law so as to bar plaintiff from seeking
redress in our courts (Marshall-Wells Co. v. Henry W. Elser & Co. 49 Phil. 70; Pacific Vegetable Oil Corporation v. Angel 0. Singson, G.R. No.
L-7917, April 29, 1955; also cited in Facilities Management Corporation v. De la Osa, 89 SCRA 131, 138).

We agree with the respondent that it is a common ploy of defaulting local companies which are sued by unlicensed foreign companies not
engaged in business in the Philippines to invoke lack of capacity to sue. The respondent cites decisions from 1907 to 1957 recognizing and
rejecting the improper use of this procedural tactic. (Damfschieffs Rhedered Union v. Cia Trans-atlantica, 8 Phil. 766 11907]; Marshall-Wells
Co. v. Henry W. Elser & Co., 49 Phil. 70 [1924]; Western Equipment Co. v. Reyes, 51 Phil. 115 [1927]; Central Republic Bank v. Bustamante, 71
Phil. 359 [1941]; Pacific Vegetable Oil Co. v. Singson, 96 Phil.-986 [1955]; Eastboard Navigation, Ltd. v. Juan Ysmael and Co., Inc., 102 Phil. 1
[1957]). The doctrine of lack of capacity to sue based on failure to first acquire a local license is based on considerations of sound public policy.
It intended to favor domestic corporations who enter was never into solitary transactions with unwary foreign firms and then repudiate their
obligations simply because the latter are not licensed to do business in this country. The petitioners in this case are engaged in the exportation
of coconut oil, an export item so vital in our country's economy. They filed this petition on the ground that Stokely is an unlicensed foreign
corporation without a bare allegation or showing that their defenses in the collection case are valid and meritorious. We cannot fault the two
courts below for acting as they did.

Anent the second issue they raise, the petitioners contend that the trial court should not have issued the order of attachment and the appellate
court should not have affirmed the same because the verification in support of the prayer for attachment is insufficient. They state that the
person who made such verification does not personally know the facts relied upon for the issuance of the attachment order. Petitioners
capitalize on the fact that Renato Calma, the assistant attorney of Bito, Misa, and Lozada, counsel for respondent, stated in his verification that
"he has read the foregoing complaint and that according to his information and belief the allegations therein contained are true and correct."

The above contention deserves scant consideration.

We rule that the defect in the original verification was cured when Renato Calma subsequently executed an affidavit to the effect that the
allegations he made in support of the prayer for attachment were verified by him from the records of Comphil and the Securities and Exchange
Commission. Moreover, petitioner had the opportunity to oppose the issuance of the writ.

As to the merit of the attachment order itself, we find that the allegations in the respondent's complaint satisfactorily justify the issuance of said
order.

WHEREFORE, IN VIEW OF THE FOREGOING, the petition is DISMISSED for lack of merit. The Temporary Restraining Order dated
February 2, 1983 is hereby DISSOLVED. Costs against the petitioners.
10
SO ORDERED.

4. G.R. No. 152392 May 26, 2005

EXPERTRAVEL & TOURS, INC., petitioner,
vs.
COURT OF APPEALS and KOREAN AIRLINES, respondent.

DECISION
CALLEJO, SR., J.:

Before us is a petition for review on certiorari of the Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 61000 dismissing the petition for
certiorari and mandamus filed by Expertravel and Tours, Inc. (ETI).

The Antecedents

Korean Airlines (KAL) is a corporation established and registered in the Republic of South Korea and licensed to do business in the Philippines.
Its general manager in the Philippines is Suk Kyoo Kim, while its appointed counsel was Atty. Mario Aguinaldo and his law firm.

On September 6, 1999, KAL, through Atty. Aguinaldo, filed a Complaint2 against ETI with the Regional Trial Court (RTC) of Manila, for the
collection of the principal amount of P260,150.00, plus attorney’s fees and exemplary damages. The verification and certification against forum
shopping was signed by Atty. Aguinaldo, who indicated therein that he was the resident agent and legal counsel of KAL and had caused the
preparation of the complaint.

ETI filed a motion to dismiss the complaint on the ground that Atty. Aguinaldo was not authorized to execute the verification and certificate of
non-forum shopping as required by Section 5, Rule 7 of the Rules of Court. KAL opposed the motion, contending that Atty. Aguinaldo was its
resident agent and was registered as such with the Securities and Exchange Commission (SEC) as required by the Corporation Code of the
Philippines. It was further alleged that Atty. Aguinaldo was also the corporate secretary of KAL. Appended to the said opposition was the
identification card of Atty. Aguinaldo, showing that he was the lawyer of KAL.

During the hearing of January 28, 2000, Atty. Aguinaldo claimed that he had been authorized to file the complaint through a resolution of the
KAL Board of Directors approved during a special meeting held on June 25, 1999. Upon his motion, KAL was given a period of 10 days within
which to submit a copy of the said resolution. The trial court granted the motion. Atty. Aguinaldo subsequently filed other similar motions,
which the trial court granted.

Finally, KAL submitted on March 6, 2000 an Affidavit3 of even date, executed by its general manager Suk Kyoo Kim, alleging that the board of
directors conducted a special teleconference on June 25, 1999, which he and Atty. Aguinaldo attended. It was also averred that in that same
teleconference, the board of directors approved a resolution authorizing Atty. Aguinaldo to execute the certificate of non-forum shopping and
to file the complaint. Suk Kyoo Kim also alleged, however, that the corporation had no written copy of the aforesaid resolution.

On April 12, 2000, the trial court issued an Order4 denying the motion to dismiss, giving credence to the claims of Atty. Aguinaldo and Suk
Kyoo Kim that the KAL Board of Directors indeed conducted a teleconference on June 25, 1999, during which it approved a resolution as
quoted in the submitted affidavit.

ETI filed a motion for the reconsideration of the Order, contending that it was inappropriate for the court to take judicial notice of the said
teleconference without any prior hearing. The trial court denied the motion in its Order5 dated August 8, 2000.

ETI then filed a petition for certiorari and mandamus, assailing the orders of the RTC. In its comment on the petition, KAL appended a
certificate signed by Atty. Aguinaldo dated January 10, 2000, worded as follows:

SECRETARY’S/RESIDENT AGENT’S CERTIFICATE

KNOW ALL MEN BY THESE PRESENTS:

I, Mario A. Aguinaldo, of legal age, Filipino, and duly elected and appointed Corporate Secretary and Resident Agent of KOREAN AIRLINES, a
foreign corporation duly organized and existing under and by virtue of the laws of the Republic of Korea and also duly registered and
authorized to do business in the Philippines, with office address at Ground Floor, LPL Plaza Building, 124 Alfaro St., Salcedo Village, Makati
City, HEREBY CERTIFY that during a special meeting of the Board of Directors of the Corporation held on June 25, 1999 at which a quorum
was present, the said Board unanimously passed, voted upon and approved the following resolution which is now in full force and effect, to wit:

RESOLVED, that Mario A. Aguinaldo and his law firm M.A. Aguinaldo & Associates or any of its lawyers are hereby appointed and authorized
to take with whatever legal action necessary to effect the collection of the unpaid account of Expert Travel & Tours. They are hereby specifically
authorized to prosecute, litigate, defend, sign and execute any document or paper necessary to the filing and prosecution of said claim in Court,
attend the Pre-Trial Proceedings and enter into a compromise agreement relative to the above-mentioned claim.

IN WITNESS WHEREOF, I have hereunto affixed my signature this 10th day of January, 1999, in the City of Manila, Philippines.

(Sgd.)

MARIO A. AGUINALDO
Resident Agent

11
SUBSCRIBED AND SWORN to before me this 10th day of January, 1999, Atty. Mario A. Aguinaldo exhibiting to me his Community Tax
Certificate No. 14914545, issued on January 7, 2000 at Manila, Philippines.

Doc. No. 119;

Page No. 25;
Book No. XXIV
Series of 2000.

(Sgd.)
ATTY. HENRY D. ADASA
Notary Public
Until December 31, 2000
PTR #889583/MLA 1/3/20006

On December 18, 2001, the CA rendered judgment dismissing the petition, ruling that the verification and certificate of non-forum shopping
executed by Atty. Aguinaldo was sufficient compliance with the Rules of Court. According to the appellate court, Atty. Aguinaldo had been duly
authorized by the board resolution approved on June 25, 1999, and was the resident agent of KAL. As such, the RTC could not be faulted for
taking judicial notice of the said teleconference of the KAL Board of Directors.

ETI filed a motion for reconsideration of the said decision, which the CA denied. Thus, ETI, now the petitioner, comes to the Court by way of
petition for review on certiorari and raises the following issue:

DID PUBLIC RESPONDENT COURT OF APPEALS DEPART FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS
WHEN IT RENDERED ITS QUESTIONED DECISION AND WHEN IT ISSUED ITS QUESTIONED RESOLUTION, ANNEXES A AND B OF
THE INSTANT PETITION?7

The petitioner asserts that compliance with Section 5, Rule 7, of the Rules of Court can be determined only from the contents of the complaint
and not by documents or pleadings outside thereof. Hence, the trial court committed grave abuse of discretion amounting to excess of
jurisdiction, and the CA erred in considering the affidavit of the respondent’s general manager, as well as the Secretary’s/Resident Agent’s
Certification and the resolution of the board of directors contained therein, as proof of compliance with the requirements of Section 5, Rule 7 of
the Rules of Court. The petitioner also maintains that the RTC cannot take judicial notice of the said teleconference without prior hearing, nor
any motion therefor. The petitioner reiterates its submission that the teleconference and the resolution adverted to by the respondent was a
mere fabrication.

The respondent, for its part, avers that the issue of whether modern technology is used in the field of business is a factual issue; hence, cannot
be raised in a petition for review on certiorari under Rule 45 of the Rules of Court. On the merits of the petition, it insists that Atty. Aguinaldo,
as the resident agent and corporate secretary, is authorized to sign and execute the certificate of non-forum shopping required by Section 5,
Rule 7 of the Rules of Court, on top of the board resolution approved during the teleconference of June 25, 1999. The respondent insists that
"technological advances in this time and age are as commonplace as daybreak." Hence, the courts may take judicial notice that the Philippine
Long Distance Telephone Company, Inc. had provided a record of corporate conferences and meetings through FiberNet using fiber-optic
transmission technology, and that such technology facilitates voice and image transmission with ease; this makes constant communication
between a foreign-based office and its Philippine-based branches faster and easier, allowing for cost-cutting in terms of travel concerns. It
points out that even the E-Commerce Law has recognized this modern technology. The respondent posits that the courts are aware of this
development in technology; hence, may take judicial notice thereof without need of hearings. Even if such hearing is required, the requirement
is nevertheless satisfied if a party is allowed to file pleadings by way of comment or opposition thereto.

In its reply, the petitioner pointed out that there are no rulings on the matter of teleconferencing as a means of conducting meetings of board of
directors for purposes of passing a resolution; until and after teleconferencing is recognized as a legitimate means of gathering a quorum of
board of directors, such cannot be taken judicial notice of by the court. It asserts that safeguards must first be set up to prevent any mischief on
the public or to protect the general public from any possible fraud. It further proposes possible amendments to the Corporation Code to give
recognition to such manner of board meetings to transact business for the corporation, or other related corporate matters; until then, the
petitioner asserts, teleconferencing cannot be the subject of judicial notice.

The petitioner further avers that the supposed holding of a special meeting on June 25, 1999 through teleconferencing where Atty. Aguinaldo
was supposedly given such an authority is a farce, considering that there was no mention of where it was held, whether in this country or
elsewhere. It insists that the Corporation Code requires board resolutions of corporations to be submitted to the SEC. Even assuming that there
was such a teleconference, it would be against the provisions of the Corporation Code not to have any record thereof.

The petitioner insists that the teleconference and resolution adverted to by the respondent in its pleadings were mere fabrications foisted by the
respondent and its counsel on the RTC, the CA and this Court.

The petition is meritorious.

Section 5, Rule 7 of the Rules of Court provides:

SEC. 5. Certification against forum shopping.— The plaintiff or principal party shall certify under oath in the complaint or other initiatory
pleading asserting a claim for relief, or in a sworn certification annexed thereto and simultaneously filed therewith: (a) that he has not
theretofore commenced any action or filed any claim involving the same issues in any court, tribunal or quasi-judicial agency and, to the best of
his knowledge, no such other action or claim is pending therein; (b) if there is such other pending action or claim, a complete statement of the
present status thereof; and (c) if he should thereafter learn that the same or similar action or claim has been filed or is pending, he shall report
that fact within five (5) days therefrom to the court wherein his aforesaid complaint or initiatory pleading has been filed.

12
Failure to comply with the foregoing requirements shall not be curable by mere amendment of the complaint or other initiatory pleading but
shall be cause for the dismissal of the case without prejudice, unless otherwise provided, upon motion and after hearing. The submission of a
false certification or non-compliance with any of the undertakings therein shall constitute indirect contempt of court, without prejudice to the
corresponding administrative and criminal actions. If the acts of the party or his counsel clearly constitute willful and deliberate forum
shopping, the same shall be ground for summary dismissal with prejudice and shall constitute direct contempt, as well as a cause for
administrative sanctions.

It is settled that the requirement to file a certificate of non-forum shopping is mandatory8 and that the failure to comply with this requirement
cannot be excused. The certification is a peculiar and personal responsibility of the party, an assurance given to the court or other tribunal that
there are no other pending cases involving basically the same parties, issues and causes of action. Hence, the certification must be
accomplished by the party himself because he has actual knowledge of whether or not he has initiated similar actions or proceedings in
different courts or tribunals. Even his counsel may be unaware of such facts.9 Hence, the requisite certification executed by the plaintiff’s
counsel will not suffice.10

In a case where the plaintiff is a private corporation, the certification may be signed, for and on behalf of the said corporation, by a specifically
authorized person, including its retained counsel, who has personal knowledge of the facts required to be established by the documents. The
reason was explained by the Court in National Steel Corporation v. Court of Appeals,11 as follows:

Unlike natural persons, corporations may perform physical actions only through properly delegated individuals; namely, its officers and/or
agents.
…
The corporation, such as the petitioner, has no powers except those expressly conferred on it by the Corporation Code and those that are
implied by or are incidental to its existence. In turn, a corporation exercises said powers through its board of directors and/or its duly-
authorized officers and agents. Physical acts, like the signing of documents, can be performed only by natural persons duly-authorized for the
purpose by corporate by-laws or by specific act of the board of directors. "All acts within the powers of a corporation may be performed by
agents of its selection; and except so far as limitations or restrictions which may be imposed by special charter, by-law, or statutory provisions,
the same general principles of law which govern the relation of agency for a natural person govern the officer or agent of a corporation, of
whatever status or rank, in respect to his power to act for the corporation; and agents once appointed, or members acting in their stead, are
subject to the same rules, liabilities and incapacities as are agents of individuals and private persons."

…
… For who else knows of the circumstances required in the Certificate but its own retained counsel. Its regular officers, like its board chairman
and president, may not even know the details required therein.

Indeed, the certificate of non-forum shopping may be incorporated in the complaint or appended thereto as an integral part of the complaint.
The rule is that compliance with the rule after the filing of the complaint, or the dismissal of a complaint based on its non-compliance with the
rule, is impermissible. However, in exceptional circumstances, the court may allow subsequent compliance with the rule.12 If the authority of a
party’s counsel to execute a certificate of non-forum shopping is disputed by the adverse party, the former is required to show proof of such
authority or representation.

In this case, the petitioner, as the defendant in the RTC, assailed the authority of Atty. Aguinaldo to execute the requisite verification and
certificate of non-forum shopping as the resident agent and counsel of the respondent. It was, thus, incumbent upon the respondent, as the
plaintiff, to allege and establish that Atty. Aguinaldo had such authority to execute the requisite verification and certification for and in its
behalf. The respondent, however, failed to do so.

The verification and certificate of non-forum shopping which was incorporated in the complaint and signed by Atty. Aguinaldo reads:

I, Mario A. Aguinaldo of legal age, Filipino, with office address at Suite 210 Gedisco Centre, 1564 A. Mabini cor. P. Gil Sts., Ermita, Manila, after
having sworn to in accordance with law hereby deposes and say: THAT -

1. I am the Resident Agent and Legal Counsel of the plaintiff in the above entitled case and have caused the preparation of the above complaint;

2. I have read the complaint and that all the allegations contained therein are true and correct based on the records on files;

3. I hereby further certify that I have not commenced any other action or proceeding involving the same issues in the Supreme Court, the Court
of Appeals, or different divisions thereof, or any other tribunal or agency. If I subsequently learned that a similar action or proceeding has been
filed or is pending before the Supreme Court, the Court of Appeals, or different divisions thereof, or any tribunal or agency, I will notify the
court, tribunal or agency within five (5) days from such notice/knowledge.

(Sgd.)

MARIO A. AGUINALDO
Affiant
CITY OF MANILA

SUBSCRIBED AND SWORN TO before me this 30th day of August, 1999, affiant exhibiting to me his Community Tax Certificate No. 00671047
issued on January 7, 1999 at Manila, Philippines.

Doc. No. 1005;

Page No. 198;
Book No. XXI
Series of 1999.

13
(Sgd.)

ATTY. HENRY D. ADASA

Notary Public
Until December 31, 2000
PTR No. 320501 Mla. 1/4/9913

As gleaned from the aforequoted certification, there was no allegation that Atty. Aguinaldo had been authorized to execute the certificate of
non-forum shopping by the respondent’s Board of Directors; moreover, no such board resolution was appended thereto or incorporated
therein.

While Atty. Aguinaldo is the resident agent of the respondent in the Philippines, this does not mean that he is authorized to execute the
requisite certification against forum shopping. Under Section 127, in relation to Section 128 of the Corporation Code, the authority of the
resident agent of a foreign corporation with license to do business in the Philippines is to receive, for and in behalf of the foreign corporation,
services and other legal processes in all actions and other legal proceedings against such corporation, thus:

SEC. 127. Who may be a resident agent. – A resident agent may either be an individual residing in the Philippines or a domestic corporation
lawfully transacting business in the Philippines: Provided, That in the case of an individual, he must be of good moral character and of sound
financial standing.

SEC. 128. Resident agent; service of process. – The Securities and Exchange Commission shall require as a condition precedent to the issuance
of the license to transact business in the Philippines by any foreign corporation that such corporation file with the Securities and Exchange
Commission a written power of attorney designating some persons who must be a resident of the Philippines, on whom any summons and
other legal processes may be served in all actions or other legal proceedings against such corporation, and consenting that service upon such
resident agent shall be admitted and held as valid as if served upon the duly-authorized officers of the foreign corporation as its home office.14

Under the law, Atty. Aguinaldo was not specifically authorized to execute a certificate of non-forum shopping as required by Section 5, Rule 7 of
the Rules of Court. This is because while a resident agent may be aware of actions filed against his principal (a foreign corporation doing
business in the Philippines), such resident may not be aware of actions initiated by its principal, whether in the Philippines against a domestic
corporation or private individual, or in the country where such corporation was organized and registered, against a Philippine registered
corporation or a Filipino citizen.

The respondent knew that its counsel, Atty. Aguinaldo, as its resident agent, was not specifically authorized to execute the said certification. It
attempted to show its compliance with the rule subsequent to the filing of its complaint by submitting, on March 6, 2000, a resolution
purporting to have been approved by its Board of Directors during a teleconference held on June 25, 1999, allegedly with Atty. Aguinaldo and
Suk Kyoo Kim in attendance. However, such attempt of the respondent casts veritable doubt not only on its claim that such a teleconference
was held, but also on the approval by the Board of Directors of the resolution authorizing Atty. Aguinaldo to execute the certificate of non-
forum shopping.

In its April 12, 2000 Order, the RTC took judicial notice that because of the onset of modern technology, persons in one location may confer
with other persons in other places, and, based on the said premise, concluded that Suk Kyoo Kim and Atty. Aguinaldo had a teleconference with
the respondent’s Board of Directors in South Korea on June 25, 1999. The CA, likewise, gave credence to the respondent’s claim that such a
teleconference took place, as contained in the affidavit of Suk Kyoo Kim, as well as Atty. Aguinaldo’s certification.

Generally speaking, matters of judicial notice have three material requisites: (1) the matter must be one of common and general knowledge; (2)
it must be well and authoritatively settled and not doubtful or uncertain; and (3) it must be known to be within the limits of the jurisdiction of
the court. The principal guide in determining what facts may be assumed to be judicially known is that of notoriety. Hence, it can be said that
judicial notice is limited to facts evidenced by public records and facts of general notoriety.[15] Moreover, a judicially noticed fact must be one
not subject to a reasonable dispute in that it is either: (1) generally known within the territorial jurisdiction of the trial court; or (2) capable of
accurate and ready determination by resorting to sources whose accuracy cannot reasonably be questionable.16

Things of "common knowledge," of which courts take judicial matters coming to the knowledge of men generally in the course of the ordinary
experiences of life, or they may be matters which are generally accepted by mankind as true and are capable of ready and unquestioned
demonstration. Thus, facts which are universally known, and which may be found in encyclopedias, dictionaries or other publications, are
judicially noticed, provided, they are of such universal notoriety and so generally understood that they may be regarded as forming part of the
common knowledge of every person. As the common knowledge of man ranges far and wide, a wide variety of particular facts have been
judicially noticed as being matters of common knowledge. But a court cannot take judicial notice of any fact which, in part, is dependent on the
existence or non-existence of a fact of which the court has no constructive knowledge.17

In this age of modern technology, the courts may take judicial notice that business transactions may be made by individuals through
teleconferencing. Teleconferencing is interactive group communication (three or more people in two or more locations) through an electronic
medium. In general terms, teleconferencing can bring people together under one roof even though they are separated by hundreds of miles.18
This type of group communication may be used in a number of ways, and have three basic types: (1) video conferencing - television-like
communication augmented with sound; (2) computer conferencing - printed communication through keyboard terminals, and (3) audio-
conferencing-verbal communication via the telephone with optional capacity for telewriting or telecopying.19

A teleconference represents a unique alternative to face-to-face (FTF) meetings. It was first introduced in the 1960’s with American Telephone
and Telegraph’s Picturephone. At that time, however, no demand existed for the new technology. Travel costs were reasonable and consumers
were unwilling to pay the monthly service charge for using the picturephone, which was regarded as more of a novelty than as an actual means
for everyday communication.20 In time, people found it advantageous to hold teleconferencing in the course of business and corporate
governance, because of the money saved, among other advantages include:

1. People (including outside guest speakers) who wouldn’t normally attend a distant FTF meeting can participate.
14
2. Follow-up to earlier meetings can be done with relative ease and little expense.

3. Socializing is minimal compared to an FTF meeting; therefore, meetings are shorter and more oriented to the primary purpose of the
meeting.

4. Some routine meetings are more effective since one can audio-conference from any location equipped with a telephone.

5. Communication between the home office and field staffs is maximized.

6. Severe climate and/or unreliable transportation may necessitate teleconferencing.

7. Participants are generally better prepared than for FTF meetings.

8. It is particularly satisfactory for simple problem-solving, information exchange, and procedural tasks.
9. Group members participate more equally in well-moderated teleconferences than an FTF meeting.21

On the other hand, other private corporations opt not to hold teleconferences because of the following disadvantages:

1. Technical failures with equipment, including connections that aren’t made.

2. Unsatisfactory for complex interpersonal communication, such as negotiation or bargaining.
3. Impersonal, less easy to create an atmosphere of group rapport.
4. Lack of participant familiarity with the equipment, the medium itself, and meeting skills.
5. Acoustical problems within the teleconferencing rooms.
6. Difficulty in determining participant speaking order; frequently one person monopolizes the meeting.
7. Greater participant preparation time needed.
8. Informal, one-to-one, social interaction not possible.22

Indeed, teleconferencing can only facilitate the linking of people; it does not alter the complexity of group communication. Although it may be
easier to communicate via teleconferencing, it may also be easier to miscommunicate. Teleconferencing cannot satisfy the individual needs of
every type of meeting.23

In the Philippines, teleconferencing and videoconferencing of members of board of directors of private corporations is a reality, in light of
Republic Act No. 8792. The Securities and Exchange Commission issued SEC Memorandum Circular No. 15, on November 30, 2001, providing
the guidelines to be complied with related to such conferences.24 Thus, the Court agrees with the RTC that persons in the Philippines may have
a teleconference with a group of persons in South Korea relating to business transactions or corporate governance.

Even given the possibility that Atty. Aguinaldo and Suk Kyoo Kim participated in a teleconference along with the respondent’s Board of
Directors, the Court is not convinced that one was conducted; even if there had been one, the Court is not inclined to believe that a board
resolution was duly passed specifically authorizing Atty. Aguinaldo to file the complaint and execute the required certification against forum
shopping.

The records show that the petitioner filed a motion to dismiss the complaint on the ground that the respondent failed to comply with Section 5,
Rule 7 of the Rules of Court. The respondent opposed the motion on December 1, 1999, on its contention that Atty. Aguinaldo, its resident
agent, was duly authorized to sue in its behalf. The respondent, however, failed to establish its claim that Atty. Aguinaldo was its resident agent
in the Philippines. Even the identification card25 of Atty. Aguinaldo which the respondent appended to its pleading merely showed that he is
the company lawyer of the respondent’s Manila Regional Office.

The respondent, through Atty. Aguinaldo, announced the holding of the teleconference only during the hearing of January 28, 2000; Atty.
Aguinaldo then prayed for ten days, or until February 8, 2000, within which to submit the board resolution purportedly authorizing him to file
the complaint and execute the required certification against forum shopping. The court granted the motion.26 The respondent, however, failed
to comply, and instead prayed for 15 more days to submit the said resolution, contending that it was with its main office in Korea. The court
granted the motion per its Order27 dated February 11, 2000. The respondent again prayed for an extension within which to submit the said
resolution, until March 6, 2000.28 It was on the said date that the respondent submitted an affidavit of its general manager Suk Kyoo Kim,
stating, inter alia, that he and Atty. Aguinaldo attended the said teleconference on June 25, 1999, where the Board of Directors supposedly
approved the following resolution:

RESOLVED, that Mario A. Aguinaldo and his law firm M.A. Aguinaldo & Associates or any of its lawyers are hereby appointed and authorized
to take with whatever legal action necessary to effect the collection of the unpaid account of Expert Travel & Tours. They are hereby specifically
authorized to prosecute, litigate, defend, sign and execute any document or paper necessary to the filing and prosecution of said claim in Court,
attend the Pre-trial Proceedings and enter into a compromise agreement relative to the above-mentioned claim.29

But then, in the same affidavit, Suk Kyoo Kim declared that the respondent "do[es] not keep a written copy of the aforesaid Resolution" because
no records of board resolutions approved during teleconferences were kept. This belied the respondent’s earlier allegation in its February 10,
2000 motion for extension of time to submit the questioned resolution that it was in the custody of its main office in Korea. The respondent
gave the trial court the impression that it needed time to secure a copy of the resolution kept in Korea, only to allege later (via the affidavit of
Suk Kyoo Kim) that it had no such written copy. Moreover, Suk Kyoo Kim stated in his affidavit that the resolution was embodied in the
Secretary’s/Resident Agent’s Certificate signed by Atty. Aguinaldo. However, no such resolution was appended to the said certificate.

The respondent’s allegation that its board of directors conducted a teleconference on June 25, 1999 and approved the said resolution (with Atty.
Aguinaldo in attendance) is incredible, given the additional fact that no such allegation was made in the complaint. If the resolution had indeed
been approved on June 25, 1999, long before the complaint was filed, the respondent should have incorporated it in its complaint, or at least
appended a copy thereof. The respondent failed to do so. It was only on January 28, 2000 that the respondent claimed, for the first time, that
there was such a meeting of the Board of Directors held on June 25, 1999; it even represented to the Court that a copy of its resolution was with
15
its main office in Korea, only to allege later that no written copy existed. It was only on March 6, 2000 that the respondent alleged, for the first
time, that the meeting of the Board of Directors where the resolution was approved was held via teleconference.

Worse still, it appears that as early as January 10, 1999, Atty. Aguinaldo had signed a Secretary’s/Resident Agent’s Certificate alleging that the
board of directors held a teleconference on June 25, 1999. No such certificate was appended to the complaint, which was filed on September 6,
1999. More importantly, the respondent did not explain why the said certificate was signed by Atty. Aguinaldo as early as January 9, 1999, and
yet was notarized one year later (on January 10, 2000); it also did not explain its failure to append the said certificate to the complaint, as well
as to its Compliance dated March 6, 2000. It was only on January 26, 2001 when the respondent filed its comment in the CA that it submitted
the Secretary’s/Resident Agent’s Certificate30 dated January 10, 2000.

The Court is, thus, more inclined to believe that the alleged teleconference on June 25, 1999 never took place, and that the resolution allegedly
approved by the respondent’s Board of Directors during the said teleconference was a mere concoction purposefully foisted on the RTC, the CA
and this Court, to avert the dismissal of its complaint against the petitioner.

IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The Decision of the Court of Appeals in CA-G.R. SP No. 61000 is REVERSED
and SET ASIDE. The Regional Trial Court of Manila is hereby ORDERED to dismiss, without prejudice, the complaint of the respondent.

SO ORDERED.

5. G.R. No. 168402 August 6, 2008

ABOITIZ SHIPPING CORPORATION, petitioner,

vs.
INSURANCE COMPANY OF NORTH AMERICA, respondent.

DECISION
REYES, R.T., J.:

THE RIGHT of subrogation attaches upon payment by the insurer of the insurance claims by the assured. As subrogee, the insurer steps into
the shoes of the assured and may exercise only those rights that the assured may have against the wrongdoer who caused the damage.

Before Us is a petition for review on certiorari of the Decision1 of the Court of Appeals (CA) which reversed the Decision2 of the Regional Trial
Court (RTC). The CA ordered petitioner Aboitiz Shipping Corporation to pay the sum of P280,176.92 plus interest and attorney's fees in favor
of respondent Insurance Company of North America (ICNA).

The Facts
Culled from the records, the facts are as follows:

On June 20, 1993, MSAS Cargo International Limited and/or Associated and/or Subsidiary Companies (MSAS) procured a marine insurance
policy from respondent ICNA UK Limited of London. The insurance was for a transshipment of certain wooden work tools and workbenches
purchased for the consignee Science Teaching Improvement Project (STIP), Ecotech Center, Sudlon Lahug, Cebu City, Philippines.3 ICNA
issued an "all-risk" open marine policy,4 stating:

This Company, in consideration of a premium as agreed and subject to the terms and conditions printed hereon, does insure for MSAS Cargo
International Limited &/or Associated &/or Subsidiary Companies on behalf of the title holder: - Loss, if any, payable to the Assured or order.5

The cargo, packed inside one container van, was shipped "freight prepaid" from Hamburg, Germany on board M/S Katsuragi. A clean bill of
lading6 was issued by Hapag-Lloyd which stated the consignee to be STIP, Ecotech Center, Sudlon Lahug, Cebu City.

The container van was then off-loaded at Singapore and transshipped on board M/S Vigour Singapore. On July 18, 1993, the ship arrived and
docked at the Manila International Container Port where the container van was again off-loaded. On July 26, 1993, the cargo was received by
petitioner Aboitiz Shipping Corporation (Aboitiz) through its duly authorized booking representative, Aboitiz Transport System. The bill of
lading7 issued by Aboitiz contained the notation "grounded outside warehouse."

The container van was stripped and transferred to another crate/container van without any notation on the condition of the cargo on the
Stuffing/Stripping Report.8 On August 1, 1993, the container van was loaded on board petitioner's vessel, MV Super Concarrier I. The vessel
left Manila en route to Cebu City on August 2, 1993.

On August 3, 1993, the shipment arrived in Cebu City and discharged onto a receiving apron of the Cebu International Port. It was then brought
to the Cebu Bonded Warehousing Corporation pending clearance from the Customs authorities. In the Stripping Report9 dated August 5, 1993,
petitioner's checker noted that the crates were slightly broken or cracked at the bottom.

On August 11, 1993, the cargo was withdrawn by the representative of the consignee, Science Teaching Improvement Project (STIP) and
delivered to Don Bosco Technical High School, Punta Princesa, Cebu City. It was received by Mr. Bernhard Willig. On August 13, 1993, Mayo B.
Perez, then Claims Head of petitioner, received a telephone call from Willig informing him that the cargo sustained water damage. Perez, upon
receiving the call, immediately went to the bonded warehouse and checked the condition of the container and other cargoes stuffed in the same
container. He found that the container van and other cargoes stuffed there were completely dry and showed no sign of wetness.10

Perez found that except for the bottom of the crate which was slightly broken, the crate itself appeared to be completely dry and had no water
marks. But he confirmed that the tools which were stored inside the crate were already corroded. He further explained that the "grounded
outside warehouse" notation in the bill of lading referred only to the container van bearing the cargo.11

16
In a letter dated August 15, 1993, Willig informed Aboitiz of the damage noticed upon opening of the cargo.12 The letter stated that the crate
was broken at its bottom part such that the contents were exposed. The work tools and workbenches were found to have been completely
soaked in water with most of the packing cartons already disintegrating. The crate was properly sealed off from the inside with tarpaper sheets.
On the outside, galvanized metal bands were nailed onto all the edges. The letter concluded that apparently, the damage was caused by water
entering through the broken parts of the crate.

The consignee contacted the Philippine office of ICNA for insurance claims. On August 21, 1993, the Claimsmen Adjustment Corporation (CAC)
conducted an ocular inspection and survey of the damage. CAC reported to ICNA that the goods sustained water damage, molds, and corrosion
which were discovered upon delivery to consignee.13

On September 21, 1993, the consignee filed a formal claim14 with Aboitiz in the amount of P276,540.00 for the damaged condition of the
following goods:

ten (10) wooden workbenches

three (3) carbide-tipped saw blades

one (1) set of ball-bearing guides

one (1) set of overarm router bits

twenty (20) rolls of sandpaper for stroke sander

In a Supplemental Report dated October 20, 1993,15 CAC reported to ICNA that based on official weather report from the Philippine
Atmospheric, Geophysical and Astronomical Services Administration, it would appear that heavy rains on July 28 and 29, 1993 caused water
damage to the shipment. CAC noted that the shipment was placed outside the warehouse of Pier No. 4, North Harbor, Manila when it was
delivered on July 26, 1993. The shipment was placed outside the warehouse as can be gleaned from the bill of lading issued by Aboitiz which
contained the notation "grounded outside warehouse." It was only on July 31, 1993 when the shipment was stuffed inside another container van
for shipment to Cebu.

Aboitiz refused to settle the claim. On October 4, 1993, ICNA paid the amount of P280,176.92 to consignee. A subrogation receipt was duly
signed by Willig. ICNA formally advised Aboitiz of the claim and subrogation receipt executed in its favor. Despite follow-ups, however, no
reply was received from Aboitiz.

RTC Disposition
ICNA filed a civil complaint against Aboitiz for collection of actual damages in the sum of P280,176.92, plus interest and attorney's fees.16
ICNA alleged that the damage sustained by the shipment was exclusively and solely brought about by the fault and negligence of Aboitiz when
the shipment was left grounded outside its warehouse prior to delivery.

Aboitiz disavowed any liability and asserted that the claim had no factual and legal bases. It countered that the complaint stated no cause of
action, plaintiff ICNA had no personality to institute the suit, the cause of action was barred, and the suit was premature there being no claim
made upon Aboitiz.

On November 14, 2003, the RTC rendered judgment against ICNA. The dispositive portion of the decision17 states:

WHEREFORE, premises considered, the court holds that plaintiff is not entitled to the relief claimed in the complaint for being baseless and
without merit. The complaint is hereby DISMISSED. The defendant's counterclaims are, likewise, DISMISSED for lack of basis.18

The RTC ruled that ICNA failed to prove that it is the real party-in-interest to pursue the claim against Aboitiz. The trial court noted that
Marine Policy No. 87GB 4475 was issued by ICNA UK Limited with address at Cigna House, 8 Lime Street, London EC3M 7NA. However,
complainant ICNA Phils. did not present any evidence to show that ICNA UK is its predecessor-in-interest, or that ICNA UK assigned the
insurance policy to ICNA Phils. Moreover, ICNA Phils.' claim that it had been subrogated to the rights of the consignee must fail because the
subrogation receipt had no probative value for being hearsay evidence. The RTC reasoned:

While it is clear that Marine Policy No. 87GB 4475 was issued by Insurance Company of North America (U.K.) _x0016_Limited (ICNA UK)
with address at Cigna House, 8 Lime Street, London EC3M 7NA, no evidence has been adduced which would show that ICNA UK is the same as
or the predecessor-in-interest of plaintiff Insurance Company of North America ICNA with office address at Cigna-Monarch Bldg., dela Rosa
cor. Herrera Sts., Legaspi Village, Makati, Metro Manila or that ICNA UK assigned the Marine Policy to ICNA. Second, the assured in the
Marine Policy appears to be MSAS Cargo International Limited &/or Associated &/or Subsidiary Companies. Plaintiff's witness, Francisco B.
Francisco, claims that the signature below the name MSAS Cargo International is an endorsement of the marine policy in favor of Science
Teaching Improvement Project. Plaintiff's witness, however, failed to identify whose signature it was and plaintiff did not present on the
witness stand or took (sic) the deposition of the person who made that signature. Hence, the claim that there was an endorsement of the marine
policy has no probative value as it is hearsay.

Plaintiff, further, claims that it has been subrogated to the rights and interest of Science Teaching Improvement Project as shown by the
Subrogation Form (Exhibit "K") allegedly signed by a representative of Science Teaching Improvement Project. Such representative, however,
was not presented on the witness stand. Hence, the Subrogation Form is self-serving and has no probative value.19 (Emphasis supplied)

The trial court also found that ICNA failed to produce evidence that it was a foreign corporation duly licensed to do business in the Philippines.
Thus, it lacked the capacity to sue before Philippine Courts, to wit:

Prescinding from the foregoing, plaintiff alleged in its complaint that it is a foreign insurance company duly authorized to do business in the
Philippines. This allegation was, however, denied by the defendant. In fact, in the Pre-Trial Order of 12 March 1996, one of the issues defined
17
by the court is whether or not the plaintiff has legal capacity to sue and be sued. Under Philippine law, the condition is that a foreign insurance
company must obtain licenses/authority to do business in the Philippines. These licenses/authority are obtained from the Securities and
Exchange Commission, the Board of Investments and the Insurance Commission. If it fails to obtain these licenses/authority, such foreign
corporation doing business in the Philippines cannot sue before Philippine courts. Mentholatum Co., Inc. v. Mangaliman, 72 Phil. 524.
(Emphasis supplied)

CA Disposition

ICNA appealed to the CA. It contended that the trial court failed to consider that its cause of action is anchored on the right of subrogation
under Article 2207 of the Civil Code. ICNA said it is one and the same as the ICNA UK Limited as made known in the dorsal portion of the
Open Policy.20

On the other hand, Aboitiz reiterated that ICNA lacked a cause of action. It argued that the formal claim was not filed within the period
required under Article 366 of the Code of Commerce; that ICNA had no right of subrogation because the subrogation receipt should have been
signed by MSAS, the assured in the open policy, and not Willig, who is merely the representative of the consignee.

On March 29, 2005, the CA reversed and set aside the RTC ruling, disposing as follows:

WHEREFORE, premises considered, the present appeal is hereby GRANTED. The appealed decision of the Regional Trial Court of Makati City
in Civil Case No. 94-1590 is hereby REVERSED and SET ASIDE. A new judgment is hereby rendered ordering defendant-appellee Aboitiz
Shipping Corporation to pay the plaintiff-appellant Insurance Company of North America the sum of P280,176.92 with interest thereon at the
legal rate from the date of the institution of this case until fully paid, and attorney's fees in the sum of P50,000, plus the costs of suit.21

The CA opined that the right of subrogation accrues simply upon payment by the insurance company of the insurance claim. As subrogee, ICNA
is entitled to reimbursement from Aboitiz, even assuming that it is an unlicensed foreign corporation. The CA ruled:

At any rate, We find the ground invoked for the dismissal of the complaint as legally untenable. Even assuming arguendo that the plaintiff-
insurer in this case is an unlicensed foreign corporation, such circumstance will not bar it from claiming reimbursement from the defendant
carrier by virtue of subrogation under the contract of insurance and as recognized by Philippine courts. x x x

xxxx
Plaintiff insurer, whether the foreign company or its duly authorized Agent/Representative in the country, as subrogee of the claim of the
insured under the subject marine policy, is therefore the real party in interest to bring this suit and recover the full amount of loss of the subject
cargo shipped by it from Manila to the consignee in Cebu City. x x x22

The CA ruled that the presumption that the carrier was at fault or that it acted negligently was not overcome by any countervailing evidence.
Hence, the trial court erred in dismissing the complaint and in not finding that based on the evidence on record and relevant provisions of law,
Aboitiz is liable for the loss or damage sustained by the subject cargo.

Issues
The following issues are up for Our consideration:

(1) THE HONORABLE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN RULING THAT ICNA HAS A CAUSE OF ACTION
AGAINST ABOITIZ BY VIRTUE OF THE RIGHT OF SUBROGATION BUT WITHOUT CONSIDERING THE ISSUE CONSISTENTLY RAISED
BY ABOITIZ THAT THE FORMAL CLAIM OF STIP WAS NOT MADE WITHIN THE PERIOD PRESCRIBED BY ARTICLE 366 OF THE CODE
OF COMMERCE; AND, MORE SO, THAT THE CLAIM WAS MADE BY A WRONG CLAIMANT.

(2) THE HONORABLE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN RULING THAT THE SUIT FOR REIMBURSEMENT
AGAINST ABOITIZ WAS PROPERLY FILED BY ICNA AS THE LATTER WAS AN AUTHORIZED AGENT OF THE INSURANCE COMPANY
OF NORTH AMERICA (U.K.) ("ICNA UK").

(3) THE HONORABLE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN RULING THAT THERE WAS PROPER
INDORSEMENT OF THE INSURANCE POLICY FROM THE ORIGINAL ASSURED MSAS CARGO INTERNATIONAL LIMITED ("MSAS") IN
FAVOR OF THE CONSIGNEE STIP, AND THAT THE SUBROGATION RECEIPT ISSUED BY STIP IN FAVOR OF ICNA IS VALID
NOTWITHSTANDING THE FACT THAT IT HAS NO PROBATIVE VALUE AND IS MERELY HEARSAY AND A SELF-SERVING DOCUMENT
FOR FAILURE OF ICNA TO PRESENT A REPRESENTATIVE OF STIP TO IDENTIFY AND AUTHENTICATE THE SAME.

(4) THE HONORABLE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN RULING THAT THE EXTENT AND KIND OF
DAMAGE SUSTAINED BY THE SUBJECT CARGO WAS CAUSED BY THE FAULT OR NEGLIGENCE OF ABOITIZ.23 (Underscoring
supplied)

Elsewise stated, the controversy rotates on three (3) central questions: (a) Is respondent ICNA the real party-in-interest that possesses the right
of subrogation to claim reimbursement from petitioner Aboitiz? (b) Was there a timely filing of the notice of claim as required under Article
366 of the Code of Commerce? (c) If so, can petitioner be held liable on the claim for damages?

Our Ruling
We answer the triple questions in the affirmative.

A foreign corporation not licensed to do business in the Philippines is not absolutely incapacitated from filing a suit in local courts. Only when
that foreign corporation is "transacting" or "doing business" in the country will a license be necessary before it can institute suits.24 It may,
however, bring suits on isolated business transactions, which is not prohibited under Philippine law.25 Thus, this Court has held that a foreign
insurance company may sue in Philippine courts upon the marine insurance policies issued by it abroad to cover international-bound cargoes

18
shipped by a Philippine carrier, even if it has no license to do business in this country. It is the act of engaging in business without the
prescribed license, and not the lack of license per se, which bars a foreign corporation from access to our courts.26

In any case, We uphold the CA observation that while it was the ICNA UK Limited which issued the subject marine policy, the present suit was
filed by the said company's authorized agent in Manila. It was the domestic corporation that brought the suit and not the foreign company. Its
authority is expressly provided for in the open policy which includes the ICNA office in the Philippines as one of the foreign company's agents.

As found by the CA, the RTC erred when it ruled that there was no proper indorsement of the insurance policy by MSAS, the shipper, in favor of
STIP of Don Bosco Technical High School, the consignee.

The terms of the Open Policy authorize the filing of any claim on the insured goods, to be brought against ICNA UK, the company who issued
the insurance, or against any of its listed agents worldwide.27 MSAS accepted said provision when it signed and accepted the policy. The
acceptance operated as an acceptance of the authority of the agents. Hence, a formal indorsement of the policy to the agent in the Philippines
was unnecessary for the latter to exercise the rights of the insurer.

Likewise, the Open Policy expressly provides that:

The Company, in consideration of a premium as agreed and subject to the terms and conditions printed hereon, does insure MSAS Cargo
International Limited &/or Associates &/or Subsidiary Companies in behalf of the title holder: - Loss, if any, payable to the Assured or Order.

The policy benefits any subsequent assignee, or holder, including the consignee, who may file claims on behalf of the assured. This is in keeping
with Section 57 of the Insurance Code which states:

A policy may be so framed that it will inure to the benefit of whosoever, during the continuance of the risk, may become the owner of the
interest insured. (Emphasis added)

Respondent's cause of action is founded on it being subrogated to the rights of the consignee of the damaged shipment. The right of
subrogation springs from Article 2207 of the Civil Code, which states:

Article 2207. If the plaintiff's property has been insured, and he has received indemnity from the insurance company for the injury or loss
arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to the rights of the insured against the
wrongdoer or the person who has violated the contract. If the amount paid by the insurance company does not fully cover the injury or loss, the
aggrieved party shall be entitled to recover the deficiency from the person causing the loss or injury. (Emphasis added)

As this Court held in the case of Pan Malayan Insurance Corporation v. Court of Appeals,28 payment by the insurer to the assured operates as
an equitable assignment of all remedies the assured may have against the third party who caused the damage. Subrogation is not dependent
upon, nor does it grow out of, any privity of contract or upon written assignment of claim. It accrues simply upon payment of the insurance
claim by the insurer.29

Upon payment to the consignee of indemnity for damage to the insured goods, ICNA's entitlement to subrogation equipped it with a cause of
action against petitioner in case of a contractual breach or negligence.30 This right of subrogation, however, has its limitations. First, both the
insurer and the consignee are bound by the contractual stipulations under the bill of lading.31 Second, the insurer can be subrogated only to the
rights as the insured may have against the wrongdoer. If by its own acts after receiving payment from the insurer, the insured releases the
wrongdoer who caused the loss from liability, the insurer loses its claim against the latter.32

The giving of notice of loss or injury is a condition precedent to the action for loss or injury or the right to enforce the carrier's liability.
Circumstances peculiar to this case lead Us to conclude that the notice requirement was complied with. As held in the case of Philippine
American General Insurance Co., Inc. v. Sweet Lines, Inc.,33 this notice requirement protects the carrier by affording it an opportunity to make
an investigation of the claim while the matter is still fresh and easily investigated. It is meant to safeguard the carrier from false and fraudulent
claims.

Under the Code of Commerce, the notice of claim must be made within twenty four (24) hours from receipt of the cargo if the damage is not
apparent from the outside of the package. For damages that are visible from the outside of the package, the claim must be made immediately.
The law provides:

Article 366. Within twenty four hours following the receipt of the merchandise, the claim against the carrier for damages or average which may
be found therein upon opening the packages, may be made, provided that the indications of the damage or average which give rise to the claim
cannot be ascertained from the outside part of such packages, in which case the claim shall be admitted only at the time of receipt.

After the periods mentioned have elapsed, or the transportation charges have been paid, no claim shall be admitted against the carrier with
regard to the condition in which the goods transported were delivered. (Emphasis supplied)

The periods above, as well as the manner of giving notice may be modified in the terms of the bill of lading, which is the contract between the
parties. Notably, neither of the parties in this case presented the terms for giving notices of claim under the bill of lading issued by petitioner
for the goods.

The shipment was delivered on August 11, 1993. Although the letter informing the carrier of the damage was dated August 15, 1993, that letter,
together with the notice of claim, was received by petitioner only on September 21, 1993. But petitioner admits that even before it received the
written notice of claim, Mr. Mayo B. Perez, Claims Head of the company, was informed by telephone sometime in August 13, 1993. Mr. Perez
then immediately went to the warehouse and to the delivery site to inspect the goods in behalf of petitioner.34

In the case of Philippine Charter Insurance Corporation (PCIC) v. Chemoil Lighterage Corporation,35 the notice was allegedly made by the
consignee through telephone. The claim for damages was denied. This Court ruled that such a notice did not comply with the notice
19
requirement under the law. There was no evidence presented that the notice was timely given. Neither was there evidence presented that the
notice was relayed to the responsible authority of the carrier.

As adverted to earlier, there are peculiar circumstances in the instant case that constrain Us to rule differently from the PCIC case, albeit this
ruling is being made pro hac vice, not to be made a precedent for other cases.

Stipulations requiring notice of loss or claim for damage as a condition precedent to the right of recovery from a carrier must be given a
reasonable and practical construction, adapted to the circumstances of the case under adjudication, and their application is limited to cases
falling fairly within their object and purpose.36

Bernhard Willig, the representative of consignee who received the shipment, relayed the information that the delivered goods were discovered
to have sustained water damage to no less than the Claims Head of petitioner, Mayo B. Perez. Immediately, Perez was able to investigate the
claims himself and he confirmed that the goods were, indeed, already corroded.

Provisions specifying a time to give notice of damage to common carriers are ordinarily to be given a reasonable and practical, rather than a
strict construction.37 We give due consideration to the fact that the final destination of the damaged cargo was a school institution where
authorities are bound by rules and regulations governing their actions. Understandably, when the goods were delivered, the necessary
clearance had to be made before the package was opened. Upon opening and discovery of the damaged condition of the goods, a report to this
effect had to pass through the proper channels before it could be finalized and endorsed by the institution to the claims department of the
shipping company.

The call to petitioner was made two days from delivery, a reasonable period considering that the goods could not have corroded instantly
overnight such that it could only have sustained the damage during transit. Moreover, petitioner was able to immediately inspect the damage
while the matter was still fresh. In so doing, the main objective of the prescribed time period was fulfilled. Thus, there was substantial
compliance with the notice requirement in this case.

To recapitulate, We have found that respondent, as subrogee of the consignee, is the real party in interest to institute the claim for damages
against petitioner; and pro hac vice, that a valid notice of claim was made by respondent.

We now discuss petitioner's liability for the damages sustained by the shipment. The rule as stated in Article 1735 of the Civil Code is that in
cases where the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently,
unless they prove that they observed extraordinary diligence required by law.38 Extraordinary diligence is that extreme measure of care and
caution which persons of unusual prudence and circumspection use for securing and preserving their own property rights.39 This standard is
intended to grant favor to the shipper who is at the mercy of the common carrier once the goods have been entrusted to the latter for
shipment.40

Here, the shipment delivered to the consignee sustained water damage. We agree with the findings of the CA that petitioner failed to overturn
this presumption:

x x x upon delivery of the cargo to the consignee Don Bosco Technical High School by a representative from Trabajo Arrastre, and the crates
opened, it was discovered that the workbenches and work tools suffered damage due to "wettage" although by then they were already physically
dry. Appellee carrier having failed to discharge the burden of proving that it exercised extraordinary diligence in the vigilance over such goods it
contracted for carriage, the presumption of fault or negligence on its part from the time the goods were unconditionally placed in its possession
(July 26, 1993) up to the time the same were delivered to the consignee (August 11, 1993), therefore stands. The presumption that the carrier
was at fault or that it acted negligently was not overcome by any countervailing evidence. x x x41 (Emphasis added)

The shipment arrived in the port of Manila and was received by petitioner for carriage on July 26, 1993. On the same day, it was stripped from
the container van. Five days later, on July 31, 1993, it was re-stuffed inside another container van. On August 1, 1993, it was loaded onto
another vessel bound for Cebu. During the period between July 26 to 31, 1993, the shipment was outside a container van and kept in storage by
petitioner.

The bill of lading issued by petitioner on July 31, 1993 contains the notation "grounded outside warehouse," suggesting that from July 26 to 31,
the goods were kept outside the warehouse. And since evidence showed that rain fell over Manila during the same period, We can conclude that
this was when the shipment sustained water damage.

To prove the exercise of extraordinary diligence, petitioner must do more than merely show the possibility that some other party could be
responsible for the damage. It must prove that it used "all reasonable means to ascertain the nature and characteristic of the goods tendered for
transport and that it exercised due care in handling them.42 Extraordinary diligence must include safeguarding the shipment from damage
coming from natural elements such as rainfall.

Aside from denying that the "grounded outside warehouse" notation referred not to the crate for shipment but only to the carrier van,
petitioner failed to mention where exactly the goods were stored during the period in question. It failed to show that the crate was properly
stored indoors during the time when it exercised custody before shipment to Cebu. As amply explained by the CA:

On the other hand, the supplemental report submitted by the surveyor has confirmed that it was rainwater that seeped into the cargo based on
official data from the PAGASA that there was, indeed, rainfall in the Port Area of Manila from July 26 to 31, 1993. The Surveyor specifically
noted that the subject cargo was under the custody of appellee carrier from the time it was delivered by the shipper on July 26, 1993 until it was
stuffed inside Container No. ACCU-213798-4 on July 31, 1993. No other inevitable conclusion can be deduced from the foregoing established
facts that damage from "wettage" suffered by the subject cargo was caused by the negligence of appellee carrier in grounding the shipment
outside causing rainwater to seep into the cargoes.

Appellee's witness, Mr. Mayo tried to disavow any responsibility for causing "wettage" to the subject goods by claiming that the notation
"GROUNDED OUTSIDE WHSE." actually refers to the container and not the contents thereof or the cargoes. And yet it presented no evidence
20
to explain where did they place or store the subject goods from the time it accepted the same for shipment on July 26, 1993 up to the time the
goods were stripped or transferred from the container van to another container and loaded into the vessel M/V Supercon Carrier I on August 1,
1993 and left Manila for Cebu City on August 2, 1993. x x x If the subject cargo was not grounded outside prior to shipment to Cebu City,
appellee provided no explanation as to where said cargo was stored from July 26, 1993 to July 31, 1993. What the records showed is that the
subject cargo was stripped from the container van of the shipper and transferred to the container on August 1, 1993 and finally loaded into the
appellee's vessel bound for Cebu City on August 2, 1993. The Stuffing/Stripping Report (Exhibit "D") at the Manila port did not indicate any
such defect or damage, but when the container was stripped upon arrival in Cebu City port after being discharged from appellee's vessel, it was
noted that only one (1) slab was slightly broken at the bottom allegedly hit by a forklift blade (Exhibit "F").43 (Emphasis added)

Petitioner is thus liable for the water damage sustained by the goods due to its failure to satisfactorily prove that it exercised the extraordinary
diligence required of common carriers.

WHEREFORE, the petition is DENIED and the appealed Decision AFFIRMED.

SO ORDERED.

6. --c/o IPC
7.
G.R. No. L-34382 July 20, 1983

THE HOME INSURANCE COMPANY, petitioner,

vs.
EASTERN SHIPPING LINES and/or ANGEL JOSE TRANSPORTATION, INC. and HON. A. MELENCIO-HERRERA, Presiding Judge of the
Manila Court of First Instance, Branch XVII, respondents.

G.R. No. L-34383 July 20, 1983

THE HOME INSURANCE COMPANY, petitioner,
vs.
N. V. NEDLLOYD LIJNEN; COLUMBIAN PHILIPPINES, INC., and/or GUACODS, INC., and HON. A. MELENCIO-HERRERA, Presiding
Judge of the Manila Court of First Instance, Branch XVII, respondents.
No. L-34382.
GUTIERREZ, JR., J.:

Questioned in these consolidated petitions for review on certiorari are the decisions of the Court of First Instance of Manila, Branch XVII,
dismissing the complaints in Civil Case No. 71923 and in Civil Case No. 71694, on the ground that plaintiff therein, now appellant, had failed to
prove its capacity to sue.

There is no dispute over the facts of these cases for recovery of maritime damages. In L-34382, the facts are found in the decision of the
respondent court which stated:

On or about January 13, 1967, S. Kajita & Co., on behalf of Atlas Consolidated Mining & Development Corporation, shipped on board the SS
"Eastern Jupiter' from Osaka, Japan, 2,361 coils of "Black Hot Rolled Copper Wire Rods." The said VESSEL is owned and operated by
defendant Eastern Shipping Lines (CARRIER). The shipment was covered by Bill of Lading No. O-MA-9, with arrival notice to Phelps Dodge
Copper Products Corporation of the Philippines (CONSIGNEE) at Manila. The shipment was insured with plaintiff against all risks in the
amount of P1,580,105.06 under its Insurance Policy No. AS-73633.

xxx xxx xxx

The coils discharged from the VESSEL numbered 2,361, of which 53 were in bad order. What the CONSIGNEE ultimately received at its
warehouse was the same number of 2,361 coils with 73 coils loose and partly cut, and 28 coils entangled, partly cut, and which had to be
considered as scrap. Upon weighing at CONSIGNEE's warehouse, the 2,361 coils were found to weight 263,940.85 kilos as against its invoiced
weight of 264,534.00 kilos or a net loss/shortage of 593.15 kilos, according to Exhibit "A", or 1,209,56 lbs., according to the claims presented by
the consignee against the plaintiff (Exhibit "D-1"), the CARRIER (Exhibit "J-1"), and the TRANSPORTATION COMPANY (Exhibit "K- l").

For the loss/damage suffered by the cargo, plaintiff paid the consignee under its insurance policy the amount of P3,260.44, by virtue of which
plaintiff became subrogated to the rights and actions of the CONSIGNEE. Plaintiff made demands for payment against the CARRIER and the
TRANSPORTATION COMPANY for reimbursement of the aforesaid amount but each refused to pay the same. ...

The facts of L-34383 are found in the decision of the lower court as follows:

On or about December 22, 1966, the Hansa Transport Kontor shipped from Bremen, Germany, 30 packages of Service Parts of Farm
Equipment and Implements on board the VESSEL, SS "NEDER RIJN" owned by the defendant, N. V. Nedlloyd Lijnen, and represented in the
Philippines by its local agent, the defendant Columbian Philippines, Inc. (CARRIER). The shipment was covered by Bill of Lading No. 22 for
transportation to, and delivery at, Manila, in favor of the consignee, international Harvester Macleod, Inc. (CONSIGNEE). The shipment was
insured with plaintiff company under its Cargo Policy No. AS-73735 "with average terms" for P98,567.79.

xxx xxx xxx

The packages discharged from the VESSEL numbered 29, of which seven packages were found to be in bad order. What the CONSIGNEE
ultimately received at its warehouse was the same number of 29 packages with 9 packages in bad order. Out of these 9 packages, 1 package was
accepted by the CONSIGNEE in good order due to the negligible damages sustained. Upon inspection at the consignee's warehouse, the
contents of 3 out of the 8 cases were also found to be complete and intact, leaving 5 cases in bad order. The contents of these 5 packages showed

21
several items missing in the total amount of $131.14; while the contents of the undelivered 1 package were valued at $394.66, or a total of
$525.80 or P2,426.98.

For the short-delivery of 1 package and the missing items in 5 other packages, plaintiff paid the CONSIGNEE under its Insurance Cargo Policy
the amount of P2,426.98, by virtue of which plaintiff became subrogated to the rights and actions of the CONSIGNEE. Demands were made on
defendants CARRIER and CONSIGNEE for reimbursement thereof but they failed and refused to pay the same.

In both cases, the petitioner-appellant made the following averment regarding its capacity to sue:

The plaintiff is a foreign insurance company duly authorized to do business in the Philippines through its agent, Mr. VICTOR H. BELLO, of
legal age and with office address at Oledan Building, Ayala Avenue, Makati, Rizal.

In L-34382, the respondent-appellee Eastern Shipping Lines, Inc., filed its answer and alleged that it:

Denies the allegations of Paragraph I which refer to plaintiff's capacity to sue for lack of knowledge or information sufficient to form a belief as
to the truth thereof.

Respondent-appellee, Angel Jose Transportation, Inc., in turn filed its answer admitting the allegations of the complaint, regarding the capacity
of plaintiff-appellant. The pertinent paragraph of this answer reads as follows:

Angel Jose Admits the jurisdictional averments in paragraphs 1, 2, and 3 of the heading Parties.

In L-34383, the respondents-appellees N. V. Nedlloyd Lijhen, Columbian Philippines, Inc. and Guacods, Inc., filed their answers. They denied
the petitioner-appellant's capacity to sue for lack of knowledge or information sufficient to form a belief as to the truth thereof.

As earlier stated, the respondent court dismissed the complaints in the two cases on the same ground, that the plaintiff failed to prove its
capacity to sue. The court reasoned as follows:

In the opinion of the Court, if plaintiff had the capacity to sue, the Court should hold that a) defendant Eastern Shipping Lines should pay
plaintiff the sum of P1,630.22 with interest at the legal rate from January 5, 1968, the date of the institution of the Complaint, until fully paid;
b) defendant Angel Jose Transportation, Inc. should pay plaintiff the sum of P1,630.22 also with interest at the legal rate from January 5, 1968
until fully paid; c) the counterclaim of defendant Angel Jose transportation, Inc. should be ordered dismissed; and d) each defendant to pay
one-half of the costs.

The Court is of the opinion that Section 68 of the Corporation Law reflects a policy designed to protect the public interest. Hence, although
defendants have not raised the question of plaintiff's compliance with that provision of law, the Court has resolved to take the matter into
account.

A suing foreign corporation, like plaintiff, has to plead affirmatively and prove either that the transaction upon which it bases its complaint is
an isolated one, or that it is licensed to transact business in this country, failing which, it will be deemed that it has no valid cause of action
(Atlantic Mutual Ins. Co. vs. Cebu Stevedoring Co., Inc., 17 SCRA 1037). In view of the number of cases filed by plaintiff before this Court, of
which judicial cognizance can be taken, and under the ruling in Far East International Import and Export Corporation vs. Hankai Koayo Co., 6
SCRA 725, it has to be held that plaintiff is doing business in the Philippines. Consequently, it must have a license under Section 68 of the
Corporation Law before it can be allowed to sue.

The situation of plaintiff under said Section 68 has been described as follows in Civil Case No. 71923 of this Court, entitled 'Home Insurance
Co. vs. N. V. Nedlloyd Lijnen, of which judicial cognizance can also be taken:

Exhibit "R",presented by plaintiff is a certified copy of a license, dated July 1, 1967, issued by the Office of the Insurance Commissioner
authorizing plaintiff to transact insurance business in this country. By virtue of Section 176 of the Insurance Law, it has to be presumed that a
license to transact business under Section 68 of the Corporation Law had previously been issued to plaintiff. No copy thereof, however, was
submitted for a reason unknown. The date of that license must not have been much anterior to July 1, 1967. The preponderance of the evidence
would therefore call for the finding that the insurance contract involved in this case, which was executed at Makati, Rizal, on February 8, 1967,
was contracted before plaintiff was licensed to transact business in the Philippines.

This Court views Section 68 of the Corporation Law as reflective of a basic public policy. Hence, it is of the opinion that, in the eyes of
Philippine law, the insurance contract involved in this case must be held void under the provisions of Article 1409 (1) of the Civil Code, and
could not be validated by subsequent procurement of the license. That view of the Court finds support in the following citation:

According to many authorities, a constitutional or statutory prohibition against a foreign corporation doing business in the state, unless such
corporation has complied with conditions prescribed, is effective to make the contracts of such corporation void, or at least unenforceable, and
prevents the maintenance by the corporation of any action on such contracts. Although the usual construction is to the contrary, and to the
effect that only the remedy for enforcement is affected thereby, a statute prohibiting a non-complying corporation from suing in the state courts
on any contract has been held by some courts to render the contract void and unenforceable by the corporation, even after its has complied with
the statute." (36 Am. Jur. 2d 299-300).

xxx xxx xxx

The said Civil Case No. 71923 was dismissed by this Court. As the insurance contract involved herein was executed on January 20, 1967, the
instant case should also be dismissed.

We resolved to consolidate the two cases when we gave due course to the petition.

The petitioner raised the following assignments of errors:

22
First Assignment of Error

THE HONORABLE TRIAL COURT ERRED IN CONSIDERING AS AN ISSUE THE LEGAL EXISTENCE OR CAPACITY OF PLAINTIFF-
APPELLANT.

Second Assignment of Error

THE HONORABLE TRIAL COURT ERRED IN DISMISSING THE COMPLAINT ON THE FINDING THAT PLAINTIFF-APPELLANT HAS NO
CAPACITY TO SUE.

On the basis of factual and equitable considerations, there is no question that the private respondents should pay the obligations found by the
trial court as owing to the petitioner. Only the question of validity of the contracts in relation to lack of capacity to sue stands in the way of the
petitioner being given the affirmative relief it seeks. Whether or not the petitioner was engaged in single acts or solitary transactions and not
engaged in business is likewise not in issue. The petitioner was engaged in business without a license. The private respondents' obligation to
pay under the terms of the contracts has been proved.

When the complaints in these two cases were filed, the petitioner had already secured the necessary license to conduct its insurance business in
the Philippines. It could already filed suits.

Petitioner was, therefore, telling the truth when it averred in its complaints that it was a foreign insurance company duly authorized to do
business in the Philippines through its agent Mr. Victor H. Bello. However, when the insurance contracts which formed the basis of these cases
were executed, the petitioner had not yet secured the necessary licenses and authority. The lower court, therefore, declared that pursuant to the
basic public policy reflected in the Corporation Law, the insurance contracts executed before a license was secured must be held null and void.
The court ruled that the contracts could not be validated by the subsequent procurement of the license.

The applicable provisions of the old Corporation Law, Act 1459, as amended are:

Sec. 68. No foreign corporation or corporations formed, organized, or existing under any laws other than those of the Philippine Islands shall
be permitted to transact business in the Philippine Islands until after it shall have obtained a license for that purpose from the chief of the
Mercantile Register of the Bureau of Commerce and Industry, (Now Securities and Exchange Commission. See RA 5455) upon order of the
Secretary of Finance (Now Monetary Board) in case of banks, savings, and loan banks, trust corporations, and banking institutions of all kinds,
and upon order of the Secretary of Commerce and Communications (Now Secretary of Trade. See 5455, section 4 for other requirements) in
case of all other foreign corporations. ...

xxx xxx xxx

Sec. 69. No foreign corporation or corporation formed, organized, or existing under any laws other than those of the Philippine Islands shall be
permitted to transact business in the Philippine Islands or maintain by itself or assignee any suit for the recovery of any debt, claim, or demand
whatever, unless it shall have the license prescribed in the section immediately preceding. Any officer, director, or agent of the corporation or
any person transacting business for any foreign corporation not having the license prescribed shag be punished by imprisonment for not less
than six months nor more than two years or by a fine of not less than two hundred pesos nor more than one thousand pesos, or by both such
imprisonment and fine, in the discretion of the court.

As early as 1924, this Court ruled in the leading case of Marshall Wells Co. v. Henry W. Elser & Co. (46 Phil. 70) that the object of Sections 68
and 69 of the Corporation Law was to subject the foreign corporation doing business in the Philippines to the jurisdiction of our courts. The
Marshall Wells Co. decision referred to a litigation over an isolated act for the unpaid balance on a bill of goods but the philosophy behind the
law applies to the factual circumstances of these cases. The Court stated:

xxx xxx xxx

Defendant isolates a portion of one sentence of section 69 of the Corporation Law and asks the court to give it a literal meaning Counsel would
have the law read thus: "No foreign corporation shall be permitted to maintain by itself or assignee any suit for the recovery of any debt, claim,
or demand whatever, unless it shall have the license prescribed in section 68 of the law." Plaintiff, on the contrary, desires for the court to
consider the particular point under discussion with reference to all the law, and thereafter to give the law a common sense interpretation.

The object of the statute was to subject the foreign corporation doing business in the Philippines to the jurisdiction of its courts. The object of
the statute was not to prevent the foreign corporation from performing single acts, but to prevent it from acquiring a domicile for the purpose
of business without taking the steps necessary to render it amenable to suit in the local courts. The implication of the law is that it was never the
purpose of the Legislature to exclude a foreign corporation which happens to obtain an isolated order for business from the Philippines, from
securing redress in the Philippine courts, and thus, in effect, to permit persons to avoid their contracts made with such foreign corporations.
The effect of the statute preventing foreign corporations from doing business and from bringing actions in the local courts, except on
compliance with elaborate requirements, must not be unduly extended or improperly applied. It should not be construed to extend beyond the
plain meaning of its terms, considered in connection with its object, and in connection with the spirit of the entire law. (State vs. American
Book Co. [1904], 69 Kan, 1; American De Forest Wireless Telegraph Co. vs. Superior Court of City & Country of San Francisco and Hebbard
[1908], 153 Cal., 533; 5 Thompson on Corporations, 2d ed., chap. 184.)

Confronted with the option of giving to the Corporation Law a harsh interpretation, which would disastrously embarrass trade, or of giving to
the law a reasonable interpretation, which would markedly help in the development of trade; confronted with the option of barring from the
courts foreign litigants with good causes of action or of assuming jurisdiction of their cases; confronted with the option of construing the law to
mean that any corporation in the United States, which might want to sell to a person in the Philippines must send some representative to the
Islands before the sale, and go through the complicated formulae provided by the Corporation Law with regard to the obtaining of the license,
before the sale was made, in order to avoid being swindled by Philippine citizens, or of construing the law to mean that no foreign corporation
doing business in the Philippines can maintain any suit until it shall possess the necessary license;-confronted with these options, can anyone
23
doubt what our decision will be? The law simply means that no foreign corporation shall be permitted "to transact business in the Philippine
Islands," as this phrase is known in corporation law, unless it shall have the license required by law, and, until it complies with the law, shall
not be permitted to maintain any suit in the local courts. A contrary holding would bring the law to the verge of unconstitutionality, a result
which should be and can be easily avoided. (Sioux Remedy Co. vs. Cope and Cope, supra; Perkins, Philippine Business Law, p. 264.)

To repeat, the objective of the law was to subject the foreign corporation to the jurisdiction of our courts. The Corporation Law must be given a
reasonable, not an unduly harsh, interpretation which does not hamper the development of trade relations and which fosters friendly
commercial intercourse among countries.

The objectives enunciated in the 1924 decision are even more relevant today when we view commercial relations in terms of a world economy,
when the tendency is to re-examine the political boundaries separating one nation from another insofar as they define business requirements
or restrict marketing conditions.

We distinguish between the denial of a right to take remedial action and the penal sanction for non-registration.

Insofar as transacting business without a license is concerned, Section 69 of the Corporation Law imposed a penal sanction-imprisonment for
not less than six months nor more than two years or payment of a fine not less than P200.00 nor more than P1,000.00 or both in the discretion
of the court. There is a penalty for transacting business without registration.

And insofar as litigation is concerned, the foreign corporation or its assignee may not maintain any suit for the recovery of any debt, claim, or
demand whatever. The Corporation Law is silent on whether or not the contract executed by a foreign corporation with no capacity to sue is
null and void ab initio.

We are not unaware of the conflicting schools of thought both here and abroad which are divided on whether such contracts are void or merely
voidable. Professor Sulpicio Guevarra in his book Corporation Law (Philippine Jurisprudence Series, U.P. Law Center, pp. 233-234) cites an
Illinois decision which holds the contracts void and a Michigan statute and decision declaring them merely voidable:

xxx xxx xxx

Where a contract which is entered into by a foreign corporation without complying with the local requirements of doing business is rendered
void either by the express terms of a statute or by statutory construction, a subsequent compliance with the statute by the corporation will not
enable it to maintain an action on the contract. (Perkins Mfg. Co. v. Clinton Const. Co., 295 P. 1 [1930]. See also Diamond Glue Co. v. U.S. Glue
Co., supra see note 18.) But where the statute merely prohibits the maintenance of a suit on such contract (without expressly declaring the
contract "void"), it was held that a failure to comply with the statute rendered the contract voidable and not void, and compliance at any time
before suit was sufficient. (Perkins Mfg. Co. v. Clinton Const. Co., supra.) Notwithstanding the above decision, the Illinois statute provides,
among other things that a foreign corporation that fails to comply with the conditions of doing business in that state cannot maintain a suit or
action, etc. The court said: 'The contract upon which this suit was brought, having been entered into in this state when appellant was not
permitted to transact business in this state, is in violation of the plain provisions of the statute, and is therefore null and void, and no action can
be maintained thereon at any time, even if the corporation shall, at some time after the making of the contract, qualify itself to transact
business in this state by a compliance with our laws in reference to foreign corporations that desire to engage in business here. (United Lead
Co. v. J.M. Ready Elevator Mfg. Co., 222 Ill. 199, 73 N.N. 567 [1906].)

A Michigan statute provides: "No foreign corporation subject to the provisions of this Act, shall maintain any action in this state upon any
contract made by it in this state after the taking effect of this Act, until it shall have fully complied with the requirement of this Act, and
procured a certificate to that effect from the Secretary of State," It was held that the above statute does not render contracts of a foreign
corporation that fails to comply with the statute void, but they may be enforced only after compliance therewith. (Hastings Industrial Co. v.
Moral, 143 Mich. 679,107 N.E. 706 [1906]; Kuennan v. U.S. Fidelity & G. Co., Mich. 122; 123 N.W. 799 [1909]; Despres, Bridges & Noel v.
Zierleyn, 163 Mich. 399, 128 N.W. 769 [1910]).

It has also been held that where the law provided that a corporation which has not complied with the statutory requirements "shall not
maintain an action until such compliance". "At the commencement of this action the plaintiff had not filed the certified copy with the country
clerk of Madera County, but it did file with the officer several months before the defendant filed his amended answer, setting up this defense, as
that at the time this defense was pleaded by the defendant the plaintiff had complied with the statute. The defense pleaded by the defendant
was therefore unavailable to him to prevent the plaintiff from thereafter maintaining the action. Section 299 does not declare that the plaintiff
shall not commence an action in any county unless it has filed a certified copy in the office of the county clerk, but merely declares that it shall
not maintain an action until it has filled it. To maintain an action is not the same as to commence an action, but implies that the action has
already been commenced." (See also Kendrick & Roberts Inc. v. Warren Bros. Co., 110 Md. 47, 72 A. 461 [1909]).

In another case, the court said: "The very fact that the prohibition against maintaining an action in the courts of the state was inserted in the
statute ought to be conclusive proof that the legislature did not intend or understand that contracts made without compliance with the law were
void. The statute does not fix any time within which foreign corporations shall comply with the Act. If such contracts were void, no suits could
be prosecuted on them in any court. ... The primary purpose of our statute is to compel a foreign corporation desiring to do business within the
state to submit itself to the jurisdiction of the courts of this state. The statute was not intended to exclude foreign corporations from the state. It
does not, in terms, render invalid contracts made in this state by non-complying corporations. The better reason, the wiser and fairer policy,
and the greater weight lie with those decisions which hold that where, as here, there is a prohibition with a penalty, with no express or implied
declarations respecting the validity of enforceability of contracts made by qualified foreign corporations, the contracts ... are enforceable ...
upon compliance with the law." (Peter & Burghard Stone Co. v. Carper, 172 N.E. 319 [1930].)

Our jurisprudence leans towards the later view. Apart from the objectives earlier cited from Marshall Wells Co. v. Henry W. Elser & Co (supra),
it has long been the rule that a foreign corporation actually doing business in the Philippines without license to do so may be sued in our courts.
The defendant American corporation in General Corporation of the Philippines v. Union Insurance Society of Canton Ltd et al. (87 Phil. 313)
entered into insurance contracts without the necessary license or authority. When summons was served on the agent, the defendant had not yet
been registered and authorized to do business. The registration and authority came a little less than two months later. This Court ruled:
24
Counsel for appellant contends that at the time of the service of summons, the appellant had not yet been authorized to do business. But, as
already stated, section 14, Rule 7 of the Rules of Court makes no distinction as to corporations with or without authority to do business in the
Philippines. The test is whether a foreign corporation was actually doing business here. Otherwise, a foreign corporation illegally doing
business here because of its refusal or neglect to obtain the corresponding license and authority to do business may successfully though unfairly
plead such neglect or illegal act so as to avoid service and thereby impugn the jurisdiction of the local courts. It would indeed be anomalous and
quite prejudicial, even disastrous, to the citizens in this jurisdiction who in all good faith and in the regular course of business accept and pay
for shipments of goods from America, relying for their protection on duly executed foreign marine insurance policies made payable in Manila
and duly endorsed and delivered to them, that when they go to court to enforce said policies, the insurer who all along has been engaging in this
business of issuing similar marine policies, serenely pleads immunity to local jurisdiction because of its refusal or neglect to obtain the
corresponding license to do business here thereby compelling the consignees or purchasers of the goods insured to go to America and sue in its
courts for redress.

There is no question that the contracts are enforceable. The requirement of registration affects only the remedy.

Significantly, Batas Pambansa Blg. 68, the Corporation Code of the Philippines has corrected the ambiguity caused by the wording of Section
69 of the old Corporation Law.

Section 133 of the present Corporation Code provides:

SEC. 133. Doing business without a license.-No foreign corporation transacting business in the Philippines without a license, or its successors
or assigns, shag be permitted to maintain or intervene in any action, suit or proceeding in any court or administrative agency in 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 old Section 69 has been reworded in terms of non-access to courts and administrative agencies in order to maintain or intervene in any
action or proceeding.

The prohibition against doing business without first securing a license is now given penal sanction which is also applicable to other violations of
the Corporation Code under the general provisions of Section 144 of the Code.

It is, therefore, not necessary to declare the contract nun and void even as against the erring foreign corporation. The penal sanction for the
violation and the denial of access to our courts and administrative bodies are sufficient from the viewpoint of legislative policy.

Our ruling that the lack of capacity at the time of the execution of the contracts was cured by the subsequent registration is also strengthened by
the procedural aspects of these cases.

The petitioner averred in its complaints that it is a foreign insurance company, that it is authorized to do business in the Philippines, that its
agent is Mr. Victor H. Bello, and that its office address is the Oledan Building at Ayala Avenue, Makati. These are all the averments required by
Section 4, Rule 8 of the Rules of Court. The petitioner sufficiently alleged its capacity to sue. The private respondents countered either with an
admission of the plaintiff's jurisdictional averments or with a general denial based on lack of knowledge or information sufficient to form a
belief as to the truth of the averments.

We find the general denials inadequate to attack the foreign corporations lack of capacity to sue in the light of its positive averment that it is
authorized to do so. Section 4, Rule 8 requires that "a party desiring to raise an issue as to the legal existence of any party or the capacity of any
party to sue or be sued in a representative capacity shall do so by specific denial, which shag include such supporting particulars as are
particularly within the pleader's knowledge. At the very least, the private respondents should have stated particulars in their answers upon
which a specific denial of the petitioner's capacity to sue could have been based or which could have supported its denial for lack of knowledge.
And yet, even if the plaintiff's lack of capacity to sue was not properly raised as an issue by the answers, the petitioner introduced documentary
evidence that it had the authority to engage in the insurance business at the time it filed the complaints.

WHEREFORE, the petitions are hereby granted. The decisions of the respondent court are reversed and set aside.

In L-34382, respondent Eastern Shipping Lines is ordered to pay the petitioner the sum of P1,630.22 with interest at the legal rate from
January 5, 1968 until fully paid and respondent Angel Jose Transportation Inc. is ordered to pay the petitioner the sum of P1,630.22 also with
interest at the legal rate from January 5, 1968 until fully paid. Each respondent shall pay one-half of the costs. The counterclaim of Angel Jose
Transportation Inc. is dismissed.

In L-34383, respondent N. V. Nedlloyd Lijnen, or its agent Columbian Phil. Inc. is ordered to pay the petitioner the sum of P2,426.98 with
interest at the legal rate from February 1, 1968 until fully paid, the sum of P500.00 attorney's fees, and costs, The complaint against Guacods,
Inc. is dismissed.

SO ORDERED.

8. G.R. No. 118843 February 6, 1997

ERIKS PTE. LTD., petitioner,

vs.
COURT OF APPEALS, and DELFIN F. ENRIQUEZ, JR., respondents.
PANGANIBAN, J.:

25
Is a foreign corporation which sold its products sixteen times over a five-month period to the same Filipino buyer without first obtaining a
license to do business in the Philippines, prohibited from maintaining an action to collect payment therefor in Philippine courts? In other
words, is such foreign corporation "doing business" in the Philippines without the required license and thus barred access to our court system?

This is the main issue presented for resolution in the instant petition for review, which seeks the reversal of the Decision1 of the Court of
Appeals, Seventh Division, promulgated on January 25, 1995, in CA-G.R. CV No. 41275 which affirmed, for want of capacity to sue, the trial
court's dismissal of the collection suit instituted by petitioner.

The Facts

Petitioner Eriks Pte. Ltd. is a non-resident foreign corporation engaged in the manufacture and sale of elements used in sealing pumps, valves
and pipes for industrial purposes, valves and control equipment used for industrial fluid control and PVC pipes and fittings for industrial uses.
In its complaint, it alleged that:2

(I)t is a corporation duly organized and existing under the laws of the Republic of Singapore with address at 18 Pasir Panjang Road #09-01,
PSA Multi-Storey Complex, Singapore 0511. It is not licensed to do business in the Philippines and i(s) not so engaged and is suing on an
isolated transaction for which it has capacity to sue . . . (par. 1, Complaint; p. 1, Record)

On various dates covering the period January 17 — August 16, 1989, private respondent Delfin Enriquez, Jr., doing business under the name
and style of Delrene EB Controls Center and/or EB Karmine Commercial, ordered and received from petitioner various elements used in
sealing pumps, valves, pipes and control equipment, PVC pipes and fittings. The ordered materials were delivered via airfreight under the
following invoices:3

Date Invoice No. AWB No. Amount

—— ————— ———— ———

17 Jan 89 27065618-7496-2941 S$ 5,010.59

24 Feb 89 27738618-7553-6672 14,402.13
02 Mar 89 27855(freight & hand- 1,164.18
ling charges per
Inv. 27738)
03 Mar 89 27876618-7553-7501 1,394.32
03 Mar 89 27877 618-7553-7501 1,641.57
10 Mar 89 28046 618-7578-3256/ 7,854.60
618-7578-3481
21 Mar 89 28258 618-7578-4634 27.72
14 Apr 89 28901618-7741-7631 2,756.53
19 Apr 89 29001Self-collect 458.80
16 Aug 89 31669 (handcarried by 1,862.00
buyer)
—————
S$36,392.44
21 Mar 89 28257618-7578-4634 415.50
04 Apr 89 28601618-7741-7605 884.09
14 Apr 89 28900 618-7741-7631 1,269.50
25 Apr 89 29127 618-7741-9720 883.80
02 May 89 29232(By seafreight) 120.00
05 May 89 29332618-7796-3255 1,198.40
15 May 89 29497(Freight & hand- 111.94
ling charges per
Inv. 29127 ——————
S$ 4,989.29
31 May 89 29844 618-7796-5646 545.70
S$ 545.70
——————
Total S$ 41,927.43

The transfers of goods were perfected in Singapore, for private respondent's account, F.O.B. Singapore, with a 90-day credit term.
Subsequently, demands were made by petitioner upon private respondent to settle his account, but the latter failed/refused to do so.

On August 28, 1991, petitioner corporation filed with the Regional Trial Court of Makati, Branch 138,4 Civil Case No. 91-2373 entitled "Eriks
Pte. Ltd. vs. Delfin Enriquez, Jr." for the recovery of S$41,939.63 or its equivalent in Philippine currency, plus interest thereon and damages.
Private respondent responded with a Motion to Dismiss, contending that petitioner corporation had no legal capacity to sue. In an Order dated
March 8, 1993,5 the trial court dismissed the action on the ground that petitioner is a foreign corporation doing business in the Philippines
without a license. The dispositive portion of said order reads:6

WHEREFORE, in view of the foregoing, the motion to dismiss is hereby GRANTED and accordingly, the above-entitled case is hereby
DISMISSED.

SO ORDERED.

On appeal, respondent Court affirmed said order as it deemed the series of transactions between petitioner, corporation and private respondent
not to be an "isolated or casual transaction." Thus, respondent Court likewise found petitioner to be without legal capacity to sue, and disposed
of the appeal as follows:7

WHEREFORE, the appealed Order should be, as it is hereby AFFIRMED. The complaint is dismissed. No costs.

26
SO ORDERED.

Hence, this petition.

The Issue
The main issue in this petition is whether petitioner corporation may maintain an action in Philippine courts considering that it has no license
to do business in the country. The resolution of this issue depends on whether petitioner's business with private respondent may be treated as
isolated transactions.

Petitioner insists that the series of sales made to private respondent would still constitute isolated transactions despite the number of invoices
covering several separate and distinct items sold and shipped over a span of four to five months, and that an affirmation of respondent Court's
ruling would result in injustice and unjust enrichment.

Private respondent counters that to declare petitioner as possessing capacity to sue will render nugatory the provisions of the Corporation Code
and constitute a gross violation of our laws. Thus, he argues, petitioner is undeserving of legal protection.

The Court's Ruling

The petition has no merit.

The Concept of Doing Business

The Corporation Code provides:

Sec. 133. Doing business without a license. — No foreign corporation transacting business in the Philippines without a license, or its
successors or assigns, shall be permitted to maintain or intervene in any action, suit or proceeding in any court or administrative agency of the
Philippines; but such corporation may be sued or proceeded against before Philippine courts or administrative tribunals on any valid cause of
action recognized under Philippine laws.

The aforementioned provision prohibits, not merely absence of the prescribed license, but it also bars a foreign corporation "doing business" in
the Philippines without such license access to our courts.8 A foreign corporation without such license is not ipso facto incapacitated from
bringing an action. A license is necessary only if it is "transacting or doing business in the country.

However, there is no definitive rule on what constitutes "doing," "engaging in," or "transacting" business. The Corporation Code itself does not
define such terms. To fill the gap, the evolution of its statutory definition has produced a rather all-encompassing concept in Republic Act No.
70429 in this wise:

Sec. 3. Definitions. — As used in this Act:

xxx xxx xxx

(d) the phrase "doing business" shall include soliciting orders, service contracts, opening offices, whether called "liaison" offices or branches;
appointing representatives or distributors domiciled in the Philippines or who in any calendar year stay in the country for a period or periods
totalling one hundred eight(y) (180) days or more; participating in the management, supervision or control of any domestic business, firm,
entity or corporation in the Philippines; and any other act or acts that imply a continuity of commercial dealings or arrangements, and
contemplate to that extent the performance of acts or works,or the exercise of some of the functions normally incident to, and in progressive
prosecution of, commercial gain or of the purpose and object of the business organization: Provided, however, That the phrase "doing business"
shall not be deemed to include 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; nor having a nominee director or officer to represent its interests in such corporation; nor
appointing a representative or distributor domiciled in the Philippines which transacts business in its own name and for its own account.
(emphasis supplied)

In the durable case of The Mentholatum Co. vs. Mangaliman, this Court discoursed on the test to determine whether a foreign company is
"doing business" in the Philippines, thus: 10

. . . The true test, however, seems to be whether the foreign corporation is continuing 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 to another. (Traction Cos. v. Collectors of Int. Revenue
[C.C.A., Ohio], 223 F. 984, 987.] The term implies a continuity of commercial dealings and arrangements, and contemplates, to that extent, the
performance of acts or works or the exercise of some of the functions normally incident to, and in progressive prosecution of, the purpose and
object of its organization.] (sic) (Griffin v. Implement Dealer's Mut. Fire Ins. Co., 241 N.W. 75, 77; Pauline Oil & Gas Co. v. Mutual Tank Line
Co., 246 P. 851, 852, 118 Okl. 111; Automotive Material Co. v. American Standard Metal Products Corp., 158 N.E. 698, 703, 327 III. 367.)

The accepted rule in jurisprudence is that each case must be judged in the light of its own environmental circumstances. 11 It should be kept in
mind that the purpose of the law is to subject the foreign corporation doing business in the Philippines to the jurisdiction of our courts. It is not
to prevent the foreign corporation from performing single or isolated acts, but to bar it from acquiring a domicile for the purpose of business
without first taking the steps necessary to render it amenable to suits in the local courts.

The trial court held that petitioner-corporation was doing business without a license, finding that:12

The invoices and delivery receipts covering the period of (sic) from January 17, 1989 to August 16, 1989 cannot be treated to a mean singular
and isolated business transaction that is temporary in character. Granting that there is no distributorship agreement between herein parties,
yet by the mere fact that plaintiff, each time that the defendant posts an order delivers the items as evidenced by the several invoices and
receipts of various dates only indicates that plaintiff has the intention and desire to repeat the (sic) said transaction in the future in pursuit of
27
its ordinary business. Furthermore, "and if the corporation is doing that for which it was created, the amount or volume of the business done is
immaterial and a single act of that character may constitute doing business". (See p. 603, Corp. Code, De Leon — 1986 Ed.).

Respondent Court affirmed this finding in its assailed Decision with this explanation: 13

. . . Considering the factual background as laid out above, the transaction cannot be considered as an isolated one. Note that there were 17
orders and deliveries (only sixteen per our count) over a four-month period. The appellee (private respondent) made separate orders at various
dates. The transactions did not consist of separate deliveries for one single order. In the case at bar, the transactions entered into by the
appellant with the appellee are a series of commercial dealings which would signify an intent on the part of the appellant (petitioner) to do
business in the Philippines and could not by any stretch of the imagination be considered an isolated one, thus would fall under the category
of'doing business.

Even if We were to view, as contended by the appellant, that the transactions which occurred between January to August 1989, constitute a
single act or isolated business transaction, this being the ordinary business of appellant corporation, it can be said to be illegally doing or
transacting business without a license. . . . Here it can be clearly gleaned from the four-month period of transactions between appellant and
appellee that it was a continuing business relationship, which would, without doubt, constitute doing business without a license. For all intents
and purposes, appellant corporation is doing or transacting business in the Philippines without a license and that, therefore in accordance with
the specific mandate of section 144 of the Corporation Code, it has no capacity to sue. (emphasis ours)

We find no reason to disagree with both lower courts. More than the sheer number of transactions entered into, a clear and unmistakable
intention on the part of petitioner to continue the body of its business in the Philippines is more than apparent. As alleged in its complaint, it is
engaged in the manufacture and sale of elements used in sealing pumps, valves, and pipes for industrial purposes, valves and control
equipment used for industrial fluid control and PVC pipes and fittings for industrial use. Thus, the sale by petitioner of the items covered by the
receipts, which are part and parcel of its main product line, was actually carried out in the progressive prosecution of commercial gain and the
pursuit of the purpose and object of its business, pure and simple. Further, its grant and extension of 90-day credit terms to private respondent
for every purchase made, unarguably shows an intention to continue transacting with private respondent, since in the usual course of
commercial transactions, credit is extended only to customers in good standing or to those on whom there is an intention to maintain long-
term relationship. This being so, the existence of a distributorship agreement between the parties, as alleged but not proven by private
respondent, would, if duly established by competent evidence, be merely corroborative, and failure to sufficiently prove said allegation will not
significantly affect the finding of the courts below. Nor our own ruling. It is precisely upon the set of facts above detailed that we concur with
respondent Court that petitioner corporation was doing business in the country.

Equally important is the absence of any fact or circumstance which might tend even remotely to negate such intention to continue the
progressive prosecution of petitioner's business activities in this country. Had private respondent not turned out to be a bad risk, in all
likelihood petitioner would have indefinitely continued its commercial transactions with him, and not surprisingly, in ever increasing volumes.

Thus, we hold that the series of transactions in question could not have been isolated or casual transactions. What is determinative of "doing
business" is not really the number or the quantity of the transactions, but more importantly, the intention of an entity to continue the body of
its business in the country. The number and quantity are merely evidence of such intention. The phrase "isolated transaction" has a definite and
fixed meaning, i.e. a transaction or series of transactions set apart from the common business of a foreign enterprise in the sense that there is
no intention to engage in a progressive pursuit of the purpose and object of the business organization. Whether a foreign corporation is "doing
business" does not necessarily depend upon the frequency of its transactions, but more upon the nature and character of the transactions. 14

Given the facts of this case, we cannot see how petitioner's business dealings will fit the category of "isolated transactions" considering that its
intention to continue and pursue the corpus of its business in the country had been clearly established. It has not presented any convincing
argument with equally convincing evidence for us to rule otherwise.

Incapacitated to Maintain Suit

Accordingly and ineluctably, petitioner must be held to be incapacitated to maintain the action a quo against private respondent.

It was never the intent of the legislature to bar court access to a foreign corporation or entity which happens to obtain an isolated order for
business in the Philippines. Neither, did it intend to shield debtors from their legitimate liabilities or obligations. 15 But it cannot allow foreign
corporations or entities which conduct regular business any access to courts without the fulfillment by such corporations of the necessary
requisites to be subjected to our government's regulation and authority. By securing a license, the foreign entity would be giving assurance that
it will abide by the decisions of our courts, even if adverse to it.

Other Remedy Still Available

By this judgment, we are not foreclosing petitioner's right to collect payment. Res judicata does not set in a case dismissed for lack of capacity
to sue, because there has been no determination on the merits. 16Moreover, this Court has ruled that subsequent acquisition of the license will
cure the lack of capacity at the time of the execution of the contract. 17

The requirement of a license is not meant to put foreign corporations at a disadvantage. Rather, the doctrine of lack of capacity to sue is based
on considerations of sound public policy. 18 Thus, it has been ruled in Home Insurance that: 19

. . . The primary purpose of our statute is to compel a foreign corporation desiring to do business within the state to submit itself to the
jurisdiction of the courts of this state. The statute was not intended to exclude foreign corporations from the state. . . . The better reason, the
wiser and fairer policy, and the greater weight lie with those decisions which hold that where, as here, there is a prohibition with a penalty, with
no express or implied declarations respecting the validity of enforceability of contracts made by qualified foreign corporations, the contracts . . .
are enforceable . . . upon compliance with the law. (Peter &, Burghard Stone Co. v. Carper, 172 N.E. 319 [1930].)

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While we agree with petitioner that the county needs to develop trade relations and foster friendly commercial relations with other states, we
also need to enforce our laws that regulate the conduct of foreigners who desire to do business here. Such strangers must follow our laws and
must subject themselves to reasonable regulation by our government.

WHEREFORE, premises considered, the instant petition is hereby DENIED and the assailed Decision is AFFIRMED.

SO ORDERED.

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