EN BANC Passing section 69 of the Corporation Law for the moment, section 70, as amended,
covers the cases of foreign corporations "transacting business in the Islands at the time
G.R. No. 22015 September 1, 1924
MARSHALL-WELLS COMPANY, plaintiff-appellant,
vs.
HENRY W. ELSER & CO., INC., defendant-appellee.
Hartigan and Welch for appellant.
J. F. Boomer for appellee.
MALCOLM, J.:
Marshall-Wells Company, an Oregon corporation, 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 not legal capacity to sue. In the demurrer, counsel stated
that "The said complaint does not show that the plaintiff has complied with the laws of
the Philippine Islands in that which is required of foreign corporations desiring to do
business in the Philippine Islands, neither does it show that it was authorized to do
business in the Philippine Islands." The demurrer was sustained by the trial judge.
Inasmuch as the plaintiff could not allege compliance with the statute, the order was
allowed to become final and an appeal was perfected.
To begin with the law as a fit setting for the issue. The Corporation Law (Act No. 1459)
contains six sections relating particularly to foreign corporations. Section 68, as
amended by Act No. 2900, provides that 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. No order for a license shall be issued except upon a statement
under oath of the managing agent of the corporation, showing to the satisfaction of the
proper Secretary that the corporation is solvent and in sound financial condition, and
setting forth the resources and liabilities of the corporation. Said statement shall contain
the following: (1) The name of the corporation; (2) the purpose for which it was
organized; (3) the location of its principal or home office; (4) the capital stock of the
corporation and the amount thereof actually subscribed and paid into the treasury; (5)
the net assets of the corporation over and above all debts, liabilities, obligations, and
claims outstanding against it; and (6) the name of an agent residing in the Philippine
Islands authorized by the corporation to accept evidence of summons and process in
all legal proceedings against the corporation and of all notices affecting the corporation.
Further evidence of the solvency and fair dealing of the corporation may be required.
Upon filing in the Mercantile Register of the Bureau of Commerce and Industry the said
statement, a certified copy of its charter, and the order of the Secretary for the issuance
of a license, the Chief of the Mercantile Register "shall issue to the foreign corporation
as directed in the order of license to do business in the Philippine Islands," and for the
issuance of the license shall collect a fee fixed in accordance with the schedule
established in section 8 of the Law.
of the passage" of the Act. Section 71 authorizes the Secretary of Finance or the
Secretary of Commerce and Communications, as the case may be, by and with the
approval of the Governor-General, "to revoke the license to transact business in the
Philippine Islands" of any foreign corporation. Section 72 concerns summons and legal
process. Section 73 makes a foreign corporation bound by all the laws, rules, and
regulations applicable to domestic corporations of the same class, with certain
exceptions.
Returning now to section 69 of the Corporation Law, its literal terminology is as follows:
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.
Is the obtaining of the license prescribed in section 68, as amended, of the Corporation
Law a condition precedent to the maintaining of any kind of action in the courts of the
Philippine Islands by a foreign corporation? The issue is framed to correspond with
defendant's theory of the case on appeal, although possibly somewhat at variance with
its stand in the lower court.
So far as we are informed, this is a question of first impression. The case
of Dampfschieffs Rhederei Union vs. Compañia Trasatlantica ([1907], 8 Phil., 766),
relating to the provisions of the Code of Commerce, only held that a foreign corporation
which has not established itself in the Philippines, nor engaged in business in the
Philippines, could, without filing its articles of incorporation in the mercantile registry,
maintain an action against another for damages. The case of Spreckles vs.
Ward ([1909], 12 Phil., 414), while making reference to a point similar to the one before
us, was merely authority for the holding, that the provisions of section 69 of the
Corporation Law denying to unregistered foreign corporations the right to maintain suits
for the recovery of any debt, claim, or demand, do not impose on all plaintiff-litigants
the burden of establishing by affirmative proof that they are not unregistered foreign
corporations; that fact will not be presumed without some evidence tending to establish
its existence. But the question is not alone new, but of prime importance, to the
consideration of which we have given mature thought.
Corporations have no legal status beyond the bounds of the sovereignty by which they
are created. A state may restrict the right of a foreign corporation to engage in business
within its limits, and to sue in its courts. But by virtue of state comity, a corporation
created by the laws of one state is usually allowed to transact business in other states
and to sue in the courts of the forum. (Paul vs. Virginia [1869], 8 Wall., 168; Sioux
Remedy Co., vs. Cope and Cope [1914], 235 U. S., 197; Cyclone Mining Co. vs. Baker
Light & Power Co., [1908], 165 Fed., 996.)
But here we have present for resolution no question of constitutional law. Article 4 of
the United States Constitution and the Fourteenth Amendment to the Constitution are
not invoked. The issue is not complicated with matters affecting interstate commerce
under the American Constitution. Nor are we concerned with a question of private
international law. It all simmers down to an issue of statutory construction.
The noncompliance 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 the statute. (Standard Stock
Food Co. vs. Jasper [1907], 76 Kan., 926; Spreckles vs. Ward, supra.)

Defendant isolates a portion of one sentence of section 69 of the Corporation Law and The order appealed from shall be set aside and the record shall be returned to the court
asks the court to give it a literal meaning. Counsel would have the law read thus: "No of origin for further proceedings. Without special finding as to costs in this instance, it
foreign corporation shall be permitted to maintain by itself or assignee any suit for the is so ordered.
recovery of any debt, claim, or demand whatever, unless it shall have the license
prescribed in section 68 of the law." Plaintiff, on the contrary, desires for the court to
consider the particular point under discussion with reference to all the law, and
thereafter to give the law a common sense interpretation.

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

Confronted with the option of giving to the Corporation Law a harsh interpretation, which
would disastrously embarrass trade, or of giving to the law a reasonable interpretation,
which would markedly help in the development of trade; confronted with the option of
barring from the courts foreign litigants with good causes of action or of assuming
jurisdiction of their cases; confronted with the option of construing the law to mean that
any corporation in the United States, which might want to sell to a person in the
Philippine must send some representative to the Islands before the sale, and go
through the complicated formulae provided by the Corporation Law with regard to the
obtaining of the license, before the sale was made, in order to avoid being swindled by
Philippine citizens, or of construing the law to mean that no foreign corporation doing
business in the Philippines can maintain any suit until it shall possess the necessary
license, — confronted with these options, can anyone doubt what our decision will be?
The law simply means that no foreign corporation shall be permitted "to transact
business in the Philippine Islands," as this phrase is known in corporation law, unless
it shall have the license required by law, and, until it complies with the law, shall not be
permitted to maintain any suit in the local courts. A contrary holding would bring the law
to the verge of unconstitutionality, a result which should be and can be easily avoided.
(Sioux Remedy Co. vs. Cope and Cope, supra; Perkins, Philippine Business Law, p.
264.)
 FIRST DIVISION
G.R. No. L-34382 July 20, 1983
THE HOME INSURANCE COMPANY, petitioner,
vs.
EASTERN SHIPPING LINES and/or ANGEL JOSE TRANSPORTATION, INC. and
HON. A. MELENCIO-HERRERA, Presiding Judge of the Manila Court of First
Instance, Branch XVII, respondents.
GUTIERREZ, JR., J.:
Questioned in these consolidated petitions for review on certiorari are the decisions of
the Court of First Instance of Manila, Branch XVII, dismissing the complaints in Civil
Case No. 71923 and in Civil Case No. 71694, on the ground that plaintiff therein, now
appellant, had failed to prove its capacity to sue.
There is no dispute over the facts of these cases for recovery of maritime damages. In
L-34382, the facts are found in the decision of the respondent court which stated:
On or about January 13, 1967, S. Kajita & Co., on behalf of Atlas
Consolidated Mining & Development Corporation, shipped on board
the SS "Eastern Jupiter' from Osaka, Japan, 2,361 coils of "Black Hot
Rolled Copper Wire Rods." The said VESSEL is owned and operated
by defendant Eastern Shipping Lines (CARRIER). The shipment was
covered by Bill of Lading No. O-MA-9, with arrival notice to Phelps
Dodge Copper Products Corporation of the Philippines
(CONSIGNEE) at Manila. The shipment was insured with plaintiff
against all risks in the amount of P1,580,105.06 under its Insurance
Policy No. AS-73633.
xxx xxx xxx
The coils discharged from the VESSEL numbered 2,361, of which 53
were in bad order. What the CONSIGNEE ultimately received at its
warehouse was the same number of 2,361 coils with 73 coils loose
and partly cut, and 28 coils entangled, partly cut, and which had to
be considered as scrap. Upon weighing at CONSIGNEE's
warehouse, the 2,361 coils were found to weight 263,940.85 kilos as
against its invoiced weight of 264,534.00 kilos or a net loss/shortage
of 593.15 kilos, according to Exhibit "A", or 1,209,56 lbs., according
to the claims presented by the consignee against the plaintiff (Exhibit
"D-1"), the CARRIER (Exhibit "J-1"), and the TRANSPORTATION
COMPANY (Exhibit "K- l").
For the loss/damage suffered by the cargo, plaintiff paid the
consignee under its insurance policy the amount of P3,260.44, by
virtue of which plaintiff became subrogated to the rights and actions
of the CONSIGNEE. Plaintiff made demands for payment against the
CARRIER and the TRANSPORTATION COMPANY for
reimbursement of the aforesaid amount but each refused to pay the
same. ...
The facts of L-34383 are found in the decision of the lower court as follows:
On or about December 22, 1966, the Hansa Transport Kontor
shipped from Bremen, Germany, 30 packages of Service Parts of
Farm Equipment and Implements on board the VESSEL, SS
"NEDER RIJN" owned by the defendant, N. V. Nedlloyd Lijnen, and
represented in the Philippines by its local agent, the defendant
Columbian Philippines, Inc. (CARRIER). The shipment was covered
by Bill of Lading No. 22 for transportation to, and delivery at, Manila,
in favor of the consignee, international Harvester Macleod, Inc.
(CONSIGNEE). The shipment was insured with plaintiff company
under its Cargo Policy No. AS-73735 "with average terms" for
P98,567.79.
xxx xxx xxx
The packages discharged from the VESSEL numbered 29, of which
seven packages were found to be in bad order. What the
CONSIGNEE ultimately received at its warehouse was the same
number of 29 packages with 9 packages in bad order. Out of these
9 packages, 1 package was accepted by the CONSIGNEE in good
order due to the negligible damages sustained. Upon inspection at
the consignee's warehouse, the contents of 3 out of the 8 cases were
also found to be complete and intact, leaving 5 cases in bad order.
The contents of these 5 packages showed several items missing in
the total amount of $131.14; while the contents of the undelivered 1
package were valued at $394.66, or a total of $525.80 or P2,426.98.
For the short-delivery of 1 package and the missing items in 5 other
packages, plaintiff paid the CONSIGNEE under its Insurance Cargo
Policy the amount of P2,426.98, by virtue of which plaintiff became
subrogated to the rights and actions of the CONSIGNEE. Demands
were made on defendants CARRIER and CONSIGNEE for
reimbursement thereof but they failed and refused to pay the same.
In both cases, the petitioner-appellant made the following averment regarding its
capacity to sue:
The plaintiff is a foreign insurance company duly authorized to do business in the
Philippines through its agent, Mr. VICTOR H. BELLO, of legal age and with office
address at Oledan Building, Ayala Avenue, Makati, Rizal.
In L-34382, the respondent-appellee Eastern Shipping Lines, Inc., filed its answer and
alleged that it:
Denies the allegations of Paragraph I which refer to plaintiff's capacity to sue for lack
of knowledge or information sufficient to form a belief as to the truth thereof.
Respondent-appellee, Angel Jose Transportation, Inc., in turn filed its answer admitting
the allegations of the complaint, regarding the capacity of plaintiff-appellant. The
pertinent paragraph of this answer reads as follows:
Angel Jose Admits the jurisdictional averments in paragraphs 1, 2, and 3 of the heading
Parties.
In L-34383, the respondents-appellees N. V. Nedlloyd Lijhen, Columbian Philippines,
Inc. and Guacods, Inc., filed their answers. They denied the petitioner-appellant's
capacity to sue for lack of knowledge or information sufficient to form a belief as to the
truth thereof.
As earlier stated, the respondent court dismissed the complaints in the two cases on
the same ground, that the plaintiff failed to prove its capacity to sue. The court reasoned
as follows:
In the opinion of the Court, if plaintiff had the capacity to sue, the Court should hold that
a) defendant Eastern Shipping Lines should pay plaintiff the sum of P1,630.22 with
interest at the legal rate from January 5, 1968, the date of the institution of the
Complaint, until fully paid; b) defendant Angel Jose Transportation, Inc. should pay
plaintiff the sum of P1,630.22 also with interest at the legal rate from January 5, 1968
until fully paid; c) the counterclaim of defendant Angel Jose transportation, Inc. should
be ordered dismissed; and d) each defendant to pay one-half of the costs.
The Court is of the opinion that Section 68 of the Corporation Law reflects a policy
designed to protect the public interest. Hence, although defendants have not raised the
question of plaintiff's compliance with that provision of law, the Court has resolved to
take the matter into account.
A suing foreign corporation, like plaintiff, has to plead affirmatively and prove either that
the transaction upon which it bases its complaint is an isolated one, or that it is licensed
to transact business in this country, failing which, it will be deemed that it has no valid
cause of action (Atlantic Mutual Ins. Co. vs. Cebu Stevedoring Co., Inc., 17 SCRA
1037). In view of the number of cases filed by plaintiff before this Court, of which judicial
cognizance can be taken, and under the ruling in Far East International Import and
Export Corporation vs. Hankai Koayo Co., 6 SCRA 725, it has to be held that plaintiff
is doing business in the Philippines. Consequently, it must have a license under Section
68 of the Corporation Law before it can be allowed to sue.
The situation of plaintiff under said Section 68 has been described as follows in Civil
Case No. 71923 of this Court, entitled 'Home Insurance Co. vs. N. V. Nedlloyd Lijnen,
of which judicial cognizance can also be taken:
Exhibit "R",presented by plaintiff is a certified copy of a license, dated
July 1, 1967, issued by the Office of the Insurance Commissioner
authorizing plaintiff to transact insurance business in this country. By
virtue of Section 176 of the Insurance Law, it has to be presumed
that a license to transact business under Section 68 of the
Corporation Law had previously been issued to plaintiff. No copy
thereof, however, was submitted for a reason unknown. The date of
that license must not have been much anterior to July 1, 1967. The
preponderance of the evidence would therefore call for the finding
that the insurance contract involved in this case, which was executed
at Makati, Rizal, on February 8, 1967, was contracted before plaintiff
was licensed to transact business in the Philippines.
This Court views Section 68 of the Corporation Law as reflective of
a basic public policy. Hence, it is of the opinion that, in the eyes of
Philippine law, the insurance contract involved in this case must be
held void under the provisions of Article 1409 (1) of the Civil Code,
and could not be validated by subsequent procurement of the
license. That view of the Court finds support in the following citation:
According to many authorities, a constitutional or
statutory prohibition against a foreign corporation
doing business in the state, unless such
corporation has complied with conditions
prescribed, is effective to make the contracts of
such corporation void, or at least unenforceable,
and prevents the maintenance by the corporation
of any action on such contracts. Although the
usual construction is to the contrary, and to the
effect that only the remedy for enforcement is
affected thereby, a statute prohibiting a non-
complying corporation from suing in the state
courts on any contract has been held by some
courts to render the contract void and
unenforceable by the corporation, even after its
has complied with the statute." (36 Am. Jur. 2d
299-300).
xxx xxx xxx
The said Civil Case No. 71923 was dismissed by this Court. As the
insurance contract involved herein was executed on January 20,
1967, the instant case should also be dismissed.
We resolved to consolidate the two cases when we gave due course to the petition.
The petitioner raised the following assignments of errors:
First Assignment of Error
 THE HONORABLE TRIAL COURT ERRED IN CONSIDERING AS
AN ISSUE THE LEGAL EXISTENCE OR CAPACITY OF
PLAINTIFF-APPELLANT.
Second Assignment of Error
THE HONORABLE TRIAL COURT ERRED IN DISMISSING THE
COMPLAINT ON THE FINDING THAT PLAINTIFF-APPELLANT
HAS NO CAPACITY TO SUE.
On the basis of factual and equitable considerations, there is no question that the
private respondents should pay the obligations found by the trial court as owing to the
petitioner. Only the question of validity of the contracts in relation to lack of capacity to
sue stands in the way of the petitioner being given the affirmative relief it seeks.
Whether or not the petitioner was engaged in single acts or solitary transactions and
not engaged in business is likewise not in issue. The petitioner was engaged in
business without a license. The private respondents' obligation to pay under the terms
of the contracts has been proved.
When the complaints in these two cases were filed, the petitioner had already secured
the necessary license to conduct its insurance business in the Philippines. It could
already filed suits.
Petitioner was, therefore, telling the truth when it averred in its complaints that it was a
foreign insurance company duly authorized to do business in the Philippines through
its agent Mr. Victor H. Bello. However, when the insurance contracts which formed the
basis of these cases were executed, the petitioner had not yet secured the necessary
licenses and authority. The lower court, therefore, declared that pursuant to the basic
public policy reflected in the Corporation Law, the insurance contracts executed before
a license was secured must be held null and void. The court ruled that the contracts
could not be validated by the subsequent procurement of the license.
The applicable provisions of the old Corporation Law, Act 1459, as amended are:
Sec. 68. No foreign corporation or corporations formed, organized,
or existing under any laws other than those of the Philippine Islands
shall be permitted to transact business in the Philippine Islands until
after it shall have obtained a license for that purpose from the chief
of the Mercantile Register of the Bureau of Commerce and
Industry, (Now Securities and Exchange Commission. See RA 5455)
upon order of the Secretary of Finance (Now Monetary Board) in
case of banks, savings, and loan banks, trust corporations, and
banking institutions of all kinds, and upon order of the Secretary of
Commerce and Communications (Now Secretary of Trade. See
5455, section 4 for other requirements) in case of all other foreign
corporations. ...
xxx xxx xxx
Sec. 69. No foreign corporation or corporation formed, organized, or
existing under any laws other than those of the Philippine Islands
shall be permitted to transact business in the Philippine Islands or
maintain by itself or assignee any suit for the recovery of any debt,
claim, or demand whatever, unless it shall have the license
prescribed in the section immediately preceding. Any officer, director,
or agent of the corporation or any person transacting business for
any foreign corporation not having the license prescribed shag be
punished by imprisonment for not less than six months nor more than
two years or by a fine of not less than two hundred pesos nor more
than one thousand pesos, or by both such imprisonment and fine, in
the discretion of the court.
As early as 1924, this Court ruled in the leading case of Marshall Wells Co. v. Henry
W. Elser & Co. (46 Phil. 70) that the object of Sections 68 and 69 of the Corporation
Law was to subject the foreign corporation doing business in the Philippines to the
jurisdiction of our courts. The Marshall Wells Co. decision referred to a litigation over
an isolated act for the unpaid balance on a bill of goods but the philosophy behind the
law applies to the factual circumstances of these cases. The Court stated:
xxx xxx xxx
To repeat, the objective of the law was to subject the foreign corporation to the
jurisdiction of our courts. The Corporation Law must be given a reasonable, not an
unduly harsh, interpretation which does not hamper the development of trade relations
and which fosters friendly commercial intercourse among countries.
The objectives enunciated in the 1924 decision are even more relevant today when we
view commercial relations in terms of a world economy, when the tendency is to re-
examine the political boundaries separating one nation from another insofar as they
define business requirements or restrict marketing conditions.
We distinguish between the denial of a right to take remedial action and the penal
sanction for non-registration.
Insofar as transacting business without a license is concerned, Section 69 of the
Corporation Law imposed a penal sanction-imprisonment for not less than six months
nor more than two years or payment of a fine not less than P200.00 nor more than
P1,000.00 or both in the discretion of the court. There is a penalty for transacting
business without registration.
And insofar as litigation is concerned, the foreign corporation or its assignee may not
maintain any suit for the recovery of any debt, claim, or demand whatever. The
Corporation Law is silent on whether or not the contract executed by a foreign
corporation with no capacity to sue is null and void ab initio.
We are not unaware of the conflicting schools of thought both here and abroad which
are divided on whether such contracts are void or merely voidable. Professor Sulpicio
Guevarra in his book Corporation Law (Philippine Jurisprudence Series, U.P. Law
Center, pp. 233-234) cites an Illinois decision which holds the contracts void and a
Michigan statute and decision declaring them merely voidable:
xxx xxx xxx
Where a contract which is entered into by a foreign corporation
without complying with the local requirements of doing business is
rendered void either by the express terms of a statute or by statutory
construction, a subsequent compliance with the statute by the
corporation will not enable it to maintain an action on the contract.
(Perkins Mfg. Co. v. Clinton Const. Co., 295 P. 1 [1930]. See also
Diamond Glue Co. v. U.S. Glue Co., supra see note 18.) But where
the statute merely prohibits the maintenance of a suit on such
contract (without expressly declaring the contract "void"), it was held
that a failure to comply with the statute rendered the
contract voidable and not void, and compliance at any time before
suit was sufficient. (Perkins Mfg. Co. v. Clinton Const. Co., supra.)
Notwithstanding the above decision, the Illinois statute provides,
among other things that a foreign corporation that fails to comply with
the conditions of doing business in that state cannot maintain a suit
or action, etc. The court said: 'The contract upon which this suit was
brought, having been entered into in this state when appellant was
not permitted to transact business in this state, is in violation of the
plain provisions of the statute, and is therefore null and void, and no
action can be maintained thereon at any time, even if the corporation
shall, at some time after the making of the contract, qualify itself to
transact business in this state by a compliance with our laws in
reference to foreign corporations that desire to engage in business
here. (United Lead Co. v. J.M. Ready Elevator Mfg. Co., 222 Ill. 199,
73 N.N. 567 [1906].)
A Michigan statute provides: "No foreign corporation subject to the
provisions of this Act, shall maintain any action in this state upon any
contract made by it in this state after the taking effect of this
Act, untilit shall have fully complied with the requirement of this Act,
and procured a certificate to that effect from the Secretary of State,"
It was held that the above statute does not render contracts of a
foreign corporation that fails to comply with the statute void, but they
may be enforced only after compliance therewith. (Hastings
Industrial Co. v. Moral, 143 Mich. 679,107 N.E. 706 [1906]; Kuennan
v. U.S. Fidelity & G. Co., Mich. 122; 123 N.W. 799 [1909]; Despres,
Bridges & Noel v. Zierleyn, 163 Mich. 399, 128 N.W. 769 [1910]).
It has also been held that where the law provided that a corporation
which has not complied with the statutory requirements "shall not
maintain an action until such compliance". "At the commencement of
this action the plaintiff had not filed the certified copy with the country
clerk of Madera County, but it did file with the officer several months
before the defendant filed his amended answer, setting up this
defense, as that at the time this defense was pleaded by the
defendant the plaintiff had complied with the statute. The defense
pleaded by the defendant was therefore unavailable to him to prevent
the plaintiff from thereafter maintaining the action. Section 299 does
not declare that the plaintiff shall not commence an action in any
county unless it has filed a certified copy in the office of the county
clerk, but merely declares that it shall not maintain an action until it
has filled it. To maintain an action is not the same as to commence
an action, but implies that the action has already been commenced."
(See also Kendrick & Roberts Inc. v. Warren Bros. Co., 110 Md. 47,
72 A. 461 [1909]).
In another case, the court said: "The very fact that the prohibition
against maintaining an action in the courts of the state was inserted
in the statute ought to be conclusive proof that the legislature did not
intend or understand that contracts made without compliance with
the law were void. The statute does not fix any time within which
foreign corporations shall comply with the Act. If such contracts were
void, no suits could be prosecuted on them in any court. ... The
primary purpose of our statute is to compel a foreign corporation
desiring to do business within the state to submit itself to the
jurisdiction of the courts of this state. The statute was not intended to
exclude foreign corporations from the state. It does not, in terms,
render invalid contracts made in this state by non-complying
corporations. The better reason, the wiser and fairer policy, and the
greater weight lie with those decisions which hold that where, as
here, there is a prohibition with a penalty, with no express or implied
declarations respecting the validity of enforceability of contracts
made by qualified foreign corporations, the contracts ... are
enforceable ... upon compliance with the law." (Peter & Burghard
Stone Co. v. Carper, 172 N.E. 319 [1930].)
Our jurisprudence leans towards the later view. Apart from the objectives earlier cited
from Marshall Wells Co. v. Henry W. Elser & Co (supra), it has long been the rule that
a foreign corporation actually doing business in the Philippines without license to do so
may be sued in our courts. The defendant American corporation in General Corporation
of the Philippines v. Union Insurance Society of Canton Ltd et al. (87 Phil. 313) entered
into insurance contracts without the necessary license or authority. When summons
was served on the agent, the defendant had not yet been registered and authorized to
do business. The registration and authority came a little less than two months later.
This Court ruled:
Counsel for appellant contends that at the time of the service of
summons, the appellant had not yet been authorized to do business.
But, as already stated, section 14, Rule 7 of the Rules of Court makes
no distinction as to corporations with or without authority to do
business in the Philippines. The test is whether a foreign corporation
was actually doing business here. Otherwise, a foreign corporation
illegally doing business here because of its refusal or neglect to
obtain the corresponding license and authority to do business may
successfully though unfairly plead such neglect or illegal act so as to
avoid service and thereby impugn the jurisdiction of the local courts.
 It would indeed be anomalous and quite prejudicial, even disastrous,
to the citizens in this jurisdiction who in all good faith and in the
regular course of business accept and pay for shipments of goods
from America, relying for their protection on duly executed foreign
marine insurance policies made payable in Manila and duly endorsed
and delivered to them, that when they go to court to enforce said
policies, the insurer who all along has been engaging in this business
of issuing similar marine policies, serenely pleads immunity to local
jurisdiction because of its refusal or neglect to obtain the
corresponding license to do business here thereby compelling the
consignees or purchasers of the goods insured to go to America and
sue in its courts for redress.
There is no question that the contracts are enforceable. The requirement of registration
affects only the remedy.
Significantly, Batas Pambansa Blg. 68, the Corporation Code of the Philippines has
corrected the ambiguity caused by the wording of Section 69 of the old Corporation
Law.
Section 133 of the present Corporation Code provides:
averments required by Section 4, Rule 8 of the Rules of Court. The petitioner sufficiently
alleged its capacity to sue. The private respondents countered either with an
admission of the plaintiff's jurisdictional averments or with a general denial based on
lack of knowledge or information sufficient to form a belief as to the truth of the
averments.
We find the general denials inadequate to attack the foreign corporations lack of
capacity to sue in the light of its positive averment that it is authorized to do so. Section
4, Rule 8 requires that "a party desiring to raise an issue as to the legal existence of
any party or the capacity of any party to sue or be sued in a representative capacity
shall do so by specific denial, which shag include such supporting particulars as are
particularly within the pleader's knowledge. At the very least, the private respondents
should have stated particulars in their answers upon which a specific denial of the
petitioner's capacity to sue could have been based or which could have supported its
denial for lack of knowledge. And yet, even if the plaintiff's lack of capacity to sue was
not properly raised as an issue by the answers, the petitioner introduced documentary
evidence that it had the authority to engage in the insurance business at the time it filed
the complaints.
WHEREFORE, the petitions are hereby granted. The decisions of the respondent court
are reversed and set aside.

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

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

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

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

It is, therefore, not necessary to declare the contract null and void even as against the
erring foreign corporation. The penal sanction for the violation and the denial of access
to our courts and administrative bodies are sufficient from the viewpoint of legislative
policy.

Our ruling that the lack of capacity at the time of the execution of the contracts was
cured by the subsequent registration is also strengthened by the procedural aspects of
these cases.

The petitioner averred in its complaints that it is a foreign insurance company, that it is
authorized to do business in the Philippines, that its agent is Mr. Victor H. Bello, and
that its office address is the Oledan Building at Ayala Avenue, Makati. These are all the
 THIRD DIVISION
G.R. No. 61950 September 28, 1990
MARUBENI NEDERLAND B.V., petitioner,
vs.
THE HONORABLE JUDGE RICARDO P. TENSUAN, Presiding Judge of the Court
of First Instance of Rizal, Branch IV, Quezon City and ARTEMIO
GATCHALIAN, respondents.
FERNAN, C.J.:
On October 23, 1976, in Tokyo, Japan, petitioner Marubeni Nederland B.V. and D.B. Teodoro
Development Corporation (DBT for short) entered into a contract whereby petitioner agreed to supply all
the necessary equipment, machinery, materials, technical know-how and the general design of the
construction of DBT's lime plant at the Guimaras Islands in Iloilo for a total contract price of
US$5,400,000.00 on a deferred payment basis. Simultaneously with the supply contract, the parties
entered into two financing contracts, namely a construction loan agreement in the amount of
US$1,600,000.00 and a cash loan agreement for US$1,500,000.00. The obligation of DBT to pay the
loan amortizations on their due dates under the three (3) contracts were absolutely and unconditionally
guaranteed by the National Investment and Development Corporation (NIDC).
Pursuant to the terms of the financing contracts, the loan amortizations of DBT fell due
on January 7, 1980, July 7, 1980 and January 7, 1981. But before the first installment
became due, DBT wrote a letter to the NIDC interposing certain claims against the
petitioner and at the same time requesting NIDC for a revision of the repayment
schedule and of the amounts due under the contracts on account of petitioner's delay
in the performance of its contractual commitments. 1 In due time, the problems
regarding the lime plant were ironed out and the parties signed a "Settlement
Agreement" on July 2, 1981. 2
However, on May 14, 1982, DBT through counsel, informed petitioner that it was
rejecting the lime plant on the ground that it has not been constructed in accordance
with their agreement. DBT made a formal demand for indemnification in the total
amount of P95,150,000. 3 In its letter dated June 1, 1982, petitioner refused to accept
DBT's unilateral rejection of the plant and reasoned that the alleged operation and
technical problems were "totally unrelated to the guaranteed capacity and
specifications of the plant and definitely are not attributable to any fault or omission on
the part of Marubeni." 4
Before the first installment under the "Settlement Agreement" could be paid, private
respondent Artemio Gatchalian, a stockholder of DBT sued petitioner Marubeni for
contractual breach before the then Court of First Instance of Rizal, Branch 4, Quezon
City. 5 In his complaint filed on June 22, 1982, Gatchalian impleaded DBT as an
"unwilling plaintiff . . . for whose primary benefit th(e) action (wa)s being prosecuted"
together with NIDC which, as pledgee of the voting shares in DBT has controlling
interest in that corporation. 6 Gatchalian sought indemnification in the amount of
P95,150,000.00 and further prayed for a writ of preliminary injunction to enjoin DBT and
NIDC from making directly or indirectly any payment to Marubeni in connection with the
contracts they had entered into. On June 25, 1982, respondent judge issued a
temporary restraining order directed against DBT and NIDC and set the injunction for
hearing. 7
On July 5, 1982, petitioner Marubeni entered a limited and special appearance and
sought the dismissal of the complaint on the ground that the court a quo had no
jurisdiction over the person of petitioner since it is a foreign corporation neither doing
nor licensed to do business in the Philippines. Private respondent opposed that motion.
On September 22, 1982, the lower court denied petitioner's motion to dismiss for lack
of merit and gave it ten (10) days within which to file an answer. Petitioner opted to
elevate the jurisdictional issue directly to the High Court. 8Hence, this petition
for certiorari and prohibition with prayer for a temporary restraining order. On October
6, 1982, we issued the restraining order and subsequently required the parties to file
simultaneous memoranda.
The pivotal issue in this case is whether or not petitioner Marubeni Nederland B.V. can
be considered as "doing business" in the Philippines and therefore subject to the
jurisdiction of our courts.
Petitioner claims that it is a foreign corporation not doing business in the country and
as an entity with its own capitalization, it is separate and distinct from Marubeni
Corporation, Japan which is doing business in the Philippines through its Manila
branch; that the three (3) contracts entered into with DBT were perfected and
consummated in Tokyo, Japan; that the sale and purchase of the machineries and
equipment for the Guimaras lime plant were isolated contracts and in no way indicated
a purpose to engage in business; and that the services performed by petitioner in the
Philippines were merely auxillary to the aforesaid isolated transactions entered into and
perfected outside the Philippines.
On the other hand, private respondent Gatchalian contends that petitioner can be sued
in Philippine courts on liabilities arising from even a single transaction because in
reality, it is already engaging in business in the country through Marubeni Corporation,
Manila branch and that they, together with Nihon Cement Company, Ltd. of Japan are
but "alter egos, adjuncts, conduits instruments or branch affiliates of Marubeni
Corporation of Japan", the parent company. 9
In resolving the issue at hand, we reiterate that there is no general rule or principle that
can be laid down to determine what constitutes doing or engaging in business. Each
case must be judged in the light of its peculiar factual milieu and upon the language of
the statute applicable. 10
Contrary to petitioner's allegations, we hold that petitioner can be sued in the regular
courts because it is doing business in the Philippines. The applicable law is Republic
Act No. 5455 as implemented by the following rules and regulations of the Board of
Investments which took effect on February 3, 1969. Thus:
xxx xxx xxx
 (f) the performance within the Philippines of any act or combination
of acts enumerated in Section 1 (1) of the Act shall constitute "doing
business" therein. In particular, "doing business" includes:
1) Soliciting orders, purchases (sales) or service contracts. Concrete
and specific solicitations by a foreign firm amounting to negotiation
or fixing of the terms and conditions of sales or service contracts,
regardless of whether the contracts are actually reduced to writing,
shall constitute doing business even if the enterprise has no office or
fixed place of business in the Philippines. . . .
2) Appointing a representative or distributor who is domiciled in the
Philippines, unless said representative or distributor has an
independent status, i.e., it transacts business in its name and for its
own account, and not in the name or for the account of the principal.
xxx xxx xxx
4) Opening offices whether called "liaison" offices, agencies or
branches, unless proved otherwise.
xxx xxx xxx
10) Any other act or acts that imply a continuity of commercial
dealings or arrangements, and contemplate to that extent the
performance of acts or works, or the exercise of some of the
functions normally incident to, or in the progressive prosecution of,
commercial gain or of the purpose and objective of the business
organization. 11
It cannot be denied that petitioner had solicited the lime plant business from DBT
through the Marubeni Manila branch. 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. In a
follow-up letter dated August 3, 1976, Hojo committed the firm to a price reduction of
$200,000.00 and submitted the proposed contract forms. As reflected in the letterhead
used, it was Marubeni Corporation, Tokyo, Japan which assumed an active role in the
initial stages of the negotiation. Petitioner Marubeni Nederland B.V. had no visible
participation until the actual signing of the October 28, 1976 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
B.V." which appeared. 12
Even assuming for the sake of argument that Marubeni Nederland B.V. is a different
and separate business entity from Marubeni Japan and its Manila branch, in this
particular transaction, at least, Marubeni Nederland B.V. through the foregoing acts,
had effectively solicited "orders, purchases (sales) 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. These
circumstances, taken singly or in combination, constitute "doing business in the
Philippines" within the contemplation of the law.
At this juncture it must be emphasized that a foreign corporation doing business in the
Philippines with or without license is subject to process and jurisdiction of the local
courts. If such corporation is properly licensed, well and good. But it shall not be
allowed, under any circumstances, to invoke its lack of license to impugn the jurisdiction
of our courts. 13
Finally, petitioner contends that it was denied due process when respondent Judge
Tensuan peremptorily denied its motion to dismiss without giving petitioner any
opportunity to present evidence at a hearing set for this purpose. 14
The alleged denial of due process is more apparent than real. Under Section 13, Rule
16 of the Revised Rules of Court, the court, when confronted with a motion to dismiss,
is given two courses of action, to wit: (1) to deny or grant the motion or allow
amendment of the pleading or (2) to defer the hearing and determination of the motion
until the trial on the merits, if the ground alleged therein does not appear to be
indubitable.
In the case at bar, assuming there was no formal hearing on the motion to dismiss prior
to its rejection, such did not unduly prejudice the rights of petitioner. Respondent court
still had to conduct trial on the merits during which time it could grant the motion after
sufficient evidence has been presented showing without any question the want of
jurisdiction over the person of the movant. It would have been different had respondent
court sustained petitioner's motion to dismiss without the required hearing in which
case, the corrective writ of certiorari would have issued against said court. In the
absence of a hearing, the appellate court, in an appeal from an order of dismissal,
would have had no means of determining or resolving the legality of the proceedings
and the sufficiency of the proofs on which the order was based.
WHEREFORE, the petition is DISMISSED for lack of merit. Respondent Court is hereby
directed to proceed with the hearing of Civil Case No. Q-35534 with dispatch. This
decision is immediately executory. Costs against the petitioner.
SO ORDERED.
 FIRST DIVISION
G.R. No. 79986 September 14, 1990
GRANGER ASSOCIATES, petitioner,
vs.
MICROWAVE SYSTEMS, INC., LORETO F. STEWARD, MENARDO R. JIMENEZ
and JOHN PALMER, respondents.
CRUZ, J.:
The Court is once again asked to interpret the phrase "doing business in the
Philippines" as applied to an unlicensed foreign corporation that has filed a complaint
against a domestic corporation.
The foreign corporation is Granger Associates, the herein petitioner, which was
organized in the United States and has no license to do business in this country. The
domestic corporation is Microwave Systems, Inc., one of the herein private
respondents, which has been sued for recovery of a sum equivalent to US$900,633.30
allegedly due from it to the petitioner.
The claim arose from a series of agreements concluded between the two parties,
principally the contract dated March 28, 1977, under which Granger licensed MSI to
manufacture and sell its products in the Philippines and extended to the latter certain
loans, equipment and parts; the contract dated May 17, 1979, for the sale by Granger
of its Model 7100/7200 Multiplex Equipment to MSI and the Supplemental and
Amendatory Agreement concluded in December 1979.
Payment of these contracts not having been made as agreed upon, Granger filed a
complaint against MSI and the other private respondents on June 29, 1984, in the
Regional Trial Court of Pasay City. This was docketed as Civil Case No. 1982-P. In its
answer, MSI alleged the affirmative defense that the plaintiff had no capacity to sue,
being an unlicensed foreign corporation, and moved to dismiss.
The law invoked by the defendants was Section 133 of the Corporation Code reading
as follows:
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; ...
The trial court, after considering the evidence of the parties in light of their respective
memoranda, sustained the defendants and granted the motion to dismiss. 1 On appeal,
the order of dismissal was affirmed by the respondent court 2 prompting the present
petition under Rule 45 of the Rules of Court.
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. It insists that it has dealt only with MSI and not the general public
and contends that dealing with the public itself is an indispensable ingredient of
transacting business. It also argues that its agreements with MSI covered only one
isolated transaction for which it did not have to secure a license to be able to file its
complaint.
According to Section 1 of Rep. Act No. 5455 —
...the phrase "doing business" shall include soliciting orders, purchases, 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 Philippines for a period or periods totalling one hundred eighty days or more;
participating in the management, supervision or control of any domestic business firm,
entity or corporation in the Philippines; any other act or acts that imply a continuity of
commercial dealings or arrangements and contemplates to that extent the performance
of acts or works, or the exercise of some of these functions normally incident to, and in
progressive prosecution of, commercial gain or of the purpose and object of the
business organization.
This Court interpreted the same phrase in the old case of Mentholatum v.
Mangaliman 3 as follows:
The true test, however, seems to be whether the foreign corporation is
continuing the body or substance of the business or enterprise for which it was
organized or whether it has substantially retired from it and turned it over to
another. (Traction Cos. v. Collectors of Int. Revenue [C.C.A. Ohio], 223 F.
984,987.) The term implies a continuity of commercial dealings and
arrangements, and contemplates, to that extent, the performance of acts or
works or the exercise of some of the functions normally incident to, and in
progressive prosecution of, the purpose and object of its organization. (Griffin
v. Implement Dealers' Mut. Fire Ins. Co., 241 N.W. 75, 77, Pauline Oil & Gas
Go. v. Mutual Tank Line Co., 246 p. 851, 852,118 Okl. 111; Automotive
Material CO. v. American Standard Metal Products Corp., 158 N.E. 698, 703,
327, I11. 367.)
We have amplified one that discussion in subsequent cases, among them Top-Weld
Manufacturing, Inc. v. ECED, S.A., 4 where we said:
There is no general rule or governing principle laid down as to what constitutes
"doing" or "engaging in" or ""transacting" business in the Philippines. Each
case must be judged in the light of its peculiar circumstance Thus, a foreign
corporation with a settling agent in the Philippines which issued twelve marine
policies covering different shipments to the Philippines and a foreign
corporation which had been collecting premiums on outstanding policies were
regarded as doing business here. The acts of these corporations should be
distinguished from a single or isolated business transaction or occasional,
incidental and casual transactions which do not come within the meaning of
the law. Where a single act or transaction, however, is not merely incidental
or casual but indicates the foreign corporation's intention to do other business
 in the Philippines, said single act or transaction constitutes "doing" or
"engaging in" or "transacting" business in the Philippines.
The petitioner contends that its various transactions with the private respondent were
mere facets of the basic agreement licensing MSI to manufacture and sell Granger's
products in the Philippines. All subsequent agreements were merely auxiliary to that
first contract and should not be considered separate transactions coming 'within the
concept of "doing business in the Philippines."
The Supplemental and Amendatory Agreement concluded by Granger and MSI in
December 1979 enumerates the various agreements between them thus:
1. Agreement dated March 28, 1977,under which MSI acquired from GRANGER the
right to manufacture, assemble, test, rent and sell, or otherwise deal in certain
electronic communications equipment designed and manufactured by GRANGER;
2. Agreement to Purchase Shares dated March 28, 1977 under which GRANGER was
granted the option to purchase thirty (30%) percent equity of MSI;
3. Amendatory Agreement dated May l2, 1978, adopting certain amendments to the
Agreement dated March 28, 1977 for the purpose of complying with the requirements
imposed by the Board of Investments and the Central Bank of the Philippines;
4. Exclusive Distributorship and Marketing Agreement dated May 16,1978, appointing
MSI to handle sale, distribution and promotion of products of GRANGER outside of the
Republic of the Philippines;
5. Sales Agency Agreement, dated May 16, 1978, under which MSI was appointed by
GRANGER as the latter's exclusive sales representative outside the Philippines to
market GRANGER products;
6. Agreement for Purchase of Shares dated May 17,1978, manifesting the intention of
GRANGER to exercise its option to purchase thirty (30%) percent of the issued and
outstanding shares of stock of MSI equivalent to a total of 9,000 issued shares of MSI;
7. Model 7l00/7200 Multiplex Agreement dated May l7, 1979, prescribing the terms and
conditions for the sale by GRANGER of Model 7100/7200 Multiplex Equipment to MSI;
8. Technology Transfer Agreement dated May 17, 1979, transferring to and/or providing
MSI by virtue of the Model 7100/7200 Multiplex Agreement, the necessary technical
services, assistance, manuals, catalogues, sales, literature, etc. for the operation of the
Model 7100/7200 Multiplex Equipment;
9. Deed of Assignment of Receivables dated October 20, 1979, under which MSI
assigned to GRANGER a certain percentage of its receivables from the Philippine
Electronics, Inc. in favor of GRANGER to secure payment and performance of MSI's
obligations to GRANGER under previous agreements.
In the Model 7100/7200 Multiplex Equipment Agreement entered into on May 17, 1979,
the following stipulations appear:
4. GRANGER shall assign in favor of MSI all orders for the Model 7100/7200
Multiplex Equipment, which have not been filled by GRANGER at the date of
the ratification of this Agreement as per paragraph 9 hereof, as described in a
list hereto attached and made a part hereof as Annex "C". All proceeds under
said orders shall be assigned to and received by MSI and MSI shall take over
and assume all obligations which GRANGER may have pursuant to the orders
of equipment within a reasonable time following receipt of the shipment of the
Products by MSI but not to exceed one hundred eighty (180) days from date
of said receipt. Any orders GRANGER may receive following the date on
which this Agreement becomes effective as provided herein will be forwarded
to MSI by GRANGER.
xxx xxx xxx
6. As an additional consideration for the purchase of the products, MSI binds
itself to render all equipment support service and maintain reasonable amount
of spares inventory for the equipment in the field previously having been sold
by GRANGER or by RCA Corporation to their customers for a period of ten
(10) years from the date the last sale of GRANGER is recorded. Any amount
earned in providing such equipment support shall be billed and received by
MSI. Additionally, MSI binds itself to assume the warranty obligations and
advance the necessary funds to perform such obligations associated with
Model 7l00/7200 Multiplex Equipment already sold by GRANGER. However,
GRANGER shall reimburse MSI the out-of-pocket cost for the services
rendered by MSI in connection with the warranty for the equipment assumed
from GRANGER but only to the extent authorized in advance by GRANGER.
A study of the enumeration does support the contention that many of the agreements
concluded by the petitioner and the private respondent were intended merely to
supplement the basic contract dated March 28, 1977. However, this is not true of the
Multiplex agreement dated May 17, 1979, which dealt with a different subject matter
and had a different consideration to be paid under a different method from that specified
in the first agreement of the parties in 1977. It is also noted that in the supplemental
and Amendatory Agreement, Granger sold to MSI certain materials/parts for 80 radios
and granted it the right to exploit the designs of Model 6015, Series of radio equipment
(1.5 Ghz.) and the Plug-In Order Wire, and the 6002 Series and Power Amplifiers. The
subject matter of this transaction is also different from those covered by the previous
agreements.
Even if it be assumed for the sake of argument that the subject matter of the first
contract is of the same kind as that of the subsequent agreements, that fact alone would
not necessarily signify that all such agreements are merely auxiliary to the first. As long
as 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 quoted 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 It would even appear 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 this country. The 'agent, was expected to extend
also in mainland China and other ASEAN countries, where MSI was to act as its
representative in the development of possible markets for Granger products. Thus it
was provided in the Agreement:
6. OFF-SHORE MANUFACTURING.
GRANGER undertakes to utilize MSI's manufacturing facilities in the
Philippines in preference to any other manufacturer for offshore manufacture,
assembly, fabrication and testing of equipment, sub-assemblies, printed
circuit boards and related or allied activities, subject to MSI's demonstrated
technical capability and its capacity to comply with normal quality and delivery
requirement for such components and as long as such off-shore
manufacturing would be to GRANGER's economic advantage.
7. MAINLAND CHINA AND ASEAN
Toward maximizing exploitation of export opportunities for the sale of MSI
manufactured equipment under license from GRANGER, MSI undertakes to
do or perform the following:
a) MSI, independently or in concert with GRANGER shall develop a marketing
strategy towards Mainland China market at its cost or on the basis of shared
expense arrangement with GRANGER, agreed between both parties in
advance, and shall pursue sales opportunities in that market as it deems
warranted. This includes establishing local sales office to manage and monitor
direct sales effort as well as appointments of non-exclusive manufacturer's
Sales Representatives or non-exclusive Distributors as the case may be;
b) MSI, always in close cooperation with GRANGER, shall develop and pursue
direct sales opportunities in the ASEAN market for its own account, always
reaching agreement with GRANGER in advance on a case-to-case basis as
to the extent of reimbursing GRANGER for its direct or indirect expenses that
it might be incurring while acting as an Exclusive Distributor or a
Manufacturer's Representative for the licensed equipment in the ASEAN
market.
We also note that in the Supplemented and Amendatory Agreement of December 1979,
Granger saw to it that it was assured of at least one seat in the board of directors of
MSI; without prejudice to the right of Granger to request additional seats as its interest
may require". Granger actually purchased 9,000 shares of MSI, representing 30% of
the latter's issued and outstanding shares of stock. 5 The fact that it was directly
involved in the business of MSI was also manifestation stipulation where Granger
"acknowledged and confirmed" the transfer of a block of stocks from one shareholder
to another group of investors. Such approval is not normally given except by a
stockholder enjoying substantial participation in the management of the business of the
company. The said stipulations read as follows.
4. BOARD OF DIRECTORS.
GRANGER shall be entitled to one (1) seat in the Board of Directors, with the
option to fill said seat at its discretion and instance. GRANGER further
interposes no objection to MSI's increasing the number of its Board of
Directors without a corresponding entitlement to an additional seat, without
prejudice however to the right of GRANGER to request additional seat as its
interest may require.
xxx xxx xxx
8. CONFIRMATION OF SALE OF SHARES OF STOCK.
The parties hereto take cognizance of the sale of shares of stock in MSI owned
by Vicente C. Sayaon, in his personal capacity and as controlling stockholder
of authorized representative of Cosmopolitan Realty Corporation and Visayas
Realty and Investment Corporation, in favor of a new group of Filipino
entrepreneurs represented in the transaction by Mrs. Remedios Porcuna. The
Deed of Sale covering this transaction is incorporated hereto by reference and
made an integral part of this Agreement.
Pursuant to the provision embodied in the said Deed of Sale, GRANGER
hereby acknowledges and confirms this transaction.
The petitioner cites the regulations of the Board of Investments stating that mere
investment in a local company by a foreign corporation should not be construed as
doing business in the Philippines. 6 It cannot be denied, however, that the investment
of Granger in MSI is quite substantial, enabling it to participate in the actual
management and control of 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. 7
At any rate, the administrative regulation, which is intended only to supplement the law,
cannot prevail against the law itself as the Court has interpreted it. It is axiomatic that
the delegate, in exercising the power to promulgate implementing regulations, cannot
contradict the law from which the regulations derive their very existence. The courts,
for their part, interpret the administrative regulations in harmony with the law that
authorized them in the first place and avoid as much as possible any construction that
would annul them as an invalid exercise of legislative power.
On the question of whether the foreign corporation must be shown to have dealt with
the public in general to be considered as transacting business in the Philippines, the
following observations are instructive:
 On the other hand, if a corporation performs acts for which it was created or
exercises some of the functions for which it was organized, the amount or
volume of the business is immaterial and a single act of that character may
constitute doing business. Thus, an engineering consulting firm that had
entered into a single contract with a Philippine government agency for the
purpose of rendering services for a period of three years as a technical
consultant in engineering will be required to obtain a license to do business.
Similarly, a foreign company invited to bid for IBRD and ADB international
projects in the Philippines will be considered as doing business in the
Philippines for which a license is required. In this regard, it is the performance
by a foreign corporation of the acts for which it was created, regardless of
volume of business, that determines whether a foreign corporation needs a
license or not. (Emphasis supplied.) 8
Finally, this case must be distinguished from Antam Consolidated, Inc. v. Court of
Appeals, 9 where this Court declared:
In the case at bar, the transactions entered into by the respondent with the
petitioners are not a series of commercial dealings which signify an intent on
the part of the respondent to do business in the Philippines but constitute an
isolated one which does not fall under the category of "doing business". The
records show that the only reason why the respondent entered into the second
and third transactions with the petitioners was because it wanted to recover
the loss it sustained from the failure of the petitioners 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. Instead of making an outright demand on
the petitioners, the respondent opted to try to push through with the
transactions to recover the amount of US$103,600.00 it lost. This explains
why in the second transaction, the petitioners were supposed to buy back the
crude coconut oil they should have delivered to the respondent in an amount
which will earn the latter a profit of US$103,600.00. When this failed the third
transaction was entered into by the parties whereby the petitioners were
supposed to sell crude coconut oil to the respondent at a discounted rate, the
total amount of such discount being US$103,600.00. Unfortunately, the
petitioners failed to deliver again, prompting the respondent to file the suit
below.
From these facts alone, it can be deduced that in reality, there was only one
agreement between the petitioners and the respondent and that was the
delivery by the former of 500 long tons of crude coconut oil to the latter, who
in turn, must pay the corresponding price for the same. The three seemingly
different transactions were entered into by the parties only in an effort to fulfill
the basic agreement and in no way indicate an intent on the part of the
respondent to engage in a continuity of transactions with petitioners which will
categorize it as a foreign corporation doing business in the Philippines.
We are convinced from an examination of the terms and conditions of the contracts and
agreements entered into between petitioner and private respondents indicate that they
established within our country a continuous business, and not merely one of a
temporary character. 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.
In any event, it is now settled that even one single transaction may be construed as
transacting business in the Philippines under certain circumstances, as we observed
in Far East International Import and Export Corporation v. Nankai Kogyo Co.,
Ltd., 10 thus:
The rule stated in the preceding section that the doing of a single act does not constitute
business within the meaning of statutes prescribing the conditions to be complied with
by foreign corporations must be qualified to this extent, that a single act may bring the
corporation within the purview of the statute where it is an act of the ordinary business
of the corporation. In such a case, the single act or transaction is not merely incidental
or casual, but is of such character as distinctly to indicate a purpose on the part of the
foreign corporation to do other business in the state, and to make the state a base of
operations for the conduct of a part of the corporations' ordinary business. (17 Fletchers
Cyc. of Corporations, sec. 8470, pp. 572, 573, and authorities cited therein.)
The petitioner stresses that whoever makes affirmative averments has the obligation to
prove such averments and points out that the private respondent has not established
its allegation that the petitioner is doing business in the Philippines. On the other hand,
it is also the rule that the factual findings of the lower court are binding on this Court in
the absence of any of those exceptional circumstances we have enumerated in many
cases that warrant a different conclusion. Having assailed the finding of the respondent
court that the petitioner is doing business in the Philippines, the petitioner had the
burden of showing that such finding fell under the exception rather than the rule and so
should be reviewed and reversed. The petitioner has not done this.
The purpose of the rule requiring foreign corporations to secure a license to do business
in the Philippines is to enable us to exercise jurisdiction over them for the regulation of
their activities in this country, 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 our courts
when it should need them later for its own protection. While foreign investors are always
welcome in this land to collaborate with us for our mutual benefit, they must be prepared
as an indispensable condition to respect and be bound by Philippine law in proper
cases, as in the one at bar.
WHEREFORE the petition is DENIED, with costs against the petitioner. It is ordered.
 EN BANC
G.R. No. L-47701 June 27, 1941
THE MENTHOLATUM CO., INC., ET AL., petitioners,
vs.
ANACLETO MANGALIMAN, ET AL., respondents.
Araneta, Zaragoza, Araneta & Bautista for petitioners.
Benito Soliven for respondents.
LAUREL, J.:
This is a petition for a writ of certiorari to review the decision of the Court of Appeals
dated June 29, 1940, reversing the judgment of the Court of First Instance of Manila
and dismissing petitioners' complaint.
On October 1, 1935, the Mentholatum Co., Inc., and the Philippine-American Drug Co.,
Inc. instituted an action in the Court of First Instance of Manila, civil case No. 48855,
against Anacleto Mangaliman, Florencio Mangaliman and the Director of the Bureau of
Commerce for infringement of trade mark and unfair competition. Plaintiffs 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 and to pay damages. The complaint stated, among other particulars, that
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; that the
Philippine-American Drug co., Inc., is its exclusive distributing agent in the Philippines
authorized by it to look after and protect its interests; that on June 26, 1919 and on
January 21, 1921, the Mentholatum Co., Inc., registered with the Bureau of Commerce
and Industry the word, "Mentholatum," as trade mark for its products; that the
Mangaliman brothers prepared a medicament and salve named "Mentholiman" which
they sold to the public packed in a container of the same size, color and shape as
"Mentholatum"; and that, as a consequence of these acts of the defendants, plaintiffs
suffered damages from the dimunition of their sales and the loss of goodwill and
reputation of their product in the market.
After a protracted trial, featured by the dismissal of the case on March 9, 1936 for failure
of plaintiff's counsel to attend, and its subsequent reinstatement on April 4, 1936, the
Court of First Instance of Manila, on October 29, 1937, rendered judgment in favor of
the complainants, the dispositive part of its decision reading thus: xxx Spanish text xxx
In the Court of Appeals, where the cause was docketed as CA-G. R. No. 46067, the
decision of the trial court was, on June 29, 1940, reversed, said tribunal holding that
the activities of the Mentholatum Co., Inc., were business transactions in the
Philippines, and that, by section 69 of the Corporation Law, it may not maintain the
present suit. Hence, this petition for certiorari.
In seeking a reversal of the decision appealed from, petitioners assign the following
errors:
1. The Court of Appeals erred in declaring that the transactions of the
Mentholatum Co., Inc., in the Philippines constitute "transacting business" in
this country as this term is used in section 69 of the Corporation Law. The
aforesaid conclusion of the Court of Appeals is a conclusion of law and not of
fact.
2. The Court of Appeals erred in not holding that whether or not the
Mentholatum Co., Inc., has transacted business in the Philippines is an issue
foreign to the case at bar.
3. The Court of Appeals erred in not considering the fact that the complaint
was filed not only by the Mentholatum Co., Inc., but also by the Philippine-
American Drug Co., Inc., and that even if the Mentholatum Co., Inc., has no
legal standing in this jurisdiction, the complaint filed should be decided on its
merits since the Philippine-American Drug Co., Inc., has sufficient interest and
standing to maintain the complaint.
Categorically stated, this appeal simmers down to an interpretation of section 69 of the
Corporation Law, and incidentally turns upon a substantial consideration of two
fundamental propositions, to wit: (1) whether or not the petitioners could prosecute the
instant action without having secured the license required in section 69 of the
Corporation Law; and (2) whether or not the Philippine-American Drug Co., Inc., could
by itself maintain this proceeding.
Petitioners maintain that the Mentholatum Co., Inc., has not sold personally any of its
products in the Philippines; that the Philippine-American Drug Co., Inc., like fifteen or
twenty other local entities, was merely an importer of the products of the Mentholatum
Co., Inc., and that the sales of the Philippine-American Drug Co., Inc., were its own and
not for the account of the Mentholatum Co., Inc. Upon the other hand, the defendants
contend that the Philippine-American Drug Co., Inc., is the exclusive distributing agent
in the Philippines of the Mentholatum Co., Inc., in the sale and distribution of its product
known as "Mentholatum"; that, because of this arrangement, the acts of the latter; and
that the Mentholatum Co., Inc., being thus engaged in business in the Philippines, and
not having acquired the license required by section 68 of the Corporation Law, neither
it nor the Philippine-American Drug co., Inc., could prosecute the present action.
Section 69 of Act No. 1459 reads:
SEC. 69. No foreign corporation or corporation formed, organized, or existing
under any laws other than those of the Philippine Islands shall be permitted to
transact business in the Philippine Islands or maintain by itself or assignee
any suit for the recovery of any debt, claim, or demand whatever, unless it
shall have the license prescribed in the section immediately preceding. Any
officer, or agent of the corporation or any person transacting business for any
foreign corporation not having the license prescribed shall be punished by
imprisonment for not less than six months nor more than two years or by a
 fine of not less than two hundred pesos nor more than one thousand pesos,
or by both such imprisonment and fine, in the discretion of the court.
In the present case, no dispute exists as to facts: (1) that the plaintiff, the Mentholatum
Co., Inc., is a foreign corporation; (2) that it is not licensed to do business in the
Philippines. The controversy, in reality, hinges on the question of whether the said
corporation is or is not transacting business in the Philippines.
No general rule or governing principle can be laid down as to what constitutes "doing"
or "engaging in" or "transacting" business. Indeed, each case must be judged in the
light of its peculiar environmental circumstances. The true test, however, seems to be
whether the foreign corporation is continuing the body or substance of the business or
enterprise for which it was organized or whether it has substantially retired from it and
turned it over to another. (Traction Cos. v. Collectors of Int. Revenue [C. C. A. Ohio],
223 F. 984, 987.) The term implies a continuity of commercial dealings and
arrangements, and contemplates, to that extent, the performance of acts or works or
the exercise of some of the functions normally incident to, and in progressive
prosecution of, the purpose and object of its organization. (Griffin v. Implement Dealers'
Mut. Fire Ins. Co., 241 N. W. 75, 77; Pauline Oil & Gas Co. v. Mutual Tank Line Co.,
246 P. 851, 852, 118 Okl. 111; Automotive Material Co. v. American Standard Metal
Products Corp., 158 N. E. 698, 703, 327 III. 367.)
distinguished that case from the one at bar in that in the former "the decision expressly
says that the Western Equipment and Supply Co. was not engaged in business in the
Philippines, and significantly added that if the plaintiff had been doing business in the
Philippine Islands without first obtaining a license, 'another and a very different question
would be presented'. " It is almost unnecessary to remark in this connection that the
recognition of the legal status of a foreign corporation is a matter affecting the policy of
the forum, and the distinction drawn in our Corporation Law is an expression of that
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
derogation of the policy-determining authority of the State.
The right of the petitioner conditioned upon compliance with the requirements of section
69 of the Corporation Law to protect its rights, is hereby reserved.
The writ prayed for should be, as it hereby is, denied, with costs against the petitioners.
So ordered. Avanceña, C.J., Diaz, and Horrilleno, JJ., concur
Separate Opinions
MORAN, J., dissenting:

In its decision of June 29, 1940, the Court of Appeals concluded that "it is undeniable Section 69 of the Corporation Law provides that, without license no foreign corporation
that the Mentholatum Co., through its agent, the Philippine-American Drug Co., Inc., may maintain by itself or assignee any suit in the Philippine courts for the recovery of
has been doing business in the Philippines by selling its products here since the year any debt, claim or demand whatever. But this provision, as we have held in Western
1929, at least." This is assailed by petitioners as a pure conclusion of law. This finding Equipment & Supply Company vs. Reyes (51 Phil., 115), does not apply to suits for
is predicated upon the testimony of Mr. Roy Springer of the Philippine-American Drug infringement of trade marks and unfair competition, the theory being that "the right to
Co., Inc., and the pleadings filed by petitioners. The complaint filed in the Court of First the use of the corporate and trade name of a foreign corporation is a property right, a
Instance of Manila on October 1, 1935, clearly stated that the Philippine-American Drug right in rem, which it may assert and protect in any of the courts of the world even in
Co., Inc., is the exclusive distributing agent in the Philippine Islands of the Mentholatum countries where it does not personally transact any business," and that "trade mark
Co., Inc., in the sale and distribution of its product known as the Mentholatum." The does not acknowledge any territorial boundaries but extends to every mark where the
object of the pleadings being to draw the lines of battle between litigants and to indicate traders' goods have become known and identified by the use of the mark."
fairly the nature of the claims or defenses of both parties (1 Sutherland's Code Pleading,
Practice & Forms, sec. 83; Milliken v. Western Union Tel. Co., 110 N. Y. 403, 18 N. E. For this reason, I dissent from the majority opinion.
251; Eckrom v. Swenseld, 46 N. D. 561, 563, 179 N. W. 920), a party cannot
subsequently take a position contradictory to, or inconsistent with, his pleadings, as the
facts therein admitted are to be taken as true for the purpose of the action. (46 C. J.,
sec. 121, pp. 122-124.) It follows that whatever transactions the Philippine-American
Drug Co., Inc., had executed in view of the law, the Mentholatum Co., Inc., did it itself.
And, 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. 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 (Mechem on Agency, sec. 1; Sory on Agency, sec. 3; Sternaman v.
Metropolitan Life Ins. Co., 170 N. Y. 21), it cannot now, to the advantage of its principal,
claim an independent standing in court.

The appellees below, petitioners here, invoke the case of Western Equipment and
Supply Co. vs. Reyes (51 Phil., 115). The Court of Appeals, however, properly
G.R. No. L-26809 December 29, 1977
AETNA CASUALTY & SURETY COMPANY, plaintiff-appellant,
vs.
PACIFIC STAR LINE, THE BRADMAN CO. INC., MANILA PORT SERVICE and/or
MANILA RAILROAD COMPANY, INC., defendants-appellees.
FERNANDEZ, J.:
This is an appeal from the decision of the Court of First Instance of Manila, Branch XVI,
in Civil Case No. 53074 entitled Aetna Casualty & Surety Company vs. Pacific Star
Line, The Bradman Co. Inc., Manila Port Service and/or Manila Railroad Company,
Inc." dismissing the complaint on the ground that the plaintiff has no legal capacity to
bring this suit and making no finding as to the liability of the defendants. 1
On February 11, 1963, Smith Bell & Co. (Philippines), Inc. and Aetna Surety Casualty
& Surety Co. Inc., as subrogee, instituted Civil Case No. 53074 in the Court of First
Instance of Manila against Pacific Star Line, The Bradman Co. Inc., Manila Port Service
and/or Manila Railroad Company, Inc. to recover the amount of US $2,300.00
representing the value of the stolen and damaged cargo plus litigation expenses and
exemplary damages in the amounts of P1,000.00 and P2,000.00, respectively, with
legal interest thereon from the filing of the suit and costs.
The complaint stated that during the time material to the action, the defendant Pacific
Star Line, as a common carrier, was operating the vessel SS Ampal on a commercial
run between United States and Philippine Ports including Manila; that the defendant,
The Bradman Co. Inc., was the ship agent in the Philippines for the SS Ampal and/or
Pacific Star Line; that the Manila Railroad Co. Inc. and Manila Port Service were the
arrastre operators in the port of Manila and were authorized to delivery cargoes
discharged into their custody on presentation of release papers from the Bureau of
Customs and the steamship carrier and/or its agents; that on December 2, 1961, the
SS Ampal took on board at New York, N.Y., U.S.A., a consignment or cargo including
33 packages of Linen & Cotton Piece Goods for shipment to Manila for which defendant
Pacific Star Line issued Bill of Lading No. 18 in the name of I. Shalom & Co., Inc., as
shipper, consigned to the order of Judy Philippines, Inc., Manila; that the SS Ampal
arrived in Manila on February 10, 1962 and in due course, discharged her cargo into
the custody of Manila Port Service; that due to the negligence of the defendants, the
shipment sustained damages valued at US $2,300.00 representing pilferage and
seawater damage; that I. Shalom & Co., Inc. immediately filed claim for the undelivered
land damaged cargo with defendant Pacific Star Line in New York, N.Y., but said
defendant refused and still refuses to pay the said claim; that the cargo was insured by
I. Shalom & Co., Inc. with plaintiff Aetna Casualty & Surety Company for loss and/or
damage; that upon demand, plaintiff Aetna Casualty & Surety Company indemnified I.
Shalom & Co., Inc. the amount of US $2,300.00; that in addition to this, the plaintiffs
had obligated themselves to pay attorney's fees and they further anticipated incurring
litigation expenses which may be assessed at P1,000.00; that plaintiffs and/or their
predecessor-in-interest sustained losses due to the negligence of Pacific Star Line prior
to delivery of the cargo to Manila or, in the alternative, due to the negligence of Manila
Port Service after delivery of the cargo to it by the SS Ampal; that despite repeated
demands, none of the defendants has been willing to accept liability for the claim of the
plaintiffs and/or I. Shalom & Co., Inc.; and that by reason of defendants' evident bad
faith, they should consequently be liable to pay exemplary damages in the amount of
P2,000.00. 2
On motion of the defendants Pacific Star Line and The Bradman Co. Inc. and with the
conformity of the plaintiff Aetna Casualty & Surety Company, the plaintiff Smith Bell &
Co. (Philippines), Inc. was dropped and the complaint was dismiss as to said plaintiff. 3
In their answer filed on February 28, 1963, the defendants Manila Port Service and
Manila Railroad Company, Inc. alleged that they have exercised due care and diligence
in handling and delivering the cargoes consigned to Judy Philippines, Inc.; that, in fact,
they had delivered the merchandise to the consignee thereof in the same quantity,
order and condition as when the same was actually received from the carrying vessel;
that a portion of the shipment in question was discharged from the carrying vessel in
bad order and condition and consequently, any loss or shortage incurred thereto, is the
sole responsibility of the said carrying vessel and not that of the arrastre operator; that
they have delivered to the consignee thereof the same quantity of merchandise and in
the same order or condition as when received from the carrying vessel; that since no
claim of the value of the goods in question was filed by the plaintiff or any of its
representative within 15 days from the discharge of the last package from the carrying
vessel, the claim has become time-barred and/or prescribed pursuant to the
management contract under which said defendants were appointed as arrastre
operator at the Port of Manila; that consequently, they are completely relieved or
released from any or all liability therefor and that they do not in any manner act as agent
of the carrying vessel in the discharge of the goods at the piers. 4
The Pacific Star Line and The Bradman Co. Inc. alleged in their answer as special
defenses that the plaintiff's cause of action, if any, against the answering defendants
had prescribed under the provisions of the Carriage of Goods by Sea Act and/or the
terms of the covering bill of lading that the entire shipment covered by the bill of lading
issued by answering defendant Pacific Star Line was discharged complete and in good
order condition into the custody of the other defendant, Manila Port Service, which was
the operator of the arrastre service at the Port of Manila; that any damage which may
have occurred to the cargo while it was in the custody of the other defendant, Manila
Port Service was caused solely by the negligence of said arrastre operator and is,
therefore, its sole responsibility, the defendant Manila Port Service is not the vessel
agent in the receiving, handling, custody and/or delivery of the cargo purchased: that
the vessel responsibility ceased upon removal of the cargo from the ship's tackle; that
defendant Manila Port Service is not the vessel's or answering defendant's agent in the
receiving, handling, custody and/or delivery of the cargo consignee; that the vessel's
responsibility ceased upon removal of the cargo from the ship's tackles; that the
vessel's liability, if any, for one case cannot exceed the sum of P 500.00 under the
Carriage of Goods by Sea Act. 5
The defendants Manila Port Service and Manila Railroad Company, Inc. amended their
answer to allege that the plaintiff, Aetna casualty & Surety Company, is a foreign
corporation not duly licensed to do business in the Philippines and, therefore. without
capacity to sue and be sued. 6 The parties submitted on November 23, 1965 the
following partial stipulation of facts-.
PARTIAL STIPULATION OF FACTS
COME NOW the parties, through their undersigned counsel, and to this Honorable
Court respectfully submit the following Partial Stipulation of Facts:
A. - On their part, defendants admit:
1. - Paragraphs 2, 3, and 4 of the complaint;
2. - That the S/S Ampal arrived in Manila, on February 10, 1962 and in due course
discharged her cargoes into the custody of the defendant Manila Port Service, including
the subject shipment complete and in good order, except two (2) cases Nos. 5804 and
16705 which were discharged under B.O. Tally Sheets Nos. 2721 and 2722 and turned
over to the custody of the defendant Manila Port Service by the vessel S/S Ampal. The
shipping Documents covering the cargo were indorsed and sent to Judy's Philippines,
Inc. for processing and eventual return thereof to the owner, and which cleared the
documents with the defendants and the Bureau of Customs;
3 - That the I. Shalom & Co., Inc. filed claim for undelivered and damaged portion of
subject cargo with defendant Pacific Star Line in New York, New York, but said
defendant refused and still refuses to pay the said claim, for the reason stated in said
defendant's letter to Smith, Bell & Co. (Philippines, Inc. dated June 1, 1962, copy of
which letter is hereto attached and marked Annex A;
4 - That Judy's Philippines, Inc. through its customs broker filed provisional claims with
defendant The Bradman Co., Inc. and defendant Manila Port Service on February 13,
1962.
B. - Defendants admit the genuineness and due execution of the following documents:
1 - Bill of Lading No. 18 dated December 22, 1961, ex S/S Ampal, attached hereto and
marked as Annex B;
2 - Invoice dated December 26, 1961 of I. Shalom & Co., Inc. attached hereto and
marked as Annex B;
3 - Provisional Claim filed with The Bradman Co., Inc. on February 13, 1962, attached
hereto and marked as Annex E;
4 - Provisional Claim filed with the Manila Port Service on February 13, 1962, attached
hereto and marked as Annex E;
5 - Request for Bad Order Examination No. 1073 dated march 6, 1962 covering Cases
Nos. 16705 and 5804, attached hereto and marked as Annex F;
6 - Request for Bad Order Examination No. 1177 dated March 5, 1962 covering Cases
Nos. 14913 and 15043, attached 'hereto and marked as Annex G;
7 - Formal Claim dated April 10,1962 addressed to defendant Pacific Star Line filed by
I. Shalom & co. Inc. attached hereto and marked as Annex H;
8 - Letter dated May 3, 1962 addressed to defendant Manila Port Service by Smith, Bell
& co. (Philippines) Inc., attached hereto and marked as Annex I;
9 - Letter dated August 8, 1962 addressed to the defendant Manila Port Service by
Smith Bell & Co. (Philippines) Inc., attached hereto and marked as Annex J;
10 - Certification of Insurance, authenticated by the Philippine Consul, New York,
U.S.A. attached hereto and marked as Annex K;
11. Subrogation Receipt dated June 1, 1962, attached hereto and marked as Annex L;
C. - On their part, plaintiff and defendant Pacific Star Line and The Bradman Company,
Inc. admit:
1. - Having knowledge and being bound by the provisions of the Management Contract
entered into by and between the Manila Port Service and the Bureau of customs on
February 29, 1956, covering the operation of the arrastre service in the Port of Manila,
a copy of which is attached hereto and marked as Annex M;
2. - The genuineness and due execution of Gate Pass No. 34582 which, aiming others,
covers Case NO. 14915, attached hereto and marked as Annex N;
3. - The genuineness and due execution of Gate Pass No. 34837, which, among others,
cover Cases No. 16706 and 16707, attached hereto and marked as Annex O;
4. - The genuineness and due execution of a Certification issued by the Office of the
Insurance Commissioner dated December 19, 1964, a photostat copy of which is
attached hereto and marked as Annex P;
5. - The genuineness and due execution of a Certification issued by the Securities and
Exchange Commission dated November 10, 1964, a photostat copy of which is
attached hereto and marked as Annex Q;
6. - That the value of the shipment in question was not specified or manifested in the
bill of lading and that the arrastre charges thereon were paid on the basis of weight
and/or measurement and not on the value thereof.
D. On other part, plaintiff and defendant Manila Port Service admit:
1. - That the shipment in question was discharged complete and in good order condition
into the custody of the Manila Port Service except Cases Nos. 5804 and 16705 covered
by Tally Sheets Nos. 2721 and 2722;
2. - That as per signed copies of Survey Report and Turnover Receipt both dated
February 26, 1962, all goods contained in Case No. 5804 were received in good order
condition by the consignee who waived all claims thereon and that the contents of Case
No. 16705 were turned over to the defendant Manila Port Service in the condition
shown in said Turnover Receipt;
3. - The genuineness and due execution of the following documents:
(a) Tally Sheet No. 2721 dated November 2, 1962 attached hereto
and marked as Annex R;
(b) Tally Sheet No. 2722, dated November 2, 1962, attached thereto
and marked as Annex S;
mark as Annex T;
(d) Turnover Receipt dated February 26, 1962, attached hereto and
marked as Annex U.
WHEREFORE, it is respectfully prayed that the following Partial Stipulation of Facts be
approved, and the parties be allowed to present evidence on the remaining
controverted issues.
Manila, Philippines, September, 1965.
The case was submitted for decision on the basis of the partial stipulation of facts and
three (3) documents submitted in evidence by the defendants consisting of (a) a
certification issued by the Office of the Insurance Commission to the effect that there is
no record in said office showing that Aetna Casualty & Surety Company has been
licensed to transact insurance business in the Philippines; (b) a certification issued by
the Securities and Exchange Commission that its records do not show the registration
of the Aetna Casualty & Surety Company either as a corporation or a partnership nor
that it has been used to transact business in the Philippines as a foreign corporation;
(c) a certification of the Clerk of Court of the Court of First Instance of Manila issued on
August 5, 1965 to the effect that thirteen (13) civil cases appear to have been filed by
and/or against the Aetna Casualty & Surety Company in said court. 8
The trial court dismissed the complaint because:
There has been a ruling that foreign corporation may file a suit in the
Philippines in isolated cases. But the case of the plaintiff here is not
that. The evidence shows that the plaintiff has been filing actions in
the Philippines not just in isolated instances, but in numerous cases
and therefore, has been doing business in this country, contrary to
Philippine laws. 9
The plaintiff Aetna Casualty & Surety Company appealed to this Court assigning the
following errors:
I
THE LOWER COURT ERRED IN RULING THAT APPELLANT
INSURANCE COMPANY IS SUBJECT TO THE REQUIREMENTS
OF SECTIONS 68 AND 69 OF ACT 1459, AS AMENDED, AND
FAILING TO COMPLY THEREWITH, HAS NO LEGAL CAPACITY
TO BRING SUIT IN THIS JURISDICTION.
II
THE LOWER COURT ERRED IN DISMISSING THE
COMPLAINT. 10
The main issue involved in this appeal is whether or not the appellant, Aetna Casualty
& Surety Company, has been doing business in the Philippines. It is a fact that said
appellant has no license to transact business in the Philippines as a foreign
corporation.
Section 68 of the Corporation Law provides that "No foreign corporation or corporation
formed, organized, or existing under any laws other than those of the Philippines shall
be permitted to transact business in the Philippines until after it shall have obtained a
license for that purpose from the Securities and Exchange Commissioners . . . ." And
according to Section 69 of said Corporation Law "No foreign corporation or corporation
formed, organized, or existing under any laws other than those of the Philippines shall
be permitted to transact business in the Philippines or maintain by itself or assignee
any suit for the recovery of any debt, claim, or demand whatever, unless it shall have
the license prescribed in the section immediately preceding ..."
It is settled that if a foreign corporation is not engaged in business in the Philippines, it
may not be denied the right to file an action in Philippine courts for isolated
transactions. 11
The object of Sections 68 and 69 of the Corporation Law was not to prevent the foreign
corporation from performing single acts, but to prevent it from acquiring a domicile for
the purpose of business without taking the steps necessary to render it amenable to
suit in the local courts. It was never the purpose of the Legislature to exclude a foreign
corporation which happens to obtain an isolated order for business from the Philippines,
from securing redress in the Philippine courts. 12
In Mentholatum Co., Inc. et al. vs. Mangaliman, et al., this Court ruled that:
 No general rule or governing principle can be laid down as to what WHEREFORE, the decision appealed from is hereby set aside and the case is
constitutes 'doing' or 'engaging in' or 'transacting' business. Indeed, remanded to the trial court for further proceedings to determine the liability of the
each case must be judged in the light of its peculiar environmental defendants-appellees, without pronouncements as to costs.
circumstances. The true test, however, seems to be whether the
foreign corporation is continuing the body or substance of the
SO ORDERED.
business or enterprise. for which it was organized or whether it has
substantially retired from it and turned it over to another. (Traction
Cos. Collectors of Int. Revenue [C. C. A. Ohio], 223 F. 984, 987.) The
term implies a continuity of commercial dealings and arrangements,
and contemplates, to that extent, the performance of acts or works
or the exercise of some of the functions normally incident to, and in
progressive prosecution of, the purpose and object of its
organization. (Griffin v. Implement Dealers Mut. Fire Ins. Co., 241 N.
W. 75, 77; Pauline Oil & Gas Co. vs. Mutual Tank Line Co., 246 P.
851, 852, 118 Okl. 111; Automotive Material Co. vs, American
Standard Metal Products Corp., 158 N. E. 698, 703, 327 I11. 367.) 13

And in Eastboard Navigation, Ltd., et al. vs. Juan Ysmael & Co., Inc., this Court held
that:

(d) While plaintiff is a foreign corporation without license to transact

business in the Philippines, it does not follow that it has no to bring
the present action. Such license is not necessary because it is not
engaged in business in the Philippines. In fact, the transaction herein
involved is the first business undertaken by plaintiff the Philippines,
although on a previous occasion plaintiff's vessel was chartered by
the National Rice and Corn Corporation to carry cargo from abroad
to the Philippines. These two isolated transactions do not constitute
engaging in business in the Philippines within the Purview of
Sections 68 and 69 of the Corporation Law so as to plaintiff from
seeking redress in our courts. (Marshall-Wells Co. vs. Henry W. Elser
& Co. 49 Phil., 70; Pacific Vegetable Oil Corporation vs. Angle O.
Singson, G.R. No. L-7917, April 29,1955.) 14

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

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