G.R. No. L-34382 July 20, 1983 THE HOME INSURANCE COMPANY, petitioner, vs.

EASTERN SHIPPING LINES and/or ANGEL JOSE TRANSPORTATION, INC. and HON. A. MELENCIO-HERRERA, Presiding Judge of the Manila Court of First Instance, Branch XVII, respondents. G.R. No. L-34383 July 20, 1983 THE HOME INSURANCE COMPANY, petitioner, vs. N. V. NEDLLOYD LIJNEN; COLUMBIAN PHILIPPINES, INC., and/or GUACODS, INC., and HON. A. MELENCIO-HERRERA, Presiding Judge of the Manila Court of First Instance, Branch XVII, respondents. No. L-34382. Zapa Law Office for petitioner. Bito, Misa & Lozada Law Office for respondents. No. L-34383. Zapa Law Office for petitioner. Ross, Salcedo, Del Rosario, Bito & Misa Law office for respondents.

GUTIERREZ, JR., J.: Questioned in these consolidated petitions for review on certiorari are the decisions of the Court of First Instance of Manila, Branch XVII, dismissing the complaints in Civil Case No. 71923 and in Civil Case No. 71694, on the ground that plaintiff therein, now appellant, had failed to prove its capacity to sue. There is no dispute over the facts of these cases for recovery of maritime damages. In L-34382, the facts are found in the decision of the respondent court which stated: On or about January 13, 1967, S. Kajita & Co., on behalf of Atlas Consolidated Mining & Development Corporation, shipped on board the SS "Eastern Jupiter' from Osaka, Japan, 2,361 coils of "Black Hot Rolled Copper Wire Rods." The said VESSEL is owned and operated by defendant Eastern Shipping Lines (CARRIER). The shipment was covered by Bill of Lading No. O-MA-9, with arrival notice to Phelps Dodge Copper Products Corporation of the Philippines (CONSIGNEE) at Manila. The shipment was insured with plaintiff against all risks in the amount of P1,580,105.06 under its Insurance Policy No. AS-73633. xxx xxx xxx

The coils discharged from the VESSEL numbered 2,361, of which 53 were in bad order. What the CONSIGNEE ultimately received at its warehouse was the same number of 2,361 coils with 73 coils loose and partly cut, and 28 coils entangled, partly cut, and which had to be considered as scrap. Upon weighing at CONSIGNEE's warehouse, the 2,361 coils were found to weight 263,940.85 kilos as against its invoiced weight of 264,534.00 kilos or a net loss/shortage of 593.15 kilos, according to Exhibit "A", or 1,209,56 lbs., according to the claims presented by the consignee against the plaintiff (Exhibit "D-1"), the CARRIER (Exhibit "J-1"), and the TRANSPORTATION COMPANY (Exhibit "K- l"). For the loss/damage suffered by the cargo, plaintiff paid the consignee under its insurance policy the amount of P3,260.44, by virtue of which plaintiff became subrogated to the rights and actions of the CONSIGNEE. Plaintiff made demands for payment against the CARRIER and the TRANSPORTATION COMPANY for reimbursement of the aforesaid amount but each refused to pay the same. ... The facts of L-34383 are found in the decision of the lower court as follows: On or about December 22, 1966, the Hansa Transport Kontor shipped from Bremen, Germany, 30 packages of Service Parts of Farm Equipment and Implements on board the VESSEL, SS "NEDER RIJN" owned by the defendant, N. V. Nedlloyd Lijnen, and represented in the Philippines by its local agent, the defendant Columbian Philippines, Inc. (CARRIER). The shipment was covered by Bill of Lading No. 22 for transportation to, and delivery at, Manila, in favor of the consignee, international Harvester Macleod, Inc. (CONSIGNEE). The shipment was insured with plaintiff company under its Cargo Policy No. AS-73735 "with average terms" for P98,567.79. xxx xxx xxx The packages discharged from the VESSEL numbered 29, of which seven packages were found to be in bad order. What the CONSIGNEE ultimately received at its warehouse was the same number of 29 packages with 9 packages in bad order. Out of these 9 packages, 1 package was accepted by the CONSIGNEE in good order due to the negligible damages sustained. Upon inspection at the consignee's warehouse, the contents of 3 out of the 8 cases were also found to be complete and intact, leaving 5 cases in bad order. The contents of these 5 packages showed several items missing in the total amount of $131.14; while the contents of the undelivered 1 package were valued at $394.66, or a total of $525.80 or P2,426.98. For the short-delivery of 1 package and the missing items in 5 other packages, plaintiff paid the CONSIGNEE under its Insurance Cargo Policy the amount of P2,426.98, by virtue of which plaintiff became subrogated to the rights and actions of the CONSIGNEE. Demands were made on defendants CARRIER and CONSIGNEE for reimbursement thereof but they failed and refused to pay the same. In both cases, the petitioner-appellant made the following averment regarding its capacity to sue: The plaintiff is a foreign insurance company duly authorized to do business in the Philippines through its agent, Mr. VICTOR H. BELLO, of legal age and with office address at Oledan Building, Ayala Avenue, Makati, Rizal.

In L-34382, the respondent-appellee Eastern Shipping Lines, Inc., filed its answer and alleged that it: Denies the allegations of Paragraph I which refer to plaintiff's capacity to sue for lack of knowledge or information sufficient to form a belief as to the truth thereof. Respondent-appellee, Angel Jose Transportation, Inc., in turn filed its answer admitting the allegations of the complaint, regarding the capacity of plaintiff-appellant. The pertinent paragraph of this answer reads as follows: Angel Jose Admits the jurisdictional averments in paragraphs 1, 2, and 3 of the heading Parties. In L-34383, the respondents-appellees N. V. Nedlloyd Lijhen, Columbian Philippines, Inc. and Guacods, Inc., filed their answers. They denied the petitioner-appellant's capacity to sue for lack of knowledge or information sufficient to form a belief as to the truth thereof. As earlier stated, the respondent court dismissed the complaints in the two cases on the same ground, that the plaintiff failed to prove its capacity to sue. The court reasoned as follows: In the opinion of the Court, if plaintiff had the capacity to sue, the Court should hold that a) defendant Eastern Shipping Lines should pay plaintiff the sum of P1,630.22 with interest at the legal rate from January 5, 1968, the date of the institution of the Complaint, until fully paid; b) defendant Angel Jose Transportation, Inc. should pay plaintiff the sum of P1,630.22 also with interest at the legal rate from January 5, 1968 until fully paid; c) the counterclaim of defendant Angel Jose transportation, Inc. should be ordered dismissed; and d) each defendant to pay one-half of the costs. The Court is of the opinion that Section 68 of the Corporation Law reflects a policy designed to protect the public interest. Hence, although defendants have not raised the question of plaintiff's compliance with that provision of law, the Court has resolved to take the matter into account. A suing foreign corporation, like plaintiff, has to plead affirmatively and prove either that the transaction upon which it bases its complaint is an isolated one, or that it is licensed to transact business in this country, failing which, it will be deemed that it has no valid cause of action (Atlantic Mutual Ins. Co. vs. Cebu Stevedoring Co., Inc., 17 SCRA 1037). In view of the number of cases filed by plaintiff before this Court, of which judicial cognizance can be taken, and under the ruling in Far East International Import and Export Corporation vs. Hankai Koayo Co., 6 SCRA 725, it has to be held that plaintiff is doing business in the Philippines. Consequently, it must have a license under Section 68 of the Corporation Law before it can be allowed to sue. The situation of plaintiff under said Section 68 has been described as follows in Civil Case No. 71923 of this Court, entitled 'Home Insurance Co. vs. N. V. Nedlloyd Lijnen, of which judicial cognizance can also be taken: Exhibit "R",presented by plaintiff is a certified copy of a license, dated July 1, 1967, issued by the Office of the Insurance Commissioner authorizing plaintiff to transact insurance business in this country. By virtue of Section 176 of the Insurance Law, it has to be presumed that a license to transact business under Section 68 of the Corporation Law had previously been issued to plaintiff. No copy thereof, however, was submitted for a reason unknown. The date of that

license must not have been much anterior to July 1, 1967. The preponderance of the evidence would therefore call for the finding that the insurance contract involved in this case, which was executed at Makati, Rizal, on February 8, 1967, was contracted before plaintiff was licensed to transact business in the Philippines. This Court views Section 68 of the Corporation Law as reflective of a basic public policy. Hence, it is of the opinion that, in the eyes of Philippine law, the insurance contract involved in this case must be held void under the provisions of Article 1409 (1) of the Civil Code, and could not be validated by subsequent procurement of the license. That view of the Court finds support in the following citation: According to many authorities, a constitutional or statutory prohibition against a foreign corporation doing business in the state, unless such corporation has complied with conditions prescribed, is effective to make the contracts of such corporation void, or at least unenforceable, and prevents the maintenance by the corporation of any action on such contracts. Although the usual construction is to the contrary, and to the effect that only the remedy for enforcement is affected thereby, a statute prohibiting a noncomplying corporation from suing in the state courts on any contract has been held by some courts to render the contract void and unenforceable by the corporation, even after its has complied with the statute." (36 Am. Jur. 2d 299-300). xxx xxx xxx The said Civil Case No. 71923 was dismissed by this Court. As the insurance contract involved herein was executed on January 20, 1967, the instant case should also be dismissed. We resolved to consolidate the two cases when we gave due course to the petition. The petitioner raised the following assignments of errors: First Assignment of Error THE HONORABLE TRIAL COURT ERRED IN CONSIDERING AS AN ISSUE THE LEGAL EXISTENCE OR CAPACITY OF PLAINTIFF-APPELLANT. Second Assignment of Error THE HONORABLE TRIAL COURT ERRED IN DISMISSING THE COMPLAINT ON THE FINDING THAT PLAINTIFF-APPELLANT HAS NO CAPACITY TO SUE. On the basis of factual and equitable considerations, there is no question that the private respondents should pay the obligations found by the trial court as owing to the petitioner. Only the

question of validity of the contracts in relation to lack of capacity to sue stands in the way of the petitioner being given the affirmative relief it seeks. Whether or not the petitioner was engaged in single acts or solitary transactions and not engaged in business is likewise not in issue. The petitioner was engaged in business without a license. The private respondents' obligation to pay under the terms of the contracts has been proved. When the complaints in these two cases were filed, the petitioner had already secured the necessary license to conduct its insurance business in the Philippines. It could already filed suits. Petitioner was, therefore, telling the truth when it averred in its complaints that it was a foreign insurance company duly authorized to do business in the Philippines through its agent Mr. Victor H. Bello. However, when the insurance contracts which formed the basis of these cases were executed, the petitioner had not yet secured the necessary licenses and authority. The lower court, therefore, declared that pursuant to the basic public policy reflected in the Corporation Law, the insurance contracts executed before a license was secured must be held null and void. The court ruled that the contracts could not be validated by the subsequent procurement of the license. The applicable provisions of the old Corporation Law, Act 1459, as amended are: Sec. 68. No foreign corporation or corporations formed, organized, or existing under any laws other than those of the Philippine Islands shall be permitted to transact business in the Philippine Islands until after it shall have obtained a license for that purpose from the chief of the Mercantile Register of the Bureau of Commerce and Industry, (Now Securities and Exchange Commission. See RA 5455) upon order of the Secretary of Finance (Now Monetary Board) in case of banks, savings, and loan banks, trust corporations, and banking institutions of all kinds, and upon order of the Secretary of Commerce and Communications (Now Secretary of Trade. See 5455, section 4 for other requirements) in case of all other foreign corporations. ... xxx xxx xxx Sec. 69. No foreign corporation or corporation formed, organized, or existing under any laws other than those of the Philippine Islands shall be permitted to transact business in the Philippine Islands or maintain by itself or assignee any suit for the recovery of any debt, claim, or demand whatever, unless it shall have the license prescribed in the section immediately preceding. Any officer, director, or agent of the corporation or any person transacting business for any foreign corporation not having the license prescribed shag be punished by imprisonment for not less than six months nor more than two years or by a fine of not less than two hundred pesos nor more than one thousand pesos, or by both such imprisonment and fine, in the discretion of the court. As early as 1924, this Court ruled in the leading case of Marshall Wells Co. v. Henry W. Elser & Co. (46 Phil. 70) that the object of Sections 68 and 69 of the Corporation Law was to subject the foreign corporation doing business in the Philippines to the jurisdiction of our courts. The Marshall Wells Co. decision referred to a litigation over an isolated act for the unpaid balance on a bill of goods but the philosophy behind the law applies to the factual circumstances of these cases. The Court stated: xxx xxx xxx

Defendant isolates a portion of one sentence of section 69 of the Corporation Law and asks the court to give it a literal meaning Counsel would have the law read thus: "No foreign corporation shall be permitted to maintain by itself or assignee any suit for the recovery of any debt, claim, or demand whatever, unless it shall have the license prescribed in section 68 of the law." Plaintiff, on the contrary, desires for the court to consider the particular point under discussion with reference to all the law, and thereafter to give the law a common sense interpretation. The object of the statute was to subject the foreign corporation doing business in the Philippines to the jurisdiction of its courts. The object of the statute was not to prevent the foreign corporation from performing single acts, but to prevent it from acquiring a domicile for the purpose of business without taking the steps necessary to render it amenable to suit in the local courts. The implication of the law is that it was never the purpose of the Legislature to exclude a foreign corporation which happens to obtain an isolated order for business from the Philippines, from securing redress in the Philippine courts, and thus, in effect, to permit persons to avoid their contracts made with such foreign corporations. The effect of the statute preventing foreign corporations from doing business and from bringing actions in the local courts, except on compliance with elaborate requirements, must not be unduly extended or improperly applied. It should not be construed to extend beyond the plain meaning of its terms, considered in connection with its object, and in connection with the spirit of the entire law. (State vs. American Book Co. [1904], 69 Kan, 1; American De Forest Wireless Telegraph Co. vs. Superior Court of City & Country of San Francisco and Hebbard [1908], 153 Cal., 533; 5 Thompson on Corporations, 2d ed., chap. 184.) Confronted with the option of giving to the Corporation Law a harsh interpretation, which would disastrously embarrass trade, or of giving to the law a reasonable interpretation, which would markedly help in the development of trade; confronted with the option of barring from the courts foreign litigants with good causes of action or of assuming jurisdiction of their cases; confronted with the option of construing the law to mean that any corporation in the United States, which might want to sell to a person in the Philippines must send some representative to the Islands before the sale, and go through the complicated formulae provided by the Corporation Law with regard to the obtaining of the license, before the sale was made, in order to avoid being swindled by Philippine citizens, or of construing the law to mean that no foreign corporation doing business in the Philippines can maintain any suit until it shall possess the necessary license;-confronted with these options, can anyone doubt what our decision will be? The law simply means that no foreign corporation shall be permitted "to transact business in the Philippine Islands," as this phrase is known in corporation law, unless it shall have the license required by law, and, until it complies with the law, shall not be permitted to maintain any suit in the local courts. A contrary holding would bring the law to the verge of unconstitutionality, a result which should be and can be easily avoided. (Sioux Remedy Co. vs. Cope and Cope, supra;Perkins, Philippine Business Law, p. 264.) To repeat, the objective of the law was to subject the foreign corporation to the jurisdiction of our courts. The Corporation Law must be given a reasonable, not an unduly harsh, interpretation which does not hamper the development of trade relations and which fosters friendly commercial intercourse among countries. The objectives enunciated in the 1924 decision are even more relevant today when we view commercial relations in terms of a world economy, when the tendency is to re-examine the political

boundaries separating one nation from another insofar as they define business requirements or restrict marketing conditions. We distinguish between the denial of a right to take remedial action and the penal sanction for nonregistration. Insofar as transacting business without a license is concerned, Section 69 of the Corporation Law imposed a penal sanction-imprisonment for not less than six months nor more than two years or payment of a fine not less than P200.00 nor more than P1,000.00 or both in the discretion of the court. There is a penalty for transacting business without registration. And insofar as litigation is concerned, the foreign corporation or its assignee may not maintain any suit for the recovery of any debt, claim, or demand whatever. The Corporation Law is silent on whether or not the contract executed by a foreign corporation with no capacity to sue is null and void ab initio. We are not unaware of the conflicting schools of thought both here and abroad which are divided on whether such contracts are void or merely voidable. Professor Sulpicio Guevarra in his book Corporation Law (Philippine Jurisprudence Series, U.P. Law Center, pp. 233-234) cites an Illinois decision which holds the contracts void and a Michigan statute and decision declaring them merely voidable: xxx xxx xxx Where a contract which is entered into by a foreign corporation without complying with the local requirements of doing business is rendered void either by the express terms of a statute or by statutory construction, a subsequent compliance with the statute by the corporation will not enable it to maintain an action on the contract. (Perkins Mfg. Co. v. Clinton Const. Co., 295 P. 1 [1930]. See also Diamond Glue Co. v. U.S. Glue Co., supra see note 18.) But where the statute merely prohibits the maintenance of a suit on such contract (without expressly declaring the contract "void"), it was held that a failure to comply with the statute rendered the contract voidable and not void, and compliance at any time before suit was sufficient. (Perkins Mfg. Co. v. Clinton Const. Co., supra.) Notwithstanding the above decision, the Illinois statute provides, among other things that a foreign corporation that fails to comply with the conditions of doing business in that state cannot maintain a suit or action, etc. The court said: 'The contract upon which this suit was brought, having been entered into in this state when appellant was not permitted to transact business in this state, is in violation of the plain provisions of the statute, and is therefore null and void, and no action can be maintained thereon at any time, even if the corporation shall, at some time after the making of the contract, qualify itself to transact business in this state by a compliance with our laws in reference to foreign corporations that desire to engage in business here. (United Lead Co. v. J.M. Ready Elevator Mfg. Co., 222 Ill. 199, 73 N.N. 567 [1906].) A Michigan statute provides: "No foreign corporation subject to the provisions of this Act, shall maintain any action in this state upon any contract made by it in this state after the taking effect of this Act, until it shall have fully complied with the requirement of this Act, and procured a certificate to that effect from the Secretary of State," It was held that the above statute does not render contracts of a foreign corporation that fails to comply with the statute void, but they may be enforced only after compliance therewith. (Hastings Industrial Co. v. Moral, 143 Mich. 679,107 N.E. 706

[1906]; Kuennan v. U.S. Fidelity & G. Co., Mich. 122; 123 N.W. 799 [1909]; Despres, Bridges & Noel v. Zierleyn, 163 Mich. 399, 128 N.W. 769 [1910]). It has also been held that where the law provided that a corporation which has not complied with the statutory requirements "shall not maintain an action until such compliance". "At the commencement of this action the plaintiff had not filed the certified copy with the country clerk of Madera County, but it did file with the officer several months before the defendant filed his amended answer, setting up this defense, as that at the time this defense was pleaded by the defendant the plaintiff had complied with the statute. The defense pleaded by the defendant was therefore unavailable to him to prevent the plaintiff from thereafter maintaining the action. Section 299 does not declare that the plaintiff shall not commence an action in any county unless it has filed a certified copy in the office of the county clerk, but merely declares that it shall not maintain an action until it has filled it. To maintain an action is not the same as to commence an action, but implies that the action has already been commenced." (See also Kendrick & Roberts Inc. v. Warren Bros. Co., 110 Md. 47, 72 A. 461 [1909]). In another case, the court said: "The very fact that the prohibition against maintaining an action in the courts of the state was inserted in the statute ought to be conclusive proof that the legislature did not intend or understand that contracts made without compliance with the law were void. The statute does not fix any time within which foreign corporations shall comply with the Act. If such contracts were void, no suits could be prosecuted on them in any court. ... The primary purpose of our statute is to compel a foreign corporation desiring to do business within the state to submit itself to the jurisdiction of the courts of this state. The statute was not intended to exclude foreign corporations from the state. It does not, in terms, render invalid contracts made in this state by non-complying corporations. The better reason, the wiser and fairer policy, and the greater weight lie with those decisions which hold that where, as here, there is a prohibition with a penalty, with no express or implied declarations respecting the validity of enforceability of contracts made by qualified foreign corporations, the contracts ... are enforceable ... upon compliance with the law." (Peter & Burghard Stone Co. v. Carper, 172 N.E. 319 [1930].) Our jurisprudence leans towards the later view. Apart from the objectives earlier cited from Marshall Wells Co. v. Henry W. Elser & Co (supra), it has long been the rule that a foreign corporation actually doing business in the Philippines without license to do so may be sued in our courts. The defendant American corporation in General Corporation of the Philippines v. Union Insurance Society of Canton Ltd et al. (87 Phil. 313) entered into insurance contracts without the necessary license or authority. When summons was served on the agent, the defendant had not yet been registered and authorized to do business. The registration and authority came a little less than two months later. This Court ruled: Counsel for appellant contends that at the time of the service of summons, the appellant had not yet been authorized to do business. But, as already stated, section 14, Rule 7 of the Rules of Court makes no distinction as to corporations with or without authority to do business in the Philippines. The test is whether a foreign corporation was actually doing business here. Otherwise, a foreign corporation illegally doing business here because of its refusal or neglect to obtain the corresponding license and authority to do business may successfully though unfairly plead such neglect or illegal act so as to avoid service and thereby impugn the jurisdiction of the local courts. It would indeed be anomalous and quite prejudicial, even disastrous, to the citizens in this jurisdiction who in all good faith and in the

regular course of business accept and pay for shipments of goods from America, relying for their protection on duly executed foreign marine insurance policies made payable in Manila and duly endorsed and delivered to them, that when they go to court to enforce said policies, the insurer who all along has been engaging in this business of issuing similar marine policies, serenely pleads immunity to local jurisdiction because of its refusal or neglect to obtain the corresponding license to do business here thereby compelling the consignees or purchasers of the goods insured to go to America and sue in its courts for redress. There is no question that the contracts are enforceable. The requirement of registration affects only the remedy. Significantly, Batas Pambansa Blg. 68, the Corporation Code of the Philippines has corrected the ambiguity caused by the wording of Section 69 of the old Corporation Law. Section 133 of the present Corporation Code provides: SEC. 133. Doing business without a license.-No foreign corporation transacting business in the Philippines without a license, or its successors or assigns, shag be permitted to maintain or intervene in any action, suit or proceeding in any court or administrative agency in the Philippines; but such corporation may be sued or proceeded against before Philippine courts or administrative tribunals on any valid cause of action recognized under Philippine laws. The old Section 69 has been reworded in terms of non-access to courts and administrative agencies in order to maintain or intervene in any action or proceeding. The prohibition against doing business without first securing a license is now given penal sanction which is also applicable to other violations of the Corporation Code under the general provisions of Section 144 of the Code. It is, therefore, not necessary to declare the contract nun and void even as against the erring foreign corporation. The penal sanction for the violation and the denial of access to our courts and administrative bodies are sufficient from the viewpoint of legislative policy. Our ruling that the lack of capacity at the time of the execution of the contracts was cured by the subsequent registration is also strengthened by the procedural aspects of these cases. The petitioner averred in its complaints that it is a foreign insurance company, that it is authorized to do business in the Philippines, that its agent is Mr. Victor H. Bello, and that its office address is the Oledan Building at Ayala Avenue, Makati. These are all the averments required by Section 4, Rule 8 of the Rules of Court. The petitioner sufficiently alleged its capacity to sue. The private respondents countered either with an admission of the plaintiff's jurisdictional averments or with a general denial based on lack of knowledge or information sufficient to form a belief as to the truth of the averments. We find the general denials inadequate to attack the foreign corporations lack of capacity to sue in the light of its positive averment that it is authorized to do so. Section 4, Rule 8 requires that "a party desiring to raise an issue as to the legal existence of any party or the capacity of any party to sue or be sued in a representative capacity shall do so by specific denial, which shag include such supporting particulars as are particularly within the pleader's knowledge. At the very least, the private respondents should have stated particulars in their answers upon which a specific denial of the petitioner's capacity to sue could have been based or which could have supported its denial for lack

of knowledge. And yet, even if the plaintiff's lack of capacity to sue was not properly raised as an issue by the answers, the petitioner introduced documentary evidence that it had the authority to engage in the insurance business at the time it filed the complaints. WHEREFORE, the petitions are hereby granted. The decisions of the respondent court are reversed and set aside. In L-34382, respondent Eastern Shipping Lines is ordered to pay the petitioner the sum of P1,630.22 with interest at the legal rate from January 5, 1968 until fully paid and respondent Angel Jose Transportation Inc. is ordered to pay the petitioner the sum of P1,630.22 also with interest at the legal rate from January 5, 1968 until fully paid. Each respondent shall pay one-half of the costs. The counterclaim of Angel Jose Transportation Inc. is dismissed. In L-34383, respondent N. V. Nedlloyd Lijnen, or its agent Columbian Phil. Inc. is ordered to pay the petitioner the sum of P2,426.98 with interest at the legal rate from February 1, 1968 until fully paid, the sum of P500.00 attorney's fees, and costs, The complaint against Guacods, Inc. is dismissed. G.R. No. 97642 August 29, 1997 AVON INSURANCE PLC. BRITISH RESERVE INSURANCE CO. LTD., CORNHILL INSURANCE PLC. IMPERIO REINSURANCE CO. (UK) LTD., INSTITUTE DE RESERGURROS DO BRAZIL, INSURANCE CORPORATION OF IRELAND PLC, LEGAL AND GENERAL ASSURANCE SOCIETY LTD., PROVINCIAL INSURANCE PLC. QBL INSURANCE (UK) LTD., ROYAL INSURANCE CO. LTD., TRINITY INSURANCE CO. LTD., GENERAL ACCIDENT FIRE AND LIFE ASSURANCE CORP. LTD., COOPERATIVE INSURANCE SOCIETY and PEARL ASSURANCE CO. LTD., petitioners, vs. COURT OF APPEALS, REGIONAL TRIAL COURT OF MANILA, BRANCH 51. YUPANGCO COTTON MILLS. WORLDWIDE SURETY & INSURANCE CO., INC., respondents.

TORRES, JR., J.: Just how far can our courts assert jurisdiction over the persons of foreign entities being charged with contractual liabilities by residents of the Philippines? Appealing from the Court of Appeals' October 11, 1990 Decision 1 in CA-G.R. No. 22005, petitioners
claim that the trial court's jurisdiction does not extend to them, since they are foreign reinsurance companies that are not doing business in the Philippines. Having entered into reinsurance contracts abroad, petitioners are beyond the jurisdictional ambit of our courts and cannot be served summons through extraterritorial service, as under Section 17, Rule 14 of the Rules of Court, nor through the Insurance Commissioner, under Section 14. Private respondent Yupangco Cotton Mills contend on the other hand that petitioners are within our courts' cognitive powers, having submitted voluntarily to their jurisdiction by filing motions to dismiss 2 the private respondent's suit below.

The antecedent facts, as found by the appellate court, are as follows: Respondent Yupangco Cotton Mills filed a complaint against several foreign reinsurance companies (among which are petitioners) to collect their alleged percentage liability under contract treaties between the foreign insurance companies and the international insurance broker C.J. Boatright, acting as agent for respondent Worldwide Surety and Insurance

Company. Inasmuch as petitioners are not engaged in business in the Philippines with no offices, places of business or agents in the Philippines, the reinsurance treaties having been entered abroad, service of summons upon motion of respondent Yupangco, was made upon petitioners through the Office of the Insurance Commissioner. Petitioners, by counsel on special appearance, seasonably filed motions to dismiss disputing the jurisdiction of respondent Court and the extra-territorial service of summons. Respondent Yupangco filed its opposition to the motions to dismiss, petitioners filed their reply, and respondent Yupangco filed its rejoinder. In an Order dated April 30, 1990, respondent Court denied the motions to dismiss and directed petitioners to file their answer. On May 29, 1990, petitioners filed their notice of appeal. In an order dated June 4, 1990, respondent court denied due course to the appeal. 3 To this day, trial on the merits of the collection suit has not proceeded as in the present petition, petitioners continue vigorously to dispute the trial court's assumption of jurisdiction over them. It will be remembered that in the plaintiff's complaint, 4 it was contended that on July 6, 1979 and on
October 1, 1980. Yupangco Cotton Mills engaged to secure with Worldwide Security and Insurance Co. Inc., several of its properties for the periods July 6, 1979 to July 6, 1980 as under Policy No. 20719 for a coverage of P100,000,000.00 and from October 1, 1980 to October 1, 1981, under Policy No. 25896, also for P100,000,000.00. Both contracts were covered by reinsurance treaties between Worldwide Surety and Insurance and several foreign reinsurance companies, including the petitioners. The reinsurance arrangements had been made through international broker C.J. Boatwright and Co. Ltd., acting as agent of Worldwide Surety and Insurance.

As fate would have it, on December 16, 1979 and May 2, 1981, within the respective effectivity periods of Policies 20719 and 25896, the properties therein insured were razed by fire, thereby giving rise to the obligation of the insurer to indemnify the Yupangco Cotton Mills. Partial payments were made by Worldwide Surety and Insurance and some of the reinsurance companies. On May 2, 1983, Worldwide Surety and Insurance, in a Deed of Assignment, acknowledged a remaining balance of P19,444,447.75 still due Yupangco Cotton Mills, and assigned to the latter all reinsurance proceeds still collectible from all the foreign reinsurance companies. Thus, in its interest as assignee and original insured, Yupangco Cotton Mills instituted this collection suit against the petitioners. Service of summons upon the petitioners was made by notification to the Insurance Commissioner, pursuant to Section 14, Rule 14 of the Rules of Court. 5 In a Petition for Certiorari filed with the Court of Appeals, petitioners submitted that respondent Court has no jurisdiction over them, being all foreign corporations not doing business in the Philippines with no office, place of business or agents in the Philippines. The remedy of Certiorari was resorted to by the petitioners on the premise that if petitioners had filed an answer to the complaint as ordered by the respondent court, they would risk, abandoning the issue of jurisdiction. Moreover, extra-territorial service of summons on petitioners is null and void because the complaint for collection is not one affecting plaintiffs status and not relating to property within the Philippines. The Court of Appeals found the petition devoid of merit, stating that: 1. Petitioners were properly served with summons and whatever defect, if any, in the service of summons were cured by their voluntary appearance in court, via motion to dismiss.

2. Even assuming that petitioners have not yet voluntarily appeared as co-defendants in the case below even after having filed the motions to dismiss adverted to, still the situation does not deserve dismissal of the complaint as far as they are concerned, since as held by this Court in Lingner Fisher GMBH vs. IAC, 125 SCRA 523; A case should not be dismissed simply because an original summons was wrongfully served. It should be difficult to conceive for example, that when a defendant personally appears before a court complaining that he had not been validly summoned, that the case filed against him should be dismissed. An alias summons can be actually served on said defendant. 3. Being reinsurers of respondent Worldwide Surety and Insurance of the risk which the latter assumed when it issued the fire insurance policies in dispute in favor of respondent Yupangco, petitioners cannot now validly argue that they do not do business in this country. At the very least, petitioners must be deemed to have engaged in business in the Philippines no matter how isolated or singular such business might be, even on the assumption that among the local domestic insurance corporations of this country, it is only in favor of Worldwide Surety and Insurance that they have ever reinsured any risk arising from any reinsurance within the territory. 4. The issue of whether or not petitioners are doing business in the country is a matter best referred to a trial on the merits of the case, and so should be addressed there. Maintaining its submission that they are beyond the jurisdiction of Philippine Courts, petitioners are now before us, stating: Petitioners, being foreign corporations, as found by the trial court, not doing business in the Philippines with no office, place of business or agents in the Philippines, are not subject to the jurisdiction of Philippine courts. The complaint for sum of money being a personal action not affecting status or relating to property, extraterritorial service of summons on petitioners all not doing business in the Philippines is null and void. The appearance of counsel for petitioners being explicitly "by special appearance without waiving objections to the jurisdiction over their persons or the subject matter" and the motions to dismiss having excluded non-jurisdictional grounds, there is no voluntary submission to the jurisdiction of the trial court. 6 For its part, private respondent Yupangco counter-submits: 1. Foreign corporations, such as petitioners, not doing business in the Philippines, can be sued in Philippine Courts, not withstanding petitioners' claim to the contrary. 2. While the complaint before the Honorable Trial Court is for a sum of money, not affecting status or relating to property, petitioners (then defendants) can submit themselves voluntarily to the jurisdiction of Philippine Courts, even if there is no extrajudicial (sic) service of summons upon them. 3. The voluntary appearance of the petitioners (then defendants) before the Honorable Trial Court amounted, in effect, to voluntary submission to its jurisdiction over their persons. 7

In the decisions of the courts below, there is much left to speculation and conjecture as to whether or not the petitioners were determined to be "doing business in the Philippines" or not. To qualify the petitioners' business of reinsurance within the Philippine forum, resort must be made to the established principles in determining what is meant by "doing business in the Philippines." In Communication Materials and Design, Inc. et. al. vs. Court of Appeals, 8 it was observed that. There is no exact rule or governing principle as to what constitutes doing or engaging in or transacting business. Indeed, such case must be judged in the light of its peculiar circumstances, upon its peculiar facts and upon the language of the statute applicable. 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. Article 44 of the Omnibus Investments Code of 1987 defines the phrase to include: soliciting orders, purchases, service contracts, opening offices, whether called "liaison" offices or branches; appointing representatives or distributors who are domiciled in the Philippines or who in any calendar year stay in the Philippines for a period or periods totaling 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 or 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 term ordinarily implies a continuity of commercial dealings and arrangements, and contemplates, to that extent, the performance of acts or works or the exercise of the functions normally incident to and in progressive prosecution of the purpose and object of its organization. 9 A single act or transaction made in the Philippines, however, could qualify a foreign corporation to be doing business in the Philippines, if such singular act is not merely incidental or casual, but indicates the foreign corporation's intention to do business in the Philippines. 10 There is no sufficient basis in the records which would merit the institution of this collection suit in the Philippines. More specifically, there is nothing to substantiate the private respondent's submission that the petitioners had engaged in business activities in this country. This is not an instance where the erroneous service of summons upon the defendant can be cured by the issuance and service of alias summons, as in the absence of showing that petitioners had been doing business in the country, they cannot be summoned to answer for the charges leveled against them. The Court is cognizant of the doctrine in Signetics Corp. vs. Court of Appeals 11 that for the purpose of
acquiring jurisdiction by way of summons on a defendant foreign corporation, there is no need to prove first the fact that defendant is doing business in the Philippines. The plaintiff only has to allege in the complaint that the defendant has an agent in the Philippines for summons to be validly served thereto, even without prior evidence advancing such factual allegation.

As it is, private respondent has made no allegation or demonstration of the existence of petitioners' domestic agent, but avers simply that they are doing business not only abroad but in the Philippines as well. It does not appear at all that the petitioners had performed any act which would give the general public the impression that it had been engaging, or intends to engage in its ordinary and

usual business undertakings in the country. The reinsurance treaties between the petitioners and Worldwide Surety and Insurance were made through an international insurance broker, and not through any entity or means remotely connected with the Philippines. Moreover, there is authority to the effect that a reinsurance company is not doing business in a certain state merely because the property or lives which are insured by the original insurer company are located in that state.12 The
reason for this is that a contract of reinsurance is generally a separate and distinct arrangement from the original contract of insurance, whose contracted risk is insured in the reinsurance agreement. 13 Hence, the original insured has generally no interest in the contract of reinsurance. 14

A foreign corporation, is one which owes its existence to the laws of another state, 15 and generally,
has no legal existence within the state in which it is foreign. In Marshall Wells Co. vs. Elser, 16 it was held that corporations have no legal status beyond the bounds of the sovereignty by which they are created. Nevertheless, it is widely accepted that foreign corporations are, by reason of state comity, allowed to transact business in other states and to sue in the courts of suchfora. In the Philippines foreign corporations are allowed such privileges, subject to certain restrictions, arising from the state's sovereign right of regulation.

Before a foreign corporation can transact business in the country, it must first obtain a license to transact business here 17 and secure the proper authorizations under existing law. If a foreign corporation engages in business activities without the necessary requirements, it opens itself to court actions against it, but it shall not be allowed to maintain or intervene in an action, suit or proceeding for its own account in any court or tribunal or agency in the Philippines. 18 The purpose of the law in requiring that foreign corporations doing business in the country be licensed to do so, is to subject the foreign corporations doing business in the Philippines to the jurisdiction of the courts, 19 otherwise, a foreign corporation illegally doing business here because of its
refusal or neglect to obtain the required license and authority to do business may successfully though unfairly plead such neglect or illegal act so as to avoid service and thereby impugn the jurisdiction of the local courts.

The same danger does not exist among foreign corporations that are indubitably not doing business in the Philippines. Indeed, if a foreign corporation does not do business here, there would be no reason for it to be subject to the State's regulation. As we observed, in so far as the State is concerned, such foreign corporation has no legal existence. Therefore, to subject such corporation to the courts' jurisdiction would violate the essence of sovereignty. In the alternative, private respondent submits that foreign corporations not doing business in the Philippines are not exempt from suits leveled against them in courts, citing the case of Facilities Management Corporation vs.Leonardo Dela Osa, et. al. 20 where we ruled "that indeed, if a foreign
corporation, not engaged in business in the Philippines, is not barred from seeking redress from Courts in the Philippines, a fortiori, that same corporation cannot claim exemption from being sued in Philippine Courts for acts done against a person or persons in the Philippines."

We are not persuaded by the position taken by the private respondent. In Facilities Management case, the principal issue presented was whether the petitioner had been doing business in the Philippines, so that service of summons upon its agent as under Section 14, Rule 14 of the Rules of Court can be made in order that the Court of First Instance could assume jurisdiction over it. The Court ruled that the petitioner was doing business in the Philippines, and that by serving summons upon its resident agent, the trial court had effectively acquired jurisdiction. In that case, the court made no prescription as the absolute suability of foreign corporations not doing business in the country, but merely discounts the absolute exemption of such foreign corporations from liabilities particularly arising from acts done against a person or persons in the Philippines.

As we have found, there is no showing that petitioners had performed any act in the country that would place it within the sphere of the court's jurisdiction. A general allegation standing alone, that a party is doing business in the Philippines does not make it so. A conclusion of fact or law cannot be derived from the unsubstantiated assertions of parties, notwithstanding the demands of convenience or dispatch in legal actions, otherwise, the Court would be guilty of sorcery; extracting substance out of nothingness. In addition, the assertion that a resident of the Philippines will be inconvenienced by an out-of-town suit against a foreign entity, is irrelevant and unavailing to sustain the continuance of a local action, for jurisdiction is not dependent upon the convenience or inconvenience of a party. 21 It is also argued that having filed a motion to dismiss in the proceedings before the trial court, petitioners have thus acquiesced to the court's jurisdiction, and they cannot maintain the contrary at this juncture. This argument is at the most, flimsy. In civil cases, jurisdiction over the person of the defendant is acquired either by his voluntary appearance in court and his submission to its authority or by service of summons. 22 Fundamentally, the service of summons is intended to give official notice to the defendant or respondent that an action has been commenced against it. The defendant or respondent is thus put on guard as to the demands of the plaintiff as stated in the complaint. 23 The service of summons upon
the defendant becomes an important element in the operation of a court's jurisdiction upon a party to a suit, as service of summons upon the defendant is the means by which the court acquires jurisdiction over his person. 24 Without service of summons, or when summons are improperly made, both the trial and the judgment, being in violation of due process, are null and void, 25 unless the defendant waives the service of summons by voluntarily appearing and answering the suit. 26

When a defendant voluntarily appears, he is deemed to have submitted himself to the jurisdiction of the court. 27This is not, however, always the case. Admittedly, and without subjecting himself to the
court's jurisdiction, the defendant in an action can, by special appearance object to the court's assumption on the ground of lack of jurisdiction. If he so wishes to assert this defense, he must do so seasonably by motion for the purpose of objecting to the jurisdiction of the court, otherwise, he shall be deemed to have submitted himself to that jurisdiction. 28 In the case of foreign corporations, it has been held that they may seek relief against the wrongful assumption of jurisdiction by local courts. In Time, Inc. vs. Reyes,29 it was held that the action of a court in refusing to rule or deferring its ruling on a motion to dismiss for lack or excess of jurisdiction is correctable by a writ of prohibition or certiorari sued out in the appellate court even before trial on the merits is had. The same remedy is available should the motion to dismiss be denied, and the court, over the foreign corporation's objections, threatens to impose its jurisdiction upon the same.

If the defendant, besides setting up in a motion to dismiss his objection to the jurisdiction of the court, alleges at the same time any other ground for dismissing the action, or seeks an affirmative relief in the motion, 30 he is deemed to have submitted himself to the jurisdiction of the court. In this instance, however, the petitioners from the time they filed their motions to dismiss, their submissions have been consistently and unfailingly to object to the trial court's assumption of jurisdiction, anchored on the fact that they are all foreign corporations not doing business in the Philippines. As we have consistently held, if the appearance of a party in a suit is precisely to question the jurisdiction of the said tribunal over the person of the defendant, then this appearance is not equivalent to service of summons, nor does it constitute an acquiescence to the court's jurisdiction. 31 Thus, it cannot be argued that the petitioners had abandoned their objections to the

jurisdiction of the court, as their motions to dismiss in the trial court, and all their subsequent posturings, were all in protest of the private respondent's insistence on holding them to answer a charge in a forum where they believe they are not subject to. Clearly, to continue the proceedings in a case such as those before Us would just "be useless and a waste of time." 32

ACCORDINGLY, the decision appealed from dated October 11, 1990, is SET ASIDE and the instant petition is hereby GRANTED. The respondent Regional Trial Court of Manila, Branch 51 is declared without jurisdiction to take cognizance of Civil Case No. 86-37932, and all its orders and issuances in connection therewith are hereby ANNULLED and SET ASIDE. The respondent court is hereby ORDERED to DESIST from maintaining further proceeding in the case aforestated. SO ORDERED. G.R. No. 105141 August 31, 1993 SIGNETICS CORPORATION, petitioner, vs. COURT OF APPEALS and FRUEHAUF ELECTRONICS PHILS. INC., respondents. Sycip, Salazar, Hernandez & Gatmaitan Law Office for petitioner. Romulo P. Atiencia for private respondent.

RESOLUTION

VITUG, J.: The crucial issue in this petition for review on certiorari is whether or not the lower court, given the factual allegations in the complaint, had correctly assumed jurisdiction over the petitioner, a foreign corporation, on its claim in a motion to dismiss, that it had since ceased to do business in the Philippines. The petitioner, Signetics Corporation (Signetics), was organized under the laws of the United States of America. Through Signetics Filipinas Corporation (SigFil), a wholly-owned subsidiary, Signetics entered into lease contract over a piece of land with Fruehauf Electronics Phils., Inc. (Freuhauf). In a complaint initiated on 15 March 1990, Freuhauf sued Signetics for damages, accounting or return of certain machinery, equipment and accessories, as well as the transfer of title and surrender of possession of the buildings, installations and improvements on the leased land, before the Regional Trial Court of Pasig, Metro Manila (Civil Case No. 59264). Claiming that Signetics caused SigFil to insert in the lease contract the words "machineries, equipment and accessories," the defendants were able to withdraw these assets from the cost-free transfer provision of the contract. On the basis of the allegation that Signetics is a "subsidiary of US PHILIPS CORPORATION, and may be served summons at Philips Electrical Lamps, Inc., Las Pias, Metro Manila and/or c/o Technology Electronics Assembly & Management (TEAM) Pacific Corporation, Electronics Avenue,

FTI Complex, Taguig, Metro Manila," service of summons was made on Signetics through TEAM Pacific Corporation. By special appearance, Signetics filed on 14 May 1990 a motion to dismiss the complaint on the ground of lack of jurisdiction over its person. Invoking Section 14, Rule 14, of the Rules of Court and the rule laid down in Pacific Micronisian Line, Inc., v. Del Rosario and Pelington 1 to the effect that the
fact of doing business in the Philippines should first be established in order that summons could be validly made and jurisdiction acquired by the court over a foreign corporation, Signetics moved to dismiss the complaint.

The trial court 2 denied the motion to dismiss in an Order, which reads: In the case of Wang Laboratories, Inc. v. Mendoza, 156 SCRA 44, the High Court explained what constitutes "doing business" as follows: Indeed it has been held that "where a single act or transaction of a foreign corporation is not merely incidental or causal but is of such character as distinctly to indicate a purpose to do other business in the State, such constitutes doing business within the meaning of statutes prescribing the conditions under which a foreign corporation may be served with summons (Far East Int'l. Import and Export Corp. v. Nankai Kogyo Co. Ltd., 6 SCRA 725 [1962]). Assuming, arguendo, that defendant is a foreign corporation not doing business in the Philippines, it has been categorically stated in the aforecited case that although a foreign corporation is not doing business in the Philippines, it may be used for acts done against persons in the Philippines. For lack of sufficient merits therefore, defendant's Motion to Dismiss is hereby DENIED. 3 Signetics filed a motion for reconsideration but this, too, was denied by the court in its Order of 11 March 1991, reiterating that the rule expressed in Wang Laboratories, Inc. v. Mendoza 4 was the
applicable and prevailing "jurisprudence on the matter."

Signetics elevated the issue to the Court of Appeals, via a petition for certiorari and prohibition, with application for preliminary injunction (CA-G.R. SP No. 24758). On 20 February 1992, the Court of Appeals rendered its decision,5 dismissing the petition and affirming the orders of the lower court. A
motion for the reconsideration of the appellate court's decision, having been denied, the instant petition for review on certiorari was filed with this Court, still on the "basic question" of whether or not "a foreign corporation can be sued in the Philippines and validly summoned by a Philippine court without prior 'proof' that it was doing business here at the time of the suit." 6

Critically dissecting the complaint, the petitioner stress that the averments in the complaint "are at best mere allegations and do not constitute "proof of 'doing business';" 7 that the allegations, in any
case, do not demonstrate "doing business"; and that the phrase "becoming interested in doing business" is "not actual doing of business here." The petitioner argues that what was effectively only alleged in the complaint as an activity of doing business was "the mere equity investment" of petitioner in SigFil, which the petitioner insists, had theretofore been transferred to TEAM holdings, Ltd.

The petitioner relies, in good part, on the Pacific Micronisian rule. The pronouncements in Wang Laboratories and in Facilities Management Corporation, 8 the petitioner adds, are mere obiter

dicta since the foreign corporations involved in both cases were found to have, in fact, been doing business in the Philippines and were thus unquestionably amenable to local court processes.

We rule for the affirmance of the appealed decision. Petitioner's contention that there should be "proof" of the foreign corporation's doing business in this country before it may be summoned is based on the following portions of the decision in Pacific Micronisian: The pertinent rule to be considered is section 14, Rule 7 of the Rules of Court, which refers to service upon private foreign corporations. This section provides: Sec. 14. Service upon private foreign corporations. If the defendant is a foreign corporation, or a non-resident joint stock company or association, doing business in the Philippines, service may be made on its resident agent designated in accordance with law for that purpose, or, if there be no such agent, on the government official designated by law to that effect, or on any of its officers or agents within the Philippines. The above section provides for three modes of effecting services upon a private corporation, namely: (1) by serving upon the agent designated in accordance with law to accept service by summons; (2) if there be no special agent, by serving on the government official designated by law to that effect; and (3) by serving on any officer or agent within the Philippines. But, it should be noted, in order that services may be effected in the manner above stated, said section also requires that the foreign corporation be one which is doing business in the Philippines. This is a sine qua non requirement. This fact must first be established in order that summons can be made and jurisdiction acquired. This is not only clear in the rule but is reflected in a recent decision of this Court. We there said that "as long as a foreign private corporation does or engages in business in this jurisdiction, it should and will be amenable to process and the jurisdiction of the local courts." (General Corporation of the Philippines, et al. vs. Union Insurance Society of Canton, Ltd., et al. 49 Off. Gaz., 73, September 14, 1950). 9 The petitioner opines that the phrase, "(the) fact (of doing business in the Philippines) must first be established in order that summons be made and jurisdiction acquired," used in the above pronouncement, would indicate that a mere allegation to that effect in the complaint is not enough there must instead be proof of doing business. 10 In any case, the petitioner, points out, the allegations
themselves did not sufficiently show the fact of its doing business in the Philippines.

It should be recalled that jurisdiction and venue of actions are, as they should be, initially determined by the allegations of the complaint. 11 Jurisdiction cannot be made to depend on independent pleas set
up in a mere motion to dismiss, otherwise jurisdiction would become dependent almost entirely upon the defendant. 12 The fact of doing business must then, in the first place, be established by appropriate allegations in the complaint. This is what the Court should be seen to have meant in the Pacific Micronisian case. The complaint, it is true, may have been vaguely structured but, taken correlatively, not disjunctively as the petitioner would rather suggest, it is not really so weak as to be fatally deficient in the above requirement. Witness the following allegations of the complaint:

3. In the year 1978, the defendant became interested in engaging in business in the Philippines . . .;

4. To serve as its local business conduit, the defendant organized a wholly owned domestic subsidiary corporation known as SIGNETICS FILIPINAS CORPORATION (SIGFIL, for brevity), which was supposed to be its actual operating entity in the Philippines; xxx xxx xxx 18. In February 1983, the defendant ceased all its business operations in the leased premise. . . .; xxx xxx xxx 23. (a) In November 21, 1986, the defendant transferred all shares of stock of SIGFIL in favor of TEAM HOLDING LIMITED, a foreign corporation organized under the laws of British Virgin Islands; xxx xxx xxx; 23. (d) Subsequently, on January 12, 1987, the new owners unmasked itself when it dropped SIGFIL's name, and changed its corporate name to TECHNOLOGY ELECTRONICS ASSEMBLY AND MANAGEMENT (T.E.A.M.) PACIFIC CORPORATION, otherwise known as TEAM PACIFIC CORPORATION. The similarity between "TEAM HOLDINGS LIMITED" and "TEAM PACIFIC CORPORATION" is all too apparent; and 24. As seen in the next-preceding paragraph, the defendant made a devious use of the fiction of separate corporate identity to shield chicanery and to perpetuate fraud. 13 The petitioner's reliance on Hyopsung Maritime Co., Ltd., v. Court. of Appeals 14 is misplaced. While
the Court therein cited the Pacific Micronisian ruling and dismissed the complaint against the petitioner for lack of jurisdiction, theHyopsung case is under a completely different factual milieu. As summarized by the Court, the complaint therein was

. . . for the recovery of damages based on a breach of contract which appears to have been entirely entered into, executed, and consummated in Korea. Indisputably, the shipment was loaded on board the foreign vessel MV "Don Aurelio" at Pohang, Korea, by a Korean firm with offices at Seoul, Korea; the corresponding bill of lading was issued in Seoul, Korea and the freight was prepaid also at Seoul; the above vessel with its cargo never ever docked at Manila or at any other port of entry in the Philippines; lastly, the petitioner did not appoint any ship agent in the Philippines. Simply put, the petitioner is beyond the reach of our courts. 15 On the other hand, the complaint, in this instance, has alleged, among other things, that Signetics had become interested in engaging in business in the Philippines; that it had actually organized SigFil, as its local business conduit or actual operating entity in the Philippines; that, through Sigfil, it had entered into the lease contract involving properties in the Philippines a situation that could have allowed Frehauf to avail itself of the provisions of Section 17, Rule 14, on extraterritorial service of summons since the relief sought consists in excluding the defendant from any interest in property within the Philippines); and that while Signetics may have had transferredall its shareholdings (before the complaint was filed) in favor of TEAM Holdings, Ltd., another foreign corporation, SIGFIL's corporate name, however, was forthwith changed to TEAM Pacific corporation, which

Freuhauf claims is a "devious" attempt to "shield chicanery and to perpetuate fraud" (see paragraphs 23 and 24, Complaint). On this score, what might in a way also be revealing is that after Freuhauf had moved to sell the attached property subject matter of the litigation, the petitioner filed the following pleading, intriguingly captioned, "Manifestation"; viz: Defendant, by counsel, respectfully states: 1. Plaintiff filed a Motion to Sell Attached Properties and scheduled it for hearing on August 24, 1990, justifying the sale on the allegations that certain properties belonging to the defendant are perishable in nature and liable to material depreciation in value. 2. In pleadings filed by the defendant, the Court was requested to determine whether there is a valid attachment on this alleged properties. This determination is necessary because defendant has pointed out that personal jurisdiction could not be justified on the basis of the so-called attachment because it was legally ineffective. Two reasons were given to the Court. First, the property has not been taken into actual custody of the sheriff as required by Rule 57, Section 7 (c). Second, the property has not been shown to be owned by the defendant. 3. Since jurisdiction over the defendant is premised on the attachment, the Honorable Court should therefore act on the motion to sell by determining (i) whether plaintiff has shown that the property proposed to be sold belongs to the defendant (ii) whether it was effectively attached and (iii) whether its sale is justified (because it is perishable or deteriorating in value). Respectfully submitted. 16 The petitioner contends that the motion to sell was filed by Freuhauf "ostensibly to ask permission to sell properties (sic.), but really to hurt petitioner in the first fight" (meaning the dismissal incident) because Freuhauf used the motion to sell "incident" as forum to prove ex-parte its argument on jurisdiction." 17 Far from continuing the "fight" on the issue of jurisdiction, the aforequoted manifestation
reflects nothing less than a surprising interest in the property which petitioner claims are not its own.

Having said that, Freuhauf, in effect, has invoked the doctrine of piercing the veil of corporate fiction, and it cannot thus be held to have improperly caused the service of summons on TEAM Pacific pursuant to Section 14, of Rule 14. As explained by the Court in Pacific Micronisian, summons may be served upon an agent of the defendant who may not necessarily be its "resident agent designated in accordance with law." The term "agent", in the context it is used in Section 14, refers to its general meaning, i.e., one who acts on behalf of a principal. 18 The allegations in the complaint,
taken together, have thus been able to amply convey that not only is TEAM Pacific the business conduit of the petitioner in the Philippines but that, also, by the charge of fraud, is none other than the petitioner itself.

In any event, it may well be that the Court should restate the rule, and it is that a foreign corporation, although not engaged in business in the Philippines, may still look up to our courts for relief; reciprocally, such corporation may likewise be "sued in Philippine courts for acts done against a person or persons in the Philippines" (Facilities Management Corporation v. De la Osa), 19 provided
that, in the latter case, it would not be impossible for court processes to reach the foreign corporation, a matter that can later be consequential in the proper execution of judgment. Verily, a State may not exercise jurisdiction in the absence of some good basis (and not offensive to traditional notions of fair

play and substantial justice) for effectively exercising it, whether the proceedings are in rem, quasi in rem or in personam. 20

This is not to say, however, that the petitioner's right to question the jurisdiction of the court over its person is now to be deemed a foreclosed matter. If it is true, as Signetics claims, that its only involvement in the Philippines was through a passive investment in Sigfil, 21 which it even later
disposed of, and that TEAM Pacific is not its agent, then it cannot really be said to be doing business in the Philippines. It is a defense, however, that requires the contravention of the allegations of the complaint, as well as a full ventillation, in effect, of the main merits of the case, which should not thus be within the province of a mere motion to dismiss. So, also, the issue posed by the petitioner as to whether a foreign corporation which has done business in the country, but which has ceased to do business at the time of the filing of a complaint, can still be made to answer for a cause of action which accrued while it was doing business, is another matter that would yet have to await the reception and admission of evidence. Since these points have seasonably been raised by the petitioner, there should be no real cause for what may understandably be its apprehension, i.e., that by its participation during the trial on the merits, it may, absent an invocation of separate or independent reliefs of its own, be considered to have voluntarily submitted itself to the court's jurisdiction.

All told Signetics cannot, at least in this early stage, assail, on the one hand, the veracity and correctness of the allegations in the complaint and proceed, on the other hand, to prove its own, in order to hasten a peremptory escape. WHEREFORE, the instant petition for review on certiorari is hereby DENIED. The lower court shall proceed with dispatch in resolving Civil Case No. 59264. Costs against the petitioner. G.R. No. L-38649 March 26, 1979 FACILITIES MANAGEMENT CORPORATION, J. S. DREYER, and J. V. CATUIRA, petitioners, vs. LEONARDO DE LA ROSA AND THE HONORABLE COURT OF INDUSTRIAL RELATIONS, respondents. Sycip, Salazar, Feliciano & Associates for petitioners. Benjamin M. Mendoza for respondent Court.

MAKASIAR, J: Petition for review on certiorari of the decision of the Court of Industrial Relations, dated February 14, 1972, ordering petitioners herein to pay private respondent Leonardo de la Osa his overtime compensation, as wen as his swing shift and graveyard shift premiums at the rate of fifty (50%) per cent of his basic sa (Annex E, p. 31, rollo). The aforesaid decision was based on a report submitted by the Hearing Examiner, CIR (Dagupan City Branch), the pertinent portions of which are quoted hereinbelow::: In a petition filed on July 1, 1967, Leonardo dela Osa sought his reinstatement. with full backwages, as well as the recovery of his overtime compensation, swing shift and graveyard shift differentials. Petitioner alleged that he was employed by respondents as follows: (1) painter with an hourly rate of $1.25 from March, 1964 to

November, 1964, inclusive; (2) houseboy with an hourly rate of $1.26 from December, 1964 to November, 1965, inclusive; (3) houseboy with an hourly rate of $1.33 from December, 1965 to August, 1966, inclusive; and (4) cashier with an hourly rate of $1.40 from August, 1966 to March 27, 1967, inclusive. He further averred that from December, 1965 to August, 1966, inclusive, he rendered overtime services daily and that this entire period was divided into swing and graveyard shifts to which he was assigned, but he was not paid both overtime and night shift premiums despite his repeated demands from respondents. Respondents filed on August 7, 1967 their letter- answer without substantially denying the material allegations of the basic petition but interposed the following special defenses, namely: That respondents Facilities Management Corporation and J. S. Dreyer are domiciled in Wake Island which is beyond the territorial jurisdiction of the Philippine Government; that respondent J. V. Catuira, though an employee of respondent corporation presently stationed in Manila, is without power and authority of legal representation; and that the employment contract between petitioner and respondent corporation carries -the approval of the Department of Labor of the Philippines. Subsequently on May 3, 1968. respondents filed a motion to dismiss the subject petition on the ground that this Court has no Jurisdiction over the instant case, and on May 24, 1968, petitioner interposed an opposition thereto. Said motion was denied by this Court in its Order issued on July 12, 1968 sustaining jurisdiction in accordance with the prevailing doctrine of the Supreme Court in similar cases. xxx xxx xxx But before we consider and discuss the foregoing issues, let us first ascertain if this Court could acquire jurisdiction over the case at bar, it having been contended by respondents that they are domiciled in Wake Island which is beyond the territorial jurisdiction of the Philippine Government. To this incidental question, it may be stated that while it is true the site of work is Identified as Wake Island, it is equally true the place of hire is established in Manila (See Section B, Filipino Employment Contract, Exhibit '1'). Moreover, what is important is the fact that the contract of employment between the parties litigant was shown to have been originally executed and subsequently renewed in Manila, as asserted by petitioner and not denied by respondents. Hence, any dispute arising therefrom should necessarily be determined in the place or venue where it was contracted. xxx xxx xxx From the evidence on hand, it has been proven beyond doubt that petitioner canvas assigned to and performed work in respondent company at slight time which consisted of two different schedules, namely, swing shift and graveyard shifts, particularly during his tenure as houseboy for the second period and as cashier. Petitioner's testimony to this effect was not contradicted, much less rebutted, by respondents, as revealed by the records. Since petitioner actually rendered night time services as required by respondents, and considering the physical, moral and sociological effects arising from the performance of such nocturnal duties, we think and honestly believe that petitioner should be compensated at least fifty percent (50%) more than his basic wage rate. This night shift premium pay would indeed be

at par with the overtime compensation stipulated at one and one-half (1 ) times of the straight time rate. xxx xxx xxx (pp. 31-36, rollo). Apropos before this Court were filed three (3) other cases involving the same petitioner, all of which had been finally dispoded of, as follows: G.R. No Date of Filing Disposition 1. L-37117 July 30, 1973 Petition denied for lack of merit on Sept. 13, 1973. Motion for Reconsideration denied lack of merit, Nov. 20,1973. 2. L-38781 June 17,1974 Petition denied for lack of merit on June 21,1974. 3. L-39111-12 Sept. 2,1974 Case dismissed on Feb. 6, 1976, pursuant to voluntary manifesta tion of private respon dent Inocente R. Riel that his claims had all been settled to his entire satisfaction. Incidentally, in connection with G.R. No. L-39111-12 (No. 3 above), WE found strong evidence that petitioner therein, which is also the petitioner in the case at bar, "twisted the arm" of private respondent, when the latter in his Manifestation dated July 3, 1975, stated: 3. ... Furthermore, since petitioner FMC is a foreign corporation domiciled in California, U.S.A. and has never been engaged in business in the Philippines, nor does it have an agent or an office in this country, there exists no valid reason for me to participate in the continuation and/or prosecution of this case (p. 194, rollo). as if jurisdiction depends on the will of the parties to a case. At any rate, considering that petitioner paid the claims of private respondent, the case had become moot and academic. Besides, the fact of such payment amounts to an acknowledgment on the part of petitioner of the jurisdiction of the court over it. WE have also noted that the principal question involved in each of the above-numbered three (3) cases is more or less Identical, to wit: Is the mere act by a non-resident foreign corporation of recruiting Filipino workers for its own use abroad, in law doing business in the Philippines? In the case at bar, which was filed with this Court on June 3, 1974, petitioners presented, inter alia, the following issue: ... can the CIR validly affirm a judgment against persons domiciled outside and not doing business in the Philippines, and over whom it did not acquire jurisdiction')

While it is true that the issues presented in the decided cases are worded differently from the principal issue raised in the case at bar, the fact remains that they all boil down to one and the same issue, which was aptly formulated and ably resolved by Mr. Justice Ramon C. Fernandez, then with the Court of Appeals and now a member of this Court, in CA-G.R. No. SP-01485-R, later elevated to this Court on appeal by certiorari in Case G.R. No. L-37117 this case, the majority opinion of the Court of Appeals, which was penned by Justice Fernandez and which WE hereby adopt, runs as follows: The principal issue presented in this special civil action is whether petitioner has been 'doing business in the Philippines' so that the service of summons upon its agent in the Philippines vested the Court of First Instance of Manila with jurisdiction. From the facts of record, the petitioner may be considered as doing busuness un the Philippines within the the scope of Section 14, Rule 14 of the Rules of the Court which provide: SEC 14. Service upon private foreign corporations. If the defendant is a foreign corporation or a non-resident joint stock company or association: doing business in the Philippines, service may be made on its resident agent designated in accordance with law for that purpose or, if there be no such agent, on the government official designated by law to that effect, or on any of its officers or agents within the Philippines. Indeed, the petitioner, in compliance with Act 2486 as implemented by Department of Labor Order No. IV dated May 20, 1968 had to appoint Jaime V. Catuira, 1322 A. Mabini, Ermita, Manila as agent for FMC with authority to execute Employment Contracts and receive, in behalf of that corporation, legal services from and be bound by processes of the Philippine Courts of Justice, for as long as he remains an employee of FMC (Annex 'I', rollo, p. 56). It is a fact that when the summons for the petitioner was served on Jaime V. Catuira he was still in the employ of the FMC. In his motion to dismiss Annex B', p. 19, Rollo), petitioner admits that Mr. Catuira represented it in this country 'for the purpose of making arrangements for the approval by the Department of Labor of the employment of Filipinos who are recruited by the Company as its own employees for assignment abroad.' In effect, Mr. Catuira was a on officer representing petitioner in the Philippines. Under the rules and regulations promulgated by the Board of Investments which took effect Feb. 3, 1969, implementing Rep. Act No. 5455, which took effect Sept. 30, 1968, the phrase 'doing business' has been exemption with illustrations, among them being as follows: xxx xxx xxx (f) the performance within the Philippines of any act or combination of acts enumerated in section l(l) of the Act shall constitute 'doing business' therein. in particular, 'doing business includes: (1) Soliciting orders, purchases (sales) or service contracts. Concrete and specific solicitations by a foreign firm, not acting independently of the foreign firm amounting to negotiation or fixing of the terms and

conditions of sales or service contracts, regardless of whether the contracts are actually reduced to writing, shall constitute doing business even if the enterprise has no office or fixed place of business in the Philippines. xxx (2) Appointing a representative or distributor who is dociled in the Philippines, unless said representative or distributor has an independent status, i.e., it transacts business in its name and for its own account, and not in the name or for the account of the principal. xxx xxx xxx (4) Opening offices, whether called 'liaison'offices, agencies or branches, unless proved otherwise. xxx xxx xxx (10) 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, or in the progressive prosecution of, commercial gain or of the purpose and objective of the business organization (54 O.G. 53). Recently decided by this Court again thru Mr. Justice Ramon C. Fernandez which is similar to the case at bar, is G.R. No. L-26809, entitled Aetna Casualty & Curety Company, plaintiff- appellant versus Pacific Star Line, the Bradman Co., Inc., Manila Port Service and/or Manila Railroad Company, Inc., defendants-appellees." The case is an appeal from the decision of the Court of First Instance of Manila, Branch XVI, in its Civil Case No. 53074, entitled Aetna Casualty & Surety Company vs. Pacific Star Lines, The Bradman Co., Inc., Manila Port Service and/or Manila Railroad Company, Inc." dismissing the complaint on the ground that the plaintiff has no legal capacity to bring the suit. It appears that on February 11, 1963, Smith Bell & Co. (Philippines), Inc. and Aetna Casualty & Surety Co., Inc., as subrogee instituted Civil Case No. 53074 in the Court of First Instance of Manila against Pacific Star Line, The Bradman Co., Inc., Manila Port Service and/or Manila Railroad Company, Inc. to recover the amount of US$2,300.00 representing the value of stolen and damaged cargo plus litigation expenses and exemplary damages in the amounts of P1,000.00 and P2,000.00, respectively, with legal interest thereon from the filing of the suit and costs. After all the defendants had filed their answer, the defendants Manila Port Service and Manila Railroad Company, Inc. amended their answer to allege that the plaintiff, Aetna Casualty & Surety Company, is a foreign corporation not duly licensed to do business in the Philippines and, therefore, without capacity to sue and be sued. After the parties submitted a partial stipulation of facts and additional documentary evidence, the case was submitted for decision of the trial court, which dismissed the complaint on the ground that the plaintiff insurance company is subject to the requirements of Sections 68 and 69 of Act 1459, as amended, and for its failure to comply therewith, it has no legal capacity to bring suit in this jurisdiction. Plaintiff appealed to this Court.

The main issue involved in the appeal is whether or not the plaintiff appellant has been doing business in the Philippines, considering the fact that it has no license to transact business in the Philippines as a foreign corporation. WE ruled: The object of Sections 68 and 69 of the Corporation Law was not to prevent the foreign corporation from performing single acts, but to prevent it from acquiring a domicile for the purpose of business without taking the steps necessary to render it amenable to suit in the local courts. It was never the purpose of the Legislature to exclude a foreign corporation which happens to obtain an isolated order for business from the Philippines, from securing redress in the Philippine courts (Marshall Co. vs. Elser & Co., 46 Phil 70,75). In Mentholatum Co., Inc., et al vs- M Court rules thatNo 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. III; Automotive Material Co. vs. American Standard Metal Products Corp., 158 N.E. 698, 703, 327 III. 367)'. 72 Phil. 524, 528529. And in Eastboard Navigation, Ltd., et al. vs. Juan Ysmael & Co., Inc., this Court held: (d) While plaintiff is a foreign corporation without license to transact business in the Philippines, it does not follow that it has no capacity to bring the present action. Such license is not necessary because it is not engaged in business in the Philippines. In fact, the transaction herein involved is the first business undertaken by plaintiff in the Philippines, although on a previous occasion plaintiff's vessel was chartered by the National Rice and Corn Corporation to carry rice cargo from abroad to the Philippines. These two isolated transactions do not constitute engaging in business in the Philippines within the purview of Sections 68 and 69 of the Corporation Law so as to bar plaintiff from seeking redress in our courts. (Marshall Wens Co. vs. Henry W. Elser & Co. 49 Phil., 70; Pacific Vegetable Oil Corporation vs. Angel O. Singson, G.R. No. L-7917, April 29, 1955)'. 102 Phil., pp. 1, 18. Based on the rulings laid down in the foregoing cases, it cannot be said that the Aetna Casualty & Surety Company is transacting business of insurance in the Philippines for which it must have a license. The Contract of insurance was entered

into in New York, U.S.A., and payment was made to the consignee in its New York branch. It appears from the list of cases issued by the Clerk of Court of the Court of First Instance of Manila that all the actions, except two (2) cases filed by Smith, Beer & Co., Inc. against the Aetna Casualty & Surety Company, are claims against the shipper and the arrastre operators just like the case at bar. Consequently, since the appellant Aetna Casualty & Surety Company is not engaged in the business of insurance in the Philippines but is merely collecting a claim assigned to it by the consignee, it is not barred from filing the instant case although it has not secured a license to transact insurance business in the Philippines. Indeed, if a foreign corporation, not engaged in business in the Philippines, is not banned from seeking redress from courts in the Philippines, a fortiori, that same corporation cannot claim exemption from being sued in Philippine courts for acts done against a person or persons in the Philippines. WHEREFORE, THE PETITION IS HEREBY DENIED WITH COSTS AGAINST THE PETITIONERS. G.R. No. 118843 February 6, 1997 ERIKS PTE. LTD., petitioner, vs. COURT OF APPEALS, and DELFIN F. ENRIQUEZ, JR., respondents.

PANGANIBAN, J.: Is a foreign corporation which sold its products sixteen times over a five-month period to the same Filipino buyer without first obtaining a license to do business in the Philippines, prohibited from maintaining an action to collect payment therefor in Philippine courts? In other words, is such foreign corporation "doing business" in the Philippines without the required license and thus barred access to our court system? This is the main issue presented for resolution in the instant petition for review, which seeks the reversal of the Decision 1 of the Court of Appeals, Seventh Division, promulgated on January 25, 1995,
in CA-G.R. CV No. 41275 which affirmed, for want of capacity to sue, the trial court's dismissal of the collection suit instituted by petitioner.

The Facts Petitioner Eriks Pte. Ltd. is a non-resident foreign corporation engaged in the manufacture and sale of elements used in sealing pumps, valves and pipes for industrial purposes, valves and control equipment used for industrial fluid control and PVC pipes and fittings for industrial uses. In its complaint, it alleged that: 2 (I)t is a corporation duly organized and existing under the laws of the Republic of Singapore with address at 18 Pasir Panjang Road #09-01, PSA Multi-Storey Complex, Singapore 0511. It is not licensed to do business in the Philippines and i(s) not so engaged and is suing on an isolated transaction for which it has capacity to sue . . . (par. 1, Complaint; p. 1, Record)

On various dates covering the period January 17 August 16, 1989, private respondent Delfin Enriquez, Jr., doing business under the name and style of Delrene EB Controls Center and/or EB Karmine Commercial, ordered and received from petitioner various elements used in sealing pumps, valves, pipes and control equipment, PVC pipes and fittings. The ordered materials were delivered via airfreight under the following invoices: 3 Date Invoice No. AWB No. Amount 17 Jan 89 27065 618-7496-2941 S$ 5,010.59 24 Feb 89 27738 618-7553-6672 14,402.13 02 Mar 89 27855 (freight & hand- 1,164.18 ling charges per Inv. 27738) 03 Mar 89 27876 618-7553-7501 1,394.32 03 Mar 89 27877 618-7553-7501 1,641.57 10 Mar 89 28046 618-7578-3256/ 7,854.60 618-7578-3481 21 Mar 89 28258 618-7578-4634 27.72 14 Apr 89 28901 618-7741-7631 2,756.53 19 Apr 89 29001 Self-collect 458.80 16 Aug 89 31669 (handcarried by 1,862.00 buyer) S$36,392.44 21 Mar 89 28257 618-7578-4634 415.50 04 Apr 89 28601 618-7741-7605 884.09 14 Apr 89 28900 618-7741-7631 1,269.50 25 Apr 89 29127 618-7741-9720 883.80 02 May 89 29232 (By seafreight) 120.00 05 May 89 29332 618-7796-3255 1,198.40 15 May 89 29497 (Freight & hand- 111.94 ling charges per Inv. 29127 S$ 4,989.29 31 May 89 29844 618-7796-5646 545.70 S$ 545.70 Total S$ 41,927.43 The transfers of goods were perfected in Singapore, for private respondent's account, F.O.B. Singapore, with a 90-day credit term. Subsequently, demands were made by petitioner upon private respondent to settle his account, but the latter failed/refused to do so. On August 28, 1991, petitioner corporation filed with the Regional Trial Court of Makati, Branch 138, 4 Civil Case No. 91-2373 entitled "Eriks Pte. Ltd. vs. Delfin Enriquez, Jr." for the recovery of
S$41,939.63 or its equivalent in Philippine currency, plus interest thereon and damages. Private respondent responded with a Motion to Dismiss, contending that petitioner corporation had no legal capacity to sue. In an Order dated March 8, 1993, 5 the trial court dismissed the action on the ground that petitioner is a foreign corporation doing business in the Philippines without a license. The dispositive portion of said order reads: 6

WHEREFORE, in view of the foregoing, the motion to dismiss is hereby GRANTED and accordingly, the above-entitled case is hereby DISMISSED. SO ORDERED. On appeal, respondent Court affirmed said order as it deemed the series of transactions between petitioner, corporation and private respondent not to be an "isolated or casual transaction." Thus, respondent Court likewise found petitioner to be without legal capacity to sue, and disposed of the appeal as follows: 7 WHEREFORE, the appealed Order should be, as it is hereby AFFIRMED. The complaint is dismissed. No costs. SO ORDERED. Hence, this petition. The Issue The main issue in this petition is whether petitioner corporation may maintain an action in Philippine courts considering that it has no license to do business in the country. The resolution of this issue depends on whether petitioner's business with private respondent may be treated as isolated transactions. Petitioner insists that the series of sales made to private respondent would still constitute isolated transactions despite the number of invoices covering several separate and distinct items sold and shipped over a span of four to five months, and that an affirmation of respondent Court's ruling would result in injustice and unjust enrichment. Private respondent counters that to declare petitioner as possessing capacity to sue will render nugatory the provisions of the Corporation Code and constitute a gross violation of our laws. Thus, he argues, petitioner is undeserving of legal protection. The Court's Ruling The petition has no merit. The Concept of Doing Business The Corporation Code provides: Sec. 133. Doing business without a license. No foreign corporation transacting business in the Philippines without a license, or its successors or assigns, shall be permitted to maintain or intervene in any action, suit or proceeding in any court or administrative agency of the Philippines; but such corporation may be sued or proceeded against before Philippine courts or administrative tribunals on any valid cause of action recognized under Philippine laws. The aforementioned provision prohibits, not merely absence of the prescribed license, but it also bars a foreign corporation "doing business" in the Philippines without such license access to our

courts. 8 A foreign corporation without such license is not ipso facto incapacitated from bringing an action.
A license is necessary only if it is "transacting or doing business in the country.

However, there is no definitive rule on what constitutes "doing," "engaging in," or "transacting" business. The Corporation Code itself does not define such terms. To fill the gap, the evolution of its statutory definition has produced a rather all-encompassing concept in Republic Act No. 7042 9 in this
wise:

Sec. 3. Definitions. As used in this Act: xxx xxx xxx (d) the phrase "doing business" shall include soliciting orders, service contracts, opening offices, whether called "liaison" offices or branches; appointing representatives or distributors domiciled in the Philippines or who in any calendar year stay in the country for a period or periods totalling one hundred eight(y) (180) days or more; participating in the management, supervision or control of any domestic business, firm, entity or corporation in the Philippines; and any other act or acts that imply a continuity of commercial dealings or arrangements, and contemplate to that extent the performance of acts or works,or the exercise of some of the functions normally incident to, and in progressive prosecution of, commercial gain or of the purpose and object of the business organization: Provided, however, That the phrase "doing business" shall not be deemed to include mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do business, and/or the exercise of rights as such investor; nor having a nominee director or officer to represent its interests in such corporation; nor appointing a representative or distributor domiciled in the Philippines which transacts business in its own name and for its own account. (emphasis supplied) In the durable case of The Mentholatum Co. vs. Mangaliman, this Court discoursed on the test to determine whether a foreign company is "doing business" in the Philippines, thus: 10 . . . The true test, however, seems to be whether the foreign corporation is continuing the body or substance of the business or enterprise for which it was organized or whether it has substantially retired from it and turned it over to another. (Traction Cos. v. Collectors of Int. Revenue [C.C.A., Ohio], 223 F. 984, 987.] The term implies a continuity of commercial dealings and arrangements, and contemplates, to that extent, the performance of acts or works or the exercise of some of the functions normally incident to, and in progressive prosecution of, the purpose and object of its organization.] (sic) (Griffin v. Implement Dealer's Mut. Fire Ins. Co., 241 N.W. 75, 77; Pauline Oil & Gas Co. v. Mutual Tank Line Co., 246 P. 851, 852, 118 Okl. 111; Automotive Material Co. v. American Standard Metal Products Corp., 158 N.E. 698, 703, 327 III. 367.) The accepted rule in jurisprudence is that each case must be judged in the light of its own environmental circumstances. 11 It should be kept in mind that the purpose of the law is to subject the
foreign corporation doing business in the Philippines to the jurisdiction of our courts. It is not to prevent the foreign corporation from performing single or isolated acts, but to bar it from acquiring a domicile for the purpose of business without first taking the steps necessary to render it amenable to suits in the local courts.

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

The invoices and delivery receipts covering the period of (sic) from January 17, 1989 to August 16, 1989 cannot be treated to a mean singular and isolated business transaction that is temporary in character. Granting that there is no distributorship agreement between herein parties, yet by the mere fact that plaintiff, each time that the defendant posts an order delivers the items as evidenced by the several invoices and receipts of various dates only indicates that plaintiff has the intention and desire to repeat the (sic) said transaction in the future in pursuit of its ordinary business. Furthermore, "and if the corporation is doing that for which it was created, the amount or volume of the business done is immaterial and a single act of that character may constitute doing business". (See p. 603, Corp. Code, De Leon 1986 Ed.). Respondent Court affirmed this finding in its assailed Decision with this explanation: 13 . . . Considering the factual background as laid out above, the transaction cannot be considered as an isolated one. Note that there were 17 orders and deliveries (only sixteen per our count) over a four-month period. The appellee (private respondent) made separate orders at various dates. The transactions did not consist of separate deliveries for one single order. In the case at bar, the transactions entered into by the appellant with the appellee are a series of commercial dealings which would signify an intent on the part of the appellant (petitioner) to do business in the Philippines and could not by any stretch of the imagination be considered an isolated one, thus would fall under the category of'doing business. Even if We were to view, as contended by the appellant, that the transactions which occurred between January to August 1989, constitute a single act or isolated business transaction, this being the ordinary business of appellant corporation, it can be said to be illegally doing or transacting business without a license. . . . Here it can be clearly gleaned from the four-month period of transactions between appellant and appellee that it was a continuing business relationship, which would, without doubt, constitute doing business without a license. For all intents and purposes, appellant corporation is doing or transacting business in the Philippines without a license and that, therefore in accordance with the specific mandate of section 144 of the Corporation Code, it has no capacity to sue. (emphasis ours) We find no reason to disagree with both lower courts. More than the sheer number of transactions entered into, a clear and unmistakable intention on the part of petitioner to continue the body of its business in the Philippines is more than apparent. As alleged in its complaint, it is engaged in the manufacture and sale of elements used in sealing pumps, valves, and pipes for industrial purposes, valves and control equipment used for industrial fluid control and PVC pipes and fittings for industrial use. Thus, the sale by petitioner of the items covered by the receipts, which are part and parcel of its main product line, was actually carried out in the progressive prosecution of commercial gain and the pursuit of the purpose and object of its business, pure and simple. Further, its grant and extension of 90-day credit terms to private respondent for every purchase made, unarguably shows an intention to continue transacting with private respondent, since in the usual course of commercial transactions, credit is extended only to customers in good standing or to those on whom there is an intention to maintain long-term relationship. This being so, the existence of a distributorship agreement between the parties, as alleged but not proven by private respondent, would, if duly established by competent evidence, be merely corroborative, and failure to sufficiently prove said allegation will not significantly affect the finding of the courts below. Nor our own ruling. It is precisely upon the set of facts above detailed that we concur with respondent Court that petitioner corporation was doing business in the country.

Equally important is the absence of any fact or circumstance which might tend even remotely to negate such intention to continue the progressive prosecution of petitioner's business activities in this country. Had private respondent not turned out to be a bad risk, in all likelihood petitioner would have indefinitely continued its commercial transactions with him, and not surprisingly, in ever increasing volumes. Thus, we hold that the series of transactions in question could not have been isolated or casual transactions. What is determinative of "doing business" is not really the number or the quantity of the transactions, but more importantly, the intention of an entity to continue the body of its business in the country. The number and quantity are merely evidence of such intention. The phrase "isolated transaction" has a definite and fixed meaning, i.e. a transaction or series of transactions set apart from the common business of a foreign enterprise in the sense that there is no intention to engage in a progressive pursuit of the purpose and object of the business organization. Whether a foreign corporation is "doing business" does not necessarily depend upon the frequency of its transactions, but more upon the nature and character of the transactions. 14 Given the facts of this case, we cannot see how petitioner's business dealings will fit the category of "isolated transactions" considering that its intention to continue and pursue the corpus of its business in the country had been clearly established. It has not presented any convincing argument with equally convincing evidence for us to rule otherwise. Incapacitated to Maintain Suit Accordingly and ineluctably, petitioner must be held to be incapacitated to maintain the action a quo against private respondent. It was never the intent of the legislature to bar court access to a foreign corporation or entity which happens to obtain an isolated order for business in the Philippines. Neither, did it intend to shield debtors from their legitimate liabilities or obligations. 15 But it cannot allow foreign corporations or
entities which conduct regular business any access to courts without the fulfillment by such corporations of the necessary requisites to be subjected to our government's regulation and authority. By securing a license, the foreign entity would be giving assurance that it will abide by the decisions of our courts, even if adverse to it.

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

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

. . . The primary purpose of our statute is to compel a foreign corporation desiring to do business within the state to submit itself to the jurisdiction of the courts of this state. The statute was not intended to exclude foreign corporations from the state. . . . The better reason, the wiser and fairer policy, and the greater weight lie with those decisions which hold that where, as here, there is a prohibition with a penalty, with no express or implied declarations respecting the validity of enforceability of contracts made by qualified foreign corporations, the contracts . . . are enforceable . . . upon

compliance with the law. (Peter &, Burghard Stone Co. v. Carper, 172 N.E. 319 [1930].) While we agree with petitioner that the county needs to develop trade relations and foster friendly commercial relations with other states, we also need to enforce our laws that regulate the conduct of foreigners who desire to do business here. Such strangers must follow our laws and must subject themselves to reasonable regulation by our government. WHEREFORE, premises considered, the instant petition is hereby DENIED and the assailed Decision is AFFIRMED. G.R. No. 22015 September 1, 1924

MARSHALL-WELLS COMPANY, plaintiff-appellant, vs. HENRY W. ELSER & CO., INC., defendant-appellee. Hartigan and Welch for appellant. J. F. Boomer for appellee. MALCOLM, J.: Marshall-Wells Company, an Oregon corporation, sued Henry W. Elser & Co., Inc., a domestic corporation, in the Court of First Instance of Manila, for the unpaid balance of a bill of goods amounting to P2,660.74, sold by plaintiff to defendant and for which plaintiff holds accepted drafts. Defendant demurred to the complaint on the statutory ground that the plaintiff has not legal capacity to sue. In the demurrer, counsel stated that "The said complaint does not show that the plaintiff has complied with the laws of the Philippine Islands in that which is required of foreign corporations desiring to do business in the Philippine Islands, neither does it show that it was authorized to do business in the Philippine Islands." The demurrer was sustained by the trial judge. Inasmuch as the plaintiff could not allege compliance with the statute, the order was allowed to become final and an appeal was perfected. To begin with the law as a fit setting for the issue. The Corporation Law (Act No. 1459) contains six sections relating particularly to foreign corporations. Section 68, as amended by Act No. 2900, provides that no foreign corporation "shall be permitted to transact business in the Philippine Islands until after it shall have obtained a license for that purpose from the Chief of the Mercantile Register of the Bureau of Commerce and Industry," upon order either of the Secretary of Finance or the Secretary of Commerce and Communications. No order for a license shall be issued except upon a statement under oath of the managing agent of the corporation, showing to the satisfaction of the proper Secretary that the corporation is solvent and in sound financial condition, and setting forth the resources and liabilities of the corporation. Said statement shall contain the following: (1) The name of the corporation; (2) the purpose for which it was organized; (3) the location of its principal or home office; (4) the capital stock of the corporation and the amount thereof actually subscribed and paid into the treasury; (5) the net assets of the corporation over and above all debts, liabilities, obligations, and claims outstanding against it; and (6) the name of an agent residing in the Philippine Islands authorized by the corporation to accept evidence of summons and process in all legal proceedings against the corporation and of all notices affecting the corporation. Further evidence of the solvency and fair dealing of the corporation may be required. Upon filing in the Mercantile Register of the Bureau of Commerce and Industry the said statement, a certified copy of its charter, and the order of the Secretary for the issuance of a license, the Chief of the Mercantile Register "shall issue to the foreign corporation as directed in the order of license to do business in the

Philippine Islands," and for the issuance of the license shall collect a fee fixed in accordance with the schedule established in section 8 of the Law. Passing section 69 of the Corporation Law for the moment, section 70, as amended, covers the cases of foreign corporations "transacting business in the Islands at the time of the passage" of the Act. Section 71 authorizes the Secretary of Finance or the Secretary of Commerce and Communications, as the case may be, by and with the approval of the Governor-General, "to revoke the license to transact business in the Philippine Islands" of any foreign corporation. Section 72 concerns summons and legal process. Section 73 makes a foreign corporation bound by all the laws, rules, and regulations applicable to domestic corporations of the same class, with certain exceptions. Returning now to section 69 of the Corporation Law, its literal terminology is as follows: No foreign corporation or corporation formed, organized, or existing under any laws other that those of the Philippine Islands shall be permitted to transact business in the Philippine Islands or maintain by itself or assignee any suit for the recovery of any debt, claim, or demand whatever, unless it shall have the license prescribed in the section immediately preceding. Any officer, director, or agent of the corporation 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. Is the obtaining of the license prescribed in section 68, as amended, of the Corporation Law a condition precedent to the maintaining of any kind of action in the courts of the Philippine Islands by a foreign corporation? The issue is framed to correspond with defendant's theory of the case on appeal, although possibly somewhat at variance with its stand in the lower court. So far as we are informed, this is a question of first impression. The case of Dampfschieffs Rhederei Union vs. Compaia Trasatlantica ([1907], 8 Phil., 766), relating to the provisions of the Code of Commerce, only held that a foreign corporation which has not established itself in the Philippines, nor engaged in business in the Philippines, could, without filing its articles of incorporation in the mercantile registry, maintain an action against another for damages. The case of Spreckles vs. Ward ([1909], 12 Phil., 414), while making reference to a point similar to the one before us, was merely authority for the holding, that the provisions of section 69 of the Corporation Law denying to unregistered foreign corporations the right to maintain suits for the recovery of any debt, claim, or demand, do not impose on all plaintiff-litigants the burden of establishing by affirmative proof that they are not unregistered foreign corporations; that fact will not be presumed without some evidence tending to establish its existence. But the question is not alone new, but of prime importance, to the consideration of which we have given mature thought. Corporations have no legal status beyond the bounds of the sovereignty by which they are created. A state may restrict the right of a foreign corporation to engage in business within its limits, and to sue in its courts. But by virtue of state comity, a corporation created by the laws of one state is usually allowed to transact business in other states and to sue in the courts of the forum. (Paul vs. Virginia [1869], 8 Wall., 168; Sioux Remedy Co., vs.Cope and Cope [1914], 235 U. S., 197; Cyclone Mining Co. vs. Baker Light & Power Co., [1908], 165 Fed., 996.) But here we have present for resolution no question of constitutional law. Article 4 of the United States Constitution and the Fourteenth Amendment to the Constitution are not invoked. The issue is not complicated with matters affecting interstate commerce under the American Constitution. Nor are

we concerned with a question of private international law. It all simmers down to an issue of statutory construction. Defendant isolates a portion of one sentence of section 69 of the Corporation Law and asks the court to give it a literal meaning. Counsel would have the law read thus: "No foreign corporation shall be permitted to maintain by itself or assignee any suit for the recovery of any debt, claim, or demand whatever, unless it shall have the license prescribed in section 68 of the law." Plaintiff, on the contrary, desires for the court to consider the particular point under discussion with reference to all the law, and thereafter to give the law a common sense interpretation. The object of the statute was to subject the foreign corporation doing business in the Philippines to the jurisdiction of its courts. The object of the statute was not to prevent the foreign corporation from performing single acts, but to prevent it from acquiring a domicile for the purpose of business without taking the steps necessary to render it amenable to suit in the local courts. The implication of the law is that it was never the purpose of the Legislature to exclude a foreign corporation which happens to obtain an isolated order for business from the Philippines, from securing redress in the Philippine courts, and thus, in effect, to permit persons to avoid their contracts made with such foreign corporations. The effect of the statute preventing foreign corporations from doing business and from bringing actions in the local courts, except on compliance with elaborate requirements, must not be unduly extended or improperly applied. It should not be construed to extend beyond the plain meaning of its terms, considered in connection with its object, and in connection with the spirit of the entire law. (State vs. American Book Co. [1904], 69 Kan., 1; American De Forest Wireless Telegraph Co. vs. Superior Court of City & County of San Francisco and Hebbard [1908], 153 Cal., 533; 5 Thompson on Corporations, 2d ed., chap. 184.) Confronted with the option of giving to the Corporation Law a harsh interpretation, which would disastrously embarrass trade, or of giving to the law a reasonable interpretation, which would markedly help in the development of trade; confronted with the option of barring from the courts foreign litigants with good causes of action or of assuming jurisdiction of their cases; confronted with the option of construing the law to mean that any corporation in the United States, which might want to sell to a person in the Philippine must send some representative to the Islands before the sale, and go through the complicated formulae provided by the Corporation Law with regard to the obtaining of the license, before the sale was made, in order to avoid being swindled by Philippine citizens, or of construing the law to mean that no foreign corporation doing business in the Philippines can maintain any suit until it shall possess the necessary license, confronted with these options, can anyone doubt what our decision will be? The law simply means that no foreign corporation shall be permitted "to transact business in the Philippine Islands," as this phrase is known in corporation law, unless it shall have the license required by law, and, until it complies with the law, shall not be permitted to maintain any suit in the local courts. A contrary holding would bring the law to the verge of unconstitutionality, a result which should be and can be easily avoided. (Sioux Remedy Co.vs. Cope and Cope, supra; Perkins, Philippine Business Law, p. 264.) The noncompliance of a foreign corporation with the statute may be pleaded as an affirmative defense. Thereafter, it must appear from the evidence, first, that the plaintiff is a foreign corporation, second, that it is doing business in the Philippines, and third, that it has not obtained the proper license as provided by the statute. (Standard Stock Food Co. vs. Jasper [1907], 76 Kan., 926; Spreckles vs. Ward, supra.) The order appealed from shall be set aside and the record shall be returned to the court of origin for further proceedings. Without special finding as to costs in this instance, it is so ordered. G.R. No. L-47701 June 27, 1941

THE MENTHOLATUM CO., INC., ET AL., petitioners, vs. ANACLETO MANGALIMAN, ET AL., respondents. Araneta, Zaragoza, Araneta & Bautista for petitioners. Benito Soliven for respondents. LAUREL, J.: This is a petition for a writ of certiorari to review the decision of the Court of Appeals dated June 29, 1940, reversing the judgment of the Court of First Instance of Manila and dismissing petitioners' complaint. On October 1, 1935, the Mentholatum Co., Inc., and the Philippine-American Drug Co., Inc. instituted an action in the Court of First Instance of Manila, civil case No. 48855, against Anacleto Mangaliman, Florencio Mangaliman and the Director of the Bureau of Commerce for infringement of trade mark and unfair competition. Plaintiffs prayed for the issuance of an order restraining Anacleto and Florencio Mangaliman from selling their product "Mentholiman," and directing them to render an accounting of their sales and profits and to pay damages. The complaint stated, among other particulars, that the Mentholatum Co., Inc., is a Kansas corporation which manufactures Mentholatum," a medicament and salve adapted for the treatment of colds, nasal irritations, chapped skin, insect bites, rectal irritation and other external ailments of the body; that the PhilippineAmerican Drug co., Inc., is its exclusive distributing agent in the Philippines authorized by it to look after and protect its interests; that on June 26, 1919 and on January 21, 1921, the Mentholatum Co., Inc., registered with the Bureau of Commerce and Industry the word, "Mentholatum," as trade mark for its products; that the Mangaliman brothers prepared a medicament and salve named "Mentholiman" which they sold to the public packed in a container of the same size, color and shape as "Mentholatum"; and that, as a consequence of these acts of the defendants, plaintiffs suffered damages from the dimunition of their sales and the loss of goodwill and reputation of their product in the market. After a protracted trial, featured by the dismissal of the case on March 9, 1936 for failure of plaintiff's counsel to attend, and its subsequent reinstatement on April 4, 1936, the Court of First Instance of Manila, on October 29, 1937, rendered judgment in favor of the complainants, the dispositive part of its decision reading thus: En meritos de todo lo expuesto, este Juzgado dicta sentencia: (a) Haciendo que sea perpetuo y permanente el iterdicto prohibitorio preliminar expedido contra Anacleto Mangaliman, sus agentes y empleados, prohibiendoles vender su producto en la forma en que se vendia al incoarse la demanda de autos, o de alguna otra manera competir injustamente contra el producto de las demandantes, y de usar la marca industrial "MENTHOLIMAN" en sus productos; (b) Ordenando al demandado Anacleto Mangaliman, que rinda exacta cuenta de sus ganancias por la venta de su producto desde el dia 10 de marzo de 1934, hasta la fecha de esta decision, y que pague a las demandantes, en concepto de daos y perjuicios, lo que resulte ser la ganancia de dicho demandado; (c) Condenando a dicho demandado, Anacleto Mangaliman, a pagar un multa de cincuenta pesos (P50) por desacato al Juzgado, y las costas del juicio; y

(d) Sobreseyendo la contra-reclamacion del demandado, Anacleto Mangaliman, contra las demandantes. In the Court of Appeals, where the cause was docketed as CA-G. R. No. 46067, the decision of the trial court was, on June 29, 1940, reversed, said tribunal holding that the activities of the Mentholatum Co., Inc., were business transactions in the Philippines, and that, by section 69 of the Corporation Law, it may not maintain the present suit. Hence, this petition for certiorari. In seeking a reversal of the decision appealed from, petitioners assign the following errors: 1. The Court of Appeals erred in declaring that the transactions of the Mentholatum Co., Inc., in the Philippines constitute "transacting business" in this country as this term is used in section 69 of the Corporation Law. The aforesaid conclusion of the Court of Appeals is a conclusion of law and not of fact. 2. The Court of Appeals erred in not holding that whether or not the Mentholatum Co., Inc., has transacted business in the Philippines is an issue foreign to the case at bar. 3. The Court of Appeals erred in not considering the fact that the complaint was filed not only by the Mentholatum Co., Inc., but also by the Philippine-American Drug Co., Inc., and that even if the Mentholatum Co., Inc., has no legal standing in this jurisdiction, the complaint filed should be decided on its merits since the Philippine-American Drug Co., Inc., has sufficient interest and standing to maintain the complaint. 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 PhilippineAmerican 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 PhilippineAmerican 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 PhilippineAmerican 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. (46 C. J., sec. 121, pp. 122-124.) It follows that whatever transactions the PhilippineAmerican 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.

The writ prayed for should be, as it hereby is, denied, with costs against the petitioners. So ordered. Avancea, C.J., Diaz, and Horrilleno, JJ., concur.

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. G.R. No. 61950 September 28, 1990 MARUBENI NEDERLAND B.V., petitioner, vs. THE HONORABLE JUDGE RICARDO P. TENSUAN, Presiding Judge of the Court of First Instance of Rizal, Branch IV, Quezon City and ARTEMIO GATCHALIAN, respondents. Siquion Reyna, Montecillo & Ongsiako for petitioner. Maximo Belmonte for private respondent.

FERNAN, C.J.: On October 23, 1976, in Tokyo, Japan, petitioner Marubeni Nederland B.V. and D.B. Teodoro Development Corporation (DBT for short) entered into a contract whereby petitioner agreed to supply all the necessary equipment, machinery, materials, technical know-how and the general design of the construction of DBT's lime plant at the Guimaras Islands in Iloilo for a total contract price of US$5,400,000.00 on a deferred payment basis. Simultaneously with the supply contract, the parties entered into two financing contracts, namely a construction loan agreement in the amount of US$1,600,000.00 and a cash loan agreement for US$1,500,000.00. The obligation of DBT to pay the loan amortizations on their due dates under the three (3) contracts were absolutely and unconditionally guaranteed by the National Investment and Development Corporation (NIDC).

Pursuant to the terms of the financing contracts, the loan amortizations of DBT fell due on January 7, 1980, July 7, 1980 and January 7, 1981. But before the first installment became due, DBT wrote a letter to the NIDC interposing certain claims against the petitioner and at the same time requesting NIDC for a revision of the repayment schedule and of the amounts due under the contracts on account of petitioner's delay in the performance of its contractual commitments. 1 In due time, the
problems regarding the lime plant were ironed out and the parties signed a "Settlement Agreement" on July 2, 1981. 2

However, on May 14, 1982, DBT through counsel, informed petitioner that it was rejecting the lime plant on the ground that it has not been constructed in accordance with their agreement. DBT made a formal demand for indemnification in the total amount of P95,150,000. 3 In its letter dated June 1,
1982, petitioner refused to accept DBT's unilateral rejection of the plant and reasoned that the alleged operation and technical problems were "totally unrelated to the guaranteed capacity and specifications of the plant and definitely are not attributable to any fault or omission on the part of Marubeni." 4

Before the first installment under the "Settlement Agreement" could be paid, private respondent Artemio Gatchalian, a stockholder of DBT sued petitioner Marubeni for contractual breach before the then Court of First Instance of Rizal, Branch 4, Quezon City. 5 In his complaint filed on June 22, 1982,
Gatchalian impleaded DBT as an "unwilling plaintiff . . . for whose primary benefit th(e) action (wa)s being prosecuted" together with NIDC which, as pledgee of the voting shares in DBT has controlling interest in that corporation. 6 Gatchalian sought indemnification in the amount of P95,150,000.00 and further prayed for a writ of preliminary injunction to enjoin DBT and NIDC from making directly or indirectly any payment to Marubeni in connection with the contracts they had entered into. On June 25, 1982, respondent judge issued a temporary restraining order directed against DBT and NIDC and set the injunction for hearing. 7

On July 5, 1982, petitioner Marubeni entered a limited and special appearance and sought the dismissal of the complaint on the ground that the court a quo had no jurisdiction over the person of petitioner since it is a foreign corporation neither doing nor licensed to do business in the Philippines. Private respondent opposed that motion. On September 22, 1982, the lower court denied petitioner's motion to dismiss for lack of merit and gave it ten (10) days within which to file an answer. Petitioner opted to elevate the jurisdictional issue directly to the High Court. 8Hence, this petition
for certiorari and prohibition with prayer for a temporary restraining order. On October 6, 1982, we issued the restraining order and subsequently required the parties to file simultaneous memoranda.

The pivotal issue in this case is whether or not petitioner Marubeni Nederland B.V. can be considered as "doing business" in the Philippines and therefore subject to the jurisdiction of our courts. Petitioner claims that it is a foreign corporation not doing business in the country and as an entity with its own capitalization, it is separate and distinct from Marubeni Corporation, Japan which is doing business in the Philippines through its Manila branch; that the three (3) contracts entered into with DBT were perfected and consummated in Tokyo, Japan; that the sale and purchase of the machineries and equipment for the Guimaras lime plant were isolated contracts and in no way indicated a purpose to engage in business; and that the services performed by petitioner in the Philippines were merely auxillary to the aforesaid isolated transactions entered into and perfected outside the Philippines. On the other hand, private respondent Gatchalian contends that petitioner can be sued in Philippine courts on liabilities arising from even a single transaction because in reality, it is already engaging in business in the country through Marubeni Corporation, Manila branch and that they, together with Nihon Cement Company, Ltd. of Japan are but "alter egos, adjuncts, conduits instruments or branch affiliates of Marubeni Corporation of Japan", the parent company. 9

In resolving the issue at hand, we reiterate that there is no general rule or principle that can be laid down to determine what constitutes doing or engaging in business. Each case must be judged in the light of its peculiar factual milieu and upon the language of the statute applicable. 10 Contrary to petitioner's allegations, we hold that petitioner can be sued in the regular courts because it is doing business in the Philippines. The applicable law is Republic Act No. 5455 as implemented by the following rules and regulations of the Board of Investments which took effect on February 3, 1969. Thus: xxx xxx xxx (f) the performance within the Philippines of any act or combination of acts enumerated in Section 1 (1) of the Act shall constitute "doing business" therein. In particular, "doing business" includes: 1) Soliciting orders, purchases (sales) or service contracts. Concrete and specific solicitations by a foreign firm amounting to negotiation or fixing of the terms and conditions of sales or service contracts, regardless of whether the contracts are actually reduced to writing, shall constitute doing business even if the enterprise has no office or fixed place of business in the Philippines. . . . 2) Appointing a representative or distributor who is domiciled in the Philippines, unless said representative or distributor has an independent status, i.e., it transacts business in its name and for its own account, and not in the name or for the account of the principal. xxx xxx xxx 4) Opening offices whether called "liaison" offices, agencies or branches, unless proved otherwise. xxx xxx xxx 10) 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, or in the progressive prosecution of, commercial gain or of the purpose and objective of the business organization. 11 It cannot be denied that petitioner had solicited the lime plant business from DBT through the Marubeni Manila branch. Records show that the "turn-key proposal for the . . . 300 T/D Lime Plant" was initiated by the Manila office through its Mr. T. Hojo. In a follow-up letter dated August 3, 1976, Hojo committed the firm to a price reduction of $200,000.00 and submitted the proposed contract forms. As reflected in the letterhead used, it was Marubeni Corporation, Tokyo, Japan which assumed an active role in the initial stages of the negotiation. Petitioner Marubeni Nederland B.V. had no visible participation until the actual signing of the October 28, 1976 agreement in Tokyo and even there, in the space reserved for petitioner, it was the signature. of "S. Adachi as General Manager of Marubeni Corporation, Tokyo on behalf of Marubeni Nederland B.V." which appeared. 12 Even assuming for the sake of argument that Marubeni Nederland B.V. is a different and separate business entity from Marubeni Japan and its Manila branch, in this particular transaction, at least,

Marubeni Nederland B.V. through the foregoing acts, had effectively solicited "orders, purchases (sales) or service contracts" as well as constituted Marubeni Corporation, Tokyo, Japan and its Manila Branch as its representative in the Philippines to transact business for its account as principal. These circumstances, taken singly or in combination, constitute "doing business in the Philippines" within the contemplation of the law. At this juncture it must be emphasized that a foreign corporation doing business in the Philippines with or without license is subject to process and jurisdiction of the local courts. If such corporation is properly licensed, well and good. But it shall not be allowed, under any circumstances, to invoke its lack of license to impugn the jurisdiction of our courts. 13 Finally, petitioner contends that it was denied due process when respondent Judge Tensuan peremptorily denied its motion to dismiss without giving petitioner any opportunity to present evidence at a hearing set for this purpose.14 The alleged denial of due process is more apparent than real. Under Section 13, Rule 16 of the Revised Rules of Court, the court, when confronted with a motion to dismiss, is given two courses of action, to wit: (1) to deny or grant the motion or allow amendment of the pleading or (2) to defer the hearing and determination of the motion until the trial on the merits, if the ground alleged therein does not appear to be indubitable. In the case at bar, assuming there was no formal hearing on the motion to dismiss prior to its rejection, such did not unduly prejudice the rights of petitioner. Respondent court still had to conduct trial on the merits during which time it could grant the motion after sufficient evidence has been presented showing without any question the want of jurisdiction over the person of the movant. It would have been different had respondent court sustained petitioner's motion to dismiss without the required hearing in which case, the corrective writ of certiorari would have issued against said court. In the absence of a hearing, the appellate court, in an appeal from an order of dismissal, would have had no means of determining or resolving the legality of the proceedings and the sufficiency of the proofs on which the order was based. WHEREFORE, the petition is DISMISSED for lack of merit. Respondent Court is hereby directed to proceed with the hearing of Civil Case No. Q-35534 with dispatch. This decision is immediately executory. Costs against the petitioner.