Alfred Hahn v CA & Bayerishe Werke Aktiengesellschaft (BMW)Alfred Hahn is a Filipino citizen doing business under the name "Hahn-Manila" He is engaged in the business of importing and selling cars manufactured by BMW. Hahn (assignor) and BMW (assignee) entered in a DOA with SPA which contained a stipulation to the effect that they shall continue their business relations as has been usual in the past without a formal contract.However later on, Hahn was informed by BMW that it was granting exclusive dealership of BMW cars and products to CMC (Columbia Motors Corporation) on the ground that BMW was dissatisfied with the various aspects of Hahn's business (decline in sales, deteriorating services and Hahn's alleged failure to comply with the standards set by BMW)Hahn protested on the ground that it was a breach of their agreement stipulated in the DOA with SPA. BMW proposed that Hahn and CMC jointly import and distribute BMW cars and parts. Hahn found the proposal unacceptable. Thus, Hahn filed a complaint for specific performance and damages against BMW. It prayed that BMW be compelled to continue the exclusive dealership with him. BMW moved to dismiss the case filed by Hahn on the ground that the trial court did not acquire jurisdiction over it through the services of summons on the Department of Trade and Industry, because BMW was a foreign corporation and it was not doing busines in the Philippines.The trial court deferred resolution of the motion to dismiss until after trial on the merits for the reasion that the grounds advanced by BMW in its motion did not seem to be indubitable.Without seeking reconsideration of the aforementioned order of the trial court, BMW filed a petition for certiorari with the CA on the ground that the trial court acted with grave abuse of discretion amounting to lack or excess of jurisdiction. The CA enjoined the trial court from hearing Hahn's complaint and later found the trial court guilty of grave abuse of discretion in deferring the resolution of the motion to dismiss. HTPISSUE: WON BMW IS NOT DOING BUSINESS IN THE PHILIPPINES AND FOR THIS REASON THE CASE AGAINST IT SHOULD BE DISMISSED.HELD: NO. BMW DOES BUSINESS IN THE PHILIPPINES.Pursuant to FIA of 1991 RA 7042 3(d) the phrase doing busines shall include appointing representatives or distributors domiciled in the Philippines and any 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.In other words, BMW may be considered doing business in the Philippines and the trial court acquired jurisdiction over it by services of summons with the DTI if Hahn is the agent or distributor in the Philippines of BMW.In this case, there was agency between Hahn as agent and BMW as principal evidenced by such facts ie. that Hahn took orders for BMW cars and transmitted the same to BMW, that payment was made directly to BMW and title over the cars passed directly to the buyer from BMW. That Hahn was credited with a commission for each car sold. In essence BMW exercised control over Hahn's activities as dealer and made regular inspections of Hahn's premises to enforce compliance with the BMW standards and specifications.Hence the trial court had indeed acquired jurisdiction over BMW. The case was remanded to the trial court for further proceedings.Eriks PTE LTD v CA & Delfin Enriquez Jr.Eriks Pte. Ltd is a non-resident foreign corporation engaged in the manufacture and sale of elements used in sealing pumps, valves and pipes for industrial purposes. It is a corporation duly

organized and existing under the laws of the Republic of Singapore. It is not licensed to do business in the Philippines and is not so engaged, and is suing on an alleged isolated transaction for which it has capacity to sue (what is prohibited by the Corporation code is foreign corporations which conduct regular business in the Philippines, access to courts without the fulfilment by such corporations of the necessary requisites to be subjected to our government regulation and authority)On various dates, Delfin Enriquez Jr doing business under the name Delrene EB Controls Centre ordered and received from Eriks various elemnts used in sealing pumps, valves, pipes and control equipment which were delivered via airfreight. The transfers of goods were perfected in Singapore with a 90-day credit term.Later on, Eriks demanded from Enriquez Jr the satisfaction if its obligation with respect to the goods. However, Enriquez Jr failed to satisfy said obligation.This prompted Eriks to file a civil case for collection against Enriquez Jr for $ 41,939.63 or its equivalent in Philippine currency, plus interest. Enriquez Jr responded with a motion to dismiss the case on the ground that the corporation (Eriks) had no capacity to sue. The trial court dismissed the complaint. On appeal, the CA affirmed the decision of the trial court. HTP.ISSUE: WON THE TRANSACTIONS INVOLVED ARE ISOLATED TRANSACTIONS AND THUS DOES NOT FALL UNDER THE PROHIBITION FOR FOREIGN CORPORATIONS TO ACCESS PHILIPPINE COURTS EVEN WITHOUT THE APPROPRIATE LICENSE.HELD: NO. SAID TRANSACTIONS ARE CONTINUING AND HENCE ERIKS AS A NON-RESIDENT CORPORATION WITHOUT A LICENSE IS PROHIBITED FROM ACCESSING PHILIPPINE COURTS AND SUE ENRIQUEZ JR.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. (69a)However, the Corporation code does not provide for the definition of “transacting business” with respect to foreign corporation. Such definition however may be found and applied in FIA 1991 or RA 7042 which provides:Sec. 3(d) 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.In this case, it can be gleaned that from the four-month period of transactions between Eriks and Enriquez Jr, that it was a continuing business relationship which constitutes doing business without a license. The sheer number of transactions (18 times) is a clear and unmistakable intention on the part of Eriks to continue the body of its business in the Philippines.Furthermore, the sale by Eriks of the items covered by the receipts is part and parcel of its main product line which was actually carried out in progressive prosecution of commercial gain and the pursuit of the purpose and object of its business.Finally, its grant and extension of 90 day credit terms to Enriquez Jr for every purchased made shows an intention to continue transacting with Enriquez Jr, since in the usual course of commercial transactions, credit is extended only to customers in good standing or those on whom there is an intention to maintain long-term relationship. Thus, it cannot be allowed to sue in Philippine Courts on the ground that it lacks the appropriate license to conduct regular business here in the

Philippines. By securing a license, the foreign entity would be giving assurance that it will abide by the decisions of Philippine courts, even if adverse to it.Agilent Technologies Singapore PTE LTD v Integrated Silicon Technology Philippines CorporationAgilent is a foreign corporation not licensed to do business in the Philippines while Integrated Silicon is a private domestic corporation 100% foreign owned and is engaged in the business of manufacturing and assembling electronics components.Integrated Silicon and Hewlett-Packard Singapore entered into a 5 year Value Added Assembly Services Agreement (VAASA) (later Hewlett assigned its rights and obligations with respect to the VAASA to Agilent) which provides that (a) Agilent shall maintain a stock of goods in the Philippines solely for the purposes of having the same processed by Integrated Silicon and (b) Agilent has consign the equipment with Integrated Silicon to be used in the processing of products for export.Thereafter, Integrated Silicon filed a complaint for specific performance and damages against Agilent on the ground that Agilent breached the parties’ oral agreement to extend the VAASA. On the other hand, Agilent filed a separate complaint against Integrated Silicon for specific performance, replevin and recovery of possession for the immediate return and delivery of Agilent’s equipment and machineries which were left behind in the plant of Integrated Silicon. To this, Integrated Silicon moved to dismiss on the ground that Agilent had no legal capacity to sue.The trial court denied the motion to dismiss filed by Integrated Silicon and granted Agilent’s application of replevin. To this, Integrated Silicon appealed to the CA. The CA reversed the trial court and ordered the dismissal of the second case (Agilent v IS) on the ground that Agilent being an unlicensed foreign corporation allegedly doing business in the Philippines lacks the legal capacity to file suit. Hence this petition.ISSUE: WON AGILENT HAS LEGAL CAPACITY TO SUEHELD: YES. Jurisprudence provides that the term “doing business” in the Philippines 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.Substance test – whether the foreign corporation is continuing the body of the business or enterprise for which it was organized or whether it has substantially retired from it and turned it over to anotherContinuity test – implies a continuity of commercial dealings and arrangements, and contemplate s to that extent, 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.Furthermore, Sec 1 if the IRR of the FIA provides the following instances not deemed to be doing business:(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.In this case, by the clear terms of the VAASA, Agilents activites in the Philippines were confined to (see above) As such, Agilent cannot be deemed to be doing business in the Philippines. Thus, Integrated Silicon’s contention that Agilent lacks the legal capacity to file suit is therefore devoid of merit.NB: If a foreign corporation does business in the Philippines without a license, it cannot sue before the Philippine courts. IF a foreign corporation is not doing business in the Philippines, it need no license to sue before Philippine courts on an isolated transaction or on a

cause of action entirely independent of any business transaction. If a foreign corporation does business in the Philippines without a license, a Philippine citizen or entity which has contracted with the said corporation may be estopped from challenging the foreign corporation’s corporate personality in a suit brought before Philippine courts. And if a foreign corporation does business in the Philippines with the required license it can sue before Philippine courts on any transaction.Steelcase v Design International Selections Inc (DISI)Steelcase is a foreign corporation existing under the laws of the US and engaged in the manufacture of office furniture with dealers worldwide. On the other hand, DISI is a corporation existing under Philippine Laws and engaged in the furniture business, including the distribution of furniture.Steelcase and DISI orally entered into a dealership agreement whereby Steelcase granted DISI the right to market, sell, distribute, install, and service its products to end-user customers within the Philippines. The business relationship continued smoothly until it was terminated sometime in January 1999 after the agreement was breached with neither party admitting any fault.Steelcase filed a complaint for sum of money against DISI alleging, among others, that DISI had an unpaid account of US$600,000.00. Steelcase prayed that DISI be ordered to pay actual or compensatory damages, exemplary damages, attorney’s fees, and costs of suit. DISI alleged that the complaint failed to state a cause of action and to contain the required allegations on Steelcases capacity to sue in the Philippines despite the fact that it (Steelcase) was doing business in the Philippines without the required license to do so. Consequently, it posited that the complaint should be dismissed because of Steelcases lack of legal capacity to sue in Philippine courts. In his Order dated November 15, 1999, Acting Presiding Judge Bonifacio Sanz Maceda dismissed the complaint, granted the TRO prayed for by DISI, set aside the April 26, 1999 Order of the RTC admitting the Amended Complaint, and denied Steelcases Motion to Admit Second Amended Complaint. The RTC stated that in requiring DISI to meet the Dealer Performance Expectation and in terminating the dealership agreement with DISI based on its failure to improve its performance in the areas of business planning, organizational structure, operational effectiveness, and efficiency, Steelcase unwittingly revealed that it participated in the operations of DISI. It then concluded that Steelcase was doing business in the Philippines, as contemplated by Republic Act (R.A.) No. 7042 (The Foreign Investments Act of 1991), and since it did not have the license to do business in the country, it was barred from seeking redress from our courts until it obtained the requisite license to do so. Aggrieved, Steelcase elevated the case to the CA by way of appeal, assailing the November 15, 1999 and May 29, 2000 Orders of the RTC. On March 31, 2005, the CA rendered its Decision affirming the RTC orders, ruling that Steelcase was a foreign corporation doing or transacting business in the Philippines without a license. Thus, the CA ruled that Steelcase was barred from access to our courts for being a foreign corporation doing business here without the requisite license to do so.ISSUES: (1) Whether or not Steelcase is doing business in the Philippines without a license; and(2) Whether or not DISI is estopped from challenging the Steelcase’s legal capacity to sue.HELD:FIRST ISSUEAnent the first issue, Steelcase argues that Section 3(d) of R.A. No. 7042 or the Foreign Investments Act of 1991 (FIA)

expressly states that the phrase doing business excludes the appointment by a foreign corporation of a local distributor domiciled in the Philippines which transacts business in its own name and for its own account.The phrase doing business is clearly defined in Section 3(d) of R.A. No. 7042 (Foreign Investments Act of 1991), to wit:That the phrase doing business shall not be deemed to include X X X nor appointing a representative or distributor domiciled in the Philippines which transacts business in its own name and for its own accountThis definition is supplemented by its Implementing Rules and Regulations, Rule I, Section 1(f) which elaborates on the meaning of the same phrase:The following acts shall not be deemed doing business in the Philippines:3. Appointing a representative or distributor domiciled in the Philippines which transacts business in the representative's or distributor's own name and account; If the distributor is an independent entity which buys and distributes products, other than those of the foreign corporation, for its own name and its own account, the latter cannot be considered to be doing business in the Philippines.

In the case at bench, it is undisputed that DISI was founded in 1979 and is independently owned and managed by the spouses Leandro and Josephine Bantug. In addition to Steelcase products, DISI also distributed products of other companies including carpet tiles, relocatable walls and theater settings.The dealership agreement between Steelcase and DISI had been described by the owner himself as:xxx basically a buy and sell arrangement whereby we would inform Steelcase of the volume of the products needed for a particular project and Steelcase would, in turn, give special quotations or discounts after considering the value of the entire package. In making the bid of the project, we would then add out profit margin over Steelcase’s prices. After the approval of the bid by the client, we would thereafter place the orders to Steelcase. The latter, upon our payment, would then ship the goods to the Philippines, with us shouldering the freight charges and taxes. [Emphasis supplied]From the preceding facts, the only reasonable conclusion that can be reached is that DISI was an independent contractor, distributing various products of Steelcase and of other companies, acting in its own name and for its own account.All things considered, it has been sufficiently demonstrated that DISI was an independent contractor which sold Steelcase products in its own name and for its own account. As a result, Steelcase cannot be considered to be doing business in the Philippines by its act of appointing a distributor as it falls under one of the exceptions under R.A. No. 7042. SECOND ISSUEIf indeed Steelcase had been doing business in the Philippines without a license, DISI would nonetheless be estopped from challenging the formers legal capacity to sue.

Unquestionably, entering into a dealership agreement with Steelcase charged DISI with the knowledge that Steelcase was not licensed to engage in business activities in the Philippines. This Court has carefully combed the records and found no proof that, from the inception of the dealership agreement in 1986 until September 1998, DISI even brought to Steelcase’s attention that it was improperly doing business in the Philippines without a license. It was only towards the latter part of 1998 that DISI deemed it necessary to inform Steelcase of the impropriety of the conduct of its business without the requisite Philippine license. It should, however, be noted that DISI only raised the issue of the absence of a license with Steelcase after it was informed that it owed the latter

US$600,000.00 for the sale and delivery of its products under their special credit arrangement.By acknowledging the corporate entity of Steelcase and entering into a dealership agreement with it and even benefiting from it, DISI is estopped from questioning Steelcase’s existence and capacity to sue.This Court has time and again upheld the principle that a foreign corporation doing business in the Philippines without a license may still sue before the Philippine courts a Filipino or a Philippine entity that had derived some benefit from their contractual arrangement because the latter is considered to be estopped from challenging the personality of a corporation after it had acknowledged the said corporation by entering into a contract with it.Gamboa v Finance Secretary Margarito TevesWilson P. Gamboa, a stockholder of Philippine Long Distance Telephone Company (PLDT)On 28 November 1928, the Philippine Legislature enacted Act No. 3436 which granted PLDT a franchise and the right to engage in telecommunications business. In 1969, General Telephone and Electronics Corporation (GTE), an American company and a major PLDT stockholder, sold 26 percent of the outstanding common shares of PLDT to Philippine Trade Investment Corporation (PTIC). In 1977, Prime Holdings, Inc. (PHI) was incorporated by several persons, including Roland Gapud and Jose Campos, Jr. Subsequently, PHI became the owner of 111,415 shares of stock of PTIC by virtue of three Deeds of Assignment executed by PTIC stockholders Ramon Cojuangco and Luis Tirso Rivilla. In 1986, the 111,415 shares of stock of PTIC held by PHI were sequestered by the Presidential Commission on Good Government (PCGG) (In 1986, the 111,415 PTIC shares held by PHI were sequestered by the PCGG, and subsequently declared by this Court as part of the ill-gotten wealth of former President Ferdinand Marcos.). The 111,415 PTIC shares, which represent about 46.125 percent of the outstanding capital stock of PTIC, were later declared by this Court to be owned by the Republic of the Philippines.In 1999, First Pacific, a Bermuda-registered, Hong Kong-based investment firm, acquired the remaining 54 percent of the outstanding capital stock of PTIC. The Philippine Government announced that it would sell the 111,415 PTIC shares, or 46.125 percent of the outstanding capital stock of PTIC, through a public bidding to be conducted on 4 December 2006. Subsequently, the public bidding was reset to 8 December 2006, and only two bidders, Parallax Venture Fund XXVII (Parallax) and Pan-Asia Presidio Capital, submitted their bids. Parallax won with a bid of P25.6 billion or US$510 million.Thereafter, First Pacific announced that it would exercise its right of first refusal as a PTIC stockholder and buy the 111,415 PTIC shares by matching the bid price of Parallax. First Pacific, through its subsidiary, MPAH, entered into a Conditional Sale and Purchase Agreement of the 111,415 PTIC shares, or 46.125 percent of the outstanding capital stock of PTIC, with the Philippine Government for the price of P25,217,556,000 or US$510,580,189. The sale was completed on 28 February 2007. With the sale, First Pacifics common shareholdings in PLDT increased from 30.7 percent to 37 percent, thereby increasing the common shareholdings of foreigners in PLDT to about 81.47 percent. This violates Section 11, Article XII of the 1987 Philippine Constitution which limits foreign ownership of the capital of a public utility to not more than 40 percent.The Philippine Government decided to sell the 111,415 PTIC shares. An invitation to bid was published in seven different newspapers from 13 to 24 November 2006.During the 8 December 2006 bidding, Parallax Capital Management LP emerged as the highest bidder with a bid of P25,217,556,000. The government notified First Pacific, the

majority owner of PTIC shares, of the bidding results and gave First Pacific until 1 February 2007 to exercise its right of first refusal in accordance with PTICs Articles of Incorporation. First Pacific announced its intention to match Parallaxs bid. On 31 January 2007, the House of Representatives (HR) Committee on Good Government conducted a public hearing on the particulars of the then impending sale of the 111,415 PTIC shares. First Pacifics intended acquisition of the government’s 111,415 PTIC shares resulting in First Pacifics 100% ownership of PTIC will not violate the 40 percent constitutional limit on foreign ownership of a public utility since PTIC holds only 13.847 percent of the total outstanding common shares of PLDT.On 28 February 2007, petitioner filed the instant petition for prohibition, injunction, declaratory relief, and declaration of nullity of sale of the 111,415 PTIC shares. Petitioner claims, among others, that the sale of the 111,415 PTIC shares would result in an increase in First Pacifics common shareholdings in PLDT from 30.7 percent to 37 percent, and this, combined with Japanese NTT DoCoMos common shareholdings in PLDT, would result to a total foreign common shareholdings in PLDT of 51.56 percent which is over the 40 percent constitutional limit.ISSUE: The Court shall confine the resolution of the instant controversy solely on the threshold and purely legal issue of whether the term capital in Section 11, Article XII of the Constitution refers to the total common shares only or to the total outstanding capital stock (combined total of common and non-voting preferred shares) of PLDT, a public utility.HELD: Common shares onlySection 11, Article XII (National Economy and Patrimony) of the 1987 Constitution mandates the Filipinization of public utilities, to wit:

Section 11. No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines, at least sixty per centum of whose capital is owned by such citizensThe provision is [an express] recognition of the sensitive and vital position of public utilities both in the national economy and for national security.Any citizen or juridical entity desiring to operate a public utility must therefore meet the minimum nationality requirement prescribed in Section 11, Article XII of the Constitution. Hence, for a corporation to be granted authority to operate a public utility, at least 60 percent of its capital must be owned by Filipino citizens. The crux of the controversy is the definition of the term capital. Does the term capital in Section 11, Article XII of the Constitution refer to common shares or to the total outstanding capital stock (combined total of common and non-voting preferred shares)? Considering that common shares have voting rights which translate to control, as opposed to preferred shares which usually have no voting rights, the term capital in Section 11, Article XII of the Constitution refers only to common shares. However, if the preferred shares also have the right to vote in the election of directors, then the term capital shall include such preferred shares because the right to participate in the control or management of the corporation is exercised through the right to vote in the election of directors. In short, the term capital in Section 11, Article XII of the Constitution refers only to shares of stock that can vote in the election of directors.This interpretation is consistent with the intent of the framers of the Constitution to place in the hands of Filipino citizens the control and management of public utilities. As revealed in the

deliberations of the Constitutional Commission, capital refers to the voting stock or controlling interest of a corporation.WHEREFORE, we PARTLY GRANT the petition and rule that the term capital in Section 11, Article XII of the 1987 Constitution refers only to shares of stock entitled to vote in the election of directors, and thus in the present case only to common shares, and not to the total outstanding capital stock (common and non-voting preferred shares). Respondent Chairperson of the Securities and Exchange Commission is DIRECTED to apply this definition of the term capital in determining the extent of allowable foreign ownership in respondent Philippine Long Distance Telephone Company, and if there is a violation of Section 11, Article XII of the Constitution, to impose the appropriate sanctions under the law.