FACILITIES MANAGEMENT CORPORATION, J. S. DREYER, and J. V. CATUIRA vs.

LEONARDO DE LA ROSA AND THE

HONORABLE COURT OF INDUSTRIAL RELATIONS [G.R. No. L-38649 March 26, 1979]
Petition for review on certiorari of the decision of the Court of Industrial Relations, dated February 14, 1972, ordering
petitioners herein to pay private respondent Leonardo de la Osa his overtime compensation, as wen as his swing shift
and graveyard shift premiums at the rate of fifty (50%) per cent of his basic sa (Annex E, p. 31, rollo).
The aforesaid decision was based on a report submitted by the Hearing Examiner, CIR (Dagupan City Branch), the
pertinent portions of which are quoted hereinbelow:::
In a petition filed on July 1, 1967, Leonardo dela Osa sought his reinstatement. with full backwages, as
well as the recovery of his overtime compensation, swing shift and graveyard shift differentials.
Petitioner alleged that he was employed by respondents as follows: (1) painter with an hourly rate of
$1.25 from March, 1964 to November, 1964, inclusive; (2) houseboy with an hourly rate of $1.26 from
December, 1964 to November, 1965, inclusive; (3) houseboy with an hourly rate of $1.33 from
December, 1965 to August, 1966, inclusive; and (4) cashier with an hourly rate of $1.40 from August,
1966 to March 27, 1967, inclusive. He further averred that from December, 1965 to August, 1966,
inclusive, he rendered overtime services daily and that this entire period was divided into swing and
graveyard shifts to which he was assigned, but he was not paid both overtime and night shift premiums
despite his repeated demands from respondents.
Respondents filed on August 7, 1967 their letter- answer without substantially denying the material
allegations of the basic petition but interposed the following special defenses, namely: That respondents
Facilities Management Corporation and J. S. Dreyer are domiciled in Wake Island which is beyond the
territorial jurisdiction of the Philippine Government; that respondent J. V. Catuira, though an employee
of respondent corporation presently stationed in Manila, is without power and authority of legal
representation; and that the employment contract between petitioner and respondent corporation
carries -the approval of the Department of Labor of the Philippines.
Subsequently on May 3, 1968. respondents filed a motion to dismiss the subject petition on the ground
that this Court has no Jurisdiction over the instant case, and on May 24, 1968, petitioner interposed an
opposition thereto. Said motion was denied by this Court in its Order issued on July 12, 1968 sustaining
jurisdiction in accordance with the prevailing doctrine of the Supreme Court in similar cases.
xxx xxx xxx
But before we consider and discuss the foregoing issues, let us first ascertain if this Court could acquire
jurisdiction over the case at bar, it having been contended by respondents that they are domiciled in
Wake Island which is beyond the territorial jurisdiction of the Philippine Government. To this incidental
question, it may be stated that while it is true the site of work is Identified as Wake Island, it is equally
true the place of hire is established in Manila (See Section B, Filipino Employment Contract, Exhibit '1').
Moreover, what is important is the fact that the contract of employment between the parties litigant was
shown to have been originally executed and subsequently renewed in Manila, as asserted by petitioner
and not denied by respondents. Hence, any dispute arising therefrom should necessarily be determined
in the place or venue where it was contracted.
xxx xxx xxx
From the evidence on hand, it has been proven beyond doubt that petitioner canvas assigned to and
performed work in respondent company at slight time which consisted of two different schedules,
namely, swing shift and graveyard shifts, particularly during his tenure as houseboy for the second period
and as cashier. Petitioner's testimony to this effect was not contradicted, much less rebutted, by
respondents, as revealed by the records. Since petitioner actually rendered night time services as
required by respondents, and considering the physical, moral and sociological effects arising from the
performance of such nocturnal duties, we think and honestly believe that petitioner should be
compensated at least fifty percent (50%) more than his basic wage rate. This night shift premium pay
would indeed be at par with the overtime compensation stipulated at one and one-half (1 ½) times of
the straight time rate.
 xxx xxx xxx (pp. 31-36, rollo).
Apropos before this Court were filed three (3) other cases involving the same petitioner, all of which had been finally
dispoded of, as follows:
G.R. No Date of Filing Disposition
1. L-37117 July 30, 1973 Petition denied for
lack of merit on Sept.
13, 1973. Motion for
Reconsideration
denied lack of
merit, Nov. 20,1973.
2. L-38781 June 17,1974 Petition denied for
lack of merit on June
21,1974.
3. L-39111-12 Sept. 2,1974 Case dismissed on Feb.
6, 1976, pursuant to
voluntary manifesta
tion of private respon
dent Inocente R. Riel
that his claims had all
been settled to his entire
satisfaction.
Incidentally, in connection with G.R. No. L-39111-12 (No. 3 above), WE found strong evidence that petitioner therein,
which is also the petitioner in the case at bar, "twisted the arm" of private respondent, when the latter in his
Manifestation dated July 3, 1975, stated:
3. ... Furthermore, since petitioner FMC is a foreign corporation domiciled in California, U.S.A. and has
never been engaged in business in the Philippines, nor does it have an agent or an office in this country,
there exists no valid reason for me to participate in the continuation and/or prosecution of this case (p.
194, rollo).
— as if jurisdiction depends on the will of the parties to a case. At any rate, considering that petitioner paid the claims of
private respondent, the case had become moot and academic. Besides, the fact of such payment amounts to an
acknowledgment on the part of petitioner of the jurisdiction of the court over it.
WE have also noted that the principal question involved in each of the above-numbered three (3) cases is more or less
Identical, to wit: Is the mere act by a non-resident foreign corporation of recruiting Filipino workers for its own use
abroad, in law doing business in the Philippines?
In the case at bar, which was filed with this Court on June 3, 1974, petitioners presented, inter alia, the following issue: ...
can the CIR validly affirm a judgment against persons domiciled outside and not doing business in the Philippines, and
over whom it did not acquire jurisdiction')
While it is true that the issues presented in the decided cases are worded differently from the principal issue raised in
the case at bar, the fact remains that they all boil down to one and the same issue, which was aptly formulated and ably
resolved by Mr. Justice Ramon C. Fernandez, then with the Court of Appeals and now a member of this Court, in CA-G.R.
No. SP-01485-R, later elevated to this Court on appeal by certiorari in Case G.R. No. L-37117 this case, the majority
opinion of the Court of Appeals, which was penned by Justice Fernandez and which WE hereby adopt, runs as follows:
The principal issue presented in this special civil action is whether petitioner has been 'doing business in
the Philippines' so that the service of summons upon its agent in the Philippines vested the Court of First
Instance of Manila with jurisdiction.
From the facts of record, the petitioner may be considered as doing busuness un the Philippines within
the the scope of Section 14, Rule 14 of the Rules of the Court which provide:
 SEC 14. Service upon private foreign corporations. If the defendant is a foreign
corporation or a non-resident 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.
Indeed, the petitioner, in compliance with Act 2486 as implemented by Department of Labor Order No.
IV dated May 20, 1968 had to appoint Jaime V. Catuira, 1322 A. Mabini, Ermita, Manila as agent for FMC
with authority to execute Employment Contracts and receive, in behalf of that corporation, legal services
from and be bound by processes of the Philippine Courts of Justice, for as long as he remains an
employee of FMC (Annex 'I', rollo, p. 56). It is a fact that when the summons for the petitioner was
served on Jaime V. Catuira he was still in the employ of the FMC.
In his motion to dismiss Annex B', p. 19, Rollo), petitioner admits that Mr. Catuira represented it in this
country 'for the purpose of making arrangements for the approval by the Department of Labor of the
employment of Filipinos who are recruited by the Company as its own employees for assignment
abroad.' In effect, Mr. Catuira was a on officer representing petitioner in the Philippines.
Under the rules and regulations promulgated by the Board of Investments which took effect Feb. 3,
1969, implementing Rep. Act No. 5455, which took effect Sept. 30, 1968, the phrase 'doing business' has
been exemption with illustrations, among them being as follows:
xxx xxx xxx
(f) the performance within the Philippines of any act or combination of acts enumerated
in section l(l) of the Act shall constitute 'doing business' therein. in particular, 'doing
business includes:
(1) Soliciting orders, purchases (sales) or service contracts. Concrete and specific
solicitations by a foreign firm, not acting independently of the foreign firm amounting to
negotiation or fixing of the terms and conditions of sales or service contracts, regardless
of whether the contracts are actually reduced to writing, shall constitute doing business
even if the enterprise has no office or fixed place of business in the Philippines. xxx
(2) Appointing a representative or distributor who is dociled in the Philippines, unless
said representative or distributor has an independent status, i.e., it transacts business in
its name and for its own account, and not in the name or for the account of the
principal.
xxx xxx xxx
(4) Opening offices, whether called 'liaison'offices, agencies or branches, unless proved
otherwise.
xxx xxx xxx
(10) 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, or in the progressive prosecution
of, commercial gain or of the purpose and objective of the business organization (54 O.G.
53).
Recently decided by this Court — again thru Mr. Justice Ramon C. Fernandez — which is similar to the case at bar, is G.R.
No. L-26809, entitled Aetna Casualty & Curety Company, plaintiff- appellant versus Pacific Star Line, the Bradman Co.,
Inc., Manila Port Service and/or Manila Railroad Company, Inc., defendants-appellees." The case is an appeal from the
decision of the Court of First Instance of Manila, Branch XVI, in its Civil Case No. 53074, entitled Aetna Casualty & Surety
Company vs. Pacific Star Lines, The Bradman Co., Inc., Manila Port Service and/or Manila Railroad Company, Inc."
dismissing the complaint on the ground that the plaintiff has no legal capacity to bring the suit.
It appears that on February 11, 1963, Smith Bell & Co. (Philippines), Inc. and Aetna Casualty & Surety Co., Inc., as
subrogee instituted Civil Case No. 53074 in the Court of First Instance of Manila against Pacific Star Line, The Bradman
Co., Inc., Manila Port Service and/or Manila Railroad Company, Inc. to recover the amount of US$2,300.00 representing
the value of stolen and damaged cargo plus litigation expenses and exemplary damages in the amounts of P1,000.00 and
P2,000.00, respectively, with legal interest thereon from the filing of the suit and costs.
After all the defendants had filed their answer, the defendants Manila Port Service and Manila Railroad Company, Inc.
amended their answer to allege that the plaintiff, Aetna Casualty & Surety Company, is a foreign corporation not duly
licensed to do business in the Philippines and, therefore, without capacity to sue and be sued.
After the parties submitted a partial stipulation of facts and additional documentary evidence, the case was submitted
for decision of the trial court, which dismissed the complaint on the ground that the plaintiff insurance company is
subject to the requirements of Sections 68 and 69 of Act 1459, as amended, and for its failure to comply therewith, it has
no legal capacity to bring suit in this jurisdiction. Plaintiff appealed to this Court.
The main issue involved in the appeal is whether or not the plaintiff appellant has been doing business in the Philippines,
considering the fact that it has no license to transact business in the Philippines as a foreign corporation. WE ruled:
The object of Sections 68 and 69 of the Corporation Law was not to prevent the foreign corporation from
performing single acts, but to prevent it from acquiring a domicile for the purpose of business without
taking the steps necessary to render it amenable to suit in the local courts. It was never the purpose of
the Legislature to exclude a foreign corporation which happens to obtain an isolated order for business
from the Philippines, from securing redress in the Philippine courts (Marshall Co. vs. Elser & Co., 46 Phil
70,75).
In Mentholatum Co., Inc., et al vs- M Court rules that-
No general rule or governing principle can be laid down as to what constitutes 'doing' or
'engaging in' or 'transacting' business. Indeed, each case must be judged in the light of
its peculiar environmental circumstances. The true test, however, seems to be whether
the foreign corporation is continuing the body or substance of the business or enterprise
for which it was organized or whether it has substantially retired from it and turned it
over to another. (Traction Cos. v. Collectors of Int Revenue [C.C.A Ohio], 223 F. 984, 987).
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 (Griffin v. Implement Dealers' Mut. Fire Ins. Co., 241 N.W. 75,
77; Pauline Oil & Gas Co. v. Mutual Tank Line Co., 246 P. 851, 852, 118 Okl. III;
Automotive Material Co. vs. American Standard Metal Products Corp., 158 N.E. 698, 703,
327 III. 367)'. 72 Phil. 524, 528-529.
And in Eastboard Navigation, Ltd., et al. vs. Juan Ysmael & Co., Inc., this Court held:
(d) While plaintiff is a foreign corporation without license to transact business in the
Philippines, it does not follow that it has no capacity to bring the present action. Such
license is not necessary because it is not engaged in business in the Philippines. In fact,
the transaction herein involved is the first business undertaken by plaintiff in the
Philippines, although on a previous occasion plaintiff's vessel was chartered by the
National Rice and Corn Corporation to carry rice cargo from abroad to the Philippines.
These two isolated transactions do not constitute engaging in business in the Philippines
within the purview of Sections 68 and 69 of the Corporation Law so as to bar plaintiff
from seeking redress in our courts. (Marshall Wens Co. vs. Henry W. Elser & Co. 49 Phil.,
70; Pacific Vegetable Oil Corporation vs. Angel O. Singson, G.R. No. L-7917, April 29,
1955)'. 102 Phil., pp. 1, 18.
Based on the rulings laid down in the foregoing cases, it cannot be said that the Aetna Casualty & Surety
Company is transacting business of insurance in the Philippines for which it must have a license. The
Contract of insurance was entered into in New York, U.S.A., and payment was made to the consignee in
 its New York branch. It appears from the list of cases issued by the Clerk of Court of the Court of First
Instance of Manila that all the actions, except two (2) cases filed by Smith, Beer & Co., Inc. against the
Aetna Casualty & Surety Company, are claims against the shipper and the arrastre operators just like the
case at bar.
Consequently, since the appellant Aetna Casualty & Surety Company is not engaged in the business of
insurance in the Philippines but is merely collecting a claim assigned to it by the consignee, it is not
barred from filing the instant case although it has not secured a license to transact insurance business in
the Philippines.
Indeed, if a foreign corporation, not engaged in business in the Philippines, is not banned from seeking redress from
courts in the Philippines, a fortiori, that same corporation cannot claim exemption from being sued in Philippine courts
for acts done against a person or persons in the Philippines.
WHEREFORE, THE PETITION IS HEREBY DENIED WITH COSTS AGAINST THE PETITIONERS.
SO ORDERED.
THE HOME INSURANCE COMPANY vs. EASTERN SHIPPING LINES and/or ANGEL JOSE TRANSPORTATION, INC. and HON.
A. MELENCIO-HERRERA, Presiding Judge of the Manila CFI [G.R. No. L-34382 July 20, 1983]
Questioned in these consolidated petitions for review on certiorari are the decisions of the Court of First Instance of
Manila, Branch XVII, dismissing the complaints in Civil Case No. 71923 and in Civil Case No. 71694, on the ground that
plaintiff therein, now appellant, had failed to prove its capacity to sue.
There is no dispute over the facts of these cases for recovery of maritime damages. In L-34382, the facts are found in the
decision of the respondent court which stated:
On or about January 13, 1967, S. Kajita & Co., on behalf of Atlas Consolidated Mining & Development
Corporation, shipped on board the SS "Eastern Jupiter' from Osaka, Japan, 2,361 coils of "Black Hot
Rolled Copper Wire Rods." The said VESSEL is owned and operated by defendant Eastern Shipping Lines
(CARRIER). The shipment was covered by Bill of Lading No. O-MA-9, with arrival notice to Phelps Dodge
Copper Products Corporation of the Philippines (CONSIGNEE) at Manila. The shipment was insured with
plaintiff against all risks in the amount of P1,580,105.06 under its Insurance Policy No. AS-73633.
xxx xxx xxx
The coils discharged from the VESSEL numbered 2,361, of which 53 were in bad order. What the
CONSIGNEE ultimately received at its warehouse was the same number of 2,361 coils with 73 coils loose
and partly cut, and 28 coils entangled, partly cut, and which had to be considered as scrap. Upon
weighing at CONSIGNEE's warehouse, the 2,361 coils were found to weight 263,940.85 kilos as against its
invoiced weight of 264,534.00 kilos or a net loss/shortage of 593.15 kilos, according to Exhibit "A", or
1,209,56 lbs., according to the claims presented by the consignee against the plaintiff (Exhibit "D-1"), the
CARRIER (Exhibit "J-1"), and the TRANSPORTATION COMPANY (Exhibit "K- l").
For the loss/damage suffered by the cargo, plaintiff paid the consignee under its insurance policy the
amount of P3,260.44, by virtue of which plaintiff became subrogated to the rights and actions of the
CONSIGNEE. Plaintiff made demands for payment against the CARRIER and the TRANSPORTATION
COMPANY for reimbursement of the aforesaid amount but each refused to pay the same. ...
The facts of L-34383 are found in the decision of the lower court as follows:
On or about December 22, 1966, the Hansa Transport Kontor shipped from Bremen, Germany, 30
packages of Service Parts of Farm Equipment and Implements on board the VESSEL, SS "NEDER RIJN"
owned by the defendant, N. V. Nedlloyd Lijnen, and represented in the Philippines by its local agent, the
defendant Columbian Philippines, Inc. (CARRIER). The shipment was covered by Bill of Lading No. 22 for
transportation to, and delivery at, Manila, in favor of the consignee, international Harvester Macleod,
Inc. (CONSIGNEE). The shipment was insured with plaintiff company under its Cargo Policy No. AS-73735
"with average terms" for P98,567.79.
xxx xxx xxx
The packages discharged from the VESSEL numbered 29, of which seven packages were found to be in
bad order. What the CONSIGNEE ultimately received at its warehouse was the same number of 29
packages with 9 packages in bad order. Out of these 9 packages, 1 package was accepted by the
CONSIGNEE in good order due to the negligible damages sustained. Upon inspection at the consignee's
warehouse, the contents of 3 out of the 8 cases were also found to be complete and intact, leaving 5
cases in bad order. The contents of these 5 packages showed several items missing in the total amount of
$131.14; while the contents of the undelivered 1 package were valued at $394.66, or a total of $525.80
or P2,426.98.
For the short-delivery of 1 package and the missing items in 5 other packages, plaintiff paid the
CONSIGNEE under its Insurance Cargo Policy the amount of P2,426.98, by virtue of which plaintiff
became subrogated to the rights and actions of the CONSIGNEE. Demands were made on defendants
CARRIER and CONSIGNEE for reimbursement thereof but they failed and refused to pay the same.
In both cases, the petitioner-appellant made the following averment regarding its capacity to sue:
The plaintiff is a foreign insurance company duly authorized to do business in the Philippines through its agent, Mr.
VICTOR H. BELLO, of legal age and with office address at Oledan Building, Ayala Avenue, Makati, Rizal.
In L-34382, the respondent-appellee Eastern Shipping Lines, Inc., filed its answer and alleged that it:
Denies the allegations of Paragraph I which refer to plaintiff's capacity to sue for lack of knowledge or information
sufficient to form a belief as to the truth thereof.
Respondent-appellee, Angel Jose Transportation, Inc., in turn filed its answer admitting the allegations of the complaint,
regarding the capacity of plaintiff-appellant. The pertinent paragraph of this answer reads as follows:
Angel Jose Admits the jurisdictional averments in paragraphs 1, 2, and 3 of the heading Parties.
In L-34383, the respondents-appellees N. V. Nedlloyd Lijhen, Columbian Philippines, Inc. and Guacods, Inc., filed their
answers. They denied the petitioner-appellant's capacity to sue for lack of knowledge or information sufficient to form a
belief as to the truth thereof.
As earlier stated, the respondent court dismissed the complaints in the two cases on the same ground, that the plaintiff
failed to prove its capacity to sue. The court reasoned as follows:
In the opinion of the Court, if plaintiff had the capacity to sue, the Court should hold that a) defendant
Eastern Shipping Lines should pay plaintiff the sum of P1,630.22 with interest at the legal rate from
January 5, 1968, the date of the institution of the Complaint, until fully paid; b) defendant Angel Jose
Transportation, Inc. should pay plaintiff the sum of P1,630.22 also with interest at the legal rate from
January 5, 1968 until fully paid; c) the counterclaim of defendant Angel Jose transportation, Inc. should
be ordered dismissed; and d) each defendant to pay one-half of the costs.
The Court is of the opinion that Section 68 of the Corporation Law reflects a policy designed to protect
the public interest. Hence, although defendants have not raised the question of plaintiff's compliance
with that provision of law, the Court has resolved to take the matter into account.
A suing foreign corporation, like plaintiff, has to plead affirmatively and prove either that the transaction
upon which it bases its complaint is an isolated one, or that it is licensed to transact business in this
country, failing which, it will be deemed that it has no valid cause of action (Atlantic Mutual Ins. Co. vs.
Cebu Stevedoring Co., Inc., 17 SCRA 1037). In view of the number of cases filed by plaintiff before this
Court, of which judicial cognizance can be taken, and under the ruling in Far East International Import
and Export Corporation vs. Hankai Koayo Co., 6 SCRA 725, it has to be held that plaintiff is doing business
in the Philippines. Consequently, it must have a license under Section 68 of the Corporation Law before it
can be allowed to sue.
The situation of plaintiff under said Section 68 has been described as follows in Civil Case No. 71923 of
this Court, entitled 'Home Insurance Co. vs. N. V. Nedlloyd Lijnen, of which judicial cognizance can also be
taken:
Exhibit "R",presented by plaintiff is a certified copy of a license, dated July 1, 1967,
issued by the Office of the Insurance Commissioner authorizing plaintiff to transact
insurance business in this country. By virtue of Section 176 of the Insurance Law, it has to
be presumed that a license to transact business under Section 68 of the Corporation Law
had previously been issued to plaintiff. No copy thereof, however, was submitted for a
reason unknown. The date of that license must not have been much anterior to July 1,
1967. The preponderance of the evidence would therefore call for the finding that the
insurance contract involved in this case, which was executed at Makati, Rizal, on
February 8, 1967, was contracted before plaintiff was licensed to transact business in the
Philippines.
This Court views Section 68 of the Corporation Law as reflective of a basic public policy.
Hence, it is of the opinion that, in the eyes of Philippine law, the insurance contract
involved in this case must be held void under the provisions of Article 1409 (1) of the
Civil Code, and could not be validated by subsequent procurement of the license. That
view of the Court finds support in the following citation:
 According to many authorities, a constitutional or statutory prohibition
against a foreign corporation doing business in the state, unless such
corporation has complied with conditions prescribed, is effective to
make the contracts of such corporation void, or at least unenforceable,
and prevents the maintenance by the corporation of any action on such
contracts. Although the usual construction is to the contrary, and to the
effect that only the remedy for enforcement is affected thereby, a
statute prohibiting a non-complying corporation from suing in the state
courts on any contract has been held by some courts to render the
contract void and unenforceable by the corporation, even after its has
complied with the statute." (36 Am. Jur. 2d 299-300).
xxx xxx xxx
The said Civil Case No. 71923 was dismissed by this Court. As the insurance contract involved herein was
executed on January 20, 1967, the instant case should also be dismissed.
We resolved to consolidate the two cases when we gave due course to the petition.
The petitioner raised the following assignments of errors:
First Assignment of Error
THE HONORABLE TRIAL COURT ERRED IN CONSIDERING AS AN ISSUE THE LEGAL EXISTENCE OR CAPACITY
OF PLAINTIFF-APPELLANT.
Second Assignment of Error
THE HONORABLE TRIAL COURT ERRED IN DISMISSING THE COMPLAINT ON THE FINDING THAT
PLAINTIFF-APPELLANT HAS NO CAPACITY TO SUE.
On the basis of factual and equitable considerations, there is no question that the private respondents should pay the
obligations found by the trial court as owing to the petitioner. Only the question of validity of the contracts in relation to
lack of capacity to sue stands in the way of the petitioner being given the affirmative relief it seeks. Whether or not the
petitioner was engaged in single acts or solitary transactions and not engaged in business is likewise not in issue. The
petitioner was engaged in business without a license. The private respondents' obligation to pay under the terms of the
contracts has been proved.
When the complaints in these two cases were filed, the petitioner had already secured the necessary license to conduct
its insurance business in the Philippines. It could already filed suits.
Petitioner was, therefore, telling the truth when it averred in its complaints that it was a foreign insurance company duly
authorized to do business in the Philippines through its agent Mr. Victor H. Bello. However, when the insurance contracts
which formed the basis of these cases were executed, the petitioner had not yet secured the necessary licenses and
authority. The lower court, therefore, declared that pursuant to the basic public policy reflected in the Corporation Law,
the insurance contracts executed before a license was secured must be held null and void. The court ruled that the
contracts could not be validated by the subsequent procurement of the license.
The applicable provisions of the old Corporation Law, Act 1459, as amended are:
Sec. 68. No foreign corporation or corporations formed, organized, or existing under any laws other than
those of the Philippine Islands shall be permitted to transact business in the Philippine Islands until after
it shall have obtained a license for that purpose from the chief of the Mercantile Register of the Bureau
of Commerce and Industry, (Now Securities and Exchange Commission. See RA 5455) upon order of the
Secretary of Finance (Now Monetary Board) in case of banks, savings, and loan banks, trust corporations,
and banking institutions of all kinds, and upon order of the Secretary of Commerce
and Communications (Now Secretary of Trade. See 5455, section 4 for other requirements) in case of all
other foreign corporations. ...
xxx xxx xxx
 Sec. 69. No foreign corporation or corporation formed, organized, or existing under any laws other than
those of the Philippine Islands shall be permitted to transact business in the Philippine Islands or
maintain by itself or assignee any suit for the recovery of any debt, claim, or demand whatever, unless it
shall have the license prescribed in the section immediately preceding. Any officer, director, or agent of
the corporation or any person transacting business for any foreign corporation not having the license
prescribed shag be punished by imprisonment for not less than six months nor more than two years or
by a fine of not less than two hundred pesos nor more than one thousand pesos, or by both such
imprisonment and fine, in the discretion of the court.
As early as 1924, this Court ruled in the leading case of Marshall Wells Co. v. Henry W. Elser & Co. (46 Phil. 70) that the
object of Sections 68 and 69 of the Corporation Law was to subject the foreign corporation doing business in the
Philippines to the jurisdiction of our courts. The Marshall Wells Co. decision referred to a litigation over an isolated act for
the unpaid balance on a bill of goods but the philosophy behind the law applies to the factual circumstances of these
cases. The Court stated:
xxx xxx xxx
Defendant isolates a portion of one sentence of section 69 of the Corporation Law and asks the court to
give it a literal meaning Counsel would have the law read thus: "No foreign corporation shall be
permitted to maintain by itself or assignee any suit for the recovery of any debt, claim, or demand
whatever, unless it shall have the license prescribed in section 68 of the law." Plaintiff, on the contrary,
desires for the court to consider the particular point under discussion with reference to all the law, and
thereafter to give the law a common sense interpretation.
The object of the statute was to subject the foreign corporation doing business in the Philippines to the
jurisdiction of its courts. The object of the statute was not to prevent the foreign corporation from
performing single acts, but to prevent it from acquiring a domicile for the purpose of business without
taking the steps necessary to render it amenable to suit in the local courts. The implication of the law is
that it was never the purpose of the Legislature to exclude a foreign corporation which happens to
obtain an isolated order for business from the Philippines, from securing redress in the Philippine courts,
and thus, in effect, to permit persons to avoid their contracts made with such foreign corporations. The
effect of the statute preventing foreign corporations from doing business and from bringing actions in
the local courts, except on compliance with elaborate requirements, must not be unduly extended or
improperly applied. It should not be construed to extend beyond the plain meaning of its terms,
considered in connection with its object, and in connection with the spirit of the entire law.
(State vs. American Book Co. [1904], 69 Kan, 1; American De Forest Wireless Telegraph Co. vs. Superior
Court of City & Country of San Francisco and Hebbard [1908], 153 Cal., 533; 5 Thompson on
Corporations, 2d ed., chap. 184.)
Confronted with the option of giving to the Corporation Law a harsh interpretation, which would
disastrously embarrass trade, or of giving to the law a reasonable interpretation, which would markedly
help in the development of trade; confronted with the option of barring from the courts foreign litigants
with good causes of action or of assuming jurisdiction of their cases; confronted with the option of
construing the law to mean that any corporation in the United States, which might want to sell to a
person in the Philippines must send some representative to the Islands before the sale, and go through
the complicated formulae provided by the Corporation Law with regard to the obtaining of the license,
before the sale was made, in order to avoid being swindled by Philippine citizens, or of construing the
law to mean that no foreign corporation doing business in the Philippines can maintain any suit until it
shall possess the necessary license;-confronted with these options, can anyone doubt what our decision
will be? The law simply means that no foreign corporation shall be permitted "to transact business in the
Philippine Islands," as this phrase is known in corporation law, unless it shall have the license required by
law, and, until it complies with the law, shall not be permitted to maintain any suit in the local courts. A
contrary holding would bring the law to the verge of unconstitutionality, a result which should be and
can be easily avoided. (Sioux Remedy Co. vs. Cope and Cope, supra; Perkins, Philippine Business Law, p.
264.)
To repeat, the objective of the law was to subject the foreign corporation to the jurisdiction of our courts. The
Corporation Law must be given a reasonable, not an unduly harsh, interpretation which does not hamper the
development of trade relations and which fosters friendly commercial intercourse among countries.
The objectives enunciated in the 1924 decision are even more relevant today when we view commercial relations in
terms of a world economy, when the tendency is to re-examine the political boundaries separating one nation from
another insofar as they define business requirements or restrict marketing conditions.
We distinguish between the denial of a right to take remedial action and the penal sanction for non-registration.
Insofar as transacting business without a license is concerned, Section 69 of the Corporation Law imposed a penal
sanction-imprisonment for not less than six months nor more than two years or payment of a fine not less than P200.00
nor more than P1,000.00 or both in the discretion of the court. There is a penalty for transacting business without
registration.
And insofar as litigation is concerned, the foreign corporation or its assignee may not maintain any suit for the recovery
of any debt, claim, or demand whatever. The Corporation Law is silent on whether or not the contract executed by a
foreign corporation with no capacity to sue is null and void ab initio.
We are not unaware of the conflicting schools of thought both here and abroad which are divided on whether such
contracts are void or merely voidable. Professor Sulpicio Guevarra in his book Corporation Law (Philippine Jurisprudence
Series, U.P. Law Center, pp. 233-234) cites an Illinois decision which holds the contracts void and a Michigan statute and
decision declaring them merely voidable:
xxx xxx xxx
Where a contract which is entered into by a foreign corporation without complying with the local
requirements of doing business is rendered void either by the express terms of a statute or by statutory
construction, a subsequent compliance with the statute by the corporation will not enable it to maintain
an action on the contract. (Perkins Mfg. Co. v. Clinton Const. Co., 295 P. 1 [1930]. See also Diamond Glue
Co. v. U.S. Glue Co., supra see note 18.) But where the statute merely prohibits the maintenance of a suit
on such contract (without expressly declaring the contract "void"), it was held that a failure to comply
with the statute rendered the contract voidable and not void, and compliance at any time before suit
was sufficient. (Perkins Mfg. Co. v. Clinton Const. Co., supra.) Notwithstanding the above decision, the
Illinois statute provides, among other things that a foreign corporation that fails to comply with the
conditions of doing business in that state cannot maintain a suit or action, etc. The court said: 'The
contract upon which this suit was brought, having been entered into in this state when appellant was not
permitted to transact business in this state, is in violation of the plain provisions of the statute, and is
therefore null and void, and no action can be maintained thereon at any time, even if the corporation
shall, at some time after the making of the contract, qualify itself to transact business in this state by a
compliance with our laws in reference to foreign corporations that desire to engage in business here.
(United Lead Co. v. J.M. Ready Elevator Mfg. Co., 222 Ill. 199, 73 N.N. 567 [1906].)
A Michigan statute provides: "No foreign corporation subject to the provisions of this Act, shall maintain
any action in this state upon any contract made by it in this state after the taking effect of this Act, untilit
shall have fully complied with the requirement of this Act, and procured a certificate to that effect from
the Secretary of State," It was held that the above statute does not render contracts of a foreign
corporation that fails to comply with the statute void, but they may be enforced only after compliance
therewith. (Hastings Industrial Co. v. Moral, 143 Mich. 679,107 N.E. 706 [1906]; Kuennan v. U.S. Fidelity
& G. Co., Mich. 122; 123 N.W. 799 [1909]; Despres, Bridges & Noel v. Zierleyn, 163 Mich. 399, 128 N.W.
769 [1910]).
It has also been held that where the law provided that a corporation which has not complied with the
statutory requirements "shall not maintain an action until such compliance". "At the commencement of
this action the plaintiff had not filed the certified copy with the country clerk of Madera County, but it
did file with the officer several months before the defendant filed his amended answer, setting up this
defense, as that at the time this defense was pleaded by the defendant the plaintiff had complied with
the statute. The defense pleaded by the defendant was therefore unavailable to him to prevent the
 plaintiff from thereafter maintaining the action. Section 299 does not declare that the plaintiff shall not
commence an action in any county unless it has filed a certified copy in the office of the county clerk, but
merely declares that it shall not maintain an action until it has filled it. To maintain an action is not the
same as to commence an action, but implies that the action has already been commenced." (See also
Kendrick & Roberts Inc. v. Warren Bros. Co., 110 Md. 47, 72 A. 461 [1909]).
In another case, the court said: "The very fact that the prohibition against maintaining an action in the
courts of the state was inserted in the statute ought to be conclusive proof that the legislature did not
intend or understand that contracts made without compliance with the law were void. The statute does
not fix any time within which foreign corporations shall comply with the Act. If such contracts were void,
no suits could be prosecuted on them in any court. ... The primary purpose of our statute is to compel a
foreign corporation desiring to do business within the state to submit itself to the jurisdiction of the
courts of this state. The statute was not intended to exclude foreign corporations from the state. It does
not, in terms, render invalid contracts made in this state by non-complying corporations. The better
reason, the wiser and fairer policy, and the greater weight lie with those decisions which hold that
where, as here, there is a prohibition with a penalty, with no express or implied declarations respecting
the validity of enforceability of contracts made by qualified foreign corporations, the contracts ... are
enforceable ... upon compliance with the law." (Peter & Burghard Stone Co. v. Carper, 172 N.E. 319
[1930].)
Our jurisprudence leans towards the later view. Apart from the objectives earlier cited from Marshall Wells Co. v. Henry
W. Elser & Co (supra), it has long been the rule that a foreign corporation actually doing business in the Philippines
without license to do so may be sued in our courts. The defendant American corporation in General Corporation of the
Philippines v. Union Insurance Society of Canton Ltd et al. (87 Phil. 313) entered into insurance contracts without the
necessary license or authority. When summons was served on the agent, the defendant had not yet been registered and
authorized to do business. The registration and authority came a little less than two months later. This Court ruled:
Counsel for appellant contends that at the time of the service of summons, the appellant had not yet
been authorized to do business. But, as already stated, section 14, Rule 7 of the Rules of Court makes no
distinction as to corporations with or without authority to do business in the Philippines. The test is
whether a foreign corporation was actually doing business here. Otherwise, a foreign corporation
illegally doing business here because of its refusal or neglect to obtain the corresponding license and
authority to do business may successfully though unfairly plead such neglect or illegal act so as to avoid
service and thereby impugn the jurisdiction of the local courts. It would indeed be anomalous and quite
prejudicial, even disastrous, to the citizens in this jurisdiction who in all good faith and in the regular
course of business accept and pay for shipments of goods from America, relying for their protection on
duly executed foreign marine insurance policies made payable in Manila and duly endorsed and
delivered to them, that when they go to court to enforce said policies, the insurer who all along has been
engaging in this business of issuing similar marine policies, serenely pleads immunity to local jurisdiction
because of its refusal or neglect to obtain the corresponding license to do business here thereby
compelling the consignees or purchasers of the goods insured to go to America and sue in its courts for
redress.
There is no question that the contracts are enforceable. The requirement of registration affects only the remedy.
Significantly, Batas Pambansa Blg. 68, the Corporation Code of the Philippines has corrected the ambiguity caused by the
wording of Section 69 of the old Corporation Law.
Section 133 of the present 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, shag be permitted to maintain or intervene in any action,
suit or proceeding in any court or administrative agency in 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 old Section 69 has been reworded in terms of non-access to courts and administrative agencies in order to maintain
or intervene in any action or proceeding.
The prohibition against doing business without first securing a license is now given penal sanction which is also
applicable to other violations of the Corporation Code under the general provisions of Section 144 of the Code.
It is, therefore, not necessary to declare the contract nun and void even as against the erring foreign corporation. The
penal sanction for the violation and the denial of access to our courts and administrative bodies are sufficient from the
viewpoint of legislative policy.
Our ruling that the lack of capacity at the time of the execution of the contracts was cured by the subsequent registration
is also strengthened by the procedural aspects of these cases.
The petitioner averred in its complaints that it is a foreign insurance company, that it is authorized to do business in the
Philippines, that its agent is Mr. Victor H. Bello, and that its office address is the Oledan Building at Ayala Avenue, Makati.
These are all the averments required by Section 4, Rule 8 of the Rules of Court. The petitioner sufficiently alleged its
capacity to sue. The private respondents countered either with an admission of the plaintiff's jurisdictional averments or
with a general denial based on lack of knowledge or information sufficient to form a belief as to the truth of the
averments.
We find the general denials inadequate to attack the foreign corporations lack of capacity to sue in the light of its positive
averment that it is authorized to do so. Section 4, Rule 8 requires that "a party desiring to raise an issue as to the legal
existence of any party or the capacity of any party to sue or be sued in a representative capacity shall do so by specific
denial, which shag include such supporting particulars as are particularly within the pleader's knowledge. At the very
least, the private respondents should have stated particulars in their answers upon which a specific denial of the
petitioner's capacity to sue could have been based or which could have supported its denial for lack of knowledge. And
yet, even if the plaintiff's lack of capacity to sue was not properly raised as an issue by the answers, the petitioner
introduced documentary evidence that it had the authority to engage in the insurance business at the time it filed the
complaints.
WHEREFORE, the petitions are hereby granted. The decisions of the respondent court are reversed and set aside.
In L-34382, respondent Eastern Shipping Lines is ordered to pay the petitioner the sum of P1,630.22 with interest at the
legal rate from January 5, 1968 until fully paid and respondent Angel Jose Transportation Inc. is ordered to pay the
petitioner the sum of P1,630.22 also with interest at the legal rate from January 5, 1968 until fully paid. Each respondent
shall pay one-half of the costs. The counterclaim of Angel Jose Transportation Inc. is dismissed.
In L-34383, respondent N. V. Nedlloyd Lijnen, or its agent Columbian Phil. Inc. is ordered to pay the petitioner the sum of
P2,426.98 with interest at the legal rate from February 1, 1968 until fully paid, the sum of P500.00 attorney's fees, and
costs, The complaint against Guacods, Inc. is dismissed.
SO ORDERED.
ERIKS PTE. LTD. vs. COURT OF APPEALS, and DELFIN F. ENRIQUEZ, JR. [G.R. No. 118843 February 6, 1997]
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?
This is the main issue presented for resolution in the instant petition for review, which seeks the reversal of the
Decision1 of the Court of Appeals, Seventh Division, promulgated on January 25, 1995, in CA-G.R. CV No. 41275 which
affirmed, for want of capacity to sue, the trial court's dismissal of the collection suit instituted by petitioner.
The Facts
Petitioner Eriks Pte. Ltd. is a non-resident foreign corporation engaged in the manufacture and sale of elements used in
sealing pumps, valves and pipes for industrial purposes, valves and control equipment used for industrial fluid control
and PVC pipes and fittings for industrial uses. In its complaint, it alleged that: 2
(I)t is a corporation duly organized and existing under the laws of the Republic of Singapore with address
at 18 Pasir Panjang Road #09-01, PSA Multi-Storey Complex, Singapore 0511. It is not licensed to do
business in the Philippines and i(s) not so engaged and is suing on an isolated transaction for which it has
capacity to sue . . . (par. 1, Complaint; p. 1, Record)
On various dates covering the period January 17 — August 16, 1989, private respondent Delfin Enriquez, Jr., doing
business under the name and style of Delrene EB Controls Center and/or EB Karmine Commercial, ordered and received
from petitioner various elements used in sealing pumps, valves, pipes and control equipment, PVC pipes and fittings. The
ordered materials were delivered via airfreight under the following invoices: 3
Date Invoice No. AWB No. Amount
—— ————— ———— ———
17 Jan 89 27065 618-7496-2941 S$ 5,010.59
24 Feb 89 27738 618-7553-6672 14,402.13
02 Mar 89 27855 (freight & hand- 1,164.18
ling charges per
Inv. 27738)
03 Mar 89 27876 618-7553-7501 1,394.32
03 Mar 89 27877 618-7553-7501 1,641.57
10 Mar 89 28046 618-7578-3256/ 7,854.60
618-7578-3481
21 Mar 89 28258 618-7578-4634 27.72
14 Apr 89 28901 618-7741-7631 2,756.53
19 Apr 89 29001 Self-collect 458.80
16 Aug 89 31669 (handcarried by 1,862.00
buyer)
—————
S$36,392.44
21 Mar 89 28257 618-7578-4634 415.50
04 Apr 89 28601 618-7741-7605 884.09
14 Apr 89 28900 618-7741-7631 1,269.50
25 Apr 89 29127 618-7741-9720 883.80
02 May 89 29232 (By seafreight) 120.00
05 May 89 29332 618-7796-3255 1,198.40
15 May 89 29497 (Freight & hand- 111.94
ling charges per
Inv. 29127 ——————
S$ 4,989.29
31 May 89 29844 618-7796-5646 545.70
 S$ 545.70
——————
Total S$ 41,927.43
The transfers of goods were perfected in Singapore, for private respondent's account, F.O.B. Singapore, with a 90-day
credit term. Subsequently, demands were made by petitioner upon private respondent to settle his account, but the
latter failed/refused to do so.
On August 28, 1991, petitioner corporation filed with the Regional Trial Court of Makati, Branch 138, 4 Civil Case No. 91-
2373 entitled "Eriks Pte. Ltd. vs. Delfin Enriquez, Jr." for the recovery of S$41,939.63 or its equivalent in Philippine
currency, plus interest thereon and damages. Private respondent responded with a Motion to Dismiss, contending that
petitioner corporation had no legal capacity to sue. In an Order dated March 8, 1993, 5 the trial court dismissed the action
on the ground that petitioner is a foreign corporation doing business in the Philippines without a license. The dispositive
portion of said order reads:6
WHEREFORE, in view of the foregoing, the motion to dismiss is hereby GRANTED and accordingly, the
above-entitled case is hereby DISMISSED.
SO ORDERED.
On appeal, respondent Court affirmed said order as it deemed the series of transactions between petitioner, corporation
and private respondent not to be an "isolated or casual transaction." Thus, respondent Court likewise found petitioner to
be without legal capacity to sue, and disposed of the appeal as follows: 7
WHEREFORE, the appealed Order should be, as it is hereby AFFIRMED. The complaint is dismissed. No
costs.
SO ORDERED.
Hence, this petition.
The Issue
The main issue in this petition is whether petitioner corporation may maintain an action in Philippine courts considering
that it has no license to do business in the country. The resolution of this issue depends on whether petitioner's business
with private respondent may be treated as isolated transactions.
Petitioner insists that the series of sales made to private respondent would still constitute isolated transactions despite
the number of invoices covering several separate and distinct items sold and shipped over a span of four to five months,
and that an affirmation of respondent Court's ruling would result in injustice and unjust enrichment.
Private respondent counters that to declare petitioner as possessing capacity to sue will render nugatory the provisions
of the Corporation Code and constitute a gross violation of our laws. Thus, he argues, petitioner is undeserving of legal
protection.
The Court's Ruling
The petition has no merit.
The Concept of Doing Business
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 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. To fill the gap, the evolution of its statutory definition has produced
a rather all-encompassing concept in Republic Act No. 7042 9 in this wise:
Sec. 3. Definitions. — As used in this Act:
xxx xxx xxx
(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. (emphasis supplied)
In the durable case of The Mentholatum Co. vs. Mangaliman, this Court discoursed on the test to determine whether a
foreign company is "doing business" in the Philippines, thus: 10
. . . The true test, however, seems to be whether the foreign corporation is continuing the body or
substance of the business or enterprise for which it was organized or whether it has substantially retired
from it and turned it over to another. (Traction Cos. v. Collectors of Int. Revenue [C.C.A., Ohio], 223 F.
984, 987.] 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.] (sic) (Griffin v.
Implement Dealer's Mut. Fire Ins. Co., 241 N.W. 75, 77; Pauline Oil & Gas Co. v. Mutual Tank Line Co., 246
P. 851, 852, 118 Okl. 111; Automotive Material Co. v. American Standard Metal Products Corp., 158 N.E.
698, 703, 327 III. 367.)
The accepted rule in jurisprudence is that each case must be judged in the light of its own environmental
circumstances. 11 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.
The trial court held that petitioner-corporation was doing business without a license, finding that: 12
The invoices and delivery receipts covering the period of (sic) from January 17, 1989 to August 16, 1989
cannot be treated to a mean singular and isolated business transaction that is temporary in character.
Granting that there is no distributorship agreement between herein parties, yet by the mere fact that
plaintiff, each time that the defendant posts an order delivers the items as evidenced by the several
invoices and receipts of various dates only indicates that plaintiff has the intention and desire to repeat
the (sic) said transaction in the future in pursuit of its ordinary business. Furthermore, "and if the
corporation is doing that for which it was created, the amount or volume of the business done is
immaterial and a single act of that character may constitute doing business". (See p. 603, Corp. Code, De
Leon — 1986 Ed.).
Respondent Court affirmed this finding in its assailed Decision with this explanation: 13
. . . Considering the factual background as laid out above, the transaction cannot be considered as an
isolated one. Note that there were 17 orders and deliveries (only sixteen per our count) over a four-
month period. The appellee (private respondent) made separate orders at various dates. The
transactions did not consist of separate deliveries for one single order. In the case at bar, the transactions
 entered into by the appellant with the appellee are a series of commercial dealings which would signify
an intent on the part of the appellant (petitioner) to do business in the Philippines and could not by any
stretch of the imagination be considered an isolated one, thus would fall under the category of'doing
business.
Even if We were to view, as contended by the appellant, that the transactions which occurred between
January to August 1989, constitute a single act or isolated business transaction, this being the ordinary
business of appellant corporation, it can be said to be illegally doing or transacting business without a
license. . . . Here it can be clearly gleaned from the four-month period of transactions between appellant
and appellee that it was a continuing business relationship, which would, without doubt, constitute
doing business without a license. For all intents and purposes, appellant corporation is doing or
transacting business in the Philippines without a license and that, therefore in accordance with the
specific mandate of section 144 of the Corporation Code, it has no capacity to sue. (emphasis ours)
We find no reason to disagree with both lower courts. More than the sheer number of transactions entered into, a clear
and unmistakable intention on the part of petitioner to continue the body of its business in the Philippines is more than
apparent. As alleged in its complaint, it is engaged in the manufacture and sale of elements used in sealing pumps,
valves, and pipes for industrial purposes, valves and control equipment used for industrial fluid control and PVC pipes
and fittings for industrial use. Thus, the sale by petitioner of the items covered by the receipts, which are part and parcel
of its main product line, was actually carried out in the progressive prosecution of commercial gain and the pursuit of the
purpose and object of its business, pure and simple. Further, its grant and extension of 90-day credit terms to private
respondent for every purchase made, unarguably shows an intention to continue transacting with private respondent,
since in the usual course of commercial transactions, credit is extended only to customers in good standing or to those
on whom there is an intention to maintain long-term relationship. This being so, the existence of a distributorship
agreement between the parties, as alleged but not proven by private respondent, would, if duly established by
competent evidence, be merely corroborative, and failure to sufficiently prove said allegation will not significantly affect
the finding of the courts below. Nor our own ruling. It is precisely upon the set of facts above detailed that we concur
with respondent Court that petitioner corporation was doing business in the country.
Equally important is the absence of any fact or circumstance which might tend even remotely to negate such intention to
continue the progressive prosecution of petitioner's business activities in this country. Had private respondent not
turned out to be a bad risk, in all likelihood petitioner would have indefinitely continued its commercial transactions with
him, and not surprisingly, in ever increasing volumes.
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. 14
Given the facts of this case, we cannot see how petitioner's business dealings will fit the category of "isolated
transactions" considering that its intention to continue and pursue the corpus of its business in the country had been
clearly established. It has not presented any convincing argument with equally convincing evidence for us to rule
otherwise.
Incapacitated to Maintain Suit
Accordingly and ineluctably, petitioner must be held to be incapacitated to maintain the action a quo against private
respondent.
It was never the intent of the legislature to bar court access to a foreign corporation or entity which happens to obtain
an isolated order for business in the Philippines. Neither, did it intend to shield debtors from their legitimate liabilities or
obligations. 15 But it cannot allow foreign corporations or entities which conduct regular business any access to courts
without the fulfillment by such corporations of the necessary requisites to be subjected to our government's regulation
and authority. By securing a license, the foreign entity would be giving assurance that it will abide by the decisions of our
courts, even if adverse to it.
Other Remedy Still Available
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. 17
The requirement of a license is not meant to put foreign corporations at a disadvantage. Rather, the doctrine of lack of
capacity to sue is based on considerations of sound public policy. 18 Thus, it has been ruled in Home Insurancethat: 19
. . . The primary purpose of our statute is to compel a foreign corporation desiring to do business within
the state to submit itself to the jurisdiction of the courts of this state. The statute was not intended to
exclude foreign corporations from the state. . . . The better reason, the wiser and fairer policy, and the
greater weight lie with those decisions which hold that where, as here, there is a prohibition with a
penalty, with no express or implied declarations respecting the validity of enforceability of contracts
made by qualified foreign corporations, the contracts . . . are enforceable . . . upon compliance with the
law. (Peter &, Burghard Stone Co. v. Carper, 172 N.E. 319 [1930].)
While we agree with petitioner that the county needs to develop trade relations and foster friendly commercial relations
with other states, we also need to enforce our laws that regulate the conduct of foreigners who desire to do business
here. Such strangers must follow our laws and must subject themselves to reasonable regulation by our government.
WHEREFORE, premises considered, the instant petition is hereby DENIED and the assailed Decision is AFFIRMED.
SO ORDERED.
HUTCHISON PORTS PHILIPPINES LTD. vs. SUBIC BAY METROPOLITAN AUTHORITY, INTERNATIONAL CONTAINER
TERMINAL SERVICES INC., ROYAL PORT SERVICES INC. and the EXECUTIVE SECRETARY
[G.R. No. 131367 August 31, 2000]
On February 12, 1996, the Subic Bay Metropolitan Authority (or SBMA) advertised in leading national daily newspapers
and in one international publication,1 an invitation offering to the private sector the opportunity to develop and operate
a modern marine container terminal within the Subic Bay Freeport Zone. Out of seven bidders who responded to the
published invitation, three were declared by the SBMA as qualified bidders after passing the pre-qualification evaluation
conducted by the SBMA’s Technical Evaluation Committee (or SBMA-TEC). These are: (1) International Container Terminal
Services, Inc. (or ICTSI); (2) a consortium consisting of Royal Port Services, Inc. and HPC Hamburg Port Consulting GMBH
(or RPSI); and (3) Hutchison Ports Philippines Limited (or HPPL), representing a consortium composed of HPPL, Guoco
Holdings (Phils.), Inc. and Unicol Management Services, Inc. All three qualified bidders were required to submit their
respective formal bid package on or before July 1, 1996 by the SBMA’s Pre-qualification, Bids and Awards Committee (or
SBMA-PBAC).
Thereafter, the services of three (3) international consultants 2 recommended by the World Bank for their expertise were
hired by SBMA to evaluate the business plans submitted by each of the bidders, and to ensure that there would be a
transparent and comprehensive review of the submitted bids. The SBMA also hired the firm of Davis, Langdon and Seah
Philippines, Inc. to assist in the evaluation of the bids and in the negotiation process after the winning bidder is chosen.
All the consultants, after such review and evaluation unanimously concluded that HPPL’s Business Plan was "far superior
to that of the two other bidders."3
However, even before the sealed envelopes containing the bidders’ proposed royalty fees could be opened at the
appointed time and place, RPSI formally protested that ICTSI is legally barred from operating a second port in the
Philippines based on Executive Order No. 212 and Department of Transportation and Communication (DOTC) Order 95-
863. RPSI thus requested that the financial bid of ICTSI should be set aside. 4
Nevertheless, the opening of the sealed financial bids proceeded "under advisement" relative to the protest signified by
RPSI. The financial bids, more particularly the proposed royalty fee of each bidder, was as follows:
ICTSI ------------US$57.80 TEU
HPPL ------------US$20.50 TEU
RPSI -------------US$15.08 TEU
The SBMA-PBAC decided to suspend the announcement of the winning bid, however, and instead gave ICTSI seven (7)
days within which to respond to the letter-protest lodged by RPSI. The HPPL joined in RPSI’s protest, stating that ICTSI
should be disqualified because it was already operating the Manila International Container Port (or MICP), which would
give rise to inevitable conflict of interest between the MICP and the Subic Bay Container Terminal facility. 5
On August 15, 1996, the SBMA-PBAC issued a resolution rejecting the bid of ICTSI because "said bid does not comply
with the requirements of the tender documents and the laws of the Philippines." The said resolution also declared that:
RESOLVED FURTHER, that the winning bid be awarded to HUTCHISON PORTS PHILIPPINES LIMITED (HPPL) and
that negotiations commence immediately with HPPL (HUTCHISON) with a view to concluding an acceptable agreement
within 45 days of this date failing which negotiations with RPSI (ROYAL) will commence with a view to concluding an
acceptable agreement within 45 days thereafter failing which there will be declared a failure of bids. 6(Underscoring
supplied)
The following day, ICTSI filed a letter-appeal with SBMA’s Board of Directors requesting the nullification and reversal of
the above-quoted resolution rejecting ICTSI’s bid while awarding the same to HPPL. But even before the SBMA Board
could act on the appeal, ICTSI filed a similar appeal before the Office of the President. 7 On August 30, 1996, then Chief
Presidential Legal Counsel (CPLC) Renato L. Cayetano submitted a memorandum to then President Fidel V. Ramos,
containing the following recommendations:
We therefore suggest that the President direct SBMA Chairman Gordon to consider option number 4 – that is to re-
evaluate the financial bids submitted by the parties, taking into consideration all the following factors:
1. Reinstate ICTSI’s bid;
2. Disregard all arguments relating to "monopoly";
3. The re-evaluation must be limited to the parties’ financial bids.
3.1 Considering that the parties’ business have been accepted (passed), strictly follow the criteria for bid
evaluation provided for in pars. (c) and (d), Part B (1) of the Tender Document.
4. In the re-evaluation, the COA should actively participate to determine which of the financial bids is more
advantageous.
5. In addition, all the parties should be given ample opportunity to elucidate or clarify the
components/justification for their respective financial bids in order to ensure fair play and transparency in the
proceedings.
6. The President’s authority to review the final award shall remain." 8 (Underscoring supplied)
The recommendation of CPLC Cayetano was approved by President Ramos, and a copy of President Ramos’ handwritten
approval was sent to the SBMA Board of Directors. Accordingly, the SBMA Board, with the concurrence of
representatives of the Commission on Audit, agreed to focus the reevaluation of the bids in accordance with the
evaluation criteria and the detailed components contained in the Tender Document, including all relevant information
gleaned from the bidding documents, as well as the reports of the three international experts and the consultancy firm
hired by the SBMA.
On September 19, 1996, the SBMA Board issued a Resolution, declaring:
NOW, THEREFORE, IT IS HEREBY RESOLVED that the bid that conforms to the Invitation to Tender, that has a realistic
Business Plan offering the greatest financial return to SBMA, the best possible offer and the most advantageous to the
government is that of HPPL and HPPL is accordingly selected as the winning bidder and is hereby awarded the
concession for the operation and development of the Subic Bay Container Terminal. 9(Underscoring supplied)
In a letter dated September 24, 1996, the SBMA Board of Directors submitted to the Office of the President the results of
the re-evaluation of the bid proposals, to wit:
SBMA, through the unanimous vote of all the Board Members, excluding the Chairman of the Board who voluntarily
inhibited himself from participating in the re-evaluation, selected the HPPL bid as the winning bid, being: the conforming
bid with a realistic Business Plan offering the greatest financial return to the SBMA; the best possible offer in the market,
and the most advantageous to the government in accordance with the Tender Document. 10
Notwithstanding the SBMA Board’s recommendations and action awarding the project to HPPL, then Executive Secretary
Ruben Torres submitted a memorandum to the Office of the President recommending that another rebidding be
conducted.11 Consequently, the Office of the President issued a Memorandum directing the SBMA Board of Directors to
refrain from signing the Concession Contract with HPPL and to conduct a rebidding of the project. 12
In the meantime, the Resident Ombudsman for the DOTC filed a complaint against members of the SBMA-PBAC before
the Office of the Ombudsman for alleged violation of Section 3(e) of Republic Act No. 3019 for awarding the contract to
HPPL. On April 16, 1997, the Evaluation and Preliminary Investigation Bureau of the Office of the Ombudsman issued a
Resolution absolving the members of the SBMA-PBAC of any liability and dismissing the complaint against them, ruling
thus:
After an assiduous study of the respective contentions of both parties, we are inclined to hold, as it is hereby held, that
there is no proof on record pinpointing respondents to have acted in excess of their discretion when they awarded the
bid to HPPL. Records revealed that respondents, in the exercise of their discretion in determining the financial packages
offered by the applicants, were guided by the expert report of Davis, Langdon and Seah (DLS) that fairly evaluated which
of the bidders tender the greatest financial return to the government. There is no showing that respondents had abused
their prerogatives. As succinctly set forth in the DLS report it stated, among others, that, "in assessing the full financial
return to SBMA offered by the bidders, it is necessary to consider the following critical matters:
 1. Royalty fees
2. Volume of TEU’s as affected by:
a. Tariff rates;
b. Marketing strategy;
c. Port facilities; and
d. Efficient reliable services.
With the preceding parameters for the evaluation of bidder’s business plan, the respondents were fairly guided by, as
they aligned their judgment in congruence with, the opinion of the panel of experts and the SBMA’s Technical Evaluation
Committee to the effect that HPPL’s business is superior while that of ICTSI’s appeared to be unrealistically high which
may eventually hinder the competitiveness of the SBMA port with the rest of the world. Respondents averred that the
panel of World Bank experts noted that ICTSI’s high tariff rates at U.S. $119.00 per TEU is already higher by 37% through
HPPL, which could further increase by 20% in the first two (2) years and by 5% hike thereafter. In short, high tariffs would
discourage potential customers which may be translated into low cargo volume that will eventually reduce financial
return to SBMA. Respondents asserted that HPPL’s business plan offers the greatest financial return which could be
equated that over the five years, HPPL offers 1.25 billion pesos while ICTSI offers P0.859 billion, and RPSI offers P.420
billion. Over the first ten years HPPL gives P2.430 billion, ICTSI tenders P2.197 billion and RPSI has P1.632 billion.
Viewed from this perspective alongside with the evidence on record, the undersigned panel does not find respondents
to have exceeded their discretion in awarding the bid to HPPL. Consequently, it could not be said that respondents’ act
had placed the government at a grossly disadvantageous plight that could have jeopardized the interest of the Republic
of the Philippines.13
On July 7, 1997, the HPPL, feeling aggrieved by the SBMA’s failure and refusal to commence negotiations and to execute
the Concession Agreement despite its earlier pronouncements that HPPL was the winning bidder, filed a
complaint14 against SBMA before the Regional Trial Court (RTC) of Olongapo City, Branch 75, for specific performance,
mandatory injunction and damages. In due time, ICTSI, RPSI and the Office of the President filed separate Answers-in-
Intervention15 to the complaint opposing the reliefs sought by complainant HPPL.
Complainant HPPL alleged and argued therein that a binding and legally enforceable contract had been established
between HPPL and defendant SBMA under Article 1305 of the Civil Code, considering that SBMA had repeatedly
declared and confirmed that HPPL was the winning bidder. Having accepted HPPL’s offer to operate and develop the
proposed container terminal, defendant SBMA is duty-bound to comply with its obligation by commencing negotiations
and drawing up a Concession Agreement with plaintiff HPPL. HPPL also pointed out that the bidding procedure followed
by the SBMA faithfully complied with existing laws and rules established by SBMA itself; thus, when HPPL was declared
the winning bidder it acquired the exclusive right to negotiate with the SBMA. Consequently, plaintiff HPPL posited that
SBMA should be: (1) barred from conducting a re-bidding of the proposed project and/or performing any such acts
relating thereto; and (2) prohibited from negotiating with any party other than plaintiff HPPL until negotiations between
HPPL and SBMA have been concluded or in the event that no acceptable agreement could be arrived at. Plaintiff HPPL
also alleged that SBMA’s continued refusal to negotiate the Concession Contract is a substantial infringement of its
proprietary rights, and caused damage and prejudice to plaintiff HPPL.
Hence, HPPL prayed that:
(1) Upon the filing of this complaint, hearings be scheduled to determine the propriety of plaintiff’s mandatory
injunction application which seeks to order defendant or any of its appropriate officers or committees to
forthwith specify the date as well as to perform any and all such acts (e.g. laying the ground rules for discussion)
for the commencement of negotiations with plaintiff with the view to signing at the earliest possible time a
Concession Agreement for the development and operation of the Subic Bay Container Terminal.
(2) Thereafter, judgment be rendered in favor of plaintiff and against defendant:
2.1. Making permanent the preliminary mandatory injunction it had issued;
2.2. Ordering defendant to implement the Concession Agreement it had executed with plaintiff in
respect of the development and operation of the proposed Subic Bay Container Terminal;
 2.3. Ordering defendant to pay for the cost of plaintiff’s attorney’s fees in the amount of P500,000.00, or
as otherwise proven during the trial.
Plaintiff prays for other equitable reliefs.16
During the pre-trial hearing, one of the issues raised and submitted for resolution was whether or not the Office of the
President can set aside the award made by SBMA in favor of plaintiff HPPL and if so, can the Office of the President direct
the SBMA to conduct a re-bidding of the proposed project.
While the case before the trial court was pending litigation, on August 4, 1997, the SBMA sent notices to plaintiff HPPL,
ICTSI and RPSI requesting them to declare their interest in participating in a rebidding of the proposed project. 17 On
October 20, 1997, plaintiff HPPL received a copy of the minutes of the pre-bid conference which stated that the winning
bidder would be announced on December 5, 1997. 18 Then on November 4, 1997, plaintiff HPPL learned that the SBMA
had accepted the bids of ICTSI and RPSI who were the only bidders who qualified.
In order to enjoin the rebidding while the case was still pending, plaintiff HPPL filed a motion for maintenance of
the status quo19 on October 28, 1997. The said motion was denied by the court a quo in an Order dated November 3,
1997, to wit:
Plaintiff maintains that by voluntarily participating in this proceedings, the defendant and the intervenors "have
unqualifiedly agreed to submit the issue of the propriety, legality and validity of the Office of the President’s directive
that the SBMA effect a rebidding" of its concession contract or the operation of the Subic Bay Container Terminal. As
such, the status quo must be maintained in order not to thwart the court’s ability to resolve the issues presented.
Further, the ethics of the profession require that counsel should discontinue any act which tends to render the issues
academic.
The Opposition is anchored on lack of jurisdiction since the issuance of a cease-and-desist order would be tantamount to
the issuance of a Temporary Restraining Order or a Writ of Injunction which this Court cannot do in light of the provision
of Section 21 of R.A. 7227 which states:
Section 21. Injunction and Restraining Order. – The implementation of the projects for the conversion into alternative
productive uses of the military reservations are urgent and necessary and shall not be restrained or enjoined except by
an order issued by the Supreme Court of the Philippines.
During the hearing on October 30, 1997, SBMA’s counsel revealed that there is no law or administrative rule or
regulation which requires that a bidding be accomplished within a definite time frame.
Truly, the matter of the deferment of the re-bidding on November 4, 1997 rests on the sound discretion of the SBMA. For
this Court to issue a cease-and-desist order would be tantamount to an issuance of a Temporary Restraining Order or a
Writ of Preliminary Injunction. (Prado v. Veridiano II, G.R. No. 98118, December 6, 1991).
The Court notes that the Office of the President has not been heard fully on the issues. Moreover, one of the intervenors
is of the view that the issue of jurisdiction must be resolved first, ahead of all the other issues.
WHEREFORE, and viewed from the foregoing considerations, plaintiff’s motion is DENIED.
SO ORDERED.20 (Underscoring supplied)
Hence, this petition filed by petitioner (plaintiff below) HPPL against respondents SBMA, ICTSI, RPSI and the Executive
Secretary seeking to obtain a prohibitory injunction. The grounds relied upon by petitioner HPPL to justify the filing of
the instant petition are summed up as follows:
29. It is respectfully submitted that to allow or for this Honorable Court to otherwise refrain from restraining
SBMA, during the pendency of this suit, from committing the aforementioned act(s) which will certainly occur
on 5 December 1997 such action (or inaction) will work an injustice upon petitioner which has validly been
announced as the winning bidder for the operation of the Subic Bay Container Terminal.
30. To allow or for this Honorable Court to otherwise refrain from restraining SBMA, during the pendency of this
suit, from committing the aforementioned threatened acts would be in violation of petitioner’s rights in respect
of the action it had filed before the RTC of Olongapo City in Civil Case No. 243-O-97, and could render any
judgment which may be reached by said Court moot and ineffectual. As stated, the legal issues raised by the
 parties in that proceedings are of far reaching importance to the national pride and prestige, and they impact on
the integrity of government agencies engaged in international bidding of privatization projects. Its resolution on
the merits by the trial court below and, thereafter, any further action to be taken by the parties before the
appellate courts will certainly benefit respondents and the entire Filipino people. 21
WHEREFORE, petitioner HPPL sought relief praying that:
a) Upon the filing of this petition, the same be given due course and a temporary restraining order and/or writ of
preliminary injunction be issued ex parte, restraining SBMA or any of its committees, or other persons acting
under its control or direction or upon its instruction, from declaring any winner on 5 December 1997 or at any
other date thereafter, in connection with the rebidding for the privatization of the Subic Bay Container Terminal
and/or for any, some or all of the respondents to perform any such act(s) in pursuance thereof, until further
orders from this Honorable Court;
b) After appropriate proceedings, judgment be rendered in favor of petitioner and against respondents --
(1) Ordering SBMA to desist from conducting any rebidding or in declaring the winner of any such
rebidding in respect of the development and operation of the Subic Bay Container Terminal until the
judgment which the RTC of Olongapo City may render in Civil Case No. 243-O-97 is resolved with finality;
(2) Declaring null and void any award which SBMA may announce or issue on 5 December 1997; and
(3) Ordering respondents to pay for the cost of suit.
Petitioner prays for other equitable reliefs.22
The instant petition seeks the issuance of an injunctive writ for the sole purpose of holding in abeyance the conduct by
respondent SBMA of a rebidding of the proposed SBICT project until the case for specific performance is resolved by the
trial court. In other words, petitioner HPPL prays that the status quo be preserved until the issues raised in the main case
are litigated and finally determined. Petitioner was constrained to invoke this Court’s exclusive jurisdiction and authority
by virtue of the above-quoted Republic Act 7227, Section 21.
On December 3, 1997, this Court granted petitioner HPPL’s application for a temporary restraining order "enjoining the
respondent SBMA or any of its committees, or other persons acting under its control or direction or upon its instruction,
from declaring any winner on December 5, 1997 or at any other date thereafter, in connection with the rebidding for the
privatization of the Subic Bay Container Terminal and/or for any, some or all of the respondents to perform any such act
or acts in pursuance thereof."23
There is no doubt that since this controversy arose, precious time has been lost and a vital infrastructure project has in
essense been "mothballed" to the detriment of all parties involved, not the least of which is the Philippine Government,
through its officials and agencies, who serve the interest of the nation. It is, therefore, imperative that the issues raised
herein and in the court a quo be resolved without further delay so as not to exacerbate an already untenable situation.
At the outset, the application for the injunctive writ is only a provisional remedy, a mere adjunct to the main suit. 24Thus,
it is not uncommon that the issues in the main action are closely intertwined, if not identical, to the allegations and
counter allegations propounded by the opposing parties in support of their contrary positions concerning the propriety
or impropriety of the injunctive writ. While it is not our intention to preempt the trial court’s determination of the issues
in the main action for specific performance, this Court has a bounden duty to perform; that is, to resolve the matters
before this Court in a manner that gives essence to justice, equity and good conscience.
While our pronouncements are for the purpose only of determining whether or not the circumstances warrant the
issuance of the writ of injunction, it is inevitable that it may have some impact on the main action pending before the
trial court. Nevertheless, without delving into the merits of the main case, our findings herein shall be confined to the
necessary issues attendant to the application for an injunctive writ.
For an injunctive writ to be issued, the following requisites must be proven:
First. That the petitioner/applicant must have a clear and unmistakable right.
Second. That there is a material and substantial invasion of such right.
Third. That there is an urgent and permanent necessity for the writ to prevent serious damage. 25
To our mind, petitioner HPPL has not sufficiently shown that it has a clear and unmistakable right to be declared the
winning bidder with finality, such that the SBMA can be compelled to negotiate a Concession Contract. Though the SBMA
Board of Directors, by resolution, may have declared HPPL as the winning bidder, said award cannot be said to be final
and unassailable. The SBMA Board of Directors and other officers are subject to the control and supervision of the Office
of the President. All projects undertaken by SBMA require the approval of the President of the Philippines under Letter of
Instruction No. 620, which places the SBMA under its ambit as an instrumentality, defined in Section 10 thereof as an
"agency of the national government, not integrated within the department framework, vested with special functions or
jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational
autonomy, usually through a charter. This term includes regulatory agencies, chartered institutions and government
owned and controlled corporations."26 (Underscoring supplied)
As a chartered institution, the SBMA is always under the direct control of the Office of the President, particularly when
contracts and/or projects undertaken by the SBMA entail substantial amounts of money. Specifically, Letter of Instruction
No. 620 dated October 27, 1997 mandates that the approval of the President is required in all contracts of the national
government offices, agencies and instrumentalities, including government-owned or controlled corporations involving
two million pesos (P2,000,000.00) and above, awarded through public bidding or negotiation. The President may, within
his authority, overturn or reverse any award made by the SBMA Board of Directors for justifiable reasons. It is well-
established that the discretion to accept or reject any bid, or even recall the award thereof, is of such wide latitude that
the courts will not generally interfere with the exercise thereof by the executive department, unless it is apparent that
such exercise of discretion is used to shield unfairness or injustice. When the President issued the memorandum setting
aside the award previously declared by the SBMA in favor of HPPL and directing that a rebidding be conducted, the same
was, within the authority of the President and was a valid exercise of his prerogative. Consequently, petitioner HPPL
acquired no clear and unmistakable right as the award announced by the SBMA prior to the President’s revocation
thereof was not final and binding.
There being no clear and unmistakable right on the part of petitioner HPPL, the rebidding of the proposed project can no
longer be enjoined as there is no material and substantial invasion to speak of. Thus, there is no longer any urgent or
permanent necessity for the writ to prevent any perceived serious damage. In fine, since the requisites for the issuance
of the writ of injunction are not present in the instant case, petitioner’s application must be denied for lack of merit. 27
Finally, we focus on the matter of whether or not petitioner HPPL has the legal capacity to even seek redress from this
Court.1âwphi1 Admittedly, petitioner HPPL is a foreign corporation, organized and existing under the laws of the British
Virgin Islands. While the actual bidder was a consortium composed of petitioner, and two other corporations, namely,
Guoco Holdings (Phils.) Inc. and Unicol Management Servises, Inc., it is only petitioner HPPL that has brought the
controversy before the Court, arguing that it is suing only on an isolated transaction to evade the legal requirement that
foreign corporations must be licensed to do business in the Philippines to be able to file and prosecute an action before
Philippines courts.
The maelstrom of this issue is whether participating in the bidding is a mere isolated transaction, or did it constitute
"engaging in" or "transacting" business in the Philippines such that petitioner HPPL needed a license to do business in
the Philippines before it could come to court.
There is no general rule or governing principle laid down as to what constitutes "doing" or "engaging in" or "transacting"
business in the Philippines. Each case must be judged in the light of its peculiar circumstances. 28 Thus, it has often been
held that a single act or transaction may be considered as "doing business" when a corporation performs acts for which it
was created or exercises some of the functions for which it was organized. The amount or volume of the business is of no
moment, for even a singular act cannot be merely incidental or casual if it indicates the foreign corporation’s intention to
do business.29
Participating in the bidding process constitutes "doing business" because it shows the foreign corporation’s intention to
engage in business here. The bidding for the concession contract is but an exercise of the corporation’s reason for
creation or existence. Thus, it has been held that "a foreign company invited to bid for IBRD and ADB international
projects in the Philippines will be considered as doing business in the Philippines for which a license is required." In this
regard, it is the performance by a foreign corporation of the acts for which it was created, regardless of volume of
business, that determines whether a foreign corporation needs a license or not. 30
The primary purpose of the license requirement is to compel a foreign corporation desiring to do business within the
Philippines to submit itself to the jurisdiction of the courts of the state and to enable the government to exercise
jurisdiction over them for the regulation of their activities in this country. 31 If a foreign corporation operates a business in
the Philippines without a license, and thus does not submit itself to Philippine laws, it is only just that said foreign
corporation be not allowed to invoke them in our courts when the need arises. "While foreign investors are always
welcome in this land to collaborate with us for our mutual benefit, they must be prepared as an indispensable condition
to respect and be bound by Philippine law in proper cases, as in the one at bar." 32 The requirement of a license is not
intended to put foreign corporations at a disadvantage, for the doctrine of lack of capacity to sue is based on
considerations of sound public policy.33 Accordingly, petitioner HPPL must be held to be incapacitated to bring this
petition for injunction before this Court for it is a foreign corporation doing business in the Philippines without the
requisite license.
WHEREFORE, in view of all the foregoing, the instant petition is hereby DISMISSED for lack of merit. Further, the
temporary restraining order issued on December 3, 1997 is LIFTED and SET ASIDE. No costs.
SO ORDERED.
MR HOLDINGS, LTD. vs. SHERIFF CARLOS P. BAJAR, SHERIFF FERDINAND M. JANDUSAY, SOLIDBANK CORPORATION,
AND MARCOPPER MINING CORPORATION [G.R. No. 138104 April 11, 2002]
In the present Petition for Review on Certiorari, petitioner MR Holdings, Ltd. assails the a) Decision1 dated January 8,
1999 of the Court of Appeals in CA-G.R. SP No. 49226 finding no grave abuse of discretion on the part of Judge Leonardo
P. Ansaldo of the Regional Trial Court (RTC), Branch 94, Boac, Marinduque, in denying petitioner’s application for a writ of
preliminary injunction;2 and b) Resolution3 dated March 29, 1999 denying petitioner’s motion for reconsideration.
The facts of the case are as follows:
Under a "Principal Loan Agreement"4 and "Complementary Loan Agreement," 5 both dated November 4, 1992, Asian
Development Bank (ADB), a multilateral development finance institution, agreed to extend to Marcopper Mining
Corporation (Marcopper) a loan in the aggregate amount of US$40,000,000.00 to finance the latter’s mining project at
Sta. Cruz, Marinduque. The principal loan of US$ 15,000,000.00 was sourced from ADB’s ordinary capital resources, while
the complementary loan of US$ 25,000,000.00 was funded by the Bank of Nova Scotia, a participating finance institution.
On even date, ADB and Placer Dome, Inc., (Placer Dome), a foreign corporation which owns 40% of Marcopper, executed
a "Support and Standby Credit Agreement" whereby the latter agreed to provide Marcopper with cash flow support for
the payment of its obligations to ADB.
To secure the loan, Marcopper executed in favor of ADB a "Deed of Real Estate and Chattel Mortgage" 6 dated November
11, 1992, covering substantially all of its (Marcopper’s) properties and assets in Marinduque. It was registered with the
Register of Deeds on November 12, 1992.
When Marcopper defaulted in the payment of its loan obligation, Placer Dome, in fulfillment of its undertaking under the
"Support and Standby Credit Agreement," and presumably to preserve its international credit standing, agreed to have
its subsidiary corporation, petitioner MR Holding, Ltd., assumed Marcopper’s obligation to ADB in the amount of US$
18,453,450.02. Consequently, in an "Assignment Agreement" 7 dated March 20, 1997, ADB assigned to petitioner all its
rights, interests and obligations under the principal and complementary loan agreements, ("Deed of Real Estate and
Chattel Mortgage," and "Support and Standby Credit Agreement"). On December 8, 1997, Marcopper likewise executed
a "Deed of Assignment"8 in favor of petitioner. Under its provisions, Marcopper assigns, transfers, cedes and conveys to
petitioner, its assigns and/or successors-in-interest all of its (Marcopper’s) properties, mining equipment and facilities, to
wit:
Land and Mining Rights
Building and Other Structures
Other Land Improvements
Machineries & Equipment, and Warehouse Inventory
Mine/Mobile Equipment
Transportation Equipment and Furniture & Fixtures
Meanwhile, it appeared that on May 7, 1997, Solidbank Corporation (Solidbank) obtained a Partial Judgment 9against
Marcopper from the RTC, Branch 26, Manila, in Civil Case No. 96-80083 entitled "Solidbank Corporation vs. Marcopper
Mining Corporation, John E. Loney, Jose E. Reyes and Teodulo C. Gabor, Jr.," the decretal portion of which reads:
"WHEREFORE, PREMISES CONSIDERED, partial judgment is hereby rendered ordering defendant Marcopper
Mining Corporation, as follows:
1. To pay plaintiff Solidbank the sum of Fifty Two Million Nine Hundred Seventy Thousand Pesos Seven
Hundred Fifty Six and 89/100 only (PHP 52,970,756.89), plus interest and charges until fully paid;
 2. To pay an amount equivalent to Ten Percent (10%) of above-stated amount as attorney’s fees; and
3. To pay the costs of suit.
"SO ORDERED."
Upon Solidbank’s motion, the RTC of Manila issued a writ of execution pending appeal directing Carlos P. Bajar,
respondent sheriff, to require Marcopper "to pay the sums of money to satisfy the Partial Judgment." 10 Thereafter,
respondent Bajar issued two notices of levy on Marcopper’s personal and real properties, and over all its stocks of scrap
iron and unserviceable mining equipment. 11 Together with sheriff Ferdinand M. Jandusay (also a respondent) of the RTC,
Branch 94, Boac, Marinduque, respondent Bajar issued two notices setting the public auction sale of the levied
properties on August 27, 1998 at the Marcopper mine site. 12
Having learned of the scheduled auction sale, petitioner served an "Affidavit of Third-Party Claim" 13 upon respondent
sheriffs on August 26, 1998, asserting its ownership over all Marcopper’s mining properties, equipment and facilities by
virtue of the "Deed of Assignment."
Upon the denial of its "Affidavit of Third–Party Claim" by the RTC of Manila, 14 petitioner commenced with the RTC of
Boac, Marinduque, presided by Judge Leonardo P. Ansaldo, a complaint for reivindication of properties, etc., with prayer
for preliminary injunction and temporary restraining order against respondents Solidbank, Marcopper, and sheriffs Bajar
and Jandusay.15 The case was docketed as Civil Case No. 98-13.
In an Order16 dated October 6, 1998, Judge Ansaldo denied petitioner’s application for a writ of preliminary injunction on
the ground that a) petitioner has no legal capacity to sue, it being a foreign corporation doing business in the Philippines
without license; b) an injunction will amount "to staying the execution of a final judgment by a court of co-equal and
concurrent jurisdiction;" and c) the validity of the "Assignment Agreement" and the "Deed of Assignment" has been "put
into serious question by the timing of their execution and registration."
Unsatisfied, petitioner elevated the matter to the Court of Appeals on a Petition for Certiorari, Prohibition and
Mandamus, docketed therein as CA-G.R. SP No. 49226. On January 8, 1999, the Court of Appeals rendered a Decision
holding that Judge Ansaldo did not commit grave abuse of discretion in denying petitioner’s prayer for a writ of
preliminary injunction, ratiocinating as follows:
"Petitioner contends that it has the legal capacity to sue and seek redress from Philippine courts as it is a non-
resident foreign corporation not doing business in the Philippines and suing on isolated transactions.
xxx xxx
"We agree with the finding of the respondent court that petitioner is not suing on an isolated transaction as it
claims to be, as it is very obvious from the deed of assignment and its relationships with Marcopper and Placer
Dome, Inc. that its unmistakable intention is to continue the operations of Marcopper and shield its
properties/assets from the reach of legitimate creditors, even those holding valid and executory court judgments
against it. There is no other way for petitioner to recover its huge financial investments which it poured into
Marcopper’s rehabilitation and the local situs where the Deeds of Assignment were executed, without petitioner
continuing to do business in the country.
xxx xxx
"While petitioner may just be an assignee to the Deeds of Assignment, it may still fall within the
meaning of "doing business" in light of the Supreme Court ruling in the case of Far East International
Import and Export Corporation vs. Nankai Kogyo Co., 6 SCRA 725, that:
‘Where a single act or transaction however is not merely incidental or casual but indicates the foreign
corporation’s intention to do other business in the Philippines, said single act or transaction constitutes doing
or engaging in or transacting business in the Philippines.’
"Furthermore, the court went further by declaring that even a single act may constitute doing business if it is
intended to be the beginning of a series of transactions. (Far East International Import and Export Corporation
vs. Nankai Kogyo Co. supra).
 "On the issue of whether petitioner is the bona fide owner of all the mining facilities and equipment of
Marcopper, petitioner relies heavily on the Assignment Agreement allegedly executed on March 20, 1997
wherein all the rights and interest of Asian Development Bank (ADB) in a purported Loan Agreement were ceded
and transferred in favor of the petitioner as assignee, in addition to a subsequent Deed of Assignment dated
December 28, 1997 conveying absolutely all the properties, mining equipment and facilities of Marcopper in
favor of petitioner.
"The Deeds of Assignment executed in favor of petitioner cannot be binding on the judgment creditor, private
respondent Solidbank, under the general legal principle that contracts can only bind the parties who had entered
into it, and it cannot favor or prejudice a third person (Quano vs. Court of Appeals, 211 SCRA 40). Moreover, by
express stipulation, the said deeds shall be governed, interpreted and construed in accordance with laws of New
York.1âwphi1.nêt
"The Deeds of Assignment executed by Marcopper, through its President, Atty. Teodulo C. Gabor, Jr., were
clearly made in bad faith and in fraud of creditors, particularly private respondent Solidbank. The first
Assignment Agreement purportedly executed on March 20, 1997 was entered into after Solidbank had filed on
September 19, 1996 a case against Marcopper for collection of sum of money before Branch 26 of the Regional
Trial Court docketed as Civil Case No. 96-80083. The second Deed of Assignment purportedly executed on
December 28, 1997 was entered into by President Gabor after Solidbank had filed its Motion for Partial
Summary Judgment, after the rendition by Branch 26 of the Regional Trial Court of Manila of a Partial
Summary Judgment and after the said trial court had issued a writ of execution, and which judgment was later
affirmed by the Court of Appeals. While the assignments (which were not registered with the Registry of
Property as required by Article 1625 of the new Civil Code) may be valid between the parties thereof, it produces
no effect as against third parties. The purported execution of the Deeds of Assignment in favor of petitioner was
in violation of Article 1387 of the New Civil Code x x x." (Emphasis Supplied)
Hence, the present Petition for Review on Certiorari by MR Holdings, Ltd. moored on the following grounds:
"A. THE HONORABLE COURT OF APPEALS COMMITS A REVERSIBLE ERROR IN COMPLETELY DISREGARDING AS
A MATERIAL FACT OF THE CASE THE EXISTENCE OF THE PRIOR, REGISTERED 1992 DEED OF REAL ESTATE AND
CHATTEL MORTGAGE CREATING A LIEN OVER THE LEVIED PROPERTIES, SUBJECT OF THE ASSIGNMENT
AGREEMENT DATED MARCH 20, 1997, THUS, MATERIALLY CONTRIBUTING TO THE SAID COURT’S
MISPERCEPTION AND MISAPPRECIATION OF THE MERITS OF PETITIONER’S CASE.
B. THE HONORABLE COURT OF APPEALS COMMITS A REVERSIBLE ERROR IN MAKING A FACTUAL FINDING
THAT THE SAID ASSIGNMENT AGREEMENT IS NOT REGISTERED, THE SAME BEING CONTRARY TO THE FACTS ON
RECORD, THUS, MATERIALLY CONTRIBUTING TO THE SAID COURT’S MISPERCEPTION AND MISAPPRECIATION
OF THE MERITS OF PETITIONER’S CASE.
C. THE HONORABLE COURT OF APPEALS COMMITS A REVERSIBLE ERROR IN MAKING A FACTUAL FINDING ON
THE EXISTENCE OF AN ATTACHMENT ON THE PROPERTIES SUBJECT OF INSTANT CASE, THE SAME BEING
CONTRARY TO THE FACTS ON RECORD, THUS, MATERIALLY CONTRIBUTING TO THE SAID COURT’S
MISPERCEPTION AND MISAPPRECIATION OF THE MERITS OF PETITIONER’S CASE.
D. THE HONORABLE COURT OF APPEALS COMMITS A REVERSIBLE ERROR IN HOLDING THAT THE SAID
ASSIGNMENT AGREEMENT AND THE DEED OF ASSIGNMENT ARE NOT BINDING ON RESPONDENT SOLIDBANK
WHO IS NOT A PARTY THERETO, THE SAME BEING CONTRARY TO LAW AND ESTABLISHED JURISPRUDENCE ON
PRIOR REGISTERED MORTGAGE LIENS AND ON PREFERENCE OF CREDITS.
E. THE HONORABLE COURT OF APPEALS COMMITS A REVERSIBLE ERROR IN FINDING THAT THE
AFOREMENTIONED ASSIGNMENT AGREEMENT AND DEED OF ASSIGNMENT ARE SHAM, SIMULATED, OF
DUBIOUS CHARACTER, AND WERE MADE IN BAD FAITH AND IN FRAUD OF CREDITORS, PARTICULARLY
RESPONDENT SOLIDBANK, THE SAME BEING IN COMPLETE DISREGARD OF, VIZ: (1) THE LAW AND ESTABLISHED
JURISPRUDENCE ON PRIOR, REGISTERED MORTGAGE LIENS AND ON PREFERENCE OF CREDITS, BY REASON OF
WHICH THERE EXISTS NO CAUSAL CONNECTION BETWEEN THE SAID CONTRACTS AND THE PROCEEDINGS IN
CIVIL CASE NO. 96-80083; (2) THAT THE ASIAN DEVELOPMENT BANK WILL NOT OR COULD NOT HAVE AGREED
TO A SHAM; SIMULATED, DUBIOUS AND FRAUDULENT TRANSACTION; AND (3) THAT RESPONDENT
 SOLIDBANK’S BIGGEST STOCKHOLDER, THE BANK OF NOVA SCOTIA, WAS A MAJOR BENEFICIARY OF THE
ASSIGNMENT AGREEMENT IN QUESTION.
F. THE HONORABLE COURT OF APPEALS COMMITS A REVERSIBLE ERROR IN HOLDING THAT PETITIONER IS
WITHOUT LEGAL CAPACITY TO SUE AND SEEK REDRESS FROM PHILIPPINE COURTS, IT BEING THE CASE THAT
SECTION 133 OF THE CORPORATION CODE IS WITHOUT APPLICATION TO PETITIONER, AND IT BEING THE CASE
THAT THE SAID COURT MERELY RELIED ON SURMISES AND CONJECTURES IN OPINING THAT PETITIONER
INTENDS TO DO BUSINESS IN THE PHILIPPINES.
G. THE HONORABLE COURT OF APPEALS COMMITS A REVERSIBLE ERROR IN HOLDING THAT RESPONDENT
MARCOPPER, PLACER DOME, INC., AND PETITIONER ARE ONE AND THE SAME ENTITY, THE SAME BEING
WITHOUT FACTUAL OR LEGAL BASIS.
H. THE HONORABLE COURT OF APPEALS COMMITS A REVERSIBLE ERROR IN HOLDING PETITIONER GUILTY OF
FORUM SHOPPING, IT BEING CLEAR THAT NEITHER LITIS PENDENTIA NOR RES JUDICATA MAY BAR THE
INSTANT REIVINDICATORY ACTION, AND IT BEING CLEAR THAT AS THIRD-PARTY CLAIMANT, THE LAW AFFORDS
PETITIONER THE RIGHT TO FILE SUCH REIVINDICATORY ACTION.
I. THE HONORABLE COURT OF APPEALS COMMITS A REVERSIBLE ERROR IN RENDERING A DECISION WHICH IN
EFFECT SERVES AS JUDGMENT ON THE MERITS OF THE CASE.
J. THE SHERIFF’S LEVY AND SALE, THE SHERIFF’S CERTIFICATE OF SALE DATED OCTOBER 12, 1998, THE RTC-
MANILA ORDER DATED FEBRUARY 12, 1999, AND THE RTC-BOAC ORDER DATED NOVEMBER 25, 1998 ARE NULL
AND VOID.
K. THE HONORABLE COURT OF APPEALS COMMITS A REVERSIBLE ERROR IN AFFIRMING THE DENIAL BY THE
RTC-BOAC OF PETITIONER’S APPLICATION FOR PRELIMINARY INJUNCTION, THE SAME BEING IN TOTAL
DISREGARD OF PETITIONER’S RIGHT AS ASSIGNEE OF A PRIOR, REGISTERED MORTGAGE LIEN, AND IN
DISREGARD OF THE LAW AND JURISPRUDENCE ON PREFERENCE OF CREDIT."
In its petition, petitioner alleges that it is not "doing business" in the Philippines and characterizes its participation in the
assignment contracts (whereby Marcopper’s assets where transferred to it) as mere isolated acts that cannot foreclose
its right to sue in local courts. Petitioner likewise maintains that the two assignment contracts, although executed during
the pendency of Civil Case No. 96-80083 in the RTC of Manila, are not fraudulent conveyances as they were supported by
valuable considerations. Moreover, they were executed in connection with prior transactions that took place as early as
1992 which involved ADB, a reputable financial institution. Petitioner further claims that when it paid Marcopper’s
obligation to ADB, it stepped into the latter’s shoes and acquired its (ADB’S) rights, titles, and interests under the "Deed
of Real Estate and Chattel Mortgage." Lastly, petitioner asserts its existence as a corporation, separate and distinct from
Placer Dome and Marcopper.
In its comment, Solidbank avers that: a) petitioner is "doing business" in the Philippines and this is evidenced by the
"huge investment" it poured into the assignment contracts; b) granting that petitioner is not doing business in the
Philippines, the nature of its transaction reveals an "intention to do business" or "to begin a series of transaction" in the
country; c) petitioner, Marcopper and Placer Dome are one and the same entity, petitioner being then a wholly-owned
subsidiary of Placer Dome, which, in turn, owns 40% of Marcopper; d) the timing under which the assignments contracts
were executed shows that petitioner’s purpose was to defeat any judgment favorable to it (Solidbank); and e) petitioner
violated the rule on forum shopping since the object of Civil Case No. 98-13 (at RTC, Boac, Marinduque) is similar to the
other cases filed by Marcopper in order to forestall the sale of the levied properties.
Marcopper, in a separate comment, states that it is merely a nominal party to the present case and that its principal
concerns are being ventilated in another case.
The petition is impressed with merit.
Crucial to the outcome of this case is our resolution of the following issues: 1) Does petitioner have the legal capacity to
sue? 2) Was the Deed of Assignment between Marcopper and petitioner executed in fraud of creditors? 3) Are petitioner
MR Holdings, Ltd., Placer Dome, and Marcopper one and the same entity? and 4) Is petitioner guilty of forum shopping?
We shall resolve the issues in seriatim.
 I
The Court of Appeals ruled that petitioner has no legal capacity to sue in the Philippine courts because it is a foreign
corporation doing business here without license. A review of this ruling does not pose much complexity as the principles
governing a foreign corporation’s right to sue in local courts have long been settled by our Corporation Law. 17 These
principles may be condensed in three statements, to wit: a) if a foreign corporation does business in the
Philippines without a license, it cannot sue before the Philippine courts;18 b) if a foreign corporation is not doing
business in the Philippines, it needs no license to sue before Philippine courts on an isolated transaction 19or on a cause
of action entirely independent of any business transaction; 20 and c) if a foreign corporation does business in the
Philippines with the required license, it can sue before Philippine courts on any transaction. Apparently, it is not the
absence of the prescribed license but the "doing (of) business" in the Philippines without such license which debars the
foreign corporation from access to our courts.21
The task at hand requires us to weigh the facts vis-à-vis the established principles. The question whether or not a foreign
corporation is doing business is dependent principally upon the facts and circumstances of each particular case,
considered in the light of the purposes and language of the pertinent statute or statutes involved and of the general
principles governing the jurisdictional authority of the state over such corporations. 22
Batas Pambansa Blg. 68, otherwise known as "The Corporation Code of the Philippines," is silent as to what constitutes
doing" or "transacting" business in the Philippines. Fortunately, jurisprudence has supplied the deficiency and has held
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, and in progressive
prosecution of, the purpose and object for which the corporation was organized." 23 In Mentholatum Co. Inc., vs.
Mangaliman,24 this Court laid down the test to determine whether a foreign company is "doing business," thus:
" x x x The true test, however, seems to be whether the foreign corporation is continuing the body or
substance of the business or enterprise for which it was organized or whether it has substantially retired from
it and turned it over to another. (Traction Cos. vs. Collectors of Int. Revenue [C.C.A., Ohio], 223 F. 984,987.) x x
x."
The traditional case law definition has metamorphosed into a statutory definition, having been adopted with some
qualifications in various pieces of legislation in our jurisdiction. For instance, Republic Act No. 7042, otherwise known as
the "Foreign Investment Act of 1991," defines "doing business" as follows:
"d) The phrase ‘doing business’ shall include soliciting orders, service contracts, opening offices, whether called
‘liaison’ offices or branches; appointing representatives or distributors domiciled in the Philippines or who in any
calendar year stay in the country for a period or periods totalling one hundred 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." (Emphasis supplied) 25
Likewise, Section 1 of Republic Act No. 5455, 26 provides that:
"SECTION. 1. Definition and scope of this Act. - (1) 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 totaling 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."
There are other statutes27 defining the term "doing business" in the same tenor as those above-quoted, and as may be
observed, one common denominator among them all is the concept of "continuity."
In the case at bar, the Court of Appeals categorized as "doing business" petitioner’s participation under the "Assignment
Agreement" and the "Deed of Assignment." This is simply untenable. The expression "doing business" should not be
given such a strict and literal construction as to make it apply to any corporate dealing whatever. 28 At this early stage and
with petitioner’s acts or transactions limited to the assignment contracts, it cannot be said that it had performed acts
intended to continue the business for which it was organized. It may not be amiss to point out that the purpose or
business for which petitioner was organized is not discernible in the records. No effort was exerted by the Court of
Appeals to establish the nexus between petitioner’s business and the acts supposed to constitute "doing business."
Thus, whether the assignment contracts were incidental to petitioner’s business or were continuation thereof is
beyond determination. We cannot apply the case cited by the Court of Appeals, Far East Int’l Import and Export Corp.
vs. Nankai Kogyo Co., Ltd.,29 which held that a single act may still constitute "doing business" if "it is not merely incidental
or casual, but is of such character as distinctly to indicate a purpose on the part of the foreign corporation to do other
business in the state." In said case, there was an express admission from an official of the foreign corporation that he was
sent to the Philippines to look into the operation of mines, thereby revealing the foreign corporation’s desire to continue
engaging in business here. But in the case at bar, there is no evidence of similar desire or intent. Unarguably, petitioner
may, as the Court of Appeals suggested, decide to operate Marcopper’s mining business, but, of course, at this stage,
that is a mere speculation. Or it may decide to sell the credit secured by the mining properties to an offshore investor, in
which case the acts will still be isolated transactions. To see through the present facts an intention on the part of
petitioner to start a series of business transaction is to rest on assumptions or probabilities falling short of actual
proof. Courts should never base its judgments on a state of facts so inadequately developed that it cannot be
determined where inference ends and conjecture begins.
Indeed, the Court of Appeals’ holding that petitioner was determined to be "doing business" in the Philippines is based
mainly on conjectures and speculation. In concluding that the "unmistakable intention" of petitioner is to continue
Marcopper’s business, the Court of Appeals hangs on the wobbly premise that "there is no other way for petitioner to
recover its huge financial investments which it poured into Marcopper’s rehabilitation without it (petitioner) continuing
Marcopper’s business in the country." 30 This is a mere presumption. Absent overt acts of petitioner from which we may
directly infer its intention to continue Marcopper’s business, we cannot give our concurrence. Significantly, a view
subscribed upon by many authorities is that the mere ownership by a foreign corporation of a property in a certain
state, unaccompanied by its active use in furtherance of the business for which it was formed, is insufficient in itself to
constitute doing business.31 In Chittim vs. Belle Fourche Bentonite Products Co., 32 it was held that even if a foreign
corporation purchased and took conveyances of a mining claim, did some assessment work thereon, and endeavored
to sell it, its acts will not constitute the doing of business so as to subject the corporation to the statutory
requirements for the transacting of business. On the same vein, petitioner, a foreign corporation, which becomes the
assignee of mining properties, facilities and equipment cannot be automatically considered as doing business, nor
presumed to have the intention of engaging in mining business.
One important point. Long before petitioner assumed Marcopper’s debt to ADB and became their assignee under the
two assignment contracts, there already existed a "Support and Standby Credit Agreement" between ADB and Placer
Dome whereby the latter bound itself to provide cash flow support for Marcopper’s payment of its obligations to ADB.
Plainly, petitioner’s payment of US$ 18,453,450.12 to ADB was more of a fulfillment of an obligation under the "Support
and Standby Credit Agreement" rather than an investment. That petitioner had to step into the shoes of ADB as
Marcopper’s creditor was just a necessary legal consequence of the transactions that transpired. Also, we must hasten to
add that the "Support and Standby Credit Agreement" was executed four (4) years prior to Marcopper’s insovency,
hence, the alleged "intention of petitioner to continue Marcopper’s business" could have no basis for at that time,
Marcopper’s fate cannot yet be determined.
In the final analysis, we are convinced that petitioner was engaged only in isolated acts or transactions. Single or isolated
acts, contracts, or transactions of foreign corporations are not regarded as a doing or carrying on of business. Typical
examples of these are the making of a single contract, sale, sale with the taking of a note and mortgage in the state to
secure payment therefor, purchase, or note, or the mere commission of a tort. 33 In these instances, there is no
purpose to do any other business within the country.
II
Solidbank contends that from the chronology and timing of events, it is evident that there existed a pre-set pattern of
response on the part of Marcopper to defeat whatever court ruling that may be rendered in favor of Solidbank.
We are not convinced.
While it may appear, at initial glance, that the assignment contracts are in the nature of fraudulent conveyances,
however, a closer look at the events that transpired prior to the execution of those contracts gives rise to a different
conclusion. The obvious flaw in the Court of Appeals’ Decision lies in its constricted view of the facts obtaining in the
case. In its factual narration, the Court of Appeals definitely left out some events. We shall see later the significance of
those events.
Article 1387 of the Civil Code of the Philippines provides:
"Art. 1387. All contracts by virtue of which the debtor alienates property by gratuitous title are presumed to
have been entered into in fraud of creditors, when the donor did not reserve sufficient property to pay all debts
contracted before the donation.
Alienations by onerous title are also presumed fraudulent when made by persons against whom some
judgment has been rendered in any instance or some writ of attachment has been issued. The decision or
attachment need not refer to the property alienated, and need not have been obtained by the party seeking
rescission.
In addition to these presumptions, the design to defraud creditors may be proved in any other manner
recognized by law and of evidence.
This article presumes the existence of fraud made by a debtor. Thus, in the absence of satisfactory evidence to the
contrary, an alienation of a property will be held fraudulent if it is made after a judgment has been rendered against the
debtor making the alienation.34 This presumption of fraud is not conclusive and may be rebutted by satisfactory and
convincing evidence. All that is necessary is to establish affirmatively that the conveyance is made in good faith and for
a sufficient and valuable consideration.35
The "Assignment Agreement" and the "Deed of Assignment" were executed for valuable considerations. Patent from the
"Assignment Agreement" is the fact that petitioner assumed the payment of US$ 18,453,450.12 to ADB in satisfaction of
Marcopper’s remaining debt as of March 20, 1997. 36 Solidbank cannot deny this fact considering that a substantial
portion of the said payment, in the sum of US$ 13,886,791.06, was remitted in favor of the Bank of Nova Scotia, its major
stockholder.37
The facts of the case so far show that the assignment contracts were executed in good faith. The execution of the
"Assignment Agreement" on March 20, 1997 and the "Deed of Assignment" on December 8,1997 is not the alpha of this
case. While the execution of these assignment contracts almost coincided with the rendition on May 7, 1997 of the
Partial Judgment in Civil Case No. 96-80083 by the Manila RTC, however, there was no intention on the part of petitioner
to defeat Solidbank’s claim. It bears reiterating that as early as November 4, 1992, Placer Dome had already bound itself
under a "Support and Standby Credit Agreement" to provide Marcopper with cash flow support for the payment to ADB
of its obligations. When Marcopper ceased operations on account of disastrous mine tailings spill into the Boac River and
ADB pressed for payment of the loan, Placer Dome agreed to have its subsidiary, herein petitioner, paid ADB the amount
of US $18,453,450.12. Thereupon, ADB and Marcopper executed, respectively, in favor of petitioner an "Assignment
Agreement" and a "Deed of Assignment." Obviously, the assignment contracts were connected with transactions that
happened long before the rendition in 1997 of the Partial Judgment in Civil Case No. 96-80083 by the Manila RTC. Those
contracts cannot be viewed in isolation. If we may add, it is highly inconceivable that ADB, a reputable international
financial organization, will connive with Marcopper to feign or simulate a contract in 1992 just to defraud Solidbank for
its claim four years thereafter. And it is equally incredible for petitioner to be paying the huge sum of US $ 18,453,450.12
to ADB only for the purpose of defrauding Solidbank of the sum of ₱52,970,756.89.
It is said that the test as to whether or not a conveyance is fraudulent is -- does it prejudice the rights of creditors? 38We
cannot see how Solidbank’s right was prejudiced by the assignment contracts considering that substantially all of
Marcopper’s properties were already covered by the registered "Deed of Real Estate and Chattel Mortgage" executed by
Marcopper in favor of ADB as early as November 11, 1992. As such, Solidbank cannot assert a better right than ADB, the
latter being a preferred creditor. It is basic that mortgaged properties answer primarily for the mortgaged credit, not for
the judgment credit of the mortgagor’s unsecured creditor. Considering that petitioner assumed Marcopper’s debt to
ADB, it follows that Solidbank’s right as judgment creditor over the subject properties must give way to that of the
former.1âwphi1.nêt
III
The record is lacking in circumstances that would suggest that petitioner corporation, Placer Dome and Marcopper are
one and the same entity. While admittedly, petitioner is a wholly-owned subsidiary of Placer Dome, which in turn, which,
in turn, was then a minority stockholder of Marcopper, however, the mere fact that a corporation owns all of the stocks
of another corporation, taken alone is not sufficient to justify their being treated as one entity. If used to perform
legitimate functions, a subsidiary’s separate existence shall be respected, and the liability of the parent corporation as
well as the subsidiary will be confined to those arising in their respective business. 39
The recent case of Philippine National Bank vs. Ritratto Group Inc., 40 outlines the circumstances which are useful in the
determination of whether a subsidiary is but a mere instrumentality of the parent-corporation, to wit:
(a) The parent corporation owns all or most of the capital stock of the subsidiary.
(b) The parent and subsidiary corporations have common directors or officers.
(c) The parent corporation finances the subsidiary.
(d) The parent corporation subscribes to all the capital stock of the subsidiary or otherwise causes its
incorporation.
(e) The subsidiary has grossly inadequate capital.
(f) The parent corporation pays the salaries and other expenses or losses of the subsidiary.
(g) The subsidiary has substantially no business except with the parent corporation or no assets except those
conveyed to or by the parent corporation.
(h) In the papers of the parent corporation or in the statements of its officers, the subsidiary is described as a
department or division of the parent corporation, or its business or financial responsibility is referred to as the
parent corporation’s own.
(i) The parent corporation uses the property of the subsidiary as its own.
(j) The directors or executives of the subsidiary do not act independently in the interest of the subsidiary, but
take their orders from the parent corporation.
(k) The formal legal requirements of the subsidiary are not observed.
In this catena of circumstances, what is only extant in the records is the matter of stock ownership. There are no other
factors indicative that petitioner is a mere instrumentality of Marcopper or Placer Dome. The mere fact that Placer
Dome agreed, under the terms of the "Support and Standby Credit Agreement" to provide Marcopper with cash flow
support in paying its obligations to ADB, does not mean that its personality has merged with that of Marcopper. This
singular undertaking, performed by Placer Dome with its own stockholders in Canada and elsewhere, is not a sufficient
ground to merge its corporate personality with Marcopper which has its own set of shareholders, dominated mostly by
Filipino citizens. The same view applies to petitioner’s payment of Marcopper’s remaining debt to ADB.
With the foregoing considerations and the absence of fraud in the transaction of the three foreign corporations, we find
it improper to pierce the veil of corporate fiction – that equitable doctrine developed to address situations where the
corporate personality of a corporation is abused or used for wrongful purposes.
IV
On the issue of forum shopping, there could have been a violation of the rules thereon if petitioner and Marcopper were
indeed one and the same entity. But since petitioner has a separate personality, it has the right to pursue its third-party
claim by filing the independent reivindicatory action with the RTC of Boac, Marinduque, pursuant to Rule 39, Section 16
of the 1997 Rules of Civil Procedures. This remedy has been recognized in a long line of cases decided by this
Court.41 In Rodriguez vs. Court of Appeals,42 we held:
". . . It has long been settled in this jurisdiction that the claim of ownership of a third party over properties levied
for execution of a judgment presents no issue for determination by the court issuing the writ of execution.
 . . .Thus, when a property levied upon by the sheriff pursuant to a writ of execution is claimed by third person in
a sworn statement of ownership thereof, as prescribed by the rules, an entirely different matter calling for a
new adjudication arises. And dealing as it does with the all important question of title, it is reasonable to require
the filing of proper pleadings and the holding of a trial on the matter in view of the requirements of due process.
. . . In other words, construing Section 17 of Rule 39 of the Revised Rules of Court (now Section 16 of the 1997
Rules of Civil Procedure), the rights of third-party claimants over certain properties levied upon by the sheriff to
satisfy the judgment may not be taken up in the case where such claims are presented but in a separate and
independent action instituted by the claimants." (Emphasis supplied)
This "reivindicatory action" has for its object the recovery of ownership or possession of the property seized by the
sheriff, despite the third party claim, as well as damages resulting therefrom, and it may be brought against the sheriff
and such other parties as may be alleged to have connived with him in the supposedly wrongful execution proceedings,
such as the judgment creditor himself. Such action is an entirely separate and distinct action from that in which
execution has been issued. Thus, there being no identity of parties and cause of action between Civil Case No. 98-13
(RTC, Boac) and those cases filed by Marcopper, including Civil Case No. 96-80083 (RTC, Manila) as to give rise to res
judicata or litis pendentia, Solidbank’s allegation of forum-shopping cannot prosper. 43
All considered, we find petitioner to be entitled to the issuance of a writ of preliminary injunction. Section 3, Rule 58 of
the 1997 Rules of Civil Procedure provides:
"SEC. 3 Grounds for issuance of preliminary injunction. – A preliminary injunction may be granted when it is
established:
(a) That the applicant is entitled to the relief demanded, and the whole or part of such relief consists in
restraining the commission or continuance of the act or acts complained of, or in requiring the performance of
an act or acts, either for a limited period or perpetually;
(b) That the commission, continuance or non-performance of the acts or acts complained of during the litigation
would probably work injustice to the applicant; or
(c) That a party, court, agency or a person is doing, threatening, or is attempting to do, or is procuring or
suffering to be done, some act or acts probably in violation of the rights of the applicant respecting the subject
of the action or proceeding, and tending to render the judgment ineffectual."
Petitioner’s right to stop the further execution of the properties covered by the assignment contracts is clear under the
facts so far established. An execution can be issued only against a party and not against one who did not have his day in
court.44 The duty of the sheriff is to levy the property of the judgment debtor not that of a third person. For, as the saying
goes, one man’s goods shall not be sold for another man's debts. 45 To allow the execution of petitioner’s properties
would surely work injustice to it and render the judgment on the reivindicatory action, should it be favorable, ineffectual.
In Arabay, Inc., vs. Salvador,46 this Court held that an injunction is a proper remedy to prevent a sheriff from selling the
property of one person for the purpose of paying the debts of another; and that while the general rule is that no court
has authority to interfere by injunction with the judgments or decrees of another court of equal or concurrent or
coordinate jurisdiction, however, it is not so when a third-party claimant is involved. We quote the instructive words of
Justice Querube C. Makalintal in Abiera vs. Court of Appeals,47 thus:
"The rationale of the decision in the Herald Publishing Company case 48 is peculiarly applicable to the one before
Us, and removes it from the general doctrine enunciated in the decisions cited by the respondents and quoted
earlier herein.
1. Under Section 17 of Rule 39 a third person who claims property levied upon on execution may vindicate such
claim by action. Obviously a judgment rendered in his favor, that is, declaring him to be the owner of the
property, would not constitute interference with the powers or processes of the court which rendered the
judgment to enforce which the execution was levied. If that be so – and it is so because the property, being that
of a stranger, is not subject to levy – then an interlocutory order such as injunction, upon a claim and prima
facie showing of ownership by the claimant, cannot be considered as such interference either."
WHEREFORE, the petition is GRANTED. The assailed Decision dated January 8, 1999 and the Resolution dated March 29,
1999 of the Court of Appeals in CA G.R. No. 49226 are set aside. Upon filing of a bond of ₱1,000,000.00, respondent
sheriffs are restrained from further implementing the writ of execution issued in Civil Case No. 96-80083 by the RTC,
Branch 26, Manila, until further orders from this Court. The RTC, Branch 94, Boac, Marinduque, is directed to dispose of
Civil Case No. 98-13 with dispatch.
SO ORDERED.