Republic of the Philippines The foreign banks involved in the controversy

SUPREME COURT are Bank of America NT and SA, Citibank N.A. and
Manila Hongkong and Shanghai Banking Corporation. On
December 11, 1981, they jointly filed with the
FIRST DIVISION Court of First Instance of Rizal a petition for
involuntary insolvency of Consolidated Mines,
Inc. (CMI), which they amended four days later.
G.R. Nos. 79926-27 October 17, 1991 2 The case was docketed as Sp. Proc. No. 9263
and assigned to Branch 28 of the Court.
STATE INVESTMENT HOUSE, INC. and STATE
FINANCING CENTER, INC., petitioners, The petition for involuntary insolvency
vs. alleged:
CITIBANK, N.A., BANK OF AMERICA, NT & SA,
HONGKONG & SHANGHAI BANKING CORPORATION, and 1) that CMI had obtained loans from the three
the COURT OF APPEALS, respondents. petitioning banks, and that as of
November/December, 1981, its outstanding
Roco, Bunag, Kapunan & Migallos for obligations were as follows:
petitioners.
Agcaoili & Associates for Citibank, N.A, and a) In favor of Bank of America (BA)
Bank of America NT & SA. P15,297,367.67

Belo, Abiera & Associates for Hongkong & (as of December 10, 1981) US$ 4,175,831.88
Shanghai Banking Corp.
(b) In favor of Citibank US$ 4,920,548.85

NARVASA, J.: (as of December 10, 1981)

The chief question in the appeal at bar is c) In favor of Hongkong & Shanghai Bank
whether or not foreign banks licensed to do US$ 5,389,434.12
business in the Philippines, may be considered
"residents of the Philippine Islands" within (as of November 30, 1981); P6,233,969.24
the meaning of Section 20 of the Insolvency Law
(Act No. 1956, as amended, eff. May 20, 1909) 2) that in November, 1981, State Investment
reading in part as follows: 1 House, Inc. (SIHI) and State Financing Center,
Inc. (SFCI) had separately instituted actions
An adjudication of insolvency may be made on the for collection of sums of money and damages in
petition of three or more creditors, residents the Court of First Instance of Rizal against CMI,
of the Philippine Islands, whose credits or docketed respectively as Civil Cases Numbered
demands accrued in the Philippine Islands, and 43588 and 43677; and that on application of said
the amount of which credits or demands are in plaintiffs, writs of preliminary attachment
the aggregate not less than one thousand pesos: had been issued which were executed on "the
Provided, that none of said creditors has royalty/profit sharing payments due CMI from
become a creditor by assignment, however made, Benguet Consolidated Mining, Inc;" and
within thirty days prior to the filing of said
petition. Such petition must be filed in the 3) that CMI had "committed specific acts of
Court of First Instance of the province or city insolvency as provided in Section 20 of the
in which the debtor resides or has his principal Insolvency Law, to wit:
place of business, and must be verified by at
least three (3) of the petitioners. . . . x x x x x x x x x
5. that he (CMI) has suffered his (CMI's) banks are not "Philippine residents." 5
property to remain under attachment or legal Resolution on the motion was "deferred until
process for three days for the purpose of after hearing of the case on the merits" it
hindering or delaying or defrauding his (CMI's) appearing to the Court that the grounds
creditors; therefor did not appear to be indubitable. 6

x x x x x x x x x SIHI and SFCI filed their own

Answer-in-Intervention, 7 and served on the
11. that being a merchant or tradesman he (CMI) three petitioner banks requests for admission
has generally defaulted in the payment of his of certain facts in accordance with Rule 26 of
(CMI's) current obligations for a period of the Rules of Court, 8 receiving a response only
thirty days; . . . from Hongkong & Shanghai Bank. 9

The petition was opposed by State Investment SIHI and SFCI then filed a Motion for Summary
House, Inc. (SIHI) and State Financing Center, Judgment dated May 23, 1983 "on the ground that,
Inc. (SFCI). 3 It claimed that: based on the pleadings and admissions on record,
the trial court had no jurisdiction to
1) the three petitioner banks had come to court adjudicate CMI insolvent since the petitioners
with unclean hands in that they filed the (respondent foreign banks) are not "resident
petition for insolvency — alleging the CMI creditors" of CMI as required under the
was defrauding its creditors, and they wished Insolvency Law." 10 Oppositions to the motion
all creditors to share in its assets — were filed, 11 to which a reply was submitted.
although a few days earlier, they had "received 12
for the account of CMI substantial payments
aggregating P10,800,000.00;" The Regional Trial Court 13 found merit in the
motion for summary judgment. By Order dated
2) the Court had no jurisdiction because the October 10, 1983, it rendered "summary judgment
alleged acts of insolvency were false: the dismissing the . . . petition for lack of
writs of attachment against CMI had remained in jurisdiction over the subject matter, with
force because there were "just, valid and costs against petitioners." 14 It ruled that on
lawful grounds for the(ir) issuance," and CMI the basis of the "facts on record, as shown in
was not a "merchant or tradesman" nor had it the pleadings, motions and admissions of the
"generally defaulted in the payment of (its) parties, an insolvency court could "not acquire
obligations for a period of thirty days . . . ;" jurisdiction to adjudicate the debtor as
insolvent if the creditors petitioning for
3) the Court had no jurisdiction to take adjudication of insolvency are not "residents"
cognizance of the petition for insolvency of the Philippines" — citing a decision of the
because petitioners are not resident creditors California Supreme Court which it declared
of CMI in contemplation of the Insolvency Law; "squarely applicable especially considering
and that one of the sources of our Insolvency Law
is the Insolvency Act of California of
4) the Court has no power to set aside the 1895 . . . " And it declared that since
attachment issued in favor of petitioners had been merely licensed to do
intervenors-oppositors SIHI and SFCI. business in the Philippines, they could not be
deemed residents thereof.
CMI filed its Answer to the petition for
insolvency, asserting in the main that it was The three foreign banks sought to take an appeal
not insolvent, 4 and later filed a "Motion to from the Order of October 10, 1983. They filed
Dismiss Based on Affirmative Defense of a notice of appeal and a record on appeal. 15
Petitioner's Lack of Capacity to Sue," echoing SIHI and SFCI moved to dismiss their appeal
the theory of SIHI and SFCI that the petitioner
claiming it was attempted out of time. The Trial himself," the object being "to provide not only
Court denied the motion. for the suspension of payments and the
protection of creditors but also the discharge
SIHI and SFCI filed with this Court a petition of insolvent honest debtors to enable them to
for certiorari and prohibition (G.R. NO. 66449), have a fresh start;"
impugning that denial. The Court dismissed the
petition and instead required the three banks 2) that the Trial Court had placed "a very
to file a petition for review in accordance with strained and restrictive interpretation of the
Rule 45 of the Rules of Court. 16 This the banks term "resident," as to exclude foreign banks
did (their petition was docketed as G.R. No. which have been operating in this country since
66804). However, by Resolution dated May 16, the early part of the century," and "the better
1984, the court referred the petition for approach . . . would have been to harmonize the
review to the Intermediate Appellate Court, provisions . . . (of the Insolvency Law) with
where it was docketed as AC SP-03674. 17 similar provisions of other succeeding laws,
like the Corporation Code of the Philippines,
In the meantime, the Trial Court approved on May the General Banking Act, the Offshore Banking
3, 1985 the banks' record on appeal and Law and the National Internal Revenue Code in
transmitted it to this Court, where it was connection with or related to their doing
recorded as UDK-6866. As might have been business in the Philippines;"
expected, this Court required the banks to file
a petition for review under Rule 45, but they 3) that in light of said statutes, the three
asked to be excused from doing so since they had banks "are in truth and in fact considered as
already filed such a petition, which had been "residents" of the Philippines for purposes of
referred to the Intermediate Appellate Court doing business in the Philippines and even for
and was there pending as AC-G.R. No. SP 03674, taxation matters;"
supra. This Court then also referred UDK-6866
to the Intermediate Appellate Court where it 4) that the banks had "complied with all the
was docketed as AC-G.R. No. CV 07830. laws, rules and regulations (for doing business
in the country) and have been doing business in
Both referred cases, AC-G.R. No. SP 03674 and the Philippines for many years now;" that the
AC-G.R. No. CV 07830, were consolidated by authority granted to them by the Securities and
Resolution of the Court of Appeals dated April Exchange Commission upon orders of the Monetary
9, 1986, and Decision thereon was promulgated Board "covers not only transacting banking
on July 14, 1987 by the Fifteenth Division of business . . . but likewise maintaining suits
said Court. 18 "for recovery of any debt, claims or demand
whatsoever," and that their petition for
The Appellate Court reversed the Trial Court's involuntary insolvency was "nothing more than
Order of October 10, 1983 and remanded the case a suit aimed at recovering a debt granted by
to it for further proceedings. It ruled: them to Consolidated Mines, Inc., or at least
a portion thereof;"
1) that the purpose of the Insolvency Law was
"to convert the assets of the bankrupt in cash 4) that to deprive the foreign banks of their
for distribution among creditors, and then to right to proceed against their debtors through
relieve the honest debtor from the weight of insolvency proceedings would "contravene the
oppressive indebtedness and permit him to start basic standards of equity and fair play, . . .
life anew, free from the obligations and would discourage their operations in economic
responsibilities consequent upon business development projects that create not only jobs
misfortunes;" 19 and that it was "crystal for our people but also opportunities for
clear" that the law was "designed not only for advancement as a nation;" and
the benefit of the creditors but more
importantly for the benefit of the debtor
5) that the terms "residence" and "domicile" do adjudication of the Philippine corporation as
not mean the same thing, and that as regards a a bankrupt;
corporation, it is generally deemed an
"inhabitant" of the state under whose law it is 7) the Monetary Board can not appoint a
incorporated, and has a "residence" wherever it conservator or receiver for a foreign bank or
conducts its ordinary business, and may have orders its liquidation having only the power to
its legal "domicile" in one place and revoke its license, subject to such proceedings
"residence" in another. as the Solicitor General may thereafter deem
proper to protect its creditors;
SIHI and SFCI moved for reconsideration and
then, when rebuffed, took an appeal to this 8) the foreign banks are not denied the right
Court. Here, they argue that the Appellate to collect their credits against Philippine
Court's judgment should be reversed because it debtors, only the right to "petition for the
failed to declare that — harsh remedy of involuntary insolvency" not
being conceded to them;
1) the failure of the three foreign banks to
allege under oath in their petition for 9) said banks have come to court with unclean
involuntary insolvency that they are hands, their filing of the petition for
Philippine residents, wishing only to "be involuntary insolvency being an attempt to
considered Philippine residents," is fatal to defeat validly acquired rights of domestic
their cause; corporations.

2) also fatal to their cause is their failure The concept of a foreign corporation under
to prove, much less allege, that under the Section 123 of the Corporation Code is of "one
domiciliary laws of the foreign banks, a formed, organized or existing under laws other
Philippine corporation is allowed the than those of the Philippines and . . . (which)
reciprocal right to petition for a debtor's laws allow Filipino citizens and corporations
involuntary insolvency; to do business . . . ." There is no question that
the three banks are foreign corporations in
3) in fact and in law, the three banks are not this sence, with principal offices situated
Philippine residents because: outside of the Philippines. There is no
question either that said banks have been
a) corporations have domicile and residence licensed to do business in this country and have
only in the state of their incorporation or in in fact been doing business here for many years,
the place designated by law, although for through branch offices or agencies, including
limited and exclusive purposes, other states "foreign currency deposit units;" in fact, one
may consider them as residents; of them, Hongkong & Shanghai Bank has been doing
business in the Philippines since as early as
b) juridical persons may not have residence 1875.
separate from their domicile;
The issue is whether these Philippine branches
4) actually, the non-resident status of the or units may be considered "residents of the
banks within the context of the Insolvency Law Philippine Islands" as that term is used in
is confirmed by other laws; Section 20 of the Insolvency Law, supra, 20 or
residents of the state under the laws of which
5) the license granted to the banks to do they were respectively incorporated. The
business in the Philippines does not make them answer cannot be found in the Insolvency Law
residents; itself, which contains no definition of the
term, resident, or any clear indication of its
6) no substantive law explicitly grants foreign meaning. There are however other statutes,
banks the power to petition for the albeit of subsequent enactment and effectivity,
from which enlightening notions of the term may a non-resident within the scope of the legal
be derived. provision authorizing attachment against a
defendant not residing in the Philippine
The National Internal Revenue Code declares Islands;" 26 in other words, a preliminary
that the term "'resident foreign corporation' attachment may not be applied for and granted
applies to a foreign corporation engaged in solely on the asserted fact that the defendant
trade or business within the Philippines," as is a foreign corporation authorized to do
distinguished from a " "non-resident foreign business in the Philippines — and is
corporation" . . . (which is one) not engaged consequently and necessarily, "a party who
in trade or business within the Philippines." resides out of the Philippines."
21 Parenthetically, if it may not be considered as
a party not residing in the Philippines, or as
The Offshore Banking Law, Presidential Decree a party who resides out of the country, then,
No. 1034, states "that branches, subsidiaries, logically, it must be considered a party who
affiliation, extension offices or any other does reside in the Philippines, who is a
units of corporation or juridical person resident of the country. Be this as it may, this
organized under the laws of any foreign country Court pointed out that:
operating in the Philippines shall be
considered residents of the Philippines." 22 . . . Our laws and jurisprudence indicate a
purpose to assimilate foreign corporations,
The General Banking Act, Republic Act No. 337, duly licensed to do business here, to the status
places "branches and agencies in the of domestic corporations. (Cf. Section 73, Act
Philippines of foreign banks . . . (which are) No. 1459, and Marshall Wells Co. vs. Henry W.
called Philippine branches," in the same Elser & Co., 46 Phil. 70, 76; Yu; Cong Eng vs.
category as "commercial banks, savings Trinidad, 47 Phil. 385, 411) We think it would
associations, mortgage banks, development be entirely out of line with this policy should
banks, rural banks, stock savings and loan we make a discrimination against a foreign
associations" (which have been formed and corporation, like the petitioner, and subject
organized under Philippine laws), making no its property to the harsh writ of seizure by
distinction between the former and the later in attachment when it has complied not only with
so far, as the terms "banking institutions" and every requirement of law made specially of
"bank" are used in the Act, 23 declaring on the foreign corporations, but in addition with
contrary that in "all matters not specifically every requirement of law made of domestic
covered by special provisions applicable only corporations. . . . .
to foreign banks, or their branches and
agencies in the Philippines, said foreign banks Obviously, the assimilation of foreign
or their branches and agencies lawfully doing corporations authorized to do business in the
business in the Philippines "shall be bound by Philippines "to the status of domestic
all laws, rules, and regulations applicable to corporations," subsumes their being found and
domestic banking corporations of the same class, operating as corporations, hence, residing, in
except such laws, rules and regulations as the country.
provided for the creation, formation,
organization, or dissolution of corporations The same principle is recognized in American
or as fix the relation, liabilities, law: that the "residence of a corporation, if
responsibilities, or duties of members, it can be said to have a residence, is
stockholders or officers or corporations." 24 necessarily where it exercises corporate
functions . . . ;" that it is .considered as
This Court itself has already had occasion to dwelling "in the place where its business is
hold 25 that a foreign corporation licitly done . . . ," as being "located where its
doing business in the Philippines, which is a franchises are exercised . . . ," and as being
defendant in a civil suit, may not be considered "present where it is engaged in the prosecution
of the corporate enterprise;" that a "foreign cause. In truth, in light of the concept of
corporation licensed to do business in a state resident foreign corporations just expounded,
is a resident of any country where it maintains when they alleged in that petition that they are
an office or agent for transaction of its usual foreign banking corporations, licensed to do
and customary business for venue purposes;" and business in the Philippines, and actually doing
that the "necessary element in its business in this Country through branch offices
signification is locality of existence." 27 or agencies, they were in effect stating that
Courts have held that "a domestic corporation they are resident foreign corporations in the
is regarded as having a residence within the Philippines.
state at any place where it is engaged in the
particulars of the corporate enterprise, and There is, of course, as petitioners argue, no
not only at its chief place or home office;" 28 substantive law explicitly granting foreign
that "a corporation may be domiciled in one banks the power to petition for the
state and resident in another; its legal adjudication of a Philippine corporation as a
domicil in the state of its creation presents bankrupt. This is inconsequential, for neither
no impediment to its residence in a real and is there any legal provision expressly giving
practical sense in the state of its business domestic banks the same power, although their
activities." 29 capacity to petition for insolvency can
scarcely be disputed and is not in truth
The foregoing propositions are in accord with disputed by petitioners. The law plainly grants
the dictionary concept of residence as applied to a juridical person, whether it be a bank or
to juridical persons, a term which appears to not or it be a foreign or domestic corporation,
comprehend permanent as well as temporary as to natural persons as well, such a power to
residence. petition for the adjudication of bankruptcy of
any person, natural or juridical, provided that
The Court cannot thus accept the petitioners' it is a resident corporation and joins at least
theory that corporations may not have a two other residents in presenting the petition
residence (i.e., the place where they operate to the Bankruptcy Court.
and transact business) separate from their
domicile (i.e., the state of their formation or The petitioners next argue that "Philippine law
organization), and that they may be considered is emphatic that only foreign corporations
by other states as residents only for limited whose own laws give Philippine nationals
and exclusive purposes. Of course, as reciprocal rights may do business in the
petitioners correctly aver, it is not really Philippines." As basis for the argument they
the grant of a license to a foreign corporation invoke Section 123 of the Corporation Code
to do business in this country that makes it a which, however, does not formulate the
resident; the license merely gives legitimacy proposition in the same way. Section 123 does
to its doing business here. What effectively not say, as petitioners assert, that it is
makes such a foreign corporation a resident required that the laws under which foreign
corporation in the Philippines is its actually corporations are formed "give Philippine
being in the Philippines and licitly doing nationals, reciprocal rights." What it does say
business here, "locality of existence" being, is that the laws of the country or state under
to repeat, the "necessary element in . . . (the) which a foreign corporation is "formed,
signification" of the term, resident organized or existing . . . allow Filipino
corporation. citizens and corporations to do business in its
own country or state," which is not quite the
Neither can the Court accept the theory that the same thing. Now, it seems to the Court that
omission by the banks in their petition for there can be no serious debate about the fact
involuntary insolvency of an explicit and that the laws of the countries under which the
categorical statement that they are "residents three (3) respondent banks were formed or
of the Philippine Islands," is fatal to their organized (Hongkong and the United States) do
"allow Filipino citizens and corporations to do incorporation and not to be regarded as
business" in their own territory and residents of the Philippines. The argument is
jurisdiction. It also seems to the Court quite based on an incomplete and inaccurate quotation
apparent that the Insolvency Law contains no of the cited Section. What Section 68 required
requirement that the laws of the state under of a "foreign bank presently having branches
which a foreign corporation has been formed or and agencies in the Philippines, . . . within
organized should grant reciprocal rights to one year from the effectivity" of the General
Philippine citizens to apply for involuntary Banking Act, was to comply with any of three (3)
insolvency of a resident or citizen thereof. options, not merely with one sole requirement.
The petitioners' point is thus not well taken These three (3) options are the following:
and need not be belabored.
1) (that singled out and quoted by the
That the Monetary Board can not appoint a petitioners, i.e.:) "incorporate its branch or
conservator or receiver for a foreign bank or branches into a new bank in accordance with
order its liquidation having only the power to Philippine laws . . . ; or
revoke its license, subject to such proceedings
as the Solicitor General may thereafter deem 2) "assign capital permanently to the local
proper to protect its creditors, which is branch with the concurrent maintenance of a
another point that petitioners seek to make, is 'net due to' head office account which shall
of no moment. It has no logical connection to include all net amounts due to other branches
the matter of whether or not the foreign bank outside the Philippines in an amount which when
may properly ask for a judicial declaration of added to the assigned capital shall at all times
the involuntary insolvency of a domestic be not less than the minimum amount of capital
corporation, which is the issue at hand. The accounts required for domestic commercial
fact is, in any event, that the law is not banks under section twenty-two of this Act;" or
lacking in sanctions against foreign banks or
powerless to protect the latter's creditors. 3) "maintain a "net due to" head office account
which shall include all net amounts due to other
The petitioners contend, too, that the branches outside the Philippines, in an amount
respondent banks have come to court with which shall not be less than the minimum amount
unclean hands, their filing of the petition for of capital accounts required for domestic
involuntary insolvency being an attempt to commercial banks under section twenty-two of
defeat validly acquired rights of domestic this Act."
corporations. The Court wishes to simply point
out that the effects of the institution of The less said about this argument then, the
bankruptcy proceedings on all the creditors of better.
the alleged bankrupt are clearly spelled out by
the law, and will be observed by the Insolvency The petitioners allege that three days before
Court regardless of whatever motives — apart respondent banks filed their petition for
from the desire to share in the assets of the involuntary insolvency against CMI, they
insolvent in satisfying its credits — that received from the latter substantial payments
the party instituting the proceedings might on account in the aggregate amount of
have. P6,010,800.00, with the result that they were
"preferred in the distribution of CMI's assets
Still another argument put forth by the thereby defrauding other creditors of CMI." Non
petitioners is that the three banks' failure to sequitur. It is in any case a circumstance that
incorporate their branches in the Philippines the Bankruptcy Court may well take into
into new banks in accordance with said Section consideration in determining the manner and
68 of the General Banking Act connotes an proportion by which the assets of the insolvent
intention on their part to continue as company shall be distributed among its
residents of their respective states of creditors; but it should not be considered a
ground for giving the petition for insolvency
short shrift. Moreover, the payment adverted to
does not appear to be all that large. The total
liabilities of CMI to the three respondent
banks as of December, 1981 was P21,531,336.91,
and US$14,485,814.85. Converted into
Philippine currency at the rate of P7.899 to the
dollar, the average rate of exchange during
December, 1981, 30 the dollar account would be
P114,423,451.50. Thus, the aggregate
liabilities of CMI to the banks, expressed in
Philippine currency, was P135,954,788.41 as of
December, 1981, and therefore the payment to
them of P6,010,800.00 constituted only some
4.42% of the total indebtedness.

WHEREFORE, the petition is DENIED and the

challenged Decision of the Court of Appeals is
AFFIRMED in toto, with costs against the
petitioners.

SO ORDERED.

Griño-Aquino and Medialdea, JJ., concur.

Cruz, J., took no part.
 Register of the Bureau of Commerce and
Industry," upon order either of the Secretary
of Finance or the Secretary of Commerce and
Republic of the Philippines Communications. No order for a license shall be
SUPREME COURT issued except upon a statement under oath of the
Manila managing agent of the corporation, showing to
the satisfaction of the proper Secretary that
EN BANC the corporation is solvent and in sound
financial condition, and setting forth the
G.R. No. 22015 September 1, 1924 resources and liabilities of the corporation.
Said statement shall contain the following: (1)
MARSHALL-WELLS COMPANY, plaintiff-appellant, The name of the corporation; (2) the purpose for
vs. which it was organized; (3) the location of its
HENRY W. ELSER & CO., INC., defendant-appellee. principal or home office; (4) the capital stock
of the corporation and the amount thereof
Hartigan and Welch for appellant. actually subscribed and paid into the treasury;
J. F. Boomer for appellee. (5) the net assets of the corporation over and
above all debts, liabilities, obligations, and
MALCOLM, J.: claims outstanding against it; and (6) the name
of an agent residing in the Philippine Islands
Marshall-Wells Company, an Oregon corporation, authorized by the corporation to accept
sued Henry W. Elser & Co., Inc., a domestic evidence of summons and process in all legal
corporation, in the Court of First Instance of proceedings against the corporation and of all
Manila, for the unpaid balance of a bill of notices affecting the corporation. Further
goods amounting to P2,660.74, sold by plaintiff evidence of the solvency and fair dealing of the
to defendant and for which plaintiff holds corporation may be required. Upon filing in the
accepted drafts. Defendant demurred to the Mercantile Register of the Bureau of Commerce
complaint on the statutory ground that the and Industry the said statement, a certified
plaintiff has not legal capacity to sue. In the copy of its charter, and the order of the
demurrer, counsel stated that "The said Secretary for the issuance of a license, the
complaint does not show that the plaintiff has Chief of the Mercantile Register "shall issue
complied with the laws of the Philippine to the foreign corporation as directed in the
Islands in that which is required of foreign order of license to do business in the
corporations desiring to do business in the Philippine Islands," and for the issuance of
Philippine Islands, neither does it show that the license shall collect a fee fixed in
it was authorized to do business in the accordance with the schedule established in
Philippine Islands." The demurrer was section 8 of the Law.
sustained by the trial judge. Inasmuch as the
plaintiff could not allege compliance with the Passing section 69 of the Corporation Law for
statute, the order was allowed to become final the moment, section 70, as amended, covers the
and an appeal was perfected. cases of foreign corporations "transacting
business in the Islands at the time of the
To begin with the law as a fit setting for the passage" of the Act. Section 71 authorizes the
issue. The Corporation Law (Act No. 1459) Secretary of Finance or the Secretary of
contains six sections relating particularly to Commerce and Communications, as the case may be,
foreign corporations. Section 68, as amended by by and with the approval of the
Act No. 2900, provides that no foreign Governor-General, "to revoke the license to
corporation "shall be permitted to transact transact business in the Philippine Islands" of
business in the Philippine Islands until after any foreign corporation. Section 72 concerns
it shall have obtained a license for that summons and legal process. Section 73 makes a
purpose from the Chief of the Mercantile foreign corporation bound by all the laws,
rules, and regulations applicable to domestic demand, do not impose on all
corporations of the same class, with certain plaintiff-litigants the burden of establishing
exceptions. by affirmative proof that they are not
unregistered foreign corporations; that fact
Returning now to section 69 of the Corporation will not be presumed without some evidence
Law, its literal terminology is as follows: tending to establish its existence. But the
question is not alone new, but of prime
No foreign corporation or corporation formed, importance, to the consideration of which we
organized, or existing under any laws other have given mature thought.
that those of the Philippine Islands shall be
permitted to transact business in the Corporations have no legal status beyond the
Philippine Islands or maintain by itself or bounds of the sovereignty by which they are
assignee any suit for the recovery of any debt, created. A state may restrict the right of a
claim, or demand whatever, unless it shall have foreign corporation to engage in business
the license prescribed in the section within its limits, and to sue in its courts. But
immediately preceding. Any officer, director, by virtue of state comity, a corporation
or agent of the corporation not having the created by the laws of one state is usually
license prescribed shall be punished by allowed to transact business in other states
imprisonment for not less than six months nor and to sue in the courts of the forum. (Paul vs.
more than two years or by a fine of not less than Virginia [1869], 8 Wall., 168; Sioux Remedy Co.,
two hundred pesos nor more than one thousand vs. Cope and Cope [1914], 235 U. S., 197;
pesos, or by both such imprisonment and fine, Cyclone Mining Co. vs. Baker Light & Power Co.,
in the discretion of the court. [1908], 165 Fed., 996.)

Is the obtaining of the license prescribed in But here we have present for resolution no
section 68, as amended, of the Corporation Law question of constitutional law. Article 4 of
a condition precedent to the maintaining of any the United States Constitution and the
kind of action in the courts of the Philippine Fourteenth Amendment to the Constitution are
Islands by a foreign corporation? The issue is not invoked. The issue is not complicated with
framed to correspond with defendant's theory of matters affecting interstate commerce under
the case on appeal, although possibly somewhat the American Constitution. Nor are we concerned
at variance with its stand in the lower court. with a question of private international law.
It all simmers down to an issue of statutory
So far as we are informed, this is a question construction.
of first impression. The case of Dampfschieffs
Rhederei Union vs. Compañia Trasatlantica Defendant isolates a portion of one sentence of
([1907], 8 Phil., 766), relating to the section 69 of the Corporation Law and asks the
provisions of the Code of Commerce, only held court to give it a literal meaning. Counsel
that a foreign corporation which has not would have the law read thus: "No foreign
established itself in the Philippines, nor corporation shall be permitted to maintain by
engaged in business in the Philippines, could, itself or assignee any suit for the recovery of
without filing its articles of incorporation in any debt, claim, or demand whatever, unless it
the mercantile registry, maintain an action shall have the license prescribed in section 68
against another for damages. The case of of the law." Plaintiff, on the contrary,
Spreckles vs. Ward ([1909], 12 Phil., 414), desires for the court to consider the
while making reference to a point similar to the particular point under discussion with
one before us, was merely authority for the reference to all the law, and thereafter to give
holding, that the provisions of section 69 of the law a common sense interpretation.
the Corporation Law denying to unregistered
foreign corporations the right to maintain The object of the statute was to subject the
suits for the recovery of any debt, claim, or foreign corporation doing business in the
Philippines to the jurisdiction of its courts. anyone doubt what our decision will be? The law
The object of the statute was not to prevent the simply means that no foreign corporation shall
foreign corporation from performing single be permitted "to transact business in the
acts, but to prevent it from acquiring a Philippine Islands," as this phrase is known in
domicile for the purpose of business without corporation law, unless it shall have the
taking the steps necessary to render it license required by law, and, until it complies
amenable to suit in the local courts. The with the law, shall not be permitted to maintain
implication of the law is that it was never the any suit in the local courts. A contrary holding
purpose of the Legislature to exclude a foreign would bring the law to the verge of
corporation which happens to obtain an isolated unconstitutionality, a result which should be
order for business from the Philippines, from and can be easily avoided. (Sioux Remedy Co. vs.
securing redress in the Philippine courts, and Cope and Cope, supra; Perkins, Philippine
thus, in effect, to permit persons to avoid Business Law, p. 264.)
their contracts made with such foreign
corporations. The effect of the statute The noncompliance of a foreign corporation with
preventing foreign corporations from doing the statute may be pleaded as an affirmative
business and from bringing actions in the local defense. Thereafter, it must appear from the
courts, except on compliance with elaborate evidence, first, that the plaintiff is a
requirements, must not be unduly extended or foreign corporation, second, that it is doing
improperly applied. It should not be construed business in the Philippines, and third, that it
to extend beyond the plain meaning of its terms, has not obtained the proper license as provided
considered in connection with its object, and by the statute. (Standard Stock Food Co. vs.
in connection with the spirit of the entire law. Jasper [1907], 76 Kan., 926; Spreckles vs. Ward,
(State vs. American Book Co. [1904], 69 Kan., supra.)
1; American De Forest Wireless Telegraph Co. vs.
Superior Court of City & County of San Francisco The order appealed from shall be set aside and
and Hebbard [1908], 153 Cal., 533; 5 Thompson the record shall be returned to the court of
on Corporations, 2d ed., chap. 184.) origin for further proceedings. Without
special finding as to costs in this instance,
Confronted with the option of giving to the it is so ordered.
Corporation Law a harsh interpretation, which
would disastrously embarrass trade, or of Johnson, Street, Avanceña, Villamor, Ostrand
giving to the law a reasonable interpretation, and Romualdez, JJ., concur.
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 Philippine 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
Republic of the Philippines jurisdiction by filing motions to dismiss2 the
SUPREME COURT private respondent's suit below.
Manila
The antecedent facts, as found by the appellate
SECOND DIVISION court, are as follows:

Respondent Yupangco Cotton Mills filed a

complaint against several foreign reinsurance
G.R. No. 97642 August 29, 1997 companies (among which are petitioners) to
collect their alleged percentage liability
AVON INSURANCE PLC. BRITISH RESERVE INSURANCE under contract treaties between the foreign
CO. LTD., CORNHILL INSURANCE PLC. IMPERIO insurance companies and the international
REINSURANCE CO. (UK) LTD., INSTITUTE DE insurance broker C.J. Boatright, acting as
RESERGURROS DO BRAZIL, INSURANCE CORPORATION agent for respondent Worldwide Surety and
OF IRELAND PLC, LEGAL AND GENERAL ASSURANCE Insurance Company. Inasmuch as petitioners are
SOCIETY LTD., PROVINCIAL INSURANCE PLC. QBL not engaged in business in the Philippines with
INSURANCE (UK) LTD., ROYAL INSURANCE CO. LTD., no offices, places of business or agents in the
TRINITY INSURANCE CO. LTD., GENERAL ACCIDENT Philippines, the reinsurance treaties having
FIRE AND LIFE ASSURANCE CORP. LTD., COOPERATIVE been entered abroad, service of summons upon
INSURANCE SOCIETY and PEARL ASSURANCE CO. LTD., motion of respondent Yupangco, was made upon
petitioners, petitioners through the Office of the Insurance
vs. Commissioner. Petitioners, by counsel on
COURT OF APPEALS, REGIONAL TRIAL COURT OF special appearance, seasonably filed motions
MANILA, BRANCH 51. YUPANGCO COTTON MILLS. to dismiss disputing the jurisdiction of
WORLDWIDE SURETY & INSURANCE CO., INC., respondent Court and the extra-territorial
respondents. service of summons. Respondent Yupangco filed
its opposition to the motions to dismiss,
petitioners filed their reply, and respondent
TORRES, JR., J.: Yupangco filed its rejoinder. In an Order dated
April 30, 1990, respondent Court denied the
Just how far can our courts assert jurisdiction motions to dismiss and directed petitioners to
over the persons of foreign entities being file their answer. On May 29, 1990, petitioners
charged with contractual liabilities by filed their notice of appeal. In an order dated
residents of the Philippines? June 4, 1990, respondent court denied due
course to the appeal.3
Appealing from the Court of Appeals' October 11,
1990 Decision1 in CA-G.R. No. 22005, To this day, trial on the merits of the
petitioners claim that the trial court's collection suit has not proceeded as in the
jurisdiction does not extend to them, since present petition, petitioners continue
they are foreign reinsurance companies that are vigorously to dispute the trial court's
not doing business in the Philippines. Having assumption of jurisdiction over them.
entered into reinsurance contracts abroad,
petitioners are beyond the jurisdictional It will be remembered that in the plaintiff's
ambit of our courts and cannot be served summons complaint,4 it was contended that on July 6,
through extraterritorial service, as under 1979 and on October 1, 1980. Yupangco Cotton
Section 17, Rule 14 of the Rules of Court, nor Mills engaged to secure with Worldwide Security
through the Insurance Commissioner, under and Insurance Co. Inc., several of its
Section 14. Private respondent Yupangco Cotton properties for the periods July 6, 1979 to July
Mills contend on the other hand that 6, 1980 as under Policy No. 20719 for a coverage
petitioners are within our courts' cognitive of P100,000,000.00 and from October 1, 1980 to
powers, having submitted voluntarily to their October 1, 1981, under Policy No. 25896, also
for P100,000,000.00. Both contracts were plaintiffs status and not relating to property
covered by reinsurance treaties between within the Philippines.
Worldwide Surety and Insurance and several
foreign reinsurance companies, including the The Court of Appeals found the petition devoid
petitioners. The reinsurance arrangements had of merit, stating that:
been made through international broker C.J.
Boatwright and Co. Ltd., acting as agent of 1. Petitioners were properly served with
Worldwide Surety and Insurance. summons and whatever defect, if any, in the
service of summons were cured by their
As fate would have it, on December 16, 1979 and voluntary appearance in court, via motion to
May 2, 1981, within the respective effectivity dismiss.
periods of Policies 20719 and 25896, the
properties therein insured were razed by fire, 2. Even assuming that petitioners have not yet
thereby giving rise to the obligation of the voluntarily appeared as co-defendants in the
insurer to indemnify the Yupangco Cotton Mills. case below even after having filed the motions
Partial payments were made by Worldwide Surety to dismiss adverted to, still the situation
and Insurance and some of the reinsurance does not deserve dismissal of the complaint as
companies. far as they are concerned, since as held by this
Court in Lingner Fisher GMBH vs. IAC, 125 SCRA
On May 2, 1983, Worldwide Surety and Insurance, 523;
in a Deed of Assignment, acknowledged a
remaining balance of P19,444,447.75 still due A case should not be dismissed simply because
Yupangco Cotton Mills, and assigned to the an original summons was wrongfully served. It
latter all reinsurance proceeds still should be difficult to conceive for example,
collectible from all the foreign reinsurance that when a defendant personally appears before
companies. Thus, in its interest as assignee a court complaining that he had not been validly
and original insured, Yupangco Cotton Mills summoned, that the case filed against him
instituted this collection suit against the should be dismissed. An alias summons can be
petitioners. actually served on said defendant.

Service of summons upon the petitioners was 3. Being reinsurers of respondent Worldwide
made by notification to the Insurance Surety and Insurance of the risk which the
Commissioner, pursuant to Section 14, Rule 14 latter assumed when it issued the fire
of the Rules of insurance policies in dispute in favor of
Court.5 respondent Yupangco, petitioners cannot now
validly argue that they do not do business in
In a Petition for Certiorari filed with the this country. At the very least, petitioners
Court of Appeals, petitioners submitted that must be deemed to have engaged in business in
respondent Court has no jurisdiction over them, the Philippines no matter how isolated or
being all foreign corporations not doing singular such business might be, even on the
business in the Philippines with no office, assumption that among the local domestic
place of business or agents in the Philippines. insurance corporations of this country, it is
The remedy of Certiorari was resorted to by the only in favor of Worldwide Surety and Insurance
petitioners on the premise that if petitioners that they have ever reinsured any risk arising
had filed an answer to the complaint as ordered from any reinsurance within the territory.
by the respondent court, they would risk,
abandoning the issue of jurisdiction. Moreover, 4. The issue of whether or not petitioners are
extra-territorial service of summons on doing business in the country is a matter best
petitioners is null and void because the referred to a trial on the merits of the case,
complaint for collection is not one affecting and so should be addressed there.
Maintaining its submission that they are beyond to be "doing business in the Philippines" or
the jurisdiction of Philippine Courts, not.
petitioners are now before us, stating:
To qualify the petitioners' business of
Petitioners, being foreign corporations, as reinsurance within the Philippine forum,
found by the trial court, not doing business in resort must be made to the established
the Philippines with no office, place of principles in determining what is meant by
business or agents in the Philippines, are not "doing business in the Philippines." In
subject to the jurisdiction of Philippine Communication Materials and Design, Inc. et. al.
courts. vs. Court of Appeals,8 it was observed that.

The complaint for sum of money being a personal There is no exact rule or governing principle
action not affecting status or relating to as to what constitutes doing or engaging in or
property, extraterritorial service of summons transacting business. Indeed, such case must be
on petitioners — all not doing business in the judged in the light of its peculiar
Philippines — is null and void. circumstances, upon its peculiar facts and upon
the language of the statute applicable. The
The appearance of counsel for petitioners being true test, however, seems to be whether the
explicitly "by special appearance without foreign corporation is continuing the body or
waiving objections to the jurisdiction over substance of the business or enterprise for
their persons or the subject matter" and the which it was organized.
motions to dismiss having excluded
non-jurisdictional grounds, there is no Article 44 of the Omnibus Investments Code of
voluntary submission to the jurisdiction of the 1987 defines the phrase to include:
trial court.6
soliciting orders, purchases, service
For its part, private respondent Yupangco contracts, opening offices, whether called
counter-submits: "liaison" offices or branches; appointing
representatives or distributors who are
1. Foreign corporations, such as petitioners, domiciled in the Philippines or who in any
not doing business in the Philippines, can be calendar year stay in the Philippines for a
sued in Philippine Courts, not withstanding period or periods totaling one hundred eighty
petitioners' claim to the contrary. (180) days or more; participating in the
management, supervision or control of any
2. While the complaint before the Honorable domestic business firm, entity or corporation
Trial Court is for a sum of money, not affecting in the Philippines, and any other act or acts
status or relating to property, petitioners that imply a continuity or commercial dealings
(then defendants) can submit themselves or arrangements and contemplate to that extent
voluntarily to the jurisdiction of Philippine the performance of acts or works, or the
Courts, even if there is no extrajudicial (sic) exercise of some of the functions normally
service of summons upon them. incident to, and in progressive prosecution of,
commercial gain or of the purpose and object of
3. The voluntary appearance of the petitioners the business organization.
(then defendants) before the Honorable Trial
Court amounted, in effect, to voluntary The term ordinarily implies a continuity of
submission to its jurisdiction over their commercial dealings and arrangements, and
persons.7 contemplates, to that extent, the performance
of acts or works or the exercise of the
In the decisions of the courts below, there is functions normally incident to and in
much left to speculation and conjecture as to progressive prosecution of the purpose and
whether or not the petitioners were determined object of its organization.9
 there is authority to the effect that a
A single act or transaction made in the reinsurance company is not doing business in a
Philippines, however, could qualify a foreign certain state merely because the property or
corporation to be doing business in the lives which are insured by the original insurer
Philippines, if such singular act is not merely company are located in that state.12 The reason
incidental or casual, but indicates the foreign for this is that a contract of reinsurance is
corporation's intention to do business in the generally a separate and distinct arrangement
Philippines.10 from the original contract of insurance, whose
contracted risk is insured in the reinsurance
There is no sufficient basis in the records agreement.13 Hence, the original insured has
which would merit the institution of this generally no interest in the contract of
collection suit in the Philippines. More reinsurance.14
specifically, there is nothing to substantiate
the private respondent's submission that the A foreign corporation, is one which owes its
petitioners had engaged in business activities existence to the laws of another state,15 and
in this country. This is not an instance where generally, has no legal existence within the
the erroneous service of summons upon the state in which it is foreign. In Marshall Wells
defendant can be cured by the issuance and Co. vs. Elser,16 it was held that corporations
service of alias summons, as in the absence of have no legal status beyond the bounds of the
showing that petitioners had been doing sovereignty by which they are created.
business in the country, they cannot be Nevertheless, it is widely accepted that
summoned to answer for the charges leveled foreign corporations are, by reason of state
against them. comity, allowed to transact business in other
states and to sue in the courts of such fora.
The Court is cognizant of the doctrine in In the Philippines foreign corporations are
Signetics Corp. vs. Court of Appeals11 that for allowed such privileges, subject to certain
the purpose of acquiring jurisdiction by way of restrictions, arising from the state's
summons on a defendant foreign corporation, sovereign right of regulation.
there is no need to prove first the fact that
defendant is doing business in the Philippines. Before a foreign corporation can transact
The plaintiff only has to allege in the business in the country, it must first obtain
complaint that the defendant has an agent in the a license to transact business here17 and
Philippines for summons to be validly served secure the proper authorizations under
thereto, even without prior evidence advancing existing law.
such factual allegation.
If a foreign corporation engages in business
As it is, private respondent has made no activities without the necessary requirements,
allegation or demonstration of the existence of it opens itself to court actions against it, but
petitioners' domestic agent, but avers simply it shall not be allowed to maintain or intervene
that they are doing business not only abroad but in an action, suit or proceeding for its own
in the Philippines as well. It does not appear account in any court or tribunal or agency in
at all that the petitioners had performed any the Philippines.18
act which would give the general public the
impression that it had been engaging, or The purpose of the law in requiring that foreign
intends to engage in its ordinary and usual corporations doing business in the country be
business undertakings in the country. The licensed to do so, is to subject the foreign
reinsurance treaties between the petitioners corporations doing business in the Philippines
and Worldwide Surety and Insurance were made to the jurisdiction of the courts,19 otherwise,
through an international insurance broker, and a foreign corporation illegally doing business
not through any entity or means remotely here because of its refusal or neglect to obtain
connected with the Philippines. Moreover, the required license and authority to do
business may successfully though unfairly
plead such neglect or illegal act so as to avoid As we have found, there is no showing that
service and thereby impugn the jurisdiction of petitioners had performed any act in the
the local courts. country that would place it within the sphere
of the court's jurisdiction. A general
The same danger does not exist among foreign allegation standing alone, that a party is
corporations that are indubitably not doing doing business in the Philippines does not make
business in the Philippines. Indeed, if a it so. A conclusion of fact or law cannot be
foreign corporation does not do business here, derived from the unsubstantiated assertions of
there would be no reason for it to be subject parties, notwithstanding the demands of
to the State's regulation. As we observed, in convenience or dispatch in legal actions,
so far as the State is concerned, such foreign otherwise, the Court would be guilty of sorcery;
corporation has no legal existence. Therefore, extracting substance out of nothingness. In
to subject such corporation to the courts' addition, the assertion that a resident of the
jurisdiction would violate the essence of Philippines will be inconvenienced by an
sovereignty. out-of-town suit against a foreign entity, is
irrelevant and unavailing to sustain the
In the alternative, private respondent submits continuance of a local action, for jurisdiction
that foreign corporations not doing business in is not dependent upon the convenience or
the Philippines are not exempt from suits inconvenience of a party.21
leveled against them in courts, citing the case
of Facilities Management Corporation vs. It is also argued that having filed a motion to
Leonardo Dela Osa, et. al.20 where we ruled dismiss in the proceedings before the trial
"that indeed, if a foreign corporation, not court, petitioners have thus acquiesced to the
engaged in business in the Philippines, is not court's jurisdiction, and they cannot maintain
barred from seeking redress from Courts in the the contrary at this juncture.
Philippines, a fortiori, that same corporation
cannot claim exemption from being sued in This argument is at the most, flimsy.
Philippine Courts for acts done against a
person or persons in the Philippines." In civil cases, jurisdiction over the person of
the defendant is acquired either by his
We are not persuaded by the position taken by voluntary appearance in court and his
the private respondent. In Facilities submission to its authority or by service of
Management case, the principal issue presented summons.22
was whether the petitioner had been doing
business in the Philippines, so that service of Fundamentally, the service of summons is
summons upon its agent as under Section 14, Rule intended to give official notice to the
14 of the Rules of Court can be made in order defendant or respondent that an action has been
that the Court of First Instance could assume commenced against it. The defendant or
jurisdiction over it. The Court ruled that the respondent is thus put on guard as to the
petitioner was doing business in the demands of the plaintiff as stated in the
Philippines, and that by serving summons upon complaint.23 The service of summons upon the
its resident agent, the trial court had defendant becomes an important element in the
effectively acquired jurisdiction. In that operation of a court's jurisdiction upon a
case, the court made no prescription as the party to a suit, as service of summons upon the
absolute suability of foreign corporations not defendant is the means by which the court
doing business in the country, but merely acquires jurisdiction over his person.24
discounts the absolute exemption of such Without service of summons, or when summons are
foreign corporations from liabilities improperly made, both the trial and the
particularly arising from acts done against a judgment, being in violation of due process,
person or persons in the Philippines. are null and void,25 unless the defendant
waives the service of summons by voluntarily is not equivalent to service of summons, nor
appearing and answering the suit.26 does it constitute an acquiescence to the
court's jurisdiction.31 Thus, it cannot be
When a defendant voluntarily appears, he is argued that the petitioners had abandoned their
deemed to have submitted himself to the objections to the jurisdiction of the court, as
jurisdiction of the court.27 This is not, their motions to dismiss in the trial court, and
however, always the case. Admittedly, and all their subsequent posturings, were all in
without subjecting himself to the court's protest of the private respondent's insistence
jurisdiction, the defendant in an action can, on holding them to answer a charge in a forum
by special appearance object to the court's where they believe they are not subject to.
assumption on the ground of lack of Clearly, to continue the proceedings in a case
jurisdiction. If he so wishes to assert this such as those before Us would just "be useless
defense, he must do so seasonably by motion for and a waste of time."32
the purpose of objecting to the jurisdiction of
the court, otherwise, he shall be deemed to have ACCORDINGLY, the decision appealed from dated
submitted himself to that jurisdiction.28 In October 11, 1990, is SET ASIDE and the instant
the case of foreign corporations, it has been petition is hereby GRANTED. The respondent
held that they may seek relief against the Regional Trial Court of Manila, Branch 51 is
wrongful assumption of jurisdiction by local declared without jurisdiction to take
courts. In Time, Inc. vs. Reyes,29 it was held cognizance of Civil Case No. 86-37932, and all
that the action of a court in refusing to rule its orders and issuances in connection
or deferring its ruling on a motion to dismiss therewith are hereby ANNULLED and SET ASIDE.
for lack or excess of jurisdiction is The respondent court is hereby ORDERED to
correctable by a writ of prohibition or DESIST from maintaining further proceeding in
certiorari sued out in the appellate court even the case aforestated.
before trial on the merits is had. The same
remedy is available should the motion to SO ORDERED.
dismiss be denied, and the court, over the
foreign corporation's objections, threatens to Romero, Puno and Mendoza, JJ., concur.
impose its jurisdiction upon the same.
Regalado, J., is on leave.
If the defendant, besides setting up in a motion
to dismiss his objection to the jurisdiction of
the court, alleges at the same time any other
ground for dismissing the action, or seeks an
affirmative relief in the motion,30 he is
deemed to have submitted himself to the
jurisdiction of the court.

In this instance, however, the petitioners from

the time they filed their motions to dismiss,
their submissions have been consistently and
unfailingly to object to the trial court's
assumption of jurisdiction, anchored on the
fact that they are all foreign corporations not
doing business in the Philippines.

As we have consistently held, if the appearance

of a party in a suit is precisely to question
the jurisdiction of the said tribunal over the
person of the defendant, then this appearance
Republic of the Philippines half of January 1991, and the balance of 5,250
SUPREME COURT metric tons on the last half of January 1991
Manila through the first half of February 1991.5 The
third amendment also required NMC to put up a
SECOND DIVISION performance bond equivalent to $451,500, which
represents the value of 10,500 metric tons of
G.R. No. 168266 March 15, 2010 molasses computed at $43 per metric ton. The
performance bond was intended to guarantee NMC’
CARGILL, INC., Petitioner, s performance to deliver the molasses during
vs. the prescribed shipment periods according to
INTRA STRATA ASSURANCE CORPORATION, the terms of the amended contract.
Respondent.
In compliance with the terms of the third
D E C I S I O N amendment of the contract, respondent Intra
Strata Assurance Corporation (respondent)
CARPIO, J.: issued on 10 October 1990 a performance bond6
in the sum of ₱11,287,500 to guarantee NMC’s
The Case delivery of the 10,500 tons of molasses, and a
surety bond7 in the sum of ₱9,978,125 to
This petition for review1 assails the 26 May guarantee the repayment of downpayment as
2005 Decision2 of the Court of Appeals in CA-G.R. provided in the contract.
CV No. 48447.
NMC was only able to deliver 219.551 metric tons
The Facts of molasses out of the agreed 10,500 metric tons.
Thus, petitioner sent demand letters to
Petitioner Cargill, Inc. (petitioner) is a respondent claiming payment under the
corporation organized and existing under the performance and surety bonds. When respondent
laws of the State of Delaware, United States of refused to pay, petitioner filed on 12 April
America. Petitioner and Northern Mindanao 1991 a complaint8 for sum of money against NMC
Corporation (NMC) executed a contract dated 16 and respondent.
August 1989 whereby NMC agreed to sell to
petitioner 20,000 to 24,000 metric tons of Petitioner, NMC, and respondent entered into a
molasses, to be delivered from 1 January to 30 compromise agreement,9 which the trial court
June 1990 at the price of $44 per metric ton. approved in its Decision10 dated 13 December
The contract provides that petitioner would 1991. The compromise agreement provides that
open a Letter of Credit with the Bank of NMC would pay petitioner ₱3,000,000 upon
Philippine Islands. Under the "red clause" of signing of the compromise agreement and would
the Letter of Credit, NMC was permitted to draw deliver to petitioner 6,991 metric tons of
up to $500,000 representing the minimum price molasses from 16-31 December 1991. However, NMC
of the contract upon presentation of some still failed to comply with its obligation
documents. under the compromise agreement. Hence, trial
proceeded against respondent.
The contract was amended three times: first, on
11 January 1990, increasing the purchase price On 23 November 1994, the trial court rendered
of the molasses to $47.50 per metric ton;3 a decision, the dispositive portion of which
second, on 18 June 1990, reducing the quantity reads:
of the molasses to 10,500 metric tons and
increasing the price to $55 per metric ton;4 and WHEREFORE, judgment is rendered in favor of
third, on 22 August 1990, providing for the plaintiff [Cargill, Inc.], ordering defendant
shipment of 5,250 metric tons of molasses on the INTRA STRATA ASSURANCE CORPORATION to
last half of December 1990 through the first solidarily pay plaintiff the total amount of
SIXTEEN MILLION NINE HUNDRED NINETY-THREE
THOUSAND AND TWO HUNDRED PESOS (₱ We find the petition meritorious.
16,993,200.00), Philippine Currency, with
interest at the legal rate from October 10, 1990 Doing Business in the Philippines and Capacity
until fully paid, plus attorney’s fees in the to Sue
sum of TWO HUNDRED THOUSAND PESOS (₱200,000.00),
Philippine Currency and the costs of the suit. The principal issue in this case is whether
petitioner, an unlicensed foreign corporation,
The Counterclaim of Intra Strata Assurance has legal capacity to sue before Philippine
Corporation is hereby dismissed for lack of courts. Under Article 12313 of the Corporation
merit. Code, a foreign corporation must first obtain
a license and a certificate from the
SO ORDERED.11 appropriate government agency before it can
transact business in the Philippines. Where a
On appeal, the Court of Appeals reversed the foreign corporation does business in the
trial court’s decision and dismissed the Philippines without the proper license, it
complaint. Hence, this petition. cannot maintain any action or proceeding before
Philippine courts as provided under Section 133
The Court of Appeals’ Ruling of the Corporation Code:

The Court of Appeals held that petitioner does Sec. 133. Doing business without a license. –
not have the capacity to file this suit since No foreign corporation transacting business in
it is a foreign corporation doing business in the Philippines without a license, or its
the Philippines without the requisite license. successors or assigns, shall be permitted to
The Court of Appeals held that petitioner’s maintain or intervene in any action, suit or
purchases of molasses were in pursuance of its proceeding in any court or administrative
basic business and not just mere isolated and agency of the Philippines; but such corporation
incidental transactions. may be sued or proceeded against before
Philippine courts or administrative tribunals
The Issues on any valid cause of action recognized under
Philippine laws.
Petitioner raises the following issues:
Thus, the threshold question in this case is
1. Whether petitioner is doing or transacting whether petitioner was doing business in the
business in the Philippines in contemplation of Philippines. The Corporation Code provides no
the law and established jurisprudence; definition for the phrase "doing business."
Nevertheless, Section 1 of Republic Act No.
2. Whether respondent is estopped from invoking 5455 (RA 5455),14 provides that:
the defense that petitioner has no legal
capacity to sue in the Philippines; x x x the phrase "doing business" shall include
soliciting orders, purchases, service
3. Whether petitioner is seeking a review of the contracts, opening offices, whether called
findings of fact of the Court of Appeals; and ‘liaison’ offices or branches; appointing
representatives or distributors who are
4. Whether the advance payment of $500,000 was domiciled in the Philippines or who in any
released to NMC without the submission of the calendar year stay in the Philippines for a
supporting documents required in the contract period or periods totalling one hundred eighty
and the "red clause" Letter of Credit from which days or more; participating in the management,
said amount was drawn.12 supervision or control of any domestic business
firm, entity or corporation in the Philippines;
The Ruling of the Court and any other act or acts that imply a
continuity of commercial dealings or Since respondent is relying on Section 133 of
arrangements, and contemplate to that extent the Corporation Code to bar petitioner from
the performance of acts or works, or the maintaining an action in Philippine courts,
exercise of some of the functions normally respondent bears the burden of proving that
incident to, and in progressive prosecution of, petitioner’s business activities in the
commercial gain or of the purpose and object of Philippines were not just casual or occasional,
the business organization. (Emphasis supplied) but so systematic and regular as to manifest
continuity and permanence of activity to
This is also the exact definition provided constitute doing business in the Philippines.
under Article 44 of the Omnibus Investments In this case, we find that respondent failed to
Code of 1987. prove that petitioner’s activities in the
Philippines constitute doing business as would
Republic Act No. 7042 (RA 7042), otherwise prevent it from bringing an action.
known as the Foreign Investments Act of 1991,
which repealed Articles 44-56 of Book II of the The determination of whether a foreign
Omnibus Investments Code of 1987, enumerated corporation is doing business in the
not only the acts or activities which Philippines must be based on the facts of each
constitute "doing business" but also those case.15 In the case of Antam Consolidated, Inc.
activities which are not deemed "doing v. CA,16 in which a foreign corporation filed
business." Section 3(d) of RA 7042 states: an action for collection of sum of money against
petitioners therein for damages and loss
[T]he phrase "doing business" shall include sustained for the latter’s failure to deliver
"soliciting orders, service contracts, opening coconut crude oil, the Court emphasized the
offices, whether called ‘liaison’ offices or importance of the element of continuity of
branches; appointing representatives or commercial activities to constitute doing
distributors domiciled in the Philippines or business in the Philippines. The Court held:
who in any calendar year stay in the country for
a period or periods totalling one hundred In the case at bar, the transactions entered
eighty (180) days or more; participating in the into by the respondent with the petitioners are
management, supervision or control of any not a series of commercial dealings which
domestic business, firm, entity or corporation signify an intent on the part of the respondent
in the Philippines; and any other act or acts to do business in the Philippines but
that imply a continuity of commercial dealings constitute an isolated one which does not fall
or arrangements, and contemplate to that extent under the category of "doing business." The
the performance of acts or works, or the records show that the only reason why the
exercise of some of the functions normally respondent entered into the second and third
incident to, and in progressive prosecution of, transactions with the petitioners was because
commercial gain or of the purpose and object of it wanted to recover the loss it sustained from
the business organization: Provided, however, the failure of the petitioners to deliver the
That the phrase ‘doing business’ shall not be crude coconut oil under the first transaction
deemed to include mere investment as a and in order to give the latter a chance to make
shareholder by a foreign entity in domestic good on their obligation. x x x
corporations duly registered to do business,
and/or the exercise of rights as such investor; x x x The three seemingly different
nor having a nominee director or officer to transactions were entered into by the parties
represent its interests in such corporation; only in an effort to fulfill the basic agreement
nor appointing a representative or distributor and in no way indicate an intent on the part of
domiciled in the Philippines which transacts the respondent to engage in a continuity of
business in its own name and for its own transactions with petitioners which will
account. categorize it as a foreign corporation doing
business in the Philippines.17
 training domestic workers to operate it, and
Similarly, in this case, petitioner and NMC similar incidental services.
amended their contract three times to give a
chance to NMC to deliver to petitioner the Most of these activities do not bring any direct
molasses, considering that NMC already receipts or profits to the foreign corporation,
received the minimum price of the contract. consistent with the ruling of this Court in
There is no showing that the transactions National Sugar Trading Corp. v. CA18 that
between petitioner and NMC signify the intent activities within Philippine jurisdiction that
of petitioner to establish a continuous do not create earnings or profits to the foreign
business or extend its operations in the corporation do not constitute doing business in
Philippines. the Philippines.19 In that case, the Court held
that it would be inequitable for the National
The Implementing Rules and Regulations of RA Sugar Trading Corporation, a state-owned
7042 provide under Section 1(f), Rule I, that corporation, to evade payment of a legitimate
"doing business" does not include the following indebtedness owing to the foreign corporation
acts: on the plea that the latter should have obtained
a license first before perfecting a contract
1. Mere investment as a shareholder by a foreign with the Philippine government. The Court
entity in domestic corporations duly emphasized that the foreign corporation did not
registered to do business, and/or the exercise sell sugar and derive income from the
of rights as such investor; Philippines, but merely purchased sugar from
the Philippine government and allegedly paid
2. Having a nominee director or officer to for it in full.
represent its interests in such corporation;
In this case, the contract between petitioner
3. Appointing a representative or distributor and NMC involved the purchase of molasses by
domiciled in the Philippines which transacts petitioner from NMC. It was NMC, the domestic
business in the representative's or corporation, which derived income from the
distributor's own name and account; transaction and not petitioner. To constitute
"doing business," the activity undertaken in
4. The publication of a general advertisement the Philippines should involve
through any print or broadcast media; profit-making.20 Besides, under Section 3(d)
of RA 7042, "soliciting purchases" has been
5. Maintaining a stock of goods in the deleted from the enumeration of acts or
Philippines solely for the purpose of having activities which constitute "doing business."
the same processed by another entity in the
Philippines; Other factors which support the finding that
petitioner is not doing business in the
6. Consignment by a foreign entity of equipment Philippines are: (1) petitioner does not have
with a local company to be used in the an office in the Philippines; (2) petitioner
processing of products for export; imports products from the Philippines through
its non-exclusive local broker, whose
7. Collecting information in the Philippines; authority to act on behalf of petitioner is
and limited to soliciting purchases of products
from suppliers engaged in the sugar trade in the
8. Performing services auxiliary to an existing Philippines; and (3) the local broker is an
isolated contract of sale which are not on a independent contractor and not an agent of
continuing basis, such as installing in the petitioner.21
Philippines machinery it has manufactured or
exported to the Philippines, servicing the same, As explained by the Court in B. Van Zuiden Bros.,
Ltd. v. GTVL Marketing Industries, Inc.:22
 foreign corporation to secure a Philippine
An exporter in one country may export its business license.23 (Emphasis supplied)
products to many foreign importing countries
without performing in the importing countries In the present case, petitioner is a foreign
specific commercial acts that would constitute company merely importing molasses from a
doing business in the importing countries. The Philipine exporter. A foreign company that
mere act of exporting from one’s own country, merely imports goods from a Philippine exporter,
without doing any specific commercial act without opening an office or appointing an
within the territory of the importing country, agent in the Philippines, is not doing business
cannot be deemed as doing business in the in the Philippines.
importing country. The importing country does
not require jurisdiction over the foreign Review of Findings of Fact
exporter who has not yet performed any specific
commercial act within the territory of the The Supreme Court may review the findings of
importing country. Without jurisdiction over fact of the Court of Appeals which are in
the foreign exporter, the importing country conflict with the findings of the trial
cannot compel the foreign exporter to secure a court.24 We find that the Court of Appeals’
license to do business in the importing finding that petitioner was doing business is
country. not supported by evidence.

Otherwise, Philippine exporters, by the mere Furthermore, a review of the records shows that
act alone of exporting their products, could be the trial court was correct in holding that the
considered by the importing countries to be advance payment of $500,000 was released to NMC
doing business in those countries. This will in accordance with the conditions provided
require Philippine exporters to secure a under the "red clause" Letter of Credit from
business license in every foreign country where which said amount was drawn. The Head of the
they usually export their products, even if International Operations Department of the
they do not perform any specific commercial act Bank of Philippine Islands testified that the
within the territory of such importing bank would not have paid the beneficiary if the
countries. Such a legal concept will have required documents were not complete. It is a
deleterious effect not only on Philippine requisite in a documentary credit transaction
exports, but also on global trade.1avvphi1 that the documents should conform to the terms
and conditions of the letter of credit;
To be doing or "transacting business in the otherwise, the bank will not pay. The Head of
Philippines" for purposes of Section 133 of the the International Operations Department of the
Corporation Code, the foreign corporation must Bank of Philippine Islands also testified that
actually transact business in the Philippines, they received reimbursement from the issuing
that is, perform specific business bank for the $500,000 withdrawn by NMC.25 Thus,
transactions within the Philippine territory respondent had no legitimate reason to refuse
on a continuing basis in its own name and for payment under the performance and surety bonds
its own account. Actual transaction of business when NMC failed to perform its part under its
within the Philippine territory is an essential contract with petitioner.
requisite for the Philippines to to acquire
jurisdiction over a foreign corporation and WHEREFORE , we GRANT the petition. We REVERSE
thus require the foreign corporation to secure the Decision dated 26 May 2005 of the Court of
a Philippine business license. If a foreign Appeals in CA-G.R. CV No. 48447. We REINSTATE
corporation does not transact such kind of the Decision dated 23 November 1994 of the trial
business in the Philippines, even if it exports court.
its products to the Philippines, the
Philippines has no jurisdiction to require such SO ORDERED.
ANTONIO T. CARPIO
Associate Justice

WE CONCUR:

ARTURO D. BRION
Associate Justice

ROBERTO A. ABAD
Associate Justice MARTIN S. VILLARAMA, JR.*
Associate Justice
JOSE PORTUGAL PEREZ
Associate Justice

A T T E S T A T I O N

I attest that the conclusions in the above

Decision had been reached in consultation
before the case was assigned to the writer of
the opinion of the Court’s Division.

ANTONIO T. CARPIO
Associate Justice
Chairperson

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the

Constitution, and the Division Chairperson’s
Attestation, I certify that the conclusions in
the above Decision had been reached in
consultation before the case was assigned to
the writer of the opinion of the Court’s
Division.

REYNATO S. PUNO
Chief Justice
Republic of the Philippines Meantime, Executive Order No. 475 was issued by
SUPREME COURT the President, on 15 August 1991 reducing the
Manila rate of additional duty on all imported
articles from nine percent (9%) to five percent
EN BANC (5%) ad valorem, except in the cases of crude
oil and other oil products which continued to
be subject to the additional duty of nine
percent (9%) ad valorem.
G.R. No. 101273 July 3, 1992
Upon completion of the public hearings, the
CONGRESSMAN ENRIQUE T. GARCIA (Second District Tariff Commission submitted to the President a
of Bataan), petitioner, "Report on Special Duty on Crude Oil and Oil
vs. Products" dated 16 August 1991, for
THE EXECUTIVE SECRETARY, THE COMMISSIONER OF consideration and appropriate action. Seven (7)
CUSTOMS, THE NATIONAL ECONOMIC AND DEVELOPMENT days later, the President issued Executive
AUTHORITY, THE TARIFF COMMISSION, THE Order No. 478, dated 23 August 1991, which
SECRETARY OF FINANCE, and THE ENERGY REGULATORY levied (in addition to the aforementioned
BOARD, respondents. additional duty of nine percent (9%) ad valorem
and all other existing ad valorem duties) a
special duty of P0.95 per liter or P151.05 per
barrel of imported crude oil and P1.00 per liter
FELICIANO, J.: of imported oil products.

On 27 November 1990, the President issued In the present Petition for Certiorari,
Executive Order No. 438 which imposed, in Prohibition and Mandamus, petitioner assails
addition to any other duties, taxes and charges the validity of Executive Orders Nos. 475 and
imposed by law on all articles imported into the 478. He argues that Executive Orders Nos. 475
Philippines, an additional duty of five percent and 478 are violative of Section 24, Article VI
(5%) ad valorem. This additional duty was of the 1987 Constitution which provides as
imposed across the board on all imported follows:
articles, including crude oil and other oil
products imported into the Philippines. This Sec. 24: All appropriation, revenue or tariff
additional duty was subsequently increased bills, bills authorizing increase of the public
from five percent (5%) ad valorem to nine debt, bills of local application, and private
percent (9%) ad valorem by the promulgation of bills shall originate exclusively in the House
Executive Order No. 443, dated 3 January 1991. of Representatives, but the Senate may propose
or concur with amendments.
On 24 July 1991, the Department of Finance
requested the Tariff Commission to initiate the He contends that since the Constitution vests
process required by the Tariff and Customs Code the authority to enact revenue bills in
for the imposition of a specific levy on crude Congress, the President may not assume such
oil and other petroleum products, covered by HS power by issuing Executive Orders Nos. 475 and
Heading Nos. 27.09, 27.10 and 27.11 of Section 478 which are in the nature of
104 of the Tariff and Customs Code as amended. revenue-generating measures.
Accordingly, the Tariff Commission, following
the procedure set forth in Section 401 of the Petitioner further argues that Executive
Tariff and Customs Code, scheduled a public Orders No. 475 and 478 contravene Section 401
hearing to give interested parties an of the Tariff and Customs Code, which Section
opportunity to be heard and to present evidence authorizes the President, according to
in support of their respective positions. petitioner, to increase, reduce or remove
tariff duties or to impose additional duties of Article VI of the Constitution provides as
only when necessary to protect local industries follows:
or products but not for the purpose of raising
additional revenue for the government. (2) The Congress may, by law, authorize the
President to fix within specified limits, and
Thus, petitioner questions first the subject to such limitations and restrictions as
constitutionality and second the legality of it may impose, tariff rates, import and export
Executive Orders Nos. 475 and 478, and asks us quotas, tonage and wharfage dues, and other
to restrain the implementation of those duties or imposts within the framework of the
Executive Orders. We will examine these national development program of the Government.
questions in that order. (Emphasis supplied)

Before doing so, however, the Court notes that There is thus explicit constitutional
the recent promulgation of Executive Order No. permission 1 to Congress to authorize the
507 did not render the instant Petition moot and President "subject to such limitations and
academic. Executive Order No. 517 which is restrictions is [Congress] may impose" to fix
dated 30 April 1992 provides as follows: "within specific limits" "tariff rates . . . and
other duties or imposts . . ."
Sec. 1. Lifting of the Additional Duty. — The
additional duty in the nature of ad valorem The relevant congressional statute is the
imposed on all imported articles prescribed by Tariff and Customs Code of the Philippines, and
the provisions of Executive Order No. 443, as Sections 104 and 401, the pertinent provisions
amended, is hereby lifted; Provided, however, thereof. These are the provisions which the
that the selected articles covered by HS President explicitly invoked in promulgating
Heading Nos. 27.09 and 27.10 of Section 104 of Executive Orders Nos. 475 and 478. Section 104
the Tariff and Customs Code, as amended, of the Tariff and Customs Code provides in
subject of Annex "A" hereof, shall continue to relevant part:
be subject to the additional duty of nine (9%)
percent ad valorem. Sec. 104. All tariff sections, chapters,
headings and subheadings and the rates of
Under the above quoted provision, crude oil and import duty under Section 104 of Presidential
other oil products continue to be subject to the Decree No. 34 and all subsequent amendments
additional duty of nine percent (9%) ad valorem issued under Executive Orders and Presidential
under Executive Order No. 475 and to the special Decrees are hereby adopted and form part of this
duty of P0.95 per liter of imported crude oil Code.
and P1.00 per liter of imported oil products
under Executive Order No. 478. There shall be levied, collected, and paid upon
all imported articles the rates of duty
Turning first to the question of indicated in the Section under this section
constitutionality, under Section 24, Article except as otherwise specifically provided for
VI of the Constitution, the enactment of in this Code: Provided, that, the maximum rate
appropriation, revenue and tariff bills, like shall not exceed one hundred per cent ad
all other bills is, of course, within the valorem.
province of the Legislative rather than the
Executive Department. It does not follow, The rates of duty herein provided or
however, that therefore Executive Orders Nos. subsequently fixed pursuant to Section Four
475 and 478, assuming they may be characterized Hundred One of this Code shall be subject to
as revenue measures, are prohibited to the periodic investigation by the Tariff
President, that they must be enacted instead by Commission and may be revised by the President
the Congress of the Philippines. Section 28(2) upon recommendation of the National Economic
and Development Authority.
 thirty (30) days after the termination of the
xxx xxx xxx public hearings.

(Emphasis supplied) c. The power of the President to increase or

decrease rates of import duty within the limits
Section 401 of the same Code needs to be quoted fixed in subsection "a" shall include the
in full: authority to modify the form of duty. In
modifying the form of duty, the corresponding
Sec. 401. Flexible Clause. — ad valorem or specific equivalents of the duty
with respect to imports from the principal
a. In the interest of national economy, general competing foreign country for the most recent
welfare and/or national security, and subject representative period shall be used as bases.
to the limitations herein prescribed, the
President, upon recommendation of the National d. The Commissioner of Customs shall regularly
Economic and Development Authority furnish the Commission a copy of all customs
(hereinafter referred to as NEDA), is hereby import entries as filed in the Bureau of Customs.
empowered: (1) to increase, reduce or remove The Commission or its duly authorized
existing protective rates of import duty representatives shall have access to, and the
(including any necessary change in right to copy all liquidated customs import
classification). The existing rates may be entries and other documents appended thereto as
increased or decreased but in no case shall the finally filed in the Commission on Audit.
reduced rate of import duty be lower than the
basic rate of ten (10) per cent ad valorem, nor e. The NEDA shall promulgate rules and
shall the increased rate of import duty be regulations necessary to carry out the
higher than a maximum of one hundred (100) per provisions of this section.
cent ad valorem; (2) to establish import quota
or to ban imports of any commodity, as may be f. Any Order issued by the President pursuant
necessary; and (3) to impose an additional duty to the provisions of this section shall take
on all imports not exceeding ten (10) per cent effect thirty (30) days after promulgation,
ad valorem, whenever necessary; Provided, That except in the imposition of additional duty not
upon periodic investigations by the Tariff exceeding ten (10) per cent ad valorem which
Commission and recommendation of the NEDA, the shall take effect at the discretion of the
President may cause a gradual reduction of President. (Emphasis supplied)
protection levels granted in Section One
hundred and four of this Code, including those Petitioner, however, seeks to avoid the thrust
subsequently granted pursuant to this section. of the delegated authorizations found in
Sections 104 and 401 of the Tariff and Customs
b. Before any recommendation is submitted to Code, by contending that the President is
the President by the NEDA pursuant to the authorized to act under the Tariff and Customs
provisions of this section, except in the Code only "to protect local industries and
imposition of an additional duty not exceeding products for the sake of the national economy,
ten (10) per cent ad valorem, the Commission general welfare and/or national security." 2 He
shall conduct an investigation in the course of goes on to claim that:
which they shall hold public hearings wherein
interested parties shall be afforded E.O. Nos. 478 and 475 having nothing to do
reasonable opportunity to be present, produce whatsoever with the protection of local
evidence and to be heard. The Commission shall industries and products for the sake of
also hear the views and recommendations of any national economy, general welfare and/or
government office, agency or instrumentality national security. On the contrary, they work
concerned. The Commission shall submit their in reverse, especially as to crude oil, an
findings and recommendations to the NEDA within essential product which we do not have to
protect, since we produce only minimal duties on imported goods may have in some
quantities and have to import the rest of what measure the effect of protecting local
we need. industries — where such local industries
actually exist and are producing comparable
These Executive Orders are avowedly solely to goods. Simultaneously, however, the very same
enable the government to raise government customs duties inevitably have the effect of
finances, contrary to Sections 24 and 28 (2) of producing governmental revenues. Customs
Article VI of the Constitution, as well as to duties like internal revenue taxes are rarely,
Section 401 of the Tariff and Customs Code. 3 if ever, designed to achieve one policy
(Emphasis in the original) objective only. Most commonly, customs duties,
which constitute taxes in the sense of
The Court is not persuaded. In the first place, exactions the proceeds of which become public
there is nothing in the language of either funds 6 — have either or both the generation
Section 104 or of 401 of the Tariff and Customs of revenue and the regulation of economic or
Code that suggest such a sharp and absolute social activity as their moving purposes and
limitation of authority. The entire contention frequently, it is very difficult to say which,
of petitioner is anchored on just two (2) words, in a particular instance, is the dominant or
one found in Section 401 (a)(1): "existing principal objective. In the instant case, since
protective rates of import duty," and the the Philippines in fact produces ten (10) to
second in the proviso found at the end of fifteen percent (15%) of the crude oil consumed
Section 401 (a): "protection levels granted in here, the imposition of increased tariff rates
Section 104 of this Code . . . . " We believe and a special duty on imported crude oil and
that the words "protective" and ''protection" imported oil products may be seen to have some
are simply not enough to support the very broad "protective" impact upon indigenous oil
and encompassing limitation which petitioner production. For the effective, price of
seeks to rest on those two (2) words. imported crude oil and oil products is
increased. At the same time, it cannot be
In the second place, petitioner's singular gainsaid that substantial revenues for the
theory collides with a very practical fact of government are raised by the imposition of such
which this Court may take judicial notice — increased tariff rates or special duty.
that the Bureau of Customs which administers
the Tariff and Customs Code, is one of the two In the fourth place, petitioner's concept which
(2) principal traditional generators or he urges us to build into our constitutional and
producers of governmental revenue, the other customs law, is a stiflingly narrow one.
being the Bureau of Internal Revenue. (There is Section 401 of the Tariff and Customs Code
a third agency, non-traditional in character, establishes general standards with which the
that generates lower but still comparable exercise of the authority delegated by that
levels of revenue for the government — The provision to the President must be consistent:
Philippine Amusement and Games Corporation that authority must be exercised in "the
[PAGCOR].) interest of national economy, general welfare
and/or national security." Petitioner, however,
In the third place, customs duties which are insists that the "protection of local
assessed at the prescribed tariff rates are industries" is the only permissible objective
very much like taxes which are frequently that can be secured by the exercise of that
imposed for both revenue-raising and for delegated authority, and that therefore
regulatory purposes. 4 Thus, it has been held "protection of local industries" is the sum
that "customs duties" is "the name given to total or the alpha and the omega of "the
taxes on the importation and exportation of national economy, general welfare and/or
commodities, the tariff or tax assessed upon national security." We find it extremely
merchandise imported from, or exported to, a difficult to take seriously such a confined and
foreign country." 5 The levying of customs closed view of the legislative standards and
policies summed up in Section 401. We believe, to which those Executive Orders are entitled.
for instance, that the protection of consumers, 7
who after all constitute the very great bulk of
our population, is at the very least as The conclusion we have reached above renders it
important a dimension of "the national economy, unnecessary to deal with petitioner's
general welfare and national security" as the additional contention that, should Executive
protection of local industries. And so customs Orders Nos. 475 and 478 be declared
duties may be reduced or even removed precisely unconstitutional and illegal, there should be
for the purpose of protecting consumers from a roll back of prices of petroleum products
the high prices and shoddy quality and equivalent to the "resulting excess money not
inefficient service that tariff-protected and be needed to adequately maintain the Oil Price
subsidized local manufacturers may otherwise Stabilization Fund (OPSF)." 8
impose upon the community.
WHEREFORE, premises considered, the Petition
It seems also important to note that tariff for Certiorari, Prohibition and Mandamus is
rates are commonly established and the hereby DISMISSED for lack of merit. Costs
corresponding customs duties levied and against petitioner.
collected upon articles and goods which are not
found at all and not produced in the Philippines. SO ORDERED.
The Tariff and Customs Code is replete with such
articles and commodities: among the more Narvasa, C.J., Gutierrez, Jr., Cruz, Paras,
interesting examples are ivory (Chapter 5, Padilla, Bidin, Griño-Aquino, Medialdea,
5.10); castoreum or musk taken from the beaver Regalado, Davide, Jr., Romero, Nocon and
(Chapter 5, 5.14); Olives (Chapter 7, Notes); Bellosilo, JJ., concur.
truffles or European fungi growing under the
soil on tree roots (Chapter 7, Notes); dates
(Chapter 8, 8.01); figs (Chapter 8, 8.03);
caviar (Chapter 16, 16.01); aircraft (Chapter
88, 88.0l); special diagnostic instruments and
apparatus for human medicine and surgery
(Chapter 90, Notes); X-ray generators; X-ray
tubes;
X-ray screens, etc. (Chapter 90, 90.20); etc.
In such cases, customs duties may be seen to be
imposed either for revenue purposes purely or
perhaps, in certain cases, to discourage any
importation of the items involved. In either
case, it is clear that customs duties are levied
and imposed entirely apart from whether or not
there are any competing local industries to
protect.

Accordingly, we believe and so hold that

Executive Orders Nos. 475 and 478 which may be
conceded to be substantially moved by the
desire to generate additional public revenues,
are not, for that reason alone, either
constitutionally flawed, or legally infirm
under Section 401 of the Tariff and Customs Code.
Petitioner has not successfully overcome the
presumptions of constitutionality and legality
Republic of the Philippines alleging, among others, that DISI had an unpaid
SUPREME COURT account of US$600,000.00. Steelcase prayed
Baguio that DISI be ordered to pay actual or
compensatory damages, exemplary damages,
THIRD DIVISION attorney’s fees, and costs of suit.

G.R. No. 171995 April 18, 2012 In its Answer with Compulsory Counterclaims7
dated February 4, 1999, DISI sought the
STEELCASE, INC., Petitioner, following: (1) the issuance of a temporary
vs. restraining order (TRO) and a writ of
DESIGN INTERNATIONAL SELECTIONS, INC., preliminary injunction to enjoin Steelcase
Respondent. from selling its products in the Philippines
except through DISI; (2) the dismissal of the
D E C I S I O N complaint for lack of merit; and (3) the payment
of actual, moral and exemplary damages together
MENDOZA, J.: with attorney’s fees and expenses of litigation.
DISI alleged that the complaint failed to state
This is a petition for review on certiorari a cause of action and to contain the required
under Rule 45 assailing the March 31, 2005 allegations on Steelcase’s capacity to sue in
Decision1 of the Court of Appeals (CA) which the Philippines despite the fact that it
affirmed the May 29, 2000 Order2 of the Regional (Steelcase) was doing business in the
Trial Court, Branch 60, Makati City (RTC), Philippines without the required license to do
dismissing the complaint for sum of money in so. Consequently, it posited that the complaint
Civil Case No. 99-122 entitled "Steelcase, Inc. should be dismissed because of Steelcase’s lack
v. Design International Selections, Inc." of legal capacity to sue in Philippine courts.

The Facts On March 3, 1999, Steelcase filed its Motion to

Admit Amended Complaint8 which was granted by
Petitioner Steelcase, Inc. (Steelcase) is a the RTC, through then Acting Presiding Judge
foreign corporation existing under the laws of Roberto C. Diokno, in its Order9 dated April 26,
Michigan, United States of America (U.S.A.), 1999. However, Steelcase sought to further
and engaged in the manufacture of office amend its complaint by filing a Motion to Admit
furniture with dealers worldwide.3 Respondent Second Amended Complaint10 on March 13, 1999.
Design International Selections, Inc. (DISI)
is a corporation existing under Philippine Laws In his Order11 dated November 15, 1999, Acting
and engaged in the furniture business, Presiding Judge Bonifacio Sanz Maceda
including the distribution of furniture.4 dismissed the complaint, granted the TRO prayed
for by DISI, set aside the April 26, 1999 Order
Sometime in 1986 or 1987, Steelcase and DISI of the RTC admitting the Amended Complaint, and
orally entered into a dealership agreement denied Steelcase’s Motion to Admit Second
whereby Steelcase granted DISI the right to Amended Complaint. The RTC stated that in
market, sell, distribute, install, and service requiring DISI to meet the Dealer Performance
its products to end-user customers within the Expectation and in terminating the dealership
Philippines. The business relationship agreement with DISI based on its failure to
continued smoothly until it was terminated improve its performance in the areas of
sometime in January 1999 after the agreement business planning, organizational structure,
was breached with neither party admitting any operational effectiveness, and efficiency,
fault.5 Steelcase unwittingly revealed that it
participated in the operations of DISI. It then
On January 18, 1999, Steelcase filed a concluded that Steelcase was "doing business"
complaint6 for sum of money against DISI in the Philippines, as contemplated by Republic
Act (R.A.) No. 7042 (The Foreign Investments Steelcase filed a motion for reconsideration
Act of 1991), and since it did not have the but it was denied by the CA in its Resolution
license to do business in the country, it was dated March 23, 2006.13
barred from seeking redress from our courts
until it obtained the requisite license to do Hence, this petition.
so. Its determination was further bolstered by
the appointment by Steelcase of a The Issues
representative in the Philippines. Finally,
despite a showing that DISI transacted with the Steelcase filed the present petition relying on
local customers in its own name and for its own the following grounds:
account, it was of the opinion that any doubt
in the factual environment should be resolved I
in favor of a pronouncement that a foreign
corporation was doing business in the THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR
Philippines, considering the twelve-year WHEN IT FOUND THAT STEELCASE HAD BEEN "DOING
period that DISI had been distributing BUSINESS" IN THE PHILIPPINES WITHOUT A LICENSE.
Steelcase products in the Philippines.
II
Steelcase moved for the reconsideration of the
questioned Order but the motion was denied by THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR
the RTC in its May 29, 2000 Order.12 IN NOT FINDING THAT RESPONDENT WAS ESTOPPED
FROM CHALLENGING STEELCASE’S LEGAL CAPACITY TO
Aggrieved, Steelcase elevated the case to the SUE, AS AN AFFIRMATIVE DEFENSE IN ITS ANSWER.
CA by way of appeal, assailing the November 15,
1999 and May 29, 2000 Orders of the RTC. On March The issues to be resolved in this case are:
31, 2005, the CA rendered its Decision
affirming the RTC orders, ruling that Steelcase (1) Whether or not Steelcase is doing business
was a foreign corporation doing or transacting in the Philippines without a license; and
business in the Philippines without a license.
The CA stated that the following acts of (2) Whether or not DISI is estopped from
Steelcase showed its intention to pursue and challenging the Steelcase’s legal capacity to
continue the conduct of its business in the sue.
Philippines: (1) sending a letter to Phinma,
informing the latter that the distribution The Court’s Ruling
rights for its products would be established in
the near future and directing other questions The Court rules in favor of the petitioner.
about orders for Steelcase products to
Steelcase International; (2) cancelling orders Steelcase is an unlicensed foreign corporation
from DISI’s customers, particularly Visteon, NOT doing business in the Philippines
Phils., Inc. (Visteon); (3) continuing to send
its products to the Philippines through Anent the first issue, Steelcase argues that
Modernform Group Company Limited (Modernform), Section 3(d) of R.A. No. 7042 or the Foreign
as evidenced by an Ocean Bill of Lading; and (4) Investments Act of 1991 (FIA) expressly states
going beyond the mere appointment of DISI as a that the phrase "doing business" excludes the
dealer by making several impositions on appointment by a foreign corporation of a local
management and operations of DISI. Thus, the CA distributor domiciled in the Philippines which
ruled that Steelcase was barred from access to transacts business in its own name and for its
our courts for being a foreign corporation own account. Steelcase claims that it was not
doing business here without the requisite doing business in the Philippines when it
license to do so. entered into a dealership agreement with DISI
where the latter, acting as the former’s
appointed local distributor, transacted The rule that an unlicensed foreign
business in its own name and for its own account. corporations doing business in the Philippine
Specifically, Steelcase contends that it was do not have the capacity to sue before the local
DISI that sold Steelcase’s furniture directly courts is well-established. Section 133 of the
to the end-users or customers who, in turn, Corporation Code of the Philippines explicitly
directly paid DISI for the furniture they states:
bought. Steelcase further claims that DISI, as
a non-exclusive dealer in the Philippines, had Sec. 133. Doing business without a license. -
the right to market, sell, distribute and No foreign corporation transacting business in
service Steelcase products in its own name and the Philippines without a license, or its
for its own account. Hence, DISI was an successors or assigns, shall be permitted to
independent distributor of Steelcase products, maintain or intervene in any action, suit or
and not a mere agent or conduit of Steelcase. proceeding in any court or administrative
agency of the Philippines; but such corporation
On the other hand, DISI argues that it was may be sued or proceeded against before
appointed by Steelcase as the latter’s Philippine courts or administrative tribunals
exclusive distributor of Steelcase products. on any valid cause of action recognized under
DISI likewise asserts that it was not allowed Philippine laws.
by Steelcase to transact business in its own
name and for its own account as Steelcase The phrase "doing business" is clearly defined
dictated the manner by which it was to conduct in Section 3(d) of R.A. No. 7042 (Foreign
its business, including the management and Investments Act of 1991), to wit:
solicitation of orders from customers, thereby
assuming control of its operations. DISI d) The phrase "doing business" shall include
further insists that Steelcase treated and soliciting orders, service contracts, opening
considered DISI as a mere conduit, as evidenced offices, whether called "liaison" offices or
by the fact that Steelcase itself directly sold branches; appointing representatives or
its products to customers located in the distributors domiciled in the Philippines or
Philippines who were classified as part of who in any calendar year stay in the country for
their "global accounts." DISI cited other a period or periods totalling one hundred
established circumstances which prove that eighty (180) days or more; participating in the
Steelcase was doing business in the Philippines management, supervision or control of any
including the following: (1) the sale and domestic business, firm, entity or corporation
delivery by Steelcase of furniture to Regus, a in the Philippines; and any other act or acts
Philippine client, through Modernform, a Thai that imply a continuity of commercial dealings
corporation allegedly controlled by Steelcase; or arrangements, and contemplate to that extent
(2) the imposition by Steelcase of certain the performance of acts or works, or the
requirements over the management and exercise of some of the functions normally
operations of DISI; (3) the representations incident to, and in progressive prosecution of,
made by Steven Husak as Country Manager of commercial gain or of the purpose and object of
Steelcase; (4) the cancellation by Steelcase of the business organization: Provided, however,
orders placed by Philippine clients; and (5) That the phrase "doing business" shall not be
the expression by Steelcase of its desire to deemed to include mere investment as a
maintain its business in the Philippines. Thus, shareholder by a foreign entity in domestic
Steelcase has no legal capacity to sue in corporations duly registered to do business,
Philippine Courts because it was doing business and/or the exercise of rights as such investor;
in the Philippines without a license to do so. nor having a nominee director or officer to
represent its interests in such corporation;
The Court agrees with the petitioner. nor appointing a representative or distributor
domiciled in the Philippines which transacts
business in its own name and for its own account;
(Emphases supplied) 6. Consignment by a foreign entity of equipment
with a local company to be used in the
This definition is supplemented by its processing of products for export;
Implementing Rules and Regulations, Rule I,
Section 1(f) which elaborates on the meaning of 7. Collecting information in the Philippines;
the same phrase: and

f. "Doing business" shall include soliciting 8. Performing services auxiliary to an existing

orders, service contracts, opening offices, isolated contract of sale which are not on a
whether liaison offices or branches; continuing basis, such as installing in the
appointing representatives or distributors, Philippines machinery it has manufactured or
operating under full control of the foreign exported to the Philippines, servicing the same,
corporation, domiciled in the Philippines or training domestic workers to operate it, and
who in any calendar year stay in the country for similar incidental services. (Emphases
a period totalling one hundred eighty [180] supplied)
days or more; participating in the management,
supervision or control of any domestic business, From the preceding citations, the appointment
firm, entity or corporation in the Philippines; of a distributor in the Philippines is not
and any other act or acts that imply a sufficient to constitute "doing business"
continuity of commercial dealings or unless it is under the full control of the
arrangements, and contemplate to that extent foreign corporation. On the other hand, if the
the performance of acts or works, or the distributor is an independent entity which buys
exercise of some of the functions normally and distributes products, other than those of
incident to and in progressive prosecution of the foreign corporation, for its own name and
commercial gain or of the purpose and object of its own account, the latter cannot be
the business organization. considered to be doing business in the
Philippines.14 It should be kept in mind that
The following acts shall not be deemed "doing the determination of whether a foreign
business" in the Philippines: corporation is doing business in the
Philippines must be judged in light of the
1. Mere investment as a shareholder by a foreign attendant circumstances.15
entity in domestic corporations duly
registered to do business, and/or the exercise In the case at bench, it is undisputed that DISI
of rights as such investor; was founded in 1979 and is independently owned
and managed by the spouses Leandro and
2. Having a nominee director or officer to Josephine Bantug.16 In addition to Steelcase
represent its interest in such corporation; products, DISI also distributed products of
other companies including carpet tiles,
3. Appointing a representative or distributor relocatable walls and theater settings.17 The
domiciled in the Philippines which transacts dealership agreement between Steelcase and
business in the representative's or DISI had been described by the owner himself as:
distributor's own name and account;
xxx basically a buy and sell arrangement
4. The publication of a general advertisement whereby we would inform Steelcase of the volume
through any print or broadcast media; of the products needed for a particular project
and Steelcase would, in turn, give ‘special
5. Maintaining a stock of goods in the quotations’ or discounts after considering the
Philippines solely for the purpose of having value of the entire package. In making the bid
the same processed by another entity in the of the project, we would then add out profit
Philippines; margin over Steelcase’s prices. After the
approval of the bid by the client, we would veil of corporate fiction and declare that
thereafter place the orders to Steelcase. The Modernform acted as the alter ego of Steelcase
latter, upon our payment, would then ship the to enable it to improperly conduct business in
goods to the Philippines, with us shouldering the Philippines. The records are bereft of any
the freight charges and taxes.18 [Emphasis evidence which might lend even a hint of
supplied] credence to DISI’s assertions. As such,
Steelcase cannot be deemed to have been doing
This clearly belies DISI’s assertion that it was business in the Philippines through
a mere conduit through which Steelcase Modernform.
conducted its business in the country. From the
preceding facts, the only reasonable Finally, both the CA and DISI rely heavily on
conclusion that can be reached is that DISI was the Dealer Performance Expectation required by
an independent contractor, distributing Steelcase of its distributors to prove that
various products of Steelcase and of other DISI was not functioning independently from
companies, acting in its own name and for its Steelcase because the same imposed certain
own account. conditions pertaining to business planning,
organizational structure, operational
The CA, in finding Steelcase to be unlawfully effectiveness and efficiency, and financial
engaged in business in the Philippines, took stability. It is actually logical to expect
into consideration the delivery by Steelcase of that Steelcase, being one of the major
a letter to Phinma informing the latter that the manufacturers of office systems furniture,
distribution rights for its products would be would require its dealers to meet several
established in the near future, and also its conditions for the grant and continuation of a
cancellation of orders placed by Visteon. The distributorship agreement. The imposition of
foregoing acts were apparently misinterpreted minimum standards concerning sales, marketing,
by the CA. Instead of supporting the claim that finance and operations is nothing more than an
Steelcase was doing business in the country, exercise of sound business practice to increase
the said acts prove otherwise. It should be sales and maximize profits for the benefit of
pointed out that no sale was concluded as a both Steelcase and its distributors. For as
result of these communications. Had Steelcase long as these requirements do not impinge on a
indeed been doing business in the Philippines, distributor’s independence, then there is
it would have readily accepted and serviced the nothing wrong with placing reasonable
orders from the abovementioned Philippine expectations on them.
companies. Its decision to voluntarily cease to
sell its products in the absence of a local All things considered, it has been sufficiently
distributor indicates its refusal to engage in demonstrated that DISI was an independent
activities which might be construed as "doing contractor which sold Steelcase products in its
business." own name and for its own account. As a result,
Steelcase cannot be considered to be doing
Another point being raised by DISI is the business in the Philippines by its act of
delivery and sale of Steelcase products to a appointing a distributor as it falls under one
Philippine client by Modernform allegedly an of the exceptions under R.A. No. 7042.
agent of Steelcase. Basic is the rule in
corporation law that a corporation has a DISI is estopped from challenging Steelcase’s
separate and distinct personality from its legal capacity to sue
stockholders and from other corporations with
which it may be connected.19 Thus, despite the Regarding the second issue, Steelcase argues
admission by Steelcase that it owns 25% of that assuming arguendo that it had been "doing
Modernform, with the remaining 75% being owned business" in the Philippines without a license,
and controlled by Thai stockholders,20 it is DISI was nonetheless estopped from challenging
grossly insufficient to justify piercing the Steelcase’s capacity to sue in the Philippines.
Steelcase claims that since DISI was aware that Unquestionably, entering into a dealership
it was doing business in the Philippines agreement with Steelcase charged DISI with the
without a license and had benefited from such knowledge that Steelcase was not licensed to
business, then DISI should be estopped from engage in business activities in the
raising the defense that Steelcase lacks the Philippines. This Court has carefully combed
capacity to sue in the Philippines by reason of the records and found no proof that, from the
its doing business without a license. inception of the dealership agreement in 1986
until September 1998, DISI even brought to
On the other hand, DISI argues that the doctrine Steelcase’s attention that it was improperly
of estoppel cannot give Steelcase the license doing business in the Philippines without a
to do business in the Philippines or permission license. It was only towards the latter part of
to file suit in the Philippines. DISI claims 1998 that DISI deemed it necessary to inform
that when Steelcase entered into a dealership Steelcase of the impropriety of the conduct of
agreement with DISI in 1986, it was not doing its business without the requisite Philippine
business in the Philippines. It was after such license. It should, however, be noted that DISI
dealership was put in place that it started to only raised the issue of the absence of a
do business without first obtaining the license with Steelcase after it was informed
necessary license. Hence, estoppel cannot work that it owed the latter US$600,000.00 for the
against it. Moreover, DISI claims that it sale and delivery of its products under their
suffered as a result of Steelcase’s "doing special credit arrangement.
business" and that it never benefited from the
dealership and, as such, it cannot be estopped By acknowledging the corporate entity of
from raising the issue of lack of capacity to Steelcase and entering into a dealership
sue on the part of Steelcase. agreement with it and even benefiting from it,
DISI is estopped from questioning Steelcase’s
The argument of Steelcase is meritorious. existence and capacity to sue. This is
consistent with the Court’s ruling in
If indeed Steelcase had been doing business in Communication Materials and Design, Inc. v.
the Philippines without a license, DISI would Court of Appeals22 where it was written:
nonetheless be estopped from challenging the
former’s legal capacity to sue. Notwithstanding such finding that ITEC is doing
business in the country, petitioner is
It cannot be denied that DISI entered into a nonetheless estopped from raising this fact to
dealership agreement with Steelcase and bar ITEC from instituting this injunction case
profited from it for 12 years from 1987 until against it.
1999. DISI admits that it complied with its
obligations under the dealership agreement by A foreign corporation doing business in the
exerting more effort and making substantial Philippines may sue in Philippine Courts
investments in the promotion of Steelcase although not authorized to do business here
products. It also claims that it was able to against a Philippine citizen or entity who had
establish a very good reputation and goodwill contracted with and benefited by said
for Steelcase and its products, resulting in corporation. To put it in another way, a party
the establishment and development of a strong is estopped to challenge the personality of a
market for Steelcase products in the corporation after having acknowledged the same
Philippines. Because of this, DISI was very by entering into a contract with it. And the
proud to be awarded the "Steelcase doctrine of estoppel to deny corporate
International Performance Award" for meeting existence applies to a foreign as well as to
sales objectives, satisfying customer needs, domestic corporations. One who has dealt with
managing an effective company and making a a corporation of foreign origin as a corporate
profit.21 entity is estopped to deny its corporate
existence and capacity: The principle will be
applied to prevent a person contracting with a Evidence provides that a written admission made
foreign corporation from later taking by a party in the course of the proceedings in
advantage of its noncompliance with the the same case does not require proof. We held
statutes chiefly in cases where such person has in the case of Elayda v. Court of Appeals, that
received the benefits of the contract. an admission made in the pleadings cannot be
controverted by the party making such admission
The rule is deeply rooted in the time-honored and are conclusive as to him. Thus, our
axiom of Commodum ex injuria sua non habere consistent pronouncement, as held in cases such
debet — no person ought to derive any as Merril Lynch Futures v. Court of Appeals, is
advantage of his own wrong. This is as it should apropos:
be for as mandated by law, "every person must
in the exercise of his rights and in the The rule is that a party is estopped to
performance of his duties, act with justice, challenge the personality of a corporation
give everyone his due, and observe honesty and after having acknowledged the same by entering
good faith." into a contract with it. And the ‘doctrine of
estoppel to deny corporate existence applies to
Concededly, corporations act through agents, foreign as well as to domestic corporations;’
like directors and officers. Corporate "one who has dealt with a corporation of foreign
dealings must be characterized by utmost good origin as a corporate entity is estopped to deny
faith and fairness. Corporations cannot just its existence and capacity." The principle
feign ignorance of the legal rules as in most "will be applied to prevent a person
cases, they are manned by sophisticated contracting with a foreign corporation from
officers with tried management skills and legal later taking advantage of its noncompliance
experts with practiced eye on legal problems. with the statutes, chiefly in cases where such
Each party to a corporate transaction is person has received the benefits of the
expected to act with utmost candor and fairness contract . . ."
and, thereby allow a reasonable proportion
between benefits and expected burdens. This is All things considered, respondent can no longer
a norm which should be observed where one or the invoke petitioner’s lack of capacity to sue in
other is a foreign entity venturing in a global this jurisdiction.1âwphi1 Considerations of
market. fair play dictate that after having contracted
and benefitted from its business transaction
xxx with Rimbunan, respondent should be barred from
questioning the latter’s lack of license to
By entering into the "Representative transact business in the Philippines.
Agreement" with ITEC, petitioner is charged
with knowledge that ITEC was not licensed to In the case of Antam Consolidated, Inc. v. CA,
engage in business activities in the country, this Court noted that it is a common ploy of
and is thus estopped from raising in defense defaulting local companies which are sued by
such incapacity of ITEC, having chosen to unlicensed foreign corporations not engaged in
ignore or even presumptively take advantage of business in the Philippines to invoke the
the same.23 (Emphases supplied) latter’s lack of capacity to sue. This practice
of domestic corporations is particularly
The case of Rimbunan Hijau Group of Companies reprehensible considering that in requiring a
v. Oriental Wood Processing Corporation24 is license, the law never intended to prevent
likewise instructive: foreign corporations from performing single or
isolated acts in this country, or to favor
Respondent’s unequivocal admission of the domestic corporations who renege on their
transaction which gave rise to the complaint obligations to foreign firms unwary enough to
establishes the applicability of estoppel engage in solitary transactions with them.
against it. Rule 129, Section 4 of the Rules on Rather, the law was intended to bar foreign
corporations from acquiring a domicile for the Philippines and other countries in order to
purpose of business without first taking the rebuild and strengthen our economy. While it is
steps necessary to render them amenable to essential to uphold the sound public policy
suits in the local courts. It was to prevent the behind the rule that denies unlicensed foreign
foreign companies from enjoying the good while corporations doing business in the Philippines
disregarding the bad. access to our courts, it must never be used to
frustrate the ends of justice by becoming an
As a matter of principle, this Court will not all-encompassing shield to protect
step in to shield defaulting local companies unscrupulous domestic enterprises from foreign
from the repercussions of their business entities seeking redress in our country. To do
dealings. While the doctrine of lack of otherwise could seriously jeopardize the
capacity to sue based on failure to first desirability of the Philippines as an
acquire a local license may be resorted to in investment site and would possibly have the
meritorious cases, it is not a magic deleterious effect of hindering trade between
incantation. It cannot be called upon when no Philippine companies and international
evidence exists to support its invocation or corporations.
the facts do not warrant its application. In
this case, that the respondent is estopped from WHEREFORE, the March 31, 2005 Decision of the
challenging the petitioners’ capacity to sue Court of Appeals and its March 23, 2006
has been conclusively established, and the Resolution are hereby REVERSED and SET ASIDE.
forthcoming trial before the lower court should The dismissal order of the Regional Trial Court
weigh instead on the other defenses raised by dated November 15, 1999 is hereby set aside.
the respondent.25 (Emphases supplied) Steelcase’s Amended Complaint is hereby ordered
REINSTATED and the case is REMANDED to the RTC
As shown in the previously cited cases, this for appropriate action.
Court has time and again upheld the principle
that a foreign corporation doing business in SO ORDERED.
the Philippines without a license may still sue
before the Philippine courts a Filipino or a JOSE CATRAL MENDOZA
Philippine entity that had derived some benefit Associate Justice
from their contractual arrangement because the
latter is considered to be estopped from WE CONCUR:
challenging the personality of a corporation
after it had acknowledged the said corporation PRESBITERO J. VELASCO, JR.
by entering into a contract with it.26 Associate Justice
Chairperson
In Antam Consolidated, Inc. v. Court of
Appeals,27 this Court had the occasion to draw DIOSDADO M. PERALTA
attention to the common ploy of invoking the Associate Justice ROBERTO A. ABAD
incapacity to sue of an unlicensed foreign Associate Justice
corporation utilized by defaulting domestic ESTELA M. PERLAS-BERNABE
companies which seek to avoid the suit by the Associate Justice
former. The Court cannot allow this to continue
by always ruling in favor of local companies, A T T E S T A T I O N
despite the injustice to the overseas
corporation which is left with no available I attest that the conclusions in the above
remedy. Decision had been reached in consultation
before the case was assigned to the writer of
During this period of financial difficulty, our the opinion of the Court’s Division.
nation greatly needs to attract more foreign
investments and encourage trade between the PRESBITERO J. VELASCO, JR.
Associate Justice
Chairperson, Third Division

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the

Constitution and the Division Chairperson’s
Attestation, I certify that the conclusions in
the above Decision had been reached in
consultation before the case was assigned to
the writer of the opinion of the Court’s
Division.

RENATO C. CORONA
Chief Justice
Republic of the Philippines referred to as the "sponsors"/"licensees")7
SUPREME COURT entered into a Memorandum of Agreement (MOA),8
Manila pertinent provisions of which read:

SECOND DIVISION 1. Background and objectives. The Licensor,

co-owner of U.S.Patent No. 5,484,619,
G.R. No. 185582 February 29, Philippine Patent No. 31138, and Indonesian
2012 Patent No. ID0003911 xxx wishes to form an
alliance with Sponsors for purposes of
TUNA PROCESSING, INC., Petitioner, enforcing his three aforementioned patents,
vs. granting licenses under those patents, and
PHILIPPINE KINGFORD, INC., Respondent. collecting royalties.

D E C I S I O N The Sponsors wish to be licensed under the

aforementioned patents in order to practice the
PEREZ, J.: processes claimed in those patents in the
United States, the Philippines, and Indonesia,
Can a foreign corporation not licensed to do enforce those patents and collect royalties in
business in the Philippines, but which collects conjunction with Licensor.
royalties from entities in the Philippines, sue
here to enforce a foreign arbitral award? xxx

In this Petition for Review on Certiorari under 4. Establishment of Tuna Processors, Inc. The
Rule 45,1 petitioner Tuna Processing, Inc. parties hereto agree to the establishment of
(TPI), a foreign corporation not licensed to do Tuna Processors, Inc. ("TPI"), a corporation
business in the Philippines, prays that the established in the State of California, in
Resolution2 dated 21 November 2008 of the order to implement the objectives of this
Regional Trial Court (RTC) of Makati City be Agreement.
declared void and the case be remanded to the
RTC for further proceedings. In the assailed 5. Bank account. TPI shall open and maintain
Resolution, the RTC dismissed petitioner’s bank accounts in the United States, which will
Petition for Confirmation, Recognition, and be used exclusively to deposit funds that it
Enforcement of Foreign Arbitral Award3 against will collect and to disburse cash it will be
respondent Philippine Kingford, Inc. obligated to spend in connection with the
(Kingford), a corporation duly organized and implementation of this Agreement.
existing under the laws of the Philippines,4 on
the ground that petitioner lacked legal 6. Ownership of TPI. TPI shall be owned by the
capacity to sue.5 Sponsors and Licensor. Licensor shall be
assigned one share of TPI for the purpose of
The Antecedents being elected as member of the board of
directors. The remaining shares of TPI shall be
On 14 January 2003, Kanemitsu Yamaoka held by the Sponsors according to their
(hereinafter referred to as the "licensor"), respective equity shares. 9
co-patentee of U.S. Patent No. 5,484,619,
Philippine Letters Patent No. 31138, and xxx
Indonesian Patent No. ID0003911 (collectively
referred to as the "Yamaoka Patent"),6 and five The parties likewise executed a Supplemental
(5) Philippine tuna processors, namely, Angel Memorandum of Agreement10 dated 15 January 2003
Seafood Corporation, East Asia Fish Co., Inc., and an Agreement to Amend Memorandum of
Mommy Gina Tuna Resources, Santa Cruz Seafoods, Agreement11 dated 14 July 2003.
Inc., and respondent Kingford (collectively
Due to a series of events not mentioned in the At Branch 150, respondent Kingford filed a
petition, the licensees, including respondent Motion to Dismiss.16 After the court denied the
Kingford, withdrew from petitioner TPI and motion for lack of merit,17 respondent sought
correspondingly reneged on their for the inhibition of Judge Alameda and moved
obligations.12 Petitioner submitted the for the reconsideration of the order denying
dispute for arbitration before the the motion.18 Judge Alameda inhibited himself
International Centre for Dispute Resolution in notwithstanding "[t]he unfounded allegations
the State of California, United States and won and unsubstantiated assertions in the
the case against respondent.13 Pertinent motion."19 Judge Cedrick O. Ruiz of Branch 61,
portions of the award read: to which the case was re-raffled, in turn,
granted respondent’s Motion for
13.1 Within thirty (30) days from the date of Reconsideration and dismissed the petition on
transmittal of this Award to the Parties, the ground that the petitioner lacked legal
pursuant to the terms of this award, the total capacity to sue in the Philippines.20
sum to be paid by RESPONDENT KINGFORD to
CLAIMANT TPI, is the sum of ONE MILLION SEVEN Petitioner TPI now seeks to nullify, in this
HUNDRED FIFTY THOUSAND EIGHT HUNDRED FORTY SIX instant Petition for Review on Certiorari under
DOLLARS AND TEN CENTS ($1,750,846.10). Rule 45, the order of the trial court dismissing
its Petition for Confirmation, Recognition,
(A) For breach of the MOA by not paying past due and Enforcement of Foreign Arbitral Award.
assessments, RESPONDENT KINGFORD shall pay
CLAIMANT the total sum of TWO HUNDRED TWENTY Issue
NINE THOUSAND THREE HUNDRED AND FIFTY FIVE
DOLLARS AND NINETY CENTS ($229,355.90) which is The core issue in this case is whether or not
20% of MOA assessments since September 1, the court a quo was correct in so dismissing the
2005[;] petition on the ground of petitioner’s lack of
legal capacity to sue.
(B) For breach of the MOA in failing to
cooperate with CLAIMANT TPI in fulfilling the Our Ruling
objectives of the MOA, RESPONDENT KINGFORD
shall pay CLAIMANT the total sum of TWO HUNDRED The petition is impressed with merit.
SEVENTY ONE THOUSAND FOUR HUNDRED NINETY
DOLLARS AND TWENTY CENTS ($271,490.20)[;]14 The Corporation Code of the Philippines
and expressly provides:

(C) For violation of THE LANHAM ACT and Sec. 133. Doing business without a license. -
infringement of the YAMAOKA 619 PATENT, No foreign corporation transacting business in
RESPONDENT KINGFORD shall pay CLAIMANT the the Philippines without a license, or its
total sum of ONE MILLION TWO HUNDRED FIFTY successors or assigns, shall be permitted to
THOUSAND DOLLARS AND NO CENTS ($1,250,000.00). maintain or intervene in any action, suit or
xxx proceeding in any court or administrative
agency of the Philippines; but such corporation
xxx15 may be sued or proceeded against before
Philippine courts or administrative tribunals
To enforce the award, petitioner TPI filed on on any valid cause of action recognized under
10 October 2007 a Petition for Confirmation, Philippine laws.
Recognition, and Enforcement of Foreign
Arbitral Award before the RTC of Makati City. It is pursuant to the aforequoted provision
The petition was raffled to Branch 150 presided that the court a quo dismissed the petition.
by Judge Elmo M. Alameda. Thus:
Herein plaintiff TPI’s "Petition, etc." before this most Honorable Court, as it [i]s
acknowledges that it "is a foreign corporation imperative to clarify whether the Philippines’
established in the State of California" and international obligations and State policy to
"was given the exclusive right to license or strengthen arbitration as a means of dispute
sublicense the Yamaoka Patent" and "was resolution may be defeated by misplaced
assigned the exclusive right to enforce the technical considerations not found in the
said patent and collect corresponding relevant laws.24
royalties" in the Philippines. TPI likewise
admits that it does not have a license to do Simply put, how do we reconcile the provisions
business in the Philippines. of the Corporation Code of the Philippines on
one hand, and the Alternative Dispute
There is no doubt, therefore, in the mind of Resolution Act of 2004, the New York Convention
this Court that TPI has been doing business in and the Model Law on the other?
the Philippines, but sans a license to do so
issued by the concerned government agency of In several cases, this Court had the occasion
the Republic of the Philippines, when it to discuss the nature and applicability of the
collected royalties from "five (5) Philippine Corporation Code of the Philippines, a general
tuna processors[,] namely[,] Angel Seafood law, viz-a-viz other special laws. Thus, in
Corporation, East Asia Fish Co., Inc., Mommy Koruga v. Arcenas, Jr.,25 this Court rejected
Gina Tuna Resources, Santa Cruz Seafoods, Inc. the application of the Corporation Code and
and respondent Philippine Kingford, Inc." This applied the New Central Bank Act. It
being the real situation, TPI cannot be ratiocinated:
permitted to maintain or intervene in any
action, suit or proceedings in any court or Koruga’s invocation of the provisions of the
administrative agency of the Philippines." A Corporation Code is misplaced. In an earlier
priori, the "Petition, etc." extant of the case with similar antecedents, we ruled that:
plaintiff TPI should be dismissed for it does
not have the legal personality to sue in the "The Corporation Code, however, is a general
Philippines.21 law applying to all types of corporations,
while the New Central Bank Act regulates
The petitioner counters, however, that it is specifically banks and other financial
entitled to seek for the recognition and institutions, including the dissolution and
enforcement of the subject foreign arbitral liquidation thereof. As between a general and
award in accordance with Republic Act No. 9285 special law, the latter shall prevail –
(Alternative Dispute Resolution Act of generalia specialibus non derogant." (Emphasis
2004),22 the Convention on the Recognition and supplied)26
Enforcement of Foreign Arbitral Awards drafted
during the United Nations Conference on Further, in the recent case of Hacienda Luisita,
International Commercial Arbitration in 1958 Incorporated v. Presidential Agrarian Reform
(New York Convention), and the UNCITRAL Model Council,27 this Court held:
Law on International Commercial Arbitration
(Model Law),23 as none of these specifically Without doubt, the Corporation Code is the
requires that the party seeking for the general law providing for the formation,
enforcement should have legal capacity to sue. organization and regulation of private
It anchors its argument on the following: corporations. On the other hand, RA 6657 is the
special law on agrarian reform. As between a
In the present case, enforcement has been general and special law, the latter shall
effectively refused on a ground not found in the prevail—generalia specialibus non
[Alternative Dispute Resolution Act of 2004], derogant.28
New York Convention, or Model Law. It is for
this reason that TPI has brought this matter
Following the same principle, the Alternative governed by the Model Law on International
Dispute Resolution Act of 2004 shall apply in Commercial Arbitration (the "Model Law")
this case as the Act, as its title - An Act to adopted by the United Nations Commission on
Institutionalize the Use of an Alternative International Trade Law on June 21, 1985 xxx."
Dispute Resolution System in the Philippines
and to Establish the Office for Alternative Now, does a foreign corporation not licensed to
Dispute Resolution, and for Other Purposes - do business in the Philippines have legal
would suggest, is a law especially enacted "to capacity to sue under the provisions of the
actively promote party autonomy in the Alternative Dispute Resolution Act of 2004? We
resolution of disputes or the freedom of the answer in the affirmative.
party to make their own arrangements to resolve
their disputes."29 It specifically provides Sec. 45 of the Alternative Dispute Resolution
exclusive grounds available to the party Act of 2004 provides that the opposing party in
opposing an application for recognition and an application for recognition and enforcement
enforcement of the arbitral award.30 of the arbitral award may raise only those
grounds that were enumerated under Article V of
Inasmuch as the Alternative Dispute Resolution the New York Convention, to wit:
Act of 2004, a municipal law, applies in the
instant petition, we do not see the need to Article V
discuss compliance with international
obligations under the New York Convention and 1. Recognition and enforcement of the award may
the Model Law. After all, both already form part be refused, at the request of the party against
of the law. whom it is invoked, only if that party furnishes
to the competent authority where the
In particular, the Alternative Dispute recognition and enforcement is sought, proof
Resolution Act of 2004 incorporated the New that:
York Convention in the Act by specifically
providing: (a) The parties to the agreement referred to in
article II were, under the law applicable to
SEC. 42. Application of the New York Convention. them, under some incapacity, or the said
- The New York Convention shall govern the agreement is not valid under the law to which
recognition and enforcement of arbitral awards the parties have subjected it or, failing any
covered by the said Convention. indication thereon, under the law of the
country where the award was made; or
xxx
(b) The party against whom the award is invoked
SEC. 45. Rejection of a Foreign Arbitral Award. was not given proper notice of the appointment
- A party to a foreign arbitration proceeding of the arbitrator or of the arbitration
may oppose an application for recognition and proceedings or was otherwise unable to present
enforcement of the arbitral award in accordance his case; or
with the procedural rules to be promulgated by
the Supreme Court only on those grounds (c) The award deals with a difference not
enumerated under Article V of the New York contemplated by or not falling within the terms
Convention. Any other ground raised shall be of the submission to arbitration, or it
disregarded by the regional trial court. contains decisions on matters beyond the scope
of the submission to arbitration, provided that,
It also expressly adopted the Model Law, to wit: if the decisions on matters submitted to
arbitration can be separated from those not so
Sec. 19. Adoption of the Model Law on submitted, that part of the award which
International Commercial Arbitration. contains decisions on matters submitted to
International commercial arbitration shall be arbitration may be recognized and enforced; or
 ruling of the arbitral tribunal on a
(d) The composition of the arbitral authority preliminary question upholding or declining
or the arbitral procedure was not in accordance its jurisdiction"35 after arbitration has
with the agreement of the parties, or, failing already commenced should state "[t]he facts
such agreement, was not in accordance with the showing that the persons named as petitioner or
law of the country where the arbitration took respondent have legal capacity to sue or be
place; or sued."36

(e) The award has not yet become binding on the Indeed, it is in the best interest of justice
parties, or has been set aside or suspended by that in the enforecement of a foreign arbitral
a competent authority of the country in which, award, we deny availment by the losing party of
or under the law of which, that award was made. the rule that bars foreign corporations not
licensed to do business in the Philippines from
2. Recognition and enforcement of an arbitral maintaining a suit in our courts. When a party
award may also be refused if the competent enters into a contract containing a foreign
authority in the country where recognition and arbitration clause and, as in this case, in fact
enforcement is sought finds that: submits itself to arbitration, it becomes bound
by the contract, by the arbitration and by the
(a) The subject matter of the difference is not result of arbitration, conceding thereby the
capable of settlement by arbitration under the capacity of the other party to enter into the
law of that country; or contract, participate in the arbitration and
cause the implementation of the result.
(b) The recognition or enforcement of the award Although not on all fours with the instant case,
would be contrary to the public policy of that also worthy to consider is the
country.
wisdom of then Associate Justice Flerida Ruth
Clearly, not one of these exclusive grounds P. Romero in her Dissenting Opinion in Asset
touched on the capacity to sue of the party Privatization Trust v. Court of Appeals,37 to
seeking the recognition and enforcement of the wit:
award.
xxx Arbitration, as an alternative mode of
Pertinent provisions of the Special Rules of settlement, is gaining adherents in legal and
Court on Alternative Dispute Resolution,31 judicial circles here and abroad. If its tested
which was promulgated by the Supreme Court, mechanism can simply be ignored by an aggrieved
likewise support this position. party, one who, it must be stressed,
voluntarily and actively participated in the
Rule 13.1 of the Special Rules provides that arbitration proceedings from the very
"[a]ny party to a foreign arbitration may beginning, it will destroy the very essence of
petition the court to recognize and enforce a mutuality inherent in consensual contracts.38
foreign arbitral award." The contents of such
petition are enumerated in Rule 13.5.32 Clearly, on the matter of capacity to sue, a
Capacity to sue is not included. Oppositely, in foreign arbitral award should be respected not
the Rule on local arbitral awards or because it is favored over domestic laws and
arbitrations in instances where "the place of procedures, but because Republic Act No. 9285
arbitration is in the Philippines,"33 it is has certainly erased any conflict of law
specifically required that a petition "to question.
determine any question concerning the
existence, validity and enforceability of such Finally, even assuming, only for the sake of
arbitration agreement"34 available to the argument, that the court a quo correctly
parties before the commencement of arbitration observed that the Model Law, not the New York
and/or a petition for "judicial relief from the Convention, governs the subject arbitral
award,39 petitioner may still seek recognition application of this rule may be excused when the
and enforcement of the award in Philippine reason behind the rule is not present in a case,
court, since the Model Law prescribes as in the present case, where the issues are not
substantially identical exclusive grounds for factual but purely legal.1âwphi1 In these types
refusing recognition or enforcement.40 of questions, this Court has the ultimate say
so that we merely abbreviate the review process
Premises considered, petitioner TPI, although if we, because of the unique circumstances of
not licensed to do business in the Philippines, a case, choose to hear and decide the legal
may seek recognition and enforcement of the issues outright.45
foreign arbitral award in accordance with the
provisions of the Alternative Dispute Moreover, the novelty and the paramount
Resolution Act of 2004. importance of the issue herein raised should be
seriously considered.46 Surely, there is a need
II to take cognizance of the case not only to guide
the bench and the bar, but if only to strengthen
The remaining arguments of respondent Kingford arbitration as a means of dispute resolution,
are likewise unmeritorious. and uphold the policy of the State embodied in
the Alternative Dispute Resolution Act of 2004,
First. There is no need to consider respondent’ to wit:
s contention that petitioner TPI improperly
raised a question of fact when it posited that Sec. 2. Declaration of Policy. - It is hereby
its act of entering into a MOA should not be declared the policy of the State to actively
considered "doing business" in the Philippines promote party autonomy in the resolution of
for the purpose of determining capacity to sue. disputes or the freedom of the party to make
We reiterate that the foreign corporation’s their own arrangements to resolve their
capacity to sue in the Philippines is not disputes. Towards this end, the State shall
material insofar as the recognition and encourage and actively promote the use of
enforcement of a foreign arbitral award is Alternative Dispute Resolution (ADR) as an
concerned. important means to achieve speedy and impartial
justice and declog court dockets. xxx
Second. Respondent cannot fault petitioner for
not filing a motion for reconsideration of the Fourth. As regards the issue on the validity and
assailed Resolution dated 21 November 2008 enforceability of the foreign arbitral award,
dismissing the case. We have, time and again, we leave its determination to the court a quo
ruled that the prior filing of a motion for where its recognition and enforcement is being
reconsideration is not required in certiorari sought.
under Rule 45.41
Fifth. Respondent claims that petitioner
Third. While we agree that petitioner failed to failed to furnish the court of origin a copy of
observe the principle of hierarchy of courts, the motion for time to file petition for review
which, under ordinary circumstances, warrants on certiorari before the petition was filed
the outright dismissal of the case,42 we opt to with this Court.47 We, however, find
relax the rules following the pronouncement in petitioner’s reply in order. Thus:
Chua v. Ang,43 to wit:
26. Admittedly, reference to "Branch 67" in
[I]t must be remembered that [the principle of petitioner TPI’s "Motion for Time to File a
hierarchy of courts] generally applies to cases Petition for Review on Certiorari under Rule
involving conflicting factual allegations. 45" is a typographical error. As correctly
Cases which depend on disputed facts for pointed out by respondent Kingford, the order
decision cannot be brought immediately before sought to be assailed originated from Regional
us as we are not triers of facts.44 A strict Trial Court, Makati City, Branch 61.
 C E R T I F I C A T I O N
27. xxx Upon confirmation with the Regional
Trial Court, Makati City, Branch 61, a copy of Pursuant to Section 13, Article VIII of the
petitioner TPI’s motion was received by the Constitution, and the Division Chairperson’s
Metropolitan Trial Court, Makati City, Branch Attestation, it is hereby certified that the
67. On 8 January 2009, the motion was forwarded conclusions in the above Decision were reached
to the Regional Trial Court, Makati City, in consultation before the case was assigned to
Branch 61.48 the writer of the opinion of the Court’s
Division.
All considered, petitioner TPI, although a
foreign corporation not licensed to do business RENATO C. CORONA
in the Philippines, is not, for that reason Chief Justice
alone, precluded from filing the Petition for
Confirmation, Recognition, and Enforcement of
Foreign Arbitral Award before a Philippine
court.

WHEREFORE, the Resolution dated 21 November

2008 of the Regional Trial Court, Branch 61,
Makati City in Special Proceedings No. M-6533
is hereby REVERSED and SET ASIDE. The case is
REMANDED to Branch 61 for further proceedings.

SO ORDERED.

JOSE PORTUGAL PEREZ

Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice
Chairperson

ARTURO D. BRION
Associate Justice MARIA LOURDES P. A. SERENO
Associate Justice
BIENVENIDO L. REYES
Associate Justice

A T T E S T A T I O N

I attest that the conclusions in the above

Decision were reached in consultation before
the case was assigned to the writer of the
opinion of the Court’s Division.

ANTONIO T. CARPIO
Associate Justice
Chairperson, Second Division