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European Resources and Technologies, Inc. v. Ingenieuburo Birkhahn, G.R. No.

providing environmental services needed in the CSEZ in connection


159586, 26 July 2004 with the waste management within the CSEZ and other areas.”
b. Should there be a disagreement between or among them relative to
FACTS: the interpretation or implementation of the MOA and the collateral
1. European Resources and Technologies Inc. (ERTI) is a corporation documents including but not limited to the Contract for Services
organized and existing under Philippine laws. between the German Consortium and CDC, the dispute shall be
2. Ingenieuburo Birkhan + Nolte Ingiurgesellschaft mbh and Heers & Brockstedt referred to a panel of arbitrators.
Gmbh & Co. (The German Consortium) are German corporations. 8. ERTI received a letter from BN Consultants Philippines, Inc., signed by Mr.
3. The German Consortium tendered and submitted its bid to the Clark Holger Holst for and on behalf of the German Consortium, stating that the
Development Corporation (CDC) to construct, operate and manage the German Consortium's contract with DMWAI, LBV&A and ERTI has been
integrated waste management center at the Clark Special Economic Zone terminated or extinguished on the following grounds:
(CSEZ). a. The CDC did not give its approval to the Consortium's request for
4. CDC accepted the German Consortium's bid and awarded the contract to it. the approval of the assignment or transfer by the German
5. CDC and the German Consortium executed the Contract for Services: Consortium in favor of ERTI of its rights and interests under the
a. The German Consortium shall be empowered to enter into a contract Contract for Services.
or agreement for the use of the integrated waste management b. The parties failed to prepare and finalize the Shareholders'
center by corporations, LGUs, entities, and persons within and Agreement pursuant to the provision of the MOU.
outside the CSEZ: c. There is no more factual or legal basis for the joint venture to
i. For waste collected within the CSEZ, the German continue.
Consortium may impose a "tipping fee" per ton of waste d. With the termination of the MOU, the MOA is also deemed
collected from locators and residents of the CSEZ, which terminated or extinguished.
fees shall be subject to the schedule agreed upon by the 9. Attached to the letter was a copy of the letter of the CDC, stating that the
parties and specified in the Contract for Services. German Consortium's assignment of an eighty-five percent (85%) majority
ii. For its operations outside of the CSEZ, the German interest to another party violated its representation to undertake both the
Consortium shall pay CDC US$1.50 per ton of non- financial and technical aspects of the project.
hazardous solid waste collected. a. The dilution of the Consortium's interest in ERTI is a substantial
b. The CDC shall guarantee that nineteen thousand eighteen hundred modification of the Consortium's representations which were used
(19,800) tons per year of solid waste volume shall be collected from as bases for the award of the project to it.
inside and outside the CSEZ. 10. ERTI, through counsel, sent a letter to CDC requesting for the reconsideration
c. The contract has a term of 25 years. of its disapproval of the agreement between ERTI and the German
d. The German Consortium shall operate the waste management Consortium.
center on a day-to-day basis. 11. Before CDC could act upon ERTI's letter, the German Consortium filed a
6. The German Consortium entered into a Joint Venture with D.M. Wenceslao complaint for injunction against herein ERTI before the RTC of Angeles City.
and Associates, Inc. (DMWAI) and Ma. Elena B. Villarama (doing business The German Consortium claimed that:
as LBV&A), embodied in a Memorandum of Understanding (MOU): a. ERTI's continued misrepresentation as to their right to accept solid
a. The parties agreed to jointly form a local corporation to which the wastes from third parties for processing at the waste management
German Consortium shall assign its rights under the Contract for center will cause irreparable damage to the Consortium and its
Services. exclusive right to operate the waste management center at the
b. Pursuant to this agreement, ERTI was incorporated. CSEZ.
c. The parties agreed to prepare and finalize a Shareholders' b. ERTI's acts destroy the Consortium's credibility and undermine
Agreement within 1 month from the execution of the MOU, which customer confidence in it.
shall provide that, of the equity in the joint venture corporation: 12. Trial  ERTI objected to the presentation of evidence on the ground that:
i. The German Consortium shall own 15%. a. The trial court had no jurisdiction over the case since the German
ii. DMWAI shall own 70%. Consortium was composed of foreign corporations doing business
iii. LBV&A shall own 15% in the country without a license
d. In the event that the parties fail to execute the Shareholders' b. The MOA between the parties provides that the dispute should be
Agreement, the MOU shall be considered null and void. referred to arbitration.
7. Without the Shareholders' Agreement having been executed, the German 13. RTC  In favor of the German Consortium.
Consortium and ERTI entered into a Memorandum of Agreement (MOA) 14. CA  Affirmed.
a. The German Consortium ceded its rights and obligations under the
Contract for Services in favor of ERTI and assigned unto ERTI,
among others, "its license from CDC to engage in the business of
ISSUES: a. In order to subject a foreign corporation doing business in the
1. W/N ERTI is estopped from assailing the capacity of the German Consortium country to the jurisdiction of our courts, it must acquire a license from
to institute the suit for injunction. the Securities and Exchange Commission (SEC) and appoint an
2. W/N the German Consortium is entitled to an injunctive writ. agent for service of process.
3. W/N the dispute is covered by the arbitration clause in the memorandum of b. Without such license, it cannot institute a suit in the Philippines.
agreement. 7. However, there are exceptions to this rule.
4. W/N the writ of preliminary injunction that is tantamount to a decision of the a. In a number of cases, we have declared a party estopped from
case on the merits. challenging or questioning the capacity of an unlicensed foreign
corporation from initiating a suit in our courts.
RULING + RATIO: NO. ERTI is not estopped. German Consortium is not entitled b. In the case of Communication Materials and Design, Inc. v. Court of
to an injunctive writ. Appeals, a foreign corporation instituted an action before our courts
ISSUE #1: seeking to enjoin a local corporation, with whom it had a
1. There is no general rule or governing principle laid down as to what "Representative Agreement", from using its corporate name, letter
constitutes "doing" or "engaging in" or "transacting" business in the heads, envelopes, sign boards and business dealings as well as the
Philippines. foreign corporation's trademark. The case arose when the foreign
a. Thus, it has often been held that a single act or transaction may be corporation discovered that the local corporation has violated certain
considered as "doing business" when a corporation performs acts contractual commitments as stipulated in their agreement.
for which it was created or exercises some of the functions for which c. In said case, we held that a foreign corporation doing business in
it was organized. the Philippines without license may sue in Philippine Courts a
b. We have held that the act of participating in a bidding process Philippine citizen or entity that had contracted with and benefited
constitutes "doing business" because it shows the foreign from it.
corporation's intention to engage in business in the Philippines. d. Hence, the party is estopped from questioning the capacity of a
2. In this regard, it is the performance by a foreign corporation of the acts for foreign corporation to institute an action in our courts where it had
which it was created, regardless of volume of business, that determines obtained benefits from its dealings with such foreign corporation and
whether a foreign corporation needs a license or not. thereafter committed a breach of or sought to renege on its
3. Consequently, the German Consortium is doing business in the Philippines obligations.
without the appropriate license as required by our laws. e. The rule relating to estoppel is deeply rooted in the axiom
a. By participating in the bidding conducted by the CDC for the of commodum ex injuria sua non habere debet — no person ought
operation of the waste management center, the German Consortium to derive any advantage from his own wrong.
exhibited its intent to transact business in the Philippines. 8. In the case at bar, petitioners have clearly not received any benefit from its
b. Although the Contract for Services provided for the establishment of transactions with the German Consortium. In fact, there is no question that
a local corporation to serve as respondents' representative, it is clear petitioners were the ones who have expended a considerable amount of
from the other provisions of the Contract for Services as well as the money and effort preparatory to the implementation of the MOA.
letter by the CDC containing the disapproval that it will be the 9. Neither do petitioners seek to back out from their obligations under both the
German Consortium which shall manage and conduct the MOU and the MOA by challenging respondents' capacity to sue. The reverse
operations of the waste management center for at least 25 years. could not be any more accurate. Petitioners are insisting on the full validity
c. Moreover, the German Consortium was allowed to transact with and implementation of their agreements with the German Consortium.
other entities outside the CSEZ for solid waste collection. 10. To rule that the German Consortium has the capacity to institute an action
4. Thus, it is clear that the local corporation to be established will merely act as against petitioners even when the latter have not committed any breach of its
a conduit or extension of the German Consortium. obligation would be tantamount to an unlicensed foreign corporation gaining
5. As a general rule, unlicensed foreign non-resident corporations cannot file access to our courts for protection and redress.
suits in the Philippines. a. We cannot allow this without violating the very rationale for the law
a. Section 133 of the Corporation Code: “No foreign corporation prohibiting a foreign corporation not licensed to do business in the
transacting business in the Philippines without a license, or its Philippines from suing or maintaining an action in Philippine courts.
successors or assigns, shall be permitted to maintain or intervene in b. The object of requiring a license is not to prevent the foreign
any action, suit or proceeding in any court or administrative agency corporation from performing single acts, but to prevent it from
of the Philippines, but such corporation may be sued or proceeded acquiring domicile for the purpose of business without taking the
against before Philippine courts or administrative tribunals on any steps necessary to render it amenable to suits in the local courts.
valid cause of action recognized under Philippine laws.” c. In other words, the foreign corporation is merely prevented from
6. A corporation has legal status only within the state or territory in which it was being in a position where it takes the good without accepting the bad.
organized. For this reason, a corporation organized in another country has no
personality to file suits in the Philippines.
ISSUE #2: 2. Even assuming for the sake of argument that respondents have the capacity
1. This issue must be resolved in a separate proceeding. to file the petition, we find merit in the issue raised by petitioners against the
2. It must be noted that the hearing conducted in the trial court was merely a injunction writ issued.
preliminary hearing relating to the issuance of the injunctive writ. 3. Before an injunctive writ can be issued:
a. In order to fully appreciate the facts of this case and the surrounding a. It is essential that the following requisites are present:
circumstances relating to the agreements and contract involved, i. (1) there must be a right in esse or the existence of a right
further proof should be presented for consideration of the court. to be protected; and
b. Likewise, corollary matters, such as whether either of the parties is ii. (2) the act against which injunction to be directed is a
liable for damages and to what extent, cannot be resolved with violation of such right.
absolute certainty, thus rendering any decision we might make b. The onus probandi is on movant to show that there exists a right to
incomplete as to fully dispose of this case. be protected, which is directly threatened by the act sought to be
3. More importantly, it is evident that CDC must be made a proper party in any enjoined.
case which seeks to resolve the effectivity or ineffectivity of its disapproval of c. There must be a showing that the invasion of the right is material and
the assignment made between petitioners and respondent German substantial, that the right of complainant is clear and unmistakable,
Consortium. and that there is an urgent and paramount necessity for the writ to
a. Where, as in the instant case, CDC is not impleaded as a party, any prevent a serious damage.
decision of the court which will inevitably affect or involve CDC 4. At the time of its application for an injunctive writ, respondents' right to operate
cannot be deemed binding on it. and manage the waste management center, to the exclusion of or without any
participation by petitioner ERTI, cannot be said to be clear and unmistakable.
ISSUE #3: a. The MOA executed between respondents and petitioner ERTI has
1. We have ruled in several cases that arbitration agreements are valid, binding, not yet been judicially declared as rescinded when the complaint was
enforceable and not contrary to public policy such that when there obtains a lodged in court.
written provision for arbitration which is not complied with, the trial court b. Hence, a cloud of doubt exists over respondent German
should suspend the proceedings and order the parties to proceed to Consortium's exclusive right relating to the waste management
arbitration in accordance with the terms of their agreement. center.
2. But there are exceptions to this rule.
a. Even if there is an arbitration clause, there are instances when DISPOSITION: WHEREFORE, the decision of the Court of Appeals in CA-G.R. SP
referral to arbitration does not appear to be the most prudent action. No. 68923 dated May 15, 2003 is REVERSED and SET ASIDE. The Orders of the trial
b. The object of arbitration is to allow the expeditious determination of court dated June 28, 2001 and November 21, 2001 are ANNULLED and SET ASIDE
a dispute. and Civil Case No. 10049 is DISMISSED for lack of legal capacity of respondents to
c. Clearly, the issue before us could not be speedily and efficiently institute the action. Costs against respondents.
resolved in its entirety if we allow simultaneous arbitration
proceedings and trial, or suspension of trial pending arbitration.
3. As discussed earlier, the dispute between respondent German Consortium
and petitioners involves the disapproval by the CDC of the assignment by the
German Consortium of its rights under the Contract for Services to petitioner
ERTI. Admittedly, the arbitration clause is contained in the MOA to which only
the German Consortium and petitioner ERTI were parties.
a. Even if the case is brought before an arbitration panel, the decision
will not be binding upon CDC who is a non-party to the arbitration
agreement.
b. What is more, the arbitration panel will not be able to completely
dispose of all the issues of this case without including CDC in its
proceedings.
c. Accordingly, the interest of justice would only be served if the trial
court hears and adjudicates the case in a single and complete
proceeding.

ISSUE #4:
1. At the outset, it must be noted that with the finding that the German
Consortium is without any personality to file the petition with the trial court, the
propriety of the injunction writ issued is already moot and academic.