Set 14

AVON Insurance PLC vs. CA Respondent Yupangco Cotton Mills filed a complaint against several foreign reinsurance companies (among which are petitioners) to collect their alleged percentage liability under contract treaties between the foreign insurance companies and the international insurance broker C.J. Boatright, acting as agent for respondent Worldwide Surety and Insurance Company. Inasmuch as petitioners are not engaged in business in the Philippines with no offices, places of business or agents in the Philippines, the reinsurance treaties having been entered abroad, service of summons upon motion of respondent Yupangco, was made upon petitioners through the Office of the Insurance Commissioner. Petitioners, by counsel on special appearance, seasonably filed motions to dismiss disputing the jurisdiction of respondent Court and the extra-territorial service of summons. Respondent Yupangco filed its opposition to the motions to dismiss, petitioners filed their reply, and respondent Yupangco filed its rejoinder. Respondent Court denied the motions to dismiss and directed petitioners to file their answer. Then, petitioners filed their notice of appeal which was denied. As fate would have it, within the respective effectivity periods of Policies 20719 and 25896, the properties therein insured were razed by fire, thereby giving rise to the obligation of the insurer to indemnify the Yupangco Cotton Mills. Partial payments were made by Worldwide Surety and Insurance and some of the reinsurance companies. Worldwide Surety and Insurance, in a Deed of Assignment, acknowledged a remaining balance still due Yupangco Cotton Mills, and assigned to the latter all reinsurance proceeds still collectible from all the foreign reinsurance companies. Thus, in its interest as assignee and original insured, Yupangco Cotton Mills instituted this collection suit against the petitioners. Issue: Whether or not the respondent Court has no jurisdiction over the petitioners being a foreign corporations not doing business in the Philippines with no office, place of business or agents in the Philippines Ruling: In the decisions of the courts below, there is much left to speculation and conjecture as to whether or not the petitioners were determined to be "doing business in the Philippines" or not. To qualify the petitioners' business of reinsurance within the Philippine forum, resort must be made to the established principles in determining what is meant by "doing business in the Philippines." In Communication Materials and Design, Inc. et. al. vs. Court of Appeals, 8 it was observed that. There is no exact rule or governing principle as to what constitutes doing or engaging in or transacting business. Indeed, such case must be judged in the light of its peculiar circumstances, upon its peculiar facts and upon the language of the statute applicable. The true test, however, seems to be whether the

foreign corporation is continuing the body or substance of the business or enterprise for which it was organized. A single act or transaction made in the Philippines, however, could qualify a foreign corporation to be doing business in the Philippines, if such singular act is not merely incidental or casual, but indicates the foreign corporation's intention to do business in the Philippines. 10 There is no sufficient basis in the records which would merit the institution of this collection suit in the Philippines. More specifically, there is nothing to substantiate the private respondent's submission that the petitioners had engaged in business activities in this country. This is not an instance where the erroneous service of summons upon the defendant can be cured by the issuance and service of alias summons, as in the absence of showing that petitioners had been doing business in the country, they cannot be summoned to answer for the charges leveled against them. As it is, private respondent has made no allegation or demonstration of the existence of petitioners' domestic agent, but avers simply that they are doing business not only abroad but in the Philippines as well. It does not appear at all that the petitioners had performed any act which would give the general public the impression that it had been engaging, or intends to engage in its ordinary and usual business undertakings in the country. The reinsurance treaties between the petitioners and Worldwide Surety and Insurance were made through an international insurance broker, and not through any entity or means remotely connected with the Philippines. Moreover, there is authority to the effect that a reinsurance company is not doing business in a certain state merely because the property or lives which are insured by the original insurer company are located in that state. 12 The reason for this is that a contract of reinsurance is generally a separate and distinct arrangement from the original contract of insurance, whose contracted risk is insured in the reinsurance agreement. 13 Hence, the original insured has generally no interest in the contract of reinsurance. 14 A foreign corporation, is one which owes its existence to the laws of another state, 15 and generally, has no legal existence within the state in which it is foreign. In Marshall Wells Co. vs. Elser, 16 it was held that corporations have no legal status beyond the bounds of the sovereignty by which they are created. Nevertheless, it is widely accepted that foreign corporations are, by reason of state comity, allowed to transact business in other states and to sue in the courts of such fora. In the Philippines foreign corporations are allowed such privileges, subject to certain restrictions, arising from the state's sovereign right of regulation. The same danger does not exist among foreign corporations that are indubitably not doing business in the Philippines. Indeed, if a foreign corporation does not do business here, there would be no reason for it to be subject to the State's regulation. As we observed, in so far as the State is concerned, such foreign corporation has no legal existence. Therefore, to subject such corporation to the courts' jurisdiction would violate the essence of sovereignty. As we have found, there is no showing that petitioners had performed any act in the country that would place it within the sphere of the court's jurisdiction.

It is also argued that having filed a motion to dismiss in the proceedings before the trial court, petitioners have thus acquiesced to the court's jurisdiction, and they cannot maintain the contrary at this juncture. This argument is at the most, flimsy. Granger Associates vs. Microwave Systems, Inc. (Amendment of License) Facts: Granger Associates, an American corporation with no license to do business in the Philippines, entered into a series of agreements with the local company, Microwave Systems, Inc., principally constituting the local company as the licensee to manufacture and sell the licensors products in the Philippines, together with a loan extended to the licensee. An action was later on brought by Granger Associates, having done business in the Philippines without obtaining a license, has no authority to maintain the suit. Granger Associates argued that the various transactions with the local company were mere facets of the basic agreement licensing MSI to manufacture and sell Grangers products in the Philippines and all subsequent agreements were merely auxiliary to the first contract and should not be considered separate transactions coming within the concept of doing business in the Philippines. Issue: Whether or not Granger Associates, having done business in the Philippines without obtaining a license has no authority to maintain the suit. Held: Although the Court found that many agreements entered into dealt on other matters as to constitute doing business, the Court went on to hold that even if it be assumed for the sake of argument that the subject matter of the first contract is of the same kind as that of the subsequent agreements, that fact alone would not necessarily signify that all such agreements are merely auxiliary to the first. As long as it can be shown that the parties entered into a series of agreements, as in successive sales of the foreign companys regular products that company shall be deemed as doing business in the Philippines. The Court also found that Granger Associates saw to it that it was assured of at least one seat in the board of directors of the local company, without prejudice to the right of Granger to request additional seats as its interest may require. The fact that it was directly involved in the business of the local company was also manifested in another stipulation where Granger Associates acknowledged and confirmed the transfer of a block of stocks from one shareholder to another group of investors. Such approval was considered by the Court as not normally given except by a stockholder enjoying substantial participation in the management of the business of the company. Although the rules and regulations of the Board of Investments provide that mere investment in a local company by a foreign corporation should not be construed as doing business in the Philippines, however the court in Granger Associates found that the investment of the foreign company was quite substantial,

enabling it to participate in the actual management and control of MSI [and] it appointed a representative in the board of directors to protect its interest, and this director was so influential that, at his request, the regular board meeting was converted into an annual stockholders meeting to take advantage of his presence. Noteworthy are the statements of the Court that At any rate, the administrative regulation, which is intended only to supplement the law, cannot prevail against the law itself as the court has interpreted it. It is axiomatic that the delegate, in exercising the power to promulgate implementing regulations, cannot contradict the law from which the regulations derive their very existence. The courts, for their part, interpret the administrative regulations in harmony with the law that authorized them in the first place and avoid as much as possible any construction that would annul them as an invalid exercise of legislative power. On the argument that a foreign corporation must be shown to have dealt with the public in general to be considered as transacting business in the Philippines, the Court held that it is the performance by a foreign corporation of the acts for which it was created, regardless of volume of business, that determines whether a foreign corporation needs a license or not.

Facilities Management Corporation vs. de la Osa

Facts: Facilities Management Corporation and J. S. Dreyer are domiciled in Wake Island while J. V. Catuira is an employee of FMC stationed in Manila. Leonardo dela Osa was employed by FMC in Manila, but rendered work in Wake Island, with the approval of the Department of Labor of the Philippines. De la Osa was employed as (1) painter with an hourly rate of $1.25 from March 1964 to November 1964, inclusive; (2) houseboy with an hourly rate of $1.26 from December 1964 to November 1965, inclusive; (3) houseboy with an hourly rate of $1.33 from December 1965 to August 1966, inclusive; and (4) cashier with an hourly rate of $1.40 from August 1966 to March 27 1967, inclusive. He further averred that from December, 1965 to August, 1966, inclusive, he rendered overtime services daily, and that this entire period was divided into swing and graveyard shifts to which he was assigned, but he was not paid both overtime and night shift premiums despite his repeated demands from FMC, et al. In a petition filed on 1 July 1967, dela Osa sought his reinstatement with full backwages, as well as the recovery of his overtime compensation, swing shift and graveyard shift differentials. Subsequently on 3 May 1968, FMC, et al. filed a motion to dismiss the subject petition on the ground that the Court has no jurisdiction over the case, and on 24 May 1968, de la Osa interposed an opposition thereto. Said motion was denied by the Court in its Order issued on 12 July 1968. Subsequently, after trial, the Court of Industrial Relations, in a decision dated 14 February 1972, ordered FMC, et al. to pay de la Osa his overtime compensation, as well as his swing shift and graveyard shift premiums at the rate of 50% per cent of his basic salary. FMC, et al. filed the petition for review on certiorari.

Issue [1]: Whether the mere act by a non-resident foreign corporation of recruiting Filipino workers for its own use abroad, in law doing business in the Philippines. Held [1]: In its motion to dismiss, FMC admits that Mr. Catuira represented it in the Philippines "for the purpose of making arrangements for the approval by the Department of Labor of the employment of Filipinos who are recruited by the Company as its own employees for assignment abroad." In effect, Mr. Catuira was alleged to be a liaison officer representing FMC in the Philippines. Under the rules and regulations promulgated by the Board of Investments which took effect 3 February 1969, implementing RA 5455, which took effect 30 September 1968, the phrase "doing business" has been exemplified with illustrations, among them being as follows: ""(1) Soliciting orders, purchases (sales) or service contracts. Concrete and specific solicitations by a foreign firm, not acting independently of the foreign firm, amounting to negotiation or fixing of the terms and conditions of sales or service contracts, regardless of whether the contracts are actually reduced to writing, shall constitute doing business even if the enterprise has no office or fixed place of business in the Philippines; (2) appointing a representative or distributor who is domiciled in the Philippines, unless said representative or distributor has an independent status, i.e., it transacts business in its name and for its own account, and not in the name or for the account of the principal; xxx (4) Opening offices, whether called 'liaison' offices, agencies or branches, unless proved otherwise. xxx (10) Any other act or acts that imply a continuity of commercial dealings or arrangements, and contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally incident to, or in the progressive prosecution of, commercial gain or of the purpose and objective of the business organization." Issue [2]: Whether FMC has been "doing business in the Philippines" so that the service of summons upon its agent in the Philippines vested the Court of First Instance of Manila with jurisdiction. Held [2]: FMC may be considered as "doing business in the Philippines" within the scope of Section 14 (Service upon private foreign corporations), Rule 14 of the Rules of Court which provides that "If the defendant is a foreign corporation, or a non-resident joint stock company or association, doing business in the Philippines, service may be made on its resident agent designated in accordance with law for that purpose or, if there be no such agent, on the government official designated by law to that effect, or on any of its officers or agents within the Philippines." Indeed, FMC, in compliance with Act 2486 as implemented by Department of Labor Order IV dated 20 May 1968 had to appoint Jaime V. Catuira, 1322 A. Mabini, Ermita, Manila "as agent for FMC with authority to execute Employment Contracts and receive, in behalf of that corporation, legal services from and be bound by processes of the Philippine Courts of Justice, for as long as he remains an employee of FMC." It is a fact that when the summons for FMC was served on Catuira he was still in the employ of the FMC. Hence, if a foreign corporation, not engaged in business in the Philippines, is not barred from seeking redress from courts in the Philippines (such as in earlier cases of Aetna Casualty & Surety Company, vs. Pacific Star Line, etc. [GR L-26809], In Mentholatum vs. Mangaliman, and Eastboard Navigation vs. Juan Ysmael & Co.), a fortiori, that same corporation cannot claim exemption from being sued in Philippine courts for acts done against a person or persons in the Philippines. Hence, the petition for review of petitioner corporation is denied.

G.R. No. L-44944 August 9, 1985 TOP-WELD MANUFACTURING, INC., petitioner, vs. ECED, S.A., IRTI, S.A., EUTECTIC CORPORATION, VICTOR C. GAERLAN, and THE HON. COURT OF APPEALS, respondents. FACTS: Petitioner Top-weld Manufacturing, Inc. (Top-weld) is a Philippine corporation engaged in the business of manufacturing and selling welding supplies and equipment. In pursuance of its business, the petitioner entered into separate contracts with two different foreign entities. One contract, entitled a "LICENSE AND TECHNICAL ASSISTANCE AGREEMENT" and dated January 2, 1972 was entered into with IRTI, S.A., (IRTI), a corporation organized and existing under the laws of Switzerland with principal office at Fribourg, Switzerland. By virtue of this agreement, the petitioner was constituted a licensee of IRTI to manufacture welding products under certain specifications, with raw materials to be purchased by the former from suppliers designated by IRTI, for a period of three (3) years or up to January 1, 1975. This contract was later extended up to December 31, 1975 in a subsequent agreement. The other contract was a "DISTRIBUTOR AGREEMENT" dated January 1, 1975 entered into with ECED, S.A., (ECED), a company organized and existing under the laws of Panama with principal office at Apartado 1903, Panama I, City of Panama. Under this agreement, the petitioner was designated as ECED's distributor in the Philippines of certain welding products and equipment. By its terms, the contract was to remain effective until terminated by either party upon giving six (6) months or 180 days written notice to the other. Upon learning that the two foreign entities were negotiating with another group to replace the petitioner as their licensee and distributor, the latter instituted on June 16, 1975, Civil Case No. 21409 against IRTI, ECED another corporation named EUTECTIC Corporation, organized under the laws of the State of New York, U.S.A., and an individual named Victor C. Gaerlan, a Filipino citizen alleged to be the representative and employee of these three corporations. Among others, the petitioner invoked the provisions of No. 9. Section 4 of Republic Act 5455 on alien firms doing business in the Philippines. The respondent corporation further alleged that Section 4 (9) of R.A. No. 5455 cannot possibly apply to the instant case, which provides that: Section 4. Licenses to do business.-No alien, and no firm, association, partnership, corporation, or any other form of business organization formed, organized, chartered or existing under any laws other than those of the Philippines, or which is not a Philippine National, or more than thirty per cent of the

outstanding capital of which is owned or controlled by aliens shall do business or engage in any economic activity in alien the Philippines, or be registered, licensed, or permitted by the Securities and Exchange Commission, or by any other bureau, office, agency, political subdivision, or instrumentality of the government, to do business, or engage in an economic activity in the Philippines without first securing a written certificate from the Board of Investments to the effect ... . Issue: Whether or not respondent corporations can be considered as "doing business" in the Philippines and, therefore, subject to the provisions of R.A. No. 5455. Held: There is no dispute that respondents are foreign corporations not licensed to do business in the Philippines. More important, however, there is no serious objection interposed by the respondents as to their amenability to the jurisdiction of our courts. There is no general rule or governing principle laid down as to what constitutes "doing" or engaging in" or "transacting" business in the Philippines. Each case must be judged in the light of its peculiar circumstances. The acts of these corporations should be distinguished from a single or isolated business transaction or occasional, incidental and casual transactions which do not come within the meaning of the law. Where a single act or transaction, however, is not merely incidental or casual but indicates the foreign corporation's intention to do other business in the Philippines, said single act or transaction constitutes "doing" or "engaging in" or "transacting" business in the Philippines. We agree with the Court of Appeals in considering the respondents as "doing business" in the Philippines. When the respondents entered into the disputed contracts with the petitioner, they were carrying out the purposes for which they were created, i.e. to manufacture and market welding products and equipment. The terms and conditions of the contracts as well as the respondents' conduct indicate that they established within our country a continuous business, and not merely one of a temporary character. This fact is even more strengthened by the admission of the respondents that they are negotiating with another group for the transfer of the distributorship and franchising rights from the petitioner. Respondents' acts enabled them to enter into the mainstream of our economic life in competition with our local business interests. This necessarily brings them under the provisions of R.A. No. 5455. We uphold the appellate court's finding that "IRTI AND ECED were doing business and engaging in economic activity in the Philippines ... as a prerequisite to which they should have first secured a written certificate from the Board of Investments."

We agree, however, that there is a more compelling reason behind the finding that the "corporations are not bound by the requirement on termination, and TOP-WELD cannot invoke the same against the former." As between the parties themselves, R.A. No. 5455 does not declare as void or invalid the contracts entered into without first securing a license or certificate to do business in the Philippines. Neither does it appear to intend to prevent the courts from enforcing contracts made in contravention of its licensing provisions. There is no denying, though, that an "illegal situation," as the appellate court has put it, was created when the parties voluntarily contracted without such license. The parties are charged with knowledge of the existing law at the time they enter into the contract and at the time it is to become operative. Moreover, a person is presumed to be more knowledgeable about his own state law than his alien or foreign contemporary. In this case, the record shows that, at least, petitioner had actual knowledge of the applicability of R.A. No. 5455 at the time the contract was executed and at all times thereafter. This conclusion is compelled by the fact that the same statute is now being propounded by the petitioner to bolster its claim. We, therefore, sustain the appellate court's view that "it was incumbent upon TOP-WELD to know whether or not IRTI and ECED were properly authorized to engage in business in the Philippines when they entered into the licensing and distributorship agreements." The very purpose of the law was circumvented and evaded when the petitioner entered into said agreements despite the prohibition of R.A. No. 5455. The parties in this case being equally guilty of violating R.A, No. 5455, they are in pari delicto, in which case it follows as a consequence that petitioner is not entitled to the relief prayed for in this case.

The Mentholatum Co. Inc. vs. Mangaliman Facts: The Mentholatum Co., Inc., is a Kansas corporation which manufactures "Mentholatum," a medicament and salve adapted for the treatment of colds, nasal irritations, chapped skin, insect bites, rectal irritation and other external ailments of the body. The Philippine-American Drug Co., Inc., is its exclusive distributing agent in the Philippines authorized by it to look after and protect its interests. On 26 June 1919 and on 21 January 1921, the Mentholatum Co., Inc., registered with the Bureau of Commerce and Industry the word, "Mentholatum", as trade mark for its products. The Mangaliman brothers prepared a medicament and salve named "Mentholiman" which they sold to the public packed in a container of the same size, color and shape as "Mentholatum." As a consequence of these acts of the Mangalimans, Mentholatum, etc. suffered damages from the diminution of their sales and the loss of goodwill and reputation of their product in the market. On 1 October 1935, the Mentholatum Co., Inc., and the Philippine-American Drug, Co., Inc. instituted an action in the Court of First Instance (CFI) of Manila against Anacleto Mangaliman, Florencio Mangaliman and the Director of the Bureau of Commerce for infringement of trade mark and unfair competition (Civil case 48855). Mentholatum, etc. prayed for the issuance of an order restraining Anacleto and Florencio Mangaliman from selling their product "Mentholiman," and directing them to render an accounting of their sales and profits and to pay damages. After a protracted trial, featured by the dismissal of the case on 9 March 1936 for failure

of plaintiff's counsel to attend, and its subsequent reinstatement on April 4, 1936, the Court of First Instance of Manila, on 29 October 1937, rendered judgment in favor of Mentholatum, etc. In the Court of Appeals (CA-GR 46067), the decision of the trial court was, on 29 June 1940, reversed, said tribunal holding that the activities of the Mentholatum Co., Inc., were business transactions in the Philippines, and that by section 69 of the Corporation Law, it may not maintain the suit. Mentholatum, etc. filed the petition for certiorari. Issue: Whether Mentholatum, etc. could prosecute the instant action without having secured the license required in section 69 of the Corporation Law. Held: No general rule or governing principle can be laid down as to what constitutes "doing" or "engaging in" or "transacting" business. Indeed, each case must be judged in the light of its peculiar environmental circumstances. The true test, however, seems to be whether the foreign corporation is continuing the body or substance of the business or enterprise for which it was organized or whether it has substantially retired from it and turned it over to another. The term implies a continuity of commercial dealings and arrangements, and contemplates, to that extent, the performance of acts or works or the exercise of some of the functions normally incident to, and in progressive prosecution of, the purpose and object of its organization. Herein, Mentholatum Co., through its agent, the PhilippineAmerican Drug Co., Inc., has been doing business in the Philippines by selling its products here since the year 1929, at least. Whatever transactions the Philippine-American Drug Co., Inc., had executed in view of the law, the Mentholatum Co., Inc., being a foreign corporation doing business in the Philippines without the license required by section 68 of the Corporation Law, it may not prosecute this action for violation of trade mark and unfair competition. Neither may the Philippine-American Drug Co., Inc., maintain the action here for the reason that the distinguishing features of the agent being his representative character and derivative authority, it cannot now, to the advantage of its principal, claim an independent standing in court. Further, the recognition of the legal status of a foreign corporation is a matter affecting the policy of the forum, and the distinction drawn in Philippine Corporation Law is an expression of the policy. The general statement made in Western Equipment and Supply Co. vs. Reyes regarding the character of the right involved should not be construed in the derogation of the policydetermining authority of the State. The right of Mentholatum conditioned upon compliance with the requirement of section 69 of the Corporation Law to protect its rights, is reserved. AETNA CASUALTY & SURETY CO. V PACIFIC STAR LINE

FACTS: Defendant Paciifc Star Line, was operating the vessel SS Ampal on a commercial run between US and Phil. port.; defendant The Bradman Co. Inc. was the ship agent in the Phils of Pacific Star Line and its vessel and that Manila Railroad Co. Inc. and Manila Port Service were the arrastre operators in the port of Manila. A cargo of Linen & Cotton Piece Goods was sent through SS Ampal and was damaged due to the negligence of defendant Pacific Star Line &/or SS Ampal. The said shipment was insured by I. Shalom & Co. Inc. and plaintiff Aetna Casualty & Surety Co. Despite repeated demands, none of the defendants has been willing to accept liability for the claim of the plaintiffs, hence, the filing of this complaint. The defendant contends that they have exercised due care and diligence in handling and delivering

of the cargoes consigned in the Phils. and alleged that plainntiff is a foreign corp. not duly licensed to do business in the Phils. and therefore, without capacity to sue and be sued. ISSUE: WON plaintiff Aetna Casualty & Surety Co. has been doing business in the Phils. HELD: The SC held that a foreign corporation is not engaged in business in the Philippines, it may not be denied the right to file an action in Philippine courts for isolated transactions. As held in Mentholatum Co., Inc. et al. vs. Mangaliman, et al., "No general rule or governing principle can be laid down as to what constitutes 'doing' or 'engaging in' or 'transacting' business. Indeed, each case must be judged in the light of its peculiar environmental circumstances. The true test, however, seems to be whether the foreign corporation is continuing the body or substance of the business or enterprise. for which it was organized or whether it has substantially retired from it and turned it over to another. he term implies a continuity of commercial dealings and arrangements, and contemplates, to that extent, the performance of acts or works or the exercise of some of the functions normally incident to, and in progressive prosecution of, the purpose and object of its organization." Based on the rulings laid down in the foregoing cases, it cannot be said that the Aetna Casualty & Surety Company is transacting business of insurance in the P ' Philippines for which it must have a license. The contract of insurance was entered into in New York, U.S.A., and payment was made to the consignee in its New York branch. It appears from the list of cases issued by the Clerk of Court of the Court of First Instance of Manila that all the actions, except two (2) cases filed by Smith, Bell & Co., Inc. against the Aetna Casualty & Surety Company, are claims against the shipper and the arrastre operators just like the case at bar. Consequently, since the appellant Aetna Casualty & Surety Company is not engaged in the business of insurance in the Philippines but is merely collecting a claim assigned to it by the consignee, it is not barred from filing the instant case although it has not secured a license to transact insurance business in the Philippines. Agilent Technologies Singapore vs. Integrated Silicon Corporation Facts: HP Singapore and Integrated Silicon entered in to a Value Added Assembly Services Agreement (VAASA). Under the terms of VAASA, Integrated Silicon (IS) was to locally manufacture and assemble fiber optics for export and HP was to consign raw materials to Integrated Silicon and pay the purchase price of the finished products. VAASA also has a provision providing for annual renewal by mutual written consent of the parties. HP assigned all its rights and obligations to Agilent. Integrated Silicon filed an action for Specific Performance and Damages alleging that Agilent breached the parties oral agreement to extend the term of VAASA. Agilent filed a separate complaint against Integrated Silicon praying that a writ of replevin be issued ordering Integrated Silicon to return its equipment and machineries left in IS's plant. IS filed a motion to dismiss on the ground that Agilent has no legal capacity to sue since it is an unlicensed foreign corporation doing business in the Phils.

Issue: W/N Agilent's is doing business in the Phils without a license which thereby disqualifies him from seeking redress from our courts. Held: SC held that the acts enumerated in VAASA do not constitute doing business in the Philippines since it is only confined to maintaining a stock of goods for the purpose of having the same processed by IS and consignment of equipment. Therefore, as a foreign corporation not doing business in the Phils, it needed no license before it can sue before our courts. To constitute doing business, the activity to be undertaken in the Philippines is one that is for profit-making. UNIVERSAL SHIPPING LINES vs. INTERMEDIATE APPELATE COURT FACTS: SEVALCO, owned and operated by the petitioner, shipped from Rotterdam Netherlands, to Bangkok, Thailand, aboard its M/V "TAIWAN", cargoes. They were respectively consigned to S. Lersen Company, Ltd. and Muang Ngarm Retreads, Ltd. Both shipments were insured with the private respondent, Alliance Assurance Company, Ltd., a foreign insurance company domiciled in London, England. Despite the arrival of the vessel Bangkok, the cargo was neither unloaded nor delivered to the consignee. The other shipment was delivered to the other consignee with weight shortage because the cargoes had been either totally or partially dissolved in saltwater which flooded Hatch No. 2 of the vessel where they had been stored. Upon arrival in Manila, Arturo C. Saavedra, master of M/V "TAIWAN" filed a marine protest. The consignees filed their respective formal claims for loss and damage to their cargoes. The insurer paid both claims for the loss and damage to their cargoes. Private respondent, as insurer-subrogee, filed an action in the Court of First Instance of Manila to recover from the petitioner and its Manila agent, Carlos Go Thong & Company, what it paid the consignees of the cargo. After trial, the court a quo rendered judgment for the private respondent. On appeal to the Court of Appeals, the decision was affirmed after exculpating petitioner's ship-agents in Manila (Go Thong) from any liability on the ground that it had no participation in the shipment of the cargo which had been loaded and discharged in places other than Manila. ISSUE: W/N private respondent has capacity to sue in the Philippines. HELD: The private respondent may sue in Philippine courts upon the marine insurance policies issued by it abroad to cover international-bound cargoes shipped by a Philippine carrier, even if it has no license to do business in this country, for it is not the lack of the prescribed license (to do business in the Philippines) but doing business without such license, which bars a foreign corporation from access to our courts.

THE COMMISSIONER OF CUSTOMS vs. K.M.K. GANI, INDRAPAL & CO., and the HONORABLE COURT OF TAX APPEALS FACTS: Two (2) containers loaded with 103 cartons of merchandise covered by eleven (11) airway bills of several supposedly Singapore-based consignees arrived at the Manila International Airport on board Philippine Air Lines (PAL) from Hongkong. The cargoes were consigned to these different entities: K.M.K. Gani (hereafter referred to as K.M.K.) and Indrapal and Company (hereafter referred to as INDRAPAL), the private respondents in the petition before us; and Sin Hong Lee Trading Co., Ltd., AAR TEE Enterprises, and C. Ratilal all purportedly based in Singapore. While the cargoes were at the Manila International Airport, a "reliable source" tipped off the Bureau of Customs that the said cargoes were going to be unloaded in Manila. The Suspected Cargo and AntiNarcotics (SCAN) of the BoC, dispatched an agent to verify the information. Upon arriving at the airport, the SCAN agent saw an empty PAL van parked directly alongside the plane's belly from which cargoes were being unloaded. When the SCAN agent asked the van's driver why he was at the site, the driver drove away in his vehicle. The SCAN agent then sequestered the unloaded cargoes. The seized cargoes "contained Mogadon and Mandrax tablets, Sony T.V., Sony Betamax, Cassette Stereos with Headphone (ala walkman), Casio Calculators, Pioneer Car Stereos, Yamaha Watches, Eyeglass Frames, Sunglasses, Plastic Utility Bags, Perfumes, etc." These goods were transferred to the International Cargo Terminal under Warrant of Seizure and Detention and thereafter subjected to Seizure and Forfeiture proceedings for "technical smuggling. At the hearing, Atty. Armando S. Padilla entered his appearance for the consignees K.M.K. and INDRAPAL. Atty. Padilla moved for the transshipment of the cargoes consigned to his clients. The Solicitor General avers that K.M.K. and INDRAPAL did not present any testimonial or documentary evidence. The, collector of Customs, ruled for the forfeiture of all the cargoes in the said containers. Consequently, Atty. Padilla, K.M.K. and INDRAPAL, appealed the order to the Commissioner. of Customs. The Commissioner of Customs affirmed the finding of the Collector of Customs of the presence of the intention to import the said goods in violation of the Dangerous Drugs Act and the Tariff and Customs Code. The Commissioner concluded that there was an "intent to unlade" in Manila, thus, an attempt to smuggle goods into the country. Atty. Armando S. Padilla, again as counsel of the consignees K.M.K. and Indrapal, appealed to the respondent Court of Tax Appeals (CTA). He argued in the CTA that K.M.K. and INDRAPAL were "entitled to the release of their cargoes for transshipment to Singapore so manifested and covered by the Airway bills as in transit, ... contending that the goods were never intended importations into the Philippines and the same suffer none of any affiliating breaches allegedly found attributable to the other shipments

under the Customs and related laws." The CTA reversed the decision of the Commissioner of Customs. Hence this petition. ISSUE: W/N a foreign corporation which does not have a license to engage in business in this country can seek redress in Philippine courts boils down as to whether it is doing business or merely entered into an isolated transaction in the Philippines. W/N the private respondents failed to establish their personality to sue in a representative capacity, hence making their action dismissable. HELD: Petition GRANTED. CTA decision is SET ASIDE. The law is clear: "No foreign corporation transacting business in the Philippines without a license, or its successors or assigns, shall be permitted to maintain or intervene in any action, suit or proceeding in any court or administrative agency of the Philippines; but such corporation may be sued or proceeded against before Philippine courts or administrative tribunals on any valid cause of action recognized under Philippine laws." However, the Court in a long line of cases has held that a foreign corporation not engaged in business in the Philippines may not be denied the right to file an action in the Philippine courts for an isolated transaction. The fact that a foreign corporation is not doing business in the Philippines must be disclosed if it desires to sue in Philippine courts under the "isolated transaction rule." Without this disclosure, the court may choose to deny it the right to sue. In the case at bar, the private respondents K.M.K. and INDRAPAL aver that they are "suing upon a singular and isolated transaction." But they failed to prove their legal existence or juridical personality as foreign corporations. We are cognizant of the fact that under the "isolated transaction rule," only foreign corporations and not just any business organization or entity can avail themselves of the privilege of suing before Philippine courts even without a license. Counsel Armando S. Padilla stated before the respondent Court of Tax Appeals that his clients are "suing upon a singular and isolated transaction." But there is no proof to show that K.M.K. and INDRAPAL are indeed what they are represented to be. It has been simply stated by Attorney Padilla that K.M.K. Gani is "a single proprietorship," while INDRAPAL is "a firm," and both are "doing business in accordance with the laws of Singapore ... ," with specified addresses in Singapore. In cases of this nature, these allegations are not sufficient to clothe a claimant of suspected smuggled goods of juridical personality and existence. The "isolated transaction rule" refers only to foreign corporations. Here the petitioners are not foreign corporations. They do not even pretend to be so. The first paragraph of their petition before the Court, containing the allegation of their identities, does not even aver their corporate character. On the contrary, K.M.K. alleges that it is a "single

proprietorship" while INDRAPAL hides under the vague identification as a "firm," although both describe themselves with the phrase "doing business in accordance with the laws of Singapore." Absent such proof that the private respondents are corporations (foreign or not), the respondent Court of Tax Appeals should have barred their invocation of the right to sue within Philippine jurisdiction under the "isolated transaction rule" since they do not qualify for the availment of such right. Western Equipment vs. Reyes (Effects of Failure to Obtain License) Facts: In 1925, Western Equipment and Supply Co. applied for the issuance of a license to engage in business in the Philippines. On the other hand, Western Electric Co. has never been licensed to engage in business, nor has it ever engaged in business in the Philippines. Western Equipment, since the issuance of its license, engaged in the importation and sale of electrical and telephone apparatus and supplies manufactured by Western Electric. A local corporation, Electric Supply Co. Inc. has been importing the same products in the Philippines. In 1926, Electric Supplys president, Henry Herman, along with other persons sought to organize a corporation to be known as Western Electric Co. Inc. Western Equipment, et al. filed against Herman to prevent them from organizing said corporation. The trial court ruled in favor of Western Equipment, holding that the purpose of the incorporation of the proposed corporation is illegal or void. Issue: Whether the foreign corporation Western Electric Co. Inc. has right of action to prevent an officer of the government from issuing a certificate of incorporation to Philippine residents who attempt to pirate the corporate name of the foreign corporation and engage in the same business. Held: A foreign corporation which has never done any business in the Philippines and which is unlicensed and unregistered to do business here, but is widely used and favorably known in the Philippines through the use therein of its products bearing its corporate and trade name, has a legal right to maintain an action in the Philippines to restrain the residents and inhabitants from organizing a corporation bearing the same name as the foreign corporation. It supported the doctrine that foreign corporation can bring an action in the Philippines to protect its reputation , corporate name and goodwill which have been established through the natural development of its trade over a long period of years, in the doing of which it does not seek to enforce any legal or contract rights arising from, or growing out of, any business which it has transacted in the Philippines. Grey v. Insular Lumber Co. (Applicable Laws to Foreign Corporations) Facts:

The foreign corporation doing business in the Philippines was organized under the laws of New York. According to the then Stock Corporation Law of New York, only stockholder owning at least 3% of the shares of the corporation may inspect the books and records of a corporation. Issue: Whether or not the intramural matters are governed by the laws where the corporation was incorporated. Held: The Supreme Court held that intramural matters such as the qualification to inspect corporate records are governed by the laws where the corporation was incorporated.