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WEEK 13 – DAVID – CORPORATION LAW - 2015400027

FOREIGN CORPORATION

FACILITIES MANAGEMENT CORPORATION, J. S. DREYER, and J. V. CATUIRA, petitioners,


vs.
LEONARDO DE LA ROSA AND THE HONORABLE COURT OF INDUSTRIAL RELATIONS, respondents.

FACTS: In a petition filed on July 1, 1967, Leonardo dela Osa sought his reinstatement. with full backwages, as well as the recovery
of his overtime compensation, swing shift and graveyard shift differentials. Petitioner alleged that he was employed by respondents as
follows: (1) painter with an hourly rate of $1.25 from March, 1964 to November, 1964, inclusive; (2) houseboy with an hourly rate of
$1.26 from December, 1964 to November, 1965, inclusive; (3) houseboy with an hourly rate of $1.33 from December, 1965 to
August, 1966, inclusive; and (4) cashier with an hourly rate of $1.40 from August, 1966 to March 27, 1967, inclusive. He further
averred that from December, 1965 to August, 1966, inclusive, he rendered overtime services daily and that this entire period was
divided into swing and graveyard shifts to which he was assigned, but he was not paid both overtime and night shift premiums despite
his repeated demands from respondents.

Respondents filed on August 7, 1967 their letter- answer without substantially denying the material allegations of the basic petition
but interposed the following special defenses, namely: That respondents Facilities Management Corporation and J. S. Dreyer are
domiciled in Wake Island which is beyond the territorial jurisdiction of the Philippine Government; that respondent J. V. Catuira,
though an employee of respondent corporation presently stationed in Manila, is without power and authority of legal representation;
and that the employment contract between petitioner and respondent corporation carries -the approval of the Department of Labor of
the Philippines.

Subsequently on May 3, 1968. respondents filed a motion to dismiss the subject petition on the ground that this Court has no
Jurisdiction over the instant case, and on May 24, 1968, petitioner interposed an opposition thereto. Said motion was denied by this
Court in its Order issued on July 12, 1968 sustaining jurisdiction in accordance with the prevailing doctrine of the Supreme Court in
similar cases.

ISSUE: WON THE COURT MAY ACQUIRE JURISDICTION OVER THE CASE? WON the plaintiff appellant has been
doing business in the Philippines, considering the fact that it has no license to transact business in the Philippines as a foreign
corporation?

RULING: YES. it may be stated that while it is true the site of work is Identified as Wake Island, it is equally true the place of hire is
established in Manila (See Section B, Filipino Employment Contract, Exhibit '1'). Moreover, what is important is the fact that the
contract of employment between the parties litigant was shown to have been originally executed and subsequently renewed in Manila,
as asserted by petitioner and not denied by respondents. Hence, any dispute arising therefrom should necessarily be determined in the
place or venue where it was contracted.

YES. From the facts of record, the petitioner may be considered as doing business un the Philippines within the the scope of Section
14, Rule 14 of the Rules of the Court which provide: SEC 14. Service upon private foreign corporations. If the defendant is a foreign
corporation or a non-resident joint stock company or association: doing business in the Philippines, service may be made on its
resident agent designated in accordance with law for that purpose or, if there be no such agent, on the government official designated
by law to that effect, or on any of its officers or agents within the Philippines.

Indeed, the petitioner, in compliance with Act 2486 as implemented by Department of Labor Order No. IV dated May 20, 1968 had to
appoint Jaime V. Catuira, 1322 A. Mabini, Ermita, Manila as agent for FMC with authority to execute Employment Contracts and
receive, in behalf of that corporation, legal services from and be bound by processes of the Philippine Courts of Justice, for as long as
he remains an employee of FMC (Annex 'I', rollo, p. 56). It is a fact that when the summons for the petitioner was served on Jaime V.
Catuira he was still in the employ of the FMC.

The object of Sections 68 and 69 of the Corporation Law was not to prevent the foreign corporation from performing single acts, but
to prevent it from acquiring a domicile for the purpose of business without taking the steps necessary to render it amenable to suit in
the local courts. It was never the purpose of the Legislature to exclude a foreign corporation which happens to obtain an isolated order
for business from the Philippines, from securing redress in the Philippine courts. Indeed, if a foreign corporation, not engaged in
business in the Philippines, is not banned from seeking redress from courts in the Philippines, a fortiori, that same corporation cannot
claim exemption from being sued in Philippine courts for acts done against a person or persons in the Philippines.

WHEREFORE, THE PETITION IS HEREBY DENIED WITH COSTS AGAINST THE PETITIONERS. SO ORDERED.
WEEK 13 – DAVID – CORPORATION LAW - 2015400027

HOME INSURANCE vs. EASTERN SHIPPING

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

The coils discharged from the VESSEL numbered 2,361, of which 53 were in bad order. What the CONSIGNEE ultimately received
at its warehouse was the same number of 2,361 coils with 73 coils loose and partly cut, and 28 coils entangled, partly cut, and which
had to be considered as scrap. Upon weighing at CONSIGNEE's warehouse, the 2,361 coils were found to weight 263,940.85 kilos as
against its invoiced weight of 264,534.00 kilos or a net loss/shortage of 593.15 kilos, according to Exhibit "A", or 1,209,56 lbs.,
according to the claims presented by the consignee against the plaintiff (Exhibit "D-1"), the CARRIER (Exhibit "J-1"), and the
TRANSPORTATION COMPANY (Exhibit "K- l"). For the loss/damage suffered by the cargo, plaintiff paid the consignee under its
insurance policy the amount of P3,260.44, by virtue of which plaintiff became subrogated to the rights and actions of the
CONSIGNEE. Plaintiff made demands for payment against the CARRIER and the TRANSPORTATION COMPANY for
reimbursement of the aforesaid amount but each refused to pay the same. The plaintiff is a foreign insurance company duly authorized
to do business in the Philippines through its agent, Mr. VICTOR H. BELLO, of legal age and with office address at Oledan Building,
Ayala Avenue, Makati, Rizal. The respondent court dismissed the complaints in the two cases on the same ground, that the plaintiff
failed to prove its capacity to sue.

A suing foreign corporation, like plaintiff, has to plead affirmatively and prove either that the transaction upon which it bases its
complaint is an isolated one, or that it is licensed to transact business in this country, failing which, it will be deemed that it has no
valid cause of action (Atlantic Mutual Ins. Co. vs. Cebu Stevedoring Co., Inc., 17 SCRA 1037). In view of the number of cases filed
by plaintiff before this Court, of which judicial cognizance can be taken, and under the ruling in Far East International Import and
Export Corporation vs. Hankai Koayo Co., 6 SCRA 725, it has to be held that plaintiff is doing business in the Philippines.
Consequently, it must have a license under Section 68 of the Corporation Law before it can be allowed to sue.

ISSUE: WON THE TRIAL COURT ERRED IN DISMISSING THE COMPLAINT ON THE FINDING THAT PLAINTIFF-
APPELLANT HAS NO CAPACITY TO SUE.

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

When the complaints in these two cases were filed, the petitioner had already secured the necessary license to conduct its insurance
business in the Philippines. It could already filed suits. Petitioner was, therefore, telling the truth when it averred in its complaints that
it was a foreign insurance company duly authorized to do business in the Philippines through its agent Mr. Victor H. Bello. However,
when the insurance contracts which formed the basis of these cases were executed, the petitioner had not yet secured the necessary
licenses and authority. The lower court, therefore, declared that pursuant to the basic public policy reflected in the Corporation Law,
the insurance contracts executed before a license was secured must be held null and void. The court ruled that the contracts could not
be validated by the subsequent procurement of the license.To repeat, the objective of the law was to subject the foreign corporation to
the jurisdiction of our courts. The Corporation Law must be given a reasonable, not an unduly harsh, interpretation which does not
hamper the development of trade relations and which fosters friendly commercial intercourse among countries.

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

Insofar as transacting business without a license is concerned, Section 69 of the Corporation Law imposed a penal sanction-
imprisonment for not less than six months nor more than two years or payment of a fine not less than P200.00 nor more than
P1,000.00 or both in the discretion of the court. There is a penalty for transacting business without registration.

And insofar as litigation is concerned, the foreign corporation or its assignee may not maintain any suit for the recovery of any debt,
claim, or demand whatever. The Corporation Law is silent on whether or not the contract executed by a foreign corporation with no
capacity to sue is null and void ab initio.
WEEK 13 – DAVID – CORPORATION LAW - 2015400027

The prohibition against doing business without first securing a license is now given penal sanction which is also applicable to other
violations of the Corporation Code under the general provisions of Section 144 of the Code.It is, therefore, not necessary to declare
the contract nun and void even as against the erring foreign corporation. The penal sanction for the violation and the denial of access
to our courts and administrative bodies are sufficient from the viewpoint of legislative policy. Our ruling that the lack of capacity at
the time of the execution of the contracts was cured by the subsequent registration is also strengthened by the procedural aspects of
these cases.

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

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

ERIKS PTE. LTD., Petitioner, v. COURT OF APPEALS and DELFIN F. ENRIQUEZ, JR., Respondents.

FACTS: Petitioner Eriks Pte. Ltd. is a non-resident foreign corporation engaged in the manufacture and sale of elements used in
sealing pumps, valves and pipes for industrial purposes, valves and control equipment used for industrial fluid control and PVC pipes
and fittings for industrial uses. In its complaint, it alleged that:

(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. 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 transfers of goods were perfected in Singapore, for private respondents account, F.O.B. Singapore, with a 90-
day credit term. Subsequently, demands were made by petitioner upon private respondent to settle his account, but the latter
failed/refused to do so. On August 28, 1991, petitioner corporation filed with the RTC MAKATI for the recovery of S$41,939.63 or
its equivalent in Philippine currency, plus interest thereon and damages. Private respondent responded with a Motion to Dismiss,
contending that petitioner corporation had no legal capacity to sue. In an Order dated March 8, 1993, 5 the trial court dismissed the
action on the ground that petitioner is a foreign corporation doing business in the Philippines without a license. The dispositive
portion of said order reads:6WHEREFORE, in view of the foregoing, the motion to dismiss is hereby GRANTED and accordingly, the
above-entitled case is hereby DISMISSED.

Petitioner insists that the series of sales made to private respondent would still constitute isolated transactions despite the number of
invoices covering several separate and distinct items sold and shipped over a span of four to five months, and that an affirmation of
respondent Courts ruling would result in injustice and unjust enrichment.

Private respondent counters that to declare petitioner as possessing capacity to sue will render nugatory the provisions of the
Corporation Code and constitute a gross violation of our laws. Thus, he argues, petitioner is underserving of legal protection.

ISSUE: Whether petitioner-corporation may maintain an action in Philippine courts considering that it has no license to do
business in the country. The resolution of this issue depends on whether petitioners business with private respondent may be
treated as isolated transactions.

RULING: The petition has no merit. The Concept of Doing Business

The Corporation Code provides: Sec. 133. Doing business without a license. - No foreign corporation transacting business in the
Philippines without a license, or its successors or assigns, shall be permitted to maintain or intervene in any action, suit or proceeding
in any court or administrative agency of the Philippines; but such corporation may be sued or proceeded against before Philippine
courts or administrative tribunals on any valid cause of action recognized under Philippine laws.

The aforementioned provision prohibits, not merely absence of the prescribed license, but it also bars a foreign corporation doing
business in the Philippines without such license access to our courts.8 A foreign corporation without such license is not ipso
WEEK 13 – DAVID – CORPORATION LAW - 2015400027

facto incapacitated from bringing an action. A license is necessary only if it is transacting or doing business in the country. The trial
court held that petitioner-corporation was doing business without a license, finding that:

The invoices and delivery receipts covering the period of (sic) from January 17, 1989 to August 16, 1989 cannot be treated to mean a
singular and isolated business transaction that is temporary in character. Granting that there is no distributorship agreement between
herein parties, yet by the mere fact that plaintiff, each time that the defendant posts an order delivers the items as evidenced by the
several invoices and receipts of various dates only indicates that plaintiff has the intention and desire to repeat the (sic) said
transaction in the future in pursuit of its ordinary business. Furthermore, and if the corporation is doing that for which it was created,
the amount or volume of the business done is immaterial and a single act of that character may constitute doing business. (See p. 603,
Corp. Code, De Leon - 1986 Ed.).

Respondent Court affirmed this finding in its assailed Decision with this explanation: 13

x x x Considering the factual background as laid out above, the transaction cannot be considered as an isolated one. Note that there
were 17 orders and deliveries (only sixteen per our count) over a four-month period. The appellee (private respondent) made separate
orders at various dates. The transactions did not consist of separate deliveries for one single order. In the case at bar, the transactions
entered into by the appellant with the appellee are a series of commercial dealings which would signify an intent on the part of the
appellant (petitioner) to do business in the Philippines and could not by any stretch of the imagination be considered an isolated one,
thus would fall under the category of doing business.

We find no reason to disagree with both lower courts. More than the sheer number of transactions entered into, a clear and
unmistakable intention on the part of petitioner to continue the body of its business in the Philippines is more than apparent.

Given the facts of this case, we cannot see how petitioners business dealings will fit the category of isolated transactions considering
that its intention to continue and pursue the corpus of its business in the country had been clearly established. It has not presented any
convincing argument with equally convincing evidence for us to rule otherwise. WHEREFORE, premises considered, the instant
petition is hereby DENIEDand the assailed Decision is AFFIRMED.

SO ORDERED.

HUTCHISON PORTS PHILIPPINES LIMITED, petitioner,


vs.
SUBIC BAY METROPOLITAN AUTHORITY, INTERNATIONAL CONTAINER TERMINAL SERVICES INC., ROYAL
PORT SERVICES INC. and the EXECUTIVE SECRETARY, respondents.

FACTS:

On February 12, 1996, the Subic Bay Metropolitan Authority (or SBMA) advertised in leading national daily newspapers and in one
international publication,1 an invitation offering to the private sector the opportunity to develop and operate a modern marine
container terminal within the Subic Bay Freeport Zone. Out of seven bidders who responded to the published invitation, three were
declared by the SBMA as qualified bidders after passing the pre-qualification evaluation conducted by the SBMA’s Technical
Evaluation Committee (or SBMA-TEC). These are: (1) International Container Terminal Services, Inc. (or ICTSI); (2) a consortium
consisting of Royal Port Services, Inc. and HPC Hamburg Port Consulting GMBH (or RPSI); and (3) Hutchison Ports Philippines
Limited (or HPPL), representing a consortium composed of HPPL, Guoco Holdings (Phils.), Inc. and Unicol Management Services,
Inc. All three qualified bidders were required to submit their respective formal bid package on or before July 1, 1996 by the SBMA’s
Pre-qualification, Bids and Awards Committee (or SBMA-PBAC). Thereafter, the services of three (3) international
consultants2 recommended by the World Bank for their expertise were hired by SBMA to evaluate the business plans submitted by
each of the bidders, and to ensure that there would be a transparent and comprehensive review of the submitted bids. The SBMA also
hired the firm of Davis, Langdon and Seah Philippines, Inc. to assist in the evaluation of the bids and in the negotiation process after
the winning bidder is chosen. All the consultants, after such review and evaluation unanimously concluded that HPPL’s Business Plan
was "far superior to that of the two other bidders." 3

However, even before the sealed envelopes containing the bidders’ proposed royalty fees could be opened at the appointed time and
place, RPSI formally protested that ICTSI is legally barred from operating a second port in the Philippines based on Executive Order
No. 212 and Department of Transportation and Communication (DOTC) Order 95-863. RPSI thus requested that the financial bid of
ICTSI should be set aside.
WEEK 13 – DAVID – CORPORATION LAW - 2015400027

The SBMA-PBAC decided to suspend the announcement of the winning bid, however, and instead gave ICTSI seven (7) days within
which to respond to the letter-protest lodged by RPSI. The HPPL joined in RPSI’s protest, stating that ICTSI should be disqualified
because it was already operating the Manila International Container Port (or MICP), which would give rise to inevitable conflict of
interest between the MICP and the Subic Bay Container Terminal facility. 5 On August 15, 1996, the SBMA-PBAC issued a resolution
rejecting the bid of ICTSI because "said bid does not comply with the requirements of the tender documents and the laws of the
Philippines." The said resolution also declared that: RESOLVED FURTHER, that the winning bid be awarded to HUTCHISON
PORTS PHILIPPINES LIMITED (HPPL) and that negotiations commence immediately with HPPL (HUTCHISON) with a view to
concluding an acceptable agreement within 45 days of this date failing which negotiations with RPSI (ROYAL) will commence with
a view to concluding an acceptable agreement within 45 days thereafter failing which there will be declared a failure of bids. The
following day, ICTSI filed a letter-appeal with SBMA’s Board of Directors requesting the nullification and reversal of the above-
quoted resolution rejecting ICTSI’s bid while awarding the same to HPPL. But even before the SBMA Board could act on the appeal,
ICTSI filed a similar appeal before the Office of the President. 7

ISSUE: whether participating in the bidding is a mere isolated transaction, or did it constitute "engaging in" or "transacting"
business in the Philippines such that petitioner HPPL needed a license to do business in the Philippines before it could come to
court.

RULING: HPPL IS A NON-RESIDENT FOREIGN CORPORATION AND SUCH BIDDING IS AN ISOLATED


TRANSACTION. 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. 28 Thus, it has often been
held that a single act or transaction may be considered as "doing business" when a corporation performs acts for which it was created
or exercises some of the functions for which it was organized. The amount or volume of the business is of no moment, for even a
singular act cannot be merely incidental or casual if it indicates the foreign corporation’s intention to do business. 29

Participating in the bidding process constitutes "doing business" because it shows the foreign corporation’s intention to engage in
business here. The bidding for the concession contract is but an exercise of the corporation’s reason for creation or existence. Thus, it
has been held that "a foreign company invited to bid for IBRD and ADB international projects in the Philippines will be considered as
doing business in the Philippines for which a license is required." In this regard, it is the performance by a foreign corporation of the
acts for which it was created, regardless of volume of business, that determines whether a foreign corporation needs a license or not.30

The primary purpose of the license requirement is to compel a foreign corporation desiring to do business within the Philippines to
submit itself to the jurisdiction of the courts of the state and to enable the government to exercise jurisdiction over them for the
regulation of their activities in this country.31 If a foreign corporation operates a business in the Philippines without a license, and thus
does not submit itself to Philippine laws, it is only just that said foreign corporation be not allowed to invoke them in our courts when
the need arises. "While foreign investors are always welcome in this land to collaborate with us for our mutual benefit, they must be
prepared as an indispensable condition to respect and be bound by Philippine law in proper cases, as in the one at bar." 32 The
requirement of a license is not intended to put foreign corporations at a disadvantage, for the doctrine of lack of capacity to sue is
based on considerations of sound public policy. 33 Accordingly, petitioner HPPL must be held to be incapacitated to bring this petition
for injunction before this Court for it is a foreign corporation doing business in the Philippines without the requisite license.

WHEREFORE, in view of all the foregoing, the instant petition is hereby DISMISSED for lack of merit. Further, the temporary
restraining order issued on December 3, 1997 is LIFTED and SET ASIDE. No costs.

SO ORDERED.

MR HOLDINGS, LTD., petitioner,


vs.
SHERIFF CARLOS P. BAJAR, SHERIFF FERDINAND M. JANDUSAY, SOLIDBANK CORPORATION, AND
MARCOPPER MINING CORPORATION, respondents.

FACTS: Under a "Principal Loan Agreement" 4 and "Complementary Loan Agreement," 5 both dated November 4, 1992, Asian
Development Bank (ADB), a multilateral development finance institution, agreed to extend to Marcopper Mining Corporation
(Marcopper) a loan in the aggregate amount of US$40,000,000.00 to finance the latter’s mining project at Sta. Cruz, Marinduque. The
principal loan of US$ 15,000,000.00 was sourced from ADB’s ordinary capital resources, while the complementary loan of US$
25,000,000.00 was funded by the Bank of Nova Scotia, a participating finance institution.

On even date, ADB and Placer Dome, Inc., (Placer Dome), a foreign corporation which owns 40% of Marcopper, executed a "Support
and Standby Credit Agreement" whereby the latter agreed to provide Marcopper with cash flow support for the payment of its
WEEK 13 – DAVID – CORPORATION LAW - 2015400027

obligations to ADB. To secure the loan, Marcopper executed in favor of ADB a "Deed of Real Estate and Chattel Mortgage" 6 dated
November 11, 1992, covering substantially all of its (Marcopper’s) properties and assets in Marinduque. It was registered with the
Register of Deeds on November 12, 1992.

When Marcopper defaulted in the payment of its loan obligation, Placer Dome, in fulfillment of its undertaking under the "Support
and Standby Credit Agreement," and presumably to preserve its international credit standing, agreed to have its subsidiary
corporation, petitioner MR Holding, Ltd., assumed Marcopper’s obligation to ADB in the amount of US$ 18,453,450.02.
Consequently, in an "Assignment Agreement" 7 dated March 20, 1997, ADB assigned to petitioner all its rights, interests and
obligations under the principal and complementary loan agreements, ("Deed of Real Estate and Chattel Mortgage," and "Support and
Standby Credit Agreement"). On December 8, 1997, Marcopper likewise executed a "Deed of Assignment" 8 in favor of petitioner.
Under its provisions, Marcopper assigns, transfers, cedes and conveys to petitioner, its assigns and/or successors-in-interest all of its
(Marcopper’s) properties, mining equipment and facilities. Meanwhile, it appeared that on May 7, 1997, Solidbank Corporation
(Solidbank) obtained a Partial Judgment9against Marcopper from the RTC, Branch 26, Manila. Upon Solidbank’s motion, the RTC of
Manila issued a writ of execution pending appeal directing Carlos P. Bajar, respondent sheriff, to require Marcopper "to pay the sums
of money to satisfy the Partial Judgment." 1

Unsatisfied, petitioner elevated the matter to the Court of Appeals on a Petition for Certiorari, Prohibition and Mandamus, docketed
therein as CA-G.R. SP No. 49226. On January 8, 1999, the Court of Appeals rendered a Decision holding that Judge Ansaldo did not
commit grave abuse of discretion in denying petitioner’s prayer for a writ of preliminary injunction, ratiocinating as follows:

"Petitioner contends that it has the legal capacity to sue and seek redress from Philippine courts as it is a non-resident foreign
corporation not doing business in the Philippines and suing on isolated transactions.

ISSUE(s): WON THE PETITIONER HAS THE LEGAL CAPACITY TO SUE AND SEEK REDRESS FROM PH COURTS 2) Was
the Deed of Assignment between Marcopper and petitioner executed in fraud of creditors? 3) Are petitioner MR Holdings, Ltd.,
Placer Dome, and Marcopper one and the same entity? and 4) Is petitioner guilty of forum shopping?

RULING. NO. We agree with the finding of the respondent court that petitioner is not suing on an isolated transaction as it claims to
be, as it is very obvious from the deed of assignment and its relationships with Marcopper and Placer Dome, Inc. that its unmistakable
intention is to continue the operations of Marcopper and shield its properties/assets from the reach of legitimate creditors, even those
holding valid and executory court judgments against it. There is no other way for petitioner to recover its huge financial investments
which it poured into Marcopper’s rehabilitation and the local situs where the Deeds of Assignment were executed, without petitioner
continuing to do business in the country.

The true test, however, seems to be whether the foreign corporation is continuing the body or substance of the business or
enterprise for which it was organized or whether it has substantially retired from it and turned it over to another. (Traction
Cos. vs. Collectors of Int. Revenue [C.C.A., Ohio], 223 F. 984,987.) x x x."

The traditional case law definition has metamorphosed into a statutory definition, having been adopted with some qualifications in
various pieces of legislation in our jurisdiction. For instance, Republic Act No. 7042, otherwise known as the "Foreign Investment
Act of 1991," defines "doing business" as follows:

"d) The phrase ‘doing business’ shall include soliciting orders, service contracts, opening offices, whether called ‘liaison’ offices or
branches; appointing representatives or distributors domiciled in the Philippines or who in any calendar year stay in the country for a
period or periods totalling one hundred eight(y) (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; Provided, however, That the phrase ‘doing business’ shall not be deemed to include mere investment as a shareholder
by a foreign entity in domestic corporations duly registered to do business, and/or the exercise of rights as such investor, nor having a
nominee director or officer to represent its interests in such corporation, nor appointing a representative or distributor domiciled in the
Philippines which transacts business in its own name and for its own account."

In the case at bar, the Court of Appeals categorized as "doing business" petitioner’s participation under the "Assignment Agreement"
and the "Deed of Assignment." This is simply untenable. The expression "doing business" should not be given such a strict and literal
construction as to make it apply to any corporate dealing whatever. 28 At this early stage and with petitioner’s acts or transactions
limited to the assignment contracts, it cannot be said that it had performed acts intended to continue the business for which it was
organized. It may not be amiss to point out that the purpose or business for which petitioner was organized is not discernible in
WEEK 13 – DAVID – CORPORATION LAW - 2015400027

the records. No effort was exerted by the Court of Appeals to establish the nexus between petitioner’s business and the acts
supposed to constitute "doing business." Thus, whether the assignment contracts were incidental to petitioner’s business or
were continuation thereof is beyond determination. We cannot apply the case cited by the Court of Appeals, Far East Int’l Import
and Export Corp. vs. Nankai Kogyo Co., Ltd., 29 which held that a single act may still constitute "doing business" if "it 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." In said case, there was an express admission from an official of the foreign corporation that he was sent to the
Philippines to look into the operation of mines, thereby revealing the foreign corporation’s desire to continue engaging in business
here. But in the case at bar, there is no evidence of similar desire or intent. Unarguably, petitioner may, as the Court of Appeals
suggested, decide to operate Marcopper’s mining business, but, of course, at this stage, that is a mere speculation. Or it may decide to
sell the credit secured by the mining properties to an offshore investor, in which case the acts will still be isolated transactions. To see
through the present facts an intention on the part of petitioner to start a series of business transaction is to rest on
assumptions or probabilities falling short of actual proof. Courts should never base its judgments on a state of facts so
inadequately developed that it cannot be determined where inference ends and conjecture begins.

The "Assignment Agreement" and the "Deed of Assignment" were executed for valuable considerations. Patent from the "Assignment
Agreement" is the fact that petitioner assumed the payment of US$ 18,453,450.12 to ADB in satisfaction of Marcopper’s remaining
debt as of March 20, 1997.36 Solidbank cannot deny this fact considering that a substantial portion of the said payment, in the sum of
US$ 13,886,791.06, was remitted in favor of the Bank of Nova Scotia, its major stockholder. 37

The facts of the case so far show that the assignment contracts were executed in good faith. The record is lacking in circumstances
that would suggest that petitioner corporation, Placer Dome and Marcopper are one and the same entity. While admittedly, petitioner
is a wholly-owned subsidiary of Placer Dome, which in turn, which, in turn, was then a minority stockholder of Marcopper,
however, the mere fact that a corporation owns all of the stocks of another corporation, taken alone is not sufficient to justify
their being treated as one entity. If used to perform legitimate functions, a subsidiary’s separate existence shall be respected, and the
liability of the parent corporation as well as the subsidiary will be confined to those arising in their respective business. 39

WHEREFORE, the petition is GRANTED.