CASE ANALYSIS 6 Isa Stephanie C.

Lagahit

Le Chemise Lacoste v Fernandez

G.R. No. L-63796-97 dated May 2, 1984
http://www.lawphil.net/judjuris/juri1984/may1984/gr_l63796_97_1984.html

FACTS:

The petitioner is a foreign corporation, organized and existing under the laws of France and
not doing business in the Philippines. It is the actual owner of the abovementioned trademarks used
on clothings and other goods specifically sporting apparels sold in many parts of the world and which
have been marketed in the Philippines since 1964. The main basis of the private respondent's case is
its claim of alleged prior registration.
In 1975, Hemandas & Co., a duly licensed domestic firm applied for and was issued Reg. No.
SR-2225 (SR stands for Supplemental Register) for the trademark "CHEMISE LACOSTE &
CROCODILE DEVICE" by the Philippine Patent Office for use on T-shirts, sportswear and other
garment products of the company. Two years later, it applied for the registration of the same
trademark under the Principal Register. The Patent Office eventually issued an order which granted
the application."Thereafter, Hemandas & Co. assigned to respondent Gobindram Hemandas all
rights, title, and interest in the trademark "CHEMISE LACOSTE & DEVICE".
The petitioner filed its application for registration of the trademark "Crocodile Device" and
"Lacoste". The former was approved for publication while the latter was opposed by Games and
Garments. The petitioner filed with the National Bureau of Investigation (NBI) a letter-complaint
alleging therein the acts of unfair competition being committed by Hemandas and requesting their
assistance in his apprehension and prosecution.

ISSUE: Whether or not petitioner has the capacity to sue.

RULING: YES.

The petitioner is a foreign corporation not doing business in the Philippines. The marketing of
its products in the Philippines is done through an exclusive distributor, Rustan Commercial
Corporation. The latter is an independent entity which buys and then markets not only products of
the petitioner but also many other products bearing equally well-known and established trademarks
and tradenames. In other words, Rustan is not a mere agent or conduit of the petitioner.
The court finds and concludes that the petitioner is not doing business in the Philippines.
Rustan is actually a middleman acting and transacting business in its own name and or its own
account and not in the name or for the account of the petitioner. More important is the nature of the
case which led to this petition. What preceded this petition for certiorari was a letter-complaint filed
before the NBI charging Hemandas with a criminal offense, i.e., violation of Article 189 of the Revised
Penal Code. If prosecution follows after the completion of the preliminary investigation being
conducted by the Special Prosecutor the information shall be in the name of the People of the
Philippines and no longer the petitioner which is only an aggrieved party since a criminal offense is
essentially an act against the State.
It is the latter which is principally the injured party although there is a private right violated.
Petitioner's capacity to sue would become, therefore, of not much significance in the main case. We
cannot allow a possible violator of our criminal statutes to escape prosecution upon a far-fetched
contention that the aggrieved party or victim of a crime has no standing to sue. In upholding the right
of the petitioner to maintain the present suit before our courts for unfair competition or infringement
of trademarks of a foreign corporation, we are moreover recognizing our duties and the rights of
foreign states under the Paris Convention for the Protection of Industrial Property to which the
Philippines and France are parties.

Discussion Questions:
(1) Define a foreign corporation. Can it do business in the Philippines? How?
Under Section 123, it is one formed, organized or existing under any laws other than those of the
Philippines and whose laws allow Filipino citizens and corporations to do business in its own
State or country.

Yes. A foreign corporation must apply for a license to transact business in the Philippines and
must comply with the requirements and conditions precedent to the issuance of the license by the
Securities and Exchange Commission and a certificate of authority from the appropriate
government agency.

(2) Is a foreign corporation has a capacity to sue in the Philippines? What are the requisites to have
the capacity to sue?

Yes if said foreign corporation transacting business in the Philippines has the necessary license
from the Securities and Exchange Commission.

A foreign corporation is possessed of the right to sue in the Philippines if:

a. the foreign corporation is transacting or doing business in the Philippines with a license, it has
the right to sue within the jurisdiction of the Philippines;
b. it is not transacting or doing business in the Philippines, it can sue even if it is not possessed of
any license.

(3) What are the reasons why foreign corporations doing business in the Philippines are regulated?

The reasons why foreign corporations doing business in the Philippines are regulated are as
follows:

a. to place them on an equality with domestic corporations;

b. to subject them to inspection so that their condition may be known; and
c. to protect the residents of the State doing business with them by subjecting them to the courts
of the State.

GENERAL GARMENTS CORPORATION vs. THE DIRECTOR OF PATENTS and PURITAN

SPORTSWEAR CORPORATION
G.R. No. L-24295 dated September 30, 1971
http://www.lawphil.net/judjuris/juri1971/sep1971/gr_24295_1971.html

FACTS:
On March 9, 1964 the Puritan Sportswear Corporation, organized and existing in and under
the laws of the state of Pennsylvania, U.S.A., filed a petition with the Philippine Patent Office for the
cancellation of the trademark "Puritan" registered in the name of General Garments Corporation,
alleging ownership and prior use in the Philippines of the said trademark on the same kinds of goods,
which use it had not abandoned; and alleging further that the registration thereof by General
Garments Corporation had been obtained fraudulently and in violation of Section 17(c) of Republic
Act No. 166, as amended, in relation to Section 4(d) thereof.

On March 30, 1964 General Garments Corporation moved to dismiss the petition on several
grounds, all of which may be synthesized in one single issue: whether or not Puritan Sportswear
Corporation, which is a foreign corporation not licensed to do business and not doing business in the
Philippines, has legal capacity to maintain a suit in the Philippine Patent Office for cancellation of a
trademark registered therein. The Director of Patents denied the motion to dismiss on August 6, 1964,
and denied likewise the motion for reconsideration on March 5, 1965, whereupon General Garments
Corporation, hereinafter referred to as petitioner, filed the instant petition for review.
ISSUE: Whether or not Puritan Sportswear Corporation has the legal capacity to sue.

RULING: YES.

Respondent went to the Philippine Patent Office on a petition for cancellation of a trademark
registered by petitioner, invoking Section 17(c) in relations to Section 4(d) of the Trademark Law. A
more or less analogous question arose in Western Equipment & Supply Co. v. Reyes, 51 Phil. 115. The
syllabus of the report, which is a correct statement of the doctrine laid down in the decision, reads as
follows:

A foreign corporation which has never done ... business in the Philippine Islands and which is unlicensed and
unregistered to do business here, but is widely and favorably known in the Islands through the use therein of its
products bearing its corporate and trade name has a legal right to maintain an action in the Islands.
xxx xxx

The purpose of such a suit is to protect its reputation, corporate name and goodwill which has been
established, through the natural development of its trade for 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 Philippine Islands.

The right to the use of the corporate or trade name is a property right, a right in rem, which it may
assert and protect in any of the courts of the world even in jurisdictions where it does not transact
business just the same as it may protect its tangible property, real or personal against trespass or
conversion.

In Asari Yoko Co., Ltd. v. Kee Boc (Jan. 20, 1961) 1 SCRA 1, the court ruled that:

The purpose of such a suit is to protect its reputation, corporate name and goodwill which has been
established, through the natural development of its trade for 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 Philippine Islands.

The right to the use of the corporate or trade name is a property right, a right in rem, which it may
assert and protect in any of the courts of the world even in jurisdictions where it does not transact
business just the same as it may protect its tangible property, real or personal against trespass or
conversion.

Discussion Questions:
(1) Is a foreign corporation not licensed to transact business in the Philippines not a juridical person?
Explain.
 The fact that a foreign corporation may not transact business in the Philippines unless it has
obtained a license for that purpose, nor maintain a suit in Philippine courts for the recovery of
any debt, claim or demand without such license does not make respondent any less a juridical
person. Indeed an exception to the license requirement has been recognized in this jurisdiction,
namely, where a foreign corporation sues on an isolated transaction. As first enunciated in
Marshall-Wells Co. v. The fact that it may not transact business in the Philippines unless it has
obtained a license for that purpose, nor maintain a suit in Philippine courts for the recovery of
any debt, claim or demand without such license (Secs. 68 and 69, Corporation Law) does not
make respondent any less a juridical person. Indeed an exception to the license requirement has
been recognized in this jurisdiction, namely, where a foreign corporation sues on an isolated
transaction.

(2) Is a foreign corporation not licensed to transact business in the Philippines has the capacity to sue
in the Philippines for trademark infringement? Explain.

Yes. The action of a foreign corporation not licensed to transact business in the Philippines to sue
for trademark infringement in the country is an act seeking for the protection of its reputation,
corporate name and goodwill. The right to the use of the corporate trade name is property right, a
right in rem, which the foreign corporation may assert and protect in any of the courts in the
world, even countries where it does not transact any business.

A foreign corporation has an exclusive right to the use of its name which may be protected by
injunction upon a principle similar to that upon which persons are protected in the use of
trademarks and trade names. It may sue in our jurisdiction for infringement of trademark and
unfair competition although it is not doing business in the Philippines.

(3) What are the instances wherein a foreign corporation not licensed to transact business in the
Philippines has the capacity to sue?

A foreign corporation without a license is not ipso facto barred from bringing an action in
Philippine courts. Unlicensed foreign corporations may sue in Philippine courts in order:

a. To seek redress for an isolated business transaction;

b. To protect its corporate reputation, name and goodwill;
c. To enforce its right not arising out of a business transaction.

(4) What are the effects of foreign corporation doing business without a license? Cite legal basis.

Under Section 133 of the Corporation Code, no foreign corporation transacting 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.

SMITH, BELL & CO., INC. vs. COURT OF APPEALS and JOSEPH BENGZON CHUA
G.R. No. 110668 dated February 6, 1997
http://www.lawphil.net/judjuris/juri1997/feb1997/gr_110668_1997.html
FACTS:

Joseph Bengzon Chua doing business under the name of Tic Hin Chiong Importer, bought and
imported to the Philippines from the firm Chin Gact Co., Ltd. of Taipei; Taiwan, 50 metric tons of
Dicalcium Phosphate valued at US$13,000. These were contained in 1,250 bags and shipped from the
Taiwan to Manila. This shipment was insured by First Insurance Co. under a Marine Policy for
US$19,500 "against all risks" at port of departure and with Smith, Bell, and Co stamped at the lower
left side of the policy as "Claim Agent." The cargo arrived at the Port of Manila on September 1982 and
thereafter the entire cargo was discharged to the local arrastre contractor, Metroport Services Inc. with
a number of the cargo in apparent bad order condition. Chua secured the services of a cargo surveyor
to conduct a survey of the damaged cargo which were delivered to Chuas house. The surveyor's
report showed that of the 1,250 bags of the imported material, 600 were damaged. Upon weighing, the
contents of the damaged bags were found to be 18,546.0 kg short. Chua then filed with Smith Bell a
formal statement of claim re the value of losses amounting to $7.3k. Smith Bell informed Chua that its
principal offered only 50% of the claim as redress on the ground of discrepancy of the items damaged
between the record of Metroport and Chuas surveyor. Dissatisfied, Chua wrote a letter to Smith Bell
refusing the redress contending that the discrepancy was a result of the loss from the vessel to
arrastre to the warehouseall of these loss were still within the all risk insurance cover. No
settlement has been made, thus Chua filed a complaint against Smith Bell. Smith Bell contends it is
not personally liable since it is merely a settling or claim agent of First Insurance Co.

ISSUE: Whether a local settling agent is personally and/or solidarily liable upon a marine insurance
policy issued by its disclosed foreign principal.

RULING: No.

A settling agent acting within the scope of its authority cannot be held personally liable and/or
solidarily liable for the obligations of its disclosed principal. An adjustment and settlement agent is no
different from any other agent from the point of view of his responsibility, for he also acts in a
representative capacity. Whenever he adjusts or settles a claim, he does it in behalf of his principal,
and his action is binding not upon himself but upon his principal. The scope and extent of the
functions of an adjustment and settlement agent do not include personal liability. His functions are
merely to settle and adjusts claims in behalf of his principal if those claims are proven and
undisputed, and if the claim is disputed or is disapproved by the principal, the agent does not assume
any personal liability. The recourse of the insured is to press his claim against the principal.

The only involvement of Smith Bell in the subject contract of insurance was having its name stamped
at the bottom left portion of the policy as "Claim Agent." Without anything else to back it up, such
stamp cannot even be deemed by the remotest interpretation to mean that Smith Bell participated in
the preparation of said contract. Under Article 1311 of the Civil Code, contracts are binding only upon
the parties (and their assigns and heirs) who execute them. The subject cargo insurance was between
the First Insurance Company, Ltd. and the Chin Gact Co., Ltd. There is absolutely nothing in the
contract which mentions the personal liability of Smith Bell.

Discussion Questions:
(1) What is a resident agent?

The resident agent is an individual who must be of good moral character and of sound financial
standing, residing in the Philippines, or a domestic corporation lawfully transacting business in
 the Philippines (Sec. 127.), designated in a written power of attorney, by a foreign corporation
authorized to transact business in the Philippines, "on whom any summons and other legal
processes may be served in all actions or other legal proceedings against such corporation.

(2) What is the function and role of resident agent?

The only function of a resident agent is to receive in behalf of a foreign corporation notices,
summons and other legal processes in connection with actions against such corporation. He has
no control over the assets of the corporation. The service of any such papers on such resident
agent has the same force and effect as if made upon the duly authorized officers of the foreign
corporation at its home office.

(3) Is the resident agent a real party-in-interest in an action against the foreign corporation? Explain.

Such agent, as a representative of the foreign corporation, is tasked only to receive legal processes
on behalf of its principal and not to answer personally for any claim against the foreign
corporation. Being a mere agent and representative, he is not the real party-in-interest in an action
by or against his principal.

B. VAN ZUIDEN BROS., LTD. vs. GTVL MANUFACTURING INDUSTRIES, INC.

G.R. No. 147905 dated May 28, 2007
http://www.lawphil.net/judjuris/juri2007/may2007/gr_147905_2007.html

FACTS:

Petitioner Zuiden, is a corporation, incorporated under the laws of Hong Kong. Zuiden is not
engaged in business in the Philippines, but is suing before the Philippine Courts, for the reasons
hereinafter stated. It is engaged in the importation and exportation of several products, including lace
products. On several occasions, GTVL purchased lace products from petitioner.
The procedure for these purchases, as per the instructions of GTVL, was that Zuiden delivers
the products purchased by GTVL, to a certain Hong Kong corporation, known as Kenzar Ltd. and the
products are then considered as sold, upon receipt by Kenzar of the goods purchased by GTVL.
Kenzar had the obligation to deliver the products to the Philippines and/or to follow whatever
instructions GTVL had on the matter.
Insofar as Zuiden is concerned, upon delivery of the goods to KENZAR in Hong Kong, the
transaction is concluded; and GTVL became obligated to pay the agreed purchase price. However,
commencing October 31, 1994 up to the present, GTVL has failed and refused to pay the agreed
purchase price for several deliveries ordered by it and delivered by Zuiden.

ISSUE: Whether or not petitioner, an unlicensed foreign corporation, has legal capacity to sue before
Philippine courts.

RULING: YES.

An unlicensed foreign corporation not doing business in the Philippines can sue before
Philippine courts. In the present case, the series of transactions between petitioner and respondent
cannot be classified as "doing business" in the Philippines under Section 3(d) of RA 7042.
An essential condition to be considered as "doing business" in the Philippines is the actual
performance of specific commercial acts within the territory of the Philippines for the plain reason
that the Philippines has no jurisdiction over commercial acts performed in foreign territories.
 Here, there is no showing that petitioner performed within the Philippine territory the
specific acts of doing business mentioned in Section 3(d) of RA 7042. Petitioner did not also open an
office here in the Philippines, appoint a representative or distributor, or manage, supervise or control
a local business. While petitioner and respondent entered into a series of transactions implying a
continuity of commercial dealings, the perfection and consummation of these transactions were done
outside the Philippines.
Further, the series of transactions between petitioner and respondent transpired and were
consummated in Hong Kong. There was no single activity which petitioner performed here in the
Philippines pursuant to its purpose and object as a business organization. Moreover, petitioners
desire to do business within the Philippines is not discernible from the allegations of the complaint or
from its attachments. Therefore, there is no basis for ruling that petitioner is doing business in the
Philippines.
Considering that petitioner is not doing business in the Philippines, it does not need a license
in order to initiate and maintain a collection suit against respondent for the unpaid balance of
respondents purchases.

Discussion Questions:

(1) When is a foreign corporation considered as doing business in the Philippines?

No general rule can be laid down as to what constitutes "doing" or "engaging" or "transacting"
business. Indeed, each case must be judged in the light of its peculiar environmental
circumstances. It should appear, however, that the corporation and its officers intended to
establish as continuous business and not one of temporary character.

(2) How is doing business or transacting business defined under the Omnibus Investment Code?

Doing business by a foreign corporation shall include:

a. Soliciting orders, purchases (sales) and service contracts

b. Opening offices, whether called "liaison" offices or branches;
c. Appointing representatives or distributors18 who are domiciled in the Philippines or who in
any calendar year stay in the Philippines for a period or periods totalling 180 days or more;
d. Participating in the management, supervision or control of any domestic business firm, entity
or corporation in the Philippines; and
e. Any other act or acts that imply a continuity of commercial dealings or arrangements, and
contemplate to that extent the performance of acts or works, or the exercise of some of the
functions normally incident to, and in progressive prosecution of, commercial gain or for the
purpose and object of the business organization.

(3) What is the definition of "transacting business in the Philippines" for purposes of Section 133 of
the Corporation Code? Give the implication if a foreign corporation is transacting business in the
Philippines.

The foreign corporation transacting business without a license, or its successors or assigns shall
not permitted to maintain or intervene in any action, suit or proceeding in any court or
administrative agency of the Philippines. Such corporation may, however, be sued or proceeded
against before Philippine courts or administrative tribunals on any valid cause of action
recognized under Philippines laws.
TEODORO B. VESAGAS, and WILFRED D. ASIS vs. The Honorable COURT OF APPEALS and
DELFINO RANIEL and HELENDA RANIEL
G.R. No. 142924 December 5, 2001
http://www.lawphil.net/judjuris/juri2001/dec2001/gr_142924_2001.html

FACTS:

Plaintiffs Deflin and Raniel spouses were members in good standing of Luz VillageTennis
Club alleging that club president Vesagas summarily stripped them of their membership without due
process of law. Thus, plaintiffs moved to declare as illegal their expulsion from the club in utter
disregard of the provisions of the clubs by laws. Respondents, on the other hand, moved to dismiss
the complaint on the ground that the SEC lacked the jurisdiction over the subject matter. They
contend that since its inception in the 1970s, the club in practice has not been a corporation, and that
it was only the plaintiffs who surreptitiously caused the clubs registration with the SEC. Further, they
argued that the club has ceased to be a corporate body at any rates thus, no intracorpoarate
relationship as between the parties.

ISSUE: Whether or not the SEC had jurisdiction over the case.

RULING: YES.

The case falls within the SEC jurisdiction. Petitioners are estopped from denying the
personality of the corporation by their very own acts. The dispute was considered as intra-corporate
in character because the parties involved are officers and members of the club; the conflict arose from
this relation between the parties, and the subject of complaint involved expulsions from the club
membership, validity of amendments of by laws.

Discussion Questions:

(1) What are the proofs need to substantiate claim of dissolution?

The proofs that need to substantiate claim of dissolution would be the ff:

A resolution authorizing the dissolution certified by a majority of the board of directors or

trustees and countersigned by the secretary of the corporation
SEC Order of dissolution
Certificate of dissolution issued by SEC

(2) What is an intra-corporate dispute? Who has the CURRENT JURISDICTION over such dispute?
Cite legal basis.
Intra-corporate dispute are those that arises a) between the corporation, partnership or
association and its stockholders, partners, members or officers b) between the corporation,
partnership, or association and the state as far as its franchise, permit or license to operate is
concerned; and c) among the stockholders, partners or associates themselves.

Intra-corporate controversies have been transferred by R.A. No. 8799 (SRC) to the regional trial
courts.

(3) What are the methods or causes of corporate dissolution?

A corporation can have perpetual existence. The law, however, permits the dissolution of
corporations. Under Section 117, a private corporation organized under the law may be dissolved
 either voluntarily or involuntarily. These two methods of dissolving corporations may be outlined
as follows:

(1) Voluntary, which may be effected:

(a) by the vote of the board of directors/trustees and the stockholders/members where no
creditors are affected (Sec.118.);
(b) by judgment of the Securities and Exchange Commission after hearing of petition for
voluntary dissolution where creditors are affected (Sec. 119.);
(c) by amending the articles of incorporation to shorten the corporate term (Sec. 120.); or
(d) In the case of a corporation sole, by submitting to the Securities and Exchange Commission a
verified declaration of dissolution for approval. (Sec. 115.)

(2) Involuntary, which may be effected:

(a) by expiration of the term provided for in the original articles of incorporation (Sec. 11.);
(b) by legislative enactment (infra.);
(c) by failure to formally organize and commence the transaction of its business within two (2)
years from date of incorporation (Sec. 22.); or
(d) by order of the Securities and Exchange Commission.

(4) Differentiate de jure dissolution and de facto dissolution.

A dejure dissolution is a dissolution in law adjudged and determined by judicial sentence, or

brought about by an act of or with the consent of the sovereign power, or which results from the
expiration of the charter period of corporate life. A de facto dissolution, on the other hand, is one
which takes place in substance and in fact when the corporation by reason of insolvency, cessation
of business, or otherwise, suspends all its operations and, as it may be, goes into liquidation still
retaining its primary franchise to be a corporation. The mere fact, however, that the corporation
has quit doing business does not necessarily constitute even a de facto dissolution, if it is still
solvent and has not gone into liquidation.

(5) Differentiate dissolution from liquidation.

Liquidation is the process of converting all assets into cash. Proceeds of which will be
used to pay out its obligations while dissolution is the termination of the business
operations of a corporation.