EASTERN
SHIPPING LINES and/or ANGEL JOSE TRANSPORTATION, INC.
Respondent.
ISSUE: Whether or not that the trial court erred in dismissing the finding that
plaintiff-appellant has no capacity to sue.
FACTS:
On or about January 13, 1967, S. Kajikita & Co. on board the SS
Eastern Jupiter, which is owned by the respondent, from Osaka, Japan coils
of Black Hot Rolled Copper Wires Rods. The shipment was covered by
Bill of Lading with arrival notice to the Phelps Dodge Copper Products
Corporation, the consignee. It was also insured with the plaintiff against all
risks in the amount of P1,580,105.06.
The coils discharged from the vessel were in bad order, consisting of
loose and partly cut coils which had to be considered scrap. The plaintiff paid
the consignee under insurance the amount of P3,260.44 for the loss/damage
suffered by the cargo. Plaintiff, a foreign insurance company duly authorized
to do business in the Philippines, made demands for payment of the aforesaid
amount against the carrier and transportation company for reimbursement of
the aforesaid amount, but each refused to pay the same. The Eastern Shipping
Lines filed its answer and denied the allegations of Paragraph I which refer to
the plaintiffs capacity to sue for lack of knowledge or information sufficient
to form a belief as to the truth thereof. Angel Jose Transportation, on the
other hand, admitted the jurisdictional averments in paragraphs 1, 2 and 3 of
the heading parties.
The Court of First Instance dismissed the complaint on the ground
that the appellant had failed to prove its capacity to sue. The petitioner then
filed a petition for review on certiorari.
The court held that the objective of the law is to subject the foreign
corporation to the jurisdiction of our court. The Corporation Law must be
given reasonable, not an unduly harsh interpretation which does not hamper
the development of trade relations and which fosters friendly commercial
intercourse among countries.
Counsel for appellant contends that at the time of the service of
summons, the appellant had not yet been authorized to do business. But, 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 the
case.
The court 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 shall 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.
The Supreme Court granted the petition, reversing the decision of the
lower court.
G.R. No. L-24295 September 30, 1971
GENERAL GARMENTS CORPORATION, petitioner,
vs.
THE DIRECTOR OF PATENTS and PURITAN SPORTSWEAR
CORPORATION, respondents.
Facts: The General Garments Corporation, organized and existing under the
laws of the Philippines, is the owner of the trademark "Puritan. Puritan
Sportswear Corporation, organized and existing in and under the laws of the
state of Pennsylvania, U.S.A., filed a petition with the Philippine Patent
Office for the cancellation of the trademark "Puritan" registered in the name
of General Garments Corporation, alleging ownership and prior use in the
Philippines of the said trademark on the same kinds of goods, which use it
had not abandoned; and alleging further that the registration thereof by
General Garments Corporation had been obtained fraudulently and in
violation of Section 17(c) of Republic Act No. 166, as amended, in relation
to Section 4(d) thereof. On March 30, 1964 General Garments Corporation
moved to dismiss the petition.
Issue: Whether or not Puritan Sportswear Corporation, which is a foreign
corporation not licensed to do business and not doing business in the
Philippines, has legal capacity to maintain a suit in the Philippine Patent
Office for cancellation of a trademark registered therein.
Ruling: Yes. Respondent is not suing in our courts "for the recovery of any
debt, claim or demand," for which a license to transact business in the
Philippines is required by Section 69 of the Corporation Law, subject only to
COMMUNICATION MATERIALS VS. CA
the exception already noted. The purpose of such a suit is to protect its
reputation, corporate name and goodwill which has been established, through
the natural development of its trade for a long period of years, in the doing of
which it does not seek to enforce any legal or contract rights arising from, or
growing out of any business which it has transacted in the Philippine Islands.
The right to the use of the corporate or trade name is a property right, a right
in rem, which it may assert and protect in any of the courts of the world
even in jurisdictions where it does not transact business just the same as it
may protect its tangible property, real or personal against trespass or
conversion.
A foreign corporation is allowed there under to sue "whether or not it has
been licensed to do business in the Philippines" pursuant to the Corporation
Law. In any event, respondent in the present case is not suing for
infringement or unfair competition under Section 21- A, but for cancellation
under Section 17, on one of the grounds enumerated in Section 4. And while
a suit under Section 21-A requires that the mark or tradename alleged to have
been infringed has been "registered or assigned" to the suing foreign
corporation, a suit for cancellation of the registration of a mark or tradename
under Section 17 has no such requirement. For such mark or tradename
should not have been registered in the first place (and consequently may be
cancelled if so registered) if it "consists of or comprises a mark or tradename
which so resembles a mark or tradename ... previously used in the
Philippines by another and not abandoned, as to be likely, when applied to or
used in connection with goods, business or services of the applicant, to cause
confusion or mistake or to deceive purchasers.
1) That the Philippine Court is one to which the parties may conveniently
resort to;
2) That the Philippine Court is in a position to make an intelligent decision as
to the law and the facts; and,
3) That the Philippine Court has or is likely to have power to enforce its
decision.
The aforesaid requirements having been met, and in view of the courts
disposition to give due course to the questioned action, the matter of the
present forum not being the most convenient as a ground for the suits
dismissal, deserves scant consideration.
Dee vs Sec
FACTS:
CSI was able to gain control when their legal counsel, Atty.
Luciano Maggay (Maggay) won a seat in the Board
capital stock of Natelco was divided into 213K CS and 87K PS, both
at a par value of P10/shares
Among the directors: Mr. Justino de Jesus, Sr., Mr. Pedro Lopez Dee
and Mrs Amelia C. Lopez Dee never attended the Maggay
Board thereby only Maggay representatives and Atty. Maggay
attended
o
Dee having been unseated filed a petition in the SEC questioning the
validity of the elections
o
May 28, 1982: SEC issued another order directing the hold-over
directors and officers to turn over their respective posts and directing
the Sheriff of Naga City and other enforcement agencies to enforce
its order
June 23, 1981: Dee filed a petition for certiorari/appeal with the
SEC en banc
September 17, 1982: CSI group filed a petition for certiorari and
prohibition with preliminary injunction or restraining order against
the CFI
May 20, 1982: Antonio Villasenor filed w/ the CFI claiming that he
was an assignee of an option to repurchase 36K shares of CS of
Natelco under a Deed of Assignment executed in his favor
May 21, 1982: restraining order dwas issued by the lower court
commanding desistance from the scheduled election until further
orders
ISSUES:
1. W/N SEC has the power and jurisdiction to declare null and void
shares of stock issued by NATELCO to CSI for violation of Sec. 20
(h) of the Public Service Act - NO
2. W/N Natelco stockholders have a right of preemption to the 113,800
shares
3. W/N the May 22, 1982 election was valid
May 25, 1982: SEC recognized the election and the duly elected
directors
o
The SEC is empowered by P.D. 902-A to decide intracorporate controversies and that is precisely the only issue in
this case.
2. NO
actual issuance of the shares after May 19, 1979 - CSI was
in control of voting shares and the Board
since the trial judge in the lower court did not have jurisdiction in
issuing the questioned restraining order, disobedience thereto did not
constitute contempt
FACTS:
Republic (petitioner), through the Presidential Commission on Good
Government (PCGG), represented by the Office of the Solicitor General
(OSG), filed a petition for forfeiture before the Sandiganbayan pursuant to
RA 1379, An Act Declaring Forfeiture In Favor of the State Any Property
To Have Been Unlawfully Acquired By Any Public Officer or Employee and
Providing For the Procedure Therefor.
Before the case was set for pre-trial, a General Agreement and the
Supplemental Agreement dated December 28, 1993 were executed by the
Marcos children and then PCGG Chairman Magtanggol Gunigundo for a
global settlement of the assets of the Marcos family. The General
Agreement/Supplemental Agreements sought to identify, collate, cause the
inventory of and distribute all assets presumed to be owned by the Marcos
family under the conditions contained therein. The General Agreement
specified in one of its "whereas clauses" the fact that petitioner obtained a
judgment from the Swiss Federal Tribunal on December 21, 1990, that the
US$356 million belongs deposited in the name of the aforementioned 5
account groups were of illegal provenance. The funds were thereafter.
remitted to the Philippines in escrow. Subsequently, respondent Marcos
children moved that the funds be placed incustodia legis because the deposit
in escrow in the PNB was allegedly in danger of dissipation by petitioner.
The Sandiganbayan, in its resolution dated September 8, 1998, granted the
motion.
6
In the said case, petitioner sought the declaration of the aggregate amount of
US$ 356M deposited in escrow in the PNB, as ill-gotten wealth. The funds
were previously held by 5 account groups, using various foreign foundations
in certain Swiss banks. In addition, the Republic sought the forfeiture of
US$25 million and US$5 million in treasury notes, which exceeded the
Marcos couple's salaries, other lawful income as well as income from
legitimately acquired property. The treasury notes were frozen at the Central
c
Hearings were conducted by the Sandiganbayan on the motion for summary
judgment filed by petitioner. Sandiganbayan ruled in favor of the Petitioner,
approving the General/Supplemental Agreements. However, in a resolution
dated 31 January 2002, the Sandiganbayan reversed itself and denied said
motion for summary judgment. It ruled that the evidence offered for
summary judgment of the case did not prove that the money in the Swiss
Banks belonged to the Marcos spouses because no legal proof exists in the
record as to the ownership by the Marcoses of the funds in escrow from the
Swiss Banks. The basis for the forfeiture in favor of the government cannot
be deemed to have been established.
The Republic filed the petition for certiorari.
ISSUE: Whether petitioner Republic was able to prove its case for forfeiture
in accordance with the requisites of Sections 2 and 3 of RA 1379.
Note: Section 2. Filing of petition. Whenever any public officer or
employee has acquired during his incumbency an amount or property
which is manifestly out of proportion to his salary as such public
officer or employee and to his other lawful income and the income
from legitimately acquired property, said property shall be
presumed prima facie to have been unlawfully acquired.
RULING: YES. The Republic was able to establish a prima facie case for the
forfeiture of the Swiss funds pursuant to RA 1379.
RA 1379 raises the prima facie presumption that a property is unlawfully
acquired, hence subject to forfeiture, if its amount or value is manifestly
disproportionate to the official salary and other lawful income of the public
officer who owns it.
The following facts must be established in order that forfeiture or seizure of
the Swiss deposits may be effected:
a ownership
by
the
public
officer
of
money
or
property acquired during his incumbency, whether it be in his
name or otherwise, and
b the extent to which the amount of that money or property exceeds, i.
e., is grossly disproportionate to, the legitimate income of the public
officer.
That spouses Ferdinand and Imelda Marcos were public officials during the
time material to the instant case was never in dispute. The combined
accumulated salaries of the Marcos couple were reflected in the Certification
dated May 27, 1986 issued by then Minister of Budget and Management
Alberto Romulo. The Certification showed that, from 1966 to 1985,
Ferdinand E. Marcos and Imelda R. Marcos had accumulated salaries in the
amount of P1,570,000 andP718,750, respectively, or a total of P2,288,750. In
addition to their accumulated salaries from 1966 to 1985 are the Marcos
couples combined salaries from January to February 1986 in the amount
of P30,833.33. Hence, their total accumulated salaries amounted
to P2,319,583.33. Converted to U.S. dollars on the basis of the corresponding
peso-dollar exchange rates prevailing during the applicable period when said
salaries were received, the total amount had an equivalent value of
$304,372.43.
The sum of $304,372.43 should be held as the only known lawful
income of respondents since they did not file any Statement of Assets and
Liabilities (SAL), as required by law, from which their net worth could be
determined. Besides, under the 1935 Constitution, Ferdinand E. Marcos as
President could not receive any other emolument from the Government or
any of its subdivisions and instrumentalities. Likewise, under the 1973
Constitution, Ferdinand E. Marcos as President could not receive during his
tenure any other emolument from the Government or any other source. In
fact, his management of businesses, like the administration of foundations to
accumulate funds, was expressly prohibited under the 1973 Constitution:
Article VII, Sec. 4(2) The President and the Vice-President
shall not, during their tenure, hold any other office except
when otherwise provided in this Constitution, nor may they
practice any profession, participate directly or indirectly in
the management of any business, or be financially interested
directly or indirectly in any contract with, or in any franchise
or special privilege granted by the Government or any other
subdivision, agency, or instrumentality thereof, including
any government owned or controlled corporation.
7
THIRD DIVISION
Petitioners contend that the RTC was barred from issuing a writ of
injunction in this case, pursuant to Section 21 of RA 7227 which
provides as follows:
Sec. 21. Injunction and Restraining Order. -- The implementation of
the projects for the conversion into alternative productive uses of the
military reservations is urgent and necessary and shall not be
restrained or enjoined except by an order issued by the Supreme
Court of the Philippines.xxv[25]
We are not persuaded. We agree with the CA that the present
provision is not a blanket prohibition of the issuance of an injunctive
relief against any SBMA action. Section 21 of RA 7227 prohibits
only such court orders which restrain the implementation of the
projects for the conversion into alternative productive uses of the
military reservations.
The Writ issued in this case did not restrain or enjoin the
implementation of any of SBMAs conversion projects. In fact, it
allowed UIG to proceed with the development of the golf course
pursuant to the LDA. It merely restrained SBMA from taking over
the golf course. Clearly, the assailed RTC Order did not seek to delay
or hamper the conversion of the former naval base into civilian uses.
Moreover, the assailed Writ of Preliminary Injunction was issued in
connection with a dispute pertaining to the correct interpretation of
the LDA. To divest the trial court of that authority is to give SBMA
unhampered discretion to disregard its contractual obligations under
the guise of implementing its projects. Indeed, Section 21 of RA
7227 should not bar judicial scrutiny of irregularities allegedly
committed by SBMA.xxvi[26]
(b)Right of Respondents to Injunctive Relief
A writ of mandatory injunction requires the performance of a
particular actxxvii[27] and is granted only upon a showing of the
following requisites:
1.The invasion of the right is material and substantial;
2.
The right of a complainant is clear and unmistakable.
3.
There is an urgent and permanent necessity for the writ to
prevent serious damage.xxviii[28]
Because it commands the performance of an act, a mandatory
injunction does not preserve the status quoxxix[29] and is thus more
cautiously regarded than a mere prohibitive injunction. Accordingly,
the issuance of the former is justified only in a clear case, free from
12
THIRD DIVISION
equipment used for industrial fluid control and PVC pipes and
fittings for industrial uses. In its complaint, it alleged that: xlviii[2]
(I)t is a corporation duly organized and existing under the laws of
the Republic of Singapore with address at 18 Pasir Panjang Road
#09-01, PSA Multi-Storey Complex, Singapore 0511. It is not
licensed to do business in the Philippines and i(s) not so engaged and
is suing on an isolated transaction for which it has capacity to sue x x
x. (par. 1, Complaint; p. 1, Record)
On various dates covering the period January 17 -- August 16, 1989,
private respondent Delfin Enriquez, Jr., doing business under the
name and style of Delrene EB Controls Center and/or EB Karmine
Commercial, ordered and received from petitioner various elements
used in sealing pumps, valves, pipes and control equipment, PVC
pipes and fittings. The ordered materials were delivered via
airfreight under the following invoices:xlix[3]
Date
17 Jan
89
24 Feb
89
02 Mar
89
03 Mar
89
03 Mar
89
10 Mar
89
21 Mar
89
14 Apr
89
19 Apr
89
89
16 Aug
Invoice No.
27065
27738
27855
27876
27877
28046
28258
28901
29001
31669
28257
28601
28900
29127
29232
29332
29497
AWB No.
618-7496-2941
618-7553-6672
(freight & handling charges per
Inv. 27738)
618-7553-7501
618-7553-7501
618-7578-3256/
618-7578-3481
618-7578-4634
618-7741-7631
Self-collect
(handcarried by buyer)
618-7578-4634
618-7741-7605
618-7741-7631
618-7741-9720
(By seafreight)
618-7796-3255
(Freight & handling charges per
21 Mar
89
04 Apr
89
14 Apr
29844
Inv. 29127)
618-7796-5646
Total
89
25 Apr
89
02
May 89
05
May 89
15
May 89
31
May 89
19
a) With the violations of the contracts by the plaintiff and "other just causes" earlier mentioned,
the defendants IRTI and ECED are fully justified in terminating them without being obliged to
pay any compensation nor to reimburse plaintiff of investment or other expenses;
b) In fact, the defendants have sent written notices dated July 25, 1975 of the termination of
their respective agreements with plaintiffs; and
c) Since no written certificate was applied for nor obtained by defendant entities from the Board
of Investments, the latter cannot legally require of them compliance with No. 9, Section 4, R.A.
No, 5455.
On October 9, 1975, the trial court issued an order granting the petitioner's application for preliminary injunction
embodied in the amended complaint and its application for a writ of mandatory preliminary injunction embodied
in the supplemental complaint,
The corporations filed with the trial court a motion for reconsideration.
On December 18, 1975, the trial court issued another order denying the said motion for reconsideration with
respect to the lifting of the writ of preliminary injunction but granting the prayer for the lifting of the writ of
preliminary mandatory injunction.
The case was elevated to the Court of Appeals on a petition for certiorari with preliminary injunction filed by the
corporations. In setting aside the questioned orders, the appelate court held that:
The determinative question defined by the contentions of the parties in this case is, whether or
not TOP-WELD may rightfully invoke the provisions of Sec. 4, Republic Act No. 5455 to enjoin
petitioner corporations from terminating the subject licensing and distributorship contracts they
have with TOP-WELD. The pertinent portion of the provision reads:
Section 4. Licenses to do business.-No alien, and no firm, association,
partnership, corporation, or any other form of business organization formed,
organized, chartered or existing under any laws other than those of the
Philippines, or which is not a Philippine National, or more than thirty per cent
of the outstanding capital of which is owned or controlled by aliens shall do
business or engage in any economic activity in alien the Philippines, or be
registered, licensed, or permitted by the Securities and Exchange Commission,
or by any other bureau, office, agency, political subdivision, or instrumentality
of the government, to do business, or engage in an economic activity in the
Philippines without first securing a written certificate from the Board of
Investments to the effect ... .
Upon granting said certificate, the Board shall impose the following
requirements on the alien or the firm, association, partnership, corporation, or
other form of business organization that is not organized or existing under the
laws of the Philippines. ... .
(9) Not to terminate any franchise, licensing or other agreement that applicant
may have with a resident of the Philippines, authorizing the latter to assemble,
manufacture or sell within the Philippines the products of the applicant, except
for violation thereof or other just cause and upon payment of compensation and
in the Philippines stops petitioner to invoke the protection of Sec. 4 (9) of Republic Act No.
5455.
III
Respondent Court of Appeals committed a grave error when it held that petitioner cannot invoke
the remedy of injunction against respondents.
At the vortex of the controversy is the issue whether or not respondent corporations can be considered as "doing
business" in the Philippines and, therefore, subject to the provisions of R.A. No. 5455. There is no dispute that
respondents are foreign corporations not licensed to do business in the Philippines. More important, however,
there is no serious objection interposed by the respondents as to their amenability to the jurisdiction of our
courts.
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 circumstances.
(Mentholatum Co. V. Mangaliman, 72 Phil. 524). Thus, a foreign corporation with a settling agent in the
Philippines which issued 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 was organized or whether it has substantially
retired from it and turned it over to another. (Traction Cos. v. Collectors of Int. Revenue [C.C.A.
Ohio], 223 F. 984, 987.) The term implies a continuity of commercial dealings and
arrangements, and contemplates, to that extent, the performance of acts or works or the exercise
of some of the functions normally incident to, and in progressive prosecution of, the purpose and
object of its organization. (Griffin 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.)
Judged by the foregoing standards, we agree with the Court of Appeals in considering the respondents as "doing
business" in the Philippines. When the respondents entered into the disputed contracts with the petitioner, they
were carrying out the purposes for which they were created, i.e. to manufacture and market welding products
and equipment. The terms and conditions of the contracts as well as the respondents' conduct indicate that they
established within our country a continuous business, and not merely one of a temporary character. This fact is
even more strengthened by the admission of the respondents that they are negotiating with another group for the
transfer of the distributorship and franchising rights from the petitioner.
Respondents' acts enabled them to enter into the mainstream of our economic life in competition with our local
business interests. This necessarily brings them under the provisions of R.A. No. 5455.
The respondents contend that they should be exempted from the requirements of R.A. 5455 because the
petitioner maintained an independent status during the existence of the disputed contracts.
This may be true if the petitioner is an independent entity which buys and distributes products not only of the
petitioner but also of other manufacturers or transacts business in its name and for its account and not in the
name or for the account of the foreign principal.
A perusal of the agreements between the petitioner and the respondents shows that they are highly restrictive in
nature. The agreements provide in part the following terms:
xxx xxx xxx
10. No Sales in Territory by IRTI
IRTI shall not solicitor or cause or permit its employees, licensees or agents to solicit or make
any sales, directly or indirectly, of WELDING PRODUCTS within or to the Philippines. IRTI
agrees to refer to LICENSEE all product inquiries received by IRTI for WELDING
PRODUCTS destined for Philippines.
xxx xxx xxx
16. x x x x x x x x x
Restrictive Covenant
LICENSEE will not, directly or indirectly, without the written consent of IRTI at any time
during the continuance of this Agreement and for a period of two years after the date of the
termination of this Agreement, engage either directly or indirectly in the business of selling
products similar to said WELDING PRODUCTS, either as principal, agent, employee or
through stock or proprietary interests in a third part entity.
xxx xxx xxx
RESTRICTI
VE COVENANT
6. DISTRIBUTOR shall not during the continuance of this agreement distribute products of any
other manufacturer or supplier in the Territory assigned to him, which are similar to the
Products.
Upon the termination of this agreement by either party, DISTRIBUTOR agrees not to engage,
directly or indirectly, in the commercialization, distribution and/or manufacture of products
competing with any EUTECTIC + CASTOLIN products covered by this agreement, or of
products likely to affect the sale of any EUTECTIC + CASTOLIN products, either as principal,
agent or employee in the Territory, this prohibition to extend for a period of two (2) years from
the date of termination, except for the explicit purpose of selling any remaining Products still in
DISTRIBUTOR's possession on the date of termination of this agreement which sales shall not
be below the DISTRIBUTOR's pretermination selling price for such Products unless such sale is
to ECED or its nominee in which case Clause 19 hereof shall govern.
xxx xxx xxx
We can conclude that assuming the petitioner maintains an independent status, in essence it merely extends to
the Philippines the business of the foreign corporations.
On the basis of the foregoing, we uphold the appellate court's finding that "IRTI AND ECED were doing
business and engaging in economic activity in the Philippines ... as a prerequisite to which they should have first
secured a written certificate from the Board of Investments."
The respondent court, however, erred in holding that "IRTI and ECED have not secured such written certificate
in consequence of which there is no occasion for the Board of Investments to impose the requirements
prescribed in the aforequoted provisions of Sec. 4, R.A. No. 5455 ... ." To accept this view would open the way
for an interpretation that by doing business in the country without first securing the required written certificate
from the Board of Investments, a foreign corporation may violate or disregard the safeguards which the law, by
its provisions, seeks to establish.
We agree, however, that there is a more compelling reason behind the finding that the "corporations are not
bound by the requirement on termination, and TOP-WELD cannot invoke the same against the former."
As between the parties themselves, R.A. No. 5455 does not declare as void or invalid the contracts entered into
without first securing a license or certificate to do business in the Philippines. Neither does it appear to intend to
prevent the courts from enforcing contracts made in contravention of its licensing provisions. There is no
denying, though, that an "illegal situation," as the appellate court has put it, was created when the parties
voluntarily contracted without such license.
The parties are charged with knowledge of the existing law at the time they enter into the contract and at the time
it is to become operative. (Twiehaus v. Rosner, 245 SW 2d 107; Hall v. Bucher, 227 SW 2d 98). Moreover, a
person is presumed to be more knowledgeable about his own state law than his alien or foreign contemporary. In
this case, the record shows that, at least, petitioner had actual knowledge of the applicability of R.A. No. 5455 at
the time the contract was executed and at all times thereafter. This conclusion is compelled by the fact that the
same statute is now being propounded by the petitioner to bolster its claim. We, therefore, sustain the appellate
court's view that "it was incumbent upon TOP-WELD to know whether or not IRTI and ECED were properly
authorized to engage in business in the Philippines when they entered into the licensing and distributorship
agreements." The very purpose of the law was circumvented and evaded when the petitioner entered into said
agreements despite the prohibition of R.A. No. 5455. The parties in this case being equally guilty of violating
R.A, No. 5455, they are in pari delicto, in which case it follows as a consequence that petitioner is not entitled to
the relief prayed for in this case.
In Bough v. Cantiveros (40 Phil. 210), the principle is laid down in these words: "The rule of pari delicto is
expressed in the maxims "ex dolo malo non eritur actio" and "in pari delicto potior est conditio defedentis." The
law will not aid either party to an illegal agreement. It leaves the parties where it finds them."
No remedy could be afforded to the parties because of their presumptive knowledge that the transaction was
tainted with illegality. (Soriano v. Ong Hoo, 103 Phil. 829). Equity cannot lend its aid to the enforcement of an
alleged right claimed by virtue of an agreement entered into in contravention of law.
Lastly, we come to the issue of "just cause" for the termination of the contracts or the alleged violations of the
contracts made by petitioner. Though properly ventilated below, this factual issue was not determined by both
the trial court and the appellate court.
The record shows that respondents, in opposing the injunction suit and alleging the violations of the contracts,
submitted and relied on their affidavits. The petitioner, however, to refute these charges, submitted a "Reply to
Opposition" which is neither verified nor supported by counter-affidavits. There is no showing in the records
before us whether oral testimony was presented by any of the parties or whether the affiants were subjected to
the test of cross-examination and if any, what was stated during the oral testimony.
The burden of overcoming the responsive effect of the answer is upon the petitioner. He who alleges a fact has
the burden of proving it and a mere allegation is not evidence. (Legasca v. De Vera, 79 Phil. 376) Hearsay
evidence alone may be insufficient to establish a fact in an injunction suit (Parker v. Furlong, 62 P. 490) but,
when no objection is made thereto, it is, like any other evidence, to be considered and given the importance it
deserves. (Smith v. Delaware & Atlantic Telegraph & Telephone Co., 51 A 464). Although we should warn of the
undesirability of issuing judgments solely on the basis of the affidavits submitted, where as here, said affidavits
are overwhelming, uncontroverted by competent evidence and not inherently improbable, we are constrained to
uphold the allegations of the respondents regarding the multifarious violations of the contracts made by the
petitioner. Accordingly, we rule that there exists a just cause for respondents to move for the termination of their
contracts with the petitioner.
Moreover, the facts on record show that the "License and Technical Assistance Agreement" between petitioner
and respondent IRTI was extended only for a period of one year or to be precise, from January 1, 1975 to
December 31, 1975. The original injunction suit was brought in the court a quo in June1975, the purpose being
to stop the respondent from terminating the contract. This purpose was realized when the court granted the
injunction. By the time respondents' appeal was decided by the Court of Appeals, it was already past the
extended period. The dispute between the parties had been rendered moot and academic. It should be stated that
the courts be it the original trial court or the appellate court have no power to make contracts for the parties. No
court would be justified in extending the life of the contracts, subject of this controversy, since that would do
violence to the basic principle that contracts must be the voluntary agreements of parties,
Parties can not be coerced to enter into a contract where no agreement is had between them as to the principal
terms and condition of the contract (Republic v. Philippine Long Distance Telephone Co., 26 SCRA 620).
With the above observations, there is nothing more for this Court to do except to dismiss the petition.
ACCORDINGLY, the petition is hereby dismissed. The appealed decision of the Court of Appeals is
AFFIRMED,
SO ORDERED.
Plana, Relova, De la Fuente and Alampay, JJ., concur.
Melencio-Herrera, J., took no part.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
PUNO, J.:
Petitioner impugns the dismissal of its Complaint for a sum of money by the respondent judge for lack of
jurisdiction and lack of capacity to sue.
The records show that petitioner is a multinational company organized and existing under the laws of the Federal
Republic of Germany. On July 6, 1983, petitioner filed an application, dated July 2, 1983, 1 with the Securities
and Exchange Commission (SEC) for the establishment of a regional or area headquarters in the Philippines,
pursuant to Presidential Decree No. 218. The application was approved by the Board of Investments (BOI) on
September 6, 1983. Consequently, on September 20, 1983, the SEC issued a Certificate of Registration and
License to petitioner. 2
Private respondent Romana R. Lanchinebre was a sales representative of petitioner from 1983 to mid-1992. On
March 12, 1992, she secured a loan of twenty-five thousand pesos (P25,000.00) from petitioner. On March 26
and June 10, 1992, she made additional cash advances in the sum of ten thousand pesos (P10,000.00). Of the
total amount, twelve thousand one hundred seventy pesos and thirty-seven centavos (P12,170.37) remained
unpaid. Despite demand, private respondent Romana failed to settle her obligation with petitioner.
On July 22, 1992, private respondent Romana Lanchinebre filed with the Arbitration Branch of the National
Labor Relations Commission (NLRC) in Manila, a Complaint for illegal suspension, dismissal and non-payment
of commissions against petitioner. On August 18, 1992, petitioner in turn filed against private respondent a
Complaint for damages amounting to one hundred twenty thousand pesos (P120,000.00) also with the NLRC
Arbitration Branch (Manila). 3 The two cases were consolidated.
On September 2, 1992, petitioner filed another Complaint for collection of sum of money against private
respondents spouses Romana and Teofilo Lanchinebre which was docketed as Civil Case No. 92-2486 and
raffled to the sala of respondent judge. Instead of filing their Answer, private respondents moved to dismiss the
Complaint. This was opposed by petitioner.
On December 21, 1992, respondent judge issued the first impugned Order, granting the motion to dismiss. She
held, viz:
Jurisdiction over the subject matter or nature of the action is conferred by law and not subject to
the whims and caprices of the parties.
Under Article 217 of the Labor Code of the Philippines, the Labor Arbiters shall have original
and exclusive jurisdiction to hear and decide, within thirty (30) calendar days after the
submission of the case by the parties for decision, the following cases involving all workers,
whether agricultural or non-agricultural:
(4) claims for actual, moral, exemplary and other forms of damages arising from an employeremployee relations.
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(6) Except claims for employees compensation, social security, medicare and maternity benefits,
all other claims arising from employer-employee relations, including those of persons in
domestic or household service, involving an amount exceeding five thousand pesos (P5,000.00)
regardless of whether or not accompanied with a claim for reinstatement.
In its complaint, the plaintiff (petitioner herein) seeks to recover alleged cash advances made by
defendant (private respondent herein) Romana Lanchinebre while the latter was in the employ of
the former. Obviously the said cash advances were made pursuant to the employer-employee
relationship between the (petitioner) and the said (private respondent) and as such, within the
original and exclusive jurisdiction of the National Labor Relations Commission.
Again, it is not disputed that the Certificate of Registration and License issued to the (petitioner)
by the Securities and Exchange Commission was merely "for the establishment of a regional or
area headquarters in the Philippines, pursuant to Presidential Decree No. 218 and its
implementing rules and regulations." It does not include a license to do business in the
Philippines. There is no allegation in the complaint moreover that (petitioner) is suing under an
isolated transaction. It must be considered that under Section 4, Rule 8 of the Revised Rules of
Court, facts showing the capacity of a party to sue or be sued or the authority of a party to sue or
be sued in a representative capacity or the legal existence of an organized association of persons
that is made a party must be averred. There is no averment in the complaint regarding
(petitioner's) capacity to sue or be sued.
Finally, (petitioner's) claim being clearly incidental to the occupation or exercise of (respondent)
Romana Lanchinebre's profession, (respondent) husband should not be joined as party
defendant. 4
On March 8, 1993, the respondent judge issued a minute Order denying petitioner's Motion for Reconsideration.
Petitioner now raises the following assignments of errors:
I
THE TRIAL COURT GRAVELY ERRED IN HOLDING THAT THE REGULAR COURTS
HAVE NO JURISDICTION OVER DISPUTES BETWEEN AN EMPLOYER AND AN
EMPLOYEE INVOLVING THE APPLICATION PURELY OF THE GENERAL CIVIL LAW.
II
THE TRIAL COURT GRAVELY ERRED IN HOLDING THAT PETITIONER HAS NO
CAPACITY TO SUE AND BE SUED IN THE PHILIPPINES DESPITE THE FACT THAT
damages for breach of a contractual obligation. The other items demanded are
not labor benefits demanded by workers generally taken cognizance of in labor
disputes, such as payment of wages, overtime compensation or separation pay.
The items claimed are the natural consequences flowing from breach of an
obligation, intrinsically a civil dispute.
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In San Miguel Corporation vs. NLRC, 161 SCRA 719 (1988), we crystallized the doctrines set forth in the
Medina, Singapore Airlines, and Molave Motors cases, thus:
. . . The important principle that runs through these three (3) cases is that where the claim to the
principal relief sought is to be resolved not by reference to the Labor Code or other labor
relations statute or a collective bargaining agreement but by the general civil law, the jurisdiction
over the dispute belongs to the regular courts of justice and not to the Labor Arbiter and the
NLRC. In such situations, resolutions of the dispute requires expertise, not in labor management
relations nor in wage structures and other terms and conditions of employment, but rather in the
application of the general civil law. Clearly, such claims fall outside the area of competence or
expertise ordinarily ascribed to Labor Arbiters and the NLRC and the rationale for granting
jurisdiction over such claims to these agencies disappears.
Civil Case No. 92-2486 is a simple collection of a sum of money brought by petitioner, as creditor, against
private respondent Romana Lanchinebre, as debtor. The fact that they were employer and employee at the time
of the transaction does not negate the civil jurisdiction of the trial court. The case does not involve adjudication
of a labor dispute but recovery of a sum of money based on our civil laws on obligation and contract.
Secondly, the trial court erred in holding that petitioner does not have capacity to sue in the Philippines. It is
clear that petitioner is a foreign corporation doing business in the Philippines. Petitioner is covered by the
Omnibus Investment Code of 1987. Said law defines "doing business," as follows:
. . . shall include soliciting orders, purchases, service contracts, opening offices, whether called
"liaison" offices or branches; appointing representatives or distributors who are domiciled in the
Philippines or who in any calendar year stay in the Philippines for a period or periods totalling
one hundred eighty (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 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,
and in progressive prosecution of, commercial gain or of the purpose and object of the business
organization. 5
There is no general rule or governing principle 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 circumstances. 6 In the case at
bench, petitioner does not engage in commercial dealings or activities in the country because it is precluded from
doing so by P.D. No. 218, under which it was established. 7 Nonetheless, it has been continuously, since 1983,
acting as a supervision, communications and coordination center for its home office's affiliates in Singapore, and
in the process has named its local agent and has employed Philippine nationals like private respondent Romana
Lanchinebre. From this uninterrupted performance by petitioner of acts pursuant to its primary purposes and
functions as a regional/area headquarters for its home office, it is clear that petitioner is doing business in the
country. Moreover, private respondents are estopped from assailing the personality of petitioner. So we held in
Merrill Lynch Futures, Inc. vs. Court of Appeals, 211 SCRA 824, 837 (1992):
The rule is that a party is estopped to challenge the personality of a corporation after having
acknowledged the same by entering into a contract with it. And the "doctrine of estoppel to deny
corporate existence applies to foreign as well as to domestic corporations;" "one who has dealth
with a corporation of foreign origin as a corporate entity is estopped to deny its corporate
existence and capacity." The principle "will be applied to prevent a person contracting with a
foreign corporation from later taking advantage of its noncompliance with the statutes chiefly in
cases where such person has received the benefits of the contract, . . . (Citations omitted.)
Finally, the trial court erred when it dismissed Civil Case No. 92-2486 on what it found to be the misjoinder of
private respondent Teofilo Lanchinebre as party defendant. It is a basic rule that "(m)isjoinder or parties is not
ground for dismissal of an action." 8 Moreover, the Order of the trial court is based on Section 4(h), Rule 3 of the
Revised Rules of Court, which provides:
A married woman may not . . . be sued alone without joining her husband, except . . . if the
litigation is incidental to the profession, occupation or business in which she is engaged,
Whether or not the subject loan was incurred by private respondent as an incident to her profession, occupation
or business is a question of fact. In the absence of relevant evidence, the issue cannot be resolved in a motion to
dismiss.
IN VIEW WHEREOF, the instant Petition is GRANTED. The Orders, dated December 21, 1992 and March 8,
1993, in Civil Case No. 92-2486 are REVERSED AND SET ASIDE. The RTC of Makati, Br. 59, is hereby
ordered to hear the reinstated case on its merits. No costs.
SO ORDERED.
Narvasa, C.J., Padilla, Regalado and Mendoza, JJ., concur.
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Stokely alleged: (1) that it is a corporation organized and existingunder the laws of the state of Indiana, U.S.A.
and has its principal office at 941 North MeridianStreet, 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 notengaged in business in the Philippines prior to the commencement of the suit
so that Stokely is notlicensed to do business in this country and is not required to secure such license; (3) that on
21 August 1978, Capital City and Coconut Oil Manufacturing (Phil.) Inc. (Comphil) with the latter
actingthrough its broker Rothschild Brokerage Company, entered into a contract (RBS 3655) whereinComphil
undertook to sell and deliver and Capital City agreed to buy 500 long tons of crude coconutoil to be delivered in
October/November 1978 at the c.i.f price of US$0.30/lb. but Comphil failed todeliver the coconut oil so that
Capital City covered its coconut oil needs in the open market at a pricesubstantially in excess of the contract and
sustained a loss of US$103,600; that to settle CapitalCity's loss under the contract, the parties entered into a
second contract (RBS 3738) on 3 November 1978 wherein Comphil undertook to buy and Capital City agreed to
sell 500 long tons of coconutcrude 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
wassupposed to repurchase the undelivered coconut oil at US $0.3925 from Capital City by paying thelatter 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, itentered into a third contract with
Comphil on 24 January 1979 wherein the latter undertook to selland 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 deliveringsaid quantity of coconut oil to Capital City at the discounted price, Comphil was to
have settled itsUS$103,600 liability to Capital City; (6) that Comphil failed to deliver the coconut oil so Capital
Citynotified 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. Stokely further prayed that a writ of attachment be issued against anyand all the properties of
Antam, et al. in an amount sufficient to satisfy any lien of judgment thatStokely may obtain in its action. In
support of this provisional remedy and of its cause of actionagainst Antam, et al., other than Comphil, Stokely
alleged that: 1) After demands were made byrespondent on Comphil, the Tambuntings ceased to be directors and
officers of Comphil and werereplaced by their five employees, who were managers of Tambunting's pawnshops
and saidemployees caused the name of Comphil to be changed to "Banahaw Milling Corporation" andauthorized
one of the Tambuntings, Antonio P. Tambunting, Jr., who was at that time neither adirector 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 theformer; 3) All of the issued and outstanding
capital stock of Comphil are owned by the Tambuntingswho were the directors and officers of Comphil and who
were the ones who benefited from the saleof Banahaw's assets or shares to Unicom; 4) All of the petitioners
evaded their obligation torespondent by the devious scheme of using Tambunting employees to replace the
Tambuntings inthe management of Banahaw and disposing of the oil mill of Banahaw or their entire interests
toUnicom; and 5) Respondent has reasonable cause to believe and does believe that the coconut oilmill, which is
the only substantial asset of Banahaw is about to be sold or removed so that unlessprevented by the Court there
will probably be no assets of Banahaw to satisfy its claim. On 10 April1981, the trial court ordered the issuance
of a writ of attachment in favor of Stokely upon the latter'sdeposit of a bond in the amount of P1,285,000.00.On
3 June 1981, Stokely filed a motion for reconsideration to reduce the attachment bond. On 11June 1981, Antam,
et al. filed a motion to dismiss the complaint on the ground that Stokely, being aforeign corporation not licensed
to do business in the Philippines, has no personality to maintain thesuit. Thereafter, the trial court issued an
order, dated 10 August 1981, reducing the attachment bondto P500,000.00 and denying the motion to dismiss by
Antam, et al. on the ground that the reasoncited therein does not appear to be indubitable. Antam, et al. filed a
petition for certiorari before theIntermediate Appellate Court. On 14 June 1982, the appellate court dismissed the
petition. Antam, etal. filed a motion for reconsideration but the same was denied. Hence, they filed the petition
for certiorari and prohibition with prayer for temporary restraining order.
Issue: Whether Stokely Van Camp, Inc. has the capacity to sue, in light of three transactions itentered into with
Comphil, Antam, etc. without license.
Held:
The transactions entered into by Stokely with Comphil, Antam, et al. are not a series of commercial dealings
which signify an intent on the part of Stokely to do business in the Philippinesbut constitute an isolated one
which does not fall under the category of "doing business." The onlyreason why Stokely entered into the second
and third transactions with Comphil, Antam, et al. wasbecause it wanted to recover the loss it sustained from the
failure of Comphil, Antam, et al. to deliver the crude coconut oil under the first transaction and in order to give
the latter a chance to make goodon their obligation. Instead of making an outright demand on Comphil, Antam,
et al., Stokely opted totry to push through with the transaction to recover the amount of US$103,600.00 it lost.
Thisexplains why in the second transaction, Comphil, Antam, et al. were supposed to buy back the crudecoconut
oil they should have delivered to the respondent in an amount which will earn the latter aprofit of
US$103,600.00. When this failed the third transaction was entered into by the partieswhereby Comphil, Antam,
et al. were supposed to sell crude coconut oil to the respondent at adiscounted rate, the total amount of such
discount being US$103,600.00. Unfortunately, Comphil, Antam, et al. failed to deliver again, prompting Stokely
to file the suit below. From these facts alone,it can be deduced that in reality, there was only one agreement
between Comphil, Antam, et al. andStokely 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
noway indicate an intent on the part of Stokely to engage in a continuity of transactions with Comphil, Antam, et
al. which will categorize it as a foreign corporation doing business in the Philippines.Stokely, being a foreign
corporation not doing business in the Philippines, does not need to obtain alicense to do business in order to have
the capacity to sue.
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Reinsurance company is not doing business in a certain state even if the property or lives which are
insured by the original insurer company are located in that state.
Reinsurance Contract is generally separate and distinct arrangement from the original contract of
insurance.
Doing business in the Philippines must be judged in the light of its peculiar circumstances upon its
peculiar facts and upon the language of the statute applicable.
o True test: whether the foreign corporation is continuing the body or substance of the business or
enterprise for which it was organized
If there exist a domestic agent of the foreign corporation it can be served with summons through that
agent without proving that such corporation is doing business in the phils or not.
o 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 Phils
o Petitioners had not 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 undertaking in the
country.
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.
Voluntary appearance before the lower court to question the jurisdiction is not equivalent to submission
to jurisdiction
The SC disposed the case in favor of the international insurers (petitioners) declaring that the lower court has
not acquired and cannot acquire jurisdiction over them and was ordered to desist from maintaining further
proceeding against them.
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It is not correct to say that "the basic fact" to be proven to establish probable cause in the instant
cases is not the "unauthorized transfer" of a motion picture that has been recorded but the "sale,
lease, or distribution of pirated video tapes of copyrighted films."
In applying for the search warrants the NBI charged violation of the entire provisions of Section
56 of P.D. No. 49 as amended by P.D.No. 1988. This included not only the sale, lease or
distribution of pirated tapes but also the transfer or causing to be transferred of any sound
recording or motion picture or other audio visual work.
But even assuming, as appellants argue, that only the sale, lease, or distribution of pirated video
tapes is involved, the fact remains that there is need to establish probable cause that the tapes
being sold, leased or distributed are pirated tapes, hence the issue reverts back to the question of
whether there was unauthorized transfer, directly or indirectly, of a sound recording or motion
picture or other audio visual work that has been recorded
Petitions denied.
SECOND DIVISION
[G.R. No. 94980. May 15,1996]
LITTON MILLS; INC., petitioner, vs. COURT OF APPEALS and GELHAAR UNIFORM COMPANY, INC.,
respondents.
SYLLABUS
1. REMEDIAL LAW; CIVIL PROCEDURE; SUMMONS; A COURT NEED NOT GO BEYOND THE
ALLEGATIONS IN THE COMPLAINT TO DETERMINE WHETHER OR NOT A DEFENDANT
FOREIGN CORPORATION IS DOING BUSINESS FOR THE PURPOSE OF RULE 14, SECTION 14;
CASE AT BAR. A court need not go beyond the allegations in the complaint to determine whether or not a
defendant foreign corporation is doing business for the purpose of Rule 14, 14. In the case at bar, the allegation
that Empire, for and in behalf of Gelhaar, ordered 7,770 dozens of soccer jerseys from Litton and for this
purpose Gelhaar caused the opening of an irrevocable letter of credit in favor of Litton is a sufficient allegation
that Gelhaar was doing business in the Philippines.
2. ID.; ID.; ID.; SERVICE OF SUMMONS; VALID IN CASE AT BAR. In accordance with Rule 14, 14,
service upon Gelhaar could be made in three ways: (1) by serving upon the agent designated in accordance with
law to accept service of summons; (2) if there is no resident agent, by service on the government official
designated by law to that effect; and (3) by serving on any officer or agent of said corporation within the
Philippines. Here, service was made through Gelhaars agent, the Empire Sales Philippines Corp. There was,
therefore, a valid service of summons on Gelhaar, sufficient to confer on the trial court jurisdiction over the
person of Gelhaar.
APPEARANCES OF COUNSEL
Juanitas, Perez, Gonzales, Bolos & Associates for petitioner.
Sycip Salazar Hernandez & Gatmaitan for private respondent.
DECISION
MENDOZA, J.:
This is a petition to review the decision of the Court of Appeals annulling the order of the Regional Trial Court
which denied private respondents plea that it is a foreign corporation not doing business in the Philippines and
therefore not subject to the jurisdiction of Philippine courts.
Petitioner Litton Mills, Inc. (Litton) entered into an agreement with Empire Sales Philippines Corporation
(Empire), as local agent of private respondent Gelhaar Uniform Company (Gelhaar), a corporation organized
under the laws of the United States, whereby Litton agreed to supply Gelhaar 7,770 dozens of soccer jerseys.
The agreement stipulated that be fore it could collect from the bank on the letter of credit, Litton must present an
inspection certificate issued by Gelhaars agent in the Philippines, Empire Sales, that the goods were in
satisfactory condition.
Litton sent four shipments totalling 4,770 dozens of the soccer jerseys between December 2 and December 30,
1983. A fifth shipment, consisting of 2,110 dozens of the jerseys, was inspected by Empire from January 9 to
January 19, 1984, but Empire refused to issue the required certificate of inspection.
Alleging that Empires refusal to issue a certificate was without valid reason, Litton filed a complaint with the
Regional Trial Court of Pasig (Branch 158) on January 23,1984, for specific performance. Litton alleged that
under the terms of the letter of credit, the goods should be shipped not later than January 30, 1984; that the
vessel stipulated to carry the shipment was scheduled to receive the cargo only on January 27, 1984; and that the
letter of credit itself was due to expire on February 14, 1984. Litton sought the issuance of a writ of preliminary
mandatory injunction to compel Empire to issue the inspection certificate covering the 2,110 dozen jerseys and
the recovery of compensatory and exemplary damages, costs, attorneys fees and other just and equitable relief.
The trial court issued the writ on January 25, 1984. The next day, Empire issued the inspection certificate, so that
the cargo was shipped on time.
On February 8, 1984, Atty. Remie Noval filed in behalf of the defendants a Motion For Extension of Time To
File An Answer/Responsive Pleading. He filed on February 17, February 22, March 2, March 14, March 26,
April 5, April 16, May 2, May 16, May 31, all in 1984, ten other motions for extension, all of which were
granted by the court, with the exception of the last, which the Court denied. On his motion, the court later
reconsidered its order of denial and admitted the answer of the defendants. On September 10, 1984, Atty. Noval
filed the pretrial brief for the defendants.
On January 29,1985, the law firm of Sycip, Salazar, Feliciano and Hernandez entered a special appearance for
the purpose of objecting to the jurisdiction of the court over Gelhaar. On February 4,1985, it moved to dismiss
the case and to quash the summons on the ground that Gelhaar was a foreign corporation not doing business in
the Philippines, and as such, was beyond the reach of the local courts.
It contended that Litton failed to allege and prove that Gelhaar was doing business in the Philippines, which they
argued was required by the ruling in Pacific Micronisian Lines, Inc. v. Del Rosario,1 before summons could be
one which is doing business in the Philippines. This is a sine qua non requirement. This fact must first be
established in order that summons can be made and jurisdiction acquired. (Italics by the Court of Appeals)2
In the later case of Signetics Corporation v. Court of Appeals,3 however, we clarified the holding in Pacific
Micronisian, thus:
The petitioner opines that the phrase, (the) fact (of doing business in the Philippines) must first be established in
order that summons be made and jurisdiction acquired, used in the above pronouncement, would indicate that a
mere allegation to that effect in the complaint is not enough there must instead be proof of doing business. In
any case, the petitioner points out, the allegations themselves did not sufficiently show the fact of its doing
business in the Philippines.
It should be recalled that jurisdiction and venue of actions are, as they should so be, initially determined by the
allegations of the complaint. Jurisdiction cannot be made to depend on independent pleas set up in a mere
motion to dismiss, otherwise jurisdiction would become dependent almost entirely upon the defendant. The fact
of doing business must then, in the first place, be established by appropriate allegations in the complaint. This is
what the Court should be seen to have meant in the Pacific Micronisian case. The complaint, it is true, may have
been vaguely structured but, taken correlatively, not disjunctively as the petitioner would rather suggest, it is not
really so weak as to be fatally deficient in the above requirement. . . .
Hence, a court need not go beyond the allegations in the complaint to determine whether or not a defendant
foreign corporation is doing business for the purpose of Rule 14, 14. In the case at bar, the allegation that
Empire, for and in behalf of Gelhaar, ordered 7,770 dozens of soccer jerseys from Litton and for this purpose
Gelhaar caused the opening of an irrevocable letter of credit in favor of Litton is a sufficient allegation that
Gelhaar was doing business in the Philippines.
Second. Gelhaar contends that the contract with Litton was a single, isolated transaction and that it did not
constitute doing business. Reference is made to Pacific Micronisian in which the only act done by the foreign
company was to employ a Filipino as a member of the crew on one of its ships. This court held that the act was
an isolated, incidental or casual transaction, not sufficient to indicate a purpose to engage in business.
It is not really the fact that there is only a single act done that is material. The other circumstances of the case
must be considered. Thus, in Wang Laboratories, Inc. v. Mendoza,4 it was held that where a single act or
transaction of a foreign corporation is not merely incidental or casual but is of such character as distinctly to
indicate a purpose on the part of the foreign corporation to do other business in the state, such act will be
considered as constituting doing business.5 This Court referred to acts which were in the ordinary course of
business of the foreign corporation.
In the case at bar, the trial court was certainly correct in holding that Gelhaars act in purchasing soccer jerseys
to be within the ordinary course of business of the company considering that it was engaged in the manufacture
of uniforms. The acts noted above are of such a character as to indicate a purpose to do business.
In accordance with Rule 14, 14, service upon Gelhaar could be made in three ways: (1) by serving upon the
agent designated in accordance with law to accept service of summons; (2) if there is no resident agent, by
service on the government official designated by law to that effect; and (3) by serving on any officer or agent of
said corporation within the Philippines.6 Here, service was made through Gelhaars agent, the Empire Sales
Philippines Corp. There was, therefore, a valid service of summons on Gelhaar, sufficient to confer on the trial
court jurisdiction over the person of Gelhaar.
Third. On the question, however, of whether the appearance of Atty. Noval in behalf of Gelhaar was binding on
the latter, we hold that the Court of Appeals correctly ruled that it was not.
Atty. Noval admits that he was not appointed by Gelhaar as its counsel. What he claims is simply that Gelhaar
knew of the filing of the case in the trial court and of his representation but Gelhaar did not object. Atty. Noval
contends that there was thus a tacit confirmation of his authority.
Gelhaar claims, however, that it was only sometime in December, 1994 when it found out that the answer which
Atty. Noval had filed in June was also made in its behalf. Gelhaar in fact sent a telex message dated January 15,
1985 to its counsel, the Sycip law firm, stating
WE NEVER AUTHORIZED THE RETENTION OF MR. NOVAL ON OUR BEHALF. WE HAVE NEVER
EXCHANGED CORRESPONDENCE NOR HAD ANY TELEPHONE CONVERSATIONS WITH HIM RE
ANY ASPECT OF THIS CASE, INCL. HIS FEES. WE ARE TOLD THAT HE HAS FILED AN ANSWER TO
LTNS (Littons) COMPLT. PURPORTEDLY ON OUR BEHALF BUT HE HAS NEVER DISCUSSED THAT
ANSWER WITH US NOR EVEN SENT US A DRAFT OR THE FINAL VERSION OF SUCH ANSWER. WE
ARE SENDING SWORN AFFIDAVITS TO THIS EFFECT BY COURIER.7
Atty. Noval has not denied any of these statements. He claims that the advisory opinions he had rendered in the
case was sent to Gelhaar by the president of Empire, Enoch Chiu, and that he was informed by Chiu that
Gelhaar had been advised on all developments in the case and the necessity of filing an answer, and that a copy
of the answer he had filed was furnished Gelhaar.
All this is, however, merely hearsay. Noval does not claim that he ever directly conferred with Gelhaar regarding
the case. There is no evidence to show that he notified Gelhaar of his appearance in its behalf, or that he
furnished Gelhaar with copies of pleadings or the answer which he filed in its behalf.
No voluntary appearance by Gelhaar can, therefore, be inferred from the acts of Atty. Noval. Nor can Atty.
Novals representations in the answer he considered binding on Gelhaar. Gelhaar should be allowed a new period
for filing its own answer.
WHEREFORE, the decision of the Court of Appeals is REVERSED. The order of the trial court denying the
motion to dismiss is hereby REINSTATED, with the MODIFICATION that Gelhaar is given a new period of ten
(10) days for the purpose of filing its answer.
SO ORDERED.
Regalado (Chairman), Romero, Puno, and Torres, Jr., JJ., concur.
MERRILL LYNCH FUTURES, INC. VS. COURT OF APPEALS, SPOUSES PEDRO M. LARA AND ELISA
G. LARA
G.R. No. 97816
July 24, 1992
NARVASA, C.J.:
FACTS:
Merrill Lynch Futures, Inc. filed a complaint against the Spouses Pedro M. Lara and Elisa G. Lara for
the recovery of a debt and interest thereon, damages, and attorney's fees. In its complaint ML FUTURES alleged
the following: that it entered into a Futures Customer Agreement with the defendant spouses, in virtue of which
it agreed to act as the latter's broker for the purchase and sale of futures contracts in the U.S.; that the orders to
buy and sell futures contracts were transmitted to ML FUTURES by the Lara Spouses "through the facilities of
Merrill Lynch Philippines, Inc., a Philippine corporation and a company servicing plaintiffs customers; the Lara
Spouses "knew and were duly advised that Merrill Lynch Philippines, Inc. was not a broker in futures contracts,"
and that it "did not have a license from the SEC to operate as a commodity trading advisor; the Lara Spouses
actively traded in futures contracts for four years; that because of a loss incurred said spouses became indebted
to ML FUTURES; that the Lara Spouses refused to pay this balance, "alleging that the transactions were null and
void because Merrill Lynch Philippines, Inc., had no license to operate as a 'commodity and/or financial futures
broker.'"
ISSUE:
Whether or not a foreign corporation has a capacity to maintain an action in the Philippines against
residents thereof
HELD:
The Court is satisfied that the facts on record adequately establish that ML FUTURES, operating in the
United States, had indeed done business with the Lara Spouses in the Philippines over several years, had done so
at all times through Merrill Lynch Philippines, Inc, a corporation organized in this country, and had executed all
these transactions without ML FUTURES being licensed to so transact business here, and without MLPI being
authorized to operate as a commodity futures trading advisor.
The rule is that a party is estopped to challenge the personality of a corporation after having
acknowledged the same by entering into a contract with it. And the "doctrine of estoppel to deny corporate
existence applies to foreign as well as to domestic corporations;" "one who has dealt with a corporation of
foreign origin as a corporate entity is estopped to deny its corporate existence and capacity." The principle "will
be applied to prevent a person contracting with a foreign corporation from later taking advantage of its
noncompliance with the statutes, chiefly in cases where such person has received the benefits of the contract,
where such person has acted as agent for the corporation and has violated his fiduciary obligations as such, and
where the statute does not provide that the contract shall be void, but merely fixes a special penalty for violation
of the statute"
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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. 8 Hence, 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:
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(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.
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4) Opening offices whether called "liaison" offices, agencies or branches, unless proved
otherwise.
SO ORDERED.
Gutierrez, Jr., Feliciano, Bidin and Corts, JJ., concur.
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FERNAN, C.J.:p
Challenged in this petition for certiorari which is anchored on grave abuse of discretion, are two orders of the
Regional Trial Court, Branch CXLII of Makati, Metro Manila dismissing the complaint for collection of a sum
of money and denying the motion for reconsideration of the dismissal order on the ground that petitioner, a
Hongkong-based bank, is barred by the General Banking Act from maintaining a suit in this jurisdiction.
The records show that on July 18, 1979, petitioner Hang Lung Bank, Ltd., which was not doing business in the
Philippines, entered into two (2) continuing guarantee agreements with Cordova Chin San in Hongkong whereby
the latter agreed to pay on demand all sums of money which may be due the bank from Worlder Enterprises to
the extent of the total amount of two hundred fifty thousand Hongkong dollars (HK $250,000). 1
Worlder Enterprises having defaulted in its payment, petitioner filed in the Supreme Court of Hongkong a
collection suit against Worlder Enterprises and Chin San. Summonses were allegedly served upon Worlder
Enterprises and Chin San at their addresses in Hongkong but they failed to respond thereto. Consequently, the
Supreme Court of Hongkong issued the following:
JUDGMENT
THE 14th DAY OF JUNE, 1984
No notice of intention to defend having been given by the 1st and 2nd Defendants herein, IT IS
THIS DAY ADJUDGED that:
(1) the 1st Defendant (Ko Ching Chong Trading otherwise known as the Worlder Enterprises) do
pay the Plaintiff the sum of HK$1,117,968.36 together with interest on the respective principal
sums of HK$196,591.38, HK$200,216.29, HK$526,557.63, HK$49,350.00 and HK$3,965.50 at
the rates of 1.7% per month (or HK$111.40 per day), 18.5% per annum (or HK$101.48 per day),
1.85% per month (or HK$324.71 per day), 1.55% per month (or HK$25.50 per day) and 1.7%
per month (or HK$2.25 per day) respectively from 4th May 1984 up to the date of payment; and
(2) the 2nd Defendant (Cordova Chin San) do pay the Plaintiff the sum of HK$279,325.00
together with interest on the principal sum of HK$250,000.00 at the rate of 1.7% per month (or
HK$141.67 per day) from 4th May 1984 up to the date of payment.
AND IT IS ADJUDGED that the 1st and 2nd Defendants do pay the Plaintiff the sum of
HK$970.00 fixed costs.
N.J. BARNETT
Registrar
Thereafter, petitioner through counsel sent a demand letter to Chin San at his Philippine address but again, no
response was made thereto. Hence, on October 18, 1984, petitioner instituted in the court below an action
seeking "the enforcement of its just and valid claims against private respondent, who is a local resident, for a
sum of money based on a transaction which was perfected, executed and consummated abroad." 2
In his answer to the complaint, Chin San raised as affirmative defenses: lack of cause of action, incapacity to sue
and improper venue. 3
Pre-trial of the case was set for June 17, 1985 but it was postponed to July 12, 1985. However, a day before the
latter pre-trial date, Chin San filed a motion to dismiss the case and to set the same for hearing the next day. The
motion to dismiss was based on the grounds that petitioner had no legal capacity to sue and that venue was
improperly laid.
Acting on said motion to dismiss, on December 20, 1985, the lower court 4 issued the following order:
On defendant Chin San Cordova's motion to dismiss, dated July 10, 1985; plaintiff's opposition,
dated July 12, 1985; defendant's reply, dated July 22, 1985; plaintiff's supplemental opposition,
dated September 13, 1985, and defendant's rejoinder filed on September 23, 1985, said motion
to dismiss is granted.
Section 14, General Banking Act provides:
"No foreign bank or banking corporation formed, organized or existing under
any laws other than those of the Republic of the Philippines, shall be permitted
to transact business in the Philippines, or maintain by itself any suit for the
recovery of any debt, claims or demands whatsoever until after it shall have
obtained, upon order of the Monetary Board, a license for that purpose."
Plaintiff Hang Lung Bank, Ltd. with business and postal address at the 3rd Floor, United Centre,
95 Queensway, Hongkong, does not do business in the Philippines. The continuing guarantee,
Annexes "A" and "B" appeared to have been transacted in Hongkong. Plaintiff's Annex "C"
shows that it had already obtained judgment from the Supreme Court of Hongkong against
defendant involving the same claim on June 14, 1984.
The cases of Mentholatum Company, Inc. versus Mangaliman, 72 Phil. 524 and Eastern
Seaboard Navigation, Ltd. versus Juan Ysmael & Company, Inc., 102 Phil. 1-8, relied upon by
plaintiff, deal with isolated transaction in the Philippines of foreign corporation. Such
transaction though isolated is the one that conferred jurisdiction to Philippine courts, but in the
instant case, the transaction occurred in Hongkong.
Case dismissed. The instant complaint not the proper action.
SO ORDERED. 5
Petitioner filed a motion for the reconsideration of said order but it was denied for lack of merit. 6 Hence, the
instant petition for certiorari seeking the reversal of said orders "so as to allow petitioner to enforce through the
court below its claims against private respondent as recognized by the Supreme Court of Hongkong." 7
Petitioner asserts that the lower court gravely abused its discretion in: (a) holding that the complaint was not the
proper action for purposes of collecting the amount guaranteed by Chin San "as recognized and adjudged by the
Supreme Court of Hongkong;" (b) interpreting Section 14 of the General Banking Act as precluding petitioner
from maintaining a suit before Philippine courts because it is a foreign corporation not licensed to do business in
the Philippines despite the fact that it does not do business here; and (c) impliedly sustaining private respondent's
allegation of improper venue.
We need not detain ourselves on the issue of improper venue. Suffice it to state that private respondent waived
his right to invoke it when he forthwith filed his answer to the complaint thereby necessarily implying
submission to the jurisdiction of the court. 8
The resolution of this petition hinges on a determination of whether petitioner foreign banking corporation has
the capacity to file the action below.
Private respondent correctly contends that since petitioner is a bank, its capacity to file an action in this
jurisdiction is governed by the General Banking Act (Republic Act No. 337), particularly Section 14 thereof
which provides:
SEC. 14. No foreign bank or banking corporation formed, organized or existing under any laws
other than those of the Republic of the Philippines shall be permitted to transact business in the
Philippines, or maintain by itself or assignee any suit for the recovery of any debt, claims, or
demand whatsoever, until after it shall have obtained, upon order of the Monetary Board, a
license for that purpose from the Securities and Exchange Commissioner. Any officer, director
or agent of any such corporation who transacts business in the Philippines without the said
license shall be punished by imprisonment for not less than one year nor more than ten years and
by a fine of not less than one thousand pesos nor more than ten thousand pesos. (45 O.G. No. 4,
1647, 1649-1650)
In construing this provision, we adhere to the interpretation given by this Court to the almost identical Section 69
of the old Corporation Law (Act No. 1459) which reads:
SEC. 69. No foreign corporation or corporation formed, organized, or existing under any laws
other than those of the Philippines shall be permitted to transact business in the Philippines or
maintain by itself or 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 shall 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.
In a long line of cases, this Court has interpreted this last quoted provision as not altogether prohibiting a foreign
corporation not licensed to do business in the Philippines from suing or maintaining an action in Philippine
courts. 9 What it seeks to prevent is a foreign corporation doing business in the Philippines without a license
from gaining access to Philippine courts. As elucidated in Marshall-Wells Co. vs. Elser & Co., 46 Phil. 70:
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 it 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 from
Philippine courts, and thus, in effect, to permit persons to avoid their contract made with such
foreign corporation. 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.
The fairly recent case of Universal Shipping Lines vs. Intermediate Appellate Court, 10 although dealing with the
amended version of Section 69 of the old Corporation Law, Section 133 of the Corporation Code (Batas
Pambansa Blg. 68), but which is nonetheless apropos, states the rule succinctly: "it is not the lack of the
prescribed license (to do business in the Philippines) but doing business without license, which bars a foreign
corporation from access to our courts."
Thus, we have ruled that a foreign corporation not licensed to do business in the Philippines may file a suit in
this country due to the collision of two vessels at the harbor of Manila 11 and for the loss of goods bound for
Hongkong but erroneously discharged in Manila. 12
Indeed, the phraseologies of Section 14 of the General Banking Act and its almost identical counterpart Section
69 of the old Corporation Law are misleading in that they seem to require a foreign corporation, including a
foreign bank or banking corporation, not licensed to do business and not doing business in the Philippines to
secure a license from the Securities and Exchange Commission before it can bring or maintain an action in
Philippine courts. To avert such misimpression, Section 133 of the Corporation Code is now more plainly
worded thus:
No foreign corporation transacting business in the Philippines without a license, or its successors
or assigns, shall be permitted to maintain or intervene in any action, suit or proceeding in any
court or administrative agency of the Philippines.
Under this provision, we have ruled that a foreign corporation may sue in this jurisdiction for infringement of
trademark and unfair competition although it is not doing business in the Philippines 13 because the Philippines
was a party to the Convention of the Union of Paris for the Protection of IndustrialProperty. 14
We even went further to say that a foreign corporation not licensed to do business in the Philippines may not be
denied the right to file an action in our courts for an isolated transaction in this country. 15
Since petitioner foreign banking corporation was not doing business in the Philippines, it may not be denied the
privilege of pursuing its claims against private respondent for a contract which was entered into and
consummated outside the Philippines. Otherwise we will be hampering the growth and development of business
relations between Filipino citizens and foreign nationals. Worse, we will be allowing the law to serve as a
protective shield for unscrupulous Filipino citizens who have business relationships abroad.
In its pleadings before the court, petitioner appears to be in a quandary as to whether the suit below is one for
enforcement or recognition of the Hongkong judgment. Its complaint states:
COMES NOW Plaintiff, by undersigned counsel, and to this Honorable Court, most respectfully
alleges that:
1. Plaintiff is a corporation duly organized and existing under and by virtue of the laws of
Hongkong with business and postal address at the 3rd Floor, United Centre, 95 Queensway,
Hongkong, not doing business in the Philippines, but is suing for this isolated transaction, but
for purposes of this complaint may be served with summons and legal processes of this
Honorable Court, at the 6th Floor, Cibeles Building, 6780 Ayala Avenue, Makati, Metro Manila,
while defendant Cordova Chin San, may be served with summons and other legal processes of
this Honorable Court at the Municipality of Moncada, Province of Tarlac, Philippines;
2. On July 18, 1979 and July 25, 1980, the defendant executed Continuing Guarantees, in
consideration of plaintiff's from time to time making advances, or coming to liability or
discounting bills or otherwise giving credit or granting banking facilities from time to time to, or
on account of the Wolder Enterprises (sic), photocopies of the Contract of Continuing
Guarantees are hereto attached as Annexes "A" and "B", respectively, and made parts hereof;
3. In June 1984, a complaint was filed by plaintiff against the Wolder Enterprises (sic) and
defendant Cordova Chin San, in The Supreme Court of Hongkong, under Case No. 3176, and
pursuant to which complaint, a judgment dated 14th day of July, 1984 was rendered by The
Supreme Court of Hongkong ordering to (sic) defendant Cordova Chin San to pay the plaintiff
the sum of HK$279,325.00 together with interest on the principal sum of HK$250,000.00 at the
rate of HK$1.7% per month or (HK$141.67) per day from 4th May, 1984 up to the date the said
amount is paid in full, and to pay the sum of HK$970.00 as fixed cost, a photocopy of the
Judgment rendered by The Supreme Court of Hongkong is hereto attached as Annex "C" and
made an integral part hereof.
4. Plaintiff has made demands upon the defendant in this case to pay the aforesaid amount the
last of which is by letter dated July 16, 1984 sent by undersigned counsel, a photocopy of the
letter of demand is hereto attached as Annex "D" and the Registry Return Card hereto attached
as Annex "E", respectively, and made parts hereof. However, this notwithstanding, defendant
failed and refused and still continue to fail and refuse to make any payment to plaintiff on the
aforesaid amount of HK$279,325.00 plus interest on the principal sum of HK$250,000.00 at the
rate of (HK$141.67) per day from May 4, 1984 up to the date of payment;
5. In order to protect and safeguard the rights and interests of herein plaintiff, it has engaged the
services of undersigned counsel, to file the suit at bar, and for whose services it has agreed to
pay an amount equivalent to 25% of the total amount due and owing, as of and by way of
attorney's fees plus costs of suit.
WHEREFORE, premises considered, it is most respectfully prayed of this Honorable Court that
judgment be rendered ordering the defendant:
a) To pay plaintiff the sum of HK$279,325.00 together with interest on the principal sum of
HK$260,000.00 at the rate of HK$1.7% (sic) per month (or HK$141.67 per day) from May 4,
1984 until the aforesaid amount is paid in full;
b) To pay an amount equivalent to 25% of the total amount due and demandable as of and by
way of attorney's fees; and
c) To pay costs of suit, and
Plaintiff prays for such other and further reliefs, to which it may by law and equity, be entitled. 16
The complaint therefore appears to be one of the enforcement of the Hongkong judgment because it prays for the
grant of the affirmative relief given by said foreign judgment. 17 Although petitioner asserts that it is merely
seeking the recognition of its claims based on the contract sued upon and not the enforcement of the Hongkong
judgment 18 it should be noted that in the prayer of the complaint, petitioner simply copied the Hongkong
judgment with respect to private respondent's liability.
However, a foreign judgment may not be enforced if it is not recognized in the jurisdiction where affirmative
relief is being sought. Hence, in the interest of justice, the complaint should be considered as a petition for the
recognition of the Hongkong judgment under Section 50 (b), Rule 39 of the Rules of Court in order that the
defendant, private respondent herein, may present evidence of lack of jurisdiction, notice, collusion, fraud or
clear mistake of fact and law, if applicable.
WHEREFORE, the questioned orders of the lower court are hereby set aside. Civil Case No. 8762 is reinstated
and the lower court is directed to proceed with dispatch in the disposition of said case. This decision is
immediately executory. No costs.
SO ORDERED.
Gutierrez, Jr., Bidin and Davide, Jr., JJ., concur.
Feliciano, J., is on leave.
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RESOLUTION
VITUG, J.:
The crucial issue in this petition for review on certiorari is whether or not the lower court, given the factual
allegations in the complaint, had correctly assumed jurisdiction over the petitioner, a foreign corporation, on its
claim in a motion to dismiss, that it had since ceased to do business in the Philippines.
The petitioner, Signetics Corporation (Signetics), was organized under the laws of the United States of America.
Through Signetics Filipinas Corporation (SigFil), a wholly-owned subsidiary, Signetics entered into lease
contract over a piece of land with Fruehauf Electronics Phils., Inc. (Freuhauf).
In a complaint initiated on 15 March 1990, Freuhauf sued Signetics for damages, accounting or return of certain
machinery, equipment and accessories, as well as the transfer of title and surrender of possession of the
buildings, installations and improvements on the leased land, before the Regional Trial Court of Pasig, Metro
Manila (Civil Case No. 59264). Claiming that Signetics caused SigFil to insert in the lease contract the words
"machineries, equipment and accessories," the defendants were able to withdraw these assets from the cost-free
transfer provision of the contract.
On the basis of the allegation that Signetics is a "subsidiary of US PHILIPS CORPORATION, and may be
served summons at Philips Electrical Lamps, Inc., Las Pias, Metro Manila and/or c/o Technology Electronics
Assembly & Management (TEAM) Pacific Corporation, Electronics Avenue, FTI Complex, Taguig, Metro
Manila," service of summons was made on Signetics through TEAM Pacific Corporation.
By special appearance, Signetics filed on 14 May 1990 a motion to dismiss the complaint on the ground of lack
of jurisdiction over its person. Invoking Section 14, Rule 14, of the Rules of Court and the rule laid down in
Pacific Micronisian Line, Inc., v. Del Rosario and Pelington 1 to the effect that the fact of doing business in the
Philippines should first be established in order that summons could be validly made and jurisdiction acquired by
the court over a foreign corporation, Signetics moved to dismiss the complaint.
The trial court 2 denied the motion to dismiss in an Order, which reads:
In the case of Wang Laboratories, Inc. v. Mendoza, 156 SCRA 44, the High Court explained
what constitutes "doing business" as follows:
Indeed it has been held that "where a single act or transaction of a foreign
corporation is not merely incidental or causal but is of such character as
distinctly to indicate a purpose to do other business in the State, such constitutes
doing business within the meaning of statutes prescribing the conditions under
which a foreign corporation may be served with summons (Far East Int'l. Import
and Export Corp. v. Nankai Kogyo Co. Ltd., 6 SCRA 725 [1962]).
Assuming, arguendo, that defendant is a foreign corporation not doing business in the
Philippines, it has been categorically stated in the aforecited case that although a foreign
corporation is not doing business in the Philippines, it may be used for acts done against persons
in the Philippines.
For lack of sufficient merits therefore, defendant's Motion to Dismiss is hereby DENIED. 3
Signetics filed a motion for reconsideration but this, too, was denied by the court in its Order of 11 March 1991,
reiterating that the rule expressed in Wang Laboratories, Inc. v. Mendoza 4 was the applicable and prevailing
"jurisprudence on the matter."
Signetics elevated the issue to the Court of Appeals, via a petition for certiorari and prohibition, with application
for preliminary injunction (CA-G.R. SP No. 24758). On 20 February 1992, the Court of Appeals rendered its
decision, 5 dismissing the petition and affirming the orders of the lower court. A motion for the reconsideration
of the appellate court's decision, having been denied, the instant petition for review on certiorari was filed with
this Court, still on the "basic question" of whether or not "a foreign corporation can be sued in the Philippines
and validly summoned by a Philippine court without prior 'proof' that it was doing business here at the time of
the suit." 6
Critically dissecting the complaint, the petitioner stress that the averments in the complaint "are at best mere
allegations and do not constitute "proof of 'doing business';" 7 that the allegations, in any case, do not
demonstrate "doing business"; and that the phrase "becoming interested in doing business" is "not actual doing
of business here." The petitioner argues that what was effectively only alleged in the complaint as an activity of
doing business was "the mere equity investment" of petitioner in SigFil, which the petitioner insists, had
theretofore been transferred to TEAM holdings, Ltd.
The petitioner relies, in good part, on the Pacific Micronisian rule. The pronouncements in Wang Laboratories
and in Facilities Management Corporation, 8 the petitioner adds, are mere obiter dicta since the foreign
corporations involved in both cases were found to have, in fact, been doing business in the Philippines and were
thus unquestionably amenable to local court processes.
We rule for the affirmance of the appealed decision.
Petitioner's contention that there should be "proof" of the foreign corporation's doing business in this country
before it may be summoned is based on the following portions of the decision in Pacific Micronisian:
The pertinent rule to be considered is section 14, Rule 7 of the Rules of Court, which refers to
service upon private foreign corporations. This section provides:
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.
The above section provides for three modes of effecting services upon a private corporation,
namely: (1) by serving upon the agent designated in accordance with law to accept service by
summons; (2) if there be no special agent, by serving on the government official designated by
law to that effect; and (3) by serving on any officer or agent within the Philippines. But, it
should be noted, in order that services may be effected in the manner above stated, said section
also requires that the foreign corporation be one which is doing business in the Philippines. This
is a sine qua non requirement. This fact must first be established in order that summons can be
made and jurisdiction acquired. This is not only clear in the rule but is reflected in a recent
decision of this Court. We there said that "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." (General Corporation of the Philippines, et al. vs. Union
Insurance Society of Canton, Ltd., et al. 49 Off. Gaz., 73, September 14, 1950). 9
The petitioner opines that the phrase, "(the) fact (of doing business in the Philippines) must first be established in
order that summons be made and jurisdiction acquired," used in the above pronouncement, would indicate that a
mere allegation to that effect in the complaint is not enough there must instead be proof of doing business. 10
In any case, the petitioner, points out, the allegations themselves did not sufficiently show the fact of its doing
business in the Philippines.
It should be recalled that jurisdiction and venue of actions are, as they should be, initially determined by the
allegations of the complaint. 11 Jurisdiction cannot be made to depend on independent pleas set up in a mere
motion to dismiss, otherwise jurisdiction would become dependent almost entirely upon the defendant. 12 The
fact of doing business must then, in the first place, be established by appropriate allegations in the complaint.
This is what the Court should be seen to have meant in the Pacific Micronisian case. The complaint, it is true,
may have been vaguely structured but, taken correlatively, not disjunctively as the petitioner would rather
suggest, it is not really so weak as to be fatally deficient in the above requirement. Witness the following
allegations of the complaint:
3. In the year 1978, the defendant became interested in engaging in business in the Philippines . .
.;
4. To serve as its local business conduit, the defendant organized a wholly owned domestic
subsidiary corporation known as SIGNETICS FILIPINAS CORPORATION (SIGFIL, for
brevity), which was supposed to be its actual operating entity in the Philippines;
xxx xxx xxx
18. In February 1983, the defendant ceased all its business operations in the leased premise. . . .;
xxx xxx xxx
23. (a) In November 21, 1986, the defendant transferred all shares of stock of SIGFIL in favor of
TEAM HOLDING LIMITED, a foreign corporation organized under the laws of British Virgin
Islands;
xxx xxx xxx;
23. (d) Subsequently, on January 12, 1987, the new owners unmasked itself when it dropped
SIGFIL's name, and changed its corporate name to TECHNOLOGY ELECTRONICS
ASSEMBLY AND MANAGEMENT (T.E.A.M.) PACIFIC CORPORATION, otherwise known
as TEAM PACIFIC CORPORATION. The similarity between "TEAM HOLDINGS LIMITED"
and "TEAM PACIFIC CORPORATION" is all too apparent; and
24. As seen in the next-preceding paragraph, the defendant made a devious use of the fiction of
separate corporate identity to shield chicanery and to perpetuate fraud. 13
The petitioner's reliance on Hyopsung Maritime Co., Ltd., v. Court. of Appeals 14 is misplaced. While the Court
therein cited the Pacific Micronisian ruling and dismissed the complaint against the petitioner for lack of
jurisdiction, the Hyopsung case is under a completely different factual milieu. As summarized by the Court, the
complaint therein was
. . . for the recovery of damages based on a breach of contract which appears to have been
entirely entered into, executed, and consummated in Korea. Indisputably, the shipment was
loaded on board the foreign vessel MV "Don Aurelio" at Pohang, Korea, by a Korean firm with
offices at Seoul, Korea; the corresponding bill of lading was issued in Seoul, Korea and the
freight was prepaid also at Seoul; the above vessel with its cargo never ever docked at Manila or
at any other port of entry in the Philippines; lastly, the petitioner did not appoint any ship agent
in the Philippines. Simply put, the petitioner is beyond the reach of our courts. 15
On the other hand, the complaint, in this instance, has alleged, among other things, that Signetics had become
interested in engaging in business in the Philippines; that it had actually organized SigFil, as its local business
conduit or actual operating entity in the Philippines; that, through Sigfil, it had entered into the lease contract
involving properties in the Philippines a situation that could have allowed Frehauf to avail itself of the provisions
of Section 17, Rule 14, on extraterritorial service of summons since the relief sought consists in excluding the
defendant from any interest in property within the Philippines); and that while Signetics may have had
transferred all its shareholdings (before the complaint was filed) in favor of TEAM Holdings, Ltd., another
foreign corporation, SIGFIL's corporate name, however, was forthwith changed to TEAM Pacific corporation,
which Freuhauf claims is a "devious" attempt to "shield chicanery and to perpetuate fraud" (see paragraphs 23
and 24, Complaint). On this score, what might in a way also be revealing is that after Freuhauf had moved to sell
the attached property subject matter of the litigation, the petitioner filed the following pleading, intriguingly
captioned, "Manifestation"; viz:
Defendant, by counsel, respectfully states:
1. Plaintiff filed a Motion to Sell Attached Properties and scheduled it for hearing on August 24,
1990, justifying the sale on the allegations that certain properties belonging to the defendant are
perishable in nature and liable to material depreciation in value.
2. In pleadings filed by the defendant, the Court was requested to determine whether there is a
valid attachment on this alleged properties. This determination is necessary because defendant
has pointed out that personal jurisdiction could not be justified on the basis of the so-called
attachment because it was legally ineffective. Two reasons were given to the Court. First, the
property has not been taken into actual custody of the sheriff as required by Rule 57, Section 7
(c). Second, the property has not been shown to be owned by the defendant.
3. Since jurisdiction over the defendant is premised on the attachment, the Honorable Court
should therefore act on the motion to sell by determining (i) whether plaintiff has shown that the
property proposed to be sold belongs to the defendant (ii) whether it was effectively attached
and (iii) whether its sale is justified (because it is perishable or deteriorating in value).
Respectfully submitted. 16
The petitioner contends that the motion to sell was filed by Freuhauf "ostensibly to ask permission to sell
properties (sic.), but really to hurt petitioner in the first fight" (meaning the dismissal incident) because Freuhauf
used the motion to sell "incident" as forum to prove ex-parte its argument on jurisdiction." 17 Far from continuing
the "fight" on the issue of jurisdiction, the aforequoted manifestation reflects nothing less than a surprising
interest in the property which petitioner claims are not its own.
Having said that, Freuhauf, in effect, has invoked the doctrine of piercing the veil of corporate fiction, and it
cannot thus be held to have improperly caused the service of summons on TEAM Pacific pursuant to Section 14,
of Rule 14. As explained by the Court in Pacific Micronisian, summons may be served upon an agent of the
defendant who may not necessarily be its "resident agent designated in accordance with law." The term "agent",
in the context it is used in Section 14, refers to its general meaning, i.e., one who acts on behalf of a principal. 18
The allegations in the complaint, taken together, have thus been able to amply convey that not only is TEAM
Pacific the business conduit of the petitioner in the Philippines but that, also, by the charge of fraud, is none
BIDIN, J.:
This is a petition for certiorari with preliminary injunction seeking to annul and set aside the: (a) order of the
respondent judge dated May 21, 1982 admitting private respondents' "First Amended Complaint" in CAR Case
No. 532 entitled "Vivienne B. Viloria, et al. vs. Philippine National Bank, et al." for declaration of nullity of the
foreclosure proceedings in violation of P.D. Nos. 27 and 946; (b) order dated June 3, 1982 denying PNB's
opposition to the first amended complaint; and (c) order dated June 28, 1982 denying PNB's motion for
reconsideration.
The undisputed facts are as follows:
Plaintiffs are tenants of four (4) parcels of land located in the municipality of Mabinay, Negros Oriental, whose
previous owner Ricardo Valeroso, mortgaged the same to the Philippine National Bank (PNB, for short). In
1971, said parcels of land were bought by spouses Agripino and Soledad Viloria who assumed the mortgage with
PNB (Rollo, Comment, p. 90).
In 1974, defendant PNB requested defendant Provincial Sheriff of Negros Oriental to foreclose the mortgage on
the aforesaid parcels of land after the failure of the owners thereof to pay certain amortization and the same was
sold at public auction to the defendant bank as the highest bidder (Rollo, Brief for Private Respondents, p. 147;
Annex "2", p. 3). Notwithstanding the fact that said lands were already brought under the Land Reform Program
of the government, the PNB caused the titles to said parcels of land transferred in its name to the prejudice of
plaintiffs (Rollo, Ibid.).
On September 8, 1981, plaintiffs Vivienne B. Viloria, et al. filed a complaint for "Declaration of Nullity of the
Foreclosure Proceedings in Violation of P.D. Nos. 27 and 946" against the defendants PNB, et al. in the Court of
Agrarian Relations, 12th Judicial District, Branch IV, Dumaguete City.
On October 7, 1981, defendant PNB answered the complaint with counterclaim for damages. Plaintiffs, in turn,
filed their reply to the counterclaim dated October 10, 1981. Defendant PNB then moved for leave of court to
file third party complaint dated October 20, 1981 against the registered owners-mortgagors of the subject parcels
of land.
Plaintiffs Vivienne Viloria, et al. moved for the amendment of their complaint to implead the heirs of the
deceased plaintiff-Agripino Viloria which respondent Judge admitted in an order dated February 26, 1982.
On May 28, 1982, private respondents Vivienne Viloria, et al. moved to further amend their amended complaint.
Notable amendment introduced in the First Amended Complaint is the inclusion of another parcel of land as
subject matter thereof, described as follows:
E Transfer Certificate of Title No. 42836, a parcel of land (Lot 787-B-2-A of the subdivision
plan, Psd-54375, being a portion of Lot 7887-B-2 described on plan Psd-956, L.R.C. Record No.
9465), with all improvements thereon situated at Cebu City. Bounded on NE., along line 1-2 by
lot 785, Cebu Cadastre; on the SE., along line 2-3, by lot 787-A, Cebu Cadastre; on the SW.,
along line 3-4, by Lot 787-B-2-B of the subdivision plan; and on the NW., along line 4-1 by lots
788-A-1 and 788-A-2 of plan Psd-17436. Containing an area of TWO HUNDRED NINETYFOUR square meters (294) more or less.
Said property belongs to the spouses Agripino and Soledad Viloria and mortgaged also with PNB. It is further
alleged that:
While letter "E" is the property located in Cebu City and mortgaged with defendant Bank should
be considered as one and indivisible with the mortgage executed upon the four (4) parcels of
land situated at Mabinay (Negros Oriental) and were put under Land Reform by virtue of the
real estate mortgage executed and signed by the spouses land owner Agripino and Soledad
Viloria which portion of the Real Estate Mortgage document specifically paragraph No. 2 which
states "That for and in consideration of certain loans, overdrafts and other credit
accommodations obtained from the mortgage, which is hereby fixed at P115,449.61 Philippine
Currency, and to secure the payment of the same and those others that the mortgage may extend
to the mortgagor including interest and expenses and other obligations owing by the mortgagor
to the mortgagee whether direct or indirect or secondary. . . (Rollo, Petition, p. 5).
PNB opposed the admission of the aforesaid private respondent's First Amended Complaint on the grounds that
there was no proper notice of hearing as required by the Uniform CAR Rules of procedure, the impropriety of
including TCT No. 42836 a residential land situated in Cebu City as subject matter of the complaint, and the
failure of private respondents to attach a copy of the real estate mortgage contract upon which the action was
based (Rollo, Annex "I", pp. 37-38).
In an order dated May 31, 1982, respondent Judge Florendo granted private respondents' Viloria, et al. motion
and thus, admitted the First Amended Complaint. Said order states among others:
Acting on the "Motion to Amend Amended Complaint" dated May 28, 1982, filed by Ma.
Corazon C. Locsin, counsel for plaintiffs, wherein the First Amended Complaint (pp. 285 to 290
inclusive) of the records, was attached thereto, and it appearing that Atty. Norberto Denura,
counsel for the defendant PNB, has received a copy of aforestated motion and also a copy of the
First Amended Complaint thereto attached, the "Motion To Amend Amended Complaint" is
hereby GRANTED and the First Amended Complaint is likewise hereby ADMITTED.
Petitioner PNB's motion for reconsideration of the above order was denied by respondent Judge Florendo in an
order dated June 28, 1981.
Hence, the petition.
As prayed for in the petition, a temporary restraining order was issued by this Court pursuant to its resolution
dated October 25, 1982 enjoining the respondent Judge from proceeding with the hearing of the case.
The First Division of this Court resolved to give due course to the petition in the resolution of March 16, 1983.
The principal issue in the instant case is whether or not the respondent Judge exceeded his jurisdiction in
admitting the First Amended Complaint which adds another parcel of land not within the coverage of Operation
Land Transfer pursuant to P.D. 27.
The petition is impressed with merit.
Upon the abolition of the Court of Agrarian Relations by BP 129 enacted on August 10, 1981 and fully
implemented on February 14, 1983, jurisdiction over agrarian disputes is now vested in the appropriate Regional
Trial Court pursuant to the provisions of Sec. 19(7) of the said law (Locsin v. Valenzuela, 173 SCRA 454 [1989];
Enrique v. Fortuna Mariculture Corporation, 158 SCRA 651 [1988]);
In view of such supervening event, it is now the appropriate Branch of the Regional Trial Court of Negros
Oriental that has jurisdiction over the case. Be that as it may, the same law provides that whenever a Regional
Trial Court takes cognizance of agrarian cases, the special rules of procedures applicable under the present laws
to such cases shall continue to be applied, unless amended by law or by rules of court promulgated by the
Supreme Court (Sec. 24, BP 129).
Coming back to the case at bar, petitioner contends that Lot No. 787-B-2-A (formerly covered by TCT No.
42836, now TCT No. 75805-PNB) being a residential/commercial and non-agricultural land situated at Cebu
City is not within the coverage of the Operation Land Transfer, thus not within the jurisdiction of the Court of
Agrarian Relations.
Jurisdiction, in general, is either one over the nature of the action, over the subject matter, over the person of the
defendants or over the issue framed in the pleadings (Balais v. Balais, 159 SCRA 37 [1988]). Jurisdiction over
the subject matter, on the other hand, is conferred by law and does not depend on the consent or objection or the
acts or omissions of the parties or any one of them (Republic v. Sangalang, 159 SCRA 515 [1988]). The law
which conferred jurisdiction on the Court of Agrarian Relations, now transferred to the appropriate Branch of the
Regional Trial Court, concerning agricultural lands, is P.D. 946 which provides, among others:
Sec. 12. Jurisdiction Over Subject Matter The Court of Agrarian Relations shall have original
and exclusive jurisdiction over:
a) Cases involving the rights and obligations of persons in the cultivation and
use of agricultural land . . .;
The private respondents Viloria, et al.'s contention that the petition for certiorari is premature since the order of
the respondent judge could have simply been assigned as an error in the appeal by the petitioner in case of
adverse judgment is not persuasive. Even when appeal is available and is the proper remedy, this court has
allowed a writ of certiorari when the orders of the lower court were issued either in excess of or without
jurisdiction (Aguilar v. Tan, supra).
WHEREFORE, the petition for certiorari is GRANTED and the orders dated May 31, June 3, and June 28, 1982
are hereby ANNULLED and SET ASIDE. The trial of CAR Case No. 532 on the merits is hereby ordered to be
conducted in the appropriate Branch of the Regional Trial Court of Negros Oriental in view of the abolition of
the Court of Agrarian Relations by BP 129 and the temporary restraining order issued by this Court dated
October 25, 1982 enjoining the hearing of CAR Case No. 532 with respect to Lot No. 787-B-2-A (formerly
covered by T.C.T. No. 43836 covering a parcel of land situated in Cebu City ) is made PERMANENT.
SO ORDERED.
Gutierrez, Jr., Feliciano, Davide, Jr. and Romero, JJ., concur.