Professional Documents
Culture Documents
4. The issue of whether or not petitioners are doing business in the country
is a matter best reffered to a trial on the merits of the case and so should be
addressed there.
The Court of Appeals found the petition devoid of merit, stating that:
The complaint for sum of money being a personal action not affecting status
or relating to property, extraterritorial service of summons on petitioners all
not doing business in the Philippines is null and void.
Maintaining its submission that they are beyond the jurisdiction of the
Philippine Courts, petitioners are now before us, stating:
Petitioners, being foreign corporations, as found by the trial court, not doing
business in the Philippines with no office, place of business or agents in the
Philippines, are not subject to the jurisdiction of the Philippine courts.
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 brokers, and not
through any entity of 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 of lives which
are insured by the original insurer company are located in that state.12 The
reason for this is that a contract or reinsurance is generally a separate and
distinct arrangement from the original contract of insurance, whose
contracted risk is insured in the reinsurance agreement.13 Hence, the
original insured has generally no interest in the contract of
reinsurance.14chanroblesvirtuallawlibrary
A foreign corporation, is one which owes its existence to the laws of another
state,15 and generally has no legal existence within the state in which it is
foreign. In Marshall Wells Co. v. Elser,16 it was held that corporations have
no legal status beyond the bounds of sovereignty by which they are created.
Nevertheless, it is widely accepted that foreign corporations are, by reason
of state comity, allowed to transact business in other states and to sue in
the courts of such fora. In the Philippines foreign corporations are allowed
such privileges, subject to certain restrictions, arising from the states
sovereign right of regulation.
Before a foreign corporation can transact business in the country, it must
first obtain a license to transact business here17 and secure the proper
authorizations under existing law.
If a foreign corporation engages in business activities without the necessary
requirements, it opens itself to court actions against it, but it shall not be
allowed maintain or intervene in an action, suit or proceeding for its own
account
in any
court or tribunal or agency
in the
18
Philippines. chanroblesvirtuallawlibrary
The purpose of the law in requiring that foreign corporations doing business
in the country be licensed to do so, is to subject the foreign corporations
doing business in the Philippines to the jurisdiction of the
courts,19 otherwise, a foreign corporation illegally doing business here
because of its refusal or neglect to obtain the required license and authority
to do business may successfully though unfairly plead such neglect or illegal
act so as to avoid service and thereby impugn the jurisdiction of the local
courts.
The same danger does not exist among foreign corporations that are
indubitably not doing business in the Philippines. Indeed, if a foreign
corporation does not do business here, there would be no reason for it to
be subject to the States regulation. As we observed, in so far as 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.
In the alternative, private respondent submits that foreign corporations not
doing business in the Philippines are not exempt from suits leveled against
them in courts, citing the case of Facilities Management
Corporation v. Leonardo Dela Osa, et. al.20 where we ruled that 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 the Philippines
Courts for acts done against a person or persons in the Philippines.
We are not persuaded by the position taken by the private respondent. In
Facilities Management case, the principal issue presented was whether the
petitioner had been doing business in the Philippines, so that service of
summons upon its agent as under Section 14, Rule 14 of the Rules of Court
can be made in order that the Court of First Instance could assume
jurisdiction over it. The court ruled that the petitioner was doing business in
the Philippines, and that by serving summons upon its resident agent, the
trial court had effectively acquired jurisdiction. In that case, the court made
no prescription as the absolute suability of foreign corporations not doing
business in the country, but merely discounts the absolute exemption of
such foreign corporations from liabilities particularly arising from acts done
against a person or persons in the Philippines.
As we have found, there is no showing that petitioners had performed any
act in the country that would place it within the sphere of the courts
jurisdiction. A general allegation standing alone, that a party is doing
business in the Philippines does not make it so. A conclusion of fact or law
cannot be derived from the unsubstantiated assertions of parties
notwithstanding the demands of convenience or dispatch in legal actions,
otherwise, the Court would be guilty of sorcery; extracting substance out of
prohibition or certiorari sued out in the appellate court even before trial on
the merits is had. The same remedy is available should the motion to
dismiss be denied, and the court, over the foreign corporations objections,
theratens to impose its jurisdiction upon the same.
If the defendant, besides setting up in a motion to dismiss his objections to
the jurisdiction of the court, alleges at the same time any other ground for
dismissing the action, or seeks an affirmative refief in the motion,30 he is
deemed to have submitted himself to the jurisdiction of the court.
In this instance, however, the petitioners from the time they filed their
motions to dismiss, their submission have been consistently and unfailingly
to object to the trial courts assumption of jurisdiction, anchored on the fact
that they are all foreign corporations not doing business in the Philippines.
As we have consistently held, if the appearance of a party in a suit is
precisely to question the jurisdiction of the said tribunal over the person of
the defendant, then this appearance is not equivalent to service of
summons, nor does is constitute an acquiescence to the courts
jurisdiction.31 Thus it cannot be argued that the petitioners had abandoned
their objections to the jurisdiction of the court, as their motions to dismiss
in the trial court, and all their subsequent posturings, were all in protest of
the private respondent's insistence on holding them so answer a charge in a
forum where they believe they are not subject to. Clearly, to continue the
proceedings in a case such as those before Us would just be useless and a
waste of time.32chanroblesvirtuallawlibrary
ACCORDINGLY, the decision appealed from dated October 11, 1990, is SET
ASIDE and the instant petition is hereby GRANTED. The respondent Regional
Trial Court of Manila, Branch 51 is declared without jurisdiction to take
cognizance of Civil Case No. 86-37932, and all its orders and issuances in
connection therewith are hereby ANNULLED and SET ASIDE. The respondent
court is hereby ORDERED to DESIST from maintaining further proceeding in
the case aforestated.
SO ORDERED.
Romero, Puno and Mendoza, JJ., concur.
EN BANC
G.R. No. L-45144 April 3, 1939
M.
E.
GREY, Plaintiff-Appellant,
COMPANY, defendant-appelle.
vs. INSULAR
for
LUMBER
appellant.
INC., petitioner,
CORTES, J.:
Petitioner seeks reversal of the decision and the resolution of the Court of
Appeals, ordering Schmid & Oberly Inc. (hereafter to be referred to simply
as "SCHMID") to refund the purchase price paid by RJL Martinez Fishing
Corporation (hereafter to be referred to simply as "RJL MARTINEZ") to D.
Nagata Co., Ltd. of Japan (hereafter to be referred to simply as NAGATA
CO.") for twelve (12) defective "Nagata"-brand generators, plus
consequential damages, and attorneys fees.
The facts as found by the Court of Appeals, are as follows:
The findings of facts by the trial court (Decision, pp. 21-28,
Record on Appeal) shows: that the plaintiff RJL Martinez
Fishing Corporation is engaged in deep-sea fishing, and in
the course of its business, needed electrical generators for
the operation of its business; that the defendant sells
electrical generators with the brand of "Nagata", a Japanese
product; that the supplier is the manufacturer, the D.
Nagata Co. Ltd., of Japan, that the defendant Schmid &
Oberly Inc. advertised the 12 Nagata generators for sale;
that the plaintiff purchased 12 brand new Nagata
generators, as advertised by herein defendant; that through
an irrevocable line of credit, the D. Nagata Co., Ltd., shipped
to the plaintiff 12 electric generators, and the latter paid the
amount of the purchase price; that the 12 generators were
found to be factory defective; that the plaintiff informed the
On the basis thereof, the Court of Appeals affirmed the decision of the trial
court ordering petitioner to refund to private respondent the purchase price
for the twelve (12) generators and to accept delivery of the same and to pay
s and attorney's fees, with a slight modification as to the amount to be
refunded. In its resolution of the motion for reconsideration, the Court of
Appeals further modified the trial courts decision as to the award of
consequential damages.
Ordinarily, the Court will not disturb the findings of fact of the Court of
Appeals in petitions to review the latter's decisions under Rule 45 of the
Revised Rules of Court, the scope of the Court's inquiry being limited to a
review of the imputed errors of law [Chan v. Court of Appeals, G.R. No. L27488, June 30, 1970, 33 SCRA 77; Tiongco v. De la Merced, G.R. No. L24426, July 25, 1974, 58 SCRA 89; Corona v. Court of Appeals, G.R. No.
62482, April 28, 1983, 121 SCRA 865; Baniqued v. Court of Appeals, G.R. No.
L-47531, January 30, 1984, 127 SCRA 596.] However, when, as in this case, it
is the petitioner's position that the appealed judgment is premised on a
misapprehension
of
facts, * the Court is compelled to review the Court of Appeal's factual
findings [De la Cruz v. Sosing, 94 Phil. 26 (1953); Castillo v. Court of Appeals,
G.R. No. I,48290, September 29, 1983, 124 SCRA 808.]
Considering the sketchiness of the respondent court's narration of facts,
whether or not the Court of Appeals indeed misapprehended the facts
could not be determined without a thorough review of the records.
Thus, after a careful scrutiny of the records, the Court has found the
appellate court's narration of facts incomplete. It failed to include certain
material facts.
The facts are actually as follows:
Agreeing with the terms of the Quotation, RJL MARTINEZ opened a letter of
credit in favor of NAGATA CO. Accordingly, on November 20,1975, SCHMID
transmitted to NAGATA CO. an order [Exhibit "4"] for the twelve (12)
generators to be shipped directly to RJL MARTINEZ. NAGATA CO. thereafter
sent RJL MARTINEZ the bill of lading and its own invoice (Exhibit "B") and, in
accordance with the order, shipped the generators directly to RJL MARTINEZ.
The invoice states that "one (1) case of 'NAGATA' AC Generators" consisting
of twelve sets wasbought by order and for account risk of Messrs. RJL
Martinez Fishing Corporation.
For its efforts, SCHMID received from NAGATA CO. a commission of
$1,752.00 for the sale of the twelve generators to RJL MARTINEZ. [Exhibits
"9", "9-A", "9-B" and "9-C".]
All fifteen (15) generators subject of the two transactions burned out after
continuous use. RJL MARTINEZ informed SCHMID about this development.
In turn, SCHMID brought the matter to the attention of NAGATA CO. In July
1976, NAGATA CO. sent two technical representatives who made an ocular
inspection and conducted tests on some of the burned out generators,
which by then had been delivered to the premises of SCHMID.
The tests revealed that the generators were overrated. As indicated both in
the quotation and in the invoice, the capacity of a generator was supposed
to be 5 KVA (kilovolt amperes). However, it turned out that the actual
capacity was only 4 KVA.
SCHMID replaced the three (3) generators subject of the first sale with
generators of a different brand.
As for the twelve (12) generators subject of the second transaction, the
Japanese technicians advised RJL MARTINEZ to ship three (3) generators to
Japan, which the company did. These three (3) generators were repaired by
NAGATA CO. itself and thereafter returned to RJL MARTINEZ; the remaining
nine (9) were neither repaired nor replaced. NAGATA CO., however, wrote
SCHMID suggesting that the latter check the generators, request for spare
parts for replacement free of charge, and send to NAGATA CO. SCHMID's
warranty claim including the labor cost for repairs [Exhibit "I".] In its reply
letter, SCHMID indicated that it was not agreeable to these terms [Exhibit
"10".]
At the outset, it must be understood that a contract is what the law defines
it to be, considering its essential elements, and not what it is caged by the
contracting parties [Quiroga v. Parsons Hardware Co., 38 Phil. 501 (1918).]
The Civil Code defines a contract of sale, thus:
ART. 458. By the contract of sale one of the contracting
parties obligates himself to transfer the ownership of and to
deliver a determinate thing, and the other to pay therefor a
price certain in money or its equivalent.
It has been said that the essence of the contract of sale is transfer of title or
agreement to transfer it for a price paid or promised [Commissioner of
Internal Revenue v. Constantino, G.R. No. L-25926, February 27, 1970, 31
SCRA 779, 785, citing Salisbury v. Brooks, 94 SE 117,118-19.] "If such
transfer puts the transferee in the attitude or position of an owner and
makes him liable to the transferor as a debtor for the agreed price, and not
merely as an agent who must account for the proceeds of a resale, the
transaction is, a sale." [Ibid.]
On the other hand, there is no statutory definition of "indent" in this
jurisdiction. However, the Rules and Regulations to Implement Presidential
Decree No. 1789 (the Omnibus Investments Code) lumps "indentors"
together with "commercial brokers" and "commission merchants" in this
manner:
... A foreign firm which does business through
the middlemen acting in their own names, such asindentors,
commercial brokers or commission merchants, shall not be
deemed doing business in the Philippines. But such
indentors, commercial brokers or commission merchants
shall be the ones deemed to be doing business in the
Philippines [Part I, Rule I, Section 1, par. g (1).]
Therefore, an indentor is a middlemen in the same class as commercial
brokers and commission merchants. To get an Idea of what an indentor is, a
look at the definition of those in his class may prove helpful.
SCHMID cannot be held liable for the implied warranty for hidden defects
under the Civil Code [Art. 1561, et seq.]
2. However, even as SCHMID was merely an indentor, there was nothing to
prevent it from voluntarily warranting that twelve (12) generators subject of
the second transaction are free from any hidden defects. In other words,
SCHMID may be held answerable for some other contractual obligation, if
indeed it had so bound itself. As stated above, an indentor is to some extent
an agent of both the vendor and the vendee. As such agent, therefore, he
may expressly obligate himself to undertake the obligations of his principal
(See Art. 1897, Civil Code.)
ATTY. AQUINO:
The trial court, however, relied on the testimony of Patrocinio Balagtas, the
head of the Electrical Department of RJL MARTINEZ, to support the finding
that SCHMID did warrant the twelve (12) generators against defects.
Upon careful examination of Balagtas' testimony, what is at once apparent
is that Balagtas failed to disclose the nature or terms and conditions of the
warranty allegedly given by SC Was it a warranty that the generators would
be fit for the fishing business of the buyer? Was it a warranty that the
generators to be delivered would meet the specifications indicated in the
Quotation? Considering the different kinds of warranties that may be
contracted, unless the nature or terms and conditions of the warranty are
known, it would not be possible to determine whether there has been a
breach thereof.
At any rate, when asked where SCHMID's warranty was contained, Balagtas
testified initially that it was in the receipts covering the sale. (At this point, it
may be stated that the invoice [Exhibit "B-l"] was issued by NAGATA CO. and
nowhere is it stated therein that SCHMID warranted the generators against
defects.) When confronted with a copy of the invoice issued by NAGATA CO.,
he changed his assertion and claimed that what he meant was that the date
of the commencement of the period of SCHMID's warranty would be based
on the date of the invoice. On further examination, he again changed his
mind and asserted that the warranty was given verbally [TSN, October 14,
1977, pp. 19-22.] But then again, as stated earlier, the witness failed to
disclose the nature or terms and conditions of the warranty allegedly given
by SCHMID.
On the other hand, Hernan Adad SCHMID's General Manager, was
categorical that the company does not warrant goods bought on indent and
that the company warrants only the goods bought directly from it, like the
three generators earlier bought by RJL MARTINEZ itself [TSN, December 19,
1977, pp. 63-64.] It must be recalled that SCHMID readily replaced the three
generators from its own stock. In the face of these conflicting testimonies,
this Court is of the view that RJL has failed to prove that SCHMID had given
a warranty on the twelve (12) generators subject of the second transaction.
Even assuming that a warranty was given, there is no way to determine
whether there has been a breach thereof, considering that its nature or
terms and conditions have not been shown.
3. In view of the foregoing, it becomes unnecessary to pass upon the other
issues.
SCHMID
&
OBERLY,
INC.
vs.
RJL
MARTINEZ
1) WON the second transaction between the parties was a sale or an indent
transaction?
INDENT
TRANSACTION
Sale
vs.
Indent
Transaction:
Held:
must account for the proceeds of a resale, the transaction is, a sale.
a. the Quotation and the General Conditions of Sale on the dorsal side
thereof do not necessarily lead to the conclusion that NAGATA CO., was the
parties, never acting in his own name but in the name of those who
real
employed him; he is strictly a middleman and for some purpose the agent of
both parties. There are 3 parties to an indent transaction, (1) buyer, (2)
informed NAGATA about the complaint of RJL. After the generators were
residing in the country where the goods are to be bought. The chief feature
found to have factory defects, SCHMID facilitated the shipment of three (3)
c. the letter from NAGATA CO. to SCHMID regarding the repair of the
generators indicated that the latter was within the purview of a seller.
seller
of
the
12
generators.
2)
RJL MARTINEZ admitted that the generators were purchased through
indent order. RJL admitted in its demand letter previously sent to SCHMID
order and three (3) by direct purchase. The evidence also show that RJL
second transaction are free from any hidden defects. In other words,
MARTINEZ paid directly NAGATA CO, for the generators, and that the latter
company itself invoiced the sale and shipped the generators directly to the
an agent of both the vendor and the vendee. As such agent, therefore, he
middleman between Nagata and RJL, by procuring an order from RJL and
Notably, nowhere in the Quotation is it stated therein that SCHMID did bind
itself to answer for the defects of the things sold. Balagtas testified initially
that the warranty was in the receipts covering the sale. Nowhere is it stated
in the invoice that SCHMID warranted the generators against defects. He
again changed his mind and asserted that the warranty was given verbally.
Hence, RJL has failed to prove that SCHMID had given a warranty on the 12
generators subject of the second transaction.
PATAJO, J.:
This is a petition for review on certiorari of the order of the then Court of
First Instance of Rizal, Branch 11 dated August 21, 1978, dismissing
petitioner's complaint.
Petitioner, a foreign partnership, filed a complaint against a domestic
corporation, Diamond Shipping Corporation, before the Court of First
Instance of Rizal for the recovery of damages allegedly caused by the failure
of the said shipping corporation to deliver the goods shipped to it by
petitioner to their proper destination. Paragraph 1 of said complaint alleged
that plaintiff is "a foreign partnership firm not doing business in the
Philippines" and that it is "suing under an isolated transaction." Defendant
filed a motion to dismiss the complaint on the ground that plaintiff has no
capacity to sue and that the complaint does not state a valid cause of action
against defendant.
Acting on said motion to dismiss, the Court of First Instance dismissed the
complaint on the ground that plaintiff being "a foreign corporation or
partnership not doing business in the Philippines it cannot exercise the right
to maintain suits before our Courts."
Hence, this petition.
The issue of whether or not a foreign corporation not engaged in business in
the Philippines can institute an action before our courts is already wen
settled in this jurisdiction.
Aetna Casualty and Surety Co. vs. Pacific Star Lines, 80 SCRA 635, is a case
similar to the present one in that the action is also one for recovery of
damages sustained by cargo shipped on defendants' vessels. Defendants set
up the defense that plaintiff is a foreign corporation not duly licensed to do
business in the Philippines and, therefore, without capacity to sue and be
sued. In overruling said defense, this Court said:
It is settled that if a foreign corporation is not engaged in
business in the Philippines, it may not be denied the right to
file an action in Philippine courts for isolated transactions.
The object of Sections 68 and 69 of the Corporation law 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. 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.
In Mentholatum Co. Inc. et al. vs. Mangaliman, et al., this Court ruled that:
No general rule or governing principle can be laid down as
to what constitutes 'doing' or 'engaging' in or 'transacting'
business. Indeed, each case must be judged in the light of
its peculiar environmental circumstances. The true test,
however, seems to be whether the foreign corporation is
continuing the body or substance of the business or
enterprise for which it was organized or whether it has
substantially retired from it and turned it over to another.
(Traction Cos. vs. Collectors of Int. Revenue (C.C. A. Ohio],
223 F. 984, 987.) The term implies a continuity of
commercial dealings and arrangements, and contemplates,
to that extent, the performance of acts or works or the
exercise of some of the functions normally incident to, and
in progressive prosecution of, the purpose and object of its
organization. (Griffin vs. Implement Dealers Mut. Fire Ins.
Co., 241 N.W. 75, 77; Pauline Oil & Gas Co. vs. Mutual Tank
Line Co., 246 P. 851, 852, 118 Okl. 111; Automotive Material
SECOND DIVISION
[G.R. No. 113074. January 22, 1997]
ALFRED HAHN, Petitioner, v. COURT OF APPEALS and BAYERISCHE
MOTOREN WERKE AKTIENGESELLSCHAFT (BMW), Respondents.
DECISION
MENDOZA, J.:
This is a petition for review of the decision1 of the Court of Appeals
dismissing a complaint for specific performance which petitioner had filed
against private respondent on the ground that the Regional Trial Court of
Quezon City did not acquire jurisdiction over private respondent, a
nonresident foreign corporation, and of the appellate court's order denying
petitioner's motion for reconsideration.
The following are the facts:
Petitioner Alfred Hahn is a Filipino citizen doing business under the name
and style "Hahn-Manila." On the other hand, private respondent Bayerische
Motoren Werke Aktiengesellschaft (BMW) is a nonresident foreign
corporation existing under the laws of the former Federal Republic of
Germany, with principal office at Munich, Germany.
On March 7, 1967, petitioner executed in favor of private respondent a
"Deed of Assignment with Special Power of Attorney," which reads in full as
follows:
WHEREAS, the ASSIGNOR is the present owner and holder of the BMW
trademark and device in the Philippines which ASSIGNOR uses and has been
using on the products manufactured by ASSIGNEE, and for which ASSIGNOR
is the authorized exclusive Dealer of the ASSIGNEE in the Philippines, the
same being evidenced by certificate of registration issued by the Director of
Patents on 12 December 1963 and is referred to as Trademark No. 10625;
....
8. From the time the trademark "BMW & DEVICE" was first used by the
Plaintiff in the Philippines up to the present, Plaintiff, through its firm name
"HAHN MANILA" and without any monetary contribution from defendant
BMW, established BMW's goodwill and market presence in the Philippines.
Pursuant thereto, Plaintiff has invested a lot of money and resources in
order to single-handedly compete against other motorcycle and car
companies.... Moreover, Plaintiff has built buildings and other
infrastructures such as service centers and showrooms to maintain and
promote the car and products of defendant BMW.
....
10. In a letter dated February 24, 1993, defendant BMW advised Plaintiff
that it was willing to maintain with Plaintiff a relationship but only "on the
basis of a standard BMW importer contract as adjusted to reflect the
particular situation in the Philippines" subject to certain conditions,
otherwise, defendant BMW would terminate Plaintiff's exclusive dealership
and any relationship for cause effective June 30, 1993....
....
15. The actuations of defendant BMW are in breach of the assignment
agreement between itself and plaintiff since the consideration for the
assignment of the BMW trademark is the continuance of the exclusive
dealership agreement. It thus, follows that the exclusive dealership should
continue for so long as defendant BMW enjoys the use and ownership of
the trademark assigned to it by Plaintiff.
The case was docketed as Civil Case No. Q-93-15933 and raffled to Branch
104 of the Quezon City Regional Trial Court, which on June 14, 1993 issued a
temporary restraining order. Summons and copies of the complaint and
amended complaint were thereafter served on the private respondent
(1).... A foreign firm which does business through middlemen acting in their
own names, such as indentors, commercial brokers or commission
merchants, shall not be deemed doing business in the Philippines. But such
indentors, commercial brokers or commission merchants shall be the ones
deemed to be doing business in the Philippines.
The question is whether petitioner Alfred Hahn is the agent or distributor in
the Philippines of private respondent BMW. If he is, BMW may be
considered doing business in the Philippines and the trial court acquired
jurisdiction over it (BMW) by virtue of the service of summons on the
Department of Trade and Industry. Otherwise, if Hahn is not the agent of
BMW but an independent dealer, albeit of BMW cars and products, BMW, a
foreign corporation, is not considered doing business in the Philippines
within the meaning of the Foreign Investments Act of 1991 and the IRR, and
the trial court did not acquire jurisdiction over it (BMW).
The Court of Appeals held that petitioner Alfred Hahn acted in his own
name and for his own account and not as agent or distributor in the
Philippines of BMW on the ground that "he alone had contacts with
individuals or entities interested in acquiring BMW vehicles. Independence
characterizes Hahn's undertakings, for which reason he is to be considered,
Hahn.) The bills of lading are made up in the name of the purchasers, but
Hahn-Manila is therein indicated as the person to be notified.
9.5. It is Hahn who picks up the vehicles from the Philippine ports, for
purposes of conducting pre-delivery inspections. Thereafter, he delivers the
vehicles to the purchasers.
9.6. As soon as BMW invoices the vehicle ordered, Hahn is credited with a
commission of fourteen percent (14%) of the full purchase price thereof,
and as soon as he confirms in writing, that the vehicles have been registered
in the Philippines and have been serviced by him, he will receive an
additional three percent (3%) of the full purchase prices as commission.
Contrary to the appellate court's conclusion, this arrangement shows an
agency. An agent receives a commission upon the successful conclusion of a
sale. On the other hand, a broker earns his pay merely by bringing the buyer
and the seller together, even if no sale is eventually made.
As to the service centers and showrooms which he said he had put up at his
own expense, Hahn said that he had to follow BMW specifications as
exclusive dealer of BMW in the Philippines. According to Hahn, BMW
periodically inspected the service centers to see to it that BMW standards
were maintained. Indeed, it would seem from BMW's letter to Hahn that it
was for Hahn's alleged failure to maintain BMW standards that BMW was
terminating Hahn's dealership.
The fact that Hahn invested his own money to put up these service centers
and showrooms does not necessarily prove that he is not an agent of BMW.
For as already noted, there are facts in the record which suggest that BMW
exercised control over Hahn's activities as a dealer and made regular
inspections of Hahn's premises to enforce compliance with BMW standards
and specifications.10 For example, in its letter to Hahn dated February 23,
1996, BMW stated:
In the last years we have pointed out to you in several discussions and
letters that we have to tackle the Philippine market more professionally and
that we are through your present activities not adequately prepared to cope
with the forthcoming challenges.11chanroblesvirtuallawlibrary
that to compel it to go to trial would be to deny its right not to submit to the
jurisdiction of the trial court which precisely it denies. Rule 16, 3 authorizes
courts to defer the resolution of a motion to dismiss until after the trial if
the ground on which the motion is based does not appear to be indubitable.
Here the record of the case bristles with factual issues and it is not at all
clear whether some allegations correspond to the proof.
Anyway, private respondent need not apprehend that by responding to the
summons it would be waiving its objection to the trial court's jurisdiction. It
is now settled that. for purposes of having summons served on a foreign
corporation in accordance with Rule 14, 14, it is sufficient that it be alleged
in the complaint that the foreign corporation is doing business in the
Philippines. The court need not go beyond the allegations of the complaint
in order to determine whether it has jurisdiction.18 A determination that the
foreign corporation is doing business is only tentative and is made only for
the purpose of enabling the local court to acquire jurisdiction over the
foreign corporation through service of summons pursuant to Rule 14, 14.
Such determination does not foreclose a contrary finding should evidence
later show that it is not transacting business in the country. As this Court
has explained:
This is not to say, however, that the petitioner's right to question the
jurisdiction of the court over its person is now to be deemed a foreclosed
matter. If it is true, as Signetics claims, that its only involvement in the
Philippines was through a passive investment in Sigfil, which it even later
disposed of, and that TEAM Pacific is not its agent, then it cannot really be
said to be doing business in the Philippines. It is a defense, however, that
requires the contravention of the allegations of the complaint, as well as a
full ventilation, in effect, of the main merits of the case, which should not
thus be within the province of a mere motion to dismiss. So, also, the issue
posed by the petitioner as to whether a foreign corporation which has done
business in the country, but which has ceased to do business at the time of
the filing, of a complaint, can still be made to answer for a cause of action
which accrued while it was doing, business, is another matter that would yet
have to await the reception and admission of evidence. Since these points
have seasonably been raised by the petitioner, there should be no real
cause for what may understandably be its apprehension, i.e., that by its
participation during the trial on the merits, it may, absent an invocation of
separate or independent reliefs of its own, be considered to have
voluntarily submitted itself to the court's jurisdiction.19
PANGANIBAN, J.:
Date
17 Jan 89
24 Feb 89
02 Mar 89
03 Mar 89
03 Mar 89
10 Mar 89
27876
27877
28046
21 Mar 89
14 Apr 89
19 Apr 89
16 Aug 89
28258
28901
29001
31669
21 Mar 89
04 Apr 89
14 Apr 89
25 Apr 89
02 May 89
05 May 89
15 May 89
28257
28601
28900
29127
29232
29332
29497
31 May 89
29844
DECISION
This is the main issue presented for resolution in the instant petition
for review, which seeks the reversal of the Decision[1] of the Court of
Appeals, Seventh Division, promulgated on January 25, 1995, in CA-G.R. CV
No. 41275 which affirmed, for want of capacity to sue, the trial courts
dismissal of the collection suit instituted by petitioner.
The Facts
Petitioner Eriks Pte. Ltd. is a non-resident foreign corporation engaged
in the manufacture and sale of elements used in sealing pumps, valves and
pipes for industrial purposes, valves and control equipment used for
industrial fluid control and PVC pipes and fittings for industrial uses. In its
complaint, it alleged that:[2]
Invoice No.
27065
27738
27855
AWB No.
618-7496-2941
618-7553-6672
(freight & handling charges per
Inv. 27738)
618-7553-7501
618-7553-7501
618-7578-3256/
618-7578-3481
618-7578-4634
618-7741-7631
Self-collect
(handcarried by buyer)
618-7578-4634
618-7741-7605
618-7741-7631
618-7741-9720
(By seafreight)
618-7796-3255
(Freight & handling charges per
Inv. 29127)
618-7796-5646
(I)t is a corporation duly organized and existing under the laws of the
Republic of Singapore with address at 18 Pasir Panjang Road #09-01, PSA
Multi-Storey Complex, Singapore 0511. It is not licensed to do business in
the Philippines and i(s) not so engaged and is suing on an isolated
transaction for which it has capacity to sue x x x. (par. 1, Complaint; p. 1,
Record)
Total
The transfers of goods were perfected in Singapore, for private
respondents account, F.O.B. Singapore, with a 90-day credit
The Issue
The main issue in this petition is whether petitioner-corporation may
maintain an action in Philippine courts considering that it has no license to
do business in the country. The resolution of this issue depends on whether
petitioners business with private respondent may be treated as isolated
transactions.
& Gas Co. v. Mutual Tank Line Co., 246 P. 851, 852, 118 Okl. 111;
Automotive Material Co. v. American Standard Metal Products Corp., 158
N.E. 698, 703, 327 III. 367.)
xxx
xxx
xxx
license, the foreign entity would be giving assurance that it will abide by the
decisions of our courts, even if adverse to it.
petition
SO ORDERED.
Narvasa, C.J., (Chairman), Davide, Jr., Melo, and Francisco, JJ., concur.
is
SARMIENTO, J.:
This is a review of the decision of the Court of Tax Appeals disposing as
follows:
WHEREFORE. the subject ten (10) cartons of articles are
hereby released to the carrying airline for immediate
transshipment to the country of destination under the
terms of the contract of carriage. No costs.
SO ORDERED. 1
The pertinent facts may be summarized thus:
On September 11, 1982, two (2,) containers loaded with 103 cartons of
merchandise covered by eleven (11) airway bills of several supposedly
Singapore-based consignees arrived at the Manila International Airport on
board Philippine Air Lines (PAL) Flight PR 311 from Hongkong. The cargoes
were consigned to these different entities: K.M.K. Gani (hereafter referred
to as K.M.K.) and Indrapal and Company (hereafter referred to as
INDRAPAL), the private respondents in the petition before us; and Sin Hong
Lee Trading Co., Ltd., AAR TEE Enterprises, and C. Ratilal all purportedly
based in Singapore.
While the cargoes were at the Manila International Airport, a "reliable
source" tipped off the Bureau of customs that the said cargoes were going
to be unloaded in Manila. Forthwith, the Bureau's agency on such matters,
the Suspected Cargo and Anti-Narcotics (SCAN), dispatched an agent to
verify the information. Upon arriving at the airport, the SCAN agent saw an
empty PAL van parked directly alongside the plane's belly from which
cargoes were being unloaded. When the SCAN agent asked the van's driver
why he was at the site, the driver drove away in his vehicle. The SCAN agent
then sequestered the unloaded cargoes.
The seized cargoes consisted of 103 cartons "containing Mogadon and
Mandrax tablets, Sony T.V. sets 1546R/176R kw, Sony Betamax SL5800, and
SL5000, Cassette Stereos with Headphone (ala walkman), Casio Calculators,
Pioneer Car Stereos, Yamaha Watches, Eyeglass Frames, Sunglasses, Plastic
Utility Bags, Perfumes, etc." These goods were transferred to the
International Cargo Terminal under Warrant of Seizure and Detention and
thereafter subjected to Seizure and Forfeiture proceedings for "technical
smuggling."
At the hearing, Atty. Armando S. Padilla entered his appearance for the
consignees K.M.K. and INDRAPAL. The records of the case do not show any
appearance of the consignees in person. Atty. Padilla moved for the
transshipment of the cargoes consigned to his clients. On the other hand,
the Solicitor General avers that K.M.K. and INDRAPAL did not present any
testimonial or documentary evidence. The, collector of Customs at the then
Manila International Airport (MIA), now Ninoy Aquino International Airport
(NAIA), ruled for the forfeiture of all the cargoes in the said containers
(Seizure Identification No. 4993-82, dated July 14, 1983). Consequently, Atty.
Padilla, ostensibly on behalf of his two clients, K.M.K. and INDRAPAL,
appealed the order to the Commissioner. of Customs. 2
The Commissioner of Customs affirmed the finding of the Collector of
Customs (Customs Case No. 83-85, January, 1984), of the presence of the
intention to import the said goods in violation of the Dangerous Drugs
Act 3 and Central Bank Circular No. 808 in relation to the Tariff and Customs
Code. 4
The Commissioner added the following findings of fact: 5
1. There is a direct flight from Hongkong to Singapore, thus
making the transit through Manila more expensive, tedious,
and circuitous.
In the case at bar, the private respondents K.M.K. and INDRAPAL aver that
they are "suing upon a singular and isolated transaction." But they failed to
prove their legal existence or juridical personality as foreign corporations.
Their unverified petition before the respondent Court of Tax Appeals merely
stated:
1. That petitioner "K.M.K. Gani" is a single
proprietorship doing business in accordance
with the laws of Singapore with address at
99 Greenfield Drive, Singapore, Rep. of
Singapore, while Petitioner INDRAPAL and
COMPANY" is a firm doing business in
accordance with the laws of Singapore with
office address at 97 High Street, Singapore
0641, Republic of Singapore, and summons
as well as other Court process may be
served to the undersigned lawyer;
2. That the Petitioner's (sic) are sueing (sic)
upon a singular and isolated transaction. 10
We are cognizant of the fact that under the "isolated transaction rule," only
foreign corporations and not just any business organization or entity can
avail themselves of the privilege of suing before Philippine courts even
without a license. Counsel Armando S. Padilla stated before the respondent
Court of Tax Appeals that his clients are "suing upon a singular and isolated
transaction." But there is no proof to show that K.M.K. and INDRAPAL are
indeed what they are represented to be. It has been simply stated by
Attorney Padilla that K.M.K. Gani is "a single proprietorship," while
INDRAPAL is "a firm," and both are "doing business in accordance with the
laws of Singapore ... ," with specified addresses in Singapore. In cases of this
nature, these allegations are not sufficient to clothe a claimant of suspected
smuggled goods of juridical personality and existence. The "isolated
transaction rule" refers only to foreign corporations. Here the petitioners
are not foreign corporations. They do not even pretend to be so. The first
paragraph of their petition before the Court, containing the allegation of
their identities, does not even aver their corporate character. On the
contrary, K.M.K. alleges that it is a "single proprietorship" while INDRAPAL
hides under the vague identification as a "firm," although both describe
themselves with the phrase "doing business in accordance with the laws of
Singapore."
Absent such proof that the private respondents are corporations (foreign or
not), the respondent Court of Tax Appeals should have barred their
invocation of the right to sue within Philippine jurisdiction under the
"isolated transaction rule" since they do not qualify for the availment of
such right.
As we had stated before:
But merely to say 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 in
the present case. The proposition as stated, refers to the
right to sue; the question here refers to pleading and
procedure. It should be noted that insofar as the allegations
in the complaint have a bearing on appellant's capacity to
sue, all that is averred is that they are both foreign
corporations existing under the laws of the United States.
This averment conjures two alternative possibilities: either
they are engaged in business in the Philippines or they are
not so engaged. If the first, they must have been duly
licensed in order to maintain this suit; if the second, if (sic)
the transaction sued upon is singular and isolated, no such
license is required. In either case, the qualifying
circumstance is an essential part of the element of plaintiffs
capacity to sue and must be affirmatively pleaded. 11
In this connection, we note also a fatal defect in the pleadings of the private
respondents. There is no allegation as to who is the duly authorized
representative or resident agent in our jurisdiction. All we have on record
are the pleadings filed by Attorney Armando S. Padilla who represents
himself as the counsel for the private respondents.
xxx xxx xxx
It is incumbent on plaintiff to allege sufficient facts to show
that he is concerned with the cause of action averred, and is
FERNAN, C.J.:p
Challenged in this petition for certiorari which is anchored on grave abuse of
discretion, are two orders of the Regional Trial Court, Branch CXLII of Makati,
Metro Manila dismissing the complaint for collection of a sum of money and
denying the motion for reconsideration of the dismissal order on the ground
that petitioner, a Hongkong-based bank, is barred by the General Banking
Act from maintaining a suit in this jurisdiction.
The records show that on July 18, 1979, petitioner Hang Lung Bank, Ltd.,
which was not doing business in the Philippines, entered into two (2)
continuing guarantee agreements with Cordova Chin San in Hongkong
whereby the latter agreed to pay on demand all sums of money which may
be due the bank from Worlder Enterprises to the extent of the total amount
of two hundred fifty thousand Hongkong dollars (HK $250,000). 1
Worlder Enterprises having defaulted in its payment, petitioner filed in the
Supreme Court of Hongkong a collection suit against Worlder Enterprises
and Chin San. Summonses were allegedly served upon Worlder Enterprises
and Chin San at their addresses in Hongkong but they failed to respond
thereto. Consequently, the Supreme Court of Hongkong issued the following:
BARNETT
JUDGMENT
THE 14th DAY OF JUNE, 1984
Pre-trial of the case was set for June 17, 1985 but it was postponed to July
12, 1985. However, a day before the latter pre-trial date, Chin San filed a
motion to dismiss the case and to set the same for hearing the next day. The
motion to dismiss was based on the grounds that petitioner had no legal
capacity to sue and that venue was improperly laid.
Acting on said motion to dismiss, on December 20, 1985, the lower
court 4 issued the following order:
SO ORDERED. 5
Petitioner filed a motion for the reconsideration of said order but it was
denied for lack of merit. 6 Hence, the instant petition for certiorari seeking
the reversal of said orders "so as to allow petitioner to enforce through the
court below its claims against private respondent as recognized by the
Supreme Court of Hongkong." 7
Petitioner asserts that the lower court gravely abused its discretion in: (a)
holding that the complaint was not the proper action for purposes of
collecting the amount guaranteed by Chin San "as recognized and adjudged
by the Supreme Court of Hongkong;" (b) interpreting Section 14 of the
General Banking Act as precluding petitioner from maintaining a suit before
Philippine courts because it is a foreign corporation not licensed to do
business in the Philippines despite the fact that it does not do business here;
and (c) impliedly sustaining private respondent's allegation of improper
venue.
We need not detain ourselves on the issue of improper venue. Suffice it to
state that private respondent waived his right to invoke it when he
forthwith filed his answer to the complaint thereby necessarily implying
submission to the jurisdiction of the court. 8
The resolution of this petition hinges on a determination of whether
petitioner foreign banking corporation has the capacity to file the action
below.
Private respondent correctly contends that since petitioner is a bank, its
capacity to file an action in this jurisdiction is governed by the General
Banking Act (Republic Act No. 337), particularly Section 14 thereof which
provides:
FIRST
[G.R.
DIVISION
No.
47701.
June
27,
1941.]
Zaragoza,
Araneta
&
Bautista,
the pleadings being to draw the lines of battle between litigants and to
indicate fairly the nature of the claims or defenses of both parties (1
Sutherlands Code Pleading, Practice & Forms, sec. 83; Milliken v. Swenseld,
46 N. D., 561, 563; 179 N. W., 920), a party cannot subsequently take a
position contradictory to, or inconsistent with, his pleadings, as the facts
therein admitted are to be taken as true for the purpose of the action.
for Petitioners.
DECISION
Benito
Soliven
for Respondents.
SYLLABUS
1. FOREIGN CORPORATIONS; MEANING OF "DOING" OR "ENGAGING IN" OR
"TRANSACTING" BUSINESS. No general rule or governing principles can
be laid down as to what constitutes "doing" or "engaging in" or
"transacting" business. Indeed, each case must be judged in the light of its
peculiar environmental circumstances. The rule 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 retire from it and turned it over to another. (Traction Cos. v.
Collectors of Int. Revenue [C. C. S. Ohio], 223 F., 984, 987.) The term implies
a continuity of commercial dealings and arrangements, and contemplates to
that extent, the performance of acts or works or the exercise of some of the
functions normally incident to, and in progressive prosecution of, the
purpose
and
object
of
its
organization.
2. ID.; ID.; LICENSE REQUIRED BY SECTION 68 OF CORPORATION LAW; RIGHT
TO SUE AND BE SUED. The Mentholatum Co., Inc. being a foreign
corporation doing business in the Philippines without the license required
by section 68 of the Corporation Law, it may not prosecute this action for
violation of trade mark and unfair competition. Neither may the PhilippineAmerican Drug Co., Inc. maintain the action here for the reason that the
distinguishing features of the agent being his representative character and
derivative authority (Merchem on Agency, sec. 1; Story on Agency, sec. 3;
Sternaman v. Metropolitan Life Ins. Co., 170 N. Y., 21), it cannot now, to the
advantage of its principal, claim an independent standing in court.
3. PLEADING AND PRACTICE; OBJECT OF PLEADINGS; POSITION
CONTRADICTORY TO, OR INCONSISTENT WITH, PLEADINGS. The object of
LAUREL, J.:
This is a petition for a writ of certiorari to review the decision of the Court of
Appeals dated June 29, 1940, reversing the judgment of the Court of First
Instance of Manila and dismissing the petitioners complaint.
On October 1, 1935, the Mentholatum Co., Inc., and the PhilippineAmerican Drug, Co., Inc. instituted an action in the Court of First Instance of
Manila, civil case No. 48855, against Anacleto Mangaliman, Florencio
Mangaliman and the Director of the Bureau of Commerce for infringement
of trade mark and unfair competition. Plaintiffs prayed for the issuance of
an order restraining Anacleto and Florencio Mangaliman from selling their
product "Mentholiman," and directing them to render an accounting of
their sales and profits and to pay damages. The complaint stated, among
other particulars, that the Mentholatum Co., Inc., is a Kansas corporation
which manufactures "Mentholatum," a medicament and salve adapted for
the treatment of colds, nasal irritations, chapped skin, insect bites, rectal
irritation and other external ailments of the body; that the PhilippineAmerican Drug Co., Inc., is its exclusive distributing agent in the Philippines
authorized by it to look after and protect its interests; that on June 26, 1919
and on January 21, 1921, the Mentholatum Co., Inc., registered with the
Bureau of Commerce and Industry the word, "Mentholatum", as trade mark
for its products; that the Mangaliman brothers prepared a medicament and
salve named "Mentholiman" which they sold to the public packed in a
container of the same size, color and shape as "Mentholatum" ; and that, as
a consequence of these acts of the defendants, plaintiffs suffered damages
from the diminution of their sales and the loss of goodwill and reputation of
their
product
in
the
market.
"1. The Court of Appeals erred in declaring that the transactions of the
Mentholatum Co., Inc., in the Philippines constitute transacting business in
this country as this term is used in section 69 of the Corporation Law. The
aforesaid conclusion of the Court of Appeals is a conclusion of law and not
of
fact.
dicta
"2. The Court of Appeals erred in not holding that whether or not the
Mentholatum Co., Inc., has transacted business in the Philippines is an issue
foreign
to
the
case
at
bar.
"3. The Court of Appeals erred in not considering the fact that the complaint
was filed not only by the Mentholatum Co., Inc., but also by the PhilippineAmerican Drug Co., Inc., and that even if the Mentholatum Co., Inc., has no
legal standing in this jurisdiction, the complaint filed should be decided on
its merits since the Philippine-American Drug Co., Inc., has sufficient interest
and standing to maintain the complaint."cralaw virtua1aw library
expuesto,
este
Juzgado
Petitioners maintain that the Mentholatum Co., Inc., gas not sold personally
any of its products in the Philippines; that the Philippine-American Drug Co.,
Inc., like fifteen or twenty other local entities, was merely an importer of
the products of the Mentholatum Co., Inc., and that the sales of the
Philippines-American Drug Co., Inc., were its own and not for the account of
the Mentholatum Co., Inc. Upon the other hand, the defendants contend
that the Philippine- American Drug Co., Inc., is the exclusive distributing
agent in the Philippines of the Mentholatum Co., Inc., in the sale and
distribution of its product known as "Mentholatum" ; that, because of this
arrangement, the acts of the former become the acts of the latter; and that
the Mentholatum Co., Inc., being thus engaged in business in the Philippines,
and not having acquired the license required by section 68 of the
Corporation Law, neither it nor the Philippine-American Drug Co., Inc., could
prosecute
the
present
action.
Section
69
of
Act
No.
1459
reads:jgc:chanrobles.com.ph
The writ prayed for should be, as it hereby is, denied, with costs against the
petitioners.
So
ordered.
MORAN, J.,
dissenting:chanrob1es
virtual
1aw
library
EN BANC
G.R. No. L-18961 August 31, 1966
ATLANTIC MUTUAL INSURANCE COMPANY and CONTINENTAL INSURANCE
COMPANY, plaintiffs and appellants, vs. CEBU STEVEDORING CO.,
INC., defendant and appellee.
William H. Quasha and Associates for plaintiffs and appellants.
Deen Law Offices for defendant and appellee.
MAKALINTAL, J.:chanrobles virtual law library
This is an appeal from three orders of the Court of First Instance of Cebu,
the last one dismissing appellants' complaint. These appellants - 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, the sum of P15,980.30; 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.chanroblesvirtualawlibrarychanrobles virtual law library
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, which states:
SEC. 69. No foreign corporation or corporation formed, organized, or
existing under any laws other than those of the Philippines shall be
permitted to transact business in the Philippines or maintain by itself or
assigned any suit for the recovery of any debt, claim, or demand whatever,
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."1 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.chanroblesvirtualawlibrarychanrobles virtual law library
It was indeed in the light of these and other consideration that this Court
has seen fit to amend the former rule by requiring in the Revised Rules
(Section 4, Rule 8) that "facts showing the capacity of a party to sue or be
sued or the authority of a party to sue or be sued in a representative
capacity or the legal existence of an organized association of persons that is
made a party, must be averred."chanrobles virtual law library
The orders appealed from are affirmed, with costs against plaintiffsappellants.
Concepcion, C.J., Reyes, J.B.L., Barrera, Dizon, Bengzon, J.P., Zaldivar,
Sanchez
and
Castro,
JJ.,
concur.
Regala, J., took no part.
MAKASIAR, J:
Petition for review on certiorari of the decision of the Court of Industrial
Relations, dated February 14, 1972, ordering petitioners herein to pay
private respondent Leonardo de la Osa his overtime compensation, as wen
as his swing shift and graveyard shift premiums at the rate of fifty (50%) per
cent of his basic sa (Annex E, p. 31, rollo).
The aforesaid decision was based on a report submitted by the Hearing
Examiner, CIR (Dagupan City Branch), the pertinent portions of which are
quoted hereinbelow:::
In a petition filed on July 1, 1967, Leonardo dela Osa sought
his reinstatement. with full backwages, as well as the
recovery of his overtime compensation, swing shift and
graveyard shift differentials. Petitioner alleged that he was
employed by respondents as follows: (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 respondents.
Respondents filed on August 7, 1967 their letter- answer
without substantially denying the material allegations of the
basic petition but interposed the following special defenses,
namely: That respondents Facilities Management
Corporation and J. S. Dreyer are domiciled in Wake Island
which is beyond the territorial jurisdiction of the Philippine
Government; that respondent J. V. Catuira, though an
employee of respondent corporation presently stationed in
Manila, is without power and authority of legal
representation; and that the employment contract between
petitioner and respondent corporation carries -the approval
of the Department of Labor of the Philippines.
Subsequently on May 3, 1968. respondents filed a motion
to dismiss the subject petition on the ground that this Court
has no Jurisdiction over the instant case, and on May 24,
1968, petitioner interposed an opposition thereto. Said
motion was denied by this Court in its Order issued on July
12, 1968 sustaining jurisdiction in accordance with the
prevailing doctrine of the Supreme Court in similar cases.
xxx xxx xxx
But before we consider and discuss the foregoing issues, let
us first ascertain if this Court could acquire jurisdiction over
the case at bar, it having been contended by respondents
that they are domiciled in Wake Island which is beyond the
territorial jurisdiction of the Philippine Government. To this
incidental question, it may be stated that while it is true the
site of work is Identified as Wake Island, it is equally true
the place of hire is established in Manila (See Section B,
Filipino Employment Contract, Exhibit '1'). Moreover, what
is important is the fact that the contract of employment
between the parties litigant was shown to have been
originally executed and subsequently renewed in Manila, as
2. L-38781 June
lack
of
21,1974.
17,1974
merit
affirm a judgment against persons domiciled outside and not doing business
in the Philippines, and over whom it did not acquire jurisdiction')
While it is true that the issues presented in the decided cases are worded
differently from the principal issue raised in the case at bar, the fact remains
that they all boil down to one and the same issue, which was aptly
formulated and ably resolved by Mr. Justice Ramon C. Fernandez, then with
the Court of Appeals and now a member of this Court, in CA-G.R. No. SP01485-R, later elevated to this Court on appeal by certiorari in Case G.R. No.
L-37117 this case, the majority opinion of the Court of Appeals, which was
penned by Justice Fernandez and which WE hereby adopt, runs as follows:
The principal issue presented in this special civil action is
whether petitioner 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.
From the facts of record, the petitioner may be considered
as doing busuness un the Philippines within the the scope of
Section 14, Rule 14 of the Rules of the Court which provide:
SEC 14. Service upon private foreign
corporations. If the defendant is a foreign
corporation or a non-resident joint stock
company or association: doing business in
the Philippines, service may be made on its
resident agent designated in accordance
with law for that purpose or, if there be no
such agent, on the government official
designated by law to that effect, or on any
of its officers or agents within the
Philippines.
Indeed, the petitioner, in compliance with Act 2486 as
implemented by Department of Labor Order No. IV dated
May 20, 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
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 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.
After all the defendants had filed their answer, 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.
After the parties submitted a partial stipulation of facts and additional
documentary evidence, the case was submitted for decision of the trial
court, which dismissed the complaint on the ground that the plaintiff
insurance company is subject to the requirements of Sections 68 and 69 of
Act 1459, as amended, and for its failure to comply therewith, it has no legal
capacity to bring suit in this jurisdiction. Plaintiff appealed to this Court.
The main issue involved in the appeal is whether or not the plaintiff
appellant has been doing business in the Philippines, considering the fact
that it has no license to transact business in the Philippines as a foreign
corporation. WE ruled:
The object of Sections 68 and 69 of the Corporation Law
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. 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 (Marshall Co. vs. Elser & Co., 46 Phil 70,75).
In Mentholatum Co., Inc., et al vs- M Court rules thatNo general rule or governing principle can
be laid down as to what constitutes 'doing'
RESOLUTION
VITUG, J.:
The crucial issue in this petition for review on certiorari is whether or not
the lower court, given the factual allegations in the complaint, 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.
The petitioner, Signetics Corporation (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).
In a complaint initiated on 15 March 1990, 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
Regional Trial Court of Pasig, Metro Manila (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.
The petitioner opines that the phrase, "(the) fact (of doing business in the
Philippines) must first be established in order that summons be made and
jurisdiction acquired," used in the above pronouncement, would indicate
that a mere allegation to that effect in the complaint is not enough there
must instead be proof of doing business. 10 In any case, the petitioner,
points out, the allegations themselves did not sufficiently show the fact of
its doing business in the Philippines.
It should be recalled that jurisdiction and venue of actions are, as they
should be, initially determined by the allegations of the
complaint. 11 Jurisdiction cannot be made to depend on independent pleas
set up in a mere motion to dismiss, otherwise jurisdiction would become
dependent almost entirely upon the defendant. 12 The fact of doing business
must then, in the first place, be established by appropriate allegations in the
complaint. This is what the Court should be seen to have meant in
the Pacific Micronisian case. The complaint, it is true, may have been
vaguely structured but, taken correlatively, not disjunctively as the
petitioner would rather suggest, it is not really so weak as to be fatally
deficient in the above requirement. Witness the following allegations of the
complaint:
3. In the year 1978, the defendant became interested in
engaging in business in the Philippines . . .;
4. To serve as its local business conduit, the defendant
organized a wholly owned domestic subsidiary corporation
known as SIGNETICS FILIPINAS CORPORATION (SIGFIL, for
brevity), which was supposed to be its actual operating
entity in the Philippines;
xxx xxx xxx
18. In February 1983, the defendant ceased all its business
operations in the leased premise. . . .;
xxx xxx xxx
23. (a) In November 21, 1986, the defendant transferred all
shares of stock of SIGFIL in favor of TEAM HOLDING LIMITED,
Philippines; that it had actually organized SigFil, as its local business conduit
or actual operating entity in the Philippines; that, through Sigfil, it had
entered into the lease contract involving properties in the Philippines a
situation that could have allowed Frehauf to avail itself of the provisions of
Section 17, Rule 14, on extraterritorial service of summons since the relief
sought consists in excluding the defendant from any interest in property
within the Philippines); and that while Signetics may have had transferred all
its shareholdings (before the complaint was filed) in favor of TEAM Holdings,
Ltd., another foreign corporation, SIGFIL's corporate name, however, was
forthwith changed to TEAM Pacific corporation, which Freuhauf claims is a
"devious" attempt to "shield chicanery and to perpetuate fraud" (see
paragraphs 23 and 24, Complaint). On this score, what might in a way also
be revealing is that after Freuhauf had moved to sell the attached property
subject matter of the litigation, the petitioner filed the following pleading,
intriguingly captioned, "Manifestation"; viz:
Defendant, by counsel, respectfully states:
1. Plaintiff filed a Motion to Sell Attached Properties and
scheduled it for hearing on August 24, 1990, justifying the
sale on the allegations that certain properties belonging to
the defendant are perishable in nature and liable to
material depreciation in value.
2. In pleadings filed by the defendant, the Court was
requested to determine whether there is a valid attachment
on this alleged properties. This determination is necessary
because defendant has pointed out that personal
jurisdiction could not be justified on the basis of the socalled attachment because it was legally ineffective. Two
reasons were given to the Court. First, the property has not
been taken into actual custody of the sheriff as required by
Rule 57, Section 7 (c). Second, the property has not been
shown to be owned by the defendant.
3. Since jurisdiction over the defendant is premised on the
attachment, the Honorable Court should therefore act on
the motion to sell by determining (i) whether plaintiff has
shown that the property proposed to be sold belongs to the
defendant (ii) whether it was effectively attached and (iii)