MERRILL LYNCH FUTURES, INC. v.
CA, filed a motion to on the grounds that plaintiff
G.R. No. 97816, July 24, 1992
Facts: Merrill Lynch Futures, Inc., a non-
resident foreign corporation, not doing
business in the Philippines entered into a
Futures Customer Agreement Spouses Pedro
M. Lara and Elisa G. Lara to act as the latter's
broker for the purchase and sale of futures
contracts in the U.S. A futures contract" is a
contractual commitment to buy and sell a
standardized quantity of a particular item at a
specified future settlement date and at a price
agreed upon, with the purchase or sale being
executed on a regulated futures exchange.
Pursuant to their contract, their order to buy
and sell futures contracts were transmitted to
through the facilities of Merrill Lynch
Philippines, Inc., a Philippine corporation and a
company servicing ML future's customers.
From the outset, the Lara Spouses knew and
were duly advised that Merrill Lynch
Philippines, Inc. was not a broker in futures
contracts, and that it did not have a license
from the Securities and Exchange Commission
to operate as a commodity trading advisor (i.e.,
'an entity which, not being a broker, furnishes
advice on commodity futures to persons who
trade in futures contracts').
The Lara Spouses actively traded in
futures contracts, including "stock index
futures" for four years, there being more or less
regular accounting and corresponding
remittances of money (or crediting or debiting)
made between the spouses and ML
FUTURES. But when the Spouses incurred a
loss and became indebted to ML FUTURES
which the latter asked them to pay, they
refused to pay and now alleged that the
transactions were null and void because Merrill
Lynch Philippines, Inc. had no license to
operate as a 'commodity and/or financial
futures broker.
This prompted Merrill Lynch Futures,
Inc. to file a complaint against Sps Lara for the
recovery of the debt plus interest and praying
for a preliminary attachment against defendant
spouses' properties. Preliminary attachment
issued ex parte and the defendant spouses
were duly served with summons. They then
ML FUTURES had no legal capacity to sue
because although not licensed to do so, it had
been doing business in the Philippines at least
for the last four (4) years thus it is prohibited by
law to maintain or intervene in any action, suit
or proceeding in any court or administrative
agency of the Philippines; and its complaint
states no cause of action since it is not the real
party in interest because all their transactions
had actually been with MERRILL LYNCH
PIERCE FENNER & SMITH, INC., and not with
ML FUTURES.
The Trial Court sustained the motion to
dismiss to which the affirmed holding that since
ML FUTURES had performed series of
business acts, consummated contracts and
undertook transactions without license, it
consequently had no legal personality to bring
suit in Philippine courts pursuant to the
provisions of Section 133 of the Corporation
Code.
Sec. 133. Doing business without a license.
— 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 in 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.
It also declared that the evidence established
that plaintiff had in fact been "doing business"
in this country in legal contemplation.
Sec. 1. Definition and scope of this ACT .
(1) As used in this Act, the term
"investment" shall mean equity participation in
any enterprise formed, organized, or existing
under the laws of the Philippines; and the
phrase "doing business" shall INCLUDE
soliciting orders, purchases, service contracts,
opening offices, whether called "liaison" offices
or branches; appointing representatives or
distributors who are 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; AND ANY
OTHER ACT OR ACTS THAT IMPLY A
CONTINUITY OF COMMERCIAL DEALINGS
OR ARRANGEMENTS AND CONTEMPLATE
TO THAT EXTENT THE PERFORMANCE OF
ACTS OR WORKS, OR THE EXERCISE OF
SOME FUNCTIONS NORMALLY INCIDENT
TO, AND IN PROGRESSIVE PROSECUTION
OF COMMERCIAL GAIN OR OF THE
PURPOSE AND OBJECT OF THE BUSINESS
ORGANIZATION.
Issue: Whether the plaintiff has no legal
capacity to sue.
Held: Yes. The rule is that a party is estopped
to challenge the personality of a corporation
after having acknowledged the same by
entering into a contract with it. And the
doctrine of estoppel to deny corporate
existence applies to foreign as well as to
domestic corporations. One who has dealt with
a corporation of foreign origin as a corporate
entity is estopped to deny its corporate
existence and capacity. The principle will be
applied to prevent a person contracting with a
foreign corporation from later taking advantage
of its noncompliance with the statutes, chiefly
in cases where such person has received the
benefits of the contract where such person has
acted as agent for the corporation and has
violated his fiduciary obligations as such, and
where the statute does not provide that the
contract shall be void, but merely fixes a
special penalty for violation of the statute.
There would seem to be no question that the
Laras received benefits generated by their
business relations with ML FUTURES.
Tan Tiong Bio, Et. Al v. C.I.R.
Facts: The Central Syndicate, a corporation
organized under the laws of the Philippines,
remitted to Collector of Internal Revenue a
sales tax for the purchase the entire stock of
surplus properties from Dee Hong Lue which
the latter had bought from the Foreign
Liquidation Commission. Subsequently it
demanded refund representing alleged excess
payment of sales tax due to the adjustment
and reduction of the purchase price in the (1)
Based on the findings: (1) that Dee Hong Lue
purchased the surplus goods as trustee for the
Central Syndicate which was in the process of
organization at the time of the bidding; (2) that
it was the representatives of the Central
Syndicate that removed the surplus goods from
their base; (3) that the syndicate must have
realized a gross profit from its sales thereof;
and (4) that if the sales tax were to be
assessed on its gross sales it would still be
liable to a deficiency sales tax. Hence, the
Collector decided that the Central Syndicate
was the importer and original seller of the
surplus goods in question and, therefore, the
one liable to pay the sales tax. Accordingly, the
Collector assessed against the syndicate
deficiency sales tax and denied the request of
the syndicate for the refund.
The Central Syndicate elevated the
case to the Court of Tax Appeals but action
thereon was deferred by the Court of Tax
Appeals until after the trial of the case on the
merits. Meanwhile, the Collector filed a motion
requiring the syndicate to file a bond to
guarantee the payment of the tax assessed
against it which motion was denied by the
Court of Tax Appeals on the ground that
cannot be legally done it appearing that the
syndicate is already a non-existing entity due
to the expiration of its corporate existence. In
view of this development, the Collector filed a
motion to dismiss the appeal on the ground of
lack of personality on the part of the syndicate.
The Court of Tax Appeals issued a resolution
dismissing the appeal primarily on the ground
that the Central Syndicate has no personality
to maintain the action then pending before it.
From this order the syndicate appealed to the
Supreme Court wherein it intimated that the
appeal should not be dismissed because it
could be substituted by its successors-in-
interest, it's directors and officers. In permitting
the substitution, the CA labored under the
premise that said officers and directors may be
held personally liable for the unpaid deficiency
assessments made by the Collector of Internal
Revenue against the defunct syndicate.
After trial, the Court of Tax Appeals affirmed
the decision of the Collector of Internal
ordering it's directors and officers to pay jointly
and severally.
Issue: Whether the Central Syndicate having
already been dissolved because of the
expiration of its corporate existence, whether
the sales tax in question can be enforced
against its successors-in-interest who are the
present petitioners.
Held: Yes. It should be stated at the outset
that it was petitioners themselves who caused
their substitution as parties in the present case,
being the successors-in-interest of the defunct
syndicate, when they appealed the case to the
Supreme Court for which reason their
substitution was effected. They cannot,
therefore, be now heard to complain if they are
made responsible for the tax liability of the
defunct syndicate whose representation they
assumed and whose assets were distributed
among them.
In the second place, there is good authority to
the effect that the creditor of a dissolved
corporation may follow its assets once they
passed into the hands of the stockholders.
Thus, recognized are the following rules in
American jurisprudence: The dissolution of a
corporation does not extinguish the debts due
or owing to it. A creditor of a dissolve
corporation may follow its assets, as in the
nature of a trust fund, into the hands of its
stockholders. An indebtedness of a corporation
to the federal government for income and
excess profit taxes is not extinguished by the
dissolution of the corporation. And it has been
stated, with reference to the effect of
dissolution upon taxes due from a corporation,
"that the hands of the government cannot, of
course, collect taxes from a defunct
corporation, it loses thereby none of its rights
to assess taxes which had been due from the
corporation, and to collect them from persons,
who by reason of transactions with the
corporation, hold property against which the
tax can be enforced and that the legal death of
the corporation no more prevents such action
than would the physical death of an individual
prevent the government from assessing taxes
against him and collecting them from his
administrator, who holds the property which the
decedent had formerly possessed. Bearing in
mind that our corporation law is of American
origin, the foregoing authorities have
persuasive effect in considering similar cases
in this jurisdiction.
Considering that the Central Syndicate
realized from the sale of the surplus goods and
that the sale of said goods was the only
transaction undertaken by said syndicate, there
being no evidence to the contrary, the
conclusion is that said net profit remained
intact and was distributed among the
stockholders when the corporation liquidated
and distributed its assets immediately after the
sale of the said surplus goods. Petitioners are
therefore the beneficiaries of the defunct
corporation and as such should be held liable
to pay the taxes in question. However, there
being no express provision requiring the
stockholders of the corporation to be solidarily
liable for its debts which liability must be
express and cannot be presumed, petitioners
should be held to be liable for the tax in
question only in proportion to their shares in
the distribution of the assets of the defunct
corporation. The decision of the trial court
should be modified accordingly.
Babst v. CA
Facts: ELISCON obtained from CBTC a loan in
the amount of P8,015,900.84, with interest at
the rate of 14% per annum, evidenced by a
promissory note.[2] ELISCON defaulted in its
payments, leaving an outstanding
indebtedness in the amount of P2,795,240.67
as of October 31, 1982.[3]
The letters of credit, on the other hand, were
opened for ELISCON by CBTC using the credit
facilities of Pacific Multi-Commercial
Corporation (MULTI) with the said bank,
pursuant to the Resolution of the Board of
Directors of MULTI adopted