Republic of the Philippines

SUPREME COURT

Manila

FIRST DIVISION

G.R. No. L-38649 March 26, 1979

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

vs.

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

Sycip, Salazar, Feliciano & Associates for petitioners.

Benjamin M. Mendoza for respondent Court.

MAKASIAR, J:

Petition for review on certiorari of the decision of the Court of Industrial Relations, dated February 14,
1972, ordering petitioners herein to pay private respondent Leonardo de la Osa his overtime
compensation, as wen as his swing shift and graveyard shift premiums at the rate of fifty (50%) per cent
of his basic sa (Annex E, p. 31, rollo).

The aforesaid decision was based on a report submitted by the Hearing Examiner, CIR (Dagupan City
Branch), the pertinent portions of which are quoted hereinbelow:::

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

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

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

xxx xxx xxx

But before we consider and discuss the foregoing issues, let us first ascertain if this Court could acquire
jurisdiction over the case at bar, it having been contended by respondents that they are domiciled in
Wake Island which is beyond the territorial jurisdiction of the Philippine Government. To this incidental
question, it may be stated that while it is true the site of work is Identified as Wake Island, it is equally
true the place of hire is established in Manila (See Section B, Filipino Employment Contract, Exhibit '1').
Moreover, what is important is the fact that the contract of employment between the parties litigant was
shown to have been originally executed and subsequently renewed in Manila, as 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.

xxx xxx xxx

From the evidence on hand, it has been proven beyond doubt that petitioner canvas assigned to and
performed work in respondent company at slight time which consisted of two different schedules,
namely, swing shift and graveyard shifts, particularly during his tenure as houseboy for the second period
and as cashier. Petitioner's testimony to this effect was not contradicted, much less rebutted, by
respondents, as revealed by the records. Since petitioner actually rendered night time services as
required by respondents, and considering the physical, moral and sociological effects arising from the
performance of such nocturnal duties, we think and honestly believe that petitioner should be
compensated at least fifty percent (50%) more than his basic wage rate. This night shift premium pay
would indeed be at par with the overtime compensation stipulated at one and one-half (1 ) times of
the straight time rate.

xxx xxx xxx (pp. 31-36, rollo).

Apropos before this Court were filed three (3) other cases involving the same petitioner, all of which had
been finally dispoded of, as follows:

G.R. No Date of Filing Disposition

1. L-37117 July 30, 1973 Petition denied for

lack of merit on Sept.

13, 1973. Motion for

Reconsideration

denied lack of

merit, Nov. 20,1973.

2. L-38781 June 17,1974 Petition denied for

lack of merit on June

21,1974.

3. L-39111-12 Sept. 2,1974 Case dismissed on Feb.

6, 1976, pursuant to

voluntary manifesta

tion of private respon

dent Inocente R. Riel

that his claims had all

been settled to his entire

satisfaction.

Incidentally, in connection with G.R. No. L-39111-12 (No. 3 above), WE found strong evidence that
petitioner therein, which is also the petitioner in the case at bar, "twisted the arm" of private
respondent, when the latter in his Manifestation dated July 3, 1975, stated:

3. ... Furthermore, since petitioner FMC is a foreign corporation domiciled in California, U.S.A. and
has never been engaged in business in the Philippines, nor does it have an agent or an office in this
country, there exists no valid reason for me to participate in the continuation and/or prosecution of this
case (p. 194, rollo).

as if jurisdiction depends on the will of the parties to a case. At any rate, considering that petitioner
paid the claims of private respondent, the case had become moot and academic. Besides, the fact of
such payment amounts to an acknowledgment on the part of petitioner of the jurisdiction of the court
over it.

WE have also noted that the principal question involved in each of the above-numbered three (3) cases
is more or less Identical, to wit: Is the mere act by a non-resident foreign corporation of recruiting
Filipino workers for its own use abroad, in law doing business in the Philippines?

In the case at bar, which was filed with this Court on June 3, 1974, petitioners presented, inter alia, the
following issue: ... can the CIR validly affirm a judgment against persons domiciled outside and not doing
business in the Philippines, and over whom it did not acquire jurisdiction')

While it is true that the issues presented in the decided cases are worded differently from the principal
issue raised in the case at bar, the fact remains that they all boil down to one and the same issue, which
was aptly formulated and ably resolved by Mr. Justice Ramon C. Fernandez, then with the Court of
Appeals and now a member of this Court, in CA-G.R. No. SP-01485-R, later elevated to this Court on
appeal by certiorari in Case G.R. No. L-37117 this case, the majority opinion of the Court of Appeals,
which was penned by Justice Fernandez and which WE hereby adopt, runs as follows:
The principal issue presented in this special civil action is whether petitioner has been 'doing business in
the Philippines' so that the service of summons upon its agent in the Philippines vested the Court of First
Instance of Manila with jurisdiction.

From the facts of record, the petitioner may be considered as doing busuness un the Philippines within
the the scope of Section 14, Rule 14 of the Rules of the Court which provide:

SEC 14. Service upon private foreign corporations. If the defendant is a foreign corporation or a non-
resident joint stock company or association: doing business in the Philippines, service may be made on
its resident agent designated in accordance with law for that purpose or, if there be no such agent, on
the government official designated by law to that effect, or on any of its officers or agents within the
Philippines.

Indeed, the petitioner, in compliance with Act 2486 as implemented by Department of Labor Order No.
IV dated May 20, 1968 had to appoint Jaime V. Catuira, 1322 A. Mabini, Ermita, Manila as agent for FMC
with authority to execute Employment Contracts and receive, in behalf of that corporation, legal services
from and be bound by 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.

In his motion to dismiss Annex B', p. 19, Rollo), petitioner admits that Mr. Catuira represented it in this
country 'for the purpose of making arrangements for the approval by the Department of Labor of the
employment of Filipinos who are recruited by the Company as its own employees for assignment
abroad.' In effect, Mr. Catuira was a on officer representing petitioner in the Philippines.

Under the rules and regulations promulgated by the Board of Investments which took effect Feb. 3,
1969, implementing Rep. Act No. 5455, which took effect Sept. 30, 1968, the phrase 'doing business' has
been exemption with illustrations, among them being as follows:

xxx xxx xxx

(f) the performance within the Philippines of any act or combination of acts enumerated in section l(l) 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, not acting independently of the 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. xxx

(2) Appointing a representative or distributor who is dociled in the Philippines, unless said
representative or distributor has an independent status, i.e., it transacts business in its name and for its
own account, and not in the name or for the account of the principal.

xxx xxx xxx

(4) Opening offices, whether called 'liaison'offices, agencies or branches, unless proved otherwise.

xxx xxx xxx

(10) Any other act or acts that imply a continuity of commercial dealings or arrangements, and
contemplate to that extent the performance of acts or works, or the exercise of some of the functions
normally incident to, or in the progressive prosecution of, commercial gain or of the purpose and
objective of the business organization (54 O.G. 53).

Recently decided by this Court again thru Mr. Justice Ramon C. Fernandez which is similar to the
case at bar, is G.R. No. L-26809, entitled Aetna Casualty & Curety Company, plaintiff- appellant versus
Pacific Star Line, the Bradman Co., Inc., Manila Port Service and/or Manila Railroad Company, Inc.,
defendants-appellees." The case is an appeal from the decision of the Court of First Instance of Manila,
Branch XVI, in its Civil Case No. 53074, entitled Aetna Casualty & Surety Company vs. Pacific Star Lines,
The Bradman Co., Inc., Manila Port Service and/or Manila Railroad Company, Inc." dismissing the
complaint on the ground that the plaintiff has no legal capacity to bring the suit.

It appears that on February 11, 1963, Smith Bell & Co. (Philippines), Inc. and Aetna Casualty & Surety
Co., Inc., as subrogee instituted Civil Case No. 53074 in the Court of First Instance of Manila against
Pacific Star Line, The Bradman Co., Inc., Manila Port Service and/or Manila Railroad Company, Inc. to
recover the amount of US$2,300.00 representing the value of stolen and damaged cargo plus litigation
expenses and exemplary damages in the amounts of P1,000.00 and P2,000.00, respectively, with legal
interest thereon from the filing of the suit and costs.
After all the defendants had filed their answer, the defendants Manila Port Service and Manila Railroad
Company, Inc. amended their answer to allege that the plaintiff, Aetna Casualty & Surety Company, is a
foreign corporation not duly licensed to do business in the Philippines and, therefore, without capacity
to sue and be sued.

After the parties submitted a partial stipulation of facts and additional documentary evidence, the case
was submitted for decision of the trial court, which dismissed the complaint on the ground that the
plaintiff insurance company is subject to the requirements of Sections 68 and 69 of Act 1459, as
amended, and for its failure to comply therewith, it has no legal capacity to bring suit in this jurisdiction.
Plaintiff appealed to this Court.

The main issue involved in the appeal is whether or not the plaintiff appellant has been doing business in
the Philippines, considering the fact that it has no license to transact business in the Philippines as a
foreign corporation. WE ruled:

The object of Sections 68 and 69 of the Corporation Law was not to prevent the foreign corporation from
performing single acts, but to prevent it from acquiring a domicile for the purpose of business without
taking the steps necessary to render it amenable to suit in the local courts. It was never the purpose of
the Legislature to exclude a foreign corporation which happens to obtain an isolated order for business
from the Philippines, from securing redress in the Philippine courts (Marshall Co. vs. Elser & Co., 46 Phil
70,75).

In Mentholatum Co., Inc., et al vs- M Court rules that-

No general rule or governing principle can be laid down as to what constitutes 'doing' or 'engaging in' or
'transacting' business. Indeed, each case must be judged in the light of its peculiar environmental
circumstances. The true test, however, seems to be whether the foreign corporation is continuing the
body or substance of the business or enterprise for which it was organized or whether it has substantially
retired from it and turned it over to another. (Traction Cos. 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. III; Automotive Material Co. vs. American Standard Metal Products Corp., 158 N.E.
698, 703, 327 III. 367)'. 72 Phil. 524, 528-529.

And in Eastboard Navigation, Ltd., et al. vs. Juan Ysmael & Co., Inc., this Court held:
(d) While plaintiff is a foreign corporation without license to transact business in the Philippines, it
does not follow that it has no capacity to bring the present action. Such license is not necessary because
it is not engaged in business in the Philippines. In fact, the transaction herein involved is the first
business undertaken by plaintiff in the Philippines, although on a previous occasion plaintiff's vessel was
chartered by the National Rice and Corn Corporation to carry rice cargo from abroad to the Philippines.
These two isolated transactions do not constitute engaging in business in the Philippines within the
purview of Sections 68 and 69 of the Corporation Law so as to bar plaintiff from seeking redress in our
courts. (Marshall Wens Co. vs. Henry W. Elser & Co. 49 Phil., 70; Pacific Vegetable Oil Corporation vs.
Angel O. Singson, G.R. No. L-7917, April 29, 1955)'. 102 Phil., pp. 1, 18.

Based on the rulings laid down in the foregoing cases, it cannot be said that the Aetna Casualty & Surety
Company is transacting business of insurance in the Philippines for which it must have a license. The
Contract of insurance was entered into in New York, U.S.A., and payment was made to the consignee in
its New York branch. It appears from the list of cases issued by the Clerk of Court of the Court of First
Instance of Manila that all the actions, except two (2) cases filed by Smith, Beer & Co., Inc. against the
Aetna Casualty & Surety Company, are claims against the shipper and the arrastre operators just like the
case at bar.

Consequently, since the appellant Aetna Casualty & Surety Company is not engaged in the business of
insurance in the Philippines but is merely collecting a claim assigned to it by the consignee, it is not
barred from filing the instant case although it has not secured a license to transact insurance business in
the Philippines.

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.

Teehankee (Chairman), Fernandez, Guerrero, De Castro, and Melencio Herrera, JJ., concur.
Facilities Management Corporation vs. Dela Rosa [G.R. No. L-38649 March 26, 1979]

Post under case digests, labor law at Monday, March 19, 2012 Posted by Schizophrenic Mind

Facts: Leonardo dela Rosa 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, painter, houseboy and cashier. 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.

The petitioner, a foreign corporation domiciled outside the Philippines was ordered by CIR then to pay
the unpaid overtime and premium pay. However, on certiorari, the petitioner contended that because it
was domiciled outside and not doing business in Philippines, it could not be sued in the country.

Issue: Whether or not petitioner has been doing business in the Philippines so that the service of
summons upon its agent in the Philippines vested the Court of First Instance of Manila with jurisdiction.

Held: Yes, 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.
Republic of the Philippines

SUPREME COURT

Manila

FIRST DIVISION

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

THE HOME INSURANCE COMPANY, petitioner,

vs.

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

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

THE HOME INSURANCE COMPANY, petitioner,

vs.

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

No. L-34382.

Zapa Law Office for petitioner.

Bito, Misa & Lozada Law Office for respondents.

No. L-34383.

Zapa Law Office for petitioner.

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

GUTIERREZ, JR., J.:

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

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

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

xxx xxx xxx

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

For the loss/damage suffered by the cargo, plaintiff paid the consignee under its insurance policy the
amount of P3,260.44, by virtue of which plaintiff became subrogated to the rights and actions of the
CONSIGNEE. Plaintiff made demands for payment against the CARRIER and the TRANSPORTATION
COMPANY for reimbursement of the aforesaid amount but each refused to pay the same. ...
The facts of L-34383 are found in the decision of the lower court as follows:

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

xxx xxx xxx

The packages discharged from the VESSEL numbered 29, of which seven packages were found to be in
bad order. What the CONSIGNEE ultimately received at its warehouse was the same number of 29
packages with 9 packages in bad order. Out of these 9 packages, 1 package was accepted by the
CONSIGNEE in good order due to the negligible damages sustained. Upon inspection at the consignee's
warehouse, the contents of 3 out of the 8 cases were also found to be complete and intact, leaving 5
cases in bad order. The contents of these 5 packages showed several items missing in the total amount of
$131.14; while the contents of the undelivered 1 package were valued at $394.66, or a total of $525.80
or P2,426.98.

For the short-delivery of 1 package and the missing items in 5 other packages, plaintiff paid the
CONSIGNEE under its Insurance Cargo Policy the amount of P2,426.98, by virtue of which plaintiff
became subrogated to the rights and actions of the CONSIGNEE. Demands were made on defendants
CARRIER and CONSIGNEE for reimbursement thereof but they failed and refused to pay the same.

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

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

In L-34382, the respondent-appellee Eastern Shipping Lines, Inc., filed its answer and alleged that it:
Denies the allegations of Paragraph I which refer to plaintiff's capacity to sue for lack of knowledge or
information sufficient to form a belief as to the truth thereof.

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

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

In L-34383, the respondents-appellees N. V. Nedlloyd Lijhen, Columbian Philippines, Inc. and Guacods,
Inc., filed their answers. They denied the petitioner-appellant's capacity to sue for lack of knowledge or
information sufficient to form a belief as to the truth thereof.

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

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

The Court is of the opinion that Section 68 of the Corporation Law reflects a policy designed to protect
the public interest. Hence, although defendants have not raised the question of plaintiff's compliance
with that provision of law, the Court has resolved to take the matter into account.

A suing foreign corporation, like plaintiff, has to plead affirmatively and prove either that the transaction
upon which it bases its complaint is an isolated one, or that it is licensed to transact business in this
country, failing which, it will be deemed that it has no valid cause of action (Atlantic Mutual Ins. Co. vs.
Cebu Stevedoring Co., Inc., 17 SCRA 1037). In view of the number of cases filed by plaintiff before this
Court, of which judicial cognizance can be taken, and under the ruling in Far East International Import
and Export Corporation vs. Hankai Koayo Co., 6 SCRA 725, it has to be held that plaintiff is doing business
in the Philippines. Consequently, it must have a license under Section 68 of the Corporation Law before it
can be allowed to sue.
The situation of plaintiff under said Section 68 has been described as follows in Civil Case No. 71923 of
this Court, entitled 'Home Insurance Co. vs. N. V. Nedlloyd Lijnen, of which judicial cognizance can also
be taken:

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

This Court views Section 68 of the Corporation Law as reflective of a basic public policy. Hence, it is of
the opinion that, in the eyes of Philippine law, the insurance contract involved in this case must be held
void under the provisions of Article 1409 (1) of the Civil Code, and could not be validated by subsequent
procurement of the license. That view of the Court finds support in the following citation:

According to many authorities, a constitutional or statutory prohibition against a foreign corporation

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

xxx xxx xxx

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

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

The petitioner raised the following assignments of errors:

First Assignment of Error

THE HONORABLE TRIAL COURT ERRED IN CONSIDERING AS AN ISSUE THE LEGAL EXISTENCE OR CAPACITY
OF PLAINTIFF-APPELLANT.

Second Assignment of Error

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

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

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

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

The applicable provisions of the old Corporation Law, Act 1459, as amended are:

Sec. 68. No foreign corporation or corporations formed, organized, or existing under any laws other than
those of the Philippine Islands shall be permitted to transact business in the Philippine Islands until after
it shall have obtained a license for that purpose from the chief of the Mercantile Register of the Bureau
of Commerce and Industry, (Now Securities and Exchange Commission. See RA 5455) upon order of the
Secretary of Finance (Now Monetary Board) in case of banks, savings, and loan banks, trust corporations,
and banking institutions of all kinds, and upon order of the Secretary of Commerce and Communications
(Now Secretary of Trade. See 5455, section 4 for other requirements) in case of all other foreign
corporations. ...

xxx xxx xxx

Sec. 69. No foreign corporation or corporation formed, organized, or existing under any laws other than
those of the Philippine Islands shall be permitted to transact business in the Philippine Islands or
maintain by itself or assignee any suit for the recovery of any debt, claim, or demand whatever, unless it
shall have the license prescribed in the section immediately preceding. Any officer, director, or agent of
the corporation or any person transacting business for any foreign corporation not having the license
prescribed shag be punished by imprisonment for not less than six months nor more than two years or
by a fine of not less than two hundred pesos nor more than one thousand pesos, or by both such
imprisonment and fine, in the discretion of the court.

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

xxx xxx xxx

Defendant isolates a portion of one sentence of section 69 of the Corporation Law and asks the court to
give it a literal meaning Counsel would have the law read thus: "No foreign corporation shall be
permitted to maintain by itself or assignee any suit for the recovery of any debt, claim, or demand
whatever, unless it shall have the license prescribed in section 68 of the law." Plaintiff, on the contrary,
desires for the court to consider the particular point under discussion with reference to all the law, and
thereafter to give the law a common sense interpretation.

The object of the statute was to subject the foreign corporation doing business in the Philippines to the
jurisdiction of its courts. The object of the statute was not to prevent the foreign corporation from
performing single acts, but to prevent it from acquiring a domicile for the purpose of business without
taking the steps necessary to render it amenable to suit in the local courts. The implication of the law is
that it was never the purpose of the Legislature to exclude a foreign corporation which happens to
obtain an isolated order for business from the Philippines, from securing redress in the Philippine courts,
and thus, in effect, to permit persons to avoid their contracts made with such foreign corporations. The
effect of the statute preventing foreign corporations from doing business and from bringing actions in
the local courts, except on compliance with elaborate requirements, must not be unduly extended or
improperly applied. It should not be construed to extend beyond the plain meaning of its terms,
considered in connection with its object, and in connection with the spirit of the entire law. (State vs.
American Book Co. [1904], 69 Kan, 1; American De Forest Wireless Telegraph Co. vs. Superior Court of
City & Country of San Francisco and Hebbard [1908], 153 Cal., 533; 5 Thompson on Corporations, 2d ed.,
chap. 184.)

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

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

The objectives enunciated in the 1924 decision are even more relevant today when we view commercial
relations in terms of a world economy, when the tendency is to re-examine the political boundaries
separating one nation from another insofar as they define business requirements or restrict marketing
conditions.

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

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

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

xxx xxx xxx

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

A Michigan statute provides: "No foreign corporation subject to the provisions of this Act, shall maintain
any action in this state upon any contract made by it in this state after the taking effect of this Act, until it
shall have fully complied with the requirement of this Act, and procured a certificate to that effect from
the Secretary of State," It was held that the above statute does not render contracts of a foreign
corporation that fails to comply with the statute void, but they may be enforced only after compliance
therewith. (Hastings Industrial Co. v. Moral, 143 Mich. 679,107 N.E. 706 [1906]; Kuennan v. U.S. Fidelity
& G. Co., Mich. 122; 123 N.W. 799 [1909]; Despres, Bridges & Noel v. Zierleyn, 163 Mich. 399, 128 N.W.
769 [1910]).

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

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

Our jurisprudence leans towards the later view. Apart from the objectives earlier cited from Marshall
Wells Co. v. Henry W. Elser & Co (supra), it has long been the rule that a foreign corporation actually
doing business in the Philippines without license to do so may be sued in our courts. The defendant
American corporation in General Corporation of the Philippines v. Union Insurance Society of Canton Ltd
et al. (87 Phil. 313) entered into insurance contracts without the necessary license or authority. When
summons was served on the agent, the defendant had not yet been registered and authorized to do
business. The registration and authority came a little less than two months later. This Court ruled:

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

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

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

Section 133 of the present Corporation Code provides:

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

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

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

It is, therefore, not necessary to declare the contract 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.

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

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

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

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

SO ORDERED.
Teehankee (Chairman), Plana, Escolin and Relova, JJ., concur.

Melencio-Herrera and Vasquez, JJ., are on leave.

Home Insurance Company vs. Eastern Shipping Lines

[GR L-34382, 20 July 1983];

Home Insurance vs. Nedlloyd Lijnen [GR L-34383]

Facts: [GR L-34382] On or about 13 January 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 Eastern Shipping Lines.
The shipment was covered by Bill of Lading O-MA-9, with arrival notice to Phelps Dodge Copper Products
Corporation of the Philippines at Manila. The shipment was insured with the Home Insurance Company
against all risks in the amount of P1,580,105.06 under its Insurance Policy AS-73633. The coils discharged
from the VESSEL numbered 2,361, of which 53 were in bad order. What the Phelps Dodge 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 Phelps Dodge'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, or 1,209,56 lbs., according to the claims
presented by the Phelps Dodge against Home Insurance, the Eastern Shipping, and Angel Jose
Transportation Inc. For the loss/damage suffered by the cargo, Home Insurance paid the Phelps Dodge
under its insurance policy the amount of P3,260.44, by virtue of which Home Insurance became
subrogated to the rights and actions of the Phelps Dodge. Home Insurance made demands for payment
against the Eastern Shipping and the Angel Jose Transportation for reimbursement of the aforesaid
amount but each refused to pay the same."

[GR L-34383] On or about 22 December 1966, the Hansa Transport Kontor shipped from Bremen,
Germany, 30 packages of Service Parts of Farm Equipment and Implements on board the VESSEL, SS
'NEDER RIJN' owned by N. V. Nedlloyd Lijnen, and represented in the Philippines by its local agent, the
Columbian Philippines, Inc.. The shipment was covered by Bill of Lading No. 22 for transportation to, and
delivery at, Manila, in favor of International Harvester Macleod, Inc. The shipment was insured with
Home Insurance company under its Cargo Policy AS-73735 'with average terms' for P98,567.79. The
packages discharged from the VESSEL numbered 29, of which seven packages were found to be in bad
order. What International Harvester ultimately received at its warehouse was the same number of 29
packages with 9 packages in bad order. Out of these 9 packages, 1 package was accepted by
International Harvester in good order due to the negligible damages sustained. Upon inspection at
International Harvester's warehouse, the contents of 3 out of the 8 cases were also found to be
complete and intact, leaving 5 cases in bad order. The contents of these 5 packages showed several items
missing in the total amount of $131.14; while the contents of the undelivered 1 package were valued at
$394.66, or a total of $525.80 or P2,426.98. For the short-delivery of 1 package and the missing items in
5 other packages, Home Insurance paid International Harvester under its Insurance Cargo Policy the
amount of P2,426.98, by virtue of which Home Insurance became subrogated to the rights and actions of
International Harvester. Demands were made on N.V. Nedlloyd Lijnen and International Harvester for
reimbursement thereof but they failed and refused to pay the same."

When the insurance contracts which formed the basis of these cases were executed, Home Insurance
had not yet secured the necessary licenses and authority; but when the complaints in these two cases
were filed, Home Insurance had already secured the necessary license to conduct its insurance business
in the Philippines. In both cases, Home Insurance made the averment regarding its capacity to sue, as
that it "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 Court of First Instance of Manila, Branch XVII, however, dismissed the complaints in both
cases, on the ground that Home Insurance had failed to prove its capacity to sue. Home Insurance filed
the petitions for review on certiorari, which were consolidated.

Issue: Whether Home Insurance, a foreign corporation licensed to do business at he time of the filing of
the case, has the capacity to sue for claims on contracts made when it has no license yet to do business
in the Philippines.

Held: As early as 1924, the Supreme Court ruled in the leading case of Marshall Wells Co. v. Henry W.
Elser & Co. (46 Phil. 70) that the object of Sections 68 and 69 of the Corporation Law was to subject the
foreign corporation doing business in the Philippines to the jurisdiction of Philippine 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
commercial relations are viewed 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. The court distinguished 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 6 months nor more than 2 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. Still, there is no question that the contracts are enforceable. The requirement of registration
affects only the remedy. Significantly, Batas Pambansa 68, the Corporation Code of the Philippines has
corrected the ambiguity caused by the wording of Section 69 of the old Corporation Law. Section 133 of
the present Corporation Code provides that "No foreign corporation transacting business in the
Philippines without a license, or its successors or assigns, shall be permitted to maintain or intervene in
any action, suit or proceeding in any court or administrative agency in the Philippines; but such
corporation may be sued or proceeded against before Philippine courts or administrative tribunals on
any valid cause of action recognized under Philippine laws." The old Section 69 has been reworded in
terms of non-access to courts and administrative agencies in order to maintain or intervene in any action
or proceeding. The prohibition against doing business without first securing a license is now given penal
sanction which is also applicable to other violations of the Corporation Code under the general
provisions of Section 144 of the Code. It is, therefore, not necessary to declare the contract null and void
even as against the erring foreign corporation. The penal sanction for the violation and the denial of
access to Philippine courts and administrative bodies are sufficient from the viewpoint of legislative
policy. Herein, 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. Home Insurance
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. Home
Insurance sufficiently alleged its capacity to sue.
THIRD DIVISION

[G.R. No. 118843. February 6, 1997]

ERIKS PTE. LTD., petitioner, vs. COURT OF APPEALS and DELFIN F. ENRIQUEZ, JR., respondents.

DECISION

PANGANIBAN, J.:

Is a foreign corporation which sold its products sixteen times over a five-month period to the same
Filipino buyer without first obtaining a license to do business in the Philippines, prohibited from
maintaining an action to collect payment therefor in Philippine courts? In other words, is such foreign
corporation doing business in the Philippines without the required license and thus barred access to our
court system?

This is the main issue presented for resolution in the instant petition for review, which seeks the reversal
of the Decision[1] of the Court of Appeals, Seventh Division, promulgated on January 25, 1995, in CA-
G.R. CV No. 41275 which affirmed, for want of capacity to sue, the trial courts dismissal of the collection
suit instituted by petitioner.

The Facts

Petitioner Eriks Pte. Ltd. is a non-resident foreign corporation engaged in the manufacture and sale of
elements used in sealing pumps, valves and pipes for industrial purposes, valves and control equipment
used for industrial fluid control and PVC pipes and fittings for industrial uses. In its complaint, it alleged
that:[2]

(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:[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

16 Aug 89

21 Mar 89

04 Apr 89

14 Apr 89

25 Apr 89

02 May 89

05 May 89

15 May 89

31 May 89

Invoice No.

27065

27738
27855

27876

27877

28046

28258

28901

29001

31669

28257

28601

28900

29127

29232

29332

29497

29844

AWB No.

618-7496-2941

618-7553-6672

(freight & hand-

ling 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 & hand-

ling charges per

Inv. 29127)

618-7796-5646

Total

Amount

S$ 5,010.59

14,402.13

1,164.18

1,394.32

1,641.57
7,854.60

27.72

2,756.53

458.80

1,862.00

--------------------

S$36,392.44

415.50

884.09

1,269.50

883.80

120.00

1,198.40

111.94

--------------------

S$ 4,989.29

545.70

--------------------

S$ 545.70

--------------------

S$ 41,927.43

===========

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 Regional Trial Court of Makati, Branch 138,[4]
Civil Case No. 91-2373 entitled Eriks Pte. Ltd. vs. Delfin Enriquez, Jr. 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:[6]

WHEREFORE, in view of the foregoing, the motion to dismiss is hereby GRANTED and accordingly, the
above-entitled case is hereby DISMISSED.

SO ORDERED.

On appeal, respondent Court affirmed said order as it deemed the series of transactions between
petitioner corporation and private respondent not to be an isolated or casual transaction. Thus,
respondent Court likewise found petitioner to be without legal capacity to sue, and disposed of the
appeal as follows:[7]

WHEREFORE, the appealed Order should be, as it is hereby AFFIRMED. The complaint is dismissed. No
costs.

SO ORDERED.

Hence, this petition.

The Issue

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

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 undeserving of legal protection.

The Courts 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 facto incapacitated from bringing an action. A license
is necessary only if it is transacting or doing business in the country.

However, there is no definitive rule on what constitutes doing, engaging in, or transacting business. The
Corporation Code itself does not define such terms. To fill the gap, the evolution of its statutory
definition has produced a rather all-encompassing concept in Republic Act No. 7042[9] in this wise:

SEC. 3. Definitions. - As used in this Act:

xxx xxx xxx

(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. (underscoring supplied)

In the durable case of The Mentholatum Co. vs. Mangaliman, this Court discoursed on the test to
determine whether a foreign company is doing business in the Philippines, thus:[10]

x x x 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.] (sic) (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 III. 367.)

The accepted rule in jurisprudence is that each case must be judged in the light of its own environmental
circumstances.[11] It should be kept in mind that the purpose of the law is to subject the foreign
corporation doing business in the Philippines to the jurisdiction of our courts. It is not to prevent the
foreign corporation from performing single or isolated acts, but to bar it from acquiring a domicile for
the purpose of business without first taking the steps necessary to render it amenable to suits in the
local courts.

The trial court held that petitioner-corporation was doing business without a license, finding that:[12]

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.

Even if We were to view, as contended by the appellant, that the transactions which occurred between
January to August 1989, constitute a single act or isolated business transaction, this being the ordinary
business of appellant corporation, it can be said to be illegally doing or transacting business without a
license. x x x Here it can be clearly gleaned from the four-month period of transactions between
appellant and appellee that it was a continuing business relationship, which would, without doubt,
constitute doing business without a license. For all intents and purposes, appellant corporation is doing
or transacting business in the Philippines without a license and that, therefore, in accordance with the
specific mandate of Section 144 of the Corporation Code, it has no capacity to sue. (addition ours)

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. As alleged in its complaint, it is 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
use. Thus, the sale by petitioner of the items covered by the receipts, which are part and parcel of its
main product line, was actually carried out in the progressive prosecution of commercial gain and the
pursuit of the purpose and object of its business, pure and simple. Further, its grant and extension of 90-
day credit terms to private respondent for every purchase made, unarguably shows an intention to
continue transacting with private respondent, since in the usual course of commercial transactions,
credit is extended only to customers in good standing or to those on whom there is an intention to
maintain long-term relationship. This being so, the existence of a distributorship agreement between the
parties, as alleged but not proven by private respondent, would, if duly established by competent
evidence, be merely corroborative, and failure to sufficiently prove said allegation will not significantly
affect the finding of the courts below. Nor our own ruling. It is precisely upon the set of facts above-
detailed that we concur with respondent Court that petitioner corporation was doing business in the
country.

Equally important is the absence of any fact or circumstance which might tend even remotely to negate
such intention to continue the progressive prosecution of petitioners business activities in this country.
Had private respondent not turned out to be a bad risk, in all likelihood petitioner would have
indefinitely continued its commercial transactions with him, and not surprisingly, in ever increasing
volumes.

Thus, we hold that the series of transactions in question could not have been isolated or casual
transactions. What is determinative of doing business is not really the number or the quantity of the
transactions, but more importantly, the intention of an entity to continue the body of its business in the
country. The number and quantity are merely evidence of such intention. The phrase isolated
transaction has a definite and fixed meaning, i.e. a transaction or series of transactions set apart from
the common business of a foreign enterprise in the sense that there is no intention to engage in a
progressive pursuit of the purpose and object of the business organization. Whether a foreign
corporation is doing business does not necessarily depend upon the frequency of its transactions, but
more upon the nature and character of the transactions.[14]

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.

Incapacitated to Maintain Suit

Accordingly and ineluctably, petitioner must be held to be incapacitated to maintain the action a quo
against private respondent.

It was never the intent of the legislature to bar court access to a foreign corporation or entity which
happens to obtain an isolated order for business in the Philippines. Neither, did it intend to shield
debtors from their legitimate liabilities or obligations.[15] But it cannot allow foreign corporations or
entities which conduct regular business any access to courts without the fulfillment by such corporations
of the necessary requisites to be subjected to our governments regulation and authority. By securing a
license, the foreign entity would be giving assurance that it will abide by the decisions of our courts,
even if adverse to it.
Other Remedy Still Available

By this judgment, we are not foreclosing petitioners right to collect payment. Res judicata does not set in
a case dismissed for lack of capacity to sue, because there has been no determination on the merits.[16]
Moreover, this Court has ruled that subsequent acquisition of the license will cure the lack of capacity at
the time of the execution of the contract.[17]

The requirement of a license is not meant to put foreign corporations at a disadvantage. Rather, the
doctrine of lack of capacity to sue is based on considerations of sound public policy.[18] Thus, it has been
ruled in Home Insurance that:[19]

x x x The primary purpose of our statute is to compel a foreign corporation desiring to do business within
the state to submit itself to the jurisdiction of the courts of this state. The statute was not intended to
exclude foreign corporations from the state. x x x x The better reason, the wiser and fairer policy, and the
greater weight lie with those decisions which hold that where, as here, there is a prohibition with a
penalty, with no express or implied declarations respecting the validity of enforceability of contracts
made by qualified foreign corporations, the contracts x x x are enforceable x x x upon compliance with
the law.(Peter & Burghard Stone Co. v. Carper, 172 N.E. 319 [1930].)

While we agree with petitioner that the country needs to develop trade relations and foster friendly
commercial relations with other states, we also need to enforce our laws that regulate the conduct of
foreigners who desire to do business here. Such strangers must follow our laws and must subject
themselves to reasonable regulation by our government.

WHEREFORE, premises considered, the instant petition is hereby DENIED and the assailed Decision is
AFFIRMED.

SO ORDERED.

Narvasa, C.J., (Chairman), Davide, Jr., Melo, and Francisco, JJ., concur.
Eriks Pte. Ltd. vs. Court of Appeals

[GR 118843, 6 February 1997]

Facts: 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. On various dates covering
the period January 17 August 16, 1989, Delfin Enriquez, Jr., doing business under the name and style
of Delrene EB Controls Center and/or EB Karmine Commercial, ordered and received from Eriks Pte. Ltd.
various elements used in sealing pumps, valves, pipes and control equipment, PVC pipes and fittings. The
transfers of goods were perfected in Singapore, for Enriquez's account, F.O.B. Singapore, with a 90-day
credit term. Subsequently, demands were made by Eriks upon Enriquez to settle his account, but the
latter failed/refused to do so. On 28 August 1991, Eriks filed with the Regional Trial Court of Makati,
Branch 138, Civil Case 91-2373 for the recovery of S$41,939.63 or its equivalent in Philippine currency,
plus interest thereon and damages. Enriquez responded with a Motion to Dismiss, contending that Eriks
had no legal capacity to sue. In an Order dated 8 March 1993, the trial court dismissed the action on the
ground that Eriks is a foreign corporation doing business in the Philippines without a license.

On appeal and on 25 January 1995, the appellate court (CA GR CV 41275) affirmed said order as it
deemed the series of transactions between Eriks and Enriquez not to be an "isolated or casual
transaction." Thus, the appellate court likewise found Eriks to be without legal capacity to sue. Eriks filed
the petition for review.

Issue: Whether a foreign corporation which sold its products 16 times over a five-month period to the
same Filipino buyer without first obtaining a license to do business in the Philippines, is prohibited from
maintaining an action to collect payment therefor in Philippine courts.

Held: Section 133 of the Corporation Code provides that "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 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 Philippine courts. A foreign corporation without such license is not ipso
facto incapacitated from bringing an action. A license is necessary only if it is "transacting or doing
business" in the country. However, there is no definitive rule on what constitutes "doing," "engaging in,"
or "transacting" business. The Corporation Code itself does not define such terms. To fill the gap, the
evolution of its statutory definition has produced a rather all-encompassing concept in Republic Act 7042
in this wise: "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 totaling 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." The accepted rule in jurisprudence is that
each case must be judged in the light of its own environmental circumstances. It should be kept in mind
that the purpose of the law is to subject the foreign corporation doing business in the Philippines to the
jurisdiction of Philippine courts. It is not to prevent the foreign corporation from performing single or
isolated acts, but to bar it from acquiring a domicile for the purpose of business without first taking the
steps necessary to render it amenable to suits in the local courts. Herein, more than the sheer number of
transactions entered into, a clear and unmistakable intention on the part of Eriks to continue the body of
its business in the Philippines is more than apparent. As alleged in its complaint, it is 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
use.

Thus, the sale by Eriks of the items covered by the receipts, which are part and parcel of its main product
line, was actually carried out in the progressive prosecution of commercial gain and the pursuit of the
purpose and object of its business, pure and simple. Further, its grant and extension of 90-day credit
terms to Enriquez for every purchase made, unarguably shows an intention to continue transacting with
Enriquez, since in the usual course of commercial transactions, credit is extended only to customers in
good standing or to those on whom there is an intention to maintain long-term relationship. The series
of transactions in question could not have been isolated or casual transactions. What is determinative of
"doing business" is not really the number or the quantity of the transactions, but more importantly, the
intention of an entity to continue the body of its business in the country. The number and quantity are
merely evidence of such intention. The phrase "isolated transaction" has a definite and fixed meaning,
i.e. a transaction or series of transactions set apart from the common business of a foreign enterprise in
the sense that there is no intention to engage in a progressive pursuit of the purpose and object of the
business organization. Whether a foreign corporation is "doing business" does not necessarily depend
upon the frequency of its transactions, but more upon the nature and character of the transactions.
Given the facts of the case, the Court cannot see how Eriks' 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 the Court to rule otherwise. Accordingly and ineluctably, Eriks must be held to
be incapacitated to maintain the action a quo against Enriquez.
FIRST DIVISION

[G.R. No. 131367. August 31, 2000]

HUTCHISON PORTS PHILIPPINES LIMITED, petitioner, vs. SUBIC BAY METROPOLITAN AUTHORITY,
INTERNATIONAL CONTAINER TERMINAL SERVICES INC., ROYAL PORT SERVICES INC. and the EXECUTIVE
SECRETARY, respondents.

DECISION

YNARES-SANTIAGO, J.:

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 SBMAs 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 SBMAs Pre-
qualification, Bids and Awards Committee (or SBMA-PBAC).

Thereafter, the services of three (3) international consultants[2] 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 HPPLs 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.[4]
Nevertheless, the opening of the sealed financial bids proceeded under advisement relative to the
protest signified by RPSI. The financial bids, more particularly the proposed royalty fee of each bidder,
was as follows:

ICTSI ------------US$57.80 TEU

HPPL ------------US$20.50 TEU

RPSI -------------US$15.08 TEU

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
RPSIs 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.[6] (Underscoring supplied)

The following day, ICTSI filed a letter-appeal with SBMAs Board of Directors requesting the nullification
and reversal of the above-quoted resolution rejecting ICTSIs 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] On August 30, 1996, then Chief Presidential Legal Counsel (CPLC) Renato L. Cayetano
submitted a memorandum to then President Fidel V. Ramos, containing the following recommendations:

We therefore suggest that the President direct SBMA Chairman Gordon to consider option number 4
that is to re-evaluate the financial bids submitted by the parties, taking into consideration all the
following factors:
1. Reinstate ICTSIs bid;

2. Disregard all arguments relating to monopoly;

3. The re-evaluation must be limited to the parties financial bids.

3.1 Considering that the parties business have been accepted (passed), strictly follow the criteria for bid
evaluation provided for in pars. (c) and (d), Part B (1) of the Tender Document.

4. In the re-evaluation, the COA should actively participate to determine which of the financial bids is
more advantageous.

5. In addition, all the parties should be given ample opportunity to elucidate or clarify the
components/justification for their respective financial bids in order to ensure fair play and transparency
in the proceedings.

6. The Presidents authority to review the final award shall remain.[8] (Underscoring supplied)

The recommendation of CPLC Cayetano was approved by President Ramos, and a copy of President
Ramos handwritten approval was sent to the SBMA Board of Directors. Accordingly, the SBMA Board,
with the concurrence of representatives of the Commission on Audit, agreed to focus the reevaluation of
the bids in accordance with the evaluation criteria and the detailed components contained in the Tender
Document, including all relevant information gleaned from the bidding documents, as well as the reports
of the three international experts and the consultancy firm hired by the SBMA.

On September 19, 1996, the SBMA Board issued a Resolution, declaring:

NOW, THEREFORE, IT IS HEREBY RESOLVED that the bid that conforms to the Invitation to Tender, that
has a realistic Business Plan offering the greatest financial return to SBMA, the best possible offer and
the most advantageous to the government is that of HPPL and HPPL is accordingly selected as the
winning bidder and is hereby awarded the concession for the operation and development of the Subic
Bay Container Terminal.[9] (Underscoring supplied)
In a letter dated September 24, 1996, the SBMA Board of Directors submitted to the Office of the
President the results of the re-evaluation of the bid proposals, to wit:

SBMA, through the unanimous vote of all the Board Members, excluding the Chairman of the Board who
voluntarily inhibited himself from participating in the re-evaluation, selected the HPPL bid as the winning
bid, being: the conforming bid with a realistic Business Plan offering the greatest financial return to the
SBMA; the best possible offer in the market, and the most advantageous to the government in
accordance with the Tender Document.[10]

Notwithstanding the SBMA Boards recommendations and action awarding the project to HPPL, then
Executive Secretary Ruben Torres submitted a memorandum to the Office of the President
recommending that another rebidding be conducted.[11] Consequently, the Office of the President
issued a Memorandum directing the SBMA Board of Directors to refrain from signing the Concession
Contract with HPPL and to conduct a rebidding of the project.[12]

In the meantime, the Resident Ombudsman for the DOTC filed a complaint against members of the
SBMA-PBAC before the Office of the Ombudsman for alleged violation of Section 3(e) of Republic Act No.
3019 for awarding the contract to HPPL. On April 16, 1997, the Evaluation and Preliminary Investigation
Bureau of the Office of the Ombudsman issued a Resolution absolving the members of the SBMA-PBAC
of any liability and dismissing the complaint against them, ruling thus:

After an assiduous study of the respective contentions of both parties, we are inclined to hold, as it is
hereby held, that there is no proof on record pinpointing respondents to have acted in excess of their
discretion when they awarded the bid to HPPL. Records revealed that respondents, in the exercise of
their discretion in determining the financial packages offered by the applicants, were guided by the
expert report of Davis, Langdon and Seah (DLS) that fairly evaluated which of the bidders tender the
greatest financial return to the government. There is no showing that respondents had abused their
prerogatives. As succinctly set forth in the DLS report it stated, among others, that, in assessing the full
financial return to SBMA offered by the bidders, it is necessary to consider the following critical matters:

1. Royalty fees

2. Volume of TEUs as affected by:

a. Tariff rates;
b. Marketing strategy;

c. Port facilities; and

d. Efficient reliable services.

With the preceding parameters for the evaluation of bidders business plan, the respondents were fairly
guided by, as they aligned their judgment in congruence with, the opinion of the panel of experts and
the SBMAs Technical Evaluation Committee to the effect that HPPLs business is superior while that of
ICTSIs appeared to be unrealistically high which may eventually hinder the competitiveness of the SBMA
port with the rest of the world. Respondents averred that the panel of World Bank experts noted that
ICTSIs high tariff rates at U.S. $119.00 per TEU is already higher by 37% through HPPL, which could
further increase by 20% in the first two (2) years and by 5% hike thereafter. In short, high tariffs would
discourage potential customers which may be translated into low cargo volume that will eventually
reduce financial return to SBMA. Respondents asserted that HPPLs business plan offers the greatest
financial return which could be equated that over the five years, HPPL offers 1.25 billion pesos while
ICTSI offers P0.859 billion, and RPSI offers P.420 billion. Over the first ten years HPPL gives P2.430 billion,
ICTSI tenders P2.197 billion and RPSI has P1.632 billion.

Viewed from this perspective alongside with the evidence on record, the undersigned panel does not
find respondents to have exceeded their discretion in awarding the bid to HPPL. Consequently, it could
not be said that respondents act had placed the government at a grossly disadvantageous plight that
could have jeopardized the interest of the Republic of the Philippines.[13]

On July 7, 1997, the HPPL, feeling aggrieved by the SBMAs failure and refusal to commence negotiations
and to execute the Concession Agreement despite its earlier pronouncements that HPPL was the
winning bidder, filed a complaint[14] against SBMA before the Regional Trial Court (RTC) of Olongapo
City, Branch 75, for specific performance, mandatory injunction and damages. In due time, ICTSI, RPSI
and the Office of the President filed separate Answers-in-Intervention[15] to the complaint opposing the
reliefs sought by complainant HPPL.

Complainant HPPL alleged and argued therein that a binding and legally enforceable contract had been
established between HPPL and defendant SBMA under Article 1305 of the Civil Code, considering that
SBMA had repeatedly declared and confirmed that HPPL was the winning bidder. Having accepted HPPLs
offer to operate and develop the proposed container terminal, defendant SBMA is duty-bound to comply
with its obligation by commencing negotiations and drawing up a Concession Agreement with plaintiff
HPPL. HPPL also pointed out that the bidding procedure followed by the SBMA faithfully complied with
existing laws and rules established by SBMA itself; thus, when HPPL was declared the winning bidder it
acquired the exclusive right to negotiate with the SBMA. Consequently, plaintiff HPPL posited that SBMA
should be: (1) barred from conducting a re-bidding of the proposed project and/or performing any such
acts relating thereto; and (2) prohibited from negotiating with any party other than plaintiff HPPL until
negotiations between HPPL and SBMA have been concluded or in the event that no acceptable
agreement could be arrived at. Plaintiff HPPL also alleged that SBMAs continued refusal to negotiate the
Concession Contract is a substantial infringement of its proprietary rights, and caused damage and
prejudice to plaintiff HPPL.

Hence, HPPL prayed that:

(1) Upon the filing of this complaint, hearings be scheduled to determine the propriety of plaintiffs
mandatory injunction application which seeks to order defendant or any of its appropriate officers or
committees to forthwith specify the date as well as to perform any and all such acts (e.g. laying the
ground rules for discussion) for the commencement of negotiations with plaintiff with the view to
signing at the earliest possible time a Concession Agreement for the development and operation of the
Subic Bay Container Terminal.

(2) Thereafter, judgment be rendered in favor of plaintiff and against defendant:

2.1. Making permanent the preliminary mandatory injunction it had issued;

2.2. Ordering defendant to implement the Concession Agreement it had executed with plaintiff in
respect of the development and operation of the proposed Subic Bay Container Terminal;

2.3. Ordering defendant to pay for the cost of plaintiffs attorneys fees in the amount of P500,000.00, or
as otherwise proven during the trial.

Plaintiff prays for other equitable reliefs.[16]

During the pre-trial hearing, one of the issues raised and submitted for resolution was whether or not
the Office of the President can set aside the award made by SBMA in favor of plaintiff HPPL and if so, can
the Office of the President direct the SBMA to conduct a re-bidding of the proposed project.
While the case before the trial court was pending litigation, on August 4, 1997, the SBMA sent notices to
plaintiff HPPL, ICTSI and RPSI requesting them to declare their interest in participating in a rebidding of
the proposed project.[17] On October 20, 1997, plaintiff HPPL received a copy of the minutes of the pre-
bid conference which stated that the winning bidder would be announced on December 5, 1997.[18]
Then on November 4, 1997, plaintiff HPPL learned that the SBMA had accepted the bids of ICTSI and
RPSI who were the only bidders who qualified.

In order to enjoin the rebidding while the case was still pending, plaintiff HPPL filed a motion for
maintenance of the status quo[19] on October 28, 1997. The said motion was denied by the court a quo
in an Order dated November 3, 1997, to wit:

Plaintiff maintains that by voluntarily participating in this proceedings, the defendant and the
intervenors have unqualifiedly agreed to submit the issue of the propriety, legality and validity of the
Office of the Presidents directive that the SBMA effect a rebidding of its concession contract or the
operation of the Subic Bay Container Terminal. As such, the status quo must be maintained in order not
to thwart the courts ability to resolve the issues presented. Further, the ethics of the profession require
that counsel should discontinue any act which tends to render the issues academic.

The Opposition is anchored on lack of jurisdiction since the issuance of a cease-and-desist order would
be tantamount to the issuance of a Temporary Restraining Order or a Writ of Injunction which this Court
cannot do in light of the provision of Section 21 of R.A. 7227 which states:

Section 21. Injunction and Restraining Order. The implementation of the projects for the conversion into
alternative productive uses of the military reservations are urgent and necessary and shall not be
restrained or enjoined except by an order issued by the Supreme Court of the Philippines.

During the hearing on October 30, 1997, SBMAs counsel revealed that there is no law or administrative
rule or regulation which requires that a bidding be accomplished within a definite time frame.

Truly, the matter of the deferment of the re-bidding on November 4, 1997 rests on the sound discretion
of the SBMA. For this Court to issue a cease-and-desist order would be tantamount to an issuance of a
Temporary Restraining Order or a Writ of Preliminary Injunction. (Prado v. Veridiano II, G.R. No. 98118,
December 6, 1991).

The Court notes that the Office of the President has not been heard fully on the issues. Moreover, one of
the intervenors is of the view that the issue of jurisdiction must be resolved first, ahead of all the other
issues.
WHEREFORE, and viewed from the foregoing considerations, plaintiffs motion is DENIED.

SO ORDERED.[20] (Underscoring supplied)

Hence, this petition filed by petitioner (plaintiff below) HPPL against respondents SBMA, ICTSI, RPSI and
the Executive Secretary seeking to obtain a prohibitory injunction. The grounds relied upon by petitioner
HPPL to justify the filing of the instant petition are summed up as follows:

29. It is respectfully submitted that to allow or for this Honorable Court to otherwise refrain from
restraining SBMA, during the pendency of this suit, from committing the aforementioned act(s) which
will certainly occur on 5 December 1997 such action (or inaction) will work an injustice upon petitioner
which has validly been announced as the winning bidder for the operation of the Subic Bay Container
Terminal.

30. To allow or for this Honorable Court to otherwise refrain from restraining SBMA, during the
pendency of this suit, from committing the aforementioned threatened acts would be in violation of
petitioners rights in respect of the action it had filed before the RTC of Olongapo City in Civil Case No.
243-O-97, and could render any judgment which may be reached by said Court moot and ineffectual. As
stated, the legal issues raised by the parties in that proceedings are of far reaching importance to the
national pride and prestige, and they impact on the integrity of government agencies engaged in
international bidding of privatization projects. Its resolution on the merits by the trial court below and,
thereafter, any further action to be taken by the parties before the appellate courts will certainly benefit
respondents and the entire Filipino people.[21]

WHEREFORE, petitioner HPPL sought relief praying that:

a) Upon the filing of this petition, the same be given due course and a temporary restraining order
and/or writ of preliminary injunction be issued ex parte, restraining SBMA or any of its committees, or
other persons acting under its control or direction or upon its instruction, from declaring any winner on
5 December 1997 or at any other date thereafter, in connection with the rebidding for the privatization
of the Subic Bay Container Terminal and/or for any, some or all of the respondents to perform any such
act(s) in pursuance thereof, until further orders from this Honorable Court;

b) After appropriate proceedings, judgment be rendered in favor of petitioner and against respondents --
(1) Ordering SBMA to desist from conducting any rebidding or in declaring the winner of any such
rebidding in respect of the development and operation of the Subic Bay Container Terminal until the
judgment which the RTC of Olongapo City may render in Civil Case No. 243-O-97 is resolved with finality;

(2) Declaring null and void any award which SBMA may announce or issue on 5 December 1997; and

(3) Ordering respondents to pay for the cost of suit.

Petitioner prays for other equitable reliefs.[22]

The instant petition seeks the issuance of an injunctive writ for the sole purpose of holding in abeyance
the conduct by respondent SBMA of a rebidding of the proposed SBICT project until the case for specific
performance is resolved by the trial court. In other words, petitioner HPPL prays that the status quo be
preserved until the issues raised in the main case are litigated and finally determined. Petitioner was
constrained to invoke this Courts exclusive jurisdiction and authority by virtue of the above-quoted
Republic Act 7227, Section 21.

On December 3, 1997, this Court granted petitioner HPPLs application for a temporary restraining order
enjoining the respondent SBMA or any of its committees, or other persons acting under its control or
direction or upon its instruction, from declaring any winner on December 5, 1997 or at any other date
thereafter, in connection with the rebidding for the privatization of the Subic Bay Container Terminal
and/or for any, some or all of the respondents to perform any such act or acts in pursuance thereof.[23]

There is no doubt that since this controversy arose, precious time has been lost and a vital infrastructure
project has in essense been mothballed to the detriment of all parties involved, not the least of which is
the Philippine Government, through its officials and agencies, who serve the interest of the nation. It is,
therefore, imperative that the issues raised herein and in the court a quo be resolved without further
delay so as not to exacerbate an already untenable situation.

At the outset, the application for the injunctive writ is only a provisional remedy, a mere adjunct to the
main suit.[24] Thus, it is not uncommon that the issues in the main action are closely intertwined, if not
identical, to the allegations and counter allegations propounded by the opposing parties in support of
their contrary positions concerning the propriety or impropriety of the injunctive writ. While it is not our
intention to preempt the trial courts determination of the issues in the main action for specific
performance, this Court has a bounden duty to perform; that is, to resolve the matters before this Court
in a manner that gives essence to justice, equity and good conscience.

While our pronouncements are for the purpose only of determining whether or not the circumstances
warrant the issuance of the writ of injunction, it is inevitable that it may have some impact on the main
action pending before the trial court. Nevertheless, without delving into the merits of the main case, our
findings herein shall be confined to the necessary issues attendant to the application for an injunctive
writ.

For an injunctive writ to be issued, the following requisites must be proven:

First. That the petitioner/applicant must have a clear and unmistakable right.

Second. That there is a material and substantial invasion of such right.

Third. That there is an urgent and permanent necessity for the writ to prevent serious damage.[25]

To our mind, petitioner HPPL has not sufficiently shown that it has a clear and unmistakable right to be
declared the winning bidder with finality, such that the SBMA can be compelled to negotiate a
Concession Contract. Though the SBMA Board of Directors, by resolution, may have declared HPPL as the
winning bidder, said award cannot be said to be final and unassailable. The SBMA Board of Directors and
other officers are subject to the control and supervision of the Office of the President. All projects
undertaken by SBMA require the approval of the President of the Philippines under Letter of Instruction
No. 620, which places the SBMA under its ambit as an instrumentality, defined in Section 10 thereof as
an agency of the national government, not integrated within the department framework, vested with
special functions or jurisdiction by law, endowed with some if not all corporate powers, administering
special funds, and enjoying operational autonomy, usually through a charter. This term includes
regulatory agencies, chartered institutions and government owned and controlled corporations.[26]
(Underscoring supplied)

As a chartered institution, the SBMA is always under the direct control of the Office of the President,
particularly when contracts and/or projects undertaken by the SBMA entail substantial amounts of
money. Specifically, Letter of Instruction No. 620 dated October 27, 1997 mandates that the approval of
the President is required in all contracts of the national government offices, agencies and
instrumentalities, including government-owned or controlled corporations involving two million pesos
(P2,000,000.00) and above, awarded through public bidding or negotiation. The President may, within
his authority, overturn or reverse any award made by the SBMA Board of Directors for justifiable
reasons. It is well-established that the discretion to accept or reject any bid, or even recall the award
thereof, is of such wide latitude that the courts will not generally interfere with the exercise thereof by
the executive department, unless it is apparent that such exercise of discretion is used to shield
unfairness or injustice. When the President issued the memorandum setting aside the award previously
declared by the SBMA in favor of HPPL and directing that a rebidding be conducted, the same was,
within the authority of the President and was a valid exercise of his prerogative. Consequently, petitioner
HPPL acquired no clear and unmistakable right as the award announced by the SBMA prior to the
Presidents revocation thereof was not final and binding.

There being no clear and unmistakable right on the part of petitioner HPPL, the rebidding of the
proposed project can no longer be enjoined as there is no material and substantial invasion to speak of.
Thus, there is no longer any urgent or permanent necessity for the writ to prevent any perceived serious
damage. In fine, since the requisites for the issuance of the writ of injunction are not present in the
instant case, petitioners application must be denied for lack of merit.[27]

Finally, we focus on the matter of whether or not petitioner HPPL has the legal capacity to even seek
redress from this Court. Admittedly, petitioner HPPL is a foreign corporation, organized and existing
under the laws of the British Virgin Islands. While the actual bidder was a consortium composed of
petitioner, and two other corporations, namely, Guoco Holdings (Phils.) Inc. and Unicol Management
Servises, Inc., it is only petitioner HPPL that has brought the controversy before the Court, arguing that it
is suing only on an isolated transaction to evade the legal requirement that foreign corporations must be
licensed to do business in the Philippines to be able to file and prosecute an action before Philippines
courts.

The maelstrom of this issue is 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.

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 corporations intention to do
business.[29]

Participating in the bidding process constitutes doing business because it shows the foreign corporations
intention to engage in business here. The bidding for the concession contract is but an exercise of the
corporations 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.

Puno, Kapunan, and Pardo, JJ., concur.

Davide, Jr., C.J., (Chairman), in the result.

Commercial Law Corporation Law Foreign Corporation License Requirement

In 1996, Hutchison Ports Philippines Limited (HPPL)won a public bidding made by the Subic Bay
Metropolitan Authority (SBMA). The project was to develop and operate a modern marine container
terminal within the Subic Bay Freeport Zone. The SBMA Board of Directors already declared HPPL as the
winner but later on, the Office of the President reversed the decision of the Board and ordered a
rebidding. In the rebidding however, HPPL was no longer among the qualified bidders. Eventually, HPPL
filed a petition for injunction to enjoin SBMA from conducting the rebidding.

ISSUE: Whether or not Hutchison has the right to file an injunction case against SBMA.

HELD: No. The declaration made by the SBMA Board declaring HPPL as the winning bidder was neither
final nor unassailable. Under LOI No. 620, all projects undertaken by the SBMA are subject to the
approval of the Office of the President. Hence, the Board of SBMA is under the control and supervision
of the President of the Philippines. Therefore, the declaration made by the Board did not vest any right
in favor of HPPL.

Further, HPPL cannot sue in the Philippines. It is a foreign corporation registered under the laws of the
British Virgin Islands. It did not register here in the Philippines.

HPPL cannot invoke that it was suing only on an isolated transaction. The conduct of bidding is not an
isolated transaction. It is doing business here in the Philippines. The Supreme Court emphasized that
as a general rule, doing or engaging in or transacting business in the Philippines is a case to case
basis. 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 corporations intention to do business.

Participating in the bidding process constitutes doing business because it shows the foreign
corporations intention to engage in business here. The bidding for the concession contract is but an
exercise of the corporations reason for creation or existence. Therefore, HPPL has done business here
without license. It cannot now sue in the Philippines without license because its participation in the
bidding is not merely an isolated transaction.

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.

THIRD DIVISION

[G.R. No. 138104. April 11, 2002]

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

DECISION

SANDOVAL-GUTIERREZ, J.:

In the present Petition for Review on Certiorari, petitioner MR Holdings, Ltd. assails the a) Decision[1]
dated January 8, 1999 of the Court of Appeals in CA-G.R. SP No. 49226 finding no grave abuse of
discretion on the part of Judge Leonardo P. Ansaldo of the Regional Trial Court (RTC), Branch 94, Boac,
Marinduque, in denying petitioners application for a writ of preliminary injunction;[2] and b)
Resolution[3] dated March 29, 1999 denying petitioners motion for reconsideration.

The facts of the case are as follows:

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$40,000,000.00 to
finance the latters mining project at Sta. Cruz, Marinduque. The principal loan of US$ 15,000,000.00 was
sourced from ADBs 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 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 (Marcoppers) 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 Marcoppers 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 (Marcoppers)
properties, mining equipment and facilities, to wit:

Land and Mining Rights

Building and Other Structures

Other Land Improvements

Machineries & Equipment, and Warehouse Inventory

Mine/Mobile Equipment

Transportation Equipment and Furniture & Fixtures

Meanwhile, it appeared that on May 7, 1997, Solidbank Corporation (Solidbank) obtained a Partial
Judgment[9] against Marcopper from the RTC, Branch 26, Manila, in Civil Case No. 96-80083 entitled
Solidbank Corporation vs. Marcopper Mining Corporation, John E. Loney, Jose E. Reyes and Teodulo C.
Gabor, Jr., the decretal portion of which reads:

WHEREFORE, PREMISES CONSIDERED, partial judgment is hereby rendered ordering defendant

Marcopper Mining Corporation, as follows:

1. To pay plaintiff Solidbank the sum of Fifty Two Million Nine Hundred Seventy Thousand Pesos Seven
Hundred Fifty Six and 89/100 only (PHP 52,970,756.89), plus interest and charges until fully paid;

2. To pay an amount equivalent to Ten Percent (10%) of above-stated amount as attorneys fees; and

3. To pay the costs of suit.

"SO ORDERED.

Upon Solidbanks 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.[10] Thereafter, respondent Bajar issued two notices of levy on Marcoppers personal and real
properties, and over all its stocks of scrap iron and unserviceable mining equipment.[11] Together with
sheriff Ferdinand M. Jandusay (also a respondent) of the RTC, Branch 94, Boac, Marinduque, respondent
Bajar issued two notices setting the public auction sale of the levied properties on August 27, 1998 at the
Marcopper mine site.[12]

Having learned of the scheduled auction sale, petitioner served an Affidavit of Third-Party Claim[13]
upon respondent sheriffs on August 26, 1998, asserting its ownership over all Marcoppers mining
properties, equipment and facilities by virtue of the Deed of Assignment.

Upon the denial of its Affidavit of ThirdParty Claim by the RTC of Manila,[14] petitioner commenced with
the RTC of Boac, Marinduque, presided by Judge Leonardo P. Ansaldo, a complaint for reivindication of
properties, etc., with prayer for preliminary injunction and temporary restraining order against
respondents Solidbank, Marcopper, and sheriffs Bajar and Jandusay.[15] The case was docketed as Civil
Case No. 98-13.

In an Order[16]dated October 6, 1998, Judge Ansaldo denied petitioners application for a writ of
preliminary injunction on the ground that a) petitioner has no legal capacity to sue, it being a foreign
corporation doing business in the Philippines without license; b) an injunction will amount to staying the
execution of a final judgment by a court of co-equal and concurrent jurisdiction; and c) the validity of the
Assignment Agreement and the Deed of Assignment has been put into serious question by the timing of
their execution and registration.

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 petitioners 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.

xxxxxx
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 Marcoppers rehabilitation and the local situs where the Deeds of
Assignment were executed, without petitioner continuing to do business in the country.

xxxxxx

While petitioner may just be an assignee to the Deeds of Assignment, it may still fall within the meaning
of doing business in light of the Supreme Court ruling in the case of Far East International Import and
Export Corporation vs. Nankai Kogyo Co., 6 SCRA 725, that:

Where a single act or transaction however is not merely incidental or casual but indicates the foreign
corporations intention to do other business in the Philippines, said single act or transaction constitutes
doing or engaging in or transacting business in the Philippines.

Furthermore, the court went further by declaring that even a single act may constitute doing business if
it is intended to be the beginning of a series of transactions. (Far East International Import and Export
Corporation vs. Nankai Kogyo Co. supra).

On the issue of whether petitioner is the bona fide owner of all the mining facilities and equipment of
Marcopper, petitioner relies heavily on the Assignment Agreement allegedly executed on March 20,
1997 wherein all the rights and interest of Asian Development Bank (ADB) in a purported Loan
Agreement were ceded and transferred in favor of the petitioner as assignee, in addition to a subsequent
Deed of Assignment dated December 28, 1997 conveying absolutely all the properties, mining
equipment and facilities of Marcopper in favor of petitioner.

The Deeds of Assignment executed in favor of petitioner cannot be binding on the judgment creditor,
private respondent Solidbank, under the general legal principle that contracts can only bind the parties
who had entered into it, and it cannot favor or prejudice a third person (Quano vs. Court of Appeals, 211
SCRA 40). Moreover, by express stipulation, the said deeds shall be governed, interpreted and construed
in accordance with laws of New York.
The Deeds of Assignment executed by Marcopper, through its President, Atty. Teodulo C. Gabor, Jr., were
clearly made in bad faith and in fraud of creditors, particularly private respondent Solidbank. The first
Assignment Agreement purportedly executed on March 20, 1997 was entered into after Solidbank had
filed on September 19, 1996 a case against Marcopper for collection of sum of money before Branch 26
of the Regional Trial Court docketed as Civil Case No. 96-80083. The second Deed of Assignment
purportedly executed on December 28, 1997 was entered into by President Gabor after Solidbank had
filed its Motion for Partial Summary Judgment, after the rendition by Branch 26 of the Regional Trial
Court of Manila of a Partial Summary Judgment and after the said trial court had issued a writ of
execution, and which judgment was later affirmed by the Court of Appeals. While the assignments
(which were not registered with the Registry of Property as required by Article 1625 of the new Civil
Code) may be valid between the parties thereof, it produces no effect as against third parties. The
purported execution of the Deeds of Assignment in favor of petitioner was in violation of Article 1387 of
the New Civil Code x x x. (Emphasis Supplied)

Hence, the present Petition for Review on Certiorari by MR Holdings, Ltd. moored on the following
grounds:

A. THE HONORABLE COURT OF APPEALS COMMITS A REVERSIBLE ERROR IN COMPLETELY DISREGARDING

AS A MATERIAL FACT OF THE CASE THE EXISTENCE OF THE PRIOR, REGISTERED 1992 DEED OF REAL
ESTATE AND CHATTEL MORTGAGE CREATING A LIEN OVER THE LEVIED PROPERTIES, SUBJECT OF THE
ASSIGNMENT AGREEMENT DATED MARCH 20, 1997, THUS, MATERIALLY CONTRIBUTING TO THE SAID
COURTS MISPERCEPTION AND MISAPPRECIATION OF THE MERITS OF PETITIONERS CASE.

B. THE HONORABLE COURT OF APPEALS COMMITS A REVERSIBLE ERROR IN MAKING A FACTUAL FINDING
THAT THE SAID ASSIGNMENT AGREEMENT IS NOT REGISTERED, THE SAME BEING CONTRARY TO THE
FACTS ON RECORD, THUS, MATERIALLY CONTRIBUTING TO THE SAID COURTS MISPERCEPTION AND
MISAPPRECIATION OF THE MERITS OF PETITIONERS CASE.

C. THE HONORABLE COURT OF APPEALS COMMITS A REVERSIBLE ERROR IN MAKING A FACTUAL FINDING
ON THE EXISTENCE OF AN ATTACHMENT ON THE PROPERTIES SUBJECT OF INSTANT CASE, THE SAME
BEING CONTRARY TO THE FACTS ON RECORD, THUS, MATERIALLY CONTRIBUTING TO THE SAID COURTS
MISPERCEPTION AND MISAPPRECIATION OF THE MERITS OF PETITIONERS CASE.

D. THE HONORABLE COURT OF APPEALS COMMITS A REVERSIBLE ERROR IN HOLDING THAT THE SAID
ASSIGNMENT AGREEMENT AND THE DEED OF ASSIGNMENT ARE NOT BINDING ON RESPONDENT
SOLIDBANK WHO IS NOT A PARTY THERETO, THE SAME BEING CONTRARY TO LAW AND ESTABLISHED
JURISPRUDENCE ON PRIOR REGISTERED MORTGAGE LIENS AND ON PREFERENCE OF CREDITS.
E. THE HONORABLE COURT OF APPEALS COMMITS A REVERSIBLE ERROR IN FINDING THAT THE
AFOREMENTIONED ASSIGNMENT AGREEMENT AND DEED OF ASSIGNMENT ARE SHAM, SIMULATED, OF
DUBIOUS CHARACTER, AND WERE MADE IN BAD FAITH AND IN FRAUD OF CREDITORS, PARTICULARLY
RESPONDENT SOLIDBANK, THE SAME BEING IN COMPLETE DISREGARD OF, VIZ: (1) THE LAW AND
ESTABLISHED JURISPRUDENCE ON PRIOR, REGISTERED MORTGAGE LIENS AND ON PREFERENCE OF
CREDITS, BY REASON OF WHICH THERE EXISTS NO CAUSAL CONNECTION BETWEEN THE SAID
CONTRACTS AND THE PROCEEDINGS IN CIVIL CASE NO. 96-80083; (2) THAT THE ASIAN DEVELOPMENT
BANK WILL NOT OR COULD NOT HAVE AGREED TO A SHAM; SIMULATED, DUBIOUS AND FRAUDULENT
TRANSACTION; AND (3) THAT RESPONDENT SOLIDBANKS BIGGEST STOCKHOLDER, THE BANK OF NOVA
SCOTIA, WAS A MAJOR BENEFICIARY OF THE ASSIGNMENT AGREEMENT IN QUESTION.

F. THE HONORABLE COURT OF APPEALS COMMITS A REVERSIBLE ERROR IN HOLDING THAT PETITIONER
IS WITHOUT LEGAL CAPACITY TO SUE AND SEEK REDRESS FROM PHILIPPINE COURTS, IT BEING THE CASE
THAT SECTION 133 OF THE CORPORATION CODE IS WITHOUT APPLICATION TO PETITIONER, AND IT
BEING THE CASE THAT THE SAID COURT MERELY RELIED ON SURMISES AND CONJECTURES IN OPINING
THAT PETITIONER INTENDS TO DO BUSINESS IN THE PHILIPPINES.

G. THE HONORABLE COURT OF APPEALS COMMITS A REVERSIBLE ERROR IN HOLDING THAT

RESPONDENT MARCOPPER, PLACER DOME, INC., AND PETITIONER ARE ONE AND THE SAME ENTITY, THE
SAME BEING WITHOUT FACTUAL OR LEGAL BASIS.

H. THE HONORABLE COURT OF APPEALS COMMITS A REVERSIBLE ERROR IN HOLDING PETITIONER

GUILTY OF FORUM SHOPPING, IT BEING CLEAR THAT NEITHER LITIS PENDENTIA NOR RES JUDICATA MAY
BAR THE INSTANT REIVINDICATORY ACTION, AND IT BEING CLEAR THAT AS THIRD-PARTY CLAIMANT, THE
LAW AFFORDS PETITIONER THE RIGHT TO FILE SUCH REIVINDICATORY ACTION.

I. THE HONORABLE COURT OF APPEALS COMMITS A REVERSIBLE ERROR IN RENDERING A DECISION

WHICH IN EFFECT SERVES AS JUDGMENT ON THE MERITS OF THE CASE.

J. THE SHERIFFS LEVY AND SALE, THE SHERIFFS CERTIFICATE OF SALE DATED OCTOBER 12, 1998, THE RTC-
MANILA ORDER DATED FEBRUARY 12, 1999, AND THE RTC-BOAC ORDER DATED NOVEMBER 25, 1998
ARE NULL AND VOID.

K. THE HONORABLE COURT OF APPEALS COMMITS A REVERSIBLE ERROR IN AFFIRMING THE DENIAL BY
THE RTC-BOAC OF PETITIONERS APPLICATION FOR PRELIMINARY INJUNCTION, THE SAME BEING IN
TOTAL DISREGARD OF PETITIONERS RIGHT AS ASSIGNEE OF A PRIOR, REGISTERED MORTGAGE LIEN, AND
IN DISREGARD OF THE LAW AND JURISPRUDENCE ON PREFERENCE OF CREDIT."
In its petition, petitioner alleges that it is not doing business in the Philippines and characterizes its
participation in the assignment contracts (whereby Marcoppers assets where transferred to it) as mere
isolated acts that cannot foreclose its right to sue in local courts. Petitioner likewise maintains that the
two assignment contracts, although executed during the pendency of Civil Case No. 96-80083 in the RTC
of Manila, are not fraudulent conveyances as they were supported by valuable considerations. Moreover,
they were executed in connection with prior transactions that took place as early as 1992 which involved
ADB, a reputable financial institution. Petitioner further claims that when it paid Marcoppers obligation
to ADB, it stepped into the latters shoes and acquired its (ADBS) rights, titles, and interests under the
Deed of Real Estate and Chattel Mortgage. Lastly, petitioner asserts its existence as a corporation,
separate and distinct from Placer Dome and Marcopper.

In its comment, Solidbank avers that: a) petitioner is doing business in the Philippines and this is
evidenced by the huge investment it poured into the assignment contracts; b) granting that petitioner is
not doing business in the Philippines, the nature of its transaction reveals an intention to do business or
to begin a series of transaction in the country; c) petitioner, Marcopper and Placer Dome are one and the
same entity, petitioner being then a wholly-owned subsidiary of Placer Dome, which, in turn, owns 40%
of Marcopper; d) the timing under which the assignments contracts were executed shows that
petitioners purpose was to defeat any judgment favorable to it (Solidbank); and e) petitioner violated the
rule on forum shopping since the object of Civil Case No. 98-13 (at RTC, Boac, Marinduque) is similar to
the other cases filed by Marcopper in order to forestall the sale of the levied properties.

Marcopper, in a separate comment, states that it is merely a nominal party to the present case and that
its principal concerns are being ventilated in another case.

The petition is impressed with merit.

Crucial to the outcome of this case is our resolution of the following issues: 1) Does petitioner have the
legal capacity to sue? 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?

We shall resolve the issues in seriatim.

I
The Court of Appeals ruled that petitioner has no legal capacity to sue in the Philippine courts because it
is a foreign corporation doing business here without license. A review of this ruling does not pose much
complexity as the principles governing a foreign corporations right to sue in local courts have long been
settled by our Corporation Law.[17] These principles may be condensed in three statements, to wit: a) if
a foreign corporation does business in the Philippines without a license, it cannot sue before the
Philippine courts;[18] b) if a foreign corporation is not doing business in the Philippines, it needs no
license to sue before Philippine courts on an isolated transaction[19]or on a cause of action entirely
independent of any business transaction;[20] and c) if a foreign corporation does business in the
Philippines with the required license, it can sue before Philippine courts on any transaction. Apparently,
it is not the absence of the prescribed license but the doing (of) business in the Philippines without such
license which debars the foreign corporation from access to our courts.[21]

The task at hand requires us to weigh the facts vis--vis the established principles. The question whether
or not a foreign corporation is doing business is dependent principally upon the facts and circumstances
of each particular case, considered in the light of the purposes and language of the pertinent statute or
statutes involved and of the general principles governing the jurisdictional authority of the state over
such corporations.[22]

Batas Pambansa Blg. 68, otherwise known as The Corporation Code of the Philippines, is silent as to
what constitutes doing or transacting business in the Philippines. Fortunately, jurisprudence has supplied
the deficiency and has held that 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 for which the
corporation was organized.[23] In Mentholatum Co. Inc., vs. Mangaliman,[24] this Court laid down the
test to determine whether a foreign company is doing business, thus:

x x x 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. (Emphasis supplied)[25]

Likewise, Section 1 of Republic Act No. 5455,[26] provides that:

SECTION. 1. Definition and scope of this Act. - (1) x x x the phrase doing business 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 totaling one hundred eighty 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.

There are other statutes[27] defining the term doing business in the same tenor as those above-quoted,
and as may be observed, one common denominator among them all is the concept of continuity.

In the case at bar, the Court of Appeals categorized as doing business petitioners 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 petitioners 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 the records. No effort was exerted by the Court of Appeals
to establish the nexus between petitioners business and the acts supposed to constitute doing business.
Thus, whether the assignment contracts were incidental to petitioners business or were continuation
thereof is beyond determination. We cannot apply the case cited by the Court of Appeals, Far East Intl
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 corporations 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 Marcoppers 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.

Indeed, the Court of Appeals holding that petitioner was determined to be doing business in the
Philippines is based mainly on conjectures and speculation. In concluding that the unmistakable
intention of petitioner is to continue Marcoppers business, the Court of Appeals hangs on the wobbly
premise that there is no other way for petitioner to recover its huge financial investments which it
poured into Marcoppers rehabilitation without it (petitioner) continuing Marcoppers business in the
country.[30] This is a mere presumption. Absent overt acts of petitioner from which we may directly infer
its intention to continue Marcoppers business, we cannot give our concurrence. Significantly, a view
subscribed upon by many authorities is that the mere ownership by a foreign corporation of a property
in a certain state, unaccompanied by its active use in furtherance of the business for which it was
formed, is insufficient in itself to constitute doing business.[31] In Chittim vs. Belle Fourche Bentonite
Products Co.,[32] it was held that even if a foreign corporation purchased and took conveyances of a
mining claim, did some assessment work thereon, and endeavored to sell it, its acts will not constitute
the doing of business so as to subject the corporation to the statutory requirements for the transacting
of business. On the same vein, petitioner, a foreign corporation, which becomes the assignee of mining
properties, facilities and equipment cannot be automatically considered as doing business, nor
presumed to have the intention of engaging in mining business.

One important point. Long before petitioner assumed Marcoppers debt to ADB and became their
assignee under the two assignment contracts, there already existed a Support and Standby Credit
Agreement between ADB and Placer Dome whereby the latter bound itself to provide cash flow support
for Marcoppers payment of its obligations to ADB. Plainly, petitioners payment of US$ 18,453, 450.12 to
ADB was more of a fulfillment of an obligation under the Support and Standby Credit Agreement rather
than an investment. That petitioner had to step into the shoes of ADB as Marcoppers creditor was just a
necessary legal consequence of the transactions that transpired. Also, we must hasten to add that the
Support and Standby Credit Agreement was executed four (4) years prior to Marcoppers insovency,
hence, the alleged intention of petitioner to continue Marcoppers business could have no basis for at
that time, Marcoppers fate cannot yet be determined.

In the final analysis, we are convinced that petitioner was engaged only in isolated acts or transactions.
Single or isolated acts, contracts, or transactions of foreign corporations are not regarded as a doing or
carrying on of business. Typical examples of these are the making of a single contract, sale, sale with the
taking of a note and mortgage in the state to secure payment therefor, purchase, or note, or the mere
commission of a tort.[33] In these instances, there is no purpose to do any other business within the
country.

II

Solidbank contends that from the chronology and timing of events, it is evident that there existed a pre-
set pattern of response on the part of Marcopper to defeat whatever court ruling that may be rendered
in favor of Solidbank.

We are not convinced.

While it may appear, at initial glance, that the assignment contracts are in the nature of fraudulent
conveyances, however, a closer look at the events that transpired prior to the execution of those
contracts gives rise to a different conclusion. The obvious flaw in the Court of Appeals Decision lies in its
constricted view of the facts obtaining in the case. In its factual narration, the Court of Appeals definitely
left out some events. We shall see later the significance of those events.

Article 1387 of the Civil Code of the Philippines provides:

Art. 1387. All contracts by virtue of which the debtor alienates property by gratuitous title are presumed
to have been entered into in fraud of creditors, when the donor did not reserve sufficient property to
pay all debts contracted before the donation.

Alienations by onerous title are also presumed fraudulent when made by persons against whom some
judgment has been rendered in any instance or some writ of attachment has been issued. The decision
or attachment need not refer to the property alienated, and need not have been obtained by the party
seeking rescission.

In addition to these presumptions, the design to defraud creditors may be proved in any other manner
recognized by law and of evidence.

This article presumes the existence of fraud made by a debtor. Thus, in the absence of satisfactory
evidence to the contrary, an alienation of a property will be held fraudulent if it is made after a judgment
has been rendered against the debtor making the alienation.[34] This presumption of fraud is not
conclusive and may be rebutted by satisfactory and convincing evidence. All that is necessary is to
establish affirmatively that the conveyance is made in good faith and for a sufficient and valuable
consideration.[35]

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 Marcoppers 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
execution of the Assignment Agreement on Macrh 20, 1997 and the Deed of Assignment on December
8,1997 is not the alpha of this case. While the execution of these assignment contracts almost coincided
with the rendition on May 7, 1997 of the Partial Judgment in Civil Case No. 96-80083 by the Manila RTC,
however, there was no intention on the part of petitioner to defeat Solidbanks claim. It bears reiterating
that as early as November 4, 1992, Placer Dome had already bound itself under a Support and Standby
Credit Agreement to provide Marcopper with cash flow support for the payment to ADB of its
obligations. When Marcopper ceased operations on account of disastrous mine tailings spill into the
Boac River and ADB pressed for payment of the loan, Placer Dome agreed to have its subsidiary, herein
petitioner, paid ADB the amount of US $18,453,450.12. Thereupon, ADB and Marcopper executed,
respectively, in favor of petitioner an Assignment Agreement and a Deed of Assignment. Obviously, the
assignment contracts were connected with transactions that happened long before the rendition in 1997
of the Partial Judgment in Civil Case No. 96-80083 by the Manila RTC. Those contracts cannot be viewed
in isolation. If we may add, it is highly inconceivable that ADB, a reputable international financial
organization, will connive with Marcopper to feign or simulate a contract in 1992 just to defraud
Solidbank for its claim four years thereafter. And it is equally incredible for petitioner to be paying the
huge sum of US $ 18, 453, 450.12 to ADB only for the purpose of defrauding Solidbank of the sum of
P52,970.756.89.

It is said that the test as to whether or not a conveyance is fraudulent is -- does it prejudice the rights of
creditors?[38] We cannot see how Solidbanks right was prejudiced by the assignment contracts
considering that substantially all of Marcoppers properties were already covered by the registered Deed
of Real Estate and Chattel Mortgage executed by Marcopper in favor of ADB as early as November 11,
1992. As such, Solidbank cannot assert a better right than ADB, the latter being a preferred creditor. It is
basic that mortgaged properties answer primarily for the mortgaged credit, not for the judgment credit
of the mortgagors unsecured creditor. Considering that petitioner assumed Marcoppers debt to ADB, it
follows that Solidbanks right as judgment creditor over the subject properties must give way to that of
the former.

III
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 subsidiarys 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]

The recent case of Philippine National Bank vs. Ritratto Group Inc.,[40] outlines the circumstances which
are useful in the determination of whether a subsidiary is but a mere instrumentality of the parent-
corporation, to wit:

(a) The parent corporation owns all or most of the capital stock of the subsidiary.

(b) The parent and subsidiary corporations have common directors or officers.

(c) The parent corporation finances the subsidiary.

(d) The parent corporation subscribes to all the capital stock of the subsidiary or otherwise causes its
incorporation.

(e) The subsidiary has grossly inadequate capital.

(f) The parent corporation pays the salaries and other expenses or losses of the subsidiary.

(g) The subsidiary has substantially no business except with the parent corporation or no assets except
those conveyed to or by the parent corporation.

(h) In the papers of the parent corporation or in the statements of its officers, the subsidiary is described
as a department or division of the parent corporation, or its business or financial responsibility is
referred to as the parent corporations own.
(i) The parent corporation uses the property of the subsidiary as its own.

(j) The directors or executives of the subsidiary do not act independently in the interest of the subsidiary,
but take their orders from the parent corporation.

(k) The formal legal requirements of the subsidiary are not observed.

In this catena of circumstances, what is only extant in the records is the matter of stock ownership. There
are no other factors indicative that petitioner is a mere instrumentality of Marcopper or Placer Dome.
The mere fact that Placer Dome agreed, under the terms of the Support and Standby Credit Agreement
to provide Marcopper with cash flow support in paying its obligations to ADB, does not mean that its
personality has merged with that of Marcopper. This singular undertaking, performed by Placer Dome
with its own stockholders in Canada and elsewhere, is not a sufficient ground to merge its corporate
personality with Marcopper which has its own set of shareholders, dominated mostly by Filipino citizens.
The same view applies to petitioners payment of Marcoppers remaining debt to ADB.

With the foregoing considerations and the absence of fraud in the transaction of the three foreign
corporations, we find it improper to pierce the veil of corporate fiction that equitable doctrine
developed to address situations where the corporate personality of a corporation is abused or used for
wrongful purposes.

IV

On the issue of forum shopping, there could have been a violation of the rules thereon if petitioner and
Marcopper were indeed one and the same entity. But since petitioner has a separate personality, it has
the right to pursue its third-party claim by filing the independent reivindicatory action with the RTC of
Boac, Marinduque, pursuant to Rule 39, Section 16 of the 1997 Rules of Civil Procedures. This remedy
has been recognized in a long line of cases decided by this Court.[41] In Rodriguez vs. Court of Appeals,
[42] we held:

. . . It has long been settled in this jurisdiction that the claim of ownership of a third party over properties
levied for execution of a judgment presents no issue for determination by the court issuing the writ of
execution.
. . .Thus, when a property levied upon by the sheriff pursuant to a writ of execution is claimed by third
person in a sworn statement of ownership thereof, as prescribed by the rules, an entirely different
matter calling for a new adjudication arises. And dealing as it does with the all important question of
title, it is reasonable to require the filing of proper pleadings and the holding of a trial on the matter in
view of the requirements of due process.

. . . In other words, construing Section 17 of Rule 39 of the Revised Rules of Court (now Section 16 of the
1997 Rules of Civil Procedure), the rights of third-party claimants over certain properties levied upon by
the sheriff to satisfy the judgment may not be taken up in the case where such claims are presented but
in a separate and independent action instituted by the claimants. (Emphasis supplied)

This reivindicatory action has for its object the recovery of ownership or possession of the property
seized by the sheriff, despite the third party claim, as well as damages resulting therefrom, and it may be
brought against the sheriff and such other parties as may be alleged to have connived with him in the
supposedly wrongful execution proceedings, such as the judgment creditor himself. Such action is an
entirely separate and distinct action from that in which execution has been issued. Thus, there being no
identity of parties and cause of action between Civil Case No. 98-13 (RTC, Boac) and those cases filed by
Marcopper, including Civil Case No. 96-80083 (RTC, Manila) as to give rise to res judicata or litis
pendentia, Solidbanks allegation of forum-shopping cannot prosper.[43]

All considered, we find petitioner to be entitled to the issuance of a writ of preliminary injunction.
Section 3, Rule 58 of the 1997 Rules of Civil Procedure provides:

SEC. 3 Grounds for issuance of preliminary injunction. A preliminary injunction may be granted when it is
established:

(a) That the applicant is entitled to the relief demanded, and the whole or part of such relief consists in
restraining the commission or continuance of the act or acts complained of, or in requiring the
performance of an act or acts, either for a limited period or perpetually;

(b) That the commission, continuance or non-performance of the acts or acts complained of during the
litigation would probably work injustice to the applicant; or

(c) That a party, court, agency or a person is doing, threatening, or is attempting to do, or is procuring or
suffering to be done, some act or acts probably in violation of the rights of the applicant respecting the
subject of the action or proceeding, and tending to render the judgment ineffectual.
Petitioners right to stop the further execution of the properties covered by the assignment contracts is
clear under the facts so far established. An execution can be issued only against a party and not against
one who did not have his day in court.[44] The duty of the sheriff is to levy the property of the judgment
debtor not that of a third person. For, as the saying goes, one mans goods shall not be sold for another
man's debts.[45] To allow the execution of petitioners properties would surely work injustice to it and
render the judgment on the reivindicatory action, should it be favorable, ineffectual. In Arabay, Inc., vs.
Salvador,[46] this Court held that an injunction is a proper remedy to prevent a sheriff from selling the
property of one person for the purpose of paying the debts of another; and that while the general rule is
that no court has authority to interfere by injunction with the judgments or decrees of another court of
equal or concurrent or coordinate jurisdiction, however, it is not so when a third-party claimant is
involved. We quote the instructive words of Justice Querube C. Makalintal in Abiera vs. Court of Appeals,
[47] thus:

The rationale of the decision in the Herald Publishing Company case[48] is peculiarly applicable to the
one before Us, and removes it from the general doctrine enunciated in the decisions cited by the
respondents and quoted earlier herein.

1. Under Section 17 of Rule 39 a third person who claims property levied upon on execution may
vindicate such claim by action. Obviously a judgment rendered in his favor, that is, declaring him to be
the owner of the property, would not constitute interference with the powers or processes of the court
which rendered the judgment to enforce which the execution was levied. If that be so and it is so
because the property, being that of a stranger, is not subject to levy then an interlocutory order such as
injunction, upon a claim and prima facie showing of ownership by the claimant, cannot be considered as
such interference either.

WHEREFORE, the petition is GRANTED. The assailed Decision dated January 8, 1999 and the Resolution
dated March 29, 1999 of the Court of Appeals in CA G.R. No. 49226 are set aside. Upon filing of a bond
of P1,000,000.00, respondent sheriffs are restrained from further implementing the writ of execution
issued in Civil Case No. 96-80083 by the RTC, Branch 26, Manila, until further orders from this Court. The
RTC, Branch 94, Boac, Marinduque, is directed to dispose of Civil Case No. 98-13 with dispatch.

SO ORDERED.

Melo, (Chairman), Vitug, Panganiban, and Carpio, JJ., concur.

Commercial Law Corporation Law License Requirement Foreign Corporation Being an assignee
does not automatically mean doing business

Marcopper Mining Corporation was unable to pay its loans from the Asian Development Bank (ADB).
Later, ADB transferred all its rights to collect from Marcopper to MR Holdings, Ltd. In order to pay MR
Holdings, Marcopper assigned all its assets to MR Holdings and executed therefor a Deed of Assignment
in MR Holdings favor.

Meanwhile, another creditor of Marcopper, Solidbank Corporation, won a case against Marcopper. The
court then issued a writ of execution directing Sheriff Carlos Bajar to levy Marcoppers assets.

MR Holdings then filed an opposition asserting that it is now the owner of Marcoppers assets hence,
Bajar cannot levy them. The lower court denied MR Holdings on the ground that the Deed of Assignment
was made in bad faith and that MR Holdings was a foreign corporation doing business without a license
in the Philippines (by virtue of the Deed of Assignment) and as such cannot sue in the Philippines.

ISSUE: Whether or not MR Holdings may sue on this particular transaction.

HELD: Yes. The Supreme Court emphasized the following rules when it comes to foreign corporations
doing business here in the Philippines:

if a foreign corporation does business in the Philippines without a license, it cannot sue before the
Philippine courts;

if a foreign corporation is not doing business in the Philippines, it needs no license to sue before
Philippine courts on an isolated transaction or on a cause of action entirely independent of any business
transaction;

if a foreign corporation does business in the Philippines with the required license, it can sue before
Philippine courts on any transaction.

Being a mere assignee does not constitute doing business in the Philippines. MR Holdings, a foreign
corporation, cannot be said to be doing business simply because it became an assignee of Marcopper.
MR Holdings was not doing anything else other than being a mere assignee. The only time that MR
Holdings is considered to be doing business here is that if it continues the business of Marcopper
which it did not.
Therefore, since it is not doing business here, pursuant to the rules above, it can sue without any license
before Philippine courts on an isolated transaction or on a cause of action entirely independent of any
business transaction.

Anent the issue of bad faith, the same was not proven. It appears that the deed of assignment was an
earlier agreement incidental to the loan agreement between ADB and Marcopper which precedes the
action brought by Solidbank against Marcopper.