201· Granger Associates c.

Microwave, 189 SCRA 631 (1990)

FACTS:

The foreign corporation Granger Associates, the herein petitioner, which was organized
in the United States and has no license to do business in this country sued the domestic
corporation, Microwave Systems, Inc. (MSI), one of the herein private respondents 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. On appeal, the order of
dismissal was affirmed by the respondent court 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.

ISSUE: Is the petitioner doing business in the Philippines?

RULING:

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.

With the examination of the terms and conditions of the contracts and agreements entered
into between petitioner and private respondents, it indicates 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., 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, Granger is considered doing business in the

Philippines.

202· General Corp. v. Union, 87 Phil 313 (1960)

 FACTS:
General Corporation of the Philippines and the Mayon Investment Co. are domestic
corporations duly organized and existing by virtue of the laws of the Philippines, with principal
offices in Manila. The Union Insurance Society of Canton, Ltd. is a foreign insurance
corporation, duly authorized to do business in the Philippines, with head office in the City of
Hongkong, China, and a branch office in Manila. The Fireman’s Fund Insurance Co. is a foreign
insurance corporation duly organized and existing under the laws of the State of California, U. S.
A. It has been duly registered with the Insurance Commissioner of the Bureau of Commerce as
such insurance company since November 7, 1946, and authorized to do business in the
Philippines since that date. The Union Insurance Society of Canton, Ltd. has been acting as
settling agent of and settling insurance claims against the Fireman’s Fund Insurance Co. even
before the last world war and continued as such at least up to November 7, 1946.
Plaintiffs sued the Union Insurance Society of Canton, Ltd. and the Fireman’s Fund
Insurance Co. for the payment of 12 marine insurance which were issued by the Fireman’s Fund
Insurance Co. for merchandise shipped from the United States to the Philippines in 1945. As
regards the issue of jurisdiction, summons corresponding to Fireman’s Fund Insurance Co. was
served, on the Union Insurance Society of Canton, Ltd. then acting as appellant’s settling agent
in this country. At that time, the appellant Fireman Co. had not yet been registered and
authorized to do business in the Philippines. Said registration and authority came a little less than
two months later.
The trial court in its decision held that service of summons for appellant Fireman’s Fund
Insurance Co. on its settling agent Union Insurance Society of Canton, Ltd., was legal and gave
the court jurisdiction over said appellant, the court ruling that the phrase "or agents within the
Philippines" clearly embraced settling agents like the Union Insurance Society of Canton, Ltd
(Section 14, Rule 7 of the Rules of Court).

ISSUES: (1) Whether or not Fireman’s Fund Insurance Co. was doing business in the
Philippines; and
(2) Whether or not that trial court acquired jurisdiction over it.

RULING:
(1) Yes. It is a rule generally accepted that one single or isolated business transaction does
not constitute "doing business" within the meaning of the law, and that transactions which are
occasional, incidental and casual, not of a character to indicate a purpose to engage in business
do not constitute the doing or engaging in business contemplated by law. In order that a foreign
corporation may be regarded as doing business within a State, there must be continuity of
conduct and intention to establish a continuous business, such as the appointment of a local
agent, and not one of a temporary character. The Fireman’s Fund Insurance Co., to judge by the
twelve marine insurance policies issued as already mentioned, policies covering different
shipments, made payable in Manila, indorsed in blank, and in practice, collectible by the
consignees in Manila or such other persons or entities who meet the terms by paying the amounts
of the invoices, rendering it not only convenient but necessary for said Fireman’s Fund Insurance
Co. to appoint and keep a settling agent in this jurisdiction, was certainly doing business in the
Philippines. And these were not casual or isolated business transactions. According to the
evidence, since before the war, the Fireman’s Fund Insurance Co. would appear to have engaged
in this kind of business and had employed its co-defendant Union Insurance Society of Canton,
Ltd. as its settling agent, although sometime in 1946, between July and August of that year,
appellant had its own employee from its head office in America, one John L. Stewart, acting as
its settling agent here. And, to conclusively prove continuity of the business and the intention of
the appellant not only to establish but to continue such regular business in this jurisdiction, less
than two months after service of summons, it applied for, obtained a license and was authorized
to regularly do business in the Philippines.
(2) SC in its conclusion hold that a foreign corporation actually doing business in this
jurisdiction, with or without license or authority to do so, is amenable to process and the
jurisdiction of local courts. If such foreign corporation has a license to do business, then
summons to it will be served on the agent designated by it for the purpose, or otherwise in
accordance with the provisions of the Corporation Law. Where such foreign corporation actually
doing business here has not applied for license to do so and has not designated an agent to
receive summons, then service of summons on it will be made pursuant to the provisions of the
Rules of Court, particularly Rule 7, section 14 thereof. SC added that where a foreign insurance
corporation engages in regular marine insurance business here by issuing marine insurance
policies abroad to cover foreign shipments to the Philippines, said policies being made payable
here, and said insurance company appoints and keeps an agent here to receive and settle claims
flowing from said policies, then said foreign corporation will be regarded as doing business here
in contemplation of law.

203. Mfg. Life v. Meer, 89 Phil 351, (1950)

204. Top-Weld v. ECEED, 138 SCRA 118 (1985)

FACTS:

Top-weld Manufacturing Inc., a Philippine corporation engaged in the business of manufacturing

and selling welding supplies and equipment, entered into separate contracts with two different
foreign entities:
With IRTI, S.A. (IRTI), a corporation organized and existing under the laws of Switzerland with
principal office in Fribourg, Switzerland: a “License and Technical Assistance Agreement”
Top-weld will be a licensee of IRTI, wherein the former will purchase raw materials from the
suppliers designated by the IRTI and will manufacture in favor of the latter welding products
under certain specifications
The contract is for a period of three years, up to Jan. 1, 1975, but was later extended up to Dec.
31, 1975.
With ECED, S.A., (ECED), a company organized and existing under the laws of Panama, with
principal office at Apartado 1903, Panama I, City of Panama: a “Distributor Agreement”
Top-weld will the ECED’s distributor in the Philippines of certain welding products and
equipment. The contract was to remain effective until terminated by either party upon giving 6
months written notice to the other. Top-weld learned that the two corporations were negotiating
with another group to replace it as their licensee and distributor. Top-weld then filed a case
against the two corporations, EUTECTIC Corporation, a corporation organized and existing
under the laws of the State of the New York, USA, and a certain Victor Gaerlan, a Filipino
citizen alleged to the representative of these three corporations. The petition for issuance of
preliminary injunction seeks:
to enjoin the two corporations from negotiating with third persons or from actually
transferring its distributorship and franchising rights
to prohibit the corporations from terminating their contracts with Top-weld, and in case
the same was already terminated, to refrain from effecting the said termination until after
good faith negotiations between them have been carried out and completed
The trial court issued a TRO pending the hearing on the petition for injunction. However, IRTI
and ECED still wrote Top-weld separate notices about the termination of their respective
contracts. Top-weld then filed an amended complaint and a supplemental complaint for
preliminary mandatory injunction invoking RA 5455, Sec. 4(9) [prohibiting alien firms doing
business in the PH from terminating existing contracts except for just cause] and seeking:
to compel ECED to ship and deliver various items covered by the distributorship contract
to prohibit the corporations from importing into the Philippines any EUTECTIC
materials, supplies or equipment except through Top-weld
On the other hand, IRTI and ECED argue:
That they are justified in terminating the contract due to the several violations committed
by Top-weld, i.e. failure to pay royalties, use of wrong materials in manufacture of
products, use of obsolete and antiquated equipment, rebranding of non-Eutectic products
using Eutectic label, falsification of invoices, etc.
RA 5455, Sec. 4(9) does not apply in the instant case since they were not required to
apply for a written certificate with the Board of Investments
RTC ruled in favor of Top-weld (both on original complaint and supplemental complaint). On
MR, RTC affirmed the grant of preliminary injunction (original complaint) but lifted the
preliminary mandatory injunction (supplemental complaint).
On appeal, CA ruled in favor of the foreign corporations and set aside the RTC orders. While
IRTI and ECED are foreign corporations contemplated by RA 5455 and are therefore bound to
secure a written certificate from the Board of Investments. However, the latter failed to enforce
said requirements, therefore it cannot likewise require compliance with Sec. 4(9) on prohibition
on termination of contracts. Top-weld did not come to court with clean hands as it entered into
business with the corporations knowing that the do not possess the requisite certificate. Thus, it
cannot invoke the equitable remedy of injunction as to do so would only perpetuate an illegal
situation of holding business with foreign corporations who do not possess the requisite
authorization.

Hence, the instant petition.

RULING: Petition granted.

Whether IRTI and ECED are foreign corporations “doing business in the Philippines” who
should comply with the requirements of Sec. 4(9) RA 5455 – YES, they are foreign
corporations doing business in the Philippines, but given the circumstances present in the
instant case, they are NOT obligated to follow Sec. 4(9) of RA 5455.

IRTI and ECED are foreign corporations “doing business in the Philippines”

What constitutes “doing” or “engaging in” or “transacting” business in the Philippines

depends on the peculiar circumstances of each case. 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.

When the foreign corporation extends the business for which it is organized here in the
Philippines, then it can be considered as doing business in the Philippines. The term implies a
continuity of commercial dealings and arrangements, 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.

Where a single act or transaction 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.
IN THIS CASE: When IRTI and ECED entered into the disputed contracts with Top-weld, they
were carrying out the purpose for which they were created, i.e. to manufacture and market
welding products and equipment. The contracts actually stipulate that they were carrying out in
the Philippines a continuous business, not a mere temporary transaction. Therefore, they can be
considered as doing business in the Philippines.

Having been engaged in business in the Philippines, IRTI and ECED should be within the
purview of RA 5455.
Contrary to IRTI and ECED’s contention that Top-weld is an independent entity which does not
conduct business exclusively with them, the foreign principal, Top-weld’s contract is exclusive
and IRTI and ECED are actually corporations dependent on Top-weld for their manufacturing
and distribution activities in the Philippines.

IRTI’s contract provides that IRTI or its employees cannot sell its welding products in the
Philippines except to Top-weld. Likewise, Top-weld cannot sell in the Philippines any other
welding products that is the same as that of IRTI’s without its written consent.
Top-weld cannot distribute any product of other manufacturer or supplier except that of ECED’s.
Further, upon termination of the contract, Top-weld cannot engage in the commercialization,
distribution and/or manufacture of products competing with ECED’s products covered by the
agreement.

Therefore, being engaged in business in the Philippines enabled IRTI and ECED to enter into the
mainstream of Philippine economic life in competition with Filipino business interests,
necessarily bringing them under the provisions of RA 5455

HOWEVER, there are compelling reasons present in the instant case to exempt them from
the requirements of Sec. 4(9).
RA 5455, Sec. 4(9) provides:
Section 4. Licenses to do business.-No alien, and no firm, association, partnership,
corporation, or any other form of business organization formed, organized, chartered or
existing under any laws other than those of the Philippines, or which is not a Philippine
National, or more than thirty per cent of the outstanding capital of which is owned or
controlled by aliens shall do business or engage in any economic activity in the
Philippines, or be registered, licensed, or permitted by the Securities and Exchange
Commission, or by any other bureau, office, agency, political subdivision, or
instrumentality of the government, to do business, or engage in an economic activity in
the Philippines without first securing a written certificate from the Board of Investments
to the effect …
xxxx
Upon granting said certificate, the Board shall impose the following requirements on the
alien or the firm, association, partnership, corporation, or other form of business
organization that is not organized or existing under the laws of the Philippines.
xxxx
(9) Not to terminate any franchise, licensing or other agreement that applicant may have
with a resident of the Philippines, authorizing the latter to assemble, manufacture or sell
within the Philippines the products of the applicant, except for violation thereof or other
just cause and upon payment of compensation and reimbursement and other expenses
incurred by the licensee in developing a market for the said products; Provided. however,
That in case of disagreement, the amount of compensation or reimbursement shall be
determined by the court where the licensee is domiciled or has its principal office who
shall require the applicant to file a bond in such amount as, in its opinion, is sufficient for
this purpose.
Sec. 4(9) of RA 5455 states that an alien corporation must possess the required
certification from the Board of Investments before he can engage in business in the
Philippines. Once said certificate is granted, such alien corporation cannot terminate any
agreement it had with a Philippine resident upon showing of breach of contract or other
just cause.
IN THIS CASE: It is admitted that IRTI and ECED did not possess the required
certification from the BOI when it entered into the contracts with Top-weld, thereby
violating RA 5455. However, while non-compliance with the law created an illegal
situation as between the parties, it did not void or invalidate the contracts they entered
into.
It is important to note that the CA erred in finding that because IRTI and ECED failed
to secure the certification, then there is no occasion for the BOI to impose the
requirements stated in Sec. 4. To rule otherwise would open the way for an
interpretation that by doing business in the country without first securing the required
written certificate from the Board of Investments, a foreign corporation may violate
or disregard the safeguards which the law, by its provisions, seeks to establish.
Nonetheless, termination of the contract (and noncompliance with Sec. 4(9)) can be
justified under the rule of in pari delicto. Apart from IRTI and ECED, Top-weld also
violated RA 5455.
The parties in a contract are charged with knowledge of the existing law at the time
they enter into the agreement and at the time it is to become operative. Between a
Philippine national and an alien, there is a presumption that the former is more
knowledgeable about his own state law than his alien or foreign contemporary.
In this case, Top-weld is presumed to be more knowledgeable of Philippine law
and the requirements of RA 5455. It was incumbent upon Top-weld to know
whether IRTI and ECED were properly authorized to engage in business in the
Philippines under RA 5455—a duty it failed to dispose when it entered into the
licensing and distributorship agreements with the two corporations
 In fact, it is shown that Top-weld knew of RA 5455 at the time when they entered into
the contracts. Still, it entered into the said contracts despite knowledge that the two
corporations were violating RA 5455.
Thus, by overlooking the required certification, Top-weld is equally guilty of
violating RA 5455. They are, therefore, in pari delicto, in which case Top-weld is
not entitled to any relief against IRTI and ECED.
Even assuming Sec. 4(9) of RA 5455 applies in the instant case, there is just cause for
IRTI and ECED to terminate the contract.
The burden of overcoming the responsive effect of the answer is upon the petitioner.
He who alleges a fact has the burden of proving it and a mere allegation is not
evidence.
In the case at bar, Top-weld failed to refute the charges made by IRTI and ECED in
their opposition wherein they stated that Top-weld violated their contracts in several
instances. IRTI and ECED presented overwhelming evidence of the supposed
breaches of the contract.
Top-weld, instead of rebutting the charges, filed a “Reply to Opposition” which was
neither verified nor supported by counter-affidavits to show its innocence. It failed to
substantiate its allegation that it did not violate the contracts, leaving IRTI and
ECED’s affidavits uncontroverted and sufficient enough for the court to rule that
there is just cause for the contract’s termination.
In any case, the dispute had been rendered moot and academic as the contract had already
expired.
As between Top-weld and IRTI, the contract was extended only until December 31, 1975.
The original injunction suit to stop the contract’s termination was filed in June 1975, but
the appeal was filed past December 1975. Therefore, the dispute had already been moot
and academic as the contract had already expired.
The courts have no power to make contracts for the parties. Parties cannot be coerced to
enter into a contract where no agreement is had between them as to the principal terms
and conditions of the contract.

205. Facilities v. De La Rosa, 898 SCRA 311 (1979)

Facts:

Facilities Management Corporation and J. S. Dreyer are domiciled in Wake Island while J. V.
Catuira is an employee of FMC stationed in Manila. Leonardo dela Osa was employed by FMC
in Manila, but rendered work in Wake Island, with the approval of the Department of Labor of
the Philippines. De la Osa was employed as (1) painter with an hourly rate of $1.25 from March
1964 to November 1964, inclusive; (2) houseboy with an hourly rate of $1.26 from December
1964 to November 1965, inclusive; (3) houseboy with an hourly rate of $1.33 from December
1965 to August 1966, inclusive; and (4) cashier with an hourly rate of $1.40 from August 1966 to
March 27 1967, inclusive. He further averred that from December, 1965 to August, 1966,
inclusive, he rendered overtime services daily, and that this entire period was divided into swing
and graveyard shifts to which he was assigned, but he was not paid both overtime and night shift
premiums despite his repeated demands from FMC, et al. In a petition filed on 1 July 1967, dela
Osa sought his reinstatement with full backwages, as well as the recovery of his overtime
compensation, swing shift and graveyard shift differentials.

Subsequently on 3 May 1968, FMC, et al. filed a motion to dismiss the subject petition on the
ground that the Court has no jurisdiction over the case, and on 24 May 1968, de la Osa
interposed an opposition thereto. Said motion was denied by the Court in its Order issued on 12
July 1968. Subsequently, after trial, the Court of Industrial Relations, in a decision dated 14
February 1972, ordered FMC, et al. to pay de la Osa his overtime compensation, as well as his
swing shift and graveyard shift premiums at the rate of 50% per cent of his basic salary. FMC, et
al. filed the petition for review on certiorari.

Issue:

Whether the mere act by a non-resident foreign corporation of recruiting Filipino workers for its
own use abroad, in law doing business in the Philippines.

Whether FMC has been "doing business in the Philippines" so that the service of summons upon
its agent in the Philippines vested the Court of First Instance of Manila with jurisdiction.

Held:

1. In its motion to dismiss, FMC admits that Mr. Catuira represented it in the Philippines "for the
purpose of making arrangements for the approval by the Department of Labor of the employment
of Filipinos who are recruited by the Company as its own employees for assignment abroad." In
effect, Mr. Catuira was alleged to be a liaison officer representing FMC in the Philippines. Under
the rules and regulations promulgated by the Board of Investments which took effect 3 February
1969, implementing RA 5455, which took effect 30 September 1968, the phrase "doing business"
has been exemplified with illustrations, among them being as follows: ""(1) Soliciting orders,
purchases (sales) or service contracts. Concrete and specific solicitations by a foreign firm, not
acting independently of the foreign firm, amounting to negotiation or fixing of the terms and
conditions of sales or service contracts, regardless of whether the contracts are actually reduced
to writing, shall constitute doing business even if the enterprise has no office or fixed place of
business in the Philippines; (2) appointing a representative or distributor who is domiciled in the
Philippines, unless said representative or distributor has an independent status, i.e., it transacts
business in its name and for its own account, and not in the name or for the account of the
principal; xxx (4) Opening offices, whether called 'liaison' offices, agencies or branches, unless
proved otherwise. xxx (10) Any other act or acts that imply a continuity of commercial dealings
or arrangements, and contemplate to that extent the performance of acts or works, or the exercise
of some of the functions normally incident to, or in the progressive prosecution of, commercial
gain or of the purpose and objective of the business organization."

2. FMC may be considered as "doing business in the Philippines" within the scope of Section 14
(Service upon private foreign corporations), Rule 14 of the Rules of Court which provides that
"If the defendant is a foreign corporation, or a non-resident joint stock company or association,
doing business in the Philippines, service may be made on its resident agent designated in
accordance with law for that purpose or, if there be no such agent, on the government official
designated by law to that effect, or on any of its officers or agents within the Philippines."
Indeed, FMC, in compliance with Act 2486 as implemented by Department of Labor Order IV
dated 20 May 1968 had to appoint Jaime V. Catuira, 1322 A. Mabini, Ermita, Manila "as agent
for FMC with authority to execute Employment Contracts and receive, in behalf of that
corporation, legal services from and be bound by processes of the Philippine Courts of Justice,
for as long as he remains an employee of FMC." It is a fact that when the summons for FMC was
served on Catuira he was still in the employ of the FMC. Hence, if a foreign corporation, not
engaged in business in the Philippines, is not barred from seeking redress from courts in the
Philippines (such as in earlier cases of Aetna Casualty & Surety Company, vs. Pacific Star Line,
etc. [GR L-26809], In Mentholatum vs. Mangaliman, and Eastboard Navigation vs. Juan Ysmael
& Co.), a fortiori, that same corporation cannot claim exemption from being sued in Philippine
courts for acts done against a person or persons in the Philippines.

206. Wang v. Mendoza, 166 SCRA 44 (1987)

FACTS:

Petitioner Wang Laboratories, Inc. is a corporation duly organized under the laws of the U.S. It is
engaged in the business of manufacturing and selling computers worldwide. In the Philippines,
petitioner sells its products to Exxbyte Technologies Corporation, is exclusive distributor.

Exxbyte is a domestic corporation engaged in the business of selling computer products to the
public in its own name for its own account.

Angara, Concepction, Regala & Cruz Law Offices (ACCRALAW) is a duly registered
professional partnership.

Respondent Accralaw entered into a contract with Exxbyte for acquisition and installation of an
Integrated Information System. Accralaw thereafter opened a letter or credit in favor of
petitioner.

The hardware was delivered and installed by Exxbyte in Accralaw’s office. Accralaw and
Exxbyte entered into another contract for the development of a date processing software program
needed to computerize the Accralaw office. Subsequent thereto and for one reason or the other,
the contract for the development of a data processing software program was not implemented.

Accralaw filed a complaint for breach of contract with damages, replevin and attachment against
herein petitioner. Petitioner filed a Motion to Dismiss the complaint on the ground that there was
improper service of summons. Petitioner filed a Motion for Deposition by Oral Examination for
the purpose of presenting testimonial evidence in support of its motion to dismiss. Respondent
court ordered the taking of the deposition by way of oral examination. Petitioner filed its reply to
the opposition to motion to dismiss. Accralaw filed an Ex-Abundante Cautela Motion for leave
to effect Extraterritorial service of Summons on Petitioner.

Respondent Judge Rafael Mendoza, among others, granted the Ex-Abundante Cautela Motion to
effect Extraterritorial Service of Summons. Denied the petitioner’s motion to dismiss on the
ground that its had voluntarily submitted itself to the jurisdiction of the court, and thus declined
to consider the legal and factual issues raised in the Motion to Dismiss.

Hence this petition contending that extra-judicial summons or any kind thereof cannot bind the
petitioner inasmuch as it is not doing business in the Philippines nor is it licensed to do business
in the country.

ISSUE:

Is petitioner doing business in the Philippines?

HELD:

No general rule or governing principle can be laid down as to what constitutes doing or
“engaging” or “trading” in business. Indeed each case must be judged in the light of its peculiar
environmental circumstances: upon peculiar facts and upon the language of the statute
applicable.
Under the circumstances, petitioner cannot unilaterally declare that it is not doing business in the
Philippines. In fact, it has installed at least 26 different products in several corporations in the
Philippines since 1976. It has registered its trade name with the Philippine Patents Office and Mr.
Yeoh who is petitioner’s controller in Asia have visited the office of its distributor for at least
four times where he conducted training programs in the Philippines. Wang has allowed its
registered logo and trademark to be used by Exxbyte and made it known that there exists a
designated distributor in the Philippines as published in its advertisements.

Indeed it has been held that “where a single act or transaction of a foreign corporation is not
merely incidental or casual but is of such character as distinctly to indicate a purpose to do other
business in the State, such act constitutes doing business within the meaning of statutes
prescribing the conditions under which a foreign corporation may be served with summons.

“Indeed if a foreign corporation, not engaged in business in the Philippines, is not barred from
seeking redress from courts in the Philippines, a fortiori, that same corporation cannot claim
exemption from being sued in Philippine courts for acts done against a person or persons in the
Philippines.

207. Georg v. Isnani, 235 SCRA 216 (1994)

FACTS:
General Corporation of the Philippines and the Mayon Investment Co. are domestic
corporations duly organized and existing by virtue of the laws of the Philippines, with
principal offices in Manila. The Union Insurance Society of Canton, Ltd. is a foreign insurance
corporation, duly authorized to do business in the Philippines, with head office in the City of
Hongkong, China, and a branch office in Manila. The Fireman’s Fund Insurance Co. is a
foreign insurance corporation duly organized and existing under the laws of the State of
California, U. S. A. It has been duly registered with the Insurance Commissioner of the
Bureau of Commerce as such insurance company since November 7, 1946, and authorized
to do business in the Philippines since that date. The Union Insurance Society of Canton, Ltd.
has been acting as settling agent of and settling insurance claims against the Fireman’s
Fund Insurance Co. even before the last world war and continued as such at least up to
November 7, 1946.
Plaintiffs sued the Union Insurance Society of Canton, Ltd. and the Fireman’s Fund
Insurance Co. for the payment of 12 marine insurance which were issued by the Fireman’s
Fund Insurance Co. for merchandise shipped from the United States to the Philippines in
1945. As regards the issue of jurisdiction, summons corresponding to Fireman’s Fund
Insurance Co. was served, on the Union Insurance Society of Canton, Ltd. then acting as
appellant’s settling agent in this country. At that time, the appellant Fireman Co. had not yet
been registered and authorized to do business in the Philippines. Said registration and
authority came a little less than two months later.
The trial court in its decision held that service of summons for appellant Fireman’s Fund
Insurance Co. on its settling agent Union Insurance Society of Canton, Ltd., was legal and gave
the court jurisdiction over said appellant, the court ruling that the phrase "or agents within the
Philippines" clearly embraced settling agents like the Union Insurance Society of Canton, Ltd
(Section 14, Rule 7 of the Rules of Court).

ISSUES: (1) Whether or not Fireman’s Fund Insurance Co. was doing business in the
Philippines; and
(2) Whether or not that trial court acquired jurisdiction over it.

RULING:
(1) Yes. It is a rule generally accepted that one single or isolated business transaction does
not constitute "doing business" within the meaning of the law, and that transactions which are
occasional, incidental and casual, not of a character to indicate a purpose to engage in business
do not constitute the doing or engaging in business contemplated by law. In order that a foreign
corporation may be regarded as doing business within a State, there must be continuity of
conduct and intention to establish a continuous business, such as the appointment of a local
agent, and not one of a temporary character. The Fireman’s Fund Insurance Co., to judge by the
twelve marine insurance policies issued as already mentioned, policies covering different
shipments, made payable in Manila, indorsed in blank, and in practice, collectible by the
consignees in Manila or such other persons or entities who meet the terms by paying the amounts
of the invoices, rendering it not only convenient but necessary for said Fireman’s Fund Insurance
Co. to appoint and keep a settling agent in this jurisdiction, was certainly doing business in the
Philippines. And these were not casual or isolated business transactions. According to the
evidence, since before the war, the Fireman’s Fund Insurance Co. would appear to have engaged
in this kind of business and had employed its co-defendant Union Insurance Society of Canton,
Ltd. as its settling agent, although sometime in 1946, between July and August of that year,
appellant had its own employee from its head office in America, one John L. Stewart, acting as
its settling agent here. And, to conclusively prove continuity of the business and the intention of
the appellant not only to establish but to continue such regular business in this jurisdiction, less
than two months after service of summons, it applied for, obtained a license and was authorized
to regularly do business in the Philippines.
(2) SC in its conclusion hold that a foreign corporation actually doing business in this
jurisdiction, with or without license or authority to do so, is amenable to process and the
jurisdiction of local courts. If such foreign corporation has a license to do business, then
summons to it will be served on the agent designated by it for the purpose, or otherwise in
accordance with the provisions of the Corporation Law. Where such foreign corporation actually
doing business here has not applied for license to do so and has not designated an agent to
receive summons, then service of summons on it will be made pursuant to the provisions of the
Rules of Court, particularly Rule 7, section 14 thereof. SC added that where a foreign insurance
corporation engages in regular marine insurance business here by issuing marine insurance
policies abroad to cover foreign shipments to the Philippines, said policies being made payable
here, and said insurance company appoints and keeps an agent here to receive and settle claims
flowing from said policies, then said foreign corporation will be regarded as doing business here
in contemplation of law.

208. N.V. Reederij v. CIR, 162 SCRA 487 (1988)

Facts:

M.V. Amstelmeer and, MV "Amstelkroon," both of which are vessels of petitioner N.B. Reederij
"AMSTERDAM," called on Philippine ports to load cargoes for foreign destination on two separate
occasions. The freight fees for these transactions were paid abroad in two payments. In these two
instances, petitioner Royal Interocean Lines acted as husbanding agent for a fee
or commission on said vessels. No income tax appears to have been paid by petitioner N.V.Reederij
"AMSTERDAM" on the freight receipts. Respondent Commissioner assessed said petitioner in the
amounts of P193,973.20 andP262,904.94 as deficiency income tax for 1963 and 1964, respectively, as "a
non-resident foreign corporation not engaged in trade or business in the Philippines under Section 24 (b)
(1) of the Tax Code. On the assumption that the said petitioner is a foreign corporation engaged in trade
or business in the Philippines, petitioner Royal Interocean Lines filed an income tax return of the
aforementioned vessels computed at the exchange rate of P2.00 to US1.00 and paid the taxthereon in the
amount of P1,835.52 and P9,448.94. Petitioner Royal Interocean Lines as the husbanding agent of
petitioner N.V. Reederij "AMSTERDAM" filed a written protest against the abovementioned assessment
made by the respondent Commissioner which protest

ISSUES:
Whether Petitioner should be taxed as a foreign corporation not engaged in trade or business in the
Philippines?

HELD:

Yes. Petitioner N.V. Reederij "AMSTERDAM" is a foreign corporation not authorized or licensed to do
business in the Philippines. It does not have a branch office in the Philippines and it made only two calls
in Philippine ports, one in 1963 and the other in 1964. In order that a foreign corporation may be
considered engaged in trade or business, its business transactions must be continuous. A casual business
activity in the Philippines by a foreign corporation, as in the present case, does not amount to engaging in
trade or business in the Philippines for income tax purposes. A foreign
corporation engaged in trade or business within the Philippines, or which has an office or place of
business therein, is taxed on its total net income received from all sources within the Philippines at the
rate of 25% upon the amount but which taxable net income does not exceed P100,000.00,
and 35% upon the amount but which taxable net income exceedsP100,000.00. 2 On the other hand, a
foreign corporation not engaged in trade or business within the Philippines and which does not have any
office or place of business therein is taxed on income received from all sources within the Philippines at
the rate of 35% of the gross income.

209. Universal Shipping v. IAC, 188 SCRA 170 (1990)

Facts:

SEVALCO Limited, owned and operated by the petitioner, shipped from Rotterdam Netherlands,
to Bangkok, Thailand, aboard its M/V "TAIWAN", 2 cargoes of 50 palletized cartons. They were
respectively consigned to S. Lersen Company, Ltd. and Muang Ngarm Retreads,Ltd. Both
shipments were insured with the private respondent, Alliance Assurance Company, Ltd., a
foreign insurance company domiciled in London, England.

Despite the arrival of the vessel at Bangkok, the cargo covered by Bill of Lading No. RB-15 was
not unloaded nor delivered to the consignee, S. Lersen Company, Ltd. The shipment under Bill
of Lading No. RB-16 was delivered to Muang Ngarm Retreads, Ltd. with a shortage in weight
because the cargoes had been either totally or partially dissolved in saltwater which flooded the
vessel where they had been stored.

Upon arrival in Manila, Arturo C. Saavedra, master of M/V "TAIWAN" filed a marine protest
stating that the source of the water could not be definitely ascertained where it comes from. He
was suspecting of some leakage of suction pipes and that hold No. 2 cannot be inspected on
account of the full cargoes inside the hold, rendering it to be inaccessible.

The consignees filed their respective formal claims for loss and damage to their cargoes. The
insurer paid both claims in the amounts of £I2,180 and £2,547.18 for the loss and damage to their
cargoes.

Private respondent, as insurer-subrogee, filed an action in the Court of First Instance of Manila to
recover from the petitioner and its Manila agent, Carlos Go Thong & Company, what it paid the
consignees of the cargo.

Issue: Whether or not private respondent has capacity to sue in this jurisdiction

Held:
Yes, The private respondent may sue in Philippine courts upon the marine insurance policies
issued by it abroad to cover international-bound cargoes shipped by a Philippine carrier, even if it
has no license to do business in this country, for it is not the lack of the prescribed license (to do
business in the Philippines) but doing business without such license, which bars a foreign
corporation from access to our courts.

210. Antam v. CA, 143 SCRA 288 (1986)

Facts:

Stokely Van Camp. Inc. is a corporation organized and existing under the laws of the state of
Indiana, U.S.A. with Capital City Product Company "(Capital City as one
of its subdivisions. Stokely and Capital City were not engaged in business in the Philippines.

Stokely and Capital filed a complaint against Banahaw Milling Corporation, Antam
Consolidated, Inc., Tambunting Trading Corporation, Aurora Consolidated Securities and
Investment Corporation, and United Coconut Oil Mills, Inc. "Unicom) for collection of sum of
money after failure to deliver the crude coconut oil under the first transaction and their failure to
comply with their obligations.

The trial court ordered the issuance of a writ of attachment in favor of Stokely upon the latter’s
deposit of a bond in the amount of P1, 285, 000.00. On 3 June 1981, Stokely filed a motion for
reconsideration to reduce the attachment bond. On June 11, 1981, Antam, et al filed a motion to
dismiss the complaint on the ground that Stokely, being a foreign corporation not licensed to do
business in the Philippines, has no personality to maintain the suit. Thereafter, the trial court
issued an order, dated 10 August 1981, reducing the attachment bond to P 500, 000.00 and
denying the motion to dismiss by Antam, et al. on the ground that the reason cited therein does
not appear to be indubitable. Antam, et al. filed a petition for certiorari before the Intermediate
Appellate Court. On 14 June 1982, the Appelate Court dismissed the petition. Antam, et al. filed
a motion for reconsideration but the same was denied. Hence, they filed the petition forcertiorari
and prohibition with prayer for temporary restraining order.

Issue:

Whether Stokely Van Camp, Inc. has the capacity, Inc has the capacity to sue, in light of there
transactions it entered into with Comphil, Antam, etc without license.

Held:

The transactions entered into by Stokely with Comphil, Antam, et al are not a series of
commercial dealings which signify an intent on the part of Stokely to do business in the
Philippines but constitute an isolated one which does not fall under the category of “doing
business.” The only reason why Stokely entered into the second and third transactions with
Comphil, Antam, et al was because it wanted to recover the loss it sustained from the failure of
Comphil 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 Comphil,
Antam. et al. Stokely opted to try to push through with the transaction to recover the amount of
USD 103, 600.00 it lost. This explains why in the second transaction Comphil. Antam, et al were
supposed to buy back the cruse coconut oil they should have delivered to the respondent in an
amount which will earn the latter a profit of USD 103, 600.00. When this failed, the third
transaction was entered into by the parties whereby Comphil Antam et. al. were supposed to sell
crude oil to the respondent at a discounted rate, the total amount of such discount being the USD
103, 600.00 . Unfortunately, the Comphil Antam, et al failed to deliver again, prompting Stokely
to file the suit below. From these facts alone, it can be deducted that in reality, there was only one
agreement between Comphil, Antam et al and Stokely want that was the delivery by the former
of 500 long tons of crude coconut oil to the latter , who in turns must pay the corresponding price
for the same. The three seemingly different transactions were entered into by the parties only in
as effort to fulfill the basic agreement and in no way indicate an intent on the part of Stokely to
engage in a continuity of transactions with Comphil, Antam, et. al. which will categorize it as a
foreign corporation doing business in the Philippines. Stokely, being a foreign corporation not
doing business in the Philippines does not need to obtain a license to do business inorder to have
the capacity to sue.

211. Aetna v. Pacific Star, 80 SCRA 635 (1977)

On February 11, 1963, Smith Bell & Co. (Philippines), Inc. and Aetna Surety Casualty & Surety
Co. Inc., as subrogee, instituted Civil Case No. 53074 in the Court of First Instance of Manila
against Pacific Star Line, The Bradman Co. Inc., Manila Port Service and/or Manila Railroad
Company, Inc. to recover the amount of US $2,300.00 representing the value of the stolen and
damaged cargo plus litigation expenses and exemplary damages in the amounts of P1,000.00 and
P2,000.00, respectively, with legal interest thereon from the filing of the suit and costs.

The complaint stated that during the time material to the action, the defendant Pacific Star Line,
as a common carrier, was operating the vessel SS Ampal on a commercial run between United
States and Philippine Ports including Manila; that the defendant, The Bradman Co. Inc., was the
ship agent in the Philippines for the SS Ampal and/or Pacific Star Line; that the Manila Railroad
Co. Inc. and Manila Port Service were the arrastre operators in the port of Manila and were
authorized to delivery cargoes discharged into their custody on presentation of release papers
from the Bureau of Customs and the steamship carrier and/or its agents; that on December 2,
1961, the SS Ampal took on board at New York, N.Y., U.S.A., a consignment or cargo including
33 packages of Linen & Cotton Piece Goods for shipment to Manila for which defendant Pacific
Star Line issued Bill of Lading No. 18 in the name of I. Shalom & Co., Inc., as shipper,
consigned to the order of Judy Philippines, Inc., Manila; that the SS Ampal arrived in Manila on
February 10, 1962 and in due course, discharged her cargo into the custody of Manila Port
Service; that due to the negligence of the defendants, the shipment sustained damages valued at
US $2,300.00 representing pilferage and seawater damage; that I. Shalom & Co., Inc.
immediately filed claim for the undelivered land damaged cargo with defendant Pacific Star Line
in New York, N.Y., but said defendant refused and still refuses to pay the said claim; that the
cargo was insured by I. Shalom & Co., Inc. with plaintiff Aetna Casualty & Surety Company for
loss and/or damage; that upon demand, plaintiff Aetna Casualty & Surety Company indemnified
I. Shalom & Co., Inc. the amount of US $2,300.00; that in addition to this, the plaintiffs had
obligated themselves to pay attorney's fees and they further anticipated incurring litigation
expenses which may be assessed at P1,000.00; that plaintiffs and/or their predecessor-in-interest
sustained losses due to the negligence of Pacific Star Line prior to delivery of the cargo to
Manila or, in the alternative, due to the negligence of Manila Port Service after delivery of the
cargo to it by the SS Ampal; that despite repeated demands, none of the defendants has been
willing to accept liability for the claim of the plaintiffs and/or I. Shalom & Co., Inc.; and that by
reason of defendants' evident bad faith, they should consequently be liable to pay exemplary
damages in the amount of P2,000.00. 2

On motion of the defendants Pacific Star Line and The Bradman Co. Inc. and with the
conformity of the plaintiff Aetna Casualty & Surety Company, the plaintiff Smith Bell & Co.
(Philippines), Inc. was dropped and the complaint was dismiss as to said plaintiff. 3

In their answer filed on February 28, 1963, the defendants Manila Port Service and Manila
Railroad Company, Inc. alleged that they have exercised due care and diligence in handling and
delivering the cargoes consigned to Judy Philippines, Inc.; that, in fact, they had delivered the
merchandise to the consignee thereof in the same quantity, order and condition as when the same
was actually received from the carrying vessel; that a portion of the shipment in question was
discharged from the carrying vessel in bad order and condition and consequently, any loss or
shortage incurred thereto, is the sole responsibility of the said carrying vessel and not that of the
arrastre operator; that they have delivered to the consignee thereof the same quantity of
merchandise and in the same order or condition as when received from the carrying vessel; that
since no claim of the value of the goods in question was filed by the plaintiff or any of its
representative within 15 days from the discharge of the last package from the carrying vessel, the
claim has become time-barred and/or prescribed pursuant to the management contract under
which said defendants were appointed as arrastre operator at the Port of Manila; that
consequently, they are completely relieved or released from any or all liability therefor and that
they do not in any manner act as agent of the carrying vessel in the discharge of the goods at the
piers. 4

The Pacific Star Line and The Bradman Co. Inc. alleged in their answer as special defenses that
the plaintiff's cause of action, if any, against the answering defendants had prescribed under the
provisions of the Carriage of Goods by Sea Act and/or the terms of the covering bill of lading
that the entire shipment covered by the bill of lading issued by answering defendant Pacific Star
Line was discharged complete and in good order condition into the custody of the other
defendant, Manila Port Service, which was the operator of the arrastre service at the Port of
Manila; that any damage which may have occurred to the cargo while it was in the custody of the
other defendant, Manila Port Service was caused solely by the negligence of said arrastre
operator and is, therefore, its sole responsibility, the defendant Manila Port Service is not the
vessel agent in the receiving, handling, custody and/or delivery of the cargo purchased: that the
vessel responsibility ceased upon removal of the cargo from the ship's tackle; that defendant
Manila Port Service is not the vessel's or answering defendant's agent in the receiving, handling,
custody and/or delivery of the cargo consignee; that the vessel's responsibility ceased upon
removal of the cargo from the ship's tackles; that the vessel's liability, if any, for one case cannot
exceed the sum of P 500.00 under the Carriage of Goods by Sea Act. 5

The defendants Manila Port Service and Manila Railroad Company, Inc. amended their answer
to allege that the plaintiff, Aetna casualty & Surety Company, is a foreign corporation not duly
licensed to do business in the Philippines and, therefore. without capacity to sue and be
sued. 6 The parties submitted on November 23, 1965 the following partial stipulation of facts-.

PARTIAL STIPULATION OF FACTS

COME NOW the parties, through their undersigned counsel, and to this
Honorable Court respectfully submit the following Partial Stipulation of Facts:

A. - On their part, defendants admit:

1. - Paragraphs 2, 3, and 4 of the complaint;

2. - That the S/S Ampal arrived in Manila, on February 10, 1962 and in due
course discharged her cargoes into the custody of the defendant Manila Port
Service, including the subject shipment complete and in good order, except two
(2) cases Nos. 5804 and 16705 which were discharged under B.O. Tally Sheets
Nos. 2721 and 2722 and turned over to the custody of the defendant Manila Port
Service by the vessel S/S Ampal. The shipping Documents covering the cargo
were indorsed and sent to Judy's Philippines, Inc. for processing and eventual
return thereof to the owner, and which cleared the documents with the defendants
and the Bureau of Customs;

3 - That the I. Shalom & Co., Inc. filed claim for undelivered and damaged
portion of subject cargo with defendant Pacific Star Line in New York, New York,
but said defendant refused and still refuses to pay the said claim, for the reason
stated in said defendant's letter to Smith, Bell & Co. (Philippines, Inc. dated June
1, 1962, copy of which letter is hereto attached and marked Annex A;
4 - That Judy's Philippines, Inc. through its customs broker filed provisional
claims with defendant The Bradman Co., Inc. and defendant Manila Port Service
on February 13, 1962.

B. - Defendants admit the genuineness and due execution of the following

documents:

1 - Bill of Lading No. 18 dated December 22, 1961, ex S/S Ampal, attached
hereto and marked as Annex B;

2 - Invoice dated December 26, 1961 of I. Shalom & Co., Inc. attached hereto and
marked as Annex B;

3 - Provisional Claim filed with The Bradman Co., Inc. on February 13, 1962,
attached hereto and marked as Annex E;

4 - Provisional Claim filed with the Manila Port Service on February 13, 1962,
attached hereto and marked as Annex E;

5 - Request for Bad Order Examination No. 1073 dated march 6, 1962 covering
Cases Nos. 16705 and 5804, attached hereto and marked as Annex F;

6 - Request for Bad Order Examination No. 1177 dated March 5, 1962 covering
Cases Nos. 14913 and 15043, attached 'hereto and marked as Annex G;

7 - Formal Claim dated April 10,1962 addressed to defendant Pacific Star Line
filed by I. Shalom & co. Inc. attached hereto and marked as Annex H;

8 - Letter dated May 3, 1962 addressed to defendant Manila Port Service by

Smith, Bell & co. (Philippines) Inc., attached hereto and marked as Annex I;

9 - Letter dated August 8, 1962 addressed to the defendant Manila Port Service by
Smith Bell & Co. (Philippines) Inc., attached hereto and marked as Annex J;

10 - Certification of Insurance, authenticated by the Philippine Consul, New York,

U.S.A. attached hereto and marked as Annex K;

11. Subrogation Receipt dated June 1, 1962, attached hereto and marked as Annex
L;

C. - On their part, plaintiff and defendant Pacific Star Line and The Bradman
Company, Inc. admit:

1. - Having knowledge and being bound by the provisions of the Management

Contract entered into by and between the Manila Port Service and the Bureau of
customs on February 29, 1956, covering the operation of the arrastre service in
the Port of Manila, a copy of which is attached hereto and marked as Annex M;

2. - The genuineness and due execution of Gate Pass No. 34582 which, aiming
others, covers Case NO. 14915, attached hereto and marked as Annex N;

3. - The genuineness and due execution of Gate Pass No. 34837, which, among
others, cover Cases No. 16706 and 16707, attached hereto and marked as Annex
O;
 4. - The genuineness and due execution of a Certification issued by the Office of
the Insurance Commissioner dated December 19, 1964, a photostat copy of which
is attached hereto and marked as Annex P;

5. - The genuineness and due execution of a Certification issued by the Securities

and Exchange Commission dated November 10, 1964, a photostat copy of which
is attached hereto and marked as Annex Q;

6. - That the value of the shipment in question was not specified or manifested in
the bill of lading and that the arrastre charges thereon were paid on the basis of
weight and/or measurement and not on the value thereof.

D. On other part, plaintiff and defendant Manila Port Service admit:

1. - That the shipment in question was discharged complete and in good order
condition into the custody of the Manila Port Service except Cases Nos. 5804 and
16705 covered by Tally Sheets Nos. 2721 and 2722;

2. - That as per signed copies of Survey Report and Turnover Receipt both dated
February 26, 1962, all goods contained in Case No. 5804 were received in good
order condition by the consignee who waived all claims thereon and that the
contents of Case No. 16705 were turned over to the defendant Manila Port
Service in the condition shown in said Turnover Receipt;

3. - The genuineness and due execution of the following documents:

(a) Tally Sheet No. 2721 dated November 2, 1962 attached hereto
and marked as Annex R;

(b) Tally Sheet No. 2722, dated November 2, 1962, attached

thereto and marked as Annex S;

mark as Annex T;

(d) Turnover Receipt dated February 26, 1962, attached hereto and
marked as Annex U.

WHEREFORE, it is respectfully prayed that the following Partial Stipulation of

Facts be approved, and the parties be allowed to present evidence on the
remaining controverted issues.

212. Avon v. CA, 278 SCRA 312 (1996)

Facts:

Respondent Yupangco Cotton Mills engaged to secure with Worldwide Security and Insurance
Co. several of its properties which were then covered by reinsurance treaties between Worldwide
Security and several foreign reinsurance companies, including herein petitioners. These
reinsurance agreements had been made through an international broker acting for Worldwide
Security. While the policies are in effect, Yupangco’s properties were razed in fire giving rise to
their indemnification. Worldwide acknowledged a remaining balance and assigned to Yupangco
all reinsurance proceeds still collectible from all the reinsurance companies. Thus, as assignee
and original insured, Yupangco instituted a collection suit against petitioners. Petitioners averred
that they are foreign corporations not doing business in the Philippines therefore cannot be
subject to the jurisdiction of its courts. CA found for Yupangco.
Issue:

Whether or not petitioners are foreign corporations doing business in the Philippines.

Ruling: NO.

To qualify the petitioners’ business of reinsurance within the Philippine forum, resort must be
made to the established principles in determining what is meant by “doing business in the
Philippines.” The term ordinarily implies a continuity of commercial dealings and arrangements,
and contemplates, to that extent, the performance of acts or works or the exercise of the functions
normally incident to and in progressive prosecution of the purpose and object of its organization.

As it is, private respondent has made no allegation or demonstration of the existence of

petitioners’ domestic agent, but avers simply that they are doing business not only abroad but in
the Philippines as well. It does not appear at all that the petitioners had performed any act which
would give the general public the impression that it had been engaging, or intends to engage in
its ordinary and usual business undertakings in the country. The reinsurance treaties between the
petitioners and Worldwide Surety and Insurance were made through an international insurance
broker, and not through any entity or means remotely connected with the Philippines. Moreover,
there is authority to the effect that a reinsurance company is not doing business in a certain state
merely because the property or lives which are insured by the original insurer company are
located in that state. The reason for this is that a contract of reinsurance is generally a separate
and distinct arrangement from the original contract of insurance, whose contracted risk is insured
in the reinsurance agreement. Hence, the original insured has generally no interest in the contract
of reinsurance.

Indeed, if a foreign corporation does not do business here, there would be no reason for it to be
subject to the State’s regulation. As we observed, in so far as the State is concerned, such foreign
corporation has no legal existence. Therefore, to subject such corporation to the courts’
jurisdiction would violate the essence of sovereignty.

213. Columbia v. Ca, 261 SCRA 144 (1996)

Facts:

Columbia Pictures, et al. had lodged a formal complaint with the NBI, vis-à-vis their anti-film piracy drive.
Eventually, the NBI obtained a search warrant against Sunshine Video seeking to seize pirated video
tapes, among others. The NBI carried out the seizure, and filed a return with the trial court. However, the
trial court eventually granted a motion to lift the order of search warrant – the contention was that the
master tapes of the copyrighted films from the pirated films were allegedly copied were never presented
in the proceedings for the issuance of the search warrants. The CA dismissed the appeal brought before
it. Hence, Columbia Pictures, et. al. bought the case before the SC. Sunshine Video contended that
Columbia Pictures, et.al. (being foreign corporations doing business in the Philippines) should have a
license in order to maintain an action in Philippine Courts – and without such license, it had no right to
ask for the issuance of a search warrant. Sunshine Video submitted that the fact that Columbia Pictures,
et al were copyright owners or owners of an exclusive rights of distribution in the Philippines of
copyright motion pictures and the fact that Att. Domingo had been appointed as their atty-in-fact
constituted “doing business in the Philippines”, under the rules of the Board of Investments.

Issue: Do Columbia Pictures, et.al. have the legal personality to sue in the Philippines?
214. Far Eastern v. Nakai Kogyo, 6 SCRA 725 (1962)

Facts:

Far East (Seller, PH Corp) entered into a contract of sale of steel scrap with Nankai (Buyer, JP
Corp). Nankai opened a letter of credit (LC) with China Bank. The steel scrap was shipped
through Everett (The Steamship Corp). Nankai acknowledged receipt. Far East requested Everett
for the Bill of Lading (BL) in order that payment will be effected against the LC. Everett refused
because the BL was issued and signed in Tokyo upon request of Nankai. Far East filed a
complaint for Specific Performance with damages against Nankai and Everett for the issuance of
the BL and a writ of preliminary injunction against the China Bank and Nankai to maintain the
LC.

Issue: Whether or not the court has jurisdiction over Nankai.

Held:

Yes. It is true that as a rule the doing of a single act does not constitute doing business within the
meaning of the law. Indeed, Nankai only consummated one transaction in the PH (the contract of
sale). But a single act may bring the corporation under the purview of doing business if such act
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 basis
of operations for the conduct of a part of corporation's ordinary business. In this case, Nankai
representatives 1) made inquiry as to the PH’s operation of mines and 2) allegedly set up office
in Luneta Hotel. It reveals Nankai’s purpose to continue engaging business in the PH even after
receiving the steel scrap. It is clear that Nankai’s transaction with the PH is only the beginning,
as it indicates that Nankai intends to build a base in this jurisdiction. Nankai and Everett should
issue the BL so that payment will be effected in favor of Far East.

215. Litton v. CA, 256 SCRA 696 (1996)

216. Marubeni v. Tensuan, 190 SCRA 105 (1990)

FACTS:

Marubeni Corp. of Japan has equity investments in AG&P of Manila. For the first quarter of
1981 ending March 31, AG&P declared and paid cash dividends to petitioner in the amount of
P849,720 and withheld the corresponding 10% final dividend tax thereon. Similarly, for the third
quarter of 1981 ending September 30, AG&P declared and paid P849,720 as cash dividends to
petitioner and withheld the corresponding 10% final dividend tax thereon. AG&P directly
remitted the cash dividends to petitioner's head office in Tokyo, Japan, net not only of the 10%
final dividend tax in the amounts of P764,748 for the first and third quarters of 1981, but also of
the withheld 15% profit remittance tax based on the remittable amount after deducting the final
withholding tax of 10%. The 10% final dividend tax of P84,972 and the 15% branch profit
remittance tax of P114,712.20 for the first quarter of 1981 were paid to the BIR by AG&P, same
with the 10% final dividend tax of P84,972 and the 15% branch profit remittance tax of
P114,712 for the third quarter of 1981. Subsequently, the 10% final dividend tax of P84,972 and
the 15% branch profit remittance tax of P114,712.20 for the first quarter of 1981 were paid to the
BIR, same with the 10% final dividend tax of P84,972 and the 15% branch profit remittance tax
of P114,712 for the third quarter of 1981. Marubeni, through SGV and Co., sought a ruling from
the BIR on on whether or not the dividends petitioner received from AG&P are effectively
connected with its conduct or business in the Philippines as to be considered branch profits
subject to the 15% profit remittance tax imposed under Section 24 (b) (2) of the National Internal
Revenue Code as amended by Presidential Decrees Nos. 1705 and 1773. In reply, Acting
Commissioner Ancheta said that such dividends were not branch profits for purposes of the 15%
profit remittance tax imposed by Section 24 (b) (2) of the Tax Code, as amended. 1. Only profits
remitted abroad by a branch office to its head office which are effectively connected with its
trade or business in the Philippines are subject to the 15% profit remittance tax. 2. To be
effectively connected it is not necessary that the income be derived from the actual operation of
taxpayer-corporation's trade or business; it is sufficient that the income arises from the business
activity in which the corporation is engaged. a. E.g. if a resident foreign corporation is engaged
in the buying and selling of machineries in the Philippines and invests in some shares of stock on
which dividends are subsequently received, the dividends thus earned are not considered
'effectively connected' with its trade or business in this country. Consequently, Marubeni filed
with the CIR a claim for refund of or issuance of a tax credit of P229,424.40, representing the
profit tax remittance incorrectly paid on the dividends remitted by AG&P to Marubeni’s head
office in Tokyo. CIR denied the claim, saying that while it is not covered by the 15% profit
remittance tax and the 10% intercorporate dividend tax, it, as a non-resident stockholder, is
subject to the 25 % tax pursuant to Article 10 (2) (b) of the Tax Treaty dated February 13, 1980
between the Philippines and Japan. The CTA affirmed the denial. 1. It stated that the dividends in
question are income taxable to the Marubeni. 2. The said dividends were distributions made by
AG&P to its shareholder out of its profits on the investments of the Marubeni, a non-resident
foreign corporation. 3. The investments in AG&P of Marubeni were directly made by it and the
dividends on the investments were likewise directly remitted to and received by the latter. 4.
Marubeni Corporation Philippine Branch has no participation or intervention, directly or
indirectly, in the investments and in the receipt of the dividends. 5. Subject to certain exceptions
not pertinent hereto, income is taxable to the person who earned it. Admittedly, the dividends
under consideration were earned by the Marubeni Corporation of Japan, and hence, taxable to the
said corporation. a. While it is true that the Marubeni Corporation Philippine Branch is duly
licensed to engage in business under Philippine laws, such dividends are not the income of the
Philippine Branch and are not taxable to the said Philippine branch

ISSUES: 1. WON Marubeni Corporation is resident foreign corporation. 2. WON the CIR and
CTA were correct in claiming that no refund was due Marubeni because the taxes thus withheld
totaled the 25% rate imposed by the Philippine-Japan Tax Convention.

RULING: 1. No. Marubeni is a non-resident foreign corporation.

1. Marubeni: following the principal-agent relationship theory, Marubeni Japan is likewise a

resident foreign corporation subject only to the 10 % intercorporate final tax on dividends
received from a domestic corporation in accordance with Section 24(c) (1) of the Tax Code of
1977 . a. Precisely because it is engaged in business in the Philippines through its Philippine
branch that it must be considered as a resident foreign corporation. b. Since the Philippine branch
and the Tokyo head office are one and the same entity, whoever made the investment in AG&P,
Manila does not matter at all. CIR and CTA: Marubeni, Japan, being a non-resident foreign
corporation and not engaged in trade or business in the Philippines, is subject to tax on income
earned from Philippine sources at the rate of 35 % of its gross income under Section 24 (b) (1) of
the tax code but expressly made subject to the special rate of 25% under Article 10(2) (b) of the
Tax Treaty of 1980 concluded between the Philippines and Japan . a. OSG: The general rule that
a foreign corporation is the same juridical entity as its branch office in the Philippines cannot
apply here. This rule is based on the premise that the business of the foreign corporation is
conducted through its branch office, following the principal agent relationship theory. It is
understood that the branch becomes its agent here. So that when the foreign corporation transacts
business in the Philippines independently of its branch, the principal-agent relationship is set
aside. The transaction becomes one of the foreign corporation, not of the branch. Consequently,
the taxpayer is the foreign corporation, not the branch or the resident foreign corporation. SC:
Marubeni is clearly a non-resident foreign corporation. a. The alleged overpaid taxes were
incurred for the remittance of dividend income to the head office in Japan which is a separate and
distinct income taxpayer from the branch in the Philippines. b. The investment (totalling 283.260
shares including that of nominee) was made for purposes peculiarly germane to the conduct of
the corporate affairs of Marubeni Japan, but certainly not of the branch in the Philippines.

217. Communication Materials v. CA, 260 SCRA 673 (1996)

FACTS:

Petitioners COMMUNICATION MATERIALS AND DESIGN, INC., (CMDI, for

brevity) and ASPAC MULTI-TRADE INC., (ASPAC, for brevity) are both domestic
corporations, while petitioner Francisco S. Aguirre is their President and majority stockholder.
Private Respondents ITEC, INC. and/or ITEC, INTERNATIONAL, INC. (ITEC, for brevity) are
corporations duly organized and existing under the laws of the State of Alabama, United States
of America. There is no dispute that ITEC is a foreign corporation not licensed to do business in
the Philippines.

On August 14, 1987, ITEC entered into a contract with petitioner ASPAC referred to as
"Representative Agreement".

Through a "License Agreement" entered into by the same parties on November 10, 1988,
ASPAC was able to incorporate and use the name "ITEC" in its own name. Thus, ASPAC Multi-
Trade, Inc. became legally and publicly known as ASPAC-ITEC (Philippines).

By virtue of said contracts, ASPAC sold electronic products, exported by ITEC, to their
sole customer, the Philippine Long Distance Telephone Company, (PLDT, for brevity).

To facilitate their transactions, ASPAC, dealing under its new appellation, and PLDT
executed a document entitled "PLDT-ASPAC/ITEC PROTOCOL" which defined the project
details for the supply of ITEC's Interface Equipment in connection with the Fifth Expansion
Program of PLDT.

One year into the second term of the parties' Representative Agreement, ITEC decided to
terminate the same, because petitioner ASPAC allegedly violated its contractual commitment as
stipulated in their agreements.

ITEC charges the petitioners and another Philippine Corporation, DIGITAL BASE
COMMUNICATIONS, INC. (DIGITAL, for brevity), the President of which is likewise
petitioner Aguirre, of using knowledge and information of ITEC's products specifications to
develop their own line of equipment and product support, which are similar, if not identical to
ITEC's own, and offering them to ITEC's former customer.

On January 31, 1991, the complaint in Civil Case No. 91-294, was filed with the Regional
Trial Court of Makati, Branch 134.

In due time, defendants filed a motion to dismiss the complaint.

On February 8, 1991, the complaint was amended by virtue of which ITEC

INTERNATIONAL, INC. was substituted as plaintiff instead of ITEC, INC.

In their Supplemental Motion to Dismiss, defendants took note of the amendment of the
complaint and asked the court to consider in toto their motion to dismiss and their supplemental
motion as their answer to the amended complaint.

After conducting hearings on the prayer for preliminary injunction, the court a quo on
February 22, 1991, issued its Order: (1) denying the motion to dismiss for being devoid of legal
merit with a rejection of both grounds relied upon by the defendants in their motion to dismiss,
and (2) directing the issuance of a writ of preliminary injunction on the same day.

From the foregoing order, petitioners elevated the case to the respondent Court of
Appeals on a Petition forCertiorari and Prohibition under Rule 65 of the Revised Rules of Court.
The respondent appellate court dismissed the case.

ISSUE:

Whether or not private respondent ITEC is an unlicensed corporation doing business in

the Philippines, and if it is, whether or not this fact bars it from invoking the injunctive authority
of our courts.

HELD:
 Considering the above, it is necessary to state what is meant by "doing business" in the
Philippines. Section 133 of the Corporation Code, provides that "No foreign corporation,
transacting business in the Philippines without a license, or its successors or assigns, shall be
permitted to maintain or intervene in any action, suit or proceeding in any court or administrative
agency of the Philippines; but such corporation may be sued or proceeded against before
Philippine Courts or administrative tribunals on any valid cause of action recognized under
Philippine laws."

With the abovestated precedents in mind, we are persuaded to conclude that private
respondent had been "engaged in" or "doing business" in the Philippines for some time now. This
is the inevitable result after a scrutiny of the different contracts and agreements entered into by
ITEC with its various business contacts in the country, particularly ASPAC and Telephone
Equipment Sales and Services, Inc. (TESSI, for brevity). The latter is a local electronics firm
engaged by ITEC to be its local technical representative, and to create a service center for ITEC
products sold locally. Its arrangements, with these entities indicate convincingly ITEC's purpose
to bring about the situation among its customers and the general public that they are dealing
directly with ITEC, and that ITEC is actively engaging in business in the country.

A foreign corporation doing business in the Philippines may sue in Philippine Courts
although not authorized to do business here against a Philippine citizen or entity who had
contracted with and benefited by said corporation. To put it in another way, 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 a 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.

By entering into the "Representative Agreement" with ITEC, Petitioner is charged with
knowledge that ITEC was not licensed to engage in business activities in the country, and is thus
estopped from raising in defense such incapacity of ITEC, having chosen to ignore or even
presumptively take advantage of the same.

In Top-Weld, we ruled that a foreign corporation may be exempted from the license
requirement in order to institute an action in our courts if its representative in the country
maintained an independent status during the existence of the disputed contract. Petitioner is
deemed to have acceded to such independent character when it entered into the Representative
Agreement with ITEC, particularly, provision 6.2 (supra).

Petitioner's insistence on the dismissal of this action due to the application, or non-
application, of the private international law rule of forum non conveniens defies well-settled
rules of fair play. According to petitioner, the Philippine Court has no venue to apply its
discretion whether to give cognizance or not to the present action, because it has not acquired
jurisdiction over the person of the plaintiff in the case, the latter allegedly having no personality
to sue before Philippine Courts. This argument is misplaced because the court has already
acquired jurisdiction over the plaintiff in the suit, by virtue of his filing the original complaint.
And as we have already observed, petitioner is not at liberty to question plaintiff's standing to
sue, having already acceded to the same by virtue of its entry into the Representative Agreement
referred to earlier.

Thus, having acquired jurisdiction, it is now for the Philippine Court, based on the facts
of the case, whether to give due course to the suit or dismiss it, on the principle of forum non
convenience. Hence, the Philippine Court may refuse to assume jurisdiction in spite of its having
acquired jurisdiction. Conversely, the court may assume jurisdiction over the case if it chooses to
do so; provided, that the following requisites are met: 1) That the Philippine Court is one to
which the parties may conveniently resort to; 2) That the Philippine Court is in a position to
make an intelligent decision as to the law and the facts; and, 3) That the Philippine Court has or
is likely to have power to enforce its decision.

The aforesaid requirements having been met, and in view of the court's disposition to
give due course to the questioned action, the matter of the present forum not being the "most
convenient" as a ground for the suit's dismissal, deserves scant consideration.

218. Merrill v. Cam, 211 SCRA 824 (1992)

Facts:
On 23 November 1987, Merrill Lynch futures, Inc. (ML FUTURES) filed a complaint with the
Regional Trial Court at Quezon City against the Spouses Pedro M. Lara and Elisa G. Lara
for the recovery of a debt and interest thereon, damages, and attorney's fees. In its
complaint ML FUTURES described itself as (a) "a non-resident foreign corporation, not
doing business in the Philippines, duly organized and existing under and by virtue of the
laws of the state of Delaware, U.S.A.;" as well as (b) a 'futures commission merchant'
duly licensed to act as such in the futures markets and exchanges in the United States, . . .
essentially functioning as a broker (executing) orders to buy and sell futures contracts
received from its customers on U.S. futures exchanges." In its complaint ML FUTURES
alleged (1) that on 28 September 1983 it entered into a Futures Customer Agreement with
the spouses (Account 138-12161), in virtue of which it agreed to act as the latter's broker
for the purchase and sale of futures contracts in the U.S.; (2) that pursuant to the contract,
orders to buy and sell futures contracts were transmitted to ML FUTURES by the Lara
Spouses "through the facilities of Merrill Lynch Philippines, Inc., a Philippine
corporation and a company servicing ML Futures' customers;" (3) that 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., "and entity
which, not being a broker, furnishes advice on commodity futures to persons who trade in
futures contracts"); (4) that in line with the above mentioned agreement and through said
Merill Lynch Philippines, Inc., the Lara Spouses actively traded in futures contracts,
including "stock index futures" for four years or so, i.e., from 1983 to October, 1987,
there being more or less regular accounting and corresponding remittances of money (or
crediting or debiting) made between the spouses and ML FUTURES; (5) that because of
a loss amounting to US $160,749.69 incurred in respect of 3 transactions involving
"index futures," and after setting this off against an amount of US $75,913.42 then owing
by ML FUTURES to the Lara Spouses, said spouses became indebted to ML FUTURES
for the ensuing balance of US $84,836.27, which the latter asked them to pay; (6) that the
Lara Spouses however refused to pay this balance, "alleging that the transactions were
null and void because Merrill Lynch Philippines, Inc., the Philippine company servicing
accounts of ML Futures, had no license to operate as a "commodity and/or financial
futures broker."

On the foregoing essential facts, ML FUTURES prayed (1) for a preliminary attachment against
the spouses' properties "up to the value of at least P2,267,139.50," and (2) for judgment, after
trial, sentencing the spouses to pay ML FUTURES: (a) the Philippine peso equivalent of
$84,836.27 at the applicable exchange rate on date of payment, with legal interest from the date
of demand until full payment; (b) exemplary damages in the sum of at least P500,000,00; and (c)
attorney's fees and expenses of litigation as may be proven at the trial. Preliminary attachment
issued ex parte on 2 December 1987, and the spouses were duly served with summons. The
spouses filed a motion to dismiss dated 18 December 1987 on the grounds that (1) ML
FUTURES had "no legal capacity to sue" and (2) its "complaint states no cause of action since it
is not the real party in interest." On 12 January 1988, the Trial Court promulgated an Order
sustaining the motion to dismiss, directing the dismissal of the case and discharging the writ of
preliminary attachment. It later denied ML FUTURES's motion for reconsideration, by Order
dated 29 February 1988. ML FUTURES appealed to the Court of Appeals. In its own decision
promulgated on 27 November 1990, the Court of Appeals affirmed the Trial Court's judgment. Its
motion for reconsideration having been denied, ML FUTURES appealed to the Supreme Court
on certiorari.

Issue:
1. Whether ML FUTURES was doing business in the Philippines without license.
2. Whether – in light of the fact that the Laras were fully aware of its lack of license
to do business in the Philippines, and in relation to those transactions had made payments
to, and received money from it for several years –the Lara Spouses are estopped to
impugn ML FUTURES capacity to sue them in the courts of the forum.
Held:

1. The facts on record adequately establish that ML FUTURES, operating in the United States,
had indeed done business with the Lara Spouses in the Philippines over several years, had done
so at all times through Merrill Lynch Philippines, Inc. (MLPI), a corporation organized in this
country, and had executed all these transactions without ML FUTURES being licensed to so
transact business here, and without MLPI being authorized to operate as a commodity futures
trading advisor. These are the factual findings to both the Trial Court and the Court of Appeals.
These, too, are the conclusions of the Securities & Exchange Commission which denied MLPI's
application to operate as a commodity futures trading advisor, a denial subsequently affirmed by
the Court of Appeals. Prescinding from the proposition that factual findings of the Court of
Appeals are generally conclusive, the Supreme Court has been cited to no circumstance of
substance to warrant reversal of said Appellate Court's findings or conclusions in this case.
Further, the Laras did transact business with ML FUTURES through its agent corporation
organized in the Philippines, it being unnecessary to determine whether this domestic firm was
MLPI (Merrill Lynch Philippines, Inc.) or Merrill Lynch Pierce Fenner & Smith (MLPI's alleged
predecessor). The fact is that ML FUTURES did deal with futures contracts in exchanges in the
United States in behalf and for the account of the Lara Spouses, and that on several occasions the
latter received account documents and money in connection with those transactions. Given these
facts, if indeed the last transaction executed by ML FUTURES in the Laras's behalf had resulted
in a loss amounting to US $160,749.69; that in relation to this loss, ML FUTURES had credited
the Laras with the amount of US $ 75,913.42 — which it (ML FUTURES) then admittedly owed
the spouses — and thereafter sought to collect the balance, US $84,836.27, but the Laras had
refused to pay (for the reasons already above stated).

2. The Laras received benefits generated by their business relations with ML FUTURES. Those
business relations, according to the Laras themselves, spanned a period of 7 years; and they
evidently found those relations to be of such profitability as warranted their maintaining them for
that not insignificant period of time; otherwise, it is reasonably certain that they would have
terminated their dealings with ML FUTURES much, much earlier. In fact, even as regards their
last transaction, in which the Laras allegedly suffered a loss in the sum of US$160,749.69, the
Laras nonetheless still received some monetary advantage, for ML FUTURES credited them
with the amount of US $75,913.42 then due to them, thus reducing their debt to US $84,836.27.
Given these facts, and assuming that the Lara Spouses were aware from the outset that ML
FUTURES had no license to do business in this country and MLPI, no authority to act as broker
for it, it would appear quite inequitable for the Laras to evade payment of an otherwise legitimate
indebtedness due and owing to ML FUTURES upon the plea that it should not have done
business in this country in the first place, or that its agent in this country, MLPI, had no license
either to operate as a "commodity and/or financial futures broker." Considerations of equity
dictate that, at the very least, the issue of whether the Laras are in truth liable to ML FUTURES
and if so in what amount, and whether they were so far aware of the absence of the requisite
licenses on the part of ML FUTURES and its Philippine correspondent, MLPI, as to be estopped
from alleging that fact as a defense to such liability, should be ventilated and adjudicated on the
merits by the proper trial court.
219. Time v. Reyes, 39 SCRA 303 (1971)

Same with # 248

220. Phil Columbia v. Lantin, 39 SCRA 376 (1971)

Facts:

Private respondent Katoh & Co. Ltd., a Japanese firm, filed in the CFI of ManilaBranch VII a
complaint alleging ten (10) causes of action against Manila-basedPhilippine Columbia
Enterprises Co. and its general partners Rufino Dy Chin andFermin Sy for the collection of
payment of ten (10) different shipments of
angle bars, mild steel bars and cold rolled steel sheets allegedly ordered by petitionersfrom
private respondent. Petitioners moved to dismiss on the grounds that privaterespondent had no
legal capacity to sue and the complaint states no cause of action.In the hearing of the motion,
private respondent asked that the reception ofevidence thereon be deferred to another date. On
the date set, respondent objectedto the presentation of evidence and filed a motion to defer
hearing anddetermination of the motion to dismiss. The Court issued the questioned
orderdeferring the determination of the motion to dismiss until the trial of the case onthe merits
because the ground stated therein does not appear to be indubitable.Petitioners moved to
reconsider but their motion was denied, hence, this petitionfor certiorari.
ISSUE: Whether or not the court committed grave abuse of discretion in deferring
thedetermination of the motion to dismiss until the trial of the case on the merits because the
ground stated therein does not appear to be indubitable.
HELD: No.
Where the complaint filed by a foreign corporation for collection of the valueof angle bars states
that plaintiff "is not engaged in business in the Philippines andthat the transactions averred in this
complaint were exports made andconsummated in Tokyo, Japan in pursuance of International
trade;" whereas themotion to dismiss for lack of capacity to sue avers that the contracts were
made inthe Philippines wherein plaintiff is not licensed to do business: the
inconsistency between the complaint and the motion to dismiss renders the ground of the latter
doubtful and may, therefore, be deferred by the trial -court until after hearing onthe merits.
Actions by foreign corporations are governed by rules different fromthose in actions against
them. Since a counterclaim partakes of the nature of acomplaint or cause of action against
plaintiff, if defendant local corporation files acounterclaim against plaintiff foreign corporation,
the latter would be a defendantthereto, in which case said foreign corporation would not be
maintaining a suit and,consequently, Section 69 of the Corporation Law would not apply.
221. Hang Lung v. Saulog, 201 SCRA 137 (1991)

222. Dansfschieffs v. La Compania, 8 Phil 766 (1907)

Case Not Found

223. The Swedish v. Manila Port, 25 SCRA 633 (1968)

Facts:

The petitioner, The Swedish East Asia Co., Ltd., a corporation duly organized and existing under
the laws of Sweden with principal offices at Gothenburg, Sweden, is admittedly not licensed to
do business in the Philippines.

On December 3, 1967 the MS “SUDAN”, owned and operated by the petitioner, arrived at the
port of Manila and discharged cargo destined thereto unto the custody of the respondent Manila
Port Service. By mistake, cargo destined for Hong Kong consisting of sixteen bundles of “lifts of
mild tees window sections” were landed at Manila. the erroneous discharge was obviously
engendered by the fact that the same ship on the same day discharged forty similar bundles
destined for consignees in the Philippines.

Vicente Pacheco, the petitioner’s agent in Manila, instructed their customs men to arrange for
the reshipment of the sixteen bundles to Hong Kong and accomplish all the necessary papers for
the payment of customs, arrastre and storage charges due on the goods, which charges were as a
matter of fact paid by the petitioner. However the reshipment of all the sixteen bundles was not
affected , because only eight of these were available at the time, as the remaining eight could not
be found. After an exchange of letters between Pacheco and the Manila Port Service, in the last
of which the latter advised International Harvester of its inability to locate the eight missing
bundles, the petitioner, presented a formal claim for the value of the missing cargo to the Manila
Port Service in the sum of P2, 349.62. On March 8, 1960 the petitioner received a letter from the
respondents rejecting the claim.

On March 13, 1961 the petitioner filed a complaint in the Court of First Instance of Manila, for
recovery of the amount of P2, 349.62, the value of the missing goods.

Issue:

Whether or not the petitioner has the capacity to sue, a foreign corporation without license to
engage in business in the Philippines , citing Sec 69 of the Corporation.

Ruling:

It must be stated however that this section is not applicable to a foreign corporation performing
single acts or “isolated transactions.” There is nothing in the record to show that the petitioner
has been in the Philippines engaged in continuing business or enterprise for which it was
organized, when the sixteen bundles were erroneously discharged in Manila, for it to be
considered as transacting business in the Philippines. The fact is that the bundles, the value of
which is sought to be recovered, were landed not as a result of a business transaction, “isolated”
or otherwise, but due to a mistaken belief that they were part of the shipment of forty similar
bundles consigned to persons or entities in the Philippines. There is no justification, therefore, for
invoking the provisions of section 69 of the Corporation Code.

224. Commissioner v. K.M.K. Gami, 182 SCRA 591 (1990)

FACTS:

Two containers loaded with 103 cartons of merchandise covered by eleven airway bills of several
supposedly Singapore based consignees arrived at the Manila International Airport.The cargoes
were consigned to different entities, among others, KMK Gani and Indrapal and Company,
private respondents. While the cargoes were at the MIA, a “reliable source” tipped the Bureau of
Customs that the said cargoes were going to be unloaded to Manila. The Suspected Cargo and
Anti-Narcotics (SCAN) dispatched an agent to verify the information.
The cargoes were seized and thereafter subject to Seizure and Forfeiture proceedings for
technical smuggling. Atty. Armando Padilla entered his appearance for the consignees KMK and
Indrapal. Records of the case do not show any appearance of the consignees in person. The
Collector of Customs rules for the forfeiture of all the cargoes. Appeal was made to the
Commissioner of Customs. The Commissioner of Customs affirmed the finding of the Collector
of Customs of the presence of the intention to import the said goods in violation of the dangerous
drugs Act and a Central Bank Circular in relation to the Tariff and Customs Code. Appeal was
then made to the Court of Tax Appeals, which reversed the decision of the Commissioner of
Customs. Hence this petition to review.

ISSUE:
Did private respondents fail to establish their personality to sue?

Can private respondents sue within Philippine jurisdiction under the “isolated transaction rule”?

HELD:

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. (Section 133, Corporation Code of the Philippines)

However, a foreign corporation not engaged in the in business in the Philippines may not be
denied the right to file an action in the Philippine courts for an isolated transaction.

The fact that a foreign corporation is not doing business in the Philippines must be disclosed if it
desires to sue in the Philippine courts under the “isolated transaction rule.” Without this
disclosure, the court may choose to deny it the right to sue.

In the case at bar, the private respondents KMK Gani and Indrapal aver that they are “suing upon
a singular and isolated transaction.” But they failed to prove their legal existence or juridical
personality as foreign corporations.

*** The “isolated transaction rule” refers only to foreign corporations. Here the petitioners are
not foreign corporations. They do not even pretend to be so. The first paragraph of their petition,
containing the allegation of their identities, does not even aver their corporate character. On the
contrary, KMK alleges that it is a “single proprietorship” while Indrapal hides under the vague
identification as a “firm”, although both describe themselves. With the phrase “Doing business in
accordance with the laws of Singapore.”

225. Facilities v. De la Osa, 89 SCRa 131 (1979)

Facts:

Facilities Management Corporation and J. S. Dreyer are domiciled in Wake Island while J. V.
Catuira is an employee of FMC stationed in Manila. Leonardo dela Osa was employed by FMC
in Manila, but rendered work in Wake Island, with the approval of the Department of Labor of
the Philippines. De la Osa was employed as (1) painter with an hourly rate of $1.25 from March
1964 to November 1964, inclusive; (2) houseboy with an hourly rate of $1.26 from December
1964 to November 1965, inclusive; (3) houseboy with an hourly rate of $1.33 from December
1965 to August 1966, inclusive; and (4) cashier with an hourly rate of $1.40 from August 1966 to
March 27 1967, inclusive. He further averred that from December, 1965 to August, 1966,
inclusive, he rendered overtime services daily, and that this entire period was divided into swing
and graveyard shifts to which he was assigned, but he was not paid both overtime and night shift
premiums despite his repeated demands from FMC, et al. In a petition filed on 1 July 1967, dela
Osa sought his reinstatement with full backwages, as well as the recovery of his overtime
compensation, swing shift and graveyard shift differentials.

Subsequently on 3 May 1968, FMC, et al. filed a motion to dismiss the subject petition on the
ground that the Court has no jurisdiction over the case, and on 24 May 1968, de la Osa
interposed an opposition thereto. Said motion was denied by the Court in its Order issued on 12
July 1968. Subsequently, after trial, the Court of Industrial Relations, in a decision dated 14
February 1972, ordered FMC, et al. to pay de la Osa his overtime compensation, as well as his
swing shift and graveyard shift premiums at the rate of 50% per cent of his basic salary. FMC, et
al. filed the petition for review on certiorari.

Issue:
1. Whether the mere act by a non-resident foreign corporation of recruiting Filipino
workers for its own use abroad, in law doing business in the Philippines.
2. Whether FMC has been "doing business in the Philippines" so that the service of
summons upon its agent in the Philippines vested the Court of First Instance of Manila
with jurisdiction.
Held:

1. In its motion to dismiss, FMC admits that Mr. Catuira represented it in the Philippines "for the
purpose of making arrangements for the approval by the Department of Labor of the employment
of Filipinos who are recruited by the Company as its own employees for assignment abroad." In
effect, Mr. Catuira was alleged to be a liaison officer representing FMC in the Philippines. Under
the rules and regulations promulgated by the Board of Investments which took effect 3 February
1969, implementing RA 5455, which took effect 30 September 1968, the phrase "doing business"
has been exemplified with illustrations, among them being as follows: ""(1) Soliciting orders,
purchases (sales) or service contracts. Concrete and specific solicitations by a foreign firm, not
acting independently of the foreign firm, amounting to negotiation or fixing of the terms and
conditions of sales or service contracts, regardless of whether the contracts are actually reduced
to writing, shall constitute doing business even if the enterprise has no office or fixed place of
business in the Philippines; (2) appointing a representative or distributor who is domiciled in the
Philippines, unless said representative or distributor has an independent status, i.e., it transacts
business in its name and for its own account, and not in the name or for the account of the
principal; xxx (4) Opening offices, whether called 'liaison' offices, agencies or branches, unless
proved otherwise. xxx (10) Any other act or acts that imply a continuity of commercial dealings
or arrangements, and contemplate to that extent the performance of acts or works, or the exercise
of some of the functions normally incident to, or in the progressive prosecution of, commercial
gain or of the purpose and objective of the business organization."

2. FMC may be considered as "doing business in the Philippines" within the scope of Section 14
(Service upon private foreign corporations), Rule 14 of the Rules of Court which provides that
"If the defendant is a foreign corporation, or a non-resident joint stock company or association,
doing business in the Philippines, service may be made on its resident agent designated in
accordance with law for that purpose or, if there be no such agent, on the government official
designated by law to that effect, or on any of its officers or agents within the Philippines."
Indeed, FMC, in compliance with Act 2486 as implemented by Department of Labor Order IV
dated 20 May 1968 had to appoint Jaime V. Catuira, 1322 A. Mabini, Ermita, Manila "as agent
for FMC with authority to execute Employment Contracts and receive, in behalf of that
corporation, legal services from and be bound by processes of the Philippine Courts of Justice,
for as long as he remains an employee of FMC." It is a fact that when the summons for FMC was
served on Catuira he was still in the employ of the FMC. Hence, if a foreign corporation, not
engaged in business in the Philippines, is not barred from seeking redress from courts in the
Philippines (such as in earlier cases of Aetna Casualty & Surety Company, vs. Pacific Star Line,
etc. [GR L-26809], In Mentholatum vs. Mangaliman, and Eastboard Navigation vs. Juan Ysmael
& Co.), a fortiori, that same corporation cannot claim exemption from being sued in Philippine
courts for acts done against a person or persons in the Philippines.
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226. FBA Aircraft v. Zosa, 110 SCRA 1 (1981)

FACTS:
The Court of First Instance dismissed a complaint filed by private respondent against petitioners,
foreign corporations which are not engaged in business in the Philippines, for lack of jurisdiction over the latter’s
persons, and ordered that the writ of attachment previously issued against the three aircrafts and
engines of petitioners be maintained until its dismissal order shall have become final, private
respondent having appealed therefrom. The trial court gave respondent-plaintiff two options to
pursue as a result of its dismissal order: "1) go to the proper appellate court for a ruling that is
definite and definitive that a foreign corporation can be sued in the Philippines on the basis of an
isolated transaction; or 2) the plaintiff may file anew a complaint asking for extra-territorial
services of summons under Section 17, Rule 14 of the Rules of Court." Petitioners defendants
meanwhile filed this petition for mandamus with preliminary injunction and Petitioners
defendants meanwhile filed this petition for mandamus with preliminary injunction and an urgent
motion for the release of the attached aircrafts and engines.

ISSUE:
Whether or not an attachment of a foreign corporation's properties in the Philippines may be
maintained.

HELD: YES.

Foreign corporation not engaged in business in the Philippines is not barred from seeking redress
from the Philippine courts, the same corporation cannot claim exemption from being sued in the
Philippine courts for acts done against a person or persons in the Philippines. It is equally
unnecessary for respondent-plaintiff to file anew a complaint for extra-territorial services of
summons upon petitioners-
defendants, because, the latter’s properties having been attached within the Philippines, extra
-territorial services of summons clearly may be effected under Rule 14, Section 17 of the Rules
of Court. Under our jurisprudence, pending extraterritorial service of summons to a foreign
corporation, an attachment of a foreign corporation's properties in the Philippines may be
maintained.

227. Signetics v. CA, 225 SCRa 737 (1993)

Facts:

1. The petitioner, Signetics was organized under the laws of the United States of America.
Through Signetics Filipinas Corporation (SigFil), a wholly-owned subsidiary, Signetics entered
into lease contract over a piece of land with Fruehauf Electronics Phils., Inc. (Freuhauf).

2. Freuhauf sued Signetics for damages, accounting or return of certain machinery, equipment
and accessories, as well as the transfer of title and surrender of possession of the buildings,
installations and improvements on the leased land, before the RTC of Pasig (Civil Case No.
59264). Claiming that Signetics caused SigFil to insert in the lease contract the words
"machineries, equipment and accessories," the defendants were able to withdraw these assets
from the cost-free transfer provision of the contract.
3. Service of summons was made on Signetics through TEAM Pacific Corp. on the basis of the
allegation that Signetics is a "subsidiary of US PHILIPS CORPORATION, and may be served
summons at Philips Electrical Lamps, Inc., Las Piñas, Metro Manila and/or c/o Technology
Electronics Assembly & Management (TEAM) Pacific Corporation, Electronics Avenue, FTI
Complex, Taguig, Metro Manila," service of summons was made on Signetics through TEAM
Pacific Corporation.

4. Petitioner filed a motion to dismiss the complaint on the ground of lack of jurisdiction over its
person. Invoking Section 14, Rule 14, of the Rules of Court and the rule laid down in Pacific
Micronisian Line, Inc., v. Del Rosario and Pelington to the effect that the fact of doing business
in the Philippines should first be established in order that summons could be validly made and
jurisdiction acquired by the court over a foreign corporation.

5. The RTC denied the Motion to dismiss. While the CA affirmed RTC. Hence this petition. The
petitioner argues that what was effectively alleged in the complaint as an activity of doing
business was "the mere equity investment" of petitioner in SigFil, which the petitioner insists,
had theretofore been transferred to TEAM holdings, Ltd.

Issue: Whether or not the lower court, had correctly assumed jurisdiction over the petitioner, a
foreign corporation, on its claim in a motion to dismiss, that it had since ceased to do business in
the Philippines.

Held: YES.

The rule is that, a foreign corporation, although not engaged in business in the Philippines, may
still look up to our courts for relief; reciprocally, such corporation may likewise be "sued in
Philippine courts for acts done against a person or persons in the Philippines" (Facilities
Management Corporation v. De la Osa), provided that, in the latter case, it would not be
impossible for court processes to reach the foreign corporation, a matter that can later be
consequential in the proper execution of judgment. Hence, a State may not exercise jurisdiction
in the absence of some good basis (and not offensive to traditional notions of fair play and
substantial justice) for effectively exercising it, whether the proceedings are in rem, quasi in
rem or in personam.

228. Philips Export v. CA, 206 SCRA 457 (1992)

A corporation’s right to use its corporate and trade name is a property right, a right in rem,
which it may assert and protect against the whole world.

FACTS:
Philips Export B.V. (PEBV) filed with the SEC for the cancellation of the word “Philips” the
corporate name of Standard Philips Corporation in view of its prior registration with the Bureau
of Patents and the SEC. However, Standard Philips refused to amend its Articles of Incorporation
so PEBV filed with the SEC a petition for the issuance of a Writ of Preliminary Injunction,
however this was denied ruling that it can only be done when the corporate names are identical
and they have at least 2 words different. This was affirmed by the SEC en banc and the Court of
Appeals thus the case at bar.

ISSUE:
Whether or not Standard Philips can be enjoined from using Philips in its corporate name

RULING: YES
A corporation’s right to use its corporate and trade name is a property right, a right in rem, which
it may assert and protect against the whole world. According to Sec. 18 of the Corporation Code,
no corporate name may be allowed if the proposed name is identical or deceptively confusingly
similar to that of any existing corporation or to any other name already protected by law or is
patently deceptive, confusing or contrary to existing law.

For the prohibition to apply, 2 requisites must be present:

(1) the complainant corporation must have acquired a prior right over the use of such corporate
name and
(2) the proposed name is either identical or deceptively or confusingly similar to that of any
existing corporation or to any other name already protected by law or patently deceptive,
confusing or contrary to existing law.

With regard to the 1st requisite, PEBV adopted the name “Philips” part of its name 26 years
before Standard Philips. As regards the 2nd, the test for the existence of confusing similarity is
whether the similarity is such as to mislead a person using ordinary care and discrimination.
Standard Philips only contains one word, “Standard”, different from that of PEBV. The 2
companies’ products are also the same, or cover the same line of products. Although PEBV
primarily deals with electrical products, it has also shipped to its subsidiaries machines and parts
which fall under the classification of “chains, rollers, belts, bearings and cutting saw”, the goods
which Standard Philips also produce. Also, among Standard Philips’ primary purposes are to buy,
sell trade x x x electrical wiring devices, electrical component, electrical supplies. Given these,
there is nothing to prevent Standard Philips from dealing in the same line of business of electrical
devices. The use of “Philips” by Standard Philips tends to show its intention to ride on the
popularity and established goodwill of PEBV.

229. Lyceum v. CA, 219 SCRA 610, (1993)

FACTS:
1. Petitioner had sometime commenced before in the SEC a complaint against Lyceum of
Baguio, to require it to change its corporate name and to adopt another name not similar or
identical with that of petitioner. SEC decided in favor of petitioner. Lyceum of Baguio filed
petition for certiorari but was denied for
lack of merit.
2. Armed with the resolution of the Court, petitioner instituted before the SEC to compel private
respondents, which are also educational institutions, to delete word “Lyceum” from their
corporate names and permanently to enjoin them from using such as part of their respective
names.
3. Hearing officer sustained the claim of petitioner and held that the word “Lyceum” was capable
of appropriation and that petitioner had acquired an enforceable right to the use of that word.
4. In an appeal, the decision was reversed by the SEC En Banc. They held that the word
“Lyceum” to have become identified with petitioner as to render use thereof of other institutions
as productive of consfusion about the identity of the schools concerned in the mind of the general
public.
5. Petitioner went to appeal with the CA but the latter just affirmed the decision of the SEC En
Banc.

HELD:
Under the corporation code, no corporate name may be allowed by the SEC if the proposed name
is identical or deceptively or confusingly similar to that of any existing corporation or to any
other name already protected by law or is patently deceptive, confusing or contrary to existing
laws. The policy behind this provision is to avoid fraud upon the public, which would have the
occasion to deal with the entity concerned, the evasion of legal obligations and duties, and the
reduction of difficulties of administration and supervision over corporations.
The corporate names of private respondents are not identical or deceptively or confusingly
similar to that of petitioner’s. Confusion and deception has been precluded by the appending of
geographic names to the word “Lyceum”. Furthermore, the word “Lyceum” has become
associated in time with schools and other institutions providing public lectures, concerts, and
public discussions. Thus, it generally refers to a school or an institution of learning.
Petitioner claims that the word has acquired a secondary meaning in relation to petitioner with
the result that the word, although originally generic, has become appropriable by petitioner to the
exclusion of other institutions.
The doctrine of secondary meaning is a principle used in trademark law but has been extended to
corporate names since the right to use a corporate name to the exclusion of others is based upon
the same principle, which underlies the right to use a particular trademark or tradename. Under
this doctrine, a word or phrase originally incapable of exclusive appropriation with reference to
an article in the market, because geographical or otherwise descriptive might nevertheless have
been used for so long and so exclusively by one producer with reference to this article that, in
that trade and to that group of purchasing public, the word or phrase has come to mean that the
article was his produce. The doctrine cannot be made to apply where the evidence didn't prove
that the business has continued for so long a time that it has become of consequence and
acquired good will of considerable value such that its articles and produce have acquired a well
known reputation, and confusion will result by the use of the disputed name.
Petitioner didn't present evidence, which provided that the word “Lyceum” acquired secondary
meaning. The petitioner failed to adduce evidence that it had exclusive use of the word. Even if
petitioner used the word for a long period of time, it hadn’t acquired any secondary meaning in
its favor because the appellant failed to prove that it had been using the same word all by itself to
the exclusion of others.

230. Universal Mills v. Universal Mills, 78 SCRA 62 (1977)

FACTS:

This is an appeal from the order of the Securities and Exchange Commission granting a petition
by the respondent to have the petitioner’s corporate name be changed as it is “confusingly and
deceptively similar” to that of the former.

On January 8, 1954, respondent Universal Textile Mills was issued a certificate of Corporation as
a textile manufacturing firm. On the other hand, petitioner, which deals in the production of
hosieries and apparels, acquired its current name by amending its articles of incorporation,
changing its name from Universal Hosiery mills Corporation to Universal Mills corporation.

ISSUE:

Whether or not petioner’s trade name is confusingly similar with that of respondent’s.

HELD:

Yes. The corporate names in question are not identical, but they are indisputably so similar that
even under the test of reasonable care and observation as the public generally are capable of
using and may be expected to exercise” invoked by appellant. We are apprehensive confusion
will usually arise, considering that x x x appellant included among its primary purposes the
manufacturing, dyeing, finishing and selling of fabrics of all kinds” which respondent had been
engaged for more than a decade ahead of petitioner.
231. Sta. Ana v. Malawi, 24 SCRA 1018, (1968)

Facts:

In 1962, Florentino Maliwat sought to register the trademark "FLORMANN" used on shirts,
pants, jackets and shoes for ladies men and children. He claimed its first use in commerce in
1955. Also in the same year (1962), Jose P. Sta. Ana (Petitioner) filed an application for the
registration of the trademark "FLORMEN" (used in ladies and children shoes). he claimed its
first use in commerce in 1959. Due to the confusing similarity , the Director of the Patent Office
ordered an interference. Maliwat's application was then granted due to his prior adoption and use
while that of Sta. Ana was denied. It was stipulated by the parties that 'Flormann' was used as a
trademark in 1953 and Maliwat used it on shoes in 1962.

Issue: Was there any trademark infringement committed?

Ruling: YES. Both products of the parties have the same descriptive properties, thus its
trademark must be protected.

The law does not require that the goods of the previous user and the late user of the same mark
should possess the same descriptive properties or should fall into the same categories in order to
bar the latter from registering his amrk. The meat of the matter is the likelyhood of confusion,
mistake or deception upon the purchase of the goods of the parties. Herein, the similarity of the
mark 'FLORMANN' and the name 'FLORMEN', as well as the likelihood of confusion is
admitted. As such, Maliwat as prior adopter has a better right to use the mark.

232. Western v. Reyes, 51 Phil 115 (1927)

233. Armco v. SEC, 156 SCRA 822 (1987

Facts:

ARMCO Steel Corp is a corporation organized in Ohio, USA hereinafter called ARMCO –
OHIO. ARMCO Marsteel-Alloy Corp was incorporated in the Philippines under its original
name Marsteel Alloy Company, Inc but its name was changed to ARMCO-Marsteel by
amendment of its Articles of Incorporation after the ARMCO-Ohio purchased 40% of its capital
stock. Both said corporations are engaged in the manufacture of steel products.

On the other hand, ARMCO Steel Corporation was incorporated in the Philippines, hereinafter
called ARMCO Philippines. A pertinent portion of its articles of incorporation provides as among
its purposes: “to contract, fabricate… manufacture .. regarding pipelines, steel frames..”

ARMCO-Ohio and ARMCO-Marsteel then filed a petition in the SEC to compel ARMCO-
Philippines to change its corporate name on the ground that it is very similar, if not exactly the
same as the name of the petitioners SEC granted the petitioners. Respondent amended its articles
of incorporation by changing by changing its name to “ARMCO structures, Inc” which was filed
with and approved by the SEC. Petitioners filed a comment alleging that the change of name of
said respondent was not done in good faith and is not in accordance with the order of the
Commission which was to take out ARMCO and substitute another word in lieu thereof in its
corporate name by amending the articles of incorporation.

Issue:

WON ARMCO-Philippines had substantially complied in good faith with said order and said
compliance had achieved the purpose of the order by changing its corporate name with the
approval of SEC.

Held:

No. The said amendment in the corporate name of petitioneris not in substantial compliance with
the order. To repeat, the order was for the removal of the word “ARMCO” from the corporate
name of the petitioner which it failed to do. And even if this change of corporate name was
erroneously accepted and approved in the SEC it cannot thereby legalize nor change what is
clearly unauthorized if not contemptuous act of petitioner in securing the registration of a new
corporate name against the very previous order of the SEC. Certainly the said previous order is
not rendered functus oficio thereby. Had petitioner revealed at the time of the registration of its
amended corporate name that there was the said order, the registration of the amended corporate
name could not have been accepted and approved by the persons in-charge of the registration.
The actuations in this respect of petitioner are far from regular much less in good faith.

Noted in fact, ARMCO STEEL-Philippines has not only an identical name but also a similar line
of business. People who are buying and using products bearing the trademark “Armco” might be
led to believe that such products are manufactured by the respondent, when in fact, they might
actually be produced by the petitioners. Thus, the good will that should grow and inure to the
benefit of petitioners could be impaired and prejudiced by the continued use of the same term by
the respondent.

234. Exxon v. Exxon, AC-G.R. CV No.02758, Jan 15, 1986

235. Atlantic Mutual v. Cebu, 17 SCRA 1037 (1966)

Facts:

Atlantic Mutual Insurance Company and Continental Insurance Company are both foreign
corporations existing under the laws of the United States. They sued the Cebu Stevedoring Co.,
Inc., a domestic corporation, for recovery of a sum of money on the following allegations: that
defendant, a common carrier, undertook to carry a shipment of copra for deliver to Procter &
Gamble Company, at Cebu City; that upon discharge, a portion of the copra was found damaged;
that since the copra had been previously insured with plaintiffs they paid the shipper and/or
consignee, upon proper claim and assessment of the damage; and that as subrogee to the
shipper's and/or consignee's rights, plaintiffs demanded, without success, settlement from
defendant by reason of its failure to comply with its obligation, as carrier, to deliver the copra in
good order. Defendant moved to dismiss on two grounds: (a) that plaintiffs had "no legal
personality to appear before Philippine courts and with no capacity to sue;" and (b) that the
complaint did not state a cause of action. Both grounds were based upon failure of the complaint
to allege compliance with section 69 of the Corporation Law.

Issue: Whether or not plaintiffs had "legal personality to appear before Philippine courts and
with capacity to sue.
Ruling:

No. The Law simply means that no foreign corporation shall be permitted to transact business in
the Philippines, unless it shall have the license required by law, and, until it complies with this
law, shall not be permitted to maintain any suit in the local courts. The object of the statute was
to 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 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 in
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." To be sure, under
the Rules of Court (Section 11, Rule 15) in force prior to the promulgation of the Revised Rules
on January 1, 1964, it was not necessary to aver the capacity of a party to sue except to the extent
required to show jurisdiction of the court. In our opinion, however, such rule does not apply in
all situations and under all circumstances. The theory behind a similar rule in the United States is
"that capacity ... of a party for purpose of suit

is not in dispute in the great bulk of cases and that pleading and proof can be simplified by a rule
that an averment of such matter is not necessary, except to show jurisdiction." But where as in
the present case, the law denies to a foreign corporation the right to maintain suit unless it has
previously complied with a certain requirement, then such compliance, or the fact that the suing
corporation is exempt therefrom, becomes a necessary averment in the complaint. These are
matters peculiarly within the knowledge of appellants alone, and it would be unfair to impose
upon appellee the burden of asserting and proving the contrary. It is enough that foreign
corporations are allowed by law to seek redress in our courts under certain conditions: the
interpretation of the law should not go so far as to include, in effect, an inference that those
conditions have been met from the mere fact that the party suing is a foreign corporation.

236. New York v. CA, 249 SCRA 416 (1995)

Facts:

NEW YORK MARINE MANAGERS, INC., a foreign corporation organized under the laws of
the United States, seeks in this special civil action for certiorari under Rule 65 of the Rules of
Court1 the annulment of the decision of the Court of Appeals which reversed the ruling of the
trial court denying the motion to dismiss of private respondent Vlasons Shipping Company, Inc.

On 25 July 1990 American Natural Soda Ash Corporation (ANSAC) loaded in Portland, U.S.A.,
a shipment of soda ash on board the vessel "MS Abu Hanna" for delivery to Manila. The
supplier/shipper insured the shipment with petitioner. Upon arrival in Manila the shipment was
unloaded and transferred to the vessel "MV Biyayang Ginto" owned by private respondent. Since
the shipment allegedly sustained wettage, hardening and contamination, it was rejected as total
loss by the consignees. When the supplier sought to recover the value of the cargo loss from
petitioner the latter paid the claim in the amount of US$58,323.96.
On 20 November 1991 petitioner as subrogee filed with the Regional Trial Court of Manila a
complaint for damages against private respondent alleging among others that —

. . . 1.01. Plaintiff is a non-life foreign insurance corporation organized under the

laws of the State of New York with offices at 123 William Street, New York, N.Y.
10038 and engaged in an isolated transaction in this case; defendant is a local
domestic corporation organized under Philippine law with offices at Zobel Street,
Isla de Provisor, Paco, Metro Manila where it may be served with summons and
other court processes . . . . 2

On 24 January 1992 private respondent filed a motion to dismiss the complaint alleging that: (a)
The complaint was filed by counsel who had no authority to sue for plaintiff; (b) The complaint
stated no cause of action or without a cause of action as (a) there was no privity of contract
between plaintiff and defendant; (b) the risks which allegedly caused damages on the goods were
not covered by the insurance issued by plaintiff, and (c) the charter agreement between the
consignee, ALCHEMCO PHILIPPINES, INC., and private respondent absolved the latter from
all kinds of claim whatsoever; (3) The claim of plaintiff was already extinguished, waived,
abandoned and/or had prescribed; and, (4) Plaintiff had no legal capacity to sue.

On 5 February 1992 petitioner opposed the motion to dismiss. On 10 April 1992 the trial court
denied the motion. On 18 August 1992 the motion to reconsider the denial was also denied. The
trial court ruled that since petitioner alleged in its complaint that it was suing on an isolated
transaction the qualifying circumstance of plaintiff's capacity to sue as an essential element has
been properly pleaded. The trial court also held that the grounds relied upon by private
respondent in its motion to dismiss were matters of defense.

On 28 September 1992 private respondent filed a petition for certiorari and prohibition with the
Court of Appeals alleging that the trial court gravely abused its discretion in issuing the orders of
10 April 1992 and 18 August 1992 which amounted to lack or excess of jurisdiction.

On 29 July 1993 the appellate court granted the petition after finding the assailed orders to be
patently erroneous.3 While it found the allegation in the complaint that plaintiff was a non-life
foreign insurance corporation engaged in an isolated transaction to be a sufficient averment, it
nevertheless held the complaint to be fatally defective for failure to allege the duly authorized
representative or resident agent of petitioner in the Philippines. Thus it enjoined the trial court
from further proceeding except to dismiss the case with prejudice.

Issue: WON the petitioner has the legal capacity to sue

Held:

This Court has held in a long line of cases that a foreign corporation not engaged in business in
the Philippines may exercise the right to file an action in Philippine courts for an isolated
transaction.5 However, in Commissioner of Customs v. K.M.K. Gani et a1.,6 citing Atlantic
Mutual Insurance Company v. Cebu Stevedoring, Inc., 7 we ruled that to say merely that a foreign
corporation not doing business in the Philippines does not need a license in order to sue in our
courts does not completely resolve the issue. When the allegations in the complaint have a
bearing on the plaintiff's capacity to sue and merely state that the plaintiff is a foreign
corporation existing under the laws of the United States, such averment conjures two alternative
possibilities: either the corporation is engaged in business in the Philippines, or it is not so
engaged. In the first, the corporation must have been duly licensed in order to maintain the suit;
in the second, and the transaction sued upon is singular and isolated, no such license is required.
In either case, compliance with the requirement of license, or the fact that the suing corporation
is exempt therefrom, as the case may be, cannot be inferred from the mere fact that the party
suing is a foreign corporation. The qualifying circumstance being an essential part of the
plaintiff's capacity to sue must be affirmatively pleaded. Hence, the ultimate fact that a foreign
corporation is not doing business in the Philippines must first be disclosed for it to be allowed to
sue in Philippine courts under the isolated transaction rule. 8 Failing in this requirement, the
complaint filed by petitioner with the trial court, it must be said, fails to show its legal capacity to
sue.

Moreover, petitioner's complaint is fatally defective for failing to allege its duly authorized
representative or resident agent in this jurisdiction. The pleadings filed by counsel for petitioner
do not suffice. True, a lawyer is generally presumed to be properly authorized to represent any
cause in which he appears, and no written power of attorney is required to authorize him to
appear in court for his client. But this presumption is disputable. Where said authority has been
challenged or attacked by the adverse party the lawyer is required to show proof of such
authority or representation in order to bind his client. The requirement of the production of
authority is essential because the client will be bound by his acquiescence resulting from his
knowledge that he was being represented by said attorney. 9 In the instant case, the extent of
authority of counsel for petitioner has been expressly and continuously assailed but he has failed
to show competent proof that he was indeed duly authorized to represent petitioner.

WHEREFORE, the petition is DENIED. The assailed decision of the Court of Appeals dated 29
July 1993 is AFFIRMED. Costs against petitioner.

SO ORDERED.

237. Rayray v. Chae, 18 SCRA 450 (1966)

Facts:

Rayray married Lee in 1952 in Pusan, Korea. Before the marriage, Lee was able to secure a
marriage license which is a requirement in Korea prior to marrying. They lived together until
1955. Rayray however later found out that Lee had previously lived with 2 Americans and a
Korean. Lee answered by saying that it is not unusual in Korea for a woman to have more than
one partner and that it is legally permissive for them to do so and that there is no legal
impediment to her marriage with Rayray. Eventually they pursued their separate ways. Rayray
later filed before lower court of Manila for an action to annul his marriage with Lee because
Lee’s whereabouts cannot be determined and that his consent in marrying Lee would have not
been for the marriage had he known prior that Lee had been living with other men. His action for
annulment had been duly published and summons were made known to Lee but due to her
absence Rayray moved to have Lee be declared in default. The lower court denied Rayray’s
action stating that since the marriage was celebrated in Korea the court cannot take cognizance
of the case and that the facts presented by Rayray is not sufficient to debunk his marriage with
Lee.

ISSUE: Whether or not Rayray’s marriage with Lee is null and void.

HELD:

The lower court erred in ruling that Philippine courts do not have jurisdiction over the case. As
far as marriage status is concerned, the nationality principle is controlling NOT lex loci
celebracionis. The lower court is however correct in ruling that Rayray’s evidence is not
sufficient to render his marriage with Lee null and void. Rayray said that the police clearance
secured by Lee is meant to allow her to marry after her subsequent cohabitation/s with the other
men – which is considered bigamous in Philippine law. The SC ruled that the police clearance is
wanting for it lacks the signature of the person who prepared it and there is no competent
document to establish the identity of the same. Also, through Rayray himself, Lee averred that it
is ok in Korea for a person who cohabited with other men before to marry another man. This is
an indication that Lee herself is aware that if it were a previous marriage that is concerned then
that could be a legal impediment to any subsequent marriage. Rayray cannot be given credence
in claiming that his consent could have been otherwise altered had he known all these facts prior
to the marriage because he would lie to every opportunity given him by the Court so as to suit his
case.

238. Santos v. CA, 210 SCRA 256 (1992)

FACTS:

The petitioner is a minor and a resident of the Philippines. Private respondent Northwest Orient
Airlines (NOA) is a foreign corporation with principal office in Minnesota, U.S.A. and licensed
to do business and maintain a branch office in the Philippines.

On October 21, 1986, the petitioner purchased from NOA a round-trip ticket in San Francisco.
U.S.A., for his flight from San Francisco to Manila via Tokyo and back. The scheduled departure
date from Tokyo was December 20, 1986. No date was specified for his return to San Francisco.

On December 19, 1986, the petitioner checked in at the NOA counter in the San Francisco
airport for his scheduled departure to Manila. Despite a previous confirmation and re-
confirmation, he was informed that he had no reservation for his flight from Tokyo to Manila. He
therefore had to be wait-listed.

On March 12, 1987, the petitioner sued NOA for damages in the RTC of Makati. On April 13,
1987, NOA moved to dismiss the complaint on the ground of lack of jurisdiction, citing Article
28(1) of the Warsaw Convention, reading as follows:

Art. 28. (1) An action for damage must be brought at the option of the plaintiff, in the territory of
one of the High Contracting Parties, either before the court of the domicile of the carrier or of his
principal place of business, or where he has a place of business through which the contract has
been made, or before the court at the place of destination.

The private respondent contended that the Philippines was not its domicile nor was this its
principal place of business. Neither was the petitioner’s ticket issued in this country nor was his
destination Manila but San Francisco in the United States.

Lower court granted the dismissal, CA affirmed.

ISSUE: WON the Philippines has jurisdiction over the case. (Issue raised by the party is WON
the provision of the Warsaw convention was constitutional)

HELD:

No jurisdiction (the provision is constitutional)

The Convention is a treaty commitment voluntarily assumed by the Philippine government and,
as such, has the force and effect of law in this country. The petitioner’s allegations are not
convincing enough to overcome this presumption. Apparently, the Convention considered the
four places designated in Article 28 the most convenient forums for the litigation of any claim
that may arise between the airline and its passenger, as distinguished from all other places.

NOTES:
WON Warsaw convention applies.

Convention applies to all international transportation of persons performed by aircraft for hire.
Whether the transportation is “international” is determined by the contract of the parties, which
in the case of passengers is the ticket. When the contract of carriage provides for the
transportation of the passenger between certain designated terminals “within the territories of
two High Contracting Parties,” the provisions of the Convention automatically apply and
exclusively govern the rights and liabilities of the airline and its passenger.

WON MNL or SFO was the destination.

The place of destination, within the meaning of the Warsaw Convention, is determined by the
terms of the contract of carriage or, specifically in this case, the ticket between the passenger and
the carrier. Examination of the petitioner’s ticket shows that his ultimate destination is San
Francisco. Although the date of the return flight was left open, the contract of carriage between
the parties indicates that NOA was bound to transport the petitioner to San Francisco from
Manila. Manila should therefore be considered merely an agreed stopping place and not the
destination.

WON Northwest has domicile in the Philippines

Notably, the domicile of the carrier is only one of the places where the complaint is allowed to be
filed under Article 28(1). By specifying the three other places, to wit, the principal place of
business of the carrier, its place of business where the contract was made, and the place of
destination, the article clearly meant that these three other places were not comprehended in the
term “domicile.”

****

Doctrine of rebus sic stantibus: Doctrine constitutes an attempt to formulate a legal principle
which would justify non-performance of a treaty obligation if the conditions with relation to
which the parties contracted have changed so materially and so unexpectedly as to create a
situation in which the exaction of performance would be unreasonable.”

But the more important consideration is that the treaty has not been rejected by the Philippine
government. The doctrine of rebus sic stantibus does not operate automatically to render the
treaty inoperative. There is a necessity for a formal act of rejection, usually made by the head of
State, with a statement of the reasons why compliance with the treaty is no longer required.

Right to court access applies only where the court has jurisdiction. Obviously, the constitutional
guaranty of access to courts refers only to courts with appropriate jurisdiction as defined by law.
It does not mean that a person can go to any court for redress of his grievances regardless of the
nature or value of his claim. If the petitioner is barred from filing his complaint before our
courts, it is because they are not vested with the appropriate jurisdiction under the Warsaw
Convention, which is part of the law of our land.

A number of reasons tends to support the characterization of Article 28(1) as a jurisdiction and
not a venue provision.
First, the wording of Article 32, which indicates the places where the action for damages "must"
be brought, underscores the mandatory nature of Article 28(1).

Second, this characterization is consistent with one of the objectives of the Convention, which is
to "regulate in a uniform manner the conditions of international transportation by air."

Third, the Convention does not contain any provision prescribing rules of jurisdiction other than
Article 28(1), which means that the phrase "rules as to jurisdiction" used in Article 32 must refer
only to Article 28(1). In fact, the last sentence of Article 32 specifically deals with the exclusive
enumeration in Article 28(1) as "jurisdictions," which, as such, cannot be left to the will of the
parties regardless of the time when the damage occurred.

COMMON CARRIERS; JURISDICTION: It is the passenger’s “ultimate destination,” not “an

agreed stopping place” that determines the country where suit against international carrier is to
be filed. Examination of the petitioner's ticket shows that his ultimate destination is San
Francisco. Although the date of the return flight was left open, the contract of carriage between
the parties indicates that NOA was bound to transport the petitioner to San Francisco from
Manila. Manila should therefore be considered merely an agreed stopping place and not the
destination.

Allegation of tort against international carrier does not include action from Warsaw Convention
provision.

The complaint could be instituted only in the territory of one of the High Contracting Parties,
before:

the court of the domicile of the carrier;

the court of its principal place of business;

the court where it has a place of business through which the contract had been made;

the court of the place of destination.

239. Perkins v. Dizon, 69 Phil 186 (1930)

Important Legal Doctrines:

In order that the court may validly try a case, it must have jurisdiction over the subject-matter
and over the persons of the parties. Jurisdiction over the subject-matter is acquired by concession
of the sovereign authority which organizes a court and determines the nature and extent of its
powers in general and thus fixes its jurisdiction with reference to actions which it may entertain
and the relief it may grant. Jurisdiction over the persons of the parties is acquired by their
voluntary appearance in court and their submission to its authority, or by the coercive power of
legal process exerted over their persons.cha

When the defendant is a non-resident and refuses to appear voluntary, the court cannot acquire
jurisdiction over his person even if the summons be served by publication, for he is beyond the
reach of judicial process.

The general rule, therefore, is that a suit against a non-resident cannot be entertained by a
Philippine court. Where, however, the action is in rem or quasi in rem in connection with
property located in the Philippines, the court acquires jurisdiction over the res, and its
jurisdiction over the person of the non-resident is non-essential.
FACTS:
On July 6, 1938, respondent, Eugene Arthur Perkins, instituted an action in the Court of
First Instance of Manila against the Benguet Consolidated Mining Company for dividends
registered in his name, payment of which was being withheld by the company; and, for
the recognition of his right to the control and disposal of said shares, to the exclusion of all
others.

The company filed its answer alleging that the withholding of such dividends and the
non- recognition of plaintiff's right to the disposal and control of the shares were due to
certain demands made with respect to said shares by the petitioner herein, Idonah Slade Perkins,
and by one George H. Engelhard. Including defendant petitioner, Idonah Slade Perkins, and
George H. Engelhard in his amended complaint, respondent Perkins prayed that they be
adjudged without interest in the shares of stock in question and excluded from any claim they
assert thereon. Thereafter, summons by publication were served upon these two non-
resident defendants pursuant to the order of the trial court. Engelhard filed his answer to the
amended complaint while petitioner Idonah Slade Perkins, through counsel, challenged the
jurisdiction of the lower court over her person .

ISSUE:
Whether or not the Court of First Instance of Manila has acquired jurisdiction over the
person of the present petitioner as a non-resident defendant, or, notwithstanding the want of such
jurisdiction, whether or not said court may validly try the case.

RULING:
Yes. Section 398 of our Code of Civil Procedure provides that when a non-resident
defendant is sued in the Philippine courts and it appears, by the complaint or by affidavits,
that the action relates to real or personal property within the Philippines in which said
defendant has or claims a lien or interest, actual or contingent, or in which the relief
demanded consists, wholly or in part, in excluding such person from any interest therein,
service of summons maybe made by publication.
The action being in quasi in rem, The Court of First Instance of Manila has jurisdiction
over the person of the non-resident. In order to satisfy the constitutional requirement of
due process, summons has been served upon her by publication. There is no question as to
the adequacy of publication made nor as to the mailing of the order of publication to
the petitioner's last known place of residence in the United States. But, of course, the action
being quasi in rem and notice having be made by publication, the relief that may be granted
by the Philippine court must be confined to the res, it having no jurisdiction to render a
personal judgment against the non-resident.
240. First Phil International v. CA, 252 SCRA 259 (1996)

Facts:

In the course of its banking operations, the defendant Producer Bank of the Philippines acquired
6 parcels of land with a total area of 101 hectares located at Don Jose, Sta. Rosa, Laguna and
covered by TCT No. T-106932 to T-106937. The property used to be owned by BYME
Investment and Development Corporation which hd them mortgaged with the bank as collateral
for a loan. The plaintiff originals, Demetrio Demetria and Jose Janolo wanted to purchase the
property and thus initiated negotiations for that purpose. In the early part of August 1987 said
plaintiffs, upon the suggestion of BYME investment’s legal counsel, Fajardo met with defendant
Mercurio Rivera, manager of the property management department of the defendant bank. The
meeting was held in pursuant to plaintiffs’ plan to buy the property. After the meeting, plaintiff
Janolo, following the advice of defendant Rivera made a formal purchase offer to the Bank
through a letter dated August 30,1987. Negotiations took place and an offer price was fixed at
P5.5million. During the course of the negotiations, the defendant bank was placed under
conservatorship and a new conservator was appointed to which the name has been refused to
recognize. A derivative suit has been filed against Rivera for the damages suffered from the
alleged perfect contract of sale involving the 6 parcels of land.

Issue: Whether or not a derivative suit may lie involving the bank and its stockholders.

Held:

No. An individual stockholder is permitted to institute a derivative suit on behalf of the

corporation wherein he hold stock in order to protect or vindicate corporate rights, whenever the
officials of the corporation refuse to sue, or are the ones, to be sued or hold the control of the
corporation. In such actions, the suing stockholder is regarded as a nominal party with the
corporation as the real party in interest.

In the face of the damaging admissions taken from the complaint in the second case, petitioners,
quite strangely, sought to deny that the second case was a derivative suit, reasoning that it was
brought not by the minority shareholders, but by Henry Co. etal. who not only hold or control
over 80% of the outstanding capital stock, but also constitute the majority in the board of
directors of petitioners bank. That being so, then they really represent the bank, so whether they
sued derivatively or directly, there is undeniably an identity of interest/entity represented.

In addition to the many cases, where the corporate fiction has been regarded, we now add the
instant case, and declare herewith that the corporate veil cannot be used to shield an otherwise
blatant violation of the prohibition against forum shopping. Shareholders, whether suing as the
majority in direct actions or as the minority in a derivative suit, cannot be allowed to trifle with
court processes particularly where, as in this case, the corporation itself has not been remiss in
vigorously prosecuting or defending corporate causes and in using and applying remedies
available to it. To rule otherwise would be to encourage corporate litigants to use their
shareholders as fronts to circumvent the stringent rules against forum shopping.

From the facts, the official bank price, at any rte, the bank placed its official, Rivera is a position
of authority to accept offers to buy and negotiate the sale by having the offer officially acted
upon by the bank. The bank cannot turn around and say, as it now does, that what Rivera states
as the bank’s action on the matter is not in fact so. It is a familiar doctrine, the doctrine of
ostensible authority, that if a corporation on knowingly permits one of its officers, or any other
agent, to do acts within the scope of apparent authority, and thus holds him out to the public as
possessing power to do those acts, the corporation will, as against any one who has in good faith
dealt with the corporation through such agent, he estopped from denying his authority.

A bank is liable for wrongful acts of its officers done in the interest of the bank or in he course of
dealings of the officers in their representative capacity but not for acts outside the scope of their
authority. A bank holding out its officers and agents as worthy of confidence will not be
permitted to profit by the frauds they my thus be enabled to perpetrate in the apparent scope of
their employment; nor will it be permitted to shrink its responsibility for such fraud even through
no benefit may accrue to the bank therefrom. Accordingly, a banking corporation is liable to
innocent third persons where the representation is made in the course of its business by an agent
acting within the general scope of its authority even though, in the particular case, the agent is
secretly abusing his authority and attempting to perpetrate fraud upon his principal or some other
person, for his own ultimate benefit.

Section 28-A of BP 68 merely gives the conservator power to revoke contracts that are, under
existing law, deemed not to be effective – i.e void, voidable, unenforceable or rescissible. Hence,
the conservator merely takes the place of a bank’s board of directors. What the said board cannot
do – such as repudiating a contract validly entered into under the doctrine of implied authority –
the conservator cannot do either.

241. K.K. Shell v. CA, 188 SCRA 145 (1990)

FACTS:

Kumagai Kaiun Kaisha, Ltd. (Kumagai), a corporation formed and existing under the laws of
Japan, filed a complaint for the collection of a sum of money with preliminary attachment
against Atlantic Venus ("Atlantic"), a corporation registered in Panama, the vessel MV Estella
and Crestamonte Shipping Corporation ("Crestamonte"), a Philippine corporation. Atlantic is the
owner of the MV Estella.

The complaint filed with the Regional Trial Court, alleged that Crestamonte, as bareboat
charterer and operator of the MV Estella, appointed N.S. Shipping Corporation ("NSS"), a
Japanese corporation, as its general agent in Japan. The appointment was formalized in an
Agency Agreement. NSS in turn appointed Kumagai as its local agent in Osaka, Japan. Kumagai
supplied the MV Estella with supplies and servicesuntil it incurred barged expenses for the total
sum of US$ 152, 412.56 but despite repeated demands Crestamonte failed to pay the amounts
due.

NSS and Keihin Narasaki Corporation (Keihin) filed complaints-in-intervention.

Petitioner Fu Hing Oil Co., Ltd. (Fu Hing"), a corporation organized in Hong Kong and not
doing business in the Philippines, filed a motion for leave to intervene with an attached
complaint-in-intervention, alleging that Fu Hing supplied marine diesel oil/fuel to the MV Estella
and incurred barge expenses for the total sum of One Hundred Fifty-two Thousand Four
Hundred Twelve Dollars and Fifty-Six Cents (US$152,412.56) but such has remained unpaid
despite demand and that the claim constitutes a maritime lien. The issuance of a writ of
attachment was also prayed for.

Petitioner K.K. Shell Sekiyu Osaka Hatsubaisho (K.K. Shell), a corporation organized in Japan
and not doing business in the Philippines, likewise filed a motion to intervene with an attached
complaint-in-intervention, alleging that upon request of NSS, Crestamonte's general agent in
Japan, K.K. Shell provided and supplied marine diesel oil/fuel to the M/V Estella at the ports of
Tokyo and Mutsure in Japan and that despite previous demands Crestamonte has failed to pay the
amounts of Sixteen Thousand Nine Hundred Ninety-Six Dollars and Ninety- Six Cents
(US$16,996.96) and One Million Yen (Y1,000,000.00) and that K.K. Shell's claim constitutes a
maritime lien on the MV Estella. The complaint-in-intervention sought the issuance of a writ of
preliminary attachment.

The trial court allowed the intervention of Fu Hing and K.K. Shell respectively. Writs of
preliminary attachment were issued upon posting of the appropriate bonds and thereafter
discharged. Atlantic and the MV Estella moved to dismiss the complaints-in- intervention filed
by Fu Hing and K.K. Shell.

Atlantic and the M/V Estella filed a petition in the Court of Appeals against the trial court judge,
Kumagai, NSS and Keihin, which sought the annulment of the orders of the trial court. Among
others, the omnibus order denied the motion to reconsider the order allowing Fu Hing's
intervention and granted K.K. Shell's motion to intervene. Again Fu Hing and K.K. Shell
intervened.

The Court of Appeals annulled the orders of the trial court and directed it to cease and
desist from proceeding with the case.

According to the Court of Appeals, Fu Hing and K.K. Shell were not suppliers but sub-
agents of NSS, hence they were bound by the Agency Agreement between Crestamonte and
NSS, particularly, the choice of forum clause, which provides:

12.0-That this Agreement shall be governed by the Laws of Japan. Any matters, disputes,
and/or differences arising between the parties hereto concerned regarding this Agreement shall
be subject exclusively to the jurisdiction of the District Courts of Japan.

Thus, concluded the Court of Appeals, the trial court should have disallowed their
motions to intervene. A motion for reconsideration was filed by Fu Hing and K.K. Shell but this
was denied by the Court of Appeals.

However, Private respondents have anticipated the possibility that the courts will not find
that K.K. Shell is expressly bound by the Agency Agreement, and thus they fall back on the
argument that even if this were so, the doctrine of forum non conveniens would be a valid
ground to cause the dismissal of K.K. Shell's complaint-in-intervention.

ISSUES:

Whether or not the doctrine of forum non conveniens would be a valid ground to cause
the dismissal of k.k. shell's complaint-in-intervention?

RULING:

FORUM NON CONVENIENS cannot be ruled as a valid ground to cause the dismissal
because there are still numerous material facts to be established in order to arrive at a conclusion
as to the true nature of the relationship between Crestamonte and K.K. Shell and between NSS
and K.K. Shell. The best recourse would have been to allow the trial court to proceed with case
and consider whatever defenses may be raised by private respondents after they have filed their
answer and evidence to support their conflicting claims has been presented.

The Supreme Court elucidated thus:

Neither are we ready to rule on the private respondents' invocation of the doctrine of
forum non conveniens, as the exact nature of the relationship of the parties is still to be
established. We leave this matter to the sound discretion of the trial court judge who is in the best
position, after some vital facts are established, to determine whether special circumstances
require that his court desist from assuming jurisdiction over the suit. It was clearly reversible
error on the part of the Court of Appeals to annul the trial court's orders, insofar as K.K. Shell is
concerned, and order the trial court to cease and desist from proceeding.

242. Hongkong v. Sheman, 176 SCRA 331 (1989) G.R. No. 72494

FACTS:
It appears that sometime in 1981, Eastern Book Supply Service PTE, Ltd. (COMPANY), a
company incorporated in Singapore applied with and was granted by HSBC Singapore branch an
overdraft facility in the maximum amount of Singapore dollars 200,000 with interest at 3% over
HSBC prime rate, payable monthly, on amounts due under said overdraft facility.

As a security for the repayment by the COMPANY of sums advanced by HSBC to it through the
aforesaid overdraft facility, in 1982, both private respondents and a certain Lowe, all of whom
were directors of the COMPANY at such time, executed a Joint and Several Guarantee in favor
of HSBC whereby private respondents and Lowe agreed to pay, jointly and severally, on demand
all sums owed by the COMPANY to petitioner BANK under the aforestated overdraft facility.

The Joint and Several Guarantee provides, inter alia, that:

This guarantee and all rights, obligations and liabilities arising hereunder shall be construed and
determined under and may be enforced in accordance with the laws of the Republic of
Singapore. We hereby agree that the Courts of Singapore shall have jurisdiction over all disputes
arising under this guarantee. …

The COMPANY failed to pay its obligation. Thus, HSBC demanded payment and inasmuch as
the private respondents still failed to pay, HSBC filed A complaint for collection of a sum of
money against private respondents Sherman and Reloj before RTC of Quezon City.

Private respondents filed an MTD on the ground of lack of jurisdiction over the subject matter.
The trial court denied the motion. They then filed before the respondent IAC a petition for
prohibition with preliminary injunction and/or prayer for a restraining order. The IAC rendered a
decision enjoining the RTC Quezon City from taking further cognizance of the case and to
dismiss the same for filing with the proper court of Singapore which is the proper forum. MR
denied, hence this petition.

ISSUE: Do Philippine courts have jurisdiction over the suit, vis-a-vis the Guarantee stipulation
regarding jurisdiction?

HELD: YES

One basic principle underlies all rules of jurisdiction in International Law: a State does not have
jurisdiction in the absence of some reasonable basis for exercising it, whether the proceedings
are in rem quasi in rem or in personam. To be reasonable, the jurisdiction must be based on some
minimum contacts that will not offend traditional notions of fair play and substantial justice

The defense of private respondents that the complaint should have been filed in Singapore is
based merely on technicality. They did not even claim, much less prove, that the filing of the
action here will cause them any unnecessary trouble, damage, or expense. On the other hand,
there is no showing that petitioner BANK filed the action here just to harass private respondents.

In the case of Neville Y. Lamis Ents., et al. v. Lagamon, etc., where the stipulation was “[i]n case
of litigation, jurisdiction shall be vested in the Court of Davao City.” We held:

Anent the claim that Davao City had been stipulated as the venue, suffice it to say that a
stipulation as to venue does not preclude the filing of suits in the residence of plaintiff or
defendant under Section 2 (b), Rule 4, ROC, in the absence of qualifying or restrictive words in
the agreement which would indicate that the place named is the only venue agreed upon by the
parties.
Applying the foregoing to the case at bar, the parties did not thereby stipulate that only the courts
of Singapore, to the exclusion of all the rest, has jurisdiction. Neither did the clause in question
operate to divest Philippine courts of jurisdiction. In International Law, jurisdiction is often
defined as the light of a State to exercise authority over persons and things within its boundaries
subject to certain exceptions. Thus, a State does not assume jurisdiction over travelling
sovereigns, ambassadors and diplomatic representatives of other States, and foreign military
units stationed in or marching through State territory with the permission of the latter’s
authorities. This authority, which finds its source in the concept of sovereignty, is exclusive
within and throughout the domain of the State. A State is competent to take hold of any judicial
matter it sees fit by making its courts and agencies assume jurisdiction over all kinds of cases
brought before them

NOTES:

The respondent IAC likewise ruled that:

… In a conflict problem, a court will simply refuse to entertain the case if it is not authorized by
law to exercise jurisdiction. And even if it is so authorized, it may still refuse to entertain the case
by applying the principle of forum non conveniens. …

However, whether a suit should be entertained or dismissed on the basis of the principle of forum
non conveniens depends largely upon the facts of the particular case and is addressed to the
sound discretion of the trial court. Thus, the IAC should not have relied on such principle.
Petition granted.

243. Philsec v. CA, 274 SCRA 102 (1997)

FACTS:

Private respondent Ducat obtained separate loans from petitioners Ayala International Finance
Limited (AYALA) and Philsec Investment Corp (PHILSEC), secured by shares of stock owned
by Ducat.

In order to facilitate the payment of the loans, private respondent 1488, Inc., through its
president, private respondent Daic, assumed Ducat’s obligation under an Agreement, whereby
1488, Inc. executed a Warranty Deed with Vendor’s Lien by which it sold to petitioner Athona
Holdings, N.V. (ATHONA) a parcel of land in Texas, U.S.A., while PHILSEC and AYALA
extended a loan to ATHONA as initial payment of the purchase price. The balance was to be paid
by means of a promissory note executed by ATHONA in favor of 1488, Inc. Subsequently, upon
their receipt of the money from 1488, Inc., PHILSEC and AYALA released Ducat from his
indebtedness and delivered to 1488, Inc. all the shares of stock in their possession belonging to
Ducat.

As ATHONA failed to pay the interest on the balance, the entire amount covered by the note
became due and demandable. Accordingly, private respondent 1488, Inc. sued petitioners
PHILSEC, AYALA, and ATHONA in the United States for payment of the balance and for
damages for breach of contract and for fraud allegedly perpetrated by petitioners in
misrepresenting the marketability of the shares of stock delivered to 1488, Inc. under the
Agreement.

While the Civil Case was pending in the United States, petitioners filed a complaint “For Sum of
Money with Damages and Writ of Preliminary Attachment” against private respondents in the
RTC Makati. The complaint reiterated the allegation of petitioners in their respective
counterclaims in the Civil Action in the United States District Court of Southern Texas that
private respondents committed fraud by selling the property at a price 400 percent more than its
true value.

Ducat moved to dismiss the Civil Case in the RTC-Makati on the grounds of (1) litis pendentia,
vis-a-vis the Civil Action in the U.S., (2) forum non conveniens, and (3) failure of petitioners
PHILSEC and BPI-IFL to state a cause of action.

The trial court granted Ducat’s MTD, stating that “the evidentiary requirements of the
controversy may be more suitably tried before the forum of the litis pendentia in the U.S., under
the principle in private international law of forum non conveniens,” even as it noted that Ducat
was not a party in the U.S. case.

Petitioners appealed to the CA, arguing that the trial court erred in applying the principle of litis
pendentia and forum non conveniens.

The CA affirmed the dismissal of Civil Case against Ducat, 1488, Inc., and Daic on the ground of
litis pendentia.

ISSUES:

1. Would the civil action filed be barred by the judgment of the U.S court?
2. Would the dismissal of the civil action be justified on the ground of forum non
conveniens?
3. Does the trial court have jurisdiction over 1488, Inc. and Daic.

RULINGS:

1. No. The foreign judgment cannot be given the effect of res judicata without giving them
an opportunity to impeach it on grounds stated in Rule 39, sec. 50 of the Rules of Court,
to wit: "want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake
of law or fact." In the case at bar, it cannot be said that petitioners were given the
opportunity to challenge the judgment of the U.S. court as basis for declaring it res
judicata or conclusive of the rights of private respondents. The proceedings in the trial
court were summary. Neither the trial court nor the appellate court was even furnished
copies of the pleadings in the U.S. court or apprised of the evidence presented thereat, to
assure a proper determination of whether the issues then being litigated in the U.S. court
were exactly the issues raised in this case such that the judgment that might be rendered
would constitute res judicata. As the trial court stated in its disputed order dated March
9, 1988.
2. No. The trial court’s refusal to take cognizance of the case is unjustified under the
principle of forum non conveniens. First, a motion to dismiss is limited to the grounds
under Rule 16, sec. 1, which does not include forum non conveniens. The propriety of
dismissing a case based on this principle requires a factual determination, hence, it is
more properly considered a matter of defense. Second, while it is within the discretion of
 the trial court to abstain from assuming jurisdiction on this ground, it should do so only
after "vital facts are established, to determine whether special circumstances" require the
court's desistance.

In this case, the trial court abstained from taking jurisdiction solely on the basis of
the pleadings filed by private respondents in connection with the motion to dismiss. It
failed to consider that one of the plaintiffs (PHILSEC) is a domestic corporation and one
of the defendants (Ventura Ducat) is a Filipino, and that it was the extinguishment of the
latter's debt which was the object of the transaction under litigation. The trial court
arbitrarily dismissed the case even after finding that Ducat was not a party in the U.S.
case.

3. It was error we think for the Court of Appeals and the trial court to hold that jurisdiction
over 1488, Inc. and Daic could not be obtained because this is an action in personam and
summons were served by extraterritorial service. Rule 14, §17 on extraterritorial service
provides that service of summons on a nonresident defendant may be effected out of the
Philippines by leave of Court where, among others, "the property of the defendant has
been attached within the Philippines." 18 It is not disputed that the properties, real and
personal, of the private respondents had been attached prior to service of summons under
the Order of the trial court dated April 20, 1987.

244. Communication Materials v. CA, 260 SCRA 673 (1996)

FACTS:

Petitioners COMMUNICATION MATERIALS AND DESIGN, INC., (CMDI) and ASPAC

MULTI-TRADE INC., (ASPAC) are both domestic corporations.. Private Respondents ITEC,
INC. and/or ITEC, INTERNATIONAL, INC. (ITEC) are corporations duly organized and
existing under the laws of the State of Alabama, USA. There is no dispute that ITEC is a foreign
corporation not licensed to do business in the Philippines.

ITEC entered into a contract with ASPAC referred to as “Representative Agreement”. Pursuant
to the contract, ITEC engaged ASPAC as its “exclusive representative” in the Philippines for the
sale of ITEC’s products, in consideration of which, ASPAC was paid a stipulated commission.
Through a “License Agreement” entered into by the same parties later on, ASPAC was able to
incorporate and use the name “ITEC” in its own name. Thus , ASPAC Multi-Trade, Inc. became
legally and publicly known as ASPAC-ITEC (Philippines).

One year into the second term of the parties’ Representative Agreement, ITEC decided to
terminate the same, because petitioner ASPAC allegedly violated its contractual commitment as
stipulated in their agreements. ITEC charges the petitioners and another Philippine Corporation,
DIGITAL BASE COMMUNICATIONS, INC. (DIGITAL), the President of which is likewise
petitioner Aguirre, of using knowledge and information of ITEC’s products specifications to
develop their own line of equipment and product support, which are similar, if not identical to
ITEC’s own, and offering them to ITEC’s former customer.

The complaint was filed with the RTC-Makati by ITEC, INC. Defendants filed a MTD the
complaint on the following grounds: (1) That plaintiff has no legal capacity to sue as it is a
foreign corporation doing business in the Philippines without the required BOI authority and
SEC license, and (2) that plaintiff is simply engaged in forum shopping which justifies the
application against it of the principle of “forum non conveniens”. The MTD was denied.

Petitioners elevated the case to the respondent CA on a Petition for Certiorari and Prohibition
under Rule 65 of the Revised ROC. It was dismissed as well. MR denied, hence this Petition for
Review on Certiorari under Rule 45.

ISSUE:

1. Did the Philippine court acquire jurisdiction over the person of the petitioner corp, despite
allegations of lack of capacity to sue because of non-registration?

2. Can the Philippine court give due course to the suit or dismiss it, on the principle of forum non
convenience?

HELD: petition dismissed.

1. YES; We are persuaded to conclude that ITEC had been “engaged in” or “doing business” in
the Philippines for some time now. This is the inevitable result after a scrutiny of the different
contracts and agreements entered into by ITEC with its various business contacts in the country.
Its arrangements, with these entities indicate convincingly that ITEC is actively engaging in
business in the country.

A foreign corporation doing business in the Philippines may sue in Philippine Courts although
not authorized to do business here against a Philippine citizen or entity who had contracted with
and benefited by said corporation. To put it in another way, 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 a 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.

In Antam Consolidated Inc. vs. CA et al. we expressed our chagrin over this commonly used
scheme of defaulting local companies which are being sued by unlicensed foreign companies not
engaged in business in the Philippines to invoke the lack of capacity to sue of such foreign
companies. Obviously, the same ploy is resorted to by ASPAC to prevent the injunctive action
filed by ITEC to enjoin petitioner from using knowledge possibly acquired in violation of
fiduciary arrangements between the parties.

2. YES; Petitioner’s insistence on the dismissal of this action due to the application, or non
application, of the private international law rule of forum non conveniens defies well-settled
rules of fair play. According to petitioner, the Philippine Court has no venue to apply its
discretion whether to give cognizance or not to the present action, because it has not acquired
jurisdiction over the person of the plaintiff in the case, the latter allegedly having no personality
to sue before Philippine Courts. This argument is misplaced because the court has already
acquired jurisdiction over the plaintiff in the suit, by virtue of his filing the original complaint.
And as we have already observed, petitioner is not at liberty to question plaintiff’s standing to
sue, having already acceded to the same by virtue of its entry into the Representative Agreement
referred to earlier.

Thus, having acquired jurisdiction, it is now for the Philippine Court, based on the facts of the
case, whether to give due course to the suit or dismiss it, on the principle of forum non
convenience. Hence, the Philippine Court may refuse to assume jurisdiction in spite of its having
acquired jurisdiction. Conversely, the court may assume jurisdiction over the case if it chooses to
do so; provided, that the following requisites are met:

1) That the Philippine Court is one to which the parties may conveniently resort to;

2) That the Philippine Court is in a position to make an intelligent decision as to the law and the
facts; and,

3) That the Philippine Court has or is likely to have power to enforce its decision.

The aforesaid requirements having been met, and in view of the court’s disposition to give due
course to the questioned action, the matter of the present forum not being the “most convenient”
as a ground for the suit’s dismissal, deserves scant consideration.

245. Manila Hotel v. NLRC, 343 SCRA 1 (2000)

FACTS:

In May 1988, Santos was hired as an overseas worker in Oman. In June, he was recruited
by Palace Hotel in China. While he was still in Oman, because it offered higher pay and benefits,
Santos accepted the offer and started working in November. The employment between him and
Palace Hotel was without the intervention of POEA. In August 1989, Santos was informed he
will be terminated due to business reverses. Subsequently, he was terminated and paid all
benefits due to him, including plane fare back to the Philippines.

In February 1990, Santos filed a complaint for illegal dismissal against Manila Hotel
Corp., (MHC), a government owned and controlled corporation and Manila Hotel International,
Ltd (MHIL), a Hong Kong Corp, 50% of which is owned by MHL.

The LA decided the case against petitioners. Petitioners appealed to the NLRC, arguing
that the POEA, not the NLRC hada jurisdiction over the case. The NLRC promulgated a
resolution, stating that the appealed Decision be declared null and void for want of jurisdiction.

Santos moved for reconsideration of the afore-quoted resolution. He argued that the case
was not cognizable by the POEA as he was not an “overseas contract worker.” The Labor Arbiter
granted the motion and reversed itself. The NLRC directed another LA to hear the case on the
question of whether private respondent was retrenched or dismissed. The LA found that Santos
was illegally dismissed from employment and recommended that he be paid actual damages
equivalent to his salaries for the unexpired portion of his contract. The NLRC ruled in favour of
private respondent.

ISSUE: Whether or not the NLRC has jurisdiction over the case?

HELD:

No. NLRC had not jurisdiction over the case. It is an inconvenient forum. Though Santos
is a Filipino, his contract was not entered into in the Philippines. It was also entered into without
the intervention of POEA.

Although MHC owns 50% of MHIL, it has no direct business in the affairs of the Palace
Hotel. MHC and MHIL are separate entities. Further, MHIL and the Palace Hotel are not doing
business in the Philippines; their agents/officers are not residents of the Philippines.

Under the rule of forum non conveniens, a Philippine court or agency may assume
jurisdiction over the case if it chooses to do so provided: (1) that the Philippine court is one to
which the parties may conveniently resort to; (2) that the Philippine court is in a position to make
an intelligent decision as to the law and the facts; and (3) that the Philippine court has or is likely
to have power to enforce its decision. The conditions are unavailing in the case at bar.
246. Soriano v. IAC, 167 SCRA 222 (1998)

Where is the proper venue of a libel case for the purpose of conferring jurisdiction on a trial
court when the complainant is a public officer?

On complaint of private respondent Francisco S. Tantuico, Jr. the then Chairman of the
Commission on Audit (COA), an information for libel was filed against petitioner Marcelo
Soriano and six (6) others in connection with press releases and articles imputing to Tantuico the
tampering by COA personnel of election returns in the May 14, 1984 Batasan elections at his
residence in Tacloban City and in the COA Regional Office in Palo, Leyte. This election offense
was allegedly committed at Tantuico's behest to assure the victory of certain candidates in the
said Batasan elections. The information which was filed with the Regional Trial Court of Leyte
states:

The undersigned City Fiscal of the City of Tacloban accuses Marcelo B. Soriano,
Bobby de la Cruz, Cesar Villegas Cirilo "Roy" Montojo, Emmanuel "Butch"
Veloso, Valenta U. Quintero and John "Doe", of the crime of Libel, committed as
follows:

That during the period from May 26, 1984 to June 1, 1984, in the City of
Tacloban, Philippines and within the jurisdiction of this Honorable Court, the
above-named accused, conspiring and confederating together and mutually
helping one another, did then and there wilfully, unlawfully and feloniously,
without justifiable motive and with malicious intent of impeaching the reputation,
honesty and virtue of Commission on Audit Chairman Francisco S. Tantuico, Jr.,
and with the malicious intent of injuring and exposing the latter to public hatred,
contempt and ridicule, published/republished in the "THE GUARDIAN" dated
May 26-June 1, 1984, a weekly newspaper/ magazine circulated in Tacloban City
and nationwide, of which accused Marcelo B. Soriano and Bobby de la Cruz are
the Editor Publisher and Associate Editor, respectively, the press release of
accused Cesar G. Villegas written/printed and first circulated/published in
Tacloban City dated May 19, 1984, copy of which is hereto attached as part of
this Information, publicly imputing the crime of falsification of public documents
and/or violation of election laws to said Chairman Francisco S. Tantuico, Jr.,
publication in the said newspaper is captioned "IMPEACH TANTUICO CASE
LOOMS", quoted verbatim to wit:

Unido lawyers are studying the filing of impeachment proceedings against

Commission on Audit regional head Francisco Tantuico, Jr. because election
returns were reportedly talled at his COA Regional Office and at his residence.

The tamper hunt trail started when a "sympathetic" COA employee informed
Con-Con delegate Roy Montejo of the 'new' tally sites.

If you want to raid or to know where the election returns are being changed,
proceed immediately to the Tantuico residence of the Commission on Audit, said
a telephone tip received by Montejo.

Tente U. Quintero former Leyte vice-mayor reported that, with fellow candidates,
Atty. Cesar Villegas and Emmanuel Veloso, all Unido bets for the five-slot
Batasan race in Leyte, Montejo and their supporters went to the Tantuico
residence some 2.5 kms., from the city proper. Having no warrant of arrest (sic)
barred their entry.

At the regional COA office at Candahug Palo, Leyte, around 11 kms., from
Tacloban, they were able to enter and were told to wait for the regional director.
 People coming in and out of the conference room attracted their attention. The
open door revealed election returns being opened by persons inside, Identified
later as COA personnel who were "shocked" to see the candidates query that they
were "merely tallying the votes for the five KBL candidates", the personnel later
added that they "did not know" who instructed them to do so.

When the photographer called by one of Mr. Veloso's assistants came, the COA
personnel drifted off one by one; leaving only the conference room, the election
returns and the envelopes ready to be photographed. It was assumed that the
personnel were wary of being photographed with the election returns.

Lack of sufficient basis for comparison led to the uncertainty of the returns being
declared as tampered or not. However, Montejo said that the returns were
supposed to have been with the Provincial Comelec supervisor, Filomeno Azeta,
as the provincial canvassing at the Leyte Provincial Capitol was still in progress at
the time of the raid.

COA Regional Director Sofronio Flores, Jr., upon seeing the three candidates,
tried to explain things. But, Unido supporters said, he failed to answer certain
questions.

The Unido lawyers, meanwhile, started preparing legal charges against the parties
seen guilty wherein said Chairman Francisco S. Tantuico, Jr., is portrayed in the
aforequoted newspaper/magazine publication as directing and/or orchestrating on
or about May 17, 1984 the tampering of the election returns for the May 14, 1984
elections in Leyte to assure the victory of certain candidates in said elections,
when in truth and in fact he has no knowledge of the alleged wrongdoing imputed
to him as at said time he was in Quezon City holding office as such Chairman of
the Commission on Audit.

Contrary to law. (pp. 24-26, Rollo)

The case was docketed as Criminal Case No. 6136 of the Leyte court. The petitioner filed a
motion to quash the information on the ground of improper venue. The petitioner contended that
the court has no jurisdiction over the offense charged because under Article 360 of the Revised
Penal Code, the libel case should have been filed at Quezon City where Tantuico holds office and
where the publication house of the "Guardian" is located.

The trial court denied the motion in a resolution dated May 16, 1985, the dispositive portion of
which reads:

Wherefore, considering that the libelous article complained contained in a press

release was printed and first published in the City of Tacloban and venue for this
case has been Properly laid in accordance with Article 360 of the Revised Penal
Code, the motion to quash the information herein filed by defendant Marcelo
Soriano is hereby denied. (p. 6, Rollo)

The petitioner then filed a petition for certiorari prohibition with prayer for a writ of preliminary
injunction with the then Intermediate Appellate Court raising the same question of jurisdiction of
the Regional Trial Court of Leyte to hear and decide the libel case on the merits.

The appellate court dismissed the petition in a decision dated September 12, 1985. It held that the
Regional Trial Court of Leyte had jurisdiction over the libel case. The appellate court also denied
a motion for reconsideration. Hence, this petition.

The only issue to be threshed out in the instant petition is whether or not the Regional Trial Court
of Leyte may try the libel case or whether or not it should be tried elsewhere.
The applicable law is Article 360 of the Revised Penal Code, as amended by Republic Act No.
1289 and Republic Act No. 4363. It provides:

Persons responsible.—Any person who shall publish exhibit or cause the

publication or exhibition of any defamation in writing or by similar means shall
be responsible for the same.

The author or editor of a book or pamphlet, or the editor or business manager of a

daily newspaper, magazine or serial publication, shall be responsible for the
defamations contained therein to the same extent as if he were the author thereof.

The criminal action and civil action for damages in cases of written defamations
as provided for in this chapter shall be filed simultaneously or separately with the
court of first instance of the province or city where the libelous article is printed
and first published or where any of the offended parties actually resides at the
time of the commission on of the offense: Provided, however, That where one of
the offended parties is a public officer whose office is in the City of Manila at the
time of the commission of the offense, the action shall be filed in the Court of
First Instance of the City of Manila or of the city, or province where the libelous
article is printed and first published, and in case such public officer does not hold
office in the City of Manila, the action shall be filed in the Court of First Instance
of the province or city where he held office at the time of the commission of the
offense or where the libelous article is printed and first published and in case one
of the offended parties is a private individual, the action shad be filed in the Court
of First Instance of the province or city where he actually resides at the time of the
commission of the offense or where the libelous matter is printed and first
published: ...

This Court in Agbayani v. Sayo (89 SCRA 699, [1979]) recapitulated the law as follows:

1. Whether the offended party is a public official or a private person, the criminal
action may be filed in the Court of First Instance of the province or city where the
libelous article is printed and first published.

2. If the offended party is a private individual, the criminal action may also be
filed in the Court of First Instance of the province where he actually resided at the
time of the commission of the offense.

3. If the offended party is a public officer whose office is in Manila at the time of
the commission of the offense, the action may be filed in the Court of First
Instance of Manila.

4. If the offended party is a public officer holding office outside of Manila, the
action may be filed in the Court of First Instance of the province or city where he
held office at the time of the commission of the offense. (at P. 705)

Both the trial court and the appellate court applied the rule that the jurisdiction of a court to try
an offense is determined by the allegations of the complaint or information (People v. Delfin, 2
SCRA 911, [1961]) and since the information alleged that the libelous article was printed and
first published in Tacloban City, the offense should be tried in Leyte. The petition is impressed
with merit.

We follow the "multiple publication" rule in the Philippines. Thus, in the cases of Montinola v.
Montalvo (34 Phil. 662, [1916]) and United States v. Sotto (36 Phil. 389 9171), this Court ruled
that each and every publication of the same libel constitutes a distinct offense. Stated more
succinctly for purposes of ascertaining jurisdiction under Art. 360 of the Revised Penal Code, as
amended, every time the same written matter is communicated such communication is
considered a distinct and separate publication of the libel.

We explained this as follows:

The common law as to causes of action for tort arising out of a single publication
was to the effect that each communication of a written or printed matter was a
distinct and separate publication of a libel contained therein, giving rise to a
separate cause of action. This rule ("multiple publication" rule) is still followed in
several American jurisdictions, and seems to be favored by the American Law
Institute. Other jurisdictions have adopted the "single publication" rule which
originated in New York, under which any single integrated publication, such as
one edition of a newspaper, book, or magazine, or one broadcast, is treated as a
unit, giving rise to only one- of action, regardless of the number of times it is
exposed to different people... (50 Am. Jur. 2d 659 cited in Time, Inc. v. Reyes) (39
SCRA 301,:313 [1971]).<äre||anº•1àw>

Petitioner Marcelo B. Soriano was included as one of the accused in the libel case in his capacity
as editor-publisher of the "Guardian." Article 360 of the Revised Penal Code provides that "the
editor or business manager of a daily newspaper, magazine ... shall be responsible for the
defamations contained therein to the same extent as if he were the author thereof." Soriano's
criminal liability, thereof, was based on a press release prepared in Tacloban City and mailed or
delivered to various newspapers. The press release was the basis of the alleged libelous article
contained in the "GUARDIAN." Thus, as far as Soriano is concerned, his criminal liability, if
any, allegedly stemmed from the publication in the May 26-June 1, 1984 issue of the
GUARDIAN of an article captioned "IMPEACH TANTUICO CASE LOOMS" wherein the full
text of the press release prepared by accused Cesar G. Villegas in Tacloban was reproduced.
Obviously, as far as petitioner Marcelo B. Soriano is concerned, the requirement as regards the
place where the libelous article was printed and first published must be construed as referring to
the publication of the press release of accused Cesar Villegas in Soriano's newpaper "THE
GUARDIAN."

The error of the trial court lies in its confusing the publication, whether mimeographed or
otherwise, of a press release by Villegas in Tacloban City with the publication by a Metro Manila
newspaper of that same press release together with various press releases or dispatches from
other parts of the country. For purposes of complying with the jurisdictional requirements of Art.
360 of the Revised Penal Code, the liability of a Manila or Quezon City editor must be deemed
as commencing with the publication of the allegedly libelous material in his newspaper and not
with the typing or mimeographing of press releases by interested persons in different
municipalities or cities, copies of which are sent to metropolitan newspapers for national
publication. The amendments to Art. 360 were intended to free media persons from the
intimidating harassment of libel suits filed in any place where a newspaper happens to be sold or
circulated. The purpose behind the law would be negated or violated if the interpretation made
by the trial court and appellate court is followed.

The May 26-June 1, 1984 issue of THE GUARDIAN shows that the newspaper is published
every Wednesday and Saturday with editorial and business offices located at Room 201, Llames
Building, 694 E. de los Santos Avenue, Cubao, Quezon City. The intended circulation is
nationwide. There is no indication from the records before us, apart from the petitioner's
receiving the press release and publishing it in the GUARDIAN, that he had a hand in its
preparation and distribution from Tacloban City.

As the respondent COA Chairman held office in Quezon City and the offending newspaper is
published in Quezon City, the case should be filed with a Quezon City court.

The Solicitor General, assisted by Assistant Solicitor General Oswaldo D. Agcaoili and Solicitor
Aurora Cortes-Jorge, disagree with the prosecution in this case. He states:
 A more circumspect reading of the information, insofar as petitioner Soriano and
co-accused Bobby de la Cruz, Editor Publisher and Associate Editor, respectively,
of The Guardian are concerned, shows that the criminal charges does not at all
state that the libelous article against Tantuico was printed and first published in
Tacloban City. Indeed, what the information merely recites is that said accused
"published/republished in "The Guardian" dated May 26-June 1, 1984, a weekly
newspaper/magazine circulated in Tacloban City and nationwide, of which
accused Marcelo B. Soriano and Bobby de la Cruz are the Editor Publisher and
Associate Editor, respectively, ... publicly imputing the crime of falsification of
public documents and/ or violation of election laws to said Chairman Francisco S.
Tantuico, Jr., which publication in the said newspaper is captioned "IMPEACH
TANTUICO CASE LOOMS", quoted verbatim to wit: ...

As a matter of fact, what the crime information does clearly asserts as having
been written / printed and first circulated/published in Tacloban City dated May
19, 1984 was the press release of accused Cesar G. Villegas which the city fiscal
to have likewise contained the malicious imputation against Tantuico. Apparently,
this was made the basis, albeit mistakenly, by the dent trial court in vesting
jurisdiction upon itself over the libel mm against petitioner whose only
involvement in the imputed offense refers to the publication of the
Guardian and not to the press release of the accused Villegas. The error is made
more apparent even from a reading of the information itself which shows that the
Villegas press release was issued on May 19, 1984 which was earlier than the
questioned publication of The Guardian which is dated May 26-June 1, 1984.

Even a recall of a copy of said issue of The Guardian (May 26-June 1, 1984) will
easily yield the fact that said newspaper was printed and first published in Quezon
City where its publishing house is located. As such, the publication in The
Guardian constituted a separate case of action for libel which should have been
filed in Quezon City. It is a settled jurisprudence that each separate publication of
a libel constitutes a distinct crime of libel, although two libelous publications
arose out of the same controversy and even if one was a partial reiteration of the
first. (People v. Vicente Sotto, 36 Phil. 389; Montinola v. Montalvo, 34 Phil. 662)

The foregoing having failed to evince any finding that the alleged libelous
statements were printed and first published in Tacloban City, but were in fact
printed and first published in Quezon City, and considering the admitted fact that
Tantuico, at the time of the commission of the offense, was a public official whose
office is located in Quezon City, the application of the provisions of Article 360 of
the Revised Penal Code constrain a conclusion that the venue and jurisdiction
over subject criminal case for libel should be lodged not in Tacloban City but in
Quezon City. (pp. 75-77, Rollo)

This decision, in helping or making it easier for media people to meet their occupational hazard
of libel suits, should by no means be viewed as encouraging irresponsible or licentious
publications.

Public officers and private individuals who are wronged through an inordinate exercise by
newspapermen or media of freedom of speech and of the press have every right to avail
themselves of the legal remedies for libel. Media cannot hide behind the constitutional guarantee
of a free press to maliciously and recklessly malign the persons and reputations of public or
private figures through the publication of falsehoods or fabrications, the sordid distortion of half-
truths, or the playing up of human frailties for no justifiable end but to malign and titillate.

At the same time, the Court should be vigilant against all attempts to harass or persecute an
independent press or to restrain and chill the free expression of opinions. In this case, the intent
of the amendment is to avoid the harassment of media persons through libel suits instituted in
distant or out-of the-way towns by public officers who could more conveniently file cases in
their places of work.

WHEREFORE, the instant petition is hereby GRANTED. The questioned decision and
resolution of the appellate court are REVERSED and SET ASIDE. The Regional Trial Court of
Leyte, Branch 7, Palo, Leyte is DIRECTED TO DISMISS Criminal Case No. 6136 in so far its
petitioner Marcelo Soriano is concerned.

SO ORDERED.

247. Diaz v. Adiong, 219 SCRA 631 (1993)

G.R. No. 106847. March 5, 1993.

PATRICIO P. DIAZ, petitioner, vs. JUDGE SANTOS B. ADIONG, RTC, Br. 8, Marawi City,
SULTAN MACORRO L. MACUMBAL, SULTAN LINOG M. INDOL, MACABANGKIT
LANTO and MOHAMADALI ABEDIN, respondents.

Rex J.M.A. Fernandez for petitioner.

Mangurun B. Batuampar for respondents.

SYLLABUS

1. REMEDIAL LAW; ACTIONS; VENUE OF LIBEL CASE WHERE OFFENDED PARTY IS

AN PUBLIC OFFICIAL. — From the provision of Article 360, third paragraph of the Revised
Penal Code as amended by R.A. 4363, it is clear that an offended party who is at the same time a
public official can only institute an action arising from libel in two (2) venues: the place where
he holds office, and the place where the alleged libelous articles were printed and first published.

2. ID.; ID.; IMPROPER VENUE; MUST BE RAISED IN A NOTION TO DISMISS PRIOR TO

A RESPONSIVE PLEADING. — Unless and until the defendant objects to the venue in a
motion to dismiss prior to a responsive pleading, the venue cannot truly be said to have been
improperly laid since, for all practical intents and purposes, the venue though technically wrong
may yet be considered acceptable to the parties for whose convenience the rules on venue had
been devised.

3. ID.; ID.; ID.; WAIVED IN CASE AT BAR BY FILING ANSWER. — Petitioner Diaz then, as
defendant in the court below, should have timely challenged the venue laid in Marawi City in a
motion to dismiss, pursuant to Sec. 4, Rule 4, of the Rules of Court. Unfortunately, petitioner had
already submitted himself to the jurisdiction of the trial court when he filed his Answer to the
Complaint with Counterclaim. His motion to dismiss was therefore belatedly filed and could no
longer deprive the trial court of jurisdiction to hear and decide the instant civil action for
damages. Well-settled is the rule that improper venue may be waived and such waiver may occur
by laches. Sec. 1 of Rule 16 provides that objections to improper venue must be made in a
motion to dismiss before any responsive pleading is filed. Responsive pleadings are those which
seek affirmative relief and set up defenses. Consequently, having already submitted his person to
the jurisdiction of the trial court, petitioner may no longer object to the venue which, although
mandatory in the instant case, is nevertheless waivable. As such, improper venue must be
seasonably raised, otherwise, it may be deemed waived.

4. ID.; ID.; ID.; RELATES TO TRIAL AND NOT TO JURISDICTION. — Indeed, the laying of
venue is procedural rather than substantive, relating as it does to jurisdiction of the court over the
person rather than the subject matter. Venue relates to trial and not to jurisdiction.
DECISION

BELLOSILLO, J p:

VENUE in the instant civil action for damages arising from libel was improperly laid;
nonetheless, the trial court refused to dismiss the complaint. Hence, this Petition for Certiorari,
with prayer for the issuance of a temporary restraining order, assailing that order of denial 1 as
well as the order denying reconsideration. 2

The facts: On 16 July 1991, the Mindanao Kris, a newspaper of general circulation in Cotabato
City, published in its front page the news article captioned "6-Point Complaint Filed vs.
Macumbal," and in its Publisher's Notes the editorial, "Toll of Corruption," which exposed
alleged anomalies by key officials in the Regional Office of the Department of Environment and
Natural Resources. 3

On 22 July 1991, the public officers alluded to, namely, private respondents Sultan Macorro L.
Macumbal, Sultan Linog M. Indol, Atty. Macabangkit M. Lanto and Atty. Mohamadali Abedin,
instituted separate criminal and civil complaints arising from the libel before the City
Prosecutor's Office and the Regional Trial Court in Marawi City. The publisher-editor of the
Mindanao Kris, petitioner Patricio P. Diaz, and Mamala B. Pagandaman, who executed a sworn
statement attesting to the alleged corruption, were named respondents in both complaints. 4

On 2 September 1991, the City Prosecutor's Office dismissed the criminal case thus 5 —

"WHEREFORE . . . this investigation in the light of Agbayani vs. Sayo case finds that it has no
jurisdiction to handle this case and that the same be filed or instituted in Cotabato City where
complainant is officially holding office at the time respondents caused the publication of the
complained news item in the Mindanao Kris in Cotabato City, for which reason it is
recommended that this charge be dropped for lack of jurisdiction."

In the interim, the civil complaint for damages, docketed as Civil Case No. 385-91 and raffled to
Branch 10 of the Regional Trial Court in Marawi City, was set for Pre-Trial Conference. The
defendants therein had already filed their respective Answers with Counterclaim.

On 18 November 1991, petitioner Diaz moved for the dismissal of the action for damages on the
ground that the trial court did not have jurisdiction over the subject matter. He vehemently
argued that the complaint should have been filed in Cotabato City and not in Marawi City. 6

Pending action on the motion, the presiding judge of Branch 10 inhibited himself from the case
which was thereafter reraffled to the sala of respondent judge.

On 15 June 1991, respondent judge denied petitioner's Motion to Dismiss for lack of merit. Diaz
thereafter moved for reconsideration of the order of denial. The motion was also denied in the
Order of 27 August 1991, prompting petitioner to seek relief therefrom.

Petitioner Diaz contends that the civil action for damages could not be rightfully filed in Marawi
City as none of the private respondents, who are all public officers, held office in Marawi City;
neither were the alleged libelous news items published in that city. Consequently, it is petitioner's
view that the Regional Trial Court in Marawi City has no jurisdiction to entertain the civil action
for damages.

The petitioner is correct. Not one of the respondents then held office in Marawi City: respondent
Macumbal was the Regional Director for Region XII of the DENR and held office in Cotabato
City; respondent Indol was the Provincial Environment and Natural Resources Officer of Lanao
del Norte and held office in that province; respondent Lanto was a consultant of the Secretary of
the DENR and, as averred in the complaint, was temporarily residing in Quezon City; and,
respondent Abedin was the Chief of the Legal Division of the DENR Regional Office in
Cotabato City. 7 Indeed, private respondents do not deny that their main place of work was not in
Marawi City, although they had sub-offices therein.

Apparently, the claim of private respondents that they maintained sub-offices in Marawi City is a
mere afterthought, considering that it was made following the dismissal of their criminal
complaint by the City Prosecutor of Marawi City. Significantly, in their complaint in civil Case
No. 385-91 respondents simply alleged that they were residents of Marawi City, except for
respondent Lanto who was then temporarily residing in Quezon City, and that they were public
officers, nothing more. This averment is not enough to vest jurisdiction upon the Regional Trial
Court of Marawi City and may be properly assailed in a motion to dismiss.

The Comment of private respondents that Lanto was at the time of the commission of the offense
actually holding office in Marawi City as consultant of LASURECO can neither be given
credence because this is inconsistent with their allegation in their complaint that respondent
Lanto, as consultant of the Secretary of the DENR, was temporarily residing in Quezon City.

Moreover, it is admitted that the libelous articles were published and printed in Cotabato City.
Thus, respondents were limited in their choice of venue for their action for damages only to
Cotabato City where Macumbal, Lanto and Abedin had their office and Lanao del Norte where
Indol worked. Marawi City is not among those where venue can be laid.

The third paragraph of Art. 360 of the Revised Penal Code, as amended by R.A. No. 4363,
specifically requires that —

"The criminal and civil action for damages in cases of written defamations as provided for in this
chapter, shall be filed simultaneously or separately with the Court of First Instance (now
Regional Trial Court) of the province or city where the libelous article is printed and first
published or where any of the offended parties actually resides at the time of the commission of
the offense: Provided, however, that where one of the offended parties is a public officer . . .
(who) does not hold office in the City of Manila, the action shall be filed in the Court of First
Instance (Regional Trial Court) of the province or city where he held office at the time of the
commission of the offense or where the libelous article is printed and first published and in case
one of the the offended parties is a private individual, the action shall be filed in the Court of
First Instance of the province or city where he actually resides at the time of the commission of
the offense or where the libelous matter is printed and first published . . . . " (emphasis supplied)

From the foregoing provision, it is clear that an offended party who is at the same time a public
official can only institute an action arising from libel in two (2) venues: the place where he holds
office, and the place where the alleged libelous articles were printed and first published.

Private respondents thus appear to have misread the provisions of Art. 360 of the Revised Penal
Code, as amended, when they filed their criminal and civil complaints in Marawi City. They
deemed as sufficient to vest jurisdiction upon the Regional Trial Court of Marawi City the
allegation that "plaintiffs are all of legal age, all married, Government officials by occupation
and residents of Marawi City." 8 But they are wrong.

Consequently, it is indubitable that venue was improperly laid. However, unless and until the
defendant objects to the venue in a motion to dismiss prior to a responsive pleading, the venue
cannot truly be said to have been improperly laid since, for all practical intents and purposes, the
venue though technically wrong may yet be considered acceptable to the parties for whose
convenience the rules on venue had been devised. 9

Petitioner Diaz then, as defendant in the court below, should have timely challenged the venue
laid in Marawi City in a motion to dismiss, pursuant to Sec. 4, Rule 4, of the Rules of Court.
Unfortunately, petitioner had already submitted himself to the jurisdiction of the trial court when
he filed his Answer to the Complaint with Counterclaim. 10
His motion to dismiss was therefore belatedly filed and could no longer deprive the trial court of
jurisdiction to hear and decide the instant civil action for damages. Well-settled is the rule that
improper venue may be waived and such waiver may occur by laches. 11

Petitioner was obviously aware of this rule when he anchored his motion to dismiss on lack of
cause of action over the subject matter, relying on this Court's ruling in Time, Inc. v. Reyes. 12
Therein, We declared that the Court of First Instance of Rizal was without jurisdiction to take
cognizance of Civil Case No. 10403 because the complainants held office in Manila, not in
Rizal, while the alleged libelous articles were published abroad.

It may be noted that in Time, Inc. v. Reyes, the defendant therein moved to dismiss the case
without first submitting to the jurisdiction of the lower court, which is not the case before Us.
More, venue in an action arising from libel is only mandatory if it is not waived by defendant.
Thus —

"The rule is that where a statute creates a right and provides a remedy for its enforcement, the
remedy is exclusive; and where it confers jurisdiction upon a particular court, that jurisdiction is
likewise exclusive, unless otherwise provided. Hence, the venue provisions of Republic Act No.
4363 should be deemed mandatory for the party bringing the action, unless the question of venue
should be waived by the defendant . . . . " 13

Withal, objections to venue in civil actions arising from libel may be waived; it does not, after
all, involve a question of jurisdiction. Indeed, the laying of venue is procedural rather than
substantive, relating as it does to jurisdiction of the court over the person rather than the subject
matter. 14 Venue relates to trial and not to jurisdiction.

Finally, Sec. 1 of Rule 16 provides that objections to improper venue must be made in a motion
to dismiss before any responsive pleading is filed. Responsive pleadings are those which seek
affirmative relief and set up defenses. Consequently, having already submitted his person to the
jurisdiction of the trial court, petitioner may no longer object to the venue which, although
mandatory in the instant case, is nevertheless waivable. As such, improper venue must be
seasonably raised, otherwise, it may be deemed waived.

WHEREFORE, for lack of merit, the Petition for Certiorari is DISMISSED and the Temporary
Restraining Order heretofore issued is LIFTED.

This case is remanded to the court of origin for further proceedings.

SO ORDERED.

248. Time v. Reyes, 39 SCRA 303 (1971) (photos)

REYES, J.B.L., J.:

Petition for certiorari and prohibition/with preliminary injunction, to annul certain orders of the
respondent Court of First Instance of Rizal, issued in its Civil Case No. 10403, entitled "Antonio
J. Villegas and Juan Ponce Enrile vs. Time, Inc., and Time-Life International, Publisher of 'Time'
Magazine (Asia Edition)," and to prohibit the said court from further proceeding with the said
civil case.
Upon petitioner's posting a bond of P1,000.00, this Court, as prayed for, ordered, on 15 April
1968, the issuance of a writ of preliminary injunction.
The petition alleges that petitioner Time, Inc.,[1] is an American corporation with principal offices
at Rockefeller Center, New York City, N.Y., and is the publisher of "Time," a weekly news
magazine; the petition, however, does not allege the petitioner's legal capacity to sue in the courts
of the Philippines.[2]
In the aforesaid Civil Case No. 10403, therein plaintiffs (herein respondents) Antonio J, Villegas
and Juan Ponce Enrile seek to recover from the herein petitioner damages upon an alleged libel
arising from a publication of Time (Asia Edition) magazine, in its issue of 18 August 1967, of an
essay, entitled "Corruption in Asia," which, in part, reads, as follows:
"The problem of Manila's mayor, ANTONIO VILLEGAS, is a case in point. When it was
discovered last year that the mayor's coffers contained far more pesos than seemed reasonable in
the light of his income, an investigation was launched. Witnesses who had helped him out under
curious circumstance were asked to explain in court. One government official admitted lending
Villegas P30,000 pesos ($7,700) without interest because he was the mayor's compadre. An
assistant declared he had given Villegas loans without collateral because he regarded the boss as
my own son. A wealthy Manila businessman testified that he had lent Villegas' wife 15,000
pesosbecause the mayor was like a brother to me. With that, Villegas denounced the investigation
as an invasion of his family's privacy. The case was dismissed on a technicality, and Villegas is
still mayor."[3]
More' specifically, the plaintiffs' complaint alleges, inter alia, that:
"(4) Defendants, conspiring and confederating, published a libelous article, publicly, falsely and
maliciously imputing to Plaintiffs the commission of the crimes of graft, corruption and
nepotism; that said publication particularly referred to Plaintiff Mayor Antonio J. Villegas as a
case in point in connection with graft, corruption and nepotism in Asia; that said publication
without any doubt referred to co-plaintiff Juan Ponce Enrile as the high government official who
helped under curious circumstances Plaintiff Mayor Antonio J. Villegas in lending the latter
approximately P30,000.00 (S7,700.00) without interest because he was the Mayor's compadre;
that the purpose of said publication is to cause the dishonor, discredit and put in public contempt
the Plaintiffs, particularly Plaintiff Mayor Antonio J. Villegas."
On motion of the respondents-plaintiffs, the respondent judge, on 25 November 1967, granted
them leave to take the depositions "of Mr. Anthony Gonzales, Time-Life International," and "Mr.
CesarB. Enriquez, Muller & Phipps (Manila) Ltd.," in connection with the activities and
operations in the Philippines of the petitioner, and, on 27 November 1967, issued a writ of
attachment on the real and personal estate of Time, Inc.
Petitioner received the summons and a copy of the complaint at its offices in New York on 13
December 1967 and, on 27 December 1967, it filed a motion to dismiss the complaint for lack of
jurisdiction and improper venue, relying upon the provisions of Republic Act 4363. Private
respondents opposed the motion.
In an order, dated 26 February 1968, respondent court deferred the determination of the motion
to dismiss until after trial of the case on the merits, the court having considered that the grounds
relied upon in the motion do not appear to be indubitable.
Petitioner moved for reconsideration of the deferment; private respondents again opposed.
On 30 March 1968, respondent judge issued an order reaffirming the previous order of deferment
for the reason that "the rule laid down under Republic Act No. 4363, amending Article 360 of the
Revised Penal Code, is not applicable to actions against non-resident defendants, and because
questions involving harassments and inconvenience, as well as disruption of public service do
not appear indubitable,. . . "
Failing in its efforts to discontinue the taking of the depositions, previously adverted to, and to
have action taken, before trial, on its motion to dismiss, petitioner filed the instant petition for
certiorari and prohibition.
The orders for the taking of the said depositions, for deferring determination of the motion to
dismiss, and for re-affirming the deferment, and the writ of attachment are sought to be annulled
in the petition.
There is no dispute that at the time of the publication of the allegedly offending essay, private
respondents Antonio Villegas and Juan Ponce Enrile were the Mayor of the City of Manila and
Undersecretary of Finance and concurrently Acting Commisioner of Customs, respectively, with
offices in the City of Manila. The issues in this case are:
1. Whether or not, under the provisions of Republic Act 4363, the respondent Court of First
Instance of Rizal has jurisdiction to take cognizance of the civil suit for damages arising
from an allegedly libelous publication, considering that the action was instituted by
public officers whose offices were in the City of Manila at the time of the publication; if
it has no jurisdiction, whether or not its erroneous assumption of jurisdiction may be
challenged by a foreign corporation by writ of certiorari or prohibition; and

2. Whether or not Republic Act 4363 is applicable to actions against a foreign corporation
or non-resident defendant.

Provisions of Republic Act No. 4363, which are relevant to the resolution of the foregoing issues,
read, as follows:
"Section 1. Article three hundred sixty of the Revised Penal Code, as amended by Republic Act
Numbered Twelve hundred and eighty nine, is further amended to read as follows:
'ART. 360. Persons responsible.- Any person who shall publish, exhibit, or cause the publication
or exhibition of any defamation in writing orby similar means, shall be responsible for the same.
'The author or editor of a book or pamphlets or the editor or business manager of a daily
newspaper, magazine or serial publication, shall be responsible for the defamations contained
therein to the extent as if he were the author thereof.
'The criminal and civil action for damages in cases of written defamations as provided for in this
chapter, shall be filed simultaneously or separately with the court of first instance of the province
or city where the libelous article is printed and first published or where any of the offended
parties actually resides at the time of the commission of the offense; Provided, however, That
where one of the offended parties is a public officer whose office is in the City of Manila at the
time of the commission of the offense, the action shall be filed in the Court of First Instance of
the City of Manila or of the city or province where the libelous article is printed and first
published, and in case such public officer does not hold office in the City of Manila, the action
shall be filed in the Court of First Instance of the province or city where he held office at the time
of the commission of the offense or where the libelous article is printed and first published and in
case one of the offended parties is a private individual, the action shall be filed in the Court of
First Instance of the province or city where he actually resides at the time of the commission of
the offense or where the libelous matter is printed and first published; Provided, further, That the
civil action shall be filed in the same court where the criminal action is filed and vice
versa; Provided, furthermore, That the court where the criminal action or civil action for
damages is first filed, shall acquire jurisdiction to the exclusion of other courts; And provided
finally, That this amendment shall not apply to cases of written defamations, the civil and/or
criminal actions which have been filed in court at the time of the effectivity of this law.
'x x x xxx xxx

'x x x xxx xxx

"Sec. 3. This Act shall take effect only if and when, within thirty days from its approval, the
newspapermen in the Philippines shall organize, and elect the members of, a Philippine Press
Council, a private agency of the said newspapermen, whose function shall be to promulgate a
Code of Ethics for them and the Philippine press, investigate violations thereof, and censure any
newspaperman or newspaper guilty of any violation of the said Code, and the fact that such
Philippine Press Council has been organized and its members have been duly elected in
accordance herewith shall be ascertained and proclaimed by ihe President of the Philippines."
Under the first proviso in Section 1, the venue of civil action for damages in cases of written
defamations is localized upon the basis of, first, whether the offended party or plaintiff is a
public officer or a private individual; and second, if he is a public officer, whether his office is in
Manila or not in Manila, at the time of the commission of the offense. If the offended party is a
public officer with office in the City of Manila, the proviso limits him to two (2) choices of
venue, namely, "in the Court of First Instance of the City of Manila or in the city or province
where the libelous article is printed and first published ..."
The complaint lodged in the court of Rizal by respondents does not allege that the libelous article
was printed and first published in the province of Rizal, and, since the respondents-plaintiffs are
public officers with offices in Manila at the time of the commission of the alleged offense, it is
clear that the only place left for them wherein to file their action is the Court of First Instance of
Manila.
The limitation of the choices of venue, as introduced into the Penal Code through its amendment
by Republic Act 4363, was intended "to minimize or limit the filing of out-of-town libel suits" to
protect an alleged offender from "hardships, inconveniences and harassments" and, furthermore,
to protect "the interest of the public service" where one of the offended parties is a public
officer."[4] The intent of the law is clear: a libeled public official must sue in the court of the
locality where he holds office, in order that the prosecution of the action should interfere as little
as possible with the discharge of his official duties and labors. The only alternative allowed him
by law is to prosecute those responsible for the libel in the place where the offending article was
printed and first published. Here, the law tolerates the interference with the libeled officer's
duties only for the sake of avoiding unnecessary harassment of the accused. Since the offending
publication was not printed in the Philippines, the alternative venue was not open to respondents
Mayor Villegas of Manila and Undersecretary of Finance Enrile, who where the offended parties.
But respondents-plaintiffs argue that Republic Act 4363 is not applicable where the action is
against a non-resident defendant, as petitioner Time, Inc., for several reasons. They urge that, in
enacting Republic Act 4363, Congress did not intend to protect non-resident defendants-as
shown by Section 3, which provides for the effectivity of the statute only if and when the
"newspapermen in the Philippines" have organized a "Philippine Press Council" whose function
shall be to promulgate a Code of Ethics for "them" and "the Philippine press"; and since a non-
resident defendant is not in a position to comply with the conditions imposed for the effectivity
of the statute, such defendant may not invoke its provisions; that a foreign corporation is not
inconvenienced by an out-of-town libel suit; that it would be absurd and incongruous,™ the
absence of an extradition treaty, for the law to give to public officers with office in Manila the
second option of filing a criminal case in the court of the place where the libelous article is
printed and first published if the defendant is a foreign corporation; and that, under the "single
publication" rule which originated in the United States and imported into the Philippines, the rule
was understood to mean that publications in another state are not covered by venue statutes of
the forum.
The implication of respondents' argument is that the law would not take effect as to non-resident
defendants or accused. We see nothing in the text of the law that would sustain such unequal
protection to some of those who may be charged with libel. The official proclamation that a
Philippine Press Council has been organized is made a pre-condition to the effectivity of the
entire Republic Act No. 4363, and no terms are employed therein to indicate that the law can or
will be effective only as to some, but not all, of those that may be charged with libeling our
public officers.
The assertion that a foreign corporation or a non-resident defendant is not inconvenienced by an
out-of-town suit is irrelevant and untenable, for venue and jurisdiction are not dependent upon
convenience or inconvenience to a party; and moreover, venue was fixed under Republic Act No.
4363, pursuant to the basic policy of the law that is, as previously stated, to protect the interest of
the public service when the offended party is a public officer, by minimizing as much as possible
any interference with the discharge of his duties.
That respondents-plaintiffs could not file a criminal case for libel against anon-resident
defendant does not make Republic Act 4363 incongruous or absurd, for such inability to file a
criminal case against a non-resident natural person equally exists in crimes other than libel. It is a
fundamental rule of international jurisdiction that no state can by its laws, and no court (which is
only a creature of the state) can by its judgments or decrees, directly bind or affect property or
persons beyond the limits of that state.[5] Not only this, but if the accused is a corporation, no
criminal action can lie against it, [6] whether such corporation be resident or nonresident. At any
rate, the case filed by respondents-plaintiffs is not a criminal case but a civil case for damages.
5 0 Am. Jur. 2d 65 9 differentiates the "multiple publication" and "single publication" rules
(invoked by private respondents) to be as follows:
"The common law as to causes of action for tort arising out of a single publication was to the
effect that each communication of written or printed matter was a distinct and separate
publication of a libel contained therein, giving rise to a separate cause of action. This rule
('multiple publication' rule) is still followed in several American jurisdictions, and seems to be
favored by the American Law Institute. Other jurisdictions have adopted the 'single publication'
rule, which originated in New York, under which any single integrated publication, such as one
edition of a newspaper, book, or magazine, or one broadcast, is treated as a unit, giving rise to
only one cause of action, regardless of the number of times it is exposed to different people, .. ."
These rules are not pertinent in the present case, because the number of causes of action that may
be available to the respondents-plaintiffs is not here in issue. We are here confronted by a
specific venue statute, conferring jurisdiction in cases of libel against public officials to specified
courts, and no other. The rule is that where a statute creates a right and provides a remedy for its
enforcement, the remedy is exclusive; and where it confers jurisdiction upon a particular court,
that jurisdiction is likewise exclusive, unless otherwise provided. Hence, the venue provisions of
Republic Act No. 4363 should be deemed mandatory for the party bringing the action, unless the
question of venue should be waived by the defendant, which was not the case here. Only thus
can the policy of the Act be upheld and maintained. Nor is there any reason why the
inapplicability of one alternative venue should result in rendering the other alternative also
inapplicable.
The dismissal of the present petition is asked on the ground that the petitioner foreign
corporation failed to allege its capacity to sue in the courts of the Philippines. Respondents rely
on Section 69 of the Corporation Law, which provides:
"SEC. 69. No foreign corporation or corporations formed, organized, or existing under any laws
other than those of the Philippines 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 the section immediately preceding...."...;
They also invoke the ruling in Marshall-Wells Co. vs. Elser & Co., Inc.[7] that no foreign
corporation may be permitted to maintain any suit in the local courts unless it shall have the
license required by the law, and the ruling in Atlantic Mutual Ins. Co., Inc. vs. Cebu Stevedoring
Co., Inc.[8] that "where... the law denies to a foreign corporation the right to maintain suit unless
it has previously complied with a certain requirement, then such compliance or the fact that the
suing corporation is exempt therefrom, becomes a necessary averment in the complaint." We fail
to see how these doctrines can be a propos in the case at bar, since the petitioner is not
"maintaining any suit" but is merely defending one against itself; it did not file any complaint but
only a corollary defensive petition to prohibit the lower court from further proceeding with a suit
that it had no jurisdiction to entertain.
Petitioner's failure to aver its legal capacity to institute the present petition is not fatal, for . . .
"A foreign corporation may, by writ of prohibition, seek relief against the wrongful assumption
of jurisdiction. And a foreign corporation seeking a writ of prohibition against further
maintenance of a suit, on the ground of want of jurisdiction, is not bound by the ruling of the
court in which the suit was brought, on a motion to quash service of summons, that it has
jurisdiction."[9]
It is also advanced that the present petition is premature, since respondent court has not definitely
ruled on the motion to dismiss, nor held that it has jurisdiction, but only deferred resolution
thereon until the case is heard on its merits. The argument is untenable. The motion to dismiss
was predicated on the respondent court's lack of jurisdiction to entertain the action; and the
rulings of this Court are the writs of certiorari or prohibition, or both, may issue in case of a
denial or deferment of action on such a motion to dismiss for lack of jurisdiction.
"If the question of jurisdiction were not the main ground for this petition for review by certiorari,
it would be premature because it seeks to have a review of an interlocutory order. But as it would
be useless and futile to go ahead with the proceedings if the court below had no jurisdiction this
petition was given due course.' (San Beda vs. CIR, 51 O.G. 5636, 5638).
'While it is true that action on a motion to dismiss may be deferred until the trial and an order to
that effect is interlocutory, still where it clearly appears that the trial judge or court is proceeding
in excess or outside of its jurisdiction, the remedy of prohibition would lie since it would be
useless and a waste of time to go ahead with the proceedings. (Phillippine International Fair, Inc.
et al. vs. Ibañez, et al., 50 Off. Gaz. 1036; Enriquez v. Macadaeg, et al., 47 Off. Gaz. 1207; see
also San Beda College vs. CIR, 51 Off. Gaz. 5636)' University of Sto. Tomas v. Villanueva, L-
13748, 30 October 1959)"
Similarly, in Edward J. Neil Co. vs. Cubacub, L-20843, 23 June 1965, 14 SCRA 419, this Court
held:
". . . It is settled rule that the jurisdiction of a court over the subject-matter is determined by the
allegations in the complaint; and when a motion to dismiss is filed for lack of jurisdiction those
allegations are deemed admitted for purpose of such motion, so that it may be resolved without
waiting for the trial. Thus it has been held the consideration thereof may not be postponed in the
hope that the evidence may yield other qualifying or concurring data which would bring the case
under the court's jurisdiction."
To the same effect are rulings in Ruperto vs. Fernando, 83 Phil. 943; Administrative of Hacienda
Luisita Estate vs. Alberto, L-12133, 21 October 1958.
Summing up, We hold:
(1) That under Article 360 of the Revised Penal Code, as amended by Republic Act No. 4363,
actions for damages by public officials for libelous publications against them can only be filed in
the courts of first instance of the city or province where the offended functionary held office at
the time of the commission of the offense, in case the libelous article was first printed or
published outside the Philippines.
(2) That the action of a court in refusing to rule, or deferring its ruling, on a motion, or for
improper venue, is in excess of jurisdiction and correctible by writ of prohibition or certiorari
sued out in the appellate Court, even before trial on the merits is had.
WHEREFORE, the writs applied for are granted, the respondent Court of First Instance of Rizal
is declared without jurisdiction to take cognizance of its Civil Case No. 10403; and its orders
issued in connection therewith are hereby annulled and set aside. Respondent court is further
commanded to desist from further proceedings in Civil Case No. 10403 aforesaid. Cost against
private respondents, Antonio J. Villegas and Juan Ponce Enrile.
The writ of preliminary injunction heretofore issued by its Supreme Court is made permanent.

249. Portillo v. Reyes, 3 SCRA 311 (1961)

FIRST DIVISION

[G.R. No. L-17707. October 27, 1961.]

MANUEL F. PORTILLO, Petitioner, v. HON. LUIS B. REYES, Judge, Court of First

Instance of Manila and CESAR RAMIREZ, Respondents.

Manuel F. Portillo for Petitioner.

E.G. Tanjuatco & Associates for Respondents.

SYLLABUS

1. VENUE; CIVIL ACTIONS IN COURTS OF FIRST INSTANCE; ACTIONS MUST BE

FILED IN COURTS OF FIRST INSTANCE WHERE PLAINTIFF RESIDES OR WHERE
DEFENDANT RESIDES OR MAY BE FOUND; WHEN PHRASE "MAY BE FOUND"
APPLICABLE. — The venue of civil actions in the Courts of First Instance is where the plaintiff
resides or where the defendant resides or may be found (Section 1, Rule 5, Rules of Court), but
the latter phrase (may be found) applies only to cases where the defendant has no residence in
the Philippines (Cohen, v. Benguet Commercial Co., Ltd., 34 Phil. 526).

2. ID.; ID.; ID.; WHEN WORDS "RESIDENCE" AND "FOUND" ARE DEEMED
SYNONYMOUS. — For purposes of determining proper venue in the Courts of First Instance,
where the defendant is a resident of the Philippines the words "residence" and "found" are
synonymous terms, meaning "domicile." (Cohen, v. Benguet Commercial Co., Ltd., supra;
Casilan, v. Tomassi, Et Al., 90 Phil., 765; 52 Off. Gaz., 806; Corre v. Tan Corre, 100 Phil., 321;
53 Off. Gaz. No. 3, 642).

DECISION

REYES, J.B.L., J.:

Petitioner Manuel F. Portillo applies for a writ of prohibition with this Court to enjoin respondent
judge, Honorable Luis B. Reyes, of the Court of First Instance of Manila, from further
proceeding with Civil Case No. 44181 on the ground of improper venue.

The records disclose that respondent Cesar Ramirez filed with the lower court a complaint for
the recovery of a sum of money, totalling P5,250.00, exclusive of interest, against the petitioner
Portillo. The complaint stated plaintiff’s residence to be at No. 7 Atok Street, Quezon City, but
made no mention of defendant Portillo’s residence, except that the latter might be served with
summons at "c/o Boulevard Theatre, Quezon Boulevard, Manila."cralaw virtua1aw library

Portillo filed a verified motion to dismiss the complaint, averring that he has his domicile in
Caloocan, Rizal, and that since neither he nor the plaintiff resides in Manila, then venue was
improperly laid with the Manila court. The motion was denied; hence, this petition.

In Courts of First Instance, the matter of venue in civil actions is regulated by section 1, Rule 5
of the Rules of Court, which reads:jgc:chanrobles.com.ph

"Civil actions in Courts of First Instance may be commenced and tried where the defendant or
any of the defendant resides or may be found, or where the plaintiff or any of the plaintiffs
resides, at the election of the plaintiff." (Italics supplied)

Respondents argue that the phrase "or may be found" (referring to the defendant or defendants)
sufficiently authorizes the bringing of the suit with the court of first instance of the place where
the defendant or any of the defendants may actually be found when the complaint is filed. That
same contention was made and rejected in Evangelista, Et Al., v. Santos, G.R. No. L-1721, May
19, 1950, wherein, among other things, we said:jgc:chanrobles.com.ph

"Section 1 of Rule 5 may seem, at first blush, to authorize the laying of the venue in the province
where the defendant ‘may be found’. But this phrase has already been held to have a limited
application. It is the same phrase used in section 377 of Act 190 from which section 1 of Rule 5
was taken, and as construed by this Court it applies only to cases where defendant has no
residence in the Philippine Islands. This was the construction adopted in the case of Cohen v.
Benguet Commercial Co., Ltd., 34 Phil. 526, which was an action brought in Manila by a
nonresident against a corporation which had its residence for legal purposes in Baguio but whose
President was found in Manila and there served with summons . . ." (Italics supplied)

In effect, this Court in the cited case reiterated the rule that as long as the defendant is a resident
of the Philippines, the words "residence" and "found" are synonymous terms, meaning
"domicile" (see also Cohen v. Benguet Commercial Co., Ltd., 34 Phil., 526; Casilan v. Tomassi,
Et Al., L-4294, January 31, 1952; Corre v. Tan Corre, 53 Off. Gaz., No. 3, 642).

Plaintiff’s argument that the foregoing rule should not apply where defendant’s residence is
unknown to the plaintiff, fails to consider that even then the latter has an equally, if not more,
convenient remedy of filing the action with the court of his own residence. And even as the
regulation of venue is primarily for the convenience of the plaintiff, as attested by the fact that
the choice of venue is given to him, it should not be construed to unduly deprive a resident
defendant of the rights conferred upon him by the Rules of Court.

WHEREFORE, the writ of prohibition is granted and the respondent enjoined from the further
proceeding with Civil Case No. 44181. The complaint in said case is, further more, ordered
dismissed, without prejudice on the part of plaintiff to file another action with the proper court.
Costs against respondent Cesar Ramirez.

250. Evangelista v. Santos, 86 Phil 387 (1950)

Facts: Juan D. Evangelista, et. al. are minority stockholders of the Vitali Lumber Company, Inc.,
a Philippine corporation organized for the exploitation of a lumber concession in Zamboanga,
Philippines, while Rafael Santos holds more than 50% of the stocks of said corporation and also
is and always has been the president, manager, and treasurer thereof. Santos, in such triple
capacity, through fault, neglect, and abandonment allowed its lumber concession to lapse and its
properties and assets, among them machineries, buildings, warehouses, trucks, etc., to disappear,
thus causing the complete ruin of the corporation and total depreciation of its stocks. Evangelista,
et. al. therefore prays for judgment requiring Santos: (1) to render an account of his
administration of the corporate affairs and assets: (2) to pay plaintiffs the value of t heir
respective participation in said assets on the basis of the value of the stocks held by each of them;
and (3) to pay the costs of suit. Evangelista, et. al. also ask for such other remedy as may be and
equitable. The complaint does not give Evangelista, et. al.'s residence, but, but purposes of
venue, alleges that Santos resides at 2112 Dewey Boulevard, corner Libertad Street, Pasay,
province of Rizal. Having been served with summons at that place, Santos filed a motion for the
dismissal of the complaint on the ground of improper venue and also on the ground that the
complaint did not state a cause of action in favor of Evangelista, et. al. After hearing, the lower
court rendered its order, granting the motion for dismissal. Reconsideration of the order was
denied. Evangelista, et. al. appealed to the Supreme Court.
Issue: Whether Evangelista, et. al. had the right to bring the action for damages resulting from
mismanagement of the affairs and assets of the corporation by its principal officer, it being
alleged that Santos' maladministration has brought about the ruin of the corporation and the
consequent loss of value of its stocks.

Held: The injury complained of is primarily to the corporation, so that the suit for the damages
claimed should be by the corporation rather than by the stockholders. The stockholders may not
directly claim those damages for themselves for that would result in the appropriation by, and the
distribution among them of part of the corporate assets before the dissolution of the corporation
and the liquidation of its debts and liabilities, something which cannot be legally done in view of
section 16 of the Corporation Law, which provides that "No shall corporation shall make or
declare any stock or bond dividend or any dividend whatsoever from the profits arising from its
business, or divide or distribute its capital stock or property other than actual profits among its
members or stockholders until after the payment of its debts and the termination of its existence
by limitation or lawful dissolution." But while it is to the corporation that the action should
pertain in cases of this nature, however, if the officers of the corporation, who are the ones called
upon to protect their rights, refuse to sue, or where a demand upon them to file the necessary suit
would be futile because they are the very ones to be sued or because they hold the controlling
interest in the corporation, then in that case any one of the stockholders is allowed to bring suit.
But in that case it is the corporation itself and not the plaintiff stockholder that is the real
property in interest, so that such damages as may be recovered shall pertain to the corporation. In
other words, it is a derivative suit brought by a stockholder as the nominal party plaintiff for the
benefit of the corporation, which is the real property in interest. Herein, Evangelista, et. al. have
brought the action not for the benefit of the corporation but for their own benefit, since they ask
that Santos make good the losses occasioned by his mismanagement and pay to them the value of
their respective participation in the corporate assets on the basis of their respective holdings.
Clearly, this cannot be done until all corporate debts, if there be any, are paid and the existence of
the corporation terminated by the limitation of its charter or by lawful dissolution in view of the
provisions of section 16 of the Corporation Law. It results that Evangelista, et. al.'s complaint
shows no cause of action in their favor.