CORPORATION

 LAW  CASE  DIGESTS  

3C  &  3S  –  ATTY.  CARLO  BUSMENTE  

HOME  INSURANCE  vs.  EASTERN  SHIPPING  LINES   the  consignee  the  sum  of  P2,980.64  for  additional  freight  and  P826.14  
G.R.  No.  L-­‐34382  –  July  20,  1983   for   salvage   charges   against   the   goods;   (c)   for   the   goods   covered   by   Bill  
  of  Lading  No.  KCE-­‐8,  ESLI  charged  the  consignee  the  sum  of  P3,292.26  
FACTS:   for   additional   freight   and   P4,130.68   for   salvage   charges   against   the  
Eastern  Shipping  Lines,   Inc.   (ESLI)   loaded   on   board   goods;   and   (d)   for   the   goods   under   Bills   of   Lading   Nos.   KMA-­‐73   and  
SS  Eastern  Explorer  in  Kobe,  Japan,  the  following  shipment  for  carriage   KMA-­‐74,  ESLI  charged  the  consignee  the  sum  of  P8,337.06  for  salvage  
to   Manila   and   Cebu,   freight   pre-­‐paid   and   in   good   order   and   charges  against  the  goods.  
condition,  viz:   (a)   (2)   boxes   internal   combustion   engine   parts,    
consigned   to   William   Lines,   Inc.   under   Bill   of   Lading   No.   042283;   (b)   The   charges   were   all   paid   Philippine  Home  Assurance  Corporation  
(10)   metric   tons   (334   bags)   ammonium   chloride,   consigned   to   Orca's   (PHAC)   under   protest   for   and   in   behalf   of   the   consignees.   PHAC,   as  
Company   under   Bill   of   Lading   No.   KCE-­‐12;   (c)   two   hundred   (200)   bags   subrogee   of   the   consignees,   thereafter   filed   a   complaint   before   the  
Glue   300,   consigned   to   Pan   Oriental   Match   Company   under   Bill   of   Regional   Trial   Court   of   Manila,   against   ESLI   to   recover   the   sum   paid  
Lading   No.   KCE-­‐8;   and   (d)   garments,   consigned   to   Ding   Velayo   under   under   protest   on   the   ground   that   the   same   were   actually   damages  
Bills  of  Lading  Nos.  KMA-­‐73  and  KMA-­‐74.   directly   brought   about   by   the   fault,   negligence,   illegal   act   and/or  
  breach  of  contract  of  ESLI.  
While  the  vessel  was  off  Okinawa,  Japan,  a  small  flame  was  detected  on    
the   acetylene   cylinder   located   in   the   accommodation   area   near   the   ESLI’s   contention:    it   exercised   the   diligence   required   by   law   in   the  
engine   room   on   the   main   deck   level.   As   the   crew   was   trying   to   handling,   custody   and   carriage   of   the   shipment;   that   the   fire   was  
extinguish   the   fire,   the   acetylene   cylinder   suddenly   exploded   sending   a   caused  by  an  unforeseen  event;  that  the  additional  freight  charges  are  
flash   of   flame   causing   death   and   severe   injuries   to   the   crew   and   due   and   demandable   pursuant   to   the   Bill   of   Lading;  and   that   salvage  
instantly   setting   fire   to   the   whole   superstructure   of   the   vessel.   The   charges   are   properly   collectible   under   Act   No.   2616,   known   as   the  
incident  forced  the  master  and  the  crew  to  abandon  the  ship.   Salvage  Law.  
   
Thereafter,   SS  Eastern  Explorer   was   found   to   be   a   constructive   total   RTC:  In  favor  of  ESLI.  ESLI  has  proven  that    
loss   and   its   voyage   was   declared   abandoned.   Several   hours   later,   a   1.) it   is   seaworthy   before   the   ship   loaded   the   acetylene   cargoes  
tugboat   under   the   control   of   Fukuda   Salvage   Co.   arrived   near   the   and   the   same   has   been   tested,   checked,   examined   and   has  
vessel  and  commenced  to  tow  the  vessel  for  the  port  of  Naha,  Japan.   complied  with  the  required  safety  measures.    
  2.) The  loss  is  caused  by  a  natural  calamity  
Fire   fighting   operations   were   again   conducted   at   the   said   port.   After    
the   fire   was   extinguished,   the   cargoes   which   were   saved   were   loaded   CA:  Affirmed  RTC  decision.    
to  another  vessel  for  delivery  to  their  original  ports  of  destination.  ESLI    
charged   the   consignees   several   amounts   corresponding   to   additional   ISSUE:  
freight   and   salvage   charges,   as   follows:   (a)   for   the   goods   covered   by   Who,  among  the  carrier,  consignee  or  insurer  of  the  goods,  is  liable  for  
Bill   of   Lading   No.   042283,   ESLI   charged   the   consignee   the   sum   of   the  additional  charges  or  expenses  incurred  by  the  owner  of  the  ship  in  
P1,927.65,   representing   salvage   charges   assessed   against   the   goods;   the   salvage   operations   and   in   the   transshipment   of   the   goods  via  a  
(b)   for   the   goods   covered   by   Bill   of   Lading   No.   KCE-­‐12,   ESLI   charged   different  carrier.    

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3C  &  3S  –  ATTY.  CARLO  BUSMENTE  

  in  a  real  danger  of  exploding  because  it  was  stored  in  

HELD:   close  proximity  to  the  engine  room.  
It  is  worthy  to  note  at  the  outset  that  the  goods  subject  of  the  present  
controversy   were   neither   lost   nor   damaged   in   transit   by   the   fire   that   2. respondent   ESLI   should   have   known   that   by   storing  
razed   the   carrier.   In   fact,   the   said   goods   were   all   delivered   to   the   the   acetylene   cylinder   in   the   accommodation   area  
consignees,   even   if   the   transshipment   took   longer   than   necessary.   supposed   to   be   reserved   for   passengers,   it  
What   is   at   issue   therefore   is   not   whether   or   not   the   carrier   is   liable   for   unnecessarily  exposed  its  passengers  to  grave  danger  
the   loss,   damage,   or   deterioration   of   the   goods   transported   by   them   and  injury.  Curious  passengers,  ignorant  of  the  danger  
but   who,   among   the   carrier,   consignee   or   insurer   of   the   goods,   is   liable   the   tank   might   have   on   humans   and   property,   could  
for   the   additional   charges   or   expenses   incurred   by   the   owner   of   the   have   handled   the   same   or   could   have   lighted   and  
ship   in   the   salvage   operations   and   in   the   transshipment   of   the   smoked   cigarettes   while   repairing   in   the  
goods  via  a  different  carrier.   accommodation  area.  
  3. the   fact   that   the   acetylene   cylinder   was   checked,  
In   our   jurisprudence,   fire   may   not   be   considered   a   natural   tested   and   examined   and   subsequently   certified   as  
disaster  or  calamity  since  it  almost  always  arises  from  some  act  of   having   complied   with   the   safety   measures   and  
man   or   by   human   means.   It   cannot   be   an   act   of   God   unless   caused   standards  by  qualified  experts  before  it  was  loaded  in  
by   lightning   or   a   natural   disaster   or   casualty   not   attributable   to   the  vessel  only  shows  to  a  great  extent  that  negligence  
human  agency.  In  the  case  at  bar,  it  is  not  disputed  that  a  small  flame   was  present  in  the  handling  of  the  acetylene  cylinder  
was  detected  on  the  acetylene  cylinder  and  that  by  reason  thereof,  the   after  it  was  loaded  and  while  it  was  on  board  the  ship.  
same   exploded   despite   efforts   to   extinguish   the   fire.   Neither   is   there   Indeed,   had   the   respondent   and   its   agents   not   been  
any   doubt   that   the   acetylene   cylinder,   obviously   fully   loaded,   was   negligent   in   storing   the   acetylene   cylinder   near   the  
stored   in   the   accommodation   area   near   the   engine   room   and   not   in   a   engine   room,   then   the   same   would   not   have   leaked  
storage   area   considerably   far,   and   in   a   safe   distance,   from   the   engine   and  exploded  during  the  voyage.  
room.   Moreover,   there   was   no   showing,   and   none   was   alleged   by   the  
parties,   that   the   fire   was   caused   by   a   natural   disaster   or   calamity   not    
attributable  to  human  agency.  On  the  contrary,  there  is  strong  evidence   As  a  rule,  general  or  gross  averages  include  all  damages  and  expenses  
indicating   that   the   acetylene   cylinder   caught   fire   because   of   the   fault   which   are   deliberately   caused   in   order   in   order   to   save   the   vessel,   its  
and  negligence  of  respondent  ESLI,  its  captain  and  its  crew.     cargo,  or  both  at  the  same  time,  from  a  real  and  known  risk.  While  the  
instant   case   may   technically   fall   within   the   purview   of   the   said  
1.  the  acetylene  cylinder  which  was  fully  loaded  should   provision,   the   formalities   prescribed   under   Articles   813   and   814   of   the  
not   have   been   stored   in   the   accommodation   area   near   Code   of   Commerce   in   order   to   incur   the   expenses   and   cause   the  
the  engine  room  where  the  heat  generated  therefrom   damage   corresponding   to   gross   average   were   not   complied   with.  
could   cause   the   acetylene   cylinder   to   explode   by   Consequently,   respondent   ESLI's   claim   for   contribution   from   the  
reason   of   spontaneous   combustion.   Respondent   ESLI   consignees   of   the   cargo   at   the   time   of   the   occurrence   of   the   average  
should   have   easily   foreseen   that   the   acetylene   turns  to  naught.  Hence,  cargo   consignees   cannot   be   made   liable   to  
cylinder,  containing  highly  inflammable  material,  was   respondent   carrier   for   additional   freight   and   salvage   charges.  

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Respondent   carrier   must   refund   the   amount   paid   under   protest   for   a   Motion   to   Dismiss,   contending   that   petitioner   corporation   had   no  
additional  freight  and  salvage  charges.   legal   capacity   to   sue.   In   an   Order   dated   March   8,   1993,   5   the   trial   court  
  dismissed   the   action   on   the   ground   that   petitioner   is   a   foreign  
ERIKS  PTE  LTD.  VS.  CA   corporation  doing  business  in  the  Philippines  without  a  license.  
G.R.  No.  118843  -­‐  February  6,  1997.    
  On   appeal,   respondent   Court   affirmed   said   order   as   it   deemed   the  
Is   a   foreign   corporation   which   sold   its   products   sixteen   times   over   a   five-­‐ series   of   transactions   between   petitioner   corporation   and   private  
month   period   to   the   same   Filipino   buyer   without   first   obtaining   a   license   respondent   not   to   be   an   "isolated   or   casual   transaction."   Thus,  
to  do  business  in  the  Philippines,  prohibited  from  maintaining  an  action   respondent   Court   likewise   found   petitioner   to   be   without   legal  
to  collect  payment  therefor  in  Philippine  courts?  In  other  words,  is  such   capacity  to  sue.  
foreign   corporation   "doing   business"   in   the   Philippines   without   the    
required  license  and  thus  barred  access  to  our  court  system?   ISSUE:    
  WON   petitioner-­‐corporation   may   maintain   an   action   in   Philippine  
FACTS:     courts  considering  that  it  has  no  license  to  do  business  in  the  country.  
Petitioner   Eriks   Pte.   Ltd.   is   a   non-­‐resident  foreign  corporation  engaged    
in  the  manufacture  and  sale  of  elements  used  in  sealing  pumps,  valves   HELD:    
and   pipes   for   industrial   purposes,   valves   and   control   equipment   used   NO.   In   the   durable   case   of   The   Mentholatum   Co.   vs.   Mangaliman,   this  
for   industrial   fluid   control   and   PVC   pipes   and   fittings   for   industrial   Court  discoursed  on  the  test  to  determine  whether  a  foreign  company  
uses.   In   its   complaint,   it   alleged   that:   It   is   a   corporation   duly   organized   is  "doing  business"  in  the  Philippines,  thus:    
and   existing   under   the   laws   of   the   Republic   of   Singapore.   It   is   not    
licensed  to  do  business  in  the  Philippines  and  i(s)not  so  engaged  and  is   ".   .   .   The   true   test,   however,   seems   to   be   whether   the   foreign  
suing  on  an  isolated  transaction  for  which  it  has  capacity  to  sue  .  .  .  "  On   corporation   is   continuing   the   body   or   substance   of   the   business   or  
various   dates,   private   respondent   Delfin   Enriquez,   Jr.,   doing   business   enterprise   for   which   it   was   organized   or   whether   it   has   substantially  
under   the   name   and   style   of   Delrene   EB   Controls   Center   and/or   EB   retired   from   it   and   turned   it   over   to   another.   The   term   implies   a  
Karmine   Commercial,   ordered   and   received   from   petitioner   various   continuity   of   commercial   dealings   and   arrangements,   and  
elements  used  in  sealing  pumps,  valves,  pipes  and  control  equipment,   contemplates,   to   that   extent,   the   performance   of   acts   or   works   or   the  
PVC  pipes  and  fittings.   exercise   of   some   of   the   functions   normally   incident   to,   and   in  
  progressive  prosecution  of,  the  purpose  and  object  of  its  organization.”  
The   transfers   of   goods   were   perfected   in   Singapore,   for   private    
respondent's   account,   F.O.B.   Singapore,   with   a   90-­‐day   credit   term.   We   find   no   reason   to   disagree   with   both   lower   courts.   More   than   the  
Subsequently,   demands   were   made   by   petitioner   upon   private   sheer   number   of   transactions   entered   into,   a   clear   and   unmistakable  
respondent  to  settle  his  account,  but  the  latter  failed/refused  to  do  so.   intention  on  the  part  of  petitioner  to  continue  the  body  of  its  business  
  in  the  Philippines  is  more  than  apparent.  As  alleged  in  its  complaint,  it  
Petitioner  corporation  filed  with  the  Regional  Trial  Court  of  Makati  for   is   engaged   in   the   manufacture   and   sale   of   elements   used   in   sealing  
the   recovery   of   S$41,939.63   or   its   equivalent   in   Philippine   currency,   pumps,   valves,   and   pipes   for   industrial   purposes,   valves   and   control  
plus  interest  thereon  and  damages.  Private  respondent  responded  with   equipment  used  for  industrial  fluid  control  and  PVC  pipes  and  fittings  

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for  industrial  use.  Thus,  the  sale  by  petitioner  of  the  items  covered  by   corporation  is  "doing  business"  does  not  necessarily  depend  upon  the  
the   receipts,   which   are   part   and   parcel   of   its   main   product   line,   was   frequency  of  its  transactions,  but  more  upon  the  nature  and  character  
actually  carried  out  in  the  progressive  prosecution  of  commercial  gain   of  the  transactions.  
and   the   pursuit   of   the   purpose   and   object   of   its   business,   pure   and    
simple.   Further,   its   grant   and   extension   of   90-­‐day   credit   terms   to   Incapacitated  to  Maintain  Suit  
private   respondent   for   every   purchase   made,   unarguably   shows   an    
intention  to  continue  transacting  with  private  respondent,  since  in  the   Accordingly   and   ineluctably,   petitioner   must   be   held   to   be  
usual   course   of   commercial   transactions,   credit   is   extended   only   to   incapacitated  to  maintain  the  action  a  quo  against  private  respondent.  
customers  in  good  standing  or  to  those  on  whom  there  is  an  intention    
to   maintain   long-­‐term   relationship.   This   being   so,   the   existence   of   a   It  was  never  the  intent  of  the  legislature  to  bar  court  access  to  a  foreign  
distributorship   agreement   between   the   parties,   as   alleged   but   not   corporation   or   entity   which   happens   to   obtain   an   isolated   order   for  
proven   by   private   respondent,   would,   if   duly   established   by   competent   business   in   the   Philippines.   Neither,   did   it   intend   to   shield   debtors  
evidence,   be   merely   corroborative,   and   failure   to   sufficiently   prove   from   their   legitimate   liabilities   or   obligations.   15   But   it   cannot   allow  
said   allegation   will   not   significantly   affect   the   finding   of   the   courts   foreign   corporations   or   entities   which   conduct   regular   business   any  
below.  Nor  our  own  ruling.  It  is  precisely  upon  the  set  of  facts  above-­‐ access   to   courts   without   the   fulfillment   by   such   corporations   of   the  
detailed   that   we   concur   with   respondent   Court   that   petitioner   necessary   requisites   to   be   subjected   to   our   government's   regulation  
corporation  was  doing  business  in  the  country.   and  authority.  By  securing  a  license,  the  foreign  entity  would  be  giving  
  assurance   that   it   will   abide   by   the   decisions   of   our   courts,   even   if  
Equally   important   is   the   absence   of   any   fact   or   circumstance   which   adverse  to  it.  
might   tend   even   remotely   to   negate   such   intention   to   continue   the    
progressive   prosecution   of   petitioner's   business   activities   in   this   Other  Remedy  Still  Available  
country.  Had  private  respondent  not  turned  out  to  be  a  bad  risk,  in  all    
likelihood  petitioner  would  have  indefinitely  continued  its  commercial   By   this   judgment,   we   are   not   foreclosing   petitioner's   right   to   collect  
transactions   with   him,   and   not   surprisingly,   in   ever   increasing   payment.   Res   judicata   does   not   set   in   a   case   dismissed   for   lack   of  
volumes.   capacity   to   sue,   because   there   has   been   no   determination   on   the  
  merits.   Moreover,   this   Court   has   ruled   that   subsequent   acquisition   of  
Thus,  we  hold  that  the  series  of  transactions  in  question  could  not  have   the  license  will  cure  the  lack  of  capacity  at  the  time  of  the  execution  of  
been   isolated   or   casual   transactions.   What   is   determinative   of   "doing   the  contract.  
business"  is  not  really  the  number  or  the  quantity  of  the  transactions,    
but  more  importantly,  the  intention  of  an  entity  to  continue  the  body  of   The  requirement  of  a  license  is  not  meant  to  put  foreign  corporations  
its   business   in   the   country.   The   number   and   quantity   are   merely   at   a   disadvantage.   Rather,   the   doctrine   of   lack   of   capacity   to   sue   is  
evidence   of   such   intention.   The   phrase   "isolated   transaction"   has   a   based   on   considerations   of   sound   public   policy.   18   Thus,   it   has   been  
definite   and   fixed   meaning,   i.e.   a   transaction   or   series   of   transactions   ruled  in  Home  Insurance  that:  
set   apart   from   the   common   business   of   a   foreign   enterprise   in   the    
sense   that   there   is   no   intention   to   engage   in   a   progressive   pursuit   of   "'.   .   .   The   primary   purpose   of   our   statute   is   to   compel   a   foreign  
the  purpose  and  object  of  the  business  organization.  Whether  a  foreign   corporation  desiring  to  do  business  within  the  state  to  submit  itself  to  

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the  jurisdiction  of  the  courts  of  this  state.  The  statute  was  not  intended   (3) Hutchison   Ports   Philippines   Limited   (or   HPPL),  
to  exclude  foreign  corporations  from  the  state.  .  .  The  better  reason,  the   representing   a   consortium   composed   of   HPPL,   Guoco  
wiser  and  fairer  policy,  and  the  greater  weight  lie  with  those  decisions   Holdings   (Phils.),   Inc.   and   Unicol   Management   Services,  
which   hold   that   where,   as   here,   there   is   a   prohibition   with   a   penalty,   Inc.  
with   no   express   or   implied   declarations   respecting   the   validity   of  
enforceability  of  contracts  made  by  qualified  foreign  corporations,  the   SBMA   hired   three   international   consultants   and   a   firm  to   ensure   that  
contracts  .  .  .  are  enforceable  .  .  .  upon  compliance  with  the  law.'  (Peter   there   would   be   a   transparent   and   comprehensive   review   of   the  
&  Burghard  Stone  Co.  v.  Carper,  172  N.E.  319  [1930].)"   submitted   bids   and   to   assist   in   the   evaluation   of   the   bids   and   in   the  
  negotiation   process   after   the   winning   bidder   is   chosen.   Hutchison  
While  we  agree  with  petitioner  that  the  country  needs  to  develop  trade   Ports  won.  
relations  and  foster  friendly  commercial  relations  with  other  states,  we    
also   need   to   enforce   our   laws   that   regulate   the   conduct   of   foreigners   Before   the   award,   however,   respondent   RPSI   sought   the   setting   aside  
who   desire   to   do   business   here.   Such   strangers   must   follow   our   laws   of   ICTSI's   bid   on   the   ground   that   ICTSI   is   legally   barred   from   operating  
and   must   subject   themselves   to   reasonable   regulation   by   our   a   second   port   pursuant   to   Executive   Order   No.   212   and   DOTC   Order  
government.   95-­‐863  as  it  already  operates  the  Manila  International  Container  Port.  
  On  August  15,  1996,  the  SBMA-­‐PBAC  issued  a  resolution  rejecting  the  
WHEREFORE,   premises   considered,   the   instant   petition   is   hereby   bid  of  ICTSI  because  "said  bid  does  not  comply  with  the  requirements  
DENIED  and  the  assailed  Decision  is  AFFIRMED.   of  the  tender  documents  and  the  laws  of  the  Philippines"  and  declared  
  that   the  winning   bid   be   awarded   to  HUTCHISON   PORTS   PHILIPPINES  
SO  ORDERED.   LIMITED  (HPPL).   The   following   day,   ICTSI   filed   a   letter-­‐appeal   with  
  SBMA's  Board  of  Directors  requesting  the  nullification  and  reversal  of  
HUTCHINSON  PORTS  PHILS.  vs.  SBMA,   the   resolution.   But   even   before   the   SBMA   Board   could   act   on   the  
G.R.  No.  131367  -­‐  August  31,  2000   appeal,  ICTSI  filed  a  similar  appeal  before  the  Office  of  the  President.  
   
FACTS:   President   Fidel   Ramos   ordered   the   SBMA   Board   of   Directors   to   re-­‐
On   February   12,   1996,   the   Subic   Bay   Metropolitan   Authority   (or   evaluate   the   financial   bids   submitted   by   the   qualified   bidders.   As   a  
SBMA)   advertised   in   leading   national   daily   newspapers   and   in   one   result,   the   SMBA   Board   issued   a   resolution   declaring   HPPL   as   the  
international   publication,  an   invitation   offering   to   the   private   sector   winning   bidder  and   awarded   the  concession  for   the   operation   and  
the   opportunity   to   develop   and   operate   a   modern   marine   container   development  of  the  Subic  Bay  Container  Terminal.  The  SBMA  Board  of  
terminal   within   the   Subic   Bay   Freeport   Zone.   Out   of   the   seven   bidders,   Directors  submitted  to  the  Office  of  the  President  the  results  of  the  re-­‐
declared  three  qualified  bidders.   evaluation   of   the   bid   proposals.   However,   Executive   Secretary   Ruben  
Torres   submitted   a   memorandum   to   the   Office   of   the   President  
(1) International  Container  Terminal  Services,  Inc.  (or  ICTSI)   recommending  that  another  rebidding  be  conducted.  
(2) a   consortium   consisting   of   Royal   Port   Services,   Inc.   and   On  July  7,  1997,  the  HPPL,  feeling  aggrieved  by  the  SBMA's  failure  and  
HPC  Hamburg  Port  Consulting  GMBH  (or  RPSI)   refusal   to   commence   negotiations   and   to   execute   the   Concession  
Agreement   despite   its   earlier   pronouncements   that   HPPL   was   the  

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winning   bidder,   filed   a   complaint  against   SBMA   before   the   Regional   conducted,  the  same  was  within  the  authority  of  the  President  and  was  
Trial   Court   (RTC)   of   Olongapo   City   for   specific   performance,   a   valid   exercise   of   his   prerogative.   Consequently,   petitioner   HPPL  
mandatory   injunction   and   damages.   Complainant   HPPL   alleged   and   acquired   no   clear   and   unmistakable   right   as   the   award   announced   by  
argued   therein   that   a   binding   and   legally   enforceable   contract   had   the  SBMA  prior  to  the  President's  revocation  thereof  was  not  final  and  
been   established   between   HPPL   and   defendant   SBMA   under  Article   binding.  
1305   of   the   Civil   Code,   considering   that   SBMA   had   repeatedly   declared    
and   confirmed   that   HPPL   was   the   winning   bidder.   Having   accepted   EFFECT:  T  
HPPL's  offer  to  operate  and  develop  the  proposed  container  terminal,   here   being   no   clear   and   unmistakable   right   on   the   part   of   petitioner  
defendant   SBMA   is   duty-­‐bound   to   comply   with   its   obligation   by   HPPL,  the  rebidding  of  the  proposed  project  can  no  longer  be  enjoined  
commencing   negotiations   and   drawing   up   a   Concession   Agreement   as  there  is  no  material  and  substantial  invasion  to  speak  of.  Thus,  there  
with  plaintiff  HPPL.   is  no  longer  any  urgent  or  permanent  necessity  for  the  writ  to  prevent  
  any   perceived   serious   damage.   In   fine,   since   the   requisites*   for   the  
While  the  case  before  the  trial  court  was  pending  litigation,  the  SBMA   issuance   of   the   writ   of   injunction   are   not   present   in   the   instant   case,  
sent   notices   to   plaintiff   HPPL,   ICTSI   and   RPSI   requesting   them   to   petitioner's  application  must  be  denied  for  lack  of  merit.  
declare   their   interest   in   participating   in   a   rebidding   of   the   proposed    
project.   HPPL   learned   that   the   SBMA   had   accepted   the   bids   of   ICTSI   *Requisites:    
and  RPSI  who  were  the  only  bidders  who  qualified.  In  order  to  enjoin   (1)  Applicant  must  have  a  clear  and  unmistakable  right.  
the   rebidding   while   the   case   was   still   pending,   plaintiff   HPPL   filed   a   (2)  There  is  a  material  and  substantial  invasion  of  such  right.  
motion   for   maintenance   of   the  status   quo.   However,   the   trial   court   (3)   There   is   an   urgent   and   permanent   necessity   for   the   writ   to   prevent  
denied  the  motion.   serious  damage.  
   
Hence,  HPPL  sought  prohibitory  injunction  before  the  Supreme  Court.     2nd  ISSUE:  
  WON  HPPL’s  participation  in  the  bidding  constitutes  "engaging  in"  or  
1st  ISSUE:   "transacting"  business  which  requires  a  license  to  do  business  in  the  
WON  HPPL  has  a  right  to  be  declared  as  the  winning  bidder.   Philippines.  
   
HELD:     HELD:    
NONE.    Though  the  SBMA  Board  of  Directors,  by  resolution,  may  have   YES.   Participating   in   the   bidding   process   constitutes   "doing   business"  
declared  HPPL  as  the  winning  bidder,  said  award  cannot  be  said  to  be   because   it   shows   the   foreign   corporation's   intention   to   engage   in  
final  and  unassailable.  The  SBMA  Board  of  Directors  and  other  officers   business   here.   The   bidding   for   the   concession   contract   is   but   an  
are  subject  to  the  control  and  supervision  of  the  Office  of  the  President.   exercise  of  the  corporation's  reason  for  creation  or  existence.  It  is  the  
All   projects   undertaken   by   SBMA   require   the   approval   of   the   President   performance   by   a   foreign   corporation   of   the   acts   for   which   it   was  
of  the  Philippines  under  Letter  of  Instruction  No.  620,  which  places  the   created,   regardless   of   volume   of   business,   that   determines   whether   a  
SBMA   under   its   ambit   as   an   instrumentality.   When   the   President   foreign   corporation   needs   a   license   or   not.   The   primary   purpose   of   the  
issued   the   memorandum   setting   aside   the   award   previously   declared   license   requirement   is   to   compel   a   foreign   corporation   desiring   to   do  
by   the   SBMA   in   favor   of   HPPL   and   directing   that   a   rebidding   be   business   within   the   Philippines   to   submit   itself   to   the   jurisdiction   of  

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the   courts   of   the   state   and   to   enable   the   government   to   exercise   To   secure   the   loan,   Marcopper   executed   in   favor   of   ADB   a     “Deed   of  
jurisdiction   over   them   for   the   regulation   of   their   activities   in   this   Real  Estate  and  Chattel  Mortgage”  dated  November  11,  1992,  covering  
country.   substantially   all   of   its   (Marcopper’s)   properties   and   assets   in  
  Marinduque.  It  was  registered  with  the  RD  on  the  following  day.  
EFFECT  OF  FAILURE  TO  SECURE  A  LICENSE  TO  OPERATE:   If   a   foreign    
corporation   operates   a   business   in   the   Philippines   without   a   license,   When  Marcopper  defaulted  in  the  payment  of  its  loan  obligation,  Placer  
and   thus   does   not   submit   itself   to   Philippine   laws,   it   is   only   just   that   Dome,   in   fulfillment   of   the   SSCA   agreed   to   have   its   subsidiary  
said   foreign   corporation   be   not   allowed   to   invoke   them   in   our   courts   corporation,   herein   petitioner   MR   Holding   Ltd.,   assumed   Marcopper’s  
when  the  need  arises.  "While  foreign  investors  are  always  welcome  in   obligation  to  ADB  in  the  amount  of  $18,453,450.02.  Consequently,  ADB  
this   land   to   collaborate   with   us   for   our   mutual   benefit,   they   must   be   assigned  to  petitioner  all  its  rights,  interests  and  obligations  under  the  
prepared   as   an   indispensable   condition   to   respect   and   be   bound   by   principal  and  complementary  loan  agreements.  On  December  8,  1997,  
Philippine  law  in  proper  cases,  as  in  the  one  at  bar."  The  requirement   Marcopper   likewise   executed   a   Deed   of   Assignment   in   favor   of  
of   a   license   is   not   intended   to   put   foreign   corporations   at   a   petitioner.   Under   its   provisions,   Marcopper   assigns,   transfers,   cedes  
disadvantage,   for   the   doctrine   of   lack   of   capacity   to   sue   is   based   on   and  conveys  to  petitioner,  its  assigns  and/or  successors-­‐in-­‐interest  all  
considerations  of  sound  public  policy.   of  its  properties,  mining  equipments  and  facilities.  
   
MR  HOLDINGS  vs.  BEJAR   Meanwhile,   it   appeared   that   on   May   7,   1997,   Solidbank   Corporation  
G.R.  No.  138104  -­‐  April  11,  2002   (Solidbank)   obtained   a   Partial   Judgment   against   Marcopper   from   the  
  RTC,   Branch   26,   Manila,   in   Civil   Case   No.   96-­‐80083   entitled     “Solidbank  
FACTS:   Corporation   vs.   Marcopper   Mining   Corporation,   John   E.   Loney,   Jose   E.  
Asian   Development   Bank   (ADB),   a   multilateral   development   finance   Reyes   and   Teodulo   C.   Gabor,   Jr..   In   the   given   case,   Marcopper   was  
institution,   on   November   4,   1992,   agreed   to   extend   to   Marcopper   ordered  to  pay  Solidbank  an  amount  of  P52,970,756.89.  
Mining  Corp.  (Marcopper)  a  loan  in  the  amount  of  $40  million  under  a    
“Principal   Loan   Agreement”   and   “Complementary   Loan   Agreement”,   to   Respondent   sheriff,   Carlos   P.   Bajar,   then   issued   2   notices   of   levy   on  
finance   Marcopper’s   minin   project   at   Sta.   Cruz,   Marinduque.   The   Marcopper’s   personal   and   real   properties,,   and   over   all   its   stocks   of  
principal  loan  of  $15  million  was  sourced  from  ADB’s  ordinary  capital   scrap   iron   and   unserviceable   mining   equipment.   Respondent   Bajar  
resources,  while  the  complementary  loan  of  $25  million  was  funded  by   together  with  another  respondent  sheriff  Ferdinand  Jandusay  issued  2  
the  Bank  of  Nova  Scotia,  a  participating  finance  institution.   notices  setting  the  public  auction  sale  of  the  levied  properties.  
   
On   even   date,   ADB   and   Placer   Dome,   Inc.,   (Placer   Dome),   a   foreign   Petitioner,   upon   learning   of   the   same,   served   an   “Affidavit   of   Third-­‐
corporation  which  owns     40%  of  Marcopper,  executed  a  “Support  and   Party  Claim”  upon  respondent  sheriffs.  Upon  denial  of  its  “Affidavit  of  
Standby   Credit   Agreement”     (SSCA)   whereby   the   latter   agreed   to   Third–Party  Claim”     by  the  RTC  of  Manila,  petitioner  commenced  with  
provide   Marcopper   with   cash   flow   support   for   the   payment   of   its   the  RTC  of  Boac,  Marinduque,     presided  by  Judge  Leonardo  P.  Ansaldo,  
obligations  to  ADB.   a   complaint   for   reivindication   of   properties,   etc.,   with   prayer   for  
preliminary   injunction   and   TRO   against   respondents   Solidbank,  
  Marcopper,  and  sheriffs  Bajar  and  Jandusay.    

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  courts;   b)   if   a   foreign   corportion   is   not   doing   business   in   the  

Judge  Ansaldo  denied  petitioner’s  application  for  a  writ  of  preliminary   Philippines,  it  needs  no  license  to  sue  before  Philippine  courts  on  an  
injunction  on  the  ground  that  petitioner  has  no  legal  capacity  to  sue,  it   isolated  transaction  or  on  a  cause  of  action  entirely  independent  of  any  
being   a   foreign   corporation   doing   business   in   the   Philippines   without   business   transaction;   and     c)   if   a   foreign   corporation   does  business   in  
license.   the  Philippines  with  the  required  license,  it  can   sue  before  Philippine  
  courts   on   any   transaction.       Apparently,   it   is   not   the   absence   of   the  
Petitioner   elevated   the   matter   to   the   CA   via   a   Petition   for   Certiorari,   prescribed   license   but   the   “doing  (of)   business”   in   the   Philippines  
Prohibition   and   Mandamus.   CA   ruled   that   Judge   Ansaldo   did   not   without   such   license   which   debars   the   foreign   corporation   from   access  
commit   grave   abuse   of   discretion   in   denying   petitioner’s   prayer   for   a   to  our  courts.  
writ  of  preliminary  injunction.    
  Batas  Pambansa  Blg.  68,  otherwise  known  as  “The  Corporation  Code  of  
The  CA  held  that:  While  petitioner  may  just  be  an  assignee  to  the  Deeds   the   Philippines,”   is   silent     as   to   what   constitutes   doing”  
of  Assignment,  it  may  still  fall  within  the  meaning  of  “doing  business”   or     “transacting”   business   in   the   Philippines.     Fortunately,  
in   light   of   the   Supreme   Court   ruling   in   the   case   of   Far   East   jurisprudence   has   supplied   the   deficiency   and     has   held   that   the   term  
International  Import  and  Export  Corporation  vs.  Nankai  Kogyo  Co.  that:   “implies   a   continuity   of   commercial   dealings   and   arrangements,   and  
‘Where  a  single  act  or  transaction  however  is  not  merely  incidental  or   contemplates,   to   that   extent,   the   performance   of   acts   or   works   or   the  
casual   but   indicates   the   foreign   corporation’s   intention   to   do   other   exercise   of   some   of   the   functions   normally   incident   to,   and   in  
business   in   the   Philippines,   said   single   act   or   transaction   constitutes   progressive   prosecution   of,   the   purpose   and   object   for   which   the  
doing  or  engaging  in  or  transacting  business  in  the  Philippines.’   corporation   was   organized.”   In   Mentholatum   Co.   Inc.,   vs.   Mangaliman,  
this  Court  laid  down  the  test  to  determine  whether  a  foreign  company  
CA   also   ruled   that   the   Deed   of   Assignment   executed   by   Marcopper   was   is    “doing  business,”  thus:  
clearly  made  in  bad  faith  and  in  fraud  of  creditors,  particularly  private    
respondent,  Solidbank.   “  x     x     x     The   true   test,   however,   seems   to   be   whether   the   foreign  
  corporation  is  continuing  the  body  or  substance  of  the  business  or  
ISSUE:   enterprise   for   which   it   was   organized   or   whether   it   has  
WON  petitioner  have  legal  capacity  to  sue   substantially  retired  from  it  and  turned  it  over  to  another.”  
   
HELD:   The  traditional  case  law  definition  has  metamorphosed  into  a  statutory  
The  Court  of  Appeals  ruled  that  petitioner  has  no  legal  capacity  to  sue   definition,   having   been   adopted   with   some   qualifications   in   various  
in   the   Philippine   courts   because   it   is   a   foreign   corporation   doing   pieces  of  legislation  in  our  jurisdiction.     For  instance,  Republic  Act  No.  
business   here   without   license.     A   review   of   this   ruling   does   not   pose   7042,   otherwise   known   as   the   “Foreign   Investment   Act   of   1991,”  
much   complexity   as   the   principles   governing   a   foreign   defines    “doing  business”  as  follows:  
corporation’s     right     to     sue   in   local   courts   have   long   been   settled   by    
our   Corporation   Law.   These   principles   may   be   condensed   in   three    “d)         The   phrase   ‘doing   business’   shall   include   soliciting  
statements,   to   wit:   a)   if   a   foreign   corporation   does   business   in   the   orders,   service   contracts,   opening   offices,   whether   called  
Philippines   without   a   license,   it   cannot   sue   before   the   Philippine   ‘liaison’  offices  or  branches;  appointing  representatives  or  

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distributors   domiciled   in   the   Philippines   or   who   in   any   There  are  other  statutes  defining  the  term  “doing  business”  in  the  same  
calendar   year   stay   in   the   country   for   a   period   or   periods   tenor   as   those   above-­‐quoted,   and   as   may   be   observed,   one   common  
totalling   one   hundred   eight(y)   (180)   days   or   more;   denominator  among  them  all  is  the  concept  of  “continuity.”  
participating  in  the  management,  supervision  or  control  of    
any   domestic   business,   firm,   entity,   or   corporation   in   the   In  the  case  at  bar,  the  CA  categorized  as  “doing  business”     petitioner’s  
Philippines;   and   any   other   act   or   acts   that   imply   a   participation   under   the   “Assignment   Agreement”   and   the   “Deed   of  
continuity   of   commercial   dealings   or   arrangements,   Assignment.”   This   is   simply   untenable.  The   expression   “doing  
and   contemplate   to   that   extent   the   performance   of   business”  should  not  be  given  such  a  strict  and  literal  construction  as  
acts  or  works;  or  the  exercise  of  some  of  the  functions   to   make   it   apply   to   any   corporate   dealing     whatever.   At   this   early   stage  
normally   incident   to,   and   in   progressive   prosecution   and   with   petitioner’s   acts   or   transactions   limited   to   the   assignment  
of,  commercial  gain  or  of  the  purpose  and  object  of  the   contracts,     it   cannot   be   said     that   it   had   performed   acts   intended   to  
business   organization;   Provided,   however,   That   the   continue  the  business  for  which  it  was  organized.    It   may   not   be   amiss  
phrase   ‘doing   business’   shall   not   be   deemed   to   include   to   point   out   that     the  purpose     or     business     for     which   petitioner  
mere   investment   as   a   shareholder   by   a   foreign   entity   in   was   organized   is   not   discernible   in   the   records.       No   effort   was  
domestic   corporations   duly   registered   to   do   business,   exerted   by   the   Court   of   Appeals   to   establish   the   nexus   between  
and/or  the  exercise  of  rights  as  such  investor,  nor  having  a   petitioner’s   business   and   the   acts   supposed   to   constitute   “doing  
nominee   director   or   officer   to   represent   its   interests   in   business.”   Thus,   whether   the   assignment   contracts   were  
such   corporation,   nor   appointing   a   representative   or   incidental   to   petitioner’s   business   or   were   continuation   thereof   is  
distributor   domiciled   in   the   Philippines   which   transacts   beyond  determination.  
business  in  its  own  name  and  for  its  own  account.”    
  The  SC  cannot  apply  the  case  cited  by  the  CA,  Far   East   Int’l   Import   and  
Likewise,  Section  1  of  R.A.  No.  5455,  provides  that:     Export  Corp.  vs.  Nankai  Kogyo  Co.,  Ltd.,  which  held  that  a  single  act  may  
“SECTION.   1.   Definition   and   scope   of   this   Act.   -­‐   (1)   x   x   x   the   phrase   still  constitute  “doing  business”  if    “it  is  not  merely  incidental  or  casual,  
‘doing   business’   shall   include   soliciting   orders,   purchases,   service   but  is  of  such  character  as  distinctly  to  indicate  a  purpose  on  the  part  
contracts,  opening  offices,  whether  called  ‘liaison’  offices  or  branches;   of   the   foreign   corporation   to   do   other   business   in   the   state.”       In   said  
appointing   representatives   or   distributors   who   are   domiciled   in   the   case,   there   was   an   express   admission   from   an   official   of   the   foreign  
Philippines   or   who   in   any   calendar   year   stay   in   the   Philippines   for   a   corporation   that   he   was   sent   to   the   Philippines   to   look   into   the  
period   or   periods   totaling   one   hundred   eighty   days   or   more;   operation  of  mines,  thereby  revealing  the  foreign  corporation’s  desire  
participating   in   the   management,   supervision   or   control   of   any   to  continue  engaging  in  business  here.     But  in  the  case  at  bar,  there  is  
domestic   business   firm,   entity   or   corporation   in   the   Philippines;   and   no  evidence  of  similar  desire  or  intent.     Unarguably,  petitioner  may,  as  
any   other     act   or   acts   that   imply   a   continuity   of   commercial   the  CA  suggested,  decide  to  operate  Marcopper’s  mining  business,  but,  
dealings   or   arrangements,   and   contemplate   to   that   extent   the   of  course,  at  this  stage,  that  is  a  mere  speculation.  Or  it  may  decide  to  
performance   of   acts   or   works,   or   the   exercise   of   some   of   the   sell  the  credit  secured  by  the  mining  properties  to  an  offshore  investor,  
functions  normally  incident  to,  and  in  progressive  prosecution  of,   in   which   case   the   acts   will   still   be   isolated   transactions.   To   see  
commercial   gain   or   of   the   purpose   and   object   of   the   business   through  the  present  facts  an  intention  on  the  part  of  petitioner  to  
organization.”   start  a  series  of  business  transaction  is  to  rest  on  assumptions  or  

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probabilities   falling   short   of   actual   proof.     Courts   should   never   petitioner  to  continue  Marcopper’s  business”   could   have   no   basis   for   at  
base   its   judgments   on   a   state   of   facts   so   inadequately   developed   that  time,  Marcopper’s  fate  cannot  yet  be  determined.  
that  it  cannot  be  determined  where  inference  ends  and  conjecture    
begins.   In  the  final  analysis,  we  are  convinced  that  petitioner  was  engaged  only  
  in   isolated   acts   or   transactions.   Single   or   isolated   acts,   contracts,   or  
Absent   overt   acts   of   petitioner   from   which   the   SC   may   directly   infer   its   transactions   of   foreign   corporations   are   not   regarded   as   a   doing   or  
intention   to   continue   Marcopper’s   business,   it   cannot   give   its   carrying  on  of  business.     Typical  examples  of  these  are  the  making  of  a  
concurrence.  Significantly,  a  view  subscribed  upon  by  many  authorities   single  contract,  sale,  sale  with  the  taking  of  a  note  and  mortgage  in  the  
is  that  the  mere  ownership  by  a  foreign  corporation  of  a  property  in  a   state   to   secure   payment   therefor,   purchase,   or   note,   or   the   mere  
certain  state,  unaccompanied   by   its   active   use   in   furtherance   of   the   commission  of  a  tort.  In  these  instances,  there  is  no  purpose  to  do  any  
business   for   which   it   was   formed,  is  insufficient  in  itself  to  constitute   other  business  within  the  country.  
doing   business.   In   Chittim   vs.   Belle   Fourche   Bentonite   Products   Co.,   it    
was   held   that   even   if   a   foreign   corporation   purchased   Addtl.  info.    
and     took       conveyances     of     a     mining   claim,     did     some   assessment   Art.1387.     All   contracts   by   virtue   of   which   the   debtor   alienates  
work  thereon,  and  endeavored  to  sell  it,  its  acts  will  not  constitute   property   by   gratuitous   title   are   presumed   to   have   been   entered   into   in  
the   doing   of   business   so   as   to   subject   the   corporation   to   the   fraud  of  creditors,  when  the  donor  did  not  reserve  sufficient  property  
statutory   requirements   for   the   transacting   of   business.  On   the   to  pay  all  debts  contracted  before  the  donation.  
same   vein,   petitioner,   a   foreign   corporation,   which   becomes   the    
assignee   of   mining   properties,   facilities   and   equipment   cannot   be   Alienations   by   onerous   title   are   also   presumed   fraudulent   when  
automatically  considered  as  doing  business,  nor  presumed  to  have  the   made   by   persons   against   whom   some   judgment   has   been  
intention  of  engaging  in  mining  business.   rendered   in   any   instance   or   some   writ   of   attachment   has   been  
  issued.       The   decision   or   attachment   need   not   refer   to   the  
One   important   point.  Long   before   petitioner   assumed   Marcopper’s   property   alienated,   and   need   not   have   been   obtained   by   the   party  
debt   to   ADB   and   became   their   assignee   under   the   two   assignment   seeking  rescission.  
contracts,   there   already   existed   a   “Support   and   Standby   Credit    
Agreement”  between  ADB  and  Placer  Dome  whereby  the  latter  bound   This  article  presumes  the  existence  of  fraud  made  by  a  debtor.    Thus,  in  
itself   to   provide   cash   flow   support   for   Marcopper’s   payment   of   its   the  absence  of  satisfactory  evidence  to  the  contrary,  an  alienation  of  a  
obligations   to   ADB.       Plainly,   petitioner’s   payment   of   US$   18,453,   property  will  be  held  fraudulent  if  it  is  made  after  a  judgment  has  been  
450.12   to   ADB   was   more   of   a   fulfillment   of   an   obligation   under   the   rendered   against   the   debtor   making   the   alienation.   This   presumption  
“Support   and   Standby   Credit   Agreement”   rather   than   an   of   fraud   is   not   conclusive   and   may   be   rebutted   by   satisfactory   and  
investment.     That   petitioner   had   to   step   into   the   shoes   of   ADB   as   convincing   evidence.     All   that   is   necessary   is   to   establish  
Marcopper’s   creditor   was   just   a   necessary   legal   consequence   of   the   affirmatively  that  the  conveyance  is  made  in  good  faith  and  for  a  
transactions   that   transpired.  Also,   we   must   hasten   to   add   that   the   sufficient  and  valuable  consideration.  
“Support   and   Standby   Credit   Agreement”   was   executed  four  (4)  years    
prior   to   Marcopper’s   insovency,   hence,   the   alleged   “intention   of   The   “Assignment   Agreement”   and   the   “Deed   of   Assignment”   were  
executed  for  valuable  considerations.  The  facts  of  the  case  so  far  show  

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that   the   assignment   contracts   were   executed   in   good   faith.  The  

execution   of   the   “Assignment   Agreement”   on   Macrh   20,   1997   and   the  
“Deed   of   Assignment”   on   December   8,1997   is   not   the   alpha   of   this  
case.     While   the   execution   of   these   assignment   contracts   almost  
coincided   with   the   rendition   on   May   7,   1997   of   the   Partial   Judgment   in  
Civil   Case   No.   96-­‐80083   by   the   Manila   RTC,   however,   there   was   no  
intention  on  the  part  of  petitioner  to  defeat  Solidbank’s  claim.     It  bears  
reiterating  that  as  early  as  November  4,  1992,  Placer  Dome  had  already  
bound   itself   under   a   “Support   and   Standby   Credit   Agreement”   to  
provide  Marcopper  with  cash  flow  support  for  the  payment  to  ADB  of  
its   obligations.  When   Marcopper   ceased   operations   on   account   of  
disastrous  mine  tailings  spill  into  the  Boac  River  and  ADB  pressed  for  
payment   of   the   loan,   Placer   Dome   agreed   to   have   its   subsidiary,   herein  
petitioner,   paid   ADB     the   amount   of   US   $18,453,450.12.  Thereupon,  
ADB   and   Marcopper   executed,   respectively,   in   favor   of   petitioner   an  
“Assignment   Agreement”   and   a   “Deed   of   Assignment.”   Obviously,   the  
assignment   contracts   were   connected   with   transactions   that   happened  
long  before  the  rendition  in  1997  of  the  Partial  Judgment  in  Civil  Case  
No.   96-­‐80083   by   the   Manila   RTC.     Those   contracts   cannot   be   viewed   in  
isolation.     If   we   may   add,   it   is   highly   inconceivable   that   ADB,   a  
reputable   international   financial   organization,   will   connive   with  
Marcopper   to   feign   or   simulate   a   contract   in   1992   just   to   defraud  
Solidbank   for   its   claim   four   years   thereafter.   And   it   is   equally  
incredible   for   petitioner   to   be   paying   the   huge   sum   of   US   $   18,   453,  
450.12  to  ADB  only  for  the  purpose  of  defrauding  Solidbank  of  the  sum  
of    P52,970.756.89.  
 
WHEREFORE,   the   petition   is   GRANTED.     The   assailed   Decision   dated  
January  8,  1999  and  the  Resolution  dated  March  29,  1999  of  the  Court  
of  Appeals  in  CA  G.R.  No.  49226  are  set  aside.  
 

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