CHAPTER 19: BUSINESS ASSOCIATIONS cases MACDONALD vs.

NATIONA CITY BANK OF NEW YORK L-7991 | may 21, 1956 | Paras | Pet for Petitioners: Paul MacDonald et al. Respondent: National City Bank of New York Quick Summary: Facts: Stasikinocey is a partnership formed by da Costa, Gorcey, Kusik and Gavino. It was denied registration by the SEC due to a confusion between the partnership and Cardinal Rattan. Cardinal Rattan is the business name or style used by Stasikinocey. Da Costa and Gorcey are the general partners of Cardinal Rattan. Moreover, Da Costa is the managing partner of Cardinal Rattan. Stasikinocey had an overdaft account with Nationa City Bank, which was later converted into an ordinary loan due the partnerships failure in paying its obligation. The ordinary loan was secured by a chattel mortgage over 3 vehicles. During the subsistence of the loan, the vehicles were sold to MacDonald and later on, MacDonald sold 2 of the 3 vehicles to Gonzales. The bank brought an action for recovery of its credit and foreclosure of the chattel mortgage upon learning of these transactions. Held: While an unregistered commercial partnership has no juridical personality, nevertheless, where two or more persons attempt to create a partnership failing to comply with all the legal formalities, the law considers them as partners and the association is a partnership in so far as it is a favorable to third persons, by reason of the equitable principle of estoppel. Where a partnership not duly organized has been recognized as such in its dealings with certain persons, it shall be considered as partnership by estoppel and the persons dealing with it are estopped from denying its partnership existence. G.R. No. 79986 September 14, 1990 GRANGER ASSOCIATES, petitioner, vs. MICROWAVE SYSTEMS, INC., LORETO F. STEWARD, MENARDO R. JIMENEZ and JOHN PALMER, respondents. Castillo, Laman, Tan & Pantaleon for petitioner. Fernando Ma. Alberto for respondents. CRUZ, J.: The Court is once again asked to interpret the phrase "doing business in the Philippines" as applied to an unlicensed foreign corporation that has filed a complaint against a domestic corporation. The foreign corporation is Granger Associates, the herein petitioner, which was organized in the United States and has no license to do business in this country. The domestic corporation is Microwave Systems, Inc., one of the herein private

respondents, which has been sued for recovery of a sum equivalent to US$900,633.30 allegedly due from it to the petitioner. The claim arose from a series of agreements concluded between the two parties, principally the contract dated March 28, 1977, under which Granger licensed MSI to manufacture and sell its products in the Philippines and extended to the latter certain loans, equipment and parts; the contract dated May 17, 1979, for the sale by Granger of its Model 7100/7200 Multiplex Equipment to MSI and the Supplemental and Amendatory Agreement concluded in December 1979. Payment of these contracts not having been made as agreed upon, Granger filed a complaint against MSI and the other private respondents on June 29, 1984, in the Regional Trial Court of Pasay City. This was docketed as Civil Case No. 1982-P. In its answer, MSI alleged the affirmative defense that the plaintiff had no capacity to sue, being an unlicensed foreign corporation, and moved to dismiss. The law invoked by the defendants was Section 133 of the Corporation Code reading as follows: 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; ... The trial court, after considering the evidence of the parties in light of their respective memoranda, sustained the defendants and granted the motion to dismiss. 1 On appeal, the order of dismissal was affirmed by the respondent court 2 prompting the present petition under Rule 45 of the Rules of Court. In this petition, Granger seeks the reversal of the respondent court on the ground that MSI has failed to prove its affirmative allegation that Granger was transacting business in the Philippines. It insists that it has dealt only with MSI and not the general public and contends that dealing with the public itself is an indispensable ingredient of transacting business. It also argues that its agreements with MSI covered only one isolated transaction for which it did not have to secure a license to be able to file its complaint. According to Section 1 of Rep. Act No. 5455 ...the phrase "doing business" shall include soliciting orders, purchases, service contracts, opening offices whether called "liaison" offices or branches; appointing representatives or distributors domiciled in the Philippines or who in any calendar year stay in the Philippines for a period or periods totalling one hundred eighty days or more; participating in the management, supervision or control of any domestic business firm, entity or corporation in the Philippines; any other act or acts that imply a continuity of commercial dealings or arrangements and contemplates to that extent the performance of acts or works, or the exercise of some of these functions normally incident to, and in progressive prosecution of, commercial gain or of the purpose and object of the business organization. This Court interpreted the same phrase in the old case of Mentholatum v. Mangaliman 3 as follows: The true test, however, seems to be whether the foreign corporation is continuing the body or substance of the business or enterprise for which it was organized or whether it has substantially retired from it and turned it over to another. (Traction Cos. v. Collectors of Int. Revenue [C.C.A. Ohio], 223 F. 984,987.) The term implies a

continuity of commercial dealings and arrangements, and contemplates, to that extent, the performance of acts or works or the exercise of some of the functions normally incident to, and in progressive prosecution of, the purpose and object of its organization. (Griffin v. Implement Dealers' Mut. Fire Ins. Co., 241 N.W. 75, 77, Pauline Oil & Gas Go. v. Mutual Tank Line Co., 246 p. 851, 852,118 Okl. 111; Automotive Material CO. v. American Standard Metal Products Corp., 158 N.E. 698, 703, 327, I11. 367.) We have amplified one that discussion in subsequent cases, among them Top-Weld Manufacturing, Inc. v. ECED, S.A., 4 where we said: 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 circumstance Thus, a foreign corporation with a settling agent in the Philippines which issued twelve marine policies covering different shipments to the Philippines and a foreign corporation which had been collecting premiums on outstanding policies were regarded as doing business here. 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. The petitioner contends that its various transactions with the private respondent were mere facets of the basic agreement licensing MSI to manufacture and sell Granger's products in the Philippines. All subsequent agreements were merely auxiliary to that first contract and should not be considered separate transactions coming 'within the concept of "doing business in the Philippines." The Supplemental and Amendatory Agreement concluded by Granger and MSI in December 1979 enumerates the various agreements between them thus: 1. Agreement dated March 28, 1977,under which MSI acquired from GRANGER the right to manufacture, assemble, test, rent and sell, or otherwise deal in certain electronic communications equipment designed and manufactured by GRANGER; 2. Agreement to Purchase Shares dated March 28, 1977 under which GRANGER was granted the option to purchase thirty (30%) percent equity of MSI; 3. Amendatory Agreement dated May l2, 1978, adopting certain amendments to the Agreement dated March 28, 1977 for the purpose of complying with the requirements imposed by the Board of Investments and the Central Bank of the Philippines; 4. Exclusive Distributorship and Marketing Agreement dated May 16,1978, appointing MSI to handle sale, distribution and promotion of products of GRANGER outside of the Republic of the Philippines; 5. Sales Agency Agreement, dated May 16, 1978, under which MSI was appointed by GRANGER as the latter's exclusive sales representative outside the Philippines to market GRANGER products; 6. Agreement for Purchase of Shares dated May 17,1978, manifesting the intention of GRANGER to exercise its option to purchase thirty (30%) percent of the issued

and outstanding shares of stock of MSI equivalent to a total of 9,000 issued shares of MSI; 7. Model 7l00/7200 Multiplex Agreement dated May l7, 1979, prescribing the terms and conditions for the sale by GRANGER of Model 7100/7200 Multiplex Equipment to MSI; 8. Technology Transfer Agreement dated May 17, 1979, transferring to and/or providing MSI by virtue of the Model 7100/7200 Multiplex Agreement, the necessary technical services, assistance, manuals, catalogues, sales, literature, etc. for the operation of the Model 7100/7200 Multiplex Equipment; 9. Deed of Assignment of Receivables dated October 20, 1979, under which MSI assigned to GRANGER a certain percentage of its receivables from the Philippine Electronics, Inc. in favor of GRANGER to secure payment and performance of MSI's obligations to GRANGER under previous agreements. In the Model 7100/7200 Multiplex Equipment Agreement entered into on May 17, 1979, the following stipulations appear: 4. GRANGER shall assign in favor of MSI all orders for the Model 7100/7200 Multiplex Equipment, which have not been filled by GRANGER at the date of the ratification of this Agreement as per paragraph 9 hereof, as described in a list hereto attached and made a part hereof as Annex "C". All proceeds under said orders shall be assigned to and received by MSI and MSI shall take over and assume all obligations which GRANGER may have pursuant to the orders of equipment within a reasonable time following receipt of the shipment of the Products by MSI but not to exceed one hundred eighty (180) days from date of said receipt. Any orders GRANGER may receive following the date on which this Agreement becomes effective as provided herein will be forwarded to MSI by GRANGER. xxx xxx xxx 6. As an additional consideration for the purchase of the products, MSI binds itself to render all equipment support service and maintain reasonable amount of spares inventory for the equipment in the field previously having been sold by GRANGER or by RCA Corporation to their customers for a period of ten (10) years from the date the last sale of GRANGER is recorded. Any amount earned in providing such equipment support shall be billed and received by MSI. Additionally, MSI binds itself to assume the warranty obligations and advance the necessary funds to perform such obligations associated with Model 7l00/7200 Multiplex Equipment already sold by GRANGER. However, GRANGER shall reimburse MSI the out-of-pocket cost for the services rendered by MSI in connection with the warranty for the equipment assumed from GRANGER but only to the extent authorized in advance by GRANGER. A study of the enumeration does support the contention that many of the agreements concluded by the petitioner and the private respondent were intended merely to supplement the basic contract dated March 28, 1977. However, this is not true of the Multiplex agreement dated May 17, 1979, which dealt with a different subject matter and had a different consideration to be paid under a different method from that specified in the first agreement of the parties in 1977. It is also noted that in the supplemental and Amendatory Agreement, Granger sold to MSI certain materials/parts for 80 radios and granted it the right to exploit the designs of Model 6015, Series of radio equipment (1.5 Ghz.) and the Plug-In Order Wire, and the 6002

Series and Power Amplifiers. The subject matter of this transaction is also different from those covered by the previous agreements. 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 company's regular products, that company shall be deemed as doing business in the Philippines. The quoted stipulations show that Granger had extended its personality in the Philippines and would receive orders for its products and discharge its warranty obligations through the agency of MSI It would even appear that Granger intended to transact business in the Philippines through the instrumentality of MSI not only for the sale and warranty of its products in this country. The 'agent, was expected to extend also in mainland China and other ASEAN countries, where MSI was to act as its representative in the development of possible markets for Granger products. Thus it was provided in the Agreement: 6. OFF-SHORE MANUFACTURING. GRANGER undertakes to utilize MSI's manufacturing facilities in the Philippines in preference to any other manufacturer for offshore manufacture, assembly, fabrication and testing of equipment, sub-assemblies, printed circuit boards and related or allied activities, subject to MSI's demonstrated technical capability and its capacity to comply with normal quality and delivery requirement for such components and as long as such off-shore manufacturing would be to GRANGER's economic advantage. 7. MAINLAND CHINA AND ASEAN Toward maximizing exploitation of export opportunities for the sale of MSI manufactured equipment under license from GRANGER, MSI undertakes to do or perform the following: a) MSI, independently or in concert with GRANGER shall develop a marketing strategy towards Mainland China market at its cost or on the basis of shared expense arrangement with GRANGER, agreed between both parties in advance, and shall pursue sales opportunities in that market as it deems warranted. This includes establishing local sales office to manage and monitor direct sales effort as well as appointments of non-exclusive manufacturer's Sales Representatives or nonexclusive Distributors as the case may be; b) MSI, always in close cooperation with GRANGER, shall develop and pursue direct sales opportunities in the ASEAN market for its own account, always reaching agreement with GRANGER in advance on a case-to-case basis as to the extent of reimbursing GRANGER for its direct or indirect expenses that it might be incurring while acting as an Exclusive Distributor or a Manufacturer's Representative for the licensed equipment in the ASEAN market. We also note that in the Supplemented and Amendatory Agreement of December 1979, Granger saw to it that it was assured of at least one seat in the board of directors of MSI; without prejudice to the right of Granger to request additional seats as its interest may require". Granger actually purchased 9,000 shares of MSI, representing 30% of the latter's issued and outstanding shares of stock. 5 The fact

that it was directly involved in the business of MSI was also manifestation stipulation where Granger "acknowledged and confirmed" the transfer of a block of stocks from one shareholder to another group of investors. Such approval is not normally given except by a stockholder enjoying substantial participation in the management of the business of the company. The said stipulations read as follows. 4. BOARD OF DIRECTORS. GRANGER shall be entitled to one (1) seat in the Board of Directors, with the option to fill said seat at its discretion and instance. GRANGER further interposes no objection to MSI's increasing the number of its Board of Directors without a corresponding entitlement to an additional seat, without prejudice however to the right of GRANGER to request additional seat as its interest may require. xxx xxx xxx 8. CONFIRMATION OF SALE OF SHARES OF STOCK. The parties hereto take cognizance of the sale of shares of stock in MSI owned by Vicente C. Sayaon, in his personal capacity and as controlling stockholder of authorized representative of Cosmopolitan Realty Corporation and Visayas Realty and Investment Corporation, in favor of a new group of Filipino entrepreneurs represented in the transaction by Mrs. Remedios Porcuna. The Deed of Sale covering this transaction is incorporated hereto by reference and made an integral part of this Agreement. Pursuant to the provision embodied in the said Deed of Sale, GRANGER hereby acknowledges and confirms this transaction. The petitioner cites the regulations of the Board of Investments stating that mere investment in a local company by a foreign corporation should not be construed as doing business in the Philippines. 6 It cannot be denied, however, that the investment of Granger in MSI is quite substantial, enabling it to participate in the actual management and control of MSI In fact, it appointed a representative in the board of directors to protect its interests, and this director was so influential that, at his request, the regular board meeting was converted into an annual stockholder's meeting to take advantage of his presence. 7 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 question of whether the foreign corporation must be shown to have dealt with the public in general to be considered as transacting business in the Philippines, the following observations are instructive: On the other hand, if a corporation performs acts for which it was created or exercises some of the functions for which it was organized, the amount or volume of the business is immaterial and a single act of that character may constitute doing business. Thus, an engineering consulting firm that had entered into a single contract with a Philippine government agency for the purpose of rendering services

for a period of three years as a technical consultant in engineering will be required to obtain a license to do business. Similarly, a foreign company invited to bid for IBRD and ADB international projects in the Philippines will be considered as doing business in the Philippines for which a license is required. In this regard, it is the performance by a foreign corporation of the acts for which it was created, regardless of volume of business, that determines whether a foreign corporation needs a license or not. (Emphasis supplied.) 8 Finally, this case must be distinguished from Antam Consolidated, Inc. v. Court of Appeals, 9 where this Court declared: In the case at bar, the transactions entered into by the respondent with the petitioners are not a series of commercial dealings which signify an intent on the part of the respondent to do business in the Philippines but constitute an isolated one which does not fall under the category of "doing business". The records show that the only reason why the respondent entered into the second and third transactions with the petitioners was because it wanted to recover the loss it sustained from the failure of the petitioners to deliver the crude coconut oil under the first transaction and in order to give the latter a chance to make good on their obligation. Instead of making an outright demand on the petitioners, the respondent opted to try to push through with the transactions to recover the amount of US$103,600.00 it lost. This explains why in the second transaction, the petitioners were supposed to buy back the crude coconut oil they should have delivered to the respondent in an amount which will earn the latter a profit of US$103,600.00. When this failed the third transaction was entered into by the parties whereby the petitioners were supposed to sell crude coconut oil to the respondent at a discounted rate, the total amount of such discount being US$103,600.00. Unfortunately, the petitioners failed to deliver again, prompting the respondent to file the suit below. From these facts alone, it can be deduced that in reality, there was only one agreement between the petitioners and the respondent and that was the delivery by the former of 500 long tons of crude coconut oil to the latter, who in turn, must pay the corresponding price for the same. The three seemingly different transactions were entered into by the parties only in an effort to fulfill the basic agreement and in no way indicate an intent on the part of the respondent to engage in a continuity of transactions with petitioners which will categorize it as a foreign corporation doing business in the Philippines. We are convinced from an examination of the terms and conditions of the contracts and agreements entered into between petitioner and private respondents indicate that they established within our country a continuous business, and not merely one of a temporary character. Such agreements did not constitute only one isolated transaction, as the petitioner contends, but a succession of acts signifying the intent of Granger to extend its operations in the Philippines. In any event, it is now settled that even one single transaction may be construed as transacting business in the Philippines under certain circumstances, as we observed in Far East International Import and Export Corporation v. Nankai Kogyo Co., Ltd. , 10 thus:

The rule stated in the preceding section that the doing of a single act does not constitute business within the meaning of statutes prescribing the conditions to be complied with by foreign corporations must be qualified to this extent, that a single act may bring the corporation within the purview of the statute where it is an act of the ordinary business of the corporation. In such a case, the single act or transaction is not merely incidental or casual, but is of such character as distinctly to indicate a purpose on the part of the foreign corporation to do other business in the state, and to make the state a base of operations for the conduct of a part of the corporations' ordinary business. (17 Fletchers Cyc. of Corporations, sec. 8470, pp. 572, 573, and authorities cited therein.) The petitioner stresses that whoever makes affirmative averments has the obligation to prove such averments and points out that the private respondent has not established its allegation that the petitioner is doing business in the Philippines. On the other hand, it is also the rule that the factual findings of the lower court are binding on this Court in the absence of any of those exceptional circumstances we have enumerated in many cases that warrant a different conclusion. Having assailed the finding of the respondent court that the petitioner is doing business in the Philippines, the petitioner had the burden of showing that such finding fell under the exception rather than the rule and so should be reviewed and reversed. The petitioner has not done this. The purpose of the rule requiring foreign corporations to secure a license to do business in the Philippines is to enable us to exercise jurisdiction over them for the regulation of their activities in this country, If a foreign corporation operates in the Philippines without submitting to our laws, it is only just that it not be allowed to invoke them in our courts when it should need them later for its own protection. While foreign investors are always welcome in this land to collaborate with us for our mutual benefit, they must be prepared as an indispensable condition to respect and be bound by Philippine law in proper cases, as in the one at bar. WHEREFORE the petition is DENIED, with costs against the petitioner. It is ordered. Narvasa ( Chairman), Gancayco, Grio-Aquino and Medialdea, JJ., concur. David Wineshop v. Phil Trust L-3869 (no file) G.R. No. L-41337 June 30, 1988 TAN BOON BEE & CO., INC., petitioner, vs. THE HONORABLE HILARION U. JARENCIO, PRESIDING JUDGE OF BRANCH XVIII of the Court of First Instance of Manila, GRAPHIC PUBLISHING, INC., and PHILIPPINE AMERICAN CAN DRUG COMPANY, respondents. PARAS, J.:

Petitioner herein, doing business under the name and style of Anchor Supply Co., sold on credit to herein private respondent Graphic Publishing, Inc. (GRAPHIC for short) paper products. For failure of GRAPHIC to pay any installment, as agagreed on the contract of sale, petitioner filed with the then Court of First Instance of Manila for sum of Money. The trial court ordered GRAPHIC to pay the petitioner. On motion of petitioner, a writ of execution was issued and the executing sheriff levied upon one (1) unit printing machine Identified as "Original Heidelberg Cylinder Press" Type H 222, NR 78048, found in the premises of GRAPHIC but herein private respondent, Philippine American Drug Company (PADCO for short) had informed the sheriff that the printing machine is its property and not that of GRAPHIC however the sheriff proceeded with the scheduled auction sale, sold the property to the petitioner. PADCO filed an "Affidavit of Third Party Claim" with the Office of the City Sheriff. Thereafter, PADCO filed with the Court of First Instance of Manila, a Motion to Nullify Sale on Execution (With Injunction), which was opposed by the petitioner. Respondent judge ruled in favor of PADCO hence the instant petition. Plaintiff contends that the controlling stockholders of the Philippine American Drug Co. are also the same controlling stockholders of the Graphic Publishing, Inc. and, therefore, the levy upon the said machinery, which was found in the premises occupied by the Graphic Publishing, Inc., should be upheld. ISSUE: Whether or not there is need to pierce the corporate veil. HELD: It is true that a corporation, upon coming into being, is invested by law with a personality separate and distinct from that of the persons composing it as well as from any other legal entity to which it may be related. As a matter of fact, the doctrine that a corporation is a legal entity distinct and separate from the members and stockholders who compose it is recognized and respected in all cases which are within reason and the law. However, this separate and distinct personality is merely a fiction created by law for convenience and to promote justice. Accordingly, this separate personality of the corporation may be disregarded, or the veil of corporate fiction pierced, in cases where it is used as a cloak or cover for fraud or illegality, or to work an injustice, or where necessary to achieve equity or when necessary for the protection of creditors. Likewise, this is true when the corporation is merely an adjunct, business conduit or alter ego of another corporation. In such case, the fiction of separate and distinct corporation entities should be disregarded. In the instant case, petitioner's evidence established that PADCO was never engaged in the printing business; that the board of directors and the officers of GRAPHIC and PADCO were the same; and that PADCO holds 50% share of stock of GRAPHIC. Petitioner likewise stressed that PADCO's own evidence shows that the printing machine in question had been in the premises of GRAPHIC since May, 1965, long before PADCO even acquired its alleged title on July 11, 1966 from Capitol Publishing. That the said machine was allegedly leased by PADCO to GRAPHIC on

January 24, 1966, even before PADCO purchased it from Capital Publishing on July 11, 1966, only serves to show that PADCO's claim of ownership over the printing machine is not only farce and sham but also unbelievable. Considering the principles and circumstances mentioned, respondent judge should have pierced PADCO's veil of corporate Identity. PREMISES CONSIDERED, Order of the then Court of First Instance of Manila, is ANNULLED and SET ASIDE, and the Temporary Restraining Order issued is hereby made permanent. MARSHALL-WELLS CO. v. HENRY W. ELSER & CO. (1924) 1) Marshall-Wells Company (an Oregon corporation) sued Henry W. Elser & Co., Inc.(a domestic corporation) in CFI Manila for the unpaid balance on a bill of goods sold by plaintiff to defendant. 2) HENRY W. ELSER & CO. (Defendant) demurred to the complaint on the statutory ground that: MARSHALL-WELLS CO has no legal capacity to sue since its complaint does not show that it has complied with the laws of the Philippine Islands in that which is required of foreign corporations desiring to do business in the Philippine Islands, neither does it show that it was authorized to do business in the Philippine Islands. 3) Section 69 of the CL states: "No foreign corporation shall be permitted to maintain by itself or assignee any suit for the recovery of any debt, claim, or demand whatever, unless it shall have the license prescribed in section 68 of the law." ISSUE: Is the obtaining of the license prescribed in section 68, as amended, of the Corporation Law a condition precedent to the maintaining of any kind of action in the courts of the Philippine Islands by a foreign corporation? HELD: For Oregon C. The implication of the law is that it was never the purpose of the Legislature to exclude a foreign corporation, which happens to obtain an isolated order for business from the Philippines, from securing redress in the Philippine courts, and thus, in effect, to permit persons to avoid their contracts made with such foreign corporations. The effect of the statute preventing foreign corporations from doing business and from bringing actions in the local courts, except on compliance with elaborate requirements, must not be unduly extended or improperly applied. It should not be construed to extend beyond the plain meaning of its terms, considered in connection with its object, and in connection with the spirit of the entire law. RATIO: The object of the statute was to subject the foreign corporation doing business in the Philippines to the jurisdiction of its courts. The object of the statute was not to prevent the foreign corporation from performing single acts, but to prevent it from acquiring a domicile for the purpose of business without taking the steps necessary to render it amenable to suit in the local courts.

The Mentholatum Co. Inc. vs. Mangaliman [GR 47701, June 27, 1941] 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 Philippine-American

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 policy-determining 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. G.R. No. L-13525 November 30, 1962 FAR EAST INTERNATIONAL IMPORT and EXPORT CORPORATION, plaintiffappellee, vs. NANKAI KOGYO CO. LTD., ET AL., defendants, NANKAI KOGYO CO., LTD., defendant-appellant. Protasio Canalita, Jesus Ocampo and Gonzalo D. David for plaintiff-appellee. Marcial Ranola and Fernandez and Benedicto for defendant-appellant. PAREDES, J.: On December 26, 1956, the Far East International Import & Export Corporation, Far East for short, organized under Philippine Laws, entered into a Contract of Sale of Steel Scrap with the Nankai Kogyo Co., Ltd., Nankai for short, a foreign corporation organized under Japanese Laws with address at Osaka, Japan. The buyer sign in Japan and the seller in Manila, Philippines. The pertinent provisions of the agreement are represented below 1. Quantity: Approximately 5,000 (five thousand) metric tons 10% more or less. xxx xxx xxx 10. Payments: BUYER shall establish an irrevocable without recourse Letter of Credit in the amount of U.S. $312,500.00 with China Banking Corp. in Manila, not later than 30 days upon receipt of SELLERS' confirmation about the availability of export permit, and shall be subject to the following terms and conditions: a. This Letter of Credit shall be drawable 90% of quantity been shipped uponpresentation of: xxx xxx xxx b. the remaining balance of 10% of the shipment shall be adjusted between BUYER and SELLER immediately after the discharge is completed at the port of destination, and shall be drawable by the SELLER upon presentation of: xxx xxx xxx 13. Force Majeure: the execution of this agrrement is subject to any and allGovernment restrictions prohibiting or penalizing in whole or in part theexport of

Iron & Steel Scrap from the Philippines, and the Seller shall not be responsible for delay in or failure of shipment or delivery or delays in transportation due to force majeure, strikes, dfferences with workmen, accidents, fires, flood, mobilizations, wars, foreign wars, riots, revolutions, regulations and restrictions or to any conditions beyond thecontrol of the SELLER whether the nature herein stated or not. 14. Dispute: In case of disputes, Board of Arbitration may be formed in Japan. Decision by the board of Arbitration shall be final and binding on both BUYER AND SELLER. Upon perfection of the contract and after having been informed of the readiness to ship and that the Export License was to expire on March 18, 1957,Nankai opened a letter for credit (No. 38/80049) with the China BankingCorporation, issued by the Nippon Kangyo, Ltd., Tokyo, Japan, in the amountof $312,500.00 on January 30, 1957. On March 15, 1957, only four (4) daysbefore the expiration of the Far East licence, three (3) boats sent by Nankai arrived in the Philippines, one to load in Manila, the other two at Poro Point, San Fernando, La Union, and Tacloban, Leyte, respectively. On March 19, 1957, the expiration of the export license, only 1,058.6 metric tonsof scrap steel was loaded on the SS Mina (loading in Manila). The loading wasaccordingly stopped. The boat at Poro Point was also unloaded of the 200 metric tons, for the same reason. An agreement was reached wherby the Far East would seek an extension of the license. However, the untimely death of President Magsaysay and the taking over by President Garcia changed the picture, for the latter and/or his agents refused to extend the license. The two boats sailed to Japan without any cargo, the third (SS Mina) only 1,058.6 metric tons. On April 27, 1957, Nankai confirmed and acknowleged delivery of the 1,058.6 metric tons of steel scrap, but asked for damages amounting to $148,135.00 consisting of dead freight charges, damages, bank charges, phone and cable expenses (Exh. F). On May 4, 1957, Far East wrote the Everett Steamship Corporation, requesting the issuance of a complete set of the Bill of Lading for the shipment, in order that payment thereof be effected against the Letter of Credit. Under date of May 7, 1957, the Everett informed Far East that they were not in a position to comply because the Bill of Lading was issued and signed in Tokyo by the Master of the boat, upon request of the Charterer, defendant herein. As repeated requests, both against the shipping agent and the buyers (Nankai), for the issuance of the of Bill Lading were ignored, Far East filed on May 16, 1957, the present complaint for Specific Performance, damages, a writ of preliminiry mandatory injunction directed against Nankai and the shipping company, to issue and deliver to the plaintiff, a complete set of negotiable of Lading for the 1,058.6 metric tons of scrap and a writ of preliminary injunction against the China Banking Corporation and the Nankai to maintain the Letter Credit. The lower court issued on May 17, 1957 an ex parte writ of preliminary injunction, after Far East had posted a bond in the amount of P50,000.00. By Special Apperance, defendant Nankai filed a Motion to Dismiss the complaint and dissolve the preliminary mandatory injunction on the followinggrounds: lack of jurisdiction over the person of the defendant and the subject matter: and failure to

state a cause of action against the said defendant. On June 8, 1957 plaintiff Far East opposed the Special Appearance and Motion to Dismiss. Before the Special Appearance, Motions to Dismiss and Dissolve Preliminary Mandatory Injunction could be ruled upon by the court a quo, plaintiff filed a Motion to file amended complaint, it appearing that Nankai had already taken the Bill of Lading for the shipment from the Master of the SS Mina and used the same to secure the delivery of the 1,058.6 metric tons of scrap. The most important amendments introduced are the allegation that defendant is doing business in the Philippines with office address at R-517 Luneta Hotel, Manila, represented by Mr. Issei Ishida and Mr. Tominaga, and the additional prayer to order the defendant Nankai to pay plaintiff the price of the scrapamounting to $68,809.00 or its equivalent in Philippine currency. The motions to dismiss the complaint and to dissolve the Writ of Preliminary Mandatory Injunction were denied, the Court holding that the grounds therefor "do not appear to be indubitable". On June 26, 1957, the defendant Nankai presented an opposition to the motion to admit amended complaint, stating that the same is belated and an unfair and unjust attempt to establish by allegation, a semblance of jurisdiction of the Court over the person of the defendant Nankai and the subject matter. Under date of June 29, 1957, the motion to file an amended complaint was denied. A motion for reconsideration of the order was presented on July 31, 1957, plaintiff alleging that the amended complaint contained facts which are necessary and indispensable for the complete resolution of the issues between the parties and that the amendment is a matter of right, since defendants have not yet filed a responsive pleading (Sec. 1, Rule 17, Rules of Court). An opposition was registered by defendant. Before resolution on the reconsideration could be issued, defendant filed its Answer to the original complaint containing the customary admissions and denials. As Special Defenses, it reiterated the grounds contained in the Motion to Dismiss Complaint and Dissolve the Writ of Preliminary Mandatory Injunction and the arguments invoked in the oppositions, replies, etc. On August 20, 1957, the Amended Complaint was ordered admitted and on September 30, 1957, Nankai presented its Answer, which is identical to the Answer to the original complaint. At the trial, plaintiff Far East, thru the testimony of its Secretary Pablo Ocampo, showed that the transaction in question was intended to be the beginning of business to be undertaken by Nankai, as in fact, the representatives of the company had made inquiries as to the operation of mines and mining rights in this jurisdiction; (Nankai) thru its representatives, Messrs. Ishida and Tominaga, established a temporary office at Room 517 Luneta Hotel and manifested their intention to put up one at the Madrigal building, which did not materialize, to the belated confirmation of the head office; that in spite of the repeated demands and actual receipt of the delivery of the 1,056.8 metric tons of scrap steel, Nankai and the steamship company failed and consistently refused to issue the Bill of Lading, which acts prevented plaintiff from collecting the price of the scrap from theChina Banking Corporation against the Letter of Credit. Defendant Everett Steamship Company and the China Banking Corporation also presented evidence, both oral and documentary.

Defendant Nankai presented Francisco Santos, accountant of the Luneta Hotel, to prove that it has not established an office at Room 517 of said Hotel; Nabuo Yoshida, chief of the Import Section of defendant Nankai show that it has not established a branch office in the Philippines and that the buying of the scrap was the only transiction of the defendant had in the Philippines; Tan Tiong Tick, the financier of the exportation in behalf of appellee, and Tan Tia Cuan, the contact man, to prove that the real party in interest is not the plaintiff Far East but the Delta Enterprises, and that the plaintiffwas merely the holder of the Export License but had no scrap. The lower court rendered judgment absolving, defendants Everett Steamship Company and China Banking Corporation from liability and denied the claim for damages, both actual and moral, of the parties; found that the question of jurisdiction over the person of defendant and the subject matter has become moot and . . . hereby renders judgment in favor of the plaintiff and against defendant Nankai Kogyo Co., Ltd., sentencing said defendant to pay plaintiff the amount of U.S. $67,710.50, or its equivalent in pesos, with interest thereon at the legal rate from the date of filing of plaintiff's complaint until fully paid, plus the sum of P1,000.00 as attorney's fees, and to pay the costs. Defendant assigned six (6) errors allegedly committed by the lower court, which may be consolidated into two propositions: to wit (1) Whether or not the trial court acquired jurisdiction over the subject matter and over the person of the defendant-appellant; and (2) the propriety of the award. Defendant contends that Philippine Courts have no jurisdiction to take cognizance of the case because the Nankai is not doing business in the islands; and that while it has entered into the transaction in question, same, however, does not constitute "doing business", so as to make it amenable to summons and subject it to the Court's jurisdiction. It bolstered this claim by a provision in the contract which provides that "In case of disputes, Board of Arbitration may be formed in Japan. Decision of the Board of Arbitration shall be final and binding on both BUYER and SELLER". The rule pertinent to the questions in issue provides SEC. 14. Service upon private foreign corporations. If the defendant is a foreign corporation, or a non-resident joint stock company or association, doing business in the Philippines, service may be made on its resident agent designated in accordance with law for that purpose, or, if there be no such agent, on the government official designated by law to that effect, or on any officer or agent within the Philipines. (Rule 7). The above rule indicates three modes of effecting service of summons upon a private, foreign corporation, viz: (1) by serving upon the agent designated in accordance with law to accept service of summons; (2) if there is no resident agent, by service on the government cial designated by law to that effect; and (3) by serving on any officer or agent of said corporation with Philippines. The plaintiff complied with the third stated above, for it has been shown that Mr. Ishida, who personally signed the contract for the purchase of the scrap in question in behalf of the Nankai Kogyo, the Trade Manager of said Company, Mr. Tominaga the Chief of the Petroleum Section of the same company and Mr. Yoshida was the man-in-charge

of the Import Section of the company's Tokyo Branch. All these three, including the first two who were served with Summons, were officers of the defendant company. It is true that the defendant entered a Special Appearance, wherein it contested the jurisdiction of the Philippines Courts to take cognizance of the case on grounds contained in the various pleadings presented by it. The motion to dismiss on the ground of lack of jurisdiction had been overruled because it did not appear indubitable. Subsequently, however, the defendant filed its Answer and invoked defenses and grounds for dismissal of complaint other than lack of jurisdiction (See pars. 12 & 13 of Answer to Amended Complaint), which circumstance vested upon the Court jurisdiction to take cognizance of the case. Even though the defendant objects to the jurisdiction of the court, if at thesame time he alleges any non-jurisdictional ground for dismissing the action, the Court acquires jurisdiction over him. Even though he does not intend to confer jurisdiction upon the court, his appearance for some other purpose than to object to the jurisdiction subjects him to jurisdiction of the court.Even though he does not wish to submit to the jurisdiction of the court, he cannot ask the court to act upon any question except the question of jurisdiction, without conferring jurisdiction upon the court. Thus though a Special appearance to object to the jurisdiction is not a submission, if it is followed by a motion to dismiss or to quash the motion invokes the jurisdiction of Court to decide the issue raised by the motion; and a decision of that issue binds the defendant. Therefore if the decision of the motion is based upon a finding of facts necessary to jurisdiction, this finding binds the defendant and the court acquires jurisdiction to determine the merits of the case. . . . . Undoubtedly if after his objection to the jurisdiction is wrongly overruled, a defendant files a cross complaint demanding affirmative relief, he cannot thereafter claim that the court had no jurisdiction over him. (p. 352.) (I Conflict of Laws, Beale and authorities cited therein.) Not only did appellant allege non-jurisdictional grounds in its pleadings to have the complaint dismissed, but it also went into trial on the merits and presented evidence destined to resist appellee's claim. Verily, there could not be a better situation of acquired jurisdiction based on consent. Consequently, the provision of the contract wherein it was agreed that disputes should be submitted to a Board of Arbitration which may be formed in Japan (in the supposition that it can apply to the matter in dispute - payment of the scrap), seems to have been waived with appellant's voluntary submission. Apart from the fact that the clause employs the word "may". The appellant alleges that the lower court did not acquire jurisdiction, because it was not doing business in the Philippines and the requirement of summons had not been fulfilled. It is difficult to lay down any rule of universal application to determine when a foreign corporation is doing business. Each case must turn upon its own peculiar facts and upon the language of the statute applicable. But from the proven facts obtaining in this particular case, the appellant's defense of lack of jurisdiction appears unavailing. The case of Pacific Micronesian Line, Inc. v. Baens del Rosario, et al., G.R. No. L-7154, October 23, 1954, relied upon in the Motion to

Dismiss and other pleadings presented by defendant-appellant, stand on a different footing. Therein, We made the following pronouncements: . . . . And the only act it did here was to secure the services of Luceno Pelingon to act as cook and chief steward in one of its vessels authorizing to that effect the Luzon Stevedoring Co., Inc., a domestic corporation, and the contract of employment was entered into on July 18, 1951. It further appears that petitioner has never sent its ships to the Philippines nor has it transported nor even solicited the transportation passengers and cargoes to and from the Philippines. In words, petitioner engaged the services of Pelingon not as part of the operation of its business but merely to employ him as member of the crew in one of its ships. That act apparently is an isolated one, incidental, or casual, and "not of a character to indicate a purpose to engage in business" within the meaning of the rule. (Emphasis ours.) In the instant case, the testimony of Atty. Pablo Ocampo that appellant was doing business in the Philippines corroborated by no less than Nabuo Yoshida, one of appellant's officers, that he was sent to the Philippines by his company to look into the operation of mines, thereby revealing the defendant's desire to continue engaging in business here, after receiving the shipment of the iron under consideration, making the Philippines a base thereof. The rule stated in the preceding section that the doing of a single act doesnot constitute business within the meaning of statutes prescribing the conditions to be complied with the foreign corporations must be qualified to this extent, that a single act may bring the corporation. In such a case, the single act of transaction is not merly incidental or casual, but is of such character as distinctly to indicate a purpose on the part of the foreign corporation to do other business in the state, and to make the state a basis of operations for the conduct of a part of corporation's ordinary business . (17 Fletchers Cyc. of Corporations, sec. 8470, pp. 572-573, and authorities cited therein.) (Emphasis ours.) It is finally noted that when defendant's motion to dismiss in the Micronesian case was denied, it immediately brought the matter to this Court on Prohibition seeking to restrain the Workmen's Compensation mission from exercising jurisdiction over the controversy. In the present case, the defendant, while entering a Special Appearance to contest the jurisdiction of the Court, pursued its defense further by filing its Answer and going into trial. There is no appeal on the lower court's findings that the failure of the appellee herein to make full shipment of the scrap was due, not to the fault of said appellee, but to the action and intervention of the Philippine Government, which was beyond the control of the plaintiff. This aspect of the case is particularly covered by paragraph 13 of the contract, heretofore reproduced.. WHEREFORE, the judgment appealed from is hereby affirmed, with costs against defendant-appellant Nankai Kogyo. Gen. Cor. Of the Philippines v. Union Ins. Society of Canton (no file) Western Equipment Supply Co. v. Reyes (pls. refer to previous chapters)

Goitia v. Campos Rueda [35 P 252] (not sure if this is the right case) F: This is an action for support by G (wife) against R (husband). After 1 mo. of marriage, R repeatedly demanded from G to perform "unchaste and lascivious acts on R's genitals." Bec. of G's refusal, R maltreated G by word and deed, inflicting bodily injuries on G. To escape R's lewd designs and avoid further harm, G left the conjugal home and took refuge in her parent's house. G filed an action for support w/ the trial court. this was dismissed on the ground that R could not be compelled to give support if G lived outside of the conjugal home, unless there was legal sep. G appealed. HELD: Marriage is something more than a mere contract. It is a new relation, the rights, duties, and obligations of w/c rest not upon the agreement of the parties but upon the general law w/c defines and prescribes those rights, duties, and obligations. Marriage is an institution, in the maintenance of w/c in its purity the public is deeply interested. It is a relation for life and the parties cannot terminate it at any shorter period by virtue of any contract they may make. The reciprocal rights arising from this relation, so long as it continues, are such as the law determines from time to time and none other. When the legal existence of the parties is merged into one by marriage, the new relation is regulated and controlled by the state or govt upon principles of public policy for the benefit of society as well as the parties. And when the object of a marriage is defeated by rendering its continuance intolerable to one of the parties and productive of no possible good to the community, relief in some way should be obtainable. The law provides that the H, who is obliged to support the wife, may fulfill this obligation either by paying her a fixed pension or by maintaining her in his own home at his option. However, the option given by law is not absolute. The law will not permit the H to evade or terminate his obligation to support his wife if the wife is driven away from the conjugal home bec. of the H's own wrongful acts. In this case, where the wife was forced to leave the conjugal abode bec. of the lewd designs and physical assaults of the H, the W may claim support from the H for separate maintenance even outside of the conjugal home. King v. Sarria (no file)