CORPO FINALS 2018

ABOITIZ SHIPPING CORPORATION v. INSURANCE COMPANY OF NORTH AMERICA,

G.R. No. 168402 August 6, 2008

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. It may, however,
bring suits on isolated business transactions, which is not prohibited under Philippine law. 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 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.
 
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 companys 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 companys agents.
 
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. 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)
 

CONCORDE CONDOMINIUM, INC., v. AUGUSTO H. BACULIO,

G.R. No. 203678 February 17, 2016

Meanwhile, Section 6 (a) of P.D. No. 902-A empowered the SEC to issue preliminary or permanent injunctions, whether prohibitory or
mandatory, in all cases in which it exercises original and exclusive jurisdiction, to wit :

(a) Devices or schemes employed by or any acts, of the board of directors, business associates, its officers or
partnership, amounting to fraud and misrepresentation which may be detrimental to the interest of the public
and/or of the stockholder, partners, members of associations or organizations registered with the Commission;

(b) Controversies arising out of intra-corporate or partnership relations, between and among stockholders, members
or associates; between any or all of them and the corporation, partnership or association of which they are
stockholders, members or associates, respectively; and between such corporation, partnership or association and
the state insofar as it concerns their individual franchise or right to exist as such entity; and

(c) Controversies in the election or appointments of directors, trustees, officers or managers of such corporations,
partnerships or associations.

However, jurisdiction of the SEC over intra-corporate cases was transferred to Courts of general jurisdiction or the appropriate Regional Trial
Court when R.A. No. 8799 took effect on August 8, 2000. Section 5.2 of R.A. No. 8799 provides:

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SEC. 5.2 The Commission's jurisdiction over all cases enumerated under Section 5 of Presidential Decree No. 902-A is
hereby transferred to the Courts of general jurisdiction or the appropriate Regional Trial Court: Provided,  that the
Supreme Court in the exercise of its authority may designate the Regional Trial Court branches that shall exercise
jurisdiction over these cases. The Commission shall retain jurisdiction over pending cases involving intra-corporate
disputes submitted for final resolution which should be resolved within one (1) year from the enactment of this Code.
The Commission shall retain jurisdiction over pending suspension of payments/rehabilitation cases filed as of 30 June
2000 until rinally disposed.

In GD Express rVorldwide N. V, et al. v. Court of Appeals (4 th Div.) et al., the Comi stressed that Special Commercial Courts are still considered
courts of general jurisdiction which have the power to hear and decide cases of all nature, whether civil, criminal or special proceedings, thus:

x x x Section 5.2 of R.A. No. 8799 directs merely the Supreme Court's designation of RTC branches that shall exercise
jurisdiction over intra-corporate disputes. Nothing in the language of the law suggests the diminution of jurisdiction of
those R TCs to be designated as SCCs. The assignment of intra-corporate disputes to secs is only for the purpose of
streamlining the workload of the R TCs so that certain branches thereof like the secs can focus only on a particular
subject matter.

The designation of certain RTC branches to handle specific cases is nothing new. For instance, pursuant to the provisions of R.A. No. 6657 or
the Comprehensive Agrarian Reform Law, the Supreme Court has assigned certain RTC branches to hear and decide cases under Sections 56
and 57 of R.A. No. 6657.

The RTC exercising jurisdiction over an intra-corporate dispute can be likened to an RTC exercising its probate jurisdiction or sitting as a special
agrarian court. The designation of the SCCs as such has not in any way limited their jurisdiction to hear and decide cases of all nature, whether
civil, criminal or special proceedings.

In Manuel Luis  C. Gonzales and Francis Alfartin D. Gonzales v. GJH Land, Inc. (formerly known as SJ Land Inc.), Chang Hwan Jang a.k.a.
Steve Jang, Sang Rak Kim, Mariechu N. Yap and Atty. Roberto P. Mallari II, 14 the Court en bane,  voting 12-1, 15 explained why transfer of
jurisdiction over cases enumerated in Section 5 of P.D. 902-A was made to the RTCs in general, and not only in favor of particular RTC
branches (Special Commercial Courts),  to wit:

As a basic premise, let it be emphasized that a court's acquisition of jurisdiction over a particular case's subject matter is different from incidents
pertaining to the exercise of its jurisdiction. Jurisdiction over the subject matter of a case is  conferred by law, whereas a court's exercise of
jurisdiction, unless provided by the law itself is governed by the Rules of Court or by the orders issued from time to time by the Court. In Lozada
v. Bracewell,  it was recently held that the matter of whether the RTC resolves an issue in the exercise of its general jurisdiction or of its limited
jurisdiction as a special court is only a matter of procedure and has nothing to do with the question of jurisdiction.
Pertinent to this case is RA 8799 which took effect on August 8, 2000. By virtue of said Jaw, jurisdiction over cases enumerated in Section 5 of
Presidential Decree No. 902-A was transferred from the Securities and Exchange Commission (SEC) to  the RTCs, being courts of general
jurisdiction. Item 5.2, Section 5 of RA 8799 provides:

SEC. 5. Powers and Functions  <~lthe Commission.  -

xxxx

5.2 The Commission's jurisdiction over all cases enumerated under Section 5 of Presidential Decree No. 902-A is
hereby transferred to the Courts of general jurisdiction or the appropriate Regional Trial Court: Provided,  that the
Supreme Court in the exercise of its authority may designate the Regional Trial Court branches that shall exercise
,jurisdiction over the cases. The Commission shall retain jurisdiction over pending cases involving intra-corporate
disputes submitted for final resolution which should be resolved within one (1) year from the enactment of this code.
The Commission shall retain jurisdiction over pending suspension of payment/rehabilitation cases filed as of 30 June
2000 until finally disposed.

The legal attribution of Regional Trial Court as courts of general Jurisdiction sterns from Section 19 (6) Chapter II or
Batas Pambansa Bilang (BP) 129, known as "The Judiciary Reorganization Act of 1980:"

Section 19. Jurisdiction in civil cases.  ~ Regional Trial Courts shall exercise exclusive original jurisdiction:

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xxxx
(6) In all cases not within the exclusive jurisdiction of any court, tribunal, person or body exercising judicial or
quasijudicial functions: ....

As enunciated in Durisol Philippines, Inc. v.  CA:

The regional trial court, formerly the court of first instance, is a court of general jurisdiction. All cases, the jurisdiction
over which is not specifically provided for by law to be within the jurisdiction of any other court, fall under the jurisdiction
of the regional trial court.

To clarify, the word "or" in Item 5.2, Section 5 of RA 8799 was intentionally used by the legislature to particularize the
fact that the phrase "the Courts of general jurisdiction" is equivalent to the phrase "the appropriate Regional Trial
Court." In other words, the jurisdiction of the SEC over the cases enumerated under Section 5 PD 902-A was
transferred to the courts of general jurisdiction, that is to say (or, otherwise known as), the proper Regional Trial
Courts. This interpretation is supported by San Miguel Corp. v. Municipal Council, wherein the Court held that:

[T]he word "or" may be used as the equivalent of "that is to say" and gives that which precedes it the same
significance as that which follows it. It is not always disjunctive and is sometimes interpretative or expository of the
preceding word.
Further, as may be gleaned from the following excerpt of the Congressional deliberations:
Senator [Raul S.] Roco:

x x x x The first major departure is as regards the Securities and Exchange Commission. The Securities and Exchange
Commission has been authorized under this proposal to reorganize itself. As an administrative agency, we
strengthened it and at the same time we take away the quasi-judicial functions. The quasi-judicial functions are not
given back to the court of general jurisdiction – The Regional Trial Court, except for two categories of cases.

In the case of corporate disputes, only those that are now submitted for final determination of the SEC will remain with
the SEC. So, all those cases, both memos of the plaintiff and the defendant, that have been submitted for resolution
will continue. At the same time cases involving rehabilitation, bankruptcy, suspension of payments and receiverships
that were filed before June 30, 2000 will continue with the SEC. In other words, we are avoiding the possibility, upon
approval of this bill, of people filing cases with the SEC, in manner of speaking, to select their court.
x x x (Emphasis supplied)

Therefore, one must be disabused of the notion that the transfer of jurisdiction was made only in favor of particular
RTC branches, and not the RTCs in general.

Having clearly settled that as courts of general jurisdiction, the designated Special Commercial Courts and the regular
RTCs are both conferred by law the power to hear and decide civil cases in which the subject of the litigation is
incapable of pecuniary estimation, such as an action for injunction, the Court will now examine the material allegations
in the petition for injunction with damages, in order to determine whether Branch 149 of the Makati RTC has jurisdiction
over the subject matter of the case.

The concept of an action for injunction, as an ordinary civil action, was discussed in BPI v. Hong, et al.7as follows:
An action for injunction is a suit which has for its purpose the enjoinment of the defendant, perpetually or for a particular time, from the
commission or continuance of a specific act, or his compulsion to continue performance of a particular act. It has an independent existence, and
is distinct from the ancillary remedy of preliminary injunction which cannot exist except only as a part or an incident of an independent action or
proceeding. In an action for injunction, the auxiliary remedy of preliminary iajunction, prohibitory or mandatory, may issue.

There is no doubt that the petition filed before the RTC is an action for injunction, as can be gleaned from the allegations made and reliefs
sought by petitioner, namely: (1) to enjoin respondents Baculio and New PPI Corporation from misrepresenting to the public, as well as to
private and government offices/agencies, that they are the owners of the disputed lots and Concorde Condominium Building, and from pushing
for the demolition of the building which they do not even own; (2) to prevent respondent Asian Security and Investigation Agency from deploying
its security guards within the perimeter of the said building; and (3) to restrain respondents Engr. Morales, Supt. Perdigon and F/C Supt. Laguna

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from responding to and acting upon the letters being sent by Bactllio, who is a mere impostor and has no legal personality with regard to matters
concerning the revocation of building and occupancy permits, and the fire safety issues of the same building.
Applying the relationship test and the nature of the controversy test in determining whether a dispute constitutes an intra-corporate controversy,
as enunciated in Medical Plaza Makati Condominium Corporation v. Cullen, the Court agrees with Branch 149 that Civil Case No. 12-309 for
injunction with damages is an ordinary civil case, and not an intra-corporate controversy.

A careful review of the allegations in the petition for injunction with damages indicates no intra-corporate relations exists between the opposing
parties, namely (1) petitioner condominium corporation, by itself and comprising all its unit owners, on the one hand, and (2) respondent New
PPI Corporation which BaCLllio claims to be the owner of the subject properties, together with the respondents Building Official and City Fire
Marshal of Makati City, the Regional Director of the Bureau of Fire Protection, and the private security agency, on the other hand. Moreover, the
petition deals with the conflicting claims of ownership over the lots where Concorde Condominium Building stands and the parking lot for unit
owners, which were developed by Pulp and Paper Distributors, Inc. (now claimed by respondent Baculio as the New PPI Corporation), as well
as the purported violations of the National Building Code which resulted in the revocation or the building and occupancy permits by the Building
Official of Makati City. Clearly, as the suit between petitioner and respondents neither arises from an intra-corporate relationship nor does it
pertain to the enforcement of their correlative rights and obligations under the Corporation Code, and the internal and intra-corporate regulatory
rules of the corporation, Branch 149 correctly found that the subject matter of the petition is in the nature or an ordinary civil action.

The Court is mindful of the recent guideline laid down in the recent case of  Manuel Luis  C. Gonzales and Francis Martin D. Gonzales v. GJH
Land, Inc. (formerly known as SJ land Inc.), Chang flwan Jang a.k.a. Steve Jang, Sang Rak Kim, Mariechu N Yap and Atty. Roberto P. Mallari
II, to wit:
For further guidance, the Court finds it apt to point out that the same principles apply to the inverse situation of ordinary civil cases filed before
the proper RTCs but wrongly rafiled to its branches designated as Special Commercial Courts. In such a scenario, the ordinary civil case should
then be referred to the Executive Judge for re-docketing as an ordinary civil case; thereafter, the Executive Judge should then order the raffling
of the case to all branches of the same RTC, subject to limitations under existing internal rules, and the payment of the correct docket fees in
case of any difference. Unlike the limited assignment/raffling of a commercial case only to branches designated as Special Commercial Courts
in the scenarios stated above, the re-raffling of an ordinary civil case in this instance to all courts is permissible due to the fact that a particular
branch which has been designated as a Special Commercial Court does not shed the RTC's general jurisdiction over ordinary civil cases under
the imprimatur of statutory law, i.e.,  Batas Pambansa Bilang (BP 129). To restate, the designation of Special Commercial Court was merely
intended as a procedural tool to expedite the resolution of commercial cases in line with the court's exercise of jurisdiction. This designation was
not made by statute but only by an internal Supreme Court rule under its authority to promulgate rules governing matters of procedure and its
constitutional mandate to supervise the administration of all courts and the personnel thereof Certainly, an internal rule promulgated by the
Court cannot go beyond the commanding statute. But as a more fundamental reason, the designation of Special Commercial Courts is, to
stress, merely an incident related to the court's exercise of jurisdiction, which, as first discussed, is distinct from the concept of jurisdiction over
the subject matter. The RTC's general jurisdiction over ordinary civil cases is therefore not abdicated by an internal rule streamlining court
procedure.

It is apt to note, however, that the foregoing guideline applies only in a situation where the ordinary civil case filed before the proper RTCs was
"wrongly raffled" to its branches designated as Special Commercial Courts, which situation does not obtain in this case. Here, no clear and
convincing evidence is shown to overturn the legal presumption that official duty has been regularly performed when the Clerk of Court of the
Makati RTC docketed the petition for injunction with damages as an ordinary civil case - not as a commercial case - and, consequently, raffled it
among all branches of the same RTC, and eventually assigned it to Branch 149. To recall, the designation of the said branch as a Special
Commercial Court by no means diminished its power as a court of general jurisdiction to hear and decide cases of all nature, whether civil,
criminal or special proceedings. There is no question, therefore, that the Makati RTC, Branch 149 erred in dismissing the petition for injunction
with damages, which is clearly an ordinary civil case. As a court of general jurisdiction, it still has jurisdiction over the subject matter thereof.
In view of the above discussion, the Court finds no necessity to delve into the other contentions raised by the parties, as they should be properly
addressed by the Makati RTC, Branch 149 which has jurisdiction over the subject matter of the petition for injunction with damages.

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MERRILL LYNCH FUTURES, INC., vs. CA

G.R. No. 97816 July 24, 1992

There being otherwise no question respecting the genuineness of the documents, nor of their relevance to at least one of the grounds for
dismissal — i.e., the prohibition on suits in Philippine Courts by foreign corporations doing business in the country without license — it would
have been a superfluity for the Court to require prior proof of their authenticity, and no error may be ascribed to the Trial Court in taking account
of them in the determination of the motion on the ground, not that the complaint fails to state a cause of action — as regards which evidence is
improper and impermissible — but that the plaintiff has no legal capacity to sue — respecting which proof may and should be presented .

The first question then, is, as ML FUTURES formulates it, whether or not the annexes, assuming them to be admissible, establish that (a) ML
FUTURES is prohibited from suing in Philippine Courts because doing business in the country without a license, and that (b) it is not a real party
in interest since the Lara Spouses had not been doing business with it, but with another corporation, Merrill Lynch, Pierce, Fenner & Smith, Inc.
The Court is satisfied that the facts on record adequately establish that ML FUTURES, operating in the United States, had indeed done
business with the Lara Spouses in the Philippines over several years, had done so at all times through Merrill Lynch Philippines, Inc. (MLPI), a
corporation organized in this country, and had executed all these transactions without ML FUTURES being licensed to so transact business
here, and without MLPI being authorized to operate as a commodity futures trading advisor.

The Court is satisfied, too, that the Laras did transact business with ML FUTURES through its agent corporation organized in the Philippines, it
being unnecessary to determine whether this domestic firm was MLPI (Merrill Lynch Philippines, Inc.) or Merrill Lynch Pierce Fenner & Smith
(MLPI's alleged predecessor). The fact is that ML FUTURES did deal with futures contracts in exchanges in the United States in behalf and for
the account of the Lara Spouses, and that on several occasions the latter received account documents and money in connection with those
transactions.

The crucial question is whether or not ML FUTURES may sue in Philippine Courts to establish and enforce its rights against said spouses, in
light of the undeniable fact that it had transacted business in this country without being licensed to do so. In other words, if it be true that during
all the time that they were transacting with ML FUTURES, the Laras were fully aware of its lack of license to do business in the Philippines, and
in relation to those transactions had made payments to, and received money from it for several years, the question is whether or not the Lara
Spouses are now estopped to impugn ML FUTURES' capacity to sue them in the courts of the forum.

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 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 (Sherwood v. Alvis, 83 Ala 115, 3 So 307, limited and distinguished in Dudley v.
Collier, 87 Ala 431, 6 So 304; Spinney v. Miller, 114 Iowa 210, 86 NW 317), where such person has acted as agent for the corporation and has
violated his fiduciary obligations as such, and where the statute does not provide that the contract shall be void, but merely fixes a special
penalty for violation of the statute. . . ." 

The doctrine was adopted by this Court as early as 1924 in Asia Banking Corporation v. Standard Products Co., in which the following
pronouncement was made: 
The general rule that in the absence of fraud of person who has contracted or otherwise dealt with an association in such a
way as to recognize and in effect admit its legal existence as a corporate body is thereby estopped to deny its corporate
existence in any action leading out of or involving such contract or dealing, unless its existence is attacked for causes which
have arisen since making the contract or other dealing relied on as an estoppel and this applies to foreign as well as
domestic corporations. (14 C.J  .7; Chinese Chamber of Commerce vs. Pua Te Ching, 14 Phil. 222).

There would seem to be no question that the Laras received benefits generated by their business relations with ML FUTURES. Those business
relations, according to the Laras themselves, spanned a period of seven (7) years; and they evidently found those relations to be of such
profitability as warranted their maintaining them for that not insignificant period of time; otherwise, it is reasonably certain that they would have
terminated their dealings with ML FUTURES much, much earlier. In fact, even as regards their last transaction, in which the Laras allegedly

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suffered a loss in the sum of US$160,749.69, the Laras nonetheless still received some monetary advantage, for ML FUTURES credited them
with the amount of US$75,913.42 then due to them, thus reducing their debt to US$84,836.27. Given these facts, and assuming that the Lara
Spouses were aware from the outset that ML FUTURES had no license to do business in this country and MLPI, no authority to act as broker for
it, it would appear quite inequitable for the Laras to evade payment of an otherwise legitimate indebtedness due and owing to ML FUTURES
upon the plea that it should not have done business in this country in the first place, or that its agent in this country, MLPI, had no license either
to operate as a "commodity and/or financial futures broker."

Considerations of equity dictate that, at the very least, the issue of whether the Laras are in truth liable to ML FUTURES and if so in what
amount, and whether they were so far aware of the absence of the requisite licenses on the part of ML FUTURES and its Philippine
correspondent, MLPI, as to be estopped from alleging that fact as defense to such liability, should be ventilated and adjudicated on the merits by
the proper trial court.

PDIC v. Citibank, N.A.,

G.R. No. 170290 April 11, 2012

The Court rules in the negative.

 
A branch has no separate legal personality;
Purpose of the PDIC
 
PDIC argues that the head offices of Citibank and BA and their individual foreign branches are separate and independent entities.  It insists that
under American jurisprudence, a banks head office and its branches have a principal-agent relationship only if they operate in the same
jurisdiction. In the case of foreign branches, however, no such relationship exists because the head office and said foreign branches are
deemed to be two distinct entities. Under Philippine law, specifically, Section 3(b) of R.A. No. 3591, which defines the terms bank and banking
institutions, PDIC contends that the law treats a branch of a foreign bank as a separate and independent banking unit.
 
The respondents, on the other hand, initially point out that the factual findings of the RTC and the CA, with regard to the nature of the money
placements, the capacity in which the same were received by the respondents and the exclusion of inter-branch deposits from assessment, can
no longer be disturbed and should be accorded great weight by this Court. They also argue that the money placements are not deposits.  They
postulate that for a deposit to exist, there must be at least two parties a depositor and a depository each with a legal personality distinct from the
other. Because the respondents respective head offices and their branches form only a single legal entity, there is no creditor-debtor
relationship and the funds placed in the Philippine branch belong to one and the same bank. A bank cannot have a deposit with itself.
 
This Court is of the opinion that the key to the resolution of this controversy is the relationship of the Philippine branches of Citibank
and BA to their respective head offices and their other foreign branches.
 
The Court begins by examining the manner by which a foreign corporation can establish its presence in the  Philippines. It may choose to
incorporate its own subsidiary as a domestic corporation, in which case such subsidiary would have its own separate and independent legal
personality to conduct business in the country. In the alternative, it may create a branch in the Philippines, which would not be a legally
independent unit, and simply obtain a license to do business in the Philippines.
 
In the case of Citibank and BA, it is apparent that they both did not incorporate a separate domestic corporation to represent its business
interests in the Philippines. Their Philippine branches are, as the name implies, merely branches, without a separate legal personality from their
parent company, Citibank and BA. Thus, being one and the same entity, the funds placed by the respondents in their respective branches in
the Philippines should not be treated as deposits made by third parties subject to deposit insurance under the PDIC Charter.
 
For lack of judicial precedents on this issue, the Court seeks guidance from American jurisprudence. In the leading case of  Sokoloff v. The
National City Bank of New York, where the Supreme Court of New York held:
 
Where a bank maintains branches, each branch becomes a separate business entity with separate books of account. A
depositor in one branch cannot issue checks or drafts upon another branch or demand payment from such other branch,
and in many other respects the branches are considered separate corporate entities and as distinct from one another as
any other bank. Nevertheless, when considered with relation to the parent bank they are not independent agencies; they

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are, what their name imports, merely branches, and are subject to the supervision and control of the parent bank , and are
instrumentalities whereby the parent bank carries on its business, and are established for its own particular purposes, and
their business conduct and policies are controlled by the parent bank and their property and assets belong to the parent
bank, although nominally held in the names of the particular branches. Ultimate liability for a debt of a branch would rest
upon the parent bank. [Emphases supplied]
 
 
This ruling was later reiterated in the more recent case of United States v. BCCI Holdings Luxembourg where the United States Court
of Appeals, District of Columbia Circuit, emphasized that while individual bank branches may be treated as independent of one another, each
branch, unless separately incorporated, must be viewed as a part of the parent bank rather than as an independent entity.
 
In addition, Philippine banking laws also support the conclusion that the head office of a foreign bank and its branches are considered as one
legal entity. Section 75 of R.A. No. 8791 (The General Banking Law of 2000) and Section 5 of R.A. No. 7221 (An Act Liberalizing the Entry of
Foreign Banks) both require the head office of a foreign bank to guarantee the prompt payment of all the liabilities of its Philippine branch, to wit:
 
Republic Act No. 8791:
 
Sec. 75. Head Office Guarantee. In order to provide effective protection of the interests of the depositors and other creditors
of Philippine branches of a foreign bank, the head office of such branches shall fully guarantee the prompt payment of all
liabilities of its Philippine branch.
 
Residents and citizens of the Philippines who are creditors of a branch in the Philippines of foreign bank shall
have preferential rights to the assets of such branch in accordance with the existing laws.
 
 
Republic Act No. 7721:
 
Sec. 5. Head Office Guarantee. The head office of foreign bank branches shall guarantee prompt payment of all liabilities of
its Philippine branches.
 
 
Moreover, PDIC must be reminded of the purpose for its creation, as espoused in Section 1 of R.A. No. 3591 (The PDIC
Charter) which provides:
 
Section 1. There is hereby created a Philippine Deposit Insurance Corporation hereinafter referred to as the Corporation
which shall insure, as herein provided, the deposits of all banks which are entitled to the benefits of insurance under this
Act, and which shall have the powers hereinafter granted.
 
The Corporation shall, as a basic policy, promote and safeguard the interests of the depositing public by way of providing
permanent and continuing insurance coverage on all insured deposits.
 
 
R.A. No. 9576, which amended the PDIC Charter, reaffirmed the rationale for the establishment of the PDIC:
 
Section 1. Statement of State Policy and Objectives. - It is hereby declared to be the policy of the State to strengthen the
mandatory deposit insurance coverage system to generate, preserve, maintain faith and confidence in the country's
banking system, and protect it from illegal schemes and machinations.
 
Towards this end, the government must extend all means and mechanisms necessary for the Philippine Deposit Insurance
Corporation to effectively fulfill its vital task of promoting and safeguarding the interests of the depositing public by way of
providing permanent and continuing insurance coverage on all insured deposits, and in helping develop a sound and stable
banking system at all times.

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The purpose of the PDIC is to protect the depositing public in the event of a bank closure. It has already been sufficiently established
by US jurisprudence and Philippine statutes that the head office shall answer for the liabilities of its branch.  Now, suppose the Philippine branch
of Citibank suddenly closes for some reason. Citibank N.A. would then be required to answer for the deposit liabilities of Citibank Philippines. If
the Court were to adopt the posture of PDIC that the head office and the branch are two separate entities and that the funds placed by the head
office and its foreign branches with the Philippine branch are considered deposits within the meaning of the PDIC Charter, it would result to the
incongruous situation where Citibank, as the head office, would be placed in the ridiculous position of having to reimburse itself, as depositor, for
the losses it may incur occasioned by the closure of Citibank Philippines. Surely our law makers could not have envisioned such a preposterous
circumstance when they created PDIC.
 
Finally, the Court agrees with the CA ruling that there is nothing in the definition of a bank and a banking institution in Section 3(b) of the PDIC
Charter which explicitly states that the head office of a foreign bank and its other branches are separate and distinct from their Philippine
branches.
 
There is no need to complicate the matter when it can be solved by simple logic bolstered by law and jurisprudence.  Based on the foregoing, it
is clear that the head office of a bank and its branches are considered as one under the eyes of the law. While branches are treated as separate
business units for commercial and financial reporting purposes, in the end, the head office remains responsible and answerable for the liabilities
of its branches which are under its supervision and control. As such, it is unreasonable for PDIC to require the respondents, Citibank and BA, to
insure the money placements made by their home office and other branches. Deposit insurance is superfluous and entirely unnecessary when,
as in this case, the institution holding the funds and the one which made the placements are one and the same legal entity.
 
Funds not a deposit under the definition
of the PDIC Charter;
Excluded from assessment
 
PDIC avers that the funds are dollar deposits and not money placements. Citing R.A. No. 6848, it defines money placement as a
deposit which is received with authority to invest. Because there is no evidence to indicate that the respondents were authorized to invest the
subject dollar deposits, it argues that the same cannot be considered money placements. PDIC then goes on to assert that the funds received
by Citibank and BA are deposits, as contemplated by Section 3(f) of R.A. No. 3591, for the following reasons: (1) the dollar deposits were
received by Citibank and BA in the course of their banking operations from their respective head office and foreign branches and were recorded
in their books as Account-Head Office/Branches-Time Deposits pursuant to Central Bank Circular No. 343 which implements R.A. No. 6426; (2)
the dollar deposits were credited as dollar time accounts and were covered by Certificates of Dollar Time Deposit which were interest-bearing
and payable upon maturity, and (3) the respondents maintain 100% foreign currency cover for their deposit liability arising from the dollar time
deposits as required by Section 4 of R.A. No. 6426.
 
To refute PDICs allegations, the respondents explain the inter-branch transactions which necessitate the creation of the accounts or
placements subject of this case. When the Philippine branch needs to procure foreign currencies, it will coordinate with a branch in another
country which handles foreign currency purchases. Both branches have existing accounts with their head office and when a money placement is
made in relation to the acquisition of foreign currency from the international market, the amount is credited to the account of the Philippine
branch with its head office while the same is debited from the account of the branch which facilitated the purchase. This is further documented
by the issuance of a certificate of time deposit with a stated interest rate and maturity date.  The interest rate represents the cost of obtaining the
funds while the maturity date represents the date on which the placement must be returned. On the maturity date, the amount previously
credited to the account of the Philippine branch is debited, together with the cost for obtaining the funds, and credited to the account of the other
branch. The respondents insist that the interest rate and maturity date are simply the basis for the debit and credit entries made by the head
office in the accounts of its branches to reflect the inter-branch accommodation. [30] As regards the maintenance of currency cover over the
subject money placements, the respondents point out that they maintain foreign currency cover in excess of what is required by law as a matter
of prudent banking practice.[31]
 
PDIC attempts to define money placement in order to impugn the respondents claim that the funds received from their head office and
other branches are money placements and not deposits, as defined under the PDIC Charter. In the process, it loses sight of the important issue
in this case, which is the determination of whether the funds in question are subject to assessment for deposit insurance as required by the
PDIC Charter. In its struggle to find an adequate definition of money placement, PDIC desperately cites R.A. No. 6848, The Charter of the Al-
Amanah Islamic Investment Bank of the Philippines. Reliance on the said law is unfounded because nowhere in the law is the term money
placement defined. Additionally, R.A. No. 6848 refers to the establishment of an Islamic bank subject to the rulings of Islamic Sharia to assist in
the development of the Autonomous Region of Muslim Mindanao (ARMM), [32] making it utterly irrelevant to the case at bench. Since Citibank

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and BA are neither Islamic banks nor are they located anywhere near the ARMM, then it should be painfully obvious that R.A. No. 6848 cannot
aid us in deciding this case.
 
Furthermore, PDIC heavily relies on the fact that the respondents documented the money placements with certificates of time deposit
to simply conclude that the funds involved are deposits, as contemplated by the PDIC Charter, and are consequently subject to assessment for
deposit insurance. It is this kind of reasoning that creates non-existent obscurities in the law and obstructs the prompt resolution of what is
essentially a straightforward issue, thereby causing this case to drag on for more than three decades.
 
Noticeably, PDIC does not dispute the veracity of the internal transactions of the respondents which gave rise to the issuance of the
certificates of time deposit for the funds the subject of the present dispute. Neither does it question the findings of the RTC and the CA that the
money placements were made, and were payable, outside of the Philippines, thus, making them fall under the exclusions to deposit
liabilities. PDIC also fails to impugn the truth of the testimony of John David Shaffer, then a Fiscal Agent and Head of the Assessment Section of
the FDIC, that inter-branch deposits were excluded from the assessment base. Therefore, the determination of facts of the lower courts shall be
accepted at face value by this Court, following the well-established principle that factual findings of the trial court, when adopted and confirmed
by the CA, are binding and conclusive on this Court, and will generally not be reviewed on appeal. [33]
 
As explained by the respondents, the transfer of funds, which resulted from the inter-branch transactions, took place in the books of
account of the respective branches in their head office located in the United States. Hence, because it is payable outside of the Philippines, it is
not considered a deposit pursuant to Section 3(f) of the PDIC Charter:
 
Sec. 3(f) The term deposit means the unpaid balance of money or its equivalent received by a bank in the usual course of
business and for which it has given or is obliged to give credit to a commercial, checking, savings, time or thrift account or
which is evidenced by its certificate of deposit, and trust funds held by such bank whether retained or deposited in any
department of said bank or deposit in another bank, together with such other obligations of a bank as the Board of Directors
shall find and shall prescribe by regulations to be deposit liabilities of the Bank; Provided, that any obligation of a bank
which is payable at the office of the bank located outside of the Philippines shall not be a deposit for any of the purposes of
this Act or included as part of the total deposits or of the insured deposits; Provided further, that any insured bank which is
incorporated under the laws of the Philippines may elect to include for insurance its deposit obligation payable only at such
branch. [Emphasis supplied]
 
The testimony of Mr. Shaffer as to the treatment of such inter-branch deposits by the FDIC, after which PDIC was modelled, is also
persuasive. Inter-branch deposits refer to funds of one branch deposited in another branch and both branches are part of the same parent
company and it is the practice of the FDIC to exclude such inter-branch deposits from a banks total deposit liabilities subject to assessment.

 All things considered, the Court finds that the funds in question are not deposits within the definition of the PDIC Charter and are, thus,
excluded from assessment.
 
WHEREFORE, the petition is DENIED. The October 27, 2005 Decision of the Court of Appeals in CA-G.R. CV No. 61316 is AFFIRMED.

SUBIC BAY METROPOLITAN AUTHORITY vs. UNIVERSAL INTERNATIONAL GROUP OF TAIWAN

G.R. No. 131680. September 14, 2000

As a general rule, unlicensed foreign non-resident corporations cannot file suits in the Philippines.  Section 133 of the Corporation Code
specifically provides:

Sec. 133. No foreign corporation transacting business in the Philippines without a license, or its successors or assigns,
shall be permitted to maintain or intervene in any action, suit or proceeding in any court or administrative agency of the
Philippines, but such corporation may be sued or proceeded against before Philippine courts or administrative tribunals
on any valid cause of action recognized under Philippine laws.
A corporation has legal status only within the state or territory in which it was organized. For this reason, a
corporation organized in another country has no personality to file suits in the Philippines.  In order to subject a foreign
corporation doing business in the country to the jurisdiction of our courts, it must acquire a license from the SEC and
appoint an agent for service of process. Without such license, it cannot institute a suit in the Philippines.

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It should be stressed, however, that the licensing requirement was never intended to favor domestic corporations who enter 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. After contracting with a foreign corporation, a domestic firm is estopped from denying the formers capacity to sue. Hence, in Merril
Lynch Futures v. CA,  the Court ruled:

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
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 x x x.

This doctrine was initiated as early as 1924 in Asia Banking Corporation v. Standard Products  and reiterated in Georg Grotjahn GMBH v.
Isnani  and Communication Materials and Design v. CA.  In Antam Consolidated v. CA,  the Court also rejected a similar argument and noted 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.

In this case, SBMA is estopped from questioning the capacity to sue of UIG.  In entering into the LDA with UIG, SBMA effectively
recognized its personality and capacity to institute the suit before the trial court.

STEELCASE, INC., v. DESIGN INTERNATIONAL SELECTIONS, INC.,

G.R. No. 171995 April 18, 2012

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:
 

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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 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. 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.
 
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. In addition to Steelcase products, DISI also distributed products of other companies including carpet tiles, relocatable walls
and theater settings. 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.
 
 
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.

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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.  Thus, despite the admission by Steelcase that it owns 25% of Modernform, with the remaining
75% being owned and controlled by Thai stockholders, 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

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]
 

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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.
 
xxx
 
 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. (Emphases supplied)
 
  The case of Rimbunan Hijau Group of Companies v. Oriental Wood Processing Corporation  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 domestic corporations; one who has dealt with a corporation of foreign origin as a corporate

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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.  (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.
 
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.
 

 
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.
 

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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 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.
 
xxx
  
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. (Emphases supplied)

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The case of Rimbunan Hijau Group of Companies v. Oriental Wood Processing Corporation  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 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.
 (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.
 
In Antam Consolidated, Inc. v. Court of Appeals , 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.

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THE MENTHOLATUM CO., INC., ET AL., v. ANACLETO MANGALIMAN,

G.R. No. L-47701 June 27, 1941

Categorically stated, this appeal simmers down to an interpretation of section 69 of the Corporation Law, and incidentally turns upon a
substantial consideration of two fundamental propositions, to wit: (1) whether or not the petitioners could prosecute the instant action without
having secured the license required in section 69 of the Corporation Law; and (2) whether or not the Philippine-American Drug Co., Inc., could
by itself maintain this proceeding.

Petitioners maintain that the Mentholatum Co., Inc., has not sold personally any of its products in the Philippines; that the Philippine-American
Drug Co., Inc., like fifteen or twenty other local entities, was merely an importer of the products of the Mentholatum Co., Inc., and that the sales
of the Philippine-American Drug Co., Inc., were its own and not for the account of the Mentholatum Co., Inc. Upon the other hand, the
defendants contend that the Philippine-American Drug Co., Inc., is the exclusive distributing agent in the Philippines of the Mentholatum Co.,
Inc., in the sale and distribution of its product known as "Mentholatum"; that, because of this arrangement, the acts of the latter; and that the
Mentholatum Co., Inc., being thus engaged in business in the Philippines, and not having acquired the license required by section 68 of the
Corporation Law, neither it nor the Philippine-American Drug co., Inc., could prosecute the present action.
Section 69 of Act No. 1459 reads:

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, or
agent of the corporation or any person transacting business for any foreign corporation not having the license prescribed shall 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.

In the present case, no dispute exists as to facts: (1) that the plaintiff, the Mentholatum Co., Inc., is a foreign corporation; (2) that it is not
licensed to do business in the Philippines. The controversy, in reality, hinges on the question of whether the said corporation is or is not
transacting business in the Philippines.

No general rule or governing principle can be laid down as to what constitutes "doing" or "engaging in" or "transacting" business. Indeed, each
case must be judged in the light of its peculiar environmental circumstances. 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. (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 III. 367.)

In its decision of June 29, 1940, the Court of Appeals concluded that "it is undeniable that the Mentholatum Co., through its agent, the
Philippine-American Drug Co., Inc., has been doing business in the Philippines by selling its products here since the year 1929, at least." This is
assailed by petitioners as a pure conclusion of law. This finding is predicated upon the testimony of Mr. Roy Springer of the Philippine-American
Drug Co., Inc., and the pleadings filed by petitioners. The complaint filed in the Court of First Instance of Manila on October 1, 1935, clearly
stated that the Philippine-American Drug Co., Inc., is the exclusive distributing agent in the Philippine Islands of the Mentholatum Co., Inc., in
the sale and distribution of its product known as the Mentholatum." The object of the pleadings being to draw the lines of battle between litigants
and to indicate fairly the nature of the claims or defenses of both parties (1 Sutherland's Code Pleading, Practice & Forms, sec. 83; Milliken v.
Western Union Tel. Co., 110 N. Y. 403, 18 N. E. 251; Eckrom v. Swenseld, 46 N. D. 561, 563, 179 N. W. 920), a party cannot subsequently take
a position contradictory to, or inconsistent with, his pleadings, as the facts therein admitted are to be taken as true for the purpose of the action.

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(46 C. J., sec. 121, pp. 122-124.) It follows that whatever transactions the Philippine-American Drug Co., Inc., had executed in view of the law,
the Mentholatum Co., Inc., did it itself. And, the Mentholatum Co., Inc., being a foreign corporation doing business in the Philippines without the
license required by section 68 of the Corporation Law, it may not prosecute this action for violation of trade mark and unfair competition. Neither
may the Philippine-American Drug Co., Inc., maintain the action here for the reason that the distinguishing features of the agent being his
representative character and derivative authority (Mechem on Agency, sec. 1; Sory on Agency, sec. 3; Sternaman v. Metropolitan Life Ins. Co.,
170 N. Y. 21), it cannot now, to the advantage of its principal, claim an independent standing in court.

The appellees below, petitioners here, invoke the case of Western Equipment and Supply Co. vs. Reyes  (51 Phil., 115). The Court of Appeals,
however, properly distinguished that case from the one at bar in that in the former "the decision expressly says that the Western Equipment and
Supply Co. was not engaged in business in the Philippines, and significantly added that if the plaintiff had been doing business in the Philippine
Islands without first obtaining a license, 'another and a very different question would be presented'. " It is almost unnecessary to remark in this
connection that the recognition of the legal status of a foreign corporation is a matter affecting the policy of the forum, and the distinction drawn
in our Corporation Law is an expression of that policy. The general statement made in Western Equipment and Supply Co. vs. Reyes  regarding
the character of the right involved should not be construed in derogation of the policy-determining authority of the State.

The right of the petitioner conditioned upon compliance with the requirements of section 69 of the Corporation Law to protect its rights, is hereby
reserved.

Separate Opinions

MORAN, J.,  dissenting:

Section 69 of the Corporation Law provides that, without license no foreign corporation may maintain by itself or assignee any suit in the
Philippine courts for the recovery of any debt, claim or demand whatever. But this provision, as we have held in  Western Equipment & Supply
Company vs. Reyes (51 Phil., 115), does not apply to suits for infringement of trade marks and unfair competition, the theory being that "the
right to the use of the corporate and trade name of a foreign corporation is a property right, a right in rem, which it may assert and protect in any
of the courts of the world even in countries where it does not personally transact any business," and that "trade mark does not acknowledge any
territorial boundaries but extends to every mark where the traders' goods have become known and identified by the use of the mark."
For this reason, I dissent from the majority opinion.

B. VAN ZUIDEN BROS., LTD.,v. GTVL MANUFACTURING IDUSTRIES, INC.

G.R. No. 147905 . May 28, 2007

Section 133 of the Corporation Code provides:

 
Doing business without license. No foreign corporation transacting business in the Philippines without a license, or its
successors or assigns, shall be permitted to maintain or intervene in any action, suit or proceeding in any court or
administrative agency of the Philippines; but such corporation may be sued or proceeded against before Philippine courts or
administrative tribunals on any valid cause of action recognized under Philippine laws.
 
The law is clear. An unlicensed foreign corporation doing business in the Philippines cannot sue before Philippine courts.  On the other hand, an
unlicensed foreign corporation not doing business in the Philippines can sue before Philippine courts.
 
In the present controversy, petitioner is a foreign corporation which claims that it is not doing business in the Philippines. As such, it needs no
license to institute a collection suit against respondent before Philippine courts.
 
Respondent argues otherwise. Respondent insists that petitioner is doing business in the Philippines without the required license. Hence,
petitioner has no legal capacity to sue before Philippine courts.
 
Under Section 3(d) of Republic Act No. 7042 (RA 7042) or The Foreign Investments Act of 1991, the phrase doing business includes:
 
x x x 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

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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.

The series of transactions between petitioner and respondent cannot be classified as doing business in the Philippines under Section 3(d) of RA
7042. An essential condition to be considered as doing business in the Philippines is the actual performance of specific commercial acts within
the territory of the Philippines for the plain reason that the Philippines has no jurisdiction over commercial acts performed in foreign
territories. Here, there is no showing that petitioner performed within the Philippine territory the specific acts of doing business mentioned in
Section 3(d) of RA 7042. Petitioner did not also open an office here in the Philippines, appoint a representative or distributor, or manage,
supervise or control a local business. While petitioner and respondent entered into a series of transactions implying a continuity of commercial
dealings, the perfection and consummation of these transactions were done outside the Philippines.
 
In its complaint, petitioner alleged that it is engaged in the importation and exportation of several products, including lace products.  Petitioner
asserted that on several occasions, respondent purchased lace products from it. Petitioner also claimed that respondent instructed it to deliver
the purchased goods to Kenzar, which is a Hong Kong company based in Hong Kong. Upon Kenzars receipt of the goods, the products were
considered sold. Kenzar, in turn, had the obligation to deliver the lace products to the Philippines. In other words, the sale of lace products was
consummated in Hong Kong.
 
As earlier stated, the series of transactions between petitioner and respondent transpired and were consummated in Hong Kong. We also find
no single activity which petitioner performed here in the Philippines pursuant to its purpose and object as a business organization.  Moreover,
petitioners desire to do business within the Philippines is not discernible from the allegations of the complaint or from its attachments.  Therefore,
there is no basis for ruling that petitioner is doing business in the Philippines.
 
In Eriks, respondent therein alleged the existence of a distributorship agreement between him and the foreign corporation. If duly established,
such distributorship agreement could support respondents claim that petitioner was indeed doing business in the Philippines.  Here, there is no
such or similar agreement between petitioner and respondent.
 
We disagree with the Court of Appeals ruling that the proponents to the transaction determine whether a foreign corporation is doing business in
the Philippines, regardless of the place of delivery or place where the transaction took place. To accede to such theory makes it possible to
classify, for instance, a series of transactions between a Filipino in the United States and an American company based in the United States as
doing business in the Philippines, even when these transactions are negotiated and consummated only within the United States.
 
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 acquire jurisdiction over the foreign exporter who has not 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 a 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 acquire jurisdiction over a foreign corporation and thus require the foreign corporation to secure a Philippine business license.  If a

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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.

Considering that petitioner is not doing business in the Philippines, it does not need a license in order to initiate and maintain a collection suit
against respondent for the unpaid balance of respondents purchases.

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