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Granger Associates vs Microwave Systems-FERNANDEZ

Note: Granger is the principal and Microwave Systems is the agent.
Facts: The foreign corporation is Granger Associates, the herein petitioner, which was organized in the United States
and has no license to do business in this country. The domestic corporation is Microwave Systems, Inc., one of the
herein private respondents, which has been sued for recovery of a sum equivalent to US$900,633.30 allegedly due
from it to the petitioner.
The claim arose from a series of agreements concluded between the two parties, principally the contract dated
March 28, 1977, under which Granger licensed MSI to manufacture and sell its products in the Philippines and
extended to the latter certain loans, equipment and parts; the contract dated May 17, 1979, for the sale by Granger
of its Model 7100/7200 Multiplex Equipment to MSI
Payment of these contracts not having been made as agreed upon, Granger filed a complaint against MSI and the
other private respondents on June 29, 1984, in the Regional Trial Court of Pasay City. This was docketed as Civil
Case No. 1982-P. In its answer, MSI alleged the affirmative defense that the plaintiff had no capacity to sue, being
an unlicensed foreign corporation, and moved to dismiss.
The law invoked by the defendants was Section 133 of the Corporation Code reading as follows:
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; ...
RTC: sustained the defendants and granted motion to dismiss
CA: affirmed
Hence this petition
W/N Granger has capacity to sue? Yes, but not in this case because of technicality. Petitioner did not assail that it
should be under the exception.
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. 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.
We are convinced from an examination of the terms and conditions of the contracts and agreements entered into
between petitioner and private respondents indicate that they established within our country a continuous
business, and not merely one of a temporary character. Such agreements did not constitute only one isolated
transaction, as the petitioner contends, but a succession of acts signifying the intent of Granger to extend its
operations in the Philippines.
In any event, it is now settled that even one single transaction may be construed as transacting business in the
Philippines under certain circumstances, as we observed in Far East International Import and Export Corporation v.
Nankai Kogyo Co., Ltd., 10 thus:
The rule stated in the preceding section that the doing of a single act does not constitute business within the
meaning of statutes prescribing the conditions to be complied with by foreign corporations must be qualified to this
extent, that a single act may bring the corporation within the purview of the statute where it is an act of the
ordinary business of the corporation. In such a case, the single act or transaction is not merely incidental or casual,
but is of such character as distinctly to indicate a purpose on the part of the foreign corporation to do other
business in the state, and to make the state a base of operations for the conduct of a part of the corporations'
ordinary business.
It is also the rule that the factual findings of the lower court are binding on this Court in the absence of any of those
exceptional circumstances we have enumerated in many cases that warrant a different conclusion. Having assailed
the finding of the respondent court that the petitioner is doing business in the Philippines, the petitioner had the
burden of showing that such finding fell under the exception rather than the rule and so should be reviewed and
reversed. The petitioner has not done this.
The purpose of the rule requiring foreign corporations to secure a license to do business in the Philippines is to
enable us to exercise jurisdiction over them for the regulation of their activities in this country.
SC: Petition denied



SEPTEMBER 28, 1990

On October 23, 1976, in Tokyo, Japan, petitioner Marubeni Nederland B.V. and D.B. Teodoro Development
Corporation 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. In due time, the problems regarding the lime plant were ironed out
and the parties signed a "Settlement Agreement" on July 2, 1981.

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.
The Court reiterated 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.
It ruled 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. In said Act, it enumerates acts that shall constitute doing
business which includes.
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.


May 21, 1984

The petitioner is a foreign corporation, organized and existing under the laws of France and not doing
business in the Philippines. It is the actual owner of the abovementioned trademarks used on clothings and other
goods specifically sporting apparels sold in many parts of the world and which have been marketed in the
Philippines since 1964. The main basis of the private respondent's case is its claim of alleged prior registration.
In 1975, Hemandas & Co., a duly licensed domestic firm applied for and was issued Reg. No. SR-2225 (SR
stands for Supplemental Register) for the trademark "CHEMISE LACOSTE & CROCODILE DEVICE" by the Philippine
Patent Office for use on T-shirts, sportswear and other garment products of the company. Two years later, it applied
for the registration of the same trademark under the Principal Register. The Patent Office eventually issued an order
which granted the application."Thereafter, Hemandas & Co. assigned to respondent Gobindram Hemandas all
rights, title, and interest in the trademark "CHEMISE LACOSTE & DEVICE".
The petitioner filed its application for registration of the trademark "Crocodile Device" and "Lacoste". The
former was approved for publication while the latter was opposed by Games and Garments. The petitioner filed with
the National Bureau of Investigation (NBI) a letter-complaint alleging therein the acts of unfair competition being
committed by Hemandas and requesting their assistance in his apprehension and prosecution.
Whether or not petitioner has the capacity to sue.
The petitioner is a foreign corporation not doing business in the Philippines. The marketing of its products
in the Philippines is done through an exclusive distributor, Rustan Commercial Corporation. The latter is an
independent entity which buys and then markets not only products of the petitioner but also many other products

bearing equally well-known and established trademarks and tradenames. In other words, Rustan is not a mere
agent or conduit of the petitioner.
The court finds and concludes that the petitioner is not doing business in the Philippines. Rustan is actually
a middleman acting and transacting business in its own name and or its own account and not in the name or for the
account of the petitioner. More important is the nature of the case which led to this petition. What preceded this
petition for certiorari was a letter-complaint filed before the NBI charging Hemandas with a criminal offense, i.e.,
violation of Article 189 of the Revised Penal Code. If prosecution follows after the completion of the preliminary
investigation being conducted by the Special Prosecutor the information shall be in the name of the People of the
Philippines and no longer the petitioner which is only an aggrieved party since a criminal offense is essentially an
act against the State.
It is the latter which is principally the injured party although there is a private right violated. Petitioner's
capacity to sue would become, therefore, of not much significance in the main case. We cannot allow a possible
violator of our criminal statutes to escape prosecution upon a far-fetched contention that the aggrieved party or
victim of a crime has no standing to sue. In upholding the right of the petitioner to maintain the present suit before
our courts for unfair competition or infringement of trademarks of a foreign corporation, we are moreover
recognizing our duties and the rights of foreign states under the Paris Convention for the Protection of Industrial
Property to which the Philippines and France are parties.

June 29, 1984

Respondent corporations, Converse Rubber Corp. and Edwardson Manufacturing Co., sued petitioner
Universal Rubber products, Inc. before the CFI of Rizal for unfair competition with damages and attorneys fees.
On March 4, 1968, petitioner filed a motion in the court below praying that the subpoena duces tecum
dated February 13, 1968 be quashed which was denied. A motion for reconsideration was likewise denied.
Consequently, on August 6, 1968, petitioner Universal Rubber Products, Inc. filed its present petition for
certiorari with preliminary injunction, alleging that in so denying its motion to quash the subpoena duces tecum and
its subsequent motion for reconsideration, respondent Judge acted with grave abuse of discretion amounting to an
excess of jurisdiction.
Petitioner Universal Rubber Products, Inc. contends that private respondent Converse Rubber Corp. is a
foreign corporation not licensed to do business in the Philippines and that respondent Edwardson is merely its
licensee; that respondent Converse has no goodwill to speak of and that it has no registration right over its own
Whether or not respondent Converse Rubber Corp. has capacity to sue.
The Court held that the disability of a foreign corporation from suing in the Philippines is limited to suits to
enforce any legal or contracts rights arising from, or growing out, of any business which it has transacted in the
Philippine Islands. On the other hand, where the purpose of the suit is to protect its reputation, its corporate
name, its goodwill, whenever that reputation, its corporate name or goodwill have, through the natural
development of its trade, established themselves, an unlicensed foreign corporation may sue in the Philippines.
Hence, it is clear that Section 29 of the Corporation Law does not disqualify plaintiff- appellee Converse
Rubber, which does not have a branch office in any part of the Philippines and is not doing business in the
Philippines, from filing and prosecuting this action of unfair competition.
Therefore Converse Rubber Corp. can file and prosecute the action of unfair competition.