Investment Law Digests – For Sept.
20 and 27 2019 Only
Eriks vs CA
Doctrine
• Doing business without a license, no access to courts, Corporation
code
o 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
o REMEDY - By this judgment, we are not foreclosing petitioner's
right to collect payment. Res judicata does not set in a case
dismissed for lack of capacity to sue, because there has been no
determination on the merits. 16Moreover, this Court has ruled
that subsequent acquisition of the license will cure the lack of
capacity at the time of the execution of the contract.
• Doing business under RA 7042
o The phrase "doing business" shall include soliciting orders,
service contracts, opening offices, whether called "liaison"
offices or branches; appointing representatives or distributors
domiciled in the Philippines or who in any calendar year stay in
the country for a period or periods totalling one hundred
eight(y) (180) days or more; participating in the management,
supervision or control of any domestic business, firm, entity or
corporation in the Philippines; and any other act or acts that
imply a continuity of commercial dealings or arrangements, and
contemplate to that extent the performance of acts or works,or
the exercise of some of the functions normally incident to, and
in progressive prosecution of, commercial gain or of the
purpose and object of the business organization: Provided,
however, That the phrase "doing business" shall not be deemed
to include mere investment as a shareholder by a foreign entity
in domestic corporations duly registered to do business, and/or
the exercise of rights as such investor; nor having a nominee
director or officer to represent its interests in such corporation;
nor appointing a representative or distributor domiciled in the
Philippines which transacts business in its own name and for its
own account.
Facts
• Petitioner Eriks is a non-resident foreign corporation (Singapore)
engaged in the business of selling elements used in sealing pumps,
valves and pipes for industrial purposes. Respondent Delrene EB
Controls Center ordered and received from petitioner various items
which were delivered via airfreight. Transfers of goods were
perfected in Singapore, for private respondent's account, F.O.B.
Singapore, with a 90day credit term. Petitioner demanded for
payment but respondent refused to do so.
• Petitioner filed with RTC for recovery of the amount plus interest.
Respondent filed a MtD on the ground that petitioner is a foreign corp
without a license. RTC granted the petition to dismiss and argued that
it is not an 'isolated transaction' but rather a series of transactions
and petitioner is without legal capacity to sue.
Issue
• Is a foreign corporation which sold its products sixteen times over a
five-month period to the same Filipino buyer without first obtaining a
license to do business in the Philippines, prohibited from maintaining
an action to collect payment therefor in Philippine courts? In other
words, is such foreign corporation "doing business" in the Philippines
without the required license and thus barred access to our court
system?
Ruling
• The corporation code provides
o Doing business without a license. — No foreign corporation
transacting business in the Philippines without a license, or its
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successors or assigns, shall be permitted to maintain or
intervene in any action, suit or proceeding in any court or
administrative agency of the Philippines; but such corporation
may be sued or proceeded against before Philippine courts or
administrative tribunals on any valid cause of action recognized
under Philippine laws.
• The aforementioned provision prohibits, not merely absence of the
prescribed license, but it also bars a foreign corporation "doing
business" in the Philippines without such license access to our
courts.8 A foreign corporation without such license is not ipso facto
incapacitated from bringing an action. A license is necessary only if it
is "transacting or doing business in the country. However, there is no
definitive rule on what constitutes "doing," "engaging in," or
"transacting" business. The Corporation Code itself does not define
such terms.
• Doing business according to RA 7042
o (d) the phrase "doing business" shall include soliciting orders,
service contracts, opening offices, whether called "liaison"
offices or branches; appointing representatives or distributors
domiciled in the Philippines or who in any calendar year stay in
the country for a period or periods totalling one hundred
eight(y) (180) days or more; participating in the management,
supervision or control of any domestic business, firm, entity or
corporation in the Philippines; and any other act or acts that
imply a continuity of commercial dealings or arrangements, and
contemplate to that extent the performance of acts or works,or
the exercise of some of the functions normally incident to, and
in progressive prosecution of, commercial gain or of the
purpose and object of the business organization: Provided,
however, That the phrase "doing business" shall not be deemed
to include mere investment as a shareholder by a foreign entity
in domestic corporations duly registered to do business, and/or
the exercise of rights as such investor; nor having a nominee
director or officer to represent its interests in such corporation;
nor appointing a representative or distributor domiciled in the
Philippines which transacts business in its own name and for its
own account.
• 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.
• The accepted rule in jurisprudence is that each case must be judged in
the light of its own environmental circumstances. It should be kept in
mind that the purpose of the law is to subject the foreign corporation
doing business in the Philippines to the jurisdiction of our courts. It is
not to prevent the foreign corporation from performing single or
isolated acts, but to bar it from acquiring a domicile for the purpose of
business without first taking the steps necessary to render it
amenable to suits in the local courts.
• We find no reason to disagree with both lower courts. More than the
sheer number of transactions entered into, a clear and unmistakable
intention on the part of petitioner to continue the body of its business
in the Philippines is more than apparent.
• Thus, we hold that the series of transactions in question could not
have been isolated or casual transactions. What is determinative of
"doing business" is not really the number or the quantity of the
transactions, but more importantly, the intention of an entity to
continue the body of its business in the country. The number and
quantity are merely evidence of such intention. The phrase "isolated
transaction" has a definite and fixed meaning, i.e. a transaction or
series of transactions set apart from the common business of a
foreign enterprise in the sense that there is no intention to engage in
a progressive pursuit of the purpose and object of the business
organization. Whether a foreign corporation is "doing business" does
not necessarily depend upon the frequency of its transactions, but
more upon the nature and character of the transactions.
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Investment Law Digests – For Sept. 20 and 27 2019 Only
• REMEDY - By this judgment, we are not foreclosing petitioner's right
to collect payment. Res judicata does not set in a case dismissed for
lack of capacity to sue, because there has been no determination on
the merits. 16Moreover, this Court has ruled that subsequent
acquisition of the license will cure the lack of capacity at the time of
the execution of the contract.
Agilent Tech. SG vs Integrated Silicon Tech PH
Doctrines
• Elements of res judicata
o Former final judgement
o Court rendering former judgement has jurisdiction over the
parties and subject matter
o Judgement was based on merits
o Similarity of parties, subject matter and cause of action
• Doing business without a license, Corporation Code
o 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.
o Exception
▪ Doctrine of estoppel - 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
• Principles regarding the right of a foreign corporation to bring suit in
PH courts
o if a foreign corporation does business in the Philippines without
a license, it cannot sue before the Philippine courts
o 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
o 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 corporation’s corporate personality in a suit brought
before Philippine courts
o if a foreign corporation does business in the Philippines with the
required license, it can sue before Philippine courts on any
transaction.
• General tests to determine whether or not a foreign corporation can
be considered as "doing business" in the Philippines
o Substance test
▪ 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.
o Continuity test
▪ 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.
Facts
• Petitioner Agilent is a foreign corporation (Singapore) not licensed to
do business in the PH. Respondent is a private domestic corporation
100% foreign owned. Integrated Silicon entered into a 5-year Value
Added Assembly Services Agreement ("VAASA") with Hewlett-
Packard Singapore (Pte.) Ltd. After 3 years, with the consent of
Integrated Silicon, HP-Singapore assigned all its rights and obligations
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in the VAASA to Agilent. Integrated Silicon filed a complaint for
"Specific Performance and Damages" against Agilent. Respondent
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
plus payment of damages.
• Agilent filed a separate complaint against Integrated Silicon for
"Specific Performance, Recovery of Possession, and Sum of Money
with Replevin, Preliminary Mandatory Injunction, and Damages",
before the RTC 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 damages.
• Respondents filed a Motion to Dismiss on the grounds of lack of
Agilent’s legal capacity to sue, litis pendentia, forum shoping an
failure to state a cause of action.
• RTC denied the MtD and granted Agilent's application for writ of
replevin
• Silicon, without filing an MR, filed a petition for certiorari with the CA
Issue
• Whether or not the Agilent as an unlicensed foreign coporation doing
business in the PH has legal capacity to file suit
Ruling
• Respondents argue that since Agilent is an unlicensed foreign
corporation doing business in the Philippines, it lacks the legal
capacity to file suit. 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 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. 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. 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. The challenge to Agilent’s 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. By the clear terms of the
VAASA, Agilent’s 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.
B. Van Zuiden Bros. Ltd. Vs GVTL Mftg
Doctrine
• Unlicensed foreign corporations, capacity to sue
o An unlicensed foreign corporation DOING business in the
Philippines cannot sue before Philippine courts.
o An unlicensed foreign corporation NOT DOING business in the
Philippines can sue before Philippine courts.
• Doing business in the Philippines
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o An essential condition to be considered as "doing business" in
the Philippines is the actual performance of specific commercial
acts within the territory of the Philippines for the plain reason
that the Philippines has no jurisdiction over commercial acts
performed in foreign territories.
o Here, there is no showing that petitioner performed within the
Philippine territory the specific acts of doing business
mentioned in Section 3(d) of RA 7042.
o Petitioner did not also open an office here in the Philippines,
appoint a representative or distributor, or manage, supervise or
control a local business. While petitioner and respondent
entered into a series of transactions implying a continuity of
commercial dealings, the perfection and consummation of
these transactions were done outside the Philippine.
o 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.
o Actual transaction of business within the Philippine territory is
an essential requisite for the Philippines 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.
Facts
• Zuiden (petitioner) is a HK Corp not engaged in business in the PH.
GVTL (respondent) purchased several lace products from petitioner.
The agreement was that petitioner delivers products purchased by
respondent to a certain HK corp - Kenzar. Kenzar had the obligation to
deliver the products to the PH and to follow the respondent's
instructions. Petitioner concluded that upon delivery of the goods to
Kenzar the transaction is completed and petitioner is liable to pay the
items.
• Respondent suddenly has failed and refused to pay the agreed
purchase price for several deliveries ordered by it and delivered by
petitioner despite repeated demands and promises to pay.
• Respondent filed a Motion to Dismiss on the ground that the
petitioner lacks the capacity to sue and that the latter is doing
business in the PH without securing the required license and such, is
not entitled to sue before PH courts. The trial court dismissed the
complaint and was sustained by the CA.
• In Eriks, while the deliveries of the goods were perfected in Singapore,
this Court still found Eriks to be engaged in business in the Philippines.
Thus, the Court of Appeals concluded that the place of delivery of the
goods (or the place where the transaction took place) is not material
in determining whether a foreign corporation is doing business in the
Philippines. The Court of Appeals held that what is material are the
proponents to the transaction, as well as the parties to be benefited
and obligated by the transaction.
• In this case, the Court of Appeals found that the parties entered into a
contract of sale whereby petitioner sold lace products to respondent
in a series of transactions. While petitioner delivered the goods in
Hong Kong to Kenzar, Ltd. (Kenzar), another Hong Kong company, the
party with whom petitioner transacted was actually respondent, a
Philippine corporation, and not Kenzar. The Court of Appeals believed
Kenzar is merely a shipping company. The Court of Appeals concluded
that the delivery of the goods in Hong Kong did not exempt petitioner
from being considered as doing business in the Philippines.
Issue
• Whether or not the petitioner has legal capacity to sue before PH
courts
Ruling
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• Yes. An unlicensed foreign corporation doing business in the
Philippines cannot sue before Philippine courts. On the other hand, an
unlicensed foreign corporation not doing business in the Philippines
can sue before Philippine courts. In the present controversy,
petitioner is a foreign corporation which claims that it is not doing
business in the Philippines. As such, it needs no license to institute a
collection suit against respondent before Philippine courts. The series
of transactions between petitioner and respondent cannot be
classified as "doing business" in the Philippines under Section 3(d) of
RA 7042. An essential condition to be considered as "doing business"
in the Philippines is the actual performance of specific commercial
acts within the territory of the Philippines for the plain reason that the
Philippines has no jurisdiction over commercial acts performed in
foreign territories. Here, there is no showing that petitioner
performed within the Philippine territory the specific acts of doing
business mentioned in Section 3(d) of RA 7042. Petitioner did not also
open an office here in the Philippines, appoint a representative or
distributor, or manage, supervise or control a local business. While
petitioner and respondent entered into a series of transactions
implying a continuity of commercial dealings, the perfection and
consummation of these transactions were done outside the
Philippine.
• In Eriks, respondent therein alleged the existence of a distributorship
agreement between him and the foreign corporation. If duly
established, such distributorship agreement could support
respondent’s claim that petitioner was indeed doing business in the
Philippines. Here, there is no such or similar agreement between
petitioner and respondent.
• 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 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.
Hahn vs CA
Doctrine
• Representative/Distributor transacting in its name and for its account
o 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 (Omnibus Investment Code).
• Representative / Licensing Agreement
o This case fits where a 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.
o 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.
o 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.
Facts
• Petitioner Hahn is a PH citizen doing business in the PH. Respondent
BMW is a nonresident foreign corporation of Germany. Petitioner
executed in favor of private respondent a "Deed of Assignment with
Special Power of Attorney," Per the agreement, the parties
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"continue[d] business relations as has been usual in the past without a
formal contract."
• 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.
• BMW was unhappy with the performance and standards of petitioner
and wished to amend the existing contract but the latter refused. This
prompted BMW to terminate the exclusive dealership.
• Petitioner argued that the termination constituted a breach of
assignment, that as long as the assignment subsisted, petitioner is the
exclusive dealer. BMW even offered that both CMC and Hahn be
jointly able to import and distribute their cards but petitioner refused
• Petitioner then filed an action for specific performance and damages
against BMW to compel it to continue the existing dealership with
TRO and preliminary injunction to prevent BMW from terminating his
exclusive dealership. Petitioner argued that BMW is a foreign
corppration doing business in the PH and may be served with
summons through the Sec. Of DTI
• The RTC issued a TRO and were served to respondent BMW via DTI
which was sent registered mail.
• BMW moved to dismiss the case contending the lack of jurisdiction of
the trial court even though summons were sent via DTI. Since BMW
was a foreign corp. not doing business in the PH and that the Deed of
Assignment was an isolated transaction and that Hahn was not an
agent and was merely a middleman transacting business in his own
name and for his own account.
• Petitioner argued that BMW was doing business in the PH with Hahn
as the agent shown by the invoices and order forms.
• BMW filed an action for certiorari with the CA which ruled that BMW
was not doing business in the PH and that Hahn acted in his own
name and for his own account independently of BMW.
Issue
• Whether or not BMW is doing business in the PH
Ruling
• Yes. This case fits where a 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. 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. 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. 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. In effect, BMW
was holding Hahn accountable to it under the 1967 Agreement.
SEC-OSG Opinion 17-03
Doctrine
• Twin characterization test, foreign corporation doing business in PH
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o 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
o The foreign corporation is engaged in activities which implies a
continuity of commercial dealings and arrangements and
contemplates to that extent, the performance of acts or works
or exercise of some of the functions normally incident to, and in
progressive prosecution of, the purpose and object of its
organization
• Hallmark of twin characterization test
o The fact it derives income from its activities
o Not the number or quantity of transactions but the intention of
the entity to continue the body of its business in the country
Facts
• Sony Computer Entertainment HK (SCEH) is a HK company and
operates Sony Entertainment Network (SEN)
• SEN is an online platform which requires an account to participate,
persons in the PH can create a SEN account, participate in the SEN
community and purchase content and sevices from SEN even if SCEH
does not have a physical presence in the PH.
• SEN employees are HK based while SEN servers are in the US
Issue
• SCEH is seeking confirmation whether or not the following as
considered as doing business in the PH
o Offer and sale of SEN services in the internet without restricting
persons located in the PH from availing the service
(maintenance)
o Assuming maintenance is not doing business in PH, will
aceepting online payments through any currency (incl. PHP) be
considered doing business
o Marketing or advertising the SEN through online and printed
publications, TV and radio commecials be doing business in the
PH
o Hiring independent contractors for marketing or advertising of
its products and selling of prepaid cards in relation to SEN
Ruling
• Twin characterization test, foreign corporation doing business in PH
o 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
o The foreign corporation is engaged in activities which implies a
continuity of commercial dealings and arrangements and
contemplates to that extent, the performance of acts or works
or exercise of some of the functions normally incident to, and in
progressive prosecution of, the purpose and object of its
organization
• Why SCEH is considered doing business in the PH based on the twin
characterization test
o SCEH will be the continuing body or substance of the business
for which it was organized in the PH regarding
▪ Funding of the online wallet
▪ Offering and selling SEN services
▪ Accepting online payments for SEN in any currency
▪ Marketing or advertising
▪ Hiring independent contractors for marketing and
advertising
o Salient points of online commercial transactions done in PH
▪ Creation of a new SEN account will take place in the PH to
participate in SEN
▪ Offering for sale and sale of online content of SEN will be
made to the SEN account holder in the PH
▪ Funding of the SEN online wallet will take place in the PH
▪ Payment of the sale of online content and services of SEN
will be made from the PH by the SEN account holder
▪ Delivery of SEN online content and services of SEN will be
made in the PH
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Soriano vs Ong Hoo
Doctrine
• Supreme court decided to not do anything
Facts
• Soriano siblings were registered co-owners and their father was the
registered usufructuary of a lot. On 1944, co-owners and usufructuary
sold the lots to Ong Hoo, who then registered the deed of sale and
executed in his favor a TCT in his name.
• Ong Hoo sold the land to Chung Te, Ching Leng and Ching Tan and was
issued a TCT under their name.
• Complaint alleges that both the original sale and subsequent transfers
made are null and void because the vendee and transferees are
Chinese citizens and cannot acquire ownership of private agricultural
lands and that the sale should be declared null and void and that
Soriano be declared as owner of the lots upon reimbursement of the
price of the sale.
• CFI ruled that the sale cannot be annulled on the principle of in pari
delictor is not applicable to the vendors as the constitutional
prohibition against the acquisition of agricultural lands by alien in
absolute and unconditional; it contains no saving clause in favor of
those who were not aware of its meaning or implications.
• It is also claimed that, in consonance with the policy of the State to
retain lands in favor of its citizens and prohibiting aliens from
acquiring them the vendor in the case at bar should be allowed to
recover back the property in the same manner as holders of
homesteads who have disposed of the same
Issue
• Whether or not petitioner is entitled to recover the property
Ruling
• In the case of the constitutional prohibition, the law is silent; it merely
prohibits acquisition of land by foreigners. The prohibition stops
there; as to the effects or results of a violation of the prohibition, both
with respect to the citizen selling his land and the alien purchasing or
acquiring the same, the Constitution is silent. If the citizen voluntarily
disposes of his property, it would seem too much to expect that the
law should order the return of the property to him. In the United
States where a prohibition similar to our, constitutional prohibition
exists, it has been held that the vendor has no recourse against the
vendee despite the alien's disability to hold the property, and that it is
only the State that is entitled by proceedings in the nature of office
found to have a forfeiture or escheat declared against the vendee
who is incapable of holding title.
• As the Constitution is silent as to the effects or consequences of a
sale by a citizen of his land to an alien, and as both the citizen and the
alien have violated the law, none of them should have a recourse
against, the other, and it should only be the State that should be
allowed to intervene and determine what is to be done with the
property subject of the violation. We have said that what the State
should do or could do in such matters is a matter of public policy,
entirely beyond the scope of judicial authority.
• While the legislature has not definitely decided what policy should be
followed in cages of violations against, the constitutional prohibition,
courts of justice cannot go beyond by declaring the disposition to be
null and void as violative of the Constitution.
Halili vs CA
Doctrine
• When non-filipinos can legally own land
o Non-Filipinos cannot acquire or hold title to private lands or to
lands of the public domain, except only by way of legal
succession
• Effect of a subsequent sale by the disqualified alien vendee to a
qualified Filipino citizen
o If a subsequent sale by the disqualified alien to a qualified PH
citizen, the flaw in the original transaction is considered cured
and the title of the transferee is rendered valid
Facts
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• Simeon, a US citizen, died leaving real properties to his heirs - his
widow (Helen) and son (David), a US citizen. Helen executed a
quitclaim transferring and conveying to David all her interest over the
land which they inherited from Simeon. David sold the parcel of land
to Emiliano and was issued in the latter's name. Petitioners who are
owners of the adjoining lot filed a complaint before the RTC
questioning the constitutionality and validity of the conveyances -
between Helen and David and between David and Emiliano, claiming
ownership is based on their right of legal redemption. RTC dismissed
the complaint and ruled that Helen's waiver of her inheritance in
favor of her son was not a contrary provision to the constitution
against sale of land to an alien.
• Petitioner filed an appeal with the CA, which was subsequently denied
and ruled that the subject land was urban, and that even if the
transfer of land to David was invalid, it cannot be redeemed since it
has passed on and was already owned by a qualified person.
Issue
• Whether or not the transfer of property to David is void
Ruling
• Non-Filipinos cannot acquire or hold title to private lands or to lands
of the public domain, except only by way of legal succession. If a
subsequent sale by the disqualified alien to a qualified PH citizen, the
flaw in the original transaction is considered cured and the title of the
transferee is rendered valid. Accordingly, since the disputed land is
now owned by Emiliano, a Filipino citizen, the prior invalid transfer
can no longer be assailed. The objective of the constitutional
provision — to keep our land in Filipino hands — has been served.
King vs Hernaez
Doctrine
• Anti-dummy law, prohibition of employment of non-management
foreign personnel in retail trade
o The language of the Anti-Dummy Law bans aliens' employment
in both control and non-control positions. They contend that
the words management, operation, administration and control,
followed by and blended with the words "whether as an officer,
employee or laborer therein", signify the legislative intent to
cover the entire scale of personnel activity so that even laborers
are excluded from employment, the only exemption being
technical personnel whose employment may be allowed with
the previous authorization of the President.
Facts
• King, a naturalized PH citizen, became owner of a grocery wholesale
and retail business previously owned by PH Cold Stores Inc. He sought
permission from the President of the PH to retain the services of 3 CN
employees. The Sec. Of Commerce and Industry recommended the
disapproval of the request on the ground that aliens may not be
appointed to operate or administer a retain business under Sec. 1 of
RA 1180 which requires that its capital be wholly owned by PH citizens
with exception to technical personnel only after securing
authorization from the President. The President agreed with the Sec.
Of Commerce and Industry and denied King's request to hire the 3 CN
workers as they were not technical positions under Commonwealth
Act 108.
• King filed a petition for declaratory relief, injuction and Mandamus
against the Sec. Of Commerce and Industry and Exec. Sec. with the
CFI. The CFI granted the writ of injunction. Respondents argued that
declaratory relief is no longer available there being a breach of the
statute meaning that the employment of the three Chinese as
salesmen and purchaser in the store of Macario King is a violation of
the Section 1 of the Retail Trade Act which provides that only citizens
of the Philippines can engage in retail trade, as well as of Section 2-A
of the Anti-Dummy Law which prohibits Chinese citizens to intervene
in the management, operation, administration or control of such
business, whether as an officer, employee or laborer with or without
remuneration and that Chinese employees are not technical men who
are exempted from the operation of the law, and even if they are,
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they need the authorization of the President which they failed to imperative that the law be interpreted in a manner that would stave
obtain in their case. The CFI ruled in favor of King. off any attempt at circumvention of this legislative purpose.
• Petitioners contend that their employment is not prohibited either by
the Retail Trade Law or the Anti-Dummy Law. The three Chinese
petitioners testified that they had nothing to do with the
management and control of the business, nor do they participate in
its profits outside of their monthly salaries. They had been employed
long before the enactment of Republic Act No. 1180. They only wait
for customers and sell according to the prices appearing on the tags
previously fixed by their manager Macario King.
• Respondents, on the other hand, sustain a different view. They hold
that the language of the Anti-Dummy Law bans aliens' employment in
both control and non-control positions. They contend that the words
management, operation, administration and control, followed by and
blended with the words "whether as an officer, employee or laborer
therein", signify the legislative intent to cover the entire scale of
personnel activity so that even laborers are excluded from
employment, the only exemption being technical personnel whose
employment may be allowed with the previous authorization of the
President.
Issue
• Is the employment of aliens in non-control positions in a retail
establishment or trade prohibited by the Anti-Dummy Law
Ruling
• Yes. When the law says that you cannot employ an alien in any
position pertaining to management, operation, administration and
control, "whether as an officer, employee, or laborer therein", it only
means one thing: the employment of a person who is not a Filipino
citizen even in a minor or clerical or non-control position is prohibited.
The reason is obvious: to plug any loophole or close any avenue that
an unscrupulous alien may resort to flout the law or defeat its
purpose, for no one can deny that while one may be employed in a
non-control position who apparently is harmless he may later turn out
to be a mere tool to further the evil designs of the employer. It is

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