[G.R. No. 113074. January 22, 1997]

ALFRED HAHN, petitioner, vs. COURT OF APPEALS and BAYERISCHE MOTOREN WERKE

AKTIENGESELLSCHAFT (BMW), respondents.

D E C I S I O N

MENDOZA, J.:

This is a petition for review of the decision[1] of the Court of Appeals dismissing a

complaint for specific performance which petitioner had filed against private

respondent on the ground that the Regional Trial Court of Quezon City did not acquire

jurisdiction over private respondent, a nonresident foreign corporation, and of the

appellate court's order denying petitioner's motion for reconsideration.

The following are the facts:

Petitioner Alfred Hahn is a Filipino citizen doing business under the name and style

"Hahn-Manila." On the other hand, private respondent Bayerische Motoren Werke

Aktiengesellschaft (BMW) is a nonresident foreign corporation existing under the laws

of the former Federal Republic of Germany, with principal office at Munich, Germany.

On March 7, 1967, petitioner executed in favor of private respondent a "Deed of

Assignment with Special Power of Attorney," which reads in full as follows:

WHEREAS, the ASSIGNOR is the present owner and holder of the BMW trademark and

device in the Philippines which ASSIGNOR uses and has been using on the products

manufactured by ASSIGNEE, and for which ASSIGNOR is the authorized exclusive

Dealer of the ASSIGNEE in the Philippines, the same being evidenced by certificate of

registration issued by the Director of Patents on 12 December 1963 and is referred to

as Trademark No. 10625;

WHEREAS, the ASSIGNOR has agreed to transfer and consequently record said transfer

of the said BMW trademark and device in favor of the ASSIGNEE herein with the

Philippines Patent Office;

NOW THEREFORE, in view of the foregoing and in consideration of the stipulations

hereunder stated, the ASSIGNOR hereby affirms the said assignment and transfer in

favor of the ASSIGNEE under the following terms and conditions:

1. The ASSIGNEE shall take appropriate steps against any user other than ASSIGNOR or

infringer of the BMW trademark in the Philippines, for such purpose, the ASSIGNOR shall

inform the ASSIGNEE immediately of any such use or infringement of the said

trademark which comes to his knowledge and upon such information the ASSIGNOR

shall automatically act as Attorney-In-Fact of the ASSIGNEE for such case, with full

power, authority and responsibility to prosecute unilaterally or in concert with

ASSIGNEE, any such infringer of the subject mark and for purposes hereof the

ASSIGNOR is hereby named and constituted as ASSIGNEE's Attorney-In-Fact, but any

such suit without ASSIGNEE's consent will exclusively be the responsibility and for the

account of the ASSIGNOR,

2. That the ASSIGNOR and the ASSIGNEE shall continue business relations as has been

usual in the past without a formal contract, and for that purpose, the dealership of

ASSIGNOR shall cover the ASSIGNEE's complete production program with the only

limitation that, for the present, in view of ASSIGNEE's limited production, the latter shall

not be able to supply automobiles to ASSIGNOR.

Per the agreement, the parties "continue[d] business relations as has been usual in

the past without a formal contract." But on February 16, 1993, in a meeting with a BMW

representative and the president of Columbia Motors Corporation (CMC), Jose

Alvarez, petitioner was informed that BMW was arranging to grant the exclusive

dealership of BMW cars and products to CMC, which had expressed interest in

acquiring the same. On February 24, 1993, petitioner received confirmation of the

information from BMW which, in a letter, expressed dissatisfaction with various aspects

of petitioner's business, mentioning among other things, decline in sales, deteriorating

services, and inadequate showroom and warehouse facilities, and petitioner's alleged

failure to comply with the standards for an exclusive BMW dealer.[2] Nonetheless, BMW

expressed willingness to continue business relations with the petitioner on the basis of a

"standard BMW importer" contract, otherwise, it said, if this was not acceptable to

petitioner, BMW would have no alternative but to terminate petitioner's exclusive

dealership effective June 30, 1993.

Petitioner protested, claiming that the termination of his exclusive dealership would

be a breach of the Deed of Assignment.[3] Hahn insisted that as long as the

assignment of its trademark and device subsisted, he remained BMW's exclusive

dealer in the Philippines because the assignment was made in consideration of the

exclusive dealership. In the same letter petitioner explained that the decline in sales

was due to lower prices offered for BMW cars in the United States and the fact that

few customers returned for repairs and servicing because of the durability of BMW

parts and the efficiency of petitioner's service.

Because of Hahn's insistence on the former business relation, BMW withdrew on

March 26, 1993 its offer of a "standard importer contract" and terminated the exclusive

dealer relationship effective June 30, 1993.[4] At a conference of BMW Regional

Importers held on April 26, 1993 in Singapore, Hahn was surprised to find Alvarez

among those invited from the Asian region. On April 29, 1993, BMW proposed that

Hahn and CMC jointly import and distribute BMW cars and parts.

Hahn found the proposal unacceptable. On May 14, 1993, he filed a complaint for

specific performance and damages against BMW to compel it to continue the

exclusive dealership. Later he filed an amended complaint to include an application

for temporary restraining order and for writs of preliminary, mandatory and prohibitory

injunction to enjoin BMW from terminating his exclusive dealership. Hahn's amended

complaint alleged in pertinent parts:

2. Defendant [BMW] is a foreign corporation doing business in the Philippines with

principal offices at Munich, Germany. It may be served with summons and other court

processes through the Secretary of the Department of Trade and Industry of the

Philippines. . . .

. . . .

5. On March 7, 1967, Plaintiff executed in favor of defendant BMW a Deed of

Assignment with Special Power of Attorney covering the trademark and in

consideration thereof, under its first whereas clause, Plaintiff was duly acknowledged

as the "exclusive Dealer of the Assignee in the Philippines" . . . .

. . . .

8. From the time the trademark "BMW & DEVICE" was first used by the Plaintiff in the

Philippines up to the present, Plaintiff, through its firm name "HAHN MANILA" and

without any monetary contribution from defendant BMW, established BMW's goodwill

and market presence in the Philippines. Pursuant thereto, Plaintiff has invested a lot of

money and resources in order to single-handedly compete against other motorcycle

and car companies .... Moreover, Plaintiff has built buildings and other infrastructures

such as service centers and showrooms to maintain and promote the car and

products of defendant BMW.

. . . .

10. In a letter dated February 24, 1993, defendant BMW advised Plaintiff that it was

willing to maintain with Plaintiff a relationship but only "on the basis of a standard BMW

importer contract as adjusted to reflect the particular situation in the Philippines"

subject to certain conditions, otherwise, defendant BMW would terminate Plaintiff's

exclusive dealership and any relationship for cause effective June 30, 1993. . . .

. . . .

15. The actuations of defendant BMW are in breach of the assignment agreement

between itself and plaintiff since the consideration for the assignment of the BMW

trademark is the continuance of the exclusive dealership agreement. It thus, follows

that the exclusive dealership should continue for so long as defendant BMW enjoys

the use and ownership of the trademark assigned to it by Plaintiff.

The case was docketed as Civil Case No. Q-93-15933 and raffled to Branch 104 of

the Quezon City Regional Trial Court, which on June 14, 1993 issued a temporary

restraining order. Summons and copies of the complaint and amended complaint

were thereafter served on the private respondent through the Department of Trade

and Industry, pursuant to Rule 14, 14 of the Rules of Court. The order, summons and

copies of the complaint and amended complaint were later sent by the DTI to BMW

via registered mail on June 15, 1993[5] and received by the latter on June 24, 1993.

On June 17, 1993, without proof of service on BMW, the hearing on the application

for the writ of preliminary injunction proceeded ex parte, with petitioner Hahn

testifying. On June 30, 1993, the trial court issued an order granting the writ of

preliminary injunction upon the filing of a bond of P100,000.00. On July 13, 1993,

following the posting of the required bond, a writ of preliminary injunction was issued.

On July 1, 1993, BMW moved to dismiss the case, contending that the trial court

did not acquire jurisdiction over it through the service of summons on the Department

of Trade and Industry, because it (BMW) was a foreign corporation and it was not

doing business in the Philippines. It contended that the execution of the Deed of

Assignment was an isolated transaction; that Hahn was not its agent because the

latter undertook to assemble and sell BMW cars and products without the

participation of BMW and sold other products; and that Hahn was an indentor or

middleman transacting business in his own name and for his own account.

Petitioner Alfred Hahn opposed the motion. He argued that BMW was doing

business in the Philippines through him as its agent, as shown by the fact that BMW

invoices and order forms were used to document his transactions; that he gave

warranties as exclusive BMW dealer; that BMW officials periodically inspected

standards of service rendered by him; and that he was described in service booklets

and international publications of BMW as a "BMW Importer" or "BMW Trading

Company" in the Philippines.

The trial court[6] deferred resolution of the Motion to dismiss until after trial on the

merits for the reason that the grounds advanced by BMW in its motion did not seem to

be indubitable.

Without seeking reconsideration of the aforementioned order, BMW filed a petition

for certiorari with the Court of Appeals alleging that:

I. THE RESPONDENT JUDGE ACTED WITH UNDUE HASTE OR OTHERWISE

INJUDICIOUSLY IN PROCEEDINGS LEADING TOWARD THE ISSUANCE OF THE WRIT

OF PRELIMINARY INJUNCTION, AND IN PRESCRIBING THE TERMS FOR THE ISSUANCE

THEREOF.

II. THE RESPONDENT JUDGE PATENTLY ERRED IN DEFERRING RESOLUTION OF THE

MOTION TO DISMISS ON THE GROUND OF LACK OF JURISDICTION, AND THEREBY

FAILING TO IMMEDIATELY DISMISS THE CASE A QUO.

BMW asked for the immediate issuance of a temporary restraining order and, after

hearing, for a writ of preliminary injunction, to enjoin the trial court from proceeding

further in Civil Case No. Q-93-15933. Private respondent pointed out that, unless the

trial court's order was set aside, it would be forced to submit to the jurisdiction of the

court by filing its answer or to accept judgment in default, when the very question was

whether the court had jurisdiction over it.

The Court of Appeals enjoined the trial court from hearing petitioner's complaint.

On December 20, 1993, it rendered judgment finding the trial court guilty of grave

abuse of discretion in deferring resolution of the motion to dismiss. It stated:

Going by the pleadings already filed with the respondent court before it came out

with its questioned order of July 26, 1993, we rule and so hold that petitioner's (BMW)

motion to dismiss could be resolved then and there, and that the respondent judge's

deferment of his action thereon until after trial on the merit constitutes, to our mind,

grave abuse of discretion.

. . . .

. . . [T]here is not much appreciable disagreement as regards the factual matters

relating, to the motion to dismiss. What truly divide (sic) the parties and to which they

greatly differ is the legal conclusions they respectively draw from such facts, (sic) with

Hahn maintaining that on the basis thereof, BMW is doing business in the Philippines

while the latter asserts that it is not.

Then, after stating that any ruling which the trial court might make on the motion to

dismiss would anyway be elevated to it on appeal, the Court of Appeals itself resolved

the motion. It ruled that BMW was not doing business in the country and, therefore,

jurisdiction over it could not be acquired through service of summons on the DTI

pursuant to Rule 14, Section 14. The court upheld private respondent's contention that

Hahn acted in his own name and for his own account and independently of BMW,

based on Alfred Hahn's allegations that he had invested his own money and resources

in establishing BMW's goodwill in the Philippines and on BMW's claim that Hahn sold

products other than those of BMW. It held that petitioner was a mere indentor or

broker and not an agent through whom private respondent BMW transacted business

in the Philippines. Consequently, the Court of Appeals dismissed petitioner's complaint

against BMW.

Hence, this appeal. Petitioner contends that the Court of Appeals erred (1) in

finding that the trial court gravely abused its discretion in deferring action on the

motion to dismiss and (2) in finding that private respondent BMW is not doing business

in the Philippines and, for this reason, dismissing petitioner's case.

Petitioner's appeal is well taken. Rule 14, 14 provides:

14. Service upon foreign corporations. If the defendant is a foreign corporation, or a

nonresident joint stock company or association, doing business in the Philippines,

service may be made on its resident agent designated in accordance with law for

that purpose, or, if there be no such agent, on the government official designated by

law to that effect, or on any of its officers or agents within the Philippines. (Emphasis

added)

What acts are considered "doing business in the Philippines" are enumerated in

3(d) of the Foreign Investments Act of 1991 (R.A. No. 7042) as follows:[7]

d) the phrase "doing business" shall include soliciting orders, service contracts,

opening offices, whether called "liaison" offices or branches, appointing

representatives or distributors domiciled in the Philippines or who in any calendar

year stay in the country for a period or periods totalling one hundred eighty (180)

days or more; participating in the management, supervision or control of any

domestic business, firm, entity or corporation in the Philippines; and any other act

or acts that imply a continuity of commercial dealings or arrangements and

contemplate to that extent the performance of acts or works, or the exercise of

some of the functions normally incident to, and in progressive prosecution of,

commercial gain or of the purpose and object of the business

organization: Provided, however, That the phrase "doing business" shall not be

deemed to include mere investment as a shareholder by a foreign entity in

domestic corporations duly registered to do business, and/or the exercise of rights

as such investor; nor having, a nominee director or officer to represent its interests

in such corporation; nor appointing a representative or distributor domiciled in the

Philippines which transacts business in its own name and for its own

account. (Emphasis supplied)

Thus, the phrase includes "appointing representatives or distributors in the

Philippines" but not when the representative or distributor "transacts business in its

name and for its own account." In addition, Section 1(f)(1) of the Rules and

Regulations implementing (IRR) the Omnibus Investment Code of 1987 (E.O. No. 226)

provided:

(f) "Doing business" shall be any act or combination of acts, enumerated in Article 44

of the Code. In particular, "doing business" includes:

(1).... A foreign firm which does business through middlemen acting in their own

names, such as indentors, commercial brokers or commission merchants, shall not be

deemed doing business in the Philippines. But such indentors, commercial brokers or

commission merchants shall be the ones deemed to be doing business in the

Philippines.

The question is whether petitioner Alfred Hahn is the agent or distributor in the

Philippines of private respondent BMW. If he is, BMW may be considered doing

business in the Philippines and the trial court acquired jurisdiction over it (BMW) by

virtue of the service of summons on the Department of Trade and Industry. Otherwise,

if Hahn is not the agent of BMW but an independent dealer, albeit of BMW cars and

products, BMW, a foreign corporation, is not considered doing business in the

Philippines within the meaning of the Foreign Investments Act of 1991 and the IRR, and

the trial court did not acquire jurisdiction over it (BMW).

The Court of Appeals held that petitioner Alfred Hahn acted in his own name and

for his own account and not as agent or distributor in the Philippines of BMW on the

ground that "he alone had contacts with individuals or entities interested in acquiring

BMW vehicles. Independence characterizes Hahn's undertakings, for which reason he

is to be considered, under governing statutes, as doing business." (p. 13) In support of

this conclusion, the appellate court cited the following allegations in Hahn's amended

complaint:

8. From the time the trademark "BMW & DEVICE" was first used by the Plaintiff in the

Philippines up to the present, Plaintiff, through its firm name "HAHN MANILA" and

without any monetary contributions from defendant BMW; established BMW's goodwill

and market presence in the Philippines. Pursuant thereto, Plaintiff invested a lot of

money and resources in order to single-handedly compete against other motorcycle

and car companies.... Moreover, Plaintiff has built buildings and other infrastructures

such as service centers and showrooms to maintain and promote the car and

products of defendant BMW.

As the above quoted allegations of the amended complaint show, however, there

is nothing to support the appellate court's finding that Hahn solicited orders alone and

for his own account and without "interference from, let alone direction of, BMW." (p.

13) To the contrary, Hahn claimed he took orders for BMW cars and transmitted them

to BMW. Upon receipt of the orders, BMW fixed the down payment and pricing

charges, notified Hahn of the scheduled production month for the orders, and

reconfirmed the orders by signing and returning to Hahn the acceptance sheets.

Payment was made by the buyer directly to BMW. Title to cars purchased passed

directly to the buyer and Hahn never paid for the purchase price of BMW cars sold in

the Philippines. Hahn was credited with a commission equal to 14% of the purchase

price upon the invoicing of a vehicle order by BMW. Upon confirmation in writing that

the vehicles had been registered in the Philippines and serviced by him, Hahn

received an additional 3% of the full purchase price. Hahn performed after-sale

services, including, warranty services, for which he received reimbursement from BMW.

All orders were on invoices and forms of BMW.[8]

These allegations were substantially admitted by BMW which, in its petition

for certiorari before the Court of Appeals, stated:[9]

9.4. As soon as the vehicles are fully manufactured and full payment of the purchase

prices are made, the vehicles are shipped to the Philippines. (The payments may be

made by the purchasers or third-persons or even by Hahn.) The bills of lading are

made up in the name of the purchasers, but Hahn-Manila is therein indicated as the

person to be notified.

9.5. It is Hahn who picks up the vehicles from the Philippine ports, for purposes of

conducting pre-delivery inspections. Thereafter, he delivers the vehicles to the

purchasers.

9.6. As soon as BMW invoices the vehicle ordered, Hahn is credited with a commission

of fourteen percent (14%) of the full purchase price thereof, and as soon as he

confirms in writing, that the vehicles have been registered in the Philippines and have

been serviced by him, he will receive an additional three percent (3%) of the full

purchase prices as commission.

Contrary to the appellate court's conclusion, this arrangement shows an agency.

An agent receives a commission upon the successful conclusion of a sale. On the

other hand, a broker earns his pay merely by bringing the buyer and the seller

together, even if no sale is eventually made.

As to the service centers and showrooms which he said he had put up at his own

expense, Hahn said that he had to follow BMW specifications as exclusive dealer of

BMW in the Philippines. According to Hahn, BMW periodically inspected the service

centers to see to it that BMW standards were maintained. Indeed, it would seem from

BMW's letter to Hahn that it was for Hahn's alleged failure to maintain BMW standards

that BMW was terminating Hahn's dealership.

The fact that Hahn invested his own money to put up these service centers and

showrooms does not necessarily prove that he is not an agent of BMW. For as already

noted, there are facts in the record which suggest that BMW exercised control over

Hahn's activities as a dealer and made regular inspections of Hahn's premises to

enforce compliance with BMW standards and specifications.[10] For example, in its

letter to Hahn dated February 23, 1996, BMW stated:

In the last years we have pointed out to you in several discussions and letters that

we have to tackle the Philippine market more professionally and that we are

through your present activities not adequately prepared to cope with the

forthcoming challenges.[11]

In effect, BMW was holding Hahn accountable to it under the 1967 Agreement.

This case fits into the mould of Communications Materials, Inc. v. Court of

Appeals,[12] in which the foreign corporation entered into a "Representative

Agreement" and a "Licensing Agreement" with a domestic corporation, by virtue of

which the latter was appointed "exclusive representative" in the Philippines for a

stipulated commission. Pursuant to these contracts, the domestic corporation sold

products exported by the foreign corporation and put up a service center for the

products sold locally. This Court held that these acts constituted doing business in the

Philippines. The arrangement showed that the foreign corporation's purpose was to

penetrate the Philippine market and establish its presence in the Philippines.

In addition, BMW held out private respondent Hahn as its exclusive distributor in the

Philippines, even as it announced in the Asian region that Hahn was the "official BMW

agent" in the Philippines.[13]

The Court of Appeals also found that petitioner Alfred Hahn dealt in other

products, and not exclusively in BMW products, and, on this basis, ruled that Hahn was

not an agent of BMW. (p. 14) This finding is based entirely on allegations of BMW in its

motion to dismiss filed in the trial court and in its petition for certiorari before the Court

of Appeals.[14] But this allegation was denied by Hahn[15] and therefore the Court of

Appeals should not have cited it as if it were the fact.

Indeed this is not the only factual issue raised, which should have indicated to the

Court of Appeals the necessity of affirming the trial court's order deferring resolution of

BMW's motion to dismiss. Petitioner alleged that whether or not he is considered an

agent of BMW, the fact is that BMW did business in the Philippines because it sold cars

directly to Philippine buyers.[16] This was denied by BMW, which claimed that Hahn was

not its agent and that, while it was true that it had sold cars to Philippine buyers, this

was done without solicitation on its part.[17]

It is not true then that the question whether BMW is doing business could have

been resolved simply by considering the parties' pleadings. There are genuine issues of

facts which can only be determined on the basis of evidence duly presented. BMW

cannot short circuit the process on the plea that to compel it to go to trial would be to

deny its right not to submit to the jurisdiction of the trial court which precisely it denies.

Rule 16, 3 authorizes courts to defer the resolution of a motion to dismiss until after the

trial if the ground on which the motion is based does not appear to be indubitable.

Here the record of the case bristles with factual issues and it is not at all clear whether

some allegations correspond to the proof.

Anyway, private respondent need not apprehend that by responding to the

summons it would be waiving its objection to the trial court's jurisdiction. It is now

settled that. for purposes of having summons served on a foreign corporation in

accordance with Rule 14, 14, it is sufficient that it be alleged in the complaint that the

foreign corporation is doing business in the Philippines. The court need not go beyond

the allegations of the complaint in order to determine whether it has jurisdiction.[18] A

determination that the foreign corporation is doing business is only tentative and is

made only for the purpose of enabling the local court to acquire jurisdiction over the

foreign corporation through service of summons pursuant to Rule 14, 14. Such

determination does not foreclose a contrary finding should evidence later show that it

is not transacting business in the country. As this Court has explained:

This is not to say, however, that the petitioner's right to question the jurisdiction of the

court over its person is now to be deemed a foreclosed matter. If it is true, as Signetics

claims, that its only involvement in the Philippines was through a passive investment in

Sigfil, which it even later disposed of, and that TEAM Pacific is not its agent, then it

cannot really be said to be doing business in the Philippines. It is a defense, however,

that requires the contravention of the allegations of the complaint, as well as a full

ventilation, in effect, of the main merits of the case, which should not thus be within

the province of a mere motion to dismiss. So, also, the issue posed by the petitioner as

to whether a foreign corporation which has done business in the country, but which

has ceased to do business at the time of the filing, of a complaint, can still be made to

answer for a cause of action which accrued while it was doing, business, is another

matter that would yet have to await the reception and admission of evidence. Since

these points have seasonably been raised by the petitioner, there should be no real

cause for what may understandably be its apprehension, i.e., that by its participation

during the trial on the merits, it may, absent an invocation of separate or independent

reliefs of its own, be considered to have voluntarily submitted itself to the court's

jurisdiction.[19]

Far from committing an abuse of discretion, the trial court properly deferred

resolution of the motion to dismiss and thus avoided prematurely deciding a question

which requires a factual basis, with the same result if it had denied the motion and

conditionally assumed jurisdiction. It is the Court of Appeals which, by ruling that BMW

is not doing business on the basis merely of uncertain allegations in the pleadings,

disposed of the whole case with finality and thereby deprived petitioner of his right to

be heard on his cause of action. Nor was there justification for nullifying the writ of

preliminary injunction issued by the trial court. Although the injunction was issued ex

parte, the fact is that BMW was subsequently heard on its defense by filing a motion to

dismiss.

WHEREFORE, the decision of the Court of Appeals is REVERSED and the case is

REMANDED to the trial court for further proceedings.

SO ORDERED.

G.R. No. 168266 March 15, 2010

CARGILL, INC., Petitioner,

vs.

INTRA STRATA ASSURANCE CORPORATION, Respondent.

D E C I S I O N

CARPIO, J.:

The Case

This petition for review1 assails the 26 May 2005 Decision2 of the Court of Appeals in

CA-G.R. CV No. 48447.

The Facts

Petitioner Cargill, Inc. (petitioner) is a corporation organized and existing under the

laws of the State of Delaware, United States of America. Petitioner and Northern

Mindanao Corporation (NMC) executed a contract dated 16 August 1989 whereby

NMC agreed to sell to petitioner 20,000 to 24,000 metric tons of molasses, to be

delivered from 1 January to 30 June 1990 at the price of $44 per metric ton. The

contract provides that petitioner would open a Letter of Credit with the Bank of

Philippine Islands. Under the "red clause" of the Letter of Credit, NMC was permitted to

draw up to $500,000 representing the minimum price of the contract upon

presentation of some documents.

The contract was amended three times: first, on 11 January 1990, increasing the

purchase price of the molasses to $47.50 per metric ton;3 second, on 18 June 1990,

reducing the quantity of the molasses to 10,500 metric tons and increasing the price to

$55 per metric ton;4 and third, on 22 August 1990, providing for the shipment of 5,250

metric tons of molasses on the last half of December 1990 through the first half of

January 1991, and the balance of 5,250 metric tons on the last half of January 1991

through the first half of February 1991.5 The third amendment also required NMC to put

up a performance bond equivalent to $451,500, which represents the value of 10,500

metric tons of molasses computed at $43 per metric ton. The performance bond was

intended to guarantee NMC’s performance to deliver the molasses during the

prescribed shipment periods according to the terms of the amended contract.

In compliance with the terms of the third amendment of the contract, respondent

Intra Strata Assurance Corporation (respondent) issued on 10 October 1990 a

performance bond6 in the sum of P11,287,500 to guarantee NMC’s delivery of the

10,500 tons of molasses, and a surety bond7 in the sum of P9,978,125 to guarantee the

repayment of downpayment as provided in the contract.

NMC was only able to deliver 219.551 metric tons of molasses out of the agreed 10,500

metric tons. Thus, petitioner sent demand letters to respondent claiming payment

under the performance and surety bonds. When respondent refused to pay, petitioner

filed on 12 April 1991 a complaint8 for sum of money against NMC and respondent.

Petitioner, NMC, and respondent entered into a compromise agreement,9 which the

trial court approved in its Decision10 dated 13 December 1991. The compromise

agreement provides that NMC would pay petitionerP3,000,000 upon signing of the

compromise agreement and would deliver to petitioner 6,991 metric tons of molasses

from 16-31 December 1991. However, NMC still failed to comply with its obligation

under the compromise agreement. Hence, trial proceeded against respondent.

On 23 November 1994, the trial court rendered a decision, the dispositive portion of

which reads:

WHEREFORE, judgment is rendered in favor of plaintiff [Cargill, Inc.], ordering

defendant INTRA STRATA ASSURANCE CORPORATION to solidarily pay plaintiff the total

amount of SIXTEEN MILLION NINE HUNDRED NINETY-THREE THOUSAND AND TWO

HUNDRED PESOS (P16,993,200.00), Philippine Currency, with interest at the legal rate

from October 10, 1990 until fully paid, plus attorney’s fees in the sum of TWO HUNDRED

THOUSAND PESOS (P200,000.00), Philippine Currency and the costs of the suit.

The Counterclaim of Intra Strata Assurance Corporation is hereby dismissed for lack of

merit.

SO ORDERED.11

On appeal, the Court of Appeals reversed the trial court’s decision and dismissed the

complaint. Hence, this petition.

The Court of Appeals’ Ruling

The Court of Appeals held that petitioner does not have the capacity to file this suit

since it is a foreign corporation doing business in the Philippines without the requisite

license. The Court of Appeals held that petitioner’s purchases of molasses were in

pursuance of its basic business and not just mere isolated and incidental transactions.

The Issues

Petitioner raises the following issues:

1. Whether petitioner is doing or transacting business in the Philippines in

contemplation of the law and established jurisprudence;

2. Whether respondent is estopped from invoking the defense that petitioner has

no legal capacity to sue in the Philippines;

3. Whether petitioner is seeking a review of the findings of fact of the Court of

Appeals; and

4. Whether the advance payment of $500,000 was released to NMC without the

submission of the supporting documents required in the contract and the "red

clause" Letter of Credit from which said amount was drawn.12

The Ruling of the Court

We find the petition meritorious.

Doing Business in the Philippines and Capacity to Sue

The principal issue in this case is whether petitioner, an unlicensed foreign corporation,

has legal capacity to sue before Philippine courts. Under Article 12313 of the

Corporation Code, a foreign corporation must first obtain a license and a certificate

from the appropriate government agency before it can transact business in the

Philippines. Where a foreign corporation does business in the Philippines without the

proper license, it cannot maintain any action or proceeding before Philippine courts

as provided under Section 133 of the Corporation Code:

Sec. 133. Doing business without a license. – No foreign corporation transacting

business in the Philippines without a license, or its successors or assigns, shall be

permitted to maintain or intervene in any action, suit or proceeding in any court or

administrative agency of the Philippines; but such corporation may be sued or

proceeded against before Philippine courts or administrative tribunals on any valid

cause of action recognized under Philippine laws.

Thus, the threshold question in this case is whether petitioner was doing business in the

Philippines. The Corporation Code provides no definition for the phrase "doing

business." Nevertheless, Section 1 of Republic Act No. 5455 (RA 5455),14 provides that:

x x x the phrase "doing business" shall include soliciting orders, purchases, service

contracts, opening offices, whether called ‘liaison’ offices or branches; appointing

representatives or distributors who are domiciled in the Philippines or who in any

calendar year stay in the Philippines for a period or periods 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; and any other act or

acts that imply a continuity of commercial dealings or arrangements, and

contemplate to that extent the performance of acts or works, or the exercise of some

of the functions normally incident to, and in progressive prosecution of, commercial

gain or of the purpose and object of the business organization. (Emphasis supplied)

This is also the exact definition provided under Article 44 of the Omnibus Investments

Code of 1987.

Republic Act No. 7042 (RA 7042), otherwise known as the Foreign Investments Act of

1991, which repealed Articles 44-56 of Book II of the Omnibus Investments Code of

1987, enumerated not only the acts or activities which constitute "doing business" but

also those activities which are not deemed "doing business." Section 3(d) of RA 7042

states:

[T]he phrase "doing business" shall include "soliciting orders, service contracts, opening

offices, whether called ‘liaison’ offices or branches; appointing representatives or

distributors domiciled in the Philippines or who in any calendar year stay in the country

for a period or periods totalling one hundred eighty (180) days or more; participating

in the management, supervision or control of any domestic business, firm, entity or

corporation in the Philippines; and any other act or acts that imply a continuity of

commercial dealings or arrangements, and contemplate to that extent the

performance of acts or works, or the exercise of some of the functions normally

incident to, and in progressive prosecution of, commercial gain or of the purpose and

object of the business organization: Provided, however, That the phrase ‘doing

business’ shall not be deemed to include mere investment as a shareholder by a

foreign entity in domestic corporations duly registered to do business, and/or the

exercise of rights as such investor; nor having a nominee director or officer to

represent its interests in such corporation; nor appointing a representative or distributor

domiciled in the Philippines which transacts business in its own name and for its own

account.

Since respondent is relying on Section 133 of the Corporation Code to bar petitioner

from maintaining an action in Philippine courts, respondent bears the burden of

proving that petitioner’s business activities in the Philippines were not just casual or

occasional, but so systematic and regular as to manifest continuity and permanence

of activity to constitute doing business in the Philippines. In this case, we find that

respondent failed to prove that petitioner’s activities in the Philippines constitute doing

business as would prevent it from bringing an action.

The determination of whether a foreign corporation is doing business in the Philippines

must be based on the facts of each case.15 In the case of Antam Consolidated, Inc. v.

CA,16 in which a foreign corporation filed an action for collection of sum of money

against petitioners therein for damages and loss sustained for the latter’s failure to

deliver coconut crude oil, the Court emphasized the importance of the element of

continuity of commercial activities to constitute doing business in the Philippines. The

Court held:

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. x x x

x x x 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.17

Similarly, in this case, petitioner and NMC amended their contract three times to give

a chance to NMC to deliver to petitioner the molasses, considering that NMC already

received the minimum price of the contract. There is no showing that the transactions

between petitioner and NMC signify the intent of petitioner to establish a continuous

business or extend its operations in the Philippines.

The Implementing Rules and Regulations of RA 7042 provide under Section 1(f), Rule I,

that "doing business" does not include the following acts:

1. Mere investment as a shareholder by a foreign entity in domestic corporations

duly registered to do business, and/or the exercise of rights as such investor;

2. Having a nominee director or officer to represent its interests in such

corporation;

3. Appointing a representative or distributor domiciled in the Philippines which

transacts business in the representative's or distributor's own name and account;

4. The publication of a general advertisement through any print or broadcast

media;

5. Maintaining a stock of goods in the Philippines solely for the purpose of having

the same processed by another entity in the Philippines;

6. Consignment by a foreign entity of equipment with a local company to be

used in the processing of products for export;

7. Collecting information in the Philippines; and

8. Performing services auxiliary to an existing isolated contract of sale which are

not on a continuing basis, such as installing in the Philippines machinery it has

manufactured or exported to the Philippines, servicing the same, training

domestic workers to operate it, and similar incidental services.

Most of these activities do not bring any direct receipts or profits to the foreign

corporation, consistent with the ruling of this Court in National Sugar Trading Corp. v.

CA18 that activities within Philippine jurisdiction that do not create earnings or profits to

the foreign corporation do not constitute doing business in the Philippines.19 In that

case, the Court held that it would be inequitable for the National Sugar Trading

Corporation, a state-owned corporation, to evade payment of a legitimate

indebtedness owing to the foreign corporation on the plea that the latter should have

obtained a license first before perfecting a contract with the Philippine government.

The Court emphasized that the foreign corporation did not sell sugar and derive

income from the Philippines, but merely purchased sugar from the Philippine

government and allegedly paid for it in full.

In this case, the contract between petitioner and NMC involved the purchase of

molasses by petitioner from NMC. It was NMC, the domestic corporation, which

derived income from the transaction and not petitioner. To constitute "doing business,"

the activity undertaken in the Philippines should involve profit-making.20 Besides, under

Section 3(d) of RA 7042, "soliciting purchases" has been deleted from the enumeration

of acts or activities which constitute "doing business."

Other factors which support the finding that petitioner is not doing business in the

Philippines are: (1) petitioner does not have an office in the Philippines; (2) petitioner

imports products from the Philippines through its non-exclusive local broker, whose

authority to act on behalf of petitioner is limited to soliciting purchases of products

from suppliers engaged in the sugar trade in the Philippines; and (3) the local broker is

an independent contractor and not an agent of petitioner.21

As explained by the Court in B. Van Zuiden Bros., Ltd. v. GTVL Marketing Industries,

Inc.:22

An exporter in one country may export its products to many foreign importing

countries without performing in the importing countries specific commercial acts that

would constitute doing business in the importing countries. The mere act of exporting

from one’s own country, without doing any specific commercial act within the territory

of the importing country, cannot be deemed as doing business in the importing

country. The importing country does not require jurisdiction over the foreign exporter

who has not yet performed any specific commercial act within the territory of the

importing country. Without jurisdiction over the foreign exporter, the importing country

cannot compel the foreign exporter to secure a license to do business in the importing

country.

Otherwise, Philippine exporters, by the mere act alone of exporting their products,

could be considered by the importing countries to be doing business in those

countries. This will require Philippine exporters to secure a business license in every

foreign country where they usually export their products, even if they do not perform

any specific commercial act within the territory of such importing countries. Such a

legal concept will have deleterious effect not only on Philippine exports, but also on

global trade.1avvphi1

To be doing or "transacting business in the Philippines" for purposes of Section 133 of

the Corporation Code, the foreign corporation must actually transact business in the

Philippines, that is, perform specific business transactions within the Philippine territory

on a continuing basis in its own name and for its own account. Actual transaction of

business within the Philippine territory is an essential requisite for the Philippines to to

acquire jurisdiction over a foreign corporation and thus require the foreign corporation

to secure a Philippine business license. If a foreign corporation does not transact such

kind of business in the Philippines, even if it exports its products to the Philippines, the

Philippines has no jurisdiction to require such foreign corporation to secure a Philippine

business license.23 (Emphasis supplied)

In the present case, petitioner is a foreign company merely importing molasses from a

Philipine exporter. A foreign company that merely imports goods from a Philippine

exporter, without opening an office or appointing an agent in the Philippines, is not

doing business in the Philippines.

Review of Findings of Fact

The Supreme Court may review the findings of fact of the Court of Appeals which are

in conflict with the findings of the trial court.24 We find that the Court of Appeals’

finding that petitioner was doing business is not supported by evidence.

Furthermore, a review of the records shows that the trial court was correct in holding

that the advance payment of $500,000 was released to NMC in accordance with the

conditions provided under the "red clause" Letter of Credit from which said amount

was drawn. The Head of the International Operations Department of the Bank of

Philippine Islands testified that the bank would not have paid the beneficiary if the

required documents were not complete. It is a requisite in a documentary credit

transaction that the documents should conform to the terms and conditions of the

letter of credit; otherwise, the bank will not pay. The Head of the International

Operations Department of the Bank of Philippine Islands also testified that they

received reimbursement from the issuing bank for the $500,000 withdrawn by

NMC.25 Thus, respondent had no legitimate reason to refuse payment under the

performance and surety bonds when NMC failed to perform its part under its contract

with petitioner.

WHEREFORE , we GRANT the petition. We REVERSE the Decision dated 26 May 2005 of

the Court of Appeals in CA-G.R. CV No. 48447. We REINSTATE the Decision dated 23

November 1994 of the trial court.

SO ORDERED.

AGILENT TECHNOLOGIES SINGAPORE (PTE) LTD., petitioner, vs. INTEGRATED SILICON

TECHNOLOGY PHILIPPINES CORPORATION, TEOH KIANG HONG, TEOH KIANG

SENG, ANTHONY CHOO, JOANNE KATE M. DELA CRUZ, JEAN KAY M. DELA CRUZ

and ROLANDO T. NACILLA,respondents.

D E C I S I O N

YNARES-SANTIAGO, J.:

This petition for review assails the Decision dated August 12, 2002 of the Court of

Appeals in CA-G.R. SP No. 66574, which dismissed Civil Case No. 3123-2001-C and

annulled and set aside the Order dated September 4, 2001 issued by the Regional Trial

Court of Calamba, Laguna, Branch 92.

Petitioner Agilent Technologies Singapore (Pte.), Ltd. (Agilent) is a foreign

corporation, which, by its own admission, is not licensed to do business in

the Philippines.[1] Respondent Integrated Silicon Technology Philippines Corporation

(Integrated Silicon) is a private domestic corporation, 100% foreign owned, which is

engaged in the business of manufacturing and assembling electronics

components.[2] Respondents Teoh Kiang Hong, Teoh Kiang Seng and Anthony Choo,

Malaysian nationals, are current members of Integrated Silicons board of directors,

while Joanne Kate M. dela Cruz, Jean Kay M. dela Cruz, and Rolando T. Nacilla are its

former members.[3]

The juridical relation among the various parties in this case can be traced to a 5-

year Value Added Assembly Services Agreement (VAASA), entered into on April 2,

1996 between Integrated Silicon and the Hewlett-Packard Singapore (Pte.)

Ltd., Singapore Components Operation (HP-Singapore).[4] Under the terms of

the VAASA, Integrated Silicon was to locally manufacture and assemble fiber optics

for export to HP-Singapore. HP-Singapore, for its part, was to consign raw materials to

Integrated Silicon; transport machinery to the plant of Integrated Silicon; and pay

Integrated Silicon the purchase price of the finished products.[5] The VAASA had a five-

year term, beginning on April 2, 1996, with a provision for annual renewal by mutual

written consent.[6] On September 19, 1999, with the consent of Integrated Silicon,[7] HP-

Singapore assigned all its rights and obligations in the VAASA to Agilent.[8]

On May 25, 2001, Integrated Silicon filed a complaint for Specific Performance and

Damages against Agilent and its officers Tan Bian Ee, Lim Chin

Hong, Tey Boon Teck and FrancisKhor, docketed as Civil Case No. 3110-01-C. It

alleged that Agilent breached the parties oral agreement to extend

the VAASA. Integrated Silicon thus prayed that defendant be ordered to execute a

written extension of the VAASA for a period of five years as earlier assured and

promised; to comply with the extended VAASA; and to pay actual, moral, exemplary

damages and attorneys fees.[9]

On June 1, 2001, summons and a copy of the complaint were served on Atty.

Ramon Quisumbing, who returned these processes on the claim that he was not the

registered agent ofAgilent. Later, he entered a special appearance to assail the

courts jurisdiction over the person of Agilent.

On July 2, 2001, Agilent filed a separate complaint against Integrated

Silicon, Teoh Kang Seng, Teoh Kiang Gong, Anthony Choo, Joanne Kate M. dela Cruz,

Jean Kay M. dela Cruz and Rolando T. Nacilla,[10] for Specific Performance, Recovery

of Possession, and Sum of Money with Replevin, Preliminary Mandatory Injunction, and

Damages, before the Regional Trial Court, Calamba, Laguna, Branch 92, docketed as

Civil Case No. 3123-2001-C. Agilent prayed that a writ of replevin or, in the alternative,

a writ of preliminary mandatory injunction, be issued ordering defendants to

immediately return and deliver to plaintiff its equipment, machineries and the

materials to be used for fiber-optic components which were left in the plant of

Integrated Silicon. It further prayed that defendants be ordered to pay actual and

exemplary damages and attorneys fees.[11]

Respondents filed a Motion to Dismiss in Civil Case No. 3123-2001-C,[12] on the

grounds of lack of Agilents legal capacity to sue;[13] litis pendentia;[14] forum

shopping;[15] and failure to state a cause of action.[16]

On September 4, 2001, the trial court denied the Motion to Dismiss and granted

petitioner Agilents application for a writ of replevin.[17]

Without filing a motion for reconsideration, respondents filed a petition

for certiorari with the Court of Appeals.[18]

In the meantime, upon motion filed by respondents, Judge Antonio S. Pozas of

Branch 92 voluntarily inhibited himself in Civil Case No. 3123-2001-C. The case was re-

raffled and assigned to Branch 35, the same branch where Civil Case No. 3110-2001-C

is pending.

On August 12, 2002, the Court of Appeals granted respondents petition

for certiorari, set aside the assailed Order of the trial court dated September 4, 2001,

and ordered the dismissal of Civil Case No. 3123-2001-C.

Hence, the instant petition raising the following errors:

I.

THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN NOT DISMISSING

RESPONDENTS PETITION FOR CERTIORARI FOR RESPONDENTS FAILURE TO FILE A MOTION

FOR RECONSIDERATION BEFORE RESORTING TO THE REMEDY OF CERTIORARI.

II.

THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN ANNULLING AND SETTING

ASIDE THE TRIAL COURTS ORDER DATED 4 SEPTEMBER 2001 AND ORDERING THE

DISMISSAL OF CIVIL CASE NO. 3123-2001-C BELOW ON THE GROUND OF LITIS

PENDENTIA, ON ACCOUNT OF THE PENDENCY OF CIVIL CASE NO. 3110-2001-C.

III.

THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN ANNULLING AND SETTING

ASIDE THE TRIAL COURTS ORDER DATED 4 SEPTEMBER 2001 AND ORDERING THE

DISMISSAL OF CIVIL CASE NO. 3123-2001-C BELOW ON THE GROUND OF FORUM

SHOPPING, ON ACCOUNT OF THE PENDENCY OF CIVIL CASE NO. 3110-2001-C.

IV.

THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN ORDERING THE DISMISSAL

OF CIVIL CASE NO. 323-2001-C BELOW INSTEAD OF ORDERING IT CONSOLIDATED WITH

CIVIL CASE NO. 3110-2001-C.[19]

The two primary issues raised in this petition: (1) whether or not the Court of

Appeals committed reversible error in giving due course to respondents petition,

notwithstanding the failure to file a Motion for Reconsideration of the September 4,

2001 Order; and (2) whether or not the Court of Appeals committed reversible error in

dismissing Civil Case No. 3123-2001-C.

We find merit in the petition.

The Court of Appeals, citing the case of Malayang Manggagawa sa ESSO v. ESSO

Standard Eastern, Inc.,[20] held that the lower court had no jurisdiction over Civil Case

No. 3123-2001-C because of the pendency of Civil Case No. 3110-2001-C and,

therefore, a motion for reconsideration was not necessary before resort to a petition

for certiorari. This was error.

Jurisdiction is fixed by law. Batas Pambansa Blg. 129 vests jurisdiction over the

subject matter of Civil Case No. 3123-2001-C in the RTC.[21]

The Court of Appeals ruling that the assailed Order issued by the RTC of Calamba,

Branch 92, was a nullity for lack of jurisdiction due to litis pendentia and forum

shopping, has no legal basis. The pendency of another action does not strip a court of

the jurisdiction granted by law.

The Court of Appeals further ruled that a Motion for Reconsideration was not

necessary in view of the urgent necessity in this case. We are not convinced. In the

case of Bache and Co. (Phils.), Inc. v. Ruiz,[22] relied on by the Court of Appeals, it was

held that time is of the essence in view of the tax assessments sought to be enforced

by respondent officers of the Bureau of Internal Revenue against petitioner

corporation, on account of which immediate and more direct action becomes

necessary. Tax assessments in that case were based on documents seized by virtue of

an illegal search, and the deprivation of the right to due process tainted the entire

proceedings with illegality. Hence, the urgent necessity of preventing the

enforcement of the tax assessments was patent. Respondents, on the other hand, cite

the case of Geronimo v. Commission on Elections,[23] where the urgent necessity of

resolving a disqualification case for a position in local government warranted the

expeditious resort to certiorari. In the case at bar, there is no analogously urgent

circumstance which would necessitate the relaxation of the rule on a Motion for

Reconsideration.

Indeed, none of the exceptions for dispensing with a Motion for Reconsideration is

present here. None of the following cases cited by respondents serves as adequate

basis for their procedural lapse.

In Vigan Electric Light Co., Inc. v. Public Service Commission,[24] the questioned

order was null and void for failure of respondent tribunal to comply with due process

requirements; inMatanguihan v. Tengco,[25] the questioned order was a patent nullity

for failure to acquire jurisdiction over the defendants, which fact the records plainly

disclosed; and in National Electrification Administration v. Court of Appeals,[26] the

questioned orders were void for vagueness. No such patent nullity is evident in the

Order issued by the trial court in this case.Finally, while urgency may be a ground for

dispensing with a Motion for Reconsideration, in the case of Vivo v. Cloribel,[27] cited

by respondents, the slow progress of the case would have rendered the issues moot

had a motion for reconsideration been availed of. We find no such urgent

circumstance in the case at bar.

Respondents, therefore, availed of a premature remedy when they immediately

raised the matter to the Court of Appeals on certiorari; and the appellate court

committed reversible error when it took cognizance of respondents petition instead of

dismissing the same outright.

We come now to the substantive issues of the petition.

Litis pendentia is a Latin term which literally means a pending suit. It is variously

referred to in some decisions as lis pendens and auter action pendant. While it is

normally connected with the control which the court has on a property involved in a

suit during the continuance proceedings, it is more interposed as a ground for the

dismissal of a civil action pending in court.

Litis pendentia as a ground for the dismissal of a civil action refers to that situation

wherein another action is pending between the same parties for the same cause of

action, such that the second action becomes unnecessary and

vexatious. For litis pendentia to be invoked, the concurrence of the following requisites

is necessary:

(a) identity of parties or at least such as represent the same interest in both

actions;

(b) identity of rights asserted and reliefs prayed for, the reliefs being founded on

the same facts; and

(c) the identity in the two cases should be such that the judgment that may be

rendered in one would, regardless of which party is successful, amount

to res judicata in the other.[28]

The Court of Appeals correctly appreciated the identity of parties in Civil Cases No.

3123-2001-C and 3110-2001-C. Well-settled is the rule that lis pendens requires

only substantial, and not absolute, identity of parties.[29] There is substantial identity of

parties when there is a community of interest between a party in the first case and a

party in the second case, even if the latter was not impleaded in the first case.[30] The

parties in these cases are vying over the interests of the two opposing corporations;

the individuals are only incidentally impleaded, being the natural persons purportedly

accused of violating these corporations rights.

Likewise, the fact that the positions of the parties are reversed, i.e., the plaintiffs in

the first case are the defendants in the second case or vice versa, does not negate

the identity of parties for purposes of determining whether the case is dismissible on

the ground of litis pendentia.[31]

The identity of parties notwithstanding, litis pendentia does not obtain in this case

because of the absence of the second and third requisites. The rights asserted in each

of the cases involved are separate and distinct; there are two subjects of controversy

presented for adjudication; and two causes of action are clearly involved. The fact

that respondents instituted a prior action for Specific Performance and Damages is

not a ground for defeating the petitioners action for Specific Performance, Recovery

of Possession, and Sum of Money with Replevin, Preliminary Mandatory Injunction, and

Damages.

In Civil Case No. 3110-2001-C filed by respondents, the issue is whether or not there

was a breach of an oral promise to renew of the VAASA. The issue in Civil Case No.

3123-2001-C, filed by petitioner, is whether petitioner has the right to take possession of

the subject properties. Petitioners right of possession is founded on the ownership of

the subject goods, which ownership is not disputed and is not contingent on the

extension or non-extension of the VAASA. Hence, the replevin suit can validly be tried

even while the prior suit is being litigated in the Regional Trial Court.

Possession of the subject properties is not an issue in Civil Case No. 3110-2001-

C. The reliefs sought by respondent Integrated Silicon therein are as follows: (1)

execution of a written extension or renewal of the VAASA; (2) compliance with the

extended VAASA; and (3) payment of overdue accounts, damages, and attorneys

fees. The reliefs sought by petitioner Agilentin Civil Case No. 3123-2001-C, on the other

hand, are as follows: (1) issuance of a Writ of Replevin or Writ of Preliminary Mandatory

Injunction; (2) recovery of possession of the subject properties; (3) damages and

attorneys fees.

Concededly, some items or pieces of evidence may be admissible in both

actions. It cannot be said, however, that exactly the same evidence will support the

decisions in both, since the legally significant and controlling facts in each case are

entirely different. Although the VAASA figures prominently in both suits, Civil Case No.

3110-2001-C is premised on a purported breach of an oral obligation

to extend the VAASA, and damages arising out of Agilents alleged failure to comply

with such purported extension. Civil Case No. 3123-2001-C, on the other hand, is

premised on a breach of the VAASA itself, and damages arising to Agilent out of that

purported breach.

It necessarily follows that the third requisite for litis pendentia is also absent. The

following are the elements of res judicata:

(a) The former judgment must be final;

(b) The court which rendered judgment must have jurisdiction over the parties

and the subject matter;

(c) It must be a judgment on the merits; and

(d) There must be between the first and second actions identity of parties,

subject matter, and cause of action.[32]

In this case, any judgment rendered in one of the actions will not amount

to res judicata in the other action. There being different causes of action, the decision

in one case will not constitute res judicata as to the other.

Of course, a decision in one case may, to a certain extent, affect the other case. This,

however, is not the test to determine the identity of the causes of action. Whatever

difficulties or inconvenience may be entailed if both causes of action are pursued on

separate remedies, the proper solution is not the dismissal order of the Court of

Appeals. The possible consolidation of said cases, as well as stipulations and

appropriate modes of discovery, may well be considered by the court below

to subserve not only procedural expedience but, more important, the ends of

justice.[33]

We now proceed to the issue of forum shopping.

The test for determining whether a party violated the rule against forum-shopping

was laid down in the case of Buan v. Lopez.[34] Forum shopping exists where the

elements of litispendentia are present, or where a final judgment in one case will

amount to res judicata in the final other. There being no litis pendentia in this case, a

judgment in the said case will not amount to res judicata in Civil Case No. 3110-2001-

C, and respondents contention on forum shopping must likewise fail.

We are not unmindful of the afflictive consequences that may be suffered by both

petitioner and respondents if replevin is granted by the trial court in Civil Case No.

3123-2001-C. If respondent Integrated Silicon eventually wins Civil Case No. 3110-2001-

C, and the VAASAs terms are extended, petitioner corporation will have to comply

with its obligations thereunder, which would include the consignment of properties

similar to those it may recover by way of replevin in Civil Case No. 3123-2001-

C. However, petitioner will also suffer an injustice if denied the remedy of replevin,

resort to which is not only allowed but encouraged by law.

Respondents argue that since Agilent is an unlicensed foreign corporation doing

business in the Philippines, it lacks the legal capacity to file suit.[35] The assailed acts of

petitionerAgilent, purportedly in the nature of doing business in the Philippines, are the

following: (1) mere entering into the VAASA, which is a service contract;[36] (2)

appointment of a full-time representative in Integrated Silicon, to oversee and

supervise the production of Agilents products;[37] (3) the appointment by Agilent of six

full-time staff members, who were permanently stationed at Integrated Silicons

facilities in order to inspect the finished goods for Agilent;[38] and

(4) Agilents participation in the management, supervision and control of Integrated

Silicon,[39] including instructing Integrated Silicon to hire more employees to

meet Agilents increasing production needs,[40] regularly performing quality audit,

evaluation and supervision of Integrated Silicons employees,[41] regularly performing

inventory audit of raw materials to be used by Integrated Silicon, which was also

required to provide weekly inventory updates toAgilent,[42] and providing and

dictating Integrated Silicon on the daily production schedule, volume and models of

the products to manufacture and ship for Agilent.[43]

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

bringing an action in Philippine courts. A license is necessary only if a foreign

corporation is transacting or doing business in the country. The Corporation Code

provides:

Sec. 133. Doing business without a license. No foreign corporation transacting business

in the Philippines without a license, or its successors or assigns, shall be permitted to

maintain or intervene in any action, suit or proceeding in any court or administrative

agency of the Philippines; but such corporation may be sued or proceeded against

before Philippine courts or administrative tribunals on any valid cause of action

recognized under Philippine laws.

The aforementioned provision prevents an unlicensed foreign corporation doing

business in the Philippines from accessing our courts.

In a number of cases, however, we have held that an unlicensed foreign

corporation doing business in the Philippines may bring suit in Philippine courts against

a Philippine citizen or entity who had contracted with and benefited from said

corporation.[44] Such a suit is premised on the doctrine of estoppel. A party

is estopped from challenging the personality of a corporation after having

acknowledged the same by entering into a contract with it. This doctrine

of estoppel to deny corporate existence and capacity applies to foreign as well as

domestic corporations.[45] The application of this principle prevents a person

contracting with a foreign corporation from later taking advantage of its

noncompliance with the statutes chiefly in cases where such person has received the

benefits of the contract.[46]

The principles regarding the right of a foreign corporation to bring suit in Philippine

courts may thus be condensed in four statements: (1) if a foreign corporation does

business in the Philippines without a license, it cannot sue before the Philippine

courts;[47] (2) if a foreign corporation is not doing business in the Philippines, it needs no

license to sue before Philippine courts on an isolated transaction or on a cause of

action entirely independent of any business transaction[48]; (3) if a foreign corporation

does business in the Philippines without a license, a Philippine citizen or entity which

has contracted with said corporation may be estopped from challenging the foreign

corporations corporate personality in a suit brought before Philippine courts;[49] and (4)

if a foreign corporation does business in the Philippines with the required license, it can

sue before Philippine courts on any transaction.

The challenge to Agilents legal capacity to file suit hinges on whether or not it is

doing business in the Philippines. However, there is no definitive rule on what

constitutes doing, engaging in, or transacting business in the Philippines, as this Court

observed in the case of Mentholatum v. Mangaliman.[50] The Corporation Code itself is

silent as to what acts constitute doing or transacting business in the Philippines.

Jurisprudence has it, however, that the term implies a continuity of commercial

dealings and arrangements, and contemplates, to that extent, the performance of

acts or works or the exercise of some of the functions normally incident to or in

progressive prosecution of the purpose and subject of its organization.[51]

In Mentholatum,[52] this Court discoursed on the two general tests to determine

whether or not a foreign corporation can be considered as doing business in

the Philippines. The first of these is the substance test, thus:[53]

The true test [for doing business], however, seems to be whether the foreign

corporation is continuing the body of the business or enterprise for which it was

organized or whether it has substantially retired from it and turned it over to another.

The second test is the continuity test, expressed thus:[54]

The term [doing business] 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 the progressive

prosecution of, the purpose and object of its organization.

Although each case must be judged in light of its attendant circumstances,

jurisprudence has evolved several guiding principles for the application of these

tests. For instance, considering that it transacted with its Philippine counterpart for

seven years, engaging in futures contracts, this Court concluded that the foreign

corporation in Merrill Lynch Futures, Inc. v. Court of Appeals and Spouses Lara,[55] was

doing business in the Philippines. In Commissioner of Internal Revenue v. Japan Airlines

(JAL),[56] the Court held that JAL was doing business in the Philippines, i.e., its

commercial dealings in the country were continuous despite the fact that no JAL

aircraft landed in the country as it sold tickets in the Philippines through a general sales

agent, and opened a promotions office here as well.

In General Corp. of the Phils. v. Union Insurance Society of Canton and Firemans

Fund Insurance,[57] a foreign insurance corporation was held to be doing business in

the Philippines, as it appointed a settling agent here, and issued 12 marine insurance

policies. We held that these transactions were not isolated or casual, but manifested

the continuity of the foreign corporations conduct and its intent to establish a

continuous business in the country. In Eriks PTE Ltd. v. Court of Appeals and

Enriquez,[58] the foreign corporation sold its products to a Filipino buyer who ordered

the goods 16 times within an eight-month period. Accordingly, this Court ruled that the

corporation was doing business in the Philippines, as there was a clear intention on its

part to continue the body of its business here, despite the relatively short span of time

involved. Communication Materials and Design, Inc., et al. v. Court of Appeals, ITEC,

et al.[59] and Top-Weld Manufacturing v. ECED, IRTI, et al.[60] both involved the License

and Technical Agreement and Distributor Agreement of foreign corporations with their

respective local counterparts that were the primary bases for the Courts ruling that the

foreign corporations were doing business in the Philippines.[61] In particular, the Court

cited the highly restrictive nature of certain provisions in the agreements involved,

such that, as stated in Communication Materials, the Philippine entity is reduced to a

mere extension or instrument of the foreign corporation. For example,

in Communication Materials, the Court deemed the No Competing Product provision

of the Representative Agreement therein restrictive.[62]

The case law definition has evolved into a statutory definition, having been

adopted with some qualifications in various pieces of legislation. The Foreign

Investments Act of 1991 (the FIA; Republic Act No. 7042, as amended), defines doing

business as follows:

Sec. 3, par. (d). The phrase doing business shall include soliciting orders, service

contracts, opening offices, whether called liaison offices or branches; appointing

representatives or distributors domiciled in the Philippines or who in any calendar year

stay in the country for a period or periods totaling one hundred eighty (180) days or

more; participating in the management, supervision or control of any domestic

business, firm, entity, or corporation in the Philippines; and any other act or acts that

imply a continuity of commercial dealings or arrangements, and contemplate to that

extent the performance of acts or works, or the exercise of some of the functions

normally incident to, and in the progressive prosecution of, commercial gain or of the

purpose and object of the business organization.

An analysis of the relevant case law, in conjunction with Section 1 of the

Implementing Rules and Regulations of the FIA (as amended by Republic Act No.

8179), would demonstrate that the acts enumerated in the VAASA do not constitute

doing business in the Philippines.

Section 1 of the Implementing Rules and Regulations of the FIA (as amended by

Republic Act No. 8179) provides that the following shall not be deemed doing

business:

(1) Mere investment as a shareholder by a foreign entity in domestic

corporations duly registered to do business, and/or the exercise of rights as

such investor;

(2) Having a nominee director or officer to represent its interest in such

corporation;

(3) Appointing a representative or distributor domiciled in the Philippines which

transacts business in the representatives or distributors own name and

account;

(4) The publication of a general advertisement through any print or broadcast

media;

(5) Maintaining a stock of goods in the Philippines solely for the purpose of

having the same processed by another entity in the Philippines;

(6) Consignment by a foreign entity of equipment with a local company to be

used in the processing of products for export;

(7) Collecting information in the Philippines; and

(8) Performing services auxiliary to an existing isolated contract of sale which

are not on a continuing basis, such as installing in the Philippines machinery it

has manufactured or exported to the Philippines, servicing the same, training

domestic workers to operate it, and similar incidental services.

By and large, to constitute doing business, the activity to be undertaken in

the Philippines is one that is for profit-making.[63]

By the clear terms of the VAASA, Agilents activities in the Philippines were confined

to (1) maintaining a stock of goods in the Philippines solely for the purpose of having

the same processed by Integrated Silicon; and (2) consignment of equipment with

Integrated Silicon to be used in the processing of products for export. As such, we hold

that, based on the evidence presented thus far, Agilent cannot be deemed to be

doing business in the Philippines. Respondents contention that Agilent lacks the legal

capacity to file suit is therefore devoid of merit. As a foreign corporation not doing

business in the Philippines, it needed no license before it can sue before our courts.

Finally, as to Agilents purported failure to state a cause of action against the

individual respondents, we likewise rule in favor of petitioner. A Motion to Dismiss

hypothetically admits all the allegations in the Complaint, which plainly alleges that

these individual respondents had committed or permitted the commission of acts

prejudicial to Agilent. Whether or not these individuals had divested themselves of

their interests in Integrated Silicon, or are no longer members of Integrated Silicons

Board of Directors, is a matter of defense best threshed out during trial.

WHEREFORE, PREMISES CONSIDERED, the petition is GRANTED. The Decision of the

Court of Appeals in CA-G.R. SP No. 66574 dated August 12, 2002, which dismissed Civil

Case No. 3123-2001-C, is REVERSED and SET ASIDE. The Order dated September 4,

2001 issued by the Regional Trial Court of Calamba, Laguna, Branch 92, in Civil Case

No. 3123-2001-C, is REINSTATED. Agilents application for a Writ of Replevin is GRANTED.

No pronouncement as to costs.

SO ORDERED.