AVON INSURANCE PLC, BRITISH RESERVE INSURANCE. CO. LTD.

, CORNHILL
INSURANCE PLC, IMPERIO REINSURANCE CO. (UK) LTD., INSTITUTE DE
RESEGURROS DO BRAZIL, INSURANCE CORPORATION OF IRELAND PLC, LEGAL
AND GENERAL ASSURANCE SOCIETY LTD., PROVINCIAL INSURANCE PLC, QBL
INSURANCE (UK) LTD., ROYAL INSURANCE CO. LTD., TRINITY INSURANCE CO.
LTD., GENERAL ACCIDENT FIRE AND LIFE ASSURANCE CORP. LTD., COOPERATIVE
INSURANCE SOCIETY and PEARL ASSURANCE CO. LTD., petitioners, vs. COURT OF
APPEALS, REGIONAL TRIAL COURT OF MANILA, BRANCH 51, YUPANGCO COTTON
MILLS, WORLDWIDE SURETY & INSURANCE CO., INC., respondents.

DECISION

TORRES, JR., J.:

Just how far can our court assert jurisdiction over the persons of foreign entities being
charged with contractual liabilities by residents of the Philippines?

Appealing from the Court of Appeals October 11, 1990 Decision [1] in CA-G.R. No. 22005,
petitioners claim that the trial courts jurisdiction does not extend to them, since they are
foreign reinsurance companies that are not doing business in the Philippines. Having entered
into reinsurance contracts abroad, petitioners are beyond the jurisdictional ambit of our
courts and cannot be rendered summons through extraterritorial service, as under Section
17, Rule 14 of the Rules of Court, nor through the Insurance Commissioner, under Section
14. Private respondent Yupangco Cotton Mills contend on the other hand that petitioners are
within our courts cognitive powers, having submitted voluntarily to their jurisdiction by filing
motions to dismiss[2] the private respondents suit below.

The antecedent facts, as found by the appellate court, are as follows:

Respondent Yupangco Cotton Mills filed a complaint against several foreign reinsurance
companies (among which are petitioners) to collect their alleged percentage liability under
contract treaties between the foreign insurance companies and the international insurance
broker C.J. Boatright, acting as agent for respondent Worldwide Surety and Insurance
Company. Inasmuch as petitioners are not engaged in business in the Philippines with no
offices, places of business or agents in the Philippines, the reinsurance treaties having been
rendered abroad, the service of summons upon motion of respondent Yupangco, was made
upon petitioners through the office of the Insurance Commissioner. Petitioners, by counsel
on special appearance, seasonably filed motions to dismiss disputing the jurisdiction of
respondent Court and the extra-territorial service of summons. Respondent Yupangco filed
its opposition to the motion to dismiss, petitioners filed their reply, and respondent
Yupangco filed its rejoinder. In an order dated April 30, 1990 respondent Court denied the
motions to dismiss of the petitioners and directed petitioners to file their answer. On May
29, 1990, petitioners filed their notice of appeal. In an order dated June 4, 1990,
respondent court denied due course to the appeal.[3]

To this day, trial on the merits of the collection suit has not proceeded as in the present
petition, petitioners continue vigorously to dispute the trial courts assumption of jurisdiction
over them.
 It will be remembered that in the plaintiffs complaint,[4] it was contended that on July 6,
1979 and on October 1, 1980, Yupangco Cotton Mills engaged to secure with Worldwide
Security and Insurance Co. Inc., several of its properties for the periods July 6, 1979 to July
6, 1980 as under Policy No. 20719 for a coverage of P100,000,000.00 and from October 1,
1980 to October 1, 1981, under Policy No. 25896, also for P100,000,000.00. Both contracts
were covered by reinsurance treaties between Worldwide Surety and Insurance and several
foreign reinsurance companies, including the petitioners. The reinsurance arrangements had
been made through international broker C.J. Boatright and Co. Ltd., acting as agent of
Worldwide Surety and Insurance.

As fate would have it, on December 16, 1979 and May 2, 1981, with in the respective
effectivity periods of Policies 20719 and 25896, the properties therein insured were razed by
fire, ethereby giving rise to the obligation of the insurer to indemnify the Yupangco Cotton
Mills. Partial payments were made by Worldwide Surety and Insurance and some of the
reinsurance companies.

On May 2, 1983, Worldwide Surety and Insurance, in a deed of Assignment,

acknowledge a remaining balance of P19,444,447.75 still due Yupangco Cotton Mills, and
assigned to the latter all reinsurance proceeds still collectible from all the foreign
reinsurance companies. Thus, in its interest as assignee and original insured, Yupangco
Cotton Mills instituted this collection suit against the petitioners.

Service of summons upon the petitioners was made by notification to the Insurance
Commissioner, pursuant to Section 14, Rule 14 of the Rules of Court.[5]

In a Petition for Certiorari filed with the Court of Appeals, petitioners submitted that
respondent Court has no jurisdiction over them, being all foreign corporations not doing
business in the Philippines with no office, place of business or agents in the Philippines. The
remedy of Certiorari was resorted to by petitioners on the premise that if petitioners had
filed an answer to the complaint as ordered by the respondent court, they would risk
abandoning the issue of jurisdiction. Moreover, extra-territorial service of summons on
petitioners is null and void because the complaint for collection is not one affecting plaintiffs
status and not relating to property within the Philippines.

The Court of Appeals found the petition devoid of merit, stating that:

1. Petitioners were properly served with summons and whatever defect, if any, in
the service of summons were cured by their voluntary appearance in
court, via motion to dismiss.

2. Even assuming that petitioners have not yet voluntarily appeared as co-
defendants in the case below even after having filed the motion to dismiss
adverted to, still the situation does not deserve dismissal of the complaint as far
as they are concerned, since as held by this Court in Linger Fisher GMBH vs.
IAC, 125 SCRA 253.

A case should not be dismissed simply because an original summons was wrongfully
served. It should be difficult to conceive for example, that when a defendant personally
appears before a court complaining that he had not been validly summoned, that the case
filed against him should be dismissed. An alias summons can be actually served on said
defendant.

3. Being reinsurers of respondent Worldwide Surety and Insurance of the risk which
the latter assumed when it issued the fire insurance policies in dispute in favor of
respondent Yupangco, petitioners cannot now validly argue that they do not do
business in this country. At the very least, petitioners must be deemed to have
engaged in business in the Philippines no matter how isolated or singular such
business might be, even on the assumption that among the local domestic
insurance corporations of this country, it is only in favor of Worldwide Surety and
Insurance that they have ever reinsured any risk arising from reinsurance within
the territory.

4. The issue of whether or not petitioners are doing business in the country is a
matter best referred to a trial on the merits of the case and so should be
addressed there.

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.

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.

The appearance of counsel for petitioners being explicitly by special appearance without
waiving objections to the jurisdiction over their persons or the subject matter and the
motions to dismiss having excluded non-jurisdictional grounds, there is no voluntary
submission to the jurisdiction of the trial court.[6]

For its part, private respondent Yupangco counter-submits:

1. Foreign corporations, such as petitioners, not doing business in the Philippines, can be
sued in the Philippine Courts, notwithstanding petitioners claim to the contrary.

2. While the complaint before the Honorable Trial Court is for a sum of money, not affecting
status or relating to property, petitioners (then defendants) can submit themselves
voluntarily to the jurisdiction of Philippine Courts, even if there is no extra-judicial (sic)
service of summons upon them.

3. The voluntary appearance of the petitioners (then defendants) before the Honorable Trial
Court amounted, in effect, to voluntary submission to its jurisdiction over their persons.[7]

In the decisions of the courts below, there is much left to speculation and conjecture as
to whether or not the petitioners were determined to be doing business in the
Philippines or not.
 To qualify the petitioners business of reinsurance within the Philippine forum, resort
must be made to established principles in determining what is meant by doing business in
the Philippines. In Communication Materials and Design, Inc. et. al vs. Court of Appeals,[8] it
was observed that:

There is no exact rule of governing principle as to what constitutes doing or engaging in or

transacting business. Indeed, such case must be judged in the light of its peculiar
circumstances, upon its peculiar facts and upon the language of the statute applicable. 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.

Article 44 of the Omnibus Investments Code of 1987 defines the phrase to include:

'soliciting orders, purchases, service contracts opening offices, whether called liaison offices
of branches; appointing representatives or distributors who are domiciled in the Philippines
or who in any calendar year stay in the Philippines for a period or periods totaling one
hundred eighty (180) days or more; participating in the management, supervision or control
of any domestic business firm, entity or corporation in the Philippines, and any other act or
acts that imply a continuity or commercial dealings or arrangements and contemplate to
that extent the performance of acts or works, or the exercise of some of the functions
normally incident to and in progressive prosecution of, commercial gain or of purpose and
object of the business organization.

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.[9]

A single act or transaction made in the Philippines, however, could not qualify a foreign
corporation to be doing business in the Philippines, if such singular act is not merely
incidental or casual, but indicates the foreign corporations intention to do business in the
Philippines.[10]

There is no sufficient basis in the records which would merit the institution of this
collection suit in the Philippines. More specifically, there is nothing to substantiate the
private respondents submission that the petitioners had engaged in business activities in
this country. This is not an instance where the erroneous service of summons upon the
defendant can be cured by the issuance and service of alias summons, as in the absence of
showing that petitioners had been doing business in the country, they cannot be summoned
to answer for the charges leveled against them.

The Court is cognizant of the doctrine is Signetics Corp. vs. Court of Appeals[11] that for
the purpose of acquiring jurisdiction by way of summons on a defendant foreign
corporation, there is no need to prove first the fact that defendant is doing
business in the Philippines. The plaintiff only has to allege in the complaint that
the defendant has an agent in the Philippines for summons to be validly served
thereto, even without prior evidence advancing such factual allegation.
 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 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.[14]

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. vs. 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 here[17] 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 Philippines.[18]

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 vs. 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 nothingness. In addition, the
assertion that a resident of the Philippines will be inconvenienced by an out-of-town suit
against a foreign entity, is irrelevant and unavailing to sustain the continuance of a local
action, for jurisdiction is not dependent upon the convenience or inconvenience of a party.[21]

It is also argued that having filed a motion to dismiss in the proceedings before the trial
court, petitioners have thus acquiesced to the courts jurisdiction, and they cannot maintain
the contrary at this juncture.

This argument is at the most, flimsy.

In civil cases, jurisdiction over the person of the defendant is acquired either by
his voluntary appearance in court and his submission to its authority or by service
of summons.[22]

Fundamentally, the service of summons is intended to give official notice to the

defendant or respondent that an action had been commenced against it. The defendant or
respondent is thus put on guard as to the demands of the plaintiff as stated in the
complaint.[23] The service of summons, upon the defendant becomes an important
element in the operation of a courts jurisdiction upon a party to a suit, as service
of summons upon the defendant is the means by which the court acquires
jurisdiction over his person.[24]Without service of summons, or when summons are
improperly made, both the trial and the judgment, being in violation of due
process, are null and void,[25] unless the defendant waives the service of summons
by voluntarily appearing and answering the suit.[26]

When a defendant voluntarily appears, he is deemed to have submitted himself to the

jurisdiction of the court.[27] This is not, however, always the case. Admittedly, and without
subjecting himself to the courts jurisdiction, the defendant in an action can, by special
appearance object to the courts assumption on the ground of lack of jurisdiction. If he so
wishes to assert this defense, he must do so seasonably by motion for the purpose of
objecting to the jurisdiction of the court, otherwise, he shall be deemed to have submitted
himself to that jurisdiction.[28] In the case of foreign corporations, it has been held
that they may seek relief against the wrongful assumption of jurisdiction by local
courts. In Time, Inc. vs. Reyes,[29] it was held that the action of a court in refusing to rule
of deferring its ruling on a motion to dismiss for lack or excess of jurisdiction is correctable
by a writ 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.[32]

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.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION
G.R. No. L-34382 July 20, 1983

THE HOME INSURANCE COMPANY, petitioner,

vs.
EASTERN SHIPPING LINES and/or ANGEL JOSE TRANSPORTATION, INC. and HON.
A. MELENCIO-HERRERA, Presiding Judge of the Manila Court of First Instance,
Branch XVII, respondents.

G.R. No. L-34383 July 20, 1983

THE HOME INSURANCE COMPANY, petitioner,

vs.
N. V. NEDLLOYD LIJNEN; COLUMBIAN PHILIPPINES, INC., and/or GUACODS, INC.,
and HON. A. MELENCIO-HERRERA, Presiding Judge of the Manila Court of First
Instance, Branch XVII, respondents.

No. L-34382.

Zapa Law Office for petitioner.

Bito, Misa & Lozada Law Office for respondents.

No. L-34383.

Zapa Law Office for petitioner.

Ross, Salcedo, Del Rosario, Bito & Misa Law office for respondents.

GUTIERREZ, JR., J.:

Questioned in these consolidated petitions for review on certiorari are the decisions of the
Court of First Instance of Manila, Branch XVII, dismissing the complaints in Civil Case No.
71923 and in Civil Case No. 71694, on the ground that plaintiff therein, now appellant, had
failed to prove its capacity to sue.

There is no dispute over the facts of these cases for recovery of maritime damages. In L-
34382, the facts are found in the decision of the respondent court which stated:

On or about January 13, 1967, S. Kajita & Co., on behalf of Atlas Consolidated
Mining & Development Corporation, shipped on board the SS "Eastern Jupiter'
from Osaka, Japan, 2,361 coils of "Black Hot Rolled Copper Wire Rods." The
said VESSEL is owned and operated by defendant Eastern Shipping Lines
(CARRIER). The shipment was covered by Bill of Lading No. O-MA-9, with
arrival notice to Phelps Dodge Copper Products Corporation of the Philippines
(CONSIGNEE) at Manila. The shipment was insured with plaintiff against all
 risks in the amount of P1,580,105.06 under its Insurance Policy No. AS-
73633.

xxx xxx xxx

The coils discharged from the VESSEL numbered 2,361, of which 53 were in
bad order. What the CONSIGNEE ultimately received at its warehouse was the
same number of 2,361 coils with 73 coils loose and partly cut, and 28 coils
entangled, partly cut, and which had to be considered as scrap. Upon
weighing at CONSIGNEE's warehouse, the 2,361 coils were found to weight
263,940.85 kilos as against its invoiced weight of 264,534.00 kilos or a net
loss/shortage of 593.15 kilos, according to Exhibit "A", or 1,209,56 lbs.,
according to the claims presented by the consignee against the plaintiff
(Exhibit "D-1"), the CARRIER (Exhibit "J-1"), and the TRANSPORTATION
COMPANY (Exhibit "K- l").

For the loss/damage suffered by the cargo, plaintiff paid the consignee under
its insurance policy the amount of P3,260.44, by virtue of which plaintiff
became subrogated to the rights and actions of the CONSIGNEE. Plaintiff
made demands for payment against the CARRIER and the TRANSPORTATION
COMPANY for reimbursement of the aforesaid amount but each refused to pay
the same. ...

The facts of L-34383 are found in the decision of the lower court as follows:

On or about December 22, 1966, the Hansa Transport Kontor shipped from
Bremen, Germany, 30 packages of Service Parts of Farm Equipment and
Implements on board the VESSEL, SS "NEDER RIJN" owned by the defendant,
N. V. Nedlloyd Lijnen, and represented in the Philippines by its local agent, the
defendant Columbian Philippines, Inc. (CARRIER). The shipment was covered
by Bill of Lading No. 22 for transportation to, and delivery at, Manila, in favor
of the consignee, international Harvester Macleod, Inc. (CONSIGNEE). The
shipment was insured with plaintiff company under its Cargo Policy No. AS-
73735 "with average terms" for P98,567.79.

xxx xxx xxx

The packages discharged from the VESSEL numbered 29, of which seven
packages were found to be in bad order. What the CONSIGNEE ultimately
received at its warehouse was the same number of 29 packages with 9
packages in bad order. Out of these 9 packages, 1 package was accepted by
the CONSIGNEE in good order due to the negligible damages sustained. Upon
inspection at the consignee's warehouse, the contents of 3 out of the 8 cases
were also found to be complete and intact, leaving 5 cases in bad order. The
contents of these 5 packages showed several items missing in the total
amount of $131.14; while the contents of the undelivered 1 package were
valued at $394.66, or a total of $525.80 or P2,426.98.
 For the short-delivery of 1 package and the missing items in 5 other
packages, plaintiff paid the CONSIGNEE under its Insurance Cargo Policy the
amount of P2,426.98, by virtue of which plaintiff became subrogated to the
rights and actions of the CONSIGNEE. Demands were made on defendants
CARRIER and CONSIGNEE for reimbursement thereof but they failed and
refused to pay the same.

In both cases, the petitioner-appellant made the following averment regarding its capacity
to sue:

The plaintiff is a foreign insurance company duly authorized to do business in the Philippines
through its agent, Mr. VICTOR H. BELLO, of legal age and with office address at Oledan
Building, Ayala Avenue, Makati, Rizal.

In L-34382, the respondent-appellee Eastern Shipping Lines, Inc., filed its answer and
alleged that it:

Denies the allegations of Paragraph I which refer to plaintiff's capacity to sue for lack of
knowledge or information sufficient to form a belief as to the truth thereof.

Respondent-appellee, Angel Jose Transportation, Inc., in turn filed its answer admitting the
allegations of the complaint, regarding the capacity of plaintiff-appellant. The pertinent
paragraph of this answer reads as follows:

Angel Jose Admits the jurisdictional averments in paragraphs 1, 2, and 3 of the heading
Parties.

In L-34383, the respondents-appellees N. V. Nedlloyd Lijhen, Columbian Philippines, Inc.

and Guacods, Inc., filed their answers. They denied the petitioner-appellant's capacity to sue
for lack of knowledge or information sufficient to form a belief as to the truth thereof.

As earlier stated, the respondent court dismissed the complaints in the two cases on the
same ground, that the plaintiff failed to prove its capacity to sue. The court reasoned as
follows:

In the opinion of the Court, if plaintiff had the capacity to sue, the Court
should hold that a) defendant Eastern Shipping Lines should pay plaintiff the
sum of P1,630.22 with interest at the legal rate from January 5, 1968, the
date of the institution of the Complaint, until fully paid; b) defendant Angel
Jose Transportation, Inc. should pay plaintiff the sum of P1,630.22 also with
interest at the legal rate from January 5, 1968 until fully paid; c) the
counterclaim of defendant Angel Jose transportation, Inc. should be ordered
dismissed; and d) each defendant to pay one-half of the costs.

The Court is of the opinion that Section 68 of the Corporation Law reflects a
policy designed to protect the public interest. Hence, although defendants
have not raised the question of plaintiff's compliance with that provision of
law, the Court has resolved to take the matter into account.
A suing foreign corporation, like plaintiff, has to plead affirmatively and prove
either that the transaction upon which it bases its complaint is an isolated
one, or that it is licensed to transact business in this country, failing which, it
will be deemed that it has no valid cause of action (Atlantic Mutual Ins. Co.
vs. Cebu Stevedoring Co., Inc., 17 SCRA 1037). In view of the number of
cases filed by plaintiff before this Court, of which judicial cognizance can be
taken, and under the ruling in Far East International Import and Export
Corporation vs. Hankai Koayo Co., 6 SCRA 725, it has to be held that plaintiff
is doing business in the Philippines. Consequently, it must have a license
under Section 68 of the Corporation Law before it can be allowed to sue.

The situation of plaintiff under said Section 68 has been described as follows
in Civil Case No. 71923 of this Court, entitled 'Home Insurance Co. vs. N. V.
Nedlloyd Lijnen, of which judicial cognizance can also be taken:

Exhibit "R",presented by plaintiff is a certified copy of a license,

dated July 1, 1967, issued by the Office of the Insurance
Commissioner authorizing plaintiff to transact insurance
business in this country. By virtue of Section 176 of the
Insurance Law, it has to be presumed that a license to transact
business under Section 68 of the Corporation Law had
previously been issued to plaintiff. No copy thereof, however,
was submitted for a reason unknown. The date of that license
must not have been much anterior to July 1, 1967. The
preponderance of the evidence would therefore call for the
finding that the insurance contract involved in this case, which
was executed at Makati, Rizal, on February 8, 1967, was
contracted before plaintiff was licensed to transact business in
the Philippines.

This Court views Section 68 of the Corporation Law as reflective

of a basic public policy. Hence, it is of the opinion that, in the
eyes of Philippine law, the insurance contract involved in this
case must be held void under the provisions of Article 1409 (1)
of the Civil Code, and could not be validated by subsequent
procurement of the license. That view of the Court finds support
in the following citation:

According to many authorities, a constitutional or

statutory prohibition against a foreign corporation
doing business in the state, unless such
corporation has complied with conditions
prescribed, is effective to make the contracts of
such corporation void, or at least unenforceable,
and prevents the maintenance by the corporation
of any action on such contracts. Although the
usual construction is to the contrary, and to the
effect that only the remedy for enforcement is
affected thereby, a statute prohibiting a non-
 complying corporation from suing in the state
courts on any contract has been held by some
courts to render the contract void and
unenforceable by the corporation, even after its
has complied with the statute." (36 Am. Jur. 2d
299-300).

xxx xxx xxx

The said Civil Case No. 71923 was dismissed by this Court. As the insurance
contract involved herein was executed on January 20, 1967, the instant case
should also be dismissed.

We resolved to consolidate the two cases when we gave due course to the petition.

The petitioner raised the following assignments of errors:

First Assignment of Error

THE HONORABLE TRIAL COURT ERRED IN CONSIDERING AS AN ISSUE THE

LEGAL EXISTENCE OR CAPACITY OF PLAINTIFF-APPELLANT.

Second Assignment of Error

THE HONORABLE TRIAL COURT ERRED IN DISMISSING THE COMPLAINT ON

THE FINDING THAT PLAINTIFF-APPELLANT HAS NO CAPACITY TO SUE.

On the basis of factual and equitable considerations, there is no question that the private
respondents should pay the obligations found by the trial court as owing to the petitioner.
Only the question of validity of the contracts in relation to lack of capacity to sue stands in
the way of the petitioner being given the affirmative relief it seeks. Whether or not the
petitioner was engaged in single acts or solitary transactions and not engaged in business is
likewise not in issue. The petitioner was engaged in business without a license. The private
respondents' obligation to pay under the terms of the contracts has been proved.

When the complaints in these two cases were filed, the petitioner had already secured the
necessary license to conduct its insurance business in the Philippines. It could already filed
suits.

Petitioner was, therefore, telling the truth when it averred in its complaints that it was a
foreign insurance company duly authorized to do business in the Philippines through its
agent Mr. Victor H. Bello. However, when the insurance contracts which formed the basis of
these cases were executed, the petitioner had not yet secured the necessary licenses and
authority. The lower court, therefore, declared that pursuant to the basic public policy
reflected in the Corporation Law, the insurance contracts executed before a license was
secured must be held null and void. The court ruled that the contracts could not be validated
by the subsequent procurement of the license.
The applicable provisions of the old Corporation Law, Act 1459, as amended are:

Sec. 68. No foreign corporation or corporations formed, organized, or existing

under any laws other than those of the Philippine Islands shall be permitted to
transact business in the Philippine Islands until after it shall have obtained a
license for that purpose from the chief of the Mercantile Register of the
Bureau of Commerce and Industry, (Now Securities and Exchange
Commission. See RA 5455) upon order of the Secretary of Finance (Now
Monetary Board) in case of banks, savings, and loan banks, trust
corporations, and banking institutions of all kinds, and upon order of the
Secretary of Commerce and Communications (Now Secretary of Trade. See
5455, section 4 for other requirements) in case of all other foreign
corporations. ...

xxx xxx xxx

Sec. 69. No foreign corporation or corporation formed, organized, or existing

under any laws other than those of the Philippine Islands shall be permitted to
transact business in the Philippine Islands or 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. Any
officer, director, or agent of the corporation or any person transacting
business for any foreign corporation not having the license prescribed shag be
punished by imprisonment for not less than six months nor more than two
years or by a fine of not less than two hundred pesos nor more than one
thousand pesos, or by both such imprisonment and fine, in the discretion of
the court.

As early as 1924, this Court ruled in the leading case of Marshall Wells Co. v. Henry W.
Elser & Co. (46 Phil. 70) that the object of Sections 68 and 69 of the Corporation Law
was to subject the foreign corporation doing business in the Philippines to the jurisdiction of
our courts. The Marshall Wells Co. decision referred to a litigation over an isolated act for
the unpaid balance on a bill of goods but the philosophy behind the law applies to the
factual circumstances of these cases. The Court stated:

xxx xxx xxx

Defendant isolates a portion of one sentence of section 69 of the Corporation

Law and asks the court to give it a literal meaning Counsel would have the
law read thus: "No foreign corporation 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 section 68 of the law." Plaintiff,
on the contrary, desires for the court to consider the particular point under
discussion with reference to all the law, and thereafter to give the law a
common sense interpretation.

The object of the statute was to subject the foreign corporation doing
business in the Philippines to the jurisdiction of its courts. The 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 on 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.
(State vs. American Book Co. [1904], 69 Kan, 1; American De Forest Wireless
Telegraph Co. vs. Superior Court of City & Country of San Francisco and
Hebbard [1908], 153 Cal., 533; 5 Thompson on Corporations, 2d ed., chap.
184.)

Confronted with the option of giving to the Corporation Law a harsh

interpretation, which would disastrously embarrass trade, or of giving to the
law a reasonable interpretation, which would markedly help in the
development of trade; confronted with the option of barring from the courts
foreign litigants with good causes of action or of assuming jurisdiction of their
cases; confronted with the option of construing the law to mean that any
corporation in the United States, which might want to sell to a person in the
Philippines must send some representative to the Islands before the sale, and
go through the complicated formulae provided by the Corporation Law with
regard to the obtaining of the license, before the sale was made, in order to
avoid being swindled by Philippine citizens, or of construing the law to mean
that no foreign corporation doing business in the Philippines can maintain any
suit until it shall possess the necessary license;-confronted with these
options, can anyone doubt what our decision will be? The law simply means
that no foreign corporation shall be permitted "to transact business in the
Philippine Islands," as this phrase is known in corporation law, unless it shall
have the license required by law, and, until it complies with the law, shall not
be permitted to maintain any suit in the local courts. A contrary holding would
bring the law to the verge of unconstitutionality, a result which should be and
can be easily avoided. (Sioux Remedy Co. vs. Cope and Cope, supra; Perkins,
Philippine Business Law, p. 264.)

To repeat, the objective of the law was to subject the foreign corporation to the jurisdiction
of our courts. The Corporation Law must be given a reasonable, not an unduly harsh,
interpretation which does not hamper the development of trade relations and which fosters
friendly commercial intercourse among countries.

The objectives enunciated in the 1924 decision are even more relevant today when we view
commercial relations in terms of a world economy, when the tendency is to re-examine the
political boundaries separating one nation from another insofar as they define business
requirements or restrict marketing conditions.
We distinguish between the denial of a right to take remedial action and the penal sanction
for non-registration.

Insofar as transacting business without a license is concerned, Section 69 of the Corporation

Law imposed a penal sanction-imprisonment for not less than six months nor more than two
years or payment of a fine not less than P200.00 nor more than P1,000.00 or both in the
discretion of the court. There is a penalty for transacting business without registration.

And insofar as litigation is concerned, the foreign corporation or its assignee may not
maintain any suit for the recovery of any debt, claim, or demand whatever. The Corporation
Law is silent on whether or not the contract executed by a foreign corporation with no
capacity to sue is null and void ab initio.

We are not unaware of the conflicting schools of thought both here and abroad which are
divided on whether such contracts are void or merely voidable. Professor Sulpicio Guevarra
in his book Corporation Law (Philippine Jurisprudence Series, U.P. Law Center, pp. 233-234)
cites an Illinois decision which holds the contracts void and a Michigan statute and decision
declaring them merely voidable:

xxx xxx xxx

Where a contract which is entered into by a foreign corporation without

complying with the local requirements of doing business is rendered void
either by the express terms of a statute or by statutory construction, a
subsequent compliance with the statute by the corporation will not enable it
to maintain an action on the contract. (Perkins Mfg. Co. v. Clinton Const. Co.,
295 P. 1 [1930]. See also Diamond Glue Co. v. U.S. Glue Co., supra see note
18.) But where the statute merely prohibits the maintenance of a suit on such
contract (without expressly declaring the contract "void"), it was held that a
failure to comply with the statute rendered the contract voidable and not void,
and compliance at any time before suit was sufficient. (Perkins Mfg. Co. v.
Clinton Const. Co., supra.) Notwithstanding the above decision, the Illinois
statute provides, among other things that a foreign corporation that fails to
comply with the conditions of doing business in that state cannot maintain a
suit or action, etc. The court said: 'The contract upon which this suit was
brought, having been entered into in this state when appellant was not
permitted to transact business in this state, is in violation of the plain
provisions of the statute, and is therefore null and void, and no action can be
maintained thereon at any time, even if the corporation shall, at some time
after the making of the contract, qualify itself to transact business in this
state by a compliance with our laws in reference to foreign corporations that
desire to engage in business here. (United Lead Co. v. J.M. Ready Elevator
Mfg. Co., 222 Ill. 199, 73 N.N. 567 [1906].)

A Michigan statute provides: "No foreign corporation subject to the provisions

of this Act, shall maintain any action in this state upon any contract made by
it in this state after the taking effect of this Act, until it shall have fully
complied with the requirement of this Act, and procured a certificate to that
effect from the Secretary of State," It was held that the above statute does
 not render contracts of a foreign corporation that fails to comply with the
statute void, but they may be enforced only after compliance therewith.
(Hastings Industrial Co. v. Moral, 143 Mich. 679,107 N.E. 706 [1906];
Kuennan v. U.S. Fidelity & G. Co., Mich. 122; 123 N.W. 799 [1909]; Despres,
Bridges & Noel v. Zierleyn, 163 Mich. 399, 128 N.W. 769 [1910]).

It has also been held that where the law provided that a corporation which
has not complied with the statutory requirements "shall not maintain an
action until such compliance". "At the commencement of this action the
plaintiff had not filed the certified copy with the country clerk of Madera
County, but it did file with the officer several months before the defendant
filed his amended answer, setting up this defense, as that at the time this
defense was pleaded by the defendant the plaintiff had complied with the
statute. The defense pleaded by the defendant was therefore unavailable to
him to prevent the plaintiff from thereafter maintaining the action. Section
299 does not declare that the plaintiff shall not commence an action in any
county unless it has filed a certified copy in the office of the county clerk, but
merely declares that it shall not maintain an action until it has filled it. To
maintain an action is not the same as to commence an action, but implies
that the action has already been commenced." (See also Kendrick & Roberts
Inc. v. Warren Bros. Co., 110 Md. 47, 72 A. 461 [1909]).

In another case, the court said: "The very fact that the prohibition against
maintaining an action in the courts of the state was inserted in the statute
ought to be conclusive proof that the legislature did not intend or understand
that contracts made without compliance with the law were void. The statute
does not fix any time within which foreign corporations shall comply with the
Act. If such contracts were void, no suits could be prosecuted on them in any
court. ... The primary purpose of our statute is to compel a foreign
corporation desiring to do business within the state to submit itself to the
jurisdiction of the courts of this state. The statute was not intended to exclude
foreign corporations from the state. It does not, in terms, render invalid
contracts made in this state by non-complying corporations. The better
reason, the wiser and fairer policy, and the greater weight lie with those
decisions which hold that where, as here, there is a prohibition with a penalty,
with no express or implied declarations respecting the validity of enforceability
of contracts made by qualified foreign corporations, the contracts ... are
enforceable ... upon compliance with the law." (Peter & Burghard Stone Co. v.
Carper, 172 N.E. 319 [1930].)

Our jurisprudence leans towards the later view. Apart from the objectives earlier cited
from Marshall Wells Co. v. Henry W. Elser & Co (supra), it has long been the rule that a
foreign corporation actually doing business in the Philippines without license to do so may
be sued in our courts. The defendant American corporation in General Corporation of the
Philippines v. Union Insurance Society of Canton Ltd et al. (87 Phil. 313) entered into
insurance contracts without the necessary license or authority. When summons was served
on the agent, the defendant had not yet been registered and authorized to do business. The
registration and authority came a little less than two months later. This Court ruled:
 Counsel for appellant contends that at the time of the service of summons,
the appellant had not yet been authorized to do business. But, as already
stated, section 14, Rule 7 of the Rules of Court makes no distinction as to
corporations with or without authority to do business in the Philippines. The
test is whether a foreign corporation was actually doing business here.
Otherwise, a foreign corporation illegally doing business here because of its
refusal or neglect to obtain the corresponding 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. It
would indeed be anomalous and quite prejudicial, even disastrous, to the
citizens in this jurisdiction who in all good faith and in the regular course of
business accept and pay for shipments of goods from America, relying for
their protection on duly executed foreign marine insurance policies made
payable in Manila and duly endorsed and delivered to them, that when they
go to court to enforce said policies, the insurer who all along has been
engaging in this business of issuing similar marine policies, serenely pleads
immunity to local jurisdiction because of its refusal or neglect to obtain the
corresponding license to do business here thereby compelling the consignees
or purchasers of the goods insured to go to America and sue in its courts for
redress.

There is no question that the contracts are enforceable. The requirement of registration
affects only the remedy.

Significantly, Batas Pambansa Blg. 68, the Corporation Code of the Philippines has corrected
the ambiguity caused by the wording of Section 69 of the old Corporation Law.

Section 133 of the present Corporation Code provides:

SEC. 133. Doing business without a license.-No foreign corporation

transacting business in the Philippines without a license, or its successors or
assigns, shall be permitted to maintain or intervene in any action, suit or
proceeding in any court or administrative agency in the Philippines; but such
corporation may be sued or proceeded against before Philippine courts or
administrative tribunals on any valid cause of action recognized under
Philippine laws.

The old Section 69 has been reworded in terms of non-access to courts and administrative
agencies in order to maintain or intervene in any action or proceeding.

The prohibition against doing business without first securing a license is now given penal
sanction which is also applicable to other violations of the Corporation Code under the
general provisions of Section 144 of the Code.

It is, therefore, not necessary to declare the contract null and void even as against the
erring foreign corporation. The penal sanction for the violation and the denial of access to
our courts and administrative bodies are sufficient from the viewpoint of legislative policy.
Our ruling that the lack of capacity at the time of the execution of the contracts was cured
by the subsequent registration is also strengthened by the procedural aspects of these
cases.

The petitioner averred in its complaints that it is a foreign insurance company, that it is
authorized to do business in the Philippines, that its agent is Mr. Victor H. Bello, and that its
office address is the Oledan Building at Ayala Avenue, Makati. These are all the averments
required by Section 4, Rule 8 of the Rules of Court. The petitioner sufficiently alleged its
capacity to sue. The private respondents countered either with an admission of the plaintiff's
jurisdictional averments or with a general denial based on lack of knowledge or information
sufficient to form a belief as to the truth of the averments.

We find the general denials inadequate to attack the foreign corporations lack of capacity to
sue in the light of its positive averment that it is authorized to do so. Section 4, Rule 8
requires that "a party desiring to raise an issue as to the legal existence of any party or the
capacity of any party to sue or be sued in a representative capacity shall do so by specific
denial, which shag include such supporting particulars as are particularly within the
pleader's knowledge. At the very least, the private respondents should have stated
particulars in their answers upon which a specific denial of the petitioner's capacity to sue
could have been based or which could have supported its denial for lack of knowledge. And
yet, even if the plaintiff's lack of capacity to sue was not properly raised as an issue by the
answers, the petitioner introduced documentary evidence that it had the authority to
engage in the insurance business at the time it filed the complaints.

WHEREFORE, the petitions are hereby granted. The decisions of the respondent court are
reversed and set aside.

In L-34382, respondent Eastern Shipping Lines is ordered to pay the petitioner the sum of
P1,630.22 with interest at the legal rate from January 5, 1968 until fully paid and
respondent Angel Jose Transportation Inc. is ordered to pay the petitioner the sum of
P1,630.22 also with interest at the legal rate from January 5, 1968 until fully paid. Each
respondent shall pay one-half of the costs. The counterclaim of Angel Jose Transportation
Inc. is dismissed.

In L-34383, respondent N. V. Nedlloyd Lijnen, or its agent Columbian Phil. Inc. is ordered to
pay the petitioner the sum of P2,426.98 with interest at the legal rate from February 1,
1968 until fully paid, the sum of P500.00 attorney's fees, and costs, The complaint against
Guacods, Inc. is dismissed.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 61950 September 28, 1990

MARUBENI NEDERLAND B.V., petitioner,
vs.
THE HONORABLE JUDGE RICARDO P. TENSUAN, Presiding Judge of the Court of
First Instance of Rizal, Branch IV, Quezon City and ARTEMIO
GATCHALIAN, respondents.

Siquion Reyna, Montecillo & Ongsiako for petitioner.

Maximo Belmonte for private respondent.

FERNAN, C.J.:

On October 23, 1976, in Tokyo, Japan, petitioner Marubeni Nederland B.V. and D.B. Teodoro
Development Corporation (DBT for short) entered into a contract whereby petitioner agreed
to supply all the necessary equipment, machinery, materials, technical know-how and the
general design of the construction of DBT's lime plant at the Guimaras Islands in Iloilo for a
total contract price of US$5,400,000.00 on a deferred payment basis. Simultaneously with
the supply contract, the parties entered into two financing contracts, namely a construction
loan agreement in the amount of US$1,600,000.00 and a cash loan agreement for
US$1,500,000.00. The obligation of DBT to pay the loan amortizations on their due dates
under the three (3) contracts were absolutely and unconditionally guaranteed by the
National Investment and Development Corporation (NIDC).

Pursuant to the terms of the financing contracts, the loan amortizations of DBT fell due on
January 7, 1980, July 7, 1980 and January 7, 1981. But before the first installment became
due, DBT wrote a letter to the NIDC interposing certain claims against the petitioner and at
the same time requesting NIDC for a revision of the repayment schedule and of the
amounts due under the contracts on account of petitioner's delay in the performance of its
contractual commitments. 1 In due time, the problems regarding the lime plant were ironed
out and the parties signed a "Settlement Agreement" on July 2, 1981. 2

However, on May 14, 1982, DBT through counsel, informed petitioner that it was rejecting
the lime plant on the ground that it has not been constructed in accordance with their
agreement. DBT made a formal demand for indemnification in the total amount of
P95,150,000. 3 In its letter dated June 1, 1982, petitioner refused to accept DBT's unilateral
rejection of the plant and reasoned that the alleged operation and technical problems were
"totally unrelated to the guaranteed capacity and specifications of the plant and definitely
are not attributable to any fault or omission on the part of Marubeni." 4

Before the first installment under the "Settlement Agreement" could be paid, private
respondent Artemio Gatchalian, a stockholder of DBT sued petitioner Marubeni for
contractual breach before the then Court of First Instance of Rizal, Branch 4, Quezon
City. 5 In his complaint filed on June 22, 1982, Gatchalian impleaded DBT as an "unwilling
plaintiff . . . for whose primary benefit th(e) action (wa)s being prosecuted" together with
NIDC which, as pledgee of the voting shares in DBT has controlling interest in that
corporation. 6 Gatchalian sought indemnification in the amount of P95,150,000.00 and
further prayed for a writ of preliminary injunction to enjoin DBT and NIDC from making
directly or indirectly any payment to Marubeni in connection with the contracts they had
entered into. On June 25, 1982, respondent judge issued a temporary restraining order
directed against DBT and NIDC and set the injunction for hearing. 7

On July 5, 1982, petitioner Marubeni entered a limited and special appearance and sought
the dismissal of the complaint on the ground that the court a quo had no jurisdiction over
the person of petitioner since it is a foreign corporation neither doing nor licensed to do
business in the Philippines. Private respondent opposed that motion. On September 22,
1982, the lower court denied petitioner's motion to dismiss for lack of merit and gave it ten
(10) days within which to file an answer. Petitioner opted to elevate the jurisdictional issue
directly to the High Court. 8Hence, this petition for certiorari and prohibition with prayer for
a temporary restraining order. On October 6, 1982, we issued the restraining order and
subsequently required the parties to file simultaneous memoranda.

The pivotal issue in this case is whether or not petitioner Marubeni Nederland B.V. can be
considered as "doing business" in the Philippines and therefore subject to the jurisdiction of
our courts.

Petitioner claims that it is a foreign corporation not doing business in the country and as an
entity with its own capitalization, it is separate and distinct from Marubeni Corporation,
Japan which is doing business in the Philippines through its Manila branch; that the three
(3) contracts entered into with DBT were perfected and consummated in Tokyo, Japan; that
the sale and purchase of the machineries and equipment for the Guimaras lime plant were
isolated contracts and in no way indicated a purpose to engage in business; and that the
services performed by petitioner in the Philippines were merely auxillary to the aforesaid
isolated transactions entered into and perfected outside the Philippines.

On the other hand, private respondent Gatchalian contends that petitioner can be sued in
Philippine courts on liabilities arising from even a single transaction because in reality, it is
already engaging in business in the country through Marubeni Corporation, Manila branch
and that they, together with Nihon Cement Company, Ltd. of Japan are but "alter egos,
adjuncts, conduits instruments or branch affiliates of Marubeni Corporation of Japan", the
parent company. 9

In resolving the issue at hand, we reiterate that there is no general rule or principle that can
be laid down to determine what constitutes doing or engaging in business. Each case must
be judged in the light of its peculiar factual milieu and upon the language of the statute
applicable. 10

Contrary to petitioner's allegations, we hold that petitioner can be sued in the regular courts
because it is doing business in the Philippines. The applicable law is Republic Act No. 5455
as implemented by the following rules and regulations of the Board of Investments which
took effect on February 3, 1969. Thus:

xxx xxx xxx

(f) the performance within the Philippines of any act or combination of acts
enumerated in Section 1 (1) of the Act shall constitute "doing business"
therein. In particular, "doing business" includes:
 1) Soliciting orders, purchases (sales) or service contracts. Concrete and
specific solicitations by a 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 xxx xxx

4) Opening offices whether called "liaison" offices, agencies or branches,

unless proved otherwise.

xxx xxx 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. 11

It cannot be denied that petitioner had solicited the lime plant business from DBT through
the Marubeni Manila branch. Records show that the "turn-key proposal for the . . . 300 T/D
Lime Plant" was initiated by the Manila office through its Mr. T. Hojo. In a follow-up letter
dated August 3, 1976, Hojo committed the firm to a price reduction of $200,000.00 and
submitted the proposed contract forms. As reflected in the letterhead used, it was Marubeni
Corporation, Tokyo, Japan which assumed an active role in the initial stages of the
negotiation. Petitioner Marubeni Nederland B.V. had no visible participation until the actual
signing of the October 28, 1976 agreement in Tokyo and even there, in the space reserved
for petitioner, it was the signature. of "S. Adachi as General Manager of Marubeni
Corporation, Tokyo on behalf of Marubeni Nederland B.V." which appeared. 12

Even assuming for the sake of argument that Marubeni Nederland B.V. is a different and
separate business entity from Marubeni Japan and its Manila branch, in this particular
transaction, at least, Marubeni Nederland B.V. through the foregoing acts, had effectively
solicited "orders, purchases (sales) or service contracts" as well as constituted Marubeni
Corporation, Tokyo, Japan and its Manila Branch as its representative in the Philippines to
transact business for its account as principal. These circumstances, taken singly or in
combination, constitute "doing business in the Philippines" within the contemplation of the
law.

At this juncture it must be emphasized that a foreign corporation doing business in the
Philippines with or without license is subject to process and jurisdiction of the local courts. If
such corporation is properly licensed, well and good. But it shall not be allowed, under any
circumstances, to invoke its lack of license to impugn the jurisdiction of our courts. 13
Finally, petitioner contends that it was denied due process when respondent Judge Tensuan
peremptorily denied its motion to dismiss without giving petitioner any opportunity to
present evidence at a hearing set for this purpose. 14

The alleged denial of due process is more apparent than real. Under Section 13, Rule 16 of
the Revised Rules of Court, the court, when confronted with a motion to dismiss, is given
two courses of action, to wit: (1) to deny or grant the motion or allow amendment of the
pleading or (2) to defer the hearing and determination of the motion until the trial on the
merits, if the ground alleged therein does not appear to be indubitable.

In the case at bar, assuming there was no formal hearing on the motion to dismiss prior to
its rejection, such did not unduly prejudice the rights of petitioner. Respondent court still
had to conduct trial on the merits during which time it could grant the motion after sufficient
evidence has been presented showing without any question the want of jurisdiction over the
person of the movant. It would have been different had respondent court sustained
petitioner's motion to dismiss without the required hearing in which case, the corrective writ
of certiorari would have issued against said court. In the absence of a hearing, the appellate
court, in an appeal from an order of dismissal, would have had no means of determining or
resolving the legality of the proceedings and the sufficiency of the proofs on which the order
was based.

WHEREFORE, the petition is DISMISSED for lack of merit. Respondent Court is hereby
directed to proceed with the hearing of Civil Case No. Q-35534 with dispatch. This decision
is immediately executory. Costs against the petitioner.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-61523 July 31, 1986

ANTAM CONSOLIDATED, INC., TAMBUNTING TRADING CORPORATION and

AURORA CONSOLIDATED SECURITIES and INVESTMENT
CORPORATION, petitioners,
vs.
THE COURT OF APPEALS, THE HONORABLE MAXIMIANO C. ASUNCION (Court of
First Instance of Laguna, Branch II [Sta. Cruz]) and STOKELY VAN CAMP,
INC., respondents.

Siguion Reyna, Montecillo & Ongsiako Law Offices for petitioners.

Bito, Misa & Lozada Law Offices for respondents.

GUTIERREZ, JR., J.:

This petition for certiorari and prohibition seeks to set aside the order of the Regional Trial
Court of Laguna which denied the petitioners' motion to dismiss on the ground that the
reason relied upon by them does not appear to be indubitable. Petitioners also seek to set
aside the decision and resolution of the Intermediate Appellate Court which respectively
upheld the order of the trial court and denied the petitioners' motion for reconsideration of
the same.

On April 9, 1981, respondent Stokely Van Camp. Inc. (Stokely) filed a complaint against
Banahaw Milling Corporation (Banahaw), Antam Consolidated, Inc., Tambunting Trading
Corporation (Tambunting), Aurora Consolidated Securities and Investment Corporation, and
United Coconut Oil Mills, Inc. (Unicom) for collection of sum of money.

In its complaint, Stokely alleged: (1) that it is a corporation organized and existing under
the laws of the state of Indiana, U.S.A. and has its principal office at 941 North Meridian
Street, Indianapolis, Indiana, U.S.A., and one of its subdivisions "Capital City Product
Company" (Capital City) has its office in Columbus, Ohio, U.S.A.;

(2) that Stokely and Capital City were not engaged in business in the Philippines prior to the
commencement of the suit so that Stokely is not licensed to do business in this country and
is not required to secure such license;

(3) that on August 21, 1978, Capital City and Coconut Oil Manufacturing (Phil.) Inc.
(Comphil) with the latter acting through its broker Roths child Brokerage Company, entered
into a contract (No. RBS 3655) wherein Comphil undertook to sell and deliver and Capital
City agreed to buy 500 long tons of crude coconut oil to be delivered in October/November
1978 at the c.i.f. price of US$0.30/1b. but Comphil failed to deliver the coconut oil so that
Capital City covered its coconut oil needs in the open market at a price substantially in
excess of the contract and sustained a loss of US$103,600; that to settle Capital City's loss
under the contract, the parties entered into a second contract (No. RBS 3738) on November
3, 1978 wherein Comphil undertook to buy and Capital City agreed to sell 500 long tons of
coconut crude oil under the same terms and conditions but at an increased c.i.f. price of
US$0.3925/lb.;

(4) that the second contract states that "it is a wash out against RBS 3655" so that Comphil
was supposed to repurchase the undelivered coconut oil at US$0.3925 from Capital City by
paying the latter the sum of US$103,600.00 which is the same amount of loss that Capital
City sustained under the first contract; that Comphil again failed to pay said amount, so to
settle Capital City's loss, it entered into a third contract with Comphil on January 24, 1979
wherein the latter undertook to sell and deliver and Capital City agreed to buy the same
quantity of crude coconut oil to be delivered in April/May 1979 at the c.i.f. price of
US$0.3425/lb.; (5) that the latter price was 9.25 cents/lb. or US$103,600 for 500 long tons
below the then current market price of 43.2 cents/lb. and by delivering said quantity of
coconut oil to Capital City at the discounted price, Comphil was to have settled its
US$103,600 liability to Capital City; (6) that Comphil failed to deliver the coconut oil so
Capital City notified the former that it was in default; (7) that Capital City sustained
damages in the amount of US$175,000; and (8) that after repeated demands from Comphil
to pay the said amount, the latter still refuses to pay the same.
Respondent Stokely further prayed that a writ of attachment be issued against any and all
the properties of the petitioners in an amount sufficient to satisfy any lien of judgment that
the respondent may obtain in its action. In support of this provisional remedy and of its
cause of action against the rest of the petitioners other than Comphil, the respondent
alleged the following: 1) After demands were made by respondent on Comphil, the
Tambuntings ceased to be directors and officers of Comphil and were replaced by their five
employees, who were managers of Tambunting's pawnshops and said employees caused the
name of Comphil to be changed to "Banahaw Milling Corporation" and authorized one of the
Tambuntings, Antonio P. Tambunting, Jr., who was at that time neither a director nor officer
of Banahaw to sell its oil mill; 2) Unicom has taken over the entire operations and assets of
Banahaw because the entire and outstanding capital stock of the latter was sold to the
former; 3) ALL of the issued and outstanding capital stock of Comphil are owned by the
Tambuntings who were the directors and officers of Comphil and who were the ones who
benefited from the sale of Banahaw's assets or shares to Unicorn; 4) ALL of the petitioners
evaded their obligation to respondent by the devious scheme of using Tambunting
employees to replace the Tambuntings in the management of Banahaw and disposing of the
oil mill of Banahaw or their entire interests to Unicorn; and 5) Respondent has reasonable
cause to believe and does believe that the coconut oil milk which is the only substantial
asset of Banahaw is about to be sold or removed so that unless prevented by the Court
there will probably be no assets of Banahaw to satisfy its claim.

On April 10, 1981, the trial court ordered the issuance of a writ of attachment in favor of the
respondent upon the latter's deposit of a bond in the amount of P l,285,000.00.

On June 3, 1981, the respondent filed a motion for reconsideration to reduce the
attachment bond. Attached to this motion is an affidavit by the assistant attorney of the
respondent's counsel stating that he has verified with the records of Comphil and the
Securities and Exchange Commission (SEC) the facts he alleged in the prayer for the
attachment order.

On June 11, 1981, the petitioners filed a motion to dismiss the complaint on the ground that
the respondent, being a foreign corporation not licensed to do business in the Philippines,
has no personality to maintain the instant suit.

After the respondent had filed an opposition to the motion to dismiss and petitioner has
opposed the attachment and the motion to reduce the attachment bond, the trial court
issued an order, dated August 10, 1981, reducing the attachment bond to P 500,000.00 and
denying the motion to dismiss by petitioners on the ground that the reason cited therein
does not appear to be indubitable.

Petitioners filed a petition for certiorari before the Indianapolis intermediate Appellate Court.

On June 14, 1982, the appellate court dismissed the petition stating that the respondent
judge did not commit any grave abuse of discretion in deferring the petitioners' motion to
dismiss because the said judge is not yet satisfied that he has the necessary facts which
would permit him to make a judicious resolution. The appellate court further ruled that in
another case entitled United Coconut Oil Mills, Inc. and Banahaw Milling Corporation v. Hon.
Maximiano C. Asuncion and Stokely Van Camp, Inc. where the facts and issues raised
therein are intrinsically the same as in the case at bar, it has already denied the petition for
certiorari filed by Unicom and Banahaw for lack of merit and the same was upheld by the
Supreme Court.

Petitioners filed a motion for reconsideration but the same was denied. Hence, they filed this
instant petition for certiorari and prohibition with prayer for temporary restraining order,
questioning the propriety of the appellate court's decision in: a) affirming the deferment of
the resolution on petitioner' motion to dismiss; and b) denying the motion to set, aside the
order of attachment.

With regards to the first question, petitioners maintain that the appellate court erred in
denying their motion to dismiss since the ground relied upon by them is clear and
indubitable, that is, that the respondent has no personality to sue. Petitioners argue that to
maintain the suit filed with the trial court, the respondent should have secured the requisite
license to do business in the Philippines because, in fact, it is doing business here.
Petitioners anchor their argument that the respondent is a foreign corporation doing
business in the Philippines on the fact that by the respondent's own allegations, it has
participated in three transactions, either as a seller or buyer, which are by their nature, in
the pursuit of the purpose and object for which it was organized. Petitioners further argue
that the test of whether one is doing business or not is "whether there is continuity of
transactions which are in the pursuance of the normal business of the corporation" and that
the transactions entered into by respondent undoubtedly fall within this category.

We reject the petitioners' arguments.

In the case of Top-Weld Manufacturing, Inc. v. ECED, S.A. (138 SCRA 118,127-128), we
stated:

There is no general rule or governing principle laid down as to what

constitutes 'doing' or 'engaging in' or 'transacting business in the Philippines.
Each case must be judged in the Light of its peculiar circumstance
(Mentholatum Co. v. Mangaliman, 72 Phil.524). Thus, a foreign corporation
with a settling agent in the Philippines which issues twelve marine policies
covering different shipments to the Philippines (General Corporation of the
Philippines v. Union Insurance Society of Canton, Ltd., 87 Phil. 313) and a
foreign corporation which had been collecting premiums on outstanding
policies (Manufacturing Life Insurance Co., v. Meer, 89 Phil. 351) were
regarded as doing business here. The acts of these corporations should be
distinguished from a single or isolated business transaction or occasional,
incidental and casual transactions which do not come within the meaning of
the law. Where a single act or transaction , however, 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. (Far East
International Import and Export Corporation v. Nankai Kogyo, Co., 6 SCRA
725).

In the Mentholatum Co. v. Mangaliman case earlier cited, this Court held:

xxx xxx xxx

 ...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
warning-organized or whether it has substantially was retired from it and
turned it over to another. (Traction Cos. v. Collectors of Int. Revenue [CCA.,
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 workers or the exercise of some of the functions normally incident to, and
in progressive prosecution of, the purpose and object of its organization.
(Griffin v. Implement Dealers' Mut. Fire Ins. Co., 241 N.W. 75, 77, Pauline Oil
& 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,
327 111. 367.) '

In the case at bar, the transactions entered into by the respondent with the petitioners are
not a series of commercial dealings which signify an intent on the part of the respondent to
do business in the Philippines but constitute an isolated one which does not fall under the
category of "doing business." The records show that the only reason why the respondent
entered into the second and third transactions with the petitioners was because it wanted to
recover the loss it sustained from the failure of the petitioners 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 the petitioners, the respondent opted
to try to push through with the transaction to recover the amount of US$103,600.00 it lost.
This explains why in the second transaction, the petitioners were supposed to buy back the
crude coconut oil they should have delivered to the respondent in an amount which will earn
the latter a profit of US$103,600.00. When this failed the third transaction was entered into
by the parties whereby the petitioners were supposed to sell crude coconut oil to the
respondent at a discounted rate, the total amount of such discount being US$103,600.00.
Unfortunately, the petitioners failed to deliver again, prompting the respondent to file the
suit below.

From these facts alone, it can be deduced that in reality, there was only one agreement
between the petitioners and the respondent and that was the delivery by the former of 500
long tons of crude coconut oil to the latter, who in turn, must pay the corresponding price
for the same. The three seemingly different transactions were entered into by the parties
only in an effort to fulfill the basic agreement and in no way indicate an intent on the part of
the respondent to engage in a continuity of transactions with petitioners which will
categorize it as a foreign corporation doing business in the Philippines. Thus, the trial court,
and the appellate court did not err in denying the petitioners' motion to dismiss not only
because the ground thereof does not appear to be indubitable but because the respondent,
being a foreign corporation not doing business in the Philippines, does not need to obtain a
license to do business in order to have the capacity to sue. As we have held in Eastboard
Navigation Ltd. v. Juan Ysmael and Co., Inc. (102 Phil. 1, 18):

xxx xxx xxx

(d) While plaintiff is a foreign corporation without license to transact business

in the Philippines, it does not follow that it has no capacity to bring the
present action. Such license is ' not necessary because it is not engaged in
business in the Philippines. In fact, the transaction herein involved is the first
 business undertaken by plaintiff in the Philippines, although on a previous
occasion plaintiff's vessel was chartered by the National Rice and Corn
Corporation to carry rice cargo from abroad to the Philippines. These two
isolated transactions do not constitute engaging in business in the Philippines
within the purview of Sections 68 and 69 of the Corporation Law so as to bar
plaintiff from seeking redress in our courts (Marshall-Wells Co. v. Henry W.
Elser & Co. 49 Phil. 70; Pacific Vegetable Oil Corporation v. Angel 0. Singson,
G.R. No. L-7917, April 29, 1955; also cited in Facilities Management
Corporation v. De la Osa, 89 SCRA 131, 138).

We agree with the respondent that it is a common ploy of defaulting local companies which
are sued by unlicensed foreign companies not engaged in business in the Philippines to
invoke lack of capacity to sue. The respondent cites decisions from 1907 to 1957
recognizing and rejecting the improper use of this procedural tactic. (Damfschieffs Rhedered
Union v. Cia Trans-atlantica, 8 Phil. 766 11907]; Marshall-Wells Co. v. Henry W. Elser & Co.,
49 Phil. 70 [1924]; Western Equipment Co. v. Reyes, 51 Phil. 115 [1927]; Central Republic
Bank v. Bustamante, 71 Phil. 359 [1941]; Pacific Vegetable Oil Co. v. Singson, 96 Phil.-986
[1955]; Eastboard Navigation, Ltd. v. Juan Ysmael and Co., Inc., 102 Phil. 1 [1957]). The
doctrine of lack of capacity to sue based on failure to first acquire a local license is based on
considerations of sound public policy. It intended to favor domestic corporations who enter
was never into solitary transactions with unwary foreign firms and then repudiate their
obligations simply because the latter are not licensed to do business in this country. The
petitioners in this case are engaged in the exportation of coconut oil, an export item so vital
in our country's economy. They filed this petition on the ground that Stokely is an
unlicensed foreign corporation without a bare allegation or showing that their defenses in
the collection case are valid and meritorious. We cannot fault the two courts below for acting
as they did.

Anent the second issue they raise, the petitioners contend that the trial court should not
have issued the order of attachment and the appellate court should not have affirmed the
same because the verification in support of the prayer for attachment is insufficient. They
state that the person who made such verification does not personally know the facts relied
upon for the issuance of the attachment order. Petitioners capitalize on the fact that Renato
Calma, the assistant attorney of Bito, Misa, and Lozada, counsel for respondent, stated in
his verification that "he has read the foregoing complaint and that according to his
information and belief the allegations therein contained are true and correct."

The above contention deserves scant consideration.

We rule that the defect in the original verification was cured when Renato Calma
subsequently executed an affidavit to the effect that the allegations he made in support of
the prayer for attachment were verified by him from the records of Comphil and the
Securities and Exchange Commission. Moreover, petitioner had the opportunity to oppose
the issuance of the writ.

As to the merit of the attachment order itself, we find that the allegations in the
respondent's complaint satisfactorily justify the issuance of said order.
WHEREFORE, IN VIEW OF THE FOREGOING, the petition is DISMISSED for lack of merit. The
Temporary Restraining Order dated February 2, 1983 is hereby DISSOLVED. Costs against
the petitioners.

SO ORDERED.

EN BANC

[G.R. No. L-2684. September 14, 1950.]

GENERAL CORPORATION OF THE PHILIPPINES and MAYON INVESTMENT

CO., Plaintiffs-Appellees, v. UNION INSURANCE SOCIETY OF CANTON, LTD. and/or
FIREMANS FUND INSURANCE CO., Defendants-Appellants.

Ross, Selph, Carrascoso & Janda and Martin B. Laurea, for appellant Firemans
Fund Insurance Co.

Nabong & Sese, for Appellees.

SYLLABUS

1. CORPORATION; FOREIGN CORPORATION DOING BUSINESS WITH OR WITHOUT LICENSE

AMENABLE TO PROCESS OF LOCAL COURTS. 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.

2. ID.; FOREIGN CORPORATION WITH A LICENSE TO DO BUSINESS; SERVICE OF

SUMMONS. 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.

3. ID.; FOREIGN CORPORATION DOING BUSINESS WITHOUT LICENSE AND DESIGNATED

AGENT; SERVICE OF SUMMONS. 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.

4. ID.; FOREIGN CORPORATION WHEN REGARDED AS DOING BUSINESS HERE. 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

DECISION
 MONTEMAYOR, J.:

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 the City of 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 Firemans 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 Firemans Fund Insurance Co. even before the last
world war and continued as such at least up to November 7, 1946.

In civil case No. 511 of the Court of First Instance of Manila, the General Corporation of the
Philippines and the Mayon Investment Co. as plaintiffs sued the Union Insurance Society of
Canton, Ltd. and the Firemans Fund Insurance Co. for the payment of twelve marine
insurance policies in the sum of P57,137.60. Said policies were issued by the Firemans Fund
Insurance Co. for merchandise shipped from the United States to the Philippines in 1945, in
the name of Western Canvas Products Company and/ or Rovan Trading Company, doing
business in Seattle, Washington, U. S. A. The original bills of lading and the original
insurance policies covering the merchandise, all indorsed in blank, were sent by the insured
to the Hongkong & Shanghai Banking Corporation in Manila with instructions that the said
documents were to be surrendered and title to the merchandise covered by them to be
transferred upon payment in full of the invoice price.

Upon arrival of the merchandise in Manila the consignee or purchaser would appear to have
failed to meet the terms of the sale and following a certain agreement between the shippers
and the herein plaintiffs, the shipping papers, including the twelve marine insurance policies
were surrendered to the herein plaintiffs and the merchandise released to them, the latter
claiming that they had paid to the bank the full invoice price. It was later found that some of
the merchandise were lost and others damaged while in transit and inasmuch as the policies
were made payable to the order of the assured in Manila, the plaintiffs filed the
corresponding claims with the defendant Union Insurance Society of Canton, Ltd. in Manila
acting as settling agent of its co-defendant Firemans Fund Insurance Co.

It seems that all the claim papers with the exception of insurance policy No. 70448/6
(Exhibit E-2) for $2,902.36 were forwarded to defendant Firemans Fund Insurance Co. at
Seattle, Washington, following instructions from the said company, and the claims there
approved by the insurance company. However, the claims were there adjudicated by the
Superior Court of the State of Washington for King County against the plaintiffs in the
present case and in favor of other claimants. As regards the claim based on insurance policy
No. 70448/6, Exhibit E-2, involved in the present appeal, inasmuch as it was filed a little
late, it was not forwarded to the United States and so was never passed upon by the
Firemans Fund Insurance Co. at Seattle; neither was it approved or disapproved by the
Union Insurance Society of Canton, Ltd. in Manila.

In the trial court the parties submitted the case upon a partial stipulation of facts and some
evidence, oral and documentary. After hearing, said court found and held that as regards
the eleven marine insurance policies which have been the subject of interpleader in the
Superior Court in the State of Washington for King County and decided by said court against
the herein plaintiffs, said decision constituted res adjudicata binding upon the plaintiffs
herein. The trial court absolved the defendant Union Insurance Society of Canton, Ltd. from
the complaint but condemned the Firemans Fund Insurance Co. to pay the plaintiffs the
sum of $2,000 or its equivalent in Philippine currency, with legal interest from and including
September 12, 1946, on the claim based on the marine insurance policy No. 70448/6,
Exhibit E-2.

The plaintiffs General Corporation of the Philippines and Mayon Investment Co. appealed
from that part of the decision referring to the eleven marine insurance policies. Said appeal
is now docketed in the Supreme Court as G. R. No. L-2303. The Firemans Fund Insurance
Co. appealed from the decision in so far as it was sentenced to pay $2,000 to the plaintiffs.
Because of the amount involved the appeal was sent to the Court of Appeals. However,
being a companion case of G. R. No. L-2303, at the instance of appellant, the case was
finally elevated to the Supreme Court which gave it due course by its resolution of
December 9, 1948, and docketed here as G. R. No. L-2684. This is the case on appeal now
under consideration.

The appellant contends that the trial court erred in holding that it acquired jurisdiction over
appellant Firemans Fund Insurance Co. and in rendering judgment against it in the sum of
$2,000.

As regards the issue of jurisdiction, it is well to state that the summons corresponding to
appellant Firemans Fund Insurance Co. was served on September 12, 1946, on the Union
Insurance Society of Canton, Ltd. then acting as appellants settling agent in this country. At
that time, the appellant. Said registration and authority came as already stated, only on
November 7, 1946, that is, a little less than two months later.

The attorneys for the Union Insurance Society of Canton, Ltd. on September 25, 1946,
petitioned the trial court to quash and declare null and void the summons issued thru it on
its co-defendant Firemans Fund Insurance Co. on the ground that the said company was
not doing business in the Philippines, and that the Union Insurance Society of Canton, Ltd.
had no authority from its co-defendant to receive summons on its behalf. The trial court in
its order of October 18, 1946, overruled said petition on the ground that according to the
complaint, the Firemans Fund Insurance Co. was doing business in the Philippines and a
mere denial of said allegation was not sufficient to justify the court in quashing the
summons, and that the matter of doing business in the Philippines was a question of fact to
be determined at the hearing of the case.

Section 14, Rule 7 of the Rules of Court reads as follows:

"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."

Applying the above legal provision, the trial court in its decision held that service of
summons for appellant Firemans 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.

We agree with the trial court in its ruling on this point. Section 14, Rule 7 of the Rules of
Court above-quoted in employing the phrase "doing business in the Philippines" makes no
distinction as to whether said business was being done or engaged in legally with the
corresponding authority and license of the Government or, perhaps illegally, without the
benefit of any such authority or license. As long as a foreign private corporation does or
engages in business in this jurisdiction, it should and will be amenable to process and the
jurisdiction of the local courts, this for the protection of the citizens, and service upon any
agent of said foreign corporation constitutes personal service upon the corporation and
accordingly judgment may be rendered against said foreign corporation. (Fisher, Philippine
Law of Stock Corporation, pp. 451, 456.) .

But, was the Firemans Fund Insurance Co. in September, 1946, then doing business in the
Philippines, within legal contemplation? 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.
(Thompson on Corporations, Vol. 8, 3d edition, pp. 844-847 and Fishers Philippine Law of
Stock Corporation, p. 415.) .

The Firemans 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 Firemans 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 Firemans 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, on November 7, 1946, less than two months after service of summons, it
applied for, obtained a license and was authorized to regularly do business in the
Philippines.

Counsel for appellant contends that at the time of the service of summons, the appellant
had not yet been authorized to do business. But, as already stated, section 14, Rule 7 of the
Rules of Court makes no distinction as to corporations with or without authority to do
business in the Philippines. The test is whether a foreign corporation was actually doing
business here. Otherwise, a foreign corporation illegally doing business here because of its
refusal or neglect to obtain the corresponding 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. It would indeed be anomalous and quite
prejudicial, even disastrous, to the citizens in this jurisdiction who in all good faith and in
the regular course of business accept and pay for shipments of goods from America, relying
for their protection on duly executed foreign marine insurance policies made payable in
Manila and duly endorsed and delivered to them, that when they go to court to enforce said
policies, the insurer who all along has been engaging in this business of issuing similar
marine policies, serenely pleads immunity to local jurisdiction because of its refusal or
neglect to obtain the corresponding license to do business here thereby compelling the
consignees or purchasers of the goods insured to go to America and sue in its courts for
redress.

Appellant further contends that according to section 68 of the Corporation Law, service of
summons on a foreign corporation may be made only upon an agent of said corporation
residing in the Philippines and authorized by the foreign corporation to accept service. Said
section refers to a foreign corporation doing business in the Philippines which has complied
with the law and obtained the corresponding license. It does not refer to a foreign
corporation actually doing business here but without the corresponding license or authority.
In the latter case, service of summons is governed by section 14, Rule 7 of the Rules of
Court.

We may add that the defense of lack of jurisdiction interposed by appellant seems to be
based on a mere technicality. True, on September 12, 1946, when service of the summons
was made, the appellant had not yet been authorized to do business in the Philippines and
so it had not yet designated an agent authorized to accept service of summons. But less
than two months thereafter, the appellant obtained such license or authority and even
according to its own theory was then amenable to the jurisdiction of the local courts. It
employed able attorneys who filed an answer, including motions on its behalf, and during
the hearing held on October 21, 1947, that is to say, about one year after it had been
authorized to do business here, it was represented by the same attorneys who not only
cross-examined the witness for the plaintiffs and agreed to or objected to documentary
evidence, but introduced a witness on its behalf and presented documentary evidence.
Under such circumstances, it must be clear that the appellant may not successfully plead
lack of jurisdiction over its person.

The appellant next urges that the plaintiffs had no interest in the insurance policy, having
received the same merely for collection according to paragraph VII of the complaint. The
truth is that the plaintiffs have such interest sufficient to authorize them to sue on and
recover upon said policy because they have met all the terms of the shipper, paid all the
amounts demanded by it thru the bank and in turn were given all the shipping papers,
including the insurance policy, Exhibit E-2. It is to be remembered that this insurance policy
was indorsed in blank and payable in Manila. One of the conditions of said policy is that thru
it the appellant insured the shipper (Western Canvas Products Co.) "as well as in his or their
own name as in that of those to whomsoever the subject matter of this policy does, may or
shall appertain, in the sum of $2,000" (First paragraph of the policy, Exhibit E-2). Moreover,
as correctly found by the trial court, there was an agreement Exhibit 2 attached to Exhibit
F-2 whereby the shipper Western Canvas Product Co. authorized the plaintiffs herein to
prosecute this case against Appellant.

Now, we come to the evidence or proof as to the loss or damage said to have been suffered
by the plaintiffs. Said plaintiffs claimed that their documentary evidence Exhibit E to E-23
establish their loss; that said documents are of the same class of documents presented in
the other eleven insurance policies and which were approved by the appellant in America in
G. R. No. L-2303. Counsel for the appellant, however, insists that the plaintiffs claim was
never approved by appellant or its settling agent. In this we agree. The setting agent here
declined to take action upon the claim filed by the plaintiffs based on the policy Exhibit E-2
and said plaintiffs failed or refused to present said claim before the appellant in America. We
shall therefore have to determine whether the evidence is sufficient to support the claim.
The trial court without discussing the evidence or referring to the documents merely held
that the evidence was sufficient to prove the claim.

Examining the evidence we find that Attorney Nabong for the plaintiffs gave no testimony
about the loss. He merely identified the documents intended to prove said loss. According to
the report (Exhibit E-21) of plaintiffs surveyor C. B. Nelson & Co., which made the survey in
order to ascertain the nature and extent of the damage alleged to have been sustained on
the shipment of the 21 cases of merchandise which came on the American Mail Lines SS
Wideawake which arrived in Manila, on October 14, 1945, covered by the policy Exhibit E-2,
eleven cases Nos. 8, 10, 11, 12, 15, 16, 17, 18, 19, 20 and 21 still remained undelivered,
and that claim for these cases should be supported by shortlanded certificates issued by the
steamship agent. We failed to find these certificates among the exhibits presented. It seems
that efforts were made on behalf of the plaintiffs to obtain these certificates from the Manila
Terminal Co. (Exhibit E-8), American Mail Line, Ltd. (Exhibit E-9), and the Luzon
Stevedoring Co. (Exhibits E-10 and E-11), but that said certificates were never issued. In
Exhibit E-14, the Manila Terminal Co., writing to the Luzon Brokerage Co., and speaking of
the eleven cases of merchandise said to have been shortlanded, merely promised to make
careful investigation and to issue the corresponding certificate if its record indicated that the
cargoes were not landed from the vessel. And, in Exhibit E- 18, the Everett Steamship
Corporation in a letter to one of the plaintiffs (General Corporation of the Philippines) said
that "all merchandise manifested on the bill of lading No. S-76 was discharged in full and in
apparent good order;" that "once cargo leaves the ships tackle, responsibility was entirely
out of our hands," and "in view of the above we regret that we cannot tender recognition of
your claim" (apparently referring to the eleven cases). We therefore find that the claim for
the loss or shortlanding of these eleven cases which constitute the bulk of the claim has not
been proven.

Going back to the report of the surveyor C. B. Nelson & Co. (Exhibit E-21), said report made
a detailed survey of the shortage or damage on cases Nos. 5, 9, 13 and 14. According to
Exhibit E-7 the shortage or damage on these four cases is valued at $635.50 or P1,271.
These exhibits E-7 and E-21 were admitted in court without objection by the appellant. We
find the claim in the amount of $635.50 to have been duly established.

In conclusion we 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. We further hold 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.

In view of the foregoing, the decision appealed from is hereby modified so as to reduce the
amount awarded to the plaintiffs and to be paid by the appellant Firemans Fund Insurance
Co., from $2,000 to $635.50 or its equivalent in Philippine currency, and in all other
respects, the decision is affirmed. No pronouncement as to costs.