Beruflich Dokumente
Kultur Dokumente
NATURE: APPEAL from the CA, 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.
FACTS:
*RTC: Respondent Yupangco Cotton Mills filed a complaint against several foreign
reinsurance companies (the 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.
In the complaint of the Respondent: it was contended that Yupangco Cotton Mills
engaged to secure with Worldwide Security and Insurance Co. Inc., several of its
properties. The contracts were covered by reinsurance treaties between Worldwide
Surety and Insurance and several foreign reinsurance companies (petitioners). The
reinsurance arrangements had been made through international broker C.J.
Boatwright and Co. Ltd., acting as agent of Worldwide Surety and Insurance.
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.
The Office of the Insurance Commissioner made a service of summons upon the
petitioners.
2. The complaint for sum of money being a personal action not affecting status or
relating to property, extraterritorial service of summons on petitioners is null and
void.
Note: (1) Petitioners are not engaged in the business with no offices, places of
business or agents in the Philippine and (2) the reinsurance treaties have been
entered abroad.
Petitioners, by counsel on special appearance, filed motions to dismiss disputing
the Courts jurisdiction and the extra-territorial service of summons.
1. Petitioners, being foreign corporations, 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.
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. 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. Hence, the original insured
has generally no interest in the contract of reinsurance.
A foreign corporation, is one which owes its existence to the laws of another
state, and generally, has no legal existence within the state in which it is foreign.
Before a foreign corporation can transact business in the country, it must first
obtain a license to transact business here 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.
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, 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.
SUB-ISSUE: W/N foreign corporations not doing business in the Philippines are not
exempt from suits leveled against them in courts as supported by the case
of Facilities Management Corporation vs. Leonardo Dela Osa, et. al.
HELD: NO. 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 the
Rules of Court can be made in order the Court could assume jurisdiction over it. 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.
SUB-ISSUE: W/N the filing of motion to dismiss, petitioners have thus acquiesced to
the court's jurisdiction.
HELD: NO. When a defendant voluntarily appears, he is deemed to have submitted
himself to the jurisdiction of the court. This is not, however, always the case. 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, 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.
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, he is deemed to have
submitted himself to the jurisdiction of the court. However, this is not the case
herein as they did not file for other grounds for dismissing the action.
PETITION GRANTED.
M. E. GREY, plaintiff-appellant,
vs.
INSULAR LUMBER COMPANY, defendant-appelle.
Concepcion (Pedro), J.:
Nature: The only question of law raised in this appeal is whether the plaintiffappellant is entitled, as stockholder of the defendant-appellee Insular Lumber
Company, to inspect and examine the books records of the transactions of said
defendant.
Facts:
1.
2.
Defendants was and is a corporation organized and existing under the laws
of the State of New York, licensed to engage in business in the Philippines,
with offices in the City of Manila, in Fabrica, Occidental Negros, in New
York and in Philadelphia. The plaintiff was and is the owner and possessor
of 57 shares of the capital stock of the defendant corporation, registered in
his name in the books thereof; that he (plaintiff) does not own three per
cent of the total capital stock of the corporation, nor does he represent
stockholders who own three per cent of its capital
During the years 1932 and 1933, the plaintiff asked the offices of the
defendant in Manila and in Fabrica to permit him to examine the books and
records of the business of said defendant, but he was not allowed to do
so. Under the law of New York, the right of a stockholder to examine the
books and records of a corporation organized under the laws of that State,
have been, during the entire period material to this action, only those
provided in section 77 of the Stock Corporation Law, which reads as
follows:
further sum of ten dollars for every twenty-four hours thereafter until such
statement shall be furnished. (S. C. L., sec. 77.)
3.
4.
5.
Issue: whether the plaintiff-appellant is entitled, as stockholder of the defendantappellee Insular Lumber Company, to inspect and examine the books records of the
transactions of said defendant.
6.
7.
8.
In the fourth place, neither can this right under the common law be
granted the defendant in the present case, since the same can only be
granted at the discretion of the court, under certain conditions, to wit:
9.
(a) That the stockholder of a corporation in New York has the right to
inspect its books and records if it can be shown that he seeks information
for an honest purpose (14 C. J., 853), or to protect his interest as
stockholder. (In re Steinway, 159 N. Y., 250; 53 N. E., 1103; 45 L. R. A., 461
[aff. 31 App. Div., 70; 52 N. Y. S., 343]).
10. (b) That said right to examine and inspect the books of the corporation
must be exercised in good faith, for a specific and honest purpose, and not
to gratify curiosity, or for speculative or vexatious purposes. (14 C. J., 854,
855.)
11. The appellant has made no effort to prove or even allege that the
information he desired to obtain through the examination and inspection
of defendants books was necessary to protect his interests as stockholder
of the corporation, or that it was for a specific and honest purpose, and not
to gratify curiosity, nor for speculative or vexatious purposes.
12. In view of the foregoing, we affirm the judgment of the lower court, with
costs against the appellant. So ordered.
Schmid & Oberly Inc. (Schmid) vs RJL Matrinez Fisshing Corp. (RJL)
Nature: Petition for review the decision and resolution of the Court of Appeals
Facts:
1. RJL MARTINEZ is engaged in the business of deep-sea fishing.
2. RJL MARTINEZ needed electric generators for some of its boats.
3. SCHMIID sold electric generators of different brands, negotiations between
them for the acquisition thereof took place. The parties had two separate
transactions over "Nagata"-brand generators.
st
a. 1 direct sale of 3 generators from SCMID
nd
b. 2 sale through SCMID, as indentor (middleman), of 12 Nagata
electric generators supplied by Nagata Corp. based in Japan.
4. All fifteen (15) generators subject of the two transactions burned out after
continuous use. RJL MARTINEZ informed SCHMID about this development.
In turn, SCHMID brought the matter to the attention of NAGATA CO.
5. In July 1976, NAGATA CO. sent two technical representatives who made an
ocular inspection and conducted tests on some of the burned out
generators, which by then had been delivered to the premises of SCHMID.
6. The tests revealed that the generators were overrated. As indicated both in
the quotation and in the invoice, the capacity of a generator was supposed
to be 5 KVA (kilovolt amperes). However, it turned out that the actual
capacity was only 4 KVA.
7. SCHMID replaced the three (3) generators subject of the first sale with
generators of a different brand.
8. As for the twelve (12) generators subject of the second transaction, only 3
was repaired by NAGATO Co. The remaining nine (9) were neither repaired
nor replaced.
9. As not all of the generators were replaced or repaired, RJL MARTINEZ
formally demanded that it be refunded the cost of the generators and paid
damages. SCHMID in its reply maintained that it was not the seller of the
twelve (12) generators and thus refused to refund the purchase price
therefor.
10. Hence, RJL MARTINEZ brought suit against SCHMID on the theory that the
latter was the vendor of the twelve (12) generators and, as such vendor,
was liable under its warranty against hidden defects.
11. TC: Decision in favor of RJL.
12. CA: Affirmed the decision of TC.
13. RJL, among others, contends that SCHMID is considered as a mere agent
of NAGATA CO., a foreign corporation not licensed to do business in the
Philippines, then the officers and employees of the former may be
penalized for violation of the old Corporation Law which provided:
Sec. 69 ... 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 both such imprisonment and fine, in the discretion
of the Court.
Issue: WON the abovementioned provision is violated by SCMID?
Held: No, does not apply to indentor.
Ratio:
A. Corporation Law finds no application to SCHMID and its officers and employees
relative to the transactions in the instant case. What the law seeks to prevent,
through said provision, is the circumvention by foreign corporations of licensing
requirements through the device of employing local representatives. An indentor,
acting in his own name, is not, however, covered by the above-quoted provision.
In fact, the provision of the Rules and Regulations implementing the Omnibus
Investments Code quoted above, which was copied from the Rules implementing
Republic Act No. 5455, recognizes the distinct role of an indentor, such that when
a foreign corporation does business through such indentor, the foreign
corporation is not deemed doing business in the Philippines.
B. In view of the above considerations, this Court rules that SCHMID was merely
acting as an indentor in the purchase and sale of the twelve (12) generators
subject of the second transaction. Not being the vendor, SCHMID cannot be held
liable for the implied warranty for hidden defects under the Civil Code.
C. An indentor is a middlemen in the same class as commercial brokers and
commission merchants.
Decision:
WHEREFORE, finding the Court of Appeals to have committed a reversible error, the
petition is GRANTED and the appealed Decision and Resolution of the Court of
Appeals are REVERSED. The complaint of RJL Martinez Fishing Corporation is hereby
DISMISSED. No costs.
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.
In Mentholatum Co. Inc. et al. vs. Mangaliman, et al., this Court ruled that:
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. vs. Collectors of Int. Revenue (C.C. A. Ohio], 223 F. 984, 987.)
And in Eastboard Navigation, Ltd. et al vs. Juan Ysmael & Co., Inc., this Court held
that:
(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.
Again, in Facilities Management Corporation vs. De la Osa 89 SCRA 131, 139,
following Aetna Casualty & Surety Co. vs. Pacific Star Line, supra, held a foreign
corporation not engaged in business in the Philippines is not barred from seeking
redress from the courts of the Philippines.
WHEREFORE, the order of respondent Court dismissing the petitioner's complaint
is hereby set aside and the case remanded for further proceedings, with costs
against private respondent.
SO ORDERED.
BMW was arranging to grant the exclusive dealership of BMW cars and products to
CMC, which had expressed interest in acquiring the same
4. On 23 February 1993, petitioner received confirmation of the information from
BMW which, in a letter, expressed dissatisfaction with various aspects of
petitioner's business, mentioning among other things, decline in sales, deteriorating
services, and inadequate showroom and warehouse facilities, and petitioner's
alleged failure to comply with the standards for an exclusive BMW dealer
5. Nonetheless, BMW expressed willingness to continue business relations with the
petitioner on the basis of a "standard BMW importer" contract, otherwise, it said, if
this was not acceptable to petitioner, BMW would have no alternative but to
terminate petitioner's exclusive dealership effective June 30, 1993.
6. Petitioner protested, claiming that the termination of his exclusive dealership
[3]
would be a breach of the Deed of Assignment. Hahn insisted that as long as the
assignment of its trademark and device subsisted, he remained BMW's exclusive
dealer in the Philippines because the assignment was made in consideration of the
exclusive dealership.
In the same letter petitioner explained that the decline in sales was due to lower
prices offered for BMW cars in the United States and the fact that few customers
returned for repairs and servicing because of the durability of BMW parts and the
efficiency of petitioner's service.
7. Because of Hahn's insistence on the former business relation, BMW withdrew on
March 26, 1993 its offer of a "standard importer contract" and terminated the
exclusive dealer relationship effective June 30, 1993.
8. At a conference of BMW Regional Importers held on April 26, 1993 in Singapore,
Hahn was surprised to find Alvarez among those invited from the Asian region. On
April 29, 1993, BMW proposed that Hahn and CMC jointly import and distribute
BMW cars and parts.
9. Hahn found the proposal unacceptable. On May 14, 1993, he filed a complaint for
specific performance and damages against BMW to compel it to continue the
exclusive dealership. He filed an amended complaint to include an application for
temporary restraining order and for writs of preliminary, mandatory and
prohibitory injunction to enjoin BMW from terminating his exclusive dealership.
10. The RTC of QC issued a temporary restraining order. Summons and copies of the
complaint and amended complaint were thereafter served on the private
respondent through the Department of Trade and Industry, which were later sent
by the DTI to BMW via registered mail on June 15, 1993 and received by the latter
on June 24, 1993
11. On June 17, 1993, without proof of service on BMW, the hearing on the
application for the writ of preliminary injunction proceeded ex parte, with
petitioner Hahn testifying. On June 30, 1993, the trial court issued an order granting
the writ of preliminary injunction upon the filing of a bond of P100,000.00
12. On July 1, 1993, BMW moved to dismiss the case, contending that the trial court
did not acquire jurisdiction over it through the service of summons on the
Department of Trade and Industry, because it (BMW) was a foreign corporation and
it was not doing business in the Philippines. It contended that the execution of the
Deed of Assignment was an isolated transaction; that Hahn was not its agent
because the latter undertook to assemble and sell BMW cars and products without
the participation of BMW and sold other products; and that Hahn was an indentor
or middleman transacting business in his own name and for his own account.
13. Petitioner Alfred Hahn opposed the motion. He argued that BMW was doing
business in the Philippines through him as its agent, as shown by the fact that BMW
invoices and order forms were used to document his transactions; that he gave
warranties as exclusive BMW dealer; that BMW officials periodically inspected
standards of service rendered by him; and that he was described in service booklets
and international publications of BMW as a "BMW Importer" or "BMW Trading
Company" in the Philippines.
14. The trial court deferred resolution of the Motion to dismiss until after trial on
the merits for the reason that the grounds advanced by BMW in its motion did not
seem to be definite
15. BMW filed a petition for certiorari with the Court of Appeals, alleging that the
respondent judge acted outside of its jurisdiction by not dismissing the case. Private
respondent pointed out that, unless the trial court's order was set aside, it would be
forced to submit to the jurisdiction of the court by filing its answer or to accept
judgment in default, when the very question was whether the court had jurisdiction
over it.
16. The Court of Appeals decided in favor of BMW, finding the trial court guilty of
grave abuse of discretion in deferring resolution of the motion to dismiss.
17. It ruled that BMW was not doing business in the country and, therefore,
jurisdiction over it could not be acquired through service of summons on the DTI
pursuant to Rule 14, Section 14.
18. The court upheld private respondent's contention that Hahn acted in his own
name and for his own account and independently of BMW, based on Alfred Hahn's
allegations that he had invested his own money and resources in establishing
BMW's goodwill in the Philippines and on BMW's claim that Hahn sold products
other than those of BMW
19. It held that petitioner was a mere indentor or broker and not an agent through
whom private respondent BMW transacted business in the Philippines.
Consequently, the Court of Appeals dismissed petitioner's complaint against BMW.
ISSUE: Whether petitioner Alfred Hahn is the agent or distributor in the Philippines
of private respondent BMW.
(If he is, BMW may be considered doing business in the Philippines and the trial
court acquired jurisdiction over it (BMW) by virtue of the service of summons on
the Department of Trade and Industry. Otherwise, if Hahn is not the agent of BMW
but an independent dealer, albeit of BMW cars and products, BMW, a foreign
corporation, is not considered doing business in the Philippines within the meaning
of the Foreign Investments Act of 1991 and the IRR, and the trial court did not
acquire jurisdiction over it (BMW).)
HELD: YES
Petitioner's appeal is well taken. Rule 14, 14 provides:
14. Service upon foreign corporations. If the defendant is a foreign
corporation, or a nonresident 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. (Emphasis added)
What acts are considered "doing business in the Philippines" are enumerated in
[7]
3(d) of the Foreign Investments Act of 1991 (R.A. No. 7042) as follows:
d) the phrase "doing business" shall include soliciting orders, service contracts,
opening offices, whether called "liaison" offices or branches, appointing
representatives or distributors domiciled in the Philippines or who in any
calendar year stay in the country for a period or periods totalling one hundred
eighty (180) days or more; participating in the management, supervision or
control of any domestic business, firm, entity or corporation in the
Philippines; and any other act or acts that imply a continuity of commercial
dealings or arrangements and contemplate to that extent the performance
of acts or works, or the exercise of some of the functions normally incident
to, and in progressive prosecution of, commercial gain or of the purpose and
The Court of Appeals held that petitioner Alfred Hahn acted in his own name and
for his own account and not as agent or distributor in the Philippines of BMW on
the ground that "he alone had contacts with individuals or entities interested in
acquiring BMW vehicles.
However, there is nothing to support the appellate court's finding that Hahn
solicited orders alone and for his own account and without "interference from, let
alone direction of, BMW."
To the contrary, Hahn claimed he took orders for BMW cars and transmitted them
to BMW. Upon receipt of the orders, BMW fixed the down payment and pricing
charges, notified Hahn of the scheduled production month for the orders, and
reconfirmed the orders by signing and returning to Hahn the acceptance sheets.
Payment was made by the buyer directly to BMW.
Title to cars purchased passed directly to the buyer and Hahn never paid for the
purchase price of BMW cars sold in the Philippines.
Hahn was credited with a commission equal to 14% of the purchase price upon the
invoicing of a vehicle order by BMW. Upon confirmation in writing that the vehicles
had been registered in the Philippines and serviced by him, Hahn received an
additional 3% of the full purchase price.
Hahn performed after-sale services, including, warranty services, for which he
received reimbursement from BMW. All orders were on invoices and forms of
BMW.
These allegations were substantially admitted by BMW which, in its petition
for certiorari before the Court of Appeals, stated:
9.4. As soon as the vehicles are fully manufactured and full
payment of the purchase prices are made, the vehicles are
shipped to the Philippines. (The payments may be made by the
purchasers or third-persons or even by Hahn.) The bills of lading
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, 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 ventilation, 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.
The trial court properly deferred resolution of the motion to dismiss and thus
avoided prematurely deciding a question which requires a factual basis, with the
same result if it had denied the motion and conditionally assumed jurisdiction. It is
the Court of Appeals which, by ruling that BMW is not doing business on the basis
merely of uncertain allegations in the pleadings, disposed of the whole case with
finality and thereby deprived petitioner of his right to be heard on his cause of
action.
ERIKS PTE. LTD., petitioner, vs. COURT OF APPEALS and DELFIN F. ENRIQUEZ,
JR., respondents.
FACTS:
Petitioner Eriks Pte. Ltd. is a non-resident foreign corporation based in Singapore
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.
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 transfers of goods were perfected
in Singapore, for private respondents account, F.O.B. Singapore, with a 90-day
The resolution of this issue depends on whether petitioners business with private
respondent may be treated as isolated transactions.
Petitioners contentions: 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 Courts ruling would result in injustice and unjust
enrichment.
Private respondents contention: 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.
HELD: NO. Judgment in favor of the private respondents
RATIO:
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 accepted rule in jurisprudence is that each case must be judged in the
light of its own environmental circumstances. 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.
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. x x x 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.
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.
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.
Incapacitated to Maintain Suit: 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. 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
governments 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.
REMEDY: By this judgment, we are not foreclosing petitioners 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. Moreover, 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. 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.