[G.R. No. 113074.

January 22, 1997]

ALFRED HAHN, petitioner, vs. COURT OF APPEALS and BAYERISCHE MOTOREN WERKE
AKTIENGESELLSCHAFT (BMW), respondents.
DECISION
MENDOZA, J.:

This is a petition for review of the decision[1] of the Court of Appeals dismissing a
complaint for specific performance which petitioner had filed against private
respondent on the ground that the Regional Trial Court of Quezon City did not acquire
jurisdiction over private respondent, a nonresident foreign corporation, and of the
appellate court's order denying petitioner's motion for reconsideration.
The following are the facts:
Petitioner Alfred Hahn is a Filipino citizen doing business under the name and style
"Hahn-Manila." On the other hand, private respondent Bayerische Motoren Werke
Aktiengesellschaft (BMW) is a nonresident foreign corporation existing under the laws
of the former Federal Republic of Germany, with principal office at Munich, Germany.
On March 7, 1967, petitioner executed in favor of private respondent a "Deed of
Assignment with Special Power of Attorney," which reads in full as follows:
WHEREAS, the ASSIGNOR is the present owner and holder of the BMW trademark and
device in the Philippines which ASSIGNOR uses and has been using on the products
manufactured by ASSIGNEE, and for which ASSIGNOR is the authorized exclusive
Dealer of the ASSIGNEE in the Philippines, the same being evidenced by certificate of
registration issued by the Director of Patents on 12 December 1963 and is referred to
as Trademark No. 10625;
WHEREAS, the ASSIGNOR has agreed to transfer and consequently record said transfer
of the said BMW trademark and device in favor of the ASSIGNEE herein with the
Philippines Patent Office;
NOW THEREFORE, in view of the foregoing and in consideration of the stipulations
hereunder stated, the ASSIGNOR hereby affirms the said assignment and transfer in
favor of the ASSIGNEE under the following terms and conditions:
1. The ASSIGNEE shall take appropriate steps against any user other than ASSIGNOR or
infringer of the BMW trademark in the Philippines, for such purpose, the ASSIGNOR shall
inform the ASSIGNEE immediately of any such use or infringement of the said
trademark which comes to his knowledge and upon such information the ASSIGNOR

shall automatically act as Attorney-In-Fact of the ASSIGNEE for such case, with full
power, authority and responsibility to prosecute unilaterally or in concert with
ASSIGNEE, any such infringer of the subject mark and for purposes hereof the
ASSIGNOR is hereby named and constituted as ASSIGNEE's Attorney-In-Fact, but any
such suit without ASSIGNEE's consent will exclusively be the responsibility and for the
account of the ASSIGNOR,
2. That the ASSIGNOR and the ASSIGNEE shall continue business relations as has been
usual in the past without a formal contract, and for that purpose, the dealership of
ASSIGNOR shall cover the ASSIGNEE's complete production program with the only
limitation that, for the present, in view of ASSIGNEE's limited production, the latter shall
not be able to supply automobiles to ASSIGNOR.
Per the agreement, the parties "continue[d] business relations as has been usual in
the past without a formal contract." But on February 16, 1993, in a meeting with a BMW
representative and the president of Columbia Motors Corporation (CMC), Jose
Alvarez, petitioner was informed that BMW was arranging to grant the exclusive
dealership of BMW cars and products to CMC, which had expressed interest in
acquiring the same. On February 24, 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.[2] 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.
Petitioner protested, claiming that the termination of his exclusive dealership would
be a breach of the Deed of Assignment.[3] 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.
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.[4] 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.

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. Later 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. Hahn's amended
complaint alleged in pertinent parts:
2. Defendant [BMW] is a foreign corporation doing business in the Philippines with
principal offices at Munich, Germany. It may be served with summons and other court
processes through the Secretary of the Department of Trade and Industry of the
Philippines. . . .
....
5. On March 7, 1967, Plaintiff executed in favor of defendant BMW a Deed of
Assignment with Special Power of Attorney covering the trademark and in
consideration thereof, under its first whereas clause, Plaintiff was duly acknowledged
as the "exclusive Dealer of the Assignee in the Philippines" . . . .
....
8. From the time the trademark "BMW & DEVICE" was first used by the Plaintiff in the
Philippines up to the present, Plaintiff, through its firm name "HAHN MANILA" and
without any monetary contribution from defendant BMW, established BMW's goodwill
and market presence in the Philippines. Pursuant thereto, Plaintiff has invested a lot of
money and resources in order to single-handedly compete against other motorcycle
and car companies .... Moreover, Plaintiff has built buildings and other infrastructures
such as service centers and showrooms to maintain and promote the car and
products of defendant BMW.
....
10. In a letter dated February 24, 1993, defendant BMW advised Plaintiff that it was
willing to maintain with Plaintiff a relationship but only "on the basis of a standard BMW
importer contract as adjusted to reflect the particular situation in the Philippines"
subject to certain conditions, otherwise, defendant BMW would terminate Plaintiff's
exclusive dealership and any relationship for cause effective June 30, 1993. . . .
....
15. The actuations of defendant BMW are in breach of the assignment agreement
between itself and plaintiff since the consideration for the assignment of the BMW
trademark is the continuance of the exclusive dealership agreement. It thus, follows
that the exclusive dealership should continue for so long as defendant BMW enjoys
the use and ownership of the trademark assigned to it by Plaintiff.
The case was docketed as Civil Case No. Q-93-15933 and raffled to Branch 104 of
the Quezon City Regional Trial Court, which on June 14, 1993 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, pursuant to Rule 14, 14 of the Rules of Court. The order, summons and
copies of the complaint and amended complaint were later sent by the DTI to BMW
via registered mail on June 15, 1993[5] and received by the latter on June 24, 1993.
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. On July 13, 1993,
following the posting of the required bond, a writ of preliminary injunction was issued.
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.
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.
The trial court[6] 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 indubitable.
Without seeking reconsideration of the aforementioned order, BMW filed a petition
for certiorari with the Court of Appeals alleging that:

I.

THE RESPONDENT JUDGE ACTED WITH UNDUE HASTE OR OTHERWISE

INJUDICIOUSLY IN PROCEEDINGS LEADING TOWARD THE ISSUANCE OF THE WRIT
OF PRELIMINARY INJUNCTION, AND IN PRESCRIBING THE TERMS FOR THE ISSUANCE
THEREOF.

II. THE RESPONDENT JUDGE PATENTLY ERRED IN DEFERRING RESOLUTION OF THE

MOTION TO DISMISS ON THE GROUND OF LACK OF JURISDICTION, AND THEREBY
FAILING TO IMMEDIATELY DISMISS THE CASE A QUO.
BMW asked for the immediate issuance of a temporary restraining order and, after
hearing, for a writ of preliminary injunction, to enjoin the trial court from proceeding
further in Civil Case No. Q-93-15933. 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.
The Court of Appeals enjoined the trial court from hearing petitioner's complaint.
On December 20, 1993, it rendered judgment finding the trial court guilty of grave
abuse of discretion in deferring resolution of the motion to dismiss. It stated:
Going by the pleadings already filed with the respondent court before it came out
with its questioned order of July 26, 1993, we rule and so hold that petitioner's (BMW)
motion to dismiss could be resolved then and there, and that the respondent judge's
deferment of his action thereon until after trial on the merit constitutes, to our mind,
grave abuse of discretion.

....
. . . [T]here is not much appreciable disagreement as regards the factual matters
relating, to the motion to dismiss. What truly divide (sic) the parties and to which they
greatly differ is the legal conclusions they respectively draw from such facts, (sic) with
Hahn maintaining that on the basis thereof, BMW is doing business in the Philippines
while the latter asserts that it is not.
Then, after stating that any ruling which the trial court might make on the motion to
dismiss would anyway be elevated to it on appeal, the Court of Appeals itself resolved
the motion. 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. 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. 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.

Hence, this appeal. Petitioner contends that the Court of Appeals erred (1) in
finding that the trial court gravely abused its discretion in deferring action on the
motion to dismiss and (2) in finding that private respondent BMW is not doing business
in the Philippines and, for this reason, dismissing petitioner's case.
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
3(d) of the Foreign Investments Act of 1991 (R.A. No. 7042) as follows:[7]
d) the phrase "doing business" shall include soliciting orders, service contracts,
opening offices, whether called "liaison" offices or branches, appointing
representatives or distributors domiciled in the Philippines or who in any calendar
year stay in the country for a period or periods totalling one hundred eighty (180)
days or more; participating in the management, supervision or control of any
domestic business, firm, entity or corporation in the Philippines; and any other act
or acts that imply a continuity of commercial dealings or arrangements and
contemplate to that extent the performance of acts or works, or the exercise of
some of the functions normally incident to, and in progressive prosecution of,
commercial gain or of the purpose and object of the business
organization: Provided, however, That the phrase "doing business" shall not be
deemed to include mere investment as a shareholder by a foreign entity in
domestic corporations duly registered to do business, and/or the exercise of rights
as such investor; nor having, a nominee director or officer to represent its interests
in such corporation; nor appointing a representative or distributor domiciled in the
Philippines which transacts business in its own name and for its own
account. (Emphasis supplied)
Thus, the phrase includes "appointing representatives or distributors in the
Philippines" but not when the representative or distributor "transacts business in its
name and for its own account." In addition, Section 1(f)(1) of the Rules and
Regulations implementing (IRR) the Omnibus Investment Code of 1987 (E.O. No. 226)
provided:
(f) "Doing business" shall be any act or combination of acts, enumerated in Article 44
of the Code. In particular, "doing business" includes:
(1).... A foreign firm which does business through middlemen acting in their own
names, such as indentors, commercial brokers or commission merchants, shall not be
deemed doing business in the Philippines. But such indentors, commercial brokers or
commission merchants shall be the ones deemed to be doing business in the
Philippines.
The question is 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).

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. Independence characterizes Hahn's undertakings, for which reason he
is to be considered, under governing statutes, as doing business." (p. 13) In support of
this conclusion, the appellate court cited the following allegations in Hahn's amended
complaint:
8. From the time the trademark "BMW & DEVICE" was first used by the Plaintiff in the
Philippines up to the present, Plaintiff, through its firm name "HAHN MANILA" and
without any monetary contributions from defendant BMW; established BMW's goodwill
and market presence in the Philippines. Pursuant thereto, Plaintiff invested a lot of
money and resources in order to single-handedly compete against other motorcycle
and car companies.... Moreover, Plaintiff has built buildings and other infrastructures
such as service centers and showrooms to maintain and promote the car and
products of defendant BMW.
As the above quoted allegations of the amended complaint show, 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." (p.
13) 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.[8]

These allegations were substantially admitted by BMW which, in its petition

for certiorari before the Court of Appeals, stated:[9]
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 are
made up in the name of the purchasers, but Hahn-Manila is therein indicated as the
person to be notified.
9.5. It is Hahn who picks up the vehicles from the Philippine ports, for purposes of
conducting pre-delivery inspections. Thereafter, he delivers the vehicles to the
purchasers.

9.6. As soon as BMW invoices the vehicle ordered, Hahn is credited with a commission
of fourteen percent (14%) of the full purchase price thereof, and as soon as he
confirms in writing, that the vehicles have been registered in the Philippines and have
been serviced by him, he will receive an additional three percent (3%) of the full
purchase prices as commission.
Contrary to the appellate court's conclusion, this arrangement shows an agency.
An agent receives a commission upon the successful conclusion of a sale. On the
other hand, a broker earns his pay merely by bringing the buyer and the seller
together, even if no sale is eventually made.
As to the service centers and showrooms which he said he had put up at his own
expense, Hahn said that he had to follow BMW specifications as exclusive dealer of
BMW in the Philippines. According to Hahn, BMW periodically inspected the service
centers to see to it that BMW standards were maintained. Indeed, it would seem from
BMW's letter to Hahn that it was for Hahn's alleged failure to maintain BMW standards
that BMW was terminating Hahn's dealership.
The fact that Hahn invested his own money to put up these service centers and
showrooms does not necessarily prove that he is not an agent of BMW. For as already
noted, there are facts in the record which suggest that BMW exercised control over
Hahn's activities as a dealer and made regular inspections of Hahn's premises to
enforce compliance with BMW standards and specifications.[10] For example, in its
letter to Hahn dated February 23, 1996, BMW stated:
In the last years we have pointed out to you in several discussions and letters that
we have to tackle the Philippine market more professionally and that we are
through your present activities not adequately prepared to cope with the
forthcoming challenges.[11]
In effect, BMW was holding Hahn accountable to it under the 1967 Agreement.
This case fits into the mould of Communications Materials, Inc. v. Court of
Appeals,[12] in which the foreign corporation entered into a "Representative
Agreement" and a "Licensing Agreement" with a domestic corporation, by virtue of
which the latter was appointed "exclusive representative" in the Philippines for a
stipulated commission. Pursuant to these contracts, the domestic corporation sold
products exported by the foreign corporation and put up a service center for the
products sold locally. This Court held that these acts constituted doing business in the
Philippines. The arrangement showed that the foreign corporation's purpose was to
penetrate the Philippine market and establish its presence in the Philippines.
In addition, BMW held out private respondent Hahn as its exclusive distributor in the
Philippines, even as it announced in the Asian region that Hahn was the "official BMW
agent" in the Philippines.[13]
The Court of Appeals also found that petitioner Alfred Hahn dealt in other
products, and not exclusively in BMW products, and, on this basis, ruled that Hahn was

not an agent of BMW. (p. 14) This finding is based entirely on allegations of BMW in its
motion to dismiss filed in the trial court and in its petition for certiorari before the Court
of Appeals.[14] But this allegation was denied by Hahn[15] and therefore the Court of
Appeals should not have cited it as if it were the fact.
Indeed this is not the only factual issue raised, which should have indicated to the
Court of Appeals the necessity of affirming the trial court's order deferring resolution of
BMW's motion to dismiss. Petitioner alleged that whether or not he is considered an
agent of BMW, the fact is that BMW did business in the Philippines because it sold cars
directly to Philippine buyers.[16] This was denied by BMW, which claimed that Hahn was
not its agent and that, while it was true that it had sold cars to Philippine buyers, this
was done without solicitation on its part.[17]

It is not true then that the question whether BMW is doing business could have
been resolved simply by considering the parties' pleadings. There are genuine issues of
facts which can only be determined on the basis of evidence duly presented. BMW
cannot short circuit the process on the plea that to compel it to go to trial would be to
deny its right not to submit to the jurisdiction of the trial court which precisely it denies.
Rule 16, 3 authorizes courts to defer the resolution of a motion to dismiss until after the
trial if the ground on which the motion is based does not appear to be indubitable.
Here the record of the case bristles with factual issues and it is not at all clear whether
some allegations correspond to the proof.
Anyway, private respondent need not apprehend that by responding to the
summons it would be waiving its objection to the trial court's jurisdiction. It is now
settled that. for purposes of having summons served on a foreign corporation in
accordance with Rule 14, 14, it is sufficient that it be alleged in the complaint that the
foreign corporation is doing business in the Philippines. The court need not go beyond
the allegations of the complaint in order to determine whether it has jurisdiction. [18] A
determination that the foreign corporation is doing business is only tentative and is
made only for the purpose of enabling the local court to acquire jurisdiction over the
foreign corporation through service of summons pursuant to Rule 14, 14. Such
determination does not foreclose a contrary finding should evidence later show that it
is not transacting business in the country. As this Court has explained:
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.[19]
Far from committing an abuse of discretion, 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. Nor was there justification for nullifying the writ of
preliminary injunction issued by the trial court. Although the injunction was issued ex
parte, the fact is that BMW was subsequently heard on its defense by filing a motion to
dismiss.
WHEREFORE, the decision of the Court of Appeals is REVERSED and the case is
REMANDED to the trial court for further proceedings.
SO ORDERED.

G.R. No. 168266

March 15, 2010

CARGILL,
vs.
INTRA STRATA ASSURANCE CORPORATION, Respondent.

INC., Petitioner,

DECISION
CARPIO, J.:
The Case
This petition for review1 assails the 26 May 2005 Decision2 of the Court of Appeals in
CA-G.R. CV No. 48447.
The Facts
Petitioner Cargill, Inc. (petitioner) is a corporation organized and existing under the
laws of the State of Delaware, United States of America. Petitioner and Northern
Mindanao Corporation (NMC) executed a contract dated 16 August 1989 whereby
NMC agreed to sell to petitioner 20,000 to 24,000 metric tons of molasses, to be
delivered from 1 January to 30 June 1990 at the price of $44 per metric ton. The
contract provides that petitioner would open a Letter of Credit with the Bank of
Philippine Islands. Under the "red clause" of the Letter of Credit, NMC was permitted to

draw up to $500,000 representing the minimum price of the contract upon

presentation of some documents.
The contract was amended three times: first, on 11 January 1990, increasing the
purchase price of the molasses to $47.50 per metric ton;3 second, on 18 June 1990,
reducing the quantity of the molasses to 10,500 metric tons and increasing the price to
$55 per metric ton;4 and third, on 22 August 1990, providing for the shipment of 5,250
metric tons of molasses on the last half of December 1990 through the first half of
January 1991, and the balance of 5,250 metric tons on the last half of January 1991
through the first half of February 1991.5 The third amendment also required NMC to put
up a performance bond equivalent to $451,500, which represents the value of 10,500
metric tons of molasses computed at $43 per metric ton. The performance bond was
intended to guarantee NMCs performance to deliver the molasses during the
prescribed shipment periods according to the terms of the amended contract.
In compliance with the terms of the third amendment of the contract, respondent
Intra Strata Assurance Corporation (respondent) issued on 10 October 1990 a
performance bond6 in the sum of P11,287,500 to guarantee NMCs delivery of the
10,500 tons of molasses, and a surety bond7 in the sum of P9,978,125 to guarantee the
repayment of downpayment as provided in the contract.
NMC was only able to deliver 219.551 metric tons of molasses out of the agreed 10,500
metric tons. Thus, petitioner sent demand letters to respondent claiming payment
under the performance and surety bonds. When respondent refused to pay, petitioner
filed on 12 April 1991 a complaint8 for sum of money against NMC and respondent.
Petitioner, NMC, and respondent entered into a compromise agreement, 9 which the
trial court approved in its Decision10 dated 13 December 1991. The compromise
agreement provides that NMC would pay petitionerP3,000,000 upon signing of the
compromise agreement and would deliver to petitioner 6,991 metric tons of molasses
from 16-31 December 1991. However, NMC still failed to comply with its obligation
under the compromise agreement. Hence, trial proceeded against respondent.

On 23 November 1994, the trial court rendered a decision, the dispositive portion of
which reads:
WHEREFORE, judgment is rendered in favor of plaintiff [Cargill, Inc.], ordering
defendant INTRA STRATA ASSURANCE CORPORATION to solidarily pay plaintiff the total
amount of SIXTEEN MILLION NINE HUNDRED NINETY-THREE THOUSAND AND TWO
HUNDRED PESOS (P16,993,200.00), Philippine Currency, with interest at the legal rate
from October 10, 1990 until fully paid, plus attorneys fees in the sum of TWO HUNDRED
THOUSAND PESOS (P200,000.00), Philippine Currency and the costs of the suit.

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

SO ORDERED.11

On appeal, the Court of Appeals reversed the trial courts decision and dismissed the
complaint. Hence, this petition.
The Court of Appeals Ruling
The Court of Appeals held that petitioner does not have the capacity to file this suit
since it is a foreign corporation doing business in the Philippines without the requisite
license. The Court of Appeals held that petitioners purchases of molasses were in
pursuance of its basic business and not just mere isolated and incidental transactions.
The Issues
Petitioner raises the following issues:
1. Whether petitioner is doing or transacting business in the Philippines in
contemplation of the law and established jurisprudence;
2. Whether respondent is estopped from invoking the defense that petitioner has
no legal capacity to sue in the Philippines;
3. Whether petitioner is seeking a review of the findings of fact of the Court of
Appeals; and
4. Whether the advance payment of $500,000 was released to NMC without the
submission of the supporting documents required in the contract and the "red
clause" Letter of Credit from which said amount was drawn.12
The Ruling of the Court
We find the petition meritorious.
Doing Business in the Philippines and Capacity to Sue
The principal issue in this case is whether petitioner, an unlicensed foreign corporation,
has legal capacity to sue before Philippine courts. Under Article 12313 of the
Corporation Code, a foreign corporation must first obtain a license and a certificate
from the appropriate government agency before it can transact business in the
Philippines. Where a foreign corporation does business in the Philippines without the
proper license, it cannot maintain any action or proceeding before Philippine courts
as provided under Section 133 of the Corporation Code:
Sec. 133. Doing business without a license. No foreign corporation transacting
business in the Philippines without a license, or its successors or assigns, shall be
permitted to maintain or intervene in any action, suit or proceeding in any court or
administrative agency of the Philippines; but such corporation may be sued or

proceeded against before Philippine courts or administrative tribunals on any valid

cause of action recognized under Philippine laws.
Thus, the threshold question in this case is whether petitioner was doing business in the
Philippines. The Corporation Code provides no definition for the phrase "doing
business." Nevertheless, Section 1 of Republic Act No. 5455 (RA 5455),14 provides that:
x x x the phrase "doing business" shall include soliciting orders, purchases, service
contracts, opening offices, whether called liaison offices or branches; appointing
representatives or distributors who are domiciled in the Philippines or who in any
calendar year stay in the Philippines for a period or periods totalling one hundred
eighty days or more; participating in the management, supervision or control of any
domestic business firm, entity or corporation in the Philippines; and any other act or
acts that imply a continuity of commercial dealings or arrangements, and
contemplate to that extent the performance of acts or works, or the exercise of some
of the functions normally incident to, and in progressive prosecution of, commercial
gain or of the purpose and object of the business organization. (Emphasis supplied)
This is also the exact definition provided under Article 44 of the Omnibus Investments
Code of 1987.
Republic Act No. 7042 (RA 7042), otherwise known as the Foreign Investments Act of
1991, which repealed Articles 44-56 of Book II of the Omnibus Investments Code of
1987, enumerated not only the acts or activities which constitute "doing business" but
also those activities which are not deemed "doing business." Section 3(d) of RA 7042
states:
[T]he phrase "doing business" shall include "soliciting orders, service contracts, opening
offices, whether called liaison offices or branches; appointing representatives or
distributors domiciled in the Philippines or who in any calendar year stay in the country
for a period or periods totalling one hundred eighty (180) days or more; participating
in the management, supervision or control of any domestic business, firm, entity or
corporation in the Philippines; and any other act or acts that imply a continuity of
commercial dealings or arrangements, and contemplate to that extent the
performance of acts or works, or the exercise of some of the functions normally
incident to, and in progressive prosecution of, commercial gain or of the purpose and
object of the business organization: Provided, however, That the phrase doing
business shall not be deemed to include mere investment as a shareholder by a
foreign entity in domestic corporations duly registered to do business, and/or the
exercise of rights as such investor; nor having a nominee director or officer to
represent its interests in such corporation; nor appointing a representative or distributor
domiciled in the Philippines which transacts business in its own name and for its own
account.
Since respondent is relying on Section 133 of the Corporation Code to bar petitioner
from maintaining an action in Philippine courts, respondent bears the burden of

proving that petitioners business activities in the Philippines were not just casual or
occasional, but so systematic and regular as to manifest continuity and permanence
of activity to constitute doing business in the Philippines. In this case, we find that
respondent failed to prove that petitioners activities in the Philippines constitute doing
business as would prevent it from bringing an action.
The determination of whether a foreign corporation is doing business in the Philippines
must be based on the facts of each case.15 In the case of Antam Consolidated, Inc. v.
CA,16 in which a foreign corporation filed an action for collection of sum of money
against petitioners therein for damages and loss sustained for the latters failure to
deliver coconut crude oil, the Court emphasized the importance of the element of
continuity of commercial activities to constitute doing business in the Philippines. The
Court held:
In the case at bar, the transactions entered into by the respondent with the petitioners
are not a series of commercial dealings which signify an intent on the part of the
respondent to do business in the Philippines but constitute an isolated one which does
not fall under the category of "doing business." The records show that the only reason
why the respondent entered into the second and third transactions with the
petitioners was because it wanted to recover the loss it sustained from the failure of
the petitioners to deliver the crude coconut oil under the first transaction and in order
to give the latter a chance to make good on their obligation. x x x
x x x The three seemingly different transactions were entered into by the parties only in
an effort to fulfill the basic agreement and in no way indicate an intent on the part of
the respondent to engage in a continuity of transactions with petitioners which will
categorize it as a foreign corporation doing business in the Philippines.17
Similarly, in this case, petitioner and NMC amended their contract three times to give
a chance to NMC to deliver to petitioner the molasses, considering that NMC already
received the minimum price of the contract. There is no showing that the transactions
between petitioner and NMC signify the intent of petitioner to establish a continuous
business or extend its operations in the Philippines.
The Implementing Rules and Regulations of RA 7042 provide under Section 1(f), Rule I,
that "doing business" does not include the following acts:
1. Mere investment as a shareholder by a foreign entity in domestic corporations
duly registered to do business, and/or the exercise of rights as such investor;
2. Having a nominee director or officer to represent its interests in such
corporation;
3. Appointing a representative or distributor domiciled in the Philippines which
transacts business in the representative's or distributor's own name and account;

4. The publication of a general advertisement through any print or broadcast

media;
5. Maintaining a stock of goods in the Philippines solely for the purpose of having
the same processed by another entity in the Philippines;
6. Consignment by a foreign entity of equipment with a local company to be
used in the processing of products for export;
7. Collecting information in the Philippines; and
8. Performing services auxiliary to an existing isolated contract of sale which are
not on a continuing basis, such as installing in the Philippines machinery it has
manufactured or exported to the Philippines, servicing the same, training
domestic workers to operate it, and similar incidental services.
Most of these activities do not bring any direct receipts or profits to the foreign
corporation, consistent with the ruling of this Court in National Sugar Trading Corp. v.
CA18 that activities within Philippine jurisdiction that do not create earnings or profits to
the foreign corporation do not constitute doing business in the Philippines. 19 In that
case, the Court held that it would be inequitable for the National Sugar Trading
Corporation, a state-owned corporation, to evade payment of a legitimate
indebtedness owing to the foreign corporation on the plea that the latter should have
obtained a license first before perfecting a contract with the Philippine government.
The Court emphasized that the foreign corporation did not sell sugar and derive
income from the Philippines, but merely purchased sugar from the Philippine
government and allegedly paid for it in full.
In this case, the contract between petitioner and NMC involved the purchase of
molasses by petitioner from NMC. It was NMC, the domestic corporation, which
derived income from the transaction and not petitioner. To constitute "doing business,"
the activity undertaken in the Philippines should involve profit-making.20 Besides, under
Section 3(d) of RA 7042, "soliciting purchases" has been deleted from the enumeration
of acts or activities which constitute "doing business."
Other factors which support the finding that petitioner is not doing business in the
Philippines are: (1) petitioner does not have an office in the Philippines; (2) petitioner
imports products from the Philippines through its non-exclusive local broker, whose
authority to act on behalf of petitioner is limited to soliciting purchases of products
from suppliers engaged in the sugar trade in the Philippines; and (3) the local broker is
an independent contractor and not an agent of petitioner.21
As explained by the Court in B. Van Zuiden Bros., Ltd. v. GTVL Marketing Industries,
Inc.:22

An exporter in one country may export its products to many foreign importing
countries without performing in the importing countries specific commercial acts that
would constitute doing business in the importing countries. The mere act of exporting
from ones own country, without doing any specific commercial act within the territory
of the importing country, cannot be deemed as doing business in the importing
country. The importing country does not require jurisdiction over the foreign exporter
who has not yet performed any specific commercial act within the territory of the
importing country. Without jurisdiction over the foreign exporter, the importing country
cannot compel the foreign exporter to secure a license to do business in the importing
country.
Otherwise, Philippine exporters, by the mere act alone of exporting their products,
could be considered by the importing countries to be doing business in those
countries. This will require Philippine exporters to secure a business license in every
foreign country where they usually export their products, even if they do not perform
any specific commercial act within the territory of such importing countries. Such a
legal concept will have deleterious effect not only on Philippine exports, but also on
global trade.1avvphi1
To be doing or "transacting business in the Philippines" for purposes of Section 133 of
the Corporation Code, the foreign corporation must actually transact business in the
Philippines, that is, perform specific business transactions within the Philippine territory
on a continuing basis in its own name and for its own account. Actual transaction of
business within the Philippine territory is an essential requisite for the Philippines to to
acquire jurisdiction over a foreign corporation and thus require the foreign corporation
to secure a Philippine business license. If a foreign corporation does not transact such
kind of business in the Philippines, even if it exports its products to the Philippines, the
Philippines has no jurisdiction to require such foreign corporation to secure a Philippine
business license.23 (Emphasis supplied)
In the present case, petitioner is a foreign company merely importing molasses from a
Philipine exporter. A foreign company that merely imports goods from a Philippine
exporter, without opening an office or appointing an agent in the Philippines, is not
doing business in the Philippines.
Review of Findings of Fact
The Supreme Court may review the findings of fact of the Court of Appeals which are
in conflict with the findings of the trial court.24 We find that the Court of Appeals
finding that petitioner was doing business is not supported by evidence.
Furthermore, a review of the records shows that the trial court was correct in holding
that the advance payment of $500,000 was released to NMC in accordance with the
conditions provided under the "red clause" Letter of Credit from which said amount
was drawn. The Head of the International Operations Department of the Bank of
Philippine Islands testified that the bank would not have paid the beneficiary if the

required documents were not complete. It is a requisite in a documentary credit

transaction that the documents should conform to the terms and conditions of the
letter of credit; otherwise, the bank will not pay. The Head of the International
Operations Department of the Bank of Philippine Islands also testified that they
received reimbursement from the issuing bank for the $500,000 withdrawn by
NMC.25 Thus, respondent had no legitimate reason to refuse payment under the
performance and surety bonds when NMC failed to perform its part under its contract
with petitioner.
WHEREFORE , we GRANT the petition. We REVERSE the Decision dated 26 May 2005 of
the Court of Appeals in CA-G.R. CV No. 48447. We REINSTATE the Decision dated 23
November 1994 of the trial court.
SO ORDERED.
AGILENT TECHNOLOGIES SINGAPORE (PTE) LTD., petitioner, vs. INTEGRATED SILICON
TECHNOLOGY PHILIPPINES CORPORATION, TEOH KIANG HONG, TEOH KIANG
SENG, ANTHONY CHOO, JOANNE KATE M. DELA CRUZ, JEAN KAY M. DELA CRUZ
and ROLANDO T. NACILLA,respondents.
DECISION
YNARES-SANTIAGO, J.:
This petition for review assails the Decision dated August 12, 2002 of the Court of
Appeals in CA-G.R. SP No. 66574, which dismissed Civil Case No. 3123-2001-C and
annulled and set aside the Order dated September 4, 2001 issued by the Regional Trial
Court of Calamba, Laguna, Branch 92.
Petitioner Agilent Technologies Singapore (Pte.), Ltd. (Agilent) is a foreign
corporation, which, by its own admission, is not licensed to do business in
the Philippines.[1] Respondent Integrated Silicon Technology Philippines Corporation
(Integrated Silicon) is a private domestic corporation, 100% foreign owned, which is
engaged in the business of manufacturing and assembling electronics
components.[2] Respondents Teoh Kiang Hong, Teoh Kiang Seng and Anthony Choo,
Malaysian nationals, are current members of Integrated Silicons board of directors,
while Joanne Kate M. dela Cruz, Jean Kay M. dela Cruz, and Rolando T. Nacilla are its
former members.[3]
The juridical relation among the various parties in this case can be traced to a 5year Value Added Assembly Services Agreement (VAASA), entered into on April 2,
1996 between Integrated Silicon and the Hewlett-Packard Singapore (Pte.)
Ltd., Singapore Components Operation (HP-Singapore).[4] Under the terms of
the VAASA, Integrated Silicon was to locally manufacture and assemble fiber optics
for export to HP-Singapore. HP-Singapore, for its part, was to consign raw materials to
Integrated Silicon; transport machinery to the plant of Integrated Silicon; and pay
Integrated Silicon the purchase price of the finished products.[5] The VAASA had a five-

year term, beginning on April 2, 1996, with a provision for annual renewal by mutual
written consent.[6] On September 19, 1999, with the consent of Integrated Silicon,[7] HPSingapore assigned all its rights and obligations in the VAASA to Agilent.[8]
On May 25, 2001, Integrated Silicon filed a complaint for Specific Performance and
Damages
against Agilent and
its
officers
Tan Bian Ee,
Lim
Chin
Hong, Tey Boon Teck and FrancisKhor, docketed as Civil Case No. 3110-01-C. It
alleged
that Agilent breached
the
parties
oral
agreement
to
extend
the VAASA. Integrated Silicon thus prayed that defendant be ordered to execute a
written extension of the VAASA for a period of five years as earlier assured and
promised; to comply with the extended VAASA; and to pay actual, moral, exemplary
damages and attorneys fees.[9]

On June 1, 2001, summons and a copy of the complaint were served on Atty.
Ramon Quisumbing, who returned these processes on the claim that he was not the
registered agent ofAgilent. Later, he entered a special appearance to assail the
courts jurisdiction over the person of Agilent.
On July 2, 2001, Agilent filed a separate complaint against Integrated
Silicon, Teoh Kang Seng, Teoh Kiang Gong, Anthony Choo, Joanne Kate M. dela Cruz,
Jean Kay M. dela Cruz and Rolando T. Nacilla,[10] for Specific Performance, Recovery
of Possession, and Sum of Money with Replevin, Preliminary Mandatory Injunction, and
Damages, before the Regional Trial Court, Calamba, Laguna, Branch 92, docketed as
Civil Case No. 3123-2001-C. Agilent prayed that a writ of replevin or, in the alternative,
a writ of preliminary mandatory injunction, be issued ordering defendants to
immediately return and deliver to plaintiff its equipment, machineries and the
materials to be used for fiber-optic components which were left in the plant of
Integrated Silicon. It further prayed that defendants be ordered to pay actual and
exemplary damages and attorneys fees.[11]
Respondents filed a Motion to Dismiss in Civil Case No. 3123-2001-C,[12] on the
grounds of lack of Agilents legal capacity to sue;[13] litis pendentia;[14] forum
shopping;[15] and failure to state a cause of action.[16]
On September 4, 2001, the trial court denied the Motion to Dismiss and granted
petitioner Agilents application for a writ of replevin.[17]
Without filing a motion for reconsideration, respondents filed a petition
for certiorari with the Court of Appeals.[18]
In the meantime, upon motion filed by respondents, Judge Antonio S. Pozas of
Branch 92 voluntarily inhibited himself in Civil Case No. 3123-2001-C. The case was reraffled and assigned to Branch 35, the same branch where Civil Case No. 3110-2001-C
is pending.
On August 12, 2002, the Court of Appeals granted respondents petition
for certiorari, set aside the assailed Order of the trial court dated September 4, 2001,
and ordered the dismissal of Civil Case No. 3123-2001-C.
Hence, the instant petition raising the following errors:

I.

THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN NOT DISMISSING

RESPONDENTS PETITION FOR CERTIORARI FOR RESPONDENTS FAILURE TO FILE A MOTION
FOR RECONSIDERATION BEFORE RESORTING TO THE REMEDY OF CERTIORARI.
II.
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN ANNULLING AND SETTING
ASIDE THE TRIAL COURTS ORDER DATED 4 SEPTEMBER 2001 AND ORDERING THE
DISMISSAL OF CIVIL CASE NO. 3123-2001-C BELOW ON THE GROUND OF LITIS
PENDENTIA, ON ACCOUNT OF THE PENDENCY OF CIVIL CASE NO. 3110-2001-C.
III.
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN ANNULLING AND SETTING
ASIDE THE TRIAL COURTS ORDER DATED 4 SEPTEMBER 2001 AND ORDERING THE
DISMISSAL OF CIVIL CASE NO. 3123-2001-C BELOW ON THE GROUND OF FORUM
SHOPPING, ON ACCOUNT OF THE PENDENCY OF CIVIL CASE NO. 3110-2001-C.
IV.
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN ORDERING THE DISMISSAL
OF CIVIL CASE NO. 323-2001-C BELOW INSTEAD OF ORDERING IT CONSOLIDATED WITH
CIVIL CASE NO. 3110-2001-C.[19]
The two primary issues raised in this petition: (1) whether or not the Court of
Appeals committed reversible error in giving due course to respondents petition,
notwithstanding the failure to file a Motion for Reconsideration of the September 4,
2001 Order; and (2) whether or not the Court of Appeals committed reversible error in
dismissing Civil Case No. 3123-2001-C.
We find merit in the petition.
The Court of Appeals, citing the case of Malayang Manggagawa sa ESSO v. ESSO
Standard Eastern, Inc.,[20] held that the lower court had no jurisdiction over Civil Case
No. 3123-2001-C because of the pendency of Civil Case No. 3110-2001-C and,
therefore, a motion for reconsideration was not necessary before resort to a petition
for certiorari. This was error.
Jurisdiction is fixed by law. Batas Pambansa Blg. 129 vests jurisdiction over the
subject matter of Civil Case No. 3123-2001-C in the RTC.[21]
The Court of Appeals ruling that the assailed Order issued by the RTC of Calamba,
Branch 92, was a nullity for lack of jurisdiction due to litis pendentia and forum
shopping, has no legal basis. The pendency of another action does not strip a court of
the jurisdiction granted by law.

The Court of Appeals further ruled that a Motion for Reconsideration was not
necessary in view of the urgent necessity in this case. We are not convinced. In the
case of Bache and Co. (Phils.), Inc. v. Ruiz,[22] relied on by the Court of Appeals, it was
held that time is of the essence in view of the tax assessments sought to be enforced
by respondent officers of the Bureau of Internal Revenue against petitioner
corporation, on account of which immediate and more direct action becomes
necessary. Tax assessments in that case were based on documents seized by virtue of
an illegal search, and the deprivation of the right to due process tainted the entire
proceedings with illegality. Hence, the urgent necessity of preventing the
enforcement of the tax assessments was patent. Respondents, on the other hand, cite
the case of Geronimo v. Commission on Elections,[23] where the urgent necessity of
resolving a disqualification case for a position in local government warranted the
expeditious resort to certiorari. In the case at bar, there is no analogously urgent
circumstance which would necessitate the relaxation of the rule on a Motion for
Reconsideration.
Indeed, none of the exceptions for dispensing with a Motion for Reconsideration is
present here. None of the following cases cited by respondents serves as adequate
basis for their procedural lapse.
In Vigan Electric Light Co., Inc. v. Public Service Commission,[24] the questioned
order was null and void for failure of respondent tribunal to comply with due process
requirements; inMatanguihan v. Tengco,[25] the questioned order was a patent nullity
for failure to acquire jurisdiction over the defendants, which fact the records plainly
disclosed; and in National Electrification Administration v. Court of Appeals,[26] the
questioned orders were void for vagueness. No such patent nullity is evident in the
Order issued by the trial court in this case.Finally, while urgency may be a ground for
dispensing with a Motion for Reconsideration, in the case of Vivo v. Cloribel,[27] cited
by respondents, the slow progress of the case would have rendered the issues moot
had a motion for reconsideration been availed of. We find no such urgent
circumstance in the case at bar.
Respondents, therefore, availed of a premature remedy when they immediately
raised the matter to the Court of Appeals on certiorari; and the appellate court
committed reversible error when it took cognizance of respondents petition instead of
dismissing the same outright.
We come now to the substantive issues of the petition.
Litis pendentia is a Latin term which literally means a pending suit. It is variously
referred to in some decisions as lis pendens and auter action pendant. While it is
normally connected with the control which the court has on a property involved in a
suit during the continuance proceedings, it is more interposed as a ground for the
dismissal of a civil action pending in court.
Litis pendentia as a ground for the dismissal of a civil action refers to that situation
wherein another action is pending between the same parties for the same cause of
action,
such
that
the
second
action
becomes
unnecessary
and

vexatious. For litis pendentia to be invoked, the concurrence of the following requisites
is necessary:
(a) identity of parties or at least such as represent the same interest in both
actions;
(b) identity of rights asserted and reliefs prayed for, the reliefs being founded on
the same facts; and
(c) the identity in the two cases should be such that the judgment that may be
rendered in one would, regardless of which party is successful, amount
to res judicata in the other.[28]
The Court of Appeals correctly appreciated the identity of parties in Civil Cases No.
3123-2001-C and 3110-2001-C. Well-settled is the rule that lis pendens requires
only substantial, and not absolute, identity of parties.[29] There is substantial identity of
parties when there is a community of interest between a party in the first case and a
party in the second case, even if the latter was not impleaded in the first case.[30] The
parties in these cases are vying over the interests of the two opposing corporations;
the individuals are only incidentally impleaded, being the natural persons purportedly
accused of violating these corporations rights.
Likewise, the fact that the positions of the parties are reversed, i.e., the plaintiffs in
the first case are the defendants in the second case or vice versa, does not negate
the identity of parties for purposes of determining whether the case is dismissible on
the ground of litis pendentia.[31]
The identity of parties notwithstanding, litis pendentia does not obtain in this case
because of the absence of the second and third requisites. The rights asserted in each
of the cases involved are separate and distinct; there are two subjects of controversy
presented for adjudication; and two causes of action are clearly involved. The fact
that respondents instituted a prior action for Specific Performance and Damages is
not a ground for defeating the petitioners action for Specific Performance, Recovery
of Possession, and Sum of Money with Replevin, Preliminary Mandatory Injunction, and
Damages.

In Civil Case No. 3110-2001-C filed by respondents, the issue is whether or not there
was a breach of an oral promise to renew of the VAASA. The issue in Civil Case No.
3123-2001-C, filed by petitioner, is whether petitioner has the right to take possession of
the subject properties. Petitioners right of possession is founded on the ownership of
the subject goods, which ownership is not disputed and is not contingent on the
extension or non-extension of the VAASA. Hence, the replevin suit can validly be tried
even while the prior suit is being litigated in the Regional Trial Court.
Possession of the subject properties is not an issue in Civil Case No. 3110-2001C. The reliefs sought by respondent Integrated Silicon therein are as follows: (1)
execution of a written extension or renewal of the VAASA; (2) compliance with the
extended VAASA; and (3) payment of overdue accounts, damages, and attorneys
fees. The reliefs sought by petitioner Agilentin Civil Case No. 3123-2001-C, on the other
hand, are as follows: (1) issuance of a Writ of Replevin or Writ of Preliminary Mandatory

Injunction; (2) recovery of possession of the subject properties; (3) damages and
attorneys fees.
Concededly, some items or pieces of evidence may be admissible in both
actions. It cannot be said, however, that exactly the same evidence will support the
decisions in both, since the legally significant and controlling facts in each case are
entirely different. Although the VAASA figures prominently in both suits, Civil Case No.
3110-2001-C is premised on a purported breach of an oral obligation
to extend the VAASA, and damages arising out of Agilents alleged failure to comply
with such purported extension. Civil Case No. 3123-2001-C, on the other hand, is
premised on a breach of the VAASA itself, and damages arising to Agilent out of that
purported breach.

It necessarily follows that the third requisite for litis pendentia is also absent. The
following are the elements of res judicata:
(a) The former judgment must be final;
(b) The court which rendered judgment must have jurisdiction over the parties
and the subject matter;
(c) It must be a judgment on the merits; and
(d) There must be between the first and second actions identity of parties,
subject matter, and cause of action.[32]

In this case, any judgment rendered in one of the actions will not amount
to res judicata in the other action. There being different causes of action, the decision
in one case will not constitute res judicata as to the other.
Of course, a decision in one case may, to a certain extent, affect the other case. This,
however, is not the test to determine the identity of the causes of action. Whatever
difficulties or inconvenience may be entailed if both causes of action are pursued on
separate remedies, the proper solution is not the dismissal order of the Court of
Appeals. The possible consolidation of said cases, as well as stipulations and
appropriate modes of discovery, may well be considered by the court below
to subserve not only procedural expedience but, more important, the ends of
justice.[33]
We now proceed to the issue of forum shopping.
The test for determining whether a party violated the rule against forum-shopping
was laid down in the case of Buan v. Lopez.[34] Forum shopping exists where the
elements of litispendentia are present, or where a final judgment in one case will
amount to res judicata in the final other. There being no litis pendentia in this case, a
judgment in the said case will not amount to res judicata in Civil Case No. 3110-2001C, and respondents contention on forum shopping must likewise fail.
We are not unmindful of the afflictive consequences that may be suffered by both
petitioner and respondents if replevin is granted by the trial court in Civil Case No.
3123-2001-C. If respondent Integrated Silicon eventually wins Civil Case No. 3110-2001-

C, and the VAASAs terms are extended, petitioner corporation will have to comply
with its obligations thereunder, which would include the consignment of properties
similar to those it may recover by way of replevin in Civil Case No. 3123-2001C. However, petitioner will also suffer an injustice if denied the remedy of replevin,
resort to which is not only allowed but encouraged by law.
Respondents argue that since Agilent is an unlicensed foreign corporation doing
business in the Philippines, it lacks the legal capacity to file suit.[35] The assailed acts of
petitionerAgilent, purportedly in the nature of doing business in the Philippines, are the
following: (1) mere entering into the VAASA, which is a service contract;[36] (2)
appointment of a full-time representative in Integrated Silicon, to oversee and
supervise the production of Agilents products;[37] (3) the appointment by Agilent of six
full-time staff members, who were permanently stationed at Integrated Silicons
facilities
in
order
to
inspect
the
finished
goods
for Agilent;[38] and
(4) Agilents participation in the management, supervision and control of Integrated
Silicon,[39] including instructing Integrated Silicon to hire more employees to
meet Agilents increasing production needs,[40] regularly performing quality audit,
evaluation and supervision of Integrated Silicons employees,[41] regularly performing
inventory audit of raw materials to be used by Integrated Silicon, which was also
required to provide weekly inventory updates toAgilent,[42] and providing and
dictating Integrated Silicon on the daily production schedule, volume and models of
the products to manufacture and ship for Agilent.[43]

A foreign corporation without a license is not ipso facto incapacitated from

bringing an action in Philippine courts. A license is necessary only if a foreign
corporation is transacting or doing business in the country. 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 prevents an unlicensed foreign corporation doing
business in the Philippines from accessing our courts.
In a number of cases, however, we have held that an unlicensed foreign
corporation doing business in the Philippines may bring suit in Philippine courts against
a Philippine citizen or entity who had contracted with and benefited from said
corporation.[44] Such a suit is premised on the doctrine of estoppel. A party
is estopped from challenging the personality of a corporation after having
acknowledged the same by entering into a contract with it. This doctrine
of estoppel to deny corporate existence and capacity applies to foreign as well as
domestic corporations.[45] The application of this principle prevents a person
contracting with a foreign corporation from later taking advantage of its

noncompliance with the statutes chiefly in cases where such person has received the
benefits of the contract.[46]
The principles regarding the right of a foreign corporation to bring suit in Philippine
courts may thus be condensed in four statements: (1) if a foreign corporation does
business in the Philippines without a license, it cannot sue before the Philippine
courts;[47] (2) if a foreign corporation is not doing business in the Philippines, it needs no
license to sue before Philippine courts on an isolated transaction or on a cause of
action entirely independent of any business transaction [48]; (3) if a foreign corporation
does business in the Philippines without a license, a Philippine citizen or entity which
has contracted with said corporation may be estopped from challenging the foreign
corporations corporate personality in a suit brought before Philippine courts;[49] and (4)
if a foreign corporation does business in the Philippines with the required license, it can
sue before Philippine courts on any transaction.
The challenge to Agilents legal capacity to file suit hinges on whether or not it is
doing business in the Philippines. However, there is no definitive rule on what
constitutes doing, engaging in, or transacting business in the Philippines, as this Court
observed in the case of Mentholatum v. Mangaliman.[50] The Corporation Code itself is
silent as to what acts constitute doing or transacting business in the Philippines.
Jurisprudence has it, however, that 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 or in
progressive prosecution of the purpose and subject of its organization.[51]
In Mentholatum,[52] this Court discoursed on the two general tests to determine
whether or not a foreign corporation can be considered as doing business in
the Philippines. The first of these is the substance test, thus:[53]
The true test [for doing business], however, seems to be whether the foreign
corporation is continuing the body 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 second test is the continuity test, expressed thus:[54]
The term [doing business] 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 the progressive
prosecution of, the purpose and object of its organization.
Although each case must be judged in light of its attendant circumstances,
jurisprudence has evolved several guiding principles for the application of these
tests. For instance, considering that it transacted with its Philippine counterpart for
seven years, engaging in futures contracts, this Court concluded that the foreign
corporation in Merrill Lynch Futures, Inc. v. Court of Appeals and Spouses Lara,[55] was
doing business in the Philippines. In Commissioner of Internal Revenue v. Japan Airlines
(JAL),[56] the Court held that JAL was doing business in the Philippines, i.e., its

commercial dealings in the country were continuous despite the fact that no JAL
aircraft landed in the country as it sold tickets in the Philippines through a general sales
agent, and opened a promotions office here as well.
In General Corp. of the Phils. v. Union Insurance Society of Canton and Firemans
Fund Insurance,[57] a foreign insurance corporation was held to be doing business in
the Philippines, as it appointed a settling agent here, and issued 12 marine insurance
policies. We held that these transactions were not isolated or casual, but manifested
the continuity of the foreign corporations conduct and its intent to establish a
continuous business in the country. In Eriks PTE Ltd. v. Court of Appeals and
Enriquez,[58] the foreign corporation sold its products to a Filipino buyer who ordered
the goods 16 times within an eight-month period. Accordingly, this Court ruled that the
corporation was doing business in the Philippines, as there was a clear intention on its
part to continue the body of its business here, despite the relatively short span of time
involved. Communication Materials and Design, Inc., et al. v. Court of Appeals, ITEC,
et al.[59] and Top-Weld Manufacturing v. ECED, IRTI, et al.[60] both involved the License
and Technical Agreement and Distributor Agreement of foreign corporations with their
respective local counterparts that were the primary bases for the Courts ruling that the
foreign corporations were doing business in the Philippines.[61] In particular, the Court
cited the highly restrictive nature of certain provisions in the agreements involved,
such that, as stated in Communication Materials, the Philippine entity is reduced to a
mere extension or instrument of the foreign corporation. For example,
in Communication Materials, the Court deemed the No Competing Product provision
of the Representative Agreement therein restrictive.[62]
The case law definition has evolved into a statutory definition, having been
adopted with some qualifications in various pieces of legislation. The Foreign
Investments Act of 1991 (the FIA; Republic Act No. 7042, as amended), defines doing
business as follows:
Sec. 3, par. (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 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 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 the progressive prosecution of, commercial gain or of the
purpose and object of the business organization.
An analysis of the relevant case law, in conjunction with Section 1 of the
Implementing Rules and Regulations of the FIA (as amended by Republic Act No.
8179), would demonstrate that the acts enumerated in the VAASA do not constitute
doing business in the Philippines.

Section 1 of the Implementing Rules and Regulations of the FIA (as amended by
Republic Act No. 8179) provides that the following shall not be deemed doing
business:
(1) Mere investment as a shareholder by a foreign entity in domestic
corporations duly registered to do business, and/or the exercise of rights as
such investor;
(2) Having a nominee director or officer to represent its interest in such
corporation;
(3) Appointing a representative or distributor domiciled in the Philippines which
transacts business in the representatives or distributors own name and
account;
(4) The publication of a general advertisement through any print or broadcast
media;
(5) Maintaining a stock of goods in the Philippines solely for the purpose of
having the same processed by another entity in the Philippines;
(6) Consignment by a foreign entity of equipment with a local company to be
used in the processing of products for export;
(7) Collecting information in the Philippines; and
(8) Performing services auxiliary to an existing isolated contract of sale which
are not on a continuing basis, such as installing in the Philippines machinery it
has manufactured or exported to the Philippines, servicing the same, training
domestic workers to operate it, and similar incidental services.
By and large, to constitute doing business, the activity to be undertaken in
the Philippines is one that is for profit-making.[63]
By the clear terms of the VAASA, Agilents activities in the Philippines were confined
to (1) maintaining a stock of goods in the Philippines solely for the purpose of having
the same processed by Integrated Silicon; and (2) consignment of equipment with
Integrated Silicon to be used in the processing of products for export. As such, we hold
that, based on the evidence presented thus far, Agilent cannot be deemed to be
doing business in the Philippines. Respondents contention that Agilent lacks the legal
capacity to file suit is therefore devoid of merit. As a foreign corporation not doing
business in the Philippines, it needed no license before it can sue before our courts.
Finally, as to Agilents purported failure to state a cause of action against the
individual respondents, we likewise rule in favor of petitioner. A Motion to Dismiss
hypothetically admits all the allegations in the Complaint, which plainly alleges that
these individual respondents had committed or permitted the commission of acts
prejudicial to Agilent. Whether or not these individuals had divested themselves of
their interests in Integrated Silicon, or are no longer members of Integrated Silicons
Board of Directors, is a matter of defense best threshed out during trial.

WHEREFORE, PREMISES CONSIDERED, the petition is GRANTED. The Decision of the

Court of Appeals in CA-G.R. SP No. 66574 dated August 12, 2002, which dismissed Civil
Case No. 3123-2001-C, is REVERSED and SET ASIDE. The Order dated September 4,
2001 issued by the Regional Trial Court of Calamba, Laguna, Branch 92, in Civil Case
No. 3123-2001-C, is REINSTATED. Agilents application for a Writ of Replevin is GRANTED.
No pronouncement as to costs.
SO ORDERED.