Non-Stock Corporations and Foundations

Theory of Non-Stock Corporation

Section 14. Contents of the articles of incorporation. - All corporations organized

under this code shall file with the Securities and Exchange Commission articles of
incorporation in any of the official languages duly signed and acknowledged by all of
the incorporators, containing substantially the following matters, except as otherwise
prescribed by this Code or by special law:

XXX

2. The specific purpose or purposes for which the corporation is being incorporated.
Where a corporation has more than one stated purpose, the articles of incorporation
shall state which is the primary purpose and which is/are the secondary purpose or
purposes: Provided, That a non-stock corporation may not include a purpose which
would change or contradict its nature as such;

Section 43. Power to declare dividends. - The board of directors of a stock

corporation may declare dividends out of the unrestricted retained earnings which
shall be payable in cash, in property, or in stock to all stockholders on the basis of
outstanding stock held by them: Provided, That any cash dividends due on
delinquent stock shall first be applied to the unpaid balance on the subscription plus
costs and expenses, while stock dividends shall be withheld from the delinquent
stockholder until his unpaid subscription is fully paid: Provided, further, That no stock
dividend shall be issued without the approval of stockholders representing not less
than two-thirds (2/3) of the outstanding capital stock at a regular or special meeting
duly called for the purpose. (16a)

Stock corporations are prohibited from retaining surplus profits in excess of one
hundred (100%) percent of their paid-in capital stock, except: (1) when justified by
definite corporate expansion projects or programs approved by the board of
directors; or (2) when the corporation is prohibited under any loan agreement with
any financial institution or creditor, whether local or foreign, from declaring dividends
without its/his consent, and such consent has not yet been secured; or (3) when it
can be clearly shown that such retention is necessary under special circumstances
obtaining in the corporation, such as when there is need for special reserve for
probable contingencies. (n)

Section 87. Definition. - For the purposes of this Code, a non-stock corporation is
one where no part of its income is distributable as dividends to its members, trustees,
or officers, subject to the provisions of this Code on dissolution: Provided, That any
profit which a non-stock corporation may obtain as an incident to its operations shall,
whenever necessary or proper, be used for the furtherance of the purpose or
purposes for which the corporation was organized, subject to the provisions of this
Title.

The provisions governing stock corporation, when pertinent, shall be applicable to

non-stock corporations, except as may be covered by specific provisions of this Title.
(n)

Section 94. Rules of distribution. - In case dissolution of a non-stock corporation in

accordance with the provisions of this Code, its assets shall be applied and
distributed as follows:

XXX
5. In any other case, assets may be distributed to such persons, societies,
organizations or corporations, whether or not organized for profit, as may be
specified in a plan of distribution adopted pursuant to this Chapter. (n)

Valley Golf and Country Club v. Vda. De Caram

Facts:

Petitioner is a duly constituted non-stock, non-profit corporation which operates a golf

course. The members and their guests are entitled to play golf on the said course
and avail of the facilities and privilege. The shareholders are likewise assessed
monthly membership dues. Cong. Caram, Jr., respondent’s husband, subscribed and
paid in full 1 Golf Share of the petitioner and was subsequently issued with a stock
certificate which indicated a par value of P9,000. It was alleged by the petitioner that
Caram stopped paying his monthly dues and that it has sent 5 letters to Caram
concerning his delinquent account.

The Golf Share was subsequently sold at public auction for P25,000 after the BOD
had authorized the sale and the Notice of Auction Sale was published in the
Philippine Daily Inquirer. Caram thereafter died and his wife initiated intestate
proceedings before the RTC of IloIlo. Unaware of the pending controversy over the
Golf Share, the Caram family and the RTC included the Golf Share as part of
Caram’s estate. The RTC approved a project of partition of Caram’s estate and the
Golf Share was adjudicated to the wife, who paid the corresponding estate tax due,
including that on the golf Share. It was only through a letter that the heirs of Caram
learned of the sale of the Golf Share following their inquiry with Valley Golf about the
Golf Share.

After a series of correspondence, the Caram heirs were subsequently informed in a

letter that they were entitled to the refund of P11,066.52 out of the proceeds of the
sale of the Golf Share, which amount had been in the custody of the petitioner.
Caram’s wife filed an action for reconveyance of the Golf Share with damages before
the SEC against Valley Golf. The SEC Hearing Officer rendered a decision in favor of
the wife, ordering Valley Golf to convey ownership of the Golf Share, or in the
alternative to issue one fully paid share of stock of Valley Golf of the same class as
the Golf Share to the wife. Damages totaling P90,000.00 were also awarded to the
wife. The SEC hearing officer ruled that under Section 67, paragraph 2 of the
Corporation Code, a share of stock could only be deemed delinquent and sold in an
extrajudicial sale at public auction only upon the failure of the stockholder to pay the
unpaid subscription or balance for the share. However, the section could not have
applied in Caram’s case since he had fully paid for the Golf Share and he had been
assessed not for the share itself but for his delinquent club dues.

Proceeding from the foregoing premises, the SEC hearing officer concluded that the
auction sale had no basis in law and was thus a nullity. The SEC en banc and the CA
affirmed the hearing officer’s decision, and so the petitioner appealed before SC.

Issue: Whether a non-stock corporation can seize and dispose of the membership
share of a fully-paid member on account of its unpaid debts to the corporation when
it is authorized to do so under the corporate by-laws but not by the Articles of
Incorporation—Yes

Held:

The Supreme Court ruled that there is Sec. 67 of the Corporation Code dealing with
the termination of membership in a non-stock corporation such as Valley Golf. A
share can only be deemed delinquent and sold at public auction only upon the failure
of the stockholder to pay the unpaid subscription. However this is not the case.

Delinquency in monthly club dues was merely an ordinary debt enforceable by

judicial action in a civil case. A non-stock corporation may seize and disposed of a
fully paid member on account of its monthly dues when such is authorized by the by-
laws or the Articles of Incorporation. Section 91 provides that membership shall be
terminated in the manner and for causes provided in the Articles of Incorporations or
the by-laws.

However, the by-laws of petitioner should have provided formal notice and hearing
procedure before a member’s share may be seized and sold. The procedure for
stock corporation’s recourse on unpaid subscription is not applicable in member’s
shares in a non-stock corporation.

SC proceeded to declare the sale as invalid. SC found that Valley Golf acted in bad
faith when it sent the final notice to Caram under the pretense they believed him to
be still alive, when in fact they had very well known that he had already died.

The Court stated:

Whatever the reason Caram was unable to respond to the earlier notices, the fact
remains that at the time of the final notice, Valley Golf knew that Caram, having died
and gone, would not be able to settle the obligation himself, yet they persisted in
sending him notice to provide a color of regularity to the resulting sale.

That reason alone, evocative as it is of the absence of substantial justice in the sale
of the Golf Share, is sufficient to nullify the sale and sustain the rulings of the SEC
and the Court of Appeals.

Moreover, the utter and appalling bad faith exhibited by Valley Golf in sending out the
final notice to Caram on the deliberate pretense that he was still alive could bring into
operation Articles 19, 20 and 21 under the Chapter on Human Relations of the Civil
Code. These provisions enunciate a general obligation under law for every person to
act fairly and in good faith towards one another. Non-stock corporations and its
officers are not exempt from that obligation.

Tax Considerations for Non-Stock Corporations

SEC. 30. Exemptions from Tax on Corporations. - The following organizations

shall not be taxed under this Title in respect to income received by them as such:
(A) Labor, agricultural or horticultural organization not organized principally for profit;

(B) Mutual savings bank not having a capital stock represented by shares, and
cooperative bank without capital stock organized and operated for mutual purposes
and without profit;

(C) A beneficiary society, order or association, operating for the exclusive benefit of
the members such as a fraternal organization operating under the lodge system, or
mutual aid association or a nonstock corporation organized by employees providing
for the payment of life, sickness, accident, or other benefits exclusively to the
members of such society, order, or association, or nonstock corporation or their
dependents;

(D) Cemetery company owned and operated exclusively for the benefit of its
members;

(E) Nonstock corporation or association organized and operated exclusively for

religious, charitable, scientific, athletic, or cultural purposes, or for the rehabilitation of
veterans, no part of its net income or asset shall belong to or inure to the benefit of
any member, organizer, officer or any specific person;

(F) Business league chamber of commerce, or board of trade, not organized for
profit and no part of the net income of which inures to the benefit of any private
stock-holder, or individual;

(G) Civic league or organization not organized for profit but operated exclusively for
the promotion of social welfare;

(H) A nonstock and nonprofit educational institution;

(I) Government educational institution;

(J) Farmers' or other mutual typhoon or fire insurance company, mutual ditch or
irrigation company, mutual or cooperative telephone company, or like organization of
a purely local character, the income of which consists solely of assessments, dues,
and fees collected from members for the sole purpose of meeting its expenses; and

(K) Farmers', fruit growers', or like association organized and operated as a sales
agent for the purpose of marketing the products of its members and turning back to
them the proceeds of sales, less the necessary selling expenses on the basis of the
quantity of produce finished by them;

Notwithstanding the provisions in the preceding paragraphs, the income of whatever

kind and character of the foregoing organizations from any of their properties, real or
personal, or from any of their activities conducted for profit regardless of the
disposition made of such income, shall be subject to tax imposed under this Code.

SEC. 34. Deductions from Gross Income. - Except for taxpayers earning
compensation income arising from personal services rendered under an employer-
employee relationship where no deductions shall be allowed under this Section other
than under subsection (M) hereof, in computing taxable income subject to income tax
under Sections 24(A); 25(A); 26; 27(A), (B) and (C); and 28(A)(1), there shall be
allowed the following deductions from gross income;
(H) Charitable and Other Contributions. -

(1) In General. - Contributions or gifts actually paid or made within the taxable year
to, or for the use of the Government of the Philippines or any of its agencies or any
political subdivision thereof exclusively for public purposes, or to accredited domestic
corporation or associations organized and operated exclusively for religious,
charitable, scientific, youth and sports development, cultural or educational purposes
or for the rehabilitation of veterans, or to social welfare institutions, or to non-
government organizations, in accordance with rules and regulations promulgated by
the Secretary of finance, upon recommendation of the Commissioner, no part of the
net [30] income of which inures to the benefit of any private stockholder or individual in
an amount not in excess of ten percent (10%) in the case of an individual, and five
percent (5%) in the case of a corporation, of the taxpayer's taxable income derived
from trade, business or profession as computed without the benefit of this and the
following subparagraphs.

(2) Contributions Deductible in Full. - Notwithstanding the provisions of the

preceding subparagraph, donations to the following institutions or entities shall be
deductible in full:

(a) Donations to the Government. - Donations to the Government of the

Philippines or to any of its agencies or political subdivisions, including fully-owned
government corporations, exclusively to finance, to provide for, or to be used in
undertaking priority activities in education, health, youth and sports development,
human settlements, science and culture, and in economic development according to
a National Priority Plan determined by the National Economic and Development
Authority (NEDA), In consultation with appropriate government agencies, including its
regional development councils and private philanthropic persons and institutions:
Provided, That any donation which is made to the Government or to any of its
agencies or political subdivisions not in accordance with the said annual priority plan
shall be subject to the limitations prescribed in paragraph (1) of this Subsection;

(b) Donations to Certain Foreign Institutions or International

Organizations. - donations to foreign institutions or international organizations which
are fully deductible in pursuance of or in compliance with agreements, treaties, or
commitments entered into by the Government of the Philippines and the foreign
institutions or international organizations or in pursuance of special laws;

(c) Donations to Accredited Nongovernment Organizations. -The term

'nongovernment organization' means a non-profit domestic corporation:

(1) Organized and operated exclusively for scientific, research,

educational, character-building and youth and sports development, health,
social welfare, cultural or charitable purposes, or a combination thereof, no
part of the net [31] income of which inures to the benefit of any private
individual;

(2) Which, not later than the 15th day of the third month after the close
of the accredited nongovernment organizations taxable year in which
contributions are received, makes utilization directly for the active conduct of
the activities constituting the purpose or function for which it is organized and
operated, unless an extended period is granted by the Secretary of Finance
in accordance with the rules and regulations to be promulgated, upon
recommendation of the Commissioner;
 (3) The level of administrative expense of which shall, on an annual
basis, conform with the rules and regulations to be prescribed by the
Secretary of Finance, upon recommendation of the Commissioner, but in no
case to exceed thirty percent (30%) of the total expenses; and

(4) The assets of which, in the event of dissolution, would be

distributed to another non-profit domestic corporation organized for similar
purpose or purposes, or to the state for public purpose, or would be
distributed by a court to another organization to be used in such manner as in
the judgment of said court shall best accomplish the general purpose for
which the dissolved organization was organized.

Subject to such terms and conditions as may be prescribed by the

Secretary of Finance, the term 'utilization' means:

(i) Any amount in cash or in kind (including administrative

expenses) paid or utilized to accomplish one or more purposes for
which the accredited nongovernment organization was created or
organized.

(ii) Any amount paid to acquire an asset used (or held for use)
directly in carrying out one or more purposes for which the accredited
nongovernment organization was created or organized.

An amount set aside for a specific project which comes within one or
more purposes of the accredited nongovernment organization may be treated
as a utilization, but only if at the time such amount is set aside, the accredited
nongovernment organization has established to the satisfaction of the
Commissioner that the amount will be paid for the specific project within a
period to be prescribed in rules and regulations to be promulgated by the
Secretary of Finance, upon recommendation of the Commissioner, but not to
exceed five (5) years, and the project is one which can be better
accomplished by setting aside such amount than by immediate payment of
funds.

(3) Valuation. - The amount of any charitable contribution of property other than
money shall be based on the acquisition cost of said property.

(4) Proof of Deductions. - Contributions or gifts shall be allowable as deductions

only if verified under the rules and regulations prescribed by the Secretary of
Finance, upon recommendation of the Commissioner.

Rights of Members to Proportionate Share of Remaining Assets Upon

Dissolution

Section 94. Rules of distribution. - In case dissolution of a non-stock corporation in

accordance with the provisions of this Code, its assets shall be applied and
distributed as follows:

1. All liabilities and obligations of the corporation shall be paid, satisfied and
discharged, or adequate provision shall be made therefore;
2. Assets held by the corporation upon a condition requiring return, transfer or
conveyance, and which condition occurs by reason of the dissolution, shall be
returned, transferred or conveyed in accordance with such requirements;

3. Assets received and held by the corporation subject to limitations permitting their
use only for charitable, religious, benevolent, educational or similar purposes, but not
held upon a condition requiring return, transfer or conveyance by reason of the
dissolution, shall be transferred or conveyed to one or more corporations, societies
or organizations engaged in activities in the Philippines substantially similar to those
of the dissolving corporation according to a plan of distribution adopted pursuant to
this Chapter;

4. Assets other than those mentioned in the preceding paragraphs, if any, shall be
distributed in accordance with the provisions of the articles of incorporation or the by-
laws, to the extent that the articles of incorporation or the by-laws, determine the
distributive rights of members, or any class or classes of members, or provide for
distribution; and

5. In any other case, assets may be distributed to such persons, societies,

organizations or corporations, whether or not organized for profit, as may be
specified in a plan of distribution adopted pursuant to this Chapter. (n)

Section 95. Plan of distribution of assets. - A plan providing for the distribution of
assets, not inconsistent with the provisions of this Title, may be adopted by a non-
stock corporation in the process of dissolution in the following manner:

The board of trustees shall, by majority vote, adopt a resolution recommending a

plan of distribution and directing the submission thereof to a vote at a regular or
special meeting of members having voting rights. Written notice setting forth the
proposed plan of distribution or a summary thereof and the date, time and place of
such meeting shall be given to each member entitled to vote, within the time and in
the manner provided in this Code for the giving of notice of meetings to members.
Such plan of distribution shall be adopted upon approval of at least two-thirds (2/3) of
the members having voting rights present or represented by proxy at such meeting.
(n)

Foreign Corporations
Definition

Section 123. Definition and rights of foreign corporations. - For the purposes of this
Code, a foreign corporation is one formed, organized or existing under any laws
other than those of the Philippines and whose laws allow Filipino citizens and
corporations to do business in its own country or state. It shall have the right to
transact business in the Philippines after it shall have obtained a license to transact
business in this country in accordance with this Code and a certificate of authority
from the appropriate government agency. (n)

Avon Insurance PLC v. CA

Facts:
Yupangco Cotton Mills and Worldwide Surety and Insurance entered into an
insurance contract whereby several of the former’s properties will be secured by the
latter. Note that these contracts were covered by reinsurance treaties between
Worldwide Surety and Insurance and several foreign reinsurance companies.

As fate would have it within the respective effectivity periods of the insurance
policies, the properties therein insured were razed by fire, thereby giving rise to the
obligation of the insurer to indemnify the Yupangco Cotton Mills. Partial payments
were made by Worldwide Surety and Insurance and some of the reinsurance
companies.

Thereafter, Yupangco Cotton Mills filed a complaint against the foreign reinsurance
companies to collect their alleged percentage liability under contract treaties between
the foreign insurance companies and the international insurance broker C.J.
Boatright, acting as agent for respondent Worldwide Surety and Insurance Company.

Inasmuch as petitioners are not engaged in business in the Philippines with no

offices, places of business or agents in the Philippines, the reinsurance treaties
having been rendered abroad, service of summons upon motion of respondent
Yupangco, was made upon petitioners through the office of the Insurance
Commissioner.

Petitioners, by counsel on special appearance, seasonably filed motions to dismiss

disputing the jurisdiction of respondent Court and the extra- territorial service of
summons. Respondent Yupangco filed its opposition to the motion to dismiss,
petitioners filed their reply, and respondent Yupangco filed its rejoinder. Respondent
Court denied the motions to dismiss and directed petitioners to file their answer.

To this day, trial on the merits of the collection suit has not proceeded as in the
present petition, petitioners continue vigorously to dispute the trial courts assumption
of jurisdiction over them.

Issue: Whether petitioners are considered to be engaged in business in the

Philippines—No

Held:

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

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

As it is, private respondent has made no allegation or demonstration of the existence

of petitioners domestic agent, but avers simply that they are doing business not only
abroad but in the Philippines as well.

It does not appear at all that the petitioners had performed any act which would give
the general public the impression that it had been engaging, or intends to engage in
its ordinary and usual business undertakings in the country.

The reinsurance treaties between the petitioners and Worldwide Surety and
Insurance were made through an international insurance brokers, and not through
any entity of means remotely connected with the Philippines. Moreover there is
authority to the effect that a reinsurance company is not doing business in a certain
state merely because the property of lives which are insured by the original insurer
company are located in that state.

The reason for this is that a contract or reinsurance is generally a separate and
distinct arrangement from the original contract of insurance, whose contracted risk is
insured in the reinsurance agreement.

A foreign corporation, is one which owes its existence to the laws of another state,
and generally has no legal existence within the state in which it is foreign.

The purpose of the law in requiring that foreign corporations doing business in the
country be licensed to do so, is to subject the foreign corporations doing business in
the Philippines to the jurisdiction of the courts, otherwise, a foreign corporation
illegally doing business here because of its refusal or neglect to obtain the required
license and authority to do business may successfully though unfairly plead such
neglect or illegal act so as to avoid service and thereby impugn the jurisdiction of the
local courts.

The same danger does not exist among foreign corporations that are indubitably not
doing business in the Philippines. Indeed, if a foreign corporation does not do
business here, there would be no reason for it to be subject to the States regulation.
As we observed, in so far as State is concerned, such foreign corporation has no
legal existence. Therefore, to subject such corporation to the courts jurisdiction would
violate the essence of sovereignty.

Another point raised: When a defendant voluntarily appears, he is deemed to have

submitted himself to the jurisdiction of the court. This is not, however, always the
case. Admittedly, and without subjecting himself to the courts jurisdiction, the
defendant in an action can, by special appearance object to the courts assumption
on the ground of lack of jurisdiction. In this instance, the petitioners from the time
they filed their motions to dismiss, their submission have been consistently and
unfailingly to object to the trial courts assumption of jurisdiction, anchored on the fact
that they are all foreign corporations not doing business in the Philippines.
License to Do Business in the Philippines

Section 124. Application to existing foreign corporations. - Every foreign corporation

which on the date of the effectivity of this Code is authorized to do business in the
Philippines under a license therefore issued to it, shall continue to have such
authority under the terms and condition of its license, subject to the provisions of this
Code and other special laws. (n)

Section 125. Application for a license. - A foreign corporation applying for a license
to transact business in the Philippines shall submit to the Securities and Exchange
Commission a copy of its articles of incorporation and by-laws, certified in
accordance with law, and their translation to an official language of the Philippines, if
necessary. The application shall be under oath and, unless already stated in its
articles of incorporation, shall specifically set forth the following:

1. The date and term of incorporation;


 2. The address, including the street number, of the principal office of the
corporation in the country or state of incorporation;

3. The name and address of its resident agent authorized to accept summons and
process in all legal proceedings and, pending the establishment of a local office, all
notices affecting the corporation;

4. The place in the Philippines where the corporation intends to operate;

5. The specific purpose or purposes which the corporation intends to pursue in the
transaction of its business in the Philippines: Provided, That said purpose or
purposes are those specifically stated in the certificate of authority issued by the
appropriate government agency;

6. The names and addresses of the present directors and officers of the corporation;

7. A statement of its authorized capital stock and the aggregate number of shares
which the corporation has authority to issue, itemized by classes, par value of
shares, shares without par value, and series, if any;

8. A statement of its outstanding capital stock and the aggregate number of shares
which the corporation has issued, itemized by classes, par value of shares, shares
without par value, and series, if any;

9. A statement of the amount actually paid in; and

10. Such additional information as may be necessary or appropriate in order to

enable the Securities and Exchange Commission to determine whether such
corporation is entitled to a license to transact business in the Philippines, and to
determine and assess the fees payable.

Attached to the application for license shall be a duly executed certificate under oath
by the authorized official or officials of the jurisdiction of its incorporation, attesting to
the fact that the laws of the country or state of the applicant allow Filipino citizens
and corporations to do business therein, and that the applicant is an existing
corporation in good standing. If such certificate is in a foreign language, a translation
thereof in English under oath of the translator shall be attached thereto.
The application for a license to transact business in the Philippines shall likewise be
accompanied by a statement under oath of the president or any other person
authorized by the corporation, showing to the satisfaction of the Securities and
Exchange Commission and other governmental agency in the proper cases that the
applicant is solvent and in sound financial condition, and setting forth the assets and
liabilities of the corporation as of the date not exceeding one (1) year immediately
prior to the filing of the application.

Foreign banking, financial and insurance corporations shall, in addition to the above
requirements, comply with the provisions of existing laws applicable to them. In the
case of all other foreign corporations, no application for license to transact business
in the Philippines shall be accepted by the Securities and Exchange Commission
without previous authority from the appropriate government agency, whenever
required by law. (68a)

Marshall-Wells v. Elser

Facts:

Marshall-Wells Company, an Oregon corporation, (state in the Pacific Northwest of

the United States) sued Henry W. Elser & Co., Inc., a domestic corporation, in the
Court of First Instance of Manila, for the unpaid balance of a bill of goods amounting
to P2,660.74, sold by plaintiff to defendant and for which plaintiff holds accepted
drafts. Defendant demurred to the complaint on the statutory ground that the plaintiff
has no legal capacity to sue saying that it has not complied with the requirements of
the PH laws and neither it was authorized to do business here. The demurrer was
sustained by the trial judge.

(Pertinent provisions of the law in this case) Sec. 68 provides:

“No foreign corporation "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," upon order either
of the Secretary of Finance or the Secretary of Commerce and Communications.:”

Sec. 69:

“No foreign corporation or corporation formed, organized, or existing under any laws
other that 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
not having the license prescribed shall be punished by imprisonment for not less than
six months nor more than two years or by a fine of not less than two hundred pesos
nor more than one thousand pesos, or by both such imprisonment and fine, in the
discretion of the court. “

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.

Issue: Whether the license prescribed in Sec. 68 is a condition precedent to the

maintaining of any kind of action in the courts of the Philippine Islands by a foreign
corporation—No

Held:

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.

Issuance of a License

Section 126. Issuance of a license. - If the Securities and Exchange Commission is

satisfied that the applicant has complied with all the requirements of this Code and
other special laws, rules and regulations, the Commission shall issue a license to the
applicant to transact business in the Philippines for the purpose or purposes
specified in such license. Upon issuance of the license, such foreign corporation may
commence to transact business in the Philippines and continue to do so for as long
as it retains its authority to act as a corporation under the laws of the country or state
of its incorporation, unless such license is sooner surrendered, revoked, suspended
or annulled in accordance with this Code or other special laws.

Within sixty (60) days after the issuance of the license to transact business in the
Philippines, the licensee, except foreign banking or insurance corporation, shall
deposit with the Securities and Exchange Commission for the benefit of present and
future creditors of the licensee in the Philippines, securities satisfactory to the
Securities and Exchange Commission, consisting of bonds or other evidence of
indebtedness of the Government of the Philippines, its political subdivisions and
instrumentalities, or of government-owned or controlled corporations and entities,
shares of stock in "registered enterprises" as this term is defined in Republic Act No.
5186, shares of stock in domestic corporations registered in the stock exchange, or
shares of stock in domestic insurance companies and banks, or any combination of
these kinds of securities, with an actual market value of at least one hundred
thousand (P100,000.) pesos; Provided, however, That within six (6) months after
each fiscal year of the licensee, the Securities and Exchange Commission shall
require the licensee to deposit additional securities equivalent in actual market value
to two (2%) percent of the amount by which the licensee's gross income for that fiscal
year exceeds five million (P5,000,000.00) pesos. The Securities and Exchange
Commission shall also require deposit of additional securities if the actual market
value of the securities on deposit has decreased by at least ten (10%) percent of
their actual market value at the time they were deposited. The Securities and
Exchange Commission may at its discretion release part of the additional securities
deposited with it if the gross income of the licensee has decreased, or if the actual
market value of the total securities on deposit has increased, by more than ten (10%)
percent of the actual market value of the securities at the time they were deposited.
The Securities and Exchange Commission may, from time to time, allow the licensee
to substitute other securities for those already on deposit as long as the licensee is
solvent. Such licensee shall be entitled to collect the interest or dividends on the
securities deposited. In the event the licensee ceases to do business in the
Philippines, the securities deposited as aforesaid shall be returned, upon the
licensee's application therefor and upon proof to the satisfaction of the Securities and
Exchange Commission that the licensee has no liability to Philippine residents,
including the Government of the Republic of the Philippines. (n)

Effects of Failure to Obtain License

Section 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. (69a)

Section 144. Violations of the Code. - Violations of any of the provisions of this Code
or its amendments not otherwise specifically penalized therein shall be punished by a
fine of not less than one thousand (P1,000.00) pesos but not more than ten thousand
(P10,000.00) pesos or by imprisonment for not less than thirty (30) days but not more
than five (5) years, or both, in the discretion of the court. If the violation is committed
by a corporation, the same may, after notice and hearing, be dissolved in appropriate
proceedings before the Securities and Exchange Commission: Provided, That such
dissolution shall not preclude the institution of appropriate action against the director,
trustee or officer of the corporation responsible for said violation: Provided, further,
That nothing in this section shall be construed to repeal the other causes for
dissolution of a corporation provided in this Code. (190 1/2 a)

Home Insurance Co. v. Eastern Shipping Lines

Facts:

Consolidated Cases:

L-34382

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 (Eastern). The shipment was covered by Bill of Lading No. O-MA-9,
with arrival notice to Phelps Dodge Copper Products Corporation of the Philippines
(Phelps Dodge) at Manila. The shipment was insured with Home Insurance Co.
against all risks in the amount of P1.5M in favor of the consignee, Phelps Dodge.
Some of the coils discharged from the vessel were in bad order. Some were loose
and partly cut, and some were entangled, partly cut, and which had to be considered
as scrap. So Home Insurance Co. paid Phelps Dodge under its insurance policy
which plaintiff became subrogated to the rights and actions of Phelps Dodge. Home
Insurance Co. made demands for payment against the Eastern and the
transportation company for reimbursement of the aforesaid amount but each refused
to pay the same.

L-34383

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. (Columbian). 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. (Harvester). The
shipment was insured with Home Insurance Co. The packages discharged from the
vessel were found to be in bad order and the delivery was short of one package.
Home Insurance then paid the consignee, Harvester under its Insurance Cargo
Policy Demands were made on N. V. Nedlloyd Lijnen and Columbian for
reimbursement thereof but they failed and refused to pay the same.

Issue: Whether Home Insurance, a foreign corporation licensed to do business at

the time of the filing of the case, has the capacity to sue for claims on contracts made
when it had no license yet to do business in the PH.—Yes

Held:

There is no question that the contracts are enforceable. The requirement of

registration affects only the remedy.

Section 133 of the present Corporation Code provides:

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

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

The 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. This implies that failure of a
foreign corporation to do obtain license to do business, when one is required, does
not affect the validity of the transactions, but simply removes the legal standing of
such foreign corporation to sue.

Therefore, it is not necessary to declare the contract null and void because 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.

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.

Amendment of License

Section 131. Amended license. - A foreign corporation authorized to transact

business in the Philippines shall obtain an amended license in the event it changes
its corporate name, or desires to pursue in the Philippines other or additional
purposes, by submitting an application therefor to the Securities and Exchange
Commission, favorably endorsed by the appropriate government agency in the
proper cases. (n)

Revocation of License

Section 134. Revocation of license. - Without prejudice to other grounds provided by

special laws, the license of a foreign corporation to transact business in the
Philippines may be revoked or suspended by the Securities and Exchange
Commission upon any of the following grounds:

1. Failure to file its annual report or pay any fees as required by this Code;


2. Failure to appoint and maintain a resident agent in the Philippines as required by

this Title;

3. Failure, after change of its resident agent or of his address, to submit to the
Securities and Exchange Commission a statement of such change as required by
this Title;

4. Failure to submit to the Securities and Exchange Commission an authenticated

copy of any amendment to its articles of incorporation or by-laws or of any articles of
merger or consolidation within the time prescribed by this Title;

5. A misrepresentation of any material matter in any application, report, affidavit or

other document submitted by such corporation pursuant to this Title;

6. Failure to pay any and all taxes, imposts, assessments or penalties, if any, lawfully
due to the Philippine Government or any of its agencies or political subdivisions;
7. Transacting business in the Philippines outside of the purpose or purposes for
which such corporation is authorized under its license;

8. Transacting business in the Philippines as agent of or acting for and in behalf of

any foreign corporation or entity not duly licensed to do business in the Philippines;
or

9. Any other ground as would render it unfit to transact business in the Philippines.
(n)

Section 135. Issuance of certificate of revocation. - Upon the revocation of any such
license to transact business in the Philippines, the Securities and Exchange
Commission shall issue a corresponding certificate of revocation, furnishing a copy
thereof to the appropriate government agency in the proper cases.

The Securities and Exchange Commission shall also mail to the corporation at its
registered office in the Philippines a notice of such revocation accompanied by a
copy of the certificate of revocation. (n)

Concept of Doing Business in the Philippines

Mentholatum v. Mangaliman

Facts:

- The Mentholatum Co., Inc., is a Kansas corporation which manufactures

“Mentholatum” a medicament and salve adapted for the treatment of colds,
nasal irritations, chapped skin, insect bites, rectal irritation and other external
ailments of the body
- The Philippine-American Drug Co., Inc., is its exclusive distributing agent in
the Philippines authorized by it to look after and protect its interests
- Mentholatum Co., Inc., registered with the Bureau of Commerce and Indistry
the word “Mentholatum” as trade mark for its products
- The Mangaliman brothers prepared a medicament and salve Mentholiman
which they sold to the public packed in a container of the same size, color
and shape as Mentholatum
- As a consequence of these acts of the Mangalimans, Mentholatum, etc.
suffered damages from the diminution of their sales and the loss of goodwill
and reputation of their product in the market
- Mentholatum Co. and Philippine-American Drug Co., Inc., instituted an
actionin the CFI of Manila against the Mangaliman brothers for infringement
of trade mark and unfair competition
- Mentholatum, etc. prayed for the issuance of an order restraining Anacleto
and Florencio Mangaliman from selling their product “Mentholiman” and
directing them to render an accounting of their sales and profits to pay
damages
- After a protracted trial, featured by the dismissal of the case for failure of
plaintiff’s counsel to attend, and its subsequent reinstatement the CFI-Manila
 rendered judgment in favor of Mentholatum
- In the CA, the decisions of the trial court was reversed, said tribunal holding
that the activities of the Mentholatum Co., Inc., were business transaction in
the Philippines, and that by Sec. 69 of the Corporation Law, it may not
maintain the suit
- Mentholatum filed the petition for certiorari

Issue: Whether Mentholatum, etc. could prosecute the instant action without having
secured the license required in Sec. 69 of the Corporation Law—No

Held:

- No general rule or governing principle can be laid down as to what

constitutes doing or engaging in or transacting business
o Each case must be judged in the light of its peculiar
environmental circumstances
o 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
o 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
- Herein, Mentholatum Co., through its agent, the Philippine-American Drug
Co., Inc., has been doing business in the Philippines by selling its products
here since the year 1929, at least
- Whatever transactions the Philippine-American Drug Co., Inc., had
executed in view of the law, the Mentholatum Co., Inc., being a foreign
corporation doing business in the Philippines without the license
required by section 68 of the Corporation Law, it may not prosecute this
action for violation of trade mark and unfair competition.
o Neither may the Philippine-American Drug Co., Inc., maintain the
action here for the reason that the distinguishing features of the agent
being his representative character and derivative authority, it cannot
now, to the advantage of its principal, claim an independent standing
in court
- Further, the recognition of the legal status of a foreign corporation is a
matter affecting the policy of the forum, and the distinction drawn in
Philippine Corporation Law is an expression of the policy
- The general statement made in Western Equipment and Supply Co. vs.
Reyes regarding the character of the right involved should not be construed in
the derogation of the policy-determining authority of the State. The right of
Mentholatum conditioned upon compliance with the requirement of section 69
of the Corporation Law to protect its rights, is reserved.
Marubeni Nederland B.V. v. Tensuan

Facts:

- Petitioner Marubeni Nederland and DB Teodoro Development Corporation

(DBT) entered into a contract whereby the petitioner agreed to supply the
necessary equipment, technical know-how and the general design of the
construction DBT’s lime plant in Iloilo for a total contract price of $5.4M on a
deferred payment basis
- Simultaneously, with the supply contract, the parties entered into 2 financing
contracts, namely a construction loan agreement in the amount of $1.6M and
a cash loan agreement for $1.5M
- The obligation of DBT to pay the loan amortizations on their due dates under
3 contracts were absolutely and unconditionally guaranteed by the National
Investment and Development Corporation (NIDC)
- Before the first installment became due, DBT wrote a letter to NIDC
interposing certain claims against the petitioner and at the same time
requesting NIDC for a revision of the repayment schedule and of the amounts
due under the contracts on account of petitioner’s delay in its contractual
commitments.
o The problems regarding the lime plant were ironed out and the parties
signed a Settlement Agreement
- However, DBT informed petitioner that it was rejecting the lime plant on the
ground that it has not been constructed in accordance with their agreement
o DBT made a formal demand for indemnification in the total amount of
P95M
o Petitioner refused to accept DBT’s unilateral rejection of the plant and
reasoned that the alleged operation and technical problems were
“totally unrelated to the guaranteed capacity and specifications of the
plant and definitely are not attributable to any fault or omission on the
part of Marubeni”
- Before the first installment under the Settlement Agreement could be paid,
private respondent, Gatchalian, a stockholder of DBT sued petitioner
Marubeni for contractual breach before the CFI
o Gatchalian impleaded DBT as an unwilling plaintiff together with NIDC
which as pledgee of the voting shares in DBT has controlling interest
in that corporation
o Gatchalian sought indemnification in the amount of P95M and further
prayed for a writ of preliminary injunction to enjoin DBT and NIDC
from making directly or indirectly any payment to Marubeni
- Petitioner Marubeni entered a limited and special appearance and sought for
the dismissal of the complaint on the ground that the court a quo had no
jurisdiction over the person of petitioner since it is a foreign corporation
neither doing business nor licensed to do business in the Philippines

Issue: Whether Marubeni Nederland can be considered as “doing business” in the

Philippines and therefore subject to the jurisdiction of our courts—Yes
Held:

- Petitioner claims that it is a foreign corporation not doing business in the

country and as an entity with its own capitalization, it is separate and distinct
from Marubeni Corporation, Japan which is doing business in the Philippines
through its Manila branch
o That the 3 contracts entered into with DBT were perfected and
consummated in Tokyo, Japan
o That the sale and purchase of the machineries and equipment for the
Guimaras lime plant were isolated transactions and in no way
indicated a purpose to engage in business
o And that the services performed by petitioner in the Philippines were
merely auxiliary to the aforesaid isolated transactions entered into and
perfected outside the Philippines
- Private Respondent, on the other hand, contends that petitioner can be sued
in Philippine courts on liabilities arising from even a single transaction
because in reality, it is already engaging in business in the country through
Marubeni Corporation, Manila branch and that they, together with Nihon
Cement Company, Ltd. of Japan are but “alter egos, adjuncts, conduits,
instruments or branch affiliates of Marubeni Corporation of Japan”, the parent
company
- The Court held that petitioner CAN be sued in the regular courts because
it is doing business in the Philippines. The applicable law is RA 5455:
o The performance within the Philippines of any act or combination of
acts enumerated in Sec. 1 of the Act shall constitute “doing business”
therein. In particular, “doing business” includes:
 Soliciting orders, purchases (sales) or service contracts.
Concrete and specific solicitations by a foreign firm amounting
to negotiation or fixing of the terms and conditions of sales or
service contracts, regardless of whether the contracts are
actually reduced to writing, shall constitute doing business
even if the enterprise has no office or fixed place of business in
the Philippines
 Appointing a representative or distributor who is domiciled in
the Philippines, UNLESS said representative or distributor has
an independent status, i.e. it transacts business in its name
and for its own account, and not in the name or for the account
of the principal
 Opening offices whether called liaison offices, agencies or
branches, unless proved otherwise
 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
 - Petitioner had solicited the lime plant business from DBT through Marubeni
Manila branch
o Records show that the turn-key proposal for the 300 T/D Lime Plant
was initiated by the Manila office through its Mr. T. Hojo
o In a follow-up letter, Hojo committed the firm to a price reduction of
$200K and submitted the proposed contract forms
o As reflected in the letterhead used, it was Marubeni Corporation,
Tokyo, Japan which assumed an active role in the initial stages of the
negotiation
o Petitioner Marubeni Nederlan had no visible participation until the
actual signing of the agreement in Tokyo and even there, in the space
reserved for petitioner, it was the signature of S. Adachi as General
Manager of Marubeni Corporation, Tokyo on behalf of Marubeni
Nederland which appeared
- Marubeni Nederlan through the foregoing acts, had effectively solicited
orders, purchases or service contracts as well as constituted Marubeni
Corporation Tokyo, Japan and its Manila branch as its representative in the
Philippines to transact business for its account as principal
o These circumstances, taken singly or in combination, constitute doing
business in the Philippines within the contemplation of the law
- A foreign corporation doing business in the Philippines with or without
license is subject to process and jurisdiction of the local courts. It shall
not be allowed, under any circumstances, to invoke its lack of license to
impugn the jurisdiction of our courts

Agilent Technologies Singapore v. Integrated Silicon

Facts:

- Petitioner Agilent is a foreign corporation, which, by its own admission, is not

licensed to do business in the Philippines
- Respondent Integrated Silicon is a private domestic corporation, 100%
foreign owned, which is engaged in the business of manufacturing and
assembling electronics components
- The judicial relation among the various parties in this case can be traced to a
5-year Value Added Assembly Services Agreement (VAASA) between
Integrated Silicon and HP-Singapore
o Under the terms of the VAASA, Integrated Silicon was to locally
manufacture and assemble fiber optics for export to HP-Singapore
o HP-Singapore for its part was to consign raw materials to Integrated
Silicon
o The VAASA had a 5-year term with a provision for annual renewal by
mutual written consent
o Later, with the consent of Integrated Silicon, HP-Singapore assigned
all its rights and obligation in the VAASA to Agilent
 - Later, Integrated Silicon filed a complaint for “Specific Performance and
Damages” against Agilent and its officers
o It alleged that Agilent breached the parties’ oral agreement to extend
the VAASA
- Agilent filed a separate complaint against Integrated Silicon
- Respondents filed a MTD in the 2nd case, on the grounds of lack of Agilent’s
legal capacity to sue; litis pendentia; forum shopping; and failure to state a
cause of action
- The trial court denied the MTC and granted petitioner Agilent’s application for
writ of replevin
- Without filing an MR, respondents filed a petition for certiorari with the CA.
The CA granted respondent’s petition for certiorari, set aside the assailed the
Order of the trial court (denying the MTD) and ordered the dismissal of the 2nd
case

Issue: Whether an unlicensed foreign corporation not doing business in the

Philippines lacks the legal capacity to file suit—No

Held:

- A foreign corporation without a license is not ipso facto incapacitated

from bringing an action in Philippine courts
o A license is necessary only if a foreign corporation is
“transacting” or “doing business” in the country
o 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 prevents an unlicensed foreign
corporation “doing business” in the Philippines from accessing our
courts
- In a number of cases, however, the courts have held that an unlicensed
foreign corporation doing business in the Philippines may bring suit in
Philippine courts against a Philippine citizen or entity who had
contracted with and benefited from said corporation
o Such suit is premised on the doctrine of estoppel
o A party is estopped from challenging the personality of a
corporation after having acknowledged the same by entering into
a contract with it
o The doctrine of estoppel to deny corporate existence and
capacity applies to foreign as well as domestic corporations
 o The application of this doctrine prevents a person from
contracting with a foreign corporation from later taking
advantage of its non-compliance with the statutes chiefly in
cases where such person has received the benefits of the
contract
- IMPORTANT: The principles regarding the right of a corporation to bring
suit in Philippine courts may thus be condensed in 4 statements:
o If a foreign corporation does business in the Philippines
WITHOUT A LICENSE, it cannot sue before the Philippine courts
o If a foreign corporation is NOT DOING BUSINESS in the
Philippines, it needs no license on an ISOLATED TRANSACTION
or on a cause of action ENTIRELY INDEPENDENT of any
business transaction
o If a foreign corporation does business in the Philippines
WITHOUT A LICENSE, a Philippine citizen or entity which has
contracted with said corporation may be ESTOPPED from
challenging the foreign corporation’s corporate personality in a
suit brought before Philippine courts
o If a foreign corporation does business in the Philippines WITH
THE REQUIRED LICENSE, it can sue before Philippine courts on
any transaction
- In the case at bar, the challenge to Agilent’s legal capacity to file suit hinges
on whether or not it is doing business in the Philippines
o However, there is no definitive rule on what constitutes doing or
engaging in business in the Philippines
o The Corporation Code itself is silent as to what acts constitute doing
or transacting business in the Philippines
o Jurisprudence has, however, defined that the term implies a
continuity of commercial dealing and arrangement, and
contemplates, to that extent, the performance of acts or works or
the exercise of some of the functions normally incident to or in
progressive prosecution of the purpose and subject of its
organization
o 2 tests:
 Substance Test: whether the foreign corporation is
continuing the body of the business or enterprise for
which it was organized or whether it has substantially
retired from it and turned it over to another
 Continuity Test: term implies a continuity of commercial
dealing and arrangement, and contemplates, to that
extent, the performance of acts or works or the exercise of
some of the functions normally incident to or in
progressive prosecution of the purpose and subject of its
organization
- The FIA of 1991 defines doing business as follows:
 o Sec. 3, par. (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 totaling one hundred eighty (180) days
or more; participating in the management, supervision or control of
any domestic business, firm, entity, or corporation in the Philippines;
and any other act or acts that imply a continuity 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 the progressive prosecution of,
commercial gain or of the purpose and object of the business
organization.
- An analysis of the relevant case law, in conjunction with Sec 1 of the IRR of
the FIA (as amended by RA 8179), would demonstrate that the acts
enumerated in the VAASA do not constitute “doing business” in the
Philippines. The said provision provides that the following shall not be
deemed “doing business”:
o (1) 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;
o (2) Having a nominee director or officer to represent its interest in
such corporation;
o (3) Appointing a representative or distributor domiciled in the
Philippines which transacts business in the representative’s or
distributor’s own name and account;
o (4) The publication of a general advertisement through any print or
broadcast media;
o (5) Maintaining a stock of goods in the Philippines solely for the
purpose of having the same processed by another entity in the
Philippines;
o (6) Consignment by a foreign entity of equipment with a local
company to be used in the processing of products for export;
o (7) Collecting information in the Philippines; and
o (8) Performing services auxiliary to an existing isolated contract of
sale which are not on a continuing basis, such as installing in the
Philippines machinery it has manufactured or exported to the
Philippines, servicing the same, training domestic workers to operate
it, and similar incidental services.
- By and large, to constitute “doing business”, the activity to be
undertaken in the Philippines is one that is for profit-making.
- By the clear terms of the VAASA, Agilent’s activities in the Philippines were
confined to (1) maintaining a stock of goods in the Philippines solely for the
purpose of having the same processed by Integrated Silicon; and (2)
consignment of equipment with Integrated Silicon to be used in the
processing of products for export. As such, we hold that, based on the
evidence presented thus far, Agilent cannot be deemed to be “doing
business” in the Philippines. Respondents’ contention that Agilent lacks
the legal capacity to file suit is therefore devoid of merit. As a foreign
corporation not doing business in the Philippines, it needed no license
before it can sue before our courts.
Granger Associates v. Microwave Systems, Inc.

Facts:

- Granger Associates is a foreign corporation which was organized in the US

and has no license to do business in this country
- Microwave Systems, Inc., is a domestic corporation which has been sued for
recovery of a sum equivalent to US$900k allegedly due from it to the
petitioner
- The claim arose from a series of agreements concluded between the two
parties, giving MSI the license to manufacture and sell its products in the
Philippines and extended t the latter certain loans, equipment and parts
o Payment of these contracts not having been made as agreed upon,
Granger filed a complaint against MSI and other private respondents
in the RTC
- MSI alleged an affirmative defense that the plaintiff had no capacity to sue,
being an unlicensed foreign corporation, and moved to dismiss the case
- The MTD was granted by RTC which was affirmed by the CA
- In this petition, Granger seeks the reversal of the respondent court on the
ground that MSI has failed to prove its affirmative allegation that Granger was
transacting business in the Philippines
o Granger insists that it has dealt only with MSI and not the general
public and contends that dealing with the public itself is an
indispensible ingredient of transacting business
o It also argues that its agreement with MSI covered only 1 isolated
transaction for which it did not have to secure a license to be able to
file its complaint

Issue: Whether Granger Associates was doing business in the Philippines—Yes

Held:

- It can be shown that the parties entered into a series of agreements, as in

successive sales of the foreign company’s regular products, that company
shall be deemed as doing business in the Philippines
- The stipulations show that Granger had extended its personality in the
Philippines and would receive orders for its products and discharge its
warranty obligations through the agency of MSI
o It appears that Granger intended to transact business in the
Philippines through the instrumentality of MSI not only for the sale and
warranty of its products in the country
- There is also a showing that investment of Granger in MSI is quite substantial
enabling it to participate in the actual management and control if MSI. In fact,
it appointed a representative in the board of directors to protect its interests,
and this director was so influential that, at his request, the regular board
meeting was converted into an annual stockholder’s meeting to take
advantage of his presence
 - From the foregoing facts, the court ruled that petitioner and private
respondent entered into an agreement that would indicate that they
established within the Philippines a continuous business, and not merely one
of temporary character
o Such agreements did not constitute only one isolated transaction, as
the petitioner contends, but a succession of acts signifying the intent
of Granger to extend its operations in the Philippines
- The purpose of the rule requiring foreign corporation to secure a license
to do business in the Philippines is to enable the courts to exercise
jurisdiction over them for the regulation of their activities in this country
o If a foreign corporation operates in the Philippines without
submitting to our laws, it is only just that it not be allowed to
invoke them in out courts when it should need them later for its
own protection
o While foreign investors are always welcome in this land to
collaborate with us for mutual benefit, they must be prepared as
an indispensible condition to respect and be bound by Philippine
law in proper cases, as in the one at bar

Western Equipment and Supply Co. v. Reyes

Facts:

- Western is a foreign corporation engaged in the business of telephone

equipment and apparatus. It has been engaged in commerce and is well
known in the trade in all countries in the world for 50 years, and at the time of
the suit, most of the telephone equipment used in the PH were manufactured
and sold by Western
- It is alleged that ¾ of such equipment used around the world has been
manufactured and/or sold by Western
o “Western Electric Company, Inc” has been registered as a trade-mark
under the Act of Congress of Feb. 20 1905
o Western has applied for a provisional license to engage in business in
the PH on May 20, 1926 and this was made permanent on Aug. 23,
1926
- Defendants all seek to incorporate a domestic corporation in the PH to be
known as Western Electric Company, Inc.
o All of them have been associated with Western as employees, or
stockholders, or agents whatever
o They had actual knowledge of the company and how it does business
- Defendant Reyes is the Director of Bureau of Commerce and Industry
o Reyes subsequently has made known to the would-be incorporator
that he intends to rule in their favor, amidst a protest from Western
- Western sought a TRO from the lower court. Defendants question Western’s
standing to sue. The lower court granted the TRO
Issue: Whether Western has standing to sue—Yes. This is a suit for unfair
competition, not a suit for infringement of trademark

Held:

- Generally, opponents who want to question the standing of foreign

corporations must follow this rule:
o The non-compliance of a foreign corporation with the statute may be
pleaded as an affirmative defense. Thereafter it must appear from the
evidence, first, that the plaintiff is a foreign corporation, second, that it
is doing business in the Philippines, and third, that it has not obtained
the proper license as provided by statute
- However, it must be noted that the sole purpose of the action of Western is
to:
o “to protect its reputation, its corporate name, its goodwill, whenever
the reputation, corporate name or goodwill have, through the natural
development of its trade, established themselves”
- Western contends that its rights to the use of its corporate and trade name:
o Is a property right, a right in rem, which it may assert and protect
against all the world, in any of the courts of the world—even in
jurisdiction where it does not transact business—just the same as it
may protect its tangible property real or personal against trespass or
conversion
o Since it is the trade and not the mark that is to be protected, a
trademark acknowledges no territorial boundaries of municipalities or
states or nations, but extends to every market where the trader’s
goods have become known and identified by the use of the mark

Antam Consolidated v. CA

Facts:

- Stokely Van Camp Inc., is a corporation organized and existing under the
laws of the state of Indiana, USA with Capital City Product Company as one
of its subdivisions. Stokely and Capital City were not engaged in business in
the Philippines
- Stokely and Capital filed a complaint against Banahaw Milling Corporation,
Antam Consolidated Inc., Tambunting Trading Coriporation, Aurora
Consolidated Securities and Investment Corporation, and United Coconut Oil
Mills for collection of sum of money after failure to deliver the crude coconut
oil under the first transaction and their failure to comply with their obligations
- The trial court ordered the issuance of a writ of attachment in favor of Stokely
upon the latter’s deposit of a bond in the amount of P1.2M
- Stokely filed a motion for reconsideration to reduce the attachment bond
- Atnam filed a motion to dismiss the complaint on the ground that Stokely,
 being a foreign corporation not licensed to do business in the Philippines, has
no personality to maintain the suit
- Thereafter the trial court issued an order reducing the attachment bond to
P500K and denying the motion to dismiss by Antam on the ground that the
reason cited therein does not appear to be indubitable
- Antam filed a petition for certiorari before the IAC. The appellate court
dismissed the petition. Hence, ANtam filed a petition for certiorari and
prohibition with prayer for TRO

Issue: Whether Stokely Van Camp, Inc., has the capacity to sue, in light of the three
transactions it entered into with Comphil, Antam, etc. without license—Yes

Held:

- The transactions entered into by Stokely with Comphil, Antam, et al are not a
series of commercial dealings which signify an intent on the part of Stokely to
do business in the Philippines, but constitute an isolated one which does not
fall under the category of doing business
- The only reason why Stokely entered into the second and third transactions
with Comphil, Antam, et al was because it wanted to recover the loss it
sustained from the failure of Comphil, Antam et al to deliver the crude
coconut oil under the first transaction and in order to give the latter a chance
to make good on their obligation
o Instead of making an outright demand on Comphil, Antam, et al.,
Stokely opted to try to push through with the transaction to recover the
amount of $103,600 it lost
o This explains why, in the second transaction, Comphil, Anram, et al.
were supposed to buy back the crude coconut oil they should have
delivered to the respondent in an amount which will later earn the
latter a profit of $103K
o When this failed, the third transaction was entered into by the parties
whereby Comphil, Antam, et al were supposed to sell the crude
coconut oil to the respondent at a discounted rate, the total amount of
such discount being $103,600
o Unfortunately, Comphil, Antam, el al failed to deliver again, prompting
Stokely to filed the suit
- From these facts alone, it can be deduced that in reality, there was only 1
agreement between Comphil, Antam, et al and Stokely and that was the
delivery of the former of 500 long tons of crude coconut oil to the latter, who
in turn, must pay the corresponding price for the same
- The three seemingly different transactions were entered into by the parties
only in an effort to fulfill the basic agreement and in no way indicate an intent
on the part of Stokely to engage in a continuity of transactions with Comphil,
Antam, et al which will categorize it as a foreing corporation doing business in
the Philippines
 - Stokely being a foreign corporation not doing business in the
Philippines, does not need to obtain a license to do business in order to
have the capacity to sue

Atlantic Mutual Insurance Company v. Cebu Stevedoring

Facts:

- Appellants—Atlantic Mutual Insurance Company and Continental Insurance

Company—are both foreign corporations existing under the laws of the US
- They sued the Cebu Stevedoring Co., Inc., a domestic corporation, for
recovery of sum of money on the following allegations:
o The defendant, a common carrier, undertook to carry a shipment of
copra for deliver to P&G at Cebu City
o That upon discharge, a portion of the copra was found damaged
o That since the copra had been previously insured with plaintiffs, they
paid the shipper and/or consignee, upon proper claim and
assessment of the damage
o That as subrogee to the shipper’s and/or consignee’s rights, plaintiffs
demanded, without success, settlement from defendant by reason of
its failure to comply with its obligation, as carrier, to deliver the copra
in good order
- Defendant moved to dismiss on two grounds:
o That plaintiffs had no legal personality to appear before Philippine
courts and with no capacity to sue
o That the complaint did not state a cause of action
o Both grounds were based upon failure of the complaint to allege
compliance with Sec. 69 of the Corporation Law

Issue: Whether plaintiffs had legal personality to appear before Philippine courts and
with capacity to sue—No

Held:

- The Law simply means that no foreign corporation shall be permitted to

transact business in the Philippines, unless it shall have the license required
by law, and until it complies with this law, shall not be permitted to maintain
any suit in the local courts
- The object of the statute was not to prevent the foreign corporation from
performing single acts, but to prevent it from acquiring 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 corporation
 - The effect of the statute preventing foreign corporation from doing business
and from bringing actions in the local courts, except in 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
- Under the Rules of Court in force prior to the promulgation of the Revise
Rules, it was not necessary to aver the capacity of a party to sue except to
the extent required to show jurisdiction of the court
o In the court’s opinion, however, that such rule does not apply in all
situations
o The theory behind a similar rule in the US is that “capacity of a party
for purpose of suit is not in dispute in the great bulk of cases, and that
pleading and proof can be simplified by a rule that an averment of
such matter is not necessary, except to show jurisdiction”
o But where, as in the present case, the law denies to a foreign
corporation the right to maintain suit unless it has previously complied
with a certain requirement, then such compliance, or the fact that the
suing corporation is exempt therefrom, becomes a necessary
averment in the complaint
o These are matters peculiarly within the knowledge of appellants alone,
and it would be unfair to impose upon appellee the burden of
asserting and proving the contrary
o It is enough that foreign corporation are allowed by law to seek
redress in our courts under certain conditions: the interpretation of the
law should not go so far as to include, in effect, an inference that
those conditions have been met from the mere fact that the party
suing is a foreign corporation

Communication Materials v. CA

- Petitioners COMMUNICATION MATERIALS AND DESIGN, INC., (CMDI)

and ASPAC MULTI-TRADE INC., (ASPAC) are both domestic corporations..
Private Respondents ITEC, INC. and/or ITEC, INTERNATIONAL, INC.
(ITEC) are corporations duly organized and existing under the laws of the
State of Alabama, USA. There is no dispute that ITEC is a foreign
corporation not licensed to do business in the Philippines.
- ITEC entered into a contract with ASPAC referred to as “Representative
Agreement”. Pursuant to the contract, ITEC engaged ASPAC as its
“exclusive representative” in the Philippines for the sale of ITEC’s products,
in consideration of which, ASPAC was paid a stipulated commission.
Through a “License Agreement” entered into by the same parties later on,
ASPAC was able to incorporate and use the name “ITEC” in its own name.
Thus , ASPAC Multi-Trade, Inc. became legally and publicly known as
ASPAC-ITEC (Philippines).
- One year into the second term of the parties’ Representative Agreement,
ITEC decided to terminate the same, because petitioner ASPAC allegedly
 violated its contractual commitment as stipulated in their agreements. ITEC
charges the petitioners and another Philippine Corporation, DIGITAL BASE
COMMUNICATIONS, INC. (DIGITAL), the President of which is likewise
petitioner Aguirre, of using knowledge and information of ITEC’s products
specifications to develop their own line of equipment and product support,
which are similar, if not identical to ITEC’s own, and offering them to ITEC’s
former customer.
- The complaint was filed with the RTC-Makati by ITEC, INC. Defendants filed
a MTD the complaint on the following grounds: (1) That plaintiff has no legal
capacity to sue as it is a foreign corporation doing business in the Philippines
without the required BOI authority and SEC license, and (2) that plaintiff is
simply engaged in forum shopping which justifies the application against it of
the principle of “forum non conveniens”. The MTD was denied.
- Petitioners elevated the case to the respondent CA on a Petition for
Certiorari and Prohibition under Rule 65 of the Revised ROC. It was
dismissed as well. MR denied, hence this Petition for Review on Certiorari
under Rule 45

Issues:

- Did the Philippine court acquire jurisdiction over the person of the petitioner
corp, despite allegations of lack of capacity to sue because of non-
registration?—Yes
- Can the Philippine court give due course to the suit or dismiss it, on the
principle of forum non convenience?—Yes

Held:

- We are persuaded to conclude that ITEC had been “engaged in” or “doing
business” in the Philippines for some time now. This is the inevitable result
after a scrutiny of the different contracts and agreements entered into by
ITEC with its various business contacts in the country. Its arrangements, with
these entities indicate convincingly that ITEC is actively engaging in business
in the country.
- A foreign corporation doing business in the Philippines may sue in Philippine
Courts although not authorized to do business here against a Philippine
citizen or entity who had contracted with and benefited by said corporation.
To put it in another way, a party is estopped to challenge the personality of a
corporation after having acknowledged the same by entering into a contract
with it. And the doctrine of estoppel to deny corporate existence applies to a
foreign as well as to domestic corporations. One who has dealt with a
corporation of foreign origin as a corporate entity is estopped to deny its
corporate existence and capacity.
- In Antam Consolidated Inc. vs. CA et al. we expressed our chagrin over this
commonly used scheme of defaulting local companies, which are being sued
by unlicensed foreign companies not engaged in business in the Philippines
to invoke the lack of capacity to sue of such foreign companies. Obviously,
the same ploy is resorted to by ASPAC to prevent the injunctive action filed
by ITEC to enjoin petitioner from using knowledge possibly acquired in
violation of fiduciary arrangements between the parties.
- Petitioner’s insistence on the dismissal of this action due to the application, or
non application, of the private international law rule of forum non conveniens
 defies well-settled rules of fair play. According to petitioner, the Philippine
Court has no venue to apply its discretion whether to give cognizance or not
to the present action, because it has not acquired jurisdiction over the person
of the plaintiff in the case, the latter allegedly having no personality to sue
before Philippine Courts. This argument is misplaced because the court has
already acquired jurisdiction over the plaintiff in the suit, by virtue of his filing
the original complaint. And as we have already observed, petitioner is not at
liberty to question plaintiff’s standing to sue, having already acceded to the
same by virtue of its entry into the Representative Agreement referred to
earlier.
- Thus, having acquired jurisdiction, it is now for the Philippine Court, based on
the facts of the case, whether to give due course to the suit or dismiss it, on
the principle of forum non convenience. Hence, the Philippine Court may
refuse to assume jurisdiction in spite of its having acquired jurisdiction.
Conversely, the court may assume jurisdiction over the case if it chooses to
do so; provided, that the following requisites are met:
o That the Philippine Court is one to which the parties may conveniently
resort to
o That the Philippine Court is in a position to make an intelligent
decision as to the law and the facts
o That the Philippine Court has or is likely to have power to enforce its
decision.
- The aforesaid requirements having been met, and in view of the court’s
disposition to give due course to the questioned action, the matter of the
present forum not being the “most convenient” as a ground for the suit’s
dismissal, deserves scant consideration.

Top-Weld Manufacturing v. ECED

Facts:
- Top-weld Manufacturing Inc., a Philippine corporation engaged in the
business of manufacturing and selling welding supplies and equipment,
entered into separate contracts with two different foreign entities:
o With IRTI, S.A. (IRTI), a corporation organized and existing
under the laws of Switzerland with principal o ice in Fribourg,
Switzerland: a “License and Technical Assistance Agreement”
 Top-weld will be a licensee of IRTI, wherein the former
will purchase raw materials from the suppliers designated
by the IRTI and will manufacture in favor of the latter
welding products under certain specifications 

 The contract is for a period of three years, up to Jan. 1,
1975, but was later extended up to Dec. 31, 1975.
o With ECED, S.A., (ECED), a company organized and existing
under the laws of Panama, with principal o ice at Apartado 1903,
Panama I, City of Panama: a “Distributor Agreement”
 Top-weld will the ECED’s distributor in the Philippines of
certain welding products and equipment. 

 The contract was to remain e ective until terminated by
either party upon giving 6 months written notice to the
other. 

- Top-weld learned that the two corporations were negotiating with
another group to replace it as their licensee and distributor.

- Top-weld then led a case against the two corporations, EUTECTIC
Corporation, a corporation organized and existing 
under the laws of
the State of the New York, USA, and a certain Victor Gaerlan, a
Filipino citizen alleged to the representative of these three corporations.
The petition for issuance of preliminary injunction seeks:
o to enjoin the two corporations from negotiating with third
persons or from actually transferring its distributorship and
franchising rights
o to prohibit the corporations from terminating their contracts with
Top-weld, and in case the same was already terminated, to refrain
from effecting the said termination until after good faith
negotiations between them have been carried out and completed

- The trial court issued a TRO pending the hearing on the petition for
injunction. However, IRTI and ECED still wrote Top-weld separate
notices about the termination of their respective contracts. 


- Top-weld then led an amended complaint and a supplemental complaint

for preliminary mandatory injunction invoking RA 5455, Sec. 4(9)
[prohibiting alien firms doing business in the PH from terminating
existing contracts except for just cause] and seeking: 


o to compel ECED to ship and deliver various items covered by the

distributorship contract 


o to prohibit the corporations from importing into the Philippines

any EUTECTIC materials, supplies or equipment except through
Top-weld 


- On the other hand, IRTI and ECED argue:



o That they are justified in terminating the contract due to 
the

several violations committed by Top-weld, i.e. failure to pay
royalties, use of wrong materials in manufacture of products, use
of obsolete and antiquated equipment, rebranding of non-Eutectic
products using Eutectic label, falsification of invoices, etc. 


o RA 5455, Sec. 4(9) does not apply in the instant case since they
were not required to apply for a written certificate with the Board
of Investments 


- RTC ruled in favor of Top-weld (both on original complaint and

supplemental complaint). On MR, RTC affirmed the grant of
preliminary injunction (original complaint) but lifted the preliminary
mandatory injunction (supplemental complaint). 


- On appeal, CA ruled in favor of the foreign corporations and set aside

the RTC orders 

 o While IRTI and ECED are foreign corporations contemplated by
RA 5455 and are therefore bound to secure a written certificate
from the Board of Investments. However, the latter failed to
enforce said requirements, therefore it cannot likewise require
compliance with Sec. 4(9) on prohibition on termination of
contracts
o Top-weld did not come to court with clean hands as it entered
into business with the corporations knowing that the do not
possess the requisite certificate. Thus, it cannot invoke the
equitable remedy of injunction as to do so would only perpetuate
an illegal situation of holding business with foreign corporations
who do not possess the requisite authorization.

Issue: Whether IRTI and ECED are foreign corporations “doing business in the
Philippines” who should comply with the requirements of Sec. 4(9) RA 5455 –
YES, they are foreign corporations doing business in the Philippines, but given
the circumstances present in the instant case, they are NOT obligated to follow
Sec. 4(9) of RA 5455.

Held:

- IRTI and ECED are foreign corporations “doing business in the

Philippines”

o What constitutes “doing” or “engaging in” or “transacting”
business in the Philippines depends on the peculiar circumstances
of each case. 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.

o When the foreign corporation extends the business for which it is
organized here in the Philippines, then it can be considered as
doing business in the Philippines. The term implies a continuity
of commercial dealings and arrangements, 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.
o Where a single act or transaction is not merely incidental or
casual but indicates the foreign corporation's intention to do other
business in the Philippines, said single act or transaction
constitutes "doing" or "engaging in" or "transacting" business in
the Philippines.
o IN THIS CASE: When IRTI and ECED entered into the disputed
contracts with Top-weld, they were carrying out the purpose for
which they were created, i.e. to manufacture and market welding
products and equipment. The contracts actually stipulate that they
were carrying out in the Philippines a continuous business, not a
 mere temporary transaction. Therefore, they can be considered as
doing business in the Philippines.
- Having been engaged in business in the Philippines, IRTI and
ECED should be within the purview of RA 5455.

o Contrary to IRTI and ECED’s contention that Top-weld is an
independent entity which does not conduct business exclusively
with them, the foreign principal, Top-weld’s contract is exclusive
and IRTI and ECED are actually corporations dependent on Top-
weld for their manufacturing and distribution activities in the
Philippines.
 IRTI’s contract provides that IRTI or its employees

cannot sell its welding products in the Philippines
except to Top-weld. Likewise, Top-weld cannot sell in the
Philippines any other welding products that is the same as
that of IRTI’s without its written consent. 

 Top-weld cannot distribute any product of other
manufacturer or supplier except that of ECED’s. Further,
upon termination of the contract, Top-weld cannot engage
in the commercialization, distribution and/or manufacture
of products competing with ECED’s products covered by
the agreement.
o Therefore, being engaged in business in the Philippines enabled
IRTI and ECED to enter into the mainstream of Philippine
economic life in competition with Filipino business interests,
necessarily bringing them under the provisions of RA 5455
- HOWEVER, there are compelling reasons present in the instant
case to exempt them from the requirements of Sec. 4(9).

o RA 5455, Sec. 4(9) provides:
 Section 4. Licenses to do business. -No alien, and no firm,
association, partnership, corporation, or any other form of
business organization formed, organized, chartered or
existing under any laws other than those of the
Philippines, or which is not a Philippine National, or
more than thirty per cent of the outstanding capital of
which is owned or controlled by aliens shall do business
or engage in any economic activity in the Philippines, or
be registered, licensed, or permitted by the Securities and
Exchange Commission, or by any other bureau, o ice,
agency, political subdivision, or instrumentality of the
government, to do business, or engage in an economic
activity in the Philippines without first securing a written
certificate from the Board of Investments to the effect ...
Upon granting said certificate, the Board shall impose the
following requirements on the alien or the firm,
association, partnership, corporation, or other form of
business organization that is not organized or existing
 under the laws of the Philippines. xxxx
(9) Not to
terminate any franchise, licensing or other agreement that
applicant may have with a resident of the Philippines,
authorizing the latter to assemble, manufacture or sell
within the Philippines the products of the applicant, except
for violation thereof or other just cause and upon payment
of compensation and reimbursement and other expenses
incurred by the licensee in developing a market for the
said products; Provided. however, That in case of
disagreement, the amount of compensation or
reimbursement shall be determined by the court where the
licensee is domiciled or has its principal o ice who shall
require the applicant to le a bond in such amount as, in its
opinion, is sufficient for this purpose.
o Sec. 4(9) of RA 5455 states that an alien corporation must
possess the required certification from the Board of Investments
before he can engage in business in the Philippines. Once said
certificate is granted, such alien corporation cannot terminate any
agreement it had with a Philippine resident upon showing of
breach of contract or other just cause.
o IN THIS CASE: It is admitted that IRTI and ECED did not
possess the required certification from the BOI when it entered
into the contracts with Top-weld, thereby violating RA 5455.
However, while non-compliance with the law created an illegal
situation as between the parties, it did not void or invalidate the
contracts they entered into.
 It is important to note that the CA erred in finding that
because IRTI and ECED failed to secure the certification,
then there is no occasion for the BOI to impose the
requirements stated in Sec. 4. To rule otherwise would
open the way for an interpretation that by doing business
in the country without rst securing the required written
certificate from the Board of Investments, a foreign
corporation may violate or disregard the safeguards which
the law, by its provisions, seeks to establish.
o Nonetheless, termination of the contract (and noncompliance
with Sec. 4(9)) can be justified under the rule of in pari
delicto. Apart from IRTI and ECED, Top-weld also violated RA
5455.

 The parties in a contract are charged with knowledge of
the existing law at the time they enter into the agreement
and at the time it is to become operative. Between a
Philippine national and an alien, there is a presumption
that the former is more knowledgeable about his own state
law than his alien or foreign contemporary.
 In this case, Top-weld is presumed to be more
 knowledgeable of Philippine law and the requirements
of RA 5455. It was incumbent upon Top-weld to know
whether IRTI and ECED were properly authorized to
engage in business in the Philippines under RA 5455—
a duty it failed to dispose when it entered into the
licensing and distributorship agreements with the two
corporations 

 In fact, it is shown that Top-weld knew of RA 5455 at the
time when they entered into the contracts. Still, it entered
into the said contracts despite knowledge that the two
corporations were violating RA 5455. 

 Thus, by overlooking the required certification, Top-
weld is equally guilty of violating RA 5455. They are,
therefore, in pari delicto, in which case Top-weld is not
entitled to any relief against IRTI and ECED. 

o Even assuming Sec. 4(9) of RA 5455 applies in the instant case,
there is just cause for IRTI and ECED to terminate the
contract.
 The burden of overcoming the responsive effect of the

answer is upon the petitioner. He who alleges a fact has
the burden of proving it and a mere allegation is not
evidence. 

 In the case at bar, Top-weld failed to refute the charges
made by IRTI and ECED in their opposition wherein they
stated that Top-weld violated their contracts in 
several
instances. IRTI and ECED presented overwhelming
evidence of the supposed breaches of the contract.
 Top-weld, instead of rebutting the charges, led a “Reply to
Opposition” which was neither verified nor supported by
counter-affidavits to show its innocence. It failed to
substantiate its allegation that it did not violate the
contracts, leaving IRTI and ECED’s affiidavits
uncontroverted and sufficient enough for the court to rule
that there is just cause for the contract’s termination.
- In any case, the dispute had been rendered moot and academic as the
contract had already expired.

o As between Top-weld and IRTI, the contract was extended only
until December 31, 1975. The original injunction suit to stop the
contract’s termination was led in June 1975, but the appeal was
led past December 1975. Therefore, the dispute had already been
moot and academic as the contract had already expired.
o The courts have no power to make contracts for the parties.
Parties cannot be coerced to enter into a contract where no
agreement is had between them as to the principal terms and
conditions of the contract.
Merrill Lynch Futures v. CA

Facts:

- Merill Lynch Futures, Inc. (MLFI) is a non-resident foreign corporation,

allegedly not doing business in the Philippines, duly organized and existing
under and by virtue of the laws of the state of the Delaware, USA
o IMLFI is a futures commission merchant duly licensed to act as such
in the futures market and exchanges in the USA, essentially
functioning as a broker
- MLFI entered into a Futures Customer Agreement with Sps. Pedro Lara and
Elisa Lara in which it agreed to act as the latter’s broker for the purchase and
sale of futures contract in the US
- Orders to buy and sell futures contracts were transmitted to MLFI by the Lara
Spouses through the facilities of Merill Lynch Philippines, Inc., a Philippine
corporation and a company servicing MLFI’s customers
o In line with the Futures Customer Agreement and through Merill Lynch
Philippines, the Sps. Lara actively traded in futures contract, including
stock index futures for 4 years
- Because of a loss amounting to $160k incurred in respect of 3 transactions
involving index futures, and after setting this off against an amount owed by
MLFI to the Lara Spouses, said spouses became indebted to MLFI for the
ensuing balance which the latter asked them to pay
- However, the Sps. Lara refused to pay alleging that the transactions were null
and void because, Merill Lynch Philippines Inc., the Philippine company
servicing accounts of MLFI had no license to operate as a commodity and/or
financial futures broker
- Hence MLFI filed a complaint with the RTC against Sps. Lara for the recovery
of a debt and interest thereon, damages and attorney’s fees
- Sps. Lara filed a motion to dismiss on the grounds that MLFI had no legal
capacity to sue and
o Although not licensed to do so, MLFI had been doing business in the
Philippines, hence MLFI is prohibited by law to maintain or intervene
in any action, suit or proceeding in any court of admin agency of the
Philippines
o Sec. 133. Doing Business without a license—No foreign corporation
transacting business in the Philippines without a license, or its
successors or assigns, shall be permitted to maintain or intervene in
any action, suit or proceeding in any court or administrative agency in
the Philippines; but such corporation may be sued or proceeded
against before Philippine courts or administrative tribunals on any
valid cause of action recognized under Philippine laws
o They alleged that they have never been informed that Merill Lynch
Philippines was not licensed to business in this country
o All their transaction had actually been with Merill Lynch Pierce Fenner
 & Smith, Inc., and not with MLFI
- RTC sustained the motion to dismiss on the grounds of lack of capacity to
sue and lack of cause of action
- CA affirmed RTC

Issue and Held:

- Whether MLFI was doing business in the Philippines without a license—Yes

o There were no questions raised regarding the genuineness of the
documents, nor of their relevance to at least one of the grounds for
dismissal
o It would have been a superfluity for the SC to require prior proof of
their authencity
o No error may be ascribed to the RTC in taking into account of the
documents in the determination of the motion on the ground that MLDI
has no legal capacity to sue—respecting which proof may and should
be presented
o The SC is satisfied that MLFI, operating in the US, had indeed done
business with Sps. Lara in the Philippines over several years (4
years), and had done so at all times through MLPI, a corporation
organized in the Philippines and had executed all these transaction
without MLFI being licensed to transact business here, and without
MLPI being authorized to operate as a commodity futures trading
advisor
 There are factual findings of both the RTC and CA. These, too,
are the conclusions of the SEC which denied MLPI’s
application to operate as a commodity futures trading advisor,
a denial subsequently affirmed by the CA
 Factual findings of the CA are generally conclusive and no
circumstance warrant reversal of said finding
o SC is satisfied, too, that the Laras did transact business with MLFI
through its agent corporation organized in the Philippines, it being
unnecessary to determine whether this domestic firm was MLPI or
Merill Lynch Pierce Fenner & Smith (MLPI’s alleged predecessor)
 The fact that MLFI did deal with futures contract in exchanges
in the US in behalf and for the account of the Lara Spouses,
and that on several occasions the latter received account
documents and money in connection with those transactions
- Whether MLFI may sue in the Philippine Courts to establish and enforce its
rights against Sps. Lara, in light of the undeniable fact that it had transacted
business in this country without being licensed to do so—Yes
o In other words, if it be true that during all the time that they were
transacting with ML Futures, the Laras were fully aware of its lack of
license to do business in the Philippines, and in relation to those
transaction had made payments to, and received money from it for
 several years, the question is whether the Sps. Lara are now
estopped to impugn ML Futures’ capacity to sue them in the courts of
the forum
o Rule: A party is estopped to challenge the personality of a
corporation after having acknowledged the same by entering into
a contract with it
o “Doctrine of estoppel to deny corporate existence applies to foreign
as well as to domestic corporations”
 One who has dealt with a corporation of foreign origin as a
corporate entity is estopped to deny its corporate existence
and capacity
o Ratio: to prevent a person contracting with a foreign corporation
from later taking advantage of its noncompliance with the
statutes, chiefly in cases where such person has received the
benefits of the contract, where such person has acted as agent
for the corporation and has violated his fiduciary obligations as
such, and where the statute does not provide that the contract
shall be void, but merely fixes a special penalty for violation of
the statute
 In the case at bar…
 Sps. Laras received benefits generated by their
business relations with MLFI which spanned a period of
7 years. It would appear quite inequitable for the Laras
to evade payment of an otherwise legitimate
indebtedness due and owing to MLFI upon the plea
that it should not have done business in this country in
the first place. Such issues should be ventilated an
adjudicated on the merits by the proper trial court

Eriks Ltd. v. CA

Facts:

- Petitioner is a non-resident foreign corporation duly organized and existing

under the laws of Singapore, and is engaged in manufacturing 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 popes
and fittings for industrial uses
- The petitioner corporation is not licensed to do business in the Philippines
and is not engaged and is suing on an isolated transaction for which it has
capacity to sue
- On various dates, private respondent Delfin Enriquez, doing business under
Delrene EB Controls Center and/or EB Karmine Commercial, ordered and
received from petitioner various materials and such was delivered via
airfreight
- The transfer of goods were perfecte in Singapore, for private respondent’s
account, F.O.B. Singapre, with a 90-day credit term
 - Upon demands made by petitioner, private respondents failed and refused to
settle its account
- Petitioner then filed a complaint with the RTC for the collection of sum of
money plus interest and damages
- Private respondent moved to dismiss the complaint on the grounds that
petitioner corporation had no legal capacity to sue
- The trial court dismissed the action on the ground that petitioner is a foreign
corporation doing business in the Philippines without a license
- CA affirmed the RTC and deemed the series of transaction between
petitioner corporation and private respondent not to be an isolated or casual
transaction. The CA also found petitioner to be without legal capacity to sue

Issues and Held:

- Whether petitioner’s business with private respondent may be treated as

isolated transactions—No
o The SC agrees to the ruling of the lower courts that the business
made by petitioner was not an isolated transaction
o The Court explained that based on the factual evidence presented,
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
o 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
o The Court further ruled that petitioner corporation was indeed doing
business in the country
 The court cited the case of Mentholatum: the true test is
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
 The Court 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 the entity to continue the body of
its business in the country
 The number and quantity are merely evidence of such
intention
- Whether petitioner corporation may maintain an action in Philippine courts
considering that it has no license to do business in the country—No
 o The Court ruled that petitioner is incapacitated to maintain the action
o The legislative never intended to bar court access by a foreign
corporation which doing an isolated business in the country
o Neither had it intended to shield debtors from their obligation
o However, it cannot allow foreign corporation which conduct regular
business any access to courts without fulfillment by such corporations
of the necessary requisites to be subjected to our government’s
regulation and authority
o 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
o Since it was clear that petitioner is doing business in the country, it is
necessary to obtain license, without such, it is not allowed to maintain
suit against private respondent
o Remedy: the foreign corporation can acquire a license and may still
file a new action against private respondent. The decision of the
court is NOT res judicata

Rule 14, Sec. 12

Section 12. Service upon foreign private juridical entities. — When the defendant is a
foreign private juridical entity which has transacted 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. (14a)

General Corp. of the Philippines v. Union Insurance Society of Canton

Facts:

- General Corporation of the Philippines and the Mayon Investment Co. are
domestic corporations duly organized and existing by virtue of the laws of the
Philippines, with principal offices in the City of Manila
- The Union Insurance Society of Canton is a foreign insurance corporation,
duly authorized to do business in the Philippines with its head office in Hong
Kong and a branch office in Manila
- The Fireman’s Fund Insurance Co> is a foreign insurance corporation duly
organized and existing under the laws of the State of California, USA. It has
been duly registered and authorized to do business in the Philippines
- The Union Insurance Society has been acting as settling agent of and settling
insurance claims against Fireman Insurance Co. even before the last world
war and continued as such
- In Civil Case No. 511, General Corporation of the Philippines and the Mayon
 Investment Co. as plaintiffs sued the Union Insurance Society and the
Fireman’s Fund Insurance Co. for the payment of 12 marine insurance
o The said policies were issued by the Fireman’s Fund Insurance Co.
for the merchandise shipped from the US to the Philippines
o The original bills of lading and the original insurance policies covering
the merchandise, all endorsed in blank, were sent by the insured to
Hong Kong and Shanghai Banking Corporation in Manila with
instructions that the said documents were to be surrendered and title
to the merchandise covered by them to be transferred upon payment
in full of the invoice price
- Upon arrival of the merchandise in Manila, the consignee or purchaser would
appear to have failed to meet the terms of the sale and following a certain
agreement between the shippers and the herein plaintiffs, the shipping
papers, including 12 marine insurance policies were surrendered to the
herein plaintiffs and the merchandise released to them, the latter claiming that
they had paid to the bank the full invoice price
o It was found later that some of the merchandise were lost and the
others damaged while in transit
- In the trial court, the said court found and held that as regards the 11 marine
insurance policies which have been subject of interpleader in the Superior
Court in the State of Washington for King County and decided by said court
against herein plaintiffs, said decision constituted res judiciata binding upon
the plaintiffs herein
o The trial court absolved Union Insurance Society but condemned the
Fireman’s Fund Insurance Co. to pay the plaintiffs

Issue: Whether the trial court erred in holding that it acquired jurisdiction over
defendants—No

Held:

- The summons corresponding to appellant Fireman’s Fund Insurance Co. was

served on Union Insurance Society then acting as appellant’s settling agent in
the Philippines
- The attorneys for the Union Insurance Society petitioned the trial court to
quash and declare null and void the summons issue thru it on its co-
defendant Fireman’s Fund Insurance Co. on the ground that the said
company was not doing business in the Philippines, and that the Union
Insurance Society of Canton had no authority from it co-defendant to receive
summons on its behalf
- Section 14, Rule 7 of the Rules of Court:
o Sec 14. Service upon private foreign corporations—if the defendant is
a foreign corporation, or a non-resident joint stock company or
association, doing business in the Philippines, service may be made
on its resident agent designated in accordance with law for that
 purpose, or, if there be no such agent, on the government official
designated by law to that effect, or on any of its officers or agents
within the Philippines
- The Court agrees with the trial court in its ruling that the above quoted Rule in
employing the phrase “doing business in the Philippines” males no distinction
as to whether said business was being done or engaged in legally with the
corresponding authority and license of the Government, or perhaps illegally,
without the benefit of any such authority or license
- As long as a foreign private corporation does or engages in business in
this jurisdiction, it should and will be amenable to process and the
jurisdiction of the local courts, this is for the protection of citizens, and
service upon any agent of said foreign corporation constitutes personal
service upon the corporation and accordingly judgment may be
rendered against said foreign corporation
- But, was the Fireman’s Fund Insurance Co. then doing business in the
Philippines, within legal contemplation?
o One single or isolated business transaction does not constitute
“doing business” within the meaning of the law, and that
transactions which are occasional, incidental and casual, not of a
character to indicate a purpose to engage in business do not
constitute the doing or engaging in business contemplated by
law
o There must be continuity of conduct and intention to establish a
continuous business, such as the appointment of a local agent,
and not one of temporary character
o In the case at bar…
 It was both necessary and convenient for the Fireman’s Fund
Insurance Co. to appoint and keep a settling agent in this
jurisdiction, and was thus certainly doing business in the
Philippines
 These were not casual or isolated business transactions
 Since before the war, the Fireman’s Fund Insurance Co. would
appear to have engaged in this kind of business and had
employed its co-defendant Union Insurance Society of Canton,
Ltd. as its settling agent
- RELEVANT ISSUE: appellant contends that at the time of the service of
summons, the appellant had not yet been authorized to do business
o As already stated, Sec. 14, Rule 7 of the Rules of Court makes no
distinction as to corporations with or without authority to do
business in the Philippines
o The test is whether a foreign corporation was actually doing
business here
o Otherwise, a foreign corporation illegally doing business here in
the Philippines, 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 local
courts
o In the case at bar…
 In less than 2 months, the appellant obtained such license or
authority and even according to its own theory was then
amenable to the jurisdiction of the local courts
 It employed able attorneys who filed an answer, including
motions on its behalf and during the hearing held
 It was represented by the same attorneys who not only cross-
examined the witness for the plaintiffs and agreed to or
objected on to documentary evidence, but introduced a
witness on its behalf and presented documentary evidence
 Under such circumstances, it must be clear that the appellant
may not successfully plead lack of jurisdiction over its person
- CONCLUSION: a foreign corporation actually doing business in this
jurisdiction, with or without license or authority to do so, is amenable to
process and the jurisdiction of local courts
o If such foreign corporation as a license to do business, then
summons to it will be served on the agent designated by it for
purpose, or otherwise in accordance with the provisions of the
Corporation Law
o No license and no designated agent: service of summons on it
will be made pursuant to the provisions of the Rules of Court

Facilities Management Corporation v. De la Osa

Facts:

- Facilities Management Corporation and J.S. Dreyer are domiciled in Wake

Island while J.V. Catuira is an employee of FMC stationed in Manila
- Leonardo De la Osa was employed by FMC in Manila, but rendered work in
Wake Island, with the approval of the Department of Labor of the Philippines
- De la Osa was employed as:
o Painter with an hourly rate of $1.25
o Houseboy with an hourly rate of $1.26
o Houseboy with an hourly rate of rate of $1.33
o Cashier with an hourly rate of $1.40
- Osa 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
FMC, et al
- In a petition filed, De la Osa sought his reinstatement with full backwages as
well as the recovery of his overtime compensation, swing shift and graveyard
shift differentials
 - Subsequently, FMC filed a motion to dismiss the subject petition on the
ground that the court has no jurisdiction over the case
- The said motion was denied by the court in its Order, after trial, the Court of
Industrial Relations, in a decision, ordered FMC, et al to pay de la Osa his
overtime compensation, as well as his swing shift and graveyard shift
premiums at the rate of 50% of his basic salary
- FMC et al filed the petition for review on certiorari

Issues and Held:

- Whether the mere act by a non-resident foreign corporation of recruiting

Filipino workers for its own use abroad, in law is doing business in the
Philippines—Yes
o In its MTD, FMC admits that Mr. Catuira represented it in the
Philippines for the purpose of making arrangement for the approval by
the DOLE of Filipinos who are recruited by the Company as its own
employees for assignment abroad
o In effect, Mr. Catuira was alleged to be a liaison officer representing
FMC in the Philippines
o Under the Rules and Regulations implementing RA 5455, the phrase
“doing business” has been exemplified with illustrations, among them
being as follows:
 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 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
 Appointing a representative or distributor who is domiciled in
the Philippines, unless said representative or distributor has an
independent status, i.e. transact business in its name and for
its own account, and not in the name or for the account of the
principal
 Opening offices, whether called “liaison offices, agencies or
branches, unless proved otherwise”
 Any other act or acts that imply a continuity of commercial
dealings or arrangement 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 business organization
- Whether FMC has been doing business in the Philippines so that the service
of summons upon its agent in the Philippines vested the CFI-Manila with
jurisdiction—Yes
 o FMC may be considered as doing business in the Philippines within
the scope of Sec. 14, Rule 14 of the Rules of Court which provides
that “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
officer or agents within the Philippines
o FMC, in compliance with Act 2486 as implemented by DOLE Order IV
had to appoint James V. Catuira as agent of FMC with authority to
execute employment contracts, and receive, in behalf of the
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
o It is a fact that when the summons for FMC was served on Catuira he
was still in the employ of the FMC
o Hence, if a foreign corporation, not engaged in business in the
Philippines, is not barred from seeking redress from courts in the
Philippines, a fortiori, that same corporation cannot claim exemption
from being sued in Philippine courts for acts done against a person or
persons in the Philippines

Signetics Corporation v CA

Facts:

- The petitioner, SIgnetics was organized under the laws of the USA. Through
Signetics Filipinas Corporation (SigFil), a wholly-owned subsidiary, Signetics
entered into a lease contract over a piece of land with Fruehauf Electronics
Phils. Inc. (Freuhauf)
- Freuhauf sued Signetics for damages, accounting or return of certain
machinery, equipment and accessories, as well as the transfer of title and
surrender of possession of the buildings, installations and improvements on
the leased land, before the RTC of Pasig
o Claiming that SIgnetics casued SigFil to insert in the lease contract
the words “machineries, equipment and accessories,” the defendants
were able to withdraw these assets from the cost-free transfer
provision of the contract
- Service of summons was made on Signetics through TEAM Pacific Corp. on
the basis of the allegation that Signetics is a “subsidiary of US PHILIPS
CORPORATION, and may be served summons at Philips Electrical lamps,
Inc., Las Pinas, Metro manila and/or c/o Technology Electronics Assembly
and Management (TEAM) Pacific Corporation, Electronics Avenue, FTI
Complex, Taguig, Metro Manila—service of summons was made on SIgnetics
through TEAM Pacific Corporation
 - Petitioner filed a motion to dismiss the complaint on the ground of lack of
jurisdiction over its person
o Invoking Sec. 14 Rule 14 of the Rules of Court and the Rule laid fown
in Pacific Micronisian, Inc. v. Del Rosario and Pelington to the effect
that the fact of doing business in the Philippines should first be
established in order that summons could be validly made and
jurisdiction acquired by the court over a foreign corporation
- The RTC denied the motion to dismiss
- CA affirmed the RTC
- The petitioner now argues that what was effectively alleged in the complaint
as an activity of doing business was the “mere equity investment” of petitioner
SigFil, which petitioner insists, had heretofore transferred to TEAM Holdings,
Ltd.

Issue: Whether the lower court had correctly assumed jurisdiction over the petitioner,
a foreign corporation, on its claim in a motion to dismiss, that it had since ceased to
do business in the Philippines—Yes

Held:

- SIgnetics cannot, at least in the early stages, assail, on the one hand, the
veracity and correctness of the allegations in the complaint and proceed, on
the other hand, to prove its own, in order to hasten a preemptory escape
- As explained by the Court in Pacific Micronisian, summons may be served
upon an agent of the defendant who may not necessarily be its resident
agent designated in accordance with law
o The term “agent”, in the context it is used in Sec. 14, refers to its
general meaning, i.e. one who acts on behalf of a principal
- The allegations in the complaint have thus been able to amply convey that
not only is TEAM Pacific the business conduit of the petitioner in the
Philippines but that, also, by the charge of fraud, is none other than the
petitioner itself
- The rule is that a foreign corporation, although not engaged in business in
the Philippines, may still look up to our courts for relief; reciprocally, such
corporation may likewise be “sued in Philippine courts for acts doine against
a person or persons in the Philippines”,
o PROVIDED it would not be impossible for court processes to reach
the foreign corporation, a matter that can later be consequential in the
proper execution of judgment
- Hence a state may not exercise jurisdiction in absence of some god
basis (and not offensive to traditional notions of fair play and
substantial justice) for effectively exercising it, whether the
proceedings are in rem, quasi in rem or in personam

Lingner & Fischer GMBH v. IAC

Facts:

- DMW was firm in West Germany manufacturing products under the

trademarks FISSAN
- Private respondents PHILCHEM is a local company which apparently also
manufactures and sells chemicals
- DMW and PHILCHEM executed a so-called Agency Agreement, the basic
provision of which was that PHILCHEM would be the exclusive importer of
the products into the Philippines
o The benefit of PHILCHEM would be the profits from re-sale in this
country of imported products
o Pertinent portion of the Agreement: “All settlements within the
compass of this Agreement shall fall under the jurisdiction of the
Philippine courts”
- DMW interests were acquired by Lingner
o Lingner was subsidiary of Beecham which opened an office in the
Philippines and is under the supervision and management of one
named Tanner
o Tanner, Lingner, and Beecham can be deemed constituted a single
personality
- The agreement was automatically renewed once but was finally terminated in
Auguest of 1977
- PHILCHEM present a claim against Linger for P1.05M under the Royalty
Clause
o The claim was discussed between PHILCHEM and Tanner of
Beecham with the intervention of the Law Firm
o No settlement having been arrived at, PHILCHEM filed a complaint
against Beecham alone
- The summons against Beecham could not be served with sheriff reporting
that Beecham was neither a company registered in the Philippines, nor
resident in the given address
- PHILCHEM then filed an amended complaint, this time making Lingner and
Beecham as defendants, and pleading that summons could be served on the
Law Firm as an agent of the defendants
- The Law Firm submitted a special appearance in the case on behalf of
Lingner, and, also on behalf of Lingner, moved for dismissal on the grounds:
o That Lingner was not a foreign corporation doing business in the
Philippines and hence could not be sued locally
o Lingner could not be served with summons through the Law Firm
- The trial court denied the MTD. IAC affirmed

Issue: Whether Lingner was doing business in the Philippines/ Whether Lingner
could be validly summoned through the Law Firm as its agent—Yes, the question of
doing business in the Philippines is immaterial since there was a contractual
stipulation designating the venue of court actions
Held:

- Evidence as to whether Lingner was doing business in the Philippines, even

before the Trial Court, is no longer necessary in view of the fact that
PHILCHEM and Lingner were contactees in the Agreement, and the claim of
PHILCHEM is based on the Royalty Clause of that Agreement
- Whether Lingner is or is not doing business in the Philippines will not matter
because the parties had expressly stipulated in the Agreement that all
controversies based on the Agreement shall fall under the jurisdiction of
Philippine Courts
o In other words, there was a covenant to the effect that Lingner can be
sued by PHILCHEM before Philippine Courts in regards to controversy
related to the Agreement
- A case should not be dismissed simply because an original summons
was wrongfully served. An alias summons can be actually served on
said defendant
o It is best that alias summons on Lingner be issued, in this case under
the provisions of Sec. 17, Rule 14 in relation to Rule 4 of the Rules of
Court which recognizes the principle that venue can be agreed upon
by the arties
- If a local plaintiff and a foreign corporation have agreed on Philippine
venue, summons by publication can be made on the foreign corporation
under the principle of liberal construction of the rules to promote just
determination of actions

Section 129. Law applicable. - Any foreign corporation lawfully doing business in the
Philippines shall be bound by all laws, rules and regulations applicable to domestic
corporations of the same class, except such only as provide for the creation,
formation, organization or dissolution of corporations or those which fix the relations,
liabilities, responsibilities, or duties of stockholders, members, or officers of
corporations to each other or to the corporation. (73a)

Section 130. Amendments to articles of incorporation or by-laws of foreign

corporations. - Whenever the articles of incorporation or by-laws of a foreign
corporation authorized to transact business in the Philippines are amended, such
foreign corporation shall, within sixty (60) days after the amendment becomes
effective, file with the Securities and Exchange Commission, and in the proper cases
with the appropriate government agency, a duly authenticated copy of the articles of
incorporation or by-laws, as amended, indicating clearly in capital letters or by
underscoring the change or changes made, duly certified by the authorized official or
officials of the country or state of incorporation. The filing thereof shall not of itself
enlarge or alter the purpose or purposes for which such corporation is authorized to
transact business in the Philippines. (n)

Section 132. Merger or consolidation involving a foreign corporation licensed in the

Philippines. - One or more foreign corporations authorized to transact business in the
Philippines may merge or consolidate with any domestic corporation or corporations
if such is permitted under Philippine laws and by the law of its incorporation:
Provided, That the requirements on merger or consolidation as provided in this Code
are followed.

Whenever a foreign corporation authorized to transact business in the Philippines

shall be a party to a merger or consolidation in its home country or state as permitted
by the law of its incorporation, such foreign corporation shall, within sixty (60) days
after such merger or consolidation becomes effective, file with the Securities and
Exchange Commission, and in proper cases with the appropriate government
agency, a copy of the articles of merger or consolidation duly authenticated by the
proper official or officials of the country or state under the laws of which merger or
consolidation was effected: Provided, however, That if the absorbed corporation is
the foreign corporation doing business in the Philippines, the latter shall at the same
time file a petition for withdrawal of its license in accordance with this Title. (n)

Section 136. Withdrawal of foreign corporations. - Subject to existing laws and

regulations, a foreign corporation licensed to transact business in the Philippines
may be allowed to withdraw from the Philippines by filing a petition for withdrawal of
license. No certificate of withdrawal shall be issued by the Securities and Exchange
Commission unless all the following requirements are met;

1. All claims which have accrued in the Philippines have been paid, compromised or
settled;

2. All taxes, imposts, assessments, and penalties, if any, lawfully due to the
Philippine Government or any of its agencies or political subdivisions have been
paid; and

3. The petition for withdrawal of license has been published once a week for three (3)
consecutive weeks in a newspaper of general circulation in the Philippines.

Penalty Provisions of the Code

Section 144. Violations of the Code. - Violations of any of the provisions of this Code
or its amendments not otherwise specifically penalized therein shall be punished by a
fine of not less than one thousand (P1,000.00) pesos but not more than ten thousand
(P10,000.00) pesos or by imprisonment for not less than thirty (30) days but not more
than five (5) years, or both, in the discretion of the court. If the violation is committed
by a corporation, the same may, after notice and hearing, be dissolved in appropriate
proceedings before the Securities and Exchange Commission: Provided, That such
dissolution shall not preclude the institution of appropriate action against the director,
trustee or officer of the corporation responsible for said violation: Provided, further,
That nothing in this section shall be construed to repeal the other causes for
dissolution of a corporation provided in this Code. (190 1/2 a)

Section 27. Disqualification of directors, trustees or officers. - No person convicted

by final judgment of an offense punishable by imprisonment for a period exceeding
six (6) years, or a violation of this Code committed within five (5) years prior to the
date of his election or appointment, shall qualify as a director, trustee or officer of any
corporation. (n)

Section 74. Books to be kept; stock transfer agent. - Every corporation shall keep
and carefully preserve at its principal office a record of all business transactions and
minutes of all meetings of stockholders or members, or of the board of directors or
trustees, in which shall be set forth in detail the time and place of holding the
meeting, how authorized, the notice given, whether the meeting was regular or
special, if special its object, those present and absent, and every act done or ordered
done at the meeting. Upon the demand of any director, trustee, stockholder or
member, the time when any director, trustee, stockholder or member entered or left
the meeting must be noted in the minutes; and on a similar demand, the yeas and
nays must be taken on any motion or proposition, and a record thereof carefully
made. The protest of any director, trustee, stockholder or member on any action or
proposed action must be recorded in full on his demand.

The records of all business transactions of the corporation and the minutes of any
meetings shall be open to inspection by any director, trustee, stockholder or member
of the corporation at reasonable hours on business days and he may demand, in
writing, for a copy of excerpts from said records or minutes, at his expense.

Any officer or agent of the corporation who shall refuse to allow any director,
trustees, stockholder or member of the corporation to examine and copy excerpts
from its records or minutes, in accordance with the provisions of this Code, shall be
liable to such director, trustee, stockholder or member for damages, and in addition,
shall be guilty of an offense which shall be punishable under Section 144 of this
Code: Provided, That if such refusal is made pursuant to a resolution or order of the
board of directors or trustees, the liability under this section for such action shall be
imposed upon the directors or trustees who voted for such refusal: and Provided,
further, That it shall be a defense to any action under this section that the person
demanding to examine and copy excerpts from the corporation's records and
minutes has improperly used any information secured through any prior examination
of the records or minutes of such corporation or of any other corporation, or was not
acting in good faith or for a legitimate purpose in making his demand.

Stock corporations must also keep a book to be known as the "stock and transfer
book", in which must be kept a record of all stocks in the names of the stockholders
alphabetically arranged; the installments paid and unpaid on all stock for which
subscription has been made, and the date of payment of any installment; a statement
of every alienation, sale or transfer of stock made, the date thereof, and by and to
whom made; and such other entries as the by-laws may prescribe. The stock and
transfer book shall be kept in the principal office of the corporation or in the office of
its stock transfer agent and shall be open for inspection by any director or
stockholder of the corporation at reasonable hours on business days.

No stock transfer agent or one engaged principally in the business of registering

transfers of stocks in behalf of a stock corporation shall be allowed to operate in the
Philippines unless he secures a license from the Securities and Exchange
Commission and pays a fee as may be fixed by the Commission, which shall be
renewable annually: Provided, That a stock corporation is not precluded from
performing or making transfer of its own stocks, in which case all the rules and
regulations imposed on stock transfer agents, except the payment of a license fee
herein provided, shall be applicable. (51a and 32a; P.B. No. 268.)

Ient v. Tullett Prebon

Facts:

- Tradition Group, where petitioners herein are employed, and Tullett are
competitiors in the inter-dealer broking business
 - On the Tradition Group’s motive of expansion and diversification in Asia,
petitioner Ient and Schulze were tasked with the establishment of Tradition
Financials Services Philippines, Inc.
- However, Tullett filed a complain-affidavit with the City Prosecution Office of
Makati City against the officers/employees of the Tradition Group for violation
of Secs. 31 and 34 of the Corporation Code which made them criminally
liable under Sec. 144
- Impleaded as respondents in the complaint-affidavit were petitioner Ient and
Schulze, Jaime Villalon, who was formerly President and Managing Director
of Tullet, Mercedes Chuidian who was formerly a member of Tullet’s Board of
Directors
- Villalo and Chuidian were charged with using their former position in Tullett to
sabotage said company by orchestrating the mass resignation of its entire
brokering staff in order for them to join Tradition Philippines, which was
evident on their conduct of several meetings with the employees
- According to Tullet, petitioner Ient and Schulze have conspired with Villalon
and Chuidian in the latter’s act of disloyalty against the company
- Petitioners argued that there could be no violation of Secs. 31 and 34 of the
Corporation Code as these sections refer to corporate acts or corporate
opportunity, that Sec 144 of the same Code cannot be applied to Secs. 31 nd
34 which already contains penalties or remedies for their violation; and
conspiracy under the RPC cannot be applied to Secs 31 and 34 of the
Corporation Code
- The City Prosecutor dismissed the criminal complaint however, on
respondent’s appeal to the DOJ, the dismissal was reverse finding the
arguments of the respondent proper
- CA affirmed the decision of the DOJ Secretary

Issue: Whether Sec. 144 of the Corporation Code applies to Sections 31 and 34 of
the same Code, thus, making it a penal offense so that conspiracy can be
appreciated and the petitioners can be impleaded—No

Held:

- SC applied the rule of lenity as a principle related to liberal interpretation in

favor of the accused in criminal cases
o The rule applies when the court is faced with two possible
interpretations of a penal statute, one that is prejudicial to the accused
and another that is favorable to him
o The rule calls for the adoption of an interpretation which is more
lenient to the accused
- According to the SC, a close reading of Sec. 144 shows that it is not a purely
penal provision because it provides that when the violator is a corporation, an
administrative penalty is imposed in the form of dissolution, which is not a
criminal sanction
- The Court also added that there is no provision in the Corporation Code using
an emphatic language to compel the SC to construe the provision as a penal
offense
- The SC held that thorough scrutinizing of the different provisions of the
Corporation Code including Sections 31 and 34, they only impose civil liability
 aside from Sec. 74
- The intention can also be gleaned from the floor of deliberations of its
proponents
- Quite apart that no legislative intent to criminalize Sections 31 and 34 was
manifested in the deliberations of the Corporation Code, it is noteworthy from
the same deliberations that legislators intended to codify the common law
concepts of corporate opportunity and fiduciary obligations of corporate
officers as found in American jurisprudence into said provisions
- In common law, the remedies available in the event of a breach of directors’
fiduciary duties to the corporation are civil remedies
o If a director or officer is found to have breached his duty of loyalty, an
injunction may be issued or damages may be awarded
o A corporate officer guilty of fraud or mismanagement may be held
liable for lost profits
o A disloyal agent may also suffer forfeiture of his compensation
- There is nothing in the deliberations to indicate that drafters of the
Corporation Code intended to deviate from common law practice and enforce
he fiduciary obligations of directors and corporate officers through penal
sanction aside from civil liability
- NOTE:
o Section 31. Liability of directors, trustees or officers. - Directors or trustees
who wilfully and knowingly vote for or assent to patently unlawful acts of the
corporation or who are guilty of gross negligence or bad faith in directing the
affairs of the corporation or acquire any personal or pecuniary interest in
conflict with their duty as such directors or trustees shall be liable jointly and
severally for all damages resulting therefrom suffered by the corporation, its
stockholders or members and other persons.

When a director, trustee or officer attempts to acquire or acquires, in violation

of his duty, any interest adverse to the corporation in respect of any matter
which has been reposed in him in confidence, as to which equity imposes a
disability upon him to deal in his own behalf, he shall be liable as a trustee for
the corporation and must account for the profits which otherwise would have
accrued to the corporation. (n)

o Section 34. Disloyalty of a director. - Where a director, by virtue of his office,

acquires for himself a business opportunity which should belong to the
corporation, thereby obtaining profits to the prejudice of such corporation, he
must account to the latter for all such profits by refunding the same, unless
his act has been ratified by a vote of the stockholders owning or representing
at least two-thirds (2/3) of the outstanding capital stock. This provision shall
be applicable, notwithstanding the fact that the director risked his own funds
in the venture. (n)

Miscellaneous
SEC Power and Supervision

PD 902-A

Section 1. The administrative supervision of the Securities and Exchange

Commission is hereby transferred from the Department of Trade and shall hereafter
be under the direct general supervision of the President.
Section 2. That the Commission shall be a collegial body composed of a Chairman
and two (2) Associate Commissioners who shall be appointed by the President and
the tenure of the office of each member shall be seven (7) years: Provided, however,
That the Chairman and the Members of the Commission first appointed by the
President shall serve for a period of seven (7) years, five (5) years and three (3)
years, as fixed in their respective appointments: Provided, further, That upon the
expiration of his term, a Member shall serve as such until his successor shall have
been appointed and qualified: and Provided, Finally, that no vacancy shall be filled
except for the unexpired portion of the term. The Chairman shall receive an annual
salary of Fifty Thousand (P50,000.00) Pesos and a monthly allowance of Two
Thousand (P2,000.00) Pesos and each Member shall receive an annual salary of
Forty-Two Thousand Five Hundred (P42,500.00) Pesos and a monthly commutable
allowance of One Thousand Five Hundred (P1,500.00) Pesos.

The Commission shall meet as often as may be necessary on such day or days as
the Chairman may fix. The notice of the meeting shall be given to all members of the
Commission and the presence of at least two (2) shall constitute a quorum. In the
absence of the Chairman, the more senior associate commissioner shall act as
presiding officer of the meeting.

The Chairman shall have the general executive control, direction and supervision of
the work and operation of the Commission and of its members, bodies, boards,
personnel and all of its administrative business.

There shall be a Secretary of the Commission, under the control and direction of the
Chairman, who shall be in charge of all the administrative business of the
Commission and shall perform such other duties and functions as may be assigned
to him. He shall be the recorder and official reporter of the proceedings of the
Commission and shall have authority to administer oath in all matters coming under
the jurisdiction of the Commission. He shall be the custodian of all records, profiles,
reports, minutes and other documents and papers filed with the Commission or
entrusted to his care and shall be responsible therefor to the Commission.

There shall be an Executive Director of the Commission who shall be responsible for
the effective implementation of the policies, rules and standards promulgated by the
Commission, to coordinate and supervise the activities of the different operating
units; to report to the Chairman the operations of such units; to report to the
Chairman the operations of such units; and to perform such functions as may be
assigned to him by the Chairman and/or by Commission. The position of the
Executive Director is hereby declared primarily confidential in nature.

Section 3. The Commission shall have absolute jurisdiction, supervision and control
over all corporations, partnerships or associations, who are the grantees of primary
franchise and/or a license or permit issued by the government to operate in the
Philippines; and in the exercise of its authority, it shall have the power to enlist the
aid and support of any and all enforcement agencies of the government, civil or
military.

Section 4. The Commission shall reorganize and restructure the present staff and
personnel of the agency. The proposed staffing pattern of the Commission with the
corresponding salary scale, attached as Annex "A" is hereby approved: Provided,
That except as to the technical staff and such other positions as the Commission,
with the approval of the President, may declare to be highly technical, policy-
determining or primarily confidential, all positions in the Commission are subject to
the Civil Service Law and Rules.

Section 5. In addition to the regulatory and adjudicative functions of the Securities

and Exchange Commission over corporations, partnerships and other forms of
associations registered with it as expressly granted under existing laws and decrees,
it shall have original and exclusive jurisdiction to hear and decide cases involving.

a) Devices or schemes employed by or any acts, of the board of directors,

business associates, its officers or partnership, amounting to fraud and
misrepresentation which may be detrimental to the interest of the public
and/or of the stockholder, partners, members of associations or organizations
registered with the Commission.

b) Controversies arising out of intra-corporate or partnership relations,

between and among stockholders, members, or associates; between any or
all of them and the corporation, partnership or association of which they are
stockholders, members or associates, respectively; and between such
corporation, partnership or association and the state insofar as it concerns
their individual franchise or right to exist as such entity;

c) Controversies in the election or appointments of directors, trustees, officers

or managers of such corporations, partnerships or associations.

Section 6. In order to effectively exercise such jurisdiction, the Commission shall

possess the following powers:

a) To issue preliminary or permanent injunctions, whether prohibitory or

mandatory, in all cases in which it has jurisdiction, and in which cases the
pertinent provisions of the Rules of Court shall apply;

b) To punish for contempt of the Commission, both direct and indirect, in

accordance with the pertinent provisions of, and penalties prescribed by, the
Rules of Court;

c) To compel the officers of any corporation or association registered by it to

call meetings of stockholders or members thereof under its supervision;

d) To pass upon the validity of the issuance and use of proxies and voting
trust agreements for absent stockholders or members;

e) To issue subpoena duces tecum and summon witnesses to appear in any

proceedings of the Commission and in appropriate cases order search and
seizure or cause the search and seizure of all documents, papers, files and
records as well as books of accounts of any entity or person under
investigation as may be necessary for the proper disposition of the cases
before it;

f) To impose fines and/or penalties for violation of this Decree or any other
laws being implemented by the Commission, the pertinent rules and
regulations, its orders, decisions and/or rulings;
 g) To authorize the establishment and operation of stock exchanges,
commodity exchanges and such other similar organization and to supervise
and regulate the same; including the authority to determine their number, size
and location, in the light of national or regional requirements for such
activities with the view to promote, conserve or rationalize investment;

h) To pass upon, refuse or deny, after consultation with the Board of

Investments, Department of Industry, National Economic and Development
Authority or any other appropriate government agency, the application for
registration of any corporation, partnership or association or any form of
organization falling within its jurisdiction, if their establishment, organization or
operation will not be consistent with the declared national economic policies.

i) To suspend, or revoke, after proper notice and hearing, the franchise or

certificate of registration of corporations, partnerships or associations, upon
any of the grounds provided by law, including the following:

1. Fraud in procuring its certificate of registration;

2. Serious misrepresentation as to what the corporation can do or is

doing to the great prejudice of or damage to the general public;

3. Refusal to comply or defiance of any lawful order of the

Commission restraining commission of acts which would amount to a
grave violation of its franchise;

4. Continuous in operation for a period of at least five (5) years;

5. Failure to file by-laws within the required period;

6. Failure to file required reports in appropriate forms as determined

by the Commission within the prescribed period;

j) To exercise such other powers as implied, necessary or incidental to the

carrying out the express powers granted to the Commission or to achieve the
objectives and purposes of this Decree.

In the exercise of the foregoing authority and jurisdiction of the Commission,

hearings shall be conducted by the Commission or by a Commissioner or by such
other bodies, boards, committees and/or any officer as may be created or designated
by the Commission for the purpose. The decision, ruling or order of any such
Commissioner, bodies, boards, committees and/or officer may be appealed to the
Commission sitting en banc within thirty (30) days after receipt by the appellant of
notice of such decision, ruling or order. The Commission shall promulgate rules of
procedures to govern the proceedings, hearings and appeals of cases falling within
its jurisdiction.

The aggrieved party may appeal the order, decision or ruling of the Commission
sitting en banc to the Supreme Court by petition for petition for review in accordance
with the pertinent provisions of the Rules of Court.
Section 7. The Commission is authorized to recommend to the President the
revision, alteration, amendment or adjustment of the charges and fees, which by law,
it is authorized to collect.

Section 8. With the approval of the President, the Commission is further authorized
to create additional positions as it may deem necessary to carry out the provisions
and intents of this Decree.

Section 9. So much amount as may be needed to implement the provisions of this

Decree taken from the income of the Commission not to exceed twenty-five (25%)
per cent thereof and any unexpended balance in the current appropriation is hereby
authorized to be appropriated.

Section 10. When the exigency of the service so requires and with the approval of
the President, funds may be set aside from the appropriation provided for the
Commission and/or from the fees collected under existing laws, decrees, rules and
regulations to defray expenses to be incurred by the Commission.

Section 11. The Commission shall submit an annual report to the President of the
Philippines not later than January 31 of each year with such recommendations as
may be necessary.

Section 12. All laws, executive orders, decrees, rules and regulations or parts
thereof, contrary to or inconsistent with the provision of this Decree are hereby
repealed, amended or modified accordingly.

This decree shall take effect immediately.

Done in the City of Manila, this 11th day of March, in the year of Our Lord, nineteen
hundred and seventy-six.

Corporation Code

Section 141. Annual report or corporations. - Every corporation, domestic or foreign,

lawfully doing business in the Philippines shall submit to the Securities and
Exchange Commission an annual report of its operations, together with a financial
statement of its assets and liabilities, certified by any independent certified public
accountant in appropriate cases, covering the preceding fiscal year and such other
requirements as the Securities and Exchange Commission may require. Such report
shall be submitted within such period as may be prescribed by the Securities and
Exchange Commission. (n)

Section 143. Rule-making power of the Securities and Exchange Commission. - The
Securities and Exchange Commission shall have the power and authority to
implement the provisions of this Code, and to promulgate rules and regulations
reasonably necessary to enable it to perform its duties hereunder, particularly in the
prevention of fraud and abuses on the part of the controlling stockholders, members,
directors, trustees or officers. (n)

Section 4. Corporations created by special laws or charters. - Corporations created

by special laws or charters shall be governed primarily by the provisions of the
special law or charter creating them or applicable to them, supplemented by the
provisions of this Code, insofar as they are applicable. (n)

Section 148. Applicability to existing corporations. - All corporations lawfully existing

and doing business in the Philippines on the date of the effectivity of this Code and
heretofore authorized, licensed or registered by the Securities and Exchange
Commission, shall be deemed to have been authorized, licensed or registered under
the provisions of this Code, subject to the terms and conditions of its license, and
shall be governed by the provisions hereof: Provided, That if any such corporation is
affected by the new requirements of this Code, said corporation shall, unless
otherwise herein provided, be given a period of not more than two (2) years from the
effectivity of this Code within which to comply with the same. (n)

Section 145. Amendment or repeal. - No right or remedy in favor of or against any

corporation, its stockholders, members, directors, trustees, or officers, nor any
liability incurred by any such corporation, stockholders, members, directors, trustees,
or officers, shall be removed or impaired either by the subsequent dissolution of said
corporation or by any subsequent amendment or repeal of this Code or of any part
thereof. (n)

Section 146. Repealing clause. - Except as expressly provided by this Code, all laws
or parts thereof inconsistent with any provision of this Code shall be deemed
repealed. (n)