Cargill Inc.

 vs Intra Strata Assurance Corporation

Facts:
 Cargill (foreign) is a corporation organized and existing under the laws of the State of Delaware. 
 Cargill executed a contract with Northern Mindanao Corporation (NMC) (domestic), whereby NMC
agreed to sell to petitioner 20,000 to 24,000 metric tons of molasses to be delivered from Jan 1 to 30 
1990 for $44 per metric ton
 The contract provided that CARGILL was to open a Letter of Credit with the BPI. NMC was 
permitted to draw up 500,000 representing the minimum price of the contract
 The contract was amended 3 times (in relation to the amount and the price). But the third amendment
required NMC to put up a performance bond which was intended to guarantee NMC’s performance 
to deliver the molasses during the prescribed shipment periods
 In compliance, INTRA STRATA issued a performance bond to guarantee NMC’s delivery.
 NMC was only able to deliver 219551 metric tons out of the agreed 10,500. Thus CARGILL sent 
demand letters to INTRA claiming payment under the performance and surety bonds. When INTRA 
failed to pay, CARGILL filed a complaint.
 CARGILL NMC and INTRA entered into a compromise agreement approved by the court, such 
provided that NMC would pay CARGILL 3 million upon signing and would deliver to CARGILL 
6,991 metric tons of molasses. But NMC still failed to comply
 RTC – in favor of CARGILL
 CA – CARGILL does not have the capacity to file suit since it was a foreign corporation doing 
business in the PH without the requisite license. The purchase of molasses were in pursuance of its 
basic business and not just mere isolated and incidental transactions

Issue: Whether or not petitioner is doing or transacting business in the Philippines in contemplation of the 
law and established jurisprudence/ Whether or not CARGILL, an unlicensed foreign corporation, has legal 
capacity to sue before Philippine courts.

Held: YES
 According to Article 123 of the Corporation Code, a foreign corporation must first obtain a license 
and a certificate from the appropriate government agency before it can transact business in the 
Philippines. Where a foreign corporation does business in the Philippines without the proper license, 
it cannot maintain any action or proceeding before Philippine courts, according to Article 133 of the 
Corporation Code
 “Doing Business”
o ….. 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.”
 Since INTRA is relying on Section 133 of the Corporation Code to bar petitioner from maintaining
an   action   in   Philippine   courts,   INTRA   bears   the   burden   of   proving   that   CARGILL   was   doing
business in the PH. In this case, we find that INTRA failed to prove that CARGILL’s activities in the
Philippines constitute doing business as would prevent it from bringing an action.
 There is no showing that the transactions between petitioner and NMC signify the intent of petitioner
to establish a continuous business or extend its operations in the Philippines.
  In this case, the contract between petitioner and NMC involved the purchase of molasses by 
petitioner from NMC. It was NMC, the domestic corporation, which derived income from the 
transaction and not petitioner. To constitute “doing business,” the activity undertaken in the 
Philippines should involve profit­making.
 Other factors which support the finding that petitioner is not doing business in the Philippines
are: (1) petitioner does not have an office in the Philippines; (2) petitioner imports products
from the Philippines through its non­exclusive local broker, whose authority to act on behalf of
petitioner is limited to soliciting purchases of products from suppliers engaged in the sugar
trade in the Philippines; and (3) the local broker is an independent contractor and not an agent
of petitioner.
 To be doing or “transacting business in the Philippines” for purposes of Section 133 of the 
 Corporation Code, the foreign corporation must  actually transact business in the Philippines
   , that is, 
perform specific business transactions within the Philippine territory on a continuing basis in its own 
name and for its own account
 CARGILL is a foreign company merely importing molasses from a Philipine exporter. A foreign 
company that merely imports goods from a Philippine exporter, without opening an office or 
appointing an agent in the Philippines, is not doing business in the Philippines.

Calleja vs Panday

Facts: Jose Pierre Panday, with the aid of 14 armed men usurped the powers which supposedly
belonged to respondents (Calleja, Tabora, et al) and took away the daily hospital collection from St.
John Hospital in Naga City. Calleja, et al filed a petition with the RTC of San Jose, Camarines Sur
for quo warranto with Damages and Prayer for Mandatory and Prohibitory Injunction, Damages and
Issuance of Temporary Restraining Order against Panday, et al.
“On May 24, 2005, RTC-Br. 58 issued an Order transferring the case to the Regional Trial Court in
Naga City. According to RTC-Br. 58, since the verified petition showed petitioners therein (herein
respondents) to be residents of Naga City, then pursuant to Section 7, Rule 66 of the 1997 Rules of
Civil Procedure, the action for quo warranto should be brought in the Regional Trial Court exercising
jurisdiction over the territorial area where the respondents or any of the respondents resides.
However, the Executive Judge of RTC, Naga City refused to receive the case folder of the subject
case for quo warranto, stating that improper venue is not a ground for transferring a quo warranto
case to another administrative jurisdiction.”
The RTC-Br. 58 then proceeded to issue and serve summons.

On July 13, 2005, RTC-Br. 58 issued the assailed Order, the pertinent portions of which read as
follows:

“It is undisputed that the plaintiffs cause of action involves controversies arising out of intra-
corporate relations, between and among stockholders, members or associates of the St. John
Hospital Inc. which originally under PD 902-A approved on March 11, 1976 is within the original and
exclusive jurisdiction of the Securities and Exchange Commission to try and decide in addition to its
regulatory and adjudicated functions (Section 5, PD 902-A). Upon the advent of RA 8799 approved
on July 19, 2000, otherwise known as the Securities and Regulation Code, the Commissions
jurisdiction over all cases enumerated in Section 5, Presidential Decree 902-A were transferred []to
the Court of general jurisdiction or the appropriate Regional Trial Court with a proviso that the
Supreme Court in the exercise of its authority may designate the Regional Trial Court branches that
shall exercise jurisdiction over these cases. Pursuant to this mandate of RA 8799, the Supreme
Court in the exercise of said mandated authority, promulgated on November 21, 2000, A.M. No. 00-
11-03-SC which took effect 15 December 2000 designated certain branches of the Regional Trial
Court to try and decide Securities and Exchange Commission Cases arising within their respective
territorial jurisdiction with respect to the National Capital Region and within the
respective provinces in the First to Twelve Judicial Region. Accordingly, in the Province of Camarines
Sur, (Naga City) RTC Branch 23 presided by the Hon. Pablo M. Paqueo, Jr. was designated as special
court (Section 1, A.M. No. 00-11-03-SC).
Subsequently, on January 23, 2001, supplemental Administrative Circular No. 8-01 which took effect
on March 1, 2001 was issued by the Supreme Court which directed that all SEC cases originally
assigned or transmitted to the regular Regional Trial Court shall be transferred to branches of the
Regional Trial Court specially designated to hear such cases in accordance with A.M. No. 00-11-03-SC.
Xxx
In the light of the above-noted observations and discussion, the Motion to Dismiss
is DENIED pursuant to the Interim Rules of Procedure for Intra-Corporate Controversies (A.M. No.
01-2-04-SC) which mandates that motion to dismiss is a prohibited pleading (Section 8) and in
consonance with Administrative Order 8-01 of the Supreme Court dated March 1, 2001, this case is
hereby ordered remanded to the Regional Trial Court Branch 23, Naga City which under A.M. No. 00-
11-03-SC has been designated as special court to try and decide intra-corporate controversies under
R.A. 8799.”
Issue: “WHETHER A BRANCH OF THE REGIONAL TRIAL COURT WHICH HAS NO
JURISDICTION TO TRY AND DECIDE A CASE HAS AUTHORITY TO REMAND THE SAME TO
ANOTHER CO-EQUAL COURT IN ORDER TO CURE THE DEFECTS ON VENUE AND
JURISDICTION.”
Decision: “Evidently, the RTC-Br. 58 in San Jose, Camarines Sur is bereft of jurisdiction over
respondents petition for quo warranto. Based on the allegations in the petition, the case was clearly
one involving an intra-corporate dispute. The trial court should have been aware that under R.A. No.
8799 and the aforementioned administrative issuances of this Court, RTC-Br. 58 was never
designated as a Special Commercial Court; hence, it was never vested with jurisdiction over cases
previously cognizable by the SEC.
Such being the case, RTC-Br. 58 did not have the requisite authority or power to order the transfer
of the case to another branch of the Regional Trial Court. The only action that RTC-Br. 58 could take
on the matter was to dismiss the petition for lack of jurisdiction.”

CEMCO HOLDINGS, INC. vs. NATIONAL LIFE INSURANCE

COMPANY OF THE PHILIPPINES, INC.
FACTS:
Union Cement Corporation (UCC), a publicly-listed company, has two principal
stockholders – UCHC, a non-listed company, with shares amounting to 60.51%, and petitioner
Cemco with17.03%. Majority of UCHC’s stocks were owned by BCI with 21.31% and ACC with
29.69%. Cemco, on the other hand, owned 9% of UCHC stocks. In a disclosure letter, BCI
informed the Philippine Stock Exchange (PSE) that it and its subsidiary ACC had passed
resolutions to sell to Cemco BCI’s stocks in UCHC equivalent to 21.31% and ACC’s stocks in
UCHC equivalent to 29.69%.
As a consequence of this disclosure, the PSE inquired as to whether the Tender Offer
Rule under Rule 19 of the Implementing Rules of the Securities Regulation Code is not
applicable to the purchase by petitioner of the majority of shares of UCC. The SEC en banc
had resolved that the Cemco transaction was not covered by the tender offer rule. Feeling
aggrieved by the transaction, respondent National Life Insurance Company of the Philippines,
Inc., a minority stockholder of UCC, sent a letter to Cemco demanding the latter to comply
with the rule on mandatory tender offer. Cemco, however, refused.
Respondent National Life Insurance Company of the Philippines, Inc. filed a complaint
with the SEC asking it to reverse its 27 July 2004 Resolution and to declare the purchase
agreement of Cemco void and praying that the mandatory tender offer rule be applied to its
UCC shares.
The SEC ruled in favor of the respondent by reversing and setting aside its 27 July
2004Resolution and directed petitioner Cemco to make a tender offer for UCC shares to
respondent and other holders of UCC shares similar to the class held by UCHC in accordance
with Section 9(E), Rule 19 of the Securities Regulation Code.
On petition to the Court of Appeals, the CA rendered a decision affirming the ruling of the SEC.
It ruled that the SEC has jurisdiction to render the questioned decision and, in any event,
Cemco was barred by estoppel from questioning the SEC’s jurisdiction.
It, likewise, held that the tender offer requirement under the Securities Regulation Code and
its Implementing Rules applies to Cemco’s purchase of UCHC stocks. Cemco’s motion for
reconsideration was likewise denied.
ISSUES:
1. Whether or not the SEC has jurisdiction over respondent’s complaint and to require Cemco
to make a tender offer for respondent’s UCC shares.
2. Whether or not the rule on mandatory tender offer applies to the indirect acquisition of shares in a
listed company, in this case, the indirect acquisition by Cemco of 36% of UCC, a publicly-listed company,
through its purchase of the shares in UCHC, a non-listed company.
HELD:
1. YES. In taking cognizance of respondent’s complaint against petitioner and eventually
rendering a judgment which ordered the latter to make a tender offer, the SEC was acting
pursuant to Rule19(13) of the Amended Implementing Rules and Regulations of the
Securities Regulation Code, to wit:
“ 13. Violation If there shall be violation of this Rule by pursuing a purchase of equity shares
of a public company at threshold amounts without the required tender offer, the Commission,
upon complaint, may nullify the said acquisition and direct the holding of a tender offer. This
shall be without prejudice to the imposition of other sanctions under the Code.”
The foregoing rule emanates from the SEC’s power and authority to regulate, investigate or
supervise the activities of persons to ensure compliance with the Securities Regulation Code,
more specifically the provision on mandatory tender offer under Section 19thereof. Moreover,
petitioner is barred from questioning the jurisdiction of the SEC. It must be pointed out that
petitioner had participated in all the proceedings before the SEC and had prayed
for affirmative relief.

2. YES. Tender offer is a publicly announced intention by a person acting alone or in

concert with other persons to acquire equity securities of a public company.
A public company is defined as a corporation which is listed on an exchange, or a corporation
with assets exceeding P50,000,000.00 and with 200 or more stockholders, at least 200 of
them holding not less than 100 shares of such company .
Stated differently, a tender offer isan offer by the acquiring person to stockholders of a public
company for them to tender their shares therein on the terms specified in the offer.
Tender offer is in place
to protect minority shareholders against any scheme that dilutes the share value of their inve
stments. It gives the minority shareholders the chance to exit the company under reasonable
terms, giving them the opportunity to sell their shares at the same price as those of the
majority shareholders. The SEC and the Court of Appeals ruled that the indirect acquisition by
petitioner of 36% of UCC shares through the acquisition of the non-listed UCHC shares is
covered by the mandatory tender offer rule. The legislative intent of Section 19 of the Code is
to regulate activities relating to acquisition of control of the listed company and for the
purpose of protecting the minority stockholders of a listed corporation. Whatever may be the
method by which control of a public company isobtained, either through the direct purchase
of its stocks or through an indirect means, mandatory tender offer applies. As appropriately
held by the Court of Appeals:
The petitioner posits that what it acquired were stocks of UCHC and not UCC. By
happenstance, as a result of the transaction, it became an indirect owner of UCC. We are
constrained, however, to construe ownership acquisition to mean both direct and
indirect. What is decisive is the determination of the power of control. The legislative intent
behind the tender offer rule makes clear that the type of activity intended to be regulated is
the acquisition of control of the listed company through the purchase of shares. Control may
[be] effected through a direct and indirect acquisition of stock, and when this takes place,
irrespective of the means, a tender offer must occur. The bottom line of the law is to give the
shareholder of the listed company the opportunity to decide whether or not to sell in
connection with a transfer of control. x x x