G.R. No.

185582
February 29, 2012
TUNA PROCESSING, INC., Petitioner, vs.
PHILIPPINE KINGFORD, INC., Respondent.
FACTS
Petitioner Tuna Processing, Inc. (TPI), a foreign corporation not
licensed to do business in the Philippines, and five Philippine tuna
processors, namely, Angel Seafood Corporation, East Asia Fish Co., Inc.,
Mommy Gina Tuna Resources, Santa Cruz Seafoods, Inc., and
respondent
Kingford
(collectively
referred
to
as
the
"sponsors"/"licensees") entered into a Memorandum of Agreement.
Due to a series of events not mentioned in the petition, the licensees,
including respondent Kingford, withdrew from petitioner TPI and
correspondingly reneged on their obligations. Petitioner submitted the
dispute for arbitration before the International Centre for Dispute
Resolution in the State of California, United States and won the case
against respondent.
To enforce the award, petitioner TPI filed a Petition for
Confirmation, Recognition, and Enforcement of Foreign Arbitral Award
before the RTC of Makati City. Kingford filed a Motion to Dismiss. Upon
the second motion for reconsideration, granted respondents motion
and dismissed the petition on the ground that the petitioner lacked
legal capacity to sue in the Philippines.
Petitioner TPI now seeks to nullify, in this instant Petition for
Review on Certiorari under Rule 45, the order of the trial court
dismissing its Petition for Confirmation, Recognition, and Enforcement
of Foreign Arbitral Award.
ISSUE
Whether or not the court a quo was correct in so dismissing the
petition on the ground of petitioners lack of legal capacity to sue.
RULING
NO. The SC held that a foreign corporation not licensed to do
business in the Philippines have legal capacity to sue under the
provisions of the Alternative Dispute Resolution Act of 2004.
Plaintiff TPIs acknowledges that it "is a foreign corporation
established in the State of California" and "was given the exclusive
right to license or sublicense the Yamaoka Patent" and "was assigned

the exclusive right to enforce the said patent and collect corresponding
royalties" in the Philippines. TPI likewise admits that it does not have a
license to do business in the Philippines.
The Corporation Code of the Philippines expressly provides that
foreign corporation transacting business in the Philippines without a
license, or its successors or assigns, shall not be permitted to maintain
or intervene in any action, suit or proceeding in any court or
administrative agency of the Philippines. This being the real situation,
TPI cannot be permitted to maintain or intervene in any action, suit or
proceedings in any court or administrative agency of the Philippines." A
priori, the "Petition, etc." extant of the plaintiff TPI should be dismissed
for it does not have the legal personality to sue in the Philippines.
However, as between the Corporation Code, a general law, and the
Alternative Dispute Resolution Act of 2004 , a special law, the latter
shall prevail. It specifically provides exclusive grounds available to the
party opposing an application for recognition and enforcement of the
arbitral award.
It is in the best interest of justice that in the enforcement of a
foreign arbitral award, we deny availment by the losing party of the
rule that bars foreign corporations not licensed to do business in the
Philippines from maintaining a suit in our courts. When a party enters
into a contract containing a foreign arbitration clause and, as in this
case, in fact submits itself to arbitration, it becomes bound by the
contract, by the arbitration and by the result of arbitration, conceding
thereby the capacity of the other party to enter into the contract,
participate in the arbitration and cause the implementation of the
result. The SC reiterate that the foreign corporations capacity to sue in
the Philippines is not material insofar as the recognition and
enforcement of a foreign arbitral award is concerned.
Therefore, petitioner TPI, although a foreign corporation not
licensed to do business in the Philippines, is not, for that reason alone,
precluded from filing the Petition for Confirmation, Recognition, and
Enforcement of Foreign Arbitral Award before a Philippine court. The
case is remanded to RTC.

G.R. NO. 152471

August 18, 2006
FIESTA WORLD MALL CORPORATION, Petitioner, vs.
LINBERG PHILIPPINES, INC., Respondent.
FACTS
Fiesta World Mall Corporation, petitioner, owns and operates
Fiesta World Mall located at Barangay Maraouy, Lipa City; while Linberg
Philippines, Inc., respondent, is a corporation that builds and operates
power plants.
Linberg filed with the RTC of Pasig City, a Complaint for Sum of
Money against petitioner. The complaint alleges that on November 12,
1997, petitioner and respondent executed a build-own-operate
agreement. Under this Contract, Linberg will construct, at its own cost,
and operate as owner a power plant, and to supply Fiesta World Mall
Corp. power/electricity at its shopping mall in Lipa City. Petitioner, on
the other hand, will pay respondent "energy fees" to be computed in
accordance with the Seventh Schedule of the Contract.
In November 1997, the power plant became operational and
started supplying power/electricity to petitioners shopping mall in Lipa
City. In December 1997, respondent started billing petitioner. As of May
21, 1999, petitioners unpaid obligation amounted to P15,241,747.58,
exclusive of interest. However, petitioner questioned the said amount
and refused to pay despite respondents repeated demands. While
both parties had discussions on the questioned billings, however,
"there were no earnest efforts to resolve the differences in accordance
with the arbitration clause provided for in the Contract."
Petitioner alleged that respondents filing of the complaint is
premature and should be dismissed on the ground of non-compliance
with paragraph 7.4 of the Contract. Thereafter, petitioner filed a Motion
to Set Case for Preliminary Hearing on the ground that respondent
violated the arbitration clause provided in the Contract, thereby

rendering its cause of action premature. This was opposed by

respondent, claiming that paragraph 7.4 of the Contract on arbitration
is not the provision applicable to this case; and that since the parties
failed to settle their dispute, then respondent may resort to court
action.
The trial court denied petitioners motion for lack of merit.
Petitioner elevated the matter to the Court of Appeals via a Petition for
Certiorari. The CA dismissed the petition and affirming the challenged
Orders of the trial court.
ISSUE
Whether the filing with the trial court of respondents complaint is
premature.
YES.

RULING

Paragraph 7.4 of the Contract, quoted earlier, mandates that

should petitioner dispute any amount of energy fees in the invoice and
billings made by respondent, the same "shall be resolved by arbitration
of three (3) persons, one (1) by mutual choice, while the other two (2)
to be each chosen by the parties themselves." The parties, in
incorporating such agreement in their Contract, expressly intended
that the said matter in dispute must first be resolved by an arbitration
panel before it reaches the court. They made such arbitration
mandatory.
It is clear from the records that petitioner disputed the amount of
energy fees demanded by respondent. However, respondent, without
prior recourse to arbitration as required in the Contract, filed directly
with the trial court its complaint, thus violating the arbitration clause in
the Contract.
It bears stressing that such arbitration agreement is the law
between the parties. Since that agreement is binding between them,
they are expected to abide by it in good faith.7 And because it covers
the dispute between them in the present case, either of them may
compel the other to arbitrate. Thus, it is well within petitioners right to
demand recourse to arbitration. The SC cannot agree with respondent
that it can directly seek judicial recourse by filing an action against
petitioner simply because both failed to settle their differences

amicably. Suffice it to state that there is nothing in the Contract

providing that the parties may dispense with the arbitration clause.
Furthermore, the SC note that the computation of the energy fees
disputed by petitioner also involves technical matters that are better
left to an arbitration panel who has expertise in those areas.
In this connection, since respondent has already filed a complaint
with the trial court without prior recourse to arbitration, the proper
procedure to enable an arbitration panel to resolve the parties dispute
pursuant to their Contract is for the trial court to stay the proceedings.
After the arbitration proceeding has been pursued and completed, then
the trial court may confirm the award made by the arbitration panel.
In sum, The SC hold that the Court of Appeals erred in
disregarding the arbitration clause in the parties Contract.